China

[Body-by-Guinness]

Harbinger of a Chinese economic issue cascade?

https://chiefio.wordpress.com/2024/01/07/oh-dear-chinese-property-giant-bankruptcy/

[Crafty_Dog]

BTW compliments on the perfect choice of thread for this one 

[Crafty_Dog]

https://www.youtube.com/watch?v=JD3m6U6g53k&fbclid=IwAR3hiosFsERWHf5oYplwMrJ8MLal4krZIqUZ5c6EZGyXdmyyExnUQsiwmMQ

[ccp]

~ 1.5 billion or more unfilled housing units in China!?  WOW

A collapse in China would be both good and bad for us I am thinking,
since we are so intertwined with them.

[DougMacG]

"A collapse in China would be both good and bad for us I am thinking,
since we are so intertwined with them."

  - Yes, during the Trump temporary tariffs policy, I was watching and hoping for them to feel the squeeze and come to the fairness and reciprocity trade window instead of what we have now.  As posted then, we had four times the leverage in trade negotiations but it did not work and was interrupted by covid, where their worldwide culpability should have hurt them even worse but it didn't.  The decoupling has begun, both ways, and they have no intention of stepping up anything other than their trade and espionage war against us and to invade Taiwan.

None of that will change under a weak President.  It didn't even change under a strong one.

To the point made, we want them to feel the sueeze and change their ways.  Complete economic collapse is another matter with far higher risks (for us). 

I favor whatever brings about the fall of the oppressive regime. 

[Crafty_Dog]

"A collapse in China would be both good and bad for us I am thinking,
since we are so intertwined with them."

Or we could say that it is a certain slice of our elites who are so intertwined with them and that this will be a very good thing for clarifying their "loyalty" to America once again while diminishing their influence in our government.

[Body-by-Guinness]

The reason Beijing seems so relaxed about the crisis is obvious: this is a situation in which China wins either way. Either the threat continues but shipping is safer for Chinese vessels than for others, in which case sailing under the protection of the red and gold flag may become a coveted competitive advantage, or Beijing finally tells Iran to knock it off, in which case China becomes the de facto go-to security provider in the Middle East. Both outcomes would be geopolitical coups. No wonder China is willing to accept a little short-term economic pain as the situation plays out.

– Nathan Levine

https://www.samizdata.net/2024/02/samizdata-quote-of-the-day-either-way-china-wins/

[Crafty_Dog]

BBG: This thread is for domestic Chinese issues.

Yours could go on the FUBAR thread or the Iran thread.

[Crafty_Dog]

February 17, 2024
View On Website
Open as PDF

China's Deflation Spiral
Reversing the trend becomes more difficult the longer it lasts.
By: Geopolitical Futures
Chinese Economic Deflation

(click to enlarge)

Recent data show China experiencing its sharpest decline in consumer prices in over 14 years, while producer prices fell by 2.5 percent, dropping for the 16th month in a row. This situation indicates a significant risk of prolonged deflation in China, exacerbated by challenges like a real estate slump, stock market downturn, loss of investor confidence, weaker exports and low consumer demand. Despite expectations for a temporary price rebound in February due to Lunar New Year demand, China's economic issues – excess supply, insufficient demand and financial strain – persist.

China's deflation is impacting the global economy, potentially accelerating interest rate cuts in emerging markets reliant on Chinese goods and raising concerns in the West about competitive disadvantages due to cheaper Chinese exports. This scenario suggests a global influx of low-priced imports as China seeks international buyers, which, while tempering inflation in some regions, poses broader economic challenges.

[Crafty_Dog]

https://www.theguardian.com/business/2024/feb/18/anger-grows-at-china-struggling-shadow-banks

[Body-by-Guinness]

Zero Hedge has its hyperbolic moments, but this post describing China’s failing stock market (which has lost $6 trillion) appears well documented.

https://www.zerohedge.com/markets/china-bans-stock-selling-market-open-close-limits-shorting?fbclid=IwAR2ZuB8G29gX5wl0Y5DJP_IOPohxap4_Mr3owGeUH2lDAeNz7v3kecuxYP0

[Crafty_Dog]

March 20, 2024
View On Website
Open as PDF

A Rare Bailout in China Sends Mixed Signals
Beijing hopes the illusion of improvement in the real estate sector will bring back foreign investors.
By: Victoria Herczegh

After years of trying to stabilize its troubled real estate sector, Beijing has unexpectedly intervened to support Vanke, the country’s second-largest property developer. This follows a downgrade in Vanke's credit rating to Ba1, considered junk status, by Moody’s. Chinese state media reported that 12 major banks, including the top six state-owned lenders, are arranging a syndicated loan of 80 billion yuan ($11 billion) for Vanke to help it meet upcoming repayment deadlines. The surprise intervention suggests the Chinese government may now offer stronger financial aid to prevent company collapses. Yet, with this initial bailout for Vanke, Beijing risks sending the wrong signal about its ability and willingness to offer similar support to other failing developers.

China’s strategy to stabilize the real estate sector has looked wobbly for some time. Since mid-2021, major developers have been defaulting on or delaying debt payments due to a liquidity crisis exacerbated by a regulatory crackdown on high leverage. The government’s previous measures to control housing prices, such as limiting purchases and setting price caps, have largely failed and were soon discarded. In 2023, property sales fell by 6.5 percent from the previous year, while property investment dropped by 9.6 percent, the second consecutive year of decline. Real estate behemoth China Evergrande Group collapsed in January and Country Garden Holdings faces liquidation in Hong Kong, despite earlier beliefs in their stability. Similarly, Vanke was considered financially robust until it revealed its financial troubles. What is unclear is why the Chinese leadership is now willing to rescue such struggling developers. After all, recent statements from the Communist Party’s annual “two sessions” meeting clarified that struggling companies should face bankruptcy and restructuring without expecting significant government help.

Vanke stands out from companies like Evergrande and Country Garden because it is partly state-owned; around 30 percent belongs to Shenzhen Metro, overseen by Shenzhen's state asset regulator. The State-owned Assets Supervision and Administration Commission of the State Council, or SASAC, manages such enterprises. Beijing's support for Vanke likely stems from its partial state ownership. Specifically, the collapse of a state-backed entity would challenge the Communist Party's credibility. A rescue, on the other hand, aligns with President Xi Jinping's emphasis on state control, especially in critical sectors like real estate. Vanke's situation is also significant because of its location in Shenzhen, a key tech hub. With the government keen to bolster high-tech industries following a lengthy crackdown, maintaining stability in Shenzhen is crucial.

A more ominous possible explanation for China’s U-turn is that leaders have become alarmed by the continued reluctance of foreign investors to return to business as usual with Beijing. Despite China's efforts to attract foreign investment through expos, sending business leaders abroad and repeatedly promising better conditions for foreign firms, direct investment liabilities dropped in the third quarter of 2023 for the first time since 1998. Companies are increasingly leaving China for Southeast Asia, India or Western countries, signaling that the situation may not improve soon. In addition to the country’s persistent economic challenges, a major deterrent for foreign companies is China's stricter regulatory measures under Xi, including amendments to the state secrets law and enforcement of a broader definition of espionage. There are some bright spots, like the fact that German foreign direct investment in China rose by 4.3 percent to a record 11.9 billion euros ($12.9 billion) last year. But a few megafirms concentrated in a handful of sectors will not provide enough outside investment to drive significant growth.

The fact remains that China’s leaders are not ready or willing to alter their market practices. Instead, they aim to attract foreign capital by creating the illusion of improvement, particularly in troubled areas like real estate. The collapse of partially state-owned firms such as Vanke would undermine this effort. However, bailing out the company risks creating the perception that Chinese banks can and will rescue other struggling developers, when in fact this bailout is likely a one-off. China’s banks, burdened with extensive mortgage loans, cannot bear further developer debts without risking their own stability.

Beijing likely hopes that recent economic bright spots, driven by manufacturing and fixed-asset investment, can fund the Vanke bailout and protect its reputation, delaying a severe debt crisis. But delaying is not solving, particularly if the tactics employed lead to moral hazard. One way or another, China’s over-indebted property market will continue to unwind. There is little that Chinese leadership can do but focus on the areas of the economy that are showing improvement and use the gains from these sectors to mitigate the downturn.

[Body-by-Guinness]

Trust in government is low in China, too:

Foreign investors aren’t the only ones bailing on China
The Hill News / by Nicholas Sargen / Mar 29, 2024 at 8:39 AM

One of the top priorities of China’s policymakers has been to stabilize the country’s equity and property markets. China’s stock market has trailed the S&P 500 index substantially since 2017, and the gap has increased in the past few years as the property bubble burst. 

China had the worst return among markets in the MSCI World index last year, and the loss in value of both mainland and Hong Kong-listed stocks from the peak in 2021 now exceeds $6 trillion according to Fortune.

In response, China’s government has adopted a series of measures to bolster the markets and stem foreign capital flight. Yet, domestic investors are also losing confidence in economic policies, as problems in the property sector are spreading, a record number of young people are unemployed and the country is flirting with deflation.

Earlier this month investors were focused on the National People’s Congress in Beijing, where China’s leaders unveiled plans about the country’s medium-term economic objectives. In the keynote speech, Premier Li Qiang reaffirmed the government’s target growth rate of 5 percent but offered no assessment of how it would be achieved. Scott Campbell of Time contends that policymakers appear to have their “head in the sand.” 

Some investors were disappointed that the government did not announce plans to increase spending to bolster the economy and property market. However, with China’s overall debt to GDP at a record 288 percent last year, additional debt-financed spending would only exacerbate the problem of economic inefficiency. 

Rather, the key issue confronting China is the need to tackle its massive excess savings. To do so, the government should re-embark on economic reforms incentivizing households to increase consumption, which is less than 40 percent of GDP.

This goal has topped the list of the country’s policy priorities since 2007, a year before Western economies were reeling from the 2008 global financial crisis. Subsequently, China’s five-year plan covering 2011-15 called for transitioning the economy from export and investment-led growth to greater reliance on domestic consumption. This goal was reiterated in the latest government plan that covers the period from 2022 to 2035.

Thus far, however, there is little to show for it, and the problem of excess saving is becoming intractable.

Martin Wolf of the Financial Times points out that China generated 28 percent of global savings in 2023 according to the IMF. This tally is only a little less than the 33 percent share of the U.S. and European Union combined. 

He points out two important implications. First, if China were an open market economy, its capital markets would be the largest in the world. Second, how these savings are managed would be the most important determinant of global interest rates and the global balance of payments.

If the share of domestic consumption to GDP fails to increase and the budget imbalance is unchanged, the gap between domestic savings and investment would be channeled either as increased capital flight from China or increased exports from China to the rest of the world. With China’s government aiming to expand production of electronic vehicles, the risk of a renewed trade conflict between China and the U.S. and EU is likely to increase in the next year or two, as I have warned previously.

Another risk is that troubles in the property sector will continue to weigh on consumer confidence. 

A New York Federal Reserve report points to a recent survey conducted by the People’s Bank of China that documents growing concerns among property owners in the country. The survey shows that 15 percent of households have suffered declines in income since the pandemic struck, and some 43 percent of respondents were insecure about their jobs. Accordingly, 60 percent of households surveyed told the People’s Bank of China they must prioritize saving over consumption.

During the 10 years before COVID, household borrowing averaged over 25 percent annually to finance real estate purchases according to the New York Federal Reserve. Property was the most important store of value for households, accounting for roughly two-thirds of household assets, while over 80 percent owned residences. 

Subsequently, as their balance sheets suffered amid the collapse of economic activity that ensued, households responded by paying down mortgage debt and increasing long-term bank deposits to earn interest income. Yet, as the Bank of China eases monetary policy to combat the risk of deflation, their incentives to continue doing so may lessen over time. 

So, what can the Chinese government do to rebuild consumer confidence?

My assessment is it will not be easy for two reasons. First, whenever confidence is shattered it inevitably takes considerable time to rebuild public trust. Second, the government has repeatedly failed to adopt policies to transform China’s development model away from export and investment-led growth to rely more on domestic consumption. Moreover, it shows no inclination to do so now, as it has placed political priorities ahead of economic goals. 

Finally, I do not foresee China’s property bubble playing out as it did in Japan in the 1990s or the U.S. 15 years ago, because China’s government controls the banking system. Rather, it will likely be a slow, steady grind that will weigh on the country’s growth prospects for years to come.   

In these circumstances, the government’s attempts to bolster China’s stock and property market face a steep uphill battle. 

Nicholas Sargen, Ph.D., is an economic consultant for Fort Washington Investment Advisors and is affiliated with the University of Virginia’s Darden School of Business.  He has authored three books including “Global Shocks: An Investment Guide for Turbulent Markets.”

https://thehill.com/opinion/finance/4561718-foreign-investors-arent-the-only-ones-bailing-on-china/

[ccp]

"Finally, I do not foresee China’s property bubble playing out as it did in Japan in the 1990s or the U.S. 15 years ago, because China’s government controls the banking system. Rather, it will likely be a slow, steady grind that will weigh on the country’s growth prospects for years to come. "

screw Xi   Mao Jinping

[Body-by-Guinness]

I about started a “China’s Penetration of the Mid-East” thread as that seems to keep consistent with other China/specific region threads, but was concerned about starting two new threads in two days, hence placed this piece about bulk Chinese weapons being found as Israel roots out Hamas in Gaza:

https://www.washingtontimes.com/news/2024/apr/4/chinese-weapons-found-gaza-report-claims/?utm_campaign=shareaholic&utm_medium=facebook&utm_source=socialnetwork&fbclid=IwAR2pNzZilwVF1UZLPI8Y2YfclvJlH49rSWP0rX2tKzFFnyd2VRblnQe5q1c

FWIW, the number of threads here is not an issue for me. Abe Lincoln was once asked “how long should a man’s legs be?” He responded “Long enough to reach the ground.” I feel the same about thread count: it should be the number of threads needed to provide logical homes for the pieces posted. Where I start having issues is when I search for that logical term, using “China” and “Chinese” in this instance, and not having anything come up consistent with similar threads for other regions or related tropics.

[Crafty_Dog]

China-Hamas can go in the Israel thread, China in the Middle East can go in the FUBAR thread (the word I remember for search function).

[Crafty_Dog]

April 22, 2024
View On Website
Open as PDF

Beijing’s View of the Chinese Economy
By: George Friedman

At an economic forum last week in Shanghai, a senior Chinese government adviser named Liu Yuanchun, who is also the president of the Shanghai University of Finance and Economics, made some stark remarks about the state of the Chinese economy.

Liu said that the effects of the COVID-19 pandemic were far worse than expected and that the fiscal standing of local governments is deteriorating quicker than thought. Seismic, structural shifts are happening rapidly, and more non-economic risks are emerging than economic ones. All of this has created imbalances that Beijing is struggling to navigate. According to Liu, China’s development in the recent past and immediate future will be marked by such disequilibrium, and striking a new balance will take time.

He went on to say these challenges from within – and the economic competition from powers without – are more daunting than the ones of a decade ago, when China was able to achieve double-digit economic growth. Growth now is much more uneven, of course, and even President Xi Jinping seems to have admitted as much when he called moderate growth the “new normal.” Evidence to that effect can be seen in China’s overcapacity issues, with the producer price index declining in March by 2.8 percent year on year, while languishing in the negative range for the 17th straight month. Supply-demand disequilibrium is apparent, too, with the first quarter’s utilization rate at just 73.6 percent, down some 7 percentage points. In short, capacity is sitting idle.

Liu also warned that the consumer price index, which grew in March by 0.1 percent year on year after expanding by 0.7 percent in February, is too off-kilter to achieve Beijing’s targeted supply-demand balance of 2-3 percent.

Perhaps most importantly, Liu said that these and other economic imbalances are here to stay. The downturn in the property market is particularly noteworthy. Property-sector investments fell in the first quarter of 2024 by 9.5 percent year over year, with total sales dropping by 27.6 percent. In other words, the days of the property sector being a “super pillar” of the Chinese economy are gone. (The sector used to account for nearly 11 percent of gross domestic product but stood at nearly 6 percent as of 2023.) Beijing is looking to other sectors such as high-tech manufacturing and electric vehicles to fill the void, but so far they have yet to do so.

What makes the statements made by Liu – who is an adviser to Xi, meaning his speech was likely approved by the president himself – so important is that they indicate Beijing is finally coming to terms with the obvious. The long-held conventional wisdom was that China’s would be an unending surge, but even in the heyday of growth, its economy was limited and unbalanced. But economic risks are expanding amid geopolitical uncertainties, the root of which, for China, was a decision a few years ago to threaten the United States with potential future military action. The threat was an unrealized bluff, but its most important outcome was to convince the U.S. that it was real.

Under those circumstances, the U.S. government adopted a hostile economic posture toward China, and private corporations in the United States saw an increased risk in operating there. Rather than increase economic activity to placate the U.S., Beijing sought the opposite outcome, curbing its access to U.S. investment. That created another imbalance, this one based on the assumption that Chinese exports to the U.S. and U.S. investment in China would not dip low enough to seriously threaten the economy.

Economists like Liu focus on the economics of a given event, but the real question is political. How private industry will respond is important; more important is how the public will respond. In China, economic fumbling can create desperate citizens and launch the country into uncharted territory. The government is working hard to contain unrest, and it seems to have now adopted a strategy of honesty – a rarity for any government. Even so, its admission is less a matter of altruism than it is a matter of strategy

[Body-by-Guinness]

China’s economy is headed for a ‘dead-end,’ and Beijing won’t do anything to stop it, scholar says

BYJASON MA
May 11, 2024 at 5:47 PM EDT
Xi Jinping holds umbrella
Chinese President Xi Jinping visiting France on Tuesday.
MATTHIEU RONDEL—BLOOMBERG/GETTY IMAGES
China’s leadership is relying on an export surge to revive slumping growth, but those policies won’t extract the world’s second largest economy from the malaise that it’s in, a top China watcher said.

Anne Stevenson-Yang, cofounder of J Capital Research and the author of Wild Ride: A Short History of the Opening and Closing of the Chinese Economy, pointed to failures by Beijing in an op-ed in the New York Times on Saturday.

“Years of erratic and irresponsible policies, excessive Communist Party control and undelivered promises of reform have created a dead-end Chinese economy of weak domestic consumer demand and slowing growth,” she wrote. “The only way that China’s leaders can see to pull themselves out of this hole is to fall back on pumping out exports.”

The result will be more tension with China’s trade partners as cheap manufactured goods continue to flood markets, while the Chinese people will turn gloomier, causing the government to get more repressive, Stevenson-Yang predicted.

The root cause of China’s economic problems is the Communist Party’s excessive control, which isn’t going away, while its strategies that focus on adding more industrial capacity are counterproductive, she said.

Most economists have recommended that Chinese leaders loosen their grip on the private sector and promote more consumption, which would entail reforming the government—”and that is unacceptable,” she added.

The 1989 Tiananmen Square protests represented an opportunity to liberalize the government in response to the growing private sector that emerged from economic reforms started a decade earlier. But that would’ve weakened the Communist Party’s power, Stevenson-Yang pointed out.

“Instead, China’s leaders chose to shoot the protesters, further tighten party control and get hooked on government investment to fuel the economy,” she said.

In the decades that followed, China’s investment-driven growth sought to pacify the people, while its cheap exports kept prices lower in the West. Meanwhile, debt piled up throughout China, and new infrastructure and housing sat underutilized.

Now, President Xi Jinping is running out of policy options, Stevenson-Yang warned, as Chinese consumers refuse to boost spending, and China’s trade partners put up more barriers to its exports. In fact, the Biden administration is poised to impose severe tariffs on a range of Chinese goods. Innovation won’t come to the rescue either, as China’s economy still relies mostly on replicating existing technologies, she added.

“All of this means that the ‘reform and opening’ era, which has transformed China and captivated the world since it began in the late 1970s, has ended with a whimper,” she concluded. “Mao Zedong once said that in an uncertain world, the Chinese must ‘Dig tunnels deep, store grain everywhere and never seek hegemony.’ That sort of siege mentality is coming back.”

China’s slowing growth, real estate crisis, high youth unemployment, and U.S. restrictions on key technologies have led to predictions of a so-called lost decade of stagnation. Pointing to China’s aging population, veteran strategist Ed Yardeni last year said the country could become “the world’s largest nursing home.”

But a top China expert warned last month against such pessimism, saying it could lead the U.S. to grow complacent.

“While its growth has slowed in recent years, China is likely to expand at twice the rate of the United States in the years ahead,” wrote Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, in Foreign Affairs

https://fortune.com/2024/05/11/china-economy-outlook-dead-end-exports-manufacturing-trade/

[Crafty_Dog]

One of my favorite courses in law school was Anti-Trust and I spent my second summer of law school in the Anti-Trust Division of the Federal Trade Commision, and have retained a residual interest over the years in anti-trust themes.

One of them was the notion of "predatory pricing" wherein a competitor seeking monopoly like dominance would sell at below cost in order to drive competitors out of business and with monopoly power established then recoup the losses and then some.

What I am sensing here is a similar dynamic except that the predatory pricing is backed by the deep pockets of the CCP.

[DougMacG]

Very interesting, Anti-Trust issues are very tricky.  The Clinton administration went after Microsoft and brought a crash on the entire tech sector.  Free market writers like Steve Moore oppose today's government actions against US tech giants like Google and Apple while these companies dominance grows.

China is a unique case.  They are an enemy and a competitor, and a supplier and a potential market.

I saw Trump's China tariffs as a tactic in support of free trade.  The end game was to break down tariffs and barriers in pursuit of free trade.  It was all interrupted by covid and US regime change.

Selling below cost isn't China's main tactic in trade (IMHO).  They also steal technology and close their market to us.  They aren't deserving of free trade, but an import tax costs us as much as it hurts them.

Now consider the idea the US under Biden is switching to a centrally planned economy with EVs in particular, also chips, solar panels and so on.

So what is our motive here:

https://www.cbsnews.com/news/biden-to-announce-new-100-tariffs-on-chinese-evs/
"Biden administration announces new tariffs on Chinese EVs, semiconductors, solar cells and more"

Is it because they are competing unfairly or because we want to be more like them?

I see a distinction between trying to break down barriers with retaliation, and us adopting their system.

It used to be that freedom beat central control every time it was tried.

The irony of it is that by banning cheaper imports we are locking ordinary Americans out of the EVs our government wants us in so badly. We are also making our own manufacturing more expensive and less competitive with the cost increases.

We ban and block our manufacturers from sourcing locally (cf. mining bans on rare earth elements) then try to protect them with tariffs to equalize the cost.

What could go wrong?

[Crafty_Dog]

Not discussing where it fits in the overall picture, only that it is analogous in part to antitrust notions about predatory pricing.

[Body-by-Guinness]

The good news is this would drive a stake through the heart of electric vehicle mandates.The bad is everything else that needs a lithium battery also starts dying:

https://wattsupwiththat.com/2024/05/21/assessing-americas-vulnerability-to-a-chinese-graphite-embargo/?utm_source=rss&utm_medium=rss&utm_campaign=assessing-americas-vulnerability-to-a-chinese-graphite-embargo

[Crafty_Dog]

https://dailycaller.com/2024/05/25/xi-jinping-revives-decades-old-playbook-to-supercharge-chinas-surveillance-state/?utm_source=piano&utm_medium=email&utm_campaign=29912&pnespid=tbVlWDpHa78LhfjarT6lGpvStkOtBYZsPbO_xvU59kRmM.nb9YAb3L0xy.rbtPa_PzSm1Ah9

[DougMacG]

https://www.youtube.com/watch?v=p4YjBH7BuxA

A horrible day in human history.

[ccp]

https://www.msn.com/en-us/news/world/hiker-finds-pipe-feeding-china-s-tallest-waterfall/ar-BB1nJ8KI?ocid=msedgntp&pc=DCTS&cvid=86686e0edac74bcfb06037e71f33671b&ei=13

and yet the person who posted this is of course criticized

I remember in 1997 ish I went with family to Venezuela and my nephew and I took a plane ride into the edge of the Amazon

The plane purposely passed Angel Falls.

Unfortunately, it was dry season and very little water was falling
I almost got left behind by the return trip plane because I stayed to long in a store that sold copies of shrunken heads and blow dart guns .....

perhaps my gringo capitalist head would have been on sale if .....

 

https://www.bing.com/images/search?q=Salto+%c3%81ngel&id=52C5FDB196B15A55BB5C525EF5C51E8C905BAF9B&form=IQFRBA&first=1&disoverlay=1

[Crafty_Dog]

July 17, 2024
View On Website
Open as PDF

Beijing’s Nervous Resolve Amid Third Plenum
The stakes are high for the country's top brass.
By: Victoria Herczegh

China’s leadership is holding its third plenary session in Beijing this week, one of the most important political meetings of the year. It’s organized by the Central Committee of the Chinese Communist Party, roughly once every five years, to plan out the country’s long-term social and economic policies. This year’s plenum will be critical, as several developments have demonstrated that Beijing is increasingly wary of how Chinese society is handling the country's protracted economic slump and turning to harsh measures to try to control the situation.

In late June, the State Council, China’s Cabinet, approved a revision to the Emergency Response Law, which outlines how the government should deal with emergency situations like natural disasters, public health crises and public security threats. According to the amendments, local governments are instructed to “guide news media organizations and support them in reporting and control of discussions,” while the press is responsible for reporting on emergencies in a “timely, accurate, objective and fair manner.” The changes will affect both Chinese and foreign journalists. While the State Council says the revisions are meant to protect journalists’ legitimate rights, many believe it will lead to more restrictions on the press, especially in their abilities to attain and report on interviews with average Chinese residents.

Though they will officially take effect on Nov. 1, there are reports that authorities have already tried to make use of the changes. Chinese journalists have stated that in a number of cases, local authorities prevented victims of natural disasters from speaking to the media, sometimes offering monetary compensation for their cooperation. The central leadership seems to be pressuring local governments to keep any incidents under wraps, and if any unfavorable information is leaked, they are forced to immediately communicate that the situation is being handled. Hence the recent string of reports on extreme weather conditions – namely, floods and droughts – in Chinese media that all looked nearly identical and lacked any personal accounts from those affected. This contrasts reporting from previous years in which victims and their families were often given an opportunity to speak extensively on their experiences.

For foreign reporters, the new restrictions shouldn’t come as a surprise. Reporting in China has always been challenging for journalists from abroad, especially those from the United States and Western Europe. Their work became even more unpredictable during the pandemic, with several incidents of reporters being followed or detained even for trying to report on topics that had nothing to do with the CCP or politics. In places deemed sensitive by the government, including regions where ethnic minorities reside like Xinjiang and Tibet, foreign journalists have simply been banned. However, until recently, Chinese journalists were given relative freedom to report, and media outlets generally prioritized “letting the people talk.” Of course, there were some limitations relating to politically sensitive issues, but interviews with locals during a natural disaster or an accident used to be an essential and expected part of daily news reporting.

With the recent changes to the Emergency Response Law, this is no longer the case: The central government no longer seems to trust either reporters or society in general to decide what should be included in national news coverage, and is even encouraging local governments to “guide” media organizations, sometimes using financial incentives, to ensure reporting is what it sees as “fair and objective.” Though Beijing’s concern is likely not limited to natural disasters, China has had several weather-related emergencies since late spring. And given Beijing's insufficient support for local governments, it’s possible that they’re failing to manage these cases in a manner that the central government deems acceptable. With these changes, what the State Council really wanted to ensure was that no leaks came out about protests or mass discontent among the population, especially around the time of the third plenum.

The central government has also imposed other measures to make sure the event runs smoothly. Several high-profile activists including journalist Gao Yu, political commentator Zha Jianguo and human rights lawyer Pu Zhiqiang have been placed under house arrest or urged to leave the capital on the week of the event. Internet censors are also working closely with the police to eliminate any content seen as critical of the government. These measures are part of the country’s “stability maintenance” system, which targets individuals the authorities see as potential agitators ahead of significant meetings and politically sensitive events. They appear to be stricter and more extensive than usual this year. During prior plenums, such operations were generally limited to the location of the event itself, while this year, according to various reports, even petitioners in provinces far away from the capital have been detained and questioned about their “activities in connection with the event.”

It's clear that the Chinese leadership is taking extensive measures to prevent any material that could disrupt peace and order before, during and after the plenum. Given the nature and extent of the restrictions, it’s not only concerned about societal morale but also about potential reactions to announcements made at the closed-door meeting. In a recent speech delivered in front of the country’s top business leaders, Premier Li Qiang advocated that “unreasonable systems and mechanisms” need to be reformed. This further indicates that Beijing is aware of the gravity of the structural problems in the economy and wants to make considerable changes.

The question is: Did President Xi Jinping and his Cabinet wait too long to make these changes, and more important, does it have the resources to impose them? In recent weeks, Xi conducted inspections of various provincial capitals and regions to identify priorities for future government policies – a common practice ahead of a plenum. The four priority areas he identified were: technological self-reliance, high-quality development, social stability and greater integration of minorities. These highly ambitious aims will be impossible to achieve as the all-important real estate sector appears on the edge of collapse, foreign investors flee the country and local governments struggle to support themselves amid insufficient support from Beijing. The need to simultaneously focus on several highly problematic sectors will make it extremely difficult for the government to come up with effective solutions. And as the final day of the plenum approaches on Thursday, it's critical for Xi to seem fully confident in his reform agenda – whether or not that is actually the case.

[Crafty_Dog]

https://www.msn.com/en-us/news/crime/china-s-kids-are-burned-out-and-out-of-work-even-date-night-is-a-drag/ar-AA1plAos?ocid=msedgntp&pc=HCTS&cvid=817d223e1cb945f38671267ca7874d5b&ei=67

[Crafty_Dog]

https://www.msn.com/en-us/news/world/diaries-of-mao-s-secretary-at-the-center-of-a-legal-battle-over-the-history-of-modern-china/ar-AA1pomk6?ocid=msedgntp&pc=HCTS&cvid=41bc5bee5c7c444cbea3db615e23bf66&ei=27

[Crafty_Dog]

September 20, 2024
View On Website
Open as PDF

China’s New Revitalization Program
The northeast offers more advantages than central China but won’t solve the country’s broader problems.
By: Victoria Herczegh

In the first weeks of September, dozens of senior Chinese officials from high-profile positions throughout the country were tapped to take up new positions in the rust belt of the northeast. Their task is simple if not easy: to use what they’ve learned in Beijing, Shanghai and Jiangsu to revitalize a once powerful region, bringing it closer to technical autonomy and thus narrowing the gap between it and the wealthier coastal regions. In political terms, the new initiative is meant to bring unity to the country and mitigate the risk of social unrest.

If this sounds familiar, it should. The goal is practically the same as that of President Xi Jinping’s flagship rural revitalization plan, which aimed to uplift the poorer, agricultural areas of central China. That project now exists only in occasional government statements. Apparently, Beijing has decided that the northeast can unlock more economic potential. The problem is that though the rust belt may well serve the government’s more immediate goals relating to high-tech and military development, its revitalization could widen the wealth gap further, aggravating the very problem the experiment is supposed to solve.

It’s no secret that the government has paid less attention to its peripheral regions than its more prominent ones. In the era of Mao Zedong’s economic planning, the region’s industrial capacity was a key driver of Chinese economic growth. But since Deng Xiaoping’s market reforms, the northeast’s economic performance has underwhelmed, its share of the national gross domestic product dropping from 13.3 percent in 1978 to 4.8 percent in 2023. Several factors contributed to the region’s decline. A structural shift occurred from heavy industries such as machinery to light industries such as textiles. After China became a member of the World Trade Organization and participated more in international trade, it began to prioritize labor-intensive industries over capital-intensive ones, thus promoting the economic output of places like Beijing, Shanghai and Guangdong. The northeast simply could not afford to make the transition, especially if transitioning meant forsaking its traditional productive capacities.

But in light of China’s recent economic downturns, it seems as though Beijing can no longer afford to ignore the rust belt. Xi’s plans aside, the effort to boost provincial economies is part of a 2023 government strategy. That year, Premier Li Qiang conducted several inspection tours in the northeastern provinces of Liaoning, Jilin and Heilongjiang, visiting aircraft, automotive and agricultural smart equipment manufacturing companies and calling for improved smart production, greater innovation and, notably, an increased role for state-owned enterprises. (The installation of new officials is just the first step in this process.) It’s not that the state’s priorities have fundamentally changed – old-school steel mills may be important, but they don’t suit China’s current needs – it’s that the state wants to transform traditional industrial centers into modernized high-tech hubs capable of jumpstarting China’s economic recovery. The government believes that the region’s resources and solid traditional industrial foundations are ideally suited to boost tech innovation and manufacturing, and that its proximity to Russia will only increase its odds of successfully developing a modern, state-of-the-art military.

It therefore seems as though Beijing has every reason to finally focus on the northeast. This is great news for the northeast, but remember that the government, wittingly or not, tends to abandon such initiatives at a moment’s notice. Even Xi’s rural revitalization plan, the headline project of his five-year plan, wasn’t immune to Beijing’s political vagaries. It was always a front for wealth redistribution, with the central government cracking down on the richest companies and individuals that accumulated wealth – often not fully legally – and moving the capital to the central region in need. The regulatory crackdowns did, in fact, result in funds being allocated to the agricultural modernization of central China. But when the government realized the importance of sci-tech in emerging economic trends – not to mention its importance in building self-sufficient supply chains – it ended its regulatory crackdowns and began to pour money into the wealthy and largely coastal tech hubs.

Similarly – and, technically, an initiative under the umbrella of rural revitalization – the relocation of youths from big coastal hubs to second- and third-tier rural cities is far less urgent than it once was. That thousands of fresh graduates in large cities struggled to find jobs commensurate with their qualifications made moving them, through various subsidies, to secure, well-paid positions in rural China seem like a no-brainer. Yet the initiative yielded few, if any, results. Most young graduates were reluctant to leave the cities, choosing instead to keep looking for big-city employment and accepting the financial support of their families. Some even took lower-paying blue-collar jobs to remain in the city.

Knowing that rural revitalization has failed in central China, or at least failed to yield the desired results, Beijing is hoping for a better outcome in the northeast. The program there bears some similarities to the revitalization plan, offering, for example, financial incentives to recent graduates who want to move there. Though it’s unclear whether the program will succeed, its advocates hope that its existing resources and capacities will make it an easier win than central China was. But even if it does succeed, providing a near-term boost to economic activity, it’s unlikely to do much for the beleaguered center.

Rural central China seems to be getting the same treatment the northeast got when the country shifted from a market economy to a planned economy, with its development being sidelined for the sake of short-term economic gains. Focusing on certain regions more than others could be advantageous during times of economic prosperity. But China today is facing a downturn, meaning ignoring a key area of the country could come with disastrous effects. Throughout Chinese history, unrest has been most likely to occur in poor rural communities, where feelings of dissatisfaction and marginalization prevail. The failure of the government's rural revitalization plan could exacerbate these tendencies, creating a hotbed for dissent.

Economic growth is important for China, but internal stability is even more critical. The Chinese leadership thus needs to turn its attention back to the country's most vulnerable region, as sacrificing it for the sake of serving more immediate interests could result in instability. Similar to its strategy in the northeast, redesigning the core ideas of the rural revitalization plan and deploying experienced officials from wealthy regions could help the government score some wins and keep at least some of its promises to rural China.

[Crafty_Dog]

https://www.msn.com/en-us/money/markets/a-banking-crisis-is-looming-in-china-it-s-not-just-property/ar-AA1r8t79?ocid=msedgntp&pc=HCTS&cvid=10e2d082ef05466f9e285fc8ce3c40bb&ei=28


bout the author: Seong-Hyon Lee is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations and an associate at the Harvard University Asia Center.

As China grapples with a deepening real estate crisis, attention is shifting to an equally pressing concern: the vulnerability of the nation’s banking sector. What was once seen as a contained issue within the property market is now threatening to send shockwaves through China’s financial system. With a significant portion of their assets tied to a struggling real estate market, Chinese banks are navigating treacherous waters, raising critical questions about the resilience of the world’s second-largest economy.

Estimates initially placed property-related loans at around 40% of total bank assets. More recent data suggests this percentage has declined, yet the property sector remains a major risk for China’s financial institutions. S&P Global projects that the nonperforming asset ratio in China’s commercial banking sector will rise to 5.7% by 2026, up from an estimated 5.6% in 2023. This forecast signals ongoing challenges in asset quality, significantly higher than the officially reported nonperforming loan ratios. For context, the Chinese government’s official NPL ratio for Chinese banks was reported at 1.6% in 2023, the lowest since 2014. This discrepancy between deteriorating bank profitability and the downward trend in officially reported NPL ratios raises questions about the accuracy of government figures.
International standards for healthy banking systems typically see NPL ratios below 1-2%, with ratios above 5% often indicating significant stress. In China, the NPL ratio for property development loans is expected to peak at 6.4% by 2025. This projected peak is more than double the median NPL ratio of 2.79% for property-related loans among China’s top 18 banks as of mid-2023. The “big four” state-owned banks had an average property-related bad loan ratio of 5.2% in mid-2023, a slight decrease from 5.5% at the end of 2022.


Rural and small-city banks are particularly vulnerable, since they lack the financial buffers of their larger counterparts. In June 2024, 40 small banks disappeared through mergers with larger institutions, and Henan province announced plans to consolidate 25 banking institutions into a provincial-level rural commercial bank. These moves highlight the fragility of smaller banks. Chinese regulators are focusing on consolidation because they lack mechanisms to manage bank failures. S&P Global estimates that it could take 4-5 years to substantially clean up high-risk rural financial institutions.

The Chinese government has responded cautiously to these risks. It is aiming to contain financial instability rather than implement aggressive stimulus measures. Recent policy decisions from the Third Plenum reflect this restraint, with Beijing seeking to manage risks without exacerbating existing imbalances.

China’s economy presents a mixed picture. The export sector remains a lifeline, with the country expanding its global market share in key industries such as electric vehicles, solar panels, and steel. Beijing is supporting this export-driven growth through currency management and favorable policies for export-oriented companies.

Domestically, the outlook is less optimistic. Retail sales have been sluggish, wage growth is slowing, and property prices remain under pressure. The services sector, which includes consumer-facing industries like retail and tourism, faces significant headwinds. As of Aug. 31, new home sales by the 100 largest real estate companies fell 26.8% compared to the same period last year, reaching 251 billion yuan ($35.6 billion). This decline follows a 19.7% drop in July, indicating a worsening trend in the residential property market.

The distress in the property market has raised concerns about its impact on the financial system. Regional banks are quickly moving to dispose of non-performing real estate loans, while larger banks are grappling with increasing bad debts in sectors such as hotels, restaurants, and retail. Despite reports of declining NPL ratios from the Chinese government, concerns therefore persist.

Banks are under government pressure to lower mortgage rates and increase investments in government bonds, further eroding their profitability. The government’s “common prosperity” initiative, aimed at reducing wealth inequality, also affects the banking sector by limiting the pace of property price growth—a key profitability factor in past decades. Although “common prosperity” was not mentioned in the Third Plenum document, it likely remains an underlying principle in Xi Jinping’s economic strategy.

Beijing has introduced several measures to stimulate the economy and stabilize the property market., Those include a policy encouraging the trade-in of old consumer goods for new ones and urging state-owned enterprises to purchase existing housing for rental purposes. However, the effectiveness of these initiatives is still uncertain.

China’s GDP growth slowed to 4.7% year-over-year in the second quarter of 2024, down from 5.3% in the first quarter. The government faces a delicate balancing act, needing to sustain export-driven growth while managing the fallout from the real estate market slump. Chinese commercial banks are contending with declining profitability as the government tries to shield smaller financial institutions from the real estate sector’s challenges. Measures to manage bad loans include leveraging asset management companies and implementing policy interventions such as reducing mortgage rates and stabilizing capital markets through market capitalization targets for state-owned enterprises.

Looking ahead, China’s low-cost export strategy will likely continue, with efforts to prevent real estate risks from spreading to the banking sector. However, the effectiveness of current measures is questionable. As economic challenges mount, the coming months will be critical in determining whether China can avoid a broader financial crisis. The strategy so far has been one of controlled management—preventing a full-scale reckoning while transitioning to a more sustainable economic model. Yet, with confidence in the economy eroding and accurate information scarce, China’s room for maneuver is shrinking rapidly. Compounding these challenges, China faces significant deflationary pressures. Recent data show persistently low consumer price inflation and declining producer prices, indicating weak domestic demand and overcapacity in the manufacturing sector. This deflationary environment strains the banking sector, impacting borrowers’ ability to service debts and potentially leading to a cycle of declining economic activity.

In response to these mounting pressures, the People’s Bank of China announced a series of measures on Sept. 24, 2024, aimed at supporting the economy and stock market. These include cutting benchmark interest rates, lowering reserve requirements for banks, reducing mortgage rates, and injecting substantial funds into the stock market. While these moves signal Beijing’s growing concern over economic weakness, many economists argue that more robust fiscal support and a comprehensive strategy to address the real estate crisis are necessary to drive a sustainable economic turnaround.

Guest commentaries like this one are written by authors outside the Barron’s and MarketWatch newsroom. They reflect the perspective and opinions of the authors. Submit commentary proposals and other feedback to ideas@barrons.com.

[Crafty_Dog]

https://www.youtube.com/watch?v=Pd_ucqUKWdY

[DougMacG]

Barclays, via Financial Times:

The economic circumstances facing China have parallels with Japan’s experience after its asset bubble burst in the early 1990s. This created the term ‘Japanification’, which is typically defined as a combination of slow growth, low inflation, and a low policy rate, accompanied by deteriorating demographic trends.

To measure this phenomena, a Japanese economist, Takatoshi Ito, introduced a Japanification Index, which measured the sum of the inflation rate, nominal policy rate, and GDP gap. To apply to China’s economy, we have adjusted this index, replacing the GDP gap with working-age population growth, as the estimation methods of GDP gaps differ across nations and working-age population is by far the most fundamental determinant for long-term growth. Our amended index shows that China’s economy has become more ‘Japanised’ than Japan’s recently, albeit marginally.

This not a surprise to us. A demographic drag, the emergence and collapse of asset bubbles, debt overhang, zombie companies, deflationary pressures from excess capacity/high debt, and high youth unemployment, to name a few, are some of the notable similarities between the economies of China and Japan post their bubbles. (Source: ft.com)

[Crafty_Dog]

Made in China 2025 is declared a success, according to new research by Bloomberg Intelligence. Unveiled a decade ago, Beijing’s landmark industrial policy has achieved most of its goals, making China the global leader in electric vehicles, high-speed rail, graphene, solar panels, and unmanned aerial vehicles (UAVs) as well as international patent applications. The research shows that China is still struggling to develop manufacturing processes for advanced semiconductors, but it predicts that Huawei’s semiconductors will soon outperform Nvidia’s, with China increasing its general chip self-sufficiency to 40% by 2030.

[Body-by-Guinness]

An apt consideration of Rubio’s perspective where China is concerned:

Rubio brings China Realism to the State Department
Senator portrays as fierce China hawk but his deep knowledge of China’s economic success could set the stage for a Nixon-like grand bargain

By DAVID P GOLDMAN
NOVEMBER 12, 2024

Marco Rubio has a thing or two to say about China. Image: X Screengrab

Marco Rubio will be the next Secretary of State in the second Trump administration, according to media reports.

The senior senator from Florida presents as a vociferous China hawk, like the whole of his Republican party, but with a key distinction: In September, Rubio published a 60-page report, “The World China Made,” with a comprehensive and painstakingly researched analysis of

Some commentators already speculate that the selection of a bona fide China hawk like Rubio might prepare a grand bargain with China, like Nixon’s 1972 China trip.

A credible anti-Communist like Nixon could make a deal with China without accusations of selling out, and Secretary of State Rubio could repeat the exercise, according to this line of thinking. Without second-guessing the incoming president’s negotiating strategy with China, Rubio’s published thoughts about China speak for themselves.

Full disclosure: the report cites Asia Times and this writer in particular, including our groundbreaking analysis of China’s export success in the Global South. By building factories in third countries, China circumvented the Trump and Biden tariffs by building supply chains for Vietnam, Mexico, India and other countries to export to the United States.


A bright line divides realists from Utopians among Washington’s China hawks. Neo-conservatives like Dan Blumenthal, popular publicists like Gordon Chang and Peter Zeihan, and true believers like former Secretary of State and CIA director Michael Pompeo believe that China is about to collapse and that the United States should hasten the fall by confronting China militarily and economically.

A senior official of the first Trump administration told this writer in 2018 that the then-president erred by striking a deal with China’s number two telecom equipment company, ZTE; if the US had shut it down, he averred, mobs of unemployed engineers would have marched on Beijing and overthrown Xi Jinping.

On the other side are realists who may detest China and accuse it of nefarious behavior but nonetheless recognize that China has made remarkable accomplishments in high-tech industry at home and in global trade. Rubio is the best-informed among the realists and he dismisses the Utopian vision in the conclusion of his report:

Commentary on China’s economy swings wildly between extremes. On the one hand, the Chinese economy is often portrayed as deeply troubled, perhaps even on the verge of collapse. Stories in this vein emphasize China’s very high debt burden, slowing growth, distressed real-estate sector, and aging population—all real problems. President Joe Biden repeated a version of this argument in an interview with Time magazine in June, where he stated that China’s economy is ‘on the brink.’…

It may be the case that China’s export- and manufacturing-oriented development model has been successful enough to propel China to the technology frontier in the short term, but not successful enough to help the country outrun its structural problems in the long term. This is certainly the narrative that many in Washington prefer, as it recalls our victory in the Cold War.

Then, an innovative, dynamic, and capitalist United States triumphed over an adversary with a gerontocratic and dysfunctional political class and a communist economic model incapable of managing the transition to the information age. It is tempting to believe that a similar triumph is now assured because our nation has been so successful in the past. We win, they lose. But an invincible belief in one’s own success is a recipe for complacency. And increasingly, this belief is at odds with the evidence in front of our faces.

If this report conveys any message, let it be that the United States cannot be complacent about Communist China. Think-tank scholars and economists may bank on China’s coming collapse. Beijing is taking the other side of that wager. It believes that manufacturing, exports, and ‘new quality productive forces’ are the keys to regime survival and indeed to the “great rejuvenation of the Chinese nation.” It believes that technology and production will enable it to preserve its communist system while becoming a rich country.

So far, it has succeeded in blazing this alternative development path. But suppose today is the high-water mark of China’s power. Even in such an optimistic scenario, the CCP will still present a real, existential threat to American industry and workers for years to come. And Communist China will still be a more formidable adversary than any the United States has faced in living memory. At this point, the burden of proof should be on the critics who insist the CCP’s project is doomed to fail.”


Some highlights from Rubio’s report include:

China leads the world in installations of industrial robots and installed more robots in 2022 than the rest of the world did combined.
China’s robot density surpassed the United States’ in 2021, a striking feat given the size of China’s manufacturing workforce and wage levels relative to our own.

Chinese smart manufacturing is enabled by its vast 5G telecommunications network, composed of more than 3.5 million 5G base stations.
Homegrown Chinese firms are helping China break its dependence on imported robots and machine tools. Despite record installations, China’s imports of industrial robots have declined the past two years. This is due to the steadily increasing business of Chinese firms, which had an estimated 35.5% domestic market. share in 2022, up from 17.5% a decade ago. China’s position in the highly fragmented machine-tool market is even stronger, with Chinese producers accounting for nearly a third of global production in 2022.

Chinese companies are establishing global value chains, which include sophisticated factories that will allow them to enter foreign markets and tamp down criticism about export practices.

Rubio’s message is that the United States has to make extraordinary efforts to stay ahead of China and should not delude itself that a stroke of the pen can hold back this technological behemoth.

The foreign policy conclusions that suggest themselves on the strength of this analysis are not hard to deduce.

Follow David P Goldman on X at @davidpgoldman

https://asiatimes.com/2024/11/rubio-brings-china-realism-to-the-state-department/

[ccp]

https://www.msn.com/en-us/news/world/china-s-ngad-white-emperor-6th-generation-fighter-is-a-problem-for-the-air-force/ar-AA1u5FD1?ocid=msedgntp&pc=DCTS&cvid=605ff7d5453f4ae1944021a1246aa84c&ei=17#fullscreen

Chinese :


https://www.bing.com/images/search?q=chinese+ancient+war+helmet&qpvt=chinese+ancient+war+helmit&form=IQFRML&first=1

Looks more Japanese :

https://www.bing.com/images/search?q=samurai+war+helmet&qpvt=samuri+war+helmet&form=IGRE&first=1

[Crafty_Dog]

Gents: 

We have a number of threads with "China" in the subject line.

I picture this particular one more for domestic Chinese matters.  Others more likely will fit best in the US-China thread or the Military thread.