China’s weakened consumer spending leaves ‘a lot of work to do’ in driving economic growth
Policies are needed to improve livelihoods and support low-income earners, or analysts say China’s new plan to rely on domestic consumption could fall flat. Household debt has risen rapidly in China as more consumers turn to loans to make ends meet in times of economic hardship “To what extent the role of consumption in the overall economy will play depends in part on how future stimulus will be pursued,” Kuijs said. “While China has made good progress with increasing the role of the service sector, there has been little headway in raising the role of consumption in the last five years. That is in no small part because every time there is downward pressure on growth, the tried-and-tested way to stimulate the economy is by boosting investment.” UBS Securities’ economists, led by Wang Tao, painted a rosy picture for consumption. They expect China’s total consumption to grow faster than GDP in the next decade “as the middle class rises and the savings rate declines” due to improvements in the social safety net, they wrote in a research report last week. Total consumption in China is expected to increase by US$8 trillion to US$9 trillion in the next decade to reach US$17 trillion in 2030, they forecast.
China’s uneven recovery from Covid has been ‘understated,’ says S&P economist
China’s services sector has been slow to rebound from the Covid-19 pandemic, said Shaun Roache, chief economist for Asia-Pacific at S&P Global Ratings. Roache said that’s “one of the most understated aspect of China’s recovery.” China on Wednesday said its producer price index rose 1.7% in February compared to a year ago, while the consumer price index fell 0.2% in the same period.
China’s rising factory-gate prices show ‘market’s concerns about the inflation outlook have emerged’
Sharper-than-expected rise in producer price index is another reason to expect Beijing to tighten economic support policies, analysts say Commodity prices and inflation expectations could rise further in the coming months, given vaccine roll-outs and fiscal stimulus in major developed market economies
The EU–China investment deal is a missed opportunity for sustainable development
There’s room for improvement on environment and labour provisions in the draft Comprehensive Agreement on Investment, writes Joe Zhang After seven years of difficult negotiation, China and the European Union announced in December that a Comprehensive Agreement on Investment (CAI) had been reached “in principle”. You might expect a strong focus on sustainable development to be at the centre of the agreement. After all, it was reached during a pandemic and following strong statements from both sides favouring ambitious climate action and “building back better”. What better time to rethink and redesign traditional approaches to economic liberalisation? The European Commission released the CAI draft text in January following multiple requests from policymakers, policy influencers and the public. Many wanted to know whether the deal would yield the benefits both sides have promised. The text allows for a preliminary analysis of where the two parties have applied a sustainable development lens – and where they might have done more.
China February factory prices roar back, consumer deflation ebbs
China’s factory gate prices rose at the fastest pace since November 2018 in February as manufacturers raced to fill export orders, raising expectations for robust growth in the world’s second-largest economy in 2021, reported Reuters. The producer price index (PPI) rose 1.7% from a year earlier, National Bureau of Statistics data showed on Wednesday, compared with the median forecast for a 1.5% rise from a Reuters poll of analysts and speeding up from a 0.3% pickup in January. “We do not think the recent period of consumer price deflation is likely to persist. Shifting pork price base effects will nudge up food inflation, a tightening labour market will push up core inflation and energy inflation will rebound thanks to rising oil prices,” said Julian Evans-Pritchard, senior China economist at Capital Economics, in a note. “Given that officials have signaled a hawkish tilt in recent weeks, we think the People’s Bank of China will tighten policy this year,” he said.
China’s ‘two sessions’: Beijing promises level playing field but boosts support for state firms
The government’s new work report promises equal treatment for private and state-owned enterprises (SOE) But Beijing’s push for SOE innovation to reach tech self-sufficiency could undermine the goal, some analysts say “State and private economies are not in opposition to each other, but are complementary,” he said. “During the reconstruction of China’s industrial chains over the next five years, large state firms will undertake the responsibility to strengthen China’s dominance in large investment projects, while also producing many development opportunities for [privately-run] small and medium-sized enterprises Innovation will be the top task for state firms in China’s effort to reach technological self-sufficiency, the country’s state assets regulator said last month. “We will concentrate their resources and strengthen them to build a national strategic technology force,” said Hao Peng, chairman and Communist Party secretary of the State-owned Assets Supervision and Administration Commission (SASAC). Research to address the nation’s technological weak links – including in machine tools, high-end semiconductors, software, new materials and jet engines – are at the top of the agenda, he said.
Where Luxury Stands In China’s Consumption-Based Economy
China’s economy quickly rose from a manufacturing superpower to a mature service sector. But how will those changes impact global luxury brands? The growing importance of the service sector in China’s economy has influenced its GDP, with the service industry’s share of the national economy increasing to 54 percent of the GDP in 2020 and providing 60 percent of its total economic growth. The COVID-19 pandemic has precipitated the repatriation of wealth, with various Western countries imposing strict lockdowns and enforcing travel restrictions, forcing the Chinese to change their shopping habits. But unfortunately, the actual driving forces of luxury consumption in China are debt-ridden Gen-Z and millennial shoppers (the debt-to-income ratio of China’s post-90s generation climbed to 1,850 percent in 2018).
China’s debt-laden local governments urged not to ‘blindly expand’ post-Covid infrastructure projects
China’s top leadership has issued a warning about the ‘heavy debt burden’ of some local governments, saying greater monitoring is needed Total government debt totalled 46.55 trillion yuan (US$7.1 trillion) at the end of 2020, including 25.66 trillion yuan owed by local authorities
Two Sessions: Amid Uncertainty, China’s Quest for Bold Development
At a historical moment of hope and uncertainty, China pledges bold economic development, despite global tensions. China’s annual “Two Sessions” meeting has approved national priorities for 2021. Delivered by Premier Li Keqiang, the Government Work Report set a growth target of over 6 percent for Chinese economy for 2021, releasing a numeric goal after it was skipped in 2020, due to the COVID-19 pandemic. China plans to create more than 11 million new jobs in 2021, while keeping inflation rate (CPI) at 3 percent and cutting the deficit-to-GDP ratio to 3.2 percent. The goal is to increase annual R&D spending by more than 7 percent in the next five years, including foreign-funded R&D centers in China. Amid the COVID-19 pandemic and the severe global contraction, China’s 2020 real GDP growth climbed to 2.3 percent, making it the only major economy to grow. In 2021, international observers project China’s growth to rise up to 8 percent, due to a low base in 2020 and the ongoing recovery momentum. In addition to fiscal and monetary policies, government’s focus is increasingly on job creation and consumer prices that have a direct impact on per capita incomes. This is vital in light of the modernization goals of China’s 14th Five-Year Plan (2021-35).
China to cross high-income economy threshold by 2025: prominent economist
China is expected to step into the ranks of high-income economies during the 14th Five-Year Plan 2021-25 period, said Lin Yifu, a standing committee member of the Chinese People’s Political Consultative Conference (CPPCC) National Committee, dean and professor at the Institute of New Structural Economics of Peking University predicted on Tuesday.
China economy: new bank loans in February fall less than expected, as ‘real financing demand is very strong’
New loans total 1.36 trillion yuan (US$209 billion), surpassing analysts’ forecasts for 950 billion yuan February M2 money supply growth accelerates to 10.1 per cent from a year earlier, well above forecast for 9.4 per cent
China and US lay groundwork for first high-level meeting under Biden
Washington and Beijing are hammering out the details of the first high-level meeting between the rival powers since President Joe Biden took office, reported the Financial Times. The terms of the high-level engagement are still being negotiated but if successful could lead to Antony Blinken, secretary of state, and Jake Sullivan, national security adviser, meeting their Chinese counterparts, say four sources. One option would involve Blinken and Sullivan talking to Wang Yi, the Chinese foreign minister, and Yang Jiechi, the top Chinese foreign policy official, in Alaska, according to two of the sources. If Sullivan and Blinken meet Yang and Wang, it would be the first time a US national security adviser and secretary of state met jointly with Chinese officials.
EV battery supply chain firms seek diversification as Biden order shines more light on China reliance
Australian-listed BlackEarth and its German partner LuxCarbon GmbH have joined the European Battery Alliance The move came two weeks after US President Joe Biden ordered a review of American supply chains for critical products crucial to the tech and defence sectors
After NYSE delisting, China Telecom to list in Shanghai
China Telecom, one of China’s three biggest telecommunications operators, said Tuesday that its board had approved the decision to list its shares on the main board in Shanghai, following its suspension from trading in New York earlier this year. The move comes after then-President Donald Trump in November signed off on adding China’s three state-backed telecommunication companies to a US investment ban. The New York Stock Exchange (NYSE) in January said it would delist the companies, which also include China Mobile and China Unicom.
CONSUMERISM, COMMUNISM, AND CARTOONS: CHINESE YOUTH REJECT JACK MA
News of the suspension of Ant Group’s initial public offering, shocking to business-world observers, received a warm welcome among some corners of Chinese youth. Many of the primary users of Ant Finance’s premier micro-lending products, neither “shit youth” nor “little pinks,” have turned against the company in response to debt incurred through the apps, employee self-immolations, labor leader arrests, an incessant propaganda and censorship diet, and founder Jack Ma’s glowing rhetoric about “996” work culture. At the LA Times, Alice Su profiled young users’ Marxism-inspired rejections of Ant’s micro-lending services:
LinkedIn China halts new sign-ups to ‘respect law’
microsoft-owned social network LinkedIn has halted new member sign-ups for its service in China while it reviews its compliance with local laws, the company said in a statement. The careers-focused site has had a Chinese-language presence since 2014, when it decided to expand by agreeing to stick to strict censorship laws, and now has over 50 million users in the country.
China angered by UK envoy’s ‘inappropriate’ article
China summoned Britain’s ambassador in Beijing on Tuesday to lodge “stern representations” over an “inappropriate” article she wrote defending recent international media coverage on China, the foreign ministry said. Caroline Wilson’s article in Chinese was posted on the official WeChat account of the British embassy in Beijing last week, amid already tense relations between Britain and China over issues including Hong Kong, Xinjiang and the media.
The meaning behind the pageantry of China’s Two Sessions
As with all political rituals, the meetings serve important purposes In 2019, the year before COVID, total consumption, both public and private, still accounted for only around 55% of the economy, compared with 64% in 2000, according to China’s 2020 statistical yearbook. The new five-year plan will not be seen as credible if it contains few specific measures to raise household income. As we watch the proceedings of the Two Sessions, we should ignore the pageantry and focus on the substance of China’s new economic strategy.
Europe’s biggest party set to take tougher line on China, push Taiwan investment deal
The European People’s Party lends support for investment agreement with Beijing, but calls for ban on goods made in ‘re-education camps’ Draft policy paper calls for Taipei to be invited to take part in WHO meetings
Chip crunch spreads to world’s top industrial computer maker
The crunch in the global chip supply chain has spread to makers of industrial computers after Advantech, the world’s largest maker of the devices, said its revenues would be held back by a shortage of components.
Supply chains critical to Taiwan’s security
Tensions are rising in the Taiwan Strait. Chinese warplanes have been entering Taiwan’s air defence identification zone on an almost daily basis. Drawing on responses from foreign policy experts, the Council on Foreign Relations’ Preventive Priorities Survey has raised Taiwan to the level of a ‘Tier 1’ (high priority) contingency, with a recent report stating ‘Taiwan is the issue with the greatest potential to turn [US–China] competition into direct confrontation’.
In message to China, Joe Biden to meet fellow Quad leaders on Friday
This is the first such summit between the US president and the PMs of India, Japan and Australia, in an alliance seen as a bulwark against Beijing’s ambitions Timing of talks shows importance Biden places on ‘cooperation with our allies and partners in the Indo-Pacific’, White House spokeswoman says
China-India relations: Beijing should speed up hydropower project, Tibetan official says
Planning and environmental impact assessments for dams on Yarlung Tsangpo River ‘should be approved as soon as possible’, region’s Communist Party deputy chief says Chairman of development company said in November the project would help to ensure China’s ‘water resources security and homeland security’
Will Myanmar’s coup help China influence ASEAN?
On 16 January 2021, Chinese Foreign Minister Wang Yi concluded a visit to four ASEAN countries. One destination was Myanmar, the upcoming country coordinator of the ASEAN–China dialogue and now centre of international attention after the country’s military seized power. The Myanmar crisis is becoming increasingly tragic, with the military’s use of lethal force now killing over 60 protestors. China’s continued efforts to boost its influence in Southeast Asia will be no cakewalk. The incoming ASEAN–China country coordinator might at first blush appear more aligned with Beijing, but there is no guarantee that Myanmar will accommodate Chinese demands. Even with the risks to ASEAN centrality and unity, the grouping’s quiet diplomacy with Naypyidaw, coupled with support from regional partners, are likely to prevent a surge in Chinese regional influence.
‘Uncomfortable signal to China’: Japan’s Suga raises Hong Kong, South China Sea, Xinjiang in phone call with India’s Modi
Japanese PM Yoshihide Suga and India’s Narendra Modi hold phone call ahead of Quad meeting with US President Joe Biden and Australian leader Scott Morrison The pair pledge to realise a free and open Indo-Pacific as Japan expresses concern over China’s ‘attempts to change status quo’ in disputed seas
China building offensive, aggressive military, top US Pacific commander says
China is assembling an increasingly offensive military and expanding its regional footprint, as Beijing steps up efforts to supplant American military power in Asia, a top US commander warned Congress on Tuesday. “I cannot for the life of me understand some of the capabilities that they’re putting in the field unless it is an aggressive posture,” Adm. Philip Davidson, the head of US Indo-Pacific Command, said in testimony before the Senate Armed Services Committee. “I see them developing systems, capabilities and a posture that would indicate that they’re interested in aggression,” Davidson said.
ANALYSIS: Communist Party seeking China’s ‘rejuvenation’
The catchword “rejuvenation” has been tucked into the major speeches at China’s biggest political event of the year, the meeting of its 3,000-member legislature. It encapsulates the ruling Communist Party’s overriding long-term objective: To build the nation into a truly global power, one that commands respect from the rest of the world. That goal is intertwined with another one: retaining a hold on power. The party keeps a tight grip by censoring the digital space, controlling the news media and locking up those who publicly challenge its line. But it also tries to woo the public by stoking national pride in the country’s growing global clout to justify its continued rule after more than 70 years at the helm.
China will work with Russia on policy towards US, says ambassador to Moscow
Zhang Hanhui tells Russian news agency Interfax that the two countries have a ‘special responsibility’ to maintain world peace and stability Joe Biden has pledged to take a tough stance towards Beijing and Moscow and is working to strengthen relations with US allies
China and Russia to build international research station on the moon
China and Russia will build a lunar station that will be used to carry out a wide range of scientific research, says the China National Space Administration Last year, China became the first country in four decades to bring rocks from the moon back to earth
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