As communist China turns 75 can Xi fix its economy?

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Getty Images People walk past a giant screen outside a shopping mall which displays a sign marking the 75th anniversary of the founding of the People's Republic of China, on the third day of a week-long National Day holidays in Beijing on 3 October, 2024.Getty Images

The ruling Communist Party unveiled a number of methods to boost China’s struggling economy as it prepared to observe its Golden Week trip and commemorate its 75th anniversary.

The plans included support for the country’s crisis-hit home business, support for the investment industry, money handouts for the weak and more government spending.

Following the announcements, stocks in mainland China and Hong Kong experienced report benefits.

However, economists caution that the policies may not be sufficient to solve China’s financial difficulties.

Some of the new measures announced by the People’s Bank of China ( PBOC ) on 24 September took direct aim at the country’s beaten-down stock market.

The new tools included funding worth 800bn yuan ($ 114bn, £85.6bn ) that can be borrowed by insurers, brokers and asset managers to buy shares.

Pan Gongsheng, the governor, added that the central banks had assistance listed companies that wanted to buy back their own shares. He also announced plans to lower borrowing costs and allow banks to increase their financing.

Only two days after the PBOC’s news, Xi Jinping chaired a shock economy-focused conference of the country’s best officials, known as the Politburo.

Authorities made the promise to increase government spending to help the economy.

The standard Shanghai Composite Index rose by more than 8 % on Monday, the day before China began its weeklong vacation, making it its best day since the global financial crisis of 2008, when it reached its peak. The action marked the end of a 20 % increase over the course of the previous five days of protest.

The Hang Seng in Hong Kong increased by over 6 % the day after businesses closed on the island.

” Buyers loved the presentations”, China researcher, Bill Bishop said.

Mr. Xi has more pressing problems to address than just popping vodka lids, which investors may have had.

Getty Images China's President Xi Jinping speaks during a National Day reception on the eve of the 75th anniversary of the People's Republic of China.Getty Images

With the 75th anniversary of the Soviet Union’s establishment, The People’s Republic has been in existence for 74 years. Only the other big socialist sate, the Soviet Union, has since fallen.

The officials of China’s leaders have long been concerned about avoiding the death of the Soviet Union, according to Alfred Wu, an associate professor at the Lee Kuan Yew School of Public Policy in Singapore.

At the forefront of officials’ minds will be boosting confidence in the broader economy amid growing concerns that it may miss its own 5% annual growth target.

” In China goals must be met, by any means necessary”, said Yuen Yuen Ang, professor of political economy at Johns Hopkins University.

The management problems that failing to meet them in 2024 may cause a slow-growth and low-confidence loop.

The decline in the nation’s property market, which started three years ago, has been one of the major drags on the second-largest economy in the world.

The lately unveiled stimulus package targeted the real estate sector in addition to laws designed to boost companies.

It includes steps to boost bank financing, lower loan rates, and lower the minimum down payment requirements for first-time home buyers.

However, some people question whether these actions will be sufficient to stabilize the housing industry.

” Those procedures are delightful but unlikely to move the needle many in isolation”, said Harry Murphy Cruise, an analyst at Moody’s Analytics.

” China’s weakness stems from a crisis of confidence, not one of credit, firms and families do n’t want to borrow, regardless of how cheap it is to do so”.

Leaders pledged to use state funds to increase economic growth at the Politburo program and go beyond the interest rate reductions.

However, the officials provided much information about the size and scope of government spending aside from establishing priorities like stabilizing the housing market, encouraging usage, and boosting employment.

” If the fiscal signal fall short of market expectations, owners could be disappointed”, warned Qian Wang, chief economist for the Asia Pacific region at Vanguard.

” In contrast, cyclical plan signal does not correct the structural issues”, Ms Wang noted, hinting that without deeper changes the difficulties China’s economy experience will not go away.

Economics believe that the real estate market’s deepening issues are essential to rebalancing the business as a whole.

The most expensive expenditure is in real estate, and falling home prices have contributed to consumer confidence being sluggish.

” Ensuring the distribution of pre-sold but empty houses had been key”, said a word from Sophie Altermatt, an analyst with Julius Baer.

Governmental assistance for household incomes must move beyond one-off transfers and be provided by improved pension and social protection systems in order to boost domestic consumption on a green basis.

Getty Images Unfinished project of Evergrande Cultural Tourism City in Zhenjiang City, China.Getty Images

On the day of the 75th celebration, an editor in the state-controlled paper, People’s Daily, struck an cheerful voice, recognising that “while the journey back remains challenging, the potential is promising”.

According to the article, concepts created by President Xi such as “high-quality development” and “new productive forces” are key to unlocking that path to a better future.

The emphasis on those concepts is a result of Xi’s desire to shift from the traditional fast growth drivers, such as investment in property and infrastructure, to create a more balanced economy based on high-end industries.

The challenge China faces, according to Ms Ang, is that the “old and the new economies are deeply intertwined, if the old economy falters too quickly, it will inevitably hinder the rise of the new”.

The leadership has come to terms with this and is taking action accordingly.

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Chinese stocks cool down as investors check reality – Asia Times

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After a week-long rally, Hong Kong-listed Chinese stocks returned on Thursday after economists were unable to accept the financial stimulus that the People’s Bank of China ( PBoC ) unveiled last week could put an end to China’s property crisis. &nbsp,

The Hang Seng Index, a benchmark of Hong Kong companies, fell 1.5 % to close at 22, 113 on Thursday. In the six trading days following the PBoC’s announcement of a number of monetary easing measures on September 24, the index increased by 4, 196 points, or 23 %. &nbsp,

Chinese property securities, which had gone over by 70-90 % over the past few years, even went on a rollercoaster ride in the past year.

Longfor Group decreased 9.5 % to HK$ 16.98 ( US$ 2.19 ) on Thursday after surging by 114 % in the previous six trading days. After increasing by 273 % from September 23 to October 2, Country Garden dropped 12.1 % on Thursday. &nbsp,

Shares of Agile Group were down 15.9 % to HK$ 1.64 on Thursday after a 353 % surge. China Vanke softened 1.2 % to HK$ 11.86 after a 163 % increase. &nbsp,

Since September 23, the Shanghai Composite Index has increased by 21 % to close at 3,335. Due to National Day breaks, the A-share marketplaces were closed the rest of the year. &nbsp,

According to an ordinary prediction made by 25 Foreign economists who were approached by Nikkei, China’s gross domestic product is then projected to increase by 4.5 to 5.5 % for the entire year of 2024. This is down from the previous survey that was conducted in July. &nbsp,

Of the 25 economics, 17 lowered their perspectives while nine maintained their prediction. According to Nikkei, the third quarter’s GDP growth rate for China was 4.6 %, compared to 4.9 % for the same period last year.

On September 24, the PBoC made its strategies to lower borrowing costs and increase financing to businesses. &nbsp,

In order to provide borrowers with an additional 1 trillion yuan ( US$ 143 billion ) of loans, it initially reduced Chinese banks ‘ reserve requirement ratios by 50 basis points. Additionally, it decreased the reverse mortgage rate for 14 days by 10 base items, reaching 1.85 %.

A number of fiscal measures were introduced by the central government to encourage the desire part of the business. Additionally, it urged local institutions to rest their house laws to stop falling house prices. &nbsp,

According to academics at PGIM, previously known as Prudential Investment Management, the lowering of second home purchase restrictions “demonstrates some willingness to expand hands of residential real estate expense.” &nbsp,

” The intention is unlikely to revive real property to the point where it causes a private wealth consequence,” they claim. Instead, it’s likely to work to remove excess stock from the industry to prevent further decline in real estate prices. &nbsp,

The government’s financial easing and recently announced fiscal measures, including those involving child benefit support, some child benefit assistance, and pension reform initiatives, are expected to aid China in meeting its 5 % growth target over the coming year, according to PGIM economics. &nbsp,

They say that prior to last week’s announcements, China was growing at about 3 % annually, which is solidly below authorities ‘ stated annual growth target of 5 %. &nbsp,

” Despite&nbsp, the&nbsp, current&nbsp, surge&nbsp, in&nbsp, market&nbsp, enthusiasm, &nbsp, the&nbsp, lasting&nbsp, effects&nbsp, may have more coverage helps and take time to present,” Alicia Garcia Herrero, chief scholar in Asia Pacific region, Natixis CIB Research, says in a study review. The true test will be whether the financial underpinnings will change.

” China’s economy is now dealing with major issues&nbsp, such&nbsp, as&nbsp, persistently&nbsp, low&nbsp, prices, poor real&nbsp, estate&nbsp, costs, &nbsp, and&nbsp, declining record need,” she says”. Just after we&nbsp, see actual improvements in these areas may market confidence be completely restored.”

Limitations of stimuli

Some experts speculated that the PBoC’s price reductions may cause asset bubbles and lower margins for Chinese banks.

According to Duncan Innes-Ker, senior director of Fitch Wire at Fitch Ratings,” We expect bank net interest margins ( NIMs) to remain pressure-stricken in the second half of this year and the entire year of 2025.” Although rate reductions will improve asset quality, we also anticipate a moderate increase in the number of affected loans rated banks will have as a result of the slowdown in growth in 2025.

Besides, he says Fitch’s calculations show that outstanding bonds issued by local government financing vehicles ( LGFVs ) increased by 3.1 % year-on-year in June 2024.

” We expect LGFV debts to continue to grow in 2024, albeit at a slower rate than the 8.8 % boost in 2024, “he adds. &nbsp,

A Beijing-based author claims in an article that the PBoC’s most recent price cut is a significant step to try to improve the Chinese market but it needs more time to evaluate whether or not it will work. Policy makers does take significant steps to stop an economic sluggishness while putting an emphasis on economic reform to achieve steady long-term growth.

He recommends that the government be aware that rate increases could lead to asset bubbles and raise systemic economic risks without actually causing a rise in corporate investment. &nbsp,

Read: China releases pleasant flood of market-friendly signal

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Indonesian miner BUMA secures 1 trillion Rupiah bond issuance | FinanceAsia

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Mining services firm Bukit Makmur Mandiri Utama (BUMA), the principal subsidiary of Indonesia Stock Exchange-listed Delta Dunia Makmur, has completed the successful issuance of the BUMA II 2024 Rupiah bonds (BUMA II 2024 bonds) with a total value of Rp1 trillion ($65.7 million).

The bonds were oversubscribed by 1.4 times and were issued in three series: Series A with a nominal value of Rp251 billion at a fixed interest rate of 7.25% per annum, maturing in 370 calendar days; Series B with a nominal value of Rp332.71 billion at a fixed interest rate of 9.25% per annum, maturing in three years; Series C with a nominal value of Rp416.26 billion at a fixed interest rate of 9.75% per annum, maturing in five years.

A “wide range” of Indonesian pension funds, mutual funds, insurance companies, asset managers, and banks invested in the offering, a BUMA spokesperson told FinanceAsia.   

Indra Kanoena, president director of BUMA, commented, “The strong market response to BUMA II 2024 bond offering reinforces confidence in BUMA’s strategic direction, robust cash flow management, and credit profile. This bonds issuance allows us to further diversify and solidify our financial foundation, driving growth in our business while strengthening our position as a leading mining service provider and advancing toward becoming a diversified global mining company.”

The proceeds will be used to manage its debt maturity profile and fuel future growth. BUMA has operations in Indonesia and Australia, and in June this year it bought the Atlantic Carbon Group in Pennsylvania for around $122 million, and subsequently BUMA became the leading producer of anthracite coal in the US. 

42.29% of the proceeds, amounting to Rp422.9 billion, is being allocated to repay debt under BUMA I 2023 Series A, which matures on January 8, 2025. Additionally, 28.86% of the funds will be used for capital expenditure to purchase heavy equipment, enhancing BUMA’s production capacity and operational efficiency, the media release said. 

The remaining 28.85% will support BUMA’s ongoing operational activities, enhancing the company’s ability to manage cash flows and control costs effectively.

The issuance has further diversified the company’s financing strategy, which consists of both USD and IDR bonds, conventional and Shariah bank loans, and leasing financing schemes. The strategy strengthens the company’s financial resilience, enhances its ability to navigate market volatility, broadens its financial base, placing the company in a better position for future growth, according to the media release.

The BUMA II 2024 bonds received an A+ rating from Pemeringkat Efek Indonesia (Pefindo) and Fitch Ratings. BNI Sekuritas and Trimegah Sekuritas Indonesiawere the joint lead underwriters for the bonds’ issuance.

Delta Dunia Group also owns two new subsidiaries: Bukit Teknologi Digital (BTech), offering mining technology solutions, and BISA Ruang Nuswantara (BIRU), a social entity dedicated to education, vocational schools, and fostering a circular economy. In July 2024, the group established Katalis Investama Mandiri to support its long-term strategy in environmental, social and governance (ESG).


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Risks rising for Asian banks from climate change | FinanceAsia

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Bankers are assessing how these dangers are playing out for their risks and how the so-called” passive” credit risk may be growing as a result of the recent severe storms that have ravaged Asia Pacific ( Apac ).

In early September, Super Typhoon Yagi caused billions of dollars of financial losses and cost hundreds of lives across Hainan, Guandong, the Philippines, Vietnam, Myanmar, and to a lesser degree Hong Kong. Banks need to realize how climate change makes lending more prone to risk because the insurance gap is also significant throughout the area. Banks are currently protected by ( re )insurance against the most extreme weather events, but if that becomes more expensive or difficult to access, the physical risks of climate change become more directly transmitted to the banks.

Tom Mortlock, weather threat expert guide – analytics, Apac, Aon, told FinanceAsia:” Financial institutions and the stream of credit is key to economic development across Asia, but so too is the insurance that sits behind this, that de-risks the lending. Sadly, Asia’s plan distance is one of the largest in the world, with only 14 % of economic costs covered by insurance in 2023, making banking in areas with high climate risk a potentially dangerous task.

Why is climate change important for financial institutions? is a report that Aon has just released.

Mortlock remarked,” Climate change is increasing the underlying risk profile in many locations and over time scales that banks are lending on. Low insurance coverage and high climate risk, combined with low insurance coverage and high climate risk, can pose a” silent” credit risk on lenders ‘ books, which has so far gone unnoticed.

Analytical analysis might be essential to weighing the risks. We are now starting to see a variety of financial institutions use traditional insurance-based analytics to understand their climate risk exposure and incorporate this into their loan origination and risk appetite decisions, according to Mortlock. &nbsp,

Although extreme weather is almost unavoidable in every region, some Asian cities are much better suited to extreme weather than others thanks to investments in drainage systems.

The Climate Risk Group’s Head of Corporate and Financing Sector Engagement, Philip Tapsall, head of the Cross-Department Initiative, stated:” Hong Kong is better prepared than other cities and regions for extreme weather events that are expected to worsen with climate change, particularly typhoons and flooding.”

However, banks operating in Hong Kong are significantly more exposed to less developed regions like south-eastern China and Southeast Asia ( SEA ), where climate change raises financial risks to balance sheets due to direct losses and economic effects.

Exposures can be caused by disruptions to trade, construction delays in supply chains, or direct financial losses caused by bank office shut downs, etc. &nbsp,

In order to help banks assess their physical risks to climate change in the city earlier this year, XDI collaborated with the Hong Kong Monetary Authority and KPMG. &nbsp,

Regulation rising

Aon’s Mortlock also noted a rise in the region’s incoming regulatory issues.

He noted that” we have a raft of climate-related regulation coming in across Asian jurisdictions where businesses will have to start making their climate related risks known to the market.” In fact, according to some analysis we conducted, over 10,000 listed companies will be required to disclose climate information by 2027 for the Asia-Pacific region.

According to Mortlock, “at the same time, regulators are beginning to conduct their own climate stress tests on the financial services sector to make sure there is enough money in the system to withstand climate shocks both now and in the future,” &nbsp,

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Stocks fall, yen rises as Ishiba takes helm in Japan – Asia Times

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Sanae Takaichi, a protégé of former prime minister Shinzo Abe and a supporter of his stock market-friendly Abenomics, won the Liberal Democratic Party’s ( LDP ) first-round presidential election on Friday, with support from stock market investors and currency traders.

In that first round, Takaichi received 181 votes, followed by Shigeru Ishiba with 154, Shinjiro Koizumi ( backed by ex-premier Yoshihide Suga ) with 136 and six other candidates who lagged far behind. Financial experts, who had ranked Takaichi as their top selection in an Asahi paper surveys, celebrated in progress.

The Nikkei 225 rose 1, 959.30 items, or 5.2 %, in two weeks to crest at 39, 829.56 on Friday afternoon after the first-round voting. But buyer hopes were dashed when Ishiba won the run-off, 215 to 194, to be party chief and almost surely Japan’s future prime minister.

The Nikkei 225 Futures index dropped about 6 % in the after-hours session on Friday. The Nikkei 225 itself lost 1, 910.01 points, or 4.8 %, on Monday ( September 30 ), falling back to 37, 919.55.

Takaichi publicly declared her antagonism to higher interest rates, endearing herself to stock market investors. She favors monetary easing and stronger fiscal stimulus, much like her later coach Abe.

She said, “Economic development comes first and foremost, and that’s what people are shocked by the price of tomatoes and almost everything else these time.”

Ishiba, on the other hand, supports Bank of Japan Governor Kazuo Ueda’s scheme of gradually raising costs to maintain the yen, which had been dropping like a stone, and tame prices.

Ishiba added that he would think about raising corporate and financial money fees, which may improve the taxation system in Japan and lessen its enormous government deficit.

Soon after Ishiba’s triumph was confirmed, the yen jumped from 146.2 to 143.3 to the penny. It therefore continued to rise, reaching 141.65 on Monday.

The share prices of Chinese manufacturers, on the other hand, were pounded. Toyota, which was up 2.0 % on Friday, dropped 7.6 % on Monday. With the notable exception of bankers, which may do nicely as interest rates rise, nearly every industry was over.

The yield on 10-year Japanese government bonds rose 0.045ppts to 0.85 %. The BOJ’s policy rate is 0.25 %.

Financial business owners may initially be disappointed, but Ishiba is supported by Chinese companies. The president of the Japan Chamber of Commerce and Industry described Ishiba as” a competent policymaker who has addressed numerous obstacles head-on,” as reported by Nippon Television.

The Chamber of Commerce, like Ishiba, is dedicated to the advancement of regional economy and the support of small and medium-sized businesses.

The chairman of Keidanren ( Japan Business Federation ), said that Ishiba is” the right leader to drive forward transformation” in the current challenging environment. The tone of Japan Inc. is typically referred to as Kaidanren.

Furthermore, an Asahi poll showed Ishiba to be the most popular candidate among the general public, supported by 26 % of respondents compared with Takaichi’s 11 %.

In the end, the LDP opted for practice and expediency over a rehashing of financial plans that were developed over a decade ago for a unique financial period. At a public vote that Ishiba intends to call on October 27, the LDP’s option may be tested.

Stock market experts chose Takaichi over the LDP debate’s first-round results, failing to consider where former prime minister Suga did vote Koizumi’s support in the two-candidate run-off.

Looking for short-term profits, they fell for Takaichi’s go-for-growth repeat of Abenomics. However, both Ishiba and the general public prefer Ishiba. As the LDP’s trust recovers among voters, the opposition Constitutional Democratic Party is in a hard place.

Following this poet on&nbsp, X: @ScottFo83517667

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Cause to buy, cause to sell China’s new bull market – Asia Times

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As Beijing’s signal campaign sends China stocks skyrocketing, matter analyst Stephen Jen&nbsp, among the bull who think China’s biggest protest since 2008 is just getting started.

” Foreign equities&nbsp, are really devalued”, says Jen, the chief executive officer of Eurizon SLJ. Because “investors are so thin everything Taiwanese”, he notes,” a severe rally is entirely feasible”.

Chinese shares rose for a ninth straight day on Monday ( September 30 ) thanks to China’s bold moves last week to slash interest rates, lower mortgage rates, relax regulations for homebuyers in major cities, reduce the amount of cash banks must keep in reserve, and telegraphed moves of stimulus to come.

Today’s wave by as much as 9.1 % in the standard CSI 300 Catalog is the biggest since 2015, a month drenched in relevance for President Xi Jinping’s state. In July and August 2015, Shanghai shares plunged to a third of their worth in just three months.

Fast-forward to the present, the People’s Bank of China’s ( PBOC ) actions, coupled with the US Federal Reserve’s big easing and falling global oil prices, mean China’s risk assets “ought to do very well”, Jen says. ” After the US vote, I expect world stocks to march profoundly into year-end”, he adds.

No so fast, warns Stephen Roach, past Asia-region chair for Morgan Stanley. Is China’s long-term financial problem over now that the Politburo has issued a message of further emergency meetings, asks economist Roach? If it were only that easy”.

Roach remains “increasingly concerned that China was at risk of falling into a&nbsp, Japanese-like quagmire&nbsp, –&nbsp, a&nbsp, balance strip recession&nbsp, characterized by slowdown and depreciation as an extension of the bursting of a big debt-fueled property bubble”.

Matter Roach among the academics wondering what, oh what, the share bulls rushing China’s means are thinking.

In fact, investors are rushing up into everything China without project plans to restore the still troubled real estate market, rebalance growth engines toward services and apart from exports, enhance local governments ‘ struggling balance sheets, and create strong safety nets to encourage China’s families to save less and spend more.

President Xi’s staff should be focused on the gap between those reversing China little posts, which Bank of America Corp discovered was one of the most crowded industry in the world, and the unrelenting China bears if it wants to keep the bulls work going.

That means entering the march with bold plans to carry out the liberalizing measures his Communist Party has promised to do since 2013 but has failed to deliver.

For today, China’s rapid return to economic stimulus setting has the nation’s attention. However, Zhiwei Zhang, an economist at Pinpoint Asset Management, is right to say that” the key policy to address the macro challenge remains to be fiscal.

In order to help China meet its 5 % economic growth target, local media are buzzing about an additional 2 trillion yuan ( US$ 285 ) worth of bond sales. Much more may be needed, nevertheless, to improve poor household demand and offset headwinds from overseas.

Japan’s increase in interest rates to their highest level since 2008 poses a risk to other countries. Another shows signs of strain in the US economy as a contentious election draws near, with both Democrats and Republicans threatening new tariffs on everything made in China.

Last week, PBOC Governor&nbsp, Pan Gongsheng&nbsp, unveiled a barrage of support measures, including a reduction in the seven-day reverse repurchase rate to 1.5 % from 1.7 %. Additionally, the PBOC announced the largest-ever rate reduction for its one-year policy loans, cutting loan prime rates and deposit rates.

The Politburo, Beijing’s top decision-making body, called for a “forceful” implementation of these and other measures supposedly to come. Additionally, it highlighted a new need to” stop declining” the real estate market.

These efforts might include removing some of the restrictions on home purchases that are still in place. Top cities could impose restrictions on visitors who are not from their own neighborhoods. In other words, liberalizing China’s “hukou” residence permit system.

Beijing has n’t yet provided a detailed timeline or procedure for getting bad assets off the balance sheets of large property developers to lessen their default risks. Or to encourage local governments to purchase unfinished real estate projects without further deteriorating their already fragile fiscal standing.

Premier Xi Qiang’s team has also made significant efforts to make more market space available for small and medium-sized private companies by reducing the dominance of state-owned enterprises. And global investors still are n’t clear on the state of Xi’s crackdown on China’s biggest tech companies.

Roach is one of the people who is concerned that last week’s Politburo statement only “paid lip service to fiscal stimulus imperatives,” even on fiscal issues. These actions were more likely to be viewed as broad promises than as a comprehensive list of planned actions.

Roach points out that while the Politburo vowed to stop the housing market’s decline, policy choices were made in support of this goal, primarily through lower mortgage rates, downpayment requirements for second homes, and lower interest rates on so-called social housing.

Roach remarks that the long-awaited fiscal program, which would absorb the surplus of unsold homes and turn it into low-income public housing, had a notable lack of detail.

China continues to be wary of implementing the kind of fiscal bazooka that was so successful in sparkeding its recovery in 2009-10, like Japan, where fiscal actions in the 1990s were repeatedly strained by rising public sector indebtedness. And perhaps that’s with good reason”, he says.

Roach points out that the Chinese government’s debt-to-gross domestic product ratio was 85 % in early 2024, nearly three times what it was in 2009. Following Lehman Brothers ‘ demise in the US, Beijing finally started using the stimulus apparatus.

It’s imperative, though, that Team Xi do more to deal with investors ‘ underlying concerns about China’s financial system than just throw money at the problem, economists say.

Last week, the PBOC cheered stock punters by unveiling a new 500 billion yuan ($ 71 billion ) swap facility that funds, securities firms and insurance companies can tap to buy equities. The facility could be increased to 1.5 trillion yuan ($ 214 billion ).

Beijing is also introducing a lending facility for publicly traded companies to buy back shares and increase holdings. It will start at 300 billion yuan ($ 42 billion ) and possibly grow to 900 billion yuan ($ 128 billion ). Additionally, a type of market stabilization fund might be in the works.

Last week, Wu Qing, the chairman of China Securities Regulatory Commission, said Beijing will roll out moves to encourage mergers and acquisitions.

With all that, there’s little doubt the stimulus floodgates have been opened. We believe that the persistent growth weakness has hit policymakers ‘ pain threshold, and the policy put has been triggered, as Goldman Sachs analysts wrote in a note.

Yet Team Xi needs to combine supply-side actions to further strengthen China’s investment environment for the long run to ensure the bull run continues.

As Roach explains, comparisons with Japan are far from perfect. There are many characteristics of China that are fundamentally different from those that contributed to Japan’s numerous “lost decades,” he claims.

” Other than being a large developing economy with several still untapped sources of future growth– namely, &nbsp, household consumption, urbanization, and&nbsp, insufficient capital endowment&nbsp, of its large workforce – China also benefits from understanding the lessons of Japan”.

For now, Roach admits,” China’s seemingly outsized policy stimulus took most of us by surprise”. He adds that” the financial authorities apparently came to the rescue with their own version of a “big bazooka” just as we had grownaccustomed to Beijing’s grudging response to increasingly serious economic problems. ‘&nbsp, At least that’s the verdict of the Chinese equity market”.

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China wakes, US builds, woke wanes and tariffs tally – Asia Times

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Your weekly, almost weekly Noahpinion collection of intriguing news from around the world is now in order.

1. China accepts the fact of the economic system.

I made the argument two weeks ago that China is experiencing a lack of global demand, and that the answer would be to have the central authorities A) loan out banks and local government funding entities, and B) apply fiscal and monetary stimulus. Maybe Xi Jinping reads my site. China is implementing some more significant signal steps:

In a unique staged media briefing broadcast live around the world on Tuesday, the People’s Bank of China led the charge to rekindle mood, opening its stock market and lowering borrowing costs. The next day it kept the good news flowing by&nbsp, lowering&nbsp, the interest rate on its one-year money to lenders by the most on history, while the government issued exceptional cash pamphlets and floated new incentives for some homeless graduates…

The 24-man Politburo under the leadership of Xi made a second-quarter-of-a-kind promise on Thursday, adding more growth-boosting goodies, vowing to increase governmental spending, and making its first “declining” pledge to prevent property prices. The wave of policy announcements even revealed a new emphasis on boosting use, saying it was “necessary to listen to the concerns of the people.”…

Foreign companies soon soared. Xi’s state appears to be attempting to bail out the Chinese banking system, which is even more encouraging ( at least if you want China to keep growing ):

China’s largest state lenders may receive up to 1 trillion yuan ( US$ 142 billion ) of money to strengthen their capacity to support the country’s struggling economy. Such a move would be the first moment since the global financial crisis in 2008 that Beijing has injected money into its large businesses.

Injecting money refers to “giving businesses money,” for those who are unfamiliar. It implies a loan.

This is probably even more important than trigger, since getting banks lending once is the key to a sustained recovery. Foreign supporters have long held that the state and banks are one and the same because of the “unitary position” principle, which is applied to the “unitary state” concept.

That concept is probably incorrect. Foreign banks have their own subsidies, and fear getting culled by the state if they fail. Giving them a cushion against loss by injecting them with money helps them gain the confidence to give again.

The last step in this process would be to rescue China’s regional government financing systems, which have grown to be very significant in China’s regional economies. But only bailing out the banks and doing some significant fiscal and monetary stimulus may have a huge impact in terms of shortening and ameliorating China’s recession.

2. The “build something country”

US economic policy has been shifting toward industrial policy. A number of commentators who are opposed to this change have been quick to dismiss the entire endeavor as a result of seeing any signs of trouble. For instance, Matt Cole and Chris Nicholson wrote an op-ed in The Hill in March of this year that was so explosively titled” DE I killed the CHIPS Act.”

Their single piece of evidence for this bold thesis was that TSMC’s fab in Arizona was projected to have significant delays due to a dispute with local construction unions.

In fact, the labor dispute it referenced had already been resolved even before that disparaging op-ed was published. And just one month after the op-ed was published, TSMC was given the official receipt of its CHIPS Act funding and suddenly declared that its Arizona project was on schedule.

Now, less than six months later, &nbsp, Tim Culpan reports&nbsp, that TSMC’s Arizona plant has started making some chips for Apple. They’re producing a fairly advanced chip, and they’re reportedly producing good yields:

The A16 SoC from Apple, which debuted in the&nbsp, iPhone 14 Pro, was first introduced two years ago in the&nbsp, iPhone 14 Pro, and is currently being produced in small, but significant quantities at TSMC’s Fab 21 in Arizona. This puts the Arizona project on track to reach its&nbsp, production target in the first half of 2025.

This is a BFD. The US government’s$ 39 billion CHIPS for America Fund is the star project under the CHIPS Act. The fact that they chose the most advanced chip in terms of both volume and technology shows that Apple and TSMC want to start big…

Currently, TSMC produces yields in Arizona that are, in essence, neck and neck, slightly below what is enjoyed in Taiwan back home. Most important, though, is that improvements are moving so rapidly that true yield parity between Taiwan and Arizona is expected to be reached in coming months.

Everyone has egg on their face now that everyone leaped at the chance to call the CHIPS Act a failure after the initial delay report.

In addition, the Inflation Reduction Act, Biden’s other significant piece of industrial policy legislation, appears to be giving US solar manufacturing a significant boost. Solar manufacturers are &nbsp, ramping up production, and the US is getting the ability to build the pieces of the solar supply chain that it had previously outsourced entirely to China and other countries:

Source: Jesse Peltan &nbsp

Although this is still insignificant in comparison to what China can produce, it means that if a war breaks out, the US will not be able to use solar power.

Note that both the successes in chips and solar are cases where the private sector made most of the investment itself, and the US government simply&nbsp, prompted&nbsp, that investment with subsidies.

This contrasts starkly with the US government’s promise to build things itself, and which was stymied by its lack of state funding and its own byzantine permitting process.

A big lesson to be learned from this is that Matt Yglesias is correct, and that the US government has willfully squandered a lot of its state funding since the 1970s. Therefore, the most effective industrial policy, at least right now, is for government to act as the spur for the private sector to invest its own money.

The even more important lesson is that knee-jerk critics of industrial policy need to be a little more prudent and circumspective, or else they’ll keep coming off as silly when industrial policy succeeds. We need intelligent, thoughtful critics who can identify the problems, challenges, and drawbacks that are bound to be found in industrial policy. People who simply pounce on any whiff of difficulty are unhelpful.

3. Justifications for tariffs

The US government is becoming more hostile to Chinese imports all the time. The “de minimis” exemption, which allows Chinese companies like Temu and Shein to send Americans small, inexpensive packages without paying tariffs, has recently been made public by Biden. Additionally, Biden’s administration is putting a ban on Chinese components in any cars that are connected to the internet to prevent potential sabotage, considering an outright ban.

Meanwhile, Trump is going around promising tariffs, tariffs, and&nbsp, more tariffs&nbsp, as the solution to a variety of economic ills ( or just because&nbsp, he really likes tariffs ). Some people are talking about it, but this is not the election’s most important policy issue.

For instance, Kim Clausing, an economist, contends that the US should cut down on tax havens by reducing the incentive for offshoring in favor of tariffs. But I think that while this is a laudable move, it would n’t really do much vis-a-vis China, because China is not a tax haven. The reason Democrats have been favoring tariffs on China, which is&nbsp, national security, is really missing from Clausing’s proposal.

Meanwhile, Oren Cass has a post at the Atlantic in which he makes a general case for tariffs as a useful policy tool. Some excerpts:

[Economists ‘] first error is to only take into account the costs of tariffs, and not the benefits… [ D] omestic production has value beyond what market prices reflect… [ D] tarifs [d ] omestic production has value… to the extent that they combat those harms, they accordingly bring collective benefits…

Manufacturing does matter, as the effects of globalization have shown. It matters for national security, ensuring both the&nbsp, resilience of supply chains&nbsp, and the&nbsp, capacity of the defense-industrial base. It also has a significant impact on growth…

Manufacturing is the engine of innovation. As the McKinsey Global Institute has &nbsp, noted, the manufacturing sector plays an outsize role in private research spending. Complete supply chains and engineering expertise are followed when offshore manufacturing heads. Firms and workers positioned near the factory floor and close to competitors, suppliers, and customers benefit from the tight feedback loop between design and production, which is necessary for improvements in both.

Cass also argues that the harms from tariffs will be limited when foreign companies circumvent the tariffs by building their products in the US. Additionally, he makes note that tariffs do generate more tax revenue.

You’ll hear me saying similar things when I defend industrial policy because all of these arguments are reasonable. But there are two questions here that Cass does n’t really address.

First of all, I believe Cass has largely identified real externalities, but that does n’t imply that tariffs are the most efficient policy tool for addressing those externalities. &nbsp,

Tariffs ‘ effects are limited&nbsp, by exchange rate adjustment — when you put tariffs on China, the yuan gets cheaper, partially negating the effect of the tariff. Additionally, tariffs on intermediate goods actually exacerbate many of the externalities Cass discusses by preventing domestic manufacturers from receiving affordable inputs for their production processes. For national security reasons, it might be a cost that is worthwhile to pay, but it is a real cost.

And second, Cass ‘&nbsp, general&nbsp, defense of tariffs ignores many of the real, specifc features of Trump’s tariff proposals. Trump would impose tariffs on US allies rather than strengthen national security because it would stifle competition on both sides and prevent them from achieving economies of scale. Additionally, it would strain both sides ‘ defense-industrial bases.

So on both sides of the tariff debate, I still see too much debate about ideal policies, and not enough engagement with the specific policies being enacted or proposed. That said, I think the debate has significantly improved since it was a few years ago, which is good. I always want to see more of Clausing and Cass ‘ arguments made in a reasonable way rather than yell at ideological positions.

4. The onset of fatigue

The inert coagulum of a once highly reactive sap is the conservatism of a religion — its orthodoxy. — Eric Hoffer

Let’s talk about wokeness as long as we’re on the subject of identity politics from the year 2010. I wrote a number of posts about this sociocultural phenomenon back in 2021 and this one is the one I summarized here.

My basic thesis is that wokeness is a Protestant-derived American belief system and social phenomenon that has been around since before the founding of the United States, and that it periodically resurfaces for a while when technological and economic changes allow.

And my fundamental prediction is that after the efflorescence of the 2010s, wokeness will fade into a waxy orthodoxy, ruling a shrinking number of university administrations, school boards, and online communities, before reappearing on the scene many decades from now.

Musa al-Gharbi wrote a great post last year that pulled together various data sources to show that the” Great Awakening” of the 2010s is waning. Now The Economist has &nbsp, a similar post, with different data sources. Several examples are provided:

[ D] discussion and support for woke views reached their peak in America in the early 2020s and have since declined significantly… Almost everywhere we looked, a similar trend emerged: wokeness increased sharply in 2015 as Donald Trump entered the political fray, increased in the aftermath of# MeToo and Black Lives Matter, reached its highest point in 2021-22, and has since decreased…

In the most recent Gallup data, from earlier this year, 35 % of people said they worried” a great deal” about race relations, down from a peak of 48 % in 2021 but up from 17 % in 2014…In]General Social Survey ] data the view that discrimination is the main reason for differences in outcomes between races peaked in 2021 and fell…in 2022. Young people and those on the left have experienced some of the biggest rises and subsequent declines in woke thinking…

The share of Americans who view sexism as a serious issue or a moderately serious issue reached a record high of 70 % in 2018….

Pew finds that the share of people who believe someone can be a different sex from the one of their birth has fallen steadily since 2017, when it first asked the question. According to YouGov, the proportion of trans people who play for sports teams that match their chosen gender rather than their biological sex has increased from 53 % in 2022 to 61 % in 2024.

The use of the term” white privilege” in television reached its highest level in 2021, appearing roughly 2.5 times for every million words in the New York Times and The Times in 2020…

Mentions of DEI in earnings calls shot up almost five-fold between the first and third quarters of 2020…They peaked in the second quarter of 2021…They have since begun to drop sharply again…The number of people employed in DEI has fallen in the past few years.

This corresponds to my 2021 forecasts. And if I’m correct, this pattern will continue over the coming years, even as conservatives continue to find and highlight instances of wokeness in mainstream culture, including academia, and other progressive areas. Wokeness is an orthodoxy now, and orthodoxies are n’t fun and cool anymore.

However, wokeness is not particularly optimized for being a conservative set of rules and traditions, but rather for being a charismatic activist movement. So I anticipate that its decline will be quick, up until, of course, it resurrects. But that will be when you and I are very old or dead.

5. Unions versus automation

It’s very hard to be a pro-union pundit when&nbsp, unions make demands like this one:

About 45, 000 dockworkers along the US East and Gulf Coasts are threatening to strike on October 1st, a move that would shut down ports that handle about half the nation’s cargo from ships…

The International Longshoremen’s Union wants to see a total ban on automation of cranes, gates, and container movements used in 36 US ports…

A prolonged strike would almost certainly hurt the US economy. The union members anticipate going on their biggest fight against the automation of job functions at ports, according to Union President [ Union President ] Daggett.

We do n’t think robotics should supplant humans, he said. ” Especially a human being that’s historically performed that job”.…

According to experts, it’s unclear whether automation will cause layoffs in the Ports of Long Beach and Los Angeles, according to a study conducted by the Economic Roundtable of Los Angeles in 2022 that was funded by the West Coast dockworkers union…

However, another study conducted by a professor at the University of California, Berkeley that year, which was commissioned by port operators and shippers, found that paid hours for port union members increased by 11.2 % between 2015 and 2021, the same year.

At the huge Port of Rotterdam, one of the world’s most automated ports, union workers pushed for early-retirement packages and work-time reductions as a means to preserve jobs. And ultimately, a researcher from Erasmus University in the Netherlands discovered that mechanization did n’t lead to significant job losses.

In terms of automation, US ports outperform their counterparts in Asia and Europe. Analysts note that most US ports take longer to unload container ships than do those in Asia and Europe and suggest that without more automation, they could become even less competitive.

The prohibition of automation is only a means of destroying the goose that produces the golden eggs, ultimately causing harm to dockworkers. It also imposes a tax on the entire US economy. If you did n’t like the inflation of 2021, you should want more efficient, high-capacity automated ports. Instead of resuming self-defeating luddism, the US should emulate Rotterdam.

This shortened and reorganized article was originally published on Noah Smith’s Noahpinion&nbsp, Substack, and is now republished with kind permission. Read the original here &nbsp, and become a Noahopinion&nbsp, subscriber&nbsp, here.

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China property shares jump as major cities ease buying curbs

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After first-tier cities eased restrictions on home purchases shortly after the Politburo pledged to stop housing market declines, shares of Chinese property developers surged on Monday ( Sep 30 ). Hong Kong’s Hang Seng Mainland Properties Index jumped more than 10 per cent in first investing, and the island’s CSIContinue Reading

Chiang Mai dam opens spillway for 1st time in years

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PUBLISHED: 30 Sep 2024 at 06: 05

Water rushes out of the spillways of Mae Ngat Somboon Chon reservoir in Chiang Mai on Sunday at a rate of 110 cubic metres per second. (Photo: Irrigation Office 1 Chiang Mai)
On Sunday, liquid evaporates from the spillways of the Mae Ngat Somboon Chon pond in Chiang Mai at a rate of 110 cubic meters per second. ( Photo: Irrigation Office 1 Chiang Mai )

Officials in Chiang Mai province’s Mae Ngat Somboon Chon tank on Monday issued a warning to residents along the Mae Ngat and Ping river for potential storms, for the first time in 13 times.

According to reports in the media, the spillways of the Mae Ngat Somboon Chon pond on Sunday released 110 square meters of water per next. The release, regional officials said, will ending at 5pm on Monday.

People living on the lenders of the river were instructed to be on the lookout for sudden floods of water from upstream as water levels were anticipated to rise. The Thai Meteorological Department ( TMD) predicted further downpours will be expected in the upper Ping River basin until Tuesday, which the Royal Irrigation Department also announced on its Facebook page on Saturday.

The precipitation, which can be big in some locations, is likely to increase water flow in the Ping River and its tributaries. The RID warned that the dam’s emergency spillway could send 150 to 200 square meters of water downstream, which would have an impact on Chiang Mai city and additional downstream areas.

The groundwater spillway’s flow rate was increased to make room for more water and stop an unrestrained overflow, according to Chalermkiat Intakanok, project director.

The next time the government of Mae Ngat Somboon Chon tank was able to transfer water was in 2011, when severe flooding hit the entire nation.

Mr Chalermkiat said that although water levels along the Ping River at Nawarat Bridge have receded to 3.05 feet, which is below the critical stage, some places, including those around Chiang Mai’s economic area, remain flooded.

Clean-up initiatives are hindered by small water force, he said. Many people are now having trouble removing mud and debris because authorities have not yet dispatched liquid trucks to help.

Separately, the Department of Disaster Prevention and Mitigation ( DDPM) issued warnings to 63 provinces in the North, Northeast, Central Region and the South to be on alert for changing weather conditions. Storms and gusty winds may arise until Wednesday in all northern regions, all northern region regions, including Bangkok, and the southeastern state of Chumphon.

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