Why China’s productivity keeps slowing down – Asia Times

By:
On:
In: Asia

China’s market is having major issues. Despite the country’s dominance of international manufacturing, its existing criteria are starting to dwindle at a level much below that of developed countries.

China’s growth has slowed down dramatically, from around 6.5 % before the pandemic to 4.6 % now, and there are credible signs that even that number is&nbsp, seriously overstated. Notice this, this, this and this on the topic. I believe that all cited here is generally in agreement.

But in the history, China has another issue that’s weighing on its people’s wealth and even making it harder to answer to the economic crisis. This is the issue of&nbsp, severely lower productivity growth.

I don’t quite believe the official numbers that say China’s total factor productivity ( TFP ) has &nbsp, fallen&nbsp, over the past decade and a half, but it’s undeniable that it has grown much more slowly than in previous periods.

Why? After the global financial crisis of 2008, Paul Krugman factors to a regional shift toward real house, an economy with slower productivity growth. I think that’s surely a part of the story, but perhaps not all of it.

In a post from 2022, I looked at the different possible causes of China’s productivity growth declining long before it reached rich-world living requirements.

But in light of China’s recent challenges, which have only gotten worse in the adjacent 2.5 years, I thought it might be useful to publish it today. I believe what I wrote is fairly solid.

Reading books about China’s market from before 2018 or until is always a fascinating experience. But some world-shaking events have changed the history since then — Trump’s trade conflict, Covid, Xi’s business reprisals, the real estate bust, shutdowns, Russia’s invasion of Ukraine. Reading predictions of China’s evolution from before these events occur is similar to reading sci-fi from 1962.

When I started&nbsp, China’s Economy: What Everyone Needs to Know®, by the veteran economic consultant Arthur Kroeber, I was prepared for this surreal effect. After all, it was published in April 2016— not the most opportune timing. So I was surprised by how significant the book still felt.

Most of the book’s explanations of aspects of the Chinese economy — fiscal federalism, urbanization and real estate construction, corruption, Chinese firms ‘ position within the supply chain, etc. — are either still highly relevant, or provide important explanations of what Xi’s policies were reacting against. Dan Wang was not wrong&nbsp, to recommend&nbsp, that I read it.

But&nbsp, China’s Economy&nbsp, is still a book from 2016, and through it all runs a strain of stubborn optimism that seems a lot less justifiable six years later.

Most crucially, while Kroeber acknowledged many of China’s economic challenges — an unsustainable pace of real estate construction, low efficiency of capital, an imbalance between investment and consumption, and so on — he argued that China would eventually overcome these challenges by shifting from an&nbsp, extensive growth model&nbsp, based on resource mobilization to one based on greater efficiency and productivity improvements.

This was made known despite his acknowledgment of the fact that Xi’s policies so far didn’t seem to be up to the challenge of reviving it because productivity growth had already slowed well before 2016 and that he had acknowledged this.

Productivity growth is the underlying thread that has connected the Chinese economy’s entire history since 2008 in many ways. According to Basic Economic Theory, eventually the growth benefits of capital accumulation hit a halt and need to be improved to maintain growth.

Some countries, like Japan, South Korea, Singapore, and Taiwan, have done this successfully and are now rich, others, like Thailand, failed to do it and are now languishing at the middle-income level. For several decades, Chinese productivity growth looked like Japan’s or Korea’s did. However, it changed slightly before Xi took office, making it appear a little more Thailand-like. Here’s a graph from&nbsp, a Lowy Institute report:

Source: &nbsp, Lowy Institute

In fact, the Lowy Institute’s numbers are more optimistic than some other sources. According to the Penn World Tables, China’s overall factor productivity has increased by about 0 or less since 2011.

And&nbsp, the Conference Board agrees.

Personally, I suspect these sources probably&nbsp, underestimate TFP growth&nbsp, ( for all countries, not just for China ). However, even Lowy’s more accurate figures reveal a significant deceleration in the 2010s. If this productivity slump persists, it will be very difficult for China to grow itself out of its problems — such as its&nbsp, giant mountain of debt&nbsp, — in the next two decades.

Then, why has China’s productivity increased so slowly? There are several compelling reasons for Xi to make a change, and each of them has significant implications.

The first reason, of course, is that China had several tailwinds that were helping them become more productive, and these are mostly gone now.

Reason 1: Hitting natural limits

Simply put, China’s productivity increased as a result of their geographic isolation from the technological frontier. When you don’t even know how to do fairly simply industrial processes, it’s pretty easy to learn these quickly.

China imported basic foreign technology by insisting that foreign companies set up local joint ventures when they invest in China, by sending students overseas to learn in rich countries, by reverse-engineering developed-country products, by acquiring foreign companies, etc. Also by industrial espionage, of course, but there are lots of above-board ways to absorb foreign technology too.

The problem is, this has limits. The technologies you need to learn to keep growing productivity quickly increase as you get near the finish line; this is not something you can easily learn from taking classes or looking at blueprints. Companies guard these higher-level secret-sauce technologies much more carefully.

For instance, China has had trouble developing its own fighter jets because only a few companies in a few countries are aware of the metallurgy to create the specialized jet engines that enable modern top-of-the-line fighters. So it becomes necessary to start creating your own products as foreign technology becomes more and more difficult to absorb.

A second tailwind was demographics. Everyone talks about China’s unusually high demographic dividend in terms of labor input ( when there are many young people with few elders or children to care for ), but it’s also likely to be a factor in productivity. &nbsp,

Maestas, Mullen &amp, Powell ( 2016 ) &nbsp, shows a negative relationship between population age and productivity at the US state level, while&nbsp, Ozimek, DeAntonio &amp, Zandi ( 2018 ) &nbsp, find that the same is true at the firm level. The mechanism is unknown, but the pattern is pretty robust. In any case, China’s population reached its highest point in terms of working-age as a percentage of the total ( and quickly reached its absolute peak ) in 2010:

A third tailwind for productivity was rapid urbanization. Simply moving people from low-productivity agricultural work to high-productivity urban manufacturing work, as Arthur Lewis&nbsp, is a well-known fact, increases productivity a lot. Another factor that increases productivity is agglomeration economies.

And economists believe that China reached its” Lewis turning point” right around 2010 when there was no longer any surplus agricultural laborers moving to the cities. China, of course, also unnecessarily reduced urbanization by using its hukou ( household registration ) system to prevent migrant laborers from settling permanently in cities. However, in any case, this tailwind also appears to be over.

Three significant tailwinds that were causing China’s productivity growth over the past ten years have probably dried up. And Xi Jinping or any other leader has no real authority over that. However, there are probably other factors that could be more helpful for policy adjustments that are dragging China’s productivity growth down as well.

Reason 2: Low research productivity

One thing you can do is to invent your own if you are unable to import foreign technology any longer. In fact, this is a good thing to do even if you&nbsp, do &nbsp, import foreign technology, since companies should create new products and new markets instead of just aping foreign stuff. In fact, China has been investing a lot more in research and development in recent years. Here’s a chart&nbsp, from the blog Bruegel:

Source: Bruegel

Unfortunately, research&nbsp, input&nbsp, doesn’t always lead to research&nbsp, output. A&nbsp, 2018 study by Zhang, Zhang &amp, Zhao&nbsp, finds that Chinese state-owned companies have much lower R&amp, D productivity than Chinese private companies, which in turn have much lower productivity than foreign-owned companies. And&nbsp, a 2021 paper by König et al. &nbsp, finds that while R&amp, D spending by Chinese companies does appear to raise TFP growth, the effect is quite modest:

Source: &nbsp, König et al. ( 2021 )

In other words, a lot of this spending is being done by state-owned companies that are just throwing money at “research” because the government tells them to, but not really discovering much. The authors point to the misallocation of resources as a major contributor to low R&amp, D productivity. They also point out that some businesses simply reclassify regular investment as” R&amp, D” to profit from tax breaks ( note that this is done everywhere ).

What about university research? This is a crucial component of how the US maintains its technological edge. And China has indeed been throwing huge amounts of money at university research, such that its expenditure&nbsp, now nearly rivals that of the US&nbsp, China recently passed the US in terms of&nbsp, published scientific papers, including&nbsp, highly cited papers.

However, the quality of this study has been questioned. Despite all this publication activity and all this money, Chinese universities are frequently found to be not the leaders in most areas of research.

Basically, the story is that Chinese scientists are under tremendous pressure to publish a ton of crappy papers, which all cite each other, raising citation counts. In the words of Scientific American, this has led to” the proliferation of research malpractice, including plagiarism, nepotism, misrepresentation and falsification of records, bribery, conspiracy and collusion”.

Therefore, the low productivity of Chinese R&amp, D may contribute to the reason why domestic innovation hasn’t surpassed foreign technology absorption.

Reason 3: Limited export markets

I’m a big fan of the development theories of Joe Studwell and Ha-Joon Chang, as everyone who reads this blog will be aware of. A pillar of the Chang-Studwell model is the idea of “export discipline“.

Basically, when companies venture out into global markets, they encounter tougher competition and also ideas for new products, new customers, and new technologies. This raises their incentive ( and their ability ) to import more foreign technology, and in general makes them more productive and innovative.

After the global financial crisis of 2008 and the recession that followed, the US wasn’t able to absorb an ever-expanding amount of imports from China. So Chinese exports to the US market&nbsp, slowed in the 2010s, and then Trump’s trade war slowed them even more. China’s exports to the EU&nbsp, rose a bit, but not that much.

Developed-country markets simply became saturated with Chinese goods, and there wasn’t much more room for expansion. Although developing nations are reportedly purchasing more Chinese goods, they lack the purchasing power of the wealthy nations. Since the mid-2000s, China’s exports as a percentage of GDP have actually decreased significantly:

Many people ( including Kroeber ) talk about this as a shift from export-led growth to growth led by domestic investment. And so it is. But if productivity benefits from exporting, then this is also a challenge for long-term growth, because there’s less opportunity for export discipline to work its magic.

This may be one factor in the decline in growth for large nations compared to smaller ones. When you have 1.4 billion people, than when you only have 50 million, as South Korea does, because the world is suffocated with your exports, which is much harder to be an export-led economy.

Which raises the question of why the US is so productive, even more productive than the majority of the rich and productive East Asian nations. Consumption might have a role in that.

Reason 4: Not enough consumption

The US has a very large economy that is geographically dispersed from the majority of the world’s major economies. This explains why the US has a very low&nbsp, amount of trade relative to GDP&nbsp, — just 23 %, compared to 81 % for Germany and 69 % for South Korea.

However, the US has a highly productive economy, surpassing that of all but a few small wealthy nations. Exports undoubtedly contributed to the US’s expansion, but in large part it was just selling itself.

As the chart above shows, China increasingly does the same. But unlike the US, China’s domestic economy is heavily weighted towards&nbsp, investment in capital goods &nbsp, — apartment buildings, highways, trains, and so on. China’s final consumption is&nbsp, only 54 % of GDP, compared to over 80 % in the US.

And private household consumption accounts for&nbsp, only 39 % of China’s GDP, compared with 67 % in the US. China is undoubtedly in a later stage of development, but Kroeber points out in his book that even nations like Japan and South Korea had significantly higher consumption shares at comparable stages of their own growth stories.

Usually this gets discussed in the context of “imbalances”. But what if it also affects productivity? Consumers have a preference for differentiated goods that spurs companies to develop new products, increase quality, offer new features, and so on.

The strategy professor&nbsp, Michael Porter argues&nbsp, that when companies compete by differentiating their products instead of simply competing on costs, it results in higher value-added — in other words, it makes them more productive.

Over the past decade, China has been building a lot of buildings and a lot of infrastructure. But it hasn’t been developing a lot of innovative and high-quality cutting-edge consumer products. Unintentionally, various government initiatives that divert resources from domestic investment to domestic consumption may be reducing Chinese productivity.

And the biggest such policy might be macroeconomic stabilization.

Reason 5: Macroeconomic stabilization

It’s important to stabilize the economy. Recessions cause many people to lose their jobs and cause a lot of suffering, and they most likely also cause underinvestment in businesses. They can damage the cohesion of entire societies. In 2008-11, the US learned this lesson the hard way when our insufficient fiscal stimulus caused a recession that was longer and more painful than it had to be.

But there may be such a thing as too much stabilization. As&nbsp, I explained in a post last September, China avoided going into recession both in 2008-11 and again in 2015-16 ( after a big stock market crash ) by pumping money into real estate, via&nbsp, lending by state-controlled banks, &nbsp, often to SOEs&nbsp, and to&nbsp, local governments.

This likely prevented the Chinese economy from experiencing recessions in 2008, 2008, and 2015-16. But it had a big negative effect on productivity growth, for three reasons.

First, SOEs simply aren’t very productive compared to other Chinese companies. Second, the funds were quickly thrown out the window, leaving little time or motivation to determine which projects were worthwhile.

Third, construction and real estate are two key sectors of the economy that have a reputation for having low rates of productivity growth. This last is probably the scariest, as it led China’s economy to be&nbsp, more dependent on real estate&nbsp, than any other in recent memory:

Source: &nbsp, Rogoff ( 2021 )

Anyone who has followed&nbsp, the saga of China’s Covid lockdowns&nbsp, will sense a familiar pattern here. The Chinese government, eager to preserve the appearance of invincibility, often goes overboard in unleashing the tools of control.

Although recessions are not good things, the measures taken by Chinese policymakers to make sure they never had even the slightest recession may have left their economy with a significant hangover from the low-productivity sector.

Will Xi bring back the increase in productivity?

There are many reasons why China’s productivity growth fell to a low level in the 2010s and 2020s.

But speeding it back up again — which every analyst, including Kroeber, seems to recommend — will be no easy task. The negative effects of productivity have vanished. These systems have a way of becoming established, and China’s misallocation of resources toward low-quality research and low-quality real estate industries won’t be easy to reverse.

Xi Jinping, of course, is going to try. Part of his effort consists of&nbsp, industrial policy&nbsp, — the&nbsp, Made in China 2025&nbsp, initiative and the&nbsp, big push for a domestic semiconductor industry. Whether those will bear fruit is still to be seen.

But in the last three years, Xi has undertaken a second, more destructive effort to reshape China’s industrial landscape. He has attacked the industries he doesn’t want, rather than simply boosting the industries he wants. &nbsp,

He has cracked down&nbsp, on consumer internet companies, finance companies, video games and entertainment. And he has attempted to&nbsp, curtail the size of the real estate industry, resulting in a slow-motion crash that ‘s&nbsp, still ongoing.

Essentially, Xi is trying to crush industries he doesn’t like, in the hopes that resources — talent and capital — flow to the industries he does like. This is a new kind of industrial policy — instead of “picking winners”, Xi is stomping losers.

One of the saddest things about optimistic 2016-era analyses like Kroeber’s is how much hope they place in internet companies like Alibaba, Tencent, and Baidu as heralds of a new, more innovative China. Xi has declared that these companies are not, in fact, the future.

However, it’s not at all clear that an economy operates similarly to a tube of toothpaste when resources are squirted out from one end. Do you really believe that starting a semiconductor company rather than an internet company will help you become Emperor Xi’s favor as a budding entrepreneur?

What if he decides next week that he doesn’t need more chip companies and that your business isn’t one of his preferred champions? What if after you get rich and successful, Xi decides you’re a potential rival and appropriates your fortune?

An economy with a leader who consistently destroys businesses and industries he dislikes is inherently risky. Chinese engineers and managers will, indeed, follow Xi’s orders and work in the sectors he wants them to. However, the absence of entrepreneurial spirit and initiative may result in this being a pyrrhic triumph.

In other words, escaping China’s low-productivity-growth trap is going to be tough, and Xi’s strategy doesn’t fill me with a ton of confidence so far.

This&nbsp, article&nbsp, was first published on Noah Smith’s Noahpinion&nbsp, Substack and is republished with kind permission. Become a Noahopinion&nbsp, subscriber&nbsp, here.

Continue Reading

Rebel Wilson legally marries Ramona Agruma in Sydney ceremony

By:
On:
In: Asia

Ramona Agruma, an American actor and comedian, has been legally married to Rebel Wilson in Sydney, the sun has revealed on social advertising.

The couple wed in Sardinia in September, but they have since remarried in a meeting that Wilson’s girlfriend officiated.

The artist proposed to Agruma, a clothing and jewellery custom, at Disneyland in 2023.

Pitch Great co-stars Adam Devine and Elizabeth Banks, who congratulated the few among the well-wishers who made comments on social media.

Wilson, 44, said it felt “right” to have the bride in her home. ” It meant my 94-year-old aunt Gar had come which was very unique to us to have her included”, she wrote on Instagram.

Agruma also shared photos from the day adding: “Married officially in Australia to my Australian princess.”

The pair are pictured gleefully with the scenery of the notorious Sydney Harbour Bridge.

The Bridesmaids actress announced the birth of her first child via surrogate in November 2022. Sharing a picture of daughter Royce Lilly, she described her as a “beautiful miracle”.

The sun made headlines earlier this year when the US type of her narrative, Rebel Rising, about Wilson’s gender, fat and reproduction, was released, and made allegations against Borat sun Sacha Baron Cohen.

The British edition of the book, published on 25 April, blacked out text believed to be relating to him.

The edits represented a” clear victory,” according to a Baron Cohen official at the time, and Wilson’s promises were “demonstrably false.”

In her narrative, Wilson even talked about being a “late comer” and losing her innocence at 35.

Continue Reading

China: A year of mass attacks reveals anger and frustration

By:
On:
In: Asia
Getty Images An elderly man rides a bicycle with bird cages on a street in Beijing on November 20, 2023. Behind him are bushes. The cages are red, white and blueGetty Images

In response to still another mass shooting in the nation earlier this year, a social media post read,” The Chinese people are so miserable. The exact user even warned:” There will only be more and more imitation attacks”.

” This drama reflects the darkness within society”, wrote another.

Such bleak assessments, following a spate of deadly incidents in China during 2024, have led to questions about what is driving people to murder strangers en masse to “take revenge on society”.

Problems like this are also exceptional given China’s great people, and are not fresh, says David Schak, associate teacher at Griffith University in Australia. But they seem to appear in waves, generally as ripoff attempts at garnering interest.

This year has been particularly troubling.

From 2019 to 2023, officers recorded three to five instances each year, where offenders attacked walkers or neighbors.

In 2024, that amount jumped to 19.

In 2019, three people were killed and 28 injured in like incidents, in 2023, 16 useless and 40 wounded and in 2024, 63 people killed and 166 injured. November was mainly terrible.

On the 11th of that month, a 62-year-old man ploughed a car into people exercising outside a stadium in the city of Zhuhai, killing at least 35. Police said that the driver had been unhappy with his divorce settlement. He was sentenced to death this week.

Weeks later, in Changde metropolis, a man drove into a group of children and parents outside a primary school, injuring 30 of them. He claimed he was upset over economic costs and family issues.

That same year, a 21-year-old who don’t student after failing his examination, went on a stabbing spree on his school in Wuxi capital, killing eight and injuring 17.

In September, a 37-year-old man raced through a Shanghai shopping centre, stabbing people as he went. In June, four American instructors were attacked at a park by a 55-year-old man wielding a knife. And there were two separate attacks on Japanese citizens, including one in which a 10-year-old boy was stabbed to death outside his school.

Reuters Floral tributes are placed near an entrance to the Wuxi Vocational College of Arts and Technology following a knife attack, in Wuxi, Jiangsu provinceReuters

The offenders have mostly targeted “random people” to display their “displeasure with society”, Prof Schak says.

These killings have sparked natural discomfort in a nation with extensive surveillance capabilities and women who often hesitate to wander alone at evening.

What, then, is the cause of China’s recent spate of mass problems?

China’s slowing market

The slow economy is currently a major cause of stress in China. It is no secret that the nation has experienced great youth unemployment, severe bill, and a real estate crisis that has squandered some families ‘ life savings, sometimes with little evidence of it.

On the outskirts of most major cities there are entire housing estates where construction has stopped because indebted developers cannot afford to complete them. In 2022, the BBC interviewed people camping in the concrete shells of their own unfinished apartments, without running water, electricity and windows because they had nowhere else to stay.

” Optimism truly does seem to have faded”, says George Magnus, a research associate at Oxford University’s China Centre. ” Let’s use the term trapped, just for the time. I believe China has sat in a kind of routine of oppression. On the one hand, there is a kind of faltering socioeconomic development model and social repression, and there is financial repression.

Studies appear to point to a significant change in attitudes, with a measurable increase in pessimism among Chinese people about their personal prospects. A significant US-China joint analysis, which for years had recorded them saying that inequality in society could often be attributed to a lack of effort or ability, found in its most recent survey that people were now blaming an “unfair economic system”.

” The question is, who do people actually blame,” he said. Mr Magnus asks. The next step is that the system is unfair to me, and I didn’t get past that. I didn’t alter my situation”.

A lack of possibilities

You may turn to journalists in nations with strong media if you had the feeling that your home had been destroyed by corrupt builders supported by local officials or that you had been badly fired from your job. However, in China, where the Communist Party controls the media and is doubtful to publish articles that negatively impact the government’s standing.

Then there are the slow and ineffective courts, which are also run by and for the group. The Zhuhai suspect’s reported purpose, which he claimed was to avoid paying what he thought was a good divorce settlement in court, was widely shared on social media.

BBC/Xiqing Wang Crowds at a job market in Guangzhou city - people sit in rows on steps, while a crowd walks past. BBC/Xiqing Wang

Additional sources for venting concerns have narrowed or been completely eliminated, according to authorities.

According to Lynette Ong, a political research professor at the University of Toronto who has conducted extensive research on how the Chinese state reacts to resistance from its citizens, Taiwanese people frequently voice their concerns online.

“]They ] will go on to the internet and scold the government … just to vent their anger. Or they may orchestrate a little opposition which the officers would generally help if it’s small-scale”, she explains. ” But this sort of protest, little opposition, has been closed off in the last couple of ages”.

There are plenty of examples of this: Increased internet censorship, which blocks words or expressions that are deemed controversial or critical; crackdowns on cheeky Halloween costumes that make fun of officialdom; or when plain-clothed men, who appeared to have been mobilised by local officials, beat up protesters in Henan province outside banks which had frozen their accounts.

As for dealing with people’s mental and emotional responses to these stresses, this too has been found wanting. Specialists say that China’s counselling services are vastly inadequate, leaving no outlet for those who feel isolated, alone and depressed in modern Chinese society.

According to Professor Silvia Kwok of Hong Kong’s City University, counseling can help strengthen emotional resilience. She adds that China needs to expand its mental health services, particularly for those who have experienced trauma or those who have mental illnesses.

People need to discover new strategies or effective ways to handle their emotions, which will lessen their risk of violent reaction in times of intense emotional stress.

Taken together, these factors suggest the lid is tightening on Chinese society, creating a pressure cooker-like situation.

” There aren’t many people engaged in mass murder,” the statement read. But still the tensions do seem to be building, and it doesn’t look like there is any way it is going to ease up in the near future”, Mr Magnus says.

Reuters Police keep watch near barricades set up along a road in Shanghai during Halloween weekReuters

The general public’s criticism of those in power should worry the Communist Party, which they claim is responsible for this.

Take this remark for example:” If the government truly acts fairly and justly, there would not be so much anger and grievance in Chinese society … the government’s efforts have focused on creating a superficial sense of harmony. Although their actions may seem to be caring about less fortunate people, they have actually caused the worst injustices.

According to Professor Ong, the difference in China is that officials have had little experience dealing with them, despite the rise in violent attacks in many nations.

” I believe the authorities are very concerned because they have never seen it before, and their instinct is to repress.”

When Xi Jinping, the leader of China, mentioned the Zhuhai attack, he appeared to acknowledge that social pressure was growing. He exhorted government officials to “learn hard lessons from the incident, address risks at their roots, end conflicts and disputes early, and take proactive measures to prevent extreme crime.”

However, so far, it seems as though the lessons learned have pushed for quicker police response times and a greater level of surveillance rather than taking into account any changes to how China is run.

According to Prof. Ong,” China is moving into a new phase, a new phase that we have not seen since the late 1970s,” referring to the period when the nation began opening to the world once more, unleashing enormous change.

” We need to be prepared for unexpected occurrences like numerous random attacks and emerging pockets of social unrest,” he said.

Continue Reading

Commentary: Manmohan Singh, India’s quiet reformer who taught a generation to dream

By:
On:
In: Asia

Singh and his colleagues were able to persuade us that in a post-socialist, market-led&nbsp, business, we, too, may be free to fight our&nbsp, dreams. With learning and hard labor, our lives, too, may be significantly better than our parents’, upward mobility may no longer be an exclusive preserve of the wealthy.

The transformation job stayed on course throughout the 1990s despite changes in institutions. However, Singh’s second word as prime minister saw the deterioration of the claim.

The ungainly Congress-led&nbsp, partnership government he ran from 2009 was besieged, from one side, by crony entrepreneurs gorging on loan from state-owned lenders just to siphon off funds into&nbsp, their Swiss bank accounts. From the other side, it was under attack by a political opposition that blamed Singh’s indecisive leadership for rampant corruption, high inflation, slowing growth and a falling rupee.

” I do not believe that I have been a weak prime minister”, Singh said in one of his last press conferences, just a few months before the Hindu right-wing leader Narendra Modi’s Bharatiya Janata Party swept the 2014 election. I sincerely believe that history will benefit me more than the current media or, for that matter, the opposition in parliament.

That prediction didn’t take too long to get&nbsp, tested. In November 2016, Prime Minister Modi&nbsp, banned 86 per cent of India’s currency overnight. Singh, who described the move as “organised loot and legalised plunder” &nbsp, said it would crush&nbsp, economic growth. He was right.

Continue Reading

Banks sued over mobile app breach

By:
On:
In: South-East Asia

PUBLISHED: 28 Dec 2024 at 04: 00

Three businesses have been sued by an consulting firm in Udon Thani after supposedly losing 2 million baht 30 hours after a cellular banking software it was using was hacked, according to an accounting firm in the city.

On-anong Bunto, 57, a part of the firm’s table, met Pol Lt Kitiphum Akkhawithayanukul, assistant chief inspector of Udon Thani’s Muang authorities, on Thursday. She lodged complaints against three institutions, accusing them of violating the Bank of Thailand’s safety procedures.

Ms. On-anong claimed that the company had opened five accounts with various businesses with mobile finance programs. On Dec 22, but, the company may not perform trades via one of its records as it was locked, she said.

The company later discovered that scammers had hacked into three accounts, including one that was used to make income payments to the firm’s employees.

Ms On-anong said the offenders transferred 49, 999 ringgit in individual purchases from each bill. Within 30 hours of the account breach, everything happened.

In the first bill, a full of 199, 999 ringgit was stolen through four 49, 999 ringgit payments. The same amount was taken out of the following bank account by four additional payments. In the last consideration, the defendants took a total of 1, 999, 999 ringgit through 40 payments.

Ms. On-anong claimed that the three banks that registered the accounts did not inform the business of the illegal withdrawals.

She claimed that the business had taken the necessary steps to notify the lenders. The banks that controlled the first and second accounts, she said, insisted they had noticed uncommon transactions and had frozend them after attempting to withdraw the money again.

However, the lender that opened the second account did not stop the withdrawals until the police prompted them, she claimed. The company’s staff, she said, disobeyed the firm’s requests to respond to its inquiries or write a complaint. They also refused to give advice on how to recover the money.

The banks that held the final account is a juristic person, which made it difficult to change the account owner’s information, she claimed.

The three businesses have been accused of failing to notify the business, and the business has filed a complaint with them. Another lawsuit was brought against the second lender.

Continue Reading

Agencies sound alarm over domestic helpers falling prey to illegal money mule activities

By:
On:
In: South-East Asia

WHAT IS BEING DOED TO HELP MAIDS?

Some employment companies are taking more steps in light of the seriousness of these illegal activities. We Are Caring, for example, windows all assistants when they are deployed to Singapore, and holds regular sessions to educate them in detecting legal action.

The team also assists them in setting up SingPass records to stop third parties from using them for ScamShield and facial recognition.

They are shy to request because their degree of online education is occasionally not very large. They are extremely excited to engage in an open discussion and to do it with another volunteers, according to the organization’s managing director, David Bensadon. &nbsp,

” And because we tell them how to prevent frauds, they feel stronger. And this is the only way to get there: we want them to be able to spot any potential scam risks shortly and exhibit the appropriate behavior.

There are also other ways to help local assistants. Non-governmental company Aidha for instance, runs free classes on financial education.

Businesses added that they are also contributing. &nbsp,

DBS said that while someone does get a cash mule, certain groups, such as students, younger individuals, and immigrant domestic workers, may be more susceptible due to various factors, such as searching for swift financial gains or apparently profitable employment opportunities. &nbsp,
  
The lender asserted that it actively combats money horse action through a dedicated “anti-mule group” established in September of last year that collaborates closely with the police. &nbsp,

According to a spokesperson, the team has collaborated with the authorities, which led to the arrest of over S$ 8.5 million in illegal funds from animal accounts.

The banks added that since 2016, it has taught more than 300,000 migrant workers digital and financial literacy courses. &nbsp,

Beaver Tan, the head of OCBC’s anti-fraud division under the group financial crime compliance, stated that frauds are becoming more powerful and difficult to spot. &nbsp,

He added that the lender has a close working relationship with the police and a crew stationed nearby the Police Anti-Scam Centre, which makes it easier to spot, detect, and prevent or freeze fraudulent transactions and affected records more quickly. &nbsp,

Time is of the essence when a fraud is discovered or reported, he said, to cease unwarranted funds flows and track them so that they have a better chance of recovering the stolen funds.

Continue Reading

Banks, telecoms face tougher scam laws

By:
On:
In: South-East Asia

PUBLISHED: 27 Dec 2024 at 05: 22

Officials show mule accounts seized from scam gangs, at the Central Investigation Bureau in 2021. (Photo: Chanat Katanyu)
Animal records seized from con groups are displayed at the Central Investigation Bureau in 2021, according to authorities. ( Photo: Chanat Katanyu )

Banks and cellular phone network providers will be held more accountable for preventing online scams by the government.

An executive order, requiring bankers and cellular phone network providers to take more care to help prevent their clients from losing money to online scams, will been announced in the Royal Gazette on Thursday, according to Deputy Minister Prasert Jantararuangtong.

We anticipate that, for example, cellular phone messages that might contain clickbait that must be immediately removed by the mobile phone network operators, or that they will be held accountable if they cause scammers to lose money, according to Mr. Prasert.

This kind of legal system, he said, has been used in other countries such as Singapore, where the government is defrost a bank account where needed.

According to Mr. Prasert, the state anticipates the order to speed up the recovery of lost funds lost in online scams by the state.

With this constitutional method, the process may take no longer than six months, an development from the existing one or two centuries, said Mr Prasert, who is also the modern economy and society minister.

Former prime minister Thaksin Shinawatra made the announcement of the order in response to a promise to stop online swindling criminals operating in neighboring nations.

He was speaking as he assisted a candidate for the Pheu Thai Party in a Tuesday regional vote in Chiang Mai.

At the campaign event for the vote, Thaksin made a hint that he knew about a significant call center group operating from a tower in Poipet, Cambodia.

He likewise claimed to have instructed the governments of Myanmar and Cambodia to do more to address the issue of virtual scams, which affects many Thai citizens.

He said without going into specifics that he would volunteer to take troops from Thailand to deal with the groups for them if these nations weren’t able to expend the funds to expel those criminals that are operating on their soil.

The Royal Thai Police (RTP ) was briefed on Thursday by Prime Minister Paetongtarn Shinawatra about the importance of keeping the public informed about the launch of an online platform to combat online scams.

The PM was paying a visit to the RTP’s office, where she was briefed on the officer’s “Cyber Check” virtual system.

It has technology that enables people to check with the police first to see if a bank account they are required to transfer money to or a phone number used by someone to contact them is on a police black list.

Continue Reading

Hong Kong dollar peg at risk in Trump’s coming fight with China – Asia Times

By:
On:
In: Asia

Under Donald Trump’s coming second administration, Hong Kong may likely play a significant role in the wider industry, security, and political conflict between the United States and China. If therefore, the Hong Kong currency’s clamp to the US franc had come under US fire.

Trump is expected to make a new policy statement regarding Hong Kong-related problems, from the city’s role in assisting Russia in obtaining dual-use Chinese goods and avoiding American restrictions to the detention of pro-democracy activists and politicians to the economic capital’s role in reported money laundering that is against US interests, according to some observers.

Before Trump emphatically won the US presidential election on November 5, the former senator vowed to free Jimmy Lai, a pro-democracy activist and media mogul, from jail. Lai, who stands accused of fomenting Hong Kong’s 2019-2020 turmoil, is obviously one of Beijing’s negotiations cards on the bargaining table between Chinese and US officials. &nbsp, &nbsp, &nbsp,

Six additional abroad Hong Kong activists were detained on Christmas Eve after their arrest warrants were issued by Hong Kong’s federal security police on the charge of inciting subversion, colluding with international forces, and getting worse. The police also imposed HK$ 1 million ( US$ 128, 425 ) bounties on each of them. &nbsp,

Tony Chung and Chloe Cheung, two young activists, social critics, Victor Ho, a former city councillor, Carmen Lau, and former comedian and performer Joseph Tay are among the six. Ho and Tay are in Canada, and Tay is in the UK.

The six, according to Hong Kong’s Security Secretary Chris Tang, have allegedly violated international law by speaking out, posting on social media, and influencing foreign governments to impose sanctions on Hong Kong authorities and courts.

As of December 25, 19 people have been arrested on suspicion of violating federal safety in Hong Kong.

The Hong Kong government’s “relentless achievement of pro-democracy protesters outside its borders is a overt excess that ignores global standards,” according to Chris Patten, the previous government of Hong Kong and a supporter of United Kingdom-based Hong Kong Watch.

He demanded that the governments of the UK, the US, and Canada “agissent quickly and collectively to protect these campaigners from international persecution, ensuring their protection, and standing strong against Beijing’s attempts to undermine the very political values we hold lovely.”

hub of financial violence

The new arrest warrants does encourage hawkish American politicians to call for more harsh methods, such as the removal of some Hong Kong-based lenders from the SWIFT financial exchange program, which, if implemented, could lead to a de-pegging of the Hong Kong dollars and US buck. &nbsp,

In a letter to US Treasury Secretary Janet Yellen in late November, John Moolenaar, president of the US House Select Committee on the Chinese Communist Party (CCP), expressed the agency’s “deep problem” with regard to Hong Kong’s reported “increasing function as a financial hub for cash laundering, sanctions evasion, and other illegal financial activities.

According to him,” Hong Kong has shifted from a trusted global financial center to a crucial player in the deepening authoritarian axis of the People’s Republic of China ( PRC ), Iran, Russia, and North Korea,” following the National Security Law of 2020, which subjected the country to the CCP’s rule. &nbsp,

” We must now question whether longstanding US policy towards Hong Kong, particularly towards its financial and banking sector, is appropriate”.

Moolenaar claimed that the US Treasury has taken preliminary action against businesses based in Hong Kong, where the city has since become a global leader in practices like importing and re-exporting prohibited Western technology to Russia, creating front companies to purchase prohibited Iranian oil, facilitating the trade of Russian-sourced gold, and managing “ghost ships” that engage in illegal trade with North Korea.

He stated that the committee is interested in learning how the US Treasury will combat Hong Kong’s financial system’s financing of money laundering and sanctions evasion.

Jesse Baker, assistant to the US deputy treasury secretary, met with Hong Kong financial institutions, including HSBC, StanChart and Bank of China ( Hong Kong ) in Hong Kong on December 11, warning them not to engage businesses with Russia or help Russia evade western sanctions, Nikkei reported.

In fact, Trump met with his top officials to decide the United States ‘ response after Beijing passed the Hong Kong National Security Law on June 30, 2020. &nbsp,

At the time, Trump had considered forcing an end to Hong Kong’s peg policy, but opted against the move due to commerce and treasury officials ‘ opposition. Instead, he signed an executive order to end Hong Kong’s special status.

The Biden administration has not discussed de-pegging the Hong Kong dollar from the US greenback over the past four years.

In November 2022, markets fretted that Hong Kong’s peg policy would end as the city’s currency had repeatedly touched 7.85 per US dollar, the lower end of the allowed peg range of 7.75-7.85, amid rising US interest rates. &nbsp,

Bill Ackman, a billionaire investor at the time, predicted that the Hong Kong dollar would decline and that its peg to the US dollar would collapse. Boaz Weinstein, a veteran trader, claimed to have a 200-to-1 payoff potential when he bet against the Hong Kong dollar. &nbsp,

De-pegging debate

Some Hong Kong experts said they don’t believe the Taiwan Straits will soon experience a de-pegging unless a sudden war breaks out. However, they did not rule out the possibility of de-pegging in the future.

According to Vincent Lam, a financial columnist and fund manager based in Hong Kong, it’s unlikely that Trump will act to stop the country from using US dollars because this conflicteth with US interests. She noted that Trump has vowed to impose a 100 % tariff on BRIC nations that engage in de-dollarization schemes. &nbsp,

He added, however, that if the Hong Kong government doesn’t improve its balance sheet, it runs the risk of depleting its$ HK$ 550 billion fiscal reserves and will have to abandon its peg policy in the coming years. He claimed that in order to maintain financial stability, Hong Kong can peg its dollar instead to a basket of global currencies.

Allan Zeman, the founder of Lan Kwai Fong Group, stated in a recent interview that the Hong Kong government should have a plan B for its currency peg policy.

He claimed that a peg to the US dollar would hurt Hong Kong’s competitiveness and economy if US inflation and interest rates remained high during the Trump 2.0 era. He claimed that in this situation, a de-pegging might be beneficial for Hong Kong.

In an article, Charles Gave, the founder of the Hong Kong-based Gavekal research group, predicted that Hong Kong might become the potential home for a new international financial system in the coming years. &nbsp,

He claimed that many Asian exporters have kept their income in Hong Kong over the past few years, leading to an increase in the city’s US dollar reserves. He claimed that if these deposits were converted into Hong Kong dollars and lent to Asian nation borrowers, a new pyramid of US dollar-denominated credit would emerge that US authorities would not be able to control. &nbsp,

Hong Kong may represent a new flashpoint in Trump’s fight with China, according to a Bloomberg commentary on December 21. Trump may look into Hong Kong’s peg policy again because he doesn’t like being told he has no say in something.

Yong Jian contributes to Asia Times. He is a Chinese journalist who specializes in Chinese technology, economy and politics.

Read: Call for HK to prepare for possible US sanctions

Continue Reading

Songsak backs locals in land dispute

By:
On:
In: South-East Asia

SRT promises are being disputed by people.

PUBLISHED: 21 Dec 2024 at 06: 05

A view of Khao Kradong in Muang district of Buri Ram from the highest point in Khao Kradong Forest Park. (Bangkok Post file photo)
From the highest level in Khao Kradong Forest Park, one can see Khao Kradong in the Muang city of Buri Ram. ( Bangkok Post file photo )

Songsak Thongsri, the Deputy Minister of Interior, said the State Railway of Thailand ( SRT ) appears to be at fault in a land dispute in Khao Kradong, Buri Ram.

Over 400 impacted residents met with Mr. Songsak and officials who discussed the property rights dispute with them in the contested land area in Muang district on Friday.

To demonstrate their legal residency on the property they claim was first occupied by their predecessors, residents of Samet and Isan sub-districts in the Muang city showed him property ownership documents, including name activities and Nor Sol 3 documents.

Some locals denied allegations of encroaching on the railroad property and claimed to have settled in the area before the railroad was built.

The governmental group examined the residential areas and the disputed railroad boundary. The contested area contains about 5, 083 ray in seven settlements in two subdistricts. The debate impacts 4, 712 communities with a population of around 7, 641 citizens and 12 government organizations, such as the Buri Ram Provincial Hall, the Provincial Administration Organisation, police facilities, schools and the Volunteer Defense Corps.

Mr. Songsak spoke out against miscommunications regarding the land’s ownership to the SRT and expressed sympathy for the affected residents. He noted that residents have been stung and harmed by the conflicting claims and unclear legal boundaries as a result of the situation.

He questioned whether the disputed land belonged to the SRT after speaking with the residents.

After listening to the residents, Mr. Songsak said he thought SRT had violated their rights.

He emphasized the significance of provincial governors and the Department of Lands holding discussions with the residents who had presented title deeds to back up their claims. Mr. Songsak gave the DoL the instructions to thoroughly examine the evidence and strictly follow the law in order to defend citizens ‘ rights.

He claimed that the lack of a clear sense of ownership has already caused problems for residents who use land titles to make purchases or obtain loans from banks.

Sombat La-on, a Buri Ram Provincial Land officer, said the DoL has adhered to court rulings, which include 35 cases where the SRT sued residents and vice versa.

The investigative committee came to the conclusion that the SRT’s evidence lacks sufficient clarity to warrant the removal of residents ‘ land titles. The committee suggested halting actions taken against the titles, a resolution that would benefit locals who have fought to keep their land rights.

The SRT has appealed the Do L’s decision.

Continue Reading

Will the federal deficit be Trump’s nemesis? – Asia Times

By:
On:
In: Asia

This research appeared earlier this week in the Asia Times ‘ International Risk-Reward Monitor, a regular examination of market forces.

Given our current position of information about the new government’s intentions, we foresee a steadily deteriorating socioeconomic environment in 2025 with continual high interest rates, higher than expected inflation, and weaker than expected earnings.

The Biden Administration bequeathed Donald Trump the largest-ever federal deficit ( at 6.1 % &nbsp, of GDP ) in an economic expansion. &nbsp, The president-elect wants to renew&nbsp, his 2018 corporate tax cut at an estimated cost of$ 400 billion per year, &nbsp, and&nbsp, eliminate taxes on Social Security income at a cost of about$ 150 billion per year. &nbsp, That would raise the federal deficit, now at$ 1.7 trillion, by about a quarter, minus possible revenues from additional tariffs ( which now bring in about$ 80 billion a year in revenue ), and whatever cost savings&nbsp, his team can obtain from spending reductions.

What didn’t go on forever didn’t, according to Okun’s Rules, and the United States doesn’t continue to run up the federal deficit continuously. But it has a price to pay to continue doing so for the near future. America doesn’t encounter a” Liz Truss time” ,&nbsp, as Swiss Re economist&nbsp, Jerome Jean Haegeli&nbsp, told the Wall Street Journal&nbsp, November 21, referring to&nbsp, the blowup of the UK tie business in October 2022 after the short-tenured prime minister proposed deep tax cuts. &nbsp, For the time being, the US can fund the Treasury’s saving need with&nbsp, local resources. However, that comes at a high price, and it’s possible that financial pressure may become stronger in 2025.

Unlike the aftereffects of the 2008 World Financial Crisis, when foreign central banks financed the boom in Treasury loans, US regional economic institutions&nbsp, absorbed the bulk of post-Covid Treasury financing, with some help from international personal investors and US homes. The presence of financial institutions in Treasury funding is more clearly visible graphically in terms of levels.

Lenders can continue to get Treasuries, but only if interest rates remain high. According to McKinsey, return on equity for large parts of the finance sector would be lower than the institutions ‘ individual cost of capital without the rise in interest rates of the previous two years. The supply on medium-term Treasuries is approximately equivalent to the bank’s loans from the central bank, which means that the deficit cannot be funded by the legendary printing press. Deposits, while, cost much less than borrowed money, and the Biden Administration’s massive governmental increase of 2019-2020 unleashed a flood of payments into the banking system. Payments rose much faster than institutions ‘ loans and leases, and were channeled into Treasuries.

That began a period in motion. Federal subsidies caused the gap to balloon, but a sizable percentage of those subsidies were reinvested back into the Treasury securities that provided the deficit. The grants unleashed prices, and the Federal Reserve&nbsp, raised interest rates, making Treasuries appealing for businesses. &nbsp, Higher interest rates&nbsp, doubled the cost of servicing the federal debt, to$ 1 trillion last year from$ 500 million in 2020.

In short, the rising of Treasuries on banks balance sheets, the higher price setting, the higher deficit expected to doubled interest payments, and higher inflation are all facets of the same problem.

What could go bad?

For one thing, a year ago, the surge in payments that made it possible for banks to purchase Treasuries with inexpensive customer money stopped. Lenders will have to make a higher yield than they already receive for immediately money from the Federal Reserve in order to continue funding the deficit. The secured over funding rate is currently higher than the supply of five-year Treasuries.

Businesses can use inexpensive reserves to finance buying of Treasury securities, but no expensive borrowings from the central bank. As we see in the chart above, &nbsp, the year-on-year shift in business businesses assets of US Treasury and Agency stocks tracks the year-on-year shift in payments.

Lenders will only be able to continue funding the Treasury gap once the spread between the central bank’s cost of funds and the produce on Treasury securities has dried up. One chance, of course, is that the main institution could provide cheaper revenue to the banks. That would in effect allow the printing press to fund the Treasury deficit, which is a badly inflationary move. Fed head Jerome Powell didn’t do this.

Another possibility is that medium-term Treasury yields need to climb. Rising long-term curiosity rates, though, may reduce if not eradicate economic growth.

Furthermore, US households may stop consuming and purchase a lot more government securities. &nbsp, American families save only 4.4 % of their disposable income, or about$ 1 trillion a year. If homeowners doubled that to$ 2 trillion a month, they could fund the gap by themselves. However, a rapid decline in use may lead to a recession, lower taxes revenues, and a bigger deficit.

Accidents are often feasible – for example, a big problem in the multi-trillion industry for short-term funding of government securities. As the Federal Reserve shrank its portfolio holdings of Treasuries, the illiquidity of the Treasury market ( as measured by the bid-asked spreads of off-the-run Treasuries ) worsened.

However, it’s unlikely that a liquidity seize-up would cause any long-term harm. Central banks have a way to react to these kinds of situations; they simply purchase whatever is available until the market drops.

The consequence of the expansion of US debt, high inflation, high Treasury rates and high debt service costs is likely to be gradual – a headwind, not a cyclone. &nbsp, This will hit US consumers the hardest.

US consumers borrowed money from credit markets to maintain their level of consumption after the Biden subsidies expired in response to high ( and significantly higher than expected ) inflation. Credit card debt increased significantly, while the interest rate on revolving credit increased from 14 % to 22 %. Revolving credit’s total interest payments increased from$ 100 billion to$ 250 billion last year.

The tax cuts that Trump’s team has &nbsp, discussed don’t have supply-side effects. Extending the old corporate tax cut doesn’t change incentives to invest, and removing taxation of Social Security benefits won’t bring more 70-year-old into the workforce. &nbsp, Tariffs cannot help but increase prices, both for consumers and for production inputs. Higher tariffs on imported capital goods will likely lead to a lower investment because the US currently imports more capital goods domestically than it produces.

Continue Reading