‘Empower, Inspire, Transform’

The Bangkok Post’s Ladies of the Year 2024 have been chosen as the outstanding people from a variety of areas who have inspired, influenced, and influenced change in their communities through their pursuit of excellence in the month of International Women’s Day.

Up until Thursday, there will be a number of in-depth characteristics of these people. The information will list their accomplishments, provide background information, and discuss their achievements.

We honor Narumon Chivangkur, Citi Country Officer and Banking Head, and Wallaya Chirathivat, President & Chief Executive Officer, Central Pattana Plc, now.


” Icon of financial light”

originating in the front

Wallaya Chirathivat , — , President &, Chief Executive Officer;  , Central Pattana Plc.

A light is a fixture in the active Thai business community: Central Pattana Plc ( CPN) President and CEO Wallaya Chirathivat.

Ms. Wallaya, who is the CEO of one of Thailand’s most important financial and property growth firms, goes beyond just being successful to being a visionary architect of the country’s future.

Her leadership has led the company to exceptional levels, and her career at CPN has been marked by pioneering accomplishments. Under her direction, the business properly launched a number of shopping center projects, thereby influencing the country’s financial history.

Her accolades demonstrate her management skill. Ms. Wallaya has been praised for her extraordinary accomplishments in driving operational success and encouraging impressive growth despite various difficulties. She has been named one of Forbes Asia’s best 20 businesswomen in 2022. She won the prestigious” Thailand Major CEO of the Year” honor in the real estate business group in 2023, a recognition of her remarkable management strategy and vision.

The revolutionary leadership of Ms. Wallaya has also won praise from around the world, with CPN receiving three big awards, including” Best CEO”,” Best CFO,” and” Best Investor Relations.” These accolades strengthen CPN’s status as a world leader in the field by demonstrating its quality in business and financial management.

Additionally, Ms. Wallaya’s commitment to sustainability has given CPN new levels. CPN continues to serve as the industry’s benchmark for sustainability with its listing in the Dow Jones Sustainability Indices ( DJSI) for real estate management and development as well as S&amp, P Global’s The Sustainability Yearbook 2024.

Importantly, CPN is ranked No. In the DJSI, Ms. Wallaya’s unwavering commitment to environmental stewardship ranks first nationally in the real estate control and development industry.

Ms. Wallaya’s trip is deeply connected to her mother’s legacy as well as her career success. At age 23, she joined the family business kingdom and set out to change the financial landscape. She demonstrated her strong organization skills and creative spirit by overseeing the change of Central Supermarket into the renowned Tops company.

Ms. Wallaya spearheaded the revitalization of Robinson and the development of Central Phuket, marking important milestones in her career, when she transitioned to the position of co-chief executive in her 30s. Her first property development project was at CPN in 2005, combining her in-depth knowledge of financial with her drive for innovation.

The redevelopment of the World Trade Center, now CentralWorld, which received the prestigious” Best of the Best Award” from the International Council of Shopping Centers in 2010, was Ms Wallaya’s most notable accomplishment.

This award recognized Ms. Wallaya’s multidimensional approach to financial development, showcasing both design excellence and successful sales.

Despite Thailand’s slow economic restoration, the company continues to invest heavily and have ambitious plans for long-term progress. CPN intends to develop five big mixed-use projects in various strategically located in Bangkok between 2023 and 2027, with a total investment of more than 100 billion baht.

Part of this ambitious plan, Central Park, which will debut in the second quarter of 2025, will redefine Bangkok’s industrial landscape, creating memorable parks in New York and London.


” International finance pioneer”

crystal ceilings blown off

Narumon Chivangkur, the mind of Citi Thailand and the country official, is also a member of the team.

Narumon Chivangkur stands as a pillar of revolutionary leadership in the realm of foreign banks in the center of Thailand’s bustling economic hubs. She embodies a blend of vision, experience, and a continuous pursuit of excellence with an famous 28-year occupation at Citi. Ms. Narumon is a visionary shaping the future of international banking in the region as the Citi Country Officer (CCO ) and Banking Head of Citi Thailand.

Beyond her recognized finance job, Ms. Narumon’s quest is enhanced by her unique skills. She performed on stage as a well-known pop singer in a bygone age, captivating audiences with her melodic words and captivating stage presence. Ms. Narumon excels in her authority by combining her special combination of creative flair and business acumen, which infuses her authority with originality and a deep understanding of the various facets of human expression.

Ms. Narumon’s trip exemplifies passion, knowledge, and a continuous pursuit of excellence. Her progression through the ranks, from a management relate in 1996 to her present position as CCO and banking mind of Citi Thailand, is a testament to her unwavering dedication to fostering growth and innovation.

In May 2023, Citigroup appointed Ms. Narumon as the fresh CCO for Thailand, making her the first woman to hold this position after the company sold its customer banking operations to United Overseas Bank in Indonesia, Malaysia, Thailand, and Vietnam. I want to help both local and international customers in their search for new business opportunities under Citi Thailand’s leadership role, she said.

Ms. Narumon has a wealth of knowledge in different fields, including foreign exchange, fixed-income securities, multi-award technique, and structured products. Her previous positions as head of business sales and arranging, head of derivatives and arranging, and nose of world markets and securities services at Citi demonstrate her management prowess. But beyond the office, she has an impact. Ms. Narumon is a steadfast supporter of diversity and inclusion, having previously served on the boards of directors of the Association of International Banks and the American Chamber of Commerce in Thailand. She has never before been more committed to empowering women in the workplace, opening the door for a new generation of leaders.

She has a clear vision for Citi Thailand, helping both domestic and foreign clients find new business opportunities and navigate the complex foreign market. Under her leadership, Citi Thailand is more than just a institution; it is also a proponent of international commerce and a change-maker. The bank’s” think globally” philosophy makes use of Ms Narumon’s vast network, which spans 95 countries, to quickly respond to client needs and promote business development across borders.

Under the direction of Ms. Narumon, Citi Thailand is dedicated to supporting their growth and fostering long-term success in the global market, from small and medium-sized businesses ( SMEs ) to large corporations. Her commitment to customer satisfaction is underlined by her proper focus on providing customized options, such as effective payment systems that can process thousands of transactions per minute. However, Ms. Narumon’s influence extends beyond banks.

Ms. Narumon also emphasizes the value of the team, focusing on developing the organization’s staff ‘ potential and efficiency, who are regarded as essential resources. With this support, bank workers can work in new techniques and gain new perspectives in order to adjust to the rapid changes in the business and technology earth.

As Ms. Narumon moves on to the next chapter of her distinguished occupation, she continues to inspire other women to strive for success. Her hard work, innovative thinking, and unwavering commitment to excellence function as a guiding light for upcoming decades of leaders.

Continue Reading

Breaking the glass ceiling

Narumon Chivangkur, Citi Thailand’s Country Officer and Head of Banking,

Narumon Chivangkur stands as a pillar of revolutionary leadership in the realm of foreign banks in the center of Thailand’s bustling economic hubs. She embodies a blend of vision, experience, and a continuous pursuit of excellence with an famous 28-year occupation at Citi. Ms. Narumon is a visionary shaping the future of international banking in the region as the Citi Country Officer (CCO ) and Banking Head of Citi Thailand.

Beyond her distinguished career in finance, Ms. Narumon’s quest is enhanced by her unique skills. She graced levels as a well-known pop singer in a bygone age, captivating audiences with her melodic words and captivating stage presence. Ms. Narumon excels because of her distinctive fusion of artistic flair and business acumen, which infuses her authority with originality and a deep understanding of how people express themselves.

Ms. Narumon’s excursion embodies hard work, experience, and a continuous pursuit of excellence. Her progression through the ranks, from a control relate in 1996 to her present position as CCO and banking mind of Citi Thailand, is a testament to her unwavering dedication to fostering growth and innovation.

In May 2023, Citigroup appointed Ms. Narumon as the fresh CCO for Thailand, making her the first woman to hold this position after the company sold its client banking operations to United Overseas Bank in Indonesia, Malaysia, Thailand, and Vietnam. I want to help both local and international customers in the search of new business opportunities under the leadership of Citi Thailand, she said.

Ms. Narumon has a wealth of knowledge in different fields, including foreign exchange, fixed-income securities, multi-award technique, and structured products. Her previous positions as head of business sales and arranging, head of derivatives and arranging, and nose of world markets and securities services at Citi demonstrate her management prowess. But she has a far-reaching impact beyond the board. As well as serving on the boards of directors of the Association of International Banks and the American Chamber of Commerce’s board of governors, Ms. Narumon is a steadfast argue for diversity and inclusion. She has an unmatched commitment to supporting people in the business world, opening the door for a fresh generation of leaders.

Her goal for Citi Thailand is simple: to assist both domestic and foreign customers in identifying new company opportunities and navigating the challenges of the world market. Under her authority, Citi Thailand is more than just a institution; it is also a force for change and a proponent of international commerce. Ms. Narumon’s” consider internationally” process makes use of Citigroup’s extensive network, which spans 95 countries, enabling the bank to quickly respond to client needs and help market expansion across borders.

Under the direction of Ms. Narumon, Citi Thailand is dedicated to supporting their growth and fostering long-term success in the global market, from small and medium-sized businesses ( SMEs ) to large corporations. Her proper focus on offering customized options, such as effective settlement systems that can process thousands of transactions per minute, underlines her dedication to satisfying her clients. However, Ms. Narumon’s influence extends beyond banks.

Ms. Narumon also emphasizes the value of the staff, focusing on developing the effectiveness and potential of the staff, which are regarded as important assets of the organization. With this support, bank workers can work in new techniques and gain new perspectives in order to adjust to the rapid changes in the business and technology earth.

As Ms. Narumon moves on to the next section of her distinguished occupation, she continues to inspire other people to strive for success. Her hard work, innovative thinking, and unwavering commitment to excellence function as a model for future leaders.

Continue Reading

Gold, Bitcoin surges show black swan risk rising – Asia Times

Gold continued to break price records on Friday, trading at US$2,183 an ounce at mid-afternoon, following a more dramatic rally in Bitcoin. Gold led Bitcoin in 2020 and 2021, during the Covid crisis. This time Bitcoin clearly led gold, suggesting that investors have more confidence in the high-tech alternative to the dollar.

Key to understanding how gold gauges geopolitical risk is the longstanding relationship between Treasury Inflation Protected Securities (TIPS) and the precious metal. Both are hedges against unexpected inflation or debasement of the dollar.

From 2007 through 2022, the gold price moved in lockstep with TIPS yields, as investors used them interchangeably. The seizure of more than $300 billion of Russian reserves after Moscow’s February 2022 invasion of Ukraine changed that.

Foreign central banks hold $3.4 trillion of Treasury debt and all foreigners own more than $8 trillion. Confiscation of reserves persuaded many foreign investors, official as well as private, to shift to gold.

That’s why the value of gold predicted by TIPS yields remained very close to the actual gold price from 2007 to 2022, and then decoupled. Gold is now nearly $900 “rich” to TIPS yields. The divergence between TIPS yields and gold is at an all-time high.

This is all the more remarkable given the strong performance of world stock markets during the past several months and the subdued price of risk hedges in options markets. The cost of options on the S&P 500 (the VIX Index) or the cost of options on major currencies is close to its all-time low.

But options only provide hedges against short-term fluctuations, and their payout depends on the smooth functioning of derivative markets.

Investors evidently want to take out insurance against extreme events – the sort of trouble that might arise from a geopolitical crisis – although they are unwilling to pay much for hedges against short-term fluctuation.

Despite the tranquil appearance of markets, the likelihood of a black swan event is rising.

Follow David P Goldman on X, formerly Twitter, at @davidpgoldman

Continue Reading

The way to prevent yet another US bank crisis – Asia Times

This is the third part of a three-part series. 

Financial system default crises can be rendered less frequent, and future bailouts of the financial system can be obviated, by private conversion of limited-liability corporate-form banks into non-corporate-form proportional-liability financial firms. 

Such firms would be less prone to default than banks are, and would not need government insurance to protect their depositors – even if they keep the same employees, payrolls, physical plant and equipment, deposits, depositors, and outstanding loan portfolios as the banks from which they are converted.

Private conversion of banks to proportional-liability financial firms is impeded not only by its conceptual novelty – no one seems to have done it or publicly suggested it until now – but also by governmental obstacles that reduce its profitability or administrative feasibility. 

Government insurance of bank deposits effectively eliminates the greatest profit incentive to convert a bank to a proportional-liability financial firm, namely that this conversion would lessen the default risk borne by its creditors including its uninsured depositors and hence the compensation that they demand. 

In addition, central, state and local governments, having no experience of non-corporate proportional liability firms, make no provision for them in diverse kinds of business regulation and taxation. One example is the issuance of business charters, the standard term for which, “articles of incorporation,” reflects the ubiquity of the corporate form.      

Partly due to the intrinsic advantages of converting banks into proportional-liability financial firms and partly due to political considerations described near the end of the second part of this three-part essay, the House Republican Caucus might best respond to any Biden administration request for a banking-system bailout during this session of Congress by conditioning its support for the requested bailout on prior enactment of legislation mandating imminent termination of governmental impediments to private conversions of banks into proportional-liability financial firms. Such legislation might aptly:

(1) mandate termination of FDIC bank deposit insurance within two years;

(2) repeal Title II of the Dodd-Frank Act, effective within two years;  

(3) and prohibit (under the interstate commerce clause of the US Constitution) any federal, state or local government discrimination against proportional-liability financial firms relative to banks in any aspect of taxation or business regulation, including the issuance of business charters, effective within six months. 

Higher Federal taxes, after two years, on banks not converted to proportional-liability financial firms, might also be warranted for banks that are not functionally specialized and structurally atypical but ought not to be necessary to induce private conversion of nearly all banks into proportional-liability financial firms. 

The rest of this essay, except for a brief envoi, tells how and why proportional-liability financial firms would be better than banks both singly and collectively, i.e., why private conversions of banks into proportional-liability financial firms would be profitable, absent governmental impediments, and why governments should facilitate and encourage such conversions.   

Problems of the corporate business form

The distinguishing feature of the corporate business form is limited liability – the exemption of the owners of a firm’s equity from any personal liability for the firm’s liabilities. 

Limited liability causes the interests of a corporation’s equity owners to be increasingly at odds with the interests of its creditors as the value of a solvent corporation’s assets diminishes relative to the value of its liabilities. 

As a solvent corporation (one with assets worth more than its liabilities) approaches insolvency (the point at which its assets are worth no more than its liabilities), its equity owners increasingly want it to take risks, even risks with negative expected values. 

For the equity owners of a nearly insolvent corporation, whose equity is already worth next to nothing and cannot have a negative value due to limited liability, there is negligible scope for loss but great scope for gain by taking large risks, even if they are bad bets.

All the downside risk of a nearly insolvent corporation is born by its creditors, who increasingly prefer that a solvent corporation not take risks as it approaches insolvency. However, a corporation’s creditors,i.e., the owners of its liabilities, have no voting rights in the corporation’s control. 

All voting rights in a corporation’s control typically are allocated to the owners of its equity, each share of equity being assigned one vote. Consequently, corporations, insofar as their management is informed by the interests of the holders of rights to vote in choosing their directors, tend to become more risk-loving and less profit-maximizing as they approach insolvency.

If a corporation’s equity trades in liquid markets, then individual owners of relatively small amounts of either its equity or its debt may be able to rely on exit (selling out) rather than voice (voting rights in corporate control) to protect their interests so management tends to be relatively independent of equity owners, save for those who own more equity than can be sold without lowering the market price of the corporation’s equity. 

However, if there is no liquid market for a corporation’s equity or if the price at which a corporation’s equity trades is highly volatile, as it may be if the corporation is either highly leveraged financially or engages in business that is unusually risky, then exit substitutes less well for voice, and even owners of relatively small amounts of equity may be concerned to make the corporation’s management reflect the interests of its equity-owners.  

If a corporation’s debt trades in liquid markets at prices that are not highly volatile, then individual owners of small amounts of its debt may be able to rely on exit (selling out) to protect their interests. Otherwise, a corporation’s financial creditors may try to protect their interests by “protective covenants” that constrain management but entail non-negligible monitoring and enforcement costs.   

How the corporate form’s problems afflict banks

With no exceptions known to this writer, US banks are corporations.  Their equity owners are totally exempt from personal liability for banks’ financial liabilities and typically are the only holders of voting rights in banks’ control. 

Financial firms that are not corporations are not called banks. For example, credit unions resemble banks in their main activities – taking deposits and making loans – but differ from banks in not being corporations. A credit union is depositor-owned.  It has no equity distinct from its deposits. Voting rights in its control are typically held solely by depositors in proportion to the value of their deposits.

The structural and behavioral characteristics of corporations described in this essay’s previous section also apply to banks, with variations described in the rest of this section.

A bank’s assets are chiefly the outstanding loans that it has made or loans made by other banks that it has bought, often in risk-diversifying bundles like mortgage-backed securities. The liabilities of a bank are chiefly its deposits, although many banks also issue debt securities.

The creditors of a bank are chiefly its depositors. The relatively few functionally specialized and structurally atypical banks for which not all of this is true fall outside the scope of this part of this essay.

If some of a bank’s deposits are government-insured, then their owners, unlike the bank’s other creditors, do not increasingly prefer that a solvent bank not take large risks as it approaches insolvency. Bank deposits are not readily tradable, but they can be withdrawn, often on demand or on short notice. Owners of uninsured bank deposits typically rely chiefly on exit by withdrawal to protect their interests.

Exit tends to substitute for voice less well for owners of a bank’s equity than for owners of the equity of non-financial corporations, even if there is a liquid market for the bank’s equity because the price of a bank’s equity tends to be more volatile than the price of the equity of a non-financial corporation. 

Bank equity prices tend to be more volatile than the equity prices of non-financial corporations for two reasons. First, banks typically are more leveraged – i.e., they have more liabilities relative to equity – than non-financial corporations. 

Their assets are created chiefly by lending money supplied by their depositors; their equity serves chiefly as a buffer against losses and tends to be little larger than is required by government regulators. Second, many factors affecting the value of banks’ assets, like market interest rates, are social constructs that can change rapidly.

For both these reasons, banking is an extraordinarily risky business. The impressively stable architecture long favored by banks, featuring multiple thick columns that appear able to withstand earthquakes, was deliberately crafted to belie this reality and inspire greater trust in banks than they in fact warrant.

Because exit tends to substitute for voice less well for owners of a bank’s equity than for owners of the equity of non-financial corporations, the management of a bank tends to be more responsive to the interests of its equity owners than is the management of a non-financial corporation.

Consequently, limited liability’s tendency to make corporations risk-loving and not profit-maximizing, insofar as corporate management is informed by the interests of its equity owners, to an extent that increases as a solvent corporation approaches insolvency, tends to afflict banks more strongly than non-financial corporations.

The tendency of limited liability to make solvent banks behave in increasingly default-prone ways as they approach insolvency, to an even greater extent than do non-financial corporations, is at best constrained, not eliminated, by greater government risk-control regulation of banks than of non-financial corporations.

In addition, the susceptibility of banks to default has greater negative externalities for the economy generally than does comparable susceptibility to default in non-financial corporations. Bank failures contract the money supply more than do failures of non-financial corporations, and therefore are uniquely likely to precipitate general economic contraction, as in 2007-08, or to aggravate an already severe economic contraction, as in 1932-33. 

That is why the US government, through the FDIC, has since 1933 been the insurer of first resort for many bank deposits but has never been the insurer of first resort for any comparably large set of liabilities of non-financial corporations.

How to solve the problem: Convert banks to proportional-liability financial firms

A bank’s propensity to take unwarranted risks, which increases as a solvent bank approaches insolvency and thereby makes the bank prone to default, could be eliminated by restructuring the bank as a financial firm with a business form that is neither a joint stock company nor a corporation but is rather between the two.

In a joint stock company, anyone owning any of its equity is personally liable for all of its debt.  Until well into the 19th century, this aspect of the then-dominant business form helped keep debtors’ prisons full. It also gave us “Ivanhoe”, which Sir Walter Scott wrote in two weeks in order to earn funds he needed to stay out of debtors’ prison after a joint stock company, some equity of which he owned, went bankrupt. 

Beyond the problems entailed by impoverishing equity owners, joint stock companies suffered from the problem that the value of their debt depended in part on the value of the ever-changing personal wealth of each of an ever-changing set of equity owners, and hence was very hard to appraise.

In a corporation, by contrast, equity ownership entails no personal liability for any of the firm’s debt. Its default risk is born entirely by its creditors, who in the case of a bank are chiefly its depositors.

In Western countries, including the US and Britain, the corporate form was legalized and then quickly superseded the joint-stock company form during the 19th century.  However, in that transition, an intermediate business form that rather obviously suggests itself was seldom if ever tried.

In that intermediate form, arguably best called the “proportional-liability” form, anyone who owns a specific proportion of its equity would be personally liable for the same proportion of its liabilities, or at least of its financial liabilities including debt securities that it has issued and, in the case of financial firms, deposits that it has accepted. 

(For the purpose of rendering, equity owners less risk-loving, they need not be personally liable for the firm’s unforeseeable liabilities). 

This proportional liability form would expose equity owners to slightly more personal liability than does the corporate form, but to far less personal liability than did the joint-stock company form. It could not impoverish any equity owner who did not foolishly overconcentrate his wealth in the equity of a single firm.

Moreover, a proportional-liability firm could include, in its charter or by-laws, limits on the amount of the firm’s equity that any individual could own, crafted to prevent overconcentration of personal wealth in its equity and in other assets with prices that co-vary strongly with the price of its equity. 

Governmental regulators of financial firms might help in the enforcement of those rules, or promulgate and enforce such rules themselves. Securities brokerages have routinely enforced such rules on their clients for many decades. 

Absent overconcentration of personal wealth in the firm’s equity and strongly price-covariant assets, the value of the firm’s debt would not vary significantly with changes either in its equity ownership or in the personal wealth of individual equity owners. 

Such a proportional-liability firm’s default risk would be born wholly by its equity owners, although no equity owner would bear too much of it. Consequently, the owners of a proportional liability firm’s equity, unlike the owners of a corporation’s equity, would neither want the firm to take risks with negative expected values nor increasingly want it to do so as it approaches insolvency.

Although the proportionate-liability business form might have advantages over the corporate form for a broad range of firms, those advantages, both for the firm and for society generally, seem greatest for financial firms – the firms that we call “banks” when they are structured as corporations – because the high business risk and high leverage of banks tends to make exit substitute for voice less well for their voting-right-monopolizing equity owners than for the voting-right-monopolizing equity owners of non-financial corporations, which tends to make the management of banks more responsive to the flawed incentives of their equity owners than are the managements of non-financial corporations.

Allocating voting rights in proportional-liability financial firms to obviate deposit insurance

A proportional-liability firm could, by provisions of its charter or by-laws, divide voting rights in its control between the owners of its equity and the owners of its financial liabilities (its creditors or debtholders) in a ratio determined by the relative values of the firm’s assets and its liabilities. 

So long as the market value of the firm’s assets exceeds the face value of its liabilities, equity owners would hold most of the voting rights in the firm’s control.  If the market value of the firm’s assets fell below the face value of its liabilities, most of the voting rights in its control would become held by it is creditors – chiefly by its depositors in the case of a financial firm. 

The assets of a proportionate-liability firm, like the assets of a corporation, would not be traded, hence would not have a directly observable market value. However, the value of the tradable equity of a proportional-liability firm would be the market value of its assets minus the present face value of its liabilities, per the basic accounting equation, E = A – L. 

That equation is true for a proportional-liability firm and implies that A = E + L. E and L are directly observable, E being the price of traded equity and L being the sum of contractually specified future payments, each discounted at the risk-free interest rate for the term of its maturity. 

Consequently, A, the market value of the firm’s assets, is readily ascertainable.  This enables voting rights to be divided between the owners of the firm’s equity and the owners of its financial liabilities in proportion to the current relative values of A and L.

Among the advantages of allocating any proportional-liability firm’s voting rights in this way is that it obviates recourse to slow and costly bankruptcy courts as a means of transferring control of a firm from its equity owners to its creditors when the firm becomes insolvent – while also allowing the equity owners hope of regaining control of the firm if the owners of its financial liabilities choose not to liquidate it and it returns to solvency while under their control.

Among the advantages of allocating a proportional-liability financial firm’s voting rights in this way is that it obviates government insurance of depositors. As soon as the value of a proportional-liability financial firm’s assets (chiefly loans) becomes insufficient to cover the face value of its liabilities (chiefly deposits), majority control of the firm passes from its equity holders to its creditors (chiefly its depositors). 

Consequently, either federal or state law or regulation might usefully require any proportional-liability financial firm to allocate its voting rights in this way, even though such voting right allocation has firm-specific efficiencies that could impel any proportional-liability firm to implement it spontaneously.

The problem with banks that has large negative external consequences and requires government insurance of bank deposits is that the incentives of the equity owners who exclusively own voting rights in a bank’s control conflict systematically with the incentives of depositors, and conflict with them more strongly as the bank’s risk of default (insolvency) grows.

That problem seems easily solved by replacing banks with proportional-liability financial firms. So kiss goodbye to the FDIC and to comparably unneeded deposit-insurance bureaucracies in other countries.    

The benefits of proportional liability cannot be captured by a corporation 

The market value of a corporation’s assets cannot readily be inferred from the price of its traded equity and the present face value of its liabilities, as the value of a proportional liability firm’s assets can.  Consequently, a corporation cannot divide its voting rights between its equity owners and its creditors in proportion to the ratio of the market value of its assets to the present face value of its liabilities.

The same inability, readily to infer the market value of a corporation’s assets, precludes creating an efficient market for corporate default risk insurance that might obviate government insurance of bank deposits.

The basic accounting equation, E = A – L, is not true for a corporation.  For a corporation, E = A – L + P,  E being the market value of its equity, A being the putative value of its assets, L being the present face value of its liabilities, and P being the putative value of limited liability, which can in theory be priced as a put option (hence “P”) owned by equity owners that enables them to sell (A – L) to the firms’ creditors for nothing when A – L is worth less than nothing. 

Because P, the value of that put, can never be less than A – L, E can never be worth less than zero. That is, due to limited liability, corporate equity – unlike the equity of a proportional-liability firm – can never have a negative market value.

Of the four variables in the corporate-form equation, E = A – L + P, only E and L are observable, E being tradable and L being contractually specified.  Consequently, although the value of E + L can be observed and must equal the sum of A + P, neither the value of A nor the value of P can readily be ascertained. 

There is no close-form solution to the problem of pricing either A or P by what is generally deemed the only rigorous and reliable method of pricing market-traded financial securities, namely the Black-Scholes-Merton option-pricing model developed in the 1970s or some variant of it. 

The best way to try to estimate the value of either A or P that is consistent with Black-Scholes-Merton pricing apparently involves simultaneous iterative estimation of both A and P based on past and current prices of both.  However, even this may fail to yield unique values for A and P.

Presumably for this reason, the prevailing method of pricing credit default swaps (CDS) does not apply the Black-Scholes-Merton option pricing model and is crude by comparison. Googling for “CDS mispricing” yields no smaller number of recent academic articles in the titles or bodies of which that term appears. 

The impossibility of pricing corporate default risk rigorously may largely explain why there is still no liquid public market for credit default swaps, so that no reporting on the CDS markets is required or published by any regulatory entity.

It seems impossible to make a well-priced insurance market for corporate default risk, i.e., a market in which corporate equity owners could sell P and corporate creditors could buy P, which would enable them to synthesize the proportional-liability form and capture some of its advantages while the firm remains legally a corporation. 

It seems impossible either to allocate corporate default risk efficiently or to allocate voting rights in corporate control optimally. The corporate business form apparently precludes both. To capture these benefits of the proportional-liability form, a corporation must be formally converted into a proportional-liability firm.

Envoi: the prospective loss of our heritage of bank-hatred

Proportional-liability financial firms would be no less able and willing than banks have been to foreclose on grandma’s farm, to evict widows and orphans from their homes, and to deny working people loans to pay for medical operations needed to save the lives of their children. 

However, they, unlike banks, would neither often cause uninsured depositors to lose their life savings, nor, by defaulting en masse, recurrently precipitate economic contractions that deprive millions of their livelihoods. Proportional-liability financial firms might be merely loathed and despised rather than viscerally hated, as banks have been by most people ever since usury became tolerated and institutionalized.

Saddeningly, we will suffer a vast and irretrievable cultural loss if our financial institutions cease to inspire hatred in enduring them, wit in mocking them and bravery in fighting them. 

Without banks, how will our grandchildren be able to appreciate Dickens’ “Little Dorrit or Wolfe’s “Bonfire of the Vanities?” How will they be able to savor Barry’s doubling in Peter Pan of Captain Hook, a child-murdering pirate, and George Darling, a childhood-killing banker? 

How will they grasp the symbol-inversion in Mary Poppins’ use of a black umbrella, a badge of office borne by Victorian London bankers even under clear skies, to fly children away from the clutches of their joyless banker-father? 

Without banks, how will our posterity be able to empathize with the Americans of the Great Depression, whose most-admired heroes, during and after the nationwide bank failures of 1932-33, were bank robbers like John Dillinger, Pretty Boy Floyd, Bonnie Parker and Clyde Barrow?

Without banks, how will future generations feel why the Paris Commune and the Bolshevik Revolution were so appealing to so many? How will they feel what has been conveyed by Jew-hatred’s portrayal of Jews as bankers or would-be bankers, which, after the German bank failures of 1931, contributed mightily to the rise of Hitler and the Holocaust?

If banks and their chronic default crises end, even without ending loan denials, foreclosures and evictions, then much of our past will be gone with the wind, as much of America’s past was when slavery ended, even though few freed slaves got their promised forty acres and a mule. 

Continue Reading

Social Security Fund ‘could go bankrupt in 30-40 years’

A new board urges essential changes

Social Security Fund 'could go bankrupt in 30-40 years'

According to the Labour Ministry, the Social Security Fund ( SSF ) may collapse over the next 30 to 40 years.

The newly established Social Security Board ( SSB), led by Sustarum Thammaboosadee, an academic from Thammasat University, met with Labour Ministry officials on Monday to discuss ideas and advocate for a more effective social security policy.

According to Labour Minister Phiphat Ratchakitprakarn, if nothing changes, the Social Security Fund may go destitute in the next 30 to 40 years.

According to Mr. Phiphat, the SSB may need to increase the peak years of employees who contribute to the bank from 55 to 60 and raise the bank collection cap from 15 000 to 20 000.

He also suggested that the board increase the maximum allowed for low-risk asset investments from 60 % to 75 %.

Phiphat says,” Something must be done.”

Additionally, investments in higher-risk assets may have a BBB or higher investment grade.

According to Mr. Phiphat, the Social Security Fund has so far accumulated an estimated 200 billion ringgit and has collected around 70 billion baht annually.

The SSF curve may quickly fall and tumble in a” V” design” when the account reaches its peak, which is anticipated to occur in the near future. Therefore, it is necessary to plan in advance,” he said.

He continued,” The SSF made a 59 billion baht revenue from 2.34 trillion ringgit in purchases last time.”

He claimed that to increase revenue to 120 billion baht, investment needs to be increased from 2.4 % to 5 %.

” The SSF’s new investment projects must not produce a profit of less than 5 % or at least 4 % during this and the following year,” he said.

He added that putting in foreign businesses also raises the risk of exchange rates.

He also urged the new board to talk about the protections it wants to include for bank people: former staff under Section 39, or separate staff under Section 40.

In addition, the country’s first-elective SSB has pledged clarity in the Social Security Fund’s management, including promoting life meetings and lowering costs.

The SSF committee’s meetings must be broadcast, according to SSB spokeswoman Ketnakorn Pojanavorapong, and the public should be able to get information about past meetings.

She also pointed out a flaw in the Prayut government’s social security law, which she claimed was proposed while the SSF was being overseen by a select section. As the first social protection commission to get elected,” we hope this will be the start of a change that may lead to a better quality of life for all people,” she said.

Continue Reading

SSF ‘could go bankrupt in 30-40 years’

New board calls for urgent changes

SSF 'could go bankrupt in 30-40 years'
Phiphat: ‘Something must be done’

The Social Security Fund (SSF) could collapse in the next 30-40 years, the Labour Ministry has warned.

On Monday, the newly formed Social Security Board (SSB) led by Sustarum Thammaboosadee, an academic from Thammasat University, met with Labour Ministry officials to exchange ideas and push for a more effective social security policy.

Labour Minister Phiphat Ratchakitprakarn said that the Social Security Fund could go bankrupt in the next 30-40 years if nothing changes.

Mr Phiphat said the SSB may need to raise the fund collection ceiling from 15,000 baht to 20,000 baht and raise the maximum age of employees who contribute to the fund from 55 to 60.

He also suggested that the board raise the ceiling for low-risk asset investments from 60% to 75%.

Meanwhile, higher-risk assets to be invested must have an investment grade of BBB and above.

Mr Phiphat said the Social Security Fund has so far accumulated an estimated 200 billion baht, collecting around 70 billion baht per year.

“When the fund reaches its peak, which is estimated to be in the near future, the SSF graph might rapidly drop and fall in a “V” shape. So, planning in advance is necessary,” he said.

Last year, the SSF made a 59-billion-baht profit from 2.34 trillion baht in investments, he added.

He said investment must be boosted from 2.4% to 5% to increase revenue to 120 billion baht.

“The SSF’s new investment projects must not generate a profit of less than 5% or at least 4% during this and next year,” he said.

Depositing in foreign banks also holds an exchange rate risk, he added.

He also urged the new board to discuss what privileges it wants to add for fund members — company employees under Section 33, former employees under Section 39, or independent workers under Section 40.

Meanwhile, the country’s first-elected SSB has pledged transparency in the Social Security Fund’s administration, including promoting live broadcasts of meetings and cutting costs.

SSB spokeswoman Ketnakorn Pojanavorapong said that all meetings of the SSF committee must be broadcast, and the public should be allowed to access information about previous meetings.

She also pointed to what she said was a flaw in the social security law drafted by the Prayut government, saying it was proposed when the SSF was supervised by a selected panel. “We, as the first-elected social security committee, hope this will be the start of change that will see a better quality of life for all people,” she said.

Continue Reading

Next US financial crisis could look like the last – Asia Times

This is the second part of a three-part series

During the last financial crisis, Carmen Reinhart and Kenneth Rogoff, both now teaching at the Charles River campus of Plagiarism University, wrote an engagingly readable and well-received book, This Time is Different (2009), describing ways in which debt boom and default cycles have varied little since the Middle Ages. 

The most amusing of these similarities is that those who profit most from each such cycle’s bubble phase sustain it by assuring the gullible that this debt bubble, unlike all its predecessors, will not end badly – that this time is different.

Reinhart’s and Rogoff’s warning seems best appreciated as reverse-reprising Tolstoy’s bon mot, in “Anna Karenina”, that although “all happy families are alike, every unhappy family is unhappy in its own way.” 

Although all debt bubbles end unhappily, the happy thoughts used to assure each bubble’s victims that it will not end unhappily must differ enough from the happy thoughts used to sustain recent previous bubbles to seem credible, at least to the gullible.

If a US financial crisis occurs in 2024, it will be novel in certain ways. Of these, the most widely anticipated is that it will occur electronically.  Fear that fast transactions via the Internet and “disinformation” via insufficiently censored electronic media might cause bank runs to spread rapidly have recently troubled elites both in the US and Europe.

Less widely discussed is the possibility that the alienation of customers by the growing electronic automation of financial institutions could aggravate a financial crisis.

During the past decade, bankers and brokers have increasingly hidden from depositors behind websites that often function poorly and phone answering services that often have long wait times and ill-trained staff. This has coincided with the closing of so many branch offices as to give rise to a new financial term, “banking desert,” to describe any of the increasingly numerous and large areas with no physical banking services in which millions of disproportionately lower-income Americans now live.

As an executive of a US-based digital services firm recently observed in discussing the limits of bank automation, having human contact with staff gives a bank’s depositors more confidence in the bank. What might move a depositor to trust bankers who hide from him behind new infotech, and whom he never meets in person? And how can a banking desert dweller tell a failing bank from a bank whose website is dysfunctional or whose phone service wait time is impossibly long? 

It seems not to have occurred to America’s ruling elites that the automation of banking might aggravate a banking crisis in these ways. Perhaps that’s because folks who live in America’s wealthier towns and neighborhoods not only still have branch banks, but increasingly have branch banks newly redesigned to include coffee bars and social lounges.  Only from working-class stiffs do bankers hide behind websites and phone banks.

A more important novel aspect of any 2024 financial crisis is that it will occur after the widely touted but still little-tested replacement of taxpayer-funded bank bailouts by financial industry-funded bank “bail-ins” authorized by Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on July 21, 2010, and implemented by Title 12, Part 380, of the Code of Federal Regulations, promulgated on January 25, 2011.

Title II of the Dodd-Frank Act, titled “Orderly Liquidation Authority,” authorizes the Federal Deposit Insurance Corporation (FDIC) to conduct “ball-in” liquidations, funded by the financial sector, of failed or failing banks or bank-like financial firms, in the hope of obviating taxpayer-funded bailouts

Title II authorizes the Secretary of the Treasury to put into FDIC receivership, pending liquidation, any bank or bank-like financial firm that is in default or deemed by the Secretary to be in danger of default, and the default of which may endanger general economic stability. 

Title II authorizes the FDIC to use the equity, debt securities or uninsured deposits of the financial firm in receivership, salaries or bonuses recently paid to that firm’s management or directors, or assessments levied on other financial firms, in order to honor that firm’s obligations to its employees and the government, including to the FDIC as insurer of its small depositors. 

The financial assets of the FDIC, which insures deposits of less than $250,000 at US banks, are grossly inadequate to respond to any large financial crisis either by bailouts or by bail-ins. As of June 30, 2023 (the most recent date for which relevant data seem to have been published), the FDIC’s Deposit Insurance Fund (DIF) had a balance of $119 billion. 

The aggregate face value of deposits at US banks was then and is now above $17 trillion. Authoritative data on the total face value of FDIC-insured deposits seem not to be publicly available but diverse observers have recently estimated that slightly more than half of US bank deposits are FDIC-insured. If so, then the FDIC’s contingent liabilities appear to exceed its assets available to cover those liabilities by a factor of at least 70.

Consequently, for the Secretary of the Treasury and the FDIC to respond to any systematic banking crisis in which many US banks default or are at risk of default – or in which even one of the largest US banks defaults or is at risk of default – entails expropriation of private financial assets.

Section 214 of the Dodd-Frank Act reads in full:

  • Liquidation required:  All financial companies put into receivership under this subchapter shall be liquidated. No taxpayer funds shall be used to prevent the liquidation of any financial company under this subchapter.
  • Recovery of funds:  All funds expended in the liquidation of a financial company under this subchapter shall be recovered from the disposition of assets of such financial company, or shall be the responsibility of the financial sector, through assessments.
  • No losses to taxpayers: Taxpayers shall bear no losses from the exercise of any authority under this subchapter.

However, section 206 of the Dodd-Frank Act requires that any action under Title II serve not merely interests specific to the company in receivership, but the stability of the economy as a whole. 

The task of deciding whose assets should be expropriated and whose should not be expropriated in the interest of general economic stability is not an enviable one. No matter how carefully such decisions are made, they may evoke public complaints and considerable resistance from within the far-from-powerless financial industry.

Any financial firm that owns either equity or debt securities issued by another financial firm in FDIC receivership or uninsured deposits in such a financial firm might cite Section 206 of the Dodd-Frank Act to argue that it should be exempted in whole or part from FDIC expropriation of those assets on the ground that their expropriation would increase its own risk of default, thereby imperiling the stability of the whole economy. 

Financial firms might even argue collectively – and plausibly – that the whole financial sector should be subjected to only minimal assessments to fund liquidations under Title II, on the grounds that to extract large assessments from banks in a time of systemically elevated risk of bank default tends further to elevate systematic bank default risk. 

This is particularly true insofar as such assessments increase – as provisions of Title II suggest that they should increase either over time or across firms – with the appraised risk of default by any financial firm from which such assessments are collected.

Any such limitation of assessments could leave the FDIC short of resources to cope with a serious financial crisis, impelling the Executive Branch to ask Congress once again to appropriate funds to bail out rather than to liquidate diverse financial institutions in danger of default. 

Inasmuch as bail-out funds would not be used to implement Title II of the Dodd-Frank Act, their appropriation would not be inconsistent with section 214 of that act, although a return to bailouts rather than bail-ins could effectively render Title II a dead letter.  

The FDIC, in its “orderly liquidation” of Silicon Valley Bank (SVB) and Signature Bank that began in March 2023, declined to use its authority under Title II to expropriate any of those banks’ uninsured deposits to help the FDIC provide insurance to those banks’ FDIC-insured deposits. The FDIC’s decision not to expropriate uninsured deposits generated public complaint.

However, the FDIC’s reason for not expropriating uninsured deposits in SVB and Signature Bank seems self-evident and underscores limitations on the FDIC’s implementation of Title II of the Dodd-Frank Act.

Had the FDIC expropriated uninsured deposits in those banks, then a non-negligible proportion of the nearly half of US bank deposits that are not FDIC-insured might have left the US banking system for some safer haven.  That could have threatened US economic stability by inducing a large and sudden contraction of bank lending, hence of the money supply, and hence of non-financial economic activity.

If, as it seems, the FDIC cannot prudently expropriate uninsured deposits of banks in FDIC receivership pending liquidation, then its resources for making good on its commitment to insure other deposits are limited to its own relatively tiny DIF, the equity and debt securities of the firms in receivership, and assessments levied on other financial firms. 

Nothing guarantees that these resources will prove adequate, in the event of a systematic financial crisis, to obviate the FDIC’s asking the President to ask Congress to appropriate funds for another financial-system bailout like that of October 2008 – especially if the financial industry resists new or increased FDIC assessments.   

Consequently, a third novel aspect of any 2024 financial crisis is that although, as in 2008, it may occasion an urgent demand by the President and Wall Street for another large bailout of the again-insolvent US financial industry, this request may come as a surprise to many voters and Congress members who have been led to suppose that Title II of the Dodd-Frank Act has lastingly obviated such bailouts by authorizing the FDIC to conduct bail-ins.

Thus, if this debt bubble is not different from 2008 in its unhappy ending, it will be different in the happy but untrue reason for which its unhappy ending was unexpected: widespread hope that a large financial sector default crisis could be ended by FDIC expropriation of uninsured deposits in failed banks or of assets of still-solvent financial firms will have been shown to be ill-founded.

So how might the House Republican Congress best respond to a 2024 bailout request? Any US financial crisis in 2024 bad enough to induce President Biden to take the politically perilous action of asking Congress to appropriate funds for another bailout of the US banking system will render Americans more receptive than ever before to novel notions about how such bailouts might lastingly be obviated. 

The 2008 taxpayer bailout of the rich and systematically corrupt US financial elite was so widely and intensely disliked by Americans that it spawned the Dodd-Frank effort to obviate such bailouts in future. If the Dodd-Frank bail-ins fail to obviate another similar bailout only 16 years later, then Americans will be even more desperate to find some way to obviate such bailouts lastingly.

If this session of Congress is asked to appropriate funds for another large financial system bailout, then the Republican Caucus of the House of Representatives, comprising a majority of that chamber’s members, will be particularly desperate for a means of lastingly obviating banking system bailouts. Only by finding some plausible means of doing that can the House Republican Caucus escape from the political dilemma in which it will find itself if this session of Congress is asked for a banking system bailout.

If the House Republican Caucus refuses to appropriate funds for a financial-system bailout needed to mitigate a foreseeably large and rapid incipient economic contraction being precipitated by a financial-sector default crisis, then the preponderance of public blame could shift from the Democrats to the Republicans. In arguing for such blame-shifting, the Democrats would have the overwhelming support of US financial, corporate, academic and media elites.

In addition, one could hardly overstate the temptations that the financial industry can offer to legislators who must fund re-election campaigns in a country where neither campaign contributions nor campaign spending can be restricted because the Supreme Court has ruled that money is speech.

On the other hand, another banking system bailout would be anathema to the increasingly populist and working-class voters who dominate the Republican Party’s primary elections.

Absent some novel and unprecedently persuasive reason to think that this banking system bailout will be the last banking system bailout, populists will oppose it as corporate welfare perpetuating a pseudo-democratic oligarchy that has impoverished American workers for decades in its pursuit of cheap foreign labor by free trade and immigration. 

Moreover, the affections of populist voters, if alienated by the support of another bank bailout, might prove past the power of campaign spending to regain.

Only by conditioning House Republicans’ support for another banking-system bailout on prior implementation of measures that would undoubtedly make that the last banking system bailout could the House Republican Caucus avoid blame for not mitigating an incipient economic contraction without alienating the populist voters who dominate Republican primary elections.

A solution to this dilemma is readily available and seems not only politically expedient but good for everyone in both the short and long terms. It also entails no additional government spending. 

The third and last part of this three-part series will describe that solution, which, although conceptually novel, is easy to understand and is based on widely-accepted financial and institutional economics theory. It is to enable private conversions of banks into a better kind of financial firm that is less prone to default and need no government insurance of its depositors. 

A financial sector made up of such firms, rather than of banks, would suffer fewer financial-system default crises and would not need government bailouts when it does experience such a crisis.

To induce the private sector to replace banks with such better financial firms, the federal government need only eliminate governmental obstacles to profitable private conversions of banks into such firms. The greatest governmental impediment to such conversions is FDIC insurance of bank deposits, which eliminates the greatest profit incentive for such conversions. 

The House Republican Caucus might best respond to any 2024 Biden administration request for a banking-system bailout appropriation by conditioning House approval of such a bailout on prior enactment of legislation of mandating imminent termination of FDIC insurance of bank deposits and of other governmental obstacles to profitable private conversion of banks into less default-prone firms that need no deposit insurance and which, after generally replacing banks, would make the financial system generate fewer default crises and not require government bailouts when such crises occur. 

Ichabod is a former US diplomat.

Continue Reading

National People’s Congress: China sets ambitious economic target for 2024

Li QiangGetty Images

China has set an ambitious growth target of around 5% for this year, as it announced a series of measures aimed at boosting its flagging economy.

Premier Li Qiang made the announcement at the opening of the annual National People’s Congress (NPC) on Tuesday.

Mr Li acknowledged that China’s economic performance had faced “difficulties”, adding that many of these had “yet to be resolved”.

It comes as China struggles to reinvigorate its once-booming economy.

“Risks and potential dangers in real estate, local government debt, and small and medium financial institutions were acute in some areas,” he said. “Under these circumstances, we faced considerably more dilemmas in making policy decisions and doing our work.”

A series of other measures to help tackle the country’s slow recovery from the pandemic were also outlined, including the development of new initiatives to tackle problems in the country’s crisis-hit property sector. Beijing also aims to add 12 million jobs in urban areas.

Regulation of financial market will also be stepped up, said Premier Li, while research will stepped up in new technologies, including artificial intelligence (AI) and life sciences.

For decades the Chinese economy expanded at a stellar rate, with official figures putting its gross domestic product (GDP) growing at an average of close to 10% a year.

On the way it overtook Japan to become the world’s second largest economy, with Beijing claiming that it had lifted hundreds of millions of people out of poverty.

Beijing says that last year the economy grew by 5.2%, which even at that level is low for China. However, some critics argue the real figure could be less than a third of that.

“I think the next five or ten years is going to be difficult,” Andrew Collier Managing Director from China research firm Orient Capital Research told the BBC.

“A lot of economists think the numbers are completely fabricated. The idea of 5.2% or 5.5% growth is much likely wrong. It’s more like 1% or 2%,” he adds.

Whichever figures are accurate, it is clear that this vast country and its leaders face a daunting array of economic challenges.

That list includes a property market in crisis, a shaky stock market, high youth unemployment and the threat of deflation as consumer prices continue to fall.

Those immediate problems are compounded by longer term issues from trade and geopolitical tensions to China’s falling birth rate and aging population.

Economic challenges

The most serious of the challenges are those associated with the housing market, which according to the International Monetary Fund (IMF) accounts for around 20% of the economy.

It is a major problem “not just for property developers but also the regional banks that are highly exposed to it,” Dan Wang, chief economist of Hang Seng Bank (China), says.

The real estate industry crisis was highlighted last week when the country’s biggest private developer Country Garden was hit with a winding-up petition in Hong Kong by a creditor.

It came just a month after debt-laden rival Evergrande was ordered to liquidate by a court in the city.

Evergrande

Getty Images

And while much of the rest of the world has struggled with soaring prices in the wake of the pandemic, China was one of the few major economies to avoid high inflation.

Now though it is having to deal with the opposite problem – persistently falling prices or deflation.

Consumer prices in China fell in January at the fastest pace in almost 15 years, marking the fourth month in a row of declines.

It was the sharpest drop since September 2009, when the world economy was still reeling from the effects of the global financial crisis.

Deflation is bad for economies as it can mean that people keep putting off buying big ticket items, like washing machines or cars, on the expectation that they will be cheaper in the future.

It also has an impact on people and businesses with debts. Prices and incomes may fall, but debts do not. For a company with falling revenue, or a household with a declining income, debt payments become more of a burden.

All of this means China is lacking something vital to a strong economy: confidence. And authorities have been scrambling to reassure investors and consumers.

“Messaging from policymakers continues to be about restoring confidence and domestic demand,” Catherine Yeung from Fidelity International told the BBC.

So far that has meant a series of relatively small measures targeting different parts of the economy.

This year alone, borrowing costs have been cut and direct support offered to developers along with other actions to tackle the property crisis.

Earlier this month, in a shock move, the head of China’s stock market regulator was replaced, in what was seen as a signal that the government was ready to take forceful measures to end the rout in its $8 trillion stock market.

Officials have also moved to clamp down on traders betting against shares in Chinese companies, and imposed new rules on selling shares at the start and end of the trading day.

An aging population and a delicate geopolitical balance

Beyond these immediate issues China also faces a number of more far-reaching challenges, including slowing productivity growth and an aging population.

“The demographic dynamics are quite unfavourable, with the population aging fast due to the one child policy,” Qian Wang, chief Asia-Pacific economist at investment firm Vanguard.

“Unlike Japan that got rich before it got old, China is getting old before it gets rich,” she adds.

There is also the seemingly intractable geopolitical issue of Taiwan.

Beijing sees self-ruled Taiwan as a breakaway province that will eventually be part of China, and has not ruled out the use of force to achieve this. But Taiwan sees itself as distinct from the Chinese mainland.

Taiwan is a key flashpoint in the tussle between China and the US for supremacy in Asia.

This, at the very least, greatly complicates China’s relations with the US and many other major Western economies.

There is also the ongoing trade dispute with the US, which started in 2018 under then-President Donald Trump and has shown no sign of easing during the Biden administration.

A potential second term in office for Mr Trump could well see a ramping up of tensions between Washington and Beijing.

Mr Trump, in characteristically hawkish comments about China, said he would impose more tariffs on its goods if he wins the US presidential election in November.

In an interview with Fox News, he said the tariffs could be in excess of 60%: “We have to do it,” he said.

Former President Donald Trump

Getty Images

While that may make for plenty of headlines, Ms Yeung suggests financial markets may be able to take this in their stride.

“Most of this negative news has already been factored in to share valuations”, she says.

Whether Mr Xi’s long-term plans for China will turn around his country’s fortunes remains to be seen. What is clear though is that its more than 1.4 billion people are unlikely to enjoy a return to double digit annual growth, and the prosperity that comes with it, anytime soon.

Related Topics

Continue Reading