Blackstone and Canada Pension Plan Investment Board agree bn AirTrunk deal | FinanceAsia

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Blackstone Real Estate Partners, Blackstone Infrastructure Partners, Blackstone Tactical Opportunities, and Blackstone’s private equity strategy for individual investors, along with the Canada Pension Plan Investment Board, have agreed to acquire AirTrunk, an Asia Pacific ( Apac ) data center firm, in a deal worth around A$ 24 billion ($ 16 billion ).

The sellers are Macquarie Asset Management ( MAM ) and Canada’s Public Sector Pension Investment Board ( CPP Investments ). MAM bought a 88 % stake in AirTrunk in April 2020 for a valuation of around A$ 3 billion. &nbsp,

A spokeswoman for Blackstone told&nbsp, FinanceAsia it is not providing&nbsp, a collapse of the equity ratios. The AirTrunk will remain 12 % owned by CPP Investments, according to the statement. CPP Investments said it has information center joint ventures and assets in major centers in Apac, including Australia, Hong Kong, Japan, Korea, Malaysia and Singapore, and the US.

The package, if completed, may be Blackstone’s largest expense in Apac. The Australian Foreign Investment Review Board has approved the deal.

AirTrunk is the largest information centre program in Apac, with a reputation across Australia, Japan, Malaysia, Hong Kong, and Singapore. It owns property that will allow for over 1GW of regional development and has more than 800MW of customer commitments.

This is Blackstone at its best, according to Jon Gray, president and CEO of Blackstone.” We are using our international platform to capitalize on our highest faith design. Another significant development comes as Blackstone strives to be the world’s largest buyer in modern infrastructure, including power, data centers, and related services.

” Digital system is experiencing unprecedented demand driven by the Artificial revolution as well as the broader digitization of the business,” said Nadeem Meghji, world co-head of Blackstone Real Estate.

They added:” Prior to AirTrunk, Blackstone’s portfolio consisted of$ 55 billion of data centers including facilities under construction, along with over$ 70 billion in prospective pipeline development. To further accede to AirTrunk’s progress, we look forward to working with its top-notch management team.

The deal, according to Robin Khuda, founder and CEO of AirTrunk, demonstrates the strength of the AirTrunk program in a strong-performing field as we prepare for the upcoming wave of development from cloud services and AI and aid the transition to energy in Apac.

We look forward to working with Blackstone and CPP Investments, gaining from their size money, industry experience, and extensive network across the various local markets, Khuda continued,” We look forward to working with them.”

In a statement from CPP, senior managing director, global head of Real Property, and head of Europe, Max Biagosch, stated:” This investment adds another step to our broader data center plan, further expanding our footprints in the region for the benefit of CPP donors and beneficiaries. It is also a fantastic illustration of close collaboration between the fund’s infrastructure and actual estate teams working smoothly up to underwrite this investment.

According to a speech from Blackstone, approximately$ 1 trillion in US capital expenditures will be expected over the next five years to be made to build and promote new data centers, and another$ 1 trillion in US funds expenditures will be made, according to a declaration from the company. &nbsp,

Blackstone has invested in the debt and equity of several other data centre firms, including Coreweave and Digital Realty, the fastest-growing data center company in the world, and QTS. &nbsp,

¬ Capitol Media Limited. All rights reserved.

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China’s Belt and Road hasn’t fast-tracked Africa’s cities – Asia Times

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American officials have grown significantly drawn to Chinese investment and borrowing over the past 20 years.

These opportunities are made quickly and apparently with less restrictive requirements than traditional funding sources. Some even suggest that China’s strategy aligns more strongly with American interests.

This attitude was summarized by the past president of Senegal, Abdoulaye Wade, in 2008:

China’s response to our needs is just better adapted than the sluggish, if occasionally patronizing post-colonial strategy of Western investors, donor organizations, and non-governmental organizations… China has assisted African countries in constructing infrastructure projects in record time.

African leaders attending this year’s 8th Forum on China-Africa Cooperation in Beijing will, no doubt, want to get more Foreign finance and investment. Every three years, the platform, which serves as the cooperation mechanism between the American nations and China, takes place. It aims to promote politics, business, protection and purchase relations between China and Africa.

Beijing has given American nations more than US$ 170 billion in provides and loans since the summit’s annual meeting in 2000. This has included bridges, ports and industrial road.

These opportunities have, among other things, begun to actively shape the nation’s cities. And the investment that African leaders want for the future is even more urgently required to make American cities more successful, livable, and sustainable.

Discussions at the annual Africa Urban Forum in Addis Abeba, Ethiopia’s cash, are centered on the issues facing towns. This event’s goal is to influence and promote diverse people settlement development.

Although possible coincidental, the juxtaposition of these events serves as a reminder that American cities need the investment Beijing seeks.

As an urban economist with a focus on funding public infrastructure and services, I’m interested in understanding why Africa has n’t benefited from Chinese investments and how to reverse this trend in my comparison of Africa’s and China’s urbanization experiences.

The power of equipment

China has influenced Africa’s industrialisation through the Belt and Road Initiative. This system project, which was launched in 2013, aims to establish a system of trade and economic links connecting China and the rest of the world.

As of December 2023, 44 of 54 African nations had signed on to the Belt and Road Initiative. According to estimates, China has contributed 2.5 times more to the development of African network through this program than the West has combined.

Significant multiple consequences can be had by investing in infrastructure on economic growth and development. In the short term, it generates demand for goods and services, particularly in design.

Over the long term, if well-planned and executed, it may increase economic growth and development. This is especially true when it comes to purchases in urban equipment. Cities are known for facilitating the exchange of input between businesses and local organizations, as well as the promotion of domestic and export areas.

China’s experience at home has shown how this can be done. China built the most substantial high-speed rail network in the world in less than ten years, for prices that are up to a second lower than those in other nations.

And between 1980 and 2000, China constructed over 184 fresh ships, some in cooperation with foreign firms, to ease the export of goods it was producing in its expanding market.

China’s change from a generally economic market to the second-largest economy in the world has been aided by these huge infrastructure investments. This move through urbanization and industrialization, in move, has helped China raise more than 800 million people out of poverty since 1978.

What has n’t worked

American nations have yet to fully realize the potential advantages of China’s system investments for urbanization. Some of the Belt and Road Initiative’s most expensive purchases are still unconnected and could turn into” white animals.”

These include Kenya’s Standard Gauge Railway. To fund it, the Kenyan authorities took on higher levels of debt. However, the route’s business practicality depends on whether or not it expands to Rwanda and Uganda.

In Uganda, another instance is the road between Entebbe aircraft and Kampala, the capital city. The Chinese built it, and it was funded. One of the most expensive streets per mile in the world is the program’s rising costs, which has resulted in its cost-per-kilometer record. If the road does n’t draw much more traffic and generate enough toll revenue, repaying the Chinese loans will be difficult.

The other problem with some Chinese-financed projects refers to long-term preparing.

Addis Ababa’s industrial light road, for instance, was constructed for$ 470 million and began operating in 2015. The Ethiopian state is now struggling to maintain the program because it has overestimated the costs of operation and maintenance.

The light rail, which is transporting a fraction of the people compared to initial forecasts, requires an estimated$ 60 million in maintenance.

Funding

Due to the lack of transparency with China’s banking, critics have labeled these kinds of projects as “debt-trap diplomacy.” In essence, they assert that China is purposefully providing loans to American nations with terms that are challenging to recover, making borrowers obligated to turn over their assets in default.

However, there are three things to consider. Second, business loans from Western organizations or multilateral organizations also account for the majority of lending to many African nations.

Next, China is concerned about the viability of its debt and the payments of its loans. For this reason, its financing to African countries in terms of the Belt and Road Initiative dropped by 55 % between 2021 and 2022 from$ 16.5 billion to$ 7.5 billion.

Eventually, this narrative disregards the influence of American leaders in approving and negotiating Chinese financing deals.

Governments and president ratify these loans and approve them by American ministers. Hence, African leaders are held accountable for making wise investment choices on the part of citizens whose income will need to be used to pay off.

China’s knowledge

It is now crucial to assess what has been effective and identify areas for improvement with the over 20 years of Chinese investment in Africa’s rapidly urbanizing and possible much more to come.

China possesses reputable knowledge in urbanization. It has new experience guiding an industrial change similar to the one taking place in Africa right now. This change occurred in addition to a decline in poverty and economic change.

So it has a role in shaping American industrialization, benefiting both sides. But it’s up to American leaders to champion their interests.

Astrid R N Haas is alternative doctor, University of Toronto

This content was republished from The Conversation under a Creative Commons license. Read the original post.

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Africa can and should get more from China – Asia Times

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China’s relation with Africa is vital to Beijing’s efforts to expand its impact in the Western-dominated world purchase. China is Africa’s most important trading companion and a major contributor to western investment, so the Forum on China-Africa Cooperation is important to both.

The site’s mountain, which takes place every three decades, provides a platform for China to showcase its international control and for American nations, both individually and collectively, to join with the country’s second-largest market on political and economic matters.

Africa will have a chance to overcome the difficulties of the post-Covid time at this year’s mountain. Earlier summits have had visible effects on African countries. For example, Kenya has become the largest producer of plants to China, with monthly export valued at US$ 800 million, since the ninth China-Africa conference in Dakar in 2021.

The expansion of e-commerce is another beneficial outcome of the opening of new business between American nations and China since 2021. This, for example, has enabled African caffeine to be exported to China. Additionally, Chinese funding and technology were directed toward the American Peace and Security Architecture through the China-Africa Peace and Security Fund.

53 African countries will take part in the three-day summit, which is obvious given the significance that American states area on the community. The only exception is Eswatini, which has diplomatic relations with Taiwan.

As a scientist who has closely followed China’s rise as a world authority and published a lot on the subject, I want to know how American states can make the most of this opportunity.

China’s Africa approaches

China’s ideas are obvious. It outlined complete techniques in 2006, 2015 and 2021. In addition to its wider goals as a global power, these details detail China’s position in relations with American states.

At the last Forum on China-Africa Cooperation conference in 2021, four papers were adopted. Of these, the 2035 Vision for China-Africa Cooperation stands out. It provides a general model for cooperating for 15 times.

China and American nations worked together to create the program. But, spectators noted that its most striking&nbsp, aspect&nbsp, was that its time shape coincided with China’s personal 2035 plan: &nbsp, Vision 2035.

Unlike China, American states have yet to develop a complete, unified plan document outlining the country’s corporate interests, and how these coincide with the China-Africa Vision for Cooperation 2035.

The 2063 Agenda, the framework for turning Africa into a forthcoming economic powerhouse, is one of the goals of the vision, which is to encourage participation for the development of China and Africa. China’s industrialisation of Africa would also be a positive thing. Additionally, the perspective encourages participation in the blue business.

Strengthening Africa’s location

In light of difficulties confronting China-African relations, the seventh Forum on China-Africa Cooperation takes position. Africa’s debts to China is a moving place. Between 2000 and 2022, China provided more than$ 170 billion in loans to 49 African countries and regional institutions.

Angola, Ethiopia, Kenya and Zambia bear especially higher levels of Chinese loan. They are conscious that Beijing is unlikely to quickly write off more debts.

Despite these challenges, Africa is not without company in its relations with China. With 54 UN member states out of 193, the globe has a significant political significance, despite not having strong economic growth as a whole.

China is certainly aware of how important a continent’s voting power is in foreign affairs is. Africa needs to have a proper perspective and a clear vision in order to use this energy in its connection with China.

To improve their position, American states must join and follow a more organized approach. African nations generally negotiate separately, rather than as a union. Their negotiations skills are weakened by this.

If there is n’t a unified African position, is it still possible for African states to negotiate as regional economic communities? This is a huge undertaking. However, the local blocs and the leading American states could begin by developing engagement plans and then use their domestic advantages to boost China’s relations.

Given that China is a very powerful entrepreneurial state with a solid strategy and substantial financial resources, this is especially crucial. A strong head of state is essential to the creation of an all-encompassing American approach.

The American private sector may enjoy a more active part in advocating for the country’s passions in discussions with the nation’s second-largest market. It’s worth noting that in July, the judgement Chinese Communist Party unveiled major market-oriented changes.

These innovations continued President Xi Jinping’s transition from high-speed to high-quality growth. Conversations to prepare for the 2024 mountain also highlighted the issues of economic practicality, local society benefits and environmental sustainability.

Market-oriented reforms are expected to accelerate the trend seen at the 2021 Dakar summit, moving from state-led initiatives to increased private-sector involvement.

To enhance the continent’s position, African states should have already discussed and adopted a unified stance ahead of the 2024 summit. Africa is at a disadvantage because it fails to work and bargain in a more organized way. It enables China to set the agenda and use the forum as a tool for its political objectives.

Looking forward

Some observers have claimed that China’s involvement with the African continent is motivated by a desire to access its natural resources in recent years. The relationship has become, in fact, much more nuanced and multifaceted.

Africa also contributes to China’s call for a community of developing nations as a counterweight to a Western-based international order. In this context, the Beijing 2024 summit will be a crucial event for both China and Africa.

It has a strong impact on how their partnership will go in the future. China and its global priorities, as well as Africa, are both interested in using their interactions with China to advance the continent.

Theo Neethling is professor of political science, Department of Political Studies and Governance, University of the Free State

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China-Africa summit: The tactics behind President Xi Jinping’s red-carpet welcome

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Getty Images Dancers perform as they welcome Zimbabwean President Emmerson Mnangagwa on 2 September 2024 at Beijing Capital International AirportGetty Images

More than 50 African leaders have been welcomed by China to Beijing this week for a conference to improve relations at a time when there is an increase in political and economic unrest around the world.

According to Macharia Munene, a professor of international relations at the University of Nairobi, “it pertains to their vanities.” The leaders received a red carpet embrace that included pleasure by dancers in bright costumes.

The leaders ‘ perceptions that the meeting was an equal ‘ had been carefully choreographed.

Before the mountain, many of them, including Kenya’s William Ruto and South Africa’s Cyril Ramaphosa, met with their Chinese counterpart Xi Jinping in one-on-one meetings and were given tour of Beijing and other places at the heart of China’s growth.

As Prof Munene puts it, China’s goal is to show American officials that” we are in the same boat, we are all subjects of American imperialism”.

Paul Frimpong, senior producer of the Ghana-based Africa-China Centre for Policy and Advisory, says that Western capabilities- as well as oil-rich Gulf states- are trying to meet China’s effect in Africa.

He tells the BBC,” There is a strong interest and opposition in and around Africa’s possible.”

Cobus van Staden, co-founder of the China-Global South Project, writes that China goes out of its way to emphasise its own status as a developing country, signalling solidarity with Africa and the rest of the Global South.

” It prevents the grimness of the US and EU’s continued support focus with its attendant conditionality and preaching,” he continues.

Getty Images Customers try make-up at the Shein pop-up store in Mall of Africa on in Johannesburg, South Africa - August 2024Getty Images

Over the last two decades, China’s politics has paid off. Out of all the countries in the world, it has risen to be Africa’s largest buying partner.

Data from the International Monetary Fund ( IMF) shows that a fifth of Africa’s exports go to China, the bulk of which includes metals, mineral products and fuel. Since 2001, the export have quadrupled in US dollars.

For American states, China is also the” second largest cause of goods” of manufactured goods and equipment, according to the IMF.

But the balance of trade, in most cases, facilitates China tremendously.

In his intergovernmental meeting with President Xi, Mr. Ramaphosa made an effort to address this issue.

The president of South Africa stated that” we would like to handle the structure of our business and reduce the business deficit.”

In a subsequent joint statement, it was stated that” China showed it was ready to boost career development by citing personnel conferences for Taiwanese companies to promote local employment in South Africa.”

Kenya, on the other hand, is requesting more breaks despite a sizable debt that consumes almost two-thirds of its annual income and has recently sparked protests as a result of the government’s attempt to raise new taxes to pay off the finances gap.

Mr Ruto hopes to secure funding for various infrastructure projects, including the completion of the Standard Gauge Railway (SGR ) to connect Kenya’s coast to neighbouring Uganda, the building of roads and dams, the establishment of a pharmaceutical park and a technology-driven transport system for the capital, Nairobi.

China stopped funding the contentious SGR four years ago after connecting Nairobi to the port town of Mombasa, which caused rail lines to end in a discipline outside the pool area of Naivasha.

Getty Images Incomplete rail tracks for the Standard Gauge Railway (SGR) line lay on the ground in Kenya - May 2019Getty Images

As a major bilateral supplier to many African countries, China has often come under scrutiny for its deals, particularly in recent years when some African countries, including Ghana, Zambia and Ethiopia, suffered debt problems.

Bill sustainability is a topic of conversation at every major forum on Chinese-African relations, according to Mr. Frimpong, and it’s good to be at the most recent summit as well.

The international forces are driven by their own interests, and the debt crisis serves as a reminder that American states need to increase their economies and finances to lessen their reliance on them.

This is especially true given that the IMF predicts that China’s expansion will continue to slow, and it is advised that African nations can adapt by promoting regional economic integration and designing structural reforms to boost local income.

Most importantly, as Dr. Van Staden points out, African leaders must “overcome the leather rope feature of these delegations to create their own offers, set their own conditions, and throw their own events.”

BBC coverage of this subject follows:

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The investors punting on a Ukraine economic renaissance – Asia Times

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Fincantieri—Europe’s largest builder, based in Italy’s Trieste—is slowly working to change former Ukraine government-owned shipyards in the Black Sea port of Odesa into a state-of-the-art manufacturing hub that will get to create some of the world’s most innovative business vessels.

Following its success in producing next-generation business boats for its Norway company VARD in Tulcea, Romania, the Roman company’s expansion into Odesa seems like the logical next step. Fincantieri employs some 4, 500 staff in Tulcea and Braila, near the Moldovan borders.

Tulcea on the Danube Delta, which was once a sleepy holiday destination, has since become the major transportation hub for Russian crops exports after Russia seized the Sea of Azov following its invasion of Ukraine on February 24, 2022. This is a turning point for political attention.

Tulcea has also been mentioned in the media as Russians continue to fly killer drones over the place to stymie transport. Given that Romania is a NATO and member of the European Union, drones have crossed and crashed into Italian country.

” The Danube here is in a curved S condition, so the Russian robots cross in and out of Italian territory”, said Ciprian Safca, a river boat captain and Tulcea local counsellor. &nbsp,” Russian robots today come in groups of five or so” ,&nbsp, he said. The Italian defense “decided it was much to let them go than to try to shoot them down and possibly miss one or two” according to the military.

Yet, the Russian robots have failed to soften Fincantieri’s devotion to east Romania and its programs for Odesa. &nbsp, If it goes away with a plan to build a next-generation factory in Odesa, Fincantieri may well be the largest foreign investment in Ukraine’s story.

The Fincantieri initiative may actually reach, in terms of overall investment and employees, the Neptune deep-sea corn cargo port built and operated by Minneapolis, Minnesota-based US food giant Cargill at the TIS Seaport outside of Odesa.

With an investment of US$ 150 million from the World Bank’s International Finance Corporation and the European Bank for Reconstruction and Development, the Neptune port was finished in 2018.

The United States International Development Finance Corporation ( US DFC) and the World Bank’s insurance group, MIGA, have already informed Fincantieri that they are willing to offer project finance and political risk insurance, while the US International Development Finance Corporation ( US DFC) is also willing to offer war risk insurance.

Putin’s bombs avoid damage to US interests

According to diplomatic sources, Vladimir Putin’s regime has avoided bombing the Neptune port because it would directly violate US interests.

According to Neptune employees, the cargo port has been operating at full capacity since October last year ( Neptune handles about 10 % of Ukraine’s grain production ) and has never been a target of Russian attacks.

Destroyed Odesa ( formerly Kempenski ) Hotel at the port of Odesa. Photo: Odessa Journal

While Putin may be reluctant to hit Cargill, he has targeted Neptune’s Odesa-based developer, Andrey Stavnitser, by obliterating its 19-story hotel on the Odesa harbor in a September 25, 2023, missile attack.

No one guards an empty bank, as emerging market experts love to point out, and neither strategy is used to protect valuable assets. Fincantieri is also a major naval defense contractor despite being best known for building gargantuan cruise ships for the likes of Carnival.

Fincantieri recently acquired from Italian defense company Leonardo an “underwater armaments systems” company, Whitehead Alenia Sistemi Subacquei S. p. A., which is reportedly capable of protecting the port of Odesa from Russian submarines, naval drones, and torpedoes.

According to this reporter, US Army Major General Timothy Brown of the Army Intelligence and Security Command and US Navy Vice Admiral Karl Thomas, the deputy chief of naval operations for information warfare, agreed that Fincantieri’s civilian and military capabilities for Odesa are crucial for Ukraine and the region.

YouTube video

]embedded content]

Deputy Chief of Naval Operations for the US Navy, Maj. Gen. Gregory Gagnon, deputy director for combat support for the USMC BGen William Wilburn, Jr., and US Navy Deputy Chief of Naval Operations for the US Navy, Vice Admiral Karl Thomas, were recorded by Capitol Intelligence/C I Ukraine using CI Glass to discuss the challenges facing Ukraine during the Service Intelligence Priorities Plenary Session of the AFSEA and INSA Intelligence and National Security Summit in Bethesda

As evidenced by the ongoing conflict in Ukraine, there is a heated debate in Washington about how seemingly ineffective major US defense contractors are at providing war material on a” just in time” basis rather than a” just not in time” basis.

However, US Secretary of the Navy Carlos del Toro, among the most committed US civilian-military leaders to Ukraine’s military victory over Russia, understands the importance of private sector investment to the country.

US Secretary of the Navy Carlos Del Toro ( left ) with Ukraine Naval Attache at the US Naval Academy in Annapolis, Maryland. Photo: PK Semler Credit: PK Semler

Odesa, it appears, will continue to play an even more significant role in the future as the US plans to relocate a sizable portion of its military to a military installation in Constanta, the Romanian Black Sea port, which is located 124 kilometers south of Tulcea.

Fincantieri’s plans are undoubtedly in the public’s interest. Sergii Marchenko, the country’s finance minister, is currently pushing an aggressive program of privatizing state-owned assets to liberalize the Ukrainian economy and reduce its obligations to foreigners, particularly those owed by state-owned enterprises.

Fincantieri and Cargill and Dubai’s DP Port, both of which are owned by foreign companies, raise hopes of an economic revival in Odesa that has n’t been seen since it became a free port between 1819 and 1859, when wealthy merchants and exporters have made the city one of Europe’s most cosmopolitan.

The likes of Stephen Schwarzman, the co-chairman and co-founder of US private equity giant Blackstone Inc., and Carlyle Group co-founder and co-chairman David Rubenstein are currently playing the role of distant wealthy merchants. In Davos, Volodymyr Zelensky and Volodymyr Zelensky, two international business leaders, met last January.

In a second Trump presidency, Schwarzman is expected to be appointed US commerce secretary, and Rubenstein could be US Treasury Secretary or Secretary of State if Kamala Harris wins the election.

Schwarzman has already directed his staff to target investment into Ukraine’s private sector companies, such as video cloud gaming giant Boosteroid. Rubenstein, meanwhile, has leveraged his considerable political and economic influence to rally support for Ukraine among US and world leaders.

There are currently rumors on Wall Street that KKR and Co co-founder Henry Kravis may be preparing a takeover offer for VEON, the$ 2 billion NASDAQ-listed company that owns Ukraine’s largest mobile phone operator, Kyivstar.

The potential KKR move, which has been welcomed by Ukraine and G7 members, would effectively remove a VEON minority investor, Russian oligarch Mikhail Fridman, from the business and Ukraine.

Paul Singer, the principal of activist hedge fund Elliott Management, is also reportedly looking to invest in VEON. At the time of writing, VEON Chairman Augie K. Fabela and VEON independent board member Mike Pompeo, a former US Secretary of State, did not respond to the request for comment.

The Russian fleet has been effectively pushed out of the Black Sea by Ukraine, which is reminiscent of the 1920 Bolsheviks ‘ decision to send the Tsarist fleet to Bizerte, Tunisia. However, new foreign investment from companies like Fincantieri, Blackstone, Carlyle, and KKR could help transform the war-torn country into a new European hub in the near future.

Peter K Semler ([email protected] ) is the chief executive editor and founder of&nbsp, Capitol Intelligence. Previously, he was the Washington bureau chief for Mergermarket. He reported this story from Odesa, Ukraine, and Tulcea, Romania.

Copyright Capitol Intelligence Group – Turning Swords into Equity ® is the title of this article. An edited version is published here with permission.

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Commentary: China’s debt divide is hurting its economy

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PRESSURE ON LOCAL Administrations

Local governments almost all of the paying, but rely on the center for revenue in a way that is uncommon elsewhere in the world, is a fundamental fact about China’s macroeconomic system.

Regions bear most of the responsibility for education, health, social protection and enclosure, in addition to clear local duties such as roads, parks and rubbish variety, and spend about 85 per cent of the state overall. Only about 55 % of government revenues are directly collected by them. Payments from the center to the areas provide a balance for the program.

There are benefits to developing decisions more closely to the people in a country as big as China, but the disparity between revenue and expenditure causes a lot of issues. For instance, the lower down the tower of management, the more the program gets starved of resources, because each rank- state, province, county- tends to hold back what it needs before passing cash onwards down the chain. The execution of northern federal spending programs is haphazard.

However, local government officials, who may deliver growth to walk the administrative ranks, do whatever they can to discover money.

China’s housing bubble was largely fueled by regional institutions ‘ rely on land sales as a source of income. To avoid the profit squeeze and fund infrastructure, off-the-books borrowing by supposedly regional government financing vehicles was a strategy.

There are numerous reports of municipalities imposing fines and penalties, starting retroactive tax investigations, or just failing to pay staff on time as their books are hampered by the housing slump and the key government’s crackdown on local borrowing. None of this is beneficial for the struggling personal business.

Beijing has long aspired to resolve these structural issues, but it is unaware of them. However, when Xi Jinping initially came to power in 2012, fiscal reform was a major part of his private policy objective, parts of which he delivered. Local governments are having trouble, for instance, because fiscal control and financial administration reforms helped make it easier to paper over issues by removing them from the books.

The central government has refused to give up power, as is customary for Xi. It frequently specifies the services that local governments must provide, but it wo n’t give over the funding sources. It is anxious to assign significant new spending obligations to the main books.

It has cracked down on regional authorities debt, and still accurate to Zhou’s preferences, it is willing to allow central government debt rise otherwise. The end result has been a de facto fiscal tightening over the past few years, despite the economy’s struggles to recover following COVID-19.

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China’s sluggish factories spurring hotter stimulus calls – Asia Times

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That loud sputtering sound emanating from China is increasing in volume as factory activity contracts for a fourth straight month.

China’s official manufacturing purchasing managers’ index (PMI) dropped to 49.1 in August from 49.4 in July. Since April 2023, this key barometer has been below the 50-mark separating expansion and contraction for all but three months.

It suggests that Beijing’s efforts to revive Asia’s biggest economy care gaining less traction than hoped.

“We believe more fiscal easing is necessary to help secure the around 5% full-year growth target,” says Yuting Yang, an economist at Goldman Sachs Group.

At the moment, trade tensions with the West and debt troubles weighing on local governments are limiting Beijing’s ability to boost consumer spending.

Add in great uncertainty about who might be leading the US economy five months from now – and the magnitude of new tariffs on China-made goods – and Xi Jinping’s government is under increasing pressure to spur growth at home.

Xi’s “fridges-not-bridges” pivot, as some economists call it, aims to put household spending in the driver’s seat.

After the slowdowns of recent history — like the 2008 Lehman Brothers crisis — Beijing switched on the infrastructure engine.

This time, though, with local government finances in distress and overcapacity sweeping the nation, Team Xi is looking to ignite a domestic demand-led growth boom.

The economic payoff for all those massive skyscrapers, six-lane highways, international airports and hotels, white-elephant stadiums, sprawling shopping districts and amusement parks has become less and less over time. And the bill is now coming due.

Pulling off this transition is easier said than done in the post-Covid-19 era. A deepening property crisis has average consumers bracing for further drops in home prices, which is complicating efforts to cushion the downturn. So are deflationary trends spooking global investors.

The resulting blow to confidence is weighing on China’s US$17 trillion economy and triggering capital outflows that are sending mainland stocks lower. All this is making it harder for Xi’s inner circle to turn things around.

“Unfortunately, our year-old negative forecast for China appears to be playing out,” says economist Richard Martin at advisory firm IMA Asia. He adds that “the rest of Asia will need to prepare for the spillover from China’s slump, including the risk of a surge in dumped products.”

Ditto for worries about how Chinese overcapacity will collide with geopolitical currents.

Among them are Western efforts to slow China’s ability to increase global market share. Last week, Canada announced new tariffs on Chinese-made electric vehicles, aluminum and steel.

Ottawa’s 100% levies on EVs and 25% taxes on steel and aluminum put it in protectionist league with Washington and Brussels.

Such moves are adding to Xi’s headaches as a uniquely chaotic US election cycle heats up. Though a Donald Trump 2.0 presidency might be tougher on Beijing, a Kamala Harris-led White House would almost surely also tighten the screws on Xi’s economy.

That might add to the argument for greater Chinese fiscal stimulus. For Xi, who earlier this year began his third term as Communist Party leader, the stakes are high at home and abroad.

The party’s legitimacy with China’s 1.4 billion people rests on rapid economic growth and increasing per-capita income. The same goes for Xi’s ambitions both among the BRICS — Brazil, Russia, India and China — and the broader constellation of Global South nations.

A major narrative surrounding the BRICS and the Global South is of emerging-market economies coming into their own and picking up the slack as the US and Europe mature and grow less rapidly.

For now, China’s overcapacity troubles are putting the nation in global headlines for all the wrong reasons. Many argue, of course, that China isn’t exporting deflation so much as rising mainland productivity and efficiency and thus making the economy more competitive.

“As China is some 55% of regional GDP and the main trading partner for most neighbors, the outlook for China policy is critical,” Martin says. “So far, economic policy has been poorly aligned with the problems undermining China’s growth.”

The good news is that signals from Xi and Premier Li Qiang suggest reforms are being implemented. Key among them: getting bad assets off property developers’ balance sheets, strengthening local government finances across the nation and supporting private sector development.

For many, though, the perceived slow pace of action raises concerns about China’s economic trajectory into 2025.

Once again, says economist Carlos Casanova at Union Bancaire Privée, China’s manufacturing PMI is “highlighting ongoing challenges in the sector, driven by a downturn in housing and sluggish domestic demand. Most components showed a sequential decline, indicating widespread weakness.”

Notably, he adds, producer price and input price subcomponents experienced “significant easing” for different reasons.

“The producer price subcomponent, closely tied to the broader producer price index,” Casanova says, “suggests that overcapacity continued to exert downside pressure on factory prices in August.”

The bottom line, Casanova says, is that “economic growth is uneven, primarily fueled by service consumption, exports and substantial investment in core technology.”

All this, he says, “suggests that the government will need to implement counter-cyclical measures to stimulate domestic demand.”

This could entail additional interest rate cuts by the People’s Bank of China, though that might put downward pressure on the yuan.

“We believe China’s reluctance to pursue RMB appreciation in August may buy exporters time to offload their dollar holdings without incurring significant currency losses,” says Tommy Xie, an economist at OCBC Bank. It also suggests the PBOC might be reluctant to ease more.

Martin at IMA notes that “our view is that policy will be forced into better alignment as you can’t let a house burn for too long before turning on the hose.”

Two big steps are needed and anticipated, Martin notes. First, allowing market clearing by freeing prices and letting firms go bankrupt.

“Beijing has just allowed that in residential property, which means a big real estate and construction shake-out and a rise in unemployment and consumer distress,” he says.

“The rest of Asia needs to be ready for an increase in China’s export dumping in 2025. Second, the national government needs to use its balance sheet to drive up growth as all other balance sheets are too weak. No change yet but we are waiting.”

A major challenge is making good on Xi’s pledge to encourage households to spend more and save less. Along with faster, more balanced economic growth, that means building bigger social safety nets.

As Xi and Li realize, investment-led growth has peaked in China, as the financial system can no longer generate the same pace of credit expansion as in the past decade, says Logan Wright, director of China markets research at Rhodium Group.

“China’s economy is slowing once again, and weaker household consumption is the primary cause,” Wright notes. Household borrowing, he explains, “remains under pressure from low levels of consumer confidence and the flagging property market.”

As a result, the imbalances between domestic and external demand have widened, with China producing persistently large trade surpluses, now reaching $858 billion over the past year, or around 4.8% of GDP.

Because of this “slowdown” in household consumption, Wright says, “calls for structural reform to rebalance China’s economy are multiplying.”

“In the absence of significant fiscal reforms, long-term household consumption growth is likely to slow to around 3% to 4% per year in real terms over the next five to ten years,” Wright says.

At most, he adds, “household consumption will contribute around 1.5 percentage points of GDP growth per year, which is likely to limit overall long-term GDP growth to around 3%, given the known headwinds to faster investment growth.”

The good news is that Xi and Li claim to be on the case, devising ways to recalibrate China’s growth engines. The bad news is that official data continue to paint a picture among investors that Beijing isn’t moving fast enough to turn things around.

Follow William Pesek on X at @WilliamPesek

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Wealth illusion: The fading mirage of Indonesia’s middle class – Asia Times

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Indonesia’s middle class is shrinking. After expanding by 21 million from 2014 to 2018, it contracted by 8.5 million in the past six years, reducing its size to 52 million, as reported by the Indonesia Economic Outlook 2024.

This class, which comprised 21-23% of the population before the pandemic, dropped to 17% last year, as outlined by the World Bank. This decline is mirrored in the aspiring middle class, rising to 49%, with many slipping into more vulnerable categories.

The so-called key driver of economic growth has contributed 82.3% of total consumption and 50.7% of tax revenues. Unfortunately, there remains a systemic challenge faced by Indonesia’s middle class to ascend to the upper class, from surviving with stagnant income growth to financing rising living costs to dwelling in a consumptive culture driven by the fear of missing out.

This unhealthy trend has emerged in recent years, where influencers broadcast their instantly acquired wealth, compelling netizens to pursue a “fake wealth” lifestyle in a pseudo-affluent society. This phenomenon, largely sustained by the rise of social media and consumerism, has led to what economists call a false sense of purchasing power that masks deeper economic insecurities.

Debt-Fueled life

Indonesia commemorates its Independence Day this month. Unfortunately, financial independence is understood superficially, focusing on achieving mere figures and encouraging the ability to possess, buy, and spend as a measure of success. Ultimately, debt in all forms (e.g., credit card, paylater, online loans) becomes an inevitable solution.

The latest National Financial Literacy and Inclusion Survey (SNLIK) 2024 by the Financial Services Authority (OJK) and Statistics Indonesia reveals a thought-provoking gap: While financial inclusion in Indonesia has reached 75.02%, financial literacy lags at 65.43%.

This discrepancy is worrying, as it suggests that many Indonesians are taking on financial instruments (i.e. debt) without fully understanding its implications.

Driven by the desire to maintain the appearance of a jet-set, many within the middle class have resorted to leveraging credit to finance their lifestyles. The Indonesia Financial Fitness Index 2024 by OCBC shows staggering figures: 80% spend money to follow their peers’ lifestyles, 41% often borrow money from friends and family, 39% save money for materialistic goods like branded stuff and up-to-date gadgets, and 12% spend more than they earn. The middle class was among those surveyed.

The proliferation of peer-to-peer (P2P) lending platforms and other digital financial services has made it easier than ever to access credit. However, this access has not been accompanied by a corresponding increase in financial literacy.

According to the latest data from OJK, consumer credit growth has outpaced income growth. In 2023, consumer loans increased by 7.5% year-on-year, compared to a GDP growth rate of 5.1% during the same period. As of May 2024, online loans reached nearly IDR65 trillion, soaring 25% year-on-year.

A growing number of middle-class households are also trapped in a debt cycle due to mindless financial decisions. Loan repayments eat into disposable income, leaving them to live paycheck to paycheck without room for reserves.

As household debt rises relative to GDP, households leverage more of their future income to meet current consumption, including everyday expenses, durable goods, housing, and possibly discretionary spending—not to mention taking debt to support their rich-looking lifestyle—implying less capacity to save and invest, potentially reducing financial security.

Mandiri Spending Index 2024 shows a hike of almost double in the total spending on groceries, from 13.9% to 27.4%. This reflects not only the presumably price surge but also the decrease in income.

The World Bank defines Indonesia’s middle class as those earning IDR4-20 million monthly. Despite its significant size, the middle class is increasingly vulnerable to economic shocks. Once seen as the backbone of Indonesia’s economic stability, it is now at risk of experiencing downward mobility.

Bank Indonesia projects that if current trends continue, a significant portion of the middle class could fall into lower income brackets within the next decade. Meanwhile, the country relies heavily on the middle class—from their tax contributions, savings and productivity, particularly in labor-intensive industries.

Suffering and Struggling in Silence

The consequences of this debt-fuelled consumption are beginning to surface. The increase in household consumption invites further revisits to delve into whether it reflects strong purchasing power or conceals an unprotected financial behavior, which may cause the freefall of the middle class once economic shocks occur.

It also invites further reflection about fostering sustainable, resilient household consumption that is not overly reliant on debt.

The middle class may be grappling on their own, with minimal support from the existing policies. In Q2 2024, the middle class are hit with a series of shocks: a VAT increase by 12% in 2025, an increase in university tuition fees, and an increase in BI rate to 6.25%, potentially affecting mortgage payments.

Fundamentally, the middle class may lack comprehensive social protection mechanisms. This is particularly concerning given the limited social protection available to this demographic group. Unlike the low-income population, who benefit from the government conditional cash transfer program, Program Keluarga Harapan (PKH), the middle class has few safety nets.

The government has also implemented social safety nets for the low-income population, such as the non-cash food aid, Bantuan Pangan Non-Tunai (BPNT). Still, there is a glaring gap in support for the middle class. This exclusion exposes them to economic downturns, rising costs of living, and unforeseen financial crises.

The IMF has noted that Indonesia’s social protection framework remains insufficiently comprehensive, particularly for those who are neither poor nor wealthy.

Although the rise in debt may be mistakenly interpreted as an indicator of an asynchronous increase in financial inclusion and literacy, the reality is more complex. The growth  of financial access is lacking solid financial education program and has led to a focus more on “looking successful” than on “being successful.”

The abovementioned gap between financial inclusion and literacy underscores the need for more robust financial education initiatives that empower individuals to manage their finances consciously, mindfully, and sustainably rather than simply increasing their access to credits.

Indonesia’s middle class is at a crossroads. The pursuit of an artificial opulent lifestyle, driven by impulsive spending and easy access to credit, has created an unsustainable economic environment.

To safeguard the middle class and ensure it remains a pillar of economic growth, Indonesia must prioritize financial literacy, promote responsible lending practices (both from the financial institution and consumer sides), and expand social protection mechanisms to include this crucial segment of the population.

Without these reforms, the nation risks not only the demise of its middle class but also the broader economic stability that it supports.

Greget Kalla Buana is sustainable finance specialist at UNDP. Anisa Indah Pratiwi is SDG financing specialist at UNDP.

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Commentary: ‘No strings attached’ cash aid for lower-income should be seen as resource, not reward

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A person in poverty is likely to feel the impact of financial mistakes more strongly and be judged for their actions. Even a minor financial misstep can lead to significant consequences.

Consider the case of Mr Anand*, a low-wage worker earning S$1,500 a month. When his 15-year-old son, Nick*, was caught using a vape in school and reported to the authorities, Mr Anand had to dip into his limited savings to pay the S$200 fine. This incident wiped out the family’s financial cushion, leaving them more vulnerable to falling into debt.

Beyond financial consequences, their mistakes are seen in the light of negative stereotypes about poverty. This reinforces beliefs that they are irresponsible or have poor planning skills, which can further perpetuate the cycle of poverty and discrimination.

Thus, policies and programmes must create some buffer for them to make some mistakes with the assistance and be given the right support to navigate the psychological effects of poverty.

CHECK OUR ASSUMPTIONS

To help individuals and families break out of the poverty cycle, we need to check our own biases and assumptions aren’t getting in the way of helping them effectively.

Policies and programmes should be informed by what research tells us about human behaviour and the complexities of poverty and what the lived experiences of those in poverty. Else, we must take the courageous step to review and revise our approach or risk reinforcing the very prejudices and discrimination that those in poverty already face.

The aim should be to resource people in poverty to enhance their mental bandwidth, not see it as a reward or inadvertently punish them

*Pseudonyms were used in this commentary.

Cindy Ng is Director of Melrose Home at Children’s Aid Society. She is a social worker by training with extensive experience working with low-income families and persons experiencing violence and abuse.

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