No China stimulus? Time to buy – Asia Times

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It’s a wonderful time

Clouds falls, you feel like

It’s a wonderful time

Don’t let it get ahead

– U2

Do not get Taiwanese companies because you think a big fiscal stimulus is coming. Get Chinese shares because a big fiscal signal is not needed.

The bull situation for Chinese stocks is not that stimulus may save the economy. The bull event for Chinese stocks is that homeowners are sitting on US$ 20 trillion in payments with nowhere to go.

The managed destruction of the property market is ongoing. Authorities have curtailed money management products and their inherent guarantees.

Money controls prevent easy access to foreign goods. And the coming storm of high-tech technology companies in clean power, semiconductors, aviation, robotics and biotech will have a lively equity market to get off the ground.          

China ’s economic transformation will be ill-served by flood-the-zone stimulus which – if we recall – is what got us the real estate bubble and subsequent “three red lines ” credit limits in the first place. What China ’s economic transition needs is better execution of “establish the new before abolishing the old. ”

What if we generate of China ’s new stimulus methods? The grab bag of goodies – reserve requirement ratio ( RRR ) cut, lowered interest/mortgage rates, special local bond sales, cash for clunker programs– are all bullets pointing in the same direction. But the power falls well short of a bazooka.

Trillions of renminbi ( RMB) in fiscal stimulus have been dangled but apparently withheld given the non-meeting held by the National Development and Reform Commission ( NDRC ) after the holidays. What has been offered will help China achieve 5 % gross domestic product ( GDP ) growth this year, hardly a lofty goal.

The only interesting policy is the People’s Bank of China ’s ( PBOC ) unexpected support for equity markets through 1 ) a collateral replacement scheme to increase risk assets at institutional investors and 2 ) a program to encourage bank lending for share buybacks.

While some ascribe this to an effort to drink consumer confidence, the likelier inspiration is an effort by the PBoC to redeploy some of China ’s$ 20 trillion in family bank deposits.

China ’s roaring property market in the past couple of weeks has given the box of laws a vote of confidence. Note that private marketplaces are behaving far more sensibly than global markets.

China ’s markets took one year off from October 1-7for National Day breaks – enough time for global markets to roll wild and unrestrained thoughts about fiscal stimulus of RMB2 trillion, RMB4 trillion, RMB6 trillion and RMB10 trillion.

The following pain in Chinese stocks traded in Hong Kong and through global ETFs occurred in Shanghai and Shenzhen after industry reopened.

Properly attributing local business confidence is of course unthinkable. Low prices from beaten down shares provide a healthy surface.

The NDRC non-meeting may include lanced the cook of huge trigger expectations. The business has good determined that China is severe about utilizing capital markets. What it needs to figure out then is that China ’s financial woes are not as grave as made out to be.

How well has President Xi Jinping managed China ’s market? Much of the company hit is predicting Japan-style stagnation, if no inevitable decline. That, of course, has been the situation for years.

According to one famous China-based economist’s 2015 forecast, President Xi’s financial performance may have earned him God Emperor standing in the mythology of China ’s socialist officials:

My assumption is that, under President Xi’s name, 2013-2023, common growth rates are unlikely to reach 3-4 %. That’s not my prediction, that ’s the upper limit of my prediction… I think that if President Xi is able to pull off average growth rates of 3-4 % during his 10 years in office, he will have accomplished something that we should really be astonished. It would be truly impressive, almost on par with what Deng Xiaoping did in the 1980’s …

In President Xi’s first two conditions, China ’s economy grew at a 6. 2 % compound average growth rate ( CAGR ), nearly double the upper limit of said predictions. China substantially outgrew all major markets except India. Somehow, our analyst was hardly twice as dismayed.

Perhaps it was President Xi’s personal problem, extending his time in office past the usual two five-year words. Alternatively of graduating with double starred first accolades from our scholar, Xi has only extended his experiments trying to earn an extraordinary triple or even a double starred second.

Graphic: Asia Times

Han Feizi’s assessment of President Xi’s economic performance is considerably less generous. Economic growth of 6. 2 % CAGR in Xi’s first two terms is not at all astonishing; it was, in fact, modestly below expectations ( Covid 2000 to 2022, what can you do? ).

Han Feizi did not and does not share our Beijing economist’s bleak assessment of the economy that Xi inherited and thus cannot grant bonus points for outperformance:

[President Xi] inherited a much more difficult economy than we think. There’s a huge amount of debt. There’s a huge amount of unrecognized bad debt.                

While China did take on a lot of debt and take it on quickly, Han Feizi fundamentally disagrees that the amount of debt and the quality of the debt is all that problematic.

It has been his correspondent’s contention that the size of China ’s economy is significantly understated compared to OECD national accounts ( see here ).

China ’s debt-to-GDP ratio is, thus, closer to ~125-200 % instead of the often quoted ~300 %. Moreover, this debt largely financed housing and infrastructure – long-lived assets with relatively low maintenance capital – able to generate value for decades.

China still has 15-20 % of the population to urbanize. Given urbanization of 1 % of the population per year, overbuilt housing should naturally resolve itself by kicking the can down the road.

As such, China ’s debt is nowhere near capacity. Xi inherited an economy headed in the wrong direction, not an economy out of runway. With property investment hobbled by redline credit limits in 2020, China nonetheless continued to grow 5 % by redirecting lending to advanced manufacturing.

A sentiment that Han Feizi might share with our Beijing economist is that Xi’s record is incomplete. No marks can be given until he sees things through. Things being another transformation of China ’s economy and society, which Han Feizi has written about before ( see here ):

China wants America’s Silicon Valley but regulated, Japan’s car companies but electrified, Germany ’s Mittelstand but scalable and Korea’s Chaebols but without political capture. It wants to lead the world in science and technology but without cram schools. A thriving economy but with common prosperity. Industry without air pollution. Digital lifestyles without gaming addiction. Material plenty without hedonism. Modernity without its ills. This is, of course, a wish-list and unrealistically ambitious. But these mad scientists sure as hell are going to try. They’ve developed a taste for it.

Various pieces of this transformation have started to take shape. The anti-corruption campaign under Xi’s tenure has been unyielding and dare we say transformative. China ’s once low-trust and loutish public of the Jiang Zemin and Hu Jintao eras is now unrecognizable, able to sustain high-trust business models like shared bikes and take-only-what-you-paid-for vending machines ( see here ).

The professional environment for China ’s young grads is surely far less treacherous than the get-rich-quick-at-any-cost mentality of the go-go days.

Output from the “new three” industries – solar, batteries and EVs – are surging, although capacity appears to be growing even faster. Deflation across multiple sectors has set off alarm bells. Although not ideal, China ’s deflation is fundamentally different from Japan’s in its lost decades.

Simplistically, deflation caused by decreasing consumption ( demand curve shifting in ) is bad; deflation caused by increasing production ( supply curve shifting out ) is good.

Unlike Japan, which suffered two recessions in the 1990s, demand in China is still growing, if weaker than optimal. Japan’s deflation started when Tokyo was the most expensive city in the world with cantaloupes selling for$ 100 each. This is not the same deflation China is currently dealing with.

China ’s real disposable household income grew 6. 1 % in 2023. In recent years, regulators have crimped the income of previously high-flying professionals in finance, tech and real estate. Upper-tier income growth has stalled while lower-tier income growth has been robust.

Economist Simon Kuznets ’s prediction that inequality would rise in the early stages of economic development before peaking and falling as wealth increases is playing out perfectly in China while it confounds expectations in more capitalist economies.      

Graphic: Asia Times

And, of course, Han Feizi does not believe China ’s economy is egregiously unbalanced ( perhaps not even unbalanced at all ) and thus has no need for massive consumption stimulus.

This is the key reason Han Feizi was not “astonished ” by China ’s ability to maintain growth over 6 % in Xi’s first two terms. There is no need for consumption to outgrow investment to signal economic health ( see here ) and thus no need for massive consumption stimulus.

China ’s regulators and anti-corruption investigators have ransacked the nation’s banks and brokerages and detained high-profile bankers, attempting to put a leash on an industry with a natural tendency to run amok. The PBoC’s support for equity markets may signal confidence in the clean-up work recently performed.

So yes, buy Chinese stocks. Valuations are still cheap, and$ 20 trillion of savings has nowhere to go. Equity markets are being prepared for China ’s high-tech future.

Growth is more sustainable in a high-trust and more equal society. No there will not be a massive consumer stimulus. But that is precisely why you should buy, not sell, China.

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The World Bank isn’t buying China’s stimulus talk – Asia Times

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To anyone who hopes 2025 will be a less terrible season for China’s economy, the World Bank has some bad news for you.

The international lender anticipates that Asia’s largest economy’s growth will decline also further next year, creating new headwinds for the region. This is in spite of Beijing’s current moves to boost economic growth in response to negative pressures and an initial global investor response that was at least initially passionate.

” Just signaled fiscal support may raise short-term progress, but longer-term development will depend on deeper structural measures”, the World Bank said on October 8. For three years, it said,” China’s expansion has spilled over advantageously to its companions, but the size of that motivation is today diminishing”.

The World Bank might be misinterpreting China’s efforts to resurrect its financial situation. It&nbsp, cut borrowing costs, slashed businesses ‘ supply need numbers, reduced loan rates and unveiled market-support resources to put a floor under share costs. In Beijing, stronger macroeconomic stimulus measures are also being considered.

If the world’s house crisis is allowed to enhance, furthering negative forces, some economists worry about a lighter course. The uncertainty issue is demonstrated by the extreme volatility in Chinese shares over the past ten days.

When the World Bank mentions the need for “deeper architectural changes,” plunging house prices are at the top of their record. Yet&nbsp, Chinese leader Xi Jinping appears to think period is on Beijing’s part in repairing the critical business. It might not be, as Japan has demonstrated over the years, &nbsp, some economists say.

China’s existing real estate troubles and Japan’s negative loan problems of the 1990s are n’t essentially analogous. The important resemblance is a critical driver of economic growth stalling out indefinitely, triggering bad knock-on implications in different industries.

In China’s situation, this likewise means municipal governments around the country. Provincial leaders have relied on area sales and tax revenues from sizable construction projects for many years.

” China’s boom-and-bust housing market is largely driven by local governments ‘ heavy reliance on expanding the real estate business to provide a major source of income”, said Tianlei Huang, an analyst at the Peterson Institute for International Economics, a Washington-based think tank.

Since 2022, Huang added,” the decline in the housing market has hurt native state funds and exposed a&nbsp, prone system&nbsp, in need of reform”.

It’s a portrait of what ails China. And still, Xi’s Communist Party continues to treat the signs of financial issues, not the underlying problems themselves. The longer they fester, the stronger the resulting headwinds.

Rather than the 4.8 % the World Bank sees China’s economy growing this year, it sees the nation expanding at just 4.3 % in 2025. Both readings are below Beijing’s current 5 % target.

Of course, for an economy at China’s level of development, 4.3 % is effectively recession territory. And if Xi’s team does n’t act boldly and expeditiously to revive growth, that figure could prove too optimistic.

One wildcard is the&nbsp, November 5&nbsp, US election. The upcoming trade wars would disproportionately hit China if Donald Trump were to win.

During his first presidency from 2027 to 2021, Trump imposed harsh tariffs on China. Xi’s government has n’t seen anything yet if Trump comes back to power. Trump has already predicted a generalized global levy on all imports into the US and a 60 % tax on all Chinese goods.

” With higher US tariffs, a number of highly open economies in the Asia-Pacific are at risk of GDP falling below their baselines”, said Deborah Tan, an analyst at Moody’s Ratings. Along with China, they include Malaysia, Singapore, South Korea, Taiwan and Thailand.

According to Tan,” these are primarily economies with high participation in global value chains and high exposure to US and Chinese intermediate goods supply and final goods demand.”

Vietnam, for example, has a high export share of gross domestic product ( GDP ) with strong linkages with&nbsp, Chinese manufacturing&nbsp, supply chains. ” Our simulation shows that within Vietnam, the high-tech goods sector will take the largest hit to output”, Tan said. ” China, similarly, the high-tech goods sector takes the largest hit to output followed by the low-tech goods sector”.

As this threat percolates, Xi’s team in Beijing risks losing even more trust among global investors.

One thing is to discredit them on the stimulus front. The slower pace of fixing the housing sector, strengthening local government balance sheets, and establishing social safety nets so that households save less and spend more are the bigger issues.

However, these measures “do not replace the more thorough structural reforms that are required to promote longer-term growth,” according to World Bank economist Aaditya Mattoo. The majority of the measures and bond proceeds will carry over into the following fiscal year given the lead time for implementation of the policy.

Mattoo notes that “even then, consumers may be reluctant to splurge because a one-time transfer would not boost longer-term incomes or address concerns about aging, illness and unemployment”.

In the interim, billionaire Ray Dalio sees this as Xi’s party’s “do what it takes” to change the gloomy narrative that may be evoking global investor sentiment. Draghi’s 2012 declaration as head of the European Central Bank is referenced here.

Last week “was a big week” ,&nbsp, said Dalio, founder of Bridgewater Associates. ” In fact, I think that it was such a big week that&nbsp, it could go down in the market-economic history books as comparable to the week Draghi said that he and the ECB would ‘ do whatever it takes,’ if China’s policymakers, in fact, do what it takes, which will require a lot more than what was announced”.

A long-time China bull, Dalio is increasingly vocal about his worries Beijing is sleepwalking into a&nbsp, Japan-like funk&nbsp, that history shows is challenging to exit. It’s taken Tokyo 25 years to begin exiting quantitative easing and its zero-interest-rate policies, and even that is proving challenging for the Bank of Japan.

To avoid it, one must devise a “beautiful deleveraging” strategy that balances printing enough yuan to support growth without causing inflation to rise too quickly while restructuring the entire economy. ” Doing these things starts to rekindle’ bottom fishing ‘ ]in stocks ] and ‘ animal spirits,'” he said. ” That is clearly happening right now,” he says.

Any new deleveraging efforts by Xi and Premier Li Qiang, Dalio said, will undoubtedly disorient and likely lead to more wealth destruction. That, it follows, will require considerable political courage, with Xi and Li having to decide where the costs and fallout of debt losses will be concentrated.

To Dalio, it all depends on “how well China’s domestic debt-money-economy challenges will be handled”.

At the same time, demographics are complicating the deleveraging process. The numerous moving parts that Xi and Li are struggling to manage are given a unique dimension by China’s aging population and shrinking working-age population. &nbsp,

” While last week saw some amazing actions and words that I’m certain will be followed by highly stimulative policies that will greatly boost asset prices,” Dalio said.” I think there are several important other things to keep an eye on to see how well China’s domestic debt-money issues will be handled,”

That’s not to say there are n’t some reform wins that Xi and Li can tout. As Sherry Zhao, analyst at&nbsp, Fitch Ratings, pointed out, refinancing risks for China’s local-government financing vehicles ( LGFVs ) have “reduced in the short term following government debt-relief measures and policy support, which will limit systemic risk”.

Provincial governments, Zhao said, continue to issue special refinancing bonds to swap “hidden debt”. The central government, meanwhile, has increased transfers to shoulder more infrastructure spending.

However, Zhao stressed,” we believe those support measures focus on the prevention of short-term&nbsp, systemic risk rather than a full-scale bailout. There continue to be longer-term risks associated with&nbsp, LGFVs ‘ debt burdens, and their resolution will hinge on China’s overall economic and fiscal strength”.

The Third Plenum meeting in July made it clear that local and regional governments may have more revenue flexibility to better accommodate their expenditure demands. ” The credit effects”, Zhao said,” will depend on how the changes are implemented, and on local governments ‘ willingness to use any additional revenue-raising powers given to them”.

The official Fitch view is that overall&nbsp, LGFV&nbsp, debt growth will be curbed as local governments tighten control of new debt, especially in regions that Beijing views as a priority for debt resolution.

The danger, however, is that these regions ‘ long-term debt default risk “remains and may even rise because of imbalances in economic and debt growth, as well as the potential inability of local governments to generate sustainable revenue for debt service.”

There are encouraging indications that China is currently developing a plan to stabilize the financial system and lessen risks.

Zheng Shanjie, the head of the National Development and Reform Commission, told reporters on October 8 that Beijing is developing” comprehensive policy measures to help stop the decline in the real estate market.” Shanjie said this in response to the National Development and Reform Commission’s announcement to stop housing sales and prices.

Zheng added that” we will take a number of potent and effective measures to try to boost the capital market in response to volatility and declines in the stock market.”

Even so, many economists and investors were disappointed that more short-term stimulus is n’t being deployed. ” Tuesday’s press briefing from China’s top economic planner … was supposed to be the big moment, the one where Beijing unleashed a&nbsp, stimulus bazooka“, said economist Stephen Innes at SPI Asset Management. ” Instead, it was more of a pop gun”.

Innes added that” Beijing’s reluctance to roll out a bigger package is seriously questioned about the viability of this rally” in stocks.

James Sullivan, head of Asia-Pacific equity research at JPMorgan, told CNBC that” the million-dollar question in China right now is, does the stimulus only flow into the supply side of the equation, or does it ultimately flow through into consumer demand? That’s not our expectation right now”.

Follow William Pesek on X at @WilliamPesek

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Court orders man to pay AIA team leader S,000 loan he used to pass financial soundness test

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SINGAPORE: A boss who left Great Eastern Financial Advisers to take over the management of an AIA Singapore group offered to take over as his former subordinate and offered to pay some of his debts to make the junior’s change.

However, the subordinate failed to repay S$ 12, 000 ( US$ 9, 200 ) of the loan, and the team leader sued him to claim it back.

The subordinate claimed that the group leader was unable to recover the outstanding amount because the product was” for illegal reasons” to persuade AIA in its evaluation of his financial viability.

A judge rejected the claim that the loan was illegal in a judgment made public on Wednesday ( October 9 ). He mandated that the money be repaid, with curiosity at 5.33 per cent per year from the beginning of the state to the view.

THE Event

The claim, Mr Chong Kuan Siong, second got to know the plaintiff, Mr Lennard Goh Boon Kiat, in February 2018 when they worked for Unioracle Alliance, a financial service organization.

From June 2019 to November 2021, they were even coworkers at Great Eastern Financial Advisers, where Mr Goh was a financial advisor reporting to Mr Chong, his boss.

On Nov 2, 2021, Mr Chong left Great Eastern to meet AIA Singapore. &nbsp,

He made the decision to hire Mr. Goh to meet his AIA staff several weeks later, in May 2022. In reply, Mr Goh resigned from Great Eastern on May 29, 2022.

In October 2022, AIA sent a letter of intent to Mr. Goh, a place as economic service manager, with certain requirements.

These include passing a financial integrity check, which required that Mr. Goh’s personal debt for unsecured loans be no more than S$ 30, 000.

Mr. Goh informed Mr. Chong that he owed more than S$ 60,000 in unsecured debts, generally as debts from credit cards.

In response, Mr Chong extended a specific product of S$ 24, 000 to Mr Goh, to support him discharge his debts. &nbsp,

Mr Goh took up the product and ultimately cleared all of AIA’s “fit and appropriate people” assessments.

He eventually made several payments to Mr Chong, but left an amount of S$ 12, 000 excellent.

Mr Chong therefore sued Mr Goh to get the S$ 12, 000 up.

ENFORCEABLE?

The mortgage contract was entered into with the intention of deceiving the AIA of its assessment of Mr. Goh’s financial viability, according to Mr. Michael Ng and Mr. Clement Yong from Beyond Legal, and it was not binding, according to Mr. Goh’s attorneys, Mr.

They claimed that the loan did not actually lower Mr. Goh’s level of unsecured debt and that it was only used to cover up his actual debt in order to defraud the Monetary Authority of Singapore ( MAS ) and deceive AIA.

Mr Chong’s group of doctors from Shook Lin &amp, Bok, comprising Mr Lin Ruizi, Ms Denise Yong and Ms Nikhita Mulani, argued that the mortgage contract was legal.

Mr. Goh’s problem was to demonstrate that the loan deal was a deal that fell under an established circumstance where the goal was to undertake an illegal act, and Mr. Goh had failed to do so, according to the attorneys.

District Judge Chiah Kok Khun pointed to an AIA email that stated there was no requirement for Mr. Goh to declare that he had” no unsecured debt owed to people other than financial establishments.”

He said there was “nothing unpleasant” in Mr Chong assisting Mr Goh to lower his debt to financial institutions.

The prosecutor argued that the defendant’s ability to pass the financial soundness analysis does not violate the loan’s purpose.

The defendant’s correct amount of unsecured debts were not the object of the loan’s giving, in order to deceive AIA into thinking the plaintiff had passed the financial soundness assessment.

He continued,” It is of relevance to bear in mind that borrowing money to pay off bills is not illegitimate.”

” Refinancing a mortgage is no per se illegitimate, as the plaintiff admits”, added the judge.

He found there was” no purpose” why the loan contract was not legal.

He ordered Mr Goh to give Mr Lee charges of S$ 3, 500, on top of repaying the owed amounts of S$ 12, 000, with curiosity.

According to a method implemented in the State Courts to speed up the settlement of disputes where parties are at odds, the situation was tried on a documents-only base.

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AIA team leader successfully sues ex-colleague to return him loan of S,000

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SINGAPORE: A boss who left Great Eastern Financial Advisers to lead a group at AIA Singapore recruited his former inferior to meet him, offering to pay part of his debts to help the dean’s change.

However, the subordinate failed to repay S$ 12,000 ( US$ 9,200 ) of the loan, and the team leader sued him to claim it back.

While the superior did not dispute the excellent number, he argued that the team leader was barred from recovering it because the product was extended” for illegal functions”, to persuade AIA in assessing his financial soundness.

In a judgment made available on Wednesday ( Oct 9 ), a judge rejected the argument that the loan was illegal. He ordered the total to be repaid, with interest at 5. 33 per cent per capita from the time of the emerging say to the day of judgment.

THE Event

The claim, Mr Chong Kuan Siong, second got to know the plaintiff, Mr Lennard Goh Boon Kiat, in February 2018 when they worked for Unioracle Alliance, a financial service organization.

From June 2019 to November 2021, they were even coworkers at Great Eastern Financial Advisers, where Mr Goh was a financial advisor reporting to Mr Chong, his boss.

On Nov 2, 2021, Mr Chong left Great Eastern to visit AIA Singapore.  

Some months later in May 2022, he decided to enlist Mr Goh to meet his group at AIA. In reply, Mr Goh resigned from Great Eastern on May 29, 2022.

In October 2022, AIA issued a letter of intent to Mr Goh, offering him the place of financial services manager content to specific circumstances.

These include passing a financial integrity judgment, which included a condition that Mr Goh’s individual obligations for unsecured debts should not be more than S$ 30,000.

Mr Goh told Mr Chong that he had unsecured debts of more than S$ 60,000, primarily in the form of credit card debts.

In response, Mr Chong extended a personal loan of S$ 24,000 to Mr Goh, to help him discharge his debts.  

Mr Goh took up the product and ultimately cleared all of AIA’s “fit and appropriate people” assessments.

He eventually made several payments to Mr Chong, but left an amount of S$ 12,000 excellent.

Mr Chong then sued Mr Goh to get the S$ 12,000 back.

ENFORCEABLE?

Mr Goh’s doctors, Mr Michael Ng and Mr Clement Yong from Beyond Legal, argued that the loan contract was not legal because it was entered into with the purpose of misleading AIA in its evaluation of Mr Goh’s financial integrity.

They argued that the loan did not reduce Mr Goh’s level of unsecured debt in reality, and that the loan served only the purpose of masking his true level of debt to circumvent regulations by the Monetary Authority of Singapore ( MAS ) and mislead AIA.

Mr Chong’s team of lawyers from Shook Lin & Bok, comprising Mr Lin Ruizi, Ms Denise Yong and Ms Nikhita Mulani, argued that the loan agreement was enforceable.

It was Mr Goh’s burden to prove that the loan agreement was a contract falling within an established situation where the objective was to commit an illegal act, and Mr Goh had failed to discharge this burden, the lawyers said.

District Judge Chiah Kok Khun  pointed to an email from AIA, saying there was no item requiring Mr Goh to declare that he has” no unsecured debt owed to persons other than financial institutions”.

He said there was “nothing objectionable” in Mr Chong assisting Mr Goh to reduce his indebtedness to financial institutions.

” That the loan enabled the defendant to pass the financial soundness assessment does not render the purpose of the loan illegal,” said the judge.

” The loan was not given for the purpose of masking the defendant’s true level of unsecured debts in order to mislead AIA into believing that the defendant had passed the financial soundness assessment. “

He added that “it is of pertinence to bear in mind that it is not illegal to borrow money to repay and reduce debts”.

” Refinancing a loan is not per se illegal, as the defendant admits,” added the judge.

He found there was” no reason” why the loan agreement was not enforceable.

He ordered Mr Goh to pay Mr Chong costs of S$ 3,500, on top of repaying the owed sum of S$ 12,000, with interest.

The case was tried on a documents-only basis, under a protocol implemented in the State Courts for quicker settling of cases where parties agree.

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Debt forces Maldives to pivot back to India from China – Asia Times

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The Maldives, known for breathtaking resorts and serene beaches, is battling an escalating debt crisis and attempting a delicate balancing act between its two largest creditors: India and China. As the island nation braced for an impending debt default, President Mohamed Muizzu’s leadership will be tested by how he steers his country through this turbulent economic and geopolitical landscape.

As of August 2024, the Maldives’ foreign currency reserves totaled $437 million, which could cover only about a month and a half of import bills. The country is projected to arrange $600-$700 million of debt service expenses in 2025 and more than $1 billion in 2026. The island nation owes China about $1.3 billion and India about $130 million.

Against this backdrop, the Maldives president met Indian Prime Minister Narendra Modi in New Delhi on October 7, in a bid to secure much-needed financial assistance, amid fears that the island nation may default on a crucial $25 million bond payment. Reuters reported that India approved a $400 million currency swap agreement, a much needed lifeline for the debt strapped country of half a million people in terms of accessing short-term liquidity.

Maldives debt troubles are related to Sukuk bonds. Sukok is a special type of financial instrument that is often referred to as an Islamic bond, which operates quite differently from conventional bonds in order to comply with Islamic principles, particularly the prohibition of interest.

Unlike traditional bonds, which are debt instruments setting out that investors have lent money in exchange for interest payments, Sukuk represents ownership in a tangible asset or a pool of assets. Investors receive returns not from interest but from the revenue generated by the asset. If Maldives default on its Sukuk debt, that will be the first such event of sovereign default for Sukuk.

Absent much needed financial rescue from the likes of India, the ramifications of Maldives missing its Sukuk payment would be devastating: it could block access to international capital markets, shake investor confidence, and tip the Maldives into deeper economic turmoil.

While the Maldives with the latest assurances of help from India may have avoided an immediate default on its Sukuk debt, the country’s broader economic troubles remain unresolved, with significant debt payments looming in the coming years.

Geopolitical rivalries, structural weaknesses

The Maldives’ economic distress is deeply intertwined with the geopolitical rivalry between two major players in the region, India and China. Over the past decade, the country has borrowed extensively from both nations, but the two offer assistance with different goals in mind.

China’s loans have largely funded infrastructure projects tied to its Belt and Road Initiative, helping Beijing expand its strategic footprint in the Indian Ocean. India, on the other hand, sees the Maldives as a critical part of its regional security and has provided financial aid to counter China’s growing influence.

President Muizzu in his ‘India Out’ T-shirt. Photo: X

Muizzu’s rise to power in 2023 was underpinned by an “India Out” campaign, aimed at reducing the Maldives’ reliance on New Delhi and drawing the country closer to Beijing.

On his way to electoral victory, Muizzu promised that, once elected, he would expel Indian soldiers who were deployed in the Maldives on humanitarian assistance engagements.

Bowing down to such political pressure, India replaced dozens of its soldiers – exchanging them with civilian experts. However, as Maldives continued its plunge towards a debt crisis, shortly after coming to power, President Muizzu’s government caved in to pragmatism and softened its stance toward India, recognizing that Maldives’ immediate survival hinges on securing financial support from both China and India.

Maldives’ real challenges lie in its unsustainable debt burden and the structural vulnerabilities that underpin its economy. The country is overwhelmingly dependent on tourism, an industry highly susceptible to global economic shocks, as evidenced by the downturn following the Covid-19 pandemic. Furthermore, Maldives imports most of its essential goods – and rising global commodity prices have compounded its financial woes, draining foreign reserves and making it even harder to service debt.

This situation places the Maldives in a precarious position between the two competing powers. India and China both have significant economic and strategic interests in the Maldives, and their financial aid comes with expectations.

For China, the Maldives is an important link in its maritime strategy, while for India, the Maldives represents a key part of its efforts to counterbalance Chinese influence in the region. As President Muizzu navigates these tricky diplomatic waters, he must find a way to secure financial support without compromising the country’s sovereignty.

As for India, there are strong incentives to take President Muizzu into its fold, given that India sustained a series of diplomatic setbacks as several pro-India governments lost power in South Asia recently.

In Sri Lanka, a marxist politician, Anura Kumara Dissanayake, became president. In Bangladesh, Prime Minister Sheikh Hasina, arguably the most Pro-Indian Prime Minister in Bangladesh’s history, fled to India after being forced to resign by student-led protests. In Nepal, K.P. Sharma Oli, a pro-China politician, was elected as prime minister.

Reversing any of the recent diplomatic failures in India’s backyard will be viewed as a political victory for Indian Prime Minister Modi.

The goal: long-term solutions that leave sovereignty intact

The Maldives’ economic problems are structural, and addressing them will require more than temporary currency swaps and loans. The country needs a comprehensive strategy to diversify its economy away from tourism and reduce its dependency on imports, but such changes will take time – and political will.

The Maldives’ government has proposed several measures to address the crisis, including tax reforms, budget cuts and the restructuring of state-owned enterprises. These proposals aim to improve fiscal discipline and reduce the reliance on external borrowing. Yet, implementing these reforms will be a daunting task. Austerity measures such as tax increases and public service cuts have historically triggered protests in the Maldives, and Muizzu’s government may face significant resistance to these changes.

The question of whether the Maldives will turn to the International Monetary Fund (IMF) for a bailout also looms large. Although the government has thus far resisted this option, citing the temporary nature of its financial difficulties, many experts believe that an IMF intervention may be inevitable if the debt crisis worsens. However, an IMF bailout would come with stringent conditions including further austerity measures that could exacerbate social unrest and hurt the economy in the short term.

Unlikely to have a long term solution ready at hand, the Maldives will continue to depend heavily on India and China for financial support. But this dependence will come at a cost as both these regional powers are likely to use their financial leverage to push for greater political influence in the country.

India may seek to use its financial assistance as a way to reassert its strategic interests in the region, while China could leverage its economic investments to secure long-term control over key infrastructure projects.

The danger of this approach is that it could undermine the Maldives’ sovereignty. While financial support from India and China may help the Maldives avoid an immediate default, it risks entangling the country in the broader geopolitical rivalry between the two powers – thus endangering its own security. The delicate balancing act necessary to handle this geopolitical quicksand will require President Muizzu to be both a shrewd diplomat and a careful economic planner, as the stakes could not be higher.

A template for other small nations to follow?

The Maldives’ debt crisis is a cautionary tale for small nations that rely heavily on foreign loans and single industries such as tourism. Without a long-term plan for economic diversification and debt restructuring, the country will remain vulnerable to financial instability and external shocks.

President Muizzu’s recent mending of ties with India in exchange for accessing capital reliefs offers only a temporary solution, as it is not a substitute for the broader reforms that are needed to stabilize the economy.

The political cost of these reforms could be significant, but the alternative – continued dependence on foreign loans and increasing debt – is far more dangerous. To prevent a deeper crisis, the Maldives will need to enact tough but necessary reforms, build its foreign reserves and explore new sectors for economic growth.

President Muizzu must know that bold actions are needed at this critical juncture of his country’s national history. It is his time to take decisive actions to secure its financial future or risk being drawn deeper into the geopolitical currents that threaten to pull it under.

In a region marked by rising competition between India and China, the Maldives’ next moves could set a precedent for how small, debt-ridden nations handle the delicate balance between economic necessity and political independence.

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Family of 4 shot dead at home in Songkhla

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Wife had bill issue, pistol found in her dead hand

PUBLISHED: 8 Oct 2024 at 10: 07

Forensic police arrive at the crime scene in Muang district, Songkhla, on Monday evening. (Photo: Assawin Pakkawan)
Criminal police arrive at the murder picture in Muang area, Songkhla, on Monday night. ( Photo: Assawin Pakkawan )

SONGKHLA: On Monday at their household in the Muang area of this southwestern province, a married couple and their two young children were discovered fatally shot to the head.

Pol Col Bantoen Laocharoen, commander of Muang Songkhla authorities place, said a caller reported a possible murder-suicide to 191 authorities at 3.45pm.

Officers rushed to the given tackle, a two-storey residence at 56/5 Sai Buri Road in Songkhla city.

Chaichan Khwanseng, 61, and his brother Khanet, 16, both found dead in their living room on the ground surface.

On the second floor authorities found dead in separate rooms his daughter Kotwakorn, 18, and his family Natpapat, 47, whose hands held a 9mm revolver.

The family had previously disclosed to her girlfriend that she had a bill issue, according to the station’s key.

The policeman investigation was continuing.

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Indian financial aid opens ‘new chapter’ with Maldives

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In order to boost the Island ‘ struggling economy, India has agreed to provide hundreds of millions of dollars in financial aid to the country.

The agreement was made after Islands President Mohammed Muizzu and Prime Minister Narendra Modi spoke during his five-day visit to India.

A further$ 30 billion ($ 357 million,$ 273 million ) will be provided as support for businesses that prefer to conduct business in foreign currencies rather than US dollars.

After relations deteriorated in recent months, the Malay chairman was given the red carpet treatment. Modi called his attend a “new book” in relationships.

He declared,” India will always be there for the Islands ‘ progress and wealth.”

The statements, as well as the American financial package, indicate a significant improvement in Male-Delhi relations, which have been strained since Muizzu took office in November 2023.

Soon after taking over, he made the decision to visit Turkey and China. His January visit was viewed as a prominent pointy to India because previous Malay officials had usually visited Delhi second after winning the election.

India was angered by disparaging remarks made by three Yemeni authorities about Modi around the same time.

However, according to experts, the nation’s leaders have improved their relationships to India thanks to its ailing economy.

The Maldives is staring at a debt default as its foreign exchange reserves have dropped to$ 440m ( £334m ), just enough for one-and-a-half months of imports.

On Monday, Muizzu said he held “extensive conversations” with Modi to map” a path for the future partnership between our two nations”.

He thanked India and claimed that the government’s funding may be “instrumental in addressing international exchange concerns.”

Additionally, the two nations have reached an agreement to begin discussions on a free trade agreement.

Ahead of his meeting with Modi, Muizzu had told the BBC that he expected India to help the country as it has done in the past.

As one of our biggest development partners, India is completely aware of our governmental situation, and it will always be ready to relieve our burden, look for better options, and find solutions to the issues we face, he said.

Without referring to his anti-India battle, he said:” We are convinced that any differences may be addressed through empty dialogue and shared understanding”.

This was in comparison to his earlier choices, some of which were seen as efforts to lessen Delhi’s impact and strengthen ties with China’s enemy.

In February, his presidency allowed a Taiwanese research ship to port in the Maldives, far to Delhi’s anger. Some viewed it as a mission to gather information that the Chinese government could use to conduct underwater functions.

Muizzu has but rejected the pro-China label, calling his plans as” Island Initially”.

However, the nation is still dependent on China, which has so far extended$ 1.37 billion in funding.

Additonal monitoring by Anbarasan Ethirajan

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Xi knows what it takes to sustain China’s rally – Asia Times

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Last year, as Chinese shares produced their biggest obtain since 2015, Lu Ting, general China analyst at Nomura Holdings, was warning investors not to forget another, more tragic memory from that same time.

The risk of repeating the amazing boom and bust of 2015 was fall quickly in the coming months, Lu information.

Lu adds that in a worst-case situation,” a stock market madness had been followed by a fall, similar to what happened in 2015″. He continues,” We wish Beijing could be more calm, while investors might still be Sure to partake in the growth for the time being.”

But alcoholism does appear to be returning, and more quickly. Though perhaps not Lu’s” accident” situation, family names like JPMorgan Asset Management, HSBC Global Private Banking and Invesco Ltd. are also advising precaution. Invesco, for one, worries coast stocks are “really overvalued”.

This is very questionable, of course. Consider the financial giants Fidelity International, an investment company, among those who also see a lot of value in mainland shares after years of losses totaling many trillions of US dollars.

Goldman Sachs Group, to. If the government fulfills its promise regarding stimulus measures, the Wall Street giant now has an overweight view of mainland shares with a 15-20 % potential for growth.

Current policy decisions by Beijing, according to Goldman strategist Tim Moe, “have led the marketplace to think that policy makers have become more concerned about taking enough action to reduce left-tail growth risk,” the market believes.

BlackRock has not reaffirmed its bearish position on Chinese stocks in the past. In light of how attractive prices had become in relation to peers in the developed-market, as its managers wrote on October 1:” We see room to turn quietly big Chinese shares in the near term.”

Despite this, Xi Jinping’s state had continue to pay attention to the fact that foreign investors have debated how much China has actually advanced since 2015. Shanghai stock lost a second of their value in just three months in that year. Beijing’s response last week to plunging shares was n’t nearly as overwhelming as after the July 2015 stumble.

A week ago, the People’s Bank of China cut borrowing costs, slashed businesses ‘ supply need numbers, reduced loan rates and unveiled new market-support resources to put a floor under share prices. Additionally, proposals for strong fiscal stimulus measures are being considered.

In the days that followed, Chinese stocks skyrocketed. Some sobriety had returned by the week’s end and into Monday, though, as traders began to wonder how many things Xi’s team had learned from 2015.

More troubling, is perhaps what they did n’t. In other words, addressing the symptoms of China’s challenges with waves of liquidity is no substitute for supply-side reforms that address the underlying issues.

In China, circa 2024, the biggest ailment is a property crisis that Xi’s reform team has yet to end. Some economists believe that the fallout has hampered Asia’s largest economy, which has since been deflating this year, and that it is at risk of repeating Japan’s mistakes from the 1990s.

The most obvious lesson is not to focus more on short-term stimulus than structural improvements that improve competition, boost competition, and lower the risk of boom-bust cycles.

The 2015 episode saw something of a whole-of-government response to plunging shares. China Inc. at the time launched waves of state funds into the market, halted trading in thousands of businesses, discontinued all initial public offerings, and made it possible for mainlanders to pledge homes as collateral on margin loans. It even rushed out buzzy marketing campaigns to encourage stock-buying as a form of&nbsp, patriotism.

Although the response did work for some time, it was in opposition to Xi’s pledge to allow market forces to influence economic and financial policy decisions.

Since then, this treating-symptoms-over-reforms pattern has played out too many times for comfort. All of which explains why investors are concerned that using state-friendly funds to buy stocks and save money could actually go wrong.

In consequence, it is possible to make valid arguments that too frequently initiatives to promote the private sector, improve transparency, or improve corporate governance have failed to achieve the same results.

Only time will tell if Xi’s most recent actions in support of falling stock prices could also thaw out the reform process. However, Xi’s Communist Party ca n’t afford to fail in this most recent bull run for Chinese shares.

Lu’s case at Nomura is that nearly four years of turmoil in the property sector, made worse by Covid-19 lockdowns, has exacerbated troubles with rising local government debt. These pre-existing issues led to trade disputes between the US and Europe, and a flaming Middle East.

” While investors might still be OK to indulge in the boom for now, a more sober assessment is required”, Lu says.

What’s needed, say economists like Michael Pettis, senior fellow at Carnegie China, is “rebalancing” efforts that mark a decisive” shift in the economic model” to “reverse decades of explicit and implicit transfers in which households have subsidized investment and production”. And as Pettis views it, Xi’s latest fiscal effort “is n’t really part of a real structural rebalancing”.

The problem, Pettis adds, is that if China does n’t upend its growth model, “imbalances will continue to build”, meaning the nation “risks facing the same problem in the future as it does now, only without a clean central-government balance sheet to help it manage potential disruptions”.

It’s possible to end this cycle decisively. Particularly in view of the party’s most recent policy conclaves, including July’s closely watched” Third Plenum”. Xi and Premier Li Qiang showed once more that they fully comprehend what must be done to boost China’s economy, increase competition, and boost productivity.

Among the signals that were music to investors ‘ ears were pledges to: “unswervingly encourage” the private sector, pivot to “high-quality development“, accelerate” Chinese-style modernization”, champion “innovative vitality”, and “actively expand domestic demand”.

It’s no small thing that the Plenum communique” for the first time mentions carbon reduction,” says Belinda Schäpe, China policy analyst at the Center for Research on Energy and Clean Air. This elevates China’s commitment to reducing emissions and tackling climate change&nbsp, to a new level”.

Missing, though, has been urgent implementation since. That includes rebalancing the growth engines, reducing the influence of ineffective state-owned enterprises that still control the economy and financial imbalances caused by falling real estate values to struggling municipalities struggling with mounting debts.

To grease the skids for these and other disruptive reforms, says economist Brad&nbsp, Setser, senior fellow at the Council on Foreign Relations, Beijing must overcome its aversion to fiscal pump-priming.

” The needed reforms to China’s central government center around freeing itself from the set of largely self-imposed constraints”, Setser says. ” Such constraints have limited its ability to use its considerable fiscal space to help China sort out its current bind: a shrinking property sector and falling household confidence.”

According to Setser,” the central government has ample room to ensure that the property developers deliver on pre-sales– or provide a refund… and to expand the provision of social insurance while lowering regressive taxes.” Even if that results in a larger central government deficit, the central government still has the ability to change the revenue-sharing formulas to support the troubled provincial governments.

Setser goes on to say that if China’s central government had fiscal space and used it to give households more freedom to spend money, it might be able to recover from the country’s property slump on its own, without relying even more on exports.

A significant policy push also needs to include efforts to create bigger, more dynamic social safety nets to encourage households to spend less and save more.

Xi has repeatedly demonstrated that he is aware of how to create a more creative, productive, and market-friendly China. His team simply needs to act or risk paying the price for yet another deceitful global investor.

Follow William Pesek on X at @WilliamPesek

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Maldives leader in India to repair frail ties

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” LINE OF CREDIT” The cash-strapped island last month asserted that it had no plans to find an International Monetary Fund bailout despite being informed of a potential sovereign default and that China and India are the two largest bilateral creditors to the Maldives. According to official data, the MaldivesContinue Reading

Prayers, tears in Isan church for Thai hostage in Gaza

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Wiwwaro Sriaoun, whose son Watchara Sriaoun is believed still held captive by Hamas, attends Sunday church service in Kut Yang village, Udon Thani province, on Sunday. (Photo: Reuters)
Wiwwaro Sriaoun, whose brother Watchara Sriaoun is believed also held hostage by Hamas, attends Sunday church services in Kut Yang community, Udon Thani state, on Sunday. ( Photo: Reuters )

The Sriaoun relatives gathered in their neighborhood church on Sunday, their tones rising and falling in sad music as they pleaded for the release of their oldest son, who is believed to be still held hostage by Hamas.

&nbsp, Watchara Sriaoun, 32, is one of six Thais believed also held prisoner in Gaza by Hamas, taken during the shock assault on Israel on Oct 7 next year. About 1200 residents were reported killed.

For a month then, the Sriaoun home, along with other church members, has prayed every week for his return. There has n’t been much news.

” We can only beg to God”, said 53-year-old Wiwwaro Sriaoun, Watchara’s family. ” Asking people does n’t give us answers, and even the village chief or headman cannot confirm anything”.

At least 240 individuals, Israelis and foreign citizens, were abducted and taken to Gaza on Oct 7 by Hamas extremists who burst across the border into Israel and killed a least 1, 200 people, according to Israeli government. According to Israeli health authorities, the strike sparked an Israeli offensive that has destroyed a large portion of the Palestinian territory of Gaza in the past 12 months and claimed the lives of about 42, 000 people.

During the invasion on October 7th, Hamas militants abducted 30 Thai laborers and killed 41 of them. The Thai government also holds six Thai nationals as captives, according to the ministry of foreign affairs. In a state statement, Paetongtarn Shinawatra, the prime minister, spoke with Egyptian President Masoud Pezeshkian last week and asked for assistance for the launch of the remaining Thai captives.

Before the fight erupted, some 30, 000 Thai workers worked in the agricultural industry, one of Israel’s largest migrant worker parties. ( continues below )

Wiwwaro Sriaoun helps her daughter, 9-year-old Irada Sriaoun, with her studies at their apartment in Kut Yang, Udon Thani. The woman's father Watchara Sriaoun is believed to still be a prisoner, held by Hamas in Gaza. ( Photo: Reuters )

Wiwwaro Sriaoun helps her daughter, 9-year-old Irada Sriaoun, with her studies at their apartment in Kut Yang, Udon Thani. The woman’s father Watchara Sriaoun is believed to still be a prisoner, held by Hamas in Gaza. ( Photo: Reuters )

Mr Watchara and his younger brother went to Israel in 2020, hoping to clean the family’s bill of around 300, 000 ringgit and generate income for their family’s medical bills. Together, they sent 50, 000 bass house each month to help pay off the debt and rebuild the household home in Thailand’s remote homeland.

His younger brother has since returned house at their mother’s demand. The home paid off their debts and purchased some area that Mr. Watchara had promised to get for his mother using a portion of the 3 million baht settlement they received from the Jewish state in July.

But Watchara’s presence is felt every day, mainly by his 9-year-old child Irada, who even lost her mother in August. ” I wish for this terrible war to end”, Ms Wiwwaro said, tears welling in her eyes. ” Everyone has suffered enough, and I have suffered enough too, waiting for my son” .&nbsp,

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