Debt – Page 90 – Sure A Not

Govt ‘solves’ 233 cases of informal debt: PM

On: December 23, 2023

PUBLISHED : 24 Dec 2023 at 05:58

The government claims it has solved the informal debts of 233 registered debtors while Prime Minister Srettha Thavisin on Saturday went to observe a debt-solving model in Nan.

According to government spokesman Chai Wacharonke, data from the Interior Ministry shows 106,863 debtors have registered with the government as it strives to solve informal debt problems.

Recent data showed a combined informal debt value worth 6.69 billion baht, with 77,525 informal loan lenders. The highest number of registered debtors was in Bangkok at 6,734, with a combined debt value of 566 million baht and 5,749 lenders.

Mae Hong Son has the lowest number of registered debtors at 151, with a combined debt value of 6.62 million baht and 117 lenders.

Mr Chai said that 1,445 debtors have entered the negotiation process, 233 of whom reached an agreement with lenders, leading to a drop from 144 million baht to 46.5 million baht in debt value.

“This is progress made so far in resolving informal debts. I urge remaining informal debtors to register with the government so we can help,” said Mr Chai.

The government hopes to help prevent debtors nationwide from paying at least 100 billion baht a year to loan sharks.

Meanwhile, the premier went to Nan on Saturday to follow up on progress of the debt programme. He urged state agencies to take action on the matter as it is a serious problem hurting the economy. As of Saturday, 563 informal debtors in Nan have registered for the programme, with a combined debt value of 33 million baht and 518 lenders.

So far, 52 debtors are in the negotiation process and four have reduced their debts. Most people were found to have borrowed money for buying consumption products, investments, house renovation, tuition fees and gambling.

Think China has a demographic problem? Check out Taiwan

By: Bolen C

On: December 23, 2023

In: Asia

Christmas is coming to Taipei and the city is at least partially decked out for the season. In Muzha, on the city’s outskirts, the Catholic church has set up a nativity scene. There is as yet no baby in the manger and the scene looks rather forlorn. That’s somehow appropriate for Taiwan, where there is a dearth of actual babies in cradles.

Over the road from the church are two pet-grooming shops, testimony to the changing composition of Taiwanese households. There are more registered cats and dogs in Taiwan than there are children under ten. As the country heads towards its eighth presidential election, to be held on January 13, 2024, it is hitting a new low in births per year.

Taiwan’s fertility rate is one of many things on the minds of the three presidential candidates: front-runner Vice President Lai Ching-te, the candidate for the Democratic Progressive Party (DPP); close rival Hou Yu-ih, running for the once all-powerful KMT; and Ko Wen-je, candidate for Taiwan People’s Party (TPP), the latest of a series of minor parties to make a splash in the country’s lively electoral landscape.

Ko is a populist who offers disaffected youth an alternative to the two large parties. He effectively politicized the fertility rate when he called a press conference on November 7 specifically to discuss responses to the declining birth rate.

Apart from announcing his own ten-point plan, notable for its novel pregnancy bonus, he took the opportunity to wax sarcastic about Hou’s planned third-child bonus and to attack Lai’s record on related policies.

Taiwan’s birth rate has become such a cause for concern that presidential candidates such as Hou Yu-ih (center left) have announced policies to address it. Photo: AP via AAP via The Conversation / ChiangYing-ying

In response, Lai’s team drew attention to Ko’s long history of misogynistic statements such as “unmarried women are like disabled parking spaces” and “[unmarried women] are causing instability and a national security crisis.”

In fact, all candidates take the problem of the falling birth rate seriously. For three years now, deaths have exceeded births in Taiwan. Only immigration is preventing a real decline in population.

The policies the candidates offer vary more in detail than in substance: the particular amounts of money differ, as do the circumstances under which the money is paid. But in the end, their policies all amount to throwing money at the problem.

A long-term problem

The fertility crisis has long been a matter of concern in Taiwan. In a perfect illustration of “be careful of what you wish for”, early population planning targets set by the then-dominant KMT were met and then exceeded in the 1980s. The fertility rate dropped below replacement level in 1983 and has never recovered.

It was identified as an issue of national security in Taiwan’s first national security report, issued in 2006. Since then the issue has been consistently in the news, local and international.

It is associated with several negative economic and social indicators: the gradual increase in the burden of the national debt on each individual; the weakening of domestic demand; the reduced supply of labor; the problem of aged care in a super-aged society.

For all these reasons, politicians take the problem seriously. Nonetheless, the fertility rate is a slow burner in Taiwanese politics – it lacks the immediacy of cross-strait relations, widely held to be the main issue in the current political contest.

But there is a meeting point between the two issues. Already many fewer young men are available for military service in Taiwan than there were a decade ago. The air force in particular is low on trained personnel and its fighter pilots are exhausted from the constant need to respond to Chinese jets crossing into Taiwanese air space.

This problem is only to some degree balanced by a parallel problem in China, where the fertility rate (1.45 in 2022) is also in precipitate decline.

On neither side of the Taiwan Strait does anyone have good ideas about how to reverse the fall. Candidates for the election in Taiwan all promise potential parents enhanced financial support while no doubt fully aware of the limited effects of such measures on fertility choices.

In China, President Xi Jinping’s advice to women that they should “play their role in carrying forward the traditional virtues of the Chinese nation” seems even less likely to yield results.

Older people now outnumber the young in Taiwan. Photo: Antonia Finnane, Author provided (no reuse)

Babies? No thanks

Young women in Taiwan tend to explain their preference for pets over babies in terms of financial pressures, particularly the cost of housing. Housing is recognized as a serious problem in Taiwan and all contenders for the presidency are promising to help with housing for couples with children.

But in a society where having children is normatively associated with marriage, being married is generally a prerequisite for enjoying even existing benefits. The fertility rate for married couples in Taiwan is reasonably high, two children being standard. The key question appears not to be why don’t women have children. The question is why don’t women get married?

In Taiwan, as in much of East Asia, marriage avoidance has become a marked phenomenon. In 2021, a mere 50% of young Taiwanese between the ages of 25 and 34 were married.

Of the unmarried group, 70% of the men wanted to get married at some future date. A majority of the unmarried women had no such intention. Similarly, many more unmarried men (61.22%) than unmarried women (42.98%) wanted eventually to have children.

Since housing and raising children are costs for men as well as for women, there is presumably something more to the falling birth rate than simply the financial pressure.

Analyzing the uniformly low and falling birth rates across East Asia, Yen-hsin Alice Cheng argues the problem is grounded in the Confucian cultural bedrock of the region. Family and society are rigidly patriarchal. Workplace organization and wider societal structures are unfavorable to women.

Historical sex ratios at birth reflect, to varying degrees, a default preference for sons, Japan offering the only exception. Government initiatives frequently land on infertile ground, a phenomenon most notable in South Korea where only a small minority of women and a tiny percentage of men have taken advantage of extremely generous parental leave schemes aimed at arresting the declining birth rate.

In this East Asian mix, Taiwan has a more progressive society than China and a less rigid patriarchy than South Korea. It has high numbers of women participating in politics. Voter turnout among women is large, and the current president is a woman: the redoubtable Tsai Ing-wen.

Women in leadership at the local level – the all-important position of mayor – outnumber men. The sex ratio at birth has been skewed in recent history but now seems to have settled into a “within normal” range.

Given the relative advantages women enjoy in Taiwan, especially relative to South Korea, it is worth pondering the possible variables for its particularly low birth rate.

A rare baby citing in Taiwan. Image: Twitter Screengrab

In a comparative study of mental health in Ukraine, Poland and Taiwan during the first year of the Russo-Ukrainian war, researchers found post-traumatic stress effects among Taiwan respondents were only slightly lower than in Ukraine, with female gender a significant risk factor.

Vicarious experience of the war, predicated on the anticipation of conflict in their own country, appears to have prompted a high degree of anxiety in Taiwan.

This finding raises the question of whether, in addition to other social forces informing their life choices, Taiwanese live with an undercurrent of concern about the future of their country.

If so, the crisis of national security constituted by the declining birthrate would seem to be part of a vicious cycle, where a lack of security in geopolitical terms is informing decisions about whether or not to marry and have children.

Antonia Finnane is Professor (honorary), The University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Nippon-US Steel deal sparks a knee-jerk backlash

By: Bolen C

On: December 23, 2023

In: Asia

Nippon Steel’s plan to acquire US Steel has triggered an uproar among the US Congress, the United Steelworkers and economic nationalists alarmed by the buyout of an American icon and the US$14.9 billion deal’s potential implications for US employment and the economy.

The reaction has been particularly strong in President Joe Biden’s birth state of Pennsylvania, where US Steel’s headquarters and several plants are located. Senator John Fetterman, a member of Biden’s Democratic Party, issued a populist statement saying:

I live across the street from US Steel’s Edgar Thompson plant in Braddock. It’s absolutely outrageous that US Steel has agreed to sell themselves to a foreign company. Steel is always about security – both our national security and the economic security of our steel communities. I am committed to doing anything I can do, using my platform and my position, to block this foreign sale.

This is yet another example of hard-working Americans being blindsided by greedy corporations willing to sell out their communities to serve their shareholders. I stand with the men and women of the [United] Steelworkers and their union way of life. We cannot allow them to be screwed over or left behind.

Fetterman was joined in opposition to the deal by a bipartisan group of politicians including Senator Bob Casey (Democrat, Pennsylvania), Senator J D Vance, (Republican, Ohio), Senator Josh Hawley (Republican, Missouri), Senator Marco Rubio (Republican, Florida), Congressman Chris Deluzio (Democrat, Pennsylvania) and Pennsylvania State Senator Jim Brewster (Democrat).

Do they have a case? On December 18, Nippon Steel and US Steel announced the signing of an agreement under which Nippon Steel will acquire 100% of US Steel in an all-cash transaction priced at $55 per share, equivalent to an equity value of $14.1 billion, Nippon will also assume US Steel’s debt, bringing the deal’s total enterprise value to $14.86 billion.

The purchase price is nearly 40% above US Steel’s closing stock price on December 15 of $39.33 and 57% more than the rival offer made by iron and steel company Cleveland-Cliffs last August, which valued US Steel at $35 per share.

US Steel’s share price jumped 26% to a 12-year high the day the Nippon transaction was announced and closed at $47.97 on December 22. Nippon Steel agreed to pay about 12 times earnings for US Steel, which is almost twice its own current valuation.

The Wall Street Journal noted, “that by shelling out so much for US Steel, Nippon [Steel] is actually making a bet that the American manufacturing renaissance will succeed, with steel demand heading structurally higher.” But, it continued, “That still won’t stop politicians from taking potshots.”

Cleveland-Cliffs CEO Lourenco Goncalves issued a statement saying:

We identified US Steel as an extremely undervalued company with significant synergy potential when combined with Cleveland-Cliffs, creating a union-friendly American champion among the top 10 steelmakers in the world.

Even though US Steel’s board of directors and CEO chose to go a different direction with a foreign buyer, their move validates our view that our sector remains undervalued by the broader market, and that a multiple re-rating for Cleveland-Cliffs is long overdue. We congratulate US Steel on their announcement and wish them luck in closing the transaction with Nippon Steel.

Closing the deal, however, could be difficult amid the nationalistic backlash. Senator Vance said, “Today, a critical piece of America’s defense industrial base was auctioned off to foreigners for cash.”

For cash plus the assumption of debt, actually, and a lot more than the competing offer. In short, a great deal for US Steel shareholders.

Japan’s Nippon Steel already has a hefty industrial presence in the US. Image: Twitter Screengrab

Nippon Steel’s share price declined after the announcement, dropping more than 5% on December 19. Since the end of November, when word of the transaction may have been circulating, it is down 13%. This raises a question: Is Nippon Steel making an overpriced mistake?

Judging from the reaction of the United Steelworkers, it might be. In both the announcement of the acquisition and its presentation to investors, Nippon Steel emphasizes that all of US Steel’s commitments to its employees and agreements – including collective bargaining agreements – with the union will be honored.

But United Steelworkers International President David McCall has his doubts. “We remained open throughout this process to working with US Steel to keep this iconic American company domestically owned and operated, but instead it chose to push aside the concerns of its dedicated workforce and sell to a foreign-owned company,” McCall said.

“Neither US Steel nor Nippon [Steel] reached out to our union regarding the deal, which is in itself a violation of our partnership agreement that requires US Steel to notify us of a change in control or business conditions,” he said.

“Based on this alone, the USW does not believe that Nippon [Steel] understands the full breadth of the obligations of all our agreements, and we do not know whether it has the capacity to live up to our existing contract,” McCall added.

Labor has good reason to fear corporate takeovers, but it is American, not Japanese, management that is known for mass lay-offs.

In fact, US Steel’s workforce shrank from 29,000 in 2018, when then-president Donald Trump slapped a 25% tariff on imported steel, to less than 23,000 in 2022. That figure is set to drop by another 1,000 due to the downsizing of the company’s plant in Granite City, Illinois, which was announced on November 28 this year.

All in all, US Steel’s workforce has been slashed by 25% since 2018. Trump’s tariff was supposed to protect American jobs but had the opposite effect, and the union couldn’t and apparently still can’t do anything about it.

Ironically, Dan Simmons, president of United Steelworkers Local 1899, which represents the workers in Granite City, told reporters that “The optimistic side of this [the acquisition] is that Nippon [Steel] was a part of a joint venture back many years ago with National Steel, when I was an employee then and they were a good partner to have.”

Rather than downsizing, Simmons says, “The right decision would be to fire those furnaces back up and make steel again because prices are very good.”

Nippon Steel may do just that. Its rationale for the acquisition includes the attractiveness of the US steel market, where quality standards are high and the rebuilding of manufacturing and infrastructure are expected to support long-term growth in demand.

It also needs to get behind the wall of tariffs first erected by Trump and built out by Biden that is unlikely to be dismantled regardless of who wins the presidential election in November 2024.

Nippon Steel has been operating in the US through joint ventures and largely- or wholly-owned subsidiaries since the 1980s. Wheeling Nippon Steel began as a joint venture with Wheeling-Pittsburgh Steel in 1984 and is now a 100%-owned subsidiary.

It was followed by the establishment of Nippon Steel Pipe America, International Crankshaft, the Indiana Precision Forge and Suzuki Garphyttan steel bar and wire companies, Standard Steel (steel wheels) and the steel sheet joint ventures NS Bluescope and AM/NS Calvert, which ArcelorMittal and Nippon Steel bought from ThyssenKrupp in 2014.

Nippon’s acquisition of US Steel, if it is completed, will be its ninth investment in the US. It would add US Steel’s integrated steel mills in the US and Slovakia to those of Nippon Steel in Japan, India, Thailand, Brazil and Sweden. Nippon Steel has downstream operations in China, Southeast Asia, the Middle East, Brazil and the US.

The deal would raise Nippon Steel’s total annual crude steel capacity from 66 to 86 million metric tons as calculated using the methodology of the World Steel Association – i.e., the sum of the nominal full production capacity of companies in which it has a 30% or greater equity interest.

Nippon Steel would then vault from 4^th to 2^nd place in the world steel rankings, overtaking Ansteel and ArcelorMittal to become nearly two-thirds the size of China’s top-ranked Baowu Steel, which has an annual crude steel production capacity of about 130 million metric tons.

The acquisition was unanimously approved by the boards of directors of both companies. It is subject to approval by US Steel shareholders and regulatory authorities, neither of which is expected to oppose the deal.

Nippon Steel plans to fund the transaction primarily through borrowings from Japanese banks, from which commitment letters have already been received. The deal is expected to close in the second or third quarter of 2024.

If US Steel had instead accepted Cleveland-Cliff’s offer, the combined entity would have had a monopoly on blast furnace steel production in the US and a dominant share of the market for steel used in the US motor vehicle industry.

As part of the Nippon Steel Group, the US steel industry will remain competitive. US Steel will retain its brand name and headquarters in Pittsburgh under the deal.

On December 19, Senators Fetterman and Casey and Representative Deluzio sent a letter to Treasury Secretary Janet Yellen, who is also chair of the Committee on Foreign Investment in the United States (CFIUS), urging her to block the proposed acquisition. They wrote:

With the passage of the Inflation Reduction Act, the Infrastructure Investment and Jobs Act, and the CHIPS and Science Act, the United States has acted to make the US market the most competitive in the world and to reshore critical supply chains. Allowing for the ownership of a major industrial participant in infrastructure and clean energy investments to be acquired by a foreign entity would be a step backwards in our commitment to supply chain integrity and economic security.”

We question whether a foreign company that has been found to be dumping steel into the US market at prices below fair market value is the best buyer for US Steel. Of further concern, Nippon Steel has facilities in the People’s Republic of China, a foreign adversary of the US.”

Senators Hawley, Vance and Rubio likewise wrote to Secretary Yellen, saying in a statement:

The transaction was not entered into with US national security in mind… [It] was not the product of careful deliberation over stakeholder interests, but rather the result of an auction to maximize shareholder returns.

Trade protections can and should induce foreign investment that expands domestic production and creates American jobs. This corporate takeover is out of step with those goals. Allowing foreign companies to buy out American companies and enjoy our trade protections subverts the very purpose for which those protections were put in place.

NSC [Nippon Steel Company] does not share US Steel’s storied connection to the United States, and its financial interests are tied into those of Japan. Earlier this year, NSC received more than $3 billion in subsidies from Japan’s Ministry of Economy, Trade and Industry. And NSC has even flouted American trade law. As recently as August 2021, NSC was found guilty of unlawfully dumping flat-rolled steel products into the US market.

The world’s leading business dailies have taken issue with these nationalistic views. The Wall Street Journal, for one, criticized both what it sees as a throwback to protectionism and the inability of politicians to distinguish between Japan and China. It asked: “Do they think the Japanese are going to bomb Pearl Harbor?”

US Senator Marco Rubio is among those opposed to the deal. Photo: Asia Times Files / AFP / Stefani Reynolds / Getty Images

The Financial Times, in an editorial entitled “The misguided US backlash against Nippon Steel raises a question of trust,” asks “If Japan does not count as a legitimate buyer of assets in the US, who does?”

Japan’s Nikkei said “US Steel takeover opposition sends the wrong message to Japan” and quotes Joshua Walker, president of the Japan Society, saying that “It sends all the wrong messages. We can’t celebrate Japan as our most important and critical ally and then attack Nippon Steel with the type of xenophobic rhetoric we are seeing.”

All this puts Biden, a self-proclaimed strong supporter of both labor unions and the US-Japan alliance, in a tight spot. In a statement issued by the White House, National Economic Advisor Lael Brainard said:

The President believes US Steel was an integral part of our arsenal of democracy in WWII and remains a core component of the overall domestic steel production that is critical to our national security. And he has been clear that we welcome manufacturers across the world building their futures in America with American jobs and American workers. However, he also believes the purchase of this iconic American-owned company by a foreign entity—even one from a close ally—appears to deserve serious scrutiny in terms of its potential impact on national security and supply chain reliability.

At this point, it seems likely Biden will pass the buck to Treasury’s CFIUS to approve or reject the deal. But the final decision may not be made until June or even September, which will put the US Steel-Nippon deal in a politicized spotlight in the run-up to the November 2024 election in an important swing state.

Follow this writer on Twitter: @ScottFo83517667

Houthi shipping attacks threaten global economy

By: Bolen C

On: December 21, 2023

In: Asia

To understand the implications for international shipping of the Yemen-based Houthi militant attacks in the Red Sea, it may be useful to start thousands of kilometers away, in the Port of Singapore. One of the busiest container shipping ports in the world, Singapore is a regular stop for all of the world’s leading shipping companies and a key hub for Asia-Europe trade.

Now, let’s imagine a major container ship sailing the 17,000 kilometers from Singapore to Rotterdam. After exiting the port, it heads for its first major choke point, the Malacca Strait. Once through that vital waterway, it finds open seas, traversing the Indian Ocean and the Arabian Sea.

As it approaches the coast of Yemen, it faces the Bab Al Mandeb Strait, another key chokepoint, before it enters the Red Sea onward to the Suez Canal.

If everything goes according to plan – and it usually does – the container ship passes through the Suez and will find itself sailing the Mediterranean headed for the Gibraltar Strait, another key choke point, between Morocco and Spain. Then, it will be on an Atlantic Ocean run north to the key Dutch port that is a major hub of northern Europe.

Everything is timed, synchronized, planned, and mapped for smooth sailings. After all, the global economy – and the bottom line of the shipping company – depends on it. Roughly 80-90% of world trade by volume is shipped by sea, according to the UN.

So, when something goes wrong in any part of that journey, it’s not just individual ships or shipping companies that feel the pain. We all do.

The recent attacks by the Houthi militants on international shipping in the Red Sea has scrambled supply chains, pushed up oil and natural gas prices, and raised geopolitical tensions far beyond the states surrounding the Red Sea.

Some of the world’s largest shipping companies – MSC, Maersk, CMA CGM Group, and Hapag-Lloyd – have suspended their sailings in the Red Sea. Energy giant BP has also declared it will avoid the Red Sea until further notice.

The implications for world trade are serious. Roughly 15% of global trade and 30% of container traffic passes through the Suez Canal. The Red Sea and the Suez Canal are vital links in the global economy, playing a pivotal role in the global supply chain of oil, natural gas, food, manufactured products and more.

Some 40% of Asia-Europe trade passes through the Suez Canal, including vital liquid natural gas supplies. In 2021, when a ship became lodged across the canal, blocking it completely, economists estimated that some US$10 billion of trade was affected for each day the waterway was blocked.

The US military has announced an international coalition to protect Red Sea shipping lanes and provide security for the some 400 ships that are traversing the Red Sea at any given time.

The US plan has not entirely soothed insurers, who have raised prices on Red Sea passages and expanded the areas considered high-risk. Prospects of US strikes against the Houthi militants, which are backed by Iran, have been raised. Oil prices are inching upward after several weeks of decline.

The Houthis, which control parts of north and west Yemen, have declared their attacks are in response to Israel’s war in Gaza and that they are targeting ships linked to Israel or using Israeli ports. Most of America’s regional allies have been cautious about joining the coalition.

Across the Arab world, even in capitals where the Houthis are seen as a serious threat to regional stability, aligning with the US at a time of rising public anger over the Israel-Gaza war has made several countries uncomfortable. As a result, the US may be required to lead this operation without a large Middle East contingent to its coalition.

Meanwhile, the role of China will also be closely watched. Chinese shippers regularly traverse the Red Sea. China is also the only major purchaser of Iranian crude oil, giving it a degree of leverage over Tehran.

Iran’s links with Houthi militants are clear, but it remains to be seen if Beijing will seek to exert pressure on Tehran to rein in the Houthi attacks – or, at least, to keep them targeted at non-Chinese vessels.

Egypt, too, should be watched. The country faces an economic quandary. The Suez Canal Authority reported a record $9.4 billion generated in the 2022-2023 financial year.

A serious dent in those revenues would further squeeze an Egyptian economy that is already reeling from a foreign exchange crunch and soaring inflation. Concerns mount that Egypt could default on its roughly $165 billion of foreign debt, one of the highest levels in emerging markets.

Meanwhile, some 100 container ships are actively avoiding the Red Sea route, according to logistics giant Kuehne+Nagel, and many more are likely to follow. The Singapore-Rotterdam route will now sail all the way around the coast of southern Africa and back up toward the Atlantic Ocean and Europe, adding weeks and rising costs to the journey.

At a time of precarious recovery in the global economy and razor-sharp geopolitical tensions, the Red Sea attacks are a reminder of how connected we are – and how dangerous it can be when those vital connections are severed.

Afshin Molavi is a senior fellow at the Foreign Policy Institute of the Johns Hopkins School of Advanced International Studies and editor and founder of the Emerging World newsletter. Twitter: @AfshinMolavi

Republished with the kind permission of Syndication Bureau, which holds copyright.

China will stress test Asia as rarely before in 2024

By: Bolen C

On: December 21, 2023

In: Asia

Today’s extreme focus on the Bank of Japan is pivoting to how the People’s Bank of China plays the economic minefield that lies ahead in 2024.

Over the next 12 months, China will stress test Asian economies as rarely before. Beijing’s dueling priorities of stabilizing growth and reducing the frequency of boom/bust cycles will center on the actions of Governor Pan Gongsheng at PBOC headquarters.

Since taking the PBOC’s reins in July, Pan has been a study in monetary restraint. Even as the all-important property sector stumbles, Pan’s team has avoided channeling giant waves of liquidity into the market. Targeted blasts, yes. But Team Pan is foregoing the powerful easing moves that traders came to expect from previous PBOC leaders.

One reason is that the yuan is under growing pressure in global markets. Nothing would get China closer to this year’s 5% growth target faster than a lower exchange rate. Pan, though, is prioritizing yuan stability over stimulus in ways that continue to confound hedge funds betting on a weaker currency.

This patience is partly about China’s default-plagued property developers. Each drop in the yuan makes paying off offshore debt more expensive and challenging. It’s also about the PBOC’s determination not to reward bad behavior through moral hazard-encouraging bailouts.

Yet this balancing act may become more precarious as China’s domestic economy underperforms at the same time the external sector disappoints.

People’s Bank of China Governor Pan Gongsheng is speaking forthrightly about the Chinese economy. Image: Twitter Screengrab

This isn’t the only way China will stress test Asia’s economies. Writing in the latest Global Polarity Monitor newsletter, Asia Times’ David Goldman argues that China will engage in “limited, stylized probes of Asian governments’ pain threshold” in naval and military matters.

Questions about the region’s economic pain threshold vis-a-vis China’s slowdown loom large as 2024 approaches.

Though the US has beaten the odds and avoided a recession, this luck might be running out. The cumulative effects of 11 US Federal Reserve rate hikes in 18 months – and the highest Treasury debt yields in 17 years – are generating intensifying headwinds. Europe is facing a treacherous 2024 as the German economy contracts.

“The fiscal woes of the last month have clearly left their mark on the German economy, with the country’s most prominent leading indicator showing just how difficult it will be for the economy to bounce back,” says ING Bank economist Carsten Brzeski.

Japan, meanwhile, may already be in recession. Data since the economy’s 2.9% contraction in the July-September period offers little hope Japan isn’t ending 2024 in the red. The sense of fragility was buttressed by the Bank of Japan’s decision on Tuesday (December 19) to leave quantitative easing in place.

Following the no-action on rates announcement, BOJ Governor Kazuo Ueda said it would be “inappropriate to think that we will rush to change our policy because the Fed is likely to move within the next three to six months.” That, he added, means the BOJ will “observe the situation for a little longer.”

To economist Krishna Guha at Evercore ISI, this means the BOJ will “methodically” prepare the ground for a first hike to exit negative rates rather than shock markets with a surprise exit, perhaps by April.

Yet that might depend more on how China fares in the months ahead than any other variable. As China’s economy loses altitude, “the case for early [BOJ] normalization is in jeopardy,” says Carlos Casanova, senior economist at Union Bancaire Privée.

As of now, the “conditions for [a] BOJ to pivot” away from QE “have not yet been met,” Casanova says. The first condition, he adds, is for 10-year Japanese government bond (JGB) yields to be at or slightly above the “new upper bound” of 1.0%. The second is for inflation to remain above the BOJ’s 2.0% target for an extended period. Both conditions remain uncertain.

Here, the BOJ isn’t operating in a vacuum. Economist Louis Gave at Gavekal Dragonomics notes that “assuming that the Fed is sounding dovish more for political reasons than any genuine concerns, the next few months should see a weaker US dollar.”

If, at the same time, Gave says, the “Bank of Japan eventually abandons its negative interest rate policies and China’s stimulus attempts start to gain a modicum of traction – and the People’s Bank of China has ramped up liquidity injections of late – we could end up with a setup that is bearish for long-dated bonds across OECD countries. Most, but especially, in the US.”

Among these central banking powers, the PBOC is a real wildcard in 2024. Odds are the BOJ will be forced to “taper” a bit in the months ahead, says Kelvin Wong, senior market analyst at OANDA. “It seems that mounting pressure from the public and private sectors has arisen.”

The Bank of Japan has a close eye on China’s economy. Photo: Asia Times Files / AFP / Xie Zhengyi / Imaginechina

Wong notes that prominent Japan business lobby Keidanren head Masakazu Tokura is urging the BOJ to “normalize monetary policy as early as possible.” Intriguingly, Economy Minister Shindo attended the BOJ’s December 19 meeting as a representative from the Cabinet Office.

“It’s rare,” Wong says, “for a Cabinet minister to attend BOJ monetary policy meetings as such ‘attendee roles’ are usually assigned to deputy ministers. In the past meetings that cabinet ministers attended had resulted in major monetary policy changes such as the launch of the mega quantitative asset-buying program in April 2013.”

Headwinds from China are among the forces complicating BOJ rate decisions.

The same goes for Bank of Korea officials in Seoul. Sputtering mainland demand has caused an about-face in South Korean exports. In recent months, the BOK cited weak global demand, led by China’s slowdown, as depressing demand for tech goods, undermining the country’s outbound shipments.

Taking a longer-term perspective, economists are mulling what China’s downshift means for the region.

“The Chinese economy has grown at an unprecedented pace since the 1980s, gaining importance globally, particularly after the country joined the World Trade Organization in 2001,” notes economist Sewon Hur at the Federal Reserve Bank of Dallas.

However, Hur notes, “the pace of growth is likely to slow as China’s economy matures because of its demographic structure and its increasing proximity to economic and technological frontiers.”

Additionally, Hur argues, “China may face more significant headwinds than would be typically expected. Notably, the country’s growth in total factor productivity — the efficiency of production — the largest contributor to China’s growth, has steadily declined since 2000. This trend is projected to continue over the next decade and beyond.”

As Chinese President Xi Jinping and Premier Li Qiang get a handle on the economy’s troubles, Southeast Asia might come into its own as a regional growth engine, argues Eunice Tan, a credit analyst at S&P Global Ratings.

“This shift could constrain the medium-term upside for China’s issuers while improving those of issuers in India, Vietnam, the Philippines and Indonesia,” Tan says.

S&P projects that China’s gross domestic product will slow to 4.6% by 2026 after growing at a 4.8% pace in 2025. By comparison, S&P sees India growing 7.0% by 2026, while Vietnam grows 6.8%, the Philippines expands 6.4% and Indonesia accelerates at a roughly 5% pace.

“Despite stimulus,” Tan says, “China’s property sector remains stressed. Constrained access to credit support and high corporate debt leverage are denting liquidity profiles, particularly of property developers and heavily indebted local government financing vehicles.”

At the same time, Tan adds, “we expect regional interest rates to likely stay high, given the US Federal Reserve will maintain a tight monetary policy to bring inflation within target. Our base case sees the US and Europe avoiding a recession in 2024, but the risk of a hard landing remains, which could affect Asia-Pacific’s exports to these regions.”

A porter walks on a bridge in Chongqing, China with new residential buildings in the background.
Photo: CNBC Screengrab / Zhang Peng / LightRocket / Getty Images

Making matters worse, China’s stumble could generate any number of downside surprises in the year ahead. The problem is that the government still hasn’t “addressed the most important issue: credit risk related to developers,” analysts at Macquarie Bank write in a report.

“Without a lender of last resort, a self-fulfilled confidence crisis could easily happen as falling sales and rising default risks reinforce each other,” Macquarie argues. “Indeed, some large developers have recently seen their credit risks rising rapidly.”

Economists at Nomura add that “China’s property sector has yet to bottom out. Markets appear to have been a bit too optimistic about the property stimulus policies over the past two months.”

If there’s any good news in the short run, write economists at Citigroup, Beijing’s “continued emphasis on supporting real estate financing and local government financing vehicle (LGFV) debt resolution will continue [to help] prevent risks [from] escalating.”

Citi analysts note that “as fragile growth continues to call for an accommodative monetary environment” by the PBOC, “more supports are still needed to boost private sentiment.”

Last month, Moody’s threatened to cut China’s credit rating, highlighting concerns over the slow pace and cost of bailing out highly indebted local governments and state firms slammed by the property crisis.

The specter of an actual downgrade of the second-biggest economy only adds to the ways China will stress test Asia in the year ahead.

Follow William Pesek on X, formerly Twitter, at @WilliamPesek

Indian man arrested after 6 years of overstaying

By: Barkar Nash

On: December 21, 2023

In: South-East Asia

PUBLISHED : 21 Dec 2023 at 11:44

NONTHABURI: Immigration police on Wednesday arrested an Indian man who was alleged to have operated as an illegal money lender and discovered that he had overstayed in the country for over six years.

Pol Col Somkiat Sonchai, the Nonthaburi immigration chief, said the 39-year-old man, identified only as Kay, was arrested in front of a rented room at Moo 3 village in tambon Bang Rak Noi of Muang district.

The arrest followed an investigation into foreign nationals involved in illegal money lending, aligning with the government’s policy to address the problem of informal debts.

Local residents informed immigration police that an Indian man had been unlawfully lending money to vendors at markets in Tambon Sai Ma. He typically used a motorcycle to collect amortised repayments from debtors there.

Acting on the information, the police successfully arrested the Indian individual.

During a subsequent search of his travel documents, it was found that he had overstayed in the country for over six years, or 2,366 days. A workbook for recording debt repayments was also found in his room.

In an initial investigation, the man denied being involved in money lending, claiming that the book belonged to a fellow Indian national.

ICAEW: Resilient economic momentum in Malaysia and SEA, but outlook ahead remains cautious

By: Mary Blight

On: December 20, 2023

In: Technology

Oxford Economics projects Malaysian economy to grow by 4.3% in 2023
2024 Budget shows govt exercising fiscal discipline, reduce budget deficit

Economic momentum has picked up in Q3 2023 in Southeast Asia, but there are concerns about potential headwinds in 2024, finds Oxford Economics in its recent research commissioned by the Institute of…Continue Reading

Kishida’s stimulus too little, too late for flagging Japan

By: Bolen C

On: December 20, 2023

In: Asia

Japanese Prime Minister Fumio Kishida announced a new fiscal stimulus program in response to a fall in his cabinet’s approval rating. His approval rating, which peaked at 59% in June 2022, plunged to 29% in November 2023 and hit a low of 17.1% in December.

Despite a reshuffle of the cabinet aimed at strengthening female representation, it has proven ineffective in alleviating growing political discontent. Japanese “voters have grown increasingly disillusioned with the administration’s ability to address the country’s social and economic woes.”

The reason for the political turmoil is higher inflation, which has painfully eroded the purchasing power of Japanese households, as wage increases have consistently lagged behind rising prices.

Kishida asserts that the new fiscal stimulus program — exceeding 17 trillion yen (US$118.3 billion) — aims to overcome deflation and put the economy back on track. The package includes temporary tax cuts of 40,000 yen ($275) per person and payouts of 70,000 yen ($480) to low-income households.

Subsidies for gasoline and utility bills have been provided to dampen consumer price inflation. Together with spending by local governments and state-guaranteed loans, the size of the package amounts to 21.8 trillion yen ($149 billion).

While this initiative focuses on aiding low-income households and the regions outside the economic centers, which have suffered over three decades of stagnation, there are major problems to overcome.

Similar to numerous previous fiscal stimulus programs, the relief will only be short-term. The persistent low-interest rate in Japan keeps paralyzing the productivity gains of Japanese corporations.

Japanese Prime Minister Fumio Kishida is pulling the fiscal lever. Image: Screengrab / ABC News

The government projects a growth rate of 1.2% between 2023–26. The projection seems far too optimistic, as the fundamental economic problems of Japan, including negative growth and distribution effects of persistent monetary and fiscal expansion, remain unresolved.

Though tax cuts may have a positive impact on consumption, persistent inflation continues to weaken growth through declining real wages. As the financing of the additional expenditures and lower tax revenues remains unclear, government debt is likely to increase further.

With about two-thirds of Kishida’s fiscal stimulus relying on debt financing, uncertainty about the future macroeconomic policy has increased. The situation could result in decreased consumption and investment.

The global monetary environment has changed. Under former prime minister Shinzo Abe, the combination of expansionary monetary and fiscal policy was sustainable, because other large central banks such as the US Federal Reserve kept interest rates low as well.

With the US Federal Reserve continuing to increase the federal funds rate along with the European Central Bank since March 2022, the Bank of Japan is caught on the wrong foot.

If the Bank of Japan were to follow the monetary policy of the US Federal Reserve, the government’s interest rate payments on the immense stock of government debt — equivalent to more than 260% of GDP — would hike.

This could lead to blocked expenditure obligations and a further decline in Kishida’s approval ratings. Large valuation losses on the Bank of Japan’s substantial holdings of government bonds could impose an additional burden on taxpayers. This explains why the Bank of Japan continues to stick to its close-to-zero yield curve targeting.

The Bank of Japan’s approach has revived carry trades, allowing investors to raise funds at low costs in Japan and invest them, for instance, in US government bonds. The US Treasury bills with a 10-year maturity yield of 4.23%, compared to the 0.77% of 10-year Japanese government bonds.

This has exerted strong depreciative pressure on the Japanese yen, which has lost 40% of its value since January 2021.

As the US Federal Reserve may keep interest rates high for longer, the depreciative pressure may persist. The continuous rise in the prices of imported goods, including raw materials, would contribute to an increase in energy and food prices.

Kishida faces a delicate situation and may be forced to choose between a Truss or an Erdogan scenario. If the Bank of Japan tightens the money supply to strengthen the yen and contain inflation while the Japanese government maintains high deficits, financial markets may lose trust in the sustainability of Japanese government finances.

Interest rates on Japanese government bonds could hike, in the same way as the United Kingdom’s interest rates hiked when former United Kingdom prime minister Liz Truss announced tax cuts without sufficient financing, coinciding with the Bank of England raising interest rates.

Japan’s yen keeps getting weaker. Image: Asia Times Files / AFP / Getty

Alternatively, if the Bank of Japan buys more government bonds, both yen depreciation and inflation would accelerate, reminiscent of Turkey under President Recep Tayyip Erdogan.

While the depreciation would benefit large export-oriented Japanese corporations, rising consumer prices would hurt major parts of the population, posing a political problem for Kishida. Facing unappealing scenarios, Kishida can only hope for a financial crisis in the United States that would force the US Federal Reserve to cut interest rates.

In this scenario, a revival of Abenomics as “Kishidanomics” could ensue, though Japan’s main economic problems – namely low growth and high inequality – would persist.

Gunther Schnabl is Professor of Economic Policy and International Economics at Leipzig University.

This article was originally published by East Asia Forum and is republished under a Creative Commons license.

Israel-Gaza: The man held with the hostages Israel mistakenly killed

By: Marcus Ching

On: December 18, 2023

In: Asia

Mr Wichian, seen here with his wife, at a temple

By Jonathan Head

South East Asia correspondent

“Am I lucky or unlucky?” Wichian Temthong pondered the question. “I guess I’m lucky, because I’m still here, still alive.”

The 37-year-old farm worker is one of 23 Thai hostages who were released by Hamas last month. Now Wichian is back in Thailand, living in a small room in an industrial suburb south of Bangkok with his wife Malai.

While he survived, three young Israeli men he met in captivity did not. They were mistakenly shot dead by Israeli soldiers.

Wichian had gone to Israel only in late September, driven like so many Thais from the poor north-east of the country to find better-paid work on Israeli farms. After nine days he was moved to an avocado orchard on the Kfar Aza kibbutz. He woke up on 7 October, his first morning there, to the sound of gunfire.

His fellow Thai workers assured him it was normal. But as the shooting got louder towards midday, they decided to lock themselves in one of the buildings. Before they could do that gunmen burst in, one holding a hand grenade. They started beating the Thais with their rifle butts.

“I crouched down like this and shouted ‘Thailand, Thailand, Thailand’, he said, showing how he pulled his arms over his head. “But they kept beating me. All I could do was keep my face down. One guy stamped on me with his feet. I crawled under the bed to hide. I tried to text my wife to say I was being taken, but they dragged me out by my leg.”

Wichian was eventually taken down into tunnels deep under Gaza, and would be kept there for 51 days. His was a lonely ordeal, because he was the only Thai, and he speaks no English, so could only communicate through drawings and hand gestures.

Conditions were grim. The hostages were fed just once a day; sometimes this was no more than a piece of bread and a dried date.

“When I was distressed they would come and talk to me, to calm me down, but I could not understand them. The only way I got by was by thinking of the faces of my children, my wife and my mother.

“When there was nothing else to do, I’d just sit against the wall and meditate. I kept thinking about the same thing over and over, which was that I had to survive.”

He remembers the other hostages who were with him in the tunnels; three young Israeli men – Yotam, Sammy and Alon – who remained in captivity after his release, only to be shot dead by nervous Israeli soldiers as they came out, waving a white cloth, last Friday.

(L-R) Alon Lulu Shamriz, Yotam Haim and Samer Talalka.

He had just seen the news, with their photographs, when we arrived to interview him.

“Every day my foreign friends and tried to support each other. We would shake hands and do fist bumps. They would cheer me up by hugging me and clapping my shoulder. But we could only communicate by using our hands.”

He found out that Yotam was a drummer, and Sammy loved riding his motorbike, and worked in a chicken farm. Wichian tried to teach them some Thai words. Wichian said two of the Israelis were in the tunnel with him from day one. The third joined them on 9 October.

He says he was treated leniently by his captors, but that in their first weeks underground two of the Israelis were sometimes beaten with electric cables.

“We were always hungry. We could only sip our water. A large bottle had to last four to five days, a smaller bottler for two days.”

He really suffered from not being able to wash. They were allowed to sleep in the day, not at night. They were always damp – nothing dried in the tunnels.

He kept himself busy by trying to clean their living area. He even helped the Hamas guards move rubble that came into the tunnel after it was struck by a bomb.

Mr Wichian, seen in these pictures with his wife and two children, says he would go back to Israel just for the chance to earn, and save, a little more

After a month the four hostages were moved to a new tunnel. “At around 7pm they brought us up. But as soon as I saw it, my heart wanted to run back down to the tunnel.

“You could see bright lights everywhere from the aerial fighting. I heard drones flying all over the place, and the sound of gunfire. We had to run for 20 minutes, trying to avoid the drones.”

Wichian says his captors encouraged him to count the days on a calendar, and even brought him a clock, because he kept asking them the time.

The end of his ordeal came suddenly. “They came pointing to me and saying ‘you, you go home, Thailand’.” He saw daylight for the first time in 51 days, and was handed over to the Red Cross and driven over the border to Egypt.

“All the time I was down there I never shed a tear. But once I came up, and saw the two other released Thais, I hugged them and cried. We had a group hug and sat down with tears filling our eyes, asking ourselves how we could have survived.

“When I got back to Thailand they gave me a new name. They called me ‘the survivor’ and ‘Mr Plenty of Fortune’.”

However, he still needs to pay back the substantial debt he incurred – around 230,000 Thai baht ($6,570; £5,180) – to cover the cost of his trip to Israel. He never had the chance to earn any money there.

So, like his wife, Wichian is taking a job in a factory. The salary is low – just 800 baht a day. They cannot save much. Their two children are living with their grandparents in their home province of Buri Ram.

Wichian sometimes has trouble sleeping, and wakes up calling for his mother. But, he says, he would go back to Israel, just for the chance to earn, and save, a little more.

Finally, some good news on interest rates

By: Bolen C

On: December 15, 2023

In: Asia

If you’re trying to build up your savings account, these are happy times. For years, you earned almost nothing on your savings, even if you parked them in certificates of deposit. Today you can get a 5.5% CD without much difficulty.

If you’re in the market to buy a house, these are definitely not happy times. With mortgage rates around 7%, monthly payments will be out of range for many potential buyers. Would-be home sellers with low-rate mortgages aren’t inclined to list, which makes houses scarcer and pushes prices higher. As a Wall Street Journal headline recently put it, “The Math for Buying a Home No Longer Works.”

If you’re a farmer or other business person who normally borrows operating money and occasionally investment money, today’s rates make you want to tear your hair out. Many farmers have scrambled to find ways to borrow less.

In the economy generally, business fixed investment is down. It hardly needs saying that a prolonged period of rates at today’s levels would be very bad for economic growth.

And worse for the federal budget. Interest costs on the federal debt have risen 39% this year from the year before and 91% from three years ago, to $659 billion. According to the Committee for a Responsible Federal Budget, those interest costs now equal 2.5% of the nation’s GDP, up from 1.6% in 2020. They’re the third largest federal expenditure category after Social Security, Medicare and defense, and in shooting distance of overtaking defense.

It would, in other words, be good in many ways and for many people, savers excepted, for interest rates to come down. Good news: The odds of them coming down are improving.

Thanks mainly to some very good inflation news, Federal Reserve policymakers have become more dovish. At their meeting on December 12 and 13, they not only left their benchmark interest rate unchanged for the fourth month in a row after 11 consecutive increases, they seem increasingly unlikely to be raising interest rates again, and they projected (projected, not promised) that they will cut rates three times next year. They didn’t indicate when they’d start cutting.

In their latest quarterly Survey of Economic Projections, the Fed policymakers forecast that their benchmark rate would be 4.6% at the end of next year, down from 5.4% at the end of 2023, with further declines to 3.9% at the end of 2025 and 2.9% at the end of 2026. In September they had forecast that the 2024 ending rate would be 5.1%.

This dovishness represents a real change from as recently as six weeks ago. At its meeting ending November 1, the Fed seemed much less certain about whether the decline in inflation was sustainable. Markets seemed to agree. The yield on the 10-year Treasury note had recently hit 5%.

Since then, inflation has continued to soften. By the most-used measures, it’s down to around 3% and by one less-used measure down near the Fed’s 2% target. Using the Fed’s preferred measure, the policymakers projected inflation would end this year running at a 2.8% rate, down from their 3.3% projection in September. They forecast it would end next year at 2.4%.

That would still be above the Fed’s target. But at the post-meeting press conference Fed Chair Jerome Powell said the Fed would not wait for 2% to begin cutting once it felt assured inflation was on a sustainable path to 2%.

In addition to the good news on inflation, the job market has cooled; while there are still more jobs than job seekers economy-wide, the gap is closing rapidly. The Fed doesn’t want a recession, but a hot labor market leaves worries about inflation heading north again.

After the Fed announced its latest decision and released the Survey of Economic Projections, the yield on the 10-year was 4.02%, down nearly 20 basis points on the day.

Much has changed on the interest-rate front in recent weeks. (DTN graphic)

Now please, farmers and other business borrowers, take this news with the normal caveats about when to tally poultry. There’s always the danger that a surprise future turnaround in inflation will force the Fed to reconsider its dovishness.

While Powell indicated policymakers think interest rates have peaked, they haven’t taken a rate increase off the table. “No one is declaring victory; that would be premature,” Powell warned at the press conference.

Still, six weeks ago there was good news (no rate increase) and bad news (inflation uncertainty) about interest rates. The news from the latest Fed meeting as well as from financial markets is just plain good.

Former longtime Wall Street Journal Asia correspondent and editor Urban Lehner is editor emeritus of DTN/The Progressive Farmer.

This article, originally published on December 14 by the latter news organization and now republished by Asia Times with permission, is © Copyright 2023 DTN/The Progressive Farmer. All rights reserved. Follow Urban Lehner on Twitter (X) @urbanize

Debt (Page 90)

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Think China has a demographic problem? Check out Taiwan

A long-term problem

Babies? No thanks

Nippon-US Steel deal sparks a knee-jerk backlash

Houthi shipping attacks threaten global economy

China will stress test Asia as rarely before in 2024

Indian man arrested after 6 years of overstaying

ICAEW: Resilient economic momentum in Malaysia and SEA, but outlook ahead remains cautious

Kishida’s stimulus too little, too late for flagging Japan

Israel-Gaza: The man held with the hostages Israel mistakenly killed

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