Debt – Page 92 – Sure A Not

Move Forward Party ready to grill govt over 2024 spend

On: December 10, 2023

PUBLISHED : 11 Dec 2023 at 04:39

The opposition Move Forward Party (MFP) is ready for a debate scheduled next month on the government’s budget bill for the 2024 fiscal year, according to its deputy leader.

Sirikanya Tansakul said the party’s working committee has outlined a number of specific topics for the debate so its MPs can prepare ahead of the House meeting.

“The MFP is educating its MPs to be prepared for the first reading of budget bill for the 2024 fiscal year,” Ms Sirikanya, who also leads the party’s economic team, said.

All MPs will be instructed on how to read and analyse the costing and timeline of the 3.48-trillion-baht bill, she said.

Ms Sirikanya said Thai governments have run budget deficits for years, yet next year’s security spending is still earmarked to increase one-third when compared to this fiscal year.

Weapons procurement will take up about 30 billion baht from the overall budget of 3.48 trillion baht, although much of that sum will be used to cover the salaries of the large number of soldiers currently in active duty, according to Ms Sirikanya.

Nevertheless, the MFP’s deputy chief said the public should be aware that public debt is not scary if loans are used to initiate or carry out key projects that are necessary for development of the country or combat climate change, for example.

She said she the MFP also supports a budget for decentralisation as it will help boost efficiency in dealing with urgent matters.

However, the names of some of the projects currently being mulled over are irrelevant to their details, she added.

She also said the sums should not be kept confidential, in an effort to ensure transparency in the state administration.

Over 80,000 sign up for debt relief scheme

By: Barkar Nash

On: December 10, 2023

In: South-East Asia

PUBLISHED : 10 Dec 2023 at 18:48

More than 82,000 people have signed up to the government’s initiative to help distressed debtors service their obligations to informal lenders since the scheme was launched nine days ago.

According to Suttipong Juljarern, permanent secretary of the Interior Ministry, as of 3pm on Saturday, 82,753 people with debts totalling 4.3 billion baht had registered for assistance.

Those who are interested in joining the programme have until Feb 29 to sign up. They can register in person at their local district office, through the ThaID mobile application or by calling the Interior Ministry’s Damrongtham Centre’s hotline at 1567.

Bangkokians topped the list of participants, with 5,349 people owing 363.8 million baht having signed up to join the scheme as of yesterday; followed by Nakhon Si Thammarat, with 3,473 owing a total of 183.6 million baht; and Songkhla, which had 3,473 participants who owed a total of 183.6 million baht.

Three provinces with fewer than 300 participants were Mae Hong Son (110 with an accumulated debt of 4.2 million baht, Ranong (169, with debts of 12.5 million baht), and Samut Songkhram (235, with debts worth 7.2 million baht).

Mr Suttipong called on all Thais who are struggling to service their household debts to sign up, so they can start putting their affairs back in order.

On the first day of the scheme’s launch, a total of 22,900 people registered, 21,001 of whom did so online, while 1,089 people walked in to their local district offices to sign up in person. In total, they owed 935.31 million baht, according to the ministry.

Prime Minister Srettha Thavisin, who said that informal debt was both the cause and consequence of many social and economic ills, is scheduled to unveil more measures to help debtors on Monday.

Anti-corruption body plans public hearing on govt’s 10k plan

By: Barkar Nash

On: December 10, 2023

In: South-East Asia

PUBLISHED : 10 Dec 2023 at 18:38

The National Anti-Corruption Commission (NACC) is planning to hold a public hearing to gauge opinions about the government’s handling of its 10,000-baht digital money handout scheme as part of the NACC’s monitoring of this controversial project.

Opinions of general members of the public and experts in relevant fields recorded during the hearing will be compiled for analysis, said Niwatchai Kasemmongkol, secretary-general of the NACC.

“Since the government recently said it would submit a loan bill to the House [to fund the scheme], the NACC is prepared to [scrutinise] what the government would do next with the loan,” he said.

Since the formation of a panel aimed at studying and monitoring the government’s implementation of the digital wallet scheme, the NACC has obtained and studied documents pertaining to the available details of the scheme and interviewed many state officials responsible for implementing the project, he said. They included personnel from the Ministry of Finance, the Revenue Department, the Comptroller General’s Department, the Public Debt Management Office and other experts.

So far, it remains unclear whether the government could actually implement the scheme as there are questions over who will provide the 500-million-baht funding and how the money will be distributed to the population, he said.

Prime Minister Srettha Thavisin admitted the government could not at this point be certain how long it would take the Council of State, the government’s legal arm, to respond to questions submitted to the council asking about a plan to borrow 500 billion baht to fund the digital handout scheme. But Mr Srettha said he was still confident the implementation of the scheme could begin in May as planned.

Deputy Prime Minister and Commerce Minister Phumtham Wechayachai earlier said a draft of the 500-billion-baht loan bill had already been submitted by Deputy Finance Minister Julapun Amornvivat to the council for inspection as well.

If the council doesn’t object to any part of the bill and sends the draft back to the government, it will then proceed with submitting the bill to the House for deliberation and passing into law, he said.

However, if the council advises the government to amend the draft on any minor points, the government do as it was told, he said.

In the event the council advises against a core part in the bill, the government will later have to discuss what should be done afterwards, he said.

Chalermchai vows to turn Democrats into ‘strong’ opposition

By: Barkar Nash

On: December 10, 2023

In: South-East Asia

PUBLISHED : 10 Dec 2023 at 16:00

Chalermchai Sri-on, the newly elected leader of the Democrat Party, has vowed to make an all-out effort to transform the party into a strong opposition.

On Sunday, the 9th leader in the 77-year history of the Democrats, Thailand’s oldest political party, posted a video on Facebook with the following message:

“I have both good news and bad news. The good news is I congratulate everyone who has been elected to the party’s executive committee. The bad news is that all of you must work hard, starting from today.

“I would like to give an assurance that this executive committee will adhere to the “ideology” and “principles” of the Democrat Party.

“The Democrat Party will never be ‘a spare part’ for any party.

“It is important for the Democrat Party to start moving immediately. I will make an all-out effort to make the Democrat Party a ‘strong’ and ‘solid’ opposition.”

The Democrat Party had failed twice in a bid to elect a new executive committee, including a new leader, due to the lack of quorum and internal rifts.

However, the party managed to overcome the hurdles in a third bid on Sunday, when Mr Chalermchai was chosen unopposed as the new party leader along with the new executive committee.

Abhisit Vejjajiva, a former party leader, was nominated by former party leader Chuan Leekpai as a candidate. But Mr Abhisit withdrew his candidacy and announced his resignation as a party member.

Watanya Bunnag, alias Madame Dear, was also nominated as a contender. The meeting was asked to waive the regulation requiring a candidate to be a party for at least five years. But Ms Wantaya failed to get enough votes to support the waiver.

Sathit Pitutecha, a former deputy leader of the party, also announced his resignation as a party member after Mr Chalermchai was elected as the new leader.

It was believed many other leading members of the party would follow suit.

Mr Chuan, a party list MP, said Mr Sathit’s resignation was unexpected. He said Mr Sathit initially said he would not attend the meeting on Sunday, reasoning that the votes had been fixed in Mr Chalermchai’s favour, but did attend after Mr Chuan asked him to.

But Mr Sathit attended the meeting only to announce his resignation, said Mr Chuan.

Mr Chuan said he was concerned about the party’s commitment – in place for 77 years – to adhere to clean politics and honesty.

“The Democrat Party has been recognised as a political institution not because it has long been in existence but because of its principles.

“Since all past leaders of the party adhered to honesty and won acceptance from the people, and the new leader has vowed to follow suit, I would like the new executive committee to watch out as there have been rumours that the Democrat Party would side with the government,” Mr Chuan said.

Mr Chuan said he was not happy when some Democrat MPs voted in support of Srettha Thavisin for prime minister in violation of a party resolution.

Asked whether he would stay with the Democrat Party despite the turbulence, Mr Chuan said: “I am not going anywhere. No matter what, I will stay put. I am indebted to the party. I have got what I have now by being with the party. The party has given me opportunities. It is where I was elected party leader after being considered a person who was good enough for the position. I am obligated to repay this debt in the last chapter of my political career.”

Marcos Jr in a delicate and dangerous three-front war

By: Bolen C

On: December 10, 2023

In: Asia

MANILA – “History has proven that they are not serious and have no sincerity when it comes to peace negotiations,” declared Philippine Vice President Sara Duterte in a spirited speech castigating the Marcos Jr administration’s plan to renew long-stalled peace negotiations with communist rebels.

“They will use this peace negotiation to betray the government and fool the people,” she said while claiming any deal with the Communist Party of the Philippines (CPP) and its National People’s Army (NPA) armed wing would be an “agreement with the devil.”

For months, former president Rodrigo Duterte and his supporters have been lambasting many of Ferdinand Marcos Jr’s key policies, including his administration’s rapid expansion of defense ties with Western allies, a break from Duterte’s often heated antagonism toward the US and EU.

Earlier this year, Duterte personally visited Beijing to discuss ways to de-escalate bilateral tensions in the South China Sea without any coordination with the Philippine government.

For the first time, however, Sara has effectively joined her father’s camp by openly criticizing a major pillar of Marcos Jr’s national security policy. As such, there is growing speculation of an impending conflict between the two powerful political dynasties ahead of 2025 midterm elections.

If that weren’t enough, Marcos Jr is now also grappling with the potential resurgence of the Islamic State to the country’s restive southern island of Mindanao.

Last week, suspected terrorists reportedly belonging to the militant Dawla Islamiyah and the Bangsamoro Islamic Freedom Fighters (BIFF) groups targeted a Catholic mass in a major public university in the city of Marawi, the site of a months-long devastating siege by IS-affiliated militants in 2017.

A Filipino soldier uses binoculars during the siege of Marawi City by Islamic State-aligned militants, July 1, 2017. Photo: Twitter

All of a sudden, Marcos Jr is confronting multiple challenges at home just as Philippine-China maritime spats in the South China Sea intensify to what some fear could be a tipping point.

Deepening crises on the home front could undermine Manila’s efforts to reorient its defense posture to focus on external security threats led by China’s assertiveness over Philippine-claimed waters and maritime features.

At the dawn of the Cold War, the Armed Forces of the Philippines was among the most formidable in the region. Trained and armed with advanced American weapons systems, and hosting the largest overseas US bases, the Southeast Asian nation was a major bulwark against the expansion of communism in Asia.

In fact, the Philippines’ own successful struggle against communist insurgencies in the 1950s served as a role model for America’s modern counter-insurgency strategy. In both the Korean and Indochina Wars, the Philippines served as a vital ally for the US, which faced a twin communist challenge from both the Soviet Union and China.

The declaration of martial law by Philippine President Ferdinand Marcos Sr, however, was both a response to as well as an accelerant of a new wave of insurgencies in the Philippines.

The notoriously corrupt and brutal Filipino dictator effectively triggered a half-a-century-long double insurgency, as both Moro Islamists as well as Maoist rebels began to mobilize across the country’s impoverished provinces.

The upshot was the complete reorientation of the AFP toward domestic security, with the Philippine Army dominating strategic decision-making as well as budgetary allocations.

To make matters worse, Marcos-era corruption began to emaciate the Philippine bureaucracy, including the country’s armed forces, which came under the control of the dictator’s favorites and cousins.

Saddled by Marcos-era debt and a deep legacy of institutional corruption, multiple Filipino presidents struggled to end insurgencies and revamp the country’s armed forces.

Throughout the second half of the 20^th century, the Philippines effectively outsourced its external security needs to the Americans under the 1951 Mutual Defense Treaty (MDT) and through the Excess Defense Articles, the Military Assistance and the Foreign Military Sales programs.

The sudden closure of American bases in the early 1990s left the Philippine military in dire straits. China’s growing maritime assertiveness, culminating in Beijing’s occupation of the Philippine-claimed Mischief Reef in the mid-1990s, served as a wake-up call for the Filipino defense establishment.

Philippine and US Marines during a surface-to-air missile simulation as part of exercise Kamandag joint exercises on October 10, 2019. Photo: Lance Cpl. Brienna Tuck / US Marine Corps

President Fidel Ramos, a top general during the Marcos dictatorship, was the first post-Cold War Filipino leader to seek to address the issue. Under his watch, the Philippines passed the 1995 AFP Modernization Act, which sought to modernize the country’s military.

The advent of the devastating 1997-98 Asian financial crisis, however, undermined those efforts. It didn’t take long, however, before domestic security issues began to dominate Philippine national security strategy.

Following the 9/11 attacks, the US enlisted the Philippines as a major non-NATO ally in its “Global War on Terror”, thus making counterterrorism a centerpiece of the alliance.

Over the next decade, the Philippine military largely focused on domestic insurgencies, both communist and Islamist. But China’s maritime assertiveness, culminating in the eventual seizure of the Philippine-claimed Scarborough Shoal in 2012, triggered another round of defense buildup in the Southeast Asian nation.

In December 2012, Philippine President Benigno Aquino III oversaw the passage of the Revised AFP Modernization Act, amending the 1995 AFP Modernization Act, which extended the AFP’s modernization for another 15 years.

During his first three years in office, the Aquino administration allocated US$648.44 million to modernizing the AFP, with the year 2013 seeing a 17% increase in defense spending.

For the 2013-2017 period, it allocated $1.73 billion for defense procurement alone. The modernization effort, spread across three five-year “horizons”, continued under the Duterte administration, which sought to allocate as much as $5.6 billion (300 billion pesos) for the acquisition of modern fighters, submarines, frigates and strategic weapons systems.

Despite acquiring modern fighter jets, frigates and missile systems, the Philippines has still fallen well short of its initial targets. Aside from bureaucratic red tape and a lack of consensus on arms acquisitions, the Covid-19 pandemic also heavily undermined the Philippine economy, which posted five quarters of recession over the 2020-2021 period.

According to Philippine Defense Secretary Gilberto Teodoro, the AFP only completed 10% of its first five-year acquisition target (Horizon 1) and about 53% of its second five-year acquisition target (Horizon 2).

The third phase (Horizon 3), from 2023 to 2028, is supposed to culminate in the acquisition of modern multirole fighter jets, radars, frigates, High Mobility Artillery Rocket Systems and a submarine fleet.

A Philippine Marine after fast-roping out of an MV-22B Osprey tiltrotor aircraft at Basa Air Field, January 22, 2016. Photo: US Marine Corps via Twitter

The Philippine legislature has allocated 45 billion pesos ($793 million) in defense spending next year, but this is unlikely to fill in the gaps. The sheer speed and scale of China’s defense build-up dwarfs all neighbors combined and the Asian superpower is expected even to surpass America’s spending in coming decades.

“[W]e have to re-strategize,” Teodoro told lawmakers earlier this year when asked about the Philippine military’s modernization program. Indeed, amid deepening and increasingly volatile maritime disputes with China, the Philippines can ill afford a resurgence of domestic security distractions.

But with insurgent threats rising, China tensions escalating and political allies turning foe in the Dutertes, Marcos Jr suddenly faces what could be characterized as a three-front war.

Follow Richard Javad Heydarian on X, formerly Twitter, at @Richeydarian

how to bring ‘slave master’ lenders to heel

By: Barkar Nash

On: December 9, 2023

In: South-East Asia

The scale of Thailand’s informal debt has captured the government’s attention, prompting it to declare the matter a national agenda issue and roll out a nationwide programme for debtors to register for help.

In the first week of registration for the scheme, more than 75,000 debtors enrolled — with their accumulated debt exceeding 3.8 billion baht owed to a diverse group of 47,000 creditors.

The government’s estimate of informal debt stands at some 50 billion baht but the problem may be bigger.

Labelling unregulated lending as “modern-day slavery”, Prime Minister Srettha Thavisin is set to unveil measures to help debtors on Tuesday. Also expected is a strategy to take on formal debt.

Deputy Finance Minister Julapun Amornvivat said the government has put together a plan to address not just informal debt, but the issue of debt across multiple sectors — from SMEs to state employees such as police and teachers — and non-bank debts like leasing.

He said the government has set an overall goal for how much debt it aims to clear, but it is still in the process of collecting the figures.

The specifics will be revealed on Tuesday by the prime minister and the details should give the public a clear understanding of how the debt relief plan will be implemented, he said.

Debt relief plans announced by the Government Savings Bank (GSB) and the Bank for Agriculture and Agricultural Cooperatives (BAAC) are only part of the mechanism, he said.

“We use normal financial tools in tackling debt, with no state budget used. Let’s wait for the details,” he said.

The debt dilemma

A source in the Pheu Thai Party said the previous governments led by the now-defunct Thai Rak Thai Party and Pheu Thai did not prioritise the debt problem and focused on job creation instead.

However, the severity of current debt problems is alarming due to various factors, including economic fallout from the Covid-19 pandemic and global economic conditions.

As a result, a committee overseeing individual debt issues, chaired by the prime minister’s chief adviser, Kittirat Na Ranong, has designated it as a national priority and decided both formal and informal debt must be addressed simultaneously to tackle the problem.

The panel’s idea involves revising laws beneficial to debtors, with the aim of providing relief and support to individuals struggling with debt.

First is removing a requirement for guarantors for those seeking loans from the Student Loan Fund (SLF) to make it easier for students to access financial support while eliminating the debt burden for guarantors in case the borrowers fail to repay.

Next is the debt owed by state officials, namely teachers and police.

The government will make sure they have at least 30% of their salary left after debt payment. Also, pay increases and splitting the monthly salary payment for civil servants into two instalments are also in the pipeline to help them better manage their finances.

Credit card debt is also a pressing concern. While it is not backed by collateral, borrowers who default on credit card payments face legal action and asset seizures. The issue including the statute of limitations will be studied further.

Even as the government is taking steps to address formal debt, that’s not the end of the problem for those who have turned to unregulated lenders. In this case, the government will focus on mediating between debtors and lenders.

“Here what’s we have in mind: if borrowers have paid more than the principal of the loan plus 15% annual interest, the debt is considered fully repaid.

“If the borrowers think they have paid much more than they owed originally and want a return, they will have to prove it. If the lenders feel they are not paid what they are owed, they must also prove their point. If they can’t prove it, the debt is considered resolved,” said the source.

Holistic approach

The source said there are three steps involved in addressing informal debt: mediating between debtors and creditors; restructuring debt; and providing financial resources for debt repayment.

In the mediation process, local administrators and police will be involved while specialists from the Finance Ministry will help with debt structuring. The GSB has soft loan programmes for informal debt and career support while the BACC has a debt relief package for farmers.

“The government is confident that more than 60% of debt will be solved with no spending from the state’s coffers. We mobilise resources and enforce the laws. The debt must be repaid, no matter what, but the interest must be fair. With job creation and the promotion of financial discipline, it should be a sustainable approach,” said the source.

Suttipong Juljarern, permanent secretary of the Interior Ministry, said the ministry’s job is to register debtors and amounts of debt and invite both parties to talk.

He said the previous administration took on informal debt but it was not fully solved due to strict requirements such as income and collateral for obtaining loans to repay informal debt.

“The Srettha government must have seen the limitation and urged state-run banks to come up with more relaxed conditions. But those who join the scheme and intentionally fail to repay will face action,” he said.

On Friday Mr Srettha, who doubles as the finance minister, outlined the government’s policy and measures to deal with informal debt as he chaired a meeting of senior officials from the Interior Ministry and police.

He admitted that tackling informal debt is a challenge especially in the mediation stage, adding the authorities might consider a “harsh approach” to step up pressure on creditors to enter the process.

“Unregulated lending is a complex problem that no single state agency can solve comprehensively. I’m urging all of you to work together — be it police, local administrators, or the Finance Ministry. Exercise your power properly to better people’s lives,” he said.

Pol Maj Gen Theeradej Thamsuthee, commander of the Metropolitan Police Bureau’s Investigation Division, said a crackdown on illegal lending is a challenge because both parties willingly entered into the agreements.

“The issue here is that borrowers can’t get access to traditional financial resources, so they turn to unregulated lending. Police are brought in after threats. But there are cases where debtors have no intention to repay and are ready to use legal threats to bargain,” he said.

Special fund mooted

Asst Prof Nada Chunsom, an academic from the School of Development Economics, NIDA, welcomed the government’s efforts in tackling informal debt but emphasised that authorities should also give help to those unable to make any payments at all.

She suggested a special fund for debtors should be considered for those who cannot get access to financial sources. Solving informal debt should not be about suspension of payments, but the focus should be on transferring unregulated debt with high interest rates into the system.

By using this approach, debtors will pay lower interest rates, allowing them to retain funds for potential investment or spending after fully repaying the debt, she said. According to her estimate, informal debt may amount to 100 billion baht. But she said the government can implement the proposed fund in a pilot phase, initially targeting debt in the range of 10-20 billion baht.

She said the method allows for checks on how it is going before implementing it more broadly to address a larger share of the informal debt. The government, she said, must also ensure borrowers have “financial literacy” to prevent them from taking on informal debt.

“And legal action must be taken against illegal lenders who charge extremely high interest rates, threaten or assault their borrowers. Lending apps should also be looked into, so the DES ministry, not only local administrators and police, should be roped in,” she said.

Some 36% of household debt is for consumption, which indicates an insufficient income. She said the government should explore ways to reduce the cost of living and so individuals’ needs to obtain loans.

China’s consumer prices fall fastest in 3 years, factory-gate deflation deepens

By: Jing Write

On: December 9, 2023

In: Asia

BEIJING: China’s consumer prices fell the fastest in three years in November while factory-gate deflation deepened, indicating rising deflationary pressures as weak domestic demand casts doubt over the economic recovery. The consumer price index (CPI) dropped 0.5 per cent both from a year earlier and compared with October, data fromContinue Reading

Loan sharks now targeted by Srettha

By: Barkar Nash

On: December 8, 2023

In: South-East Asia

PUBLISHED : 9 Dec 2023 at 04:00

The government has declared a crackdown on illegal loans and loan sharks as a national priority.

Describing these illicit lending practices as “modern-day slavery”, Prime Minister Srettha Thavisin emphasised the urgent need to eliminate such activities to restore normalcy and social order.

“Addressing illegal loans has become a national priority. This policy isn’t about the government’s or my image. It’s about alleviating people’s hardships and returning their smiles and sense of security. People must be able to live without fear,” said Mr Srettha.

The prime minister announced the policy yesterday. The government has opened avenues for affected debtors to file petitions through the Damrongtham Centre hotline at 1567 or by visiting their local district offices until Feb 29. As of yesterday, 75,199 people had signed up for the scheme, with at least 3.82 billion baht of debt needing to be settled.

Additionally, the Royal Thai Police (RTP) has set up a suppression centre for the issue on its 1599 hotline to receive complaints about loan sharks, as well as the Office of the Prime Minister’s 1111 hotline.

The complaints will be collected before they are transferred to related agencies. Police and prosecutors can arrest those in question immediately after the complaint is received, according to Mr Srettha.

The state will also provide mediation between debtors and loaners with a provision for reconciliation. A settlement written between both parties is expected after the negotiations conclude.

The agreement must follow a system set by the Interior Ministry and include the most suitable debt clearing for each debtor, including interest rate, instalments, and instalment period, said Mr Srettha.

After this, the Office of the Prime Minister will keep track of the results. More negotiations will be arranged if the parties see no success. A lawsuit will be needed if any predatory lending has been reported afterwards, said Mr. Srettha.

Interior Minister Anutin Charnvirakul warned lenders not to obstruct their debtors from registering.

Responding to reports of vandalism related to the scheme, Mr Anutin said such actions would not improve the situation but rather exacerbate the legal repercussions against those engaging in illegal lending practices.

Will property implode China’s economy? Not necessarily

By: Bolen C

On: December 8, 2023

In: Asia

Forty years of continuous growth has transformed China into one of the world’s two largest economies.

This is a remarkable achievement that has lifted hundreds of millions of people out of poverty and into the global middle class, consistently surpassing expectations and confounding those who predicted an economic bust.

That pace of growth is now slowing for several reasons. Like in many advanced economies, China’s population is getting older – a demographic transition that has been exacerbated by China’s one-child policy between 1980 and 2016.

Globally, there is post-Covid-19 resurgence of economic nationalism. Trade growth, already suffering from market saturation, is slowing as manufacturers in Europe and North America reshore, diversify their sources of supply or their governments impose trade barriers.

But there is another brake on China’s growth. Its economy has for many years depended on outsized domestic investment in real estate and infrastructure and those investments are showing sharply diminishing returns.

Local governments that rely on land sales for revenue need to service their debt and revenues are collapsing as the real estate boom falters.

Will China’s economy melt down as a result? Not necessarily – at least not in a financial crisis of the kind the West experienced in 2007–08. But it will not be easy to manage these problems, the remedies may be difficult, and the end result is likely to be much slower trend growth.

In joint research with International Monetary Fund economist Yuanchen Yang, we have estimated how much of China’s economy depends on real estate and associated infrastructure.

China hasn’t intervened in the property market as aggressively as many anticipated. Image: Twitter

In 2021, the direct and indirect impact of real estate in China’s economy was 22% of GDP, or 25% when factoring in imported content. If infrastructure such as roads, mass transit and water pipes that service residential and commercial real estate is included, the total rises to 31%.

In the years immediately before the Covid-19 pandemic, the total was even higher. The only advanced economy in recent history with a similar share of real estate plus infrastructure investment in GDP was Spain during the run-up to the Global Financial Crisis, though that peaked below the 30% level that China has now sustained for a decade.

The physical transformation of China’s cities over the past three decades has been remarkable. But looking at the cumulative building that has already taken place, it is clear that the construction growth engine cannot power China’s economy as it has in the past.

Real estate is durable. As the stock increases, the economic returns to construction decline. For example, floor area per capita of housing in China is now equal to or greater than France or the United Kingdom.

While the United States’ housing stock remained stable at 65 square meters per capita from 2011 to 2021, China’s housing stock increased from 5 square meters per capita in 1992 to almost 49 square meters per capita in 2021.

80% of that floor space is in smaller, poorer Tier 3 cities, which have not benefited nearly as much from agglomeration effects as the richer, more prosperous Tier 1 cities like Shenzhen, Beijing, Guangzhou and Shanghai, and mid-ranked Tier 2 cities. Tier 3 city populations are already in decline, prices are falling and vacancies in many regions are high.

Nationally, the ratio of real estate under construction to completed commercial real estate has been steadily increasing, suggesting a market in which developers cannot complete projects due to a lack of final buyers and funding.

Infrastructure investment has similar challenges. Projected investment in high-speed rail vastly outpaces the growth in the number of people who are using it, and recent infrastructure investment has been concentrated in Tier 3 cities.

At the same time, local government debt has climbed relentlessly from around 5% in 2006 to 30% in 2018, even by conservative estimates, and regional private banks are also exposed. The central government can always decide to bail everyone out, but doing so while maintaining the credit growth needed to fuel the economy poses challenges.

China’s local governments are straining under debt piles. Image: Twitter Screengrab

Chinese household wealth is overwhelmingly concentrated in real estate. Even without a financial crisis, the central government will be forced to adapt to wean China’s economy off its dependence on this sector.

Beijing might use its sweeping powers to restructure and reallocate economic activity as it has done effectively in the past. There are also fiscal policies that would address this problem, such as increasing transfers to bail out local governments or allowing local officials to impose property taxes – though the latter appears off the table politically into the foreseeable future.

The government can also attempt to redirect infrastructure investment into areas that are still underinvested in Tier 3 cities, including schools and hospitals. China’s authorities have been effective at meeting economic challenges during its four decades of growth, but addressing this set of problems will be daunting even for them.

Kenneth Rogoff is Thomas D Cabot Professor of Public Policy and Professor of Economics at Harvard University and a member of the CEPR Research Policy Network on International Lending and Sovereign Debt.

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

‘Loan sharks’ arrested for vandalism

By: Barkar Nash

On: December 7, 2023

In: South-East Asia

Restaurant assault will be used as a case study.

PUBLISHED: 4:00 on December 8, 2023.

CHAI NAT: According to police, members of a loan shark crew have been detained after they broke into their borrower’s restaurant in the Sankhaburi area of the Central Plains province while registering with the government.

Two offenders from the crew, identified only as Traiphob, 28, of the Nern Kham city, and Nirut, 24, were detained on Wednesday, according to a media briefing led by Pol Lt Gen Jirasan Kaewsaeng-Ek, director of Provincial Police Region 1.

They were also apprehended along with a getaway bicycle, hat, and clothing.

The two were detained, according to Pol Lt Gen Jirasan, for allegedly vandalizing the restaurant that their debtor, Piyathida ( surname withheld ), owned. Soon after the theft, they were captured.

One of the lenders who reportedly signed up for the government’s program to help people settle their debts with non-traditional lenders was Ms. Piyathida.

She had taken out a loan of 30,000 ringgit from he named Theerasak or Maew. Until she settled the bill, Mr. Theerasak charged an outrageous interest charge of 850 ringgit per day.

Following Ms. Piyathida’s registration with the state-run program, Mr. Theerasak gave the order for Mr Traiphob and Mr Nirut to vandalise her diner at around 4.30 a.m. on Wednesday.

According to Pol Lt Gen Jirasan, Mr. Theerasak was afterwards detained at his home in the Hankha district.

Pol Lt. Gen. Jirasan had previously been invited by Prime Minister Srettha Thavisin to discuss the case. The top stated that he wanted the cafe assault on Ms. Piyathida to be used as a case study in predatory financing.

According to Mr. Srettha, the Royal Thai Police has pledged to safeguard the identities of listed debt while treating alleged predatory lenders fairly during the inspection process.

As of Wednesday, 68, 651 individuals had enrolled in the program, at least 4,449 of whom were based in Bangkok.

Those who need assistance from the state can register online through ( debt ). Dopa. Come. According to Suttipong Juljarern, lasting secretary of the Interior Ministry, users can access the ThaiID mobile apps by dialing the Damrongtham Centre’s line on 1567 or by going to their neighborhood area office until Feb 29 of next year.

In other news, on Wednesday, a Bangkok debtor who had been harmed by their illegal loan shark came to see investigators at the Crime Suppression Division ( CSD ).

One of the community people claims that the defendant, Toey only, was slashed on the arm by the loan sharks two months ago. The situation is being looked into by the CSD.

Debt (Page 92)