Debt – Page 98 – Sure A Not

10k wallet policy ‘could backfire’

On: November 18, 2023

Jatuporn says loan plan faces challenges

The government could inflict severe or even fatal wounds upon itself if it pushes the controversial digital wallet scheme, says one of its fiercest critics.

The ruling Pheu Thai Party cannot be trusted to carry out the policy after reneging on promise after promise, Jatuporn Prompan, a former red-shirt leader and co-leader of Kana Lomruam Prachachon (Melting Pot Group), said during a live-stream on Facebook.

Mr Jatuporn was referring to campaign promises by Pheu Thai, particularly its initial pledge not to form a government with former coalition parties under the previous Prayut Chan-o-cha administration.

The Pheu Thai Party later ditched the Move Forward Party (MFP), its pro-democracy ally, to set up a government with Bhumjaithai, Palang Pracharath and the United Thai Nation Party, the three core parties of the previous administration.

Mr Jatuporn said the government had also revised the wallet policy amid growing criticism, including an about-face on its financing. It now wants to issue an act to allow for half a trillion baht in borrowing to pay for the scheme.

Earlier, Premier Srettha Thavisin said no loan would be procured to execute the flagship policy.

Mr Jatuporn said the proposed loan via an act might run into legal hurdles as it must be carried out within the framework of the State Fiscal and Financial Responsibility Act, which deals with limits for emergency funding.

If the loan was an urgent measure, as the government claimed, it should be obtained through an executive decree, not an act, according to Mr Jatuporn.

An executive decree authorises the government to launch a policy to tackle a crisis at hand and return the policy for parliament’s approval later.

“The government should have opted for the decree, not an act, to justify its cause. It’s just full of contradictions,” he said.

The government has reiterated the urgent need to offer the 10,000 baht handout as a stimulus measure to Thais aged 16 and older who earn less than 70,000 baht per month and have under 500,000 baht in bank deposits.

Based on these criteria, an estimated 50 million people will be eligible — down from the 56 million intended originally.

Deputy Finance Minister Julapun Amornvivat said the government needs to stimulate the economy, which is the aim of the digital wallet project.

“If we continue to allow the economy to expand by 2% per year while the government maintains a budget deficit of 600-700 billion baht annually, by 2027 the public debt will exceed 70% of GDP, above the ceiling in the fiscal discipline framework,” he said.

He said stimulating the economy so it can expand at an average level of 5% per year will help reduce the public debt-to-GDP ratio in the medium term because when GDP expands, the ratio will narrow.

“If we don’t do anything and allow the government’s public debt to exceed 70%, the country’s credit rating would be derailed,” said Mr Julapun.

However, Mr Jatuporn said some members of the Council of State — which is set to vet the bill seeking to borrow 500 billion baht to fund the scheme — might find the bill falls short of being legal.

“Failing to survive scrutiny by the Council of State, the government’s legal arm, is the least of the political injuries bound to be inflicted on the government,” he said. The more hurtful “wound” would be for the measure to attract inadequate support from coalition parties in parliament, he added.

“The underlying question here is whose fault would it be if the scheme didn’t pull through. Mr Srettha might have to face the music and become the political sacrificial lamb,” he said.

Meanwhile, Thanathorn Juangroongruangkit, head of the Progressive Movement, said the 500 billion baht earmarked for the policy would be better spent revamping public transport, public health, the environment, and the education and water reticulation systems.

Jatuporn: Wallet policy âcould inflict fatal woundsâ

By: Barkar Nash

On: November 18, 2023

In: South-East Asia

Pheu Thai has already shown it can’t be trusted to keep promises, says critic

Jatuporn: Wallet policy ‘could inflict fatal wounds’ — Jatuporn Prompan, a former red shirt leader and now a fierce critic of the Pheu Thai Party, makes a point during a television interview in August.

The government could inflict severe or even fatal wounds upon itself if it continues to push its digital wallet scheme, says one of its fiercest critics.

Mr Jatuporn was referring to campaign promises by Pheu Thai, particularly its initial pledge not to form a government with former coalition parties linked to the military from the previous Prayut Chan-o-cha administration.

Pheu Thai later ditched the Move Forward Party, its pro-democracy ally, to set up a government with Bhumjaithai, Palang Pracharath and the United Thai Nation Party, the three core parties of the previous administration.

Mr Jatuporn, 58, said the government had also revised the wallet policy amid growing criticism, including an about-face on its financing. It now wants to issue an act to allow for 500 billion baht in borrowing to pay for the programme.

Prime Minister Srettha Thavisin had said earlier that no loan would be procured to execute the flagship policy, Mr Jatuporn noted.

The former red-shirt stalwart said the proposed loan via an act might run into legal hurdles as it must be carried out within the framework of the State Fiscal and Financial Responsibility Act, which deals with limits for emergency funding.

If the loan was an urgent measure, as the government claims, it should be obtained through an executive decree, not an act, according to Mr Jatuporn.

‘Crisis’ rallying cry

An executive decree authorises the government to launch a policy to tackle a crisis at hand, and then to present the policy for parliamentary approval later.

“The government should have opted for the decree, not an act, to justify its cause. It’s just full of contradictions,” he said.

Mr Srettha and other key Pheu Thai figures have formed a united front to drive home the message that Thailand’s weak economic growth constitutes a “crisis” that can only be solved by a major stimulus programme.

Mr Srettha even posted a copy of a front-page story from the Bangkok Post on his X account to underscore his message.

Gross domestic product in Thailand has averaged 1.9% a year over the past decade, one of the worst performances in Southeast Asia. The sub-par performance will continue unless the government does something dramatic, Pheu Thai maintains.

The 10,000-baht handout will be given to an estimated 50 million Thai nationals aged 16 and older who earn less than 70,000 baht per month and have under 500,000 baht in bank deposits. It is scheduled to begin in May 2024, three months behind the original schedule.

Managing the debt ratio

He said stimulating the economy so it can expand at an average of 5% per year will help reduce the public debt-to-GDP ratio in the medium term because when GDP expands, the ratio will narrow.

“If we don’t do anything and allow the government’s public debt to exceed 70%, the country’s credit rating would be derailed,” said Mr Julapun.

However, Mr Jatuporn said some members of the Council of State — which is preparing to vet the bill seeking to borrow 500 billion baht to fund the scheme — might find the bill short of being legal.

“Failure to survive scrutiny by the Council of State, the government’s legal arm, is the least of the political injuries bound to be inflicted on the government,” he said.

The more hurtful “wound” would be for the measure to attract insufficient support from coalition parties in parliament, Mr Jatuporn added.

“The underlying question here is whose fault would it be if the scheme didn’t pull through. Mr Srettha might have to face the music and become the political sacrificial lamb,” he said.

Meanwhile, Thanathorn Juangroongruangkit, the head of the Progressive Movement, says the question people should be asking is, if the government had 500 billion baht, what would be the best way to spend it?

He said in a recent presentation that Thailand is no longer competitive enough to support high levels of economic growth. Investing in fundamental improvements to restore competitiveness would be better than just giving away “helicopter money” for a quick fix, he said.

He suggested that the money earmarked for the handout policy would be better spent revamping public transport, public health, water management, environmental protection and the education system.

จำเป็นครับ pic.twitter.com/M73YZs2qBp

— Srettha Thavisin (@Thavisin) November 16, 2023

Analysis: Move Forward takes step back

By: Barkar Nash

On: November 18, 2023

In: South-East Asia

The main opposition Move Forward Party (MFP) is struggling to live up to its name as it is mired in internal strife, which is eating away at its popularity, according to political analysts.

For a party which has secured a solid footing in politics over a relatively short time, the MFP has established itself as a visionary party of the present and the future, which defies conventional norms, challenges the status quo and is driven by a young, reformist mindset.

It has championed a high standard of morality in staunchly defending fundamental values and rights, at the forefront of which lies gender equality and non-tolerance for transgressions, including sexual harassment. However, it is this very problem that the party has addressed poorly.

The MFP has consistently been dogged by accusations of misconduct by its members. None have been more damning than the sexual harassment allegedly committed by two of its constituency MPs, and how the MFP has handled the politically explosive scandals has backfired.

It all started with juicy revelations by an anti-MFP webpage called Wannee Kao Klai Kohok Arai (What Lies Have the Move Forward Party Been Telling Today?) that the party harboured two lawmakers who made indecent advances on their female volunteer assistants during the election campaign.

The expose instantly launched serious digging into the allegations by netizens, and before long, the identities of the two male MPs were revealed — Wittiphong Thonglour of Prachin Buri and Chaiyamphawan Manpianjit of Bangkok. The party started a probe, under duress, against the two MPs and at a snail’s pace.

A growing number of supporters and admirers then began losing patience over what they thought should have been a straightforward probe, arguing the evidence against the MPs — which mostly found its way onto social media in the form of online chatroom records — was clear as day.

Already, talk had swirled about the party dragging its feet to protect its own members and not being prepared to forsake its cherished stance of not being sidetracked from its moral high ground.

Some MFP supporters spoke via social media channels to express disappointment with the slow progress of the investigation.

Increasing pressure on the party prompted it to finally release an MP-executive panel decision on Nov 1 that begged even more questions than answers.

The party declared both Mr Wuttiphong and Mr Chaiyamphawan guilty of sexual harassment. However, despite facing identical allegations, the men were treated differently.

A vote saw the axe fall on Mr Wuttiphong. But while he was kicked out of the party, Mr Chaiyamphawan survived expulsion since there were not enough votes against him, as required by the party’s constitution, to oust him.

However, he was given an ultimatum: publicly admit to the alleged sexual misconduct and apologise to his three alleged victims and the public by Nov 3, or else. He was given only one day in which to do so.

As part of the ultimatum, the party also ordered him to compensate his alleged victims and stop any form of communication that would further damage their reputation, both directly and indirectly.

In addition, Mr Chaiyamphawan was warned not to engage in any further acts of sexual harassment.

But as it turned out, it was found that although Mr Chaiyamphawan said he accepted the party’s resolution passed on Nov 1, he had presented more damaging information against the victims in a bid to absolve himself. As a result, a meeting was convened again on Nov 7 to purge Mr Chaiyamphawan.

Even though Mr Chaiyamphawan was on the receiving end of indignation unleashed against him from within and outside the party, critics noted that the MFP was being trapped in a quagmire it had set for itself.

They argued that if the party executives and MPs had applied the same yardstick in the votes on Nov 1, both men would have been expelled, leaving no room for accusations of double standards. After learning of his expulsion, Mr Wuttiphong attributed his being booted out to his lack of connections within the party.

Days later, Mr Wutthipong held a bombshell press briefing in which he revealed he had accused an assistant of a high-profile party MP, who also sits on the MFP executive board, of pocketing kickbacks from a landfill company in Prachin Buri. He insisted this expose cost him his party membership.

According to Nuttaa “Bow” Mahattana, an activist and political commentator, the MFP’s internal probe, which was decidedly instrumental in handing what amounted to a political death warrant for the two MPs, was shrouded in secrecy.

She questioned the procedure the party adopted in considering the cases against the two men, suggesting that if they failed to measure up to standards, the MFP risked being labelled as having crucified its members in a kangaroo court. This would be most unhelpful to the party, which desperately needs to repair the damage to its image.

Is Srettha on borrowed time?

Srettha: Facing criticism over loan plan

When Prime Minister Srettha Thavisin dropped a bombshell on Nov 10 about the government’s plan to borrow 500 billion baht to finance the 10,000-baht digital money handout, a chorus of criticism erupted from all corners.

Along with concerns about the massive amount of debt the scheme would create and doubts over whether the stimulus plan can do as intended, critics zeroed in on whether the loan bill would meet the criteria outlined in the law governing fiscal and financial discipline.

Section 53 of the State Fiscal and Financial Discipline Act allows the Finance Ministry to propose a law for borrowing only in an urgent case where there is a need for continued spending to resolve an economic crisis and when waiting for the regular budget process would be too slow.

While the government views the current situation as a crisis, critics do not see eye to eye with them and insist that there is no economic crisis justifying the handout.

Senator Kamnoon Sidhisamarn argued that the loan bill, which has been sent to the Council of State, the government’s legal arm, to be vetted, did not satisfy any of the criteria in Section 53.

First and foremost, the loan bill must undergo a lengthy scrutiny process in the House of Representatives and the Senate, not to mention that it might be submitted to the Constitutional Court for a ruling. If the borrowing is urgent, why not opt for an executive decree which can be issued by the cabinet?

The digital wallet policy is a one-time handout to some 50 million people who must spend it within six months, so it does not require continued spending. Next, the country is not currently facing a crisis, at least not to the extent experienced during the Covid-19 pandemic, according to the senator.

Moreover, the budget bill for the 2024 fiscal year has yet to be deliberated by parliament, and the government can incorporate the digital wallet project into it, the senator said. If the giveaway is included in the annual spending plan, it will match with the Pheu Thai Party’s clarification to the Election Commission regarding the funding source for the flagship policy.

It was reported that the government’s loan bill caused jitters among those who attended the Nov 10 meeting of the digital wallet committee chaired by Mr Srettha.

Near the end of the meeting, Pakorn Nilprapunt, secretary-general of the Office of the Council of State, was said to have expressed concerns about legal issues and possible ramifications if the policy failed to comply with the law.

It was reported that at one point, Bank of Thailand (BoT) governor Sethaput Suthiwartnarueput mentioned the National Anti-Corruption Commission’s (NACC) interest in the policy. He reportedly asked the meeting to record his remarks.

Some committee members, especially those from the coalition partners, appeared visibly anxious.

It remains to be seen how the Council of State will advise the government.

Several political observers believe even if the Council of State rules the loan bill can proceed, there is a slim chance it will be passed by parliament, no matter what the prime minister says.

Before leaving for Apec meetings in San Francisco early this week, Mr Srettha said he had complete confidence that the government’s partners would back the loan bill.

“I am confident the government has the solid support of 320 votes in parliament [to ensure passage of the loan bill],” he said.

Given that the digital wallet policy is on the NACC’s radar and triggering complaints and calls for its scrutiny, MPs from the coalition parties may have second thoughts about giving it the go-ahead, observers said.

They said that, eventually, the loan bill would end up in the Constitutional Court, and if it is found to be unlawful, the ruling Pheu Thai Party and its coalition partners could be held accountable. Even if the bill manages to sail through the House, it will hit a roadblock in the Senate.

Senator Chalermchai Fuengkhon revealed that several fellow Upper House members disagreed with the borrowing plan, and they could petition the Constitutional Court to rule on the legality of the bill. One-tenth of senators, or 25 of them, can initiate the process.

According to some observers, Mr Srettha’s fate is tied to the loan bill. As a financial law sponsored by the government, if it fails to clear the House, the premier must choose between resigning and dissolving the House.

However, they say this could prove to be an exit strategy for Mr Srettha, whose popularity rating during the first two months is lower than expected, and he may not last a full four-year term.

Stepping in to take his place would be none other than Pheu Thai leader Paetongtarn Shinawatra, who brought herself into the inner circle by attending a coalition get-together dinner on Nov 8, according to observers.

Move Forward takes step back

By: Barkar Nash

On: November 18, 2023

In: South-East Asia

The main opposition Move Forward Party (MFP) is struggling to live up to its name as it is mired in internal strife, which is eating away at its popularity, according to political analysts.

Already, talk had swirled about the party dragging its feet to protect its own members and not being prepared to forsake its cherished stance of not being sidetracked from its moral high ground.

Some MFP supporters spoke via social media channels to express disappointment with the slow progress of the investigation.

Increasing pressure on the party prompted it to finally release an MP-executive panel decision on Nov 1 that begged even more questions than answers.

The party declared both Mr Wuttiphong and Mr Chaiyamphawan guilty of sexual harassment. However, despite facing identical allegations, the men were treated differently.

As part of the ultimatum, the party also ordered him to compensate his alleged victims and stop any form of communication that would further damage their reputation, both directly and indirectly.

In addition, Mr Chaiyamphawan was warned not to engage in any further acts of sexual harassment.

Is Srettha on borrowed time?

Srettha: Facing criticism over loan plan

While the government views the current situation as a crisis, critics do not see eye to eye with them and insist that there is no economic crisis justifying the handout.

Senator Kamnoon Sidhisamarn argued that the loan bill, which has been sent to the Council of State, the government’s legal arm, to be vetted, did not satisfy any of the criteria in Section 53.

It was reported that the government’s loan bill caused jitters among those who attended the Nov 10 meeting of the digital wallet committee chaired by Mr Srettha.

It was reported that at one point, Bank of Thailand governor Sethaput Suthiwartnarueput mentioned the National Anti-Corruption Commission’s (NACC) interest in the policy. He reportedly asked the meeting to record his remarks.

Some committee members, especially those from the coalition partners, appeared visibly anxious.

It remains to be seen how the Council of State will advise the government.

Several political observers believe even if the Council of State rules the loan bill can proceed, there is a slim chance it will be passed by parliament, no matter what the prime minister says.

Before leaving for Apec meetings in San Francisco early this week, Mr Srettha said he had complete confidence that the government’s partners would back the loan bill.

“I am confident the government has the solid support of 320 votes in parliament [to ensure passage of the loan bill],” he said.

However, they say this could prove to be an exit strategy for Mr Srettha, whose popularity rating during the first two months is lower than expected, and he may not last a full four-year term.

Commentary: The G20âs approach to debt has failed

By: Jing Write

On: November 16, 2023

In: Asia

CHINA HAS A DIFFERENT UNDERSTANDING OF COMMON FRAMEWORK

It is by now clear however that China either had a very different understanding of the Common Framework’s terms or wasn’t serious when signing up to them.

Common rules, especially around comparability of treatment, are essential to being able to move forward complex debt restructuring negotiations involving a multitude of official and private sector creditors. And the longer the process takes, the more economic damage tends to befall the defaulting country (and the lower its likely ability to repay its creditors anyway).

Real discussion of how this is expected to work in practice is only occurring now, through a working group steered by the IMF, World Bank and India, the current G20 president.

It remains to be seen how the recommendations, including on comparability of treatment, will be implemented. Even then, they are non-binding, leaving country negotiations to continue on a case-by-case basis – defying the whole point of having a unified framework in the first place.

When it comes to China’s role, two key issues of consistency stand out.

First, China seems to want to pick and choose when its policy banks – which have led its Belt and Road lending – are considered official or commercial lenders. For example, in Sri Lanka, China has accepted that the China Development Bank be treated as an official lender whereas in Zambia, it has argued that the bank is a commercial creditor (and thereby likely subject to smaller losses).

A second problem is that China is highly reluctant to take a haircut on its loans, preferring to defer debt repayments instead. In doing so, China is effectively trying to treat the various debt crises it is caught up in as mere problems of illiquidity, rather than the insolvency problems that they really are.

For instance, China has deferred Laos’ scheduled debt repayments four consecutive times between 2020 and 2023 but has yet to recognise that the country is virtually insolvent. Meanwhile, the Lao government’s most recent revenue strategy has consisted of selling off state assets.

For the Common Framework to remain relevant, it must be explicit on how and what a country and its creditors need to do when it is insolvent.

Delay may blunt effect of handout

By: Barkar Nash

On: November 16, 2023

In: South-East Asia

Deputy finance minister denies scheme will be abandoned if Council of State rejects loan idea

PUBLISHED : 16 Nov 2023 at 21:07

The digital wallet handout, estimated to cost the government 500 billion baht, is two to three months behind schedule, which may result in diminishing economic stimulus effects, says Deputy Finance Minister Julapun Amornvivat.

Originally scheduled to launch in February, the plan to give 10,000 baht in digital money to some 50 million people is now expected to start in May. However, the government still requires parliamentary approval of a lending bill to borrow 500 billion baht to fund the scheme.

Mr Julapun said the Ministry of Finance has not yet drafted the bill, pending an opinion from the Council of State, the government’s legal advisory body.

He declined to say whether the government would cancel the project if the Council of State disagrees with state borrowing as a funding option. Mr Julapun said the council would probably provide an explanation rather than simply saying it agreed or disagreed with the project.

Under Section 53 of the 2018 State Fiscal and Financial Discipline Act, the government can pass a borrowing bill if there is a justification for an urgent handout to solve an economic crisis.

There is a wide disparity between economists and the government, as the latter views the current situation as a crisis, conceded Mr Julapun.

Pheu Thai Party officials have been repeating the message that in their view, a decade of GDP growth averaging less than 2% a year — one of the poorest performances in Southeast Asia — constitutes a crisis.

Mr Julapun said that borrowing 500 billion baht by issuing government bonds would not create an instant burden for the government as the loan would be taken out only after the digital money was exchanged by businesses or cashed out from a state bank. The government could create incentives for people to hold the digital money for as long as possible, said Mr Julapun.

He said the government’s stimulus measures, which include the digital wallet, a trillion-baht southern land bridge, and incentives to attract foreign direct investment, should increase gross domestic product growth. The government has set a target for average annual GDP growth of 5%, about double the current level.

In any case, Mr Julapun said he believed the ratio of public debt to GDP would either remain steady at its current level of 63% or decline.

He also denied the government plans to halt the digital wallet project if borrowing under the Loan Act is blocked by the Council of State.

“We never had any intention to end the project. We want to see the successful implementation of this initiative,” said Mr Julapun.

He said the Thai economy is in crisis and economic growth is inadequate to provide the government with sufficient income to support the country’s ageing demographics over the next 4-5 years, particularly as welfare expenses rise.

Biden-Xi in a half-hearted rapprochement

By: Bolen C

On: November 16, 2023

In: Asia

The polite way to characterize Joe Biden’s meeting with Xi Jinping is that it cleared a rather low expectations bar but failed to achieve any new heights for the globe’s most important relationship.

Yet the ways in which US President Biden and Chinese leader Xi left the summit in California’s Santa Cruz mountains, their first in a year, offers more insights than what the men discussed – or didn’t broach – in private.

Biden went to the microphones to spin his first meeting with the Chinese leader in a year as “constructive and productive” and “blunt.” Xi went to work — attending a high-stakes dinner with top CEOs who’ve recently grown skittish on investing in China.

The symbolism is clear enough. With one year to go before a bruising 2024 US election, dismal approval ratings and Moody’s Investors Services threatening a downgrade, global investors figure Biden has little left to offer Sino-US dynamics.

Besides, with geopolitical fires burning from Ukraine to Israel and Republicans at home trying to impeach him and jail his son, Hunter, few think Biden will have the bandwidth to pile on more China trade sanctions.

Indeed Biden doubling down in San Francisco on his earlier description of Xi as a “dictator” spoke to how hemmed in his options are by election-related atmospherics.

Only time will tell if the Xi-Biden meeting will “mark at least a near-term bottom in the structural decline of the US-China relationship,” observes Bill Bishop, a long-time China-watcher and author of the Sinocism newsletter.

The fact the meeting took place at all suggests a calmer period ahead for bilateral investment and trade relations. It also signaled a renewed willingness to attempt to move past the myriad fissures of the last 12 months.

Yet both sides are having to eat some disappointment. China must accept that the technology transfers from the US vital to taking the economy upmarket aren’t happening anytime soon.

Biden must accept that the 14-member Indo-Pacific Economic Framework that the US hoped would be a counterweight to China is stuck in first gear, at best. The IPEF’s gathering in San Francisco this week wrapped up with little more than a hollow communique.

Joe Biden’s Indo-Pacific Economic Framework aims to counterbalance China’s rising power and influence in Southeast Asia. Image: Facebook

For Xi, the CEO gathering was far more vital than the Biden meeting. For Wall Street and Silicon Valley, seeing the leaders of the world’s two biggest economies make nice, even just for the cameras, puts China Inc’s prospects in a different light. Just the headline that Xi and Biden restored military-to-military communications will comfort Western decision-makers.

Yet for Team Xi, the hard part has only just begun. Beijing’s policy blunders these last three years have taken a heavy toll, driving giant waves of capital out of Chinese assets. From draconian Covid-19 lockdowns to tech crackdowns to the re-emergence of state-owned enterprises as the economy’s main growth drivers, Xi’s street cred as a bold reformer is in tatters.

The charm offensive at Wednesday’s CEO dinner was an ideal chance to turn the tide. Attendees included bigwigs like Apple’s Tim Cook, BlackRock’s Larry Fink, Blackstone’s Steve Schwarzman, Broadcom’s Hock Tan, Pfizer’s Albert Bourla, Qualcomm’s Cristiano Amon, Visa’s Ryan McInerney and myriad other uber executives.

It was Xi’s moment to reassure chieftains that growth is stabilizing, Beijing is repairing the property sector, the clampdown on internet platforms is over, local government debt levels are being addressed, efforts are intensifying to champion private sector growth and Sino-US trade ties are getting back on track.

“China recorded a loss of US$11.8 billion in foreign investment in the third quarter and wants to stop the outflow,” says Dominic Chiu, analyst at Eurasia Group.

Chiu adds that for Xi the dinner with US corporate executives was a chance “to reassure stakeholders that China remains open for business.”

Odds are, Chiu says, Xi made “modest gestures on issues of concern to the US Chambers” but “it’s unlikely that anything fundamental will emerge regarding China’s views on data security or state industrial policy.”

Even more important, though, is that Xi’s inner circle “walks the walk” once back in Beijing. “Talking the talk” in San Francisco is a great start. But lowering the geopolitical temperature requires follow-through in Communist Party circles, just as any reset requires a recalibration of Biden’s policies in Washington.

Walking the walk in San Francisco. Picture: Twitter Screengrab

But for Xi, the stakes are more immediate as Wall Street debates whether his economy is “uninvestable.” The good news is that Xi and Premier Li Qiang have been working behind the scenes to stabilize a cratering property market.

In the short run, this includes additional fiscal and monetary stimulus. In the longer run, it involves creating mechanisms to help developers get weak assets off balance sheets and reduce default risks.

“China’s property crisis remains a key risk for the economy as a whole, feeding through to consumer demand and investment while pressuring local government financing vehicles and increasing asset risks within trust products,” says Justin Patrie, analyst at Fitch Ratings.

“Policy support has increased since the summer, though there remains a high degree of uncertainty as to whether it will be sufficient to begin a recovery in the property sector,” he said.

The problem for Xi is that it’s been 12 months since his government unveiled a 16-point plan to fix the property market – and with little success so far in terms of implementation or results. (The 16-point playbook preceded Li’s arrival as premier in March.)

The plan includes: offering property loans for developers with sound corporate governance; allowing local governments to set “reasonable” down-payment thresholds and mortgage rate floors in a city-specific approach to improve demand; offering fundraising options to construction companies; allowing extensions on borrowings; supporting bond issuance by quality developers; and encouraging trust companies to provide developers funding support for mergers and acquisitions, rental properties and retirement homes.

Other steps involve offering special loans for property project completions; supporting acquisitions of property projects by stronger developers from weaker rivals; devising market-based approaches including bankruptcy and debt restructuring; creating more credible credit scoring systems; increasing fundraising for acquisitions; and diversifying fundraising for rental properties by growing the market for real estate investment trusts (REITs).

In July 2023, Li, then four months into the job, pledged to “adjust and optimize” policies to ensure the healthy and stable development of the property market, urging local governments to roll out measures to stabilize things.

The bottom line, notes analyst Rosealea Yao at Gavekal Dragonomics, is that Xi and Li “have not yet abandoned the aim to reduce the economy’s reliance on property over the long term.”

As such, Beijing has been reluctant to reopen the stimulus spigot as aggressively as in the past. The mechanics of this balancing act are playing out in real-time.

The next step, Yao reckons, “is likely to be a rollback of other housing-purchase restrictions in first-tier cities.” All told, she notes, “recent policy easing is likely to be enough to stabilize property sales at a low level and put transactions on course to decline.”

Yet, Yao adds, “it’s now fairly clear that the government’s bottom lines for property policy have shifted relative to the highly restrictive stance of recent years.”

There are still things the government is unwilling or reluctant to do because it is still committed to the goal of reducing the economy’s reliance on property over the medium and long term.

The current aim of policymakers, Yao notes, is probably to simply stabilize housing sales, which have steadily deteriorated since April and are dragging on economic growth. If transactions continue to weaken, officials are likely to deploy ever more aggressive steps to put a floor under the market.

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

This problem is not going away, a challenge highlighted by China slipping back into deflation in October. Core inflation, which excludes volatile fresh food and energy, dropped 0.6% last month year on year.

Such data add to “evidence of renewed economic weakness,” Capital Economics analysts wrioe in a note to clients. HSBC economist Erin Xin adds that the price trend “reflects uncertainty around the solidity of China’s recovery.”

It’s complicated, considering mainland retail sales recovered to 7.6% year-on-year in October, says economist Carlos Casanova at Union Bancaire Privée.

Yet news this week that Chinese home prices in October plunged the most in eight years can’t be ignored. They point to a worsening property slump that could negatively affect both inflation and retail sales.

The National Bureau of Statistics reports that new-home prices, excluding state-subsidized housing, in 70 cities fell 0.38% month on month. That was the biggest drop since early 2015.

“Property remains the biggest drag amid the rising credit risk among developers,” says Larry Hu, economist at Macquarie Group Ltd.

Such data also suggests that recent stimulus measures aimed at major cities around the nation over the last three months haven’t put a floor under a vital sector dragging on Beijing’s economic recovery hopes. Amid such uncertainty, there’s great value for Xi in putting the US relations on a firmer ground to reduce the risk of additional trade sanctions.

Some observers argue that concerns in senior Politburo ranks in Beijing are prodding Xi to do his part to ease tensions. Along with the weakest economy in 30 years, Xi is fending off “the impression among at least part of the Chinese elites that the most important diplomatic relation for China… is being mismanaged,” says Alicia Garcia Herrero, an economist at Natixis CIB.

Just about the only thing on which Biden’s Democrats and Republicans loyal to former president Donald Trump agree on is being tough on China. Xi may thus be hoping to equalize the Sino-US trade issue ahead of November 2024.

As economist Diana Choyleva at Enodo Economics adds: “Earlier in the year Xi was effectively blanking the US, convinced that any talks would gain nothing and only benefit the US.”

US President Joe Biden and Chinese President Xi Jinping meet at Filoli estate, a historical site in San Francisco, on November 15, 2023. Photo: screengrab, RTHK

However, Choyleva notes, “It appears that a combination of an under-performing economy, the impact of US technology restrictions — which have undoubtedly slowed China’s technological progress, even if they have not been as successful as the administration had wished — and growing diplomatic isolation has persuaded him of the need for a tactical pause.’’

Biden may be eyeing his own tactical pause. Slowing growth, the US national debt topping US$33 trillion and the specter of losing Washington’s last AAA credit rating mean the US needs all the foreign investment it can get. And with $860 billion worth of US Treasury securities, Beijing isn’t without leverage points versus Washington.

While hardly a game-changer, events in San Francisco may offer both Biden and Xi face-saving ways to tamp down global headwinds and signal their economies are back in business. That’s particularly true of Xi’s team, which just made a timely sales pitch to the biggest of the globe’s big money.

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

Govt to reveal new debt relief package

By: Barkar Nash

On: November 15, 2023

In: South-East Asia

Students, teachers, SMEs to get help

PUBLISHED : 16 Nov 2023 at 06:32

The government will announce a new debt relief package for several groups, including former students repaying their student loans, teachers and small- and medium-scale business owners, Prime Minister Srettha Thavisin said on Wednesday.

The package, also to be made available to those paying off loans to non-bank creditors, may come towards the end of this month, he said.

On Tuesday, new guidelines were drafted by the government committee set up to solve debt problems.

They are aimed at helping former students struggling to repay their loans to cope better with their debt repayments.

The guidelines were also expanded to cover major debt problems faced by many other groups, which will be addressed in the new debt relief package to be announced soon, said the premier.

Lawaron Saengsanit, permanent secretary for finance and also chairman of the Student Loan Fund (SLF) board, said a new regulation has been introduced allowing the SLF to adjust the criteria for calculating loan repayments, which will reduce the overall debt amount.

Under the new rule, student repayments would initially go towards deducting the principal sum first. Only in the later periods would the repayments be used for the deduction of interest and any late repayment fee.

This represents a reversal in the order of deductions from the previous repayment criteria. The new order will translate into significantly smaller repayment amounts, according to Mr Lawaron.

The new rule takes effect immediately and the 3.5 million student loan borrowers stand to benefit from it. Their loan repayments are in the process of being revised.

With the new SLF repayment calculation, some long-term borrowers may also have found they are already over-repaying their loans and can claim back the surplus amounts, according to Kittirat Na Ranong, chief adviser to the PM.

Those who have paid more than they should can get their money back, thanks to a new rule which came into effect on March 20, said Mr Kittirat, a former finance minister.

The new calculation method will also rescue some SLF debtors facing foreclosure as their loan amounts will be substantially cut. Around 46,000 of them may avoid the seizure and repossession of assets.

Xi and Biden at summit speak of conflict avoidance

By: Bolen C

On: November 15, 2023

In: Asia

State leaders of China and the United States met on the sidelines of the Asia-Pacific Economic Cooperation (APEC) leaders’ meeting on Wednesday to discuss trade, Taiwan and other geopolitical issues.

Chinese President Xi Jinping and US President Joe Biden had a face-to-face meeting at Filoli estate, a historical site in San Francisco. The two had not met each other since they had a talk in Bali, Indonesia a year earlier.

“Sino-US relations have not always been smooth, but the two countries still have to deal with each other,” Xi said in his opening speech at the meeting. “Confrontation is not a practical move. The earth can accommodate both China and the US.”

“Although the two countries have different development paths, as long as they adhere to mutual respect, peaceful coexistence and win-win cooperation, they can transcend their differences and find a way for the two countries to get along with each other,” he said. “The future of China and the US is bright.”

Biden said both China and the US should make sure that their competition will not lead to conflicts. He said both countries can work together in artificial intelligence and climate change issues.

Before the two leaders’ meeting, China and the US said in a joint statement that they recall, reaffirm, and commit to further the effective and sustained implementation of the April 2021 US-China Joint Statement Addressing the Climate Crisis and the November 2021 US-China Joint Glasgow Declaration on Enhancing Climate Action in the 2020s.

They said they decided to operationalize the Working Group on Enhancing Climate Action in the 2020s, to engage in dialogue and cooperation to accelerate concrete climate actions.

Win-win situation

On Tuesday and Wednesday, China’s state media published a series of articles, saying that the Xi-Biden meeting would help significantly improve Sino-US relations.

“We hope that the positive stance shown by the US in its recent interactions with China is not political calculation and tactic, and that the verbal commitments it has made will become concrete policies and substantive actions,” Xinhua said in a commentary on Wednesday.

“We also hope that the US will not be fettered by domestic party disputes and the selfish interests of politicians, and will work together with China to make long-term efforts to accumulate good news and momentum in China-US relations and promote the real stabilization and improvement of bilateral relations,” it said.

It said the general trend of the world is peace, development, cooperation and win-win situation, and that no country or group of countries can dominate world affairs alone.

Xinhua also said cooperation, not competition, should dominate the perception of Sino-US relations. It said if both sides define their entire relationship with competition, antagonism will continue to increase while the two nations will face a risk of slipping into the abyss of a “New Cold War.”

It said China and the US can boost bilateral trade, work together in the carbon neutrality and medical sectors and encourage mutual investment. It said China’s middle-class population will provide growth potential for American farmers.

Besides, the China Central TV said in an article that Xi had paid a lot of effort to encourage informal exchange between Chinese and US people over the past three decades. His effort included an invitation of the wife of late American physicist Milton Gardner to visit Fuzhou, where the scientist spent 10 happy years of his childhood, in 1992.

“We’re not trying to decouple from China. What we’re trying to do is change the relationship for the better,” Biden told reporters at the White House on Tuesday.

He said the US was wary of investing in China due to Beijing’s business practices, which require foreign investors to turn over their trade secrets.

He said that, by meeting with Xi, he wanted to get back on a “normal course of correspondence,” such as being able to have emergency phone calls or military talks whenever there is a crisis.

China’s ‘real problems’

In early 2023, political tensions between China and the US were heightened by the Chinese spy balloon incident, Taiwan matters and Washington’s chip exports ban against China. The two sides could only resume dialogues in May.

Xi’s US trip happened against a backdrop of China seeing a decline in its foreign direct investment (FDI) and exports this year. The Chinese economy is also facing deflationary risks.

On Tuesday, Biden said at a fundraiser in San Francisco that China has “real problems.”

“President Xi is another example of how re-establishing American leadership in the world is taking hold. They’ve got real problems,” he said, without further elaboration.

“Nations that have no problems do not exist in this world,” Mao Ning, a spokesperson of the Chinese Foreign Ministry, said in a regular media briefing on Wednesday in what may have been a retort to Biden’s remark. “China is confident that it can achieve better development and achieve brighter prospects,” she said. “It is hoped that the US can also seriously solve its own problems and bring better life to the American people.”

Prior to this, Biden said on August 10 that China’s economic situation was a ticking time bomb. He said China was in trouble as it had a slowing growth and high youth unemployment rate.

China’s FDI fell 14.7% year-on-year to about US$132.9 billion in the first nine months of this year. The figure is an estimation calculated by Asia Times with the FDI in renminbi terms.

In January-October, China’s exports fell 5.6% to US$2.79 trillion from the same period of last year. The country’s imports dropped 6.5% to US$2.11 trillion.

People also reduced spending due to falling or unstable income. In October, China’s consumer price index (CPI) fell 0.2% year-on-year, according to the National Bureau of Statistics (NBS). It was the second contraction in prices since the last one in July.

NBS officials said falling consumer prices were a result of rising food supply and weaker demand after long holidays.

The Chinese economy has been hit by a property and local government debt crisis over the past two years. Many property developers were struggling to sell their apartments, return loans and finish their construction work.

The central government is going to issue 1 trillion yuan of sovereign bonds but the sum is only enough for local governments to pay the interest on their outstanding debt.

According to China’s Ministry of Finance, the outstanding amount of local government debt grew 15.1% to 35.06 trillion yuan at the end of last year from 30.47 trillion yuan a year earlier.

Read: End to decoupling tops China’s pre-summit demands

Follow Jeff Pao on Twitter at @jeffpao3

‘Economy crying for stimulus’

By: Barkar Nash

On: November 15, 2023

In: South-East Asia

Digital baht handout plan seen as saviour

The government insists the economy is in a crisis and requires a stimulus package to prevent the situation from deteriorating and a recovery harder to mount.

Such sentiments emerged amid a growing debate on the state of the economy, with some questioning whether it is genuinely in crisis and in need of the government’s proposed 10,000-baht handout scheme, which would entail a loan of 500 billion baht.

Prommin Lertsuriyadet, secretary to the Prime Minister, told the Bangkok Post that several indicators show economic growth is slower than other countries in the region and household debt is rising, firmly putting the nation in the grip of a crisis.

Without intervention to stimulate the economy, the situation will go downhill rapidly, he said.

Dr Prommin said the government sees “every single individual as an economic engine to create growth” and the 10,000-baht digital money handout scheme, backed by blockchain technology, is deemed the most effective way to restart the economy.

He added the policy was announced in parliament and the government has an obligation to implement it.

Surapong Suebwonglee, a member of the national committee on soft power development, wrote on Facebook on Tuesday to justify the implementation of the digital currency giveaway and counter objections by a group of 99 academics including former governors of the Bank of Thailand.

He cited the small GDP growth, slower money supply growth that has affected liquidity, and ballooning household debt and GDP growth projected by freelance economist Chartchai Parasuk as causes for concern.

In a post that likened the country’s economy to a bleeding patient, Dr Surapong said this year’s GDP growth was likely to be below 2%, or lower than previous forecasts.

Last year, the Finance Ministry’s Fiscal Policy Office projected GDP growth this year would reach 3.85% before later revising the figure down to 2.7%. The Bank of Thailand has predicted 2.8% growth.

However, with GDP growth in the first and second quarters at 2.6% and 1.8%, respectively, it is unlikely the overall growth for 2023 would reach 2.8%, Dr Surapong said.

He cited comments by Mr Chartchai, who predicted growth in the third semester of 1.4% or 1.8% for the year as a whole.

Dr Surapong said GDP growth corresponds to money supply growth. In the third quarter, the latter grew 1.8%, compared to 3.3% and 2.0% in the first and second quarters.

Additionally, in the first three weeks of October, there was a capital outflow of 7.73 billion baht, which raised concern as to whether overall GDP growth would meet the forecast of 2.8%.

Dr Surapong said Thailand started facing liquidity problems in the middle of this year, prompting banks to withhold new lending. In July, excess liquidity was negative 858 billion baht and this hit 1 trillion baht in August.

“This was due to the large capital outflows and the withholding lending, which has led to a third concern,” he said.

He said 7.4% of household debts have been registered as non-performing loans since the second quarter.

Debt (Page 98)

Is Srettha on borrowed time?

Is Srettha on borrowed time?

CHINA HAS A DIFFERENT UNDERSTANDING OF COMMON FRAMEWORK

Win-win situation

China’s ‘real problems’