Cabinet to review wage hike

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Govt urged to respect committee’s decision

Cabinet to review wage hike
A worker is on duty in Din Daeng district. (Bangkok Post file photo)

The cabinet is expected to order a review of new daily minimum wage rates on Tuesday, while business organisations are urging the government to respect the decision on wage increases made by a tripartite wage committee.

Labour Minister Phiphat Ratchakitprakarn said on Monday he has no authority to review the rates approved by the committee and will ask the cabinet to consider ordering the review.

“As the labour minister, I oversee the tripartite committee, but I cannot interfere with its decision. The only way is to submit the matter to the cabinet, so it will order the review,” he said.

However, he said there would be nothing the government could do if the committee stood by its decision. “The new rates were unanimously agreed upon by representatives of the employees, employers and the state in the committee,” he said.

The committee approved the new rates last Friday.

Mr Phiphat said a review is typically based on the rate of economic growth, inflation, and the cost of living over the past five years. He noted that the economic disruption of the Covid-19 years — 2020 and 2021 — should not be used to calculate the new wage rates.

Prime Minister Srettha Thavisin on Saturday said he would seek a revision of the committee’s decision to raise the daily minimum wage rate by between 2 and 16 baht across the country, saying he couldn’t agree with such low hikes.

Mr Srettha said he would seek talks with the committee, which is comprised of officials from the Ministry of Labour, employers and employees, in the coming weeks.

He said if the committee’s decision to raise wages by only 2-16 baht is submitted to the cabinet for endorsement, he will reject it and call for a more suitable raise.

“Should we really have to leave the minimum wages for Thai workers this ridiculously low, while Singapore, for one, offers a minimum wage of 1,000 baht a day?” he asked.

Hassadin Suwatthanapongchet, secretary-general of the Federation of Thai Industries’ Northeastern Chapter, on Monday said Mr Srettha should respect the committee’s decision on the new wage rates to ensure fairness to both employees and employers.

A sharp increase in the daily minimum wage could hurt the economy, which is still making a slow recovery, he said.

Veerasu Kaewboonpun, an employee’s representative on the committee, said the new wage rates were a compromise acceptable to all sides on the committee as employers can also afford to pay them while the new rates also offer employees enough money to live on.

The daily minimum wage for Thai workers nationwide is set to rise from Jan 1, 2024, and the new rates will vary from province to province, ranging from 330 to 370 baht, according to the committee. The current rates are between 328 and 354 baht. The increases in the daily minimum wage will range from 2 to 16 baht, or an average of 2.4%.

However, the new daily wage falls short of the 400 baht per day minimum wage that the Pheu Thai Party promised during its election campaign earlier this year. Pheu Thai’s plan for a big wage hike rattled businesses that feared it would push up operating costs and make the country less competitive for investors when the economy is underperforming.

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Chalermchai undecided on Democrat leadership bid

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Strong support from MPs could make him the front-runner if he enters Sunday’s contest

PUBLISHED : 8 Dec 2023 at 19:54

Chalermchai undecided on Democrat leadership bid
Chalermchai Sri-on (right), the acting secretary-general of the Democrat Party, joins then-acting leader Jurin Laksanawisit at a party assembly in July, when an attempt to stage a leadership vote collapsed. (Photo: Varuth Hirunyatheb)

Chalermchai Sri-on says he has yet to decide whether to seek the leadership of the Democrat Party on Sunday, despite indications that his strong support among party MPs makes him a front-runner.

The acting secretary-general of the party was responding to reports that a faction of MPs, led by Dech-it Khaothong of Songkhla, would support Mr Chalermchai to become the new party leader instead of over acting deputy leader Narapat Kaewthong, as they believed Mr Chalermchai could help unify the party.

Mr Chalermchai said he would have to hold talks with these MPs because taking the helm is a big challenge. He added he had never expressed any ambitions for any post.

The Democrat Party is his home, he said, and he wants it to develop and prosper without any disruption.

“Let me talk to them first. Some party issues can’t be discussed in public,” he said.

Mr Narapat and Watanya “Madam Dear” Bunnag, chairwoman of the party’s political innovation committee, have announced their bids to run for party leadership on Sunday.

Ms Watanya on Friday confirmed her decision to vie for the top job even though some 21 MPs are said to support Mr Chalermchai. She said she offered an opportunity for the party to grow.

Asked if she would remain with the party if she lost the race, she said it depended on whether the party’s direction changes dramatically from the day she became a member.

“I’ll have to assess it first. If I don’t belong in the organisation, I will take this into consideration,” she said.

The Democrat Party has been without a leader since Jurin Laksanawisit stepped down in a show of responsibility following the party’s poor performance in the May 14 general election.

An internal disagreement over who should take the helm forced two meetings to elect a new leader to collapse due to a lack of quorum.

Under the party rules governing the leadership contest, an MP’s vote carries more weight than that of an ordinary party member, at a ratio of around 70 to 30. Thus, a candidate with strong MP support is more likely to secure a victory without any problems.

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How do you transport two giant pandas?

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Edinburgh Zoo's giant panda Tian TianMedia PA
authored by Morag Kinniburgh
Scottish BBC News

The two enormous pandas at Edinburgh Wild will eventually get sent back to China, and procedures have been ongoing for years.

The first 10-year borrowing was extended by two decades, but the 20-year-old pandas, who have grown to be a popular tourist attraction, are currently traveling to Sichuan province.

Darren McGarry, mind of living collections at the Royal Zoological Society of Scotland ( RZSS), which manages the park, says,” There’s a whole lot of transportation that have to arise.”

Darren McGarry

To send the pandas to Chengdu’s China Wildlife Conservation Association base properly, it has taken a long time to make intricate plans.

According to Mr. McGarry, the UK and Chinese governments have agreed to place the couple in quarantine for a number of weeks in order to abide by pet health laws.

The pandas undergo routine vet exams, such as blood and feces sampling, to make sure they are healthy and do n’t bring any diseases into China.

Rab Clark, the zoo's blacksmith, has built two bespoke metal crates

They have been adjusting to their new cartons, which Rab Clark, the smith at the zoo, built for their trip to China.

In order for the keepers to keep an eye on them during the journey, he built two custom metal crates with sliding padlock doors, semen trays, and retractable screens.

According to Mr. Clark,” The keepers let me know what they’re looking for and what’s needed so that we can work together to determine what is best for the dog.”

The crates measure 190 cm long, 146 cm high, and 127 cm wide, or about 6 feet by 5 feet and 4 feet.

There is really quite a bit of space for them within, it’s not tight, despite the fact that they appear to be small, Mr. Clark says.

” I believe they’ll be alright. They’ll travel safely, I have no doubt.

Workers unload travel crates containing giant panda Yang Guang (sunshine) from a plane at the airport in Edinburgh on December 4, 2011

AFP

To transport the penguins from the park to Edinburgh Airport, a low-loader carrier has been hired.

It is not your usual delivery, though.

According to Mr. McGarry, the conversation about finding a vehicle to put two enormous pandas in was intriguing.

Early on Monday morning, the carrier may depart from Edinburgh Zoo.

To lessen the possibility of disturbance from crowds of well-wishers or opposition groups, the precise time was kept a secret.

Many people are relieved that the penguins will no longer be kept in captivity in Scotland because they believe the aquarium should never have taken them.

You may picture them in China’s forests, where they belong, but not in an Edinburgh park, according to Bob Elliot of the animal welfare organization One Kind.

” Then that their time has come, park choices are so antiquated, and we really need to be thinking about ways to save animals in the wild rather than just zaos.”

A plane, bearing a picture of a giant panda and carrying Tian Tian (sweetie) (bottom) and Yang Guang (sunshine), two giant panda

AFP

The trip to Sichuan will take place on a China Southern aircraft that has been specially chartered.

With the majority of the seats removed, it is a common customer plane.

At have 12 by the end constructing of Edinburgh Airport, a forklift will be used to load the panda crates.

The sole four passenger seats behind the captain and co-pilot may be occupied by a RZSS guard and vet, an airport established from China, and another person.

The humans on board will need to heat their own meals in the on-board microwave because there wo n’t be a cabin crew, but the pandas will have health checks, food, and water throughout the flight.

There will be a dispatch that none of us will see on the airplane halfway between Edinburgh and China, according to Mr. McGarry. ”

Michael Livingstone

The pandas will then be under the control of the Chinese after RZSS guard Michael Livingstone hands over the keys to the box to them.

The pandas, according to Mr. Livingstone, are typically a little sluggish and like to stay in the morning, so he has been steadily advancing their wake-up time to getting them used to earlier starts.

He claims that getting them into their crates, which will be wheeled to the van and driven down Zoo Hill before being lifted one by one onto the transporter, wo n’t be difficult.

They will be loaded onto the aircraft, secured in place with the pack wheels removed, Mr. Livingstone says after traditions and other conventional checks at the airport.

We’ll be able to serve them new bamboo that has just been cut on the plane and keep an eye on them.

Pandas - Stephanie Mota RZSS veterinary surgeon (going on flight to China)

Stephanie Mota, a veterinarian for RZSS, will also be on table.

She says,” I’m never expecting to have major problems during the journey.” ”

My strategy is to provide Yang Guang with a lot of bamboo throughout the trip because they are both in good health.

Of course, I’ll keep a close eye on them and make sure they have one of their favorite guards with them so they can be content.

They are harmful animals, so Ms. Mota will test their breathe, appetite, and feces all without touching them.

She claims that performing tasks with a giant dragon usually necessitates general anesthesia, which we are unable to perform while flying.

They have training, but they probably wo n’t perform at their best.

We anticipate that they wo n’t respond normally because the environment is different.

Tian Tian, one of the giant pandas at Edinburgh Zoo

Media PA

The pandas travel for 12 to 13 hours to Chengdu, a state in Sichuan, where they are once more quarantined before being moved to another tiger center.

Next year, RZSS employees intend to go see the two enormous penguins it to check on them.

It’s weird, and I feel unusual. ” Mr. McGarry remarks.

We try not to find attached, but we must take care of them in order to become physically attached.” I’ve always known they were leaving.

It’s a challenging time.

” I’m thrilled because I’ll return the following year for a follow-up to make sure they’re okay.

” I have no doubt they will be. They are the federal wealth of China.

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PBOC’s Pan telling hard, uncomfortable truths

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At a moment of peak uncertainty about the direction of China’s economy, People’s Bank of China (PBOC) Governor Pan Gongsheng is surprising many by speaking in unusually direct terms.

Some of the ambiguity of the “Xi Jinping thought” era is a government big on soaring reform rhetoric and fuzzy on nuts-and-bolts specifics. It’s here where Pan’s burst of economic realpolitik is both refreshing and telling.

The bottom-line message: kindly give China some space and tolerance to pull off modern history’s greatest effort to transition away from property and infrastructure to new drivers of economic growth. Oh, and that period of 8-10% annual growth? It’s not coming back.

“The traditional model of relying heavily on infrastructure and real estate might generate higher growth, but it would also delay structural adjustment and undermine growth sustainability,” Pan told bankers in Hong Kong on Tuesday (November 28).

He added that “the ongoing economic transformation will be a long and difficult journey. But it’s a journey we must take.”

Pan went on to say that “China’s real estate sector is searching for a new equilibrium” to achieve “healthy and sustainable growth” of the “high-quality” variety.

Nor did Pan shy from discussing the biggest potential cracks in China’s financial system. He admitted, for example, that financially fragile regions in the west and north of the country may have “difficulties servicing local government debts.” Expect more defaults, in other words.

Such off-script admissions of turbulence to come are relatively rare in official Communist Party circles. Normally, the top-down impulse in the Xi era has been to project an image of economic omniscience and omnipotence. As such, Pan’s foray into straight talk is useful, intriguing and timely.

On Thursday, China’s National Bureau of Statistics released fresh signs that the manufacturing and services sectors shrank in November, fanning expectations for increased state support as the economy faces intensifying headwinds.

The manufacturing purchasing managers index dropped to 49.4 while non-manufacturing activity slid to weaker than expected 50.2.

Manufacturing data is down in a slowing Chinese economy. Photo: Asia Times Files / Imaginechina via AFP / Liang Xiaopeng

Granted, central bankers as a profession tend to speak in vague and non-committal ways. Obfuscation, in other words, is a monetary policymaker’s tool — their modus operandi — to keep all options open at all times.

A top practitioner of the discipline was Alan Greenspan, who chaired the US Federal Reserve from 1987 to 2006. As he once joked to a business forum: “If I’ve made myself too clear, you must have misunderstood me.”

Yet Pan is hardly playing rhetorical games as he telegraphs a long, bumpy road ahead. Naturally, this had PBOC watchers wondering if a new, more activist monetary strategy might be in store in Beijing.

Including, perhaps, a pivot toward quantitative easing (QE) with Chinese characteristics. Though the PBOC hasn’t officially gone the QE route, the central bank spent the last few months — Pan took the helm in July — expanding its balance sheet with aggressive lending to banks.

The PBOC’s total assets jumped 8.6% year on year in October to 43.3 trillion yuan (US$6.1 trillion), the biggest increase since at least 2014. Again, neither Pan nor his staff are talking explicitly about QE. And notable PBOC leaders of the past threw cold water on the prospects for Chinese QE.

In 2010, Zhou Xiaochuan, governor from 2002 to 2018, cautioned that QE policies, particularly in the US, were causing havoc globally.

In September 2021, Pan’s immediate predecessor, Yi Gang, warned that runaway, Japan-like asset purchases “would damage market functions, monetize fiscal deficits, harm central banks’ reputation, blur the boundary of monetary policy and create moral hazard.”

At the time, Yi said that “China will extend the time for implementing normal monetary policy as much as possible and there is no need for asset purchases.”

Yet the need for big asset purchases has gone full circle as China’s post-Covid rebound disappoints. China’s worsening property crisis is pushing the PBOC toward more assertive strategies to boost liquidity.

Some of this has been to absorb a boom in government bond issuance to add fiscal jolts to an ailing economy and to support green sector pursuits.

In a report earlier this week, the PBOC said it’s working to “unblock the monetary policy transmission mechanism, enhance the stability of financial support for the real economy, promote a virtuous economic and financial cycle, and keep prices reasonably stable.”

This has the PBOC mulling a strategy of providing upwards of 1 trillion yuan ($141 billion) in cheap financing for construction projects. Under Beijing’s Pledged Supplementary Lending (PSL) program, the PBOC will channel low-cost long-term liquidity to policy banks to boost lending to the infrastructure and housing sectors.

This plan is at least nominally QE-adjacent. Though more targeted than the QE employed by the Bank of Japan, which pioneered the technique in 2000 and 2001, and the Fed, the PBOC’s plan would make large-scale bond purchases behind the scenes aimed at depressing yields.

Economists can’t help but connect the dots and label this expansion of the PBOC’s balance sheet as “Chinese-style” QE.

Analysts are looking for signs of quantitative easing with Chinese characteristics. Photo: Facebook

“Beijing might have finally recognized the need to introduce quantitative easing or money printing for the collapsing property sector,” notes Nomura economist Ting Lu. “We believe Beijing will eventually need to reach into its own pockets, with printed money from the PBOC – such as PSL – to fill up the vast funding gap and secure the delivery of pre-sold homes.”

Economists at Goldman Sachs said in a recent note to clients “we think additional broad-based monetary policy easing is still needed to facilitate the large amount of government bond issuance and improve sentiment towards growth.”

It’s a controversial step, one that divides economists.

In an August note to clients, Robert Carnell, economist at ING Bank, warned that “QE would put the Chinese yuan under further weakening pressure, which it is very clear the PBOC does not want and would make it much harder for them to manage the yuan. It would also raise the risks of capital outflows, which they will also be keen to avoid.”

Count Carnell among economists who think the answer to China’s troubles lies with Xi’s reform team, not earlier PBOC policies. “As for government stimulus policies, these, we think, will tend to be along the lines of the many supply-side enhancing measures that we have already seen.”

Carnell adds that “the way through a debt overhang is not to print more debt, though it may be to swap it out for lower-rate central government debt, or longer maturity debt to ease debt service.

“Enhancing the efficiency of the private sector will also play a key role, though this and all the supply-side measures will take a considerable time to play out. The tiresome chorus clamoring for more stimulus is unlikely to stop in the meantime.”

This week, Xi made a rare visit to Shanghai just as his team unveiled a 25-point plan to reinvigorate private sector innovation and productivity.

Others argue that the end justifies the means. “Some traditionalists would argue that central banks should not engage in asset allocation, except through the interest-rate channel,” said Andrew Sheng at the University of Hong Kong.

“But QE has already proven to be a powerful resource-allocation tool capable of transforming national balance sheets. An innovative, well-planned QE program … could support China’s efforts to tackle some of the biggest challenges it faces,” he adds.

Like central banks in high-income countries after the 2008 financial crisis, “the PBOC could still avail itself of quantitative easing, with large-scale purchases of government bonds giving commercial banks more liquidity for lending,” notes Shang-Jin Wei, a former Asian Development Bank (ADB) economist.

Wei adds that “if the goal is to achieve higher inflation – as is the case in China today – there is no mechanical limit on the additional stimulus that can be applied to the economy through this channel.”

Wei channels Mario Draghi when he argues “China needs the ‘whatever it takes’ approach that the European Central Bank pursued a decade ago when it, too, was facing a debt-deflation spiral. The PBOC should publicly declare a strategy to monetize a big portion of government debt and to incentivize more private equity investment.”

Pan hasn’t done that, of course. And it’s debatable that he will. But as China grapples with an unprecedented property crisis, it will fall to the PBOC to grease the skids via liquidity as local governments dispose of bad debts.

The enterprise will echo the role the BOJ played in the early 2000s to facilitate the discarding of toxic loans undermining what was then Asia’s biggest economy.

Resolving local government debt troubles, made worse by an explosion of local government financing vehicles (LGFVs), is vital to stabilizing China’s $61 trillion financial sector while China Inc is already grappling with cratering real estate markets.

The idea, argues state-run Xinhua News, is to “optimize the debt structure of central and local governments” to improve the quality of national growth.

PBOC Governor Pan has markets dissecting his every move on rates. Image: BBC Screengrab

As China embarks on what Pan calls a “long and difficult journey” of disruption, the PBOC is on the frontlines. “Looking ahead,” Pan said, “China’s economy will remain resilient. I’m confident China will enjoy healthy and sustainable growth in 2024 and beyond.”

Yet as Pan just explained with unusual frankness, “China is experiencing a transition in its economic model” driven by a belief that “high-quality, sustainable growth is far more important” than rapid expansion.

Doing whatever it takes to get there may have China pivoting in ways most never expected – and in ways almost certain to unnerve global markets.

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

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Taiwan still flashing red despite US-China ‘thaw’

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A restoration of high-level official meetings between US and People’s Republic of China (PRC) leaders following the spy balloon crisis of February 2023 has fueled cautious optimism that US-China relations are improving. 

The most important event in this purported “thaw” was the meeting between Chinese Communist Party General Secretary Xi Jinping and US President Joe Biden in California on November 15. Xi appeared to offer the Americans assurances that China was not preparing to wage war against Taiwan.

But while the Xi-Biden summit was modestly successful, the chance of a conflict is scarcely if at all reduced because Taiwan, the most likely trigger for war, remains as much a flashpoint as ever.

The most encouraging item from the summit on the Taiwan issue is that Xi reportedly told Biden that China had no plans to take military action against Taiwan. This, however, is only superficially encouraging.

First, it tells us nothing new. War would be a terrible option for Beijing. Either a blockade or invasion could fail, and any “victory” would be Pyrrhic for the Chinese, with huge losses of lives and treasure, serious and perhaps regime-threatening economic disruption, and decades of difficulty trying to govern a hostile Taiwan population. 

Therefore we can assume Xi would opt for war only as a last resort, prompted by a trigger that has not yet occurred, such as Taiwan’s formal declaration of de jure independence.

Xi seemed to be refuting speculation that Beijing has already decided to attack Taiwan, perhaps as early as 2024. And we already knew that a major PLA combat operation against Taiwan would require many months of unusual and visible preparations.

Second, the credibility of any public statement by Xi is questionable. His government denies persecuting Uighurs, denies government-sponsored industrial cybertheft, denies bullying other countries, insists that the spy balloon was a “weather balloon” – I could go on.

Chinese President Xi Jinping and US President Joe Biden at a summit meeting at the Filoli Estate, San Francisco, November 15, 2023. Photo: Chinese Ministry of Foreign Affairs

In any case, it would be a mistake to interpret Xi’s comments too literally. In 2015, Xi told then-US president Barack Obama that “there is no intention to militarize” China’s artificial island bases in the South China Sea. After the Chinese government packed those sandbars with military facilities and equipment, government propagandists explained that militarization for self-defense purposes does not count as “militarization.”

Even if Xi has not ordered his military to attack Taiwan by a particular future date, neither can we take his statement to mean that he will never attack Taiwan. Both Xi and the PRC leaders who came before him have stubbornly refused to rule out the possible use of force against Taiwan. 

They see this threat as essential to deterring Taiwan independence. Therefore Xi does have a plan, even if he has not yet decided to implement it.

During the retaliation for the Nancy Pelosi visit to Taiwan in 2022 and Taiwan President Tsai Ing-wen’s visit to the US in April 2023, PRC forces carried out military maneuvers around Taiwan that showcased capabilities and missions specifically germane to a war to conquer Taiwan, as if to douse any doubts that such a plan exists.

Even Xi’s meager assurance during his California visit may have gone too far. Xi’s own government quickly discounted it. 

On November 21, Chen Binhua, spokesperson for the PRC’s Taiwan Affairs Office, complained that Democratic Progressive Party (DPP) presidential candidate Lai Ching-te had been using Xi’s statement to discredit the assertion by the opposition Kuomintang Party that electing a DPP president would lead to a China attack on Taiwan. 

Chen said Lai was taking Xi’s statement “out of context” and “creating excuses for continuing provocations.”

Other statements by Xi were less assuring. He reportedly demanded that the United States “take real actions to honor its commitment of not supporting Taiwan independence” and that the US “stop arming Taiwan.”

This reiterates Beijing’s recent position that while claiming to follow a “One China” policy, Washington is in practice pushing Taiwan toward permanent formal independence as a means of “containing” or suppressing China.

Xi’s comments in California indicate no reduction in Beijing’s fear that America is abetting Taiwan’s independence. This fear is the main factor increasing the risk of a Taiwan Strait war. Xi also suggested that there is a limit to how long Beijing will refrain from using force if peaceful attempts at “unification” are not working.

Biden did not promise to stop selling arms to Taiwan and Xi did not promise to halt his military intimidation of the island. Since Xi returned home from California, PRC military aircraft and ships have continued menacing Taiwan, just as they had been before the summit. 

Picking the low-hanging fruit does not necessarily make the high-hanging fruit more accessible. Indeed, Beijing often argues the opposite: that China will not cooperate on issues of obvious common interest until after the more contentious issues are solved.

A helicopter flies a Taiwanese flag in Taoyuan, Taiwan. Photo: Asia Times Files / Ceng Shou Yi / NurPhoto via Getty Images

After the Pelosi visit, for example, Beijing suspended cooperation with the United States in

  • combating illegal drug trafficking,
  • mitigating the negative effects of climate change and
  • avoiding unintended military incidents.

This expansive linkage of issues is also the premise of increasingly frequent Chinese economic coercion against trade partners: normal economic activity cannot continue until the trade partner demonstrates respect for a PRC “core interest,” often Beijing’s claim to sovereignty over Taiwan.

Despite the frothy good feeling of the Xi-Biden summit, the US-China relationship remains in a serious downturn. The steps the two countries took toward recovery in the latter part of 2023 are welcome but fragile. They could be swept away easily by the next crisis over Taiwan, which still seems inevitable.

Denny Roy is a senior fellow of the East-West Center, Honolulu.

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Xi’s big push to reverse China’s massive capital flight

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Xi Jinping’s first public visit to Shanghai in three years signals a new effort to boost China’s private sector. Yet even more important, Xi’s team in Beijing chose this week’s occasion to unveil a series of reforms that are a bigger deal than might meet the eye.

The stocks of Shanghai-centered tech companies like Semiconductor Manufacturing International Corp, Hua Hong Semiconductor Ltd. and Will Semiconductor Co. rallied on the news Monday.

The visit, coupled with new policies to level playing fields and increase private companies’ access to capital, is seen by some as Xi following through on vows made in California earlier this month to make life easier for China’s beleaguered entrepreneurs.

To date, Xi’s attempts to restore investor confidence amid struggles to move past Covid-19 fallout have fallen short. More than US$1 trillion of foreign capital fled mainland share markets since Xi clamped down on Big Tech in late 2020. More recent fears about deflation haven’t helped.

In recent weeks, Xi restarted China’s stimulus machine amid calls for greater government action amid a property crisis and stalling economic recovery. In particular, the People’s Bank of China, China’s central bank, has channeled more liquidity to troubled property developers.

Analyst Zerlina Zeng at CreditSights speaks for many when she says “we expect China’s softening external stance and warming relationship with the US and other developed markets to set a more conducive geopolitical backdrop for China credit.”

But the reforms being outlined this week could be a game-changer. The PBOC and seven other government bodies have unveiled 25 steps to increase the role of the private sector.

They will apply to a broad range of private sector industries, including the ailing property market. Gavekal Research analyst Xiaoxi Zhang isn’t exaggerating when she warns that “debt strains from property developers and local government financing vehicles are spreading across China’s economy.”

There are concerns, too, that Beijing’s criminal probe into the wealth management unit of Zhongzhi Enterprise Group, one of China’s largest “shadow banks,” could soon spook Asian markets the same way China Evergrande Group’s default did in 2021.

The Zhongzhi Group shadow bank is on the verge of collapse. Image: Twitter

Broader initiatives include setting clear and transparent targets for widening access to financial services for private enterprises.

With an emphasis on regular performance assessments and financial support, the plan is to increase the proportion of loans to private enterprises while improving organizational structures to increase efficiency.

Areas of particular focus include: supporting technological innovation amongst small and medium-sized enterprises, entrepreneurs in the green and low-carbon space and innovators keen to disrupt China from the ground up.

This will include a greater tolerance for risk-taking and the non-performing loans that startups can rack up. Beijing seeks to recalibrate lending and borrowing practices to increase private sector development while limiting risks.

This also includes increased support for first-time loans and unsecured loans. Financial institutions will be encouraged to develop a wider range of credit-financing products suitable for private enterprises.

Most important of all, Xi’s reform team is eying a great leap forward for China’s corporate bond market. This has long been a stumbling block for smaller, less established corporate credits. In particular, China plans to expand the range of bond financing options — and the scale — to private enterprises.

Under a series of “innovation bills” under the National Association of Financial Market Institutional Investors and China Securities Regulatory Commission, new structures will be welcomed for stock-bond hybrid products, green bonds, carbon neutrality bonds, transition bonds, infrastructure bonds and other financing tools.

Support programs will seek to incentivize private enterprises to issue asset-backed securities to restructure and revitalize existing assets. Registration mechanisms will be streamlined.

And Beijing will prod state-owned entities like China Bond Insurance Co and China Securities Finance Corporation, and even non-government institutions, to adhere to global standards and raise their credit market games.

That means building world-class systems for credit guarantees, credit risk mitigation tools, credit analysis and ratings and expanding China’s universe of bond financing support tools for private enterprises.

At long last, the Communist Party finally seems serious about facilitating increased bond investment in private enterprises. In years past, Beijing worried about a “crowding out” effect if private issuers lured capital from the national and local governments.

China’s bond markets haven’t kept pace with the economy’s needs. Image: Twitter

Now, Beijing will encourage banks, insurance companies, pension funds, public funds, and other institutional investors to allocate capital to private enterprises. Regulators will be charged with internationalizing trading mechanisms, market pricing, compliance and disclosure procedures.

Xi’s team also is stepping up efforts to develop a high-yield bond market. Few steps might be more impactful for private sector development – especially tech-oriented SMEs – than creating a dedicated high-yield debt platform empowered by world-class trading systems. It would supersize capital-raising options and pull in new generations of overseas investors.

In June, local media reported that the PBOC and CSRC sought advice from market participants on setting up a high-yield marketplace. As of then, only four high-yield debt issues with coupons exceeding 8% had priced in 2023.

Authorities sought input from fixed-income players, investment bankers, legal experts, rating companies and accountants. This would channel greater financing to tech enterprises, startups and riskier borrowers.

The key, though, is implementation. The disconnect between Xi’s rhetoric since 2012 and execution helps explain why investors tend to be skeptical of China’s past efforts to reboot the reform process.

“Time will tell whether President Xi’s words will first stem the current large foreign direct investment outflows and eventually lead to a resumption of the net FDI inflows that China has enjoyed for more than four decades,” says Nicholas Lardy, senior researcher at the Peterson Institute for International Economics. “A safe assumption is that it will take more than words to accomplish this objective.”

It helps that the news dropped days after Xi’s government drafted a list of property developers eligible for large-scale support, including the troubled Country Garden Holdings. The property crisis remains a major turnoff for overseas investors.

New data, Lardy notes, “imply that foreign firms operating in China are not only declining to reinvest their earnings but – for the first time ever – they are large net sellers of their existing investments to Chinese companies and repatriating the funds.”

The outflows in question exceeded $100 billion in the first three quarters of 2023 and, as Lardy predicts, “are likely to grow further based on trends to date.”

Among the factors Lardy cites as repelling overseas investors and chieftains: tense Sino-US tensions; recent news of Beijing cracking down on foreign consultancy and due-diligence firms vital to evaluating investments; Beijing’s increasingly stringent regulatory environment; new national security laws; and restrictions on cross-border data flows.

Michael Hart, president of the American Chamber of Commerce in China, notes that “foreign business executives here are eager to continue in China. But boards back in the US are wary.”

Hence the importance of Xi and Li ensuring that these new private enterprise policies are implemented in credible and transparent ways. The good news is that Li, party secretary for Shanghai City from 2017 to 2022, has close ties with, and deep understanding of, China’s tech sector.

Li Qiang understands the tech sector. Image: Screengrab / NDTV

Veteran banker Zhu Hexin seems a solid choice as new party chief of the State Administration of Foreign Exchange (SAFE). He will assume management of China’s foreign exchange stockpile from PBOC Governor Pan Gongsheng. Zhu also was appointed as a member of the central bank’s party committee.

Prior to SAFE, Zhu helmed state-run financial conglomerate CITIC Group, meaning he comes to the job with deep market knowledge and industry contacts. Also, Vice Premier He Lifeng has been tapped to oversee economic and financial policy and trade talks with the US and Europe as head of the Central Financial Commission.

It now falls to Li, Zhu and He to ensure that President Xi’s recent pledges to top Western chieftains in San Francisco don’t fall by the wayside.

CEOs on hand to hear Xi speak included Apple’s Tim Cook, Bridgewater Associates’ Ray Dalio, Citadel Securities’ Peng Zhao, ExxonMobil’s Darren Woods, JPMorgan Chase’s Jamie Dimon, Microsoft’s Satya Nadella, Pfizer CEO Albert Bourla and Tesla’s Elon Musk.

There, Xi claimed that “China doesn’t seek spheres of influence, and will not fight a cold war or a hot war with anyone.” Xi also seemed to preview the next phase of reform, stating that “we should remain committed to open regionalism, and steadfastly advance the building of a free trade area of the Asia-Pacific. We should make our economies more interconnected and build an open Asia-Pacific economy featuring win-win cooperation.”

Xi added that “we should promote transitions to digital, smart and green development. We should boost innovation and market application of scientific and technological advances and push forward the full integration of digital and physical economies. We should jointly improve global governance of science and technology, and build an open, fair, just and non-discriminatory environment for the development of science and technology.”

Earlier this month, Xi presided over a private sector symposium in Beijing to highlight its central role in a more innovative and productive Chinese future. There, Xi stressed that private enterprises contribute more than 60% of gross domestic product, 50% of tax revenue, 80% of urban employment, 90% of new jobs and 70% of tech innovation.

“Over the past 40 years, the private sector of the economy has become an indispensable force behind China’s development,” Xi acknowledged.

Yet private enterprise has had a rough few years, from Covid-19 to Xi’s tech crackdown. A major concern now is that China falls into a Japan-like lost decade, so-called “Japanification.”

Economist Takatoshi Ito, a former Japanese deputy vice minister of finance, notes that the Chinese property sector’s “travails echo Japan’s experience” with bad loans and deflation.

But, Ito adds, “perhaps the greatest threat to China’s economic growth and development is Xi himself. Xi has spent the last few years tightening government control over all aspects of life in the country, including the economy. The regulatory crackdown on large tech companies like Alibaba, which began in late 2020, is a case in point.”

Alibaba took the brunt of Xi’s tech clampdown. Image: Agencies

Though regulators “have since backed off somewhat, and China’s government is actively supporting high-tech industries like electric vehicles, Xi’s obsession with control continues to pose a serious threat to China’s prospects. Not only does it hamper innovation by domestic firms; it also discourages foreign investment.”

The good news is that the private sector reforms detailed in recent days suggest Xi is serious about bold economic disruption and recalibrating growth engines away from state-owned enterprises and public investment toward private sector innovation.

As long as implementation is swift and credible, 2024 could be a markedly better year for China than many investors now pulling their investments from Asia’s largest economy expect.

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

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Climate protest: More than 100 arrested at world’s largest coal port

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An aerial shot of protestors spelling out we are the rising tideRising Tide
By Hannah Ritchie
BBC News, Sydney

A two-day blockade of the world’s largest coal port has triggered 109 arrests.

Hundreds of activists swam or used kayaks to occupy the Newcastle port’s shipping lane in Australia, to protest climate inaction.

They claim the disruption prevented over half a million tonnes of coal from leaving the country.

Australia is the world’s second biggest coal exporter and relies on the fossil fuel for its own electricity needs.

Located roughly 170 km (105 miles) from Sydney, the Port of Newcastle is the country’s most important terminal for coal shipments.

An estimated 3,000 people from across Australia took part in the 30-hour weekend blockade of its shipping lane, which had been approved by police.

But dozens of protesters remained in the water following the protest cut-off point – triggering 109 arrests, including five minors who were subsequently released.

On Monday, 104 people were charged over their refusal to leave the harbour channel, according to a statement from New South Wales police.

“I am doing this for my grandchildren and future generations,” said 97-year-old Alan Stuart, who defied the deadline.

“I am so sorry that they will have to suffer the consequences of our inaction. So, I think it is my duty to do what I can,” he added.

Rising Tide – which organised the action – has called it the “biggest act of civil disobedience for climate in Australia’s history”.

The protest took place just days ahead of COP28, the yearly global climate change summit, which begins in Dubai on Thursday.

The blockade

Rising Tide

Rising Tide says it wants Anthony Albanese’s government to tax thermal coal exports and cancel new fossil fuel projects.

Australia has long been considered a climate laggard, but Mr Albanese promised to “join the global effort” to curb emissions when taking office in 2022.

Since then, his government has enshrined into law an emissions reduction target of 43% by 2030, up from the nation’s previous commitment of 26-28%. That difference is equivalent to eliminating emissions from Australia’s entire transport or agriculture sectors.

But Mr Albanese has also refused to outlaw new fossil fuel projects completely – and has green lit four new coal mines since last May, with 25 more projects waiting for approval, according to the Australia Institute.

Anjali Beams, a 17-year-old school student from Adelaide who was one of the last protesters to leave the Newcastle shipping lane on Sunday, said she was risking arrest because Australia’s “decision makers have consistently ignored young people’s voices”.

“I will not be complicit in letting my future get sold away by the fossil fuel industry for their profit,” she added.

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Rethinking Indonesia’s nickel market dominance

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Calling Indonesia “the Saudi Arabia of nickel,” one of the metals underpinning global steel production and ambitions to decarbonize energy and transport systems, would be an insult to Indonesia’s market dominance.

Indonesia’s mines accounted for nearly half of global nickel production in 2022. It has banned raw nickel exports since 2020 as the country pushes to move up global value chains for renewable energy. 

Indonesia is a G20 member, a developing democracy and has an enormous potential home market for both steel and electric vehicles (EV).

But despite the seeming centrality of nickel to net-zero ambitions, Indonesia may find itself in a situation eerily similar to that of Saudi Arabia and its oil reserves — sitting atop plentiful resources whose value is set to wane as the EV sector booms. The challenge lies in navigating two landscapes, one geopolitical and one chemical.

In a shifting geopolitical environment, Indonesia is attempting to secure a more prominent place in the EV battery supply chain. This involves moving beyond mining ore and benefaction to battery assembly at a time when major EV battery importers like the United States and the European Union (EU) are onshoring battery assembly.

In the United States, these attempts include enticing tax credits in the Inflation Reduction Act (IRA). In Europe, they include government loans via the InvestEU program, independent member-state initiatives and an anti-subsidy investigation into Chinese automakers. 

The investigation aimed to prevent Chinese EV makers who source nickel from Indonesia from flooding the European market with cheap imports. In both instances, Indonesia’s reliance on Chinese manufacturers and finance in the nickel sector creates vulnerabilities for its EV ambitions.

The second challenge is more fundamental. Indonesia’s nickel reserves and industrial ambitions are at risk of being rendered less valuable by changes in battery chemistry, or the combination of materials and technologies used in the batteries themselves. 

Nickel is a key component in nickel-manganese-cobalt (NMC) batteries, which currently dominate the market due to advantages in range and power-to-weight. But this dominance may be fleeting.

As with most things EV-related, Tesla is the bellwether. In 2021, Tesla adopted lithium iron phosphate (LFP) batteries, with nearly half of its production models using them by the first quarter of 2022. 

In August of this year, Tesla CEO Elon Musk announced that the company would be transitioning most of its entry-level vehicles – Model 3 and Model Y – and its shorter-range semi-trucks to using LFP batteries. For a regional hub, Tesla chose to set up shop in neighboring Malaysia rather than in the nickel giant.

Indonesian President Joko Widodo talks with Founder and CEO of Tesla Motors Elon Musk during their meeting at the SpaceX launch site in Boca Chica, Texas, U.S., May 14, 2022. Photo: Indonesia’s Presidential Palace / Handout

Tesla did not invent or even bring to market the first EVs, but it popularised and democratized them. Its move toward LFP batteries is one major reason that S&P Global forecasts that after 2030 the dominance of NMC batteries will wane in favor of LFP batteries. LFP batteries offer less range and high-end performance. 

But they are also less prone to catching fire and are made of much more globally abundant and cheaper raw materials. For most EV users, LFP batteries provide more than enough range and power.

This forecast does not include the effects of potentially market-disrupting frontier technologies like sodium-ion and solid-state batteries, upon which Toyota has placed a heavy bet. 

These technologies would further depress the relative demand for nickel. There will still be a market for NMC batteries in performance-oriented EVs offering pavement-wrinkling torque and acceleration. 

But the global market in the future may be smaller than the current one – and with technology, disruption is rarely linear. The market may change even more quickly than S&P anticipates.

For Indonesia to sustain nickel as an engine for growth and development within these landscapes, its priority should be to cultivate closer relationships with the United States and the EU. These markets and their comparatively affluent consumer bases will drive an appetite for higher-performance, NMC-based EVs. 

Indonesia’s relationship with the EU is seemingly on track to expand, with shared ambitions to conclude negotiations on a comprehensive Indonesia-EU free trade agreement (FTA) before Indonesia’s 2024 election.

The outlook regarding the United States is less straightforward. In September, Indonesian President Joko Widodo proposed a critical minerals trade agreement with the United States during talks with Vice President Kamala Harris. 

A limited, critical minerals-specific FTA would allow Indonesian materials to qualify for the IRA’s domestic and FTA partner tax incentives. The FTA would seemingly be consistent with the US Biden administration’s desire to avoid creating more comprehensive, multi-sector and multi-issue FTAs.

Cultivating tighter US and EU relationships should not come at the expense of partnerships with Asian firms, including those in China and Korea. And EU and US partnerships will not be cost-free. 

Both the EU and the United States are concerned about Indonesia’s use of export bans as a tool of economic policy. The EU has already challenged Indonesia’s ban and won at the World Trade Organization.

Indonesia’s raw nickel export ban could backfire. Image: Facebook

The text of the IRA also specifically requires any minerals-specific FTA to commit parties to “reduce or eliminate restrictions on exports” while allowing less extreme policies, like export taxes. 

And agreements with the EU and US will bring heightened scrutiny on the environmental impacts of open-pit mining and new business rules that some in Indonesia’s opposition view as too capital-friendly, allowing provincial governors to set minimum wages without input from trade unions and experts from civil society.

For Indonesia, the price of stronger EU-US partnerships may be substantial. But it would be preferable to seeing its nickel and related industrial ambitions become a casualty of changing chemistry and a shifting geopolitical landscape.

Cullen Hendrix is Senior Fellow at the Peterson Institute for International Economics in Washington, DC.

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

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Two blockchain firms to be added to MAS’ licensing list | FinanceAsia

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Two crypto firms have recently announced that they have obtained in-principle approval (IPA) from the Monetary Authority of Singapore (MAS) to provide digital asset-related offerings compliant with the watchdog’s requirements.

Through the licensing scheme under the city state’s Payment Services Act, MAS regulates seven types of payment services, including account issuance, domestic money transfer, cross-border money transfer, merchant acquisition, e-money issuance, digital payment tokens and money-changing.

Singapore-headquartered StraitsX acquired its licence as a major payment institution (MPI) for digital payment token services, while Taiwan-based XREX’s Singapore entity received approval covering six service categories except for money-changing services.

Upon receiving the licence, StraitsX will focus on issuing two single-currency pegged stablecoins (SCS) that are 1-1 pegged to Singapore dollars (XSGD) and US dollars (XUSD), respectively.

XSGD is currently available for minting and redemption via StraitsX’s platform, while XUSD is under development and will be released to the public in the near future, FinanceAsia has learned..

“The in-principle approval from  the MAS allows us to demonstrate compliance with the regulatory framework for stablecoin issuance,” Kenny Chan, head of StraitsX, said.

“We see potential in single-currency pegged stablecoins as a credible and reliable medium to facilitate innovations in payment transactions both domestically and across borders,” he added.

Citing the purpose bound money (PBM) testing led by MAS as an example, Chan emphasised the programmability and interoperability of stablecoin-powered payment solutions and explored use cases, including programmable rewards and escrow arrangements for online commerce.

“Stablecoins play a significant role in the digital asset ecosystem as they frequently form the bridge to the fiat leg of a transaction,” said Etelka Bogardi, Asia head of fintech and financial services regulatory, partner at Norton Rose Fulbright.

“It was therefore important to safeguard financial stability and consumer protection in this space.”

She added that as one of the frontrunners in stablecoin regulation, Singapore’s licencing regime has introduced important safeguards through reserve management and redemption mechanics requirements.

The MAS is also expected to introduce a regulatory framework under the Payment Services Act, which will be dedicated to stablecoin-related issuance and intermediation activities. The framework is set to be finalised in Augustafter a public consultation which started in October 2022.

“We believe that the regulatory clarity provided in the finalised framework, as well as Singapore’s position as a trusted hub for global business will provide a strong foundation for the issuance of stablecoins pegged to other G10 currencies,” Chan remarked.

Blockchain benefit

XREX’s business focusses on blockchain-based cross-border payment technology. The Taiwan-based team will useXREX Singapore as their Asia Pacific (Apac) headquarters, and look to expand its payment product that supports fiats, stablecoins and cryptocurrencies in the region.

Christopher Chye, chief executive officer (CEO) at XREX Singapore, told FA that the approval process took approximately two years’ , which he referred to as “hard fought” in a company press release. The team is looking to elevate the in-principle approval to a full licence over the next six months, he added.

“Blockchain technology has the potential to decimate transaction fees, facilitate atomic settlement and enable programmable money,” he said.

Moreover, he addted that “stablecoins are particularly well-positioned to bring respite to illiquidity issues, and we look forward to acquiescing our customers and prospects to the use of stablecoins in the imminent future.”

The XREX Group team claims to be the only digital asset player approved by both Singaporean and Taiwanese regulators to provide virtual asset services, according to the note.

Chye said that the compliance team has been studying the licensing regime formalised in the United Arab Emirates (UAE) and closely following regulatory developments in Hong Kong.

“Singapore boasts a progressive and robust regulatory framework, offering our users the clarity and confidence they need to access digital assets and use stablecoins,” said XREX Group and XREX Singapore head of compliance, Nick Chang, in the statement.

Chye added: “We feel optimistic about the regulatory developments across various jurisdictions and the attention central banks have afforded to this. Clear, reasonable, and practical regulations are crucial for the development of the blockchain industry.”

¬ Haymarket Media Limited. All rights reserved.

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