China tech giants offer upside surprises

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As Chinese Communist Party leaders gathered at the beach resort of Beidaihe in recent days, the many storm clouds on the horizon were impossible to ignore.

Between an economic slowdown, deflationary forces, new property market distress and ongoing hostilities with the West, Chinese leader Xi Jinping has a full slate of headwinds with which to contend.

Yet it’s worth noting key areas where Beijing is picking up potentially powerful tailwinds, too. Despite the various sources of turbulence, Chinese tech earnings are racking up some impressive gains.

From Ant Group making a net profit of 13.37 billion yuan (US$1.85 billion) in the three months to March 31, a 17.5% year-on-year jump, to Huawei reporting 2.2% year-on-year growth in consumer business revenue for the first half of the year, there’s reason for optimism that the worst may be over for China’s battered tech giants.

Such signs of hope are badly needed at a moment when US President Joe Biden’s White House is cranking up the punitive pressure on China’s tech firms, nominally in the name of US national security.

Last week, Team Biden banned US investors from investing in sections of China’s chips, quantum computing and artificial intelligence (AI) industries. The step could upend efforts to lift Sino-US ties from their historic lows. Team Xi might retaliate anew.

One interesting wrinkle surrounding this year’s Beidaihe confab is the theme of scientific and tech self-sufficiency.

To amplify the point, invites were extended to a large number of semiconductor and AI experts — at least 57 — on the “forefront of domestic technology.” Such invitations tend to shed light on the concerns that Beijing views as most urgent.

The official Xinhua news agency quoted Xi’s chief of staff Cai Qi saying “We hope all experts … make new and greater contributions to achieving high-level scientific and technological self-reliance.”

On the ground, though, there are myriad signs that China Inc is coming out the other side of the last few years of regulatory crackdowns on tech platforms — and showing convincing signs of life.

Take Alibaba Group reporting a 14% year-on-year jump in quarterly sales in the April-June period despite sputtering mainland economic growth.

Back in fashion?: Jack Ma playing to the crowd during a 20th anniversary event for Alibaba in Hangzhou. Photo: Asia Times Files / AFP / Strigner

All of the key business units of the e-commerce colossus Jack Ma built are returning to life and buttressing the argument that Xi’s wealth and confidence destroying clampdown is in the rearview mirror.

“Big tech earnings may show continued recovery, with profits expected to rise 10.4% year-on-year in 2Q,” says Marvin Chen, an analyst at Bloomberg Intelligence.

This was the pledge that Premier Li Qiang made in March when he became Xi’s No 2 official and financial reform enforcer.

News that the domestic commerce unit of Alibaba — ground zero of Xi’s tech clampdown in late 2020 — is now producing about $16 billion in revenue, a 12% rise year on year in Q2, seems indication enough that China’s Big Tech may be ready to shift into higher gear.

The bold corporate overhaul Alibaba announced in March is by all indications off to a solid start. China’s online commerce leader announced plans to split its $220 billion empire into six business units, a major restructuring that promises to yield several initial public offerings (IPOs).

The breakup frees up Alibaba’s main divisions from e-commerce and media to the cloud to operate with far more autonomy, laying the foundation for future spinoffs and market debuts that create fresh wealth and jobs.

The maneuver also offers a blueprint for other tech giants to navigate around regulators’ efforts to curb monopolistic behavior among internet platforms. As Neo Wang, analyst at Evercore ISI, puts it, the six-way split-up could “serve as a template for Alibaba’s peers.”

Since November 2020, when regulators clamped down on Ma’s empire, Baidu, Meituan, Tencent and a who’s-who of Big Tech names have felt the monopoly-curbing, regulatory heat.

Yet it was Ma’s Ant that bore the initial brunt of the market-shaking putsch. Beijing regulators pounced in particular on Ma’s plans to take his fintech unit public, a planned $37 billion IPO that would have been history’s biggest.

Rather than listing in New York, as Alibaba did in 2014, Ant was to sell shares in Shanghai and Hong Kong. The IPO had promised to raise the Greater China region’s status as a tech and finance superpower.

Now, as economic growth stalls and property woes dangerously fester, Team Xi needs to lean into these tech green shoots to strengthen the tailwinds coursing through the economy.

Since March, Premier Li has been linearly focused on catalyzing more scientific and technological innovation and affording the private sector more space to grow and create well-paid jobs.

According to Li’s plans, Beijing regulators are going easier on tech giants and supporting the development of micro, small and medium-sized enterprises (MSME) to address record youth unemployment, which hit a record 21.3% in June, without relying on large-scale stimulus.

Chinese Premier Li Qiang wants more private sector-led economic growth. Photo: Pool

China cut interest rates this week in a move that surprised many analysts and underscored the deepening depths of China’s economic troubles.

“The market was expecting the People’s Bank of China to wait until September before easing again, and [recent] cuts suggest that the authorities’ concern about the state of the macroeconomy is mounting,” says Robert Carnell, head of Asia-Pacific research at ING Bank, said.

A big piece of the economic revival puzzle is reversing Xi’s efforts to maintain the dominance of state-owned enterprises (SOEs). In the years since 2015, the year when Shanghai stocks collapsed, Xi’s response has been to support SOEs to boost economic growth.

Li’s charge now is to diversify the economy away from exports and smokestack industries, which ultimately means incentivizing greater private sector innovation and productivity.

The key will be for Xi to give Li the latitude to get his reform plans dating back to 2013 back on track. A decade ago, Xi pledged to let market forces play a “decisive” role in Beijing’s decision-making.

Since then, though, China has become less, not more, transparent, withholding key data needed for efficient market mechanisms. Indeed, Xi’s recent regulatory crackdowns and other restrictions on private business have made it harder and harder for outside credit ratings companies to assess where China Inc is headed.

Last month, Li said the government is stepping up efforts to normalize China’s regulatory environment. The goal, Li has said, is to “reduce the costs of compliance and promote the healthy development of industry.” He said that “on the journey of building a modern socialist country, the platform economy has great potential.”

In a speech in mid-July, Li told tech chieftains in the audience – including officials from Alibaba Group, TikTok owner ByteDance and food delivery group Meituan – to “push to increase their international competitiveness and dare to compete on the global stage.”

To analyst Kelvin Wong at OANDA, the latest rhetoric from the top man on China’s State Council is “likely to boost positive animal spirits in the short-term at least.”

But Team Xi also must work harder to pull in more foreign capital. “Inbound investment has fallen despite Premier Li’s best efforts to roll out the welcome mat for foreign executives and local government officials crisscrossing the globe in search of new sources of capital,” the Eurasia Group consultancy wrote in a note.

Eurasia Group points out that “multiple factors” have contributed to China’s failure to boost FDI.

“Cash-strapped local governments are unable to offer the generous subsidies and access to free land that they once did. The nationwide push for a ‘unified market’ increasingly discourages preferential treatment or discriminatory policies at the local and provincial levels,” the Eurasia Group report said.  

“Domestic firms are becoming formidable competitors in industries such as automaking, narrowing the opportunities for foreign firms in sectors that have attracted a large share of FDI in the past,” the same report said.

“Hawkish signals from Beijing over national security” – including a revised anti-espionage law that went into effect on 1 July – a crackdown on the activities of foreign consultancies and due diligence firms operating in the country, are also denting new FDI, the Eurasia Group said.

That, and other recent moves targeting select multinationals, “have contributed to a deepening anxiety among foreign companies, many of which are weighing China opportunities against third country alternatives as they try to ‘de-risk’ their supply chains in the face of rising geopolitical tensions,” the report said.

Yet recent signals from China’s top tech companies suggest better days lie ahead. Team Xi just needs to accelerate efforts to ensure the virtuous cycle continues.

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

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State polls highlight Anwar government weakness

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SINGAPORE – Malaysian Prime Minister Anwar Ibrahim’s administration survived a key electoral test over the weekend, losing support to a conservative opposition bloc but maintaining its incumbency of state governments in midterm polls that nonetheless served as a sobering early referendum on his nine-month-old “unity” government.

The August 12 state elections resulted in a “3-3” outcome, meaning the Pakatan Harapan-led (PH) government and right-wing opposition alliance Perikatan Nasional (PN) each clinched three states out of the six that were up for election, with the latter making significant inroads nationwide in key Malay Muslim majority constituencies.

The results had broader implications, especially for the Barisan Nasional (BN) coalition and its main party, the United Malays National Organization (UMNO), which won only 19 of the 108 seats it contested. Analysts see the electoral drubbing as further proof of UMNO’s diminished role as a national political force after its previous six decades of uninterrupted rule.

Calls for reform within UMNO have resurfaced amid its lackluster performance, which saw the party’s share of seats across six states fall by more than half from 41 with no wins in Malay-majority Terengganu or Kedah. The dismal showing has stoked speculation that deputy premier Ahmad Zahid Hamidi, UMNO’s embattled president, could face a leadership challenge.

Internal strife within UMNO and demands for Zahid’s resignation, as some senior party figures have already expressed openly on social media, could potentially test the stability of the unity government in the months ahead given the pivotal role Zahid played In Anwar’s ascension to the premiership after November general elections resulted in a hung parliament.

Zahid is the subject of an ongoing corruption and money laundering trial, making his senior position in government all the more controversial. Already a liability for sacking his rivals to tighten his grip over UMNO since his appointment as deputy premier, Zahid’s failure to boost Malay Muslim support for the avowed reformist government has cast further doubt on his political utility.

“A widespread perception among the Malay electorate, in particular, that the UMNO leadership is corrupt has been building up since the [2013] general election,” said veteran political analyst Chandra Muzaffar. “It peaked in the recent state elections because UMNO continues to be led by a man facing 47 corruption-related charges who is hell-bent on remaining in power and has rid the party of those who are critical of his wrongdoings.”

Corruption-accused Ahmad Zahid Hamidi was an electoral liability at August 12 state polls. Image: Facebook

With a rallying call of “dulu lawan, sekarang kawan” (once foes, now friends), proponents of the PH-BN alliance, a previously unthinkable pairing of political adversaries, had certain hopes of UMNO attracting Malay voters to Anwar’s PH coalition, which enjoys strong support from non-Malay minority communities, though less so among ethnic Malays who account for some 60% of the 33 million population.

A survey conducted by the Kuala Lumpur-based research firm Ilham Centre in July found that Anwar’s approval ratings among minority Chinese (88%) and Indians (81%) in the six states holding elections were overwhelmingly positive. The data also showed that only 24% of Malays, around one in four respondents, were satisfied with his performance as prime minister.

The PH-BN pact only proved viable in Negeri Sembilan, where it won a two-thirds majority with BN contributing 14 out of 31 state seats. BN failed to contribute more than two seats to the government in all other states. Selangor, Malaysia’s wealthiest state, was the only of the six contested to have a government without a two-thirds majority, with PH-BN winning 34 out of 56 seats.

Despite big talk on the hustings, right-wing opposition bloc PN failed to flip Penang, Negeri Sembilan or Selangor as it boasted it would, but it still has much to celebrate. Its candidates picked up 15% to 30% more votes in a majority of seats compared to November’s election. Of the 245 state assembly seats up for grabs, PN took 146 seats compared to PH’s 80 and BN’s 19 seats.

PN chairman Muhyiddin Yassin, a former premier and political veteran, said the results represented a “huge wave calling for change” and that Anwar and Zahid had a “moral responsibility” to resign from their posts. “PN’s roaring success in garnering Malay support shows that PN is now the main political platform for Malays. UMNO is no longer relevant,” boasted Muhyiddin at a press conference.

Wong Chin Huat, a professor and deputy head of the Asia headquarters of the UN Sustainable Development Solutions Network at Malaysia’s Sunway University, said voters’ shift away from UMNO stems from grassroots discontent with Zahid’s leadership and perceptions that the party has been relegated as a junior partner in government, having only contested a small number of seats.

“Zahid cannot be officially challenged as president, but pressure may mount for him to step down as president or deputy premier and be replaced by his deputy, Mohamad Hasan,” he told Asia Times. Without leadership renewal and reinvention, “UMNO may try to shift the blame to its alliance with PH and pressure the government to move to the right, which would destabilize the government.”

Muzaffar added that “though an open, outright challenge against Zahid Hamidi may not happen immediately, it is quite conceivable – given UMNO’s electoral debacle – that other UMNO leaders will come together and try to coax him to resign as UMNO president. Zahid’s departure in this manner will not have repercussions for the political system.”

In his post-election speech, Anwar gave assurances that his government would remain stable and called for a cooling of the political temperature following what observers saw as one of Malaysia’s most divisive ever election campaigns. “All parties, win or lose, should join hands to defend the peace and focus on the dignity of the nation and champion the public interest,” he said.

Malaysia’s political divide was on full display during campaigning, with both rival coalitions resorting to scare tactics on the stump. PN’s largest member, the hardline ultraconservative Parti Islam SeMalaysia (PAS), leaned heavily into racial and religious sentiments and proved adept at harnessing social media platforms like TikTok to sway younger voters.

PAS supporters at a recent campaign rally. Some saw the state election result as indicative of a new ‘green wave.’ Image: Twitter

PAS turned in a stellar performance, winning all but two of 45 seats in a landslide victory in Kelantan and fully capturing Terengganu, leaving the state without an opposition. The Islamist party, which stunned observers by outperforming in November’s general election, also helped PN win a two-thirds majority in Kedah state, clinching 33 of the 36 seats in the state assembly.

PN’s narrative familiarly accuses Anwar of being a proxy for non-Malays, warning that Muslim and Malay rights will be marginalized under his leadership while also more credibly taking shots at PH’s embrace of graft-tainted UMNO. Anwar, in turn, dismissively implied that PAS-led states were examples of backward governance, dog-whistling to non-Malay fears of fundamentalist religious rule.

In a separate viral exchange between Anwar and a non-Malay student who asked him whether race-based education quotas could be replaced by a meritocracy system, the premier came off to many as impatient and combative, telling her that doing so would be disastrous and cause PH to “lose all the elections in this country, and you will suffer more in this country run by PAS [and PN].”

“PN continues to exploit the concerns of the Malay-Muslim majority and leverage identity politics. Anwar tried to woo Malay-Muslim voters with divisive rhetoric/stances of his own but this failed to bolster PH-BN’s support and may have just alienated progressive voters,” said Peter Mumford, a Southeast Asia analyst with the Eurasia Group consultancy.

Anwar’s government has been accused of pandering to social conservatives and his progressive supporters have appeared dismayed by the perceived slow pace of promised institutional reforms. PH had campaigned on a broad reform and clean governance agenda. So far, it has reduced subsidies for the wealthy, eased listing rules for companies and abolished the mandatory death penalty.

“There is also dissatisfaction that Anwar has failed to deliver on some of the promised political and economic reforms, though his ‘reformist’ image has always seemed questionable, so this is not surprising,” Mumford added. “A stronger result for PH-BN might have given Anwar more confidence to proceed with significant reforms, though this now looks unlikely.”

The factors behind PN’s rising support in what has been dubbed the “green wave” after the color of PAS’ party flag continue to be debated by analysts. While PAS has emerged as the biggest beneficiary of disillusionment with the once-popular UMNO, some see economic distress over higher living costs and slowing economic growth under Anwar as key reasons for its rise.

Apart from economic challenges, some analysts say attacks on prominent opposition figures by government leaders during the election campaign alienated many Malay voters. PN leader Muhyiddin also notably faces abuse of power and money laundering charges that were brought against him in March, which he claims amount to political prosecution.

Malaysia’s ex-premier Muhyiddin Yassin believes the political tide is shifting in his coalition’s favor. Image: Facebook

Oh Ei Sun, a senior fellow at the Singapore Institute of International Affairs (SIIA), believes socio-economic reasons do not fully account for PAS’ success. “There is a desire for a more religiously and racially-oriented socio-political narrative, regardless of socio-economic status,” he told Asia Times, pointing to the party’s dominance of rural areas and rising appeal in wealthier urban states.

“Religiously and racially-motivated rhetoric is not something new in Malaysia and has been occurring for many years. It’s just that now PN is using it more prominently and exclusively, and as long as Malaysia still has a racially-divided society at large, I think it’s very difficult to get rid of this social and religious messaging” he opined.

“A certain degree of ethnic polarization will remain for some time to come,” Muzaffar concurred.  “However, political polarization can be overcome if leaders on both sides of the political divide adopt a conciliatory tone. As leader of the ruling coalition, Anwar Ibrahim set the right tenor in his election night speech. The opposition should now respond, and both should translate words into deeds.”

Follow Nile Bowie on Twitter at @NileBowie

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China floods: The families torn apart by ‘huge, furious waves’

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Trapped people are evacuated at flood-hit Tazhao village on August 1, 2023 in Zhuozhou, Hebei Province of China. Rescue and relief efforts were underway after heavy rains triggered floods in Zhuozhou.Getty Images

Ten-year-old Miao Chunyou screamed for her mum as she disappeared into a brown torrent that had engulfed western Beijing.

The strong currents ripped Miao from her father’s grip as floods, triggered by incessant rains, chased the family of three to the roof of a neighbour’s house.

Her mother, clinging to a tree branch, watched helplessly. That was the last time she saw Miao. More than 10 days have passed but the couple has heard no news about their daughter.

“It was like a scene from a movie, with huge, furious waves,” Miao’s mother tells the BBC. She only shared her last name, Chang.

China is no stranger to floods, but July saw a ttrio of typhoons from the Pacific Ocean over three weeks, which exacerbated seasonal monsoon rains. Two of the three made landfall in the country, including super typhoon Doksuri, which churned slowly over large areas of north-west China for several days, inundating Beijing and surrounding provinces such as Hebei. That week, the Chinese capital experienced the most rainfall in 140 years.

Sixty-two people have so far been confirmed dead in the deluge – 33 from Beijing and 29 from neighbouring Hebei province.

Miao was swallowed by water “as high as two adults, one standing on the other”, her mother says. “Villagers in their 70s or 80s said they had never seen floods this big in their lives.”

She says that it had been raining heavily until July 30, when the downpour eased. The family believed the worst had passed, but stayed home, worried that going outside could expose them to mudslides.

But the following morning “the rain came down heavily”, Ms Chang said. As water rapidly filled the house, she and her husband tried to pump it out. But within half hour, flood water and mud smashed through the front wall.

Miao Chunjou

Handout

Mr Chang is a migrant worker and spends much of the year in Beijing, where he sells spices. His wife and daughter were visiting him from Henan when the rains began. The three had mostly been apart during years of zero-Covid rules, and this was had been a much-awaited reunion. They had planned to visit Tiananmen square the day they lost Miao to the flood.

Ms Chang and her husband adopted Miao as a baby. They have two older sons, 27-year-old twins, who were back home in Henan province in central China when the flood hit. Distraught at what happened to their sister, one of them is unable to even speak, Ms Chang says.

China’s flood control system allows for water to be diverted from major cities like Beijing, Shanghai and Tianjin to surrounding areas. During the floods, Hebei’s Party Secretary Ni Yuefeng proudly declared that his province would act as a “moat” to protect Beijing, stirring anger among his constituents, who said the speed with which the flood waters hit caught them by surprise.

Wan, who wished to reveal only his last name, lives in Beijing but was alerted to a distress message on WeChat on 2 August. The mountain village of Tangjiazhuang in Hebei province, where his family lives, was hit by a landslide two days earlier.

It had cut off the village of 2,000 mostly elderly people. Some families had gathered there for the cool highland weather because parts of China had sweltered in heat waves before the typhoons brought deadly rains.

Mr Wan says he rushed to Tangjiazhuang with his wife to rescue their relatives. But they were stopped at a neighbouring village by neck-deep water. Undeterred, they took an alternate route that involved a an uphill three-hour hike. The terrain caused him to slip and twist his ankle.

“When we finally got there, all we saw was an ocean, with nothing left,” Mr Wan’s wife recalls.

Aerial view of excavators operating to repair the collapsed roads in flood-hit areas in Fangshan District on August 4, 2023 in Beijing, China.

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Rescuers reached Tangjiazhuang on 3 August, three days after the landslide, and a day after the Wan couple found the village where their family had been in ruins. Local authorities counted 10 people dead and 18 others missing. Mr Wan, citing anecdotal reports, says the death toll is likely higher than official tallies.

Mr Wan says seven of his relatives are either dead or missing, including his two nephews, aged seven and four. He reads out their names: “Wan Hanying, my second uncle, Li Shulan, my second aunt, Wan Hechun, my third uncle, Jing Zhizhen, my third aunt, Wan Gongle, my sister, her children, Li Jiaqi and Li Jiaxin.”

China’s state-run media, which has released death tolls outside Beijing over several days, has focused on the rescue efforts, with headlines such as: “There is a sense of security called the People’s Liberation Army” and “Shandong rescue team work in floods, starving, with hands shaking uncontrollably from the cold”.

But that did not stop those on social media form noticing that President Xi Jinping did not visit any of the sites where disaster struck, unlike his predecessors. He did call for an “all-out” flood rescue effort, a message that was carried prominently on state media.

Instead on 31 July, as parts of north-east China were submerged, and Miao was swept away, Mr Xi attended a ceremony in Beijing to promote generals in the Central Military Commission.

A little girl carrying two kettles walks around waterlogged street on July 20, 2016 in Tianjin, China. Heavy rains hit Tianjin, disrupting traffic in the Chinese capital.

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Mr Xi could be asserting his status as a princeling, or someone born to a Communist Party official, says Dr Ming Xia, a professor of political science and global affairs at the City University of New York.

“He draws more legitimacy from the revolutionary tradition and does not urgently seek to derive some legitimacy from public opinion, as his predecessors Hu Jintao and Wen Jiabao, who were born into ordinary families, did.”

As the floods receded, people have begun piecing their lives back together, shovelling mud out of their homes, and washing clothes and appliances that have turned brown. But scientists say climate change will spawn stronger, more frequent typhoons like Doksuri.

For Mr Wan, it is all too much. “The mountain still has fissures and future dangers are certain,” he says. “We definitely won’t live there anymore.”

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China’s default drama cries out for faster reforms

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Seeing “China Evergrande Group” trending on global search engines is the last thing Xi Jinping needs as 2023 goes awry for Asia’s biggest economy.

News that exports plunged 14.5% in July year on year was the latest blow to China’s hopes of growing its targeted 5% this year. It’s the biggest drop since February 2020, when Covid-19 was sledgehammering trade and production worldwide.

Yet the default drama at Country Garden Holdings is a reminder that the call for help is coming from inside China’s economy.

This week, Country Garden was trending in cyberspace as it faced liquidity troubles akin to those of the humbled China Evergrande in 2021. 

The whiff of trouble that tantalized markets in recent weeks proved true amid reports noteholders failed to receive coupon payments due on August 7.

That has global investors worried about an Evergrande-like domino effect. “If Country Garden, the biggest privately owned developer in China, goes down, that could trigger a crisis in confidence for the property sector,” says Edward Moya, senior market analyst for Oanda.

Analyst Sandra Chow at advisory firm CreditSights notes that “with China’s total home sales in the first half of 2023 down year-on-year, falling home prices month-on-month across the past few months and faltering economic growth, another developer default – and an extremely large one, at that – is perhaps the last thing the Chinese authorities need right now.”

The risk is slamming investor sentiment toward China. And it spotlights the urgent need for Chinese leader Xi and Premier Li Qiang to repair the shaky property sector and accelerate state-owned enterprise (SOE) reform.

A more vibrant and resilient property market is crucial to China’s economic recovery in the short run and reducing the frequency of boom-bust cycles in the longer run. The sector, if running smoothly, can generate as much as one-third of China’s gross domestic product.

Earlier this month, Li pledged to “adjust and optimize” Beijing’s approach to building a healthier, more stable property market. Li has urged major cities to devise measures to stabilize markets in their own jurisdictions. 

Chinese President Xi Jinping (L) and Premier Li Qiang (R) face economic troubles. Image: NTV / Screengrab

That followed a pledge by the People’s Bank of China (PBOC) to provide developers with 12 additional months to repay their outstanding loans due this year.

This week’s default chatter raised the stakes. On August 3, Moody’s Investors Service slashed Country Garden’s credit rating to B1, putting it in the “high risk” category. 

“This downgrade reflects our expectation that Country Garden’s credit metrics and liquidity buffer will weaken due to its declining contracted sales, still-constrained funding access and sizable maturing debt over the next 12 to 18 months,” says Moody’s analyst Kaven Tsang.

Country Garden’s stock has cratered over the last week after the company’s warning of an unaudited net loss for the first six months of 2023. Clearly, Country Garden has been grappling with liquidity chaos for some time. 

As the company noted in a July 31 exchange filing, it “will actively consider taking various countermeasures to ensure the security of cash flow. Meanwhile, it will actively seek guidance and support from the government and regulatory authorities.”

A day later, Country Garden reportedly canceled an attempt to raise US$300 million by selling new shares. 

As analysts at Nomura wrote in a note, “recent signals from top policymakers… suggest Beijing is getting increasingly worried about growth and have clearly recognized the need to bolster the faltering property sector. They are starting a new round of property easing and may introduce some stimulus to redevelop old districts of large cities.”

More important, though, is for Xi and Li to tackle the underlying cracks in the financial system. The sector’s troubles are structural, not cyclical.

Thanks partly to slowing urbanization and an aging and shrinking population, demand for new housing is on the wane. When economists worry about a Japan-like “lost decade” in China, the unfolding property crisis is Exhibit A.

The more that already massive oversupply increases, the more difficult it’s becoming for Beijing’s stimulus to flow through to construction activity. 

And the more the property sector acts like a giant weight around the economy’s ankles, the more China’s financial woes look like Japan’s bad-loan crisis.

China’s beleaguered property market is dragging down the wider economy. Photo: AFP / Noel Celis

This dynamic is a clear and present danger to China’s ability to surpass the US in GDP terms, a changing of the economic guard many thought might happen as soon as the early 2030s. Yet so is the slow pace of SOE reform as China’s economic model shows growing signs of trouble.

Xi and Li clearly understand the urgency. In recent months, Xi’s Communist Party set out to help boost the valuations of SOE stocks, which represent a huge share of China’s overall market. 

According to Goldman Sachs Group, SOEs in sectors from banking to steel to ports account for half the Chinese stock market universe. Yet Xi’s talk of creating a “valuation system with Chinese characteristics” is a work in progress, at best.

The SOE conundrum is a microcosm of Xi’s challenge to balance increasing the role of market forces and boosting investment in listed state companies, while also pulling more international capital China’s way.

In his second term in power, from 2018 to 2023, Xi more often than not tightened his grip on the economy at the expense of private sector development and dynamism. 

The most drastic example was a tech sector crackdown that began in late 2020. It started with Alibaba Group founder Jack Ma and quickly spread across the internet platform space.

Since then, global money managers have grown increasingly more cautious about investing in Chinese assets. This, along with a steady flow of disappointing economic data, is undermining Chinese stocks, which are among the worst-performing anywhere this year. 

That has given Xi and Li all the more reason to ensure that the practices of China’s largest state-owned giants come into better alignment with global investors’ interests and expectations.

China needs a huge increase in global investment to realize its vision for a 5G-driven technological revolution. Monetary stimulus can’t get China Inc there any more than Bank of Japan stimulus can revive Japan’s animal spirits.

Given the fallout from Covid-19 and crackdowns of recent years, China’s biggest tech companies are no longer cash rich or self-supporting. And the transition from SOE-driven to private sector-led growth has become increasingly muddled.

“If SOEs are able to pick and integrate the right targets, control risk effectively and promote innovation, outcomes should be credit-positive for the firms involved and beneficial for China’s growth,” says analyst Wang Ying at Fitch Ratings.

The global environment hardly helps, as evidenced by recent declines in export activity. US efforts to contain China’s rise – whether one calls it “decoupling” or de-risking” – is an intensifying headwind.

On August 9, US President Joe Biden detailed new plans to curb American investments in Chinese companies involved in perceived as sensitive technologies such as quantum computing and artificial intelligence. 

Chinese leader Xi Jinping and US President Joe Biden are at loggerheads on tech issues. Photo: Pool / Twitter / Screengrab

Though nominally aimed at preventing US capital and expertise from flowing into mainland technologies that could facilitate Beijing’s military modernization, the limits are sure to have an added chilling effect on market sentiment.

Lingering pandemic fallout hardly helps. Adam Posen, president of the Peterson Institute for International Economics, a Washington-based think tank, argues that China is suffering “economic long Covid” that could mean its condition is even weaker than global markets realize.

In a recent article in Foreign Affairs, Posen said that “China’s body economic has not regained its vitality and remains sluggish even now that the acute phase – three years of exceedingly strict and costly zero-Covid lockdown measures – has ended. 

He warns that the “condition is systemic, and the only reliable cure – credibly assuring ordinary Chinese people and companies that there are limits on the government’s intrusion into economic life – can’t be delivered.”

Xi is, of course, trying. The campaign, which recently fueled a jump of over 50% in some SOE stocks, is accompanied by a slogan of buying into a “valuation system with Chinese characteristics.”

Last month, Chinese Vice Premier Zhang Guoqing said the government is redoubling efforts to deepen and hasten SOE reform. 

Zhang, a member of the Political Bureau of the Communist Party of China Central Committee, said the aim is to boost core competitiveness and prod SOEs to innovate, achieve greater self-reliance and raise their science and technology games.

More recently, Liu Shijin, a former vice minister and research Fellow of the Development Research Center, said government agencies must begin viewing entrepreneurs not as “exploiters” but as growth drivers.

But pulling off a transition toward private sector-driven growth would be much easier to pull off if China’s underlying financial system was more stable. The biggest risks start with the property sector.

“The problems of China’s property developers are only getting more severe,” says economist Rosealea Yao at Gavekal Dragonomics. 

“The sales downturn is likely to throw many more private-sector developers into financial distress — a risk underscored by Country Garden’s recent missed bond payments. Unless sales can be stabilized, developers will be trapped in a downward spiral.”

Yao cites three reasons why a continued downturn in sales could push many private sector property developers into financial distress. 

First, private developers have been mostly shut out of capital markets and thus unable to roll over maturing bonds since late 2021, when China Evergrande fueled investor concerns that other highly leveraged private sector developers would also be unable to repay their debts.

“Private sector developer issuance in the onshore bond market is now minimal, and has collapsed in the offshore market as well,” Yao says. “Companies with state ownership, by contrast, still mostly retain the faith of onshore bonds with bondholders demonstrating that they are not entirely risk-free. 

“The combination of both weak revenues and lack of refinancing ability has led many firms to default or negotiate repayment extensions since the start of 2022, and the number of defaults and extensions remains elevated this year.”

A worker at the construction site of Raffles City Chongqing in southwest China’s Chongqing Municipality. Photo: Asia Times Files / AFP / Wang Zhao

 Two, cash liquidity positions of private sector developers are deteriorating. According to the annual reports of 86 non-state-owned developers, she notes, short-term liabilities exceeded cash on hand by 725 billion yuan ($100 billion) in 2022, compared to a shortfall of 171 billion yuan ($23 billion) in 2021.

“This,” Yao says, “suggests that the firms may have insufficient liquidity to repay their maturing debts – though Country Garden boasted more cash on hand than its short-term liabilities at the end of 2022, suggesting this measure could understate the problem, as developer reserves may be shrinking rapidly this year.”

Third, many private-sector developers are not just illiquid – they are getting closer to insolvency. That is mostly due to rising impairment charges as the companies are forced to recognize that assets on their balance sheets have declined in value, often under pressure from auditors. 

“Such charges deplete the asset side of companies’ balance sheets, pushing them closer to a situation in which the value of their liabilities could exceed the value of their assets — similar to the more traditional path to insolvency through negative net profits reducing equity,” she adds.

Again, Xi and Li clearly know what needs to be done to put China on more solid economic and financial ground. They just need to accelerate badly needed reform moves – before more indebted property developers like Country Garden hit investor confidence in the country’s prospects and direction. 

Follow William Pesek on Twitter at @WilliamPesek

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Keep workplace fairness law tight, tripartite committee says in response to feedback on expanding scope

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SINGAPORE: After receiving input on expanding the list of protected features, the Tripartite Committee on Workplace Fairness recommended that the proposed law against working bias be” strongly scoped” for a start.

One of the suggested protected features that was announced in February was age and culture. Some suggested that intimate orientation, gender identity, criminal record, and other features should also be protected during open sessions.

Fundamental societal norms must be taken into account, Manpower Minister Tan See Leng stated at a press conference on Friday( August 4 ).

He emphasized that approximately 95 % of discrimination complaints are related to the protected groups, which include:

  1. Age
  2. Nationality
  3. Sexual orientation, marital status, conception, and parental obligations
  4. Language, faith, and civilization
  5. conditions of illness and mental wellbeing

    Even if they are not specifically mentioned in the legislation, workers are still protected from all types of workplace discrimination by the Tripartite Alliance for Fair and Progressive Employment Practices( TAFEP ), according to the report.

    The committee advised keeping the legislation’s scope strongly defined in order to safeguard against the more widespread and well-known forms of discrimination, which support our main social and economic targets.

    The Tripartite Committee’s last report contains 22 tips, away from 20 in the interim report, after taking open input into consideration.

    According to a joint press release from the Ministry of Manpower ( MOM ), National Trades Union Congress( NTUC ), and Singapore National Employers Federation( SNEF ), the government accepted all recommendations.

    According to Dr. Tan, this is a significant turning point in our efforts to create an environment that is fairer and more pleasant at work, and it will serve as strong evidence that workplace discrimination is unacceptable in Singapore.

    The Tripartite Committee, which was established in July 2021, is presided over by Dr. Tan, NTUC secretary-general & nbsp, Ng Chee Meng, and SNEF president Robert Yap.

    Since there are exclusions for businesses with fewer than 25 people, the proposed law does protect 75 % of all people. According to the report, mandatory counseling will be the first step in resolving issues, and judgment at the Employment Claims Tribunal will serve as the” last resort.”

    Employers may want no law, according to Dr. Robert Yap, because it adds rigidity and may impede business expansion.

    To stop work bias in its tracks, he said,” but we understand that appropriate action must be taken against accidental employers.”

    According to Mr. Ng, the policy serves as a deterrent against unethical behavior, making it an essential first step toward an equitable work.

    The work is good, so hopefully over the next five to ten years, people won’t be overly familiar with the specifics of the law.

    ” We may not have that amicable a workplace if we have to use legislation to enforce ,” he said.

    ADDITIONAL Precision IN Meanings

    The committee suggested definitions for illness, mental health conditions, maternity, and caregiving responsibilities in response to requests for more clarity on the terms of protected characteristics.

    The Enabling Masterplan in Singapore will be used to define impairment.

    It will include people with autism as well as those who suffer from academic, actual, or visual impairments that significantly affect their ability to perform day-to-day tasks.

    Major types of diagnosed mental problems, typically accompanied by distress or impairment in crucial functions, are referred to as mental health conditions.

    The law does protect women who are pregnant, taking legal maternity leave, or nursing.

    Those who declare that they intend to include kids will also be safeguarded. For instance, it might be viewed as favoritism if an individual is excluded from a talent development program because she intends to get married quickly.

    Anyone who takes care of a family member in want, regardless of whether they reside in individual communities, is referred to as having caring responsibilities.

    Collateral DISCRIMINATION AND Abuse

    The report of the bilateral committee noted that there are already legal protections in place in relation to recommendations to contain workplace abuse in the legislation. Authorities you file a report on victims.

    Harassment victims may seek guidance from TAFEP, which may request that the employer conduct an appropriate, impartial investigation. & nbsp,

    Additionally, direct discrimination will not be outlawed by the law because it harms those who have protected characteristics when the policy appears to be negative.

    For instance, even though all employees may be required to take a pre-employment exam, older workers typically don’t do well on it. This could be considered discriminatory in an indirect way.

    According to the report, such gray situations could be generally litigated and cause significant uncertainty for both employers and employees if indirect discrimination were included in the law.

    Such cases may be taken up by TAFEP, who will work to find a solution.

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    India LGBTQ+ couples: ‘My parents were ready to kill me for their honour’

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    In this picture taken on January 8, 2023, a gender rights activist of LGBTQ community takes part in the Delhi queer pride parade in New Delhi. (Photo by Sajjad HUSSAIN / AFP) (Photo by SAJJAD HUSSAIN/AFP via Getty Images)Getty Images
    By Divya Arya
    BBC News

    When 17-year-old Manoj – who was recorded female sex at birth – told his family that he felt like a man and loved a woman, he almost got killed.

    He says his parents refused to accept him, tied his hands and feet, beat him up badly and locked him up in a corner of the house. His father threatened to kill him.

    “The violence was beyond anything I had imagined,” he says.

    “I had thought whatever be my truth, I would be accepted, after all this was my family. But my parents were ready to kill me for their honour.”

    For a woman in rural India, wanting to assert the right to identify as a trans man could lead to sharp retaliation.

    Manoj says he was pulled out of the village school in one of India’s poorest states – Bihar in northern India – and forcibly married to a man twice his age.

    “I even contemplated taking my own life, but my girlfriend stood by me through it all. That I am alive, and we are together now, is because she didn’t give up on me,” he says.

    Now 22, and hiding in a big city for the past year, Manoj and his girlfriend, Rashmi, are eagerly awaiting the Supreme Court’s verdict on their petition asking for the legal right to marry.

    India decriminalised gay sex in 2018, but same-sex marriages are still not recognised. The Supreme Court heard 21 petitions asking for legalisation this year and a ruling is expected soon.

    While others have argued for the right to marry as a matter of equality, Manoj and Rashmi’s petition, filed jointly with two couples and four LGBTQ+ feminist activists, asserts that marriage is a way out of the brutal physical and mental violence inflicted on them by their own families.

    “Legal recognition of our relationship is the only way out of this life of fear,” Manoj says.

    India has half-a-million transgender people, as counted in the last census in 2011, a number that activists believe is a gross underestimation.

    In 2014, the Supreme Court had ruled that trans people be recognised as the third gender. Five years later, India passed a law that prohibits discrimination in education, employment, healthcare and criminalises offences against them, including physical, sexual, emotional and economic abuse.

    But violence from families is a complex challenge.

    Trans rights

    Violent families

    Most laws and the society perceive family by blood, marriage, or adoption as the safest space for individuals, says Mumbai-based feminist lawyer Veena Gowda.

    “Familial violence is not unknown to any of us, be it against the wife, children, or queer trans people. But it is made consciously invisible, as seeing it and acknowledging it would mean questioning the very institution of ‘family’,” she says.

    Ms Gowda was part of a panel comprising a retired judge, lawyers, academicians, activists and a government social worker that heard detailed testimonies of familial violence faced by 31 people from the LGBTQ+ community in a closed-door public hearing.

    Its findings were published in April this year in a report titled, ‘Apno ka bahut lagta hai’ (Our own hurt us the most) that recommended that LGBTQ+ people be given the right to choose their own family.

    “Seeing the nature of violence faced by the testifiers, it would amount to denying them their very right to life and life with dignity if they do not have a right to choose their own family, free from violence,” Ms Gowda says.

    “The right to marry would be a way of creating this new family and redefining it.”

    A few months after his forced marriage, Manoj tried to get together again with Rashmi, but was tracked down by his “spouse”, who he says threatened to sexually assault both of them.

    They escaped to the nearest railway station and boarded the first train that was leaving but he says they were found by their family and brought home to a fresh round of beatings.

    “He was being forced to sign a ‘suicide letter’ that blamed me for his death,” Rashmi recounts.

    Manoj’s resistance meant he was locked up again and his mobile phone taken away.

    It was only after Rashmi contacted a LGBTQ+ feminist resource group and the women cell of the local police that they were able to get protection and escape Manoj’s family home.

    They moved into a government shelter for trans people but had to move out soon as Rashmi is not a transgender person.

    Trans rights

    Getty Images

    Escape and survival

    Manoj was also able to get a divorce. But support systems that help in escaping violent families and building a new life are few.

    Koyel Ghosh, who uses “they” and “them” as personal pronouns, is the managing trustee of Sappho for Equality, the first Lesbian-Bisexual-Transmasculine people rights collective in eastern India that started two decades ago. They remember clearly the day in 2020 they got a helpline call about a couple who had run away to a city in eastern India but then had to sleep on the footpath for seven nights.

    “We rented a space and put them there so that they had temporary shelter for three months and they could focus on getting a job as that is the only way they can build a new life,” Koyel says.

    Apart from social stigma, the threat of violence at home, disrupted education and forced marriages, many trans people also struggle to find stable employment.

    India’s last census showed that their literacy rate at 49.76% was much lower than the country’s 74.04%.

    According to a survey of 900 trans people in Delhi and Uttar Pradesh by the National Human Rights Commission in 2017, 96% had been denied jobs or forced into begging and sex work.

    Saphho has set up a shelter to help runaway couples rebuild their lives – 35 couples have been housed there in the past two years.

    It’s tough work. Koyel gets three to five distress calls daily and regularly reaches out to a support network of lawyers to find solutions.

    “I have received death threats, faced mobs in villages, hostility in police stations because I am also open with my queer identity and they just can’t deal with it,” Koyel says.

    When Asif, a trans man, and his girlfriend, Samina, reached out to Koyel, they were at their local police station in a village in eastern India.

    Samina alleges that the constables called her a eunuch and said she should have died instead of going public with her relationship.

    Childhood friends-turned-lovers, they had fled their families twice before but were brought back. This was their last chance to escape and they needed support.

    “It was only when Koyel arrived that the police’s bad behaviour stopped. A senior officer chided their juniors for their prejudice and ignorance of laws as public servants,” Samina says.

    Now living safely in a big city, the couple are co-petitioners with Manoj and Rashmi in the Supreme Court.

    “We are happy now. But we need that piece of paper, a marriage certificate, to deter our families and community with fear of penalties or police action,” Asif says.

    “If the Supreme Court doesn’t help us, we may have to die. We will never be accepted as we are, will remain on the run, always afraid of being separated,” he says.

    Names of petitioners have been changed to protect their identities.

    BBC News India is now on YouTube. Click here to subscribe and watch our documentaries, explainers and features.

    Presentational grey line

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    New Zealand: Minister quits after drink driving crash

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    NZ justice minister Kiri AllanGetty Images
    By Derek Cai
    BBC News, Singapore

    New Zealand’s justice minister has resigned with immediate effect, after failing an alcohol breath test in the wake of a car crash.

    39-year old Kiri Allan was charged with careless driving and resisting arrest.

    She is the fourth minister from Prime Minister Chris Hipkins’ cabinet to leave since March, ahead of an election in October.

    No casualties were reported from the crash, which took place in Wellington on Sunday night local time.

    Following her arrest, the former minister was detained at a police station for four hours before being released. She is due to appear in court at a later date.

    Ms Allan, whom Mr Hipkins said had been suffering from “extreme emotional distress”, will remain as a member of parliament for now.

    “She understood that retaining her ministerial warrant was untenable, especially for a justice minister to be charged with criminal offending,” said the prime minister in a press conference.

    Ms Allan, who was also minister for regional development, conservation, and emergency management, had recently taken time off due to “personal difficulties”, only returning to work last Monday.

    She confirmed her separation from her partner last month and is also facing accusations of poor working relationships with her staffers.

    In a statement, Ms Allan said that she had returned to parliament believing she could juggle personal challenges with her job.

    “My actions yesterday show I wasn’t okay,” she said, adding that she will consider her future in politics.

    Ms Allan was once seen as the darling of the Labour party. She was even tipped to succeed former prime minister Jacinda Arden, who stepped down from her role earlier this year before Mr Hipkins took over.

    Her resignation is the latest development in what Mr Hipkins admitted has been a “messy” time in his own party.

    Transport and immigration minister Michael Wood resigned in June over his failure to disclose a possible conflict of interest in stock ownership. A month earlier, customs minister Meka Whaitiri switched sides to join another party.

    Four months ago, police minister Stuart Nash in March was also fired after it was revealed he had given confidential information to donors.

    An April opinion poll predicted a close contest in the upcoming election between the centre-left Labour party and its main opposition the National party.

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    How a US soldier made a mad dash into North Korea

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    SEOUL/WASHINGTON: US Army Private Travis T King had finished serving time in detention in South Korea and was being escorted to the airport to fly home and likely face disciplinary action. But he never made it to his plane. Instead, he passed alone through security to his departure gate andContinue Reading

    Graft claimed in police hotline bid

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    In: South-East Asia

    PUBLISHED : 18 Jul 2023 at 06:00

    Graft claimed in police hotline bid
    Officials man the 191 emergency hotline. (Bangkok Post file photo)

    The Royal Thai Police (RTP) is to review a complaint regarding the bidding for the rights to operate its 191 emergency hotline.

    The complaint was presented to the RTP on Monday by activist Srisuwan Janya and Yoswaris Chuklom, alias Jeng Dokjik, who chairs the Ruam Jai Rak Chart (United Hearts for the Nation) group and alleged that the process had been rigged.

    Mr Srisuwan said the RTP run project is worth over 7 billion baht and is to be financed by the National Broadcasting and Telecommunications Commission.

    Approved by the cabinet on Dec 25, 2018, the project was modelled on hotline systems already in operation in other countries where distress calls are routed to a central hub which coordinates with local services in order to respond to emergencies more efficiently.

    The project involves building the infrastructure and installing telecommunication networks.

    Mr Srisuwan alleged the terms of reference (ToR) had been written to favour one particular firm in the bidding, which has now been cancelled twice on suspicion of corruption.

    The project also requires that three companies install telecommunication networks, which Mr Srisuwan claimed was another cause for concern as it could lead to confusion between different emergency response teams.

    Despite the project having gone through three national police chiefs, little headway has been made.

    On July 10, the Comptroller’s General Department opened a fresh bid calling for firms to tender their offers on Aug 10.

    RTP spokesman Pol Lt Gen Archayon Kraithong said the complaint against the project was received, and the RTP office will gather the documentary evidence needed to review the allegations.

    Mr Yoswaris said the owner of the company allegedly favoured by the ToR has close connections with a high-profile politician and senior RTP officers.

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    US Congress needs to scrutinize foreign-aid spending closely

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    The United States has a long and noble tradition in international development. In 1961, the US Congress passed the Foreign Assistance Act, which reaffirmed “the traditional humanitarian ideals of the American people and renewed [their] commitment to assist people in developing countries to eliminate hunger, poverty, illness, and ignorance.” 

    But if it’s true, as many claim, that the US Department of State (DOS) and the United States Agency for International Development (USAID) have frittered away billions of taxpayers’ dollars on quixotic, far-fetched, and even harebrained initiatives, then it’s time for Congress to ax programs that are inconsistent with or irrelevant to the original intent under the Foreign Assistance Act, or contrary to the US government’s foreign-policy priorities.  

    The President’s Fiscal Year 2024 Budget Request for DOS and USAID is jam-packed with excess and dubious programs. It calls for “$63.1 billion for foreign assistance and diplomatic engagement, which includes $32 billion in foreign assistance for USAID fully and partially managed accounts, $3 billion (10%) above the FY2023 Adjusted Enacted level.”

    Given the unprecedented size of the budget request, Congress must go over it during the markup process on Capitol Hill with a fine-tooth comb – or, better yet, a hacksaw – and eliminate funding for projects that are wasteful, ill-conceived, or contrary to American values, or which fly in the face of the recipient’s values. In any case, Americans have pressing needs at home that cry out for attention. 

    The Fiscal Year 2024 State, Foreign Operations, and Related Programs Appropriations Bill, released on June 22, “provides $52.5 billion for programs under the jurisdiction of the subcommittee.” This is a decent start. 

    A bank teller wouldn’t hand you a wad of cash just for the asking. You have to establish your bona fides as a client of the bank. Likewise, Congress should not dish out cash to any overzealous DOS/USAID ideologue who insists his or her pet program is vital to global stability or national security without presenting corroborating evidence that it is needed or that it will work.

    Foreign assistance – Gordian knots 

    DOS/USAID development assistance fits, broadly speaking, into two categories: a) essential humanitarian aid to save lives, alleviate suffering and meet basic human needs, and b) advocacy and sponsored research, which, frankly, is often optional, ill-conceived, or possessed of a whiff of ideology. Some research projects – for example, those related to dual-use biological research – are potentially dangerous. 

    Advocacy programs are often brazen exercises in social engineering incompatible with (when not subversive of) the values and standards of the recipient nation. Moreover, not infrequently, they bankroll “market-oriented reforms,” a euphemism for concentrating economic power in the hands of entrenched elites while leaving everyone else for the most part high and dry. Or they aim to achieve utopian goals only in the distant future – if at all (and it’s probably better if they never do).

    Having said that, Congress should unambiguously continue to support humanitarian activities such as international disaster assistance, food security, nutrition, sanitation, biodiversity, and medical aid. That’s the easy part.

    The hard part is distinguishing between essential humanitarian aid that is in the national interest from what is not – and then excising the vast quantities of lard that surround most budget submissions. That which is ideologically inspired, that is, anchored in belief structures detached from science and reality, should come in for especially close scrutiny.

    The size of the DOS/USAID budget request for 2024 is just under the average of the annual budget outlays for the Department of Defense for the years 1960-1972 (when the Vietnam War was on); it is more than the 2023 defense budgets of any one of America’s major allies, that is, of France, Saudi Arabia, Japan or Germany.

    To be sure, most development professionals are hard-working, kind, and extraordinary individuals who are motivated by a spirit of service and compassion toward others, let there be no doubt. But they owe it to the US taxpayer and the world’s poor to pull the plug on failed projects and programs, especially the ones that are fruitless, have resulted in botched outcomes or were of dubious intent to begin with. 

    Foreign aid for advocacy re-examined 

    USAID’s mission is “to transform families, communities, and countries” across the globe. Fine, but from what, into what? And with what end in mind?

    American institutions are informed by a specific idea of the human person who, as a rational, sensitive creature made of body and soul and possessed of fundamental rights and transcendent dignity, lives within a pre-existing, objective order that governs the cosmos. 

    This concept of the human person is reflected in the American Declaration of Independence: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” 

    These convictions gave rise to the American spirit of enterprise, individual responsibility, tolerance, and good humor. Our spirit is optimistic, humane, and pragmatic and, until recently, rigorously non-ideological. 

    The alternative worldview – prevalent among agnostics, practical atheists, skeptics, and most of America’s cultural elites today – sees the human person as a psychologically challenged complex construction of atoms and electrical impulses descended from one thing or another after a long period of random mutations.  

    They cannot explain where consciousness and feelings come from and do not even try. Their vision is reductionist and pessimistic and, as a result, they tend to see development assistance as limited to a means of preventing social disorder, alleviating poverty, and mitigating human distress rather than as an opportunity to do just that and bring out the greatness in each human being. 

    Some aid programs aim at nothing less than changing long-standing social norms and attitudes in countries deemed insufficiently attuned to the interests of progressive humanity. This kind of thinking is captured, for example, in “Biden USAID’s Radical Gender Policy Is Exporting Cultural Colonialism” or “Biden Takes the Culture War to Hungary.” 

    Today’s orthodox worldview in the academy tends to limit the purpose of development to the attainment of bodily comfort (or at least to the minimization of discomfort) and the achievement of prosperity – perfectly worthy goals but ones which fall short of integral human development in a wholistic sense – or some other material goal such as harnessing natural forces in order to improve the human condition.  

    To limit the aim of foreign development assistance to such material considerations is to treat the endeavor as an exercise in experimental science or a kind of animal husbandry – with people as the animals.

    Since US foreign aid affects people, families and countries, Congress must insist that USAID formulate development assistance policies that are secundum natura hominis, not contra natura hominis, that is, consistent with or, at least, not contrary to the nature of the human person and enhance the common good of society. 

    When engaging foreign countries, USAID must be careful not to export a reductive vision of the human person, which may inadvertently promote moral underdevelopment or be seen as part of a bid for geo-political dominance.

    Aid programs in support of education can easily degenerate into a means of social indoctrination, no matter how high-minded the stated purpose, and be used to overrule a person’s conscience, regulate outcomes, and control the uncooperative. 

    Spotlight on performance

    The Heritage Foundation, which has long cast a critical eye on US foreign assistance programs, highlighted the need for improved efficiency metrics and good governance to measure performance in its report “USAID 2017-2021: The Journey to Self-Reliance.” This report provides “a solid base from which to launch even bolder reforms while offering a future Congress a basis upon which to reshape foreign aid authorizations and appropriations.” 

    Congress should take a hard look at programs that have become bloated and/or undergone ideological drift. The pursuit of ideological pseudo-reality only undermines foreign aid’s exalted purpose, that is, to save lives, foster entrepreneurial spirit and self-reliance, alleviate distress, and foment a culture of life and the common good. As such, it disserves and betrays both those who need the aid and those who give it, namely the US taxpayer.

    When deliberating on the DOS and USAID budget request and during markup, which has begun, Congress should insist that agencies: 

    1. Explain the value proposition and assumptions of specific line-items in the proposed budget and set forth the expected outcomes within a realistic timeframe. Congress should challenge experimental programs and request that USAID spell out its criteria for prioritizing countries and allocating funding “to reform coalitions and policy priorities” under, for example, its “Dekleptification Guide ” (September 2022).
    2. Define unambiguously the meaning of words such as “prosperity,” “freedom,” “human rights,” “equity,” “democratic governance,” “health,” and “inclusion.”
    3. Disclose criteria for selecting partners, allocating funds, and determining the purpose of each proposed line item against benchmarks, timelines, and past achievements/failures. 
    4. Identify redundancy in certain specific accounts, for example, USAID ‘s Pillar Bureaus, Transition Initiatives, Complex Crisis Fund, Economic Support Fund, Functional Bureaus and Offices, Prevention and Stabilization Fund, and Democracy Fund, to name a few.
    5. Check for inconsistencies in language and reasons for de-prioritizing formerly high-priority accounts. For example, if international religious freedom is one of the administration’s top priorities, the FY2024 request of $11.4 million (66% of which covers salaries, benefits, utilities and supplies) for the Bureau of International Religious Freedom seems paltry. 

    Moreover, as Representative Mario Diaz-Balart underscored on June 23 in his remarks at FY24 State, Foreign Operations, and Related Programs Sub-Committee Markup, Congress must make sure that foreign assistance does not “leave countries unable to support themselves, more dependent on foreign aid and throw the door open for Communist China.” 

    Learn from Afghanistan

    The economic component of foreign aid to Afghanistan was $39 billion, or 30% of its total outlay of approximately $91.4 billion between 2001 and 2021.

    The report of the Special Inspector General for Afghanistan Reconstruction (July 2021) – “What We Need to Learn: Lessons from 20 years of Afghanistan Reconstruction” – unequivocally states that “the US government did not understand the Afghan context and therefore failed to tailor its efforts accordingly.” 

    Good intentions do not compensate for bad ideas or boundless ideological confidence. 

    John F Sopko, the author of the report, lamented the failure of aid policy in Afghanistan: “We [need] to determine why the effort to build a strong, sustainable Afghan state failed so dramatically and disastrously.” That failure had more to do with bad ideas than with poor management or a lack of resources. Congressional oversight should seek to prevent such failures in the future.

    Listen to partners without preconditions

    Foreign assistance initiatives must be in sync with the wishes and concerns of peoples and elected officials across the globe. If not, the US runs the risk of blowback. Here is just one example: 

    President Andrés Manuel López Obrador of Mexico, in a recent note to US President Joe Biden, slammed USAID: “I would like to briefly express to you that for some time the United States government, in particular the United States Agency for International Development has dedicated itself to financing organizations openly opposed to the legal and legitimate government that I represent, which is clearly an interventionist act, contrary to international law and the respect that should prevail between free and sovereign states.” 

    This sentiment is increasingly expressed by countries around the world. 

    The problem of concentration

    USAID, with its small and shrinking partner base, has a concentration problem. Congress should require it to divulge the names of its top 25 implementing partners and, more important, the names of its subcontractors and how often they are engaged. Ditto the recipients. 

    Concentration has been a problem for years. According to USAID’s website (link recently deleted), “In FY2017, 60% of obligations went to 25 partners, and more than 80% of obligations went to just 75 partners. The number of new partners has decreased consistently since 2011 when the agency worked with 761 new partners; in 2018, it worked with 226 new partners.” 

    Congress should tell USAID to diversify its partner base and expand local empowerment even if this results in increased inefficiencies and workloads. USAID must dramatically expand direct assistance to worthy recipients in foreign countries, by-passing its Washington-based brokers. 

    Putting human development, humanitarian assistance first

    To be sure, Congress should:

    1. Continue to support USAID’s humanitarian aid portfolio: water management, food security, sanitation, sustainable agriculture, small businesses and entrepreneurship, disaster preparedness, sensible environmental and biodiversity programs, non-intrusive health initiatives (such as malaria and HIV/AIDS care, improved nutrition for vulnerable children, etc) and the promotion of religious freedom and, generally, culture-of-life initiatives. 
    1. Ensure that the programming in the 2024 Budget Request neither contradicts the principles embodied in the 1961 Foreign Assistance Act, the Declaration of Independence, and other key documents of the United States, or undermines the interests of, or otherwise antagonizes, partner countries that may regard the ideologies, attitudes or policies we would introduce as alien, deleterious or anathema. 
    1. Insist emphatically that DOS/USAID focus on traditional humanitarian assistance and scale way back on the undesirable and intrusive aspects of its advocacy work. Such an approach will better reflect the original intent of foreign aid, the magnanimity of Congress and the generosity of the American people. 

    And, as indicated in the aforementioned appropriations bill, Congress should demand transparency by requiring “the public posting of reports and foreign assistance data on the Department of State and USAID websites so the American taxpayers can see how the funds are used” and who is receiving the funding. 

    In short, Congress must insist that DOS/USAID spend taxpayers’ money more wisely while giving us something we haven’t had in a long time: a foreign policy anchored in realism, common sense, and more respectful engagement with foreign countries, taking into account their unique needs, cultures, and sensitivities.

    In this way, USAID will remain “the world’s premier international development agency and a catalytic actor driving development results” while demonstrating American generosity. 

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