China’s two sessions: Amid takeaways from Premier Li Qiang’s maiden work report, focus falls on his role under Xi

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According to analysts, Premier Li’s record ended up being much on promises but short on details.

Indeed, important economic goals for the year were set as anticipated, most notably the “around 5 %” growth in the gross domestic product ( GDP ).

This may indicate that post-pandemic confidence will continue to grow after 2023, which also increased by ( roughly ) 5 %, according to Dr. Lim told CNA.

This may possibly signal a prolonged post-Covid recovery, he added.

Premier Li even made the promise to transform China’s development strategy, among other things, to stop business overcapacity, defuse risks in the property sector, and reduce wasteful spending by local governments.

However, no specific steps or a timetable for the planned steps were provided. According to LKYSPP’s Assoc Prof Wu,” I did n’t see any significant breakthrough,” calling it “very much” a routine report.

According to Dr. Chen Gang, assistant director and senior research fellow at NUS’s East Asian Institute, the president’s work is not bad given the challenges they’re facing. The report follows earlier years ‘ record model. &nbsp,

” Stabilizing economic growth, business, expense, and international relations are also top priorities.”

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However, authorities made a number of observations.

According to Ms. Jing Liu, HSBC’s chief analyst for Greater China, “very essential,” the government’s long-standing commitment to changes and opening up is.

She cited Premier Li’s suggestion to establish a level playing field for various business types.

In China, private companies are a significant development driver, providing 80 % of industrial jobs, and acting as the long-term backbone of the nation’s US$ 18 trillion market.

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China: What Li did and didn’t say at the NPC – Asia Times

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Investors already seem unimpressed by China’s pledge to grow around 5% this year. It’s not because of what Premier Li Qiang said about Asia’s biggest economy but rather what his National People’s Congress report failed to address.

Along with Beijing holding its fire on massive new stimulus, the report lacked new strategies to fix a property crisis exacerbating deflation. Nor did it detail fresh moves to strengthen China’s capital markets to stabilize sliding stocks.

Li’s report did contain many goodies that might normally send mainland stocks skyward. The gross domestic product (GDP) target is certainly ambitious given Japan is in recession, Europe is heading that way and US Federal Reserve rate cuts are off the table for now.

Plans to champion “high-quality development” augur well for increased innovation, research and development, green energy, cutting-edge manufacturing and, ultimately, higher disposable incomes across the nation.

Investors may be cheered by talk of generating 3% consumer price inflation, holding the fiscal deficit to 3%, creating 12 million urban jobs and increasing tech self-sufficiency as Washington tightens the screws. There’s hope, too, that the plan to issue one trillion yuan (US$139 billion) of ultra-long special central government bonds will boost consumption.

The work report that Li unveiled stressed that to be “well prepared for all risks and challenges,” the government is working to ensure that “internal drivers of development are being built up.”

As such, it said “we will implement a package of measures to defuse risks caused by existing debts and guard against risks arising from new debts.”

Beijing, it added, “will take prudent steps to defuse risks in small and medium financial institutions in some localities and take tough measures against illegal financial activities.”

Overall, Li “provided a largely positive review of the development” efforts, says Bert Hofman, a senior fellow at the National University of Singapore.

But little of note has been said so far about repairing the biggest cracks undermining the economy — and global investors’ confidence in it. These include a property crisis putting China in global headlines for all the wrong reasons and a $9 trillion mountain of local government financing vehicle (LGFVs) debt.

To economist Alicia Garcia-Herero at Natixis, the big takeaway is that the NPC “work report confirms the same growth target as last year, but without a plan.”

Of course, many investors would add to the list the steady reduction in transparency on President Xi Jinping’s watch. Though Li claimed Beijing will “vigorously promote” openness to information, Xi’s moves to tighten control over data, particularly among foreigners, aren’t helping.

Nor is China’s surprising decision to scrap the premier’s traditional press conference at the close of the NPC. It’s the first time that’s happened since 1993.

“China seems to be heading towards close-door policies with more opaqueness on economic policies,” says analyst Kelvin Wong, who publishes the Lighthouse Chronicle newsletter.

As such, he detects a “lack of any clear catalyst to kickstart a major bullish impulsive trend structure for China and Hong Kong benchmark stock indices.”

Without increased visibility on Beijing’s policy, Wong says, “China stock market and capital markets are likely to be shunned by international players,” except for those within the Belt and Road circle of nations.

Ruihan Huang, senior researcher at the Paulson Institute think tank, argues the NPC’s work report contained “good news for foreign investment.”

“Beijing will fully abolish restrictive measures on foreign investment access in the manufacturing sector and liberalize market access in services such as telecommunications and medical care.”

On the other hand, Huang adds, it’s noteworthy that amidst the persistently sluggish real estate market, Li omitted the phrase “houses are for living, not for speculation” this year. In 2023, then-premier Li Keqiang featured that phrase prominently.

China’s ambition, expressed by China’s 5% growth target, might indeed raise concerns that Team Xi might resort to putting short-term growth ahead of long-term reforms to avoid future boom-bust cycles.

Chinese Premier Li Qiang and President Xi Jinping in March 2023. Photo: Xinhua

Lynn Song, greater China chief economist at ING Bank, notes that with “pervasively downbeat sentiment and property market weakness remaining an overhang, reaching 5% growth this year may be more difficult.” As such, her team expects to see “a moderate level of policy support.”

Yet moving China beyond those up-down GDP cycles requires reading the cracks underneath the economy. And with action, not slogans.

It’s grand that Xi and Li favor “higher productivity” and “high quality” growth. It’s another thing to do the heavy lifting to achieve it, China watchers say.

By her reading, Garcia-Herero at Natixis says Tuesday’s proceedings offered “no stimulus — the fiscal deficit even lower — no liberalization, nothing.”

On Tuesday, Li acknowledged that China’s economic performance faces “difficulties” that have “yet to be resolved.” Li even detailed where the cracks lie, saying that “risks and potential dangers in real estate, local government debt, and small and medium financial institutions were acute in some areas. Under these circumstances, we faced considerably more dilemmas in making policy decisions and doing our work.”

One problem, of course, is a lack of trust in China’s economy at a moment when Xi’s party is muddying foreign investors’ ability to discern the true fundamentals of the economy. Already, for example, there are doubts among analysts that China really grew at the 5.2% rate Beijing claims in 2023.

“A lot of economists think the numbers are completely fabricated. The idea of 5.2% or 5.5% growth is [very] likely wrong,” says Andrew Collier, managing director at research firm Orient Capital, told BBC. “It’s more like 1% or 2%.”

Though that may seem overly pessimistic, Collier speaks for many when he says “I think the next five or 10 years is going to be difficult.”

That’s in part due to an intensifying US-China trade war. In Washington, President Joe Biden’s White House continues to limit China Inc’s access to semiconductors and other vital technology – and US investors’ ability to invest in mainland tech firms.

On Tuesday, Beijing reaffirmed its overriding goal of becoming self-reliant in chipmaking and artificial intelligence in order to compete with the West.

The central government is boosting spending on technology and scientific research by 10% to nearly US$52 billion this year. Along with promoting national champions, the plan involves giving key enterprises a pivotal role in driving the policy.

“We will fully leverage the strengths of the new system for mobilizing resources nationwide to raise China’s capacity for innovation across the board,” Li’s report as delivered to lawmakers said.

“We will pool our country’s strategic scientific and technological strength and non-governmental innovation resources to make breakthroughs in core technologies in key fields and step up research on disruptive and frontier technologies.”

Yet underneath these worthy goals is a financial system still misallocating capital, damaging confidence among foreign investors and undermining domestic business and household confidence.

In February alone, the value of new home sales plunged 60% from a year earlier. That followed a more than 34% drop in the previous month.

China’s property market is a growing drag on the economy. Image: Screengrab / CNBC

Because real estate is the main asset in which Chinese invest, plunging property values are undermining consumption at a moment when Xi and Li hope to boost domestic demand.

As such, Beijing must detail plans to accelerate steps to repair the housing sector and to get bad assets off property developers’ balance sheets.

It’s vital, too, that Xi and Li find ways to reassure global asset managers that the roughly $7 trillion stock rout between 2021 and last month won’t continue. Beijing’s deployment of the “national team” of state funds to buy shares won’t renew confidence in the long run. That, analysts say, requires bold policy changes.

That’s why, for now, economists at HSBC think “recent market turmoil may prompt more decisive and quick moves by the national team to help restore confidence and prevent a self-fulfilling cycle.”

Yet decisive and quick moves seemed in short supply Tuesday. The same goes for altering the narrative on deflation.

“Once the expectation for further deflation is formed, consumers and investors will cut back on their spending,” says Gene Ma, head of China research at the Institute of International Economics. “Deflation will reduce the nominal GDP and thus raise the debt/GDP ratio and exacerbate the debt overhang.”

Ma argues that “the falling asset prices and negative wealth effect are hurting investment and consumption. The falling asset value relative to liability may force businesses and households to repay their debts to deleverage, making monetary easing like pushing on a string. Moreover, deflation causes weaker corporate earnings, rising defaults, and deteriorating bank asset quality, which in turn could lead to credit contraction.”

The People’s Bank of China has responded with cuts to required reserve rates and official interest rates. However, Ma says, “the producer price inflation-adjusted real lending rates remained elevated at 6.6% in the fourth quarter. We think a lot more forceful policy measures are needed to prevent deflation from doing more damage. The PBOC should explicitly anchor the inflation expectations by introducing an inflation target of 2% to 3%.”

So far in 2024, the PBOC has been reluctant to ease assertively. One reason is Xi’s determination to keep the yuan from falling. That, Xi’s inner circle apparently worries, would squander progress made in building global trust in the yuan and anger Washington head of a contentious election.

Another is fear of incentivizing bad lending and borrowing behavior. The liquidity bursts that are flowing from the PBOC have been enough to tame bond market dynamics but not stabilize Shanghai stocks.

Part of the rationale seems to be that China can do the bare minimum to stabilize stocks and keep GDP as close to 5% as possible. The restrained nature of policy moves, though, appears positive for bond markets and negative for stocks.

Hence the benchmark’s sharp swings up and down on Tuesday. The Hang Seng China Enterprises Index dipped as much as 2.6%, the most in more than a month.

The good news: Xi and Li still have another week of NPC festivities to lay out a clear and coherent plan to repair a cratering property market and restore trust in the stock market. All global markets can do is hope that they use it.

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

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Weather warning: summer storms, high temperatures

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Summer storms may bring weather to parts of the Northeast, Central, East and South over the next few days as a reduced- pressure system moves over the top part of the country, the Meteorological Department warned on Monday.

The lower- pressure front, which will be effective until March 7, combined with a strong, south- southerly wind will bring gloomy conditions and cause temperatures to hover around 38- 40 degrees Celsius. &nbsp,

The top may cause climate changes all the way to the South, with the ministry warning of possible showers and waves of up to one centimeter in both the Gulf of Thailand and the Andaman Sea.

Between March 8- 9, a warm front from China will shift towards the region, causing storms as it clashes with the prevailing lower- pressure, hot front across the country. &nbsp,

Those living in the North and the Northeast does expect windy conditions with big rain and lightning attacks during the time.

Waves of 1- 2 yards are expected across the South.

Individually, satellite images and files from the Geo- Informatics and Space Technology Agency ( Gistda ) showed that as of 8am on Monday, five counties had extremely high levels of ultra- good PM2.5 substances -&nbsp, far above the healthy threshold for exposure over a 24- hour period of 37.5 microgrammes per square metre set by the government.

Nakhon Phanom reported the worst fine dust pollution, with PM2.5 levels averaging 82.8 µg/m³, followed by Mukdahan ( 82.5µg/m³ ), Kalasin ( 76.5µg/m³ ), Phayao ( 76µg/m³ ), and Roi Et ( 75.6µg/m³ ).

Thirty- one regions reported toxic levels of good dust pollution.

Bangkok, however, has enjoyed fairly fine weather quality over the past several times, according to Gistda. Satellite pictures taken on Sunday showed 1, 015 flames areas across the country, 355 of them in forest resources.

Myanmar had the most hotspots in the region with 3, 963, followed by Cambodia ( 1, 686 ), Laos ( 1, 030 ), and Vietnam ( 335 ).

Due to a fire across the border, Preah Vihear ( Phra Viharn ) National Park in Sri Sa Ket’s Kantharalak district, on the border with Camboldia, will remain closed until March 8.

Park key Jit Ardsanjorn said that the smoke from the fire affected some areas in Thailand, particularly around Noen Nub Dao on the eastern slopes of Ha Mo E Daeng.

Park officials and soldiers from Preah Vihear Forest Fire Control Station and men were helping control the incident, making more firebreaks.

Extra firetrucks and crew were on backup if needed, Ms Jit said.

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Blackstone appoints head of SEA private equity, aims to double Singapore headcount | FinanceAsia

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A spokesperson for Blackstone has confirmed to&nbsp, FinanceAsia that the size of its Singapore private equity team will double in order to expand into Southeast Asia ( SEA ) in the next two years. The group had “evaluate options” across the board in SEA, including Singapore, the spokesperson added. &nbsp, &nbsp,

Additionally, the New York-based other asset manager has appointed Mumbai-based Aravind Krishnan, a managing director at Blackstone Private Equity, to direct Singapore’s private capital staff. Krişnan, who has been with Blackstone for 11 years, will quickly move to Singapore to help with the team’s expansion.

In a press release released on January 16, Blackstone Private Equity’s head of Asia, Amit Dixit, stated in an email that” Singapore is home to some of our most significant owners, as well as office for international and Asian firms and a gate to SEA. Our SEA private capital company will be led by Aravind, who has been with Blackstone for more than a decade. The Blackstone Singapore group now has more than 100 professionals.

Blackstone celebrated its eighth celebration in the Lion City with a recent move to a new business in Singapore. Over 100 folks work for the company overall it.

In the launch, Blackstone’s global head of personal ownership, Joe Baratta, stated,” This is a great time to be in Singapore, an important doorway to the SEA and its emerging options. Over the past ten years, we have grown more than threefold across all of our companies and forged valuable collaborations with our shareholders, the government, and businesses. Our footprints in SEA will be greatly increased by the development of our private capital business.

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Two sessions: Can a rubberstamp parliament help China’s economy?

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Delegates attend the opening session of the Chinese People's Political Consultative Conference (CPPCC) at the Great Hall of the People, in Beijing, China, 04 March 2023.EPA
By Stephen McDonell
BBC News, Beijing

The Chinese government is under massive pressure to come up with solutions for its troubled economy.

So people will be watching the National People’s Congress to see what’s on offer when it starts on Tuesday.

Nearly 3,000 NPC delegates gather annually, for just over a week, inside Beijing’s cavernous Great Hall of the People to pass laws, approve personnel changes and delegate the operation of government to smaller groups which meet throughout the year.

It is, for the most part, a political performance which rubber-stamps decisions already made behind closed doors.

But given that the messages delivered have been thought through by those in power, analysts will be looking out for any change in the official Party line and what it might mean for China and the world.

For example, a certain new phrase might signal a change in industrial policy or a potential new law governing investment rules.

Crucially, the lens through which to view all of this is that there is nothing more important to the Communist Party than ensuring the longevity of its rule in China. For the current leader, Xi Jinping, it is absolutely paramount in virtually all aspects of life.

This has not seemed like much of a struggle in recent decades, as business boomed and living standards improved for most, year after year.

But now Asia’s engine of growth is locked in a real estate crisis which has dissolved the life savings of many families who paid for flats which were never delivered; it has armies of university graduates who can’t find good jobs and it is burdened by huge amounts of local government debt, which has robbed policymakers of the ability to inject funds into infrastructure in the same way they used to be able to, whenever times were tough.

It had been the case that a new road project, or a series of bridges, could soak up a lot of unemployment, unused steel and excess concrete capacity. But this is a period of much more uncertainty.

“This year’s NPC will be held at a time of unusual ferment and volatility, particularly over economic policy,” says Richard McGregor, author of The Party, which examines China’s structures of government.

He told the BBC that there are “rumours swirling about the government looking for a large statement of some kind to restore confidence and lift growth. There is widespread unhappiness about the state of the economy, and in turn about the direction Xi Jinping has set for the country”.

In the past, when enormous changes generated great concern – like the flooding of entire historic areas to make way for the Three Gorges Dam project – there have been protest votes registered at the NPC.

But it would take an exceptionally brave Party representative to try that under Xi Jinping.

Mr McGregor said he doesn’t expect denunciations of leadership during this Congress, as “all of the delegates have learnt to stay very much on message”. However, he added that “even critical murmurs will be significant”.

Professor Ann Lee from New York University said the session could see legislation providing more support to the private sector.

“This is a tacit recognition that China’s economy needs more entrepreneurial investment in order to meet Xi’s high-quality growth goals,” she said.

‘New productive forces’

A phrase Mr Xi has been using since the end of last year in reference to the direction of the country is “new productive forces”. This is likely to be peppered through speeches in coming weeks as well.

But what does it mean?

Dr Jon Taylor from the University of Texas at San Antonio said that Mr Xi is referring to “an emphasis on the development and commercialisation of technology and science, digitisation, and high-end manufacturing centring on emerging intelligent and eco-friendly technologies”.

He added that, while this is a “quite interesting catchphrase”, it is going to take time for these types of industries to take off, partly because “these sectors of China’s economy are relatively small”, and “the problem is that China faces some serious challenges, thanks to an underperforming economy”.

He said that the new emphasis on technological innovation may pay off in the long term, but that “in the short term, China remains dependent on infrastructure spending and a wobbly property market”.

People walk inside a shopping district in Beijing, China, 09 December 2023.

EPA

One interesting aspect of Mr Xi’s “new productive forces” was when he told the Politburo in January that such forces would be “freed from traditional economic growth mode and productivity development paths”, which would seem to suggest that the coming high-tech breakthroughs could be organised by and for the Party.

According to the former Chief Economist at multinational investment bank UBS, George Magnus, “this emphasises the party’s leadership, control and power to leverage ‘new productive forces’ for ideological work. This, in turn, means an industrial policy that serves to strengthen the Party’s dominance in the economy’s core digital and scientific spaces”.

Professor Lee sees the use of this phrase as important because it shows that “Xi is determined to reinvigorate the Chinese economy after setbacks from its real estate sector and the ongoing trade tensions with the West” and said that it “may signal a turning point”.

Choreographed questions, mountains of jargon

This mass political gathering starts with a marathon speech from the Premier, in which he reads out the Government Work Report, which summarises – in a very formulaic fashion – how China has performed over the past 12 months over a wide range of areas: the economy, the environment, in agriculture and so on.

Then it moves on to what the Party’s plan for the next year is. This is a key place to pick up any shifts in government thinking, but a magnifying glass may be required to spot it amongst the mountain of jargon.

During the NPC, there will also be a series of highly choreographed press conferences in which only screened questions are permitted and virtually all answers rehearsed.

Over recent years, the Party has also placed fake foreign correspondents into these press briefings, who seemingly represent the international media but are really from front companies based overseas but controlled by Beijing.

“The days of relatively candid press conferences from various ministries and provincial delegations on the sidelines of the Congress are pretty much gone,” said Mr McGregor.

This vast meeting may be an elaborate show – with loyal delegates head down in turgid reports – but that doesn’t mean it will be without important developments.

According to Dr Taylor, “while the Congress tends to be a decidedly performative autocratic exercise, there are elements of policy innovation and promulgation that bubble up”.

These are trying times for China, he said.

The country “faces several challenges that it will continue to struggle with this year: encouraging foreign direct investment in the midst of decoupling, systemically addressing local government debt, restoring private sector confidence, developing greater technological and scientific self-reliance, and ramping up consumer demand”.

There are significant problems facing this superpower and the moment for answers is upon it.

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Singapore aims to build AI talent pool through accelerated masters programme, visiting professorships

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SINGAPORE: As part of moves to attract and nurture top minds in the area of artificial intelligence (AI), Singapore will launch professorships as well as a masters programme, said Minister for Communications and Information Josephine Teo on Friday (Mar 1).

The AI Visiting Professorship aims to attract top researchers to collaborate with Singapore, and the plan is to award it to a pilot batch of five visiting professors over the next few years, said the Ministry of Communications and Information (MCI).

These professors will be required to spend at least 20 per cent of their time on these collaborations. They will also need to identify a local collaborator and will be encouraged to supervise junior researchers and students in Singapore. 

“The goal is for these AI visiting professors to drive research aligned with our national AI research agenda, provide increased training opportunities for local students and catalyse additional research activities in Singapore,” said MCI.

This follows Deputy Prime Minister Lawrence Wong’s announcement during his Budget 2024 speech earlier in February, that the government will invest more than S$1 billion (US$743.7 million) over the next five years in AI computing, talent and industry development. 

This supports Singapore’s updated National AI Strategy (NAIS) 2.0, which was launched in December last year.

“There is no doubt that technology has become a big part of Singaporeans’ daily lives,” said Mrs Teo in parliament, laying out her ministry’s spending plans for the year.

“Overall, 84 per cent say that digital technologies have made their lives easier, and more than half are prepared to try new technologies.”

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China’s got a fixable lost-in-translation problem – Asia Times

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As Xi Jinping’s regulators tighten their grip on quantitative trading, they are inadvertently giving global investors another reason to make ill-timed comparisons to 2007.

In August of that year, as US subprime debt troubles were starting to bubble up, a bunch of model-driven hedge funds suffered their own “quant quake,” a phrase now being applied to China.

Drawing such comparisons clearly isn’t Beijing’s intention. But they come at a moment when many global investors wonder if China is having its own “Lehman moment” amid cratering property and stock values.

Odds are, China isn’t, as scores of Asia Times articles have argued in recent months. The market forces in 2007 and 2008 that toppled Lehman Brothers were of a different nature than those plaguing China Evergrande Group or Shanghai trading pits.

Yet the quant crackdown fits with a disturbing pattern that helps explain why foreign investors are so skittish on Chinese markets. It’s a reminder of how mixed messaging can cause confusion at a moment when Xi is struggling to revive foreign interest in the stock market — while doing things that scare investors off.

Forty months on, Wall Street is still trying to figure out what’s going on with Jack Ma and the much-anticipated Ant Group initial public offering. Despite countless tries, Team Xi never managed to explain that episode — or myriad crackdowns on tech platforms since.

By late 2023, stung by debates about whether China is “uninvestable,” it seemed Team Xi was turning the page. In the last 10 days of last year, though, regulators unveiled plans for a crackdown on the gaming industry.

Though Beijing tried to walk back the news, it was too late as investors feared broader curbs on tech platforms. Tencent alone saw tens of billions of dollars fleeing its shares.

And then just when investors started to dip their toes again in Chinese tech shares, Beijing announced it had amended the State Secrets Law to expand coverage to high-tech industries. The pivot is effective May 1.

Even if this step, which Beijing says supports the research and application of new technologies, is a wise one, confusion and mixed signals abound. Meanwhile, headlines concerning Hong Kong’s latest move to implement a new local National Security Law hardly help.

A billboard referring to Beijing’s National Security Law for Hong Kong, seen beyond a Chinese national flag held up by a pro-China activist during a rally outside the US Consulate in the city. Photo: Asia Times Files / AFP / Anthony Wallace

The law, foreign investors fear, would go further to remake what was once the globe’s freest economy in Beijing’s highly controlled image. Its vaguely worded provisions allowing prosecution for offenses from “treason” to “insurrection” to “sabotage” to theft of “state secrets” to “external interference” have investment banks and news organizations in a whirl.

Beijing’s quant ban, meanwhile, is triggering the PTSD of all too many investors still trying to make sense of the events of late 2020. The good news is that next week affords Xi and Premier Li Qiang an ideal opportunity to change the narrative and regain reformist momentum.

The annual National People’s Congress opens on March 5. Along with setting China’s gross domestic product (GDP) target, the NPC is a chance to articulate plans for economic reforms and reboot Xiconomics for the duration of Xi’s third term as party leader.

“We continue to expect an ambitious growth target of around 5% of real GDP growth and more supportive fiscal policy this year,” analysts at Goldman Sachs wrote in a note. “Key topics to monitor during this year’s ‘two sessions’ include discussions about the government’s ‘new model’ for the property sector, local government financing and fiscal reforms, as well as other demand-side stimulus such as support to consumption.”

Both Xi and Li proved in recent months that they know how to calm nerves among the foreign investment set, particularly when it comes to the globe’s most important bilateral trade relationship.

In November, Xi told a ballroom full of top CEOs that China is again open for business and ready to work with the US. “China is willing to be a partner and friend of the United States,” Xi told an audience that included Apple CEO Tim Cook and Tesla CEO Elon Musk.

“If we regard each other as the biggest rival, the most significant geopolitical challenge and an ever-pressing threat, it will inevitably lead to wrong policies, wrong actions and wrong results,” Xi said.

He added that “no matter how the global landscape evolves, the historical trend of peaceful coexistence between China and the United States will not change.”

In Davos in January, Premier Li said that “choosing investment in China is not a risk, but an opportunity.” Li said “investing in China will bring huge returns and a better future” and described the CEOs on hand as “participants, witnesses and beneficiaries of China’s reform and opening up.”

China, Li said, “stands ready to seriously look into and solve the difficulties and problems encountered by foreign enterprises” operating in the country. “We will take active steps to address reasonable concerns of the global business community,” Li said.

Li Qiang, for one, is welcoming to foreign investors. Image: Screengrab / NDTV

To Michael Hirson, China economist at 22V Research, the speech was indicative of “Li’s desire to set a confident tone for the global audience.”

Xi’s government, in other words, knows how to talk the talk global investors want to hear. In a January 16 speech to top party officials, for example, Sinologists were intrigued by how much time Xi spent talking about the financial system.

These days, “the financial system is all the rage in policy circles,” Trivium consultancy analysts wrote in a note. That same week, Trivium notes, top Communist Party’s top theorist Qu Qingshan argued that “only by accelerating the construction of our financial power and continuously improving our country’s competitiveness and voice in international finance can we seize the initiative in the game of great powers.”

Yet Xi’s team has significant work to do to clarify where Beijing plans to take the reform process next. At present, many foreign investors are at a crossroads on whether to double down on China or reduce exposure.

“Low valuations are typically associated with higher future returns, although of course there are no guarantees,” says Henry Ince, an analyst at Hargreaves Lansdown. “Our conversations with fund managers have painted a mixed picture: some remain cautious on the outlook ahead but others believe some companies offer compelling value at current market prices.”

The confusion of recent months – years, actually – also has many Chinese innovators unsure on how to proceed. As Fred Hu, CEO of Primavera Capital Group, tells Bloomberg, “Chinese entrepreneurs are lying low, or lying flat. This sense of insecurity, in my observation, in the Chinese entrepreneur community, is really — I have not seen it like this since 1978.”

That was the year then-leader Deng Xiaoping launched epochal reforms to propel China from the Cultural Revolution era. Hu notes that “the single biggest priority in my mind is legal reform, is really to establish true rule of law that is essential for the healthy function of a modern market economy, which China is.” That, Hu says, means ensuring that entrepreneurs feel protected from “arbitrary political interference and worse, even prosecution.”

The bottom line, Hu says, is that if China “really commits to rule of law and market reforms, I do think the confidence will slowly but surely come back, then the animal spirit will be rekindled.”

The NPC is a timely opportunity for Xi to allay fears that he plans to continue concentrating power and enabling state-owned industries to grow their dominance. All this means the most powerful Chinese leader since Mao Zedong is on the clock with markets as never before.

Li, too. Seen by many as a champion of high-tech entrepreneurship, the hope is that Li will have more clout and autonomy with Xi to raise China’s innovative game than his predecessor, Li Keqiang. That might enable Xi’s “common prosperity” plan to gain greater traction to raise living standards at all income levels.

Beijing could do so next week by signaling an acceleration in steps to repair the property sector, strengthen capital markets, champion the private sector, recalibrate growth engines from exports to domestic demand, internationalize the yuan and build bigger social safety nets to encourage households to save less and spend more.

It’s vital, too, that Xi and Li reassure global asset managers that the roughly US$7 trillion stock rout between 2021 and last month is over. And not just because Beijing deployed the “national team” of state funds to buy shares but due to renewed confidence.

Odds are, “recent market turmoil may prompt more decisive and quick moves by the national team to help restore confidence and prevent a self-fulfilling cycle,” HSBC economists write in a note.

It’s more important, though, that Beijing win back global investors’ trust with a renewed commitment to raise China’s financial game.

One area of keen interest is China’s $3 trillion trust industry, which has emerged as yet another threat to financial stability. Beset by scandals, China’s trust companies remain a major thorn in the side of regulators.

Last July, Beijing faced sizable protests after private wealth giant Zhongzhi Enterprise Group and its affiliate Zhongrong International Trust suspended payments on a variety of high-yield investment products.

Zhongrong International Trust didn’t keep its word to investors. Photo: Handout

In November, China tweaked rules to increase risk prevention. Yet Xi and Li have more work to do to prod trust firms to prioritize offering wealth management services over acting as broader channels to markets, which can imperil portfolios.

At the moment, too much of what Beijing is doing to modernize the economy is getting lost in translation with global investors voting with their feet. Some of the concern is China’s economic trajectory in 2024.

“The fragility of the economic recovery” was signaled in February by the authorities’ “stepped-up support for the economy and housing market” via an “unusually large” 25 basis-point reduction in the five-year loan prime rate, a benchmark interest rate that commercial banks use for long-term lending, says Lan Wang, an analyst at Fitch Ratings.

Wang adds that “we expect the rate cut to squeeze net profit at banks, while delivering a minor boost to economic activity.” A bigger one may be needed amid “tepid external demand, slower manufacturing” and disruptions from the Red Sea conflict are likely to slow cargo and container throughput growth for Chinese port operators, Wang notes.

In February, mainland home sales dropped sharply despite Beijing’s efforts to boost the market. New home sales, as reported by the 100 biggest real estate companies, plunged 60% last month year on year, after dropping 34.2% in January. In recent days, officials cut key mortgage reference rates.

“We doubt that those measures alone will be sufficient to restore confidence in the property market,” says Serena Zhou, an economist at Mizuho Securities. “Unconventional measures will likely be essential.”

Meanwhile, Sino-US relations are a big wild card. This week, US President Joe Biden’s Commerce Department opened a probe into perceived national security risks posed by China-made hardware and software in smart cars.

With the November 5 election approaching, China can expect a slew of fresh efforts in Washington to toss sand in its economic gears as candidates on both sides of the political divide vow to get tough on China.

But taking a longer-term perspective, change is indeed transforming China’s economy. Economist Louise Loo at Oxford Economics notes that Xi’s team is making progress in elevating the “new three” industries – electric vehicles, lithium-ion batteries and solar cells – to create new jobs and generate disruptive forces. 

At the upcoming NPC, Xi and Li have a unique window of opportunity to spotlight these dynamics and others — and to divert attention from the policy confusion of recent years. China’s leaders would be wise to use it. Otherwise, Beijing’s lost-in-translation problem might sow even more doubt and foreign investor flight.

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

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Hong Kong agents say property deals jump after big policy moves

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HONG KONG: Hong Kong’s property market immediately celebrated the removal of decade-long curbs with a jump in transactions, property agents said on Thursday (Feb 29), as authorities made a concerted bid to boost the city’s depressed real estate market. Hong Kong, long among the world’s most expensive housing markets, sawContinue Reading

Deterrents to a Hamas-style North Korea border raid – Asia Times

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The October 7, 2023, Hamas attack on Israel was surprising in many aspects. The motorized paragliders, despite their slow speed, served as a wake-up call for countries dealing with potential border infiltration issues.

The graphic videos depicting hostages being abducted across the breached “smart fence” were certainly horrifying, particularly for the Republic of Korea (ROK): The Israeli fence is modeled after South Korea’s, with its cutting-edge sensors and closed-circuit TV situated in the Demilitarized Zone (DMZ).

Yet, despite subsequent heated debates in National Assembly hearings, it seems the ROK is safe for now, for several reasons. These include distinct operational environments and recently upgraded defense and radar systems.

The geographical difference between the flat southern regions of Israel and the mountainous DMZ, which is laden with countless landmines and air-defense guns, makes a direct comparison unfeasible.

Also, the ROK does not experience a daily influx of workers crossing the border, a factor that enabled some working visa-holding Palestinians to turn into belligerents on October 7.

Lastly, the ROK’s indigenous TPS-880K multifunctional radar, recently fielded by LIG (a LG subsidiary), can detect very small drones and paramotors within a nine-mile range and a little more than a mile in altitude.

The radar can instantly issue C4 (command, control, comms, and computer) orders to varying types of air-defense guns, as well as the low-altitude combined anti-aircraft weapon (Bi-ho Hybrid) and ROK sentries, serving as the linchpin of the integration of the ROK’s DMZ weaponry.

While human error is always possible, as was evidenced by a North Korean drone that infiltrated Seoul last year, the integrated, automated defense system appears quite sufficient in addressing systematic invasions.

However, the conversation about border security has sparked further debates over the ROK military’s plan to partially revoke the September 19 Comprehensive Military Agreement (CMA), in which both countries agreed to “completely cease all hostile acts against each other” and implement military confidence-building measures in the air, land and sea domains.

To foster inter-Korean reconciliation, the 2018 CMA established no-fly zones around the DMZ, essentially halting aerial intelligence, surveillance and reconnaissance (ISR) activities by the ROK-US alliance.

The CMA’s raison d’être, aimed at decreasing inter-border clashes, has lost its justification due to recent shifts in global security concerns wherein previously unthinkable military moves, like Russia’s illegal invasion of Ukraine and subsequent drone warfare, have become the new norm.

This has required the alliance to reconsider and revoke the clause prohibiting DMZ ISR activities.

North Korea’s launching of its first reconnaissance satellite, condemned by the international community due to its use of illegal ballistic missile technology that threatens the “global nonproliferation regime,” has resulted in a game of brinkmanship, leading to the complete abandonment of the CMA on November 23.

In this volatile security landscape, the rapidly changing demographics of the ROK represent a wake-up call for both the ROK and Democratic People’s Republic of Korea, as the North is formally known.

With roughly 1.32 million foreign residents in the greater Seoul metropolitan area (GSMA) within 50 kilometers (30 miles) of the DMZ, an unprecedented challenge has emerged for both Koreas.

The involvement of numerous countries as prime stakeholders protecting the lives of their citizens transforms potential incidents involving hostages, or casualties in the GSMA, from a purely inter-Korean issue to an international crisis.

For the DPRK, the existence of diverse stakeholders offers strategic advantages, buying time and creating extra room to maneuver. The recent Hamas attack and international hostage abductions resulted in extremely complex multilateral negotiations involving the US, Israel, Hamas, Qatar and Egypt.

An established international entity, preferably a security-related one, would have facilitated the negotiation much more easily, but the lack thereof stalled subsequent hostage release deals.

Remember that old UN Command?

Interestingly, this changing landscape is not actually disadvantageous for the ROK. In fact, while the Yoon Suk Yeol administration’s attempt to revitalize the United Nations Command (UNC) must have been planned long before the Hamas attack, its plan to galvanize the long-quiescent structure has gathered international attention.

A South Korean honor guard stands in front of boxes containing the remains of the UNC and ROK soldiers killed in North Korea in the 1950-53 Korean War during the mutual repatriation ceremony of soldiers’ remains in Seoul, South Korea on July 13, 2018. Image: Pool

The UNC, much like NATO, functions not only as a collective defense mechanism but also to protect the increasing number of foreign nationals in Korea. No longer a pure battle command, the UNC has managed inter-border military and civilian issues over the last several decades under the 1953 Armistice.

On November 14, a ministerial-level conference in Seoul – with all 17 UN sending states, or countries that contributed combat troops or supporting personnel in the 1950 Korean War – reaffirmed the spirit of the 1953 Armistice and pledged that they would repel any future attack on the ROK.

The revitalization of the UNC appears an attractive countermeasure in the event of international-scale hostage abductions or casualties due to DPRK attacks. The UNC, a coherent entity with military and government representatives from around the world, can facilitate international negotiations as the sole conduit to prevent inter-agency and inter-country complications and confusions, drawing on its time-tested experience in dealing with civilian populations.

Of course, some might argue that subtle and sensitive negotiations are not always suited for the military. They might also contend that civilian foreign service officers and personnel specializing in hostage negotiations would be more appropriate. However, such claims themselves further justify the revitalization of the UNC in regard to ramping up its manpower and inviting the presence of such specialists.

This approach addresses legitimate concerns about the need for diplomatic and negotiation expertise within the UNC, ensuring a comprehensive and well-rounded approach to addressing complex international challenges.

The ROK, traditionally a very homogenous nation, is embracing rapid immigration and the presence of foreign laborers due to its birth rate crisis. Next year alone, a record number of approximately 160,000 new, legal foreign laborers will arrive, taking up positions at small local farms and factories, some of which are located within 30 miles of the DMZ.

With the presence of foreign nationals, including those represented by the UN sending states and the UN Command, any DPRK move that jeopardizes their safety would prompt the Yoon administration to reinforce the UNC with support from relevant member states.

Such a scenario goes against the DPRK’s best interests. Despite the traditional DPRK rhetoric calling for dismantling the UNC (given the UNC’s position outside of the UN’s direct purview), the current security circumstances do not favor any reckless actions from the DPRK.

The changing demographic landscape and increased international presence in South Korea make it imperative for the DPRK to tread cautiously.

James JB Park is a former staff member of the Korean Presidential Blue House and National Security Council. A reserve officer of the Republic of Korea Army, he is currently pursuing graduate studies at Columbia University in the United States.

The views expressed are those of the author and do not reflect the official policy or position of the ROK government, the Presidential Blue House or the ROK military. This article was first published by Pacific Forum and is republished with permission.

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