Posts Tagged ‘China’s economy’

China’s Xi calls for more imports and more ‘open economy’

July 18, 2017

AFP

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© AFP | China’s President Xi Jinping called on for measures to liberalise trade and simplify import procedures while reducing tariffs on certain consumer products

BEIJING (AFP) – Chinese President Xi Jinping has called for an increase in imports and fewer restrictions for foreign investors as Beijing comes under pressure from the US and Europe to provide a more level playing field for companies in the country.Donald Trump has railed against China’s massive trade surplus while the European Union and US companies have complained about a lack of access to the huge market.

Speaking to a Communist Party committee on financial and economic affairs, Xi called for “expanding imports while stabilising exports”, state-run media reported on Tuesday.

China’s leaders trying to transform the economy from a reliance on exports and state investment to one driven by domestic demand, though that has led to a slowdown in growth to 26-year lows.

Xi also said “an open economy” with fewer restrictions to foreign access will serve to “promote balance of payment under the current account”, according to the China Daily.

The large US trade deficit with China was a major talking point for Trump during last year’s presidential campaign, when he claimed Beijing had “stolen” millions of jobs from Americans.

He also accused China of manipulating its currency to support its exports — a charge he has dropped since taking office in January.

In his statement on Monday, Xi called for measures to liberalise trade and simplify import procedures while reducing tariffs on certain consumer products.

He stressed keeping the yuan currency’s value “basically stable at a reasonable and balanced level”, and steadily pushing it “to become an international currency”, Xinhua state news agency reported.

At the World Economic Forum in Davos, Switzerland, at the start of the year, Xi stood out as a defender of free trade and globalisation in the face of Trump’s protectionist rhetoric.

But foreign firms in China have long pointed out the obstacles to doing business in the country, where they say domestic companies enjoy distinct advantages.

“A market environment featuring fair play should be created in the country,” Xi said in his statement, noting that “national treatment in laws and policies should be granted to foreign-funded companies after they enter the market.”

China’s Growth Masks Unresolved Debt and Real-Estate Problems

July 18, 2017

Behind strong expansion figures are troubling signs including a heavy reliance on real-estate market

Towers under construction in Guiyang in southwest China's Guizhou Province. The property market, together with construction and home furnishings, now contributes to a third of the country’s overall economy.
Towers under construction in Guiyang in southwest China’s Guizhou Province. The property market, together with construction and home furnishings, now contributes to a third of the country’s overall economy. PHOTO: HU YAN/ZUMA PRESS
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July 17, 2017 11:03 a.m. ET

BEIJING—China touted its buoyant economic expansion this year as evidence it can reduce debt without harming growth. But the outlook appears hazier when considering the property market’s outsize role in the economy, jittery consumers and signs that significant deleveraging hasn’t fully set in.

Beijing said domestic demand fueled 6.9% growth in the second quarter, a result that matched the first-quarter growth rate and beat economists’ forecasts. However, economists and analysts say the result has to be measured against a continued reliance on problematic sectors such as real estate and a lack of meaningful progress toward cutting the country’s debt.

Meanwhile, Chinese consumers aren’t spending as fast as their wages rise, suggesting many have become more financially strapped because of high property prices.

The latest data is “a blip amid a growth deceleration,” said China economist Larry Hu at Macquarie Securities in Hong Kong.

Still Addicted?

On a mission to wean itself off debt-fueled growth, China credited domestic demand for a stronger-than-expected second quarter. Yet, lending stayed high and consumption rose at a slower pace than wages.

Source: National Bureau of Statistics (GDP); Wind Info (loans, wages, consumption)

Armed with a more stable yuan and reduced capital outflows, Beijing has been able to tighten credit without causing market panic or affecting headline growth. That effort has forced banks and other financial institutions to cut back on borrowing from each other. But it hasn’t led to significant debt reduction in the economy.

“There hasn’t been too much deleveraging going on,” said Zhu Chaoping, a Shanghai-based economist at UOB Kay Hian.

In June, Chinese banks issued a higher-than-expected 1.54 trillion yuan in new loans, or roughly $227 billion, compared with 1.1 trillion yuan in May. More than a third of that amount went to home lending. Indeed, a resilient property market is the most important driver of China’s growth so far, according to economists including Messrs. Zhu and Hu.

The results mean that in a year that will see a twice-a-decade leadership transition, Beijing will have little problem reaching its full-year growth target of about 6.5%.

But Beijing has to continue to clamp down on credit to shift to a more sustainable growth model, leaders say. If growth slows in the coming months, that clampdown could become more difficult. “We shouldn’t be too optimistic about the economic picture in the second half of the year,” said Sheng Songcheng, a senior adviser at the People’s Bank of China.

Should growth weaken, Mr. Sheng said, the PBOC likely will gradually guide down the short-term interest rates used to price bonds and bank-to-bank loans and ease the liquidity constraints on the country’s financial system to help the economy. That would mark a shift in strategy since late last year, when the PBOC embarked on an untraditional tightening path by pushing up the short-term rates while leaving unchanged the benchmark rates.

Beijing faces a policy dilemma in its battle to tame the property market, which, together with construction and home furnishings, now contributes to a third of the overall economy. It doesn’t want home prices to soar for fear of destabilizing bubbles; on the other hand, it needs to prevent a property crash that could torpedo the economy.

Since late last year, a series of measures intended to curb home buying has helped slow the run-up in home prices in megacities such as Beijing, Shanghai and Shenzhen. Yet those measures have done little to deter potential buyers. Many of them have simply flocked to smaller cities.

Nationwide, property sales jumped 16% from a year earlier in the second quarter, primarily driven by the gains in medium-size and small cities. Property investment continued to accelerate in the first half. Still, there were signs that developers tempered investment toward the end of the period, expecting buyers to scale back amid purchasing restrictions.

In addition, the rising property prices are causing many consumers to tighten their purse strings. In the first six months, wages earned by urban residents increased 6.5%, on average, according to official data. By comparison, their consumption picked up at a slower pace of 5.1%. Property-related expenses represented the second-largest share of consumption after food and alcohol.

The gap indicates the toll that high home prices are taking on consumption as well as growing uncertainty among ordinary Chinese about the economy, economists and labor experts say.

One of them is Wang Jun, a 30-year-old car salesman in the southern metropolis of Guangzhou. Unwilling to be left out of the housing boom, Mr. Wang earlier this year bought a property with a mortgage payment that makes up about 75% of his monthly income. “I have to be frugal,” Mr. Wang said.

Write to Lingling Wei at lingling.wei@wsj.com

Appeared in the July 18, 2017, print edition as ‘China’s Growth Masks Signs of Trouble.’

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South China Sea, Update — China Air Forces Exercises, Indonesia Makes its Claim

July 17, 2017

BEIJING — Jul 17, 2017, 2:55 AM ET

By CHRISTOPHER BODEEN, ASSOCIATED PRESS

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Philippine Trade Secretary Ramon Lopez

A look at recent developments in the South China Sea, where China is pitted against smaller neighbors in multiple disputes over islands, coral reefs and lagoons in waters crucial for global commerce and rich in fish and potential oil and gas reserves:

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EDITOR’S NOTE: This is a weekly look at the latest developments in the South China Sea, the location of several territorial conflicts that have raised tensions in the region.

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INDONESIA RENAMES PART OF SOUTH CHINA SEA TO SECURE EXCLUSIVE ECONOMIC ZONE

Indonesia has named waters in its exclusive economic zone that overlap with China’s expansive claim to the South China Sea as the North Natuna Sea, an assertion of sovereignty that has angered Beijing.

The decision announced Friday by the Ministry of Maritime Affairs has been in the works since mid-2016 and was vital to law enforcement at sea and securing Indonesia’s exclusive economic zone, said Arif Havas Oegroseno, the deputy minister for maritime sovereignty.

He said the name would reduce confusion and is already used by the oil and gas industry for the waters.

A Chinese foreign ministry spokesman said at a regular news briefing that the “so-called change of name makes no sense at all.”

“We hope the relevant countries can work with China for the shared goal and jointly uphold the current hard-won sound situation in the South China Sea,” he said.

China claims most of the South China Sea, putting it in dispute with many Southeast Asian nations, and has carried out extensive land reclamation and construction on reefs and atolls to bolster its claims.

Indonesia doesn’t have a territorial dispute with China, but Beijing’s nine-dash line, which signifies its claims, overlaps with Indonesia’s internationally recognized exclusive economic zone extending from the Natuna islands.

“The map of Indonesia has clear coordinates, dates and data, and the government would not negotiate with other nations that make unconventional claims … including those who insist on a map of nine broken lines,” Oegroseno said.

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A YEAR AFTER HAGUE ARBITRATION RULING, CHINA REMAINS DEFIANT

Filipino officials behind an arbitration case in which the Philippines won a resounding victory over China last year are expressing alarm that Beijing continues to defy the decision, in what they are calling a setback to the rule of law.

Last week, they urged President Rodrigo Duterte, who has indefinitely set aside the decision that invalidated China’s sweeping historic claims in the South China Sea, to explore diplomatic and legal means by which to pressure China into complying.

Duterte has promised to take up the arbitration ruling with China before his six-year term ends in 2022, but is also courting China as an economic partner and possible security ally. His administration says his pragmatic outreach has calmed tensions, revived dialogue and reaped pledges of huge Chinese investments and other benefits.

“Despite its friendlier face, we do not see restraint in China’s militarization and unlawful activity in the West Philippine Sea,” said former Foreign Secretary Albert del Rosario, who spearheaded moves to bring the Philippines’ disputes with China to international arbitration in 2013. He cited China’s moves to fortify its seven man-made islands in the Spratly group with missile defense systems.

Supreme Court Justice Antonio Carpio said China is reneging on its treaty obligation because it ratified the United Nations Convention on the Law of the Sea under which the arbitration decision was based.

China last week marked the anniversary of the ruling with the relatively mild language it has adopted toward the Philippines in recent months. “With the joint efforts by China and the Philippines over the past year, the dispute has been brought back to the peaceful settlement through dialogue and consolation, and bilateral ties have improved overall,” spokesman Geng Shuang said.

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PHILIPPINES SEES TRADE BENEFITS IN LOW-KEY APPROACH TO DISPUTES WITH CHINA

Philippine Trade Minister Ramon Lopez has predicted faster growth of economic ties with China following Manila’s decision to effectively shelve their territorial disputes.

Lopez said in an interview with Hong Kong’s South China Morning Post last week that the Philippines’ “realistic and practical” approach to those controversies would encourage Chinese trade and investment and help the country meet its ambitious economic growth target of 7-8 percent over the coming five years.

“I credit it to the wisdom of (Philippine President Rodrigo Duterte) to really be more realistic and practical, to consider the positive points of having a relationship with China renewed,” Lopez told the newspaper.

“He has mentioned in many of his statements that, ‘Why fight China when we can set aside the differences and focus on areas of cooperation, focus on how China and the Philippines can help in mutual growth?'” Lopez said.

Exports of Philippine bananas and mangos to China and Hong Kong grew by 34 percent in the first five months of this year following the lifting of Chinese restrictions, he said, much higher than the 14 percent rate for the rest of the world.

Lopez said he also backed allowing Chinese to visit for a week visa-free as a further boost to business ties.

“If you want to explore business opportunities and therefore you want to visit the Philippines and meet the people, that is something we can look at,” he said.

The Philippines has become “much safer” to do business in since Duterte launched his bloody war on drug dealers and addicts, with the crime rate dropping 53 percent over the past year, Lopez said. Some 5,000 suspects have died so far in the campaign, and human rights group have called for an independent investigation into Duterte’s possible role in the violence.

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Associated Press writers Niniek Karmini in Jakarta, Indonesia, and Jim Gomez in Manila, Philippines, contributed to this report.

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 (Contains links to several more related articles)

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Dominance of the South China Sea, the Malacca Strait and the Indian Ocean would solidify China’s One Belt One Road project
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The international arbitration court in the Hague said on July 12, 2016, that China’s “nine dash line” (what Bill Hayton calls the U-shaped line) was not recognized under international law — making the Vietnamese and Philippine claims on South China Sea islands valid and lawful.
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China’s aircraft carrier Liaoning at Hong Kong
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 (Contains links to information about Vietnam’s renewed efforts to extract oil and gas from the sea bed)

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China’s Growth Is Still on Borrowed Time — Markets aren’t celebrating

July 17, 2017

A lot of things went right for China in the second quarter—but markets aren’t celebrating

That’s prompted surprisingly little celebration.

Markets tanked: shares in Shenzhen were down nearly 5% in early trade, as investors worried that better growth also meant a continuing crackdown on debt, which roiled markets this spring, would intensify. President Xi Jinping added fuel to the fire with tough comments over the weekend.

And the clock is ticking for China to tackle its dangerous debt overhang before slowing growth makes it too difficult. Rebounding trade tensions or U.S. inflation could spell trouble in the months ahead.

China’s official GDP figures should always be taken with a grain of salt, but in this case there are good reasons to think growth has held up well. The best evidence comes from the housing sector: steel prices have been on a tear in recent weeks, and housing-investment growth ticked up again to 7.9% in June, the fastest pace since April.

Moreover, the uptick is coming from medium-size cities in the interior, rather than the highly speculative coastal markets: housing inventories nationwide peaked at 30 months of sales in early 2015 and have since fallen to around 20 months, estimates Rosealea Yao, senior analyst at Gavekal Dragonomics in Beijing, a level last seen in early 2011.

The other reason to give some credence to the uptick is trade: Chinese export growth hit a four-month high in June and its trade surplus rebounded sharply. June data also showed growth in the IT and metal manufacturing sectors—good indicators for exports and housing respectively—rising sharply.

As speculators know well, however, past performance is no guarantee of future results. Much of the new housing strength has been driven by rising mortgage debt—consumer loans outstanding in China were nearly a third higher in May than a year earlier.

A welder at a construction site in Beijing in May.
A welder at a construction site in Beijing in May. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES

Two other big problems could take China off the glide path in late 2017. The first is Donald Trump : a so-called 100-day action plan on trade is about to expire with few tangible results and rising Chinese trade with North Korea will be difficult for Mr. Trump to ignore. Trade restrictions could knock one leg out from Chinese growth later this year.

The second is the Federal Reserve. Chinese regulators will find it far easier to deal with their domestic leverage problem—without sparking a real financial crisis—if capital outflows remain weak, as they have been in recent months. If U.S. inflation surprises on the upside and the Fed moves more aggressively to tighten, however, money will begin to leak out of China again.

Good growth last quarter gives Chinese regulators more time to right the ship—investors should welcome the reprieve but realize the waters ahead still look choppy.

Write to Nathaniel Taplin at nathaniel.taplin@wsj.com

https://www.wsj.com/articles/chinas-growth-is-still-on-borrowed-time-1500271959?mod=e2fb

China’s economy slows in second quarter

July 15, 2017

AFP

© AFP / by Allison JACKSON | The world’s second-largest economy seeks stability in the face of a darkening global outlook

BEIJING (AFP) – China’s economy lost momentum in the second quarter, a survey shows, as Beijing’s efforts to curb risky lending and investment took a toll on the Asian powerhouse.

The world’s second-largest economy expanded by 6.8 percent in the April-June period, compared with a year ago, according to the median forecast of 12 analysts polled by AFP.

That follows a better-than-expected increase of 6.9 percent in the first three months of the year.

The estimate comes ahead of the official release on Monday of China’s closely-watched GDP growth data for the second quarter.

Debt-fuelled investment in infrastructure and real estate has underpinned China’s growth for years but warnings of a potential financial crisis have spurred Beijing to clamp down.

In the latest alert, Fitch Ratings on Friday said China’s growing debt could trigger “economic and financial shocks” even as it maintained its A-plus rating on the country.

That follows Moody’s decision in May to downgrade China for the first time in almost three decades on concerns over its ballooning credit and slowing growth.

Tighter restrictions on property purchases and bank lending will continue to weigh on the economy in the months ahead, said Larry Hu, head of China economics at Macquarie Group.

“We expect GDP growth to trend down in the second half of 2017 on slowing property sales and tight liquidity,” he said.

The economy is likely to face further headwinds as consumption also comes under pressure from slowing income growth, said Fan Zhang, senior China economist at RHB Bank.

UBS chief China economist Tao Wang said “higher funding costs due to supervisory tightening” will impact fixed-asset investment — which measures spending on real estate, roads and bridges.

But a sharp slowdown in the second half is unlikely as policymakers prepare for an important Communist Party congress later this year that will likely make President Xi Jinping the most powerful leader in a generation.

“It is therefore highly probable that authorities will use the resources and policy tools at their disposal to ensure a positive economic outcome,” Citibank said.

The government has trimmed its 2017 GDP growth target to around 6.5 percent, after it expanded by 6.7 percent in 2016 — its slowest rate in more than a quarter of a century.

Despite growing concerns about China’s financial risks, Premier Li Keqiang said last month that the country could reach this year’s economic growth targets.

Last quarter’s growth momentum had continued into the current one, he said, noting that traditional economic indicators such as power generation and consumption, and new business orders had increased “significantly”.

by Allison JACKSON

Fitch keeps China’s ‘A+’ rating but warns over debt

July 14, 2017

AFP

© AFP | Debt-fuelled investment in infrastructure and property has underpinned China’s rapid growth, but there are concerns that years of freewheeling credit could lead to a financial crisis with global implications

BEIJING (AFP) – Fitch Ratings warned Friday that China’s growing debt could trigger “economic and financial shocks”, but said it will maintain the country’s A-plus rating with a stable outlook despite its concerns.The announcement follows Moody’s shock decision in May to downgrade the world’s second-largest economy for the first time in almost three decades on concerns over its ballooning credit and slowing growth.

While China’s external finances were robust and near-term growth prospects “favourable”, Fitch said “large and rising debt levels” in its non-financial sector were a significant risk.

“Overall leverage in the context of continued adherence to ambitious GDP growth targets raises the potential for economic and financial shocks,” it added.

Debt-fuelled investment in infrastructure and property has underpinned China’s rapid growth, but there are widespread concerns that years of freewheeling credit could lead to a financial crisis with global implications.

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Beijing has been clamping down on bank lending and real estate purchases but those efforts are complicated by the government’s determination to meet its full-year growth target of around 6.5 percent.

That compares with last year’s pace of 6.7 percent, which was the slowest in around a quarter of a century.

Premier Li Keqiang said last month that China could meet the target.

In a positive sign for China, capital outflows have “fallen sharply” since early this year and the current account — a key gauge of the economy’s health — remains in surplus.

But Fitch said tighter monetary conditions could lead to slower growth next year of 5.9 percent.

“Macro-prudential regulations and tighter credit conditions will, in Fitch’s forecasts, result in a slowdown in the housing sector and investment spending,” it said.

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 — MAY 24, 2017

China’s Export, Import Growth Accelerate in June — Balance of Trade? — “Keep up or you lose”

July 13, 2017

BEIJING — Growth in China’s exports and imports accelerated for a second straight month in June in a positive sign for global demand and the country’s own economy.

Customs data showed exports rose 11.3 percent, up from May’s 8.7 percent. Imports gained 17.2 percent, up from 14.8 percent.

Unexpectedly strong export demand could help to support Chinese economic growth that is forecast to weaken this year as Beijing tightens bank lending controls to reduce the risks of rising debt.

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China is the nation gaining the most, so China should step up to pay for a greater share of the planned railway network, the Thai transport minister said less than a month ago

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Harvard study predicts dramatic fall in China’s economic growth, impressive rise for India

July 10, 2017

BEIJING: A Harvard University study has projected a dramatic fall in China’s economic growth to 4.41 per cent in the coming years until 2025. On the other hand, India would perform extremely well growing at 7.72 per cent during the period, Havard’s Center for International Development said in a study.

“The economic pole of global growth has moved over the past few years from China to neighboring India, where it is likely to stay over the coming decade,” it said.

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Prime Minister Narendra Modi and Chinese President Xi Jinping exchange greetings at the BRICS leaders’ informal gathering, in Hamburg, Germany on Friday. (PTI)

What is significant that even Indonesia, Vietnam, Uganda, Kenya and Mexico are expected to perform a lot better than the world’s sector biggest economy, according to the report.

“China’s rapid growth rate over the past decade has narrowed the gap between its complexity and its income, which researchers suggest is the harbinger of slower growth,” CID researchers said adding, “The growth projections still have China growing above the world average, though at 4.4 percent annually for the coming decade, the slowdown relative to the current growth trend is significant”.

Elaborating further, Ricardo Hausmann, director of CID, professor at the Harvard Kennedy School (HKS), said, “The major oil economies are experiencing the pitfalls of their reliance on one resource. India, Indonesia, and Vietnam have accumulated new capabilities that allow for more diverse and more complex production that predicts faster growth in the coming years”.

The study said that “The growth projections are based on measures of each country’s economic complexity, which captures the diversity and sophistication of the productive capabilities embedded in its exports and the ease with which it could further diversify by expanding those capabilities”.

The researchers emphasized that there are many steps policymakers, investors, and business leaders can take to enter more complex production to realize faster growth.
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http://timesofindia.indiatimes.com/world/china/harvard-study-predicts-dramatic-fall-in-chinas-economic-growth-impressive-rise-for-india/articleshow/59517456.cms

China exposes US$120 million local government debt scandal

July 1, 2017

Beijing vows to punish officials involved in using taxpayers’ money to pay off debts incurred by authorities in central China city

By Frank Tang
South China Morning Post

PUBLISHED : Saturday, 01 July, 2017, 1:33pm
UPDATED : Saturday, 01 July, 2017, 1:40pm

A fresh scandal involving 818 million yuan (US$120 million) of murky local government debt has been exposed by China’s finance ministry, in another demonstration of Beijing’s determination to clean up the troublesome sector.

The municipal government of Zhumadian, a city in central China’s Henan province, is the latest to be caught out by the central government for borrowing irregularities. It is the third local authority to be named and shamed this year, following Qianjiang, Chongqing municipality in March and Zoucheng, Shandong province in April.

According to a statement posted on the finance ministry’s website on Friday, the Zhumadian government in September 2015 used taxpayers’ money to repay loans and cover interest payments incurred by one of its financing vehicles, which it then billed as “government service procurement”.

“We have closely coordinated with the National Audit Office to crack down on such irregularities or violation of laws,” Wang Kebing, deputy head of the finance ministry’s budget management department, told a media briefing in Beijing.

“Our provincial authorities are following some investigations … and we will punish [the officials involved] once confirmed,” he said.

The finance ministry is currently playing a game of cat-and-mouse with several local governments. Despite Beijing’s efforts to set clear boundaries between government debt and corporate liabilities, it is often hard to separate local governments from the debts incurred by their corporate vehicles.

Earlier this year, Moody’s downgraded China’s sovereign rating for the first time since 1989, citing the country’s rising debt level.

After years of investment stimulus since 2008, China’s local governments have built up a mountain of debt, and raised fears at home and abroad of its potential to weigh on the banking system and bring an unprecedented level of risk to the country’s financial stability.

Since auditing the scale of local debt in 2013, Beijing has sought to regulate its growth by setting a cap on annual bond issuances and preventing illegal financing via the new Budget Law, which came into effect in January 2015.

According to official figures, China’s local government debt totalled 15.3 trillion yuan at the end of last year, comprising 10.6 trillion yuan of bonds and 4.7 trillion yuan pending bond replacement.

A growing concern is that many local governments are accumulating more implicit debt through a variety of means, including guarantees, trust products and, most recently, the public-private partnership (PPP). The fear for Beijing is that this, together with the contingent debt incurred by financing vehicles, will end up being shouldered by the central government.

“Local financing vehicles are ordinary corporations and [since the enactment of the new Budget Law] receive no more government backing for their debt. Their debt will not be paid with taxpayer’s money,” Wang said.

Meanwhile, the finance ministry said in its circular released in May that it has stepped up its scrutiny of project financing.

Wei Qiang, spokesman for the National Audit Office, said that the government has set a red line on PPP projects that do not belong to the government debt.

“Overall it functions well and no … violations have been found yet,” he said.

The audit office said last week that the outstanding debt of 16 selected cities around the country has risen by 87 per cent over the past four years, but claimed that China’s debt level is “overall controllable”.

http://www.scmp.com/news/china/economy/article/2100851/china-exposes-us120-million-local-government-debt-scandal

China on charm offensive at World Economic Forum

June 29, 2017
(Dale de la Rey/AFP)
(Dale de la Rey/AFP)

NEWS ANALYSIS

The World Economic Forum (WEF) in the Chinese city of Dalian this week for the so-called Summer Davos comes at a time when China is assuming a greater global profile, including on issues such as climate change and trade, and as United States President Donald Trump intends to withdraw from a series of international treaty commitments in these areas.

This week’s forum is not the first time this year that China has used the WEF to position itself positively on the world stage. In January, Xi Jinping became the first Chinese president to give a speech at Davos in Switzerland, making an impassioned defence of economic globalisation in the face of Trump’s protectionist rhetoric.

China has been a big beneficiary of globalisation, with International Monetary Fund data since 2014 showing that the Chinese economy is now larger than the US on a purchasing power parity basis. This formula makes adjustments for the fact that goods are cheaper in the country relative to the US.

But the consequences of China’s strong economic growth have been more than financial. In terms of perceptions, many believe the global economic and political balance of power has swung significantly, and this has been reinforced by major Chinese trade and diplomatic forays such as the “One Belt, One Road” initiative.

This shift in perceptions is having important, real-world implications including feeding into Trump’s posturing on China and occasionally blunt rhetoric on issues from international trade to alleged currency manipulation. Trump has toned down his rhetoric towards Beijing in recent weeks.

Yet earlier this year, and during the 2016 election campaign, he questioned whether “China asked us if it was okay to devalue their currency making it harder for our companies to compete, heavily taxing our products going into their country”. Separately, he asserted the US is “like the piggy bank that [has been] robbed” by Beijing. One of Trump’s many threats has been to impose punitive tariffs on goods made in China.

The stark change in international perceptions towards China is underlined by data from Pew Global Research. This shows, for instance, that 52% of Australians in 2016 believed Beijing is now the “world’s leading economic power”, which represents a rise of 12 percentage points (from 40%) since 2008 alone. Comparable data for other countries includes Japan (a rise from 19% in 2008 to 24% in 2016), the United Kingdom (a rise from 29% to 35% over the same period), and the US (26% to 34%).

One big reason for these changed perceptions of China’s strength stems from the aftermath of the 2008-2009 financial crisis. Although much of the developed world subsequently recovered from the worst economic downturn for a generation, China has enjoyed mostly robust growth.

The high point of China’s perceived economic strength — prior to the country’s most recent financial “stickier patch” since 2015 — was in 2013. Then a wide variety of people in countries such as Australia (63%), Germany (59%), Canada (56%), Spain (56%), Czech Republic (55%), France (53%) and the United Kingdom (53%) judged China to be the world’s leading economic power. Others, including the US (44%), also scored China more highly than in either 2008 or 2016.

Although welcomed by many in China, this opinion shift is not without headaches for Beijing. It has exposed the country to greater foreign scrutiny and fed into perceptions, seized upon by populist politicians such as the US president, tapping into angst about China’s rise.

The significantly brighter spotlight on the country, especially since 2008, has exposed a “soft power deficit”, which is complicating its rise to power. Soft power, which rests upon the international attractiveness of a country’s foreign policy, political values and culture, is recognised by Beijing as a key political commodity, but one it has had limited success in cultivating.

As international perceptions of the country’s power have changed, its global acceptability has weakened in some key countries, as underlined in Pew’s data in 2016. In only two of 15 nations surveyed, Greece and Australia, did half or more of those polled state a favourable opinion toward China.

A majority in multiple European countries — including France, Germany, Spain, Italy and Sweden — view China negatively. In the US, only 37% of people were positive about China, compared with 55% with a negative view. Trump, as with other populist politicians in the West, are well aware of this sentiment, and that US Republicans tend to be less favourable than Democrats towards the country.

Moreover, the most recent data underlines that positive perceptions of China have declined in more than half of the countries where Pew’s longitudinal data is available. This includes France (drop of 17 percentage points since 2015), Spain (13 points), India (10 points), Italy (eight points), the United Kingdom eight points) and Germany (six points).

If this critical scrutiny intensifies, Beijing must find better ways of tackling this soft-power deficit, including enhanced international public diplomacy to win more foreign “hearts and minds”. At a symbolic level, measures might include using the country’s growing capabilities in space travel for high-profile international co-operation projects. Surveys underline that, internationally, many people admire China’s strength in science and technology.

Beijing will also secure benefits by better addressing foreign concerns about Beijing’s intentions as a rising power, as Xi and other Chinese leaders are now doing. As with climate change diplomacy, it can now intensify efforts to be seen as a responsible, peaceful global stakeholder and match this rhetoric with actions.

Andrew Hammond is an associate at the Centre for International Affairs, Diplomacy and Strategy at the London School of Economics

https://mg.co.za/article/2017-06-29-00-china-on-charm-offensive-at-world-economic-forum

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