No quick fixes for China’s economy – Shaun Rein

 

Shaun Rein

Business analyst Shaun Rein dives deeper into the China economy as consumer confidence in first-tier cities is lower than he has seen in 27 years and the government’s economic targets focus on the next 3-5 years, he tells CNBC. The government is unwilling and unable to rely on stiff financial bazookas as it did in the previous crisis of 2008. Economic growth of 5 percent is enough for the government now, as it wants to diminish the gap between haves and have-nots, he adds.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more financial experts at the China Speakers Bureau? Do check out this list.

The ugly face of deflation – Shaun Rein

 

China’s consumers are trading down because of deflation, and are looking for cheap prices, says Shanghai-based business analyst Shaun Rein to CNBC. China’s government is unlikely to use financial support for the economy, he adds, as it finds the current growth of 5 percent quite enough, as its priority is dealing with the gap between the haves and have-nots, not at trying to increase that economic growth.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more financial experts at the China Speaker Bureau? Do check out this list.

 

Foreigners left China, but not because of COVID-19 – Gabor Holch

 

Gabor Holch

Foreigners have left China in large numbers, but the most important reasons were other than COVID-19, argues intercultural coach and consultant Gabor Holch in his video. Already before the coronacrisis, the exodus was taking place because economic growth was dropping, career opportunities for expats were diminishing and the expat community was already severely hit before the lockdowns, he argues.

Gabor Holch is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more strategic experts at the China Speakers Bureau? Do check out this list.

China’s modest economic ambitions – Victor Shih

 

Victor Shih

China limited its GDP growth for 2023 to a modest 5 percent at the opening of the National People’s Congress this weekend. Political analyst Victor Shih explains the background of this lower-than-expected ambition in the Guardian.

The Guardian:

[Premier] Li [Keqiang] began the speech saying Covid-19 and other domestic and international factors had affected the country’s economy “beyond our expectations”.

He announced the government would aim to create about 12m urban jobs, but left room to move with unemployment rates – keeping the urban target at 5.5%, which it was most recently reported as being in December.

Prof Victor Shih at the University of California, San Diego, told the Guardian the targets were “not overly ambitious”, and allowed the government and its incoming new premier a potential “easy victory”.

“They don’t call for any massive stimulus, and that partly stems from a recognition that exports – a main engine of growth for China’s economy in the last three years – will likely not be so strong this coming year,” he said.

The speech also pledged to resolve housing issues for young people, improve welfare provisions to elderly people and “improve the birth support system”. In recent weeks, the CCP has unveiled a number of policies that aim to reverse the declining birthrate by encouraging people to have more children.

Shih said welfare increases and stimulating consumption – another focus of Li’s speech – would require sizeable government funding.

“So a lot of this wording sounds to me like an empty promise in a sense, because it’s unclear where the money would come from unless growth miraculously comes in way beyond expectations.”

More in the Guardian.

Victor Shih is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more political analysts at the China Speakers Bureau? Do check out this list.

How Xi Jinping tries to balance between control and growth – Arthur Kroeber

 

Arthur Kroeber (right)

Leading economist Arthur Kroeber, author of China’s Economy: What Everyone Needs to Know®, discusses how China’s leadership balances between control and economic growth, looking at the zero-Covid policies and the property crisis at the Fairbank Center for Chinese Studies and the Harvard Kennedy School Rajawali Foundation Institute for Asia.

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your (online) meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more experts on risk management at the China Speakers Bureau? Do check out this list.

China’s balancing act between control and economic growth – Ian Johnson

 

Ian Johnson

CFR scholar and China veteran Ian Johnson discusses the country’s difficult balancing act between keeping control and economic growth at a panel of the Council of Foreign Relations, with of course attention to the Russian invasion of Ukraine, COVID-19, and China’s agenda.

Ian Johnson is a speaker at the China Speakers Bureau. Do you need him at your (online) meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more political experts at the China Speakers Bureau? Do check out this list.

Vanishing villages – Ian Johnson interviews Liang Hong on the fallout of economic growth

 

Ian Johnson

CFR-scholar Ian Johnson introduces and interviews bestseller author Liang Hong (in translation) about her book China in One Village on the vanishing villages and the costs of economic growth in the countryside, for the China Institute.

China in One Village, the bestselling book by Liang Hong, chronicles how the author’s village has fallen into moral and physical decay over the past 40 years. In this virtual program presented by China Institute on December 8, 2021, Liang and Ian Johnson, author of The Souls of China, will discuss the fate of China’s countryside and the human impact of China’s extraordinary rise. Liang’s book, newly published in English, raises the question: after decades of rapid development, what happens to the millions of Chinese still left behind by the country’s astounding economic growth?

Ian Johnson is a speaker at the China Speakers Bureau. Do you need him at your (online) conference or meeting? Do get in touch or fill in our speakers’ request form.

Are you looking for more experts on cultural change at the China Speakers Bureau? Do check out this list.

Growth over reforms? - Sara Hsu

Sara Hsu

President Xi Jinping entered his tenure with a clear commitment to reform. But slacking economic growth might jeopardize that promise, writes analyst Sara Hsu in the Diplomat. One main reason: central and local governments have very different interests.

Sara Hsu:

One reason that the leadership is in such a bind with local governments is that fiscal imbalances between the central and local governments have still not been corrected. Local governments have been desperate for sufficient revenue to cover their massive expenditures on social services and infrastructure and continue to face no reprieve. The recent fiscal reform appears to have even skewed revenues a bit more in favor of Beijing, as service enterprises will switch from paying the business tax, which generally goes to local governments, to the VAT tax, which is transferred to the central government. 

Another reason why local governments were allowed to use LGFVs is because the attempt to expand the municipal bond markets was insufficient. Local governments rolled out 400 billion RMB in 2014, which proved insufficient to finance local government projects. Land sales have also slowed, resulting in smaller revenue intake. 

China needs additional fiscal reform, particularly with redistribution from central to local coffers, but this is unlikely to happen as both central and local government are pressed for funds to stimulate growth and implement reforms. Certainly the leadership has a challenging road ahead. The reversal on local government debt channels is just one harbinger of obstacles to come.

More in the Diplomat.

Sara Hsu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch, or fill in our speakers´ request form.

Are you looking for more political experts at the China Speakers Bureau? Do check out this list. 

Related articles

• Graft or Growth in China?
• Will fine-tune policies to combat downward pressure: China politburo

Is China doing enough to boost consumption? - Sara Hsu

Sara Hsu

For centuries the world has been hoping China would become a buyer of (their) consumption products. Now this has been the official line of the central government and financial analyst Sara Hsu looks how successful the push has been from investment to consumption in the Diplomat. Good jobs are key, she argues.

Sara Hsu:

Consumption, however, is dependent not only on the presence of health care and urban residence, but on jobs, and this is where the anxiety prevails. Households earning $16,000 to $24,000 accounted for only 15 percent of urban households in 2012. GDP per capita averages at only $6,807, and the population is aging. Young people are far less willing to work in labor-intensive manufacturing, and are increasingly college educated. China’s challenge now lies in creating the types of jobs that will cater to a growing mass of educated workers and provide higher incomes; as local officials have learned, simply building up urban areas does not draw in high value businesses, nor does it create middle class residents in the absence of jobs. 

Real changes in China’s labor force present challenges to today’s generation. An excess supply of labor (i.e., unemployment) is especially problematic among college graduates, who face an employment rate of about 70 percent just out of school. The types of jobs suitable for these individuals might normally be found in services and the higher value-added industries, which is what the economy is gearing toward but has not yet pulled off. While the reform agenda includes changes in the services sector to open it up to competition, this cannot happen too soon. When proper employment is lacking, the labor force can become less productive over time. This is something that happened in Japan during the nineties. 

What is more, recent policies to reduce tariffs and increase consumption of imports are positive in terms of a push to increase overall consumption, but purchases of imports actually represent a drag on GDP growth. While part of the plan is to ramp up competition in the domestic sphere by pulling in more foreign goods, the key is to widen the operating space for domestic firms in the services (including retail) industry. Already, domestic firms are facing declining profit margins in China’s cutthroat retail sector. Policies that attempt to promote entrepreneurship may help to combat this. 

At the time of this writing, moves were announced by the State Council to encourage the hiring of the longer-term unemployed and new graduates to stave off an unemployment crisis. Preference in bids for large-scale projects is to be given to firms that commit to hiring more people. This is on the right track, but while these policies may improve the employment outlook, they could still go further in ensuring that most firms have better access to finance, lower taxes, and strong supporting institutions. In addition, it is the restructuring toward a service-based, skills-intensive economy that is essential. 

In short, the restructuring of China’s economy cannot happen too soon, and job creation must lead this process. China now has a skilled labor force looking for suitable work and hoping to raise its standard of living, if only the right jobs were there.

More in the Diplomat.

Sara Hsu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers´request form.

Are you looking for more financial experts at the China Speakers Bureau? Do check out this list.

Related articles

• Why we shouldn't judge a country by its GDP
• Solution to Economic Stagnation

How to break the lock-down mode - Shaun Rein

+Shaun Rein 

China´s much needed anti-corruption drive has now put the country into a lock-down mode, and new projects have halted, tells business analyst Shaun Rein at CNBC. The cut in the reserve ratio ratio (RRR) this weekend is one way for a kickstart, although nobody know what will really work.

Shaun Rein at CNBC:

A: I have been saying for the last three months, its much more bearish than the rest of the market, the economy is lot weaker than a lot of people think. First, the government has been very serious about pollution reduction, which has impacted some of the capacity of the large manufacturing, steel, cement and like that as well as the corruption crackdown and that is one of the big concern that I have right now. The correction crackdown is serious, it is widespread and it is needed. There is way too much corruption, but what happened is the whole country sort of in lockdown mode, nobody is willing at the government level to approve new projects, procurement department and state owned enterprises are nervous about buying things because they are worried about being fingered as being corrupt. So even with this reduction in the reserve requirement ratio (RRR) I am not concerned it is going to have as big effect on stimulating economy as people think because people won’t loan out money and people won’t borrow money if they are scared to do business right now. 

Sonia: What does the Chinese market need to stimulate the economy and if this growth continues to disappoint then would you expect an additional benchmark rate cut in the next couple of quarters, something that many experts are now talking about? 

A: I think what we need to look at is not gross domestic product (GDP) growth but we need to take a look at unemployment and the second reason why I am more concerned about the economy is in the last month urban unemployment has been hovering around 5 percent – that’s really a problem. So the unemployment rate in areas of manufacturing are still fairly strong and you can easily stimulate that by forcing state owned enterprises to do heavy investment; train construction, airport construction and you can get jobs there but the issue is urban unemployment is weak and there aren’t a lot of easy remedies. The government is trying to switch from manufacturing oriented economy more towards one of technology and innovation as I outlined in my new book ‘The End of Copycat China’ but it is not easy to do that. You cannot get companies that are producing things all a sudden to become innovators, so there is definitely going to be some weakness, some problems in the economy over the next three-four months and frankly there are no easy answers on how they stimulate the economy.

More at CNBC.(including audio)

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

Are you looking for more experts to manage your China risk at the China Speakers Bureau? Do check out our list here.  

Related articles

• China cuts banks' reserve ratio requirement as growth slows
• Next dish on menu may be even more unpalatable
• How China´s rich diversify their wealth globally - Rupert Hoogewerf
• Chinese investors are going crazy for Hong Kong shares and they're surging higher

Export still key for China´s economy - Sara Hsu

+Sara Hsu 

It has become fast the new jargon, China´s "new normal", an economic growth on a lower level. But a fast-dropping export could still hurt the country´s economy severely, warns financial analyst Sara Hsu in the Diplomat. If it realizes its restructuring agenda, that might change, but that is still an "if".

Sara Hsu:

U.S. exports to and imports from China decreased in February, falling by 14 percent and 8.7 percent, respectively. Imports of automobiles and auto parts from China fell by 22 percent. U.S. imports from China were down by 8 percent in March. Japanese exports to China also slowed, contracting by 17.3 percent year on year in February and 24.8 percent in March. 

While it is a myth that China’s growth relies mainly on the production of exports, exports do contribute about 26 percent to China’s GDP growth, so that a slowdown in exports has a moderate to strong impact on GDP. The numbers directly impact GDP, and also generate anxiety among market makers about China’s economic future; for example, the Australian dollar fell almost 1.5 percent on China’s trade news, since China is a large consumer of Australia’s natural resources. Despite assurances by China’s leadership that China’s slower expansion is a healthy sign of the “New Normal,” the markets appear not to be fully convinced by this. 

China’s future hinges in large part on its restructuring agenda. As such, China is attempting to move up the export value chain, and has increased exports of technology-intensive goods such as smartphones and transportation vehicles. While most of China’s high-tech export products are assembled rather than fully produced in China, home-grown technology companies are being encouraged. High-technology manufacturing will, over time, result in higher-paid jobs, higher value of production and exports, and commercial innovation. This will hopefully increase China’s export value, in time. In the short run, until China’s economy bottoms out, Europe really rebounds, and the dollar slows its ascent, we may see more surprises in the trade figures. Beijing will no doubt be hoping they won’t be as shocking as they were this time around.

More in the Diplomat.

Sara Hsu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers´ request form.

Are you interested in more stories by Sara Hsu? Do check out the list here.

Related articles

• China's trade collapse raises fears of growth slowdown
• China is poised to report worst growth since the financial crisis
• China export slump indicates slowing global growth
• UPDATE2: China's 1st qtr GDP growth at 7.0%, slowest since 2009

Weak labor market can threaten social stability - Shaun Rein

+Shaun Rein 

China´s economy entered a downward trend in February. And while a lower economic growth might still be alright, the real danger lies in a weaker labor market and pressure on social stability, says business analyst Shaun Rein in the Voice of America.

The Voice of America:

“So starting in February the economy has been on a major downward trend, much more so than many economists realize," said Shaun Rein, head of China Market Research. "And the decline is really focused on unemployment, not so much GDP growth, which I think is really an ok number. But what you’re seeing in the factory area is some of the smaller and weaker factories having to squeeze margins." 

Rein added China’s labor markets are weakening in both urban and rural areas among blue and white collar workers, which could threaten social stability. Although many of those participating in the labor protests have been detained, few have been criminally prosecuted.

More in the Voice of America.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

Are you interested in more stories by Shaun Rein? Check out this regularly updated list.  

Related articles

• Where's the wage growth? Goldman Sachs has an answer
• China to notch 7.2% GDP growth in 2015: ADB
• China's Vice Premier Seeks "Reasonable Growth"
• President Xi says China should not focus on growth rate only
• China's Coming Education Crisis - China Real Time Report - WSJ

Can China urbanize in a sustainable way? - Sara Hsu

+Sara Hsu 

China´s urbanites are expected to growth with a few hundred million over the coming yers. But can cities grow in a sustainable way, wonders urbanization expert Sara Hsu in The Diplomat. The is both room for doubt and for hope, she writes.

Sara Hsu:

The plan outline looks good, but the devil, as always, is in the details. Will the environment really be protected? Will increased urbanization lead to a larger carbon footprint for the newly urbanized residents, particularly since one goal of urbanization is to increase domestic consumption? Will local governments protect farmers’ land rights when they often have not in the past? Will there be sufficient provision of services, such as a waste and water management when these services already fall short in many regions? The promises of the plan, coupled with inability to support these same policies in many regions, gives rise to doubt over whether the urbanization plan can indeed be implemented in a sustainable way.
Further, China’s urbanization process is already underway. This has taken place in several different ways, through constructing residences on the outskirts of large cities, through building up small and medium sized cities, and through construction of new cities. Some difficulties have been encountered, in terms of attracting people to new cities and resulting in existence of “ghost towns,” or in attracting sufficient industry and employment to newly populated areas, as in Shaanxi province, where rural residents resettled in urban areas have found themselves jobless. Although the Shaanxi urbanization process has resulted in part in the creation of ecological farmland towns, it is still too soon to tell whether the impacts of urbanization will be altogether environmentally sustainable.
China faces a difficult task in increasing urbanization—essentially, some analysts view China as under-urbanized, in comparison to Western nations, while others view China as over-urbanized in its struggle to care for its vast urban population. How can these two views be compromised? Given an increase in urbanization, will the country indeed be able to implement sustainable development, as it claims it will but heretofore has been unable to achieve? Based on past performance, the likelihood of China’s urbanization process falling into the sustainable category is low, but hopes are high. We hope to be pleasantly surprised.

More in the Diplomat.

Sara Hsu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers´request form.

Are you a media representative and do you want to talk to one of our speakers? Do drop us a line.  

Related articles

• Making sense out of PBOC´s policies - Sara Hsu
• The bifurcation of China´s property market - Sara Hsu
• China´s new sources of growth - Sara Hsu
• The risks of shadow banking: a framework - Sara Hsu
• How Much Bad Debt Can China Absorb?
• What are the risks of shadow banking? - Sara Hsu

Creating jobs no longer tops economic concerns - Arthur Kroeber

Arthur Kroeber

The magic dance around China's annual GDP has become a different ball game, tells economist Arthur Kroeber in the China Money Podcast. And linking the country's economic growth to the growth of jobs is nonsense anyway.

The China Money Podcast:

Q: So you think growth will be slower than 7%, the magic number that's just enough to provide sufficient employment for China's massive labor force? 

A: This statement is never true. People started talking about the minimum 7% number in late 1990s and early 2000s. At that time, the government was slashing tens of millions of jobs in state-owned enterprises. The population of young people was expanding dramatically. In those days, it's difficult to grow fast enough to generate enough jobs. Today, state-owned enterprises are net employers. More importantly, the number of young people entering the labor force every year is shrinking. You simply don't need to create the same amount of jobs now. Also, the structure of the GDP growth is much more important than the level of growth when you try to figure out how many jobs are being created. An aluminum smelter and 10,000 little retail stores may record the same GDP growth, but the number of jobs being created may be five times different. So this whole notion that you have to generate a specific number of GDP growth to generate a certain amount of jobs is just nonsense.

More in the China Money Podcast.

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.  

China Weekly Hangout

The China Weekly Hangout is likely to resume activities again coming Thursday, and will start with another open office session to discuss upcoming subjects. On the last hangout, China old-hands +Steve Barru and +Fons Tuinstra had a first discussion on 8 July on the upcoming issues.   Watch this space and our China Weekly Hangout page for more announcements.

Related articles

• A lot of corporate stress for the next 18 months - Arthur Kroeber
• China's real threat: no reform - Arthur Kroeber
• China: innovative, but not in the right way - Arthur Kroeber
• Pork is one of the silliest problems in US-China relations - Arthur Kroeber
• China's economy needs a diet - Arthur Kroeber

A lot of corporate stress for the next 18 months - Arthur Kroeber

Arthur Kroeber

A slowing economy and efforts for introduce structural reforms will most probably work out fine in the long run, tells economist Arthur Kroeber in CSMonitor. But for companies, on a micro level, we will see a lot of stress in the coming 18 months, as easy credit is not longer on the agenda.

CSMonitor:

Since the new government took office in March, it has been sending signals that it is no longer ready to follow tradition and combat any fall in economic growth rates with a surge in credit. 

“The government now is sitting by and allowing the economy to do a natural deceleration,” says Arthur Kroeber, head of the GaveKal Dragonomics economic consultancy in Beijing. “It is not jumping in to stimulate the economy and keep it artificially high.” 

That is in marked contrast to Beijing’s reaction to the 2008 financial crisis, which was to launch a massive stimulus plan that kept the economy humming even as most of the rest of the world went into recession... 

The labor market in China is still tight, employers complain, and urban wages have been rising by nearly 20 percent a year since 2010, according to official figures. 

The effect of China’s “one child policy,” in place for 30 years, means that workers are likely to be in short supply for the foreseeable future. 

“That makes it a good time to carry out structural reforms, because you can do it without too much social tumult,” suggests Mr. Kroeber... 

“In the macro sense, everything will probably all work out,” predicts Kroeber. “At the micro level, when it comes to corporate stress, we can expect a lot of bad news over the next 18 months.”

More in CSMinitor.

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

China Weekly Hangout

Getting trade agreements in place is one of the ways China tries to get deals done. But who is doing it better? The +China Weekly Hangout discussed in June the way the EU and the US are dealing (of fail to deal) with China, with negotiation expert +Andrew Hupert from New York, Swiss lawyer +Nathan KAISER from Taipei and political analyst +Steve Barru from Denver, Colorado. Moderated by +Fons Tuinstra of the China Speakers Bureau.

The +China Weekly Hangout will hold on Thursday 18 July an open office where you can drop in to discuss upcoming subjects, panelists and current affairs in China. Here is our announcement, or you can register for participation right away on our event page.   

Related articles

• Withdrawing from investment policies - Arthur Kroeber
• China's real threat: no reform - Arthur Kroeber
• Inefficiencies do not hurt economic growth - Arthur Kroeber
• China's economy needs a diet - Arthur Kroeber