Weblog with daily updates of the news on a frugal, fair and beautiful China, from the perspective of internet entrepreneur, new media advisor and president of the China Speakers Bureau Fons Tuinstra
China’s central government surprised this week by supporting its economy by a string of measures including cutting interest rates. Financial analyst Ben Cavender expects more action in the coming months, but meanwhile, foreign investors get jibberish and that might offer great opportunities for other economies like India, he adds at CNBC-TV18.
Business analyst Shaun Rein comments on the disappointing figures from Alibaba for CNA. “The economy is improving, but certainly not on track,” he says. While the consumers might be traveling more compared to 2019, they are certainly spending less, as their confidence is low, Rein adds.
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The baby industry used to be a winner in China in the past, but the falling birth rate is hitting international companies in this industry hard, says Shanghai-based business analyst Shaun Rein to Reuters. Part of the industry is now refocusing on India, which overtook China in population growth.
The crowds might be back in China’s restaurants but they are not spending as much as they used to. The economy is not back on track, the labor market is bad and salaries are being cut. Business analyst Shaun Rein has sent his researchers out, and they did come back with bad news, he tells CNBC.
China’s economy took a positive turn after the government ended in December 2022 its zero-Covid policies, but economist Sara Hsu warns 2023 offers still many headwinds, she writes in Project Syndicate.
Sara Hsu:
In anticipation of this shortfall, export-oriented Chinese businesses have heartily embraced the end of zero-COVID by courting overseas export orders and foreign investment. But whether this additional marketing activity will offset slowing global demand remains to be seen.
Renewed stimulus may help. China is expected to roll out fiscal support for its semiconductor industry and for new technology infrastructure, and the government will be heavily promoting electric-vehicle purchases and tourism. In late 2022, the Ministry of Finance announced a commitment to supporting innovation and rural development through tax cuts and other stimulus measures, and the People’s Bank of China has signaled that it will continue to provide liquidity and allow for credit growth.
All told, China’s 2023 outlook is vastly different from that of 2022, owing to the change in its COVID policy. The economy is poised for a rebound in many critical areas. Barring some new disruption, that will help propel it past three years of economic pain and paralysis.
China is heading for a fundamental breakdown, argues Harry Broadman, Partner, and Chair, Emerging Markets Practice, Berkeley Research Group LLC, at a wide-ranging speech at the Charleston Chamber of Commerce, November 2022 (Charleston, South Carolina). It started by bailing out investors at its stock markets, which are no real markets, he says.
China veteran Ian Johnson, senior fellow for China studies at the Council on Foreign Relations think-tank, discusses at Channel News Asia how different China might treat much-discussed political issues like Taiwan after the visit of US House speaker Pelosi and possible new tracks in economic directions. The recent shift of focus towards the private sector as a key part of China’s economic growth strategy is more of a “tactical adjustment” instead of a change in the leadership’s thinking, said Mr. Johnson.
Channel News Asia:
Mr Johnson said that US House Speaker Nancy Pelosi’s visit to Taiwan in August had set a precedent for future House Speakers, regardless of their party, to make the “mandatory” visit as a show of support for the island.
“I think this was one of those cases where the Biden administration probably didn’t want Pelosi to visit, but didn’t feel in the current climate in Washington, where there was a bipartisan consensus against China, that they didn’t feel they could speak up and ask her not to go. And so she went,” he said.
He noted that while unprecedented military activity followed the visit, it was “relatively limited” and died down after about a week.
“I think China made its point. Nothing untoward happened. There were no planes shot down or ships sunk, or anything like that,” he said, adding that it remains a “worrying” development for Beijing and those in Washington who are seeking better ties.
The recent shift of focus towards the private sector as a key part of China’s economic growth strategy is more of a “tactical adjustment” instead of a change in the leadership’s thinking, said Mr Johnson.
China’s two-pronged approach is to have domestic consumption drive the economy, while also attracting foreign investments through its markets and production capabilities.
Mr Johnson said that President Xi and his party have over the decades shown a “certain amount of pragmatism” and know that economic growth is important.
“In China, just like in other countries, people are most affected by their wallets and their livelihoods. And so they (the party) realise they have to get back on track. Getting rid of zero-COVID is part of that, for sure,” he said.
China’s economy is not doing as well as it used to do, but hiding the financial data during the recent Party Congress was a bad move, says financial analyst Victor Shih, author of Coalitions of the Weak, at ANI. “The very likely reason the numbers were delayed was the State Council leaders were afraid the numbers would detract from the triumphant tone of the party congress,” he added.
ANI:
The transparency in economic figures of the country and their revelation in the form of the release of data on how the economy fared in the past three months seems to lack under the regime of Xi Jinping.
Highlighting the situation of China’s economy, a specialist in Chinese elite politics and finance at the University of California at San Diego, Victor Shih said, “It does show the primacy of politics in influencing the very competent, institutional technocracy that China has.”
“The very likely reason the numbers were delayed was the State Council leaders were afraid the numbers would detract from the triumphant tone of the party congress,” he added.
“It’s a horrible blunder. I don’t know if they are massaging the numbers. Even if they need to massage the figures, the better thing to do would be to massage them within the usual time frame,” stated Yale University law professor specialising in comparative legal and economic history, Taisu Yang in a separate statement, according to the Sydney Morning Herald.
Moreover, Beijing set a target in March that growth would be “about 5.5 per cent” this year, however, the country’s economy grew only a little more than 3 per cent in the third quarter.
Veteran investor Jim Rogers discusses with Brad Carr what happens to China’s economy and its global implications now the country’s real estate bubble has popped.
China veteran lawyer Mark Schaub looks back at the three decades he was involved with China and looks at how the country might look like in 2023, in his China chit-chat. What can larger foreign companies and the smaller ones expect? And of course: what is happening to the joint ventures?
Mark Schaub:
The Clock is Clicking for Joint Ventures – The PRC Foreign Investment Law came into effect on January 1, 2020 contains a time bomb for joint ventures (ok a bit overly dramatic but bear with me). One of its provisions abolishes the differences between Sino-foreign joint ventures and other types of PRC companies – primarily in respect of their governing structures (i.e. move to a shareholder meeting, board of directors and management). The law provides a five-year transition period for existing JVs so January 1, 2025 is D-Day.
Many may think that this is just simple paper shuffling – change the joint venture contract and articles of association. They may be right but normally life is much more complex. In addition to the mandatory changes the law also allows joint venture partners to agree to more flexibility on governance. All long term joint ventures have issues – opening up the joint venture contract will also open up a Pandora box of issues that have built up over decades.
Life has Moved On – 1993 was really so long ago. Back then Jiang Zemin was PRC president, Bill Clinton US president. The European Economic Community created the single market. Ukraine had recently become independent of the Soviet Union. Inflation in USA was under 3%. China’s annual GDP per head was USD377. People in Shanghai would ask foreigners if they like their own country or China better.
So, a lot has changed.
Things have probably changed in your JV or China business.
Has the market changed? Is the business still profitable? Has local competition become stronger? Does the current business model still meet market requirements? Has the business been impacted by practical changes? This is often in respect of procurement. Is the old way of doing business still the right way to do business? Are the contractual arrangements which are in place still fit for purpose? What are the real risks of 2023? Has the management changed? There must have been management changes. Worse still have there been no management changes?
How is your JV partner? Still looking healthy? Many successful SME JVs are based on a foreign and a Chinese entrepreneur forging a business together. Often outside of first tier cities. Wanting the best for their children a lot of these Chinese entrepreneurs sent them to Harvard or Oxford. These children also wanting the best for themselves are often unwilling to return to rural or industrial Sichuan or Liaoning province. Even if they return is this second generation tough enough and knowledgeable enough to run the business. They often have a less than perfect knowledge – in one case the founder’s son who showed us around the factory got lost and had to phone someone to find us. US and European family-owned businesses bring in family members or professional management early on – China often not so much. These kids may be more interested in trust funds than widgets.
China’s economy is heading for a rough time as it continues to curtail activities under its dynamic zero-COVID policies, says Shanghai-based business analyst Shaun Rein in the Global Eye. Heatwaves, drought, and high unemployment among youngsters add to those problems, he says.
China’s consumers have developed new behavior during the lengthy quarantine, writes marketing expert Ashley Dudarenok and dives into newly emerged economies like the smart home market, and the fitness market for Dao Insights.
Ashley Dudarenok:
The smart home market
People at home started looking into purchasing smart home and entertainment devices during the pandemic, driving the “Stay-at-Home” Economy forward. Such devices include electronic locks, home security devices and virtual reality equipment.
Smart home technology has evolved in recent years due to the rapid development of new technologies such as the Internet of Things (IoT), artificial intelligence, and 5G. China’s market has demonstrated to have the biggest potential as the world’s demand rises.
In recent years, IoT devices are becoming more powerful and smarter, and their form factors are shrinking. Enhancements in communication protocols are delivering greater range and greater energy efficiency, and consumers are adding more connected devices to their homes. All of this means the possibility of realising more complex functional combinations, where multiple devices can work together seamlessly and intelligently.
According to the China Business Industry Research Institute, the scale of China’s smart home market has increased from 260.85 billion RMB ($38.66 billion) to 514.47 billion RMB ($76.24 billion) from 2016 to 2020 with an average annual compound growth rate of 18.51%.
The home fitness market
With nationwide lockdowns came the closure of fitness centres and sports interest classes. The Chinese were forced to come up with ways to stay fit during the pandemic and this led to a rise in the purchases of exercise equipment. People were also worried about living an inactive lifestyle at home and decided to start actively taking care of their health.
More young people were opting for at-home workouts as the pandemic spread because the internet has made regimens, fitness gurus, and sports stars more accessible than ever. Millions have made it a daily ritual to tune into Liu Genghong’s livestreams. The 49-year-old musician, who was born in Taiwan, recently rose to fame online because of his entertaining fitness livestreams on Douyin. Olympic sprinter Su Bingtian, who has 4.7 million followers on Douyin, regularly shares brief videos of at-home workouts like squats and high knee exercises.
Over half of the 234 participants in a small-scale survey by CGTN exercise at home on a regular basis, and over one-third of participants exercise every day or at least three times each week. The pandemic, time savings, and cost savings were listed by respondents as the three main benefits of working out at home.
China’s real economic problem: they increase capital spending, but are not able to improve productivity that is already at a shockingly low level, says leading economist Arthur Kroeber, author of China’s Economy: What Everyone Needs to Know®, at a panel at CSIS discussing with Thomas Orlik, Chief Economist for Bloomberg Economics, and author of the book, China: The Bubble That Never Pops. While an economic collapse is unlikely, a grinding halt to economic development might be its largest danger, Kroeber adds.
Leading China economist Arthur Kroeber discusses the basis of the country’s economic growth and its relations with the US, at a panel of the Brown China Summit. Kroeber “explained that China’s alignment with Russia is an effort to erode the current U.S. global order in order to create more space for the two countries.”
The Brown Daily Herald:
Kroeber opened the discussion by explaining that Chinese economic growth is motivated by “improvements in the labor force, increases in capital and increases in productivity.” In recent years, the trajectory of the labor force and capital has been “going into reverse, and … (the Chinese government’s) obsession with top-down control is not ideal for productivity growth,” he said…
The panel also discussed the global economic and military repercussions of China’s potential involvement in the Russia-Ukraine conflict. “I think there’s a belief among many Chinese leaders that … the United States is hostile and they’re very powerful, but they’re also in decline,” Kroeber said. He explained that China’s alignment with Russia is an effort to erode the current U.S. global order in order to create more space for the two countries.
“From a long-term strategic perspective, it is hard to see this as anything other than a big mistake by China,” Kroeber added. “Its economic relationship with Russia … is very narrow and based on resources.
“Over a five to 10 year period, this (alignment) will probably come to be seen as a pretty major error of judgment,” he concluded.
Leading economist Arthur Kroeber looks at how China changed between the Olympics of 2008 and 2022 at the US Council of Foreign Relations. The role of the state, while it has always been strong, did become more emphasis on the economy and business relations, he tells at the forum.
US scholar and former foreign correspondent Howard French dives into the US debate on whether sanctioning and divesting from China are helpful. French does not think so and compares the position of China with North Korea – where sanctions did not work – and South Africa, where they did, at a debate at Intercollegiate Studies Institute.
, at a panel at CSIS discussing with Thomas Orlik, Chief Economist for Bloomberg Economics, and author of the book,
