How Xi Jinping moved away from Deng Xiaoping's reforms - Arthur Kroeber

Arthur Kroeber

One of the key legacies of president Xi Jinping is moving away from some of the key reforms initiated by his predecessor Deng Xiaoping, for example, where it comes to the importance of private companies for China's economy, says leading economist Arthur Kroeber in Global Village Space.

Global Village Space:

One of Xi’s overarching goals in terms of economic management is to effectively, if not formally, declare the end of the era of reform of Deng Xiaoping,” said Arthur Kroeber, a founding partner and managing director at research firm Gavekal Dragonomics.
Whereas Deng and subsequent leaders bolstered the role of private businesses in the economy and reduced that of the state, Xi seems to think that the balance is now about right, Kroeber said.

More in Global Village Space.

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State-owned companies get too many loans – Arthur Kroeber

Arthur Kroeber

Private companies have a hard time getting bank loans, says economist Arthur Kroeber to Barron's. But that is nothing new, he adds, the problem is that state-owned companies get loans too easy. That division is more important than the level of China's debts, he adds. "Too much attention has been paid to the debt problem."

Barron's:

Arthur Kroeber: The latest survey of corporate chief financial officers showed that the finance conditions for private companies is quite poor. There is a problem there, but they have always had that issue. The problems are not so much that private companies get too little; it’s that state-owned companies get too much. It is loss of opportunities for private companies to expand and do as much as they are capable of doing... 

Kroeber: I agree with the generalization that way too much attention has been paid to the debt problem and its significance has in many ways been exaggerated. But I think there are some issues that are material. China’s gross debt to GDP is probably around 260%. That is not particularly high for a developed economy, but it is extremely high for a developing economy. Although you have not had deleveraging in the sense of a reduction in that ratio, it is clearly an aim of government policy not to let that ratio rise—or not very much. It is an important constraint on policy and one of the reasons, over the last year and a half as the economy has slowed, that the government doesn’t want to do more debt-fueled stimulus.

More in Barron's.

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Reform state-owned companies lagging - Sara Hsu

Sara Hsu

China might have announced drastic reform of its government, state-owned companies are still lagging behind in reforms, argues financial analyst Sara Hsu. Because their access to state funding is unlimited, they keep on creating new debts and have little incentive to improve efficiency, says Sara Hsu at CGTN.

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More control and more openness: China conundrum - Victor Shih

Victor Shih

China's economy is more and more controlled by the state, but the country is also pledging more openness. Political analyst Victor Shih looks at CNBC whether China can deal with this conundrum, or not. China's agenda and ambitions are clear, but now how they might work out, he says.

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More at CNBC.
Leveraging is expanding too rapidly in China, academic says from CNBC.

State gets stronger in economy - Arthur Kroeber

Arthur Kroeber

State-owned companies are getting a stronger grip on the economy, at the expense of private capital, says economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know®, at the New York Times. The major investment of major tech firm in China Unicom was just the latest move.

The New York Times:

A number of state-owned companies, including big players in the energy and railroad industries, have also said in filings this year that Communist Party committees will play a major role in corporate leadership. The new language essentially formalizes — and underscores — what most investors and executives already assumed to be the case. 

“It seems for the last two-and-a-half years the tide has been moving toward state capital at the expense of private capital,” said Arthur Kroeber, a partner at Gavekal, a research firm. “That’s not very encouraging.” 

Still, China Unicom’s deal has the potential to be different because some successful private companies are involved, Mr. Kroeber said. 

“This can be fairly interpreted as a signal that there’s a fairly serious effort to restart this mixed ownership reform in more or less the format that was originally planned,” he said.

More at the New York Times.

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New credit only helps state-owned enterprises - Victor Shih

Victor Shih

China is trying to boost the economy by opening its credit lines again, but that credit mainly serves the state-owned companies, while the private sector is suffering, explains financial analyst Victor Shih in Bloomberg.

Bloomberg:

The readings dash hopes a lending binge in January would flow through to boost activity. 

The credit surge "is having an underwhelming impact on the economy," said Victor Shih, a professor at the University of California at San Diego who studies China’s politics and finance. "The problem may be that investment is increasingly state driven, which only benefits a small handful of state-owned enterprises. The private sector is still suffering from deflationary pressure." 

The central bank said it lowered the RRR rate to guide stable and appropriate growth in credit and create appropriate monetary and financial conditions for supply-side structural reform, according to a statement on its website late Monday.

More in Bloomberg.

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