Chindia Alert: You’ll be Living in their World Very Soon
aims to alert you to the threats and opportunities that China and India present. China and India require serious attention; case of ‘hidden dragon and crouching tiger’.
Without this attention, governments, businesses and, indeed, individuals may find themselves at a great disadvantage sooner rather than later.
The POSTs (front webpages) are mainly 'cuttings' from reliable sources, updated continuously.
The PAGEs (see Tabs, above) attempt to make the information more meaningful by putting some structure to the information we have researched and assembled since 2006.
SYDNEY (Reuters) – The Australian government said on Friday it would meet a week ahead of schedule to decide whether to ease social distancing restrictions, as the numbers of new coronavirus infections dwindle and pressure mounts for business and schools to reopen.
Australia has reported about 6,700 cases of the new coronavirus and 93 deaths, well below the levels reported in the United States and Europe. Growth in new infections has slowed to less 0.5% a day, compared to 25% a month ago.
Prime Minister Scott Morrison said it was imperative to lift social distancing restrictions as early as possible as 1.5 million people were now on unemployment benefits and the government forecast the unemployment rate to top 10% within months.
“We need to restart our economy, we need to restart our society. We can’t keep Australia under the doona,” Morrison said, using an Australian word for quilt.
Morrison’s government has pledged spending of more than 10% of GDP to boost the economy but the central bank still warns the country is heading for its worst contraction since the 1930s.
With less than 20 new coronavirus cases discovered each day, Morrison said state and territory lawmakers would meet on May 8 – a week earlier than expected – to determine whether to lift restrictions.
“Australians deserve an early mark for the work that they have done,” Morrison told reporters in Canberra.
Australia attributes its success in slowing the spread of COVID-19 to social distancing restrictions imposed in April, including the forced closures of pubs, restaurants and limiting the size of indoor and outdoor gatherings.
Morrison said 3.5 million people had downloaded an app on their smartphones designed to help medics trace people potentially exposed to the virus, though the government is hoping for about 40% of the country’s 25.7 million population to sign up to ensure it is effective.
Cabinet will also decide next week how to restart sport across the country, the prime minister said.
The government says any resumption of sport should not compromise the public health, and recommends a staggered start beginning with small groups that play non-contact contact sport outdoors.
The recommendations suggests Australia’s National Rugby League (NRL) competition may not get permission to restart its competition as soon as many in the sports-mad country would like.
TOKYO (Reuters) – Uncertainty over Japan’s economic outlook is “extremely high” as the coronavirus pandemic hits output and consumption, central bank Governor Haruhiko Kuroda said, stressing his readiness to take additional monetary steps to prevent a deep recession.
While aggressive central bank actions across the globe have eased financial market tensions somewhat, corporate funding strains were worsening, Kuroda told a quarterly meeting of the Bank of Japan’s regional branch managers on Thursday.
“The spread of the coronavirus is having a severe impact on Japan’s economy through declines in exports, output, demand from overseas tourists and private consumption,” he said.
Japan recorded 503 new coronavirus infections on Wednesday – its biggest daily increase since the start of the pandemic – as a state of emergency took effect giving governors stronger legal authority to urge people to stay home and businesses to close.
In contrast to stringent lockdowns in some countries, mandating fines and arrests for non-compliance, enforcement will rely more on peer pressure and a deep-rooted Japanese tradition of respect for authority.
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The balancing act underscores the difficulty authorities have in trying to contain the outbreak without imposing a mandatory lockdown that could deal a major blow to an economy already struggling to cope with the virus outbreak.
Hideaki Omura, the governor of the central Japan prefecture of Aichi, said he would declare a state of emergency for his prefecture on Friday.
Omura said Aichi, which includes the city of Nagoya and hosts Toyota Motor Corp, was talking with the central government about being included in the national state of emergency as well, but felt he could not wait any longer to restrict movement.
“Looking at things the past week and watching the situation – the rise in patients, the number without any traceable cause – we judged that it was a very dangerous situation and wanted to make preparations,” he told a news conference.
Even with less stringent restrictions compared with other countries, analysts polled by Reuters expect Japan to slip into a deep recession this year as the virus outbreak wreaks havoc on business and daily life.
Shares of Oriental Land Co (4661.T) fell on Thursday after the operator of Tokyo Disneyland said it would keep the amusement park shut until mid-May.
Entertainment facility operator Uchiyama Holdings (6059.T) said it was closing 43 karaoke shops and 11 restaurants until May 6.
“For the time being, we won’t hesitate to take additional monetary easing steps if needed, with a close eye on developments regarding the coronavirus outbreak,” Kuroda said.
Kuroda’s remarks highlight the strong concern policymakers have over the outlook for Japan’s economy and how companies continue to struggle to generate cash, despite government and central bank promises to flood the economy with funds.
At its policy meeting later this month, the BOJ is likely to make a rare projection that the world’s third-largest economy will shrink this year, sources have told Reuters.
The BOJ eased monetary policy in March by pledging to boost purchases of assets ranging from government bonds, commercial paper, corporate bonds and trust funds investing in stocks.
The government also rolled out a nearly $1 trillion stimulus package to soften the economic blow.
BEIJING, March 27 (Xinhua) — China’s central bank has pledged to improve its macro-economic control to limit the fallout of the novel coronavirus disease (COVID-19) outbreak and better shore up its economy.
The impacts of the epidemic on China’s economy were generally controllable, the People’s Bank of China (PBOC) said in a statement published Friday after a regular meeting of its monetary policy committee, adding that the country’s economy has maintained strong resilience and its economic fundamentals for long-term sound growth has remained unchanged.
In addition to strengthening international macro-economic policy coordination, China will also take innovative approach to improve its macro-economic regulation and pursue a prudent monetary policy with more moderate flexibility, the meeting decided.
“Though the outbreak was basically curbed in the country and production resumption picked up pace, our containment efforts and economic growth face new challenges arising from intensifying downward economic pressure and the virus-hit global economy,” the central bank said.
The PBOC also vowed to utilize multiple policy tools to maintain market liquidity at a reasonably ample level and keep prices stable, while guiding financial institutions to enhance credit support for production resumption, agricultural production, poverty relief and other key areas.
Financial supply-side structural reform will be advanced to establish a modern financial system featuring high adaptability, competitiveness and inclusiveness, the central bank said.
It will further smooth the transmission mechanism of monetary policies and cut the real interest rate of loans to beef up support for real economy, especially for micro and small enterprises and private firms.
The meeting also called more efforts to strengthen coordination among monetary, fiscal, employment and other policies and deepen market-oriented interest rate reform in a bid to buffer the economic blow from the ongoing epidemic outbreak.
BEIJING, Feb. 24 (Xinhua) — With the positive trend of containing the outbreak of novel coronavirus illness (COVID-19), China is meticulously expanding business operations with a precise approach that attaches different priorities to regions in light of their health risks.
A total of 11 newly confirmed cases of COVID-19 were reported Sunday outside Hubei Province, the center of the outbreak, while 24 provincial-level regions didn’t report newly confirmed cases, according to the National Health Commission Monday.
As more provincial-level regions have been reporting no newly confirmed cases for longer streaks, more local governments are starting to lower their emergency response to fast-track the restoration of economic and social order.
While high-risk regions still need to be fully committed to epidemic prevention and control, regions with relatively low risks are encouraged to focus on forestalling cases brought in from elsewhere and comprehensively restoring the order of production and life, said a meeting Sunday.
Coastal province Fujian has divided the 88 cities and counties into four groups, ranging from regions with over ten infections to regions with none, and adopted differentiated measures to better fight the outbreak and mitigate the impact on the economy.
Changting County in Fujian, for instance, which has no confirmed cases of infection, has seen most of the key enterprises resume production.
The country has pledged efforts such as arranging customized trains for migrant workers, smoothing the traffic, enhancing credit support and alleviating social security burden on employers to bring enterprises back on track.
Shanghai Municipality has rolled out 28 policies to provide targeted fiscal support, tax and fee cuts, as well as epidemic-prevention supplies for local enterprises, ferrying them through rough patches.
Foreign companies will also benefit from the supportive policies and be treated on the same footing as other types of enterprises, said Xu Wei, spokesperson for the Shanghai municipal government.
The operation resumption rate of 51,000 foreign-funded enterprises in Shanghai is nearly 70 percent, while that of the regional headquarters of 217 multinational companies is as high as 93 percent.
Wyeth Nutrition, a Sino-U.S. joint venture with its headquarter in Shanghai, is operating at its capacity to supply infant formula in China.
“The local commerce department has built a green channel for us, ensuring smooth operation of our supply chains and product delivery in the Yangtze River Delta,” said Cao Jingheng, vice president of the company.
Foreign firms and firms are high on the agenda of Chinese government agencies when formulating preferential policies.
The Ministry of Commerce has promised to strengthen services and guarantees to foreign-funded enterprises while the General Administration of Customs vowed efforts to optimize the port business environment and promote reciprocal market opening up.
Now with the country gradually heading back to work, many are confident that the potential economic blow brought by the national production halt is expected to be only a short-term, one-off hit against China’s solid economic foundation.
The epidemic might disturb economic activities in the first quarter of this year, but the economy is likely to steady shortly after the epidemic is contained, as the unleashing of pent-up demands will make up for previous weak economic performance, said Pan Gongsheng, vice governor of the People’s Bank of China, the central bank.
International Monetary Fund Managing Director Kristalina Georgieva said Saturday that she expects China’s economy to “return to normal in the second quarter” of 2020.
“As a result, the impact on the world economy would be relatively minor and short-lived,” Georgieva said.
BEIJING (Reuters) – China reported a sharp decrease in new deaths and cases of the coronavirus on Saturday but a doubling of infections in South Korea and 10 new cases in Iran added to unease about its rapid spread and global reach.
Mainland China had 397 new confirmed cases of coronavirus infections on Friday, down from 889 a day earlier, but only 31 cases were outside of the virus epicentre of Hubei province, the lowest number since the National Health Commission started compiling nationwide data a month ago.
But infection numbers continued to rise elsewhere, with outbreaks worsening in South Korea, Italy and Lebanon and Iran, prompting a warning from the World Health Organization that the window of opportunity to contain the international spread was closing..
South Korea saw another spike in infections, with 229 new confirmed cases, taking its tally to 433. Officials warned that could rise substantially as more than 1,000 people who attended a church at the centre of the outbreak had shown flu-like symptoms.
Iran, which had no reported cases earlier this week, saw 10 new cases, one of which had died, taking the number to 28 infections and five deaths.
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It has spread to some 26 countries and territories outside mainland China, killing 13 people, according to a Reuters tally.
WHO director-general Tedros Adhanom Ghebreyesus on Twitter expressed concern on Saturday about cases with no clear link to China and called on all countries to invest urgently in preparedness. He made an appeal for $675 million to support the most vulnerable countries.
On Friday, he said now was the time to act decisively.
“We still have a chance to contain it,” he said. “If we don’t, if we squander the opportunity, then there will be a serious problem on our hands.”
An outbreak in northern Italy worsened with its first two deaths, among 17 confirmed cases including its first known instance of local transmission.
Japan confirmed 14 new coronavirus cases on Saturday, among those a teacher who had shown symptoms while working at her school.
Japan is facing growing questions about whether it is doing enough to contain its spread, and concern about whether it could scupper this year’s Tokyo Olympics. Organisers on Saturday postponed the start of training for volunteers as a precaution.
The Bank of Japan’s governor on Saturday shrugged off talk that the widening epidemic is triggering an outflow of funds from Asia.
The total number of confirmed cases in mainland China rose to 76,288, with the death toll at 2,345 as of the end of Friday. Hubei reported 106 new deaths, of which 90 were in Wuhan.
But new, albeit isolated findings about the coronavirus could complicate efforts to thwart it, including the Hubei government’s announcement on Saturday that an elderly man took 27 days to show symptoms after infection, almost twice the presumed 14-day incubation period.
That follows Chinese scientists reporting that a woman from Wuhan had travelled 400 miles (675 km) and infected five relatives without showing signs of infection, offering new evidence of asymptomatical spreading.
State television on Saturday showed the arrival in Wuhan of the “blue whale”, the first of seven river cruise ships it is bringing in to house medical workers, tens of thousands of which have been sent to Hubei to contain the virus.
Senior Chinese central bank officials sought to ease global investors’ worries about the potential damage to the world’s second-largest economy from the outbreak, saying interest rates would be guided lower and that the country’s financial system and currency were resilient.
Chen Yulu, a deputy governor of the People’s Bank of China, said policymakers had plenty of tools to support the economy, and were fully confident of winning the war against the epidemic.
“We believe that after this epidemic is over, pent-up demand for consumption and investment will be fully released, and China’s economy will rebound swiftly,” Chen told state television.
China has recently cut several key lending rates, including the benchmark lending rate on Thursday, and has urged banks to extend cheap loans to the worst-hit companies which are struggling to resume production and are running out of cash.
The transport ministry said businesses would resume operations on a larger scale later this month and said more roads, waterways and ports were returning to normal.
Online media and Weibo users posted footage and images on Saturday of some malls reopening, including in the cities of Wuxi, Hangzhou and in Gansu province, with shoppers queuing in near-empty streets outside for mandatory temperature checks as trickles of customers in masks perused luxury goods shops and makeup counters.
Some analysts believe China’s economy could contract in the first quarter from the previous three months due to the combined supply and demand shocks caused by the epidemic and strict government containment measures. On an annual basis, some warn growth could fall by as much as half from 6% in the fourth quarter.
However, transport restrictions remain in many areas and while more firms are reopening, the limited data available suggests manufacturing is still at weak levels, with disruptions starting to spillover into global supply chains.
Samsung Electronics (005930.KS) said on Saturday that one coronavirus case had been confirmed at its mobile device factory complex in Gumi, causing a shutdown of its entire facility.
Finance leaders from the Group of 20 major economies were set to discuss risks to the world economy in Saudi Arabia this weekend.
The WHO’s Tedros on Twitter said 13 priority countries in Africa had been identified for help because of their direct links to China or high travel volume. That would include 30,000 personal protective kits on the way to six countries and 60,000 more for 19 states in the weeks ahead.
Media caption Americans are taken from the docked ship to Haneda airport in Tokyo
Two planes carrying hundreds of US citizens from a coronavirus-hit cruise ship have left Japan, officials say.
One plane has landed at a US Air Force air base in California, and its passengers will be isolated at military facilities for 14 days.
There were some 400 Americans on board the Diamond Princess. The ship with some 3,700 passengers and crew has been in quarantine since 3 February.
Meanwhile, China reported a total of 2,048 new cases on Monday.
Of those new cases, 1,933 were from Hubei province, the epicentre of the outbreak.
More than 70,500 people across China have been infected by the virus. In Hubei alone, the official number of cases stands at 58,182, with 1,692 deaths. Most new cases and deaths have been reported in Wuhan, Hubei’s largest city.
In other developments:
In Japan, a public gathering to celebrate the birthday of new Emperor Naruhito later this week has been cancelled, due to concerns over the spread of the virus while organisers of the Tokyo marathon due to take place on 1 March are considering whether to cancel the amateur part of the race, reports say
In China, the National People’s Congress standing committee said it would meet next week to discuss a delay of this year’s Congress – the Communist Party’s most important annual gathering – because of the outbreak
At the weekend, an American woman tested positive for the virus in Malaysia after leaving a cruise liner docked off the coast of Cambodia
A Russian court has ordered a woman who escaped from a quarantine facility to go back and stay there until she is confirmed to be disease-free, Fontanka news agency reports. Alla Ilyina has until Wednesday to return
What’s happening on the Diamond Princess?
The cruise ship was put in quarantine in Japan’s port of Yokohama after a man who disembarked in Hong Kong was found to have the virus.
On Monday, Japanese officials said there were 99 new cases of infections on board the ship, bringing the total to 454 confirmed cases. It is the largest cluster of cases outside China.
A Russian woman who was on board and tested positive is thought to be the first Russian national to contract the virus after the two previous cases found in Russia were Chinese nationals, Reuters news agency reports.
She will be taken to a hospital for treatment, the Russian embassy in Japan said.
At least 40 US citizens who were on board are infected and will be treated in Japan, Dr Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases told US broadcaster CBS.
Image copyright AFPImage caption Those bound for the US left from Tokyo’s Haneda Airport
The two aircraft chartered by the US government left Tokyo’s Haneda Airport in the early hours of Monday. The second flight was due to land at another base in Texas.
More than 300 passengers are being repatriated voluntarily, the US state department said. Fourteen of them were reported during transit to have tested positive for the virus and were being kept separate from the other passengers, it said.
we would like to just finish the quarantine on the ship as planned, decompress in a non-quarantine environment in Japan for a few days, then fly back to the U.S. pursuant to our own arrangements. What’s wrong with that?
The smartphones were distributed so people could use an app, created by Japan’s health ministry, which links users with doctors, pharmacists and mental health counsellors. Phones registered outside of Japan are unable to access the app.
Other evacuation flights have been arranged to repatriate residents of Israel, Hong Kong and Canada. On Monday, Australia announced that it would evacuate 200 of its citizens too.
What is happening in China?
According to official figures for 16 February, 100 people died from the virus in Hubei, down from 139 on Saturday.
The Chinese authorities are tightening curbs on movement to combat the outbreak. People in Hubei province, which has 60 million people, have been ordered to stay at home, though they will be allowed to leave in an emergency.
In addition, a single person from each household will be allowed to leave the building or compound they live in every three days to buy food and essential items.
On housing estates, one entrance will be kept open. It will be guarded to ensure that only residents can enter or leave.
All businesses will stay closed, except chemists, hotels, food shops and medical services.
“The effects of epidemic prevention and control in various parts of the country can already be seen.”
The proportion of infected patients considered to be in a “serious condition” has dropped nationwide from more than 15% to just over 7%, according to China’s State Council.
Taiwan has reported a death from the illness – a taxi driver, 61, who had not travelled abroad recently but had diabetes and hepatitis B, Health Minister Chen Shih-chung said.
The minister said many of his passengers had come from China.
Outside China, there have been more than 500 cases in nearly 30 countries. Four others have died outside mainland China – in France, Hong Kong, the Philippines and Japan.
Meanwhile, a plane carrying 175 evacuated Nepalis, mostly students, has arrived in Kathmandu from Wuhan.
The measures China has taken to stop the spread of the coronavirus are starting to have an impact, Mi Feng, a spokesman at the National Health Commission, said on Sunday.
In other developments:
The number of people who have tested positive on the Diamond Princess cruise ship, which is being held in quarantine in Japan, has risen to 355. The US and Canada are sending planes to evacuate their citizens
A Chinese tourist has died in France – the first fatality outside Asia
An 83-year-old American woman has tested positive after disembarking another cruise ship that was turned away by a number of countries before being allowed to dock in Cambodia
In the UK, all but one of nine people being treated have been discharged from hospital
On Saturday, World Health Organization (WHO) head Tedros Adhanom Ghebreyesus praised Beijing’s response to the outbreak.
“China has bought the world time. We don’t know how much time,” he said. “We’re encouraged that outside China, we have not yet seen widespread community transmission.”
How is China coping?
Tens of millions of Chinese still face heavy restrictions on their day-to-day life as part of the government’s efforts to halt the spread of the disease, which causes a disease named Covid-19.
Much of the response has focused on the hard-hit province of Hubei and its capital Wuhan, where the outbreak began. The city is all but sealed off from the rest of the country.
Foreign Minister Wang Yi said that along with a drop in infections within Hubei there had also been a rapid increase in the number of people who had recovered.
China’s central bank will also disinfect and store used banknotes before recirculating them in a bid to stop the virus spreading.
Media caption Medics in Wuhan resort to shaving their heads in a bid to prevent cross-infection of the coronavirus
In another development Chinese state media published a speech from earlier this month in which Chinese President Xi Jinping said he said he had given instructions on 7 January on containing the outbreak.
At the time, local officials in the city of Wuhan were downplaying the severity of the epidemic.
This would suggest senior leaders were aware of the potential dangers of the virus before the information was made public.
With the government facing criticism for its handling of the outbreak, analysts suggest the disclosure is an attempt to show the party leadership acted decisively from the start.
‘Forbes’ magazine reported that China’s central bank will launch its own sovereign digital currency to coincide with the Singles’ Day online shopping festival
The People’s Bank of China is seeking to address financial risks and counter the current dominance of the US dollar
The Singles’ Day is a holiday celebrated in China on November 11 and has become the largest online shopping day in the world. Photo: Simon Song
China’s desire to launch the world’s first government-backed digital currency could see the possible rival to Facebook’s Libra be launched in time for November’s Singles’ Day online shopping festival despite a Chinese media report playing down the timing as “inaccurate speculation”.
Several central bank officials have publicly spoken out over the past several weeks about the need for China to launch its own digital currency since Facebook unveiled its plans for Libra, and the People’s Bank of China (PBOC) appear to be making rapid progress ahead of an expected launch.
Forbes magazine reported this week, citing a source who previously worked for the Chinese government, that China’s central bank could launch the digital currency as soon as November 11 as its bids to address financial risks and to counter the current dominance of the US dollar.
The PBOC did not respond to a faxed request for comment on the Forbes story, although Sina.com said that the report was “inaccurate speculation” citing an unnamed source close to the central bank.
China’s central bank is expected to distribute its digital currency through the big four state-owned banks – the Industrial and Commercial Bank of China, China Construction Bank, the Agricultural Bank of China, and the Bank of China – and mobile payments systems Alipay and WeChat Pay, as well as UnionPay, the state-supported credit card provider, according to the Forbes report. Alibaba is the owner of the South China Morning Post.
Ma Changchun, deputy chief of the Payment and Settlement Division of the PBOC, said at the start of August that a digital currency prototype existed and that the central banks’ Digital Money Research Group had already fully adopted blockchain architecture to ensure its use in retail transactions.
“The People’s Bank digital currency can now be said to be ready,” said Ma on August 11.
The People’s Bank digital currency can now be said to be ready Ma Changchun
Former central bank governor Zhou Xiaochuan said last month that, in addition to central banks, “commercial entities” should be allowed to issue banknotes backed by their own private currency assets, although he did not elaborate on what kind of “commercial entities” might be appropriate to issue a digital currency in China.
China is also ready to make Shenzhen a pilot zone for digital currency as part of plans for the city to become a socialist model city, according to a statement summarising a meeting between the Shenzhen party secretary Wang Weizhong and central bank governor Yi Gang released on Thursday.
The PBOC implemented a blanket crackdown in China on trading of cryptocurrency, including bitcoin, which are not backed by any government, viewing them as risks to China’s financial stability and security. At the same time, in 2014 the central bank created its own academy to study digital currencies and the related blockchain technology.
Neil Woodfine, director of marketing at blockchain start-up Blockstream, said a digital currency created by the PBOC would be “just like cash” and “would be fully controlled by the central bank.”
“If it’s digital instead of physical, they can close accounts and monitor all activities [in the entire financial system]. Commercial bank deposits are difficult for them to monitor, control or pull information out of for verification because the numbers are in each bank’s data centre,” Woodfine said.
Wang Xin, director of the central bank’s research bureau, said last month that
to create its own digital currency have pushed Beijing to speed up its own digital currency plan as Libra could potentially pose a challenge to Chinese cross-border payments, monetary policy and even financial sovereignty.
Leonhard Weese, the president of the Bitcoin Association of Hong Kong, said that a government-backed digital currency may enhance the PBOC’s control of China’s monetary system, cutting reliance on commercial banks to transmit changes in monetary policy.
“It would be similar to just killing the commercial banks,” Weese said.
which would be a non-sovereign digital currency controlled by a Swiss-based company, has come under intense scrutiny by regulators and central banks worldwide. Last month, the Group of Seven industrialised nations, known as the G7, called for urgent regulatory measures and other types of action to address serious concerns over Libra.
Central banks, however, have expressed interest in launching their own digital currencies to counter the US dollar and to gain more control of their own monetary systems.
Mark Carney, governor of the Bank of England, argued last week that the US dollar, the current dominant reserve currency, could be replaced by a global digital alternative to tackle ultra-low interest rates.
Facebook’s Libra, which is expected to be launched next year, will be pegged to a basket of convertible currencies – so it could serve as a stable online currency – while its payments will be endorsed by Visa and Mastercard. Photo: Reuters
A digital currency “could dampen the domineering influence of the US dollar on global trade”, Carney said last week at the US Federal Reserve’s annual conference, adding that a digital currency has the edge to counter shocks emanating from the US through trade and exchange rates.
Daniel Wang, chief executive and co-founder of blockchain start-up Loopring, said that a Chinese government-backed digital currency may provide a new way for the yuan to compete globally.
“If the central bank wants to increase the global competitiveness of the yuan through its digital currency, only an open and standard-based competitor carries any hope,” said Wang.
A digital yuan would “remain a sovereign currency under a centralised sovereign,” continuing to require the trust from users in the Chinese central bank and government institutions behind it, Wang added.
Alfred Schipke, senior resident representative for China at the International Monetary Fund (IMF), said that the bank is “open” to digital currencies, including the one being developed by China’s central bank.
The IMF in principle is looking at these things favourably. It’s a two-way process where we learn from China, which is often at the forefront of development. Alfred Schipke
“We don’t have a specific view on a particular currency, we haven’t looked at the details of the latest proposals from China,” Schipke said on Thursday. “The IMF in principle is looking at these things favourably. It’s a two-way process where we learn from China, which is often at the forefront of development.”
Blockstream’s Woodfine said that Beijing’s move also reflects a growing concerns among central banks that a financial disaster is on the horizon.
The 30-year US Treasury bond yield fell to an all-time low 1.976 per cent on Thursday, while yields around the world also plunged to multi-year or record low, triggering rising fears over a global recession.
Central banks around have also been driving down interest rates, with the PBOC recently unveiling a key interest rate reform that effectively cuts borrowing costs for companies to boost its slowing economy.
“We’ll see a move by governments and central banks to take back control over the financial system and use that power to direct their economies, continuing to pump money into the system to keep it afloat,” Woodfine added.
“A digital currency would be the perfect channel for helicopter money,” he said in reference to the idea that a central bank could stimulate the economy by giving out large quantities of money to the public, as if dumped from the sky. “They can send out free money to consumers.”
The Chief Economic Adviser, K Subramanian, disagreed with the idea of industry-specific incentives and argued for structural reforms in land and labour markets. Members of Prime Minister Narendra Modi’s economic advisory council sound inchoate, resorting to social media and opinion editorials to counter one another.
In essence, the quibble among the members of the economic team of Mr Modi and his government is not about whether India is facing an economic slowdown or not, but about how grave the current economic crisis is.
To put all this in context, it was less than just two years ago, in November 2017, that the global ratings agency Moody’s upgraded India’s sovereign ratings – an independent assessment of the creditworthiness of a country – for the first time in 14 years.
Image copyrightGETTY IMAGESImage captionSales of cars and SUVs have slumped to a seven-year low
Justifying the upgrade, Moody’s had then argued that the economy was undergoing dramatic “structural” reforms under Mr Modi.
In the two years since, Moody’s has downgraded its 2019 GDP growth forecast for India thrice – from 7.5% to 7.4% to 6.8% to 6.2%.
The immediate questions that arise now are: is India’s economic condition really that grim and, if yes, how did it deteriorate so rapidly?
To make matters worse, Finance Minister Nirmala Sitharaman presented her first budget recently with some ominous tax proposals that threatened foreign capital flows and dented investor confidence. It sparked criticism and Ms Sitharaman was forced to roll back many of her proposals.
Image copyright GETTY IMAGESImage caption In 2016, India withdrew 85% of all currency notes from the economy
So, it is indeed true that India is facing a sharp economic downturn and severe loss of business confidence.
The alarm over the economic condition is not merely a reflection of a slowdown in GDP growth but also the poor quality of growth.
Private sector investment, the mainstay of sustainable growth in any economy, is at a 15-year low.
In other words, there is almost no investment in new projects by the private sector. The situation is so bad that many Indian industrialists have complained loudly about the state of the economy, the distrust of the government towards businesses and harassment by tax authorities.
But India’s economic slowdown is neither sudden nor a surprise.
Behind the fawning headlines in the press over the past five years about the robustness of India’s growth was a vulnerable economy, straddled with massive bad loans in the financial sector, disguised further by a macroeconomic bonanza from low global oil prices.
India’s largest import is oil and the fortuitous decline in oil prices between 2014 and 2016 added a full percentage point to headline GDP growth, masking the real problems. Confusing luck with skill, the government was callous about fixing the choked financial system.
Media caption What is really happening with India’s economy?
This move destroyed supply chains and impacted agriculture, construction and manufacturing that together account for three-quarters of all employment in the country.
Before the economy could recover from the currency ban shock, the government enacted a transition to a new indirect taxation system of the Goods and Services Tax (GST) in 2017. The GST rollout wasn’t smooth and many small businesses initially struggled to understand it.
Such massive external shocks to the economy, coupled with a reversal in low oil prices, dealt the final blow to the economy. Millions of Indians started to lose their jobs and rural wages remained stagnant. This, in turn, impacted consumption, slowing down the economy sharply.
Not easy
The wobbly state of the economy has also thrown government finances in disarray: tax revenues are much below expectations.
On Monday, the government got a much-needed breather when India’s central bank announced a $24bn (£19bn) one-time payout for the cash-starved government. (This amount is more than the dividend paid by the central bank to the government in all five years of the Congress rule between 2009 and 2014.)
The solutions to the economic crisis are not easy.
Indian industry, fed and fattened with government protection through decades, is once again clamouring for tax cuts and financial incentives.
But it is not clear that such benefits will revive private sector investment and domestic consumption immediately.
For all the hype about the Make in India programme, hailed as the harbinger of the country’s emergence as a manufacturing power, India’s dependence on China for goods has only doubled in the past five years.
India today imports from China the equivalent of 6,000 rupees ($83; £68) worth of goods for every Indian, which has doubled from 3,000 rupees in 2014.
So, India is neither making goods for itself nor for the world.
Image copyright AFPImage caption India’s agrarian crisis is a major stumbling block
Ornamental tax and other fiscal incentives to specific industries are not suddenly going to make Indian manufacturers competitive and stop India’s addiction for affordable Chinese goods. If any, the trade spat between China and the United States only saw countries such as Vietnam and Bangladesh benefit and not India.
More currency or trade tariffs are not the solutions either. The central bank has lowered interest rates and there is some push to lowering the cost of capital for industry. But again, Indian industry will invest more only when demand for goods and services increases. And demand will increase only when wages increase, or there is money in the hands of people.
So, the only immediate solution for India seems to be to boost consumption through a stimulus given directly to people, in the classical Keynesian mould.
Of course, such a stimulus should be combined with reforms to boost business morale and confidence.
In sum, India’s economic picture is not pretty.
It is important for India’s political leadership to see this not-so-pretty picture and not hide behind rose tinted glasses. Prime Minister Modi has a unique electoral mandate to embark on bold moves to truly transform the economy and pull India out of the woods.
BEIJING (Reuters) – China’s central bank on Sunday pledged to further support the slowing economy by spurring loans and lowering borrowing costs, following data that showed a sharp drop in February’s bank lending due to seasonal factors.
The central bank is widely expected to ease monetary policy further this year to encourage lending especially to small and private firms vital for growth and job creation.
The central bank’s “prudent” monetary policy will emphasize on counter-cyclical adjustments, said People’s Bank of China (PBOC) Governor Yi Gang, using a phrase that implies the need to fight an economic slowdown.
“The global economy still faces some downward pressure and China faces many risks and challenges in its economy and financial sector,” Yi said at a press conference on the sidelines of the country’s annual meeting of parliament.
There is still some room for the PBOC to cut reserve requirement ratios (RRRs), although the amount of room is less compared with a few years ago, Yi said.
The PBOC has cut the amount of cash that commercial banks need to set aside as reserves five times in the past year to spur lending to small businesses in the private sector. The RRR for big banks is now at 13.5 percent and the ratio for small- to medium-size banks is at 11.5 percent.
Yi said lending rates for small firms are still relatively elevated due to higher risk premiums and the central bank will forge ahead with reforms to lower such risk premiums.
High risk premiums on loans to small firms reflect commercial banks’ traditional reluctance to extend credit to the sector because of concerns about their creditworthiness.
PBOC data on Sunday showed new bank loans in China fell sharply in February from a record the previous month, but the drop was likely due to seasonal factors, while policymakers continue to press lenders to help cash-strapped firms stay afloat.
A pull-back in February’s tally had been widely expected as Chinese banks tend to front-load loans at the beginning of the year to get higher-quality customers and win market share.
Chinese banks made 885.8 billion yuan ($131.81 billion) in net new yuan loans in February, down sharply from a record 3.23 trillion yuan in January, when several other key credit gauges also picked up modestly in response to the central bank’s policy easing.
Yi said combined January-February new loans and total social financing (TSF), a broad measure of credit and liquidity in the economy, could paint a more accurate picture as they showed a rise of 374.8 billion yuan and 1.05 trillion yuan from a year earlier, respectively.
DEBT DEFAULTS
Analysts say China needs to revive weak credit growth to help head off a sharper economic slowdown this year, but investors are worried about a further jump in corporate debt and the risk to banks as they relax their lending standards.
Corporate bond defaults hit a record last year, while banks’ non-performing loan ratio notched a 10-year high.
Pan Gongsheng, a vice governor at the PBOC, told the same briefing that China will control the amount of bond defaults in 2019, using both legal and market means.
Pan conceded that bond defaults increased last year, but the level of defaults was not high compared with China’s average bad loan ratio.
Premier Li Keqiang told parliament on Tuesday that monetary policy would be “neither too tight nor too loose”. Li also pledged to push for market-based reforms to lower real interest rates.
Chinese policymakers have repeatedly vowed not to open the credit floodgates in an economy already saddled with piles of debt – a legacy of massive stimulus during the global financial crisis in 2008-09 and subsequent downturns.
Sources have told Reuters the central bank is not ready to cut benchmark interest rates just yet, but is likely to cut market-based rates.
Yi said the downward trend in TSF has been initially curbed and broad M2 money supply growth will be more or less in line with nominal gross domestic product growth in 2019, Yi added.
Central bank data showed growth of outstanding TSF, a rough gauge of broad credit conditions, slowed to 10.1 percent in February from January’s 10.4 percent, versus a record low of 9.8 percent in December.
M2 money supply grew 8.0 percent in February from a year earlier, missing forecasts, the central bank data showed. Yi said China’s macro leverage ratio, or the amount of debt relative to GDP, was at 249.4 percent at the end of 2018, a fall of 1.5 percentage points from a year earlier, Yi said.
Analysts note there is a time lag before a jump in lending will translate into growth, suggesting business conditions may get worse before they get better.
Most economists expect a rocky first half before conditions begin to stabilize around mid-year as support measures begin to have a greater impact.
China’s economic growth is expected to cool to around 6.2 percent this year, a 29-year low, according to Reuters polls.
Growth slowed to 6.6 percent last year, with domestic demand curbed by higher borrowing rates and tighter credit conditions and exporters hit by the escalating trade war with the United States.
CHINDIA ALERT: You'll be living in their world, very soon 