Archive for ‘chairman Mao Zedong’

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03/03/2020

Coronavirus: will China’s economy shrink for the first time since the Cultural Revolution in 1976?

  • Plunges in official and private sector purchasing managers’ indices amid the coronavirus outbreak prompted sharp revisions of economic forecasts
  • Analysts expect China to enact additional fiscal and monetary stimulus but stop short of massive support enacted after the global financial crisis in 2008
Due to the outbreak of the coronavirus, the once unthinkable scenario in which China’s economy posts a zero growth rate or even an absolute contraction compared to the previous quarter is now seen as a real possibility. Photo: AP
Due to the outbreak of the coronavirus, the once unthinkable scenario in which China’s economy posts a zero growth rate or even an absolute contraction compared to the previous quarter is now seen as a real possibility. Photo: AP

The odds are rising that China will report a sharp deceleration in growth – or even a contraction in the first quarter as a result of the impact of the coronavirus epidemic.

The outbreak has paralysed the country’s manufacturing and service sectors, putting Beijing in the difficult position of either forgoing its economic growth goal for 2020 or returning to its old playbook of massive debt-fuelled economic stimulus to support growth.
The larger-than-expected deterioration in the official and private sector purchasing managers’ indices for both the manufacturing and services sectors to all-time lows in February – the first available economic indicators showing the extent of the economic damage done by the epidemic – has prompted economists to slash their Chinese growth forecasts.
Several are even expecting the once unthinkable scenario in which China’s economy posts a zero growth rate or even an absolute contraction compared to the previous quarter, even though the weakness is likely to be only short-lived.

A contraction in first quarter growth would be the first since the end of the Cultural Revolution in 1976.

A report published by the East Asian Institute at the National University Singapore noted that China could report a contraction of 6.3 per cent in the first quarter from the first quarter of 2019, while the growth rate for 2020 is set to fall well short of the 5.6 per cent needed by Beijing to meet its economic goal.

If China still wants to achieve an average 5.6 per cent growth for 2020, it would have to engineer a growth rate of as high as 12.7 per cent in the second half of the year, according to the report by Bert Hofman, Sarah Tong and Li Yao.

“The question is whether this is feasible and whether the consequences in terms of increased debt and potentially less productive investment are worth the price,” according to the report.

What is gross domestic product (GDP)?
China’s headline year-over-year gross domestic product (GDP) growth rate has hovering in a narrow range between 6 per cent and 7 per cent for 18 consecutive quarters until the end of 2019, but a sharp dip in the otherwise steady growth trajectory in the world’s second largest economy would send fresh warning signs about the risks of relying excessively on China as a production base and consumption market, particularly for large multinationals from Hyundai to Apple.
An official recognition of an economic contraction, even a brief one, would break a long tradition of China reporting consistent growth to prove the Communist Party’s ability to manage the economy and to rally the whole country to achieve one historical milestone after another.
President Xi Jinping

insisted last week that China would realise the vision of building up a “comprehensively well-off” society by 2020, an inheritance from China’s former paramount leader Deng Xiaoping and a major gauge of progress to realise Xi’s grand “Chinese dream” by the middle of the century.

One key but loosely defined parameter for achieving a “comprehensively well-off” society is that the size of the economy at the end of this year will be double that of 2010.
To achieve that, economists calculate that China must achieve a 5.6 per cent growth this year, although Beijing has been vague about the specific target, although this now seems out of reach barring massive stimulus or a redefinition of the goal.
Louis Kuijs, head of Asia economics at Oxford Economics, said his group has cut its forecast for the year-on-year growth rate to 2.3 per cent for the first quarter and 4.8 per cent for 2020 overall, adding that it would be next to impossible for China to make up the lost ground during the reminder of the year given the impact of the coronavirus
on the rest of the world, particularly South Korea, Japan and Italy, who are all major trading partners.

It will be extremely difficult, to say the least, to meet the annual growth targets for 2020 set previously. It would require massive, unreasonable amounts of stimulus, if it is at all possible, given the headwinds Louis Kuijs

“It will be extremely difficult, to say the least, to meet the annual growth targets for 2020 set previously. It would require massive, unreasonable amounts of stimulus, if it is at all possible, given the headwinds,” Kuijs said.

Instead, it would “make much more sense” for the Chinese leadership to play down the need to literally meet the previously set economic target,” he added.

Beijing’s social and economic development targets for this year have not yet been made public, even though Xi has pledged that the government would still achieve them despite the challenge posed by the virus outbreak.

The full-year targets covering growth, employment and inflation are usually released at the National People’s Congress, the ceremonial gathering of China’s legislature in early March, but this key annual event has been postponed due to the threat of the coronavirus, which has infected over 80,000 people and killed more than 2,900 in the country as of Tuesday.

China’s National Bureau of Statistics is due to publish first quarter GDP growth data in mid-April, with combined industrial production, retail sales and fixed-asset investment data for January and February due next week.

They will offer a clearer picture of how much the coronavirus epidemic has damaged China’s growth in the first two months of this quarter, although the damage it has caused in China and the rest of the world is hard to measure because the epidemic is still evolving.

Production among manufacturing companies across China, except in the virus epicentre of Wuhan, Hubei province, have been gradually returned to normal, with firms that have close ties to local governments and access to financial resources resuming production faster than the much larger number of small businesses.

Chinese diaspora fights coronavirus discrimination in the US
The latest data from China’s industry ministry showed that only 32.8 per cent of 
small and medium-sized enterprises

had restarted production as of the middle of last week, an increase of just 3.2 percentage points from three days earlier. But even among the larger enterprises the government is trying to help, many are not running at full capacity due to disrupted logistics that have impeded the delivery of raw materials to factories and finished products to customers.

A shortage of workers due to travel barriers erected to stem the spread of the virus, or local regulations that prevent factories from resuming full operations until they have implemented sufficient health safeguards, are also hampering efforts.

Foxconn, which assembles most of Apple’s iPhones in China, said normal production is not expected to resume until the end of March.

China, though, has limited its economic aide policies to “targeted” fiscal and monetary moves, avoiding the massive stimulus it undertook in 2008 in response to the global financial crisis that led to the negative side-effects of high debt and unproductive investments.

[China] will be cautious about the scale of any intervention. The size of the stimulus will likely depend on how quickly economic activity recovers on its own Andy Rothman

Andy Rothman, a San Francisco-based strategist for investment fund Matthews Asia and a long-time watcher of the Chinese economy, said China will report a sharp fall in economic activity in the first quarter and that it “is prepared to implement a stimulus”.

“But [China] will be cautious about the scale of any intervention. The size of the stimulus

 will likely depend on how quickly economic activity recovers on its own,” Rothman said.
China’s ruling Communist Party has never reported a contraction in economic growth since the country started the reform and opening up movement in 1978.
Even in 1990, when China was hit by Western sanctions following the crackdown on the 1989 pro-democracy movement, the country still reported an annual growth of 3.8 per cent.

The larger-than-expected fiscal and monetary policy stimulus will help make meeting the targets for 2020 less challengingLiu Li-Gang

In the history of quarterly GDP growth rates – China started to report such data in 1994 going back to 1992 – the lowest growth rate on record of 6.0 per cent was in the third and fourth quarters of 2019.
The most recent year that China admitted to an economic contraction was 1976, the final year of the Culture Revolution and the year when chairman Mao Zedong died.
Liu Li-Gang, the chief China economist for Citigroup Global Markets Asia in Hong Kong, said Beijing has the policy reserves to keep economic growth on track, including increasing the fiscal deficit and loosening monetary policy.
“The lower GDP growth [in the first quarter] means that larger fiscal and monetary policy easing will be needed,” Liu said. “The larger-than-expected fiscal and monetary policy stimulus will help make meeting the targets for 2020 less challenging.”
Source: SCMP

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24/07/2019

China’s choice of Shanghai for US trade talks emphasises commercial rather than political focus, analysts say

  • Switching first face-to-face gathering since G20 summit from Beijing sends message that ‘trade should be trade, and politics should be politics,’ analyst says
  • Trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are set to meet counterparts Vice-Premier Liu He and Commerce Minister Zhong Shan
Shanghai is China’s global financial hub, while Beijing is viewed as more of a political centre. Photo: Bloomberg
Shanghai is China’s global financial hub, while Beijing is viewed as more of a political centre. Photo: Bloomberg
China’s decision to hold next week’s negotiations with the United States in Shanghai could be a fresh sign that Beijing is revising its strategy as it prepares for a protracted trade war, analysts said.
By choosing global financial hub Shanghai rather than the political centre of Beijing, China is trying to play down the political aspects of the talks and emphasise the commercial elements, analysts suggested.
The meeting will be the first face-to-face gathering of the two countries’ trade negotiators since talks collapsed in May without a deal as the US blamed China for renegading on earlier promises, while China blamed the US for being too demanding.
The trade teams have held two phone conversations in July, although neither Washington or Beijing have confirmed the venue or schedule for the talks next week.
Shen Jianguang, the chief economist at JD Digits and a veteran Chinese economy watcher, said China is changing the location of the talks to send a message that “trade should be trade, and politics should be politics”.
He added that the choice of Shanghai implies that China is trying to focus on the technical issues such as the US relaxation of sales restrictions to 
Huawei Technologies

and China’s purchase of US farm products instead of political issues that will be more difficult to resolve.

“The Shanghai talks will only result in a small step,” Shen said.

Trade representative Robert Lighthizer

and Treasury Secretary Steven Mnuchin are expected to lead the US delegation to meet their Chinese counterparts headed by Vice-Premier Liu He and Commerce Minister Zhong Shan, the South China Morning Postreported earlier this week.

The Shanghai talks will only result in a small stepShen Jianguang

Bloomberg and The Wall Street Journal reported on Wednesday that the talks will take place in Shanghai, and a source confirmed the location to the Post. Hua Chunying, China’s foreign ministry spokeswoman, said on Wednesday that she had no information to provide on the location of the talks.
Chang Jian, chief China economist at Barclays, said that the choice of Shanghai is a sign that the initial goal of the talks would be “smaller”, focusing more on specific import and export arrangements rather than wholesale institutional changes in China’s economic model.
“It shows that China is preparing for a protracted trade talks for years to come,” Chang said. “For China, a precondition for a grand deal is that the US has to lift all tariffs, which the US will find very hard to do.”
Aidan Yao, a senior emerging Asia economist at AXA Investment Managers, said the fact that it took almost a month after the ceasefire agreement reached between President Xi Jinping and US counterpart Donald Trump at the G20 summit in Japan for a face-to-face meeting to take place is already a confirmation of “the deep divide” that remains.
“Without a clear strategy to tackle them, I doubt anyone should hold their breath for a breakthrough” despite certain goodwill gestures in recent days, Yao said.

Without a clear strategy to tackle them, I doubt anyone should hold their breath for a breakthroughAidan Yao

The initial arrangements for the meeting came after the US announced that it would offer exemptions to 110 Chinese products, including medical equipment and key electronic components, from import tariffs. China, meanwhile, said that several companies would buy American agricultural products having already applied for exemptions from the tariffs imposed by Beijing.
Liao Qun, the chief economist at China Citic Bank International, said a change of location could pump “fresh air” into the talks.

“Shanghai is the window of China’s reform and opening up and the country’s economic heart,” Liao said. “It could be a positive change”.

Larry Hu, chief China economist of Macquarie Capital, noted that Shanghai has played a unique role in US-China relations.

“The important Shanghai Communiqué was inked in the city,” Hu said, referring to the diplomatic document signed between China and US in 1972 during president Richard Nixon’s visit to China to meet Chinese chairman Mao Zedong.

The document, which is part of the Three Joint Communiqués, paved the way for Beijing and Washington to establish official diplomatic relationships later that decade.

The Three Joint Communiqués are a collection of joint statements made by the governments of the US and China from 1972, 1979 and 1982.

Source: SCMP

Posted in AXA Investment Managers, Barclays, Bloomberg, chairman Mao Zedong, China Citic Bank International, China’s choice, Chinese President Xi Jinping, commercial focus, G20 summit, Japan, Macquarie Capital, Minister of Commerce Zhong Shan, political focus, Richard Nixon, Robert Lighthizer, Shanghai, Steven Mnuchin, The Wall Street Journal, Uncategorized, US President Donald Trump, US trade talks, Vice-Premier Liu He | Leave a Comment »

06/07/2019

China Focus: Peacebuilders in China-Japan friendship

TIANJIN/BEIJING, July 6 (Xinhua) — Even at the age of 100, Yang Enze, one of the founders of China’s optical communication, does not stop his research and teaching as a professor at Tianjin University.

Besides his pioneering achievements as the chief engineer of China’s first optical communication project for practical use in the 1970s, Yang is also known as a survivor and a witness of the war of Japanese aggression against China.

“I was admitted to Wuhan University in 1937, the year when Japanese troops attacked the Lugou Bridge, also known as Marco Polo Bridge, on the outskirts of Beijing, on July 7,” said the senior recalling the start of his academic study.

The incident marked the beginning of Japan’s full-scale war against China during World War II and triggered China’s full-scale resistance against the invasion.

Ahead of the 82nd anniversary of the incident that falls on Sunday, Yang said because of the war, his university in central China’s Hubei Province was relocated to southwestern province of Sichuan to avoid the enemy forces. “Even in Sichuan, there were a lot of Japanese bombings, but none of the students missed any of the classes as long as there was no air-raid siren,” he recalled.

It was at that time he and many of his peers cemented the belief that the country needed advanced science and technology for reconstruction and revival.

“I have always kept in mind late chairman Mao Zedong’s words that it was Japanese militarists’ crime that was to blame for the war, not Japanese civilians, ” Yang said, noting that he still gets in touch with many Japanese scholars.

He established the first optical communication laboratory in Tianjin in 1985, when he was invited to teach at Tianjin University. In Yang’s career, he has made friends with several leading experts from Japan at international conferences and even kept friendship with some of them.

Also in Tianjin, Morita Naomi, a Japanese language teacher in Nankai University, works as a consultant to the school’s research institute of Zhou Enlai-Daisaku Ikeda.

“By involving in the research of the friendship between the late Chinese premier and the Japanese philosopher, I want to search for the core factors that help consolidate the friendship between the two peoples,” said Naomi.

She came to Nankai to pursue a master-degree study in Modern Chinese and Chinese Literature in 2010 and has stayed ever since.

When she first arrived, she had troubles even in learning Chinese phonics. Now she can read and speak Chinese fluently, write beautiful Chinese characters, and study ancient Chinese literature independently.

As a teacher, she feels frustrated that most of her Chinese students are more likely to be attracted by Japanese animation and games rather than Japanese literature.

According to the school’s statistics, nearly half of the undergraduates in the 2019 class of Japanese major chose to work in Japanese-funded enterprises or Japanese-related enterprises after graduation.

Naomi said Japanese visitors to China are more likely to choose destinations like Beijing, Shanghai and Guangzhou. Peking University in Beijing impresses young Japanese most.

According to a report released by the China Tourism Academy, China received 2.69 million Japanese visitors in 2018, making Japan China’s fourth largest source of foreign tourists. In the same year, Chinese made 9.06 million outbound visits to Japan as a direct destination.

The academy released the report at the 2019 China-Japan Tourism Forum Dalian held on May 26, which focused on promoting win-win cooperation on cultural exchanges and tourism between the two countries.

China and Japan agreed to push forward bilateral relations along the right track of peace, friendship and cooperation, at the summit of the Group of 20 (G20) major economies held in Osaka, Japan, in June.

This year marks the 70th anniversary of the founding of the People’s Republic of China, and Japan has also entered the Era of Reiwa. It is also the China-Japan Youth Exchange Promotion Year, for promoting friendship and cooperation in a wide range of areas between the two peoples.

“We keep the wartime memory not because we bear the hatred, but because we want the younger generations to cherish what they own today and move towards a better future,” said 70-year-old Zhen Dong, who on Friday visited an exhibition on Beijing’s past, held in Beijing Municipal Archives.

Zhao Hongwei, a professor with Tokyo-based Hosei University, said when it comes to the bilateral relations between China and Japan, it is very important to promote the free trade agreement and expand the markets of both sides.

Source: Xinhua

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