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.
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BEIJING/SHANGHAI (Reuters) – China’s biggest listed banks posted higher profits in the first quarter despite the wider impact of the coronavirus pandemic on the economy, though margins shrank.
The world’s largest commercial lender Industrial and Commercial Bank of China Ltd (ICBC) (601398.SS)(1398.HK) on Tuesday reported a 3.04% rise in first quarter net profit compared to a year earlier, while Bank of Communications Co Ltd (BoCom) (601328.SS)(3328.HK) reported a 1.8% rise.
Meanwhile at Agricultural Bank of China Ltd (AgBank) (1288.HK)(601288.SS) and China Construction Bank Ltd (CCB) (601939.SS)(0939.HK), first quarter net profit rose 4.79% and 5% respectively from the same period last year.
Following suit, Bank of China Ltd (BOC) (601988.SS) (3988.HK) posted on Wednesday a 3.17% rise in first-quarter net profit.
The growth came despite China’s economy posting the first quarterly contraction since at least 1992 due to the coronavirus pandemic. The government restricted people from travelling and going back to work to contain the spread of the virus, reducing revenue for companies and income for residents.
China’s largest banks are historically more resilient than their smaller kin, as they lend more to state-backed enterprises and have larger capital reserves.
However, despite this firmer base, net interest margins shrank at four of the five lenders, as loan prime rate reform and looser monetary policy weighed, said analysts.
AgBank did not report its net interest margin, the difference between what banks pay on deposits and earn on loans.
SOURED DEBT
ICBC, AgBank and CCB bucked the trend of the wider banking sector by posting steady non-performing loan (NPL) ratios.
The banking sector’s NPL ratio climbed in the first quarter to 2.04%, the banking and insurance regulator said, the highest level since the global financial crisis.
The rise came despite Chinese regulators moving to give banks leeway, allowing them to postpone some loan repayments until the end of June, as credit card and mortgage defaults surged.
About one-third of Chinese bank loans are to sectors including transport and retail that are significantly stressed by the pandemic, according to S&P Global.
“You can see generally from banks’ results that some lenders have reported falling asset quality, the NPL ratios have risen quite a lot,” said Richard Cao, an analyst at Guotai Junan International on Monday.
The largest banks are best placed to absorb such losses with a better ability to get financing and withstand a substantial volume of bad loans, S&P said in a research note in April.
‘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.”
A Google search for basic information on India’s caste system lists many sites that, with varying degrees of emphasis, outline three popular tropes on the phenomenon.
First, the caste system is a four-fold categorical hierarchy of the Hindu religion – with Brahmins (priests/teachers) on top, followed, in order, by Kshatriyas (rulers/warriors), Vaishyas (farmers/traders/merchants), and Shudras (labourers). In addition, there is a fifth group of “Outcastes” (people who do unclean work and are outside the four-fold system).
Second, this system is ordained by Hinduism’s sacred texts (notably the supposed source of Hindu law, the Manusmriti), it is thousands of years old, and it governed all key aspects of life, including marriage, occupation and location.
Third, caste-based discrimination is illegal now and there are policies instead for caste-based affirmative action (or positive discrimination).
These ideas, even seen in a BBC explainer, represent the conventional wisdom. The problem is that the conventional wisdom has not been updated with critical scholarly findings.
The first two statements may as well have been written 200 years ago, at the beginning of the 19th Century, which is when these “facts” about Indian society were being made up by the British colonial authorities.
In a new book, The Truth About Us: The Politics of Information from Manu to Modi, I show how the social categories of religion and caste as they are perceived in modern-day India were developed during the British colonial rule, at a time when information was scarce and the coloniser’s power over information was absolute.
Image caption Conventional wisdom says the caste system is a four-fold categorical hierarchy of the Hindu religion
This was done initially in the early 19th Century by elevating selected and convenient Brahman-Sanskrit texts like the Manusmriti to canonical status; the supposed origin of caste in the Rig Veda (most ancient religious text) was most likely added retroactively, after it was translated to English decades later.
These categories were institutionalised in the mid to late 19th Century through the census. These were acts of convenience and simplification.
The colonisers established the acceptable list of indigenous religions in India – Hinduism, Sikhism, Jainism – and their boundaries and laws through “reading” what they claimed were India’s definitive texts.
What is now widely accepted as Hinduism was, in fact, an ideology (or, more accurately, a theory or fantasy) that is better called “Brahmanism”, that existed largely in textual (but not real) form and enunciated the interests of a small, Sanskrit-educated social group.
There is little doubt that the religion categories in India could have been defined very differently by reinterpreting those same or other texts.
The so-called four-fold hierarchy was also derived from the same Brahman texts. This system of categorisation was also textual or theoretical; it existed only in scrolls and had no relationship with the reality on the ground.
This became embarrassingly obvious from the first censuses in the late 1860s. The plan then was to fit all of the “Hindu” population into these four categories. But the bewildering variety of responses on caste identity from the population became impossible to fit neatly into colonial or Brahman theory.
Image copyright GETTY IMAGESImage caption A leader of those formerly considered untouchable with a government official in British India
WR Cornish, who supervised census operations in the Madras Presidency in 1871, wrote that “… regarding the origin of caste we can place no reliance upon the statements made in the Hindu sacred writings. Whether there was ever a period in which the Hindus were composed of four classes is exceedingly doubtful”.
Similarly, CF Magrath, leader and author of a monograph on the 1871 Bihar census, wrote, “that the now meaningless division into the four castes alleged to have been made by Manu should be put aside”.
Anthropologist Susan Bayly writes that “until well into the colonial period, much of the subcontinent was still populated by people for whom the formal distinctions of caste were of only limited importance, even in parts of the so-called Hindu heartland… The institutions and beliefs which are now often described as the elements of traditional caste were only just taking shape as recently as the early 18th Century”.
In fact, it is doubtful that caste had much significance or virulence in society before the British made it India’s defining social feature.
Astonishing diversity
The pre-colonial written record in royal court documents and traveller accounts studied by professional historians and philologists like Nicholas Dirks, GS Ghurye, Richard Eaton, David Shulman and Cynthia Talbot show little or no mention of caste.
Social identities were constantly malleable. “Slaves” and “menials” and “merchants” became kings; farmers became soldiers, and soldiers became farmers; one’s social identity could be changed as easily as moving from one village to another; there is little evidence of systematic and widespread caste oppression or mass conversion to Islam as a result of it.
All the available evidence calls for a fundamental re-imagination of social identity in pre-colonial India.
The picture that one should see is of astonishing diversity. What the colonisers did through their reading of the “sacred” texts and the institution of the census was to try to frame all of that diversity through alien categorical systems of religion, race, caste and tribe. The census was used to simplify – categorise and define – what was barely understood by the colonisers using a convenient ideology and absurd (and shifting) methodology.
Image copyright AFPImage caption India’s constitution was written by BR Ambedkar, a member of the Dalit community which is at the bottom of the caste system
The colonisers invented or constructed Indian social identities using categories of convenience during a period that covered roughly the 19th Century.
This was done to serve the British Indian government’s own interests – primarily to create a single society with a common law that could be easily governed.
A very large, complex and regionally diverse system of faiths and social identities was simplified to a degree that probably has no parallel in world history, entirely new categories and hierarchies were created, incompatible or mismatched parts were stuffed together, new boundaries were created, and flexible boundaries hardened.
Image copyright GETTY IMAGESImage caption Dalits, or untouchables, were at the bottom of the caste system
The resulting categorical system became rigid during the next century and quarter, as the made-up categories came to be associated with real rights. Religion-based electorates in British India and caste-based reservations in independent India made amorphous categories concrete. There came to be real and material consequences of belonging to one category (like Jain or Scheduled Caste) instead of another. Categorisation, as it turned out in India, was destiny.
The vast scholarship of the last few decades allows us to make a strong case that the British colonisers wrote the first and defining draft of Indian history.
So deeply inscribed is this draft in the public imagination that it is now accepted as the truth. It is imperative that we begin to question these imagined truths.
So says Werner Burger, a numismatic historian and Sinologist who has published a detailed history of money in the Qing Dynasty, entitled “Ch’ing Cash.” Mr. Burger has spent his professional life tracking down details of nearly every coin minted in China over three centuries. After three decades of making official requests, it wasn’t until 1996 that Beijing granted him access to the previous century’s imperial mint reports, the modern equivalent to central bank money supply statistics.
His conclusion: The Jiaqing Emperor, By letting the fakes infiltrate the economy, the Jiaqing emperor and his successors allowed the effective exchange rate for standard brass Chinese coins to swell from the official rate of 1000 per unit of silver to as high as 2500. Soldiers wages were effectively halved, giving them little incentive to fight the various battles against Western colonizers.
Mr. Burger refutes the notion that China’s trade with the United Kingdom, which for a time involved China sending silver to the U.K. in exchange for opium, was responsible for the debasement. He said the amount of silver sent abroad didn’t affect the exchange rate, noting a mid-century period of three decades when China actually experienced silver inflows.
Amid such currency instability, “all attempts at economic reforms and progress were bound to fail. China had no chance to catch up with the rest of the world and so lost a whole century to corruption and greedy officials,” says Mr. Burger.
For investors who want to learn from China’s past mistakes, the two volume history will cost a pretty penny: $800.
CHINDIA ALERT: You'll be living in their world, very soon 