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.
China’s leadership has made it clear to its people that the world will become more dangerous and they must be prepared for hard times
Beijing’s relatively small stimulus response to Covid-19 suggests it wants to save its economic policy ammunition for a bigger battle
China opted not to set a GDP target for 2020. Photo: Xinhua
Beijing’s decision not to set an annual GDP target for 2020 – for the first time since 2002 – is a sign it is putting stability ahead of growth as part of its preparations for an escalating conflict with the United States.
Economic development has always been the central theme for Beijing since it established diplomatic relations with the US in 1979. But this year it has given priority to job creation and tackling poverty. The coronavirus outbreak might appear to have been the reason for the shift, but the underlying factor is the tension with the US.
Covid-19 offered a preview of what a decoupling of China and US might look like: aircraft grounded, cargo flows disrupted, value chains broken, goodwill and cooperation lost, blame games started.
Both countries have suffered heavy human and economic losses from the coronavirus, yet that did not inspire them to work together. Instead, hostility and rivalry has thrived, and neither wants to blink first.
The Chinese leadership has made it clear to its people that the world will become more dangerous and they must be prepared for hard times. As such, the government is saving its economic policy ammunition.
While the stimulus plans introduced in the US, Germany, Japan and France exceed 10 per cent of their national GDP and interest rates have been cut to the bone, Beijing stopped at just 1 trillion yuan (US$140 billion) worth of special treasury bonds and 1.6 trillion yuan of additional local government bonds. In total, about 2.6 per cent of GDP.
Interest rates in China – 2.7 per cent on 10-year bonds – are some of the highest among major economies.
China’s 6.6 per cent defence spending boost lowest in three decades
23 May 2020
China’s budget fiscal deficit has increased to 3.6 per cent of GDP for 2020, but the larger deficit is mainly from tax and fee cuts instead of increased fiscal expenses, except for an increased military spending.
Beijing is calling on provincial and local authorities to tighten their belts, which is unusual for a government that has huge assets and can increase spending at any time through quantitative easing.
So why is the government, which is known for intervening in the economy, being so restrained?
It is bracing itself for a perceived period of turbulence and hardship as its relationship with the US turns sour. It is putting jobs and social stability on top of its agenda, instead of growth.
Beijing is refraining from excessive spending, eliminating sources of potential instability, making appeals to the most vulnerable social groups, and saving its power for a bigger test.
Against that backdrop, the National People’s Congress passed the national security legislation on Hong Kong. Beijing knew the bill would anger the US, but did it anyway.
Hong Kong is known as China’s gateway to the international capital market and the largest offshore yuan market, but Beijing is ready to trade losses on the financial and economic front for potential gain on a fortified national security fence.
All this points to the suggestion that Beijing is preparing for the possibility of decoupling from the US, even if it doesn’t necessarily want to.
The threat of a new Cold War is clouding the world. The theme of life for one or two generations of people on both sides of the Pacific may shift from growth and prosperity to struggle and confrontation.
China and the US have yet to collide totally, but that moment is drawing near.
Chinese groups calling for more ‘fighting spirit’ are getting the upper hand on those who favour calm and cooperation, government adviser says
From Hong Kong to Covid-19, trade to the South China Sea, Beijing and Washington are clashing on a growing number of fronts and in an increasingly aggressive way
Efforts to promote dialogue and cooperation between the US and China are failing, observers say. Photo: AFP
Moderates who favour dialogue and cooperation as a way to resolve China’s disputes with the United States are losing ground to hardline groups bent on taking the fight to Washington, according to political insiders and observers.
“There are two camps in China,” said a former state official who now serves as a government adviser and asked not to be named.
“One is stressing the combat spirit, the other is trying to relieve tensions. And the former has the upper hand.”
Relations between China and the US are under intense pressure. After Beijing moved to introduce a national security law for Hong Kong, US President Donald Trump said on Friday that Washington would begin eliminating the special policy exemptions it grants the city, as it no longer considers it autonomous from mainland China.
Beijing’s decision to enact a national security law for Hong Kong was met with anger from the US and other Western countries. Photo: Sam Tsang
The two nations have also clashed over trade, Xinjiang, Taiwan and the South China Sea, with the US passing several acts denouncing Beijing and sanctioning Chinese officials.
China has also experienced turbulence in its relations with other countries, including Australia and members of the European Union, mostly related to the Covid-19 pandemic
and Beijing’s efforts to position itself as a leader in the fight against the disease with its policy of “mask diplomacy”.
After Canberra appealed for an independent investigation to be carried out to determine the origins of the coronavirus, Beijing responded by imposing tariffs on imports of Australian barley, showing it is prepared to do more than just trade insults and accusations with its adversaries.
Pang Zhongying, a professor of international relations at Ocean University of China in Qingdao, said there was a worrying trend in China’s relations with other nations.
“We need political and diplomatic means to resolve the challenges we are facing, but … diplomatic methods have become undiplomatic,” he said.
“There are some who believe that problems can be solved through tough gestures, but this will never work. Without diplomacy, problems become confrontations.”
said during his annual press conference on the sidelines of the National People’s Congress last weekend that China and the United States must work together to prevent a new Cold War.
His words were echoed by Chinese Premier Li Keqiang, who said during a press conference after the closure of the legislative session on Thursday that the many challenges facing the China-US relations could only be resolved through cooperation.
However, the government adviser said there was often quite a chasm between what China’s leaders said and what happened in reality.
“Even though we say we do not want a Cold War, what is happening at the working level seems to be different.” he said. “The implementation of policies is not properly coordinated and often chaotic.”
Tensions between China and the US have been in a poor state since the start of a trade war almost two years ago. After multiple rounds of negotiations, the sides in January signed a phase one deal, but the positivity that created was short-lived.
In February, Beijing expelled three reporters from The Wall Street Journal over an article it deemed racist, while Washington has ramped up its military activity in the South China Sea and Taiwan Strait, and threatened to revoke the visas of Chinese students studying science and technology in the US over concerns they might be engaged in espionage.
Beijing has also used its state media and army of “Wolf Warrior” diplomats to promote its narrative, though many Chinese scholars and foreign policy advisers have said the latter’s nationalistic fervour has done more harm than good and appealed to Beijing to adopt a more conciliatory tone.
However, Hu Xijin, editor-in-chief of Chinese tabloid Global Times, said China had no option but to stare down the US, which regarded the world’s most populous nation as its main rival.
“Being contained by the US is too high a price for China to pay,” he said. “I think the best thing people can do is forget the old days of China-US ties”.
Jin Canrong, a professor of international relations at Renmin University in Beijing, wrote in a recent newspaper article that Beijing’s actions – notably enacting a national security law for Hong Kong – showed it was uncompromising and ready to stand its ground against the US.
Wu Xinbo, dean of international studies at Fudan University in Shanghai, agreed, saying relations between the two countries were likely to worsen in the run-up to the US presidential election in November and that Beijing should be prepared for a fight.
But Adam Ni, director of China Policy Centre, a think tank in Canberra, said the issue was not that the moderate camp had been sidelined, but rather Beijing’s perception of the US had changed.
“Beijing has woken up to the idea that America’s tough policy on China will continue and it is expecting an escalation of the tensions,” he said.
“The centre of gravity in terms of Beijing’s perception of the US has shifted, in the same way the US perception of China has shifted towards a more negative image”.
Beijing was simply responding in kind to the hardline, assertive manner of the US, he said.
Tsai Ing-wen visited exiled Hong Kong bookseller a day after NPC voted in favour of legislation
Lam Wing-kee said fleeing Hongkongers saw Taiwan as a step towards applying for asylum in the West
President Tsai Ing-wen (centre) shows her support for Hong Kong bookseller Lam Wing-kee (right) with Lin Fei-fan, deputy secretary general of the ruling Democratic Progressive Party. Photo: Taiwan presidential office/AFP
Her visit came a day after China’s legislature, the National People’s Congress, voted in favour of a resolution to initiate the legal process for a national security law to be imposed on Hong Kong, despite concerns from the United States, the European Union and elsewhere that the move would erode human rights, freedom and autonomy in the city.
Tsai said on behalf of all Taiwanese people, she welcomed Lam to stay in Taiwan where he could bolster the island’s efforts to further freedom and democracy.
Hongkongers who want to flee to Taiwan ‘will go through strict screening’
28 May 2020
Lam, one of the five shareholders and staff at Hong Kong’s Causeway Bay Books, fled to Taiwan in April last year after he was detained by Chinese agents for eight months in 2015 for selling books critical of the Chinese leadership.
between October and December that year and it emerged they had been detained on the Chinese mainland.
President Tsai Ing-wen looks at a book while visiting Lam Wing-kee on Friday. Photo: Taiwan presidential office/AFP
Lam later said he had been detained and blindfolded by police after crossing the border into mainland China from Hong Kong in October 2015.
The case triggered a huge controversy and raised fears of growing Chinese control in the city.
Seeing Lam as a representative of Hongkongers fleeing to Taiwan to avoid political persecution, Tsai said she wanted to understand what challenges these exiles faced and what help they needed during their stay on the self-ruled island.
“I want to tell Boss Lam [Wing-kee] and our Hong Kong friends that the government here has set up an ad hoc committee to offer help to them very soon,” she said.
On Wednesday, Tsai called for the government to set up an ad hoc committee to work out a “humanitarian help action plan” for Hong Kong people seeking to live in Taiwan or immigrate to the island. It was borne out of concern they would be arrested or prosecuted for taking part in months of anti-government protests triggered last year by the now-shelved extradition bill.
Chen Ming-tong, head of the Mainland Affairs Council, the island’s top mainland policy planner, said on Thursday his council would draft the measures for cabinet’s approval in a week.
Under the plan, the Mainland Affairs Council would issue special measures and coordinate with the island’s authorities on how to help Hongkongers relocate to Taiwan and take care of them.
Bookseller Lam told Tsai what Hongkongers needed most was to have their stay in Taiwan extended.
Lam said that currently, because of the absence of a political asylum law, Hongkongers could only apply to live in Taiwan through study, work, investment, their professional skills or close relatives.
He said fleeing Hongkongers usually came to Taiwan on tourist permits, which at most allowed them to stay for up to six months, giving them not enough time to apply for long-term residence in Taiwan.
“It would be better if they can stay for nine months and preferably one year,” he said.
Lam said some fleeing Hongkongers saw Taiwan as an intermediary base as they hoped to apply for asylum in the West, but it took a long time for Western countries to screen and approve their asylum requests.
Meanwhile, Premier Su Tseng-chang said Article 18 of the Laws and Regulations Regarding Hong Kong and Macau Affairs was good enough to deal with the current crisis in the absence of a political asylum law in Taiwan.
That article states that “necessary help shall be provided to Hong Kong or Macau residents whose safety and liberty are immediately threatened for political reasons”.
Li held a press conference to mark the end of the parliamentary session. This is the South China Morning Post’s live coverage.
Reporting by Wendy Wu, Gary Cheung, Frank Tang, Mai Jun, Sarah Zheng, Kinling Lo, Linda Lew, Coco Feng, Liu Zhen, Laura Zhou, Echo Xie, Keegan Elmer, Catherine Wong, Zhuang Pinghui, Tony Cheung
6:05PM
The End
Li’s key points
The main points from Li’s press conference:
The central government will stick to the principle of “one country, two systems”, and “Hong Kong people governing Hong Kong” with a high degree of autonomy. The NPC’s resolution for a
. But he said at the press conference that “peaceful reunification” was still Beijing’s policy and the mainland was open to further exchanges with Taiwan.
Even though the central government did not set a GDP growth target, China will implement
On the difficult and unpredictable external factors faced by China, Li said the pandemic had hit the world severely, greatly reducing exchanges between countries.
If conditions persisted, there would be more dangers to the global economy, which could undermine efforts to contain the coronavirus.
Combating the virus required an open economy to ensure the supply of goods for public health, he said.
He said China would to continue to open up and maintain the stability of the supply chain.
5:46PM
Rise in pensions
Li said that given the tough economic times, Beijing would expand coverage of subsistence allowances and unemployment benefits as well as increase pensions for the elderly.
“There can be no loopholes – if there are any gaps, then this will make people feel there is no hope for the future,” he said. “As the saying goes, the people are the foundation of a state and when the foundation is solid, the state enjoys tranquility.”
5:41PM
Ending poverty
Li said that even with the fallout from the coronavirus pandemic, the country was still determined to reach its goal of eliminating poverty by 2020.
He said there were some 5 million people living below the poverty line before the outbreak, and more may have fallen below it since then, making eliminating poverty a “daunting task”.
5:36PM
Questions
So far Li has taken nine questions, of which four were from foreign media, one was from Hong Kong and one from Taiwan.
Li said the central government must work hard to help business flourish, aiming at having 10,000 new enterprises registered each day.
The government must get rid of all unnecessary restrictions on the market, foster fair competition and create tangible wealth, he said.
He said there had been a surge in new kinds of businesses, such as online platforms, during the pandemic, and some of these businesses had seen their revenue grow by two-thirds.
5:20PM
China-US tensions
On escalations in China-US tensions and speculation about a new Cold War, Li acknowledged new challenges between the two countries, but said there was room for bilateral cooperation, including on the economy and technology.
Their relationship could be either mutually beneficial or mutually harmful, he said.
was not good for either country or the world, Li said.
Referring to a phase one trade deal reached in January, Li said the two countries should continue to follow through on the consensus reached by the leaders of both countries.
He said trade and economic cooperation should be based on market forces. There were differences in each other’s systems, and conflicts were inevitable, but the key was how to handle the problems.
We need to mutually respect each other’s core interests and search for areas for cooperation, Li said.
The US had in recent days issued a strategic policy that appeared to signal that Washington had abandoned its engagement policy towards Beijing.
He also spoke of new investment by a hi-tech US company in the central Chinese city of Wuhan, an example he said reflected the importance of business ties and cooperation between the countries.
Li had earlier sent a congratulatory letter to the company, the US conglomerate Honeywell.
5:11PM
Hong Kong and the national security law
Asked whether the NPC’s resolution for a national security law for Hong Kong
meant that Beijing had abandoned the “one country, two systems” model for Hong Kong, Li said the law was to secure the long-term stability of “one country, two systems”.
He said that “one country, two systems” and a high degree of autonomy were long an important part of Beijing’s basic state policy, and had been implemented from the start.
He said the national security law resolution was designed “for the steady implementation of one country, two systems and Hong Kong’s long-term stability and prosperity”.
5:04PM
Growth for jobs
Li said growth would be needed to support job creation, one issue of greatest public concern.
About one-third of recent comments left on the State Council’s website were on employment.
China was committed to helping businesses survive and retain jobs, he said.
University students are expected to graduate and enter the workforce in record numbers this year.
4:59PM
‘No change’ on Taiwan
Li said that Beijing’s cross-strait policy would not change, and that the mainland Chinese government was open to further exchanges with Taiwan to move forward on “peaceful reunification” with the self-ruled island.
He rejected all “Taiwanese independence forces” and external interference in Taiwan.
He said Beijing remained committed to the 1992 consensus – the political understanding that there is only “one China” but that each side has its own understanding of what this means.
Last week, Taiwanese President Tsai Ing-wen officially started her second term, after a landslide election win in January that many saw as an endorsement of her harder stand against Beijing.
Li said Beijing would continue to pay high attention to the island, adding that no Taiwanese died from the coronavirus in mainland China.
4:50PM
Jobs – not infrastructure
Li said the government’s measures to counter the coronavirus would focus on
About 70 per cent of the funds would support people’s income and boost consumption.
Smaller firms would also be targeted for support.
“The central government will live on a tight budget,” Li said.
4:44PM
‘No cover-up allowed’
Li said China had successfully controlled the coronavirus within its borders and Beijing had acted in a transparent and timely manner throughout the pandemic.
“No cover-up will ever be allowed,” he said.
Li said there were two main challenges in the pandemic: controlling the virus outbreak and reopening the economy. International cooperation was important for both.
“We may have to live with Covid-19 for some time to come,” he said.
4:36PM
Coronavirus inquiry
In response to a question about the origins of the coronavirus and calls for an
Li said that getting a clear, scientific understanding of the source of the virus could contribute to global public health.
He also referred to the World Health Assembly’s endorsement of an independent review into the World Health Organisation’s handling of the pandemic and its animal origins.
Li said the virus had no borders and much was still not known about it, adding that the international community needed to work together to keep the virus in check and create a vaccine.
Beijing and Washington have sparred over the origin of the virus, and earlier the Chinese foreign ministry condemned the US and Australia for their calls of an independent investigation into Beijing’s response to the pandemic.
The US has accused Beijing of cover-ups and a lack of transparency, while a Chinese foreign ministry spokesman suggested earlier that the US could be the origin of the virus.
Li said Beijing was open to international cooperation on research and development for a vaccine. Washington has accused China of seeking to steal its vaccine research, a charge that Beijing has strongly rejected.
Economic stability
The cabinet is determined to stabilise the economy, according to Li.
“If there are big changes, we still have policy room, including on the fiscal, financial and social security fronts,” he said.
“We are confident that under the strong leadership of [President] Xi Jinping and with joint efforts across the nation, we will be able to prevail in the difficulties and achieve the goal of building a moderately prosperous society.”
Chinese businesses still face grim economic reality despite Covid-19 restrictions being lifted
Coronavirus and the economy
Li said the Chinese economy was deeply integrated into the global economy, so China would not be immune from the impact of the coronavirus.
Economic development remained key to solving China’s problems today, Li said.
Li starts his annual press conference by saying that the restrictions imposed for Covid-19 will not affect his communication with the media.
Earlier, Li Zhanshu, chairman of the Standing Committee of the National People’s Congress, presided over a near-unanimous vote to pass a resolution on a national security law for Hong Kong that would ban separatism, subversion, foreign interference, and terrorism in the city.
The votes were 2,878 in favour, one against, six abstentions, and one who did not press the button to vote.
Critics say the move to enact a national security law will end the “one country, two systems” model in Hong Kong. The United States said on Thursday that Hong Kong was no longer autonomous from China, a decision that could end the city’s special trading status with the US.
This year all journalists are restricted to the press centre, the first time that the media have not been in the same room as the premier at his annual press conference.
Journalists waiting for the presser can watch a live broadcast of the NPC’s closing ceremony at the press centre’s lounge. But vote count is not shown at the broadcast. Photos: Jun Mai
All journalists attending the conference were tested for the coronavirus at 6am today and had to wait for the results at the Diaoyutai Hotel.
PLA commander says new law will help to crack down on separatist and foreign forces in ‘two sessions’ interview
Military has ‘determination, confidence and ability’ to safeguard national security interests and Hong Kong prosperity
China’s People’s Liberation Army has said its Hong Kong garrison will “resolutely” safeguard national security and sovereignty. Photo: Sam Tsang
The People’s Liberation Army has said the Chinese military will “resolutely” safeguard China’s national security and sovereignty, in its first statement since Beijing announced plans to impose a sweeping national security law in Hong Kong.
Chen Daoxiang, commander of the PLA’s Hong Kong garrison, said it would “act with firm resolve to implement the central government’s decision and plans” as well as continuing to implement the “one country, two systems” policy in the city.
How China is drafting a new Hong Kong national security law at the National People’s Congress
Speaking on the sidelines of China’s annual parliamentary meetings, also known as the
, Chen told state broadcaster CCTV that the new law would help to crack down on separatist and foreign forces aiming to undermine China’s national unity.
“[The garrison] will implement, according to law, various tasks delegated by the party and the people, and has the determination, confidence and ability to safeguard national security and development interest as well as Hong Kong’s continuing prosperity,” he said.
Commander of the PLA Hong Kong garrison Chen Daoxiang. Photo: Weibo
The proposal to impose a national security law in Hong Kong – which will give Beijing more direct control over the city – was introduced by China’s legislature on Friday. Beijing has blamed foreign forces for inciting last year’s months-long protests in Hong Kong, sparked by opposition to a separate and now-withdrawn extradition bill, and described the unrest as a grave threat to national security.
Separately, CCTV reported that a group of top military officials said in a session on Tuesday that there was a “great urgency” for Beijing to impose the law in a bid to address the “new risks and challenges” in governing the city.
The officials, who included Central Military Commission vice-chairmen Xu Qiliang and Zhang Youxia, said the plan was a “very timely, necessary and important” step to prevent and punish efforts to undermine China’s national sovereignty and security.
They reiterated the PLA’s commitment to opposing intervention from foreign forces in Hong Kong as well as maintaining China’s national unity and territorial integrity.
“Hong Kong affairs are purely China’s internal affairs. We resolutely oppose efforts by any foreign country, organisation and individual in interfering with Hong Kong affairs, and will resolutely guard against and contain any attempts by external forces in … engaging any separatist, subversion and infiltration activities,” they said, according to CCTV.
The planned national security law has drawn strong condemnation from the US government, with Secretary of State Mike Pompeo calling it a “death knell” for the territory’s relative autonomy. White House national security adviser Robert O’Brien said on Sunday that the US government would likely impose sanctions on China if Beijing went ahead with the plan.
The tech investment push is part of a fiscal package waiting to be signed off by the National People’s Congress, which convenes this week
This initiative will reduce China’s dependence on foreign technology, echoing objectives set forth previously in the ‘Made in China 2025’ programme
A conductor rehearses the military band on the sidelines of the National People’s Congress in Beijing’s Great Hall of the People in March of last year. China’s legislature is expected to sign off on a massive tech-led stimulus plan. Photo: AP
Beijing is accelerating its bid for global leadership in key technologies, planning to pump more than a trillion dollars into the economy through the roll-out of everything from next-generation wireless networks to artificial intelligence (AI).
In the master plan backed by President Xi Jinping himself, China will invest an estimated 10 trillion yuan (US$1.4 trillion) over six years to 2025, calling on urban governments and private hi-tech giants like Huawei Technologies to help lay 5G wireless networks, install cameras and sensors, and develop AI software that will underpin
and Huawei to SenseTime Group at the expense of US companies.
As tech nationalism mounts, the investment drive will reduce China’s dependence on foreign technology, echoing objectives set forth previously in the “Made in China 2025”
programme. Such initiatives have already drawn fierce criticism from the Trump administration, resulting in moves to block the rise of Chinese tech companies such as Huawei.
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“Nothing like this has happened before, this is China’s gambit to win the global tech race,” said Digital China Holdings chief operating officer Maria Kwok, as she sat in a Hong Kong office surrounded by facial recognition cameras and sensors. “Starting this year, we are really beginning to see the money flow through.”
The tech investment push is part of a fiscal package waiting to be signed off by China’s legislature, the National People’s Congress, which convenes this week. The government is expected to announce infrastructure funding of as much as US$563 billion this year, against the backdrop of the country’s worst economic performance since the Mao era.
The nation’s biggest purveyors of cloud computing and data analysis Alibaba, the parent company of the South China Morning Post, and Tencent Holding will be linchpins of the upcoming endeavour. China has already entrusted Huawei, the world’s largest telecommunications equipment supplier, to help galvanise 5G. Tech leaders including Pony Ma Huateng and Jack Ma are espousing the programme.
Maria Kwok’s company is a government-backed information technology systems integration provider, among many that are jumping at the chance. In the southern city of Guangzhou, Digital China is bringing half a million units of project housing online, including a complex three quarters the size of Central Park in New York City. To find a home, a user just has to log on to an app, scan their face and verify their identity. Leases can be signed digitally via smartphone and the renting authority is automatically flagged if a tenant’s payment is late.
China is no stranger to far-reaching plans with massive price tags that appear to achieve little. There is no guarantee this programme will deliver the economic rejuvenation its proponents promise. Unlike previous efforts to resuscitate the economy with “dumb” bridges and highways, this newly laid digital infrastructure will help national champions develop cutting-edge technologies.
“China’s new stimulus plan will likely lead to a consolidation of industrial internet
providers, and could lead to the emergence of some larger companies able to compete with global leaders, such as GE and Siemens,” said Nannan Kou, head of research at BloombergNEF, in a report. “One bet is on industrial internet-of-things (IoT) platforms, as China aims to cultivate three world leading companies in this area by 2025.”
China is not alone in pumping money into the technology sector as a way to get out of the post-coronavirus economic slump. Earlier this month, South Korea said AI and wireless communications would be at the core of it its “New Deal” to create jobs and boost growth.
Nothing like this has happened before, this is China’s gambit to win the global tech raceMaria Kwok, COO at Digital China Holdings
The 10 trillion yuan that China is estimated to spend from now until 2025 encompasses areas typically considered leading edge, such as AI and IoT, as well as items such as ultra-high voltage lines and high-speed rail, according to the government-backed China Centre for Information Industry Development. More than 20 of mainland China’s 31 provinces and regions have announced projects totaling over 1 trillion yuan with active participation from private capital, a state-backed newspaper reported on Wednesday.
Separate estimates by Morgan Stanley put new infrastructure at around US$180 billion each year for the next 11 years – or US$1.98 trillion in total. Those calculations also include power and rail lines. That annual figure would be almost double the past three-year average, the investment bank said in a March report that listed key stock beneficiaries including companies such as China Tower Corp, Alibaba, GDS Holdings, Quanta Computer and Advantech Co.
Beijing’s half-formed vision is already stirring a plethora of stocks, a big reason why five of China’s 10 best-performing stocks this year are tech plays like networking gear maker Dawning Information Industry and Apple supplier GoerTek. The bare outlines of the master plan were enough to drive pundits toward everything from satellite operators to broadband providers.
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It is unlikely that US companies will benefit much from the tech-led stimulus and in some cases they stand to lose existing business. Earlier this year, when the country’s largest telecoms carrier China Mobile awarded contracts worth 37 billion yuan for 5G base stations, the lion’s share went to Huawei and other Chinese companies. Sweden’s Ericsson got only a little over 10 per cent of the business in the first four months. In one of its projects, Digital China will help the northeastern city of Changchun swap out American cloud computing staples IBM, Oracle and EMC with home-grown technology.
It is in data centres that a considerable chunk of the new infrastructure development will take place. Over 20 provinces have launched policies to support enterprises using cloud computing services, according to a March research note from UBS Group.
Tony Yu, chief executive of Chinese server maker H3C, said that his company was seeing a significant increase in demand for data centre services from some of the country’s top internet companies. “Rapid growth in up-and-coming sectors will bring a new force to China’s economy after the pandemic passes,” he told Bloomberg News.
From there, more investment should flow. Bain Capital-backed data centre operator ChinData Group estimated that for every one dollar spent on data centres another US$5 to US$10 in investment in related sectors would take place, including in networking, power grid and advanced equipment manufacturing. “A whole host of supply chain companies will benefit,” the company said in a statement.
There is concern about whether this long-term strategy provides much in the way of stimulus now, and where the money will come from. “It’s impossible to prop up China’s economy with new infrastructure alone,” said Zhu Tian, professor of economics at China Europe International Business School in Shanghai. “If you are worried about the government’s added debt levels and their debt servicing abilities right now, of course you wouldn’t do it. But it’s a necessary thing to do at a time of crisis.”
Digital China is confident that follow-up projects from its housing initiative in Guangzhou could generate 30 million yuan in revenue for the company. It is also hoping to replicate those efforts with local governments in the northeastern province of Jilin, where it has 3.3 billion yuan worth of projects approved. These include building a so-called city brain that will for the first time connect databases including traffic, schools and civil matters such as marriage registry. “The concept of smart cities has been touted for years but now we are finally seeing the investment,” said Kwok.
The rhetoric towards the self-ruled island has hardened in Premier Li Keqiang’s annual work report
Beijing regards Taiwan as one of its core national interests and says it ‘resolutely opposes’ any separatist activity
Beijing regards reunification with Taiwan as one of its core interests. Photo: EPA-EFE
Beijing has hardened its rhetoric towards Taiwan, removing references to “peaceful reunification”, in the government’s annual work report.
Observers said the change reflected the stronger stance Beijing would adopt in tackling the Taiwan issue, which it regards as one of its key national interests.
The past six work reports since President Xi Jinping took power in 2013 stressed peaceful reunification and the 1992 consensus – under which both sides tacitly agree there is only one China, but have different interpretations on what this means.
But the latest report from Premier Li Keqiang took a different tone, saying: “We will adhere to the major principles and policies on work related to Taiwan and resolutely oppose and deter any separatist activities seeking ‘Taiwan independence’.”
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“We will improve institutional arrangements, policies, and measures to encourage exchanges and cooperation between the two sides of the Taiwan Strait, further cross-strait integrated development, and protect the well-being of our compatriots in Taiwan,” the report said.
“We will encourage them to join us in opposing ‘Taiwan independence’ and promoting China’s reunification.
“With these efforts, we can surely create a beautiful future for the rejuvenation of the Chinese nation,” it said, dropping a clause that described the process as “peaceful”.
The 1992 consensus allows leeway for both parties to negotiate an agreement, but President Tsai Ing-wen has said the island would never accept it as the basis for cross-strait relations.
Taiwan’s Mainland Affairs Council said on Friday that the “one country, two systems” framework, touted by Beijing as a political basis for unification, had harmed cross-strait relations. It called for the two sides to work together to resolve their differences.
Tang Shao-cheng, an international relations specialist at Taiwan’s National Chengchi University, said the change in wording and tone of the Taiwan section of the work report could be seen as a warning to Tsai’s independence-leaning Democratic Progressive Party (DPP).
“Not mentioning ‘peace’ suggests Beijing is considering unification both by peaceful means and by force,” Tang said.
President Xi Jinping and Premier Li Keqiang at the National People’s Congress opening session on Friday. Photo: Kyodo
Derek Grossman, an analyst from US-based think tank Rand Corporation, said Beijing would continue to put pressure on the island using diplomatic, military, economic and psychological means.
“Beijing will continue to send military aircraft near the island … [it] could decide to end the Economic Cooperation Framework Agreement which has remained active in spite of Tsai’s election in 2016; Beijing could steal one or more diplomatic partners from Taipei. I would expect these types of actions to be on the table,” Grossman said.
How would mainland China attack Taiwan? A video outlines one scenario
22 May 2020
Sun Yun, director of the China programme at the Stimson Centre think tank in the US, said Beijing faced a dilemma on whether to continue economic integration with Taiwan because that had not had the political effect it wanted.
“The obstacles to unification are not economic, but political. Taiwan is unwilling to pursue unification with an authoritarian mainland. To solve that issue, presumably the mainland could pursue political reform. But in reality, the Chinese Communist Party is unwilling,” she said.
“If the economic and political approach doesn’t work, what’s left is the military approach. But with US intervention, the mainland will not prevail.”
Beijing recently warned Washington it would respond after US Secretary of State
, and demanded that the US stop selling arms to the island.
Joshua Eisenman, a professor from the University of Notre Dame in Indiana, said Beijing was running out of countermeasures, since its actions had only hardened attitudes on the island and enhanced the sense of Taiwanese identity.
“As I see it, all that remains is for the [Chinese Communist Party[ to sit down and talk to the DPP without preconditions and establish a modus vivendi for cross-strait relations,” he said.
BEIJING (Reuters) – China announced on Wednesday that its parliament will open a key annual session on May 22, signalling that Beijing sees the country returning to normal after being reduced to a near-standstill for months by the COVID-19 epidemic.
During the gathering of the National People’s Congress in the capital, delegates will ratify major legislation, and the government will unveil economic targets, set defence spending projections and make personnel changes. The ruling Communist Party also typically announces signature policy initiatives.
The session was initially scheduled to start on March 5 but was postponed due to COVID-19, which has infected nearly 83,000 people and killed more than 4,600 on the mainland after emerging late last year in the central city of Wuhan.
As the epidemic has subsided, economic and social life gradually returned to normal, making it possible for the congress to convene, the official Xinhua news agency quoted the standing committee of the NPC, the legislature’s top decision-making body, as saying.
The committee also appointed Huang Runqiu as the new minister for ecology and environment, a post vacated when predecessor Li Ganjie became deputy Communist Party chief for Shandong province earlier this month, Xinhua reported.
Tang Yijun was also named as the new justice minister to replace Fu Zhenghua, who has reached the retirement age of 65 for ministers.
The Chinese People’s Political Consultative Conference (CPPCC), an advisory body to parliament, has proposed starting its annual session a day before the parliamentary session opens.
Analysts expect China to roll out additional fiscal stimulus in order to cushion the blow from COVID-19, which has developed in to a worldwide pandemic that some fear will trigger a severe global recession.
China’s economy contracted for the first time on record during the January-March period, when the government imposed severe travel and transport restriction to curb the spread of the epidemic.
Parliament is also expected to discuss the anti-government protests in Hong Kong, amid growing speculation that Beijing take steps to strengthen its grip on the city.
It is unclear how long parliament and its advisory body will meet for this time, and people familiar with the matter have told Reuters that this year’s annual sessions could be the shortest in decades due to COVID-19 concerns. Usually more than 5,000 delegates descend on Beijing from all over China for at least 10 days.
Beijing city plans to ease quarantine rules as early as Thursday, two sources familiar with the situation told Reuters, ahead of the key political meetings.
People arriving in the capital from other parts of China will no long have to be quarantined for two weeks unless they come from high-risk areas such as Heilongjiang in the north and some parts of Guangdong in the southeast, the sources said.
In response to the 2008 global financial crisis, China pumped a 4 trillion yuan (US$575 billion) into its economy but it led to a mountain of local government debt
Various early indicators suggest China’s economy will slow in the first quarter of 2020, with some suggestions it will suffer a first contraction since 1976
President Xi Jinping said China must accelerate construction of “new infrastructures such as 5G networks and data centres” on top of speeding up “key projects and major infrastructure construction” in response to the economic impact caused by the coronavirus outbreak. Photo: Xinhua
China should not try to bolster its coronavirus-hit economy by again resorting to a massive debt-fuelled fiscal and monetary stimulus programme, according to a group of government advisers.
Various early indicators suggest China’s economy will slow in the first quarter of 2020, with some even suggesting it will suffer a first contraction since the end of the Cultural Revolution in 1976.
This raises the question if China will miss its key 2020 growth target, with voices on both sides of the debate discussing what stimulus policies are needed to offset the deep impact of the coronavirus.
China is already leaning towards some additional stimulus, with Premier Li Keqiang ordering the central bank pump additional money into the banking system, while President Xi Jinping has announced the need for more spending on “new infrastructure”.
Are there other ways out for China except stimulus policies?Liu Shijin
“Are there other ways out for China except stimulus policies?” rhetorically asked Liu Shijin, who previously worked closely with Vice-Premier Liu He, the top economic aide to Xi, at the Development Research Centre, the think tank attached to the State Council.
“If it really works, why can’t Japan and the United States reach a 5 per cent growth rate?”
It is believed China will need to achieve an average 5.6 per cent growth in 2020 to achieve its goal of doubling the size of its economy from 2010, which is a key goal for
China’s economy grew by 6.1 per cent in 2019, and while it was the slowest in 29 years, the US economy only grew 2.3 per cent, with Japan’s estimated to grow by 0.9 per cent.
What is gross domestic product (GDP)?
Liu Shijin, who is now a deputy head of the China Development Research Foundation and a policy adviser to the People’s Bank of China, argued that a growth rate averaging 5 per cent over the next decade is sufficient for China to meet its development goals.
Growth in 2020, though, may well be below 5 per cent given that the impact of the coronavirus is “unprecedented” and larger than both severe acute respiratory syndrome (Sars) in 2003 and the 2008 global financial crisis.
Xi said earlier this month that China must accelerate construction of “new infrastructures such as 5G networks and data centres” on top of speeding up “key projects and major infrastructure construction already included in state plans” like additional high-speed railway lines in response to the economic impact caused by the coronavirus outbreak.
But as this will mainly rely on corporate and private investment, Liu Shijin feels it will be too small to engineer a major rebound in the growth rate.
When encountering challenges, we should first push forward new reform measures to unleash growth potential. Now is the right timeLiu Shijin
“It’s a different thing compared to real [government-led] economic stabilisation,” Liu Shijin told a web seminar hosted by Peking University’s National School of Development on Wednesday.
“When encountering challenges, we should first push forward new reform measures to unleash growth potential. Now is the right time.”
Instead, to support longer-term growth, China should put its efforts into the development of its “city clusters”, which could lead to higher spending on housing construction, urban infrastructure and manufacturing, added Liu Shijin, which would increase the growth rate by up to an additional percentage point over the next decade.
China has so far refrained from the massive stimulus programme it adopted in 2008 in response to the global financial crisis, which included a 4 trillion yuan (US$575 billion) plan that pumped cheap money into government-backed projects but also created a mountain of local government debt.
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Zhang Bin, a senior researcher at the Chinese Academy of Social Sciences, said infrastructure construction will remain an important part of any plan to support growth.
“If the funding [for the 4 trillion yuan stimulus] had come solely from treasury bonds or local government bonds [rather than risky lending], there wouldn’t be so much shadow banking, unmanageable credit expansion, high leverage, implicit liabilities or financial risks,” he said.
“If the balance sheets of corporations, households and local governments can’t be repaired, it might lead to insufficient demand and a decline into a vicious [downward] cycle.”
Zhang, like Liu Shijin, is a key member of the China Finance 40 Forum, a group of state economists who advocate more structural reforms to support the Chinese economy. In particular, Zhang has set sights on reforms that would boost consumption, which accounted for 58 per cent of Chinese growth last year.
“The biggest weak link of the Chinese economy is that 200 to 300 million migrant workers can’t [legally] settle in big cities,” he said. “Only if they are able to settle in the city that China can be called a real well-off society. It will also boost the economy, lift demand for manufactured goods and unleashed consumption potential.”
Currently, most large Chinese cities only provide social services including health care and schooling to residents who have a legal permit, or hukou. Most migrant workers who come to the big cities for jobs are blocked from obtaining a hukou, meaning they have to travel back to their rural hometowns to have access to basic social services, so often do not settle in their adopted city.
In response to this idea, Xu Yuan, a professor at Peking University, called for the government to build 10 million affordable housing units annually to accommodate new urban citizens, which would address short-term economic pain and serve the nation’s long-term development.
China will release its annual growth target as well as other key goals, including the fiscal deficit ratio and local bond quota, at the National People’s Congress, although the annual parliamentary convention, previously scheduled for March 5, has been postponed, with a new date yet to be announced.
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
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.
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.
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The latest data from China’s industry ministry showed that only 32.8 per cent of
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.”
CHINDIA ALERT: You'll be living in their world, very soon 