Posts tagged ‘United States’

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10/02/2016

U.S. and India consider joint patrols in South China Sea – U.S. official | Reuters

The United States and India have held talks about conducting joint naval patrols that a U.S. defence official said could include the disputed South China Sea, a move that would likely anger Beijing, which claims most of the waterway.

An Indian Navy personnel gestures on the deck of the newly built INS Kochi, a guided missile destroyer, during a media tour at the naval dockyard in Mumbai, India September 28, 2015. REUTERS/Shailesh Andrade/Files

Washington wants its regional allies and other Asian nations to take a more united stance against China over the South China Sea, where tensions have spiked in the wake of Beijing’s construction of seven man-made islands in the Spratly archipelago.

India and the United States have ramped up military ties in recent years, holding naval exercises in the Indian Ocean that last year involved the Japanese navy.

But the Indian navy has never carried out joint patrols with another country and a naval spokesman told Reuters there was no change in the government’s policy of only joining an international military effort under the United Nations flag.

He pointed to India’s refusal to be part of anti-piracy missions involving dozens of countries in the Gulf of Aden and instead carrying out its own operations there since 2008.

The U.S. defence official said the two sides had discussed joint patrols, adding that both were hopeful of launching them within the year. The patrols would likely be in the Indian Ocean where the Indian navy is a major player as well as the South China Sea, the official told Reuters in New Delhi on condition of anonymity.

The official gave no details on the scale of the proposed patrols.

There was no immediate comment from China, which is on a week-long holiday for Chinese New Year.

China accused Washington this month of seeking maritime hegemony in the name of freedom of navigation after a U.S. Navy destroyer sailed within 12 nautical miles of a disputed island in the Paracel chain of the South China Sea in late January.

The U.S. Navy conducted a similar exercise in October near one of China’s artificial islands in the Spratlys.

Source: Exclusive: U.S. and India consider joint patrols in South China Sea – U.S. official | Reuters

Posted in China alert, Chindia Alert, Foreign invasion, GeoPolitics, History, India alert, Military, Neighbour conflict, Politics | 1 Comment »

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08/02/2016

Gong Xi Fa Cai! What to expect in China’s Year of the Monkey – SCMP

The Year of the Monkey is expected to be another turbulent year for the world’s second largest economy. Here, SCMP reporters gaze into their crystal balls for what might lie ahead.

An installation celebrates the Year of the Monkey at Ditan Park in Beijing. Photo: EPA

POLITICS: Political jockeying and more crackdowns

The Communist Party will be focused on preparations for a new leadership team, to be unveiled at the 19th Party Congress next year. Apart from President Xi Jinping (習近平) and Premier Li Keqiang (李克強), the rest of the Politburo Standing Committee will have reached retirement age. The new appointments will be keenly observed for clues as to who Xi intends to succeed him.

Two of Xi’s signature campaigns – the drives against corruption and in favour of frugality in public life – are likely to continue to reshape the nation.

…

– Cary Huang

DIPLOMACY: Conflicts and tensions to escalate

Following Xi’s maiden presidential visit to the Middle East, Beijing is expected to increase its role as a broker in the region’s conflicts. Beijing has already hosted representatives from Syria and Afghanistan for talks. But other than calling for dialogue, China’s options are limited, partly because it does not want to be seen as interfering in the internal affairs of other nations.

With the Beijing-led Asian Infrastructure Investment Bank having just started operations, China is expected to boost its economic diplomacy by funding infrastructure projects overseas.

Tensions in the South China Sea are also expected to rise, as China is likely to continue building structures in the disputed waters. How the United States and China handle the issue – especially the Pentagon’s deployment of warships within 12 nautical miles of Chinese-controlled islands – will be the biggest concern.

– Teddy Ng

DEFENCE: Band(s) of Brothers?

The top priority of the military will be to rebuild morale and its integrity following its restructuring into five theatre commands. Xi set the tone this month by visiting Jinggangshan, the cradle of the communist revolution in China. The Eastern Theatre Command’s land force quickly followed his lead and visited Gutian in Fujian (福建) province, where the Red Army pledged obedience to the party in 1929, and saluted the party flag. Other commands are expected to make similar displays of fidelity.

It will be a bumpy road: the old ways of managing operations, carrying out orders through personal connections and using favoured contractors, has been upended. Xi wants to turn the PLA into a fighting force that meets international standards, with all the efficiencies and accountability that entails.

– Minnie Chan

ECONOMY: Pandora’s Box to open?

There’s actually little disagreement between billionaire investor George Soros and Beijing decision-makers over China’s economic prospects in 2016 – both agree growth will be lower in 2016 than that of 2015. Where they disagree is on how much and how quickly.

One thing is for sure, China will never admit an economic “hard-landing”, though investors may find plenty of evidence for one – from factory closures to rising unemployment and financial strains.

…

– Zhou Xin

UNEMPLOYMENT: What’s the real picture?

Of all of China’s official economic indicators, the registered urban jobless rate is possibly the least reliable. The rate, released quarterly, has barely ever moved from 4.1 per cent in recent years, regardless of the economic cycle. Another jobless rate compiled by the statistics agency, which is increasingly being cited by the premier, claims a level of about 5 per cent.

Neither of these official rates are likely to change much throughout 2016.

…

– Zhou Xin

A-shares: Beware the bear!

The mainland’s stock market, after witnessing a sharp fall at the beginning of 2016, is expected to continue a bear run in the Year of Monkey amid a crisis of confidence.

A depreciating yuan, the imminent launch of the new initial public offering (IPO) mechanism and a bleak outlook for corporate earnings are set to exacerbate weak sentiment with millions of retail investors suffering paper losses following a market rout last year.

Local investors are increasingly betting on a further downturn in the A-share market.

Corporate earnings are likely to stay flat in 2016 despite Beijing’s increased efforts to navigate a transition to a consumer-led growth.

– Daniel Ren

Consumption: Bittersweet for retailers

Online stores are continuing to take business from their brick-and-mortar counterparts.

While overall consumption growth is expected to further slow in 2016, bringing problems for both sectors, shopping malls and big stores face their own particular woes.

Hypermarkets could see custom slow, but business at smaller formats such as mini-marts and convenience stores should remain stable.

People will continue to spend more on tourism, leisure, food and health-related products.

Domestic brands will continue to gain ground on foreign ones.

Women will continue to take a greater role in driving spending. Consulting firm Mintel found more than half of Chinese mothers control the family budget and that women are more willing to try new products and experiences than men.

– Mandy Zuo

E-commerce: Click, click, click to buy, buy, buy

The personal computer era is over. Mobile-commerce, which enables people to buy everything from anywhere via the internet, is dominating the online sector and this trend shows no sign of stopping.

Retail on WeChat, the most popular social media platform, is expected to grow steadily. The mobile platform is also becoming an important tool of advertising and communication for businesses.

Online to offline (O2O) business will continue to boom as mainlanders show growing interest and loyalty in professional home services such as home cleaning and massage.

With growing demand from mainland consumers for prime goods overseas, fiercer competition is expected in cross-border business. Internet giants, entrepreneurs and small businesses will flock to the sector, which the Ministry of Commerce projects will grow an average 30 per cent in the next few years.

– Mandy Zuo

P2P lending: More closures, collapses and runaway owners

The long-awaited regulations reining in peer-to-peer lending are expected to bring an industry shakeup that will knock out a significant number of players.

Industry data showed the number of P2P lending platforms dropped a second consecutive month to 2,566 at the end of January from 2,595 in December.

The draft rules, released by the China Banking Regulatory Commission at the end of 2015, define P2P lending platforms as internet financing intermediaries and forbid them from selling wealth management and other financial products that attract investors with promises of high returns.

…

– Kwong Man-ki

Tourism: Slowdown, what slowdown?

Despite the economic slowdown, the depreciation of the yuan and turmoil in the stock markets, Chinese tourists passed a milestone last year – making a record 120 million outbound trips and spending US$104.5 billion to make China the world’s leading source of tourists.

The boom is expected to continue this year, thanks to a relaxation in visa policies in more countries as well as a strong yuan against the euro and yen.

…

– Laura Zhou

Childbirth: More buns in the oven

The Year of the Monkey is traditionally regarded an auspicious year for giving birth, so it will prove popular with people planning families. Some of those may have delayed their plans from the Year of the Goat, which is decidedly inauspicious.

More of the newborns are likely to be second children, as parents seek to benefit from the new policy allowing all couples to have two children.

…

– Zhuang Pinghui

URBANISATION: Millions to relocate

Urbanisation will maintain its pace with millions relocating, most of them rural residents.

They will continue to move to cities near rivers, railway lines and coastlines and more of them will be migrating with spouses and children.

The policy of issuing residence permits to migrants and granting urban household registrations to rural residents are helping them to access public services and integrate in urban life.

– Zhuang Pinghui

ENVIRONMENT: More smoggy days?

As the new five-year plan period (2016-2020) begins, cities will need to set targets on how to improve water and air quality. But whether much can be done to reduce smog problems – especially in heavily polluted city clusters near Beijing and Shanghai – depends largely on how determined local governments are to slash overcapacity in heavy industries.

At the end of 2015, Beijing’s persistent smog pushed the city authorities to pledge better management of small-scale coal burning. If other cities follow suit, the move could impact China’s environmental footprint.

…

– Li Jing

http://www.scmp.com/news/china/policies-politics/article/1910019/kung-hei-fat-choy-what-expect-chinas-year-monkey

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03/02/2016

China’s new wind power capacity hits record high – Xinhua | English.news.cn

China‘s newly installed wind power capacity reached a record high in 2015 amid increasing efforts from the government to boost clean energy.

The new wind power capacity jumped to 32.97 gigawatts last year, more than 60 percent higher than 2014, the National Energy Administration (NEA) said on Tuesday.

Wind power generated 186.3 terawatt hour of electricity in 2015, or 3.3 percent of the country’s total electric energy production, data showed.  (Editor’s note: worldwide average is 4% – https://en.wikipedia.org/wiki/Wind_power)

Promoting non-fossil energy including wind power, China is in the middle of an energy revolution to power its economy in a cleaner and sustainable manner. The government aims to lift the proportion of non-fossil fuels in energy consumption to 20 percent by 2030 from present around 11 percent.

China’s energy mix is currently dominated by coal.

However, the NEA warned of the suspension of wind farms in Inner Mongolia, Xinjiang and Jilin. The phenomenon occurs in the early stage of wind power capacity construction due to the mismatching of new installation and local power grid.

Source: China’s new wind power capacity hits record high – Xinhua | English.news.cn

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28/01/2016

Grossly Deceptive Plans (GDP) | The Economist

ON JANUARY 19th China declared that its gross domestic product had grown by 6.9% in 2015, accounting for inflation—the slowest rate in a quarter of a century.

It was neatly within the government’s target of “around 7%”, but many economists wondered whether the figure was accurate. Online chatter in China about dodgy GDP numbers was fuelled a week later by the arrest of the man who had announced the data: Wang Baoan, the head of the National Bureau of Statistics. The country’s anti-graft agency accused him of “serious disciplinary violations”, a euphemism for corruption. But beyond all the (justifiable) doubts about the figures lies another important question. That is: why does China have a GDP target at all?

It is the only large industrial country that sets one. Normally central banks declare specific goals for things like inflation or unemployment. The idea that a government should aim for a particular rate of output expansion, and steer the economy to achieve that, is unusual. In the case of China, which is trying to wean its economy off excessive reliance on GDP-boosting (but often wasteful and debt-fuelling) investment, it is risky. It is inconsistent with the government’s own oft-repeated mantra that it is the quality of growth that matters, not the quantity.

In the past, setting a target may not have made much difference. For all but three of the years between 1992 and 2015, China’s growth was above target, often by a big margin. A rare period when targets seemed to affect the way officials tried to manage the economy was from 2008 to 2009, when growth fell sharply (see chart). It would be hard to argue that targets themselves have been responsible for China’s overall (impressive) record of growth in recent decades.

Now, however, the economy is slowing. This is inevitable: double-digit growth is no longer achievable except at dangerous cost (total debt was nearly 250% of GDP in the third quarter of 2015). But the government is worried that the economy may slow too fast, and that this could cause a destabilising surge in unemployment. So it has been ramping up investment again, and goading local governments to do the same by setting a high growth target.

For a while there were signs that the leadership itself had doubts about the merits of GDP target-setting. In 2013 Xinhua, an official news agency, decried what it called the country’s “GDP obsession”. By the next year, 70 or so counties and cities had scrapped their targets. In 2015 Shanghai joined them, becoming the first big city to break with orthodoxy (each level of government sets its own GDP target, often higher than the national one). Liu Qiao of the Guanghua School of Management at Peking University says the central government ought to follow suit.

Last year there were hints that it might. The prime minister, Li Keqiang, said the government would not “defend [the target for 2015] to the death”. And in October, talking about the government’s work on a new five-year economic plan (which will run from 2016 to 2020), President Xi Jinping avoided mentioning a number. That raised expectations that targets might at least be downplayed, if not abandoned.

They have not been, however. An outline of the five-year plan, unveiled in November, contained the usual emphasis on growth. And Mr Xi appeared to change his tune, saying expansion must average at least 6.5% a year until 2020. Many economists believe that will require yet more debt-inducing stimulus. A GDP target for this year is all but certain to be announced, as usual, at the annual session of the legislature in March (when the five-year plan will also be adopted). It will probably be higher than 6%. Speculation that the government might set a target range in order to give itself more policymaking flexibility (as the IMF and the World Bank have urged) has ebbed. In December some national legislators complained that local governments were busting their debt ceilings because there was “still too much emphasis on GDP”.

So why is there still a target? The reasons are political. In a country so large, central leaders are always fearful of losing their grip on far-flung bureaucrats: setting GDP targets is one means by which they believe they can evaluate and control those lower down. Local officials are also judged by environmental standards, social policies and what the Communist Party calls “virtue”—that is, being uncorrupt and in tune with the party’s latest interpretation of Marxist doctrine. But GDP is usually the most important criterion, having the attraction of being (roughly) measurable.

Source: Grossly Deceptive Plans | The Economist

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27/01/2016

India to build satellite tracking station in Vietnam that offers eye on China | Reuters

India will set up a satellite tracking and imaging centre in southern Vietnam that will give Hanoi access to pictures from Indian earth observation satellites that cover the region, including China and the South China Sea, Indian officials said.

The move, which could irritate Beijing, deepens ties between India and Vietnam, who both have long-running territorial disputes with China.

While billed as a civilian facility – earth observation satellites have agricultural, scientific and environmental applications – security experts said improved imaging technology meant the pictures could also be used for military purposes.

Hanoi especially has been looking for advanced intelligence, surveillance and reconnaissance technologies as tensions rise with China over the disputed South China Sea, they said.

“In military terms, this move could be quite significant,” said Collin Koh, a marine security expert at Singapore’s S. Rajaratnam School of International Studies. “It looks like a win-win for both sides, filling significant holes for the Vietnamese and expanding the range for the Indians.”

The state-run Indian Space Research Organisation (ISRO) will fund and set up the satellite tracking and data reception centre in Ho Chi Minh City to monitor Indian satellite launches, the Indian officials said. Indian media put the cost at around $23 million.

India, whose 54-year-old space programme is accelerating, with one satellite launch scheduled every month, has ground stations in the Andaman and Nicobar islands, Brunei, Biak in eastern Indonesia and Mauritius that track its satellites in the initial stages of flight.

The Vietnam facility will bolster those capabilities, said Deviprasad Karnik, an ISRO spokesman.

Source: India to build satellite tracking station in Vietnam that offers eye on China | Reuters

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24/01/2016

Well-wishing | The Economist

SINCE he took over as China’s leader in 2012, Xi Jinping has been a busy globetrotter. Last year he visited more countries than Barack Obama, America’s president (14 against 11).

Heedless of whether his hosts are powerful, puny or pariahs, he has flown everywhere from America to the Maldives and Zimbabwe. Mr Xi wants to project China’s rising power—and his role in promoting that—to foreign and domestic audiences. But until this week, he had not set a presidential foot in the Middle East.

The trip, under way as The Economist went to press, began in Saudi Arabia (whose king, Salman bin Abdul Aziz, is pictured with Mr Xi). He then visited Egypt and was due to finish his tour in Iran. No Chinese president had toured the region since 2009. China’s leaders had worried about getting embroiled in the region’s intractable disputes. But China has a big stake in the Middle East. It is the world’s largest oil importer and gets more than half of its crude from the region (see chart). Mr Xi’s much ballyhooed “new Silk Route”, aimed at linking China and Europe with the help of Chinese-funded infrastructure, runs across the Middle East. Chinese companies are already building expressways and harbours there. In this section Divorce: a love story Well-wishing Reprints Related topics Middle East Politics Government and politics World politics Asia-Pacific politics

The timing of Mr Xi’s tour is tricky. Tensions between Saudi Arabia and Iran are particularly high after Saudi Arabia executed a Shia cleric earlier this month and angry Iranians responded by storming the Saudi embassy in Tehran. But the lifting of Western sanctions on Iran on January 16th (see article) allowed Mr Xi to display even-handedness by visiting both countries, without upsetting Western powers. Mr Xi, like his predecessors, likes to present China as a non-interfering champion of peace. (Xinhua, China’s state-run news agency, said this week that the West’s “meddling hands” were “more of a mortal poison than of a magic potion” in the Middle East.) But Mr Xi is not keen to play a central role as peacemaker. China’s first “Arab Policy Paper”, released on January 13th, is a vague, waffly document. It talks of “building a new type of international relations”, but is devoid of new ideas.

Zhang Ming, a vice-foreign minister, said this week that economic development was the “ultimate way out” of conflict in the region. By expanding its trade and investment links with the Middle East, China hopes discontent and conflict there will gradually dissipate. In addition to crushing dissent, it is trying a similar approach in Xinjiang, a province in western China with a large Muslim population—so far without success.

In the long run, China may find it hard to avoid taking sides. To some extent it has already done so in Syria: it talks to representatives from both the Syrian government and the opposition, but by vetoing UN resolutions on intervention it tilts, in effect, in the government’s favour. The presence of a growing number of Chinese citizens in the Middle East may challenge China’s non-interventionist approach. After a Chinese national was executed by Islamic State in November, China promised to strengthen protection of its citizens abroad. Its new rules of Middle Eastern diplomacy could end up resembling familiar Western meddling

Source: Well-wishing | The Economist

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14/01/2016

Xi’s new model army – The Economist

Xi Jinping reforms China’s armed forces—to his own advantage

CHINA’S biggest military shake-up in a generation began with a deliberate echo of Mao Zedong.

Late in 2014 President Xi Jinping went to Gutian, a small town in the south where, 85 years before, Mao had first laid down the doctrine that the People’s Liberation Army (PLA) is the armed force not of the government or the country but of the Communist Party. Mr Xi stressed the same law to the assembled brass: the PLA is still the party’s army; it must uphold its “revolutionary traditions” and maintain absolute loyalty to its political masters. His words were a prelude to sweeping reforms in the PLA that have unfolded in the past month, touching almost every military institution.

The aim of these changes is twofold—to strengthen Mr Xi’s grip on the 2.3m-strong armed forces, which are embarrassingly corrupt at the highest level, and to make the PLA a more effective fighting force, with a leadership structure capable of breaking down the barriers between rival commands that have long hampered its modernisation efforts. It has taken a long time since the meeting in Gutian for these reforms to unfold; but that reflects both their importance and their difficulty.

The PLA itself has long admitted that it is lagging behind. It may have plenty of new weapons—it has just started to build a second aircraft-carrier, for instance—but it is failing to make effective use of them because of outdated systems of command and control. Before any substantial change in this area, however, Mr Xi felt it necessary to strengthen the party’s control over the PLA, lest it resist his reforms and sink back into a morass of money-grubbing.

The reforms therefore begin with the main instrument of party control, the Central Military Commission (CMC), which is chaired by Mr Xi. On January 11th the CMC announced that the PLA’s four headquarters—the organisations responsible for recruiting troops, procuring weapons, providing logistics and ensuring political supervision—had been split up, slimmed down and absorbed into the commission. Once these were among the most powerful organisations in the PLA, operating almost as separate fiefs. Now they have become CMC departments.

Power to the party

The political headquarters was the body through which the party kept an eye on the ranks and ensured they were up to speed on Maoist texts and the party’s latest demands. The loss of its autonomous status may suggest that the party’s role is being downgraded. Far from it. Now the party’s CMC (there is also a state one, which exists only in name) will be better able to keep watch. The body’s 15 new departments will include not only departments for politics but also for logistics, personnel management and fighting corruption. Mr Xi has already turned his guns on graft, imprisoning dozens of generals.

The second reform has been to put the various services on a more equal footing. The land forces have hitherto reigned supreme. That may have been fine when the PLA’s main job was to defend the country against an invasion across its land borders (until the 1980s the Soviet Union was considered the biggest threat). But now China has military ambitions in the South China Sea and beyond, and wants the ability to challenge American naval and air power in the western Pacific. A recent editorial in the Liberation Army Daily, a PLA mouthpiece, berated the armed forces for their “army-centric mindset”.

In addition to those for the navy and air force, a separate command has now been created for the army, which had previously run everything. On December 31st the CMC also announced the formation of a command responsible for space and cyberwarfare, as well as one for ballistic and cruise missiles (previously known as the Second Artillery Force, part of the army). There is also a new joint command with overall control of the various services, a little like America’s joint chiefs of staff.

Big changes are also afoot in regional command structures. China used to be divided into seven military regions. These were powerful and relatively self-contained; sharing or swapping troops and equipment was rare. Now, according to reports in the South China Morning Post, a newspaper in Hong Kong, the number will be reduced to five. Troops will be recruited and trained by the various services before regional deployment. This will ensure greater central control over the regions.

China has been talking about military reform for decades, but change has been glacial. Opposition within the armed forces has been intense. “If [reform] is not done properly,” wrote Sun Kejia and Han Xiao of the PLA National Defence University last month, “it could affect the stability of the armed forces or even all of society.” (The article was promptly removed from the Liberation Army Daily website.) Demobbed soldiers could make trouble—Mr Xi wants the number of troops to be cut by 300,000. State firms have been ordered to reserve 5% of jobs for laid-off veterans.

The recent reforms are more extensive than most Western observers had expected after the Gutian conference. But even so, they are incomplete. The army still holds sway over some appointments (all five chiefs of the new regional commands are army generals, for instance). The PLA has traditionally given higher status to combat units than to those providing communications, logistics, transport and the like, a misplaced emphasis in an age when information and communications are crucial in warfare. The reforms do little to correct that bias. Moreover, many details about them remain unclear. No one knows, for example, where the troop cuts will come from or what units will go into the new space and cyberwarfare command.

The first result of the reforms is likely to be confusion in the ranks, until the new system settles down. Dennis Blasko, an American observer of the PLA, says no one can be sure of the results until they are tested in battle. Amid the murk, only one man clearly seems to have got his way: Mr Xi.

From: http://www.economist.com/news/china/21688424-xi-jinping-reforms-chinas-armed-forcesto-his-own-advantage-xis-new-model-army

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14/01/2016

Economists React: China’s December Trade Data May Mean Worst Is Over – China Real Time Report – WSJ

Better-than-expected export and import data in December suggest the beginning of a modest improvement in trade despite recent turmoil in Chinese financial markets, economists say, even as a weaker yuan helps exporters.

China’s exports in December were off 1.4% from a year earlier, a smaller decline than November’s 6.8% or the median 8% forecast of 15 economists surveyed by the Wall Street Journal. Imports were down 7.6%, compared with November’s 8.7% and the 11% median forecast.

Following are excerpts from economists’ views on Wednesday’s trade data, edited for style and length:

The idea that China needs to devalue its currency to reflect a weakening export sector is not borne out by the 2015 trade figures, which show that China gained world-wide market share in a tough global trading environment. The past couple of months, we’ve seen exports surprise on the upside. Worries that something is going on in China behind the scenes, that real compelling economic fundamentals are pushing the yuan weaker, is inconsistent with what we’re seeing on the trade front.—Tim Condon, ING Group ING +0.96%

China’s December trade data was reassuring—indicating that, despite the turmoil on the stock and foreign-exchange markets, growth dynamics in the real economy are evolving more gradually and may actually be improving somewhat. The improvement in exports suggests that the global goods trade gained some momentum toward the end of 2015, with China helped by a weaker yuan. Headline December goods import data were down 7.6%, but import volumes have started to improve. We estimate import volumes were up 7.5% year on year in December, mainly due to better “normal imports” used in China’s own economy (rather than re-exported), implying a pickup in domestic demand momentum at the end of 2015.—Louis Kuijs, Oxford Economics

Better-than-expected trade data hint that the yuan depreciation in December—the currency fell 1.5% against the dollar—could have boosted external demand. For the year, China’s exports dropped by 2.8% and imports plunged by 14.1%. The underperformance of imports reflects sluggish demand for commodities as China moves toward a more consumption-driven growth model. It also highlights the deleveraging under way in China’s manufacturing sector because of the property slowdown. The mixed picture illustrated by China’s trade figures convinced us that growth will be under pressure. Also, China could steer further yuan depreciation at an appropriate pace and time to support economic growth and facilitate the deleveraging in many sectors plagued by overcapacity.—Zhou Hao, Commerzbank AG

China’s better-than-forecast trade figures may signal the beginning of a modest improvement as the yuan stabilizes against a weighted basket of currencies. That could translate into export growth of 5% to 7% and import growth of 1% to 2% this year. Demand may not be a big driver, but China is becoming more competitive with its exchange rate.—Ding Shuang, Standard Chartered STAN.LN +0.35%

China’s better-than-expected export data in December was mainly due to the world’s recovering appetite for exports from China, but its sustainability is still an open question. The devaluation of the yuan might have played a role in boosting exports, though it wasn’t the main driver. To what extent the yuan will influence exports this year is uncertain, given the central bank’s intervention in the foreign-exchange market. But January export figure should be relatively positive since 2015 provided a weak base for comparison.—Ma Xiaoping, HSBC HSBA.LN +0.49%

Source: Economists React: China’s December Trade Data May Mean Worst Is Over – China Real Time Report – WSJ

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06/01/2016

What might happen in China in 2016? – McKinsey

Abbreviated from McKinsey: http://www.mckinsey.com/Insights/Strategy/What_might_happen_in_China_in_2016?cid=other-eml-alt-mip-mck-oth-1601

What’s in store for China in 2016?

The reality is that China’s economy is today made up of multiple subeconomies, each more than a trillion dollars in size. Some are booming, some declining. Some are globally competitive, others fit for the scrap heap. How you feel about China depends more than ever on the parts of the economy where you compete. In 2015, selling kit to movie theaters has been great business, selling kit to steel mills less so. In your China, are you dealing with a tiger or a tortoise? Your performance in 2016 will depend on knowing the answer to this question and shaping your plans accordingly.

Many well-established secular trends in China will continue in 2016. The service economy’s expansion is perhaps most prominent among them. In this piece, as usual, I won’t spend much time on the most familiar things. Instead, I will highlight what I believe will become the more important and more visible trends in 2016, either because they are now accelerating to scale or a discontinuity may become a tipping point. (For a quick summary, see sidebar, “The China Orr-acle: Gordon’s predictions for 2016.”) I hope you find my ideas valuable.

The 13th five-year plan—few surprises

Much of China’s 13th five-year plan will seem pretty familiar, as it has been flagged in advance at the Fifth Plenum and elsewhere. Perhaps the only challenge will be to interpret the plan’s intent clearly through the new “party speak” now coming to dominate government pronouncements.

The GDP growth target will still be 6 percent–plus, which will be softened a bit but not eliminated by parallel quality-of-life goals: the environment, health, income, and the like. Achieving the growth target will remain the core objective of fiscal and monetary policies, so expect lower interest rates and pressure on the exchange rate versus the US dollar in 2016. Financial reforms aimed at moving more of the economy toward a market-based allocation of capital will continue.

Meanwhile, there will be more progress on interest-rate deregulation, on the IPO process (registration rather than approval), on permitting new entrants (especially from the tech sector and from abroad) into financial services, and on reimplementing laws suspended in the summer of 2015. The plan will promote decentralization, but the reality is likely to be greater centralization. More infrastructure will be built, mainly to enhance intraregional development—for example, around Greater Beijing.

Green initiatives, reinforced by December 2015 commitments made in Paris and the “red alert” in Beijing that same month, will take center stage. The central government will make such big and visible commitments to its citizens that local authorities will have to mount a serious effort to deliver. There will be tougher emissions standards and more spending to support the development of nonfossil fuels. Green finance will be available. Both private-sector and state-owned companies will rebrand their ongoing initiatives as green. China will explicitly build new export engines from its emerging global leadership in green products; for example, expect to see lots of Chinese-made air-filtration products in Delhi and the rest of India in 2016. Beyond green initiatives, going global will remain a key theme, as detailed in the One Belt, One Road program.1

 

Finally, the plan will recognize China’s success in raising labor productivity over the past decade and prioritize the acceleration of productivity growth, for both capital and labor, from 2016 to 2020. The plan will raise the implications of higher productivity for workers: the disappearance of many traditional well-paying jobs and the need for increased labor mobility and for the lifetime renewal and development of skills. But I am concerned that implementation will be left to local administrators and that the regions requiring the most help will have the lowest amounts of money to invest in reskilling the workforce and the least impressive actual skills to deliver.

Fewer jobs, flatter incomes—and, potentially, less confidence

The workplace in China is already changing dramatically in ways that will create many individual losers—for example, workers in industry sectors in secular decline (such as steel or textiles) or in industries where technology is rapidly displacing people even as output grows (like financial services or retailing). The government must help these workers reskill themselves to deliver on its commitment that all parts of society will benefit from economic growth and to keep people actively engaged in the economy. It will not be enough for officials to visit major local employers, as they did during the global financial crisis, and press them to retain all their current workers.

…

The maturing of investing: More options for Chinese investors and foreign investment managers

Chinese investors today remain dependent on bank deposits and property. Yet after the volatility of the property and stock markets in 2015, investors want to diversify into more stable vehicles. The number of wealth managers seeking to address this need has increased massively. Often, their main challenge is not finding clients but rather credible products to sell. The main challenge for investors is to find advisers they can trust; most simply push the products that give them the largest commission.

…

Manufacturing in China is changing, not disappearing

The closely watched manufacturing purchasing manager’s index (PMI) remains below 50, which indicates deterioration, leading to talk that the country may be nearing the end of its time as a manufacturer for the world. Let’s be clear: manufacturing is not about to become irrelevant in China. However, the country is evolving toward extremes of performance: the truly awful and the genuinely competitive.

…

 

Agricultural imports are rising and rising

In 2016, China’s growing food needs will drive agricultural imports to record highs in both volume and value. A wider range of countries than ever before will find agricultural-export opportunities there.

…

More centralization

The Chinese media, especially during President Xi’s increasingly frequent trips abroad, made it clear that economic decision making has been centralized over the past two years. China will become still more centralized in 2016, rolling back decentralization where it had unintended outcomes. For example, after local governments received authority to approve new power plants, more than 150 new coal-fired ones were green-lit in the first nine months of 2015—more than three times the number approved in 2013, under the old centralized decision-making process. Unsurprisingly, coal-producing areas granted the largest number of approvals for plants that weren’t required under any realistic demand projection, even setting aside the question of whether any new plants at all should be coal fired. State-owned enterprises are behind most of these projects and would expect to be bailed out if they fail. Thus, for multiple reasons, such decisions will be recentralized.

…

Moving people at scale—the middle class, not peasants

Despite prodigious investment, many Chinese cities cannot build enough quality infrastructure to avoid massive day-to-day congestion. Even though the new five-year plan will commit the country to build more of it, that will not solve these problems; growth has simply outstripped potential solutions. For example, Beijing’s population officially grew by 60 percent, to 21 million, in just the past 14 years—and unofficially by significantly more.

…

Movies in China: $$$

A Chinese movie will gross $500 million domestically in 2016. As a benchmark, the highest-grossing movie of all time on US domestic screens is Avatar, at $760 million. This year’s leading domestic productions in China were Monster Hunt (which has grossed $380 million as of September) and Lost in Hong Kong (more than $200 million). The leading international movie, Furious 7, grossed almost $400 million in China. The country’s box office has been set to grow by almost 50 percent in 2015, and new screen additions alone should deliver 20 percent–plus growth in 2016. More than half of the top-ten movies for 2015 (as of late November) are domestic productions, and 60 percent of the box office comes from Chinese movies. The country’s producers and directors have clearly tapped into what excites local moviegoers (and what censors permit).

…

China continues to go global, with the United Kingdom as a new focal point

China’s outbound investment will accelerate in 2016, with One Belt, One Road–related initiatives driving much of it. A second driver will be distressed-asset acquisitions in basic materials and related sectors: Chinese acquirers may plan not to extract the assets in the near term but simply to stockpile them as long-term insurance. Finally, a growing share of the acquisitions will come from private-sector companies that aspire to global leadership. These companies are increasingly sophisticated buyers, conducting quality due diligence, working with traditional advisers, and focusing on countries where they think that warm political relations will make it easier to do deals.

…

And finally . . .

My enduring prediction that big business would embrace soccer in China has finally been realized, even if that happened more slowly than I expected. Footballer Sergio Agüero, of Manchester City Football Club, took what became one of the world’s most shared selfies, with President Xi and British Prime Minister David Cameron. It seemed only a matter of time before Chinese capital (specifically, China Media Capital and CITIC Capital Holdings) invested in Manchester City and its global network of teams, which includes the New York City Football Club. Other leading teams are exploring how to participate in China. Arsenal Football Club has a multiyear grassroots program in place, as does Real Madrid. And outbound investment in soccer is growing, highlighted when Wanda Group bought into Atlético de Madrid in 2015.

…

As always, don’t overfocus on short-term noise about Chinese GDP growth. Try to identify the medium-term direction of the parts of the economy relevant to your business. Enjoy China in 2016!

Gordon Orr is a director emeritus of McKinsey and senior external adviser.

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01/01/2016

‘The Miraculous History of China’s Two Palace Museums’ – China Real Time Report – WSJ

In late 1948 and early 1949, toward the end of the Chinese civil war, Nationalist leader Chiang Kai-shek transported across the Taiwan Strait hundreds of thousands of valuable Chinese artifacts which are now stored in Taipei’s National Palace Museum. Along with its Palace Museum counterpart in Beijing – more famous as the Forbidden City – the museums serve as one of the most poignant reminders of the division of China.

Beijing’s Palace Museum, which celebrated its 90th anniversary in October, was established shortly after the last Chinese emperor, Pu Yi, was forced from his palace, where he had been allowed to stay even after the Chinese republic was founded in 1911.

Intellectuals at the time wanted to set up a Chinese museum along the lines of the great museums in Europe.

Today, millions visit both museums each year, crowding around artifacts such as the Jadeite Cabbage and the Meat-Shaped Stone in Taipei.

Among the visitors are huge tour groups of mainland Chinese tourists, as the Taipei government continues to liberalize travel policies for its neighbor amid a broader detente.

This week, a branch of the National Palace Museum housing exhibits from around Asia was inaugurated in the southern Taiwanese city of Chiayi.

In his book “The Miraculous History of China’s Two Palace Museums,” Hong Kong-based writer Mark O’Neill details the treacherous history of how some of China’s most precious artifacts were rescued from the invading Japanese imperial army in the 1930s and later transported to Taiwan, and the powerful symbolism of the museums.

Source: Writing China: Mark O’Neill, ‘The Miraculous History of China’s Two Palace Museums’ – China Real Time Report – WSJ

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