China's future in "uncharted waters," analysts say, Suicide bomber kills Confucius Institute workers in Karachi & US voters "overwhelmingly" support tariffs on China goods -- China Boss News 5.02.22
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China's future in “uncharted waters,” analysts say
China Boss thinks these are precarious times for the Middle Kingdom, and, so, it seems do other long-time China watchers. Here’s a sample from the news last week of what some well-known analysts and a top private equity investor say are their biggest concerns.
“Later this year the CCP will hold its twice-a-decade congress, at which Xi is expected to seek an unprecedented third term as leader . . . but the timing and impact of China’s worst [coronavirus] outbreak, as well as the Ukraine war, has upset the stability he likely hoped would see him confidently through,” The Guardian’s Helen Davidson said last week.
The Guardian:
“There is some potential that a failure of zero-Covid, now he’s taken such clear responsibility for it, is a challenge to Xi,” says Prof Mary Gallagher, a political scientist and China expert with the university of Michigan.
“We’re in uncharted waters in how these transitions work. With constitutional amendments [introduced in 2018 to remove term limits] Xi is expected to get his third term but it’s very unclear to see how it would actually happen.”
Gallagher says the political elite is the most divided she’s seen it since 1989, over not just Covid, but also the economy and the Russian invasion of Ukraine.
“We know there is debate among the elites. Unfortunately it’s hitting up against a time period for Xi Jinping which makes it very dangerous to open up.”
In an op-ed for CNBC, William Rhodes and Stuart Mackintosh discussed “the four big threats to China’s economy - “at home, in health, in debt, and in a fracturing globe.”
Rhodes and Mackintosh, CNBC [excerpt]:
Real estate
Chinese real estate defaults continue. Last year saw a record number of defaults among Chinese developers, from Evergrande on down. S&P estimates that between 20% and 40% of property developers may face default.
Property development accounts for 25-30% of China’s economy, according to a January report from the Peterson Institute for International Economics, a nonpartisan think tank. . . .
‘Zero-Covid’
As China’s housing markets shake, the effects of the pandemic policy are making economic matters worse. . . .
Risky external loans
. . . Belt and Road has saddled developing states with at least $385 billion in debts, according to a 2021 report from AidData, an international development research lab based at the College of William and Mary in Virginia.
There, China faces three negative dynamics: debt defaults, nonperforming loans on the books of its largest banks and state lenders, and collateral damage to diplomatic and geopolitical interests if it seizes nations’ assets as part of sometimes onerous loan terms.
Russia’s invasion of Ukraine
Globalization — the engine that powers China’s economy — risks stalling under the pressure of the pandemic and Russia’s war with Ukraine. Supply chains are stretched and broken, or else being reconstituted with new routes and links.
. . . Choosing Russia over the globalization in which their country is so deeply embedded is a shortsighted, damaging economic bargain, one which could result in secondary sanctions on Chinese firms, as the U.S. has warned.
In an usually blunt set of remarks at a meeting last week, Weijian Shan, founder of one of Asia’s biggest private equity investors, “has criticised the Chinese government for policies that he says have resulted in a ‘deep economic crisis comparable to the global financial crash,’” Financial Times said.
Financial Times:
Weijian Shan, whose group PAG manages more than $50bn, said his fund had diversified away from China and was being “extremely careful” about its portfolio in the country.
“We think the Chinese economy at this moment is in the worst shape in the past 30 years,” he said in a video of a meeting viewed by the Financial Times.
“The market sentiment towards Chinese stocks is also at the lowest point in the past 30 years. I also think popular discontent in China is at the highest point in the past 30 years.”
Finally, in a nod to the infamous “Let them eat cake” pronouncement that Marie Antoinette is rumored to have made just prior to the French Revolution and the loss of her head at the guillotine, Bloomberg’s Shuli Ren added that Chinese leader Xi Jinping “may soon learn you can’t eat statistics.”
Ren, Bloomberg:
If beating the U.S. in headline numbers, whether it’s Olympic medals or GDP growth, is what Xi most cares about, what does it say about his policy priorities? With rising job uncertainty and global inflation coming to bite, the Chinese are bound to feel their living standards are slipping.
Let them eat 5.5% GDP growth, Xi might say.
For the rest of Helen Davidson’s report for The Guardian, As China looks on at a world opening up, can Xi Jinping survive zero-Covid?, click here. For Rhodes and Mackintosh’s op-ed in CNBC, Op-ed: The four big threats to China's economy, click here.
For FT’s update, China in ‘deep crisis’, says Hong Kong private equity chief, click here, and for Shuli Ren’s opinion in Bloomberg, China’s Xi May Soon Learn You Can’t Eat Statistics, click here.
Law and International Xi
UN team in China to prepare for HR Commissioner’s Xinjiang visit, The Guardian
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