Xi looks to the Middle East to save China's economy, Plus Mexico takes PRC's top spot in US trade & Russia threatens China's food security -- China Boss News 7.21.23
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What happened.
China’s economic troubles dominated news headlines after reports of second quarter growth came back lower than expected. New York Times' Keith Bradsher said that "China's economy is flashing many warning signs," while Financial Times' staff proposed Beijing "launch a weighty stimulus package."
But award-winning correspondent for the Wall Street Journal and author Lingling Wei (who was based in Beijing until China expelled her in 2020) was more blunt. She laid much of the blame for China’s economic woes on Xi Jinping whom she accused of “chok[ing] off Western investment” with an expanded anti-espionage law and a “waive of raids, investigations and detentions” targeting foreign businesses.
Wei, WSJ:
For Chinese leaders, keeping pressure on foreign firms while simultaneously trying to get them to invest is becoming an evermore precarious balancing act, which threatens to deprive the country of the capital, technologies, ideas and management skills that have helped power China’s rise.
Why it matters.
Gulf streams rising
In May, China Boss tried to portray the alarming scale of the PRC’s financial troubles by suggesting that Xi Jinping’s much-delayed phone call with Ukraine’s President Zelensky was intended to move the spotlight away from a Financial Times bombshell report recording a massive $550bn drop in Chinese equities published the same day.
(This week, NYT’s Bradsher wrote something along similar lines: “One Reason China Is Willing to Engage Again: Its Troubled Economy.” )
Investors started to lose faith in China’s economic recovery way before that, however. Back in October 2022, The South China Morning Post reported that “[f]oreign investors [had] cut their holdings of yuan-denominated bonds for a record eighth consecutive month.”
But before you start thinking about world politics sans Xi Jinping and the Chinese Communist Party, consider alternative inflows of cash which might boost their staying power.
Last week, Bloomberg staff published a report about the increase in “Middle Eastern wealth flows to China” driven by “[d]issatisfaction with the decades-old US security umbrella.”
China’s deals with major regional players, like Saudi Arabia and United Arab Emirates, are “moving well beyond crude purchases,” they said.
Bloomberg:
One of the deals that could benefit from closer ties in the coming months is Chinese-owned seed giant Syngenta Group’s planned $9 billion Shanghai IPO. The state-backed company’s advisers have been having discussions with Middle Eastern sovereign funds including the Abu Dhabi Investment Authority and Saudi Arabia’s Public Investment Fund about becoming cornerstone investors, people with knowledge of the matter have said.
Investment streams are flowing both ways, according to The National, a UAE English-language newspaper. "Saudi Arabia's special economic zones" and “the country's continued push to diversify its economy" has helped pave the way for "agreements worth $50 billion signed during Chinese President Xi Jinping's visit to Saudi Arabia in December," news staff said.
That last part was emphasized to remind you that Xi only got around to dialing up Zelensky by the end of April 2023. What’s more, securing Gulf deals must be extremely important for China’s supreme leader to see to them personally.
The way Xi sees it
Why Chairman Xi can’t just do the sensible thing and lighten up on his “foreign pressure” campaign against Western firms to relieve some of China’s economic stress is also, very likely, due to diverging interests.
Experts told the Financial Times that, despite China's worsening economic performance, Xi and his top policymakers are "maintaining strategic focus." (Emphasis on that, too. )
Financial Times:
“Xi Jinping does not define economic success in terms of GDP growth,” says Arthur Kroeber, founding partner and head of research at Gavekal Dragonomics. “He defines it in terms of tech self-sufficiency.”
As long as the government can hit its targets on this front, he says, “then his calculation is we can figure out how to spread the growth enough to keep people content”.
Is Xi, simply, turning China inward to protect national security, as he says? Or does he want to insulate the Party from unflattering comparisons with Asian democracies and the West? In a darker, yet equally plausible scheme, Xi and his echo-chambered advisors will seal Fortress China before moving on Taiwan and the South China Sea’s shipping routes.
Whatever the objective, Xi seems to think the Arab world’s oil wealth will help China steer anti-West. And with US tensions escalating as his partner in Moscow struggles with war and mutiny, risking the farm on the Gulf’s vast but quickly depleting fossil fuel profits is, probably, his best bet.
This Week’s China News
The Big Story in China Business
WORRISOME 2ND QUARTER DATA: China’s second-quarter economic data is “fanning fears” of a faltering recovery, according to the South China Morning Post.
Great “missed” expectations: Growth stalled at 6.3 per cent, below the expected 6.8. Retail sales and investment (fixed assets and private) failed to meet targets, also. Property investment took another nose dive, while exports “recorded their biggest decline in over three years,” CNBC said.
Youth joblessness got even higher: Unemployment among young people ages 16-24 “hit a new high of 21.3 per cent in June, up from 20.8 per cent in May.”
Factoring in skewed numbers: The data is even worse when you account for the fact that Beijing’s baseline is pegged to the second quarter of last year when China was frozen in deep zero-Covid lockdowns, as NYT’s Keith Bradsher reminds.
In other China business news
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