China.com recently reported that, at a recent press conference, Zhou Xiaochuan, the governor of China’s central bank, expressed his views on “systemic financial risks.” He proposed that the bottom line of China’s risk control should be to get prepared for stopping any kind of “severe adjustment” in the economy when China faces its Minsky Moment. A Minsky moment, named after U.S. economist Hyman Minsky, is a sudden major collapse of asset values which is part of the credit cycle or business cycle. Such moments occur because long periods of prosperity and the increasing value of investments lead to increasing speculation using borrowed money. As part of Zhou’s further explanation, he gave examples about China’s debts, especially company bonds and local government debts (channeled through local financial platforms). Zhou emphasized the importance of taking this issue seriously.
Source: China.com, October 20, 2017
Well-known Chinese news site Sina recently reported that the newly released Apple Watch Series 3, which added support for the LTE cellular connection, is facing governmental challenges in China. The LTE functionality was available on China Unicom at launch. However, the Chinese government abruptly terminated the LTE access for the new Apple Watch Series 3 subscribers a few days later without explanation. Industry analysts expressed the belief that the Chinese government was concerned about the fact that it could not track who was using the new Apple Watch. Apple’s new eSIM technology used in the Watch made it very difficult to track the user’s identity and China heavily regulates the mobile communications industry. The Chinese regulator, the Ministry of Industry and Information Technology, didn’t respond to the media’s requests for comment. Not long-ago the Chinese government forced Apple to remove more than 400 VPN apps from the local version of its App Store. VPN technology offers a way to bypass China’s Great Firewall.
Source: Sina, October 20, 2017
The China Securities Journal recently reported that SWIFT (Society for Worldwide Interbank Financial Telecommunication) released its September report. The report showed that the usage of China’s currency (the RMB) in international transactions fell to 1.85 percent. Among all currencies, the RMB was ranked number six for September, down from number five in August (1.94 percent). The report also pointed out that there is no clear relationship between the size of an economy and the usage of its currency in international transactions. The U.S. GDP is 25 percent of the global total, while the U.S. Dollar accounts for nearly 40 percent of all global transactions. China’s GDP takes a 15 percent share in the global economy, but the RMB accounts for less than two percent of the usage internationally. Although many RMB clearing centers have been established across the globe, the internationalization of the Chinese currency seems to have a long way to go to catch up with the Euro or even the British Pound.
Source: China Securities Journal, October 17, 2017
Epoch Times published an article in which it reported that Beijing has been extending its control over Foreign Companies in China. It now requires that these companies allow party branch offices to be established within the company and is pushing to grant operational decision making power to the party’s branch office. According to the statistics disclosed during the media conference at the 19th National Congress on the subject of the “party’s development and exercise of strict self-governance in every respect,” by the end of 2016, Chinese Communist Party branch offices had been established in 93.2 percent of 147,000 State Owned Enterprises; 67.9 percent of 2.7 million private companies, and 70 percent of 100,600 foreign companies in China. The article quoted the comments that several China scholars gave. They stated that the party organization might act like a union but its real purpose is to control and supervise how the company operates. One scholar told Epoch Times that, “The party can’t trust anyone. It must have its own people to do supervision. Therefore it must build a party organization everywhere even including temples and religious organizations.” The article also quoted a Reuters news article stating that top management from over 12 European companies gathered in Beijing at the end of July to discuss their concerns about how the party tried to influence the company’s day to day operations. One company manager disclosed that they received political pressure to modify the joint venture contract to include language that allowed the party to have decision making rights in company operations and investment decisions. According to Epoch Times, having the party organization manage the company is in conflict with the theory of a market economy and will eventually force private companies in China to lose their international competitive advantage.
1. Epoch Times, October 22, 2017
2. China.com, October 19, 2017
According to an article Radio Free Asia (RFA) published, during the 19th National Congress, reporters from foreign media have been under tightened security and have been limited in what they could report. The article stated that the reporters have been subjected to ID checks at hotels throughout Beijing. On certain occasions, reporters have only been allowed to listen during delegate meetings but could not raise any questions. Even when they were allowed to ask questions, reporters complained that there was not much to write about. All they heard was that almost all the delegates they interviewed gave similar answers such as, “Support Xi’s core values and line up with the central administration,” “Socialism with Chinese Characteristics for a New Era,” or “The central administration is centered on comrade Xi.” The article stated that the police, the armed police, the special police, and the plain clothes police could be seen everywhere. Hotel staff have been told to pay special attention to reporters and to perform ID checks on them.
Source: Radio Free Asia, October 19, 2017
According to an article the Epoch Times published, prior to the 19th National Congress, an internal order was issued within the Public Security Bureau to conduct “door to door” visits to Falun Gong adherents to collect their personal information, take videos, or photo or monitor their activities. The action started in February of 2017 and took place in over 28 provinces and cities. Some of the Falun Gong adherents ended up being “kidnapped,” their houses were searched illegally, they were arrested, or they were sent to brainwashing sessions. Some were tortured to death, and some were forced to flee China. The article stated that the actions were contradictory to what Xi Jinping has been advocating according to the “rule by law” and his effort in cleaning up the judiciary system. It observed that the Public Security Bureau was still carrying out the orders that Jiang Zemin issued to the 610 office (a security agency named for the date of its formation on June 10, 1999, established specifically for the purpose of coordinating and implementing the persecution of Falun Gong). That agency is still operating and is following the policy that Jiang used his influence to initiate.
Source: Epoch Times, October 21, 2017