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Taiwan CNA: Official Think Tank Report Warns of Possible Financial Panic in China

Taiwan Central News Agency reported that the National Institute for Finance Development, a senior think tank in China, recently published an internal report on China’s economy. The report was circulating on the Internet on June 24, and was carried by online websites, including Sohu. The report stated that China’s defaulting on bonds, tightening liquidity, and the fall in the exchange rates and stock markets have occurred one after another this year. Meanwhile the increase in the interest rate in the U.S. and the threat of a US-China trade conflict all suggest that the Chinese people are very likely to experience a financial panic very soon. The report concluded that, in the next several years, “preventing the occurrence and spread of financial panic” is the most important task for financial institutions to undertake. The report relied on the official May economic data which showed that the economy is getting weaker: industry added value came in below expectations, capital investment was the lowest since 2000, consumer spending continued to decline, and the increase in the total Retail Sales of Consumer Goods was only at 8.5 percent, the lowest since July 2003. The report also mentioned that the financial environment is alarming with a lack of growth in credit, tightened financing for companies, increases in credit defaults, and increased risks in the financial stock market. It further suggested that the Central Administration should come up with a crisis management plan to deal with the panic. All financial institutions and the Public Security Bureau should have plans so they do not repeat the same mistake when many institutions did not take action during the stock market turbulence in China in 2015 and the financial crisis in the U.S. in 2008. At the same time, the report recommended that China should take measures to minimize the impact of any foreign currency like the U.S. dollar. The report also indicated that financial panic is different from a financial crisis, but it will lead to a financial crisis if the investors feel lost and start to panic. According to the report, China must not ignore the fact that, in 2008, the financial crisis in the U.S. turned out to be a financial crisis globally.

Source: Central News Agency, June 27, 2018
http://www.cna.com.tw/news/acn/201806270203-1.aspx

Briefings | | |   Economy/Resources

Caijing: May Growth Rate of China’s Retail Sales of Consumer Goods Reached Fifteen Year Low

Large Chinese financial news media Caijing recently reported that, based on the data that the Chinese National Bureau of Statistics just released, the May growth numbers for the total retail sales of all consumer goods slowed down significantly to 8.5 percent, year-over-year. This growth rate is much lower than the expected 9.4 percent. The number is at its lowest level since May 2003. Interestingly, the growth rate of urban consumer retail is significantly lower (8.3 percent) than that of the suburban rate (9.6 percent). Another noticeable trend is that automobile related consumer spending growth actually saw a decline of one percent. The Chinese National Bureau of Statistics offered the comment that the significant slowdown is mainly due to short-term factors and external uncertainty. The Bureau expects the growth to remain stable.

Source: Caijing, June 14, 2018
http://economy.caijing.com.cn/20180614/4470274.shtml

Briefings | | |   Economy/Resources

Alibaba Chairman Jack Ma Expressed Concern about the Economic Outlook

Well-known Chinese news site Tencent News recently reported that, not long ago, Alibaba Group (NYSE: BABA) Chairman Jack Ma delivered a speech at the Conference of the Zhejiang Chamber of Commerce. Ma advised people that they should have a good understanding of the economy; he felt that the “good days are numbered” for China’s manufacturing industry. Ma warned that, over the next 20 years, people should not expect any fundamental improvement in the China-U.S. relationship and that there may be some ups and downs. The United States has taken China on as a strategic competitor rather than a partner. The Western culture emphasizes competition. During the Shanghai Import Expo, the Chinese government mentioned a plan that would involve imports valued at US$24 trillion over the next 15 years. Ma pointed out that this will have a major disruptive impact across the entire Chinese manufacturing landscape, especially in consumer products. The Alibaba Group is a Chinese multinational e-commerce, retail, Internet, AI and technology conglomerate. When it went public, it was the world’s largest IPO. As of March 2018, Jack Ma is one of China’s richest men with a net worth of US$42.7 billion.

Source: Tencent News, June 14, 2018
https://kuaibao.qq.com/s/20180614B17CO200?refer=spider

Briefings | | |   Economy/Resources US-China Relations

China Had 57 Percent Increase in Crude Oil Imports from the U.S.

Well-known Chinese news site Sina recently reported that the China Customs Administration just released the numbers on crude oil imports for the first quarter of this year. According to the official data, China had a year-over-year 57 percent increase in crude oil imports from the United States. Also, based on the same data, the U.S. crude oil weight in China’s total crude oil imports increased to 2.5 percent in the first quarter. This new development is positive for the China-U.S. trade relationship, as well as China’s goal of diversifying oil suppliers. China is currently the second largest buyer of U.S. crude oil. However, China’s two largest oil suppliers are still Russia and Saudi Arabia. At this moment, the United States has domestic bottlenecks and limitations in its capacity for pipeline deliveries as well as port loading capacity limitations for its rapidly increasing oil export volume.

Source: Sina, June 7, 2018
http://news.sina.com.cn/c/2018-06-07/doc-ihcscwwz8429652.shtml

Briefings | | |   Economy/Resources US-China Relations

Pou Chen Corporation Exited Mainland China

Taiwanese news site Mirror Media recently reported that leading footwear manufacturer Pou Chen has completed its exit from Mainland China. Pou Chen is the largest branded athletic and casual footwear manufacturer in the world. It does OEM manufacturing for major global labels such as Nike, Adidas, Asics, Clarks, Reebok, Puma, New Balance, Crocs, Merrell, Timberland, Converse, and Salomon. Pou Chen makes one out of every five athletic and casual shoes. It started changing its Mainland China operating strategy a few years ago, switching from running production lines to primarily providing distribution channels. By now all footwear production lines have stopped and all Pou Chen owned hotel businesses in the Mainland have been sold as well. Pou Chen Corporation has completely exited the Mainland market. Some industrial land ownership still remain in the hands of Pou Chen; it plans to sell to or jointly develop them with real estate construction companies. Pou Chen currently has a large amount of cash in hand. The next investment plan is to build museums in Taiwan.

Source: Mirror Media, May 29, 2018
https://www.mirrormedia.mg/story/201180529fin004/

Briefings | | |   Economy/Resources Geo-Strategic Trend

Green Peace: Increase in China’s 2018 Carbon Emissions Expected to Be the Fastest in Six Years

China Carbon Trading Online recently published a report by Green Peace, which showed that China’s 2018 carbon emission volume will increase at a pace never seen in the past six years. Green Peace reached this conclusion based on China’s official data. This brings back the doubt as to whether the Paris Agreement can truly result in curbing carbon emissions. Green Peace’s calculation showed China’s carbon emissions increased four percent in the first quarter of this year. China is currently the largest carbon emissions country in the world; it creates a quarter of the world’s total emissions. Global emissions stabilized between 2014 and 2016. However, in 2017, the total emissions started growing again as a result of the increase in the volume that China produces, as well as the European Union and the rest of the Asian countries. Scientists expressed their belief that, according to the Chinese government’s economic development plan, China’s increase in emissions will continue. China estimated that its emissions level will top out “before 2030.”

Source: China Carbon Trading Online, May 30, 2018
http://www.tanjiaoyi.com/article-24347-1.html

Briefings | | |   Economy/Resources Social Stability

Apple Daily: China’s Vice Premier Liu He and His Negotiation Position

Major Hong Kong newspaper Apple Daily recently published an analysis which senior Chinese journalist Lu Yue authored on China’s Vice Premier Liu He and his position on trade. Liu is currently the Special Envoy of President Xi Jinping and China’s Chief Negotiator for trade negotiations with the United States. Liu was a two-time student (1994 and 2002) at the Harvard Kennedy School, where he obtained his Master’s degree in Public Administration. Liu was also Xi’s economic adviser for ten years when Xi was the government official in Fujian Province. This background gives Liu the unquestionable justification to take the lead position in the on-going US-China trade negotiation. In the Chinese leadership domain, he is regarded as “half a Standing Committee Member” of the Communist Party’s Politburo.

In the current “trade war” with the United States, China’s top leadership did not step out and make any direct comment on any tactics. The ones making noise are the Ministry of Foreign Affairs, the Ministry of Commerce, Customs, and the Chinese media. A careful examination reveals that not all of these entities are in the domain that reports to Liu. Liu is essentially against taking on a full-blown trade war with the U.S. because it might result in a loss that could trigger a total collapse of the Chinese economy. Liu built his judgment on three factors: First is the fact that China did not fulfill the promises it made to the World Trade Organization (WTO). Second, China can sustain the trade war only to US$150 billion, which is the total amount that China imports from the U.S. The third factor is that the United States can find a substitute elsewhere for all goods that the U.S. imports from China, while most of the goods that China imports from the U.S. are critical at the life-line level. This is especially so in the high-tech product category. China, as an information society, may cease to function if the U.S. expands its export ban on ZTE to all Chinese buyers. It would be a better situation for China to accept Trump’s conditions and then use those as a driver to push much needed internal reforms.

Liu’s current negotiation strategy is “overall compromise coupled with partial discussions.” He is extremely good at working out convincing details in the numbers, which was the reason his 15-minute meeting with Trump got extended to 45 minutes. As an example, Liu offered US$60 billion worth of agricultural purchases when the U.S “ask price” was US$30 billion. China’s refusal to commit to $200 billion in trade deficit reduction was largely a PR show.

Source: Apple Daily, May 31, 2018
https://hk.news.appledaily.com/local/daily/article/20180531/20406367

Briefings | | |   Economy/Resources US-China Relations

China’s Resident Deposit Balance Saw a Sharp Decline in April

Well-known Chinese news site Tencent recently reported, based on data that the Chinese central bank recently released, that as of the end of April, the balance of the total deposits of China’s residents fell to RMB 67.4 trillion, which was 1.32 trillion less than the same number at the end of March. This is the largest single-month decline in history. It also represents a 2.1 trillion year-over-year decline. For many years, China has been considered a country with a high rate of savings. However, in 2017, the balance of resident’s deposits started to see a net reduction. In 2008, China’s household savings rate was 53.2 percent. In 2017, that rate dropped to 7.7 percent. In the first quarter of this year, all major domestic national banks saw negative growth for the balance of individual savings. In the same period of time, consumer spending did not show any significant growth. Statistics showed that people have been putting more and more money into investment funds and the real estate market. The savings decline can have a major impact on the economy. It may result in slower bank investments into the economy, an increased cost of borrowing, and more resources sucked into the real estate bubble.

Source: Tencent Financial News, May 18, 2018
https://finance.qq.com/a/20180518/006822.htm

Briefings | | |   Economy/Resources