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Chinese Scholar: Recession Is Inevitable

Xu Xiaonian, a professor of economics and finance at the China Europe International Business School, said that as long as the pandemic in Europe and America is not over, Chinese export companies will have no orders, and a recession is inevitable. Xu made the remarks at the CEIBS Alumni Association on the evening of March 26 when discussing the outlook for the recent pandemic and the Chinese economy.

Xu Xiaonian said in his speech that the current rate of resumption of work is actually meaningless. “Where are the orders?”  He asked.

Xu believes that many of the online discussions about an international pandemic are “foolish.” As long as the pandemic in Europe and America is not over, China has no orders; workers have no wages and there is no consumption. “We are not able to finish the rest of the course by ourselves. We have to accompany the whole world to finish the entire journey. Only when the world economy returns to normal can China be normal. ”

“We can’t close the door and play by ourselves. We are not only short of food and oil, but we are also short of markets; we are short of orders. Our per capita GDP is one-fifth of that of the United States and one-fourth that of Europe. The domestic purchasing power cannot support our enormous manufacturing capacity.”

He also said, “We still lack raw materials, especially the technology-intensive basic raw materials, which must be imported from South Korea, Japan and Germany. We lack technology, and technology cannot be developed rapidly when we close the door.”

Source: Sina, March 30, 2020

The Paper: Beijing to Increase Deficit Rate and Issue Special Government Bond

According to The Paper, China’s Politburo held a meeting on March 27. For the first time, it proposed to “appropriately raise the fiscal deficit rate and issue special government bonds” to deal with the impact of the epidemic on the economy. A number of economists recommended a deficit rate of 3.5 percent versus 2.8 percent in 2019. It would bring in 700 billion yuan (US$99 billion). Meanwhile they also recommended issuing a special government bond of no less than 1 trillion yuan (US$140 Billion). Moreover, they reiterated that the local government could increase the scale of their special debt limit from 2.15 trillion yuan (US$300 billion) for 2019. If the deficit rate for 2020 were to increase to 3-4 percent, it would mean that the local government debit limit could go up to 4 trillion yuan (US$560 billion).

Source: The Paper, March 27, 2020

China Economy: Offshore RMB Fell Nearly 900 Points

China Economy recently reported that, on March 19, Chinese currency RMB fell 865 base points, against the US Dollar, in offshore trading. At the same time, the RMB fell 938 base points onshore. This is the first time since October 2019 that the Chinese RMB fell below 7.16 Yuan for one US Dollar. The U.S. Dollar has seen strong growth recently, with high demand across the globe. It is becoming the core asset for managing risks because of its nature of being fully exchangeable with full global circulation. Experts expressed their belief that the significant decline of the Chinese RMB is typical for a market full of volatility.  At the same time, China is facing high pressure on interest rate reduction. Some investment organizations pointed out that the Chinese currency is looking at further devaluation in the near term and in the foreseeable future. Offshore RMB (CNH) is RMB that circulates outside Mainland China. CNH settlements are typically done in Hong Kong, Singapore, London and Luxembourg.

Source: China Economy, March 19, 2020

Apple Smartphone Chinese Sales Saw a Sharp Decline in February

Shanghai-based Chinese financial news site East Money recently reported that, according to statistics that the China Academy of Information and Communication Technologies just released, the Chinese smartphone market declined by 54.7 percent, year-over-year. Apple iPhone sales in China saw a 61 percent decline during the same period of time. Apple announced its first quarter sales will miss its earlier projection, mainly due to the public health situation in China, which has impacted both manufacturing and market demand. Although Apple’s Chinese factories resumed their work, yet the pace of restoring capacity has been slower than expected. This will impact Apple’s global sales. Some Apple suppliers like Qorvo also reduced their forecasts. Also worth noting is that, the International Data Group (IDC) projects that the first quarter global smartphone sales will decline by 40 percent, year-over-year.

Source: East Money, March 9, 2020

The Government Is Taking over the HNA Group

The HNA Group, is a rapidly expanding airline and conglomerate in China. After the high-profile mysterious death of its Chairman, Wang Jian, in France in last year, the Hainan Provincial government has been leading its restructure.

The HNA Group announced on February 29 that its high liquidity risk that started at the end of 2017 continued and worsened in 2020 due to the novel coronavirus. Therefore, it requested to form the “Hainan Provincial Government HNA Joint Working Group” to coordinate and address the risk. The Hainan Provincial government has led the working group.

Key personnel in the joint work group are all from government offices or state-owned enterprises:

  • Director Gu Gang, Chairman of Hainan Development Holding Co., Ltd, which is directly owned by the Hainan Provincial government
  • Executive Deputy Director Ren Qinghua, Director of Management Committee of the Hainan Yangpu Economic Development Zone
  • Deputy Director Li Shuangchen, Deputy Director of the Central and South China Regional Administration, Civil Aviation Administration
  • Deputy Director Cheng Gong, Deputy Director of the Credit Management Bureau, China Development Bank.

The HNA Group also re-elected its seven-member board. Gu Gang and Ren Qinghua joined the board. While HNA Co-founder Chen Feng remained as the Chairman, Gu Gang became the Executive Chairman and Ren Qinghua became the joint-company CEO.

HNA Group Co., Ltd. is a Chinese conglomerate headquartered in Haikou, Hainan, China. Founded in 2000, it is involved in numerous industries including aviation, real estate, financial services, tourism, logistics, and more.

People have been sayings that the HNA Group is connected with Wang Qishan.

Source: Stock Times, February 29, 2020

Economy: China’s Exports in January and February Dropped 17 Percent

Because of the Impact of the novel coronavirus, China’s exports in the first two months of this year dropped dramatically. According to the data that the General Administrations of Customs released on March 7, China’s exports in those two months were US $292 billion, a decrease of 17.2 percent from the level a year ago. Imports were US $299.5 billion, a decrease of 4 percent. China had a trade deficit of US $7 billion, the first trade deficit since April 2018. A year ago, China had US $41.5 billion trade surplus.

Related posting on Chinascope:

Source: Radio France International, March 7, 2020中国/20200307-受新冠肺炎疫情影响中国1-2月出口同比下降17-2

Xinhua: China’s February PMI Declined Significantly

Xinhua recently reported, based on data that the Chinese National Bureau of Statistics released, that China’s February manufacturing PMI index saw a free fall to 35.7 percent, down by 14.3 percentage points from January. Apparently the coronavirus pandemic was a direct cause of the sharp decline. Among the sub-indexes of the manufacturing PMI, month-over-month, new orders fell 22.1 percent, the raw material inventory fell 13.2 percent, employment fell 15.7 percent, and supplier delivery time fell 17.8 percent. All aspects of manufacturing in China suffered major slow-downs in February. In the meantime, non-manufacturing PMI declined 24.5 percentage points to 29.6 percent, month-over-month. However, financial services and capital market activities are still expanding. For the sectors of broadcasting, satellite services, and internet services, the market saw minor declines – significantly above average. The construction sector had the most significant decline with a month-over-month drop of 33.1 percentage points, to 26.6 percent. China’s overall PMI for February was 28.9 percent, which was 24.1 percent below January. PMI is an indicator of financial activity reflecting purchasing managers’ acquisition of goods and services. A PMI number below 50 typically reflects a decline.

Source: Xinhua, February 29, 2020

Beijing Daily: Car Sales in the First Half of February Dropped 92 Percent

Beijing Daily recently reported that the China Passenger Car Association (CPCA) just released data showing that, in the first half of February, Chinese passenger car sales saw a landslide decline. Year-over-year domestic sales recorded a 92 percent decline, which is the sharpest drop in history. Apparently, the spreading coronavirus is having an impact on the economy. Most of the car dealerships across China are still not open for business. Some have initiated online sales but have not received much business. China’s Ministry of Commerce commented that the central government is coming up with a plan to encourage consumers to spend on cars. Some local governments have already announced new government subsidies for new purchases of both commercial and passenger automobiles. According to the CPCA, in January, the Chinese automobile market already saw a year-over-year decline of 21.5 percent.

Source: Beijing Daily, February 21, 2020

CAAM: China’s January Automobile Sales Declined Significantly

Xinhua recently reported that, according to the data that the China Association of Automobile Manufacturers (CAAM) just released, January Chinese national automobile manufacturing volume declined 33.5 percent, month-over-month, and 24.6 percent, year-over-year. The sales volume declined 27 percent, month-over-month and 18 percent, year-over-year. Passenger car sales declined 27.1 percent month-over-month and 20.2 percent, year-over-year. New energy source automobile sales declined 54.4 percent year-over-year. According to CAAM officials, the coronavirus impact started later in January, so the numbers do not yet reflect the pandemic. February numbers are expected to be much worse, as they will start to show the impact of the virus on market activities, manufacturing capacity, export limitations, financial bottlenecks and tougher government regulations. In the near term, the Chinese automobile market may have further significant landslides.

Source: Xinhua, February 13, 2020

Locust Plague, the Next Disaster to Hit China?

The desert locust (scientific name “Schistocerca gregaria”), the type of locust that is most destructive to human beings, has been spreading in Africa, the Middle East, India, and Pakistan. The Food and Agriculture Organization of the United Nations has warned about a possible food crises in countries that they have invaded.

Two of China’s neighboring countries, Pakistan and India, are suffering from its attacks. Pakistan has entered a state of emergency; its government expressed that the country will end up with no harvest at all this year if it doesn’t get the pest under control. Some Indian scholars predicted the locust plague will cause a 30 to 50 percent reduction in India’s food growth this year.

Kang Le, an Ecologist and Entomologist, and an Academician at the Chinese Academy of Sciences, told China Science News, during his interview with the newspaper, that the desert locusts will not impact China.

Kang said, “The current Locust plague is caused by the Schistocerca gregaria type. Its distribution region does not include China. Some scientists reported that the Schistocerca gregaria type was discovered in Yunnan Province in the early 1900’s but that claim was not confirmed. Therefore, Schistocerca gregaria will not create a severe threat to China.”

Kang also said that China has had a good experience in treating types of migratory locusts in China. However, that experience cannot easily be applied to the desert locust. “Since the desert locust has different characteristics and lives in a different environment from China’s types of locusts, it is not practical to apply China’s experience to the desert locust directly.”

On the other hand, Twitter has posted that the desert locusts have already arrived in Xinjiang.

1., February 15, 2020
2. Twitter