By Xiao Qi, China Confidential
China’s shadow finance sector has become a global concern. The International Monetary Fund (IMF) and World Bank have both warned about the risks associated with the rapid build-up of assets within such an opaque sector, while central bankers now regularly reference Chinese shadow finance as a key potential risk to global economic stability.
But while concern over the lurking horrors in China’s financial shadows remains justified, regulatory actions mean that the systemic risks that they pose are finally starting to ebb. This is happening in spite of the fact that the overall scale of the shadow system is continuing to expand. Read more
By Alastair Campbell and W. John Hoffmann, Exceptional Resources Group
“There is no difference between reform and anti-corruption: both must be implemented within the framework of law”.
So said Chinese leader Xi Jinping, and with the end of a high level Communist Party meeting last month, the significance of Xi’s “Rule of Law” campaign has become crystal clear. It is a key tool in his attempt to restructure the framework of Party political power and decision-making via the four new Party central leading groups which he chairs. Read more
Can China innovate its way out of a prolonged economic growth slowdown? Shaun Rein, managing director of the China Market Research Group, believes so. In his new book, “The End of Copycat China – The Rise of Creativity, Innovation and Individualism in Asia”, he argues that China will start innovating now because it has to – and that it didn’t before simply because it didn’t need to. That’s an interesting theory, but is he right?
Rein first does battle with common perceptions that the Chinese political system or culture limits its ability to innovate. It’s not because China is a communist-led country with limited individual freedom, that it does not come up with corporate inventions, he says. Read more
There may be some light at the end of the tunnel for China’s beleaguered housing market, according to a survey of real estate developers by China Confidential. Home sales growth in October was the highest in 18 months, while a separate survey of urban consumers shows home buying sentiment at a multi-year high.
China Confidential’s monthly survey of 300 real estate developers across 40 cities, showed a sharp rebound in sales volumes in October, with companies reporting the biggest month-on-month increase since March 2013. Developers reported an even larger expansion in sales inquiries, suggesting that many potential home-buyers remain on the side-lines. Read more
Official statements on bad loans in Chinese banks come with a health warning: analysts widely believe they understate the real level of delinquency by a wide – though unknowable – margin.
Nevertheless, official statistics can be helpful in assessing whether the problem is deepening or alleviating. In that context, an analysis published on Thursday by EY, the accounting firm, shows stress levels rising rapidly among China’s top banks. Read more
By Alastair Campbell and W. John Hoffmann, Exceptional Resources Group
The “rule of law” is set to dominate China’s key Communist Party plenum in October, Xinhua, the official news agency, has said. The rule of law is a “must” if the country is to attain “economic growth, clean government, cultural prosperity, social justice and a sound environment”, Xinhua added.
Many observers would agree. Some may even believe that China is about to embrace a Western-style system in which all actors – the government, institutions, companies and individuals – become subservient to an independent legal code. But what, in practice, is the renewed focus on rule of law likely to mean for China’s development? Read more
By Bo Zhuang of Trusted Sources
Overhauling state-owned enterprises (SOEs) is key to the Chinese growth story for the next 10 years. But, while the approach being taken by the Xi Jinping leadership acknowledges the need for change, it also stresses the parallel need to strengthen the Communist Party State. This could mean reform will take a rather different form to the assumptions of markets, which have risen on the back of expectations of market-friendly change. Read more
By Jonathan Fenby, Trusted Sources
There’s nothing like an acronym or a catchy label when it comes to emerging markets. The master alchemist, Jim O’Neill, set the pace with the formulation 13 years ago of the four-nation BRICs (with or without a final capital S for South Africa). Fidelity followed that with the MINT collection of Mexico, Indonesia Nigeria and Turkey constituting MINT.
Then Morgan Stanley chipped in with Fragile Five, which – such are the vagaries of nomenclature – includes five members of the previous two aggregations.
Now, a new and potentially more durable grouping is emerging – even if it does not lead itself to an acronym that trips off the tongue. The best I can come up with is CIMI – or, if you twist it to give Mexico rather than China first place, the marginally more memorable MICI, though that would invite too many columnists to compare them to Disney’s mouse. Read more
China said on Tuesday it will tighten curbs on journalists to prevent the disclosure of state secrets, commercial secrets and “unpublicised information” as the administration of Xi Jinping reinforced controls over information amid outpourings of anti-Beijing sentiment in Hong Kong.
Xinhua, the Chinese official news agency, said that rules published by the State Administration of Press, Publication, Radio, Film and Television prohibit disclosure of “various information, materials and news products that journalists may deal with during their work, including state secrets, commercial secrets and unpublicised information.”
None of the key terms used – including state secrets, commercial secrets and unpublicised information – were defined, leaving them open to interpretation by China’s army of censors both within media organisations and in several state bodies charged with regulating information industries. Read more
By Stephen Green, Standard Chartered Bank
Dangerous things can lurk in the shadows of a financial system. We know this because when the US banking system almost burnt down in 2008, the stuff in the shadows was the fire’s accelerant. The highly-leveraged, off-balance sheet vehicles loaded with securitised debt meant made the banking crisis were far worse than it would have otherwise been.
Knowing the problems that lurked in the US, the idea of shadow banking in China freaks people out. The sector seems to have grown fast, in an economy already known for its tendency for asset bubbles and bad lending. We have spent time poking around in the shadows. We believe that much of the fear is misplaced. Read more
The ingenuity of Chinese netizens seeking to commemorate the 1989 Tiananmen massacre in defiance of the country’s “Great Firewall” of censorship is reaching new heights.
Armed with little but the remarkable flexibility of Chinese characters, the more daring among 618m internet users are finding an endless string of linguistic ruses to outfox – at least temporarily – the world’s most formidable forces of online control to get their messages out. Read more
By Gavin Bowring of Asean Confidential in Astana, Kazakhstan
One of the biggest talking points on the sidelines of the recent Asia Development Bank (ADB) Annual Meeting in Astana, Kazakhstan, was China’s proposal to effectively create its own “ADB”, a regional infrastructure finance lender known as the Asian Infrastructure Investment Bank (AIIB), with start-up capital of US$50bn, the majority of which would come from China.
The initiative’s political undertones have become somewhat awkward. Although discussions with the EU, Malaysia, Singapore, and Australia on AIIB’s creation have been underway for a year, neither Japan, India, nor the United States have yet been invited. This stems in part from China’s frustration over their dominance of the ADB bureaucracy, despite China having become a major capital provider to the organization. Read more
China, the US’s biggest geopolitical rival, is emerging as a new power in a region long considered America’s backyard. Robin Wigglesworth, capital markets correspondent, looks into why Caribbean nations find it hard to resist Beijing’s advances.
Everything in China is political, even when it might not be.
A series of seemingly unrelated corruption scandals in China all share a common thread that has got the political class in Beijing very excited and boosted speculation that an elite power struggle is under way within the ruling Communist party.
The connections seem tenuous at first but spend enough time in the Byzantine world of Chinese politics and the logic starts to appear compelling. Read more
When the White House created a petitioning website in 2011, it surely didn’t count on Barack Obama being asked to invade China, rule on the flavour of tofu and investigate a two-decade old Chinese poisoning case.
But that is exactly what has happened over the past week as Chinese people, motivated variously by a sense of justice, powerlessness or just plain humour, have flooded the White House “We the People” website. Read more