Let it slow, let it slow, let it slow
In a less than glacial about face, China is putting ideology and disease mitigation ahead of its economy
Hard times in China: © Ehteshamul Haque Adit; Unsplash.
Without plunging headlong into a thicket of numbers and arid acronyms, the world is suffering from a growth deficit and governments everywhere are scrambling for fixes.
You’d be forgiven for thinking that the last major crisis of 2008 was recent enough to provide guidance, but evidently it’s different this time.
Not least because China has its own financial quandaries – while also shaping up more as an adversary than motor of global economic recovery.
As The Economist puts it
China’s leaders may be seeking to avoid the past’s mistakes, even if it means also forgoing the past’s successes. Xi Jinping, China’s president, and Li Keqiang, its prime minister, came into office in 2013, several years after the financial crash, when the unwelcome after-effects of China’s stimulus efforts were keenly felt. Torrential spending by the many arms of the state left behind excess capacity, a skewed pattern of production and heavy debts.
In short, even if the Xi and Li dynamic duo wanted to give us an encore (they don’t), they probably can’t.
As the Center for Strategic & International Studies (CSIS) points out, China’s economy is looking unprecedentedly bad.
It is difficult to overstate just how disappointing China’s economic performance has been so far in 2022. Even at the start of the year, discussions focused on the potential strength of any recovery, and which sectors might lead that rebound. Instead, lockdowns destroyed that narrative as the economy contracted in Q2 at over a 10 percent annualized rate, posting only 0.4 percent year-on-year real GDP growth. Official growth targets have now been abandoned … Households have been hit hardest by Covid-19 restrictions and the resulting uncertainty about employment and incomes from service industries, which has slowed consumption. Financial stress is also materializing in multiple places—from protests at banks in Henan to growing boycotts on mortgage payments, as well as accelerating defaults by property developers.’
Michael Pettis, Senior Fellow, Carnegie Endowment, tweets, “If you want to understand what must happen over the next few years … you must understand the imbalances – including the surge in debt – that have built up since the mid-2000s and that must eventually be unwound.”
Back to CSIS:
A credit bubble of historic proportions that drove China’s growth over the past decade is currently unwinding, and slowing the economy as a result. Defaults on multiple asset classes, along with failures at banks and other financial institutions, have raised new questions among depositors and investors about when Beijing will finally intervene more forcefully.
The answer is they won’t.
Writes Pettis:
There are still many analysts that think that with the right set of policy reversals, China can return to the days of 5% growth, or at least of 4% growth. They are wrong. The only way China can revive earlier growth mechanisms is by worsening its existing imbalances.
‘China’s domestic structural issues, as well as high debt, the property sector and other problems, mean that it is impossible for China to introduce substantial stimulus [this time],” Wei Hongxu, a researcher with the independent multinational think tank Anbound, [told the South China Morning Post.]
“Under the increasingly fierce strategic competition between China and the US, it is not realistic to expect China’s policy to keep pace … and reduce pressure on the US,” he added.
CNBC notes that on Friday, the National Bureau of Statistics spokesperson told reporters that more infrastructure and manufacturing investment could support growth, but he added that Covid outbreaks and extreme weather since August affected construction of some projects.
Meanwhile, CNBC cited Chinese developer Country Garden on the property market as having '“slid rapidly into severe depression.”
Everyone’s feeling the pinch, including internet lenders, reports the Wall Street Journal
[Internet lenders’] performance shows how China’s wider economic problems—which have hurt the largest banks and included defaults at giant property developers—are affecting even companies catering to small borrowers.
The Financial Times asks:
What does this all mean for the world? … The big worry is simply that we face what the IMF … call[s] a potential ‘confluence of calamities’, including Ukraine and the pandemic … [and] the risk … that strategic competition between the US and China could lead to the division of the world into US-centric and China-centric blocs.
That’s the big picture, but as The Economist points out, in China’s case there are domestic issues at play that touch on far more than simply throwing money at infrastructure or – heaven forbid; this is socialism with Chinese characteristics – providing funds to Chinese citizens to promote a demand-side recovery:
Mr Xi has become deeply invested in maintaining a ‘zero-covid’ regime, which he portrays as proof of China’s superior social model. Local governments are under pressure to keep a lid on infections; a preoccupation that would distract them from an all-out effort to boost public investment, even if the financing were available. In addition, the ever-present threat of lockdowns has crushed the confidence of consumers and entrepreneurs. Thus any additional government outlays would be less effective in stimulating private spending.
George Magnus, an associate at Oxford university’s China Centre … says [there] ‘will not be so much a collapse in world trade but a significant stall in growth — beyond what’s been going on anyway — and, importantly, a shift in patterns … I suspect all the rhetoric about China being the engine of global exports and growth is pretty much over.’
In other words, the West is on its own and either at war or on the brink of war – and the days of easy money belong to summers past.
Coup rumors provide weekend entertainment
Me? House arrest? I’m the chairman of everything … Illustration © Dian Purdiyanti, Dreamstime.com
While some China watchers claimed to have heard no rumors that CCP General Secretary Xi Jinping had been put under house arrest upon his return from Uzbekistan, for those of us who don’t live in social-media bias-confirmation bubbles, Twitter lit up over the weekend with “Xi’s in trouble” tweets.
Newsweek took the bait:
Xi and the phrase #ChinaCoup trended on social media after tens of thousands of users spread unconfirmed rumors that the president was detained and overthrown by the China’s People's Liberation Army.
This speculation, which has not been discussed by any reputable sources, arrived as there are hardly any commercial flights flying over the capital of Beijing on Saturday, with unverified reports claiming all trains and buses are also being canceled out of Beijing.
Yale professor Taisu Zhang inserted a rational corrective into the clamor with a two-entry tweet thread on Saturday:
Rule number one of Chinese politics watching: don’t believe (basically routine) rumors of palace coups in the lead up to a Party Congress unless the evidence is truly overwhelming. Rule number two: don’t believe rumors of coups that can only be traced to overseas Chinese media.
Which all leads to rule number three: let’s have some common sense, shall we? What would a coup against the most powerful Chinese politician of the past 40 years realistically look like? Normalcy in Beijing with no visible large scale troop movements whatsoever? Come on, people.
As others with common sense also pointed out, you would expect some very weird messaging to emanate from state media as a coherent narrative was literally cooked up on the spot with any scraps on hand.
That didn’t happen. China gave every appearance of projecting as usual.
As Bill Bishop noted in a highly out-of-character update of his Sinocism SubStack:
Xi ‘disappeared’ for over a week after his visit to Hong Kong for the July 1 handover anniversary, because he also had to quarantine was what I heard. If true, then he should also be quarantining after his SCO trip [to Uzbekistan].
So the inherent opacity of the system just gives these rumors more room to spread, even if not based on reality.
In short, there was no coup – and if there is to be one, please, perpetrators, have the decency to not do it on a weekend.
Just ‘TikTok it’
For Gen Z, the New York Times reports, TikTok is becoming the new search.
More and more young people are using TikTok’s powerful algorithm — which personalizes the videos shown to them based on their interactions with content — to find information uncannily catered to their tastes. That tailoring is coupled with a sense that real people on the app are synthesizing and delivering information, rather than faceless websites.
In our studies, something like almost 40 percent of young people, when they’re looking for a place for lunch, they don’t go to Google Maps or Search. They go to TikTok or Instagram,” Prabhakar Raghavan, a Google senior vice president, said at a technology conference in July.
As Business Insider notes, even if there’s no stopping a youth migration from the old-fashioned search engine, it’s a phenomenon that’s likely to arrive freighted with dubious luggage.
A new study by NewsGuard, a site that monitors misinformation across the internet, found that one in five search results on TikTok contains misinformation. The study analyzed the top 20 search results across 27 different news topics ranging from ‘2022 election’ to ‘mRNA vaccine.’
NewsGuard's study found that TikTok also prompted users with biased search terms. For example, if a user searched for ‘covid vaccine,’ TikTok would offer suggestions for more biased search terms such as ‘covid vaccine truths’ or ‘covid vaccine HIV.’ More than half of the search results that popped up about the 2022 midterm elections contained ‘hyper-partisan left-leaning rhetoric,’ the study noted.
Pay as you stay
It’s still small-scale – as in two cash-strapped local governments, one in Yunnan Province, the other in Chongqing Municipality – but if it’s a sign of things to come, it’s going to be highly unpopular with a lockdown-fatigued population facing record unemployment.
Via China Xiaokang (Chinese language, translation: ChinaDiction):
Zhenxiong County in Yunnan and Changshou District in Chongqing have announced that from midnight September 21, fees will apply for those placed in centralized isolation and those who refuse to pay will face legal repercussions.
According to the report, fees range up to CNY300 a night and CNY60 for meals – approximately US$60.
Tough if you just happened to be in the wrong supermarket at the wrong time and money’s tight due to droughts, floods, lockdowns and crippled supply chains – or your local bank is bust.
All your history are ours
This Qing Dynasty jadeite cabbage embraces ‘the historical inevitability in China’s choice of the socialist road,’ now outrageously displayed in Taiwan’s National Palace Museum. Photo: WikiCommons.
Every government and politician in power fiddles the history books somewhat, but – as Foreign Policy notes – China deserves, at the very least, a badge for its wide-ranging revisionism of the past, often meandering into sheer fabulism.
Seen from a Party perspective, this is more complex than simply rewriting and air-brushing history to make the past redound to the glory of China’s contemporary overlords.
It’s about ring-fencing any historical view that does not support the inevitability of Party rule as “nihilism.”
Says Rana Mitter, a professor of history and politics of modern China at the University of Oxford:
‘The party has come up with two complementary terms to get at its envisioned future and its past failures. “National rejuvenation” refers to restoring China to its rightful position and a global actor in its own right,’ Mitter said. ‘“National humiliation” refers to all the factors that have prevented that.’ Conveniently, only the CCP can deliver the Chinese people from humiliation to realized rejuvenation.
Along the way, it’s essential that the party comes up with a moral for every historical story—clear connective tissue between past events and their implications for the present and future.
“One of the lines that [Xi] uses about the Second World War is that it was the first time China was attacked by an outside power and was able to fight back, which gives it a particular kind of cachet,” Mitter explained.
Except it was the Nationalist (KMT) army that took the brunt of that war, as the CCP marched through the wilds of backwoods China before hiding out in caves in Yan’an, Shaanxi Province, and pouncing on a diminished and exhausted Nationalist army (we’re simplifying history somewhat here) and forcing it to retreat to Taiwan.
Details … Who’s got time for them? Actually, China does when they’re self-serving, and even, as the Foreign Policy writer points out, when some of them seem “laughably trivial:”
Was Hu Qiaomu, Mao Zedong’s secretary, the real author of a poem by Mao, ‘Snow—to the Tune of Spring in Qin Garden’? Was Mao Anying, Mao Zedong’s son, martyred because he gave his position away while making egg fried rice?
At least there’s a moral in the latter: never give your Chinese socialist pedigree away with your egg-fried rice wok skills.
Tangshan thugs get time
Video grab of the Tangshan incident via Reuters.
According to multiple media reports, a Chinese court has finally sentenced members of a gang who brutally attacked female staff in a restaurant in Tangshang, Hebei Province, northeastern China, three months ago.
Video of the incident spread on Chinese social media faster than the nimblest of censor fingers, galvanizing the nation in horror and reigniting debate on China’s gender inequality.
Reports the Wall Street Journal:
Seven people were found guilty of taking part in the assault, and together with 21 other gang members of committing a string of serious offenses over the past decade, according to a social-media post by the Guangyang district court in China’s northern Hebei province. The gang received jail sentences of between six months and 24 years, it said.
Interestingly, as others have noted,
The sentences were not actually about injuries suffered by the women, but were for a numerous crimes committed by the defendants over many years.
In fact, their crimes could not have happened without the collusion of local police, which made the trial political and of far more consequence than an everyday beating of innocent citizens.
It may not happen as often as it should, but public outrage can lead to change in the PRC.
The ‘Sun Clique’ goes down
Former deputy security minister Sun Lijun – accused of disloyalty to Xi Jinping (and leading a clique) is jailed for life. Photo: Weibo.
The South China Morning Post reports that former deputy security minister Sun Lijun was sentenced to death with a two year reprieve that can be commuted to life in jail.
He was found guilty of taking CNY646 million (US$91 million) in bribes, stock manipulation and illegal gun possession.
Sun’s sentencing came after five former police chiefs who were implicated in his corruption case were jailed earlier this week, indicating that the biggest purge in China’s security apparatus over the last five years is drawing to a close.
State media made no reference to his – and his alleged accomplices – political crimes, but according to Bloomberg:
The party’s top disciplinary body had previously accused him of “cultivating personal power and forming an interest group.” He was also found to have been in derelict in his duty during Covid outbreaks in early 2020, and was accused of releasing confidential documents.
The word is, that’s it: Xi’s done with purges ahead of the October Party Congress, but 20 days is an aeon in the foam-tossed rapids of Chinese politics.
The Greater Sinosphere
Australia
Wanted: a stable relationship
Australian Foreign Minister Penny Wong with China’s chief foreign minister, Wang Yi
For reasons bound up in Australia’s unique political culture – and its projected image of itself as an “Asian” nation, whatever that might mean – when things go south in China relations, the Australian’s blame themselves.
Foreign minister, Penny Wong, appears determined to make amends with a China aggrieved by the belligerence of Australia’s last government.
In an official statement, Wong described meeting China’s State Councilor and Minister of Foreign Affairs Wang Yi, on the margins of the 77th session of the United Nations General Assembly in New York as …
… a constructive conversation, where I expressed Australia’s views on a range of bilateral, trade, consular and human rights issues, as well as international and regional security.’
At a guess, Wang Yi nodded politely in full knowledge that China will go about business as usual, which includes threatening Taiwan and securing the South China sea and the Pacific islands on Australia’s peripheries.
In fact, on the subject of Taiwan, Wang said on Saturday at the very same General Assembly that international efforts to interfere with the island nation will be “crushed by the wheels of history.”
Into that mix, you might throw Ukraine, on which the Chinese Global Times commented:
One day before the referendums held by four regions in Ukraine on whether to join Russia started, Chinese State Councilor and Foreign Minister Wang Yi in a meeting with Ukrainian Foreign Minister Dmytro Kuleba conveyed clearly China's position on the Ukraine crisis, and Chinese analysts said China has always adhered to its position, maintained strategic resolve, and will not be affected by external pressure.
Wanted: stable relationship (rising ethno-nationalist states with irredentist ambitions preferred).
Hong Kong
Quarantine measures scrapped
Hong Kong is once again more than a hotel room with a view. Photo: Ryan Kwok; Unsplash.
Hong Kong has announced it is scrapping hotel quarantine for inbound travelers in an effort to regain its status as a global financial center, reports Bloomberg.
Under new rules that came into effect today, PCR tests are no longer required before departure – a rapid-antigen test will now do – but a PCR test will be required upon arrival
But as Bloomberg warns in a follow-up report, flying into Hong Kong under the new rules will not be an opened-up Singapore experience.
For non-residents, Hong Kong allows only vaccinated travelers from outside of China, except those with a medical reason explaining why they can’t be immunized.
A daily rapid test is required for the first week, with PCR laboratory tests done on arrival and on days two, four and six.
After arrival at the Hong Kong airport, travelers can head out to their chosen venue – either a residence or a hotel room – to serve their three day self-monitoring period.
Newly arrived, Covid-free arrivals will be assigned an amber code, which allows them to go to work and school, to shop for groceries and to buy takeaway foo, but not to visit restaurants and bars where masks are removed.
The list goes on …
Scarce, expensive flights hamper travel rebound
Commercial fleets still remain grounded and Cathay has warned it could only increase flights to one-third of pre-Covid levels by the end of the year. Video grab: Ishrion Aviation.
Cathay Pacific has been pleading for a return to business as usual, but now it’s happened it and other airlines are “rushing to fill a yawning gap in reduced flight schedules,” reports Bloomberg.
Cathay, which supplies about 45% of plane seats in and out of Hong Kong, has previously warned it could only increase flights to one-third of pre-Covid levels by the end of the year, hobbled by a lack of aircraft and the need to train new pilots and staff. Foreign carriers have gutted schedules or stopped flying to the city altogether.
Travelers face paying significantly higher prices for available tickets. They’ll need to stump up HK$102,000 ($13,000) for a return business-class flight to Los Angeles early next month, more than double the usual fare. A return economy-class seat to London departing Oct. 3 will cost HK$25,600, as much as triple regular prices.
Singapore
Asia’s city-state face-off
It’s kind of official: Singapore is winning, reports the South China Morning Post.
After months of warnings about Hong Kong losing out to Singapore as an international finance centre and amid repeated government denials – and assertions of confidence in the city – it has happened: Singapore has overtaken Hong Kong in the latest Global Financial Centres Index, a semi-annual survey by the China Development Institute and the London think tank Z/Yen Partners.
And it’s not just Singapore; even Thailand is taking up some of the Hong Kong slack.
The World Dragon Boat Racing Championships International Federation has moved the 2023 event to Thailand.
ChinaDiction is proudly based in Bangkok, and we’re sure that the Thailand World Dragon Boat Racing Championships will be a stupendous success with Thai characteristics.
But, oh, Hong Kong … Ouch!
Taiwan
Blockade: No negotiations, no surrender
A spate of articles on how China could blockade Taiwan or take one or more of its outlying islands has elicited an official response, reports Reuters.
A Chinese blockade of Taiwan or the seizure of an offshore island would be considered an act of war and Taiwan would not surrender, a senior Taiwanese security official told Reuters using unusually strong and direct language.
While Taiwan President Tsai Ing-wen and others in her administration have repeatedly said that while they want peace they would defend themselves if attacked, the details of what Taiwan would consider an attack warranting a response have generally been left unsaid, given the many scenarios.
The latest statements, coming amid a general US shift away from ambiguity on the Taiwan issue, suggest that Taiwan is prepared to speak out on some red lines.
Chris Taylor in Bangkok
Taiwan’s best and brightest seek higher salaries abroad
A money turtle. What Taiwan workers deserve is more of the real thing. Actual money. Photo: © Yeuperng, Dreamstime.com.
Taiwan is notorious for its low salaries.
This sad state of affairs was illustrated once again by a job post on the Constitutional Court website seeking an English secretary to handle international correspondence, explain the court’s procedures, operate its English website, and research international cases. Qualifications included at least a BA –preferably in law and overseas study.
The candidate also has to be able to translate both ways between English and Chinese and to have mastered (精通) English and Chinese speaking, listening, reading, and writing.
The monthly pay is NT$46,692 (about US$1,467) with a BA, NT$50,842 (US$1,593) with an MA, and NT$54,992 (US$1,753) with PhD.
While Taiwan’s average monthly salary (excluding overtime and bonus) is about NT$41,000 (about US$1,284), almost 27% of full-time employees–about 2.47 million people– make less than NT$30,000 (US$940).
Of course some Taiwanese make more. For example, entry level engineers at Taiwan Semiconductor (TSMC) can make NT$2 million annually (about US$63,000), but the TSM turnover rate is notoriously high at over 16% – allegedly due to on-the-job pressure, brutally long hours and a highly regimented company culture.
In a 2016 paper, Tobias Haepp and Ping-Lung Hsin (Xīn Bǐnglóng, 辛炳隆) found that Taiwanese wages increased rapidly in the 1980s and early 1990s.
They subsequently slowed in the 1990s, and have stagnated or undergone negative growth since 2002 despite healthy increases in labor productivity. See Michael Turton’s recent Taiwanese migrant workers and the salary crisis for more.
The result is that many young Taiwanese are voting with their feet.
Before the pandemic, about 700,000 Taiwanese worked overseas. Half of them were between 20 and 40 years old. Seventy-seven percent held college degrees.
Meanwhile, as the best and brightest head abroad in search of better conditions and salaries, Taiwan also has about 700,000 migrant workers doing dirty and dangerous jobs that Taiwanese are unwilling to do without substantially higher pay.
Michael Fahey in Taipei
Women in politics
Hsiao Bi-khim in 2019; now de-facto Taiwan ambassador to the US. Photo: WikiCommons.
One of the most remarkable aspects of Taiwanese politics is how deeply women are involved. President Tsai-ing-wen (Cài Yīngwén, 蔡英文) of course is a woman, but there are also four female Grand Justices on the Constitutional Court. A woman is the president of the Control Yuan (Taiwan’s highest “watchdog” body) and 42 of Taiwan’s 113 legislators are women.
At the end of November, Taiwan will hold 22 elections for mayors and county magistrates. No fewer than 15 viable candidates are women, eight of whom are running as incumbents.
One of the challengers Kolas Yotakas in Hualien is also the first Taiwanese Indigenous candidate for county magistrate. In Taipei City, 24 women have been nominated by major parties as candidates for the 61-seat Taipei City Council.
One remaining bastion of male supremacy is the Executive Yuan’s cabinet. Premier Su Tseng-chang (Sū Zhēnchāng, 蘇貞昌) has appointed 40 men and just two women as ministers with and without portfolios.
Another is the military, but this week saw Chen Yu-lin (Chén Yùlín, 陳育琳) promoted to major general as she was appointed director of the Army Command Headquarters’ Political Warfare Department. Major General Chen is the first female ROC army major general.
Four female lieutenant generals are waiting for promotion to the higher ranks.
Michael Fahey in Taipei
Demographics, robots and funerals
As Taiwanese families shrink in size amid a looming demographic squeeze, robots are stepping up to assist in the mourning of lost loved ones.
Professional mourning outfits have long been a “thing” – particularly in Taiwan’s “deep South,” where strippers would often enliven the proceedings in what were more wakes than solemn funerals, as the foreign press would occasionally seize on with unbridled glee.
As Taiwan continues to mature as a de-facto member of the modern world, it’s perhaps only proper that robots take the strippers place.
Chris Taylor in Bangkok
‘Beerbucks’
Booze at Starbucks launched in the US in 2014, but by January 2017 it was deemed a failure and phased out.
Un-phased Taiwan is bringing in locally brewed ales with familiar Starbucks canned packaging.
In a market that’s wildly accommodating to culinary experimentation – let’s take boba pizza as an obvious, relatively innocuous example – “beer at Bucks” could well be a goer in Taiwan; they serve it on tap at some 7-Elevens after all.
Chris Taylor in Bangkok
Tibet
Hacking group harvests exiled data
Downtown Lhasa, overlooked by the Potala Palace, once home to Tibet’s spiritual leader, the Dalai Lama. Photo: Xuyu Chi; Unsplash.
Bloomberg reports that alleged Chinese state-sponsored hackers are email phishing “a range of targets linked to Tibet, posting at times as pro-independence political party and a prominent media organization.”
The hacking group known as TA413 uses fishing emails and customized malicious software to collect intelligence likely on behalf of the Chinese government, according to Recorded Future Inc., a Massachusetts-based cybersecurity firm.
Coda
China says ‘no’ to Pooh
What a time to be going for an unprecedented third term in power.
Those Russians are still invading Ukraine (it’s next door, for heaven’s sake!), Covid apparently doesn’t seem to get that zero means zero – nearly zero doesn’t cut it – the real estate sector is a stack of cards, I’m still purging disloyal cliques, and then there’s this bloody Pooh bear …
Who in the their right minds would call a cartoon bear Pooh, and who would conflate said Pooh bear with the most powerful man in the world?
Don’t get me started on Pelosi, Biden and Taiwan. Sometimes I think the entire world is suffering from post-covid cognitive decline.