China Weighs Broad Stimulus With Property Support, Rate Cuts; Exclusive: The Power Play in Guangdong: Huang Kunming and Li Xi
Sequoia will still stand tall in China after VC firm's breakup; Huawei wins lion’s share of China Mobile’s 5G base station contracts; China holds live-fire drills in East China Sea north of Taiwan
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The Power Play in Guangdong: Huang Kunming and Li Xi
In the previous term, Li Xi, hailing from Shaanxi, served as the Party Secretary of Guangdong Province. He had been promoted to the position of Politburo Standing Committee member and assumed the role of Secretary of the Central Commission for Discipline Inspection during the 20th National Congress of the Communist Party of China. As mentioned earlier, Li Xi also supervised the three premier officials, Cai Qi from Fujian, Li Qiang from Zhejiang, and Ding Xuexiang from Shanghai, along with numerous other officials within the Party.
So, how could Li Xi be balanced? The answer lies in appointing a prominent official from one of the aforementioned three provinces to serve as the Party Secretary of Guangdong, effectively cutting off Li Xi's potential avenues and establishing mutual checks and balances. This is precisely why Huang Kunming from Fujian was chosen to take over as the Party Secretary of Guangdong.
In fact, Huang Kunming currently holds significant power as a regional leader in China.
Firstly, he is a close ally of Xi Jinping, having worked alongside him in both Fujian and Zhejiang. Shortly after Xi Jinping assumed the position of General Secretary at the 18th National Congress in 2012, he transferred Huang Kunming from the position of Minister of the Propaganda Department in Zhejiang Provincial Party Committee to Beijing, where he served as the Deputy Minister of the Central Propaganda Department. In 2017, Huang Kunming was promoted to the position of Politburo member, Secretary of the Central Secretariat, and Minister of the Central Propaganda Department.
Secondly, Huang Kunming is one of the few individuals who, after serving as a deputy national-level leader in Beijing, transitioned to the role of provincial Party Secretary in a local region.
To our limited knowledge, the only precedent was Xi Jinping's father, Xi Zhongxun, who served as Vice Premier of the State Council in the 1950s and 1960s. Shortly after the end of the Cultural Revolution, he became the first Party Secretary of Guangdong Province, leading the reforms and opening up.
Lastly, Guangdong has held its position as China's leading economic powerhouse for over 30 years, underscoring its economic significance. By the end of 2022, Guangdong's GDP accounted for approximately 10% of the national GDP, equivalent to about one and a half times that of Zhejiang, twice that of Henan, four times that of Shanghai, and six times that of Inner Mongolia.
China cuts short-term borrowing costs as economy slows
Nikkei Asia
China’s central bank, the People’s Bank of China (PBOC), has cut its seven-day reverse repurchase agreement rate by 10 basis points to 1.9%, the first cut in 10 months, in an attempt to boost investor confidence and raise a struggling post-Covid recovery. Wang Yifeng, an economist at China Minsheng Banking, anticipates that this will be the first in a series of additional cuts, adding he would not be surprised if the PBOC drops the rate again in August.
China Weighs Broad Stimulus With Property Support, Rate Cuts
Bloomberg
China may soften its stance towards property markets and has prepared a series of action plans to support its economy, including at least 12 measures designed to assist real estate and domestic demand, say anonymous sources. Among the proposed plans, regulators are to lower overdue residential mortgages and aid re-lendings through China's state policy banks to encourage homes to be delivered. The moves are part of a wider package of government aid proposals drafted by multiple government agencies. Although no firm details on the scope have been revealed, Bloomberg reports the plan has yet to be finalised and may change.
Sequoia will still stand tall in China after VC firm's breakup
Nikkei Asia
The split between Sequoia Capital and Sequoia China represents a more nuanced shift in the private market investing landscape, says an op-ed in Nikkei Asia. Sequoia China has focused on diversification with a mix of hard and soft technologies, the op-ed notes, hinting that the country's golden age of investing in consumer-focused start-ups is passing. With the Chinese firm less likely to be caught up in regulatory risks across the Pacific than under the Sequoia umbrella, it is free to seek out contracts with national champions in the hard tech area, such as robotics and the energy transition, emerging under President Xi Jinping's ambitious Made in China 2025 project. Meanwhile, US investors are becoming the "bigger victims" of the threats to Chinese tech by building a diversified investment portfolio with Sequoia's Neil Shen being hailed as the "most brilliant" investor in Chinese tech.
Pimco says China property needs broader policy support for meaningful recovery
South China Morning Post
China's property market needs a more comprehensive policy approach that includes a wider usage of different funding channels, according to Pacific Investment Management (Pimco). Confidence appears to be hard to come by, and Stephen Chang, managing director and portfolio manager at Pimco Asia, said that a full use of the three arrows of capital raising has been lacking with a "near absence" of equity funding. China's real estate sector is under the shadow of the worst-ever debt crisis, and analysts at Goldman Sachs are predicting an L-shaped recovery in the coming years.
China orders last Indian journalist in country to leave
Japan Times
Reuters reports that Beijing has joined Delhi in the tit-for-tat ejection of journalists, causing India to lose its last correspondent in China. The move leaves no Indian media presence in China at a time of deteriorating relations between the two countries. The decision by China was made despite India hosting G20 and the Shanghai Cooperation Dialogue meetings this year. India had four reporters based in China earlier this year, with the Hindustan Times reporter leaving over the weekend, while two Indian journalists from public broadcaster Prasar Bharati and The Hindu newspaper were denied visa renewals in April.
Huawei wins lion’s share of China Mobile’s 5G base station contracts
South China Morning Post
Huawei will provide over half of China Mobile's 5G base stations between 2023 and 2024 in contracts worth CNY4.1bn ($574m), according to calculations by the South China Morning Post. Additionally, Huawei's rival, ZTE, was the second-largest winner, accounting for 26% of the contracts awarded while Datang, Nokia and Ericsson were the remaining successful bidders.
China holds live-fire drills in East China Sea north of Taiwan
Reuters
China has begun military exercises in the East China Sea close to the north of Taiwan, with live-fire exercises from warships, as the US and its allies engage in drills in the Western Pacific. China conducts regular exercises along its coast, though the ones in close proximity to Chinese-claimed Taiwan often receive the greatest attention. China's East China Sea exercises are being conducted at the same time as a quadrilateral naval exercise in the Philippine Sea, which began on Friday. The drill involves the US, Japan, Canada and France, including two carrier strike groups led by US aircraft carriers USS Nimitz and USS Ronald Reagan.
Taiwan civil defence handbook includes tips on identifying Chinese soldiers
Reuters
Taiwan's military has issued an updated civil defence handbook that includes instructions on how to distinguish between Chinese and Taiwanese soldiers in a war scenario. The booklet has been improved since last year's way of finding bomb shelters, water, food supply, and emergency first aid was downplayed as not reflecting the war scenario following the Russia/Ukraine conflict. The new guide includes different illustrations of troops from Taiwan and China. China considers Taiwan its own territory, though the island is democratically governed. Taipei has ramped up its military preparedness in the wake of increasing political pressure from Beijing, as well as military threats.
With eye on China, Japan developing missiles to protect remote islands
Japan Times
Japan is increasing development of missile systems to protect itself, partly due to concerns over China and North Korea's growing military capabilities. As part of Tokyo’s Defense Buildup Program, the long-range “counterstrike capabilities” will reportedly include new variants of the Type-12 anti-ship missile, hypersonic weapons, cruise missiles, upgraded hypervelocity glide projectiles and a new long-range, maneuverable “island defense anti-ship missile”. Analysts believe that these are Japan's attempts to improve its indigenous capacity to defend itself and keep up to defence improvements made by China. Although these missiles will primarily be used to defend Japanese citizens, the US would also be expected to benefit from these weapons by having large areas around Japan well protected, thus allowing US forces to focus elsewhere. Furthermore, with production capacity now directly under Tokyo’s control, Japan hopes to reinvigorate the local defense industry whilst ensuring interoperability with the US targeting systems for information sharing.
China's quantum leap — Made in Germany
Deutsche Welle
The Chinese government has been working with Germany's University of Heidelberg for two decades on quantum communication technologies with the aim of boosting China's internal security and military projection. Documents obtained by Correctiv and DW suggest the relationship has waxed as scientific and economic ties between China and Europe have strengthened. The university appointed quantum physicist Pan Jian-Wei an honorary professor in 2009 following a period of joint research that included work on cryptography and telecommunication technologies. Several students moved from the Southwest German university to work alongside Pan at his start-up, Quantum CTek, in Hefei, China, while Pan retained strong ties to Heidelberg. The plan to build a cutting-edge quantum research centre with Heidelberg, however, has not been realised, in part because of political opposition to scientific collaboration with China. Germany's foreign minister, Heiko Maas, described China as being a "systemic rival" in an interview with Germany's ARD TV network in March.
Chinese EVs to capture 15 per cent of European market by 2025: KPMG
South China Morning Post
Chinese electric vehicle (EV) makers such as BYD, Nio, Xpeng, and Li Auto are expected to have around 15% of Europe's EV market by 2025, says KPMG China's chief economist, Kevin Kang. He said home-grown Chinese brands have "huge potential" and could contribute the most to future European sales increases. Chinese-run cars accounted for less than 10% of the 1.28 million battery EVs sold in Europe last year. Kang suggested ways of increasing brand visibility such as collaborating with local car dealers, acquiring more local car brands, setting up local production plants through greenfield investments, and establishing local stores and customer service centres.
China Bonds Rally With Analysts Seeing More Rate Cuts From PBOC
Bloomberg
China's sovereign bonds have rallied after the country's central bank unexpectedly cut its policy rate on Tuesday. The yield on 10-year government bonds fell four basis points to 2.63%, the lowest it has been for nine months; offshore yuan fell 0.2% to 7.1706 against the dollar, nearing the 7.2 mark; and property stocks gained on hopes of more stimulus. Analysts believe the central bank's move has yet to see bonds hit their lowest rates, with the interest rate on the medium-term lending facility and the loan prime rate predicted to follow.
Pakistan uses Chinese yuan to buy cut-price oil from Russia
South China Morning Post
Pakistan has bought discounted Russian crude oil under its first government-to-government import agreement using Chinese currency, which brings a major change in its usual US dollar-dominated exchange policy. This follows an economic crisis in Pakistan where its diminishing foreign exchange reserves are scarcely enough to cover a month of controlled imports, leading to a risk of default on its overseas debt load. Pakistan's petroleum minister said although he wouldn't discloses the commercial details, the payment had been made in renminbi.
Singapore bargain-hunters target distressed Chinese properties
Nikkei Asia
Foreign investors, including Singaporeans, are buying up bargain foreclosure properties in China, with sales of office buildings and factories at a quarterly record of $1.93bn in Q4 2022, up 14% from the same period the year before and 73% higher than in 2019, the first year such figures were tracked. Policy changes introduced by Beijing in 2021 have led to a series of defaults by developers. One of this year's biggest distressed deals was Singaporean company CapitaLand Investment's purchase in October of an office block in Beijing at a 30% discount on its 2021 valuation of $290m.
Chinese warships are salvaging North Korea’s crashed satellite, South Korea says
South China Morning Post
South Korea has reported that Chinese warships are conducting salvage operations in the waters where a North Korean space rocket crashed last month. The South Korean military is already carrying out its own search for wreckage of the North Korean space vehicle that plunged into waters near the West Coast island of Eocheongdo, and has already retrieved some debris from the water, including a large cylindrical object.
One of China’s Top Hedge Funds Unwinds Bet on Property Rebound
Bloomberg
Shanghai Banxia Investment Management Center's Banxia Macro Fund cut its holdings in Chinese property stocks leading to its flagship fund experiencing its worst monthly loss since at least 2018, shrinking 9.8% in May, as existing policies failed to support the property market. The firm's outlook expects the bottoming out of the property price to occur in the first half of next year rather than within Q2 2020 as previously predicted. Despite the decline, the hedge fund is the best performer among multi-asset funds running at least ¥10bn ($1.4bn) for the past five years, according to Shenzhen PaiPaiWang Investment.
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