Exclusive Insight: Is the Hiroshima G7 Summit China's "Plaza Accord" Moment?
Major Hong Kong democratic party disbands amid China security clampdown; China to Strengthen Semiconductor Cooperation With South Korea; China Cracks Down on Over 1 Million Social Media Posts Accounts
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Exclusive Insight: Is the Hiroshima G7 Summit China's "Plaza Accord" Moment?
The recently concluded G7 Summit has implicitly established certain restrictions on China's future development. Concurrently, there are increasing international voices in favor of Japan. Some people, particularly those who are pessimistic about China's future, are wondering if this is China's "Plaza Accord" moment.
Considering the challenges Japan faced at the time of the Plaza Accord and some of the difficulties China is currently confronting, I believe that the Chinese government has managed well in the face of U.S. trade pressure over the years: it has cracked down on financial speculation, discouraged excessive overseas investment by various companies, and suppressed the property market to avoid asset bubbles. Essentially, it has traversed the first stage of the contest, laying a solid foundation for subsequent responses and should be able to prevent the economy from falling into long-term stagnation in the next 10-20 years.
Looking back at the Plaza Accord, the United States coerced Japan and Germany to appreciate their currencies in an attempt to salvage American manufacturing. After the Yen appreciated significantly, Japan tried to maintain economic vitality by lowering interest rates, which led to asset bubbles. The sensation of wealth amongst the Japanese population led to a surge in purchasing power and inflation, eventually reaching a major economic turning point. Coincidentally, as the Asian Tigers rose (and later, the rapid progress of Chinese manufacturing), Japan fell into a 20-year decline. While this started with the Plaza Accord, it was a matter of poor response, and in the later stages of decline, Asian neighbors were vying with Japan in the manufacturing market. Japan also failed to produce any revolutionary changes in the field of innovation and technological upgrading, leading to a lack of economic momentum.
Germany is often cited as a model student of the Plaza Accord. After the Mark appreciated, Germany did not overly rely on hedging fiscal and monetary policy measures but responded smoothly, focusing on improving industrial technology and production efficiency, thus avoiding asset bubbles. However, when praising Germany, it is easy to overlook that Germany's steady industrial development also benefited from the expansion of the European market following the dissolution of the Soviet Union and the establishment of the European Union, as well as the benefits of East-West Germany unification. This is quite different from Japan's situation, which faced the rise of emerging countries' manufacturing industries...
As for the United States, the initiator of the Plaza Accord, it did not manage to protect its own manufacturing industry. It wasn't until the IT revolution in the Clinton era that its economy ushered in a new golden decade, moving towards a new economy. Of course, the various economic and political challenges the United States faced afterwards are a separate topic.
If the Plaza Accord holds any lessons, my views are as follows: 1. Relying on restricting other countries' development cannot solve one's own problems; strengthening oneself is the only way out. 2. China has learned some lessons from Japan, timely avoiding the potential problems brought about by asset bubbles; the so-called German model may be a reflection of this thought process. 3. China's Belt and Road Initiative, which aims to expand new overseas markets, may also have given ordinary Chinese manufacturing more time and space, creating conditions for the advancement of new technologies and high-end manufacturing.
The basic situations of China and Japan are quite different: China's endogenous demand is much larger than Japan's in the 70s and 80s, and the political systems are also different. But there are many similarities: especially the closed cultural traditions and cautious attitudes towards immigration, which make both countries not only keen on product exports and craving for the world's bulk commodities, but also weak in terms of internationalization of scientific and technological research, culture, and services... This limits their problem-solving perspective to essentially looking for solutions domestically, rather than seeking solutions in the global market like the United States, or having the European market as a backyard like Germany... As a multipolar world gradually forms, whether China can maintain steady growth for the next 10-20 years and avoid challenges after crossing the middle-income trap is still a serious issue.
When I look at the diligent efforts and challenges faced by Chinese companies in emerging markets, I certainly see similarities and differences with the efforts of Japanese companies in the past. Perhaps the performance of Chinese companies in emerging markets, especially when facing competition and challenges from new manufacturing countries like Vietnam and India, can provide some research references for predicting China's development prospects in the next decade?
(The author of this article is Yang Tian, CEO of a shipping company, and a special contributing analyst for The China Brief.)
Major Hong Kong democratic party disbands amid China security clampdown
Reuters
Hong Kong's Civic Party announced that it will disband after its members voted to wind up the party, making it one of the biggest opposition parties to close down in recent years. Under pressure from China, Hong Kong's democratic opposition has struggled in the wake of the introduction of the national security law and the overhaul of the electoral system in the city. The Civic Party, known for representing professionals in Hong Kong, including lawyers, accountants and scholars, was considered to be a more moderate democratic voice. Several members of the party have been arrested or exiled as a result of the Chinese government's crackdown on dissent in Hong Kong.
China to Strengthen Semiconductor Cooperation With South Korea
Bloomberg
China and South Korea have agreed to strengthen dialogue and cooperation on semiconductor supply chains as tensions rise globally over chip technology and supply. The tech sector has become a key battlefield over national security between the two largest economies, with the US already blacklisting Chinese tech firms, cutting off the flow of processors and banning its citizens from providing some help to the Chinese chip industry. The Chinese and South Korean commerce ministers met at the APEC Trade Ministers meeting, where they discussed maintaining stability in industrial supply chains and collaboration in bilateral, regional and multilateral fields.
China Cracks Down on Over 1 Million Social Media Posts, Accounts
Bloomberg
The Chinese government has banned or closed down more than one million social media accounts and posts that it deemed to be spreading rumours, misusing charities or impersonating the government during its latest content moderation drive. The crackdown comes as part of Beijing’s wider plans to regulate the tech sector. Last month, regulators tightened rules aimed at laying out how algorithm-based platforms should operate.
Chinese aircraft carrier Shandong sails through Taiwan Strait -Taiwan defence ministry
Reuters
China's aircraft carrier, the Shandong, sailed through the Taiwan Strait on Saturday, accompanied by two other ships. The move comes amid tensions between China and Taiwan, which Beijing claims as a part of its territory. Taiwan has described the increased military activity in the region as "harassment and intimidation".
US and China hold more trade talks despite continuing tensions
Financial Times
US Trade Representative Katherine Tai and Chinese Commerce Minister Wang Wentao have met to discuss economic and trade disputes, along with concerns over Beijing's stance on US companies. Wang spoke about worries over Trump-era tariffs and Joe Biden's Indo-Pacific Economic Framework. The meeting was held five days after the US president forecast an imminent "thaw" in relations at the end of the G7 summit. Wang's discussions with Tai followed talks with US commerce secretary Gina Raimondo, in the first visit by a senior Chinese official to the US capital since 2020.
Economic development in Asia still faces many challenges, China minister says
Reuters
China's commerce minister, Wang Wentao, has said that economic and trade development in the Asia-Pacific region faces many challenges and disturbances. Speaking at a conference of the Asia-Pacific Economic Cooperation in Detroit, he acknowledged the region's difficulties but said China, as a major developing country, was willing to make contributions. He also stressed the importance of open regionalism, deepening trade and investment cooperation, and sustainable and inclusive trade development. World leaders have been seeking ways to strengthen global supply chains amid continuing uncertainty stemming from the Covid-19 pandemic.
North Korea spent the pandemic building a huge border wall
Reuters
North Korea has built hundreds of kilometers of border fences and walls with China and Russia to seal its borders and prevent outsiders from getting in and North Koreans from escaping. Pyongyang has tightened the flow of information and goods into the country, building the infrastructure with little acknowledgement from state media, in a move that is likely to have long-lasting effects, including choking economic lifelines. The project has seen the number of defectors to South Korea fall dramatically. Only 67 defectors made it to South Korea last year, compared with 1,047 in 2019. The country's fortified border zones and electronic border fences have also been designed to help curb the flow of COVID-19. However, the crackdown has cost vulnerable groups such as women and has caused economic strain to those living in peripheral areas. Kim Jong Un has transformed urban areas under his rule, with increased national control over the "Party Life" mechanism, a form of social credit system that evaluates citizens' loyalty to deploy influence over the military and other party members far from the border who might otherwise build power bases and pose a threat to the leadership.
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