David Fuller and Eoin Treacy's Comment of the Day
Category - China

    Leave no dark corner

    Thanks to a subscriber for this article by Matthew Carney for Australia’s ABC news. Here is a section:

    The Party is using the system to win back some of the control it lost when China opened up to the world in the 1980s and rapid development followed.

    It’s a way to silence dissent and ensure the Party’s absolute dominance.

    Already, about 10 million people have been punished in the trial areas of social credit.

    Liu Hu is just one of them.

    Hu lost his social credit when he was charged with a speech crime and now finds himself locked out of society due to his low score.

    In 2015, Hu lost a defamation case after he accused an official of extortion.

    He was made to publish an apology and pay a fine but when the court demanded an additional fee, he refused.

    Last year, the 43-year-old found himself blacklisted as “dishonest” under a pilot social credit scheme.

    “There are a lot of people who are on the blacklist wrongly, but they can’t get off it,” says Hu.

    It’s destroyed his career and isolated him, and he now fears for his family’s future.

    The social credit system has closed down his travel options and kept him under effective house arrest in his hometown of Chongqing.

    In an apartment above the streets of Chongqing city, Hu tries to use a phone app to book train tickets to Xi’an. The attempt is rejected.

    “[The app] says it fails to make a booking and my access to high-speed rail is legally restricted,” he explains.

    Hu’s social media accounts, where he published much of his investigative journalism, have also been shut down.

    Hu claims his combined Wechat and Weibo accounts had two million followers at their peak but are now censored.

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    India Offers Land Twice Luxembourg's Size to Firms Leaving China

    This article by Shruti Srivastava for Bloomberg may be of interest to subscribers. Here is a section: 

    Providing land with power, water and road access may help attract new investments to an economy that was slowing even before the virus hit, and is now staring at a rare contraction as a nationwide lockdown hit consumption.

    The government has hand-picked 10 sectors -- electrical, pharmaceuticals, medical devices, electronics, heavy engineering, solar equipment, food processing, chemicals and textiles -- as focus areas for promoting manufacturing. It has asked embassies abroad to identify companies scouting for options. Invest India, the government’s investment agency, has received inquiries mainly from Japan, the U.S., South Korea and China, expressing interest in relocating to the Asia’s third-largest economy, the people said.

    The four countries are among India’s top 12 trading partners, accounting for total bilateral trade of $179.27 billion. The foreign direct investments by the four nations between April 2000 and December 2019 stands at over $68 billion, government data shows.

    Making unused land available in special economic zones, which already have robust infrastructure in place, is also being examined. A detailed scheme for attracting foreign investments is expected to be finalized by end of the month, the people said.

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    China Rolls Out Pilot Test of Digital Currency

    This article by Jonathan Cheng for the Wall Street Journal may be of interest to subscribers. Here is a section:

    In Xiangcheng, a district in the eastern city of Suzhou, the government will start paying civil servants half of their transport subsidy in the digital currency next month as part of the city’s test run, according to a government worker with direct knowledge of the matter.

    Government workers were told to begin installing an app on their smartphones this month into which the digital currency would be transferred, the worker said.

    Civil servants were told that the new currency could be transferred into their existing bank accounts, or used directly for transactions at some designated merchants, the person said.

    China is ahead of many other countries in preparing the launch of an official digital currency. In recent years, the use of traditional paper bills and cash has declined sharply, and smartphone payments have become so ubiquitous that many Chinese people, particularly younger urban dwellers, no longer carry their wallets or cash for shopping. Instead, they use Tencent Holdings Ltd. ’s WeChat Pay and Alipay, operated by Ant Financial Services Group, an affiliate of Alibaba Group Holding Ltd.

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    China Suffers Historic Economic Slump With Hard Recovery Ahead

    This article from Bloomberg new may be of interest to subscribers. Here is a section:

    Much depends now on whether consumers regain a willingness to spend amid nervousness that the virus can stage a comeback as controls are relaxed. Evidence from the epicenter of the virus, Wuhan, suggests progress will be slow.

    While factories around Wuhan are working around the clock to get back up to speed, the recovery of consumer-focused businesses won’t be straightforward. People are cautiously taking to the streets again, but they remain subject to curbs on their movements aimed at keeping the virus at bay.

    The nation’s per capita disposable income declined by 3.9% in real terms in the first quarter from a year ago, the first contraction since the data was available in 2014.

    Consumer caution “continues to restrain demand, and thus activity more broadly,” said Frederic Neumann, co-head of Asia economic research at HSBC Holdings Plc in Hong Kong. “This is reminder also for other economies of the arduous path to full recovery even after full lockdowns are removed. All this points to the need for a more determined policy push on both the monetary and fiscal fronts to ‘shock the system’ and get activity back up to its earlier vitality.”

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    China Urbanization 2.0

    Thanks to a subscriber for this report from Morgan Stanley which may be of interest. Here is a section:

    Welcome to the $1.5 Trillion Minefield of Defaulted Chinese Debt

    One of the biggest challenges of buying Chinese corporate debt is working out the borrower’s ties to the government, says Soo Cheon Lee, chief investment officer at SC Lowy, a credit-focused banking and investment firm. “China is not about the financials, it’s about relationships,” Lee says. “That’s driving a lot of the liquidity available to a company. You really need to understand the local landscape, and it’s difficult for foreign players to understand who has that connection or support from the state.”

    Sometimes a Chinese company will appear to be in dire straits, only to come up with the cash for a debt payment at the last minute, Lee says. “For most of the companies in Asia, we know two weeks before whether they have financing or if they are going to restructure,” he says. “I think it’s very unique for China to not be able to predict a default.”

    Some firms are not what they appear to be, Lee says. “If you are truly a state-owned enterprise,” he says, “you will continue to get support from the government or state-owned banks. But when we look at companies that claim to be SOEs but aren’t really SOEs, we see they’re having some difficulties.”

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    Copper Rises on China, Trimming Big Quarterly Slump

    This article from Bloomberg news may be of interest. Here is a section:

    Copper climbed as a strong rebound in Chinese manufacturing bolstered the outlook for demand, trimming the industrial metal’s biggest quarterly drop since 2011.

    China’s official purchasing managers’ index rose this month, up from a record low in February, signaling the world’s second-largest economy is restarting. While the outlook remains uncertain as the country faces a growing threat from slumping external demand, production cuts at major mines around the world are shoring up sentiment for copper.

    The metal extended gains after President Donald Trump called on Congress to provide $2 trillion for infrastructure spending in the U.S.

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    Xi Jinping visits Wuhan, in major show of confidence as China turns corner on coronavirus

    This article by James Griffiths for CNN may be of interest to subscribers. Here is a section:

    He "will visit and express regards to medical workers, military officers and soldiers, community workers, police officers, officials and volunteers who have been fighting the epidemic on the front line, as well as patients and residents during the inspection," Xinhua reported.

    That Xi can visit the city suggests the government has supreme confidence in his safety and epidemic controls put in place there. The closest he previously came to the frontlines of the outbreak was visiting virus treatment centers in the capital Beijing, which has far fewer cases than Wuhan.

    Senior government officials, including Vice Premier Sun Chunlan and Premier Li Keqiang, have visited Wuhan, but it was assumed until now that the risk to Xi, even if slight, was not worth the potential cost. Since taking office in 2011, Xi has centralized authority massively, becoming China's most powerful leader since Mao Zedong, and were the 66-year-old to fall ill, that could seriously destabilize the political system.

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    Covid-19 and Global Dollar Funding

    Thanks to a subscriber for this edition of Zoltan Pozsar and James Sweeney’s report for Credit Suisse on the plumbing of the global financial sector. Here is a section:

    The Coronavirus Hunter Is Racing for Answers in a Locked Lab

    This article by Robert Langreth for Bloomberg may be of interest to subscribers. Here is a section:

    Over the last five years, Baric, working closely with Vanderbilt University infectious-disease specialist Mark Denison, tested almost 200,000 drugs against SARS, MERS and other bat coronavirus strains.  He found at least two dozen that appeared to hinder the virus.

    Among the most promising was Gilead’s remdesivir, a drug that fared poorly when used against a recent Ebola outbreak in Africa. In the lab, it worked against numerous coronavirus strains, including SARS and other bat coronaviruses that are similar to the new strain. Every coronavirus it was tested on, “it had high potency and efficacy,” Denison says.

    That work was fortuitous. In early January, Baric got an urgent call from an infectious-disease colleague to send his unpublished data on remdesivir to colleagues in China who were dealing with a then-mysterious outbreak. Baric says he “was shocked” to see how fast the coronavirus was spreading.

    Since then, work at his lab has been virtually nonstop. Each scientist puts in from one to six hours inside two different clean rooms equipped to handle the virus. The lab’s workday begins at 6 a.m. and often goes until 11 p.m. Individual sessions are short for safety and practical reasons — researchers aren’t permitted to eat, drink or visit the bathroom once inside the lab. Everyone has to pass an FBI background check and undergo months of safety training.

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