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

    What Kind of Regime Does China Have?

    This article by Francis Fukuyama for the American Interest may be of interest to subscribers. Here is a section:

    Xi’s China is thus not the inevitable culmination of prior Chinese history. When he was elevated to head of the Party in 2012, many Chinese elites hoped that he would deal with mounting corruption—which he did, in a highly authoritarian fashion—but also lay the ground for a more liberal China that would permit more freedom to talk, think, interact, and even criticize their government. They were bitterly disappointed when he moved in the opposite direction, placing priority above all not on the welfare of the nation as a whole, but on the survival of the Chinese Communist Party. Why he did this was the result of his personal quirks and history; another leader may have gone in a very different direction. There was no historical inevitability to the present outcome.

    The dangers of a regime that seeks totalitarian control were laid bare in the early days of the COVID-19 crisis, when speaking honestly about the unfolding epidemic, as Dr. Li Wenliang did, was severely punished. For all we know, the flow of misinformation is continuing today. It is wrong to hold up the CCP’s totalitarian approach in dealing with the virus as a model to be emulated by other countries. Nearby South Korea and Taiwan, both healthy liberal democracies, achieved even better results in the pandemic without the draconian methods used by China. One of the great dangers today is that the world looks to Xi’s totalitarian model, rather than a broader East Asian model that combines strong state capacity with technocratic competence, as the winning formula in facing future crises.

    How then should the United States and other Western democracies deal with Xi’s China? The starting point is to recognize that we are dealing with an aspiring totalitarian country like the mid-20th century Soviet Union, and not with some kind of generic “authoritarian capitalist” regime. There is no true private sector in China. Although there are quasi-property rights and ambitious entrepreneurs there, the state can reach into and control any one of its supposedly “private sector” firms like Tencent or Alibaba at any point. Although the Trump administration’s campaign against Huawei has been clumsy and in many respects self-defeating, the goal is essentially correct: It would be crazy for any liberal democracy to allow this firm to build its basic information infrastructure, given the way it can be controlled by the Chinese state.

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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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    Facebook's $5.7 Billion Bet on Jio Is a Move Beyond Ads

    This note from Bloomberg Research may be of interest. Here is a section:

    Facebook's investment of $5.7 billion in India's top telecom operator Reliance Jio highlights a broader bet on India’s online growth beyond ads. Jio has more than 388 million subscribers with reach in content, payments and ecommerce, all of which Facebook can scale up via its 380 million WhatsApp, Facebook or Instagram users in India. Plans to integrate Jio’s small businesses to enable shopping on WhatsApp shows an acceleration in e-commerce.

    THESIS: Facebook will be the hardest-hit internet company in 2020 from the virus fallout as a sharp ads decline and small and medium business exposure can take growth down to low-single digits, while surging usage hits profit harder. Yet we believe exiting this uncertainty with a higher user base and new habits means diversification into new businesses and a 2021 ad rebound will make its growth emerge the strongest among peers. More than 60% of Facebook's sales are in the U.S., the U.K., Germany, Japan, France and Italy. Small and medium business make up the majority of Facebook's 7 million advertisers. Earnings in 1Q will likely reset growth expectations, creating room for longer-term sales outperformance as Facebook pushes into diversifying its business post-virus.

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    RBI Chief Sees Room to Cut India Rates as Virus Dents Growth

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

    Speaking in an interview with Bloomberg News in Mumbai just hours before finance ministers and central bank chiefs from the G-7 economies were scheduled to discuss policy options, Shaktikanta Das said “there is a strong reason for coordinated policy action.” For India, options include a rate cut and supporting the market through liquidity measures, he said.

     Inflation, which had kept the central bank from easing since December, is expected to moderate, he said in an interview at the RBI’s headquarters. He argued the bank’s flexible inflation-targeting framework allows the central bank to look through recent price pressures and loosen policy.

    “We’re ready for a response should the situation warrant,” Das said in a meeting room decorated with framed portraits of his predecessors. “I think the G-7 countries are having a conference. And going forward, in the near future, I do expect some discussion through video conference or telephone conference among the central banks of the large economies, including India.”

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    British Tycoons, Cerberus in Talks to Acquire Yes Bank Stake

    This article by Baiju Kalesh and Suvashree Ghosh for Bloomberg may be of interest to subscribers. Here is a section:

    The beleaguered Indian lender has been struggling to raise capital for the past few months, amid concerns about the quality of its assets and its exposure to the stressed shadow banking sector. Firms including JC Flowers & Co., Tilden Park Capital Management, Oak Hill Advisors and Silver Point Capital have submitted non-binding expressions of interest, Yes Bank said in a stock exchange filing in Mumbai on Feb. 12.

    Shares of Yes Bank rose 0.4%. The bank’s 2023 dollar bond climbed about 1 cent to 84.5 cents, according to Bloomberg- compiled prices.

    “A high pedigree long-term investor could make all the difference for the bank which is under investor scrutiny,” Kranthi Bathini, an analyst at WealthMills Securities. “The ball is in the regulator’s court now.” The Hindujas already hold a stake in IndusInd Bank Ltd., another Indian private lender.
     

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    Davos 2020: Sanjiv Bajaj Sees 'Some Uptick' In Consumer Lending Business

    This article from Bloomberg quoting the CEO of Bajaj Finserv may be of interest to subscribers. Here is a section:

    For the non-bank financial sector as a whole to turn around, the government needs to put aside fiscal discipline for around two years and jump-start the economy, said Bajaj.

    “We need the tailwind from the government to rebuild the sector.” Sanjiv Bajaj, MD, Bajaj Finserv
    India’s non-bank lenders have been reeling since the latter half of 2018, when IL&FS Ltd. group companies defaulted on debt and triggered an industry-wide credit squeeze, raising borrowing costs for small lenders. The government and the RBI stepped in to support by assuring increased liquidity and a provision for a partial guarantee to help these firms sell loans.

    Bajaj said midsize players which aren’t perceived as being “pristine” have had trouble raising funds, especially from banks. “The only answer is either economy to pick up or more equity to come in or the liquidity problem will become a solvency problem in their case.”

    “If the government help doesn’t come, we’ll see some deterioration or stagnation,” said Bajaj.

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    China's Steadying Inflation Leaves Door Open for Monetary Easing

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

    “The PBOC is likely to continue to use interest rate and liquidity tools to loosen monetary conditions in 2020, though the easing will probably be less pronounced than last year,” David Qu, a China economist at Bloomberg Economics in Hong Kong, wrote in a note. “We expect the PBOC to stick to a stance of measured easing to counter the economic slowdown.”

    For the year, consumer inflation for 2019 stood at 2.9%, in line with the government-set target of 3%, while producer prices declined 0.3%. Core inflation, which removes the more volatile food and energy prices, stabilized at 1.4% in December, signaling ongoing weakness in the broader economy.

    China’s economy has shown signs of recovery in recent months as global demand steadies and trade tensions ease. As commodity prices rise and factories start restocking, PPI deflation is set to continue to moderate and some see it turning positive as soon as January.

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    Imagine 2030

    Thanks to a subscriber for this report from Deutsch Bank’s Konzept team which may be of interest. Here is a section on India:

    Email of the day on corruption in India:

    Thank you for your wonderful service once again. My day starts every morning with listening in to your Video Commentary of the Day along with my tea. All other comments and blogs are seen much later after I reach office.

    As I recall, from our first meeting in 2012 you have always had a strong positive view on governance in India. At a closer range the warts are more visible to us.

    You may find a different viewpoint from your stance on the going-ons in India. This is an article published in the Times of India, the foremost newspaper in India and traditionally and currently pro- the current regime. You may find it interesting.

    https://timesofindia.indiatimes.com/blogs/Swaminomics/how-bjp-is-fast-becoming-like-congress-in-graft/

    Hope all is well at your end.

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