Chinese economy, mid-September update

Reading Time:

Chinese Officials Unveil Energy, Railway Tie-Ups With U.S. Companies: Economic advisers to Chinese President Xi Jinping "announced an agreement between Chinese rail companies and a U.S. firm that hopes to build a rail line linking Southern California to Las Vegas, and disclosed a planned $3 billion fund to invest in energy-efficient projects in China."

Agenda and schedule for Xi's visit: Chinese President’s State Visit Has Weighty Agenda and Busy Schedule

[On September 23,] Mr. Xi takes part in a round-table discussion with chief executives sponsored by Henry M. Paulson Jr., chairman of the Paulson Institute at the University of Chicago and a former Treasury secretary. He will also visit Boeing’s factory in Everett, Wash., its largest production site for commercial aircraft. China is a huge Boeing customer.

WSJ: Crises Put First Dents in Xi Jinping’s Power

Mr. Xi’s economic policy team is now rethinking its strategy, shelving reliance on the stock markets to help state-run companies pay off debts, according to political insiders. In the past week, state media have touted a theory attributed to Mr. Xi that calls for an accelerated shift to higher-level manufacturing and away from steel and other industries with excess capacity.
Worries among Mr. Xi’s supporters are that his troubles are emboldening influential interest groups, including captains of state industries and retired leaders who want to rein in his antigraft campaign and reforms of the state sector.
Supporters say Mr. Xi has weakened his opponents with the anti-corruption drive and by taking decision-making power away from a bloated government bureaucracy. Chinese authorities launched several investigations into share price manipulation last week and punished 197 people for spreading rumors online about the stock market and other recent events, according to state media.

Washington Post: U.S. won’t impose sanctions on Chinese companies before Xi visit

Nikkei: With reforms, Xi bulking up state companies to take on the world

Some U.S. politicians "are calling on Washington not to accord "state guest" status to Xi during the visit." (Source: Nikkei) (Sarcastic translation: Despite mutual mistrust, the relations between the superpowers are still too good.)

Pilling: The dangers in Delhi’s dream of overtaking China

Post-1990, number of MNCs has doubled. China & US home to ~50% of the new ones - via Jana Remes. (MGI study: The new global competition for corporate profits)

NYT: Airbnb Seeks to Expand in China With Local Help

Chinese environment: Ground operation

Faced with public discontent, Beijing has started to address air pollution by modernising factories and moving coal-consuming industries away from cities. By 2020, many major waterways are supposed to meet new drinking water standards. Some of these remedies may be counter-productive, since moving polluting factories to the hinterlands can have the perverse effect of fouling air, soil and water closer to river sources.
Yet the government is only now beginning to grapple with soil pollution, after years in which experts struggled to bring attention to the issue.
In 2004, workers digging Beijing’s Songjiazhuang subway station were poisoned by gases leeching from an abandoned pesticide plant. That sparked China’s first regulations on decontaminating abandoned industrial sites. Recent incidents, including cyanide contamination after the Tianjin blasts, are raising public awareness.

Luxury in China: false dawns

Prada’s China sales were down 1.2 per cent in reported terms but tumbled 19.1 per cent at last year’s exchange rate. ... Over two-and-a-half years, forecasts for Prada’s 2016 earnings have come down 56 per cent. The shares (in euro terms) are down 48 per cent. It is a similar story, with smaller declines, at Richemont.

Diana Choyleva: China’s changes will help developed world

The US must welcome China into the global financial system and allow it to take its rightful place in global monetary institutions. Whether the renminbi is added to the currencies that make up the International Monetary Fund’s special drawing right unit will be a litmus test.

G20 supports China’s efforts to stabilise economy

Pierre Moscovici, the EU Commissioner for Economic Affairs, praised “the absolute determination of the [Chinese] authorities to sustain growth”.
European enthusiasm for Beijing was replicated in softer terms by US officials. Jack Lew, US Treasury secretary, pressed Lou Jiwei, his Chinese counterpart, for a signal that China would allow market pressures to drive the renminbi up as well as down.

Gillian Tett: China risks repeating the errors of Japan

Japan’s model changed from the 1970s onwards. As the country’s economy matured, Japanese companies had less need for bank-supplied cheap credit, and, as it grew wealthy, investors started hunting for places to put their cash. The government slowly started to move away from a bank-dominated, tightly controlled financial system towards something that had the trappings of capital markets open to the outside world. However, Japan’s pace of liberalisation was belated and uneven (if not downright arbitrary) and asset price bubbles developed as capital swirled around.

EU groups warn China over pace of reform: ‘Crisis of confidence’ over ‘contradictory government agenda’

Foreign businesses account for less than 2 per cent of China’s banking sector and have a very small penetration rate in property and casualty insurance.

China's IMF ambitions revealed in new archive report

Richard Samans: Inclusive growth needed to avert EM crisis

We identify 15 areas of domestic institutions that particularly matter for broad social inclusion in both the process (employment) and benefits (median household income and standard of living) of growth. And we benchmark countries against their peer group in detail — like a diagnostic scan of the use of policy space/strength of institutions.

... [China] would benefit by addressing its relative weaknesses in such areas as urban housing affordability and conditions, undernourishment and sanitation, agricultural productivity, disproportionate reliance on consumption taxes and low levels of social protection, in which it ranks 23rd out of 25 upper-middle income countries.

Chinese financial markets - has the panic been justified?

A collection of links and quotes from the last couple of weeks: Jeffrey Frankel: China Confronts the Market some important developments that foreigners decry as the...

Weekend links

FT: Review of Rich People, Poor Countries Hall, Kendrick and Nosko: The Effects of Uber's Surge Pricing: A Case Study Transcript of the second GOP debate...