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Tue, 25th April 2017

Anirudh Sethi Report

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Archives of “Kuomintang” Tag

Watching and waiting for China’s capital-control-induced bubble

Anyone in mainland China with a lot of money to move — companies foreign or domestic, or individuals — now seems likely to run into the capital controls that the authorities have thrown up in hopes of stopping a sell-off in the currency.

Real estate tycoon Pan Shiyi has given up on selling the Hongkou Soho, a striking Shanghai office tower whose tenants include Japanese electronics group Panasonic. Located just north of the Bund, the city’s iconic waterfront, the building was designed by Japanese architect Kengo Kuma. Pan had been looking to invest proceeds from the sale overseas but sees little hope of gaining approval for that.

 Similar cases of apparent official obstruction have surrounded other foreign deals. Online game developer Giant Interactive’s agreed-on purchase of an Israeli peer for 30.5 billion yuan ($4.42 billion) remains under review. Technology group LeEco and conglomerate Dalian Wanda Group have yet to complete their respective U.S. acquisitions of television maker Vizio and TV studio Dick Clark Productions.

Meanwhile, total social financing, China’s broad measure of credit and liquidity, continues rising by double digits. With limited outlets to overseas, Chinese money has nowhere to go but domestic assets.

President DonaldTrump calls Chinese ‘grand champions’ of currency manipulation

President Donald Trump declared China the “grand champions” of currency manipulation on Thursday, just hours after his new Treasury secretary pledged a more methodical approach to analyzing Beijing’s foreign exchange practices.

In an exclusive interview with Reuters, Trump said he has not “held back” in his assessment that China manipulates its yuan currency, despite not acting on a campaign promise to declare it a currency manipulator on his first day in office.

 “Well they, I think they’re grand champions at manipulation of currency. So I haven’t held back,” Trump said. “We’ll see what happens.”

During his presidential campaign Trump frequently accused China of keeping its currency artificially low against the dollar to make Chinese exports cheaper, “stealing” American manufacturing jobs.

But Treasury Secretary Stephen Mnuchin told CNBC on Thursday he was not ready to pass judgment on China’s currency practices.

India playing with fire by challenging China over Taiwan, warns Chinese media

Warning India against playing the ‘Taiwan card’, an op-ed article in Global Times said that New Delhi will suffer losses by challenging “one China” policy. 

The editorial titled  ‘New Delhi will suffer losses if it plays Taiwan card’ reminded India that even the new US President Donald Trump has made a U-turn on challenging the ”one China” policy.

“By challenging China over the Taiwan question, India is playing with fire.  At a time when new US President Donald Trump has put the brakes on challenging China over the Taiwan question, agreeing to change course and respecting the “one China” policy, India stands out as a provocateur,” the article said .

“High-level visits between India and Taiwan are not very frequent, so why did India invite the Taiwan delegation to visit at this time?” the article asked referring to Taiwanese MPs delegation. 

It is the first such visit since the Taiwanese President Tsai Ing-wen administration took office, it said. 

Tsai, who won on elections last year is a strong supporter of Taiwan’s independence from China. 

Trump: Senkaku islands will be protected. Japan is top ally

Trump on his call with President of China

  • It was a very, very warm conversation
  • I think the relationship will also be very-much a benefit to Japan
  • It was a long talk
  • Promises to honor ‘one china’ policy

Abe hinted of a greater US presence around the disputed Senkaku islands. Trump said the US will defend all areas under Japanese ‘administrative control’.

What this looks like is that Trump backed off on supporting Taiwan in exchange for China backing off on the disputed islands and perhaps something regarding North Korea. In the early days of Trump’s win, he promised to review Taiwan’s status but he’s quickly backed down.

US jettisoning ‘One China’ would trigger geopolitical earthquake

In the less than two weeks since his inauguration, U.S. President Donald Trump has taken a series of controversial actions that have rocked the world.

But he has not yet offered any clue about his real intentions regarding the so-called One China policy, which is a matter of great concern to East Asia. 

 Trump indicated his willingness to reconsider this long-established principle, which, simply put, means Taiwan cannot become an independent nation.

If the U.S. abandons its commitment to this principle, it would be a historic policy shift that could violently shake East Asia’s security architecture and the structure of economic relations among countries in the region. 

One beginning

On Jan. 23, the online Japanese-language version of South Korea’s JoongAng Ilbo newspaper carried an intriguing article on the issue written by one of its columnists.

In the article, titled “Trump: ‘How about Three Chinas?'” the author, quoting a source who has contacts within Trump’s inner circle, said Trump, after being elected, asked former Secretary of State Henry Kissinger whether he should maintain the “One China” policy. Kissinger reportedly floated the idea of three Chinas instead of two.

China “Shocked” By Navarro Appointment, As Trump Team Proposes 10% Import Tariff

As the FT first reported yesetrday, in a dramatic development for Sino-US relations, Trump picked Peter Navarro, a Harvard-trained economist and one-time daytrader, to head the National Trade Council, an organization within the White House to oversee industrial policy and promote manufacturing. Navarro, a hardcore China hawk, is the author of books such as “Death by China” and “Crouching Tiger: What China’s Militarism Means for the World” has for years warned that the US is engaged in an economic war with China and should adopt a more aggressive stance, a message that the president-elect sold to voters across the US during his campaign.

 

In the aftermath of Navarro’s appointment, many were curious to see what China’s reaction would be, and according to the FT, Beijin’s response has been nothing short of “shocked.” To wit:

 The appointment of Peter Navarro, a campaign adviser, to a formal White House post shocked Chinese officials and scholars who had hoped that Mr Trump would tone down his anti-Beijing rhetoric after assuming office.

“Chinese officials had hoped that, as a businessman, Trump would be open to negotiating deals,” said Zhu Ning, a finance professor at Tsinghua University in Beijing. “But they have been surprised by his decision to appoint such a hawk to a key post.”

China’s True FX Outflows Since August 2015 Are $1.1 Trillion, Double The Official Number

Two months ago, when looking at an alternative measure of Chinese capital outflows using SAFE data, Goldman found that contrary to official PBOC reserve data, “China’s Capital Outflows Are Soaring Again”, having hit $78 billion in September.

Over the weekend, and following the latest PBOC data which revealed an outflow of $56 billion in November (which was only $34 billion when FX adjusted), Goldman repeated its FX flow calculation using SAFE data, and found the China continues to mask the full extent of its outflows, which in November spiked to $69 billion, and that “since June, this data has continued to suggest significantly larger FX sales by the PBOC than is implied by FX reserve data”, once again suggesting that China is eager to mask the true extent of reserve outflows, perhaps in an attempt to not precipitate the feedback loop of even further panicked selling of Yuan and even more outflows, and thus, even more reserve depletion.

According to Goldman’s MK Tang, money has been leaving in yuan payments for 14 consecutive months, while the central bank’s yuan positions have slumped the most since January. The situation could get worse, said Banny Lam, head of research at CEB International Investment Ltd, cited by Bloomberg.

China to penalise U.S. automaker for monopolistic behaviour – China Daily

China will soon slap a penalty on an un-named U.S. automaker for monopolistic behaviour, the official China Daily newspaper reported on Wednesday, quoting a senior state planning official.

Investigators found the U.S. company had instructed distributors to fix prices starting in 2014, Zhang Handong, director of the National Development and Reform Commission’s price supervision bureau, was quoted as saying.

 News of the penalty comes at a sensitive time for China-U.S. relations after U.S. president-elect Donald Trump called into question a long-standing U.S. policy of acknowledging that Taiwan is part of “one China”.

Beijing maintains that self-ruled Taiwan is a wayward province of China and has never renounced the use of force to take it back.

Zhang was quoted in an exclusive interview with the newspaper as saying that no one should “read anything improper” into the timing or target of the penalty.

The article did not give further details.

China Newspapers Blast “Diplomatic Rookie” Trump For “Inability To Keep His Mouth Shut”

It seems that Trump’s phone call with Taiwan’s president Tsai Ing-wen as well a recent pair of tweets from the president-elect blasting China for devaluing their currency, taxing U.S. imports and military provocations in the South China Sea have served their purpose of ruffling some feathers in Beijing.

While the “official reaction” out of Beijing to Trump’s “provocations and falsehoods” has been muted, newspapers across China, often viewed as a mouthpiece of the Communist Party, have spent the day lashing out at the “diplomatic rookie.”.  Per Yahoo News, the People’s Daily accused Trump of “provoking friction and messing up China-US relations,” a move they say will not help “make America great again.”

 Donald Trump is a “diplomatic rookie” who must learn not to cross Beijing on issues like trade and Taiwan, Chinese state media said Tuesday, warning America could pay dearly for his naivety.

Trump’s protocol-shattering call with Taiwan’s president and a subsequent Twitter tirade against Beijing’s policies could risk upending the delicate balance between the world’s two largest economies, major media outlets said.

“Provoking friction and messing up China-US relations won’t help ‘make America great again'”, said a front-page opinion piece in the overseas edition of Communist Party mouthpiece People’s Daily.

Trump

Speculation grows over possible extension of Xi’s term

Speculation is rife in Chinese political circles about the results of the recent annual meeting of the Communist Party of China’s leaders, in the seaside resort of Beidaihe.

Following the unusually long meeting in the town in Hebei Province, some pundits say Chinese President Xi Jinping, like Japanese Prime Minister Shinzo Abe, wants to extend his term in office. According to party observers, there was no specific discussion of candidates to succeed Xi as the Communist Party’s general secretary, and Xi seemed to be paving the way for extending his term.

 The meeting this year was different from the one in the summer of 2006, when candidates to be China’s future leader were discussed. Li Keqiang, now China’s premier, was seen as the leading candidate for the top job at that time, while Xi was hardly mentioned — at least publicly.

The top echelons of the party will be reshuffled at its convention in the fall of 2017, and usually, party leaders exchange frank opinions about the nation’s future leadership during their summer gathering the year before. But little information was leaked about this year’s meeting, possibly because Xi suppressed discussions in a bid to avoid gradually becoming a lame duck, even if he retains his current post following next year’s convention.