<div id="NLpost" class="nl-post-wrapper" style="margin:0 auto;"><div id="NLHeader" class="post-card"><div id="Page-header" class="mainheader"><h1 class="t1">An unmistakable first-quarter recovery' for China's economy</h1><div class="date">March 30, 2019</div><a href="https://www.linkedin.com/in/malcolmriddell/" target="_blank" class="date" style="color: inherit;border-bottom: 0px solid #008dc8;text-decoration: none;">by Malcolm Riddell</a></div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">We start with a report by Leland Miller, president of China Beige Book, that China’s economy is recovering.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">I’ll review anything from Leland or the CBB. Deng Xiaoping encouraged us to seek truth from facts and that is what the CBB does by tracking 3,300 Chinese firms for its analyses.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">The problem: the CBB serves mainly central banks and institutional investors – we generally don’t hear much about its findings. That’s why if you have a rare sighting of Leland Miller, pay attention.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">China’s bond market also caught my eye. The IMF has recently published, <em>The Future of China’s Bond Market</em>. And, it’s terrific. Top western and Chinese experts have contributed chapters. It’s about as comprehensive and thorough as you could ask for.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">I came across an interview with former freetrader, Larry Kudlow, director of the National Economic Council. Mr. Kudlow now believes that tariffs can pierce intransigence. Could be, but it’s a pretty blunt weapon that can have unintended consequences.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">So, as a contrast, we end with an essay by Nobel laureate, Michael Spence, about an unintended consequence. Mike explains why we are in ‘a prolonged period of radical uncertainly.’ The major source: the U.S.-China trade war. But, wait there’s more. All together, very sobering.</p></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>I. THE LAW AND THE PROTESTS</strong></div><div id="article1" class="post-card"><div class="t2-block">1. 'An unmistakable first-quarter recovery' for China's economy</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar3001" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe src="https://www.bloomberg.com/multimedia/api/embed/iframe?id=03ce4519-08bd-43e8-b704-d84dd7f410c3" allowscriptaccess="always"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China’s economy</strong> showed “an unmistakable first-quarter recovery” after a weak end to 2018, though the level of new borrowing casts doubt on the sustainability of the rebound, according to Leland Miller, president of the <a href="https://www.chinabeigebook.com/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">China Beige Book</a>, on <a href="https://www.bloomberg.com/news/articles/2019-03-27/china-beige-book-says-first-quarter-recovery-is-unmistakable" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Bloomberg</a>.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'"The recovery extends</strong> across both sectors and geographies, with every major sector and each one of our regions showing better revenue results than Q4,” China Beige Book said in a report based on survey data from of over 3,300 Chinese firms across China.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Yet this rally</strong> didn’t appear out of nowhere, and there are at least three compelling reasons to doubt its staying power: credit, credit, and credit,'' says Leland.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Every time</strong> you see a recovery in China you know that there's going to be credit in the phrase, but, even by those standards, this is pretty extraordinary.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We're not only</strong> seeing some of the highest borrowing levels we've seen in the last six years, but we've seen the types of firms that are typically disadvantaged get credit.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Private firms</strong> that are supposedly credit starved, small- and medium-sized enterprises (SMEs) that are supposedly credit starved - they are borrowing more than State-Owned Enterprises (SOEs).’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That's very unusual in China,</strong> but it shows there's clear policy support for these types of firms.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China</strong> is forcing a recovery by giving everybody a loan to everybody who wants one.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Usually,</strong> when you see an expansion of access to credit, you have easing rates - rates get cheaper and cheaper.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This time,</strong> we see higher rates across the board.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘An economy</strong> can withstand that for a quarter or so at the beginning of a rally.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But, not</strong> for two or three quarters in a row.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘To the extent</strong> that the Chinese want to use this to continue to push momentum and it doesn't take off on its own, then you're going to see the PBOC further subsidize rates and probably subsidize them quite dramatically.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Shadow banking</strong> is another really big headliner here.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Our data</strong> showed that shadow finance was being cracked down 2017 and earlier.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Now, we saw</strong> the highest level of shadow bank usage since early 2016.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This is the second</strong> consecutive quarter that we've seen the shadow bank usage increase.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China swore</strong> this was something they wouldn’t do, and now they have.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Just another indication</strong> that the priority has absolutely shifted from reform and restructuring and deleveraging to growth at all costs.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Beijing leadership</strong> said not too long ago that the path of reform and restructuring and deleveraging was irreversible - well, they’ve reversed it.’</li></ul></td></tr></tbody></table></p></div></div><div id="article2" class="post-card"><div class="t2-block">2. China’s Bond Market Comes of Age—Sort of</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar3002" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://images.wsj.net/im-63332?width=1260&amp;aspect_ratio=1.5" alt="chinadebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato',sans-serif;">Chinese bonds are finally joining a global bond benchmark, meaning soon most bond managers will own them. The Chinese government bond market, however, isn’t quite what it appears.</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China's</strong> has an almost $13 trillion onshore bond market - the third largest after the U.S. and Japan.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But,</strong> foreigners only have 2-8% invested.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'That could change</strong> when Chinese sovereign bonds and debt go onto the Bloomberg Barclays Global Aggregate Index - a benchmark for portfolio managers worldwide - on April 1.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>This is the</strong> 'seal of approval for its efforts to modernize its bond market and make it easier for foreign investors to participate,' according to <a href="https://www.bloomberg.com/news/articles/2019-03-26/why-china-s-bond-market-is-about-to-get-less-exotic-quicktake" target="_blank" rel="nofollow noopener" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Bloomberg</a>.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Citigroup says</strong> foreigners will buy $100 billion to $130 billion of mainland bonds this year, while Standard Chartered Plc forecasts $286 billion by 2021.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Curb your enthusiasm</strong>. 'The headline numbers on foreign ownership of central-government debt look impressive,' <a href="https://www.wsj.com/articles/chinas-bond-market-comes-of-agesort-of-11553850716" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">writes</a> Nathaniel Taplin in the Wall Street Journal.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But China’s</strong> total sovereign-bond market is far larger than it appears.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The real heavyweight</strong> in the Chinese bond market is local-government debt — roughly 25% larger than central-government debt at 19 trillion yuan ($2.8 trillion) and growing far faster.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Local governments’ net debt</strong> financing needs were more than twice the level of the central government’s last year.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Local-government bonds</strong>, which won’t be included in the Bloomberg index, have always traded within a tight range of central-government bonds, because investors think Beijing would never allow a province or major city to go bankrupt.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Investors in Chinese treasuries</strong> should therefore be aware that they are essentially along for the ride with China’s local-government bond market. That isn’t such a comfortable place to be'.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Local governments</strong> have in the past issued piles of bonds to fund bailouts of dubious local state-owned corporate debt.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Given China’s economic slowdown</strong>, that could easily happen again —and soon.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Chinese banks</strong> are still sitting on plenty of such dodgy state-owned company debt and are undercapitalized, a major reason why growth in bank lending has been so slow to recover.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'One way to fix the problem</strong> is by magically converting high-risk state-owned corporate debt into low-risk official government debt.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Hey, presto,</strong> better bank balance sheets: But all of this would effectively be underwritten by Beijing, meaning higher sovereign-debt yields.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'So, foreigners</strong> could be exposed to the huge local-government debt market, whether or not they want to be.'</li></ul></td></tr></tbody></table></p></div></div><div id="article3" class="post-card"><div class="t2-block">3. 'The Future of China's Bond Market'</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar3003" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe width="720" height="405" src="https://www.youtube.com/embed/97a4zDMTWHA?color=white"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>For an in-depth understanding</strong> of China'a bond market, read the IMF's recently published <em>The Future of China's Bond Market</em> (below).</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Top western and Chinese</strong> analysts cover different aspects of the markets. Comprehensive.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The Center for Strategic and International Studies</strong> (CSIS) hosted a discussion of the book. Watch the <a href="https://youtu.be/97a4zDMTWHA" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">1hr 32m CSIS overview.</a></p><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="pdf-container" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;padding: 0 2%;background-color: #ccc;"><iframe src="https://docs.google.com/viewer?url=https://www.elibrary.imf.org/doc/IMF071/25402-9781484372142/25402-9781484372142/Other_formats/Source_PDF/25402-9781484393147.pdf&amp;embedded=true" style="width:100%; height:500px;border:none;"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"><a href="https://www.elibrary.imf.org/doc/IMF071/25402-9781484372142/25402-9781484372142/Other_formats/Source_PDF/25402-9781484393147.pdf" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">open in a new window</a></p></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>II. POTENTIAL BACKLASH FROM THE U.S.<br></strong></div><div id="article4" class="post-card"><div class="t2-block">4. 'The president has taught me that tariffs have an important use in trade negotiations': Larry Kudlow</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar3004" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe width="720" height="405" src="https://www.youtube.com/embed/1dLS4_UsvIU?color=white"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Well, I will tell you</strong>, as a confirmed free trader, that the president has taught me - and a lot of other people - that tariffs have an important use in trade negotiations. ,' says Larry Kudlow, the National Economic Council director, in a <a href="https://youtu.be/1dLS4_UsvIU" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">1m 40s CNBC interview</a>.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘You can get</strong> through the intransigence.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If your goal</strong> is free fair and reciprocal trade; if you believe, as the president does, that in a pure world we should have zero tariffs and non-tariff barriers and subsidies, you’ve got to get there.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘A lot of the</strong> world's trading system is broken down.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The WTO</strong> has not done its job.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China</strong> has been in non-compliance in many different areas - others believe that in Europe and Japan.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, tariffs play</strong> a role, and I've learned that.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I've watched,</strong> particularly in the Chinese negotiations - that's probably the best example - the President get tough on China with tariffs.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'We hurt China</strong> economically - they're already on the downslope.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Here we are,</strong> deep into negotiations, that perhaps will turn out very well.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>What changed?</strong> ‘I am now involved in it hands on, in the real world. And, I'm not the free trade purest I once was.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The president’s</strong> a pretty good negotiator - that's what I've learned.’</li></ul></td></tr></tbody></table></p></div></div><div id="article5" class="post-card"><div class="t2-block">5. 'A prolonged period of radical uncertainty' - 'a major source is the Sino-American trade war': Michael Spence</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11944af9a60955b363aa08_Michael%20Spence.png" alt="chinadebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="excerpt" style="font-size: 1.125em;line-height: 1.75em;margin: .625em 0;margin-bottom: 1.5em;font-style: italic;text-align: center;color: #c80000;padding: 10px 5%;font-family: 'Lato',sans-serif;">With new sources of uncertainty proliferating by the day, the world should brace for a broad economic slowdown or, at minimum, a lengthy period of slower growth.</p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The global economy</strong> is weakening, in no small measure because of a deep, widespread sense of uncertainty,' <a href="https://www.cfr.org/article/economic-consequences-global-uncertainty" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">writes</a> Nobel Laureate Michael Spence on the Council on Foreign Relations website.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'And a major source</strong> of that uncertainty is the ongoing Sino-American “trade war,”’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The conflict</strong> has cast doubt on the future of global economic connectivity, which has led to lower investment and consumption in China and the United States, and among their respective trading partners.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The global economy</strong> is undergoing a major transition, owing to the rise of emerging economies, especially in Asia, and the digital transformation of business models and global supply chains.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And while it is obvious</strong> that global-governance structures and rules need an overhaul, existing international institutions lack the power to push through such changes on their own, and the governments of the world’s leading economic powers do not seem up to the task.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Taken together</strong>, these diverse economic and political trends may or may not lead to another global crisis or sudden stop.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Either way</strong>, they will sustain a prolonged period of radical uncertainty.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Under such conditions</strong>, caution may seem like the best policy for companies, investors, consumers, and even governments.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But caution carries its own costs</strong>: companies and countries that fail to invest enough in, for example, new digital technologies may well fall by the wayside.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And as long as</strong> the rules and institutions governing the global economy remain in doubt, continued underperformance is to be expected.’</li></ul></td></tr></p></div></div></div>

<div id="NLpost" class="nl-post-wrapper" style="margin:0 auto;"><div id="NLHeader" class="post-card"><div id="Page-header" class="mainheader"><h1 class="t1">'Xi visits a divided EU with charm and deals'</h1><div class="date">March 27, 2019</div><a href="https://www.linkedin.com/in/malcolmriddell/" target="_blank" class="date" style="color: inherit;border-bottom: 0px solid #008dc8;text-decoration: none;">by Malcolm Riddell</a></div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">William Barr's summary of the Mueller Report has strengthened the U.S. trade negotiation team.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">Within a couple of weeks of the EU's agreeing to a tougher position toward China, Italy went bilateral and signed an MoU for participation in the Belt and Road Initiative.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">And, Xi Jinping has just ended what appears to be a successful European trip, dispensing gratitude and contracts.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">Confused about how to put these events and others like them into a coherent framework? Me too.</p></td></tr></tbody></table></p></div></div><div id="article1" class="post-card"><div class="t2-block">1. Mueller report give U.S. more clout in trade negotiations</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe width="720" height="405" src="https://www.youtube.com/embed/KKLgBY4M5yw" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Beijing will see</strong> the Mueller report as a win for the president.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And,</strong> it will strengthen the U.S. negotiating position in the trade talks,’ says Kevin Rudd, president of the Asia Society Policy Institute and former Australian prime minister, in a <a href="https://youtu.be/KKLgBY4M5yw" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">7m 16s CNBC interview</a>.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘When Lightizer and Mnuchin</strong> head off to Beijing this week, I think they’ll have a bit of wind in their sails.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'This makes it</strong> more likely for a more substantive outcome from an American perspective.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The Mueller report</strong> - actually the Barr report - has now increased the duration of the Trump administration,’ says John Rutledge, SAFANAD Chief Investment Officer in a <a href="https://youtu.be/eOvjVI5E9R0" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">3m 35s CNBC interview</a>.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, China knows</strong> that there’s more likelihood they will be dealing with the same guys for the next two years.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>If this were</strong> a ‘normal administration, trade talks would be done between middle-level people.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'A switch</strong> from one normal president to another normal president question wouldn't matter.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But, ‘Trump</strong> is calling the shots on this himself.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Greater certainty</strong> that Trump will be in office at least until 2020 ‘opens up the possibility for more hardcore, real talks between China and the U.S.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>In some ways,</strong> then ‘the trade talks should go easier.’</li></ul></td></tr></p></div></div><div id="article2" class="post-card"><div class="t2-block">2. 'The time of European naïveté towards China had ended': Macron</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar2702" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="pdf-container" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;padding: 0 2%;background-color: #ccc;"><iframe src="https://docs.google.com/viewerng/viewer?url=https://ec.europa.eu/commission/sites/beta-political/files/communication-eu-china-a-strategic-outlook.pdf" style="width:100%; height:500px;border:none;"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"><a href="https://docs.google.com/viewerng/viewer?url=https://ec.europa.eu/commission/sites/beta-political/files/communication-eu-china-a-strategic-outlook.pdf" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">open in a new window</a></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Overshadowed</strong> by the trade war and Brexit, 'what went under-reported was that the EU took its most significant steps yet – though belated and insufficient – to address China’s increasingly assertive and state-subsidized push into Europe,' <a href="https://www.atlanticcouncil.org/blogs/new-atlanticist/europe-s-struggle-for-a-china-strategy" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">writes Frederick Kempe</a>, president and chief executive officer of the Atlantic Council.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The challenge</strong> is that China for some time has executed a clear plan that has put Europe increasingly at the heart of its global political and economic strategy while Europe has lacked any unified policy approach of its own.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'That has given China</strong> maximum leverage in negotiating with EU member countries, almost exclusively on a bilateral basis.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>On March 12,</strong> 'after months of study, the European Commission released its “<a href="https://ec.europa.eu/commission/sites/beta-political/files/communication-eu-china-a-strategic-outlook.pdf" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">EU-China: Strategic Outlook</a>,” (read above) that included the clearest and toughest language yet toward China in an EU document,' says Kempe.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'After years</strong> of a more benign approach to Beijing, it branded China as “an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Some have said</strong> that the strong wording of the document reflects the US labelling of China as a "strategic competitor," but I think Europe’s position is independent from that,' says Lucrezia Poggetti, research associate at the Berlin-based Mercator Institute for China Studies, in the <a href="https://www.scmp.com/news/china/diplomacy/article/3001583/how-united-states-nudged-european-union-towards-tougher-stand" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">South China Morning Post</a>.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The definition of China</strong> is more sophisticated than that, and reflects debates that we have been having in Europe.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The EU’s position</strong> was rooted in its own position on China but the China-US trade war was a chance to drive its message home,' Poggetti says.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Europe has been strategically using</strong> the window of opportunity presented by the US-China trade war to push more for its economic interests more assertively.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But, 'to some extent,</strong> the EU paper is also a wake-up for Beijing because it could upend the prevailing thinking among Chinese political elites who have pinned their hopes on close ties with Europe to offset the pressure from deteriorating relations with the United States amid the trade war,' says Pang Zhongying, a Beijing-based international affairs specialist, in the <a href="https://www.scmp.com/news/china/diplomacy/article/3001583/how-united-states-nudged-european-union-towards-tougher-stand" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">South China Morning Post.</a></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>So, perhaps with this in mind,</strong> Xi Jinping made his recent European 'trip – which included stops in Italy, France and Monaco – to try to ease fears that Beijing has become a threat to the EU, a mission that took on greater importance with China mired in a trade war with the United States,' says the <a href="https://www.scmp.com/news/china/diplomacy/article/3002725/europe-wakes-why-beijing-mission-quell-brussels-fears-about" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">South China Morning Post</a>.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>If that is so</strong>, Xi faced a tough audience in France.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Last 'Friday French president</strong> Emmanuel Macron, who met with Mr Xi in Paris on Tuesday, declared that the “time of European naïveté” towards China had ended, and called for a robust and co-ordinated response by the EU towards Beijing,' reports the <a href="https://www.ft.com/content/fda398ac-4d72-11e9-b401-8d9ef1626294" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Financial Times.</a></li></ul></td></tr></tbody></table></p></div></div><div id="article3" class="post-card"><div class="t2-block">3. Xi in Europe: How China is outmaneuvering Trump on trade</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar2703" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://images.newrepublic.com/f26bde109df204ce7e91858fe8346a9615c421cf.jpeg?w=1000&amp;q=65&amp;dpi=1&amp;fm=pjpg&amp;fit=crop&amp;crop=faces&amp;h=667" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'As Chinese President Xi Jinping</strong> concludes his first foreign trip of 2019, he can congratulate himself on at least one thing: masterfully making use of the daylight between Brussels and Washington when it comes to China policy,' writes Sam Bresnick in <a href="https://newrepublic.com/article/153399/china-outmaneuvering-trump-trade" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">The New Republic</a>.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The Italian portion</strong> of the visit focused on the BRI, Rome’s endorsement being Xi’s greatest win so far in 2019.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Italy, a founding member of the EU</strong>, is the first G7 country to formally sign on to China’s grand infrastructure project, breathing new life into the much-maligned initiative.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Over the past year,</strong> Malaysia, Myanmar, Pakistan, and Bangladesh, among others, canceled or cut back BRI projects.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The seizure of the Sri Lankan port</strong> of Hambantota and fears of so-called “debt-trap diplomacy” further eroded faith in the project, with many countries questioning Beijing’s promises of “win-win” cooperation.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But Italy</strong> is the wealthiest country to join the BRI, and Xi will be able to signal to his constituents that the project is still held in high international regard despite the aforementioned setbacks.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Though many EU countries</strong>, particularly Germany and France, have been highly skeptical of the BRI, the Five Star Movement wing of Italy’s populist coalition government has observed the success of Greece’s Piraeus Port (more on that below), a majority share of which is held by COSCO, a Chinese state-owned enterprise.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Prime Minister Giuseppe Conte</strong> hopes to make Italy’s own ports, notably those in Trieste and Genoa, similar entry points for Chinese trade with Europe.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>And while another group</strong> in the governing coalition—the far-right League—takes a dim view of engagement with China, during Xi’s visit, Rome signed 29 deals worth $2.8 billion, wagering on Chinese investments to help pull it out of a grinding recession.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Xi’s visit to Monaco</strong> had much do with the country’s endorsement of Huawei.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Despite U.S. pressure,</strong> 'on February 27, Monaco Telecom and Huawei signed a memorandum of understanding to develop and deploy “smart city” technology for the principality.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'France</strong>, the current chair of the G7 and a strong U.S. ally, was supposed to be Xi’s toughest stop on his Mediterranean swing.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'In a bid</strong> to emphasize European unity, French President Emmanuel Macron invited German Chancellor Angela Merkel and European Commission President Jean-Claude Juncker to join his meeting with Xi on Tuesday.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Macron</strong>, who has been supportive of the BRI in the past, has recently coarsened his rhetoric, noting that the initiative should not be “one-way.”</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'He has been</strong> invited to the upcoming BRI forum in April but is unlikely to attend.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'While in France,</strong> however, Xi cemented a new phase of economic cooperation with Europe, signing an almost $34 billion deal with Airbus for 300 airplanes.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China has historically</strong> been one of U.S.-based Boeing’s best customers, accounting for almost 20 percent of the company’s sales as of 2017.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But given Boeing’s recent disasters</strong> and the contentious U.S.-China relationship, Xi has deftly shifted the trajectory of China’s aviation sector, simultaneously shoring up economic ties with the EU and dealing a blow to Washington.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Beijing</strong> is offering deals countries want.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'And while China will undoubtedly</strong> still have difficulties with both the EU and the United States, on this trip,at least, Xi seems to have thoroughly outmaneuvered those set against him in Washington.'</li></ul></td></tr></tbody></table></p></div></div><div id="article4" class="post-card"><div class="t2-block">4. 'The Belt and Road Initiative Impact on Europe: An Italian Perspective'</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar2704" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="pdf-container" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;padding: 0 2%;background-color: #ccc;"><iframe src="https://docs.google.com/viewerng/viewer?url=http://en.iwep.org.cn/papers/papers_papers/201711/W020171109393879132046.pdf" style="width:100%; height:500px;border:none;"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"><a href="https://docs.google.com/viewerng/viewer?url=http://en.iwep.org.cn/papers/papers_papers/201711/W020171109393879132046.pdf" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">open in a new window</a></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Why did Italy</strong> recently become the first G7 country to sign an MoU to participate in the BRI?</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>One thing</strong> that influenced the decision is <a href="http://en.iwep.org.cn/papers/papers_papers/201711/W020171109393879132046.pdf" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'The Belt and Road Initiative Impact on Europe: An Italian Perspective,'</a> written in 2017.</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Here is just</strong> the section on COSCO’s investment in the Port of Piraeus and how it’s taking business from Italian ports, especially the already troubled Trieste.</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But</strong>, the whole 14-page paper is worth a read. Fascinating!</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'This paper analyzes</strong> the impact of the Belt and Road Initiative (BRI) on Europe with a specific focus on Italy.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'We concentrate</strong> on the impact of new railways and port infrastructures on bilateral trade.'</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Our analysis</strong> suggests that the development of new railway connections will benefit most of the Northern and Central European countries.'</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Investment in new port facilities</strong>, although less “new” compared with railways, may be a bigger game changer'.</p></li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China’s largest state-owned shipping company</strong>, COSCO, is investing massively in port infrastructure in the Mediterranean segment of the BRI.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The most noteworthy</strong> of COSCO’s investments here is the Port of Piraeus’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Thanks to Chinese investments</strong>, Piraeus has experienced rapid growth, increasing from facilitating 2 percent of total Mediterranean traffic in 2008 to 13 percent in 2015.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'COSCO</strong> plans to increase the port’s potential of 35 percent by 2018.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The development</strong> of the Port of Piraeus has already increased the importance of the Mediterranean Sea as an import/export hub for China.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The Port of Piraeus</strong> is not simply growing in size but is also changing in nature.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'If China’s plan to connect</strong> it to Budapest via high-speed train succeeds, the port will be transformed from a transshipment station into China’s main gateway for Central and Eastern Europe.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The expansion of Piraeus</strong> as COSCO’s main shipping hub will allow the port to attract and absorb greater volumes not only from other ports in the Mediterranean but also from the ports in Northern Europe, boosting competition in this sector.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘With the full development</strong> of the port and its related railway network, the most dynamic shipping companies will likely prefer to use this area as a distribution network not only for the Balkans and Eastern Europe but also for North African and Western European countries.’</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The Italian port of Trieste</strong> in the high Adriatic Sea could be displaced by Piraeus capacity, especially if this port is linked through railways with the center of Europe.'</p></li></ul></td></tr></tbody></table></p></div></div></div>

<div id="NLpost" class="nl-post-wrapper" style="margin:0 auto;"><div id="NLHeader" class="post-card"><div id="Page-header" class="mainheader"><h1 class="t1">'Two Sessions' End</h1><div class="date">March 23, 2019</div><a href="https://www.linkedin.com/in/malcolmriddell/" target="_blank" class="date" style="color: inherit;border-bottom: 0px solid #008dc8;text-decoration: none;">by Malcolm Riddell</a></div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">The National People’s Congress ended last Friday.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">There was less drama than last year when prominently term limits were eliminated. Some have opined that the NPC ended with a whimper not a bang.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">What transpired instead showed us China’s intentions. Things like boosting support for the private sector and eliminating forced tech transfer.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">But, the NPC also raised questions, such as, does China really believe that the deleveraging campaign has met its goals? What mix of stimulants will China use to juice the economy. And, on and on.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">As with everything about China’s government, its actions – not its words – count.</p></td></tr></tbody></table></p></div></div><div id="article1" class="post-card"><div class="t2-block">1. 'Foreign Investment Law': the level playing field</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar2301" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe width="720" height="405" src="https://www.youtube.com/embed/8B_8ZSYU1Dw?color=white"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>On the new Foreign Investment Law</strong> in this <a href="https://youtu.be/8B_8ZSYU1Dw" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">5m video</a>. ‘You could certainly say - line by line - this looks better than what was on paper before,’ says Fraser Howie, co-author of <em>Red Capitalism</em> and one of my favorite China analysts.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Those six</strong> bullet points or whatever sound great.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But, let's not forget</strong> - just a few weeks ago, China officials were denying there was any forced technology transfer in the first place.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘And, now all of a sudden</strong>, something that didn't exist is now illegal.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Foreigners</strong> and local companies being treated as equals?’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Local Chinese</strong> private companies aren't the equals of State-Owned Enterprises.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, even</strong> within just the purely domestic sphere, it's an uneven playing field.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Saying that now foreigners</strong> are suddenly going to be treated the same – it’s very hard to see how that's going to happen.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But, you've got</strong> to put that in the political context.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Under Xi Jinping,</strong> the era of reform is finished; you are now in some different sort of era.’</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘He has made no secret</strong> of the importance of the Communist Party - an organization that sits completely outside the law - and the importance of this State controlling many of the key sectors of the economy.'</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, you can have</strong> a better law on paper, but how it actually plays out is very hard to see.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘What the law</strong> says and what actually happens on the ground are two very different things.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>You can read</strong><a href="https://www.uschina.org/sites/default/files/2015%20Draft%20Foreign%20Investment%20Law%20of%20the%20People%27s%20Republic%20of%20China_JonesDay_0.pdf" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">the draft 'Foreign Investment Law' here.</a></p></td></tr></tbody></table></p></div></div><div id="article2" class="post-card"><div class="t2-block">2. 'Foreign Investment Law': 'Tech transfer in China is no longer the main concern'</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar2302" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><th>2. 'Foreign Investment Law': 'Tech transfer in China is no longer the main concern'</th></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe width="720" height="405" src="https://www.youtube.com/embed/C9IpFcyTmsI?color=white"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The NPC passed</strong> new Foreign Investment Law that, among other things, bans forced tech transfer.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Here are some thoughts</strong> about the new law's IP protection and other issues from Nick Lardy of the Peterson Institute for International Economics (PIIE) in <a href="https://youtu.be/C9IpFcyTmsI" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">this 2m 32s video</a>.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Q:</strong> 'The new foreign investment law includes this focus on IP protection.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Anecdotally,</strong> I’ve heard from several executives who say IP protection is no longer their top concern.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Some say</strong> they have already been ripped off.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They also say</strong> China has evolved so much they that they've adopted their own IP protection.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'So, what difference</strong> will this make to foreign investors on the margin here?'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Lardy:</strong> 'I think probably less than the Trump administration thinks for the reasons you allude to.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Most most ventures</strong> going into China now are wholly foreign-owned, so they can take steps to preserve their technology.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The main concern</strong> for many investors is still regulatory uncertainty about how the rules are applied.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'That's more important today</strong> than the technology transfer issues.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But,</strong> the Trump administration has not fully recognized that.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But, for China industries</strong> that still require foreign firms to enter through joint ventures, the ban on forced tech transfers is a big deal for those that have yet to enter the market.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>As with all else in China</strong>, how the ban is implemented, especially at the local levels, will show just how big a deal.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>You can read </strong><a href="https://www.uschina.org/sites/default/files/2015%20Draft%20Foreign%20Investment%20Law%20of%20the%20People%27s%20Republic%20of%20China_JonesDay_0.pdf" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">the draft 'Foreign Investment Law' here.</a></p></td></tr></tbody></table></p></div></div><div id="article3" class="post-card"><div class="t2-block">3. Yi Gang: 'China has deleveraged' | Michael Pettis: 'No. Debt has gone up'</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar2303" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe width="720" height="405" src="https://www.youtube.com/embed/4rdh6zf-9OY?color=white"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>At the National People's Congress</strong>, Yi Gang, Governor of the People's Bank of China reported that the goals of the deleveraging had been met; Michael Pettis of Peking University disagrees.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I don't really think</strong> there has been any deleveraging in China, says Michael in <a href="https://youtu.be/4rdh6zf-9OY" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">this 5m 13s video.’</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘According to</strong> China’s own numbers, debt continued to grow faster than a nominal GDP.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Instead of deleveraging</strong>, ‘there has been an increase in China’s debt burden.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The rate</strong> at which things have gotten worse has improved slightly, but debt itself has continued to get worse.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The main reason</strong> for the growth in debt in China is the unbalanced nature of demand.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘For a large economy,</strong> such as China, there are basically two main sources of demand: consumption and investment.</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In China</strong>, household income is low and so is consumption.’</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, by definition,</strong> investment growth must be high to keep the economy growing.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But, China</strong> long ago reached the point at which most of the needed investment has been completed.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, now</strong> a lot of investment in China is really non-productive.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘As a result debt</strong> is growing much faster than debt servicing capacity.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>To rebalance,</strong> consumption has to go up. And, ‘there are two ways you can raise consumption.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The sustainable way</strong> is with growth in household income.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The unsustainable way</strong> is with growth in consumer debt.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘In the last three</strong> to four years, we did see consumption growth pick up.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But, we also saw China</strong> go from one of the countries with the lowest amount of household debt to, by some accounts, one of the countries with the highest amount of household debt.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So the growth</strong> in consumption in recent years has not been sustainable growth.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It's been the wrong kind of growth,</strong> and it's already stabilizing.’</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>II. POTENTIAL BACKLASH FROM THE U.S.<br></strong></div><div id="article4" class="post-card"><div class="t2-block">4. 'China can't create growth- or jobs - out of tax cuts'</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar2304" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe width="720" height="405" src="https://www.youtube.com/embed/xgU0m9lPGxY?color=white"></iframe></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>At the National People's Congress,</strong> Premier Li Keqiang 'declared that economic policy would have an “employment first” focus: the government would strive to keep the unemployment rate below 5.5% and provide training for those out of work,' reports <a href="https://www.economist.com/china/2019/03/09/chinas-prime-minister-frets-about-the-countrys-economy" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">The Economist</a>.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The official jobless rate</strong> has remained steady at about 5%, but manufacturing and tech firms have recently started laying off employees.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China has pledged</strong> to create more the 11 million new jobs this year.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>To do that</strong>, China needs stronger growth. But how?</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'For months</strong> Mr Li has sworn off what he calls “flood-style stimulus”, (ie, deluging the economy with cash as if irrigating a rice paddy).</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'He repeated</strong> that phrase in his NPC speech.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But the Communist Party</strong> is still looking for ways to pep up the economy.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Conveniently</strong>, there is one policy tool that does not involve building yet more bridges, and that has the added benefit of being popular: reducing tax.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Mr Li unveiled cuts</strong>, mostly for firms, that should total nearly 2trn yuan this year, or more than 2% of forecast gdp'.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Economists at hsbc</strong>, a bank, called it China’s most sweeping corporate-tax cut in a decade.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Not so fast</strong>. ‘There were mixed signals at the NPC regarding stimulus.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But, frankly speaking</strong>, I don't buy them,' says Alicia Garcia Herrero, Senior Fellow at the Bruegel think tank, in a <a href="https://youtu.be/mudzS-06Ld8" target="_blank" rel="nofollow noopener" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">3m 11s video</a> interview.</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘I think</strong> they're going to stimulate the economy.’</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘At the end of the day</strong>, they care for the short term, and they can't simply see an economy doing poorly, especially on the employment side.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'So, we will see more stimulus</strong> than we were told we would see at the NPC meeting.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That will be good</strong>, of course, for employment data down the road.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But, it will be artificial</strong> because this is just about stimulating the economy with no structural change.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We heard</strong> at the NPC that there will be tax cuts, especially, on the manufacturing sector, which is the hardest hit because of the trade war and trade developments.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Frankly,</strong> I don't think China can create growth out of tax cuts.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘We saw tax cuts fail</strong> to stimulate the economy last year.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The stimulus</strong> is going to come mainly from massive bank credit again to the private sector.'</p></td></tr></tbody></table></p></div></div><div id="article5" class="post-card"><div class="t2-block">5. 'The manufacturing sector, mired in a crisis of confidence, needs more than this tax cut.'</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar2305" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://media-cdn.list.ly/production/681084/3361417/3361417-china-s-tax-cuts-just-won-t-cut-it_600px.png?ver=2568399759" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The manufacturing sector</strong> needs something better than tax cuts announced by Premier Li Keqiang at the NPC. Ramping up government spending or monetary easing would be more effective.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Tax cuts</strong> don’t solve the single biggest problem crimping China’s companies: longer working capital cycles,’ says <a href="https://www.bloomberg.com/opinion/articles/2019-03-05/npc-china-s-vat-tax-cut-won-t-help-manufacturing-sector" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Bloomberg's Anjani Trivedi.</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘An ongoing liquidity squeeze</strong> continues to deprive private and, increasingly, state-backed companies of credit, which is affecting their everyday operations and ability to service debt.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Structures have weakened</strong>; short-term borrowings are becoming a larger part of firms’ total debt; receivables are ballooning, as are the number of days inventories are held.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Large swathes</strong> of the manufacturing sector are paralyzed.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Beijing</strong> is beginning to acknowledge this.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Premier ‘Li’s paper</strong> noted that various levels of the government must pay off at least half of the debt owed to businesses by the end of this year, and can’t pile on more account payables.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘State-backed companies</strong> have been squeezing cash from their capital-starved suppliers and customers: SOEs owe the private sector 2.1 trillion yuan in the form of net account receivables, one of the many problems affecting companies’ liquidity.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The manufacturing sector</strong>, mired in a crisis of confidence, needs more than this tax cut.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘These companies</strong> — mostly private — have long borne a disproportionate burden of taxes, contributing a third of the government’s revenue.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘A cut to the top bracket</strong> will amount to a tax reduction of 400 billion yuan to 600 billion yuan.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That’s about</strong> 2 percent to 3 percent of corporate profits overall, or 5 percent to 7 percent for manufacturers.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Meanwhile,</strong> their profits shrank between 8 percent and 14 percent every month last year.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So even as the tax cut</strong> lifts profitability, it isn’t enough to restart the capital-expenditure and investing cycle.’</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>III. CONGRESS &amp; THE PRESIDENT REACT<br></strong></div><div id="article6" class="post-card"><div class="t2-block">6. With Streaks of Gray Hair, Xi Jinping of China Breaks With Tradition</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar2306" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://static01.nyt.com/images/2019/03/07/world/07china-gray2/merlin_151727646_626990b6-efc8-4d81-932e-4880255d8d91-jumbo.jpg?quality=90&amp;auto=webp" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table><p class="caption" style="font-size: .8125em;line-height: 1.75em;margin: .625em 0;display: block;color: #848484;margin-top: .5em;margin-bottom: 1.2500em;font-family: 'Lato',sans-serif;"></p></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Chinese leaders</strong> have long sported unnaturally black heads of hair. Mr. Xi is going gray as he builds his image as a man of the people,' reports the <a href="https://www.nytimes.com/2019/03/07/world/asia/china-xi-jinping-gray-hair.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">New York Times</a>.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>At the NPC,</strong> 'Xi Jinping’s ‘latest attempt to shake things up may be one of his boldest moves yet: Mr. Xi is going slightly — though unabashedly — gray, in defiance of longstanding Communist Party tradition.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'For decades,</strong> Chinese leaders have sported unnaturally black heads of hair, a look that symbolized unity and gave the party a youthful veneer.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But Mr. Xi,</strong> 65, appears to be dispensing with vanity as he presents himself as a relatable and avuncular leader, part of his efforts to soften his hard-line policies.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'As Mr. Xi</strong> takes part in the annual meeting of China’s legislature this week, the silver streaks in his hair have been a hit with delegates and the public.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Mr. Xi</strong> has a history of making sartorial choices that underscore his image as a man of the people. He is often pictured in China wearing a navy blue, zippered windbreaker, a symbol of humility as he leads a campaign against corruption.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'His salt-and-pepper hair</strong> further reinforces that image, as well as Mr. Xi’s desire to be seen as a paternal figure and live up to the nickname by which he is popularly known, “Uncle Xi,” experts say.'</li></ul></td></tr></tbody></table></p></div></div><div id="article7" class="post-card"><div class="t2-block">7. Another insight from 'The Relevant Organs'</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar2307" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><iframe id="twitter-widget-0" scrolling="no" frameborder="0" allowtransparency="true" allowfullscreen="true" class="twitter-tweet twitter-tweet-rendered" style="position: static;visibility: visible;display: block;width: 500px;height: 714.781px;padding: 0px;border: none;max-width: 766px;min-width: 220px;margin-top: 10px;margin-bottom: 10px;margin: 0 auto;" data-tweet-id="1106294860544262144" title="Twitter Tweet"></iframe><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></td></tr></tbody></table></td></tr></tbody></table></p></div></div></div>

<div id="NLpost" class="nl-post-wrapper" style="margin:0 auto;"><div id="NLHeader" class="post-card"><div id="Page-header" class="mainheader"><h1 class="t1">'Two Sessions' II</h1><div class="date">March 13, 2019</div><a href="https://www.linkedin.com/in/malcolmriddell/" target="_blank" class="date" style="color: inherit;border-bottom: 0px solid #008dc8;text-decoration: none;">by Malcolm Riddell</a></div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘Over the past few months, the central bank stopped calling its monetary policy "prudent and neutral."Now it's just calling it "prudent."’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">‘Markets have been, and still are, desperate to paint the change as proof of imminent monetary loosening. But on Sunday, Yi Gang was clear that the monetary stance has not changed: ‘"The meaning of prudent monetary policy has not changed."’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><em>(This from the ‘trivium china’ daily Tip Sheet, published by ‘trivium china’ consultancy. You should <a href="https://triviumchina.com/trivium-daily-newsletter/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">subscribe to the Tip Sheet</a> – terrific and free.)</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">Yi Gang may be clear in his mind. But, his colleagues are sending out signals. And the NPC has only contributed to the confusion.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">So, be cautious in taking any NPC official or sideline statements as the final word.</p></td></tr></p></div></div><div class="section_title w-condition-invisible"><strong>I. THE LAW AND THE PROTESTS</strong></div><div id="article1" class="post-card"><div class="t2-block">1. China's increased State role is reason for slowing economy, Lardy Says</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar1301" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe width="720" height="405" src="https://www.youtube.com/embed/y9leE5WX9Yg" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘The major reason</strong> China's economy has slowed down by several percentage points is the increased role of the state over the last five six years,' argues Nick Lardy of the Peterson Institute in the <a href="https://youtu.be/y9leE5WX9Yg" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">5m interview</a>, above.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China now has</strong> 'a very state-directed economy that has moved away from the market orientation that was characteristic of earlier years,’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Xi Jinping </strong>says that the Party must be in control of everything everywhere all the time.’</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, we've seen a resurgence</strong> of the role of the Party particularly in the economy.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>At the NPC,</strong> 'we're seeing a little bit of a pullback from the emphasis on the State; a recognition that the private sector is important'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But that's a direction</strong> they've been moving in for several months, so it's not a revolutionary change.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If they don't go back</strong> to market-oriented reform, China could slow down even more.’</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China should allow</strong> the market to have a greater role to have a more efficient allocation of capital.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They should have real bankruptcy </strong>for firms, which the Chinese even admit are "zombie firms" that lose money continuously.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘They need more merger and acquisition</strong> activities so that more efficient firms can take over the assets of inefficient firms.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘If China went back</strong> to market-oriented reform, they could be growing at 8% or even more.'</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The rub.</strong> After 35 years of market-oriented reform, the Party had lost a good deal of its control - not just of the economy but of the people.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Xi Jinping</strong> was put in charge, not to maximize GDP, but to reassert Party control - and to eliminate threats to the survival of the Party.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>As distasteful </strong>as many of his actions are to some (read, me), he's doing a pretty good job of achieving those goals.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>And, it's only cost him</strong> a few percentage points of GDP.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><em>(for links to Nick's long video presentation and a podcast, please go to the last post)</em></p></td></tr></tbody></table></p></div></div><div id="article2" class="post-card"><div class="t2-block">2. Addressing the crisis of confidence - what Premier Li said and didn't say</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar1302" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" poster="https://listly-temp.s3.amazonaws.com/958168_Addressing%20the%20crisis%20of%20confidence.png" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe width="720" height="405" src="https://www.youtube.com/embed/l0HkLhSHhaQ" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen poster="https://listly-temp.s3.amazonaws.com/958168_Addressing%20the%20crisis%20of%20confidence.png"></iframe></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘China is going through a transition period</strong> from an investment-driven economy to a consumption-driven economy, says Yichen Zhang, Chairman &amp; CEO of CITIC Capital and Chinese People's Political Consultative Conference (CPPC) member, during his<a href="https://youtu.be/l0HkLhSHhaQ" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;"> 5m interview</a>, above.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘During this period companies </strong>need to find ways to upgrade themselves.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘So, there is a general confidence </strong>issue simply because things are not so easy anymore.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘People are so used to </strong>building up new capacity and producing more and then serving an ever-expanding market.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Now, they have to adjust </strong>and learn a way to upgrade their products and focus more on serving a more discerning consumer market.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Three factors </strong>that contributed decreasing business confidence last year were addressed or alluded to in Premier Li’s Work Report to the NPC.’</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘First and foremost </strong>was deleveraging.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘That happened </strong>all at the same time across many different financial markets.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘It was not as coordinated </strong>as the government would have liked.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This was reflected </strong>in the Premier Li’s Work Report – he did not want to highlight that, but he clearly indicated the government could have done this better.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Second, </strong>there were doubts about the role of the private owned enterprises, the POEs.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Premier Li, </strong>in his Work Report, was trying to reassure entrepreneurs that they're very much needed and encouraged to build their business.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Third, </strong>the U.S.-China trade war.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘This had a major psychological impact </strong>on the market.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘But, obviously, </strong>I don't think they want to openly comment on that during in the government Work Report.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>‘Still, </strong>the good progress made so far in trade negotiations will remove a lot of overhang.’</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'With those three factors </strong>addressed, I think this year will be fairly steady.'</p></td></tr></tbody></table></p></div></div><div id="article3" class="post-card"><div class="t2-block">3. Is China looking for 'good' shadow banks?</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar1303" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe width="720" height="405" src="https://www.youtube.com/embed/sl_CtoeEHLI" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>If you watch </strong>a lot of coverage of the financial sector at the NPC, you will be surprised - not unexpectedly - that only a partial picture emerges.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Not to say that what Yi Gang, </strong>Governor of the PBOC, and the others cover in, for example, the <a href="https://youtu.be/sl_CtoeEHLI" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">90m+ news conference </a>, above, isn't important, just incomplete.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>For reference, here's </strong>the <a href="http://www.cbrc.gov.cn/chinese/newShouDoc/89B2A3BB26D04333B0E15CA652C3B6DE.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">statement </a>by China Banking and Insurance Regulatory Commission (CBIRC)'s statement in Chinese.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>One thing of note </strong>, Governor Yi announced that the structural deleveraging campaigned had achieved its goals.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China’s macro-leverage ratio </strong>, or the ratio of its total debt to its gross domestic product, has stabilized since last year, reversing the trend of previous years in which the ratio rose by an average of more than 10 percentage points,' reports <a href="https://www.caixinglobal.com/2019-02-25/china-has-achieved-goals-of-deleveraging-campaign-financial-watchdog-says-101383677.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Caixin.</a></li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But, is this </strong>a case of, as a <a href="https://www.wsj.com/articles/chinese-deleveraging-is-dead-long-live-chinese-deleveraging-11551171159" target="_blank" "="" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">WSJ </a>headline noted, 'Chinese Deleveraging is Dead, Long Live Chinese Deleveraging!'?</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Investors </strong>would be forgiven for being confused by the messages coming from the Chinese government this week. Don’t worry, the authorities are probably a little confused too.'</p></li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>No more so than </strong>the current attitude toward shadow banking.</p></li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The government </strong>has cracked down on shadow banking, putting the small businesses that depend on it in a bind.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>And, since banks </strong>couldn't be strong-armed into filling the gap, maybe shadow banking isn't looking so bad.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>"Regulators are trying to distinguish </strong>between good and bad shadow banking operations, and would tighten oversight of "unhealthy shadow banks" whose lending "doesn’t enter the real economy but only results in adding leverage,"' Wang Zhaoxing, vice-chairman of the China Banking and Insurance Regulatory Commission told the <a href="https://www.scmp.com/economy/china-economy/article/2189394/china-mulls-reprieve-some-shadow-bankers-stop-fall-growth" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">South China Morning Post</a> on the sidelines of the NPC.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'We need to have </strong>an accurate understanding of shadow banking.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'For those </strong>[institutions] whose financing benefits the real economy and which have good internal risk controls, we may continue to allow them to exist and support them.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>This seems </strong>to have been under consideration for a while - with the same confusion. 'Ambivalence toward the nascent shadow banking rebound [in January] is also obvious' wrote the WSJ's Nathaniel Taplin in <a href="https://www.wsj.com/articles/beijing-risks-choking-recovery-before-it-begins-11551343123?mod=article_inline" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'Beijing Risks Choking Recovery Before It Begins: Are banks and shadow banks free to lend again? Don’t ask Beijing.'</a></p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'A statement</strong> on the topic by China’s bank regulator called for promoting financial intermediation by businesses who “operate cautiously in accordance with regulations.”'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The same statement, </strong>however, resolved to go on “blocking the side door and opening the front door,” official-lese for forcing lending back on bank balance sheets.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>"The regulator </strong>also said “structural deleveraging has hit its expected target.”'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'But the day after,</strong> a central bank representative called for “pushing forward structural deleveraging.”'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>All by way of saying, </strong>we can't tell whether China has decided to deleverage more - or, more likely, to releverage.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But, if if the credit </strong>begins to flow, keep an eye open for those "good" shadow banks, and, of course, the changing definition of good - it will get broader if the private sector gets in more trouble.</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>II. POTENTIAL BACKLASH FROM THE U.S.<br></strong></div><div id="article4" class="post-card"><div class="t2-block">4. PODCAST (12m 22s) | Analysing China’s Two Sessions and the influence of tech company chiefs</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar1304" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><iframe src="https://open.spotify.com/embed?uri=spotify%3Ashow%3A14IT7c4rHC1M7ithU1jVD7" width="100%" height="78px" frameborder="0" allowtransparency="true" allow="encrypted-media" style="background-image: linear-gradient(to right bottom, rgb(128, 7, 16), rgb(0, 0, 0)), linear-gradient(transparent, rgb(0, 0, 0) 50%); height:120px; padding:20px;"></iframe></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong><a href="https://open.spotify.com/show/14IT7c4rHC1M7ithU1jVD7" target="_blank" rel="nofollow noopener" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">In this podcast</a>,</strong> South China Morning Post's Zen Soo and Shenzhen-based tech reporter Celia Chen talk about China's largest annual political meetings, the Two Sessions.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>They delve </strong>into the tech founders who are present this year (and the one notable absentee), and discuss the technology proposals submitted by these technology heavyweights.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>They also share </strong>tips on how to get called on to ask questions to delegates and representatives at the meetings.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>And, they take a look </strong>into Made in China 2025 - and the conspicuous absence of the term in this year's government work report (spoiler: <em>wear red</em>).</p></td></tr></tbody></table></p></div></div><div id="article5" class="post-card"><div class="t2-block">5. Explaining the seating plan at China's Two Sessions</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar1305" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe width="720" height="405" src="https://www.youtube.com/embed/F8zqXWvP1DA" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Never gave a thought</strong> to how deputies to the Two Sessions are seated.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But this</strong><a href="https://youtu.be/F8zqXWvP1DA" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">1m 13s CGTN video</a> is pretty interesting.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">Here's the transcript:</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The approximately 3,000 deputies</strong> to the National People's Congress - the country's top legislature - occupy seats inside the Great Hall of the People.'</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'So where</strong> does everyone sit':</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'In the front row</strong> sit the executive chairs of the Presidium, who are also the main moderators for all the meetings of the Two Sessions.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'In the auditorium,</strong> all the 35 delegations rotate their seats each year allowing them the chance to sit in the middle of the venue.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Within the delegation,</strong> deputies rotate from back to front each year, so that everyone gets to sit in the front of the meeting.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'No matter where</strong> a deputy sits his or her vote counts equally.'</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Of course.</strong></p></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>III. CONGRESS &amp; THE PRESIDENT REACT<br></strong></div><div id="article6" class="post-card"><div class="t2-block">6. IN DEPTH | More Nick Lardy on 'The State Strikes Back: The End of Economic Reform in China?'</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar1306" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe width="720" height="405" src="https://www.youtube.com/embed/PR2-q7d1jn8" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Want to learn</strong> more about Nick Lardy's views?</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Watch</strong> this 1h 10m video presentation.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Lardy, the finest analyst of China’s economy outside China,</strong> believes that China’s future could be equally bright as its recent past but that policy choices by China’s leadership are preventing that continued success, and contributing instead to the current downturn,' says the Peterson Institute.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Or, </strong><a href="https://piie.com/experts/peterson-perspectives/trade-talks-episode-70-nicholas-lardy-chinese-economy" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;"><strong>listen</strong></a> to PIIE's 'Trade Talks,' with a 30m podcast, 'Nicholas Lardy on the Chinese Economy.'</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>And,</strong> get his book, <em><a href="https://piie.com/bookstore/state-strikes-back-end-economic-reform-china" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">The State Strikes Back: The End of Economic Reform in China?<br></a></em></p></td></tr></tbody></table></p></div></div></div>

<div id="NLpost" class="nl-post-wrapper" style="margin:0 auto;"><div id="NLHeader" class="post-card"><div id="Page-header" class="mainheader"><h1 class="t1">'Two Sessions' I</h1><div class="date" style="margin-bottom:10px;">March 9, 2019</div><a href="https://www.linkedin.com/in/malcolmriddell/" target="_blank" class="date" style="color: inherit;border-bottom: 0px solid #008dc8;text-decoration: none;">by Malcolm Riddell</a></div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">The National People’s Congress is underway. And, it sure feels different from last year.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">Last year, you could feel the confidence in China’s economy and in Xi Jinping.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">This year, not so much. Trump's shadow is creeping into some of the policy statements. And, since the last NPC, Xi Jinping's authority has maybe frayed a bit around the edges.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">There are already some pretty good analyses that are worth a look. You'll find my picks here. With more to come as the Two Sessions roll on.</p></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>I. THE LAW AND THE PROTESTS</strong></div><div id="article1" class="post-card"><div class="t2-block">1. Facing Slowing Economic Growth, China’s Premier Promises Relief for Business</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar0901" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://static01.nyt.com/images/2019/03/05/world/05chinapremier1/merlin_151623498_53c84756-7785-4de9-80d4-87086697e360-jumbo.jpg?quality=90&amp;auto=webp" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">The annual report by Li Keqiang, the No. 2 leader, laid out promises to reduce burdens on the private sector and warned about “struggle” ahead. NYT</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China’s premier</strong> said on Tuesday that his government would respond to an economic slowdown by cutting taxes, easing burdens on the private sector and giving markets a bigger role — diluting the heavily pro-state pronouncements and policies that critics have warned were scaring investors,' <a href="https://www.nytimes.com/2019/03/04/business/china-premier-li-keqiang-speech.html" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">reports NYT's Keith Bradsher and Chris Buckley</a>.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Calling 2019 a “crucial year”</strong> for China’s economy, Premier Li Keqiang, the second-ranking official in China after President Xi Jinping, laid out measures long supported by private businesses.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Mr. Li’s annual report</strong> to the national legislature revived rhetoric about market solutions after the government faced growing criticism for favoring government initiatives and state-owned companies, squeezing out private enterprise.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'“We will keep using market-oriented</strong> reforming thinking,” Mr. Li said in his report. “The government must act with resolve to hand matters it shouldn’t manage over to the market.”'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>“We will face a graver and more complicated environment</strong>, as well as risks and challenges,” Mr. Li said. “We must be fully prepared for a tough struggle.”'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Mr. Li set an ambitious target</strong> for economic growth this year of 6 to 6.5 percent.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The three main choices</strong> for maintaining high growth have been to further ramp up spending on roads, bridges, rail lines and other infrastructure; to print more money and force banks to lend more; or to cut taxes and deregulate.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The government</strong> has been slow to cut taxes or deregulate, preferring to maintain its revenues and control. But many tycoons want lower taxes.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Overall, '“This was not a leadership</strong> that appeared strong and decisive with a clear vision,” says Elizabeth C. Economy of the Council on Foreign Relations.</p><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/2sS6I49z9dY"></iframe></td></tr></tbody></table></td></tr></tbody></table></p></div></div><div id="article2" class="post-card"><div class="t2-block">2. Six key takeaways from China's annual policy blueprint</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar0902" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://cdn1.i-scmp.com/sites/default/files/styles/1200x800/public/images/methode/2019/03/05/bcc0fab6-3f06-11e9-b20a-0cdc8de4a6f4_image_hires_171741.jpg?itok=XZXXB12M" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Chinese Premier Li Keqiang</strong> delivered his 2019 government work report on Tuesday morning to the National People’s Congress in Beijing, but what does it mean?' asks the South China Morning Post]</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Here are my favorite three - 1 ,2, &amp; 5</strong> from SCMP's <a href="https://www.scmp.com/economy/china-economy/article/2188667/six-key-takeaways-china-premier-li-keqiangs-annual-policy" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'Six key takeaways from China's annual policy blueprint'</a>:</p><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>'1. Uncertain outlook'</h2><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The government</strong> is foreseeing “graver and more complex” risks and challenges of a “both predictable and unpredictable” nature, and China must be “prepared to fight tough battles” this year.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'As such,</strong> the government has set the economic growth target in a range of 6.0 to 6.5 per cent, which offers Beijing the necessary leeway to cope with those uncertainties.'</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>2. Tax cut</h2><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The government announced</strong> a 3 percentage points cut in value-added tax rate (VAT) for manufacturers to 13 per cent, a significant tax cut.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The VAT tax cut</strong> is part of a broader efforts by Beijing to help its domestic businesses, especially the manufacturing sector, that is vital for employment and social stability.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>In </strong><a href="https://www.bloomberg.com/opinion/articles/2019-03-05/npc-china-s-vat-tax-cut-won-t-help-manufacturing-sector" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'China’s Tax Cuts Just Won’t Cut It: <strong>The manufacturing sector needs something better</strong>,'</a>Bloomberg's Anjani Trivedi points out:</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Generous as that is</strong>, the tax cuts don’t solve the single biggest problem crimping China’s companies: longer working capital cycles.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'An ongoing liquidity squeeze</strong> continues to deprive private and, increasingly, state-backed companies of credit, which is affecting their everyday operations and ability to service debt.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Capital structures have weakened</strong>; short-term borrowings are becoming a larger part of firms’ total debt; receivables are ballooning, as are the number of days inventories are held.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Large swathes</strong> of the manufacturing sector are paralyzed.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The manufacturing sector</strong>, mired in a crisis of confidence, needs more than this tax cut.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'These companies</strong> — mostly private — have long borne a disproportionate burden of taxes, contributing a third of the government’s revenue.'</li></ul><hr style="border: 0;border-top: 3px solid #f5f5f5;height: 5px;margin: 10px auto;text-align: center;"><h2>5. No ‘Made in China 2025’</h2><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The phrase “Made in China 2025”</strong>, a Beijing strategy that invites suspicion from the US and Europe, did not appear in the 2019 government work report, but Beijing’s ambitions for upgrading its manufacturing industry remains.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>According to</strong><a href="https://www.wsj.com/articles/china-drops-a-policy-the-u-s-dislikes-at-least-in-name-11551795370" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">'Beijing Drops Contentious'Made in China 2025' Slogan, but Policy Remains,'</a> WSJ:</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'“Made in China 2025,”</strong> a government-led industrial program at the center of the contentious U.S.-China trade dispute, is officially gone—but in name only.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'During a nearly 100-minute speech</strong>to China’s legislature Tuesday, Premier Li Keqiang dropped any reference to the plan that the Trump administration has criticized as a subsidy-stuffed program to make China a global technology leader at the expense of the U.S. The policy had been a highlight of Mr. Li’s State-of-the-Nation-like address for three years running.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Instead, Mr. Li said</strong> the government would promote advanced manufacturing. He ticked off a list of emerging industries to nurture—next-generation information technology, high-end equipment, biomedicine and new-energy automobiles—that were also in “Made in China 2025” and with a similar goal: “Buy China.”'</li></ul></td></tr></tbody></table></p></div></div><div id="article3" class="post-card"><div class="t2-block">3. China’s Stimulus Muddle Deepens</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar0903" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://images.wsj.net/im-57752?width=1260&amp;aspect_ratio=1.5" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">Beijing is going to find it increasingly difficult to achieve its twin aims of cutting debt while keeping growth on track.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Li Keqiang, China’s premier</strong>, has a few ideas for 2019: keep overall debt growth in check, cut taxes, accelerate government bond issuance, and boost lending to small businesses,' reports <a href="https://www.wsj.com/articles/chinas-stimulus-muddle-deepens-11551782225" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Nathaniel Taplin in the WSJ</a>.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'If that sounds like</strong> a lot to ask—and contradictory—it is.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Some of these goals</strong> will fall by the wayside.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Getting banks</strong> to lend more to small businesses without overall credit growth accelerating will be near impossible.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'And significantly higher government debt</strong> sales will require more banking system liquidity to keep rates from rising and further damaging growth.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'That means</strong> more monetary easing: probably not a 2015-like flood, but definitely a rising tide.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'In short</strong>, Beijing is still holding on to contradictory goals: boosting growth and formal government debt issuance while keeping overall indebtedness in check.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The result</strong> is likely to be a relatively weak stimulus by past standards—although still enough to boost overall leverage—and a weak recovery, at best, some time in the second half.'</li></ul></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>II. POTENTIAL BACKLASH FROM THE U.S.<br></strong></div><div id="article4" class="post-card"><div class="t2-block">4. China’s ‘two sessions’: an economic watershed or more of the same?</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar0904" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://cdn1.i-scmp.com/sites/default/files/styles/1200x800/public/images/methode/2019/03/05/e27a7ef4-3e56-11e9-b20a-0cdc8de4a6f4_image_hires_102813.jpg?itok=Zo9SO-6Y" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'History may record</strong> that this year was a watershed for China, when Chinese leaders started taking the steps to change course and remove the structural obstacles to the country’s further development to become the world’s largest economy,' said the <a href="https://www.scmp.com/economy/china-economy/article/2188570/chinas-two-sessions-economic-watershed-or-just-more-same" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">South China Morning Post</a>.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Or it may show leaders</strong> stayed their course, with the Chinese economy continuing to muddle along, trapped by its unwillingness to set its “animal spirits” free.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The meetings of the “two sessions”</strong> – the National People’s Congress (NPC), the country’s parliament where major policies are ratified, and the Chinese People’s Political Consultative Conference, the government’s top political advisory group – could give strong evidence over the next two weeks of the direction China’s leaders will choose.'</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'How far China is willing to go</strong> to enact the structural changes to its system that are necessary to level the playing field for private firms, both domestic and foreign, remains in question.'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'“Xi, despite being a strong figure</strong>, does not seem to have the political will or capacity to tackle these economic issues head-on,” said Lynette Ong, University of Toronto.' -' “His power base comes from the red aristocrats (princelings) who have major stakes in the SOEs and protected sectors.”'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But, Xi's political will</strong> may be stiffened thanks to President Trump's pressure.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Xi has to figure out</strong> the minimum he has to do to placate U.S. demands.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Then, he has to figure out</strong> how to actually implement changes that the U.S. may closely monitor.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Failing at that,</strong> he's back under threat.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>So, as Xi weighs special interests</strong> against U.S. actions, he could take on those interests.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>The problem for Xi,</strong> and for Chinese leaders for centuries, is getting his orders followed.</li></ul></td></tr></tbody></table></p></div></div><div id="article5" class="post-card"><div class="t2-block">5. Xi Jinping Works to Stifle Dissent Amid Concerns About China’s Economy</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar0905" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="https://images.wsj.net/im-57241?width=1260&amp;aspect_ratio=1.5" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">President Xi Jinping, battling a persistent downturn in China’s economy, is trying to gird his rule by demanding absolute loyalty from the Communist Party in an effort to stifle simmering dissent. WSJ</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'While Mr. Xi remains undisputedly in charge</strong>, party watchers say his maneuvers point to disquiet within the government and political elite' says the <a href="https://www.wsj.com/articles/xi-jinping-works-to-stifle-dissent-amid-concerns-about-chinas-economy-11551609000" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">WSJ</a>.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Critics say</strong> the president’s policies have failed to shore up the slowing economy, unnecessarily aggravated tensions with the U.S. and alienated many other foreign governments.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Meanwhile, they say</strong>, his insistence on control and threats to punish wayward officials are creating a policy muddle on the economy and sowing confusion in the bureaucracy.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'“Xi does feel a sense of crisis”</strong> as he grapples with China’s economic woes and bureaucratic resistance within the party, says Deng Yuwen, a former deputy editor of the Study Times, a newspaper published by Beijing’s elite Central Party School. “From Xi’s perspective, he believes his policies are correct but the problem is they aren’t being implemented properly.”'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'A test of Mr. Xi’s authority</strong> will unfold over the next two weeks, when roughly 3,000 lawmakers gather in Beijing to review the government’s economic blueprint for a year full of politically challenging anniversaries.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'The atmosphere is a measure</strong> of how Mr. Xi’s aura of dominance, if not his power, has receded over the past year.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Last spring</strong>, he appeared unassailable as China’s leader, having emerged from a party conclave with unrivaled authority and cleared a path toward lifetime rule by scrapping term limits on his presidency.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Concerns that he had concentrated too much power</strong>, fueled by fulsome state-media praise for his leadership, soon stirred criticism, exacerbated by slowing growth and trade tensions with the U.S.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Who are Xi Jinping’s Enemies?'</strong>. Willy Wo-Lap Lam goes into more detail in the Jamestown Foundation's <a href="https://jamestown.org/program/who-are-xi-jinpings-enemies/" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">China Brief</a>:</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'While Xi’s status</strong> as “core of the party,” the highest commander, and “pathfinder for the people” does not seem to have been seriously challenged by the multi-pronged attacks launched by US President Donald Trump, there is little doubt that his enemies in the party and government have multiplied.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'So who</strong> are Xi’s political foes?'</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Foremost among them</strong> are cadres and even ordinary folks who are the beneficiaries of Deng’s visionary policy, represented by Xi’s fellow princelings who are the offspring of party elders closely tied to Deng Xiaoping’s reforms.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Xi is also facing opposition</strong> from regional administrators who fear the trade war’s potential to exacerbate unemployment.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Serious employment problems</strong> could translate into street protests, which would adversely affect local-level cadres’ chances for promotion.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Some analysts believe</strong> that Xi’s unpopularity among regional officials could be one reason why he has decided not to convene the Fourth Plenum of the Central Committee this year.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Some the nation’s most prominent intellectuals</strong> are also chafing under Xi’s ironclad control over their freedom of expression.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Xi’s popularity among China’s burgeoning middle class</strong>—estimated to be around 400 million people—could also be put at risk by a rising tide of economic warning signs, including declining government investment, feeble consumer spending, and mounting debt among local governments.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>If Willy is right</strong>, then Xi needs more than a show of strength at the NPC.</p></td></tr></tbody></table></p></div></div><div class="section_title w-condition-invisible"><strong>III. CONGRESS &amp; THE PRESIDENT REACT<br></strong></div><div id="article6" class="post-card"><div class="t2-block">6. FINTECH: Two Sessions Sends Strong Signals on Support for Chinese Fintech Development</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar0906" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="bg-holder" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;max-width: 100%;margin: 0 auto;padding: 0;"><img src="http://www.chinabankingnews.com/wp-content/uploads/2019/03/National-Peoples-Congress.jpg" alt="CHINADebate" style="width: 100%;margin: 0 auto;"></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Delegates to the National People’s Congress (NPC)</strong> and the Chinese People’s Political Consultative Conference (CPPCC) have submitted a slew of opinions and recommendations for China’s fintech sector, reports the <a href="http://www.chinabankingnews.com/2019/03/06/two-sessions-sends-strong-signals-on-support-for-chinese-fintech-development/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">China Banking News</a>.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Pony Ma</strong> (马化腾), NPC delegate and chair and CEO of internet giant Tencent, has submitted seven written proposals at the Two Sessions this year, touching upon multiple areas including the Industrial Internet, the Greater Bay Area, basic scientific research and environmental protection.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Zhang Jin</strong> (张劲), CPPCC and chair of Cedar Holdings, called for the establishment of a shared service platform for supply chain financing that makes use of technologies including big data and the blockchain, and is connected to key participants including financial institutions, core enterprises, small and medium-sized enterprises and third party logistics providers.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Liu Shangxi</strong> (刘尚希), CPPCC representative and head of the Chinese Academy of Fiscal Sciences, also pointed to the ability of fintech to resolve the financing challenges of small and medium-sized enterprises.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China already leads in fintech</strong> - mobile payments, online lending, consumer finance, online money-market funds, online insurance, personal financial management, and online brokerage.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Take payments.</strong> According to <a href="https://piie.com/blogs/china-economic-watch/how-china-leapfrogged-ahead-united-states-fintech-race" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Peterson Institute's Martin Chorzempa</a>:</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'When American Internet companies</strong> began to take off in the 1990s, credit cards were ubiquitous and joined into international networks. American ecommerce sites simply needed to accept credit cards to handle payments from anywhere in the country and even abroad.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But, because of 'the backward state</strong> of China’s payment infrastructure in the early 2000s, when Internet companies were beginning to expand,' ecommerce firms were forced to develop their own payment tools to build nationwide businesses.</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Tencent</strong> (China’s largest social and gaming company) and Alibaba (its largest ecommerce company) built their own payment systems.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>In effect,</strong> the country has leapfrogged from cash to mobile payments, bypassing the payment cards system,' says <a href="https://www.brookings.edu/blog/order-from-chaos/2018/02/08/whats-happening-with-chinas-fintech-industry/" target="_blank" style="color: inherit;border-bottom: 1px solid #008dc8;text-decoration: none;">Brookings' David Dollar</a>.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'Behind China’s fintech miracle</strong> lies the country’s unique technology ecosystem: a tech-savvy population, an underdeveloped banking industry, and an initially relaxed regulatory environment.'</li><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>'China’s remarkably unsophisticated banks</strong> stand in marked contrast to its well-developed technological infrastructure and soaring demand for financial services.'</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>China's government</strong> is paying more and more attention to fintech and its regulation (think peer-to-peer lending). So expect these proposals to get both attention and maybe pushback.</p></td></tr></tbody></table></p></div></div><div id="article7" class="post-card"><div class="t2-block">7. How tea is served in the Great Hall of the People in China</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar0907" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/_NsLjWwMcV0"></iframe></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><em>Great South China Morning Post video (60s).</em></p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">Here's the transcript:</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Soon after Xi Jinping</strong> became China's top leader in 2012 he made significant changes not only to China's governance but also how tea is served in the Great Hall of the People.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Xi's predecessors</strong> used to be served by female attendants only.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>But since Xi</strong> took the helm state leaders in the first two rows are served by men.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>Xi is also the only leader</strong> whose cup is not refilled but replaced.</p><ul style="margin-bottom: 0;margin-top: .625em;"><li style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>An attendant</strong> will bring an extra cup for Xi, take away his old cup and put the new one on his table.</li></ul><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><strong>No one knows exactly why</strong> we don't know whether this arrangement is all about security concerns or simply a personal preference.</p></td></tr></tbody></table></p></div></div><div id="article8" class="post-card"><div class="t2-block">8. 'Two Sessions': A rap song extolling China's annual political meeting</div><div class="table-block w-richtext" data-ix="appear-on-load" style="opacity: 1; transition: opacity 1000ms ease 0s;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;"><table class="nl_card" id="19mar0908" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><table class="multi-block" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><tbody><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="embed-responsive embed-responsive-16by9" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;position: relative;display: block;height: 100%;padding: 0;overflow: hidden;"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/a5rvO5e-rik"></iframe></td></tr></tbody></table></td></tr><tr style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;"><td class="nl-post" style="border-collapse: collapse;width: 100%;color: #001544;letter-spacing: 0px;padding: 0 2.5em;overflow: hidden;"><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">State-sponsored propaganda at its best.</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">Here's the refrain:</p><p style="font-size: 1em;line-height: 1.875em;margin: .625em 0;">We’ve got “two sessions,” w-we’ve got “two sessions.”<br>For the fragrance we’re blessing,<br>to the world we show our affection.<br>See we’ve got “two sessions”<br>let me show you Chinese manners.<br>Tramp the bygone cession we’re the fortitude presence.</p></td></tr></tbody></table></p></div></div></div>