Asian shares rose to a six-month high on Wednesday while the dollar steadied as investors were buoyed by China’s reopening and optimistic towards U.S. inflation data.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose as much as 0.82 percent to touch six-month high of 538.56, while Japan’s Nikkei gained 1 percent.
Hong Kong’s Hang Seng index gained 1 percent, lifted by hopes of a strong economic rebound from the COVID-19 pandemic and discounted values of stocks.
“Despite a solid start to the year, there should be a lot more upside to China’s stocks, with earnings upgrades to drive further outperformance,” said SPI Asset Management’s Stephen Innes.
“Although we are not pitching a tent in that camp just yet, many investors are starting to believe China’s reopening could be faster than expected on pent-up demand, a robust economic rebound and fewer supply constraints.”
Investor attention will be put on the U.S. consumer price index, scheduled to be released on Thursday. The data will be crucial in determining what the Fed is likely to do with interest rates in its next meeting at the start of February.
(Source: CGTN with input from AFP, Reuters)
]]>The unsolid fundamentals for economic recovery, “triple pressure” of shrinking demand, supply shocks and weakening expectations, and a turbulent external environment demand efforts to step up maneuvers for macro fiscal policies and optimize the policy toolbox, according to Liu.
He specified that expanding fiscal policies includes efforts to coordinate the fiscal revenue, deficit, and interest subsidies and appropriately increase fiscal spending.
Data shows that China’s educational expenditure totaled 33 trillion yuan (about $4.75 trillion) from 2012 to 2021. During the same period, general-public budget health and housing expenditure stood at 13.6 trillion yuan and 6 trillion yuan, respectively.
“The fiscal balance issue is still outstanding in 2023, but we will not roll back on spending on people’s wellbeing,” Liu said.
He also noted the need to budget the scale of special-purpose bonds issued by local governments.
Efforts will also be made to channel fiscal funds to primary-level governments and tilt support toward challenging and underdeveloped regions.
In terms of improving the effectiveness of fiscal policies, Liu stressed the importance of perfecting the tax and fee policies and boosting their accuracy to help enterprises overcome difficulties.
China has carried out a wide array of tax and fee cuts over the years, which has effectively bolstered market expectations, especially in 2022 when the country implemented large-scale value-added tax credit refunds, Liu said.
Tax and fee cuts, as well as refunds and deferrals combined, topped 4 trillion yuan in 2022, which helped enterprises to keep their business afloat, he added.
He also highlighted the efforts to optimize fiscal spending structure and strengthen the synergy between monetary, industrial, technological, and social policies to prompt an overall economic upturn.
In response to a question regarding risks, Liu said China’s government debt-to-GDP ratio is far below the internationally recognized alert level of 60 percent and that of major market-oriented and emerging economies. The risks are generally manageable, Liu noted.
Source: Xinhua News Agency
]]>Some experts say that China’s determination to open up further to the outside world remains unwavering, which provides opportunities for the rest of the world. “China’s successful experience has benefitted not only China but also the whole world. We are glad to see that China, as the second largest economy in the world, is taking a leading role in promoting multilateralism as the international trading principle. China has been actively promoting international trade and further opening its domestic market, sharing the dividends of its economic growth with countries around the world”, said Wichai Kinchong Choi, senior vice president of Thai bank Kasikornbank. “With such a big economy of scale, China is playing its role and turning out to be a land of opportunities of the East. And it is duly sharing its part in global trade and the ways to remove global sluggish growth. We can see the importance and the significance of this big economy in the whole world.” said Badiea Shaukat, an economic consultant at Islamabad-based Sustainable Development Policy Institute.
(Source: Xinhua)
]]>Noting that Mwangi Wachira, an economist and ex-World Bank staffer, said during an interview recently that China stands on the right side of the history of economic globalization and will bring more confidence and opportunities to global economic recovery with its broad prospects of high-standard development, Zhao said openness is the only way for development and progress.
Amid the complex domestic and international situation, Zhao said China’s economy is making steady progress with its fundamentals of long-term improvement unchanged and has always been a positive energy for global prosperity and development.
China’s economy grew at an average annual rate of 6.6 percent over the past decade, contributing more than 30 percent on average to world economic growth, Zhao said.
In 2021, China’s GDP accounted for 18.5 percent of the world economy, and its trade in goods and services totaled $6.9 trillion, securing the world’s second-largest economy and the largest trading nation, said Zhao.
The spokesperson quoted the remarks from President Xi Jinping made at the 29th APEC Economic Leaders’ Meeting as saying that “history has proven time and again that only openness, inclusiveness and win-win cooperation is the right way forward for humanity.”
China has remained a firm advocate of an open global economy, Zhao said.
By advancing high-quality Belt and Road cooperation, proposing the Global Development Initiative and promoting its implementation, China expands economic ties with all countries and shares development opportunities to help implement the UN 2030 Agenda for Sustainable Development, he added.
(Source: CGTN)
]]>By Shen Jianguang
Note: Shen Jianguang is the chief economist of JD.com. The views expressed in the article are the author’s personal views.
China’s economy continued to maintain momentum, thanks to the ongoing industrial transformation and economic upgrade last year, despite geopolitical challenges and coronavirus flare-ups across the world. However, during the second half of last year there was a convergence of several economic challenges, which resulted in greater downward pressure on the economy. As a result, economic growth fell to 4.9 percent in the third quarter and 4 percent in the fourth quarter. But despite the blips, the resilient economic performance in 2021 is important as it sets the tone for the major economic and macroeconomic policies that are likely to play out in 2022.
China’s economic resilience
When we look back at 2021, the most striking aspects were the robustness of China’s industrial chain, rising foreign investment, technological innovation and digital economic development. So it goes without saying that these were the fundamentals on which the Chinese economy leaned on to withstand external shocks.
There was also a visible pick-up in China’s exports, albeit at a relatively higher level than anticipated. Industrial supply chains continued to gain strength, despite the pandemic flare-ups. But this may not be the case this year. There may be a slight tapering of the demand from overseas markets. That should not be a cause for concern as it helps in the supply-side recovery, while overall exports may see a gradual decline. However, considering the spread of the global pandemic and the unresolved transportation bottlenecks, it is expected that exports may still see double-digit growth rates.
Higher investment flows from abroad were another factor that lifted growth last year. As China further expands opening-up to the outside world, and the U.S. continues to ease monetary policies after the pandemic, the country’s attractiveness to foreign investors is only bound to gain further strength. Coupled with the scale advantage of the domestic market and the inherent advantages of the industrial chain, China will continue to be a beacon for foreign investment.
High-tech manufacturing, which saw solid growth last year, will see steady uptick this year. Last year, investment in high-tech manufacturing grew 16.7 percent, with sectors like computers, electronic equipment and other industries maintaining the uptrend. Strengthening the strategic orientation of technological innovation is expected to benefit high-tech investment in the long run. The policy emphasizes enhancing the core competitiveness of the manufacturing industry and guiding more capital to flow to high-tech-related industries.
Digital economy also saw considerable traction last year, largely due to the rising interest in technologies such as 5G, big data, artificial intelligence and blockchain. According to data provided by the Academy of Information and Communications Technology, China’s digital economy achieved a scale of $5.4 trillion in 2020, making it the second in the world after the United States. As digital technologies gain ground, industrial integration will be further deepened, and the economy will automatically move toward high-quality development.
Challenges facing the economy
By the second half of last year, due to the multiple shocks, there was a greater downward pressure on the Chinese economy. This year, it is imperative for the policymakers to address issues such as weak consumption recovery, high unemployment among the youth on the demand side, operating pressure for small and medium-sized enterprises on the supply side, as well as to manage the expected pressure due to the downturn in the real estate market.
The biggest challenge would, however, be to find ways to boost individual consumption, which has been largely weak. Slowdown in income growth, consumption pressure and high debt pressures have all contributed to this trend. Considering the recent epidemic spread in some areas, it may be difficult to improve the overall consumption levels in the next one or two months. More priority needs to be given for boosting domestic demand.
The second major factor is to address challenges due to the increased pressure on small and medium-sized enterprises and supply constraints. In 2021, the gap between the year-on-year change of producer price index (PPI) and consumer price index (CPI) was once as high as 12.9 percentage points. Due to this, the costs of middle and downstream enterprises have increased significantly, while profits have been largely in the upstream, even as production and operations continue to face pressure. Although with the implementation of the supply guarantee policy, PPI has peaked and dropped on a yearly basis, the scissor gap has gradually narrowed but will still maintain a high level for some time, unless the above-mentioned issues are addressed.
The real estate sector, which has long been a major pillar of the economy, is on a full decline, with limited expectations of a turnaround.Since the third quarter of last year, due to the tightened regulatory policies, the real estate market has cooled rapidly. At the same time, liquidity risks and debt defaults of real estate enterprises have triggered widespread concerns in the domestic and foreign markets. The weakness in the real estate sector is expected to have a spillover effect on enterprises and residents.
Youth unemployment is still high, while structural employment pressures are becoming more prominent. In December, the unemployment rate in the national urban survey was stable at 5.1 percent, but the unemployment rate in the population survey for those aged 16-24 stood at 14.3 percent, nearly three times the overall rate and the highest for the same period since 2018. The weakness in the internet, education and training industries seems to have had a major impact on employment levels. In addition, under the “double carbon” target, energy-intensive industries will be gradually phased out, leading to a considerable decline in the overall job levels. A cooling real estate sector will also affect the employed population, while the pandemic flare-ups may delay a full recovery of catering, accommodation and other contact services, leading to more job losses.
Leveraging macroeconomic policies
As a next step, to further pump-prime the economy, it is important to implement “economic construction as a central task.” Fiscal and monetary policies need to be further improved to boost policy coordination and reverse market expectations. On the one hand, while driving infrastructure investment, the government should shift its focus from the current supply side to the demand side, it should also place greater emphasis on transfer payments and consumption. There is also enough room for monetary policy tweaks. Internationally, the interest rate differentials between China and the United States are in a comfortable zone, and the RMB exchange rate remains strong. Domestically, inflation constraints have weakened. Considering the lag of some policies to stabilize growth and the fact that the U.S. Federal Reserve has not yet started to raise interest rates, it is necessary to use timely policy tools such as reducing the reserve requirement ratio and interest rates in tandem with fiscal easing.
(Source: CGTN)
State Councilor and Defense Minister General Wei Fenghe (center) attends the 9th ASEAN Defense Ministers’ Meeting Plus in Siem Reap, Cambodia, on Wednesday. The meeting brought together defense ministers from ASEAN and its dialogue partners.
State Councilor and Defense Minister General Wei Fenghe called on Wednesday for world solidarity and fairness instead of division and hegemony, as he told his counterparts from Southeast Asia and Asia-Pacific countries that world peace is facing major challenges.
Wei made the remarks in his speech at the 9th ASEAN Defense Ministers’ Meeting Plus held in Cambodia, which brought together defense ministers from ASEAN and its dialogue partners — Australia, China, India, Japan, New Zealand, the Republic of Korea, Russia and the United States.
In the face of major challenges to world peace and development, the right direction to take is to build a community with a shared future for mankind, which is also where the world’s future lies, Wei said.
He urged all countries to be united rather than divided, fair rather than hegemonistic, open rather than closed, and mutually beneficial rather than selfish, so as to jointly shape and maintain a regional order that balances the concerns of all parties and serves their interests.
Wei also said that the Chinese military is willing to work with the militaries of other countries to continue contributing to world peace.
China does not covet the interests of other countries, but its resolve to defend its own interests is as firm as a rock, the general stressed, reiterating China’s position on the Taiwan question.
He said Taiwan is part of China and resolving the Taiwan question is a matter for the Chinese, adding that the Chinese military is unyielding, assured, confident and able to defeat any intruders.
Wei pointed out that the security situation in the Asia-Pacific region remains stable, but there are certain concerns. He told the conference that the defense departments of all countries should uphold the central role of ASEAN, follow the Global Security Initiative, focus on practical cooperation and work together to build a solid barrier for universal security.
Liu Lin, a researcher at the People’s Liberation Army Academy of Military Science, said the security concerns in the Asia-Pacific region that Wei mentioned mostly result from the US, which has been increasing its presence in Southeast Asia in recent years to compete with China.
“The US has been attempting to what it calls ‘shape the strategic environment’ around China by building security frameworks in Southeast Asia and the Asia-Pacific”, Liu said, pointing to the AUKUS alliance with the United Kingdom and Australia, and the Quadrilateral Security Dialogue, which involves three Asia-Pacific countries — Australia, Japan and India.
That has increased security uncertainty in the region, which is why Wei highlighted the unity of all countries and called for upholding the central role of ASEAN in his speech, Liu said.
“China values the role of ASEAN much more, which has an independent and self-determined diplomacy,” she said. “The regional bloc emphasizes a balance between China and the US, benefiting China-ASEAN defense cooperation a lot and bringing huge potential and space for it.”
China’s ties with ASEAN are one of the priorities of the country’s neighborhood diplomacy, which China pays great attention to, Liu said. Deepening defense cooperation between China and ASEAN would benefit regional peace and stability, particularly in the South China Sea, and enhance mutual trust between China and ASEAN countries, she added.
On the sidelines of the ADMM-Plus, Wei also met with defense ministers or representatives of the US, Vietnam, Laos, Australia, New Zealand, the Republic of Korea and Russia, and discussed strengthening bilateral military cooperation and issues of common concern, said the Defense Ministry.
(Source: Chinadaily)