Analysis Of The Bond Market In ASIA
Financial Indicators in Major Advanced Economies and Select Emerging East Asian Markets
News From Asia This Week
Monday
Israel strikes Gaza, Lebanon overnight; Netanyahu convenes generals
Israel bombarded Gaza with air strikes early on Monday and its aircraft struck southern Lebanon overnight, as Israeli Prime Minister Benjamin Netanyahu convened a meeting of his top generals and his war cabinet to assess the escalating conflict. Israel’s attacks concentrated on the Gaza Strip’s centre and north, Palestinian media reported. A strike on a house near the Jabalia refugee camp, in northern Gaza, killed several Palestinians and wounded others, according to media reports.
Beijing ‘concerned’ by KMT official saying party is mislabelled as ‘pro-China’
Beijing says it is “concerned” about comments made by a senior official in Taiwan’s mainland-friendly opposition Kuomintang, who said it was wrong to call it the “unification party”.
Chen Binhua, a spokesman for Beijing’s Taiwan Affairs Office, on Wednesday said mainland Chinese had also “expressed their dissatisfaction with such remarks, which undermine mutual trust between the two sides of the Taiwan Strait and hurt the feelings of compatriots on both sides”.
Foxconn’s China hubs targeted in tax probes
Chinese authorities are investigating mainland bases of Taiwanese contract manufacturer Hon Hai Precision Industry, known as Foxconn, on tax and other compliance grounds, according to state media.The Communist Party-affiliated Global Times reported Sunday that Chinese authorities have conducted tax audits on “key enterprises” of Foxconn in Guangdong and Jiangsu provinces, and that the Ministry of Natural Resources has investigated land use at such bases in Henan and Hubei provinces. Shares in Foxconn were down nearly 3% at one point on Monday morning in Taipei, while Foxconn Industrial Internet, the iPhone maker’s most important China-listed subsidiary, was down 10% in Shanghai.
Philippines summons Chinese envoy over collisions in disputed waters
Manila summoned Beijing’s ambassador on Monday (Oct 23) over two collisions between Philippine and Chinese vessels in the disputed South China Sea, a foreign ministry official said.
“We’re making full use of diplomatic processes available to us. That includes summoning the Chinese ambassador, which we did this morning,” foreign ministry spokeswoman Teresita Daza told reporters.Earlier on Monday, the Philippines repeated its call for China to stop its “provocative actions”, warning that its continued attempts to block Manila’s resupply missions to a disputed atoll in the South China Sea could have “disastrous results”.
Tuesday
Bangladesh trains collide, killing 17, wounding scores -police
World fossil fuel demand is set to peak by 2030 as more electric cars hit the road and China’s economy grows more slowly and shifts towards cleaner energy, the International Energy Agency said, undercutting the rationale for any rise in investment.
The report from the IEA, which advises industrialised countries, contrasts with the view of oil producer group the Organization of the Petroleum Exporting Countries, which sees oil demand rising long after 2030 and calls for trillions in new oil sector investment.
World oil, gas, coal demand to peak by 2030, IEA says
World fossil fuel demand is set to peak by 2030 as more electric cars hit the road and China’s economy grows more slowly and shifts towards cleaner energy, the International Energy Agency said, undercutting the rationale for any rise in investment.
The report from the IEA, which advises industrialised countries, contrasts with the view of oil producer group the Organization of the Petroleum Exporting Countries, which sees oil demand rising long after 2030 and calls for trillions in new oil sector investment.
4 lost years: How the EU fumbled its response to China’s belt and road
EU leaders will gather in Brussels this week to toast their flagship infrastructure drive Global Gateway, launched to much fanfare in 2021 as an alternative to China’s Belt and Road Initiative.But internal documents and conversations with 10 sources involved in the EU’s infrastructure discussions reveal a bureaucracy that fought tooth and nail against using connectivity as a foreign policy tool.
A months-long investigation paints an unflattering picture of European Commission infighting, turf wars and inaction that jars with the muscular rhetoric presented by its leader, Ursula von der Leyen.
China-US Economic Working Group holds ‘productive, substantive’ first meeting
An economic working group between China and the United States conducted its first remote meeting on Tuesday, according to China’s Ministry of Finance and the US Department of the Treasury.The meeting, chaired by financial officials at the deputy ministerial level, had “in-depth, candid and constructive communication”, the Chinese statement said.
Wednesday
Bird Flu Has Reached Antarctica and Could Have A Devastating Effect
The lethal form of bird flu that has been killing millions of wild birds in the world has reached Antarctica via South America, the bird flu has been ongoing since 2020 and is responsible for a hitherto unseen decimation of the avian population.
China officially expels Li Shangfu as defense minister and Qin Gang
Chinese Defense Minister Li Shangfu has been expelled from his post, the country’s top legislative body said Tuesday without elaborating. In a regular meeting, the National People’s Congress Standing Committee removed Li, according to Chinese state media.No replacements were named in the meeting. Li Shangfu, and Qin Gang were named as state councillors in March, as Xi began his third term, both have been dropped from there as well. Nikkei reported.
Russia sends fighter jets after two U.S. bombers near its border
Russia scrambled fighter jets to intercept two U.S. bombers and a drone that approached Russia’s northern and southern borders on Tuesday, the Russian Defense Ministry reports. According to the ministry, two U.S. B-1B strategic bombers approached the border over the Baltic Sea and a Global Hawk drone approached the border over the Black Sea. As with the fighter jets, a single Su-37 approached in both cases and the U.S. bombers and the drone pivoted away from the Russian border, the ministry said.
Asian stocks bounce on China spending plans
China led Asia’s stock markets higher on Wednesday as investors cheered the approval of a trillion-yuan sovereign bond issue as a harbinger of stimulus, China’s top parliament approved a 1 trillion yuan ($137 billion) bond issue, state media reported adding the funds would be spent rebuilding disaster zones and improving infrastructure. Also helping the mood was state-owned investment company Central Huijin announcing it was buying exchange-traded funds, a move which has sparked strong rallies in the past.
Thursday
Israel bombards Gaza, prepares invasion as Putin warns conflict could spread beyond Middle East
Israel bombarded Hamas targets as it prepared for a ground invasion, with Russia warning the conflict could spread beyond the Middle East, and as world powers failed to secure plans to deliver critical humanitarian aid to the besieged Gaza Strip.
U.S. President Joe Biden, in remarks looking beyond the war that began with an Oct. 7 attack on Israel by Palestinian Hamas militants, said on Wednesday that the future should include Israeli and Palestinian states side by side.
US drops digital trade demands at WTO to allow room for stronger tech regulation
U.S. Trade Representative Katherine Tai has dropped longstanding U.S. digital trade demands in World Trade Organization talks in order to give Congress room to regulate big tech firms, her office said on Wednesday.
The U.S. is withdrawing proposals made in 2019 by the Trump administration insisting that WTO e-commerce rules allow free cross-border data flows and prohibit national requirements for data localization and reviews of software source code.
China-Australia relations: before Anthony Albanese’s visit, Canberra ‘will not oppose’ Beijing’s CPTPP trade-pact bid
With relations between China and Australia improving in the lead-up to Prime Minister Anthony Albanese’s long-anticipated visit next week, sources said Canberra will not stand in the way of Beijing joining one of the world’s biggest multilateral trade deals.
Australia “will not oppose China joining the CPTPP” – the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – and will “consider China’s application on its merits”, one source said, emphasising that this is not a vow to advocate for China.
India’s polluted Mumbai, behind only China’s Beijing in poor air quality, issues new construction rules to combat smog
India’s financial capital of Mumbai has asked construction sites to use barricades and banned the burning of rubbish in open grounds in a bid to combat worsening air quality, according to a government notification.
The move comes two days after Swiss group IQAir rated Mumbai with an air quality index (AQI) of 160, making it the second most polluted city in the world on Monday, behind only China’s Beijing. A score between 151-200 is classed as ‘unhealthy’, while a score below 100 is ‘healthy’.
Friday
Li Keqiang, former premier of China, dead after heart attack
Li Keqiang, China’s former premier who stepped down this March, died in Shanghai on Friday morning at the age of 68. State broadcaster CCTV is reporting that he suffered a heart attack one day earlier.In his decade as premier, Li steered the world’s second-largest economy through a difficult period featuring ballooning government debt, trade tensions with the US and the coronavirus pandemic.Chinese media outlets are attributing their reports to CCTV or the state news agency Xinhua, which made the announcement shortly after 8am.As of 9am on Friday, the front pages of China’s major websites – including official media – had not yet turned black and white, the usual indicator of mourning.
China to tighten its state secrets law in biggest revision in a decade
All state employees with access to classified information will be banned from travelling overseas without prior approval – and even for a period after they leave the job or retire – under a draft revision of China’s state secrets law. A dozen new clauses have been added to the Law on Guarding State Secrets in the revision, the details of which were made public on Wednesday.
US strikes two Syrian facilities after attacks by Iran-backed militia
U.S. President Joe Biden ordered strikes on two facilities in Syria following attacks on U.S. troops in the past week, the Pentagon said, warning the U.S. will take additional measures if attacks by Iran’s proxies continue. U.S. forces have been hit more than a dozen times in Iraq and Syria in the past week by what Washington suspects are Iran-backed groups. Hamas, Islamic Jihad and Lebanon’s Hezbollah are all backed by Tehran.
White House: Russia is executing soldiers who refuse to follow orders
The United States has information that the Russian military is executing soldiers who do not follow orders related to the war with Ukraine, the White House said on Thursday. “We have information that the Russian military has been actually executing soldiers who refuse to follow orders,” White House spokesperson John Kirby told reporters.
Mongolian Intelligence chief Peljee Odonbaatar Will Strive For Neutrality
The colonel in charge of Mongolia’s General Intelligence Agency strives for neutrality with neighbours China and Russia, with mining and oil projects in the back of his mind.
Decypher Opinion
Iran is heating up the Middle East
Iranian Oil is still finding its way to global customers despite sanctions put in by United States since 2018. After the breaking out of Israel Hamas war it is important for America to break Iran’s oil-smuggling complex which has become more sophisticated over the years. Iran is seen as the primary sponsor of multiple Palestinian militant groups. Putting a stop to Iranian oil smuggling is considered a necessity to indirectly prevent anti-Israeli operations in west Asia by drying up Iranian coffers. But it is easier said than done.
A large dark fleet of old oil tankers using Malaysian ports as a cover, is delivering Iranian oil to China the largest global customer, where small ‘teapot’ refineries are utilizing it. The oil tankers rarely do the full journey from Iran to China. Some pick up fuel from other ships off the shores. Many then transfer loads off the shores of Malaysia or Singapore, where smaller vessels take them to northern China. Often the Iranian oil is mixed with other crudes from places like Venezuela or mislabeled as a different petrochemical product. Ownership of the oil tankers is disguised through shell companies registered in places such as China, Vietnam, and the United Arab Emirates. Seizing these ships en masse at sea would demand and only China’s government can restrict the ‘teapot’ refineries.
Another consumer of sanctioned Iranian oil is Pakistan whose Baluchistan province shares a long border with Iran. Smuggling of Iranian oil is a major economic and security issue in Pakistan. One of the primary reasons for Pakistan Petroleum Dealers Association (PPDA) to go on strike in the month of July was the smuggling of Iranian oil in Pakistan which according to them had brought down petrol sales by 30%.
In an effort to clamp down on cross-border smuggling, Islamabad banned trade activities with Iran in Baluchistan which sparked large protests by local political groups demanding immediate restoration of trade activities. Baluchistan is Pakistan’s least-developed province and, as such, depends largely on neighboring Iran to meet its needs for food and other essential commodities. The ban on trade activities is causing major hardships to the people of Baluchistan.
Decypher Insight: Southeast Asia’s Aging Dilemma: Getting Old Before Getting Rich
Thailand is witnessing a rapid demographic transformation, with the proportion of its population aged 65 and above doubling over 19 years, reaching 14% in 2021. This pace of aging outstrips many developed nations, such as Japan, which took 24 years to undergo a similar transition. Thailand’s challenge is compounded by its low GDP per capita, standing at $7,000 in 2021, necessitating a response to the demands of an aging society without the financial resources typical of high-income nations.
Several developing countries in Asia, including Thailand, Indonesia, the Philippines, and Sri Lanka, are contending with the challenges of rapid aging. By 2030, the percentage of their population aged 65 or over is expected to reach 25.5%, 13.2%, 7.6%, and 22%,, respectively. This demographic shift presents significant hurdles for these nations, straining government finances, reducing the available workforce, and lowering overall productivity.
The implications of this swift aging are substantial, leading to increased demands on governments to provide healthcare and pensions, diverting resources from essential investments in education, training, and infrastructure. This issue extends beyond Thailand, affecting other developing countries in Asia, including Vietnam, Indonesia, the Philippines, and Sri Lanka. However, India provides a positive example of addressing the demographic transition. The country’s success is driven by internal migration, where a significant portion of the population moves from less prosperous areas to more economically thriving regions. India’s booming internal migration is illustrated by its last census in 2011, which counted 450 million internal migrants. To address these challenges, solutions include boosting female participation in the workforce and adopting pragmatic immigration policies to extend the demographic transition.
Beyond The Great Wall
Exploring News About China in Depth
Net Outflow of funds from China hits 7-year high in September
Outflows of investment capital from China continues to grow at an alarming pace. Biggest decline has been reported this year to hit a 7 year low. Foreign companies are scaling back their operations in China, and wealthy Chinese are putting money abroad.
Chinese government is tracking this very nervously. China’s State Administration of Foreign Exchange, which tracks monthly international financial transactions by domestic banks on behalf of businesses and households, the net outflow reached US$ 53.9 Billion. With stagnant growth, weakening Yuan this will be something to watch out for in the future.
Li Keqiang: A pragmatist Politician In The CCP
When Premier Li Keqiang came up in the party he was seen as an eventual successor to Xi Jinping. Xi had other plans he systematically reduced the position and the role of Li, it did not help Li that he was presiding over one of the most trying times for the Chinese economy. If the world has to remember him, an opinion piece he wrote for Bloomberg will help, we are quoting from the piece, which is hyperlinked here.
“China stands resolute with the World Trade Organization and multilateral free-trade agreements designed to be inclusive. Economic globalization has enabled the creation and sharing of wealth on an unprecedented scale. There are problems, too, more on the sharing side. These can be addressed, but only if countries work together to ensure that a rising tide really does lift all boats.”
China vetoes ‘evasive’ US proposal as UN Security Council remains deadlocked on Israel-Gaza war
Beijing has vetoed a US-backed proposal at the UN Security Council on the situation in Gaza, calling it “evasive” and “seriously out of balance”, as the body remains deadlocked in delivering a response to the Israel-Gaza war.
The US draft resolution called for a humanitarian pause to enable the delivery of aid to Gaza. It also reaffirmed the “inherent right of all states” to self-defence while fully complying with international law.
However, the proposal elicited harsh criticism from Beijing because it failed to call for a ceasefire and made no mention of the Israeli military’s evacuation order calling for over 1 million people to leave northern Gaza.
“The draft does not reflect the world’s strongest calls for a ceasefire and an end to the fighting, and it does not help resolve the issue,” China’s ambassador to the United Nations Zhang Jun told the council after the vote on Wednesday.
Xi meets U.S. California Governor
Chinese President Xi Jinping on Wednesday met with Gavin Newsom, governor of the U.S. state of California, at the Great Hall of the People in Beijing.
Noting that China and the United States, as the world’s two largest economies, account for more than a third of the global economy and nearly a quarter of the world’s population, and bilateral trade accounts for about a fifth of the global total, Xi said the interests of both sides are closely intertwined.
Xi said that the achievements of China-U.S. relations have not come easily and should be cherished all the more.
China’s policy toward the United States is consistent, which is mutual respect, peaceful coexistence and win-win cooperation, Xi said, adding that China will continue to work in this direction and hopes that the United States will work with China in the same direction.
Joe Biden warns China not to attack the Philippines
President Joe Biden has warned China not to engage in dangerous and unlawful activity towards the Philippines and warned that any attack on the US ally would trigger Washington’s mutual defence treaty with Manila. Speaking alongside Australian prime minister Anthony Albanese, Biden said he wanted to send a “clear message” to Beijing after China’s coastguard tried to block a Filipino supply mission in the South China Sea. “The United States defence commitment to the Philippines is ironclad. Any attack on Filipino aircraft, vessels or armed forces will invoke our mutual defence treaty with the Philippines,” Biden said.
Inventions based on threatened animals are on the rise
Amy Hisnley and her colleagues at the University of Oxford have found that wildlife based patents have been increasing at an alarming rate. They analysed patents documents from 1970 to 2020 and found that 27,308 patents involved threatened group which could potentially have huge market in China. Even though there is a trade ban, the rise in animal products continues at an alarming rate.
China is changing how it governs finance.
Zhou Xin wrote an informed opinion piece on Chinese change in strategy of how it governs its finance, we quote from his informed article here,
“China’s central bank recently eliminated 30 positions. While downsizing 4 per cent of its total headcount may seem like an insignificant move, it reflects big changes in how Beijing views the country’s financial landscape.
The job cuts by the People’s Bank of China (PBOC) took place against the backdrop of the creation of the Central Finance Commission (CFC), a Communist Party organ that has replaced the Financial Stability and Development Committee (FSDC), established by the State Council in 2017 to act as China’s supreme decision-making body on national financial affairs.
The office of the FSDC, which was originally located within the PBOC, has been closed and merged with the CFC’s office.
That office, which the Post reported started operations in late September, is managed by Vice-Premier He Lifeng. Situated on Beijing Financial Street, it is a stone’s throw away from the PBOC, where the CFC has drawn more than 100 officials – including securities and banking regulators – to handle the country’s most pressing financial challenges.”
SMC founder Morris Chang’s major worry: US-China decoupling
Khusboo Razdan reports from New York:
The one thing that comes closest to keeping Morris Chang, the tech king of Taiwan, up at night is decoupling of the world’s two largest economies, the United States and China.
“It looks like countries are mad at each other, and that worries me,” Chang, the 91-year-old retired founder of the Taiwan Semiconductor Manufacturing Company, said on Thursday at an Asia Society event in New York.
TSMC, the world’s largest producer of advance semiconductors, is Asia’s most valuable company with a market cap of over US$400 billion.
In discussing decoupling, Chang cited the book Destined for War: Can America and China Escape Thucydides’s Trap? by Harvard professor Graham Allison
China puts some curbs on graphite export could possibly impact EV market
China, the world’s leading graphite producer and a critical source for electric vehicle (EV) batteries, has announced new export restrictions, requiring permits for certain graphite products, including high-purity synthetic and natural flake graphite.
Global WhatsApp jobs scam worth €100m linked to China
Euronews Next recently conducted an investigation into a vast global job scam with an estimated worth of €100 million. The scam primarily targets WhatsApp users through deceptive job offers. The investigation started with contact made to “Stella,” who posed as a recruiter for Digital Logic, a London-based commerce platform. Stella urged investigators to convert US dollars into Tether (USDT), a cryptocurrency, and transfer it to Digital Logic. Initially promising, the job required regular resets by adding 30 USDT each week, raising suspicions. The claimed Texan registration of Digital Logic was found to be fabricated. An AI cybersecurity firm, CloudSEK, discovered over 1,000 firms targeted by this scam, and they believe it has already extracted over €100 million from more than 100,000 victims. The investigation also found patterns linking the scam to Chinese coding and infrastructure, suggesting involvement by Chinese-origin groups. This scam appears to have links to “cyber slavery,” a form of modern slavery spreading across Southeast Asia and, increasingly, Latin America.
China Widens Lead Over US in AI Patents After Beijing Tech Drive
China has significantly expanded its lead over the United States in the race for AI patents, showcasing the country’s commitment to shaping the future of this transformative technology. In 2022, Chinese institutions filed for 29,853 AI-related patents, marking an 80% increase from the previous year and surpassing the US by a significant margin. China now accounts for more than 40% of global AI patent applications. This trend reflects Beijing’s efforts to gain a competitive edge in various tech sectors, including chipmaking, space exploration, and military sciences. Chinese President Xi Jinping’s call for increased fundamental research has led to substantial investments in AI and quantum computing. Key players like Baidu, Alibaba, and Tencent are actively working to develop AI technologies, emphasizing China’s leadership in AI innovation. The country has maintained this trajectory since surpassing the US in AI patent filings back in 2017.
Elections In the Maldives Disrupt India’s China Containment Strategy: Nikkei Opinion
India’s diplomatic efforts in South Asia have been hindered by the election of Mohamed Muizzu, a pro-China leader who defeated pro-India incumbent President Ibrahim Mohamed Solih in the Maldives presidential election. Muizzu’s coalition had taken a strong stance against India’s influence in the Maldives in the run-up to the elections, and he had made a statement saying, “We will send back foreign soldiers in the Maldives.” Experts believe that since China continues to strengthen ties with South Asian countries, India needs a new strategy that respects these countries’ sovereignty in order to effectively counter China’s growing influence in the region.
Investor Chris Wood on Chinese House Price Conundrum
Quoted from Chris Wood’s Newsletter (Courtesy Grizzle)
“It is now eight weeks since China announced the most significant of its various incremental easing measures undertaken this year, namely lowering on 31 August the downpayment requirements on mortgages nationwide to 20% for first-time homebuyers and 30% for second-home buyers, down from 30-40% for first-home buyers and 50-80% for second homes in tier-1 cities.
The initial evidence, though it is still early days, is that there are some signs of a stabilisation in property sales; though this writer would not want to exaggerate this.
It is also the case that the one-week national holiday in the first week of October also impacts the data. This is traditionally a week which sees a downturn in property transactions. But given the downturn in the market which preceded it, this writer would view a stabilisation in activity as a positive not a negative.
On this point, weekly primary residential floor space sales in the major 30 cities averaged 2.345m sqm in the four weeks ended 15 October, up 9% from the previous four weeks and were 18% above the recent low of 1.988m sqm in the four weeks to 27 August prior to the announcement, though they are still down 21% YoY.”
The Finance Is Getting Tricky in China?
On October 24, 2023, Chinese President Xi Jinping made his inaugural confirmed visit to the People’s Bank of China (PBoC). This visit is occurring against the backdrop of several pressing economic challenges facing China, which include a decelerating growth rate, a struggling property market, and mounting debt levels. It is noteworthy that this visit follows the recent dismissal of China’s Finance Minister, Liu Kun.
While concerns of potential complacency among policymakers arose due to the faster-than-expected economic growth in Q3, the government’s approval of an additional 1 trillion yuan in central-government bonds signifies its unwavering commitment to address these economic challenges. Moreover, back in March, President Xi Jinping established the Central Financial Commission (CFC), a Communist Party commission tasked with overseeing financial sector regulation. The CFC’s primary objectives encompass strengthening the CCP’s control over the financial sector and addressing pivotal economic issues.
Additionally, on October 25, Chinese and US central bank officials held a video conference to address monetary and financial stability, alongside other financial issues. The meeting, jointly led by vice-ministerial representatives from the PBOC and the US Department of the Treasury, included the involvement of pertinent financial regulatory authorities from both nations, aligning with the newly established economic and financial working groups. These developments highlight the government’s commitment to preserving control and stability within the financial sector.
