Chinas

China’s property crisis weighs on developing Asia’s 2023 growth outlook – ADB

MANILA – Economic growth in developing Asia this year will be slightly lower than previously expected as the weakness in China’s property sector and El Niño-related risks cloud regional prospects, the Asian Development Bank (ADB) said on Wednesday.

Updating its regional economic outlook, the ADB trimmed its 2023 growth forecast for developing Asia to 4.7%, from 4.8% projected in July.

But the growth forecast for next year for the grouping, which consists of 46 economies in the Asia-Pacific and excludes Japan, Australia and New Zealand, was revised slightly upwards to 4.8% from 4.7% previously.

“We see resilient growth in the region really based on pretty strong domestic consumption and investment, and despite reduced external demand, which is a dampener on export-driven growth,” Albert Park, ADB’s chief economist, told a press conference.

The ADB tempered its growth forecasts for East Asia, South Asia, and Southeast Asia this year, with China and India expected to grow 4.9% and 6.3%, respectively, slightly lower than the July growth projections of 5.0% and 6.4%.

China’s property crisis “poses a downside risk and could hold back regional growth,” the ADB said in its report.

The Manila-based lender maintained its 2024 growth forecasts for China and India at 4.5% and 6.7% respectively.

While growth has so far been robust and inflation pressures are receding in developing Asia, Park said governments need to be vigilant against the many challenges the region faces, including food security.

Inflation in developing Asia is forecast to ease to 3.6% this year from 4.4% last year, and continue to slow to 3.5% in 2024, giving central banks policy space, but the ADB said interest rate hiking and easing cycles will vary going forward. — Reuters

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Fewer ‘I dos’ ruin the party for China’s $500 bln wedding industry

SHANGHAI/HONG KONG – COVID wasn’t kind to wedding planners in China, where marriages are traditionally elaborate, expensive affairs, but the industry estimated at almost $500 billion is now facing a bigger threat: a plunge in the number of couples willing to tie the knot.

The trend, which has become more obvious as the economy weakens and consumer confidence wanes, is also worrying officials trying to revive marriage, and birth, rates which dropped to record lows last year, leading to the first decline in population numbers in 60 years.

“The number of marriages is falling and few are willing to spend a lot on weddings,” said Yuan Jialiang, who ran a full-scale wedding planning business for almost a decade in Shanghai before switching to focus on wedding photography before the pandemic.

“The future of this industry doesn’t look promising.”

There were 6.8 million marriages across China last year, 800,000 fewer than in 2021 and the lowest since the government began publishing the data in 1986.

This drop in marriage registrations will exacerbate the decline in births in China, now one of the world’s fastest-ageing societies. Many cities deny unmarried mothers child-raising or healthcare subsidies and having children out of wedlock is often frowned upon.

“You have a lot of consumers that are just saying ‘well, you know, marriage isn’t the right thing for me’ and a lot of younger adults in China feel that raising kids is just too expensive,” said Ben Cavender, managing director and head of strategy at China Market Research Group.

“The traditional Chinese wedding industry is probably in for tough times.”

BUDGET, BACKLOG

Before the pandemic hit, weddings were big business in China, with Daxue Consulting estimating the industry to be worth 3.6 trillion yuan ($487 billion) in 2020.

Couples traditionally splash out on gold jewelry, elaborate decor and luxury venues but Frank Chen, from Chen Feng Wedding Planning in Shanghai, says few weddings this year had a budget of over 100,000 yuan ($13,736).

“People are more inclined to go for a simple and niche wedding,” said Chen, adding that a decade ago, it was common for couples to spend millions of yuan.

Many weddings planned for 2022 were postponed by COVID-19 lockdowns, resulting in a busier 2023 for some firms.

Jewelry companies Chow Tai Fook 1929.HK and TSL 0417.HK said they expect demand for wedding jewelry this year to return to pre-pandemic levels.

TSL, however, said the long-term future of the industry would depend on the strength of the economy.

“It’s just the COVID backlog,” said wedding planner Xueyi, whose business in Xi’an and Shanghai has also seen a spike this year. “Some of my clients who had bookings rescheduled have actually separated.”

‘NICHE, NICHE, NICHE’

The economic downturn has hit the middle class, and the youth, the hardest, resulting in high jobless rates and low household spending.

Wealthier consumers appear to be better insulated against the macroeconomic headwinds and Jewel Wang, owner of a network of stores selling wedding dresses by U.S. designer Vera Wang, expects companies specializing in high-end or bespoke services to fare better than those in the low-to-mid-ranges.

Wang, who is also founder of Nora’s bridal boutique in Shanghai which stocks luxury gowns from designers including Oscar de la Renta and Carolina Herrera, said June was the best month in a decade due to pent-up demand.

“For us it makes more sense to find the next bride who can afford our products versus capturing a greater part of the market,” she added.

Still, she was cautious about the future.

“As a market we see an absolute downturn in spending. Our strategy has been to stay niche, niche, niche,” said Wang.

“We don’t want to flow with the broader market because we don’t think that it’s a good place to go.” – Reuters

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Upheavals in Xi’s world spread concern about China’s diplomacy

BEIJING — The disappearance of China’s defense minister, the latest in a string of upheavals in the country’s top ranks, is stoking uncertainty about President Xi Jinping’s rule as an internal security clampdown trumps international engagement.

The growing unpredictability could affect the confidence other countries have in the leadership of the world’s second-biggest economy, diplomats and analysts say.

Defense Minister Li Shangfu, who has missed meetings including with at least one foreign counterpart since he was last seen in late August, is under investigation in a corruption probe into military procurement, Reuters reported on Friday.

Newly installed Foreign Minister Qin Gang vanished with scant explanation in July, the same month as an abrupt shake-up of the military’s elite Rocket Force, which oversees China’s nuclear arsenal.

As Mr. Xi, China’s commander-in-chief has focused inward, he caused concern among foreign diplomats this month by missing a Group of 20 summit in India, the first time he has skipped the global leaders’ gathering in his decade in power.

Faced with the growing uncertainties, some diplomats and analysts are calling for a hard look at the true nature of Mr. Xi’s regime.

“Clear-eyed assessments are needed — this isn’t just a question of whether China is a partner or a competitor, it is a source of economic, political and military risk,” said Drew Thompson, a former Pentagon official who is now a scholar at the National University of Singapore.

Due to a lack of transparency surrounding the changes, various explanations were plausible “and this feeds the crisis of confidence that is brewing around China,” Thompson said.

China’s Foreign Ministry did not immediately respond to a request for comment on Saturday.

PROXIMITY ISN’T PATRONAGE
Regarding Defense Minister Li’s disappearance and investigation, a ministry spokeswoman told reporters on Friday she was not aware of the situation. The State Council and Defense Ministry did not respond to requests for comment.

Since his appointment in March, Mr. Li has been the public face of China’s expanding military diplomacy, expressing concern over US military operations during a high-profile security conference in June and visiting Russia and Belarus in August.

He had been expected to host an international security meeting in Beijing in October and represent the People’s Liberation Army (PLA) at a meeting in November of regional defense chiefs in Jakarta.

With corruption long permeating China’s military and state institutions, some analysts and diplomats believe Mr. Xi’s anti-graft crackdowns mark political purges across the Communist Party.

“Regardless of the reason… the sense that this could keep happening could have an impact on foreign actors’ confidence in engaging with their Chinese counterparts,” said Helena Legarda, lead analyst with the Mercator Institute for China Studies in Berlin.

The Mr. Li upheaval is unusual for its speed and its reach into Xi’s hand-picked elites.

“This is all so sudden and opaque. One thing we can now see is that proximity does not equate to patronage in Xi’s world,” said Singapore-based security analyst Alexander Neill, an adjunct fellow with Hawaii’s Pacific Forum think-tank.

CONTINUITY RISK
Although not in a direct command position, Mr. Li serves on Mr. Xi’s seven-person Central Military Commission and is one of China’s five state councilors, a cabinet position that outranks regular ministers. Some scholars believe he is close to General Zhang Youxia, who sits above him on the commission and is Xi’s closest ally in the PLA.

Mr. Li, sanctioned by Washington in 2018 for an arms deal with Russia, shunned a meeting with US Defense Secretary Lloyd Austin at Singapore’s Shangri-la Dialogue security conference in June, where a handshake marked their closest interaction.

Mr. Austin and other US officials are keen to resume high-level talks between the two militaries regional tensions roil. But Beijing counters that it wants Washington to be less assertive in the Asia-Pacific.

Regional envoys say deeper Chinese military diplomacy is vital, particularly with the U.S. but also with other powers, as China increasingly deploys forces around Taiwan — the democratically governed island it claims — and across disputed parts of the East and South China Seas.

If Mr. Li’s fate “reflects Xi’s increasingly inward focus, it is not good for those of us who want greater openness and lines of communications with China’s military,” said one Asian diplomat.

As the PLA has an unprecedented level of military engagements with Southeast Asian forces this year, the recent swift changes back in Beijing “spur speculation and some concern about the continuity of policy,” said political scientist Ja Ian Chong at the National University of Singapore.

“A shake-up of the military at this time is likely to draw attention, given the heightened activity of the PLA near Taiwan and the East China Sea, as well as stepped-up paramilitary activity in the South China Sea, since such actions create potential risk of accidents, escalation and crises,” Ja Ian Chong said. — Reuters

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PM Sunak raises concern over interference in UK democracy with China’s Li

Prime Minister Rishi Sunak said he had raised his concern over any Chinese interference in Britain’s parliamentary democracy during a meeting with Chinese Premier Li Qiang at a G20 summit in India, after the reported arrest of two alleged spies.

The Sunday Times reported that one of the people arrested on suspicion of spying for China was a researcher in the British parliament.

Mr. Sunak said he was limited in what he could say about an ongoing investigation but told reporters he had raised “his very strong concerns about any interference in our parliamentary democracy, which is obviously unacceptable”, with Mr. Li.

London’s Metropolitan Police said two men were arrested in March under the Official Secrets Act, and had been released on police bail until early October.

The allegations potentially undermine Mr. Sunak’s bid for more dialogue with China, illustrated by a visit by foreign minister James Cleverly to Beijing last week.

Mr. Sunak’s Conservative government has sought a thaw in relations with China, engaging with Beijing on matters such as climate change but also criticising it in several areas including human rights.

Mr. Sunak said he raised areas where there are disagreements, but the meeting showed the value of the strategy of engaging “where it makes sense”.

“I think the right thing to do was take the opportunity to engage, to raise concerns specifically, rather than just shouting from the sidelines,” he said.

A Chinese readout from the meeting did not mention the spying allegation but welcomed Britain’s expanded practical cooperation with China, adding Mr. Li had said that “the two sides should properly handle their differences”.

However, the Chinese embassy in the UK responded to the arrests, saying the allegations were made up and that China firmly opposed them.

“The so-called claim that China is suspected of ‘stealing British intelligence’ is completely fabricated and malicious slander,” the embassy said on its website, urging relevant parties to stop anti-China political manipulation and “self-directed political farce”.

Iain Duncan Smith, Conservative lawmaker and China critic, said Beijing’s attitude seriously questioned Sunak’s approach.

“I don’t think it’s a dialogue. I think it’s a kind of pathetic monologue,” Duncan Smith, who has been sanctioned by China, told Times Radio. “What’s actually going on is China is ignoring much of what we say.” — Reuters

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Biden speaks to China’s Li at G20, says economic ‘crisis’ makes Taiwan invasion less likely

HANOI — US President Joe Biden said on Sunday he held his highest level talks with Chinese leadership in months, adding that Beijing’s economic wobbles would not lead it to invade Taiwan.

Mr. Biden said he met with Chinese President Xi Jinping’s No.2, Chinese Premier Li Qiang, at the annual G20 summit in New Delhi. The talks were the highest level meeting between the two powers in nearly 10 months since Biden and Xi spoke at last year’s G20 in Indonesia.

Mr. Li, who took became premier in March, attended the gathering of world leaders in place of Mr. Xi. The two leaders were not expected to hold talks at the G20 but unscripted encounters at summits are common.

“My team, my staff still meets with President Xi’s people and his cabinet,” Mr. Biden told reporters. “I met with his No.2 person in India today.”

He added: “We talked about stability,” and the Southern Hemisphere. “It wasn’t confrontational at all.”

The White House on Sunday said Mr. Biden had met with a Chinese leader at the summit.

The two super powers have been trying to thaw frosty relations this year after a spat over a suspected Chinese spy balloon that flew over US territory, while fears of an economic slowdown have gripped Beijing.

Speaking at a press conference in Vietnam, Mr. Biden touted the US economy as the “strongest” globally. He told reporters that China’s growth was slowing due to a weak global economy as well as Chinese policies but did not specify which policies.

Mr. Biden called China’s economic situation a “crisis,” citing issues in the real estate sector and high youth unemployment.

“One of the major economic tenets of his plan isn’t working at all right now,” Mr. Biden said of Mr. Xi, without elaborating. “I’m not happy for that, but it’s not working.”

Mr. Biden added: “He has his hands full right now.”

The Democratic president is headed into a 2024 re-election campaign where his own handling of the economy and inflation has become a central concern for voters.

The US economy grew at a 2.1% annualised rate last quarter. Central bankers have sharply raised interest rates to bring inflation back down to target levels.

August trade data showed China’s exports and imports both narrowing their declines, joining other indicators showing a possible stabilisation in the economic downturn, as policymakers seek to spur demand and fend off deflation.

Mr. Li has said China should achieve its 2023 growth target of around 5%, but some analysts think a worsening property slump, weak consumer spending and tumbling credit growth could mean lower growth.

OPEN DIALOGUE
Mr. Biden has tried to keep communications open with China to lower the temperature in international frictions including over Taiwan, the self-ruled island claimed by China.

“I don’t think this is going to cause China to invade Taiwan,” Mr. Biden said of the country’s economic troubles. “As a matter of fact, the opposite, probably doesn’t have the same capacity that it had before.”

He described the United States as a Pacific power with no intention of withdrawing from the region.

Mr. Biden also said recent moves by Chinese officials to curb the use of US-designed Apple iPhones by state employees amounted to trying to “change some of the rules of the game” on trade.

“I am sincere about getting the relationship right,” he said. — Reuters

#Biden #speaks #Chinas #G20 #economic #crisis #Taiwan #invasion

China’s economic gloom hangs over Japan’s long-awaited recovery

TOKYO – Policymakers in Tokyo believe China’s deepening economic woes could hit Japan’s fragile recovery, especially if Beijing fails to shore up demand with meaningful stimulus, potentially delaying an exit from ultra-loose monetary policy.

China’s downturn would leave Japan’s export-reliant economy with little external support as aggressive Federal Reserve interest rate hikes cool growth in the United States, another key driver of global activity.

The risks from China will be among key topics of debate at the Bank of Japan’s September policy meeting, say five sources familiar with the bank’s thinking, and raise fresh questions about Governor Kazuo Ueda’s efforts to wean the economy off the massive monetary stimulus of the past decade.

“What’s happening in China is worrying and could deal a huge blow to Japan’s economy,” said one of the sources, who spoke on condition of anonymity due to the sensitivity of the matter.

“A downturn in China may diminish the chance of Japan achieving sustained wage growth,” which is a crucial condition for phasing out monetary stimulus, another source said.

In a sign of growing pessimism over China, the government also said its monthly economic report for August that “concern over China’s outlook” was among risks to Japan’s recovery.

“China is over,” a senior Japanese government official told Reuters on condition of anonymity because of sensitivity of the issue. “I think China will never return to 5% growth.”

Having taken steps in July to make its ultra-loose policy sustainable, the BOJ is widely expected to keep monetary settings unchanged at its Sept. 21-22 meeting.

NEW RISKS

While many Japanese policymakers expect China to avert a hard-landing, thanks in some part to Beijing’s recent support measures, the stakes for Japan are high.

China is Japan’s largest trading partner, accounting for 20% of its exports, having replaced the United States in 2020. Exports to China fell 8.6% in the first half of this year as demand for cars, steel and electronics wilted.

Economists believe China’s downturn could knock 1-2 percentage points off Japan’s annual growth, fueling fears of a prolonged slowdown in Asia’s two biggest economies, which combined account for about a fifth of global gross domestic product.

China is also losing its appeal as a production hub for Japanese firms with some already reducing exposure to the country.

Komatsu Ltd 6301.T, was among them. The world’s No. 2 construction machinery maker has shifted some operations away from China, its chief executive Hiroyuki Ogawa told Reuters this week.

Ogawa said going forward Komatsu will “cut down on production capacity in a way to match actual demand in China.”

Diplomatic tensions may also be a factor.

Suntory Holdings chief executive Takeshi Niinami warned China’s economy is in an “extremely difficult” situation, which may be contributing to a rising backlash against Japan over the release of treated Fukushima water into the ocean.

Those bilateral strains could additionally dash hopes of a revival in Chinese tourists, delaying a broad-based recovery in Japan’s service sector.

The risks from China heighten challenges for the BOJ in winding down its bond yield control, a key part of its monetary policy aimed at sustainably reflating stagnant consumer demand.

“Exports to China had already been weak and headwinds to inbound tourism are clearly bad for Japan’s economy,” said Toru Suehiro, chief economist at Daiwa Securities. “All in all, it’s hard to justify tightening monetary policy any time soon.”

Japan’s core inflation hit 3.1% in July, exceeding the BOJ’s 2% target for the 16th straight month. Firms also promised wage hikes unseen in three decades this year, heightening the case for a retreat from decades of ultra-loose monetary policy.

While some BOJ policymakers began dropping hints of a near-term policy shift, Governor Ueda has stressed the need to wait until domestic demand and wage growth replace import costs as a key driver of consumer inflation.

The darkening outlook for Japan’s recovery may push back the timing of a BOJ policy shift. Falling demand in overseas markets like China could weigh on manufacturers’ profits and discourage them from hiking wages – a prerequisite for phasing out monetary stimulus.

BOJ board member Toyoaki Nakamura last month described China’s high unemployment and shrinking investment as sources of concern.

Analysts expect Japan’s economic growth to slow in the current quarter after a brisk expansion in the April-June period, heightening uncertainty on whether a spiral of higher wages and inflation could take hold.

In a sign rising inflation is already taking a toll on consumption, Japan’s household spending suffered its biggest drop in nearly 2-1/2 years in July.

“China’s recent weakness alone won’t be enough for the BOJ to alter its optimistic projection on external demand,” said former top BOJ economist Seisaku Kameda, now an economist at a think tank affiliated with Japan’s Sompo Holdings.

“But China’s weakness certainly heightens the hurdle for Japan to sustainably achieve 2% inflation, which is a quite ambitious goal in the first place.” – Reuters

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