Chinese Economics Thread

[Equation]

Someone's lost is somebody's gain.

By Ignoring Africa, US Cedes Jobs To China

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, Contributor
Guest commentary curated by Forbes Opinion. Avik Roy, Opinion Editor.

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and was senior director for Africa at the White House from 2011-2015.

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shows that China more than doubled its foreign direct investment (FDI) projects in Africa in 2016, and that the value of these projects outweighs U.S. investments by a factor of 10. Moreover, China’s Commerce Ministry recently

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that China-Africa trade increased by 16.8% year-on-year in the first quarter of 2017. As if that was not enough, various African leaders were courted at a summit in Beijing last month, which promised extensive deals in infrastructure and trade under China’s “One Belt, One Road” initiative. All of this serves as an exclamation mark on the following sentence: The United States must step up its game on U.S.-Africa trade and investment.

Moroccan King Mohamed VI (C-L) and Li Biao (C-R), Chairman of the Chinese group Haite, attend the launch of a Chinese investment project in Morocco on March 20, 2017, at the royal palace near Tangiers. (Photo credit: FADEL SENNA/AFP/Getty Images)

Unfortunately, the U.S. has been slow to stake out a serious commercial strategy toward Africa, and U.S. companies by and large continue to overestimate the risks of doing business in the region. In contrast, China has sustained a policy of deliberate engagement and investment on the continent—and is making enviable returns in the process. Across Africa, China’s infrastructure projects generate earnings worth around

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, which directly and indirectly translate into numerous jobs for Chinese citizens.




Building on a strong legacy of bipartisanship regarding U.S.-Africa policy, the Obama Administration

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commercial ties on the continent, including through initiatives like Power Africa (designed to double electricity access in the region) that garnered

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. Indeed, U.S. FDI in Africa surged by over 70% from 2008 to 2015, on a historic-cost basis. Yet, in absolute terms, much more remains to be done to fully capitalize on Africa’s potential to contribute to U.S. growth.

Worryingly, the Trump Administration is so far heading in exactly the wrong direction. The policy signal to increase U.S. investment in Africa is no more. Whereas President Obama called for stronger U.S.-Africa economic ties—as did key Cabinet-level champions—the Trump Administration has shown no senior-level interest in this agenda. The raft of vacant positions across key federal departments compounds the problem.


Worse, President Trump is actively trying to eviscerate some of the vital tools needed to promote a serious commercial agenda. Though the “

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” are ongoing, fortunately Congress has so far rejected President Trump’s shortsighted proposals to eliminate funding for the U.S. Overseas Private Investment Corporation (OPIC) and U.S. Trade and Development Agency (USTDA). Both are important for trade and investment globally, and in Africa in particular. Between 2009 and 2016, OPIC’s commitment of about $7 billion in financing and insurance to secure projects in Africa catalyzed an additional $14 billion in investments in the region. Over that same time period, USTDA more than doubled its Africa portfolio of grants and technical assistance for infrastructure projects, boosting U.S. exports by at least $2.5 billion.

These and other tools should be strengthened—not demolished—to support U.S. businesses in Africa and to successfully compete with China. This includes the U.S. Export-Import bank, which has been outpaced by the China Export-Import Bank (some

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say by a factor of 37 for loans to Africa) despite having a Congressional mandate to prioritize helping U.S. exporters compete for business in Africa.

The Trump Administration still has the opportunity to advance a serious commercial agenda in Africa, but we are reaching an inflection point, beyond which it will be increasingly difficult to make up for lost ground. As a dynamic continent of over one billion people (who will comprise one quarter of the world’s population and workforce by 2050), Africa’s role in the global economy will certainly increase over time. As the U.S. economy looks for new global growth to fuel domestic jobs, Africa represents a critical commercial frontier. Seizing this opportunity, however, depends on the interest and capacity of American companies to do business in Africa. There is still time to change course but, failing that, middling policy and weakened tools to promote U.S. investment in Africa essentially constitute a “China First” policy.

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[Blackstone]

There seems to be an endless stream of elite PRC businessmen arrested. Is it Xi fighting corruption or taking out his political enemies? The jury's still out.

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The chairman of a Chinese financial conglomerate who tried to forge a business relationship with President Trump’s son-in-law has been detained by police.

Wu Xiaohui, the chairman of Anbang Insurance Group, was taken away on Friday in Beijing, according to Caijing, a respected newsmagazine. In a statement early Wednesday morning in China, the company said that Mr. Wu was “for personal reasons no longer able to perform his duties.”

Two people briefed on the matter — a company executive and a business partner of Anbang — confirmed that Mr. Wu had been detained.

Mr. Wu, who piloted Anbang’s rapid rise to global prominence with splashy purchases like the Waldorf Astoria hotel in Manhattan, is the latest Chinese tycoon to be ensnared in an anti-corruption drive that has swept the country in recent years. Another of China’s wealthiest and most politically connected financiers, Xiao Jianhua, was reportedly seized from his luxury hotel in Hong Kong by Chinese police officers and taken over the border in January. He has not been seen publicly since.

The detention of Mr. Wu is likely to reverberate through business circles in China and the United States.

Anbang, which claims to have almost $300 billion in assets, had recently been on a worldwide buying spree, and Mr. Wu counted Wall Street executives like Stephen A. Schwarzman as among his business partners in the United States.

The Caijing article said Mr. Wu was detained as part of a Chinese government investigation into Anbang. The two people who confirmed that Mr. Wu had been detained asked for anonymity because they were not authorized to speak to the news media.

Anbang is also a major issuer of speculative wealth management products, which have attracted a tidal wave of money from Chinese investors. Mr. Wu’s detention follows a move last month by China’s insurance regulator to bar the company from offering new insurance products for three months as part of a wider clampdown. The regulator said at the time that it was taking disciplinary measures against the company over the improper sale of insurance products.

It was not clear on Tuesday what would happen to Mr. Wu. Some executives caught up in the government’s crackdown on corruption in the financial sector, which began last year, have vanished for a few days only to reappear, back in charge of their companies. Others, like Mr. Xiao, have been held for months in undisclosed locations without any charges being publicized.

Xu Ming, a billionaire caught up in a 2012 political scandal, vanished and died in prison in late 2015 at 44, according to a report in one Chinese government-owned newspaper in Hong Kong.

Sterling political connections on both sides of the Pacific Ocean might have worked to Mr. Wu’s advantage in his business dealings. He married a granddaughter of Deng Xiaoping, China’s paramount leader in the 1980s and in November met with Jared Kushner, Mr. Trump’s son-in-law and a top adviser, in a bid to buy a stake in a Manhattan office building partly owned by Mr. Kushner’s family company. The deal was eventually abandoned after media coverage that highlighted a perceived conflict of interest. Mr. Kushner’s purview at the White House includes relations with China.

Anbang has taken the money it raised from Chinese savers and invested much of it abroad. Last year, Anbang spent more than $6 billion for a collection of luxury hotels across the United States. The seller of those hotels was the Blackstone Group, whose chairman and chief executive, Mr. Schwarzman, is one of Mr. Trump’s closest business advisers.
Photo
The headquarters of Anbang Insurance Group in Beijing. Credit Jason Lee/Reuters

In a separate effort, Anbang offered more than $13 billion for Starwood Hotels and Resorts before abandoning its bid early last year after media scrutiny of its opaque ownership structure.

China’s insurance sector has been in turmoil in recent months. In April, anti-corruption investigators announced that they were focusing on the insurance sector and specifically, the country’s top insurance regulator. Xiang Junbo, the chairman of China Insurance Regulatory Commission, was later removed from office after the government placed him under investigation for “severe violations of discipline.”

Mr. Wu’s detention comes at a politically sensitive time in China. The ruling Communist Party is set to convene a leadership meeting this year that will pick a new generation of top officials, and the party puts the preservation of stability — both financial and political — at a premium in the months ahead of the conclave, held once every five years.

“The framing question here is, has he been behaving badly by Chinese standards?” asked Derek M. Scissors, a resident scholar and China economist at the American Enterprise Institute. “If it’s just him doing something the party doesn’t like, it doesn’t matter. The question is whether the whole firm has been used to do things the party doesn’t like.”

In its statement, Anbang said that the company would continue to operate as usual without Mr. Wu. But it is unclear if Anbang can still pursue its global ambitions if Mr. Wu does not return to the helm.

Questions about Anbang’s internal workings and political ties have dogged the company in recent years. Even a cursory examination of its shareholding structure shows a company that is remarkable in its opacity.

Founded in 2004 by Mr. Wu and several other businessmen in the eastern Chinese city of Ningbo, the company boasted remarkable political connections from its inception. One of its early business partners was Chen Xiaolu, the son of a People’s Liberation Army marshal from the first decades of Communist rule. The board once included the son of a former prime minister and a top trade official who led China’s negotiations into the World Trade Organization.

Anbang, which originally focused on car insurance and was partly owned by a state-owned automaker, expanded quickly and moved its headquarters to Beijing.

While Anbang’s growth was easy to track, its ownership was not. Last year, an investigation by The New York Times into the company found that 35 of its 39 shareholders, all companies, were once owned by Mr. Wu or his relatives, Deng’s granddaughter or Mr. Chen.

While many of the companies are owned at least in part by Mr. Wu’s family members near Wenzhou, a heavily Christian city south of Ningbo, the trail to identify other current owners ended at times at mail drop boxes and empty offices, The Times found.

That unusual structure drew the attention of insurance regulators in New York, who asked Anbang last year to provide more information before it signed off on a proposed $1.6 billion acquisition of a Des Moines-based life insurer, Fidelity & Guaranty Life. That deal, like those for Starwood and the Kushners’ Fifth Avenue office tower, fell through.

Still, Anbang’s opaque structure did not stop the company’s $6.5 billion acquisition of a portfolio of luxury hotels from Blackstone. The deal, with the exception of a hotel located next to a naval base, was cleared by the Committee on Foreign Investment in the United States, or Cfius, as was the purchase of the Waldorf Astoria.

Mr. Wu made much of his relationship with Mr. Schwarzman, who now heads Mr. Trump’s business advisory council. During a question-and-answer forum at Harvard University in 2015, Mr. Wu described Mr. Schwarzman as a good friend. A spokeswoman for Blackstone declined to comment.

Later on Wednesday in China, the Caijing article and other accounts of Mr. Wu’s detention had been removed from the internet.
Correction: June 13, 2017

An earlier version of this article, in describing Wu Xiaohui’s political ties, misstated his wife’s relation to Deng Xiaoping, the former leader of China. She is Deng’s granddaughter, not daughter.

 

[Equation]

There seems to be an endless stream of elite PRC businessmen arrested. Is it Xi fighting corruption or taking out his political enemies? The jury's still out.

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Meanwhile Trump and his Kusher associates are still doing business with China? And no arrest what so ever as of late.

 

[Equation]

The Meteoric Rise of China's Middle Class

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Zacks Research Staff

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June 14, 2017


Despite some worries lately, the burgeoning middle class in China is a force to be reckoned with on the global stage. In the short time since Deng Xiaoping’s economic reforms, China has become home to the largest middles class on Earth, with over 225 million households now in this category.

The Economist, the current criterion for those within the middle class involves earning between $11,500 and $43,000 a year in current U.S. dollars, a metric that should be kept in context with China’s lower cost of living." data-reactid="12" style="margin-bottom: 1em;">These households reflect a dramatic change from the five million households that represented the demographic just 17 years ago. According to The Economist, the current criterion for those within the middle class involves earning between $11,500 and $43,000 a year in current U.S. dollars, a metric that should be kept in context with China’s lower cost of living.

This growth has led to a major shift in quality of life within China. According to a research paper presented at an international conference on sustainable development in 2005, China managed to reduce the proportion of the population in sever poverty from 250 million to 26 million between 1978 and 2004. This, coupled with the aforementioned boost in middle class citizens, reflects the fact that Chinese people are experiencing a kind of financial stabilization that to many was otherwise unthinkable in the past.

From the opening of the first McDonald’s MCD in Beijing in 1991 to now, the rise of consumerism in China has dramatically altered the way people choose to spend their money (also read: Globalization and the Shift in Chinese Consumerism). According to research by Global X, the issuers of the China Consumer ETF CHIQ, Chinese GDP growth is expected to be propelled largely by consumption in the years to come.

In 2014 alone, the annual per capita income rate of households grew by 9.4%. Smaller cities in China are becoming more urbanized, and the Urbanization Plan under the 13th Five-Year Plan is now targeting 60% national urbanization by 2020.

Newer generations in China that have lived under better economic standards are more confident about personal income growth, and are more loyal to brand names; they are also less hesitant to try new products and services. Retail sales have grown every year since 2005, a trend that will likely continue in the years to come. As of the latest reports, retail sales rose 10.7% year-over-year in May.

For a look at more investment opportunities in China, check out this special edition of the Zacks Friday Finish Line, where hosts Ryan McQueeney and Maddy Johnson are joined by Brendan Ahern, the Chief Investment Officer of KraneShares. KraneShares is a leading provider of China-focused ETFs and Chinese investment education.

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[Hendrik_2000]

Excellent news I guess ccp keep their promise to increase people living standard
This new energy finding should revolutionize the energy sector of China first posted by Stranglove
It still take couple more years for China to perfect the exraction/production method. But once they do it will lessen the need for imported gas and oil and therefore increase security
The Combustible Ice Revolution

What will a new fossil fuel revolution bring about?
By Mei Xinyu | NO. 24 JUNE 15, 2017

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One of the world's largest reserves of fossil fuels—"combustible ice"—has come a step closer to commercial exploitation.

China's Ministry of Land and Resources (MLR) announced on June 2 that the country's trial mining of combustible ice in the Shenhu sea area of the South China Sea has maintained 22 days of continuous gas production. Following the success of the trial mining, China holds the record as the country with the longest run-time for maritime combustible ice mining in the world.

Combustible ice, technically known as methane hydrate or natural gas hydrate, is a frozen mixture of water and natural gas that can be found beneath seafloors, under Antarctic ice and inside Arctic permafrost. It can be lit on fire in its frozen state and is believed to comprise one of the world's most abundant fossil fuels.

The recent trial took place in the Shenhu sea area, about 320 kilometers southeast of Zhuhai City, Guangdong Province. Li Jinfa, Deputy Director of the MLR's China Geological Survey, said the trial produced an average of 8,350 cubic meters of gas with high purity each day. According to Li, the mining operation is safe and no environmental pollution has been caused.

Despite the need to address a series of technical problems, all available information indicates that widespread mining of combustible ice and possible commercial use of the resource may be not far off in the future—and China may be poised to take a leading position in this sector.

Reserves of combustible ice double the total amount of crude oil and natural gas available. As a result, once it becomes commercially viable to exploit the resource, it will have a profound impact on China and the world's energy industry. It may even surpass the shale gas revolution that has deeply changed the international energy market in recent times.

Changing energy structures

The potential combustible ice revolution will first enhance China's negotiating power for natural gas imports, especially in negotiations for long-term contracts.

For China, expanding oil and gas imports from the United States has a strategic purpose. The Panama Canal expansion project completed in 2016 has enabled U.S.-produced crude oil and liquefied natural gas (LNG) to enter the East Asian market with more competitive prices. Expanding imports from the United States, a new natural gas global supplier, will help China bargain with its conventional suppliers.

In fact the East Asian gas premium is narrowing as LNG trade grows. What we need to do is to expand imports of LNG from the United States under favorable conditions in order to further reduce or ultimately diminish the East Asian gas premium.

Among the consensus on 10 issues reached by China and the United States in the 100-Day Action Plan of the China-U.S. Comprehensive Economic Dialogue released shortly before the Belt and Road Forum for International Cooperation was held in Beijing in May, the fourth clause roused much attention: "The United States welcomes China, as well as any of our trading partners, to receive imports of LNG from the United States. The United States treats China no less favorably than other non-free trade agreement (FTA) trade partners with regard to LNG export authorizations. Companies from China may proceed at any time to negotiate all types of contractual arrangement with U.S. LNG exporters, including long-term contracts, subject to the commercial considerations of the parties."


Admittedly, China's mining of combustible ice will not impose significant impact on the spot market, because it will take time to realize commercial-scale production of the resource. It will, nonetheless, affect negotiations of long-term contracts.

In the long term, the potential combustible ice revolution will make LNG more competitive than pipeline natural gas. The pipelines needed to transport natural gas involve huge amounts of fixed-assets investment and complicated cross-border operations. In addition, the pipelines are also easily affected by unpredictable risks in the countries they pass through. On the other hand, LNG doesn't involve cross-border construction and operations of infrastructure, and operations are more flexible, so the market size of LNG keeps growing at a faster pace than that of the overall natural gas market. Since most of global combustible ice resources are in the sea instead of on land, mining of the resource will mainly rely on shipping by LNG vessels instead of through pipelines.

In the overall energy market, the combustible ice has the potential to push up market shares of natural gas in the world and especially in China.

The percentage of natural gas consumption in China's energy mix is still far below the world average, but China has already become one of the world's top natural gas consumers. Industrial, residential and transportation-related natural gas consumptions are all on the rise. Furthermore, China's natural gas infrastructure is large enough to meet domestic demand and the country is able to assume a role as a natural gas trading center for East Asia.

Under these circumstances, gaining huge domestic exploitable resources of natural gas is likely to trigger a new round of explosive growth of natural gas consumption in China.

Affecting economic structures

Once commercial exploitation of the combustible ice begins, the competitiveness of China's eastern and southeastern coastal regions will be further intensified as they are capable of combining their more advanced industries with the new resource.

The combustible ice revolution will change the international economic structure in a similar way: Industrial powers will gain more advantages, while oil and gas exporting nations without strong manufacturing and modern service industries will be weakened. That is because most of the combustible ice resources are beneath the seafloor, and industrial powers have the capability to explore these resources. Traditional oil and natural gas exporting nations will hence lose their resource advantages against industrial countries.

Faced with such possible conditions, both oil and gas-producing regions in China and the world must be aware that once the combustible ice revolution takes place, they will lose their competitiveness and their economic power will be weakened if they still uphold policies featuring resource populism—a sentiment that's characterized by unreasonable overcharging of resources to foreign buyers and unfavorable treatment of foreign investors in resource-abundant countries. Therefore these regions and countries must abandon these policies and be prepared to address the challenges to come.

In the past decade of primary product market boom, resource populism prevailed in some traditional oil and gas-producing nations, but since global oil prices began to drop in the second half of 2014, these countries and regions have been gradually abandoned by investors. The possible combustible ice revolution might further intensify such pressure on those countries and regions.

The author is an op-ed contributor to Beijing Review and a researcher with the Chinese Academy of International Trade and Economic Cooperation

Copyedited by Bryan Michael Galvan

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[Orthan]

Article about china´s FX reserves. According to it, the FX outflows from china accelerated, and it questions china´s official data.

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[N00813]

Should this be in military exports /s?

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IDF buying mass-market DJI drones
Yaakov Lappin, Tel Aviv and Jeremy Binnie, London - IHS Jane's Defence Weekly
15 June 2017

[The Mavic folds up so that is just 198 x 83 x 83 mm in size. (DJI)]

The Israel Defense Forces (IDF) will equip the majority of its combat companies by the end of this year with small unmanned aerial vehicles (UAVs) designed for the consumer and commercial markets, a senior military source has told Jane's.

"We are going with the most highly sold unmanned aerial systems, those produced by DJI," the source said. "We are buying the Mavic, their flagship product, and for more professional units we are buying the Matrice [100], which has better abilities, more time in the air, other kinds of cameras," the source said.

Most of the companies that will receive the systems will be infantry, although other types of ground forces units will receive them as well, the source added.

The Mavic only has a day camera, but it weighs just 743 g, folds up to make it highly portable, and can fly for up to 27 minutes. The more expensive and larger Matrice 100 quadcopter can be fitted with different payloads such as an infrared camera or an additional battery to extend its flight time to up to 40 minutes.

The source said the acquisition of the DJI quadcopters is a temporary measure until a small military UAV called the Tzur becomes available. Industry sources have told Jane's that the Tzur project has not as yet resulted in a contract being signed with a manufacturer.

The IDF source said the acquisition of commercial UAVs would provide clear operational advantages for forces in the field. "They will have the ability to get a high-quality picture from the air, as well as images from opposite angles," he stated. "The enemy was used to hiding behind a wall or a home. Suddenly, it is exposed from 360°."

"In the past, only planes and drones that are expensive and complicated to operate could provide images to the company level.

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To read the full article,

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(329 of 570 words)

 

[Hendrik_2000]

It is commendable that NHK make this kind of real live report
It will contribute greatly to dispel stereotype and promote understanding of real modern China with their problem,challenge and opportunity
At heart actually they have a lot in common, sharing respect for education, family, hard work and how to cope with pressure of modern life. Great video! click the link

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The Newly Wealthy Only Children of China
Broadcast on June 15, 2017

China's one-child policy, created as an effort to prevent overpopulation, was ended in 2016 after 37 years. Now, those born during the first generation of the policy are reaching middle age, and are raising their own families. Although hard work among economic prosperity has granted many of them wealthy lifestyles, their wishes for large families are accompanied by the challenge of parenting siblings with different needs than they had as only children. In this episode, we catch up with families from the one-child policy generation who take careful steps into a new era of parenthood.

Available until June 29, 2017

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[KIENCHIN]

Should this be in military exports /s?

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IDF buying mass-market DJI drones
Yaakov Lappin, Tel Aviv and Jeremy Binnie, London - IHS Jane's Defence Weekly
15 June 2017

[The Mavic folds up so that is just 198 x 83 x 83 mm in size. (DJI)]

The Israel Defense Forces (IDF) will equip the majority of its combat companies by the end of this year with small unmanned aerial vehicles (UAVs) designed for the consumer and commercial markets, a senior military source has told Jane's.

"We are going with the most highly sold unmanned aerial systems, those produced by DJI," the source said. "We are buying the Mavic, their flagship product, and for more professional units we are buying the Matrice [100], which has better abilities, more time in the air, other kinds of cameras," the source said.

Most of the companies that will receive the systems will be infantry, although other types of ground forces units will receive them as well, the source added.

The Mavic only has a day camera, but it weighs just 743 g, folds up to make it highly portable, and can fly for up to 27 minutes. The more expensive and larger Matrice 100 quadcopter can be fitted with different payloads such as an infrared camera or an additional battery to extend its flight time to up to 40 minutes.

The source said the acquisition of the DJI quadcopters is a temporary measure until a small military UAV called the Tzur becomes available. Industry sources have told Jane's that the Tzur project has not as yet resulted in a contract being signed with a manufacturer.

The IDF source said the acquisition of commercial UAVs would provide clear operational advantages for forces in the field. "They will have the ability to get a high-quality picture from the air, as well as images from opposite angles," he stated. "The enemy was used to hiding behind a wall or a home. Suddenly, it is exposed from 360°."

"In the past, only planes and drones that are expensive and complicated to operate could provide images to the company level.

Want to read more? For analysis on this article and access to all our insight content, please enquire about our subscription options:　

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To read the full article,

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(329 of 570 words)

DJI is not going to like this, they refuse to enter into the military drone market. Which is a smart move, knowing the civilian market is alot larger and not giving any excuse to western countries to sanction them but of course they cannot stop any miltary from using their product.

 

[SamuraiBlue]

DJI is not going to like this, they refuse to enter into the military drone market. Which is a smart move, knowing the civilian market is alot larger and not giving any excuse to western countries to sanction them but of course they cannot stop any miltary from using their product.

Join the club, in the past before lifting of the self imposed embargo the US military had to buy Panasonic Toughbooks from retailers.