China to rely less on economic stimulus as it battles risks

Journalists raise their hands to ask questions to Zhou Xiaochuan, governor of the People's Bank of China during a press conference held on the sidelines of the annual meeting of China's National People's Congress (NPC) in Beijing, Friday, March 9, 2018. (AP)
Updated 09 March 2018

China to rely less on economic stimulus as it battles risks

BEIJING: China has moved away from its old growth model which was heavily reliant on investment and will rely less on stimulus to boost the economy in future, People’s Bank of China governor Zhou Xiaochuan said on Friday.
Zhou’s comments echoed those of other top officials at China’s parliament this week which suggested that Beijing will be more cautious about spending this year while it focuses on reducing the risks from a rapid build-up in debt.
After years of heavy pump-priming, markets worry less generous stimulus could retard the pace of growth not only in China but globally.
But analysts believe Beijing will continue to keep the system well supplied with cash to avoid the risk of a sharp slowdown in economic growth, even as they continue to tighten the screws on financial regulations.
“We now emphasize the new normal of the economy, shifting from the past growth model of quantitative growth... referring to the accumulation of capital and investment to boost economic growth,” Zhou told reporters on the sidelines of the annual parliament session.
“While pursuing higher quality growth, we will have to reduce our reliance on the old growth model of investment,” said Zhou, in what was likely his last news briefing before his expected retirement this month.
Zhou said China needs to improve its regulatory supervision as soon as possible to curb risks to the financial system.
He said China has begun to make progress in reducing such risks, but numerous threats remain, such as a lack of transparency at financial holding companies and digital currencies.
“Everybody should see that China has entered a stabilizing leverage and is gradually reducing the leverage situation. The trends are clear,” said Zhou, referring to high debt ratios.
Zhou pointed to a moderation in China’s broad M2 money supply growth last year as evidence that the official “de-risking” and “de-leveraging” campaign was working.
The PBOC said on Friday that M2 growth was 8.8 percent on-year in February, higher than January’s 8.6 percent growth but down from 11.1 percent in the year-ago period.
Financial risks from private financial conglomerates that used highly leveraged acquisitions to expand rapidly in recent years have come to forefront with the government seizure of Anbang Insurance Group Co. Ltd.
The central bank is drafting rules on financial holding companies, PBOC Vice Governor Pan Gongsheng said at the same news conference.
Earlier this week, Premier Li Keqiang announced a growth target of around 6.5 percent this year, the same level that it handily beat in 2017 thanks in part to massive government infrastructure spending and record bank lending.


UK to purge Huawei from 5G by 2027, angering China and pleasing Trump

Updated 14 July 2020

UK to purge Huawei from 5G by 2027, angering China and pleasing Trump

  • UK to purge Huawei from 5G by 2027
  • No new 5G components to be bought from end of 2020

LONDON: Prime Minister Boris Johnson ordered Huawei equipment to be purged completely from Britain’s 5G network by 2027, risking the ire of China by signalling that the world’s biggest telecoms equipment maker is no longer welcome in the West.
The seven-year lag will please British telecoms operators such as BT, Vodafone and Three, which had feared they would be forced to spend billions of pounds to rip out Huawei equipment much faster. But it will delay the roll out of 5G.
The United States had long pushed Johnson to reverse a decision he made in January to grant Huawei a limited role in 5G. London has also been dismayed by a crackdown in Hong Kong and the perception China did not tell the whole truth over the coronavirus.
Britain’s National Security Council (NSC), chaired by Johnson, decided on Tuesday to ban the purchase 5G components from the end of this year and to order the removal of all existing Huawei gear from the 5G network by 2027.
The cyber arm of Britain’s GCHQ eavesdropping agency, the National Cyber Security Center, told ministers it could no longer guarantee the stable supply of Huawei gear after the United States imposed new sanctions on chip technology.
Telecoms companies will also be told to stop using Huawei in fixed-line fiber broadband within the next two years.
“This has not been an easy decision, but it is the right one for the UK telecoms networks, for our national security and our economy, both now and indeed in the long run,” Britain’s Digital, Culture, Media and Sport Secretary Oliver Dowden told parliament.
“By the time of the next election, we will have implemented in law, an irreversible path for the complete removal of Huawei equipment from our 5G networks.”
In what some have compared to the Cold War antagonism with the Soviet Union, the United States is worried that 5G dominance is a milestone toward Chinese technological supremacy that could define the geopolitics of the 21st century.
With faster data and increased capacity, 5G will become the nervous system of the future economy — carrying data on everything from global financial flows to critical infrastructure such as energy, defense and transport.
After Australia first recognized the destructive power of 5G if hijacked by a hostile state, the West has become steadily more worried about Huawei.
White House national security adviser Robert O’Brien is meeting representatives of France, the UK, Germany and Italy in Paris this week to discuss security, including 5G.
The West is trying to create a group of rivals to Huawei to build 5G networks. Other large-scale telecoms equipment suppliers are Sweden’s Ericsson and Finland’s Nokia .

End of ‘Golden Era’?
Hanging up on Huawei, founded by a former People’s Liberation Army engineer, marks the end of what former Prime Minister David Cameron cast as a “golden era” in ties, promoting Britain as Europe’s top destination for Chinese capital. Cameron toasted the relationship over a beer with President Xi Jinping in an English pub, which was later bought by a Chinese firm.
Trump, though, has repeatedly asked London to ban Huawei which Washington calls an agent of the Chinese Communist state — an argument that has support in Johnson’s Conservative Party.
Huawei denies it spies for China and has said the United States wants to frustrate its growth because no US company could offer the same range of technology at a competitive price.
China says banning one of its flagship global technology companies would have far-reaching ramifications.
In January, Johnson defied Trump by allowing what he called high-risk companies’ involvement in 5G, capped at 35%.