China's economy slows as Beijing wrestles with debt

China's economy slows as Beijing wrestles with debt
Workers install steel beams on a building under construction in Beijing on Oct. 26, 2021. (AP)
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Updated 01 November 2021

China's economy slows as Beijing wrestles with debt

China's economy slows as Beijing wrestles with debt
  • Finally, Xi’s government is confronting the problem by clamping down on borrowing by a real estate industry that supports millions of jobs

BEIJING: China’s economic rebound from the coronavirus pandemic is stalling as President Xi Jinping’s government cracks down on surging corporate debt.
For a decade, the ruling Communist Party has talked about shifting to economy based on spending by 1.4 billion consumers instead of on building factories and apartments. But with each slowdown, Beijing fell back on pepping up growth with more construction and borrowing.
Finally, Xi’s government is confronting the problem by clamping down on borrowing by a real estate industry that supports millions of jobs.
That is sending shockwaves through the economy. Businesses and households are jittery as housing sales and construction slump. That is chilling auto and retail sales. It has possible global repercussions as China buys less steel and other building materials.
“Many customers would like to wait and see,” said Liang Qiming, a salesman for online real estate broker 5i5j.com in Nanchang, a southern provincial capital that was turned into a boomtown by a flurry of construction over the past two decades.
China became the world’s factory, but the bigger power driving its economic boom was a construction frenzy that took off in the late 1990s. Developers and local governments poured borrowed money into blanketing the country with new apartments, office towers, shopping malls, bridges and railways.
Xi’s government appears to be willing to accept a politically painful slowdown to get that debt under control and achieve the longer-term goal of self-sustaining, safer growth.
Beijing “doesn’t want growth at all costs, followed by the likely or inevitable financial market crash, which is very much the sort of European-U.S. model,” said Robert Carnell, head of Asia research for ING.
Financial markets are on edge about whether one of the biggest developers, Evergrande Group, might be allowed to collapse under 2 trillion yuan ($310 billion) in debt as a warning to others.
Beijing wants to make sure families receive apartments sold to them by Evergrande before they were built, as is common in China, economists say. But they say it is trying to avoid sending the wrong message by bailing out the company.
Evergrande is a “pre-emptive cleanup,” Carnell said.
China revived from the coronavirus pandemic earlier than the United States, Europe or Japan, but but that rebound quickly flattened out.
Depressed by the building slump, the economy expanded just 4.9% over a year earlier in the three months ending in September much weaker than the previous quarter’s 7.9% growth. Compared with the previous quarter — the way other major economies are measured — growth in the three months ending in September fell to 0.2%, among the weakest of the past decade.
Housing sales fell 32% in September from a year earlier. Buyers were put off by curbs on mortgage lending and anxiety about whether developers might fail to deliver apartments paid for in advance. That means less spending on furniture and appliances.
With no sign Beijing will ease up, forecasters expect the economy to weaken further, since consumers who are reluctant to spend won't fill the gap left by lower investment.
This quarter's growth might fall as low as 3% over a year ago, according to Nomura. Bank of America cut its full-year forecast from 8% to 7.7%, which still would be among the world’s strongest. It slashed next year’s outlook from 5.3% to just 4%.
The total owed by companies, households and the government rose to almost the equivalent of three times annual economic output last year from 270% in 2018 — high for a middle-income country.
Xi affirmed his priorities at an August planning meeting, calling for “high-quality development” and “forestalling major financial risks,” according to the official Xinhua News Agency.
“China is in the middle of a transformation from growth driven by blind investments to high-quality growth,” said Zuo Xiaolei, an economist in Beijing.
Regulators tightened control over use of debt by real estate developers last year. Hundreds already had gone bankrupt following other restrictions imposed since 2017.
Tightening control, Beijing on Oct. 15 declared 19 of China's biggest banks that account for three-quarters of their industry's assets to be “domestic systemically important banks" that will face closer government scrutiny and lending controls.
A midsize developer, Modern Land (China) Co., announced it failed to pay off on a $250 million bond due Oct. 25. Earlier, another developer, Fantasia Holdings Group, missed a $205.7 million payment to bondholders due Oct 5.
Evergrande has caused more anxiety due to its vast debt, which includes $18 billion owed to foreign bondholders.
It failed to make a bond payment due Sept. 23. An official newspaper said the company avoided being declared in default by wiring $83.5 million for the payment on Oct. 22, one day before the end of a 30-day grace period.
“The risk of a sharper slowdown in real estate activity can’t be ruled out,” Tommy Wu of Oxford Economics said in a report.
Meanwhile, the economy also faces headwinds from power rationing imposed in major manufacturing areas to meet official efficiency goals. Automakers and other factories have been disrupted by shortages of processor chips.
Auto sales plunged 16.5% in September from a year earlier, according to the China Association of Automobile Manufacturers.
Buyers are uneasy about the pandemic and economic outlook, said Chu Xianwu, who sells Jeeps at Shandong Xinju Auto trading Co. in the eastern city of Jinan. He said sales there were down 20% from six months ago.
“I really hope the situation will improve in the near future,” Chu said.


Bank of England official warns of tough times for crypto

Bank of England official warns of tough times for crypto
Updated 17 May 2022

Bank of England official warns of tough times for crypto

Bank of England official warns of tough times for crypto
  • G7 to discuss crypto-asset regulation, says French central banker

RIYADH: Investors in crypto currencies should expect more difficult times ahead as tightening financial conditions around the world stoke appetite for safer assets, Bank of England Deputy Gov. Jon Cunliffe said on Tuesday.

Asked at a Wall Street Journal conference if rising interest rates would ramp up pressure on crypto currencies, Cunliffe said: “Yes, I think as this process continues, as (quantitative tightening) starts in the US ... I think we’ll see a move out of risky assets.” Cunliffe added that the conflict in Ukraine also had the potential to cause a renewed flight to safer assets.

Bitcoin, the world’s largest cryptocurrency, fell as low as $25,401 on Thursday, its lowest since Dec. 2020. It hit a record high of $69,000 in November. 

However, it traded higher on Tuesday, up 0.2 percent to $30,418 as of 08:52 a.m. Riyadh time.

Ether, the second most traded cryptocurrency, was priced at $2,077, up 0.32 percent, according to data from CoinDesk.

G7 meeting

The regulation of crypto-assets is likely to be discussed at a meeting of Group of Seven finance chiefs this week in Germany, French central bank head Francois Villeroy de Galhau said on Tuesday.

“What happened in the recent past is a wake-up call for the urgent need for global regulation,” Villeroy told an emerging markets conference in Paris, referring to recent turbulence in crypto-asset markets.

“Europe paved the way with MICA (regulatory framework for crypto-assets), we will probably ... discuss these issues among many others at the G7 meeting in Germany this week,” he added.

Grayscale to launch digital assets

Grayscale will list an exchange-traded fund in Europe made up of companies representing the “Future of Finance,” the world’s largest cryptocurrency asset manager said in a statement on Monday. 

The ETF, tracking the “Bloomberg Grayscale Future of Finance Index,” will be listed on the London Stock Exchange, Italy’s Borsa Italiana and Germany’s Deutsche Börse Xetra and begin trading on May 17. It is the first time that US-based Grayscale has listed a fund in Europe.

The index contains a mixture of companies involved in digital currencies including asset managers, exchanges, brokers, technology firms, as well as firms directly involved in cryptocurrency mining. “For us, the digital economy is primarily being driven through the proliferation of digital assets,” said Grayscale CEO Michael Sonnenshein.


Digital transformation, women participation are the need of the hour, says VP Visa CEMEA

Digital transformation, women participation are the need of the hour, says VP Visa CEMEA
Updated 18 May 2022

Digital transformation, women participation are the need of the hour, says VP Visa CEMEA

Digital transformation, women participation are the need of the hour, says VP Visa CEMEA

RIYADH: In a post-pandemic world, digital transformation has been one of the main changes for companies and economies as a whole.

In an exclusive interview with Arab News on the sidelines of the Arab Women Forum in Dubai, Visa CEMEA Vice President of Marketing Christine Harb emphasized the need for digital transformation and women’s representation.

“I believe that digital transformation is done in multiple phases. There are pretty traditional organizations in the way they operate and are trying to move into a more agile space,” she said.

Harb added: “When you look at how digital is transforming the world and the metaverse impacting on organizations, there is a need to rethink how people collaborate and engage. So it’s not just about making sure that you have the right tools or enabling employees and people to connect.”

She explained that the shift is not only in digitizing the economy but also in how women’s representation has been a focus for organizations and educational spheres.

“Now, we are already equipped. So maybe we are on the right track. But, still, a lot needs to be done, mainly around policies and regulations that would protect women and open new doors to them, when it comes to, you know, bigger roles, but also allowing them to be their authentic selves,” she concluded.


Commercial Bank of Kuwait plans to digitize, says CEO

Commercial Bank of Kuwait plans to digitize, says CEO
Updated 18 May 2022

Commercial Bank of Kuwait plans to digitize, says CEO

Commercial Bank of Kuwait plans to digitize, says CEO

DUBAI: Elham Mahfouz, the chief executive officer of the Commercial Bank of Kuwait, said that robots will play a major role in the future, with 85 million jobs expected to be taken over in the next two to three years.

Speaking to Arab News at the Arab Women Forum, Mahfouz said that the bank’s next plan is digitization and that, in the next two to three years, the look of banks will be different.

CBK is the only bank to have SwatchPAY, which is a smart-watch payment service, she informed.

Beginning her journey in banking around 35 years ago, Mahfouz climbed up the ladder after starting as a credit analyst. She has been the CEO of the bank for the last eight years, she informed.

“Being in a high position can favor the institution if you want to implement certain kinds of dreams that you have to get the institution in a certain way and pave the way with the team,” she added.

Mahfouz told Arab News that one of the things that stood out to her as a woman working in the banking sector was getting more support from males than females.

Self-development, focus, and patience are factors that have influenced her journey to reaching the top post, Mahfouz said.

She added that the following generations are tech-savvy and are very smart when it comes to technological advances. However, Mahfouz said they have to have patience and read more.


Women should not relinquish their rights in business, says Suzy Kanoo

Women should not relinquish their rights in business, says Suzy Kanoo
Updated 18 May 2022

Women should not relinquish their rights in business, says Suzy Kanoo

Women should not relinquish their rights in business, says Suzy Kanoo

DUBAI: When it comes to taking a huge step like running a family business, most entrepreneurs would flinch, especially in a male-dominated industry. Female successors would instead pass their rights to a male than take the path of leadership.

In an exclusive interview with Arab News, the CEO and president of Khalil bin Ebrahim Kanoo Co. and International Motor Trading Agency, Suzy Kanoo, shared her advice on what women should do when put in that position, and it’s not relinquishing their rights.

Speaking on the sidelines of the Arab Women Forum event in Dubai, Kanoo, who has also authored “Hear Us Speak: Letters from Arab Women,” expressed that one of the main obstacles women face in the business world is not believing in themselves.

“The Japanese call it Ikigai. Find a purpose and passion, do it well, and make sure it benefits society. Whatever it is, anything that you think is insignificant isn’t insignificant for that individual. So, find that purpose and do it well,” she added.

Kanoo has been the voice of the Arab world, and her book discusses real-life stories about Arab women that have experienced physical or emotional abuse but outlived their circumstances.

“My book emphasizes that never let a male, whether a cousin or a brother, force you or coerce you into signing documents asking you to relinquish your rights of the family business,” she said.

Her book brought to light the circumstances of the marginalized women who succumbed to male domination and gave away what was rightfully theirs.

However, Kanoo feels those were different times. She finds Gen Z is the most empowered generation. They believe that nothing should stop them from achieving their goals. In addition, they understand technology better than the previous generations.

But the struggle is not over. Even emancipated women have to fight on multiple fronts. An accomplished writer and businesswoman, Kanoo is currently facing problems with the automotive business. Her production declined by 50-60 percent.

Does that mean she is letting off the reins? No chance. The feisty lady is expanding into different sectors, opening a restaurant from personal investments and launching an advisory company for blockchain technology.

 

 

 

 

 


Egypt expects $8bn investments in energy sector this year, minister says 

Egypt expects $8bn investments in energy sector this year, minister says 
Updated 17 May 2022

Egypt expects $8bn investments in energy sector this year, minister says 

Egypt expects $8bn investments in energy sector this year, minister says 

RIYADH: Egypts expects that the value of investment in the energy sector would range between $7 to $8 billion during the current fiscal year, the minister of petroleum and mineral resources told Alarabiya. 

Tarek El-Molla added that the figures were under review with international companies, noting that changes in global oil prices require increased investment plans.

He said the government is currently focusing on maximizing the use of natural resources, confirming that Egypt aims to return to the oil production levels of 5 years ago.