CiCM 2nd August 2023

NEWS IN CHINA

In a meeting held on 2 August, the People’s Bank of China favoured downward interest rates and down payment ratio for housing loans. The bank has instructed commercial banks to implement city specific and differentiated housing credit policies to adapt to the conditions of the housing market. The bank has proposed amendments to the interest rates of already existing personal housing loans. The objective is to keep the real estate market afloat and keep the financing stable for investments in housing properties. The initiative will also facilitate technological innovation, green development and the cultivation of small, medium and micro enterprises. Implementation of the “Sixteen Financial Measures” including guarantee loan support loan, real estate financing, support for housing leasing, urban village renovation and affordable housing construction was also prioritised. The meeting also discussed foreign exchange policies, development of digital Yuan and simplification of the process of foreign investment. This was the first PBOC work conference after the new central bank governor, Pan Gongsheng, was appointed.
President Xi Jinping, issued instructions on flood prevention and disaster relief, demanding all out search and rescue to save people trapped in floods caused by typhoon Doksuri. Beijing and Hebei provinces got inundated by heavy precipitation in northern China and areas along the Yellow and Huaihe rivers. The rains have caused 11 deaths and 27 people were missing. Beijing’s meteorological service reported that an average of 260 mm of rain descended on the city on Tuesday. President Xi urged everyone to make every effort to save people and ensure proper treatment to victims affected by the flooding. He commanded that individuals should be resettled and compensated for their losses and public infrastructure which was damaged, should be repaired as soon as possible. He emphasised that this was a crucial time for the nation and during which authorities should reinforce monitoring, forecasting and early warning. However, rains have reduced in intensity but the situation is still critical in some parts of northern China. China’s Vice Premier Zhang Guoqing stressed on making the all-out efforts while guiding relief work in Beijing.
China’s online regulators have invited the public to comment on draft rules to curb internet addiction and cultivate socialist values among children and teenagers. The Cyberspace Administration of China stated that rules will apply to everyone aged under 18 and the consultation would last for one month. The objective of rules is to improve the positive role of the Internet and develop a favourable environment for minors. The CAC notice also highlights that the new rules will be applicable to all mobile devices, smartphones, laptops, digital wearables etc. The regulators want to push content which has higher “social interest”. There are several features for different age groups and time management. The minor mode also enables more efficient parental management than youth mode. CAC also encouraged platform companies to use big data and algorithms to set up policing infrastructure to put the new restrictions into practice.
Li Dong, a former deputy general manager of the CHNEnergy Investment Group, was expelled from the Communist Party of China on August 2. He faced allegations of violations of party discipline and national laws. According to the Central Commission for Discipline Inspection and the National Supervisory Commission, Li did not cooperate in the investigation. He is accused of violating the eight point decisions on improving party and government conduct by attending banquets, accepting arrangements of travel, playing golf and receiving gifts and money. He was engaged in money trading by using his influence in product sales and business operations. Li also occupied important positions at China Shenhua Energy Company, a coal-based company associated with CHNEnergy Investment Group. He has been under investigation since February. His case has been handed over to the procurator for further process.
China’s economic regulator has announced a series of 28 detailed measures to stimulate economic activity and tackle the problems faced by private enterprises. The measures are poised to work on five key aspects- promoting fair market access, offering strong financial support, boosting legal guarantees, optimising services and creating a sound atmosphere for private economies. The measures comprise cutting red tape to smoothen the enterprises’ participation in national science and technology projects. ‘Green Light’ investment also received a push to invest in new technologies and services. The measures preceded guidelines in July to drive private sector growth. The National Development and Reform Commission highlighted that private capital will participate in major profitable projects and real estate infrastructure.

SOCIAL MEDIA CHATTER IN CHINA

A video of a mother beating her son over homework has gone viral. The video is dated 27 July where a woman in Anhui province is screaming at the boy and repeatedly slapping him as he tries to ward off the blows. The woman is screaming “Your summary is not correct. What are you writing?” Once the boy moves out of the frame, the mother seems frustrated and is seen continuously striking the furniture. The video has drawn condemnation of the woman’s behaviour on social media. Some are lashing out at the woman for her inappropriate behavior while others express understanding of the mothers frustration and lamenting how the overly competitive Chinese education system can drive parents insane. In China, prospects for university graduates have become so bleak that parents and children are under pressure to perform well at any cost. In a 2021 viral video, a man was enraged while tutoring his daughter that his jaw got dislocated. In a similar viral video, a man gets so frustrated teaching his daughter that he started hitting the wall in anger.

INDIA WATCH

China’s currency swap agreements with developing and global south countries have implications for the international economic order and India’s interests. Bilateral swaps are denominated in RMB and the currency of another partner, leading to the partner using RMB for shorter periods on low interest rates with its own currency as implicit collateral. As China is a big provider of goods and a source of foreign investments, these transactions in RMB instead of US Dollars suit China and even the partner country. Currently, China is engaged with 41 countries in currency swap agreements with a total amount exceeding RMB 3.5 trillion from 2009 to 2020. The Ukraine war and growing antagonism between Russia and the US has also afforded China the opportunity to push more RMB in the international market.

Following in the footsteps of China, India has also launched its own currency swap agreements. Excessive dependence on the Dollar leaves a country vulnerable to the US pressure and spillover of financial risk. These measures are necessary on two fronts: to maiantaim strategic economic independence from the Dollar to prevent spillover of financial risks and compete with China in the extension of financial aid through currency swap agreements. There are several countries which have currency swap agreements with India: Botswana, Fiji, Germany, Guyana, Israel, Malaysia, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka and the UK.

However, there is a flip side to the Indian de-dollarization efforts. Attempts to circumvent the dollar would produce very little results and in turn, may give a push to the internationalization of the Yuan. Experts are of the opinion that as long as China maintains its extreme capital controls on the use of the Yuan, it can not be adopted by other countries as a reserve currency.

Prepared By

Rahul Kheswa

Rahul Kheswa has recently completed his MA in East Asian Studies with a specialisation in China from the University of Delhi. For his BA, he majored in History and Political Science. During his MA, he learnt elementary Mandarin Chinese through elective course. Rahul’s research interest lies in Chinese society and continental philosophy.