I. Numbers, Lethargy & Libra
Chinese president Xi Jinping convened a high-level meeting on Tuesday to discuss Party-building in central Party and state institutions. If you’d forgotten who is boss in the Party-state system, Xi had a not-so-subtle reminder. He said state “institutions should actively respond to what the CPC Central Committee advocates, implement what it decides, and stop what it forbids.” And then there was more to follow, as he hit out at official lethargy, which also tells us much about how the anti-corruption campaign and centralisation of authority has slowed the wheels of the bureaucratic machinery.
“You absolutely cannot view anti-corruption as an excuse to not accept responsibility or to do nothing…Be brave to handle heavy burdens, crack hard nuts and handle hot potatoes…Don’t be muddle-headed officials who are politically apathetic and do things half-heartedly; don’t be lazy officials who spend the whole day eating and idle their time away,” he reportedly said.
Meanwhile, Chinese GDP data for the first half of the year are expected next week. Finance Minister Liu Kun is confident that growth will remain between 6% to 6.5% for the year. A Reuters poll pegs it at 6.2%, a number that Fitch Ratings agrees with. This week GAC released trade data, showing a year-on-year decline by exports by 1.3% in June, while imports fell 7.3% in the same period. Interestingly, the declines were lower than expected. Also, China’s overall trade surplus in June was $50.98 billion, and that with the US was $29.92 billion in June, up from $26.89 in May. For the first half of 2019, China’s trade surplus with the US was $140.48 billion — higher than $133.76 billion in the first half of 2018.
Also this week, the PBOC also released data regarding lending. It showed that Chinese banks extended 1.66 trillion yuan ($241.47 billion) in net new yuan loans in June, up from 1.18 trillion yuan in May but less than expected. Reuters reports that household loans, mostly mortgages, rose to 761.7 billion yuan from 662.5 billion yuan in May, while corporate loans rose to 910.5 billion yuan from 522.4 billion yuan. Broad M2 money supply rose 8.5% in June from a year earlier, the same pace as May. Despite that, there’s been more than 55 billion yuan ($8 billion) of local note defaults took place in the first half of 2019, including 20 first-time defaulters, reports Bloomberg. VC deals in the country plummeted in the second quarter. The number of deals nearly halved to 692 and value of investments fell 77% year-on-year to $9.4 billion.
Finally, Wang Xin, director of PBOC’s research bureau, suggested that the Chinese central bank could be quickening up its efforts to launch a digital currency. This is, of course, in response to Facebook announcing plans to establish the Libra. Also on record this week was Mu Changchun, PBOC deputy director. He wants Libra to be put under the oversight of monetary authorities and forsees a new set of challenges for the Yuan. For more on this, do check out this thread by the Peterson Institute’s Martin Chorzempa, who terms the Libra as “the greatest threat to Chinese fintech dominance.”
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