Notes
Compiling information on China’s economic stimulus measures.
Is this a multi-pronged approach? Risk management measures include expanding regulatory scrutiny of broader segments of the formal banking sector and shadow-banking sectors.
Holiday home sales rose 27.1% year-on-year due to government stimulus. We’re beginning to see signs of unleashing pent-up pandemic demand. Chinese citizens are moving closer to adjusting consumption habits in a post-pandemic economy.
It’s unclear if Chinese consumption habits will return to their pre-pandemic levels. It’s unclear if existing SARS-CoV-2 variations will mutate, leading to further economic and/or public health disruptions.
Economic stimulus will continue to be driven by fiscal policy. I’m still trying to understand how this mechanism works. Are policies implemented at local government levels largely guided by central government mandates? State Council? If State Council, what influence does incoming Premier Li Qiang have over current Premier Li Keqiang?
Geopolitically we’ve entered a new phase of China’s pandemic policy. As demand rebounds following the lifting of China’s stringent pandemic policy, Chinese citizens will begin traveling to other countries at higher rates. Whether Chinese overseas consumer spending ever fully rebounds to pre-pandemic levels is unclear.
Another question I’d like to answer is whether unleashing pent-up Chinese consumer demand is inflationary or deflationary. Intuitively it seems unleashing Chinese consumer demand must be inflationary because of heightened pressures on commodity demand. Is unleashing pent-up Chinese demand inflationary or deflationary?
China Economy
China’s Finance Minister Reiterates Plan for Fiscal Expansion (Bloomberg)
China’s Finance Minister Liu Kun reiterated plans to appropriately expand fiscal spending to aid economic recovery, while pledging to prevent systemic risks.
Liu said, according to an interview with the official Xinhua News Agency on Tuesday, that China’s recovery is still not solid. He cited risks including a contraction in demand and disruptions to supply.
China Releases Draft Version of Financial Stability Law, Outlines Establishment of Financial Stability Guarantee Fund (China Banking News)
China has just seen the release of the draft version of a new law on financial stability that outlines the creation of a specialised national fund to ward off systemic risk in the finance system.
The “Financial Stability Law (Draft)” (金融稳定法(草案)) released on 30 December call for the establishment of a financial stability guarantee fund that will provide reserve funds for the disposal of financial risk, and be subject to “overall management via overall coordination measures.”
China Outlook: Earlier Reopening to Drive Faster Rebound (Danske Bank)
The Chinese reopening happened faster than we expected, leading us to revise the growth profile for China. We now expect GDP to take a bigger hit in Q4 and Q1 but that the recovery starts already in February/March, 3-4 months earlier than we previously expected. The weak start of the year pulls down the average of 2023 taking our annual growth forecast down to 4.6% (previously 4.9%) whereas a stronger starting point in 2024 pushes up the growth forecast to 6.0% (previously 5.3%).
China Pandemic Policy
US Says Covid Tests For China Travelers Based 'On Science' (Barron’s)
The United States said Tuesday that the requirement of Covid tests for travelers from China was based on science and due to Beijing's lack of transparency on surging cases.
China earlier Tuesday denounced measures taken by a number of countries on its travelers as "unacceptable," two days before air passengers two years and older will be required to show a negative Covid test to enter the United States.
White House Says No Cause for China Retaliation Over Covid Curbs (Bloomberg)
The White House said there’s no reason Beijing should retaliate against the US and other nations that have imposed Covid restrictions on its travelers, saying the moves were justified on public health grounds as China experiences a surge in cases.
“There’s no cause for retaliation here. Just because countries around the world are taking prudent health measures to protect their citizens, that’s what you’re seeing from us and others,” White House Press Secretary Karine Jean-Pierre said Tuesday in a briefing.
China Technology
What’s next for the chip industry (Technology Review)
The year ahead was already shaping up to be a hard one for semiconductor businesses. Famously defined by cycles of soaring and dwindling demand, the chip industry is expected to see declining growth this year as the demand for consumer electronics plateaus.
PRC State Media
Digitalization gaining ground in China on wider application (China Daily)
Chinese enterprises' expenditures on digital businesses will witness speedy growth in 2023, as cutting-edge digital technologies, such as 5G, artificial intelligence and cloud computing, have been increasingly applied into a wide range of fields and integrated with the real economy, according to market research company International Data Corp.
The digital transformation of enterprises will stand at an inflection point this year and the next five years will still be a golden period for pushing forward digitalization, IDC said, expecting more than 50 percent of the global GDP will be driven by digitally transformed enterprises in the next five years.
China blasts restrictions targeting Chinese passengers (CGTN)
Chinese Foreign Ministry spokesperson Mao Ning told a press briefing on Tuesday that it is unacceptable for some countries to have adopted entry restrictions that target only passengers from China, as that epidemic control response lacks scientific merit.
"We firmly oppose the practice of manipulating epidemic prevention and control measures to achieve political goals, and will take corresponding measures according to the principle of reciprocity," Mao said.