Newsletter 92 - November 13, 2021
Welcome to the 92nd edition of Trade War.
China’s sixth plenum closes with a “resolution on history,” a demonstration of Xi Jinping’s ever more formidable power.
A virtual summit between U.S. president Joe Biden and Xi is set for Monday. And U.S. intelligence struggles to understand Beijing’s decision-making.
China’s real estate sector looks ever more battered. And foreign investors keep pumping money in to Chinese stocks and bonds.
Exalting Xi as one of China’s greatest leaders
By getting a resolution on history included in the just-closed sixth plenum, only the third such resolution in the last 100 years, Xi Jinping has further paved the way for extension of his rule, reports the New York Times.
“Under Mr. Xi’s leadership, China has “made historic achievements and undergone a historic transformation,” said an official summary, or communiqué, from the meeting,” reported the Times. “Under Mao, Deng and now Mr. Xi, the communiqué said, China had “achieved the tremendous transformation from standing up and growing prosperous to becoming strong.”
“Mr. Xi has faced a succession of crises, but he has often been able to turn them into vindication for his hard-line ways. He responded to months of pro-democracy unrest in Hong Kong by imposing a harsh security law. He applied sweeping restrictions to limit the spread of Covid-19 in China. And Beijing claimed victory after Canadian authorities released Meng Wanzhou.”
Name tally: Xi - 17; Mao - 7; Deng just 5
In a demonstration of power, Xi Jinping got mentioned 17 times in the communique of the 6th Plenum; that compared to only seven mentions for Mao and just five for Deng Xiaoping.
Common Prosperity only gets one line
Meanwhile, “Common Prosperity” only got one mention, tweets University of Michigan political scientist Mary Gallagher.
6th Plenum Communique in all its glory
The folks at Neican have put together a Chinese-English side-by-side version of the 6th Plenum Communique. (The text of the history resolution has yet to be released.)
Biden - Xi virtual summit scheduled for Monday
A virtual summit between U.S. president Joe Biden and Chinese leader Xi Jinping is scheduled to happen Monday evening, the White House has confirmed, reports Politico.
“Although no major breakthroughs are expected on hot-button issues — including tensions over Taiwan, the mostly Muslim region of Xinjiang, and Hong Kong — the meeting could produce initiatives on a range of issues, including easing of visa restrictions, the creation of a bilateral nuclear weapons dialogue and a possible framework to ease trade frictions,” Politico reports.
The two leaders have spoken twice over the phone so far this year, with a 90-minute call on September 9 being the most recent contact.
US intelligence struggles to understand Xi’s China
The U.S. is struggling to get adequate intelligence on decision-making inside the Xi government, report Bloomberg New’s Peter Martin, Jennifer Jacobs, and Nick Wadhams.
“That reality comes after officials in both the Trump and Biden administrations said they were surprised by Beijing’s rapid moves to consolidate control of Hong Kong, project military power across the South China Sea, limit probes into the origins of Covid-19, undercut Chinese companies going public in the U.S. and ramp up hacking against adversaries,” reports the financial news services.
“Xi’s sweeping efforts to change China’s domestic politics and consolidate his control also have taken a toll on American intelligence,” Bloomberg reports. “The shift from a system of “collective” leadership under former Presidents Jiang Zemin and Hu Jintao toward one dominated by Xi means that the CIA has had to go from focusing on the inner circles of seven or even nine top leaders to, effectively, just one.”
Malaise spreads in struggling property sector
Signs of malaise are spreading throughout China’s indebted property sector, report the New York Times’ Alexandra Stevenson and Joy Dong.
“Money is becoming harder to find because the cost of borrowing has soared, fewer people are buying apartments and the value of property is falling. Property companies have $40 billion of payments to make to foreign investors alone over the next two months,” the Times reports.
“As Chinese real estate developers fail to meet their most basic financial obligations, experts are warning that Evergrande’s problems have already started to have a dangerous spillover effect.”
Why China must deleverage its property industry
Here is a good thread on why China needs to continue to rein in property sector debt, even at the risk of hurting the broader economy - from Peking University finance professor Michael Pettis.
So much for China being ‘uninvestable’
Despite the market crackdowns, foreign investors are putting ever more money into renminbi stocks and bonds, report the Financial Times’ Hudson Lockett and Tabby Kinder.
The total invested by foreign investor into renminbi stocks and bonds has grown some $120 billion this year to reach $1.1 trillion, “as global capital becomes ever more intertwined with Chinese finance,” reports the business paper.
“The increase in foreign holdings of Chinese assets comes during a rough patch for some of the country’s markets. The CSI 300 barometer of shares traded in Shanghai and Shenzhen is down 7 per cent for the year to date. Government and corporate bonds issued in renminbi have generated returns of about 4 per cent this year,” reports the Financial Times.
“Foreign trading of onshore stocks and bonds has increased as western banks including Goldman Sachs and JPMorgan have pushed to acquire licenses and wholly-owned subsidiaries in mainland China, which has led to a greater research effort on Chinese companies,” reports the paper. “HSBC and Fidelity recently turned positive on Chinese assets for the first time since the regulatory crackdown began in July.”
And FDI floods into China
Meanwhile, foreign direct investment into China is likely to set a new record high this year, tweets Bloomberg News’ Tom Hancock.
Xi Jinping’s particular obsession with controlling history is seen in both his policing of the past, with a hotline to report “historical nihilism,” and in the latest resolution on history, reports Jesse Lau for the New Statesman.
“Such efforts have been ramped up this year, which marked the 100th anniversary of the founding of the party in July. A newly amended criminal code punishing those who slander the nation’s heroes and martyrs took effect in March, allowing prosecutors to seek prison sentences of up to three years.”
Here is an interesting thread on house ownership trends in China and how that would affect the impact of a property tax, from Modern Alpha’s Liqian Ren.
As part of its campaign to reduce property sector debt, China has cracked down on the recent trend of developing towns for tourism and industry outside megacities, reports the South China Morning Post.
“The percentage that land sales and real estate taxes contribute to local government fiscal revenue has been rising every year since 2015, and reached a peak of 37.6 per cent in 2020, according to public data,” the paper reports.
ICMYI: Recent panel on Great Power Politics
In case you missed it, here is the video of the conversation on “Great Power Politics: The Biden Administration and China” I recently moderated with some really great speakers, hosted virtually by the Asia Society Northern California.
And a Montana picture
I had to spend a recent Sunday in the office but the view wasn’t bad at all.