China
The cost of US debt and rebalancing Asian growth
Author: Peter Warr, ANU Since the Asian financial crisis of 1997–98, the countries of East Asia have, in aggregate, run huge annual current account surpluses. The counterparts of these surpluses, including Europe and the US , have been correspondingly huge current account deficits. This process has continued for over a decade and a half, and huge stocks of debt have accumulated. Much of this is US government debt owed to the central banks of the East Asian countries. About half of it is held by China . It is expected that the debt will eventually be repaid and this implies that the surpluses must eventually turn into deficits, and vice versa. Indefinite accumulation of debt is unsustainable. Current account imbalances are not necessarily a problem. They reflect what international economists call international inter-temporal trade. One country (the surplus country) is exchanging current goods and services for financial assets, which are claims on goods and services in the future. The other country (the deficit country) is doing the reverse. Mutual gains from trade arise from these transactions because the initial circumstances of the countries involved are not the same. For some countries it makes sense to save more now, because they have a younger working age population, for example, in order to consume or invest more later. For others, the reverse applies. In this respect, inter-temporal trade is not fundamentally different from contemporaneous trade in goods and services. But basic differences do exist. The time dimension can mean that the individuals obliged to repay a debt may not be the same as those who incurred it. So the outcomes chosen by this generation of Americans, for example, can create an unwelcome problem for the next generation. Many observers regard the present global imbalances as unsustainable, even in the short run. First, East Asian countries may be unwilling to continue to accumulate US debt and even wish to reduce the stock they hold. Second, the US may be unwilling to allow this accumulation of indebtedness to continue and seek to reduce the stock of debt they currently owe. The two are not mutually exclusive and could happen at the same time. They both rest on the fear that the burden of debt servicing might suddenly become intolerable for the debtors, notably the US, meaning an unexpectedly rapid adjustment becomes necessary. East Asia’s current account surpluses may have to decline, and even turn into deficits, very quickly. This must happen eventually — the question is when . It might not be a problem if it happens ‘gradually and predictably’. But if it happens ‘soon’, at an unexpectedly rapid rate, there may be a serious adjustment problem involved. If the problem is anticipated it might be possible to avoid the large-scale unemployment and other social costs that would otherwise result. But these events are uncertain, and ‘growth rebalancing’ is essentially a problem of risk management. From the perspective of the East Asian countries, the interest in growth rebalancing is motivated by two concerns. First, there is the possibility that current account surpluses (positive flows) will turn into deficits (negative flows) quickly, leading to social disruption and other adjustment costs. Second, there is the fear that the stock of debt owed to them may become so high that it becomes impossible to repay. The first concern is more immediate. Especially since the Asian financial crisis, the countries of Asia and the Pacific have, to varying extents, focused their production towards exports and away from their domestic markets. But if the current account surpluses are to be reduced significantly, or even reversed, then resources must be reallocated towards production for the domestic market to avoid massive unemployment. For the deficit countries the problem is exactly the reverse. The policy imperative is similar in both cases: avoid the disruption — especially large-scale unemployment — resulting from having to adjust too rapidly. The issue is not really whether such growth rebalancing will occur, but when, at what rate and by what means. In the current global environment Asia is vulnerable to such an adjustment problem arising at short notice. Some ‘rebalancing’ now — away from reliance on external demand and towards domestic demand — can reduce this vulnerability by reducing Asia’s export dependence. A simple model of the global demand and supply of loanable funds can be used to bring out a key feature of the adjustment options. Suppose the deficit countries, principally the US, wish to reduce their current account deficits. Is it better for the US to make the adjustment itself or attempt to induce Asia to adjust by reducing its surplus? If the US adjusts, its excess demand for funds declines, the level of its current account deficit declines and world interest rates fall. If Asia contracts its excess supply of funds, the same combination of current account balances may result, but with an increase in world interest rates. Given the huge level of its stock of debt, the US has a strong interest in low world interest rates. It should therefore do the adjusting itself and not be berating Asia to reduce its current account surpluses. Peter Warr is John Crawford Professor of Agricultural Economics and Head of the Arndt-Corden Department of Economics in the Crawford School of Economics and Government at ANU. How should G20 help global rebalancing? Asian Development Bank and the invention of a new Asian growth paradigm The Greek tragedy: Global debt crisis and balance sheets
Author: Peter Warr, ANU
Since the Asian financial crisis of 1997–98, the countries of East Asia have, in aggregate, run huge annual current account surpluses.
The counterparts of these surpluses, including Europe and the US, have been correspondingly huge current account deficits. This process has continued for over a decade and a half, and huge stocks of debt have accumulated. Much of this is US government debt owed to the central banks of the East Asian countries. About half of it is held by China. It is expected that the debt will eventually be repaid and this implies that the surpluses must eventually turn into deficits, and vice versa. Indefinite accumulation of debt is unsustainable.
Current account imbalances are not necessarily a problem. They reflect what international economists call international inter-temporal trade. One country (the surplus country) is exchanging current goods and services for financial assets, which are claims on goods and services in the future. The other country (the deficit country) is doing the reverse. Mutual gains from trade arise from these transactions because the initial circumstances of the countries involved are not the same. For some countries it makes sense to save more now, because they have a younger working age population, for example, in order to consume or invest more later. For others, the reverse applies. In this respect, inter-temporal trade is not fundamentally different from contemporaneous trade in goods and services. But basic differences do exist. The time dimension can mean that the individuals obliged to repay a debt may not be the same as those who incurred it. So the outcomes chosen by this generation of Americans, for example, can create an unwelcome problem for the next generation.
Many observers regard the present global imbalances as unsustainable, even in the short run. First, East Asian countries may be unwilling to continue to accumulate US debt and even wish to reduce the stock they hold. Second, the US may be unwilling to allow this accumulation of indebtedness to continue and seek to reduce the stock of debt they currently owe. The two are not mutually exclusive and could happen at the same time. They both rest on the fear that the burden of debt servicing might suddenly become intolerable for the debtors, notably the US, meaning an unexpectedly rapid adjustment becomes necessary.
East Asia’s current account surpluses may have to decline, and even turn into deficits, very quickly. This must happen eventually — the question is when. It might not be a problem if it happens ‘gradually and predictably’. But if it happens ‘soon’, at an unexpectedly rapid rate, there may be a serious adjustment problem involved. If the problem is anticipated it might be possible to avoid the large-scale unemployment and other social costs that would otherwise result. But these events are uncertain, and ‘growth rebalancing’ is essentially a problem of risk management.
From the perspective of the East Asian countries, the interest in growth rebalancing is motivated by two concerns. First, there is the possibility that current account surpluses (positive flows) will turn into deficits (negative flows) quickly, leading to social disruption and other adjustment costs. Second, there is the fear that the stock of debt owed to them may become so high that it becomes impossible to repay. The first concern is more immediate.
Especially since the Asian financial crisis, the countries of Asia and the Pacific have, to varying extents, focused their production towards exports and away from their domestic markets. But if the current account surpluses are to be reduced significantly, or even reversed, then resources must be reallocated towards production for the domestic market to avoid massive unemployment. For the deficit countries the problem is exactly the reverse. The policy imperative is similar in both cases: avoid the disruption — especially large-scale unemployment — resulting from having to adjust too rapidly.
The issue is not really whether such growth rebalancing will occur, but when, at what rate and by what means. In the current global environment Asia is vulnerable to such an adjustment problem arising at short notice. Some ‘rebalancing’ now — away from reliance on external demand and towards domestic demand — can reduce this vulnerability by reducing Asia’s export dependence.
A simple model of the global demand and supply of loanable funds can be used to bring out a key feature of the adjustment options. Suppose the deficit countries, principally the US, wish to reduce their current account deficits. Is it better for the US to make the adjustment itself or attempt to induce Asia to adjust by reducing its surplus? If the US adjusts, its excess demand for funds declines, the level of its current account deficit declines and world interest rates fall. If Asia contracts its excess supply of funds, the same combination of current account balances may result, but with an increase in world interest rates.
Given the huge level of its stock of debt, the US has a strong interest in low world interest rates. It should therefore do the adjusting itself and not be berating Asia to reduce its current account surpluses.
Peter Warr is John Crawford Professor of Agricultural Economics and Head of the Arndt-Corden Department of Economics in the Crawford School of Economics and Government at ANU.
- How should G20 help global rebalancing?
- Asian Development Bank and the invention of a new Asian growth paradigm
- The Greek tragedy: Global debt crisis and balance sheets
Read more from the original source:
The cost of US debt and rebalancing Asian growth
Business
China Dismantles Prominent Uyghur Business Landmark in Xinjiang – Shia Waves
The Chinese government demolished the Rebiya Kadeer Trade Center in Xinjiang, affecting Uyghur culture and commerce, prompting criticism from activists amid concerns over cultural erasure and human rights violations.
Demolition of a Cultural Landmark
The Chinese government recently demolished the Rebiya Kadeer Trade Center in Urumqi, Xinjiang, a vital hub for Uyghur culture and commerce, as reported by VOA. This center, once inhabited by more than 800 predominantly Uyghur-owned businesses, has been deserted since 2009. Authorities forcibly ordered local business owners to vacate the premises before proceeding with the demolition, which took place without any public notice.
Condemnation from Activists
Uyghur rights activists have condemned this demolition, perceiving it as part of China’s broader strategy to undermine Uyghur identity and heritage. The event has sparked heightened international concern regarding China’s policies in Xinjiang, which have been characterized by allegations of mass detentions and cultural suppression, prompting claims of crimes against humanity.
Rebiya Kadeer’s Response
Rebiya Kadeer, the center’s namesake and a notable Uyghur rights advocate, criticized the demolition as a deliberate attempt to erase her legacy. Kadeer, who has been living in exile in the U.S. since her release from imprisonment in 2005, continues to advocate for Uyghur rights. She has expressed that her family members have suffered persecution due to her activism, while the Chinese government has yet to comment on the legal ramifications of the demolition.
Source : China Demolishes Uyghur Business Landmark in Xinjiang – Shia Waves
China
China Expands Nationwide Private Pension Scheme After Two-Year Pilot Program
China’s private pension scheme, previously piloted in 36 cities, will roll out nationwide on December 15, 2024, enabling workers to open tax-deferred accounts. The initiative aims to enhance retirement savings, address aging population challenges, and stimulate financial sector growth.
After a two-year pilot program, China has officially expanded its private pension scheme nationwide. Starting December 15, 2024, workers covered by urban employee basic pension insurance or urban-rural resident basic pension insurance across the country can participate in this supplementary pension scheme. This nationwide rollout represents a significant milestone in China’s efforts to build a comprehensive pension system, addressing the challenges of a rapidly aging population.
On December 12, 2024, the Ministry of Human Resources and Social Security, together with four other departments including the Ministry of Finance, the State Taxation Administration, the Financial Regulatory Administration, and the China Securities Regulatory Commission, announced the nationwide implementation of China’s private pension scheme effective December 15, 2024. The initiative extends eligibility to all workers enrolled in urban employee basic pension insurance or urban-rural resident basic pension insurance.
A notable development is the expansion of tax incentives for private pensions, previously limited to pilot cities, to a national scale. Participants can now enjoy these benefits across China, with government agencies collaborating to ensure seamless implementation and to encourage broad participation through these enhanced incentives.
China first introduced its private pension scheme in November 2022 as a pilot program covering 36 cities and regions, including major hubs like Beijing, Shanghai, Guangzhou, Xi’an, and Chengdu. Under the program, individuals were allowed to open tax-deferred private pension accounts, contributing up to RMB 12,000 (approximately $1,654) annually to invest in a range of retirement products such as bank deposits, mutual funds, commercial pension insurance, and wealth management products.
Read more about China’s private pension pilot program launched two years ago: China Officially Launches New Private Pension Scheme – Who Can Take Part?
The nationwide implementation underscores the Chinese government’s commitment to addressing demographic challenges and promoting economic resilience. By providing tax advantages and expanding access, the scheme aims to incentivize long-term savings and foster greater participation in personal retirement planning.
The reform is expected to catalyze growth in China’s financial and insurance sectors while offering individuals a reliable mechanism to enhance their retirement security.
| This article was first published by China Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, and India . Readers may write to info@dezshira.com for more support. |
Read the rest of the original article.
China
How a scandal over sanitary pads is shaping feminist activism in China
Chinese sanitary pad brands face scandal over misleading product quality and pH levels. Consumer outrage grows amid larger issues of women’s health neglect and activism for better standards linked to declining fertility rates.
A string of prominent sanitary pad brands in China have become embroiled in a scandal about the quality of their products. The controversy began in early November when consumers complained that that the advertised lengths of many sanitary pads were misleading.
Then, a few days later, customers discovered that many pads had pH levels similar to textiles such as curtains and tablecloths that do not come into frequent contact with skin, potentially causing irritation or harm to users.
The anger only intensified when ABC, one of the companies at the centre of the controversy, responded dismissively to concerned consumers. ABC emphasised that it was complying with national standards, and reportedly replied to a complaint with: “If you cannot accept it, then you can choose not to buy it”.
Chinese companies have since apologised for their sub-par products, and ABC has even said that it was “deeply sorry” for its “inappropriate” response. But for many women in China, this scandal is about more than just defective products. It is part of a troubling pattern in which women’s health and dignity is blatantly disregarded.
In 2022, Chinese women took to social media to advocate for sanitary pads to be sold on trains. Their demands were swiftly dismissed, with China Railway saying sanitary pads were “private items” that women should prepare for themselves in advance.
Some people on the internet echoed this sentiment, arguing that it was inappropriate and unhygienic to sell sanitary pads on trains. “You don’t want sanitary pads sold alongside food, do you?”, one wrote.
Remarks like this laid bare not only the stigma surrounding menstrual blood in China, where it is seen as polluting and shameful, but also the widespread ignorance among men about menstruation. This was again highlighted by one social media user who questioned absurdly: “Why can’t women just hold it in?” The recent scandal over poor quality sanitary pads is yet another chapter in this story.
The neglect of women’s basic needs in China has worsened with the government’s push for higher birth rates. China’s ruling Communist party began actively promoting higher birth rates in the mid-2010s after decades of limiting most families to one child. The push is driven primarily by the state’s concerns over an ageing population and a shrinking labour force.
This pro-natalist agenda, which has been bolstered by media campaigns urging women to prioritise marriage and motherhood, has pressured many to sacrifice their education and careers. In anticipation of having to provide paid maternity leave, employers also often discriminate in the processes of hiring and promotions.
Meanwhile, feminist advocacy faces censorship and suppression. This has included the shutdown of influential media platforms like Feminist Voices and the blocking of #MeToo-related hashtags. Activists have resorted to creative methods, such as using symbols like the “Rice Bunny” (a term that is pronounced “mi tu” in Chinese) emoji, to navigate strict surveillance and content filtering that targets discussions on gender equality.
Why the #RiceBunny hashtag has become China’s #MeToo.
Fighting for change
Women in China are now rallying for higher standards in the production and regulation of sanitary products. They are actively submitting comments via the government’s online platform for the public to provide feedback to standard setting officials.
On November 22, a representative from the organisation responsible for drafting the new standards stated that public feedback had been heard and will be considered in the process. However, this response is far from satisfactory. The same companies that produce sanitary pads in China are heavily involved in setting these standards.
Women’s active involvement in shaping the revision of national standards is reflective of a consistent strategy in which they use government-provided channels for political participation. Yet women in China have now also started to link the issue of low-quality sanitary products to broader societal challenges, including falling fertility rates.
In the 1970s, when China first implemented its one-child policy, over six children were born for every woman of childbearing age. This had dropped to an average of one-and-a-half by the 2000s. At the same time, there is a growing prevalence of infertility in China. A 2021 study published in The Lancet, a peer-reviewed medical journal, shows that China’s infertility rate rose from 12% in 2007 to 18% in 2020. One in every 5.6 Chinese couples of childbearing age faces challenges in conceiving a baby.
Throughout the recent sanitary pad scandal, hashtags such as #LowQualitySanitaryPadsCauseFemaleIntertility have spread across Chinese social media platforms such as Weibo. By aligning their grievances with national anxieties, feminist activists in China are strategically reframing their demands to align with state priorities.
Such an approach may, on the one hand, risk unintentionally reinforcing existing stereotypes about women and societal expectations. But it may also increase the likelihood of their concerns being addressed, as it presents better sanitary product standards as a critical public health and national concern rather than a “women’s issue” that can simply be dismissed.
Feminist activism in China looks to be growing in maturity. Narratives and strategies are now being carefully crafted to ensure maximum impact both in public and policy arenas.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
- China Dismantles Prominent Uyghur Business Landmark in Xinjiang – Shia Waves
- China Expands Nationwide Private Pension Scheme After Two-Year Pilot Program
- How a scandal over sanitary pads is shaping feminist activism in China
- Yakult Unveils Restructuring Plans for Its China Operations | ESM Magazine
- Italy’s Strategic Shift Towards China After Exiting the Belt and Road Initiative
- Financial Analysis and Cost Audits: Uncovering Cost Inefficiencies
