Category: China

  • Indian Economy: ‘Real Alternative’ to China?

    Indian Economy: ‘Real Alternative’ to China?

    A CNN report highlighted that market watchers are quite keen on Prime Minister Narendra Modi’s return to power for a third straight term in the upcoming Lok Sabha polls which will bring greater predictability to economic policies…reports Asian Lite News

    With the benchmark indices in the Indian stock market hitting new highs, FDI inflow burgeoning and strong investments happening in infrastructure, while China continues to reel under its property crisis, accelerated capital outflow and economic concerns, several experts believe that New Delhi offers a “real alternative” to Beijing, CNN reported.

    The report further highlighted that market watchers are quite keen on Prime Minister Narendra Modi’s return to power for a third straight term in the upcoming Lok Sabha polls which will bring greater predictability to economic policies.

    Financial professionals around the world are noticing India’s development since 2014 under PM Modi, who has said he wants the nation to become a USD 5 trillion economy by 2025. Notably, the optimism around the world’s most populous nation is in stark contrast to the mood found in China, which is grappling with a myriad of economic challenges, including an accelerated flight of capital from the country, CNN reported.

    The Chinese stock markets have suffered a protracted slump since recent peaks in 2021, with more than USD 5 trillion in market value having been wiped out from the Shanghai, Shenzhen and Hong Kong bourses. Foreign direct investment (FDI) plunged last year, and fell again in January, down nearly 12 per cent compared to the same month in 2023.

    On the other hand, India’s stock market, is hitting record highs. The value of companies listed on India’s exchanges surpassed USD 4 trillion late last year. According to CNN, the future appears even brighter as India’s market value is expected to more than double to USD 10 trillion by 2030, according to a Thursday report by Jefferies, which would make it “impossible for large global investors to ignore.”

    Peeyush Mittal, a portfolio manager at Matthews Asia, a San Francisco-based investment fund said that there is no country like China other than India.

    “China is a no go, so…which is the other country that can maybe replace China?” said Mittal. “There’s no country like China other than India … in some form or fashion, it is the substitute that maybe the world is looking for to drive growth,” he said.

    Japan has also benefited from investors seeking an alternative to China — Tokyo’s benchmark index hit a new high for the first time in 34 years last week, helped by improving corporate profits and a weak yen. But the country is stuck in recession and recently lost its position as the world’s third biggest economy to Germany.

    MSCI’s indexes help institutional investors worldwide decide how to allocate money and where to focus their research. The latest revision by global stock index compiler MSCI reflects the bullishness towards India. MSCI said this month that it would increase India’s weighting in its emerging markets index to 18.06 per cent from 17.98 per cent, while reducing China’s to 24.77 per cent.”

    India’s weight in the MSCI emerging market index was about 7 per cent a couple of years back,” said Aditya Suresh, head of India equity research at Macquarie Capital. “Do I think that 18 per cent [in the MSCI index] is naturally gravitating more towards 25 per cent? Yeah, that’s kind of clearly where our conversations are leading us to believe.”

    As India heads towards national elections in the coming months, market watchers are hoping for PM Modi-led Bharatiya Janata Party’s return to power for a third term, bringing greater predictability to economic policies for the next five years, CNN reported.

    “If Modi is back with a majority and political stability is there, then I can certainly say with confidence that there’ll be a lot more investor interest in India on a more sustainable basis,” said Mittal.

    Also, there are good reasons for the euphoria around India. From a surging young population to humming factories, the country has a lot going in its favour. The International Monetary Fund expects India to grow by 6.5 per cent next financial year compared to 4.6 per cent for China.

    Analysts at Jefferies expect the country to become the world’s third largest economy by 2027. Much like China more than three decades ago, India is only at the beginning of an infrastructure transformation, spending billions on building roads, ports, airports and railways.Aditya Suresh said that there is a “very strong multiplier effect” on the economy from the investments in digital and physical infrastructure, which “you cannot roll back.”

    The world’s fastest growing major economy is also trying to capitalize on the rethink underway among companies on supply chains. Global businesses want to diversify operations away from China, where they faced obstacles during the pandemic and are exposed to risks arising from tension between Beijing and Washington.

    “India is a prime candidate to benefit from the ‘friend-shoring’ of supply chains, notably at the expense of China,” Hubert de Barochez, a market economist at Capital Economics wrote in January. As a result, some of the world’s biggest companies, including Apple supplier Foxconn, are expanding their operations in India. Tesla CEO Elon Musk said his company is looking to invest in India “as soon as humanly possible.”

    “[PM Modi] really cares about India because he’s pushing us to make significant investments in India, which is something we intend to do,” Musk told reporters last June. But, some experts have also raised concerns that India’s confidence may be bordering on hubris, as per CNN.

    According to Macquarie, retail investors alone own 9 per cent of India’s equity market value versus foreign investors at slightly under 20 per cent. Analysts, however, expect foreign investments to pick up in the second half of 2024, once the election is out of the way.

    Another potential challenge highlighted is that despite its new economic swagger, India might not have the capacity to absorb all the money that is flowing out of China, whose economy is still about five times bigger.But the fact that India’s sizzling rally is driven by domestic investors adds to the country’s strengths and reduces its dependence on foreign fund flows, as per CNN.

    Apart from geopolitical rifts and an uncertain economic outlook, foreign companies and investors have grown increasingly wary of domestic political risks in China, including the possibility of raids and detentions. Institutional investors are still very wary about buying Chinese stocks, even though many now look like a bargain.

    “There are many good businesses in China, but with all the regulatory issues it becomes very difficult to predict what they will look like in the long run,” said Priyanka Agnihotri, portfolio manager at Baltimore-based Brown Advisory.

    India, on the other hand, enjoys healthy relations with the West and other major economies, and is aggressively wooing large firms to set up factories in the country.Finance Minister Nirmala Sitharaman, in her budget speech said FDI inflows since 2014 stood at nearly USD 600 billion, which is twice the amount during the previous decade.

    “For encouraging sustained foreign investment, we are negotiating bilateral investment treaties with our foreign partners, in the spirit of first develop India,” she added.

    Analysts say that it would hard to stop the economic juggernaut India has set in motion, irrespective of what happens to China, CNN reported. “Even if China comes back to the table and resolves a lot of problems, I don’t think India is going back into the background anymore,” Mittal said. “It has arrived.” (ANI)

    ALSO READ: Maldives Terminates Hydrographic Pact With India

  • Speculation Surrounds Beijing’s Role in Nepal’s Political Transition

    Speculation Surrounds Beijing’s Role in Nepal’s Political Transition

    After Prachanda decided to break the alliance with the Nepali Congress, it is all set to withdraw its support by Tuesday itself….reports Asian Lite News

    As speculation is rife that Beijing is behind the new political change in Nepal, the Chinese Ministry of Foreign Affairs stated on Tuesday that China is ready to work with the new government in Nepal.

    Breaking the year-long political alliance with the Nepali Congress, Nepal Prime Minister Pushpa Kamal Dahal a.k.a. Prachanda reorganised his Cabinet on Monday by ousting Nepal’s grand old party, and inducting the CPN-UML and Rastriya Swatantra Party.

    China is willing to work with the new Nepali government, Chinese Foreign Ministry spokesperson Mao Ning said during a regular press conference in Beijing on Tuesday.

    “We sincerely hope that all the parties in Nepal will unite and cooperate to smoothly advance the work related to the formation of a new government and achieve political stability, economic development, and improvement of people’s livelihood,” the spokesperson said.

    After snapping the alliance with the Nepali Congress, Prachanda on Monday inducted three ministers in the new Cabinet, one from his party CPN (Maoist Centre), one from CPN-UML, and a third from the Rastriya Swatantra Party.

    After Prachanda decided to break the alliance with the Nepali Congress, it is all set to withdraw its support by Tuesday itself.

    As a friendly neighbour and cooperative partner, China attaches great importance to Nepal-China relations and is willing to work with the new Nepali government to adhere to the five principles of peaceful coexistence, enhance traditional friendship, deepen pragmatic cooperation, and promote Nepal-China strategic cooperation for ever-lasting friendship oriented towards development and prosperity, Ning said.

    China is facing several controversies in Kathmandu for failing to expedite the projects under the Belt and Road Initiative ( BRI), not completing the projects undertaken by the Chinese companies and contractors, on the issue of corruption, and the ongoing investigation into one ambitious airport which was built on a loan by China, among others.

    China is in a very awkward position in Kathmandu and was hell-bent to reorganise the two major Communist parties – UML and Maoist Centre – so that its image could be improved in Nepal.

    The partnership will further develop and create more benefits for the people of the two countries, said spokesperson Ning.

    ALSO READ: Prachanda’s Split with Coalition Partner Sparks Political Turmoil in Nepal

    ALSO READ: India, Nepal Foreign Secretaries Hold Bilateral Talks

  • China’s Delicate Dance with Russia Amid War

    China’s Delicate Dance with Russia Amid War

    Both nations are aggrieved by perceived humiliation at the hands of the West, and they are likewise led by two men who share values of nationalism, centralized power and autocratic governance. Furthermore, they hubristically think their countries’ future survival depends upon them….reports Asian Lite News

    Although Chairman Xi Jinping has a personal affinity with President Vladimir Putin, the two countries’ bilateral relations are marked by reserve rather than trust.

    Furthermore, Putin’s invasion of Ukraine has proved rather awkward for China. Despite becoming bogged down in its “special military operation” that has now extended into its third year, Russia, the weaker partner in a bilateral relationship that is perhaps best described as a quasi-alliance, remains vital in China’s plans to build an axis against the US and Western allies.

    Philipp Ivanov, Senior Fellow at the US-based Asia Society Policy Institute, said: “China and Russia are drawn to each other by virtue of their strategic geography, alignment of values and views of their current leaders, common enemy in Washington, natural economic complementarities and opportunism. Despite these areas of convergence, Russia and China are also driven apart by historical animosities, power asymmetry, competition in overlapping spheres of interest, deep cultural differences and shallow societal links.”

    Both nations are aggrieved by perceived humiliation at the hands of the West, and they are likewise led by two men who share values of nationalism, centralized power and autocratic governance. Furthermore, they hubristically think their countries’ future survival depends upon them.

    Yet the Ukraine war is the biggest test of Sino-Russian ties in the past few decades.

    Putin’s military adventurism has both accelerated and disrupted bilateral ties, emphasizing to Beijing that Moscow is not a reliable partner.

    Ivanov further wrote: “The war in Ukraine … has deepened Russia’s economic dependence on China, increased the power asymmetry between the two countries, and squeezed Moscow’s diplomatic playing field vis-a-vis China. Beijing has gained an even more loyal ally, as well as discounted access to Russian commodities, but its partnership with Moscow has damaged China’s ties with Europe and deepened the rift with the United States.”

    In fact, Ivanov suggested that their relationship may have reached its zenith since both are fiercely independent and unwilling to compromise their strategic autonomy. “This, together with their growing power asymmetry and competition for spheres of interest, will limit the scope for further alignment. Yet, at this historic juncture, for both China and Russia, the benefits of their partnership offset the risks.”

    Of course, China and Russia make perfect trading partners. The former is the world’s foremost supplier of manufactured goods, while Russia is rich in natural resources, meaning China can diversify its dependence on energy from the Middle East.

    However, Ivanov argues the West is incorrectly overplaying the view that Russia has become a Chinese vassal.

    A short time before Russia invaded Ukraine in February 2022, Xi and Putin met in Beijing, jointly declaring a strategic partnership “without limits”. Then, on the eve of the invasion, the PLA Daily declared: “The Sino-Russian relationship is in the best shape on record, and it has already become a great power relationship with the highest degree of mutual trust, cooperation, coordination and strategic value; the key to such a relationship is the strategic leadership of the leaders of the two states.”

    Such an all-embracing declaration created a foreign-policy quagmire for China. The war put Beijing in a difficult position, as it was forced to side with Russia. Initially, Xi might have been invigorated by a swift Russian victory, for this would give him confidence to do the same against Taiwan. However, Ukraine’s staunch resistance has imposed a heavy cost on Russia, and made Xi realize that victory against Taiwan would not be as quick and tidy as he once imagined. Furthermore, international support for Ukraine surpassed anything Putin or Xi could have feared, and many were quick to impose sanctions on Russia. This is a key deterrent for China, since its economy relies upon international trade.

    Guoguang Wu, Senior Fellow on Chinese Politics, Center for China Analysis at the same Asia Society Policy Institute, discerned three phases in China’s evolving policy over the Ukraine conflict. Xi has been forced to recalculate policies, and his miscalculations in his notion that the East is rising and the West is inexorably declining have been laid bare. Underwriting it all, he maintains the utmost priority on his own regime’s security, and his desire to challenge the Western-led world order.

    The first policy stage, from February to May of 2022, according to Wu, was “friendship without limits”. China could not bring itself to call Russia’s military actions an invasion, and it has oft repeated Russia’s narrative that NATO must take primary responsibility for the war.

    The second phase coincided with the stagnation of Putin’s offensive in Ukraine and his regime becoming odious to most of the world. After Putin’s blitzkrieg failed, China started to play down its “no limits” partnership with Russia. It detached itself from Russian actions, pretending to be a responsible peacemaker, and published a vague proposal for China-mediated peace talks in February 2023. Naturally, this was mere diplomatic deception, for China still condoned Russian aggression. Beijing claims to be “on the right side of history”, but it has actively undermined international solidarity in condemning Russia. One example is how Beijing lobbied Indonesia to exclude Ukraine as a topic at the G20 meeting in November 2022.

    Xi was disappointed his “two-hands” policy was not accepted or applauded, ignorant that such a position only exposed Chinese hypocrisy and created growing disenchantment with Beijing. Russia, too, may have been annoyed by China’s public stance.

    The third phase began around mid-2023, where China reaffirmed its alliance with Russia because Xi’s “two-hands” strategy of appeasing the West while supporting Putin did not work. Last year, for instance, Xi told Putin after a personal meeting,

    Ukraine war pictures.(photo:instagram)

    “Right now there are changes [in the world], the likes of which we haven’t seen for 100 years, and we are the ones driving these changes together.”

    Wu assessed: “China’s new policy, in my interpretation, is merely a revision of its initial stance on the war, reverting to clear support for Russian military action in Ukraine with less emphasis on diplomatic camouflage. However, the recalculation takes into account the reality that the West is still powerful enough to block Xi’s grand strategy.” Xi faces challenges on the home front with a more fragile Chinese economy, and he cannot afford Western-led sanctions that would exacerbate the situation.

    Xi’s original dilemma remains, though. By supporting Putin, he upsets numerous other nations and risks bad press, sanctions and questions about his leadership. Yet he cannot abandon Putin, for that might accelerate defeat in Ukraine. The conflict has adversely affected China’s relations with the USA and Europe, at a time when it was trying to drive a wedge between the two. It has also undermined China’s narrative about respecting the sovereignty and territorial integrity of others.

    If Putin loses in Ukraine, this would threaten his survival as Russia’s leader. Such uncertainty is not welcomed by Xi, who counts Putin a friend, plus a weakened and chaotic Russia does not help China at all.

    Early on, the West threatened Beijing with severe repercussions if it supported Russia. It has not done so overtly, but it has provided ongoing support throughout the conflict.

    Ivanov noted: “As far as we know, apart from limited transfers of dual-use equipment that can be used in Russia’s war effort, China has refrained from providing direct military aid to Russia. That might change if Russia faces a comprehensive defeat in Ukraine, which China may deem contrary to its interests. At this stage of the conflict, China sees the risks of Western sanctions and further damage to its vital relationship with Europe as outweighing the benefits of supporting Russia.”

    In July 2023, the US Office of the Director of National Intelligence (ODNI) published a report detailing Chinese support for Russia. In 2022, Russian imports from China increased 13% to USD76 billion, while chip exports increased 19%, mostly through shell companies in Hong Kong. The ODNI stated that China “is providing some dual-use technology that Moscow’s military uses to continue the war in Ukraine, despite an international cordon of sanctions and export controls. The customs records show PRC state-owned defense companies shipping navigation equipment, jamming technology and fighter jet parts to sanctioned Russian government-owned defense companies.”

    Other items documented as being sold to Russia are smokeless gunpowder, drones and spare parts, helmets and body armor.

    Sino-Russian military ties include joint exercises, arms sales and military-technical cooperation. However, with Russia focused intently upon Ukraine, this has affected the regularity and depth of bilateral joint training.

    China, too, would have watched with consternation the June 2023 rebellion by the Wagner private military contractor firm, led by Yevgeny Prigozhin. John Culver, Nonresident Senior Fellow with the Atlantic Council, said: “As Beijing watched Prigozhin’s private army move toward Moscow, one thought may have entered Xi Jinping’s head: ‘I was correct to jail Generals Xu Caihou and Guo Boxiong and purge disloyalty and corruption from the People’s Liberation Army (PLA).’” When Xi rose to power, the PLA was effectively a self-run entity, its top commanders having been appointed by Xi’s predecessors.

    Culver elaborated: “As Xi rose in the Chinese Communist Party to be the designated heir by 2010, the party leadership watched in terror as the Arab Spring briefly swept autocrats from power, backed by the US/West. The lords of Zhongnanhai may have asked themselves, if the 1989 Tiananmen Square crisis happened here today, would the PLA again save the party? Or would the army – as the Egyptian military did – put its interests above its loyalty to the revolution? Looking at the corrupt military of that period, they likely concluded, ‘We don’t know. It probably would depend on the circumstances.’ For the party’s army, this is the wrong answer. Under Xi, party control over the PLA…has been greatly tightened. And lessons forgotten after 1989 were recalled, especially the need to move/replace general officers frequently and never again allow independent power bases to emerge in the PLA.”

    It is patent that Putin’s actions in Ukraine have caused great discomfort to Xi, and also forced him to progressively alter his foreign policy. Given this, Wu suggested three elements in China’s ongoing policy. “First, Beijing will cease to try to significantly distance itself from Russia; but neither will China return to its ‘no limits’ partnership with the country. Instead, Beijing will cover its tracks while trying to reduce, if not entirely avoid, the costs of standing with Russia.

    “Second, and most important, Xi’s revised calculations do not seem to be based on a Russian military triumph in Ukraine, but rather on Russia’s ability to fight for as long as possible. Xi might still expect that Putin could gain military advantage in Ukraine, especially if Western support for Ukraine begins to flag. In any case, a long war of attrition could have the effect of weakening both the West and Russia, thus making China the winner in both grand strategy and regime security.”

    “Third,” Wu said, “China’s new policy will give it a bargaining chip in its growing rivalry with the West, particularly the United States. If necessary, Xi could leverage the shifting goals of the war, giving China more freedom for international manipulation.”

    As Ivanov concluded: “The Russian war on Ukraine has dramatically raised the stakes. The war remains the most acute challenge to the international system, with profound consequences. One of them is how a Russian victory in Ukraine (defined by a larger territorial grab) would influence decision-making in Beijing on Taiwan. It is possible that as Xi ages, his power remains unchallenged, his fear of US encirclement grows and the Chinese economy slows down, he will be more willing to take risks to achieve reunification with Taiwan.” (ANI)

    ALSO READ:

  • China to Start Legislative Meetings Amid Concerns Over Economy, Security

    China to Start Legislative Meetings Amid Concerns Over Economy, Security

    The meetings, referred to as the “Two Sessions” or “lianghui”, traditionally offers a preview of the Chinese government’s policy agenda for the year….reports Asian Lite News

    Thousands of Chinese political elites and lawmakers will gather in Beijing this week for annual legislative meetings as concern continues to mount over Beijing’s economy, national security and ambition of ‘reunification’ with Taiwan, Voice of America (VOA) reported.

    The meetings, referred to as the “Two Sessions” or “lianghui”, traditionally offers a preview of the Chinese government’s policy agenda for the year.

    It will start with the annual meeting of the Chinese People’s Political Consultative Conference on March 4 and will be followed by the annual legislative session of China’s rubber-stamp parliament on March 5, during which Chinese Premier Li Qiang will deliver his first government work report.

    Some analysts are of the opinion that amid the economic downturn and political turbulence within the Chinese Communist Party over the last year, this year’s meetings will be highlighted by Beijing’s responses to the economic challenges, its possible emphasis on national security, and its rhetoric on cross-strait relations and possible personnel appointments.

    “In the face of continuous economic difficulties, whether the [Chinese Communist Party] leadership is able to power through the two sessions and build some consensus within party ranks to come up with realistic policy targets will be an important benchmark for assessing the degree of centripetal forces in the party,” Wen-ti Sung, a political scientist at the Australian National University, told VOA.

    Since scrapping its Zero-Covid strategy at the end of 2022, China has been facing various economic challenges, including property developers defaulting on debt, a historically high youth unemployment rate, low consumer and household confidence, and weak overseas demands.

    After last year’s sluggish economic performance, 2024 began with Chinese shares sinking to a five-year low last month.

    Two of China’s biggest and deeply indebted property developers — Evergrande and Country Garden — face even more challenges: One received liquidation orders, the other a liquidation petition, VOA reported.

    Against this backdrop, some experts say Beijing is unlikely to roll out structural reforms to the economy during the Two Sessions.

    “I’m skeptical about whether Beijing would move forward with more bold economic reform or not,” Dexter Roberts, director of China affairs at the University of Montana’s Mansfield Center, told VOA by phone.

    While top Chinese officials have talked about the need for economic reform over the last decade, Roberts says China’s top leadership, particularly President Xi Jinping, “doesn’t believe in releasing control over the economy,” which is what China needs to address the persistent economic challenges.

    Roberts and other analysts think Beijing will try to highlight two economic concepts that top Chinese officials, including Xi, have repeated over the last year: high-quality development and new productive forces, which refers to growth models that rely less on big stimulus measures and focus more on “innovation.”

    “High-quality development is the byword for accepting lower growth while looking for new economic drivers such as new innovative technologies,” Roberts said. “I don’t expect them to roll out big stimulus measures during the Two Sessions.”

    The Politburo, a top decision-making body, said it will rely on more fiscal instruments to support the sluggish economy. The 24-member political organ vowed to create a “stable, transparent and predictable policy environment” by strengthening fiscal policy and ensuring monetary policies remain “flexible, moderate and precise,” VOA reported.

    Despite economic headwinds, Roberts said he expects China to set the 2024 economic growth target at 5 per cent.

    “[Since] the 26 biggest cities [in China] have already set their 2024 economic growth targets slightly higher than 5 per cent, it’s a sign that the figure will also be around 5 per cent at the national level,” he said.

    Some observers are also of the opinion that national security will remain an important theme of this year’s Two Sessions.

    Earlier this week, members of the National People’s Congress Standing Committee passed revisions to the Law on Guarding State Secrets, which broadened the range of information that would be considered a national security risk, VOA reported.

    “Xi has been pushing a governance model that prioritises national security, so while economic policies will be one of the main focuses of this year’s two sessions, the Chinese government will still mention security and coordinated development,” Wang Hsin-hsien, an expert on Chinese politics at National Chengchi University in Taiwan said.

    He said China’s Ministry of State Security has become more involved in issues that may not be their primary focus over the last few months, suggesting a possible expansion of their power in recent years.

    According to some analysts, security now overshadows other aspects of Chinese governance.

    “Security is now prioritized over other issues, including economy and diplomacy,” Alfred Wu, an expert on Chinese politics at the National University of Singapore said.

    Additionally, some observers say that during the Two Sessions, it will be important to pay attention to China’s stance and rhetoric on cross-strait relations since a new government will take office in Taiwan in May.

    In recent months, Beijing has repeatedly characterized the president-elect as a “separatist” and vowed to “resolutely fight” efforts to pursue Taiwan independence.

    “We need to pay attention to how the Chinese leadership talks about the Taiwan issue during the government work report and whether Beijing decides to revise the anti-secession law, which suggests the use of non-peaceful means against Taiwan,” Wang Hsin-hsien said.

    He said that Beijing is unlikely to introduce new policy measures regarding cross-strait relations.

    Some experts believe Beijing is also expected to appoint a new foreign minister during the two sessions since former Chinese Foreign Minister Qin Gang officially resigned as a lawmaker last week.

    Liu Jianchao, the Chinese Communist Party’s international liaison, is widely expected to get the job.

    Roberts, who described Liu as charismatic and speaking good English, said he is “the right person” to be the next Chinese foreign minister.

    “[Since] Xi seems to have decided that China’s relationship with the US needs to improve, [Liu’s appointment] could be beneficial to US-China relations,” he said. (ANI)

    ALSO READ: China Increases Grey Zone Tactics

  • China Increases Grey Zone Tactics

    China Increases Grey Zone Tactics

    In February, Taiwan has detected over 250 Chinese military aircraft and over 150 Chinese naval ships 150 times…reports Asian Lite News

    Nine Chinese military aircraft and 8 naval vessels were tracked by Taiwan’s Ministry of National Defence (MND) around Taiwan between 6 am on Friday (local time) and 6 am on Saturday (local time), Taiwan News reported.

    Four out of nine People’s Liberation Army (PLA) aircraft crossed the Taiwan Strait median line and entered the southwest corner of Taiwan’s air defence identification zone (ADIZ).

    The MND said it monitored the situation and responded by deploying appropriate resources and forces.

    “9 PLA aircraft and 8 PLAN vessels operating around Taiwan were detected up until 6 a.m. today. 4 of the aircraft crossed the median line of the Taiwan Strait and entered Taiwan’s SW ADIZ. #ROCArmedForces have monitored the situation and employed appropriate forces to respond,” Taiwan’s Ministry of National Defence posted on X.

    Since September 2020, China has increased its use of ‘grey zone tactics’ by incrementally increasing the number of military aircraft and naval ships operating around Taiwan, according to Taiwan News.

    Grey zone tactics are defined as “an effort or series of efforts beyond steady-state deterrence and assurance that attempts to achieve one’s security objectives without resort to direct and sizable use of force.”

    Earlier, 10 Chinese military aircraft and six naval vessels were detected by Taiwan between 6 am on Thursday and 6 am on Friday

    According to Taiwan’s MND, one aircraft crossed the Taiwan Strait median line, of the 10 People’s Liberation Army (PLA) aircraft.

    In response, Taiwan also sent aircraft and naval vessels and deployed air defence missile systems to monitor the PLA activity.

    Earlier, 19 Chinese military aircraft and seven naval vessels were detected on Thursday. Among the 19 Chinese PLA aircraft, 12 crossed the Taiwan Strait median line.

    So far in February, Taiwan has detected over 250 Chinese military aircraft and over 150 Chinese naval ships 150 times, according to a Taiwan News report.

    Taiwanese ex-legislative candidate indicted

    Former independent legislative candidate Ma Chih-wei has been officially indicted by the Taoyuan District Prosecutors Office on charges related to alleged collaboration with China during her candidacy preparations for Taiwan’s elections held on January 13, Focus Taiwan reported.

    The indictment accuses Ma of violating the Anti-Infiltration Act, National Security Act, and Personal Data Protection Act, seeking a 44-month prison term and a fine of NTD2 million (USD63,231).

    Ma, who has been in custody since January 5, faced allegations of passing information to China and receiving financial support in connection with her election campaign. The indictment points to violations of the Anti-Infiltration Act, designed to prevent interference by “foreign hostile forces” in Taiwan, as Ma allegedly accepted funds from an “infiltrative entity” to finance her election bid, according to Focus Taiwan.

    The National Security Act charges stem from Ma allegedly sharing “Taiwanese intelligence and other election-related information” with her Chinese benefactors. Prosecutors claim that during a trip to China in April 2023, the 40-year-old established connections with individuals involved in Taiwan affairs. Subsequent discussions between the parties reportedly involved exchanging political intelligence on Taiwan for financial support.

    Ma’s interactions continued with multiple visits between Taiwan and China, resulting in remittances, including cryptocurrency payments.

    The indictment outlines transactions totaling about NTD1 million, with Ma allegedly providing a confidential book to her handlers. The book contained sensitive information such as job titles, names, and phone numbers of officials in the Presidential Office, Executive Yuan, and National Security Bureau.

    Despite Ma finishing third in the election with 8.56 per cent of the vote, prosecutors assert that she received instructions from her Chinese contacts on how to conduct her campaign. The Taiwan People’s Party (TPP), of which Ma was a member and Taoyuan chapter spokesperson in 2023, disassociated from her after she failed to secure official support and subsequently registered as an independent candidate.

    Due to Ma’s refusal to acknowledge wrongdoing and her lack of cooperation during the investigation, the prosecutors recommended a more severe sentence to the Taoyuan District Court, where she is currently detained.

    Ma’s expulsion from the TPP followed her detention on January 6, further isolating her from the party. TPP Chairman Ko Wen-je had initially considered endorsing Ma as a TPP candidate but withdrew support after she registered independently, Focus Taiwan reported. (ANI)

    ALSO READ-China Agrees to Rollover $2 Bn Debt for Pakistan

  • Biden Questions Security of Chinese Cars

    Biden Questions Security of Chinese Cars

    Biden noted that China is determined to dominate the future of the auto market, including by use of unfair means…reports Asian Lite News

    US President Joe Biden has ordered US Secretary of Commerce to conduct an investigation into possible security risks of Chinese-manufactured cars, The Washington Post reported.

    In a statement released by White House, Biden stated, “I am announcing unprecedented actions to ensure that cars on US roads from countries of concern like China do not undermine our national security. I have directed my Secretary of Commerce to conduct an investigation into connected vehicles with technology from countries of concern and to take action to respond to the risks.”

    Biden noted that China is determined to dominate the future of the auto market, including by use of unfair means. He said that China’s policies could flood US’ market with its vehicles, posing risks to US’ national security.

    He stated that majority of cars these days are connected to mobile phones, navigation, critical infrastructure and to the companies which have manufactured them. He stressed that connected vehicles from China could gather sensitive date about Americans and their infrastructure and send the information to China.

    In a statement, Biden stated, “China is determined to dominate the future of the auto market, including by using unfair practices. China’s policies could flood our market with its vehicles, posing risks to our national security. I’m not going to let that happen on my watch.”

    “Most cars these days are “connected” – they are like smart phones on wheels. These cars are connected to our phones, to navigation systems, to critical infrastructure, and to the companies that made them. Connected vehicles from China could collect sensitive data about our citizens and our infrastructure and send this data back to the People’s Republic of China. These vehicles could be remotely accessed or disabled,” he added.

    While announcing the investigation, Biden expressed his desire to ensure that the future of auto industry will remain in the US. He said, “With this and other actions, we are going to make sure the future of the auto industry will be made here in America with American workers.

    In the statement, Biden said, “China imposes restrictions on American autos and other foreign autos operating in China. Why should connected vehicles from China be allowed to operate in our country without safeguards?”

    US-China flag

    The investigation, led by the US Commerce Department, will not place any immediate restrictions on the import or sale of Chinese-manufactured automobiles, The Washington Post reported citing administration officials, who spoke on condition of anonymity on Wednesday (local time). According to the officials, the agency does not have the authority to ban or restrict sales if it finds any serious risks.

    The officals said many of the vehicles in question are electric. However, its not their electric motors that pose a concern, but their use of high-tech software, cameras and sensors that could be used to gather data or sabotage vehicles.

    The decision announced by Biden echoes the US administration’s campaign against the Chinese telecom giant Huawei, which the United States accused of posing security risks to communications infrastructure, according to The Washington Post report.

    The US has banned the import or sale of Huawei’s telecom-network gear. The US administration has also urged allied nations not to use it. Chinese-based telecom company Huawei has accused the US of using national security as an excuse to clobber a globally competitive rival.

    US Commerce Secretary Gina Raimondo said that investigation will help the agency to find whether the executive order issued under the Trump administration that gave the US President new powers to protect domestic information and communications technology from national security threats, The Washington Post reported.

    In a call with journalists, Raimondo said, “Imagine if there were thousands of Chinese vehicles on American roads that could be immediately disabled by somebody in Beijing. It’s scary to contemplate.” She added, “We are doing [the investigation] now before Chinese-manufactured vehicles become widespread in the United States and potentially threaten our national security.” (ANI)

    ALSO READ: Lula: Biden Vital for U.S. Democracy’s Survival

    ALSO READ: Biden, Trump Prevail in Michigan Primaries

  • Modi slams DMK for ad showing rocket with Chinese flag

    Modi slams DMK for ad showing rocket with Chinese flag

    The Prime Minister highlighted the proposal for AIIMS to be built in Madurai while accusing the state government of ‘non-cooperation.’…reports Asian Lite News

    Prime Minister Narendra Modi targeted the ruling, Dravida Munnetra Kazhagam in Tamil Nadu over a newspaper advertisement of the state government that allegedly showcased a ‘Chinese rocket’.

    The Prime Minister accused the DMK of ‘looting’ people’s tax money and alleged that the state government insulted the scientists of the Indian Space Research Organisation (ISRO) who were part of the country’s successful space missions, including Chandrayaan-3.

    “DMK is a party that does not work but stands ahead to take false credit. These people paste their stickers on our schemes. Now they have crossed the limits, they have pasted China’s sticker to take credit for the ISRO launch pad in Tamil Nadu,” PM Modi said while addressing a gathering in Tirunelveli.

    The Prime Minister alleged that the DMK is ‘not ready’ to accept India’s progress in the space sector.

    “They are not ready to accept India’s progress in the space sector and with the taxes that you pay, they give advertisements and do not even include a picture of India’s space in it. They did not want to present India’s space success in front of the world, they insulted our scientists, our space sector, and your tax money. Now it’s high time that the DMK is punished for their deeds,” Modi said.

    He further lashed out at the Congress and DMK and accused the alliance parties of engaging in ‘dividing’ the nation.

    “Children, old people, youth, women, poor and middle class, every section, every society of Tamil Nadu is coming with BJP with full confidence today. People of Tamil Nadu are looking at BJP with great hopes. People are seeing how BJP has taken forward the positive politics of sensitivity and social justice in the country,” he said.

    “This immense love and trust of Tamil Nadu is a big responsibility for us. People see how the BJP has promoted the positive politics of sensitivity and social justice. I guarantee you, the BJP will leave no stone unturned to rise up to your expectations,” PM Modi said.

    The Prime Minister highlighted the proposal for AIIMS to be built in Madurai while accusing the state government of ‘non-cooperation.’

    “Today, if the country moves forward 100 steps, then Tamil Nadu should also move forward with the same speed, this is Modi’s resolve. Therefore, if we have opened many new AIIMS in the country in the last 10 years, then we are going to open AIIMS in Madurai also,” he said.

    Earlier in the day, the Prime Minister inaugurated, laid the foundation stone of and dedicated to the nation multiple development projects worth Rs 17,300 crores in Thoothukudi.  (ANI)

    ‘I don’t think India has declared China an enemy country’

    DMK MP K Kanimozhi came to the party’s defence after Prime Minister Narendra Modi criticised the state government’s newspaper advertisement allegedly showcasing ‘China rocket’ picture.

    “I don’t know from where the person who did the artwork found this picture,” Kanimozhi said while speaking to reporters outside Chennai airport on Wednesday.

    New Delhi, Feb 8 (ANI): Dravida Munnetra Kazhagam (DMK) MP Kanimozhi Karunanidhi speaks in the Lok Sabha during the Budget Session of Parliament, in New Delhi on Thursday. (ANI Photo/Sansad TV)

    “I don’t think India has declared China an enemy country. I have seen that the Prime Minister has invited the Chinese PM and they have gone to Mahabalipuram. Just because you do not want to accept the truth, you are finding reasons to divert the issue,” the DMK leader said.

    Tamil Nadu BJP president K Annamalai hit out at the ruling DMK for allegedly using a ‘China rocket’ picture in a newspaper advertisement promoting the proposed second launch pad of ISRO in the state.

    “This advertisement by DMK Minister Anita Radhakrishnan to leading Tamil dailies today is a manifestation of DMK’s commitment to China and their total disregard for our country’s sovereignty. DMK, a party fighting high on corruption, has been desperate to paste stickers ever since the announcement of ISRO’s second launch pad in Kulasekarapatinam was released,” Annamalai said in a post on X. (ANI)

    ALSO READ-Modi attacks Congress, Left parties in Kerala

  • China Agrees to Rollover $2 Bn Debt for Pakistan

    China Agrees to Rollover $2 Bn Debt for Pakistan

    The officials said that China has informally communicated its decision to further extend the repayment period …reports Asian Lite News

    China has agreed to rollover a $2 billion debt on existing terms after initially seeking a hike in price, as Pakistan’s policy to maintain foreign exchange reserves through deposits by three countries is becoming costly due to a 118 per cent surge in interest cost, a media report said.

    An understanding has been reached with Beijing to further extend the repayment period of the $2 billion loan maturing on March 23 — the Pakistan Day, The Express Tribune reported.

    Sources said that China had initially asked to further increase the interest rate on the $2 billion debt. Pakistan is currently paying 7.1 per cent interest on the basis of the six-month Secured Overnight Finance Rate (SOFR) plus 1.715 per cent, the report said.

    The officials said that China has informally communicated its decision to further extend the repayment period and the Finance Ministry is waiting for a formal response.

    Pakistan’s interim Prime Minister Anwaarul Haq Kakar had last month formally requested the Chinese government to rollover the maturing loans, according to officials, The Express Tribune reported.

    Pakistan paid Rs 26.6 billion in interest in the last fiscal to China, Saudi Arabia, and the UAE on the $9 billion deposits that these three nations placed with the State Bank of Pakistan (SBP), the SBP balance sheet showed.

    In the preceding year, the country had paid Rs 12.2 billion which jumped by 118 per cent within a year.

    The authorities said that a major factor behind the 118 per cent increase in the interest cost was the currency devaluation in the previous fiscal, The Express Tribune reported.

    The central bank’s gross official foreign exchange reserves stand at $8 billion.

    Over the past one decade, Pakistan has adopted a policy to borrow from the regional countries during difficult economic times.

    ALSO READ: Opacity Surrounds China’s Expanding Nuclear Arsenal

  • Opacity Surrounds China’s Expanding Nuclear Arsenal

    Opacity Surrounds China’s Expanding Nuclear Arsenal

    The Pentagon suggests China’s expansion of missile silos and ICBMs indicates a shift towards launch-on-warning readiness. China denies this, maintaining a “moderate” readiness stance amidst policy debates….reports Asian Lite News

    Without providing the world with any word of explanation, in the past five years, the People’s Liberation Army Rocket Force (PLARF) of China has expanded the types and quantity of its nuclear-tipped weapons more than at any point in its history.

    Indeed, last month, the Bulletin of the Atomic Scientists published its annual in-depth Nuclear Notebook. The chapter entitled Chinese Nuclear Weapons, 2024, authored by Hans M Kristensen, Matt Korda, Eliana Johns and Mackenzie Knight, warned, “In all, China’s nuclear expansion is among the largest and most rapid modernization campaigns of the nine nuclear-armed states” in the world.

    The chapter’s authors stated that in the past year, “China has continued to develop its three new missile silo fields for solid-fuel intercontinental ballistic missiles [ICBM], expanded the construction of new silos for its liquid-fuel DF-5 ICBMs, has been developing new variants of ICBMs and advanced strategic delivery systems, and has likely produced excess warheads for eventual upload onto these systems once they are deployed. China has also further expanded its dual-capable DF-26 intermediate-range ballistic missile [IRBM] force, which appears to have completely replaced the medium-range DF-21 in the nuclear role.”

    For those advocating reductions in nuclear weapons, such figures make grim reading. Apart from land-based truck-launched and silo-launched missiles, the PLA Navy is now carrying JL-3 submarine-launched ballistic missiles (SLBM) on its six Type 094 nuclear-powered ballistic missile submarines.

    In the air, H-6 bombers of the PLA Air Force have been reassigned to an operational nuclear mission, plus there is continued development of an air-launched ballistic missile that likely has a nuclear capability. This capacity will grow even more once the stealthy H-20 bomber is fielded.

    Chinese military spokesmen have neither confirmed nor denied the expansion of the ICBM force, and the authors of the Bulletin of the Atomic Scientists chapter on China acknowledged the opacity of the PLARF: “Analyzing and estimating China’s nuclear forces is a challenging endeavor, particularly given the relative lack of state-originating data and the tight control of messaging surrounding the country’s nuclear arsenal and doctrine.” Beijing has never officially revealed warhead numbers, and its opacity regarding its nuclear capability is legendary.

    When asked why Chairman Xi Jinping is prioritizing China’s ballistic-missile arsenal in such a fashion, Ankit Panda, Stanton Senior Fellow, Nuclear Policy Program at the Carnegie Endowment for International Peace, told ANI: “There is likely no one overarching reason.

    For one, this may simply be part of Xi’s broader efforts to pursue a world-class military for the country. China could also have calculated that a larger force is necessary for assuring retaliation, which is a traditional objective. The surge could also be a result of the Rocket Force gaining greater political power after the 2015 reorganization of the PLA. We simply do not know the exact answer, since China has yet to give us an authoritative case for why the force is growing.”

    Admiral Charles Richard, the previous commander of the US Strategic Command, said in April 2022 that China’s expansion of strategic forces was “breathtaking.” The force’s current commander, General Anthony Cotton, testified vexingly last March that “China seeks to match, or in some areas surpass, quantitative and qualitative parity with the United States in terms of nuclear weapons. China’s nuclear capabilities already exceed those needed for its long-professed policy of ‘minimum deterrence’, but China’s capabilities continue to grow at an alarming rate”.

    It is thus the Pentagon’s opinion that massive new missile silo fields and the expansion of China’s liquid-fueled ICBM inventory show that Beijing is moving to a launch-on-warning posture to increase the peacetime readiness of its nuclear forces.

    It believes part of this posture involves implementing an “early warning counterstrike” strategy, relying on space- and ground-based sensors to warn of enemy missile strikes so that China has time to launch its own missiles before they are destroyed. On the other hand, China insists it is keeping the PLARF at a “moderate” readiness level.

    The construction of several hundred of these aforementioned missile silos has created considerable debate regarding China’s official “No First Use” policy. The 2024 report noted, “…There is little evidence to suggest that the Chinese government has deviated from it, which is also reiterated in its 2023 national defense strategy.”

    The four authors added: “Regardless of what the specific red lines may be, China’s No First Use policy probably has a high threshold. Many experts believe there are very few scenarios in which China would benefit strategically from a first strike, even in the case of conventional conflict with a military power such as the United States.”

    The same document observed: “The modernization of the nuclear forces could gradually influence Chinese nuclear strategy and declaratory policy in the future by offering more efficient ways of deploying, responding, and coercing with nuclear or dual-capable forces. The 2022 US Nuclear Posture Review suggested that China’s trajectory of expanding and improving its nuclear arsenal could ‘…provide [China] with new options before and during a crisis or conflict to leverage nuclear weapons for coercive purposes, including military provocations against US allies and partners in the region’. Advanced non-nuclear weapons could also provide a strategic strike capability that may achieve effects similar to a first use of nuclear weapons.”

    Could a Taiwan invasion scenario constitute such an occasion where China might threaten the use of nuclear weapons? After all, President Vladimir Putin played such a nuclear card to keep NATO and the US from getting directly involved in the Ukraine conflict.

    Panda offered his assessment of whether nuclear coercion could occur amidst a Taiwan contingency. “China has historically shied away from issuing nuclear threats, and has traditionally maintained a fairly restrained nuclear posture. Xi could calculate, however, that a much larger Chinese nuclear force will imbue US decision-making with greater prudence in a potential Taiwan contingency than a smaller force. He is likely right about that.”

    The Bulletin of the Atomic Scientists estimated that China currently fields 438 nuclear warheads, plus another 62 warheads that have been produced but not operationalized. This assessment corresponds almost identically to the 500 warheads estimated by the Pentagon in last year’s report on China’s military capabilities.

    In past editions of these reports, the US Department of Defense predicted that the PLARF’s nuclear warhead stockpile would reach 1,000 by 2030, and perhaps even 1,500 by 2035, many of which will be “deployed at higher readiness levels” and most fielded on systems able to reach the continental United States.

    However, the Bulletin of the Atomic Scientists noted that some previous Pentagon estimates have proven inaccurate, plus there are many variables that are difficult to predict when reaching such figures by the US military. For instance, how many missile silos will China eventually build, how many will actually host a missile, and how many warheads are on each weapon? Also, how many ballistic missile submarines and bombers will be constructed, and how many DF-26 ballistic missiles will be deployed, and what percentage of them will have a nuclear mission?

    A table in the chapter listed the following amounts for each missile type: IRBMs comprising the DF-26 (x108); ICBMs represented by the DF-5A (x6), DF-5B (x60), DF-31A (x24), DF-31AG (x64) and DF-41 (x84); SLBMs of JL-3 type (x72); gravity bombs dropped by H-6K bomber aircraft (x10),and air-launched ballistic missiles carried by H-6N bombers (x10).

    There are some interesting points to note in this independent assessment. One is that all nuclear-tipped versions of the DF-21 and DF-31 are likely retired, as are JL-2 SLBMs previously carried on submarines.

    The DF-17 hypersonic medium-range ballistic missile was once thought capable of carrying a nuclear warhead, but now the general consensus is that this is not the case. In addition, the report assumed that half of China’s DF-26 IRBM inventory is armed with nuclear warheads, even though there is no data to verify how accurate this approximation is.

    Regarding the DF-26 missile, which can have either a conventional or nuclear warhead, such ambiguity makes it difficult for another party during hostilities to decide how they are being targeted. This obviously creates doubt and the risk of swift escalation.

    In this respect, Panda told ANI: “There are risks here, but those risks could have deterrence benefits for China. In particular, US and allied attempts to possibly attrite China’s DF-26 forces could be interpreted by the Chinese leadership as part of an attack on the country’s nuclear forces, with escalatory consequences.”

    Panda therefore noted that this should be a topic for dialogue between China and the US. Naturally, that leads to another whole area of complexity, for Beijing refuses to engage with the USA on nuclear weapon control frameworks.

    Panda observed: “China has said that the US and Russia should first reduce their force sizes to that of Beijing’s, before arms control can ensue; we might now be looking at a world where China instead moves closer to where Russia and the United States are. We are potentially looking at a three-way arms race in the coming decades, particularly as US-Russia arms controls fray almost completely.”

    This is a worrying scenario, as the relative stability of the Cold War, with its mutually assured destruction, gives way to a tripartite arms race over nuclear weapons.

    China is believed to be developing an indigenous HQ-19 anti-ballistic missile system, as well as a hit-to-kill midcourse interceptor. These could target IRBMs and possibly ICBMs, although the Bulletin of the Atomic Scientists authors asserted that “the latter would still take many years to develop.”

    The PLARF has expanded its number of missile brigades. The authors estimated that the force presently has 45 brigades possessing ballistic or cruise missile launchers. An estimated 30 of these operate launchers with nuclear capability, or will upgrade to this status soon. A new missile is believed to be in development too.

    Called the DF-27, it allegedly has a range of 5,000-8,000 km. Given that such a range is redundant for nuclear strikes, since such distances are easily encompassed by ICBMs, this suggests that the DF-27 may end up with only a conventional strike role. US intelligence assessed in February 2023 that China had conducted a flight test of a multirole hypersonic glide vehicle for the DF-27, which travelled around 2,100km.

    China has also tested a strategic hypersonic glide vehicle and a fractional orbital bombardment system at least once. A test of the latter in July 2021 was particularly significant, given its unprecedented nature. However, there are limiting factors on the PLARF’s ascent.

    The expansion of China’s nuclear stockpile is dependent upon stores of plutonium, highly enriched uranium (HEU), and tritium. The International Panel on Fissile Materials assessed that, as of late 2022, China possessed 14 tonnes of HEU and 2.9 tonnes of separated plutonium, an amount that was sufficient to double China’s nuclear weapon inventory over the past five years.

    However, if China is to field more weapons – such as the 1,000 warheads predicted by the Pentagon, it will need extra fissile material production. Kristensen, Korda, Johns and Knight also noted, “The readiness of the Chinese nuclear missile force was challenged in early 2024 with disclosure that a US intelligence assessment had found that corruption within the People’s Liberation Army had led to an erosion of confidence in its overall capabilities, particularly when it comes to the Rocket Force.”

    They added that “recent dismissals of top defense officials and widespread corruption might chill the Chinese leadership’s willingness to arm missiles with warheads in peacetime.” The PLARF is a strategic force, but Xi is ruing the lack of loyalty amongst its top leadership, and the corruption that appears rife in the organization. It is one thing to invest heavily in this missile force, but there are serious question marks in Xi’s mind about its political, and likely combat, reliability. (ANI)

    ALSO READ: China’s Economy at Critical Crossroads

  • China’s Economy at Critical Crossroads

    China’s Economy at Critical Crossroads

    Looking ahead, analysts are expecting the economy to face stiff headwinds in the ‘Year of the Dragon’…reports Asian Lite News

    Amid falling growth rates, low business sentiment, and international investors pulling out due to the crisis-stricken property market, subdued export earnings, and crackdowns on private industry, China is currently facing a critical moment to revive its economy, Al Jazeera reported, citing the analysis of several experts.

    In 2023, China was able to narrowly beat its economic growth target of 5 per cent, one of its lowest benchmarks in decades. Looking ahead, analysts are expecting the economy to face stiff headwinds in the ‘Year of the Dragon’.

    As business sentiment continues to falter, economists broadly agree that Beijing needs to roll out measures to stimulate more domestic consumption.

    While some analysts are calling for radical measures to jolt China’s economy, expectations are subdued owing to Beijing’s aversion to broad-based social spending, according to Al Jazeera. On the other hand, some experts see grounds for optimism beyond the current strains.

    China is experiencing its longest deflationary run since the 2008 Global Financial Crisis. Consumer prices fell in January for a fourth straight month and declines look likely to extend into 2024.

    “China didn’t see the boost most people expected after COVID restrictions were removed in late 2022,” Kevin P Gallagher, the director of the Boston University Global Development Policy Centre, told Al Jazeera. “Authorities are now keenly aware of the threat of falling prices.”

    Falling prices risk turning into a self-reinforcing cycle if households and businesses postpone purchases in the hope that goods will keep getting cheaper. Deflation also squeezes debtors as the real cost of borrowed money rises.

    In China’s case, where the debt-to-GDP ratio, including local government liabilities, reached 110 per cent in 2022, the situation poses a growing headache for policymakers.

    Notably, in recent months, Beijing authorities have ramped up support measures to try and stem falling prices – mortgage rates on home purchases have been lowered, and banks have been allowed to hold smaller cash reserves to spur increased lending, Al Jazeera reported.

    Much of China’s deflationary woes can be traced back to its beleaguered real-estate sector, which accounts for 20-30 per cent of GDP.

    After the 2008 Global Financial Crisis, local governments encouraged a debt-fueled construction boom to boost growth. But after decades of rapid urbanisation, housing supply has run ahead of demand.

    Amid several high-profile developer defaults, including the failure of Evergrande Group, new home sales fell by 10-15 per cent in China last year, according to the Fitch Ratings agency.

    In turn, Chinese households have become cautious about spending money, especially on property, while a weak social safety net encourages families to save for emergencies.

    In 2022, household consumption accounted for just 38 per cent of China’s GDP. On the other hand, private spending made up 68 per cent of the GDP in the United States that same year.

    “Households ran down savings during the pandemic,” Sheana Yue, a China economist at Capital Economics said. “The real-estate crash undermined consumer confidence even further. China also has an ageing population, and, typically, spending declines with age.”

    The upshot is that gross national savings exceeded 40 per cent in 2023, more than double the US level.

    “Looking ahead, getting people to spend their savings won’t be easy. For decades, economists have encouraged the government to rebalance the economy away from investment in favour of consumption,” Yue said.

    At 42 per cent of GDP, China’s rate of investment dwarfs that of other emerging economies, let alone advanced economies – which average 18-20 per cent. In addition to housing stock, Beijing has invested heavily in roads, bridges and train lines.

    As with housing, however, years of overinvestment have resulted in spare capacity. Revenues at China Railway, for instance, regularly fall short of costs. At the end of 2022, the state-backed agency was 6.11 trillion yuan (USD 886 billion) in debt.

    “We’re seeing the limitations of China’s capital-intensive infrastructure model,” Yue said. “And given that interest rates are already quite low, Beijing will need to start stimulating consumption to generate high and stable growth.”

    Yue said policymakers should remove incentives to hoard savings by spending more on education, healthcare, and pension provisions.

    Analysts expect the National People’s Congress–China’s rubber-stamp parliament — to again set an annual growth target of about 5 per cent when it meets in March, as reported by Al Jazeera.

    While many economists have exhorted Beijing to stimulate growth through household transfers, Victor Shih, an expert on the Chinese economy at the University of California, San Diego, expects investment-driven growth to continue to hold sway.

    “Marxist ideology, which valorises industrial production, remains the fundamental basis for policymaking in Beijing,” Shih said.

    “In all likelihood, the government will continue to subsidise manufacturing. Consumption, by contrast, is viewed as indulgent,” Shih added. “There are 1.4 billion people in China, so comprehensive social assistance would be extremely expensive, especially in a deflationary context.”

    Shih said Beijing could raise household consumption by urging companies to pay higher wages but that “China’s manufacturing edge is partly based on subdued worker income”.

    As such, “higher wages would undermine Chinese exports, which is an important source of output,” he said.

    “I don’t think the government will shift budgetary priorities in favour of the Chinese people… which will likely result in a period of economic weakness.”

    Gary Ng, a senior Asia Pacific economist at Natixis in Hong Kong, said that Beijing has other strategic priorities.

    “President Xi [Jinping] appears less keen on stimulating rapid growth than he is on optimising the economy for security and resilience,” Ng said.

    In recent years, Beijing has invested heavily in strategic industries like artificial intelligence and advanced computer chips.

    By moulding industrial policy on the basis of national security, Beijing has set its sights on reducing its reliance on foreign technology and supporting its long-term geopolitical ambitions.

    At the same time, Ng said, “Beijing has shown a new willingness to invest in more consumer-facing tech sectors, like renewable energy and electric vehicles.”

    “Unlike property, these industries have the capacity to create jobs and promote economic self-sufficiency,” he said.

    Ng also stressed that economic transformation takes time and that “there’s no magic pill for lightning-quick growth”.

    “Investment in high-tech sectors should, slowly, reform China’s economic base,” he said. “Incidentally, private consumption is already on an upward trend.”

    Gallagher, of Boston University, said China’s economic growth trajectory is healthier than sometimes portrayed.

    “It’s easy to forget about China’s economic development since the 1990s. Growth has slowed from high levels lately but it still tallied at 5.2 per cent last year,” Gallagher said. “Forecasts are equally solid for this year.”

    “Hawks have been predicting the demise of China’s growth model for decades,” Gallagher added. “It is true, however, that to build on China’s remarkable success, Beijing has to shake off its timidity about the investment-consumption pivot.”

    Gallagher said 2024 is likely to underscore the urgency of reform amid the possibility of Donald Trump’s return to White House, who in his previous term had unleashed a strong trade war against China, Al Jazeera reported.

    “If Donald Trump is re-elected (in the US) and chooses to engage in a new trade war, Beijing will want to be more self-reliant. The Year of the Dragon could be ideal for China to step up its efforts to unleash domestic consumption,” he said. (ANI)

    ALSO READ-US, EU Sanctions Extend to China Firms Supporting Ukraine War