With little room for tightening, Beijing lacks good options to prevent a return of capital flight. China cannot afford to match the US policy changes as lower tax rates and higher interest rates would further drive up budget deficits and debt.
In 2018, economic stability will remain the Chinese leadership's priority. Despite all the good intentions to tackle structural problems, Beijing will be hard-pressed to tolerate a drop of GDP growth below an annual average of 6.4 percent.
China’s import ban on some "dirty" solid wastes could be a big contribution to protecting the global environment. The ban could force exporting countries to raise their recycling standards. At the same time, China would have to enforce stricter standards on domestic producers to defend the ban against potential trade disputes.
Interview with Danit Gal (via Young China Watchers)
"Do it first, regulate later," is how Danit Gal characterizes China's approach to Artificial Intelligence (AI). In this interview, she describes China's competitive advantages as large-scale commercial application, strategic planning and the lack of regulation.
China works full steam on institutionalizing its cooperation with Eastern Europe, building the 16+1 initiative into a platform for its Belt and Road Initiative. The economic reality lags far behind the announcements, but the promise of Chinese investment and the symbolism of the high-level cooperation between China and Eastern Europe are turning into a stress test for EU cohesion.
The CCP reasserts its control over the private sector by extending its reach far inside foreign and Chinese companies. For foreign investors, such close and often involuntary cooperation with the party-state can bring lucrative opportunities but also lead to questionable business decisions.
Strict outflow controls have helped maintain China's financial stability. But they risk undermining their own utility by keeping funds in the country, driving investors into risky sectors and creating an excuse to postpone overdue reforms in the financial sector.
Economic planning and societal control: The digital transformation is changing the rules of the game in the global systemic competition. China's determined pursuit of a "digital Leninism" presents a major challenge to liberal market economies and democratic political systems.
China's Internet economy is developing rapidly with the help of government funding and a protected domestic market. European governments have to rethink their digital policies to be prepared for the Chinese competition.
The state’s role in economic planning has increased under Xi Jinping, and national interests take precedence over market principles. Signs point to more government controls and intervention, rather than liberalisation, as a result of the 19th Party Congress.
With its recent promises of better market access for foreign companies, China tries to placate international criticism. But the steps are half-hearted at best, especially since the relaxations in some areas go hand in hand with new restrictions in others.
Interview with Shazeda Ahmed
In setting up the so called Social Credit System, China plans to monitor, rate and regulate the behavior of citizens and companies with the help of big data. What motivates the government? What are the major challenges? And what do people in China think about this system?
China’s outbound M&A volume has contracted significantly since the beginning of the year. The Chinese government’s attempt to curtail acquisitions outside the core business areas of Chinese companies and the resulting breathing spell could have a favourable effect on M&A success probabilities.
North Korea’s triumph in the standoff with the United States may be short-lived. The strategic value of its nuclear deterrent is questionable, as it has profoundly alienated China, North Korea’s long-time ally. At the same time, the regime in Pyongyang continues to dig its own grave with its failed economic policies.
(via The Diplomat)
The increasing digitalization of life in China has increased the need for the security of personal data. To ensure effective data protection, the party-state would have to create a unified legal framework and to subject itself to supervision.
China’s GDP growth rate target wastes resources and prevents necessary structural adjustments. The target encourages the build-up of overcapacities and forces the government to stimulate demand even if this demand is not sustainable. China should replace growth targets with economic forecasting and assessments of China’s capacity growth potential.
Interview with Carsten Holz
The Chinese government spends millions to develop the Tibetan areas of China. But what can investment achieve in these remote regions? Can it create sustainable jobs and change people’s lives? In this MERICS Experts Podcast, the economist Carsten Holz of Hongkong University of Science and Technology accounts his research trip on the Tibetan plateau in Western Sichuan.
After turbulences in the stock and real estate markets, China’s next speculative asset bubble might be building in the Fintech sector. Stricter regulation won’t solve the underlying problem: the lack of attractive investment options caused by low interest rates and capital controls will keep producing new bubbles.
The global fight against climate change will continue after the US withdrawal from the Paris Agreement. Participants at a MERICS conference agree that Germany and China can play a decisive role in keeping the topic on the G20 agenda.
The evasion of VAT for the import of digital services from China is a growing problem for the EU. Rather than waiting for the completion of a European single digital market, loopholes for non-EU suppliers should be closed now.
China aims to fight growing risks in its financial sector with restrictions on shadow banking assets and interbank lending. But a sudden reduction of liquidity could increase rather than reduce the risk of a financial panic and dampen growth.
Air pollution is a severe problem across China, but the levels of pollution vary greatly between regions. Though still a major challenge, air quality in urban centers like Beijing and Guangzhou is improving. Cities in the industrial heartland on the other hand have seen little to no Progress.
Charlotte Roehren (via The Diplomat)
With its growing international integration, China is becoming a major actor in global health issues. Beijing has valuable experience in fighting pandemics and in providing health and medical support to Africa. The G20 Summit in Hamburg will be an opportunity for China to step up its multilateral health engagement.
Punitive levies on Chinese imports would hurt American consumers and U.S. companies that are part of the global supply chain. At the same time, they would strengthen Beijing's resolve to speed up its quest for independence from foreign technology.
(via The Diplomat)
International businesses in China struggle to comply with new regulations, which force them to store critical data within China's borders, limit the application of foreign encryption services, and require handing over customer data of terror suspects.