ECONOMY

Xi Warns of Decoupling; Dalio Touts China Bonds: Boao Update

Chinese President Xi Jinping, in a keynote speech delivered for the annual Boao Forum Tuesday, called for greater global economic integration and warned against decoupling while calling on certain countries to avoid “bossing others around.”

Ray Dalio, founder of Bridgewater Associates, said the world is overweight in U.S. bonds and China’s bond market looks relatively attractive. Fang Xinghai, vice chairman of China Securities Regulatory Commission, said regulators are keeping a close watch over hedge fund inflows to safeguard financial stability as the nation opens its capital markets.

Chinese government officials and business leaders are gathered this week on the tropical island province of Hainan for the forum, with discussions encompassing topics from digital currencies to carbon neutrality and the economic outlook for a post-pandemic world. Billed as an Asian version of the World Economic Forum, the event kicked off Sunday and is slated to run through Wednesday.

Bloomberg News captured the pulse of the event throughout the forum. Updated as of Tuesday 2:30 p.m. Beijing time.

  • Click here for the agenda, here for latest list of delegates
  • Chinese central bank governor Yi Gang to speak on a panel about carbon neutrality on Tuesday at 4 p.m. local time
  • Larry Fink, Deputy PBOC Governor Li Bo, former PBOC Governor Zhou Xiaochuan speaking on a panel about pension reform on Tuesday at 8 p.m. local time
  • A look at China’s green goals; first-quarter economic performance

Xi Challenges U.S. Global Leadership

“International affairs should be conducted by way of negotiations and discussions, and the future destiny of the world should be decided by all countries,” Xi said in a pre-recorded video speech, without naming the U.S. specifically. “One or a few countries shouldn’t impose their rules on others, and the world shouldn’t be led on by the unilateralism of a few countries.”

In a veiled critique of U.S. efforts to reduce dependence on Chinese supply chains and withhold exports of goods like advanced computer chips, Xi said “any effort to build barriers and decouple works against economic and market principles, and would only harm others without benefiting oneself.”

“What we need in today’s world is justice, not hegemony,” Xi said, adding that China would never engage in an arms race. “Bossing others around or meddling in others’ internal affairs will not get one any support.”

IMF Sees Multi-Speed Recovery of Global Economy

IMF Managing Director Kristalina Georgieva said she sees multi-speed recovery of the global economy in 2021 and the U.S. and China will drive global growth.

Speaking at the Boao forum Monday night, she cautioned that strong growth could lead to faster-than-expected policy tightening, while the pace of vaccine rollout is another risk to global economy.

Dalio: Cash, Bonds Bad Assets to Hold

Ray Dalio, founder of Bridgewater Associates, said cash and bonds are bad assets to hold and stocks are better investment.

Speaking at the Boao Forum, Dalio also said China’s bond market looks relatively attractive. The world is overweight in U.S. bonds and underweight in Chinese assets, he added.

Lam: Seems Worst is Over for Hong Kong

Hong Kong’s Chief Executive Carrie Lam expects the city will see about 3% to 5% annual economic growth this year, she said in an interview with state broadcaster CCTV during the Boao forum.

Hong Kong’s economy has faced multiple challenges in the past two to three years, including trade disputes between China and the U.S., social unrest and pandemic, Lam said. “Now, it seems the worst time is over.”

Keep an Eye on Fast Money Inflows

Fang Xinghai said the securities watchdog is paying “high attention” to overseas brokers that are backed by hedge funds and use the Stock Connect program for investments into China.

“There are rules that if a foreign account creates a large market move we can stop its trading,” he said. “So we have tools to prevent these investments from creating fluctuation in our markets.”

Investors such as mutual funds, pension funds and insurance funds are “very welcome” in China, he said.

He also said China plans to increase inclusion factors of mainland A-shares in major indexes, and continue to expand the scope of inclusion to attract more foreign investment. As of the end of March, foreign capital held 5% of China’s stock markets.

Huang Zhaohui, Chief Executive Officer of China International Capital Corporation Ltd, said at the same panel that capital market opening is a must for China and the country should boost equity financing as part of economic transformation.

Full-throated Defense of Belt and Road

China’s former central-bank boss delivered a full-throated defense of the country’s Belt and Road projects, dismissing what he called “conspiracy theories” about geopolitical motivations for overseas infrastructure investments.

China’s investments marry its overcapacity in some industries with demand in developing countries, Zhou Xiaochuan, former governor of the Peoples Bank of China said at the forum.

“They are bottom-up, not top-down,” he said. “The banks take decisions by themselves, they are not told to do it, and the financing is based on the market rates.”

China has faced criticism that its investments are part of a strategy to entrap some countries in excessive debt, boosting China’s political clout over the target nation.

China Hopes Both U.S. and China Can Join TPP

To truly liberalize trade and investment in the Asia-Pacific, we hope that China can be admitted to CPTPP trade deal and the U.S. would also return to it, former senior Chinese trade official Long Yongtu said at the Boao forum. If that happens, then TPP would become a high-level regional trading agreement, Long said, adding it would be difficult, but he hoped both nations will make the effort.

Neither country is a member of the Comprehensive and Progressive for Trans-Pacific Partnership, although China has recently said that it is considering joining.

The U.S. was one of the parties negotiating the deal, until President Donald Trump pulled out. China also recently finished the ratification of the Regional Comprehensive Economic Partnership, a separate trade deal which was signed in 2020.

“I very much hope that RCEP and TPP will someday in the future adopt a format for the two to converge or integrate with each other. Then we will have the largest free trade agreement in the whole world,” Long said. The U.S. is the key for this – if they express a positive view about returning to CPTPP and show positive signals on it, the two trade blocs will merge eventually, he said. Long was China’s chief trade negotiator during the country’s process to join the World Trade Organization.

Huawei, China Mobile on Power of 5G

Huawei Technologies Co.’s Ken Hu, one of three rotating chairmen who take turns filling the post, on Monday talked up the business by outlining how 5G can reduce waste and speed things up dramatically — including for itself. Hu described how China’s largest technology company by sales is revamping one of its main plants in the southern city of Dongguan, doing away with miles of pre-5G telecom cables. “We need about 560 kilometers of cable to connect all of the devices in the 60,000-square-meter, 3-floor plant, which could basically be saved after deploying 5G. This is a very big change.”

Read: China Builds World’s Largest 5G Mobile Network: Xinhua

Separately, China Mobile chairman Yang Jie Said it was helping take ultra-fast 5G into mines at a depth of up to 500 meters, to help monitor underground working surfaces, control coal mining machines and detect hazardous gas.

“The input-output ratio is still very high,” Yang said at a panel, adding that with help of the 5G technology, “we can reduce the number of people working underground by 20 for each working surface” and “it saves tens of millions yuan of investment every year.”

Foreign Insurers Urged to Learn From Chinese Peers

Chinese insurance companies have learned a great deal from their overseas peers in terms of corporate governance and products, but foreign players haven’t been as enthusiastic in localizing their services and sales practices in China, Shang Jingguo, secretary general of the Insurance Association of China, said in an interview on the sidelines of the Boao Forum.

“The insurance market is a very localized one. It’s not as standardized as the securities market in terms of sales and services,” said Shang, adding that foreign players “should think of how to better connect with the local culture”.

China has eased restrictions and started allowing foreign insurance companies to fully control local units starting January 2020. China is now the world’s second-largest insurance market following the U.S., according Deloitte.

The market share of foreign insurers, however, remains small in mainland China, standing at around 7%, according to local media reports.

China’s Solutions for Global Problems

Chinese Foreign Ministry spokesman Wang Wenbin gave a taste of what Xi will discuss during a regular press briefing Monday in Beijing. Xi’s keynote speech will touch on the risks and challenges the world is facing, and what solutions China can offer to promote development and prosperity, the spokesman said.

“This reflects the world’s aspiration to address changes and strengthen global governance,” Wang said. “China hopes all parties will have a full discussion, and make plans for better development and to create a better future for Asia and the world.”

Wang declined to identify the second senior official who state media reports indicated will attend the forum in person, saying the ministry would release information “in due course.”

Encouraging Signs of Consumer Spending

China’s low-income households are picking up spending, boding well for overall consumption in the economy and a sign of a more balanced recovery, the chief economist of e-commerce giant JD.com Inc.said.

Higher earners in the nation’s biggest cities expanded their spending during the pandemic last year to splurge on luxury and electronic products such as phones and computers, Shen Jianguang said in an interview at the Boao Forum. The driver for consumption is now starting to shift to smaller cities, he said.

“Recently we are seeing a lot of people started working and all the shops are open,” he said. Consumption is “more geared toward necessity goods and less discretionary goods” and spending in tier-three and tier-four cities are picking up, he said.

Politicization of Trade a ‘Great Pity’

The business community was glad to see Europe and China reach the Comprehensive Agreement on Investment, but “then we have seen that political differences have sort of created issues that could make an early ratification difficult to achieve,” according to Jens Eskelund, China CEO of shipping firm AP Moller – Maersk A/S.

Esekelund is also vice president of the EU Chamber of Commerce in China.

“I think it is something that the EU Chamber of Commerce sees as a worrying tendency that trade sometimes becomes politicized and that political difference have spillovers into the commercial arena. It’s something we think is a great pity,” he said on a panel at the Boao Forum. “Our hope is that, irrespective of the current differences, that it will be possible for the two sides to find some sort of common ground that leads to ratification.”

In a position paper published in September 2020, 43% of the chamber’s members reported that the business environment had become increasingly politicized compared to the previous year.

Crowded Rooms, Not Many Masks

The Boao Forum is the first big offline event in China this year, with over 2000 people attending. That’s fewer than in previous years, but it’s still a shock to suddenly be back in an environment with people crammed into meeting rooms, or in a press room with journalists pressed cheek by jowl. While there’re still some signs of the pandemic, including plastic barriers on the dinner tables, one big visual surprise is just how many people aren’t wearing masks.

While there are basically no virus cases in China, the country’s efforts to deal with the return to normal is still a process of trial and error. Initially the Boao Forum demanded that all journalists attending be vaccinated. But that was soon rescinded, likely because there wasn’t enough time for everyone to have the two shots needed. Still, all attendees had to have a virus test before coming to Boao, and then another one on arrival. So even if the masks are gradually coming off and life is returning to normal, there’s still a long way to go.

Boao Forum Returns After Hiatus

China is signaling it’s open for business with the resumption of the high-profile Boao Forum for Asia, an opportunity for the government to make a renewed effort to lure foreign investors in a post-pandemic world. The event was canceled last year as a result of the coronavirus pandemic.

Xi Warns of Decoupling; Dalio Touts China Bonds: Boao Update

Digital Yuan Not to Replace Dollar

China’s goal for internationalizing its currency is not to replace the dollar, and the efforts to create a digital yuan are aimed at domestic use, a senior central bank official said Sunday.

“For the internationalization of the renminbi, we have said many times that it’s a natural process, and our goal is not to replace the U.S. dollar or other international currencies,” People’s Bank of China Deputy Governor Li Bo said Sunday.

Internationalizing Yuan a Top Priority, Says Economist

The top priority for China’s financial sector is promoting the global use of its currency and opening up the financial markets, instead of digitizing the yuan, said Wu Xiaoqiu, director of the Finance and Securities Institute at Renmin University of China.

“Global history tells us a country’s financial opening up always begins with liberalizing the currency,” said Wu at a presser at the Boao Forum. “The key task now is not to put so much focus on the digital currency.”

China should work toward allowing free cross-border flow of capital and greater exchange rate flexibility, Wu said. The country’s economy is solid enough, and liberalizing the yuan exchange rate is unlikely to lead to a crisis of sudden depreciation of the yuan, he added.

CanSino Checking Vaccine Safety Closely

CanSino Biologics Inc. is monitoring its Covid-19 vaccine more carefully after cases of blood clots forced other suppliers to suspend inoculations. “We’re just monitoring more cautiously,” CanSino Chairman Yu Xuefeng said on the sidelines of the Boao Forum.

The comments come as a vaccine from Johnson & Johnson was halted in Europe after U.S. officials paused immunizations to investigate blood clots suffered by six women.

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