Skip to main content

Goodbye, China Deleveraging. Onward Belt and Road?

Andy Mukherjee

(Bloomberg Opinion) -- With China’s fiscal, monetary, currency and credit policies all taking a pro-growth turn, President Xi Jinping’s deleveraging campaign is clearly over. Or, at the very least, it’s going into the freezer for as long as there’s no letup in trade tensions with the U.S.

But what about Xi’s other pet idea? In Southeast Asia, the ambitious belt-and-road project witnessed a 36 percent year-on-year decline in investment commitments and construction contracts in the first half. The setback is temporary, according to Citigroup Inc., which expects Beijing will yield to its partners’ concerns for the sake of its “overarching geostrategic imperatives.” 

Maintaining the region’s confidence in belt-and-road may be a crucial defense against domestic fragility. The yuan is at its weakest in more than a year; banks’ reserve ratio has been cut three times; and now, following a meeting of the State Council, authorities are vowing a “more proactive” fiscal policy. The People’s Bank of China will extend credit via a medium-term lending facility for lenders to buy corporate bonds — the funding could be twice the size of purchases if the securities are rated AA or below.

All this is clearly aimed at reining in rising distress. Including the recent cross-defaults on 13 of coal miner Wintime Energy Co.’s bonds — totaling about 10 billion yuan ($1.5 billion) — the default rate in China may now be running at 0.52 percent, higher than the 2016 peak of 0.45 percent, according to Bank of America Merrill Lynch’s calculations. 

Southeast Asia and Pakistan may use the opportunity to shave a few billion dollars off interest costs. To the extent Beijing’s attention is diverted to fighting fires in the domestic economy, overseas recipients of Beijing’s infrastructure financing are bound to demand — and get — sweeter terms. 

Malaysia’s new Prime Minister Mahathir Mohamad has sent an emissary to China to renegotiate loans and contracts. In Thailand, there’s nervousness about a five-year plan to redevelop the country’s eastern seaboard as a trade and transport hub — and link it with belt-and-road. There’s no guarantee the next civilian government will continue to back the $51 billion makeover, or that it won’t spend the money instead on farmers in the landlocked northeast. 

A bigger and more immediate test for China, however, may arrive after Wednesday’s elections in Pakistan. Opposition leader Imran Khan, while not repudiating his country’s growing dependence on Beijing, hasn’t ruled out re-examining the loans for a $62 billion China-backed trade corridor if his party forms a government. Imports of machinery and transport equipment to set up the corridor have sunk the Pakistani rupee by 18 percent over the past year, leaving Islamabad in the unenviable position of managing its hard-currency shortfall by taking yet more loans from its regional neighbor.

With its own competitiveness under threat from U.S. President Donald Trump’s hawkish policies and posturing, China has an increasing need of its Asian allies — for everything from relocating low-cost manufacturing to sourcing chemicals, clothing and soybeans. Deleveraging at home can be allowed to be a casualty of a global trade war. But leaving marquee Chinese projects stranded overseas, with partners complaining about high debt and low returns? That simply won’t do.

Pakistan’s next prime minister should aim to show up in Beijing with a list of demands. Odds are, he won’t return empty-handed.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

©2018 Bloomberg L.P.



https://www.bloombergquint.com/global-economics/2018/07/24/goodbye-china-deleveraging-onward-belt-and-road

Comments

Popular posts from this blog

SSG Commando Muddassir Iqbal of Pakistan Army

“ Commando Muddassir Iqbal was part of the team who conducted Army Public School operation on 16 December 2014. In this video he reveals that he along with other commandos was ordered to kill the innocent children inside school, when asked why should they kill children after killing all the terrorist he was told that it would be a chance to defame Taliban and get nation on the side. He and all other commandos killed children and later Taliban was blamed.
Muddassir Iqbal has deserted the military and now he is  with mujahedeen somewhere in AF PAK border area”
For authenticity of  this tape journalists can easy reach to his home town to interview his family members or   ISPR as he reveals his army service number”
Asalam o Alaikum: My name is Muddassir Iqbal. My father’s name is Naimat Ali. I belong to Sialkot divison (Punjab province), my village is Shamsher Poor and district, tehsil and post office  Narowal. Unfortunately I was working in Pakistan army. I feel embarrassed to tell you …

The Rise of China-Europe Railways

https://www.csis.org/analysis/rise-china-europe-railways

The Rise of China-Europe RailwaysMarch 6, 2018The Dawn of a New Commercial Era?For over two millennia, technology and politics have shaped trade across the Eurasian supercontinent. The compass and domesticated camels helped the “silk routes” emerge between 200 and 400 CE, and peaceful interactions between the Han and Hellenic empires allowed overland trade to flourish. A major shift occurred in the late fifteenth century, when the invention of large ocean-going vessels and new navigation methods made maritime trade more competitive. Mercantilism and competition among Europe’s colonial powers helped pull commerce to the coastlines. Since then, commerce between Asia and Europe has traveled primarily by sea.1Against this historical backdrop, new railway services between China and Europe have emerged rapidly. Just 10 years ago, regular direct freight services from China to Europe did not exist.2 Today, they connect roughly 35 Chinese…

CPEC Jobs in Pakistan, salary details

JOBS...نوکریاں چائنہ کمپنی میںPlease help the deserving persons...Salary:Salary package in China–Pakistan Economic Corridor (CPEC) in these 300,000 jobs shall be on daily wages. The details of the daily wages are as follows;Welder: Rs. 1,700 dailyHeavy Duty Driver: Rs. 1,700 dailyMason: Rs. 1,500 dailyHelper: Rs. 850 dailyElectrician: Rs. 1,700 dailySurveyor: Rs. 2,500 dailySecurity Guard: Rs. 1,600 dailyBulldozer operator: Rs. 2,200 dailyConcrete mixer machine operator: Rs. 2,000 dailyRoller operator: Rs. 2,000 dailySteel fixer: Rs. 2,200 dailyIron Shuttering fixer: Rs. 1,800 dailyAccount clerk: Rs. 2,200 dailyCarpenter: Rs. 1,700 dailyLight duty driver: Rs. 1,700 dailyLabour: Rs. 900 dailyPara Engine mechanic: Rs. 1,700 dailyPipe fitter: Rs. 1,700 dailyStorekeeper: Rs. 1,700 dailyOffice boy: Rs. 1,200 dailyExcavator operator: Rs. 2,200 dailyShovel operator: Rs. 2,200 dailyComputer operator: Rs. 2,200 dailySecurity Supervisor: Rs. 2,200 dailyCook for Chinese food: Rs. 2,000 dailyCook…