From LC no.19

Previously a South Korean journalist working in Beijing China. Now not a in South Korea. Anything about Chinese politics, economics, and more.

[fromlibrarycourt]

어버이날 風樹之嘆

비록 하루 늦었지만. 樹欲靜而風不止，子欲養而親不待 나무는 고요하려 하나 바람이 그치지 않고 자식이 봉양하려 하나 어버이는 기다려주지 않네. 살아 계실 때 잘해 드립시다.

[fromlibrarycourt]

Panama Papers didn’t happen in China

Chinese censors must be one of the most efficient and effectively managed state institutions around the world. As soon as posts related to Panama papers began to be circulated, they were at work. According to Baidu, Panama Papers do not exist.

Among the Chinese high-level officials to be implicated in this 2.6TB leak from Mossack Fonseca were 2 members of the 7 Standing Committee of the Politburo, one of them being Liu Yunshan 刘云山, the propaganda chief himself, as well as president Xi Jinping. So the stakes were quite high and the range of censorship equally extensive (the word for “brother-in-law” was reported to be included in the “sensitive” list, or got “404ed” 被404了 since it was the name of Xi Jinping’s brother-in-law, Deng Jiagui 邓家贵.) 

Just as the Russian propaganda machine portrayed it as part of an “information war” against Putin, China’s Global Times called it “a new means for ideology-allied Western nations to strike a blow to non-Western political elites”. Besides the “Western plot” card, as the China Digital Times noted, the week that Panama Papers were released coincided with news of assault on a woman at a Beijing hotel and the non-intervention of the bystanders, which for the latter reason attracted a flurry of views and moralizing comments about the state of Chinese society etc. etc.--it was enough to distract. The confidence with which the spokesman of the Ministry of Foreign Affairs repeatedly no-commented questions related to Panama was also notable.

However tempting it is to imagine the damage this may have on the legitimacy of Chinese leadership, I would argue it was limited, if not negligible. In 2012, when Bloomberg and NYT reported on the former Premier Wen Jiabao 温家宝’s wealth, there were no uprisings. 

To many people in China, as this Economist article rightly points out, high-level corruption is neither news nor a compelling reason to lose faith in the leadership. The Chinese middle class which that widely-quoted study on the relationship between GDP per capita (threshold being USD 6,000) and democratization (and of course the end of history thesis) had hoped would become the next agents of change, were for the large part unmoved. Admittedly, that idea would have appeared more persuasive at the height of American power before 2008 when capitalism and democracy seemed to partner up well. 

Of course, calling for an outright regime change or endorsing democratization in public have unequivocally become unpopular since Tiananmen.  That is not to say the Chinese middle class has no political consciousness, which would be a grand generalization on a group of more than 100 million people. In fact, the quesiton of how to make China a better place is something almost everyone obsesses about. But, more and more are less convinced by the merits of democracy as an effective mode of governance (Trump). Additionally, some of my Chinese friends (who are mostly the children of the middle class) have lamented how many Chinese millennials are less concerned about such matters than by the latest trend in Korean hair style. Though it’s hard to say without a comprehensive survey, the argument has been made that much of the middle class, in part out of a sense of powerlessness to effect any meaningful change themselves, are more concerned about their daily lives.

There is an interesting comparison to be made with Russia, another authoritarian country whose leader has been a central cast to this episode through the proxy of a cellist called Sergei. Similar to China, not much shit was given in Russia (Andrey Kostin, head of a state bank that allegedly involved” called the idea of Putin’s involvement “bullshit”). "Corruption is seen as a fact of life, and the sense that there’s nothing we can do about it is pervasive,” editor of the journal Counterpoint Maria Lipman told the Economist.  Corruption in China, however, is not a fact of life. In fact, the campaign to rid its system of graft has been one of the most enduring and intense ones to take place since the communist takeover. If you talk to a cab driver in Beijing, my go-to source for the “average Chinese Joe”, many of them will tell you it’s all to settle political scores. Yet the same people also believe the anti-corruption campaign is genuinely having an impact, nevermind whether it will be rooted it out once and for all--the Xi administration remains one of the more popular governments in the world according to a survey. So, it is rather odd that there should be very little reaction to all of this, especially when Xi Jinping’s relative was on the client list of the same law firm that Gu Kailai, the wife of Bo Xilai, Xi’s arch enemy, and the poster child of the bad boys’ club in China.

In this instance, however, I was personally more curious as to how this news would be received at a time when discontent appears to be brewing within Chinese society and the political circle in regards to more oppression of the freedom of speech and media, and the increasing influence of Xi Jinping. But that idea itself, that the oppression of the freedom of speech or the increasing hold on power of Xi can impair Chinese society, has also not gained such wide currency either. Such developments are often taken with a positivist attitude; so people are less judgmental. It seems more apparent that authoritarian politics, not corruption, is taken as a fact of life in China. Due to such circumstances, along with other factors, contradictions of an authoritarian regime in relation to corruption come under less scrutiny, especially if the economy is doing relatively OK. 

But we also mustn’t forget the achievements of China’s propaganda apparatus. When such episodes like Panama Papers strike, media blackouts and the forestallments of anything vaguely civil society-esque  (remember the five feminists who were arrested for protesting about women’s rights) have obviously played a great role in pre-empting sentiments adverse to the incumbent government. The former gives the impression to the masses that it is not an important issue (or that it doesn’t exist). The latter prevents more active citizens from making it into one. Both have seen an uptick under Mr. Xi, and together with the recent memory of Tiananmen, these make for a powerful propaganda package that keeps potential dissent on the side of caution. 

Such control of media and public opinion, I believe, was the main factor behind the extraordinary difference in reaction to the cruise ship sinking in China and South Korea. In both countries, a cruise ship sank, the leading crew members survived but hundreds died. In China, the official pronouncement that it was a natural disaster was taken at face value and discussions were wrapped up within the week. In Korea, it was a to begin a long period of intense political firestorm, and still continues to be one of the major reasons for the strikingly low ratings of the current Park administration. 

[fromlibrarycourt]

深夜的经济学｜Late night economics: what did the People’s Bank of China do to the offshore RMB market?

The background:

China has two currency rates. One is onshore, which trades within a narrow band dictated by a central bank daily rate (the yuan is allowed to rise and fall by 2% of this fixed rate). The other is offshore, where the yuan floats freely and serves as an indicator of what markets think about the Chinese economy. Since last August, when the PBoC declared a change to how it fixes daily yuan rates, which they say reflects market value, the yuan was expectedly devalued. But it was depreciating at much quicker pace than people had anticipated. Caixin’s details on the change: The new method, which officials said better reflects market value, links the daily rate to the currency’s closing price for the previous trading session. The fixing is a reference the central bank provides to interbank forex market traders based on the perceived value of the yuan. It is a mid-point from which daily spot trading prices for the yuan are allowed to deviate by 2 percent in either direction.

Dreading further depreciation of the yuan, those with offshore yuan holdings started selling. Then you had speculators who sought profit from the weakening yuan by short-selling their yuan holdings, and the gap between onshore and offshore yuan widened to a record. (Besides the fact that offshore is free floated and onshore isn’t, the fact that capital can’t come out freely from mainland once in, has contributed to the widening gap). Details on short-selling CNH (offshore RMB in Hong Kong): Known as “carry trading,” it has become popular practice for speculators to swap borrowed offshore yuan for dollars, then rebuy RMB when it has depreciated, pay off the loan and keep the remainder. Only made possible since August when the RMB started depreciating. All this had led offshore RMB to become significantly more devalued than onshore RMB, with the gap widening to over 1,300 basis points (in November it was about 300). What the PBoC has done is to stop short-sellers by raising the interest rate at which they can borrow CNH. It has done so by selling its massive foreign exchange reserves and buying up offshore RMB through state-owned banks in Hong Kong. Hibor (Hong Kong Inter-bank Offered Rate) went to record highs of 66.8% on January 12.

The RMB has now stabilized at 6.58 against the dollar.

But the move has not been without costs. Countering short-selling in such a manner reduced FOREX reserves, which last year shrank for the first time by 500 billion USD to 3.3 trillion. At a time when, Chinese companies are still saddled with 1.53 trillion dollars in foreign debt, most of which are also short-term. But as China’s economic transition continues (as well as the ups&downs of the stock market), the expectation is further depreciation, and that means more intervention of that nature is likely.

[fromlibrarycourt]

Briefing: financial scams in China, why so many?

Scams in China’s finance industry is a trend I think will continue for a long time. Quartz has done this great compilation of financial scandals in China:

http://qz.com/576389/a-banner-year-financial-scams-in-china-nabbed-at-least-24-billion-in-2015/

Here are a few highlights:

E Zubao and other P2P financing platforms—at least $11 billion

Fanya Metal Exchange—about $6 billion

MMM social financial network—beyond calculation

Zhuoda Group—about $1.6 billion

GSM Financial Group—about %6.2 billion

And it also discusses why these schemes succeed, or why investors keep falling for them:

First off, opportunities in real estate and of course the stock market seem dubious, and new financial companies, especially peer-2-peer lending firms present an attractive alternative.

But of course, while rule of law has much to catch up on this new and upcoming industry, presenting a great opportunity for crooks with a bit of brains to come in and attract innocent investors looking for swift gains.

Indeed, many of these firms lie beyond the scope of supervision. P2P lending platforms often go beyond their normal role as sole information brokers and provide services and products that only licensed banks or lending companies offer. Many of them are not even registered with the State Administration for Industry and Commerce.

And investors will just go for these seemingly shady companies for really quite simple reasons: i)friends recommended it,

ii)just believed in their marketing campaign promising incredibly high returns (in some cases, people know it’s a ponzi scheme but still go for it confident they can get out with some gains before it all collapses),

iii)some famous investor spoke well of it (eg.,

iv) some local government has backed them like in the case of Fanya. People just expect the government will have their back once things go south. Nothing more than the trusting soul of man under authoritarianism.

v)And another unique feature on mainland:

Put these all together: it’s a lack of experience in investments. Mainland has arrived to capitalism late and so investing habits are also in its teenage years. So all of this will take time to develop, but it will also require reform on all fronts, law, regulation, supervision, general education, and availability of information etc. But most importantly, my view is that it is the enforcement of law, as always, they can make most difference in the short-term.

[fromlibrarycourt]

Briefing: 旧的不去，新的不来 how to reform the state-owned enterprises? Look to Korea.

If the old doesn’t go, the new won’t come. As discussed in the last post, central to solving China’s debt problem is the reform of a system that keeps state-owned zombie enterprises on life support, while new, innovative companies are denied the privilege.

Here’s a nice idea by Michael Schuman, a Bloomberg view columnist, and one that I always thought of writing, but he did it better than I previously conceived in my mind. Look at what Korea did with its Chaebols, copy/adopt it. I say this, not just because, or maybe partially because I’m from South Korea.

1. Break the tripartite relationship between Government-Corporations-Banks

South Korea has followed state capitalism model for development, starting from rule of the military dictator Park Jung-hee (father of the current president) whereby policymakers directed credit to strategic industries, and ordered major business leaders to focus on them. The result was dramatic growth.

But by the ‘90s, these chaebols, so central to the growth miracle, had become just like what China’s SOEs look like: bloated, inefficient, hoarding resources that can go to those with better business plans.

Notably though, it did take a crisis for this status-quo system to unravel. The ’97 Asian Financial Crisis. Massive restructuring took place.

Banks were freed from state reins, became well more efficient and held to more stringent standards. Everything from the way window customer services were conducted to loan decisions were revamped to distribute resources more efficiently and as quick as possible.

And chaebol affiliates won’t be able to make loans to each other to survive. Off the dole they were, as Schuman puts, and once on their own, they began to, well, behave more like corporations in a normal capitalist economy. For them, it meant “streamlining their business by cutting staff and selling assets”. This happened to a lot of other firms too, if they weren’t forced to go bankrupt or go through mergers. There were many suicides.

Can we call it necessary evil?

Now, Samsung is just second to Apple in smartphone productions, although not the most well-known, Hyundai cars are being sold the world over, etc. It’s a miracle to see corporations from a nation of 50 million that has risen from the ashes of war just 50 odd years ago to be shouldering with the world’s top corporations. Did I say I was South Korean?

As a caveat, I have to mention that it took a financial crisis to urge Korean corporations transform themselves into what they are now. Debates are still ongoing as to possibilities of a hard-landing, but China has a stunningly solid macroeconomic environment, as the World Economic Forum report has pointed out, making a crisis very unlikely. Lest, the government deliberately lets one happen. But that’s highly unlikely, for the ruling Communist party will surely lose all credibility.

Where has China got too? As Schuman points out, China is nowhere near doing this.

About 80% of all loan so to state-owned companies whose returns are only a third of private firms. Beijing has shown balls of steel in radically restructuring state-owned firms back in 1990s. But as of now, I’m not sure what’s holding them back, but local governments for sure are continuing to funnel subsidies to these state-owned zombies. Why? They used to be biggest tax contributors. Their local growth may depend on these firms, which often are the biggest employers especially in heavy industry regions like the Northeastern provinces, Shanxi, and Inner Mongolia. And also they fear social unrest if mass layoffs happen all too quickly. According to China Labour Bulletin’s monitor, number of labour related protests have perceptibly gone up since 2013.

But Caixin has argued that there is a new economy up and coming to absorb the pain from scalping away the old. Just need to give more gas to the younglings? However, I do think that especially in areas like Manchuria where there is little sign of the new economy, things are looking quite bleak. More on that later.

[fromlibrarycourt]

Briefing: China’s debt problem

Here is what’s wrong with debt in China: too huge, built-up too fast, and hard to count. Huge compared to produced goods:

Although economy has grown at 6.9% in Q3 y-o-y, yet bank loans increased by 15.4% in Q3 compared with the same period in 2014.  China’s overall debt-to-GDP ratio is continuing its steady upward march.

Growth in credit did slow down. Measured by total social financing (TSF) growth (bank loans + corporate bonds + shadow lending) soared to 35% in 2009, but rose by 13% this quarter from a year earlier. But what is important is to see how much debt is rising vis-à-vis GDP, to truly measure indebtedness.

Fast Buildup: In 2007, debt was 160% of GDP. Now the ratio stands at more than 240%, 161 trillion yuan ($25 trilliion). That’s almost double the buildup in debt in the US and UK in the run-up-to the financial crisis.

Here is the graph that Bloomberg produced based on McKinsey numbers:

Hard to count:

The sheer pace of new lending, regulatory loopholes, shadow banking practices, and a murky system of implicit guarantees (not clear whether debt is backed by the government or who would be allowed to go bust)

A crisis? Since most of the debtors are state-owned companies and creditors, state-owned banks, the Chinese government can still control the situation. It has done so by simply rolling over non-performing loans when they are due, or extend the deadline.

SOE and finance reform central to reducing debt:

However, that only spares the economy of an eventual reckoning in the short-run. And in addition, when there is a need for loans to be distributed to soft-land growth, a lot of it is still being funneled to zombie corporations rather than the enterprising private sectors.

This situation has got worse. 6 years before the crisis, one yuan of credit brough 5 yuan of national output. Now that ratio has come down to 1/3.

Indeed, central to reducing debt is restructuring old and unproductive SOEs as well as overhauling a financial system which continues to favour these at the cost of new, full-of-potential companies that will precisely be the new drivers of growth.

What has the government done so far?

The government should bravely have pulled the plug on these old SOEs continuing to extend loans and not letting them go bust (the power equipment maker Baoding Tianwei, and Kaisa Group which has failed to pay overseas bonds) apart from but it hasn’t done so because it fears of social unrest and the toll it might take on.

It has so far tried to get a clearer picture of liabilities:

- require local government to compile and display better data on debt. - force banks to bring more of their shadow loans onto balance sheets (they have made more official loans to substitute shadow loans) It has also used monetary easing and low cost bonds (longer payback periods)-swap program (2 trillion yuan worth of high-interest debt) for local governments to reduce cost serving debt.

One problem is the last solution. People think this is just brushing the problem else where. Net bond issuance in first nine months of 2015 was 8.7 trillion yuan, up 67% y-o-y. More on bonds later.  Optimism and Pessimism: Optimists say companies and local governments will simply grow their way out of the problem with an expanding economy. As China continues to grow (still at 6 something %, it will need additional projects; one road one belt, though by itself will not be enough). And the Chinese government has plenty of money to cover bad debt. They also pluck on specific types of debt. The ratio of debt to equity for listed companies, for instance has peaked at 159 % in the middle of 2012, aand has started to edge down. It’s some distance away from the 234% in the US just before the Lehman collapse. Additionally, while those in the old economy do indeed have excess credit, with close-to zero return on assets, those in the new economy like e-commerce Alibaba are more innovative, cater to consumers, post much less debt to equity ratios and more impressive return on assets. The private sector is outpacing state sector in output, profits, and employment. Service sector’s contribution to GDP has been bigger than manufacturing since 2013. But pessimists say risks are mounting as China’s economy cools and slower inflation threatens to make debts harder to repay. The Chinese government does have an unusually strong fiscal firepower and can bailout everyone. But high debt can drag on growth, like it did on Japan and Europe. IMF puts the drag-on-growth threshold at 96% of GDP. 

[fromlibrarycourt]

SCMP Editor-In-Chief Steps Down, Is Replaced by Deputy Wang Xiangwei, the Hong Kong newspaper's first mainland-born editor, hands reins to Tammy Tam, statement from Post says

(Beijing) – The editor-in-chief of the South China Morning Post stepped down on November 6 and will be succeeded by his deputy, Hong Kong's leading English-language newspaper said in a statement.

Wang Xiangwei, who held the position for the last four years, told Caixin he is resigning to spend more time with his family.

The SCMP said that Wang's deputy, Tammy Tam, will take over as editor-in-chief.

Tam, deputy editor of the SCMP since 2012, used to work at the Hong Kong TV news providers i-Cable and ATV. She led a 300-strong newsroom at ATV that started Hong Kong's first free-to-air 24-hour news channel.

She is also "well versed with Hong Kong and mainland China political development," the SCMP's statement said.

Wang was the newspaper's first mainland-born editor. He was a member of the Chinese People's Political Consultative Congress, moved to Hong Kong in 1993 and worked at the Eastern Express.

Wang joined the SCMP in 1996 to cover business news. He took charge of the Post's China section in 2000, and was promoted to deputy editor in 2007 and then editor-in-chief in 2011.

The SCMP statement credited Wang with contributions to the paper's China coverage.

[fromlibrarycourt]

The Beijing Mayor’s head is safe

-"The Beijing mayor has vowed on his own head to control the smog, but we still have to rely on the wind to control it,"... -"Hi Mayor, I’m here, waiting for your head," a person using the Internet handle "I Love Rao Zizhao" wrote -People's Daily editorial said, "It is the determination and active actions that will lead to the most-wanted clean air, not the promised ‘head.’" http://www.bloomberg.com/news/articles/2015-12-02/china-s-blast-of-fresh-air-quiets-calls-for-beijing-mayor-s-head

[fromlibrarycourt]

역사 교육의 목표

"역사교육의 목표는 국민 만들기다? 무슨 교육목표가 그란게 있습니까? 교육이 뭐에요? 교육은 제 생각엔요, 우리 모두는 국민이기 전에 인간이에요. 국민으로서 생각하기 전에 인간으로서 생각 해야되요." (유시민 2015)

[fromlibrarycourt]

Chinese Gov't 'Causes an Investment Gap with U.S.'

(Beijing) – There is a widening gap between Chinese investments in the U.S. financial sector and those heading the other direction, mainly caused by the Chinese government's restrictions on market access against foreign investors, an expert from the U.S. research firm Rhodium Group says.

Chinese merger and acquisition deals in the U.S. financial services this year are expected to break a record, reaching more than US$ 2.8 billion, up from last year's US$ 100 million, data from Rhodium show.

Deals that are expected to be completed next year totaled nearly US$ 1.6 billion.

Meanwhile, U.S. investments in the Chinese financial sector are expected to reach only US$ 115 million, down from the US$ 163 million last year, the data show.

An important factor behind the decline is restrictions on investment imposed by the Chinese government, said Thilo Hanemann, research director at Rhodium. He said the limitations amounted to a protectionist barrier that does not affect Chinese investors in the U.S. financial sector as much.

The major restriction on U.S. companies is a limit on the equity stakes they can hold, he said.

Chinese investors are far more likely to be allowed to hold majority ownership in companies they invested in the U.S. financial sector than U.S. firms seeking partners in China, and this was caused primarily by Chinese government restrictions, Hanemann said.

Investments worth US$ 4.4 billion from China to the U.S. financial sector, where Chinese investors hold bigger stakes than their U.S. partners in a co-founded venture, have been made or are expected to be completed from 2000 to the end of next year, Hanemann said.

Meanwhile, only US$ 731 million worth of investments heading the other direction have majority U.S. ownership, he said. In deals worth US$ 3.2 billion, U.S. investors' ownership fell in the range of 10 to 50 percent.

Chinese government restrictions on market access are "particularly acute in the most attractive sectors under the new growth model, including high-tech manufacturing and modern services," Hanemann said.

In sectors like communications and financial services, China scored 0.75 on the OECD FDI Regulatory Restrictiveness Index. The United States scored 0.11 and 0.042, respectively. Lower figures signify fewer restrictions.

The U.S. business community has been one of the most important drivers of an American policy of engagement with China, Hanemann said. If it is being excluded from attractive sectors of the Chinese economy, he warned, that could "tip the scale in favor of less engaging" policy toward China.

[fromlibrarycourt]

Two-Child Policy Tipped to Boost Sales of Mid-Priced, Essential Baby Goods

(Beijing) – Demand for mid-priced children's products and essential products like infant formula and diapers will rise the most when the latest easing of the one-child policy takes effect, an expert says.

The ruling Communist Party recently announced it will relax its 35-year-old family-planning policy to allow all married couples to have two children in an attempt to boost falling birthrates. It is unclear then the change will happen.

Joy Huang, a manager at Euromonitor International, a consumer research firm, has said that the move will have the most impact in China's smaller cities and rural areas.

She added that since incomes are lower in these places, products in a certain price range will be affected the most by the policy change.

"Mid-priced baby products and necessary items such as baby formula and diapers will benefit the most, while unnecessary goods or less necessary products like baby clothes will benefit less," she said.

Since slower growth will mean individuals have less disposable income to spend, consumers are more likely to choose "more value-for-money products that meet quality standards, but not premium products to support a second child."

Credit Suisse estimated the policy change will mean 3 million to 6 million more babies will be born from 2017 to 2021. Assuming the cost of raising a child is 40,000 yuan per year, these newborns will consume between 120 billion yuan to 240 billion yuan worth of goods per annum starting in 2017, the Swiss financial services firm predicted.

Demand for formula will increase the most because it accounts for more than one-third of what the average five-year old consumes, Credit Suisse said. Yili International and Mengniu Dairy will see formula sales rise by 15 percent in 2017, it added.

More than 120 billion yuan worth of formula will be sold this year in China, Euromonitor said.

However, Con Williams, an economist at Australia and New Zealand Banking Group, said a government campaign to encourage breastfeeding could affect sales of formula.

Only about 28 percent of children less than six months old are breastfed in China, compared with the global average of 40 percent, a survey by the United Nations Children's Fund found.

The government has been making "a concerted effort to promote breastfeeding," Williams said, and this may come "at the expense of infant formula."

http://english.caixin.com/2015-11-19/100876158.html

[fromlibrarycourt]

보수언론의 FOX NEWS化

밑 사진을 보면, 대표 보수신의 1면은 온통 빠리태러 사건/ 별개 기사로 도배 되있고, 대표 좌파신문1면엔 광화문 시위/ 박근혜 정부 비판하는 기사로 도배 되있다.

물론 ISIS가 선동한 파리 및 다른 중동국가 시민들에 대한 테러는 모든 인류가 주의하고 애도 해야 할 사건이다. 그렇지만 나라가 왈칵 뒤집힌 상태에 동 나라 신문사가 1면을 해외 사건으로 도배 했다는건 분명 고의적인 편집상 결정이다. 이에 따라 문제 제기를 하고 싶다:

기본적으로 우리나라 보수언론은 보수권력 앞에선 기어다닐 줄 밖에 모른다. 단순하게 폄하 하려는게 아니다. 소위 우리나라 지식분자/엘리트들이라는 조중동 기자들을 비판해야하는지, 아니면 그 소유주들을 비판해야될지. 아마 권력에 대한 충성심이 보수언론DNA에 바킨건 후자의 책임이 더 클 것이라 생각된다. 이 중 조선일보 그리고 조선TV (한국에 나올 때 가끔 보면서 느낀 건 tv조선은 미국 대표 막장걸래언론 FOX뉴스의 영업모델 및 철학...멘토로 모신 것 같다)가 제일 악질 적이라고 생각한다. 이런 친권력 언론의 편집부는 한국에서 일자리를 못 찾으면 중국국가 선전부 (propaganda department) 소속이나 다름 없는 국영매체 인민일보나 CCTV같은 곳에서 대환영을 받을 것이다. 다들 뻔히 아는 사실이지만, 이럴 때 다시 한번 강조 하고 싶다: 언론은 태생부터 권력자들이(기업이건 정부건) 일반 무력한 시민들을 착취하지 못 하게 하려고 설립된 단체로서 民主주의가 제대로 돌아가게 해주는 중대한 역할을 맡는다. 피와 같은 진실된 정보와 투명성을 대중에게 멈춤 없이 공급 해줘야되는 언론이 제대로 기능을 못 하면 民主주의는 막말로 하자면 심장마비걸린 사람 처럼 뒤진다.

[fromlibrarycourt]

Two-Child Policy 'Will Have Biggest Impact Outside Big Cities'

(Beijing) – The dropping of the one-child policy will have the biggest impact in China's smaller cities and rural areas where the costs of living are low, two experts say.

The ruling Communist Party said in October it will allow couples to have a second child, more than three decades after limiting them to one. The move is an attempt to stave off problems brought on by an aging population and a shrinking workforce, and comes after a rule change in 2013 that allowed couples in which either parent was an only child to have a second infant.

Many experts say the changes are too little, too late, in part because families living in the country's large cities fear the expense of adding to their family.

Joy Huang, of the consumer research firm Euromonitor International, said the two-child policy "is expected to have a higher impact in small cities and rural areas."

"High living costs and hectic lifestyles will limit the desire of people in first- and second-tier cities to have second child," she said, using a property market term to refer to the country's biggest cities and provincial capitals.

Louis Lam, an analyst at Australia and New Zealand Banking Group Ltd., added that the latest change will have the biggest effect in farming areas because "rural-sector families are usually more willing to have more than one children."

Analysts at Credit Suisse Group estimated the policy will mean an extra 3 to 6 million babies are born per year in the 2017-2021 period, creating more demand for baby formula, diapers and other products related to raising children.

The Swiss multinational said demand for formula will increase the most because it accounts for more than one-third of what the average 5-year-old child consumes.

Following the party's announcement on October 29, investors snapped up shares in formula companies Yashili International Holdings Ltd. and the American company Mead Johnson Nutrition Co.

http://english.caixin.com/2015-11-16/100874681.html

[fromlibrarycourt]

China Will Be Key to Future of G-20, Ex-Canadian PM Paul Martin Says "Architect" of the Group of 20 major economies says China should play major role in the bloc when it takes over leadership and hosts a summit next year

(Beijing) – In the late 1990s, the world seemed to be lurching from one economic crisis to another. But only a handful of developed countries, known as the Group of Seven, seemed to have the last word on what everyone else should do about it.

One man thought there was something wrong with that: Paul Martin, the former prime minister of Canada, who is widely credited as the architect of the Group of 20.

Established in 1999, the grouping serves as a forum for world economic leaders, such as finance ministers and central bank governors, from both developed and developing countries to discuss pressing issues.

This year's G-20 summit will be held in Antalya, Turkey, from November 15 to 16. China will take over the G-20 presidency on December 1 and host the summit for the first time, in the major eastern city of Hangzhou, in November next year.

Though retired now, Martin still remains influential in meetings related to the G-20. He is also quick to point out the bloc's successes, arguing that a summit in London in 2009, in the wake of the global financial crisis, prevented "an awful a lot of trade protectionism and the 2008 recession would have been even worse than it was."

In an interview with Caixin, Martin also expressed high hopes for the future of the grouping, especially when China takes on a bigger role.

"The Chinese summit could well be the rebirth of not just of the G-20, but the rebirth of real cooperation, if it recognizes the necessity of properly funding, of strengthening the great international institutions," he said.

The following are excerpts of Caixin's interview with Martin.

Caixin: You are often called "the father of the G-20." So how did you start it all?

Paul Martin: In the late 1990s, there was the Asian crisis, the Russian default on its debt and a very large devaluation in Brazil. This was really the worst financial crisis since the end of the Second World War. When G-7 finance ministers decided what these nations should do, the Asian countries rejected us. At that point, it became very clear that the G-7 was not going to dominate the world in economic thought. Plus, China and India were not at the table. So I told Larry Summers, the U.S. secretary of treasure at the time, that we have to create an organization. He agreed. We sat down and picked the nations and this is how the G20 was created.

It first started with the finance ministers, but it became very evident that it should be elevated to the leaders' level. When I became prime minister, the first person I talked to was the then premier of China, Wen Jiabao, and he was a great supporter. But we had all of the countries except the U.S. They didn't say no; they just wouldn't say yes. Ultimately after the 2008 financial crisis, President (George W.) Bush acceded to it.

There are high expectations for what the G-20 should achieve. But there are also voices that question whether it has actually done anything.

The London summit was a huge success. If it had not been for it, those countries would have been engaged in awful a lot of trade protectionism, and the 2008 recession would have been even worse than it was. Secondly, the G-20 – out of the ashes of the financial stability forum – attempted to look at financial regulation, which wasn't very successful. They created the Financial Stability Board (FSB), which was really one of the great innovations of the last generation. But you're right. Since then the G-20 has had successes but nothing like those which got it started. Multilateral institutions like the FSB have to be beefed up by the G-20. It should become a treaty amongst countries, and it should be given the power to call countries to account if their financial sector regulation is not sufficient.

What kind of contributions can China make at the 2016 Hangzhou summit?

The Chinese summit could be a tremendous success. For one, it should deal with the handshake agreements between the presidents of China and of the United States on climate change. There will be a lot of details to work out, and you have the year ahead leading to the summit to do that. And the fact that a powerful nation like China is holding the summit is a great impetus for success.

Second, and equally important, the G-20, unlike the G-7, is not a series of nations with the same kinds of economies and the same kinds of political system. This means it needs the great multilateral institutions to bind their decisions together. But these institutions are facing difficulty right now. For instance, due to the reluctance of the U.S. Congress to go along with the quota and governance reforms, the International Monetary Fund (IMF) is in some trouble. Some have also said the IMF's treatment of nations during the Asian crisis was harsher compared to its treatment of European nations which got into some trouble later on. There can only be one monetary anchor – the IMF – and it cannot be subjected to the whim of any individual country. For it to not reform would be a fundamental issue. That reformation will only take place if the G-20 acts.

Should the G-20 purely focus on economic affairs or should it concern itself with other matters of global significance?

The purpose of the G-20 is not only to deal with financial institutions. In the Mediterranean, in Europe, or in the Andaman Sea, we have just witnessed some of the greatest human tragedies. Hundreds of thousands of refugees were escaping with nowhere to go. The UN commissioner for refugees said it was broke. This means that young children are going to be condemned to refugee camps, where there is no education, only ill health. Think of what we're saying, the morality of that.

When the Ebola crisis occurred in Africa, Doctors Without Borders was in there ahead of the WHO. What in the heaven's name is happening when an organization like the WHO does not have the money to contain disease? Dr. Margaret Chan, who is the head of the WHO, said we're about to face an onslaught of infectious diseases we thought had been dealt with. And she doesn't have the money to deal with it. You're right to talk to me about the financial problems. But you know financial problems don't mean much if you're a young person struck with some infectious disease and there is nobody there to help you. Financial problems don't mean a lot to some refugee who has come out of a war-torn Syria and there is no place for that person to land.

The Chinese summit could well be the rebirth of not just of the G-20, but the rebirth of real cooperation, if it recognizes the necessity of properly funding, of strengthening the great international institutions. If we can do that, then people will look back at the Chinese summit and say, "Thank god for China."

[fromlibrarycourt]

Hank Greenberg on his Dealings with China, Take on Financial Crisis Former AIG boss tells Caixin about his experiences in China and how failure by U.S. regulators was to blame for the global financial crisis

(New York) – The life of Maurice "Hank" Greenberg, the former chief executive of American International Group, has been far from ordinary.

He served in not just one but two major wars of the last century, World War II and the Korean War, and afterward built AIG into an insurance giant.

He was forced to step down as its chief executive amid an accounting scandal in 2005, and two years later, he sued the former attorney general of the state of New York for defamation in a case that is still pending.

He also filed a lawsuit against the U.S. government over the terms of 2008 bailout of AIG, for which he scored a victory this June, albeit one not without costs.

"To me it's very clear: the regulators failed to regulate," he said of the 2008 financial meltdown.

Greenberg, who turns 90 this year, now has the aura of a wise old man, is unwavering in his clarity of thought and his opinions.

He established links to China a long time ago. He relaunched AIG's operations in China, which date back to 1919 but were halted in 1949. Now, his China-related time is spent mostly on Starr Companies, which acquired Shanghai-based, state-owned Dazhong Insurance Co., Ltd. last year.

Asked about the recent turmoil in China's stock market, Greenberg said, "What I don't understand is this: the year before the market went up by 150 percent and the correction was roughly in the 35-40 percent range. Why did everybody panic suddenly?"

Caixin spoke to the financial sage about his thoughts on the 2008 global financial crisis, the state of Chinese economy and the upcoming U.S. presidential election.

Excerpts of his interview follow.

Caixin: It has been more than seven years since the outbreak of the financial crisis. What is the most important lesson we should take from the crisis?

Maurice Greenberg: Well, to me it's very clear: the regulators failed to regulate. In the U.S., they were packaging many institutions such as banks and investment banks, which were packaging mortgages. They were being advertised as triple-A-rated by many rating agencies. Many rating agencies never even saw them. Nonetheless, they were packaged that way and being sold that way. In fact, overwhelmingly they were not (what the rating agencies said they were) and as a result, many of these instruments collapsed.

After the global financial crisis, there was a lot of debate on strengthening financial regulations. The U.S. passed the Dodd-Frank Act and Europe started macro prudential regulation. Are these reforms enough to prevent another crisis?

Sometimes, it's more than enough, depending on the regulator. You don't want to regulate to the point where you stop businesses from functioning, curb innovation and growth. There has to be balance. You need intelligent regulators. You need to pay the price to get the best regulators and try not to have people unqualified to be regulators. So you just have to upgrade the regulators and have commonsense regulation that doesn't curb innovation.

What are the potential risks as the Chinese economy goes through the current period of transition? It is a painstaking effort to strike a balance between more radical reform and maintaining socio-economic stability.

You can't eliminate risk. That's simply not possible. Also, China's economy is not independent of the global economy. As the global economy slows down, it also has an impact on the Chinese economy. But that's not unexpected. It's the No. 2 economy in the world and it's the largest population of any country. So of course you're going to have areas that are going to be more hard-hit than other areas. (There is an) impact on population, as things slow down. You have SOEs that are obviously going to slow down as well. They're essentially government owned. So the government has a responsibility to provide whatever they need in the way of capital.

Recently, the Chinese stock market crashed. The government tried very hard to bail it out. That was very controversial. In what kind of circumstances should the government intervene?

China is not a full market economy yet. Many investors in the Chinese market really don't have enough knowledge and experience to know when to invest and how to invest. There's a learning experience going on.

The government intervened in the market and got criticism for doing that. What I don't understand is this: the year before the market went up by 150 percent and the correction was roughly in the 35 to 40 percent range. Why did everybody panic suddenly? Markets do go up and down, that's part of what a market economy is. The government can't come in and say, "It's only going to go in one direction. It's only going to go up, it's never going to go down." That's simply not realistic.

That will change over time. In due course, as the economy matures more, the government will be more confident in the economy, the people who invest will have more experience, there will be less intervention. It takes time and it's not going to happen overnight.

Many investors worry about China's devaluation of the yuan. What is your opinion on this? Do you think depreciation will have any significant impact on the world economy?

As the global economy has slowed down, there have been pressures on different currencies. So when things slow down and business in China slows down, there's an attempt to increase the activity by lowering the value of your currency. In due course, that doesn't fly. If the government manages the currency, it makes investors uncomfortable. If the government's going to intervene, it undermines confidence.

Before the stock market and the yuan turmoil, people were confident in the government's management skills, but afterwards less so. Fed chief Janet Yellen mentioned her concerns about the Chinese economy and the government's management skills. So, is it a management problem?

In terms of the management of the currency, Zhou (Xiaochuan, governor of the People's Bank of China) – one of the best in the world – has done a great job. And I think his credibility in that area is unimpaired. He's a terrific person. I've known him for many years. He says what he thinks, and if those above him are ordering him to do something, he will fight back.

You can't compare this to the financial crisis we went through here in the United States in 2008. We failed in many areas. The regulators failed in their job. Not only failed, they ignored it. If something like that happened in China, we'd be all over the thing. So I think that China is an evolving market, and maybe it won't be a market economy in the sense that we think of a market economy for some time. But so what? It has to fit what it thinks is good for China, not what we think is good for other countries. It has to do what's best for China and its people. And foreigners have to understand that.

China intends to have the yuan included in the IMF's currency basket. What are the upsides and the downsides of this for China and for the world.

I think China should be included in the SDR basket. It's the second largest economy in the world and I think it should be part of it. There's no question about it in my mind. If it's not included, it's political and has nothing to do with economics. Not being included is the downside.

We are recently hearing more complaints from investors, such as rising labor costs, stricter regulations of foreign investment and barriers to entry in certain sectors. Will there be less American investment in China?

Yes, labor costs maybe higher but, that's natural. It's happened in other countries as well. Companies invest where they get the best return for their investors. China would do the same thing.

But depending on the industry, it could favor local companies over foreign ones. There is some discrimination in China, particularly in the areas where SOEs operate. That's not a good idea. If you want to get the best from a foreign company that brings technology and new ideas, you can't have regulations that harm their growth in the country. We have an insurance company in China. I must say, by and large, we've been treated pretty fairly. We've been there long time.

But some companies don't spend enough time trying to understand China and how to operate in a country like China. It's part of your job to understand how to do business in a country in which you're competing against local companies and other foreign companies.

You worked closely with former premier Zhu Rongji and helped to bring China to the world and the WTO. What is your advice to current leaders for integrating China into the world economy.

I think it's important that China become integrated in the global economy that way. The second largest economy in the world shouldn't be on the outside looking in. But China's also got to take the responsibilities that go with being part of that community. It has to meet the same standards that others do. You can't say, "I will take the best of what you're going to give me, but I'm not going to give you back anything." Zhu Rongji understood that. He was a great leader. And China benefited from his leadership and from being in the WTO.

What should China do regarding the Trans-Pacific Partnership?

I think there is more opposition in our country to the TPP than in foreign countries. The TPP will not come into being until the new administration, I believe, is in place. If China wanted to come into the TPP, they know what they have to do. You can't have industries that are government controlled, and be part of a free-trade agreement. I do think it's in the national interest of both countries to have a free-trade agreement. But it may take a long time to negotiate.

Why do bilateral investment treaties (BIT) take so long? Is there a way to accelerate the process? And what's your prediction on the BIT negotiation between the U.S. and China given that the presidential election will take place next year?

The problem is that both sides have a laundry list of areas that they don't want to make subject to that agreement. I think there ought to be a group that is appointed in each country to meet on a continuous basis to resolve these issues, not just have meetings a couple of times a year like now.

A BIT between China and U.S. also depends on both countries. They have to also make available their part of the agreement. And you can't say one side should open its markets to technology companies: the reciprocal is not taking place in China.

It's very difficult to predict. We have a Congress currently that is almost in a revolutionary stage. They can't agree among themselves. The Republican Party is pretty much split. The Democratic Party is opposed to trade agreements, believing that it affects them adversely. It's going to take a strong leader in the president to bring us together.

You have advised a number of presidents, in both parties. Who will you advise next?

I predict that the current leaders of the Republican Party – the ones with the highest polling rates – in my judgment will not be the next president. I could be wrong obviously, but we'll see. But those of you who watched that circus last evening it was obvious that Hilary Clinton did the best of all of them. And Bernie – whatever his last name is – was probably second. If you have the backing and the knowledge, you can run. But it doesn't mean you're going to be elected. But you never know, it's a democracy. Who would have believed that Donald Trump would be running?

Are you concerned about the outcome of the election?

No. We have had some very good presidents over our history, and some poor ones. But that's what democracy is all about. We survive the poor ones and we benefit from good ones. We're going through a period here that a majority of the public that's speaking out now about this are unhappy with the political system. That's how Donald Trump gets to be out front in the poll right now, but common sense will take place, as people go to the voting booths.

What are you going to tell him, or her, about dealing with China?

To me, China and the U.S. are the two most important countries in the world right now. It's in China's national interest and our national interest that we have a constructive relationship. We are living in a world that not only has just economic problems but also geopolitical problems which are growing with intensity and concern. Is the world safer if China and U.S. were closer together, or China and Russia closer together? Where do children from China want to go to school? Where do Chinese want to invest? So why should China have a closer geopolitical relationship with Russia, than with the U.S.?

Some think China is repeating every major mistake that Japan has made, that we'll fall into the same trap.

I don't think so. China and Japan are much different. Japan has an aging population, but the Japanese have not let immigrants from other countries come in. I always thought that the natural factory for Japan would be China, as the manufacturing arm of Japan, because Japan is not going to change its culture very easily. China has a population of 1.4 billion, it's not in the same league population-wise as Japan. So I don't view that as something to be concerned about.

How did your early experiences in the army influence you? Did it help your career?

I enlisted in the army when I was 17 years old. I was bored in high school, and I served in Europe from Normandy, linking up with the Russians in Linz, Austria. I came back out of the army, had to finish high school, which was a very difficult year and a half. After being in a war, going back to high school, I don't envy anybody having to do that. Then, I went onto college and law school. When I finished law school, almost on the day the Korean War broke out, and I had stayed in the reserves because I needed the money when I was going to school. I was recalled about two months after the Korean War broke out. They needed field officers. I found myself on an airplane going to Korea. I spent about 14 months in the coldest winter I've ever spent in my life. I commanded a company. I was a captain when I came back. I think you learn something about leadership. I learned that you never ask anybody to do what you wouldn't do. Not everybody feels that way about it. I run my life that way, and have done so since the army. I don't ask any employees to do what I wouldn't do. I work long hours. I have a brief case almost every night. I don't finish until about 11 o'clock. That's been my life since I went to work for Starr and ran AIG. That's me. You either give up your soul and complete attention, or you shouldn't do it.

[fromlibrarycourt]

Views: Renewing a Feverish Debate Tu Youyou's Nobel Prize has reignited controversy over traditional Chinese medicine, so Caixin got two experts to tell us what they thought of the issue

After the news that Tu Youyou, an 84-year-old Chinese scientist, had been awarded a Nobel Prize for an anti-malaria drug she found in the 1960s, China rejoiced. It was the country's first such Nobel honor for a scientist who was born, bred and trained in China.

However, amid the celebration, which even included Premier Li Keqiang saying the award was a victory or traditional Chinese medicine (TCM), critical voices were also heard.

A major point of contention was whether Tu's victory vindicated TCM, and others pointed out Chinese classical texts guided her to her discovery. The topic once again raises questions about the effectiveness and scientific basis of TCM and its standing versus so-called Western medicine.

In light of this, Caixin spoke to a TCM specialist in the capital and a Western scholar of the history of Chinese medicine for their takes on the issue.

Dr. Guan Weidong, senior TCM specialist at Puhua International Clinic in Beijing

Marta Hanson, associate professor of the history of Chinese medicine at Johns Hopkins University

Caixin: Should this award be regarded as a victory for TCM?

Guan Weidong: This prize primarily touched upon the development and application of clinical medicine. Tu Youyou's research methods completely adhered to the paradigms of modern medicine research and development, but she was very much informed by TCM's customs on preparing and applying that medicine. Besides it was from TCM that she drew key inspiration. The significance of this award lies in recognizing an accomplishment and the benefit to humanity this accomplishment had, not a certain research method. That said, from a historical point of view, since TCM has always benefited public health and will continue to do so, the Nobel should also recognize the leading figures of Chinese medicine.

Marta Hanson: What everyone is missing in this debate about whether or not the Nobel Prize committee recognized TCM is the concept of "medical bilingualism." It is the ability of people to not just read in two medical languages but to understand two different medical systems. In light of this, it is too simplistic to reduce what Tu Youyou did. She was able to systematically work through the 1,700-year-old classical texts not only because she was native Chinese, but more importantly, she understood Chinese medical history, concepts and doctrines to access the complex historical archive of TCM.

She has also spent her entire career in a medically bilingual institution at the China Academy of Chinese Medical Sciences (CACMS) that has been committed to integrating the best of Chinese and modern Western medicine. Tu's research cannot be separated from the core founding value placed on medical bilingualism of this institution, or the medical-scientific politics in which she and her colleagues carried it out.

Since the fall of Qing Dynasty (1644-1911), national politics have significantly played a role in both public health politics and the politics of "Chinese" versus "Western" medicine in China, especially since 1949. Project 523 – a secret military mission mandated by Mao to support Vietnamese troops who were being decimated by malaria – that Tu led in order to find a new drug that can combat malaria is a prime example of this. Sixty years later, the founding goals of the CACMS have not only been realized in this Nobel Prize but are embodied in the intellectual formation of their new Nobel laureate.

Do you think TCM has a place in 21st century medicine? Can it meaningfully contribute to the progress of humanity's understanding of medicine and health?

Guan: Entering the 21st century, humankind still faces a whole variety of threats to public health. Equipped solely with Western medicine, we will not be able to deal with them. One special characteristic of TCM is its holistic approach: preparing a medicine that aims at the underlying root causes of the illness, not just the symptoms, as is the case with Western medicine.

Our understanding of the relationship between the medicine and the essence of the illness has been acquired through daily practice and accumulated through generations, yielding a variety of prescriptive methods that include "yanfang" (prescriptions that blend herbal, mineral, animal and artificial substances that have been proven through experience) or "pianfang" (household recipes without theoretical justification that are typically practiced at home by laypersons like grandmothers). Applied in accordance with the specificity of the ailment, they have a very precise effect. These are not just extremely valuable in themselves. TCM's system of theories regarding health and life, and its treatment techniques will contribute to the perfection of modern medicine, ultimately helping to form a new comprehensive medical paradigm. That is the primary duty of and the greatest contribution that TCM can make in the 21st century.

Whether it's Chinese or Western, the fundamental purpose of medicine is not to profit, but to serve humanity. Consequently, Chinese and Western medicine are at once united, at once competing against one another, and at once complementing one another. Some patients respond better to Western medicine, some to Chinese, and others have to combine both, which often generates a more effective result.

Hanson: I would use the term "modern biomedicine" over "Western medicine" because it is now a truly global multi-ethnic medical system with many "non-Western" scientists such as Tu contributing to its development. TCM certainly has a place in 21st century biomedicine. Take for instance, the SARS epidemic in 2003-2004, during which practitioners succeeded in combining Chinese-biomedical treatments for over half of the patients. This is a demonstration of medical bilingualism in a clinical rather than the research setting Tu represents.

What is the state of TCM in China and what are its prospects?

Hanson: According to the New York Times, there are 1.1 million doctors of Western medicine versus 186,947 TCM doctors, and some 23,095 Western hospitals versus 2,889 Chinese medicine hospitals. But this doesn't do justice to the fact that many Western hospitals in China have a TCM department or integrated medicine, and vice versa for Chinese hospitals. Many biomedically trained practitioners also have a Chinese medical background because of the Cultural Revolution period (1966-76) and vice versa for TCM-trained practitioners. But, the number of students studying TCM is much lower than biomedicine. And TCM, as I understand, is considered an alternative for weaker students who couldn't make it into the more prestigious Western medical colleges.

I hope the Chinese government will continue to support top-down "medical bilingualism" of the traditional and modern biomedical approaches to healing as a model for other countries to think about medical pluralism in their health care systems.

Guan: I believe the state subsidy for TCM falls short. TCM colleges with education and research institutions just focus on developing equipment, facilities and general infrastructure, but the actual number of professionals in TCM is decreasing every year. Those who can practice both Chinese and Western medicine are also increasingly lacking. You can see this happening in medical institutions across the nation and the world.

[fromlibrarycourt]

China’s stock market crash and its links to the global economy: not all that bad.

Despite the Chinese economy’s deep integration with that of the world (slowdown in China’s growth rate has been a major factor in the globe’s commodities slump), its stock markets are still relatively insulated.

First, the direct links: foreign investors only hold 2% of all Chinese equities, the rest is all dominated by retail investors. Chinese investors, who may have lost a fortune in recent, and ongoing crash, also have very limited holding of global financial assets, apart form of course the official foreign reserve.

Secondly, and you must be aching to ask, the knock-on effect: if the stock market crash impacts consumer and business spending, or worse yet, says something about the health of the economy, surely it will diminish Chinese demand for world goods (and that’s serious because not only is China the second largest economy, but it is also the top trading partner of more than 100 countries).

1. Remember the bull run since January occurred in the midst of a comprehensive slowdown; skyrocketing equities had little to do with actual economic activity, but more driven by retail punters buoyed by the crowd enthusiasm, and funded my margin financing. And as Chen Long points out, “the economy is actually showing signs of stabilisation as industrial value-added business and property sales are rebounding.” http://www.chinafile.com/conversation/how-much-does-chinese-market-matter-world

2. Surely it would significantly reduce consumer and business spending, the former having lost wealth, and latter losing one of its capital-raising channels? First, only stocks held is worth about RMB 13 trillion, less than 5% of Chinese household assets—RMB 50 trillion are bank deposits and property assets are more than RMB 150 trillion. Out of total financing in China, equities only represent 5%. So again, though a channel may have been lost, the more important source of capital, in China that’s loans from banks and bonds, are still very much on a green light.

Taken together, the impact on the economy, as it stands, is relatively minimal. So, we may shift all our energies and attention unto the situation in Europe, and hope that the people of Greece make the right choice.