By Gareth Vaughan
Against the backdrop of a sweltering summer, China's Covid-zero policy rumbles on, the country's commercial property sector teeters, and youth unemployment soars.
To talk about all these issues and more, I spoke to Beijing-based David Mahon, Managing Director of Mahon China Investment Management, for the latest episode of interest.co.nz's Of Interest Podcast.
On the weather Mahon says it's China's hottest summer since records began in 1961, and has exceeded anything he has experienced in the almost 40 years he has lived in China.
It has also been dry leading to "a complete collapse" of key hydro-driven power from the Yangtze River and its tributaries. This has led to factory closures and limited electricity supplies to some cities, with the impact stretching from Sichuan province to Shanghai.
"It's having major ramifications on the economy," Mahon says. "This year's weather means the harvest in general will also be poor."
In terms of the battle against Covid-19, Mahon describes the experience of being tested every three days, the challenges of business travel, clients in lockdown running out of food, and when and how he thinks the Government will start to loosen the Covid-zero policy.
"The Covid policies are baffling at the moment. I think China knows that whatever happens there'll be a death toll once they begin to relax as New Zealand is finding," says Mahon.
In the podcast he also talks about how China's strategic reserves are helping it combat inflation, interest rates, supply chains, problems in the commercial property sector, high youth unemployment and general demographic challenges, plus what recent clashes between bank depositors and the police were about.
"The longer-term issue is that in general China won't have enough workers in industry, and they're going to have to look at a migrant worker programme, something which to date they never would've even begun to conceive of," Mahon says of China's demographic challenges.
39 Comments
About ten years ago, China was admired for great GDP growth, and able to keep going even during the GFC. Staying clear of wars and staying neutral, and pursuing trade, made its prescence in the world.
Today the World is wary of a rich and powerful nation, with an impressive military capability.
Why are we antagonising China? - https://www.airforce.gov.au/exercises/pitch-black-2022
Berlin fully joins Australia drills for 1st time, urged to resist US' anti-China game
This was more than a veiled threat - GT Voice: Australia’s overreaction to rumor on imports reflects guilty conscience
Look again:
The exercise will host up to 2500 personnel and up to 100 aircraft from around the globe including participants from Australia, Canada, France, Germany, Indonesia, India, Japan, Malaysia, Netherlands, New Zealand, Philippines, Republic of Korea, Singapore, Thailand, UAE, US and UK. Significantly, Germany, Japan, and the Republic of Korea will be participating fully for the first time.
The West's Dangerously Simple-Minded Narrative About Russia and China
The US saw the opportunity Morrison offered and played him like the fool. They are intent on locking Australia into AUKUS. The aim of AUKUS appears to be to use Australian territory and resources to threaten and perhaps attack China. The Australian people, through parliament, have been given no information on the details of what is proposed under AUKUS or indeed what it entails. No opportunity for debate has yet been provided. To say Australia has been railroaded would be an understatement. Link
The problem is like our housing market and germanys reliance on russia gas... government have known about it for years but failed to take sufficient actions to force markets to diversify.
Strategically as a country becoming reliant on one major (dictatorship) trading partner for one main product and a housing ponzi.. is like being captain of the titanic 'what iceberg'
China’s Overextended Real Estate Sector Is a Systemic Problem
This is an excellent Carnegie series about what’s really going on in China. Talks about how the trap of systemic risk forms and is playing out, except it reads as if it was talking about NZ as much as China!
September 1985. Seems like just yesterday, when I was taking a Friday end of week drink in Fanny's Wine Bar, and one of my friends, Steve; a commodity trader from Cargill, London, paged me (real tech stuff back then!) and asked me to return to the office to do "a deal or two". We had a credit limit of $100m, with $53m free, and he asked me to "sell (Dollars against) the (Deutsche) Mark and Yen, at any price". The market was already weakening, but we got his order done way below the last price I'd see earlier that day. That Sunday, they signed the Plaza Accord. He'd got wind of it.
And why is this important today?
Jackson Hole. Friday. Was that our Plaza Accord moment of today? I guess we are about to find out.
Kicking and Screaming Into Deflationary Seas
Capital "outflows" (aren't outflows), currency depreciations and reserve losses are all symptoms of rapid tightening of external financial conditions. But what tightening? Everyone says Fed rate hikes. Dammit, no. Has nothing to do w/irrelevant rate hikes. Link
Like China, India using "contingent liabilities" which is NOT a good sign (they never work and actually make things worse). RBI calls theirs “net forward assets"; whatever they're called, they are off-balance sheet and their use just means it's gotten bad. Link
The tyanny of distance. It took some bold polynesions to settle Aotearoa originally. Followed by bold migrants from the UK. We are descended from hardy people. Up to and including more recent arrivals. Moving to NZ is an exercise in courage. Being unable to compete for migrants for whatever reason means we will have to rely once again on our own ingenuity and work ethic to keep our country functioning. That is training our own professionals, engineers and hands on skills to keep our lifestyle going in a world where the knowledge and skill gaps we are currently experiencing are not easily skilled. We can do it though. I have faith in our workforce.
Yes, the potential is there. But I fear that the balance of incentives in NZ, which favor borrowing to buy assets rather than business innovation and effort, will stuff us domestically, and constrain quality immigration. Both groups are disinsentived by the same issue.
If I had my way monetary policy (which has blown asset bubbles) would be abolished to get the balance back in the favour of labour.
... we should be actively recruiting internet spammers , scammers & hackers from Nigeria / Russia / India into NZ citizenship , if they'll agree to turn the tables ... and hack into Russia , North Korea & China ...
Put the $ 2.1 billion into that , instead of stupid " Kiwi Bank " ...
We should open our borders to the Pacific Islands. Especially Tonga and any other pacific country that is threatened by climate change or economic hardship. Those who are willing to make the committment would be welcome. They are our brothers and sisters who are decent people and would certainly help out with many of our skill shortages. Sure we would need to train and educate them but they would be a sound investment and give them an option in the future. If we look after them they will repay us manyfold in the future.
The US is poking the panda again...
Hmm, the taiwan strait is 180km and the EEZ is 200nm. Of course they're supposed to allow passage but it still seems provocative given the tensions at the moment.
How would the US like Chinese frigates in the gulf of Mexico 100km off the coast of Texas or Florida...?
See reply below...
And this https://www.unclos.org/
"Innocent passage" through someone's territorial waters is fine, but would you decsribe the current situation as "innocent"?
Plus I'm not sure calling it "international waters" is correct https://en.m.wikipedia.org/wiki/International_waters
More on Chinas climate/heat problems:
https://www.nzherald.co.nz/world/extreme-china-heatwave-could-lead-to-g…
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