Commentary on Political Economy

Monday, 25 October 2021

 Amnesty International ferme ses bureaux à Hongkong par crainte de représailles

Les bureaux d’Amnesty International à Hongkong en octobre 2021.

Les bureaux d’Amnesty International à Hongkong en octobre 2021. ISAAC LAWRENCE / AFP

L’organisation Amnesty International a annoncé, lundi 25 octobre, la fermeture de ses bureaux à Hongkong. « Cette décision, prise le cœur lourd, est due à la loi sur la sécurité nationale de Hongkong, qui rend impossible en pratique pour les organisations de défense des droits humains de travailler librement et sans crainte de sérieuses représailles de la part du gouvernement », a expliqué dans un communiqué la présidente du bureau international de l’ONG, Anjhula Mya Singh Bais.

« Hongkong a longtemps été une base régionale idéale pour les organisations internationales de la société civile », a-t-elle poursuivi. « Mais le fait que les groupes locaux de défense des droits et les syndicats aient été récemment pris pour cibles est le signal d’une intensification de la campagne menée par les autorités pour débarrasser la ville de toute voix dissidente. Il est de plus en plus difficile pour nous de continuer à travailler dans un environnement aussi instable », a ajouté la présidente d’Amnesty.

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Article réservé à nos abonnés

L’ONG dispose de deux bureaux à Hongkong : sa section locale et son quartier général régional pour l’Asie du Sud-Est et le Pacifique. Le premier fermera le 31 octobre et le second d’ici à la fin de 2021.

« Environnement de répression et perpétuelle incertitude »

Adoptée en juin 2020, la loi sur la sécurité nationale a radicalement transformé le paysage politique, culturel et légal du territoire. Selon Pékin, cette législation draconienne a permis à Hongkong de retrouver la stabilité après les manifestations prodémocratie parfois violentes de 2019.

Le texte punit sévèrement toute infraction considérée par la Chine comme constitutive de sécession, subversion, collusion avec des forces étrangères ou de terrorisme. Rédigé de façon très floue, il rend en fait illégale l’expression de presque toute forme d’opposition, certains crimes contre la sécurité nationale étant passibles de la prison à vie. « L’environnement de répression et de perpétuelle incertitude créé par la loi sur la sécurité nationale rend impossible de savoir quelles activités pourraient conduire à des sanctions criminelles », a déploré Amnesty International.

Sunday, 24 October 2021

 The U.N. Should Open Its Door to Democratic Taiwan

Expelled 50 years ago to make room for the Beijing government, today it deserves full recognition.

By Gary Schmitt and Michael Mazza

Oct. 24, 2021 6:20 pm ET

A Taiwanese flag during the national day celebration in Taipei, Oct. 10. PHOTO: ANN WANG/REUTERS

Taiwan wasn’t always a pariah at the United Nations. For more than 20 years the Taipei-based government represented China there, including on the Security Council. That changed on Oct. 25, 1971, when the General Assembly voted to admit delegates from the People’s Republic of China. The Republic of China lost its seat and has been on the outside looking in ever since. Resolution 2758 marked the beginning of Beijing’s assault on Taiwan’s international status.

In 1970 Beijing’s supporters in the U.N. faced an uphill battle. Only a year later the proposal passed in a landslide. What changed? In July of that year, President Richard Nixon revealed that national security adviser Henry Kissinger had visited Beijing, that Nixon himself would do so before May 1972, and that the latter meeting would “seek the normalization of relations between the two countries.”

In 1971 there was a reasonable case for the Beijing government’s inclusion in the U.N. It had all the qualifications of statehood, and the 850 million people living on the mainland had no representation. It also seemed increasingly untenable to exclude a nuclear power.

There was no such case, however, for excluding Taiwan. At the time, it had diplomatic relations with 54 countries, including the U.S., Japan, Australia, South Korea, New Zealand, West Germany, Israel and South Africa. Its mutual defense treaty with the U.S. would remain in force for the rest of the decade. Taiwan, a founding member of the World Bank and the International Monetary Fund, remained a member of those organizations until losing its seats to China in 1980. A true reckoning would have recognized the existence of two states, each with a right to U.N. membership—a solution not unlike those later reached to admit both North and South Korea and both East and West Germany.

Instead, the U.N. has only compounded its 1971 error in recent decades. In the early 2000s, to explain why he had blocked a Taiwanese diplomat from speaking to the U.N. Correspondents Association, Secretary-General Kofi Annan invented a U.N. “one-China policy.” His successor, Ban Ki-moon, went even further, invoking Resolution 2758 and claiming that “the United Nations considers Taiwan for all purposes to be an integral part of the People’s Republic of China.”

But Resolution 2758 says nothing of the sort—it doesn’t even refer to Taiwan. The U.N. charter doesn’t give the U.N. the power to make territorial decisions, nor does international law recognize a U.N. vote as a legitimate means of drawing sovereign boundaries.

So what explains the U.N.’s legal and moral malfeasance in its treatment of democratic Taiwan—preventing it, for example, from even participating as an observer in World Health Organization meetings? The obvious answer is the U.N.’s deference to China. Beijing’s diplomats throw temper tantrums, mobilize partners to advance China’s interests, and have been especially successful at putting Chinese officials in positions of authority in various U.N. bodies such as the International Telecommunications Union.

The U.S. and its diplomatic allies have failed repeatedly to push back against China’s bullying. To mark Resolution 2758’s 50th anniversary, the U.S. should make clear to Beijing that absent far greater Chinese flexibility on Taiwan’s engagement in the U.N., Washington will launch a campaign to secure Taiwan’s full membership.

Such a campaign would feature American diplomats publicly making the case for Taiwan’s inclusion, introducing annual resolutions at the General Assembly, and coaxing recalcitrant U.N. members to support a seat for Taiwan. Faced with a fight over full membership for Taiwan, U.S. allies and partners might increase their own pressure on China to accept at least partial participation.

As the U.S. establishes the legal rationale for Taiwan’s participation—that it has all the attributes of a sovereign state under international law—Washington may have to rethink its own policy. When the U.S. formally recognized China, Washington acknowledged “the Chinese position that there is but one China and Taiwan is part of China,” and it has consistently stated that the resolution of the dispute must be peaceful. But a peaceful resolution is nowhere in sight as Beijing continues to increase military, economic and diplomatic pressure. And the people and government of Taiwan are no longer interested in unification with China.

A fight over Taiwan’s membership in the U.N. might at a minimum lead the U.N. to reverse its dubious reading of Resolution 2758 and in turn open the door for Taiwan’s greater participation in international organizations. But it could also move the U.S. and its allies to take a more principled position toward an island democracy that is increasingly important to the global order that the U.N. was intended to promote.

Mr. Schmitt is a senior fellow and Mr. Mazza a nonresident fellow in foreign and defense studies at the American Enterprise Institute.

Saturday, 23 October 2021

 How China’s bubble began

For a moment, as Chi­nese real estate gia­nt Evergrande teeter­ed on the edge of ba­nkruptcy, it looked as though President Xi Jinping might do the unthinkable: pri­ck the greatest real estate bubble in history.

He’s right about the problem—property sp­eculators have hijac­ked the world’s seco­nd largest economy.​ Homes are “for livi­ng in, not for speculation,” is Xi’s mantr

But those speculators are responding to a set of incentives unique to the Chinese model of developme­nt. In fact, Chinese land and housing ma­rkets are set up in a way that not only encourages but virtu­ally demands the speculative purchase of apartment

If Xi really wants to put speculators out of business, he’ll have to alter a cri­tical component of the Chinese “state ca­pitalist” system in which the central go­vernment sets a grow­th target and local governments deliver by pumping up their real estate market

Property developers like Evergrande are merely cogs in this growth-gene­rating machine.s.s.a.

Of course, the entire system depends on buyers of apartments believing their val­ues will keep rising. Absent that faith, the market craters, taking with it GDP growth while gutting the finances of loc­al governments and destroying middle cla­ss family wealth.

Speculators have alw­ays bet that Beijing will never let that happen, given that real estate drives more than one-quarter of economic output and 90% of families own their own home.

They’re probably cor­rect. Right on cue, Evergrande this week​ staved off default by paying a bond co­upon ahead of a Saturday deadline. Speculators appear to have won another round.

Indeed, it’s becoming clear that Beijing has no intention of allowing Evergrande to collapse altogether under the weight of its $300 billion in debt. Rather, Chine­se authorities want to punish the world’s most indebted deve­loper as a warning to others about the dangers of out-of-con­trol borrowing.

Their normal playbook is to squeeze demand. Hence, in larger cities speculators are held in check by a thicket of res­trictions on property purchases. In Beij­ing, for instance, married couples are only allowed to own two homes.

Now,​ Chinese author­ities are also squee­zing supply,​ placing limits on the borrowing of real estate developers—­the so-called three “red lines” introduced last ye­ar. Still, they’re just dealing with the speculative excesses of the system, not changing the system itself.

The idea that real estate will deliver unearned windfalls, guaranteed by the gov­ernment, is as old as the Chinese housing market. Prior to 1988, all Chinese wor­kers lived in state-­owned welfare housin­g. Then, Premier Zhu Rongji sold off the government’s entire stock of urban hous­ing at bargain-basem­ent prices, and almo­st overnight China became a nation of homeowners.

China’s former Premi­er Zhu Rongji gives his farewell address during the National People’s Congress in Beijing in 2003.

Those homes have appreciated year aft­er year. In fact, it’s argu­ably not speculation at all when property prices can only go up. Most investors think of apartment purchases as a one-way bet, which is why so many buy two or three —or ten, for th­at matter, if they can get a mortgage.

Meanwhile, city gove­rnments have every incentive to support ever-rising prices: land sales account for 46% of total gove­rnment fiscal revenu­e.

A number of smaller cities are so desper­ate to keep prices trending up that they­’re forcing rural re­sidents to sell their village homes and move into more expen­sive urban high-rise housing blocks. In other words, they’re manufacturing deman­d.

Beijing is now trapp­ed in a speculative marketof its own mak­ing. An obvious exit, as Matthew Brooker notes in Bloomberg Opinion, would be to instit­ute a property tax. At a stroke of the pen, this would disco­urage the purchase of multiple homes by raising their so-cal­led “carrying costs” while offering local governments a stab­le source of revenue.

But Beijing seems to have balked at this solut­ion. The risks of antag­onizing local govern­ments and middle-cla­ss homeowners are ap­parently too high.

It may be that Xi, in going after indebt­ed property develope­rs, has altered the psychology of proper­ty speculation if not the policy underpi­nnings. With real es­tate prices falling for the first time in six years, said​ Ting Lu, chief China econom­ist at Nomura, house­holds “may not belie­ve their home price will rise forever. That’s very, very imp­ortant.”

Ting Lu Photographer: Jerome Favre

In any event, the Ev­ergrande fiasco has exposed a popular my­th about the Chinese economy—the notion that it’s guided by technocrats who gaze far into the future, in contrast to the­ir counterparts in Western democracies who struggle to think beyond the next ele­ctoral cycle. It tur­ns out that China may be locked into the worst kind of econo­mic short-termism.

“State capitalism” as practiced in the all-important property sector is largely a speculative enterp­rise. The longer it lasts, the more pain­ful the adjustment when it finally comes crashing down.

 How Hong Kong's Elite Turned on Democracy

How Hong Kong’s Elite Turned on Democracy

Beijing’s bludgeoning of the prodemocracy movement in Hong Kong would not have been possible without the enthusiastic help of willing collaborators.

A wrecking ball bearing the symbol of Hong Kong's flag breaks a column.
Getty; The Atlantic

A core member of Hong Kong’s prodemocracy camp stood on the balcony of the city’s legislature a quarter century ago, his fist raised in the air, and promised to continue to fight for universal suffrage. Today, he promotes the destruction of what limited voting freedoms Hong Kong has.

Among the loudest present-day advocates for the national-security law imposed by Beijing on Hong Kong last year is a high-profile lawyer who took up politics explicitly to fight against such legislation.

A lawmaker who now boasts about the benefits of Beijing’s crackdown and pushes anti-American conspiracy theories was once widely praised for her turn toward democracy while studying in the United States, part of what her thesis adviser called a “political and intellectual journey.”

From afar, it may appear as though China’s reengineering of Hong Kong involves two parties: the authorities in Beijing, and a populace up in arms over the curbing of its freedoms. Yet the former could not have so easily succeeded in bludgeoning the latter into submission without a third group—Hong Kong’s ruling class. These officials, politicians, and commentators employ a combination of historical revisionism, double standards, gaslighting, and whataboutisms, carrying out Beijing’s mission of transforming the city while attempting to maintain the veneer of democratic competition and convince residents their freedoms have not been eroded. The messages they push, delivered straight-faced, beggar belief: A less representative election is actually more democratic; Hong Kong has never been as safe and stable, but the threat of terrorism has never been more dire; even as organization after organization is forced to close, civil society is as vibrant as ever.

These collaborators come in as many varieties as Hong Kong’s famed dim sum. There are the cheerleaders for patriotic state education who send their own children to international private schools and sit on the boards of universities overseas, and the elites whose family members reside in the same countries that they allege meddle in Hong Kong’s affairs. And there are the law-enforcement leaders who claim that the U.S. is trying to destroy Hong Kong but know the enemy well, many having studied there or even trained with the FBI.

In Hong Kong, some once-outspoken pro-democracy veterans now appear to suffer from sudden political amnesia. Officials who obediently worked for the British colonial government are clambering over one another to prove their nationalist credentials to Beijing. And those who decried the British, their heavy-handed laws, and the colonial police officers who enforced them now applaud the use of those same regulations as they pursue their political enemies. (A few of the British officers are still on the force.)

The speed and zeal with which Hong Kong’s leaders have acquiesced have been jarring, given its history. When the British handed Hong Kong back to China in 1997, the city was left with a strong court system, a tradition of free speech, and leaders educated in an open society with international connections. Hong Kong is showing with remarkable clarity that there is no need for violence or revolution if elites and politicians are willing to go along with a crackdown.

“The lesson for us all is that even though you think your society would be immune to appeals to create a kind of authoritarian regime, look out,” Michael Davis, a global fellow at the Wilson Center, in Washington, D.C., and the author of Making Hong Kong China, told me.

Twilight Of DemocracyAnne Applebaum, Doubleday Books
Making Hong Kong ChinaMichael Davis, Association for Asian Studies
When you buy a book using a link on this page, we receive a commission. Thank you for supporting The Atlantic.

One thing that Hong Kong has never been is a full democracy. The colonial government lacked popular legitimacy and instead co-opted business elites. Under the “one country, two systems” framework enacted when Hong Kong was handed back to China, tycoons and magnates continued to command outsize say in the government, shifting their loyalties as the flags changed over the city.

Technically, Hong Kongers can still vote, though these ballots carry far less power now than in previous years. Under a system meant to ensure that only “patriots” run Hong Kong, the number of people allowed to choose the city’s election committee has been curtailed from 233,000 electors to just 4,800—equivalent to 0.06 percent of the city’s population. One voter, the former head of the police-oversight board, arrived at the polls last month wearing a baseball hat commemorating the 100th anniversary of the founding of the Communist Party of China, lest there be any confusion about who was calling the shots. Barely a fifth of the city’s legislature will be directly elected at the next set of polls in December, down from half previously. No pro-democracy parties have yet put forward candidates.

The city’s administration is led by a chief executive handpicked by Beijing. Those who have held the role have never possessed particularly refined or impressive political skills, yet they have the extremely challenging job of balancing two distinct constituencies—the people of Hong Kong and the bosses in Beijing. This relatively underdeveloped, partially democratic system helps to explain why the drastic changes have been so accepted by those in power and others seeking it.

In Twilight of Democracy, the Atlantic staff writer Anne Applebaum observes that in order for democratic governments to slide into authoritarianism, they “need the people who can use sophisticated legal language, people who can argue that breaking the constitution or twisting the law is the right thing to do.” She continues, “They need members of the intellectual and educated elite, in other words, who will help them launch a war on the rest of the intellectual and educated elite, even if that includes their university classmates, their colleagues, and their friends.” Hong Kong may not have had a fully democratic system for Beijing to dismantle, but the types of individuals described by Applebaum are plentiful in the city.

Law Chi-kwong, for example, was described in the late 1990s as one of the “best-known advocates for democracy and the rule of law” in Hong Kong. A founding member of the city’s largest pro-democracy party, the longtime academic was denied entry to Shanghai in 2004—a badge of honor of sorts. But in 2017, he quit the Democratic Party to serve as Hong Kong’s secretary for labor and welfare. Two years later, as pro-democracy protests took hold, he told concerned residents that they had more to worry about from barbecue smoke than from the thousands of rounds of tear gas police had fired at demonstrators. More recently, he has been deployed to trumpet Beijing’s line about the overhaul of the electoral system. When questioned regarding his about-face, he awkwardly dodges inquiries. Asked about the legality of the city’s annual vigil to mark the 1989 Tiananmen Square massacre, which he had participated in for years, his response was tautological: “Everything that’s illegal is illegal.”

Prodemocracy figures weren’t the only ones shocked and outraged in 1989. Tam Yiu-chung, Hong Kong’s sole representative on China’s National People’s Congress Standing Committee, has always been a staunchly pro-Beijing figure, but that year he denounced the crackdown and signed a petition against Beijing’s actions. Yet this year, after the organizers of Hong Kong’s annual Tiananmen vigil were arrested under the national-security law, their organization was struck from the city’s company registry, and a museum dedicated to the 1989 protests was raided by police, Tam told reporters that the authorities were just following the law. When I asked Tam about this recently, he said that back in 1989 he hadn’t known all the facts about what had happened in Beijing.

Others are more loquacious in their defense of the Chinese government. Ronny Tong, a lawyer and an outspoken critic of an unsuccessful push in 2003 to pass a previous set of national-security laws, entered politics explicitly to combat such proposals. Tong stepped down as a lawmaker and joined the current administration in 2017, and since the arrival of the current national-security law has positioned himself as one of the government’s loudest attack dogs, often appearing on international TV talking over other guests and lambasting hosts. This time last year, he argued that the reaction to the security law was alarmist: “There are no mass arrests of dissidents and no shutting down of media,” he said.

Three months later, 53 people, including some members of Tong’s old party, were arrested for violating the national-security law; their alleged crime was taking part in an unofficial primary vote for an election that never happened. “Of course I’ve been correct,” Tong told me when I asked him if he stood by his statement. “The Hong Kong police are not going around the place knocking on everybody’s door and arresting everybody left, right, and center on trumped-up charges,” he said. Tong told me that my standard for the term mass arrest was “really, really low.” More than 100 people have now been arrested under the security law. And to his point on the media, Apple Daily, a prodemocracy newspaper that was Hong Kong’s largest newspaper by circulation, was forced to close in June when authorities arrested its top editors and froze its assets.

When I asked Fred Li, a former pro-democracy lawmaker turned business consultant, why so many people, including his old party comrades, had gone along with Hong Kong’s reengineering, he responded simply, “Do they have a choice?”

Those who wish to resist the changes sweeping across so many facets of Hong Kong can, of course, follow multiple paths, but none is particularly appealing. The options are jail, fleeing abroad to pursue activism in exile, or staying in Hong Kong and stepping away from politics (with the knowledge that past actions could at some point be used against you). And a final option: servility.

Lee Morgenbesser, a senior politics lecturer at Griffith University, in Australia, who studies authoritarian politics, told me that many people go along with the types of dramatic political overhauls being carried out in Hong Kong for one of three reasons: benefit, fear, or ignorance. For existing political elites, he said, the question to ask is how they stand to benefit. “If they are complicit and demonstrate loyalty, they get to keep their job, the salary, the perks of office that go with it,” he told me. If you opt out of politics, but move to the intertwined business community, “you are not going to get a contract for a job or tax benefits in any particular area without also demonstrating loyalty to the process that is under way.” People’s backgrounds are of little consequence, because ultimately, he said, “if you want to survive and you want to maintain your livelihood, you need to bend with the political wind.”

That wind is blowing from the north. Holden Chow, a pro-Beijing lawmaker, will bend as far and fast as needed to please the bosses there. When he was elected in 2016, Chow spoke of serving as a bridge between the mainland and Hong Kong. Those efforts have been tossed aside in favor of a more bombastic approach. Chow is now one of the loudest and most performative members of the pro-Beijing camp, staging protests outside the U.S. consulate in Hong Kong and taking to Twitter to launch barbs at anyone who offends China and to post celebratory messages when pro-democracy figures are arrested or jailed.

Chow is far less abrasive in person, but, as if trying to live up to his online persona, he referred to himself as a “patriot” no less than a half a dozen times during a recent conversation we had. One of his main talking points is the need for patriotic education in Hong Kong schools, the logic being that young students will thus be more amenable to Beijing’s ways, and less prone to calling for democracy like the hundreds of thousands of students who took to the streets in 2014 and 2019. It is a theory that is paradoxical in relation to his own life experience: Chow attended a posh English boarding school and then the London School of Economics.

He told me that he had come to the realization that Hong Kong needed to bolster its Chinese nationalism while working a short stint at a most American institution—Cedar Point, a sprawling amusement park in Sandusky, Ohio, home of the Iron Dragon roller coaster and delicacies such as powdered-sugar-topped funnel cake. “The Star-Spangled Banner” was played every morning and the American flag was raised. It was different from Hong Kong, Chow said, where people “don’t know you should respect the national anthem and national flag.”

When I told Chow that the U.S., unlike Hong Kong, does not criminalize destroying or burning the flag, he seemed taken aback. “That is not correct, is it?” he asked. A few weeks later, he voted in favor of a law that makes it illegal to demean the Chinese flag online. Violators face up to three years in prison.

Twilight Of DemocracyAnne Applebaum, Doubleday Books
Making Hong Kong ChinaMichael Davis, Association for Asian Studies

Friday, 22 October 2021


 The result of the German election was known within minutes of the polls closing on 26 September. But the kind of government that will emerge is being decided now, behind closed doors, in intense three-way coalition negotiations. With the Christian Democratic Union (CDU)/Christian Social Union (CSU) humiliated by a defeat of unprecedented magnitude, Olaf Scholz of the Social Democratic party (SPD) is the clear favourite to succeed Angela Merkel at the chancellery.

The real question is the balance of power between the SPD’s two coalition partners, the Greens and the Free Democratic party (FDP). A key issue in those negotiations is who gets the job at the Finance Ministry. The politicians concerned may be unknown outside of Germany, and the battle over who controls the purse strings may not seem glamorous. But it will, in fact, decide the prospects not just of Germany’s next government, but of Europe.

Thursday, 21 October 2021

 Chinese Developer Defaults Pile Up as Evergrande Contagion Spreads

The problem could worsen as a wave of debt from the beleaguered industry comes due in the coming months

The Shanghai headquarters of Sinic Holdings. The company was recently downgraded by S&P Global Ratings to a ‘selective default’ rating.


By Frances Yoon, Quentin Webb and Elaine Yu

Oct. 21, 2021 5:34 am ET





HONG KONG—The pain is spreading in the market for Chinese junk bonds.

Dollar-bond defaults from Chinese property developers are rising quickly as the country’s housing market slumps, and the problem could worsen as a wave of debt from the beleaguered industry comes due in the coming months.

Real-estate developers dominate China’s international high-yield bond market, making up about 80% of its total $197 billion of debt outstanding, according to Goldman Sachs.

The market has already endured its worst selloff in a decade, after property giant China Evergrande Group EGRNF -8.05% skipped some interest payments to dollar bondholders in late September, and smaller rival Fantasia Holdings Group Co. surprised investors by defaulting on debt that matured in early October.

An Evergrande site in Lu'an, Anhui province, China, this month.


Since then, at least four other Chinese developers have either defaulted or asked investors to wait longer for repayment. A 30-day grace period for Evergrande to pay international bondholders, meanwhile, runs out this weekend, and investors are expecting the company to default on close to $20 billion in outstanding dollar debt.

The average yield on an ICE BofA index of Chinese high-yield corporate bonds stood at 20.3% Wednesday, after topping 23% last week. At the height of the selloff on Oct. 13, the average price of bonds in the index had plunged 21% in just one month—its worst performance since October 2011.

“Global investors have been offloading high-yield bonds issued by Chinese developers because of the concerns that they have, rightly, about the future of those companies and their capability to repay debts,” said Jing Sima, China strategist at BCA Research. “The lack of response from Chinese policy makers definitely adds to that concern,” she added.

July 2021









How do you think the Evergrande crisis will continue to affect the Chinese economy? Join the conversation below.

While property bond prices have stabilized somewhat in recent days, many remain at distressed levels. The extreme market dislocation raises the risk of a vicious cycle, in which companies can’t refinance coming debts because borrowing costs are too high, leading to more defaults and further hits to investors’ and home buyers’ confidence.

Some investors say they are now monitoring every pending interest and principal payment in the sector, and asking chief financial officers if their companies will pay back debt as planned. “We now need to track every single coupon and upcoming maturity,” said Jim Veneau, head of fixed income for Asia at AXA Investment Managers.

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On Wednesday evening, Chinese developer Modern Land (China) Co. , which has a $250 million bond coming due on Oct. 25, said it is facing liquidity issues and is looking to hire a financial adviser. It scrapped an earlier plan to delay repaying most of the bond by three months.

Over the past week, China Properties Group Ltd. defaulted on $226 million in three-year notes that matured on Oct. 15. And on Tuesday, S&P Global Ratings downgraded Sinic Holdings (Group) Co. to a “selective default” rating, after the Shanghai-headquartered company failed to repay $250 million of bonds that came due a day earlier.

Xinyuan Real Estate Co. , another cash-strapped developer, swapped more than $200 million in dollar bonds that were scheduled to mature on Oct. 15 with debt that matures in two years, in what is known as a distressed debt exchange.

Developers are skipping debt payments to preserve cash since it will be difficult to refinance upcoming maturities in the international bond markets if yields remain elevated, said Rachana Mehta, co-head of regional fixed income at Maybank Asset Management.

‘We now need to track every single coupon and upcoming maturity.’

— Jim Veneau, AXA Investment Managers

Investors are also concerned that Evergrande, Fantasia and other cash-strapped Chinese developers would give priority to paying their suppliers and creditors in mainland China, leaving less money for their offshore bondholders.

The refinancing pressure is likely to intensify, with more than $6 billion of dollar debt maturing in January, according to Goldman Sachs—up from $2.2 billion this month, and less than $2 billion in each of November and December.

At the same time, contracted sales at many developers have already fallen by more than 20% or 30% on an annual basis, and this slowdown is likely to continue.

What China's Economic Slowdown Means for Global Investors



What China's Economic Slowdown Means for Global Investors

What China's Economic Slowdown Means for Global Investors

China recorded a steep economic slowdown in the third quarter as its pandemic bounceback fades—and now, Beijing is taking on longer-term issues including household debt and energy consumption. WSJ’s Anna Hirtenstein explains what investors are watching. Photo: Long Wei/Sipa Asia/Zuma Press

In recent days, Moody’s Investors Service downgraded its speculative-grade ratings on numerous developers and cut its outlook on others to negative. The credit-assessment company said it expects many developers’ contracted sales to fall over the next six to 12 months, due to weaker consumer sentiment amid tight funding conditions.






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Many traders and investors are watching what happens with Kaisa Group Holdings Ltd. , which defaulted in 2015. One of its bonds that matures in November 2024 was bid at 30 cents on the dollar Thursday, according to Tradeweb.

On Monday, Moody’s downgraded Kaisa to B2, saying the company has up to $3.2 billion of offshore debt coming due by the end of next year. The figure includes bonds that become puttable, meaning investors are able to demand the company buys them back before their maturity date.

To be sure, bonds from some stronger companies such as Country Garden Holdings Co. and Logan Group Co. have regained some ground in recent days, after China’s central bank said any risks of financial spillover from Evergrande were controllable.

And some companies are making payments on schedule. Shimao Group Holdings Ltd. said last week that it had paid back an $820 million bond at maturity as planned.

Sept. 2021









Central​China Real​Estate



Still, sentiment remains fragile. “Investors are not looking for bargains yet because the selloff has become pretty damaging,” said AXA’s Mr. Veneau. “There’s probably more of a mind-set of assessing the damage.”

Real estate is a major driver of the Chinese economy and financial distress among developers is likely to add to households’ reluctance to buy property, alongside other concerns such as difficulties obtaining mortgages and doubts that prices will keep rising. Chinese buyers often put large sums of money down upfront for as-yet unfinished projects.

“The true concern is that this will negatively impact economic growth, as it affects home-buyer appetite to buy homes,” said Tracy Chen, a portfolio manager at Brandywine Global.

To turn more positive on the sector, Ms. Mehta of Maybank Asset Management said she was waiting for the market for new debt issuance to reopen for developers, or for signs of government support to emerge. These could come at next month’s full gathering, or plenum, of the central committee of China’s Communist Party.

 It’ll Take More than American Military Might to Shore Up Taiwan

Team Biden needs a fuller strategy that includes international recognition and new regional alliances.

By John Bolton

Oct. 20, 2021 6:29 pm ET

Taiwanese soldiers stand on an armored vehicle in Taipei, Taiwan, Oct. 10. PHOTO: CENG SHOU YI/ZUMA PRESS

China’s threat to Taiwan is real, not hypothetical, as recent incursions into the island’s air-defense zone demonstrate. To counter Beijing’s renewed belligerence, a successful strategy must go beyond eliminating the “strategic ambiguity” over whether the U.S. will come to the island’s defense. A successful strategy will require clarifying Taiwan’s status, its critical place in Indo-Pacific politics, and its economic importance globally. The U.S. military contribution to Taiwan’s security is crucial, but it requires strong political support here and abroad.

It begins by affirming that Taiwan is a sovereign, self-governing country, not a disputed Chinese province. It meets international law’s criteria of statehood, such as defined territory, stable population and the performance of normal governmental functions such as viable currency and law enforcement. Washington, Tokyo and others would be entirely justified to extend diplomatic recognition, and its attendant legitimacy, to Taipei.

The 1972 Shanghai Communiqué, the foundational statement of current U.S.-China relations, is effectively dead. The communiqué says that “the United States acknowledges that all Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is a part of China,” and “doesn’t challenge that position.” Beijing warped these words to mean “one China run by Beijing,” a formulation the U.S. never accepted.

The reality the U.S. acknowledged in 1972 no longer exists. Taiwan’s National Chengchi University has polled the island’s people about their identity for 30 years. Between 1992 and 2021, those identifying as Taiwanese rose to 63.3% from 17.6%; those identifying as Chinese fell to 2.7% from 25.5%; those identifying as both Taiwanese and Chinese fell to 31.4% from 46.4%. (Some 2.7% didn’t respond, down from 10.5%.) The “silent artillery of time,” as Abraham Lincoln called it, will likely continue these trends. Taiwan’s citizens have made up their own minds: There is no longer “one China” but “one China, one Taiwan,” as Beijing has feared for decades.


Broader recognition of Taiwan’s status as an independent state would be extremely helpful in expanding politico-military alliances to buttress the island’s defenses against China. Yet Washington’s support may be insufficient to deter Beijing from attempting to subjugate Taiwan (or near-offshore islands like Quemoy and Matsu). Formal or informal alliances that include Taipei would show Beijing that the costs of belligerence toward Taiwan are significantly higher than China may expect.

One step would be forming an East Asia Quad, consisting of Taiwan, Japan, South Korea and America, complementing the existing Japan-India-Australia-U.S. Quad. Japan should welcome this development. Its decision makers increasingly understand that a Chinese attack on Taiwan is an attack on Japan. Both are part of “the first island chain” separating the mainland from the broader Pacific, and their mutual security is inextricable.

It would be harder to persuade South Korea to join in such an effort due to historical animosities toward Japan and other factors, but its people are nonetheless aware of the consequences of Taiwan falling to China. The 2022 presidential election is an opportunity to debate whether to stand with its neighbors or risk eventually living under Greater China’s suzerainty. Vietnam, Singapore, Australia and Canada could join this Taiwan-centric grouping in due course.

Taipei’s residual South China Sea territorial claims could be bargaining chips for closer relations with other partners, especially littoral states like Vietnam, the Philippines and Singapore. At this southern end of the first island chain, Taiwan’s navy could make material contributions to freedom-of-navigation missions. Taiwan is also developing increasingly important cyberwarfare capabilities and artificial intelligence.

Similar cooperation with Pacific island states would also enhance Taiwan’s reputation as a good neighbor. In addition, American and Taiwanese information statecraft in the Indo-Pacific and globally should expose China’s hypocritical behavior on climate change and Covid and its repression of Uyghurs, Hong Kong and religious freedom. Failure to counter Beijing’s extensive influence operations hamstrings efforts to constrain China and protect Taiwan.

Few Americans appreciate how critical an economic partner Taiwan is, especially its semiconductor manufacturing industry and its extensive trade links throughout the Indo-Pacific, all of which could support enhanced politico-military ties. Economic issues are important for regional countries and Europeans, who may be less willing to engage in military action. These countries should be reminded of China’s threat, including Beijing’s weaponizing telecommunications companies like Huawei and ZTE and its brutality in taking Canadians hostage in retaliation for the legitimate arrest of Huawei CFO Meng Wanzhou.

More military assets supporting Taiwan are critical but potentially futile without a fuller American strategic vision, with buy-in from citizens and other like-minded countries. That vision must be broad, persuasive and implemented without delay,to ensure the sustained popular support needed to prevail.

Mr. Bolton is author of “The Room Where It Happened: A White House Memoir.” He served as the president’s national security adviser, 2018-19, and ambassador to the United Nations, 2005-06.