World

China begins nationwide push to reveal hidden government debt

China has begun a fresh round of nationwide inspections to work out how much money local governments’ owe, according to people familiar with the matter, a sign that authorities are preparing to take concrete steps to tackle a key financial risk.

Local officials will be pressed to come clean about their so-called hidden debt as national leaders attempt to get a fuller picture of liabilities across all levels of government, the people said, asking not to be named discussing private information. The campaign is being led by the Ministry of Finance, one of the people said.

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It’s not clear when the survey will end or what will follow it, but an accurate accounting of the size of the liabilities would be key to formulating policies to address the problem.

The assessment has been underway at least since May, one of the people said. The people asked not to be identified as the discussions were private.

The finance ministry didn’t respond to a fax requesting comment.

There are more than 3,000 individual administrative units in China, with 31 provinces, 333 cities and almost 3,000 counties. Many of them use companies called ‘local government financing vehicles’ to borrow money to pay for infrastructure and other services that can’t be paid for from their official budgets.

The companies are controlled by the local authorities but are not officially part of the government so their debts don’t appear on official balance sheets, making local finances appear to be in better shape than they really are.

The central government officially denies that government is responsible for these debts, but investors and banks lend to the LGFVs at low interest rates because it is assumed that local authorities will not let any of them fail but will eventually repay their debts.

However, many of the investments made by the LGFVs have struggled to make a profit or even enough money to repay their loans, and investors increasingly see the whole sectors as a financial risk. LGFVs were the most frequently cited top risk in a Bloomberg survey earlier this year of 53 economists, money managers and strategists at financial institutions ranging from sovereign wealth funds to banks and pensions.

Official Debts

Ministry of Finance data showed governments across China had 37 trillion yuan ($5.1 trillion) in on-book debt outstanding at the end of April, but there is no official total for how much hidden debt there is and who owes it.

The International Monetary Fund estimated in February that nationwide there was 66 trillion yuan of LGFV hidden debt at the end of 2022, up from 40 trillion yuan in 2019, with that quick increase underscoring how local governments ramped up off-book borrowing and spending during the pandemic to support their local economies.

China has already conducted several audits of local debt over the past decade. After a 2013 audit, Beijing banned local authorities from borrowing except through the sale of official bonds, and then in 2015 launched a campaign to swap local governments’ off-balance-sheet debt for bonds.

The Ministry of Finance more recently allowed some regions to issue bonds to repay LGFV borrowings in an attempt to eliminate the remaining hidden debt, after another round of checks in 2018. Guangdong province became the first to claim it had successfully done so in 2021.

Other LGFVs have been allowed to renegotiate their loans, including one in Guizhou province agreeing with its banks in December last year to extend its loans for two decades.

This new audit of local government debt risks comes just as China’s economic recovery is losing momentum. The real estate sector shows no sign of rebounding, global demand for Chinese goods and domestic consumption are both weakening, and local authorities’ ability to spur growth with infrastructure spending has been limited by their massive debt stockpile and falling income.

Expectations for more monetary and fiscal stimulus have risen following the surprise rate cut last week by the People’s Bank of China.

The State Council, China’s cabinet, said late last week it was discussing stimulus proposals, and a major policy announcement is expected to come after the July meeting of the Communist Party’s powerful Politburo.

Morgan Stanley analysts expects China to roll out rate cuts, widen the fiscal deficit by expanding government bond quotas, announce more infrastructure investment, provide tax incentives to support high-end manufacturing and ease home purchase restrictions.

The government announced Wednesday that it would extend tax breaks for people to buy electric cars through 2027, in an effort to boost both demand and industrial output.

However, more and more domestic economists are urging Beijing to shift the focus of fiscal stimulus toward boosting household income, as the return on investment of infrastructure projects has declined, leaving local authorities struggling to repay the debt taken on to fund the constructions.

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World

Crown Prince of Abu Dhabi meets with CEOs of leading Norwegian companies

H.H. Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, has met with a group of CEOs from leading Norwegian companies, as part of their participation in the UAE-Norway Investment Forum, held alongside his official visit to the Kingdom of Norway.

During the meeting, H.H. Sheikh Khaled bin Mohamed bin Zayed underscored the UAE leadership’s commitment to strengthening economic cooperation with its international partners.

He highlighted that investment in innovation and knowledge is a cornerstone for achieving sustainable development, noting that enhancing collaboration with Norwegian companies across key sectors will open new avenues for mutual economic growth between the two countries.

The UAE-Norway Investment Forum, taking place in Oslo, aimed to highlight available investment opportunities and strengthen trade relations between the UAE and Norway, fostering shared interests and supporting innovation and knowledge-based economic visions.

-wam

World

At the Indonesia International Book Fair 2024, TRENDS inaugurates 10th global office, releases four books

As part of its Asian research tour, partnership with Aletihad News Center, and
primary sponsorship of the Indonesia International Book Fair 2024, TRENDS
Research & Advisory inaugurated its office in Jakarta, marking its 10th location
worldwide. It also released four books in Indonesian.
The inauguration event was attended by ambassadors of the UAE, Bahrain, and
Jordan to Indonesia, chairpersons of the UAE and Indonesian Publishers’
Associations, the Director of TRENDS’ Jakarta office, and a group of researchers
and academics.
Speaking at the event, Dr. Mohammed Abdullah Al-Ali, CEO of TRENDS
Research & Advisory, stated that TRENDS’ international offices—set to reach 15
by the end of 2024—aim to enhance the Center’s research efforts and deepen its
role in disseminating knowledge, thus serving as a global knowledge bridge.
He emphasized, “At TRENDS, we believe in the importance of cooperation
between think tanks and prioritize this endeavor. We believe the TRENDS office in
Jakarta will enhance the exchange of knowledge and ideas between think tanks in
Asia and the Middle East, opening new horizons for collaboration in various
fields.”

Four books in Indonesian
As part of the Jakarta office’s inaugural activities, four books were released in
Indonesian, including the 11th and 12th books of the Muslim Brotherhood
Encyclopedia and Global Trends in AI and Automation and the Future of
Competition between Man and Machine: An Analytical Forward-looking Vision.

Hostility to Arab states
The 11th book of the Muslim Brotherhood Encyclopedia, The Concept of the State
According to the Muslim Brotherhood, highlights its hostile stance toward Arab
states since its inception. The group views them as an obstacle to its ascent to
power. It opposed the modern principles upon which these states were built,
considering them incompatible with the group’s unique interpretation of Islam,
which it claimed to embody exclusively.

Exclusion of nonconformists
The 12th book, The Muslim Brotherhood: Rejection of Tolerance and Exclusion of
Nonconformists, examines the Muslim Brotherhood’s stance towards
nonconformists, individuals, and entities. The book reveals the group’s binary view
of the world, categorizing others as allies or adversaries. It ties these relationships
to the Brotherhood’s internal power struggles and self-serving interests.

Global Trends in AI
The third book, Global Trends in AI, explores significant developments in AI and
its impact on various aspects of life, including the economy, society, and
governance. It also offers a comprehensive analysis of technological advancements
in AI, its applications across sectors, the ethical and social challenges it presents,
and its future trajectory.

Automation

The fourth book, Automation and the Future of Competition between Man and
Machine: An Analytical Forward-looking Vision, addresses the growing challenges
faced by the human workforce in the face of widespread automation and AI
applications. The book concludes that while automation presents a significant
challenge to the labor market, it simultaneously creates new opportunities. It
emphasizes the importance of preparing for this shift through skills development,
continuous education, and adopting economic and social policies that support the
workforce.

Prominent pavilion and active presence
The TRENDS’ pavilion at the Indonesia International Book Fair has attracted
numerous visitors, including academic researchers and officials, such as the
ambassadors of the UAE, Bahrain, Qatar, Jordan, and Turkey. Additionally,
chairpersons of Arab and Indonesian publishers’ associations, authors, publishers,
and students visited the pavilion. All were impressed with and praised TRENDS’ diverse, valuable publications. They also commended TRENDS’ active
international presence and ability to address global developments with rigorous
analytical research.
Dr. Mohammed Abdullah Al-Ali honored the esteemed guests, including
ambassadors of the UAE and Bahrain to Indonesia, Wedha Startesti Yudha,
Chairperson of the Indonesia International Book Fair Committee, Arys Hilman
Nugraha, Chairman of the Indonesian Publishers Association, and others,
presenting them with TRENDS’ publications and commemorative shields.
Additionally, he awarded TRENDS’ Research Medal to Ni Made Ayu Martini
Indonesian Deputy Minister of Marketing, Tourism and Creative Economy
It is worth noting that during its current Asian research tour, TRENDS announced
the launch of the TRENDS Research Medal, awarded to individuals who make
significant contributions to the development of scientific research and promote collaboration with TRENDS in strengthening a culture of research across various fields.

World

US determined to prevent full-scale war in Middle East, Joe Biden tells UNGA79

US President Joe Biden highlighted the US Administration’s determination to prevent a wider war that engulfs the entire Middle East region, noting that a diplomatic solution “remains the only path to lasting security to allow the residents from both countries to return to their homes on the border safely”.

In remarks he made today before the 79th Session of the United Nations General Assembly (UNGA79), the US President said, “Full-scale war is not in anyone’s interest,” adding that a diplomatic solution is still possible.

He also touched on “the rise of violence against innocent Palestinians on the West Bank”, and the need to “set the conditions for a better future”, which he said featured “a two-state solution, where the world — where Israel enjoys security and peace and full recognition and normalised relations with all its neighbours, where Palestinians live in security, dignity, and self-determination in a state of their own”.

President Biden underscored the ceasefire and hostage deal put forth by Qatar and Egypt, which the UN Security Council endorsed. He said, “Now is the time for the parties to finalise its terms, bring the hostages home,” adding that this would help ease the suffering in Gaza, and end the war.

-WAM