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IN TODAY’S EDITION
1️⃣ Can China’s central bank save the day? |
2️⃣ The Intrigue jobs board |
3️⃣ Flag of the day |
Hi Intriguer. The term ‘greatest film of all time’ is getting thrown around again lately, this time back in the direction of The Shawshank Redemption, as the Oscar-nominated prison drama turns 30 this year.
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The line from that movie that always stuck with me is this one, whispered by Morgan Freeman to Tim Robbins as they dream about life back outside the Shawshank State Penitentiary: “Tell you where I’d go – Zihuatanejo.”
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As seems to happen a bit in my life, I later went and checked that place out for myself while serving in Mexico, and I can confirm that 1990s-era Morgan Freeman was indeed correct: it’s a stunning beach on Mexico’s Pacific coast, where you can watch the waves roll in while eating some of the world’s best fish tiritas.
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Anyway, let’s get into today’s briefing, which leads with the surprise announcement dropped by China’s central bank governor yesterday. Onwards!
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PS – We’ve just announced our next live event in DC together with our friends at Samsung – further deets below!
THE HEADLINES
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Hezbollah claims its missile targeted Mossad HQ.
Israel says it has intercepted a ballistic missile fired towards Tel Aviv, with no reported damage or casualties. Still, Israel’s defence force says it’s the first time a Hezbollah missile has reached central Israel. And the attack comes a day after Israel’s heavy bombardment targeting Hezbollah across southern and central Lebanon, leaving over 550 dead. The UN Security Council will meet today (Wednesday) to discuss the escalating conflict.
Zelensky tells UN that Russia must be “forced” into peace.
Addressing the UN Security Council, the Ukrainian president has urged countries, including Russia’s fellow BRICS members (Brazil, India, China and South Africa), to take a more active role: “This war cannot simply fade away, it cannot end by talks, action is needed”. He’s expected to present his peace plan to Joe Biden tomorrow (Thursday).
China test-fires ballistic missile.
Beijing says it’s successfully tested an intercontinental ballistic missile (ICBM) by launching a dummy warhead into the Pacific. China hasn’t test-launched an ICBM into international waters since 1980, preferring instead to keep its practice runs domestic. By opting for an outward display of power, China might be posturing as the region heats up.
Cambodia pulls out of regional development pact after protests.
Prime Minister Hun Manet has announced his country will pull out of a 2004 cooperation agreement with neighbouring Vietnam and Laos, bowing to fierce opposition criticism that the deal promotes foreign interests. The shock move could undermine Cambodia’s already fragile standing in the region, while potentially providing an opportunity for China to further expand its local influence.
US sues Visa on monopoly accusations.
The US department of justice is suing payment services giant Visa, alleging the company has violated antitrust rules and affected “the price of nearly everything”. Specifically, there are accusations (which Visa denies) that it’s been trapping merchants with “disloyalty charges” and paying potential rivals to stay out of the market. Visa is the largest of the payment networks in the US, generating around $7B in fees each year.
TOP STORY
Pan Gongsheng to the rescue?
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China’s central bank governor Pan Gongsheng took a sip of tea then sent global markets buzzing yesterday (Tuesday) as he announced the most aggressive stimulus package since the pandemic, for the world’s second-largest economy.
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While the timing and specifics contained surprises, it’s all part of something we’ve long been tracking: China’s attempts to grapple with a deflating property bubble, weak consumer demand, wage stagnation, and beyond.
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So, Governor Pan’s new plan includes 1) a 0.5% interest rate cut, 2) incentives for homebuyers, 3) an easing of bank reserve ratios to free up a trillion yuan ($142 billion) in extra lending, and 4) the first inklings of a stock stabilisation fund.
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Pan will have been happy with what happened next:
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China’s stocks enjoyed their biggest rally since 2020
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Stocks across broader Asia hit new 2.5-year highs, and
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Even US and European futures in China-linked industries got a bump, from automobiles to luxury goods.
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The cherry on top? Pan also hinted there could be more of that sweet sweet stimulus to come, depending on how things play out next.
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But the Harvard and Cambridge-educated Pan may have felt a little deflated by what then happened: folks started asking the same question they asked last time, and the time before that: is this enough? For many China-watchers, Pan has now given China’s economy some extra breathing room, but its deep-rooted challenges persist.
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Of course, China’s economy has major strengths, from high tech to low costs, and more renewable energy installed last year than the rest of the world combined. But when it comes to challenges? Ufff, take your pick: whether it’s China’s shrinking and ageing demographics, its huge and shadowy debt pile (often with local governments), the growing list of countries blocking its low-cost exports, and beyond.
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And it’s worth a quick look at just one of the challenges: China’s property sector.
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It toppled into crisis back in 2021, after Beijing tried to rein in developers that had taken on way too much debt – by the time a Hong Kong court ordered the liquidation of the infamous Evergrande this year, it was the world’s most indebted developer, owing $300B.
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As a result, sure, China doesn’t have the kind of housing affordability crisis afflicting parts of the West. But China’s estimated ~80 million vacant homes are a tangible sign of something else: as more developers teeter, they risk taking households with them. That’s because China’s households store ~70% of their wealth in real estate.
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So in this context, and with other dashboard lights like youth unemployment flashing red, you can see why observers might still ask if Pan’s measures are enough:
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Yep, home-owners will welcome the mortgage relief, but they’ll also be more likely to just pay down their loan rather than spend or invest, and
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Yep, freeing up $142B for new lending sounds good, but it doesn’t address the reasons why folks and firms are still reluctant to borrow in the first place.
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So all the attention is still on President Xi Jinping and his politburo, who are expected to convene just before China enters a weeklong holiday (National Day) in early October.
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And yet Xi has long resisted the growing calls to firehose more cash at the economy and jolt it back to life, arguing that too much stimulus can breed idleness.
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So the world will be watching for any signs that Xi might now have changed his tune.
INTRIGUE’S TAKE
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But what do other folks in China think? This Chinese-language article was doing the rounds last month before Beijing censored the original, and it’s easy to see why:
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The author (a professor) describes “an environment of financial repression” and warns that if everyone is still “confused, anxious and worried, then monetary easing is useless”
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He describes a “self-protection mentality”, with officials focused less on solving problems and more on “how to minimise the risk of being held accountable”
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As a result, he describes China’s mounting problems as being like Sisyphean stones: “prevention and control are becoming more and more difficult… and the actual price paid is getting higher and higher”
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In turn, he argues that “short-term risk elimination leads to long-term risk accumulation”, and in the end, he says
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“No matter which market, it will enter a state of shrinking until… a black swan breaks out”.
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Now to be clear, this is just a single article. But it’s still circulating widely. And in a political context where high-profile economists are vanishing for dropping critical remarks in a private group chat, there aren’t enough fire emojis to describe an article like this one. And that might offer a sense of why China-watchers, including members of Team Intrigue, still have real doubts whether Governor Pan’s measures are enough.
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Also worth noting:
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By way of possible counterpoint to the gloomy picture above, we’re also getting word on the ground that this could be a good time for entrepreneurs to start a business in China, as anxious local governments (including in megacities like Shanghai) are now offering some remarkable incentives.
INTERNATIONAL INTRIGUE PRESENTS
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Join us in Washington, DC for “Securing Tomorrow: The Future of Cyber Threats and Global Defense” on Thursday, October 24 at 6 PM EDT.
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In an increasingly interconnected world, the stakes in cybersecurity have never been higher. We’re convening top minds to explore the cutting-edge of cyber defense, covering the escalating global cybercrime industry, the shadowy realm of industrial and state-sponsored espionage, and the critical need for international cooperation.
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Looking ahead, we’ll explore the future of defense and the innovations shaking up our security landscape. Get the scoop on the strategies and tech that will shape the next era of global protection.
MEANWHILE, ELSEWHERE…
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🇹🇼 Taiwan: China’s national security ministry has blamed a Taiwanese military-backed hacker group for a string of cyberattacks on targets in China. Taiwanese authorities have denied the charges and are in turn accusing Beijing of spreading disinformation.
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🇳🇴 Norway: A Russian warship fired a warning shot at a Norwegian fishing vessel in the Arctic earlier this month, according to the ship’s skipper. The incident took place within Norway’s exclusive economic zone.
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🇦🇺 Australia: The Reserve Bank of Australia has opted not to cut rates, flagging it first wants to be confident inflation is “moving sustainably towards the target range” (2-3%). The latest inflation figures today (Wednesday) show headline inflation has fallen to 2.7%, but the central bank is warning that underlying inflation is still too high.
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🇨🇴 Colombia: The Egmont Group, an international anti-money laundering organisation, has suspended Colombia’s access after President Petro released confidential Egmont-supplied information. Specifically, Petro revealed claims that his predecessor had bought the infamous Pegasus spyware for $11M – it’s the phone-hacking tool some governments have used to spy on critics.
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🇹🇿 Tanzania: Police have arrested three opposition leaders in an attempt to stop a planned protest. The planned demonstration was against the apparent ‘disappearance’ of government critics by Tanzanian security forces.
EXTRA INTRIGUE
We found some jobs we thought you might enjoy!
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Associate (wealth management) @ Morgan Stanley in Mumbai
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Counter-terrorism programme management assistant @ UN in Doha
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Senior analyst @ Bank of England in London
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Product designer @ Meta near Seattle
FLAG OF THE DAY
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Never underestimate the power of a grudge.
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North Macedonia and Greece have long been locked in a spat about the heritage of the ancient kingdom of Macedonia and its famed leader, Alexander the Great. The issue is so entrenched that Greece pushed hard to get its northern neighbour to add ‘North’ to its name, to differentiate it from Greece’s own region of Macedonia (where Alexander was born).
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So we shouldn’t be surprised that after North Macedonia became an independent country back in 1991, it announced a flag featuring Alexander’s own ‘Vergina Sun’ symbol. But this proved too spicy for the Greeks, so further negotiations produced the above tweaked version in 1995.
DAILY POLL
If you were President Xi Jinping, where would you focus your economic policy? |
Yesterday’s poll: How do you think ambassadors should be chosen?
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🟨🟨🟨⬜️⬜️⬜️ 🖋️ By political leaders (26%)
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🟩🟩🟩🟩🟩🟩 🏛️ By the foreign ministry (49%)
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🟨⬜️⬜️⬜️⬜️⬜️ 🎩 By a group of peers (15%)
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⬜️⬜️⬜️⬜️⬜️⬜️ 🗳️ By popular vote (5%)
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⬜️⬜️⬜️⬜️⬜️⬜️ 👵 By seniority (2%)
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⬜️⬜️⬜️⬜️⬜️⬜️ ✍️ Other (Write in!) (3%)
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Your two cents:
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🏛️ M.G: “Having served under both political and career ambassadors, the choice is easy. Expertise vs blather. Competence vs connections.”
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🖋️ A.L: “Ambassadors should be chosen by those whose policies they are expected to represent.”
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👵 F.A.S: “A diplomat needs a long career and early competition to enter the system under objective grounds. Leaving their fate to political influence spoils the system and the principles of merit that underpin it.”
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✍️ W.B: “People with a proven record of diplomatic success should be chosen through the foreign ministry. The problem is that it is usually a popularity contest.”
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