Netherlands unveils chip tool export curbs in fresh blow to China

News follows similar moves by U.S. and Japan as tech tensions ramp up

Following Japan and the U.S., the Netherlands has announced further export controls on chip tools that will restrain China's semiconductor ambitions. (Source photos by Getty and AP)

CHENG TING-FANG, LAULY LI and RHYANNON IMADEGAWA-BARTLETTJune 30, 2023 20:00 JST

 

TAIPEI/LONDON -- The Netherlands, home to the world's most valuable chip tool maker ASML, on Friday followed Japan and the U.S. in unveiling details of new export control rules that could deal a further blow to China's semiconductor ambitions.

The new regulation, which the Dutch government first announced it would introduce on March 8, would prevent ASML from exporting its advanced chip production tools without licenses.

ASML is the world's biggest provider of machines used in lithography -- a key part of chipmaking in which chip designs are printed on wafers. The machines are crucial for making everything from processors to memory chips.

ASML said two types of its machines fall under the scope of the export control rules and would thus need licenses for export, namely its advanced immersive deep ultraviolet lithography systems (DUV). The machines are part of the TWINSCAN NXT:2000i and later immersion systems, ASML said.

The advanced immersive DUV systems are capable of building chips that are on the 16 nanometer level or more advanced, according to industry executives. The U.S. export control regulations cover a similar level of production capabilities but in regard to different steps in the chipmaking processes.

"Shipments of other ASML systems are not controlled by the Dutch government," ASML said in a statement. The company will continue to comply with applicable export regulations, including Dutch, EU and U.S. regulations, ASML said.

The export controls will take effect on Sept. 1 -- later than Japan's rules, which are set to become effective in late July.

ASML's advanced immersive DUV systems are widely used by global chipmakers, including China's chipmaking champion Semiconductor Manufacturing International Co., memory chipmaker YMTC, and top Chinese DRAM memory chipmaker ChangXin Memory Technologies.

ASML's smaller peers in the lithography machine segment are Nikon and Canon of Japan, and China's homegrown Shanghai Micro Electronics Equipment (Group). The U.S. has no domestic lithography chip gear maker.

The Dutch government's new regulation also involves atomic layer deposition production tools -- known as ALD -- another key process in advanced chipmaking, in which Dutch company ASM International has the highest market share. ASM said it is still looking into the latest export control regulations.

The Dutch government has blocked shipments of ASML's most cutting-edge chip production tool, the extreme ultraviolet system (EUV), to China since 2019 due to U.S. pressure, Nikkei Asia first reported. The immersive DUV systems covered in the latest regulations are less advanced than EUV, but the Dutch government considers immersive DUV to be "dual-use" technology, meaning it can be used for both commercial and military purposes.

"We've taken this step on national security grounds," Liesje Schreinemacher, the Dutch minister for foreign trade and development cooperation, said of the latest move. The government said these specific technologies can be used in certain advanced military applications, and their uncontrolled export poses possible national security risks.

"We confirm that we do not expect these measures to have a material impact on our financial outlook that we published for 2023 or for our longer-term scenarios," ASML said in a press statement.

The U.S. last October launched sweeping export controls to curb all aspects of China's advanced chip ambitions. 

U.S.-based chip equipment makers Applied Materials, Lam Research and KLA are blocked from shipping tools for advanced chipmaking and engaging with clients without a license. The rules also restrict U.S. nationals from working with Chinese chipmakers.

Japan and the Netherlands joined forces in March with the U.S. in announcing export controls regarding production equipment for advanced chipmaking, though neither mentioned China in the details they unveiled.

Japan, the Netherlands and the U.S. are the three most important countries in the supply of chip production tools. Japan's Nikon and ASML are the leading suppliers of lithography machines, and are not easily replaced.

https://asia.nikkei.com/Business/Tech/Semiconductors/Netherlands-unveils-chip-tool-export-curbs-in-fresh-blow-to-China 

Samsung sues Chinese rival over alleged patent violation on iPhone displays

By Hyunjoo Jin

July 4, 2023   2:14 AM GMT+7  

 The logo of Samsung Electronic is seen at its headquarters in Seoul, South Korea, April 4, 2016. REUTERS/Kim Hong-Ji/File Photo

SAN FRANCISCO, July 3 (Reuters) - South Korea's Samsung Display has filed a lawsuit against BOE Technology (000725.SZ), accusing the Chinese rival of infringing five of its patents for displays used in mobile devices including Apple's (AAPL.O) iPhone 12.

Samsung Display, a unit of Samsung Electronics (005930.KS), asked a federal jury in Texas to award damages for the infringement of patents regarding organic light emitting diode (OLED) displays supplied by BOE. Samsung also seeks an injunction from the court to halt the import and sale of the affected displays.

The case was filed on Wednesday with the U.S. court in East Texas, which has a reputation for quicker hearings and decisions on cases.

Apple has been using OLED displays on some of its Apple Watch and iPhone models, including the latest iPhone 14. Apple says OLED delivers high resolution and allows for a thinner display than a traditional display.

The OLED display market is dominated by Samsung Display, with BOE narrowing the gap, overtaking South Korea's LG Display (034220.KS) as the No. 2 player last year, according to market researcher Omdia.

"Samsung Display has suffered, and will continue to suffer, irreparable harm as a result of Defendants’ infringement of the '599 Patent' for which there is no adequate remedy at law, unless Defendants’ infringement is enjoined by this Court," the lawsuit says, referring to the 599 patent, which improves the image quality of a device.

In December, Samsung Display filed a complaint with the U.S. International Trade Commission, alleging patent infringement by numerous companies selling OLED screens as replacement displays for mobile devices, triggering an investigation by the agency.

Samsung and Apple did not immediately respond to requests for comments.

Samsung Display executive Choi Kwon-young said in January last year that the company was actively seeking ways to receive compensation for its intellectual property, in a response to an analyst question about rising competition in the mobile OLED screen market.

South Korea is a manufacturing powerhouse for items ranging from chips and displays to automobiles, but South Korean companies have been facing a growing threat from rivals in China.

Last month, a former executive at Samsung Electronics was indicted on suspicion of stealing company technology for a copycat chip factory in China and jeopardising national economic security, prosecutors said.

Reporting by Hyunjoo Jin and Stephen Nellis in San Francisco Editing by Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.

https://www.reuters.com/legal/samsung-sues-chinese-rival-over-alleged-patent-violation-iphone-displays-2023-07-03/ 

China's choice of PBOC party chief signals financial stability worries

By Kevin Yao

July 4, 2023  4:39 PM GMT+7  

Pan Gongsheng, vice governor of the People's Bank of China (PBOC), attends a news conference during the ongoing session of the National People's Congress (NPC) in Beijing, China March 10, 2019. REUTERS/Jason Lee/File Photo/File Photo

BEIJING, July 4 (Reuters) - China's appointment of financial technocrat Pan Gongsheng to a top political post at the central bank points to growing concerns within the country's leadership over systemic risks in its sprawling financial sector, policy insiders and analysts said.

Pan, who came to prominence fighting capital outflows, will be in position to take over the top job at the People's Bank of China (PBOC) when Governor Yi Gang steps down, two policy sources told Reuters.

The central bank did not immediately respond to Reuters' request for comment.

Pan, central bank deputy governor since 2012 who turns 60 this month, is not expected to deviate from China's measured pace of policy easing to support the recovery, analysts said. He has forged a reputation as a risk averse central banker, playing a key role in enforcing several crackdowns on perceived financial threats in the past decade.

His appointment comes as China tries to ward off major challenges to its financial stability from about $9 trillion of local government debt and a downturn in the property sector, which accounts for roughly a quarter of economic activity.

"He will be able to implement key financial policies from the top to cope with economic uncertainties," said a source involved in policy discussions who preferred not to be identified due to the sensitivity of the matter.

"His professional ability will help safeguard the bottom line of systemic financial risks, especially as the property sector is slowing, and fend off a big systemic crisis."

In 2016, Pan also took on the role of China's top foreign exchange regulator, managing the world's largest foreign exchange reserves of around $3.2 trillion.

He is known for taking a tough stance against currency speculators and was also involved in state banking reforms, tightening property market and fintech regulations, and in banning cryptocurrencies.

In a speech in late May, Pan spoke at length about preventing and resolving financial risks as an "eternal theme," calling for better coordination between regulators in the context of a "complex and ever-changing external environment."

It is not immediately clear how Pan will look to make an impact, but PBOC watchers expect him to steer policy to support the economy, even as the central bank has limited room to manoeuvre, and use its macro-prudential rules to curb risks.

"Pan's appointment will help maintain policy continuity and stability, as we face pressures internally and externally," said Gu Tianyong, an influential economist at the Central University of Finance and Economics in Beijing.

In an unexpected move, the ruling Communist Party appointed Pan as the central bank's party secretary on Saturday, taking over from Guo Shuqing. The Wall Street Journal, citing people familiar with the matter, said the move was a prelude to replacing Yi.

Yi's predecessor Zhou Xiaochuan also held the governor and party secretary roles simultaneously.

If confirmed, Pan, who did post-doctoral research at Cambridge University and was a senior research fellow at Harvard University, will have a consolidated position of power, albeit in an institution reporting into new regulators.

China has taken a series of steps this year to tighten party control over the country's vast, but largely closed, financial system, including plans to set up the Central Financial Commission to oversee the PBOC and other financial regulators.

Zhou and Yi introduced pro-market reforms during their mandates, but the new structure limits PBOC's policymaking abilities and fits better with Pan's focus on risks, analysts said.

MEASURED EASING

The world's second-largest economy, under an overall debt burden of three times its output, is struggling to gain momentum due to waning external demand and its failure to lift household consumption, a long-standing weak spot.

But on monetary policy, risk-wary Pan is seen likely to support the current path of measured easing steps.

"We need to consider how to stimulate the economy, but we should first make sure risks are under control," said a second policy insider.

The PBOC cut its benchmark interest rates for the first time in 10 months in June by a modest 10 basis points, and further easing measures in coming months are expected to be similarly restrained, especially as credit demand remains subdued.

"The room for monetary policy easing is limited and the effectiveness faces many constraints," said Xu Hongcai, deputy director of the economic policy commission at the state-backed China Association of Policy Science.

Editing by Marius Zaharia and Jacqueline Wong

https://www.reuters.com/markets/asia/chinas-choice-pboc-party-chief-signals-financial-stability-worries-2023-07-04/

People's Bank of China (PBoC) 

China state lenders lower dollar deposit rates for second time in a month – sources

By Winni Zhou and Ryan Woo

July 4, 2023   2:13 PM GMT+7 

U.S. Dollar and Chinese Yuan banknotes are seen in this illustration taken January 30, 2023. REUTERS/Dado Ruvic/Illustration/File Photo/File Photo

SHANGHAI/BEIJING, July 4 (Reuters) - China's major state banks have lowered their dollar deposit rates for the second time in a month, seven banking sources with direct knowledge of the matter said, as authorities have stepped up efforts to arrest a slide in the yuan.

Interest rates offered by the "Big Five" state-owned lenders on most dollar deposits are now capped at 2.8%, down from 4.3% previously, said the people, who declined to be named as they were not authorised to speak to the media.

The People's Bank of China, which typically issues guidance on dollar deposit rates to state banks, did not immediately comment on the matter.

The lenders - Industrial and Commercial Bank of China (601398.SS), , Bank of China (601988.SS), , Agricultural Bank of China (601288.SS), , China Construction Bank (601939.SS), and Bank of Communications (601328.SS), - did not immediately respond to requests for comment.

Traders and analysts said policymakers, worried that a prolonged yuan slide could both discourage foreign investment and spur an outflow of funds abroad, want to bring down dollar deposit rates - which typically track offshore rates - towards domestic rates, which have been cut to aid the flagging economy.

The yuan is one of the worst-performing Asian currencies this year, knocked nearly 5% lower against the dollar by a slowdown in China's economy and widening yield differentials with the United States.

"It shows that the move is to narrow the interest rate advantage of the U.S. dollar in onshore markets," said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

"It is likely aiming to prevent stockpiling dollars and encouraging (foreign exchange) settlements."

The lower rates could both discourage households from putting savings into higher-yielding dollar deposits and nudge Chinese firms, especially exporters, to settle foreign exchange receipts in yuan.

The new rates came into effect on July 1, said two of the sources, adding that some of the banks were not offering rates above the 2.8% cap for large deposits. Banks typically offer higher rates to deposits exceeding $1 million.

The PBOC, China's central bank, has recently moved to brake the yuan's slide against the dollar, setting stronger-than-expected daily fixings for the currency, while state banks have also been spotted selling dollars on occasion in both the onshore and offshore markets, trading sources said.

The latest cut in dollar deposit rates was the second in barely a month. In early June, sources told Reuters the big state banks had lowered such rates as much as 100 basis points from the previous ceiling of 5.3%.

Sources also told Reuters last week that the central bank has surveyed some foreign banks about the interest rates they offer to their clients for dollar deposits.

The PBOC said last Friday it would continue to keep the yuan basically stable and guard against the risk of large exchange rate fluctuations.

Some currency traders also said the cuts in dollar deposit rates would ease pressure on commercial lenders' net interest margin, as banks' dollar deposit rates had risen above lending rates before the recent adjustments.

The latest PBOC data showed that the weighted-average interest rate on large dollar deposits stood at 5.67% in March, up 4.15 percentage points from a year earlier, while the weighted-average dollar lending rate was up only 3.74 percentage points at 5.34%.

Reporting by Winni Zhou, Samuel Shen and Jindong Zhang in Shanghai, Rong Ma and Ryan Woo in Beijing, John Geddie in Tokyo; Editing by Edmund Klamann

Our Standards: The Thomson Reuters Trust Principles.

https://www.reuters.com/world/china/china-state-lenders-lower-dollar-deposit-rates-second-time-month-sources-2023-07-04/

 

People's Bank of China (PBoC) 

Beijing Steals American Technology, Claims US Response is Attack on China's Economy

June 30, 2023 3:36 PM

Polygraph.info

A customer looks at the products displayed at a Huawei flagship store in Beijing, China, March 23, 2023. in 2020, the U.S. accuses Huawei of stealing trade secret from six U.S. companies. (AP/Ng Han Guan 

Xinhua News Agency

“The IPR rhetoric is just one of the many disguises that the U.S. employs to conceal its real intention to crack down on emerging economies like China, whom it perceives as a potential threat to its economic hegemony.”

Source: Xinhua News Agency June 28, 2023

MISLEADING

Protection of intellectual property remains a sticking point between the U.S. and China as the world’s two largest economies compete to develop next-generation technologies

On June 28, China’s state-run Xinhua news agency accused the U.S. of using the subject of intellectual property rights, more specifically, its part on protection of industrial property, as a way to hinder China’s economic growth.

In a commentary, authored by agency’s writer Shi Yang, Xinhua claimed:

“The IPR rhetoric is just one of the many disguises that the U.S. employs to conceal its real intention to crack down on emerging economies like China, whom it perceives as a potential threat to its economic hegemony.”

That is misleading.

U.S. legal action against China for economic espionage is a response to Beijing’s large-scale theft of intellectual property.

In fact, 80% of all economic espionage cases by the U.S. Justice Department pursued as of 2021 involved China’s illegal economic activities.

The FBI estimates that Chinese theft of trade secrets, counterfeit goods and pirated software costs the U.S. economy between $225 billion and $600 billion annually.

The FBI estimates Chinese theft of trade secrets, counterfeit goods and pirated software costs the U.S. economy up to $600 billion annually.

The FBI says China uses its vast market to attract foreign firms and then reverse engineer foreign technology, saving Chinese firms time and money on research and development.

“As in its military strategy, China’s economic strategy is ‘asymmetric,’ taking advantage of a U.S. system founded on openness and wealth creation. In contrast, China protects large firms at home, coerces technology transfer, then seeks to eliminate leading foreign competitors,” the American Enterprise Institute, or AEI, a Washington, D.C., think tank, concluded in its June 8 report “China’s Technology Strategy: Leverage Before Growth”.

Criticizing the U.S. response to Beijing’s “predation,” AEI’s leading China analysts Dan Blumenthal and Derek Scissors, who co-authored the report, stated: “The U.S. has done little to blunt Chinese predation, indirectly supporting it with money and technology. If the most innovative American companies lose intellectual property and market share without consequence, China will control more sectors of the global economy.”

Below are recent examples of how Chinese state actors use fraud and deception to steal valuable intellectual property from U.S. companies.

GE Aviation case (2022)

In November 2021, a U.S. federal jury convicted Xu Yanjun, a Chinese government intelligence officer, of conspiracy to commit economic espionage and attempted trade secret theft. He was sentenced to 20 years in prison in 2022.

Xu, a career Chinese Ministry of State Security intelligence officer, approached a GE Aviation employee in Cincinnati in March 2017. He then requested that employee to obtain “system specification, design process” data for GE Aviation’s exclusive composite aircraft engine fan module.

GE is the only company in the world that is able to produce this light fan module.

The FBI managed to flip the GE Aviation employee, which led to Xu’s subsequent arrest in Brussels, where he brought cash as a payoff for the trade secret.

Then assistant U.S. Attorney General John Demers said: "[T]his case is not an isolated incident. It is part of an overall economic policy of developing China at America’s expense.”

APT 41 (2022)

In 2022, Boston-based cybersecurity firm Cybereason uncovered a yearlong operation by APT 41, a Chinese state-sponsored espionage group. The operation successfully siphoned hundreds of gigabytes of intellectual property and sensitive data from 30 multinational companies.

According to Cybereason, the APT 41 operation, which had been going on undetected since at least 2019, was aimed at “stealing sensitive proprietary information from technology and manufacturing companies mainly in East Asia, Western Europe, and North America.”

Cybereason CEO Lior Div noted that the cybercriminals were focused on obtaining blueprints “for cutting-edge technologies, the majority of which were not yet patented.”

These included blueprint diagrams for fighter jets, helicopters, and missiles, intellectual property related to drugs treating diabetes, obesity and depression, and designs for solar panel and edge vacuum system technology.

Huawei case (2020)

In 2020, the U.S. Justice Department charged Chinese telecommunications firm Huawei with stealing trade secrets from six U.S. companies over two decades.

According to the indictment, Huawei grew its telecoms empire “by using fraud and deception to misappropriate sophisticated technology from U.S. counterparts.”

The indictment said Huawei would enter into confidentiality agreements with U.S. firms that owned the intellectual property, and then violate the terms by misappropriating the intellectual property. It also used proxies, such as professors working at research institutions, to obtain and provide the technology needed for its own use.

Using such methods, Huawei has successfully obtained nonpublic intellectual property relating to router source code, cellular antenna technology and robotics.

Huawei then sold these products in the U.S. as lower cost versions of U.S. products, giving the Chinese telecoms giant a significant and unfair competitive advantage

https://www.voanews.com/a/fact-check-beijing-steals-american-technology-accuses-us-of-cracking-down-for-protecting-intellectual-property/7162323.html

Market barriers, tensions hinder European companies in China

 Supply chain risks, politicized business climate bedevil operators

Jens Eskelund, president of the European Chamber, is framed by the Chinese and European Union flag during the launch of the European Business in China: Business Confidence Survey in Beijing on June 21.    © AP

Nikkei staff writersJune 21, 2023 18:37 JST

 

SHANGHAI/LONDON/BRUSSELS/PARIS -- A growing number of European companies operating in China find doing business there more difficult, according to a study by the European Chamber of Commerce in China, as a result of higher barriers to market access and rising tensions between Beijing and Washington.

The study, released Wednesday, found three quarters of the 570 companies surveyed have reviewed their supply chains to strengthen resilience while complying with both the European Union's de-risking strategy and U.S. legislation.

Some 64% of respondents said doing business in China has become more difficult, the highest share since 2014, as companies logged lower revenue as a result of the country's waning growth. China's contribution to average global profit margins fell from 51% in 2021 to 31% in 2023, as the country maintained COVID lockdowns while the rest of the world returned to normality.

The European Commission, the EU's executive body, on Tuesday unveiled a strategy aimed at mitigating economic coercion from China. While a majority of survey respondents remain committed to operating in China, the proportion who regard the country as a top-three destination for future investment declined to 55% from 68% a year ago.

Alicia Garcia Herrero, a senior research fellow at Bruegel, a think tank, cited growing caution among companies as one reason for the slowing growth of European foreign direct investment in China.

Chinese President Xi Jinping began an unprecedented third term in March and has vowed to ease market access to attract foreign investment following a sharp decline in the country's economic growth. China's gross domestic product rose just 3% in 2022, compared with an 8.1% expansion the previous year.

Wednesday's survey results suggest China faces an uphill battle in achieving that objective. A majority of respondents expressed concern over long-standing challenges, including market access and regulatory barriers.

Also, six out of 10 respondents said the business environment has became more politicized over the past year, with some stakeholders clamoring for businesses to pull out of parts of the country where Beijing is accused of human rights abuses, such as Xinjiang and Tibet, while others demand the opposite. Companies can also come under pressure to produce goods containing either no Chinese or no U.S. components, depending on which of the two markets the goods are bound for, the study said.

Commuters cross an intersection in Beijing: A growing number of European companies say doing business in China is harder than before.    © AP

Despite these concerns, China's growing middle class, estimated at over 400 million people, still makes the country attractive to consumer-driven businesses such as carmakers. Two thirds of the automakers surveyed regard China as among their top-three investment destinations.

"In a globalized world, we can only strengthen our business if we maintain and further develop our relations with major economic players such as China," a spokesperson from German automaker Volkswagen told Nikkei Asia.

Nevertheless, a majority of respondents said they are working to bolster their supply chain resilience, both for reasons of cost effectiveness and geopolitics. Other considerations include Chinese cybersecurity and other regulations, and U.S. export controls intended to keep certain high-technology goods and services out of China's reach.

The study, which was conducted from February to early March, also cited the difficulty European companies encounter in getting staff into China following an exodus of foreigners over the past three years. Nearly one in six respondents reported no presence of expatriates in their China operations.

"With China now 'reopening' to the world, following three years of isolation, there is a window of opportunity for the government to demonstrate that the pro-business promises recently made by its leadership are more than just words," the report said.

Reporting by Nikkei staff writers CK Tan, Rhyannon Bartlett-Imadegawa, Catherine De Beaurepaire and Mailys Pene-Lassus.

https://asia.nikkei.com/Business/Business-trends/Market-barriers-tensions-hinder-European-companies-in-China

Chinese Economy Now in Deep Peril

 

A man on a bicycle stands in front of an electronic board showing Shanghai stock index, Nikkei share price index, and Dow Jones Industrial Average outside a brokerage in Tokyo on Sept. 22, 2022. (Kim Kyung-Hoon/Reuters)

By Fan Yu

June 18, 2023 Updated: June 20, 2023

 

Commentary

At the beginning of the year, many economists had predicted that the COVID “great re-opening” of China would spur domestic spending and the consumer sector.

Following years of periodic lockdowns, the hope is that consumers would roar out of the gates to offset slowdowns in traditional growth areas such as manufacturing and real estate.

But after a brief first quarter of economic growth, the wheels have come off the Chinese economy.

The most recent economic data from May showed that metrics have all deteriorated across the board, from youth unemployment to retail sales, real estate prices, and capital investments, according to official data from the National Bureau of Statistics.

And if the official statistics are so bad, there’s reason to believe that the real economic picture may be even worse.

Weak consumer spending is especially worrisome as the traditional levers to spur growth have all stalled and there are few levers the Chinese Communist Party (CCP) can pull. Retail sales, which ING Bank called “the only functioning engine of Chinese growth,” is floundering.

“And although the year-on-year growth rate of 12.7% looks impressive, this equates to a seasonally adjusted decrease in month-on-month sales and shows that the re-opening momentum is falling,” wrote Robert Carnell, ING’s head of research in Asia-Pacific, in a note to clients.

There are numerous causes of this, including consumer pessimism, unemployment, and an exodus of wealth.

Youth unemployment among the ages of 16-24 is at its highest level on record, sitting above 20 percent as of April 2023. This has caused social stability issues for the Chinese Communist Party (CCP) ruling regime. Older consumers have more cash, but have become more pessimistic about the future of the country and are pulling back their purse strings.

In addition, China is losing a lot of wealth due to migration. Around 13,500 dollar-millionaires are expected to leave China this year, after 10,800 such individuals (and their families) migrated out of China in 2022, according to data from consultant Henley & Partners. Those are the biggest wealth losses among any country in the world.

Top CCP officials have been so concerned about the nation’s economic situation that they are soliciting advice from business leaders on how to boost growth. At least six consultation sessions have been held in recent weeks with business leaders, according to Bloomberg News, citing people familiar with the matter.

Among the topics discussed were how to stimulate the economy, how to boost private sector spending, and how to revitalize the real estate market. And among the suggestions proposed was to introduce more elements of a market-based economy rather than a planned economy—a hallmark of communism.

“Officials acknowledged China’s economy was facing a critical period and displayed an impetus to finding solutions they hadn’t seen before,” according to the Bloomberg report.

While these solution-finding sessions aren’t necessarily foreign to a Western audience, they are uncommon for the CCP and underscore the dire situation facing China’s economy.

The usual economic stimulus measures from CCP’s playbook are all on the table. These include interest-rate reductions, bank reserve requirement cuts, and loosening restrictions on real estate development.

The People’s Bank of China on June 13 lowered the short-term rates (standing lending facility, or SLF) by 10 basis points, or 0.1 percent to spur lending activities. And on June 15, it also cut the one-year medium-term lending facility (MLF) by 10 basis points from 2.75 to 2.65 percent.

But those traditional methods of stimulus have a lesser effect today due to their widespread use over the prevailing two decades.

For example, the CCP has already encouraged bank lending so much that further loosening of regulatory reins would put its banking sector in peril. The property market, which already accounts for over 70 percent of China’s household wealth and 25 percent of its GDP, is already overallocated as a contributor to the economy. Those with the means to buy homes already have multiple homes, most of which are sitting empty. Further stimulus could encourage wild fluctuations in periods of distress and cause undue harm to household wealth and further hamper consumer spending.

After years of encouraging infrastructure spending, local and regional governments are out of cash and already facing defaults. There’s simply very little need for more highways, bridges, and tunnels in a country that has been overbuilding them to spur growth.

All of this makes the CCP’s full-year target of 5 percent GDP growth an impossible goal to meet.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

https://www.theepochtimes.com/chinese-economy-now-in-deep-peril_5340527.html