January 15, 2025 • 11 mins
Financial regulators see their incomes slashed by as much as 50%, Beijing seeks to demand the sliding yuan, global supply chain shifts, & will Musk buy TikTok?
China Update provides listeners with the most up to date political, economic, and geostrategic analysis on China - so that you are on top of the world's number 2 economy. These podcasts are based on hundreds of articles, think tank reports, government statements and other resources in English and Chinese every week. The views and analysis are all my own and I produce the podcasts.
My Patreon: https://www.patreon.com/chinaupdate
Disclaimer: China Update is not a financial advisory channel. While I take great care in researching everything discussed in these podcasts, nothing I say should be taken as investment advice. Please speak to a professional before making any investment decisions. #China
China Update provides listeners with the most up to date political, economic, and geostrategic analysis on China - so that you are on top of the world's number 2 economy. These podcasts are based on hundreds of articles, think tank reports, government statements and other resources in English and Chinese every week. The views and analysis are all my own and I produce the podcasts.
My Patreon: https://www.patreon.com/chinaupdate
Disclaimer: China Update is not a financial advisory channel. While I take great care in researching everything discussed in these podcasts, nothing I say should be taken as investment advice. Please speak to a professional before making any investment decisions. #China
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Happy Wednesday, everybody. Welcome to another episode of China Update,
(00:03):
where it provides you with the most up to date political, economic,
and geostrategic analysis on the world's number two economy. My
name is Tony. Let's jump in. UK based Rointers reports
in an exclusive published today that Beijing has introduced significant
pay reductions for staff at its top three financial regulators,
including the Central Bank, as part of a broader effort
(00:24):
to align their salaries with other civil servants. Effective this month,
employees at the People's Bank of China, the National Financial
Regulatory Administration, and the China Securities Regulatory Commission will see
their income slash by as much as fifty percent. The
mover's part of a regulatory overhaul initiated in twenty twenty
three aimed at consolidating power and improving oversight within the
(00:47):
financial sector. Previously, staff at these regulatory bodies enjoyed more
competitive pay compared with other civil servants, with department heads
earning nearly double their counterparts in other state institutions. Following
the changes, officials below department head level we'll see a
forty percent pay cut, while senior officials could face a
reduction of up to sixty percent. Jewell Chan, a finance
(01:10):
professor at the University of Hong Kong and former advisor
to China's securities regulator, speaking to US based the Wall
Street Journal, observed on this development that being read or
politically loyal is now considered more important for Chinese financial
professionals than being competent. Quote. If you're not loyal enough
to the party, your professional sophistication will not be of
(01:32):
any value. If anything, it may be of negative value
because you may use your talent and sophisticated skills to
try and hurt the party in quote. Thus, the firewall
that was once erected between technocrats running the economy and
wider government and party idea logs, a separation that has
served at China very well in the past and helped
(01:53):
its economy surge out of the male era, is increasingly
being torn down, and such labors typically beare bit of fruit.
Analyst points out that in order to attract skilled financial regulators,
one must provide a competitive salary, otherwise the quality of
those regulators will decline over time. This isn't what China
needs at a time of severe economic and financial challenges either,
(02:16):
and on this theme, Beijing continues to send signals that
it wants to keep the currency stable as it hovers
near a record low against the dollar in offshore trading.
China is walking a tight rope on its currency. Economic
fundamentals suggest a weaker Yan, but the specter of capital
outflows still haunts Beijing, making it wary of any sharp
(02:37):
moves in the currency. The People's Bank of China and
regulators have pledged to enhance foreign exchange market management, curb
disruptive behaviors, and maintain the Yan at stable levels. These
efforts underscore Bejing's growing sensitivity to the currency's weakness, which
is seen as a reflection of confidence in China's economy.
Chinese financial media outlet E Tigh reports that the People's
(02:58):
Bank of China head Pugonghung made an unscheduled appearance at
the Asian Financial Forum in Hong Kong, in which he
quote emphasized maintaining the basic stability of the R and
B exchange rate at a reasonable and balanced level end quote.
On Tuesday yesterday, the State Council Information Office held a
press conference where this was also reiterated. The escalation of
(03:20):
the People's Bank of China's battle against the currency bears
suggests China is not yet ready to let go of
its type grip on the currency, despite pressure from a
yawning interest rate discount to the US, looming tariff threats,
and a sluggish domestic economy. Chinese officials are worried about
disorderly capital outflows that could accompany a sell off of
(03:41):
Yan assets, something that could lead to financial instability, further
crash and asset prices, or even a financial crisis at
a time when policymakers already have enough crises on their hands.
It suggests, too, that Beijing is increasingly concerned about its
collapsing currency. When authorities allowed a sudden three percent against
the dollar in twenty fifteen in response to a weak
(04:04):
domestic economy, it exacerbated an exodus of capital from the country.
China's foreign exchange reserves, a proxy for capital outflows, dropped
nearly one trillion UIST dollars between twenty fourteen and twenty seventeen.
While the Yan may see short term relief, analysts caution
that long term challenges, including US tariffs and the sluggish
(04:24):
property market, could continue to weigh on the Chinese currency.
As Tommy Sier head of Asia Macro Research at Oversea
Chinese Banking Corp. Expressed earlier this week. Quote for now,
Yan's stability remains a priority. However, in the medium term,
the success of this strategy will hinge on economic fundamentals
(04:46):
end quotes, and as Beijing knows painfully well, their economic
fundamentals still are not looking very good. Next up, we
have two more developments to cover, but as quickly, if
you gettings and value from today's episode, I have a
huge favor to our that is to just hit that
like button. It is the only way in which the
channel can grow and be shown to new people. Another
(05:06):
tremendous help for the channel as well is if you're
a regular viewer and you have not yet subscribed, maybe
consider subscribing. About fifty five percent of regular viewers people
who watch most episodes, are not subscribed. This is also
very positive for the algorithm and the channel's growth. It's
just me making these episodes every day. It's a tremendous
honor to do so. And if you do appreciate that,
it's just two clicks of the mouse, but it's a
(05:28):
huge help for me. Thank you so much. Next up,
several us outlets including Bloomberg and The Wall Street Journal,
citing unnamed sources, have been reporting over the last forty
eight hours that Chinese officials are evaluating the possibility of
Elon Musk acquiring TikTok's US operations at the platform fails
to overturn a ban in the United States. Reports which
(05:48):
TikTok said yesterday are quote pure fiction end quote. This
option arises amidst escalating tensions between Byte Dance Limited, TikTok's
parent company, and US law makers, citing national security concerns.
Last Friday, TikTok made its arguments to the Supreme Court
in the US, and as of the recording of this episode,
the Supreme Court has not yet made a ruling. The
(06:08):
Financial Times reports that quote Chinese officials are hoping Musk
could help broker a deal that might prevent the platform
from being forced to shut down en quote, while ByteDance
remains committed to fighting the ban, at least that's what
it says senior Chinese officials. Reports these outlets are exploring alternatives,
one of which involves Musk's x platform, formerly known as Twitter,
(06:30):
acquiring TikTok's US business. The integration could leverage TikTok's one
hundred and seventy million US users to bolster X's advertising
ambitions and benefit Musk's artificial intelligence endeavors through his Xai firm. However,
the path to such a deal is fraught with uncertainty.
Chinese export rules restrict the sale of software algorithms like
(06:53):
TikTok's proprietary recommendation engine grant, engaging significant influence over any
potential transaction. What's more, according to a Wall Street Journal report,
citing its own unnamed sources, quote, in discussions to date,
officials concluded that it was best to let the ban
take effect and keep TikTok under Byteedancer's ownership so that
negotiations could continue after Trump takes over end quote. Musk's
(07:18):
connections with both China and the incoming Trump administration add
another layer of intrigue. His extensive investments in Tesla's Shanghai
factory have fostered goodwill with Chinese authorities, while his financial
backing of Trump's re election campaign positions him as a
trusted ally in Washington. Nevertheless, critics question whether masks ties
(07:38):
to Trump could raise ethical concerns about leveraging political connections
for business gains. Musk is also highly reliant on China,
with forty percent of his Tesla cars being sold to
the Chinese ev market, the biggest of the world last year. Meanwhile,
as the US considers banning Tektok, Chinese social media app
read Note, also known as Shahansh and Mandarin in China,
(08:02):
has seen a dramatic surge in users. More than seven
hundred thousand users joined the platform in just two days,
pushing it to the top of US download charts. A
live chat titled TikTok Refugees attracted over fifty thousand participants,
fostering cultural exchanges between American and Chinese users. While Americans
explored topics like food and unemployment, some ventured into sensitive discussions,
(08:27):
prompting Chinese users to caution against addressing political issues. Some
analysts have cautioned, however, that this so called TikTok refugee
situation might have been partially orchestrated by the company itself.
Red Notes, valued at seventeen billion US dollars, is now
scrambling to adapt to its growing English speaking user base,
including building translation tools. Unlike many Chinese apps, red Note
(08:50):
operates a single version globally adhering to domestic that is
within China moderation rules. Indeed, as veteran China analyst Bilbishop
of today quote, enjoy it while it lasts. I think
at some point the censorship challenges are going to become
problematic quote. And speaking of technology, this brings us to
(09:11):
our final development for today. In a move suggesting that
Beijing is pushing hard against supply chain shifts away from China,
US based technology outlet Rest of World reported yesterday, citing
five unnamed people, that fox Con, Apple's key manufacturing partner,
has halted the deployment of Chinese employees to its Indian factories,
(09:31):
opting instead to send Taiwanese workers. This development comes alongside
delays in shipping specialized manufacturing equipment from China to India,
potentially disrupting iPhone production in the Indian factories. These factories
play a critical role in Apple's ongoing efforts to diversify
manufacturing away from China. These suspensions reportedly influenced by the
(09:53):
Chinese government Good Hindo Apple's ambitious plans to expand next
generation iPhone production in India. Some Chinese employees or already
stationed in India have been asked to return home, while
others with travel plans were told to cancel. This has
led Foxcohn to accelerate the deployment of Taiwanese workers and
ramp up semi finished product exports from China to minimize disruption.
(10:14):
India has become increasingly significant in Apple supply chain, assembling
fourteen billion UIST dollars worth of iPhones in the twenty
twenty four fiscal year. The broader backdrop of US China tensions,
as well as a general trend globally to diversify away
from Chinese supply chains, stringent pandemic controls and geopolitical rivalries,
have accelerated Apple's production shift to India and other regions.
(10:37):
Experts suggest the suspensions highlight China's strategic leverage and signal
its unease over losing manufacturing dominance. Indeed, today, Japanese based
financial media outlet Nicae Asia reports are more companies running
into problems exporting equipment and materials to their supply chains
in other countries. Quote China is increasing its scrutiny of
(10:58):
exports by Apple and other American technology companies, hampering their
efforts to expand production in Southeast Asia and India. The
tighter customs checks are related to dual use technology export
controls Beijing introduced in early December and have resulted in
delays of days or even weeks on shipments of production
equipment and material to Vietnam and India. Sources said the
(11:19):
supply chain started encountering sporadic cases in August last year
of Chinese customs holding their exports of production equipment bound
for Southeast Asia or India for days without giving a
specific reason. The situation has escalated since early December, with
Chinese customs officials citing new export controls as the reason
(11:39):
for stricter reviews. Okay, that is today's episode of China Update.
Thank you so much everybody for watching. Have a good Wednesday,
and I will see you all tomorrow
Happy Wednesday, everybody. Welcome to another episode of China Update,
(00:03):
where it provides you with the most up to date political, economic,
and geostrategic analysis on the world's number two economy. My
name is Tony. Let's jump in. UK based Rointers reports
in an exclusive published today that Beijing has introduced significant
pay reductions for staff at its top three financial regulators,
including the Central Bank, as part of a broader effort
(00:24):
to align their salaries with other civil servants. Effective this month,
employees at the People's Bank of China, the National Financial
Regulatory Administration, and the China Securities Regulatory Commission will see
their income slash by as much as fifty percent. The
mover's part of a regulatory overhaul initiated in twenty twenty
three aimed at consolidating power and improving oversight within the
(00:47):
financial sector. Previously, staff at these regulatory bodies enjoyed more
competitive pay compared with other civil servants, with department heads
earning nearly double their counterparts in other state institutions. Following
the changes, officials below department head level we'll see a
forty percent pay cut, while senior officials could face a
reduction of up to sixty percent. Jewell Chan, a finance
(01:10):
professor at the University of Hong Kong and former advisor
to China's securities regulator, speaking to US based the Wall
Street Journal, observed on this development that being read or
politically loyal is now considered more important for Chinese financial
professionals than being competent. Quote. If you're not loyal enough
to the party, your professional sophistication will not be of
(01:32):
any value. If anything, it may be of negative value
because you may use your talent and sophisticated skills to
try and hurt the party in quote. Thus, the firewall
that was once erected between technocrats running the economy and
wider government and party idea logs, a separation that has
served at China very well in the past and helped
(01:53):
its economy surge out of the male era, is increasingly
being torn down, and such labors typically beare bit of fruit.
Analyst points out that in order to attract skilled financial regulators,
one must provide a competitive salary, otherwise the quality of
those regulators will decline over time. This isn't what China
needs at a time of severe economic and financial challenges either,
(02:16):
and on this theme, Beijing continues to send signals that
it wants to keep the currency stable as it hovers
near a record low against the dollar in offshore trading.
China is walking a tight rope on its currency. Economic
fundamentals suggest a weaker Yan, but the specter of capital
outflows still haunts Beijing, making it wary of any sharp
(02:37):
moves in the currency. The People's Bank of China and
regulators have pledged to enhance foreign exchange market management, curb
disruptive behaviors, and maintain the Yan at stable levels. These
efforts underscore Bejing's growing sensitivity to the currency's weakness, which
is seen as a reflection of confidence in China's economy.
Chinese financial media outlet E Tigh reports that the People's
(02:58):
Bank of China head Pugonghung made an unscheduled appearance at
the Asian Financial Forum in Hong Kong, in which he
quote emphasized maintaining the basic stability of the R and
B exchange rate at a reasonable and balanced level end quote.
On Tuesday yesterday, the State Council Information Office held a
press conference where this was also reiterated. The escalation of
(03:20):
the People's Bank of China's battle against the currency bears
suggests China is not yet ready to let go of
its type grip on the currency, despite pressure from a
yawning interest rate discount to the US, looming tariff threats,
and a sluggish domestic economy. Chinese officials are worried about
disorderly capital outflows that could accompany a sell off of
(03:41):
Yan assets, something that could lead to financial instability, further
crash and asset prices, or even a financial crisis at
a time when policymakers already have enough crises on their hands.
It suggests, too, that Beijing is increasingly concerned about its
collapsing currency. When authorities allowed a sudden three percent against
the dollar in twenty fifteen in response to a weak
(04:04):
domestic economy, it exacerbated an exodus of capital from the country.
China's foreign exchange reserves, a proxy for capital outflows, dropped
nearly one trillion UIST dollars between twenty fourteen and twenty seventeen.
While the Yan may see short term relief, analysts caution
that long term challenges, including US tariffs and the sluggish
(04:24):
property market, could continue to weigh on the Chinese currency.
As Tommy Sier head of Asia Macro Research at Oversea
Chinese Banking Corp. Expressed earlier this week. Quote for now,
Yan's stability remains a priority. However, in the medium term,
the success of this strategy will hinge on economic fundamentals
(04:46):
end quotes, and as Beijing knows painfully well, their economic
fundamentals still are not looking very good. Next up, we
have two more developments to cover, but as quickly, if
you gettings and value from today's episode, I have a
huge favor to our that is to just hit that
like button. It is the only way in which the
channel can grow and be shown to new people. Another
(05:06):
tremendous help for the channel as well is if you're
a regular viewer and you have not yet subscribed, maybe
consider subscribing. About fifty five percent of regular viewers people
who watch most episodes, are not subscribed. This is also
very positive for the algorithm and the channel's growth. It's
just me making these episodes every day. It's a tremendous
honor to do so. And if you do appreciate that,
it's just two clicks of the mouse, but it's a
(05:28):
huge help for me. Thank you so much. Next up,
several us outlets including Bloomberg and The Wall Street Journal,
citing unnamed sources, have been reporting over the last forty
eight hours that Chinese officials are evaluating the possibility of
Elon Musk acquiring TikTok's US operations at the platform fails
to overturn a ban in the United States. Reports which
(05:48):
TikTok said yesterday are quote pure fiction end quote. This
option arises amidst escalating tensions between Byte Dance Limited, TikTok's
parent company, and US law makers, citing national security concerns.
Last Friday, TikTok made its arguments to the Supreme Court
in the US, and as of the recording of this episode,
the Supreme Court has not yet made a ruling. The
(06:08):
Financial Times reports that quote Chinese officials are hoping Musk
could help broker a deal that might prevent the platform
from being forced to shut down en quote, while ByteDance
remains committed to fighting the ban, at least that's what
it says senior Chinese officials. Reports these outlets are exploring alternatives,
one of which involves Musk's x platform, formerly known as Twitter,
(06:30):
acquiring TikTok's US business. The integration could leverage TikTok's one
hundred and seventy million US users to bolster X's advertising
ambitions and benefit Musk's artificial intelligence endeavors through his Xai firm. However,
the path to such a deal is fraught with uncertainty.
Chinese export rules restrict the sale of software algorithms like
(06:53):
TikTok's proprietary recommendation engine grant, engaging significant influence over any
potential transaction. What's more, according to a Wall Street Journal report,
citing its own unnamed sources, quote, in discussions to date,
officials concluded that it was best to let the ban
take effect and keep TikTok under Byteedancer's ownership so that
negotiations could continue after Trump takes over end quote. Musk's
(07:18):
connections with both China and the incoming Trump administration add
another layer of intrigue. His extensive investments in Tesla's Shanghai
factory have fostered goodwill with Chinese authorities, while his financial
backing of Trump's re election campaign positions him as a
trusted ally in Washington. Nevertheless, critics question whether masks ties
(07:38):
to Trump could raise ethical concerns about leveraging political connections
for business gains. Musk is also highly reliant on China,
with forty percent of his Tesla cars being sold to
the Chinese ev market, the biggest of the world last year. Meanwhile,
as the US considers banning Tektok, Chinese social media app
read Note, also known as Shahansh and Mandarin in China,
(08:02):
has seen a dramatic surge in users. More than seven
hundred thousand users joined the platform in just two days,
pushing it to the top of US download charts. A
live chat titled TikTok Refugees attracted over fifty thousand participants,
fostering cultural exchanges between American and Chinese users. While Americans
explored topics like food and unemployment, some ventured into sensitive discussions,
(08:27):
prompting Chinese users to caution against addressing political issues. Some
analysts have cautioned, however, that this so called TikTok refugee
situation might have been partially orchestrated by the company itself.
Red Notes, valued at seventeen billion US dollars, is now
scrambling to adapt to its growing English speaking user base,
including building translation tools. Unlike many Chinese apps, red Note
(08:50):
operates a single version globally adhering to domestic that is
within China moderation rules. Indeed, as veteran China analyst Bilbishop
of today quote, enjoy it while it lasts. I think
at some point the censorship challenges are going to become
problematic quote. And speaking of technology, this brings us to
(09:11):
our final development for today. In a move suggesting that
Beijing is pushing hard against supply chain shifts away from China,
US based technology outlet Rest of World reported yesterday, citing
five unnamed people, that fox Con, Apple's key manufacturing partner,
has halted the deployment of Chinese employees to its Indian factories,
(09:31):
opting instead to send Taiwanese workers. This development comes alongside
delays in shipping specialized manufacturing equipment from China to India,
potentially disrupting iPhone production in the Indian factories. These factories
play a critical role in Apple's ongoing efforts to diversify
manufacturing away from China. These suspensions reportedly influenced by the
(09:53):
Chinese government Good Hindo Apple's ambitious plans to expand next
generation iPhone production in India. Some Chinese employees or already
stationed in India have been asked to return home, while
others with travel plans were told to cancel. This has
led Foxcohn to accelerate the deployment of Taiwanese workers and
ramp up semi finished product exports from China to minimize disruption.
(10:14):
India has become increasingly significant in Apple supply chain, assembling
fourteen billion UIST dollars worth of iPhones in the twenty
twenty four fiscal year. The broader backdrop of US China tensions,
as well as a general trend globally to diversify away
from Chinese supply chains, stringent pandemic controls and geopolitical rivalries,
have accelerated Apple's production shift to India and other regions.
(10:37):
Experts suggest the suspensions highlight China's strategic leverage and signal
its unease over losing manufacturing dominance. Indeed, today, Japanese based
financial media outlet Nicae Asia reports are more companies running
into problems exporting equipment and materials to their supply chains
in other countries. Quote China is increasing its scrutiny of
(10:58):
exports by Apple and other American technology companies, hampering their
efforts to expand production in Southeast Asia and India. The
tighter customs checks are related to dual use technology export
controls Beijing introduced in early December and have resulted in
delays of days or even weeks on shipments of production
equipment and material to Vietnam and India. Sources said the
(11:19):
supply chain started encountering sporadic cases in August last year
of Chinese customs holding their exports of production equipment bound
for Southeast Asia or India for days without giving a
specific reason. The situation has escalated since early December, with
Chinese customs officials citing new export controls as the reason
(11:39):
for stricter reviews. Okay, that is today's episode of China Update.
Thank you so much everybody for watching. Have a good Wednesday,
and I will see you all tomorrow
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