January 17, 2025 • 12 mins
Vanke, one of China’s biggest, and once among the most respected developer in China, has collapsed. TikTok could be saved, RedNote, & we discuss Scott Bessent's comments on 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
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 Friday, everybody. Welcome to another episode of China Update,
(00:03):
where I provide 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 now. We have a
very big episode today. There are a lot of important
developments to move through. In fact, so much has happened
that there will likely be two videos over the weekend,
both on Saturday and Sunday to make sure they were
up to date. Today Friday sees the publication of China's
(00:25):
twenty twenty four economic numbers. There is a lot to unpack.
We will be doing a deep dive into those numbers tomorrow.
For today, we already have enough to cover and we'll
start with a very concerning development with the housing crisis.
It is official van ker one Ka, one of China's
biggest and once among the most respected developers in China,
(00:46):
has collapsed. State run financial media outlet The Economic Observer
broke the news yesterday that the CEO of the real
estate giant Bunka has been taken away by police and
that a government task force in shun Jin has taken
control of the company. With this action, every major Chinese
developer has either collapsed or has been kept on life
(01:06):
support by local authorities, a sign of just how much
rot was under the floorboards of China's formerly biggest growth
sector and just how big a challenge it has been
for policymakers to deal with over these several years. The sector,
which once accounted for around a quarter of the economy
at its peak, has been mired in a debt crisis
since twenty twenty one, resulting in corporate defaults and tens
(01:29):
of millions of uncompleted homes. Banker's financial woes became public
early last year after the firm sought to extend the
maturity of its debt as its monthly sales plunged below
break even levels. It was ranked number five by sales
volume in the country last year, down from number two
and twenty twenty three. The market crash around this developer
(01:52):
has been swift to The already rock bottom stock price
plunged a further ten per cent as trading opened today Friday,
and five of its Onshore bonds were temporarily suspended from
trading after plunging more than twenty nine percent. Meanwhile, it's
not looking good for other developers either. This week, Chinese
financial media outlet e High reports that Chinese real estate companies,
(02:14):
including Country Garden Holdings, are proposing debt restructuring plans with
worse than expected terms, asking creditors for significant concessions due
to poor home sales and shrinking balance sheets. According to
industry insiders, the latest schemes propose that creditors forgive substantial
portions of debt principle because home sales and property firms
(02:36):
of liquidity have not significantly improved over the past year.
For Shun based Country Garden, formerly China's largest property developer,
recently proposed a plan to restructure its overseas debt, aiming
to reduce its liabilities by up to eleven point six
billion US dollars. As of the thirty first of December
last year, the firm's total overseas interest bearing liabilities stood
(02:57):
at sixteen point four billion US dollars. Another industry giant,
Sunic China Holdings, recently unveiled its second debt restructuring plan
because its first scheme, agreed upon in late twenty twenty three,
was proven to be insufficient. The latest program asked creditors
to forgive over fifty percent of the home builder's outstanding
debt quote. According to an insider at the property company.
(03:20):
In Eastern China, home sales and asset deposits are crucial
funding sources for distress real estate companies to repay debts. However,
sales among China's top one hundred real estate companies fell
thirty percent last year, and builders in default performed even worse.
This forced them to revise their debt restructuring schemes after
failing to meet sales projections included in their initial twenty
(03:42):
twenty three restructuring plans. In quote now moving to a
very different Chinese company. On the other side of the Pacific,
Chinese owned social media giant Tektok may well have been
saved at the last minute, as politicians, some of which
voted for the TikTok ban from both signs of the isle,
appear now to be trying to find a solution to
(04:03):
save the company. As the January nineteenth deadline approaches for
TikTok to divest from its Chinese parent company by dance
or face a full ban. In the United States, US
lawmakers and others are scrambling to find a solution to
avoid a nationwide ban on the popular app. Representative Mike
Waltz has indicated that President elect Trumps exploring options to
quote keep TikTok from going dark end quote, citing provisions
(04:26):
in the law that would allow for a ninety day
extension of significant progresses made towards a divestiture. This extension
could provide Trump with the necessary time to broker a
deal that would allow TikTok to remain operational. In the US,
Senate Minority Leader Chuck Schumer has expressed concerns about the
national security risks posed by the app, but has also
called for more time to find an American buyer. Schumer
(04:49):
emphasized that millions of Americans rely on TikTok and a
rushed band could disrupt their livelihoods. He has worked with
both parties to extend the deadline and avoid unnecessary consequences.
In addition to these legislative maneuvers, Trump's advisors have suggested
that the outgoing president, that is President Biden, could issue
an executive order to suspend enforcement of the divestiture law
(05:11):
if the Supreme Court rules in favour of the law.
While the law provides a mechanism for an extension. Some
legal experts believe that Biden's administration may not have the
authority to delay the deadline, especially with the transition of
power looming. As the debate continues, TikTok has also made
its presence felt politically with reports that the company will
sponsor an inauguration party for President Elect Trump, further intertwining
(05:35):
the app's fate with u s political and legal developments.
With time running out, both parties do appear eager to
avoid a ban that could have lasting implications for users
and the broader technology industry better in China. Anles's build
Bishop sardonically observed on these developments. Today, TikTok called American
politicians bluff with its announced intention to shut down on
(05:55):
January nineteen, and politicians on both sides are caving in
spite of the law or for which almost all of
them voted. There is a bipartisan scramble to figure out
how to keep the service alive. The Supreme Court has
scheduled an announcement of options starting at ten am Eastern
Time Friday, and so perhaps the Court will put the
feckless politicians out of their misery by either overturning the
(06:18):
law or issuing an injunction or administrative stay. This whole
process has not only been gross, but also embarrassing, and
it will be interesting what lessons she and his team
take away from this whole mess. In quote, we should
note that Bill Bishop is an American citizen who is
based in Washington. Meanwhile, while we are in the space,
(06:38):
one of the interesting stories from this week, which is
also tied to the TikTok stuff, has been the surge
of TikTok users to read Note. The English name of
a Chinese social media company Shalhanshul, which literally translates to
Little read Book, a reference to the mal Era book
popular during the disastrous Cultural revolution of China's Foreign ministry
(06:59):
is using this development as a pr win. The sudden
movement of users to the platform appears to have caught
PRC sensors off guard, as the US based outlet The
Information reports, the Cyberspace Administration of China, the country's Internet watchdog,
is concerned that English language content showing up on Red
Note may contain politically sensitive posts that are not otherwise
(07:20):
allowed on Chinese social media. According to three people with
knowledge of the communications between Chinese officials and Red Note.
Chinese officials raised the issue with Red Note government relations
team earlier this week, the outlet reports warning that the
company needs to ensure China based users cannot see posts
from US users. According to two of the people, since then,
Red Note employees have been scrambling the outlet rights to
(07:42):
hide US users posts from Chinese users. While the interaction
between users in the US and China on Red Note
have mostly been lighthearted banters and friendly cultural exchanges, the
sheer volume of the content was enough to alarm Chinese
internet regulators better in China analysts Build Bishop also had
an interesting take on the m quote. The surge of
TikTok users to Shaohongshual Red Note has been interesting and
(08:04):
fun to watch, but I am skeptical it will last,
both because TikTok is likely to get a reprisal and
because PRC cyber regulators cannot be comfortable with the spontaneous interactions.
On the one hand, the Ministry of Foreign Affairs is undertaking
an aggressive effort to project openness and build people to
people engagement with the US, so this influx of Americans
to Red Note should be a good thing. But on
(08:26):
the other more powerful regulatory hand, this influx of Americans
threatens this information management regime and so as likely seen
as a political security threat. If regulators wanted to be clever,
perhaps they could create a walled garden within Shaohongshul Red
Note where the foreigners can gather impost while on the
Chinese side only politically reliable users are allowed, so the
(08:49):
foreigners will think they're having an authentic Chinese Internet experience
and learning about real life in China, but in fact
would just be another managed people to people engagement that
may be too compleated, though it would be nice if
the unfiltered engagements could continue, but allowing that would require
a real shift in how the party manages the Internet. Still,
there may be an upside for read Note and its investors,
(09:12):
as if they go public overseas. The brand recognition from
the surge and overseas usage may also drive a surge
and interest in the IPO. Now we have one more
development to cover, but is quickly. If you're getting some
value from today's episode of China Update, it's a huge
help if you can hit the like button, and for
regular viewers who have not yet subscribed, it's also tremendously
(09:33):
useful for the algorithm. If you consider subscribing at the
bell notification icon and you will be on top of
this analysis as it's released. Patroon and by me Coffee
links are also in the description for those who want to
help keep the channel financially sustainable. I rely primarily on
subscribe to support, so this is also a big help.
Thank you so much, and finally for today, Scott Bessent,
my apologies if I'm mispronouncing that surname. President elect Donald
(09:57):
Trump's nominee for Treasury Secretary, has made bearish comments about
China's economic outlook, describing the world's second largest economy as quote,
being in a recession if not a depression quote. The
comments were made as he testified on Capitol Hill yesterday
as part of his confirmation process. Bessant criticized China's economic imbalances,
pointing to its prioritization of military spending and reliance on
(10:20):
exporting cheap goods to sustain growth. His remarks come as
China grapples with a prolonged deflationary period, with economists predicting
that the country may experience its longest streak of deflation
since the nineteen sixties. His situation highlights the death of
China's current economic struggles, further exacerbated by the challenges of
balancing military ambitions and economic stability. Of course, regular viewers
(10:40):
know very much the difficulties Chinas economically. Bessett also called
attention to China's failure to meet the agricultural purchasers commitments
outlined in the Phase one trade deal between the US
and China signed during the first Trump administration. Under this agreement,
China was expected to purchase forty billion US dollars worth
of US agricultural goods annually, target that has been increasingly missed.
(11:02):
Although Chinese purchases peaked at thirty eight point one billion
in twenty twenty two, they have dropped significantly in subsequent years,
with estimates showing a sixteen percent decline in twenty twenty
four compared to the same period in twenty twenty three.
Beissent vowed that if confirmed, he would press China to
resume these purchases and possibly seek a catch up provision
to make up for the shortfall over the past four years.
(11:24):
Besant's stance on these issues signals a tougher approach to
US China relations, particularly regarding trade imbalances in China's handling
of its domestic economy. The outcome of his confirmation and
subsequent actions, combined with some other key cabinet positions, for
example Marco Rubio, who we discussed yesterday, along with of
course President elect Donald Trump himself, will significantly shape the
(11:46):
US approach to its economic dealings with China in the
coming years. Okay, that is today's episode of China Update.
Thank you so much everybody for watching. Have a good Friday,
have a RESTful weekend, and I will see you all tomorrow.
Happy Friday, everybody. Welcome to another episode of China Update,
(00:03):
where I provide 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 now. We have a
very big episode today. There are a lot of important
developments to move through. In fact, so much has happened
that there will likely be two videos over the weekend,
both on Saturday and Sunday to make sure they were
up to date. Today Friday sees the publication of China's
(00:25):
twenty twenty four economic numbers. There is a lot to unpack.
We will be doing a deep dive into those numbers tomorrow.
For today, we already have enough to cover and we'll
start with a very concerning development with the housing crisis.
It is official van ker one Ka, one of China's
biggest and once among the most respected developers in China,
(00:46):
has collapsed. State run financial media outlet The Economic Observer
broke the news yesterday that the CEO of the real
estate giant Bunka has been taken away by police and
that a government task force in shun Jin has taken
control of the company. With this action, every major Chinese
developer has either collapsed or has been kept on life
(01:06):
support by local authorities, a sign of just how much
rot was under the floorboards of China's formerly biggest growth
sector and just how big a challenge it has been
for policymakers to deal with over these several years. The sector,
which once accounted for around a quarter of the economy
at its peak, has been mired in a debt crisis
since twenty twenty one, resulting in corporate defaults and tens
(01:29):
of millions of uncompleted homes. Banker's financial woes became public
early last year after the firm sought to extend the
maturity of its debt as its monthly sales plunged below
break even levels. It was ranked number five by sales
volume in the country last year, down from number two
and twenty twenty three. The market crash around this developer
(01:52):
has been swift to The already rock bottom stock price
plunged a further ten per cent as trading opened today Friday,
and five of its Onshore bonds were temporarily suspended from
trading after plunging more than twenty nine percent. Meanwhile, it's
not looking good for other developers either. This week, Chinese
financial media outlet e High reports that Chinese real estate companies,
(02:14):
including Country Garden Holdings, are proposing debt restructuring plans with
worse than expected terms, asking creditors for significant concessions due
to poor home sales and shrinking balance sheets. According to
industry insiders, the latest schemes propose that creditors forgive substantial
portions of debt principle because home sales and property firms
(02:36):
of liquidity have not significantly improved over the past year.
For Shun based Country Garden, formerly China's largest property developer,
recently proposed a plan to restructure its overseas debt, aiming
to reduce its liabilities by up to eleven point six
billion US dollars. As of the thirty first of December
last year, the firm's total overseas interest bearing liabilities stood
(02:57):
at sixteen point four billion US dollars. Another industry giant,
Sunic China Holdings, recently unveiled its second debt restructuring plan
because its first scheme, agreed upon in late twenty twenty three,
was proven to be insufficient. The latest program asked creditors
to forgive over fifty percent of the home builder's outstanding
debt quote. According to an insider at the property company.
(03:20):
In Eastern China, home sales and asset deposits are crucial
funding sources for distress real estate companies to repay debts. However,
sales among China's top one hundred real estate companies fell
thirty percent last year, and builders in default performed even worse.
This forced them to revise their debt restructuring schemes after
failing to meet sales projections included in their initial twenty
(03:42):
twenty three restructuring plans. In quote now moving to a
very different Chinese company. On the other side of the Pacific,
Chinese owned social media giant Tektok may well have been
saved at the last minute, as politicians, some of which
voted for the TikTok ban from both signs of the isle,
appear now to be trying to find a solution to
(04:03):
save the company. As the January nineteenth deadline approaches for
TikTok to divest from its Chinese parent company by dance
or face a full ban. In the United States, US
lawmakers and others are scrambling to find a solution to
avoid a nationwide ban on the popular app. Representative Mike
Waltz has indicated that President elect Trumps exploring options to
quote keep TikTok from going dark end quote, citing provisions
(04:26):
in the law that would allow for a ninety day
extension of significant progresses made towards a divestiture. This extension
could provide Trump with the necessary time to broker a
deal that would allow TikTok to remain operational. In the US,
Senate Minority Leader Chuck Schumer has expressed concerns about the
national security risks posed by the app, but has also
called for more time to find an American buyer. Schumer
(04:49):
emphasized that millions of Americans rely on TikTok and a
rushed band could disrupt their livelihoods. He has worked with
both parties to extend the deadline and avoid unnecessary consequences.
In addition to these legislative maneuvers, Trump's advisors have suggested
that the outgoing president, that is President Biden, could issue
an executive order to suspend enforcement of the divestiture law
(05:11):
if the Supreme Court rules in favour of the law.
While the law provides a mechanism for an extension. Some
legal experts believe that Biden's administration may not have the
authority to delay the deadline, especially with the transition of
power looming. As the debate continues, TikTok has also made
its presence felt politically with reports that the company will
sponsor an inauguration party for President Elect Trump, further intertwining
(05:35):
the app's fate with u s political and legal developments.
With time running out, both parties do appear eager to
avoid a ban that could have lasting implications for users
and the broader technology industry better in China. Anles's build
Bishop sardonically observed on these developments. Today, TikTok called American
politicians bluff with its announced intention to shut down on
(05:55):
January nineteen, and politicians on both sides are caving in
spite of the law or for which almost all of
them voted. There is a bipartisan scramble to figure out
how to keep the service alive. The Supreme Court has
scheduled an announcement of options starting at ten am Eastern
Time Friday, and so perhaps the Court will put the
feckless politicians out of their misery by either overturning the
(06:18):
law or issuing an injunction or administrative stay. This whole
process has not only been gross, but also embarrassing, and
it will be interesting what lessons she and his team
take away from this whole mess. In quote, we should
note that Bill Bishop is an American citizen who is
based in Washington. Meanwhile, while we are in the space,
(06:38):
one of the interesting stories from this week, which is
also tied to the TikTok stuff, has been the surge
of TikTok users to read Note. The English name of
a Chinese social media company Shalhanshul, which literally translates to
Little read Book, a reference to the mal Era book
popular during the disastrous Cultural revolution of China's Foreign ministry
(06:59):
is using this development as a pr win. The sudden
movement of users to the platform appears to have caught
PRC sensors off guard, as the US based outlet The
Information reports, the Cyberspace Administration of China, the country's Internet watchdog,
is concerned that English language content showing up on Red
Note may contain politically sensitive posts that are not otherwise
(07:20):
allowed on Chinese social media. According to three people with
knowledge of the communications between Chinese officials and Red Note.
Chinese officials raised the issue with Red Note government relations
team earlier this week, the outlet reports warning that the
company needs to ensure China based users cannot see posts
from US users. According to two of the people, since then,
Red Note employees have been scrambling the outlet rights to
(07:42):
hide US users posts from Chinese users. While the interaction
between users in the US and China on Red Note
have mostly been lighthearted banters and friendly cultural exchanges, the
sheer volume of the content was enough to alarm Chinese
internet regulators better in China analysts Build Bishop also had
an interesting take on the m quote. The surge of
TikTok users to Shaohongshual Red Note has been interesting and
(08:04):
fun to watch, but I am skeptical it will last,
both because TikTok is likely to get a reprisal and
because PRC cyber regulators cannot be comfortable with the spontaneous interactions.
On the one hand, the Ministry of Foreign Affairs is undertaking
an aggressive effort to project openness and build people to
people engagement with the US, so this influx of Americans
to Red Note should be a good thing. But on
(08:26):
the other more powerful regulatory hand, this influx of Americans
threatens this information management regime and so as likely seen
as a political security threat. If regulators wanted to be clever,
perhaps they could create a walled garden within Shaohongshul Red
Note where the foreigners can gather impost while on the
Chinese side only politically reliable users are allowed, so the
(08:49):
foreigners will think they're having an authentic Chinese Internet experience
and learning about real life in China, but in fact
would just be another managed people to people engagement that
may be too compleated, though it would be nice if
the unfiltered engagements could continue, but allowing that would require
a real shift in how the party manages the Internet. Still,
there may be an upside for read Note and its investors,
(09:12):
as if they go public overseas. The brand recognition from
the surge and overseas usage may also drive a surge
and interest in the IPO. Now we have one more
development to cover, but is quickly. If you're getting some
value from today's episode of China Update, it's a huge
help if you can hit the like button, and for
regular viewers who have not yet subscribed, it's also tremendously
(09:33):
useful for the algorithm. If you consider subscribing at the
bell notification icon and you will be on top of
this analysis as it's released. Patroon and by me Coffee
links are also in the description for those who want to
help keep the channel financially sustainable. I rely primarily on
subscribe to support, so this is also a big help.
Thank you so much, and finally for today, Scott Bessent,
my apologies if I'm mispronouncing that surname. President elect Donald
(09:57):
Trump's nominee for Treasury Secretary, has made bearish comments about
China's economic outlook, describing the world's second largest economy as quote,
being in a recession if not a depression quote. The
comments were made as he testified on Capitol Hill yesterday
as part of his confirmation process. Bessant criticized China's economic imbalances,
pointing to its prioritization of military spending and reliance on
(10:20):
exporting cheap goods to sustain growth. His remarks come as
China grapples with a prolonged deflationary period, with economists predicting
that the country may experience its longest streak of deflation
since the nineteen sixties. His situation highlights the death of
China's current economic struggles, further exacerbated by the challenges of
balancing military ambitions and economic stability. Of course, regular viewers
(10:40):
know very much the difficulties Chinas economically. Bessett also called
attention to China's failure to meet the agricultural purchasers commitments
outlined in the Phase one trade deal between the US
and China signed during the first Trump administration. Under this agreement,
China was expected to purchase forty billion US dollars worth
of US agricultural goods annually, target that has been increasingly missed.
(11:02):
Although Chinese purchases peaked at thirty eight point one billion
in twenty twenty two, they have dropped significantly in subsequent years,
with estimates showing a sixteen percent decline in twenty twenty
four compared to the same period in twenty twenty three.
Beissent vowed that if confirmed, he would press China to
resume these purchases and possibly seek a catch up provision
to make up for the shortfall over the past four years.
(11:24):
Besant's stance on these issues signals a tougher approach to
US China relations, particularly regarding trade imbalances in China's handling
of its domestic economy. The outcome of his confirmation and
subsequent actions, combined with some other key cabinet positions, for
example Marco Rubio, who we discussed yesterday, along with of
course President elect Donald Trump himself, will significantly shape the
(11:46):
US approach to its economic dealings with China in the
coming years. Okay, that is today's episode of China Update.
Thank you so much everybody for watching. Have a good Friday,
have a RESTful weekend, and I will see you all tomorrow.
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