Over the weekend the Chinese Premier Li Keqiang acknowledged the government’s efforts to steer the world’s second largest economy to a ‘new normal’ of slower but better quality growth, that is more geared towards domestic consumption and less debt dependant. Such a transition is not an easy one; as Mr Li put it ‘Like the struggle from chrysalis to butterfly, this process of transformation and upgrading is filled with promise but also accompanied by great pain’.
Mr Li was speaking at the start of the National People’s Congress where he also said that the annual economic growth target for 2017 would be around 6.5%. Last year at the same conference the target for growth was put at between 6.5 and 7%; actual growth came in at 6.7%. The Chinese government are willing to sacrifice a small percentage of growth in exchange for paying more attention to financial and economic risks in the coming months and years. ‘Financial supervisors should fix weak links and act hard against illegal activities’ he said whilst believing that there is a need to rein in house prices, as houses are to be lived in, not for speculation, referring to the recent big increases.
In an effort to oversee the risks Guo Shuqing replaced Shang Fulin as the Chairman of the China Banking Regulatory Commission. At one of his first high-level meetings Guo acknowledged there were risks in both the financial sector and the banking system. The top risks that are to be his priority included non-performing assets, liquidity risk, the shadow banking sector, external shocks, the real estate bubble and government debt. Along with Guo’s appointment there will be a push with the PBoC and insurance regulators to contain the risks in what they call the regulatory ‘no man's land’.
Also noted over the weekend was that car manufacturing is due to stop completely in Australia by the end of the year. The last 2 car companies to end production will be General Motors Holden and Toyota. As a result of Toyota’s decision alone about 2,500 jobs will be lost, with high production costs, the strength of the Aussie USD and an extremely competitive market all being blamed. The closure is a blow for Australian Prime Minister Tony Abbott who appealed directly the Toyota not to close it plant.
According to reports the Free Trade Agreement that Australia signed with Thailand in 2005 signalled the beginning of the end of its car industry. Since that time, when Australia agreed to lift imports tariffs on car built in Thailand, more than 2 mln vehicles have been imported from its Asian neighbour whilst just 100 cars went the other way. The outlook for those workers looks bleak according to a report issued by the University of Adelaide in 2013 after another Japanese car maker, Mitsubishi, closed its gates in 2008. In the report the University estimated about one third of those blue collar workers laid off would more than likely become long term unemployed.