Evergrande- new financial crisis with epicenter China or limited effect and bailout?

Evergrande- new financial crisis with epicenter China or limited effect and bailout?

Evergrande Group. Photo: VCG

A lot of panic and alarmist reports about  a possible new financial crisis and  a “Lehmann moment”for the Chinese economy as the system relevant real state giant Evergrande is in trouble and in danger to become bankrupt. While some experts said this was he logic result of an real estate bubble which now bursts, one should not forget that there have been similar warnings since the 90s that hidden debts of banks, shadow banks, state owned enterprises, hedge funds like CITIC and the intransparency of the Chinese economy will lead to a financial crisis, but it didn´t happen as many doomssayer said. Among all the warnings from a financial crisis the rating agency Fitch which rated Evergrande from CCC now to CC and therefore as high risk, thinks the effects will be limited.However the 3 big rating agencies already during the US financial crisis 2008 had wrong prognosis. On the one side the Chinese government despite all new regulations could make a bail out as Evergrande is too big to fail and the CPC wants to show the superiority and stability of its economic and political system- in the national and international arena. Other experts think that the new regulations of the CPC lead to this crisis and that the Chinese government has to decide whether to take some of the regulations back which would be a loss of face and a conviction that the CP C caused the problem or to stick to them, bail out Evergrande and hope that such a problem won´t occur with other real estate giants, banks and related entities.. However it is unlikely that the CPC will again deregulate the economy as it did before in the last decades. Some think that financial crisis are the normal logic of capitalism, systemic, others critizise neoliberalism, immoral behaviour , morale hazard and greed for this excesses, neoliberal thinkers on the other side blame the Chinese state interventionism and the CP China as the deeper cause of all problems and would like deregulate everything and topple the CPC. However, such a crisis can also happen in the neoliberal, deregulated USA as the financial crisis in 2008 proved. Whatever the interpretation of the venet, let´s first take a look at the medi. The Germn Handelsblatt writes:

“Concern about China’s “Lehman Moment”: Evergrande’s impending bankruptcy alarms the global financial markets

Evergrande is still not finding new investors. That also makes foreign investors nervous – and brings back very bad memories. A huge crash: Evergrande shares have lost more than 80 percent of their value since the beginning of the year. The drama surrounding the heavily indebted Chinese real estate developer Evergrande is leading to ever greater nervousness on the international financial markets. The stock exchanges in Asia have been under pressure for days. At Evergrande, an important payment deadline expires in the next week. Investors in Europe and the USA are therefore increasingly concerned that the Chinese government may let the company slide into bankruptcy in an uncontrolled manner. The fear expressed again and again: Then China would have its own “Lehman moment”. The bankruptcy of the US bank of the same name caused a domino effect at other banks in 2008 and is considered one of the triggers of the global financial crisis.”


The reality is: The Chinese real estate company Evergrande threatens to run out of money, banks are already being warned of payment defaults. However, rating agency Fitch believes China’s leadership will prevent escalation.Angry demonstrators are protesting in front of the headquarters of the indebted real estate giant Evergrande – and investors fear a financial crisis in the event of bankruptcy. It is now becoming public that the Chinese housing authority has apparently already warned banks of payment defaults, the Bloomberg news agency reported, citing insiders. Accordingly, Evergrande will not be able to pay the interest on loans on September 20. The company has been in talks with financial institutions since this week. The Chinese real estate giant has a total debt of more than $ 300 billion. But the rating agency Fitch reassures: In their opinion, payment defaults at the real estate company are completely manageable for the Chinese banking system. However, smaller institutions are likely to see a significant increase in bad loans on their balance sheets, according to a report by Fitch. A stress test by the Chinese central bank showed that the average equity ratio of around 4,000 banks in the People’s Republic would only decrease slightly if the number of loans at risk of default from real estate companies increased. The Fitch analysts write that the effects on house prices in the event of a possible collapse of China’s second largest real estate developer are also minor. It can be assumed that the government will intervene to protect the interests of the households

Fitch downgraded Evergrande’s rating from “CCC +” to “CC” a week ago. This corresponds to a “very high credit risk” and means that the rating agency’s experts assessed the likelihood of loan defaults to be higher. On Wednesday, the group’s shares fell to their lowest level since 2014. After a price slide of more than 20 percent, trading in the China Evergrande bond, which runs until May 2023, was suspended on the Shenzen Stock Exchange. Other bonds of the group also gave way, but are still allowed to be traded. In the southern Chinese city of Shenzhen, protesters gathered in front of the headquarters of the indebted real estate giant on Wednesday for the third day in a row. A company representative offered the disgruntled business partners apartments, parking spaces or storage rooms instead of money, protesters told a reporter for the AFP news agency. “But we don’t need that. Neither of us agreed, ”said a woman named Wang. Home buyers, suppliers and craftsmen as well as small investors fear the bankruptcy of Evergrande. On Tuesday, the group warned that there was no guarantee that the company would be able to meet all of its financial obligations. The group is present in more than 280 Chinese cities and is one of the largest private companies in the People’s Republic. At the end of June, the stock of apartments under construction was 1.4 million, according to the consulting firm Capital Economics, and their value was the equivalent of 170 billion euros.

More and more customers fear that the pre-paid apartments will never be built. Suppliers and subcontractors have already complained about payment defaults; work on construction sites is suspended. Evergrande is not only active in the real estate industry. In 2019, the group founded the electric car manufacturer Evergrande Auto, which has not yet sold a single vehicle. The company also invested in the tourism, internet, digital economy, insurance and amusement parks sectors. The company also owns the Guangzhou FC soccer club in Canton. As with many large Chinese corporations, Evergrande’s holdings are nested in more than 200 subsidiaries. The loans and mutual financial obligations are hardly transparent. In order to explore „all possible solutions“ to alleviate its liquidity crisis, Evergrande hired the two consulting firms Houlihan Lokey and Admiralty Harbor Capital to look at the capital structure this week. Debtors should therefore be persuaded to postpone payment terms or to get involved in alternative agreements. Evergrande admitted that it had not been able to make „significant progress“ in selling its shares

Experts cite several reasons for Evergrande’s difficulties. After many years of booming China’s real estate market, observers see „signs of a turning point.“ Authorities are also taking action against speculation and want to take air out of the real estate bubble. Rents should no longer rise so strongly. Supervisory authorities are taking action against excessive lending by banks to real estate companies, restricting borrowing and setting upper limits – also in order to contain the growing risks in the financial sector as a whole. It is part of the regulation campaign by state and party leader Xi Jinping, who wants to regain control of powerful tech companies, online retail and financial services, gaming, driving services and the entertainment and education industries.

Grown on the wave of the real estate boom, expansion and debt become its undoing. Shenzhen / Munich – From a successful real estate developer and glamorous owner of the most successful soccer club in Asia to an insolvent problem group: China’s second largest real estate developer Evergrande has taken an unprecedented nosedive. The company has amassed the world’s largest mountain of debt in the industry: more than $ 300 billion. On Monday, around 100 investors stormed the Evergrande headquarters in Shenzhen, southern China *, demanding overdue payments. Pictures on the microblog service Weibo showed crowds harassing a manager in the company lobby and filming the scene with their smartphones. In neighboring Guangzhou, angry home buyers surrounded an office and demanded that a disused Evergrande construction site be continued. As is customary in China *, they made large down payments years before their apartments were ready to move into.

According to data from the analysis company REDD Intelligence, almost 800 Evergrande projects across China are still unfinished. According to REDD, up to 1.2 million customers are currently waiting to move into their new apartment – and now fear that this will never be possible. Most home buyers have become heavily indebted in anticipation of ever increasing property prices – also because owning a home is one of the most important goals in life in China. Every Tuesday Evergrande has to testify on the Hong Kong Stock Exchange, where it is listed. Last week, the company admitted that the group would become insolvent if it does not get immediate access to liquidity. This Tuesday followed the forecast that sales would continue to decline in September and that there would be no further progress in the sale of parts of the company. Founder Xu Jiayin has to break up his conglomerate in order to service at least some of his debts. Among other things, he is looking for a buyer for the loss-making electric car division.

The world now fears a collapse of the group. Since the beginning of the year, the Group’s share price has fallen by three quarters. International rating agencies like Fitch downgraded Evergrande bonds to junk levels. Fitch said the company’s bankruptcy „appears likely“. Debt rescheduling seems inevitable. Because at the moment Evergrande can neither pay banks nor its suppliers. The greatest danger for international investors are the outstanding bonds of the company. The financial service Bloomberg already compared the scenario with the dystopian hit series “The Hunger Games” and its hunger games for life and death. Because as long as Evergrande’s bonds are not actually in default, Xu can choose who he wants to repay to first. Whoever trumpets politically correct slogans loudest, agitates on social media or threatens street protests will likely be paid out first, speculates Bloomberg. Foreign investors are unlikely to be – they enjoy a lower priority, according to financial experts. This is not the case with suppliers or employees who Evergrande persuaded for years to buy wealth products from a subsidiary called Evergrande Wealth: „It’s okay if I run out of things – but Evergrande Wealth investors cannot be left without something,“ said Xu Jiayin, according to Bloomberg on Friday. Analysts assume that buyers of Evergrandes dollar bonds will only get a quarter of their investment back.

And cooperation partners are also at risk. Evergrande has been operating a joint venture with the German automotive supplier Hella in Shenzhen for the development and production of battery management systems since 2020. In June, Hella – which has been part of the French Faurecia group since August – announced an expansion of the cooperation. Evergrande also founded a joint venture based in Berlin with the German drive specialist Hofer Powertrain in 2019. What will become of these joint ventures is completely uncertain.

However, Evergrande is actually a typical case of “too big to fail” – too big to fail. Its failure would shake China’s real estate market; it would hit banks as well as millions of homeowners.

 The Evergrande case is also a beacon for the industry, which has heated up both the credit and construction industries in the country by building huge residential complexes on credit. Housing prices rose immeasurably, especially in large cities; Small apartments in new high-rise buildings on the outskirts of Beijing * can cost the equivalent of up to 600,000 euros – and that in an emerging country with still relatively low incomes. Banks therefore gave the developers credit for credit. At the same time, the rising prices made it more attractive to speculate in real estate than with stocks on the country’s notoriously fluctuating stock exchange – which only fueled prices even further. Experts have been talking about a bubble for years. But this has not burst – so far. But other real estate groups have already been drawn into Evergrande. For example, the successful office building developer Soho from Beijing: The US investment giant Blackrock actually wanted to take over Soho for three billion US dollars. But on Monday, Blackrock stopped the deal, and Soho shares slipped 35 percent, according to a report by the British Guardian.

Evergrande is therefore the most difficult test to date for the willingness of President Xi Jinping * to let over-indebted companies fail. Beijing has so far been silent on the case. A rescue package would tacitly give a daring economy on credit its blessing. Instead, Beijing began some time ago to use rules to drive out excesses in the sector. Limits when buying a home – only one second home is allowed per couple – are intended to curb speculation. At times, Beijing restricted the sale of building land in many cities. Beijing recently introduced a rent brake. The authorities are also taking action against the state banks‘ excessive lending to real estate companies. The ratio of liabilities to assets of the real estate companies must not be more than 70 percent, the net indebtedness not exceed 100 percent. As early as April of this year, Evergrande was no longer able to meet such requirements – and therefore no longer received any new loans.

Evergrande founder Xu is well connected. When Xi Jinping celebrated the 100th birthday of the Communist Party * in the summer, Xu was standing with the VIPs at the Gate of Heavenly Peace in Beijing. The son of a woodcutter has been a party member for 35 years. He invested in government-sponsored industries such as electric cars and traditional Chinese medicine. He donates a lot of money to charity and shares Xi’s love for football * – as he demonstrated by buying the football club, which was henceforth called Guangzhou Evergrande. With the help of expensive players like Lucas Barrios, who came from BVB in 2012, the club has been Chinese champions several times and won Asia’s version of the Champions League. In 2017, the Chinese magazine Hurun * listed the now 62-year-old Xu as the richest man in the country, with a fortune of 43 billion US dollars. But as early as April 2020, according to the US magazine Forbes, this fortune had practically halved – among other things because of Corona and the beginning doldrums on the real estate market.

In 1996, Xu – also known internationally as Hui Ka-Yan, as his name is spelled in the local dialect of his home province of Guangdong * – founded Evergrande in the provincial capital of Guangzhou. The company grew and, according to a company website, now owns more than 1,300 projects in more than 280 cities. Evergrande mainly focused on upscale residential complexes and shopping centers. Rising prices and cheap loans made it possible. Over the years, Evergrande has also expanded into countless other industries from mineral water, health products to baby milk; a conglomerate with dozens of subsidiaries emerged. The latest prestige project should be electric cars. Evergrande’s health division (!) Took over a startup, then the group bought the Swedish-Chinese NEVS, which had emerged from the traditional Saab brand, and founded its own electronic brand called Hengchi. Hengchi was to build six models, the first of which were presented at the Shanghai auto show in April. Now Xu is looking for a buyer for the loss-making electronics subsidiary. It’s on the home stretch of the decision. According to a report by the South China Morning Post, Evergrande has now hired star US lawyers who specialize in spectacular bankruptcies in addition to a Hong Kong law firm: the California-based law firm Houlihan Lokey, which specializes in debt rescheduling, also advised Lehman Brothers when it collapsed almost 15 years ago triggered the global financial crisis. China’s authorities are also starting to investigate the conglomerate’s finances. Rescue or bankruptcy – this question should be answered soon and whether the CP C risks a fiancial crisis-this time not with the USA, but China as epicenter. Hopefully, Fitch´s analysis that the impact of a bancruptcy of Evergrande is limited, is real.

Speculator, investor, chair and founder of Soros Fund Management and the Open Society Foundations George Soros claims in the Financial Times on August 30th 2021 that Evergrande is an systemic cause of the dysfunctional Maostyle Communist Party´s rule as Xi Jinping would not understand market economy:

:”Investors in Xi’s China face a rude awakening .The leader’s crackdown on private enterprise shows he does not understand the market economy

 Xi Jinping regards all Chinese companies as instruments of a one-party state Xi Jinping regards all Chinese companies as instruments of a one-party state Xi Jinping, China’s leader, has collided with economic reality. His crackdown on private enterprise has been a significant drag on the economy. The most vulnerable sector is real estate, particularly housing. China has enjoyed an extended property boom over the past two decades, but that is now coming to an end. Evergrande, the largest real estate company, is over-indebted and in danger of default. This could cause a crash. The underlying cause is that China’s birth rate is much lower than the statistics indicate. The officially reported figure overstates the population by a significant amount. Xi inherited these demographics, but his attempts to change them have made matters worse. One of the reasons why middle-class families are unwilling to have more than one child is that they want to make sure that their children will have a bright future.

 As a result, a large tutoring industry has grown up, dominated by Chinese companies backed by US investors. Such for-profit tutoring companies were recently banned from China and this became an important element in the sell-off in New York-listed Chinese companies and shell companies. The crackdown by the Chinese government is real. Unnoticed by the financial markets, the Chinese government quietly took a stake and a board seat in TikTok owner ByteDance in April. The move gives Beijing one seat on a three-person board of directors and first-hand access to the inner workings of a company that has one of the world’s largest troves of personal data. The market is more aware that the Chinese government is taking influential stakes in Alibaba and its subsidiaries. Xi does not understand how markets operate.

 As a consequence, the sell-off was allowed to go too far. It began to hurt China’s objectives in the world. Recognising this, Chinese financial authorities have gone out of their way to reassure foreign investors and markets have responded with a powerful rally. But that is a deception. Xi regards all Chinese companies as instruments of a one-party state. Investors buying into the rally are facing a rude awakening. That includes not only those investors who are conscious of what they are doing, but also a much larger number of people who have exposure via pension funds and other retirement savings. Recommended Brooke Masters Investors in China should beware Beijing’s unpredictability Pension fund managers allocate their assets in ways that are closely aligned with the benchmarks against which their performance is measured. Almost all of them claim that they factor environmental, social and corporate governance (ESG) standards into their investment decisions.

The MSCI All Country World Index (ACWI) is the benchmark most widely followed by global equity asset allocators. An estimated $5tn is passively managed, which means that it replicates the index. A multiple of this amount is actively managed, but it also closely tracks the MSCI index. In MSCI’s ACWI ESG Leaders Index, Alibaba and Tencent are two of the top 10 constituents. In BlackRock’s ESG Aware emerging market exchange-traded fund, Chinese companies represent a third of total investments. These indices have effectively forced hundreds of billions of dollars belonging to US investors into Chinese companies whose corporate governance does not meet the required standard — power and accountability is now exercised by one man who is not accountable to any international authority. The US Congress should pass a bipartisan bill explicitly requiring that asset managers invest only in companies where actual governance structures are both transparent and aligned with stakeholders. This rule should obviously apply to the performance benchmarks selected by pensions and other retirement portfolios. If Congress were to enact these measures, it would give the Securities and Exchange Commission the tools it needs to protect American investors, including those who are unaware of owning Chinese stocks and Chinese shell companies. That would also serve the interests of the US and the wider international community of democracies. SEC chair Gary Gensler has repeatedly warned the public of the risks they take by investing in China. But foreign investors who choose to invest in China find it remarkably difficult to recognise these risks. They have seen China confront many difficulties and always come through with flying colours. But Xi’s China is not the China they know. He is putting in place an updated version of Mao Zedong’s party. No investor has any experience of that China because there were no stock markets in Mao’s time. Hence the rude awakening that awaits them.“


However, the official mouthpiece of the CP China calms the panic down, claims that Evergrande is no systemic risk, won´t have disastrous spillover effects and critizises George Soros and his Open Society who hopes to gain profit from a financial crisis, spreads rumours and to topple the Cp China and transform China to a liberal, capitalist society. The Cp China also sees o need to take back the regulations and reforms implemented by Xi Jinping. However, Evergrande should also be a “warning shot” to other companies, is perceived to be an isolated event that won´t damage China´s economic overall performance:

Evergrande’s crisis does not pose ’systemic risk,‘ won’t change housing regulations: experts

Isolated case won’t affect China’s efforts to ensure sound housing market

By GT staff reporters Published: Sep 14, 2021 07:33 PM

As some Western media outlets and investors used Chinese property giant Evergrande’s debt crisis to bash the Chinese economy, experts on Tuesday pointed out that such criticism overstates the impact of the isolated incident on China’s property market and will not affect China’s efforts to strengthen regulation of the housing market to prevent major financial risks and ensure sustainable development.

Following recent reporting over Evergande’s liquidity crisis, as the group reportedly faces deadlines on more than $300 billion in liabilities, fails to pay overdue bills and imposes lengthy repayment delays on holders of wealth management products, some China bashers warned of bleak prospect for the Chinese economy.

Most notably, George Soros, who is despised by many around the world for creating and profiting from crises, warned that an Evergrande default „could cause a crash“ within China’s economy in a recent article in the Financial Times. Soros has been predicting a fall of the Chinese economy for many years, even though the world’s second-largest economy continues to grow rapidly.

Cao Heping, a professor of economics at Peking University in Beijing, said that Soros, who is an investor with a political purpose, attempts to gain benefits by spreading „China economic collapse“ rhetoric. „Western media and investors‘ tricks are doomed to fail,“ Cao told the Global Times on Sunday, noting that Evergrande’s debt problem was isolated to a single firm.

The sprawling developer has entered into too many sectors not connected to its core business – including new energy vehicles, sports and finance – stretching the firm’s liquidity to breaking point, said Li Changan, professor of the Academy of China Open Economy Studies at the University of International Business and Economics.

According to Evergrande’s interim financial results, its short-term liability to be due within a year was 240 billion yuan ($37.2 billion) as of June 30, while cash and cash equivalents were only valued at 86.77 billion yuan during the same period.

The group said on Tuesday that its contract sales are expected to see „significant continuing decline“ in September, thereby resulting in the continuous deterioration of cash collection and would place „tremendous pressure“ on the group’s cash flow and liquidity.

The company has been actively exploring options with potential investors on the sales of part of its stakes in China Evergrande New Energy Vehicle Group Ltd and Evergrande Property Services Group Ltd, as well as purchasers for its office building in Hong Kong. However, it is uncertain whether the group will be able to execute these sales, the statement continued.

Evergrande said that it has engaged financial advisers to assess its capital structure, evaluate the liquidity of the group and explore all feasible solutions to ease the current liquidity issue and reach an optimal solution for all stakeholders as soon as possible.

The new statement didn’t appease investors, Evergrande shares continued to fall on Tuesday, with the group’s share prices plunging nearly 12 percent, its new energy branch down 25 percent and its property services arm down about 12 percent at closing bell.

In fact, Chinese regulators have been monitoring Evergrande’s debt problem and talked with the group about the state of its operations, which means that the exposure to the broader public markets can be contained, Li said.

China’s central bank and the banking and securities regulators summoned Evergrande executives in mid-August to discuss the firm’s present situation, urging the property developer to fully implement the central government’s strategic measures aimed at maintaining the sound and sustainable development of the property market by not extending business activities, actively tackling debt and promoting stability within the property and financial markets.

Experts said that there are no systemic risks to China’s property sector, largely due to the central government’s years-long agenda aimed at minimizing risks in the financial and housing markets.

Amid the government’s continuous measures to rein in the red-hot housing market, floorspace transactions and revenue for commercial buildings across the country dropped year-on-year for the first time so far this year in July, down 8.5 percent and 7.1 percent respectively, latest data from the National Bureau of Statistics showed.  

Experts hold an optimistic outlook for the Chinese economy. Cao said that the fall of property companies that focus on speculation will reduce the cost for the country’s digital transformation and facilitate sustainable development of the Chinese economy rather than lead to a collapse.

Amid the COVID-19 pandemic, the Chinese economy has continued on a steady recovery path, even as other major economies, most notably the US economy, face renewed risks and uncertainty. Cao projected that China’s GDP will likely reach 6 percent during the third and fourth quarters of the year, driving annual GDP growth rate to above 9 percent.


“Evergrande related stocks plunge as liquidity crisis deepens

By Global Times Published: Sep 16, 2021 12:28 PM

Stocks related to China’s second-largest property developer Evergrande Group closed lower on Thursday as worries deepened that the company’s debt crisis could have spillover effects on the country’s financial market and real estate sector.

Shares of Evergrande closed 6.76 percent lower after plunging as much as 10 percent earlier. Shares of China Evergrande New Energy Vehicle Group fell by 12 percent.

The steep price drop comes after Evergrande’s main business, Hengda Real Estate Group Co, applied on Thursday to suspend trading of its onshore corporate bonds for one day, fueling further concern over Evergrande’s unfolding debt crisis. Upon resumption on Friday, the bonds will be traded through negotiated transactions, the group said in a filing.

Evergrande has been bogged down in a liquidity crisis, reportedly facing more than $300 billion in debt, while also failing to pay overdue bills and defaulting on multiple wealth management products.

The trading suspension and adjustment was likely aimed at limiting market volatility after the group revealed the potential default risk, Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Thursday.

„The pricing of bonds needs to be greatly adjusted. Without a new trading method, the price of bonds may fall sharply and fluctuates. Many companies would adjust the trading mechanism for their bonds due to default risks,“ he said.

China Chengxin International (CCXI) said in a stock filing on Wednesday that it has lowered Evergrande’s bonds ratings to A from AA, and that both the bonds ratings and its issuer’s rating were put on a watch list for further downgrades.

Should the developer default on its debts, there will be adverse effects across the financial sector, with possible spillover effects on the financial system and on other real estate companies, Xi noted.

„Creditors who provide funds to Evergrande, mostly some small and medium-sized banks, will face great asset losses and risk of cross-defaults,“ Xi said. „It will also be difficult for other real estate enterprises to raise funds due to the default concern.“

Shares of other listed real estate groups also dropped on Thursday with Sunac China Holdings sinking 11.38 percent and R&F Properties falling 11.87 percent.

The downgrade of Evergrande bonds and the subsequent market reaction indicates rising pressure on the capital market from the default risks, Yan Yuejin, a real-estate analyst told the Global Times on Thursday.

„For the industry, it comes as a warning call to others following real estate enterprises to monitor the risks, and prevent the spread of the debt crisis,“ Yan said.


And as a reaction to the new US efforts in the Asian pivot as the new defence pact AUKUS and despite a possible financial crisis, China wants to expand further and become member of the TPP successor Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP),  after Trump canceled TPP and Biden makes no efforts to push and promote new freetrade agreements:

“China officially applies to join CPTPP, as the US increasingly isolated in trade

Move cements country’s leadership in global trade, as US increasingly isolated

By GT staff reporters Published: Sep 17, 2021 12:41 AM

China on Thursday officially applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), in a landmark move that attests to the country’s commitment to global trade liberalization despite the impact of the COVID-19 pandemic and intensifying efforts by the US to isolate and contain China’s development. 

The late-night announcement aims to cement China’s leadership role in global trade, while piling pressure on the US that has thus far stayed away from rejoining the revised version of the Trans-Pacific Partnership (TPP), a regional trade pact initiated by the US under former President Barack Obama that was widely believed to be aimed at containing China’s rise, experts said. 

Chinese Commerce Minister Wang Wentao on Thursday filed a written request for CPTPP accession with New Zealand’s Minister for Trade and Export Growth Damien O’Connor, acting as CPTPP depositary, the Ministry of Commerce (MOFCOM) said in a late-night statement on its website. 

The two ministers held a teleconference discussing relevant follow-up work after China’s official application, said the statement. 

The CPTPP, an 11-nation free trade deal that became effective in December 2018, replaced the TPP after the US withdrew in 2017 under former President Donald Trump. China’s potential membership would also enhance trade cooperation with US allies, including Canada, Japan and Australia, while the US stays on the sidelines.

With Thursday’s announcement, China has shown to be fast-tracking its CPTPP vision, another giant step after the signing of the Regional Comprehensive Economic Partnership (RCEP), observers noted.

In February, MOFCOM Spokesman Gao Feng revealed at an online press conference that China was actively conducting a study on matters related to joining the CPTPP and was willing to strengthen technical exchanges with CPTPP members on relevant problems.

The CPTPP, a high-standard trade deal, covers more areas than the RCEP, among other free trade deals China having signed, such as labor and environmental issues, Gao Lingyun, an expert at the Chinese Academy of Social Sciences in Beijing, told the Global Times on Thursday.

The move is a significant development for China’s involvement in international economic and trade deal setting and tends to put China on a better position in deciding on future trade rules, Gao said. 

The deal is also expected to complement existing domestic efforts to deepen reform and opening-up, especially when it comes to trade and investment deregulation, he remarked. 

While the RCEP, still being ratified, is much of an Asia-centric pact, the CPTPP is geographically more far-reaching, with Canada and Peru as its members, meaning that „its accession could expand our circles of friends“ with a greater cloud in trade terms, according to the trade expert, reckoning the application announcement as reverberating politically with the CPTPP member countries.

Song Wei, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, a think tank under the MOFCOM, said that the application filing is indicative of China’s unswerving stance on global trade openness despite the rise of global trade protectionism that’s being fanned by the long tail of COVID-19.

China is hoping for the CPTPP to put global trade and economic cooperation back on track, underscoring the need for multilateralism, thereby reviving both the Chinese economy and the global economy in the post-COVID-19 era.

More importantly, watchers of international affairs stressed that China’s latest step that is set to steady its partnership with CPTPP members, would inevitably subject the US to what could be overwhelming pressure.

The US‘ changed course on trade policy has remained in place even after Trump’s successor Joe Biden broke with Trump’s unruly go-it-alone mentality in foreign policy, rejoining the Paris climate change agreement and becoming a member of the World Health Organization once again.

There have been no signs of the Biden administration attempting to revive the trade pact though. US Trade Representative Katherine Tai has also dodged questions about the US‘ return to the TPP.

Contrary to China’s open and optimistic attitude toward the CPTPP, the US is seen increasingly distancing itself from traditional trade partners, including Japan and South Korea, Song commented.

As the trade pact is envisioned to cement China’s role as a contributor to regional and global trade integration, it is hoped that its progress can also spur China-US cooperation, she noted. 

Albeit under greater pressure from China in the trade arena, it’s still unlikely for the US to rejoin the pact, Gao said, citing the hollowing out of US domestic industries that could ferment issues throughout US domestic services trade should it re-link with the trade deal that could eventually erode US economic strength primarily focusing on its services prowess. 


At the beginning of the Xi rule and at its 18th Party Congress I and Global Review were invited as guest commentators on the website of Chinese state television CCTV and China Radio International. However. I as a guest author for Global Review at the website of the Chinese state televison CCTV and China Radio International CRI already critizised the deregulation of the Chinese financial markets in wake of the Trump- Xi meeting as it could generate a new international crisis, this time with China at its epicenter like 2008. In the article “Interpreting trend of US-China ties and impact on Asia“published at the China Plus section of China Radio International on 15th November 2017, I wrote:

“Another factor is that the liberalization of the financial markets in China and the USA will reshape the whole financial architecture of the world. On the one side it will give a big boost for globalization. On the other side it will globalize the risks for a new financial crisis. China gives majority rights and shares to foreign banks and insurances, but Bloomberg perceives this as a compromise to Trump´s national economic pressure and the need to diversify the bad loans of Chinese banks, shadow banks and other financial institutions and state enterprises which accumulated debts to the brinkmanship of default besides currency and trade surpluses. “

After Xi built his one- man dictatorship, merged CCTV, CRI and other propganda oultlets in one propagnda entity, there was no free space anymore for even such comments- total dictatorship and we were kicked out. But it happened as we prophezised and Xi tries now to pull the emergency break against Evergrande, but the results could also be devastating. It is not only Soros, but a bunch of US and international speculators, whom Kyle Bass and the Comitee on the Present danger China is organizing for a private economic war beyond the US state economic war against China. Soros and Kyle Bass already tried to speculate against the Hongkong dollar and see this speculation not just as a mean for profit, but also in political terms to destabilize the Chinese economy and to topple the CP China. These guys don´t care about the international dimensions of such a financial crisis, were always the profiteers and winner or as their friend and speculator Warren Buffett once claimed: “Of course there is a class war, but we are winning it”

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