Aurelia Butler

China’s Xi Jinping is known for his tough leadership style, brooking no dissent, purging corrupt officials and attacking what he sees as US hegemony. But the country’s most powerful man since Mao Zedong took on the role of salesman-in-chief this week as he sought to persuade a group of visiting US chief executives that China was still a good investment. A friendly and relaxed Chinese president received the group of 18 Americans — who included Chubb’s Evan Greenberg, Blackstone’s Stephen Schwarzman and Qualcomm’s Cristiano Amon — at the Great Hall of the People, where they held a photo shoot before he took their questions for nearly two hours. Those present said the performance was unprecedented for Xi, who is usually more stiff and formal on official occasions. “It was very warm. You know, he was seeking to persuade,” said Steve Orlins, president of the National Committee on US-China Relations, and one of the attendees and organisers of the visit. “I mean, there were trillions of dollars of revenue in there. So it was a lot of money and a lot of people who are invested and have to decide: will they increase their investment? So clearly, he was he was there to say, our economy is resilient. We’re doing better. We’re going to do better,” Orlins said. The meeting comes as China’s economy has been struggling to regain its footing, with a deep property slump undermining domestic demand and trading partners complaining that cheap Chinese exports are threatening to undercut their domestic industries.The economic troubles and growing geopolitical tensions with the US have driven down foreign direct investment in China, with inflows last year falling to their lowest level since the 1990s. China’s President Xi Jinping, centre, with US chief executives and business group leaders in Beijing on Wednesday More

BEIJING (Reuters) – A sentence from a months-old speech by Chinese President Xi Jinping has sparked speculation the central bank might start aggressively buying government bonds to support the economy, a stimulus measure China has long shunned.But most analysts say the People’s Bank of China (PBOC) will stick with traditional tools rather than resorting to massive liquidity injections through “quantitative easing” (QE), as some major economies such as Japan and the United States have done.Market expectations remain high for more stimulus to boost the world’s second-largest economy, which is showing tentative signs of momentum despite a long-running debt crisis in the property sector, which used to account for a quarter of China’s gross domestic product.”The People’s Bank of China must slowly increase the trading of treasury bonds in its open market operations,” Xi told a major financial meeting in October in a speech that was not published at the time but was included in a book this month.The Hong Kong-based South China Morning Post cited an excerpt of the speech on Thursday from the book, triggering market talk about how to interpret Xi’s words against the backdrop of the PBOC’s reluctance to flood the system with liquidity due to fears of inflation and asset bubbles.China’s blue-chip stock index bounced 0.5% off one-month lows on Thursday. On Friday, 10-year treasury bond futures rose the most in three weeks.The speculation also reflects investor sensitivity to comments made by Xi, China’s president for 11 years and its most powerful ruler since Mao Zedong. The PBOC did not immediately respond to a request for comment. LIQUIDITY AMPLE, ROOM TO CUT RATESXi’s speech was “not buying government bonds in the primary market, therefore not an indication of QE”, said Morgan Stanley’s chief China economist, Robin Xing.”In fact, in the same speech, Beijing made hawkish comments that the deleveraging process requires a tighter grip on money and credit supply, which we believe indicates continued preference for austerity to prevent misallocations,” Xing said in a note to investors.The PBOC is not allowed to buy bonds directly from the central government. It last bought them in the secondary market in 2007. Xi was “calling for replenishing the central bank’s monetary policy toolkit”, including expanding its options in open-market trading of government bonds to manage liquidity, said Tao Wang, head of Asia economics and chief China economist at UBS Investment Bank.Guolian Securities economist Rocky Fan said the PBOC could buy treasury bonds while reducing reverse repurchases, replacing one with the other. Among other traditional policy tools, PBOC Deputy Governor Xuan Changneng said last week that cutting commercial banks’ reserve requirement ratios, now averaging around 7% after a 50-basis-point cut in January, would be an important way to inject liquidity.Last month, the PBOC cut its five-year loan prime rate by 25 basis points to 3.95%, the most since the reference rate was introduced in 2019. The PBOC last cut the rate on one-year medium-term lending facility loans, a guide to the loan prime rate, by 15 basis points to 2.50% in August.”(Other) central banks are doing QE because their policy rates are close to zero and they can’t cut any further, but the PBOC still has room to cut its policy rate, which is now 2.5%,” Macquarie economists wrote in a note. China is targeting 3.9 trillion yuan ($540 billion) in local government special bond issuance this year to support the economy, up from 3.8 trillion yuan last year, and 1 trillion yuan in special ultra-long term treasury bonds to help key sectors. Reflecting high demand for bonds and the ample liquidity in the financial system, China’s 30-year treasuries yield around 2.47%, near this month’s record low of 2.442%.”Whether you look at money supply or the level of interest rates, the degree of monetary easing we’ve experienced has rarely been seen in history,” said Xia Chun, chief economist at Forthright Holdings. ($1 = 7.2239 Chinese yuan renminbi) More

The index hit successive record highs this month, after breaking levels on Feb. 22 last seen in 1989 during the country’s bubble economy. The rally was supported by foreign buying on a weaker yen and expectation that the Bank of Japan will stick with loose monetary policy.The index rallied 12,328 points in the fiscal year ending on Friday, marking its biggest gain on an absolute basis. It rose 44% in the year, the most since the financial year ended March 2021.On Friday, the Nikkei ended up 0.5% at 40,369.44, recouping some of the previous session’s losses.”Investors remain cautious over a possible intervention in the currency market but overall they take the weak yen as a positive factor for domestic stocks,” said Fumio Matsumoto, chief strategist at Okasan Securities.The yen fell to a 34-year low against the dollar this week, prompting local authorities to hold an emergency meeting, a sign Tokyo is moving closer to intervening in the market.The Japanese yen was last flat at 151.40 per dollar. Chip-related Tokyo Electron and Advantest rose 0.79% and 1.85%, respectively. The property sector jumped 1.96%, adding 16% this month, the most among sectors. The sector has been underpinned by a government survey released this week that showed land prices in the country rose at the fastest pace in 33 years in 2023.Optimism that the Bank of Japan will not raise interest rates rapidly supports their stock prices, Okasan Securities Matsumoto said. The broader Topix rose 0.61% to 2,768.62 on Friday. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.French inflation has fallen faster than forecast to its lowest level since July 2021, while price growth also undershot expectations in Italy to boost hopes that the European Central Bank will cut interest rates soon.Consumer price growth in France slowed to 2.3 per cent in March, down from 3.2 per cent in February, according to figures released by the national statistics agency on Friday. Economists polled by Reuters had expected a reading of 2.8 per cent.The decline reflected slower annual price rises in all areas, including a drop in services inflation to 3 per cent, a fall in energy inflation to 3.4 per cent and a sharp slide in food inflation to 1.7 per cent. Fresh food prices fell 3.9 per cent in the year to March.On a month-on-month basis, inflation in the eurozone’s second-largest economy slowed from 0.9 per cent to 0.3 per cent.The figures, coming ahead of data next week that is expected to show eurozone inflation slowed slightly to 2.5 per cent, are likely to solidify investor bets that the ECB will start cutting interest rates by June at the latest.French central bank governor François Villeroy de Galhau said in a speech on Thursday that the ECB could even cut rates at its next meeting, on April 11, if inflation kept falling faster than forecast and the economy remained mired in stagnation.“We must not ignore the risk of weighing excessively on activity by keeping our foot pressed on the monetary brake for too long,” he said, adding that this meant the “time has come” to start cutting rates this spring. “The exact date of the first cut — April or early June — has no existential importance,” he added.In Italy, consumer prices rose 1.3 per cent in the year to March, a smaller than expected increase from 0.8 per cent in the previous month. The Italian statistics agency said the increase reflected the end of seasonal clothing sales as well as higher prices for transport services and a slower decline in energy costs. Economists had expected a reading of 1.5 per cent.Spanish data published on Wednesday showed inflation in the eurozone’s fourth-largest economy increased slightly less than widely forecast, from 2.9 per cent in February to 3.2 per cent in March. Spanish core inflation, which strips out energy and fresh food prices to give a better picture of underlying price pressures, slowed from 3.5 per cent in February to 3.3 per cent in March.The annual growth of consumer prices in the 20 countries that share the euro slowed to 2.6 per cent in February, bringing it closer to the ECB’s 2 per cent target. After this week’s “three-for-three downside surprises in eurozone inflation,” Claus Vistesen at Pantheon Macroeconomics said on X: “Is an April cut back on the menu? Not sure, but it’s now tight.” He added that the latest data was “something for the ECB to ponder over the long weekend”.However, rate-setters worry that rapid wage growth is still pushing up prices in the labour-intensive services sector, where inflation slowed only slightly to an annual pace of 3.9 per cent in February.Since the disruption caused by the pandemic and Russia’s full-scale invasion of Ukraine triggered the biggest price surge for a generation, eurozone inflation has fallen rapidly from its peak of 10.6 per cent in October 2022. This has raised hopes that the ECB could soon start to lower borrowing costs after it raised the benchmark rate to a record 4 per cent last year.Senior ECB policymakers have signalled they are likely to wait until June to give them time to check if wage pressures are moderating enough to allow inflation to reach their target. More

SEOUL (Reuters) – South Korea is launching a high-speed train service that will reduce the travel time between central Seoul and its outskirts, a project officials hope will encourage more youth to consider homes outside the city, and start having babies.South Korea has the world’s lowest fertility rate, and its youth have often cited long commutes and cramped, expensive housing in greater Seoul, home to about half the population, as the main reasons for not getting married and starting a family.The birth rate in Seoul is even lower than the national average, and the government has tried to boost the number of newborns through subsidies, with little success.Officials are now pinning their hopes on the Great Train eXpress (GTX), a 134 trillion won ($99.5 billion) underground speedtrain project that, by 2035, will provide six lines linking Seoul to several outlying areas.On Friday, President Yoon Suk Yeol inaugurated a section of the first line, which will cut the commute time from Suseo in capital to the satellite city of Dongtan to 19 minutes from 80 minutes now on a bus.The shorter commute “will enable people to spend more time with their family in the mornings and evenings,” he added. The line is due to go into service on Saturday, and once fully operational, the GTX will be one of the fastest underground systems in the world, with trains travelling at speeds of up to 180 km per hour (112 mph), officials said.Owning a home in South Korea is costly, with median prices hitting a peak in June 2021 after rising 45% over five years. Seoul is particularly expensive, offering some of the worst value for money per square foot of any advanced economy, analysts say.Land Minister Park Sang-woo told Reuters the GTX would allow young people to consider homes far away from the capital without having to spend hours commuting. The time they get back can go towards their families, he added.”With two-hour commute on the way home, for example, how can anyone make time for babies? The idea is to give people more leisure time after work,” he said.Some analysts, however, said the GTX could contribute to the decline of rural South Korea, by sucking more people into the already overcrowded capital.”To revive regional towns facing extinction, the most important thing is to equip other areas with a similar kind of public infrastructure too,” said Kim Jin-yoo, professor of Urban Planning & Transportation Engineering at Kyonggi University. More

Thailand recorded a current account surplus of $2 billion in February, after a deficit of $0.2 billion in the previous month, the BOT said. There have been 8.73 million foreign tourist arrivals in Thailand this year up to March 24, up 44% year-on-year, with visitors from China reaching 1.63 million, tourism ministry data showed.The government is aiming for a record of 40 million foreign visitors this year following the 28 million in 2023.The economy in March will be helped by tourism, but export recovery and industrial manufacturing will have to be closely monitored, Assistant Governor Chayawadee Chai-Anant told a briefing. The BOT is monitoring the global economic recovery, government spending and economic stimulus measures, she added. Southeast Asia’s second-largest economy unexpectedly shrank 0.6% in the final quarter of 2023 from the third, with full-year growth at 1.9%, lower than the 2.5% growth in 2022.Last month, the central bank lowered its 2024 growth outlook to 2.5%-3.0% from 3.2%. Car production in regional autos hub Thailand fell 19.28% in February from a year earlier, largely due to a decline in production of pickup trucks and more imported electric vehicles (EVs), a local industry group said. This week, BOT Governor Sethaput Suthiwartnarueput said first-quarter gross domestic product was “not likely to look pretty” but drag factors would ease later in the year, and the BOT must ensure the policy rate was appropriate for supporting long-term growth.Despite government pressure to ease policy, the BOT last month left its key interest rate unchanged at 2.50%, the highest in more than a decade, in a split vote. It will next review monetary policy on April 10. More