“It doesn’t matter how much you dye your hair blonde, how sharp you make your nose, you’ll never become Europeans or Americans.” Wang Yi, China’s top foreign policy official, used these less-than-diplomatic words to vent his resentment before Joe Biden’s meeting with Japan and South Korea.
This Friday at Camp David, China’s neighbors aim to set a historic milestone in their cooperation with the United States. Cooperation will be strengthened in many areas, such as the military, cybersecurity and supply chains. Japan’s prime minister and South Korea’s president did not have to dye their hair to achieve this.
While China interprets this as an effort to create a kind of “Asian NATO,” Japan and South Korea seek a strong partner because they feel increasingly threatened by China and North Korea. The United States also benefits from the alliance. Michael Radunski explains the connections.
Chi ku – “eat bitterness“: This is what Xi Jinping is asking of young people in China in light of the high youth unemployment rates of over 20 percent. After all, he, too, had to endure hardships during the Cultural Revolution. He wants the pursuit of money to give way to the pursuit of spiritual wealth. Chinese society should not be like the West, unable to restrain the greedy nature of capital. Will this appeal resonate with the motivated but prospectless graduates?
Young people start out in an adult life that is different from that of the previous generation. The latter experienced rapid growth in prosperity, but today, numerous crises weigh down on China’s economy. The real estate blight threatens to spread to other economic sectors. The financial market is in particular peril. Finn Mayer-Kuckuk and Felix Lee report.
Have a pleasant Friday!
China’s real estate crisis is no longer just limited to the housing sector, but is also spilling over into other areas, such as the job and foreign exchange markets. Of particular concern at this stage is the entanglement of the real estate industry with the financial sector, which has provided it with crucial funding. This could turn the price collapse in the housing market into a systemic problem.
Even state and party leader Xi Jinping has expressed his views on the current economic development. This is unusual: He usually stands above things and leaves economic policy statements to his premier. But the current economic situation is obviously too severe to remain silent.
In view of a youth unemployment rate of over 20 percent, Xi had already appealed a few weeks ago to “eat bitterness” (chi ku) and endure hardship. After all, that’s what he had to learn as a young man during the Cultural Revolution.
In view of the real estate crisis, Xi now called on his fellow citizens not only to strive for money, but to pursue “spiritual wealth.” He said this in a speech recently published by the party organ Qiushi, even though he already gave it in February. Xi demanded China focus on long-term goals such as improving education, health care and food for its 1.4 billion people.
It is not about pursuing short-term prosperity, Xi said. He said the real problems are with the West. “They cannot curb the greedy nature of capital.” However, in China, it will be possible to modernize society in harmony.
So his message is: It doesn’t matter if there are fewer jobs and the value of real estate is falling. What matters are entirely different intrinsic values. But Xi’s attempt at downplaying the problems with old socialist rhetoric was unsuccessful. On Thursday, he only caused more unrest in the markets. The flood of negative economic news in the past few days has been too severe.
A so-called “shadow bank,” Zhongrong International Trust, has had to admit to serious problems for the first time. These financial institutions invest money on investors’ behalf without having a banking license. They are important players in China. A bankruptcy would further upset sentiment.
As Reuters reports, Zhongrong International Trust is experiencing liquidity problems. The fund has already had to stall investors waiting in vain for interest and payouts on their investments. Zhongrong is one of China’s leading providers of widely used investment products. The company has invested considerable sums in the real estate market.
The reason for the problems at Zhongrong: The company has invested money in real estate companies on behalf of investors, but these are currently tumbling like dominoes. With Country Garden, China’s second-largest real estate developer is also facing default. A heavy blow to China’s economy, as it was a flagship company.
Country Garden’s debt, which at one point was rated higher than Disney’s, amounts to the equivalent of 190 billion dollars. Particularly alarming is that Country Garden recently missed dollar interest payments of 22 million dollars on its bonds. This means that international investors are being dragged along into the vortex.
With Country Garden, one of the last companies in the real estate sector considered stable, is now in trouble. The crisis surrounding Evergrande, once one of China’s largest construction companies, is far from over. Its bankruptcy has been dragging on for two years now and is turning into a horror without end. In the meantime, Evergrande has amassed gigantic debts amounting to the equivalent of 300 billion euros.
The immediate consequences for the real economy are already massive:
So what no one in China really wants to speak out is quite open for everyone to see: A multi-trillion euro bubble has burst in China’s real estate market. Just like in Japan in 1990, in the USA in 2007, in Europe in the euro crisis of 2010 or after the internet bubble of 2000, the shock waves are rippling through the entire economic system. The comparison with Japan is particularly apt.
The government wants to get a grip on the problems and attempts to stabilize the situation. This works to some extent – by slowing down the progress of events. But the money that was squandered ineffectively is now gone. We are witnessing a car accident in slow motion.
According to official figures, the average property price fell by 0.1 percent compared to last year. That might not sound like much. Compared to their peak in August 2021, prices for new properties have fallen by 2.4 percent, while prices for existing properties have fallen by 6 percent. That also sounds modest.
According to a Bloomberg report, the picture painted by real estate agents and private data providers is much bleaker. Analysts have surveyed real estate agents on actual prices and conclude that prices for existing properties have plunged by at least 15 percent in prime neighborhoods of major metropolitan areas such as Shanghai and Shenzhen, as well as in more than a dozen other cities.
The reason for the discrepancy between official and private price statistics also has to do with the nature of the real estate market. The final price emerges in many private transactions and is not centrally registered. High discounts do not flow into any statistics at first; what is visible above all is the optimistic bid price with which the buyer goes to the market.
Moreover, many properties are left vacant at the old market price. This also explains the standstill of the official figures: Many transactions simply do not happen. As a result, no new price points are being created. Current data show a massive drop in sales of more than 30 percent. One million homes are not finding buyers at all in the sad market. They remain vacant.
The dangerous mix of toxic developments threatens the entire Chinese economy. The real estate sector alone contributes to about one-fifth of China’s economic output. But if the financial sector is dragged even further into this crisis, the real economy will also be affected. Consumers are already refraining from new purchases, companies are forced to lower prices, and with it, wages, which means nothing other than deflation.
If banks become more cautious about risk, lending will decline. Then many good business ideas and solid small and medium-sized enterprises will perish due to lack of money.
Observers expect the Chinese leadership to introduce further stimulus measures in the coming weeks in addition to the aid already provided and instruct its subordinate central bank to cut interest rates. But the bigger the crisis, the more ineffective the instruments. In a crisis mood, the offered capital often does not find enough optimistic buyers willing to take risks. Felix Lee/Finn Mayer-Kuckuk
China’s highest-ranking foreign politician did not mince words about the Japanese and South Koreans: “It doesn’t matter how much you dye your hair blonde, how sharp you make your nose, you’ll never become Europeans or Americans,” ranted Wang Yi at a trilateral conference with Japan and South Korea in the eastern Chinese city of Qingdao. His advice: “We must know where our roots lie.” South Koreans and Japanese could “never become Westerners.”
The reason for Wang’s anger are the plans of Japan’s Prime Minister Fumio Kishida, South Korea’s President Yoon Suk-yeol and US President Joe Biden. The three leaders will meet for the first time this Friday for a trilateral summit. At Camp David, they seek to deepen their cooperation.
A formal alliance between the three countries will not be formed on Friday. But on Tuesday, Yoon announced that “a new milestone in trilateral cooperation will be set” at Camp David. It is expected that a hotline will be established at the leadership level, regular military drills will be held and more cooperation in cyber security and missile defense will be established. In addition, essential supply chains will be jointly secured.
What shines through in all these projects: It is not mutual affection that brings the former enemies together. It is North Korea and China.
Despite all UN sanctions, North Korea regularly fires missiles and tests medium- and long-range projectiles – most recently an intercontinental ballistic missile of the type Hwasong-18 with solid propellant. This missile could theoretically also hit US soil. Just this Monday, strongman Kim Jong-un announced plans to further increase the production of missiles and other weapons.
In addition, Kishida, Yoon and Biden are also concerned about China’s increasingly strong behavior – not only towards Taiwan, the USA, and most recently, the Philippines. Japan and South Korea are also repeatedly experiencing Beijing’s wrath. Key points include the simmering dispute over the Diaoyu/Senkaku Islands, the deployment of the US missile system THAAD or the economic dependence on China.
The problems may differ, but both Tokyo and Seoul are convinced that they need the United States as a close partner to meet this challenge.
China’s ambassador in Seoul, Xing Haiming, recently warned bluntly that some countries in the region would increasingly rely on the USA. But: “Those who bet on China’s loss will surely regret their decision in the future.”
It seems to be the era of alliances. But while North Korea, China and Russia have been cooperating ever more closely, especially since the Ukraine war, the historical animosity between Japan and South Korea has hindered a similar development. Despite domestic opposition, Kishida and Yoon now want to bridge the gap between their two countries.
And so, the USA is also presented with a historic opportunity. After all, experts have so far seen the reluctance of America’s closest Asian allies as a potential Achilles’ heel for US security interests in the region. Washington has failed to form a unity.
“I find the meeting at Camp David mind blowing,” posted Dennis Wilder on the short messaging service X. The Georgetown University professor was responsible for relations between Japan and South Korea under George W. Bush and looks back on the challenges at the time: “We could barely get South Korean and Japanese leaders to meet with us in the same room.”
In the run-up to the Camp David meeting, Rahm Emanuel, current US ambassador to Tokyo, said it would send a strong signal to China, which was trying to intimidate other countries in the Indo-Pacific region. “We’ve created something that […] China was hoping would never happen.”
China strongly dislikes the rapprochement between Japan, South Korea and the USA. The spokesperson of the Chinese Foreign Ministry in Beijing was far more diplomatic than his boss Wang Yi this week. But the direction was the same. China was opposed to “the cobbling together of various small circles by the countries concerned.” Beijing also “opposes practices that exacerbate confrontation and jeopardize the strategic security of other countries.”
On Monday, Chinese military expert Song Zhongping told the state-run Global Times that the US and its Asian allies were building a joint defense mechanism similar to NATO to strengthen joint capabilities in military command, early warning, missile technology and other areas. “The move is ostensibly aimed at North Korea, but its real target is China,” Song said.
Even if the meeting in Camp David is a historic step, the parties involved are under enormous pressure in their project: They have a historic opportunity to forge an important alliance in the Indo-Pacific. But the window of opportunity is narrow.
The mutual rapprochement between Kishida and Yoon stands on feet of clay. It is under heavy fire both in Japan and South Korea. The majority of South Koreans even call Yoon’s policy “humiliating diplomacy.” And even if Yoon could still convince his people of his course, the constitution only allows him a five-year term in office.
Added to this is the situation in the USA. Joe Biden is investing a lot of money and energy in building important alliances there. But in just a few weeks he will be busy fighting for his re-election – with an uncertain outcome. And China should not be underestimated either. As an enormous neighbor of Japan and South Korea, the People’s Republic has many tools at its disposal to drive a wedge between parties. Wang Yi will hardly trust the different hair colors of Kishida, Yoon and Biden.
Construction site at night: The nearly 290-kilometer-long high-speed rail line that workers are working on here at Henggang Station runs from Nanchang, Jiangxi in the west, via the porcelain city of Jingdezhen to Huangshan, Anhui further east. It is expected to be completed by the end of the year.
“It doesn’t matter how much you dye your hair blonde, how sharp you make your nose, you’ll never become Europeans or Americans.” Wang Yi, China’s top foreign policy official, used these less-than-diplomatic words to vent his resentment before Joe Biden’s meeting with Japan and South Korea.
This Friday at Camp David, China’s neighbors aim to set a historic milestone in their cooperation with the United States. Cooperation will be strengthened in many areas, such as the military, cybersecurity and supply chains. Japan’s prime minister and South Korea’s president did not have to dye their hair to achieve this.
While China interprets this as an effort to create a kind of “Asian NATO,” Japan and South Korea seek a strong partner because they feel increasingly threatened by China and North Korea. The United States also benefits from the alliance. Michael Radunski explains the connections.
Chi ku – “eat bitterness“: This is what Xi Jinping is asking of young people in China in light of the high youth unemployment rates of over 20 percent. After all, he, too, had to endure hardships during the Cultural Revolution. He wants the pursuit of money to give way to the pursuit of spiritual wealth. Chinese society should not be like the West, unable to restrain the greedy nature of capital. Will this appeal resonate with the motivated but prospectless graduates?
Young people start out in an adult life that is different from that of the previous generation. The latter experienced rapid growth in prosperity, but today, numerous crises weigh down on China’s economy. The real estate blight threatens to spread to other economic sectors. The financial market is in particular peril. Finn Mayer-Kuckuk and Felix Lee report.
Have a pleasant Friday!
China’s real estate crisis is no longer just limited to the housing sector, but is also spilling over into other areas, such as the job and foreign exchange markets. Of particular concern at this stage is the entanglement of the real estate industry with the financial sector, which has provided it with crucial funding. This could turn the price collapse in the housing market into a systemic problem.
Even state and party leader Xi Jinping has expressed his views on the current economic development. This is unusual: He usually stands above things and leaves economic policy statements to his premier. But the current economic situation is obviously too severe to remain silent.
In view of a youth unemployment rate of over 20 percent, Xi had already appealed a few weeks ago to “eat bitterness” (chi ku) and endure hardship. After all, that’s what he had to learn as a young man during the Cultural Revolution.
In view of the real estate crisis, Xi now called on his fellow citizens not only to strive for money, but to pursue “spiritual wealth.” He said this in a speech recently published by the party organ Qiushi, even though he already gave it in February. Xi demanded China focus on long-term goals such as improving education, health care and food for its 1.4 billion people.
It is not about pursuing short-term prosperity, Xi said. He said the real problems are with the West. “They cannot curb the greedy nature of capital.” However, in China, it will be possible to modernize society in harmony.
So his message is: It doesn’t matter if there are fewer jobs and the value of real estate is falling. What matters are entirely different intrinsic values. But Xi’s attempt at downplaying the problems with old socialist rhetoric was unsuccessful. On Thursday, he only caused more unrest in the markets. The flood of negative economic news in the past few days has been too severe.
A so-called “shadow bank,” Zhongrong International Trust, has had to admit to serious problems for the first time. These financial institutions invest money on investors’ behalf without having a banking license. They are important players in China. A bankruptcy would further upset sentiment.
As Reuters reports, Zhongrong International Trust is experiencing liquidity problems. The fund has already had to stall investors waiting in vain for interest and payouts on their investments. Zhongrong is one of China’s leading providers of widely used investment products. The company has invested considerable sums in the real estate market.
The reason for the problems at Zhongrong: The company has invested money in real estate companies on behalf of investors, but these are currently tumbling like dominoes. With Country Garden, China’s second-largest real estate developer is also facing default. A heavy blow to China’s economy, as it was a flagship company.
Country Garden’s debt, which at one point was rated higher than Disney’s, amounts to the equivalent of 190 billion dollars. Particularly alarming is that Country Garden recently missed dollar interest payments of 22 million dollars on its bonds. This means that international investors are being dragged along into the vortex.
With Country Garden, one of the last companies in the real estate sector considered stable, is now in trouble. The crisis surrounding Evergrande, once one of China’s largest construction companies, is far from over. Its bankruptcy has been dragging on for two years now and is turning into a horror without end. In the meantime, Evergrande has amassed gigantic debts amounting to the equivalent of 300 billion euros.
The immediate consequences for the real economy are already massive:
So what no one in China really wants to speak out is quite open for everyone to see: A multi-trillion euro bubble has burst in China’s real estate market. Just like in Japan in 1990, in the USA in 2007, in Europe in the euro crisis of 2010 or after the internet bubble of 2000, the shock waves are rippling through the entire economic system. The comparison with Japan is particularly apt.
The government wants to get a grip on the problems and attempts to stabilize the situation. This works to some extent – by slowing down the progress of events. But the money that was squandered ineffectively is now gone. We are witnessing a car accident in slow motion.
According to official figures, the average property price fell by 0.1 percent compared to last year. That might not sound like much. Compared to their peak in August 2021, prices for new properties have fallen by 2.4 percent, while prices for existing properties have fallen by 6 percent. That also sounds modest.
According to a Bloomberg report, the picture painted by real estate agents and private data providers is much bleaker. Analysts have surveyed real estate agents on actual prices and conclude that prices for existing properties have plunged by at least 15 percent in prime neighborhoods of major metropolitan areas such as Shanghai and Shenzhen, as well as in more than a dozen other cities.
The reason for the discrepancy between official and private price statistics also has to do with the nature of the real estate market. The final price emerges in many private transactions and is not centrally registered. High discounts do not flow into any statistics at first; what is visible above all is the optimistic bid price with which the buyer goes to the market.
Moreover, many properties are left vacant at the old market price. This also explains the standstill of the official figures: Many transactions simply do not happen. As a result, no new price points are being created. Current data show a massive drop in sales of more than 30 percent. One million homes are not finding buyers at all in the sad market. They remain vacant.
The dangerous mix of toxic developments threatens the entire Chinese economy. The real estate sector alone contributes to about one-fifth of China’s economic output. But if the financial sector is dragged even further into this crisis, the real economy will also be affected. Consumers are already refraining from new purchases, companies are forced to lower prices, and with it, wages, which means nothing other than deflation.
If banks become more cautious about risk, lending will decline. Then many good business ideas and solid small and medium-sized enterprises will perish due to lack of money.
Observers expect the Chinese leadership to introduce further stimulus measures in the coming weeks in addition to the aid already provided and instruct its subordinate central bank to cut interest rates. But the bigger the crisis, the more ineffective the instruments. In a crisis mood, the offered capital often does not find enough optimistic buyers willing to take risks. Felix Lee/Finn Mayer-Kuckuk
China’s highest-ranking foreign politician did not mince words about the Japanese and South Koreans: “It doesn’t matter how much you dye your hair blonde, how sharp you make your nose, you’ll never become Europeans or Americans,” ranted Wang Yi at a trilateral conference with Japan and South Korea in the eastern Chinese city of Qingdao. His advice: “We must know where our roots lie.” South Koreans and Japanese could “never become Westerners.”
The reason for Wang’s anger are the plans of Japan’s Prime Minister Fumio Kishida, South Korea’s President Yoon Suk-yeol and US President Joe Biden. The three leaders will meet for the first time this Friday for a trilateral summit. At Camp David, they seek to deepen their cooperation.
A formal alliance between the three countries will not be formed on Friday. But on Tuesday, Yoon announced that “a new milestone in trilateral cooperation will be set” at Camp David. It is expected that a hotline will be established at the leadership level, regular military drills will be held and more cooperation in cyber security and missile defense will be established. In addition, essential supply chains will be jointly secured.
What shines through in all these projects: It is not mutual affection that brings the former enemies together. It is North Korea and China.
Despite all UN sanctions, North Korea regularly fires missiles and tests medium- and long-range projectiles – most recently an intercontinental ballistic missile of the type Hwasong-18 with solid propellant. This missile could theoretically also hit US soil. Just this Monday, strongman Kim Jong-un announced plans to further increase the production of missiles and other weapons.
In addition, Kishida, Yoon and Biden are also concerned about China’s increasingly strong behavior – not only towards Taiwan, the USA, and most recently, the Philippines. Japan and South Korea are also repeatedly experiencing Beijing’s wrath. Key points include the simmering dispute over the Diaoyu/Senkaku Islands, the deployment of the US missile system THAAD or the economic dependence on China.
The problems may differ, but both Tokyo and Seoul are convinced that they need the United States as a close partner to meet this challenge.
China’s ambassador in Seoul, Xing Haiming, recently warned bluntly that some countries in the region would increasingly rely on the USA. But: “Those who bet on China’s loss will surely regret their decision in the future.”
It seems to be the era of alliances. But while North Korea, China and Russia have been cooperating ever more closely, especially since the Ukraine war, the historical animosity between Japan and South Korea has hindered a similar development. Despite domestic opposition, Kishida and Yoon now want to bridge the gap between their two countries.
And so, the USA is also presented with a historic opportunity. After all, experts have so far seen the reluctance of America’s closest Asian allies as a potential Achilles’ heel for US security interests in the region. Washington has failed to form a unity.
“I find the meeting at Camp David mind blowing,” posted Dennis Wilder on the short messaging service X. The Georgetown University professor was responsible for relations between Japan and South Korea under George W. Bush and looks back on the challenges at the time: “We could barely get South Korean and Japanese leaders to meet with us in the same room.”
In the run-up to the Camp David meeting, Rahm Emanuel, current US ambassador to Tokyo, said it would send a strong signal to China, which was trying to intimidate other countries in the Indo-Pacific region. “We’ve created something that […] China was hoping would never happen.”
China strongly dislikes the rapprochement between Japan, South Korea and the USA. The spokesperson of the Chinese Foreign Ministry in Beijing was far more diplomatic than his boss Wang Yi this week. But the direction was the same. China was opposed to “the cobbling together of various small circles by the countries concerned.” Beijing also “opposes practices that exacerbate confrontation and jeopardize the strategic security of other countries.”
On Monday, Chinese military expert Song Zhongping told the state-run Global Times that the US and its Asian allies were building a joint defense mechanism similar to NATO to strengthen joint capabilities in military command, early warning, missile technology and other areas. “The move is ostensibly aimed at North Korea, but its real target is China,” Song said.
Even if the meeting in Camp David is a historic step, the parties involved are under enormous pressure in their project: They have a historic opportunity to forge an important alliance in the Indo-Pacific. But the window of opportunity is narrow.
The mutual rapprochement between Kishida and Yoon stands on feet of clay. It is under heavy fire both in Japan and South Korea. The majority of South Koreans even call Yoon’s policy “humiliating diplomacy.” And even if Yoon could still convince his people of his course, the constitution only allows him a five-year term in office.
Added to this is the situation in the USA. Joe Biden is investing a lot of money and energy in building important alliances there. But in just a few weeks he will be busy fighting for his re-election – with an uncertain outcome. And China should not be underestimated either. As an enormous neighbor of Japan and South Korea, the People’s Republic has many tools at its disposal to drive a wedge between parties. Wang Yi will hardly trust the different hair colors of Kishida, Yoon and Biden.
Construction site at night: The nearly 290-kilometer-long high-speed rail line that workers are working on here at Henggang Station runs from Nanchang, Jiangxi in the west, via the porcelain city of Jingdezhen to Huangshan, Anhui further east. It is expected to be completed by the end of the year.
