April 2015

China’s $46 billion investment on Pakistan  :
The China-to-Indian-Ocean Road via Pakistan

It is part of the Southern Corridor that also connects China to the Pacific Ocean.

(Cf. in yellow below the connection of Islamabad to the Indian Ocean - Gwadar Port - and also to the Pacific Ocean)



Source: CNN. Video at this article link


Pakistan lands $46 billion investment from China


Excerpts from the article:

"Most projects will be in energy and transport, concentrated in the proposed 'China-Pakistan Economic Corridor'".
"It's all part of Xi's ambitious plan to build trade routes that will link China to its near neighbors in Asia and Europe."
"China also sees the Pakistan package as helping tackle homegrown militants."





China's Xi Jinping agrees $46bn superhighway to Pakistan



Excerpts from the article:

"The focus of spending is on building a China-Pakistan Economic Corridor (CPEC) - a network of roads, railway and pipelines between the long-time allies.


Many say Mr Sharif's penchant for "thinking big" and China's increasing need to control maritime trade routes may well combine to pull off an economic miracle in Pakistan.


In Pakistan, a decade-old separatist insurgency in Balochistan province, where the economic corridor starts, makes that area extremely volatile. Many observers believe however that the incentive of an economic miracle may make Islamabad work harder to stabilise the situation.


Under the CPEC plan, China's government and banks will lend to Chinese companies, so they can invest in projects as commercial ventures.


A $44m optical fibre cable between the two countries is also due to be built.

 Pakistan, meanwhile, hopes the investment will enable it to transform itself into a regional economic hub.'


Proposed China Pakistan corridor image at http://www.bbc.com/news/world-asia-32377088


@infobookcom Tweet



Reflections from my first Asia-Pacific Trip as Deputy Secretary posted by Antony "Tony" Blinken





Media Note | Office of the Spokesperson | Washington, DC | February 4, 2015
Deputy Secretary of State Antony Blinken Travel to the Republic of Korea, China, and Japan
"In his first trip overseas as Deputy Secretary of State, Deputy Secretary Antony Blinken will travel next week to the Republic of Korea (ROK), China, and Japan to meet with a wide range of government officials and non-governmental experts"


Pictures: https://www.flickr.com/photos/statephotos/sets/72157650719421031



(Link to blog from following tweet)

 Antony Blinken @ABlinken · Feb 19
Back in DC, but Asia focus continues. Met w/ ASEAN ambassadors yesterday to review my trip. http://go.usa.gov/33VcC 


Twitter Q&A Session before trip

Antony Blinken @ABlinken · Feb 4
Look forward to it! RT @StateDept Questions about East Asia policy? #AskTony! Twitter Q&A Friday at 10:30am ET. http://go.usa.gov/hPrJ 

Antony Blinken retweeted
EAP Bureau @USAsiaPacific · Feb 4
Deputy Secretary of State @ABlinken will travel to the ROK, China, and Japan February 9-14. Follow his travel @ http://go.usa.gov/hP5V  
From link above: “In advance of his trip to East Asia, Deputy Secretary Blinken will hold a Twitter Q&A on Friday, February 6 at 10:30 A.M. Follow along with #AskTony for more information.”

Antony Blinken @ABlinken · Feb 6
Getting ready to hit the road but eager to answer your questions first. Let's hear them! #AskTony

Antony Blinken retweeted
Christopher D Osborn @mvbcdo · Feb 6
What concrete actions is the U.S. prepared to take to encourage the reunification of the Korean peninsula? @StateDept#askTony#Tongil
Antony Blinken @ABlinken · Feb 6
.@mvbcdo Look forward to discussing ways to support ROK in conversations on Korean peninsula issues. #AskTony

Antony Blinken retweeted
Brookings China @BrookingsChina · Feb 6
@ABlinken What are your main goals for this upcoming trip? #AskTony

Antony Blinken @ABlinken · Feb 6
.@BrookingsChina Advancing the rebalance, consulting close allies - #ROK & #Japan, and building cooperation w/#Chinahttp://go.usa.gov/hetW 

Antony Blinken retweeted
KIM Kyu Hyeon @kkhDreaming · Feb 6
#AskTony@ABlinken RoK and Japan are not getting along. Surely US needs to take bold action for security in the region. Don't you think?
Antony Blinken @ABlinken · Feb 6
.@kkhDreaming Trilateral cooperation important for peace and stability. Will discuss more in Seoul and Tokyo.

A Reporter creates a personal page: https://storify.com/yaraki/tony-blinken-q-and-a-ahead-of-his-travel-to-dprk-c


Antony Blinken @ABlinken · Feb 21
Lucky to get some advice yesterday from one of the best to ever walk the @StateDept halls: @madeleine



US State Department Deputy Secretary Anton Blinken: "American, French, Jew New Yorker, Parisian..." (quoting Le Monde)

(In French) 


Translation of selected passages from the Le Monde article:


(refers to May 2011) At the White House, he has the title of the diplomatic advisor to the Vice President. Americans do not know him but he is in all meetings. It is he who supervises the departure of US troops from Iraq.


“American, French, Jewish New Yorker, Parisian...”

His father Donald Blinken was a lawyer and an influential investor in New York, a future financial powerful personality of the democratic circles. His mother Judith was the director of ballet Merce Cunningham. In the apartment on Park Avenue, she was receiving Arturo Toscanini and Leonard Bernstein.


In 1968, Judith met Samuel Pisar Blinken in a New York soirée event. The French-American lawyer, globetrotter, a survivor of Auschwitz, Harvard graduate, was advisor to John Kennedy. In 1970, Judith Blinken  divorced and – as Judith Pisar - went to live in Paris with her son. The contrast between the adolescence of his stepfather, deported at age 13, and his own, full of privileges, contributed to the intellectual and political awakening of the young Blinken.


In an interview with the Washington Post on September 16, 2013, Samuel Pisar told that Antony had insisted on knowing what he had experienced. "It gave him another dimension, another perspective on the world, he said. When he has to worry today about deadly gases in Syria, he almost inevitably thinks of the gas which eliminated my entire family. »


Tony Blinken has known the France of the Giscard years. (...)


After high school, he chose the United States: Harvard and international relations at Columbia in New York. Almost against his will, he joined the Clinton administration in which officials for Europe were looking for an "intelligent and cosmopolitan" perspective, according to the Washington Post. Since then he has been a pillar of transatlantic relationships, discreet and deemed convenor.



Secretaire d'Etan Adjoint Americain, Antony Blinken: "Americain, Français, Juif New Yorkais, Parisien..." (Le Monde)



(Mai 2011) A la Maison Blanche, il a le titre de conseiller diplomatique du vice-président. Les Américains ne le connaissent pas mais il est de toutes les réunions. C'est lui qui supervise le départ des troupes américaines d'Irak.


Américain, français, juif new-yorkais, parisien…

Son père Donald Blinken était un juriste et un investisseur influent à New York, future puissance financière des milieux démocrates. Sa mère Judith était la directrice des ballets Merce Cunningham. Dans l'appartement de Park Avenue, elle recevait Arturo Toscanini et Leonard Bernstein.


En 1968, Judith Blinken a rencontré Samuel Pisar dans une soirée new-yorkaise. L'avocat franco-américain, globe-trotteur, rescapé d'Auschwitz, diplômé de Harvard, avait été conseiller de John Kennedy. En 1970, Judith Blinken a divorcé et – devenue Judith Pisar – est allée s'installer à Paris avec son fils. Le contraste entre l'adolescence de son beau-père, déporté à 13 ans, et la sienne, gorgée de privilèges, a contribué à l'éveil intellectuel et politique du jeune Blinken.


Dans une interview au Washington Post du 16 septembre 2013, Samuel Pisar a raconté qu'Antony avait insisté pour savoir ce qu'il avait vécu. « Cela lui a donné une autre dimension, une autre perspective sur le monde, a-t-il dit. Quand il a à se préoccuper aujourd'hui des gaz mortels en Syrie, il pense presque inévitablement aux gaz qui ont éliminé ma famille entière. »


Antony Blinken a connu la France des années Giscard. (…)


Après le bac, il a choisi les Etats-Unis : Harvard, puis relations internationales à Columbia, à New York. Presque à son corps défendant, il est entré dans l'administration Clinton où les chargés de l'Europe cherchaient une perspective « intelligente et cosmopolite », selon le Washington Post. Depuis, il est un pilier des relations transatlantiques, discret et réputé rassembleur.




2015 IMF report on China (1 of 2)

released on 2015-08-14


Indirect link - Click on "Read the report"

pdf link at following tweet


IMF: Balancing act needed to manage an orderly slowdown and advance structural reforms in China


IMF: Implementation of outlined reforms key for success of econ transition & creating new sources of growth in China. http://ow.ly/QVG2d 


IMF ‏@IMFNews  Aug 15 | IMF: Bold reforms needed in financial sector and SOEs for China to transition to a more open and market based economy http://ow.ly/QWa3z 

IMF: Recent stock market developments in China not a game-changer; vigilance needed to guard against the build-up of risks early on.



Excerpts from the report:


China's role in world commerce after the financial crisis

(p.23) Growth transition and commodity prices. The post-global financial crisis investment drive was associated with a significant increase in the demand for commodities, particularly steel and other metals. The demand from China has therefore been seen as supporting world commodity prices in the aftermath of the global financial crisis, and this view has been strengthened by the association between the slowdown in China’s investment growth and the recent decline in commodity prices.



(p.24) China moving up the global value chain. While the post-global financial crisis investment boom had a major impact on China’s trade pattern, deep structural changes played an equally important role in shaping China’s role in the global economy. In the last two decades China graduated from a low-skill, labor-intensive exporter towards more sophisticated products, increasing domestic value addded and reducing import content of exports (Box 10). Such changes have posed challenges and opportunities for its trading partners, particularly in the region. For example, the move up the value chain has contributed to a sharp improvement in China’s trade deficit with the main Asian electronics supplier countries even as its surplus with the United States and the European Union has continued to rise. Meanwhile, the exit from labor intensive goods—albeit gradual given remaining pockets of relatively cheap labor in inland China—has allowed low-income Asia (such as Bangladesh, Cambodia, and Vietnam) to fill the space vacated by China (6).


(note: for instance computer electronic parts to make computers are no longer imported from other countries)







China market reaches inflection point on goods like apparel and toys

Countries like Vietnam, Bangladesh and Cambodia "fill the space vacated by China"

(p.53, Box10, lower panel)




Unsold real estate - Buildup of housing inventory 

Years of very high real estate investment have resulted in considerable oversupply. Residential real estate investment—which accounts for more than two-thirds of total real estate investment—has been an important source of growth and employment, including by boosting activity in related industries. However, housing inventories have risen a lot, especially in smaller (Tier 3 and 4) cities, which on average have unsold supply of around three years of sales.



China’s Equity Market: Recent Developments and Risks


p.38 - Box 4

The stock market has more than doubled over the last year, despite a slowing economy and declining profit growth. The influx of new investors, a surge in margin lending, and rising leverage and interconnectedness of securities firms pose potential financial stability risks. The broader risks for growth are rising, but likely still relatively small.

Sharp rise in prices. The market’s rapid ascent since the middle of 2014 understandably raises concerns about the prospect for future price volatility and the possible implications for broader financial stability.
The market’s more than 150 percent gain stands in sharp contrast to modest price changes for international markets and has come even as domestic economic growth has moderated. The upswing has been broad based, encompassing almost every listed stock (...).


A number of factors may have pushed prices higher. Some market participants point to comments by high-level officials that may have been interpreted as offering “official support” to the market. The authorities and securities exchanges have implemented measures to promote equity investment including easing rules for margin borrowing (April 2013), liberalizing mutual funds (August 2014), and allowing investors to open multiple brokerage accounts (April 2015). Inflows to the equity market may also have been boosted by households reallocating saving away from real estate and optimism about shareholder-friendly SOE reforms.



Credit (Social Financing) is high but its increase pace is declining considerably

Credit in China has risen rapidly and is high by many metrics. The corporate sector, in particular, has increased debt-to-GDP ratios since the global financial crisis and a period of deleveraging is warranted.

Credit is high. Total social financing (TSF) and the BIS measure of credit to the private sector are complementary ways to measure credit to the nonfinancial private (that is, nongovernment) sector. Both increased dramatically since the global financial crisis. (...) The rise has been driven by the corporate sector, particularly in real estate firms, SOEs (state-owned enterprises), and overcapacity sectors. Household debt has doubled since 2008, but is still low. It is primarily for mortgages (with relatively low loan-to-value ratios), represents just a fraction of household wealth, and is actually less than household deposits.


Credit growth, especially in shadow banking, has declined considerably


In the aftermath of the global financial crisis, total social financing (TSF), a broad measure of credit, increased dramatically. However, since 2014, the pace of TSF growth has decelerated considerably, from the peak of 34.4 percent (TSF stock, year-on-year) at end-2009 to 12.4 percent in May 2015 (estimated by IMF staff, Figure 2). The change in dynamics was even more dramatic for the flow of credit, which contracted 19 percent in 2015 (January-May, year-on-year). The reversal was a result of
stricter regulation of shadow banking activities, which also helped improve the composition of TSF
growth toward conventional bank loans. TSF growth has also been affected by tighter financial
conditions as reflected in REER appreciation and, earlier this year, rising real interest rates (from falling
inflation). The central bank has, since last November, lowered the benchmark lending rate by 90 basis
points in three steps and twice cut reserve requirements (1).


Figure 2 - upper panel



2015 IMF report on China (2 of 2)

"China’s transition to a ‘new normal’, characterized by slower yet safer and higher-quality growth" 

(quoting the IMF report)


Indirect link - Click on "Read the report | PDF link at following tweets


Excerpts from the IMF report on China released on 2015-08-14


(p.2) Excerpt from introductory text


China is transitioning to a new normal, with slower yet safer and more sustainable growth. Growth last year fell to 7.4 percent and, this year, is forecast to slow further to 6.8 percent on the back of slower investment, especially in real estate. The labor market has remained resilient despite slower growth, as the economy pivots toward the more labor-intensive service sector. This, in turn, has supported house-hold consumption. Inflation is forecast to remain at 1.5 percent, pulled down by the appreciation of the real effective exchange rate and falling global commodity prices.




New leadership, new direction for the economy: (…) The Third Plenum reform blueprint, announced in late-2013, set out a comprehensive agenda to be completed by 2020. On the economic side, the aim is to move to a more sustainable growth model, including by giving the market a decisive role in the economy. It also covers issues such as urbanization, rural land reform, one-child policy, environment, and institutional frameworks.



The Third Plenum Reform Blueprint



Communiqué of the Third Plenary Session of the 18th Central Committee of the Communist Party of China


“We must deepen economic system reform by centering on the decisive role of the market in allocating resources, adhere to and improve the basic economic system, accelerate the improvement of the modern market system, macro-control system and open economic system. We must accelerate the trans-formation of the growth pattern, and make China an innovative country. We must promote more efficient, equal and sustainable economic development.”





Announced reforms of the Third Plenum (and respective IMF advice) can be found at Appendix I of the 2014 IMF report for China, available at the link above.

[People’s Republic of China—Staff Report, IMF Country Report No. 14/235 (2014)]





WSJ - November 2013

Beijing Endorses Market Role in Economy



“BEIJING—The first policy blueprint from President Xi Jinping a year into his reign said market forces would play a "decisive" role in the economy…”


A reliance on exports and investment in heavy industry drove growth that averaged about 10% a year for 30 years—a world record. But it also produced wasteful investment in real-estate projects and in heavily polluting industries. It has also made China increasingly dependent on the vagaries of global markets, as slumps in exports to places like the U.S. and Europe took a toll at home.


Instead, top policy makers want to turn China into a consumer society that more closely resembles the U.S. and Western Europe, where the service and high-technology sectors play a bigger role and where innovation is encouraged.


Making such a transition is bound to reduce the rate of growth, at least in the short term, because it is far easier to withdraw support from older industries than it is to encourage the creation of new ones. But Chinese officials figure they have little choice. Growth has already been slowing despite a huge run-up in lending—a formula that has led to financial crises elsewhere in the world.




Excerpts from the IMF report (continued)


(p.8) Adjustment underway. The authorities’ plans are in line with previous staff advice and progress has been made. Credit growth, in particular the ‘shadow bank’ component, has slowed; the real estate sector is undergoing a needed adjustment; and a new budget law is tackling the challenges of local government finances. Reforms aimed at liberalizing the financial system have also advanced (Appendix I). Key achievements include the introduction of deposit insurance and progress in liberalizing interest rates.


(p.8) Significant challenges still ahead. Faster progress on growth-enhancing reforms is critical. Since the global financial crisis, the pattern of growth has relied on an unsustainable mix of credit and investment. This has led to rising government and corporate debt, increasing pressure on the financial system, and declining investment efficiency. Moving to a safer and more sustainable growth path requires reversing these trends.


(p.5) Key Issues

Context. China is moving to a ‘new normal,’ characterized by slower yet safer and more sustainable growth. The transition is challenging, but the authorities are committed to it. They have made progress in reining in vulnerabilities built-up since the global financial crisis and embarked on a comprehensive reform program.


Outlook and macro policies. Growth is projected at 6.8 percent this year, down from 7.4 percent last year. This slowdown, which is in line with the authorities’ target of around 7 percent and staff’s recommended range of 6½ to 7 percent, reflects progress in addressing vulnerabilities, including slower total social financing (TSF) growth, tighter oversight of shadow banking, a correction in real estate, and a new budget law. To ensure further progress in addressing vulnerabilities, GDP growth should be permitted to slow to 6–6½ percent next year.



Structural reform. Progress has been made, but considerable work remains in implementing the authorities’ reform agenda in the financial, fiscal, state-owned enterprises (SOE), and external sectors. Priorities are moving to a more market-based financial system; improving the management of government finances; leveling the playing field between SOE and the private sector; and having an effectively floating exchange rate regime within 2–3 years. The faster the progress, the sooner the growth-enhancing benefits will materialize.


(p.14) B. Impact of Reforms

(paragraph 21). Staying with the current growth model is not an option. In the near term, it may result in higher growth, but at the expense of a continued rise in vulnerabilities.(…)


In contrast, staff baseline projections assume steady progress in addressing vulnerabilities and implementing reform.

  • Growth slows in the near term as a reduction in unsustainable demand weighs on activity. This includes slower credit growth to eliminate the debt overhang and a multiyear correction in real estate investment to bring down excess housing inventories.
  • Growth thus falls to 6¼ percent in 2016 and 6.0 percent in 2017, cushioned by productivity gains from structural reforms.
  • Starting in 2018, overall growth picks up modestly as those productivity gains begin to dominate. Staff analysis—based on the experience of other fast-growing Asian economies, modeling exercises, and growth convergence regressions—suggests that growth of around 6½ percent in 2020 is ambitious yet achievable with successful reforms (Box 6 and Figure 6).



(Paragraph 23). Toward internal and external balance by 2020. The staff baseline assumes that the Third

Plenum blueprint is implemented by 2020 as announced by the authorities (4). Implementing these reforms  including social security, financial sector, fiscal, exchange rate, capital account, and SOE reforms—will reduce excess savings, lower investment, raise productivity, and boost consumption. The investment-to-GDP ratio declines as growth becomes less capital intensive and shifts to more labor intensive services.


(4) See Appendix I in the People’s Republic of China—Staff Report, IMF Country Report No. 14/235 (2014). https://www.imf.org/external/np/sec/pr/2014/pr14369.htm




Economic Analysis by Bloomberg


Excerpts from a Bloomberg analysis by Peter Coy published on 2015-08-27


"Large parts of the Chinese service sector, like restaurants and health care, continue to grow, supporting the broader economy. But the signs in industrial sectors, in which other countries and foreign companies have the greatest stake through trade, paint a bleaker picture.


For more than a decade, prices surged for iron ore, a main ingredient in making steel, as new skyscrapers, rail lines and other infrastructure were built across China. 


But he conceded that the country’s steel production would most likely “grow a little more slowly,” citing a forecast that works out to just 1.4 percent annually — a figure that sounds more like Europe than the formerly go-go economy of China.



Automobile manufacturers cut their shipments of new cars to dealers by 7 percent in July, compared with a year earlier. Retail sales had not suddenly tanked, said Cui Dongshu, the secretary-general of China’s Passenger Car Association, which represents manufacturers. Rather, too many cars had been sent to dealers’ lots in previous months, he said. In other words, manufacturers were slow to see the economy’s deceleration and waited too long to throttle back their factories. “What manufacturers are doing is adjusting inventory levels to the ‘new normal,’ ” said Bill Russo, a former chief executive of Chrysler China, using a favorite phrase of President Xi Jinping of China in recent months to describe an economy that is expanding at a slower pace.


Similar adjustments are taking place around the globe.


Most important, China acted as a counterweight to the chronically slow-growing markets in Europe."