China Targets ‘Ambitious’ Growth Without Road Map to Get There

March 7, 2024 By alexfrewmcmillan in Asia, China, Communist Party, Geopolitics, Hong Kong, Investment, Politics, Stock market Tags: Asia, Beijing, China, Chinese Communist Party, Covid-19, economy, Hong Kong, Investment, Stock market, stocks, Two Sessions Leave a comment

Investors are disappointed about the lack of detail from China’s legislature as Premier Li forecasts growth of “around 5%.”

China has set a challenging target for GDP growth this year “at around 5%” as its legislature holds its annual meeting that sets the tone for the rest of the year.

On the surface, the target seems achievable. It’s essentially unchanged from last year, when the target was a slightly more specific “around 5.0%,” with 2023 growth coming in at 5.2% in the end.

But we need to dig a little deeper into those targets. Last year benefited from coming off a low base because much of China was locked down for large parts of 2022, making for flattering year-over-year comparisons. That won’t be the case now.

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And any hopes for the Chinese economy to come roaring back to life after the Covid-19 pandemic have fizzled. A loss of corporate and consumer confidence, lackluster demographics, the trend toward “friendshoring” and difficulties deploying international capital across the Bamboo Curtain provide a pessimistic backdrop.

Given the strong headwinds blowing against the Chinese economy, not least of which is the gale of negative trends afflicting China’s property market, a 5% target for 2024 is “ambitious” in the eyes of Commerzbank. It will undoubtedly require stimulus that will need to be rolled out with better coordination among the various ministries and levels of government.

A ‘Very Challenging’ Mark to Hit

Providing that stimulus is a problem. Local governments are still staggering under the weight of debts run up during the costly, failed fight to eliminate Covid-19. Now those local administrations are hit by the reality that private developers have little to no appetite to buy land, one of the main ways that a local government raises funds.

Investment firm Nomura said it will be “very challenging” for China to hit the mark. The numbers for January and February have been lackluster. Beijing officials anticipate inflation of around 3.0% this year, which means nominal growth will need to run at 7.4% for 2024.

“Beijing should step up central government spending and encourage regions with relatively healthy balance sheets to increase spending as well,” the Nomura China economics team headed by Ting Lu wrote in a note to clients. The central government should expand quantitative easing, allow local governments to issue special bonds and refinance others to swap out hidden debt.

But the current budget leaves little room for such spending. What’s more, 12 Chinese provinces have been highlighted as high-risk, financially. The revenues of local government-managed funds, which last year raised 87.5% of their money from land sales, are budgeted to rise by only 0.1% this year.

“We believe this target is still overly optimistic,” the Nomura team noted, “considering the continued downward spiral of the property sector.” Those local-government funds saw revenues contract 10.1% in 2023, well below the target of 0.4% expansion.

In other words, all is not well, particularly at the local level. Beijing will need to figure out some way to turn around the loss of confidence in the property market, and in private developers in particular, which has led to a stalling of transactions as well as a negative wealth effect for property owners.

Premier’s Lower Profile

China has a history of hitting government forecasts, with most economists believing the data are “massaged” if the numbers don’t cooperate. But even Premier Li Qiang admits it is a lofty goal for 2024.

“It is not easy for us to realize these targets,” Premier Li said in delivering the forecast as part of the government work report to nearly 3,000 delegates in the Great Hall of the People in Beijing. “We need policy support and joint effort on all fronts.”

China’s legislature is holding its annual “Two Sessions” meetings this week, with the legislative National People’s Congress taking place alongside the advisory Chinese People’s Political Consultative Conference. The work report calls for the creation of 12 million jobs in urban areas, the highest target ever set, and maintaining the urban jobless rate at around 5.5%, although there were no specifics on how to achieve either goal. Defense spending will rise 7.2%, the same increase as last year.

For the first time since 1993, Li did not hold a news conference after delivering his speech. That downgraded the profile of China’s No. 2 official, with Premier Li also technically the highest-ranked civil servant in China. Beijing said Li will not give such a briefing during his five-year term, barring “special circumstances.”

No. 1 on all fronts, of course, is Chinese President Xi Jinping. Xi, who is also general secretary of the Chinese Communist Party, and he is calling on the legislature to develop “new quality productive forces,” according to the official wire service Xinhua. These high-tech initiatives should help upgrade traditional sectors to “high-end, intelligent and green industries,” although Xi said it is “necessary to prevent a headlong rush into projects and the formation of industry bubbles.”

It was Xi’s clarion call that “Houses are for living in, not for speculation” in 2019 that led to strict measures on credit levels for Chinese developers that were laid out in August 2020. With the property market now in free-fall, that phrase was omitted from the government work report for the first time since its 2019 inclusion.

Otherwise, there were pretty pictures painted of plans to boost growth, but no major structural reforms and no injection of stimulus. The Beijing government left its inflation target at 3%, same as every year in the last decade bar Covid-infected 2020, and left monetary and fiscal policy largely unchanged.

Investors are clearly disappointed by the lack of overt stimulus and market support. One economist called it a “target without a plan,” given the absence of moves to bolster consumption, turn falling wages around and address the deflationary period that China first entered as of last summer.

We can see the reaction most clearly in the Hong Kong market. The benchmark Hang Seng Index led the losses in Asia on Tuesday as the target was announced, with the Hong Kong market off 2.6% to a two-week low. Similarly, the Hang Seng China Enterprises Index of Hong Kong-listed mainland companies fell 2.6% and the Hang Seng Mainland Properties Index of Chinese developers fell 2.4%.

We also can see how the Beijing government would like to order the stock market to rise back up. Trading on Tuesday in mainland markets was masked by buying from state-owned funds, causing the CSI 300 blue-chip index of the largest listings in Shanghai and Shenzhen to rise 0.7%.

State-Supported Rally Doesn’t Last

But that’s window dressing directed by mainland administrators to make the government look good. It can’t and won’t last. The CSI 300 sank 0.4% on Wednesday with the state support removed. The Hang Seng, meanwhile, clawed back 1.7% on Wednesday on a day most Asian markets moved higher.

I was joking with an East Asia-focused fund manager that I’m waiting for Beijing to declare that from now on it only will allow investors to buy shares and never sell. The market would crash as everyone heads for the exits as fast as possible before such a new rule is imposed. While that’s a joke, I’m sure Beijing officials have considered something similar.

Chinese officials last month moved to curtail the ability to short stocks and to prevent quant funds from trading large volumes of stock that might disrupt markets. One prominent fund was barred from trading for three days for so-called “disorderly” trading. Securities regulators also told major institutional investors not to reduce equity holdings at the open and at the close of each trading day – effectively, a partial selling ban.

Economists, meanwhile, still forecast that China will miss its growth mark, with the World Bank forecasting growth of 4.5% for the mainland economy in 2024 and the International Monetary Fund predicting 4.6%.

Chinese Stocks Surge But Can the Year of the Dragon Roar?

February 8, 2024 By alexfrewmcmillan in Asia, Business, China, Communist Party, Hong Kong, Investment, Stock market Tags: A Shares, Alibaba, Alibaba Group Holding, Central Huijin, China, China Securities Regulatory Commission, Chinese New Year, CSI 300, CSRC, Equities, Hang Seng Index, Hong Kong, Investment, Lunar New Year, stocks Leave a comment

Heading into the Lunar New Year this weekend, Chinese officials are increasingly concerned about poorly performing stocks. Will they make the necessary stimulatory moves?

Have we reached the China bottom?

That’s what I asked my fund-manager friend yesterday as Chinese equities surged. The blue-chip CSI 300 index jumped 3.5% to post its biggest one-day gain since November 2022. He thinks we must be there.

In Hong Kong, the Hang Seng Index soared 4.0%, its biggest gain since last July. Tech stocks led the way, up 6.8%, and the Hang Seng China Enterprises Index of mainland businesses listed in Hong Kong rallied 4.9%.

There are several drivers, which certainly leave investors with plenty to ponder as many Asian markets take a Lunar New Year break. But I’m not entirely convinced they justify a sustained rally.

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What’s driving the optimism? Essentially, it revolves around the extent of the Beijing government’s concern that equity markets have fallen so far, for so long, that it constitutes a threat to social stability.

Driver 1 is that Central Huijin Investment, a subsidiary of the US$1.2 trillion Chinese sovereign wealth fund, said on Tuesday that it is increasing its investment into exchange-traded funds for Chinese A shares. It didn’t disclose how much it has invested but says the buying has already begun, with more to come “to resolutely safeguard the stable operation of the capital market,” according to state news service Xinhua.

Driver 2 is that the stock watchdog, the China Securities Regulatory Commission (CSRC), says it will support Central Huijin’s efforts. It will also “coordinate and guide” other institutional investors, both state-backed and private, “to enter the market more vigorously.” It will also encourage listed companies to buy back their own shares.

Driver 3 is that regulators plan on running their concern about financial markets right up the flagpole, to the very top. Officials from the CSRC, China’s equivalent of the U.S. Securities and Exchange Commission, plan to brief Chinese President Xi Jinping about the need for “forceful” measures to support the market, according to a Bloomberg report.

It’s not clear what if anything would come of such a briefing. Xi is nicknamed “The Core,” such is the centrality he has ensured for himself in party politics, and everyday Chinese life. But he has previously hewn to decidedly Marxist-Leninist tactics, and prefers a centralized command economy in which the Chinese Communist Party comes first, state-owned enterprises second, and the private sector comes third.

It was the targeting of successful entrepreneurs and Big Tech, followed by efforts to rein in the property industry, that started this market downturn. The Chinese Communist Party is, fundamentally, suspicious that the private sector can pose a threat to its supremacy.

Mainland markets are coming off fresh five-year lows set on Friday, while Hong Kong stocks are half the value of their first post-Covid rally in February 2021. Since early 2021, around US$7 trillion has been wiped off the market capitalization of Chinese companies.

While there have been frequent efforts by officials to talk the market back up, so far they have met with little success. Government ministries have also responded with strictures telling analysts to avoid negative commentary. Social-media posts about the markets are also censored and scrubbed from the Internet if they gain traction.

This led to a strange situation where an innocuous U.S. embassy post about efforts to combat giraffe poaching in Namibia using GPS technology became an impromptu graffiti wall lamenting the state of stocks and the economy in China, soliciting 166,000 posts.

There has been concrete but piecemeal action to support the stock market. The CSRC this week announced curbs on securities lending intending to make it difficult to short stocks, while the stock watchdog has vowed “zero tolerance” in targeting malicious short sellers. Securities cannot now be re-lent, a practice that brokerages used by borrowing shares then lending to clients for short sales. Securities lending is already down 24%, the CSRC says.

But these have been tweaks around the edges, and tinkering with how the markets operate does not change fundamentals. Slower economic growth of 3% to 4% “is here to stay” for China, the New York-based think tank Rhodium Group says in a new commentary.

It notes that China’s market-support efforts in 2023 already involved ETF purchases by Central Huijin as well as state-owned China Reform Holdings Corp. The CSRC slowed the pace of new stock listings, tightened rules on share sales by large shareholders and even, late in the year, briefly stopped mutual fund managers selling more shares than they bought. Stamp duty on stocks was halved, brokerage handling fees cut, margin requirements lowered…

These are artificial measures to shape supply, demand and prices for shares, the commentary notes, “administrative solutions to stock exchange problems.” It will require less control over private capital for markets to truly reform and recover.

So, even if there is a high-level meeting between stock-market regulators, officials and Xi, the outcome will likely be more pep talk, more tinkering with market function, but little to boost company fundamentals and stimulate the economy. China appears at a loss as to how to turn a lack of confidence around.

And indeed, while mainland stocks enjoyed a second day of gains for Wednesday, with the CSI 300 adding another 1.0%, Hong Kong stocks saw a little selling, ending Wednesday down 0.3%.

China bellwether Alibaba Group HK:9988 and (BABA) added 7.6%, not quite fully reflected in Tuesday’s showing on Wall Street, where it advanced 4.8%. The stock ended the day down 1.5% on Wednesday in Hong Kong.

Surely we cannot have far farther to fall in Chinese equities. But Tuesday’s rally does little to reassure investors. The selling has been longest and hardest in Hong Kong, where it’s easy for international investors to buy and sell. We have a couple more days of trade to see if there really are green shoots taking hold suggesting a longer-term rally.

We are heading into the Lunar New Year, and the Year of the Dragon, which will start on Saturday. Markets in mainland China will break at the close on Thursday, and remain shuttered all of next week, making Feb. 19 their next day of action.

In Hong Kong, trading also ceases on the eve of the new year, Friday, although markets will be back in action next Wednesday, Feb. 14.

Taiwanese stocks – one of last year’s success stories, with a semiconductor-driven 26.8% advance for 2023 – have already broken for the holidays, inching ahead 0.2% on Monday before the break. They resume on Thursday, Feb. 15.

Vietnam and South Korea also honor the Lunar New Year, with markets closed as of Thursday in Hanoi and Ho Chi Minh, and as of Friday in Seoul. Korean trade kicks back into gear on Tuesday, Feb. 13 with Vietnamese action resuming two days later.

There’s plenty to ponder as East Asia breaks for food and family gatherings. How markets shape up when trading resumes will depend on the direction of company profits and the overall Chinese economy, far more than administrative measures attempting to game an upward move.

India Passes China for World’s Largest Population

April 20, 2023 By alexfrewmcmillan in Asia, Business, China, Demographics, Geopolitics, India, Investment, Politics, Population Tags: Apple, China, Contraception, Demographics, Family planning, India, Migration, One-child policy, Population, Retail, United Nations, Women's rights Leave a comment

Mark your calendar. Today is the day that India holds more people than anywhere else on Earth, after two centuries of Chinese population supremacy.

Hot on the heels of the world surpassing 8 billion total people, India has surpassed China to become the world’s most-populous nation, according to fresh data.

India is now home to 1,428,600,000 people, according to newly released numbers from the United Nations, which you can find on its World Population Dashboard. China is home to a mere 1,425,700,000.

It’s a momentous shift. India’s economy is younger and still growing, while China is suffering from an ageing population and the low birthrate that’s a hangover from decades of the one-child policy, whose generations are now marrying and having their own children at less-than-replacement rate.

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Multinational companies are already keen to diversify production away from an overdependence on China due to geopolitical tensions as well as rising wages. Add to that equation the greater relative attraction of the Indian market, likely to grow at a faster pace than China for years to come.

So it is with impeccable timing that Apple is opening its first stores in India, with an outlet in Mumbai and then in New Delhi. India has also improved the attractiveness for international retailers with changes in the law that allow direct ownership of local stores, whereas companies used to have to work through a local partner. Apple has sold for 25 years into India through third parties.

Apple is now also making iPhones in India for sale to the local market, and is also ramping up production of its goods in Vietnam. The company will likely be making one-quarter of its products outside China by 2025, according to JPMorgan Chase, up from less than 5% now.

The official confirmation in the change in the population world order comes today, although of course demographics rely on estimates and censuses conducted over periods of time. The U.N. Population Fund has just released its State of World Population report for 2023, which you can find here.

India will begin to see its population shrink, too, and likely in fairly short order, within two to three decades. Already, 31 of its 36 states are seeing the population decline, but the remaining five states have such a high fertility rate that they offset the others.

India’s population growth reportedly peaked at 2.4% in the 1980s but has dropped to 1% as of 2020. However, the last Indian census was in 2011, and the country delayed the population count that was due to occur in 2021 due to the pandemic. The United Nations has updated the 2011 count based on fertility, mortality and migration rates.

The world passed 8 billion people in November 2022. To me, that’s too many. But the United Nations would rather cast the numbers in a positive light.

“For many of us, it represented a milestone that the human family should celebrate,” Natalia Kanem, the executive director of the U.N. Population Fund, writes in the new report, “a sign that people are living longer, healthier lives and enjoying more rights and greater choices than ever before.”

Kanem does make an excellent point that birthrates aren’t the be all and end all. Increased gender equality can offset problems in both low-birthrate nations, by encouraging women to enter the workforce, and in high-birthrate nations, by giving women more agency in family planning.

The United Nations says that around 24% of women and girls are “unable to say no to sex,” while 11% are unable to make decisions over contraception. Such families are unable to control unplanned pregnancies, while the poorest people may lack access to contraception even if they’re allowed to avail themselves of it.

World population growth is now at its slowest pace since 1950. Just eight nations will account for half of the projected growth in population by 2050.

China’s shrinking, ageing population is entering a world that nations such as Japan and Italy already inhabit. In fact, two-thirds of the world’s people live in places where the fertility rates are below the “replacement rate” of 2.1 births per woman. As mortality rates decrease, it makes sense that fertility rates fall, too.

In China, it is also a rising standard of living and rising incomes that are leading to a decline in the birthrate. Many Chinese families say they would rather focus their resources on a small number of children — often choosing to have only one child where they’re legally allowed and politically encouraged to have more — to give them a better start in life.

India’s fertility rate has fallen from 5.7 children per mother in 1950 to 2.2 births per woman today. So it is on the cusp of shifting into decline.

Often forgotten in this discussion is the effect of migration. A country with a shrinking population can quickly offset that effect by encouraging more workers to move there from abroad. Immigration is a dirty word in today’s politics. But it can be a boon to an economy that is struggling under an “inverted pyramid” of population, with a bulging older demographic slice supported by a tinier young generation.

We should also reconsider how we measure economic success. Figures for gross domestic product rely so much on growth that they “praise” a country that concretes over its entire wilderness to populate it with cities and factories. Gross domestic happiness is forgotten.

The U.N. report calls on governments to strengthen pension and healthcare systems in response to these demographic changes, as well as to promote exercise and healthy ageing, and protect migrant rights.

Biden Promises U.S. Military Will Defend Taiwan if Attacked

May 24, 2022 By alexfrewmcmillan in Anthony Albanese, Asia, Australia, Business, China, Communist Party, Fumio Kishida, Geopolitics, India, Indo-Pacific Economic Framework, Investment, Japan, Politics, Quad, South Korea, Trans-Pacific Partnership, U.S. President Joe Biden, United States, Yoon Suk-yeol Tags: Trans-Pacific Partnership Leave a comment

Surprising even his own staff, the U.S. president overshadowed the launch of the Indo-Pacific Economic Framework for Prosperity.

The response from U.S. President Joe Biden came firm and clear. Would the United States get involved militarily to defend Taiwan, a move it has avoided so carefully in Ukraine?

“Yes,” Biden said bluntly in Tokyo on Monday. The reporter who asked the question, not quite believing her ears, says “You are?”

“That’s the commitment we made. That’s the commitment we made,” he repeated.

With that statement, Biden ensured that today’s unveiling of the Indo-Pacific Economic Framework, his signature commercial pact in Asia, would be overshadowed by defense. A country accused of presenting “all guns and no butter” delivered a large shipment of both.

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It’s the second time recently that Biden has spoken off the cuff about a U.S. military response to an invasion of Taiwan and replied in much the same way. During a town hall event last October, he was asked if the United States would come to Taiwan’s defense if it was attacked by China. “Yes,” Biden replied. “We have a commitment to that.”

It is a change in tack. U.S. presidents always dodge the question of whether the U.S. military would defend Taiwan. They hide behind “strategic ambiguity,” fudging that they uphold the “One China policy,” which is deliberately vague.

China insists on the “One China principle,” one key word of difference, stating that the Beijing government is the only legitimate government in China, which includes Taiwan. On the U.S. side, the “One China policy” recognizes the Beijing government as the legal government of China, but only “acknowledges” China’s position that China also includes Taiwan, without agreeing that it’s true.

Confused? You should be. It allows the United States to keep Beijing sweet while maintaining unofficial relations with Taiwan. The U.S. stance was first stipulated in 1972, when then-president Richard Nixon used the “One China policy” as a way to say “You sort this one out” to the Chinese on both sides of the Taiwan Strait while doing business with both.

But Biden was very clear. The United States military would defend Taiwan if China invades it. Or in diplomat-speak, “any unilateral effort to change the status quo using force.”

It has become a more pressing issue after Russia invaded Ukraine, which Russian President Vladimir Putin says should be part of Russian soil. White House officials scurried today just as they did back in October to walk back Biden’s comments on Taiwan, asserting that there’s no change in U.S. policy. But you could say that under Biden, it is becoming more clear. A Chinese military invasion would be met with a U.S. military response.

China bristles

Not surprisingly, Beijing was furious in its response to Biden’s statement. “The Taiwan question is purely China’s affair,” a foreign affairs spokesman said. “There is no room for compromise or concession.”

China urges the United States to stand by the “One China principle,” using that word of difference again, and to “refrain from sending wrong signals to Taiwan separatist forces to avoid causing grave damage to bilateral relations.”

Biden first hinted at this change last August, when the United States withdrew from Afghanistan. He promised “we would respond” to an attack against a fellow member of NATO, adding “same with Japan, same with South Korea, same with Taiwan.” Taiwan had never before been presented with the same kind of promise of defense as those other allies.

Japanese Prime Minister Fumio Kishida, speaking alongside Biden today, was also asked how his country would respond if China invades Taiwan. He beat around the bush, like leaders always do. Japan is equally ambiguous on the status of Taiwan.

“We asserted the importance of peace and stability of the Taiwan Strait, and the peaceful resolution of the Taiwan issue,” Kishida said, adding that there is no change in the “fundamental position” of the United States and Japan.

“In Asia, we are against any unilateral effort to change the status quo using force,” Kishida added. “In Asia, peace and stability must be upheld and defended.”

That last word, “defended,” may also represent a very subtle shift by Japan, since we are parsing sentences today. Japan is increasing its “self-defense” forces, having agreed to a pacifist constitution after World War II that forbids it fighting a war. But it has 105 U.S. fighter jets on order, the F-35 Lightning, and in March launched the first of 22 new Mogami class stealth frigate ships as it beefs up its capability to respond to threats overseas.

Kishida told Biden that Tokyo is ready to take a more robust defensive stance, including the ability to retaliate. That will include a “considerable increase” in the Japanese defense budget, Kishida said.

As for the Framework…

Today was supposed to be the big unveiling of the Indo-Pacific Economic Framework for Prosperity. It’s a kind of Trans-Pacific Partnership-lite, after the U.S. withdrawal from the TPP trade deal in 2017.

The exact roster of the 13 participating nations was a secret until today. They are the United States and Japan, together with Australia, Brunei, India, Indonesia, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam.

The IPEF is so far light on trade, and light on detail. The framework looks to build on four pillars: the Connected Economy, concentrating on digitization, including cross-border standards for data flows; the Resilient Economy, improving supply chains; the Clean Economy focusing on clean energy and decarbonization; and the Fair Economy, to enact and enforce standards on taxation and transparency and against money laundering and bribery.

We will see where it heads. National Security Advisor Jake Sullivan says not having trade in the agreement at all “is a feature of IPEF, not a bug.” It’s a deal intended to reflect a services-dominant, data-driven world.

While the United States says the IPEF is an open framework that other nations can join, it is presented as an alternative to Chinese interests in the region. It’s also an attempt at economic reintegration with Asia after a period of withdrawal.

“Especially as businesses are beginning to increasingly look for alternatives to China, the countries in the Indo-Pacific Framework will be more reliable partners for U.S. businesses,” U.S. Secretary of Commerce Gina Raimondo said in outlining the deal. She calls it a “turning point in restoring U.S. economic leadership in the region, and presenting Indo-Pacific countries an alternative to China’s approach to these critical issues.”

For now, though, negotiations are only just launching for the IPEF. There are no firm commitments or agreements, with today only the “starting gate,” in the words of Raimondo.

Taiwan, pointedly, is not part of IPEF. The United States says it will deepen bilateral trade ties with the island instead.

Next up: The Quad Squad

There will also be a meeting on Tuesday in Tokyo of the leaders of the Quad, the “Asia Pacific democracies” partnership consisting of the United States, Japan, India and Australia. Biden will also meet one-on-one with Indian Prime Minister Narendra Modi and the new Aussie leader.

New Australian Prime Minister Anthony Albanese, from the center-left Labor Party, has been swiftly sworn in so that he can fly to Japan to take part. It looks likely that Albanese will gain the 76 parliamentary seats necessary – the party is ahead in 78 races – for him to govern without forming a coalition. If not, he must make a deal with climate-minded independents and/or members of the Green Party for support.

Outgoing Liberal leader Scott Morrison had accused Albanese of being weak on China. Albanese will be accompanied in Tokyo by new Australian foreign minister Penny Wong, who is Malaysian Chinese by background. All eyes will be on how Albanese handles Australia’s current antagonistic relationship with China and what he has called a Chinese Communist Party that is more “forward-leaning” and “aggressive.”

“Butter and guns” were also both on display in Biden’s two-day trip to South Korea, where he visited both a Samsung Electronics factory and the Osan Air Base. It was at Osan, now a U.S. Air Force base, where U.S. troops were first deployed in the Korean War, with “Task Force Smith” fighting the Battle of Osan in 1950 as their first engagement with North Korean troops.

New South Korean President Yoon Suk-yeol has agreed with Biden to explore ways to expand joint military exercises that always infuriate North Korea. The two presidents appear to be taking a tougher stance on North Korea, with Biden saying at the air base that they pledged “our readiness to take on all threats together.”

Would Biden meet with the North Korean leader, Kim Jong-un? “That would depend on whether he is sincere, and whether he is serious,” Biden said. We’ll have to take the U.S. president at his word.

Biden Visits Korea and Japan With Rare Opportunity

May 24, 2022 By alexfrewmcmillan in Asia, Australia, Business, China, Communist Party, Geopolitics, India, Indo-Pacific Economic Framework, Investment, Japan, Politics, Quad, South Korea, Stock market, United States Tags: Australia, Donald Trump, Fumio Kishida, Geopolitics, India, Indo-Pacific Economic Framework, Japan, Joe Biden, NATO, politics, Quad, Samsung Electronics, Solomon Islands, South Korea, Trans-Pacific Partnership, U.S. President, United States, Yoon Suk-yeol Leave a comment

On his first Asia spin as president, Joe Biden will find a surprisingly warm welcome, and is due to launch an economic framework for US-Asia relations.

Joe Biden is today starting his first Asia trip as U.S. president, visiting South Korea and Japan with an unusual opportunity to cement alliances with these key Asia Pacific democracies. He will be mindful all the time of the threats presented by a nuclearized North Korea and by China, with its promise to conquer Taiwan, by force if necessary.

I’m watching Biden’s first steps in Korea, where he has made a Samsung Electronics chip factory in Pyeongtaek his first stop. Samsung chief Jay Lee has been excused from attending his accounting-fraud trial to take Biden on a tour, where they’re joined by new South Korean President Yoon Suk-yeol. Samsung in November announced a US$17 billion chip factory near Austin, Texas, and is showing off its advanced 3-nanometer chips for the first time on Biden’s visit.

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During his five-day Asia stay, Biden will find fertile ground to forge friendships with new U.S.-friendly leaders in both Tokyo and Seoul, arguably the best opportunity in two decades to do so. Rivals China and North Korea, meanwhile, are both battling Covid-19 outbreaks that undermine domestic popularity for the leadership in Beijing and Pyongyang.

Still, U.S. and South Korean intelligence suggests that North Korea may well test another long-range intercontinental ballistic missile during Biden’s visit, or possibly even conduct its first nuclear-bomb test since 2017. Biden cancelled an intended trip to the demilitarized zone between the two Koreas, and there’s been no progress on denuclearization talks since he became president.

Biden arrives in Asia at a time that leaders have newly taken office who have pledged to improve relations with the United States. Japanese Prime Minister Fumio Kishida moved into the Kantei on October 4, while Yoon was inaugurated on May 10. Yoon may push for South Korea to join “the Quad,” the alliance of Pacific democracies that currently consists of the United States, Japan, Australia and India.

The U.S. president is due for a summit with Yoon on Saturday, then will fly to Tokyo on the next day, where he is set to launch the Indo-Pacific Economic Framework on Monday, May 23. The framework is a U.S.-led initiative designed to counter criticism that the United States has focused only on security issues in Asia. China champions the Regional Comprehensive Economic Partnership free-trade deal that went into effect with 14 other Asia Pacific nations on January 1. But the United States has been accused of an “all guns and no butter” approach.

The “IPEF” is very vague and in its early days. An early draft obtained by the Financial Times shows that member nations have agreed only to “launch negotiations” on trade. But even that assertion may be watered down in a planned two-page statement simply to say the countries are starting consultations that could lead to negotiations that might amount to something. Phew. The language was literally being finalized on the Air Force One flight to Seoul.

Biden is attempting to undo some of the damage done when former president Donald Trump pulled out of the Trans-Pacific Partnership, an executive order Trump literally signed on Day 1 when he took office in January 2017. Kishida in Tokyo will likely nudge Biden to consider rejoining the recast 11-nation partnership, which Japan had championed, although there’s been no indication the United States is considering that.

The IPEF will be a weak TPP substitute. It does not include any improved access to U.S. markets for Asian nations, whereas the TPP promised free-market access for many goods. But the IPEF will attempt to address infrastructure, supply-chain resilience, clean energy, and digital trade. Kishida will join Biden at the unveiling, with South Korea, Australia, New Zealand, the Philippines and Singapore likely to join Japan and the United States in the deal.

Biden will then attend a Quad summit in Tokyo on May 24. The four-way partnership has risen in profile since it was rebooted in 2017, having been on hiatus since Australia withdrew in 2008 in a bid to improve Aussie relations with China. How things have changed. Australia is once again “all-in” on the Quad, and is now instead embroiled in trade disputes with China, which it has also accused of meddling in domestic politics to the extent of attempting to get a Beijing “agent” elected to national office.

The Quad, whose leaders met in person in September at the White House, has made progress on public health with the Quad Vaccine Partnership, pledging 1.2 billion vaccine doses globally, and on infrastructure. It has also formed a coordination group to “deliver transparent, high-standards infrastructure” in the region, a response to China’s Belt and Road Initiative. It is also working on green energy, lower-emissions shipping and high-tech supply chains for goods like semiconductors.

But it has yet to make much obvious headway in handling the military threat China poses in the Pacific. Beijing has basically gotten away with its island-building program to construct missile, naval and air-force bases on islands in the South China Sea. There’s been deadly conflict on the Himalayan border between Indian and Chinese troops, where China has again built structures in contested no-man’s land.

Most recently, Australia in particular has been alarmed by a security pact China has struck with the Solomon Islands, which could see Chinese troops based in the island nation. U.S. officials have said they would need to respond to any deployment of Chinese paramilitary troops to a country that saw heavy fighting on Guadalcanal during World War II, after Japan built naval and air bases there. Aussie defense minister Peter Dutton said in response to the China-Solomon security pact agreed in April that “Australia should prepare for war,” claiming China is “on a very deliberate course at the moment.”

The leadership in Canberra is in question. Australia holds national elections on Saturday, in which it is mandatory to vote. The opposition, left-leaning Labor Party holds a very slight edge over the conservative Liberal Party, and its unpopular Prime Minister Scott Morrison, or “ScoMo.” If there’s a change in leadership, it’ll be a scurry to take part in the IPEF signing and the Quad summit, with Biden due to meet the leaders of India and Australia on the sidelines.

Unusually, a group of around 25 independent candidates known as the “teals,” almost all women with successful careers, may hold the balance of power in Australia. Inaction on climate change has fueled frustration with the “gray-haired men fighting for power,” as Damien Cave put it in The New York Times, in a country that produces the world’s highest levels of coal-generated greenhouse gas per person, and that faces devastating now-annual bushfires and floods.

One of Biden’s key differences from his predecessor on the foreign-policy front is his ability to forge multinational diplomatic alliances. He held a summit at the White House on May 12-13 for the leaders of the nine Southeast Asian nations in ASEAN, at which they agreed to strengthen economic ties, improve health security, collaborate on smart manufacturing and develop renewable energy. Most pointedly, they pledged maritime cooperation and to maintain “the South China Sea as a sea of peace, stability and prosperity,” noteworthy since China claims almost all of that sea as its own territory.

Biden noted a joint desire to see an Indo-Pacific that is “free and open, stable and prosperous, and resilient and secure.” The United States committed US$150 million in infrastructure initiatives with ASEAN op top of support of US$100 million made after Vice President Kamala Harris visited Southeast Asia in August.

Former president Donald Trump alienated just about everyone, and championed an isolationist policy of the United States going it alone. He opted to skip ASEAN meetings when he was in power. Given Trump’s antagonism toward NATO, which he repeatedly hit up for money, it is hard to imagine him having any success calling on Europe to present a united diplomatic front against Russia after its invasion of Ukraine. Then-German chancellor Angela Merkel was pretty upfront with her disdain for Trump; French President Emanuel Macron backed off their early “bromance,” saying the lack of U.S. leadership under Trump had led to NATO’s “brain death.”

Trump saved his warmest words for hardmen dictators like Russian President Vladimir Putin, describing Putin’s early moves in Ukraine as “genius.” Putin “was a friend of mine,” Trump told the golfer John Daly in March. “I got along great with him.” His attempts to curry favor with North Korean leader Kim Jong-un led to a great photo op as Trump became the first U.S. president to step across onto North Korean soil, but ultimately produced no progress on the diplomatic front.

Trump also criticized the “horrible” terms of trade with South Korea. He took Japan to task for not buying enough U.S. autos, while ignoring that many American models are way too big for Japanese streets. That informed a decision to impose higher tariffs on Japanese steel. Trump criticized Japan and South Korea, too, for failing to pay enough for the U.S. troops stationed on their soil.

The Biden administration rolled back the Trump-era tariffs on Japanese steel as of April 1. With this first Asia spin, Biden will be hoping to strengthen U.S. influence across the Pacific, both in terms of the economy and the security of the region. These first small steps may help improve the direction of U.S.-Asia policy, after many Asian nations began to sense that Washington was retreating from Asia. The United States, and its leader, are back here in Asia again.

China Sets ‘Highly Challenging Target’ for Economy

March 7, 2022 By alexfrewmcmillan in China, Communist Party, Coronavirus, Covid-19, Investment, Politics, Real Estate, Stock market Tags: 20th Party Congress, CCP, China, Chinese Communist Party, CSI 300, economy, growth forecast, Hang Seng, Li Keqiang, National People's Congress, Stock market, Topix, Xi Jinping Leave a comment

Premier Li Keqiang stresses stability and the importance of 100 million ‘market entities,’ even as Beijing keeps up its regulatory assault on the private sector.

China will target growth of 5.5% in 2022, at the high end of expectations but still far off the double-digit pace we’d grown used to, as the Middle Kingdom grew to become the world’s second-largest economy.

Premier Li Keqiang delivered a forecast of GDP growth of “around 5.5%” while giving his annual work report to the National People’s Congress, the Chinese Communist Party’s yearly agenda-setting meeting for the country’s economy.

“This is a highly challenging target,” Société Générale economists Wei Yao and Michelle Lam say in a research note. It is an acceleration from the two-year compound growth 5.1% rate established in 2021, and there are plenty of headwinds blowing against the Chinese economy.

This story first appeared on Real Money, the premium site of TheStreet.com. Click here to visit the original story.

Top of the list: China still has a “zero-Covid” policy that requires a disruptive snap local lockdown wherever cases break out. It’s hardly a realistic approach in the face of the hyperinfectious Omicron variant. A leading Chinese virus expert has hinted at a change in approach, as I mentioned on Friday, with the potential for China to move toward “Chinese-style coexistence with the virus,” whatever that means.

It’s vague language that allows the Chinese Communist Party to carve out any old “live with Covid” strategy that it likes, explaining away any aberrations by saying they’re necessary in China. It would be a face-saving step designed to discourage too many people from asking why such harsh lockdowns were ever necessary.

But the CCP has so far struck a fine balance by avoiding an overload of the Chinese healthcare system, which is not strong outside the major cities, while permitting much of daily life to return to normal. This has been achieved by barring nearly all overseas travel. The number of Chinese passports issued in the first half of last year was just 2% of the number issued in the first half of 2019.

China set a growth target of “over 6%” for 2021, and official growth came in at 8.1%. Given the wild swings in the economy produced by the pandemic, China also cites the 5.1% average compound annual growth rate over 2020 and 2021, combined.

Li, speaking to around 3,000 delegates in the Great Hall of the People on Saturday, laid out the lowest growth target since 1991. He acknowledges that China “could face more difficulties and challenges this year,” and pledges that China will issue C¥2.5 trillion (US$396 billion) in tax refunds in 2022, in support of the private sector.

President Xi Jinping directed a series of regulatory crackdowns over the course of the last 18 months, in particular targeting Big Tech but also highlighting the “disorderly expansion of capital.” Quite what the “orderly expansion of capital” looks like is unclear; the criticism, part of the overarching “Xi Jinping Thought” that’s now codified in the Chinese Communist Party charter, gives license for the party to curb the power of the private sector, and take down a notch both Chinese “unicorn” companies and its billionaire entrepreneurs.

Meetings like the NPC owe a lot to the Marxist-Leninist roots of the Chinese Communist Party, and the “five-year plan” style of a command economy. Li praised the work of “market entities, over 100 million in number,” for having responded “with fortitude and resilience” to the shocks of the last year. “Employment is pivotal to people’s well-being,” he continued, suggesting the party is not at this time in a position to push its difficult overhaul of its inefficient, bloated state-owned enterprises. “Our efforts to keep market entities afloat are aimed at maintaining stable employment and meeting basic living needs.”

China is resisting direct stimulus from the government to support the economy as it slows, and Li said the government will target a fiscal deficit of 2.8% of GDP this year, down from 3.2% in 2021. But economists believe Beijing will continue to roll out dovish policies this year, and is even warming to the property sector, where prices have gone into reverse. It kept its inflation target at “around 3%,” and the forecast for land sales stays flat, an optimistic call given that many parcels of land are going unbought due to the financial deleveraging forced on developers.

The SocGen team calculate that the measures announced at this meeting equate to fiscal stimulus of around 3% of GDP. That’s one percentage point larger than the economists expected. Li frequently stressed “stability,” and he repeated the Communist Party’s clarion call that “housing is for living, not for speculation,” suggesting it will pull support once again if home prices start to rise.

It is not yet therefore time to consider buying the beaten-down shares of Chinese developers. Li warned that “land prices, home prices and general housing market’s expectations should be stabilized,” with affordable housing and an expansion of the rental-housing stock high on his list of priorities. Nomura says the overall impression, coupled with no mention of imposing a property tax, is that policy has turned “slightly friendly” toward the beleaguered property sector.

The NPC, coming on the heels of the closing ceremony for the Beijing Winter Olympics on February 24, marks the second major marker for the Chinese government this year. It is building toward the 20^th Party Congress, likely in November, the latest installment of a key leadership overhaul that’s held once every five years. At this Party Congress, Xi will be seeking an unprecedented third term as president, having pushed through a change in the constitution that will allow him to run again. He will surely be unopposed but must still muster the support of the party. Xi wants to be able to declare victory over the coronavirus and point to solid steering of the economy.

Li did not mention the Russian invasion of Ukraine, but the geopolitical distress haunts this year’s proceedings. China is staying largely silent, not wishing to criticize its ally, Russia, but is therefore giving tacit support of the war. It is attempting to cast itself in the role of peacemaker, but it may find it hard to push Russian President Vladimir Putin to the negotiating table at a time he appears recalcitrant. Putin is insisting on the “demilitarization” of Ukraine, but China – whose officials stress over and over again the importance of national boundaries and “sovereignty” – has done nothing to criticize the clear violation of Ukraine’s borders.

Chinese shares are dropping today in synch with other Asian markets. The CSI 300 of the largest companies in Shanghai and Shenzhen ended down 3.2%. As is usual when there’s selling in this downturn, Hong Kong has fared worse than most, with the Hang Seng lurching 3.7% lower.

It’s another heavy day of selling on Asian markets on Monday, with the Topix in Japan closing down 2.8%, and all major indexes lower. The day began badly after oil shot up, with Brent crude up 8.9% at the time of writing, having risen briefly above US$130 per barrel. That hurts most Asian nations, which bar Malaysia all import large amounts of oil. The United States is leading the charge in figuring out how to restrict and sanction oil shipments out of Russia, the world’s third-largest oil exporter.

The Sensex in India is also down 2.7% at the time of writing. China and India bookend the United States as the three largest importers of oil in the world.

Indonesia is also a major oil extractor, although the former OPEC member is now a net importer of oil. Still, the production levels out of Southeast Asia are insulating those markets slightly on Monday. The Jakarta Composite Index were down 0.8%, Singapore stocks were 1.0% lower an hour before the close, and Malaysian equities were off 2.3%.

Will Asia Catch Back Up in 2022?

January 4, 2022 By alexfrewmcmillan in Asia, Australia, China, Communist Party, Coronavirus, Covid-19, Geopolitics, Hong Kong, Investment, Politics, Real Estate, Stock market Tags: "Live with Covid", "Zero Covid", 2022 lookahead, 2022 preview, 20th National Congress, Alibaba, Alibaba Group Holding, Asia, Australia, Beijing Olympics, China, China Evergrande Group, Chinese Communist Party, Chinese developers, Didi Global, Hang Seng Index, Hong Kong, India, IPO, KOSPI, Living with Covid, Nifty 50, Sensex index, Singapore, South Korea, Stock market forecast 2022, Stock market performance, Straits Times Index, TAIEX index, Taiwan, Winter Olympics Leave a comment

For Asia, 2021 was tease. It was a year that often promised something better, only to deliver everything worse. It’s hard to escape the feeling at the end of the year that we are back in much the same position as when it began.

This story originally appeared on Jan. 3, 2021 on TheStreet.com and its subscription service Real Money. Click here for the original story.

Will 2022 see the Asia Pacific region finally escape its cycle of opening up, then locking down again? There were tentative attempts to welcome foreign visitors once again in countries like Thailand, Vietnam and Indonesia. That gave way to a hellish pattern of waves of virus washing over the region, with all the travel bans, curfews and stay-at-home orders that unfold in response. Asia’s production schedules and shipments have been heavily disrupted as a result.

China persists in its zero-Covid strategy, an ultimately impractical approach that is exported to Hong Kong as East Asia’s financial hub attempts to open the mainland borders. Anyone returning from overseas must spend three weeks in an expensive hotel. China will likely maintain its position at least until the “coronation” of President Xi Jinping for a third term. That will come in the power reshuffling confirmed during the weeklong 20^th National Congress, the latest in a series of once-every-five-years major meetings that is due to happen in October or November. March will see the growth target set at the annual National People’s Congress.

Before that, the Beijing winter Olympics will go ahead from February 4-20 in front of Chinese spectators, if all goes to plan. The winter events will make Beijing the first city to host both summer and winter games. But the political undercurrents are strong. The Olympics will go ahead minus diplomatic delegations from the United States, United Kingdom, Canada and Australia, in protest of the human-rights violations in China’s westernmost Xinjiang province, and the death of civic society here in Hong Kong. China says those politicians weren’t invited in the first place…

Other governments in the Asia Pacific region, led in this regard by Singapore, Australia and New Zealand, appear willing to try something other than “zero Covid.” Ratchet up the vaccine rate, do your best to protect and triple-jab the vulnerable, and learn to “live with Covid.” This seems the sensible approach.

When you look at the 26.9% gain for the S&P 500 in 2021, the 21.0% gains for the Eurozone stocks in the Euro Stoxx 50 index, and the 14.3% advance in London’s FTSE 100 index, it has been a disappointing year for Asian equities. There’s scope for them to gain ground in relative terms.

The S&P Asia Pacific Broad Market Index, which tracks developed markets in Asia, posted a loss for 2021, down 0.6%. But that was a better showing than the S&P Asia Pacific Emerging BMI, which netted a 2.3% decline for the year. China-linked plays had a torrid time.

There were solid gains for the Tokyo market, with the broad Topix index up 10.4% for the year. But it was a tougher time for export-oriented companies, as reflected in the poorer 4.9% showing for the Nikkei 225, which tracks big-caps and multinationals. Those kinds of companies should benefit in the year ahead from a weaker yen, as the Fed boosts the dollar by raising rates.

I’ve indicated before that the Japan market will be a safe haven in 2022. We can be certain that the central Bank of Japan will maintain its exceedingly easy monetary policy, with Japanese interest rates still negative at -0.10%. Inflation is not a concern, as yet, in Japan – in fact, it is desirable. The central bank and the government have struggled to achieve a 2% inflation target since setting that as a goal way back in 2013.

The Japanese economy should post strong (for it) growth of 3.2% in 2022, according to IMF estimates, up from 2.4% last year. It’s a similar pace of growth as you’d find in South Korea, Taiwan and Singapore, all typically more dynamic in recovery mode. Underpinning it all, the Japanese government under new Prime Minister Fumio Kishida passed a record US$490 billion stimulus spending package in November, bucking the trend toward tapering in other developed markets.

Value Partners, the Hong Kong-based asset manager, indicates that “investor sentiment towards Japan remains weak, and needs time to pick up,” it states in its 2022 market outlook. “Corporate earnings will likely continue to recover and we view that Japan will be one of the very few countries that will continue to have earnings upgrades.”

Australian stocks also delivered steady if not stellar performance, with the S&P/ASX 200 index up 13.0%. “With pent-up demand following Q3 lockdowns, a high vaccination rate, elevated confidence and rebounding mobility, the stage is set for a strong six months” in Australia, Nomura predicts in its global economic outlook for 2022.

Singapore’s Straits Times index didn’t quite post double-digit gains, up 9.8% in 2021. Like Australia, Singapore is now exceptionally poised having vaccinated the vast majority of its populace. The jobs market is improving, while the strength of high-end manufacturing and pharmaceuticals should stand the city-state in good stead for the year ahead. It’s a likely outperformer.

The problems with supply chains globally hurt South Korea, where the Kospi advanced only 3.6% all year. Despite the heavy influence of semiconductor producers on the Seoul market, electronics- and tech-related exporters did not experience the stellar kind of year they had in 2020, when the world couldn’t get enough gadgets to keep people company in lockdown.

Korea will have presidential elections in March, which add an element of uncertainty to the market. The central Bank of Korea also became the first in Asia to raise rates back in August, did so again in November, and will likely continue to tighten throughout 2022 to combat rising prices and home-price inflation. Rates may rise to 1.5% by the end of the year. That makes it a hard market to like for now, with South Korea’s highly indebted population sure to struggle under straightened circumstances. There’s pressure on the Seoul home market, where prices have doubled in the last five years.

The strongest showing in Asia came in India, where the Sensex posted a 21.7% gain for 2021, with the Nifty 50 up 23.8%. In fact, it’s been a very strong showing by the Mumbai market since the original depths of the first wave of Covid back in March 2020. The Indian market has more than doubled since then, with the Sensex up 111.1%.

That’s come on the back of breakneck growth, the world’s strongest major economy with a pace of 9.5% in 2021, likely to moderate to 8.5% in 2022. Reflecting that slowdown, Indian equities have flagged since mid-October, down 5.7% in the last 10 weeks of the year, so there’s no surging strength to carry them into the new year.

“While India enjoys a long-term secular bull market with expanding new-economy sectors, and is still in the upward profit cycle, we are cautious as valuations are at extreme levels versus the rest of Asia,” Value Partners notes.

Taiwan also outperformed as a market, a rare year when it did not move in lockstep with South Korea. The Taiex index added 23.7%, with electronics makers booking strong orders. Taiwanese companies also benefitted from sanctions and restrictions on some mainland Chinese manufacturers. In Taipei, retail traders became very active in the market, and have not been hampered by the higher rates seen in Korea. The Taiwanese central bank may start to raise rates next year, which could stem the tide of retail flows.

There was a narrow 0.2% loss in the Philippines, where the process of vaccinating 110 million people across 7,000 islands proving exceptionally difficult. The task is even more trying in the world’s largest archipelago, Indonesia, with the world’s fourth-largest population of 274 million people spread across 17,000 islands.

The commodities boom and increased digitalization of the Indonesian economy drove the Jakarta market up 10.1% in 2021. Vaccination rates and the success of “back to normal” business will dictate the future direction of equities in both island nations this year.

More than anything, 2021 became the year that the full vulnerability of investors in China was exposed. A series of sudden, overnight regulatory actions made it eminently clear that the Chinese Communist Party puts its own interests and its diktats over the Chinese people far above any common capitalist concerns about investor protection.

First, the for-profit tutoring industry was essentially banned. Then young people were restricted to at most three hours of videogame playing over the weekend. Next came an assault on Big Tech, with all China’s largest tech companies called in for a dressing down, and ordered to change their ways. Most recently, the country has started revising its securities laws to restrict how and where Chinese companies can go public.

Caught in the crossfire were the poor investors who bought into the “China story,” such as those who subscribed to the international offering of DiDi Global, the Chinese ride-haling market leader. Its business should be a huge growth market – scratch that, it is a huge growth market. But DiDi ran afoul of rules that didn’t exist, fulfilling the requirements of securities regulators for a foreign listing but failing to appease the newly-powerful, previously obscure cyberspace-security review office.

DiDi saw its apps stripped from Chinese app stores, and was barred from signing up new customers. That tanked its business, with the company last week posting a US$6.3 billion loss for the first nine months of the year. And it tanked its stock, an immediate descent days after its June 30 listing that leaves it down 64.8% as of the end of the year.

So it was Chinese and Hong Kong stocks that saw the most-pessimistic mood all year. The CSI 300 index of the largest stocks in Shanghai and Shenzhen fell 5.2% over the course of 2021.

Life was even worse here in Hong Kong, where the much-hated National Security Law continues to be used to pound pro-democracy activity, and anyone deemed “anti-patriotic.” The benchmark, the Hang Seng index, plunged 14.1% over the last 12 months.

Hong Kong’s mix of overseas-inclined Chinese companies, in particular those that also have U.S. listings, drew it down. The city also has a hefty influence from Chinese property developers. Many of those are in or on the brink of default, led by China Evergrande Group, which lost virtually all its value, down 88.8% over the last 12 months.

Hong Kong has been my home for the last 20 years, but it’s terrible to see it suffer so. We are walled in by excessive quarantine, treated to an East Germany-style police state, and are losing the international attractiveness that a once-free city has surrendered.

In Beijing, there is no sign that Chinese regulators will ease up their pressure on overleveraged developers. President Xi has cast scorn on investor-owners, repeating his insistence that “Houses are for living in, not for speculation.” This flies in the face of conventional wisdom, where the incredible unpredictability of the stock market leads anyone with any money to look to invest it in property, first and foremost.

Not that consolidation will be a bad thing in the long run in the property industry. There are too many Chinese developers, 103,262 of them as of 2020, the last count by Statista, a number that grew 21.1% in a decade. Fly-by-night behavior and overborrowing to fund rapid development drove land prices sky high, and homes in the biggest cities are the domain only of the wealthy.

But it is a painful correction as the model is disrupted of pre-selling flats off plan, then racing through development to the next project. Local and provincial governments have based their budgets on aggressive land sales projections, too, so there’s desperation at that level and reports of deep wage cuts among local Communist Party officials.

I don’t see any way to recommend Chinese stocks in 2022, except as a completely contrarian or bottom-feeding play. They are too unpredictable at this stage. Someone is going to make a lot of money when Alibaba Group Holding rebounds. It’s an extremely profitable company that saw its share price fall 47.8% in 2021 in a move that had nothing to do with its fundamentals. But a bet on the company is essentially a bet on what kinds of regulations the Chinese government will implement, without warning. It is not your conventional rebound story.

If you know what social changes Beijing is going to push next, and which companies it will target, perhaps you can make that kind of call. If not, there are better places to invest your money where you can be sure your ownership is valued, protected, and means something.

Hong Kong Stocks Stagger Into 2022 as World’s Worst Performer

January 4, 2022 By alexfrewmcmillan in Asia, China, Communist Party, Hong Kong, Investment, Stock market Tags: Asian stocks, China, CSI300 index, Hang Seng, Hang Seng Index, Investment, Stock market, Stock market performance 2021 Leave a comment

Hong Kong was the worst performing major stock market not only in Asia but the entire world in 2021. The hamstrung Hang Seng index hobbled into year end. It’s astonishing to see a major financial hub’s market down almost 15% in what was supposed to be a year of recovery, when U.S. markets and others have been touching record highs.

This story first appeared on TheStreet.com and its subscription service, Real Money. Click here for the original story.

The Hong Kong stock market’s increasing influence from Chinese tech explains part of the underperformance. Then there’s real estate, a mainstay of the local market but beaten down by the sharp falls in mainland Chinese developers. And equally, the depressing disappearance of the city’s civic freedoms are to blame.

The Hang Seng index plunged 14.1% last year. It is far out of step with the double-digit gains in Australia (up 13.0%), Japan’s Topix index (up 10.4%), Indonesia (up 10.1%), and the majorly outperforming markets in Taiwan (up 23.7%) and India (up 21.7%).

There are smaller gains, true, in Singapore (up 9.8%), South Korea (up 3.6%), with the Philippines essentially flat (0.2% lower for 2021), and losses in New Zealand (down 0.4%) and Malaysia (down 3.7%).

Chinese markets also ended in the red. It is internationally focused Chinese companies that are experiencing the rot. The Hang Seng China Enterprises Index is made up exclusively of Chinese companies that are listed in Hong Kong but that do not trade inside mainland China. It was down a startling 23.8% in 2021, a sharp contrast with home-listed Chinese companies.

It’s a reflection of the rising pressure from Beijing for Chinese companies to “return back home” in terms of their listing. Didi Global (DIDI) is the unwitting poster child for that category of company. The ride-hailing market leader in China was pressured into delisting from the New York Stock Exchange under duress from Beijing. It was barred from signing new customers after its June 30 IPO, leaving its shares now 66.2% below the listing price. It said at the start of this month that it will abandon the NYSE and attempt to list in Hong Kong, as I explained at the time.

Most of the tech companies listed in Hong Kong have U.S. listings that are sure to be equally unpopular with the Chinese Communist Party. Until they abandon them, there’s the suspicion their shares can be hurt by drastic action. U.S. authorities are also acting to bar foreign companies if they don’t file accounts that can be inspected by U.S. regulators – a move that Chinese law suggests would be illegal. It’ll take a regulatory huddle across the Pacific to sort that one out.

Meanwhile, Hong Kong’s market remains in limbo. It should rebound once any penalties that Beijing is levying on Big Tech are laid down, and if the U.S. listing issue can be resolved. If and when that happens, there could be a swing in the order of 20% to 30% – the Hong Kong market’s underperformance this year – but this is a regulatory issue, not one driven by fundamentals. A policy change could be announced overnight in Beijing, or Washington. Or not.

Then there are the ongoing social problems in Hong Kong. Britain says 88,000 Hong Kongers have taken up its offer of a residence visa through September, after the program began in January. A record number of Hong Kongers have emigrated, to the United States, Australia, Canada, Singapore and New Zealand and other popular destinations.

British Foreign Secretary Liz Truss just delivered the six-month report that Britain compiles twice a year to cover the state of play in Hong Kong. It is damning in its condemnation of the oppression of citizens by the Hong Kong puppet government and the Chinese Communist Party above it.

In particular, a much-hated National Security Law went into effect on June 30, 2020, imposed directly from Beijing rather than having any input from Hong Kong’s people or their representatives. But the local authorities – the police, the courts, the administration of Chief Executive Carrie Lam, and the shadowy National Security Office – have abused it to persecute any and all of Beijing’s perceived enemies.

The media is under attack, sometimes literally. Unions, civic groups and student unions have been forced to disband. There’s an informant’s hotline, East Germany-style, for you to rat on your neighbors if you think they’re not patriotic enough. You can feed through information, photos, audio clips and video files if you want to report a violation of the National Security Law, which is so vague that popular protest slogans can land you in jail.

Britain notes that any contact by its politicians with anyone in Hong Kong is often construed by Beijing and the Hong Kong government as “foreign collusion.” This can involve the simplest diplomatic contact, and in fact Beijing’s critics are dubbed to be “colluding” with, well, anyone that they contact overseas. The Hong Kong government and China frequently refer to shady “foreign forces,” which sounds like an army, or the CIA, but can equally mean the World Association of Girl Guides and Girl Scouts. They never identify who these “foreign forces” are.

Hong Kong is preparing to hold joke elections on December 19. They’re a sham designed to pretend there’s any semblance of democracy in the city. But no pro-democracy candidates are running – they’re not allowed to, since only pre-screened “patriots” who support the mainland government and the Chinese Communist Party can take part.

The vast majority of opposition politicians have either gone into exile, or are in jail. The city’s most-popular newspaper, the pro-democracy tabloid Apple Daily, was forced to shut down when its accounts were frozen and its top executives arrested. On Monday, the newspaper’s founder, Jimmy Lai, was sentenced to 13 months in prison for attending a vigil honoring those who died in the 1989 Tiananmen Square massacre. Hong Kong used to mark the June 4 anniversary with a memorial service attended by thousands of people. It has been banned the last two years, under the pretense that it would violate Covid-19 protocols.

Lai, who was sentenced alongside seven other pro-democracy leaders, is already in prison. He was convicted of inciting people to participate in a rally for a cause that is, at least on paper, legal to celebrate. But the police didn’t approve the vigil – for political reasons they pretend are all about public health. A hand-picked judge doing Beijing’s bidding, Amanda Woodcock, insists there’s a need for “deterrent” sentences due to the disruption to public order and the way those attending “belittled” a public-health threat. She insists those convicted thought the Tiananmen Square massacre commemoration was “more important than protecting the community.”

They thought nothing of the sort. Lai wrote a mitigation letter that you can find here. Any punishment will see him share the “burden and the glory” of those who shed their blood to proclaim truth, justice and goodness. “May the power of love of the meek prevail over the power of destruction of the strong,” he says.

These social issues bubble away, a poisonous undercurrent beneath society. It is the issues over U.S. listings that have depressed the city’s stock market this year, not to mention the forced deleveraging of the Chinese property industry. Hong Kongers will remain depressed as long as they’re oppressed by the dictatorship sitting atop them.

Have I Been Given a Dodgy Pfizer Shot in Hong Kong?

March 24, 2021 By alexfrewmcmillan in Asia, Business, China, Coronavirus, Covid-19, Hong Kong, Investment, Stock market, Vaccine Tags: availability bias, biontech, blood clot, China, confirmation bias, Covid-19, drugs, fosun, Hong Kong, negative news bias, news bias, pfizer, plane crash, sinovac, vaccination, vaccine Leave a comment

Lies, damn lies, and statistics in the vaccine age, as Hong Kong and Macau stop administering the Pfizer/BioNTech drug.

This story first appeared on TheStreet.com on Wednesday, March 24, 2021.

I’ve been given a dodgy vaccine dose.

Hong Kong and Macau have today suspended delivery of the Pfizer/BioNTech/Fosun shots. The Chinese local distributor, Fosun, requested the halt of the first batch of the vaccine to reach these shores. Batch 210102 consists of 585,000 doses. Eight days ago, I got one.

The markets moved on the suspension. The Hang Seng Index opened slightly lower after yesterday’s 0.8% drop in the S&P 500. But as morning word broke of the vaccine halt, the Hang Seng faltered, ending Wednesday down 2.0% at its lowest level in more than 10 weeks. The Hong Kong benchmark is now in a technical correction. It has fallen 10% since a February 17 peak.

Now, I’m not too worried. About the vaccine, at least. I’m worried the negative news will delay shots getting into arms, and ultimately the economic opening up of Hong Kong and Asia in general.

There have been reports of “more than 50” instances of defective packaging for the Pfizer drug made by front-line nursing staff. Those reported defects include cracks in the tops of the glass vials, leaks, or stains on the outside. There’s no apparent safety threat.

The defective doses have been thrown out. Fosun, which received the packaging complaints, wrote to the governments in Hong Kong and Macau, telling them to suspend use of the drug as a precaution. It’s undecided how long the suspension will last. Fosun distributes the drug in China, while Pfizer sends it around the rest of the world.

The sudden halting of the BioNTech vaccine will raise further doubts in the minds of a Hong Kong public that is already highly skeptical about getting inoculated, as I explained before I got my shot. The Pfizer/BioNTech drug is one of only two available so far in Hong Kong. The administration of the Chinese-made Sinovac vaccine can continue.

We need to be very careful about how we respond to such reports. The tendency, as I exaggerated at the start of this article, is to think “Oooh, vaccine, dodgy.” AstraZeneca (AZN) is contending with far worse such misperceptions. The authorities should investigate if the Pfizer doses already administered have had the right strength.

I was, by chance, asked to provide some media training today for a major fund manager. The media coaching is something that I do very occasionally, when my corporate news sources request it. Here I was, giving the reporter’s eye view to companies administering their PR.

My early comments focused on three biases that are prevalent in today’s media: negative news bias (we remember bad news better), availability bias (we ascribe greater importance to news we’ve recently read) and confirmation bias (we seek out, by choice of news source or through algorithmic suggestions, news stories and data that support what we already believe).

The halting of the vaccines has Availability Bias written all over it. So, too, do the issues over the AstraZeneca jab concerning both blood clots in Europe and the veracity of its 79% efficacy rate.

An easy way of thinking about the combination of these biases: You never read about a plane that doesn’t crash.

It’s an exaggeration, we have all probably read a story about a pimped-out Gulfstream or a stealth bomber or two. We just remember the plane crashes.

Nevertheless, there have been an average of 14 fatal accidents for commercial and cargo planes globally per year over the last five years, according to the Aviation Safety Network, resulting in 345 deaths per year. In 2020, there were five commercial passenger-plane accidents, killing 299 people.

There were 42,060 people who died in vehicle crashes in the United States alone in 2020. The pandemic and empty roads seem to have encouraged reckless driving: the figure was up 8% over 2019, and the highest since 2007, even though people drove 13% less. What’s more, the fatality rate per 100 million miles driven spiked 24%, the largest annual jump ever, since the National Safety Council started collecting data in 1923. Speed, drugs and perhaps empty roads coupled with a deadly pandemic that encourage reckless behavior are factors.

Hardly anyone is afraid of hopping in a car. Plenty of people are terrified to fly. Yet even when you break it down into accidents per mile travelled, driving is far more dangerous.

It is far more dangerous to get Covid than to get a Covid vaccine. Covid is killing more than 20,000 people per week in Europe. Controversially, it might have been advisable for Europe to continue to give people the AstraZeneca vaccine even if they knew it was causing dangerous blood clots… but on further investigation, and to the best of our knowledge, it is not, anyway.

I need to write “to the best of our knowledge,” because we’re handling a health emergency in real time. The newly developed drugs involve vaccines developed in a year, when the process normally takes a decade. We have learnt a lot about Covid over the course of the pandemic, and will continue to learn about both it and the drugs designed to contain it.

Many European nations screeched to a halt with their AstraZeneca programs when the red flag was raised over concerns about suspiciously timed blood clots. At that time, there were 18 cases of cerebral sinus vein thrombosis, of which one was fatal, out of 20 million people vaccinated in Europe. That’s 0.00009% blood clots, and 0.000005% that were fatal.

Random chance determines that some people are going to get blood clots, and that seems to be what has been going on, although the clotting issue is still being investigated. In fact, the number of blood clots was lower than average in the general population, AstraZeneca says. But blood clots have become the plane crashes of the vaccine age.

Here in Hong Kong, I can tell you every single case of hospitalization after someone got a vaccine. On Monday, the latest info available, there were 20 people taken to hospital after receiving a dose, as this daily report outlines. “A female aged 58 suffered from dizziness,” one report starts. “A male aged 46 suffered from palpitation and increase in blood pressure,” another begins. “A female aged 20 suffered from loss of consciousness and abdominal pain,” and so on.

While this public record may be necessary, it also isn’t all that useful. What we want to know is, did the vaccine cause those effects? Did the person faint or get high blood pressure because they were stressed out? As a direct result of the drug? Because they don’t like needles? Or because they watched a scary movie on their phone while they waited?

Our Negative News Bias tells us it’s directly because of the vaccine drug. Our Availability Bias tells us everyone feels faint, when in fact 20 Hong Kongers had typically very minor reactions out of 23,400 people who got a dose that day: 0.085%. And we don’t even know why those 0.085% of people had that response. Confirmation bias tells anti-vaccers they were right all along.

The Hong Kong government reports that around 403,000 people have so far been vaccinated against Covid-19. Of those, 150,200 received the BioNTech vaccine, and 252,800 got the Sinovac jab. So about one-quarter of the original BioNTech Batch 210102 has been administered. The second Batch 210104 of 758,000 doses is all in storage.

The Sinovac numbers are higher because it was available first, and was for a while the only anti-Covid dose you could get. Mainland China is encouraging people to get a Chinese-made vaccine if they want streamlined entry to China, even though a Chinese vaccine is not available in many places, including the United States.

The BioNTech vaccine has been proving far more popular with the folks I know. Yesterday, about twice as many people signed up for the BioNTech/Pfizer shot as the Sinovac option. Its 95% efficacy figures are far higher than for Sinovac, which has variously been cited as 50.4% effective in Brazil, 65.3% in Indonesia and 91.3% in Turkey. The World Health Organization suggests a minimum efficacy of 50% – meaning 50 out of 100 people have total immunity – for a vaccine to be approved.

I’ve already indicated that I do not think the Sinovac drug should have been cleared in Hong Kong. The company has not released its clinical trials data to the public. It has not been properly peer reviewed. Hong Kong has broken its own public health rules to approve the drug, desperate to get a Chinese alternative into arms first before any “foreign” drug.

The 95% efficacy rate of the Pfizer/BioNTech drug has yet to be challenged. Should these defect reports dent its reputation in the public eye? According to the Hong Kong director of health, there have been eight incidents of cracked BioNTech vials, 22 air-pressure issues leading to leaks, 16 reports of vial seals being loose, and 11 cases of stains or marks on the outside.

That’s 57 incidents out of a batch of 585,500 doses. That’s a rate of 0.0097%. I like those odds. I’ve got an appointment to get my second dose three weeks after the first – assuming that this temporary halt in the vaccine program lifts.

It’s an appointment I intend to keep.

Vaccine Skepticism May Hold Back Asian Recovery

March 24, 2021 By alexfrewmcmillan in China, Communist Party, Coronavirus, Covid-19, Geopolitics, Hong Kong, Stock market, Vaccine Tags: anti-vaccer, biontech, China, covid, Covid-19, fosun, Hong Kong, mmr, pfizer, sinovac, vaccine Leave a comment

Getting international travel and commerce back on track may hinge on vaccine acceptance.

This story first appeared on TheStreet.com on Monday, March 15, 2021

I’m due to go get my COVID-19 vaccination, the first jab, Tuesday. But I’m one of the few and the brave in Hong Kong.

There has been apathy, antipathy and resistance to vaccinations in Hong Kong, resulting in a very slow take-up. Only around 5% of the eligible population of Hong Kongers has taken advantage of the free program. According to one doctor, 40% of the people who have actually reserved their injection do not show up.

It’s understandable that there’s skepticism about a new vaccine, developed at record pace. I get it. A process that normally takes a decade took a year. It took me a day to make up my mind.

But the main detriment to the initiative in Hong Kong has been coverage of six deaths in the city of people who have taken the Chinese vaccine, Sinovac. That has dampened any enthusiasm that may have existed — and that was in shorter supply than doses anyway.

Oh, and the Sinovac vaccine should not be approved in Hong Kong, in my view. The health authorities here are not following their own rules, and have passed a special exemption to get the drug cleared for use, against protocol. Ordinarily, any drug would have to have its clinical-trial results published, and peer reviewed in medical journals. But that has not occurred.

The maker of the drug, Sinovac Biotech, has not released the data. Quite why, I don’t know, but we can all have our suspicions. The most innocent explanation is that there are no longer enough COVID-19 cases within China to make a large enough sample of patients. The Beijing-based company has struggled to conduct its own research in its home market.

But Sinovac is being used and tested in Brazil. Researchers there said in mid-January that the Sinovac vaccine was only 50.4% effective, when you include mild infections. They initially gave a 78% efficacy rate, but then admitted it does not include patients who still caught the virus but had “very mild infections.”

The World Health Organization sets a minimum standard that a vaccine must have an efficacy of at least 50% for it to qualify. The figure means that of 100 people given the vaccine, 50 are guaranteed not to get it at all, while the other 50 may or may not, and may have a milder version of the disease if they do.

Indonesia also ran trials on Sinovac, and found it to be 65.3% effective. The highest efficacy came from tests in Turkey, where researchers said it proved 91.3% effective, both nations reporting interim results from late-stage trials.

If you’re being charitable, you’ll chalk up Sinovac Biotech’s inability to publish its results to the difficulties of squaring away research from all over the world. If you’re being suspicious, you may wonder what kind of side effects and hospitalizations are contained in the figures they undoubtedly have.

One Hong Kong doctor here joked that the Hong Kong population is taking part in another phase of Sinovac’s late-stage trials, without knowing it. We chuckle, knowing there’s a grain of truth.

Hong Kongers, for a population that thrives on a famously entrepreneurial and risk-taking economy, are surprisingly risk-averse in their daily life. Widespread, mild hypochondria has stood them in good stead in the face of an unknown disease. Mask wearing and social distancing took off right away, even before “social distancing” became a thing.

It is not going to help the vaccine program. On top of that, every death or hospitalization of someone who has taken a COVID-19 jab gets blown up in the city’s tabloids. The first two deaths, the authorities said on investigation, were coincidence. “Natural” heart attacks are gonna happen if you inject a lot of people, just like some will die in car crashes. Now we have six coincidences …

There’s a political angle to the vaccines, undoubtedly. We have two vaccines available, the Chinese one with insufficient data and a Western one with data supplied.

Hong Kong did not start administering any vaccines until it was able to give out a Chinese-made one, rushing through Sinovac with incomplete and non-public testing data. Only then could the Pfizer-BioNTech vaccine that the city had reserved be flown in. Another standard for the Hong Kong drug authorities is that the drug be approved elsewhere in reputable markets, and the Pfizer drug had been given the seal of approval in Britain and the United States.

Here in Hong Kong it is not the “Pfizer drug.” The name Pfizer (PFE) is nowhere to be found. This is the BioNTech/Fosun drug, which has the made-up drug name of Comirnaty, as you can see from the Hong Kong booking form. A subsidiary of the conglomerate Fosun International (FOSUF) gets involved. And yes, Comirnaty is the exact same one that Pfizer makes.

BioNTech is the brains behind Comirnaty, the first mRNA vaccine ever to get approved anywhere in the world, when Britain gave it the all-clear. Pfizer was pulled in to help commercialize and mass produce the drug. It contains a molecule of a type called messenger RNA that carries instructions to make a protein that can bind with SARS-CoV-2, the virus that causes COVID-19. Unlike a conventional vaccine, the kind we have all taken for polio or smallpox, it does not contain any of the virus itself, which is present in “old-fashioned vaccines,” in a weakened or denatured state.

Pretty smart, huh? I think of it like a Trojan Horse of a drug. That’s not quite right, it’s sending your body a message to generate body doubles so that when the virus arrives, it gets confused, and attacks the dummy instead.

Why has Pfizer been erased? All pharmaceuticals companies have to have a Chinese joint venture to sell drugs in China. That’s where Fosun Pharma, the largest drugmaker in China, comes in.

I was worried this partnership would mean the drug will be made in China. But BioNTech will be making the drug in Europe, at production bases in Germany and Belgium, with Fosun acting as distributor as well as conducting the regulatory applications and marketing in China.

Pfizer is BioNTech’s global partner — except in China. Hong Kong Chief Executive Carrie Lam, whose every uttering seems politically calibrated to please Beijing, says Pfizer is a “co-supplier” alongside Fosun Pharma.

Fortunately, it’s the same drug, and that’s the one I’ll be getting. I would in no circumstances whatsoever get the Sinovac drug that has been approved when it shouldn’t have been approved, in my view. The Pfizer drug has peer-reviewed data showing it’s 95% effective, as per the E.U. product factsheet.

For Sinovac, Hong Kong health authorities say they’ve seen some but not all of the numbers. Yet again, they have also not released them to the public, or said which numbers they’ve seen. On top of that, Hong Kong health authorities are giving the Sinovac drug to all ages, from 18 and up. Even in mainland China, it is not given to people over 60.

Numbers out of China are often, well, just numbers. One friend of mine who runs a business says most Chinese companies have two sets of books, one with financials they show to the public or partners, and another that give the real picture. He insists his company does not!

We have an added layer of politics involved. China is keen to build a medical database and has used a “voluntary” program to collect biometrics including DNA and facial-recognition scans from the Uighur population in Xinjiang. This “health check” info can and will be used by the Communist authorities. Folks mistrust the Hong Kong government badly enough to expect them to do the same.

Then of course the entire world has to contend with anti-vaccer misinformation. Much of that stems from a completely discredited piece of research indicating that there’s a link between the measles/mumps/rubella shot and autism.

THIS IS NOT TRUE, people! The concept was based on a discredited piece of research unfortunately published in the esteemed medical journal The Lancet, in 1998. The journal retracted it partially in 2004 and completely in 2010.

The damage, however, was done, or at least the info was out there on the Internet. An article in the Annals of Pharmacotherapy, another peer-reviewed journal, calls the alleged autism-vaccine connection “perhaps, the most damaging medical hoax of the last 100 years.”

I’m no scientist, but I trust that the medical establishment has been working double and triple time on COVID-19. A 95% efficacy on the Pfizer/BioNTech shot hasn’t been shot down. And with just about all the vaccines, “efficacy” in medical terms of granting complete immunity is different from “efficacy” in real-life terms. It is rare for people given any COVID-19 vaccine to get hospitalized.

I’ve noticed that expatriates in Hong Kong appear more willing to get vaccinated. This may be because they’re keen to travel. China’s very slow take-up on vaccinations is likely to hamper efforts to deploy its newly introduced “vaccine passport,” which also raises a lot of concerns over health-record privacy and sharing that information between governments.

In the United States, a commendable 32 doses per 100 people has been administered (not quite 32% vaccination because some people might have had a second shot). In China, the figure is 3.8 doses per 100 people.

It’s a very personal decision whether to get the shot or not. I understand, I’ll reiterate, if people hesitate about adopting this new technology. I don’t buy the first generation of a new phone or computer, and when I once did, it broke quicker than I expected.

Tuesday, I’ll try the new technology. I put my faith that the medical community has been working double, triple, quadruple time to get this right. Any company that produces a faulty vaccine would be destined for the scrapheap.

The medical community has been fooled before, yes. See MMR-autism, above. I’ll set this skepticism aside. I have kids, I meet a lot of people that I don’t want to infect. It’s the right thing, I feel, to do. One small shot for my arm, a giant leap of faith for mankind.

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