There have been various developments on this aspect of the China story—the key is spotting when a series of seemingly unconnected events actually represent a plan, and who knows. But first, Nicaragua announced it was shifting recognition from Taipei to Beijing, the first of the holdouts to do so since the Pacific island state of Kiribati in 2019. That leaves 14 nations, mostly dots in the Caribbean and the Pacific, that recognize the ROC, plus of course the Vatican. Then, a senior US defense official told a Senate panel in Washington that bolstering the island’s “self-defenses” was an urgent priority. And further, China not only downgraded its relations with Lithuania, which has allowed the establishment of a “Taiwan” office in its capital, but also, according to Lithuania’s vice-foreign minister, sent messages to multinational corporations “that if they use parts and supplies from Lithuania, they will no longer be allowed to sell to the Chinese market or get supplies there.” That’s a biggie, if he’s right.
In property market news, ratings agency Fitch has declared Evergrande in default on a debt payment for the first time, but the world didn’t end. The incredible amount of work the Center has done over the past couple of months to diversify the impact has been successful. But the basic problems are still there—the property sector is massively over-leveraged, there are other companies that cannot cover their payments, and the international markets are surely going to raise rates for China borrowings as a result. To offset the negativity, the central bank reduced the bank reserve rates, which means more money into the economy, and the Center issued a communique on an easing of property market rules. With the 20th Party Congress now less than a year away, the ship has to be kept steady. The RMB, for what’s worth as a bellwether, is at its highest point in three years against the USD.
Have a great weekend.