Mr Xi met with business leaders last week and made all the right noises about the importance of economic development. He is also reported to have told officials across the country to emphasize job creation. The Third Plenum cometh (in July), and the dire state of the economy is apparently beginning to sink in. The problem is that so many of the contributing factors are deeply structural. The stock markets of Shanghai and HK and the RMB exchange rate are the closest things we have to reliable barometers of the extent of the situation—Shanghai stocks continue to move around the 3,100 level, and there is a sense that in the absence of National Team support the index would quickly fall back below the magic 3,000 mark. There is also growing, but of course unsubstantiated, talk of a possible sudden devaluation of the RMB. Factory activity also unexpectedly slowed in May.
Another comment from Mr Xi was a question about how come China is not birthing as many unicorns these days—that is, non-listed private companies with a market value of at least one billion US dollars. This could be a great opportunity for possibly unicorny companies to grab cash from state VC funds. “Just following orders!” But would such investments be properly structured? Would they have the desired outcome? Or would it be just a money sink, a bit like much of the investment into semi-conductors in the previous cycle?
But the big news of the week was the conviction of Mr Trump on 34 criminal charges. It’s a pity this isn’t followed next week by the documents case down in Florida, because that’s the one where it gets really categorical. How does the conviction play into the November election? Hard to say. It probably makes him less electable, to some extent, but the GOP, having sold its soul to this guy and having tied him albatross-like around its neck, now has no choice but to field him as its candidate.
Enjoy the weekend.