China Braces for Economic Growth to Fall Below 6%

China Braces for Economic Growth to Fall Below 6%(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. China’s policy makers are preparing for two key policy meetings in the coming weeks with fresh evidence that sooner rather than later, the number for gross domestic product growth will start with a 5.Data released Friday showed an economy expanding at just 6.0%, the slowest in almost three decades, and with broad investment growth too tepid to rely on an upturn down the road.People’s Bank of China Governor Yi Gang responded to the data not by hinting at much greater stimulus in the pipeline, but by reminding investors that China’s focus remains on keeping its heavy debt load under control.Yi’s comments may set the scene for a meeting of the Politburo, the Communist Party’s top leaders, and the ensuing Fourth Plenum of the Party’s Central Committee, a broader gathering that may mull longer-term questions of economic policy. While those events could produce a shift away from the current targeted, moderate stimulus regime, there have been few signals to date of any change.The leaders are “looking at a very long horizon,” and that approach makes the headline growth rate -- either above 6% or slightly below it -- not that important, Yao Wei, chief China economist at Societe Generale SA in Paris, said in an interview on the sidelines of the International Monetary Fund’s annual meetings in Washington last week.“They measure the policy scope by looking at the overall debt, by looking at how much risk there is in shadow banking, in the housing sector and in inflation,” Yao said. “Looking at all these things, they judge they actually don’t have much scope from a long-term perspective. So they’re very careful about how to use it and when to use it.”Growth volatility is acceptable if other targets on employment, income and environmental protection are met, according to the top economic planning agency. China is facing downward pressure and challenges, but the country is able to meet major economic targets for this year, the National Development and Reform Commission’s spokesman Yuan Da said Monday. In the first three quarters of 2019, there were 10.97 million new urban jobs created, 99.7% of the target for the full year, according to the Statistics Bureau. With few major monetary policy moves in the past month, the Loan Prime Rate, a market gauge of borrowing costs, remained unchanged in October, according to a PBOC release Monday.In his statement to the IMF’s steering committee at the meetings, Yi said that growth had been stable this year and the “main economic indicators kept within an appropriate range.” While keeping credit growing, the bank should also pay attention to “maintaining a stabilized leverage ratio,” he said.Yi won support for China’s approach from the IMF, which otherwise has been urging more action to support the global economy. Kenneth Kang, deputy director of the fund’s Asia and Pacific Department, said any support to prop up the Chinese economy should be “contained, calibrated to the shock, it should be temporary in nature and it should be focusing on re-balancing growth down the road.”Stabilization Signs?Even though the third quarter growth numbers came in below estimates, policy makers may in fact be seeing signs of a stabilization, particularly if the nascent trade-war truce with the U.S. holds.Corporate demand for long-term credit picked up in recent months, the growth of auto sales -- an important part of the country’s retail sales -- contracted less, and infrastructure investment stabilized at a low level. These factors are among those that have prompted economists from Citigroup Inc, Barclays Plc, Oversea-Chinese Banking Corp Ltd, and Natwest Markets Plc to cautiously call a bottoming-out.“The positive factors such as the trade truce, low base effect, the stabilization of manufacturing sector and pickup of infrastructure investment may give the PBOC more reason to take a wait and see approach,” Tommy Xie, an economist at Oversea-Chinese Banking Corp., wrote in a note.To be sure, if conditions were to worsen materially from here, China still has ample room to react, with interest rates far above zero. Before last week’s growth data, economists surveyed by Bloomberg saw full-year expansion for 2019 coming in at 6.2% before slowing to 5.9% in 2020.For now, the early signs of stabilization give the authorities a chance to debate some long-term issues at the coming meetings, such as a graying population and the merits of freer internal migration of labor. These reforms could be more important than imminent policy loosening in ensuring a steady performance of the economy in the longer term.“There are a lot of ways that China could manage its long-term demographic problems,” Scott Kennedy, an expert on the U.S.-China economic relationship at the Center for Strategic and International Studies in Washington. “There are many things they could do, from eliminating the hukou system to delaying the retirement age to permitting inward immigration.”Some of these topics are likely become the topics at the upcoming Party meetings.“We wait for the upcoming Politburo meeting and a possible fourth Plenum for signals on the medium-term policy outlook,” Liu Peiqian, China economist at Natwest Markets Plc. “In particular we look for the Politburo’s assessment about external uncertainties and how the authorities will balance their priorities of growth, deleveraging and stability.”(Updates with NDRC comments and data on job creation from seventh paragraph. )To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at [email protected] contact the editors responsible for this story: Jeffrey Black at [email protected], James MaygerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.


Gojek founder and CEO Nadiem Makarim resigns to join Indonesian cabinet; Soelistyo and Aluwi to be new co-CEOs

Nadiem Makarim, founder and CEO of Gojek, said on Monday he has stepped down from his role at the ride-hailing startup to join Indonesia president Joko Widodo’s cabinet.

The announcement, which has taken many by surprise, comes a day after Widodo was sworn in for a second term. Widodo has previously said that he wants young business executives to join his cabinet.

In a statement, a Gojek spokesperson told TechCrunch that Andre Soelistyo, Gojek Group President and Kevin Aluwi, Gojek co-founder, are taking over as co-CEOs of the startup.

“We are very proud that our founder will play such a significant role in moving Indonesia onto the global stage. It is unprecedented for a passionate local founder’s vision to be recognized as a model that can be up-scaled to help the development of an entire country,” the spokesperson said.

“We have planned for this possibility and there will be no disruption to our business. We will make an announcement on what this news means for Gojek within the next few days. We respect the process set out by the President and will not make a further comment until there is an official announcement from the Palace,” the spokesperson added.

Makarim (pictured above) said he was honored that the president had asked him to join his cabinet as a minister. He did not reveal which position he would hold, but an announcement from Widodo is expected later this week. “I am very happy to be here today as it shows we are ready for innovation and to move forward,” he told reporters.

Makarim founded Gojek in 2010 as a two-wheeler hailing service. The startup has since expanded to include a range of services including mobile payments, food delivery, online shopping and most recently on-demand video streaming.

The startup has amassed more than 2 million driver partners and 400,000 merchants on its platform. Gojek was valued at almost $10 billion in its most recent financing round. The company, which operates in Singapore, Vietnam, and Thailand, clocked gross transactions worth $9 billion last year.

Makarim comes from a prominent Indonesian family: His parents are anti-corruption activists, while his grandfather is an independence hero.

GLOBAL MARKETS-Asian shares tick up, pound skids on Brexit tumult

GLOBAL MARKETS-Asian shares tick up, pound skids on Brexit tumultAsian stocks edged up on Monday as Chinese shares reversed early losses, supported by hopes for progress in resolving the U.S.-China trade war, while sterling slipped after the British parliament delayed a crucial vote on a Brexit withdrawal deal. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.25%. Chinese shares advanced 0.31%, while Japan's Nikkei rose 0.30%.


Gojek Co-Founder Resigns CEO Post to Join New Indonesian Cabinet

Gojek Co-Founder Resigns CEO Post to Join New Indonesian Cabinet(Bloomberg) -- Nadiem Makarim, co-founder of Indonesia’s first startup unicorn Gojek, has resigned as chief executive officer of the ride-hailing giant to take on a cabinet post in the country’s new government.His appointment is in line with President Joko Widodo’s publicly stated preference to include professionals and millennials in his second-term team. Widodo, commonly known as Jokowi, was sworn in on Sunday and is wasting little time in unveiling his cabinet roster.The Gojek founder, who announced his resignation to reporters Monday, hails from a prominent Indonesian family. His grandfather was part of the delegation that won the country’s independence from the Netherlands in a 1949 conference at The Hague.Read more: Jokowi Eyes $7 Trillion Indonesia Economy With New CabinetMakarim started Gojek in 2010 as a call-center arranging couriers in Jakarta. At that early stage, everything was done manually -- employees called motorbike drivers one by one until someone accepted an order -- and Makarim had to work at other startups in order to sustain Gojek.It was only in 2014 that the Gojek co-founder decided to introduce a mobile app, with backing from private equity investor Northstar Group. When that debuted in January 2015, the service was so popular Gojek couldn’t cope with demand, he said in an interview in 2016.Valued at $10 billion, Gojek today has more than 2 million drivers and 400,000 merchants, while its apps have been downloaded more than 155 million times in Southeast Asia. The company counts Google, JD.com Inc. and Tencent Holdings Ltd. among its investors and is seen as an icon for aspiring Indonesian entrepreneurs.To contact the reporters on this story: Yoolim Lee in Singapore at [email protected];Vlad Savov in Tokyo at [email protected] contact the editors responsible for this story: Edwin Chan at [email protected], Thomas Kutty AbrahamFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.


China Surveillance Giant Expects Client Losses From U.S. Ban

China Surveillance Giant Expects Client Losses From U.S. Ban(Bloomberg) -- Hangzhou Hikvision Digital Technology Co. warned it may lose customers in overseas markets because of its U.S. blacklisting, underscoring the extent to which curbs on the sale of American technology may hurt the world’s largest video surveillance business.Executives at the Chinese camera provider, which reported profit in line with estimates, said clients may hold off on purchases while they gauge the impact of those restrictions. But the company is large enough to withstand U.S. sanctions and develop its own technology in the longer term, they said. Its own home market remains a rich vein of revenue as the U.S. business shrinks, a trend that may persist, Huang Fanghong, a Hikvision senior vice president, said on a call Saturday. Its shares gained as much as 5.4% Monday -- the most in more than a month on an intraday basis.Hikvision found itself in the cross-hairs of the Trump administration this month after it joined other Chinese companies -- including Huawei Technologies Co. -- on an Entity List that prevents American firms from supplying it with components and software. The seller of video cameras used around the world in surveillance was accused of involvement in human rights violations against Muslim minorities in the far-western region of Xinjiang. On Monday, brokerages including Citigroup and CICC cut their projections on Hikvision’s 2020 earnings growth.“While management says they expect the worst is over, we believe some customers may have concerns on the impact of the Entity List,” Citigroup analysts wrote.Hikvision executives say they had anticipated the action and stockpiled enough key parts to keep operations going for some time. The company has also said it didn’t foresee major impact on its business as a result of the ban.In Huawei’s case, for instance, some suppliers including Intel Corp. and Micron Technology Inc. developed workaround solutions to the prohibition. Most of Hikvision’s American suppliers are continuing to do business with it, while abiding by export regulations and without the need for special licenses, according to Huang.“We have made a great deal of preparations, from a year ahead of the ban,” Huang said. “There’s no way for us to fully discuss the impact from the entity list in 10 days. We need more time to talk to our suppliers and customers. A steady component supply is key in this process, no matter if we decide to use original materials or a replacement design.”The U.S. decision, which came on the eve of sensitive trade negotiations, takes President Donald Trump’s economic war against China in a new direction: the first time his administration has cited human rights as a reason for action. It deals a potentially heavy long-term blow against Hikvision, which has steadily switched to Chinese-made components in recent years but still relies on the likes of Intel, ON Semiconductor Corp. and Texas Instruments Inc., particularly for higher-end chips.Still, as much as 80% of Hikvision’s sales are insulated from the U.S. ban, analysts Charles Shum and Simon Chan of Bloomberg Intelligence wrote in an Oct. 8 note.“Hikvision’s sales may continue to rise over the next year despite the Trump administration’s decision,” they wrote. “It can also source alternative parts, though with a weaker performance, from local suppliers in the medium term.”Hikvision reported Friday that net income grew 17% to 3.81 billion yuan ($538 million) in the September quarter, while revenue grew 23%. The company forecast growth of 5% to 20% in net income this year.Hikvision was added to the Entity List alongside SenseTime Group Ltd. and Megvii Technology Ltd., two giant enterprises Beijing is counting on to spearhead advances into a revolutionary technology. Hikvision doesn’t play as outsized a role in China’s ambitions but it’s a key partner to Beijing as well as governments around the world. Its cameras are used from Paris to Bangkok and Urumqi, and are considered pivotal to crime prevention as well as helping build “smart cities” or networked urban environments.Longer term, U.S. sanctions threaten to crimp some of the explosive growth Hikvision has managed this decade, in large part due to China’s effort to put in place the world’s largest surveillance and monitoring network. The company may find itself short of the components it needs to build advanced systems, unless Chinese chipmakers succeed in developing more advanced chips -- another of Beijing’s stated policy ambitions in tech.Thanks to cheap but capable cameras, the Chinese company has enjoyed double-digit growth over the past eight years. Demand for its surveillance cameras, video storage and data analysis services has boomed particularly in its home market. Overseas, the company competes against Canon, Hanwha Techwin and Bosch.(Updates with shares and analysts’ actions from the second paragraph)To contact Bloomberg News staff for this story: Gao Yuan in Beijing at [email protected] contact the editors responsible for this story: Edwin Chan at [email protected], Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.


GLOBAL MARKETS-Asian share markets cautious, pound stumbles on Brexit drama

GLOBAL MARKETS-Asian share markets cautious, pound stumbles on Brexit dramaThe Brexit maelstrom, worries over slowing global growth and international trade frictions have kept investors on edge over recent months. The vote for an extension dealt a blow to optimism that a deal agreed last week would ensure Brexit happens with little economic disruption. While the British government insisted Brexit will take place on Oct. 31, uncertainty over whether the EU will agree a delay and how British lawmakers will respond could weigh on sentiment over the week.