- Are they going to level off or fall further?
- China is trying hard to attract foreign investment. Is it working?
- Beijing aims to turn China into a global IP powerhouse
Dear Reader,
When we look at global leading indicators, things are starting to flatline a bit, but still in a contracting perspective.
We believe that things will level off for a bit in this depressed level before falling further, driven by timing and some restocking following weak orders around the globe.
For example, some regional Fed datasets pointed to a small increase in new orders – but they still remain in net contraction.
The next shoe likely drops in June, when summer spending and driving never really materializes.
The below chart shows you how the bond and CDS (Credit Default Spread) on U.S. treasuries are pricing in a serious problem, as the equity market is asleep at the wheel.
The fixed income markets (globally for the most part) are signaling a huge problem that the equity market has been ignoring.
The issues are not just relegated to the U.S. with more pain coming on multiple fronts.
China is Trying Hard to Attract Foreign Investment
China is trying hard to attract and retain foreign investment that has started to adjust supply chains at a much faster pace.
They have gone back to promising IP protection, but the CCP so far has just rehashed some promises made previously.
We have said for years that a lot of this protection would fall flat as local provinces look to shield local industry – even if the IP is stolen.
Beijing wants foreign businesses to feel safe about their intellectual property in China.
Beijing Aims to Turn China Into a Global IP Powerhouse
On Wednesday, Executive Vice Premier Ding Xuexiang delivered a speech about IP protection to a World Intellectual Property Organization (WIPO) event in Beijing.
Some context: Beijing aims to turn China into a global IP powerhouse, as part of its tech innovation drive.
- To get there, China must have a robust IP protection regime to attract foreign technology.
Ding said China would play by the rules (Gov.cn):
- “[We will] firmly uphold the multilateral IPR [intellectual property rights] system with the WIPO at its core and make the global IPR governance system fairer and more equitable.”
He also promised to continue improving IP protection in China by:
- “Strengthening the building of IPR institutions”
- “Improving [IPR] administrative and judicial protection systems”
- “Improving patent and trademark review policies”
Our take: The central government may be serious about IP protection, but local governments are inclined to protect their local champions over foreign businesses.
- Beijing has battled local protectionism for many years, with little success.
- Without progress on this issue foreign businesses will remain skeptical about China’s IP protection regime.
China is trying to win friends in the local region as food becomes a bigger focal point.
There have been broad shortfalls in the area, so China is looking to push a bit harder on providing some support to win hearts, but also stomachs.
The fastest way to an ally’s heart is through their stomach.
That’s why Beijing is backing a year-long effort to boost cooperation on agriculture and food security with the Association of Southeast Asian Nations (ASEAN).
On Tuesday, Vice Premier Liu Guozhong, who oversees food security, kicked things off in Beijing, calling the new campaign (Gov.cn):
- “Conducive to…safeguarding global food security, coping with agricultural risks…and promoting high-quality agricultural development.”
Liu promised to work closely with ASEAN members over the next year, to boost regional food security through:
- Better coordination of agricultural policy
- Further opening up agricultural markets
- Expanding personnel exchanges
Premier Li Qiang also wrote in with recs, calling for cooperation on (Gov.cn 2):
- Green, smart, and digital agriculture
- Poverty alleviation and rural revitalization
That’s all pretty vague. But ag ministry reps from all 10 ASEAN member states flew in specially – suggesting more concrete deliverables, like expanded market access, will follow.
Get smart: China’s Southeast Asian neighbors have mixed feelings about Beijing’s rise – but China’s massive market and successful rural development approaches are both highly attractive.
Get smarter: It’s a tasty win-win if Beijing can firm up regional diplomatic relationships while boosting food security.
Another important fact – and likely one of the most important pieces when evaluating economic expansion – is government spending.
Local governments have accelerated their use of Special Purpose Bonds (SPBs), but even at the accelerated rate – it still is a bit weak vs last year.
It gives you an idea on how the law of diminishing returns is catching up to growth.
We continue to see China underwhelming against estimates as the global market slows around them.
They will see some growth as local spending and demand picks up, but it will be localized and still disappointing vs what the market expects.
Thanks for reading,
Freedom Financial News
