Report by : Gan Yung Chyan, KUCINTA SETIA
News on airport management, aviation management, land transport management, CCP, Singapore, Myanmar
The new restrictions on US dollars introduced last week by the Central Bank of Myanmar (CBM) have come as a crippling blow to businesses already struggling in an economic recession resulting from post-coup political turmoil and the covid pandemic.
In April, the CBM ordered financial institutions to convert foreign currency earned by its customers into kyat within one business day at an official exchange rate of 1,850 kyats to the US dollar, as the military regime was desperate for U.S. Dollars.
On 3 April 2022, the CBM ordered that foreign currency earned by locals must be converted into local currency at the official exchange rate within one working day.
In June 2022, following requests and criticisms, the bank exempted companies that are 10 per cent or more owned by overseas entities from the mandatory currency conversion.
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Repayments of foreign loans suspended in Myanmar
At the same time, the bank has also ordered companies and individual borrowers to suspend repayments of foreign loans, both on the interest and the principal loan.
Companies in Myanmar have at least US$1.2 billion in outstanding dollar-denominated loans, according to Bloomberg. Those borrowers include telecom company Ooredoo Myanmar Ltd., City Square Commercial Co., a real estate firm, and telecom tower companies Apollo Towers Myanmar Ltd. and Irrawaddy Green Towers Ltd.
“There is no way we can follow its [regime’s] directives. We are completely at a loss and it is worse for foreigners. As everyone will only wait and see, all the businesses are bound to stop,” said an international freight forwarder from Yangon.
Car makers including Japan’s Suzuki and Korea’s Hyundai have recently halted production in Myanmar.
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CBM has made businesses unable to continue operations in Myanmar
Business owners said the CBM’s capricious directives are making it difficult for them to continue their business operations, as they have little time to prepare or adapt to new directives. The majority of exporters and importers are suffering as their US dollar earnings are converted to kyats at 1,850 kyats per dollar, while they have to pay more than 2,000 kyats per dollar when they buy greenbacks from the market. As a result, many are not making new business transactions.
On Wednesday, the exchange rate hit more than 2,400 kyats per dollar. But, again, in the dollar market, the demand is high and the supply is low.
“It is better not to do anything, but you will make a loss when you do [a business transaction]. There is no hope of doing business here, not anymore,” said an agricultural produce exporter.
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The Dollar crisis started in July 2021
The value of the Kyat declined after the Myanmar military staged a coup in February last year, and it plunged again after the regime limited cash withdrawals from banks and ATMs, and has continued to slide amid political instability and a general economic downturn.
The exchange rate weakened to more than 2,000 kyats per US dollar around July last year when Myanmar had to import large volume of medicines and medical oxygen amid the deadly third covid wave, despite the fact that the CBM had been selling millions of U.S. Dollars.
In August 2021, the CBM re-introduced a fixed exchange rate, replacing the managed floating exchange rate. The move remedied nothing, except that the exchange rate further slumped the following month to more than 2,700 kyats per dollar in the open market.
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Myanmar banks stop selling U.S. Dollars in March 2022
The regime gave up selling U.S. Dollars in March 2022 by which time the CBM had sold more than US$530 million.
On 3 April 2022, the CBM ordered that foreign currency earned by locals must be converted into local currency at the official exchange rate within one working day.
Moreover, the regime has limited imports of fuel, cooking oil, pharmaceuticals and other items deemed as luxuries in a bid to prevent the outflow of US dollars. It has also imposed restrictions on export and import licenses.
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Myanmar banks stop transactions in Renminbi and Baht in favour for U.S. Dollars from depositors
The regime’s efforts to seize US dollars do not stop there. Earlier this month, the junta reversed its position on allowing the use of the Renminbi and Baht for trade along the borders with China and Thailand, ordering transactions be made in US dollars through banks.
All these moves indicate that the regime is desperate to preserve the country’s declining foreign currency reserves.
“[The regime] is desperate to find U.S. Dollars. It apparently lacks long-term planning. If this continues, no new foreign investments will come into the country and existing foreign investments will leave the country. So the economy will slump further,” said an economist.
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Junta controls U.S. Dollars for its military expenditures
The regime is controlling U.S. Dollars partly because it needs the greenbacks for its military expenditures as it struggles to contain nationwide armed resistance to the junta, he added.
With its ground forces performing poorly, the junta has to rely heavily on aerial attacks in fighting resistance forces and ethnic armed organizations. Aviation fuel, the basic necessity to operate helicopter gunships and jet fighters, has to be imported with US dollars.
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Myanmar moves towards bankruptcy
The regime has ordered companies and individual borrowers to suspend repayments of foreign loans but it did not clarify for how long the order will be in force for.
Many foreign firms have already ditched their operations in Myanmar since the coup amid international pressure not to do business with the military regime but it appears that many more firms will be likely to be forced to leave Myanmar because they are no longer commercially viable in the current business environment.
It is also possible that the regime is intentionally creating the economic crisis. Recent developments suggest that the regime is returning to an economy closed to the outside world, like its predecessors. It appears that the regime and its cronies are trying to monopolize the economy.
The U.S. Dollar shortage will lead to a decline in imports of fuel, cooking oil and pharmaceuticals. Their stocks are already running low and prices for them have soared.
The economist said, “It is fair to say that the suspension of foreign loan repayments is a pre-stage for bankruptcy. If the crisis worsens, Myanmar will be bankrupt.”
There are previous examples of governments being toppled by economic crises resulting from mismanagement and corruption. The case of Sri Lanka, which has recently declared bankruptcy, is the most recent example.
News (16) to (20) / Editor : Wu Liya / https://www.aboluowang.com/2022/0721/1778752.html
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Xi Jinping is resisted, facing the worst political crisis; 460,000 enterprises closed in half a year
Recently, the phenomenon of "suspending loans for unfinished buildings" has spread like a raging fire to 91 cities in CCP China. At the same time, the CCP is also facing six major tests, including the epidemic, inflation, employment, property market, confidence, and debt. Before the 20th National Congress, Xi Jinping will face the worst political crisis.
Who is the culprit in the "unfinished building suspension"? The Bank of Zhengzhou and the Housing Authority have blamed each other, and no one wants to take responsibility. Cheng Xiaonong, an economist living in the United States, believes that "the scourge of the seed", today's property market crisis is entirely caused by the CCP's indulgence of real estate developers, which can be said to be self-inflicted.
Sri Lanka has declared bankruptcy, and China, its big creditor, is accused of deploying "economic colonization", and nine other "One Belt One Road" countries may follow.
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Xi Jinping faces resistance, faces worst political crisis
The recent phenomenon of homebuyers refusing to pay their mortgages has spread like a fire to 91 cities in China.
The real estate market accounts for one-fifth of China's economic activity. About 70% of household wealth in China is tied to real estate, far more than in the U.S., making it one of the Communist Party's most sensitive political issues.
For months, Xi Jinping has firmly reined in "overleveraged" Chinese developers, sparking a record wave of defaults that put at least 24 major real estate companies on the verge of collapse, while also scaring people bad for global investors.
UK newspaper The Guardian published an article on 19 July saying that boycotting mortgage loans threatens China's economic and political stability.
China's economy is facing a blow from stagnant growth, high unemployment, resistance to mortgage payments and ongoing covid lockdowns, with the potential for severe social and political consequences.
The refusal of homebuyers to pay their mortgages is a sign that the confidence of ordinary Chinese in the property market and the wider banking sector is beginning to crumble.
At present, new epidemics have reappeared in many places in China, the CCP has implemented partial blockade measures again, and major cities such as Shanghai are also facing the threat of further paralysis, all of which have exacerbated the uncertain prospects for the future.
In response to the sluggish Chinese economy, the Beijing government has responded in recent weeks with plans for another massive infrastructure project worth as much as $70 billion in an attempt to ensure growth.
However, the Guardian says many economists and China watchers now believe that Beijing's "borrow-and-build" economic model has collapsed and that more infrastructure suggests the road to destruction, rather than leading to a sustainable future.
Construction on about 13 million apartments has stopped in the past year, market research firm Capital Economics said in a research note.
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UK media: China's economy faces six major challenges
UK newspaper Financial Times recently published an article saying that China's economy continues to decline and faces six major tests, including the epidemic, inflation, employment, property market, confidence, and debt.
Affected by the epidemic control, China's GDP in the second quarter was 26877.15 billion yuan (RMB, the same below), an increase of only 0.4% year-on-year, which was lower than expected. China's overall growth rate in the first half of the year was only 2.5%, far below expectations.
The Financial Times commentary on 19 July 2022 said that to achieve the 5.5% growth target set by the CCP, GDP must be 630,944 in the second half of the year.
1. Epidemic test
At present, the Omicron strain with strong transmission ability has broken defenses one after another across China, and the epidemic prevention situation in the second half of the year is not optimistic.
As of 18 July 2022, there have been outbreaks in more than 20 provinces across the country, with 407 high-risk areas and 659 medium-risk areas, totaling 1,066. Continued containment measures to contain the virus have slammed China's economy.
2. Inflation test
In the first half of the year, China's PPI (producer price index) rose 7.7%, including an 8.7% rise in the first quarter and a 6.8% rise in the second quarter.
The CPI (Consumer Price Index) rose 1.7%, of which 1.1% in the first quarter and 2.3% in the second quarter.
900 million Renminbi, an increase of about 8.15%, but it is very difficult and faces six major tests.
3. Employment test
This year, there are about 16 million new urban laborers in need of employment, of which 10.76 million are college graduates, a record high. In June, the unemployment rate of urban migrant agricultural population increased by 0.6 percentage points year-on-year. The unemployment rate of youth aged 16 to 24 continued to rise, reaching 18.2%, 18.4% and 19.3% in April, May and June 2022 respectively.
4. Real estate market test
Real estate, the main pillar of China's economy, has been overdrawn and weak. In the first half of the year, the national real estate development investment decreased by 5.4%, the newly started housing area decreased by 34.4%, the completed housing area decreased by 21.5%, the sales area of commercial housing decreased by 22.2%, and the sales volume of commercial housing decreased by 28.9%.
The wave of loan cessation has had an impact on banks and the financial system. Many experts warned that if the wave of "lending suspension" continues to spread, it may trigger a financial turmoil similar to that in 2008, and the outside world is closely watching it.
5. Test of Faith
The economy continues to decline, people's income has dropped sharply, and consumption is weak. In the first half of the year, the total retail sales of consumer goods fell by 0.7%, and in the second quarter, it fell by 4.6%; after deducting price factors, the per capita disposable income of urban residents increased by 1.9%, and the per capita consumption expenditure decreased by 0.9%.
6. Debt test
Data released by the Ministry of Finance on 14 July showed that in the first half of the year, the national general public budget revenue fell by 10.2%, and the national tax revenue fell by 14.8%; the national general public budget expenditure increased by 5.9%. The national government fund budget revenue fell by 28.4%, while the expenditure increased by 31.5%.
News (19)
Chinese regulators to fine Didi more than $1 billion, end cybersecurity scrutiny
Chinese authorities are preparing to fine ride-hailing giant Didi Global Inc. more than $1 billion, according to people familiar with the matter, ending a year-long cybersecurity review of the company.
Once the penalties are announced, the Chinese government intends to ease a previous ban on new user registrations from Didi and will allow the Beijing-based technology company's mobile app to reopen in China. Some of the insiders said that the penalties will also pave the way for Didi to list in Hong Kong. In China, tens of millions of users use Didi's apps every month.
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