Pesek's View From Asia
Starting today, I'm going to publish a daily rundown of my take on some of the stories driving the debate in politics, finance and social issues across Asia:China ordered a nationwide audit of debt as the new Communist Party leadership investigates the extent to which a record credit boom threatens the financial system.
It's only when the tide goes out, billionaire Warren Buffett famously said, that you learn who's been swimming naked. Premier Li Keqiang is sure to uncover a whole lot of public indecency as he dispatches staff to scour the books of provinces and cities around the nation. Thing is, cash-rich Beijing could cover the estimated 12 trillion yuan ($1.96 trillion) or more of local-government debt the exercise may turn up. What's not clear is whether central-government leaders are truly ready to crack down on a system in which Party officials and cronies have grown rich off excess credit and reckless borrowing. Finding the problem will be easier than solving it.Shinzo Abe, Japan's prime minister, may delay sales tax increases, a step that would roil markets and court credit downgrades.
Last year's deal to double the consumption tax in two steps -- the first stage in 2014, the other in 2015 -- was heralded by all three major debt-rating companies. Now, as Abe wavers on fiscal reform, bond investors are left to wonder what gives. I've argued myself that Abe should postpone or water down tax hikes on the households he's hoping will spend more to boost growth. But at the same time he must offer details on how else he plans to rein in a runaway public debt, the largest in the world. Otherwise, surging yields will cannibalize Abe's revitalization plans and shoulder check world markets.Cambodian Prime Minister Hun Sen extended his 28-year rule in one of Asia’s poorest countries, but with a significantly reduced majority.
Negativity on Cambodia is the default for many Asiaphiles. But let's accentuate the positive here. It's hardly comforting that Hun Sen, as cynical and corrupt a strongman as you will find in Asia, will stay a member of the notorious 10,000-days-in-power club, which includes Robert Mugabe of Zimbabwe and former Yemen president Ali Abdullah Saleh. It's great news, though, that Sunday's election was the closest in two decades and that the ruling party's majority has shrunk to a mere 13 seats from more than 60. While the opposition has contested the result, claiming voting irregularities, it has its best chance in years to force Hun Sen to open up the political system and tackle rampant cronyism and corruption.South Korea made a ``final'' offer to North Korea for talks on reopening the suspended Gaeseong joint industrial zone.
If there's anything Kim Jong Un needs, it's hard currency. Roughly 53,000 North Koreans work at the Gaeseong complex, which is about 6 miles north of the demilitarized zone between the two countries. More important, before it was shuttered in April amid rising tensions, Kim's isolated regime generated $100 million in annual profits there. Weeks of talks on restarting operations have led nowhere. Will Kim go for the obvious windfall or let his 23 million continue suffer the consequences? The answer will be a clue to how rational the young leader really is.Goldman Sachs-owned ReNew Wind Power says government regulations will wipe out profits in India's wind-farm industry.
Few priorities should be more important to officials in New Delhi than encouraging cleaner, cheaper and more efficient energy sources. That very assumption led Goldman Sachs to invest $385 million in Mumbai-based ReNew. But now regulators demand that wind farms offer day-ahead forecasts for generation and face big fines for inaccuracies. That's lunacy for an energy source that's wildly intermittent even in the most developed of nations. It's another example of India's government getting in the way of an economy that need less regulation to thrive. And it sends a terrible signal at a time when India wants to attract more foreign-direct investment.
(William Pesek is a Bloomberg View columnist. Follow him on Twitter.)