News Perspective: Why experts are not optimistic about Beijing’s “big gift package”

Welcome to “News Perspectives.” I am Li Xin.

Today’s focus: The “big gift package” is here! The Chinese Communist Party’s policies of “reserve requirement ratio cut + interest rate cut + reduction of existing home loans” have boosted the stock market! Why are economists not optimistic? It’s not enough to overcome economic challenges! The CCP’s crackdown on “economic pessimism” intensifies, with scholars criticizing the missing party leader!

Professor Jin Canrong, with titles in political science and expertise in American issues, reposted a rumor on his Weibo account, claiming that “iPhones, solar panels, laptops, and cars also exploded in Lebanon,” and that “iPhone explosions could cause people to lose their hands or parts of their head and face.”

This rumor seems to have official approval and tolerance, making the idea of iPhone explosions a national craze. Some stores posted notices prohibiting those with iPhones from entering. There are even cases of couples sleeping separately because one of them uses an iPhone.

Global Times debunked the rumor, stating that the videos circulating online showing iPhone explosions were cut and spliced by self-media accounts. Sina Finance also clarified: Can iPhones be remotely exploded? How absurd is this rumor.

This rumor originated from attacks where Hezbollah members in Lebanon were targeted with pagers and walkie-talkies exploding, resulting in 37 deaths and around 3,000 injuries. Analysts believe that the Hezbollah members likely purchased counterfeit products, possibly infiltrated or tampered with by Israel during production or transportation, implanted with miniature explosives.

Many Chinese internet celebrities spreading the rumor of iPhones exploding are encouraging consumers to buy Huawei phones. Their reason is that in the event of a war, the US government might confiscate iPhones, implanting WeChat with explosives and detonators to eliminate Chinese people. A nationalist internet celebrity named “Lonely Smoke and Evening Cicada” said, “Putin makes Apple phones explode with a gesture?” She then added, “Thanks to the Western oligarchs, Huawei is getting this wave of explosive traffic.”

Conversely, some netizens say, “The Lebanon incident serves as a warning to buy Apple devices, as it can help avoid using the same device as those within the system.”

A professional in the industry, a designer of lithium-ion battery structures for smartphones under the pseudonym “CAD Painter,” commented: Foreign BP phones exploding are bringing out the foolish and brainless in China. iPhones are the safest phones, not just in secure communication technology but also in the safety of their batteries. It is not an exaggeration to say that the probability of an iPhone exploding is almost zero. He explains: The safety of iPhones has reached an extreme level where even the FBI in the US cannot crack them, proving why iPhones sell so well. iPhones have been around for 20 years, and there has never been news of iPhone battery explosions, both in theory and practice, confirming that iPhone batteries are the safest.

Lastly, he says, “I am not worried about illiteracy, I am worried about people who have ulterior motives. Unable to compete directly, they resort to such tactics behind the scenes. Falling behind is not scary, what’s terrifying is a dirty mind.” The important thing needs to be emphasized three times: falling behind is not scary, what’s terrifying is a dirty mind. Falling behind is not scary, what’s terrifying is a dirty mind.

Less than 48 hours after its official release, Huawei’s foldable screen phone Mate XT’s astronomically inflated price plummeted, from nearly a hundred thousand RMB markup to just four thousand, with even unsold black phones. This news trended on Baidu on September 24. The scalping market even has slogans like “one price per hour” and “I’ll have stock if you want to buy, but I won’t buy it from you if you want to sell.”

Industry analysts believe that the collapse of the scalped prices for Huawei’s foldable screen caused by the lack of consumer acceptance and exorbitant initial pricing.

Some netizens mocked: Apple turned computers into phones, while Huawei turned phones into tablets, overcomplicating simple matters.

The People’s Bank of China announced a series of economic rescue measures on Tuesday. PBOC Governor Pan Gongsheng, at a press conference held by the State Council Information Office, announced a 0.5% cut in the reserve requirement ratio and the provision of 1 trillion RMB in long-term liquidity to the financial markets. Depending on market liquidity conditions, they might further reduce the reserve requirement ratio by 0.25 to 0.5% this year.

Among these measures, the most significant is the mortgage policy. Pan Gongsheng stated that the interest rates on existing home loans would be reduced by 0.5 percentage points, and the minimum down payment for second homes would be lowered from the current 25% to 15%, benefiting 150 million people and reducing interest payments by 150 billion RMB.

Some netizens asked, “With lower loan rates, will people be more willing to buy houses?”

Chinese real estate tycoon Wang Jianlin has a famous viewpoint: “No country’s real estate market can prosper for more than 50 years.” Back in 2019, amid the rampant expansion of major real estate companies, Wang Jianlin chose to retire early, selling off his real estate projects. Typically, after a country’s real estate development for over 20 years, it reaches its peak in terms of housing numbers and buying demand, having exhausted resources. Coupled with current birth rates, it’s not hard to predict the market by 2025.

Prices continue to drop, selling below market value or becoming a norm due to surplus housing and a surge in listings for secondhand homes.

High vacancy rates, with rates over 20% in third- and fourth-tier cities and around 15% in major cities, make it challenging for prices to rise.

The bubble is yet to burst, especially in third- and fourth-tier cities, which have seen an explosive development in recent years. Once the bubble bursts, property prices might drop to unimaginable lows. Therefore, the real estate market in 2025 might become more severe, with first-tier cities likely faring better due to policy support, but third- and fourth-tier cities facing difficulties.

A Hong Kong blogger, Zhou Yuanyuan, noted that the authorities seem rushed, introducing a new set of measures with many unusual statements. However, she mentioned that years of deep-rooted issues in the A-share market cannot be resolved with just one meeting. The authorities are only showing a willingness to solve problems, or else investors in the stock market will lose faith.

Analysts say that with drastic cuts in house prices, the central government’s recent policies are “too little, too late,” with challenges in achieving subsequent economic uplift.

The Wall Street Journal quoted economists saying that while these supportive measures are welcomed, they are insufficient to lift China’s economy out of the low-growth dilemma resulting from falling prices, worsened real estate crises, and escalating trade tensions.

Lin Changnian, CEO of Easy East Securities in Hong Kong, described the latest market rescue measures as “too late, too little.” Though he stated that having a plan is better than having none.

However, one major question remains: Will the package of measures released on Tuesday provide significant economic stimulus or if easing policies by the central bank are truly what China’s economy needs.

China’s borrowing costs are already low, yet credit data shows that households and businesses are not interested in borrowing. The consumer confidence index is nearing historic lows, reflecting concerns over employment during the economic downturn and anxieties about the collapse of the housing market.

Barclays estimates that since 2021, the real estate crisis has erased around $1.8 trillion in household wealth, equivalent to around $60,000 per household.

Most importantly, the real estate market remains China’s biggest problem. Many economists suggest that the government should not support weak housing demand by cutting interest rates but should let property prices fall further and take bolder measures to clear a substantial number of unfinished housing units to restore market confidence.

The Wall Street Journal published a report on Tuesday titled “Top Chinese Economists Missing After Comments on WeChat Moments.” The report cited sources saying that Zhu Hengpeng, a 55-year-old former deputy director of the Economic Research Institute of the Chinese Academy of Social Sciences, was detained by authorities this spring.

Zhu was meant to speak at a conference at Tsinghua University on May 25, but due to being uncontactable, another scholar replaced him.

Sources revealed that Zhu, turning 55 this month, was detained in the spring for allegedly making “inappropriate” remarks in a private WeChat chat group. They said that Zhu’s comments included criticisms of China’s weak economy and subtly criticizing the life and death of Xi Jinping.

Zhu has been critical of current Communist Party policies. He disagrees with the heavy tax burden and inadequate social security structure in China, claiming that these inhibitions suppress the growth of residents’ consumption.

He has also written articles criticizing the vast urban-rural gap in social security and healthcare in China. Although not directly targeting Xi Jinping, his criticism is subtly aimed at questioning government practices.

At present, the specific charges being investigated remain unknown. Zhu has been relieved of his position at the Economic Research Institute of the Chinese Academy of Social Sciences, where he also served as the deputy secretary of the institute’s party committee.

Currently, his name has been removed from the academic committee member list web page of the Industrial Development and Environmental Governance Research Center at Tsinghua University. A source disclosed that Zhu joined this committee in December 2022, with such appointments usually being unlimited.

Last month, a “political earthquake” occurred at the Economic Research Institute of the Chinese Academy of Social Sciences. The entire leadership, including the director, party secretary, deputy directors, and deputy party secretaries, were all replaced. This incident marks the most severe “political accident” to occur at the Chinese Academy of Social Sciences in over a decade.

Chen Pokong, a current commentator in the US, stated that Zhu Hengpeng, a liberal scholar with a reformist inclination, had his position at the Economic Research Institute of the Chinese Academy of Social Sciences entirely removed by Xi Jinping following a falling-out with Liu He. Liu He, a confidant of Xi Jinping, had previously held positions as a member of the Politburo as well as vice premier of the State Council and served as a key advisor to Xi Jinping on financial matters.