SINOWEEKLYPLUS

North Korea becomes a “normal” country; what was signaled at the Central Financial and Economic Affairs Commission meeting

SinoInsight 1
North Korea has been carrying out a flurry of diplomatic activities ahead of an inter-Korean summit on April 27 and Kim Jong Un’s meeting with President Donald Trump in May.

March 25-March 28: Kim and his wife Ri Sol Ju visit Beijing.

March 31: Choe Hui Chol, North Korea’s vice minister, makes an official visit to Singapore.

April 3: Kim and Ri attended a concert featuring South Korean pop stars in Pyongyang. Kim Yong Chol, the vice chairman of North Korea’s Worker’s Party and military hardliner, issued a rare apology to South Korean reporters who were denied entry to the concert theater.

April 4: Kim Son Gyong, North Korea’s director for European affairs, meets European Union official in Brussels. Both parties discussed the prospect of denuclearization on the Korean Peninsula.

OUR TAKE
1. We believe that Trump’s “maximum pressure” strategy and stringent United Nations sanctions have forced Kim Jong Un to yield. Kim now appears to be in the process of enacting China’s “reform and opening” strategy to develop North Korea’s economy and preserve his rule. The diplomatic “charm offensive” is a bid by North Korea to show the world that it is now a normal country and not the rogue regime of the past.

2. North Korea’s diplomatic moves further corroborate our assessment that the Korean Peninsula is moving towards peace.

SinoInsight 2
Xi Jinping is scheduled to attend the Boao Forum opening ceremony on April 10 and deliver a keynote speech. The forum is held in Hainan this year.

OUR TAKE
Expect Xi to announce major measures on reform and opening up, including transforming Hainan into a free-trade port.

Beijing appears to be very concerned that American tariffs, which target “Made in China 2025” tech strategy, could have a severely detrimental effect on China’s economy and destabilize CCP rule. In weighing pros and cons, the CCP would likely make concessions when negotiating with the U.S.

SinoInsight 3
On April 4, China’s insurance regulator announced that Anbang Group would receive a 61 billion yuan ($9.7 billion) capital injection from the government. After the capital injection, Anbang’s registered capital would remain unchanged at 61.9 billion yuan.

OUR TAKE
1. Anbang appears to have incurred a huge deficit, and Beijing has to use taxpayers’ money to bail out the company and prevent its collapse.

2. Anbang’s case shows that China faces tremendous financial risks. Also, Anbang’s debt problems point towards trouble in the banking sector, and is one of the main reasons why the Xi administration is warning of Black Swans and Gray Rhinos while stringently regulating the financial sector.

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