NVIDIA Sanctions, Monetary Policy Change "Changed U.S.-China Relations, Opportunity for South Korea?"

■ Broadcast: YTN Radio FM 94.5 (09:00-10:00)
■ Host: Reporter Cho Tae-hyun
■ Air date: December 12, 2024 (Thursday)
■ Talk: Park Seung-chan, professor of Chinese Studies at Yongin University / Director of the China Management Research Institute

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information.

◆ Reporter Cho Tae-hyun (hereinafter referred to as Cho Tae-hyun): Let's continue with YTN Radio Live Economy Part 2. So far, the domestic political situation is so confusing that we have neglected it for a while. Let's take a look at the world economy. It's time for the world economy. Today, I will pay attention to China again with Professor Park Seung-chan of Yongin University's Chinese Studies Department. Is the professor out?

◇ Park Seung-chan, professor of Chinese Studies at Yongin University / Director of the China Management Research Institute (hereinafter Park Seung-chan): Yes, how are you?

◆ Cho Tae-hyun: Hello, professor. It's been a while since I saw you, but I think the Chinese side will be interested in Jungkook. What's the atmosphere like in China?

◇ Park Seung-chan: On the surface, China seems to be continuing to investigate our articles in real-time. First of all, due to the current domestic situation, various foreign relations and international relations are all empty, so nothing is going on right now, but from China's point of view, it doesn't seem that bad.

◆ Cho Tae-hyun: Really? Why is that?

◇ Park Seung-chan: Yes, first of all, from our point of view, Chinese visitors are being canceled in the short term. So the Chinese side is a little worried, but I think the inside is a little different. The first is to divide companies and the government, and for companies, I was worried a lot because there was an atmosphere in which Korea-China relations were frozen in the current government and there was an image of post-China, but since Trump 2.0 will begin soon, China is likely to be more active in strengthening cooperation with Korean companies because it has to seek survival by de-China again. Secondly, from the perspective of the Chinese government, there are some subtle differences between Korea and the U.S. in the existing Korea-U.S., Korea-U.S.-Japan links, but I think the weakest link in this area is Korea, so the Chinese government will continue to try to manage the Korea-China relations more actively after this period of chaos with Korea. So, because of that, there was a visa waiver before that, so overall, I think that if this goes on for some time, China will go in a better direction in various ways such as cooperation with Korea.

◆ Cho Tae-hyun: So do you mean we have room to use it as an opportunity?

◇ Park Seung-chan: That's right. That's how I see it. First of all, as I said, Chinese companies are now strengthening sanctions in Trump 2.0, and so are various buyers. In various fields, we are sending invisible love calls to Korean companies right now, and in that opportunity, how we will use this opportunity becomes an important part. That's why I think it can be a good opportunity to strengthen cooperation between Chinese companies. At the same time, what we need to see is that as China continues to become technologically self-reliant now, we need to make more efforts to monitor this technology at the same time. As we read the changes in Chinese companies, we should make more efforts in areas where we can take advantage of what they lack and go global together, or where we can expand our exports to China.

◆ Cho Tae-hyun: Okay. Then, let's go to China properly. China's economic situation seems to have been difficult if the Chinese economy is more difficult than ours, but the Central Economic Cooperation Conference has been held since yesterday. What the hell is this?

◇ Park Seung-chan: The Central Economic Cooperation Conference. It is held in December, and this is the year to determine the policy direction for next year by considering the economic performance of the year and the internal and external economic conditions.

◆ Cho Tae-hyun: Finishing a year and making plans for next year.

◇ Park Seung-chan: That's right. So because this is important, President Xi Jinping himself presents a direction, reviews the problems, translates the overall economic macro-micro direction for next year, and then each ministry and each province leads to dominoes.

◆ Cho Tae-hyun: Yes, I see. a situation that leads to dominoes China's growth target for this year was around 5%. Is this a possible situation?

◇ Park Seung-chan: Last December 10th. President Xi Jinping and Prime Minister Li Chang also talked about it, but what happened on December 11th was that the heads of major international economic organizations such as the IMF and the WTO were brought in. So we did a one-plus-style conversation, and we talked about how we would go around 5% confidence. We're talking to a certain extent, but I think we need to think about whether it's possible when we look at the actual situation. So about 10 days ago, I went around three cities in China. To see the site, various economic stimulus measures are announced, especially in the real estate sector, and it is detected that Beijing and Shanghai are slightly trading in the first-tier cities. However, the 3rd and 4th line cities still seem to have some difficulties. The local atmosphere is a bit like that. Consumption is still the core of consumption now, but consumption still has a war of nerves. In terms of consumption, the government has to release more money. There's a shopping festival in November, so there's a little bit of support, but I still think consumption should wait a little longer.

◆ Cho Tae-hyun: Okay. I think there was another strong economic stimulus story at the meeting where President Xi Jinping talked about. But here, I'm going to turn monetary policy into a stable and easing. I think there was a story like this, what does this mean?

◇ Park Seung-chan: First of all, what kind of meeting that President Xi Jinping presided over is the meeting of the Central Politburo on December 9th before the Central Economic Cooperation Conference. That's what I talked about there. For our viewers, there is a four-step process for China to see how this economic policy is made. To give you a brief explanation, as you said earlier in early December, this is the Central Politburo meeting chaired by President Xi Jinping, which is in December, and the Central Politburo meeting is held on the 1st of every month, and the important thing is July and December in terms of our economy. So July is the year when we do economic inspections in the second half of the year and decide the macro direction, and on December 9th, we identify problems here and do economic risk factors, and this is the first stage of the Central Economic Cooperation Conference that you mentioned. It's going to proceed. This is level 2. When the direction is set to a certain extent here, each ministry will hold an annual working meeting. Perhaps after the end of December, the Ministry of Finance and the Ministry of Commerce of the People's Bank of Korea will continue to hold a working meeting within this year on the financial currency. And the third stage is that the local association will be held in December next year. So, according to the policy direction determined by the Central Economic Cooperation Association, the agenda of what local governments will do and what infrastructure projects to raise GDP is set. If you get a rough target for economic growth, the last four steps, the biggest political event you know in March of next year, will be announced this year's 2025 economy. So please understand this first. As you said, there has been a change this time, that's right. In China's monetary policy, the existing China was said to be stable, but this time, the expression "appropriate easing" was used.

◆ Cho Tae-hyun: The phrase has changed a bit.

◇ Park Seung-chan: It's different. There are five major stages of Chinese monetary policy. Austerity, proper austerity, and stability are the main policies. And then I'm going to relax myself and go out myself. Appropriate relief followed by relief, which is said to be appropriate relief. So, it means that you need to release more money. It means that it's not good. That's why there's a meaning to supply additional liquidity, so in this regard, the market has changed a little in 14 years. Because of the stable to appropriate easing, the market thinks that the money will be released more soon.

◆ Cho Tae-hyun: If you look at the latest one, was it from Reuters last night? Anyway, some say that China is considering allowing the currency to weaken next year. What does this mean?

◇ Park Seung-chan: So in the end, I think China is very likely to cut its reserve ratio and interest rates further to stabilize liquidity, and the market has a lot of meaning. So when we talk about what percentage, how much bank reserve ratio, and how much we're going to cut when we talk about real estate, we don't talk about that, but we talk about at least 25 basis points, and more, we talk about 50 basis points in the market. So overall, the static adequacy is important, and we're thinking that we're going to keep this trend in this direction of giving liquidity and actively expanding fiscal spending by lowering interest rates to that extent because of the appropriate monetary policy.

◆ Cho Tae-hyun: Okay. Active fiscal policies and things like that continue to be talked about in China. If it is a more active fiscal policy, there will be a number of things like the monetary policy you mentioned earlier, but it is more active. What can you think of?

◇ Park Seung-chan: In the end, active fiscal policy is more about releasing money. In the end, when asked about the direction of releasing money, the Central Economic Cooperation Conference, which is currently underway today, has also emerged as a key agenda, such as consumption coupons to boost consumption in order to eventually solve domestic demand, and then to expand various appropriate amounts for this conversion. The first is to release money in the area of expanding domestic demand. The second is the agenda that came out at the Central Political Bureau meeting, which I mentioned about innovative science and technology and innovative agenda, and this time, it will probably come out again at the Central Economic Cooperation Council. What this means is scientific innovation, but in the end, it's fiscal policy, but economic growth can be achieved only when infrastructure is done, not just money is released, so the direction of investment in infrastructure investment, that is, increasing investment, is not the existing bridge or railroad, but literally spending more money on infrastructure in areas such as 5G or data centers for science and technology innovation to continue in this hegemonic political battle between the U.S. and China. The third is to spend more money in the real estate sector. In the end, we need to supplement local finances, and the stock market continues to rise a little more right now, but people buy real estate houses, so I think fiscal policy will probably be implemented in various areas such as funds for real estate recovery to restore the psychological nature of the market.

◆ Cho Tae-hyun: Okay. You just talked about technology, but this is the core of the U.S.-China conflict. Recently, NVIDIA launched an investigation on charges of violating sanctions and anti-trust laws. Looking at the recent atmosphere, it seems that China is moving a lot from the old defensive to the offensive. How do you see the atmosphere?

◇ Park Seung-chan: That's right. Since AI has been handed over now, the weakest link is there for China, so it's changing from a more passive position to an offensive now anyway, which means that we're ready. So as soon as the Biden administration imposed sanctions, including HDM and AI semiconductors, on December 2nd, it implemented a policy to weaponize the various resources we've talked about as of December 3rd. I did it as if I was waiting. So not only that, but also the case of NVIDIA that you just mentioned sends a signal that we will eventually strengthen sanctions against U.S. companies now. Now, NVIDIA itself is also the second in sales in the United States, and China accounts for about 16-17% of the total, which is largely affected. In any case, stock prices are affected, and many other U.S. companies have high market share and high sales in China, so these cards also signal that they're fiddling now.

◆ Cho Tae-hyun: Recently, we announced a mineral control plan for rare metals, and there is a possibility that this raw material control plan will continue to come out, right?

◇ Of course, this is the beginning. What I'm fiddling with right now is not only 17 rare earth elements, but also about 10 other minerals, including titanium, tin, as far as I know. So, the scenario is already prepared in China according to the direction of sanctions that Trump will take office next year on January 20th.

◆ Cho Tae-hyun: Okay. Professor, that's all for today. Please let me know next time. Thank you.

◇ Park Seung-chan: Yes, thank you.

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