As terrestrial 5G mobile networks are being rolled out across countries, there is a renewed interest in integrating Non-Terrestrial Networks.
SatNets for 5G
Satellites and terrestrial networks have always been considered two independent ecosystems, and their standardisation efforts have proceeded independent of each other.
The primary non-terrestrial network that is being considered is the low latency Low Earth Orbit (LEO) satellite networks (SatNets), as a complement to terrestrial networks.
Towards this, Starlink, operated by the Elon Musk-owned SpaceX, and OneWeb, promoted by Bharti Global, have launched about 2,500 and 648 LEO satellites respectively at an altitude of about 1,200 km with the objective of promoting global broadband connectivity.
There are other players such as Reliance Jio in a joint venture with Luxembourg-based SES and Amazon’s Project Kuiper.
Benefits of using SatNets
1] Service continuity in emergency: service continuity to provide seamless transition between terrestrial networks and SatNets in case of public safety, disaster management and emergency situations;
2] Providing service in remote area: Service ubiquity to provide 5G services in unserved and underserved areas of the world, thereby bridging the digital divide;
3] Scalability: Service scalability that utilises the unique capabilities of SatNets in multicasting and broadcasting similar content over a large geographical area.
4] Service to in-motion user: The LEO SatNets can provide service not only to stationary but also to in-motion users.
5] Low latency over long distance: Wireless communications through LEO satellites over long distances is proven to be 1.47 times faster than communication over the same distance through terrestrial optic fibre. It is this advantage along with global coverage that provide a strong use case for LEO SatNets to complement terrestrial optic fibre networks.
SatNet in standardisation: In view of the above advantages, standard-setting organisations such as the Third Generation Partnership project (3GPP), comprising telcos and equipment manufacturers around the world, started integrating SatNets in the standardisation process.
Measures by the government
Realising the advantages, the Government, in its National Digital Communications Policy 2018, has indicated the development of an ecosystem for local manufacturing of satellite communication systems and promoting participation of private players for the strengthening of satellite communication infrastructure in the country.
Accordingly, the New Space India Limited (NSIL), a public sector enterprise, was established in 2019 to re-orient space activities from a ‘supply driven’ model to a ‘demand driven’ model, thereby ensuring optimum utilisation of the space assets.
The Department of Space also established in 2020 a new regulatory body named the Indian National Space Promotion and Authorisation Centre (IN-SPACe).
IN-SPACe is intended to provide a level playing field for private companies to use Indian space infrastructure.
Issues and challenges
Allocation of frequency: Issues will involve addressing issues around frequencies to be allocated for satellite broadband, the methodology of allocation, the relatively higher cost of consumer equipment and the placement and interconnections of SatNets with terrestrial public landline/ mobile networks at the ground stations
Cost: The other major challenge in LEO SatNets is the cost of user terminal and access charges to the end users.
A recent research analysing both Starlink and OneWeb concludes that the standalone LEO SatNets have a distinct cost advantage only if the density is less than 0.1 person per square km compared to terrestrial broadband networks.
Hence it is to the advantage of LEO SatNet providers to integrate their networks with terrestrial 5G networks to improve the cost economies.
Conclusion
All these, along with the proposed revisions to the Satellite Communications Policy of the Government, will provide the required fillip to LEO SatNets to become an integral part of the communication infrastructure of the country.
LEO satellites orbit between 2,000 and 200 kilometers above the earth. LEO satellites are commonly used for communications, military reconnaissance, spying and other imaging applications.
A low earth orbit (LEO) satellite is an object, generally a piece of electronic equipment, that circles around the earth at lower altitudes than geosynchronous satellites.
Satellites made for communications benefit from the lower signal propagation delay to LEO.
This lower propagation delay results in less latency.
Being closer to the earth has an obvious benefit for many types of earth observational satellites by resolving smaller subjects with greater detail.
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Surging inflation and sharp slowdowns in the United States and China prompted the IMF to cut its outlook for the global economy this year and next, while warning that the situation could get much worse.
By one common definition, the major global economies are on the cusp of a recession.
What is Recession?
A recession is a significant decline in economic activity that lasts for months or even years.
Experts declare a recession when a nation’s economy experiences negative GDP, rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time.
Recessions are considered an unavoidable part of the business cycle—or the regular cadence of expansion and contraction that occurs in a nation’s economy.
What causes Recessions?
These phenomena are some of the main drivers of a recession:
A sudden economic shock: An economic shock is a surprise problem that creates serious financial damage. The coronavirus outbreak, which shut down economies worldwide, is a more recent example of a sudden economic shock.
Excessive debt: When individuals or businesses take on too much debt, the cost of servicing the debt can grow to the point where they can’t pay their bills. Growing debt defaults and bankruptcies then capsize the economy.
Asset bubbles: When investing decisions are driven by emotion, bad economic outcomes aren’t far behind. Investors can become too optimistic during a strong economy.
Too much inflation: Inflation is the steady, upward trend in prices over time. Inflation isn’t a bad thing per se, but excessive inflation is a dangerous phenomenon. Central banks control inflation by raising interest rates, and higher interest rates depress economic activity.
Too much deflation: While runaway inflation can create a recession, deflation can be even worse. Deflation is when prices decline over time, which causes wages to contract, which further depresses prices. When a deflationary feedback loop gets out of hand, people and business stop spending, which undermines the economy.
Technological change: New inventions increase productivity and help the economy over the long term, but there can be short-term periods of adjustment to technological breakthroughs. In the 19th century, there were waves of labour-saving technological improvements.
What’s the difference between Recession and Depression?
Recessions and depressions have similar causes, but the overall impact of a depression is much, much worse.
There are greater job losses, higher unemployment and steeper declines in GDP.
Most of all, a depression lasts longer—years, not months—and it takes more time for the economy to recover.
Economists do not have a set definition or fixed measurements to show what counts as a depression. Suffice to say, all the impacts of a depression are deeper and last longer.
In the past century, the US has faced just one depression: The Great Depression.
The Great Depression
The Great Depression started in 1929 and lasted through 1933, although the economy didn’t really recover until World War II, nearly a decade later.
During the Great Depression, unemployment rose to 25% and the GDP fell by 30%.
It was the most unprecedented economic collapse in modern US history.
By way of comparison, the Great Recession was the worst recession since the Great Depression.
During the Great Recession, unemployment peaked around 10% and the recession officially lasted from December 2007 to June 2009, about a year and a half.
Some economists fear that the coronavirus recession could morph into a depression, depending how long it lasts.
How long do recessions last?
Gulf War Recession (July 1990 to March 1991): At the start of the 1990s, the U.S. went through a short, eight-month recession, partly caused by spiking oil prices during the First Gulf War.
The Great Recession (2008-2009): As mentioned, the Great Recession was caused in part by a bubble in the real estate market.
Covid-19 Recession: The most recent recession began in February 2020 and lasted only two months, making it the shortest US recession in history.
Can we predict a recession?
Given that economic forecasting is uncertain, predicting future recessions is far from easy. However, the following warning signs can give you more time to figure out how to prepare for a recession before it happens:
An inverted yield curve: The yield curve is a graph that plots the market value—or the yield—of a range. When long-term yields are lower than short-term yields, it shows that investors are worried about a recession. This phenomenon is known as a yield curve inversion, and it has predicted past recessions.
Declines in consumer confidence: Consumer spending is the main driver of the US economy. If surveys show a sustained drop in consumer confidence, it could be a sign of impending trouble for the economy.
Drop in the Leading Economic Index (LEI): Published monthly by the Conference Board, the LEI strives to predict future economic trends. It looks at factors like applications for unemployment insurance, new orders for manufacturing and stock market performance.
Sudden stock market declines: A large, sudden decline in stock markets could be a sign of a recession coming on, since investors sell off parts and sometimes all of their holdings in anticipation of an economic slowdown.
Rising unemployment: It goes without saying that if people are losing their jobs, it’s a bad sign for the economy.
How does a recession affect individuals?
We may lose your job during a recession, as unemployment levels rise. It becomes much harder to find a job replacement since more people are out of work.
People who keep their jobs may see cuts to pay and benefits, and struggle to negotiate future pay raises.
Investments in stocks, bonds, real estate and other assets can lose money in a recession, reducing your savings and upsetting your plans for retirement.
Business owners make fewer sales during a recession, and may even be forced into bankruptcy.
With more people unable to pay their bills during a recession, lenders tighten standards for mortgages, car loans, and other types of financing.
India has severely criticized the reported move by both China and Pakistan for third-party participation in some projects on the China-Pakistan Economic Corridor (CPEC) that passes through Pakistan-occupied Kashmir (PoK).
China-Pakistan Economic Corridor (CPEC)
The CPEC, one of the most ambitious components of Beijing’s Belt and Road Initiative (BRI), was announced to great fanfare in 2015.
CPEC is a collection of infrastructure projects that are under construction throughout Pakistan beginning in 2013.
Originally valued at $47 billion, the value of CPEC projects is worth $62 billion as of 2020.
It is intended to rapidly upgrade Pakistan’s required infrastructure and strengthen its economy by the construction of modern transportation networks, numerous energy projects, and SEZs.
On 13 November 2016, CPEC became partly operational when Chinese cargo was transported overland to Gwadar Port for onward maritime shipment to Africa and West Asia.
Why CPEC?
CPEC has consistently been held up as a “gamechanger” for Pakistan’s economy.
But the road to completion has proved long and winding. Reports indicate that the pace of CPEC projects has been slowing down in Pakistan in recent years.
At the same time, China is the only country that is heavily investing in Pakistan.
Why in news?
The lack of progress has led to numerous reports about CPEC being at a near standstill in the country.
Gwadar, despite being the epicenter of multibillion-dollar projects, lacks basic necessities like reliable access to water and electricity, let alone other facilities.
The baloch freedom movement is another impediment to the stalled project.
There have been sporadic attacks in Gwadar and elsewhere in the province and the country to discourage Chinese investments in the province.
China is also seeking to deploy its Army in the CPEC projects, to which Pakistan has contested.
India’s reservation
The GoI, which shares tense relations with Pakistan, objects to the CPEC project as upgrade works to the Karakoram Highway are taking place in Gilgit-Baltistan.
This is the territory illicitly occupied by Pakistan in 1947-48.
During the visit of Indian PM Modi to China in 2015, the Indian FM, Sushma Swaraj reportedly told the Chinese.
India did not object to the Chinese construction of the Karakoram Highway which was built between 1959 and 1979.
Russia will pull out of the International Space Station (ISS) after 2024 and focus on building its own orbiting outpost.
Why in news?
Russia will end a symbolic two-decade orbital partnership between Moscow and the west.
International Space Station (ISS)
The ISS was launched in 1998 as part of joint efforts by the U.S., Russia, Japan, Canada and Europe.
The idea of a space station originated in the 1984 State of the Union address by former U.S. President Ronald Reagan.
The space station was assembled over many years, and it operates in low-earth orbit.
Since its inception, it has served as a laboratory suspended in space and has aided multiple scientific and technological developments.
The ISS was originally built to operate for 15 years.
Why was ISS launched?
A space station permits quantum leaps in research in science, communications, and in metals and lifesaving medicines which could be manufactured only in space.
ISS has consistently maintained human presence for the past 21 years, providing astronauts with sophisticated technologies for scientific research.
What is Russia’s role in maintaining the ISS?
The ISS is built with the cooperation of scientists from five international space agencies — NASA of the U.S., Roscosmos of Russia, JAXA of Japan, Canadian Space Agency and the European Space Agency.
Each agency has a role to play and a share in the upkeep of the ISS.
Both in terms of expense and effort, it is not a feat that a single country can support.
Russia’s part in the collaboration is the module responsible for making course corrections to the orbit of the ISS.
They also ferry astronauts to the ISS from the Earth and back.
Until SpaceX’s dragon spacecraft came into the picture the Russian spacecraft was the only way of reaching the ISS and returning.
India has added five more Ramsar sites, or wetlands of international importance, bringing the number of such sites in the country to 54.
Newly added Ramsar Sites
Karikili Bird Sanctuary, Pallikaranai Marsh Reserve Forest and Pichavaram Mangrove in Tamil Nadu,
Sakhya Sagar in Madhya Pradesh
Pala Wetlands in Mizoram
What are Wetlands?
A wetland is a distinct ecosystem that is flooded by water, either permanently or seasonally, where oxygen-free processes prevail.
The primary factor that distinguishes wetlands from other landforms or water bodies is the characteristic vegetation of aquatic plants, adapted to the unique hydric soil.
Significance of Wetlands
Wetlands provide a wide range of important resources and ecosystem services such as food, water, fibre, groundwater recharge, water purification, flood moderation, erosion control, and climate regulation.
They are, in fact, are a major source of water and our main supply of freshwater comes from an array of wetlands that help soak rainfall and recharge groundwater.
They provide many societal benefits: food and habitat for fish and wildlife, including threatened and endangered species; water quality improvement; flood storage; shoreline erosion control; economically beneficial natural products for human use; and opportunities for recreation, education, and research, etc.
India and Ramsar Wetlands
India’s Ramsar wetlands are spread over 11,000 sq.km — around 10% of the total wetland area in the country — across 18 States.
No other South Asian country has as many sites, though this has much to do with India’s geographical breadth and tropical diversity.
The UK (175) and Mexico (142) — smaller countries than India — have the most Ramsar sites, whereas Bolivia spans the largest area with 1,48,000 sq.km under the Convention protection.
The National Wetland Inventory and Assessment compiled by the ISRO estimates India’s wetlands to span around 1,52,600 square kilometres.
What makes Ramsar designation significant?
Being designated a Ramsar site does not necessarily invite extra international funds.
Acquiring this label helps with a locale’s tourism potential and its international visibility.
Criteria for Ramsar site designation
To be Ramsar site a place must meet at least one of the criteria as defined by the Ramsar Convention of 1961, such:
Supporting vulnerable, endangered, or critically endangered species or threatened ecological communities or,
If it regularly supports 20,000 or more waterbirds or,
Is an important source of food for fishes,
Spawning ground,
Nursery and/or migration path on which fish stocks are dependent upon.
Static or flowing, fresh, brackish or salt, including areas of marine water the depth of which at low tide does not exceed six metres
Does not include river channels, paddy fields, human-made water bodies/ tanks specifically constructed for drinking water purposes
Back2Basics: Ramsar Convention
The Convention on Wetlands of International Importance (better known as the Ramsar Convention) is an international agreement promoting the conservation and wise use of wetlands.
It is the only global treaty to focus on a single ecosystem.
The convention was adopted in the Iranian city of Ramsar in 1971 and came into force in 1975.
Traditionally viewed as a wasteland or breeding ground of disease, wetlands actually provide fresh water and food and serve as nature’s shock absorber.
Wetlands, critical for biodiversity, are disappearing rapidly, with recent estimates showing that 64% or more of the world’s wetlands have vanished since 1900.
Major changes in land use for agriculture and grazing, water diversion for dams and canals, and infrastructure development are considered to be some of the main causes of loss and degradation of wetlands.
The generation of unique disability IDs (UDIDs) had increased from an average of 5,000 a day to an average of 7,000 to 9,000 daily during the 90-day Azadi Se Antodaya Tak campaign.
Why such a move?
According to the 2011 Census, there were 2.68 crore people with disabilities.
What is Unique Disability IDs (UDIDs)?
“Unique ID for Persons with Disabilities” project is being implemented with a view of creating a National Database for PwDs, and to issue a Unique Disability Identity Card to each person with disabilities.
It functions under the Ministry of Social Justice and Empowerment.
The project aims only to encourage transparency, efficiency and ease of delivering the government benefits to the person with disabilities, and ensure uniformity.
The project will also help in stream-lining the tracking of physical and financial progress of beneficiary at all levels of hierarchy of implementation – from village level, block level, District level , State level and National level.
Types of disabilities covered
As per the Persons with Disabilities (Equal Opportunities, Protection of Rights & Full Participation) Act, 1995 – A person with a disability can be defined as one with one or more of disabilities falling under any of the below-mentioned categories :
Blindness
Leprosy-cured
Cerebral Palsy: It means a group of non-progressive conditions of a person characterized by abnormal motor control posture resulting from brain insult or injuries occurring in the pre-natal, peri-natal or infant period of development.
Low vision: It means a person with impairment of visual functioning even after treatment of standard refractive correction but who uses or is potentially capable of using vision for the planning or execution of a task with appropriate assistive device;
Locomotor disability: It means disability of the bones, joints or muscles leading to substantial restriction of the movement of the limbs or nay form of cerebral palsy;
Mental retardation: It means a conditions of arrested or incomplete development of mind of a person which is specially characterized by sub normality of intelligence;
Mental illness: It means any mental disorder other than Mental retardation
Hearing Impairment: It means loss of sixty decibels or more in the better ear in the conversational range of frequencies
Monkeypox was previously limited to the local spread in central and west Africa, close to tropical rainforests, but has recently been seen in various urban areas and now in more than 50 countries.
About monkeypox
A virus belonging to the poxviruses family causes a rare contagious rash illness known as monkeypox.
This zoonotic viral disease (a disease transmitted from animals to humans) has hosts that include rodents and primates.
It is a self-limiting disease with symptoms lasting two to four weeks and a case fatality rate of 3-6 per cent.
Symptoms: A skin rash on any part of the body could be the only presenting symptom.
Swollen lymph nodes are another distinguishing feature. Aside from these, other symptoms of a viral illness include fever, chills, headache, muscle or back aches, and weakness.
Mode of transmission: Touching skin lesions, bodily fluids, or clothing or linens that have been in contact with an infected person can result in transmission.
It’s also worth noting that monkeypox does not spread from person to person through everyday activities like walking next to or having a casual conversation with an infected person.
Treatment: Monkeypox is mostly treated by managing symptoms and preventing complications if it is diagnosed.
In the minor proportion who are immunocompromised, complications can occur; pulmonary failure was the most common complication with a high mortality rate.
Containment Measures
Because symptoms usually appear 5-21 days after exposure, people with rashes, sores in the mouth, rash, eye irritation or redness, or swollen lymph nodes should be monitored.
When symptoms appear, it is critical to isolate the infected from other people and pets, cover their lesions, and contact the nearest healthcare provider.
It is also critical to avoid close physical contact with others until instructed to do so by our healthcare provider.
It is preferable to use home isolation whenever possible.
Priority should be given to educating grassroots workers about symptoms, specimen collection, disease detection, acquiring sample collection equipment, and maintaining cold storage of specimens.
Increased surveillance and detection of monkeypox cases are critical for controlling the disease’s spread and understanding the changing epidemiology of this resurging disease.
Preventive health measures, such as avoiding infected animal or human contact and practising good hand hygiene, are the best option.
Vaccines and drugs
In the US, pre exposure vaccination with JYNNEOS® is available to healthcare workers and lab workers exposed to this group of poxviruses.
The smallpox vaccine is 85 percent effective against the disease.
Another vaccine, ACAM2000, is a live vaccinia virus vaccine that is otherwise recommended for smallpox immunisation and can also be used for high-risk individuals during monkeypox outbreaks.
In addition, Tecovirimat, an antiviral drug used to treat smallpox, is recommended for monkeypox.
Challenges: Smallpox vaccination programmes have been discontinued for the past 50 years, resulting in a scarcity of effective vaccines.
There are approved drugs and vaccines, but they are not widely available to scale up controlling monkeypox.
Why WHO declared it as international concern?
The increase in monkeypox cases in a short span of time in many countries necessitated the declaration of public health emergency of international concern (PHEIC) and additional research studies.
It is unclear whether the recent sudden outbreaks in multiple countries result from genotypic mutations that alter virus transmissibility. SARS-CoV-2 and monkeypox virus co-infection can alter infectivity patterns, severity, management, and response to vaccination against either or both diseases.
As a result, there is a need to improve diagnostic test efficiency.
Way forward
Plan for pandemic preparedness: This is not the last such difficulty we will face, as the world is still witnessing more such public health crises.
Zoonotic diseases are caused by various factors, including unchecked deforestation, climate coupled with a failure to prioritise public health, poverty, and climate change.
Instead, a robust plan for pandemic preparedness should be accelerated, guided by a single health agenda.
The world is yet to recognise emerging and re-emerging infectious diseases as a genuine threat.
The immediate priority is to strengthen the surveillance infrastructure, including hiring public health professionals and field workers who can participate in outbreak detection and response during many future PHEICs.
Conclusion
Without prioritising public health strengthening, the threat of new and re-emerging infectious diseases, as well as the enormous social and economic challenges that accompany them, is real and grave.
China is witnessing one of the most challenging economic crisis in its history.
The real estate market which accounts for nearly 30% of its GDP has come crashing down in the past 1 year.
Property sales plummeted by 72%, 1000s of people are protesting in 86 cities, and now there is a banking crisis where banks have started freezing the accounts of the Depositors.
In its heaviest crackdown on depositors, it has deployed tanks against the protesters.
And in spite of all this trouble, experts say that this is the just beginning of one of the worst economic crises that is followed in China!! The question is-
Chinese Evergrande Crisis: A backgrounder
What is Evergrande?
Evergrande is a Real Estate company which currently owns more than 1,300 projects in more than 280 cities across China.
The broader Evergrande Group now encompasses far more than just real estate development.
Its businesses range from wealth management, making electric cars and food and drink manufacturing.
It even owns one of country’s biggest football teams – Guangzhou FC.
What is the crisis?
Chinese property giant Evergrande, whose liabilities exceed $300bn (£228bn), failed to meet interest payments to international investors.
That prompted Fitch, an agency that rates companies’ financial risk, to declare Evergrande in default.
The crisis has spooked investors who fear contagion across China’s property and banking sectors.
Fitch, whose risk ratings are closely followed by major investors seeking to deploy billions of dollars, said it contacted Evergrande about the non-payment but received no response.
How did it land itself in trouble?
Evergrande expanded aggressively to become one of China’s biggest companies by borrowing more than $300bn.
Last year, Beijing brought in new rules to control the amount owed by big real estate developers.
The new measures led Evergrande to offer its properties at major discounts to ensure money was coming in to keep the business afloat.
Now, it is struggling to meet the interest payments on its debts.
This uncertainty has seen Evergrande’s share price tumble by almost 90% over the last year.
Why would it matter if Evergrande collapses?
There are several reasons why Evergrande’s problems are serious.
Loss of public money: Many people bought property from Evergrande even before building work began. They have paid deposits and could potentially lose that money if it goes bust.
Loss to investors: There are also the companies that do business with Evergrande. Firms including construction and design firms and materials suppliers are at risk of incurring major losses, which could force them into bankruptcy.
Economic impact on China
Huge dependence on a single company: Evergrande is an enormous company embedded across China’s financial system and economy, which relies heavily on the property for growth and jobs.
Credit crunch in theeconomy: If Evergrande defaults, banks and other lenders may be forced to lend less. This could lead to what is known as a credit crunch, when companies struggle to borrow money at affordable rates.
Withdrawal of foreign investments: Companies that can’t borrow find it difficult to grow, and in some cases are unable to continue operating. This may also unnerve foreign investors, who could see China as a less attractive place.
Snowball effect on debts: In theory, a collapse could chase investors away from other publicly traded developers, setting off a chain of defaults.
Rise in unemployment: A collapse could also undermine the economic activity and jobs created by Evergrande and its downstream suppliers.
Visible bankruptcy: Cash is so short the company this summer started paying some suppliers with unfinished apartments instead of money.
Why Chinese people are fuming over the streets?
Many investors have expressed concerns about the Chinese government’s lack of communication about its plans.
Continued absence of a clear message from Beijing is posing notable downside risk to growth.
Given wide use of property as collateral for loans to companies and local governments, a deep and widespread drop in prices, however unlikely, could threaten the financial system.
To head off further damage, the government faces the challenge of ensuring customers get the homes they bought.
What is China’s government doing to prevent a crisis?
The government of the province, where Evergrande is based, said that at the company’s request it would dispatch a working group to help Evergrande manage its risks and maintain normal operations.
China’s central bank said it supported the decision to step in and would cooperate, while banking and securities regulators said they would work together to maintain the health of the broader property market.
Chinese authorities had earlier asked local governments to prepare to step in—only at the last minute—if Evergrande fails to manage its affairs in an orderly fashion.
This approach signals Beijing’s reluctance to bail out the debt-saddled property developer while bracing to cushion any economic or social fallout.
What exactly went wrong with the Real estate market in China?
There were two immediate triggers that precipitated the crisis at Evergrande.
Chinese regulators, as part of a widespread crackdown on sectors such as the digital economy and education, kicked off probes into the high borrowings of property developers.
To counter that, Evergrande tried selling off some of its business.
But a progressive slowing down of China’s property market and tapering demand for new houses crimped cash flows.
These two factors combined to precipitate the cash crunch at Evergrande.
Three red lines In August 2020, in an effort to better manage the heavily leveraged sector, Chinese regulators introduced rules dubbed the “three red lines” to limit borrowing of real estate firms. The three red lines mandate that developers maintain: 1. A debt-to-asset ratio of 70% or lower, 2. A 100% cap on net debt to equity, 3. Enough cash on hand to satisfy short-term borrowing, debts, and liabilities.
Why is the world worrying?
A collapsing property market in China has triggered alarm bells across the world.
(1) Future of manufacturing
It is still the manufacturing hub of the world and if its economy falters, countries around the globe would suffer from slower and more expensive exports.
Contract electronics and semiconductor manufacturing, where China is a global leader, had already stalled various sectors such as auto, consumer electronics and more due to Covid-induced supply bottlenecks.
This would only go up further in an economic crisis.
(2) Future of BRI Projects
China is also the global creditor of the developing world. Developing countries dependent on China for infrastructure projects, would be hard-hit.
The Xi-government has sponsored numerous projects under the Belt and Road Initiative.
Currently, BRI projects are valued at over $1 trillion across 139 countries around the globe. These building sites, highways, power generation plants and so on could be left unfinished.
(3) Disburse of finances
China’s extended property boom that started in the mid-1990s has now ensured that nearly three quarters of the country’s household wealth is locked up in housing.
An impending collapse at the biggest real estate company could have a serious knock-on effect on the entire economy.
It could drag down growth and potentially setting off a cascading impact that could singe the global commodities and financial markets.
Impact on India
India’s buoyant iron ore exports, much of which is headed to China, could also see an impact if the twin crises in China triggers an extended slowdown in the Chinese real estate market.
In India’s stock markets, the metals segment, which has been surging since the start of the year and appeared to show signs of overheating.
Analysts view this more as a short-term correction, but there could be an extended impact if the crisis in China were to remain unresolved.
And there could potentially be a sustained impact on global growth prospects, dampening the nascent recovery that is underway in markets such as India.
Why global sentiments now are against China?
Aggressive expansion: In recent years, China has expanded its diplomatic and economic relationships through aggressive means.
Covertness of BRI: It has been positioning itself as a donor of much-needed public goods through it’s the Belt and Road Initiative.
As China’s influence has grown, so have the number of countries concerned with its:
Lack of economic reciprocity
Dominant technological policies
Coercive foreign policy practices, and
Regional military ambitions
In Asia, where strong economic ties with China are critical to development, Beijing has still managed to drum up resentment for its unyielding position on territorial claims in the South China Sea.
Criticism of Chinese policies, both at home and abroad, has revealed the grittier side of Beijing’s diplomacy.
The coronavirus has only further highlighted this dynamic.
Will China collapse?
What do incidences say?
Freezing of bank accounts: Some Chinese banks have responded by seizing purchasers’ savings deposits, claiming they are really ‘mortgage investment products.’
Putting tanks over protestors: This has sparked open protests outside some banks, leading to the government surrounding the banks with tanks.
However, there is not going to be a financial crash in China. Why?
That’s because the government controls the financial levers of power:
The central bank,
The big four state-owned commercial banks which are the largest banks in the world (who lends Pakistan always)
The so-called ‘bad banks,’ which absorb bad loans
Big asset managers
Hence we can say that China is too big to collapse.
How can China achieve this?
Ans. Socialistic Autocracy
The government can order the big four banks to exchange defaulted loans for equity stakes and forget them.
It can tell the central bank, the People’s Bank of China, to do whatever it takes.
It can tell state-owned asset managers and pension funds to buy shares and bonds to prop up prices and to fund companies.
It can tell the state bad banks to buy bad debt from commercial banks.
It can get local governments to take up the property projects to completion.
So a financial crisis is ruled out because the state controls the banking system.
What are the lessons India needs to learn from the Chinese economic Crisis?
What we need to learn from this Chinese crisis is that investment instruments driven by mindless social norms will often cost both the people and the economy heavily.
In this case the Chinese definition of a well-seeded person got a ton of debtpiled up for the Chinese people in spite of the sky high prices.
In our case in India the same thing happened with fixed deposits (FDs) because we outright considered FDs to be safe because of the social norm without understanding inflation.
Similarly the mindless purchase of gold is now hindering our economy so take a step back and assess whether your instruments are backed by calculated strategy or just mindless social norms.
The Indian real-estate sector has been stagnant.
If companies in the sector are to be believed, this has primarily been because of high interest rates. But what is basically holding back people are high home prices.
We need homes in a price range of ₹10-15 lakh for real estate to become a major contributor to economic growth, like it has been in the Chinese case.
