Good evening, dear audience. Welcome to “Harmony Moment”, I am Harmony. Today is February 12, 2025, Wednesday. What major events have occurred today?
Today’s Focus:
– Musk warns: If budget is not cut, the US will go bankrupt
– Small banks in China undergo a wave of mergers involving nearly 60 billion in assets, experts warn of greater concerns.
– Protests escalate as Wang Yi departs for UK.
Recently, US President Trump appointed tech magnate and billionaire Elon Musk to lead the newly established “Department of Government Efficiency” (DOGE), aimed at reducing federal spending. The Trump administration has been issuing orders to cut down on massive federal budget expenditures.
On February 11, Musk met with President Trump at the White House. During the meeting, Musk issued a stern warning that if the budget is not cut, the US will face bankruptcy.
Musk specifically pointed out that the US’s budget deficit in the previous fiscal year had reached $1.8 trillion. He stated, “Reducing federal spending is not optional but a mission that Washington must carry out.”
Currently, the Trump administration is in conflict with the US courts. Due to Trump’s extensive fiscal austerity measures, some federal agencies have shut down, some employees have been laid off, leading to multiple lawsuits challenging the legality of certain cost-cutting measures taken by the White House.
At the same time, President Trump has ordered all US government agencies to closely collaborate with DOGE led by Musk to identify government employees that can be laid off and government functions that can be terminated to streamline the federal workforce.
According to executive orders signed by the president, government agencies can only hire one new employee after every four employees leave. Agency heads must consult with DOGE when deciding which positions to fill. However, Trump has exempted employees engaged in critical areas like national security, public safety, law enforcement, and immigration enforcement from layoffs to ensure these positions are not affected.
Nevertheless, the large-scale downsizing of the US government may face legal obstacles. Many government employees are members of labor unions, meaning any major downsizing or workforce reduction must comply with collective bargaining agreements, while non-union civil service employees are protected by federal laws.
When asked about responding to external criticism, Musk stated that US citizens have expressed support for “major government reform” through their votes, a core issue emphasized by President Trump during his campaign.
As the head of SpaceX and Tesla, Musk’s appointment has raised questions regarding potential conflicts of interest. In response, Musk stated, “I fully expected rigorous scrutiny and essentially undergo ‘full scrutiny’ every day; passing unnoticed is impossible.”
The goals of the Trump administration and Musk aim to uncover fraud and waste in the government system, planning to save approximately $1 trillion in expenses in the coming years, equivalent to 15% of the federal budget.
The success of these measures remains to be seen. Next, let’s look at news from China:
Last year, the financial system in mainland China witnessed an unprecedented wave of mergers among small banks. Official data shows that in 2024 alone, at least 290 rural banks and cooperative societies merged to form larger regional banks, setting a historical record. While this reform aims to mitigate financial risks, analysts warn that these mergers could potentially lead to more issues.
According to Reuters, mainland China currently has about 4,000 small banks, many of which are supported by provincial governments and primarily rely on short-term money markets and interbank lending for funding.
Currently, the Chinese economy continues to struggle, particularly in the real estate market, impacting many small banks due to slowing loan growth and a surge in non-performing loans. Simultaneously, governments at all levels are heavily indebted and unable to provide continued support, leading to banks’ inability to operate. There are concerns that the collapse of certain banks could trigger a chain reaction, jeopardizing the stability of the entire financial system.
In response to a larger crisis, a wave of mergers among small banks in mainland China has emerged. In 2024, at least 290 rural banks and cooperative societies merged to form larger regional banks.
By regulatory and company documents’ calculations, as of 2024, the total assets of rural banks and cooperative societies in mainland China were around 57 trillion Chinese yuan, equivalent to twice the total assets of the Australian banking industry and one-third of the US banking industry.
However, the non-performing loan ratios of these banks far exceed the industry’s average levels. Official data shows that in the third quarter of 2024, the non-performing loan ratio of rural commercial banks reached 3.04%, almost double the national banking industry’s overall non-performing loan ratio of 1.56%.
These are not the most severe cases, with analysts indicating that the financial conditions of many small banks are even worse.
For example, in the case of the merger of the Liaoning Rural Commercial Bank last year, a bank established by the Liaoning provincial government in September 2023 with a registered capital of 20.8 billion Chinese yuan.
In June 2024, the Liaoning Rural Commercial Bank merged with 36 local small rural banks, some with high non-performing loan rates, such as the Liaoning Dengtou Rural Commercial Bank. According to the bank’s report, by the end of 2021, the non-performing loan rate was 21.54%, significantly higher than the industry’s average of 1.73% at that time.
Christopher Beddor, the deputy director of the China research division at Gavekal Dragonomics, expressed to Voice of America that mergers alone cannot solve issues like non-performing assets that still widely exist.
Jason Bedford, an analyst from FrontPoint Waters Fund and UBS Asian, stated that merging small banks cannot address the fundamental issues and that consolidating bankrupt institutions may lead to more significant problems.
Christopher Beddor, the deputy director of China research at Gavekal Dragonomics, specializing in studying the Chinese economy, also mentions that merger strategies alone cannot resolve issues like non-performing assets, saying that “many problems will persist.”
In 2025, the Chinese government will continue to push forward with the integration of small banks. According to a report by Economic Reference under Xinhua News Agency, at least six provincial-level rural commercial banks or joint agricultural banks will complete construction in provinces (autonomous regions) including Jiangsu, Jiangxi, Henan, Guizhou, Xinjiang, and Inner Mongolia.
Industry insiders are generally concerned that the restructuring and mergers of small and medium banks may simply shift problems from multiple small banks to larger institutions, fearing the inability to respond in a crisis.
As for the future, we will continue to monitor this situation. Moving on to the next news piece:
Recently, Beijing’s plan to construct Europe’s largest embassy in London stirred human rights protests in the public, with no willingness from the Chinese side to change the plan, sparking controversy. Against this backdrop, Chinese Foreign Minister and member of the Central Political Bureau Wang Yi visited the UK on the 12th, once again bringing attention to human rights issues concerning the Chinese Communist Party.
During this visit, China and the UK are expected to discuss international security, the Ukraine conflict, and other issues.
However, the most debated topic remains Beijing’s plan to build a large embassy in London. Ahead of Wang Yi’s visit to London, protests were organized by British civilians opposing Beijing’s construction of Europe’s largest Chinese embassy in London.
The Financial Times reported that British authorities proposed changes to Beijing’s plan, such as adding a fence to protect historical relics and ensuring emergency rescue corridors are clear, but the Chinese side showed no interest in altering the plan.
In 2018, Beijing acquired the old Royal Mint site near the Tower of London to build Europe’s largest embassy. However, this plan has faced widespread opposition in British society. As early as 2022, the local council rejected China’s building permit. In July of last year, after the Labour Party came to power, the Chinese side reapplied, and the plan progressed again under the intervention of the British government.
This plan has caused significant public backlash in the UK. Last Saturday, around 3,000 people took to the streets of London to protest. Jaywick, a shadow justice minister of the Conservative Party, called the new embassy a potential “giant spy center” and urged the British public to “resist to the end.”
Simultaneously, the British Home Office received dozens of joint letters from Hong Kong and Tibetan activists requesting the UK to include Chinese and Hong Kong government-related organizations in the highest level of the Foreign Influence Registration Scheme (FIRS) and monitor the activities of Chinese agents in the UK.
Article 19, named after the Universal Declaration of Human Rights, issued a statement calling on the British government to prioritize human rights issues in its strategy towards China. Through the meeting with Wang Yi, they demand an explanation from Beijing for reneging on the Sino-British Joint Declaration, immediate unconditional release of Hong Kong media mogul Jimmy Lai and other illegally detained British citizens, and an immediate halt to cross-border repression of Hong Kong, Chinese, and ethnic minority individuals in the UK.
Two days before Wang Yi’s arrival in the UK on February 10, the Prime Minister’s Office in the UK hosted a New Year’s reception, inviting four Hong Kong activists currently being sought by the Hong Kong government. They include Jannelle Leung, Senior Advocacy and Project Officer at the Hong Kong Democracy Council (HKDC), Kalim Leung, Founder of the British Hong Kong Alliance, Spring Cheung, Communications and Media Assistant at the Committee for Free Hong Kong Foundation (CFHK), and former Hong Kong Legislative Council member Nathan Law.
Kalim Leung mentioned that at the reception, they questioned Prime Minister Johnson about Beijing’s plan to construct a “super embassy” at the old Royal Mint site in London. Just two days prior, thousands of protesters gathered at the old site.
Johnson replied that he would review the scheme.
Kalim Leung and others briefed Johnson on how the Hong Kong government had put out a million-dollar bounty on them and urged Johnson to pay more attention to the situation of Hong Kong political prisoners like Jimmy Lai. Johnson stated that he raises this issue every time he meets with Chinese officials.
Kalim Leung stated that Johnson, being a human rights lawyer, appeared to understand the situation in Hong Kong when they discussed their views about Hong Kong. Regarding the invitation of the wanted Hong Kong activists by the Prime Minister’s Office before Wang Yi’s visit to the UK, Kalim Leung mentioned that despite frequent exchanges between UK and China officials causing unease, the democratic mechanism ensures the situation will not worsen significantly. He viewed the invitation as a positive affirmation from the Prime Minister’s Office, indicating to the Chinese government that while they may be wanted, they still have freedom and the right to speak up in the UK.
Alright, time swiftly passes by. Thank you for accompanying us during this episode of “Harmony Moment”. If you enjoyed our program, don’t forget to like, comment, and share it with more friends! See you tomorrow at the same time; farewell!
Production Team of “Harmony Moment”