DeepSeek’s AI breakthrough ‘is biggest shock to come out of China in 185 years’
By Dannie Peng
DeepSeek may prove to be China’s most important technological contribution to the world in almost two centuries, according to a leading scientist.
Rao Yi, the president of Capital Medical University in Beijing, argued in a post on social media: “DeepSeek is the biggest shock to human society to come out of China in terms of science and technology in 185 years.
“It’s not that China’s technological achievements in the past were unimportant, but that the real-world reaction triggered by the out-of-the-blue DeepSeek [was much stronger].”
Rao also alluded to China’s defeat at the hands of the British in the first opium war in 1842, which ended China’s self-perceived leadership of the world and exposed how it had fallen behind in military technology.
DeepSeek recently made global headlines with the release of two large language models (LLMs) V3 and R1, which were built at a fraction of the cost and computing power of leading US products such as ChatGPT but performed at a similar level.
OpenAI’s chief executive Sam Altman admitted it was an “impressive model, particularly around what they’re able to deliver for the price”.
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By Dannie Peng
DeepSeek may prove to be China’s most important technological contribution to the world in almost two centuries, according to a leading scientist.
Rao Yi, the president of Capital Medical University in Beijing, argued in a post on social media: “DeepSeek is the biggest shock to human society to come out of China in terms of science and technology in 185 years.
“It’s not that China’s technological achievements in the past were unimportant, but that the real-world reaction triggered by the out-of-the-blue DeepSeek [was much stronger].”
Rao also alluded to China’s defeat at the hands of the British in the first opium war in 1842, which ended China’s self-perceived leadership of the world and exposed how it had fallen behind in military technology.
DeepSeek recently made global headlines with the release of two large language models (LLMs) V3 and R1, which were built at a fraction of the cost and computing power of leading US products such as ChatGPT but performed at a similar level.
OpenAI’s chief executive Sam Altman admitted it was an “impressive model, particularly around what they’re able to deliver for the price”.
via SCMP Full Text Feed
ByteDance’s new AI model goes viral for its deepfake capabilities that animate photos
By Ben Jiang
ByteDance, the tech giant behind TikTok, has introduced an artificial intelligence (AI) model that is gaining widespread attention for its ability to transform photos and sound bites into realistic videos, underscoring China’s growing capabilities in the field.
The company’s OmniHuman-1 multimodal model can create vivid videos of people speaking, singing, and moving with a quality “significantly outperforming existing audio-conditioned human video-generation methods”, the ByteDance team behind the product said in a paper. AI-generated images, videos and audio of real people are often referred to as deepfakes, a technology becoming more prominent in cases of fraud as well as more harmless uses for entertainment.
ByteDance has become one of the hottest AI companies in China. Its Doubao app is currently the most popular consumer-facing AI app in the country. It has not released the OmniHuman-1 to the public yet, but sample clips have gone viral.
One notable demo features a 23-second video of Albert Einstein delivering a speech. TechCrunch’s Kyle Wiggers described the app’s output as “shockingly good” and “perhaps the most realistic deepfake videos to date”.
The model highlights the advancements Chinese developers are making despite Washington’s efforts to curb the country’s AI progress. The launch follows OpenAI widening the release of its video-generation tool Sora, which was made publicly available to ChatGPT Plus and Pro users in December.
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By Ben Jiang
ByteDance, the tech giant behind TikTok, has introduced an artificial intelligence (AI) model that is gaining widespread attention for its ability to transform photos and sound bites into realistic videos, underscoring China’s growing capabilities in the field.
The company’s OmniHuman-1 multimodal model can create vivid videos of people speaking, singing, and moving with a quality “significantly outperforming existing audio-conditioned human video-generation methods”, the ByteDance team behind the product said in a paper. AI-generated images, videos and audio of real people are often referred to as deepfakes, a technology becoming more prominent in cases of fraud as well as more harmless uses for entertainment.
ByteDance has become one of the hottest AI companies in China. Its Doubao app is currently the most popular consumer-facing AI app in the country. It has not released the OmniHuman-1 to the public yet, but sample clips have gone viral.
One notable demo features a 23-second video of Albert Einstein delivering a speech. TechCrunch’s Kyle Wiggers described the app’s output as “shockingly good” and “perhaps the most realistic deepfake videos to date”.
The model highlights the advancements Chinese developers are making despite Washington’s efforts to curb the country’s AI progress. The launch follows OpenAI widening the release of its video-generation tool Sora, which was made publicly available to ChatGPT Plus and Pro users in December.
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How is China retaliating against US tariffs, and what impact will it have?
By Ji Siqi
Within minutes of the United States hiking tariffs on all Chinese imports by 10 per cent, Beijing announced a slew of retaliatory measures in a bid to gain leverage in any future trade negotiations with Washington.
The moves unveiled on Tuesday included a 10-15 per cent increase in tariffs on certain US imports, export restrictions on some critical minerals, the addition of two US companies to a Chinese government blacklist, and an antitrust investigation targeting American tech giant Google.
China has also filed a complaint against the US levies with the World Trade Organization.
Although the steps taken by Beijing are more measured and targeted than the US’ across-the-board tariffs on Chinese goods, economists said China’s moves were carefully calibrated – as some of them will hit areas that US President Donald Trump most cares about.
“The combination of retaliatory tariffs with export bans, entity-list additions and antitrust probes suggests a more coordinated and comprehensive approach by policymakers compared with the 2018-19 US-China trade war,” economists from Goldman Sachs said in a note on Tuesday.
According to Beijing’s announcement, eight goods imported from the US will face additional duties of 15 per cent, including coal and liquefied natural gas (LNG).
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By Ji Siqi
Within minutes of the United States hiking tariffs on all Chinese imports by 10 per cent, Beijing announced a slew of retaliatory measures in a bid to gain leverage in any future trade negotiations with Washington.
The moves unveiled on Tuesday included a 10-15 per cent increase in tariffs on certain US imports, export restrictions on some critical minerals, the addition of two US companies to a Chinese government blacklist, and an antitrust investigation targeting American tech giant Google.
China has also filed a complaint against the US levies with the World Trade Organization.
Although the steps taken by Beijing are more measured and targeted than the US’ across-the-board tariffs on Chinese goods, economists said China’s moves were carefully calibrated – as some of them will hit areas that US President Donald Trump most cares about.
“The combination of retaliatory tariffs with export bans, entity-list additions and antitrust probes suggests a more coordinated and comprehensive approach by policymakers compared with the 2018-19 US-China trade war,” economists from Goldman Sachs said in a note on Tuesday.
According to Beijing’s announcement, eight goods imported from the US will face additional duties of 15 per cent, including coal and liquefied natural gas (LNG).
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Thailand’s Paetongtarn Shinawatra in China, with trade, railway, scam farms on the table
By Laura Zhou
Thai Prime Minister Paetongtarn Shinawatra has arrived in China for a four-day visit as the two sides look to crack down on telecoms scam farms in Southeast Asia, and with trade, technology and infrastructure expected to top the agenda.
Thailand, a long-time US ally, is also a crucial regional partner for Beijing in light of its fierce rivalry with Washington.
Paetongtarn arrived in Beijing on Wednesday for what is her first visit to China since taking office in August.
Accompanying the Thai prime minister are four deputy prime ministers – in charge of transport, internal affairs, finance and digital economy, respectively.
Ministers overseeing foreign policy, tourism and agriculture are also part of the Thai delegation.
Thai media reports ahead of Paetongtarn’s visit said she would meet Chinese President Xi Jinping in a bid to curb negative public perceptions about tourism safety in the kingdom, after several Chinese nationals were trafficked into Myanmar via Thailand to work at cyber scam farms there.
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By Laura Zhou
Thai Prime Minister Paetongtarn Shinawatra has arrived in China for a four-day visit as the two sides look to crack down on telecoms scam farms in Southeast Asia, and with trade, technology and infrastructure expected to top the agenda.
Thailand, a long-time US ally, is also a crucial regional partner for Beijing in light of its fierce rivalry with Washington.
Paetongtarn arrived in Beijing on Wednesday for what is her first visit to China since taking office in August.
Accompanying the Thai prime minister are four deputy prime ministers – in charge of transport, internal affairs, finance and digital economy, respectively.
Ministers overseeing foreign policy, tourism and agriculture are also part of the Thai delegation.
Thai media reports ahead of Paetongtarn’s visit said she would meet Chinese President Xi Jinping in a bid to curb negative public perceptions about tourism safety in the kingdom, after several Chinese nationals were trafficked into Myanmar via Thailand to work at cyber scam farms there.
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Thailand shuts power to Myanmar’s scam hub, PM Paetongtarn vows firm action
By SCMP’s Asia desk
Thailand has pulled the plug on electricity and internet access to Myanmar border areas bristling with scam factories, in a belated effort to disrupt fraud operations being carried out by illegally sending logistics and people across the border.
Bangkok has faced diplomatic blowback for failing to help eradicate these syndicates, which are mostly clustered around the Myawaddy area of Myanmar, particularly since the high-profile rescue of Chinese actor Wang Xing last month from a scam park close to the Thai border in Tak province.
The incident triggered outrage across social media in China and prompted holidaymakers from Thailand’s most important tourism market to cancel their plans to travel to the kingdom.
Attention has focused on Thailand being used as a transit hub by criminal syndicates to lure and transport unsuspecting workers, as well as SIM cards, satellite links and petrol for the scam compounds to operate.
Thai authorities have consistently said it is impossible to combat these scam operators based beyond the kingdom, arguing that its geography makes it virtually impossible to police the long and remote frontiers to Myanmar, Laos and Cambodia.
But following a visit by China’s Assistant Public Security Minister Liu Zhongyi to address the scam crisis, Thailand launched its biggest crackdown to date against the criminal syndicates.
via SCMP Full Text Feed
By SCMP’s Asia desk
Thailand has pulled the plug on electricity and internet access to Myanmar border areas bristling with scam factories, in a belated effort to disrupt fraud operations being carried out by illegally sending logistics and people across the border.
Bangkok has faced diplomatic blowback for failing to help eradicate these syndicates, which are mostly clustered around the Myawaddy area of Myanmar, particularly since the high-profile rescue of Chinese actor Wang Xing last month from a scam park close to the Thai border in Tak province.
The incident triggered outrage across social media in China and prompted holidaymakers from Thailand’s most important tourism market to cancel their plans to travel to the kingdom.
Attention has focused on Thailand being used as a transit hub by criminal syndicates to lure and transport unsuspecting workers, as well as SIM cards, satellite links and petrol for the scam compounds to operate.
Thai authorities have consistently said it is impossible to combat these scam operators based beyond the kingdom, arguing that its geography makes it virtually impossible to police the long and remote frontiers to Myanmar, Laos and Cambodia.
But following a visit by China’s Assistant Public Security Minister Liu Zhongyi to address the scam crisis, Thailand launched its biggest crackdown to date against the criminal syndicates.
via SCMP Full Text Feed
Hong Kong girl, 5, dies after suspected medical blunder involving stitches
By Elizabeth Cheung
A Hong Kong girl who suffered a cardiac arrest while receiving stitches for a head wound in a public hospital died on Wednesday, and the Coroner’s Court will follow up on the case.
Lai Sum-yuet died on Wednesday morning at age five at Princess Margaret Hospital, where she was being treated in the paediatric intensive care unit after the suspected medical blunder about eight months ago.
“[Sum-yuet’s] condition started to deteriorate earlier this week and she was in a critical state,” a spokesman for the Kowloon West group of public hospitals said. “Her condition continued to worsen and she died on [Wednesday] morning.”
“The cluster is deeply saddened over the patient’s death and offers its deepest condolences.”
Clinical psychologists had been arranged to offer counselling to the family,” he added.
The hospital would maintain communication with the family and offer all possible assistance, the spokesman said.
“The cluster is highly concerned about the incident and will fully facilitate relevant judicial procedures. The case had also been referred to the Coroner’s Court for follow-up,” the spokesman added.
via SCMP Full Text Feed
By Elizabeth Cheung
A Hong Kong girl who suffered a cardiac arrest while receiving stitches for a head wound in a public hospital died on Wednesday, and the Coroner’s Court will follow up on the case.
Lai Sum-yuet died on Wednesday morning at age five at Princess Margaret Hospital, where she was being treated in the paediatric intensive care unit after the suspected medical blunder about eight months ago.
“[Sum-yuet’s] condition started to deteriorate earlier this week and she was in a critical state,” a spokesman for the Kowloon West group of public hospitals said. “Her condition continued to worsen and she died on [Wednesday] morning.”
“The cluster is deeply saddened over the patient’s death and offers its deepest condolences.”
Clinical psychologists had been arranged to offer counselling to the family,” he added.
The hospital would maintain communication with the family and offer all possible assistance, the spokesman said.
“The cluster is highly concerned about the incident and will fully facilitate relevant judicial procedures. The case had also been referred to the Coroner’s Court for follow-up,” the spokesman added.
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In UK, rise of Indian-origin extremist ideologies risks deepening divisions: analysts
By Biman Mukherji
A leaked UK Home Office report has, for the first time, identified Indian-origin Hindu nationalist extremism, Hindutva and the Sikh separatist movement as domestic security concerns.
Analysts said the United Kingdom must navigate these ideological tensions carefully, as unchecked extremism risked fuelling further violence and deepening divisions within diaspora communities.
The UK Home Office’s report, commissioned by Home Secretary Yvette Cooper in August 2024, was recently leaked to the right-leaning Policy Exchange think tank.
The report called Hindu nationalist extremism “an extremist ideology that advocates for Hindu supremacy and seeks to transform India into an ethno-religious Hindu state”.
Hindutva was described as a political movement that “advocates for the hegemony of Indian Hindus and the establishment of a monolithic Hindu Rastra or state in India”.
The report noted: “Tensions between Hindu and Muslim communities in the UK are still evident and the events in Leicester show how disinformation can play a role in offline action.”
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By Biman Mukherji
A leaked UK Home Office report has, for the first time, identified Indian-origin Hindu nationalist extremism, Hindutva and the Sikh separatist movement as domestic security concerns.
Analysts said the United Kingdom must navigate these ideological tensions carefully, as unchecked extremism risked fuelling further violence and deepening divisions within diaspora communities.
The UK Home Office’s report, commissioned by Home Secretary Yvette Cooper in August 2024, was recently leaked to the right-leaning Policy Exchange think tank.
The report called Hindu nationalist extremism “an extremist ideology that advocates for Hindu supremacy and seeks to transform India into an ethno-religious Hindu state”.
Hindutva was described as a political movement that “advocates for the hegemony of Indian Hindus and the establishment of a monolithic Hindu Rastra or state in India”.
The report noted: “Tensions between Hindu and Muslim communities in the UK are still evident and the events in Leicester show how disinformation can play a role in offline action.”
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China Future Tech webinar | How is DeepSeek shaping the race for AI supremacy?
By SCMP
Date and time: Monday, February 10, 2025 | 10.30am-11.30am HKT
The live webinar will be available for all readers. Our speakers will also engage in a Q&A session. Submit your questions in advance for direct answers and valuable insights unique to this event.
Chinese artificial intelligence start-up DeepSeek has sent shock waves through Silicon Valley and Wall Street with its low-cost, high-performance models. It has boosted confidence and morale among China’s AI community for showing that the country can develop AI capabilities on a par with, if not better than, the United States, despite Washington’s export restrictions on advanced chips.
Much, however, remains unknown about the low profile company, which was founded less than two years ago by Chinese hedge-fund manager Liang Wenfeng. The South China Morning Post will host a webinar to address some common questions from our readers about DeepSeek, including:
Does DeepSeek have government backing, and how does it align with China’s AI regulatory framework?
Is DeepSeek superior and more reliable than ChatGPT?
How will DeepSeek overcome an intensifying US semiconductor stranglehold?
How does DeepSeek being more energy- and cost-efficient change the needs of infrastructure, especially in the supply of and demand for data centres?
Did DeepSeek benefit from existing US technology and code?
Our panellists are:
Jacques van Wersch, Director of SCMP Plus (moderator)
Zhou Xin, SCMP Technology Editor
Matt Haldane, SCMP Technology Production Editor
Josephine Ma, SCMP China News Editor
via SCMP Full Text Feed
By SCMP
Date and time: Monday, February 10, 2025 | 10.30am-11.30am HKT
The live webinar will be available for all readers. Our speakers will also engage in a Q&A session. Submit your questions in advance for direct answers and valuable insights unique to this event.
Chinese artificial intelligence start-up DeepSeek has sent shock waves through Silicon Valley and Wall Street with its low-cost, high-performance models. It has boosted confidence and morale among China’s AI community for showing that the country can develop AI capabilities on a par with, if not better than, the United States, despite Washington’s export restrictions on advanced chips.
Much, however, remains unknown about the low profile company, which was founded less than two years ago by Chinese hedge-fund manager Liang Wenfeng. The South China Morning Post will host a webinar to address some common questions from our readers about DeepSeek, including:
Does DeepSeek have government backing, and how does it align with China’s AI regulatory framework?
Is DeepSeek superior and more reliable than ChatGPT?
How will DeepSeek overcome an intensifying US semiconductor stranglehold?
How does DeepSeek being more energy- and cost-efficient change the needs of infrastructure, especially in the supply of and demand for data centres?
Did DeepSeek benefit from existing US technology and code?
Our panellists are:
Jacques van Wersch, Director of SCMP Plus (moderator)
Zhou Xin, SCMP Technology Editor
Matt Haldane, SCMP Technology Production Editor
Josephine Ma, SCMP China News Editor
via SCMP Full Text Feed
Alibaba’s updated Qwen AI model overtakes DeepSeek’s V3 in chatbot ranking
By Ben Jiang
Chinese e-commerce giant Alibaba Group Holding’s latest open-source Qwen artificial intelligence (AI) model surpassed DeepSeek-V3 to become the top-ranked non-reasoning model from a Chinese developer, according to a third-party benchmarking and ranking platform, highlighting the rapid pace of Chinese firms’ advance in the emerging technology.
Alibaba Cloud’s Qwen2.5-Max, launched during the Lunar New Year holiday, has climbed to seventh place on Chatbot Arena, a benchmarking project developed by computer scientists from UC Berkeley to evaluate the performance of large language models (LLMs) – the technology underpinning chatbots such as OpenAI’s ChatGPT. Rankings are determined by users voting on the quality of the output. Alibaba owns the South China Morning Post.
DeepSeek-V3, which the namesake Chinese start-up launched in late December to the shock of the global tech community, is currently ranked ninth.
“Alibaba’s Qwen [2.5] Max is strong across domains,” Chatbot Arena said in a post on X. The model performs especially well in the technical areas, including coding, maths and hard prompts, which are used to elicit more direct and well-defined responses from chatbots, the organisation added.
It also said that the latest Qwen model matches top proprietary models such as Microsoft-backed OpenAI’s GPT-4o and Claude from Anthropic, backed by Amazon.com.
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By Ben Jiang
Chinese e-commerce giant Alibaba Group Holding’s latest open-source Qwen artificial intelligence (AI) model surpassed DeepSeek-V3 to become the top-ranked non-reasoning model from a Chinese developer, according to a third-party benchmarking and ranking platform, highlighting the rapid pace of Chinese firms’ advance in the emerging technology.
Alibaba Cloud’s Qwen2.5-Max, launched during the Lunar New Year holiday, has climbed to seventh place on Chatbot Arena, a benchmarking project developed by computer scientists from UC Berkeley to evaluate the performance of large language models (LLMs) – the technology underpinning chatbots such as OpenAI’s ChatGPT. Rankings are determined by users voting on the quality of the output. Alibaba owns the South China Morning Post.
DeepSeek-V3, which the namesake Chinese start-up launched in late December to the shock of the global tech community, is currently ranked ninth.
“Alibaba’s Qwen [2.5] Max is strong across domains,” Chatbot Arena said in a post on X. The model performs especially well in the technical areas, including coding, maths and hard prompts, which are used to elicit more direct and well-defined responses from chatbots, the organisation added.
It also said that the latest Qwen model matches top proprietary models such as Microsoft-backed OpenAI’s GPT-4o and Claude from Anthropic, backed by Amazon.com.
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Belt and robot: Chinese start-up to open first robotics facility in Central Asia
By Mia Nulimaimaiti
China’s fast-growing humanoid robotics industry is set to establish its first foothold in Central Asia, after a Shanghai-based start-up agreed a deal with Kazakhstan to partner on a series of ventures in the country.
The deal will see the Chinese company, AgiBot, establish a joint venture in Kazakhstan to build robotics manufacturing facilities, a “data factory” for training robotic systems and a research and development centre, among other projects.
The agreement between AgiBot and Kazakhstan’s Ministry of Digital Development, Innovation and Aerospace Industry will mark the first time a Chinese robotics company has localised production in a Central Asian country.
For Kazakhstan, the move aligns with its recent push to attract foreign investment as it seeks to diversify its economy beyond natural resources, with a focus on artificial intelligence, manufacturing, green energy and other emerging industries.
“Partnership with an advanced company like AgiBot is an important milestone in the history of Kazakhstan’s robotics industry,” said Zhaslan Madiyev, the country’s minister of digital, innovations and aerospace.
“This will not only help launch a facility in one of the most promising branches of mechanical engineering, but also strengthen local expertise and create a domestic centre of competence in robotics,” he added, according to the Times of Central Asia.
Kazakhstan, which is China’s northwestern neighbour, is also reportedly expanding its IT sector by building a global network of tech hubs, with new offices in the United States, United Kingdom, Saudi Arabia and Singapore.
via SCMP Full Text Feed
By Mia Nulimaimaiti
China’s fast-growing humanoid robotics industry is set to establish its first foothold in Central Asia, after a Shanghai-based start-up agreed a deal with Kazakhstan to partner on a series of ventures in the country.
The deal will see the Chinese company, AgiBot, establish a joint venture in Kazakhstan to build robotics manufacturing facilities, a “data factory” for training robotic systems and a research and development centre, among other projects.
The agreement between AgiBot and Kazakhstan’s Ministry of Digital Development, Innovation and Aerospace Industry will mark the first time a Chinese robotics company has localised production in a Central Asian country.
For Kazakhstan, the move aligns with its recent push to attract foreign investment as it seeks to diversify its economy beyond natural resources, with a focus on artificial intelligence, manufacturing, green energy and other emerging industries.
“Partnership with an advanced company like AgiBot is an important milestone in the history of Kazakhstan’s robotics industry,” said Zhaslan Madiyev, the country’s minister of digital, innovations and aerospace.
“This will not only help launch a facility in one of the most promising branches of mechanical engineering, but also strengthen local expertise and create a domestic centre of competence in robotics,” he added, according to the Times of Central Asia.
Kazakhstan, which is China’s northwestern neighbour, is also reportedly expanding its IT sector by building a global network of tech hubs, with new offices in the United States, United Kingdom, Saudi Arabia and Singapore.
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China’s local government financing vehicles are a ticking debt bomb
By David Tingxuan Zhang
Across China, idle construction sites, delayed civil servant salaries and back-tax demands on businesses all point to a lingering fiscal crisis. Now entering its fourth year, the property market slump has crippled land sales – the primary revenue source for local governments, especially those in the hinterland regions and underdeveloped areas.
With shrinking revenues, local governments are struggling to repay mounting debt while still trying to meet economic growth targets.
Policymakers have acknowledged the severity of the problem, signalling fiscal reforms to give local governments greater revenue-raising power and to ease austerity measures. At the same time, Beijing hopes to boost household consumption to reduce reliance on government-led investment.
Yet until these efforts take effect – which could take years – China must still lean on debt-funded infrastructure investment to achieve its target economic growth, widely expected to be 5 per cent this year.
Indeed, policymakers have signalled their intent to further ramp up borrowing to stimulate the economy. At last December’s central economic work conference, officials pledged to expand the issuance of the central government’s ultra-long special bonds and local government special-purpose bonds this year – both key to sustaining local infrastructure investment amid economic headwinds.
But the strategy risks backfiring. Once dominated by state-owned enterprises (SOEs), local infrastructure development is increasingly controlled by local government financing vehicles (LGFVs) – shadowy entities that blur the line between public finance and commercial lending. Instead of efficiently funding projects, these vehicles are fuelling a dangerous debt cycle that threatens to destabilise China’s economy.
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By David Tingxuan Zhang
Across China, idle construction sites, delayed civil servant salaries and back-tax demands on businesses all point to a lingering fiscal crisis. Now entering its fourth year, the property market slump has crippled land sales – the primary revenue source for local governments, especially those in the hinterland regions and underdeveloped areas.
With shrinking revenues, local governments are struggling to repay mounting debt while still trying to meet economic growth targets.
Policymakers have acknowledged the severity of the problem, signalling fiscal reforms to give local governments greater revenue-raising power and to ease austerity measures. At the same time, Beijing hopes to boost household consumption to reduce reliance on government-led investment.
Yet until these efforts take effect – which could take years – China must still lean on debt-funded infrastructure investment to achieve its target economic growth, widely expected to be 5 per cent this year.
Indeed, policymakers have signalled their intent to further ramp up borrowing to stimulate the economy. At last December’s central economic work conference, officials pledged to expand the issuance of the central government’s ultra-long special bonds and local government special-purpose bonds this year – both key to sustaining local infrastructure investment amid economic headwinds.
But the strategy risks backfiring. Once dominated by state-owned enterprises (SOEs), local infrastructure development is increasingly controlled by local government financing vehicles (LGFVs) – shadowy entities that blur the line between public finance and commercial lending. Instead of efficiently funding projects, these vehicles are fuelling a dangerous debt cycle that threatens to destabilise China’s economy.
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