Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – October 29, 2021

Alibaba is ramping up in Europe, and is already ahead of Amazon in one region
Alibaba ranks among the top three e-commerce platforms in Europe, according to Euromonitor International. The company is keen to tap a wave of growth in online shopping there, especially for the upcoming Singles Day festival on Nov. 11. Logistics arm Cainiao plans to install a total of 5,000 package lockers globally before Singles Day, especially in Russia, Poland, Spain and France.  Spain, Russia and Brazil are among the core countries for overseas unit AliExpress’ expansion, Li Dawei, head of AliExpress Supply Chain, told CNBC earlier this month.

Strong, balanced, sustainable and inclusive growth? The G20 and the pandemic
The G20 is not doing enough to support strong, balanced, sustainable and inclusive growth in the wake of COVID-19, with the poorest countries left behind by the recovery.  The G20, the leaders of which will meet in Rome on 30-31 October, considers itself the world’s leading forum for economic coordination, committed to the pursuit of strong, balanced, sustainable and inclusive growth. But how effective has the G20 been in dealing with the economic crisis provoked by the COVID-19 pandemic? We assess this in two ways. First, we examine the actual and projected impact of the crisis on four sub-groups of countries, as defined in the International Monetary Fund’s World Economic Outlook (WEO): the advanced economies; China; the emerging markets apart from China; and the low-income countries. Second, we examine the evolution of the economic impact of the pandemic, as captured in successive editions of the WEO, and the flexibility of the G20 response as economic (and medical) circumstances changed.   Figure 3 compares the October 2019 output forecasts to the October 2021 forecasts. The shapes of the curve are changed. The strong recovery for advanced economies, with output expected to peak in 2022, is anticipated to allow output levels to surpass pre-pandemic forecasts, by 4.3% in 2024. This forecast relies on the success of the strong stimulus response to the crisis. For China, the recovery in 2021 gets the country back on track to reach output levels expected pre-pandemic. Only emerging economies and low-income countries are anticipated to suffer output losses in the medium term. By 2024, emerging markets are expected to suffer a 4% output loss and, low-income countries a worrying 10% in 2024. Further, it is worth noting that for low-income countries, the curve bottoms out only in 2022 – the IMF thus anticipates that the worst impacts of the crisis are still to come for these countries.  China apart, the remainder of the emerging and developing world is still struggling to return to its pre-pandemic trajectory; only the advanced economies are back to their earlier growth path, and are expected to enjoy more robust growth prospects than was the case pre-pandemic. Clearly the October 2021 WEO forecasts are themselves contingent on the future course of the virus, and on policies adopted by the rich countries as they react to domestic labour market and price developments. Nevertheless, on present forecasts, it is difficult to argue that the recovery has been inclusive.

China debt: Beijing names and shames costly local government projects in bid to curb debt
Beijing has put the spotlight on eight wasteful local government projects as part of its ongoing campaign to reduce debt     The State Council urged local governments to ‘strictly follow fiscal discipline’ and ‘condense’ construction spending   The State Council named three projects in the northwestern province of Qinghai, three in Ningxia, and one each in the southwestern provinces of Guizhou and Yunnan.
One of the projects mentioned was the Qinghai International Convention Centre in Xining, the capital of Qinghai province.  Construction on the project started in July 2019 even though its private developers had not secured funding, which eventually forced local governments to bail them out.   The State Council has been reviewing local implementation of central government policies, including debt management, deleveraging, carbon reduction and, more recently, energy supply on a quarterly basis in recent years.  Beijing has ordered governments at all levels to tighten their belts, saying debt management is a “lifelong political responsibility”, particularly while the country focuses on pandemic recovery and helping hard-hit small businesses.   China’s 31 provincial-level jurisdictions had a combined debt of 28.5 trillion yuan by the end of August, according to data from the Ministry of Finance. However, these projects might just be the tip of the iceberg and local liabilities, despite repeated orders from Beijing for deleveraging.  Implicit liabilities, including those incurred in state-owned enterprises, public-private partnership projects, financing vehicles and many other forms, are widely estimated to be higher at dozens of trillions of yuan.  Guizhou was ranked No 2 among China’s provincial-level jurisdictions in terms of debt-to-fiscal revenue ratio, with a reading of 157 per cent last year and 148.4 per cent in 2019, according to a research from China Bond Rating released earlier this year.   Qinghai was ranked in fifth place, with a ratio of 127.4 per cent in 2020, while Yunnan and Ningxia had ratios of 122.3 per cent and 119.9 per cent, respectively.    “For those regions, their priority should be reducing spending and repaying debt first,” Wen said.   In a tone-setting 10-point article published by state-owned Xinhua News Agency this week, Beijing said China would reach its growth target this year, but called on local governments to take more responsibility for resolving debt and financial risks.

5 things you need to know about China’s power crisis
China has been dealing with power rationing and blackouts since September due to Beijing’s determination to cut emissions and surging prices. The power crunch has already had an impact on the economy and has raised concerns ahead of the winter heating season.

China holds the financial key to huge carbon emission avoidance
Coal power generation needs to be phased out quickly to achieve the targets of the Paris Agreement. Cost-competitive renewable energies are already pushing coal out of the market in many countries. Nevertheless, some countries are still constructing new coal-fired power plants.  China is an important part of this puzzle. It is not only the largest coal user but has also been a major financier of coal power plants abroad, particularly through the Belt and Road Initiative (BRI). This is despite the Paris Agreement stating that finance flows should be ‘consistent with a pathway towards low greenhouse gas emissions’.
President Xi Jinping recently pledged that China would stop building coal plants abroad. While this announcement deserves praise, it remains unclear if Xi was referring to finance as well as construction and when this moratorium would be enacted. The withdrawal of China from coal financing could substantially accelerate the global coal phase-out. The full withdrawal of Chinese finance for planned coal plants could avoid over 8 gigatons of carbon dioxide emissions if replaced by clean alternatives and begun as quickly as possible. With an increasing need to mitigate climate change, two questions remain. First, when exactly will China withdraw from coal projects and will this be applicable for already planned projects? Second, what will be the alternative? To ensure that the goals of the Paris Agreement can still be achieved, it will be important to re-channel coal investments into non-emitting alternatives.

Between Coal and Climate Goals, China Faces a Balancing Act
Recent power crisis underscores the challenge for the country’s road to resign from coal.

COP26: China must broaden scope of national carbon trading market to meet climate commitments, say experts
Tightening quotas and including more sectors will help China’s carbon-trading exchange play a bigger role in decarbonisation drive, analysts say. Ahead of the COP26 summit, China released a framework for its path towards peak emissions and carbon neutrality.

China sends ‘modest’ climate pledge to Glasgow for COP26
Disappointed observers find no new announcements in China’s updated commitment, leaving them wanting more     World needs ‘giant leaps’ in 2030 ambitions from all major emitters if net zero target is to be met, they say.

Rebuilding US-Chinese cooperation on climate change: The science and technology opportunity
What a difference a decade makes. Ten years ago, during the runup to what became the Paris Agreement, it was cooperation between the United States and China that largely set the direction for global efforts on climate change. The two countries funded joint research projects and exchanged best practices with regulators and academics. Most visibly, in 2014, just a year before the Paris Agreement was adopted, U.S. President Barack Obama and Chinese President Xi Jinping held a summit in Beijing at which the two nations pledged to each other the actions they would take. That pledging approach is a centerpiece of the Paris Agreement — today, nearly every country on the planet has a pledge, and most have updated them to reflect new efforts.

FDA updates on efforts to assist U.S. companies with China’s new food facility regulation
On October 22, 2021, the U.S. Food and Drug Administration (FDA) published an update on its efforts to assist US companies on China’s implementation of a new registration requirement for all food facilities importing foods into China that is set to become effective January 1, 2022.  Food facilities may be prohibited from importing products into China unless they are registered.  Different requirements are established for the registration depending upon the type of food being imported.

US trade chief Katherine Tai says she aims to reduce US-China tensions
The relationship between the superpowers has reached the point where a misunderstanding could spark ‘a giant fire’ with ‘drastic implications’, she warned. Tai spoke with Chinese Vice-Premier Liu He earlier this month to discuss China’s lack of compliance with a phase one trade deal with the US.

China takes aim at US and its allies over ‘unreasonable’ claims at WTO trade review
Wang Shouwen, China’s vice-minister for commerce, says many of the complaints made at the regular policy review were beyond the WTO’s remit. Wang said otherwise the review was ‘successful’ and had provided Beijing an opportunity to explain new trade policies and clear up any doubts.

Huawei revenue drops 32 per cent in first nine months as US sanctions cripple its once lucrative smartphone business
Huawei is quickly losing relevance in China’s smartphone market, ranking No 6 in the third quarter and shipping around 5 million units during this period. Its net profit margin was 10.2 per cent for the three quarters, up from 8 per cent in the same period last year.

US lawmakers pass tighter restrictions on Huawei, ZTE, sending bill to Biden
The US Senate voted to approve the Secure Equipment Act on Thursday, sending the bill to President Joe Biden for his signature. The bill bars companies deemed security threats from receiving new equipment licences, delivering another blow to Huawei, ZTE and other Chinese tech companies.

Evergrande staves off second default in a week by paying US$45.2 million in overdue coupon before grace period runs out
Evergrande paid US$45.2 million of coupon due on its 9.5 per cent, US$951 million bond that matures on March 29, 2024, according to sources. Evergrande missed the payment on September 29, and was given 30 days to comply before bondholders are entitled to declare it in default.

Evergrande Averts Default Again But More Coupon Payment Deadlines Are On The Horizon
Zhou Chuanyi, a credit analyst at Singapore-based Lucror Analytics, said it’s likely that Hui used some of his own wealth to pay up. “Evergrande itself doesn’t have much left to repay offshore bonds, ” she said. “The boss probably invested his own resources to solve the problem.” Hui, who has a fortune of $11.2 billion that is largely based on $8 billion in Evergrande dividend payouts received over the years, could be trying to avoid lengthy legal proceedings with his offshore bondholders, said Zhou. He needs to buy time and focus on issues in the domestic market, including the delivery of unfinished real estate projects as demanded by local authorities. Chinese authorities, in the meantime, have urged Hui to repay Evergrande debt with his personal wealth, Bloomberg reported earlier this week. A luxury villa in Hong Kong linked to the billionaire has recently been pledged as loan collateral to China Construction Bank, according to a report by local financial journal Caixin. The proceeds will be used for another coupon payment of $260 million, according to local media HK01.

Over 86% of Chinese post-90s are indebted for non-essential consumption
In China’s 175 million-strong post-90s generation, only 13.4% of them are debt-free as according to the Chinese Youth Consumption Report.  In addition to paying back house mortgages, more than 60% of Gen-Z have used borrow to buy schemes for products,  not daily essentials,  but those that would improve their quality of life. This method of purchasing has driven the economy, with industries ranging from pet to healthcare, beauty care, and entertainment, which are some of the fastest-growing as a result.

China’s Mega Banks Extend Profit Gains on Easing Bad Loans
China’s biggest state-run banks extended their earnings recovery in the third quarter, fueled by rising credit demand and improving asset quality even as turmoil mounts in the nation’s sprawling real estate market. The world’s biggest bank by assets, Industrial & Commercial Bank of China Ltd., on Friday reported net income rose by 11% in the third quarter, according to a filing. Bank of China Ltd.Agricultural Bank of China Ltd., and China Construction Bank Corp. delivered gains of 13% to 16%. All lenders saw a decline in their non-performing loan ratios from the end of last year.

Chinese electric vehicle maker BYD, backed by Warren Buffett, to raise up to US$1.8 billion in Hong Kong share sale
BYD plans to sell new shares in a range of HK$273.5 to HK$279.5 each     Proceeds of sale would help fund working capital, research and development   The share sale comes a day after BYD reported that its net profit dropped 27.5 per cent to 1.27 billion yuan (US$199 million) in the third quarter. BYD’s shares fell 1.7 per cent on Friday following is earnings announcement the night before.

China’s carmakers face profit squeeze amid rising material costs, dwindling demand
The country’s carmakers are expected to report a drop in net profits for October, says the China Association of Automobile Manufacturers (CAAM). A surge in the factory-gate inflation rate drove up prices of materials used in carmaking, which include steel, aluminium and copper   In September, a total of 1.75 million passenger vehicles were delivered to customers in the mainland, down 16.5 per cent from the same month a year ago, CAAM said earlier this week.   From January to September, the industry delivered a total of 14.86 million cars, a drop of 11 per cent on the year. China, the world’s largest car market, first reported a drop in sales in 2018, after nearly two decades of buoyant growth. Passenger car sales in 2020 dropped by an annual 6.5 per cent.  China’s economy expanded 4.9 per cent in the third quarter, a much slower rate than the 7.9 per cent seen in the previous quarter and the breakneck 18.3 per cent in the first three months of this year.  The mainland’s producer price index (PPI) hit an all-time record of 10.7 per cent in September as the country grappled with an energy crisis.  The factory-gate inflation rate drove up prices of materials used in carmaking, which include steel, aluminium and copper. The new-energy vehicle segment, which comprises pure electric, plug-in hybrid and fuel-cell cars, once the bright spot in the mainland’s automotive industry, has fallen victim to a surge in battery prices. “In addition to price hikes of steel, aluminium and copper, a battery price hike would put further pressure on EV makers, especially the mass market brands,” said UBS analyst Paul Gong. “The impact would be particularly felt by EV pure plays.” He was referring to companies that are completely dedicated to making electric vehicles. Since late 2020, battery materials have increased in price significantly, leading to an extra cost of US$19 to US$22 per kilowatt-hour (kWh), Gong estimated.  The cost of EV batteries fell from US$700 per kWh in 2012 to an average of US$137 per kWh last year. It will decline to US$100 per kWh in 2023 and US$73 by 2030, according to forecasts by IHS Markit.

Greater Bay Area: tech entrepreneurs call for more policy support to attract talent to the region
Experts call for government officials to draw up better policies to draw the country’s best and brightest to the region    Talent flow between Hong Kong and the mainland leaves much to be desired, said professors, officials and entrepreneurs.

Taiwan’s economy will be less rosy in 2022
The comparative advantage of Taiwan’s economy will continue to be in manufacturing advanced semiconductor chips, but production bottlenecks will become more obvious in terms of yearly growth. Consumption is under strain while the key risk remains the relationship to Mainland China.

China’s Foreign Minister Tries Again to Win Europe Back
China’s foreign minister is limiting his European tour to friendlier ground, in hopes of halting a downward slide in China-Europe relations.    China’s Foreign Minister Wang Yi is in Europe this week, hoping to stem a downward slide in China-Europe relations. He started his trip in Greece and will visit Serbia, Albania, and Italy from October 27 to 29, ending his trip just ahead of the G-20 Summit in Rome. (China’s President Xi Jinping will not be attending the Rome meeting in person, continuing his 21-month streak of avoiding international travel.)  Wang’s Europe tour following a trip to Qatar from October 25 to 26, where he met with a delegation of the Afghan Taliban’s interim government. On October 27, Wang met with Greek Prime Minister Kyriakos Mitsotakis and Greek Foreign Minister Nikos Dendias. The same day, Wang traveled to Belgrade, Serbia, for meetings with Serbian Prime Minister Ana Brnabic and National Assembly Speaker Ivica Dacic.  Chinese Foreign Ministry spokesperson Wang Wenbin explained the logic behind Wang’s choice of destinations: “Greece, Serbia, Albania and Italy are important cooperation partners of China in Europe. China and these four countries boast profound traditional friendship, have close cooperation across the board and share fruitful outcomes in BRI cooperation.”

China’s aluminium supply shortage keeps prices near 13-year high with little sign of easing amid power cuts, emission targets
Production of power-intensive metals has been scaled back dramatically as nation strives to conserve electricity and reduce pollution. Beijing plans to peak carbon emissions by 2030, and analysts said it means more cutbacks are coming.

Taiwan talks up cross-strait exchanges, urges Beijing to ‘renounce hostility’
Easing of Covid-19 restrictions planned, says island’s top official for cross-strait relations, asking mainland to embrace peace to ease tensions  He says Beijing’s ‘political and military intimidation has never led to solutions’ – but Beijing’s Taiwan office calls Taipei’s stance a deception   “Given the fact that the two sides of the Taiwan Strait differ in their institutions and values, they need to pragmatically deal with issues of mutual concern through dialogue on an equal footing,” Chiu said.  Beijing, which regards Taiwan as a breakaway province, has suspended communication with the island since Tsai, from the independence-leaning Democratic Progressive Party (DPP), became Taiwanese president in 2016.  In a statement on Friday, Ma Xiaoguang, spokesman for Beijing’s Taiwan Affairs Office, said Taiwan’s ruling party was colluding with foreign forces to push for independence while at the same time calling for dialogue with Beijing.  “This illusion is an attempt to mislead the people of Taiwan and deceive the international community,” Ma said. “This kind of deception is despicable and must be stopped.” He accused Taiwanese officials of deliberately damaging the foundation for cross-strait talks by refusing to acknowledge the 1992 consensus – a tacit understanding between the two sides that there is one China, but that each side can have its own understanding of what that means.  Ma said acknowledging the 1992 consensus was a simple issue of “right and wrong” and that adhering to the one-China principle was the precursor to peaceful development of relations. In another statement earlier on Friday, Ma accused Chiu of smearing the mainland government, saying cross-strait tension was caused by the DPP.  He said the mainland’s aggressive gestures towards Taiwan were targeting a pro-independence camp rather than ordinary Taiwanese people

Colombia, Washington’s “Closest Ally,” Looks to Beijing
An expected surge in Chinese investment may bring Bogotá even closer.

US ‘China Initiative’ racially profiled scientists, ruined careers
More than 90 per cent of researchers agreed their Chinese colleagues made important contributions to research and training      Study also finds overwhelming support for greater collaboration with mainland China.

China drafts tough rules to stop data from leaving its borders as Beijing tightens grip on information
The new rules could also potentially affect data flows between the Chinese mainland and Hong Kong, as they cover all data leaving China’s ‘borders’   An international consumer goods company will have to go through the government if it wants to share its Chinese consumer database with head office.

Xi Jinping Is Too Busy Lobbying China’s Elite for a Global Summit
Every five years, a big meeting rumbles around in the world’s second-largest economy. While China isn’t a democracy, the Communist Party leadership meeting next year will be an election of sorts. President Xi Jinping, having coalesced power around himself and secured a constitutional rewrite to bust presidential term limits, is going for an unprecedented third term.

Work Drinking in China Comes Under Fire
China’s drinking culture is thousands of years old. Can it be reshaped to fit the modern era?   Today, there is push-back against the work-drinking culture, both from society at large, as well as from the CCP itself. As the Financial Times reported, “The Central Commission for Discipline Inspection, the Chinese Communist party’s anti-corruption watchdog, said pressure to drink could lead to crimes and such practices should be replaced with ‘correct values’, according to a commentary on its website.” The CCP has also attempted to crack down on mass purchases of expensive alcohol at work banquets as part of its anti-corruption campaign. A single bottle of Maotai, China’s national liquor, can cost thousands of dollars.   It is to be hoped that modernizing these traditional drinking practices will lead to greater safety for the vulnerable in business, political, and social situations in China. That the discussion is happening at all, both in social media as well as in the CCP, is already a step in the right direction.
There is something to be said, however, for leaving room for the ritual to survive – as long as excess, shaming, and actual physical harm are removed from the equation. After all, protecting the best parts of a 9,000-year-old tradition can certainly be considered cultural preservation.

China in ‘culture export’ push as it seeks to expand soft power overseas with global media platforms
One purpose of the policy framework is to encourage exports of ‘films, television episodes and video games’    Authorities have designated 29 districts and places as China’s production centres of traditional artworks as well as films, video games and books  Beijing’s definition of “cultural” products and services is broad and includes everything from silk scarves to porcelain vases. According to the most recent breakdown of data from the Ministry of Commerce, China’s exports of cultural products in 2019 were worth US$100 billion while imports were only worth US$11.6 billion. But in terms of cultural and entertainment services trade, China imported US$4 billion worth of such services in 2019, far exceeding its exports of US$1.2 billion. The jury is still out on how Beijing’s renewed push will help to boost China’s “cultural exports”. At a press conference in September, the commerce ministry listed a few examples, including a movie and television production base in Zhejiang creating an “export platform” of Chinese television shows. The platform has snapped up more than 5 million subscribers overseas.  However, while certain Chinese technology firms have been quick to gain global influence, such as ByteDance, whose short video app TikTok has won over 1 billion monthly active users worldwide, there has also been push back by some countries, such as the US and India, amid national security and data privacy concerns.

Airlines to Cut Int’l Passenger Flights to and From China for New Season
China will allow 408 scheduled international passenger flights to and from the country per week in the winter season ending in March next year, down from 644 in the summer season, China’s aviation regulator said on Friday.   That is down 21.1% from a year ago when international travel remained heavily depressed due to the surging COVID-19 pandemic.  The announcement will likely douse hopes for any immediate reopening of Chinese borders as more and more countries reopen their economies. China has so far adopted a zero-COVID approach towards sporadic domestic outbreaks, which has far-reaching implications for the Chinese economy.

Leaving Beijing? Take Note of These (Complicated) COVID-19 Rules
Beijing’s recent COVID-19 cases have led authorities to introduce new rules for those leaving and (re-) entering the city.   Beijing residents are advised to avoid leaving Beijing unless absolutely necessary.     However, most people in the city are permitted to travel as long as the individual in question’s Beijing Health Kit (北京健康宝) and travel code (行程卡) are both green.   As of press time, Beijing has one mid-risk and one high-risk area, both located in Changping district. Rules are different for anyone who resides in these areas. As has been the case during other outbreaks, those leaving the city should not travel to high- or mid-risk areas, nor should they travel to areas where one or more confirmed cases of COVID-19 have been reported. This is because, as we will find out below, travel to these areas will affect your ability to return to Beijing.

Understanding China’s historic changes through informed empathy
 “There is something major afoot in China right now,” says Kaiser Kuo, but single-lens analysis that lacks empathy won’t cut it in providing insight into the complexity of the changes. What SupChina has called the Red New Deal could mark the start of a new phase in Chinese history, and it deserves to be taken seriously and seen from multiple perspectives.

Alain Gillard
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