China Press Review – August 27, 2021

China’s economic health will depend on its Covid-19 recovery
With the pandemic persisting, Beijing has been alert in applying policy remedies where needed. But whatever else it does, China’s economic performance will inevitably be determined by the success of its fight to control the coronavirus

China’s slowing industrial profits growth adds further evidence to loss of economic momentum
Industrial firms’ profits in July increased 16.4 per cent on an annual basis – the slowest rate this year – to 703.67 billion yuan (US$108.5 billion)    Zhu Hong, senior statistician at the National Bureau of Statistics, attributed the slower growth to sporadic coronavirus cases, flooding and high commodity prices

Explainer   How is China’s regulatory crackdown already hurting its economy?
China’s move to clamp down on industries ranging from steel to education to property has roiled financial markets and curbed the outlook for growth    President Xi Jinping still said this week that China will strive to complete major economic and social development targets set for this year

China’s Tech Sector Is Too Big To Fail—That’s Why Beijing Is Cracking Down on It
Beijing’s ongoing tech crackdown sent U.S.-listed Chinese stocks into a tailspin and left investors and analysts wondering what is going on in China.     Beijing fears the massive size of the digital economy and its rampant shady business practices could result in civil unrest or even economic ruin if left unchecked.   The tech sector has become too big to fail, and it will remain a target until Beijing is satisfied that its most serious risks have been resolved.

China home to over 1 billion Internet users
The country’s booming 5G development and increasing numbers of aged netizens have boosted the user base in China, already the world’s No. 1 country by Internet population for many years, the China Internet Network Information Center (CNNIC) said.   Among the total 1.01 billion Internet users, 28 percent were middle-aged and elderly users over 50 years old by June, up 5.2 percent from a year ago and the fastest-growing group of all ages, according to CNNIC.

Beijing drafts new rules to tame recommendation algorithms in latest push to rein in Big Tech
The new rules will ‘regulate algorithm-empowered recommendation activities on the internet’     The Cyberspace Administration of China, which released the proposed regulation on Friday, is soliciting public feedback until September 26

China tech giant Alibaba says delivery robots are the future. Here are 4 charts that explain why
In a blog post the company said the robots were a “fast, reliable and relatively cheap” way to meet the huge demand for parcel delivery in China, the world’s largest market for online shopping. The “Xiaomanlv” or “small donkey” robots can deliver about 50 packages at a time and as many as 500 boxes in one day, covering 100 kilometres on a single charge, the company said.   Alibaba claims its robots will overcome the “problem” of last-mile shipping – the part where a parcel actually arrives at your door – which it says is plagued by the issue of delivery people getting lost or stuck in traffic.

Why Jerome Powell Could Be Trapped At Zero For Years
Jerome Powell may think the Delta variant ruined his best-laid plans for the economy. The truth is, the Federal Reserve chairman lost control of his super-aggressive policies long ago.    Oddly, the dynamic that many investors see as irrational—calm amid rising inflation—may be the only one that makes true sense. Few people would say 5% increases in consumer prices are a good thing. But the Delta-variant risk lent credence to the view that inflation is transitory. And that the real risk is weak inflation.    Doesn’t Japan know it? Granted, Japan faces a more complicated economic equation. Much of its deflation is about demographics. An aging and shrinking population buys fewer new homes, cars, electronics and apparel than those with sizable ranks of twentysomethings and thirtysomethings.    Still, the Powell Fed is quickly realizing it’s stuck. It won’t even get the chance to brainstorm with monetary experts from around the world this weekend, when the Fed had planned to hold its annual Davos-for-central-bankers retreat in Jackson Hole, Wyoming. Thanks to Delta, it’s now been deflated to a Zoom call.

The Prosperity Drive
More information and comments emerged this week about the “common prosperity” policy, aimed at creating a measure of wealth distribution to make Chinese society more equal. The government has basically decided, it seems, not to use taxation as a means of achieving this goal, and it is true that the rich can always find loopholes in tax laws and regulations. Instead, information emerged about what is called “Third Distribution” under which wealthy people and companies are encouraged to donate part of their assets to the great common prosperity pot. Philanthropy that is to one extent or another voluntary. But how much would be appropriate? It will be for the authorities to decide.   The initial reaction, as we sense it, of what we shall call the “upper middle class” is that they understand the motives of the policy, and there is concern about what it will mean for them in specific terms. So much of the wealth of these people in China is held in shares in listed companies, companies which will be required to make contributions impacting on bottom lines and therefore share prices and therefore wealth levels. One Chinese official was even moved to tell a news briefing that the purpose of the policy was not “killing the rich.” More of the top private companies and their founders donated large sums to the pot. Many more will follow. This is a good policy to get out in front of. The question is how far the negative perceptions out there are actually going to become a reality. As of now, we don’t know.

5 Reasons ‘New Luxury’ Is the ‘New Normal’ in China
Starbucks isn’t strictly a luxury brand, but it holds a position as ‘New Luxury’ in China, where consumers   Price points are generally high for premium products. Yet, they can help assure consumers that New Luxury is frequently still within financial reach. Chinese consumers are attracted to brands that feel special. This specialness is at the core of New Luxury, and consumers anticipate stores like these to embody innovation.  Consumers are likely to reject New Luxury brands that look like they were intended for the masses, as they seek aspirational lifestyles.

China’s Big Tech vows to give back as Xi touts ‘common prosperity’
Tencent and Pinduoduo unnerve investors with emphasis on social responsibility  China’s top internet companies have pledged billions of dollars for social goods in response to President Xi Jinping’s call to share their wealth, in a sign of the big politically driven change in a sector already hit by Beijing’s regulatory crackdown. Philanthropic and investment commitments have been unveiled this year by companies ranging from Tencent Holdings to online retailer Pinduoduo and top executives including Wang Xing of food delivery platform Meituan and Lei Jun of smartphone maker Xiaomi. These efforts will fund areas such as research, agriculture and clean energy. The pledges come as Xi ratchets up rhetoric about “common prosperity” — which includes income regulation and redistribution — and bids to narrow the yawning income inequality gap in the world’s second-largest economy. Businesses have shifted noticeably. After reporting first-half earnings, large companies such as Alibaba Group Holding and online retailer focused on plans to create value for society instead of profits, spooking investors already worried by Beijing’s regulatory crackdowns. Analysts are trying to gauge whether the shift represents a serious threat to corporate bottom lines, or whether investments ultimately will rebound to companies’ benefit.   Meanwhile, Zhang Yiming of TikTok parent ByteDance and Pinduoduo founder Colin Huang have vowed to donate much of their personal wealth. Five of China’s tech billionaires have pledged at least $13 billion of their personal or corporate fortunes to charitable foundations and initiatives, a sum that far exceeds previous years’ totals, according to Fortune magazine.  Xi restated the socialist value of common prosperity — heavily used by former leader Deng Xiaoping in the 1980s — at a meeting of the Communist Party’s Central Committee for Financial and Economic Affairs last week. He called for “reasonable adjustments to the excessively high incomes” and encouraged wealthy people and companies to give back more to society. Though China declared this year that it has eradicated poverty, income inequality has not narrowed since 2015. The richest 20% of Chinese had average disposable income of more than 80,000 yuan last year, 10.2 times what the poorest 20% earn, government data shows.

China’s Communist ‘Common Prosperity’ Campaign
The “common prosperity” ideology is the realization of Chinese socialism imposed upon market-based, modern activity, which makes it especially hard for investors to interpret.   Under Xi, China is marking the evolution of its socialist market economy from a poor society to a thriving economy with “common prosperity.” This does not involve the typical evolution of firms and wealth as seen in the West, but has produced some awkward bumps along the road in the form of regulation and now wealth redistribution via voluntary charitable donations.    Chinese experts have increasingly expounded upon the idea of common prosperity in the media, while Chinese firms scramble to join in the ideological edification. Whether China’s flourishing private sector can continue to grow under such a heavy hand has yet to be seen. If it does, this will, indeed, give great credence to the idea of common prosperity.

China’s Top Court Says Grueling ‘996’ Work Schedule Illegal
The Supreme People’s Court published a set of labor-related disputes to clarify legal standards of working hours and overtime wages.

DiDi Stock Could Drop by Two-Thirds if the Company Leaves China
Regulators removed the company’s app from app stores

How VCs can lead the way with ESG and impact investing
Issues surrounding climate change and inequalities across the globe multiplied with the onslaught of the Covid pandemic over the last year     Already underserved groups such as ethnic minorities, people with disabilities, children, migrants, women and the elderly were hit the hardest by the pandemic. This widened the gap between vulnerable groups and populations, and deepened socioeconomic inequalities

China’s video game industry in stormy waters as the country grapples with its love-hate relationship
China’s domestic gaming revenues in 2020 rose to 278.7 billion yuan with almost half of the country now playing video games    After an article in state media called video games ‘spiritual opium’ an investor sell-off saw nearly US$100 billion wiped off the value of gaming stocks    The comparison between video games and drugs by Chinese state media dates back to 2000 when People’s Daily called video games “digital heroin”. That same year, the Chinese government banned the sale of video game consoles. It wouldn’t be until 2015 that Sony’s PlayStation and Microsoft’s Xbox were allowed an official presence. In 2020, three years after its global launch, the Nintendo Switch finally came to China with the help of Tencent. At launch, it only had three games and Chinese players cannot play with their international peers. Keeping a tight grip on foreign gaming giants and grooming Tencent as the sector champion, with its 4000 international developers, may be part of Beijing’s calculus.    It affords authorities better visibility into the industry, forces Tencent to lead the industry by example, and gives China sway over an international cultural behemoth.  “Tencent, as the biggest gaming company in the world, and having direct influence and ownership over many studios worldwide, might function as Beijing‘s spear to spread its influence,” said Shenzhen-based consultant Camilo. “Just like Hollywood moulded world views and perceptions all over the planet in favour of an American-centric perspective, it is legitimate to assume that Beijing has similar plans, including through gaming.”

Hong Kong stocks log weekly gain on tech bounce as traders await Fed guidance on tapering
Hang Seng Index lifted by improved sentiment before BYD, Meituan publish post-trading earnings reports      Tech stocks swayed the market as recent slump attracted buyers and detractors alike, southbound flows remained weak    Hong Kong stocks completed a winning week as traders look for a boost in earnings reports from big China technology firms even as US regional Fed officials called for an early pullback in monetary stimulus. The Hang Seng Index climbed 2.3 per cent for the week to 25,407 as a bounce in Chinese tech stocks lifted the market out of bear territory. Electric-car maker BYD climbed 2.3 per cent and Meituan, which is under Beijing’s antitrust probe, slipped 0.8 per cent before their earnings releases. The Hang Seng Tech Index logged a 7.3 per cent advance this week after a marginal drop on Friday, handing investors the best performance in seven months. China’s Shanghai Composite Index added 0.6 per cent.     While Hang Seng Index members are trading close to the average book value, the cheapness has yet to lure mainland Chinese investors in a big way. They were still net sellers of local shares this week, suggesting China’s regulatory clampdown has continued to weigh on sentiment.

Taiwan rolls out $180 stimulus vouchers in wake of COVID curbs
Taipei expands giveaway from last year, looking to help eateries and hotels    Under last year’s Triple Stimulus Vouchers program, residents paid NT$1,000 to receive NT$3,000 worth of cash-equivalent coupons. This year, similar vouchers for a greater amount will be given for free.   The stimulus vouchers are expected to boost Taiwan’s economy and help retailers, night markets and department stores hit hard by the pandemic, Prime Minister Su Tseng-chang told a cabinet meeting Thursday.   Taiwan remained under stringent coronavirus restrictions, including a ban on indoor dining, for over two months after an outbreak in May that followed many months of successful control. Private-sector consumption slipped 0.41% in the April-June quarter.    The strict protocols have been lifted gradually since the end of July, and Taiwan reported no new cases Wednesday. Now Taipei wants to put consumption back on track with the help of free cash. The cabinet upgraded its real gross domestic product forecast this month to 5.88% growth for 2021. The third upward revision of the year is driven by strong exports, particularly chips. Taiwan’s economy grew 3.12% last year, the strongest expansion in Asia.

Coronavirus: Wuhan study finds nearly half of recovered patients still had symptoms a year later
Twenty per cent continued to experience the most common symptoms of fatigue or muscle weakness after 12 months, researchers say      They called for larger studies to understand the long-term consequences of the disease and for more support for survivors

US and China tipped to get tougher on climate change when John Kerry visits in September
Second visit to China this year by US special climate envoy comes at a time of extreme tension in bilateral relations     Impact of the visit is expected to extend beyond global warming battle, says climate observer

What China’s New Guidelines on ‘Green Development’ Mean for the Belt and Road
A new document promises to bring environmental considerations much deeper into China’s overseas project planning.

Extending the Belt and Road to Afghanistan—
The Geo-Economics of Growth Contrary to its previous position as a buffer zone between the Russian and British Empires in the geopolitical “Great Game,” Afghanistan is perfectly positioned to become a bridge between northern Eurasia and South Asia, and between East Asia and West Asia. It is squeezed between two of the main BRI corridors; the China-Pakistan Economic Corridor (CPEC) to the south of its border, and the China-Central Asia-Iran-Turkey New Silk Road Corridor to its north.

China would rather be feared than defied
Nationalist outrage has often served China well over the years, but that may be changing   Further complicating China’s image, its nationalist fervour is increasingly on display far from home. In August 2019 Lithuania accused China’s embassy in Vilnius of rallying Chinese citizens to disrupt a protest in support of Hong Kong’s democrats (Chinese diplomats were photographed handing out banners). A few months later Chinese-speaking visitors proudly filmed themselves vandalising signs of support for Hong Kong planted on the Hill of Crosses, a shrine to national independence dating to Lithuania’s occupation by Nazi Germany and then by the Soviet Union. The videos went viral, appalling Lithuanians. In April this year expansion of Klaipeda’s outer harbour was put on hold for at least a decade. Senior officials had earlier called China’s attempts to invest in the port a national-security risk. In May Lithuania’s foreign minister announced his country’s withdrawal from the 17 plus one, calling it divisive and less efficient than a unified EU. State media accuse Lithuania of foolishly provoking China in order to curry favour with America, as if smaller countries lack any will of their own. The mood of gloom and wariness among many European embassies in Beijing is obvious to all. But domestic political imperatives require outsize displays of anger, whenever China feels disrespected. That is a clumsy way to manage foreigners. To China, however, being defied is worse

US-China trade growth has Australia asking whether WTO can stop ‘economic coercion’
Wine, coal and beef exports from US to China are now far greater than those from Australia – a shift driven in large part by the geopolitical dispute between Beijing and Canberra     Critics accuse Washington of doing little to help Australia in its China conflict, as American exporters cash in on increased demand amid supply shortages

Kamala Harris in Vietnam: China takes shot at US’ bullying South China Sea claims
Chinese embassy in Hanoi accuses Washington of stoking tensions between neighbours in the contested waters    Differences in political values and government systems stand in way of alignment between Vietnam and US, analysts say  t went on to invoke bitter memories among the Vietnamese people of the traumatic war. “The world will never forget the war crimes the United States has committed against the people of Vietnam and other parts of the world,” it said.  Noting that Chinese diplomatic missions had routinely issued similar sharp rebukes against the US in the recent months, Xu Liping, an expert on regional affairs at the Chinese Academy of Social Sciences, said it showed Beijing was keen to be treated as an equal by Washington.“China is clearly aware of the implications of the visits by Harris and other US officials on regional politics and our priority is to prevent the South China Sea from standing in the way of friendly ties with Hanoi,” Xu said. The South China Sea dispute has long been the biggest obstacle in Beijing’s relations with Hanoi, with Vietnam rising to become the most vocal regional critic of China’s expansive claims.   According to Carlyle Thayer, emeritus professor at the University of New South Wales at the Australian Defence Force Academy, Vietnam’s strategic importance for the US was in the fact that Hanoi “has consistently resisted China’s intimidation in the South China Sea and built up a credible military deterrence to China”.  But both Xu and Thayer also noted that the potential of possible geostrategic alignment between Washington and Hanoi should not be overestimated because of the differences in political values and systems of government.   “Apart from the trauma of war, which remains a sensitive topic for both Vietnam and the US, the authorities in Hanoi are deeply concerned about Washington’s intention of instigating ‘peaceful evolution’,” Xu said.   During a meeting with Chinese ambassador Xiong Bo just hours before Harris landed in Hanoi on Tuesday, Vietnamese Prime Minister Pham Minh Chinh voiced concerns about “peaceful evolution” of hostile forces and their attempts to sow discord between the communist neighbours.

Vietnam, US in Cautious Dance during Harris Visit
Hanoi’s pre-emptive strike against a non-existent threat   Considering pre-visit speculation in some American media and subsequent reports in Vietnamese media, a reader might conclude that Kamala Harris came to Vietnam bearing a conditional proposal that bilateral ties be raised to a ‘strategic partnership’ – the better to deal with China’s presumption of sovereignty over the South China Sea – and that the second and third most consequential leaders of the party-state replied “no indeed, Ms Harris, we think that our current ‘comprehensive partnership’ with the US is just dandy.” However, it seems that Harris didn’t touch human rights issues at all, except for a meeting with a handful of political dissidents. Nor, notwithstanding imaginative reporting by some US media, did Harris press Vietnam to join a united front against Chinese pretensions to ownership of the South China Sea. Background briefings before the vice president left for Singapore and Vietnam stressed that she wasn’t visiting either country to talk about China, but rather to signal greater American engagement in Southeast Asia on a growing list of cooperative, bilateral activities. Her mission, reporters were told, was to signal that the unreliable, ego-driven Asia engagement of the Trump administration ended with Joe Biden’s election. Harris would reinforce a similar message delivered by Secretary of Defense Lloyd Austin during a brief stop in Hanoi last month. And, though upstaged by the debacle in Afghanistan, that seems to be exactly what she did.

South China Sea: Beijing rushing code of conduct to undermine 2016 Hague ruling, claims Philippines’ Del Rosario
Former foreign secretary and other experts allege Beijing has ulterior motive in claiming progress in long-running talks, and say final agreement is not likely this year or next     Critics say two provisions China placed in the draft code will compromise Southeast Asian nations’ ability to partner foreign firms in military exercises and exploitation of energy resources. But some say compromise is needed   Malaysian analyst Ngeow Chow Bing said Asean would have to make compromises if it wanted a code of conduct. He said Malaysia was committed to such a code, though it was a “least bad option” and likely to be flawed. Ngeow, the director of the Institute of China Studies at the University of Malaya, said Asean states had to make some kind of compromise to break the impasse because asking China to comply with the arbitral ruling was unlikely to work China has said it neither accepts nor recognises the 2016 ruling. It “would be almost impossible to ask [Beijing] to retreat all the way back to Hainan and give up all their claims”, said Ngeow, referring to the island off the south coast of mainland China. Ngeow said he saw the Malaysian government maintaining a position of flexibility because it viewed the code of conduct as a building block that would evolve over time. Political science professor Alma Salvador, who teaches international relations at the Ateneo de Manila University, said given the challenges of the code of conduct negotiations Asean countries should go after the “low lying fruit” of agreements on fishing, the environment and a safety mechanism to manage incidents at sea. Former Australian foreign minister Gareth Evans said Asean countries should not expect the United States to bear the full burden of maritime security in the region, even though it was seeking to counter China’s influence.  Evans said “the fiasco of the Afghanistan withdrawal” had highlighted the risks of relying solely on the US to keep the peace. “I don’t think the United States will abandon its general commitment to the Indo-Pacific any time soon, but I don’t think any of us can assume that it would do all the heavy lifting itself. I don’t think any of us can assume that there is anything automatic about the support the allies and partners of the US can expect if we get into trouble,” Evans said.

Spies For Hire: China’s New Breed Of Hackers Blends Espionage And Entrepreneurship
One posting from Hainan Xiandun stood out. The ad, on a Sichuan University computer science hiring board from 2018, boasted that Xiandun had “received a considerable number of government-secret-related business.”   The company, based in Hainan’s capital, Haikou, paid monthly salaries of $1,200 to $3,000 — solid middle-class wages for Chinese tech workers fresh out of college — with bonuses as high as $15,000. Xiandun’s ads listed an email address used by other firms looking for cybersecurity experts and linguists, suggesting they were part of a network.

The Myth of the Chinese Wilderness
As China aims to create 60 national parks by 2035, what will happen to the 12 million human residents inside protected areas?

Saihanba: Not only a place of pastime, but also a symbol of perseverance
Chinese President Xi Jinping, also general secretary of the Communist Party of China (CPC) Central Committee and chairman of the Central Military Commission, made an inspection tour of the Saihanba forest farm in north China’s Hebei Province on Monday. He also checked the growth of the trees and highlighted the promotion of the Saihanba spirit, which he enshrined in the series of CPC spirits and the high-quality “green development” of the forest farm.–130ObtdBaNO/index.html

UK watchdog fines banned Chinese broadcaster CGTN US$274,000 for breaches of privacy rules
Media regulator Ofcom said it had fined Star China Media Limited ‘for serious breaches of our fairness and privacy rules on its CCTV and CGTN services’    The complaints involve two high-profile Hong Kong dissidents, Simon Cheng and Gui Minhai

China’s nearly 300 million students will be studying “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” this coming school year, according to guidelines published by the Ministry of Education on Tuesday. The announcement follows dramatic new limits on the private tutoring industry, ostensibly aimed at wresting back control over education from private capital, but which some observers suspect might be “a pretense to monopolize education and centralize brainwashing.” At Reuters, David Stanway reported on the new guidelines:

A Is for Anxiety: Tutoring Clampdown Tests China’s Parents
Reforms to reduce the schooling burden on young children have stressed-out parents scrambling for classes.

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