Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – August 31, 2021

China’s shipping-container costs hit all-time highs, and shortage will further push up prices in coming months
Prices of shipping containers have more than doubled in the past year, and container freight rates are up 351 per cent year on year, according to Drewry maritime consultancy. But with container manufacturers rushing to meet demand – and making hefty profits – industry insiders warn of a supply glut once the pandemic is over. As the world’s largest container-producing country, China produces more than 96 per cent of the world’s dry cargo containers and 100 per cent of temperature-controlled refrigerated – or “reefer” – containers, according to Drewry’s data.   In the first six months of this year, China’s output of dry boxes climbed 235 per cent, year on year, to 3 million 20-foot equivalent units – the standard measure for freight container volume, known as TEU – while reefer-container production more than doubled to 260,000 TEU, according to a report published by Drewry in early August.   Capitalising on the high demand and surging prices, China International Marine Containers Group (CIMC), a major container manufacturer, reported a net profit of 4.39 billion yuan (US$678 million) in its container-manufacturing business in the first half of this year. This marked a massive 1,739 per cent rise compared with the same period last year.  “Pricing has been driven by soaring demand for newbuild containers as shipping lines and lessors have been seeking to rebuild fleets in the face of chronic equipment availability due to widening disruption across the container supply chain,” said John Fossey, head of container equipment and leasing research at Drewry.   “But also, increased input costs, particularly for [weathered] steel and flooring materials, have also played a part. We expect dry-box prices to peak in the third quarter and to soften thereafter, easing further over subsequent years as trade normalises.”   But prices of specialist containers – including reefer containers and tank containers used to ship liquids, gases and powders – are expected to continue rising, with prices moderating over the next few years.   “We expect reefer-container equipment availability to remain an issue for certain trades during their peak seasons, as the global fleet is not expected to keep pace with rising cargo demand, despite record output of newbuild containers,” said Philip Gray, head of reefer-shipping research at Drewry.

Xi Jinping says Big Tech crackdown is making progress, calls for Communist Party to ‘guide’ companies
Xi says antitrust campaign against internet platforms has seen early results and called for the Party to do more to supervise businesses  Beijing’s crackdown has led to a market rout this year that has wiped US$1 trillion off Chinese tech stocks

Why is China’s economic outlook raising alarms after August’s non-manufacturing PMI plunge?
Chinese authorities blame weak economic sentiment on Delta outbreaks and floods, but analysts say there’s more to the picture     China’s official composite purchasing managers’ index fell to the lowest point since coronavirus lockdowns began in February 2020 – marking a rare dip into the contraction range

No more fake Chanel as China tightens regulations even further on counterfeit e-commerce sales
Revisions come amid a widening crackdown by regulators, including SAMR, on Big Tech and their internet businesses    Proposed updates to the country’s e-commerce law promise much harsher punishments for operators found selling fake products online

Huawei employs more lobbyists in the EU than Google, Facebook, Microsoft and Apple, but spends less
Huawei has the full-time equivalent of 19 lobbyists on payroll in the EU, where it is fighting policies curbing its ability to provide 5G infrastructure     The tech sector spends more on lobbying on the continent than any other, including pharmaceuticals, fossil fuels, finance and chemicals

Smart Cities: Using technology to connect the city and foster social progress
One of the major goals related to the building of Smart Cities is to “connect the different city infrastructure elements,” Erdal Elver, President and Chief Executive Officer of Siemens Ltd. in Hong Kong and Macao, says      Successful Smart Cities are intended to be more efficient, make urban life better for citizens, and reduce environmental impact through long-term sustainable practices

China’s tightened limits for kids’ gaming time raise questions about tolerance for foreign platforms, VPNs
The new rule is expected to steer young people to find alternative platforms on which to play without restriction    The grey area for video gaming in China remains significant, as many consumers play unlicensed games on international platforms such as Steam   Chinese video game industry veteran Charlie Moseley, founder of hobbyist group China Gaming Federation, is sceptical about the enforcement of the new rule.    “I wonder how capable China‘s administrators will be at enforcing [the new restriction]”, Moseley said. “Will they really crack down, or will they allow grey and black markets to meet the demand?”   While access to foreign video games in China has become more restricted in recent years, the demand for gaming virtual private networks (VPNs) has also increased.   Known as game boosters or accelerators, gaming VPNs have become some of the most downloaded apps in the country whenever a new hit foreign title is released.   Niko Partners’ Hanson said she believes that China’s grey market for gaming will remain active, despite the new restriction, because of the wide popularity of gaming VPNs.   Large Chinese video game companies, including video gaming giants Tencent Holdings and NetEase, offer their own game boosters and other services, according to a Niko Partners report on Monday. It said young gamers “may bypass the new rule by logging into global servers via VPN and avoid the time limits”.

In the driver’s seat: China’s electric vehicle makers target Europe
Key developments and challenges to European governments and companies

Evergrande NEV’s stuttering car-production plan delivers blow to Hui Ka-yan’s vision of challenging Elon Musk’s Tesla
Mass production of Hengchi-branded cars is in the final stretch, but the group still faces cash flow challenges, says arm of China Evergrande Group      Evergrande NEV reports loss of 4.8 billion yuan (US$742 million) for the first half   Evergrande’s subsidiaries are also being punished on concern the world’s most-indebted developer will need to sell assets at a steep discount amid mounting pressure from Beijing.   Acknowledging challenges on cash flow, the EV start-up said it faces risks of defaulting on its loans and disputes outside normal business. It will continue efforts to discuss the sale of assets with potential investors and closely monitor the capital expenditure of the EV business.   The start-up had 12.5 billion yuan of cash buffer at the end of June, compared with 13.3 billion yuan of borrowings and 73 billion yuan of trade payables due within a year, Monday’s filing showed.   “Now that the parent company has a liquidity problem, it’s impossible for Evergrande New Energy to meet previous targets for car production,” said Castor Pang, head of research at Core Pacific-Yamaichi International H.K.   Even at its relatively sound health care segment, payments to suppliers and construction fees in the “Health Valley” aged-care communities were delayed, the company said. Some projects were suspended as a result.

Endebted China Evergrande faces risk of loan defaults, legal action, billionaire chairman Hui Ka-yan admits as profit tanks
The world’s most heavily indebted home builder has suspended construction at some projects, says Hui, as half-year profit plummets by 29 per cent   The Shenzhen-based developer can now only hope to survive, not make profit, says Ivan Li of Loyal Wealth Management

No more fake Chanel as China tightens regulations even further on counterfeit e-commerce sales
Revisions come amid a widening crackdown by regulators, including SAMR, on Big Tech and their internet businesses    Proposed updates to the country’s e-commerce law promise much harsher punishments for operators found selling fake products online  In April, the country’s largest online retail platform Alibaba was slapped with a US$2.8 billion fine after a probe determined that it had abused its market position for years, which was about 4 per cent of the company’s 2019 domestic revenue.   Last year, SAMR said it had fined Alibaba’s Tmall, and Vipshop for pricing irregularities after consumers complained that the platforms raised prices before introducing discounts, engaged in fraudulent promotions and induced consumers into purchases during the Singles’ Day shopping festival.   According to the 2020 annual report on intellectual property protection by Alibaba, only 1.08 out of every 10,000 transactions on its online marketplace are suspected counterfeit, while the number of links suspected to involve rule infringements reported by consumers for deletion, decreased by 33 per cent compared with the previous year.

Chinese regulator is probing Ping An Insurance’s property investments, sources say
China’s banking and insurance sector regulator is probing Ping An Insurance Group of China’s investments in the property market, two people with knowledge of the matter told Reuters.  The China Banking and Insurance Regulatory Commission has also ordered the insurer to stop selling alternative investment products, the sources, who declined to be identified as the information is not public, told Reuters.  The company in a statement said its real estate exposure was significantly lower than the regulatory cap.

China to cap annual urban rent increases at 5 per cent to rein in runaway prices and make homes affordable to job seekers
Rental charges in urban areas will not be allowed to rise by more than 5 per cent a year, the Ministry of Housing and Urban-Rural Development said   Vice-premier Han Zheng has pledged to avoid using property as a tool to boost the economy

China’s biggest air show to highlight homegrown technology
biggest air show will put its homegrown civil and military aviation technology on display next month, the mayor of host city Zhuhai said on Tuesday, though the closely watched C919 narrowbody jet is not among the listed aerial exhibitions.

EU’s event-packed fall will set the tone for its China policy in 2022
As the EU gets back to work after the summer break, its looking like China will be high on the agenda this fall. The turbulent first half of 2021 set the scene, with the exchanging of sanctions, the freezing of the Comprehensive Agreement on Investment (CAI) and the intensifying of transatlantic ties. Further developments this fall will indicate the direction the EU may take on China over the course of the next year.

China-Australia trade: iron ore miner Fortescue set earnings, shipment records in past financial year
Since prices hit an all-time high of more than US$230 a tonne in May, prices for the steelmaking ingredient have fallen with Chinese authorities curbing output      Beijing blocked several goods amid its protracted geopolitical conflict with Canberra, but iron ore shipments are still welcomed with open arms

China’s Taxpayer Credit Rating System: An Explainer
We explain China’s taxpayer credit rating system, including how it works and why it is important for foreign enterprises based in the country and doing business in China.

China Shuts American Chamber Of Commerce In Chengdu — Reuters
China ordered the closure of the U.S. Consulate in Chengdu in July 2020 in apparent retaliation after the Trump administration ordered the shuttering of the Chinese consulate in Houston. Chengdu is best known among many travelers globally for its pandas and hotpot cuisine. Its large group of multinational investors include Intel, Texas Instruments and Toyota.   American companies in China have as of late remained optimistic about their prospects in the country, but changing political currents are making it hard to focus solely on business, a former China diplomat and business association leader said at the “U.S.-China Business Forum” organized by Forbes China, the Chinese-language edition of Forbes, earlier this month.—reuters/

Xi Is Forgetting the Very Thing That Made China Great Again
The economy only began to excel when the party’s cadres released their grip from the nation’s throat. Beijing should not take a backward step now.

Landmark gathering of China’s Communist Party elite set for November
Hundreds of members of the Central Committee will meet in Beijing but an exact date has yet to be announced      It will be the last major meeting before next year’s national congress – and an expected leadership reshuffle   he plenum signals the start of the changing of the guard in Beijing, a process that will continue until the next party congress.   In 2016 at the last plenary session of the 18th Central Committee, the party declared General Secretary Xi the “core” of its leadership, elevating him to an even higher status within the organisation.  At the sixth plenum of the 11th Central Committee in 1981, the party laid down its official verdict on the Cultural Revolution, paving the way for the era of reform and opening up under Deng.   Observers will be watching to see if the party continues to follow precedent on its leadership changes, especially the informal retirement age of 68 for its top leadership set by Deng.   Nearly a dozen of the 25 members of the Politburo will be older than 68 in October next year.    Beijing has made changes to most regional and ministerial party chiefs and government heads in the last year to allow for the major personnel moves to come.

Xi’s China, the Handiwork of an Autocratic Roué
This is further proof that for a nation to play a meaningful part in the modern international world, it is insufficient to revel in possessing an almighty state with limitless political power. What is necessary is the building of a civilized society and a political system that is underpinned by a meaningful culture of law. There is no escaping the fact that nations need a form of politics grounded in a constitutional order. By that, I mean a modern constitutional framework that protects the freedom and human rights of its citizens. In the present era, this is still the best path for any truly rational society.     To advocate on behalf of such a system is not merely a self-serving and pragmatic response to historical inevitability; rather, if China is to hope for collective political salvation, it is a necessity. China and the Chinese people lack a truly resilient political system; we are instead burdened with one that, despite its formidable appearance, is inherently fragile. It is threatened to its core by every tempest. Meanwhile, we must cope with our anxieties as best we can, holding on to what inspiration we can. Even as this age of darkness advances, I know that regardless of my benighted circumstances, my soul rises up, confident in humanity’s better future

China’s summer movie box office heads for an early winter on the dearth of blockbusters during Communist Party’s centenary
Ticket sales during the June-August summer holiday amounted to 6.7 billion yuan on Tuesday, the lowest number since 2013   Some Hollywood titles including Walt Disney’s “Cruella” and “Mulan” were affected by the slow summer   “The ability for high profile celebrities to influence consumers and promote projects will be closely watched with harsh punishments for those crossing red lines,” said Chris Fenton, a film producer and author of Feeding the Dragon: Inside the Trillion Dollar Dilemma Facing Hollywood, the NBA, & American Business.  Some stars have already been ensnared in the campaign, including actress Zheng Shuang, who was fined 299 million yuan last week for tax evasion. Online video platforms have also removed the name of Vicki Zhao – one of China’s best-known actresses – from several drama series and films with no explanation, raising questions about whether she had come into regulators’ crosshairs.  Chinese entertainment stocks have already felt the blow. Alibaba Pictures has dropped 18 per cent since Friday, while studio and video platform operator Mango Excellent Media fell 13 per cent.

Alain Gillard
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