Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – December 10, 2021

China’s economic policymakers doubling down on ‘stability’ for 2022 in the face of ‘threefold pressure’
Annual central economic work conference wrapped up on Friday with leaders stressing the importance of boosting demand with ‘front-loaded’ policy support. Beijing hints it will ease up on regulation of big private players after a heavy-handed crackdown this year jolted domestic markets, and excessive capital growth may instead be curbed with a type of ‘traffic-light.

China aims for steady economic growth in 2022
The central government on Friday promised tax cuts and support for entrepreneurs to shore up slumping economic growth.    China will continue implementing proactive fiscal policies and prudent monetary policies so as to pursue steady progress in the economic development of next year, according to a statement released after the annual Central Economic Work Conference held in Beijing from Wednesday to Friday.

Podcast : China’s economic policy, with Barry Naughton and Max J. Zenglein
Despite the many challenges China’s economy is facing on several levels, the Chinese leadership seems determined to push for fundamental shifts of China’s economic system. Beijing seeks to tackle long-term structural issues and rebalance the economy in line with broader policy goals. The latest buzzword spread is “common prosperity”, seeking to narrow the yawning wealth gap in the country. What does Beijing hope to achieve and why is it rolled out right now? In this episode of our podcast, we discuss with Barry Naughton and Max J. Zenglein. Barry Naughton is the So Kwan Lok Chair of Chinese International Affairs at UC San Diego and one of the most highly respected economists working on China. He is also a member of MERICS’ International Scientific Council. Max J. Zenglein is Chief Economist at MERICS .

China’s long-term problems are forcing it to rethink the whole economy
The People’s Bank of China is encouraging Chinese banks to lend more to businesses and consumers by cutting the proportion of deposits that they have to hold as reserves by 0.5 percentage points to an average of 8.4% from December 15.  It follows a similar cut in July, and is an interesting counterpoint to western central banks such as the Bank of England and Federal Reserve. They are talking about tightening monetary conditions to dampen inflation by raising interest rates and reducing quantitative easing, which effectively creates more money to stimulate lending.  So why are the Chinese loosening and what effect will it have?

Beijing to moderate monetary policy to support growth
Chinese policymakers have signalled they will moderate monetary and fiscal policy to support growth in the world’s second-largest economy, but remain committed to their larger goals of reining in debt levels and cooling the country’s property sector.  The Chinese Communist party’s annual year-end economic planning meeting, which closed on Friday in Beijing, said it would “prioritise stability”, according to the official Xinhua agency. It added that China’s economy faced “triple pressure” from shrinking demand, supply shocks and weakening expectations. The three-day meeting has been overshadowed by the ongoing debt crisis at developer China Evergrande Group and a downturn in the broader property market, which has raised fears that economic growth could slow sharply next year.

Two things must happen before China’s property sector can see better prospects, analyst says
The outlook for China’s property sector could turn brighter in the coming months if two economic conditions improve, Logan Wright, director of China markets research at Rhodium Group.   Stabilizing property sales and greater access to funds within China could help lift the real estate sector in the country, he said.  Wright said markets would focus on China’s annual Central Economic Work Conference, for any “additional concrete steps to stabilize both the property sector and the economy as a whole.”

Evergrande chairman Hui Ka-yan forced to sell pledged shares in embattled developer
Hui Ka-yan’s stake in Evergrande has fallen to 59.78 per cent from 61.88 per cent following the forced share sale    While no transaction value was provided, the shares were worth HK$498 million (US$64 million), according to Bloomberg

Evergrande Restructuring Seen Unavoidable After Company Officially Called A Defaulter
Analysts say an Evergrande default has long been anticipated, and the scenario has already been priced in its distressed-level bonds and free-falling shares. The Hong Kong-listed developer, which hasn’t publicly responded to the Fitch report, probably can’t maintain its silence for much longer. 
“Previously, Evergrande could just drag this on and negotiate privately with creditors,” says Zhou Chuanyi, a credit analyst at Singapore-based Lucror Analytics. “If they officially default, then a debt restructuring is unavoidable.” The company didn’t respond to an e-mailed request for comment. It announced on Monday that it had set up a risk management committee consisting of Hui himself and executives from conglomerates owned by Guangzhou city as well as the country’s bad-debt manager Cinda, to help “mitigating and eliminating the future risks of the group.”

Will China’s Cloud Emperor Alibaba Ever Come Back?
Alibaba is now worth half what it once was, and holding it seems counter-intuitive Moreover,  Alibaba is still a great business despite operating under the pall of Xi’s new “common prosperity” mantra. A singles day sales set a record on Nov. 11 — Alibaba continuing to build a strong moat around its merchant services.   Neither clients nor customers are abandoning it because Alibaba still represents 40% of China’s e-commerce market. By way of comparison, Amazon.Com (NASDAQ:AMZN) had 41% of the U.S. e-commerce market.   Alibaba also remains China’s largest Cloud Emperor. That is, it still owns the largest share of China’s cloud servers and gets nearly 40% of the country’s cloud revenue. Like Amazon, and America’s other Cloud Czars, Alibaba is also starting to design its own server chips, the Yitian line. For the three months ending in September, Alibaba brought in over $3.1 billion from cloud computing. 
The Yuan, meanwhile, continues to appreciate against the U.S. dollar. It’s now at 6.38 to the greenback. It was over 7 as recently as June 2020. Your Chinese investments are appreciating even if they’re standing still.

SenseTime’s stock market debut may be spoiled by US-China tensions
SenseTime’s big stock market debut may be hitting a snag because of brewing tensions between the United States and China.    The Chinese artificial intelligence startup is supposed to price shares Friday as it readies an initial public offering in Hong Kong, where it plans to raise up to $767 million.
But the news is being overshadowed by reports that Washington could spoil the party by adding SenseTime to another trading blacklist.  The Financial Times reported Thursday that Washington had decided to place the company on a list of “Chinese military-industrial complex companies,” in which US President Joe Biden has banned Americans from investing.

Asia-Pacific markets broadly decline as investors await U.S. inflation data
Asia-Pacific markets declined Friday as investors assess risks associated with the new omicron Covid variant and look ahead to key inflation data in the U.S.   Stateside, the Labor Department is set to release November’s consumer price index Friday morning local time, which measures the cost of dozens of items.   Estimates suggest the reading could mark its highest year-over-year level since 1982.

Didi is delisting in New York. Here’s what happens if you own a delisted stock
Chinese ride-hailing app Didi announced last week that it would delist from the New York Stock Exchange and pursue a listing in Hong Kong.  Delisting means a Chinese company traded on an exchange — like the Nasdaq or New York Stork Exchange — would lose access to a broad pool of buyers, sellers and intermediaries.    Rising political pressure in the U.S. and China are increasing the chance that Chinese stocks listed in New York might be forced off exchanges there.
While the Chinese government has yet to outright ban foreign listings, new rules announced this summer have discouraged what was once a rush of Chinese IPOs in the U.S.

What’s behind global luxury brands’ “double standards” in mainland China?
It’s only a few days after the international winter apparel brand Canada Goose has been embroiled in controversy for a “discriminatory” return policy in mainland China. While the Canadian brand is still under fire, several other global luxury labels have also been called out recently for the same reason of double-standard return policy in China. Included were also Burberry, Chanel, Dior, Hermes, and Louis Vuitton. Products sold by these brands at their physical stores are not refundable but some such as Hermes and Louis Vuitton, offer exchange service within 30 days from the date of purchase, given that the product is still in “good condition”.   For online purchases with Dior, Hermes, and Louis Vuitton, they can be returned “without reason within seven days” or exchanged within 30 days from the date of receipt. While Burberry offers the longest return period for online purchases for up to 30 days after the item has been delivered.     Compared to return policies in mainland China, overseas customers enjoy more flexible return and exchange services. Burberry and Hermes offer refunds or exchanges for overseas customers like those in America who made purchases online within 30 days from the date of arrival. So does Louis Vuitton’s policies in the US and UK, with a 14-day period given to consumers in Hong Kong.

Ganfeng Lithium’s global expansion continues
China’s Ganfeng Lithium accounts for 24% of global output of lithium hydroxide — a key component in lithium-ion batteries — which is a significant jump from 18% the previous year.

China to scrap foreign ownership cap for firms managing US$2.9 trillion in insurers’ assets
Draft rules pave the way for foreign investors to raise their stakes in insurance asset management companies to 100 per cent and assume control     Announcement seen as signalling China’s commitment to removing foreign ownership limits

China uses quantum satellite to protect world’s largest power grid against attacks
Operation commands able to be sent using particles of light relayed by Mozi, the world’s first quantum satellite      It offers reliable protection against blackouts caused by hacking, especially for commands sent over long distances or without optical fibres

US and China at war? Why Thucydides Trap or Cold War analogies are deeply unhelpful
The emergence of new technologies, including in nuclear weaponry, and cyberspace has changed international relations and rendered the analogies meaningless      Instead, treating the Sino-American relationship as a complex but unique relationship would enable a more positive focus and downsize the negativity dominating discourse

Will China overtake the West or has it started to decline?
The CCP rules with a reckless mix of overconfidence and anxiety  For now, it does seem that China will continue to increase its economic power, despite slowing down. China’s gross domestic product grew by about 6% in 2019 before the COVID-19 pandemic. China’s nominal GDP could surpass that of the U.S. as early as 2028, according to the Japan Center for Economic Research. China outpaced the U.S. in international patent filings in both 2019 and 2020, becoming the world’s number one. It has also begun to eclipse the U.S. in some technologies, including personal computing, surveillance equipment and mobile communications infrastructure. Although population decline and serious income disparity are not problems to be taken lightly, the CCP is confident it can maintain social stability using the unrivalled digital surveillance network it has developed., but remains full of confidence   Another scenario could play out in the longer term, however, in which China goes into gradual decline. That is because it has a number of problems any leader would be unable to resolve. “Until 2009 or so, China maintained “a peaceful rise” policy. But since then, it gradually became more assertive in a foolish way that intimidates nobody but instead drives them into an anti-China coalition which now includes the U.S., India, Japan, Australia, Vietnam and so on. “As China faces more serious internal problems, including the demography, the Chinese leadership is losing [its] ability to act rationally,” said Luttwak. One thing is clear: rising or declining, China will maintain its hardline stance toward the rest of the world. A rising China fueled by overconfidence can become reckless, while a declining China suffering frustration and anxiety may also be prey to risky acts. The second state is harder to identify and trickier to handle. The world needs to be prepared either way, with contingencies and constructive dialogues prepared.

Dollar firms ahead of U.S. inflation data as China’s central bank clips yuan’s wings
The dollar was firm on Friday ahead of U.S. inflation figures, which could settle the course of interest rates, while the Chinese yuan was nursing its sharpest drop in months after a nudge lower from authorities triggered a slide.

In the name of democracy, US summit sets out to divide the world
The recognition that democracy can take different forms takes a backseat to the apparent US intent to draw a fence around likely allies in an effort to isolate a rising China

Beijing derides Joe Biden’s summit and insists China is a great democracy
The Chinese government has launched a bitter public relations campaign targeting Joe Biden’s Summit for Democracy, arguing that the Communist nation also deserves recognition as one of the world’s great democracies.       In the run-up to the US president’s two-day summit, which opened in Washington on Thursday, Xi Jinping’s administration issued a flurry of white papers and seminars extolling the advantages of China’s political system and criticising America for trying to impose its democratic model on the rest of the world.

The future of democracy and rise of authoritarianism in Asia
History has shaped party politics and electoral instability in Asian democracies. History remains a critical factor in understanding how young Asian democracies can be strengthened and stabilised in the future.   Our research on the determinants of electoral instability in 19 Asian democracies found that constrained electoral competition during the pre-democratic period distorted the formation of free and fair electoral environments after the democratic transition process. But not all authoritarian regimes are the same. The detrimental impact of authoritarian legacies on democratic party system development depends on the degree to which they disrupt political development after transition. This does not necessarily mean that the future of Asian democracies has already been cast by the dice of history. Behind the shadow of the authoritarian past is hope, provided that post-transitional leaders manage to keep democracy as ‘the only game in town’. The routinisation in political behaviour generated by years and years of democratic experience is able to wash away even the worst authoritarian heritage. This is certainly good news for some young Asian democracies that can expect a brighterdemocratic future despite years of authoritarianism.Even with the potential to embrace a democratic future, the road to democracy is not straightforward and democratic backsliding remains a constant threat. Political leaders in countries like India, the Philippines and Kyrgyzstan might have already restarted the clock by putting in peril not just democracy but the stability of party politics in the near future.   The future of electoral politics and democracy in the region depends on political leaders and their willingness to rewrite the mistakes of their authoritarian past. As stated in one of the most famous movie series of the 20th century, ‘the future has not been written […] there is no fate but what we make for ourselves’.

Xi Jinping’s New World Order
Can China Remake the International System?    Xi’s ambition for Chinese centrality on the global stage is exquisitely captured by his Belt and Road Initiative. Launched in 2013, the initiative not only offers a physical manifestation of Chinese centrality through three overland and three maritime corridors that will connect China to Asia, Europe, the Middle East, and Africa but also evokes historical memories of the Silk Road and of Chinese centrality during imperial times. In its original conception, the BRI was a vehicle for Chinese-led hard infrastructure development along the six corridors. Today, BRI offshoots include so-called digital, health, and polar Silk Roads, and all countries are welcome to participate.   Xi’s ambition for Chinese centrality on the global stage holds little attraction for much of the rest of the world, and in the current context of mounting international opposition, his outright success appears unlikely. Yet if Xi perceives that his strategy is unraveling, the result for the international community could be as challenging as if he were to succeed. In recent months, Xi has alarmed global leaders by cracking down on China’s world-class technology sector, eradicating the last vestiges of democracy in Hong Kong, and flexing China’s military muscles through a hypersonic missile test. And the potential looms large for further, even more destabilizing actions, such as resorting to the use of force to unify with Taiwan. Xi has not articulated a peaceful path forward for unification with the island nation, and he has already demonstrated a willingness to engage in risky military behavior in the East China and South China Seas and on the border with India.  Faced with significant international headwinds, Xi has responded by raising the stakes. He appears unwilling to moderate his ambition, except in areas that do not compromise his core political and strategic priorities, such as climate change. An optimal—although still unlikely—outcome would be for Xi to engage in a series of internal ongoing and implicit tradeoffs: claim regional economic leadership but step back from military aggression in the region, take pride in arresting the spread of COVID-19 but acknowledge the weakness of Chinese vaccine innovation, trumpet success in eliminating terrorist attacks in Xinjiang but begin the process of releasing the “reeducated” Uyghur Muslims from the labor camps. This would enable Xi to maintain a narrative of success in advancing Chinese centrality while nonetheless responding to the most significant concerns of the international community. Whether Xi is able to realize his ambition will depend on the interplay of many factors, such as the continued vitality of the Chinese economy and military and the support of other senior leaders and the Chinese people, on the one hand, and the ability of the world to continue to resist Chinese coercion and the capacity of the world’s democracies and others to articulate and pursue their own compelling vision of the world’s future, on the other. Perhaps most important to Xi’s success, however, will be his ability to recognize and address the vast disconnect between what he wants to deliver to the world and what the world wants delivered from him.

Xi faces the dilemma of China’s imperial rulers
Some 76 emperors — more than a quarter of the total 282 since 211 BCE — were toppled, murdered or forced to commit suicide by these elites. So it was crucial for Chinese rulers down the ages to find a way to control and placate the elites. But therein lay a “sovereign’s dilemma”, Wang says. The capacity of the dynasty to get things done depended on enlisting the their support. But when such families grew strong, they could — and often did — turn against the emperor. “In order to maintain their grip on power, Chinese emperors broke the social ties among the elites, which rendered them an incoherent group,” he says. Such a course of action could extend an emperor’s rule and prolong a dynasty — but it also gradually weakened the capacity of the state to get things done. Wang sees parallels with Xi’s China today.   Xi’s anti-corruption campaign, which has targeted hundreds of senior officials since its launch in 2012, has helped limit the influence of the powerful “red families” that surround the CCP court.    As Xi waits to be anointed as latter-day emperor at the 20th National Congress of the Chinese Communist party next year, he must strike an age-old balance. It will not be Sino-US relations, climate change or even domestic economic growth that weighs heaviest on his mind.

China’s New Hypersonic Aircraft Is Based on a Rejected NASA Design
And it can go faster than five times the speed of sound.   A team of researchers in China has built and tested a prototype hypersonic flight engine based on a design that was scrapped by NASA over 20 years ago, according to a report from the South China Morning Post (SCMP).The prototype itself might not lead to a production version of hypersonic aircraft. Still, in a paper in the Journal of Propulsion Technology, the team behind the machine said “understanding its work mechanism can provide important guidance to hypersonic plane and engine development.”

China’s domestic air traffic recovery faltering due to zero-Covid policy
China’s domestic air traffic is faltering due to a zero-Covid policy that has led to tighter travel rules in Beijing and weaker consumer confidence after repeated small outbreaks.
Air China, China Eastern Airlines and China Southern Airlines posted a combined loss of nearly 8 billion yuan ($1.25 billion) in the third quarter.   Domestic capacity at the country’s three biggest airlines reached around 115% of pre-Covid levels in April but by October had fallen to around 77% due to outbreaks, HSBC data showed.

Alain Gillard
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