Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – December 2, 2021

China’s ‘state-centric approach’ to technical standards-setting worries EU firms
The West has long had a lead when it comes to global technical standards, setting the specifications that shape most of the products consumers use.  European Union Chamber of Commerce in China report says China’s ‘state-centric approach’ to standards will add to risks due to increased politicisation and potential decoupling.

Minimum wage hikes sweep China in ‘common prosperity’ push
Trend risks a production exodus over costs already higher than Southeast Asia’s  Chinese provinces have responded to President Xi Jinping’s “common prosperity” campaign by hiking minimum wages, but higher labor costs could prompt manufacturers to shift production elsewhere. Twenty out of China’s 31 provincial-level regions have increased their minimum wages so far in 2021. Many overseas companies, including Toyota Motor, Honda Motor and Nissan Motor, operate in Guangdong. Larger offices and factories already pay above minimum wage, so “the increase will have no direct impact at all,” This year, Xi’s call for “common prosperity” accelerated the trend. In an August meeting, the Communist Party’s Central Committee for Financial and Economic Affairs called for broader income distribution in order to realize his vision. Half the provinces that lifted minimum wages this year did so in September or later. Migrant workers from rural areas to cities stand to benefit the most. Those employed at factories tend to earn a significant amount of overtime and are believed to usually make around double the minimum monthly wage. Even so, many still struggle to get by. Xi has essentially solidified his bid for a rare third term as Communist Party leader at the party congress in 2022. He likely aims to further strengthen his grip on power by appealing to China’s nearly 300 million migrant workers. Provincial governments are also eager to attract more workers amid a worsening labor crunch. But higher wages also risk driving businesses away. Labor costs are already higher in China than in many Southeast Asian countries. Japanese companies paid ordinary manufacturing workers in China an average base salary of $531 a month in 2020, compared with $447 in Thailand and $250 in Vietnam, according to a survey by the Japan External Trade Organization. Some manufacturers are already moving operations out of China. Samsung Electronics shifted smartphone production to Vietnam from China in 2019. Further wage increases could pressure more businesses to follow suit.

China’s manufacturing advantage at risk as restrictions mount and competition intensifies, leading engineer warns
Adviser to Beijing suggests that China set up a vocational education system to train talent for advanced manufacturing as nation tries to stave off international competition       Pandemic has accelerated the push to reshore parts of the manufacturing process, and this poses a serious challenge as China strives to improve its supply chain

The G20 Common Framework for Debt Treatments Must Be Stepped Up
With the debt service suspension initiative expiring and interest rates poised to rise, low-income countries will find it increasingly difficult to service their debts. Despite significant relief measures brought on by the COVID-19 crisis, about 60 percent of low-income countries are at high risk or already in debt distress. In 2015 that number was below 30 percent.  With policy space tightening for highly indebted countries, the framework can and must deliver more quickly.  The Common Framework is intended to deal with insolvency and protracted liquidity problems, along with the implementation of an IMF-supported reform program. G20 official creditors—both traditional “Paris Club” creditors, such as France and the United States, and new creditors, such as China and India, which, as shown in the chart below, overtook the Paris Club as lenders in the last decade—agreed to coordinate to provide debt relief consistent with the debtor’s capacity to pay and maintain essential spending needs. The Common Framework requires private creditors to participate on comparable terms to overcome collective action challenges and ensure fair burden sharing.

Our three calls for China in 2022
The slew of policy announcements in recent months has slowed. The government will rely on investment to drive growth, while tough Covid-19 measures will remain The government will rely on investment to support growth. The key drivers here are renewable energy, 5G applications and the expansion of networks to rural areas, Artificial Intelligence, and semiconductor technology research. This activity will partially fill the gap left by investment previously undertaken by real estate developers. Consumption too will play a major part while manufacturing will depend on export demand, freight rates, and the availability of semiconductors. Three calls for China in 2022: State-Owned Enterprises to return as the core of investment entity    No change to the slight easing of monetary policy

China Cybersecurity Regulations – What do the New Draft Regulations Say?
China’s cybersecurity regulations are getting further strengthened with the release of a new set of measures to beef up the requirements of existing data protection and cybersecurity laws. The new Regulation expands and clarifies requirements for companies to protect data and networks in several areas, including handling of ‘important’ data, cross-border data transfer, personal information protection, and responsibilities of internet platforms.

Is China Stacking the Technology Deck by Setting International Standards?
Though often overshadowed by China’s advances in technology, the state-directed strategy to set technological standards will have a lasting impact.    Chinese President Xi Jinping’s avowed intent to make China a “cyber great power” is not to be taken lightly. Early in his tenure, Xi announced his determination to enable Chinese indigenous technology to “catch up and surpass” the West. Since then, international attention has focused on China’s rapid advance in cutting-edge technologies such as AI, quantum computing, 5G networks, the Internet of Things, new materials, and synthetic biology, to name a few. But what seems to go largely unnoticed is a state-directed two-track strategy to gain a strategic and structural advantage by setting international technology standards.      The first of these tracks is a deliberate push to gain influence in the international technical standards-setting bodies      For Western countries to compete effectively with Beijing’s two-track approach to technological standards-setting they must first determine, in consultation with industry, what their priorities should be. Technologies and standards are not all equal, and resources are not infinite. So, the place to begin is selecting strategically important emerging technologies, assessing the types of technical standards relevant to them, and determining where and how these standards will be established. Government-industry and government-to-government coordination is essential for both prioritization and for effective action in global SDOs.    It is appropriate for China to play a role in shaping tech governance commensurate with its growing status as a technology leader. As China expands its influence through the Digital Silk Road and in SDOs, its ability to shape global technical standards is set to increase. Given the importance of those standards in terms of economic competitiveness, national security, and to the freedoms rooted in an open internet, it is time for the United States and its partners to up their game.

The hard reality behind China’s leadership in EVs
Coal miners and related industries flourish despite Beijing’s climate pledges  Despite the global chip shortage that has hit automakers around the world, demand for electric vehicles in China is cruising along. Sales of battery-powered electric vehicles, or BEVs, which run completely on stored electricity, reached nearly 2 million units in the first 10 months of 2021, a threefold increase over the previous year. This compares with an 8.8% rise in passenger car sales overall in China. The China Association of Automobile Manufacturers says BEVs now account for 12% all new passenger car sales in the country.    In past decades, foreign automakers led the way in turning China into both the world’s largest producer of cars and the biggest car buyer. With EVs, Chinese companies are playing a key role in both developing the technology and fostering the market itself.   However, more than 60% of the power that moves these electrified vehicles in China comes from coal-fired plants. It is true that the share of renewables — mainly wind and solar — in the country’s energy production has risen. But with China’s energy consumption leaping 440% over the past two decades, China has added 983.22 GW of coal-fired generating capacity during the period, according to Global Energy Monitor, a San Francisco-based nongovernmental organization. That is almost 70% of all new coal-fired power plants built worldwide during the period.  It is ironic to see the coal industry become one China’s fastest growing while a global debate rages over how and when to phase out use of the black stuff. At the global climate summit in Glasgow last month, India demanded that the official communique’s reference to coal power be softened to “phase down” from “phase out.” China quietly supported that move.   China has pledged to reach its carbon emissions peak in 2030 and to become carbon neutral in 2060, 10 years later than other big Asian economies like Japan, South Korea and Hong Kong. But Boris Kan, a senior credit officer at Moody’s Investors Service, believes the energy transition will be “a very challenging road for China,” as the process “involves reconfiguration of China’s industrial base.” The Chinese economy still depends heavily on carbon-intensive industries — utilities, steel, cement, oil and gas — to create economic growth and jobs.    China may look like as if it is moving toward decarbonization with EVs, but the reality is more complicated.

Facebook uncovers Chinese network behind fake expert
Facebook and Instagram parent company Meta removed more than 500 accounts after receiving reports of a fake Swiss biologist   Facebook owner Meta Platforms has removed more than 500 accounts linked to an online disinformation network primarily based in China. The accounts had promoted the claims of a fake Swiss biologist called “Wilson Edwards”, who alleged the US was meddling in efforts to find the origins of Covid-19.

Chip shortage risks becoming a glut in 2023 as fabs scramble to add capacity, say analysts
There is potential for overcapacity in 2023 as larger-scale fab expansions come online towards the end of 2022, according to IDC Research      The semiconductor industry is highly cyclical, running through a peak-to-trough cycle every 4 to 6 years.

AI Strategic Competition, Norms, and the Ethics of Global Empire
Western democracies should play an active role in shaping the norms governing artificial intelligence and other advanced technologies.  More impressive and ambitious than its Belt and Road Initiative, China has been building a global data technology empire, one that is on track to surpass the United States and all Western powers in AI technology and other cutting-edge technological advances. It announced it would do as such in a conference held with foreign diplomats in 2018, setting 2030 as the deadline for China’s AI dominance.   Think tanks and NGOs researching AI norms and ethics should be financed, and value-compatible AI research should be funded, both in China and elsewhere. Such research is notably being produced out of universities in Montreal, San Francisco, and Singapore. Finally, research visits, trips, and exchanges should be organized to facilitate open and free discussions between Western and Chinese AI scientists, thinkers, and entrepreneurs. To kill two birds with one stone, these exchanges and fora could also help to alleviate the growing tensions between our two governing blocs.    The false dichotomy between the “good” of AI and the “bad” of AI is just that; a false dichotomy. We can make technology work towards the improvement of global living standards while disassociating it from the interests and concerns of totalitarian rule, but much work remains to be done before we reach such a point.

China’s carbon trading exchange struggles with unclear policies as it eyes expansion, say analysts
The ETS, which currently only allows power companies to trade carbon allowances, is poised to expand to allow financial institutions to participate    Ambiguities in emissions data reporting, trading legislation and tax issues have created confusion and caused volatility in prices lately

China’s Rising Vulnerability To Foreign Investors
Foreign investment in China has historically focused on direct investment, and investment in portfolio assets was largely confined to foreign currency denominated debt.    Things have changed dramatically in the past 10 years. In 2011, foreigners’ holdings of China’s liquid portfolio assets were just 14 per cent the size of China’s reserve assets. In June, they were almost two-thirds the size at $2.1tn.

Australia expands military cooperation
Defence Minister Peter Dutton says Australia is working towards a free and open Indo-Pacific region.    Australia is in the final stages of developing an annual military training exercise with South Korea as it works towards building partnerships to counter Chinese aggression.

Hong Kong luxury home sales recover from Covid-19-induced slump, to hit record high this year
Transactions of upscale homes worth more than HK$100 million (US$12.8 million) reached HK$46.4 billion in the first 11 months of the year     Sales this year are on track to exceed the last record of HK$46.6 billion set in 2018

China’s growing market for NFTs, metaverse could foster new money-laundering schemes, central bank official warns
As virtual assets, NFTs and the metaverse could be used for money-laundering purposes, according to a People’s Bank of China official     More than 50 jurisdictions across mainland China plan or have already moved to establish a regulatory framework for NFTs and the metaverse

Peng Shuai: will sponsor Adidas speak out on sexual assault allegation and ensuing controversy? The dilemma sportswear brands face as China’s Winter Olympics nears
Peng has been sponsored by Adidas for almost 15 years, but the brand and Peng’s other major sponsors remain quiet over the Chinese tennis player’s situation    The 2022 Beijing Winter Olympics will be a test to see whether brands that rely on the China market risk criticising the Chinese government before the event

As Omicron rattles stock markets, is the panic warranted?
While medical experts say they don’t know enough yet about the new variant of concern, politicians, vaccine company bosses and economists haven’t shied away from airing their views     Markets and news stories tend to overreact to shock news, but investors should look carefully at the evidence   The lesson for those investors who sold on the dip last Friday should be to ask: the market may have fallen but is there any evidence to say that Omicron is going to shut the global economy down? The real reason why markets fell last week was that most have gone up effortlessly this year and quite rightly so. Liquidity is still high, earnings are going up, and the Fed is ridiculously accommodating negative real interest rates.    This new variant came at a time when the markets needed a good excuse to break the consistent bullishness, but it will not be the trigger for a crash. It was merely the supporting act for Fed chairman Jerome Powell’s comments this week indicating interest rates might go up earlier than expected.  As another great behaviouralist Gerd Gigerenzer says, we have to live with uncertainty. Investors must follow the science, and not be panicked by editors, politicians and epidemiologists burnishing their careers. Since the beginning of time, viruses have and will continue to evolve. Investors should worry about the next one – not a variant.   The remaining question for Covid-19 is: what happens when the World Health Organization runs out of Greek letters?

US-EU dialogue on China expected to end with ‘robust’ joint statement
A State Department official says Washington and Brussels have increasingly converged in their views on the rising power since May    The second high-level meeting on Thursday is set to focus on areas for cooperation in US and EU policies on China

Has Berlin got a Green light to get tough on Beijing?
The leadership of the World Trade Organization could, it seems, teach global supply chains a thing or two about resilience.   Bütikofer argues that an emergent China-sceptic consensus is aligning the German business, human rights and national security communities. One salutary lesson was the fate of the EU-China Comprehensive Agreement on Investment (CAI) which Merkel’s government, doing the German export sector’s bidding, jammed through in the dying days of its EU presidency last year. China’s subsequent move to slam sanctions on parliamentarians across Europe     Germany has often been cautious about these tools, warning the commission not to put heavy burdens on industry or invite foreign retaliation against exports. Huotari said that, particularly with regard to procurement, “the message to the commission now will be that what you guys are doing is good, and we are not going to put as many blocks in your way as we have in the past”. There are other aspects of German trade policy we’ll examine in future newsletters, particularly carbon border pricing. But our preliminary conclusion is this: it’s not just the swapping of Scholz for Merkel we need to watch for but fundamental movements in the European centre of gravity on China and trade.

Germany’s incoming foreign minister Annalena Baerbock vows ‘toughness’ with China
Annalena Baerbock from the Green party is set to become Germany’s first woman top diplomat  She has vowed to put human rights at the centre of German diplomacy, signalling a more assertive stance

Beijing asks Democratic Republic of Congo to help gain release of kidnapped Chinese miners
Foreign Minister Wang Yi makes the request of his DRC counterpart at a meeting on the sidelines of Forum on China-Africa Cooperation    Two Chinese citizens were killed and five kidnapped in a militia attack on a gold mine on November 21

Debt worries see China slash finance pledge to Africa
China will slash the amount of finance it gives to Africa over the coming three years by a third, an indicator of Beijing’s increasing caution over the continent’s debt levels, reports the Financial Times. In a video address to the triennial Forum on China-Africa Cooperation being held in Senegal, Chinese leader Xi Jinping pledged $40 billion to African countries in investment, credit lines, trade finance and special drawing rights.   While this represents a cut from the $60 billion pledged at the previous two Focac summits, Xi emphasised his commitment to what he called a “win-win” relationship. In addition, China’s president promised 1 billion Covid-19 vaccine doses, although he provided no timeframe. He also pledged to step up co-operation on solar, wind and other renewable investments and to simplify procedures in order to increase agricultural imports from African states.

The EU’s naive response to China’s Belt and Road initiative
Although China portrays its Belt and Road initiative as a win-win, the reality is rather different. The quality of some of the infrastructure projects it funds leaves much to be desired. And the vast debts built up to deliver the projects (China holds more than 70 per cent of Djibouti’s national debt) has the appearance of a ‘debt-trap’ aimed at ensuring the grip of Chinese influence. To counter this image, China is using its soft power to win hearts and minds. During the pandemic, China sold and donated vaccines to 13 African countries, mostly those where they had existing economic ties. China has also been investing in African media. Since moving its regional office to Nairobi, the Chinese state-run Xinhua News Agency has built one of the largest correspondent networks on the continent. Chinese state TV, radio and China Daily’s Africa edition now have offices in Nairobi. As a response to the Belt and Road initiative, the EU’s Global Gateway is naïve. It underestimates the scale of China’s investment and exaggerates the lure of Western democratic values. African states do not want another’s dream to follow. They want links not further dependencies. The failure of developed nations to properly support vaccine roll outs in the developing world has been blamed for the emergence of the Omicron variant. This should serve as a reminder that what unfolds in Africa has the potential to affect us all.

China alert to global economic risks from Omicron, but ‘financial turmoil’ of early pandemic unlikely
China is monitoring new global economic risks and will ‘review policies’ on trade in a timely manner   Analysts say Omicron variant may create only a small shock, as governments are more prepared

Coronavirus pandemic a ‘critical opportunity’ for US-China cooperation, report says
America should take steps to improve ties with China in health security, according to report from the Centre for Strategic and International Studies    It says that while this will not be an easy task in the ‘stark and forbidding’ climate of relations, the opportunities outweigh the risks

Canada Goose says all Chinese customers can return clothes after policy triggers nationalist backlash
The winter clothes brand faced a firestorm of criticism online after a customer complained she could not return a substandard parka bought in a Shanghai store   The company clarified its policy after being accused of double standards by state media and internet users

Beijing warns against ‘politicising’ sport after WTA pulls out of China over Peng Shuai case
WTA chief Steve Simon says ‘I don’t see how I can ask our athletes to compete in China’ as concerns for former champion’s welfare grow following sexual assault claim      International Olympic Committee holds second video call with star and defends ‘quiet diplomacy’ after being hit by backlash

Coronavirus: Beijing ‘gives green light’ for quarantine-free travel between Hong Kong and mainland China even as Omicron has world on edge
Once over the border, travellers must use the mainland health code app, which tracks their whereabouts via mobile phone signal data from three major telecoms companies: China Telecom, China Unicom and China Mobile. It can show which countries or cities a user has visited over the past 14 days.   Travellers from Hong Kong must also have a valid mainland phone number and home return permit.   The “Leave Home Safe” app, which has been downloaded 6.9 million times since its launch a year ago, lets users enter venues such as restaurants and bars by scanning a QR code. It has since been made mandatory at government facilities, and from December 9 will be required at all restaurants.   Long-awaited programme to begin shortly after Legislative Council election on December 19, insider tells the Post    Government also reveals details of new health code app, which launches next week, and says locations visited in Hong Kong will not be automatically shared with mainland  Before the double whammy of the coronavirus pandemic and the 2019 anti-government protests, about 319,800 people crossed the mainland border from Hong Kong each day for work or tourism, according to the most recently available government numbers. In the first 10 months of 2021, visitor arrivals from the mainland were virtually non-existent, dropping 98 per cent year on year to just 52,755 people.   About 2.7 million people crossed the border in 2020, with most of those arrivals coming in the early months of the pandemic. In stark contrast, 43.8 million came to the city in 2019.

China defends zero-Covid strategy, says speed vital to stopping spread
National Health Commission director Ma Xiaowei vows to stick with the country’s approach, underlining importance of ‘golden first 24 hours’     The country can now contain outbreaks in two weeks, he says    Asked by Xinhua about the Omicron variant, Ma did not respond directly on whether it would cause a change in China’s control measures.  “We will make full use of the golden 24 hours from the start of an outbreak … before it spreads widely or before the infected could transmit the virus to others and identify close contacts and secondary close contacts of confirmed cases,” he said. Omicron has spread around the world, with the World Health Organization classifying it as a “variant of concern” and warning of the high risk it poses.  Little is known of Omicron’s transmissibility and the severity of the illness it can cause. Scientists are trying to assess whether the dozens of mutations in its spike proteins – which allow the coronavirus to enter human cells – might hamper the effectiveness of existing vaccines.

Alain Gillard
Information Officer
Service Asie Pacifique
Place Sainctelette 2
1080 Bruxelles
Tél 02 421 85 09 – Fax 02 421 87 75
Copyright © 2020 awex, All rights reserved