Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – December 7, 2021

China’s foreign trade gallops 22% from Jan-Nov, exceeding 2020’s level
China’s imports and exports surged 22 percent year-on-year in the first 11 months this year to reach 35.39 trillion yuan ($5.55 trillion), exceeding the level of trade volume seen last year (32.16 trillion yuan) thanks to better than expected performance in November, data from China Customs said on Tuesday.    Chinese experts said the jump showed that China’s economy has recovered to the level before the pandemic, and it is expected that the high growth of China’s foreign trade will be maintained through the second half of 2022.  In US dollar terms, China’s total import and export value in the first 11 months of this year reached $5.47 trillion, an increase of 31.3 percent compared with the same period last year, the data from the customs said.

China trade balance $71.72B vs $82.75B expected
China trade balance Prior was a surplus of $84.54B
Exports +22.0% vs +17.2% y/y expected Imports +31.7% vs +19.5% y/y expected This is good news for the global economy. China imports are early in the global manufacturing cycle and the pickup in November suggests that Chinese manufacturers see strong global demand for what they’re selling.  The rise in exports and overall trade is also good news, though the continued elevation in the overall trade balance could be politically problematic as the Biden administration reviews the Phase 1 trade deal and its missed commitments

UK business group calls on Beijing to improve market reforms, resume flights
Call came as the Chamber revealed that a large proportion of British companies have yet to return to pre-pandemic levels of revenue     Chair of Chamber expressed concern that Beijing’s border lockdown and zero-Covid strategy had precipitated an outflow of foreign talent

Climate change: China should bankroll renewable energy transition in coal-dependent countries, analysts say
Japan is supporting energy transition in Southeast Asia through the Asian Development Bank and China will follow, analyst says   As Japanese and Chinese investors have reaped the benefits from over investment in Indonesia’s coal-powered energy sector, ‘it is only logical for them to be part of the solution in supporting’ its energy transition

Beijing leaves antitrust out of 2022 economic goals, focuses on technological development
A meeting of the Communist Party’s Politburo left out mentions of the ‘disorderly expansion of capital’ that last year signalled a widening tech crackdown    The government continues to emphasise technological self-sufficiency and innovation as it seeks to address slowing growth amid pressure from Washington

China’s middle class is starting to look a lot like America’s, and that’s not a good thing
Rising levels of household debt, unaffordable homes, and a risk of falling out of the middle class — wait, is this the US or China?   Housing is increasingly unaffordable for China’s middle class, and household debt levels are rising.  China’s middle class faces the real possibility of not being able to do better than their parents.  In other words, China’s middle class is starting to look a lot like America’s.

EU will propose new trade weapon to counter China’s economic coercion
The move could result in China and other countries accused of economic bullying being shut out of lucrative parts of the European market   A draft document repeatedly states that Brussels sees the instrument as a deterrent and the ‘last resort’ to be used when other efforts fail

The EU is finally putting its money where its mouth is on China
The European Union has long been criticized for trying to have its cake and eat it when it comes to China. On one hand, it badly wants a strong economic relationship with its biggest partner for goods trade. On the other, it recognizes the Chinese government is a serial human rights offender and systemic rival.  This attempt to balance contradictory realities has often led to policy incoherence from Brussels. It was only this time last year that the EU and China finalized a major investment agreement to strengthen their trade ties. It included a number of commitments derided by critics as superficial on issues such as climate change, despite China being the world’s largest greenhouse gas emitter; and labor rights, despite European lawmakers passing a resolution just weeks before the agreement was finalized condemning Beijing’s alleged system of forced labor for Uyghur Muslims in its western Xinjiang region.

Europe and the US: From divergence to convergence on China?
Is the US moving closer to the EU’s complex definition of China as a partner, competitor, and systemic rival? Plamen Tonchev explores the different lenses Europe and the US use to look at China.  Both Europeans and Americans have been scrambling to make up their minds about how they should approach China – whether to view it as a strategic threat, a fierce competitor, or an indispensable partner in, say, addressing the climate crisis. In fact, this odd mix is exactly the definition the European Commission and the EU’s external action service came up with in March 2019 in a policy paper titled EU-China Strategic Outlook, in which China was dubbed “simultaneously a cooperation partner, an economic competitor in pursuit of technological leadership, and a systemic rival promoting alternative models of governance.” Back then, on the other side of the pond US President Donald Trump only viewed China as an economic competitor and was busy unleashing waves of increased tariffs on Chinese imports. This ultimately led to the signing of what became known as a Phase One trade deal between Washington and Beijing in January 2020.

US and China: Healing a wounded relationship
Of course, there are still plenty of areas where the 2 countries disagree, such as human rights. But there is now a floor under the relationship and it is no longer in free fall. And, since the relationship is characterised by competition, there is a ceiling as well. Since both sides acknowledge it to be the world’s most important bilateral relationship, it should be handled with care. China still is reluctant to characterise the relationship as primarily competitive and prefers to describe it as one of “mutual respect, peaceful co-existence and win-win cooperation”.In fact, China doesn’t accept Biden’s description of the world today as being characterised by a contest between democracy and autocracy, claiming that China itself is democratic. Interestingly, however, the Chinese Communist Party, in its November party plenum, issued a resolution describing the world today in not so different terms.  A resolution on the 100-year history of the party said: “Our continued success in adapting Marxism to the Chinese context and the needs of our times has enabled Marxism to take on a fresh face in the eyes of the world, and significantly shifted the worldwide historical evolution of and contest between the 2 different ideologies and social systems of socialism and capitalism in a way that favours socialism.”

Will China have to loosen policy?
The latest news on Evergrande suggests that the property developer is very close to default, and the shares of the super-indebted group say pretty clearly that it is going to happen. The shares fell 20 per cent on Monday, a move barely visible on the long-term chart:The Chinese authorities seem to be trying to do with Evergrande what they did successfully (to date) with the over-extended insurer Anbang: some sort of orderly, break-upy, liquidationy thingy which will not require a general bailout of the sector, or fiscal and monetary juicing of the economy.This will involve state-owned entities taking Evergrande’s assets and liabilities at prices that will not require big losses to be recognised. The government’s goal is “to reach a balance between short-term stability and long-term reforms”, as Chaoping Zhu, of JPMorgan Asset Management, put it in the Financial Times today. Which is, if you think about it, what we’re all trying for in life, isn’t it?But this balance requires discipline, and there are a few signs that China might engage in a general easing of financial conditions, of the sort that encourages rather than discourages risk-taking, but which eases the short-term pain — and supports markets.

Beijing seeks to orchestrate slow motion collapse for Evergrande
Chinese officials face challenge untangling heavily indebted group while minimising damage to rest of property sector. On Monday night, the Chinese Communist party’s Politburo said it would take steps to “boost public housing and support the housing market”. That helped assuage market nerves even as Evergrande bondholders said that they had not received overdue repayments totalling $82.5m, potentially signalling a formal default that the group has narrowly avoided on three other occasions over recent months. The total value of the debts was $343m — the same amount of money Hui raised by selling nine per cent of his controlling stake in Evergrande late last month. But neither he nor Evergrande have said if the proceeds would be used to pay international bondholders or domestic creditors, including tens of thousands of retail investors and suppliers that government officials worry could erupt in widespread protests. Eswar Prasad, a China finance expert at Cornell University, said the Politburo statement and simultaneous measures by the central bank to boost liquidity in the banking sector signalled Beijing’s intention “to support growth but without a broad expansion of credit that could fuel a resurgence of financial market imbalances”. Zhiwei Zhang, chief economist at Pinpoint Asset Management, added that “the message from the Politburo was important, it indicates the government may loosen policies in the property sector.” But even if it does, it will probably be too late to prevent Evergrande from sinking under the weight of its debts

Evergrande Moves Toward Restructuring; State Swoops in to Contain Risk
China Evergrande Group has set up a risk management committee as the cash-strapped property developer inches closer to a debt restructuring that has loomed for months over global markets and the world’s second-largest economy.    The real estate giant, which is grappling with over $300 billion in liabilities and is at risk of becoming China’s biggest-ever default, said on Monday that the committee included officials from state entities and would play an important role in “mitigating and eliminating the future risks” of the group.    On Friday, Evergrande said it would seek to restructure its offshore debt after acknowledging that it may no longer be able to meet its financial obligations, prompting the provincial leaders of the southern province of Guangdong, where it is based, to step in to help manage the fallout.

In China, Will Luxury Go Down the Drain With Evergrande?
Without a government bailout, cash-strapped Evergrande’s economic prospects seem morose. Moreover, the group’s collapse could seriously dent China’s debt-ridden housing market while bringing down adjacent sectors.This outcome will impact real estate speculators, but it will also hurt young, middle-class investors and middle-market consumers who have been active in the luxury market. Close to 80,000 Chinese investors had bought Evergrande’s wealth management products (WMPs), but it is highly doubtful they will cash out.As mentioned previously, the Evergrande fallout could shake up the luxury industry. As consumers lose their homes and get buried in debt, they will be forced to abandon “conspicuous consumption” and focus exclusively on necessities. And even those who don’t get directly impacted by the real estate bubble might choose to hide their wealth and status to avoid scrutiny. Xi Jinping’s “common prosperity” goal has already been sending shock waves through the upper class. Therefore, an additional crisis could precipitate societal changes, pushing the rich to hide their assets and status.  Obviously, a government bailout could save Evergrande. But that doesn’t mean smaller property developers would also get rescued. A change is already underway, and luxury brands need to prepare for a reality where “silent luxury” is trending over “bling.”

China Increasingly Obscures True State Of Its Economy To Outsiders
China’s Communist Party has long maintained tight control over information, and the effort has intensified under leader Xi Jinping. The country has become increasingly opaque over the past year, even as its presence on the world stage grows.    A new data-security law has made it harder for foreign companies and investors to get information, including about supplies and financial statements. Several providers of ship locations in Chinese waters stopped sharing information outside the country, making it hard to understand port activity there. Chinese authorities have restricted information on coal use, purged documents related to political dissent cases from an official judicial database, and shut down academic exchanges with other countries.

Elon Musk needs China. China needs him. The relationship is complicated
With the US tightening technology exports to China in 2018, President Xi Jinping defiantly pledged to make China the world’s future innovation and industrial center. Key to his plan was Elon Musk.

Audi ties up with Alibaba, Baidu, Tencent for in-car technology as it eyes young Chinese buyers
Audi has formed tie-ups with Alibaba Group Holding, Baidu and Tencent Holdings to collaborate in the fields of big data, IoT and urban mobility    The German carmaker plans to to assemble five battery-powered EV models at its mainland-based plants in 2025, says Audi executive Giorgio Delucchi

Alibaba’s record 12 per cent rally lifts Hang Seng from 14-month low as China injects US$188 billion of liquidity
China’s central bank announced a cut in banks’ reserve-requirement ratio with effect from December 15, unleashing US$188 billion of liquidity into the system    Alibaba Group soared 12 per cent, a record since its November 2019 listing in Hong Kong following a 10 per cent overnight gain in its US-listed securities

EXPLAINER: Chinese Builder’s Debt Struggle Rattles Investors
Global investors are watching nervously as one of China’s biggest real estate developers tries to avoid a default on its $310 billion mountain of debt.  Regulators appear to be focused on making sure homebuyers get apartments they paid for and preventing any financial surprises.  Evergrande has formed a “risk management” panel with experts from other companies. The government of its home province of Guangdong is sending a team to Evergrande headquarters to supervise operations. Cities and provinces with Evergrande projects have set up teams to scrutinize their finances.  The government also is promising measures to support economic growth that sank to an unexpectedly low 4.9% over a year earlier in the quarter ending in September due to the slowdown in construction and real estate sales.  On Monday, the central bank increased the amount of money banks have available for lending by 1.2 trillion yuan ($190 billion).

More than a third of Hong Kong firms to step up hiring, almost 60 per cent to increase pay, CPA Australia survey finds
Measures to combat Covid-19 and stimulate the economy have bolstered the city’s economic recovery and prospects, says president of industry body   Sixty-seven per cent say resumption in travel would be a top contributor to growth

Under Pressure From China’s Authorities, Didi Is Delisting From the New York Stock Exchange
Since its IPO on the NYSE, Didi has been the target of investigations and penalties from China’s Cyberspace Administration.    Didi’s delisting move accelerates China’s decoupling from U..S capital markets. The CAC has added other U.S.-traded Chinese app-based companies to their investigations, including Full Truck Alliance Co and Kanzhun Ltd.   Didi was founded in 2012 as a taxi-hailing app and has expanded into other ride-hailing options including private cars and buses. It is also investing in electric cars, artificial intelligence, and other technology development. Didi Global Inc’s top shareholders include Japanese multinational SoftBank Group Corp. and U.S.-based ride-hailing app Uber, which sold its China business to Didi in 2016.  Didi’s shares were offered on June 30 at $14/share, raising $4.4 billion. They closed on Friday at $6.07 after the delisting announcement.

What is green hydrogen and can it help China meet its carbon goals?
Coal has powered China’s breakneck economic growth over the past four decades, but it also presents one of the biggest challenges to its climate ambitions. Bloomberg predicted that by 2050, green hydrogen could be the cheapest production method for steel and had the potential of capturing over 30 per cent of the market. Move to renewables to accelerate after COP26 despite challenges, experts say In China, some steps have already been taken in this direction. Chinese iron and steel manufacturing conglomerate HBIS Group said last year that it would operate the world’s first direct reduced iron production plant powered by hydrogen-enriched gas.The country’s western regions are shaping up to be hubs of this industrial transformation as they expand their renewable energy sources, according to a study led by Jiang Kejun, from the Chinese Academy of Macroeconomic Research. The distribution of ethylene, benzene, ammonia, paraxylene, methanol and hydrogen will be relocated from eastern provinces to western and inland areas such as Qinghai, Xinjiang, Ningxia and Gansu by mid-century, according to the research.

Biden’s misguided framing of US-China rivalry as democracy versus autocracy
On 9 December 2021, US President Joe Biden will hold the ‘Summit for Democracy’, where he will likely repeat his emphasis on a battle between democracies and autocracies in the 21st century. Biden’s aim to promote democratic renewal around the world is admirable, and China needs to tame its authoritarian tendencies. But framing US–China strategic competition in terms of democracy versus autocracy is a poor strategy. This false ideological dichotomy inhibits sophisticated analysis. It will intensify global polarisation and fuel geopolitical competition at a time when international solidarity is desperately needed to deal with climate change and other shared challenges.
There is some truth to Biden’s categorisation. The conflict between Washington and Beijing is about political values and the ways in which society, economy, trade and technology are managed. Yet Washington and Beijing share many similarities. Both have implemented top-down developmental state measures in, for example, promoting their respective high-tech sectors.  Both the United States and China fall within the broadest definition of a capitalist system, with the former characterised by the domination of private capital and the latter by state-owned enterprises. The rivalry between the two countries should therefore be seen as a competition between different economic models within the same overarching capitalist system.  Any ideologically-based rivalry should be deemed unnecessary. As Kishore Mahbubani argues, ‘by treating the new China challenge as akin to the old Soviet strategy, America is making the classic strategic mistake of fighting tomorrow’s war with yesterday’s strategies’.Ideological reconciliation between the United States and China is possible if the United States can work out a middle position that recognises some elements of China’s promotion of the right to development. Perhaps Biden’s grandchildren will follow his advice of ‘doing their doctoral thesis on the issue of who succeeded: autocracy or democracy’. They would be in a better position to judge whether Biden overcomes the misguided dichotomy between democracy and autocracy and averts a dangerous ‘new Cold War

In US–China competition, technology matters, but alliances matter more
The United States and China are competing for dominance in technology. America has long been at the forefront in developing the technologies (bio, nano, information) that are central to economic growth in the 21st century and US research universities dominate higher education globally. In Shanghai Jiao Tong University’s annual Academic Ranking of World Universities, 16 of the top 20 institutions are in the US; none is in China.   But China is investing heavily in research and development, and it is already competing with the US in key fields, not least artificial intelligence, where it aims to be the global leader by 2030. Some experts believe that China is well placed to achieve that goal, owing to its enormous data resources, a lack of privacy restraints on how that data is used, and the fact that advances in machine learning will require trained engineers more than cutting-edge scientists. Given the importance of machine learning as a general-purpose technology that affects many other domains, China’s gains in AI are of particular significance.   That deep economic interdependence is what makes the US relationship with China different from its relationship with the Soviet Union during the Cold War. With the Soviets, the US was playing a one-dimensional chess game in which the two sides were highly interdependent in the military sphere but not in economic or transnational relations.  With China, by contrast, the US is playing three-dimensional chess with vastly different distributions of power at the military, economic and transnational levels. If we ignore the power relations on the economic or transnational boards, not to mention the vertical interactions between the boards, we will suffer. A good China strategy therefore must avoid military determinism and encompass all three dimensions of interdependence. Finally, a successful US response to China’s technological challenge will depend upon improvements at home as much as on external actions. Increased support for research and development is important. Complacency is always a danger, but so, too, is lack of confidence or an overreaction driven by exaggerated fears. As former Massachusetts Institute of Technology provost John Deutch contends, if the US attains its potential improvements in innovation, ‘China’s great leap forward will likely at best be a few steps toward closing the innovation leadership gap that the United States currently enjoys.’   With enough time and travel, technology inevitably spreads. If the US lets its fears about tech leakage shut it off from such valuable human imports, it will surrender one of its biggest advantages. An overly restrictive immigration policy could severely curtail technological innovation—a fact that must not get lost in the heated politics of strategic competition.

Why War With Taiwan Would Be a Huge Gamble for China’s Xi
Deaths, economic sanctions and possible defeat are all deterrents.  For all the talk of Chinese President Xi Jinping’s desire to invade Taiwan, one counterpoint is often overlooked: The domestic risks involved in starting a potentially devastating war.    China is now enjoying the fruits of more than four decades of peace, which have turned the economy from an agricultural backwater into one of the world’s primary growth engines. Many ordinary citizens like Beijing resident Joanna, who asked to be identified by her English name due to fears over speaking about Taiwan, are worried a military conflict would erase that prosperity and lead to a rise in poverty.

2022 Beijing Winter Olympics: China criticises US diplomatic boycott
China has condemned a planned US diplomatic boycott of the 2022 Winter Olympics in Beijing and threatened to retaliate.

3 Unexpected Luxury Growth Categories Coming to China
Despite a gloomy global economy, China’s luxury market continues to break new ground. Here are three luxury categories with massive development potential.  Fragrances will help define the tastes of the next generation of luxury consumers, and key market players are investing in them well beyond traditional distribution strategies. Ikea has helped bring affordable design into the homes of modern Chinese consumers through its 37 stores and online Tmall store, but there is still scope for significant growth as it is well behind its coverage of Germany and the US.   The 2022 Beijing Winter Olympics could create a new and vibrant market category in China surrounding winter sports, thanks to a massive investment in infrastructure and a heightened awareness of outdoor sports.

Top 5 Cross-Border Retail Trends to Watch That Are Captivating Chinese Consumers
As consumers in China unpack their bargains from a shopping splurge during Black Friday and Cyber Monday, we dug into insights gleaned from across the digital ecosystem to uncover key shopping trends that are on the rise.  What we found may surprise and spanned emerging trends from snacks for pampered pooches to a new wave of scalp-care products. Sales festivals such as Black Friday and 11.11 have grown in importance this year in the world’s largest consumption market as Chinese consumers are still unable to shop overseas due to the coronavirus pandemic. They are turning in droves to e-commerce platforms instead. We trawled through the data and insights gleaned during retail’s busiest season: Here is what we learned. No. 5 The ‘Fur Baby’ Boom  No. 4 Healthy Snacking  No. 3 Haircare is the New Skincare   No. 2 Ingredient-based Beauty    No. 1 Vintage in Vogue

China Built the World’s Largest Antenna. And It Uses Earth as a Gigantic Radio Station?
And no one knows where it’s based. China has been slowly but steadily working its way to the top. Frequently making headlines with its space-related developments, the country now claims to be operating the world’s largest antenna for its submarine operations. What’s special about the antenna is the fact that it was designed to maintain underwater communications over 1,900 miles (3,000 km), enough to reach Guam, the biggest U.S. military base in the western Pacific Ocean, according to the project’s lead engineer Zha Ming and his colleagues from the Wuhan Maritime Communication Research Institute, reports South China Morning Post.

Alain Gillard
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