Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – December 9, 2021

China’s 20th anniversary as a WTO member triggers mixed emotions
Rich countries have a pretty standard narrative about China’s membership of the World Trade Organization, which goes like this. It joined in December 2001 following a decade of enthusiasm about the irresistible march of globalisation. The assumption was that the arc of Chinese development was long but that it bent towards capitalism. China’s status under WTO rules as a “non-market economy” was even given a pre-determined expiry date. That turned out to be wrong. Reformers such as Zhu Rongji, Chinese premier from 1998 to 2003, were supplanted by aggressive economic nationalists. True, Beijing actually has a fairly good record of complying with the letter of WTO dispute settlement rulings, having for example dismantled state support to its wind turbine industry. It has joined the multi-party interim appeal arrangement, the workaround institution that various countries set up after the US put the WTO appellate body into the deep freeze.   But the gaps in the WTO rule book, which was designed for market economies, have become all too obvious. The subsidies disciplines leave a lot of the huge range of Chinese trade-distorting government interventions uncovered. Attempts to bring more of the companies and agencies of state under them have been foiled by the unhelpful definition of a “public body” set down by the WTO’s dispute settlement system.

China in the WTO – 20 happy years and (at least) one unfulfilled promise
Beijing has lived up to many of its accession commitments, but forced technology transfer lives on, says Jacob Gunter. Tackling market-access restrictions is the only way to remedy this.  China will celebrate 20 years of World Trade Organization (WTO) membership on December 11. It has lived up to many accession commitments, but has failed to fulfill some critical promises. Among the most glaring is the failure to end compelled technology transfer from foreign to domestic companies. The practice has cost foreign players billions and seen Chinese rivals leapfrog ahead in some industries – and nothing will change until the problem is seen as part of China’s market-access regime, not as an administrative or legal one.   Two attempts to resolve the issue using the latter means did little in the last two years. China’s Foreign Investment Law came into force at the start of 2020 with provisions that, at least on paper, sought to end forced technology transfer. Article 22 forbids, “administrative bodies from using administrative means to force technology transfer.”

As China-EU ties regress, Brussels’ envoy asks: are we back in the Mao era?
Nicolas Chapuis picks up on the phrase ‘evil spirits and ghosts’, used by Communist Party mouthpiece about challenges to China’s development      He compares the hostile tone to ‘niugui sheshen’, a phrase made popular by Mao Zedong, notably during the Cultural Revolution

US-China tech war: China to overtake America in core 21st century technologies within next decade, Harvard report predicts
China is poised to gain on the US in the fields of AI, 5G, quantum information science, semiconductors, biotechnology and green energy      In some areas, China is already leading the US, according to a report from the Harvard Kennedy School

US dollar-yuan exchange rate: China ups forex deposit reserve requirement ratio in bid to curb currency rally
The People’s Bank of China (PBOC) will raise the reserve requirement ratio for banks from 7 per cent to 9 per cent effective from Wednesday next week     The offshore yuan weakened following the announcement, dropping by as many as 200 basis points to 6.3680 against the US dollar

Supply chain disruptions may ease in the second half of 2022, insurer says
Renewed virus outbreaks, China’s zero-Covid policy and expected trade volatility during the Lunar New Year may continue to stress supply chains for now, trade credit insurer Euler Hermes said in a new report on Thursday.   However, three factors could start to normalize trade in the second half of 2022: cooling consumer demand, healthy inventory levels and increased shipping capacity.

China inflation: consumer price growth accelerates due to rising food costs, but factory-gate prices ‘level off’
China’s official consumer price index (CPI) rose by 2.3 per cent in November from a year earlier, up from 1.5 per cent in October   China’s producer price index (PPI) rose by 12.9 per cent in November from 13.5 per cent in October

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

China’s Evergrande defaults on dollar debt
Fitch Ratings cuts property giant’s long-term foreign currency issuer default rating to restricted default.

Evergrande rated ‘default’ by Fitch after missed payment
Neither company nor government has confirmed that Evergrande has defaulted     Fitch has become the first rating agency to declare that China Evergrande’s overseas bonds are in default after the world’s most indebted developer failed to make a crucial interest payment this week.

Climate change: China’s NDRC outlines peak-emissions strategy for data centres, 5G networks to support net-zero goals
China will relocate non real-time data centres from eastern to Western regions to utilise abundant supply of wind and solar energy therePlan comes with a warning to local governments to prevent unchecked developments and detrimental practices in land, finance and tax matters

Alibaba’s Jiang Fan moves back into the limelight with mission to win hundreds of millions of new consumers overseas
Former Taobao and Tmall president reassigned to lead Alibaba’s new International Digital Commerce unit, which includes AliExpress and Lazada  Appointment is part of a major management reshuffle at Alibaba and follows an 87 per cent plunge in September quarter net income amid new business investments   On the surface, Jiang’s new role serves as another demotion. In the September quarter, sales at Alibaba’s international e-commerce operations only accounted for 7.5 per cent of the company’s total revenue in that period.  But the relatively low customer base at Alibaba’s international retail operations presents an opportunity for Jiang to redeem himself and prove his value to the company, which paid a record 18.2 billion yuan fine in April to conclude the government’s antitrust investigation of the firm.  Jiang is widely considered as instrumental in shoring up the lead of Alibaba’s Chinese online retail platforms in the world’s biggest e-commerce market against rivals like and Pinduoduo.  Meanwhile, Alibaba’s China Digital Commerce unit – which includes the Taobao and Tmall businesses that Jiang used to oversee – will now be led by Trudy Dai Shan, one of the company’s founding members and a partner, according to an internal letter published on Monday.  Dai, who has worked across multiple business segments in Alibaba, is known inside the company as Su Quan, one of the most powerful female martial artists in novelist Louis Cha Leung-yung’s kung fu masterpiece The Deer and the Cauldron.

Alibaba, Farfetch, and Lauder: China’s Still Good to Some — But Not All
In the beauty and online retailing spaces, Alibaba, Farfetch, and Estée Lauder all saw high double-digit growth in the quarter ending in September — and not all of it was compared to weak 2020 earnings either. While it looks like Asia’s star faded a little based on growth, China remains a guiding light in the run-up to the holidays and beyond.

Alibaba ends a ‘cautious’ year overshadowed by antitrust probe by doubling stake in tour agency
At 4.41 yuan per share, the price is half what Alibaba paid for its initial 5 per cent stake in Shenzhen-listed UTour Group in September last year   In the first seven months, Alibaba invested 20.8 billion yuan in 22 deals, compared with Tencent Holdings’ 163 deals worth a combined 93.1 billion yuan in the first half

TikTok jumps on online shopping bandwagon
TikTok is now producing its first live shopping and entertainment event on Wednesday where people can buy products directly on the platform, tapping into the rise of “social shopping”.

Apple’s reported US$275 billion China investment questioned by state media after report of Tim Cook’s lobbying
A report about Apple CEO Tim Cook personally lobbying for favoured treatment in China has been downplayed by state media, which questioned the amount invested    After Cook met with Chinese politicians in 2016, Apple invested in Didi Chuxing, moved iCloud operations to China, and partnered with Tsinghua University

AI adoption and impact
A majority of survey respondents now say their organizations have adopted AI capabilities, as AI’s impact on both the bottom line and cost saved is growing. Findings from the 2021 survey indicate that AI adoption is continuing its steady rise: 56 percent of all respondents report AI adoption in at least one function, up from 50 percent in 2020. The newest results suggest that AI adoption since last year has increased most at companies headquartered in emerging economies, which includes China, the Middle East and North Africa: 57 percent of respondents report adoption, up from 45 percent in 2020. And across regions, the adoption rate is highest at Indian companies, followed closely by those in Asia–Pacific.

Global investors pile into China’s sovereign bonds in search of returns from the strengthening yuan
Overseas investors bought 87.9 billion yuan of China’s soveriegn bonds last month, more than three times their October purchases, according ChinaBond’s data     Global holdings of Chinese sovereign bonds surged to a record-high of 2.39 trillion yuan   The share of China’s sovereign bonds held by overseas investors rose to 10.9 per cent in November from 10.7 per cent last month, according to Bloomberg calculation. That’s after the bonds were included in FTSE Russell’s flagship index in October, which analysts expect to drive around US$130 billion of inflows across three years.   The ChinaBond data cover the majority of the interbank market, where most government and policy bank notes are traded. More figures will likely be released by the Shanghai Clearing House that will include some credit bonds in the interbank and exchange markets.

China’s New Futuristic Outbound Investment Development Strategy
The Chinese invested Colombo Port City and Electric Air Mobility vehicles are showing the way ahead as the Belt & Road Initiative goes hi-tech.

China Policy Will Test Germany’s Coalition
Germany’s new coalition government has promised to pursue a values-based foreign policy highlighting democracy and human rights and putting less emphasis on the country’s commercial interests, the overriding priority of successive administrations under Angela Merkel. Yet the day before he assumed office as Merkel’s successor, Olaf Scholz showed what a tightrope act this is likely to entail. Scholz took a tough line on Russian threats to Ukraine, Berlin’s most pressing foreign policy issue.

EU threatens China with WTO action as reports of Lithuanian trade blockade escalate
The EU is investigating complaints from Lithuanian exporters that the country was ‘wiped’ from the Chinese customs system     Row sparked by Lithuania’s efforts to strengthen ties with Taiwan, which Beijing considers a breakaway province.

Lithuania braces for Beijing-led corporate boycott as fallout over Taiwan de facto embassy continues
Sources report multinational firms cancelling contracts with Lithuanian suppliers after mainland threats to block access to Chinese market    Lithuanian vice-minister of foreign affairs said mainland authorities were also curtailing exports to Lithuania

China says Australia, Britain, U.S. to pay price for wrong acts
Australia, Britain and the United States will pay a price for their “mistaken acts” after deciding not to send government delegations to February’s Winter Olympics in Beijing, China’s foreign ministry said on Thursday.

China Is Slamming Shut Its Window of Opportunity
Leaders in Beijing have lost the tactical flexibility and risk controls that helped them nurture the country’s rise, and it’s not clear they are capable of changing course.  Tactically, China used to mix toughness and concessions masterfully to de-escalate tensions and divide the West. But Beijing’s toolbox now appears to include hammers only. Its uncompromising stance on human rights, as demonstrated by its retaliation against the European Union after Brussels imposed sanctions on Chinese officials involved in the crackdown in Xinjiang, harms China more than it helps. There’s now little chance China’s investment treaty with the EU will be approved anytime soon.   Chinese leaders have a decision to make. If they feel that they are strong enough to get their way, they might well double down on risky adventures. The report that China is seeking its first military base on Africa’s Atlantic coast, if true, may be an indication of such a fateful choice.

Decarbonising Hong Kong is a moral imperative in climate change fight
Hong Kong has the power plants in place to decarbonise our energy supply and now needs to build replacement capacity or convert them   Nuclear power, natural gas, green hydrogen, offshore wind and large-scale batteries are all pieces in the puzzle of achieving a carbon-free city    Rather than waste it, we can use electrolysers to produce hydrogen and feed it into the pipeline, gradually increasing the ratio of hydrogen and reducing natural gas. If we begin that process now, the ratio will be close to or at 100 per cent hydrogen within 30 years.    Other exciting options are within our grasp. Technology has made offshore wind an increasingly viable technology for Hong Kong. While we are short of land, there is bountiful space in the waters surrounding us. Renewable energy could ultimately supply around 10 per cent of our city’s energy.   We are also drawing on the technology of large-scale batteries. We have installed one at Hong Kong International Airport, another piece of the puzzle as we work towards a carbon-free city where fossil fuels are supplanted by green energy.   Decarbonisation is no longer a distant dream or a lofty aspiration. It is a process that is under way and a destination we can reach on schedule through a combination of technology, cooperation and strategic planning.
More critically, as global temperatures continue to rise and put the lives and futures of whole populations in jeopardy, decarbonisation is a moral imperative to humanity we cannot afford to ignore.

China Wants to Rule the World by Controlling the Rules
The American monopoly on international rule-writing is facing its stiffest challenge since the fall of the Soviet Union    Xi wants to usurp the U.S. role as arbiter of global rights and wrongs, based on an entirely different set of criteria, such as who does and does not support Chinese interests and power. Beijing regularly imposes sanctions of its own on countries it views as a threat to its interests. Australia, for example, has faced severe economic coercion, including effective bans on key exports, for supporting an independent investigation into the origins of the coronavirus pandemic, which Beijing considers an attempt to undermine Communist rule. When Lithuania recently cozied up to Taiwan, Beijing downgraded its diplomatic relations and blocked imports from the country. In the end, the U.S. and China will likely never agree on what the global order should be, and they’re never likely to abide by the other’s rules. Ultimately, neither power can fully enforce its version of the rules, either. To a certain extent, they both prefer it that way. “The big powers don’t want impartial independent adjudication of their behavior under prevailing international norms,” Cohen pointed out. “They want to settle things themselves.”

What role will age limits play at China’s 2022 party congress?
Experts weigh the possibility of the weaponization of retirement norms among top leadership positions at the Chinese Communist Party’s key meeting next year

China population: article demanding Communist Party members have three children goes viral
Opinion piece says members must ‘act on the three-child policy’ to boost China’s low fertility rates    Original article has been removed, but screenshots have been widely circulated on social media

As China Pushes More Births, Mothers Find it Harder to Work
A study finds that having children makes it harder for women to find jobs. Some employers say they don’t want mothers

China in 2022 – a look ahead

Alain Gillard
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