Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – February 15, 2022

China, Belgium to continue expanding mutual openness
Belgium and China celebrated 50 years of diplomatic relations in 2021. Belgium was one of the first Western countries to cooperate with China, and Belgian companies have been contributing to China”s development in their own ways, helping it develop from being a largely agricultural society into the second-largest economy in the world, with a huge consumer market.  As a result of these investments and joint cooperation, trade relations between Belgium and China have grown tremendously as well, and China is currently Belgium’s sixth-largest trading partner, making up about 4.1 percent of Belgium’s trade. Belgium is China’s sixth-largest trading partner in the European Union, and trade between Belgium and China has grown 16.4 percent over the past 10 years.

Forecasts 2022: China alone at home and decoupling?
2022 is likely to see China turning inward and geopolitical tensions increasing, putting pressure on the global economy, says MERICS Senior Analyst Roderick Kefferpütz, following analysis of China forecasts from a number of key sources.

China’s local governments, hit by property market slowdown, court foreign investment to steady growth
In recent weeks, a number of local governments have released investment plans worth billions of dollars to help steady economic growth     Many are hoping to make up a shortfall in property spending with investment in manufacturing, especially advanced technology

Recent China-Hong Kong Inbound and Outbound Investments into Asia
Preparations for RCEP are well underway as China and Hong Kong make strategic acquisitions and investments.

US inflation and interest rates: why the Fed needs help from China
Since the inflationary pressure on the US is partly a consequence of supply chain dislocations, fast and hard rate hikes won’t be enough if Chinese production does not get back into top gear   Such considerations are why investors expecting the US dollar to strengthen against the yuan may be disappointed  In part, the inflationary pressure the US is presently experiencing is a direct consequence of decades of US offshoring of production to China, production that has been materially disrupted by Beijing’s zero-Covid policy.   Pandemic-related disruption to manufacturing in China has resulted in global supply chain problems and exerted upward pressure on prices worldwide. After all, as Bank of Japan board member Toyoaki Nakamura said recently, “China’s economy is the world’s market and factory.”  From this perspective, the best thing for the Fed would be for the Chinese economy to get back into top gear. If not, presumably, a succession of US rate hikes will only realistically influence that segment of higher US inflation unrelated to global supply chain dislocations.  In this scenario, moving hard and fast might make good sense to the Fed in its attempt to curb US inflation, but it’s not necessarily a winning formula. Unless global supply chains normalise, it could end up negatively impacting US economic growth prospects and ultimately it may not enhance the allure of the greenback. Fortunately for the Federal Reserve, help could be at hand from a Chinese economy that may be stirring. New bank lending in China in January rose 11.5 per cent year on year in January to 3.98 trillion yuan (US$626 billion), more than three times the December figure of 1.13 trillion yuan, data released by the PBOC last week showed. As Iris Pang, chief economist for Greater China at Dutch bank ING, pointed out: “Most of the loan growth came from corporate longer-term loans.” Even allowing for the fact that Chinese banks tend to book loans at the beginning of the year, “this year’s jump is significant even on a year-on-year basis”. Supportive PBOC monetary policy combined with buoyant new bank lending may prove to be the boost the Chinese economy needs, zero-Covid policy or not. That might anyway lead investors to see renewed value in renminbi-denominated investments, but it could also prompt a market re-evaluation of how far the US central bank will need to tighten, given that, if Chinese production cranks up, that should ease the very global supply chain problems which have helped drive the higher US inflation readings that are now so vexing the Fed.The Fed is set to start hiking rates, while the PBOC certainly is not, but against the backdrop of a global pandemic, that doesn’t automatically translate into material US dollar gains against the yuan.

China’s PBoC kept one interest rate unchanged but there is another one coming
China’s central bank, the PBoC, kept the 1Y Medium-Term Lending Facility (1Y MLF) interest rate unchanged today. We don’t have to hold our breath for long until Feb 20th when the Loan Prime Rate will be announced.

podcast : Beijing tech crackdown: China’s new data rules come into effect
From Alibaba being slapped with a record fine to Tencent’s suspension from rolling out new apps, Beijing’s crackdown on the technology industry has been considerable and it’s expected to continue for years to come.  Now, new rules require companies with more than one million users’ data to undergo a review before listing overseas.

China’s SMIC sees a strong domestic demand despite chip shortages, US sanctions
Despite SMIC being a US trade blacklist, and facing chip shortages, it still reported record revenue and a surge in profit for 2021. The company plans to spend US$5 billion for three new plants in Beijing, Shanghai and Shenzhen.  SMIC is confident that domestic demand will insulate it from any global shocks.

Banks haven’t quit coal. Study says commercial lenders have channeled $1.5 trillion to the industry since 2019
Financial institutions from just six countries — the U.S., China, Japan, India, Canada and the U.K. — were found to be responsible for over 80% of coal financing and investment between January 2019 and November last year.   Coal is the most carbon-intensive fossil fuel in terms of emissions and therefore the most critical target for replacement in the transition to renewable alternatives.  Yet, even as policymakers and business leaders repeatedly tout their commitment to the so-called “energy transition,” the world’s fossil fuel dependency remains on track to get even worse.

Cross-border e-commerce pilot zones forge a promising future for China’s foreign trade
Last week, China”s State Council issued a statement, approving the establishment of more cross-border e-commerce pilot zones in 27 cities and regions, including Erdos in Inner Mongolia and Yangzhou city in Jiangsu province.   This now brings the overall tally of pilot zones to 132, covering almost all provincial-level regions in China from coastal industrial powerhouses such as Jiangsu, Zhejiang and Guangdong to inland areas.  According to official data, cross-border e-commerce volume soared tenfold over the past five years.  In 2021 alone, China’s cross-border e-commerce imports and exports climbed 15 percent year-on-year to 1.98 trillion yuan ($311 billion), with related pilot zones playing a significant role in spurring the growth. China began setting up cross-border e-commerce pilot zones as early as 2015 in Hangzhou, Zhejiang province, in a bid to trial the new business form and digitalize its trade channels. In these pilot zones, local governments provide a variety of trade services ranging from logistics, payment, law, taxation and customs clearance to facilitate enterprises’ cross-border e-commerce businesses.

China’s digital yuan is not death knell for Alipay and WeChat Pay
China’s digital payment market is big enough for the e-CNY, Alipay and WeChat Pay to survive and thrive alongside one another   The digital currency will benefit from more visibility while payment platforms will benefit from the additional payment flows generated  E-commerce operators rely on the platform’s buyer analytics to sell their products. No one can beat the payment platforms’ sophisticated marketing tools for getting product in front of shoppers. Giving up on these services would be to their detriment. Rather than see the e-CNY and payment platforms as being locked in a life-or-death struggle where only one will survive, it is essential to understand that the market for digital payment in China is massive and will only expand with the introduction of the e-CNY.    How Chinese consumers ultimately decide to make their mobile payments will depend on perceived benefits. Some will choose to pay with e-CNY for its low cost and its highly touted advantages in privacy. Others will continue to use the Alipay and WeChat Pay networks because of the services and convenience they provide.   A good comparison can be made with credit cards in the West, where one’s choice of which card to use depends on its perceived advantages with mileage points, cash back or other features. The West’s experience with credit cards also teaches us that one card isn’t going to eliminate the others. The market is big enough for all to coexist harmoniously. Likewise, the digital yuan, Alipay and WeChat will live in symbiosis on the phones of China’s consumers. China’s digital payment market is big enough to support them all and growing even bigger.

Tesla’s China-made vehicle sales reach almost 60,000 in January
Electric vehicle manufacturer Tesla sold almost 60,000 vehicles that were built in China last month, reports Reuters. The China Passenger Car Association (CPCA) said on Monday that US-based Tesla sold 59,845 China-made units in January. Tesla, which is making Model 3 sedans and Model Y sport-utility vehicles in Shanghai, sold 70,847 China-made vehicles in December. Chinese EV makers Nio Inc delivered 9,652 cars in January, increasing by 33.6% year-on-year, and Xpeng Inc delivered 12,922 vehicles.   CPCA said passenger car sales in January in China totaled 2.11 million, down 4.5% from a year earlie

China tech firm develops controversial IT system that can predict whether an employee is about to resign
A user of professional networking app Maimai said he was fired after his company found out he had been applying for other jobs, using the system  The system, built by Sangfor Technologies, analyses the resignation intentions of employees by looking at their online activities

podcast : Could China replace Europe as Russia’s key trading partner?
Germany is counting on the threat of economic sanctions to avoid conflict between Russia and Ukraine. However, Russian President Vladimir Putin is putting his hopes on China.

As Drought Worsens, Guangdong to Face ‘Severe’ Water Shortages
Rivers in the southern province have received 70% less rain since last fall.

Virtual real estate to have profound consequences for real world property. Here’s how
The idea of owning virtual property is enticing for a generation of prospective buyers raised on Minecraft and cryptocurrency   Hong Kong property tycoon Adrian Cheng Chi-kong and alternative investing firm Sun Hung Kai and Company have been snapping up virtual land

Tesla battery supplier CATL downplays business risks of US sanctions in meeting
The founder of CATL says Chinese foundries are capable of producing alternative chips for the company   The EV-battery maker denied rumours that it was seeking professional advice on the possibility of being subject to US sanctions

Shaun Lim: Chinese Tech Firms Gradually Move Toward Domestic Replacement With Designed-in-China Chips
The semiconductor supply chain from chip design, to manufacturing, testing & packaging, is very long and complicated. The previous world order, built up over the past several decades, was driven by internationalization. Corporations run different aspects of their businesses in different countries or parts of the world depending on their needs (e.g. proximity to supply chain, availability of talent pool, labor cost considerations, etc.) – resulting in different ecosystems being built up based on each region/country’s competitive advantages (e.g. chip design in North America, equipment design in Europe, manufacturing and testing in Asia) which maximizes efficiency. But over the last few years, as geopolitics-related considerations intensify, there is an increased focus on regionalization, localization and self-reliance. In this effort, certain segment like chip design, where human resources are able to flow relatively freely, will be easier. China has a huge labor force with lots of smart people and semiconductor veterans who previously worked at internationally leading companies. Given the strategic importance of the sector to the country, government support is also strong which in turns drives capital into the sector, leading to a boom of entrepreneurial initiatives.  In addition, we are seeing massive demand for products in China. China will be the largest market for deep tech applications (e.g. artificial intelligence, IoT, robotics), which in turn drives the demand for semiconductor. Geopolitical considerations will also drive Chinese companies to seek made-in-China proprietary solutions and products. The strong market potential in turn attracts investors, and the massive capital inflow has driven up valuations in the sector.

Brands Court Chinese Consumers in the Metaverse with Array of Limited Editions For Valentine’s Day on Alibaba’s Tmall
Yves Saint Laurent launches limited-edition gift boxes for Valentine’s Day on Tmall. Photo credit: Alibaba Group   Love went virtual this year, with many fashion and beauty brands launching a slew of digital limited-editions for Valentine’s Day on Alibaba Group’s online marketplace Tmall. British luxury fashion brand Burberry offered romantics 100 units of digital pieces inspired by its popular deer mascot. Swiss luxury watch brand Piaget is selling 35 digital collectibles featuring its tiger-themed wristwatch.   For lovers demanding a more tangible token of affection, Tom Ford debuted its latest rose-based fragrance, Rose De Chine, featuring a Chinese golden peony. A limited-edition lipstick from Hermès, in its signature Rouge Grenat dark red shade, is trending on Tmall.

Understanding China’s latest guidelines for greening the Belt and Road
Only six months after the last guidelines, a new release gives more robust direction on greening China’s overseas projects, with focus on pollution, climate and biodiversity

Taiwan joins WTO case against China over Lithuania
Taiwan has joined the United States and Australia in backing a European Union trade case against China at the World Trade Organization over Beijing’s alleged trade curbs on Lithuania, its foreign ministry said on Tuesday (15 February).

As the Russia-Ukraine crisis unfolds, China and Taiwan are watching
Global attention is focused on Russia and whether President Vladimir Putin will order an invasion of Ukraine.   Russia has massed 100,000 troops at various points along its border with Ukraine.  Until earlier this month, China had been mostly silent as tensions have risen between NATO and Russia.

Ukraine in China-Russia Relations
If we interpret the China-Russia joint statement literally (that their relationship will not be “affected by the changing international environment and circumstantial changes in third countries”), China is likely to maintain its ties and engagements with Russia if conflict erupts. This means that China would not heed international calls to sanction or punish Russia. Beijing could try to make the case that its relationship with Russia should be based on China-Russia dynamics and not how Russia deals with a third country. If Beijing assesses that the United States or NATO was at fault for starting the conflict, China could even provide more support to Russia. A business-as-usual PRC response, however, would be viewed by the international community as supporting Russia. It could undermine PRC efforts to position itself as a global leader and norm setter. It also risks inviting U.S. and Western sanctions on China for supporting Russia, though Beijing might assess that the United States may be wary of pushing China even closer to Russia. China needs Russia as a strong and staunch friend. The two have shared core threat assessments: fears of military “encirclement” led by the United States; a deep suspicion that the United States seeks to undermine their political systems and promote “color revolutions”; and concerns that the United States and its allies and partners are using economic sanctions, technological decoupling, and other means to undermine both countries’ development. Given Xi’s calls for the PLA to prepare for the worst and be prepared to fight wars, he cannot discount the possibility that China might find itself in a situation similar to Russia in the future – having to use military force against a neighbor that is backed by the United States and an international coalition. This could be over Taiwan, the Senkakus, the Spratlys, or along the China-India border. In these scenarios, Russian support would be critical for helping China weather international political and economic sanctions. For there to be any possibility of future Russian support, Xi would have to be willing to support Russia now in the event of a conflict over Ukraine.

New Zealand to lower barriers to Chinese investment under upgraded trade deal
The two nations have updated their free-trade agreement, as China seeks more such deals and New Zealand competes for share of Chinese market     It is expected to attract more Chinese investment into New Zealand, while China has pledged to open up several of its sectors

What a 19-Year Old Study Tells Us About China’s J-20
A study from 2003 – now available in exclusive English translation – contains important insights on China’s fifth-generation (and beyond) fighter development.  Rapid prototyping and digital design technologies may yield shorter development cycles for new aircraft in development, including sixth-generation fighters. However, it is very likely that an equivalent paper similar to the Strategic Study would have been written and distributed in the last few years for the sixth-generation fighter project. Pre-research and development are likely to have already been underway for some time, and this has been stated by industry figures as well. There is evidence of research for planforms with possible applications for sixth-generation fighters in recent years, and studies into multiple high-speed tailless flying wing configurations have been identified, as well as a mysterious full sized tailless flying wing airframe visualized at Chengdu Aircraft Corporation. These are likely only part of the small, publicly identified crumbs that bear relevance to the PLA’s sixth-generation effort, but the lessons from the Strategic Study should demonstrate that when the sixth-generation fighter emerges, it will have resulted from a similarly long cycle of academic assessment, pre-research, and developmental work.

China’s snake-like robot designed to move or manipulate a large object in space, according to paper
Researchers say their serpentine attachment – with each segment an independent robot – can get into tight corners for in-orbit repairs     The robotic tentacle could crush a small satellite like ‘a python strangles its prey’ but that China does not plan to use it as a weapon, says observer

The universities and disciplines China aims to turn into world-beaters
Plan from education and finance ministries lists 147 universities and 331 disciplines intended to reach ‘first-class’ standard  The aim is for more Chinese institutions and specialisms to rank among the world’s best by 2030, and the country to be a global education power by 2035

China’s population crisis could give women greater reproductive rights, but hurdles remain
Statement from China’s top health authority about revising rules and standards on assisted reproductive technology has become widely circulated and debated   Some say institutional changes to controversial policies are long overdue, as China looks to adapt to the reproductive needs and rights of its people   The nation’s family-planning policies have somewhat vacillated in the past and took a pronatalist turn in 2016 as Beijing eased its strict one-child policy – in effect for 36 years – to tackle sinking birth rates that have only continued to decline. Birth restrictions were further relaxed last year as China allowed couples to have up to three children. The revised law included support measures to encourage people to have bigger families, including financial, tax, insurance, education, housing and employment measures. Chinese authorities at all levels of government have since been casting about for ways to encourage women to have more children to counter the falling birth rate.
Against this backdrop, the provincial health commission of Hunan said in August that it would recommend legalising egg-freezing and egg donations to the National Health Commission. “Allowing single women to freeze their eggs with conditions is a practical demand,” the provincial health authority said. “Suggesting that women freeze the eggs first, and thaw them later with a legal birth certificate, is a feasible solution.”  The topic of surrogacy, and the ethical issues surrounding it, also arose last year as actress Zheng Shuang set off a furore when people learned that she had two surrogate children in the United States with her former boyfriend and had abandoned them after an acrimonious break-up.  And just last month, it was revealed that a 33-year-old Shandong-based businesswoman in eastern China, Li Xueke, had gone to Thailand four years ago and gave birth to triplets through in vitro fertilisation. The news quickly went viral. Unlike the United States and Europe, where extramarital births account for about 40 per cent of the total, there is no official Chinese data on the birth rate among unwed women. Whether that changes as China aggressively moves to boost its birth rate remains to be seen, but for now, Xu and countless others are eager to see real progress to protect their reproductive rights. “I still don’t have an urgent need to become a mom, but the need to freeze my eggs is getting more and more pressing, because they are getting older,” Xu said. “If it’s completely hopeless to free my eggs at home, I will consider saving money to do it abroad. But this is not the best outcome. I still want to insist on my lawsuit and freeze my eggs at this hospital [in Beijing].”

Chinese rocket’s moon crash won’t be dangerous but raises questions, experts say
Moon can withstand far bigger impacts, according to astronomers, but the object’s misidentification as SpaceX rocket shows the challenge of tracking space junk   The crash will add to the debris in orbit, responsibility for which should be borne by spacefaring nations, Hong Kong expert says

I lost faith in the U.S. and China. Then the Chinese internet saved me
 “I hope we can all have the courage to face and criticize ourselves, to understand others and have the goodwill to place ourselves in their shoes.”  “As a Chinese working for an American company in Japan, I hope all the time that we can throw away politics and differences and stop criticizing others. If we try to understand each other we’ll find that people really have more in common than not. If an alien saw us from outer space, they might not be able to understand why, actually, we are criticizing and fighting each other.”  “As a Chinese in America I really hope the relationship between our two countries can be friendly, but the environment in front of my eyes has turned so bad that I truly feel powerless.”   “I also believe love is the answer to solve all problems

Alain Gillard
Information Officer
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