Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – February 22, 2022

New China Guidelines Promote Transfer of Manufacturing to Inland Regions
China’s manufacturing sector is set to move from the developed east coast to the country’s inland regions – that is, the central, western, and northeastern regions – per new government documents.

China plans bigger tax, fee cuts in 2022 to prop up slowing economic growth
Tax fee cuts will be larger in 2022 than last year’s 1.1 trillion yuan (US$173.68 billion) in reductions, said Finance Minister Liu Kun. Planned transfer payments to local governments will help largely offset the impact from tax and fee cuts on local governments’ revenues, he added.

China tells banks, state firms to report exposure to Jack Ma’s Ant Group
The Chinese authorities have told the nation’s biggest state-owned firms and banks to start a fresh round of checks on their financial exposure and other links to Ant Group, renewing scrutiny of billionaire Jack Ma’s financial empire, according to people familiar with the matter. Multiple regulators, including the banking watchdog, recently told institutions under their oversight to closely examine all exposure they had to Ant, its subsidiaries and even its shareholders up till January, said the people. The sources described this as by far the most thorough and wide-ranging look into deals with Ant and said institutions were told that they must report findings back as soon as possible.

Chinese state firms, banks need to report Ant exposure
Authorities in China have ordered the country’s largest state-owned firms and banks to start a new group of checks on their financial exposure and other links to Jack Ma’s Ant Group, increasing scrutiny on the Chinese billionaire’s financial empire, reports Bloomberg. According to people familiar with the matter, multiple regulators, including the banking watchdog, recently told institutions under their oversight to closely examine all exposure they had to Ant, its subsidiaries and even its shareholders up to January. The people described this as by far the most thorough and wide-ranging look into deals with Ant and said institutions were told they must report findings back as soon as possible. It was unclear what triggered the new scrutiny or whether it will lead to any actions or conclusions by regulators, the people said. The National Audit Office is leading the initiative, two of the people said. The China Banking and Insurance Regulatory Commission and the top auditor didn’t immediately respond to requests seeking comment.

China’s Two Traps
When Deng Xiaoping launched China’s strategy of “reform and opening up” in 1978, economists in the West had their doubts. In their view, a vibrant market economy was fundamentally incompatible with China’s authoritarian political system. But many in the East – including Koreans like me, who witnessed the East Asian miracle while living under developmental dictatorship – were hopeful. Now that China is the world’s second-largest economy, it seems clear that our optimism was warranted. But, as China’s economic slowdown suggests, the next phase of its development is rife with challenges. The country risks being ensnared by two traps: the “middle-income trap” (the tendency of fast-growing developing economies to lose momentum once they reach middle-income status) and the Thucydides Trap (when tensions between an insecure incumbent hegemon and a rising power lead to conflict). As I argue in my new book on China, global value chains (GVCs) are a key variable linking these two traps. The middle-income trap is undoubtedly formidable, having ensnared Thailand, Turkey, and Brazil, to name a few examples. It comes about partly because of the difficulty of building sufficient innovation capabilities to enable the economy to shift from low-wage activities to the production of higher value-added goods. Beyond innovation, economic research has identified two other variables that determine whether a country can evade the middle-income trap: the presence of large world-class businesses and the absence of excessive inequality. On the former variable, China is also doing very well. The number of Chinese companies in the Fortune Global 500 soared from 10 in 2000 to 135 in 2021, surpassing America’s 122. Inequality, however, remains a serious problem. China’s Gini coefficient (a common measure of inequality, with zero representing absolute equality and one representing absolute inequality) stands at nearly 0.42, much higher than, say, South Korea (0.30). The top 10 percent of Chinese own more than 40 percent of the country’s pre-tax national income. While these figures put China roughly on par with the United States (US), they do not bode well for avoiding the middle-income trap. That said, China’s government recognizes the country’s inequality problem and has committed to addressing it through the so-called common prosperity campaign. As for the Thucydides Trap, although the US and China are not currently fighting a conventional war, they are locked in a tense competition, not least over GVCs. The US does not want to rely on value chains led by its rising challenger, so it has imposed tariffs and restrictions on Chinese exports and banned many Chinese companies from accessing critical technologies, such as semiconductors. While the US most likely cannot achieve comprehensive economic decoupling from China, it might be able to do so in high-tech sectors, including semiconductors, batteries, and artificial intelligence. This prospect has sent China’s efforts to bolster its innovation capabilities into overdrive. But China’s weak rule of law also carries serious risks, including official corruption, which tends to increase inequality and thus could undermine China’s efforts to avoid the middle-income trap. In South Korea, democratization played a central role in strengthening the rule of law and checking corruption, thereby enabling the country to reach high-income status. Despite the “Beijing consensus,” China has not yet developed a system that can support a similar transition. While China does not have to adopt Western-style liberal democracy, it will need to devise a viable alternative, which might constitute a third trap facing China.

Is China’s lithium quest fuelled by business or politics, and how far will it go to secure ‘white gold’?
South America’s Lithium Triangle contains more than half of the world’s reserves of the critical metal that is used in batteries, and China is looking to carve out a bigger piece of the pie. But the metal’s mining and refinery have been politicised amid rising geopolitical tensions with the West and an ongoing supply-chain crisis

Wave of disruption: China’s crackdowns leave investors confused
Last week China’s biggest food delivery company lost $US26 billion ($36 billion) of market value after China’s authorities ordered it to cut the fees it charges restaurants. Also last week, there were reports that the authorities have directed China’s bad debt managers to help bail out struggling property developers, paying above-market prices for assets if necessary. In effect, the authorities are socialising the profits of the food delivery colossus, Meituan, while socialising some of the losses of their teetering property developers.

Chinese cryptocurrency exchange Huobi plans to re-enter U.S. market, but with asset management focus
Chinese cryptocurrency exchange Huobi is planning to re-enter the U.S. market more than two years after it ceased operations to comply with regulations, co-founder Du Jun, told CNBC.
Several years of tighter crypto regulation in China has given Huobi further impetus to expand into other parts of Asia with Europe and the U.S. next, Du said. A step back into the U.S. market could put Huobi in competition with companies like Coinbase.

Market to China’s Gen Z? The top 5 consumer trends to watch out for in 2022
Ready or not, marketers in China have kick-started a new race of marketing with events including Lunar New Year and the recently-concluded Beijing Winter Olympics being the key dates in the marketing calendar so far. With one marketing season fast moving into another in the new year, what are the priorities that marketers should focus on? The team at Dao Insights has selected 5 key consumer trends in China for 2022 to help brands market with confidence, in a future rife with the uncertainty following a prolonged pandemic and fast-evolving consumer market.

China remains biggest export country for German electrical, digital industry in 2021
remained the biggest export country for Germany”s electrical and digital industry in 2021, the country’s Electro and Digital Industry Association (ZVEI) said on Monday. The industry’s exports to China increased by 7.5 percent to 25.1 billion euros ($28.5 billion) last year, according to ZVEI. The United States ranked second, with exports up 10.2 percent year-on-year at 19.1 billion euros. Total exports by Germany’s electrical and digital industry reached 224.6 billion euros last year, exceeding pre-crisis levels in 2019 by 4.6 percent, according to ZVEI.

China enriches list for cross-border e-commerce retail imports
China will further optimize the list of imported retail goods for cross-border e-commerce starting from March 1, 2022, the Ministry of Finance said. The list will add a total of 29 product categories including ski equipment, tomato juice and golf equipment, according to a statement jointly issued by the ministry and seven other departments. All the items included in the list are in high demand by consumers in recent years, said Gao Lingyun, a researcher with the Chinese Academy of Social Sciences.

Chinese textile group creditors target Lycra
Creditors of Chinese textile and fashion company Shandong Ruyi Technology Group have announced the firm has defaulted on a loan used in the purchase of Lycra Co, the stretchy-fabric company, and that they would be looking to gain control of the US-based Lycra, reports The Wall Street Journal.
The move is the latest financial challenge for Ruyi, the company stitched together by textile magnate Qiu Yafu, who had promised to challenge the likes of LVMH Moët Hennessy Louis Vuitton as a global luxury conglomerate. After a flurry of acquisitions in recent years, Ruyi has retrenched. Some of its creditors have moved to wrest control of brands Ruyi bought. Creditors related to the Lycra deal include Hong Kong-based finance company China Everbright; Lindeman Asia Investment and Lindeman Partners Asset Management, both South Korean private-equity and asset management firms specializing in cross-border deals; and Tor Investment Management, a Hong Kong asset-management firm.

Why China is a better bet for investors, even as US Fed raises interest rates
Given the high US inflation rate, whatever the Fed does in the coming months, the reality is that investors in US Treasuries will be earning a negative real return. With China, however, investors can be sure that fiscal and monetary policy will remain stimulatory to support the economy

Hong Kong’s Hang Seng index leads losses in Asia as tensions between Russia and Ukraine escalate
Shares in Asia-Pacific declined on Tuesday, with Hong Kong leading losses among the region’s major markets. Developments surrounding the Ukraine crisis are likely to continue keeping investors on edge on Tuesday.
Russian President Vladimir Putin ordered forces into two breakaway regions of eastern Ukraine, following a Monday announcement that he would recognize their independence.

Hong Kong IPO issuers forced to accept lower valuations as geopolitical tension, coronavirus fifth wave sap investors’ demand
Surge in Omicron cases and uncertainties linked to threat of a Russian invasion of Ukraine are drying up IPOs in Hong Kong. Proceeds raised in first two months of 2022 down 87 per cent from a year ago, as issuers either postpone plans or trim deal size.

Chinese student says valuable NFT was stolen in phishing scam, revealing a thriving digital token investor community on the mainland
The stolen work, from the popular Doodles collectible NFT project, made up roughly half the value of his entire NFT assets, the student told the Post Last weekend, 17 OpenSea users had NFTs worth a combined US$1.7 million stolen in a separate targeted phishing attack.

China delays new anti-money laundering rules amid privacy worries, pushback from small financial firms
Chinese authorities have postponed introduction of new rules requiring financial institutions tighten due diligence on clients and transactions. Delay comes after small and medium-sized financial institutions asked for more time to revise and improve their internal management systems.

China has pivoted and no one has noticed
The economic effect of these tightening measures has begun to be felt in recent quarters, with the Chinese economy now slowing, and it is highly likely that growth will continue to weaken in the coming quarters as the lagged effects of tightening continue to feed through. As a result, Chinese policymakers pivoted in late 2021. To be specific, in November 2021, the People’s Bank of China’s third-quarter monetary policy deleted three key phrases that were in prior reports: the valve of money supply will be properly controlled refraining from adopting indiscriminate credit stimulus measures maintaining implementing normal monetary policy. The removal of these hawkish statements opened the door for easing in 2022.

China’s trade disputes with Australia, US and Japan push Beijing to alter course and plan accordingly
Experts say geopolitical and trade rifts could persist, but China is also looking to join larger multi-country pacts. Tech-related targets make up a big part of China’s five-year plan through 2025, but it could take years for innovation goals to be realised.

China’s Foreign Minister Wang speaks with U.S. Secretary of State Blinken about Ukraine
China’s Foreign Minister Wang Yi and U.S. Secretary of State Antony Blinken discussed tensions in Ukraine in a phone call Tuesday, according to official statements from both the U.S. and China.
Just hours before the call, Russian President Vladimir Putin ordered troops into two breakaway parts of Ukraine after recognizing their independence.
Putin had met with Chinese President Xi Jinping in Beijing ahead of the Winter Olympic Games in the city.

China ‘concerned’ about Ukraine crisis, resists taking sides despite US pressure
White House confirms US Secretary of State Antony Blinken spoke with China’s Foreign Minister Wang Yi on Tuesday about Russia’s aggression. China’s envoy to the United Nations Zhang Jun called on all sides to show restraint and avoid any action that escalates tensions.

Ukraine crisis: Asia braces for economic fallout
Analysts see both winners and losers from crisis, with China likely to benefit from diversion of Russian exports.

In an Uneven Fight With China, Lithuania’s Brand Becomes Toxic
“Unfortunately, Lithuania has become a toxic label,” he mentioned, lamenting that China’s financial energy has given it irresistible leverage over international provide chains — and because of this, the power to strike wherever these chains intersect along with his tiny Baltic nation or every other nation that causes offense to Beijing. Mindful that overseas clients for laser sensor chips produced by Brolis Group need to keep away from ending up on China’s blacklist, the corporate lately scrapped plans to construct a $50 million manufacturing facility at residence and needs to set it up in Belgium as a substitute. The lopsided struggle between Lithuania, with a inhabitants of underneath three million, and China began final summer season over a consultant workplace that Taiwan, a thriving democracy that Beijing claims as Chinese territory, was opening in Vilnius, the Lithuanian capital.

Beijing berates US for ‘trying to include Taiwan in strategy to contain China’
Containment is the wrong signal to send if relations are to recover, Foreign Minister Wang Yi tells US’ Antony Blinken during telephone talks. Policies have contradicted what Joe Biden promised Xi Jinping during virtual summit, Wang says.

Balancing China in the Indo-Pacific: the role of France and Germany
France and Germany have an opportunity to jointly pursue Europe’s interests in the Indo-Pacific and bolster regional security, argue Mathieu Duchâtel and Roderick Kefferpütz. This article is the first in a series called “A Franco-German approach to China,” published by Institut Montaigne and MERICS.

How Xi Jinping’s Anti-Corruption Crusade Went Global
Xi’s relationship with China’s business elite has long been fraught. The tension, experts say, was crystallised by the private sector’s response to the early years of the corruption crackdown. China’s stock of currency reserves, which reached $4tn in 2014, was a source of national pride and gave the government security against times of turmoil, like the global financial crisis. In the mid 2010s, the level of reserves fell by around one quarter. Victor Shih, a professor of Chinese political economy at the University of California, San Diego, believes the wave of capital flight marked a critical turning point for the powerful leader. “Xi Jinping really began to distrust the financial elite during that period. ‘Losing’ one trillion dollars in the space of one year was a big shock to the leadership. It instilled a long-term distrust of the financial sector,” Shih says. A collection of the highest flyers among China’s corporate elite — those viewed as responsible for overseeing the explosion in outbound investment — felt Xi’s wrath. The reprisals served a clear warning over the future direction of the relationship between the authoritarian CCP leadership and the entrepreneurs and business leaders on whom the country relies for economic growth. One of the most striking examples was the abduction of Xiao Jianhua: the secretive billionaire financier with links to Beijing’s top leaders was snatched from Hong Kong’s Four Seasons Hotel in January 2017 and taken to the mainland. Many of China’s business elites — including tech titans such as Jack Ma, have homes in Hong Kong. Xiao’s case — a Canadian citizen abducted extrajudicially by Chinese agents — was a cautionary tale: no one was safe.

Hollywood relies on China to stay afloat. What does that mean for movies?
The economics have made it something of a no-brainer, because China’s box office has grown as America’s box office has flatlined. … Pre-COVID, around 2008 or 2009, when studios started to wake up to how much money could be made at the Chinese box office, something else very important happened, which is that the DVD market collapsed. And it can be hard to remember this in an era where we’re all streaming, but for many years, DVD sales, because they were so cheap to make and profitable to sell, really kept the lights on at a lot of studios. And so when the DVD market collapsed, studios were scrambling to find a way to make up for that lost revenue when China entered the picture. I think a lot of studio executives, if they were on the line, would say that they censor movies for all kinds of markets. They censor movies for airplanes. It’s a market reality they have to respond to. But what we’ve seen with China over the past decade is a scale of censorship that is unlike anything Hollywood has had to reckon with, and also a playbook of censorship that goes far beyond cutting a scene for a movie before it goes into a certain country. China has made it clear that it wants to censor films that are being made in America and released around the world, not just movies that are being released into their home mark

Hong Kong orders compulsory Covid tests for all its citizens
Hong Kong’s government has ordered the compulsory testing of all of its 7.5 million citizens as the city battles surging coronavirus infections.

Asia’s cautious approach to Omicron
A divide is emerging between how the Asia Pacific region has responded to the Omicron wave of COVID-19, and how North American and Western European countries have responded.
Finally, there is some evidence that the Sinovac and Sinopharm vaccines — which have been used extensively throughout the region — may provide less protection against Omicron than other vaccines. More than 30 countries in Asia initially either bought Sinovac and Sinopharm vaccines or received them as donations as part of China’s.

Alain Gillard
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