Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – February 23, 2022

Chinese feel imported inflation pressure, from coffee to crude to cosmetics
Price hikes at major coffee chains such as Starbucks and Luckin set off a social media firestorm, illustrating public gripes over inflation as Chinese consumers see own wages fall. Analysts say outcry is an indication that Chinese consumers have turned more sensitive to inflationary pressures in a difficult economic climate. 

China: What to expect from the Two Sessions
The highlight of China’s ‘Two Sessions’ for businesses and economists is the government work report, which is usually published on 5 March. It will give us clues about the main direction of government policies. Here’s what we expect. 

Stability, but for how long? China’s 2022 economic outlook
Chinese officials are pulling out all the stops to ensure growth and stability ahead of the 20th Communist Party Congress in October, where President Xi Jinping intends to solidify his position as he heads into a third term. 

Central SOEs set to help steady economic growth
The steady growth in revenue of centrally administered state-owned enterprises will better help underpin overall economic growth this year, while these enterprises are also expected to do more in terms of research, innovation and keeping prices stable, experts said. The State-owned Assets Supervision and Administration Commission of the State Council said on Feb. 15 that in January, major economic indicators of China’s centrally administered SOEs achieved steady double-digit growth as they have worked actively to keep growth stable and pursue high-quality development. 

China’s middle class worries about the future under Xi Jinping’s ‘common prosperity’ initiative
President Xi Jinping’s strategy to reduce wealth inequality is now the main objective in China’s next stage of development. But heavy-handed regulation coupled with a slowing economy has some middle-class citizens worried about their livelihoods in spite of the tax cuts, government revenue from personal income tax grew by 21 per cent last year from 2020, outpacing economic growth of 8.1 per cent. Middle income earners are the main contributors of personal income tax, which is 45 per cent in the highest bracket. Although China’s high tax rates have been criticised by some economists for discouraging productivity, there is no sign they will be lowered soon. Under common prosperity, China is focused on closing tax loopholes, and has punished celebrities for tax evasion, while encouraging the rich to make public donations. George Magnus, a research associate at Oxford University’s China Centre, said: “I think there could certainly be some proposals to ease the tax burden on the middle class, and tighten it on ‘unreasonable’ incomes, but I doubt we are going to see a significant reform of the tax system. “I feel quite upset that I’ve been working hard to get into the upper class, but now I feel like actually, I’m falling out of the middle class,” Ma said. “With a monthly income of 30,000 yuan, most of it goes to pay the mortgages and the rest needs to support the daily expenses of four people.
“We’ve not been travelling for a long time, and we even have to stop paying the insurance we bought in Hong Kong a few years ago. “I hope there’ll be policies to address my woes.” 

Building a green future in China
At a time when floods, wildfires, and other climate-related disasters have become more frequent and destructive than ever, the global construction industry, which has long been criticized for its carbon emissions, is moving toward a more sustainable future. In China, a government initiative and a growing eco-conscious public are major factors in heralding green buildings. With up to 2 billion square meters constructed annually, China is the largest building construction market in the world, accounting for nearly half of new construction globally in the coming decade. At the same time, China’s 14th Five-Year Plan, formalized by the National People’s Congress (NPC) last year, aims to reduce “emissions intensity” — the amount of CO2 produced per unit of gross domestic product (GDP) — by 18% and sets a 13.5% reduction target for “energy intensity” over the period of 2021 to 2025. Because China’s ongoing urbanization is slated to increase its energy consumption by as much as 40% in the next 15 years, Chinese policymakers have made advancing green building construction and renovation a top priority. According to Xinhua, in 2021, the total floor area of China’s green buildings exceeded 6.6 billion square meters amid the country’s efforts to promote high-quality development in urban and rural areas. 

Exploring European Couture’s Future in China
The last number of years have seen global luxury brands developing new physical and digital approaches to present their haute couture collections in China. In 2019, Dior’s Spring Summer 2020 collection was livestreamed on Huawei PP and in 2020, its first digital haute couture show went live in China with a short movie by the Italian film director Matteo Garrone in July. Plus, coronavirus restrictions have resulted in a continued absence of Chinese representatives during European fashion shows, which has prompted brands to find new communication and localization strategies in the Chinese market. In 2021, Balenciaga presented 30 looks from its 50th Couture Collection and also offered viewings, fittings, and performances for press, clients, and VIPs. 

Fundraising by Chinese private funds dives, slowing economy takes toll
Money raised by newly-launched private funds in China plunged 44% in January from a month earlier, latest official data showed, adding to evidence of rapidly-shrinking risk appetite amid a slowing economy and rising geopolitical tensions. The disclosure by the Asset Management Association of China (AMAC) mirrors a slump in fundraising by Chinese mutual funds, and comes as a growing number of money managers announce fund launch failures, or extend subscription periods. Newly-registered private funds totalled 95.9 billion yuan ($15.16 billion) in January, down 44% month-on-month, according to AMAC. Of the total, fundraising by products that invests in stocks and bonds dropped 49%, while private equity and venture capital fundraising fell 25%, and 17%, respectively, according to the association. 

China back-pedals on plan to ban personal QR codes for business payment receipts after backlash
On Tuesday, the Payment and Clearing Association said merchants can continue to use personal QR codes for business transactions after the March 1 deadline. Alipay and WeChat Pay confirmed individuals can continue to use personal QR codes to receive payments, but both offered the option of upgrading to a business one. 

China Fights Latest Debt Crisis With Firm That Caused Last One
Huarong and peers were told to aid developers, small banks. Investors remain jittery and divided over AMCs’ new mandate. China’s economy is facing multiple risks in 2022, battling a property slump and the ongoing pandemic. The real estate industry will need at least $140 billion to cover maturing bonds, coupons and trust products this year. At banks, outstanding loans to the real estate sector stood at 51.4 trillion yuan as of September, accounting for 27% of the nation’s total lending and more than any other industry. Total non-performing loans climbed to a record 2.85 trillion yuan by the end of December, with city and rural banks showing biggest increases. The central bank labeled 422 financial institutions as high risk entities last year, with most of them being small rural banks. The state of China’s myriad of small, regional lenders has been an ongoing concern since mid-2019, when regulators seized control of a bank in Inner Mongolia — the first such move in two decades — and imposed losses on some creditors. There have been at least 20 mergers involving smaller banks since 2020, and bad-debt managers played a key role by either buying a large amount of bad loans or providing restructuring consulting services. Huarong, Cinda and other bad-debt managers could help cushion banks from the corrosive effects of 126 billion yuan of problem property loans, according to Bloomberg Intelligence estimate. Andrew Collier, managing director of Orient Capital Research Inc. in Hong Kong, said the use of AMCs is another shortcut to backstop the economy without adding to the debt burden of the central government. “The leadership is afraid of an economic downturn but even more concerned about a massive, central government stimulus that would lead to an even worse property bubble whose collapse would call into question the effectiveness of the Communist Party,” he said. 

EU to punish rights abuses in supply chains, with forced labour ban to follow
Bloc will require large companies to ensure their supply chains are free of human rights and environmental abuses, with fines for failing to comply. But the issue of forced labour, particularly complex for firms active in China, is not covered by the EU, which will address it with a separate ban. 

Asia-Pacific markets rise as investors watch deepening Ukraine crisis
New Zealand dollar jumps U.S. President Joe Biden said Tuesday Russia has begun “an invasion” of Ukraine and announced sanctions against Russian banks and the country’s sovereign debt. The S&P 500 declined about 1% overnight stateside and currently sits more than 10% below its Jan. 3 record close. 

Climate Change: Chinese cement makers face carbon capture technology challenges, says partner of industry giant
An undeveloped market for the collected gas means corporate efforts remain at a pilot stage, says president of Calgary-based Delta CleanTech. The cement sector is responsible for 15 per cent of carbon dioxide emissions in China, the world’s largest emitter.

China’s economy is struggling to heal from the self-inflicted wounds of its property market crackdown
Though necessary to combat soaring prices, China’s reining in of the real estate sector has slowed investment growth and weakened the economy. As Beijing seeks to stabilise growth, there is ample room to ease policy without letting developers fall back into their old ways. 

China’s housing market gets lifelines as cities, lenders ease down payment and financing to arrest slump
Lived-in home sales in Shenzhen shrank last year to a 15-year low, according to an industry association; January sales in Guangzhou fell 56 per cent ‘Policy easing may have entered a new phase,’ according to Zhang Zhiwei, chief economist at Pinpoint Asset Management. 

Health sovereignty in the digital age: China shows more urgency
The medical sector is now experiencing a major shift due to the trade and technology war. However, this is not so much due to the developed countries’ awareness of their vulnerability, for basic products and active principles of drugs (mostly coming from China), as to Chinese measures aiming at gaining autonomy from American and European companies, as part of its « Made in China 2025 » objectives. This policy has already helped transform China’s trade deficit in the medical technology sector from €1.3 billion in 2019 to a surplus of €5.2 billion in 2020, according to a study by the ECIPE institute. This sectoral performance might seem insignificant, as its overall trade surplus culminated at $676 billion last year. In fact, this development has far-reaching consequences. Medical technologies are about to be upended by personal electronics, another focal point of the Chinese economy, from smartphones and smartwatches to the proliferation of modular sensors for widespread medical monitoring. What is at stake today is not a simple matter of trade rebalancing, but rather a race for technological leadership among major powers, faced with the combined effects of aging and deteriorating lifestyles. The Chinese authorities are redefining the market through centralized, monumental orders. From imaging equipment to surgery, resuscitation and medical robotics, this approach aims at lowering prices and favoring its producers. Many pieces of equipment have seen their price cut by more than half, up to 90% in the case of stents. In addition to these orders, the usual toolkit of subsidies, tax incentives and direct financing helps Chinese players to capture the domestic market, rapidly develop their exports to other emerging economies, before challenging developed countries on their own markets, with slashed prices.

Hong Kong announces $21 billion budget to support economy as city battles new Covid wave
 “I have earmarked $20 billion for other potential anti‑epidemic needs. We will provide full support to fight the epidemic should more resources be required,” said Financial Secretary Paul Chan during his budget speech. The semi-autonomous Chinese city is experiencing its fifth wave of coronavirus infections, with daily cases soaring to record highs. Economic measures include consumption vouchers and a 100% reduction in profits tax and salaries tax. 

Sweeteners to ease Covid-19 pain: from vouchers and tax cuts to rent relief – 7 key takeaways from
Financial Secretary Paul Chan’s HK$170 billion budget includes a substantial amount set aside for pandemic relief and public health measures. It also lays out rental protections for small businesses, higher taxes for landlords and more consumption vouchers for everyday residents. 

China to roll out supportive measures for SMEs
Against the backdrop of the pandemic, China will implement more supportive policies to help these enterprises get through operational and financing difficulties, he said. The country will continue to cut taxes and fees for SMEs. China’s total tax and fee cuts last year amounted to nearly 1.1 trillion yuan (about 173.3 billion U.S. dollars), official data showed. “Small and medium-sized enterprises benefited the most from last year’s tax and fee reduction,” Yu said.

ByteDance worker dies after collapsing at gym, again raising 996 discussion on Chinese social media
The employee in his late 20s died after an hour-long workout at a company gym, according to an internal memo from the TikTok owner. No cause of death has been given, but news of tech workers’ deaths has raised public scrutiny of the pressures in the industry.

Shop Taobao, Tmall and JD in English!
If you’re tired of relying on friends to help you buy things online, or if you haven’t yet discovered how amazing online shopping is in China – this one’s for you. has taken Taobao, Tmall and JD – China’s three biggest shopping platforms – put them all together and tailor-made everything for China’s expats. If a product exists, you can find it on Baopals.

China Post puts Starbucks, Costa on notice with coffee shop, could tap vast network to outsell overseas giants
Post provider opened its first coffee shop last week in the coastal city of Xiamen. ‘China Post, which can bank on its staggering number of outlets, has an edge when it comes to building a big coffee chain’. 

How Chinese Beauty Brand Florasis Mixes Tradition And E-Commerce to Win Young Consumers
Chinese cosmetics brand Florasis is attracting younger consumers by combining tradition with modern e-commerce tactics. The digitally native brand’s annual gross merchandise value (GMV) grew to over RMB3 billion ($470 million) between its launch in 2017 and 2020. Florasis is riding a wave of interest in China’s cultural heritage known as Guochao, literally “national tide” in Mandarin. Its ingredients and packaging designs are steeped in local tradition and are a hit among Generation Z and millennial consumers.

China tries to walk tightrope over Ukraine crisis as Beijing looks to balance ties with Russia and concerns over Taiwan
Beijing’s opposition to separatist movements risks being undermined by Vladimir Putin’s recognition of Donetsk and Luhansk as independent republics. One diplomatic analyst said Moscow’s actions were a ‘slap in the face’ for Beijing as it tries to maintain ties with all sides. 

Learning the right lessons from Ukraine for Taiwan
Russia’s intimidation of Ukraine is inviting media commentators to question American strength and credibility. It is fueling speculation about whether Beijing might replicate Moscow’s moves and seek to seize Taiwan by force. Such superficial analysis should not induce public anxiety in Taiwan or command the attention of Taiwan’s leaders. To be sure, there are lessons for Taiwan’s leaders to draw from events in Ukraine, but these are not them.

With some seeing parallels to Ukraine, Taiwan steps up its defenses.
Taiwan’s president, Tsai Ing-wen, on Wednesday ordered the island’s armed forces and security personnel to step up surveillance and strengthen defenses as she sought to reassure those who see, in the Ukraine conflict, echoes of the self-governed territory’s own existential crisis. Ms. Tsai’s instructions were delivered as a growing number of people within and outside the island are drawing parallels between Ukraine and Taiwan, a democratically ruled territory that Beijing claims as its own. 

CCP mouthpiece orders content unfavorable to Russia or pro-Western to be censored
Horizon News, part of CCP-owned Beijing News, leaked its internal directives for reporting on Russia’s invasion of Ukraine in a Weibo post on Tuesday (Feb. 22), revealing it would only publish pro-Kremlin content. The post wrote that any content unfavorable to Russia or pro-Western must be censored, per a Business Insider article. The directive also gave instructions on narrowing the scope of debate on the website — all user comments are to be carefully screened and posted gradually. 

Sea cucumbers feed China’s influence in Sri Lanka
Chinese investment has taken off through its Belt and Road Initiative. China has become one of Sri Lanka’s largest creditors, with at least $3.5bn of outstanding loans, and controls the Hambantota port on its southern coast, near some of the world’s busiest shipping lanes. Critics have accused Chinese loans of pushing Sri Lanka into a debt crisis from which it is struggling to emerge, and Sri Lanka last month asked China to restructure its debts. India has responded with a diplomatic counter offensive, providing about $1bn of assistance and hosting Sri Lanka’s foreign minister this month. P Mathan, head of the nearby Passaiyoor Fishermen Federation, who has organised protests against Chinese investments, said: “As long as I’m president, the Chinese won’t be allowed to come here.” “How can we survive if these people come and take what we need to make a living?” said S Pakeekaran, a 26-year-old prawn fisherman at a protest in Jaffna. “The Indians come with a free hand, rob our fish and go.” While wild sea cucumbers have long been harvested in the area, export-oriented farming has accelerated in the past year. The creatures, which can grow to full size in a matter of months, are shipped to Hong Kong or Singapore and sold on to mainland China, where they are prized for their chewy skin and soft interior. At least 400 more fishermen have applied for permits to set up sea cucumber farms, and the Chinese-owned Gui Lan sea cucumber hatchery is busier than ever. 

The Future of Drones in the Indo-Pacific
Drones are changing the nature of war, but are yet to decisively shift the balance of power in the Indo-Pacific. Drones are a vital part of China’s strategy for winning information and intelligence wars, and China has become one of the world leaders in this sector by introducing a large number of advanced drone systems. According to the Stockholm International Peace Research Institute, China has delivered 220 drones to 16 countries within the last decade. Michael Horowitz noted that armed drone proliferation is inevitable because of Chinese exports. China’s exports have prompted other nations, such as South Korea, Turkey, and Russia, to boost their own efforts in developing indigenous drone capabilities. Chinese drones have been filling the void created by the United States in the global drone market. Although the U.S. exports its drones to 55 countries, its strict regulations on the selling of military drones mean that most customers from Africa and the Middle East have turned to China. The Chinese state-owned company AVIC has been selling drones for use in various battlefields, such as to the UAE for use in Libya’s civil war, to Egypt for targeting Sinai rebels, and to Saudi-led troops in Yemen. Although they are not as capable as the U.S. or Israeli ones, Chinese drones are much cheaper (the MQ-9 Reaper costs $30 million, whereas the Wing Loong II costs $1-2 million). Also, contrary to the United States, China does not pay much attention to how its customers operate these UAVs.  According to Alexander Huang from Tamkang University, UAVs are a cost-effective means of observing huge areas like the South China Sea in a non-hostile situation. However, should it come to a military standoff in the Indo-Pacific region, where countries have more capacity and up-to-date military capabilities compared to already war-torn countries, UCAVs with their current capabilities are still some time away from reshaping the rivalries of the Indo-Pacific region.

The Lesser-Known Border Dispute: China And India
While the world awaits the next steps in the Russian-Ukrainian crisis, there is another border dispute that is not as widely discussed. India and China share a 2,167-mile border, which the two countries have disputed for over 80 years. The two countries went to war over this border in 1962, ending with a standoff that continues to today. Although a tense standoff, both countries claim to be committed to avoiding another war. This dispute is increasingly important given that both countries are emerging superpowers with modern militaries and nuclear weapons. Further, the two countries account for 35 percent of the global population and 21 percent of the global. Furthermore, both countries are vying for dominance in the region and do not want to appear weak. The border dispute provides both countries the opportunity to flaunt their military and economic strengths. This is critical for both countries given India’s relationship with Pakistan and China’s relationship with the West. Chinese media has reported numerous cutting-edge technologies being fielded to the region, including exoskeletons and armed robots. While both technologies provide little tactical value for this situation, the dispute provided an outlet for advertising these technologies. Meanwhile, India is showing that it will not be pushed by China, responding to the border dispute by deploying troops into the region. They have also responded politically by sanctioning numerous Chinese apps and skipping the opening ceremony of the Winter Olympics held in Beijing. The border dispute between India and China is one that is very important, given the role that both countries play in the region and globally. The combination of mistrust, a desire to exude dominance, and an ambiguous border has the potential to eventually lead to a war.  However, in the meantime, India and China will likely maintain the standoff with little resolution.–lesser-known-border-disputechina-and-india/

Avoiding the Red Card: The Challenge of Separating Sports and Politics in China
In recent years, China’s massive market has proven an irresistible lure for Western sporting leagues. China has publicized its desire to dominate the international sports market, particularly through its August 2021 national fitness plan, which calls for promoting fitness and sports among the Chinese citizenry and increasing China’s sports industry to 5 trillion yuan (roughly $758 billion) by 2025. In contrast, the international sports industry stood at roughly $388 billion in 2020, with North America making up 35 percent ($136 billion) and the Asia Pacific making up 30 percent ($116 billion). (It is possible that the figures constituting a sports market may vary between countries.) Such a plan shows the CCP’s desire to make China’s culture healthier through increased sports participation and to drive interest in both sports participation and viewership. The growing interest in sports and the potential magnitude of the Chinese market have become irresistible temptations to prestigious sports organizations and athletes from around the world. 

Podcast: Hong Kong Faces China’s Worst Outbreak
Hong Kong is now dealing with a bigger Covid crisis than the outbreak in Wuhan that heralded the start of the pandemic, throwing into doubt whether China’s Covid Zero playbook of mass testing, isolation and quarantine can stamp it out. Dr. Amesh Adalja, Johns Hopkins Center for Health Security senior scholar, explains how the city got here on Bloomberg Quicktake’s Charge. (Source: Bloomberg)

China population: rust-belt province Heilongjiang unveils plan to halt exodus of residents, boost births
Heilongjiang’s population has plummeted by 16 per cent, or 6.46 million, from a decade ago, according to data from China’s 2020 census. The provincial government has promised to promote Beijing’s three-child policy and launch incentives for couples to have children.

China’s child-rearing costs far outstrip U.S. and Japan: research
Although new policies allow families to have as many as three children, China’s birth rate dropped to 7.52 births per 1,000 people in 2021, the lowest since the National Bureau of Statistics began recording the data in 1949. The sky-high costs of child-rearing have helped prompt a crackdown by Beijing on the private tutoring industry while some regions have been giving couples cash for having a second or third child. Beijing-based YuWa Population Research Institute said in a report published on Tuesday that the average cost of raising a child to the age of 18 in China in 2019 stood at 485,000 yuan ($76,629) for a first child, 6.9 times China’s per capita GDP that year. China ranks second highest among the 13 countries included in the study, behind only South Korea, which has the lowest birth rate in the world. The U.S. figure, based on 2015 data, stood at 4.11 times per capita GDP while Japan’s figure, based on 2010 data stood at 4.26. Child-rearing costs are even higher in China’s major cities, reaching more than 1 million yuan in Shanghai and 969,000 yuan in Beijing. Birth rates in the two cities are even lower than the national average. YuWa warned the declining birth rate would “profoundly affect” China’s economic growth potential, its ability to innovate and its welfare burden. China would need to spend at least 5% of its annual GDP to create incentives for couples to have more children, including education subsidies, preferential mortgage rates, tax breaks, equal paternity and maternity leave, as well as the construction of more childcare centers, it added. 

China to delay retirement ages ‘gradually’ by 2025, after holding firm for seven decades
China’s life expectancy at birth has more than doubled from just 35 years in 1949, and population experts say its long-mandated retirement ages are impractical. State Council decision is latest move by Beijing to cope with a population crisis fuelled by nation’s falling birth rate, rapidly greying population and dwindling workforce. 

China pushes gradual delay in retirement
Some complained that such policies would worsen the competition for employment amongst young job seekers. Others described the scheme as an “exploitation” of young working people, considering China’s toxic work culture with overtime work being the biggest controversy. A postponed retirement means they will have to bear with an intensive workload for longer, which has led to many raising concerns about the health of the working class in the long run. The pushback is also a combined consequence of China’s birth policies. Growing up through the one-child policy, many workers of the young generations are an only-child. But with the implementation of the three-child policy, they are facing the pressure to have children when they come to their childbearing ages, which could impact their roles within the job market on top of increased costs in parenting. Therefore, the new scheme is believed to further the conflict between workers’ careers and family responsibilities.

How China Under Xi Jinping Is Turning Away From the World
The miracle of modern China was built on global connections, a belief that sending young people, companies and future leaders to soak up the outside world was the route from impoverishment to power. Now, emboldened by its transformation, the country is shunning the influences and ideas that nourished its rise. The country’s most dominant leader in decades, Xi Jinping, seems intent on redefining China’s relationship with the world, recasting the meeting of minds and cultures as a zero-sum clash. Education officials are imposing restrictions on English education and requiring that scholars ask permission to attend even virtual international conferences. Regulators have punished Chinese companies for raising money overseas. Mr. Xi has exhorted artists to embrace “cultural confidence” by promoting traditional Chinese literature and art, and has warned against imitating Hollywood.

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