Biggest Consumer Trends for China in 2022 and the Foreseeable Future
We look at some of the prominent consumer trends in China and spending patterns among its mid-to high-income groups and highlight sectors with potential for consumption growth. Meanwhile, Chinese brands are themselves making aggressive moves in western markets via online commerce channels and by localizing their brand identities to better reach their target audience.
China relies on “little giants” and foreign partners to plug stubborn technology gaps
Efforts to upgrade the manufacturing sector have produced patchy results, says Alexander Brown. Beijing hopes drawing on Germany’s Mittelstand model will deliver more success. Struggling to develop indigenous high-tech suppliers, China is taking a leaf out of Germany’s economic handbook. So-called little giants – highly specialized companies that dominate niche markets – are meant to emulate Germany’s “hidden champions” and develop the core technologies China is lacking. But whether the country can actually engineer such specialized firms remains uncertain. China could find cooperating with foreign companies and institutions on research and development (R&D) more effective – as long as it can attract willing partners.
US-China tech war: Taipei, Washington on same page when it comes to curbing Beijing’s semiconductor expansion
Taiwan is increasingly aligning its policies with Washington to reshape existing value chains, a process that could limit mainland China’s access to know-how and talent. Analysts say the revised laws plug a loophole but Taiwan government efforts might not be enough, and private firms will need their own strategy to prevent IP leakage.
Global chip shortage may soon turn into an oversupply crisis
Only companies investing in advanced semiconductors will see their margins increase. With the global supply chain increasingly shaken by U.S. sanctions on key Chinese companies, many semiconductor foundries have been caught in the crossfire. After all, China forms 35% of global semiconductor demand even though its companies only produce 6% of global supply. Against such a background, TSMC has announced its plan to further investment in the U.S. and Japan, and potentially Germany and the Czech Republic in the future. In the same vein, electronics contract manufacturing giant Foxconn, which employs more than a million people in China, has just announced its plan to invest in India to produce chips. In the specific case of Taiwan and TSMC, another reason that is often being overlooked for expanding production abroad is the island’s relatively high seismic risk and limited supply of engineers and electricity for the massive investment that many of its semiconductor companies are planning. All in all, chip shortages will ease slightly in 2022 with more production in Asia, but a massive wave of new supply will be on stream in 2023. Given that the bulk of that production will only be for mature node semiconductors, only higher-end chips will face shortages. Of course, another potential bottleneck for the entire industry is the supply of vital rare earths and other raw materials needed to manufacture the semiconductors themselves, which could be in jeopardy as a result of rising geopolitical tensions. Other uncertainties include climate change and the need to meet various emissions targets, which are bound to affect the production of semiconductors as well, and any resulting upward pressure on energy prices. Still, the massive investment in mature node semiconductors does point to a potential bifurcation in the supply of semiconductors, with the least advanced ones experiencing huge supply increases, if geopolitics and rare earths are permitting, while the most advanced chips, which are key for new technologies, will remain scarce. This means that the largest sector of the semiconductor industry may end up saddled with overcapacity. Instead, those producers shifting operations toward the higher end of the market, such as TSMC, will see their margins increase as demand continues to outstrip supply.
Dealing with the dilemma of the Chinese market
Move close and get burned at home, move away and lose traction with 1.4bn people. The Federation of German Industries (BDI), Germany’s leading business group is worried. “China is one of the most important markets worldwide,” said Friedolin Strack, head of the Department of International Markets at BDI, during an interview with Nikkei. “But it is difficult to partner with a powerful nation like China.” He explained that there is too much business in the Chinese market at risk for individual companies to speak out on human rights issues. China is not just targeting businesses and nations. “A fox is now placed in charge of watching the sheep,” said Peter Dahlin, director of the international human rights group Safeguard Defenders, at the annual meeting of Interpol in Turkey on Nov. 25, 2021. Dahlin was angry over the selection of an official from China’s Ministry of Public Security as a member of Interpol’s Executive Committee. Three of the United Nations’ 15 specialized agencies — international organizations deemed of great importance by the body — are led by Chinese nationals, including the International Telecommunication Union. There are concerns that growing Chinese financial contributions to these organizations are changing their policies and operations. The heads of the World Health Organization and the International Olympic Committee have also drawn criticism for being biased toward Beijing. When Australian think tank Lowy Institute recently evaluated the “national power” of 26 countries and regions in the Asia Pacific region in eight areas, China, which placed second overall, saw its score drop for the first time since 2018. The U.S., ranked first, was far ahead in “cultural influence.”
Climate Change: China to slash costs of energy-storage systems for industry to leapfrog the world by 2030, according to five-year plan
The production cost of large chemicals-based energy-storage systems will be cut by 30 per cent by 2025, putting the industry on path to leapfrog the world by 2030. Compressed air energy-storage technology would realise “engineering applications” in units with 100 megawatts of capacity, according to the government’s plan. More than 20 provinces have already announced plans to install energy storage systems over the past year, with the combined capacity of over 40 gigawatts, Daiwa said. Installed capacity may expand to 42.5GW in 2025, soaring to 128GW in 2030, they said. Provincial authorities also required developers of new renewable energy projects to invest in storage systems to take care of at least 10 to 30 per cent of their projects’ needs. If storage system costs reach Beijing’s 30 per cent reduction target, they would become commercially viable without subsidies, at 0.8 to 1.0 yuan per watt-hour, the Daiwa analysts estimated. CICC’s analysts concurred, forecasting an annual return rate of 15.6 per cent for an energy storage system installed at a solar farm if the cost reduction target is reached, according to a clients’ note on Tuesday. Energy storage system installations can be incentivised by expanding the differentials between retail power tariffs during peak and non-peak periods, to help installers recoup their investment, they said.
China sets ‘reasonable’ price range for thermal coal, cites ‘lessons’ from recent power crunches
China has set the benchmark for 5,500 kcal thermal coal at Qinghuangdao Port at 570-770 yuan (US$86.98-US$121.77). Beijing is trying to balance the profits of coal plants and miners after the nation was hit by crippling power outages last year.
Tencent promises to become carbon-neutral across its operations and supply chain by 2030
It is Tencent’s responsibility as a global technology leader to help the world achieve carbon neutrality, Pony Ma says Tech giant to keep use of carbon offsets to a minimum and prioritise active emissions reduction measures.
LG Electronics exits solar panel business on stiff China rivalry
Company turns focus to more profitable EVs and TVs LG Electronics said on Thursday that it will withdraw from its solar panel business, having been priced out of the market by Chinese manufacturers jostling for control. According to Tokyo-based renewable market researcher RTS Corp., Chinese companies control 70% of the global solar panel market. In 2021, Panasonic also said it would exit from the market for the same reason of intensifying competition with Chinese manufacturers. LG Electronics in April also announced that it would terminate its loss-making smartphone business, as part of its rolling back of unprofitable segments. In turn, it is focusing on the more profitable sectors such as electric vehicles. In July, LG established a joint venture with Canadian Magna International, an automobile parts giant, to produce EV drive systems.
Alibaba quarterly revenue grows at slowest pace on record as business in China remains hobbled by tightened regulation, weak consumer spending
The e-commerce giant’s total revenue in the quarter ended December 31 reached US$38.07 billion, which missed analysts’ consensus estimates Net income was down 74 per cent from a year ago to US$3.21 billion, which was below the 60 per cent decline projected by analysts.
Alibaba falls 8% after it reports slowest ever revenue growth and misses expectations
The 10% revenue growth is the slowest quarterly year-on-year growth rate for the company since its 2014 U.S. listing. Alibaba has been facing macroeconomic headwinds and increased competition in China which have weighed on the company’s business. Alibaba shares were down more than 8% in pre-market trade.
Ant Group NFT platform punishes 56 accounts for reselling digital collectibles, exercising caution
Topnod, the NFT platform owned by Alipay owner Ant Group, said the accounts will be prevented from transferring NFT ownership after reselling assets for money Chinese platforms ban the reselling of so-called digital collectibles because of regulatory uncertainty following a cryptocurrency crackdown last year
How Chinese smartphone brand Oppo plans to take on Apple, Samsung at high end of the market
Oppo, the world’s No 4 smartphone vendor, will rely on its Find series to spearhead a push into the lucrative premium sector dominated by Apple and Samsung Oppo’s ambitions for high-end handsets got an extra lift after its merger with OnePlus, the Chinese smartphone brand popular with geeks in the West.
Moody’s downgrades Chinese property developer Shimao as debt troubles drag on
Moody’s on Wednesday cut its rating on Shimao by two notches, to Caa1 from B2, and lowered its outlook to negative, down from “ratings under review.” The ratings agency expects Shimao will find it harder to repay investors in time as contracted sales fall and the developer needs cash to keep projects afloat. Among other negative headlines around real estate developers like Shimao, S&P Global Ratings said last week the auditors for Shimao’s mainland China subsidiary, Hopson Development Holdings, and China Aoyuan Group all resigned in late January.
Bank of America executive to leave Hong Kong as exodus continues
Bank of America, the second-largest US bank by assets, launched a review of its Hong Kong business last month to identify staff who could be relocated to Singapore. The number of moves has not yet been decided but is expected to cover a number of its business units and operations.
China’s yuan ‘trading like a safe haven currency’ as Ukraine crisis roils markets
The yuan is still hovering near a four-year high after Russian leader Vladimir Putin ordered an operation to demilitarise Ukraine. The yuan dropped on news of the attack, but its decline against the US dollar has been more muted than peers.
How should Chinese Companies Deal with U.S.’ Targeted Sanctions?
First, the U.S state apparatus against China in the fields of science, technology and industry is already in continuous operation. Second, the U.S sanctions against China’s science and technology, as well as business sectors are based on expert research, not on decisions made by politicians. Third, with regards to U.S sanctions in the field of science and technology, China needs to make long-term preparations and establish bottom-line thinking. Fourth, in the face of U.S sanctions, China must adhere to open and cooperative reasoning. Insisting on openness and cooperation is not contradictory to the bottom-line thinking of establishing independent innovation.
China must ‘think of strategic bottom line’ in relations with US, expert says
International relations scholar also calls for Beijing to ‘make effective preparations to firmly take the initiative in times of major crisis and challenge’ He was speaking at an event in Shanghai marking the 50th anniversary of Richard Nixon’s visit to China.
The Ukraine crisis is a major challenge for China
The ever-closer diplomatic relationship between Russia and China could be seen at the Winter Games
Hours before Russian President Vladimir Putin announced a military operation in Eastern Ukraine, the US accused Moscow and Beijing of combining to create a “profoundly illiberal” world order.
Why China matters in the Ukraine conflict
Russia’s escalation of tensions in Ukraine has prompted the US and European allies to impose sanctions on some Russian banks and citizens. But China has refrained from following suit. The BBC’s Asia Business Correspondent Mariko Oi explains the scale of its economic ties with both Russia and Ukraine – and how China could help out Russia.
China refuses to call Russian attack on Ukraine an ‘invasion,’ deflects blame to U.S.
China’s Foreign Ministry spokesperson refused to categorize Russia’s attack as an “invasion” during a press conference Thursday. Russian President Vladimir Putin announced an attack on Ukraine earlier in the day, and explosions in Kyiv and other cities in Ukraine followed. Ukraine’s military claimed to be engaged in fighting within its borders, and Ukraine President Volodimyr Zelenskyy described the violence as an invasion to destroy the country. Within hours, leaders from the United States, Germany, the United Kingdom and beyond condemned the Russian attack.
China ready to soften economic blow to Russia from Ukraine sanctions
Beijing has a record of providing economic support to Moscow during Putin’s stand-offs with the west, including in the wake of the Russian annexation of Crimea in early 2014 Russia is by far Beijing’s biggest recipient of loans from official sector institutions, totalling as much as $151bn between 2000 and 2017, according to AidData, an international research lab at the College of William & Mary in Virginia.
That included $86bn of non-concessional and semi-concessional debt from China’s state-owned policy banks and commercial banks — mostly loans collateralised against future receipts from oil exports.
Russia’s Gazprom and China’s CNPC signed a 25-year deal this month on a new gas supply route. Chinese policy banks’ main lending activities are in the “global south”, Jakobowski said. “They have less worry about getting hit for violating US sanctions,” he said. “China will likely again lend money to Russia following the state-to-state sanctions-proof model.” Since the Crimean annexation, Beijing’s ability to soften the blow from sanctions has been strengthened as the two countries have steadily reduced the use of the dollar in their bilateral trade. Sino-Russian economic ties have also firmed with bilateral trade expected to have hit a record $140bn in 2021, reflecting consistent double-digit annual growth. The success of Russian efforts to take the sting out of sanctions by boosting settlements in other currencies is highlighted by a series of recent energy deals with China. These arrangements skirt the dollar-based financial system with loans and credit in renminbi. When Putin met Xi in Beijing this month, Russia’s Gazprom and China’s CNPC signed a 25-year deal on a new gas supply route, the Power of Siberia pipeline, launched in 2019 that is expected to reach full capacity in 2025. And Rosneft, Russia’s top crude producer and its top oil exporter to China, accounting for 7 per cent of the country’s total annual demand, agreed with CNPC to supply 100mn tonnes of oil to China through Kazakhstan over 10 years. Russia and China are also working on a third gas pipeline project to run via Mongolia. Some analysts said a deal could be signed by the end of this year.
As Ukraine crisis deepens, China lifts all wheat-import restrictions on Russia
Agreement reflects deepening ties between Beijing and Moscow while addressing China’s need to enhance food security China could provide a lifeline to Russia’s economy after the United States and its allies imposed swift economic sanctions on Moscow this week.
Ukraine’s crisis between the United States, Russia and China
China is closely following the Ukrainian issue, since, like Russia, it has a difficult relationship with the West, especially with the United States of America. The anti-Chinese issue, which was set by former President Donald Trump, has also been taken up again by current President Joe Biden. In the United States, China and Russia are officially defined as “major challenges” for the White House, which means that pressure on Russia will surely be followed by pressure on China. Moreover, China still has an unresolved problem with Taiwan. Just like Ukraine, Taipei has been receiving ever more US weapons lately. The way in which NATO handles the situation with Ukraine will tell China much about what to expect in case of an escalation around Taiwan or in the South China Sea. It has to be said that Ukraine is a country in which China has its own interests. For example, China’s global New Silk Road initiative (One Belt One Road) includes the Ukrainian trading port of Chornomors’k. China consistently remains Ukraine’s largest trading partner and Ukraine is the largest supplier of wheat to China. By 2025, both countries plan to increase bilateral trade from 15.7 billion to 20 billion US dollars per year. China has also invested in various Ukrainian infrastructure projects, including a new metro line in Kiev.
Oil prices jump 6% as Russia launches attack on Ukraine; Brent hits $100 for first time since 2014
U.S. crude futures jumped 6.67% to trade at $98.24 per barrel on Thursday. Brent crude futures were up 6.95% at $103.57 per barrel, crossing the $100 level for the first time since 2014.. Spot gold, traditionally seen as a safe-haven asset, rose 1.81% and last traded at $1,942.06.
Neutrality For Taiwan? Why It Remains An Option – OpEd
The entry of the Taiwanese delegation in the opening ceremony of the Beijing Winter Olympics on February 4 served again as a reminder of the largest dilemma plaguing international relations in East Asia today. As the Guardian aptly reported, its “athletes had to march under a banner saying Chinese Taipei and a neutral flag.” De facto, Taiwan is an independent state, but de jure, it is not recognized as such due to Beijing’s staunch refusal to see the island go its way. However, political forces in Taiwan imagine this Olympic “neutral compromise” to serve as a model for a solution with the mainland.
Beijing Winter Olympics: Anta woos Eileen Gu for more collaboration after hitting marketing gold
Anta, which owns several winter sports brands like Salomon and Atomic, plans to design new athletic wear tailored to Gu’s persona to launch in the third quarter. Gu is appointed by at least 26 brands as endorser, fuelled by a booming winter sports economy which is expected to exceed US$158 billion by 2025
China Plans COVID-19 Measures to Allow International Exchanges
Wu Zunyou, the chief epidemiologist at the Chinese Centre for Disease Control and Prevention, stated that teams on the Chinese mainland are looking to improve COVID-19 policies to enable international exchanges. Wu, speaking in a press conference on Tuesday, said that they are looking at an approach to the virus that is neither zero-COVID nor laissez-faire. China’s current zero-COVID policy has enabled the country to largely contain the spread of the virus on the mainland but it has led to strict restrictions on international travel. Wu went on to state that the new approach will put “people first and life first” but also contain the pandemic. Should the team find a suitable approach that balances the control of the disease and allows for international exchanges, it might be possible that international travel is back on the cards sooner than we thought. Wu also claimed that he was cautiously optimistic that the pandemic will end this year. However, since China closed its borders many experts have come out with claims as to when international travel will open up again.
Culture; can it save exhausted young office workers?
The debate around China’s toxic overtime work culture resurfaced recently after the deaths of 3 employees within the first two months of 2022. One of the employees was from Bilibili (China’s equivalent to YouTube) with the tragic incident happening during Chinese New Year, and the most recent is from ByteDance (parent company of the viral short video app TikTok) on 23 February.
All three were born post-90s and died of sudden cardiac death with overtime work allegedly to blame. Bilibili is still in hot water following the death of its employee on 4 February. The 25-year-old was responsible for content review for the video-sharing platform and died whilst on duty. The company denied the allegation that working during the holiday was the cause of the tragedy. In the meantime, it announced on 8 February that the company would scale up its recruitment of content reviewers this year by 1,000 in the hope to spread the workload.
US Justice Department ends ‘China Initiative’ amid concerns over racial bias and a culture of fear
The shift represents a move from the Trump-era programme targeting Chinese espionage and intellectual property theft and will become more ‘threat-driven’. ‘Perception of bias undermines our efforts, and makes it harder for us to earn the trust of the communities that we’re trying to serve’.
China’s censors increasingly play the part of morality police with the conservative values of 1950s America, say experts
LGBT people, gender fluidity, feminism and female sexuality are increasingly in the sights of China’s censors as much as political dissent. Experts describe the moral preoccupations of authorities as similar to the moral panic of 1950s middle class American society. China’s video-streaming platforms must find a good balance among the political pressure from the Chinese government, the economic pressure from global media companies, demands from its consumers and users, these companies’ brand names and PR strategies, and so on,” he said. Hockx said changes to the government’s approach in recent years have shown that consumer power in China is decreasing and that the government is more willing to intervene in popular culture. “The Fight Club example shows that there is still wiggle room and that unprompted, overcautious, and clearly silly censorship decisions by certain companies can be effectively challenged by consumers.” “However, the government is now actively seeking to exercise more control and willing to sacrifice economic benefit in doing so,” Hockx said.
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