Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – February 25, 2022

China’s trade with Russia won’t be enough to offset sanctions, U.S. says
In the hours after Russia invaded Ukraine, the U.S., U.K. and European Union announced new sanctions aimed at isolating Moscow from the global economy. China’s foreign ministry said Thursday the country’s trade with Russia and Ukraine would remain “normal” and refused to call the attack an “invasion.” Meanwhile, the customs agency approved wheat imports from Russia. China is the largest trade partner for both Russia and Ukraine.

Podcast : China’s position on the war in Ukraine, with Jakub Jakóbowski and Helena Legarda
Ukraine has once again risen to the headlines due to an intensification of its conflict with Russia that has been smoldering since 2014, culminating in a full-scale invasion by Russia early on February 24. 
The Chinese position in the weeks leading up to and during the war so far has been one of hedging, trying to avoid taking a clear side in the deepening crisis. In a meeting ahead of the Beijing Winter Olympics on February 4, Russian president Vladimir Putin and Chinese State and Party Leader Xi Jinping issued a joint statement of support and affirmed their commitment to “deepening back-to-back strategic cooperation.” Chinese official statements on the situation in Ukraine, however, sound much more uncommitted. In a speech at the Munich Security Conference on February 19, Chinese Foreign Minister Wang Yi urged all sides to “shoulder their responsibilities and work for peace.” As the war broke out, Beijing continued to call for restraint and a negotiated solution to the crisis. But it also adopted a more Russia-friendly tone, questioning the use of the word ‘invasion’ to describe the situation and blaming the US for aggravating the crisis. To analyze the Chinese position in Russia’s war in Ukraine, the status of the Russia-China relationship and the implications for future conflicts, we are joined by two experts on the issue: Jakub Jakóbowski and Helena Legarda. Jakub coordinates the Connectivity in Eurasia project and is a senior fellow at the China Program of the Centre for Eastern Studies (OSW), a public think tank based in Warsaw, Poland. In November he co-authored a study on the Russia-China relationship. Helena is a Lead Analyst in the Foreign Relations team at MERICS and has recently published a new issue of our Security and Risk Tracker that analyzed the situation in Ukraine among other topics.

Ukraine-Russia crisis: Will China be Putin’s economic lifeline?
Beijing has emerged as a key player with the potential to undermine the international pressure campaign against Moscow. The measures announced so far have not targeted Russia’s lucrative energy sector or the country’s access to the SWIFT payments system, both of which would impose severe costs on Moscow but at the risk of high collateral damage in the form of skyrocketing oil and gas prices. Europe is especially dependent on Russian natural gas, which makes up 41 percent of the continent’s supply. Xu said he expected Beijing and Moscow to boost cooperation on ways to reduce their exposure to international financial system. “They also talked about creating mechanisms, which are some kind of framework beside SWIFT to deal with sanctions,” he said. “But there’s so far no clear progress in establishing such a mechanism. Obviously, it’s not an easy job.” García Herrero said the sanctions announced so far were so minor that Beijing would see no reason to miss a “juicy” opportunity to thumb its nose at the West. “They are just so limited, I don’t think China needs to even bypass them,” she said. “I don’t think China will bypass those sanctions, they will just find other ways to support Russia.” “So far, I think, Biden and the West look very weak, the sanctions are limited.” The cost of Beijing’s support, however, could rise dramatically if stronger measures were introduced down the track, García Herrero said. “If we go full-in on sanctions, the cost is humongous for China,” she said. “It’s very easy to get entangled in this situation for China unless they show restraint, which they are not because they think this is an easy goal, but it might not be so easy.”

What is Swift and what would happen if Russia is banned?
About 300 Russian financial institutions, including many that have been sanctioned, use the swift financial messaging system. Banning Russia from Swift would mean its banks can no longer use it to make or receive payments with foreign financial institutions.

Ukraine crisis: China walks ‘diplomatic tightrope’, but impact of sanctions on Russia seen as ‘limited’ for bilateral trade
China has called for restraint from all sides and opposed unilateral sanctions, while saying it will continue trade with both Russia and Ukraine. Analysts say China is likely to support Russia financially and through trade, though if the situation escalates Beijing may ‘rethink its position’.

Negotiate with Ukraine, China’s Xi Jinping urges Russia’s Vladimir Putin
Two presidents talk on the phone for the first time since Russian forces launched attack on neighbor   Cold war mindsets should be abandoned and security concerns respected, Xi says.

Russia-China and the warning against Ukraine of falling into the “trap of Western democracy”
Here, despite the departure of Ukrainian former President “Yanukovych”, the Chinese Foreign Ministry previously confirmed that the strategic partnership and its provisions are still valid with Ukraine.  Accordingly, China has a broader interest and conviction in defending the rule of “non-interference in the internal affairs of countries”. Although China has adopted a more flexible interpretation of this rule in recent years, Beijing is reluctant to condone any external military intervention in Ukraine (without obtaining the approval of the UN Security Council). The reason is that Beijing fears that any breach of this rule, could have its possible implications for the possibility of outside interference in the territories that China claims should belong to China, including (Tibet and Taiwan). Therefore, China does not want to move to prevent Russian military intervention, but it may play positive roles in resolving the current crisis in Ukraine for the benefit of its Russian ally. Although the evidence so far does not show any movement in this Chinese direction to ease the crisis between Ukraine and Russia. However, China’s positions were limited to expressing its concern about the Russian military intervention in Ukraine, but it did not blame Russia or urge it to refrain from such a step for fear of deteriorating relations with Moscow, which is essential to the Chinese regime. Instead, some Chinese sources focused on (conspiracy theory, expressing Chinese fear of the presence of foreign Western hands), aiming to sabotage Ukraine and involve Russia in igniting the conflict. In a previous editorial in the “People’s Daily”, the mouthpiece of the Communist Party of China, China asked the United States of America and its Western allies to abandon the “Cold War mentality approach” to the Ukrainian crisis, while at at the same time warning Ukraine not to fall into the “trap of Western democracy”.

Taiwan Watches Ukraine With an Eye Toward Security at Home
Taiwan’s government is on alert for ripple effects from the Russian invasion in the form of “cognitive warfare” and economic difficulties. Finally, Taiwan’s government shares similar concerns with many fellow resource-constrained Asian nations about the potential for the Ukraine conflict to drive up prices, particularly in the energy sector. Taiwan relies on Russia for about 17 percent of its coal imports and 14 percent of LNG imports. At the NSC meeting, Tsai directed her administration to “[c]ontinue responding to economic developments while ensuring the stability of our supply of goods, commodity prices, and stock and foreign exchange markets.” The NSC meeting summary makes clear that while Taiwan’s government wants to be prepared for a military contingency, it has its eye on other knock-on effects from the crisis in Ukraine. We shouldn’t let the remote possibility that China will launch a copycat invasion overshadow the far more likely, if more prosaic, ways the war in Ukraine will impact Taiwan. The Russian invasion of Ukraine will have ripple effects around the world, Taiwan included.

Does The Biden Administration Have ‘Strategic Clarity’ On Taiwan? – Analysis
It seems that the Biden administration has taken steps in this direction, and it appears to have bipartisan support in the US. On 18 February 2021, Republican Senator Rick Scott introduced a bill in the House of Representatives to authorise the US to take military action to defend Taiwan against any military attack from China. In the same month, Robert Gates, a former secretary of defence, identified Taiwan as the most concerning issue in US-China relations. According to Gates, it is  “time to abandon our longtime strategy of strategic ambiguity toward Taiwan.” The US has also been encouraging its allies, such as Japan and Australia, to overtly clarify their stands on Taiwan. Both countries have become more explicit in their exchanges with Taiwan in the last one year. Blinken has reportedly urged Paraguay to maintain diplomatic relations with Taiwan. In March 2021, the US ambassador to Palau John Hennesey-Niland visited Taiwan as part of an international delegation of democracies. In August and October 2021, Biden said that the US would defend Taiwan in case of a military attack. On both occasions, however, the White House later played this down by saying that the US policy towards Taiwan had not changed. Biden also reportedly said to Xi during their phone conversation that the US “strongly opposes unilateral efforts to change the status quo or undermine peace and stability across the Taiwan Strait.” The US appears to be showing movements in the direction of ‘strategic clarity’ on Taiwan. There are however apprehensions that this could be counterproductive by making China more assertive than restrained. Taiwan may also misinterpret it as a sign to press for independence. In both cases, the situation would entail moving away from the status quo, which would have its own consequences. So, many experts feel that the policy of ‘strategic ambiguity’ should formally continue, and the ‘rock-solid’ US resolve to defend Taiwan, in the case of any military exigencies, must be conveyed to China through other means.

China-US relations: top former American envoys call for talks and restraint as Ukraine crisis adds to tensions
50 years after the signing of the Shanghai Communique, Henry Kissinger says Beijing and Washington must find a way to agree on their disagreements. Gary Locke says it has become popular and far too easy for China and the US to demonise each other.

Taiwan sanctions Russia over Ukraine invasion, limits on chip and hi-tech exports expected
Energy imports and restricted sale of sensitive technology such as semiconductors anticipated to be among island’s measures to punish Moscow. Taiwan may one day need help from the international community and needs to show it is ‘a giver, not just a taker’, academic says.

Taiwanese express sympathy for Ukraine but doubt Beijing will use opportunity to attack island
Most people on the island do not think there will be an attack from the Chinese mainland while the US and Europe focus on Russia’s invasion. The crisis has been widely covered by local media but many doubt it will have much impact on their daily lives.

What Ukraine-Russia Tensions Mean For The US’ Indo-Pacific Strategy – Analysis
The one problem with the Trump Indo-Pacific strategy was that the president himself undercut it by taking the US out of the Trans-Pacific Partnership (TPP) in 2017. The TPP was an ambitious trade agreement aimed at reducing the dependence of its signatories on Chinese trade and drawing them closer to the United States. The Trump administration’s alternative approach was to propose a Blue Dot Network (BDN) to certify international standards for infrastructure projects to corner China. It sought to encourage public-private partnerships for infrastructure development, enhance connectivity and contribute to a cleaner environment to provide an alternative to China’s Belt and Road Initiative (BRI).  The BDN financing project was taken up through the Group of Seven (G-7) which, in June 2021, announced a global infrastructure initiative which the Biden administration has linked to its ‘Build Back Better World (B3W)’ programme. The Americans said that this was  a “values-driven, high-standard and transparent” initiative which seeks to catalyse private capital to invest in global infrastructure and focus on climate, health, digital technology, gender equity and equality. The fate of the Biden administration’s Indo-Pacific Strategy is now hostage to two developments; First, the uncertainty and dangers that have appeared in Europe on account of the Ukraine-Russia conflict; and second, the state of the Biden presidency itself which will become clearer by the end of this year, when the off-year elections take place in the US. The US president may have no problem in delivering on the military aspects of his programme, but whether he can find the money to promote the B3W is a moot question, considering that he failed to persuade the US Congress.

Beijing hits out at claims it backed Ukraine attack
The Foreign Ministry has spoken about Russia’s attack on Ukraine, saying on Friday that China opposes any act inciting war and has taken a responsible attitude from the very beginning to persuade all parties not to escalate tensions. The Xinhua News Agency said spokesperson Hua Chunying made the remarks in response to suggestions from the US State Department that Moscow had launched its huge offensive thanks to Beijing’s backing. Responding at the ministry’s daily press briefing to queries about Ukraine, Hua Chunying said the United States had sent at least US$1.5 billion worth of weapons and ammunition to the country. Stressing that China-Russia relations are built on the basis of non-alliance, non-confrontation and the non-targeting of third countries, the spokesperson said this is fundamentally different from US actions in drawing ideological lines, forming cliques with bloc politics and creating confrontations and divisions. “Even today, we are still facing the real threat from the United States and its so-called allies wantonly interfering in China’s internal affairs and undermining China’s sovereignty and security on Xinjiang, Hong Kong and Taiwan issues,” she said.

Ukraine crisis: stock experts assess buying the dip or seeking protection as market risks mount
Morgan Stanley, Amundi, RBC Wealth Management offer views on what to expect in coming days as the Russia-Ukraine conflict unfolds. Hang Seng Index lost 6.5 per cent this week in the worst rout since March 2020. The conflict could inflate the risk premium for Chinese markets and push them closer to bear-case targets. “China has considerable policy levers to pull in an adverse global growth scenario,” equity strategists led by Jonathan Garner wrote in a report on Thursday. “However, global investors may raise the risk premium on Chinese investments as a result of Russia’s actions.” The bank’s year-end target for the Hang Seng Index in a bear-case is 21,000 points, or 8 per cent downside from Friday’s closing level. “This [Ukraine] situation may cause investors to focus further on the areas of contention between the US and China, including Taiwan,” they said, as both nations square off in areas including trade, financial market policy and national security.

China’s Economy Stabilizes With Uncertain Growth Outlook
China’s economy continued to stabilize at subdued levels in February, weighed down by a property market slump, softer global demand and disruptions to business activity during the Lunar New Year holidays. That’s the outlook from Bloomberg’s aggregate index of eight early indicators for this month. While the overall gauge was unchanged, several underlying measures worsened, suggesting an uncertain growth outlook that may require more fiscal and central bank support in coming months. Global demand is also stabilizing, which may be a sign that China’s record export growth may start to ease in coming months. South Korean exports, a bellwether for global trade, grew at the slowest pace since last March. The trend is also confirmed by the Standard Chartered survey, with the sub-index for export-oriented firms dropping significantly into contractionary territory. Property sales continued to slump in February despite the holiday period usually being a good month for purchases as people return to their home towns and buy real estate. Authorities have recently started to loosen up restrictions to revive the industry, which may provide some support in the future. The Shanghai branch of China’s central bank urged commercial banks to accelerate real-estate loans and banks in Guangzhou cut their mortgage rates. Mortgage down payments for some homebuyers were cut last week in several cities including Chongqing.

Olympic gains: Study highlights China’s progress on air pollution since 2008
US academics find China is responsible for over 70% of global reductions in airborne pollutants over the last seven years, reductions that may increase the country’s life expectancy.

China’s solar power capacity set for record increase in 2022 – industry body ..
China is expected to add 75 to 90 gigawatts (GW) of solar power in 2022, its solar manufacturing association said on Wednesday, far higher than a record increase in capacity last year.

Tesla plans new factory in Shanghai that would double China production to a million cars a year as demand for electric vehicles soars
The US carmaker will soon begin construction of a new plant in the Lingang free-trade zone near to its enormous Gigafactory 3, said two sources. The move represents a huge effort to ramp up production amid soaring demand for Tesla’s electric vehicles from customer in China and abroad.

Joe Biden cannot ignore Tesla and Elon Musk if he is serious about electric vehicles and climate change
The US president has been pushing the electric vehicle transition without the biggest EV player, Tesla    While it is true that rich Americans like the Tesla CEO are getting richer, blaming Musk for inequality is not the answer. Instead, Biden must work with him.

US-China trade: will Biden’s call to break free of China for rare earths help counter opposition to US mines?
Merely mentioning China and calling to oppose its supply-chain dominance helps Washington push back against domestic opposition to controversial mining operations, according to Chinese experts  Strategic minerals such as lithium are becoming increasingly essential, and Chinese companies control much of the global supply.

Five things to know about the Chinese logistics market heading into 2022
The COVID-19 pandemic has only accelerated development of China’s logistics industry, which was already moving at breakneck speed. For decades, the country has been a crucial node in the supply chain of companies around the globe. And while many customers in other countries only awakened to the convenience of online shopping and delivery during the pandemic, millions of drivers have long been zipping through Chinese cities to deliver parcels of all sizes. In this article, we present five insights global investors, logistics companies, and shippers should be aware of. Generally speaking, surging demand for logistics services coupled with supply chokeholds resulting from pandemic lockdowns and travel restrictions have translated into a profitable year for many logistics players. The COVID-19 pandemic also sped up the industry’s sophistication. While we see greater consolidation and integration in some subsectors such as third-party logistics and express-delivery carriers, we’re also expecting growth in other areas such as warehouse automation and air cargo. Whichever stakeholder you are, an understanding of these trends can help with your decision making for 2022.

China’s high-tech zones show strong growth momentum in 2021
China’s national high-tech zones have shown strong anti-risk ability and growth momentum, a Chinese official said at a press conference on Friday. The annual revenue of the country’s 169 state-level high-tech zones is expected to exceed 48 trillion yuan (about 7.6 trillion U.S. dollars) in 2021, up about 12 percent year on year, said Shao Xinyu, vice minister of science and technology. According to initial estimate, profits from these high-tech zones totaled 4.2 trillion yuan, a year-on-year increase of about 17 percent, Shao added. He also noted that the national high-tech zones have contributed about 13 percent of China’s GDP with only 0.1 percent of the country’s land area.

Can China’s experimental engine supercharge hypersonic space race?
If successful, the magnetic fluid engine could make near-orbit passenger travel a viable commercial reality. Lead scientist says the development marks a technological revolution and a historic moment for China. A Beijing-based space scientist, who is not involved in Wei’s project, said the development of a brand-new technology carried risks and there were signs the Chinese space authorities “do not want to put all their eggs in one basket”. The scientist, who asked not be named, noted that two designs were unveiled in mid-February for China’s next-generation manned launch vehicle – a hypersonic aircraft and a more conventional two-stage reusable rocket. The conceptual rocket launcher was mocked as a knock-off when it was revealed by Wang Xiaojun, president of the China Academy of Launch Vehicle Technology, at an online international symposium. Social media users said it looked and worked almost exactly like SpaceX’s reusable Starship, which has become the workhorse of US space missions. The giant Starship rocket, which can send 100 tonnes of cargo into space, is expected to make its first orbital flight next month ut SpaceX’s success raised the question of whether China should follow suit, according to the Beijing scientist, who said some of China’s reusable rocket prototypes had already achieved vertical landing in test flights. While China’s researchers are not turning their backs on reusable rocket technology, the scientist said the interest in air-breathing engine technology is stronger – pointing out that the fuel efficiency of a rocket engine is already low, with powered descents and soft landings consuming even more energy. “China’s goal is to make space travel as easy as taking an airline. The technology would not be sustainable in the long term if only rich people can afford a ride to space,” the scientist said. “That is why Wei said there must be a revolution.”

Xi Focus: How Xi’s thought fosters a greener, more sustainable Chinese economy
The last 10 years have also witnessed China’s unprecedented moves on improving the environment, from controlling air, water and soil pollution to conserving existing green ecosystems as well as adding new forests, grasslands and wetlands. Good air days came along with the fast growth of green areas. Earlier data from NASA satellites showed that China alone accounts for 25 percent of the global net increase in leaf area during 2000-2017. Joining Beijing citizens to plant trees in April last year, Xi urged greater efforts to increase the country’s forest areas, enhance the quality of forests and boost the carbon sink capacity of ecosystems. Since 2013, Xi has joined Beijing citizens in tree-planting activities for nine consecutive years. Data from the white paper on responding to climate change showed that from 2016 to 2020, China had planted around 36.3 million hectares of forests and added 202,600 hectares of new wetlands. In late October last year, central authorities issued a guiding document on achieving the carbon goals, laying out key specific targets and measures for the coming decades. By 2030, China’s carbon emissions will peak, stabilize and then decline, and by 2060, China will be carbon neutral and have fully established a green, low-carbon and circular economy, it says.

Evergrande crisis: distressed exchanges, default waivers build as Chinese developers wonder, where’s the policy stimulus?
Zhenro and Jingrui are joining other cash-strapped developers in delaying debt repayments, weakening bond covenants. China’s housing market is facing the worst slowdown in a decade after a months-long decline in home sales.

Evergrande sells four projects to state-owned firms for US$337 million
China Evergrande Group said on Friday (Feb 25) it sold stakes and “right to debt” in four developments to two state-owned trust firms for 2.13 billion yuan (US$337.35 million), in a move to ensure their construction goes ahead as well as delivery of its other projects. The world’s most indebted property developer is struggling to complete projects and homes – deemed a priority by China’s policymakers to ensure social stability – while weighed down by its more than US$300 billion in liabilities.

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