Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – February 4, 2022

China’s economy to endure another Covid New Year
China is reporting more confirmed Covid cases per day as its population prepares to celebrate the Chinese New Year. Localised social distancing measures are tight in Beijing, which will hurt catering businesses, but some consumption items will benefit. Infrastructure investment should pick up after the holiday  We aren’t yet revising our GDP forecasts. These currently stand at 4%Year-on-Year growth in the first quarter of this year, and 5.4% for the whole of 2022. This is partly because the People’s Bank of China (PBoC) has confirmed that it will deliver a more accommodative monetary policy in 2022. We expect to see more rate cuts in the 7D reverse repo, 1Y Medium Lending Facility, 1Y and 5Y Loan Prime Rates. As an indicator, we forecast the 7D reverse repo rate to fall from 2.2% at the beginning of the year to 1.7% by the end of the year. This forecast, however, relies on Covid cases remaining limited and confined to small area outbreaks, so the risks are skewed to the downside.

German Chamber’s Business Confidence Survey 2021/22: Long-Term Outlook is Positive
The 2021/22 Business Confidence Survey indicates that German companies continue to place confidence in China as an engine of growth and are making long-term bets on the country. To this end, many German businesses are localizing technical and operational expertise, as China’s zero-COVID policy has resulted in continued travel restrictions. Rising prices of raw materials, energy, and labor; enforcing intellectual property protections; and perceived difference in treatment by local officials when compared to domestic firms are among the top concerns expressed by the German Chamber’s survey respondents.  Amid an ongoing pandemic and the gradual restructuring of global supply chains, the future of foreign business in China is full of unanswered questions. Despite the uncertainties, German companies in China are still confident about doing business in the country in 2022, as captured by the latest Business Confidence Survey 2021/22 released by the German Chamber of Commerce in China.

Germany’s (Not So) New China Policy
Under new Chancellor Scholz, obstacles remain for transatlantic coordination on China.   It might be wise for Washington to moderate expectations toward a new German or EU China policy. European leaders are not blindly going to follow Washington’s approach vis-a-vis the PRC, particularly, since the return of former President Donald Trump in 2024 appears to be a realistic scenario. Specific policy goals should be defined by both sides of the Atlantic to avoid unrealistic expectations and to make sure that they are on the same page.   Despite the above-mentioned obstacles, transatlantic policy coordination on China remains essential for the shared goal of maintaining the international rules-based order. If both sides were able to agree on a realistic burden-sharing arrangement (e.g., Europe has a comparative advantage in international diplomacy, de-escalation, and reform of multilateral institutions) transatlantic cooperation on China could turn out to be impactful, long-lasting, as well as in the best interest of both parties.

Asia: Central banks still focused on growth
There have been some notable tweaks to policy accommodation in recent weeks, but central banks in Asia-Pacific are still favouring growth over inflation concerns

US-China tech war: Top Chinese university pulls report that concluded China would suffer more from tech decoupling with US
A key finding from the analysis was that both the US and China would suffer from a tech decoupling, but China’s losses would likely be bigger than those of the US    The report compared the development of China and the US in areas such as information technology, artificial intelligence (AI) and aerospace technology

China plans to grow its digital economy
State-led CBDC introduction will be a priority China’s National Development and Reform Commission unveiled plans last month to expand the country’s digital economy. It added a target to China’s 14th Five Year Plan (2021-25), adopted last year, to increase the sector’s gross domestic product contribution to 10% by 2025, up from 7.8% in 2020.This might be surprising in view of last year’s regulatory crackdown on private providers of digital finance, ride-hailing services, education, entertainment and gambling. This comes on top of cyber currencies being outlawed and peer-to-peer platforms regulated out of existence.

Australian iron imports to China slow but ‘roaring’ demand likely to return, analysts say
Diplomatic ties have remained icy in recent years, but Australian exports of iron ore had cushioned a complete fall-out in the relationship     Curbs to steel production, a pursuit of emissions reduction, a crackdown on the debt and growth in the property sector were factors that affected demand last year

China’s fully cashless society a step closer after two private banks end services for banknotes and coins
Two private banks in Liaoning province and the capital of Beijing will no longer provide services involving banknotes and coins, effective March and April respectively   Beijing has been conducting a nationwide pilot scheme for the e-yuan, with more than 261 million people downloading the wallet app

Digital US dollar edges towards reality as code developed by Boston Fed, MIT exceeds requirements
A 35-page white paper into two possible codes that could be used to process transactions was released on Thursday     It concludes the first phase of the multi-year research initiative known as ‘Project Hamilton’ that was announced in August 2020  Pursuing a US CBDC could help ensure the US dollar’s dominance, especially as other countries like China move forward with their own digital currencies. But the Federal Reserve has also pointed out a range of potential risks, including possible runs on financial firms and a reduction in the amount of deposits in the traditional banking system. Strategists at Bank of America Corp. have said they think a US digital dollar is inevitable, predicting that issuance would probably occur between 2025 and 2030.

Chinese electric-car makers BYD, Xpeng skyrocket on January sales as Hong Kong stocks surge after Lunar New Year holiday
Shares soared as trading resumed on Friday, amid signs the global sell-off in tech stocks may be easing   A slowing Chinese economy bolstered hopes that further policy easing is round the corner

EU deploys new strategy in standards battle with China
China’s own standardization policy, released last October, commits to international cooperation. It pledges to “promote the opening of standards and systems, and ensure that foreign-invested enterprises participate in the formulation of standards in accordance with the law,” according to a translation of a report on a government website. The EU Chamber of Commerce in China, however, has alleged that China uses its domestic standards to erect market barriers against foreign companies. It says technical specifications are only made available to a select group of foreign enterprises and updates remain confidential.  At the same time, critics say China uses its Belt and Road infrastructure initiative to establish de facto standards abroad, giving Chinese companies an edge. In recent months, German companies have, for example, complained that they increasingly run into difficulties when supplying industrial equipment to Russia due to the country’s growing embrace of Chinese standards.  “If an international committee used to have 200 participants and now 20 are added from EU countries, it does make a difference,” Pfeil said. “In terms of the European Commission announcing it will fund standardization projects in neighboring countries and in Africa, it will be a similar effect, as these projects will then likely lead to standards that are compatible with products and processes by European companies.”   Some may say that Europe is fighting fire with fire, shifting away from an approach that largely left standards to the private sector.    Sibylle Gabler, director of government relations at the German national organization for standardization DIN, said the EC was compelled to respond to China’s concentrated state-driven standardization by finding a European answer that combines the bottom-up approach with political priority setting. “Moreover, in October last year, China released its new strategy for standards that calls for a more intensive use of international standards in China,” Gabler told Nikkei Asia. “But from what we hear from companies, this is not happening.”

Will the Year of the Tiger Roar for Luxury Spending in China?
So far, the Year of the Tiger feels more like the Year of the Mouse, thanks to China’s meek economy and luxury spending. So far, the Year of the Tiger hasn’t been kind to luxury spending in China. And according to Bain & Company, the rest of the year won’t look much better. Hopes that Chinese luxury spending would recover to pre-COVID-19 levels during 2022 have slowly slipped away, thanks to a host of ongoing problems. Rolling lockdowns due to the seemingly uncontrollable spread of Omicron to limited international travel to the landslide of the failing property sector are just a few of the issues contributing to China’s ever-slowing economy and luxury spending. Although uneven, luxury consumption on the Mainland remained strong in 2021. All luxury categories experienced year-on-year increases in the first half of last year (from 40 to 100 percent) yet slowed down during the second half (from zero to 25 percent). Moreover, the total value of luxury purchases in China was an astounding $74 billion, with leather goods being the fastest-growing category at 60 percent for the year, followed by fashion and lifestyle, each accounting for 40 percent.  With harsh Omicron containment policies expanding in China and further global supply chain disruptions affecting domestic consumption, China’s lackluster luxury market will certainly not make up lost revenue from China’s various other problem areas. In fact, Bain predicts it will slow to “low double-digit growth” in 2022 compared to a record 36-percent year-on-year increase in 2021.

Reason there is going to be a mass exodus of Chinese billionaires
The leaders of the 80 richest family-controlled businesses in China are leaving their roles, though not for the reasons you might imagine.

China’s belt and road plans face new EU, US competition, but ‘space for cooperation’ remains
The EU’s Global Gateway and the US-supported Build Back Better World (B3W) initiative have raised questions about the impact on China’s Belt and Road Initiative    But experts say the global infrastructure deficit is so large, there is room for multiple players and even opportunity for collaboration between China and the EU

How Beijing sees the world: Contextualizing Chinese foreign policy
The other aspect of The World According To China is its unremitting seriousness. While always enlightening and well-argued, it’s somewhat dry. Clearly Economy is aiming it at the serious side of the reading market, toward think tankers, policymakers, and statesmen. (It’s a very Washington, D.C., book, if you know what I mean). But I refuse to believe that seriousness and verve cannot coexist: the greatest political writers, from Karl Marx to JK Galbraith to Peter Hennessy, continually demonstrate otherwise. I’m not asking for flippancy in a book concerning some of the most important geopolitical issues on earth, but Economy’s prose can be somewhat leaden. There are no changes in tone, or sentence structure, or arresting images. On the other hand, such gravity suggests the book’s numerous strengths: it’s extremely well informed, cogently argued and deftly structured, with intelligent prescriptions. You also feel like you’re getting the inside track to U.S. government thinking, which is highly valuable (especially considering the impenetrability of the Chinese side). Yet I came away feeling I would never read the book again. The World According To China is ultimately a hard-headed, pragmatic book, rather than one to savor.

Chinese property group Shimao feels chill of sector’s liquidity crisis
“Shimao is very proactive in terms of trying to solve their problem. We have seen various assets they would like to sell,” said the investor, contrasting the company’s approach with that of Evergrande and Kaisa, the sector’s second-biggest offshore bond issuer, which have struggled to close asset sales. “This is not for show, this is for real. They are really trying to sell assets to help the cash flow situation,” the person added.  Chen estimated that Shimao would raise about Rmb25bn from asset sales, which should be enough to manage upcoming maturities.  The company’s future depends on confidence being restored, said Chen. “If the market sentiment doesn’t change and they cannot reopen financing channels and there is no material policy easing, then eventually they may need to do a debt restructuring,” she said.

Big Tech’s red packet war for Lunar New Year sees less cash given away as campaigns try users’ patience
Promises of cash handouts in the form of digital lai see ahead of the holiday amounted to US$1.3 billion, US$250 million less than last year      Some consumers are getting tired of competing to win just a few yuan each as increasing competition has made such campaigns less valuable to tech firms

China’s coronavirus missteps open door for US, but it fails to capitalise: report
When it comes to global health leadership, neither Beijing nor Washington appears to be winning the battle for influence and soft power      ‘The US has messed up so badly with its own response, it’s not going to get a good reputation now. It can’t even get its own population vaccinated’

Omicron may mean China’s success in tackling Covid-19 is ‘fleeting’, says US report
Beijing’s ‘opportunistic’ efforts to portray itself as a global health leader may be undermined by the new variant, Council for Foreign Relations report argues    Washington urged not to ‘overreact’ to Chinese efforts and seek ways to cooperate on tackling challenges such as the pandemic

The Taiwan Saga
The storm that has been gathering over the South China Sea in recent years has now reached Taiwan’s shores. The question is whether Taiwan, alone or with the backing of other democracies, will be able to withstand China’s strong will for reunification. The relations between China, Taiwan and the United States is at its lowest point in the region’s history. For China’s president, Xi Jinping, Taiwan is now the last bastion of resistance in his quest for national rejuvenation. Is the reunification of Taiwan with China – like German reunification – the key question for the Chinese people?

US says China ties won’t stop Russian economic ‘catastrophe’ after any Ukraine invasion
The warning comes after Chinese state media publishes Putin’s pledge that Beijing and Moscow would resist Western sanctions pressure    The US says it has an array of tools it can deploy if foreign companies, including those in China, try to evade export control actions over Ukraine

Xi Jinping brushes off furore dogging Beijing’s ‘Genocide Olympics’
Xi Jinping had yet to assume power when the bidding process for the 2022 Winter Olympics formally began a decade ago. Three years later, as Beijing beat Almaty for hosting rights in 2015 by just four votes, it still appeared Xi would be a “normal” Chinese president who would preside over the Games as his second and final term neared its close.   In the intervening seven years, however, Xi has transformed Chinese politics and international geopolitics. He is widely expected to embark on an unprecedented third term as head of the Chinese Communist party, state and military at a congress that will probably convene in October or November.   As a result, Friday’s Olympics opening ceremony marks not the beginning of the end of his political career, but rather the start of a new chapter for China’s most powerful ruler

President Xi Jinping, China’s ‘chairman of everything’
The last time the Olympics came to China, he oversaw the whole endeavor. Now the Games are back, and this time Xi Jinping is running the entire nation.  The Chinese president, hosting a Winter Olympics beleaguered by complaints about human rights abuses, has upended tradition to restore strongman rule in China and tighten Communist Party control over the economy and society.  A big potential stumbling block to achieving Xi’s ambitions is the struggling economy. Growth is slumping after Beijing tightened controls on use of debt in its real estate industry, one of its biggest economic engines. That adds to the drag from politically motivated initiatives, including tech development and orders to manufacturers to use Chinese suppliers of components and raw materials, even if that costs more.      “Xi himself weakens the economy rather than strengthening it,” Tsang said. “If you mess up the economy, he’s not going to make China the dominant power in the world.

Vladimir Putin salutes Russia’s ‘unprecedented’ close ties with China in talks with Xi Jinping
Energy cooperation between the two nations will be boosted, Putin says,     On the eve of the meeting Chinese and Russian foreign ministers said both nations opposed formation of ‘blocs’ seeking to trigger confrontation in Asia-Pacific

Putin and Xi blame U.S. and allies for heightening arms race
Xi and Putin are expected to deepen economic and political ties, especially gas imports by China amid Western sanctions on Russia, which are restricting Moscow’s sources of foreign currency. In his statement published by Xinhua on Thursday, Putin wrote that “we have plans to implement a number of large-scale joint projects,” including constructions of four new units at nuclear power plants in China “with the participation of Rosatom State Corporation.”  Putin’s statement added that “foreign policy coordination” will also be “an important part of the visit.”  According to Russia’s TASS news agency, which quoted Kremlin aide Yuri Ushakov, the two leaders plan to issue a joint statement on international relations and global sustainable development that “will reflect the common views of China and Russia on the most important global issues, including security issues

Putin and Xi rebuke US at summit that underlines closer ties
Vladimir Putin and Xi Jinping opposed the expansion of Nato and issued a veiled rebuke to the US, criticising “certain states” for trying to impose “democratic standards” on other countries, at a Beijing summit that underlined their strengthened ties.  With the west opposing the Russian military build-up on the Ukraine border and China’s treatment of Uyghurs in Xinjiang, the Russian and Chinese leaders presented a united front in talks just hours before the opening ceremony of the Beijing Winter Olympics.  Xi said China and Russia would support each other’s sovereignty and interests, while also dealing with external interferences and regional security threats, according to Chinese state media.

Putin’s Olympic trip signals warmer Russia-China ties
“Russia is obviously the weaker and needier partner over time,” says Alexander Gabuev, who believes territorial disputes could affect relations.    “It’s not that China will seek to reclaim the Far East,” he says. “But it could really poison their relationship.”  Ukraine-related sanctions may have brought the two countries together, but Annette Bohr points out that China has yet to formally recognise Russia’s annexation of Crimea, seized from Ukraine in 2014.    “It’s struck a happy medium, by coming down on the side of Russia, but not talking about the need for an invasion of Ukraine.”

As China welcomes the world to Winter Olympics, its economy is ever more isolated from the west
As the Beijing Winter Olympics get underway, all eyes are on China. There has been lots of coverage about China’s chilly relationship in the west and its persecution of the Uighur and other minorities, but there is also much to be said about the Chinese economy.   China did seem to have weathered the pandemic better than many major economies, having contained the virus so aggressively. Yet the picture has since deteriorated as renewed domestic COVID outbreaks, including the new omicron variant, have caused fresh economic disruption. But there is a contradiction between continuing to engage with global trade and the Chinese government’s instinct towards technological self-sufficiency and homegrown innovation. Trade liberalisation also requires, for example, opening up the banking sector to foreign lenders to make it more efficient. Yet that is a long way from Beijing’s interventionist approach. Indeed, the fact that the banks, which are partly owned by the state, were given mandates to lend to state-owned companies with poor financial status was the cause of many the debt problems in the first place.

China, Russia enhance ‘growing energy partnership’ with gas deal during Xi Jinping, Vladimir Putin meeting
President Xi Jinping met with Russian counterpart Vladimir Putin on Friday in Beijing ahead of the opening ceremony of the Winter Olympics      A series of agreements were confirmed, including a deal for Russia to supply China with 10 billion cubic metres (353 billion square feet) of gas per year via a new pipeline

Xi Jinping and Vladimir Putin have been holding a summit as the Games begin. EPA
Unfortunately, the indications are that China is more likely to move towards greater isolationism from the west. This might mean restricting people visiting the country and concentrating more on domestic consumption than global trade. We might see it further tacking away from globalisation via trade wars, as well as imposing greater capital controls to make it harder for money to get in and out of the country. Obviously, China is partly acting out of provocation from the west, but its overall policy shift has been to a large extent homegrown.
As with the winter Olympics, where China is trying to keep the athletes separate from its people, the nation is also behaving in a similar way with regard to the rest of the world. What should be a celebration of international cooperation is happening at a time when the exact opposite is taking place

The Winter Olympic Games in Beijing 2022, with Valarie Tan
With the 24th Winter Olympic Games, Beijing has become the first city to host both the Winter and Summer Olympic Games – a source of national pride and a sign of China’s ambition to become a global superpower. The leadup to the games, however, has been mired by the decision of several liberal democracies not to send high level dignitaries to the games in protest over human rights violations in Xinjiang. In addition, the specter of the ongoing global Covid pandemic is having its effect on the games.
What do the Winter Olympic Games 2022 mean for the Chinese leadership, how is Covid affecting this year’s games and what do the Chinese people think about them? We will discuss these questions with Valarie Tan, Analyst at MERICS. In her view, “both Olympic Games [2008 and 2022] are part of Xi Jinping’s legacy and a true reflection of Chinas expansion and ambition to become a global superpower.”

podcast : China: ‘The economics behind the Games keep them going’ amid human rights abuses, reporter says
HBO Real Sports Title Reporter Isobel Yeung joins Yahoo Finance Live to address the human rights abuses being conducted by China ahead of the Winter Olympic Games, what it says to participate in these Olympics, and China’s economic presence.

A Green Olympics: A Test Case For China & Carbon Neutrality
As the winter Olympics kick off this week in Beijing, the games hope to set a new first: being the first carbon-neutral winter Olympics. For China — the second-largest economy and a major carbon emitter — it’s a way to show the millions of people who will be watching the games that it is serious about achieving its ambitious climate goals. The country aims to peak carbon emissions by 2030 and be carbon neutral by 2060. It’s making significant progress — and while not yet perfect, the clean energy preparations made for the games have accelerated China’s progress in some areas, since the infrastructure and technology will remain long after the athletes leave.

US House Speaker advises athletes not to speak out at Olympics to avoid retaliation by Beijing
‘Do not risk incurring the anger of the Chinese government because they are ruthless,’ Nancy Pelosi says    Call follows Chinese organising committee official’s warning that participants whose words violated Chinese laws would be subject to “certain punishments”

China’s Top Filmmaker Is Older and — Maybe — Wiser
Zhang Yimou is back for another Olympics opening ceremony, but he’s not the same director he was 14 years ago.

Inside China’s biggest megacity, where 32 million people live in a land area the size of South Carolina and skyscrapers give way to vast farmland beyond the city center
Chongqing is China’s biggest megacity, with more than 30 million people living in an area the size of South Carolina. Skyscrapers give way to vast farmlands, where many still live in rural conditions outside the city center. The city is known for its hotpot, railways, and futuristic architecture.

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