Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – January 10, 2022

Asia faces three main risks in 2022, says economist
Asian countries will face three major headwinds for the year head, according to Carlos Casanova senior economist, Asia at Swiss private bank UBP. More broadly, the emerging markets in the region — while well positioned, will be more impacted by these factors, Casanova pointed out, especially if the Fed moves aggressively on the policy front.

Trade in 2022 — a minefield awaits
My last set of year-ahead predictions, in 2020, had such a high hit rate I’ve been reluctant to repeat the exercise in case the massive role of good luck on that occasion became too obvious. In any case, globalisation since the pandemic hasn’t mainly been framed by a set of neat processes (trade deals, dispute settlement cases) with clear observable outcomes. So instead of spuriously precise forecasts, here’s what I’m keeping an eye on in 2022.

China needs middle-class growth and consumption to sustain economic success
Higher incomes for the bottom tiers in society and a stronger middle class are essential for a sustainable consumer economy     If China can deliver on these, the newly minted middle class will be a driver for greater consumption as well as continued, improved industrialisation

China’s emissions trading market likely to see expansion, rising carbon price in 2022, say analysts
The carbon price in the emissions trading scheme (ETS) could reach 65 yuan per tonne this year, up from 54.22 yuan at the end of 2021, Refinitiv forecasts. However, the scheme – which has just concluded its first compliance period – could still do with some tweaks, they said

The state of Asian trade and trade agreements in 2022
Peter Petri, a professor at Brandeis International Business School and a nonresident senior fellow in the John L. Thornton China Center at Brookings, joins David Dollar to discuss recent developments in Asian trade agreements and to look at regional trade issues in 2022. These include CPTPP—the Comprehensive and Progressive Agreement for Trans-Pacific Partnership—and RCEP, the Regional Comprehensive Economic Partnership, which Petri says “could be a pivotal point in economic history.”

RCEP is a good thing for global trade but will it stand the test of time? That’s doubtful
The important issues of non-tariff barriers, unbalanced terms of trade and the increasingly digitalised and protectionist economic environment are not addressed     In short, the RCEP exposes all the limitations of a traditional trade agreement    Exports as a share of China’s GDP have fallen from over 35 per cent in the 2000s to less than 20 per cent, while revenues from the digital sector in places such as Indonesia have tripled in the past four years. China’s more internally-driven and decelerating economy may further accentuate this mini decoupling between the Asian powerhouse and its fast-growing neighbours. Second, the RCEP doesn’t address more serious bottlenecks such as non-tariff barriers, which have undermined even existing free trade agreements. From hygiene regulations and packaging requirements to special customs formalities, many countries have used a whole host of non-tariff measures to suppress imports and protect domestic industries.Most recently, Vietnam complained about “overkill” border trade restrictions amid China’s “zero-Covid” policy, which has hampered normally boisterous trade between the two neighbours.   In Southeast Asia, for instance, former newly industrialised countries have largely become resource-exporting nations to China, which has emerged as a major technological hub and high-end consumer market in Asia.  But as leading economists have noted, emerging markets can’t simply rely on raw material exports and services, which tend to be dominated by cronies, but need instead to move up the value chain and expand their manufacturing base to address domestic unemployment and income inequality     To this end, Indonesia, Southeast Asia’s largest economy, has imposed restrictions on exports of unprocessed raw materials, courted hi-tech foreign investments, and expanded joint manufacturing production with Japanese and Western conglomerates. Across the Indo-Pacific, governments have come under growing pressure to enhance supply-chain resilience, ramp up domestic production capacity for employment generation, reduce reliance on hi-tech and precious materials imports, and nurture local unicorns and industrial champions.  Overall, the RCEP may have given globalisation a desperately-needed second wind and, accordingly, reaffirmed China’s position as a dominant trading nation in the Indo-Pacific amid a declining America. But it is also exposing the shortcomings of traditional trade agreements, which are increasingly out of step with emerging concerns over non-tariff barriers, the digitisation of economic activity, and protectionist impulses among emerging nations.

Under the RCEP, Asia will be free to pursue its own aims rather than those of the US
Trade deals are all too often used as weapons by advanced economies to exploit developing nations     With the absence of the US, the newly formed Regional Comprehensive Economic Partnership charts a less interventionist path for Asian countries   All this argues in favour of a less interventionist model of economic partnership agreement and the RCEP arguably supplies it. It is of a less “high-level” nature than architects of the original TPP envisaged for the Asia-Pacific region, but that is maybe no bad thing.     The irony is that just as the US was poised to capitalise on its economic agenda-setting mission via the TPP, former president Donald Trump pulled America out. The TPP may not be dead but, if it makes a comeback, it is likely to be with China and others as members and that will be a different animal.

China urges its consumer goods firms to make more ‘innovative’ products
China’s industry ministry on Monday proposed guidelines that it said it hoped could encourage its consumer goods enterprises to be more innovative with their products, giving examples such as smart rice cookers and robot vacuum cleaners.   The Ministry of Industry and Information Technology (MIIT), said the guidelines were aimed at the country’s “light industry”, defined as enterprises that make consumer goods and tools, said the sector faced as an insufficient supply of mid-to-high end products and a lack of globally well-known brands.  Examples of products it is encouraging the industry to produce include computer enabled rice cookers, shoes with location functions aimed at children and the elderly and liquor with a lower alcohol content for younger consumers.   It also said that by 2025 it hoped to see an improvement in the prestige of China’s brands and its position in the world’s manufacturing value chain. opens robotic shops in the Netherlands as Chinese e-commerce giant tests new model in Europe
The stores merge online ordering with pickup shops, where robots prepare parcels for collection and home delivery has remained largely unscathed by government’s tech crackdown but new markets are key to offset slower consumer spending in China

Chip shortage leaves Tesla and other electric car buyers in China waiting months for new vehicles
Tesla’s Shanghai-made Model 3s and Model Ys may not be delivered until the end of the quarter, while other EVs have wait times of at least a month     The global chip shortage continues to disrupt the auto industry after forcing Chinese carmakers to cut production by 1 million in 2021

China’s digital yuan: e-CNY wallet tops download charts in Apple and Xiaomi app stores ahead of Lunar New Year
The e-CNY wallet was the most downloaded app after launching last week, but the roll-out remains limited to select cities     While the digital yuan can be used on mobile payment apps like Alipay and WeChat Pay, the dedicated app has maintained momentum with discounts and red packets

In China, live-stream sales success stretches from wealthy influencers to savvy farmers
In last year’s Singles’ Day sales, China’s e-commerce platforms hit a record US$151 billion gross merchandise value, a sign that live-stream retail is booming   There are at least 1.23 million “professional” live-streaming hosts and assistants across the nation, according to iResearch, some of whom, such as Li and Viya, have become million or even billionaires.    While local governments and foreign diplomats are joining the trend, tax evaders and vendors of dodgy products are on notice  In 2020, some 600 million people in China were estimated to live on a monthly income of 1,000 yuan or less – meaning e-commerce has a huge potential to improve their living standards.  In the eastern province of Zhejiang, the pilot zone for Xi’s common prosperity drive, the local government of Kecheng, a district in Quzhou city, said it would foster and support more than 50 “village live-commerce celebrities” to promote B&Bs, tourism and farm produce. It aims to achieve annual revenues of 2 billion yuan by 2025.   In the northeastern province of Jilin, Wangqing county government has recently arranged for farmers in the Manhe village to sit in on talk show sessions to improve their live-streaming skills.  “At the beginning, I was totally directionless. I spoke to nobody for at least five hours a day in front of my mobile phone for 30 days in the trial period as required by Taobao when viewers were blocked,” he said. “No listeners. No customers. It’s like walking in darkness. I didn’t give up because I had to make a living.” Since 2020, the county government has supported his business by sending officials to be guest hosts for his live sessions, which helped him expand his supplier network and boost business,

China announces breakthrough in 6G mobile technology
A high-tech institute, backed by the Chinese government, has announced a major achievement related to what it called “the world’s fastest” 6G-oriented real-time wireless transmission. It is understood that the research team has achieved a sixth-generation (6G) level wireless transmission, up to a speed of 206.25 gigabits per second, for the first time in a lab environment, according to the post by Purple Mountain Laboratories on 5 January.     With the development of 6G technology, it is expected that the peak transmission speed could be up to 100 times faster than the current 5G system, which had already enabled data to be transferred at a speed that is 20 times faster than previous standards.

Dairy giant Yili Group, Huawei come out top in China for hitting UN’s sustainable development targets, Hurun Report finds
Yili took the top spot for its commitments to biodiversity protection and poverty reduction, the report says    Other companies to make the top 10 include Country Garden, Pingan Insurance, Tencent and BYD

Licence to kill: why a 0.007% yield could be dangerous
For years, China’s banks and the broader Chinese financial sector have been innovating in a not dissimilar way with banker’s acceptances. According to CEIC Data, China’s banker’s acceptances market was worth Rmb3tn late last year, down from a peak of close to Rmb8tn in 2014, but still vast and a key part of the shadow banking activity that China has relied on to fuel its growth.  Shadow banking as a proportion of China’s overall financial activity has grown dramatically in recent years. It now accounts for more than 60 per cent of GDP, compared with next to nothing before the global financial crisis, according to research published by the Manchester School and Wiley. That puts it ahead of the UK, where shadow banking has also grown in importance, but equates to barely half of GDP.  Shadow banking products are many and varied, but the bulk of them in one way or another short-circuit mainstream banking regulation. Banker’s acceptances have become an important way for Chinese banks to comply with government diktats on lending, since they count as loans, while avoiding the capital charge of balance-sheet lending.

China’s expat tax system: who pays and how does it work?
Recent plans by Beijing to reform tax exemptions on expatriate employee allowances have thrown the spotlight on China’s tax regime for foreigners    Individuals who are domiciled in the mainland, or have been living in the country for a total of 183 days in a tax year, are considered tax residents

A Close Reading of China’s New Cybersecurity Review Measures, in Effect Feb 15, 2022
Several revisions in China’s updated Cybersecurity Review Measures, in effect from February 15, 2022, focus on risks associated with data processing activities and the data security risks arising from Chinese entities listing overseas. Under the new Measures, network platform companies with access to the personal information of more than one million users will need to apply for a cybersecurity review before listing abroad. A reading of the language of the new Measures has resulted in industry experts assuming that the geographical scope of “foreign listings” does not include Hong Kong. If this understanding is correct, the Measures could shift more Chinese companies towards Hong Kong IPOs to avoid potential reviews.

China plans its first ‘free data port’ in Guangzhou as Beijing eyes total control over cross-border information flows
The Nansha International Data Free Trade Port will be the country’s trial project for cross-border data transfer     The project is expected to play an important role in future data exchanges between China and the outside world amid tighter regulations

China’s metaverse: pioneer analyst picks 6 stocks to emulate Facebook, Roblox and other 2021 winners
Roblox, Meta Platforms were among biggest stock winners in 2021, deemed as ‘Year One’ of the metaverse’s development    Ma Tianyi at Minsheng Securities picks Tencent among six stocks to benefit from the latest, hottest concept in China’ capital market

Shares of Chinese developer Shimao spike 20% on report it’s selling all its real estate projects
Chinese business publication Caixin reported the embattled developer is selling all of its real estate projects, both residential and commercial.   The rally marked a turnaround from Friday’s session when it plunged nearly 17% after Reuters reported it failed to make full repayment on a trust loan. In a Monday note, ratings giant S&P Global said that default risks in China’s real estate sector will likely escalate in the first quarter of this year, especially if policy doesn’t “meaningfully ease.”

China renewables: the stretched ethics of solar panels from Xinjiang
Betting on clean energy has been lucrative. Funds have flocked to environmental, social and governance investments in Asia. Of them, Chinese solar power has been a favourite thanks to fat returns. But it may also be the most risky bet.    Beijing’s push for carbon neutrality has sparked an unprecedented rally in local solar stocks. Shares of JA Solar Technology have doubled in the past year, trading at over 45 times forward earnings, nine times more than global peers. Local rival GCL-Poly is up over 80 per cent.  China is the world’s largest producer of solar panels and also its key material polysilicon. Nearly half the world’s supply of polysilicon, which requires an energy intensive manufacturing process, is made in China’s north-western region of Xinjiang.

China’s emissions trading market likely to see expansion, rising carbon price in 2022, say analysts
The carbon price in the emissions trading scheme (ETS) could reach 65 yuan per tonne this year, up from 54.22 yuan at the end of 2021, Refinitiv forecasts     However, the scheme – which has just concluded its first compliance period – could still do with some tweaks, they said

How China’s zero covid strategy impacted its economy
It is not just mainland China, but even Hong Kong an important financial hub has been following a zero covid policy which has impacted its economy – especially the tourist sector. The fact that Hong Kong will be opening to China before it opens to the rest of the world has also not sent out a positive message to international businesses.      China faces the onerous responsibility of not just keeping covid19 under check, but also preventing a further slow down in its economy. Economic challenges and the zero covid approach will lead not only to domestic problems, but also impact its economic linkages with the rest of the world, especially neighbouring countries in South East Asia (China is an important market for agricultural products of Vietnam and Myanmar). The slow down in China’s economy and the remarks by Li Keqiang with regard to the same also highlight the limitations of Xi Jinping’s economic vision and the fact that there is a growing concern with regard to the country’s possible economic challenges over the next few months.

Covid pandemic: Chinese city tests 14m people after cluster
The Chinese port city of Tianjin is aiming to test its 14 million residents within the next 48 hours after the discovery of a cluster of Covid cases.

What is it like to stay at one of China’s massive quarantine centres in the Greater Bay Area?
Authorities in four southern Chinese cities have built health stations catering to thousands of travellers at any one time     Food, conditions and prices vary, according to a range of sources

Crisis-hit Sri Lanka asks China to restructure its debt
Sri Lanka’s President Gotabaya Rajapaksa and Chinese Foreign Minister Wang Yi in Colombo, Sri Lanka
The president of crisis-hit Sri Lanka has asked China to restructure its debt repayments as part of efforts to help the South Asian country navigate its worsening financial situation.

There is no roadblock in the way of improving Sino-US ties
According to my long-term observations, the challenge that the US strategic circle has been confronted with in assessing Sino-US ties is: How to comprehend China? What is the best strategy for dealing with China? What is the proper topic for researching Sino-American relations? If they have a more objective perspective of China and a more reasonable understanding of China’s growth, there will be less friction between China and the US, and bilateral ties will develop more smoothly. Otherwise, there will be additional difficulties and twists and turns.

The levels and axes of the Chinese vision in practice to deal with Washington
When analyzing the Chinese vision for dealing with Washington, perhaps China has some tools and means that it can use to exert pressure in the face of the United States of America, and the (Iranian card) comes as the profitable option for China in Syria, Iraq and Yemen, to achieve a balance against Turkish influence and vice versa, Russia will lead direct talks between Israel and the Palestinians, which will (reinforce the decline of indicators of American influence in the Middle East).

China says Sri Lanka has benefited from Belt and Road Initiative after request to restructure country’s debt
Colombo made the request for help as it struggles with an economic crisis resulting from the Covid-19 pandemic     Chinese lending has been criticised in the past for leaving countries stuck in a ‘debt trap’ and has already taken control of a port in Sri Lanka

It’s Advantage China in the Indian Ocean
Wang Yi’s visits to the Maldives and Sri Lanka signal Beijing’s priorities fairly clearly: it’s focusing on South Asia and the Indian Ocean  But as its own economy reels under the pandemic, New Delhi’s ability to compete consistently with Beijing’s economic influence is suspect. Far before Rajapaksa made his plea to Wang this weekend, Sri Lanka had asked India for a debt moratorium in February 2020. New Delhi did not respond to that request. Sri Lanka also made more recent requests for emergency lines of credit to import food, fuel, and medicines, and also a currency swap arrangement. New Delhi did not respond to those either.   Despite its historical advantages, India has also lost its primacy on trade to China more recently. Between September 2020 and September 2021, trade between China and Sri Lanka increased by over 85 percent, according to the Observatory of Economic Complexity. Trade between China and the Maldives increased by 80 percent during the same period. India’s trade ties, meanwhile, have remained relatively flat. As the virus continues to spread, countries will seek to align more strongly with regional powers that can meet their economic needs. In 2020, when asked why Colombo keeps going back to China for more debt, a Sri Lankan minister simply said that China has the “most amount of cash now.” That fact puts the advantage firmly in favor of Beijing.

Taiwan’s exports to mainland China, Hong Kong hit record high as semiconductor demand fuels cross-strait trade
Taiwanese official says US sanctions have led to a significant increase in mainland demand for Taiwan’s chips, and strong demand will continue until the mainland’s chip technology is upgraded     Additionally, foreign-owned factories based on the mainland still need to purchase chips from Taiwan

Chinese brands shine at CES 2022
Chinese consumer electronics brands have won several top prizes at the ongoing 2022 Consumer Electronics Show (CES), shining through the booming era of consumer electronics.    The 2021-2022 Global Top Brands (GTB) Awards Ceremony was held online Thursday during CES 2022, held in Las Vegas from Jan. 5 to 7. Six awards were announced, including top 15 Global Smartphone Brands, top 10 Global TV Brands, and International Innovation Enterprises Brand Award.

A Tale of Two Crises: Why US Strategy in Ukraine Has Few Implications for Taiwan
The strategic lessons to be learned in a potential Ukraine conflict are limited – and potentially misleading when applied to Taiwan.

The Commodities Feed: China omicron concerns
Social unrest in Kazakhstan has offered some support to copper and zinc, although there haven’t been reports of any meaningful disruptions to supply. Kazakhstan is a sizeable supplier of major metals to China. During the first eleven months of 2021, China imported 765kt of copper concentrate (3.6% of total imports) and 243kt of refined copper (7.6% of total) from Kazakhstan. Imports of zinc concentrate were rather smaller at 46kt, representing only 1.4% of total imports. However, China imported over 195kt of refined zinc from Kazakhstan, almost half of its total imports during the first eleven months. Last week there was a report that China authorities had urged banks to boost property lending amid default fears, a sign that we may have seen the worst from last year’s unprecedented tightening in the sector. However, the effects of this may only be evident post-Chinese New Year, when we come out of a seasonal lull in downstream activities.

For Chinese Workers in Indonesia, No Pay, No Passports, No Way Home
They were promised higher wages and good jobs in Indonesia. Now they’re looking for a way out.

For Chinese, Rising Rent Isn’t Just a Financial Problem
The past year’s rent spikes aren’t just a financial problem; they threaten urbanites’ happiness and faith in social justice.

Why China has reason to wish for a Trump presidency in 2024
Trump’s grip on the Republican Party makes his return to the White House a not-so-far-fetched possibility      While we could expect China hawks to dominate his team in any comeback, his disdain for allies and military adventures, and penchant for deal-making, will chime with a Beijing hoping to cool tensions

Alain Gillard
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