Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – January 11, 2022

Goldman Lowers China 2022 Growth Forecast to 4.3% on Omicron
Goldman Sachs Group Inc. cut its forecast for China’s economic growth this year to 4.3% due to the increased difficulty of containing the more-contagious omicron coronavirus variant.  The downgrade from the bank’s previous projection of 4.8% incorporates a 0.9 percentage point drag from Covid-related restrictions, which will be partly offset by monetary and fiscal easing, economists including Goldman’s chief China economist Hui Shan said in a note.  The negative impact from infections and restrictions as China pursues a policy of virus elimination will mostly be felt in the first quarter of 2022, the economists said. They see a rebound in the following three months, assuming that outbreaks can be controlled more easily after the winter months and as booster vaccinations are more widely deployed

World Bank sees sharp world growth slowdown, ‘hard landing’ risk for poorer nations
The World Bank on Tuesday cut its forecasts for economic growth in the United States, the Euro area and China and warned that high debt levels, rising income inequality and new COVID-19 variants threatened the recovery in developing economies.  China’s GDP was expected to expand by 8% in 2021, about 0.5 percentage points less than previously forecast, with growth seen slowing to 5.1% in 2022 and 5.2% in 2023.

China’s industrial automation efforts give hope to struggling industries, but underlying problems persist
Pandemic-led export boom, concerns over China’s rapidly ageing society and a desire to save money have all contributed to the trend of replacing workers with machines     Automation helps upgrade manufacturing and the supply chain, but some say it does little to help boost domestic consumption or address China’s ageing problem

Uncertainty ahead for Xi’s China
In 2021 China was, and in 2022 again will be, dominated by the domestic economy, relations with the United States, the COVID-19 pandemic and President Xi Jinping. Despite spectacular bounce-back growth in the first half of the year, China’s economy had slowed dramatically by year’s end. Worries centred on the property market, a perennial concern for over a decade due to fears of overheating.  While disaster has so far been averted, in 2022 all eyes will be both on how the government handles this looming crisis and how it continues to treat the private sector, a significant source of employment. It will also be important to see how Beijing implements its ‘dual circulation’ strategy which is meant to strengthen the role of Chinese consumers and make them more important as sources of growth. The test will be to see whether this reenergises growth. Harsh lockdowns are also unlikely to aid growth in the year ahead.  In 2021, the management of COVID-19 in China was markedly different to the rest of the world. Beijing’s insistence on draconian lockdowns meant that even single incidences of infection saw cities and regions closed down. The upside to this was effective prevention of COVD-19 spreading.   The latter made clear the long list of challenges from delivering public health to addressing China’s environmental problems and dealing with inequality.   Xi’s administration showed it took no hostages, giving figures like multi-billionaire Jack Ma of Alibaba harsh treatment for criticisms he was deemed to have made of the central bank. Other entrepreneurs also found themselves on thin ice. The message was clear — China under Xi was about levelling up the middle class, the new heroes of the revolution. Their standards of living needed addressing, something that became even clearer when the results of the national census held every ten years were issued. . Xi’s China is increasingly metropolitan, employed in the service sector and high consuming. The ultra-rich have to serve the people or risk being politically punished. As part of this, a new programme of ‘common prosperity’ was announced by the central government — a Chinese version of ‘levelling up’. The aim is to address the pressure on the middle class, rather than focussing on the extremely poor or the entrepreneurial wealthy. 
In 2022, the most dependable prediction is that at the five yearly Party Congress, Xi will return for a third term in power. This will confirm the widely held notion that his is a perpetual leadership. 
Expect no mercy to opponents of Xi’s mission to make China great again. 2022 will be a further stepping-stone to this all-important milestone.

China’s population crisis can be solved only by printing trillions of yuan to boost birth rate, prominent economist claims
Controversial comments by Ren Zeping suggest that US$314 billion would help add 50 million kids over a decade, in part by relying on older Chinese women to give birth    But demographers and state media throw cold water on Ren’s idea, warning of inflation risks and pointing to failed attempts in other countries   Despite an outpouring of criticism from the public and analysts, some of whom suggested that Ren’s ideas were impractical and lacked common sense, he doubled down on them during a live-stream broadcast on Monday evening. Encouraging births by printing money will become the reality in the next years, he argued. Chinese demographer Liang Jianzhang had suggested a day earlier that the government should allocate 5 trillion yuan – nearly 5 per cent of the country’s GDP – for encouraging childbirth, housing stipends and childcare facilities. Unlike with Ren’s money-printing option, Liang suggested that the 5 trillion yuan come from the fiscal budget. Economists and analysts pounced on Ren’s comments with their own critical assessments. The Beijing News published an op-ed arguing that Ren’s money-printing strategy was a far cry from basic economic principles and would lead to inflation, thus further driving up the cost of raising children.    Hong Hao, chief strategist at Bank of Communications, pointed to the United States and Japan in refuting the impact that printing money has on birth rates. “Examples from abroad have proved that printing money has nothing to do with birth rates, and setting up a special fund would be useless,” Hong said. “In the industrialised age, population growth is of least concern because you can’t turn the tide.”  Yi Fuxian, a demographer and senior scientist at the University of Wisconsin-Madison, also noted how it is increasingly difficult for women to have children as they get older. Between 56 and 65 per cent of births in China are by women aged 20-29, he said.“It’s medically ignorant to count on 40- and 50-year-old women to ramp up birth rates,” Yi said.

An economist has put a price tag on getting China’s birth rate up: $300 billion
China’s birth rate has been dropping steadily in recent years, creating a shrinking workforce and mounting burdens on the state pension system. There were only 8.5 births per 1,000 people in 2020, the lowest rate since the People’s Republic of China was established 1949. But the government could spend its way out of this demographic collapse, according to a top Chinese economist.
Ren Zeping, the former chief economist for debt-laden property giant Evergrande, is known for his outspokenness. He proposed that the Chinese central bank should print an additional 2 trillion yuan ($314 billion) to set up a fertility fund. This could help the country to have 50 million more babies in 10 years’ time, according to a memo (link in Chinese) issued by Ren, now the chief economist at brokerage Soochow Securities, and his team on Jan. 10.

China Evergrande switches headquarters building in cost-saving move as financial pressures mount
Evergrande says to ‘save costs’ its has moved its headquarters building     Analysts say headquarters move not only saves costs, but may help Guangdong government solve Evergrande problem

Alibaba CEO Daniel Zhang quits Weibo board amid government scrutiny on Big Tech
The Weibo board seat of Alibaba chairman Daniel Zhang Yong has been filled by Alibaba chief marketing officer Chris Tung Pen Hung    Weibo, a popular social media forum, has drawn government scrutiny over its management of online discussions

Fast Retailing: political risk remains biggest challenge to growth
Fast Retailing needs both China and the US for its future. The owner of Japanese fast-fashion chain Uniqlo plans to increase investment in China, its biggest foreign market. While the US offers more growth potential, expansion there will require making tough political choices.
Fast Retailing will this year begin operating an automated warehouse in the Shanghai area as part of a ¥100bn ($865m) global investment plan to adapt to a changing retail environment. named the exclusive interactive partner of China’s Spring Festival Gala 2022, a Chinese online retailer, has been named as the official exclusive partner for China’s most-watched television broadcast, the Spring Festival Gala (31st January 2022). At this event, will give out digital red packets and physical gifts worth a total value of 1.5 billion RMB ($235.4 million). This has been the biggest offer to date, surpassing its predecessors, including Douyin’s (Chinese Tik Tok) 1.2 billion RMB, Kuaishou’s 1 billion RMB, Baidu’s (China’s answer to Google) 900 million, and Taobao’s at 600 million.

Alibaba combines Taobao & Tmall, taking China’s e-commerce to the new era
China’s two biggest e-commerce platforms Taobao and Tmall are to be combined into one, as announced by Trudy Shan Dai (the new head of Alibaba’s China digital commerce unit)  six days after her appointment coming into effect on 1 January. The integration is part of the restructuring of the Group’s back-end operations, which include the establishment of three operation centres for both Taobao and Tmall. The focuses of this reorganisation are on platform strategies, user expansion and industrial development for merchants; as according to Chinese media outlet Consume, citing an internal email to all staff members. The Hangzhou-based group, who is also the owner of the South China Morning Post, confirmed the news on 7 January to the media but declined to give further comments.

VW sells 10,000 fewer electric cars in China as chip crisis hits deliveries
Volkswagen sold 10,000 less electric vehicles in China than last year’s forecast due to a shortage of semiconductors to deliver to customers in the largest markets in fierce competition with domestic brands.  Marque in Germany sold 70,000 of its five flagship ID models, most of which were launched in the past year and were targeted for sales of 80,000 to 100,000 in 2021.  Overall, the VW Group, including Audi and Porsche, delivered 3.3 million vehicles in China last year, 14% less than in 2020.

Electric cars account for over 20 per cent of China’s new vehicle sales, reaching Beijing’s goal ahead of schedule
It is the latest signal that the mainland’s motorists are shifting from oil-guzzling vehicles to environmentally friendly cars   New-energy vehicle deliveries jumped 138.9 per cent to 505,000 units in December, which represented 22.6 per cent of total car sales   hina’s electric car market is now dominated by a raft of carmakers ranging from Tesla and BYD to SAIC-GM-Wuling, General Motors’ three-way joint venture with SAIC Motor and Wuling Motors.  Mini EVs with a driving range of less than 200 kilometres and smart cars fitted with high-performance batteries that can go as far as 600km on a single charge are all well received by customers in the world’s largest automotive and NEV market.
Tesla is the leader in the premium EV segment but its Chinese rivals such as Xpeng Motors and NIO are snapping at its heels by developing intelligent cars with autonomous driving technologies and advanced in-car entertainment systems. Cui Dongshu, general secretary of the CPCA, said more EVs would replace conventional cars in the coming years.  “It was a great leap forward in terms of the EV adoption rate, which stood at only 5.8 per cent in 2020,” he said. “The joint ventures by global conventional carmaking giants have yet to prove their strength in the EV sector, with only 3.7 per cent market share.”
Total car sales on the mainland increased 4.4 per cent to 20.15 million units, data from the CPCA showed.  It was the first time the mainland’s car market had reported year-on-year sales growth since 2017.

China’s solar panel giants ramp up polysilicon capacity to fix supply chain shortages
After years of falling prices, the cost of the raw material skyrocketed last year as a jump in demand overwhelmed existing manufacturing capacity    China’s top producers have opened new plants with combined capacity of 160,000 tons a year, adding to the current global capacity of about 620,000 tons

Chinese tech VC funding reaches record $131bn
Chinese venture capital investments reached a record high of $130.6 billion in 2021, despite a sweeping governmental crackdown on the technology industry that slowed investments and sent valuations into a nosedive, reports Caixin. The record total was 50% higher than the $86.7 billion reached in 2020.
The performance is stunning given the devastation wrought on the industry’s marquee players. Alibaba, Tencent, ByteDance and ride-hailing provider Didi Global were all battered by regulations over the past year. The entire online tutoring sector, once a hot spot for venture dollars, was forced to turn non-profit.   Yet entrepreneurs and venture firms pivoted to new opportunities with startling speed. They’ve turned away from softer internet businesses and toward hard-core technologies like semiconductors, robotics and enterprise software. The amount of money going into biotechnology hit $14.1 billion last year, up ten-fold from 2016.

China Deemed Crypto-Mining ‘Obsolete’
China top planning body marked crypto mining as ‘obsolete’. The National Development and Reform Commission made the designation on Monday to update the 2019 policy that reinforces government effort to stamp out industry entirely.

An end to the US-China trade war is the world’s best hope for long-term pandemic recovery
As global growth slows, the US must increase government spending and taxation, while China can pick up the remaining slack through heavier investment spending    Most importantly, though, a return to strong US-China bilateral trade would do much to restore economic confidence

Global Gateway: playing “catch-up” with China or a chance for change?
The recently unveiled Global Gateway (GG) initiative is the EU’s newest attempt to boost its connectivity policies. Its previous major connectivity endeavor, the 2018 EU Asia Connectivity Strategy, aimed at connecting the EU and Asia, never took off. The Global Gateway with wider reaching ambitions is a fresh chance for the EU to be more successful in bringing tangible results.

Taiwan, Canada to start talks on investment agreement
Taiwan and Canada have agreed to start talks on an investment protection agreement, both governments said on Monday (Jan 10), part of the Chinese-claimed island’s efforts to boost ties with fellow democracies in the face of growing pressure from Beijing.     Taiwan has been angling for trade deals with what it views as like-minded partners such as the United States and the European Union.

Echoes of the past in the uncertain future of China-US ties
The insight of American sinologist Michel Oksenberg is just as relevant today as it was 30 years ago    Beijing is facing anti-Chinese sentiment in the West and leaders feel under siege in ways similar to the aftermath of the 1989 Tiananmen Square crackdown

Will China’s Railway in Laos Help Bolster Its ‘Soft Power’?
The inauguration of the long-promised rail line offers Beijing a chance to burnish its image in mainland Southeast Asia.   A country that builds the infrastructure of another one in need in an efficient and fair way (and certainly without the intent of setting it a “debt trap”), is likely to result in an improved reputation, certainly when the project is brought to completion. A country that helps the development of areas where these infrastructures are built (and beyond), could grant opportunities to the beneficiary country that were never an option, such as greater trade and business opportunities. A country that promotes in a genuine (and not imperialistic) way its cultural and historical features can generate interest and admiration, particularly if supported by educational and professional opportunities, such as scholarships. For the time being, these are all speculations in the case of China in Laos, but soft power relies on perceptions. These start with how words and promises are received by target audiences, and grow if, when, and how these promises are delivered.    None of these developments is certain – quite the opposite, in fact – but the channels of attraction are now wide open and it is in the hands of the Chinese and Lao people, as much as those of their leaders and policymakers, to make the most of a rare opportunity that has been many years in the making. As I have argued elsewhere, the BRI could constitute a monumental geopolitical, economic, and sociocultural change, but every major step – such as the opening of this railway – ought to be carefully taken in support of China’s plans for global recognition as a truly responsible power.

India may reconsider some investments from China: Report
India imposed curbs amid a bloody border standoff with China and also to avert risks of opportunistic takeovers.

In the face of US-Russia tension, China backs Moscow’s troop deployment to Kazakhstan
Wang Yi tells Sergey Lavrov Beijing supports Russian aid to crack down on violent, terrorist forces on precondition of respect for ‘Kazakhstan’s sovereignty’  The China-Belarus relationship is also in the spotlight, with Xi Jinping assuring Alexander Lukashenko their two countries should work together more closely

China’s Foreign Minister Wang Yi Visits Eritrea, Kenya & Comoros: Report & Analysis
China’s Foreign Minister Wang Yi has been on his traditional New Year visit to Africa, just one year after Africa united as a Free Trade Area under the African Continental Free Trade Agreement (AfCFTA) which permits the duty-free sourcing and combining of African manufactured components and products into a finished item for both resale on the AfCFTA markets or for re-export. This gives significant opportunities to access other markets and combine with other manufacturers, such as with Renault, a dominant player in North Africa.

China applies brakes to Africa lending
October 28 was a bad day for Ugandan finance minister Matia Kasaija. Hauled into parliament and grilled over the terms of a $200m Chinese loan for the expansion of Entebbe airport, which serves the capital Kampala, he apologised to the assembled lawmakers. “We shouldn’t have accepted some of the clauses,” he said. “But they told you . . . either you take it or leave it.” At issue was a contract signed six years earlier with China Eximbank, one that some Ugandan lawmakers, officials and lawyers say undermines national sovereignty. A report by Ugandan newspaper Daily Monitor even suggested that Beijing could seize Entebbe airport, the country’s main international gateway — a claim that echoed accusations of Chinese “debt traps” and one forcefully denied by both governments.   Despite such signs of caution from Beijing, the controversy over the Entebbe airport loan reflects a growing conviction in much of the west and among some academics and campaigners in Africa that Chinese lending is essentially predatory. They point to Chinese control of Sri Lanka’s Hambantota deepwater port through a 99-year lease as evidence of Beijing’s presumed designs on strategic assets in Africa. They also suggest that Chinese lending, including to prestige projects such as the $4bn railway linking Kenya’s port of Mombasa with Nairobi, benefit corrupt elites more than citizens.  “The volume of credit that some [African governments] have binged on makes them dependent beyond any sensible notion of sovereignty,” says Chidi Odinkalu of the Fletcher School of Law and Diplomacy at Tufts University, expressing common misgivings about the sheer volume of Chinese lending and the implied quid pro quos. “You can’t blame China for looking to secure repayments from dissolute regimes who think money can be free,” he adds. “Africans are running from western conditionality. Now they are locked in a manner of speaking in a Chinese ‘financing wall’.”

China’s Omicron threat ‘under control’, no lockdown planned for Beijing Winter Games, organisers say
Organising committee says coronavirus clusters can be contained within the Games ‘bubble’ and protocol will only be changed due to a large-scale outbreak    China’s pandemic controls are being tested by sporadic coronavirus outbreaks, including the first local infections of the highly-transmissible Omicron variant

3rd Chinese city locks down as COVID-19 cases spike, isolating 20 million people
A third Chinese city has locked down its residents because of a COVID-19 outbreak, raising the number confined to their homes in China to about 20 million people.      It wasn’t clear how long the lockdown of Anyang, home to 5.5 million people, would last. Mass testing was being enforced, standard procedure whenever outbreaks pop up around the country.    Another 13 million people are locked down in the city of Xi’an and 1.1 million in Yuzhou, with restrictions imposed on the port city of Tianjin, only about an hour from Beijing, which is to host the Winter Olympics from Feb. 4.    A games official responsible for disease control, Huang Chun, said organizers are counting on the cooperation of athletes and officials to prevent an outbreak that could affect participation.

Covid Foreign Policy: A Methodical China And An Impulsive
Simply put, the advent of the pandemic alters decision-making in two important ways: Covid weakens national economic performance and it raises the costs of new ventures. By injecting an additional element of risk, one might expect a reduction in risky behavior. Let’s look at two countries that have been pursuing international boundary and territorial claims in recent years: Russia and China.
China has much greater capabilities than Russia, but it also faces higher stakes in 2022. In terms of capabilities, China has robust social management tools such as lockdowns and tracing technologies. Perhaps more importantly, it also has a successful economy, with the IMF pegging its GDP growth at 5.6%, so it has a greater ability to withstand disruption and can even compensate businesses and individuals to some extent.  The higher stakes? China hosts the Olympics in February and later this year convenes the Communist Party Congress, its showcase national political event. My prediction is that if we put all this together, through this year at least, China will have little appetite for forcing or raising discretionary international issues. That being said, China will retain acute sensitivity to Taiwan and other core issues, and will feel compelled to act if it believes those core issues are threatened. In other words, against the backdrop of Covid, China will not go looking for trouble. Assuming my prognosis of a more restrained China and a less restrained Russia this year is accurate, why this divergence? Governance is one reason. Both Presidents Xi and Putin are strong leaders, but China embodies more elements of collective leadership, whereas Putin has more autocratic powers. The economic difference is another reason. The IMF places China’s GDP at just over ten times Russia’s GDP. China can engage other countries with trade and investment. Russia’s most potent engagement tool is not economic, but politico-military. The bottom line: Maybe Covid does not so much shape the world we are in, as it reveals the pre-existing inclinations. President Xi seems much more aware of the challenges and costs of brinkmanship and does not display any particular desire for it. President Putin seems to relish it, heedless of the potential costs to Russia.

Five Mao fanatics jailed over articles ‘smearing former Chinese leaders’
Group leader, who is awaiting trial, says he has ‘no regrets’ after avidly following Mao Zedong Thought and being drawn to Mao-era socialism     Ex-Study Times editor says sentencing shows Beijing will not tolerate ultra-leftists if they are deemed destabilising before National Party Congress this year

Chinese Courts to Parents: Talk to Your Kids Once in a While
Chinese courts have issued the first rulings under the country’s new “family education” law.    “Through these orders, parents are guided to adjust their family education methods and approaches. At the same time, the orders warn the parents of the legal consequences if they fail to fulfill their duties,” he said.   Zheng added that the law will get the state more involved in helping parents, but many parents do not understand their responsibilities under the law.

Alain Gillard
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