Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – January 20, 2022

Exports could be key driver for China’s growth as Covid drags down spending, say analysts
Exports will continue to drive China’s economy for the rest of the year as the domestic market remains sluggish, according to analysts.   Chinese leaders have indicated for many years that they want to move away from exports as the main source of growth and towards domestic consumption for sustainable economic growth, said Mattie Bekink, China director at the Economist Intelligence Corporate Network.

China’s outbound direct investment tops 930b yuan in 2021
China’s outbound direct investment (ODI) saw stable growth last year, rising by 2.2 percent year on year to 936.69 billion yuan, the Ministry of Commerce (MOFCOM) said Thursday.  In U.S. dollar terms, the ODI during this period rose 9.2 percent from a year ago to $145.19 billion, said MOFCOM spokesperson Shu Jueting.  Non-financial investment into countries along the Belt and Road increased 14.1 percent year on year to $20.3 billion during the period, the data showed.  In 2021, China saw 560 newly-signed foreign contracted projects with a value of more than $100 million, 46 more from the previous year, said the ministry. The projects are mainly in the infrastructure sector, such as transportation.

China needs a new growth model, but that requires serious reform
China’s authorities appears keen to tolerate decrease short-term development within the curiosity of securing long-term prosperity. This method is well-intentioned, however the particular insurance policies adopted danger creating extra uncertainty and volatility, in flip eroding public assist for the reforms wanted to bolster long-term productiveness and development.   But there’s a manner to enhance this trade-off: adopting forceful measures that higher outline the federal government’s function within the economic system and monetary markets. Beijing has set out two frameworks to information its policymaking. The primary, “twin circulation”, implies continued engagement with world commerce and finance however seeks a higher reliance on home demand in addition to technological self-sufficiency and homegrown innovation. The “widespread prosperity” agenda goals at a extra equitable distribution of the fruits of development. These are laudable frameworks however come up towards some tough realities.  Beijing’s willingness to let Evergrande default exhibits it is able to encourage market self-discipline by eliminating implicit state ensures backing up monetary companies and main firms. Nonetheless, the concomitant want to extend state management of the economic system and monetary system, together with the central financial institution’s measures to direct credit score by fiat slightly than by means of market mechanisms, provides extra confusion than readability.

A Close Reading of China’s Fintech Development Plan for 2022-2025
We discuss the contents of China’s Fintech Development Plan for 2022-2025, released by its central bank, which lays out opportunities for fintech expansion, major regulatory goals for the government, and Beijing’s ambitions for advanced fintech applications and inclusive growth of the country’s fintech sector.

Why Young Chinese Are Turning Their Backs on Western Brands
For many middle-class Chinese, “Made in China” has gone from critique to chic   For Lina, a master’s student in management, sustainable consumption choices were a dividing line, differentiating a new era of producers and consumers in which people like her construct a personal identity distinct from mass materialistic choices. In the process, young consumers like her are creating a new national image of China as “cool” and fashionable — all while reshaping global consumption patterns.    For young Chinese, the availability of Western brands calls to mind China’s tremendous economic growth, but also more problematic trends like mindless consumption and the fetishization of Western lifestyles. My interviews gave me the sense that, among this group, there is a prevailing sense of alienation with existing patterns of consumption and a desire for a new kind of Chinese production and consumption, one defined by a new spirit, an appetite for personal autonomy, and a desire to be “cool.”

Serving China’s Gen Z? Top 3 food trends to watch out for in 2022
China’s Gen Zers are redefining Chinese food, bringing a revolution within the industry and taking Chinese cuisine to new territories. Over the past year, the Chinese food market has seen a continuous birth of food products that never existed before, as a result of the fast-changing consumer demands among the young generations.   Entering the new year, the occurrence shows no signs of slowing down, instead the market has been scaling up in order to cater to the diverse needs of young Chinese consumers. Here Dao Insights summarises three top trends in food that deserve more attention from brands to win over those “picky” Chinese foodies in 2022.

Why the US Fed and PBOC both risk making policy mistakes
Markets’ underpricing of the Fed’s resolve to tackle inflation could be devastating if and when the central bank is forced to raise rates more aggressively     Likewise, amid signs of financial contagion in China’s property market, the PBOC must decide on the timing and extent of more forceful action

Strategic rivalry with China and Biden’s transatlantic promise
High-level dialogues brought new life to transatlantic China-policy coordination during President Joe Biden’s first year in office. But Michael Laha says EU-US collaboration is still a work in progress.

Joe Biden says he won’t lift tariffs on Chinese imports since Beijing hasn’t abided by phase one trade deal
US president says China is not meeting its commitments, made under the Trump-era trade agreement, to purchase more American goods  Biden acknowledges pressure from the business community but says it’s not enough to convince him to change course

China balks at Biden’s insistence on maintaining Trump-era tariffs, while think tank urges ‘recoupling’
Removing tariffs is ‘conducive to the recovery of the global economy’, commerce ministry says    But President Joe Biden, while acknowledging pressure from the business community, says ‘we’re not there yet’

Reflections on the Phase One Agreement
On January 15, 2020, the United States and China signed the Phase One trade agreement, signaling a thaw, at least temporarily, in the bilateral trade relationship.  As part of the agreement, China committed to purchase a significant amount of US goods over 2020 and 2021, as well as make a number of reforms in intellectual property, agriculture, and financial services that would benefit American companies. Two years later, most of the commitment deadlines have passed, but bilateral tariffs remain at nearly an all-time high. At this juncture, the China Business Review asked US-China trade scholars and experts to reflect on the Phase One agreement and recommend next steps for the United States’ trade policy toward China.

China cuts mortgage reference rate for first time in nearly 2 years, benchmark lending rate for second straight month
China’s one-year loan prime rate (LPR) was cut from 3.80 per cent to 3.7 per cent, the People’s Bank of China (PBOC) said on Thursday    The five-year LPR, which is the reference for mortgages, was also cut from 4.65 per cent to 4.6 per cent

Evergrande, Kaisa and other indebted developers get a break as China’s rate cuts release funds to relieve their cash crunch and mounting debt
The Hang Seng Mainland Properties Index, which tracks the performance of property developers traded on the Hong Kong stock exchange, rose by as much as 5.2 per cent    China Evergrande Group, Kaisa Holdings, Sunac China Holdings and other Chinese developers all soared

Hong Kong’s Hang Seng jumps 3% as China cuts key lending rates; property, tech stocks soar
China on Thursday cut its one-year loan prime rate by 10 basis points, while its five-year LPR was cut by 5 basis points, according to its central bank.    U.S. bond yields fell back slightly after shooting up earlier this week, with the 10-year retreating to 1.854% after hitting 1.9% earlier on Wednesday.    Oil prices rose for a fourth day to a seven-year high overnight.

As China’s focus switches from property to capital market development, who will benefit?
When President Xi Jinping announced the launch of the Beijing stock exchange, it signalled the highest level of support for capital market development     Beijing intends to redirect household savings away from property and into stocks and other capital market products, and financial services can be the bridge

Chinese SOEs net profits up 29.8% y-o-y in 2021
Net profits of China’s state-owned enterprises (SOEs) was up 29.8% year-on-year in 2021, reaching a total of RMB 1.8 trillion ($283.56 billion), reports Reuters. The growth was also higher than the 2.1% in 2020, according to a statement from the State-owned Assets Supervision and Administration Commission. The overall revenue of central government-owned state firms grew 19.5% from a year earlier to RMB 36.3 trillion in 2021, the State-owned Assets Supervision and Administration Commission also said.

China Vows to Curb Technology Firms’ Influence on Governments
China vowed to curb the influence of tech companies on governments as part of a sweeping statement reaffirming the party’s vow to break the ties between money and power in a range of industries.
In a communique released following the plenary session of the Chinese Communist Party’s top anti-graft group, the government said it wouldn’t relent on political factions and interest groups within the party and will zoom in on corruption underpinning the disorderly expansion of capital and monopolies, state news agency Xinhua reported on Thursday. While the pledge to renew the government’s anti-corruption campaign also targets state-owned enterprises and the financial sector, it is more bad news for the nation’s tech giants, which have been grappling with Beijing’s tightened regulations on areas ranging from digital finance and data security to online games and overseas listings. Earlier this week, Reuters reported that China’s internet overseer would require tech companies to seek approval before making investments or raising funds. The Cyberspace Administration of China said the reports were untrue. 
Targeting corruption in all aspects of society comes as President Xi Jinping seeks to secure an unprecedented third term as China’s paramount leader at a key Communist Party summit later this year. Beijing has mounted an ever-expanding effort to crack down on sectors ranging from technology and education to properties and tax evasion by popular live-streaming influencers. Xi has also laid out a vision for common prosperity to redistribute wealth among China’s 1.4 billion people in response to the yawning wealth gap that threatens to stoke social unrest. The China Central Commission for Discipline Inspection placed the chairman of China Life Insurance Co. under investigation in a surprise move earlier this month, with a nationwide anti-corruption crackdown focusing on financial institutions and regulators netting more than 20 officials since its start in October as authorities step up scrutiny of the nation’s $54 trillion financial system. The official denial came after reports circulated online that platforms with at least 100 million users would have to seek approval for external investment deals   Different government agencies, with varying priorities and authority, are becoming increasingly visible in regulating the country’s Big Tech companies

China Tech Digest: TSMC To Change All UPS Batteries To Lithium Iron Phosphate Batteries; NEV Market Penetration Reached 19.1% In December 2021
TSMC will change all uninterrupted power supply(UPS) lead-acid batteries in its plants to lithium iron phosphate batteries in 2030, striving to save another 2.7 million kWh of electricity per year, and adjust the power supply architecture of high-performance computing computer rooms to a DC power supply system for lithium iron phosphate batteries. TSMC’s above-mentioned plan also counseled three system suppliers to adopt it together, promoting the sustainable goal of reducing the carbon footprint of each unit product by 30% and saving 1.5 billion kWh in the supply chain

Samsung overtook Intel as top chip seller in 2021
Memory business boosts South Korean giant as product makers stockpile   The semiconductor market as a whole grew 25.1% last year to $583.5 billion, according to Gartner, as sales topped half a trillion dollars for the first time.   Revenue for Intel, which fell to second place, grew only 0.5% to $73.1 billion. Sales by the U.S. chipmaker rose the slowest among the top 25 companies amid tough competition in the server CPU space, Intel’s strength.  Direct rivals such as U.S. maker AMD, which rose to 10th place from 14th in the ranking, improved their market shares. Qualcomm of the U.S. and Taiwan’s MediaTek, which both make chips for the telecommunications industry, ranked fifth and seventh, respectively. In addition to 5G smartphones taking off, the American sanctions against China’s Huawei Technologies caused a favorable shift in smartphone market shares. Caught in the middle of U.S.-China trade frictions, Huawei’s semiconductor business has faltered dramatically. Revenue at chipmaking subsidiary HiSilicon Technologies dropped to roughly $1 billion in 2021 compared with $8.2 billion the previous year.

EV battery startup SES to partner with Honda
SES Holdings, a US startup with plans to open a Shanghai factory next year, is teaming up with Honda to boost the development of its novel lithium-metal batteries, with the Japanese automaker announcing investment in the battery company.

China: Buying Up Europe
A staggering 40% out of 650 Chinese investments in Europe in the years 2010-2020, according to Datenna [a Dutch company that monitors Chinese investments in Europe], had “high or moderate involvement by state-owned or state-controlled companies.” When the Chairman of the UK parliament’s Foreign Affairs Committee, Tom Tugendhat, wrote that Chinese ownership of the British microchip plant, Newport Wafer Fab, “represents a significant economic and national security concern”, UK Business Secretary Kwasi Kwarteng responded that the deal had been “considered thoroughly”. Only after considerable pressure did British Prime Minister Boris Johnson agree to a national security review of the sale. The European Court of Auditors, an EU institution that oversees EU finances, has found that gaining an overview of Chinese investments in the EU is difficult because of the lack of comprehensive data; it seems no one is recording it. Efficient systems for blocking foreign investments based on national security concerns also appear either to be lacking or simply not used sufficiently. The “strictest screening frameworks” clearly are not stopping China. What appears to be urgently needed in Europe now is a deeper understanding of the threat that China poses, as well as the political will to act on it. Action is urgently needed to block investments that serve up Europe’s strategic assets on a silver platter to China’s state-owned companies, which the Chinese Communist Party then use to advance its expansionist ends.

US’ Xinjiang law puts Chinese businesses in crosshairs, forcing them to take sides in political maelstrom
Exporters and factory owners in China’s manufacturing hub of Guangdong are bearing the brunt of the new law, which looks to have sweeping implications on global trade    Experts say law will strangle exports in various Chinese industries, forcing some foreign companies to leave Xinjiang, or even China altogether

World Re-Binarized: Brief History Of Sino-American Collision Course – Analysis
Americans performed three very different policies on the People’s Republic: From a total negation (and the Mao-time mutual annihilation assurances), to Nixon’s sudden cohabitation. Finally, a Copernican-turn: the US spotted no real ideological differences between them and the post-Deng China. This signalled a ‘new opening’: West imagined China’s coastal areas as its own industrial suburbia. Soon after, both countries easily agreed on interdependence (in this marriage of convenience): Americans pleased their corporate (machine and tech) sector and unrestrained its greed, while Chinese in return offered a cheap labour, no environmental considerations and submissiveness in imitation. Both spiced it by nearly religious approach to trade.  However, for each of the two this was far more than economy, it was a policy – Washington read it as interdependence for transformative containment and Beijing sow it as interdependence for a (global) penetration. In the meantime, Chinese acquired more sophisticated technology, and the American Big tech sophisticated itself in digital authoritarianism – ‘technological monoculture’ met the political one.    But now with a tidal wave of Covid-19 and binary blame-game, the honeymoon is over. While the US-led west becomes disappointment, China provoked backlash instead of gaining global support and adoration. Is any new form of global centrality in sight?

Did Honduras’ New President Change Her Mind About Dropping Taiwan?
An inaugural invite for Taiwanese President Tsai underscores the complicated background of Honduras-Taiwan ties.

Taiwan war risk highest in past 25 years as US tensions rise, mainland expert warns
Growing US support for Taipei and Beijing’s ramped up reunification rhetoric mean risk of conflict highest since 1996 crisis, academic points out   Beijing unlikely to show aversion to military conflict, as this would deepen US support and make Taiwan more determined to seek independence, Shi Yinhong says

Your Comprehensive Guide for Traveling Home and Back to China
The winter holiday and Chinese New Year vacation used to be a great time for people in China to travel abroad and go see friends and family in other parts of the world. However, because of the pesky virus, leaving the country and coming back requires a lengthy time in isolation and being allowed back in at all is a risk we all face.   Depending on what country you wish to travel to, some of these rules may be different. Double check what regulations are in place in your final destination before planning your trip.

Covid-19 in China: cases continue to fall as Tianjin says Omicron outbreak is under control
The country has adopted strict measures to curb the outbreak in the run-up to the Winter Olympics and Lunar New Year   After a warning that post could spread the virus, Guangzhou tells people who received international mail to get tested

Xi’an Partially Lifts Lockdown as City Sees No Local COVID-19 Cases
The city of 13 million people was entirely shut down amid a surge in coronavirus cases.  Chinese health officials said Beijing’s only Omicron case might have contracted the virus from contaminated mail sent from Canada, though experts have questioned the theory. Authorities have asked citizens to refrain from ordering foreign goods amid the global spike in coronavirus cases, while residents in cities such as the southern tech hub of Shenzhen found that such deliveries could change the status of their mobile health passport, restricting various services.   Amid recent virus flare-ups, local authorities in several cities have discouraged Spring Festival travel for the third year since the start of the pandemic, offering cash and other incentives. However, some migrant workers have snubbed such subsidies, leaving for their hometowns earlier than usual to avert possible future restrictions.

How internet services help Xian’s 13 million residents cope with Covid-19 lockdown in China
Citizens are using WeChat mini-programs and chat groups to find food and supplies    With people barred from leaving their homes, basic necessities are hard to come by

China plans expansion of high-speed railway equal to combined length of next 5 largest countries by network size by 2025
China, which has the world’s largest high-speed railway network, will expand its length to 50,000km by 2025    The country will also widen use of the Beidou satellite navigation system, while tightening control of transport data

Public trust surges in China, falls dramatically in world’s democracies
Global survey finds autocratic states scoring well, with a surge to 83 per cent among Chinese respondents and new lows in democratic countries    Results align with trend of recent years towards disillusionment with capitalism, political leadership and the media

One could say that Xi Jinping himself is a risk to the Chinese economy
Reckless policies hurt economy and delay Xi Jinping’s goal to overtake U.S.  “Overconfidence is bad for China’s development.” So said a Chinese economist when the latest gross domestic product figures were announced on Monday. A positive take would be to focus on the 8.1% growth for the full year of 2021, pushing the Chinese economy to as much as 80% of the U.S. economy in dollar terms. But a more recent snapshot shows meager 4% growth in the October-December quarter. “Given the serious economic slowdown we are currently facing,” the economist said, “the day China surpasses the U.S. is moving away, not coming closer.” Meanwhile, on the subject of overconfidence, a prominent scholar’s shocking analysis has been widely talked about in China.   Xi had just become China’s top leader, and as he and Yan had similar ways of thinking, the scholar gained clout and prominence. As the Chinese economy recovered rapidly until the first half of 2021 and Western economies slumped, the Xi administration became overly confident. This created an elevated mood in Chinese society, with a hint of narcissism.  The “third resolution on history,” adopted at the sixth plenary session of the party’s 19th Central Committee in November, includes multiple mentions of confidence.  It is now impossible to change the policy. In addition to the zero-coronavirus policy, there have been human-made errors. Rapid and rigid orders from Beijing’s Zhongnanhai, where Chinese leaders have their offices, are dragging down the economy. Policies have hurt the housing market, which greatly contributes to the economy. Pressure on tech giants as well as on the gaming and education industries has made matters worse.  In late 2021, the Japan Center for Economic Research predicted that China’s nominal GDP will exceed the U.S.’s in 2033, as many as five years later than its previous forecast. But Xi and his team have brought about a “policy-induced slump.” Overconfidence has driven not only China’s top leaders but also its bureaucrats and ordinary citizens, including Tsinghua University students, into near narcissism, clouding their objective judgment. On Monday, the news of China’s economic slowdown in the last quarter of 2021 sent shock waves around the world. On the same day, Xi delivered a speech at a World Economic Forum-related meeting via video. “Shifts in the domestic and international economic environment have brought tremendous pressure,” he said, “but … we have every confidence in the future of China’s economy.” Is his “confidence” different from the problematic overconfidence that is seen at home and abroad? Will it lead to flexible policy adjustments? It is too early to say.

Alain Gillard
Information Officer
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