Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – January 25, 2022

China GDP: IMF cuts growth forecast to 4.8 per cent, warns property sector pressure a ‘prelude’ to broader slowdown
China’s zero-Covid policy likely to weigh on consumption and construction prospects, International Monetary Fund (IMF) says. Slowdown in China will drag on the global economic recovery from the pandemic, with spillovers to trading partners, the IMF reports.

Slowdowns in the U.S. and China will hold back global growth, a report says.
The International Monetary Fund forecasts that the growth rate of the world economy will slow to 4.4 percent in 2022.

IMF cuts growth forecasts for US, China and the world as Omicron spreads
The International Monetary Fund (IMF) lowered its economic forecasts for the United States, China and the global economy on Tuesday (Jan 25), and said uncertainty about the pandemic, inflation, supply disruptions and US monetary tightening posed further risks.   “We project global growth this year at 4.4 per cent, 0.5 percentage point lower than previously forecast, mainly because of downgrades for the United States and China,” Gita Gopinath, the IMF’s No 2 official, wrote in a blog on the latest update of the World Economic Outlook. The IMF said the rapid spread of the Omicron variant had led to renewed mobility restrictions in many countries and increased labour shortages, while supply disruptions were fuelling inflation.

China’s “common prosperity” not enough to remedy inequality, Korea’s central bank finds
Slowing economic growth, difficulties expanding tax revenue, and structural disparities are all playing a part.

China unveils 10 measures to save energy and cut emissions as it takes steps to achieve 2060 carbon neutral goal
The State Council announced a comprehensive plan for energy conservation and emission reduction as part of the 14th five-year plan from 2021 to 2025 The plan calls for China’s energy intensity to drop by 13.5 per cent in 2025 compared with 2020.

Is China’s interest rate easing cycle nearing an end?
The PBOC’s latest lending rate cuts last week, the second in two months, are admittedly modest but pushing them further risks triggering inflationary pressures With the economy slowing, however, Beijing must find less risky ways of boosting consumer demand and business confidence. Consumer and business optimism need a lot more support. Consumer confidence still seems relatively lacklustre, decreasing to 119.5 last November, well down from the recent post-Covid-19 crisis cyclical high of 127 in February 2021. Annual retail sales growth of 1.7 per cent in December is worryingly flat. Business confidence, as measured by the National Bureau of Statistics purchasing managers’ index for manufacturing, is stuck in neutral territory at 50.3 in December, close to the 50 boundary which delineates expanding or contracting economic activity. There’s definitely scope for the government to cut taxes to boost consumer demand, while increased spending on public infrastructure investment would be a boon to business confidence.   While there may be some scope for small interest-rate cuts, Beijing must be wary of making the domestic debt bubble and property market speculation even worse. With the Fed on the brink of tighter monetary policy, a reduced interest rate gap to the US will put pressure on the renminbi-US dollar exchange rate.  A weaker currency might be good news for China’s export growth, but it could risk opening up more trade tensions with the US at the wrong time.

Biden too weak to take advantage of China’s economic woes
A nation is powerful if its economy is too, if it has nuclear weapons with which it can fight, or both. Our economy made us a post-World War II superpower as much as our nuclear arsenal did. 
China, like the U.S., is a superpower due to its economy and its nuclear arsenal. But if its economy fails to support its aggressive strategies, China’s strength and its hold over its people will diminish greatly.  There is considerable evidence that China’s economy is in a deepening slump. It is in our strategic interests to worsen those problems.

Online fast fashion shop Shein planning New York IPO as founder weighs citizenship change amid tighter regulations
Shein founder Chris Xu is considering Singapore citizenship to get around new rules in China restricting offshore IPOs  The US is the biggest market for the e-commerce company, which saw its valuation balloon to US$50 billion last year amid the pandemic. Shein ships to 150 countries and territories from its many global warehouses, according to its website.  It made around 100 billion yuan (US$15.7 billion) in revenue in 2021, taking advantage of the pandemic that shifted global consumption online, said one of the sources and another person with knowledge of the matter. Its valuation was around US$50 billion in early 2021, they said.The valuation is estimated to have as much as doubled in the past year, one of the first two sources said. The company, whose investors include Sequoia Capital China, IDG Capital and Tiger Global, was valued at US$15 billion in its last funding round in August 2020, according to CB Insights data. According to Coresight Research, Shein’s estimated sales in 2020 jumped 250 per cent over the preceding year to US$10 billion, with over 2,000 items added on its website weekly. The Shein spokesperson said as a private company it did not disclose financial figures. Shein has hired Bank of America, Goldman Sachs and JPMorgan to work on the IPO, said the source with knowledge of the company’s valuation, and another person familiar with the matter.

China Evergrande names official from bad debt firm to board
State-owned Cinda looks set to play major role in property group’s restructure  This move suggests that Cinda will play a key role in Evergrande’s reorganization. A Cinda vice president serves as a member of the risk management committee set up by Evergrande last month. Evergrande’s home province of Guangdong will announce the company’s debt restructuring framework by March 5, according to international media reports. The developer, which has more than $300 billion in liabilities, is expected to sell assets to a group of investors led by the Chinese government, reports say. Cinda was founded in 1999 as one of the four biggest managers of nonperforming debt. The State Council, China’s cabinet, ratified Cinda’s establishment, and the Finance Ministry is a major shareholder. Evergrande also said Sunday that it has named Shawn Siu, the chairman of China Evergrande New Energy Vehicle Group, as an executive board member. On Monday, Evergrande issued a statement urging offshore investors not to take radical legal measures. An ad-hoc group of investors said in a press release last week that the group will take “all necessary actions to vehemently defend its legal rights and protect its legitimate interests.”

Are China Port Closures to Blame for Continued Supply Chain Disruption?
China’s strict zero-COVID policy has led to several instances of port closures over the past year, exacerbating the crisis in global supply chains. But issues stemming from the COVID-19 pandemic in logistics chains around the world are also to blame. The ongoing supply chain crisis has led to rising costs of raw materials and shipping containers, which is impacting manufacturers and end-consumers alike. Sustained disruption in global supply chains is likely to impact China’s imports and exports in 2022, but the government is prepared for this outcome.

The Dilemma of Hong Kong’s Fixation on Zero COVID
Hong Kong’s obsession with zero COVID is leading it down unproductive rabbit holes — like hamster culling — rather than finding long-term solutions.   The longer Hong Kong holds out before it finds a way to counterbalance its zero COVID deference to Beijing with the real-world costs to its people, the more difficult and the higher the cost it will be for Hong Kong to extract itself from the hole it dug for itself. On the other hand, Beijing should see Hong Kong as the ideal testing ground for an exit plan from zero COVID. After all, Hong Kong’s value is always its differentiation from the mainland, rather than complete integration and sameness.    However, judging from the political development in the last few years, such rethinking on the role of Hong Kong will prove elusive. That’s doubly true in 2022, which is an exceptionally political year for China – with Xi Jinping’s planned ascension to a precedent-breaking third term – and for Hong Kong, with Beijing loyalists jockeying for Beijing’s favor to be anointed as the next chief executive. Under those circumstances, it’s unlikely either Beijing or Hong Kong will take the political risks needed to move away from zero COVID. So, sadly, while many in the rest of the world may see the beginning of the end to the pandemic, Hong Kong, and indeed China, show no signs of moving forward

China unveils 10 measures to save energy and cut emissions as it takes steps to achieve 2060 carbon neutral goal
The State Council announced a comprehensive plan for energy conservation and emission reduction as part of the 14th five-year plan from 2021 to 2025    The plan calls for China’s energy intensity to drop by 13.5 per cent in 2025 compared with 2020 levels

China jobs: record number of graduates faced with supply shortage as employment prospects dim amid economic slowdown
The number of jobs available per applicant among fresh university graduates in China fell to 0.88 in the fourth quarter of 2021, according to the results of a new survey    The surveyed unemployment rate in urban areas in 2021 was 5.1 per cent, compared to 14.3 per cent for people aged 16 to 24, according to government statistics

Alibaba’s home province to offer preferential tax policies and promote ‘hard tech’ such as chips and digital security
The local government aims to ease the financial burden for enterprises and individuals by 300 billion yuan in 2022     Policy support is in line with China’s pivot towards core technology areas to help it fend off pressure and sanctions imposed by the US

China’s small and medium firms evolve to seek vitality amid pandemic
Many of China’s small and medium-sized enterprises (SMEs) have been hit hard by the COVID-19 pandemic that is still raging across the globe. Instead of giving in, they have fought a way out of the predicament and are now embracing an even brighter prospect.   Located in the southern Chinese tech hub of Shenzhen, Guangdong Province, Taihua Toys (Shenzhen) Co., Ltd. faced a make-or-break moment in early 2020 as the overseas market is vital for the company.  “Factories stopped running due to the COVID-19 outbreak, and customer orders could not go out as scheduled,” said Liu Wenwei, general manager of the toy maker. He could not help crying when he recalled “the darkest hour” of the company.  Workers still got paid, even without working, Liu said. In the meantime, the pandemic situation overseas led to a sharp drop in orders, and it was hard to find a container to transport goods, making it difficult for the prepared products to be shipped abroad.  Around the Chinese Lunar New Year in 2021, the company’s cash flow was about to wither as it faced a pincer attack from both upstream suppliers’ capital settlement and workers’ wages. Due to the impact of the COVID-19 pandemic, China’s gross domestic product (GDP) shrank 6.8 percent in the first quarter of 2020, according to the National Bureau of Statistics (NBS). Guangdong has the highest concentration of SMEs in China. By the end of 2020, there were over 5.86 million SMEs in the province, accounting for about one-seventh of the national total. Many of them were facing the same dilemma as Liu’s company.

5G adoption in European Union is falling behind US and China, risks missing 2025 target, report says
A study from the European Court of Auditors said EU members should to step up efforts to deploy 5G and address related security issues     Citing a separate, tech-industry study, the ECA indicated that 5G could add as much as 1 trillion euros (US$1.1 trillion) to the European economy and create or transform 2 million jobs between 2021 and 2025.  But such economic rewards require a lot more spending on 5G, whose deployment across the EU until 2025 could cost almost 400 billion euros (US$452 billion), according to the ECA. These funds need to come primarily from mobile network operators, it said. Differences among EU countries over 5G security partly explain the delays in the roll-out of the infrastructure, the ECA said. It highlighted member-state divergences in the treatment of Chinese 5G vendors such as Huawei, which face US allegations of serving the geopolitical ambitions of China’s Communist Party.While the US government has taken a hard line against Chinese suppliers’ involvement in American 5G networks, the European Commission – the EU’s executive arm – has tread more carefully. A key constraint for the European Commission is that national-security decisions remain in member countries’ hands    A majority of member states are set to miss a 2025 target for urban area coverage because of a failure to do things like assign radio spectrum  Although the EU has come up with a “toolbox” to align national approaches to classifying high-risk 5G vendors, ambiguities exist and the whole initiative needs more bloc-wide regulatory teeth, according to the ECA.  “There remains a risk that the toolbox in itself cannot guarantee that member states address security aspects in a concerted manner,” the organisation said.  The European Commission sought to offer assurances on 5G security after the ECA published its report, saying in a statement that it’s “very attentive to reinforcing the security of 5G networks” and that, based on the toolbox, “most member states have managed to protect the most sensitive parts of the networks from high-risk suppliers”.

JD Technology, fintech unit of China’s, engages banks for Hong Kong IPO that could raise up to US$2 billion, source says
The company is working with banks to list shares in Hong Kong this year, with a deal size of between US$1-2 billion, source says   The fourth listing by a JD group company in Hong Kong will see its valuation shrink by at least 35 per cent compared with its previously planned Star Market IPO

What Are the Secrets to Selling Hard Luxury to Gen Z in China?
Traditionally, luxury brands counted on a majority buyer base of older, established, and affluent individuals and a minority of younger consumers using luxury goods as a means to communicate (or attempt to simulate) personal wealth and social status. And while this style of buying continues to this day, over the past three decades the luxury market has become far more democratic, younger, incredibly digital, and far more globalized (i.e., less strictly Eurocentric), with luxury goods seen not only as a way to signal wealth but also as a way to reflect one’s own personal style and taste.    Key drivers of this shift are millennials, those born between 1981 and 1996, and Gen Zers (born between 1997 and 2010). Whereas luxury, in previous decades, was about exclusivity and conveying wealth and status through the object or logo itself, young luxury consumers today are public and open about their consumption habits and eager to share. According to a BCG survey, millennial and Gen Z consumers are 30 percent more likely than the average luxury consumer to talk to others about their high-end purchases, and 60 percent more likely to recommend a brand to others

China food security: new draft rules ‘open the door’ for gene-edited crops
The draft rules stipulate that once gene-edited plants have completed pilot trials, a production certificate can be applied for   Gene editing is a newer technology that is seen as less risky than GM because it does not involve adding any foreign genes to a plant

US-Japan alliance restricting vital tech exports to China risks ‘major impact’ on trade, supply chains
Tokyo and Washington are mulling a multilateral framework to regulate the export of advanced tech to China, according to Japan’s Yomiuri newspaper   Experts say restrictions would be hard to implement because of potential supply chain disruptions, and risk severe damage to China-Japan trade

China-US relations: Blinken says Beijing is bringing more aggression to competitive and cooperative ties
US secretary of state says relationship is growing increasingly adversarial because ‘this is in many ways a different China on the world stage’ But he acknowledges Washington’s own rejection of multilateralism in recent years has allowed Beijing to take a more prominent global role

Allies urged to use US report to help refute Beijing’s South China Sea claims
Washington repeats its stance that it will not accept any of China’s territorial declarations about the resource-rich region   ‘This study is a very important basis on which friends and allies can draw to push back on the claims,’ says US State Department official

US officials urge other nations to push back against Beijing’s South China Sea claims
Senior US State Department officials have expressed hope that the agency’s detailed study concluding China’s assertions in the South China Sea are unlawful will enable other nations to push back against Beijing’s claims.

Chinese Economic Engagement In Africa: Implications For US Policy – Analysis
China may have missed the European Scramble for Africa that characterized the turn of the last century, but it has been making up for this since the 1950s. The pace of this investment has increased in the past couple of decades. According to China’s Ministry of Commerce, Chinese foreign direct investment (FDI) to Africa grew at an average compound rate of 18% per year from 2004 to 2016. FDI refers to business investments made by entities from one country (China in this case) into another country. Lending activities by China in Africa dwarf their FDI investment. Financing of Chinese contracted projects in Africa has also been increasing and peaked in 2015 at USD$55 billion, almost twenty times the level of FDI. Similarly, by 2016, China was the largest exporter to Africa, accounting for 17.5% of African imports. By mid-2017, more than ten thousand Chinese-owned companies were operating in Africa. The largest companies by value are State-owned enterprises that dominate in energy, transportation, and resource sectors. Indeed, since 2010, a third of Africa’s power grid and infrastructure has been financed and constructed by Chinese state-owned companies.

Beijing takes to the ice as Winter Olympics approach
Unlike a lot of other winter sports, ice skating has long been a popular sport across the north of China. The country’s capital Beijing, which is also hosting the Winter Olympics, is no exception. With just about a week to go before the Games begin, the BBC’s China correspondent Stephen McDonell spent a day on the ice with some residents from the city. He asked them about their love for ice skating and how they felt about the upcoming Games, which are taking place under strict coronavirus restriction

Forced Prison Labor in China: Hiding in Plain Sight
Two years after a 6-year-old discovered a plea for help in a package of Christmas cards, newly released prisoners detail their accusations – and the prison’s cover up when the scandal broke.

Tencent fires 70 people and blacklists 13 firms in anti-fraud campaign
Chinese internet giant Tencent fired 70 people and blacklisted 13 firms last year as part of anti-graft campaign. The latest internal investigation comes after a year of tightening regulation on China’s technology sector and as Beijing scrutinizes the practices of the country’s internet titans.

Gaming for the China Story
When Xi Jinping presided over a collective study session of the Politburo on “international communication work” last May, urging his comrades to “build a credible, lovable and respectable image of China,” he probably did not envision telling the story of a teenage girl resurrected from the dead on a journey of revenge across a post-apocalyptic American landscape. But this, say some enthusiastic young Chinese, is the real way into the hearts – and the pockets – of global gamers, and perhaps a more effective way of “telling China’s story well.”

China launches internet ‘purification’ campaign for lunar new year
China has launched a month-long campaign to clean up online content during next week’s lunar new year festival, in its latest effort to reshape behaviour on the internet.  The Cyberspace Administration of China, the country’s top internet regulator, has instructed officials to sweep away “illegal content and information” and target celebrity fan groups, online abuse, money worship, child influencers and the homepages of media sites.   The campaign will apply the tradition of cleaning house before the new year, the most important holiday in China, to the internet, envisioning a “purification” of the online world. The edict is the latest step in Beijing’s clampdown on the entertainment industry as authorities purge content deemed immoral, unpatriotic and non-mainstream from online culture.  President Xi Jinping has unleashed a broader effort to reshape Chinese social mores and culture, diminishing materialism and western influence in favour of a more nationalistic and homegrown approach.  Xi’s government has launched a “common prosperity” drive to push for greater wealth distribution, which has prompted a surge of charitable giving by technology sector tycoons, as well as stepping up tax probes and penalties against wealthy individuals.  Officials have even mandated that television shows and movies include celebrities’ nationalities in the credits to name and shame those who have given up Chinese citizenship.  Censors have also escalated their culling of content deemed to be misaligned with the Communist party’s priorities.

Opinion | China’s Zero-Covid Policy Is a Pandemic Waiting to Happen
Over the next few years, most people in the world, including China, are likely to be exposed to the coronavirus. With an incubation time potentially as short as three days, and many infected people being asymptomatic, the virus will spread rapidly. By the time an outbreak is identified, it will have moved to another city.   We can begin to see the future in many Chinese cities, most prominently in Xi’an, more than 600 miles from Beijing. Last month, the government locked down Xi’an’s 13 million residents in response to a relatively small outbreak of the Delta variant, which is less transmissible than Omicron. This strict lockdown lasted about three weeks. There also has been spread in Tianjin, a city near Beijing. Alarmingly, epidemiological research on a sizable number of the people infected with Omicron in Tianjin found that about 95 percent of them had been fully vaccinated with the Chinese vaccines. And on Jan. 15, Chinese officials said Beijing’s first case of the Omicron variant had been found, leading to a localized lockdown and mass testing.

Xi Jinping pledges US$500 million in aid for Central Asian nations
Chinese president tells leaders the funds will be provided over the next three years for ‘projects involving people’s livelihoods’    He also hit out at other countries ‘using human rights as an excuse to intervene in domestic politics’ during virtual meeting

China steps up drive against cyberbullying, fake news, online scams during Lunar New Year holiday
The Cyberspace Administration of China launched the month-long campaign to ensure a ‘healthy, festive and peaceful’ online environment during the holiday  The move comes as China implements renewed curbs against the Covid-19 pandemic, disrupting travel plans for many among the world’s biggest internet population

Why China’s Global Image Is Getting Worse
China’s public image “remains broadly negative” in many countries, according to a study by Pew Research Center. In Australia, a place where the public held a positive image of China in the late 2010s, only about 20 percent of people have a positive image of it today. In Japan, just 10 percent of people have a favorable image of China. In addition, prominent opinion leaders in many nations are now implementing diplomatic boycotts of the Winter Olympics, and even some of Beijing’s most ardent past supporters, such as trade organizations, have increasingly expressed dissatisfaction and anger with China.

China Faces a Host of Problems and the Olympics Haven’t Even Started
While Xi’s “China Dream” of prosperity has become reality for hundreds of millions of people, extending these gains to a population with rising expectations for a bright future won’t be easy. China is still a middle-income country. To reach Western levels of prosperity, it needs 6% to 7% growth for another generation. That goal now looks nearly impossible to achieve, because the growth engines that have powered China forward in recent decades are running out of steam. First, a reshoring of manufacturing away from China and advances in robotics have cut into China’s lower-wage advantage. Second, its demographics are discouraging. China announced that birth rates have fallen for the fifth consecutive year. In coming years, a shrinking workforce will weigh on growth, and that smaller number of workers will have to support a fast-growing population of elderly people. The state’s shift from a “one-child policy” to a “two-child policy” and now a “three-child policy” hasn’t helped. Xi has promised that China will achieve a “common prosperity” that reduces income inequality by redistributing wealth across regions, income groups and economic sectors. But for now, the country looks to be getting old before it can grow broadly rich. China also has a debt problem. In particular, it has relied heavily for economic growth on easy credit for property and other speculative investments. Too often the institutional borrowers who have accepted much of this money expect government help and protection if they struggle to repay. Xi knows China’s domestic tranquility, and its national security, depend on financial stability. To avoid a banking crisis and an economic crash, China’s government has tried to clean up the business of borrowing and lending. But the various fights in recent months over the fate of possibly “too-big-too-fail” companies, like the deeply indebted property developer Evergrande, make reform much easier to promise than to deliver. For the 2022 Winter Games, China’s leaders have a more immediate problem. Throughout the pandemic, the state has sharply limited the number of COVID-19 infections within the country’s borders with a “zero-COVID policy.” It has used digital devices to track and trace infections, and its tight, highly centralized political control to enforce lockdowns of a large number of people. In 2020, this policy was among the world’s most effective, and helped China to be the only major economy to experience growth that year. Not so much now. It’s much harder to build a fence around the Omicron variant, which is far more infectious if less dangerous for those who’ve been fully vaccinated. China has yet to roll out its own versions of the mRNA vaccines that have proven so effective. As China prepares for its new moment in the Olympic spotlight, it faces the most highly transmissible form of COVID-19 yet. Compared with America and Europe, it has a much smaller percentage of people protected by previous infections or access to the most effective vaccines. That’s why foreigners can’t attend the Games as spectators, and why domestic audiences will enter by invitation only. More than 20 million people across China are currently locked down. All of this comes at a time of economic slowdown. Fourteen years after China’s debut as Olympic host, the spotlight is getting much hotter.

Alain Gillard
Information Officer
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