Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – January 5, 2022

Despite rate cuts, aggressive Chinese monetary policy easing is not on the cards
With a property slump and pandemic-induced weak consumption dragging down the economy, the PBOC has limited room for manoeuvr. Policymakers will not want to undermine the policy goal of curbing property speculation, and their hands are tied in the face of the zero-Covid policy.

China’s cbank set to step up cash injection before Lunar New Year holiday – CSJ
China’s central bank is set to “timely replenish” liquidity shortfalls before the Lunar New Year holiday, the state-owned China Securities Journal said on Wednesday.   The People’s Bank of China (PBOC) will likely step up cash injections through open market operations into the banking system from the second half of the month to meet rising demand for cash from both companies and households ahead of the week-long holiday, which starts from Jan. 31 this year, the official newspaper reported.

Chinese banks cut back traditional lending as concern over economy mounts
Chinese banks rushed to meet their annual state-imposed lending quotas last month by buying up low-risk financial instruments rather than issue loans, a surge that bankers and analysts said reflected financial institutions’ wariness about the country’s slowing economy.

What China’s New Payment Rules Mean for Alipay, WeChat Pay
Regulations set to take effect March 1 aim to get small businesses to stop taking customer payments through barcodes generated by person accounts on the platform.

China’s expat tax breaks extension praised by Western companies, but business concerns remain
European Chamber of Commerce in China says decision will ‘stem the flow of foreign talent’   Protectionism, an opaque regulatory system and travel restrictions still frustrate multinationals

China’s Covid policy will be a wild card for markets in 2022
How long will China keep its zero-Covid policy? The choice Beijing makes is one of the greatest wild cards for 2022. The consensus is that China’s stance will ease after the Winter Olympics in February. This would boost consumption and stabilise the economy following its sharp slowdown last year. But Beijing is more likely to keep its current strategy of strict lockdowns and closed borders until the end of 2022. Stringent controls in China will thus keep influencing financial markets globally.

China’s Unpredictable, Heavy-Handed Governance Threatens Growth
China enters 2022 with a bit less swagger than a year earlier. A roaring economic comeback then has since been tripped up by Covid-19 lockdowns, energy shortages and a cooling property market. Declining births and worsening international relations cloud the longer-term outlook.    But what alarms some close observers of China’s economy isn’t any one of these challenges: It’s the government’s unpredictable and heavy-handed process for dealing with them. Last year, this manifested itself in sudden and disruptive bans on online tutoring, campaigns against effeminate celebrities, on-and-off restrictions on burning coal and regulatory assaults on consumer Internet companies. To be sure, forthcoming data should show China still grew solidly last year. And Chinese leaders seem to have earned the benefit of the doubt. With their blend of state and market, dubbed “socialism with Chinese characteristics,” they have presided over spectacular growth since 1978.   It’s important, though, to understand why. This didn’t reflect the enlightened interventions of state overseers,

China will ensure stable economic growth in Q1, premier says
The government will implement greater tax and fee cuts for businesses and would provide targeted support for Covid-affected sectors such as services, Li was quoted as saying. PHOTO: REUTERS
[BEIJING] China will ensure stable economic growth in the first quarter of 2022, state radio quoted Premier Li Keqiang as saying on Wednesday.   The government will implement greater tax and fee cuts for businesses and would provide targeted support for Covid-affected sectors such as services, Li was quoted as saying.   China would extend existing tax breaks and increase deductions for research and development (R&D) expenses when companies calculate their income tax, Li added.

Asia’s top risk in 2022 will be U.S.-China tensions over Taiwan, says political risk analyst
The tense relationship between the U.S. and China over Taiwan will be the main challenge for Asia in the year ahead, according to a political risk analyst.   Beijing sees any move by Washington on Taiwan as negative or infringing on its interests, said D.J. Peterson, president of Longview Global Advisors.

China Evergrande to meet local bondholders, seek delay of payments that they can demand as early as Saturday
Firm’s China unit Hengda to hold an online meeting with bondholders about a 4.5 billion yuan note with a January 8 put option    Trading in Evergrande bonds will be halted from Thursday ahead of the meeting

Evergrande crisis: four grandiose projects that sum up indebted Chinese developer’s ‘reckless expansion’
Troubles haunt some of Evergrande’s lavish and grandiose projects as developer runs out of cash, loses control of developments     Evergrande was last week ordered to demolish 39 structures at Ocean Flower Island in Hainan, adding to its woes

As China ramps up environmental efforts, property developers face more scrutiny, says fund manager
China’s property developers could come under come greater scrutiny for flouting environmental laws, as Beijing steps up efforts to reinforce rules, according to one portfolio manager.  The latest move by Chinese authorities to order indebted property developer China Evergrande to demolish 39 buildings of its Ocean Flower Island project came as a surprise to many, said Teresa Kong, head of fixed income at investment firm Matthews Asia.    “The environmental wildcard is one that we should consider — not only for developers, but also for many other industries that under scrutiny, as China really does step up in terms of environmental protection,” noted Kong.

Chip makers poised for third year of growth, defying boom-and-bust trend in semiconductors
If estimates about semiconductor sales increases in 2022 pan out, it would reverse a decades-long trend where high production leads to chip gluts      Chip makers like Intel are betting this time is different given that semiconductors are now found in so many devices, not just computers and mobile devices

China Mobile shares rise in Shanghai debut after US exit
China Mobile shares have risen as they started trading in Shanghai after raising $7.7bn (£5.7bn) in China’s biggest public offering in a decade.

Huarong debt saga shows Beijing’s continued influence on markets
When China Huarong Asset Management failed to announce its financial results in April last year, investors sought to read the political runes of the country’s largest non-performing loan manager.
Lai Xiaomin, the former chairman of the company It has been executed For corruption just a few weeks ago. In the absence of an official statement on the outcome of Huarong Asset Management, investors began to wonder if broad expectations for government support were misguided this time.
Huarong Asset Management, a majority-owned and international major borrower, has expanded far beyond its initial authority during Rye’s tenure. It suddenly became a test case for Beijing’s approach to corporate failure.

China’s business crackdown threatens growth and innovation
In the fall of 2018, an article published in the Chinese media by a Beijing banker shocked the Chinese business community. Its author declared that the historic mission of private enterprise was about to be fulfilled and that communist ideology would no longer support its continued expansion. The article was so widely shared and caused such consternation that the Communist Party spoke out to calm nerves.   Then, in November 2020, Ant Group’s initial public offering, which was scheduled to raise $ 37 billion, was suspended after an intervention by the Chinese regulator. And in July last year, prominent businessman Sun Dawu was sentenced to 18 years in prison for, among other crimes, “causing trouble.”

China’s internet watchdog posts revised app rules to tighten cybersecurity provisions even further
It requires that app providers carry out a tough security assessment before launching ‘new technologies, new applications and new functions’    The new amendments come amid a huge overhaul of China’s legal framework for online security and privacy in the past few years

Opinion: In Asia, China fills an economic void the United States left
There were no fireworks or fanfare to mark the occasion, but in addition to being the start of a new year, Jan. 1, 2022, marked Day One of a new economic and geopolitical reality in East Asia. It figures to be advantageous for China and unfavorable for the United States — and, to make matters worse, this outcome is due largely to this country’s own policy errors, under both former president Donald Trump and President Biden. At issue is the Regional Comprehensive Economic Partnership, or RCEP, a new trade agreement that 15 countries — including China, Japan, South Korea and Australia — signed Nov. 15, 2020. It took effect for most of them this New Year’s Day. Spearheaded by smaller countries that are grouped in the Association of Southeast Asian Nations, the deal reflected ASEAN members’ interest in greater regional integration, which they hope will defuse long-standing political differences between China on the one hand and democracies such as South Korea and Japan on the other.  The deal covers 2.3 billion people accounting for $25.8 trillion in output, as well as $12.7 trillion in trade, according to the World Bank. It aims to phase out all import tariffs among signatory nations within 20 years and create common rules for intellectual property and e-commerce. And yet its provisions in both of the latter two areas are weak, reflecting China’s preferences; it also lacks labor and environmental standards consistent with what U.S. analysts consider a “high quality” trade agreement. What’s more, RCEP’s tangible economic impact is likely to be incremental rather than transformational: $500 billion in additional world trade, by 2030, according to a Brookings Institution analysis. (Total trade was roughly $19 trillion in 2019, the last pre-pandemic year.)   What cannot be denied is the agreement’s geopolitical significance. Quite simply, this is the sort of thing that happens when the United States abandons the task of shaping economic integration. President Barack Obama had tried to forge a 12-country Trans-Pacific Partnership under U.S. leadership, whose members would have included seven RCEP signatories, plus Canada, Mexico, Chile and Peru — but not China. (South Korea and the United States already have a separate trade promotion accord.) Mr. Obama’s wise goal, which enjoyed bipartisan support, was to foster economic integration on U.S. terms, not China’s.

Elizabeth Economy on ‘The World According to China’
“China’s ability to influence the behavior of international actors is often less than we believe.”  Governments, the media, and educational institutions all have an important role to play in ensuring that efforts to constrain malign PRC behavior do not contribute to attacks on the Chinese diaspora. This means not conflating the Chinese government with people of Chinese descent and avoiding policies and language that perpetuate and inflame racism. In addition, when responding to Chinese influence operations, countries need to take the time necessary to understand the precise nature of the threat in order to develop the most effective response. This is particularly important when policies have the potential to harm innocent people’s lives and reputations (such as those designed to identify scientists engaged in Chinese-government sponsored espionage in university and national labs).  Finally, the Chinese diaspora has an important role to play in holding both host countries and China accountable. In the United States, for example, Chinese American community leaders rightly draw attention to cases in which the government needlessly ruins the careers of Chinese American scientists through false accusations of scientific espionage. It is equally important that this community defend American values in the face of Chinese coercion, for example, by publicly defending the rights of Chinese students in the United States to voice their opinions freely and without fear of Chinese government coercion.

Germany’s Dangerous (Economic) Entanglements: Chinese Edition
That Germany’s increasing reliance on natural gas from Russia (a reliance that, one way or another, will be boosted further by the shuttering of three nuclear power stations at the end of December) may limit the extent to which Germany will be prepared to push back against Vladimir Putin has, rightly, been a concern for years.    But what about Germany’s dependence on China?    Despite China’s appalling human rights record and its expansionist policy towards Hong Kong and Taiwan, Germany’s new chancellor is happy to continue Merkel’s work in cosying up to China. In his first telephone conversation with Xi, Scholz failed to press him on any problematic issues; instead he assured him that ‘Germany wanted to continue to work with China in a spirit of mutual respect and trust.’ Diplomatic insiders claim that Scholz reassured Xi of a continuation of Merkelian policy even before he officially took over as chancellor. He is said to have promised to work towards lifting the suspension of the EU-China [trade] deal. [Progress towards its ratification was halted after objections in the European Parliament.. . . It isn’t only political considerations that have shaped Scholz’s China-friendly approach. Germany’s automobile and machinery industries combined account for well over half of Germany’s exports to China; this surely explains why many German business leaders in these areas have nothing but praise for China. Siemens boss Roland Busch has recently called for a ‘respectful exchange’ with the People’s Republic which ‘has every right to be confident. In the last 20 years it pulled one billion people out of poverty and established a veritable middle class.’ Politicians who represent regions with strong economic ties to Beijing, like the Liberal Hans-Ulrich Rülke in Baden-Württemberg, agree that the new government ‘must not forget what an important economic and trading partner the People’s Republic of China is.’

Scholz tells Xi he wants to ‘deepen’ economic ties with China
Readouts of a first phone call between the new German chancellor and the Chinese president do not mention human rights. A German readout of the call was less specific, saying both leaders “discussed, among other things, the deepening of the bilateral partnership and economic relations, the development of EU-China relations and international issues.” Scholz’s office did not reply to a request for comment on whether the Chinese readout correctly represented his remarks about the EU-China deal. Notably, neither of the readouts referenced any discussion about China’s human rights situation or Sunday’s controversial election in Hong Kong, which EU foreign policy chief Josep Borrell described Monday as “a violation of democratic principles and political pluralism.” The German coalition agreement said the new government would “clearly address China’s human rights violations, especially in Xinjiang.”   According to the Chinese readout of the call, Scholz said he would seek “to host a new round   of German-Chinese government consultations, strengthen practical cooperation in clean energy, digital economy and service industries.”Xi said he hopes “that Germany will continue to play a positive role in stabilizing China-EU relations and continue to inject stability and positive energy into China-EU relations,” according to the document.

Europe Struggles to Meet China’s Trade Challenge
China’s economic pushback against the European Union over Lithuania’s outreach to Taiwan has sparked divisions in the EU and raised fresh doubts about its ability to shield its giant market from Beijing’s pressure.  China in recent weeks has effectively blocked Lithuanian firms from its market and started pressing European and U.S. firms with Lithuanian suppliers to cut those ties or risk being frozen out, according to U.S. and European officials. The Chinese pressure came after Taiwan in November opened a representative office under the island’s name in Lithuania’s capital, a move Beijing called an “egregious precedent” and vowed to retaliate. Most Taiwanese offices abroad use the name of Taiwan’s capital, Taipei.   China’s economic measures, which were never officially announced, show Beijing remains able to sidestep growing EU moves to defend its market from China’s economic behavior. The EU holds authority over member states’ trade policy.   Since 2019, the bloc has announced policies aimed at helping its companies compete with Chinese rivals and to gain leverage for European firms in China.   Yet the response from European capitals to China’s pressure on Lithuania has been muted. Some diplomats have been critical of the Baltic country’s decision to challenge Beijing over Taiwan, a politically charged issue for President

US-China reach trade talk ‘stalemate’ despite expiry of phase-one deal as Beijing, Washington remain silent
Talks between Vice-Premier Liu He and US Trade Representative Katherine Tai and US Treasury Secretary Janet Yellen have yet to happen   China’s two-year commitment to buy an additional US$200 billion of American goods and services expired last week, with indications are that it has fallen around 40 per per cent short

China’s outgoing EU envoy to lead Shanghai Cooperation Organisation. Can the group punch its weight?
Zhang Ming is to take over as secretary general, making him the first Chinese to head the Eurasian grouping since 2006   His appointment could extend China’s influence in the group, which – much like the European Union – has sometimes been described as a ‘talking shop’

IKEA fails to please Chinese consumers despite promising a price increase lower than the global average
IKEA has hiked its prices globally, by an average of 9%, after the Christmas season and blamed the increase in costs on the supply chain. Including raw materials, transport, and logistics as reasons for the increase, ultimately caused by the pandemic. Soon after the group’s announcement, a staff member of IKEA in mainland China provided more clarity on 31 December as to how the retailer’s global price adjustment would affect the Chinese market “There had been some price adjustments made to our products by the parent company, but the price adjustment level in the Chinese mainland market is lower than the average increase of price worldwide

China could stay shut for all of 2022: Goldman Sachs
Evidence Sinovac offers limited protection for Omicron will reinforce resolve to stick with ‘zero COVID,’ analysts say

Account of life in locked down Xian highlights ‘costs’ of zero-Covid policy
Journalist Jiang Xue says neighbours have been swapping food to deal with supply shortages and encouraging each other after ‘making it through another day’      She says workers tasked with delivering supplies are overstretched and can’t meet demand, and people offering to help can’t get the permit needed to leave home

Epidemiologist: ‘Xi’an COVID Wave Worst in China Since Wuhan’
The chief epidemiologist of China’s Center for Disease Control (CDC) has said that the current outbreak of COVID-19 in the Shaanxi provincial capital Xi’an, is the worst in China since the lockdown in Wuhan, which was implemented in January 2020.    Zeng Guang pointed out that Xi’an was facing an outbreak of the Delta variant, which is more transmissible than previous variants which led authorities to impose a lockdown in Wuhan and later led China to restrict international travel.

Coronavirus: cases in Xian may be slowing but anywhere in China could be next, says health expert
Xian, whose residents have been locked down for almost two weeks, reported 35 Covid-19 cases on Wednesday, a drop from 95 the day before      Zeng Guang, former chief epidemiologist at China CDC, says chains of infection in Xian have not been obvious compared with previous outbreaks

Are ‘Sponge Cities’ the Answer to Shenzhen’s Water Scarcity?
Shenzhen is facing its worst drought on record. Can authorities find a holistic, long-term solution? As such, they are activities inspired and supported by ecosystem processes to fulfil human and societal needs, and can play a role in protecting rivers for people and nature by strengthening community resilience, particularly in urban contexts. Implementing NBS in Shenzhen and its hinterlands could protect and restore the ecosystem services, providing a long-term sustainable water supply to the Greater Bay Area.  Nonetheless, implementing NBS is not without concerns. The first challenge is developing a fair payment mechanism to support environmental and ecological restoration in water resource regions. The second concern is the establishment of monitoring systems, which are needed to understand both the current and future state of the environment. These systems are also needed to support governments and policymakers in making informed decisions on river basin management. The third issue is stakeholder participation. Stakeholders in this instance include not only governments (local and central) and institutions, but also various interest groups such as non-governmental organizations (NGOs) and the public. With each stakeholder having a vested interest in river basin management and achieving sustainable development, also falling in line with China’s dual aims of “ecological civilization” and “beautiful China,”  differences of opinion are likely. As policy formulation and implementation does not reflect the goals of all stakeholders, whose opinions should be prioritized over others? To tackle water scarcity in Shenzhen, sponge cities should be regeared from reducing flood risks and runoff pollution to reducing freshwater demands and increasing water supply through rainwater and wastewater reuse. Further, green solutions must be expanded beyond sponge cities to wider river basins. Doing so will enable the development of integrated water resources management plans to sustain long-term water security across the Greater Bay Area.

China military: Xi Jinping stresses need for hi-tech training for troops
The People’s Liberation Army must develop ‘an elite force that is capable of fighting and winning wars’, he says as military begins this year’s exercises    Multiple hotspots will require the PLA to develop a combination of strategies and capabilities for different circumstances, analysts say

Taiwan should destroy chip infrastructure if China invades: paper
U.S. scholars propose deterrence strategy to make island ‘unwantable’ “Despite a huge Chinese effort for a ‘Made in China’ chip industry, only 6% of semiconductors used in China were produced domestically in 2020,” the paper notes. The People’s Liberation Army’s goal for a successful invasion is 14 hours, a Chinese analyst with connections in the PLA Navy told the authors, while the PLA projects the U.S. and Japan to need 24 hours to respond. Meanwhile, the paper proposes making efforts to convince Beijing of the “considerable advantages” to maintaining the status quo. “Washington must restate in unambiguous terms the status of Taiwan is undetermined, that the United States has no plans to support independent statehood for Taiwan, and it will not seek to shift the status quo using gray-zone tactics that violate the spirit of Sino-American rapprochement,” the authors write.

China-US space race heats up as Chinese firm plans over 40 launches this year
CASC forecasts an arduous year ahead to ‘accelerate the development of China as a space power’   China’s aims this year include finishing the Tiangong space station and signing a five-year agreement on space cooperation with Russia

Alain Gillard
Information Officer
Service Asie Pacifique
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