China Press Review – July 5, 2021

No more a victim: China must leave its past behind and embrace its strength
China’s ‘century of humiliation’ is long over. As it looks to the next 100 years, the focus should be on how it can help to improve the world. It must continue to caution against the use of force to discourage wars, share its anti-poverty lessons and encourage healthy competition with the US.

Growth in China’s June services activity falls to 14-month low: Caixin PMI
Growth in China’s services sector slowed sharply in June to a 14-month low, weighed down by a resurgence of COVID-19 cases in southern China, a private survey showed on Monday, adding to concerns the world’s second-largest economy may be starting to lose some momentum.

Container shipping costs at record high
Container shipping prices have reached record highs some 18 months after the outbreak of the coronavirus pandemic which disrupted maritime logistics chains and drove demand sky-high. “We are basically running out of vessels and of empty containers,” said Alan Murphy, head of the consultancy Sea Intelligence. “There’s been a massive shortage of empty containers, they are in the wrong place, they are stuck in ports and not in Asia ready to be loaded.” The Freightos Baltic Index, a benchmark for major shipping routes, has more than tripled in a year to nearly US$7,000 for a trip from China to the west coast of the United States. A trip to Europe has exceeded US$10,000, from just US$1,600 at the same time last year.

What happens if Chinese household wealth is unleashed on the world?
Tentative steps at liberalisation reflect fears over the strong renminbi and risks of a bubble in domestic markets  The $23bn total through the Wealth Connect scheme will not move global markets, but if Beijing is laying the groundwork for further reform, that cap could change in time. Citi’s Aldcroft notes that hundreds of millions of people in China have already bought into some form of domestic mutual fund, which he says are currently more than 99 per cent targeted towards the domestic markets. Diversified investments overseas — the kind that help build stable retirement systems and insurance markets — would continue a long-term pattern in which the Chinese middle class flocks to buy the staples of its western counterparts. Its policy approach, though, is equally liable to change course despite its gradual trajectory. “Ultimately everything about China is about control, keeping control, maintaining control,” says Aldcroft. “And it’s not going to let things get out of control.”

China tech investors may find that Pekingology is a must-learn term
Despite massive amounts of Western money flowing into China, helping entrepreneurs better connect with consumers, investor concerns may be on the rise     It is getting harder to tell a good China business story by just using terms that US investors can easily understand    More importantly, it’s getting harder to tell a good China business story by just using terms that US investors can easily understand –
Nothing better reflects the sweet financial marriage between China and the West than this model: venture capitalists from the West Coast of the United States provide funding to the brightest entrepreneurs in China, helping them reach hundreds of millions of Chinese consumers in a short time span via internet technologies. Then Wall Street banks arrive to help them walk through the legal and regulatory labyrinth before an eventual public offering on the New York Stock Exchange or the Nasdaq. Hundreds of billions of dollars flowed across the Pacific over the last two decades. For every week in the first half of 2021, there’s one Chinese technology company making an initial public offering in the US. They raised US$12 billion in total, or about four times as much as in the first half of 2020. i.e. user base, market share, revenues and earnings.   As Beijing becomes increasingly impatient with the profit-centric focus of the country’s tech giants at the expense of the public’s best interests, oversight officials are changing the game’s rules by adjusting laws and the regulatory structure.The changes could disrupt or even overthrow proven business models. For instance, a start-up can no longer thrive in China simply by gathering massive amounts of user data and then applying smart algorithms to turn the users into potential consumers, because the cost of acquiring and managing data is set to rise steeply.   To understand where the real value lies, investors in China’s tech stocks may need to spend as much time studying the latest policies and practices out of Beijing – known as Pekingology – as they do reading corporate financial statements.

After Didi, China Targets Other Companies Over Data Security Risks
The probe is the latest step by authorities to scrutinize the country’s thriving tech sector.

Didi says removal of app in China will affect business
China’s biggest ride-hailing company Didi Chuxing has warned there will be an adverse impact on its revenues after its app was removed from Chinese stores.

China’s Cybersecurity Regulator Targets More U.S.-Listed Tech Companies After Didi Investigation
China’s cybersecurity officials have launched investigations into three more apps operated by U.S.-listed companies, just one day after they ordered the country’s smartphone app stores to remove Didi Chuxing over the misuse of customers’ personal information. Chinese regulators are clamping down on the country’s tech companies through tighter regulations on data security.

As China’s foreign currency deposits pass US$1 trillion, banks face unwanted headache, yuan pressure
China’s foreign exchange deposits hit US$1.01 trillion at end of May, up 35.7 per cent from a year earlier, having surpassed US$1 trillion for the first time in April    China is also seeing rising capital inflows from other channels which continues to place unwanted upwards pressure on the yuan exchange rate   Overseas lending through Chinese banks to projects under the Belt and Road Initiative has actually been decelerating rapidly, partly because of credit concerns and partly due to a decline in financing of coal-fired power plants as the industry gradually shifts away from fossil fuels into renewable energy, said Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis.  “It is obvious that the operations are becoming smaller [in the belt and road project],” Garcia-Herrero said. “We will see defaults, and for that you will need writes offs and for that you will need capital.”  There have been speculation that private sector financial institutions have been carrying out shadow intervention to suppress the yuan’s appreciation on behalf of the PBOC, although there is not enough proof for the assertion at this stage, Hu said. “But if the yuan continues to strengthen, it will become harder and harder for banks and exporters to hoard more dollars, given the potential loss from currency mismatch and negative carry,” Hu explained, meaning that banks could struggle with low yielding and depreciating foreign assets as the yuan continues to appreciate.

3 ways Asia can recover from the Covid-19 pandemic faster
Countries in the East Asia and Pacific region will benefit from cooperation in three major areas: vaccine deployment, reviving sectors of the regional economy, and building on their close integration into global value chains  One, ending the pandemic. The region can work together on vaccine production and deployment within a global context of greater supply and cooperation. Some countries, including Indonesia, Thailand and Vietnam, are already looking at expanding production capacity.   Second, collaboration is also needed in reviving the economy. Poverty has spiked in East Asia and the Pacific since early 2020 as entire sectors and industries, including tourism, remain shuttered. Governments have increased fiscal stimulus and social protection schemes, but these efforts have often fallen short as economies struggle to cope with the most recent waves of infections.   Three, regional integration could be deepened. Early in the pandemic there was much talk about the disruption of global value chains, as imports were interrupted and some countries faced shortages. World Bank research, by contrast, shows that close integration into global value chains reduced the vulnerability of East Asian economies during the pandemic, and that the Covid-19 shock has in fact deepened the region’s trade integration

China’s local governments roll over more debt to ease risks
Local governments in China have more than doubled bond sales to roll over maturing debt this year, helping to ease their repayment risk, reported Bloomberg.  Cities and provinces sold about RMB 1.9 trillion ($293 billion) of refinancing bonds in the first six months of the year, according to data from the Ministry of Finance and compiled by Bloomberg News. That’s a sharp increase from about RMB 700 billion sold in the same period of 2020, and RMB 660 billion in 2019. The refinancing bonds are sold to replace maturing securities, reducing pressure on local authorities to pay back the debt. “The amount of debt due will keep growing, so the scale of refinancing isn’t likely to fall,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc in Hong Kong. “That’s the case unless policy makers seriously look to reduce the absolute value of the debt, which is unlikely.”

China’s economy sees new pockets of growth in rising shopping trends
Chinese brands were able to adapt more quickly to local trends than foreign brands last year, according to the latest “China Shopper Report” from Bain & Company and Kantar Worldpanel.   People living in smaller cities were also more willing to spend last year than those living in large ones, the report said.  However, Chinese consumers overall are more price sensitive than before, the analysis found.

US-China tech war: How this local chip firm has taken off in China as Huawei still reels under US sanctions
Sales have also been helped after Honor, the budget brand spin-off from Huawei, decided to use Unisoc chips for its latest phone model    Unisoc, a subsidiary of Chinese state-backed semiconductor conglomerate Unigroup, climbed into the top five with total shipments of 800,000 units in May

How China’s influencer factories mint live streamers to feed China’s billion dollar e-commerce industry, selling everything from lipstick to rocket launches
Viya, known as China’s live-streaming diva with over 80 million followers on Alibaba’s Taobao, started at Xinhe in 2017, making it a Mecca for others    China’s live-streaming e-commerce market posted annual growth of 121.5 per cent last year to reach 961 billion yuan

Alibaba restructures operations to form life services division to take on Meituan
The new division includes digital mapping platform AutoNavi, online travel business Fliggy, and local services platforms and Koubei    t is poised to ramp up competition with on-demand local services and food delivery giant Meituan

Is China’s ‘global energy internet’ plan growing in power? Yes, but not as President Xi Jinping envisioned
Ever since President Xi Jinping pitched the idea of a “global energy internet” to the United Nations six years ago, China has been trying to persuade the world to build the high-voltage highways that would form its backbone. That plan to wrap the planet in a web of intercontinental, made-in-Beijing power lines has gone pretty much nowhere. Yet the fortunes of so-called supergrids appear to be turning, if not on quite the spectacular, Bond-villain scale Xi first envisaged. China has both a manufacturing and technological edge in ultra-high-voltage direct current (UHVDC) transmission lines, and has taken a lead in proposing global technical standards and governance for them. If Xi’s plans are ever realised, those are advantages that some believe could have profound geopolitical implications, granting China power and influence similar to that which the United States gained by shaping the global financial system after World War II. Yet it is not China that is driving renewed interest in cables that can power consumers in one country with electricity generated hundreds, even thousands of miles away in another. Instead, carbon-neutrality commitments, technological advances and improved cost incentives are accelerating a broad expansion of renewable power generation.Coal, gas and even nuclear plants can be built close to the markets they serve, but the utility-scale solar and wind farms many believe essential to meet climate targets often cannot. They must be located wherever the wind and sun are strongest, which can be hundreds or thousands of miles from urban centres. Long cables can also connect peak afternoon solar power in one time zone to peak evening demand in another, reducing the price volatility caused by mismatches in supply and demand as well as the need for fossil-fuelled backup capacity when the sun or wind fade.

The ‘Most Complicated Machine’ of the Cold War That’s Out of China’s Reach
President Biden and many lawmakers in Washington are concerned these days about China’s ambitions with computer chips and basic technology.   But a giant machine sold by a Dutch company has emerged as an important lever for policymakers – and it shows that any country’s hopes of building a completely self-sustaining supply chain in semiconductor technology are unrealistic.

Is China a cybersecurity threat the US should lose sleep over?
A close reading of a report on cyber capabilities and national power raises questions about whether China really has the offensive aspirations that keep the US intelligence community awake at night, rather than a defensive obsession built on a century of turmoil at the hands of foreign powers

China’s first-half mutual fund sales hit record as industry boom continues amid lacklustre stock performance
Onshore money managers sold 1.6 trillion yuan (US$248 billion) of newly launched funds, an all-time high for the six-month period, according to the Securities Times   The euphoria for mutual funds shows no signs of abating in spite of the dreary performance of stocks in 2021

Sinopec says it has started building China’s largest carbon capture project
The project involves capturing carbon dioxide from Sinopec’s Qilu refinery during a hydrogen making process and then injecting it into 73 oil wells in the nearby Shengli oilfield    Company estimates that 10.68 million tonnes of carbon dioxide will be injected, which will boost crude production by nearly 3 million tonnes

China’s steelmakers need cleaner process to put climate goals in reach, report says
Industry is the second-largest carbon emitter after the power sector, but this could be reduced if it moves to electric, according to US think tank    It also estimates steel producers could be saddled with US$70 billion in stranded assets if they continue building new blast furnaces using coal  The industry regulator in April said steel capacity and output would be reduced this year to achieve peak emissions sooner. That was after crude steel output increased by 5.2 per cent last year to a record 1.05 billion tonnes in response to a fast recovery in construction and manufacturing demand following a slump caused by the Covid-19 pandemic.  Swalec from Global Energy Monitor said China “should strictly enforce capacity production limits, with clampdowns primarily on the higher emissions BF-BOF plants”. “It could also use their capacity-shifting policies to incorporate emissions reduction strategies like requiring that capacity be shifted from BF-BOF processes to EAF-based processes,” she said.

How the West can learn from China’s Belt and Road Initiative and vice versa
The G7’s Build Back Better World plan, US Blue Dot Network and EU’s connectivity strategy can learn from China in offering more flexibility to the global south     Meanwhile, the Belt and Road Initiative can learn to be more transparent

To take the Greater Bay Area to the next level, why not learn from Europe?
As Greater Bay Area cities brag about their strengths, what about enabling unfettered movement of workers in the region and harmonising tax arrangements?    We have much to learn from the EU, where leaders have found common ground on developing shared practices while protecting local autonomy

UK’s largest chip plant in Newport set to be bought by Chinese-owned firm
Newport Wafer Fab, the U.K.’s largest chip producer, is set to be bought by Chinese-owned semiconductor company Nexperia for around £63m  next week, according to CNBC.   The American TV business channel said they had spoken to two sources close to the deal who asked to remain anonymous because the information is not yet public.  CNBC’s Sam Shead said that Nexperia, a Dutch firm that is 100%-owned by China’s Wingtech Technology, told CNBC on Friday that the deal talks are ongoing. Located in Duffryn, Newport, privately-held NWF’s chip plant dates back to 1982 and it is one of just a handful of semiconductor fabricators in the U.K.   It is located at a factory previously known as Inmos.

Why China Is The Only Luxury Superpower
Over the last five years, most luxury growth was generated by Mainland China or Chinese tourists, and the market is only becoming more crucial  Hainan has bloomed into an entertainment/travel/shopping destination that could, in a few years, rival Dubai, now that its generous duty-free allowances are redirecting customers from other destinations to stores inside China.  China’s domestic luxury consumption will continue to grow after approximately 400 million people transition from low-income to middle and upper-middle-class households over the next few years. This growth is sure to fuel further demand for luxury goods in China.   Looking at some of the top-selling luxury brands today, many are only working at 20-30 percent when it comes to their digital capabilities in China.

Bitcoin Backlash: An Opportunity to Rethink Digital Currencies for Real Development
The existential crisis that Bitcoin is going through, with China’s crackdown and Elon Musk’s about-face, points to the disconnect between the crypto craze and real political-economic issues. The last phase of euphoria, against a backdrop of a poor technical understanding, was exacerbated by emergency monetary policies. Beyond this exuberance inherent to the cryptocurrency’s design, the recent crash should allow for a reorientation toward the development of digital currencies that are conducive to real productive development. This involves capitalizing – in a well-thought-out way – on the experimental avenues opened up by existing digital currencies. Central banks’ digital currency projects in particular are essential in this respect, provided that they allow for the implementation of new policy tools

Nine out of 10 middle-income Hongkongers aged over 50 have no plan to retire as they don’t have sufficient pension funds, survey finds
The vast majority of respondents feared their pension savings would not be enough to see them through old age in comfort    They also believe the Covid-19 pandemic is likely to increase health care costs in the future, a further blow to their retirement plans

China’s Championship Sponsors and the Relentless March of Beijing’s Politico-Economic Progress
For avid watchers of male football’s UEFA European Championships, currently being staged across several countries, one thing has occupied the minds of many observing off-field matters: what are those Chinese letters appearing on the pitch-side perimeter signage during the matches? The profusion of Chinese sponsors now clustering around sport raises a question: why are they there? In simple terms, it’s because Chinese corporations have the money to acquire the sponsorship rights associated with sport events. At one level, the rapid and sometimes double-digit recent growth of the Chinese economy means that the likes of Alibaba have the resources to outbid their global rivals. At another level, European companies seem much less predisposed towards paying big money for their names to be associated with UEFA, the Olympics and others.  One reason for European reluctance to engage in such deals is that they are essentially based on visibility and awareness, that is people can see your name and may know what you do. Sponsorship in Europe is a rather more mature, sophisticated business practice than it appears to be in China. That said, perhaps this is what Chinese brands need right now hence the current raft of deals is something akin to a down payment on the future recall of consumers across the world

Why China embraced Marxism but not other Western thinking
In the early 20th century, the Chinese understood that the rebuilding of China after the collapse of the old order would be a monumental task      Marx provided historical and political perspectives on how capitalism would evolve, and a concept of dialectics that was almost Chinese

Germany wants independent China experts as concerns about Confucius Institutes and Beijing’s influence over universities grows
Berlin says it is still keen to engage, but does not want to rely on the Chinese-funded institutes for expertise       Angela Merkel has been a leading supporter of engagement, but the elections later this year could see a shift in Berlin’s stance

China’s arms trade: which countries does it buy from and sell to?
China’s inventory consists of weapons from several countries, primarily Russia  The country has expanded its military capabilities to become a major exporter itself

Coronavirus: China’s cities are in a race for herd immunity – but what does that mean?
Cities vulnerable to a high risk of imported cases, those near China’s borders or its largest cities were a priority and given wider vaccine availability   Experts agree that at least 70 per cent of the population must be immune for herd immunity but after that opinions vary about level and duration of protection

Xi Kickstarts a Jittery CCP’s Second Century
As party marks a milestone, president’s aggressiveness stirs international alarm  Chinese President Xi Jinping this week presided over the 100th birthday of the Chinese Communist Party to praise the most dramatic rise out of poverty of any country in world history and to say China would take no stick from anybody.

On July 1, weeks of secretive preparations for the Party’s centenary culminated in a massive ceremony in Tiananmen Square punctuated by a martial speech delivered by Xi Jinping. Xi warned that anyone who dare bully, oppress, or enslave China “will find their head broken and blood flowing against a great wall of steel built with the flesh and blood of more than 1.4 billion Chinese people!”

China’s Communist Party seeks younger members as it looks to the future
More than 80 per cent of those who have joined since January 2020 are aged 35 or younger    Drive for new blood about finding ‘right successors’ to deliver goal of becoming modern socialist country by 2049

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