China Press Review – June 10, 2020

Press review

‘Don’t waste the crisis’: EU business group presses China to open markets
European chamber’s annual survey finds companies grappling with a more politicised, state-dominated environment   Forced technology transfers also a big concern for foreign players in the country

Virus magnifies challenges of doing business in China, EU group says
The COVID-19 epidemic has exacerbated already worrisome trends to doing business in China amid slowing revenue growth, regulatory obstacles and the clout of the state-owned sector, a European business group said on Wednesday (10 June).

5 Questions About China That Boards Should Be Asking Right Now
U.S.-China relations have not been so tense since before President Jimmy Carter and Chinese leader Deng Xiaoping agreed to exchange ambassadors in 1979. Attitudes have hardened especially in the last two months, in part because of the Covid-19 pandemic, and in part because of the troubling developments in Hong Kong. Some voices in the Washington establishment are even advocating a “decoupling” of the deep, complex business connections between the two countries that have been built up over decades.   Because many U.S. companies give their China operations a large measure of autonomy, top management and boards often do not have a good grasp of the risks they face. Based on a review of 75 confidential board assessments conducted over the past 15 years, we can report that almost no board possesses a complete picture of its company’s operations in Greater China, including Hong Kong. Management may make presentations about international sales in general, but very few details about China surface at the board level.

China’s factory prices continued to fall in May, but consumer inflation slowed
China’s producer price index (PPI) fell 3.7 per cent year-on-year in May, highlighting the ongoing impact of the coronavirus pandemic     Consumer inflation rose 2.4 per cent from a year earlier, down from a 3.3 per cent gain in April

China: Bank lending – is it effective?
In China, bank loan growth is almost led by the government‘s policy stance. During this important recovery stage, the government wants banks to lend but banks are rightly worried about credit risk. Is the lending strategy working? Aggregate financing increased by CNY3.19 trillion in May after rising CNY3.094 trillion in April. Most of the increase came from yuan loan growth, at CNY1.48 trillion, followed by government-related debt net issuance of CNY1.14 trillion. Corporate debt net issuance was CNY297.1 billion.  Shadow banking items continued to shrink in May.

China’s new bank loans fell in May, but broader credit growth quickened amid policy easing
Banks extended 1.48 trillion yuan (US$209 billion) in new yuan loans in May, down from 1.70 trillion yuan in April     Premier Li Keqiang told the National People’s Congress last month that monetary policy would be more flexible, and growth of M2 and total social financing would be significantly higher this year.

Oversight of Chinese telecoms companies is lacking, US lawmakers find
Federal agencies ‘historically exercised minimal oversight’ to safeguard US telecommunications networks, Senate subcommittee report says   China Mobile, China Telecom, and ComNet have been operating in the US for about 20 years without ‘sufficient oversight’, it adds

Dread over impending anti-Huawei law grows at US companies
Section 889, part B, of the National Defence Authorisation Act requires US government contractors to ensure their global supply chain is devoid of gear from banned Chinese tech firms   More than a dozen industries are engaged in a lobbying frenzy ahead of an August 13 deadline to comply with that far-reaching provision

Trump wants to delist Chinese companies from U.S. exchanges. That could hurt Wall Street
The U.S. Senate last month passed a bill that could essentially ban many Chinese companies from listing their shares on U.S. exchanges, or raising money from American investors. “I think in terms of protecting American investors, this bill if it becomes law, could backfire,” warned Jesse Fried, a professor of law at the Harvard Law School.  Fried said, however, there’s “good reason” to think the bill won’t get passed, predicting that Wall Street will oppose it.   While Chinese companies have traditionally preferred to list in the U.S. due to the prestige, Fried said that Beijing isn’t “particularly interested” in keeping it that way.

No threat to Hong Kong’s crown as international financial centre, AXA Investment Managers says
Terence Lam, AXA Investment Managers’ head of sales and marketing for Asia, remains ‘bullish’ on city    Hong Kong remains one of AXA’s biggest markets as it eyes expansion in the region

The US Position on Hong Kong’s Special Status
 The US revocation of Hong Kong’s special status could damage Hong Kong’s status as one of Asia’s premier financial centers. If the US removes Hong Kong’s trade privileges, China-based traders would have less incentive to trade via Hong Kong. Instead, they may increasingly opt for mainland options, like the Shanghai Free Trade Zone.    Revocation of Hong Kong’s status may also raise the stature of Shanghai and Shenzhen as financial hubs. However, because mainland China is subject to strict capital controls from the Chinese government, Hong Kong will continue to be important for Chinese finance regardless of US actions. Currently, about half of China’s overseas direct investment flows through Hong Kong, where the US dollar is freely tradeable, and many Chinese firms use Hong Kong for fundraising.

Hong Kong security law: wealthy Chinese fret about city’s status as safe haven for investment
Wealthy mainlanders have long invested in Hong Kong, taking advantage of the city’s unique privileges within China to buy real estate, shares and insurance    But Beijing’s plan to impose a national security law on Hong Kong has left some fretting about the future of the financial hub and their investments there

Hong Kong protests: alarmed by violence, especially at PolyU and Chinese University, Beijing drafted national security law for city
Few had read between the lines when Beijing signalled last October it had run out of patience over the national security law    A source has described Beijing’s frustration with the inaction of Hong Kong’s pro-establishment camp regarding Article 23

China falling further behind US trade deal energy targets, even as crude oil imports soar to record volumes
China bought record volumes of crude oil in May, but analysts do not expect the US to have been the major provider, despite lofty targets in the phase one trade deal    China is significantly behind on ‘overly ambitious’ energy import targets, but insiders on both sides of the deal suggest agricultural goods are being given a priority

China’s New Technologies Are Making Retail More Sustainable
Disruptive technologies in China have lessened the pollution footprint but can they really rescue businesses while helping to save the planet? The Fourth Industrial Revolution we’re currently in has helped Chinese e-commerce giants to quickly adopt sustainable practices. These disruptive technologies have eased the pollution footprint and led to waste reduction while enhancing productivity and sustainability. But most Chinese SMEs don’t have the technological and financial resources of Alibaba or, so their ethical positioning gets neglected while they ignore potentially sustainable business models. But since pro-environmental behavior is almost unanimously rewarded by the public, more and more businesses are giving it a try despite the challenges.

China’s high-tech dream could come at a price
Debt risks stalk ‘new infrastructure’ push costing trillions of dollars and linked to Made in China 2025   The last time Beijing unveiled wide-ranging infrastructure projects during the height of the global financial crisis in 2008, it left a trail of local government debt.   “It remains to be seen whether China’s ‘new infrastructure’ push can avoid the mistakes of its infrastructure spending spree following the global financial crisis, which landed local governments and state-owned enterprises in massive debt for projects with minimal or negative returns,” Meinhardt said. “Hundreds of thousands of new 5G base stations or EV charging points will bring minimal returns if 5G phone and EV demand do not increase at the same rate. Second-guessing future demand is always a high-risk venture, and nowhere more so than in the area of new technology,” she added. If that worst-case scenario materialized, it would at least be Made in China debt.

Coronavirus: China retail group Wangfujing secures duty-free licence as government seeks to revive spending
Wangfujing Group, one of China’s largest retail companies, has won a duty-free licence from the Ministry of FinanceApproval comes as China’s government seeks to address its twin goals of boosting consumer spending and opening the economy further to foreign companies

Tencent eyes Pinduoduo’s turf
As China’s economy is experiencing a big hit from the coronavirus pandemic, internet giants like Tencent are looking into lower-tier markets for new growth opportunities. In 2025, physical goods in lower-tier markets will account for 45% of total online retail sales in China, or some RMB 8.1 trillion (around $1.25 trillion), Xingye Research estimates. This would represent a compound annual growth rate (CAGR) of 18.3% from 2018 to 2025 (although these estimates were made before the disruption of the coronavirus outbreak).

In Depth: China Eases Off Rules That Have Strangled Mainland’s Offshore Trade
After being held back for years by a crackdown on inflows of speculative cash disguised as offshore trade payments, central regulators are loosening their grip on the business to help Shanghai lure multinationals and compete with hubs like Hong Kong and Singapore to reroute global capital through the Chinese mainland.    Chinese authorities are already signaling their openness to rule changes that would make it easier for Chinese companies to do more offshore trade. A

Cathay Pacific shares fall below pre-bailout level as investors shun merits of US$5 billion rescue plan
Shares soared nearly 19 per cent at the open, but finished with 1 per cent decline     Government bailout leads to increase in number of shares, worrying investors, while outlook for international route resumption is uncertain, analysts say

South Korea’s jobless rate jumps to 10-year high amid pandemic
South Korea’s jobless rate jumped to a 10-year high in May as businesses continued to reel from the coronavirus pandemic.  The unemployment rate climbed to 4.5 percent last month, from 3.8 percent in April, data from the statistics office showed Wednesday. Economists expected a rise to 4 percent. The number of jobs fell by 392,000 in May from the prior year.

COVID-19, economic crisis and gender equality in Asia
The global research evidence is clear: economic crises exacerbate pre-existing inequalities, damaging the employment opportunities and economic security of women more than men. The 1980s debt crisis, the 1997 Asian financial crisis and the 2008 Global Financial Crisis all provide stark warnings to governments and businesses that recent efforts to promote gender equality and economic empowerment will be undone unless women are prioritised in COVID-19 recovery planning and policymaking.    A review of the research on the gendered impact of economic crises highlights what is at stake. Women’s participation in formal employment, political representation, health outcomes and educational achievement declines during and after periods of economic crisis creating a long-term negative impact on women’s human capital formation and economic security. The severity of the impact on women and gender equality depends on the scale and depth of the crisis. Multi-dimensional crises have the strongest impact on women’s socioeconomic equality and economic security.

Mumbai overtakes Wuhan peak as India Covid cases spike
India’s financial capital, Mumbai, has recorded 51,000 cases of Covid, taking it past the peak in Wuhan, where the virus first emerged. The news comes amid a surge of infections in India, which has 266,598 confirmed cases. Maharashtra state, of which Mumbai is the capital, has 90,000 of them. Infections are also spiking in the capital Delhi, where authorities have said they expect to see more than half a million cases by the end of July.

As China’s ‘vendor economy’ goes from state approval to reject, analysts see synergies with commercial real estate market
Premier Li’s call for loosening of controls on street vendors swiftly rejected by Shanghai, Beijing city authorities    Cushman & Wakefield sees merits in promoting concept as a way to spur employment and synergies with real estate market

9 Dead, 120,000 Relocated as Floods Ravage Southern China
The situation in Guangxi and neighboring provinces is “very severe,” with heavy rainfall expected to continue for the rest of the week.

China’s silent treatment for Australia in beef, barley trade row viewed as new normal under ‘Wolf Warrior’ diplomacy
China imposed tariffs on Australian barley and banned exports of beef from four Australian abattoirs three weeks ago   Australian Trade Minister Simon Birmingham has since tried unsuccessfully to speak with China’s Minister of Commerce Zhong Shan

US and Russia to resume nuclear talks, but China casts cloud
US and Russian officials are set to meet in Vienna on June 22 for a new round of arms-control talks.    China reiterates lack of interest in joining new round of talks

EU says China behind ‘huge wave’ of Covid-19 disinformation
Brussels shifts position by accusing Beijing for first time of running false campaigns

Russia will not be Donald Trump’s tool in US diplomatic war against China
Suggestions that Russia be readmitted into an expanded G7 appear to be part of a ploy to make China look abandoned by its friends    Russia does not want to risk its relations with established partners for the sake of joining some exclusive clubs where it is not even wanted

Why India-China border dispute will continue to be shaped by mutual distrust
Beijing and New Delhi seem to be inching towards a peaceful resolution to their latest standoff, which began in May    But questions remain over how the latest flare-up happened, and what role the United States will play

China and India ‘reach consensus’ in Himalayan border stand-off
Beijing says both sides taking action to ease situation based on agreement    Tensions have escalated in recent weeks with skirmishes but it is not clear how the clashes erupted

China Has Designs on Democracy in Southeast Asia
A Base in Cambodia Is Only the Beginning

Only economic strength can foil China’s designs
Beijing seems emboldened by its early escape from covid’s clutches in asserting itself as Asia’s biggest power. For the long-term defence of India, a fast-emerging economy is our best hope

Chinese scientists say they’ve made a fibre that could be strong enough to build a moon base
Team developed high-performance construction material from artificial lunar dust that could potentially be made using volcanic rock on site     But they say it is still going through testing, with production process yet to be simulated in space-like environment

internet goliath Tencent is building a city the size of Midtown Manhattan in China, complete with grass-
The project, which is expected to finish in 7 years, is one of the latest examples of tech companies delving into urban planning.

Alain Gillard
Information Officer
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