China Press Review – June 14, 2021

Why businesses may have to ‘pick sides’ if China starts using anti-sanctions law
New legislation could see companies taken to court if they comply with Western sanctions on China. One legal observer says fashion companies that refuse to use Xinjiang cotton or Huawei could be targeted. “(When the law passed), there were many businesses’ legal departments that could not sleep well,” he said. “This law places a bet on where the future of globalisation will be. If you think it is the US, then your values do not align with China.”   Companies involved in imposing foreign sanctions against China would also be banned from taking part in overseas Chinese investment, such as infrastructure projects in Africa, Tian said.  It could also see a supplier in China that had a contract cancelled due to foreign sanctions or restrictions seek compensation in a Chinese court, he said. “There is certainly a risk to companies, but that risk had already been put on the table earlier in these MofCom orders, so I think a lot of companies have already digested that,” he said.   “My impression from speaking to clients and others is that most are taking this new development in their stride because a lot of what they’re seeing is familiar to them, and they’ve already thought through these issues and made their calculations accordingly.”    Tian said the new law could also affect Chinese companies that had complied with foreign sanctions, citing the removal of the Chinese smartphone maker Xiaomi from a US investment blacklist after reaching an agreement with the authorities.

G7 summit: after the political theatre, the US, Britain and EU must get back to working with China
The celebratory mood of the gathering of Western leaders in the UK makes for fine political theatre, even if it may not go far enough to provide solid foundations of a future ‘alliance of democracies’   High-level collaboration with China is necessary to tackle our foremost global problems, not least pandemic recovery and climate change

Biden heads to Nato talks with focus on China, Russia and soothing allies
US president is seeking greater coordination on efforts to check actions by the two adversaries    He  will underscore Washington’s ‘rock solid’ commitment to the transatlantic security alliance  At the G7, leaders sought to convey that the club of wealthy democracies – Canada, France, Germany, Italy, Japan, Britain and the United States – is a better friend to poorer nations than authoritarian rivals such as China and Russia.   The G7 meeting ended with a communique that called out forced labour practices and other human rights violations impacting Uygur Muslims and other ethnic minorities in China’s western Xinjiang region. The president declined to discuss private summit negotiations over the provision, but said he was “satisfied” with the communique, although differences remained among the allies about how forcefully to call out Beijing.

Getting real about US–China cooperation
One of the toughest questions in the current frosty era of relations between Washington and Beijing is whether and how to pursue cooperation amid ‘extreme’ geopolitical competition. Despite its importance, the practice of cooperation rarely receives the type of rigorous analysis necessary for devising effective strategy.  Prioritising multilateral initiatives would also force China to confront paying diplomatic costs with several countries, not just the United States, if it considers backing out of an agreement. And it would reduce the domestic political costs in both Washington and Beijing of seeking to work together in the first place. Lastly, security initiatives to reduce risk and improve crisis management stand as the major exception to the multilateral preference and are still worth pursuing bilaterally. But this agenda must also grapple with extensive practical implementation challenges, most notably an apparent lack of interest in Beijing.    Cooperation and coordination can still play a role in US–China relations, albeit a much reduced one. But only if policymakers pursue it with the right mindset.

China-US competition will heat up but ‘we can work together’: former diplomat
Senior foreign affairs expert Fu Ying predicts rivalry will intensify over which system of governance is superior  In remarks published to coincide with the end of G7 summit, Fu says China is prepared for direct competition

China slams ‘manipulation’ after criticism from G7
China on Monday accused the G7 of “political manipulation” after it criticised Beijing over its human rights record in Xinjiang and Hong Kong.

G7 singles out China, calls for renewed Covid-19 origin search and respect for rights in Hong Kong, Xinjiang
Group of Seven leaders issue their strongest rebuke of Beijing since the violent Tiananmen Square crackdown and issue an appeal to support democratic societies    White House says the G7 is concerned by the use of all forms of forced labour in global supply chains

What differentiates the US-driven Blue Dot Network from China’s Belt and Road Initiative? Money
The revived Blue Dot Network is the latest in a series of attempts by the US, Japan and Australia to counter China’s transnational infrastructure-focused scheme   However, it lacks the funding needed to back projects in the way China has been able to, using its foreign exchange reserves and financing from state banks

Climate change: China’s plan to double carbon capture capacity by 2025 hinges on securing funding for projects
China could add eight large-scale carbon capture, utilisation and storage projects by 2025, IHS Markit said    Implementation of CCUS technology could pare China’s carbon emissions by 60 per cent by 2050 but would cost the nation US$450 billion, Goldman Sachs said

Is Chinese bank ICBC’s coal exit a power move for a greener belt and road?
ICBC chief economist Zhou Yueqiu says the bank will make a road map and timeline for the gradual withdrawal of coal financing     Observers say Beijing may be exerting pressure on financiers

China’s yuan could become world’s ‘currency of choice’ by 2050 under dual circulation plan
Market entities will use yuan for cross-border purposes as China’s economy integrates with rest of the world, says ex-deputy central bank governor Hu Xiaolian      China’s dual circulation plan places a greater focus on the domestic market, and is its approach to adapting to an increasingly unstable and hostile outside world

As central banks explore digital currency, could NFT bonds be the future?
Non-fungible tokens as bonds are a new concept but could help establish central bank digital currencies, and offer cheaper and safer transactions   It could also help central banks access alternative forms of financing and digitise traditional asset vehicles

China’s bitcoin crackdown: Fourth-largest bitcoin-producing province joins the country’s moves against crypto mining
Yunnan, which ranks fourth in China in terms of bitcoin hashrate, has promised to shut down any company in violation of the new rules by the end of June     China accounts for 65 per cent of the global bitcoin hash rate, according to the Cambridge Bitcoin Electricity Consumption Index

‘Too Big to Fail’ May Not Apply in China Anymore: Goldman
The size and type of defaults that have occurred in China in recent times indicate that the notion of “too big to fail” may no longer apply to the nation’s borrowers, according to Goldman Sachs Group Inc. There has been a noticeable up-tick in defaults by Chinese state-owned enterprises since late 2019 and some of the borrowers that have failed to repay debt recently such as China Fortune Land Development Co. have had large amounts of outstanding bonds, analysts including Kenneth Ho wrote in a report dated Friday. “Even for large corporates or for state-related entities, policy makers are much less willing to extend support,” Goldman Sachs analysts wrote. “Policy makers are now less likely to conduct full bailouts than compared with the past.” Concerns about the financial health of state-backed bad debt manager China Huarong Asset Management Co., which has about $21 billion in outstanding U.S. currency notes, have shaken the Asian dollar bond market since April after its failure to release financial results triggered speculation about a potential debt restructuring. While the treatment of recent distressed cases in China indicates a waning of implicit government support for borrowers, it doesn’t mean that there’s no government backing, according to Goldman analyst

US-China tech war: Huawei is still on the hook as Joe Biden fine-tunes America’s competitive strategy with Beijing
The US Innovation and Competition Act earmarked US$54.2 billion towards shoring up America’s competence on a number of technological fronts, including chips production, and catch up on 5G technology     It also leaves Huawei on a list of restricted entities, banning it from gaining access to US hardware and software until it can prove that it no longer poses any threat to US national security
“Given that the US intends to restrict Huawei’s development in high-end areas such as 5G … the probability of the US lifting its ban on smartphone chips for Huawei in the short term is scant,” said Arisa Liu, a chip industry analyst with the Taiwan Institute of Economic Research.   Even Huawei’s founder Ren said earlier this year that he thinks it would be “extremely difficult to remove Huawei from the entity list” and the goal for Huawei is simply “to survive” after it reported its lowest revenue growth in a decade.   For other big Chinese tech firms, one clear takeaway from the Huawei story is to avoid incurring the wrath of Washington if at all possible.  Xiaomi, also targeted by Washington for alleged ties to China’s military, managed to file a lawsuit challenging the executive decision on technical legal grounds, and got off the US trade blacklist.   “In the long term, we are likely to see continuity in terms of Trump’s efforts to reshore semiconductor manufacturing to the US, and hopefully intensify it,” said Will Hunt, a research analyst at the Centre for Security and Emerging Technology, a think tank at Georgetown University.

4 things you should know about China’s new data security law
Ambiguities abound, but the legislation provides a slightly clearer framework regarding the storage and handling of personal data. China’s National People’s Congress approved a new data security law on Thursday, for the first time mapping out the country’s legislation for the handling of user data. The law will come into effect on September 1, and it has been described by overseas media as a “new power play” to rein in tech companies as well as a “necessity” by state media.  Here are four key points from the legislation that points to how the law will change the management of personal data in China.

996 culture: Tencent-owned company offers employees a break, but with a catch
A gaming studio under Tencent has introduced ‘Wednesday Health Day’, encouraging employees to go home at 6pm one day a week    Chinese media and internet users have often attributed reports of premature deaths of young tech workers to punishing workloads

As TikTok shortens attention spans, China’s Netflix-like platforms struggle to keep viewers
China’s streaming platforms have accused short video apps of hurting their business by letting users post edited clips of movies and TV shows that can be watched for free     With hefty content costs, low subscription prices and a competitive market, the path to profitability remains unclear for China’s long form video sites, analysts say

Geely to press on with methanol-powered vehicles despite risk of failure, founder says
Geely’s unit CRI is designing the world’s largest plant with a capacity to produce 110,000 tons of low-carbon intensity methanol per year in Henan province    Methanol fuel could boost China’s energy independence and help the nation’s drive toward carbon-neutrality by 2060

Coronavirus: Taiwan outbreak ‘appears to stabilise’ as new cases fall
Epidemic command centre attributes slowing of number of infections to soft lockdown and public restraint     But public cannot let their guard down yet, health minister says

Will Chinese Tourists Visit A Re-Opened Europe?
According to the Institute of Medical Biology at the Chinese Academy of Medical Sciences, China has administered more than 845 million vaccine doses as of June 10. Despite the massive vaccine injections, many Chinese are still conservative about traveling abroad. Given the multiple outbreaks overseas, Chinese citizens have reservations about the credibility of foreign governments on their pandemic control.  Meanwhile, France is hurting its chances at drawing Chinese luxury shoppers to its shores now that luxury houses have rolled out aggressive China strategies to leverage consumption repatriation while also taking advantage of domestic duty-free retail in the post-pandemic era. Given that health concerns are still the priority for Chinese travelers and China has been building up its local luxury scene, welcoming back one of the segments with the strongest buying power is knotty for Europe in the short-medium term.

Open for business? The trouble with bringing down China’s coronavirus travel barriers
The country is racing to vaccinate the public and reach herd immunity to prevent imported cases getting a foothold    But there is no sign that restrictions will ease for travellers any time soon, diplomats say

China’s nuclear power giant CGN dismisses reports of leak warning at a Guangdong facility, says indicators ‘normal’
All indicators of the Taishan Nuclear Power Plant in Taishan, South China’s Guangdong Province and its surrounding environment are normal, according to continued monitoring data, the China General Nuclear Power Corporation (CGN), the operator of the plant, said in a statement sent to the Global Times on Monday, refuting reports of an alleged fission gas leak at the plant.

What China’s ‘Market Maoists’ Tell Us About Trade Tensions Today
But in his new book, called Market Maoists, historian Jason M. Kelly argues that China’s Communists emphasized the importance of economic ties with market-economies long before the 1970s. He tracks the history of the CCP’s trade strategy, from selling soybeans to fund its civil war battle with the rival Nationalist Party, to deals made by Communist bureaucrats to import technology from Europe in the face of a U.S. embargo.  One of those key Mao-era concepts is “zili gengsheng,” which was revived by Xi Jinping amid the trade war with the U.S. and is often translated as “self-reliance.” The CCP has proven far more resilient and adaptable than many would have guessed years ago, when Mao was still alive. Partly this reflects the flexibility of certain underlying trade principles, such as “zili gengsheng.” It matters, too, that no organized opposition exists inside China to point out when new policies contradict old ones. Still, the CCP does strive to cultivate its own legitimacy by presenting a coherent narrative of its rise to power and its role in restoring national greatness, a perpetual project that requires party officials to seek continuity and coherence across shifts in trade policy over time.

China-Australia relations: Canberra ‘ready to sit around the table’ with Beijing again, PM Scott Morrison says
Australia’s attempts to make contact with China have repeatedly failed after bilateral ties nosedived last year  Canberra’s trade minister said on Sunday he wrote to his Chinese counterpart in January and was ‘still waiting for a response

In the Balkans, China and Russia rush in where the EU loses its tread
Tensions are resurfacing in a peninsula that has long been a geopolitical battleground The bloc is losing credibility, creating opportunities for rivals, observers say   The next inflection point may come when Slovenia takes over the EU’s rotating presidency in July. The government in Ljubljana has set accelerating expansion high on the agenda.   “If you are not doing anything to prevent fighting, you are asking for trouble,” Galbraith said. “Fighting on the EU’s borders will make the EU look futile and weak. It will plague the EU in dealing with their own threats to democracy and countering populism.”

Greece is not abandoning China even though others are, ambassador says
Greece deepened its economic ties with Beijing in the wake of the financial crisis.   Investments from China represent an important source of income for the indebted nation.  Italian Prime Minister Mario Draghi said his country would assess its participation in the Belt and Road initiative “carefully.”

Good China-Russia Relations Are Here to Stay
A Russia-U.S. détente is unlike to happen any time soon.  In the past several years, Moscow and Beijing have taken their relations to a higher level. Russia is selling some of its most advanced weaponry (such as Sukhoi 35 jet fighters) to China. This may be partially driven by pragmatic business considerations (Moscow also offered to sell these jets to a NATO member state, Turkey). However, it is also a symbolic display of closeness of Sino-Russian ties. Moreover, encouraged by the top political echelons in both countries, Sino-Russian cooperation has entered new frontiers, including joint high-tech projects like the building of nuclear reactors by Russian firm Rosatom in Tianwan, and the Xudapu nuclear power plants. The two countries will also jointly manufacture a new passenger plane, CR929, and aim to build a lunar space station. It is hard to imagine a sudden reversal of these developments, which took years to achieve.    On the other hand, what Moscow and Washington could, and should, do at this juncture in their relations, is to agree on improving communication, especially vis-à-vis issues in states that are on Russia’s borders. This is particularly true for those that aspire to become part of the European Union and NATO, which Russia opposes. This could, at the very least, help manage possible crises situations. Moreover, given Biden’s declared interest in rejoining and reviving the the Iran nuclear deal, the Joint Comprehensive Plan of Action (JCPOA), this presents a possible arena for constructive interaction between Russian and American diplomats. Controlling Iran’s nuclear program and preventing Tehran from obtaining nuclear weapons is a rare area on which both great powers presently agree.

Webinar  The CCP’s next century   Jun 15, 2021 14:30 – 16:00
100 years CCPAs it approaches its 100th anniversary in July, the Chinese Communist Party (CCP) appears stronger and more confident than ever. The leadership in Beijing is convinced that its own governance model is superior to Western democratic models. Recent tensions over human rights and trade issues have highlighted that European actors need to find ways to deal with an increasingly assertive China under CCP-rule. In the latest MERICS Paper on China “The CCP’s next century: expanding economic control, digital governance and national security” our experts cover three key aspects of CCP governance: the integration of the economy under politics, the role of digitalization and the new foreign policy paradigm that puts China’s national security first. In this web seminar the authors will present their analysis and be joined by seasoned China experts for an inspiring discussion.

Why China’s declining population growth may be good news
Evidence suggests that in all prosperous countries where women are well educated and free to choose whether to have children, fertility rates fall significantly. This should be seen as a positive development   When populations no longer grow, there are fewer workers per retiree, but also a reduced need for infrastructure and housing investment

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