China Press Review – June 23, 2021

China’s GDP Surge Is Chance To Reboot Country’s Image On World Stage
China’s economy had a great 12 months, leading the globe out of the Covid-19 era. Yet the last year has damaged something equally important: Beijing’s soft power. Beijing’s handling of questions about what happened in Wuhan—and why officials were so slow to warn the world about a coming pandemic—boggles the mind. If China’s handling of the initial outbreak was indeed the “decisive victory” that it claims, why overreact to Australia’s call for a probe? Harvard Kennedy School students might one day take classes recounting how China’s leaders squandered the Donald Trump era. As the U.S. president was undermining alliances, upending supply chains, losing allies, and playing down the pandemic, Beijing had a once-in-a-lifetime opportunity to increase the country’s influence at Washington’s expense.    China’s revival could have an even bigger impact. Look at how China’s growth in recent months is lifting so many boats in Asia. In May alone, Japan enjoyed a 23.6% surge in shipments to China. Mainland demand for everything from motor vehicles to semiconductor machinery to paper products is helping Japan recover from its worst downturn in decades. South Korea, too.    The best thing Xi can do to boost China’s soft power is to lean into this recovery, and provide the stability that the rest of the globe needs. Xi should let China’s GDP power do the talking for him.

Inflation, Made in China
The standard explanation why inflation has been so low for so long in so many places is three words: “technology and globalization”. The technological side has a lot to do with Moore’s Law. Over time, more and more of the goods and services we buy are digital, and computing power is getting cheaper. Globalization has a lot to do with China. His export machine gives us all the cheap stuff and removes wages from manufacturing industries around the world. Is China’s history as a deflationary exporter over? This is what Diana Choyleva of Enodo Economics thinks. It plots the U.S. import price index for China against the renminbi / dollar exchange rate:

Letter: China must pivot to consumption-led growth or risk decline
In “How China broke the Asian model” (June 22), Gideon Rachman concludes that in our new geopolitical environment, Xi Jinping’s China needs to find a new development model if its rise is to continue uninterrupted. In framing this judgement, he is doubtless correct, but it leaves us hanging a bit: what might this new development model look like, and will Xi embrace it? China is in a different place, and seems not to want to follow this path. Its working-age population will decline relentlessly for the foreseeable future. It has income per head similar to Malaysia and Russia, but consumption per head that is only slightly more than Iraq and a bit lower than Jamaica. Its consumption share of gross domestic product is absolutely low and barely more than it was in 2010, while investment still accounts for over 45 per cent of national income. The share of informal sector workers with low levels of skill in the economy, according to development economist Scott Rozelle, is at an all time high, while the level of educational attainment in the workforce is lower than typical middle-income nations. Educational, economic and social welfare reforms are needed urgently. Yet Xi’s China retains a firm Leninist, supply-side, production-oriented grip on policy. A recent research paper published by the People’s Bank of China argued that China should not follow the example of other countries in promoting more consumption-oriented growth. The government certainly has virtually no policies designed to do so. If it doesn’t, though, and balks at enabling economic and social reforms, the misallocation of capital and bad debt problems associated with such high investment will act as additional deadweights on China’s growth potential.  The new model China should follow, urgently because of the external environment, isn’t actually new at all. The problem is that for China’s current leadership, it is a political bridge too far. Only one of China’s current politics and its economic trajectory is likely to continue uninterrupted.

China will create millionaires over 3 times faster than US in 5 years
China will create millionaires at a quicker pace than the United States in the five years through 2025, as a rapid recovery from the world’s worst public-health crisis in a century helps corporate chieftains generate and accumulate wealth faster, according to the 12th Global Wealth Report by Credit Suisse.

Is Shanghai the New Beauty Capital?
This year, a number of initiatives, store openings, and digital innovations located in Shanghai suggest the city’s growing allure to beauty leaders. Photo: Sephora’s Weibo  China’s demand for beauty and skincare products continues to rise significantly, confirming the country as a powerhouse for beauty. By 2025 it’s expected to reach a value of $87.64 billion.   A number of high-profile openings and incubators, from Tmall’s beauty division to LVMH‘s $154 million beauty e-commerce hub, will up the city’s beauty allure.  Shanghai is now the largest port of entry for beauty products, up 17.9 percent in 2020. China is the world’s second-largest beauty and personal care product market after the US. Today it has a value of $38.6 billion. As innovation grows post-pandemic, a number of initiatives, physical store openings, and digital innovations located in Shanghai suggest the city’s growing allure to beauty leaders. Jing Daily asks, can it become a beauty capital

Minimum wages rise in China amid economic recovery
Multiple provincial-level regions of China have increased their minimum wage standards since the beginning of this year as the economy recovers further from the COVID-19 impact.    In the provinces of Jiangxi, Heilongjiang and Shaanxi as well as the Xinjiang Uygur Autonomous Region, the statutory minimum monthly wages for developed cities have been raised to 1,850 yuan (about $286), 1,860 yuan, 1,950 yuan and 1,900 yuan, respectively, official data shows.

How Alibaba Won Latin American E-commerce
Alibaba’s growing influence in Latin America rarely makes the headlines, but it is winning the e-commerce company a competitive edge in the region

Huawei 5G ban is upheld by Swedish court in further blow to Chinese telecoms giant’s European plans
The ruling is Huawei’s second loss on appeal after authorities in Stockholm barred the company from its network in October, citing national security       ‘Our door remains open to constructive dialogues with relevant parties to work out practical solutions to mitigate any security concern,’ Huawei says

China Releases Data Security Law: Some Expert Observations and Comments
This law can be treated as another pillar of China’s legal framework on information security and data (privacy) protection, besides the Cybersecurity Law (CSL) that was launched in 2017 and focused on network security and the Personal Information Protection Law (PIPL), which is at the second reading stage and expected to be published later this year.   It has been only two months since the second reading of the draft Data Security Law (in April of 2021), which indicates that Chinese legislative authorities are eager to publish it quickly to tackle emerging threats to data security.   In this article, we address the main changes in the published version of the Data Security Law as compared to its second draft. We also highlight the areas of concern for foreign companies running businesses in China.

China’s bitcoin crackdown: Mining equipment, and carbon emissions, moving from the mainland to US
Beijing has started to crack down on mining due to its heavy reliance on cheap power and related impact on the environment     Social media video posted by Chinese logistics company showed it shipping bitcoin mining equipment to the US on behalf of a client

China’s carbon neutral goal: Shanghai’s new national carbon emissions trading platform unveils trading rules, sets stage for launch
Shanghai Environment and Energy Exchange will handle account openings for traders and operations of the new trading platform until a formal national carbon emissions operator is set up  The exchange will eventually take over all transactions in regional pilot exchanges

Chip shortage restricts China’s car production, leaving showrooms empty, but local brands are faring better
Car output fell 6.8 per cent in May to 2 million vehicles, but local brands with lower sales have better weathered the semiconductor shortage    Wait times for certain car models have jumped from weeks to months

Electric cars may outsell petrol-fuelled vehicles sooner than expected in 2033, EY’s AI prediction tool says
EV sales may outpace fossil fuel-burners in 12 years in Europe, China and the US, EY says using an AI-assisted prediction tool    By 2045, non-EV sales are seen plummeting to less than 1 per cent of the global car market

Can Chinese EV makers get a jump on Tesla and tap partners in Southeast Asia for expansion?
Despite the popularity and reach of Tesla, Chinese EV brands have a good chance of dominating the emerging market in Southeast Asia    And Indonesia, with its abundant nickel resources and large market, would make an ideal partner

Xpeng gets the green light for Hong Kong IPO, extending city’s dual listing process to attract companies to raise capital
The Guangzhou-based carmaker received the nod for an IPO in Hong Kong comparable in size to its US$1.1 billion stock sale in New York    The stock offer, coming less than a year after Xpeng raised funds, is considered a dual primary listing   Xpeng, named after its founder He Xiaopeng, also began exporting electric cars to Norway. It announced a plan to fit its P7 all-electric coupe with lidar sensors, becoming the world’s first passenger car to use the light-based radar for greater precision in autonomous driving.

Kuaishou joins 1 billion user club on the back of live streaming in China, international expansion
China’s No 2 short video-sharing app operator joins rival ByteDance and Tencent as internet platforms with 1 billion monthly active users   Kuaishou’s tally covers all of its existing platforms in China as well as those on its Kwai and Snack Video apps targeted at international markets

Huarong – a silent bail out that went wrong
The financial conglomerate’s near bankruptcy has been a setback for market discipline in China, argue Max Kärnfelt and François Chimits. The financial system has to ditch old habits.    Huarong, a financial conglomerate with debts of USD 22 billion, in April failed to publish its financial records for 2020, reviving fears about possible systemic risks lurking in the world’s largest financial system. That may have seemed far-fetched considering authorities’ control over finance and four years of reforms to clean up the sector and improve capital allocation. But Huarong did throw a stark light on the work they have to do to impose market discipline.

Coronavirus: how China’s closed borders have hit trade and diplomacy
Chinese traders are feeling the pinch as they try to do everything online, as overseas clients count the cost of shipping delays     Meanwhile, top-level meetings have been held virtually at a time when Beijing’s relations with major trade partners are worsening  Pang noted that Beijing’s efforts to shore up relations in the region come amid growing tensions with other world powers. “China’s relations with Western countries, like the US and EU, are tense,” he said. “Relations with Japan have not recovered in a real sense, and China’s relations with India are also tense. On the other hand, Biden continues to push America’s Indo-Pacific strategy.” Beijing sees that strategy as a containment policy.   Even with more in-person talks, China faces a challenge to gain the trust of its own region and beyond. Territorial disputes in the South China Sea have long been a source of tension between China and some Asean members, including Brunei, Vietnam and the Philippines.  Pang said Asean was reluctant to accept a “comprehensive strategic partnership” with China, a designation it uses for countries it has strong ties with. “China’s relations with Asean may be better,” he said. “But their relations are complex because of the South China Sea and other issues.”

Coronavirus impact on China’s exports may have been underestimated amid Guangdong outbreak, analysts say
Some small and medium-sized enterprises across southern manufacturing hub of Guangdong are worried about losing orders to other factories in China if sporadic outbreaks persist     Strict coronavirus-control measures in Guangdong have had a serious impact on container throughput at various ports

Taiwan extends Covid curbs by two weeks
Taiwan will extend its coronavirus curbs by two more weeks until July 12, as the situation has yet to reach a point where they can be relaxed, Health Minister Chen Shih-chung said on Wednesday.      Taiwan has been dealing with a rise in domestic infections since May after months of relative safety, leading the government to limit personal gatherings and close entertainment venues.

Is the zero-Covid approach of China and Japan about saving face?
Two strategies have emerged to deal with the coronavirus: mitigation, favoured by the US and Europe, and elimination, which dominates in Asia   Mitigation leaves people free to decide on the risks they take, but in collectivist-leaning societies, one owes it to others not to become sickened   Meanwhile, both the Ningbo Containerised Freight and Shanghai Containerised Freight indices reached new highs this week, indicating that the congestion problems in Guangdong have spread to other regions.     “In addition to the port congestion, the soaring container freight index, the recent appreciation of the yuan and the rising raw material prices have also impacted the profits of Chinese exporters, and this has somewhat inhibited their willingness to take more orders. We believe that exports in June will be lower than the level since the beginning of the year,” Soochow Securities in a note on Tuesday.  China’s exports grew almost 28 per cent in dollar terms in May from the same period of last year, which was below the pace in April but still well above historical growth rates.

No meeting planned between Blinken and China’s Wang at G20 -U.S. official
There is no meeting planned between U.S. Secretary of State Antony Blinken and Chinese Foreign Minister Wang Yi at a G20 gathering in Italy next week, a State Department official said on Wednesday, after the Financial Times reported that Beijing and Washington were discussing such a meeting.

Exaggerating Challenge From China Threatens U.S. Security
Official Washington has identified China as the primary challenger to the United States in virtually every sphere. This overwhelming emphasis on Beijing as the ultimate threat to the United States is misguided and is more likely to undermine U.S. security than it is to enhance it.     Focusing on China is a good way to pump up the Pentagon’s already bloated budget – which is currently higher than the peaks of the Korean or Vietnam wars or the Reagan buildup of the 1980s — but it will not make us safer. A war between the U.S. and China – two nuclear-armed powers – would be catastrophic and preventing it should be a central tenet of U.S. security strategy. But current, military-centric policies are more likely to risk such a conflict than they are to keep it from occurring.   It’s important to begin any assessment of the challenge from China by noting that the United States currently outpaces it militarily by a large margin. The U.S. has a more modern air force, a more capable navy and a far larger nuclear arsenal than China, and it spends roughly three times as much on its military. The spending gap widens considerably when U.S. allies in NATO, Australia, Japan, and South Korea are taken into account.

China Has Stopped Biding Its Time
American attitudes towards China have modified dramatically over the previous decade. There’s a lot much less confidence that the democratic world can deliver China right into a rules-based worldwide order—or that the expansion of the Chinese language center class will create inner strain for liberalization and democracy. Elites in each political events agree that competitors with China is now on the heart of U.S. financial and international coverage, a stance that many Individuals endorse.

US lawmakers seem open to narrower Asian trade pact in wake of TPP failure
At subcommittee hearing, senators are urged to consider a scaled-down pact focusing on digital trade    ‘We need to be strategic and to work cooperatively with our allies. This is especially true in the Asian-Pacific region’    Cutler and some CPTPP members have expressed doubt that Beijing is willing to accept membership requirements.However, Beijing has integrated more deeply with its neighbours through the Regional Comprehensive Economic Partnership (RCEP), a free-trade agreement among the 10 member states of the Association of Southeast Asian Nations (Asean) bloc and five other countries including China. That agreement, which is not as comprehensive as CPTPP in terms of digital trading rights, labour protections and environmental standards, accounts for approximately 30 per cent of global trade and gross domestic product.That gives RCEP “the potential to restructure some trade patterns and supply chains in Asia through lower trade costs and streamlined rules”, according to a US Congressional Research Service report published in November. “As RCEP enters into force, Congress might consider how US commercial interests could be affected by an agreement that allows firms from other developed economies to make supply chains more efficient, as well as the impact of the perceived diminishing US role in shaping trade rules,” the report said.

Reconciling the rhetoric and reality of Biden’s trade policy
Even as the Biden administration continues to tout cooperating with allies to ensure stability in the Indo-Pacific, the United States is unlikely to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) anytime soon. Yet, the United States cannot confront the China challenge without relying on like-minded nations. Beijing is already moving to hedge against US measures that could isolate it from the global economy through its dual circulation strategy. In doing so, China is moving forward with plans to reduce its dependence on overseas markets and technology, while simultaneously boosting the reliance of emerging markets on Chinese goods and know-how. Coupled with the Belt and Road Initiative, Beijing’s goal is to build a new order centred around China, especially on the economic front. Equally effective would be for the Biden administration to sign on to newly developing economic partnerships that aim to deal with both post-COVID-19 growth challenges and the China challenge at the same time. The trilateral Supply Chain Resilience Initiative is such an opportunity, which would allow the United States to cooperate with Australia, Japan and India on their efforts to reduce over-dependence on China-based supply chains.  Even though the Biden administration will be hemmed in by its domestic considerations and unable to ink new trade deals any time soon, that should not constrain it from aligning its policies to abide by its rallying cry for cooperation. The call for working together with partners on the economic front is hardly altruistic. The United States alone cannot push back against China’s broader regional ambitions without collective action. Washington’s sole focus on its narrowly defined domestic growth considerations might mean that its call for cooperation will simply be dismissed as empty words.

China needs to adjust its diplomatic approach to win the battle for Southeast Asia and the South China Sea
Asean defence ministers’ focus on China’s behaviour suggests that if Beijing does not recalibrate its approach, it might lose diplomatic ground to the US      With recent conciliatory moves towards Indonesia, Beijing has shown it can repair its diplomatic damage   China’s domestic values do not offer an attractive alternative, but most Southeast Asian countries do not care how China treats its own citizens. Some are just as authoritarian and draconian, and they also resent US criticism of their governing style. Playing to this sentiment, Wang has said, “We support Asean in upholding the principle of non-interference in internal affairs”.   China has shown it can repair its diplomatic damage if it wants to. For example, China’s intrusions into Indonesia’s EEZ threatened to provoke nationalistic responses in Indonesia, which could be a dangerous development. However, Beijing has adjusted its behaviour and tension has given way to warming ties. Indonesian President Joko Widodo has referred to China as a “good friend and brother”. Earlier this month, China and Indonesia initiated an “inaugural high-level dialogue”. Usually very sensitive about its maritime security, Indonesia accepted China’s offer to try to salvage its lost submarine in the Lombok Strait. It has also undertaken naval exercises with China off the coast of Jakarta. This is remarkable because allowing US naval vessels to pass by its capital has been a sticking point in Indonesia’s negotiations over delineating a sea lane in the Java Sea.If China wants to win the long-term struggle for Southeast Asia, it needs to do more of the same – lighten up, avoid diplomatic mistakes, be more patient and conciliatory and play its powerful hand more carefully.

Australians’ trust in China has fallen to record lows, according to new survey
The Lowy Institute’s annual poll has found that nearly two out of three Australians see Beijing as more security threat than economic partner An analyst expressed concern that one in five Australians said the Chinese people they met negatively influenced their overall view of China

Australians have lost trust in Chinese government but don’t want to be dragged into war, poll finds
The prime minister, Scott Morrison, has repeatedly declared Australia would not “trade away” its values in the face of what the government has called “economic coercion” by China.  Beijing has rolled out tariffs and other trade actions against Australian export sectors including barley, wine, seafood and coal amid disagreements over the Morrison government’s early public calls for an independent international investigation into the origins and handling of Covid.   As an invitee to this month’s G7 summit in Cornwall, England, and in a series of side meetings, the prime minister sought support from his counterparts to pursue a balance in the Indo-Pacific region that “favours freedom”.

Hong Kong’s Apple Daily, symbol of pro-democracy movement, to close
Tabloid founded by Jimmy Lai and targeted by police raid last week will print final edition on Thursday

Shanghai Aims to Expand Influence Through Soft Power
The city’s target aligns with the country’s goal of establishing “a reliable, lovable, and respectable China

Alain Gillard
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