China Press Review – June 25, 2021

How China’s dual circulation strategy heralds a new era for global trade and business
The implications of China’s strategy need to be clearly understood by foreign governments and companies. Expect trade frictions to worsen and a more demanding business environment as Beijing seeks greater economic independence while maximising the world’s dependence on China. To be clear, no one will be thrown out. Instead, subtle and not-so-subtle legal, regulatory and market measures will be used to make it more onerous for less-favoured companies to conduct business in China. More foreign companies will decide the juice is not worth the squeeze and depart.   To an extent, these dynamics are well understood and the game is already being played. Foreign business organisations in China have bent over backwards for years to show the synergies between their corporate members and China’s development objectives.  Voluminous reports are prepared and executives speechify on the research and development they conduct in China and the technology they transfer to local partners. The pressure on foreign companies to “justify their existence” in China will intensify as the preference for domestic alternatives becomes more explicit. China’s leadership has accurately diagnosed a fundamental shift in the external policy environment and is responding with logical policies to advance national interests. Through the dual circulation strategy, it seeks to make China less dependent on the rest of the world while maximising the leverage associated with the world’s dependence on China. The implications of China’s strategy need to be clearly understood by foreign governments and companies. And they will need to be just as insightful and pragmatic as the Communist Party in developing strategies to account for current realities and to protect their interests. A new era has begun.

Chinese firms see more stable business environment in US despite tensions, survey says
Up to 39 per cent of executives expect US-China relations to improve, a survey by the China General Chamber of Commerce – USA shows     The uptick in optimism follows years of deteriorating views of the environment for Chinese firms operating in the US

Global minimum tax faces ‘long and rocky path’ to implementation after G20 endorsement
Group of 7 leaders agreed in early June to a global minimum tax rate of at least 15 per cent, which is expected to be endorsed by the Group of 20 next month    But the proposal also needs to be agreed to by nearly 140 countries known as the Inclusive Framework and could take up to five years to take effect   China, which has a nominal corporate tax rate of 25 per cent and grants a 15 per cent rate to some hi-tech companies, has not yet released an official position on the reform. Aside from tax havens such as the Bahamas, Cayman Islands and Jersey, which had a zero tax rate, the global minimum rate would target earnings from digital goods made by technology firms, Gupta said.
The new tax plan would lift corporate tax revenues for rich countries and China, which is expected to be the second-largest recipient of increased tax revenues, Gupta added.

China’s Silicon Valley issues new policies to cultivate its own e-commerce giant, boost local online retail industry
While Shenzhen is home to tech giants Tencent and Huawei, the city lacks its own e-commerce champion to compete with Alibaba, and Pinduoduo   There are currently more than 553,000 e-commerce-related companies registered in Shenzhen, the most of any city in the country

China backs Hong Kong to join RCEP trade deal in potential boost to city’s flagging logistics sector
China’s commerce ministry says Beijing ‘will actively support Hong Kong’s early accession’ to the Regional Comprehensive Economic Partnership (RCEP)    The 15-nation pact could boost Hong Kong’s trading and logistics sector, which has seen its share of gross domestic product steadily decline, analysts say   Hong Kong was the top global financial centre for initial public offerings (IPO) last year, with fundraising up 27 per cent to about HK$400 billion (US$51.5 billion). The IPO size grew about sixfold to 180 billion Hong Kong dollars in the first five months this year, according to Chan, the city’s financial secretary.    Under RCEP, any country or customs territory can join 18 months after the agreement comes into force, meaning if things proceed as planned Hong Kong could become a member from the middle of 2023.    To enter into force, the pact needs to be ratified by three-fifths of the 15 signatories – namely six Asean countries and three others.

Japan ratifies RCEP, world’s biggest FTA including China, ASEAN
Japan on Friday ratified the Regional Comprehensive Economic Partnership (RCEP), the world’s biggest Free Trade Agreement (FTA), which comprises 15 Asia-Pacific countries including China and 10 members of ASEAN, the Foreign Ministry said.   The ministry, as reported by Xinhua citing local media, said Tokyo deposited its ratification instrument with the ASEAN Secretariat. In doing so, Japan has become the third member toward the enforcement of RCEP.

Hong Kong can connect Greater Bay Area with world, much like San Francisco’s role in Bay Area, US think tank says
Both cities are meeting grounds, says US think tank Bay Area Council Economic Institute in report issued with the Hong Kong Trade Development Council     This is the first time an American think tank has been asked to draw up such a report   In both regions, Hong Kong and San Francisco play the role of international connectors. Randolph said both cities rose to global prominence in the mid-19th century as centres of trade and finance, with Hong Kong looking outward to Europe and America, not inward to China, and San Francisco looking westward to Asia, not eastward to Europe.  Historical parallels can be found between San Francisco and Hong Kong in their unique paths to development, which speak to the role and influence each has on its surrounding region, he said. “Both have strong entrepreneurial, pro-democratic traditions that embrace risk, disruption and creative freedom over technocratic efficiency,” Randolph said.  Hong Kong plays a key role in connecting the Greater Bay Area with international businesses, said HKTDC’s Kwan. As an international financial and business hub, the city is the ideal springboard for accessing opportunities arising from the development zone, he added.

US-China tech war: Beijing’s semiconductor push could be hindered by delays in US permit approvals for equipment imports
Approvals process has become congested amid too many applications, resulting in likely equipment shipment delays to new chip plants in China     Chinese companies are factoring longer lead times into their plans, but the issue is hampering a domestic ramp-up in capacity   Global foundries are currently trying to ramp up their capacity amid a chip crunch, and the mature 28-nm process is in hot demand.  TSMC, the world’s largest contract chip maker, decided in April to spend US$2.87 billion to expand production at its Nanjing fab, which produces chips on the 28-nm node.
SMIC, which was added to the US Commerce Department Entity List last December over its alleged ties to the Chinese military, said in March it will build a 28-nm foundry in Shenzhen.

Chinese carmaker SAIC to spin off hydrogen fuel cell unit, eyes Star Market IPO
Shanghai Hydrogen Propulsion Technology will prioritise Shanghai Stock Exchange’s Nasdaq-style Star Market for IPO, financial magazine Caijing says      SAIC has been actively looking to raise capital to support growth of SHPT: sources  Hydrogen fuel cell technology produces power through an electrochemical reaction of hydrogen with oxygen, generating heat and water as by-products. The technology is, as of now, largely untapped because of the high costs involved, the limited driving range of such vehicles and few refuelling stations.   Companies that are currently using such vehicles are relying heavily on generous government subsidies – 240,000 yuan for every hydrogen-powered car and up to 400,000 yuan for such trucks. Almost all of the 7,200 such vehicles on China’s roads as of July last year were retrofitted commercial trucks, according to new energy consultancy   Shanghai aims to increase the number of hydrogen-powered vehicles to 10,000 units by 2025, which represents more than an eightfold jump from the 1,200 such cars in 2020

China’s banks’ foreign currency stockpile surpassed record $1 trillion
China’s banks stockpiled over $1 trillion of foreign currency deposits for the first time ever, allowing capital to flow out of the country more freely, reported Bloomberg.   With the growth of demand for Chinese goods during the pandemic and more foreign investors purchasing Chinese stocks and bonds, the foreign earnings of exporters increased, and foreign currency deposits grew steadily. Through May, deposits surged over $260 billion.   According to the People’s Bank of China (PBOC), commercial lenders had a record of $1.38 trillion of foreign exchange last month during which the foreign reserves of the PBOC rose to the highest it’s been in five years. The rapid accumulation was due to surges in overseas investors, high demand for Chinese products, and a surplus in trade.

 Wall Street Journal reported that China is likely to keep COVID-19 border restrictions for another year. Do you have any comment on this?
I’m not aware of what you mentioned. In principle, I would like to stress two points. First, since the onset of COVID-19, by drawing on the practice of other countries and international customary practice, China adjusts its management measures on in-bound travelers in light of the changing epidemic situation in a science-based manner.    The coronavirus is still spreading in many parts of the world with the emergence of many variants. China will continue taking prevention and control measures through scientific analysis in light of the evolving situation. On the basis of ensuring safety, China stands ready to work actively to foster healthy, safe and orderly personnel exchanges with other countries

Dairy: the deep historical link between China and Japan
The production of dairy products was an important industry that was transmitted from China to Japan as early as the seventh century. This industry is often overlooked in discussions of historical Sino-Japanese relations. It highlights the need for us to be more aware of the deeper historical connections, including the transfer of material culture, between China and Japan.

Coronavirus latest: Taiwan to step up border curbs to keep out delta variant
Taiwan will tighten border controls to keep out the highly contagious delta variant of the coronavirus, authorities say, requiring arrivals from five countries — Bangladesh, Britain, Indonesia, Israel and Peru — to be placed in centralized quarantine facilities for 14 days, starting Sunday. People coming from Brazil and India already face such quarantines, while all others must quarantine at home or in hotels for 14 days.

Is there room for China in Australia’s travel bubble?
While Australia has managed the COVID-19 pandemic exceptionally well, hard border closures led to substantial losses in its tourism sector. Australia is ranked among the top 10 most affected economies in terms of tourism revenue loss. A Deloitte report on Australia’s tourism recovery outlined three scenarios, with even the most severe scenario anticipating some international travel bubbles emerging in 2021.   Travel bubbles between China and outbound travel destination countries may emerge as a more effective policy tool than the ADS scheme to regulate Chinese outbound tourism. Other countries may also seek travel bubbles with China to spur the recovery of their tourism industries. They will need to have a high vaccination rate in their population and should have already brought infection numbers under strict control. And countries that recognise Chinese vaccines are likely to be treated more favourably. In the ADS era of Chinese outbound tourism, Australia was an early bird to ride on the scheme. In the COVID-19 era, it seems Australia still has the rein in its hands for tourism recovery.

Alibaba’s First ‘Netpreneur’ Masterclass in Europe Wraps Up
Alibaba Business School (ABS), the company’s training and education arm, has concluded the first European edition of its Netpreneur Masterclass program this week as it rolled out learning resources for entrepreneurs and business leaders worldwide.     More than 200 participants from Italy and Spain enrolled in the six-week online training – designed to share insights and equip executives and small and medium-sized enterprises with the knowledge they need to navigate the digital economy. Participants ranged from 25 to 69 years old, and 80% of them represented small businesses.

Millions turn to livestreaming to earn a living during Covid-19 pandemic, as the gig economy takes hold
Many people and businesses would not have survived the pandemic if it were not for the gig economy, says co-founder of live streaming service Uplive   Asia Innovations Group, the start-up behind Uplive and Lamour, is looking at launch an IPO in New York in the second half of this year, sources say

The calm before the birthday
It was a week of lots of medium-level developments in the China sphere but nothing which really stands out. Which could be anything other than a coincidence. Happy 100! Nothing is allowed to cast a shade on the festivities. But some of the items that struck our eye were related to the endless march of change that is US-China relations.   The word is Biden is pushing for a one on one, or perhaps Mano a Mano is more appropriate, conversation with Mr Xi. There are certainly many topics to address. One can predict with a fair degree of certainty what the Chinese position would be going into the call, but what would be interesting would be to see the prioritization of the list of topics that the US would submit. There is little or nothing the Chinese side will be ready to compromise on, one presumes. The Putin chat is likely to be the model. Then there is Huawei—the US moved another step closer to exorcising all its equipment from domestic telecoms infrastructure, even as parts of the EU said they were considering using the company’s equipment.   In other news, banking officials are warning about inflation, crypto currency looks like it’s going to continue to get whacked until it surrenders and the foreign exchange holdings of China’s banks hit a new high.

Chaos vs control: China’s communists and a century of revolution
”.   As the CCP turns 100, its leaders are still struggling to reconcile growth and stability   In 35 years of reporting on China and its emergence as a global power, perhaps the most perceptive and certainly the most genial person I met was Cao Siyuan. He was by no means grand. His face looked as if it had been moulded by laughter. He laughed frequently, often at his own jokes and sometimes at himself. He had once, before a dramatic fall from grace, been an adviser to China’s top leader. But when asked about his time among the ruling elite, he would demur, describing himself as no more than a “seventh-grade, sesame seed-sized official The economic emergence spurred by the reforms has led to the biggest and longest-run economic boom in history. In 1980, China’s annual gross domestic product stood at a mere $191bn, or $195 per capita, making it one of the poorest countries in the world. Nearly 40 years later, its GDP has increased 75 times to $14.3tn, or $10,261 per capita, in 2019. On its current trajectory, it may overtake the US as the world’s largest economy in about a decade or so.   “A party-state system that has no checks or balances . . . invariably gives rise to the rule of a clique of trusted lieutenants. Hence we have seen the equivalent of a court emerge and the political behaviour endemic to a court,” Xu wrote. For much of the past 100 years of CCP history, power struggles among its elite had little impact on the outside world. But now China is the world’s biggest trading nation, a crucial source of investment and technology as well as home to about a fifth of humanity. Future episodes of the type of disorderly change that has so often sullied the annals of CCP history could plunge the wider world into crisis.

China hits out at ‘bandit-like’ US over trade restrictions on Xinjiang firms
Washington says Hoshine Silicon Industry will not be able to sell its products in the US due to ‘reasonable indications’ of forced labour in its manufacturing process     It also announced that Hoshine and four other firms will be subject to tight restrictions on their ability to acquire US commodities, software and technology

US and European allies must ‘maximise alignment’ to confront China, White House official says
Western nations find broad agreement on human rights, but there is divergence on some other issues, says US National Security Council’s top China official  US pledges to ‘stand together against the coercive and otherwise problematic behaviours that we see from Beijing on the economic front’   European leaders have welcomed the US resumption of multilateralism, in sharp contrast to the go-it-alone approach that characterised the foreign policy of the Donald Trump administration. Speaking through a translator ahead of her meeting with Blinken on Wednesday, Merkel said that the German and US administrations “had been able to find a common basis on which to tackle the geostrategic challenges of the world, not only (to) identify them but actually to agree on a common approach towards these problems” – including China and Russia.   Officials in Beijing, hoping that US-China tensions would de-escalate with the new Biden administration, have looked on with frustration as Washington courts its European allies.   Condemning what he called an attempt to interfere in China’s internal affairs, foreign ministry spokesman Zhao Lijian said earlier this month that the G7 statement revealed “the bad intentions of the US and a few other countries to create confrontation and estrangement, and widen differences and disagreements

How Will the EU Navigate U.S.-China Tensions?
Over the past few years, Europe and the United States have each approached China’s rise differently. Washington has moved to reduce its economic reliance on Beijing while castigating its increasingly assertive global stance. Brussels, on the other hand, has tried to insulate its business ties with China from its concerns about Chinese policies and ambitions. Europe and China jointly proposed the Comprehensive Agreement on Investment (CAI), while German Chancellor Angela Merkel and French President Emanuel Macron strove to keep the continent’s relations with Beijing on solid footing. Recently, however, it appears as though Europe has shifted course to align elements of its China strategy more closely with those of the United States. The CAI has been shelved, and France and Germany have announced plans to play a larger role in the South China Sea disputes. How will Europe manage its relationship with Beijing going forward? And how should Europe deal with worsening U.S.-China relations?    During a live recording of the China in the World podcast, Paul Haenle spoke with Rosa Balfour, Director of Carnegie Europe, and Cui Hongjian, Director of the Department of European Studies at the China Institute of International Studies, on the trajectory of U.S.-EU-China relations. This panel is the fifth of the Carnegie Global Dialogue Series 2020-2021 and is also available to be watched online

Biden crackdown on Beijing dims hopes for Chinese companies in US
Survey shows more businesses had expected better bilateral relations after Trump  Huawei has been calling for discussions with the Biden administration “separately” from Beijing to resolve issues including the U.S. export ban on the company and the detention of its CFO Meng Wanzhou, but has not yet engaged with the administration.   The greater consistency of the Biden administration’s policies is also seen as an improvement by some Chinese companies. “Last year, you literally did not know what would happen the next day, because there was no way to tell what Trump would do next. Biden seems to be more predictable,” which offers businesses more stability, said an executive at a Chinese tech firm who asked not to be named.   While the competition between China and the U.S. will surely persist, Biden’s more considered, rules-based approach to China could benefit businesses in both countries. “To make progress on U.S.-China trade and economic challenges, one of the keys will be stability, consistency and coherence in U.S. foreign policymaking,” Ezell said.

Biden’s ban on Xinjiang-produced solar products fuels stock rally in repeat of cotton boycott episode
Solar-panel parts suppliers are surprising winners in stock markets as Biden’s move enriches company valuations  China unveils a programme this week to boost solar-panel installations that could add US$154 billion to the market size: Dongguan Securities

Kuaishou ends gruelling overtime policy as China’s Big Tech try to reform controversial 996 working culture
Kuaishou’s overtime arrangement was first introduced in January ahead of the company’s IPO, but has now been cancelled     The culture of 996 – working 9am to 9pm, six days a week – has become an unwritten rule for most of China’s tech industry  Lauded by tech bosses such as Jack Ma, founder of Post owner Alibaba Group Holding, the 996 schedule has seen resistance from tech workers for years, with the practice coming under the spotlight again earlier this year.    In January, Shanghai-based e-commerce platform Pinduoduo came under the microscope after a 22-year-old employee collapsed while walking home from work, and later died in hospital. A week later, the company said another young worker had jumped to his death in his hometown of Changsha.  The cases sparked an investigation into the company by the Shanghai authorities, criticism from China’s state broadcaster CCTV, and renewed discussion on social media about the 996 culture. Tech workers have been complaining about 996 for years, and in 2019 some launched a project called “996.ICU” on Microsoft’s GitHub code-sharing community.“If you work 996, you end up in an ICU (intensive care unit),” the campaign’s slogan read. Some netizens have even joked about a new work ethic – “007”, or “00.00am to 00.00pm” seven days a week.  The 996.ICU campaign led Chinese state media to criticise such labour rights violations, but little has changed in the past two years.

Education in China: high costs, intense competition for schools, excessive tutoring, and fewer children
The anxiety and high cost of educating a child in China means many parents are not considering having more children    Despite efforts to equalise the distribution of resources between schools, parents continue to compete for what they think are the best options

‘Repression by Beijing’ killed Hong Kong’s Apple Daily, Joe Biden says
US president and lawmakers from both parties denounce the moves that forced the ‘much-needed bastion of independent journalism’ to close    Biden also calls for release of detained journalists and media executives, saying their work is ‘not a crime’

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