Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – March 1, 2022

China’s 2021 GDP surpasses 114 trillion yuan: NBS
China’s gross domestic product (GDP) exceeded 114 trillion yuan (about $18.1 trillion) in 2021, registering an increase of 8.1 percent over the previous year and an average growth of 5.1 percent over the preceding two years, the National Bureau of Statistics (NBS) said in a release (link in Chinese) on Monday.

Stability key for economic policymakers
Recent figures from the National Bureau of Statistics show that China’s inflation eased in January, with consumer-price growth slowing to 0.9 percent year-on-year. Some research bodies said that might offer more leeway for monetary policies in shoring up growth. Some suggested that steady growth of household incomes will better facilitate China’s pursuit of high-quality growth. Liu Shijin, who is also a member of the CPPCC National Committee, said one key measure to promote China’s high-quality growth is to enlarge the size of its middle-income population. He suggested expanding that population from the current 400 million to around 800 million to 900 million in the next 10 to 15 years to achieve high-quality growth.

How Reliable Are China’s Statistics?
Beijing has both the motive and means to fudge its statistics. Finally, there are the statistics that Beijing releases, such as those of the National Bureau of Statistics. There should be no doubt these data reflect the narrative Beijing wishes to convey. In ordinary times, this may require little or no manipulation. Even in a crisis, these data must have a degree of truth to match individuals’ observations and quiet their suspicions. However, we should not be surprised that Beijing would fudge its data if it perceived doing so as necessary or advantageous. The hope has been that after Mao’s reign of terror a more open China would provide better statistics. Perhaps it has, but as COVID-19 has shown, the motive and means to misrepresent data remain. In providing an obviously faulty statistic for China’s population, it is possible the statistics chief simply made a mistake. My experience with the CCP and PRC suggest this is unlikely: its apparatchiks tend toward the punctilious. It is more likely there was some confusion as to the desired statistic and the director attempted to paper over it. Whatever the answer, as lawmakers, regulators, and business people implement the Uyghur Forced Labor Prevention Act and other important protective measures, they should take PRC statistics with a healthy serving of salt.

China PMI surprised to the upside with policy support
Both manufacturing and non-manufacturing PMIs recovered back above 50, showing signs that domestic demand from infrastructure investment is starting to show its impact while consumption continues to remain weak.

China manufacturing: almost half of southern firms lost production capacity during power crisis, survey shows
Nearly half of the companies surveyed lost significant production capacity, says a survey from the American Chamber of Commerce (AmCham) in South China. Most respondents believed the US-China trade dispute may expand in 2022, and optimism about the future is lower than the previous year.

Efforts in entrepreneurship, innovation make China home to more unicorns
China ranked second globally in the number of unicorn companies, or startups valued at more than $1 billion, in 2021, with rising unicorns growing to become “decacorns” with a valuation of more than $10 billion, the latest industry report said. A report by market consultancy CB Insights said the United States was home to the most unicorns globally last year with the number reaching 488. China followed with 170 unicorns. According to the report, 31 percent of global unicorns are valued at around $1 billion and only 46 global companies are decacorns, among which 10 Chinese companies-including tech firm DJI Innovations, social content firm Xiaohongshu and consumer brand Yuanqi Senlin-made the list last year.

Will TikTok bring its Chinese e-commerce game to the West?
It’s been a year since TikTok piloted its ‘TikTok Shopping programs’ in Indonesia and the UK, and already the two markets have totalled a gross merchandise value of about 6 billion RMB ($951 million), according to Chinese tech media sources. Although only 30% of the GMV came from the UK ­– the rest was from the mature Indonesian e-commerce market, TikTok sees huge potential in European and American markets.
Will TikTok bring its Chinese e-commerce game to the West? | Dao Insights

China tech crackdown: Beijing’s off-campus tutoring ban puts 90 per cent of firms out of business
Last July, Beijing launched a sweeping crackdown that essentially stifled the industry, by banning the provision of holiday and weekend training. Industry insiders said it has not truly reduced burdens on Chinese students and their parents, as competition for quality education remains fierce in society.

China’s private sector struggling with ‘common prosperity’, Covid-19 and financing; SOEs thrive
China’s private sector contributes more than half of the country’s tax revenue and GDP, yet it is bearing the brunt of economic pressure. Crackdowns on tech giants and private tutoring, and Covid-19 restrictions on tourism and catering have all taken a toll.

Tech Gear Maker Warns Conflict Is Blocking China-Europe Railway
Zyxel says it stopped using Chinese-run Belt-and-Road link. The conflict threatens to worsen serious supply chain strain.

Just how extreme is China’s lead in the container port business?
China is the world’s largest exporter of containerized goods, produces eight of every 10 new containers, is the leading builder of container ships and operates the fourth-largest liner company. It should come as no surprise that China overwhelmingly dominates the global container port rankings — and with ocean trade now surging, that its port tally has reached a new peak.

China on verge of high-income status after wealth measure jumps 20%
Despite these gains, inequality remains an challenge for Beijing. The top 20% of households on average had 10.3 times as much disposable income as the bottom 20% last year. While the gap between urban and rural households narrowed, ballooning housing prices worsened inequality within urban populations. The share of wealth held by the top 1% of households jumped 9.7 percentage points from 2000 to 30.6% in 2020, according to Credit Suisse — a steeper increase than in the U.S., India, Russia and Brazil. President Xi Jinping’s government looks to address inequality with its push for “common prosperity,” an effort Beijing is trying to balance with promoting stable growth as the twice-a-decade Communist Party congress approaches this fall.

China warns of ‘huge’ pressure on foreign trade as economic challenges mount
A top Chinese official warned on Tuesday that China’s economy faces multiple challenges at home and abroad this year, including “huge” pressure from uncertainty over global trade and from still-lacklustre domestic consumption. Foreign trade, which helped drive the world’s second-largest economy last year, will be confronted by uncertain external demand and a high statistical base from 2021, said Commerce Minister Wang Wentao. “This year, the pressure on foreign trade will be huge and the situation will be very severe,” Wang said at a press conference. Labour shortages and high raw material costs have also heaped pressure on the ability of China’s small and medium-sized companies to handle overseas orders, he said. Given the global uncertainties, China must “do everything possible” this year to spur domestic consumption, Wang said.

EU plans summit with China on April 1 to address tensions
European Union will hold a summit with China on April 1 in an attempt to diffuse growing tensions between the two, European Commission Vice-President and EU trade chief Valdis Dombrovskis said on Monday.

China says US sanctions over Ukraine should not affect right to trade with Russia
China is opposed to unilateral sanctions with no basis in international law, foreign ministry says “China is not in favour of using sanctions to solve problems and furthermore opposed to unilateral sanctions that have no basis in international law”. ‘Normal trade’ with Russia to continue, spokesman says, while calling for de-escalation in Ukraine. “China supports all efforts that contribute to de-escalation and a political solution,” Wang said. “Regarding European security issues, the legitimate security concerns of all countries should be taken seriously. “Under the premise of five consecutive rounds of Nato’s eastward expansion, Russia’s legitimate security demands should be taken seriously and properly addressed.”

Ukraine invasion: Chinese tech firms face dilemma over Western sanctions on Russia
Complying with Western sanctions on Russia would run counter to the Chinese government’s official policy of opposing such measures. However, Chinese companies could find themselves subject to huge fines and penalties for breach of sanctions if they work with targeted entities.

Ukraine-Russia crisis tests Beijing’s desire to maintain ‘normal trade’ with both
‘We hope they can reach peace’, commerce minister says, as impacts of the Russia-Ukraine war begin to emerge on the world’s second-largest economy. Russia and Ukraine are both important trading partners with China, and Beijing made a deal with Kyiv last year after it withdrew its call to give UN human rights chief access to Xinjiang. “China and Europe are two independent forces in the world, with broad strategic consensus and common interests. The geopolitical risks facing China’s Belt and Road Initiative are mounting, warned China’s assistant commerce minister, Sheng Qiuping, during Tuesday’s press conference, without mentioning the Ukraine crisis. Both Russia and Ukraine are participants in China’s plan to grow global trade. Notably, Beijing and Kyiv deepened their cooperation in the initiative by agreeing in December 2020 to work together on projects related to trade, transport, infrastructure, industrial investments and agriculture. We believe that China-EU cooperation is greater than competition,” Wang said, while also calling for the China-EU bilateral investment deal to be ratified and brought into force. That came after European Commission Vice-President and EU trade chief Valdis Dombrovskis reportedly told the trade committee of the European Parliament on Monday that the EU will hold a summit with China on April 1, in an attempt to defuse growing tensions. Meanwhile, Wang also warned that foreign direct investment into China’s manufacturing sector has shown a downward trend. The value declined by 4.6 per cent last year compared with that of 2019, before the pandemic, and the weight of manufacturing-directed foreign investment fell to only 19.4 per cent of the overall foreign investment, he said.

The Ukraine Invasion: What Lessons Is China Learning?
Xi Jinping is watching Ukraine with one eye on Taiwan. The West must give him reason to think any invasion would be disastrously costly. China has become Russia’s economic lifeline. Given China’s extensive trade relations with the United States and Europe, for now Western sanctions against Russia will mean that China will parasitically benefit from the hardship of the Russian people, thereby simultaneously alleviating Putin’s pain and lessening the impact of these sanctions. Therefore, the United States must also closely monitor trade between Russia and China, preformulate collective economic sanction plans on China, and impose them when necessary. China’s economy is still largely dependent on international trade. Given the potential inadequacy of purely domestic economic activity to promote continued growth in time, if international financial ties are suddenly lost, China’s economy may falter or even fall. Xi is in urgent need of maintaining both political and economic stability together to build up his mandate to stay in power for an unprecedented third term at the 20th Party Congress this fall. He could not afford to ignore major economic sanctions imposed by the West. Political power is as personal as it is institutional within the CCP in general and its ruling class in particular. Therefore, it is critical to leverage on what matters to individual leaders and the institutions that support them. The most obvious target is the vast wealth of China’s ruling elite. Much of it is entwined with China’s most significant multinational companies or hidden in foreign banks, making this elite more vulnerable to financial sanctions. The intelligence agencies of Western countries know a great deal about the hidden assets of members of the Chinese ruling class, and publishing such information would itself be a serious blow to the CCP regime. The United States has never taken these systematic actions, but now is the time to openly prepare for such actions, which by itself will be an effective deterrent to Xi’s ambitions for Taiwan. Another element of deterrence is also necessary: strategic clarity. Although the United States and NATO have yet to take direct military action against Russia, and may not in the future, the United States must explain to its people and the world that the Taiwan issue is different, and that the United States has not only a moral but legal responsibility to defend Taiwan. The past policy of strategic ambiguity may have played its due role, but as China’s ambition and capacity to unify Taiwan by force is becoming more and more obvious, and especially given that Putin’s invasion of Ukraine has become a reality, the United States must abandon the existing strategy. Vagueness will no longer be enough to stop Xi. Finally, Russia is currently standing at the forefront of those confronting the democratic world. In addition to sanctions, the international community should fully support the anti-war and pro-democracy forces of the Russian people and strive to achieve political reform there so as to remove the root causes of dictatorship and military violence. This would not only be a more fundamental way to end the Ukrainian crisis and erase Putin’s fascist rule. It would also present the most profound warning to Xi, because what he fears most is the possibility that the liberal-minded and peace-loving people might combine with breakaway members of his ruling clique to form an effective force against Xi and CCP totalitarianism. Russia’s growing isolation, especially Putin’s political downfall, over its aggression against Ukraine would tell Xi that the same fate might await him if he dared invade Taiwan.

China ready to ‘play a role’ in Ukraine ceasefire
China signalled it was ready to play a role in finding a ceasefire in Ukraine as it “deplored” the outbreak of conflict in its strongest comments yet on the war. Beijing said it was “extremely concerned about the harm to civilians” in comments that came after a phone call between Chinese foreign minister Wang Yi and his Ukrainian counterpart Dmytro Kuleba. “Ukraine is willing to strengthen communications with China and looks forward to China playing a role in realising a ceasefire,” the Chinese statement said on Tuesday. It added that it respected “the territorial integrity of all countries”, without indicating whether Beijing accepted Russia’s claim to the Crimean peninsula or shared its recognition of separatists in the Donbas region of eastern Ukraine.

Ukraine reaches out to China to make Russia end conflict
According to statement, China’s Foreign Minister Wang Yi told Kuleba that Beijing was ready to make every effort to help end the war through diplomacy.

Will China fund Moscow’s war chest as Western sanctions bite?
Beijing has limited policy options to deal with a partner at war. Beijing still wants to count on Moscow as a long-term strategic partner to fend off America’s global influence.
China is the only major economy that still has a direct line to a fast-isolated Russia — but the pressure is increasing on Beijing to change that. Just weeks after the two countries signed a “no limits” partnership agreement, China now has no choice but to recalibrate its position on bilateral trade and macroeconomics with Moscow, after President Vladimir Putin launched an unprovoked war on Ukraine. While Beijing still wants to count on Moscow as a long-term strategic partner to fend off America’s global influence, it will no doubt be wary of the international reaction if it opts for measures that could be interpreted as an endorsement of Putin’s aggression, according to experts.

Russia sanction: China’s small banks come under scrutiny for their support of Moscow amid US, EU financial hurdles
Small banks that don’t have any international business exposure are likely to keep financing Russia and service payments. China’s biggest lenders are already showing signs of complying with US and European sanctions in a bid to protect their large international footprints. “Chinese financial institutions, particularly the large ones, they tend to act like EU and US banks do – they follow all the same sanctions programs, they have internal control structures which are very similar,” said Nick Turner, a lawyer at Steptoe & Johnson in Hong Kong who advises companies on sanctions compliance. Small banks would have less capital available for lending to Russia but will also be limited by worries about financial stability – an overriding priority for Beijing which has focused on the risks posed by a series of failures at small banks since 2019. If history is a guide, the response of China’s commercial banks to sanctions on Russia could be underwhelming, as following Russia’s 2014 annexation of Crimea. “When financial sanctions were introduced, there was discussion that Chinese banks would step in and replace the funding that was lost,” said Iikka Korhonen, head of the Bank of Finland Institute for Emerging Economies, which specialises in analysis of China and Russia. “That has not happened. Chinese banks are also cautious about irritating the US”.

As Russia’s isolation grows, China hints at limits of friendship
Chinese state-owned financial institutions have been quietly distancing themselves from Russia’s beleaguered economy. Russia’s economy gets hammered by sanctions, China has emerged as the key player with the potential to lessen its partner’s economic pain. But amid Moscow’s deepening international isolation, there are growing signs that Beijing’s willingness to throw its strategic partner an economic lifeline may only go so far.

China Was Woefully Unprepared for the Russia-Ukraine War
There has been speculation that China could exploit a situation in which Washington was preoccupied by Ukraine by taking action against Taiwan or in the South China Sea. Beijing has rejected that suggestion, but the Ukraine conflict has at the very least highlighted the diplomatic gulf between Washington and Beijing, as China avoids direct criticism of Russia’s conduct. The hawkish Chinese tabloid Global Times said “while the ongoing Ukraine-Russia tussle is intensifying, the U.S. military is attempting to demonstrate its capabilities to stir up trouble” in both Europe and Asia. The same newspaper in an editorial last week warned Taiwan that the Ukrainian crisis proved that “Washington is not reliable” and there is only one option for the island’s future – “to achieve reunification with the mainland.” The Taiwanese Ministry of National Defense on Monday said “in response to the development of the Ukrainian-Russian military conflict,” Taiwan’s army continues to “maintain a high degree of vigilance and closely monitors the military dynamics around the Taiwan Strait to ensure national security.” One lesson that China can learn from the Russian invasion of Ukraine, according to Alexander Vuving, a professor with the Hawaii-based Daniel K. Inouye Asia-Pacific Center for Security Studies, is that a unilateral decision to take over a smaller country won’t be acceptable in modern times.“ I think China is not yet ready to launch an invasion of Taiwan,” Vuving said, adding: “But China will intensify its ‘testing’ action to test the capabilities and resolve of its opponents across the Taiwan Strait and in the South China Sea.”

Can Russia’s Sanctions Pain Be China’s Gain?
What does the Russia-Ukraine conflict, and the surprisingly strong Western response look like from Beijing? Potentially a boon over the long run on the energy front, but deeply worrying financially.
Budding Sino-Russian entente aside, a full-out attempt to dilute Western sanctions in Russia’s favor is unlikely because of the risk to China’s own technology and financial champions. Beijing will intensify efforts to insulate itself from the possibility of similarly united sanctions down the road, but it will continue to be hindered by the desire to maintain a high degree of control over the yuan. The consequences of the crisis for global energy flows were metastasizing even before the invasion of Ukraine: For China, the most alarming aspect of the crisis is probably its financial implications. The joint decision by the European Union, the U.S., the U.K., Japan and Canada to sanction Russia’s central bank— pummeling the ruble and freezing access to many of the foreign assets the Central Bank of Russia would need to defend it. But the problem is that China’s currency still isn’t fully convertible even in normal times, much less in a geopolitical crisis of the sort unfolding now. China’s central bank regularly intervenes in both the onshore currency market and the offshore one in Hong Kong when they move in ways it doesn’t like. Yuan deposits held onshore are in many cases subject to both quantitative and qualitative controls in terms of how much can be converted and how the proceeds can be legally used. Those rules also tend to shift when overall capital outflows or inflows change rapidly. That will continue to put a relatively low ceiling on global demand for yuan relative to the size of China’s economy. And for now, the macroeconomic risks of removing China’s capital controls — particularly for the heavily indebted-real estate and state sectors — still probably outweigh the geopolitical impetus to push the yuan’s  adoption abroad. Beijing will accrue some advantages in the energy and, potentially, technological realms over the long term from the current.

Alain Gillard
Information Officer
Service Asie Pacifique
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