Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – March 10, 2022

Two sessions 2022: 5 Chinese tech leaders weigh in 
Founders of leading Chinese tech companies present policy proposals to China’s Two Sessions in 2022.  The annual meetings of the National People’s Congress (NPC) and the advisory Chinese People’s Political Consultative Conference (CPPCC) being held this week are most important for the windows they provide into the government’s economic targets and policy priorities in the coming year.  But the so-called “two sessions” meetings also enable some top private enterprise executives who are members of the two bodies to present recommendations for policy directions publicly. This year, airing perspectives from tech industries were founders of Tencent, Baidu, NetEase, Xiaomi, and Geely. Their recommendations perhaps won’t be taken up by government authorities this year but might merit serious official consideration in future years.

Analysis: Less Xi, more Li in China policy speech
President’s signature policies take back seat as economy sputters
Many had seen Xi’s power as invincible leading up to the party national congress and that a third term was a given. But there has been a slight change. That shift comes from the sputtering economy, on the verge of slowing to levels unacceptable to the party.   The slow down can be attributed to none other that Xi’s own extreme economic policies.  Even bureaucrats in the central government under Li are expressing concern. “Small and medium-size private companies are losing steam,” said one. “If the situation remains unchanged, China’s powerful economy, which we have spent years building, could collapse instantly.” Another major headache is Ukraine. In this regard, Li expressed a sense of crisis, albeit indirectly. “A comprehensive analysis of evolving dynamics at home and abroad,” he said, “indicates that this year the risks and challenges for development rise significantly, and we must keep pushing to overcome them.”  Li addressed the issue because in addition to worsening relations with the U.S. the strife in Ukraine is adding to the downward pressure on China’s economy.  Skyrocketing oil prices will directly hit the Chinese economy. The country will also face growing pressure from Western nations as it is supporting Russia amid that country’s war on Ukraine. An acceleration of supply chain disruptions is possible.In sessions he attended at the National People’s Congress, Xi touted the superiority of China’s political system and governance, saying that the country’s successful fight against COVID-19 and the elevation of millions out of poverty has stood in contrast to the disorder in the West.  But this logic is tricky because it puts him in line with Russian President Vladimir Putin and firmly against the West. China’s confrontation with the West will only get harsher with this kind of language.    Domestically, Xi may no longer have the absolute voice in economic policy. The traditional collective leadership system, albeit slightly, has made a comeback.    Yet, the political legacy Xi has spent nine years forging with a fierce anti-corruption campaign will not disappear easily.   Will Xi’s momentum build? Or is it on the other side of its peak?  The first round of personnel changes could come any day now. All eyes are on whether Xi’s close aides, spread across China, will be summoned back to Beijing and offered key roles.

The rising costs of China’s friendship with Russia
For Xi Jinping, some of the very same pressures are starting to build. In the early days of the Russian invasion, China tried to keep its head down — perhaps in the hope that a short, sharp incursion would not cause too many reverberations. China’s growing economic discomfort was noticeable in the video conference Xi held on Tuesday with his French and German counterparts Emmanuel Macron and Olaf Scholz. The Chinese leader appealed for “maximum restraint” in Ukraine and said the three countries should “jointly support peace talks” between Moscow and Kyiv. But he also criticised western sanctions that are exacerbating commodity price rises. “Sanctions will affect global finance, energy, transportation and stability of supply chains, and dampen the global economy that is already ravaged by the pandemic,” Xi said. “This is in the interest of no one.”  Among the large economies, China is one of the most exposed to the fallout from the war. As the world’s biggest importer of oil, it has watched crude prices — which were already high — surge 27 per cent since the war began, while Chinese iron ore contracts surged 25 per cent over the first 10 days of the conflict.  “We should not slacken our efforts on food security,” the president said. “Nor should we rely on the international market to solve the problem. We need to be prepared for a rainy day [and] keep food security as our priority.”

China tries to ‘square a circle’ in Ukraine
I think understanding how that reality is going to change the way Americans, the way Europeans, the way everyone thinks about our world is something that it’s too soon to conclude but I do think some of the geopolitical effects are already evident. We’ve spent this whole podcast talking about one of them, which is how deep is the Russia-China alignment, not just in this crisis, but on things that are unrelated to this crisis? How meaningful will that be for thinking about international order? China’s not opposed to order. It just doesn’t particularly care for all elements of the one that the United States has been promoting in the post-Cold War period. The second of course is where American focus and commitment will be. There’s been a debate in the United States over the last several years about pivoting to Asia, rebalancing to Asia, focusing on the Indo-Pacific. I’m part of the Indo-Pacific crowd but if my crowd, this crowd, thinks that the United States will not have to make big new security commitments, emotional commitments, psychological commitments, policy commitments in Europe, I think this crowd is delusional given what I just said about European reactions to this and the view that this is an absolute catastrophe. The idea that there’s some sort of two region policy and that there aren’t tradeoffs choices, and in fact, things that are going to link these two regions together, certainly in European thinking that’s delusional to me. I think those contradictions have probably become a lot sharper for the United States and the American foreign policy class hasn’t quite assimilated that yet. Third, I think on a lot of the issues that matter to third, fourth, fifth, six players, particularly in the global south where the agenda remains the same, Ukraine or no Ukraine — growth, employment, opportunity, innovation, sustainability, development — on those things, no matter how sharp the U.S.-China confrontation is, no matter how much the United States wants to talk about in access of authoritarians versus a coalition of democracies, those countries will still try to have the name of the game be addition and multiplication, not subtraction and division. Those are the operations that matter. That being the case, I think we’re heading for a geoeconomics of diversity and potentially a geopolitics of fragmentation, not Cold War like bipolarity into two neat coalitions. Particularly on economic issues that matter, cross border data, access and transfers, infrastructure construction, project finance, trade standards, investment rules. It is not, as president Obama once put it when he talked about the Trans-Pacific partnership, American rules versus Chinese rules. We talked about this last time. He said, “If we don’t write the rules, China’s going to write the rules.” Now, people are saying, “If we don’t write the rules,China and Russia are going to write the rules.” The reality is there are a lot of rules to be written and a lot of standards to be set. There are a lot of players who are going to set them and not just on United Nations votes, but on things like cross border data rules, data access and transfer rules. India is not in the same place as the United States. I just did a volume here at the Carnegie Endowment on the Korean way, with data, on data governance and open data and cross border data, Korea’s not lined up in some coalition of democracies either. I think we’re heading for a world of fragmentation where geopolitics and geoeconomics may diverge. I think the key is to think with some granularity about that because as I said, for most countries, the mathematical operations that matter are still addition and multiplication, not subtraction in division. A world where ideological drawings are drawn very sharply, that’s a world of sharper choices and of subtraction and division and I still think two thirds of the world is not going to want to play that game.

In a video meeting with French President Emmanuel Macron and German Chancellor Olaf Scholz on Tuesday, Xi Jinping urged his French and German counterparts to pursue “maximum restraint” in responding to Russia’s invasion of Ukraine. The war has forced Beijing into an awkward position of hedging between Europe and Russia in an attempt to maintain positive relations with each. But China’s reluctance to condemn Russia’s interference in Ukrainian sovereignty, even as the war drags into its third week, has not gone unnoticed in Europe, and appears to have strained Europe-China relations.

Xi Jinping isn’t siding with Putin over Ukraine, as many in Washington fear. He’s trying to steer clear of the crisis.
China has the economic muscle to undercut Western sanctions on Russia. But for now, Xi Jinping is playing it safe by walking a middle road between Putin and Biden China could also aid Russia by expanding its investments into Siberia and Russia’s far east in exchange for timber, oil, and wheat — deals that would circumvent sanctions because they don’t show up on bank ledgers. “In effect, it’s a bartering system,” said Zenel Garcia, an expert on Sino-Russia relations who teaches at the US Army War College. State-backed Chinese companies, he added, had already done similar swaps with Iran. He said that “if push comes to shove” with Russia, he believed “they would do it again.” Indeed, a closer look at China’s interests suggests that Xi has a lot to lose from supporting Putin. China may be Russia’s largest trading partner, but Russia’s modest economy — smaller than Italy’s, with a gross domestic product of $1.5 trillion — isn’t enough to rank in China’s top ten. This means that while China may reap some incidental benefits from Russian economic dependence, that dependence only runs one way, from Moscow to Beijing. In economic terms, China may be far more interested in making sure that Putin’s invasion of Ukraine doesn’t interfere with its much larger trading relationships with the West. For starters, there is much more money at stake with the US and Europe — economies with a combined $38 trillion in gross domestic product that trade some $1.4 trillion with China each year. (China-Russia trade is about one-tenth of that amount.) In addition, some of the goods and services that China imports from the West — higher education, scientific equipment, specialized software — aren’t ones that it can find elsewhere.But now, with Russia bogged down and its economy reeling from Western sanctions, it looks like Ukraine could serve as a deterrent to China’s ambitions in Taiwan. The Chinese military has less experience and far fewer nuclear weapons than Russia. And while the West is heavily dependent on Chinese labor and manufacturing, it could still freeze as much as one-third of China’s $3.2 trillion in foreign reserves if Xi decided to invade Taiwan. Such post-invasion sanctions could also hamper Xi’s long-term ambition to elevate the renminbi into a global reserve currency — one that would rival the euro and the dollar. “Beijing is looking at how the West sank the Russian economy over the course of a few days and wondering if they’re vulnerable,” Torigian said. Even before Putin invaded Ukraine, Beijing signaled that it was trying to walk a middle road between Russia and the West. After the Olympics summit, anonymous Chinese officials walked back the “no limits” friendship with Russia, saying it was never intended to commit China to backing the invasion of Ukraine. On February 19, speaking via video at the Munich Security Conference, China’s foreign minister cautioned that “Ukraine should not be a frontline for major party competition.” In a blunt rebuff of Moscow, he added that “the sovereignty, territorial integrity, and independence of any country should be safeguarded.” Nor did he or Xi join Putin two days later in recognizing the so-called “people’s republics” of Donetsk and Luhansk — Russian-occupied land in eastern Ukraine — whose supposed protection served as a pretext for the invasion.
In the end, rather than deepening any alliance between Russia and China, Ukraine may wind up driving a wedge between the US’s two biggest competitors. For Xi, Russia is more of a liability than an asset. “It would certainly be in China’s interest for Russia to wrap the invasion up quickly,” Torigian said. “The reputational and financial risks to China increase the more that time goes on.”

Russia says China has refused to supply airlines with parts after sanctions
Official says Russia will look to source parts from other countries after failed attempt to obtain them from China     Russian aviation sector is being squeezed by Western sanctions over Moscow’s invasion of Ukraine

Ukraine invasion: how much Russian oil will China soak up after the US, Britain announce embargo?
China is expected to absorb incremental amounts of Russian oil following an import ban imposed by the United States and Britain  However, uncertainty over shipping and fears of secondary sanctions mean the amount will be limited in the short term, analysts say   Chinese refiners will adjust their buying strategies again once it becomes clear if they are exposed to secondary sanctions and when they figure out workarounds for payment, Meidan said. Some trade will shift to settlement in yuan using China’s Cross-Border Interbank Payment System (CIPS) as an alternative to Swift, though few oil market participants are familiar with the Chinese system. “Using CIPS will take time to set up and it remains unclear to what extent Russian sellers are willing to move wholesale to the yuan,” she said. But the discounted crude from Russia could be more appealing to Chinese refiners later in the year, especially if prices remain high, Meidan said  Beijing has asked state refiners to consider suspending exports of petrol and diesel in April amid shortage concerns, according to a Reuters report citing anonymous sources on Wednesday.  Nevertheless, even though China has the appetite for more Russian crude, demand cannot grow indefinitely, experts said. “In the long term we expect that the Russian economy can strengthen the links with mainland China, its largest trade partner,” said Jakub Kwiatkowski, a senior economist at IHS Markit. “On the other hand, we believe that mainland China is not able to absorb the whole sanctions-related trade shift.”

Russian-Ukraine war will ‘get worse before it gets better,’ Army Secretary Christine Wormuth says
Russia’s invasion of Ukraine will likely continue to escalate, U.S. Army Secretary Christine Wormuth told CNBC on Wednesday.   “Unfortunately, I think that this is going to get worse before it gets better, as it looks like the Russians are going to turn to some potentially brutal tactics,” she said.   Wormuth’s comments come as the House of Representatives gears up to vote on a $1.5 trillion spending bill on Friday that includes nearly $14 billion in aid to Ukraine.

podcast : Evergrande: the end of China’s property boom
The rapid expansion of China’s property sector was powered by a great migration from the farms to the cities – and built on cheap credit. The FT tells the story of Evergrande, the most indebted property developer in the world, which now stands on the brink of collapse. It’s a story that changes the outlook for China’s position as the locomotive of global economic growth. But is this China’s Lehman Brothers moment? posts 1st annual loss since 2018 as new businesses bleed cash
Shares drop as much as 18% after latest results from Alibaba rival  Slowing economic growth and higher costs knocked Alibaba rival to its first annual loss in three years, sending its Nasdaq-listed shares down more than 18% at one point amid heavy selling in Chinese tech stocks.    Net loss attributable to ordinary shareholders for the full year of 2021 was 3.6 billion yuan ($569 million), compared to a net income of 49.4 billion yuan for 2020. reported Thursday.

Chinese nickel giant Tsingshan said to have sufficient inventory for delivery
The company has swapped its nickel matte for domestic nickel plate, says state media Securities Daily     Tsingshan’s short on the LME is said to be 100,000 tonnes, but could be larger when taking into account other amounts through agencies, according to Bloomberg report

China’s Growing Club Of Indebted Property Billionaires
China’s real estate industry used to be a goldmine, minting one billionaire after another. Today, it has become a debt trap for shareholders and investors. The industry’s billionaire founders are facing their day of reckoning. They need to honor payments for a mountain of dollar bonds they have issued to international investors, which will come due in the next four years, with outstanding balances of $27.33 billion in 2022, $18.28 billion in 2023, $19.03 billion in 2024, and $ 17.99 billion in 2025, according to Chinese data provider Wind. The super defaulter is China’s formerly richest billionaire, Evergrande founder and Chairman Hui Ka Yan. He has not yet offered a workable restructuring plan after missing payments on nearly $20 billion of international bonds that were all deemed to be in default late last year.Hui is not the first to land on this slippery slope, however. Twenty one Chinese property developers have been ensnared in a vicious debt spiral in recent years, according to Fitch Ratings. They have defaulted on the payment of domestic or offshore dollar bonds, or both. Chinese securities brokerage Essence Securities estimated that of the 14 mainland real estate developers that defaulted on their payments of dollar bonds, totaling $8.65 billion as of year-end 2021, 10 took place last year, involving $6.34 billion. Debt crisis aside, billionaires being billionaires, some still are capable of generous philanthropic cash contributions. Kaisa’s Kwok Ying Shing earned 19th place in the 2021 Forbes China Philanthropist List, with cash donations of nearly 248 million yuan, including 120 million yuan for rural revitalization in his home province of Guangdong. Whether or not this is a prudent use of his money is subject to debate.

Why does China want to join the Digital Economy Partnership Agreement (DEPA)?
We explore what the landmark multinational trade agreement involves and why countries might want to join it As businesses around the world pursue digital transformation to modernise their operations, politicians have realised digital trade, data rules, and services need to be enshrined in formalised agreements too. Trade between nations is slowly evolving to include digital services and technological aspects that were previously unheard of. This has led to the UK, for example, aiming to break down digital trade barriers to help businesses export services abroad. Taking this a step further, some countries are formally ratifying digital agreements to cooperate when it comes to technology. The US and Japan, for example, signed a digital trade agreement in October 2019, which signified the importance of the digital economy. While addressing the G20 Leaders’ Summit in October last year, Chinese President Xi Jinping revealed the country had decided to apply to join the Digital Economy Partnership Agreement (DEPA). This is a first of its kind agreement between Asia-Pacific and Latin American nations that establishes new approaches to digital trade and supports interoperability. If successful, China would be the largest economy to join the agreement.

Russia’s VTB Bank offers up to 8 per cent interest for yuan deposits, as it hoards renminbi to skirt dollar sanctions
Deposits can be opened remotely through VTB Online with a minimum amount of 100 yuan (US$16)     The yield on US dollars when placed for 3 months is 8 per cent per annum and 7 per cent for euros, while the six-month rate for roubles is 21 per cent, according to VTB

Ukraine an opportunity to test China’s strategic outlook
Decisions undertaken by Washington and Beijing in the coming months could have outsized influence over the trajectory of US–China relations, and the entire international system, for coming decades. The more China clings to Russia following Russian President Vladimir Putin’s barbarism in Ukraine, the stronger calls will grow to treat China and Russia as interchangeable enemies bent on imposing their might-makes-right vision for the world.  Efforts to stimulate Beijing about the long-term consequences of its decisions may prove to be for naught. Beijing could decide that it is arrayed against a hostile West bent on blocking China’s rise and that its only recourse is to remain in lockstep with Moscow, consequences be damned. If I were an oddsmaker, I would rank this as the most likely scenario.  At the same time, China and Russia do not have perfectly aligned interests. China has a lot more to lose than Russia. Putin is essentially an arsonist of the international system presiding over a country in terminal decline. Xi sees himself as a renovator of the international system to make it more accommodating of China’s vision and its values. China views itself as a country on the rise. Beijing’s interests are ill-served when the United States and the European Union view China and Russia as interchangeable foes.  For Beijing, gradually reorienting from Russia need not mean moving closer to the West. It would simply mean that Beijing continues to be guided by its own interests, rather than entrenched commitments with Moscow. Any progress along these lines would not yield any signing ceremonies or headline-worthy pronouncements out of Beijing. It would not ameliorate profound US concerns over China’s conduct at home and its assertiveness abroad. But in the world of diplomacy, actions by Beijing to gradually distance itself from Moscow would count as progress.

China’s Rural Revitalization Strategy: Opportunities for Investment
China’s Rural Revitalization Strategy is a core component of the government’s goals to promote more balanced economic and social development and to eliminate poverty. While many foreign investors set their eyes on China’s developed urban metropolises, a significant amount of the country still lives in rural areas. We discuss the key investment and business opportunities for foreign companies aligning with the goals of China’s rural revitalization program in this article. Food security was one of the central concerns of this year’s Document No. 1. With a population of 1.4 billion people with growing consumption demands, food security has long been a concern for the Chinese government. These concerns have only grown more pressing in recent years, with issues like the swine flu, international trade disputes, and floods revealing the precariousness of food supplies.   To strengthen food security, Document No. 1 calls for greater production of key crops. This could mean expanded opportunities for foreign agricultural biotech products, such as seeds. While at times difficult to navigate, the Biosecurity Law of China allows for foreign participation in the sector. In addition to expanding domestic production, China is seeking to diversify its sourcing of key agricultural products like soybeans to mitigate trade risks. Producers of agricultural products worldwide may therefore find new opportunities to trade with China, especially for products for which China is currently dependent on a small number of countries.

China to double trading band with rouble after currency’s plunge
China will double the permitted trading range between its currency and Russia’s rouble to help bolster trade between the two countries as the Russian economy reels from western sanctions imposed after its invasion of Ukraine. The China Foreign Exchange Trade System (CFETS) announced on Thursday that “in accordance with the requirements of market development” it would widen the daily trading band for the renminbi’s exchange rate with the rouble, allowing the currency cross to trade 10 per cent in either direction of a daily midpoint set by China’s central bank, up from 5 per cent previously.CFETS said the new trading band would be implemented from Friday, “with the approval of the People’s Bank of China and the State Administration of Foreign Exchange”. China has refrained from hitting Russia with sanctions even as western countries enacted a flurry of economic punishments for Moscow’s invasion of Ukraine. Russia is a key supplier of oil and natural gas for Beijing and the two have made substantial efforts to de-dollarise bilateral trade in the years since sanctions were first imposed on Russia over its annexation of Crimea in 2014.

Can China’s SWIFT Alternative Give Russia a Lifeline?
Russia’s increasing use of the RMB and connectivity with China’s international payment system will struggle to mitigate the fallout of international sanctions    Russian oil and broader RMB-based trade may help to mitigate some of the immediate impacts of the SWIFT ban. However, while significant news coverage has pointed to increased reliance on China as a solution to a SWIFT ban for Russia, regional integration between SPFS and CIPS will fail to provide an adequate alternative. Until further internationalization of the RMB takes place, this network would be unable to support Russia’s international trade requirements. Even more worrying for Russia, China may even lack the intent to integrate SPFS with CIPS in order to prevent entangling itself in punitive action from the West, rendering this whole debate pointless.

Why Beijing thinks Taiwan is different to Ukraine
Key difference is the Eastern European country’s status as a recognised sovereign state and so far Beijing’s ‘red line’ has not been crossed   But Washington’s support for the self-ruled island is increasingly infuriating Beijing, which is taking careful note of the war’s progress

CPPCC endorses patriots governing HK
The country’s top political advisory body wrapped up its annual session in Beijing on Thursday by adopting a resolution that ensures the principle of patriots governing Hong Kong.    President Xi Jinping and other state leaders attended the closing meeting of the Chinese People’s Political Consultative Conference (CPPCC) at the Great Hall of the People.    Delegates approved a work report of the CPPCC Standing Committee and a political resolution on the annual session, among other things.

China Fights New COVID-19 Spike With More Selective Approach
China is tackling a COVID-19 spike with selective lockdowns and other measures that appear to slightly ease its draconian “zero tolerance” strategy.   In Hong Kong, where experts say the city’s worst outbreak to date may have peaked, barber shops and hair salons reopened Thursday. Still, many are seeing that as an example of mixed messages from the government of the semi-autonomous Chinese territory that has been ordered to follow the “zero tolerance” approach used on the mainland.

China Censors Online Ukraine Debate, Bars Calls for Peace
China’s censors, who quietly determine what can be discussed on the country’s buzzing social media platforms, are silencing views of citizens protesting against Russia’s invasion of Ukraine

Can China win the battle against adolescent obesity?
Prior to China’s economic rise, obesity amongst young teens was never a serious problem. Modern lifestyle has heavily influenced the more traditional plant-based Chinese diets.

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