Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – March 11, 2022

China GDP: 2022 economic growth target is within reach, ‘but it will come at a cost’
Variety of options in Beijing’s fiscal policy toolkit are expected to help insulate it from the impact of a protracted war in Ukraine, but analysts flag risks of overreaching. Some economists are already revising GDP forecasts for China based on geopolitical tensions, and further adjustments may come.

China’s economy faces ‘complex environments’ and headwinds to policy goals for 2022, Premier Li warns
‘It’s like climbing a high mountain,’ Li Keqiang says in last major press conference of his premiership, speaking to the challenges that China faces in realising 5.5 per cent GDP growth  Global uncertainties such as Russia-Ukraine war and tensions with West pose outsized threat to China’s economic goals, but Beijing remains confident

How China’s economy has evolved over a decade: In charts
As China’s Two Sessions, the most important event in the country’s annual political calendar gets underway, the economy will be one of the focuses.     China has transformed its economic situation over the past decades and the changes just with in the last ten years have been dramatic.

Chinese premier appeals to US to lift export bans on China
There is great potential for cooperation between the two countries, Li Keqiang says, striking a milder note than the Chinese foreign minister earlier in the week  Competition in trade is still ‘benign and fair’, he says

China’s Premier Says Term Ending as Questions Over Xi Future Remain
Chinese Premier Li Keqiang said he would step down from his post after this year, pointing to a coming reshuffle amid questions over the future of President Xi Jinping.  Li made the disclosure at his annual news conference Friday in response

Why Russia’s Ukraine invasion is a ‘Lehman moment’ for the global economy
Investors were caught off guard both by Russia’s escalation of the conflict and the West’s resolve to punish Moscow with severe financial sanctions     The shock from sanctions against a commodities powerhouse makes the conflict a defining moment for a global economy still recovering from the pandemic   Attention is now focused on the acute challenges faced by the US Federal Reserve. However, it is the European Central Bank, which is already divided over the timing of interest rate increases, that faces the mother of all policy dilemmas: how to prevent inflation from going through the roof without killing the euro-zone economy. For markets, which are not used to taking geopolitical risks seriously, the war in Ukraine is a wake-up call for investors to pay more attention to international relations. For the global economy, however, the conflict is a perilous moment that could snuff out the recovery and tip the world back into recession.

Russia-Ukraine crisis to reshape supply chains, flatten world trade
The improvement in global supply chains has ended before it ever really began. The war in Ukraine will bring longer-lasting disruption and the trade outlook will bear the consequences of sanctions. Expect a new round of delays and protracted supply shortages The biggest hit to supply chains would come from any severe disruption to Russian energy exports, as several European countries are dependent on Russia for energy. But even in the absence of this, there are more challenges to come. In addition to exporting agricultural products such as wheat, corn, and sunflower oil (India, China, the Netherlands, and Egypt are large consumers) both Ukraine and Russia export large amounts of steel, palladium, platinum, and nickel, among others. World trade will weaken more sharply than previously expected. Following the pandemic, continued supply chain troubles and higher inflation and shipping costs pose further downside risks to our trade outlook. Sanctions on several products previously exported to Russia, voluntary bans on exports and efforts to reduce oil and gas imports will all hit global trade this year. Nevertheless, we continue to expect some growth in world trade volume in 2022. The US economy and the Asian region ex-China have limited direct economic linkages to the area, speaking in favour of continued trade, although they are not immune to the indirect consequences of this conflict, such as a sharp drop in demand from Europe. Trade growth might hover just above the 0% area if the war drags on. But whatever happens, trade flows will be significantly reshaped.

Climate change: Ageing population in developed countries poses big carbon-reduction challenge for ‘world factories’ like China, Middle East, study finds
Growing ranks of senior citizens leading carbon-intensive lifestyles pose a challenge for global efforts to reduce emissions, says study in Nature magazine    They are more likely to live in larger houses which use more energy and to spend more on manufactured goods, the report suggests

China’s new-energy vehicle sales drop in February for second month in a row, but outlook remains upbeat
NEV sales reached 334,000 last month, down 22.6 per cent from January, according to the China Association of Automobile Manufacturers    NEV sales were affected after subsidies were slashed by 30 per cent in January

China Orient issues US$1.6 billion bond as it heeds Beijing’s call to acquire soured assets of distressed property developers
China Orient Asset Management three-year onshore bond will carry a coupon of 2.5 per cent to 3.5 per cent  It is the first bond sale by one of China’s five big asset management companies to support the nation’s US$2.8 trillion housing market

‘China willing to play positive role for peace’
Premier Li Keqiang said on Friday that China is deeply concerned about the situation in Ukraine and is willing to make “constructive efforts” for world peace.   At a press conference, the premier described the situation in Ukraine as “grave” and said he hopes for a return to peace.  He said China will exercise restraint, adding that it is important to support Russia and Ukraine in carrying forward ceasefire negotiations and in achieving a peaceful settlement. “The pressing task now is to prevent tension from escalating or even getting out of control,” Li said.  The premier was also asked about possible sanctions against Beijing for supporting Moscow.   “Reeling from the Covid-induced shock, the world economy today is already struggling. Relevant sanctions will hurt the world economic recovery. It is in no one’s interest,” Li said.

China is ‘deeply’ worried about Ukraine crisis, Premier Li Keqiang says
 “On Ukraine, indeed the current situation there is grave, and China is deeply concerned and grieved,” Chinese Premier Li Keqiang told reporters Friday. This year marks Li’s final appearance at the press briefing as premier, a position he’s held since 2013.  Li closed the roughly two-hour-long session with a pledge that China would continue to open up its economy regardless of changes in the international environment.

China Has Tools to Help Russia’s Economy. None Are Big Enough to Save It.
When the United States and its allies declared a financial war on Russia after its invasion of Ukraine, the world turned to see what China would do.     As a growing global power, one of the ways China has extended its influence is by establishing close financial ties with countries unwilling to follow rules dictated by the United States and other Western powers. Surely, the thinking went, China would do the same for Russia. There is just one big problem: money. Specifically, China’s money.  To help Russia evade sanctions, China would have to offer a viable substitute to the American dollar. But Chinese money — the renminbi — is barely used outside of China. Only 3 percent of the world’s business is done using the redback. Even Russia and China conduct their trade mostly in U.S. dollars and euros. What’s more, the risks of helping Russia avoid economic ruin may be greater for China than any possible reward. Much of China’s own economy depends on the U.S. dollar and the financial edifice that underpins it. Chinese companies are active around the globe, using the American financial system to pay employees, buy materials and make investments. China is the world’s largest exporter, and is paid for its goods mainly in dollars. Should Beijing run afoul of the sanctions against Russia, China’s own financial stability would be put at risk at a time when its leaders have emphasized caution. And besides, the few lifelines that Chinese leaders could feasibly offer Russia would not be strong enough to help the country survive a financial blackout from the United States and its allies.

China starts to feel the pain from its friendship with Russia
Beijing’s economy deeply exposed to market turmoil and sanctions unleashed by war in Ukraine

War in Ukraine: How Asian economies are divided over Russia sanctions
Thousands across Asia have joined anti-war protests but governments are split in their response to Russia    Since its invasion of Ukraine, Russia has become the world’s most sanctioned country. But only a few governments in Asia have taken tough action against Moscow. China has refused to outright condemn the invasion of Ukraine and has not imposed any sanctions on Russia. India, Pakistan, Vietnam, Bangladesh, Sri Lanka, Laos and Mongolia also sat out the vote on a United Nations’ resolution to demand the end of Russia’s military operations in Ukraine.

podcast : Russia’s Invasion of Ukraine: Geopolitical Ripples in Asia
Russia’s invasion of Ukraine has had wide-ranging effects across the Indo-Pacific. The hosts discuss the consequences.

Record plunge in, Alibaba hits Hong Kong market amid US delisting move, Russia-Ukraine tensions
Hang Seng tumbles 3.2 per cent as tech leaders like Alibaba, and Meituan crash by more than 7 per cent     The US SEC asked five Chinese companies to show cause why they should not be delisted in new move following the enactment of audit inspection law   Hong Kong stocks tumbled, heading for the biggest weekly loss in two years, as Chinese companies faced renewed regulatory risks in the US. Ceasefire talks between Russia and Ukraine stalled. The Hang Seng Index plunged 3.2 per cent to near a six-year low of 20,222.79 at the local noon trading break. The loss this week of 7.7 per cent was the steepest since the depth of the Covid-19 pandemic in March 2020. The Hang Seng Tech Index plunged 7.6 per cent, and the Shanghai Composite Index lost 2.2 per cent. tumbled by a record 16 per cent after annual loss widened. Meituan and Tencent slumped at least 5 per cent. Alibaba Group Holding crashed 6.6 per cent to a new all-time low. “Everyone is panicking and rushing to sell” under current risk-off sentiment, said Dai Ming, a fund manager at Huichen Asset in Shanghai. “There could be more selling pressure, should the Ukraine ceasefire talks break down or oil prices climb back up.”  Elsewhere, geopolitical risks added to prevailing risk aversion as Ukraine and Russia failed to make progress in talks to halt the two-week war amid wide differences. The crisis has fuelled commodity prices, stoking concerns about global inflation and recession.   Meanwhile, consumer prices in the US rose 7.9 per cent in February, the most in four decades, entrenching the Federal Reserve’s policy tightening bias as policymakers look to start raising interest rates from as early as this month.

U.S.-Listed Chinese Companies Worth $1.1 Trillion Face Risk Of Delisting
The window for regulators in China and the U.S. to resolve their auditing dispute is closing–threatening nearly $1.1 trillion worth of U.S.-listed Chinese stocks after the Securities and Exchange Commission signaled its intention to delist five such firms for failing to comply with accounting rules. The SEC announced on Thursday that fast-food chain Yum China, technology firm ACM Research as well as biotechnology companies BeiGene, HutchMed and Zai Lab are now facing the prospect of delisting under the Holding Foreign Companies Accountable Act, which became law in December 2020. The SEC identified the companies as the first batch to be put on its provisional list for potential future delisting for failing to submit detailed audit documents that support their financial statements.  Analysts say more than 200 Chinese companies listed in the U.S. are at risk of getting delisted eventually, and the the room for future negotiation appears to be rather limited. Although the China Securities Regulatory Commission said in an online statement that it “opposes the politicization of securities regulation,” but it is willing to continue to communicate with U.S. regulators to resolve the dispute. The U.S. now views China as a “strategic competitor” and seeks to counter what it describes as “Beijing’s aggressive and coercive actions” while defending its own economic interests. “The U.S. is considering whether to give China access to its capital markets, and allowing trade of China-based companies by U.S. persons may pose threats to U.S. national security,” he says. “Under a context of U.S.-China strategic competition, everything related to China has been elevated to a national security level.” Losing access to U.S.-based financing channels could prove to be a heavy blow. Although Chinese companies from e-commerce giant Alibaba to games developer NetEase have in recent years completed secondary listings in Hong Kong, relatively small turnover in the Asian financial hub suggests lower liquidity and investor interest to trade the shares. Yum China, for example, sees more than 90% of its turnover volume taking place in the U.S., despite being dual-listed in New York and Hong Kong

China developers: record junk yields keep pushing limits
Credit rating agencies continue to push Chinese developers on to the junk pile, as rating cuts continue. More companies, previously not seen as high risk, are surprising markets with bad news bringing another debt crisis there. This signals that mass defaults are coming.   Logan Group, which operates prime residential and commercial properties in China’s Greater Bay Area, including Shenzhen, was downgraded three notches to CCC- by S&P Global Ratings on Friday. It cited a likely restructuring of its onshore debt plus its large amount of debt maturities. Peer Times China also received a downgrade by Fitch. Shares of both companies have plunged more than 80 per cent in the past year.   Logan has a serious crunch with about $1bn in bonds maturing this year, not much less than its market capitalisation. It has guaranteed private placement notes of around a similar amount, which it now may have to repay. Its three-year dollar bond fell to 13 cents on the dollar on Friday from 95 cents in December. That plunge underscores a recent trend in the Chinese property sector. Even developers that had otherwise shown no signs of credit trouble have taken sudden turns for the worse. This past week was a record for Chinese junk dollar bonds as the average yield hit a record 26 per cent. More than half of all high-yield offshore notes of local developers trade below 50 cents on the dollar, according to Bloomberg data.

The state of China’s electric vehicle market with Robert Yu
Auto industry veteran Robert Yu talks about the booming EV market in China, which sold a total of about 3 million cars in 2021, compared to the 800,000 EVs sold in the U.S. the same year. He speaks to Chris about the current market, and how firms like NIO and Xpeng are exceptionally well-positioned around the globe, and have recently begun entering into the European mark

BYD became China’s second-biggest automaker in February. Here’s how and why
In February, BYD overtook a Volkswagen’s joint venture in China (SAIC-Volkswagen) to become the second-largest passenger vehicles maker in the country, thanks to a surge in the company’s plug-in hybrid vehicles sales, industry data showed on Tuesday. Another Volkswagen Chinese joint venture, FAW-Volkswagen, kept its top seller position.

The first year of China’s carbon neutrality pledge, in numbers
The latest official data serves as a report card on China’s progress in 2021 towards carbon peaking and neutrality  Last year was both the first full year since China committed to carbon neutrality, and the first of the 14th Five Year Plan (FYP) period. It saw the dual carbon targets – of peaking by 2030 and neutrality by 2060 – included for the first time in the annual Government Work Report to the Two Sessions, as well as a procession of policy changes and market responses. So, how did China perform? Recently released data from the National Bureau of Statistics (NBS) can indicate progress on the low-carbon transition. Carbon intensity fell 3.8% in 2021, against GDP growth of 8.1%. Total carbon emissions grew 4% – a fall on the 9% growth seen in the first half of the year. Once again there were big increases in renewables generation capacity, while products representative of the transition, such as electric vehicles, outshone construction materials like steel and concrete. Coal remains the trickiest problem for the transition: in the year since committing to peak carbon by 2030, coal consumption reached a new high in China, nearing but not surpassing the peak figure from 2013.

Climate Change: Why firms such as Covestro, with ambitious net-zero emissions goals, have a hard time buying green power in China
German firm Covestro plans to invest €250 million to €600 million globally by 2030 to reach its net-zero goal    It has bought 100 million kWh through a one-year agreement from solar farms owned by Datang Wuzhong New Energy

China’s pork prices fall in February
The average pork price index in 16 provincial-level regions tracked by the Ministry of Agriculture and Rural Affairs was 16.79 yuan (about $2.65) per kg in February, down 13.1 percent month on month.    The price index dropped 55.2 percent compared with the same period last year, narrowing by 2.4 percentage points from the previous month”s decrease.

What do the different fates of H&M’s sub-brands say about China’s fast fashion market?
The story of Monki (a self-claimed storytelling brand under the Swedish fast-fashion clothing label H&M that offers competitive prices) in China seems to be coming to an end, with the brand issuing a notice on its flagship store on Tmall (China’s e-commerce giant), informing customers of the store closure on 1 April. The brand’s storefronts on other social media like Dazhong Dianping (Chinese answer to TripAdvisor) and Xiaohongshu (a Chinese lifestyle-sharing platform) are also understood to be closing. Despite entering China in 2015, followed by a swift landing on the digital marketplace in 2016, as well as offline installations covering nine of China’s major cities including Beijing, Shanghai, Chengdu, and Shenzhen, the overall presence of Monki in China is weak.

‘Two sessions’ 2022: China’s blueprint for national computing network takes the spotlight, sparking market speculation
Plan to channel computing resources from the country’s eastern regions to more impoverished western regions, was rolled out by China’s NDRC    Delegates at the ‘two sessions’ political gathering have made various suggestions as to how China should build the mega network

Why China’s ‘condescension diplomacy’ will be of no help in resolving regional disputes
Foreign Minister Wang Yi’s remarks that third parties should be kept out of Sino-India ties and the South China Sea row suggested nations are incapable of taking unilateral decisions   Beijing should avoid ‘condescension diplomacy’ and instead reach out to neighbours and address their discomfort with its heavy-handed policies

Insights from AmCham South China’s Latest Survey on 2022 Business Outlook
Despite many uncertainties, such as travel restrictions, IPR, profitability amid the pandemic, and US-China tensions, the outlook of businesses in China going into 2022 was net positive, according to AmCham South China’s latest survey. That’s because most companies accepted that China’s economic prowess made it an undeniably attractive investment destination and one that is unlikely to be replaced by any other country in the near to medium term. At the same time, it should be noted that pivotal changes to the world have occurred since the release of this report,

JPMorgan accelerates senior relocations from Hong Kong to Shanghai
JPMorgan has accelerated plans to relocate some of its top investment bankers in Hong Kong to mainland China as draconian pandemic restrictions have made traveling from the territory to meet clients almost impossible. The Wall Street bank has also run an analysis on how to make “overnight relocations” of key staff from Hong Kong to Singapore in recent weeks as part of contingency plans for a full shutdown of markets in the Chinese territory, which is suffering its worst outbreak of coronavirus.   JPMorgan is the latest international lender in Hong Kong to plan for significant changes to its regional operations as more than two years of travel restrictions have led to an exodus of workers, concerns about operational problems and questions about its future as a global financial center.  Hong Kong’s “fly in, fly out model is currently broken”, said an executive close to JPMorgan. “Having bankers in Hong Kong to cover mainland China clients does not make sense.”  The bank will speed up an expansion of its mainland investment bank to mitigate the travel problems in Hong Kong by relocating a small number of top dealmakers to Shanghai, according to the executive and another person close to the matter. Currently, executives traveling from Hong Kong to mainland China have to undergo a two or three-week quarantine on both legs of their trip.

China struggles to rein in biggest virus outbreak since Wuhan
Mainland China is struggling to contain its biggest coronavirus outbreak since the pandemic erupted in Wuhan two years ago, as the Omicron variant tests President Xi Jinping’s zero-tolerance strategy and puts Shanghai at risk of being locked down. Changchun, the capital of north-eastern Jilin province with 9mn people and an important manufacturing base, was ordered into lockdown on Friday after 23 new cases were reported, the latest in a series of citywide crackdowns in recent months. Health authorities reported that daily case numbers have tripled in the past week, adding up to more than 1,100 cases across 17 regions and forcing officials in several cities to erect emergency makeshift hospitals. The latest rise in China’s cases has refocused attention on Xi’s decision not to stray from its zero-Covid strategy of tightly sealed borders and — whenever an infection is detected — citywide lockdowns, mass testing and meticulous contact tracing.

Coronavirus: Asia’s Covid deaths top 1 million, as Omicron spreads across region
New cases still at record levels in Malaysia, Singapore, South Korea, Thailand and Vietnam but have fallen sharply in India, Indonesia and the Philippines    China, despite ‘dynamic zero’ strategy to curb infections, has been tested by fast-spreading Omicron; Deaths have soared in Japan, South Korea and Hong Kong  The mainland reported on Friday more than 1,000 new local infections, the highest daily count since Beijing contained its first national outbreak in early 2020, driven by a jump in asymptomatic infections. It has not reported a single death since January last year.   It is still too early for the world’s most populous country to consider easing its stringent curbs, as Omicron is still capable of causing many deaths, said Liang Wannian, head of an expert group on Covid-19 prevention.

Ukraine war: Xi Jinping ‘is unsettled’ by invasion, CIA director says
US spy chief William Burns says Xi’s own intelligence community ‘doesn’t appear to have told him what was going to happen’   US officials admit that, despite predicting Russian President Vladimir Putin’s invasion plans, they had underestimated Ukraine’s ability to defend itself

3 Possible Futures for China-Russia Military Cooperation
After the Ukraine war, will China maintain, expand, or scale back its military cooperation with Russia? At a time in which many of the world’s advanced economies are united in their opposition to Putin’s war, Russia would probably be the most enthusiastic party for strengthened military relations with China. An enhanced military relationship could include the expanded sale of Russian arms to ease some of the pain of Russia’s struggling economy, and it could also signal to the world — including the Russian people — that China remains supportive of Russia’s leadership. China would likely favor stronger military ties with Russia that more credibly deter the U.S. and its allies, accelerate China’s acquisition of key technologies that its defense industry cannot yet replicate, and heighten the realism of Chinese military training. A stronger China-Russia military relationship — to potentially reach the level of a formal alliance — is the worst of the three futures for the United States, as it would improve Beijing and Moscow’s capability of waging coordinated two-front coercion or even war in the future. Such a scenario would make the Pentagon’s “integrated deterrence” framework — the leveraging of all instruments of national power among the U.S. and its allies — more important than ever.

Ukraine invasion forces Washington’s Asia allies to rethink their security
Russia’s invasion of Ukraine has spurred some of Washington’s closest allies in Asia to harden their stance against China and bolstered voices in Japan’s ruling party who argue the country should consider hosting US nuclear weapons.   The shift in thinking in Japan, Australia and South Korea is raising fears of heightened tension in a region that is already home to several of the world’s most dangerous flashpoints.    “It is a major wake-up call. War has not gone away. There’s no denial of that any more,” Rory Medcalf, head of the National Security College at the Australian National University, said of the fallout of the Ukraine invasion on the region.   In Japan, senior figures in the ruling Liberal Democratic party said it had prompted a historic shift in thinking within its ranks, which they also believed, though some way off, would eventually be shared by the public.

It is likely that the expanded use of sanctions will spur countries to pursue models of economic development that increase friction for the global economy. These moves might be conspicuous, such as when countries pursue policies ranging from protectionism to autarky. But they could also be more subtle. China is an outlier in the global economy because its embrace of markets was circumscribed. Chinese policymakers realized that to win their own economic war — the battle for development — the iron fist needed to guide the invisible hand. Other states may come to that same conclusion, particularly if China fares better than more marketized economies at weathering the coming storm.
As Mulder concludes in his book, the future of liberal internationalism is dimming. The unabated use of the economic weapon is “stitching animosity into the fabric of international affairs and human exchange.” That fabric is built upon iron, coal, and transport. It can blanket us in peace or shroud us in war.

China’s tech platforms become propaganda tools in Putin’s war
The Ukraine invasion is casting an unflattering light on the role of China’s private technology groups, including Tencent, Sina Weibo and ByteDance, in disseminating official misinformation, posing difficult compliance issues for the companies’ foreign investors.   The internet platforms of tech giants in China are promoting content backing Russian president Vladimir Putin’s attack on Ukraine while suppressing posts that are sympathetic to Kyiv, potentially conflicting with international funds’ corporate and social responsibility commitments and public statements against the war.  In the conflict’s opening days, Beijing followed Moscow in blaming the US for instigating the crisis. False reports of Ukraine’s president Volodymyr Zelensky fleeing Kyiv and Ukrainian troops surrendering were shared widely in China. This week, Russian disinformation reports of US-run biological laboratories in Ukraine with “large quantities of dangerous viruses” were repeated by China’s foreign ministry spokesperson and state media.   “The Chinese market is uninvestable from an ESG perspective,” said Félix Boudreault, managing director of Sustainable Market Strategies, an environmental, social and corporate governance (ESG) investment research group.  Many of the companies most popular with investors were subject to strict state controls, said Boudreault, adding that tech and media companies were “extremely vulnerable to the strike of a pen from a Chinese bureaucrat”.

Alain Gillard
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