Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – March 4, 2022

Ukraine outcry and Covid chaos overshadow Xi’s celebrations
Just a few weeks ago it seemed that the last Chinese parliamentary session of President Xi Jinping’s second term in office would be a congratulatory affair, where his administration could brag about the success of its Covid containment policies while focusing on efforts to shore up an economy hit by its worst property downturn in years.  But the National People’s Congress, which convenes in Beijing on Saturday, will now be overshadowed by the international furore over Xi’s support for Russia’s invasion of Ukraine — and the collapse of his zero Covid policy in Hong Kong.    The mounting controversies suggest that the run-up to a quinquennial Chinese Communist party congress in October or November, at which Xi is expected to begin an unprecedented third term in power, will be rockier than he and his supporters had envisaged

‘Two sessions’ 2022: with China’s debt and economic outlooks on tap for policy-setting meetings, analysts weigh in
Rebound in infrastructure investment growth seen filling ‘a small part of the gap left by slowing export growth, the large property sector contraction and the rising costs of China’s zero-Covid strategy’    As China’s poorer regions face growing economic pressure, deteriorating financial conditions may warrant more fiscal support from Beijing

Economy in focus at China’s annual congress: Five things to know
The lawmaking NPC officially opens Saturday with Premier Li Keqiang delivering a state-of-the-nation style speech that evaluates the previous year’s policies and will likely set gross domestic product targets for 2022, as well as other social and economic priorities.    China’s economy expanded by 8.1% last year, beating an official 6% target, but momentum slowed markedly in the last quarter of 2021. Economists are widely betting on a growth target of between 5% and 6% for 2022, with a budget deficit of around 3% to 3.5% compared with 3.2% last year. China’s key defense spending budget will also be tabled, with more spending expected.   Stabilizing growth is crucial ahead of twice-a-decade meetings this fall when President Xi Jinping looks to secure an unprecedented third term in office. A severe downturn in the economy could hurt his chances of staying on as China’s leader.

‘Unprecedented challenge’: China top advisory body chief calls for unity behind Communist Party
Wang Yang urges members to rally behind party in preparation for its national congress    He makes no mention of Ukraine, a potentially divisive issue, analyst says

China’s Two Sessions 2022: What’s on the agenda?
The Two Sessions are always of interest to foreign investors, as it serves as a valuable window into China’s politics, reveals Beijing’s priorities for the coming year, and therefore the overall policy direction that the country will take.

Top 3 Reasons to Invest in China in 2022
China continues to offer huge market growth potential, has a skilled labor pool and unparalleled infrastructure, and is investing in its capabilities as a manufacturing base for industries of the future. Investing in China is not always easy, but there is no other country that can replace it. Companies that ignore the market risk falling behind their competitors.

China facing economic slowdown as 28 of 31 provinces record reduced growth targets
Twenty-eight of China’s 31 provincial-level governments have announced reduced growth targets and policy goals for 2022 as compared to previous years, indicative of the fact that China’s economic slowdown has become a cause of worry for its government, states a media report. The recent data in which regions such as Shanghai, Guangdong and Beijing also recorded a lower growth rate as compared to the previous year, has posed a concern for the post-COVID economic recovery of China, The Hong Kong Post reported.

ANALYSIS-China’s ‘common prosperity’ push leads to divergence in regulatory approach
China’s so-called “common prosperity” push in the near-term will not only aim to bridge the widening wealth gap but is also set to shape the country’s regulatory approach, with sectors seen crucial for the economy getting more state support. As part of that move, analysts expect the embattled property sector, accounting for a quarter of the economy, to get more regulatory support, while internet firms will remain a crackdown target due to what Beijing says is disorderly capital expansion.   Global investors who were burned by numerous crackdowns last year will looking for signs of clear regulatory divergence at China’s rubber-stamp parliament annual meeting starting on Saturday, when policymakers are expected to unveil more stimulus to ease slowing economic growth.

Why do Gen-Z Chinese women choose Western skincare brands over Japanese brands?
For many Gen-Z women, using high-end Japanese skincare brands like Shiseido and SK-II in their early 20s used to be something to brag about. For many of them, Japanese brands were their priority when choosing to invest in skincare products.    However, this is no longer the case. When you look at the Double 11 cosmetic sales of Tmall from 2019 to 2021, it is clear to see that the top 3 skincare/cosmetic brands are all from Europe or North America, including Estée Lauder, Lancôme, and L’Oréal. It seems like Japanese brands are losing their popularity in the Chinese market, but what is the reason behind this?

How Chinese advances in technology, from 5G and cloud computing to the e-yuan, power Beijing Winter Paralympic Games
Advances in 5G mobile communications, China’s digital currency and cloud infrastructure services help anchor Beijing’s latest Olympic hosting duties    China supported the development and launch of 212 relevant hi-tech advances for the recent Winter Olympic Games and this month’s Paralympics

China’s aging population leads to predictions of ’17-year supremacy’
Leaders need another $7.8tn to realize Xi’s ‘common prosperity’    China is set to overtake the U.S. in terms of nominal gross domestic product in 2033, with the U.S. again claiming the top spot in 2050, according to the latest JCER forecast. In the standard scenario, China’s GDP will be nearly 5% larger than that of the U.S. by 2038. The gap narrows in the 2040s, after which the U.S. will retake the top spot. By 2060 its economy is predicted to be 10% larger than China’s.    JCER’s forecast is based on three factors: corporate facilities (capital), the size of the labor force, and productivity, which is influenced by technological development and efficiency.  Until now, China has accumulated capital as the economy has grown, but capital investment is likely to slow in the future. Restrictions on real estate spending will weigh on medium-term investment as well. Meanwhile, the labor participation rate will drop as the number of workers declines. Tighter regulation of internet companies and others will hinder productivity growth. It is, of course, possible to craft an optimistic growth scenario by adjusting these three factors: The economy can maintain relatively high growth if capital investment picks up substantially in the tech sector and others, and if deregulation and further opening to the rest of the world keep productivity growth strong. If all three factors are revised upward, including the labor participation rate by raising the retirement age and other measures, China will overtake the U.S. in 2031 and the gap between them will continue to widen after that. In this scenario, China could become the global hegemon.

Alibaba-backed electric vehicle cruises into a booming market crowded by Tesla, Xpeng and NIO cars
The IM L7, a luxury electric sedan from joint venture IM Motors, marks Alibaba’s first foray into the world’s largest electric vehicle market    Tech rivals including Huawei, Xiaomi and Baidu have also bet on EVs to fuel future growth

Alibaba shares sink to new low amid gloomy China tech outlook
The stock price of Alibaba Group Holding fell below 100 Hong Kong dollars ($13) a share for the first time Friday, a day of heavy selling in Chinese tech stocks as investors fretted over the company’s growth prospects and risk of further regulatory pressure from Beijing.  Alibaba closed down 5.17% to HK$99 on the Hong Kong Stock Exchange, down 68% from its peak. Tencent, the largest Chinese technology company by market capitalization, touched HK$400 during the day, its lowest since mid 2020. The Hang Seng Tech Index, meanwhile, tumbled 4.4% to a record low.   The decline in Alibaba, also listed on the New York Stock Exchange and holder of the U.S. record for the largest initial public offering, came after it last week posted its slowest quarterly revenue growth, a 10% increase to 242.6 billion yuan ($38.4 billion) for the December quarter. The quarterly financial report did not show any signs of improvement in most business areas.

As U.S. and European businesses cut ties with Russia, Chinese tech firms remain silent
American firms such as Apple and Disney have reduced their business in Russia after the country invaded Ukraine but Chinese technology firms have remained silent on the issue.     Companies including Huawei, Xiaomi and Alibaba declined to comment when contacted by CNBC about whether they would cut their business in Russia.    While leaders in the U.S., Europe and Asia have denounced and sanctioned Russia and its president Vladimir Putin, China has refused to call the attack an invasion.

China, Russia trade continues despite Western sanctions, but Beijing ‘will not ride to the rescue’
State-owned Shandong Expressway Minsheng Group bought 50 carriages of barley from Russia, which was transported by the China-Europe railway lines    A train carrying 747 tonnes (747,000kg) of goods left Liaoning province for Russia despite sanctions imposed by the United States, European Union and their allies

Why China’s Banks Won’t Come to Russia’s Rescue
On paper, China’s banks and its homegrown payments system could offer Russia respite from crippling Western sanctions. In practice, it isn’t that simple. The two countries increasingly trade with each other without using dollars, giving Russia an important outlet for selling oil, gas and other products without touching the US financial system. Just over a third of Russia’s exports to China were settled in dollars as of last September, the most recent data available shows, down from 96% in 2013. A little more than half of China’s exports the other way were settled in dollars, down from 90% in 2013.But this trade pales against the other markets now largely shut off to Russia, and while Beijing has also been vocal in its recent opposition to sanctions, big Chinese banks aren’t likely to ride to Russia’s rescue. Another major headache is a 2017 law that allows the US to penalize foreign entities that trade with sanctioned companies, countries and individuals. For any bank that wants to be able to transact in dollars, the consequences could be drastic. “Chinese financial institutions are taking these sanctions seriously and being very careful about understanding what the risks are,”  Launched in 2015, CIPS was developed by China’s central bank to promote the international use of the yuan, and largely handles yuan-denominated trades between China and abroad. But as of the third quarter of last year it handled an average of just 13,000 transactions a day, raising questions about how quickly it could scale up. Although the comparison isn’t exact, Swift processed more than 40 million messages a day over the same period. “I don’t think it’s a viable alternative either as in sanction evasion or as a means of replacing the Swift system in international finance at the moment,” said Josh Lipsky, director of the Atlantic Council’s GeoEconomics Center. “CIPS is not ready,” he said.

Ukraine war may ‘change trajectory’ of China’s moves to insulate against US dollar, Fed chair says
US Federal Reserve Chair Jerome Powell was questioned on Thursday in a US Senate Banking Committee hearing     The hearing focused on how China might view US-led efforts to isolate Russia’s economy, especially by damaging its ability to use the US dollar

podcast : What Does China Think of Putin’s War?
In the week since the Russian invasion of Ukraine, the United States and the European Union have effectively cut off Russia from the international banking system, frozen Russian assets abroad, and cancelled partnerships with Russian companies. The ruble is in free fall, and inside the country, opposition to the war is reportedly increasing. Chinese President Xi Jinping is a well-known admirer of Putin, and China and Russia share an autocratic world view, but China has neither condemned Russia’s actions nor rushed to its defenseEvan Osnos joins Dorothy Wickenden to discuss the history of Russia-China relations, China’s current economic and diplomatic calculations, and what the war in Ukraine may tell us about the changing international balance of power.

Chinese investors bet on shares in companies linked to China-Russia trade
Chinese investors have snapped up shares in companies with Russia-related supply chain activities, on expectations of increased business between Moscow and Beijing following Western countries’ sanctions on Russia. These companies are in the so-called “China-Russia trade concept” index, which include container lines and port operators. The index has jumped more than 20% since February 28, data from financial data provider iFinD showed. Among them, Jinzhou Port 600190.SS , located in China’s north Liaoning Province, close to Russia, reached its 10% price limit for six consecutive sessions on the Shanghai Stock Exchange.

Can China Shield Russia From Ukraine-Linked Sanctions?
In the short term, the tangible support that China can provide to Russia is limited, but the strategic implications are more profound.   In the longer term, Russia can diversify more of its energy exports to China from the West, and as China sees natural gas as a cleaner alternative to coal and oil, its demand for gas is predicted to grow rapidly, doubling by 2035, according to one estimate. But it takes time to construct pipelines or expand the capacity of existing lines. Gazprom announced in January that together with China it would jointly construct a Power of Siberia 2 gas pipeline, which will start sending gas in two to three years, up to 50 bcm per year. In comparison, Russia exports between 150 bcm and 190 bcm of gas to Europe each year. If Europe managed to find other gas suppliers than Russia, Russia would need to find potential buyers other than China.  More severe short-term impacts on Russia may come from the financial sanctions. In January, China and Russia agreed to establish their own financial information transmission systems to avoid sanctions that block them from the U.S. dollar-denominated SWIFT system. The two countries have their own systems, CIPS and SPFS, denominated in the Chinese renminbi and Russian ruble, respectively, and the RMB and ruble are convertible, so technically it should be easy to establish a joint system that serves China-Russia transactions. The question is how attractive their alternative to SWIFT will be for their trading partners.  Looking at the bigger picture, an escalation or prolonged Ukraine conflict would bring chaos to international capital markets, supply chains, and global economy as a whole. That is not what China wishes to see at a time when a post-COVID-19 recovery is badly needed and when China is at a crucial juncture of economic restructuring. There are numerous geopolitical risks as well. The EU is China’s biggest trading partner, and China will try to maintain normal relations with the EU as well as its member states. China still has hopes for Europe to become one solid pole in the formation of a multipolar world with more strategic independence from the United States. China also needs to ensure domestic stability ahead of the important Party Congress in autumn this year, which is expected to extend Xi’s term in office. The conflict with Russia may distract Western powers’ attention and resources from the South China Sea and Taiwan, but heightened tensions in global politics are not conducive to China’s development plans or its ambition of national rejuvenation. At a deeper level, the events and the roles of various parties in the Russia-Ukraine conflict could entrench China’s strategic judgment of the current world order as one characterized by major power competition and the Western determination, led by the U.S., to uphold its dominance. The trade war with the United States made China frame the current time as a period of strategic opportunity that forces China to strengthen itself in an adverse international environment. The Russia-Ukraine conflict could strengthen the framework for extraordinary and nationalistic Chinese policies.

Beijing will pay if it helps Russia evade sanctions, US State Department official warns
‘China, if it were to seek to evade the sanctions, or somehow dividing the sanctions, they would be vulnerable,’ says Derek Chollet     The nations that have joined in sanctioning Russia represent a combined 50 per cent of the global economy; China accounts for around 15 per cent

Ukraine crisis: How much trade does Russia do with China?
Trade between the two has been growing steadily in recent years. It hit a new high of almost $147bn (£110bn) last year – up nearly 36% from the previous year – and accounted for about 18% of Russia’s overall trade in 2021.

US shouldn’t treat China as a rival: NPC spokesman
“How the United States chooses to raise its competitiveness – including the research and development and manufacturing capacity of chips – is its own matter,” he said via a video link.  “But to use China’s development as an excuse and take China as a strategic rival, this will only erode the mutual trust and cooperation between the two countries, and will eventually hurt the US’ own interests.”

Can Biden’s China policy be more than “Trump lite?”
Jeff Bader, former senior director for Asian Affairs at the National Security Council, joins the Sinica Podcast to discuss a growing divide in U.S.-China relations.  I think we’ve covered a lot of the issues in previous questions when you talked about what are China’s international ambitions? And I think that that is one that we, as Americans, need to focus on. But I don’t think it serves our interests or it’s intellectually honest to imagine an end state of China’s international ambitions. And so the teleological way that, 40 the years from now, they intend to dominate the world. I think that’s a ridiculous way of thinking about countries in a multi-polar world, which this world is going to be in the coming century.  China is a major power, it’s feeling its oats. It’s throwing its elbows around, but it’s got severe limitations at home. We haven’t gotten into those, well, I’m sure you’ve done those in your other broadcasts about the demographic crisis China faces and whether China’s going to continue to be wage competitive at the low end of the income scale. Whether China can continue to create the jobs they need to, for all the kids coming out of universities. Whether a heavy handed approach to regulation of the business community, that has been in evidence for the last year, is going to be successful in creating the kind of moral society that Xi Jinping is talk about or rather is going to stamp out innovation.   I mean, all sensible Chinese leaders know that the private sector is driving China’s economic growth and private sector and foreign investment. And they’re not a straight line, innovation doesn’t work in straight lines. You have to allow for innovation. And something happens way over in the corner there that then affects your progress in areas you really care about. And if you’re just, as they are now, saying, “We’re not going to tolerate unfettered growth in social media, internet technology, home tutoring, financial services.” I mean, they need to be very, very careful thinking that you can just squeeze one end of the economy and it’s not going to come out in ways that you don’t like elsewhere.

50 years of panda diplomacy: the softest power meets the hard reality of US-China tensions
Lingling and Xingxing arrived in Washington in 1972 as a symbolic offering of friendship between the US and China, sparking panda fever around the world     As history has shown, the warmth the animal envoys created has not lasted, although the bears’ popularity has

‘Two sessions’ 2022: Beijing urges EU not to ‘amplify’ China-Lithuania dispute
Spokesman for the Chinese legislature Zhang Yesui addresses China-EU relationship and the America Competes Act  But no mention of the Russia-Ukraine war or, in a break from recent tradition, China’s defence spending

The China–Russia condominium in Kazakhstan
Kazakhstan’s increasing dependence on China and Russia may further erode US influence in the country and impact its billion-dollar investments in the energy sector. But Kazakhstan will continue to court US, European and Japanese investment as a way to mitigate its excessive dependence on China and Russia. Kazakh leaders have often tolerated Western criticism over human rights to preserve lucrative economic ties. Kazakhstan is likely to continue this policy but with much less room to manoeuvre.  Some Western observers believe that the January riots may undermine Chinese influence in Kazakhstan. But it may have the opposite effect. The rapid deployment of Russian troops further demonstrated to Kazakh leaders that Russia is the ultimate guarantor of their security. During the crisis, China limited itself to statements of solidarity and offers of economic assistance. Central Asian leaders know that they need the assistance of both powers. Under the China–Russia condominium, Kazakh President Kassym-Jomart Tokayev and other Central Asian leaders seem to be secure in power.

Paradox: Reconciling drastic moves and political stability
For the overseas China-watching community, there is a pressing need to evaluate and reconcile two seemingly contradictory observations about the Chinese leadership on the eve of the 20th Party Congress. On the one hand, Beijing has made drastic policy moves –– what foreign analysts often describe as hardline and coercive approaches –– on both domestic affairs and foreign relations. But at the same time, the leadership of the Chinese Communist Party (CCP) has been noticeably concerned about the need for both socioeconomic stability at home and a less hostile environment abroad.
These observations are perhaps both valid. The Chinese government has undertaken a sweeping crackdown on numerous giant private companies like Didi, Alibaba, and Evergrande as well as many education and entertainment stocks in recent months. There has been no sign that the CCP leadership will change its position on Xinjiang and Hong Kong. Beijing will firmly continue its pressure campaign against Taiwan’s independence. China’s tit-for-tat economic coercion against U.S.-led “selective technological decoupling” –– and retaliatory sanctions targeting individuals and institutions in North America and Europe —has fomented deep concern in the United States and among its allies.

Omicron: China’s tech hub Shenzhen in selective lockdown as zero-Covid policy closes electronics market and offices
Major electronic markets have banned all persons from entering, and authorities are strictly restricting gatherings in the surrounding area until Monday    Some office buildings in the city were briefly put under lockdown when suspected cases were found, forcing workers to stay inside overnight

Hong Kong’s Covid-19 woes show administrators alone cannot solve crises
The arrival of a team of policy experts from Beijing offers a sliver of hope of saving Hong Kong from leadership that is out of its depth    With any luck, the unnerving, morale-sapping period of flip-flops, procrastination, mixed messages and policy missteps will soon end

‘Two sessions’ 2022: calls for China’s family-planning restrictions to be fully abolished gather steam
China’s rapidly slowing population growth and dwindling fertility rate have sounded alarms for urgent measures to be laid out in annual policy plan  A raft of measures, policy changes and benefits are recommended by delegates to both of the ‘two sessions’ in the lead-up to the agenda-setting meetings

China Embraces Russia’s Propaganda on the War
Hours after Russia invaded Ukraine on Feb. 24, the Chinese Communist Party tabloid, Global Times, posted a video saying that a large number of Ukrainian soldiers had laid down their arms. Its source: the Russian state-controlled television network, RT. The one-two punch is working, keeping the Chinese public from facts while sowing confusion. On the Chinese social media platforms, many people adopted Mr. Putin’s and Russian media’s language, calling the Ukrainian side extremists and neo-Nazis.They kept bringing up the Azov Battalion as if it represented all of Ukraine. The battalion, a unit of the Ukrainian National Guard, is known for having neo-Nazi sympathizers but remains a fringe presence in the country and its military. President Zelensky himself is Jewish and won the presidential election in 2019 with 73 percent of the votes. His approval rate soared to over 90 percent recently for his wartime leadership.

Alain Gillard
Information Officer
Service Asie Pacifique
Place Sainctelette 2
1080 Bruxelles
Tél 02 421 85 09 – Fax 02 421 87 75
Copyright © 2020 awex, All rights reserved