China Press Review – March 6, 2019

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U.S. trade gap with China reaches all-time high under Trump
The U.S. trade deficit in goods with China set a new record during President Donald Trump’s second year in office, despite his efforts to rein in what the administration views as Beijing’s trade transgressions. The trade gap rose to $419.2 billion in 2018, from the previous record of $375.5 billion in 2017, a Commerce Department report released Wednesday showed.

China’s February exports seen falling most in 2 years, imports down again – Reuters poll
China’s exports likely contracted in February after a surprise bounce in January, while imports fell for a third straight month, a Reuters poll showed, heightening anxiety over whether Washington and Beijing can resolve deep differences over trade. China’s overall trade surplus is seen to have shrunk sharply to $26.38 billion in February from $39.16 billion the previous month, according to the Reuters poll.

‘Very difficult and very exhausting’ US-China trade war talks should be ‘treasured’, says Chinese minister
Zhong Shan is the first senior Chinese official to discuss the meetings that took place in Beijing and Washington A trade deal could be signed by President Xi Jinping and US counterpart Donald Trump during a planned meeting in Florida in March

What misconceptions pervade China-U.S. trade talks?
In this increasingly interconnected world, no one can come out of a trade war unscathed. Due to the China- U.S. trade tensions, the International Monetary Fund (IMF) has already adjusted down expectations for global economic growth this year. A failure to reach a trade deal would send shock waves across financial markets around the world. Given the high stakes, it is imperative for both sides to seize the momentum created by the last round of high-level negotiations, resolve the outstanding issues in a constructive and incremental way, and return the bilateral trade relations to the normal.

Asian nations not forced to choose between US and China despite trade war, senior American diplomat says
US Ambassador to Indonesia, Joseph Donovan, says ‘vision for a free and open Indo-Pacific excludes no nation’ Planned extradition hearing for Meng Wanzhou and charges laid against Michael Kovrig and Michael Spavor have stretched relations between Beijing and Washington

Finding an antidote for China’s economic flu
Premier Li Keqiang is expected to reveal parts of the remedy at the National People’s Congress “There’s a lot of anxiety at the moment, so I suspect this year will really be about this oasis of calm in the midst of a typhoon of uncertainty,” Kerry Brown, the professor of China studies at King’s College London, told The Daily Telegraph, an influential British national newspaper.“Whether people buy into that or not, the show will go on.” Indeed, it will, with Li conducting the mood music when the curtain goes up on the National People’s Congress before President Xi Jinping takes over the baton and the podium.

China econ survey: What’s the main factor to boost China’s economy in 2019?
To get you a better view of how China’s economy is faring, Global Business surveyed economists across the greater China region. The economists and other experts ranked three main factors that will be important for China in 2019. The trade war and truce between China and the United States was at the top of the list. The second was the global economic performance while China’s local government’s debt followed. Meanwhile, the economists said Fed rate decisions and foreign capital flows were also important, though less than the top three.

Cramer: Why Trump could decide to walk away from a trade deal with China
There’s a chance that President Trump could put more pressure on or walk away from trade talks with President Xi Jinping, CNBC’s Jim Cramer says. Xi has been losing advantage in the negotiations as the Chinese economy weakens, he says. But walking away from the negotiation table could damage the markets in the short term, he says.

China’s Close Government-Business Ties Are A Key Challenge In U.S. Trade Talks
As Trump administration officials seek to overhaul China’s trade policies, they need to be realistic. Chinese officials believe their system has served them well, and they’re not going to change it overnight, Wu says. “To the extent that we’re expecting major, fundamental structural reforms, that’s going to be very difficult to obtain, because they see this governance structure as being having been vital for both their political and economic successes,” he says.

Trade war spurs Li Keqiang to offer business incentives
The showdown helped shape the premier’s work report with references to challenges and risks but besides the tax cuts and help for the private sector, there was emphasis on the importance of investment in research

US-China trade war suspicions have had chilling effect on Beijing’s Thousand Talents Plan
Once a call home to thousands of Chinese overseas, scheme is overshadowed by mistrust as conflicts over tariffs and politics poison well of goodwill

At Two Sessions, China Seeks to Bolster Cooling Economy
Beijing is keeping to a high growth target, while adopting new measures to grease economic wheels.

Beijing vows to upgrade country’s manufacturing in ‘two sessions’ conference – but makes no mention of ‘Made in China 2025’ for first time in three years
The Chinese government budget for science and technology will expand 13.4 per cent to 354.31 billion yuan (US$52.88 billion) this year Premier Li Keqiang avoids mentioning ‘Made in China 2025’ plan amid trade tensions with US

China to take steps to boost domestic consumption this year: state planner
China’s state planner said on Wednesday that the government will implement measures to further boost domestic consumption this year. China will boost the incomes of urban and rural residents, and domestic consumption is expected to continue to expand and to upgrade, said Ning Jizhe, vice-chairman of the National Development and Reform Commission (NDRC).

China Expects a ‘Tough Economic Battle’ in 2019 as Debt Legacy and Trade Standoff Bite
The lower bound of the GDP target would be the slowest pace of economic growth in almost three decades, a consequence of China’s long deceleration as policy makers prioritize reining in debt risks, cleaning up the environment and alleviating poverty. Warning of a “tough economic battle ahead,” Li announced tax cuts worth 2 trillion yuan ($298 billion) for the year.

China to make forced technology transfer illegal as Beijing tries to woo back foreign investors
Issue a key demand made by US President Donald Trump as part of the ongoing US-China trade war China expected to pass new foreign investment law next week during National People’s Congress

China must prepare for the ‘intelligent’ future
The second session of the 13th National People’s Congress (NPC) stressed the importance of China’s rapidly expanding AI industry and its many implications for China’s future. It was recognized that China has an imperative to put into place the legislative framework and incentives that will ensure rapid, effective and responsible development of this new and exciting technology. At the same time, it has also noted that AI will present challenges in terms of creating socially responsible applications. Issues related to data security and privacy are at the forefront of these concerns.

In China First, Hainan Vows to Ban Oil-Fueled Vehicles
Pledge comes days after the island committed to phasing out single-use plastics.

The Problem With China: Cramer’s ‘Mad Money’ Recap
Jim Cramer focuses on the specter of slowing growth and political instability in China — and the importance of a trade deal.

China’s Growth Model Doesn’t Work Any More, Rabobank’s Every Says
Michael Every, head of Asia financial markets research with Rabobank, talks about China’s economic policies, the yuan, the dollar and Treasuries. The National Development and Reform Commission says China aims to boost consumption by measures including raising income, cutting taxes and fees, The NDRC also says China will give more access to the private sector in fixed-asset investments, Every speaks on “Bloomberg Daybreak: Middle East.” (Source: Bloomberg)

A balanced macroeconomic approach could be China’s panacea
The Chinese economy continued to slow down at an accelerated pace in 2018. Lower rates of growth are seen in several key indicators from domestic investment and consumption to trade. To counteract the downturn, there are calls for the government to adopt more expansionary monetary and fiscal policies. But a wiser move would be to implement a more balanced macroeconomic approach that responds to the slowdown without posing a risk to the achievement of more sustainable and high-quality growth in the long run.

A balanced macroeconomic approach could be China’s panacea

US car tariffs would have ‘bigger effect’ on global economy than US-China trade war, says WTO economist
World Trade Organisation chief economist Robert Koopman warns that there would be a ‘big disruptive effect’ on supply chains and on consumers hoping to buy cars Direct trade between the US and China accounted for just 3 per cent of global trade in 2017 compared to 8 per cent for the car sector including parts

The U.S.-China Tech War Is Being Fought in Central Europe
The Czech Republic’s complicated relationship with the Chinese giant Huawei offers a lesson in the benefits and pitfalls of courting Beijing.

Huawei’s planned lawsuit against the US government could help it gain friends in the West, experts say
Huawei’s lawsuit against the US will likely be closely watched as a landmark case, and the result could influence and affect how other countries perceive its equipment The lawsuit also comes as Meng Wanzhou, Huawei’s chief financial officer who is currently awaiting possible extradition to the US, sues Canada for violating rights

German security hawks are fighting to keep Huawei out of 5G, in clash with economy ministry and industry lobby
Hardliners fear Huawei could help China steal secrets from German companies or even the state They are pushing for strict criteria on equipment suppliers before the government begins issuing 5G licenses in two weeks

Beijing’s interests will not be served if Europe is divided over Chinese investment, says ambassador to Brussels
Zhang Ming says the EU knows its own mind and will not bow to US pressure over any part Huawei may have in development of 5G technology

China blocks Canadian canola exporter as tension since Sabrina Meng Wanzhou arrest continues
No scientific basis for alleged contamination of oil-seed crop, Canada says after China revokes company’s permit Canadian government ‘working very, very hard’ with Chinese counterparts on the issue, with 40 per cent of Canada’s canola exports going to China

Will China’s debt wish topple the world economy?
Any ambiguity in China’s economic performance will have a seismic effect on the major financial centres across the globe.. Officially, it is a small number: 47.60%. Unofficially, it’s hard to figure out. For a good reason, the government is both the lender and the borrower. One branch of the government lends money to another branch of government. But there are some unofficial estimates. Like one from the Institute of International Finance (IIF) last year, placing China’s debt to GDP at a whopping 300%!

Will China’s debt wish topple the world economy?

China’s ‘zombie’ companies are a big threat to the economy — and JPMorgan says their debt pile means the country could be slowing faster than anyone thought
China’s economy is beset by huge public and corporate debt problems that JPMorgan says threaten to derail the country’s growth story. Economic growth in China has been steadily slowing and could get even lower, making the world’s second-largest economy unlikely to overtake the US anytime soon. The key risk — disposing of “zombie” state-owned companies — means the economy could be forced to adopt a zero-interest-rate policy, JPMorgan said.

China’s 2019 Work Report: Growth Target, Tax Cuts Announced
Every year, China’s premier delivers a Work Report at the Two Sessions meetings, which acts as a policy agenda for the coming year. Here, China Briefing delves into the details and impacts of the 2019 Work Report.

State Firm Profits Will Pay for China’s Tax Cuts, Sinochem Chief Says
Chemicals giant Sinochem Group Co. Ltd. said the state sector will have to hand over more of its profits to the government in order to support wider tax cuts, in comments that signal the role state-owned enterprises (SOEs) will play in the country’s fiscal reshuffle.

How the Greater Bay Area can supercharge an economic dynamo
Hong Kong will complement Guangdong under the bay area plan, with the city’s strong banking and financial sectors thriving alongside the province’s hi-tech manufacturing and growing services sector

China’s Nantong dreams big with infrastructure projects to drive growth in economic downturn
The Hutong Yangtze River Bridge will be four times the length of the Golden Gate Bridge in San Francisco, and is estimated to cost more than US$5.34 billion National Development and Reform Commission granted approvals for more than US$137.87 billion worth of projects in December to boost slowing economy

Chinese electric vehicle maker Nio scraps Shanghai factory plan after losses double to US$1.4 billion
Nio sold just over 10,000 units in the past year, well below the market consensus of 100,000 needed to achieve economies of scale

Copycat Syndrome: How Can Luxury Businesses Stand Out in the China Market?
International luxury brands seem to have settled into a “cookie cutter” business plan for the China market these days — one that necessarily involves key opinion leader (KOL) celebrity marketing, splashy events, digital gimmicks, a huge China “footprint” with as many new mall stores as possible, predictable executive profiles, and millennials millennials millennials! For a supposedly “creative” industry, this level of uniformity is, frankly, shocking, and that level of sameness is beginning to hurt the industry as a whole. But, believe it or not, a few luxury businesses are doing things differently in China, and with tons of success.

Copycat Syndrome: How Can Luxury Businesses Stand Out in the China Market?

Mulberry opens new store on Tmall luxury pavilion
Mulberry has launched a flagship store on Tmall Luxury Pavilion, Alibaba Group’s dedicated platform for premium brands, the British luxury label announced on Wednesday.

China’s small-town youth offer big time potential for online sales of cosmetics
In China’s e-commerce battle for beauty, youngsters in the country’s smaller cities and towns represent an increasingly alluring market. China’s e-commerce boom plays a major role in this transition by delivering products and lifestyle, previously out of reach to many in remote areas, through online channels.

China’s small-town youth offer big time potential for online sales of cosmetics

China’s war on smog targets coal-fired power and diesel trucks – and will punish failing cities
In third winter of curbs, cities that have failed air standards must make further PM2.5 cuts as part of Beijing’s campaign to counter pollution Ministry to encourage cleaner fuels and crack down harder on substandard diesel vehicles

Xi Jinping says revival of Chinese economy must not be bought at expense of the environment
President joins delegates from Inner Mongolia at National People’s Congress, telling them not to ‘attempt to breach the red line of ecological protection’

China’s environmental clean-up having big impact
Environmental protection and climate change have evolved from an abstract idea to an important part of people’s daily lives. China, the world’s second largest economy, is playing an active leadership role and deeply integrating the issue in activities promoting South-South cooperation.

China’s mega transmission lines
The State Grid Corporation of China has announced it is building a 1.1 million volt transmission line that will be able to deliver the output of 12 large power plants over 2,000 miles. The project is the first of its kind in the world, and a big step in the company’s plans to stitch together the grids of neighbouring nations into a supergrid. How will the project work and what does it mean for China’s influence in the region?

China’s mega transmission lines

Robot waiters and snail pizza: What US fast food brands do to please Chinese diners
America’s fast food giants are having to work harder to win over diners in China. With more than 1.3 billion people, the country has driven sales at the likes of McDonald’s (MCD) and KFC in recent years. The Chinese fast food industry is now worth $131 billion a year, according to research firm Euromonitor. But things are getting tougher as the world’s second biggest economy slows and diners demand more. The response has been glitzier restaurants, bigger menus — and some pretty weird food.

Unable to sell luxury homes in Beijing, mainland developer Tahoe Group offers discounts of up to US$1.3 million
Analysts say rich buyers have tightened their purse strings as the US-China trade war has a hit a range of businesses

China’s Super Rich Exiting as Economy Fades
A popular online meme perfectly expresses where China’s economy is headed: “The year 2019 may be the worst year in this decade, but it will be the best year in the next decade.”
China’s economy is decelerating so rapidly that the super-rich are getting out while the getting is good. One of them is Chen Tianyong, a real estate developer in Shanghai, who posted this on the Internet: “China’s economy is like a giant ship heading to the precipice. Without fundamental changes, it’s inevitable that the ship will be wrecked and the passengers will die. My friends, if you can leave, please make arrangements as early as possible.”

Cash gains popularity among world’s super-rich amid concerns over political instability, downturn
Rush to cash was particularly strong among Asia’s UHNW clients in 2018, where 56 per cent more wealth managers reported increased cash holdings Sentiment among Asia’s wealthy has soured more than their North American counterparts mainly because of the US-China trade war, Brexit and realignment in Europe

Chinese Workers Flee Japan’s Controversial Work-training System
Unscrupulous agents in China are luring workers into overseas placements with low pay and poor conditions.

Italy may become largest economy yet to back China’s Belt and Road: reports
Italy may be about to formally endorse China’s Belt and Road Initiative, becoming the largest economy yet to back the massive global infrastructure project which is a signature policy of President Xi Jinping. According to multiple reports, the Italian government could sign a memorandum of understanding within weeks, in hopes of attracting greater Chinese investment in its struggling economy.

Italy looking to sign non-binding Belt and Road MOU with China: Geraci
Italy is negotiating to sign a memorandum of understanding to become a part of China’s Belt and Road Initiative (BRI) when Chinese President Xi Jinping visits later this month, a government official said on Wednesday.

US-China trade war: simulation gives students lesson in negotiation and diplomacy
The Hinrich Trade Negotiation Simulation offers students a rare insight into the reality behind the scenes of trade talks, with guidance from experts Students from seven Hong Kong universities took part last month, the first time the event has been held in the city in the middle of a trade war

Google Employees Fear China Search Project Continues
News last year of Google’s “Project Dragonfly,” a censorship- and surveillance-enabled search engine designed to facilitate the company’s return to the Chinese market, triggered a strong backlash among employees. Some left in protest, while many more organized to express their discontent. The project, combined with other issues like the company’s handling of sexual harassment, likely contributed to the findings of an internal poll released last month, which showed strong but notably declining confidence in Google’s leadership and priorities.

Google Employees Fear China Search Project Continues

Google China revenues grew by over 60% in 2018
Google received a strong revenue growth of over 60% in China last year to US$3 billion. It led Google to expand its advertising sales team there, according to the report from The Information.ByteDance who spent over US$300 million on overseas adverting to promote Tik Tok was reported to be one of Google’s biggest advertisements buyers. Alibaba was one of them who also spent a lot for Alipay and cloud computing business

Modernising military remains top priority as China boosts defence spending to US$175.98 billion after announcement in Two Sessions
Funding will rise to US$175.98 billion in 2019 – up by 7.5 per cent from 2018 but less than the 8.1 per cent growth last year Analyst says the increase will ‘only fuel greater and deeper suspicion of Beijing’s motivations and strategic objectives’

China’s Pension System Is Not Aging Well
There may be more pressing issues, but the simmering pension crisis cannot be put on the back burner for much longer.

Can the US win the new cold war with China? Not without risking a nuclear war
America is using flimsy means to confront the strongest adversary it has ever faced, and needs to ask itself if it is willing to fight a hot war to maintain its position in Asia

‘Time for the Chinese miracle’: Beijing’s new English language propaganda push
Campaign including confusing rap song and stilted video explainer coincides with the annual Two Sessions political conference Su Han sings his English-language rap about a Chinese political meeting Chinese state media dropped a music video over the weekend featuring a little-known Chinese performer named Su Han. In the video Su raps over images of his country’s achievements, including a rover landing on the far side of the moon, a pair of cloned monkeys, high rise buildings, a group of smiling women in ethnic dress, and curiously, a server room.

Bohemian Rhapsody’s release in China is a victory, despite the cuts
In a country where gay scenes are banned on TV, the fact that Freddie Mercury’s story is being shown at all is a breakthrough

Ren Hang’s Provocative Photographs Show a China We Rarely See
An exhibition in Paris showcases the work of a Chinese photographer whose career was meteoric, and tragically brief.

Get Ready for China’s Baby Quotas
Demographic fears mean a hard future for women’s rights.
Get Ready for China’s Baby Quotas

Alain Gillard
Information Officer
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