China Press Review – May 27, 2020

Press review

China’s fiscal stimulus is good news, but will it be enough?
The Chinese government unveiled a bigger stimulus package worth at least 4.5 percent of GDP at the outset of the National People’s Congress that began on May 22, after China experienced an unprecedented 6.8 percent year-over-year contraction in its GDP in the first quarter. Rather than repeating its old playbook of relying primarily on credit expansion as it did during the global financial crisis in 2008–10, this year’s Government Work Report reveals that China is leveraging its fiscal policy to revive its economy suffering from the COVID-19 pandemic. This is good news for financial stability, though it may be too early to tell how successful the stimulus will be. China has a longstanding practice of placing a ceiling of 3 percent on budget deficits as a share of GDP. This ceiling is now cracking with the deficit-to-GDP ratio in excess of 3.6 percent of GDP this year (see figure below), which means about RMB 1 trillion (US$140.2 billion)[1] will be added to the government’s deficit spending this year. Aside from the increase in budget deficit, the central government is issuing an anti-virus special government bond worth RMB 1 trillion that is not accounted for in the budget deficit. The combined RMB 2 trillion (US$280.5 billion) will be transferred to prefecture and county governments directly in its entirety.

US-China partial decoupling is inevitable, and must be carefully managed to minimise disruption
In a US election year with the global economy battered by Covid-19, deteriorating relations between the two biggest economies have little hope of being mended    Given the political realities, constructive dialogue won’t be possible until after a newly elected US administration is inaugurated in January 2021

Should China wield antitrust laws to counter US attacks on Huawei amid global tech competition?
Beijing sees a tit-for-tat strategy as essential to ensuring US cooperation. But weaponising laws could send conflicting signals to businesses, even as a new law US law targeting Huawei is unlikely to succeed

China’s industrial giants remain under pressure as profits continue to decline, but at slower pace
From January to April, China’s industrial giants’ profits were down 27.4 per cent    This was a further slight improvement from the 36.7 per cent drop over the first three months, and the record 38.3 per cent drop from a year ago in the first two months of 2020

The pandemic disrupted global supply chains but were they already morphing?
   It is still too early to see the real effects of the COVID-19 pandemic or even the US-China trade war.   Was participation in global value chains already peaking before the pandemic?   The United States has obstacles to overcome, including a shortage of skilled labor and high production costs.

JD boosts logistics network as China’s e-commerce players prepare for spending frenzy at 618 festival
E-commerce players in China have all been expanding their infrastructure to fulfil the needs of millions of online consumers as 618 approaches

Can Luxury Brands Survive In China Without Online Partners?
With the rise of online shopping in China, it’s become increasingly important for global luxury brands to form a partnership with an e-commerce company. Photo: Prada. Composoite: Haitong Zheng.
On May 18th, Church’s, the high-end English footwear brand under Prada’s control, officially joined With this recent addition, JD is currently representing four labels that are under the Prada Group. Meanwhile, JD’s main competitor, Alibaba is using its dedicated site for luxury brands, Tmall Luxury Pavilion, as a platform for high-end international brands, hosting big names like Valentino, Tod’s, and Versace.

New US Bill Threatens Chinese E-Commerce and Streaming Giants
Around 200 Chinese companies might be delisted from the New York Stock Exchange and the tech-heavy Nasdaq due to a recently passed bill in the US. Chinese e-commerce and streaming giants, including, VIP.comWeibo’s owner Sina, iQiyi, and Bilibili, which all have collaborated closely with US and European luxury brands in recent years, are under threat.  The dispute is centered around Chinese firms that, for years, have been unwilling to give for American regulators access to audit their records. The bill was fueled by Luckin Coffee’s fraudulent sale figures, which were exposed in April. The self-proclaimed Starbucks competitor was given a delisting notice by Nasdaq a week ago. Last week, legislation was unanimously passed by the Senate stating that a company could only be traded after three consecutive years of regular inspection, the Wall Street Journal reported. The bill is expected to be passed by the House and then signed into law by President Trump.

Shanghai hopes pent-up consumer spending will boost economy, but poll shows big-ticket purchases have been put on hold amid gloomy outlook
City organises 55 Shopping Festival to drive discretionary spending by residents    Boston Consulting Group poll suggests about two-thirds of mainland consumers will not spend lavishly this year

China’s Young Struggle for Jobs in the Post-Outbreak Era
Finding work for a generation has become a major priority for the country’s leaders, who have promised a better life in exchange for a lack of political freedom.

China debt: bond problems could still resurface in 2020 after defaults amid coronavirus lower than expected
Bond defaults have dropped 26 per cent from a year earlier, but a larger increase was expected due to the economic damage caused by the coronavirus    Value of defaults rose almost 40 per cent to 64 billion yuan (US$9 billion), although more than half came from one case involving the state-owned Founder Group

China IP cases surge amid US complaints, Beijing push for technology self-reliance
China prosecuted a total of 11,003 people last year for violating trademarks, patents, copyright and business secrets, a rise of 32.2 per cent from 2018    Trade partners have long complained about intellectual property theft in China, which is also trying to encourage innovation at home

Costly electric vehicles confront a harsh coronavirus reality
The economic crisis triggered by the Covid-19 pandemic has put the electric vehicle ambitions of Volkswagen and other major carmakers at risk     Even before the crisis, carmakers had to contend with the downturn in China, the world’s biggest car market, where about half of all EVs are sold

Volkswagen is in final talks to pay US$491 million for an electric carmaker in Anhui, sealing its biggest acquisition in China
Volkswagen is poised to buy 50 per cent of Anhui Jianghuai Automobile Group for at least 3.5 billion yuan, according to people familiar with the matter   Jianghuai owns JAC Motors, Volkswagen’s electric vehicle partner

E-commerce giant Amazon in talks to buy autonomous vehicle start-up Zoox
Dow Jones reported that Amazon is in advanced talks to buy Zoox for less than the US$3.2 billion valuation from 2018    Zoox is unlikely to sell for less than the US$1 billion that it has already raised, according to people familiar with the matter

EV safety concerns ratchet up after fiery crash in Shenzhen
A driver was killed during a fiery crash after rear-ending a school bus with his electric van in the southern Chinese city of Shenzhen on Tuesday, ushering in a new wave of EV safety concerns among Chinese consumers. A rare loss of human life, the incident is one of the several EVs catching fires over the past month in Chinese major cities, a big blow for the market already going through an extended slump.

Here’s how Europe is now dwarfing China in EV investments
Europe attracted €60 billion in investments for electric vehicles in 2019 — compared to China’s €17.1 billion the same year. According to the Brussels-based nonprofit Transport and Environment, Europe’s 2019 figure is 19 times higher than it was two years ago, which was then €3.2 billion. In comparison, China’s figure was then €22 billion. In 2019, China’s investment figure dropped to €17.1. billion.

Tencent to plow $70 billion into cloud, AI over 5 years
Chinese internet giant Tencent announced Tuesday it will invest RMB 500 billion (around $69.9 billion) into cloud computing and other technologies over the next five years.    While the Shenzhen-based company said the investment plan is a response to Beijing’s call for investment in so-called “new infrastructure,” it is also strikingly similar to a plan announced by e-commerce giant Alibaba last month.

China stymies ‘experiments’ aimed at whipping up housing market frenzy in many cities facing budget squeeze
Wuwei city in Anhui province pulls policies aimed at boosting sales, mirroring reversals in 11 other cities since February    More local governments will continue test the water to shore up fiscal revenue and economic growth: analyst

Coronavirus: Thai Airways, Asia’s first airline to file for bankruptcy
Cathay Pacific and Singapore Airlines are also under pressure. Six world carriers have already gone under or suspended operations. Air travel will only return to pre-pandemic levels in 2023.

Shaping South Korea’s middle-power future
At the 2020 World Health Assembly, South Korean President Moon Jae-in shared his country’s success fighting COVID-19 based on democratic institutions, science and technology. He has also pledged Seoul will become a world leader in human security cooperation. This reflects South Korea’s national identity as a rising middle power in Asia, in stark contrast to its colonised and war-ravaged past. Middle-power goals, such as strengthening diplomatic networks that implement multilateralism, are now a yardstick for South Korea’s foreign policy performance. If Seoul falls short, addressing the North Korea challenge and defending a rules-based order in Asia will be ever more difficult. Second, South Korea’s democratic liberal values often clash with its realist foreign policy pragmatism in dealing with China. Seoul sometimes takes a deferential approach to its powerful neighbour and largest trading partner, informed by a belief that the diplomatic road to Pyongyang runs through Beijing. This leads South Korea to abstain from criticising human rights conditions in Xinjiang and Hong Kong, and from advocating for North Korean escapees who are often exploited in China or repatriated to the Kim regime. Seoul also tends to stay mum on China’s maritime expansionism in the South China Sea, on questions of WTO compliance, and on international standards for China’s Belt and Road Initiative.

China and India move troops as border tensions escalate
Thousands of Chinese troops reportedly move into sensitive areas along Himalayan frontier

Two Sessions 2020: China-US rivalry in ‘high-risk period’, Chinese defence minister says
US has intensified its ‘suppression and containment’ of China since start of Covid-19 pandemic, top defence official and PLA general Wei Fenghe says    ‘We must strengthen our fighting spirit, be daring to fight and be good at fighting, and use fighting to promote stability,’ he says

China’s top virus warrior ‘shocked’ by US coronavirus death toll
America’s response contrasts sharply with 17 years ago when authorities listened to experts and contained Sars to just over two dozen cases, Zhong Nanshan says    Scientist unsurprised by persistence of conspiracy theories surrounding China and the new pathogen

National security law: Hong Kong’s appeal as business hub in the spotlight as China law looms large
China’s National People’s Congress is set to approve a motion to amend Hong Kong’s Basic Law, the city’s mini-constitution, on Thursday   It is perceived by many as a damaging blow to the city’s autonomy that could undermine its many business advantages

British broadcast watchdog to punish CGTN for biased coverage of Hong Kong protests
Reports ‘did not give due weight to a wide range of voices on this matter of major political controversy’, regulator says   Star China Media, which holds the British licence for the Chinese state network, claims protesters didn’t want to talk to Chinese or Mandarin-language channels

Hong Kong national security law heightens South Korea’s painful choice: US or China?
US pressure on South Korea to cut its reliance on Chinese supply chains is likely to grow if city is stripped of its special trading status, experts say     Both countries are key to South Korea’s economy and in preventing aggression from Pyongyang, but China is biggest trading partner by far

China vows to hit back at US over any action on Hong Kong national security law
Foreign ministry says bill for the city is Beijing’s concern and it will accept no foreign interference   Asked about sanctions over the legislation, Donald Trump says the United States might make some move on this issue this week

As a new cold war dawns and the US pursues strategic competition with China, Beijing must reassess its own policies
US opposition to China’s enactment of a national security law in Hong Kong is grounded in a larger strategy of opposing China on all fronts    In response, China must exercise its right to safeguard national sovereignty, adhere to multilateralism and expand the reform and opening up process

Two sessions: coronavirus lawsuits spur call in China for rethink on state immunity
Lawmakers say the time right for the country to let Chinese citizens sue foreign governments in its courts     Submission to NPC comes amid legal claims overseas demanding that Beijing pay compensation for the pandemic

TikTok-owner ByteDance said to have hit US$3 billion in net profit last year, showing brisk growth
ByteDance generated more than US$17 billion in revenue and more than US$3 billion in net profit last year, according to people familiar with the matter   The revenue for last year is more than double the company’s tally of about US$7.4 billion in 2018

As we emerge from the coronavirus pandemic, the world must invest in digital infrastructure as well as health care
The shift to online activities due to the pandemic has only amplified the digital divide   The gap between the haves and the have-nots will only increase unless the developing world is supported in boosting digital infrastructure

After Covid: A Connectivity Pandemic?
The connected vs. the unconnected  Across all our goals – both as individuals and as human beings collectively – we will all rely more on digital technology in our lives.  Unless we quickly address the challenge of providing high-quality universal access to the Internet to all of us, we will not be capable of building inclusive economies. We would never be capable of bringing our vast resources to deal with future catastrophes or environmental degradation. And we will not be able to give young people global access to the wealth of human understanding so that they can understand, drive innovation and give rise to the future.  We need to increase awareness to guarantee that our global connective knowledge continues flowing to overcome our present situation. But we must also ensure that we maintain the urgency of extending access to all.

Women Rule, Men Drool in China’s Hottest New Show
In the gender-bending period drama “The Romance of Tiger and Rose,” women command armies while men dream of domestic bliss.

Alain Gillard
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