Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – October 12, 2021

IMF Trims View on Growth Rebound as ‘Dangerous Divergence’ Seen
The International Monetary Fund expressed concern the global economic recovery has lost momentum and become increasingly divided, even as it stuck by its prediction for a robust rebound from the Covid-19 recession.  The Washington-based lender now expects output to expand 5.9% worldwide this year, down 0.1 percentage point from what it anticipated in July and a bounce from the 3.1% contraction of 2020, it said on Tuesday in its latest World Economic Outlook. It held the forecast for 2022 at 4.9%.  “Overall, risks to economic prospects have increased, and policy trade-offs have become more complex,” Gita Gopinath, the fund’s director of economic research, said in the report’s introduction. “The dangerous divergence in economic prospects across countries remains a major concern.”  China will grow at a rate of 8% this year and 5.6% next, both a decline of 0.1 point from July, the fund said. It raised its projection for the euro area to 5% for this year from 4.6%, and kept its 2022 estimate at 4.3%. Forecasts for Japan, the U.K., Germany and Canada were all cut for this year, but lifted for 2022. Low-income countries were tipped to advance just 3% this year, a slicing of 0.9 point from July.

Global recovery continues, but the momentum has weakened and uncertainty has increased (full report, pdf )
The global economic recovery is continuing, even as the pandemic resurges. The fault lines opened up by COVID-19 are looking more persistent—near-term divergences are expected to leave lasting imprints on medium-term performance. Vaccine access and early policy support are the principal drivers of the gaps.   The global economy is projected to grow 5.9 percent in 2021 and 4.9 percent in 2022, 0.1 percentage point lower for 2021 than in the July forecast. The downward revision for 2021 reflects a downgrade for advanced economies—in part due to supply disruptions—and for low-income developing countries, largely due to worsening pandemic dynamics. This is partially offset by stronger near-term prospects among some commodity-exporting emerging market and developing economies. Rapid spread of Delta and the threat of new variants have increased uncertainty about how quickly the pandemic can be overcome. Policy choices have become more difficult, with limited room to maneuver.

China’s export growth likely eased in Sept on electricity curbs: Reuters poll
– China’s export growth likely slowed in September as electricity rationing hit production at home, while a shift in consumption towards services as developed economies reopened likely reduced global appetite for Chinese goods, a Reuters poll showed on Tuesday. Exports are expected to have risen 21.0% in September from a year earlier, according to the median forecast of 30 economists in the poll, after growing 25.6% in August.

Increased scrutiny on Chinese public-private ties
Chinese leader Xi Jinping is increasing scrutiny on the connections between China’s state banks and other major financial players, and large private-sector firms, widening the crackdown on “capitalist forces” in the economy, reports The Wall Street Journal. Mr. Xi, who started the clampdown late last year with a regulatory assault on private technology giants, is launching a sweeping round of inspections of financial institutions. People with knowledge of the plan told the WSJ that the inspections, announced in September with few details, focus on whether state-owned banks, investment funds and financial regulators have become too friendly with private firms. Including some that have recently landed in Beijing’s crosshairs, such as property giant China Evergrande Group, ride-hailing company Didi Global and financial-technology firm Ant Group. The examination, which is led by China’s top anti-corruption agency and centers on 25 financial institutions at the heart of the Chinese economy, is part of his broad effort to steer China towards a system with “common prosperity.”

Morgan Stanley upgrades China property sector outlook
Morgan Stanley has lifted its view on China’s real estate industry to “attractive” from “in line,” saying regulators may relax their grip on the sector to help stabilize it and support the economy, reports Reuters. The company’s analysts said that systemic risks have become more manageable as regulators and local governments have the experience and the mechanisms in place to deal with developer defaults.  China’s property sector – which accounts for about a quarter of the country’s gross domestic product – has been hit by tighter borrowing caps that have hurt cashflow as well as developers’ ability to finish construction and raise funds for new projects.   The crisis at struggling developer China Evergrande, which is grappling with some $300 billion in debt and has missed two coupon payments, has only added to those strains as investors fret that other developers are also susceptible to default

Global property prices set to lose upside momentum on negative policy shock and China slowdown
Higher interest rates and market-cooling measures likely to slow price-gain momentum in the coming months, Knight Frank says     Property stocks have been rallying this year, regaining all of the losses triggered by the pandemic, based on an S&P index

Small semiconductor firms say China’s power crunch adding to problems from low capacity and trade war with US
Small and medium-sized semiconductor companies say they had to freeze production over lack of power, adding to chip industry woes amid low capacity  Executives and industry professionals discussed the issue at the 2021 Yangtze River IC Summit in Nanjing on Monday

Aluminium surges to 13-year high as China raises power price
Aluminium price surged to above $3,050 a tonne for the first time in 13 years after China announced it decided to lift cap on power price to ease its electricity shortage but which will raise energy costs for smelters.    The price of the metal – used for making cans, kitchen tools to aeroplane parts – hit $3, 071.75 a tonne on Monday, its highest since July 2008.  “The announcement last week that electricity prices will be raised is expected to dent margins for many producers,” said analysts at ANZ Research in a note on Tuesday.  Aluminium eased to 0.51% to $3,026.75 a tonne on Tuesday. Aluminium prices have hit multi-year high as Beijing’s dual control of energy consumption led to production curbs in the aluminium-producing regions.

Despite soaring energy prices, China shouldn’t tighten monetary policy
Central banks in emerging markets may feel obliged to react to rising energy prices, even though tighter monetary policy won’t necessarily be effective against them   As the People’s Bank of China is no doubt aware, higher interest rates might leave both consumers and companies even more financially vulnerable  Nevertheless, unless equilibrium in energy prices is restored, either through a marked increase in supply or through demand destruction, elevated energy prices may be here to stay for a while, leaving consumers with less money to spend on other goods, which in turn accentuates the problems of manufacturers whose own fuel bills have also risen.    In such circumstances, as the PBOC will no doubt be aware, not only is tighter local monetary policy ineffective against global energy price rises, higher interest rates may also exacerbate an already difficult situation by increasing personal and corporate debt service costs, leaving both consumers and companies even more financially vulnerable     Unlike many other central banks, the PBOC took a more nuanced approach to the pandemic, providing targeted monetary policy support but not slashing interest rates or resorting to massive programmes of quantitative easing. In the post-pandemic environment, while soaring energy prices that are driving inflation higher may prompt some central banks to tighten monetary policy, policymakers in China should not be tempted down this path. China’s economy will be better served by the PBOC sticking with its current monetary policy.

China liberalises pricing for coal-fired electricity
China’s top economic planner announced on Tuesday an improved pricing mechanism for coal-fired power to deepen market-oriented pricing reform in the sector.    The National Development and Reform Commission said it will fully liberalise pricing for electricity generated from coal, and that industrial and commercial users will all have to buy from the market.

China power crisis: Premier Li warns provinces not to ‘jump the gun’ by cutting electricity to homes
China’s No 2 figure, Li Keqiang, reinforces importance of energy security, but says cutting power is not only way to meet carbon-emission targets   Comments come at a high-level meeting of the National Energy Committee as nation struggles to address a widespread power shortage that is affecting livelihoods and threatening economic growth   Li stressed that energy security was important, but he also said cutting power was not the only way to meet carbon-emission targets. He urged provincial governments to review the transformation of their power mix, including by looking into more oil and gas exploration and methane production.  At the meeting, the National Energy Committee also agreed to make “careful calculations” of China’s coal supply and power demand needs.  Beijing has said that its emission will peak in 2030, and that it is striving to become carbon neutral by 2060 – a strategy that could help with the global fight against climate change while reshaping the Chinese economy that depends so heavily on coal  The decades-long endeavour, estimated to cost more than 100 trillion yuan (US$15.5 trillion), has already affected the local supply of coal and thermal power this year, with a reduction in mining activities.  Zhou Hao, a senior emerging markets economist with Commerzbank, said China is certainly facing some problems with its energy supply, but the country is not alone, as it is part of a global green effort. “It’s more of a political issue than an economic one,” he said. “However, it’s an opportunity for China to examine how much cost it will face and be willing to take in the pursuit of green development.” Last week, Li also announced that electricity prices would be allowed to rise by as much as 20 per cent against NDRC’s benchmarks, compared with a current cap of 10 per cent. The NDRC implemented those measures in the reforms announced on Tuesday.

China power crisis sparks rush for generators from factories
Desperate factory owners in China are increasingly turning to diesel generators to keep their business going during the power crisis that threatens both the country’s economic growth and its green ambitions.   Power shortage It disrupted industry and left some households without electricity. To distribute fuel, some states have ordered factories to be closed for several days each week, and employees should use stairs and offices under pressure to avoid using air conditioners at low temperatures. I was told.   As the winter heating season approaches, China is also instructing coal miners: Expansion of production Significantly, and signaled that it would allow energy producers, who had been crippled by high coal costs, to raise their electricity prices.

Short-term energy price pain could be long-term climate change gain
The rise in oil and natural gas prices shouldn’t be a precursor to a supercharged inflation surge, and there is no reason for central banks to hit the panic button    Instead, the spike in prices could be a blessing in disguise if it hastens the switch to a zero-carbon world    Market reports suggest that China is on a spending spree, buying up energy supplies at any price to meet domestic winter fuel needs, but it is not alone. In the last few weeks, as wholesale energy prices have surged, nine out of the 60 or so energy suppliers that provide gas and electricity to homes across the UK market have gone bust. More failures are expected in the coming months, according to national energy regulator Ofgem.

China and India face a deepening energy crunch
Two of Asia’s largest economies are racing to contain a worsening energy crunch.
China is trying to assuage concerns about skyrocketing prices as its major coal mining hubs grapple with heavy rains and deadly accidents, problems that are compounding efforts to address power shortages.   Some leaders in India, meanwhile, are warning that key regions including the capital, New Delhi, could face a “power crisis” as the cost of electricity rises, even as the central government says the country has enough coal supplies to meet demand.  Energy demand is soaring worldwide as the global economy reopens. But supply isn’t keeping up.

China isn’t the only huge Asian economy with a coal shortage now
India is also teetering on the edge of a power crisis. As of Oct. 6, 80% of India’s 135 coal-powered plants had less than 8 days of supplies left — more than half of those had stocks worth two days or fewer, according to  The power crisis would likely have an immediate impact on India’s nascent economic recovery which is being led by industrial activity instead of services, according to Kunal Kundu, India economist at Societe Generale.

Future of Asia: The future of financial services
Asia is the world’s consumption growth engine—miss Asia and you could miss half of the global picture, a $10 trillion consumption growth opportunity over the next decade. But Asia’s consumer markets are changing dynamically with new growth angles that offer opportunities for financial services players and consumption curves that are shifting or mutating. Financial services players should consider how to redraw their Asian consumer maps.    New McKinsey Global Institute (MGI) research finds that three large shifts are playing out across the region. First, as incomes rise across Asia, more consumers will reach the highest tiers of the income pyramid, and movement within the consuming class is likely to be a larger driver of consumption growth than movement into it. Second, cities will continue to drive consumption growth, but promising sources of growth are increasingly diverse cohorts within cities, such as Insta-grannies in Seoul, Generation Z gamers in Surabaya, career moms in Manila, and lifestyle-indulging digital natives in Chengdu. Third, as the relationship between income and consumption breaks down in some instances, new consumption curves are emerging in specific categories

China Probes State Banks for ‘Political Deviations’
That’s according to a Monday (Oct. 11) report in The Wall Street Journal, which says President Xi Jinping has ordered inspections of financial institutions (FIs) to determine whether state-owned banks, regulators and investment firms have gotten too close to private companies.    These inspections are being led by China’s leading anti-corruption agency, with a focus on 25 key FIs. The Journal notes that this is part of Xi’s larger effort to move China’s economy away from Western-style capitalism as he prepares to leave offic

Ant Group registered capital rises 47%
Chinese fintech giant Ant Group has increased its registered capital to RMB 35 billion ($5.44 billion) from RMB 23.8 billion, as the company undergoes government-mandated restructuring, reports Reuters. Ant, an affiliate of e-commerce leader Alibaba, said in a statement on Monday that the increase was to support growth and was “according to relevant regulations and business needs.” Authorities in April ordered sweeping restructuring at Ant after halting the financial technology (fintech) firm’s record $37 billion initial public offering in November, underscoring government determination to rein in its internet giants. The overhaul subjects Ant to tougher regulatory oversight and capital requirements.  Ant said the 47% jump in registered capital comes from “capitalization of the company’s capital reserve.” It said it had not engaged in any fundraising activity and that no additional investors were involved.

COP15: China’s Xi Jinping pledges US$232m for new fund to protect world biodiversity
The Kunming Biodiversity Fund will help developing nations better protect their ecology, President Xi tells UN conference    Xi also pledged to accelerate solar power development in China, with scale of projects set to surpass India’s entire renewable energy portfolio

Overseas Covid-19 relaxations pose new challenges for China
Vice-Premier Sun Chunlan calls for more study into how the virus transmits as other countries open up to foreign travel     Chinese border controls remain among the strictest in the world but authorities are grappling with how far to loosen them  Gao said China’s road map had been to increase its vaccination rate, develop new vaccines and eventually create a drug to tackle Covid-19, but eliminating the virus would be a long battle. “Since we are battling this virus in a long fight, I want to ask: are there other solutions rather than living with the virus?” He was more optimistic than Zhong Nanshan, China’s leading respiratory diseases expert, who said in early October that the country’s strategy should centre on prevention and a healthy lifestyle rather than the development of a treatment, while it was unknown how long vaccines would offer protection and whether the death rate would continue to fall.  “When all these are uncertain, our guiding thought is to promote healthy living. That means we will not spend a lot of energy researching how to save the ill,” Zhong said in an interview with Southern People Weekly.   As of mid-September, 78 per cent of China’s population were vaccinated against the coronavirus, and local outbreaks in recent months have been brought under control within weeks.

What’s In A Name? From Fosun Fashion To Lanvin Group
Fosun Fashion Group has rebranded itself to Lanvin Group to build on a 132-year legacy. Will this daring move help it become the LVMH of China? Photo: Courtesy of Fosun Fashion Group
What happened: Fosun Fashion Group has rebranded and will now go by Lanvin Group. Alongside the luxury house Lanvin, the Shanghai group also currently controls Italian luxury shoemaker Sergio Rossi, Austrian underwear label Wolford, American womenswear company St. John Knits, and tailor Caruso. The announcement included the acquisitions of two new investors: Japanese trading conglomerate ITOCHU Corporation and luxury footwear manufacturer, Stella International. This latest capital round sees Lanvin Group’s total amount raised to approximately $300 million. It was established in 2017 by the conglomerate Fosun International Limited.

EV battery maker CATL plans $5-billion China recycling facility
Contemporary Amperex Technology Co Ltd 300750.SZ plans to build a battery material recycling facility in the central Chinese province of Hubei with an investment of up to 32 billion yuan ($4.96 billion), the electric-vehicle battery maker said on Tuesday.   The company’s announcement comes at a time when global demand for electric vehicles has surged, which makes securing battery materials a key task for the industry. China, the world’s biggest car market, has also set standards and policies to promote battery recycling and save materials.

Lenovo’s China IPO withdrawal leaves investors fuming as they blame founder Liu Chuanzhi for woes
Lenovo Group planned to raise US$1.6 billion from sale of Chinese depositary receipts, but withdrew its application      The IPO would have helped the Chinese personal-computer giant to lower its debt ratio that stood at 90.5 per cent at the end of last year

Evergrande’s first EV may roll out in 2022 with local government aid, a year behind schedule and after losing US$84 billion in value
Carmaking arm of distressed developer said it will make sure the first EV is ready for delivery early next year     Evergrande Auto said the Tianjin Binhai High-tech New Zone had pledged its support    The carmaker, which briefly topped the century-old Ford Motor in market capitalisation in February after raising HK$10 billion (US$1.3 billion) in a top-up stock sale in Hong Kong a month earlier, is yet to deliver a single car. While it has stopped paying nearly all suppliers and some of its employees because of the cash squeeze, existing staff have been told to get the assembly line ready to produce its first model. Evergrande Auto had set itself the lofty goal of building a million electric vehicles a year by 2025 as part of its journey to global domination. Earlier this year, before its troubles spiralled, it set a goal of delivering 100,000 units in 2022.  In August, when Evergrande was reportedly in talks with smartphone maker Xiaomi over the sale of a stake in the EV unit, two prototypes of its Hengchi cars were seen by the South China Morning Post conducting a road test

Chinese Developer Sinic Warns of Default as Hidden Risks Mount
Chinese developer Sinic warns of default on US$250 million bond due next week   Sinic Holdings has US$694 million in dollar bonds outstanding and has already missed domestic payments last month    Borrowing costs for dollar junk-rated debt, which is dominated by Chinese developers, soars to highest level in about a decade with yields at 17.5 per cent

Meituan founder Wang Xing locks down social media posts as China’s food delivery giant puts antitrust investigation behind it
The Meituan founder and chief executive has hidden from public view all of his posts on Chinese microblogging platforms Weibo and Fanfou    That move was apparently made weeks before the government closed its antitrust investigation of Meituan, which was handed a US$533 million fine

China ‘Banned’ Crypto. Can The SEC Try Doing The Same?
China banned crypto last month. And what happened? Bitcoin prices rose. Take that, Xi Jinping.
Bitcoin and other crypto’s have been up nearly every day this month and is up again on Monday, so, as that old Sunkist tuna commerical used to say back in the 1970s…Sorry, Charlie.   As most cryptocurrency investors know, the People’s Bank of China and the National Development and Reform Commission outlawed cryptocurrency mining and declared all cryptocurrency transactions illegal.  The question that I’ve often asked, as an investor in Bitcoin and numerous altcoins is – how long before the Fed kills this market? Is it a serious possibility?   “Unfortunately, we will see a deeper crackdown,” thinks Daniel Santos, CEO of DeFi.Finance, a project of Woonkly Labs. is in the hybrid finance space, aka “HyFi”, which is usually described as a bridge between cryptocurrency DeFi and the old school, centralized financial institutions. “Unregulated defi products will face difficulties. Governments aren’t going to allow (crypto lending) platforms that don’t require know-your-customer and follow anti-money laundering laws,” Santos says. Woonkly Labs is working on DeFI and NFT platforms that comply with the European regulators. They are based in Estonia, which has set itself to be a hub for crypto start-ups in the Eurozone. “Only time will tell what’s going to happen next.”     China tends to spook the crypto world, giving traders a reason to sell. But, am I wrong here…the cryptocurrency universe is becoming, perhaps, unspookable.  Every time Beijing cracks down on Bitcoin, the running joke is that China has already banned cryptocurrency 18 times.
Chinese government agencies have issued a string of increasingly restrictive but never conclusive legal prohibitions of various aspects of crypto since 2013, but as Wired magazine UK points out, China’s crypto industry has thrived.   The ramp up of China’s repression of bitcoin and other cryptocurrencies was always going to happen. Crypto’s borderless and unregulated nature runs counter to the Chinese government’s vision for a state-dominated economy. Beijing sees cryptocurrencies as the epitome of mindless guesswork, Wired reported and I would add – Beijing sees it as Macau-style gambling and nothing more.   Mamlouk thinks it gets more heated as technology advances and your crypto is mined by stateless algorithms.  “The real battle is going to start when a truly autonomous system is created and can run its own platforms with minimal help from humans,” Mamlouk says, meaning it would be harder for a state to target them individually. “Artificial intelligence will play a huge role and for crypto — it is a major game changer,” Mamlouk says. “Any system that can domicile its servers in the right place and has the ability to move them swiftly is basically bulletproof from a regulatory standpoint. What will remain is how these systems stand the test of time from a technology perspective (not a regulatory one).

Worsening global digital divide as the US and China continue zero-sum competitions
In the digital era we live in, seven “super platforms” in the U.S. and China constitute two-thirds of total market value worldwide. Yet we hardly see any significant joint efforts between the U.S. and China to help combat digital divides in the least developed countries. This article originally appeared in ThinkChina.   The COVID-19 crisis has interrupted daily life and business routines across the world, caused a massive loss of millions of lives, and exacerbated economic disparities within and between countries. COVID-19 has also revealed fundamental challenges in the international order. As Kissinger has asserted, “the world will never be the same after the coronavirus.” One can reasonably expect that cynicism regarding regional and global integration, as well as radical populismracismultra-nationalism and xenophobia, will likely continue to rise around the world.

EU’s Charles Michel to speak with China’s Xi on Friday
Call to come amid strained relations between Beijing and Brussels.  European Council President Charles Michel is expected to focus on human rights and trade issues during a phone call Friday with Chinese leader Xi Jinping amid strained relations between Brussels and Beijing, according to an EU official.  EU-China relations have been deteriorating over the past year over Beijing’s treatment of its Muslim Uyghur minority in the Xinjiang region as well as a showdown with Lithuania over Taiwan. Some EU countries including Lithuania have been calling for a tougher approach to China as a result.
On Sunday, EU foreign policy chief Josep Borrell vowed to deal with Beijing “from a position of unity and strength.”

Xi Jinping plans call with EU’s Charles Michel, as Brussels looks to steady ship on China
The Chinese president will speak with the European Council president on Friday  Call would follow European Union leadership talks last week on how the bloc should engage with China going forward

Global Gateway – the European Union’s new connectivity strategy
To successfully answer the challenge of China’s Belt and Road Initiative with its new connectivity strategy, the EU needs to form a clearer picture of where and how the BRI is succeeding, argues Jacob Mardell.    The topic of connectivity, meaning the physical and institutional connective infrastructure of ports, roads, fiber optic cables, customs arrangements, and so on, has picked up steam over the past couple of years, largely as a belated response to China’s Belt and Road Initiative (BRI)—a campaign launched in 2013 to position China as a leading provider of global public goods

China’s Loss Can Be Southeast Asia’s Gain
COVID-19 has exposed the myriad weaknesses of cross-border value chains. Once the backbone of globalization, now they are associated with vulnerability to disruption. Thanks to the pandemic, value chains are being reconfigured with a focus on resilience.     At the same time, China’s changing role in the global economy is forcing companies to reconsider it as a manufacturing hub. The world’s factory has reinvented itself as the world’s investor. Increasing digitalization of production and ongoing trade tensions with the United States have also contributed to an exodus of companies from China.

Hong Kong Added to EU Watchlist on Non-Cooperative Tax Jurisdictions
Hong Kong was recently added to the EU’s grey list of non-cooperative tax jurisdictions due to concerns the city is enabling ‘double non-taxation‘ of passive income. In response, the Hong Kong government reiterated its commitment to make the requisite amendments to its tax law to comply with EU standards, a move that may have a limited impact upon some foreign enterprises in Hong Kong.

Taiwan asks Australia to support its bid to join CPTPP trade pact
Closer engagement with Taiwan makes sense after Beijing’s boycotts of Australian products, Taipei’s de facto ambassador tells Canberra parliament committee    Pacific trade bloc has received applications to join from Taipei and Beijing

US and China seek the right level of pressure as Taiwan tensions grow
The issue of the self-ruled island is regarded as one area of tension between Beijing and Washington which could lead to conflict     Both sides are trying to lay down firm markers while avoiding the risk of miscalculation

Why China’s fiercest Wolf Warrior in Sweden was just fighting the good fight
Gui Congyou, who ended his term as Chinese ambassador last month, gained notoriety with his unusually strident, confrontational posture    But ‘shotgun’ diplomats such as Gui are only responding to the leadership’s calls for a ‘fighting spirit’ against the Western plot to contain China As Lu Shaye, China’s ambassador to France and another famed Wolf Warrior diplomat, put it, “In the eyes of Westerners, our diplomacy is on the offensive and aggressive, but the truth is, it is they who are on the offensive and aggressive.”  As Beijing struggles to continue its ascendancy, defying an increasingly hostile world, Chinese diplomats have often found themselves under the uncomfortable spotlight of international scrutiny.  On the one hand, they are themselves not used to China’s newly acquired status as a global power, while on the other, they grow increasingly impatient with what they see as nitpicking criticism about China, and refuse to accept that they may be in the wrong.  For them, China is and will always be on the defensive, and Wolf Warrior diplomacy, such as Gui’s talk of shotguns, is a natural response to the Western plot to contain China     Lu was elevated to the Paris job in 2019 after a two-year stint as China’s top envoy in Canada during which he oversaw bilateral ties sinking to a historical low over the arrest of Meng Wanzhou, the CFO of Chinese telecoms giant Huawei.

podcast : How China Makes Foreign Policy
The process by which China makes its foreign policy is often considered to be a black box — or at least very difficult for outsiders to discern.   The head of the Chinese Communist Party is the ultimate decision maker. But as in any government there are also various bureaucracies with their own — and sometimes competing  — interests.

Alain Gillard
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