Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – October 22, 2021

Why China’s slow economic growth is a bigger headache than its energy crunch and Evergrande’s debt crisis
The problems in the energy and property sectors, though serious, do not pose a systemic risk to the economy, despite the alarming news headlines. The more urgent task for Beijing is to reinvigorate growth that has slowed since 2010

Investor fears of stagflation risk turning into a self-fulfilling prophecy
The narrative of a return to high prices and low growth may appeal to markets spooked by a supply chain crisis and China’s growth scare, but it’s not supported by current economic conditions

What does a stronger US dollar-yuan exchange rate mean, and why is Beijing worried?
The exchange rate between China’s yuan and the US dollar has become a closely watched issue    A lower yuan exchange rate figure means it takes fewer yuan to purchase one US dollar, indicating a stronger Chinese currency

US intelligence warns American firms to protect 5 key technologies from China
Artificial intelligence, quantum computing, bioscience, semiconductors, and autonomous systems are five critical tech areas, says US intelligence    American firms and researchers need to pay more attention to protect research against threats from nation-states acquiring American know-how, officials add

Growth, property and power
Growth was a big topic this week with the GDP number for Q3 coming in at only 4.9%, even against the pandemic-hit Q3 of 2020. One analyst predicted that the Q4 GDP growth rate would be 2.5%. The causes of the slowdown are many, including the continuing power cuts, property market woes, and a general slowdown in the real economy. But there is no sign that the Center intends to address the issue with massive stimulus packages. The days of Premier Wen Jiabao declaring in 2008 that China would “hold to 8%” growth – BAO BA!!! – are long gone. And there are indications that the Center is anyway looking to shift the narrative away from the GDP growth number. Growth is no longer the goal by itself, it is now “common prosperity,” depending on how that phrase is interpreted. But the malaise in the property sector remains a key issue, even though people have now realized it is not going to up-end everything. The troubled property group Evergrande got a three-month extension on some of its bond repayments falling due, but it failed to offload Evergrande Property Services as a way to raise cash. Another property developer, Sinic, defaulted on payments of $246m and Modern Land (China) canceled payments on $250m, and everyone is wondering how many nearly distressed property developers are waiting in the wings. The wider property market, a cornerstone of the Chinese economy, is increasingly showing signs of being impacted. Investments made by property developers fell 3.5% year-on-year in September, and home sales by value fell 16.9% in the same month from a year earlier. The floor area of new construction projects started in the month fell 13.5% and home price growth has stalled. Beike Zhaofang, an online property agency platform, facing a hard winter, fired many of its staff. But Vice Premier Liu He calmed a lot of nerves when he declared that risks in the country’s property sector are controllable.  Enjoy the weekend and turn off the lights.

Opinion | Is China in Big Trouble?
These are scary instances in America, with one in every of our main events careening into authoritarianism and the opposite having problem shifting ahead thanks to 2 uncooperative senators. Most of what I write, inevitably, focuses on the troubled prospects for our republic. But everybody wants a break. So at present I wish to speak about a happier subject: The dangers of an financial disaster in China.   OK, not precisely happier. But a change in topic, anyway.   Warnings in regards to the Chinese financial system aren’t new — however till now the worriers, myself included, have been persistently flawed. Back in 2013 I recommended that China’s development mannequin was turning into unsustainable, and that its financial system could be about to hit a Great Wall; clearly that didn’t occur

China cites ‘flexible’ yuan exchange rate, healthy economy as buffer against US tapering
Currency regulator says China’s economic fundamentals, including ‘improving flexibility’ of the yuan exchange rate, mean impact of US tapering controllable   Comments reinforce market expectations Beijing is less willing to intervene in the foreign exchange market, allowing for greater volatility

China warns ‘complex and grim’ external environment poses risk to stabilising foreign direct investment
New five-year foreign investment plan outlines more conservative growth target for coming five years, in light of economic uncertainties both at home and abroad    As Beijing vows to advance investment ties with other countries, analysts warn that deteriorating international relations and decoupling could impede effort

MOFCOM: Foreign investment into China expected to top 1 trillion yuan in 2021
Foreign investment into China is expected to exceed 1 trillion yuan ($160 billion) this year, Ministry of Commerce (MOFCOM) said on Friday, adding the country could achieve the target of stabilizing foreign investment for the year with various favorable conditions attracting foreign investors, despite complicated external environment.   Global foreign investment has rebounded in the first half of 2021, according to a report by the United Nations on October 19. Foreign direct investment in East and Southeast Asia increased by 25 percent year on year, which is roughly the same as the growth rate of foreign investment to China, said Zong Changqing, director of the Foreign Investment Department at the MOFCOM. The report also predicted that cross-border investment throughout the year will be better than expected, and may re-exceed the level before the COVID-19.

China to accelerate US$224 billion of local bond issuance to support slowing economy
China has set an annual quota of 3.65 trillion yuan for local government special bonds, which mainly fund infrastructure projects, this year    China’s local governments issued a net 2.22 trillion yuan (US$347 billion) in special bonds in the first nine months of 2021, accounting for 61 per cent of the quota   “We will strive to complete the 2021 special bond quota by the end of November to continue to promote the positive role of special bonds in local economic and social development.”
China has set an annual quota of 3.65 trillion yuan for local government special bonds, which mainly fund infrastructure projects, this year.    The figures suggest that local governments could issue a monthly average of 717 billion yuan (US$112 billion) in special bonds in October and November, a sharp increase from the first nine months.   About half of the funds raised from the special bonds in January-September went to transport, urban infrastructure and industrial estates, with the rest going to affordable housing, education and health care sectors, Li said.  China’s fiscal revenue fell by 2.1 per cent in September from a year earlier due to slowing economic growth and statistical base effects, Liu Jinyun, a second ministry official, told the briefing.  “Fiscal revenue growth is likely to show a downward trend in the next few months,” Liu said, adding that the government remains on track to achieve its planned revenue this year, and the budgeted spending will be guaranteed.  Fiscal revenue grew by 16.3 per cent in the first nine months from a year earlier to 16.4 trillion yuan (US$2.6 trillion), while fiscal spending rose by 2.3 per cent from a year earlier to 17.9 trillion yuan, Liu added.

China may be moving toward easy monetary policy, but it will have to tread delicately
Analysts say any easing by the People’s Bank of China may not come in overt moves, especially as the U.S. tightens monetary policy.    Instead, China will likely seek targeted measures.  The PBOC needs to support a slowing economy, while keeping inflation in check.

CATL’s EV battery breakthrough holds promise as cost-effective, game-changing alternative the industry’s waiting for
CATL makes rapid progress on sodium-ion batteries, improving the performance of the alternative technology to the mainstay lithium-ion batteries    The commercialisation of sodium-ion batteries is still some time away, as it will take time to fine-tune products that are a viable option to lithium-ion, say analysts

China’s EV battery manufacturers race to develop new technologies that are less reliant on pricey metals
Electric car assemblers like NIO and Xpeng are now in a race for supremacy in the future of mobility, and new battery technologies may well be the key   But refashioning a segment that is vast, fast-changing and vital to the broader industry will not be easy, analysts warn

COP26: why carbon pricing is crucial to China’s climate change pledges
China’s emissions trading scheme is a welcome development, but its size belies its narrow scope and lack of allure for investors   To reach its full potential, it needs to cover more of China’s emissions, go beyond the electricity sector and let prices reflect the true cost of carbon

China to create rare-earths giant by joining three state companies
Beijing to tighten grip on market with SOE controlling 70% of domestic production
China will restructure three rare-earths producers to create a state-owned company with a nearly 70% share of the domestic production quota for the metals that are essential to manufacturing high-tech products.   The move is aimed at accelerating the development of resources and processing technology and strengthening Beijing’s control over the mining sector in anticipation of prolonged trade tensions with Washington.  By restructuring the country’s major rare-earth companies, the government seeks to extend control from production to the entire supply chain, including exports. The move comes as the U.S. looks to create an alternate supply chain for rare earths, joining forces with Australia .   China Minmetals Corporation (CMC), a major state-owned resource company, China Aluminum Corporation, a major state-owned nonferrous metals company, and the government of Ganzhou City in Jiangxi Province, region known for its rare earth deposits, are “planning a strategic reorganization” of their respective rare earths subsidiaries, according to the listed subsidiary of CMC.    Demand for rare earths is expanding due to the global spread of EVs. Due to political instability in Myanmar, another top producer of rare earths, the price of dysprosium and terbium in China has increased by about 60% and 90%, respectively, from a year ago. At the end of September, the Chinese government expanded the production quota for rare earths for 2021 by 20% compared to the previous year.

Tencent, Huawei, other major Shenzhen firms to bolster user data safeguards ahead of roll-out of new personal information law
More than 20 major Shenzhen-based companies, all of which operate popular apps, have pledged to boost their user data security   The commitment was made ahead of the implementation of China’s new Personal Information Protection Law on November 1

Hopson says it considers agreement to buy Evergrande unit to be ‘legally binding’ despite cancellation
An October 1 bid to buy 50.1 per cent of Evergrande Property Services for HK$20.04 billion failed to materialise because Evergrande rescinded the sale   Hopson’s latest filing complicates an increasingly messy restructuring saga for Evergrande, the world’s most indebted developer

Evergrande staves off default, paying US$83.5 million of overdue offshore bond coupon before 30-day grace period runs out
Evergrande wired the payment due on its 8.25 per cent, US$2.03 billion bond maturing in March 2022 to Citibank on Thursday, according to separate reports   Evergrande missed the payment on its offshore debt on September 23 and was given 30 days grace until this weekend before being declared in default

China will set up a property tax pilot plan, taking small steps after years of dithering to tame home prices for common prosperity
The State Council will select the first regions and the timing for collecting the dutiable tariff on land, as well as owners of residential and commercial real estate, according to the state news agency Xinhua   Legally owned rural homes will be exempted from the pilot plan, which lasts for five years before the National People’s Congress (NPC) turns it into a nationwide law, Xinhua said

US approval of export permits to Huawei, SMIC suppliers shows challenges in decoupling from China
US suppliers have reportedly been granted tens of billions of dollars worth of permits to export to Huawei and Chinese chip maker SMIC   American businesses are not ready to give up on the Chinese market amid a global chip shortage, according to analysts

ByteDance gaming studio lays off dozens of employees amid Beijing’s gaming crackdown, sending a chill down industry
The Chinese tech giant is said to have dismissed many junior level employees from Ohayoo, a gaming unit it created in 2018    The downsizing at Ohayoo has sent shock waves across China’s gaming community, as it reverses ByteDance’s previous position as an aggressive hirer of top talent

China passes new law ordering parents to do more to lift ‘twin pressures’ of homework and private tuition
Legislation, which also reinforces curbs on the amount of time children can spend playing video games, follows a recent crackdown on the tutoring industry    Previous meetings of the country’s top legislative body indicate that the law will encourage families to promote children’s moral and intellectual development

Beijing passes law to limit homework for children
The nation’s top legislative body has approved a draft law that will reduce the amount of homework mainland children have to complete as part of a push for family-friendly education policies.   The National People’s Congress Standing Committee approved a law on family education promotion on Saturday, the last day of its latest session.    Details have not been published, but the official Xinhua News Agency reports that local governments will have to take steps to reduce the burden of excessive homework and off-campus tutoring in compulsory education.

China puts cryptocurrency mining on industrial blacklist in final step to eliminate the activity
The National Development and Reform Commission has added cryptocurrency mining to a list of industries that China wants to abolish    This action could hammer the final nail in the coffin of cryptocurrency mining activities in China

Asia’s consumer map is being redrawn
Asia is the world’s consumption growth engine—miss Asia and you could miss half the global picture, a $10 trillion consumption growth opportunity over the next decade, write Jeongmin Seong and Tiago Devaso in Brookings Future Development blog.    The average size of households has declined in most Asian countries over the past 20 years, by, for example, about 10 percent in Indonesia and almost 30 percent in China. Almost one-third of households in advanced Asian economies and more than 15 percent in China are already single-person ones, and a robust “singles economy” is emerging. Social media, home food delivery, smaller packaged food portions, solo dining and travel, and even pets and robot “friends” as companions are all on the rise.

China’s Xi Jinping targets energy, food security and environment in Shandong trip
President signals that home-grown technology is central to meeting the country’s fuel and eco needs, analyst says     China must hold its power sources in its own hands, Xi says, as China in grip of fuel crisis

China’s Vocational Education Reform and Foreign Investment Opportunities
Although China is tightening regulations on academic tutoring for school-age students, it is simultaneously encouraging private investment in vocational education. China believes upskilling its workforce is key to the country’s continued economic growth. Foreign investment is explicitly welcome in the vocational education sector.   On October 12, 2021, the Communist Party Central Committee and the State Council issued the Guidelines on Promoting the High-Quality Development of Modern Vocational Education (hereafter “Guidelines”). The document sets clear goals, including that by 2025, the enrollment of vocational colleges should be no less than 10 percent of the total enrollment of higher education institutions; and by 2035, China’s vocational education should be among the best in the world.   Moreover, contrary to its recent abrupt crackdown on for-profit tutoring in core education, China has been constantly pushing for the accelerated development of its vocational education system for many years.

WTO members blast China during 20th anniversary trade policy review
The U.S. has pressed China to give up its claim to special and differential treatment at the WTO, given its huge role in the international trade system.

On China, Biden Channels Trump
The only difference from Trump’s approach was Tai’s promise that the United States would seek “allies” and “agreements” with international organizations and other nations to raise pressure on China. Rather than a substantive difference, this constituted little more than a talking point. Washington has all but discounted the rules of the World Trade Organization (WTO) as applicable to the matter of China trade. Tai did not even mention the G-7 or the G-20. She did point to the recent U.S.-EU agreement on competition between Boeing and Airbus, but if America truly wants a united front with Europe against China, it would lift Trump’s steel and aluminum tariffs on European producers. These remain in place. Neither has the United States done much to consummate a trade agreement with the newly separate United Kingdom, nor has it approached the successor to the defuncted Trans-Pacific Partnership (TPP), the Progressive Agreement for Trans-Pacific Partnership (PATPP). This decision is especially noteworthy since last month China applied for admission to that agreement.

China’s Journey Into The Unknown
China watchers have grown ever more anxious as President Xi Jinping has concentrated power in his own hands, and as the Communist Party of China’s (CPC) leadership has become more coercive, both at home and abroad. The so-called trade war with the United States (US), deterioration in relations with many foreign governments, and the COVID-19 pandemic have had far-reaching consequences for China. And now comes Xi’s regulatory and legal clampdown on private firms and their owners, as he champions a new campaign to promote “common prosperity.” The speed and scope of these developments exemplify the hazard of book-writing on contemporary affairs. Even so, the three books examined here provide (each in its own way) a valuable perspective on the more lasting aspects of Xi’s China, identifying features that can guide thinking about the future of a country that is both challenging the world and facing major challenges of its own.

Why Asean may think twice before standing with China over Aukus
China has come out strongly against the trilateral security deal as posing hidden dangers to regional peace and stability     But with opinion among Asean members divided, and many wary of China’s own military build-up, Beijing’s regional drive could well face a few hurdles    So far, Asean has moved cautiously on Aukus. It has been more than a month since the deal was established, but the 10-member group has yet to release any official position. Last week, Malaysia’s defence minister Hishammuddin said the bloc was hoping for a clear consensus on Aukus in the Asean leaders’ summit next month.  “On security issues, Asean has been walking a tightrope of sorts, in that it has had to make some very careful decisions. So China’s five-point response is likely to find limited resonance among Asean countries,” Chen in Hainan said, with “five-point response” referring to the opposition to Aukus raised by Foreign Minister Wang.   “This is because they have too many issues to take into consideration, from how to avoid division and maintain the bloc’s centrality while avoiding taking sides between China and the US.”  Choong said Asean was “unlikely to swing to either the US or China”, as managing a balance of power remained a priority.   And according to Chen, Beijing is likely to continue talks with Asean countries while enhancing its anti-submarine warfare capabilities.  “To Asean countries, China should make clear its position on nuclear non-proliferation, which I think has some room for dialogue,” Chen said.    “Meanwhile, China should make it clear that Southeast Asian countries should not participate in any similar partnerships like Aukus, otherwise it would be seen as taking sides.”

Japan foreign minister calls for U.S. to join CPTPP
U.S. interim envoy to Tokyo supports Taiwan’s entry into the trade pact    Japan’s foreign minister called for the U.S. to support stability in the Indo-Pacific region by joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), following China’s recent move to enter the trade pact. “It’s important for the U.S. to be engaged in creating regional economic order, including by returning to [the negotiating table for] the TPP,” Toshimitsu Motegi said in a video message shown on Saturday at the Mount Fuji Dialogue, an event hosted by the Japan Center for Economic Research and the Japan Institute of International Affairs. That comes after China and Taiwan applied to join the CPTPP in September. While the U.S. initially played a central role in forming the bloc, Washington under former President Donald Trump withdrew from the pact in 2017.  Schriver said that the Quad and AUKUS “would not add value in an operational way” in the near term. Rather, they will work down the line along with diplomatic efforts by governments in the region. “The headlines right now are dominated by AUKUS and Quad, but we should forget [them],” he said. “The priority work is still really with the modernization of our alliance.”

This Is How Biden Can Get the Edge Over China
As a U.S. diplomat managing our relations with China, I often was asked, “What is our leverage over China?” Beijing was always either doing something we didn’t like — buying oil from Iran, building a port in Cambodia, locking up dissidents — or not doing something that we thought it should, like enforcing sanctions on North Korea or opening its market to U.S. agricultural products.   We were constantly considering what sticks or carrots we might deploy to change China’s behavior. There were no easy answers; frustrations over the insufficiency of our leverage and our inability to “change China” are longstanding. But China’s growing power exacerbates the problem. And in this era of great power competition, the need to accrue and use leverage to influence Chinese actions has never been greater.

Biden says US will defend Taiwan if China attacks
President Joe Biden said the US would defend Taiwan if China attacked, in an apparent departure from a long-held US foreign policy position.

US officials walk back Biden’s remarks on Taiwan, say ‘strategic ambiguity’ policy has not changed
After Biden tells CNN ‘we have a commitment’ to come to Taiwan’s defence, White House says ‘president was not announcing any change’ in policy     ‘Nobody wants to see cross-strait issues come to blows, and certainly not President Biden,’ US Defence Secretary Lloyd Austin says

China’s Africa infrastructure ‘quad’ idea for France, Germany ‘doomed to fail’
Governmental cooperation suggested by President Xi Jinping faces obstacles, according to Johns Hopkins University researchers    Companies from the three nations do cooperate, but past attempts to formalise ties suggest Xi’s idea will not proceed, they say

China’s largest, most advanced civilian patrol boat could be used to support South China Sea claims
The newly launched Haixun 09 will be used to protect the country’s maritime claims, according to state broadcaster CCTV      But one military observer warns that deploying it to disputed waters risks triggering an international incident with rival claimants

China’s Biggest Influencer Pushes a New Message: Buy Chinese
Li “The Lipstick King” Jiaqi has risen to become China’s most powerful livestreamer. Now, he’s jumping on a new trend: an upsurge in Chinese patriotism.

China reports highest number of Covid-19 cases in over a month
The 38 domestically transmitted cases centred on Inner Mongolia and Gansu and were the largest number seen since September 20    The local authorities have stepped up their alert levels and urged National Day tourists who visited the affected areas to get tested

China sticking with ‘zero Covid’, but is it a binary choice?
A strategy that has succeeded in containing the country’s outbreaks presents considerable logistical and economic challenges    The inevitability of further cases and a waning of vaccine antibody levels beg the question of how long China should persist with it

Alain Gillard
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