Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – October 27, 2021

China industrial profit growth accelerates despite rising price of coal, supply shortages, power rationing
Profits at China’s industrial firms jumped 16.3 per cent year on year to 738.74 billion yuan (US$115.7 billion), quickening from the 10.1 per cent gain in August. China’s industrial sector has been hit by the surging price of coal, supply shortages and power rationing triggered by coal shortages due to emission reduction targets

Chinese economic statecraft: what to expect in the next five years?
Chapter from ‘Storms Ahead: the Future Geoeconomic world order’ on the expectations from the next five years of Chinese economic policy, published on 27 October 2021.

Evergrande’s crisis puts Hong Kong-China debt restructuring accord to the test before ink runs dry on pilot agreement
Hong Kong and China signed an agreement on May 14 to facilitate the cross-border debt restructuring   Shenzhen, Shanghai and Xiamen were selected as three cities in mainland China for the pilot scheme

podcast : Victor Shih on Evergrande
China’s real estate giant Evergrande is in crisis. Having accumulated more than 300 billion USD in debt, Evergrande – one of the largest property developers on earth – is on the brink of collapse. On October 4, trading of Evergrande’s shares was suspended on the Hong Kong stock exchange after its shares plummeted in response to a missed interest payment. It has since resumed work on multiple infrastructure projects, but its future remains unclear. What has caused this pressure on Evergrande? What will its greater impact be, and how will the Chinese government deal with it? In this podcast, MERICS Director of Communications and Publications Claudia Wessling asks Victor Shih of UC San Diego, an expert on Chinese banking and fiscal policies.

Evergrande crisis: a third of China’s developers may face pressure with US$84 billion in debt maturing by end of 2022, S&P warns
More than half of rated Chinese property developers have junk-rated debt, S&P says   Risk of default is ‘real’ as massive pile of offshore, onshore debt set to mature by December 2022   Another sign of strain is commercial bills, effectively “I owe yous” (IOUs) issued by Evergrande and other developers.  The total amount of outstanding commercial bills by rated developers increased by more than 30 per cent to about 125 billion yuan in 2020 as developers have turned to them amid the tight financing and restrictive regulatory environment, S&P said. The risk to developers is manageable, but suppliers and service providers could stop taking the bills if things worsen, the ratings company said.   “In a more extreme scenario, non-payment risk of developers could cause construction suspension, putting a hard stop to developers’ cash flows. Project delivery and revenue booking would deteriorate rapidly, hitting the credit metrics of developers,” S&P’s Chow and Liang said. “The affected general contractors and suppliers may then stop paying their own suppliers, or stop work for other property developers, causing spillover effects.”

Is Evergrande China’s Lehman Moment?
We have already seen signs of distress in China as its massive real estate bubble bursts. It seems that the world’s second-largest economy is experiencing its own Lehman moment, shockingly reminiscent of what the U.S. experienced leading up to the Great Financial Crisis. The real estate bubble was fueled by excessive leverage and speculation propped up by governmental support of local housing markets. In many ways, the situation in China is even more precarious than was the case in the U.S., because so much of its economy is tied to housing and construction.   There are an estimated 65 million vacant housing units in China, about 20% of the total. Recent research notes that over 90% of Chinese households are already homeowners, while 20% own more than one home. Just as we saw when the U.S. real estate bubble surfaced, the widespread belief that real estate is always a safe investment led many Chinese families to buy additional homes with the hope of flipping them for profit. However, speculation has pushed prices beyond the reach of many people in a country where average annual wages are under USD 15,000 per person. There are also fewer potential buyers, with the 2020 Chinese census showing the slowest population growth in half a century. On top of that, China’s households have borrowed over $6.4 trillion in the last six years, an increase similar to what the U.S. experienced leading up to the 2008 real estate market collapse.   Evergrande had sold 1.6 million units of undelivered apartments on a pre-order basis to Chinese consumers after traditional lending vanished. Should Evergrande fail, which seems highly likely, it will be the largest real estate company default in history with $300 billion in debt. Private companies that were previously distressed have the opportunity to re-emerge in the public domain, possibly through merging with a SPAC. Their ability to become reaccepted by the public market once they’ve fixed their balance sheet problems is a natural progression back to an overall winning strategy. The attractiveness of investing in both public and private post-distress equities in this part of the cycle will likely remain very interesting for the medium-term.    In the meantime, it would be wise to also keep an eye on China due to the risk of systemic fallout from its bursting real estate bubble.

China urges property developers to pay international debts
China’s economic planning agency has encouraged national companies to repay their international debt a few days before another payment deadline for real estate developer Evergrande, after barely avoiding last week’s default. The National Development and Reform Commission (National Development and Reform Commission) said late Tuesday that businesses need to be prepared to pay offshore bond principal and interest to maintain their reputation and market order.  The agency didn’t mention the company by name, but the announcement was made by Evergrande, a developer with more than $ 300 billion in debt and who began to embody concerns about the sector. Last-minute interest payments With Friday offshore bonds.The company’s number of peers has been the default in recent weeks. Modern Land is an official filing in Hong Kong on Tuesday, Payment failed $ 250 million interest and principal payable the day before, following defaults from Fantasia When Cynic this month.

Alibaba, Tencent, Meituan push Hong Kong stocks lower as tensions in US-China relations resurface
Hang Seng Index falls 1.5 per cent for the biggest drop in three weeks, with Chinese technology stocks leading the pack of decliners    Hearing by US lawmakers raises fear that a law is in the offing to possibly get Chinese companies booted from American exchanges

China maps path to carbon peak, neutrality under new development philosophy
Around China

Chinese authorities on Sunday unveiled a guiding document on the country’s work to achieve carbon peaking and carbon neutrality goals under the new development philosophy, laying out key specific targets and measures for the coming decades.

EU tech rules should also curb anticompetitive practices by cloud computing providers, study says
Amazon Web Services was the leading provider in the second quarter, followed by Microsoft Azure and Google Cloud, according to Statista   The new EU rules should also cover software licensing, the report said, with respondents citing unfair terms imposed by some of the big software companies

China amends Anti-Monopoly Law for the first time amid tech crackdown, increasing penalties and regulatory control
China’s draft amendment for the 13-year-old Anti-Monopoly Law calls for greater control of the tech sector and increases regulators’ discretionary power    The amended law is expected to take effect sometime in 2022   ncreased scrutiny of the technology sector is explicitly spelt out in some parts of the amended law.  Article 37, for example, specifies that the enforcement priority for merger reviews will be areas that concern people’s livelihood, finance, technology and media.   “It is quite unusual to incorporate enforcement priorities in a national law,” University of Hong Kong’s Zhang said.  It also says that businesses shall not “exclude or limit” competition by abusing data, algorithms, technology, capital advantages or platform rules. A dominant player engaging in these activities is considered to be abusing its market power, according to the law.

China updates rules on real-name registration online in crackdown on schemes to revive banned user accounts
The Cyberspace Administration of China has proposed updating regulations on how users of domestic online platforms identify themselves    This was designed to prevent owners of banned social media accounts from registering under a similar name on another platform

US government bans China Telecom from operating in the country
Washington is barring a major Chinese state-owned telecommunications firm from operating in the United States over national security concerns — an action that threatens to once again increase tensions between the world’s two largest economies.     The US Federal Communications Commission on Tuesday said it has ordered China Telecom to discontinue US services within 60 days, citing findings that the company’s American subsidiary “is subject to exploitation, influence, and control by the Chinese government.”  The company is also “highly likely to be forced to comply with Chinese government requests without sufficient legal procedures subject to independent judicial oversight.”

BelOrta Conference back in China
The Belgian cooperative has shipped its first container of the new Conference pear season to the Chinese mainland

How Hard Could China’s Tech Crackdown Hit Luxury in 2022?
Recent cancellatons and arrests indicate that Beijing regulators are far from done with their crackdown on the entertainment sector.  Brands need to keep a close eye on the ongoing tech crackdown, which could have a huge impact on their marketing activities in 2022.   With the National Congress a little under a year away, the year ahead is likely to be complicated for foreign and domestic brands alike.

How BRI Debt Puts China at Risk
Critics pushing the “debt trap diplomacy” slogan often downplay the fact that BRI debt is as much a problem for China as it is for borrowing countries   This trend indicates two things. First, problematic BRI projects have attuned Beijing to the risk of international infrastructure financing. Second, and more importantly, with growing concerns over its own domestic debt, Beijing has less appetite for overseas lending. Indeed, since the  National Party Congress in late 2017, Beijing has taken a more aggressive stance in tightening credit and restricting PPP projects as well as their related lending activities. Likewise, Chinese banks became more selective with overseas lending after China’s financial regulators imposed more due diligence requirements on new loans and Chinese firms were told to deleverage, particularly their unproductive overseas assets. It was no coincidence that at the Belt and Road Forum in 2017 and 2019, Beijing stressed the importance of “quality” rather than “quantity” in BRI projects.   With challenges both at home and abroad, Beijing seems to have realized that infrastructure diplomacy is easier said than done. However, while China has already begun repositioning the BRI for a more credit constrained future, Washington’s approach and policies appear to remain stuck in the past, with an undue focus “debt traps” or “debt for equity” swaps. In talking with the Global South, Washington should highlight the unsustainability of the BRI and the repercussions of copying China’s growth model, while offering support to help developing countries make efficient and accountable infrastructure investments. In talking with Beijing, Washington could feed Xi Jinping’s desire to demonstrate that China is a “responsible great power” and emphasize why walking away from BRI’s infrastructure fueled and debt-laden past could be similar to what Tocqueville called “self-interest rightly understood.”
With Evergrande’s looming collapse and Beijing’s heightened vigilance against asset bubbles, the time is ripe for Washington to adopt a new narrative on BRI.

Greece woos investments on Chinese foreign minister’s visit
Greek officials sought to expand Chinese investment in the country during talks on Wednesday with China’s Foreign Minister Wang Yi, that also touched on regional geopolitics, sports and minorities.   Greece recently emerged from a brutal decade-long financial crisis that wiped out a quarter of its economy and has been eager to attract international investments. China, which is constructing ports, railways and other infrastructure in dozens of countries around the world under its Belt and Road Initiative, is already heavily involved in Greece.    The Chinese company Cosco Shipping now owns 67% of Greece’s Piraeus Port Authority, one of the largest ports in Europe, after Greek lawmakers ratified the sale of a 16% stake in the company on top of the 51% Cosco already held.    Greece also granted Cosco another five years to follow through with investments that it had promised to make as part of its deal to buy a majority stake in Piraeus.

COSCO raises stake in Greek port
China COSCO Shipping Corp, the country’s largest shipping group, announced on Monday that it has completed an additional 16 percent stake acquisition in the Greek port of Piraeus, marking a fresh step in turning the port into a major international transit hub for products and services between Asia and Europe.

Grandstanding or sincere? China’s move to join the CPTPP
Dismissed as grandstanding by skeptics, Aya Adachi says China’s recent application to join Asia-Pacific’s newest and most liberal free trade club could well be the real deal.

G20 must coax a reluctant China back into the fold
Nowadays, China seems less interested in multilateral engagement more broadly    However, the world cannot end the pandemic, address the climate crisis or ease the energy-supply emergency without China’s active and positive contribution to the G20    In fact, nowadays China seems less interested in multilateral engagement more broadly. It used to participate actively in multilateral initiatives, especially on finance and fiscal policy. But cooperation is now particularly difficult in these areas, and throughout Italy’s G20 presidency, China has seemed to lack much motivation to try.    This is a serious problem. We cannot end the Covid-19 pandemic, address the escalating climate crisis, or ease the energy-supply emergency threatening to derail the global economic recovery without China – specifically, without a China that contributes actively and positively to the G20. China also has specific demands regarding transparency and disclosure. The other G20 countries – including Indonesia, which will begin its presidency next year – should take note of this in attempting to bring China back into the fold.   As for Italy, it has done well during its G20 presidency to keep focus on common goals and limit the pandemic’s impact on proceedings. It has also brought tangible advances, on issues such as open trade, international aid and gender equality.   Now, as its presidency winds down, Draghi should shore up those all-important personal relationships, especially at the private dinner. And, like at any reunion, it should end with a “family photo” of leaders who were glad they made the trip.

Semiconductor giant TSMC’s decision to cooperate with Washington’s chip data request fuels anger in China
The US government said its request was aimed at finding out reasons for the chip shortage but the move has raised alarm bells in China     One account on Chinese social media Weibo described TSMC’s agreement to hand over information as ‘kneeling to the US’

US official chides Xi Jinping for his anticipated absence from the G20 and COP26 meetings
‘President Xi has chosen not to attend these summits. He‘s chosen not to leave China at all in calendar year 2021,’ National Security Adviser Jake Sullivan says     Joe Biden has yet to meet face-to-face with Xi since becoming US president and wants to by the end of the year

Japan’s foreign minister says ties with China remain ‘in a difficult situation’
Toshimitsu Motegi expresses hope that the relationship will improve, stressing need for communication and dialogue     At the same forum, his Chinese counterpart Wang Yi warns that issues like Taiwan are ‘serious and sensitive’

European lawmakers to visit Taiwan next week to meet with Taipei officials
Trip comes as EU-China relations fray and Taipei lobbies for a bilateral investment agreement with the EU    An EU trade representative, though, says ‘there is no convincing economic rationale’ for such a deal

Xi Jinping and Emmanuel Macron speak for first time since Aukus alliance was announced
Chinese leader tells France’s president that the EU should maintain its autonomy in foreign policy   Macron says he hopes the delayed China-EU investment deal will soon be approved, according to CCTV

Germany Inc.’s China syndrome
Ignoring Beijing’s human rights abuses is becoming increasingly difficult for Berlin.   Among the BDI’s guidelines for new European foreign economic policy, for example, there is a call for a stronger euro relative to other currencies, arguing this “would provide Europe with more weight in the international payments system and global financial markets.”   Nils Schmid, the SPD’s foreign policy spokesman in the German parliament, argued Germany needs to push harder within the EU for a common stance on China — one that isn’t necessarily in opposition to the U.S.’s but that puts European interests first.   Germany’s incoming government needs to “strengthen the foundations for the ability to act — on the national as well as the European level,” he said. “Then there will be no need to declare a new Cold War with China.”

Chinese pressure blamed as Xi Jinping book events are cancelled in Germany
Lectures on the book, co-authored by a pair of German journalists, were pulled at the last minute. One cancellation came after a Chinese consulate intervened    The embassy in Berlin slammed what it saw as irresponsible remarks but did not deny the chain of events as reported   The abrupt cancellation of events discussing a German book on Xi Jinping has raised fresh concerns about Chinese interference in European academia, prompting Beijing’s embassy in Berlin to defend Confucius Institutes. Two separate events designed to promote the book on the Chinese president at Confucius Institutes in German universities were abandoned, various German media reported over the weekend. In one instance, the cancellation came after the local Chinese consulate waded in.  The book, titled Xi Jinping – the Most Powerful Man in the World, is authored by Stefan Aust, a journalist who once served as the editor-in-chief of the weekly news magazine Der Spiegel, and Adrian Geiges, a veteran China correspondent for Hamburg-based weekly current affairs magazine Stern.   Concerns about Chinese influence have also seeped into the political debate in Germany. As part of its manifesto for last month’s federal election, the German Free Democratic Party – now in coalition talks to form the new government – said it would ensure Confucius Institutes in the country were independent from the Chinese government.  And in July, German Education Minister Anja Karliczek praised the University of Hamburg’s decision to shut its Confucius Institute. Karliczek said Germany should be “less dependent” on such outfits and doubled the allotted government funding for Chinese studies.    While the Chinese government denies that Confucius Institutes are foreign missions, they have strong links with official channels.   China researchers elsewhere in Europe have voiced alarm over efforts to stifle criticism. Some European think tanks and academics have been targeted with sanctions, while others face attacks in state media or from diplomats.

Chinese censors target German publishers
As China tries to expand its influence abroad, it’s going beyond politics and business to target literature and publishing. German publishers are among those that have been targeted by censors, as DW has learned.

Chen Po-wei Is the Latest Victim of Taiwan’s ‘Recall Revenge’
Another progressive young politician was recalled, part of a broader wave of recalls backed by the opposition KMT.    Since Chen’s recall, there has been some discussion of whether there will be further “revenge recalls” in the future. At the same time, even if the KMT does intend to use recall votes to target opponents – especially young progressives – going forward, targeting Taiwan’s most prominent youth politicians may not help a party that hopes to turn its image around to win back the support of young people. The recall vote against Chen was termed a “generational conflict” in some domestic political discourse. Similarly, backing and fielding politicians with as checkered political records as members of the Yen family may not exactly help the KMT’s reputation either.    A by-election will subsequently be held to determine who fills Chen’s seat, at a date to be decided. This, too, is likely to be fought over between the pan-Blue and pan-Green camps.

China updates rules on real-name registration online in crackdown on schemes to revive banned user accounts
The Cyberspace Administration of China has proposed updating regulations on how users of domestic online platforms identify themselves     This was designed to prevent owners of banned social media accounts from registering under a similar name on another platform

China’s education, tutoring industry posts 10 available jobs for every applicant amid crackdown, study finds
K-12 tutoring companies have ‘transitioned their businesses’, but millions of jobs were affected after Beijing said firms ‘violated the laws of education’     CIER index that gauges China’s labour market also shows that jobseekers are leaving some competitive top-tier job markets for greater stability in lower-tier cities

Can Hong Kong’s Li Ka-shing, the tycoon dubbed ‘superman’, save the planet with ‘edible plastic’, seaweed food cartons?
Li’s Horizons Ventures says its investments in sustainability projects can soon be scaled up to production level and make a real impact on the global campaign to save the environment    The company will co-operate with entrepreneurs in Hong Kong to enhance their competitiveness in a fast-changing world

China’s e-commerce platforms ban keyword search for Squid Game-related products, but merchants find workarounds
An online check yielded no results for a keyword search using ‘Squid Game’ on shopping platforms Taobao, and Pinduoduo    Merchants have devised workarounds for consumers to find Squid Game-related goods on these platforms using keywords such as ‘squid mask’ and ‘Halloween costume’

Can Japan Be a Bridge Between AUKUS and ASEAN?
Positioned on the outside of AUKUS, but with friendly ties will all countries involved, Japan can reassure ASEAN about the new pact.   Should Japan execute the task, it will also solidify Japan’s position within its alliance with the United States as well as among the Quad. Even though in military power and technology the United States is way above Japan, Japan will be seen as a rare partner that can communicate and maintain the trust of Southeast Asians, and thus significantly helpful to translate the United States’ and the Quad’s interests in the Indo-Pacific to be better understood by ASEAN countries.

China-US tension: spat escalates after Blinken calls for UN support of Taiwan
Observers say secretary of state’s comments are a sign of the US upgrading its support for Taiwan while not yet signalling a major policy change   Blinken says letting Taipei take part in international bodies is consistent with US one-China policy, academic argues that policy is becoming an ‘empty shell’

US is ‘years behind’ China on hypersonic weapons, Raytheon head says
Defence contractor CEO Gregory Hayes says the superfast technology is the most destabilising threat to the homeland     While the Pentagon has a number of programmes in development, the Chinese military has actually fielded the weapons

China’s ‘Zero COVID’ Strategy Puts Several Cities on Lockdown
With the Beijing Winter Olympics less than 100 days away, the country is on high alert to halt the coronavirus spread.

Bottled water magnate Zhong Shanshan tops Hurun China Rich List with US$60.6 billion as mainland property tycoons drop out of top 10 for first time
Nongfu Spring founder takes the top spot, as Beijing’s crackdown on the property sector delivers a blow to the wealth of real estate tycoons    Well-known businessman Li Ka-shing ranked eighth with a fortune of US$33.4 billion as the list expanded to include Hong Kong, Macau and Taiwan for the first time
Bottled water magnate Zhong Shanshan tops Hurun China Rich List with US$60.6 billion as mainland property tycoons drop out of top 10 for first time

Hong Kong passes new film censorship law
Hong Kong’s legislature has passed a new law banning films deemed to violate China’s national security interests, the latest blow to freedom of expression in the territory.

China Public Holiday 2022 Schedule Released
The State Council released the official China public holiday 2022 schedule through its Circular of the General Office of the State Council on the Arrangement of Public Holidays in 2022 (see here for the official source) on October 25, 2022.   As is traditional, the holiday schedule features two major week-long holidays (often referred to as ‘Golden Week’): Spring Festival (also known as Chinese New Year) and the National Day holiday. In 2022, Spring Festival falls between January 31 and February 6, and the National Day holiday falls between October 1 and 7.  Foreign human resource managers should note that Saturdays and Sundays are often marked as additional official workdays in China to compensate for long holiday breaks. For example, in 2022, Saturday, January 29 and Sunday, January 30, are designated as official workdays to partially offset the seven days off for Spring Festival. Private companies in China, however, have the right to determine their own schedules – that is, allow for additional days off – so long as the official holiday calendar is maintained.

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