Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – October 4, 2021

China’s consumption story steadily evolving
China’s consumption story is evolving. Rising incomes still matter, but the primary feature of the next decade may very well be the impact of sweeping demographic and social change that is coinciding with the rapid march of technology. To find the consumers who will drive China’s growth, you need to look at very different groups of individuals. So who are the consumers who are key to growth? Jonathan Woetzel and Jeongmin Seong highlight five consumer shifts that matter.

How China is bidding for global intellectual dominance
‘Geointellect’ is an emerging manifestation of China’s global influence. I coined this term to denote a country’s dominance in higher education, research and innovation paradigms across geographies. Though facilitated at times by soft power, geointellect is differentiated, inter alia, by its rationale to establish and consolidate China’s global intellectual dominance.   Its focus is on vigorously enhancing the visibility of Chinese academic and research institutions and of disciplines – inclusive of concepts and theories – which exhibit Chinese characteristics. Thus, while soft power is ‘a means to success in world politics’, geointellect symbolises the crown of knowledge.   Moreover, geointellect is constructed, unlike soft power, which is tethered to others’ perceptions and opinions and is, as China expert David Shambaugh points out, “earned”. Succinctly, it is to national rejuvenation what a spoke is to a hub

China’s local authorities take a hard look at Evergrande’s projects to ring fence any collapse from hurting their jurisdictions
A community in Guangzhou Huangpu district ceases Evergrande’s contract for local shantytown renovation project    At least nine provinces demand Evergrande affiliates to transfer project revenue to government-managed bank account to avoid the funds being used for other purposes or businesses

China’s power crisis: will climate, economy and public trust prove too tough to balance?
With power to factories cut in two-thirds of the country just before winter, millions of residents are in a panic over surviving without electric heat  The tension between the economy and climate, simmering since Xi’s 2060 carbon neutrality pledge, is now hitting home and fuelling public skepticism “While energy consumption control targets likely play a role in some provinces, their role is being exaggerated to attack the climate policies,” said Lauri Myllyvirta, lead analyst at Centre for Research on Energy and Clean Air. “There is absolutely no reason why suddenly about every province decides that they have to cut power to meet this energy control targets, including those that are on track in the first half year.” Since Xi pledged last September to reach carbon neutrality by 2060, the tension between the economy and climate has been simmering. Officials from major coal producer Inner Mongolia, for example, say that the region’s high emissions are inevitable given its role in driving China’s economic engine. Fossil fuel executives also argue that they are important in safeguarding China’s “national energy security” during events such this power crisis. “There are so many voices out there now made by different interest groups,” said Qin Yan, lead carbon analyst for Refinitiv. “Some people arguing for coal’s role to ‘secure energy’ forget the other side of the story, that coal is associated with so much risk now that it is important for the power sector to move away from it.” Exaggerating how climate policies worsened the power crunch could affect China’s efforts to win public support for its net zero campaign. Overzealous efforts to clean up air pollution around Beijing in 2008 and an initiative to replace coal heaters in homes with gas and electricity in 2017 have led to rare bouts of public unrest from citizens discomfited by the changes.   Wang, for example, lost a coal furnace in the 2017 campaign and all the state-owned coal sellers have also disappeared. But he still has his fireplace and is planning to take matters into his own hands to procure some old-fashioned fuel for this winter.  “If I have to choose between environmental protection and winter heating, of course, I choose the latter,” he said.

China is in the midst of a power crunch and the Evergrande crisis. But not everyone is panicking — yet
Ninety million empty flats and a generation squeezed out of the housing market in big cities.    An economy heading for a slowdown that’s currently growing too fast for power plants to keep up.     It might look like China is headed towards disaster, but crystal ball gazing in the world’s most populous country has never been easy.    In recent weeks, some commentators have pondered whether the collapse of the world’s most indebted company, Chinese property giant Evergrande, will doom the global economy.  Evergrande owes $400 billion, and some have even speculated its downfall could be the world’s next “Lehman Brothers moment”.

Evergrande shares suspended as possible sale of property management unit looms
Hopson Development reportedly considering buying controlling stake of Evergrande’s property management unit, according to mainland Chinese media report     Shenzhen-based Evergrande has more than US$300 billion in liabilities

China Evergrande to raise $5 billion from property unit sale – Global Times
Distressed developer China Evergrande will sell a half-stake in its property management unit to Hopson Development for more than $5 billion, Chinese media said on Monday, after both Evergrande and Hopson requested trading halts ahead of a major transaction.

Another billionaire helps China’s Evergrande with stake purchase
Chus are the latest billionaire family to help out their pal, the Evergrande founder, with a 51 percent stake purchase offer.   Hopson Development Holdings Ltd., a Hong Kong-listed real estate firm controlled by the billionaire Chu family, has agreed to buy a controlling stake in Evergrande’s property services business, Cailian reported Monday, citing people it didn’t identify. Evergrande Property Services Group Ltd. said in a statement that its shares were halted on Monday due to a pending announcement of a possible offer for shares of the company. Hopson declined to comment.

Evergrande: Could it be the end of the road for the world’s most indebted property developer, as US$37 billion bill comes due?
There is mounting fear about developer’s ability to repay piling debt against the backdrop of muted property sales and efforts by Beijing to rein in the property sector     The company ‘is no longer a viable business’, say TS Lombard analysts

China’s switch to financing overseas renewable energy projects from coal-fired power plants to be slow and challenging
President Xi Jinping said last month that China will no longer build new coal-fired power projects abroad, and will increase support for low-carbon projects     In Southeast Asia, an immature regulatory environment and insufficient power grid investment are seen as hurdles to investment despite a clear preference for renewable energy projects

Chinese AI gets ethical guidelines for the first time, aligning with Beijing’s goal of reining in Big Tech
China released the country’s first set of guidelines on AI ethics, emphasising user rights and data control    The guidelines are part of China’s goal to become the global AI leader by 2030, but also align with Beijing’s effort to crack down on Big Tech influence

China tightens political control of internet giants
After flourishing for two decades with little regulation, China’s internet industries face a future of tighter control by the ruling Communist Party and pressure to pay for its tech ambitions, social welfare and propaganda

Lordstown Sells Ohio Factory To Foxconn To Manufacture Its Own EV
As a part of the deal, Lordstown will sell the factory for $230 million and will also sell $50 million worth of shares to the manufacturing giant.

The Bull Case For Investing In China
For a lot of traders, latest regulatory actions by China have been unnerving. It has sparked fears that the nation has made a sudden and dangerous coverage shift that’s anti-business and anti-investor.    The gradual slide in China’s inventory market from its February peak sharply accelerated within the third quarter. Traders appeared to change from calmly decoding regulators’ actions as solely targeted on a couple of large tech corporations to alarm that no trade is remoted from a sudden rush of regulatory reforms. Fears unfold that modifications geared toward reining within the extra leverage of property builders, akin to Evergrande, might carry the danger of a monetary and shopper meltdown.   Timing strikes in any market is tough and China will be much more difficult. There may be threat that the regulatory rollout could proceed, property costs might fall and undermine shopper confidence, to not point out the potential for Covid-19 associated considerations and the tense US-China relationship to weigh on the expansion outlook.   But, the potential for the regulatory depth to ease with out leaving important financial injury suggests the steadiness of dangers could possibly be tilted to the upside from present ranges. Excessive volatility is one cause why having a long-term perspective is very necessary for rising market traders. Lengthy-term traders in rising markets akin to China know that endurance could also be rewarded with sturdy positive aspects.

The West’s ‘Hong Kong narrative’ was wrong. But so is Paul Chan’s
The financial secretary’s report, meant to showcase Hong Kong’s recovery from the protest chaos of 2019, laid bare the extensive damage wrought, blaming it in part on US interference   But its claim of a return to peace and economic health is an overstatement; there is still much to be done

Biden’s new China trade plan echoes Trump’s, but assumes Beijing won’t change
.S. Trade Representative Katherine Tai connected Monday volition question caller talks with China implicit its nonaccomplishment to support promises made successful a “Phase 1” commercialized woody struck with erstwhile president Donald Trump, but volition not prosecute “Phase 2” negotiations implicit Beijing’s authorities subsidies and different structural issues.     Senior Biden medication officials said Tai volition prosecute a virtual gathering with Chinese Vice Premier Liu He to sermon the commercialized woody “soon” portion starting a “targeted” process to revive exclusions for definite Chinese imports from punitive U.S. tariffs.

US-China trade war: Washington set to exempt some products from tariffs
Companies expected to be able to lobby for exemptions from import duties on Chinese goods, although criteria yet to be revealed   US Trade Representative Katherine Tai to give speech setting out the Biden administration’s approach to trade with China   Our objection to the previous administration’s approach [to trade with China] was that it really did not build on our strengths, whether that was at home or with our partners and allies,” the second administration official said. “Their approach was done in a way that was at times chaotic, including hurting select sectors of the American economy.” The tariff exclusion process will allow companies to lobby the government to be exempt from the import duties imposed on two-thirds of all Chinese goods during the trade war  . The official would not elaborate on the criteria against which such appeals would be judged, but said that it was designed to ensure that “trade policies are reinforcing our domestic policies”. In her talks with Liu, Tai is also expected to raise US concerns about China’s industrial policies – systemic issues that the Biden administration does not believe were adequately addressed under the purchases-focused phase one deal. But despite the US government’s continued concerns on that front, it was not seeking negotiations for a phase two agreement, the official said. News of the talks came as China continued to rail against Washington’s use of punitive tariffs, with Chinese Commerce Ministry spokeswoman Shu Yuting saying last week that “under the current situation of increasing global inflationary pressure, tariffs have caused great pressure and losses to enterprises and consumers of the two countries”

podcast : Biden administration unveils four-part China trade policy
The Biden administration will outline its latest, four-part China trade strategy later on Monday. CNBC’s Kayla Tausche joins “Squawk Box” to break down the details.

The Geopolitical Conquest of Economics
Although economics and geopolitics have never been completely separate domains, international economic relations were shaped for 70 years by their own rules. But the rise of China and its growing rivalry with the United States have brought this era to an end.

China-EU relations: Europeans seek face time with President Xi Jinping to help soothe ailing ties
Chinese and European Council presidents are expected to hold talks as early as this month, according to an EU official     Since their last discussion, tension has risen over human rights and economic practices

Next German leader should put aside ideological differences to work with China, says ambassador
Wu Ken tells state media that Germany will be an important partner no matter who forms the next government    Ambassador also praised Chancellor Angela Merkel for ‘open mind’ towards China

‘She listened’: Chinese liberals reflect on conversations with Angela Merkel
Outgoing German chancellor met academics and dissidents on nearly all her trips to China    Law professor says discussions showed her personal concern for human rights and legal issues

Op-ed: Biden needs to act now to shore up economic foreign policy to restore confidence in U.S. leadership
The Biden administration should act to correct its post-Afghanistan foreign policy malaise by embracing economic agreements that rally its global partners and restore confidence in U.S. leadership.  
That effort should begin, but not end, with an embrace and expansion of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP, to include the United Kingdom (which has applied to join) and other European partners (who have not)

Japan’s Position on the CPTPP Applications of China and Taiwan
With some bold yet skillful diplomacy, Japan’s next government has a real diplomatic opportunity.  
China’s application is, in the first instance, a matter for the CPTPP chair. In 2021, this is Japan, to be followed by Singapore and   For China, too, the negotiations will hardly be straightforward. In particular, state-owned enterprise reform and the elimination of domestic regulations are just two of a multitude of aspects that clash with China’s socialist system. The most valuable aspect for Beijing is to show the country and the rest of the world that it has applied for membership and is engaged in ongoing accession negotiations. That may also be true for the Tsai administration. For the time being, the fact that Taiwan has applied for membership and is moving forward with negotiations is important in and of itself.  The U.S. is using climate change as an opportunity to cooperate with China. Likewise, if the Japanese government can seize this rare opportunity of China’s application to join the CPTPP to boost its dialogue with China, and if it can occasionally show a willingness to engage in dialogue and discussion about China’s socioeconomic system and other issues related to the CPTPP, the new Kishida government will enjoy significantly expanded scope for diplomacy. The same applies to Taiwan. China’s inevitable opposition to Taiwan’s accession means that Japan cannot ensure Taiwan’s accession alone. The Japanese government will need to engage in dialogue and coordination with Taiwan and other member countries, treading more cautiously and yet at the same time more boldly than ever before.

FOCUS: Japan’s Kishida to promote TPP, economic security with China in sight
China has recently filed an application to join the 11-member TPP, prompting Japanese officials to voice doubts about whether the emerging powerhouse can meet the high standards set in the pact, including detailed rules over state-owned enterprises.   “It is important not to bend existing rules to include China. This will be a test of whether a rule-based international order can be maintained,” Oba said. “If the rules are relaxed, then the CPTPP that calls for high-level and comprehensive liberalization will fall apart

One-third of China’s Belt and Road projects facing major problems: Report
At least one-third of China’s ambitious Belt and Road Initiative (BRI) projects have run into major implementation problems due to factors such as corruption scandals, labour violations, environmental hazards, and public protests, Radio Free Asia reported citing a study by AidData.

US ‘concerned’ by China’s incursion into Taiwan’s defence zone
The US has said it is “very concerned” by China’s “provocative” actions after Taiwan claimed some 93 Chinese military planes had flown into its air defence zone in the past three days.

Taiwan says dozens of Chinese planes entered defence zone
Taiwan says a total of 39 Chinese military jets flew into its air defence zone on Saturday – the largest incursion by Beijing to date.

In Three Days, Nearly a Hundred Chinese Warplanes Swarmed Around Taiwan
The Chinese air force flew a record 93 warplanes over the span of three days into the air space surrounding Taiwan. Thirty-eight on Friday. Thirty-nine on Saturday. Sixteen on Sunday.

China’s plan to block export of ‘core’ data raises questions over implementation
A draft regulation by the Ministry of Industry and Information Technology seeks to protect core domestic technology data from leaving China’s borders   The proposed rules, which define data according to their level of importance, lack clarity, experts said   The rules specify that data should be labelled as “important” if its leakage, tampering or illegal use is likely to threaten China’s “politics, land, military, economy, culture, society, science and technology, cyberspace, ecosystem, resources and nuclear security”. Data that affects that country’s overseas interest, as well as its data security in space, polar regions, deep sea and artificial intelligence, is also deemed important.  Any information that poses a “serious threat” to these areas will be considered “core”.  Moreover, the draft regulation categorises information as “important” if it can affect the “development, production, operation and economic interest of industries”, including the telecoms sector. Data is classified as “core” if its export can significantly impact major enterprises, information infrastructure and other important resources in China. Only data whose leakage, tampering or illegal use will have “little impact” on the society is classified as “ordinary”. It is not always clear what counts as “little impact”, Xiong Dingzhong, partner at Beijing-based TsingLaw Partners, told Chinese media Southern Metropolis Daily, since there are no quantifiable standards. In reality, this means that authorities are likely to have the final say.  “This will be one of the biggest difficulties for regulating data in the future. Regulators have huge discretionary power in law enforcement,” said Xiong.

China’s population crisis is here to stay, but is Beijing doing enough to limit the fallout?
Births in Anhui province this year may only reach 530,000, or about half the number it recorded in 2017, according to local authorities.    The situation is indicative of China’s larger demographic crisis, but Beijing has woken up to the challenge and is encouraging more births   In short, China’s family planning policy has taken a U-turn in 2021 from punishing births to encouraging couples to have babies, as the demographic crisis is too obvious to be ignored.  But the experience of rich economies, particularly neighbouring Japan and South Korea, show it is extremely hard to boost births in a competitive society. It is much easier to find a couple with no kids in a large Chinese city like Beijing and Shanghai than to meet a couple with three. In retrospect, China’s infamous one-child policy was implemented for too long and was too harsh. It was justified by the blind belief the population was excessively big. Bureaucratic inertia from China’s family planning apparatus helped prolong the mistaken policy when facts on the ground had changed. Looking forward, China’s shifting demographic picture will put pressure on its economic prospects and property prices for years to come.

Media that get the Meng Wanzhou case right
While the mainstream Canadian media have gone full on nationalistic and anti-China, its left-wing press has been offering much more nuanced and sophisticated analyses on US extraterritorial overreach, Chinese impunity and Canadian complicity China is one of the media’s favourite topics right now, The piece concludes: “While China’s arrest of the two Michaels may have been spurious, Canada’s arrest of Meng Wanzhou was pretty flimsy too … Canada’s foreign policy blind spot isn’t China: it’s the US.”
Canadian Dimension points out that it was Washington that drew first blood. “The supposed crimes of Meng [Wanzhou] were committed outside the US. The statement of facts affirms that this was the case and reveals that the US charges arose because Huawei’s economic transactions were denominated in US dollars ‘that cleared through the United States’. The Tyee, an online news magazine, points out the obvious: “This is classic big-power realpolitik, and Canada has long benefited from being the protected sidekick of the biggest power of the past 80 years. This time, though, Canada took the kind of kicking the Americans are used to dishing out to weak nations.”By and large, I have to say the lefties in Canada have generally got it right this time. It was playing the “janitorial role” that got Canada into so much trouble over the Meng case. Now, Ottawa must decide whether it wants to double down with Washington to take on China, or to normalise relations with the Middle Kingdom.

China’s ‘miracle’ economy under threat at the hands of authoritarian Chairman Xi Jinping
Despite his seemingly wholesome intentions, President Xi Jinping’s authoritarian acts could be choking China’s once prosperous “miracle” economy.    Coal. Meat. Wine. Cash. Beijing paints itself as playing a powerful game of coercive diplomacy. But the price may be a homegrown economic reckoning – with Chairman Xi Jinping’s authoritarian acts choking the nation’s “miracle” economy.  “China is turning away from the package of policies that promoted rapid growth. Under Xi, Beijing has slid back toward totalitarianism. Xi has appointed himself ‘chairman of everything’, destroyed any semblance of collective rule, and made adherence to ‘Xi Jinping Thought’ the ideological core of an increasingly rigid regimen. And he has relentlessly pursued the centralisation of power at the expense of economic prosperity,” they write in Foreign Policy.    “Objective economic analysis is being replaced by government propaganda. Innovation is becoming more difficult in a climate of stultifying ideological conformity … Xi hasn’t simply stopped the process of economic liberalisation that powered China’s development: He has thrown it hard into reverse.” That comes with economic consequences.   When it comes to the wide-reaching financial fallout of the Evergrande crisis, blame needs to be apportioned. “The property business made Evergrande’s founder and boss, Xu Jiayin, super-rich, which makes him a perfect villain in an era in which the CCP will need plenty,” notes McGregor. “It’s no wonder (Xi) is looking for rich villains and greater loyalty. He will need both”.

Is China’s “age of ambition” over?
Xi Jinping tempers the expectations and aspirations of the country’s next generation.   The ideological redirection mandates that the people subordinate their own ambitions to those of the state, demographic initiatives pressure them to form families that adhere to state goals, and the decoupling of China from the world means that the media, culture and education that many Chinese grew up loving is now considered “spiritual pollution”. For those who have known only social mobility and have come to expect the same for their children, the idea of sacrificing that advantage in exchange for a vague concept of “common prosperity” can be hard to accept. As one Shanghai-based mother explained to me about the prospect of her daughter foregoing higher education in favour of vocational work: “Despite the state’s broader goal, would it be okay with me if my daughter couldn’t receive higher education? I think the answer is no […] Maybe it’s a bit selfish, but it’s true. I’m very supportive of education equality, but only if my kid is one of the lucky ones.”   While some observers fear that China’s new shifts mark a return to the revolutionary and totalitarian horrors of the Mao era, others see China’s course as similar to that of Japan in the 1990s – rebalancing an over-leveraged economy to concentrate on consumption rather than investment, avoiding crisis by generating decades of drawn-out stagnation, but with a broadly high quality of life. In either case, the economic dynamism and emphasis on individuals’ ability to pursue their own dreams will likely continue to wane, replaced by a focus on shared, moderate prosperity. Whether for good or bad, this may mean the end of China’s age of ambition.

Alain Gillard
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