Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – October 5, 2021

China is not heading toward a market economy, often due to its own policies, report concludes
China ‘is clearly not what was envisioned’ when it was admitted into the World Trade Organization in 2001, Atlantic Council and Rhodium Group find. The nation has back-pedalled from its stated economic objectives, and the US and other market economies must protect themselves when dealing with it.

China must boost fiscal stimulus as global and domestic challenges loom
Recent Chinese economic data and global trade figures are an early warning signal that global recovery is slowing in the face of several lingering problems. China should not turn to much looser monetary policy to get faster results, given that fiscal expenditure can be increased without great damage to government finances.

What Do Chinese Consumers Really Want From E-Commerce Platforms?
Consumers under the age of 30 account for almost 50 percent of luxury purchases in China.
It is now crucial for luxury brands to make their products readily available on e-commerce and social platforms in China.     Today’s Chinese consumer expects a suite of perks, both online and offline, from luxury brands.

Fantasia, another debt-laden Chinese property developer, defaults on US$205 million bond, as Evergrande crisis rolls on
The missed payment on Monday will add to fears about the financial health of the Chinese property sector    Earlier on Monday, Fitch Ratings downgraded Fantasia’s long-term foreign currency issuer rating to ‘CCC’ from ‘B’, citing the risk of default

Evergrande: Investors kept waiting over ‘major’ deal
As investors wait for an announcement about the future of struggling Chinese real estate giant Evergrande, two more property companies are causing concerns over their ability to repay debt.

Evergrande’s most bizarre holdings? A hodgepodge of amusement parks all over China called ‘Fairyland’
The real estate giant Evergrande also owns 15 amusement park projects in China.   They’re dubbed “Fairyland” theme parks and were meant to “surpass” Disneyland.   Videos show one of its parks completely empty, while Wall Street Journal reporters found another partially operating.

China Real Estate Shares Pummeled In Hong Kong; Alibaba Falls Again, Coal Gains
Alibaba Group bounced back from the day’s lows but ended down 1.2%, amid continuing worries about potential fallout from higher interest rates globally and Beijing government policy toward heavyweights in China’s technology sector. Alibaba’s closing price of HK$135.30 was its lowest close since the company’s secondary listing at HK$176 a share at the Hong Kong Stock Exchange in 2019.  Among other China technology leaders, Tencent lost 1.5% and Meituan fell 1.3%.

China Evergrande crisis casts shadow on Chinese real estate sector’s outstanding US$232 billion offshore bonds, Fitch says
Together with Fantasia Holdings and Ronshine China, Evergrande has driven the bulk of the six downgrades that Fitch made during the third quarter in a portfolio of 50 major Asian high-yield corporate issuers     Funding costs for such issuers had risen to 7.5 per cent as of the end of the third quarter, from 6.3 per cent in the second quarter

Empty Buildings in China’s Provincial Cities Testify to Evergrande Debacle
The property giant borrowed heavily to develop in out-of-the way places like Lu’an

IMF briefed on probe into China’s ‘Doing Business’ report rankings at World Bank
The World Bank cancelled the ‘Doing Business’ report partly due to an investigation by law firm WilmerHale     It found that Kristalina Georgieva, then the chief executive of the World Bank, and other senior staff had pressured economists to improve China’s 2018 ranking

China orders coal and energy funding to ease power crisis, warns against Mou-tai and Puer tea investment
Banks and other financial institutions should prioritise lending to qualified mines and power plants so they can increase thermal coal and electricity output     The China Banking and Insurance Regulatory Commission also warned against investments in high-end consume goods such as Mou-tai liquor and Puer tea

China needs coal, and Australia has it. But something’s standing in the way
China needs to bolster its coal supply to avoid an economic slowdown this quarter, but Beijing’s icy relations with Australia could make that difficult, according to Japanese investment bank Mizuho.   The world’s second-largest economy is facing a power shortage owing to a combination of factors such as extreme weather, surging demand for Chinese exports and a national push to reduce carbon emissions.    China generates most of its electricity by burning coal but inventory of major power plants reached a 10-year low in August.

China steps up coal imports from Kazakhstan, South Africa and Mozambique amid supply crunch
China has increased purchases of coal from Kazakhstan since the start of the year as power cuts have become more frequent and coal supplies dwindle     A global coal supply shortage has sent prices soaring and contributed to an electricity crunch that has hammered businesses in the world’s No 2 economy  L ike South Africa, China’s coal trade with Mozambique was active between 2011-14, but disappeared until February this year. Monthly imports from the African nation hit 174,000 tonnes in April, the highest level on record.   All of this comes as China’s unofficial ban on Australian coal imports continues after it was imposed last October amid political tensions that had escalated last April when Canberra called for an independent investigation into the origins of the coronavirus without consulting Beijing.  In relation to thermal coal, which is at the centre of the power crisis, China only imports about 7 per cent. hile the amount is small and not critical to China’s total consumption, overseas suppliers such as Australia – and now Kazakhstan and others – play a big role in plugging shortages as they arise.  That shortage has now hit the second largest economy in the world, following years of problems in the domestic coal mining sector, such as reduced mining, closure of mines and corruption crackdowns.

podcast : Tracing the Causes of China’s Power Crunch
The past week has seen more than half of China’s provinces experience their worst power supply disruptions for more than a decade. It’s a confluence of factors ranging from new safety standards at coal mines to low rainfall, all of which constrained power supply. Bloomberg NEF’s Ali Izadi-Najafabadi discusses the factors on “Bloomberg Daybreak: Asia

What is happening to the Chinese economy?
Uncertainty around the fate of a large and heavily indebted Chinese property conglomerate, Evergrande, spooked equity markets at the end of September and prompted many market participants to question whether the much-discussed potential for the country to drive investment returns in the coming years continues to hold true. The scale of the company’s debts and the potential for it to destabilise the wider financial system prompted many investors to conjure images of a ‘Lehman moment’; a reference to the collapse of Lehman Brothers, a US bank that precipitated the global financial crisis.   But after an initial and sharp market sell-off, global equities swiftly recovered, and even when Evergrande missed a debt repayment, this did not seem to negatively impact sentiment towards global equities. He says he believes that as China moves out of the fixed income trap in the coming years, the trend, or average rate of economic growth, will be lower but will be higher quality; that is, more resilient to external shocks over the longer term, but also more volatile over the shorter term because a feature of an economy moving out of the middle-income trap is a greater reliance on consumption-led growth, where volatility tends to be higher in the short term. Lyons says traditionally one would expect to be able to address the issue by having more open stock markets, as this provides an alternative route to capital to go than into housing market investments. However, he notes that while the UK has a well-developed stock market, it does not appear to have prevented over investment in housing.    Lyons is long-term very positive on the outlook for Asian economies and Netwealth has significant allocations to China, Korea and Japan. Robert Horrocks, chief investment officer at Matthews Asia, says that as policymakers in the country try to move away from housing investment, it is likely this will reduce demand for commodities and be negative for global mining stocks. He expects policymakers in China to take actions in the years ahead to boost the income of lower earners, as this would increase the level of consumption in the economy, and this is one of the pre-requisites for an economy to exit the middle-income trap. He says one of the problems with the domestic stock market is “that it’s filled with lots of poor-quality companies”. But he notes that unless China actually stops growing, the wider Asian economies will continue to benefit.

China’s Luxury Shoppers Slash Spendings to Shop Abroad, Report Says
Buoyed by the prospects of border opening, high-end Chinese consumers are becoming less inclined to splurge domestically.

What to Make of the New Regulations in China’s Gaming Industry
China introduced new rules impacting the online gaming time allowed for minors end of August. Further, September witnessed regulatory moves and information from authorities – indicative of new red lines on gaming contents. Cumulatively, these set to change how international players operate in China’s gaming market.

Chinese hit games reach new heights amid Beijing’s crackdown on the industry
Tencent’s Pokémon Unite and Honour of Kings, as well as miHoYo’s Genshin Impact, have achieved record-breaking downloads and revenue      The Chinese government is tightening approval standards for new video games, according to industry insiders    Beijing is also setting a long list of “red lines” for game developers to avoid if they want to secure government approvals for new games in future, according to a memo from a recent internal training course organised by China’s state-backed gaming association for members, seen by the Post. Game developers have been told that video games are no longer considered “pure entertainment”, but rather a new form of art that must highlight a “correct set of values”.   Facing pressure at home, Chinese game companies are turning to foreign markets for new opportunities. In the first half of this year, Tencent, 37Games, G-bits and CMGE Technology have all seen their overseas game business grow more than 10 per cent.

Wendy Cutler on China, Taiwan, and the CPTPP
China and Taiwan have each applied for membership in the trade pact. What are the next steps – and the broader implications?    This is the key question and one on which CPTPP members will deliberate. Over the years, China has moved closer to CPTPP obligations in certain areas, including liberalizing its services market, lifting investment restrictions, and strengthening its intellectual property protection and enforcement regime. But on many other matters, including state owned enterprises, labor rights, environmental protections, and e-commerce, large gaps remain between the high-standard CPTPP rules and Chinese trade practices.    Coming six days after China’s bid, Taiwan’s formal CPTPP accession application complicates the decisions facing CPTPP members. CPTPP rules clearly stipulate that separate customs territories, like Taiwan, can be members. In recent years, Taiwan has been consulting with CPTPP members and taking steps to bring its trade regime in compliance with CPTPP rules by passing laws and implementing regulations on intellectual property protection, agriculture, and other areas.  While CPTPP countries would welcome the U.S. back to the agreement, the Biden administration has shown little interest in rejoining. President Biden has made it clear that he will not pursue trade agreements until domestic measures are implemented to build back the strength and resilience of the U.S. economy.  To date, CPTPP members have received three formal applications for accession – the United Kingdom, China, and Taiwan – but more are expected over time. Thailand and South Korea appear to be the most viable prospective candidates, but have yet to make the leap. The Philippines, Indonesia, and Colombia, among others, have expressed varying degrees of interest in the past, but their degree of seriousness is unclear. What is clear is that all prospective candidates will be closely watching developments in the U.K. accession to gain a better sense of the process, including the expectations and flexibilities of the current CPTPP membership.

China’s Belt & Road In The Mediterranean: From Giant Container Ships To Cruise Liners
The rollout of China’s Belt & Road Initiative (BRI) across the northern half of the Mediterranean Sea is typically portrayed in strikingly polar opposite terms depending on the political source. Western think-tanks and Washington/Brussels-centric media regularly depict the BRI as a plot by the Chinese Communist Party to ‘undermine European unity’, ‘divide the transatlantic alliance’, ‘create unsustainable debt burdens’, among other hyperbole.    In contrast, Chinese state media paint a picture of China and various south European countries as having ‘a bright and enduring future’, ‘each other’s most important strategic partners’, ‘ancient civilisations coming together’ among many other superlative constructs. This article looks past the political messaging to explore some of the substantive economic features of the BRI for European countries in the northern half of the Mediterranean region. A subsequent article will analyse the BRI’s impact on the southern portion of the Mediterranean in North Africa and the Middle East.

China’s economic progress, stability benefiting the world
CPC injects momentum into reform, opening-up and socialist modernization

Failure to defend Taiwan would be ‘catastrophic’ for peace in Asia, Tsai Ing-wen says
Island will do whatever it takes to defend itself, with the consequences of failure reaching beyond its shores, Tsai writes in Foreign Affairs magazine    Japanese foreign minister says Tokyo hopes Taipei and Beijing can resolve their differences, but will weigh possible scenarios ‘to consider what options we have’

Conflict risk could rise without Beijing-Taipei channel, mainland Chinese expert warns
The threat of a cross-strait clash is building without a way for the two sides to foster trust, former PLA researcher says     Growing PLA presence near island meant to deter pro-independence forces, he says

Exclusive | China, US eye further talks with Yang Jiechi set to meet Jake Sullivan
Top Chinese diplomat Yang to hold talks with US national security adviser in Switzerland, sources say
They aim to rebuild communication channels and implement consensus reached between presidents Xi Jinping and Joe Biden, one source says

China Unbound: How China’s Rise Impacts the World
The Diplomat author Mercy Kuo regularly engages subject-matter experts, policy practitioners, and strategic thinkers across the globe for their diverse insights into U.S. Asia policy. This conversation with Joanna Chiu – senior journalist at the Toronto Star, Canada’s largest newspaper, and author of newly published “China Unbound: A New World Disorder” (ANANSI 2021) – is the 289th in “The Trans-Pacific View Insight Series.”

What Does Meng Wanzhou’s Release Mean for China-US Relations?
In the short run, the relationship might become warmer, but the long-term technology competition is going to be tough.   The last reason for us to be more cautious about future China-U.S. relations is the lack of common understandings in almost all policy areas, including climate change. A one time, climate change was regarded as one notable area where we could see some real cooperation between the world’s largest economies, but now that hope is also drifting away slowly. Despite the fact that both economies place high value on addressing climate change, the differences in their economic development stages lead to different policy implementations. Currently in China there is a serious shortage of electricity, which resulted from multiple factors, including, as some criticized, the too quick transition to green energy by cutting the use of coal, which still accounts for more than 50 percent of China’s power production. This simply shows how difficult it is to achieve real cooperation between the two, even when their fundamental interests align well.    Of course, one does need to become too pessimistic in seeing a cold war coming, as neither side has appetite for that. Clearly, a full economic decoupling is impossible despite the ongoing trade conflicts and tech competition, but we will need more patience before we can see some real improvement in the relationship.

The China Factor in Elections in Japan and Germany
Having won the leadership race for the ruling LDP, former foreign minister Fumio Kishida is set to become Japan’s next prime minister within a couple of days; and then face a general election by November-end. In Germany, voters have cast their ballot but the verdict is undecided. With the SDP and CDU winning 25.7% and 24.1% of votes respectively, the election is being called “most uncertain” in German history. Most analysts in China are telling us, unpredictable governments led by weak leaders in both Japan and Germany do not augur well for China, whose economy has entered a soft patch.   Finally, if early reactions in op-ed columns in the Chinese media are any indication, the future new leaders in Fumio Kishida in Japan and Olaf Scholz in Germany are both “trouble” for China. On Kishida, an opinion column in an influential Chinese newspaper commented: “With Kishida as the new LDP leader, Japan should gear up for a new government by this time around next year.” A Chinese commentary on the post-election fluid political situation in Germany said: “Following Merkel’s departure and with a weak new leader in Germany, the strongest economy in Europe, will on the one hand pave the way for France to have a greater say in the EU policy towards China. At the same time, no matter who emerges as the new German leader – Armin Laschet or Olaf Scholz – neither of the two will be in a position to rise up to the stature of Merkel any time soon.”    To sum up, if in Japan a China challenge awaits the next cabinet, then it is China’s turn to be nervous about what’s in store for Beijing in post-Merkel Germany.

Coronavirus: is China really about to ease its tough border restrictions?
Zhong Nanshan has listed the prerequisites for the country to reopen, including ‘relatively’ low transmission elsewhere      Beijing has concerns about how its health care system would cope with a major outbreak, especially in rural areas   In an interview with Southern People Weekly magazine over the weekend, he listed the prerequisites for reopening: 80 to 85 per cent of China’s population would have to be vaccinated against Covid-19, which is expected by year’s end; vaccination rates would need to be high in other countries; and their transmission and death rates would need to be “relatively” low.    For China, concerns about how the country’s hospital system would cope with a major outbreak among its vast 1.4 billion population – especially in the rural areas – are a big reason the borders have remained closed.  An effective treatment might help convince Beijing to lift its border restrictions. US drug maker Merck last week said its experimental antiviral pill reduced hospitalisations and deaths by half in recently infected people and that it would seek emergency use authorisation for the drug in the US. But it is too early to say if it will be a game changer – more safety and efficacy data is needed, particularly on whether it could cause genetic mutations, though the company has ruled this out.

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