Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – October 6, 2021

European companies in Hong Kong considering moving staff elsewhere because of zero-Covid restrictions, chamber says
Strict quarantine rules have led many businesses to consider restructuring at least part of their operations to places such as Singapore, says chairman of European Chamber of Commerce. Chamber issued open letter in August warning city leader Carrie Lam that pandemic controls threatened Hong Kong’s standing as a global finance hub.

China at a turning point?
The debt problems afflicting China’s real estate market deepened this week after another property developer defaulted on its bonds and the world’s most heavily indebted property group Evergrande extended a suspension of its shares into a second day without explanation. Fantasia Holdings, a mid-sized developer, that just weeks ago assured investors it had “no liquidity issue”, said in a stock exchange filing that it “did not make the payment” on Monday of a $206m bond maturing that day, triggering a formal default. The default adds to fears that a crisis at Evergrande will spread to include more of China’s property developers, which account for a large portion of the Asian high-yield bond market.

Fantasia downgraded to default status by rating companies as Chinese property sector crisis worsens
Missed debt payment by Fantasia this week adds to China property sector concerns spawned by Evergrande’s liquidity crisis    S&P, Fitch and Moody’s all cut Fantasia to default or near default status

Chinese Estates offers to take firm private after selling stake in debt-ridden China Evergrande at loss
Joseph Lau’s family offers HK$4 apiece to public investors in Hong Kong-listed company, whose stock closed at HK$2.18 on last trading day before it was suspended   Company says losses arising from sale of China Evergrande shares had exacerbated its fundamentals

China Goes All Out to Cope with Power Outages
China is making all-out efforts to ensure the nation’s power supply after power outages halted factory production and hit families in some regions, amid calls for a better electricity pricing mechanism and improved energy structure.

How to Review Your Suppliers in China: Key Considerations and Case Study
We highlight key managerial considerations to effectively review your suppliers in China and business partners in general. A case study is also presented to illustrate how outsourcing a supplier review is useful as many businesses cannot personally vet their supplier networks due to movement restrictions during the ongoing pandemic.

US-China trade: who will ‘targeted tariff-exclusion process’ help more, Chinese factories or American buyers?
Washington’s approval process for tariff exemptions has been called opaque and inefficient under Donald Trump and Joe Biden, and most exemptions have expired   Trade analysts expect the Biden administration to put the interests of US industry ahead of bilateral trade, even if doing so helps some Chinese manufacturers

U.S. Trade Policy Adapts to a China That Will Never Change
Biden’s emerging China strategy doesn’t involve China, instead focuses at home and on allies President Biden’s top trade official this week delivered an unusually bleak assessment of U.S. efforts over the past two decades to change China’s trade practices, from subsidies and intellectual property to technology transfer.

US demand for chip supply data from TSMC, Samsung, Apple, others sparks debate about true intentions in China
Industry watchers in China fear Washington’s latest move to combat the chip shortage could put Chinese firms at a disadvantage and help target sanctions   The US Commerce Department has asked for supply chain data from tech giants and carmakers, including TSMC, Intel, Samsung, Apple, Microsoft, Daimler and BMW

Huawei, ZTE win China Mobile contract for converged 5G and 4G network, leaving out foreign suppliers
Huawei and ZTE will each build half the US$2 billion converged 5G and 4G network of the world’s largest mobile carrier by subscribers    The deal signals yet another vote of confidence for US sanctions-hit Huawei and limited headway in China for foreign telecoms gear makers

Huawei renews effort in mobile payments amid Beijing’s moves to boost industry competition
Beset by US sanctions, Huawei has started to ramp up its mobile payments service after gaining a nationwide licence from a corporate acquisition in March    Its Huawei Pay app has an opportunity to become competitive against industry giants Alipay and WeChat Pay, according to analysts

Geely builds satellites to guide autonomous vehicles
Chinese carmaker Geely is aiming to manufacture 500 satellites per year in order to create a high-precision navigation network for guiding autonomous vehicles. With the move, the privately-owned automaker is entering a field in China that’s long been dominated by the military. Geely’s mass production of a range of different satellites has already begun in Taizhou, in the eastern province of Zhejiang

China manufacturing town is again buzzing after being crippled by Samsung’s departure in 2019
Two years after Samsung closed its last smartphone factory in China, the abandoned community gets a second chance    Some foreign companies are rethinking or delaying plans to diversify production away from China, despite US tariffs

Manufacture in China, Get Your Product Copied? Not That Simple.
There are many examples out there of companies that got in big trouble because of their suppliers in China. In many cases, a supplier got very tempted to start selling the same product on their customer’s market.     As a result, people who are designing and developing a new product are often reluctant to plan for manufacturing in China, even when the difference in cost will obviously be massive.

Key Lessons From China Brand Failures
China is regarded as a massive market that almost guarantees sustainable growth and profitability. In the past, the country has provided huge opportunities for profit, and many success stories exist across wide swathes of the economy.   Nevertheless, the reality is that numerous fashion, premium, and luxury brands have failed in this mega-market. The list of high-profile casualties includes the recent announcement that US retailers Urban Outfitters and Everlane are withdrawing from the Chinese market. Although every brand failure has its own idiosyncratic story, we have outlined three critical lessons to facilitate brand success in China. These lessons are about learning from the costly mistakes of others because the Chinese market is too important for brands to falter in.

EU-China Opinion Pool: Germany’s China policy after the election
The consensus appears to be that whatever the composition of the next German government, its China policy will be more hard-edged than Angela Merkel’s. The parties’ campaign platforms provide some evidence for this prediction.But do the politicians and parties involved really have the ability to implement such a shift? This issue might become a test for the ability of Germany’s next government to produce political and policy coherence on a key issue of national security: to limit or mitigate the impact of German economic dependence on China, while at the same time drawing clearer red lines and using leverage to protect them.  This is where proposals to create a permanent national security council to advise the chancellery (mooted by this project of which I was a member) might help to create greater policy coherence. That, in turn, would help bring about greater EU cohesion on China. Which is needed both vis-à-vis Washington and Beijing

EU leaders discuss need to ‘rebalance’ relations with China, at first talks about Beijing in a year
China had slipped down the agenda of Tuesday’s talks after Afghanistan and the Aukus defence pact were added as discussion points at a late stage.     Lithuanian officials hoped the talks in Slovenia would result in ‘economic solidarity’ from the EU, amid a simmering row with Beijing   “The EU defends its own interests and values and protects its citizens, so in defining its interest, it’s also [about] being able to have a dialogue with China, as well as with the US. That’s in a nutshell, the idea of this debate In their first talks on China for a full year, leaders of the European Union’s 27 member states discussed the need to “rebalance” the bloc’s relationship with Beijing, according to an EU official who was present.
They talked about the need for “firmness” in dealing with China, “the will to engage with China on a series of global issues”, especially climate change, as well as an investment deal struck in December that “remains de facto frozen”, said the official, who asked not to be named. Technical work continues on the deal behind the scenes in Brussels, and while it is impossible for it to pass without the parliament’s approval, it is still seen as a priority in some quarters  There is a sense among Brussels officials and diplomats that the deterioration in ties that led to the demise of the agreement needs to be arrested. Against this backdrop, leaders were set to discuss a potential EU-China summit and whether to proceed on a “27+1” basis, with all national leaders present, or on a smaller scale with fewer taking part. A leaders summit was scheduled for Leipzig, Germany, in September last year but cancelled because of Covid-19, only to be held in reduced format online. Diplomats said the late change in the agenda of Tuesday night’s talks should not be read as a signal that China was not important, rather that EU-China relations were not a crisis topic, such as Afghanistan and Aukus. The EU’s focus is a contrast to the United States, which has China at the top of its foreign policy agenda. Diplomats in Brussels said the US embassy was “constantly badgering” them on issues relating to China, insisting that they take a sterner line towards Beijing. On Monday night, European Commission President Ursula von der Leyen spoke to US President Joe Biden at his request, POLITICO reported, during which they agreed to defend human rights and tackle China on industrial policy. Von der Leyen reiterated that “there was no intention to decouple from China”.  Sven Biscop, a director of the Egmont Institute, a Brussels think tank on international relations, said China was a priority for the EU, but not in the same way as it was for Washington.  “For the US, the rise of China is almost seen as an identity crisis,” Biscop said. “If your identity is that you’re the No 1 great power, and suddenly there’s a challenge, then you can see that has indeed become the sole focus on most of US foreign policy

U.S.-China talks will be difficult, but reengagement is the right strategy, expert says
U.S.-China talks will be “extremely tough sledding,” but reengagement is the correct strategy to take, according to Wendy Cutler of the Asia Society Policy Institute.   Her comments came after U.S. Trade Representative Katherine Tai on Monday said she is looking forward to negotiations with the Chinese.  Cutler also said she sees a “possible thaw in relations” between Washington and Beijing, noting that the two presidents spoke on the phone recently.

Chinese loans in Africa: will risky business pay off or buyer’s remorse beat soft power?
Beijing has adopted a ‘high-risk, high-reward’ strategy in Africa, offering huge amounts of credit to resource-rich nations with corruption or security issues     But many leaders initially eager to join the belt and road are now rethinking Chinese infrastructure projects over inflated cost and debt concerns

5 Things U.S. Policymakers Must Understand About China-Africa Relations
The eighth convening of the Forum on China-Africa Cooperation (FOCAC), likely to be held late this year, marks more than 20 years of high-level and institutionalized dialogue between Beijing and African leaders. The forum serves as a joint platform allowing Chinese and African officials to formulate how Chinese engagement can support African development goals and other ongoing initiatives. Over the years, Chinese leaders have used FOCAC to announce pledges for development financing in Africa.

NATO head: China is not an enemy
China is on the rise, with the world’s largest navy and on track to have the world’s largest economy. Jens Stoltenberg, NATO’s Secretary-General, tells POLITICO’s Ryan Heath about his plan to stay one step ahead of China’s advances. Plus: he has a message for France on the recent U.S.-Australia submarine deal.   “We don’t regard China as an adversary or an enemy. We need to engage with China on important issues such as climate change — there’s no way to reduce emissions enough in the world without also including China. We need to discuss arms control with China. So, we need to engage politically with China. At the same time, we see the rise of China. We see that China soon will have the biggest economy in the world. They already have the second largest defense budget. They have the largest navy already. They are investing heavily in new modern capabilities, including nuclear capabilities. They are leading in the use of many new disruptive technologies, such as artificial intelligence — also integrating that into new very advanced weapons systems. And we see a much more assertive China, for instance, in the South China Sea. All of this matters for our security and therefore NATO has to respond to that.” – Jens Stoltenberg, NATO Secretary General

Beijing ‘fully able’ to invade Taiwan by 2025, island’s defence minister says
Warning of conflict comes after PLA ramps up pressure on island with warplane sorties    ‘It is the toughest situation I have seen in more than 40 years of my military life,’ Chiu Kuo-cheng tells legislature

What Do Taiwanese Think of China’s Record-Setting Incursions Into Taiwan’s ADIZ?
Chinese military aircraft have broken consecutive records in the past week. What message is Beijing trying to send, and is it being received as intended?  Likewise, it is not true that Chinese military threats dominate the headlines in Taiwan. Certainly the record-breaking flybys were a front-page news item, but they appeared alongside a number of other headlines. News headlines from international media may paint a misleading picture of reactions in Taiwan, where domestic responses were still comparatively muted. It may be the case that China has not yet been successful in building a narrative of progressive escalating threats to Taiwan, with military threats having occurred too often in such a manner that they become a repetitive news item that the public is used to. Frequently hyperbolic reporting from Taiwanese media, including on cross-strait issues, could be another factor as to why the Chinese flybys may be seen in a less serious light.   If the number of Chinese warplanes dispatched to Taiwan’s ADIZ continues to increase, it remains to be seen whether this moves the needle of Taiwanese public opinion. It is possible that China will continue military activity in the coming days, because the ROC’s national holiday, Double Ten Day, is coming up on October 10. Tsai is expected to give a speech on the occasion, which will also see military displays, though public celebrations will not take place in light of COVID-19. An ongoing visit to Taiwan by former Australian Prime Minister Tony Abbot,an upcoming visit to Taiwan by French senators, or visits to Czechia, Lithuania, and Slovakia by Taiwanese delegations could provide other occasions for China to show its displeasure, potentially leading to more military threats.

Joe Biden says he and China’s Xi Jinping agreed to abide by Taiwan agreement
US president appears to reiterate one-China policy that recognises Beijing but with expectation for Taiwan’s future to be resolved peacefullyIn apparent reference to call with Xi in September, he says US will stick to it and ‘I don’t think [Xi] should be doing anything other than abiding’

In Asia, the epicenter of the global health crisis, indicators are less optimistic for 2022. After a strong recovery, most countries in the region are likely to experience a surge in corporate bankruptcies of around 18% on average l ‘last year. In view of weaker state support, the rise in bankruptcies has already started in a number of countries. In India, for example, economists expect a wave of bankruptcies next year (+ 69%). Given the economic and demographic weight of India in the region, this massacre could cause damage in the medium term. On the other hand, economic analysts estimate that failures in the industrial sector and logistics in Asia will remain lower in 2021 than in 2019. Five factors will set the tone for the path ahead. 1) The global momentum of the economic rebound, which will be decisive for the pace of removal of state support measures, and in turn impact the pace of business insolvency normalization: most advanced economies should see GDP growth above the +1.7% required to stabilize insolvencies in 2021-20222 . 2) The pace of withdrawal of state support, since it will also influence the cash-burning dynamic of companies as 3) many fragile companies will still be at high risk of default, notably the pre-Covid-19 ‘zombies’ kept afloat by emergency measures and the companies weakened by extra indebtedness from the crisis. 4) The deterioration of companies’ financials, which is adding to debt sustainability issues. And 5) the quick recovery of business creation, since the increase in the number of businesses will mechanically increase the base for potential insolvencies, particularly in sectors where creation is highly related to meeting new needs arising from the pandemic (i.e. home delivery) but with uncertain viability.

Alain Gillard
Information Officer
Service Asie Pacifique
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