Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – October 7, 2021

Changing China: How Xi’s ‘common prosperity’ may impact the world
China says its policies aimed at narrowing the widening wealth gap are precisely what it needs in this moment of its economic trajectory – but critics say it comes with even greater control of how business and society will be governed.

China welcomes ‘positive statements’ by US as talks hint at change of mood
Beijing says its top diplomat Yang Jiechi’s meeting with White House National Security Adviser Jake Sullivan was ‘constructive’  China ‘attaches importance to President Biden’s recent positive statements on Sino-US relations’, Yang says      The official added that climate change needed to be dealt with separately from other issues in the relationship – contrary to Chinese Foreign Minister Wang Yi’s remark to US climate envoy John Kerry in September that cooperation on climate change would be compromised if bilateral relations were dominated by confrontation.  The Chinese statement did not give specific details of the areas discussed, saying only that the talks covered the issues of Hong Kong, Taiwan, Xinjiang,  Tibet, human rights and maritime disputes.   But there was a notable difference between the two sides’ statements. The White House said the meeting was intended to responsibly manage the competition between the two sides, whereas Yang was quoted as saying that Beijing opposed seeing China-US relations as “competition”. Pang Zhongying, an international relations expert at Ocean University of China, said the talks had been unusually long, at six hours, and that both sides were making efforts to improve relations.  “It is a sign that the ties between the two nations are improving,” he said. “But still, China does not want to see its relations with the US as competition. It wants to stress more on cooperation.”

Wang Xiangwei on why he’s optimistic about the US-China relationship
Post veteran talks about paranoia, Hong Kong’s resilience, and why it’s not in Beijing’s interest to turn Hong Kong into another Chinese city      In this lightly edited interview with The Wire, Wang discusses Hong Kong’s current situation and US-China relations among other issues   Right now, we all focus on the negatives of the bilateral relationship. That means we have not paid much attention to the positives. For instance, trade and investment has long been considered the ballast, the anchor of bilateral ties. That is something the two leaders can build on.   I met a good friend who works for a major American company, and she told me that the company was very quiet but very happy. They organise trips to the provinces, and the reception level is always high-level. And major companies, including big oil companies, are setting up new plants; JPMorgan was given its first full brokerage licence to operate here. In June, the government approved of Fidelity [Investments] to have a licence for mutual funds. Those deals are good and may help stabilise the relationship.  Xi and Biden should really put aside their reservations. They both have a very nationalistic audience to answer to at home. But they should meet and resume a dialogue as soon as possible. They should go back to basics by focusing on common interests, such as trade and investments, and reversing the tit-for-tat expulsion of journalists and visa restrictions. I’m optimistic about the China-US relationship. There’s too much at stake.

AmCham Survey Findings Show US Businesses Bullish on China in 2021
A majority of US businesses still bullish on China and are optimistic about its market growth potential. They intend to expand their operations in the country despite US-China tensions, increasing competition from local players, and hiring challenges. Pharmaceuticals, medical devices, and life sciences companies as well as automotive, non-consumer electronics, and industrial manufacturers are among the most optimistic. Contrary to expectations, over 72 percent of respondents said that they had no plans to move supply chains out of China in the next three years.

Is Beijing At Risk Of Overreaching And Curtailing Future Growth?
 What is going on? Regardless of the merits of the concern over these issues, do these new interventions represent some sort of government overreach? Why tamper or modify the policies that led to economic growth?   The socio-political issues China is now grappling with are the consequences of success. Greater social stratification; urban-rural divides; the role of tech in households are all issues Americans and societies around the world grapple with. China’s concern over educational technology, for example, is said to stem from concerns over hyper-competition among school children as well as from concerns over giving more affluent families unfair advantages.  . The Chinese Communist Party assumes ultimate responsibility for societal success, and in their definition, this entails more than maximizing economic output. There must be an inclusive dimension to this economic growth as well    President Xi has never seen himself merely as a steward, merely the head manager of a system. He has tended to see himself as a leader, someone who is helping transform China. So he would not be true to his sense of purpose if his presidency was only about keeping economic growth on track.  In China, this evolution will play out through government intervention and social media. Even seemingly non-political trends such as “tang ping,” or lying flat, can be a bit touchy for the government as it seems to mock a work ethic and make social alienation “cool.” Counter-culture guru Timothy Leary could advise his adherents in the U.S. to “Turn on, tune in, and drop out,” but we are unlikely to hear an equivalent sentiment in China.
The summary question for all this is whether the enormous period of economic growth is at an end? That depends on the magnitude and duration of the government intervention. In my view, China is likely to continue to enjoy high rates of growth for some time to come, but these rates will move closer to the world average growth rates in the decades ahead.

China willing to cooperate on digital financial rule making, central bank’s Yi Gang says
Financial services should be conducted by licensed companies   Technology firms offering financial services must adopt ‘same business, same rules’ approach    The tighter scrutiny by Beijing also prompted the US Securities and Exchange Commission to ask Chinese firms that use shell companies – known as variable interest entities (VIEs) – to go public on American bourses to make additional disclosures about their structures and potential regulatory risks in China.    Yi said companies that engage in financial activities must be licensed to operate, firewalls need to be set up to avoid the spread of financial risks between sectors and the “direct link” between financial information and commercial information needs to be severed.   “Platform companies conducting financial activities should follow the principle of same business, same rules,” Yi said.  He noted that the PBOC had asked technology platform operators to carve out their personal credit information businesses and to provide credit information services to financial institutions through licensed credit information agencies. “This could help break the information monopoly and promote information sharing,” he said.

Evergrande and energy crises shows Beijing’s need for systems thinking
Twin setbacks reveal gaps in China’s policymaking process    Two emerging threats to the Chinese economy have alarmed global investors. The first is the Evergrande debt crisis, which has sent shock waves across financial markets and left investors feeling worried that another Lehman moment could be imminent. The second is the power shortage crisis in northeast China that has quickly spread to 20 Chinese provinces and will probably worsen during the winter. The power crunch is not only affecting the daily lives of a vast Chinese population but is also crippling manufacturing and will slow China’s economic growth this year.  Decentralized policy experimentation was a hallmark of China’s pragmatic policymaking and has often been credited as the key reason behind China’s phenomenal economic success.   With Beijing tightening its control over the bureaucratic apparatus in recent years, however, local officials are less incentivized to engage in risky policy innovations. Instead, Beijing has needed to rely more on top-down mobilization and campaigns to push forward its policy initiatives.  Although centralized decisive measures tend to bring about immediate and dramatic results, they often lead to unforeseen impacts that can thwart the initial policy goals, as we can see from the Evergrande and power crises.   In the meantime, China has also appeared more complacent. Last week, a commentary in the People’s Daily asked the nation, “how do we continue with our success?” The answer, perhaps, is to adopt a more humble attitude in dealing with a complex dynamic system like China’s.

As the Evergrande saga unravels, China’s property market can expect a further slowdown
Even before Evergrande’s troubles, developers were taking steps to reduce leverage to meet new rules, a tightening of mortgage approvals had dampened housing demand and market concerns over default risks had led to higher financing costs

Evergrande’s Hong Kong ally boosts Chinese Estates shares with privatisation bid at 83 per cent premium
Chinese Estates’ stock surged 32 per cent, adding HK$1.77 billion in market value to the developer  Company intends to dump its remaining 4.4 per cent stake in Evergrande amid its liquidity woes, ending ties spanning 12 years

Fall in China’s $1.3 trln land sales to test local finances, economy
Sagging demand at China’s urban land auctions amid a crackdown on borrowing by private developers risks squeezing regional finances, pressuring local governments to scramble for other income sources to fund investments and support the economy. Land sales soared to a record 8.4 trillion yuan ($1.3 trillion) in 2020, the equivalent of Australia’s annual gross domestic product, bolstering fiscal budgets in a pandemic year.

Xi’s pledge on financing coal plants overseas misses point
China’s domestic installation of coal-fired power plants continues at great pace

US toymakers leave China-made products behind as global shipping bottlenecks threaten to squeeze holiday sales
Sky-high shipping costs and supply chain bottlenecks are forcing US toymakers to leave products in China     But for toymakers that heavily rely on holiday sales, there is a lot at stake for the nearly US$33 billion US industry      Toy executives say they cannot raise prices any more than 10 per cent – even though it will not completely cover the higher costs – because they are worried about shopper reaction. Mattel, the nation’s largest toy company, warned this summer it is raising prices in time for the holiday season to offset higher shipping costs, though it did not say by how much.    Costs of containers on ships have increased more than six-fold from last year with some brand executives saying they have gone up to US$20,000 from roughly US$3,000 a year ago. That has forced big retailers like Walmart and Target among others to charter their own ships.

China’s CATL, Ganfeng lock in supplies of lithium as price of key battery metal touches record high
Lithium carbonate prices in China are at record highs after a nearly fivefold increase in the past year    CATL outbid Ganfeng Lithium for Canada’s Millennial Lithium, while its Chinese rival bought Mexico’s Bacanora Lithium in August     Lithium carbonate prices in China are at record highs after a nearly fivefold increase in the past year, BloombergNEF analysts said on Wednesday in a note. The price of Chinese lithium shipped abroad has also climbed because of tight supply and stable battery demand, though at a slower pace than the domestic surge due to the absence of a spot market, according to the analysts.   The rally comes as a global push for less polluting energy sources that has carmakers and battery manufacturers racing to secure supplies of so-called future-facing commodities including lithium, copper and nickel. Two Chinese companies sparked a bidding war for Canada’s Millennial, which has lithium assets in Argentina, with Contemporary Amperex Technology (CATL) eventually outbidding Ganfeng Lithium.    Chinese firms have been keen on securing strategic materials in South America in particular as they seek dominance in the EV supply chain. Ganfeng has been on an acquisition spree as the lithium market tightens.The company, which has stakes in mining operations in countries including Argentina, Australia and China, gobbled up Mexico’s Bacanora Lithium in August.CATL already had stakes in Neo Lithium, whose project is in Argentina. “We have and will continue to see the Chinese looking to buy lithium,” said Matthew Hind, head of global mining at Bank of Nova Scotia’s investment banking division. “There will also be small-cap consolidation as well as EV companies buying stakes in mines with strategic partners in order to secure supply.” “In other words, consolidation will be driven by several different players,” Hind said.

Prada takes over Shanghai wet market to tap Gen Z consumers – although it’s only offering wrapping paper
At least 200 people crowded the two-floor market where about 30 stores were operating
The campaign has gone viral on Chinese social media and is expected to draw thousands of Shanghai shoppers during the National Day holiday

US President Joe Biden’s CIA director creates new unit focusing on China
The agency’s head William Burns said the China Mission Centre was designed to tackle the threat from ‘the Chinese government, not the people’  An official says the unit’s role is comparable to the focus on Russia in the Cold War or counterterror operations after the 9/11 attacks

The Man Behind Xi Jinping’s Foreign Policy
Xi’s actions on China’s periphery seemed to further confirm the creeping assertiveness of the country’s foreign policy. China had seized the Scarborough Shoal in the disputed South China Sea a few months before he took office. Xi followed up by declaring the Air Defense Identification Zone that Wang Yi would end up defending to Australian Foreign Minister Julie Bishop in November 2013. Alarm in Washington escalated even more dramatically for those with the right kinds of security clearance. Unknown to the general public, American spy satellites began to pick up images of rapid Chinese island-building in the South China Sea in late 2013. Over the next 20 months, China dredged and reclaimed 17 times as much land as all the other claimants combined had dredged over the preceding four decades. Beijing was now taking a far more provocative approach to its territorial claims in the South China Sea, through which $5 trillion in shipborne trade passes each year. China’s claims overlap with those of the Philippines, Malaysia, Vietnam, Taiwan, and Brunei.  In a March 2014 speech in Paris, Xi laid out the changes to Chinese foreign policy in the most explicit terms yet. “Napoleon Bonaparte once said that China ‘is a sleeping lion,’ and ‘when China wakes up, it will shake the world,’” he said. “In fact, the lion of China has awoken, but what the world sees now is a peaceful, amiable, civilized lion.” In a speech in Shanghai in May that year he called on “the people of Asia to run the affairs of Asia.” The United States, Xi implied, was no longer welcome in China’s neighborhood

Xi Jinping has begun China’s Third Revolution
P Viswa Nathan writes: The Chinese president’s main objective is to ensure that the communist system of governing will become the global order.

Alain Gillard
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