Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – September 10, 2021

‘US Biden and China’s Xi hold first call in seven months
A White House Statement said both leaders had “discussed the responsibility of both nations to ensure competition does not veer into conflict”.  This is only the second call between them since President Biden took office.  US- China relations have been tense, with clashes over issues like trade, espionage and the pandemic.   “The two leaders had a broad, strategic discussion in which they discussed areas where our interests converge, and areas where our interests, values, and perspectives diverge,” the White House Statement added.

US firms in China want Biden-Xi summit to lift trade barriers
American firms in China are hoping for a meeting between Presidents Joe Biden and Xi Jinping this year, according to a new survey, as they look for relief from trade barriers raised during the Trump era. More than 60 per cent of American Chamber of Commerce in China members surveyed cited the need to restore regular visa services for business executives and their families, according to a survey released by the group Friday (Sept 10).  Another 47 per cent wanted the removal of tariffs, with more than three-quarters of companies complaining that measures levied during the trade war were impacting their operations.

US-China visa services, Xi-Biden meeting among top priorities for AmCham firms
Business group survey finds corporate desire for practical communication between the governments of the two countries      Most companies say tariffs on both sides damaging their operations in China   Tensions between China and the US rose dramatically under Biden’s predecessor, Donald Trump, whose administration launched a trade war between the world’s two biggest economies.
The war included a range of tariffs that the Biden administration has so far maintained.
But nearly 80 per cent of the firms in the AmCham survey felt that bilateral tariffs were having a negative impact on their businesses in China, mainly through higher manufacturing costs, declining market demand and loss of business to competitors.  In a previous survey late last year, over 40 per cent of respondents said the tariffs had no impact on their operations in China.   Last month, more than 30 US trade groups, including the US Chamber of Commerce, the American Farm Bureau Federation and the Semiconductor Industry Association, called on the Biden administration to remove tariffs, which they said were harming the American economy.

Assessing China’s “common prosperity” campaign
Evidence has been mounting in recent months that the Chinese leadership may be implementing a hard pivot toward asserting greater state control of society and the economy. In the months following Beijing’s surprise November 2020 decision to block Alibaba’s Ant Group from listing on the Shanghai and Hong Kong stock exchanges, Chinese authorities have launched a widening series of crackdowns on technology giants, wealthy individuals, education services providers, celebrities, and even youth video gamers. Restraints on Beijing’s interventions in society and the economy have become harder to identify.    Even with this wave of authoritative clarifications, it remains too early to tell where this regulatory crackdown will end. Has the Chinese leadership decided to rely upon a one-way ratchet to inalterably tighten control over society and the economy? Or have recent steps, such as the announcement of a new Beijing stock exchange, served as a signal that Beijing is searching for ways to reset the relationship between the party, society, and the market, but in ways that do not choke off dynamism that will be needed to sustain high-quality growth?   While the answers to these questions is as yet unknowable, it already is clear that Beijing’s actions in the coming months will bear careful watching for signs of the direction the country is heading. Actions — not words — will be the currency in which Beijing’s intentions will need to be understood.

Xi’s call for common prosperity signals a new period of populism, state regulation and interventionism
The term “common prosperity” (共同富裕) has long been part of the CCP’s ideological language. Under Xi, the term and an accompanying ideological framing of economic policy are making a comeback. The term represents the ideological core of Xi’s proclaimed ambition of building a socialist society. The foundation of this shift in policy was laid in recent years as the Party became increasingly wary of unconstrained market mechanisms and speculation. Runaway real-estate prices, rising inequality and surging costs for education threatened to tarnish the CCP’s economic achievements.

The Real Cause of China’s Alibaba Crackdown
Political intrigue? Personal grudges? There’s a more basic cause for Alibaba’s ill fortune: The company threatens China’s monetary authority.   he first, and the most obvious, problem is that Alibaba is not a commercial bank, and therefore not covered by the conventional regulatory system that applies to banking. While a commercial bank must face scrutiny by the central bank and other financial regulators –for example, regularly reporting its reserves – Alibaba as a tech company is free from such supervision. Hence, by managing a mobile payment system without much constraint, Alibaba has gained a dangerous privilege in the financial system. The central bank is understandably concerned about it. What if Alibaba began to manipulate its currency through the Alipay system by, for instance, boosting some people’s Alipay accounts to curry favor with them? The numbers can be created out of thin air without being backed by real RMB, but they have real purchasing power. China’s regulators would not be able to detect or stop such irregularities in time.  The second problem, not surprisingly, is Alipay’s extreme popularity. PBOC must be ill at ease with the massive use of a private mobile payment system. After all, how can the monetary authority uses its policies to effectively maintain financial and economic stability if the majority of grassroot transactions in China take place through a non-RMB currency? It is totally foreseeable that, left unchecked, the business of Alipay will continue to grow, and one day the central bank might need Alibaba’s support or even approval in order to achieve its monetary policy objectives. PBOC cannot tolerate such a possibility. The third problem, unique in the context of China, is that Alibaba is not state-owned. The Chinese government has much weaker control over tech companies like Alibaba than over financial institutes such as the “Big Five” banks. What makes things worse is that Alibaba has gone public in the United States, so any global investor can become a shareholder of Alibaba and therefore (in theory, at least) have a say in the operation of the company. Through this mechanism, it is possible for foreign powers to influence the Alipay system. There is no doubt that Chinese financial regulators are growing more vigilant about such risks as the political relationship between China and the United States keeps deteriorating.   Now the political wind is against Alibaba and will continue to be so. No matter how much ground Alibaba concedes, the inherent tension between a private mobile payment system and a public monetary authority does not easily go away. As long as PBOC pushes forward its digital RMB, Alipay, as well as other private mobile payments, will have no choice but to be integrated into one state-controlled mobile payment system. What remains to be seen is just how painful that transition will be.

Alibaba elaborates on how it will use its 100 billion yuan ‘common prosperity’ fund – pointing to ‘high quality growth’ for all
Alibaba wants to build a ‘common prosperity model’ in Zhejiang by 2025, said Simon Hu, head of Alibaba’s public welfare group   The plan consists of 10 initiatives including promoting investments in technology, supporting small businesses, and fostering development in rural areas   Alibaba’s move follows a call last month by Chinese President Xi Jinping for companies to “adjust” high income levels, prodding wealthy individuals and companies to “give back to society”.Tencent Holdings, the world’s largest games publisher and Asia’s most valuable company by market capitalisation, earmarked US$7.7 billion last month following a similar pledge in March towards its common prosperity fund. The fund will be used to help lift low-income groups, improve health care coverage, contribute to rural economic development and support grass roots education.  Chen Lei, the chairman and chief executive of e-commerce giant Pinduoduo, said during his company’s second-quarter earnings call that the firm had launched a 10 billion yuan agriculture initiative to help rural residents, whose average income remains about a third of that earned by urban residents.  Wang Xing, founder of food delivery giant Meituan who has a net worth of US$20 billion, said during the company’s second-quarter earnings call on Monday that common prosperity is “built into Meituan’s genes”. The evidence, Wang explained, is in the company’s name, which means “better together” in Chinese.

Alibaba Lays Out Philanthropy Plan of Action Amid US$15.5 Billion Push for ‘Common Prosperity’
During its annual Philanthropy Week event, Alibaba tapped livestreaming to raise awareness for charity initiatives, such as the China Foundation for Poverty Alleviation’s program that recruits volunteers within rural communities to take care of “left-behind children” Alibaba Group has updated its philanthropic priorities to focus on revitalizing rural areas and protecting the environment, in line with China’s goal of promoting “common prosperity,” the company said during its annual Philanthropy Week.
The announcement came hot on the heels of the company’s pledge to invest US$15.5 billion in tackling wealth inequality.

China has become a laboratory for the regulation of digital technology
WITH FOREIGN opponents reminiscent of Fb and Google blocked, home tech giants have for twenty years dominated the Chinese language market. The Communist Get together has stored a agency grip on politics, however the tech companies have had appreciable leeway of their enterprise actions. “It was a Wild West inside an authoritarian system,” says Martin Chorzempa of the Peterson Institute, an American think-tank.

China’s Trillion-Dollar Hurdle To Crack Into Top Global Semiconductor Ranks
Thus SMIC is China’s laggard in its race for core tech independence. As of 2020, SMIC’s global share of contract chip manufacturing was only 4%, compared to Samsung’s 18% and TSMC’s 50% (and for advanced chip manufacturing even more dominant at 80%). Most analysts believe SMIC to be three to four years behind TSMC’s technology. This gap has forced SMIC to compete more on a commodity level—cheap phones, appliances, cars and so on. What could bring SMIC into the top ranks? In a word, Huawei. The Shenzhen superstar has needed a top factory partner since Trump’s actions in 2020 restricted Samsung and TSMC from fully serving Huawei.   China also will have to develop a world-class chip manufacturing equipment business. This is not trivial. Etching transistors onto silicon at 5 nanometer scale—a human hair width is around 90,000 nanometers—is a technological feat. Very few equipment companies can do it.  The investment needed to achieve Xi’s dream of core tech independence, just in semiconductors, is estimated to cost between $1 trillion to $3 trillion. But reaching that goal will take more than just money. It will take trust in the scientists, engineers, bold thinkers and mavericks, along with experimentation and creative finance required to make it happen. It can’t automatically happen by top-down command. Meanwhile, Intel, Samsung, TSMC and others are not sitting still.

SILICON | Are Chinese chipmakers spending enough on R&D?
Chip design companies have to plow a high proportion of revenue back into research and development (R&D) in order to catch up with competitors or to just stay ahead of them. The more a company spends attracting the best researchers and licensing the best tools, the more likely a company is able to innovate, keep up with Moore’s Law, stay ahead of the competition, and win the most market share. If a company doesn’t spend enough and falls a generation behind competitors, then it will end up either having to burn money to catch up — or find something new or niche to do.

Climate change: China should pledge absolute carbon emissions cap until 2025, advisory body headed by vice-premier says
Influential policy research body chaired by Vice-Premier Han Zheng calls on China to improve carbon pricing and create a renewables-based energy system    As the world’s biggest producer of greenhouse gases, China’s near-term ambitions are in the spotlight ahead of COP26 global talks in Glasgow

China is on course to build the best cars in the world
Europeans and other western nations have dominated automotive excellence for over a century. Whether it is the satisfying thud of the door closing on a Volkswagen from Wolfsburg, or the beauty of a Ferrari from Modena, these brands are iconic – and very lucrative for their manufacturers. When we think of reliability, the Germans, and latterly the Japanese, have had it sewn up. But if you rest on your laurels, an upstart will soon be chasing at your heels.   The Chinese are not exactly upstarts in the traditional sense: it’s more than a decade since they surpassed America to become the most prolific car-makers in the world. But despite reaching that milestone in 2008, China’s cars were still mostly clones of cheap western vehicles.  Now, however, China is arguably producing the best cars in the world, and on track to dominate auto manufacturing. How did this happen, and will the west be able to regain its crown?

China’s “Common Prosperity” Drive Sends Luxury Stocks Tumbling
In August, the Jing Daily KraneShares China Global Luxury Index hit a new low as investors drove the share prices of the world’s largest luxury companies downwards.

Hong Kong stocks advance as tech firms add to US$205 billion rebound while Xi-Biden talk boosts sentiment
Hang Seng Index advances 1.7 per cent, set for a third week of gain amid buoyant demand for Chinese tech stocks      Xi-Biden talk boosts sentiment while market awaits details on impending Wealth Management Connect and Bond Connect schemes   Investors are also keeping their eyes out for market goodies as the city prepares for deeper financial linkages with mainland China. The city is expected to unveil the Wealth Management Connect and Bond Connect schemes within days, Pang Gongsheng, deputy governor of China’s central bank, said on Thursday.

Canton Fair Will Be Offline for the First Time Since Pandemic
The Canton Fair will be back to an offline format more than a year after switching online amid the COVID-19 pandemic.    GRT Radio reports that more than 200,000 buyers are estimated to join the offline portion of the 130th China Import and Export Fair, which will open on October 15. An online section will also be in the mix for the major trade fair.

Ping An Insurance becomes top holder of cash-strapped China Fortune Land, raising survival hopes
China Holdings has been relegated to second largest owner of cash-strapped developer after trimming its stake in a debt restructuring exercise     Ping An Insurance is seen as a passive investor though the stake has become a drag to earnings

Wealth Management Connect: China’s US$46.5 billion cross-border channel gives Hong Kong a leg up in the Greater Bay Area
Four of the top 10 richest people in China live in the Greater Bay Area, according to Forbes     Individuals can only invest up to 1 million yuan in investment products under the new cross-border scheme

podcast : China Lets Evergrande Reset Debt Terms
China Evergrande Group is said to have received a “green light” from Beijing to reset some of the terms of its debts, buying the embattled developer a little more time to offload and find cash. Bloomberg’s Rebecca Choong Wilkins reports on “Bloomberg Markets: China Open.”

China coal-fired power companies on the verge of bankruptcy petition Beijing to raise electricity prices
The Beijing Electric Power Industry Association has asked authorities for permission to raise electricity rates as coal prices skyrocket     Petition follows a letter last month from 11 coal-fired power companies within the Beijing-Tianjin-Tangshan power grid asking for relief

State media warn of ‘huge bubble’ in NFT as cryptocurrencies lose steam in China
An article in a sister paper of People’s Daily has become the latest state media outlet to question the prospect of non-fungible tokens    NFTs, built on blockchain, have so far been tolerated in China, where the mining and trading of cryptocurrencies are banned   Experts indicated that NFTs are still tolerated in China.   NFT, “if legally bought, is protected by China’s law”, wrote a group of lawyers from Beijing-based Tian Yuan Law Firm recently, citing the Civil Code and a 2020 regulation handed down by the Supreme Court and the National Reform and Development Commission that vowed to protect rights in the digital era, such as the ownership of virtual assets.   Amid a global NFT frenzy, Chinese tech giants have begun to experiment with digital assets.  Tencent rolled out its NFT trading platform Huanhe last month and said it would release digital collections on its streaming platform QQ Music. In June, Alibaba’s financial-technology affiliate Ant Group put up two NFT-backed images for sale via its digital wallet app Alipay. The company stressed that NFTs and cryptocurrencies are two different things.

Hong Kong export credit insurer sees claims drop to 10-year low as it benefits from steady overseas business environment
Governments have learned from past mistakes and have offered more help to SMEs during the pandemic, says new ECIC chief   Outlook looks cloudy as some governments have started to withdraw subsidies

Qianhai economic zone’s expansion to benefit state-owned developers with massive land banks
An influx of talent from Hong Kong and Macau will lead to rising demand for homes in Qianhai economic zone     State-owned China Merchants Group, Grand Joy and Shenzhen Metro Group sit on massive land reserves in the main districts of Nanshan and Bao’an

Chinese Foreign Minister Begins 3-Nation Tour of Southeast Asia
The visit will include stops in Vietnam and Singapore, which recently hosted U.S. Vice President Kamala Harris.     Buried under the diplomatic boilerplate about “a shared community of mankind,” Chinese diplomats have had a fairly simple message for Southeast Asian governments: China is in the region; the United States isn’t.  Beijing has also tried to tune its outreach to the public health challenges posed by the COVID-19 pandemic, which is surging in many Southeast Asian countries, and presented China as an inexorable partner for the region as it seeks to restart economic growth. Indeed, today Cambodia’s Prime Minister Hun Sen gave an address at the 18th China-ASEAN Expo in which he effusively thanked China for “its leading role in the fight against the COVID-19 at the global level.”    At the same time, proximity is also a source of angst for the nations of Southeast Asia. While the region appreciates Chinese support as it struggles to shrug off its current COVID-19 slump, vaccines and promises of further “development cooperation” will not neutralize the consternation that many governments in the regions feel – particularly those facing the hard edge of Chinese power in the South China Sea. All this will ensure the region will continue look further afield, including to the U.S., as China’s relative power continues to grow.

China promises to raise imports from ASEAN ahead of new rail link
Train line to Vientiane, third connection for the bloc, due to open Dec. 2 “We will treat ASEAN as a priority in China’s neighborhood diplomacy,” Wang told the gathering of diplomats, businesspersons and officials who tuned in via video link.  Meanwhile, shipments along a transport corridor involving both land and sea routes between China and Southeast Asia, known as the Chongqing Connectivity Initiative, rose 30% last year, according to Singapore Deputy Prime Minister Heng Swee Keat. The calls to boost trade come as concerns rise that growth in China, the region’s economic engine, might be losing momentum. Backed by strong demand from key trading partners amid delta variant COVID outbreaks, Chinese exports in August beat market expectations, rising 25.6% from a year before, up from 19.3% growth in July. Imports rose 33.1%, up from 28.1% in July. Li-Gang Liu, chief China economist for Citigroup, said in a client note on Wednesday that “the strong export growth is unlikely to be repeated in the remainder of the year.”   With developed economic reopening, Liu expects consumers to shift spending back to services from goods purchases, and said the strong yuan would undermine Chinese competitiveness.

You don’t even understand the basics’: Chinese ex-diplomat lashes out at EU envoy
Nicolas Chapuis draws sharp criticism after accusing China of ‘changing its diplomacy’ and questioning its attacks on Lithuania’s Taiwan deal    Former foreign ministry official warns that ambassador’s ‘biases’ could hurt hopes of improved bilateral relations

Taliban ‘won’t allow’ terrorists to thrive, but China’s concerns remain
The militant group’s spokesman reportedly says many East Turkestan Islamic Movement members have left Afghanistan     But the claim is unverified and may mean those members continue to operate elsewhere, Chinese expert says

Two decades after 9/11, China is more concerned than ever about Afghanistan
The Taliban’s victory could give rise to bolder attacks by other extremist groups, threatening China’s economic interests     There is also a fear that counterterrorism efforts in Xinjiang could be endangered by a resurgence in extremism    It’ll be good enough for China if it can keep its own interests from being infringed during the turmoil, and it’s far-fetched to talk about China helping the Taliban become more moderate and rational, as China’s influence on the group is actually quite limited,” said Song Luzheng, an international relations researcher at Fudan University. “China can only persuade the Taliban from the perspective of its own interests, like it can try to convince the Taliban not to shelter terrorist groups for the sake of the sustainability of its own regime. While it’s true China can also use its economic advantages to exert influence, such influence can’t be overestimated,” he said.   “Besides, China will not establish diplomatic relations with the Taliban regime at least before the G20 summit in Italy at the end of October, as the heads of China and the US may hold their first meeting during G20. And the US will consider it a humiliation if Beijing recognises the regime before that.”

China-Australia relations: Beijing lobbies Canberra for help to join CPTPP regional trade pact despite spat
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was formed in 2018 between 11 nations, including Australia  China has expressed an interest to join the pact and has now submitted submissions to an Australian parliamentary inquiry  19  The pact was originally conceived by his predecessor Barack Obama as an economic bloc to balance Beijing’s growing power. Since then, Australia has seen its relations with China nosedive in the wake of its call last year to allow independent investigators to be allowed into Wuhan to probe the origins of the coronavirus. Beijing has put ministerial relations in a deep freeze and implemented a range of trade reprisals on Australian goods including coal, barley and wine   Such concerns are not addressed in the embassy’s submission to the Australian government. It says China should be allowed to join CTTPP due to its initiatives to increase imports, improvements to market access for foreign investment, and strengthening of intellectual property protections. “The  Chinese economy and the Australian economy are highly complementary with enormous potential in cooperation,” it said.It describes a bilateral free-trade deal between the countries in force since December 2015 as marking “a milestone for our trade and economic cooperation, creating favourable conditions for deepening, broadening and improving our bilateral economic relationship.” Britain is also lobbying to join the CPTPP, having formally requested to join earlier this year.

China-Australia relations: damage from trade bans limited as Australian exporters ‘successfully pivot’ to new markets
China’s targeted bans on Australian goods have had an insignificant impact on most Australian exporters, the Australia-China Relations Institute says      The institute says in a new report its findings undermine claims that Australian businesses with close trade ties to China are naive or irresponsible

The Politics of Taiwan’s COVID-19 Response
Taiwan’s first real COVID-19 outbreak engendered fierce political debates between the DPP and the KMT.   With the Delta variant having finally entered community transmission in Taiwan in the past week, expect political contestation between the DPP and KMT to continue, especially with KMT chair elections scheduled to take place on September 25. As seen in the recent KMT chair debates, COVID-19 looms large for opposition party as an issue with which to attack the DPP.

Fleeing China, Hong Kongers flock to Britain. ‘We are not emigrating — we are escaping’
He has no job, he’s still grappling with English and the climate is often cold and wet, but Dennis Chan is still grateful to be setting up his life in Britain. The 34-year-old arrived in Edinburgh, the Scottish capital, alone in April after quitting his job as a cargo officer for Cathay Pacific airlines in Hong Kong.

Ai Weiwei: Credit Suisse closed bank account over China
Leading Chinese dissident and artist Ai Weiwei has said he was told by Credit Suisse that his foundation’s bank account in Switzerland would be closed over his “criminal record” in China.

China’s cultural crackdown: few areas untouched as Xi reshapes society
Vast range of new regulations prompt fears of a return to tight social control of pre-reform days

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