Belgian-Chinese Chamber of Commerce (BCECC)

China Press Review – September 14, 2021

Hong Kong stocks slide on China slowdown concerns as Evergrande sinks to seven-year low on debt crisis
Consensus estimates suggest China’s economy lost further momentum in August as retail sales, factory output slowed.  China Evergrande slumped to the lowest since 2014 after developer engaged outside external experts in precursor to debt revamp.

China Evergrande turns to advisers who helped fix debt debacles at Lehman, Noble Group, Luckin Coffee as investors brace for losses
China Evergrande moves closer to a debt workout after hiring restructuring experts involved in Lehman, Noble Group and Luckin Coffee implosions    Developer’s free pass on debt binge appears to have ended as crisis deepens after ‘three red lines’ rules

Evergrande: Why the Chinese property giant is close to collapse
China Evergrande, once the country’s second-largest real estate developer, is drowning under a huge debt pile. Some 1.5 million people have put deposits on new homes that have yet to be built.

What Will Become Of Cash-Strapped China Evergrande?
Chinese billionaire Hui Ka Yan is probably edging towards a restructuring of Evergrande’s whopping $302 billion in total liabilities, as the property developer makes little progress in averting a mounting debt crisis that has led to protests outside its headquarters.  The question, however, is how much bond investors can expect to recover. To comply with the government’s goal of ensuring financial and social stability, Evergrande may opt to pay employees and suppliers first, says Zhou. Its trade and other payables, including commercial bills that allow the firm to pay suppliers for goods and services already received on a future fixed date, grew 13.5% to 829.2 billion yuan last year. Several companies have threatened to or already launched legal action against Evergrande for overdue payments. Investors of Evergrande’s dollar-denominated notes may only get 25% of their money back, Iris Chen, a Hong Kong-based credit analyst at Nomura, wrote in an August research note. The payment will be mainly driven by asset sales at its listed subsidiaries such as the electric car unit, which could face as much as a 60% discount to its current value “considering a lack of actual business profitability and growth perspective.” “Recovery can potentially be better if Evergrande can execute better-than-expected asset disposals, ”she writes. “But too early asset disposals can also be bad for recovery value of the USD bonds as other creditors can front-run bond holders on the disposal proceeds.

Property, Prestige, and ‘Common Prosperity’: China’s Real Estate Market in 2021
An overheating property market represents a significant threat to economic and social stability in China. Xi’s new “common prosperity” campaign is attempting to correct the issue of widening social inequality; access to affordable housing is a key component. The Chinese government has floated the idea of implementing a nationwide residential property tax to cool the housing market. This idea has been tried before. In 2011, Chongqing and Shanghai both experimented with new property taxes on second or high-priced homes. However, this plan was not replicated nationwide. While implementing a residential property tax may help cool the market, there is pushback to this plan from inside the Chinese Communist Party itself. Many CCP officials use property to hide their wealth, and therefore, there has not been the political will to implement such a policy. Although recent indications point towards the implementation of a property tax in the near future, as with many things in China, there is no knowing for certain until it is announced by the party.   An overheating property market represents a significant threat to economic and social stability in China. To avert a crisis, Xi must prevent the nation’s property bubble from popping and subsequently wiping out the wealth of ordinary Chinese citizens. How Xi responds at this critical juncture will impact his legacy for decades to come.

Asia Takes the Lead For Recovery and Regional Growth For Global Trade
The digital economy is projected to add over $1 trillion to the Asian economy over the next decade.     But is China’s rise set to last? And if not, what does this mean for the rest of East Asia?   More than half of all e-commerce transactions in the world are now coming out of China.

China Likely Suffered Another Economic Slowdown Last Month
China’s economy likely slowed further in August, with data on consumption, industrial output and investment due Wednesday to reveal the extent of the damage caused by an outbreak of the delta variant.  The extent of the slowdown will be closely watched for sign that it’s serious enough to prompt authorities to change their current stance of slowly withdrawing liquidity from markets and keeping stimulus limited. The ongoing regulatory crackdown on sectors like education, the internet and property may have exacerbated the recent economic weakness. The Wednesday data will likely show China’s recovery remains uneven. Strong global demand led to record exports in August but domestic consumers turned cautious as lockdowns and fear kept many at home, meaning the industrial sector is expected to have fared better than retail sales.

China should stop building more coal power plants soon, climate change think tank says ahead of Glasgow summit
China commissioned 76 per cent of new capacity globally last year, up from 64 per cent in 2019, E3G says     Beijing has yet to translate into detailed policies a commitment by Xi to ‘strictly control’ coal consumption between 2021-25 and phase it down in the following five years

Where Next on UK-China Engagement?
The UK’s Evolving Priorities, Geopolitical Developments and China’s New Strategic Framework
A major new report from the British Foreign Policy Group, co-authored by the BFPG’s Director Sophia Gaston and Prof. Rana Mitter of Oxford University, warns the UK still has a long way to go before it can effectively and constructively engage with China, and secure the nation against the challenges China poses now and into the future. The report recognises the UK Government has made important progress in implementing new safeguards and in building a more robust strategy on human rights and global norms. But it argues the UK’s ‘reset’ on China remains a work in progress, and there is still much to be done to strengthen the UK’s position so we can pursue China engagement from a more confident position. Significant, structural change to policy-making processes will be required to effectively balance security and openness, as pursuing a ‘balanced’ relationship will involve regular points of tension. We must build systems capable of accommodating these in a principled and consistent fashion.   In light of the ongoing scrutiny that will be required towards different points of engagement, the report proposes a “triad” model for making decisions about actions towards China – categorising choices around the nature, sphere and stakes of such decisions, to ensure the Government can consider their implications in the round.

Big Tech competition in China will be reshaped by tearing down ‘walled gardens’, a staple of the platform economy
Analysts say competition between Big Tech companies Alibaba, ByteDance and Tencent will change after the MIIT ordered them to stop blocking each other’s links      The precise effect of the mandate will depend on how companies interpret the order and whether they find excuses to keep some of their walls erect

China’s new regulation of platforms: a message for American policymakers
At a time when the United States and its Western allies are struggling to determine the proper oversight of digital platform companies, the Chinese government is moving decisively ahead with its own plan. That China has designed regulations for these digital platform companies to stimulate competition and innovation should send a message to Western policymakers.   The new policies—ranging from competition enforcement to opening corporate data hoards—are an exercise of raw autocratic power. Apparently, one reason for the action is preservation of that power against the growing strength of the platform companies and their charismatic leaders. Another rationale for the move, however, is that the new enforcement will make Chinese digital platform companies more competitive and stimulate innovation.

Can China’s drive to protect gig economy workers work by pressing Big Tech to give more?
The focus on labour rights is part of the Chinese government’s push to create a fairer society and narrow the income gap under President Xi Jinping    Internet companies must now sign labour contracts with their gig workers, and provide them with the insurance coverage of state-run insurers

Alibaba Being Repositioned As An Emerging Market Belt & Road Champion
Beijing’s Alibaba Tech Moves Are Strategic As The West Sweats Its China Ecommerce Supply Chains

Smart Cities of the Future Rely on Innovation, Critical Discussions
In the Chinese city of Hangzhou, an AI-based smart technology called “City Brain” has helped reduce traffic jams by 15%. During the pandemic, New York City analyzed data related to spending pattern changes in specific neighborhoods to better allocate aid disbursement and investment priorities. And San Diego was lauded for approaching city-building with a “citizen-centric focus”, thanks in part to its use of mobile apps, and expansion of open data, along with its Get It Done citizen reporting tool.

Chip shortage will drag on ‘for some time’, Chinese ministry warns, as country looks to boost semiconductor support
The Ministry of Industry and Information Technology said the chip crunch remains ‘quite serious’ despite China’s efforts to help buyers get components  The ministry blamed the pandemic for creating a supply and demand imbalance, which has taken an especially heavy toll on the automotive industry

China’s booming electric car market prompts lithium producer and battery assembler to raise funds for expansion
Tianqi Lithium of Chengdu was given the go-ahead by its board to offer 20 per cent of its enlarged capital in an initial public offering (IPO) in Hong Kong   The stock sale could be as much as US$850 million, based on the US$29.5 billion market value of Tianqi’s A shares listed in Shenzhen    One of the world’s largest producers of lithium, as well as its biggest customer in the assembly of lithium-ion battery packs, have announced separate fundraising plans to expand their production amid soaring worldwide demand for the renewable energy source in the booming electric car industry.

Alibaba leads $300 million investment into Chinese autonomous driving start-up
Alibaba has led investments worth more than $300 million into Chinese autonomous driving start-up   The Shenzhen-based start-up makes the self-driving systems for vehicles that involve hardware and software. Alibaba’s involvement in the funding round underscores the ambitions of China’s technology giants to get a foothold in the area of driverless cars.Other investors in’s latest funding round include Greater China-focused tech investor Jeneration Capital and Chinese carmaker Geely will use the funds to double the fleet of its test robo-taxis to 150 by the end of this year, up from the current 70

Demand for data centres is in a lull. The national security law has little to do with it
The current lull is caused by misguided perception about looming oversupply over the next few years     Hong Kong offers big opportunities given a favourable supply-demand gap, backed by sharp growth in hyperscale and media-content businesses

China’s first C919 aircraft bound for China Eastern Airlines to enter final assembly
The Chinese government formed the Commercial Aircraft Corp of China (COMAC) in 2008 to design and build the single-aisle C919        COMAC hopes to obtain a type certificate, which certifies the model as airworthy, by the end of the year

ESG considerations to rise among mainland China, Hong Kong investors as awareness grows in Asia-Pacific, BNP Paribas survey shows
75 per cent of investors in China and Hong Kong are allocating less than a quarter of their assets with ESG considerations in mindChange is happening swiftly, with ESG playing a rapidly increasing role in investment decisions in Asia-Pacific, BNP Paribas executive says

Will collapse of Blackstone’s Soho China deal foreshadow caution by foreign investors in future real estate tie-ups?
Blackstone bid to buy developer fell through last week as foreign deals face greater scrutiny in Beijing     Soho China’s valuation has dropped since deal was announced in June as China’s real estate sector faces challenges of its own

Beijing Stock Exchange could be alternative to SPAC listings by innovative Chinese tech companies, trade group says
Proposed Beijing Stock Exchange to focus on innovative small and medium-sized enterprises    Appetite for SPAC deals with Chinese companies low after Beijing’s crackdown on technology firms,

Shanghai summons video gaming companies for a lecture as city follows up on government drive to protect minors
The meeting in Shanghai was called by multiple municipal departments, including the Shanghai communist propaganda unit    Major Shanghai-based gaming companies include Bilibili, miHoYo, Lilith Games, Giant Network and XD Inc   Last Thursday, the South China Morning Post reported that Chinese regulators have temporarily slowed their approvals of new online games in the country amid increased scrutiny of how video games companies are enforcing Beijing’s order. The meeting last week also highlighted content checks for video games, stressing that games with a “wrong set of values”, including money worship and “gay love”, need to be bypassed. Additionally, a statement from official state media outlet Xinhua ordered companies to strengthen self-regulation when it comes to monetisation, and stop game mechanics that aim only to generate profit.

9/11 and Asia: Two Decades Later
A virtual conference announcing the launch of Diplomat Risk Intelligence probes how 9/11 changed the Asia-Pacific. Podcast China

20 years after 9/11, the US is again in a great power confrontation
Now Biden and his team are determined not to let anything — particularly in the Middle East — distract from the goal of focusing on China. And thus, while the terrorist attacks of Sept. 11, 2001, were traumatic and profoundly shaped events of the next 20 years, the real shift in U.S. foreign policy is underway now, as a near-peer competitor has emerged for the first time since the Soviet collapse. The bipartisan support for being tough on China is so strong that Sen. Bernie Sanders (I-Vt.) has complained, “It is distressing … that a fast-growing consensus is emerging in Washington that views the U.S.-Chinese relationship as a zero-sum economic and military struggle.” Bipartisan support for getting tough on China buttresses Biden’s domestic and foreign policy goals. He argues that the threat from China shows the need to demonstrate that democracies can perform for their citizens, for example, by passing the infrastructure bill. It puts GOP realists back in their comfort zone of talking about great power politics, and allows neoconservatives to talk tough on human rights.The bipartisan spirit that emerged on 9/11 in the United States dissipated relatively quickly, largely due to the Iraq War. Despite the nasty politics in America today, the consensus on China is growing and deepening quickly.

Don’t target third party, China says, as Biden prepares to host Quad leaders
The White House will host leaders of Australia, Japan and India on September 24 for the first in-person Quad summit, as US pledges to counter China’s rise   Any regional alliance should aid mutual trust and cooperation, rather than target a third party or harm its interests, the Chinese foreign ministry said

EU pushes for deeper Indo-Pacific ties in face of China concerns
Draft document shows bloc is seeking closer trade, investment ties with Taiwan The European Union will seek new digital partnerships with Japan, South Korea and Singapore, and closer trade and investment relations with Taiwan in an effort to build influence in Asia after the chaotic western military exit from Afghanistan. China is at the center of the EU’s concerns, although the document calls for a “multifaceted engagement” with Beijing and is restrained in its direct criticism. The draft strategy warns instead that tensions around contested territories and maritime zones, such as in the South China Sea and the Taiwan Strait, “may have a direct impact on European security and prosperity.” The EU proposes to explore the possibility for talks on digital partnership agreements with Tokyo, Seoul and Singapore, according to the document. These would enhance cooperation on — and interoperability of standards for — emerging technologies such as artificial intelligence. The accords would enable deeper cooperation on data governance, trusted flows and data-based innovation, and would complement World Trade Organization negotiations on e-commerce. The EU also pledges to pursue trade and investment relationships with partners with whom it doesn’t have agreements, such as Taiwan. The draft strategy stops short of proposing a bilateral investment agreement like that recently backed by the European Parliament’s foreign affairs committee and proposed by Taiwanese President Tsai Ing-wen in May.
by 2030.  The EU declined to make any statement on the draft document, saying it didn’t comment on alleged leaks.

US Aircraft Carrier Commander Asserts Freedom to Navigate the South China Sea
“We’re not going to be coerced or forced to cede the international norms,” said Rear Adm. Dan Martin, commander of the Carl Vinson Strike Group.

Coronavirus outbreak in neighbouring Fujian province force Canton Fair to be cut to just 5 days
The biannual Canton Fair, which has been held since 1957, will resume in person activities from October 15, but will now only last five days    “The current travel restrictions will just increase the cost and lead to fewer foreign buyers attending, even though they have been staying in China.” This year’s Canton Fair is focused on promoting  China’s dual-circulation strategy, according to vice commerce minister Ren Hongbin, with the aim to help export-oriented enterprises attract buyers from both abroad and at home. Since last year, Beijing has pushed forward with the dual-circulation strategy, which places a greater focus on relying on domestic demand due to a hostile external environment.   Across Fujian province, 60 new infections were reported on Monday, bringing the total number to 135     “We originally planned to participate in Canton Fair for 10 days, mainly to meet with local buyers, but had low expectations for the growth in new orders from abroad,” said Linda Zhang, a sales manager for a Zhejiang-based producer of smart home devices. “Even for us, who have been attending the Canton Fair for several decades, we have to change our thinking and expectations for the offline exhibition.   “Due to the pandemic, we as exporters are getting used to approaching customers and selling online, and the proportion of online sales is becoming larger and larger.    “Before the pandemic, we would deliberately debut new products at the Canton Fair to buyers from across the world, but now we no longer plan to do so.“Orders are not the main worry this year for mid-sized and small mainland exporters, but shortage of raw materials and containers to ship overseas.”

Alain Gillard
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