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China Press Review – September 9, 2021

“996” is Ruled Illegal: Understanding China’s Changing Labor System
China’s top court has ruled that the controversial “996” overtime work policy (working 9am to 9pm, 6 days a week) is illegal, taking aim at the excessive working hours commonly practiced at Chinese Internet companies. On August 26, 2021, the Supreme People’s Court (SPC) and Ministry of Human Resources and Social Security (MOHRSS) jointly released a guideline illustrating 10 typical cases of overtime work, all of which were won by employees. The authorities unpacked the legal basis behind the verdict of each case.

China Factory Inflation Surge to Add Pressure to Global Prices
China’s factory-gate inflation accelerated to a 13-year high, adding to the pressure on global consumer prices which have been pushed up by a commodities boom, soaring shipping costs and an uneven economic recovery from the pandemic.    Producer prices in China rose 9.5% in August from a year earlier, the National Bureau of Statistics said Thursday, mainly driven by higher commodity prices. U.S. data due next week is forecast to show consumer prices rose by more than 5% for a third straight month in August as businesses raised prices for goods and services, even as the Federal Reserve claims the cost pressure will be temporary.

China’s factory and consumer prices continue to diverge, ramping up concern of an economic slowdown
High commodity prices caused factory-gate inflation to rise at its fastest pace in 13 years in August, while consumer inflation was depressed     Analysts say the widening ‘scissors gap’ between factory and consumer prices points to worsening profit margins for Chinese companies

Can blockchain work in climate policy? China may use immutable records in green power trading pilot plan as transactions kick off
The scheme will be led by the National Development and Reform Commission (NDRC), and the power distributors State Grid and China Southern Power Grid   A trading centre in Beijing and another one in Guangzhou will be established under the plan  he trading of mid and long-term electricity supply has already existed for years in China, part of the reforms in the nation’s power market, which includes interregional transactions between grid operators and direct purchases by energy-intensive manufacturers from generators.    The new scheme will add a separate category for renewable power trading, which will be given preferential treatment on contracts execution and settlement. Starting with wind and solar power, the scheme will gradually be broaden to include hydro and other types of renewable energy, the NDRC said.   The scheme will prioritise power trading for unsubsidised wind and solar farms that are not protected by guaranteed offtake from the grid companies, said Refinitiv’s lead carbon analyst Qin Yan.   On Tuesday, some 30 power users and 32 solar and wind farm operators in Zhejiang province struck 50 deals during the trading debut, Xinhua reported. Buyers are willing to pay an extra 1 fen, or 0.01 yuan, per kilowatt-hour for certified green power. The province’s average power price is 55.5 fen, or 0.55 yuan (9 US cents).   Six work sites of German chemicals giant BASF in Shanghai, Jiangsu and Guangdong provinces have also joined the pilot trading, buying 440 million kWh through to 2025 from various power producers.   A solar power producer in the Ningxia Hui autonomous region in north China will supply the equivalent of 30 per cent of the power demand of three BASF sites in Shanghai through to the end of next year.  It will be China’s first commercial interprovincial renewable electricity trade, said BASF, which has a goal to achieve net zero emission by 2050.   Rival Covestro’s Shanghai chemicals manufacturing site has also signed a contract to buy 100 million kWh of solar power in Ningxia next year, around a tenth of its annual electricity needs.  The French energy management and automation technology firm, Schneider Electric, has agreed to buy 17 million kWh, making up 88 per cent of the electricity demand of its five plants in Shanghai, also from solar farms in Ningxia.  In addition to carbon permits and green power trading, Beijing is also “highly likely” to reintroduce the China certified emission reductions (CCER) scheme – launched in 2015 and suspended in 2017 – said Daiwa Capital Markets head of utilities and renewables research Dennis Ip.   The scheme allowed emitters to offset up to 5 per cent of their annual obligations to buy carbon emission permits, if they have invested in green projects such as renewable energy.

China not giving up on building a coal-fired power plant in BiH
Chinese companies China Gezhouba Group Company (CGGC) and China Energy Engineering Group (GEDI) still want to go ahead with a project of building a new thermal power plant block in the eastern town of Tuzla with a Chinese government-backed loan even though the project was cancelled.

Chinese tech tycoons’ retreat spurs speculation about true motives amid controversies and Big Tech crackdown’s Richard Liu recently joined the founders of ByteDance and Pinduoduo in stepping aside from day-to-day management    Some analysts say the entrepreneurs may really want to pursue other interests, but a government crackdown and controversies cloud the tech industry

Chinese Tesla rival XPeng plans new vehicles and targets a distant future in robots and flying cars
Chinese electric carmaker XPeng is exploring areas including robotics and flying cars, which could play a role in its longer-term goals.  He Xiaopeng, CEO of XPeng, said the company is building a research and development team for flying cars that will “have a few hundred people.”  He also said the company will continue to release new models, including a potential 7-seater, and will see an increasing portion of revenue generated by software

Chinese carmakers sidestep chip shortage troubles to grow sales, market share at the expense of global rivals
Home-grown vehicle brands increased their market share to 43.1 per cent in July from 36.5 per cent in January    Carmakers relied on alternative supplies and reduced chip usage in basic models to help sustain buoyant sales while improving their profit margins

Tech stocks sink in Hong Kong on renewed concerns about regulations as China freezes approval for online games
Hang Seng Index tumbled 2.3 per cent, the biggest drag in more than six weeks as tech giants paced losses     Tech benchmark sank 4.5 per cent after Beijing summoned Tencent, NetEase and others, and said to freeze approval for new online titles

Exclusive | China said to suspend approval for new online games, heating up Beijing’s campaign against gaming addiction
Sources said the decision to freeze new video game approvals was revealed at a meeting between Chinese regulators and industry giants Tencent and NetEase    It is unclear how long this suspension of new game approvals will last, the sources said

It’s a Lehman Moment, Not Volcker, That China Should Fear
If officials manage to reshape China’s property sector, it’ll be an impressive feat of economic management. But if they don’t, a long-lasting debt crisis and balance-sheet recession could be in the cards.   The reality is that China’s real estate sector is simply too big, too overvalued and too important to the economy to reshape without risking incalculable, and potentially catastrophic, consequences. Analysts arguing that the property crackdown is here to stay are implicitly betting that Beijing can calibrate this process, choosing how much pain it’s willing to take in exchange for a progressively smaller and less overextended industry. If officials pull it off, it will be a hugely impressive feat of economic management.   Politics mitigates against any radical near-term shift. President Xi Jinping will seek a third term of office at next year’s Communist Party congress, and any turbulence before then would be unhelpful. The rhetoric of “common prosperity” plays well with those left behind by China’s economic miracle; real estate has been a key driver of inequality, and cheaper home prices would please them. But the country also has hundreds of millions of property owners by now. How would they feel if the value of their apartments fell by 30%, or 50%, or 70%?   If signs of serious cracks or economic distress build, it’s far more likely that policy makers will reverse course and ease off, as they have in the past. There may be an enormous crisis coming in China real estate, as George Soros contends, but it’s one that’s more likely to be the result of a market accident than the product of a deliberate government policy choice. China’s Lehman moment is still the one to watch.

Property market rocked as Evergrande struggles to repay $300bn debts
Shares in Hong Kong-listed firm slump 10% and bond trade suspended amid fears for shaky Chinese real estate market

NIO’s shares tumble as US$2 billion top-up fundraising in New York signals delay in Hong Kong secondary stock sale
NIO plans to sell up to US$2 billion of American depositary shares in a top-up offering, the biggest sale by a Chinese company since Didi sale in June    Shares of the electric carmaker dropped by as much as 6.3 per cent in New York

Op-ed: A key choice awaits China — money or principles
China is at a crucial moment in its political and economic evolution. The political growl that is trying to become a dominant roar is being met with unexpected economic obstacles. As China aspires to become a global superpower, it’s fascinating that it is facing the very test it presumed the Western world would fail: money or principles.     China cannot continue to tout our economic ties when technology is shamelessly stolen, copyrights are ignored, Hong Kong is subdued, Uyghurs are persecuted, and Taiwan is threatened. Nor can we ignore the way that Xi seeks to reshape China itself, as entrepreneurs are silenced, companies come under greater government control, and technology and big data are unleashed for Orwellian social control.    “The Art of War” by Sun Tzu posits that understanding one’s adversary is fundamental to a victorious strategy. China’s understanding of the West in general, and the United States specifically, is arrogant, hedonistic and money loving. It presumes that Western countries will sacrifice principles in pursuit of profits. The paradigm of the greedy Westerner has served China well since Tiananmen Square, but recent experience with Australia suggests that China may have misjudged.

podcast : The Biden Administration and US-China Relations in 2021
Are U.S.-China relations set to deteriorate further? The Diplomat’s Asia Geopolitics podcast host Ankit Panda (@nktpnd) speaks to Shannon Tiezzi, The Diplomat’s editor-in-chief, about U.S.-China relations in 2021.

On the persistence of the China shock
A surge in imports from China as it modernized its economy during the 1990s and early 2000s caused job and income losses in U.S. manufacturing communities that persisted for years after the import shock plateaued around 2010, finds a paper to be discussed at the Brookings Papers on Economic Activity (BPEA) conference on September 9.

America’s intensifying focus on Asia opens opportunities for strengthening US-Taiwan relations
Asia will become the epicenter of America’s strategic focus. To sustain its edge in its competition with China, Washington will place greater relative emphasis on rebuilding at home and working with partners to address global challenges. The United States and Taiwan can and should support each other in these critical areas. Deepened educational exchanges, closer collaboration on technological innovation, cross-fertilization of investments in development of critical technologies, and intensified efforts to bolster supply chain security will pay strategic dividends. So, too, will joint efforts to accelerate green technology development and deployment. The United States and Taiwan also can work together to spread best practices for improving democratic resilience against external attempts to interfere in democratic governance. This transition phase in American foreign policy presents fresh prospects for the United States and Taiwan to bolster mutually beneficial coordination. Both sides would be wise to seize such opportunities.

South China Sea: Beijing ramps up drills and tests its ability to seize an island
PLA exercises in contested waters coincide with rising tension with the US military and its insistence on freedom-of-navigation operations in the region   China has conducted 20 naval exercises involving elements of island capture in the first half of 2021, far exceeding 13 such exercises last year

Destroyer Performs FONOP, U.S. Navy Disputes Chinese Claim That It Ousted Warship
The U.S. Navy is disputing a claim from China that it chased an American warship out of the South China Sea after the U.S. vessel performed a freedom of navigation exercise.   USS Benfold (DDG-65) on Wednesday sailed near the Spratly Islands – which China has staked a claim to – according to a news release from U.S. 7th Fleet.   The People’s Liberation Army (PLA) quickly criticized the FONOP and claimed it chased the U.S. guided-missile destroyer out of the waters, according to a report in state-owned media outlet CGTN.

China eyes more coal imports from Mongolia as supply shortage bites
At a meeting on Tuesday, China requested more coal from Mongolia to help offset an ongoing supply shortage      Mongolia has replaced Australia as China’s largest source of imported coking coal since the second half of last year

The ‘air breathing’ tech that China hopes can fuel a new generation of satellites
Chinese space authorities have devoted considerable resources to developing the technology    Researchers found that shock waves in space could complicate designs of the eyes in the sky, but have made headway in overcoming this

China’s Covid-hit travel market shows signs of recovery as Mid-Autumn Festival bookings surge
Interprovincial tour bookings for the upcoming Mid-Autumn Festival holiday have surged over the past two weeks, according to     But most travellers will be shunning long-distance trips for holidays closer to home, as the threat of Covid-related cancellations still lingers

Applying for a PU Letter to Visit China
China’s immigration rules during the COVID-19 pandemic have been strictly enforced. A population of 1.4 billion, coupled with increased urbanization over the past twenty years have made the specter of mass transmission a real possibility, hence the protocols. Foreign travel to China has been discouraged at this time specifically to prevent the spread of any imported covid strains entering the country while the authorities race to develop new vaccines and build a safe social environment.

How China’s GDP Growth Fails To Measure Its Standard Of Living: The Tragedy Of The Current Recentralization
Perhaps the most durable myth about China is that the Communist Party has “lifted a billion people out of poverty” and should be revered for that monumental contribution. This is inaccurate for a number of reasons. First, poverty is not a static state that is cured by delivering a set of material goods. If it were, then the U.S. would still be thanking FDR and the Democratic Party for lifting us out of Great Depression poverty. Second, China’s abject state of poverty was, of course, created by Mao Zedong and the Communist Party in the first place. Other Asian countries leapt ahead during the 1960 and 1970s. China was held back. But the most important reason to take this “lifting out of poverty” meme with a grain of salt is that poverty remains very real for two-thirds of Chinese, the two-thirds classified as “rural,” the two-thirds that investors in China never see. The best corrective to misunderstandings about this “invisible China” is a book that came out in 2020 and remains the most important book on China in a decade: Invisible China, by Scott Rozelle and Natalie Hell. The authors draw on years of work in China’s countryside, where they have conducted regular, extensive surveys.. China’s education attainment ranks lower than Brazil, Argentina, Mexico, Philippines, and South Africa The myopia keeps them from learning. Back in 2008, the MIT economist Yasheng Huang, in his book Capitalism with Chinese Characteristics, argued that China experienced a brief rural renaissance and a surge in growth during the 1980s. But the Communist Party’s fear of overthrow following the Tiananmen protests led to a dramatic centralization of power and shift of economic privilege decisively away from rural areas. Huang showed that measures that track the standard of living across China and the general well-being of the Chinese people show deterioration after the centralization. To climb out of the stagnation trap and deliver a better standard of living for its people, China must revert to a more liberal package of economic and political reforms, in fact to the reforms that were under way in the 1980s. That would mean a loosening of control. Under Xi Jinping, China is traveling in the opposite direction.

‘Reversing Gears’: China Increasingly Rejects English, and the World
A movement against Western influence threatens to close off a nation that succeeded in part by welcoming new ideas.

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