As Xi Jinping visits Europe, the role of China-Russia ties in EU relationship comes under microscope
TikTok tycoon Zhang Yiming now calls Singapore home – as do many Chinese tech titans these days
Welcome to this issue of The China Brief. Today is May 8, 2024. Here at The China Brief, we bring you the latest news on China's politics, economy, and society from global media sources, along with exclusive expert analysis. If you find our content helpful, please subscribe to our newsletter.
South China Morning Post
Chinese President Xi Jinping's visit to Europe has highlighted the role China plays in Europe's relationship with Russia. French President Emmanuel Macron and European Commission President Ursula von der Leyen both called for Beijing to take a tougher line on Russia's war in Ukraine. However, China did not change its position on the conflict. Chinese analysts said it was a crucial moment for European leaders to decide if they wanted to pull China closer to their orbit or push it away. While China and Europe share a common interest in seeking a political solution to the Ukraine war, Helena Legarda, lead analyst at the Mercator Institute for China Studies in Berlin, said it remained to be seen how far their mutual desire for peace could go towards ending the war.
South China Morning Post
UBS has predicted that the profitability of Chinese companies looks set to rise as the economy stabilises. The bank said that corporate profits fell in the first three months of this year after a downturn in the property market and weak domestic demand weighed on earnings. More than 5,000 companies on the mainland's three exchanges posted an average 4% decline in earnings YoY. Excluding the financial sector, the drop widened to 5% due to its large market weighting.
TikTok tycoon Zhang Yiming now calls Singapore home – as do many Chinese tech titans these days
South China Morning Post
ByteDance founder Zhang Yiming is living in Singapore while maintaining his Chinese citizenship, according to documents filed in TikTok's lawsuit against the US government. Zhang is part of a growing number of Chinese tech executives who have relocated to Singapore due to regulatory tightening and Covid-19 restrictions in China. Other tech entrepreneurs who have moved to Singapore include Alibaba CEO Eddie Wu and cryptocurrency pioneer Wu Jihan. Zhang's stake in ByteDance is estimated to be worth over $40 billion. The lawsuit indicates that ByteDance does not intend to sell TikTok as the deadline for divestment approaches, and instead wants the law requiring divestment to be declared unconstitutional.
Rise in Chinese espionage arrests alarms Europe
Guardian
European countries, including the UK, Germany and Belgium, are grappling with a growing wave of allegations about Chinese spying and espionage. Concerns are being raised that the pace of Chinese influence operations in Europe, through traditional espionage and more “greyzone” activity such as influence peddling and transnational repression, has intensified as attitudes towards China have hardened. China has dismissed the allegations of espionage as “malicious slander”.
Ursula von der Leyen is now a household name – and that could be Europe’s salvation
The Guardian
A new poll shows that Ursula von der Leyen, the current President of the European Commission (EC), has a much higher level of public recognition than previous EC presidents. This could provide an opportunity for EU leaders to push through much-needed reforms to address the continent's challenges, such as deeper defence integration and closer fiscal integration. However, von der Leyen's public profile also leaves her open to criticism, and there is a risk that the upcoming European Parliament elections could result in a larger bloc of radical-right populist and nationalist members than ever before.
South China Morning Post
The US International Development Finance Corporation (DFC) is facing legal obstacles that hinder its ability to compete with China's Belt and Road Initiative, according to a House panel. Since its launch, the DFC has faced criticism for its restrictions, reduced availability of funds and slow project approval. China has invested nearly $1tn in Belt and Road projects worldwide, while the DFC has a maximum contingent liability of $60bn. The DFC's CEO, Scott Nathan, called on Congress to review eligibility criteria for funding and increase the budget for additional staff to speed up project approvals.
South China Morning Post
Ren Chunsheng, leader of the preparatory team for the Complaint Mediation Centre of the National Financial Regulatory Administration (NFRA), has been detained by China's top anti-corruption watchdog, the Central Commission for Discipline Inspection (CCDI). Ren is the first senior official at the new financial regulator to be targeted in an anti-corruption investigation. The NFRA was established in March 2018 as part of a major overhaul of state organs, and the Complaint Mediation Centre is a key mechanism for handling consumer complaints about financial institutions.
Baidu PR chief's videos spark backlash over harsh workplace culture
Nikkei Asia
Baidu, the Chinese search engine giant, is facing criticism after its head of PR, Qu Jing, released videos on TikTok's Chinese sister Douyin in which she positioned herself as a tough manager who was unconcerned about her subordinates' personal well-being. Qu also claimed she could prevent anyone who complained about her from finding a job in the industry. The controversy highlights the tensions in China's tech industry and the friction between older management and younger workers. Some tech companies have already suspended the "996" practice of working from 9am to 9pm six days a week as a result of public and regulatory pressure.
AI boom fuels demand for major data centre deals in Asia-Pacific this year
South China Morning Post
Private equity investors and asset managers are preparing for a surge in mergers and acquisitions (M&A) and investments related to data centres in the Asia-Pacific region, as the demand for digital infrastructure grows with the boom in artificial intelligence. The Asia-Pacific region has led M&A activity in the global data centre market this year, with M&A value totalling $840.47m, more than half of the global total, according to LSEG data. M&A activity in the region's data centre market is expected to intensify in 2024.
Chinese leader Xi Jinping set to meet Serbian officials on the second leg of his Europe tour
Associated Press
Chinese leader Xi Jinping has arrived in Serbia in a visit that is hoped by the Balkan country to boost its entry to the European Union. Xi is due to meet top Serbian officials and later will visit Hungary, which is also considered to be a friendly partner of China in Europe. Serbia is viewed by China as a key country in its Belt and Road initiative, which is aimed at increasing Beijing's influence in Europe.
Phantom forces at work in China's bull market rally
Nikkei Asia
The MSCI China Index has risen 25.2% since late January, putting it in bull market territory, but the stock market rally may be a fleeting one if President Xi Jinping’s team fails to tackle China’s protracted housing crisis. The property sector is the linchpin of China’s economy, and with housing becoming an increasingly risky bet, it remains to be seen whether Xi’s pledge to address the situation will be successful. The latest stock rally in China could be another temporary upturn if the government fails to execute its plans effectively.
Morgan Stanley warns against chasing China stocks rally as rebound may stall
South China Morning Post
Morgan Stanley has warned investors to approach Chinese stocks with caution as the market may now be overbought, and technical signs suggest that gains will wane. The bank suggests that although China's economy has stabilised, consumption and the housing market still need time to pick up, leading to ongoing pressure on deflation and corporate earnings. The bank's warning comes as other investment banks such as UBS and Goldman Sachs have turned positive on Chinese stocks, due to market reforms and a pro-growth tone from the recent Politburo meeting.
Elon Musk floated robotaxi launch in China, Chinese state media says
Al Jazeera
Elon Musk has reportedly suggested testing Tesla's full self-driving feature in China by deploying it in robotaxis. During Musk's visit to China last month, officials told him that Beijing welcomes Tesla to conduct robotaxi tests in the country. However, the Chinese authorities have not immediately approved Tesla's widespread use of the full self-driving feature. Tesla is still required to obtain approval from Chinese regulators to collect and transfer data used to train its software before it can fully roll out the feature. Tesla operates its largest manufacturing plant outside of the US in Shanghai, where about half of its vehicles are produced.
South China Morning Post
Chinese regulators are increasing the scrutiny of IPO hopefuls in order to slow down the pace of fresh fund raisings and boost secondary markets. The regulators are inspecting old business deals and the personal bank accounts of senior executives, and the heightened scrutiny has resulted in a growing list of local companies withdrawing IPO applications. More than 130 Chinese IPO candidates have terminated their listing plans this year, and total funds raised via IPOs have plunged nearly 90% to $2.6bn in the first four months, the lowest since 2013.
Former Chinese defence minister Wei Fenghe emerges after months of speculation
South China Morning Post
The appearance of former Chinese defence chief Wei Fenghe's name on a floral tribute at a funeral suggests that he may be politically safe, following months of speculation about his fate. Wei disappeared from the public eye after his successor was sacked from the defence minister role in October 2023. Wei's absence from official events and the Lunar New Year greetings list were seen as signs that he may be in trouble. The Chinese military has been a target of President Xi Jinping's anti-corruption campaign, with several senior officials being purged.
Albanese rejects China’s argument that Australia was at fault for dangerous aircraft encounter
Associated Press
China's account of a recent clash between Chinese and Australian military aircraft in international airspace over the Yellow Sea has failed to undermine Australia's objections. The Chinese and Australian governments lodged official protests over the incident, with both blaming the other for the use of flares against an Australian navy helicopter by a Chinese fighter jet. Australian Prime Minister Anthony Albanese said that he rejected China's argument that Australia was at fault, pointing to the Chinese Foreign Ministry's confirmation that the helicopter had flown within international airspace. He described the incident as "unprofessional and unacceptable".
US cancels export licenses of suppliers to China’s Huawei
Al Jazeera
The US has revoked some licences that allow companies to ship goods, such as chips, to sanctioned Chinese telecommunications equipment maker Huawei Technologies. The move comes after the release last month of Huawei’s first AI-enabled laptop, the MateBook X Pro powered by Intel’s new Core Ultra 9 processor, which drew fire from Republican lawmakers. The US Department of Commerce declined to specify which licences have been withdrawn. The move, first reported by Reuters, comes after concerted pressure by Republican China hawks in Congress who have been urging the Biden administration to take tougher action to thwart Huawei.
In rapidly aging China, millions can't afford to retire
Japan Times
Many rural migrants in China are facing a difficult decision as they approach retirement age. With limited options for pension and healthcare benefits, many are forced to continue working into their old age. For those who do retire, returning to their village and living off a small farm and monthly pensions is often the only option. This highlights the challenges faced by China's aging population and the need for better social security systems.
China’s overcapacity dilemma solvable with ‘painful’ industrial revamp, scholars say
South China Morning Post
Advisers to Beijing have called for China to accept the "painful restructuring" of certain industries to alleviate concerns over overcapacity. Lu Feng, a professor at the National School of Development at Peking University, argued that inaction could impede China's economic recovery and lead to increased scrutiny from the US and Europe. He named petrol cars, petrochemicals, low-end computer chips, batteries and electric vehicles as examples of industries which require rearrangement. China's authorities have already sought to curb overcapacity, however, they have denied allegations that they are flooding global markets with cheap goods to crowd out competitors.
China seen hacking systems to build profiles of U.K. defense personnel
Japan Times
Chinese hackers are suspected of using data obtained from cyberattacks on UK government institutions to build profiles of British military personnel and individuals in sensitive roles. The UK Ministry of Defence recently revealed that state-backed hackers had accessed the names, bank account details, and addresses of thousands of soldiers, sailors, and air force pilots. While Secretary of State for Defence Grant Shapps did not directly attribute blame, he stated that the involvement of another state could not be ruled out. This comes as part of China's expanding espionage efforts against the US and its allies.
Banned Chinese cotton found in 19% of U.S. and global retailers' merchandise, study shows
Japan Times
A study has found that traces of banned Chinese cotton were found in 19% of a sample of merchandise sold at US and global retailers in the past year. The study, conducted by researchers from natural resource analytics firm Stratum Reservoir and DNA lab Applied DNA Sciences, analysed garment samples, cotton swabs and shoes from big box retailers and e-commerce platforms. The study used isotopic testing to link cotton to specific geographic areas and tested the merchandise for traces of cotton from Xinjiang, the far western region of China. The firms declined to name the retailers whose merchandise they tested.
Ex-Google CEO Schmidt says he considered buying TikTok
South China Morning Post
Former Google CEO Eric Schmidt has confirmed that he considered purchasing TikTok but is no longer interested in acquiring the popular video-sharing app. Schmidt believes the US would be better off regulating TikTok rather than banning it or subjecting it to judicial action. ByteDance, TikTok's parent company, is required to sell the app within a year under a new federal law, or it will face a ban in the US. ByteDance is unlikely to sell the core technology that powers TikTok's algorithm, making it difficult and expensive to recreate.
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