BREAKING: China’s top legislature to meet November 4-8, as market awaits stimulus plans
Apple’s Tim Cook meets China’s commerce minister, the second regulator he met this week
Welcome to this issue of The China Brief. Today is October 25, 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.
China robotaxi IPOs may struggle to find their way
Reuters BreakingViews
Pony AI and WeRide, two companies in the autonomous vehicle sector, are preparing for listings in the US, but face challenges as shares of similar companies like Mobileye and Hesai have plummeted in value over the past year. Both companies have ambitious technology and projects, with Pony operating a fleet of driverless taxis and trucks in China, and WeRide offering a paid high-automation taxi service. However, their business models rely on technology that is still largely in testing phases, and both companies remain unprofitable, with modest sales growth and significant losses.
Investor confidence in the autonomous vehicle market is waning, as highlighted by Tesla's recent event lacking a clear commercialization strategy. Other companies like Mobileye have seen significant drops in market value. Despite this, Pony and WeRide are seeking high valuations that suggest rapid growth, with WeRide's projected worth at over 100 times its sales and Pony's potentially at over 20 times its forward sales. Without a significant increase in revenue, these new automotive ventures may be asking investors to prioritize technology over immediate profitability.
https://www.breakingviews.com/considered-view/china-robotaxi-ipos-may-struggle-to-find-their-way/
China’s top legislature to meet November 4-8, as market awaits stimulus plans
South China Morning Post
China's top legislature, the National People's Congress (NPC), will hold a meeting from November 4-8 to address various economic issues. This meeting coincides with the upcoming US presidential election on November 5 and is seen as a strategic response to potential geopolitical developments. The agenda will cover financial work, state asset management, and law revisions, although no specific bills related to the financial ministry or budget plans have been announced yet. The timing suggests that Chinese policymakers aim to manage any fallout from the US election and provide updates on the country's economic stimulus efforts.
https://www.scmp.com/economy/economic-indicators/article/3283851/chinas-top-legislature-meet-november-4-8-market-awaits-stimulus-plans?utm_source=rss_feed
Apple’s Tim Cook meets China’s commerce minister, the second regulator he met this week
South China Morning Post
Apple CEO Tim Cook met with Chinese Minister of Commerce Wang Wentao during his second visit to China this year, where they discussed enhancing economic cooperation between the US and China. Cook emphasized Apple's commitment to investing in Chinese supply chains, describing China as a crucial market for the company. He also stated that Apple aims to act as a bridge between the two countries in economic and trade matters. The meeting occurred amid growing competition from local smartphone manufacturers like Huawei and uncertainty regarding the launch of Apple's new AI services in China, which requires regulatory approval. Despite challenges, Apple's iPhone 16 has recently regained popularity in the Chinese market, placing the company back in the top rankings.
https://www.scmp.com/news/article/3283866/apples-tim-cook-meets-chinas-commerce-minister-second-regulator-he-met-week?utm_source=rss_feed
U.S. steps up export control enforcement efforts in Taiwan
Nikkei Asia
The U.S. is intensifying efforts to enforce export controls on Chinese companies like Huawei, particularly in Taiwan and other parts of Asia. As part of this initiative, a regional export control officer from the U.S. Commerce Department was stationed in Taiwan in June 2023 to assist local companies in complying with American regulations. Ariel Joshua Leinwand, the officer, has been involved in training tech firms, including major suppliers like Taiwan Semiconductor Manufacturing Co. (TSMC), on U.S. export controls.
The U.S. has also requested additional information from TSMC regarding potential circumventions of export restrictions related to Huawei, which has been on a trade blacklist due to its alleged military ties. TSMC claims it has not supplied Huawei since September 2020 and is committed to compliance with export regulations. Meanwhile, Japan has implemented export restrictions that align with U.S. policies, further isolating China in high-tech sectors.
Taiwan, as a leading semiconductor hub, is enhancing its own export controls to match U.S. standards, particularly concerning AI server shipments. The collaboration between Taiwan and the U.S. aims to ensure that Taiwanese tech suppliers fully understand and adhere to the complexities of U.S. export regulations.
https://asia.nikkei.com/Business/Technology/U.S.-steps-up-export-control-enforcement-efforts-in-Taiwan
Can China’s Xi and India’s Modi reset rocky ties after border detente?
Al Jazeera
The recent BRICS summit in Kazan, Russia, showcased significant geopolitical developments, particularly regarding India and China's relations. Russian President Vladimir Putin hosted the summit, where Indian Prime Minister Narendra Modi and Chinese President Xi Jinping held their first substantial dialogue in five years, aiming to reset ties strained by a deadly 2020 border clash. An agreement for troop disengagement along their contested border was announced, which analysts view as a pivotal moment in Asia's geopolitical landscape, indicating India's potential shift away from reliance on the U.S. amid rising tensions with China.
However, uncertainties remain about the details of the agreement and the actual status of the border, as both countries have not clarified the specifics. Despite Modi's assurance that no territory has been lost to China, experts express skepticism about the clarity of the situation. Additionally, India's economic ties with China have been strained since the 2020 clash, but there are calls for rethinking these relations to boost investment and job creation. Overall, while the meeting marks a step toward improved relations, deeper strategic concerns between India and China persist.
https://www.aljazeera.com/news/2024/10/25/can-china-and-india-reset-their-rocky-relationship-after-border-detente
Star Chinese fund manager bets on Alibaba, liquor stocks for shareholder returns
South China Morning Post
Chinese fund manager Zhang Kun has significantly invested in Alibaba, making it the second-largest holding in his US$8.5 billion portfolio. He purchased 40.4 million shares for 4 billion yuan (US$561 million), representing 9.1% of his fund's assets. Zhang noted that leading technology and consumer stocks offer attractive shareholder returns, bolstered by recent Chinese government stimulus measures. Alibaba's shares surged 56% in the third quarter due to a share buy-back plan and improving e-commerce performance. Zhang also increased investments in other liquor companies while reducing his stake in Tencent Holdings.
https://www.scmp.com/business/china-business/article/3283850/star-chinese-fund-manager-bets-alibaba-liquor-stocks-shareholder-returns?utm_source=rss_feed
Ukraine war: what does North Korea gain by sending troops to Russia?
South China Morning Post
North Korea has reportedly dispatched troops to Russia, potentially seeking military technology and support amid the Ukraine conflict. Analysts suggest this move helps Russia violate international sanctions and sovereignty, with North Korean troops trained to operate military equipment. The deployment complicates North Korea’s relations with Europe, as it aligns with Russia against Ukraine. Experts warn of risks for North Korea, including potential backlash and casualties. Additionally, the collaboration could alter strategic calculations for the U.S. and South Korea regarding a possible conflict on the Korean peninsula. North Korea’s actions signify a deeper partnership with Moscow amid ongoing international tensions.
https://www.scmp.com/week-asia/politics/article/3283848/ukraine-war-what-does-north-korea-gain-sending-troops-russia?utm_source=rss_feed
Beijing offers private firms more access to national projects and research
South China Morning Post
Beijing is taking steps to attract more private investment to support its economic growth and stabilize the job market. The National Development and Reform Commission (NDRC) has announced plans to enhance private enterprises' access to state research facilities and national projects, particularly for those with strong innovation capabilities. The NDRC aims to guide qualified private firms in undertaking high-risk, high-value technological research and facilitate talent transfer from universities to these companies. This initiative is part of a broader effort to boost business confidence in the private sector, which is crucial for the economy.
However, private entrepreneurs remain skeptical due to previous unmet promises and ongoing challenges such as market access barriers and funding difficulties. The recently proposed private economy promotion law aims to address these issues but has been criticized for its lack of specific targets. Business sentiment in the private sector has declined, exacerbated by strict Covid-19 measures and regulatory crackdowns. The private sector plays a significant role in China's economy, accounting for over 60% of GDP and employing more than 80% of the urban workforce. Recent government data indicates a slight decline in private investment, highlighting the need for effective policy implementation.
https://www.scmp.com/economy/china-economy/article/3283822/beijing-offers-private-firms-more-access-national-projects-and-research?utm_source=rss_feed
Millions joined a livestream selling tickets to space on a Chinese rocket
CNN
Deep Blue Aerospace has sold two tickets for a planned 2027 space tourism flight, priced at approximately $140,000 each. The tickets sold out immediately during a livestream on the Chinese shopping platform Taobao, attracting around 3 million viewers. The reusable Nebula-1 rocket, intended for the trip, is still in development after a recent test failure. Chinese companies are increasingly entering the space tourism market, with plans for future flights and ticket sales. Deep Blue Aerospace aims to compete globally as China seeks to enhance its space capabilities, alongside established firms like Blue Origin and Virgin Galactic.
https://edition.cnn.com/2024/10/25/china/china-space-tourism-ticket-sale-livestream-intl-hnk/index.html
China, Brics bloc not ready to reject US dollar despite Russian entreaties
South China Morning Post
Despite concerns over US financial sanctions, Brics nations are hesitant to abandon the US dollar. Russian President Putin's recent summit highlighted this reluctance, as he acknowledged that Brics countries are not actively pursuing an alternative payment system. Experts suggest that while bilateral currency agreements may offer some solutions, fully bypassing the US dollar remains challenging. Russia, facing severe sanctions after its Ukraine invasion, is particularly motivated to seek alternatives, such as local currencies and new payment systems. Former PBOC governor Zhou Xiaochuan emphasized the importance of local currencies for monetary sovereignty while acknowledging the US dollar's continued significance.
https://www.scmp.com/economy/global-economy/article/3283877/china-brics-bloc-not-ready-reject-us-dollar-despite-russian-entreaties?utm_source=rss_feed
Hong Kong customs seizes HK$100 million of contraband goods, including computer processors
South China Morning Post
Hong Kong customs seized contraband worth HK$100 million (US$12.9 million) from a shipment intended for Taiwan, including HK$67 million in computer processors. The cargo, which also contained laptops and smartwatches, was found in a container declared to hold electronic accessories. Authorities suspect the goods were meant for mainland China to evade up to HK$10 million in tariffs. An ongoing investigation has not yet resulted in arrests. Customs has previously intercepted multiple smuggling attempts, highlighting the shifting tactics of cross-border syndicates to evade detection.
https://www.scmp.com/news/hong-kong/law-and-crime/article/3283882/hong-kong-customs-seizes-hk100-million-contraband-goods-including-computer-processors?utm_source=rss_feed
Chinese and Russian coastguard chiefs call for more cooperation on ‘far seas’
South China Morning Post
Chinese and Russian coastguards have agreed to enhance cooperation on maritime operations in "far seas" following recent joint patrols in the Arctic and northern Pacific. During a meeting in Beijing, the coastguard leaders called for deeper collaboration and pledged to improve long-distance joint operations to support their strategic partnership. This meeting marked the second since a memorandum of understanding was signed last year to strengthen maritime law enforcement cooperation. The coastguards successfully conducted joint exercises, focusing on maritime security, law enforcement, and rescue operations. The Arctic region, particularly the Northwest Passage, holds strategic significance for both countries, especially as climate change could open new shipping routes. Additionally, recent discussions between military officials from both countries indicate a unified stance on global issues and a commitment to expanding military ties amidst pressure from the US and its allies.
https://www.scmp.com/news/china/military/article/3283880/chinese-and-russian-coastguard-chiefs-call-more-cooperation-far-seas?utm_source=rss_feed
China’s Hesai to keep challenging Pentagon’s blacklist decision
South China Morning Post
Hesai Group announced its intention to continue legal proceedings against the US government after being reinstated on the Pentagon's blacklist of Chinese companies linked to the military. The US Justice Department indicated that the Pentagon had initially removed Hesai from the list but decided to relist it based on new information. Hesai, known for its lidar technology used in self-driving cars, was added to the blacklist in January, along with other firms. The company, which claims its products are solely for commercial and civilian use, filed a lawsuit against the US government in May, asserting it has no ties to the military. Hesai aims to address what it describes as mistakes in the listing process. The move comes amid similar legal actions, including a lawsuit from Chinese drone maker DJI against the US Defense Department.
https://www.scmp.com/tech/tech-war/article/3283773/chinas-hesai-keep-challenging-pentagons-blacklist-decision?utm_source=rss_feed
Huawei staff arrives at new mega-campus, hub of China’s tech drive
South China Morning Post
Huawei Technologies has inaugurated a sprawling campus in Shanghai's suburb to enhance China's technological self-sufficiency amid US sanctions. The Lianqiu Lake campus, significantly larger than Google's headquarters, will accommodate around 35,000 researchers, with many expected to arrive by February 2024. The facility supports Huawei's semiconductor arm, HiSilicon, and aims to attract top talent, contributing to China's push for technological breakthroughs. The local real estate market is experiencing a surge in property prices due to the influx of tech workers. Huawei continues to innovate, recently launching advanced chips and its HarmonyOS mobile operating system.
https://www.scmp.com/tech/big-tech/article/3283700/huawei-staff-arrives-new-mega-campus-hub-chinas-tech-drive?utm_source=rss_feed
Chinese investment banks turn inward as global dreams fade from view
South China Morning Post
Jiang Chengjun, the former head of investment banking at Haitong Securities, was arrested in late August upon returning to China to face allegations of "work-related" crimes. This high-profile arrest underscored the challenges faced by Chinese financial institutions as they aspire to compete globally. Haitong, one of China's top brokerages, has struggled with losses and was delisted from the Hong Kong stock exchange earlier this year. Analysts attribute the difficulties to overreliance on mainland operations, inadequate compliance, and fierce competition in Hong Kong, which complicates their ambitions of becoming significant players on the international stage.
Despite recent stimulus measures from Beijing aimed at revitalizing the mainland economy, the long-term profitability of Chinese brokers remains uncertain due to fundamental issues within the sector. President Xi Jinping has emphasized the need for China to evolve into a "financial superpower" with a robust regulatory environment and talent pool, yet domestic challenges hinder the potential for overseas expansion. Experts warn that reliance on the domestic market could raise sustainability concerns, while servicing international clients presents its own set of difficulties due to intense competition.
The proposed merger between Guotai Junan and Haitong Securities signifies an effort to consolidate resources and enhance competitiveness, but analysts caution that the merged entity would still lag behind leading U.S. investment banks. As Chinese financial institutions increasingly seek opportunities in emerging markets—diverging from traditional Western avenues—Hong Kong's status as a global financial hub may be jeopardized. Political and economic changes have diminished the influence of Western investors in Hong Kong, leading to concerns that the city may struggle to regain its former prominence in the international financial landscape.
https://www.scmp.com/economy/china-economy/article/3283690/chinese-investment-banks-turn-inward-global-dreams-fade-view?utm_source=rss_feed
IMF chief warns that world risks falling into slow-growth rut and urges China to enact reforms
Associated Press
The IMF warns that the global economy, facing geopolitical tensions and high debt, risks stagnation with slow growth. Managing Director Kristalina Georgieva highlights the need for China to take decisive actions to revitalize its economy, which is projected to grow slowly. Global economic growth is expected at 3.2%, with trade losing its growth momentum. While inflation is stabilizing, many individuals still feel economic uncertainty. Georgieva emphasizes the importance of shifting China's focus from exports to consumer spending to foster more reliable economic growth.
https://apnews.com/article/imf-world-economy-debt-inflation-32b7b5fe50176a680a380835e7113723
A female comedian has Chinese men up in arms
Economist
Yang Li, a stand-up comedian, has faced backlash from Chinese men for her humorous remarks about confidence and appearance. Her comments from a streamed show four years ago continue to provoke negative reactions. Recently, on October 18th, JD.com, a major e-commerce company in China, ended its partnership with Yang due to ongoing complaints from offended male audiences. However, women's support for Yang is growing in response to the backlash.
https://www.economist.com/china/2024/10/24/a-female-comedian-has-chinese-men-up-in-arms
How China is trying to win back foreign tourists
Economist
Before the COVID-19 pandemic, China was the top tourist destination in Asia, with its travel agencies managing 8.6 million tourist visits in the first half of 2019. Foreign entries and exits totaled 47.7 million during that period. However, tourism numbers significantly declined during the pandemic and have not fully recovered, with only 3.1 million tourist visits and 29.2 million foreign entries and exits recorded in the first half of the current year.
https://www.economist.com/china/2024/10/24/how-china-is-trying-to-win-back-foreign-tourists
TikTok owner ByteDance faces flagging growth as e-commerce rivals, geopolitics take toll
South China Morning Post
ByteDance, the owner of TikTok, is experiencing reduced momentum in 2024, with significantly slower revenue growth and narrowed profit margins compared to last year. The company’s revenue from January to September fell short of expectations, particularly with its e-commerce feature, TikTok Shop, failing to meet gross merchandise volume targets. Contributing factors include sluggish advertising spending in China and high expenditures on AI. Additionally, TikTok faces challenges in the U.S., including potential bans and lawsuits, while competing with rivals in the e-commerce sector.
https://www.scmp.com/tech/big-tech/article/3283710/tiktok-owner-bytedance-faces-flagging-growth-e-commerce-rivals-geopolitics-take-toll?utm_source=rss_feed
Number of Chinese migrants at US-Mexico border drops to lowest count of the year
South China Morning Post
The number of Chinese migrants attempting to cross the US southern border illegally has significantly decreased, reaching its lowest monthly count this year in September with 1,326 encounters, down from 2,198 in June. This decline follows the implementation of new asylum processing restrictions by President Biden in June, which limits asylum claims when illegal crossings exceed certain thresholds. The peak of Chinese migrants trying to enter the US occurred in December 2022, with 5,980 encounters.
Overall, migrant encounters at the southern border have also dropped, with September reporting the lowest total of 101,790. The Biden administration has been under pressure to manage the influx of migrants, leading to nearly 400 repatriation flights to various countries, including China. Recent coordination with China's immigration authorities has improved repatriation efforts.
Factors contributing to the decline in Chinese migrants include the suspension of Ecuador's visa-free program for Chinese travelers and Panama's new flight arrangements to deter US-bound migration. The article highlights the ongoing challenges and changing dynamics in migrant flows between China and the US.
https://www.scmp.com/news/china/article/3283762/number-chinese-migrants-us-southern-border-drops-lowest-count-year?utm_source=rss_feed
Involution? The biggest threat to China’s quantum computing field is internal risk: expert
South China Morning Post
China must urgently cultivate elite talent in quantum computing to foster innovation, warns Yu Dapeng from the Chinese Academy of Sciences. Despite substantial public funding, stagnation is attributed to insufficient emphasis on talent development and internal competition leading to "involution." Yu cites historical setbacks, such as disruptions during the Cultural Revolution, which hindered scientific progress. China aims to lead in quantum technology by 2035, enhancing its capabilities in various sectors. The country has developed a complete quantum computing system but faces challenges in establishing a robust supply chain and fostering collaboration among diverse experts.
https://www.scmp.com/news/china/politics/article/3283730/involution-biggest-threat-chinas-quantum-computing-field-internal-risk-expert?utm_source=rss_feed
The 'Trump trade' risk has Asia re-buckling its seatbelts
Nikkei Asia
William Pesek discusses the potential implications of a second Trump presidency on Asia, highlighting concerns over trade wars, tariffs, and geopolitical instability. With Trump threatening high tariffs on China and taxes on vehicles from Mexico, countries like Japan and South Korea face economic risks. Trump's unpredictable policies could also destabilize U.S. alliances and impact financial markets, especially if he attempts to interfere with the Federal Reserve. Even if Trump loses, the threat of unrest could lead to further economic consequences. Overall, the uncertainty surrounding U.S. leadership poses significant challenges for Asia.
https://asia.nikkei.com/Opinion/The-Trump-trade-risk-has-Asia-re-buckling-its-seatbelts
CATL, China’s king of EV batteries, unveils new product for hybrid cars amid rising demand
South China Morning Post
Contemporary Amperex Technology (CATL) has introduced its new Freevoy Super Hybrid Battery, which allows hybrid cars to travel up to 400km solely on battery power, reinforcing CATL's status as the leading electric vehicle (EV) battery manufacturer. This innovation aims to address consumer concerns about range anxiety in mainland China, where there is a growing preference for hybrid vehicles that combine battery and combustion engine technology. The Freevoy battery can provide up to 280km of range with just a 10-minute charge, surpassing the typical range of existing plug-in hybrid batteries. CATL plans to equip around 30 car models with this battery by the end of 2025, with major clients including Tesla and BMW. The demand for hybrids is increasing, with hybrid cars accounting for over 41% of EV deliveries in July 2024, up from 30% in 2023. CATL currently holds a 37.1% share of the global EV battery market, as the penetration rate for EVs in China continues to rise.
https://www.scmp.com/business/china-business/article/3283724/catl-chinas-king-ev-batteries-unveils-new-product-hybrid-cars-amid-rising-demand?utm_source=rss_feed
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