China Condemns US’s Overcapacity Claim Just Before Blinken Visit; China acquired US-restricted Nvidia AI chips built in Super Micro, Dell and Gigabyte Technology servers, tenders show
Chinese Villagers Jumped at the Deal of a Lifetime—Then It Turned Sour: The country’s real estate crisis has dealt a particularly harsh blow to homeowners in poorer regions
Welcome to this issue of The China Brief. Today is April 23, 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’s Economy Is ‘Failing,’ U.S. Indo-Pacific Commander Says
WSJ
The article discusses statements made by Admiral John Aquilino, head of the U.S. Indo-Pacific Command, asserting that China's economy is failing. Aquilino made these remarks during a briefing in Tokyo, expressing skepticism about China's reported economic growth figures and highlighting a real estate market crash as a significant factor in the country's economic decline. He also questioned the accuracy of China's defense budget figures, suggesting they may be higher than officially reported.
WSJ
The article recounts the story of Bella Zhao's family, who exchanged their aging townhouse and farmland for five apartments and two stores offered by property developers in 2009. The developers, led by Wanda Group, had plans to transform their village into a high-end resort but the ambitious project stalled, leaving Zhao's properties empty. The real estate downturn has left many homeowners, like Zhao, unable to sell their properties despite desperate attempts. The market's economic problem is an imbalance of too many sellers and too few buyers, exacerbated by villagers trading homes for new apartments, adding to the oversupply. This crisis has particularly affected smaller towns and villages, where the real estate sector was vital to the local economy. While local governments are encouraging home purchases, it offers little help to homeowners like Zhao, who are unable to sell their properties. Zhao, having moved away from the village, hopes to sell her property portfolio for as much as $500,000 and invest elsewhere, away from China's unstable property market.
Bloomberg
China strongly criticized the US for accusing them of industrial overcapacity just before Secretary of State Antony Blinken's visit. A Chinese diplomat labeled the accusation as malicious, aimed at hindering China's industrial development for competitive advantage. This attack indicates potential difficult discussions during Blinken's trip, coinciding with tensions over various issues including military exercises near the South China Sea and Taiwan. While Beijing's response has been relatively restrained, statements from the Foreign Ministry imply growing irritation towards US actions. Despite this, both sides stress the need to effectively manage their disagreements. Blinken's visit follows recent interactions between top officials from both countries, with a focus on addressing concerns about China's support for Russia amid the Ukraine crisis. Additionally, reports suggest Washington may impose sanctions on Chinese banks to curb their support for Moscow. Chinese officials maintain their stance of non-involvement in the Ukraine crisis and reject accusations of selfish motives.
South China Morning Post
Chinese bubble-tea chain Sichuan Baicha Baidao Industrial had a disappointing first day of trading on the Hong Kong Stock Exchange, following the city's biggest initial public offering (IPO) of the year. Shares in the company slumped 27% to HKD12.80 ($1.65) following a 38% intra-day drop. The offering raised HKD2.6bn, however, the company's high valuation and the challenging environment in the Hong Kong IPO market were cited as reasons for the poor first-day performance.
South China Morning Post
Apple has added eight Chinese suppliers and removed four contractors in China during the past financial year, according to its newly published supplier list. Despite efforts to diversify its supply chain and shift production to other parts of Asia, mainland China remains Apple's main manufacturing base. Of its 187 disclosed suppliers, over a third are located in China. The newly added Chinese suppliers include Baoji Titanium Industry and San'an Optoelectronics, among others. While Apple has been working to reduce its reliance on Chinese suppliers, mainland China accounted for the majority of the company's 13 new suppliers last year.
German EU lawmaker’s aide is arrested on suspicion of spying for China
Associated Press
A German man who works for a German lawmaker in the European Parliament has been arrested on suspicion of spying for China. The suspect, named Jian G., is accused of working for a Chinese intelligence service and passing on information on negotiations and decisions in the European Parliament. He is also alleged to have spied on Chinese dissidents in Germany. The arrest comes a day after three Germans suspected of spying for China were arrested in a separate case. In addition, British prosecutors announced on Monday that a former researcher and another man were charged with spying for China.
South China Morning Post
Mainland Chinese universities and research institutes have acquired high-end Nvidia artificial intelligence (AI) chips through resellers, despite US trade restrictions. A Reuters review of hundreds of tender documents found that 10 Chinese entities acquired advanced Nvidia chips embedded in server products made by Super Micro Computer, Dell Technologies, and Taiwan’s Gigabyte Technology. The servers contained Nvidia’s most advanced chips, according to the previously unreported tenders fulfilled between 20 November and 28 February.
China to revise statistics law to fight data fraud
Yahoo US
China is planning to revise its statistics law in an attempt to fight persistent data fraud, according to the state-run Xinhua news agency. The government has repeatedly vowed to investigate and punish officials for forging economic data or interfering in statistical work, amid concerns about the reliability of Chinese data. The proposed changes will help strengthen statistical supervision and authorities will be able to pin down legal responsibility. The amendment will also increase fines for illegal behaviour by firms and public institutions that refuse to or delay reporting data.
South China Morning Post
China's stock-market watchdog, the China Securities Regulatory Commission (CSRC), is revising the country's securities investment fund law in response to the nine guidelines recently unveiled by the country's cabinet. The revisions are expected to increase accountability for fund managers, enhance investor protection and boost confidence among overseas investors. The CSRC is also seeking to strengthen the role of fund managers and custodians and increase the cost of illegal activities and rule violations.
China’s small towns thrive as more opt out of demanding megacity life
Japan Times
Zhao Xiaowei, a former barista in Beijing, has returned to his hometown in northeastern China to open his own boutique cafe. Tired of struggling to make a living in the expensive capital city, Zhao now earns more money and enjoys a better quality of life by running his own business in his hometown. He serves high-quality drip coffee made with Geisha beans for 60 yuan ($8.30) per cup. Zhao values being close to his family and having a hot meal waiting for him when he gets home.
Probe of PwC's Evergrande conduct casts shadow on Big Four auditors
Nikkei Asia
An investigation into PwC's audit work on China Evergrande Group has raised concerns over the impact on the Big Four consulting firms' relationships with Chinese companies and may lead to tighter accounting procedures on existing clients. Regulators in Hong Kong are investigating PwC over whistleblower allegations about the firm's handling of Evergrande, which is now in liquidation. The probe follows a fine issued to Hengda Real Estate, a core mainland entity of Evergrande, for inflating revenue. PwC has called a special partners meeting in response to an open letter making allegations about the audit of Evergrande.
Tensions between Beijing and Washington are the biggest worry for US companies in China, report says
Associated Press
A survey by the American Chamber of Commerce in China revealed that simmering tensions between Beijing and Washington are the top concern for American companies operating in China. Other concerns include inconsistent and unclear policies, rising labour costs, and data security issues. The report also highlighted that despite Chinese leaders insisting that Beijing welcomes foreign businesses, many still face barriers to investment and operations. The report made recommendations for both China and the US, including the need for high-level exchanges and communication, and for China to create transparent and practical economic policies which treat domestic and foreign entities equally.
Hong Kong stock market rebound continues, spurred by Chinese securities regulator’s support pledge
South China Morning Post
Hong Kong stocks rose for a second day as investors reacted positively to measures announced by China's securities regulator to support the Hong Kong market. The Hang Seng Index rose 1.5%, following a 1.8% rise the previous day. The Hang Seng Tech Index rose 2.6%, while the Shanghai Composite Index retreated 0.5%. Stocks were also boosted by an overnight rally in US shares amid expectations that tech companies will deliver strong earnings results. Investors will be watching closely for corporate results, with seven companies on the Hang Seng Index due to release their report cards this week.
WADA rejects cover-up charge over investigation into Chinese swimmers
Japan Times
The World Anti-Doping Agency (WADA) has denied allegations of a cover-up in its investigation into Chinese swimmers testing positive for a prescription heart drug. Reports over the weekend claimed that 23 Chinese swimmers had tested positive for trimetazidine (TMZ), a drug that can enhance performance. The head of the United States Anti-Doping Agency (USADA), Travis Tygart, accused WADA and the Chinese anti-doping body of secretly hiding these positive tests. WADA has stated that it will take "whatever action necessary" in response to the allegations.
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