China cuts key rate after Xi’s big meeting disappoints investors;Summer of devastating floods shows steep challenge for China as it grapples with extreme weather
Lame duck or legacy maker? How Biden announcement could affect US relations with foreign leaders
Welcome to this issue of The China Brief. Today is July 22, 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 cuts key rate after Xi’s big meeting disappoints investors
Japan Times
China has surprised investors by cutting interest rates in an attempt to support the slowing economy. The People's Bank of China cut the seven-day reverse repo rate, a key short-term policy rate, for the first time in almost a year. Chinese banks also lowered their main benchmark lending rates, making it cheaper to borrow for mortgages and other loans. The interest rate cuts come after a major Communist Party meeting failed to provide any short-term stimulus for the economy.
https://www.japantimes.co.jp/business/2024/07/22/markets/china-key-rate-xi-investors/
Summer of devastating floods shows steep challenge for China as it grapples with extreme weather
CNN
Severe flooding across China has forced tens of thousands of people from their homes and caused military personnel to be deployed to help in recovery efforts. Before the latest flooding, natural disasters had already caused nearly $13bn in direct economic losses and affected 32 million people in China this year. Last month, 71 people died in flooding and landslides in southern China. At the same time, the country is grappling with the human-driven climate change that is expected to make extreme weather events more frequent. China's Ministry of Emergency Management says the government has acknowledged the urgency of the situation. However, the country's authorities have a difficult task given the mounting social frustration with China's stuttering economy and the broader direction of the country. In addition, local governments, which are strapped with high levels of debt, are tasked with recovery efforts. China, the world’s largest greenhouse gas emitter, has looked to position itself as a leader in the global transition to green energy – despite the challenges of weaning itself off coal due to high demand for power.
https://edition.cnn.com/2024/07/22/china/china-floods-climate-change-intl-hnk/index.html
Lame duck or legacy maker? How Biden announcement could affect US relations with foreign leaders
Guardian
World leaders may be "scrambling to meet the Democratic challengers" after Joe Biden announced he would not be standing for re-election, according to Kori Schake, the director of foreign and defense policy studies at the American Enterprise Institute. With the US election due to take place in November, leaders had been preparing for a sea change in US policy under a potential Donald Trump administration. However, Biden's withdrawal from the race may mean more continuity in US policy, Schake added. In particular, European leaders are likely to be frustrated to lose Biden, who has led the way on the conflict in Ukraine. However, the next steps for Biden's influence abroad will depend on the success of his protégé, Kamala Harris, in her campaign for the Democratic nomination, the Guardian suggests.
https://www.theguardian.com/us-news/article/2024/jul/22/lame-duck-or-legacy-maker-how-biden-announcement-could-affect-us-relations-with-foreign-leaders
Promises abound of deepened reform, but what did China’s third plenum tell us?
South China Morning Post
China's third plenum, a four-day meeting of the Communist Party's elite Central Committee, concluded with a communique that sought to balance growth and security. The statement indicated that China would continue to deepen reforms in various areas, including the economy, rural land, taxation, environmental protection, and national security. The communique also called for the country to deepen supply-side reform, integrate the digital economy into the real economy, upgrade modern infrastructure, and build resilience in its industrial supply chain. It emphasized the importance of improving human capital and talent and pledged support for the development of the non-state sector. However, Western firms in China expressed disappointment over the lack of specific measures to improve the business climate in the document.
While the communique promised to "better leverage the role of the market," it did not include the phrase "decisive role" that had been used in previous years. This suggests a downgrading of the market's importance in China's economy. The communique also set a 2029 deadline to develop a "quality workforce" to support a country and economy driven by innovation. The meeting received and approved reports on corruption cases, including those involving former defense minister Li Shangfu and two other generals. Former foreign minister Qin Gang was removed as a member of the Central Committee.
Representatives of Western firms in China expressed disappointment over the lack of specific measures to improve the business climate in the communique. This suggests that overseas enterprises will remain cautious about increasing their investments in China until a clearer picture of future reforms emerges.
https://www.scmp.com/economy/china-economy/article/3271338/promises-abound-deepened-reform-what-did-chinas-third-plenum-tell-us?utm_source=rss_feed
China finally agrees with Trump on something — they both think Kamala Harris can't win
Yahoo US
Vice President Kamala Harris is relatively unknown in China, and Chinese social media has dismissed her as having even less of a chance of winning the White House than her former running mate Joe Biden. China's heavily moderated social media is no true indicator of its foreign policy, but such discussions provide a glimpse at what rhetoric the authorities allow to survive and thrive. However, despite predictions from both Donald Trump and China, a FiveThirtyEight round-up of the latest polls shows Harris' performance with voters differs from Biden's by only a small margin -- typically by one or two percentage points at most.
https://www.yahoo.com/news/china-finally-agrees-trump-something-043608885.html
Bohai Bank to sell US$3.5 billion in loans to China’s bad banks in bid to shore up capital
South China Morning Post
China Bohai Bank is planning to sell $3.5bn worth of assets at a discount to bidders including China's big four bad banks, in an effort to shore up its capital levels. The assets for sale include non-performing loans (NPLs) and special mention loans, with a principal amount of CNY 25.6bn ($3.5bn). The move comes as China's banks struggle with rising bad debt and narrowing margins. Bohai Bank's bad loan ratio rose to a four-year high of 1.78% at the end of 2023.
https://www.scmp.com/business/banking-finance/article/3271368/bohai-bank-sell-us35-billion-loans-chinas-bad-banks-bid-shore-capital?utm_source=rss_feed
Xi vows to rewire China’s finances, help indebted regions
Japan Times
President Xi Jinping has revealed plans to address the debt crisis facing China's local governments. The plans involve transferring more revenue from the central government to local authorities, allowing them to receive a larger share of consumption tax. The move is part of the Communist Party's long-term blueprint for the Chinese economy.
https://www.japantimes.co.jp/business/2024/07/22/economy/xi-china-finances-indebted-regions/
China to allow delayed retirement to combat population woes
Japan Times
China plans to gradually raise its retirement age to address increasing pressure on pension budgets caused by a growing aging population. The current retirement age in China is one of the lowest in the world. The reform comes as life expectancy in China continues to rise and is projected to exceed 80 years by 2050. The announcement was made in a policy document that also outlined plans to combat the declining birth rate and aging population in the country.
https://www.japantimes.co.jp/news/2024/07/22/asia-pacific/society/china-retirement-age-raise/
Volkswagen extends ties with China’s Xpeng to develop new EV models, technologies
South China Morning Post
Volkswagen Group has signed an agreement with Chinese electric vehicle (EV) manufacturer Xpeng to develop systems that improve intelligent driving capabilities. The carmakers will also enhance their partnership to develop new models in an effort to save costs amid increased competition in China. The deal will see the establishment of two project houses where engineers from both companies will collaborate on the development of electrical/electronic architecture. The first vehicle equipped with the jointly developed system is due to be produced within two years.
https://www.scmp.com/business/china-business/article/3271401/volkswagen-extends-ties-chinas-xpeng-develop-new-ev-models-technologies?utm_source=rss_feed
China boosts infrastructure checks after second deadly highway collapse in 3 months
South China Morning Post
Chinese authorities have called for increased safety checks of key infrastructure after a bridge collapse in Shaanxi province killed at least 15 people. The incident occurred during heavy rainfall caused by a persistent storm, with flash floods causing vehicles to plunge into the river. This is the second fatal highway collapse in China in three months. The Ministry of Emergency Management has urged local authorities to closely monitor major infrastructure, especially highways, railways, bridges, and tunnels. The ministry also called for the better use of monitoring technologies to detect and report risk factors.
https://www.scmp.com/news/china/politics/article/3271400/china-boosts-infrastructure-checks-after-second-deadly-highway-collapse-3-months?utm_source=rss_feed
Hong Kong plays leading role in sanctions evasion: report
Nikkei Asia
Hong Kong has become a hub for helping US enemies avoid international sanctions, according to a report by the Committee for Freedom in Hong Kong Foundation. Hong Kong companies have reportedly exported technology to Russia, as well as drone parts to Iran and facilitated illicit ship-to-ship oil transfers for North Korea. The report alleges that 206 Hong Kong companies were involved in shipping high-priority items to Russia in December, with 40% by value consisting of 11 high-priority items which are vital to Russia's war machine.
https://asia.nikkei.com/Politics/International-relations/Hong-Kong-plays-leading-role-in-sanctions-evasion-report
Trump 2.0 would not play out like Trump 1.0 in markets
Financial Times
Investors are using the same strategies that worked during Donald Trump's first term to position themselves for a potential second, according to a UBS strategist. However, the market is "setting itself up for disappointment" as conditions are different now to 2016. The US economy is in a later stage of the economic cycle, US debt levels are higher and long-term bond yields may not respond to interest rate cuts, keeping the cost of capital high. Meanwhile, lower taxes may not boost GDP or earnings growth as anticipated.
https://www.ft.com/content/0aca4515-757c-42d4-9e08-a7087d70133f
China’s Dangerous Nuclear Push
Foreign Affairs
The United States should adopt a tough approach to arms control negotiations with China to prevent a destabilizing arms race in Asia, according to a Foreign Affairs op-ed by Rebecca Davis Gibbons and Rebecca Hersman. The authors argue that Washington should respond positively to Beijing's recent invitation to negotiate a "no first use" treaty and push for a broader arms control agreement. If China refuses to participate, the US should consider nuclear-sharing arrangements with South Korea and Japan, as well as updating and expanding its own nuclear arsenal. The authors contend that a coercive approach is justified and has been effective in the past, citing the deployment of nuclear-tipped missiles in West Germany and the Netherlands in the 1980s as an example.
https://www.foreignaffairs.com/china/chinas-dangerous-nuclear-push
Taiwan starts annual war games, aiming to closely mimic actual combat
Japan Times
Taiwan has started its annual Han Kuang war games, aiming to simulate how to repel a Chinese attack. The drills have cancelled elements that were mostly for show, instead focusing on intensified nighttime exercises and practicing how to operate with severed command lines. China has been staging exercises around Taiwan for the past four years to pressure Taipei to accept Beijing's claim of sovereignty.
https://www.japantimes.co.jp/news/2024/07/22/asia-pacific/politics/taiwan-war-games-combat/
China’s youth, anxious over job market, trust in science to secure their future
South China Morning Post
Chinese students are increasingly choosing to study engineering and science subjects at university, rather than arts and humanities, as the job market and government policies drive them towards these sectors. A survey conducted by recruitment platform Zhaopin found that 41 of the 50 best-paid majors for those with three years' work experience were engineering-related. Subjects in science and management also featured highly. Meanwhile, both education policies and the job market are encouraging students to pursue engineering and science degrees, according to a report by consultancy iiMedia.
https://www.scmp.com/economy/china-economy/article/3271122/chinas-youth-anxious-over-job-market-trust-science-secure-their-future?utm_source=rss_feed
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