China unveils US$70 billion swap tool to enhance stock market liquidity
Renaissance names founder’s wife to chair bank, as Bao Fan remains missing
Welcome to this issue of The China Brief. Today is October 10, 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.
Li Qiang to tout ‘righteous’ China as Asean forum mutes criticism of Beijing: analysts
South China Morning Post
China aims to present itself as "righteous" at an upcoming Asean forum in Laos, addressing concerns from Southeast Asian nations over recent South China Sea clashes. Premier Li Qiang will participate in discussions focusing on regional stability and cooperation amid rising tensions, particularly with the Philippines and Vietnam. While Asean countries view China as a key economic partner, they remain wary of its aggressive actions in disputed waters. Analysts predict that while territorial disputes will be raised, Asean’s response will likely be subdued, emphasizing mutual interests in trade and investment over maritime security issues.
https://www.scmp.com/news/china/diplomacy/article/3281736/li-qiang-tout-righteous-china-asean-forum-mutes-criticism-beijing-analysts?utm_source=rss_feed
China unveils US$70 billion swap tool to enhance stock market liquidity
South China Morning Post
China's central bank has introduced a new swap tool aimed at boosting stock market liquidity and supporting the capital markets, with an initial allocation of 500 billion yuan (approximately US$70.7 billion). The Securities, Funds, and Insurance Companies Swap Facility will allow qualified institutions to exchange government bonds or central bank bills for their corporate bonds or stock exchange-traded funds as collateral. This initiative is expected to enhance the investment capacity of non-banking financial institutions in China's stock market, which has experienced volatility recently due to speculation about government stimulus. The central bank clarified that this move would not increase the money supply, adhering to legal restrictions on lending to non-banking entities. Following the announcement, major stock indices in China saw gains. The facility is part of broader policies introduced by the People’s Bank of China to stimulate the economy, including cuts to mortgage rates and reserve requirements. Despite recent efforts, a press conference by China’s economic planner did not deliver significant stimulus, leading to market disappointment.
https://www.scmp.com/economy/policy/article/3281769/china-unveils-us70-billion-swap-tool-enhance-stock-market-liquidity?utm_source=rss_feed
Renaissance names founder’s wife Hui Yin-ching to chair bank, as Bao Fan remains missing
South China Morning Post
China Renaissance Holdings Limited has appointed Hui Yin-ching, wife of founder Bao Fan, as its new chairperson, following Bao's disappearance over a year ago amid an investigation. Hui, 54, will oversee strategic planning and wealth management, leveraging her experience and connections to drive future growth. Bao, who founded the firm in 2005, resigned in February citing health reasons, with the company's shares plummeting significantly post-investigation. Renaissance has faced financial struggles, reporting a widened net loss and a drop in revenue while reducing its workforce by a third since Bao's absence.
https://www.scmp.com/business/banking-finance/article/3281809/renaissance-names-founders-wife-hui-yin-ching-chair-bank-bao-fan-remains-missing?utm_source=rss_feed
3 reasons investors should be cautious on China’s stimulus surge
South China Morning Post
As of the end of the third quarter of 2024, the S&P 500 reached an all-time high, while Hong Kong's Hang Seng Index lagged significantly, down 36% from its 2018 peak. However, in Q3, the Hang Seng surged by 21.7%, fueled by China's aggressive stimulus measures. Analysts suggest this could signal a sustained rally in emerging markets. Despite optimism, caution prevails due to China's policy credibility issues, potential economic challenges in the U.S., and uncertainties surrounding the upcoming presidential election, which could impact global growth and market stability.
https://www.scmp.com/opinion/world-opinion/article/3281793/3-reasons-investors-should-be-cautious-chinas-stimulus-surge?utm_source=rss_feed
Investors went wild for China during its big holiday. But Chinese shoppers showed little of that optimism
CNN
During China's recent Golden Week holiday, global investors showed enthusiasm for Chinese assets, but this optimism was not reflected in the domestic economy. Goldman Sachs reported that tourism revenue per person was 2.1% lower than pre-pandemic levels, highlighting ongoing issues with consumer confidence. Weak domestic demand and low tourism spending indicate a need for significant fiscal stimulus, with some economists advocating for a package worth up to 10 trillion yuan ($1.4 trillion) to boost consumption and restore confidence. Despite a 26% increase in cross-border travel and a 42% rise in international flights compared to last year, consumer confidence remains low. Following weak economic data, the Chinese government announced a stimulus package focused on monetary measures, boosting stock markets temporarily. However, subsequent declines in Shanghai and Shenzhen stock markets occurred after the National Development and Reform Commission did not announce a major stimulus, disappointing investors. Attention now turns to an upcoming press conference by the Ministry of Finance, where more direct stimulus measures are hoped for.
https://edition.cnn.com/2024/10/10/business/china-golden-week-travel-spending-hnk-intl/index.html
Taiwan leader defiant towards China in first National Day address
Yahoo US
In his first National Day address, Taiwanese President Lai Ching-te stated his commitment to resisting any attempts by Beijing to annex or encroach upon Taiwan's sovereignty. He emphasized that Taiwan, officially known as the Republic of China, is not subordinate to the People's Republic of China, which views Taiwan as part of its territory. Lai highlighted the importance of democracy and freedom in Taiwan and expressed his mission to unite the 23 million Taiwanese people. He also called for China to collaborate with the international community on global issues. Additionally, Lai outlined plans to enhance Taiwan’s resilience in national defense, economic stability, disaster prevention, and democracy to ensure greater security and peace in the region.
https://www.yahoo.com/news/taiwan-leader-defiant-towards-china-074829030.html
China property: Hangzhou scraps price caps, cuts down payments in bid to stabilise market
South China Morning Post
Hangzhou has lifted price caps on new housing projects and reduced down payment requirements to stimulate its property market, reflecting a trend among major Chinese cities to stabilize housing prices. The local government’s move, aimed at encouraging demand, comes after a rise in buying interest during the recent national holiday. Analysts expect housing prices to stabilize and anticipate increased land acquisitions by builders. Similarly, Chengdu is seeking public input on measures to ease residency requirements for homebuyers, further indicating a push for market recovery. Overall, local governments are adopting bolder strategies to support the struggling property sector.
https://www.scmp.com/business/china-business/article/3281817/china-property-hangzhou-scraps-price-caps-cuts-down-payments-bid-stabilise-market?utm_source=rss_feed
China-Europe trade war ‘unavoidable’ on current trends, says EU business leader
South China Morning Post
Jens Eskelund, chairman of the European Union Chamber of Commerce in China, warns that a trade war between the EU and China is "unavoidable" due to increasing Chinese exports and declining imports from Europe. Recent tariffs imposed by China on EU brandy and ongoing investigations into EU products highlight rising tensions. Eskelund emphasizes that China should acknowledge Europe's concerns regarding its policies, which are contributing to deflation and overcapacity in various sectors. He urges both sides to ensure fair distribution of value from globalization to prevent further disputes and economic imbalance.
https://www.scmp.com/news/china/diplomacy/article/3281754/china-europe-trade-war-unavoidable-current-trends-says-eu-business-leader?utm_source=rss_feed
China to end Australian lobster ban by end of year, ‘huge relief’ for industry
South China Morning Post
Australian businesses are celebrating the announcement that China will lift its unofficial ban on live lobster imports by the end of the year, following a meeting between Chinese Premier Li Qiang and Australian Prime Minister Anthony Albanese. The restrictions, which have been in place for over three years, were imposed after Australia called for an investigation into the origins of COVID-19. Prior to the ban, China was a significant market for Australian lobsters, accounting for 95% of exports worth A$750 million in 2019. The removal of the ban is expected to restore vital trade flows and boost confidence in Australia-China relations. Albanese noted that the timing of the ban's removal aligns with the upcoming Chinese New Year, which will benefit the Australian lobster industry. Both leaders expressed optimism about the future of their bilateral relationship, with commitments to strengthen trade and investment ties. Additionally, China has previously lifted tariffs on Australian wine and removed bans on beef imports, indicating improving relations between the two countries.
https://www.scmp.com/economy/global-economy/article/3281864/china-end-australian-lobster-ban-end-year-huge-relief-industry?utm_source=rss_feed
Baidu eyes Hong Kong, overseas for self-driving cars as Tesla gears up for robotaxi launch
South China Morning Post
Baidu plans to expand its robotaxi service, Apollo Go, outside mainland China, targeting Hong Kong and other international markets as competition in autonomous driving intensifies. The company aims to release its Apollo 10.0 open platform for global users. Despite rising geopolitical tensions affecting test drives in the US, Baidu's service has gained traction, completing 899,000 rides in three months. The company is pushing for adoption despite local taxi drivers' concerns about job losses. Hong Kong is also investing in autonomous vehicle technology to bolster its status as an innovation hub.
https://www.scmp.com/tech/big-tech/article/3281866/baidu-eyes-hong-kong-overseas-self-driving-cars-tesla-gears-robotaxi-launch?utm_source=rss_feed
China warns Japan against ‘external forces’ in talks with Tokyo’s new top diplomat Takeshi Iwaya
South China Morning Post
China's top diplomat, Wang Yi, cautioned Japan's new Foreign Minister Takeshi Iwaya against external interference in regional matters during their first conversation. They discussed strengthening bilateral ties amid Japan's concerns over escalating Chinese military activities. Wang emphasized the importance of maintaining regional peace while Iwaya expressed serious worries about Chinese military incursions and urged transparency. Tensions have risen due to Japan's alliances with the US, wartime grievances, territorial disputes, and safety issues for Japanese citizens in China. Both nations aim to communicate and address these concerns while seeking improved relations.
https://www.scmp.com/news/china/diplomacy/article/3281836/china-warns-japan-against-external-forces-talks-tokyos-new-top-diplomat-takeshi-iwaya?utm_source=rss_feed
Hong Kong stocks rebound from sell-offs on PBOC’s US$70 billion stock buying facility
South China Morning Post
Hong Kong and Chinese stocks experienced a rebound following a sell-off after the central bank introduced a new funding facility aimed at bolstering the stock market. The Hang Seng Index increased by 2.5% to 21,157.38, while the Hang Seng Tech Index rose by 2.2%. The CSI 300 Index and Shanghai Composite Index both gained 0.8%. The People's Bank of China announced a new swap tool worth 500 billion yuan (approximately US$70.7 billion) to enhance liquidity in the stock market and support the healthy development of capital markets. This facility allows qualified securities, mutual funds, and insurance companies to swap government bonds or central bank bills for corporate bonds or exchange-traded funds as collateral. Applications for the program are being accepted immediately, with the possibility of expanding its size in the future.
https://www.scmp.com/business/china-business/article/3281775/hong-kong-stocks-rebound-sell-offs-pbocs-us70-billion-stock-buying-facility?utm_source=rss_feed
How much is China’s massive trade-in programme driving consumption of everyday items?
South China Morning Post
In March, Beijing initiated a large-scale trade-in program to address sluggish consumption and overcapacity, utilizing around 300 billion yuan in government bonds. Local governments manage purchase subsidies, but many are hesitant due to debt. In August, the central government increased subsidies for automotive trade-ins. During the recent National Day holiday, the program saw significant success, with over 2.52 million consumers purchasing home appliances, generating 55.79 billion yuan in sales. Additionally, local governments expanded subsidies to other products, and over 130 cities introduced housing trade-in policies, although buyer participation remains low.
https://www.scmp.com/economy/china-economy/article/3281713/how-much-chinas-massive-trade-programme-driving-consumption-everyday-items?utm_source=rss_feed
Xiaohongshu: How ‘China’s Instagram’ is transforming the travel industry
CNN
The Kennedy Town Playground’s basketball courts in Hong Kong, often overlooked by locals, have become a popular destination for tourists from mainland China seeking picturesque views of the city skyline. This trend is largely driven by Xiaohongshu (Little Red Book), a social media platform akin to Instagram, which has transformed travel recommendations for Chinese tourists. With 300 million users, primarily urban dwellers under 35, Xiaohongshu offers authentic travel insights through user-generated content, leading visitors to lesser-known spots that become hotspots, such as Black Square in Copenhagen and a nondescript bench in Central Park, NYC.
Despite a sluggish economy, the National Day holiday saw a 33.2% increase in Chinese outbound trips, many of which relied on Xiaohongshu for planning. Businesses, particularly in Europe, are leveraging this trend to attract Chinese customers, while locals in tourist-heavy areas express concerns over overcrowding and safety. The article highlights how Xiaohongshu is reshaping travel patterns for Chinese tourists, creating a dual-edged sword of economic opportunity for businesses and challenges for local communities.
https://edition.cnn.com/travel/xiaohongshu-china-instagram-transforming-travel-industry/index.html
China expands project ‘white list’ to ease blues in property market
South China Morning Post
China is working to stabilize its struggling property market by urging local governments and financial institutions to provide funding for ongoing projects. The Ministry of Housing and National Financial Regulatory Administration emphasized expanding the "white list," which identifies compliant real estate projects eligible for financial support. This initiative aims to ensure project deliveries and improve market conditions. Additionally, the People’s Bank of China announced mortgage rate cuts and reduced down payments to stimulate housing sales. Recent data shows a surge in interest for new homes, particularly in major cities, following promotional efforts during the National Day holiday.
https://www.scmp.com/economy/policy/article/3281712/china-expands-project-white-list-ease-blues-property-market?utm_source=rss_feed
US envoy to Japan pushes for Nato-like trade bloc to counter China’s economic coercion
South China Morning Post
US Ambassador to Japan, Rahm Emanuel, proposed in a Wall Street Journal opinion piece that the United States and its allies should form a coalition similar to NATO to counter China's economic coercion. He emphasized the importance of a unified economic stance against China, suggesting a trade-defence coalition with a commitment akin to NATO's Article 5, where an attack on one member is considered an attack on all. Emanuel pointed to Australia’s experience with Chinese tariffs after criticizing Beijing as a valuable lesson, advocating for closer collaboration among like-minded nations to reduce economic reliance on China. His comments come amid discussions of a NATO-like defense structure in Asia, although many officials view the idea as unrealistic. Emanuel, known for his strong stance on China, is speculated to have future political ambitions.
https://www.scmp.com/news/asia/east-asia/article/3281770/us-envoy-japan-pushes-nato-trade-bloc-counter-chinas-economic-coercion?utm_source=rss_feed
Tech war: China boosts quantum computer production with self-developed chips amid US sanctions
South China Morning Post
Origin Quantum, a Chinese company sanctioned by the US, is enhancing its production capabilities for superconducting quantum computers, marking a significant step in China's goal for technological self-sufficiency. The Hefei-based firm has successfully maintained its 72-qubit quantum chip in stable operation for nine months on its Origin Wukong computer and is now expanding its chip production line to develop more advanced quantum chips. Additionally, they plan to increase their assembly line's capacity from five to eight quantum computers at a time. This initiative comes in response to US trade restrictions aimed at limiting China's access to advanced technologies, including quantum computing. Origin Quantum, which has received backing from state-owned funds and was founded by notable physicists, has already attracted interest from various countries, particularly the US, for its quantum computing capabilities.
https://www.scmp.com/tech/tech-war/article/3281699/tech-war-china-boosts-quantum-computer-production-self-developed-chips-amid-us-sanctions?utm_source=rss_feed
What can we expect from the pair of 100 billion yuan investments China advanced?
South China Morning Post
China's capital markets were disappointed after a press conference by the National Development and Reform Commission (NDRC) chairman, Zheng Shanjie, failed to announce significant economic stimulus measures. While two investment plans totaling 200 billion yuan (approximately US$28.4 billion) were revealed, details on the funded projects were scarce. The NDRC plans to advance 100 billion yuan from the 2025 central fiscal budget this year and identify strategic construction projects requiring additional investment. The NDRC deputy chairman indicated that these plans would be finalized by the end of the month, with potential for immediate physical investment this year.
Economic analysts suggest that this government spending could lead to an additional 330 billion yuan (US$46.7 billion) in investments by the end of the year, potentially boosting China’s GDP growth rate to 5.5% in the fourth quarter and achieving a full-year growth rate of around 5%. However, the Chinese economy is currently facing challenges, particularly in the real estate sector, which has suppressed domestic consumption. The government is aiming to stimulate consumption and economic activity through targeted spending as growth has slowed in recent quarters.
https://www.scmp.com/economy/policy/article/3281686/what-can-we-expect-pair-100-billion-yuan-investments-china-advanced?utm_source=rss_feed
How high can the low-altitude economy soar as US, China battle for supremacy?
South China Morning Post
During China's National Day holiday, Nansha district in Guangzhou highlighted advancements in drones and eVTOL aircraft, notably the EH216-S passenger drone by Ehang. As China aims to lead in eVTOL technology, competition with the U.S. intensifies, though neither country has begun commercial operations. Analysts predict significant market growth by 2040 but warn of high costs and regulatory challenges. Initial eVTOL rides may cost twice as much as ground taxis. Experts believe commercial viability could take another decade, primarily due to battery efficiency and production costs.
https://www.scmp.com/economy/china-economy/article/3281685/how-high-can-low-altitude-economy-soar-us-china-battle-supremacy?utm_source=rss_feed
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