China’s ‘time running out’ to meet economic growth target as August figures falter;Are things looking up for China's tech billionaires?
Japan sends senior official to China over boy's fatal stabbing
Welcome to this issue of The China Brief. Today is 09 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 ‘time running out’ to meet economic growth target as August figures falter
South China Morning Post
In September, China's economy showed signs of strain despite an initial boost from strong export data in August, which recorded an 8.7% year-on-year increase, the fastest in 17 months. This positive trade performance, particularly with key partners like the US and EU, was overshadowed by disappointing domestic figures, including a mere 2.1% rise in retail sales and a significant 10.2% drop in property investment. Analysts expressed concerns that these trends could hinder China's ability to meet its GDP growth target of around 5% for the year, particularly as consumption, industrial activity, and investment continued to decline.
The outlook for China's economy is further complicated by the global context, including new tariffs imposed by the US and its allies, which could impact export competitiveness. Although the Federal Reserve's recent interest rate cut has eased pressure on the Chinese yuan, allowing potential room for monetary easing in China, the People's Bank of China (PBOC) has opted to maintain key policy rates. This hesitation reflects the PBOC's concerns about bank profitability and long-term bond yields, with analysts suggesting only modest rate cuts may occur in the near future.
Experts emphasize that significant changes are needed for China to regain economic momentum and achieve its growth target. With President Xi Jinping indicating a relaxed focus on immediate growth goals, the urgency for effective policy measures intensifies amid rising challenges. Economists warn that without timely interventions, the world’s second-largest economy risks falling short of its targets, highlighting the critical need for strategic adjustments to navigate the prevailing economic headwinds.
https://www.scmp.com/economy/china-economy/article/3279542/chinas-time-running-out-meet-economic-growth-target-august-figures-falter?utm_source=rss_feed
Are things looking up for China's tech billionaires?
Australian Broadcasting Corporation
Pony Ma, co-founder of Tencent Holdings, has regained his status as China's richest person with a net worth exceeding $65 billion. His wealth stems from Tencent's success in the tech and gaming sectors, notably with the launch of "Black Myth: Wukong." Despite a challenging regulatory environment, Ma emphasizes compliance with state regulations, contrasting with Jack Ma's downfall after criticizing them. While China's government encourages private sector growth, it maintains ultimate control, viewing the market as a tool for socialist objectives. Recent regulatory shifts signal potential recovery for the private sector, but always under state authority.
https://www.abc.net.au/news/2024-09-23/are-things-looking-up-for-chinas-tech-billionaires/104384192
Japan sends senior official to China over boy's fatal stabbing
Japan Times
Japan's vice foreign minister, Yoshifumi Tsuge, will meet with Beijing officials on Monday to discuss the recent fatal stabbing of a schoolboy at Shenzhen Japanese School. This visit, taking place from Sunday to Tuesday, follows Prime Minister Fumio Kishida's call for an explanation and a plea for China to ensure the safety of Japanese citizens in the wake of the attack in Shenzhen.
https://www.japantimes.co.jp/news/2024/09/23/japan/vice-foreign-minister-china-stabbing/
Why China’s sea-rail transport link plan for Africa is an echo of the ‘Hunan model’
South China Morning Post
China is revitalizing the ancient Silk Road to East Africa through the Belt and Road Initiative, enhancing air, railroad, and sea connections. Recent discussions at the Forum on China-Africa Cooperation (FOCAC) summit emphasized developing a multimodal sea-rail transport network, with Chinese President Xi Jinping meeting leaders from Kenya, Tanzania, and Ethiopia to prioritize infrastructure projects. China aims to establish an East African connectivity hub, leveraging Ethiopia’s transport advantages and integrating industrial parks operated by Chinese firms.
Key projects include the 750km Addis Ababa-Djibouti railway and plans for extending the Standard Gauge Railway from Kenya into neighboring countries. The initiative reflects China's strategy of connecting landlocked regions in Africa with international trade routes, similar to its domestic logistics corridors. However, experts caution that China's financial commitments appear weaker than in previous years, with many African nations nearing unsustainable debt levels. Future funding may focus on low-borrowing regions like Tanzania, while ensuring that investments align with national development goals and regional cooperation in East Africa.
https://www.scmp.com/news/china/diplomacy/article/3279520/why-chinas-sea-rail-transport-link-plan-africa-echo-hunan-model?utm_source=rss_feed
How Beijing is preparing for America's next president
Japan Times
China is preparing for increased tensions with the U.S. regardless of whether Donald Trump or Kamala Harris wins the upcoming presidential election. Both candidates are expected to engage in disputes over trade, technology, and Taiwan. In response, China is adopting a comprehensive approach to its U.S. relations by coordinating efforts across various sectors, including economics, military, and technology, in light of the U.S. strategy of containment that seeks to maintain technological dominance and limit China's global market access. As a result, China is bracing for a prolonged period of hostility with the U.S.
https://www.japantimes.co.jp/commentary/2024/09/23/world/next-us-president-china/
China stimulus calls are growing louder — inside and outside the country
CNBC
BEIJING — More economists are calling for China to stimulate growth, including those based inside the country.
China should issue at least 10 trillion yuan ($1.42 trillion) in ultra-long government bonds in the next year or two for investment in human capital, said Liu Shijin, former deputy head of the Development Research Center at the State Council, China's top executive body.
That's according to a CNBC translation of Liu's Mandarin-language remarks available on financial data platform Wind Information.
His presentation Saturday at Renmin University's China Macroeconomy Forum was titled: "A basket of stimulus and reform, an economic revitalization plan to substantially expand domestic demand."
Liu said China should make a greater effort to address challenges faced by migrant workers in cities. He emphasized Beijing should not follow the same kind of stimulus as developed economies, such as simply cutting interest rates, because China has not yet reached that level of slowdown.
After a disappointing recovery last year from the Covid-19 pandemic, the world's second-largest economy has remained under pressure from a real estate slump and tepid consumer confidence. Official data in the last two months also points to slower growth in manufacturing. Exports have been the rare bright spot.
Goldman Sachs earlier this month joined other institutions in cutting their annual growth forecast for China, reducing it to 4.7% from 4.9% estimated earlier. The reduction reflects recent data releases and delayed impact of fiscal policy versus the firm's prior expectations, the analysts said in a Sept. 15 note.
"We believe the risk that China will miss the 'around 5%' full-year GDP growth target is on the rise, and thus the urgency for more demand-side easing measures is also increasing," the Goldman analysts said.
China's highly anticipated Third Plenum meeting of top leaders in July largely reiterated existing policies, while saying the country would work to achieve its full-year targets announced in March.
Beijing in late July announced more targeted plans to boost consumption with subsidies for trade-ins including upgrades of large equipment such as elevators.
But several businesses said the moves were yet to have a meaningful impact. Retail sales rose by 2.1% in August from a year ago, among the slowest growth rates since the post-pandemic recovery.
China in the last two years has also introduced several incremental moves to support real estate, which once accounted for more than a quarter of the Chinese economy. But the property slump persists, with related investment down more than 10% for the first eight months of the year.
"The elephant in the room is the property market," said Xu Gao, Beijing-based chief economist at Bank of China International. He was speaking at an event last week organized by the Center for China and Globalization, a think tank based in Beijing.
Xu said demand from China's consumers is there, but they don't want to buy property because of the risk the homes cannot be delivered.
Apartments in China have typically been sold ahead of completion. Nomura estimated in late 2023 that about 20 million such pre-sold units remained unfinished. Homebuyers of one such project told CNBC earlier this year they had been waiting for eight years to get their homes.
To restore confidence and stabilize the property market, Xu said that policymakers should bail out the property owners.
"The current policy to stabilize the property market is clearly not enough," he said, noting the sector likely needs support at the scale of 3 trillion yuan, versus the roughly 300 billion yuan announced so far.
China's top leaders have focused more on bolstering the country's capabilities in advanced manufacturing and technology, especially in the face of growing U.S. restrictions on high tech.
"While the end-July Politburo meeting signaled an intention to escalate policy stimulus, the degree of escalation was incremental," Gabriel Wildau, U.S.-based managing director at consulting firm Teneo, said in a note earlier this month.
"Top leaders appear content to limp towards this year's GDP growth target of 'around 5%,' even if that target is achieved through nominal growth of around 4% combined with around 1% deflation," he said.
In a rare high-level public comment about deflation, former People's Bank of China governor Yi Gang said in early September that leaders "should focus on fighting the deflationary pressure" with "proactive fiscal policy and accommodative monetary policy."
However, Wildau said that "Yi was never in the inner circle of top Chinese economic policymakers, and his influence has waned further since his retirement last year."
China's latest report on retail sales, industrial production and fixed asset investment showed slower-than-expected growth.
"Despite the surge in government bond financing, infrastructure investment growth slowed markedly, as local governments are constrained by tight fiscal conditions," Nomura's Chief China Economist Ting Lu said in a Sept. 14 note.
"We believe China's economy potentially faces a second wave of shocks," he said. "Under these new shocks, conventional monetary policies reach their limits, so fiscal policies and reforms should take the front seat."
The PBOC on Friday left one of its key benchmark rates unchanged, despite expectations the U.S. Federal Reserve's rate cut earlier this week could support further monetary policy easing in China. Fiscal policy has been more restrained so far.
"In our view, Beijing should provide direct funding to stabilize the property market, as the housing crisis is the root cause of these shocks," Nomura's Lu said. "Beijing also needs to ramp up transfers \[from the central government\] to alleviate the fiscal burden on local governments before it can find longer-term solutions."
China's economy officially still grew by 5% in the first half of the year. Exports surged by a more-than-expected 8.7% in August from a year earlier.
In the "short term, we must really focus to be sure \[to\] successfully achieve this year's 2024 growth goals, around 5%," Zhu Guangyao, a former vice minister of finance, said at the Center for China and Globalization event last week. "We still have confidence to reach that goal."
When asked about China's financial reforms, he said it focuses on budget, regional fiscal reform and the relationship between central and local governments. Zhu noted some government revenue had been less than expected.
But he emphasized how China's Third Plenum meeting focused on longer-term goals, which he said could be achieved with GDP growth between 4% and 5% annually in the coming decade.
https://www.cnbc.com/2024/09/23/china-stimulus-calls-are-growing-louder-at-home-and-abroad.html
PM Modi at the UN and the US: The Morning After
Diplomat
Prime Minister Narendra Modi's recent visit to the United Nations from September 21-23 was notably brief, as he skipped the General Assembly to focus on bilateral meetings, particularly with President Biden during the Quad Summit in Delaware. This meeting highlighted the evolving relationship between India and the U.S., showcasing unprecedented intimacy, reminiscent of past interactions between leaders. The discussions covered various initiatives and military cooperation, underscoring the growth of their partnership over the past 25 years, especially under Biden's administration.
While Modi missed the General Assembly, he participated in the pre-UNGA Summit of the Future, advocating for Security Council reforms, a long-standing goal for India. The article reflects India's frustration at its current non-permanent status in the Council while Pakistan secures a temporary seat. Modi also aims to position India as a leader for the Global South, competing with China for influence in developing regions. Although Modi's engagement with world leaders was limited, the visit reinforced India's strategic aspirations on the global stage, particularly with the upcoming U.S. elections influencing future relations.
https://thediplomat.com/2024/09/pm-modi-at-the-un-and-the-us-the-morning-after/
Mainland China says Anonymous64 ‘cyber army’ targeting Beijing is backed by Taiwan
South China Morning Post
Beijing's Ministry of State Security claims it has identified a group of Taiwanese hackers, Anonymous64, allegedly backed by Taiwan's defense ministry, aiming to undermine China's political system through cyberattacks. This accusation follows rising tensions between Taiwan and China under Taiwan's new leader, William Lai, who supports independence. The ministry accuses Taiwan's Information, Communications and Electronic Force Command (ICEFCOM) of orchestrating these attacks, which supposedly target mainland institutions. ICEFCOM denies the claims, emphasizing its focus on cybersecurity. Beijing has threatened severe penalties for those involved in separatist activities, intensifying its campaign against perceived threats from Taiwan.
https://www.scmp.com/news/china/politics/article/3279634/mainland-china-says-anonymous64-cyber-army-targeting-beijing-backed-taiwan?utm_source=rss_feed
Michael Kovrig describes more than 1,000 days as China's prisoner
CBC
On December 10, 2018, Canadian diplomat Michael Kovrig was arrested in Beijing while out to dinner with his pregnant partner. He was surrounded by unidentified men who detained him on charges of endangering China's state security. Kovrig endured nearly six months of solitary confinement in a padded cell, facing relentless psychological interrogation aimed at coercing him into confessing to false accusations. During this time, he developed coping mechanisms, including yoga and meditation, and began learning Chinese to maintain his mental resilience.
In May 2019, Kovrig was formally arrested alongside another Canadian, Michael Spavor, and transferred to a pre-trial detention facility, which offered slightly better conditions. After two years of imprisonment, both men were released on September 25, 2021, following the resolution of a diplomatic crisis involving Huawei's CFO, Meng Wanzhou. Kovrig emphasized the need for Canada to prepare better for potential diplomatic fallout from such arrests. Upon his return, he joyfully reunited with his daughter, who had been shown recordings of his voice during his absence, and appreciated the simple pleasures of freedom.
https://www.cbc.ca/news/politics/michael-kovrig-solitary-confinement-interrogation-arsenault-1.7330152
Kweichow Moutai seeks to prop up flagging shares with first-ever repurchase programme
South China Morning Post
Chinese liquor company Kweichow Moutai is set to initiate its first stock repurchase program to stabilize its shares amid declining consumer spending in China. The company plans to buy back between 3 billion yuan (US$425.4 million) and 6 billion yuan of its shares over the next year, following shareholder approval. The repurchased shares will be canceled, reducing the company's registered capital.
The company's flagship product, Flying Fairy liquor, has seen a price drop of 30% over the past year, reflecting weak demand and a sluggish recovery in the market. Kweichow Moutai's shares recently hit their lowest point since April 2020, prompting UBS Group to downgrade its rating. The stock's performance has not improved following the announcement of the buyback plan, with shares falling by 0.2% on the following trading day.
The broader context includes a slowdown in China's retail sales and consumer confidence, with indicators suggesting a potential impact on industrial production and the job market. Kweichow Moutai aims to restore investor confidence through this repurchase initiative, which will be funded by the company's capital and will not interfere with its operations or long-term strategy.
https://www.scmp.com/business/china-business/article/3279603/kweichow-moutai-seeks-prop-flagging-shares-first-ever-repurchase-programme?utm_source=rss_feed
China tightens military-civilian export controls ‘just in time’, experts say
South China Morning Post
China is enhancing export controls on dual-use items that can serve both military and civilian purposes to protect national security amid external threats. The State Council approved regulations to refine the 2020 Export Control Law, addressing fragmented rules on sensitive technologies. Experts noted the timely need for tighter controls due to the weaponization of civilian goods. While China aims to strengthen management of these exports, it is not targeting specific countries. However, there are concerns that such measures may accelerate global technological fragmentation and separate supply chains, as countries seek alternative sources for critical materials.
https://www.scmp.com/news/china/politics/article/3279577/china-tightens-military-civilian-export-controls-just-time-experts-said?utm_source=rss_feed
China’s 100-billion-yuan question: does rare government bond purchase alter policy course?
South China Morning Post
In late August, the People's Bank of China executed a treasury bond trade for the first time in nearly 20 years, purchasing 100 billion yuan (US$14.1 billion). This move sparked discussions about its implications, with officials clarifying that it does not equate to Western-style quantitative easing (QE). Instead, it is seen as a liquidity-management tool aimed at enhancing monetary policy. While the PBOC maintains room for conventional measures, concerns about fiscal monetization and further bond issuance arise amid China's economic challenges, including a property crisis and local debt issues.
https://www.scmp.com/economy/policy/article/3279348/chinas-100-billion-yuan-question-does-rare-government-bond-purchase-alter-policy-course?utm_source=rss_feed
Is biotech the next battleground in US-China decoupling?
South China Morning Post
The Biosecure Act, recently passed by the US House of Representatives, aims to decouple American and Chinese biotech sectors by banning federal funding for US companies partnering with specific Chinese firms. This bipartisan effort addresses national security concerns over China's ambitions in life sciences and its access to sensitive data. While supporters argue it protects American interests, critics warn it may hinder global scientific collaboration and slow drug development, given the reliance on Chinese contract research organizations. The act reflects a broader trend of techno-nationalism, signaling a shift in the global scientific landscape shaped by geopolitical tensions.
https://www.scmp.com/opinion/china-opinion/article/3279475/biotech-next-battleground-us-china-decoupling?utm_source=rss_feed
Shanghai offers wider access to foreign funds to buy start-ups, signals more QFLP quota
South China Morning Post
Shanghai's mayor, Gong Zheng, has announced plans to support offshore private equity investments in local technology firms, potentially increasing quotas for such investments. This move aims to boost growth in Shanghai's financial and tech sectors, especially as foreign investment has been hindered by geopolitical tensions and regulatory issues. In 2021, funding for unlisted Chinese start-ups peaked at US$132.7 billion but dropped significantly to US$45.4 billion in 2023, with only US$25.7 billion raised in the first half of this year. The municipal government is also looking to raise the quota for the Qualified Foreign Limited Partners (QFLPs) program, which facilitates foreign investment in China's tech sector. Currently, 90 foreign institutions have been approved under this scheme, allowing them to invest in local companies without prior regulatory approval. Shanghai's economy grew by 4.8% last quarter, below the national average, and the city aims for a 5% growth rate this year despite challenges.
https://www.scmp.com/business/china-business/article/3279513/shanghai-offers-wider-access-foreign-funds-buy-start-ups-signals-more-qflp-quota?utm_source=rss_feed
As China’s job market falters, graduates forced to scale back career ambitions
South China Morning Post
In China, fresh graduates face a tough job market, with many scaling back career ambitions amid high youth unemployment rates, which reached 18.8% in August. A notable case is a 24-year-old physics master's graduate who is set to work as a janitor at a high school. The job market's contraction, driven by sluggish economic growth and a record influx of 11.79 million graduates, has left many seeking roles in domestic work or pursuing further studies to delay job hunting. Universities are promoting postgraduate studies as a strategy to enhance qualifications and improve placement statistics.
https://www.scmp.com/economy/china-economy/article/3279509/chinas-job-market-falters-graduates-forced-scale-back-career-ambitions?utm_source=rss_feed
Stay informed about the latest news, analysis, and policy briefs from across the globe related to China with the China brief. Our team aggregates, synthesizes, and summarizes the most important information from various sources, including media outlets, think tanks, government agencies, and industry experts.
Our mission is to provide you with easily accessible and critically valuable information tailored to your specific field of interest. We understand the significance of staying up-to-date on developments related to China and aim to make this information comprehensible for our readers.
Join the conversation and stay informed about the latest news and developments related to China by visiting our website at www.6dobrief.com