China’s Xi Jinping is visiting Europe for the first time in five years – his goodwill tour will be an uphill struggle
China Is Buying Gold Like There’s No Tomorrow;What China must learn from Japan’s decades-long debt-deflation slowdown
Welcome to this issue of The China Brief. Today is May 5, 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.
CNN
China’s President Xi Jinping’s trip to Europe is an opportunity to build bridges and counter the notion of a growing rift with the continent, which has been fuelled by trade frictions and growing suspicions about Beijing’s global ambitions and influence. Xi’s trip starts with one of his toughest critics, European Commission President Ursula von der Leyen, who has spearheaded the EU’s rallying cry to “derisk” its supply chains from China over concerns about securing its key technologies. The EU has launched trade probes into China’s wind turbines and procurement of medical equipment, and raided offices of Chinese security equipment maker Nuctech as part of an investigation into subsidies. Italy formally exited China’s Belt and Road initiative in March, costing the program its only G7 member country. However, Xi’s stops in Serbia and Hungary are likely to be much less contentious – something the Chinese government likely factored in when mapping out the visit, observers say. “In Belgrade and Budapest, Xi will not have to listen to the criticism he hears in other European capitals,” said Noah Barkin, a Berlin-based visiting senior fellow at the German Marshall Fund of the United States.
China Is Buying Gold Like There’s No Tomorrow
NY Times
Gold prices have surged to their highest ever levels this year, driven by increasing demand from Chinese consumers. Chinese investors have turned to gold as confidence in traditional investments like real estate and stocks has faltered, and the country's central bank has been steadily adding to its gold reserves. In addition, Chinese speculators are betting that there is still room for appreciation in gold prices. This has led to a 50% increase in the global price of gold since late 2022, despite traditionally less appealing factors such as higher interest rates and a strong US dollar.
What China must learn from Japan’s decades-long debt-deflation slowdown
South China Morning Post
China's latest GDP figures for Q1 2022 show a growth rate of 5.3%, driven by a 6.1% increase in industrial production and a 9.9% increase in manufacturing investments. However, the National Bureau of Statistics reports that industrial profits at large Chinese companies declined 3.5% from the previous year, and industrial revenue also fell sharply in March. Additionally, the consumer price index fell to near zero and the producer price index remained in deflation territory. Exports were also down 7.5%. These figures indicate subdued demand and weak domestic consumption. If domestic consumption remains weak, China will be forced to export its excess supply, which could provoke a protectionist backlash from developed countries. Chinese authorities have responded to the slowing economy by lowering borrowing costs, borrowing and investing in infrastructure development, and increasing investments in "new quality productive forces". However, these strategies may lead to excess capacity and generate deflationary pressures. Chinese officials do not acknowledge the country's excess supply problem, but excess supply and insufficient demand are two sides of the same coin.
Developing Taiwan’s own ‘Starlink’ crucial for island-wide emergency, space agency says
CNN
Taiwan is developing an indigenous communication satellite system to ensure internet access in the event of a disaster or disruption caused by hostilities with China. It aims to create its own version of the Starlink satellite system pioneered by Elon Musk’s SpaceX, which uses a network of thousands of satellites to deliver internet access to areas where conventional connections are unavailable. Taiwan’s unique geopolitical location, just 100 miles off the coast of China, makes it particularly vulnerable to disruption of its 15 submarine internet cables. Last year, outlying Taiwanese islands were cut off from the internet for weeks after two submarine cables connecting them to Taiwan’s main island were damaged by passing ships. Taiwan’s space agency plans to develop two communication satellites, the first of which could be launched by 2026, and assist private companies with the launch of four additional satellites. However, experts estimate that Taiwan would need hundreds of satellites to create a system that provides uninterrupted backup internet access.
South China Morning Post
Tens of thousands of workers have left their jobs at Chinese Big Tech firms in recent years as the sector has lost its growth momentum and jobs have been cut. While tech jobs remain among the best-paid positions in the Chinese job market, they are no longer seen as shortcuts to wealth. Many former tech employees have used their experience to set up their own businesses, helping web influencers and offering advice on subjects such as e-commerce and career change. China’s so-called BAT companies – Baidu, Alibaba and Tencent – shed nearly 25,000 jobs in 2023.
France’s Macron calls for reset of economic ties with China
Japan Times
French President Emmanuel Macron is calling for an update of the country’s economic ties with China, just as the country’s leader Xi Jinping is expected to travel to France for a state visit.In a wide-ranging interview with La Tribune Dimanche, the French president says Europe wants more reciprocity in its economic ties with China, in order to better ensure its economic security. 'I’m calling for an ‘aggiornamento’ because China is now in excess capacity in many areas and exports massively to Europe,” Macron said in the interview, using the Italian word for update.
South China Morning Post
China has called on New Zealand to abandon "megaphone diplomacy" and engage in "constructive dialogue" to resolve disputes. The Chinese embassy in Wellington made the statement in response to New Zealand Foreign Minister Winston Peters expressing concerns about China's security presence in the Pacific. Since coming to power last year, New Zealand's conservative coalition government has sought to deepen ties with the US-led allies, amid concerns about China's growing influence in the region. China has been accused of assertive behaviour in the South China Sea and human rights abuses in Tibet and Xinjiang.
South China Sea: 4 points to consider on China-Philippines ‘gentleman’s agreement’
South China Morning Post
The first letter argues that China must adhere to the international rules-based order established by global maritime treaties of which it is a member. The author points out that the so-called "gentleman's agreement" between China and the Philippines regarding the South China Sea was verbal and had no evidence in writing. They also highlight that China's installations in the area are now a military base, despite previous claims that they were for fishermen. The author references the international arbitral tribunal ruling that China's claims within the "nine-dash line" have no legal basis, and argues that the rocks in the area cannot support human life and therefore cannot have their own exclusive economic zone.
The second letter criticizes the US government's support for Israel despite its expansion of settlements in the occupied Palestinian territory. The author argues that this is hypocritical given that the US claims to champion freedom, democracy, and human rights. They highlight the displacement, land confiscation, and human rights violations inflicted upon the Palestinian people, and criticize the suppression of voices critical of Israeli policies in the US. The author argues that the crackdown on student protests calling for an end to military aggression against Palestinians undermines freedom and justice, and damages the US's credibility as a defender of human rights.
Are Chinese-made skincare brands downplaying their origins to appeal to Southeast Asians?
South China Morning Post
Chinese-made skincare brands are gaining popularity in Muslim-majority markets, such as Indonesia and Malaysia, due to their low prices and perceived high quality. However, many of these brands obscure their origins and present themselves as local products to avoid concerns about safety and halal certification. Skintific, one such brand, is marketed in Malaysia and Indonesia using local celebrity ambassadors and sold in local drug stores, but it does not disclose that its products are made in China. Other Chinese-made brands, such as Glad2Glow, The Originote, and Lavojoy, also downplay their origins and are often sold in the "local brands" sections of pharmacies. The lack of transparency about their origins may be due to past scandals related to unsafe ingredients in Chinese products. Additionally, consumers in Muslim-majority markets may be concerned about whether products have halal certification or contain ingredients that are forbidden in Islam. Chinese-made brands must meet the standards of local regulators to be sold legally in these markets, and concerns about illegally imported Chinese-made cosmetics have been raised in the past.
What has driven China to bankroll controversial Ugandan crude oil pipeline?
South China Morning Post
China has agreed to fund the construction of the East African Crude Oil Pipeline (EACOP) in Uganda after Western lenders withdrew their support due to opposition from environmental and human rights groups. The pipeline, set to run from Uganda’s Lake Albert oilfields to the port of Tanga in Tanzania, will be financed by China Export & Credit Insurance Corporation (Sinosure) and the Export-Import Bank of China (Eximbank). Uganda has vast oil reserves but has struggled to secure funding for the pipeline amid concerns about human rights and sustainability. China’s involvement is seen as driven by geopolitics, as the country looks to portray itself as a reliable development partner, even as it invests in renewable energy projects. Critics argue that China’s financing of the pipeline contradicts its efforts to “green” the Belt and Road Initiative and invest in renewable energy. There are also concerns that Uganda, which is at moderate risk of debt default, will seek to change the terms of the pipeline deal.
Ping An Insurance votes against reappointing outgoing HSBC CEO Noel Quinn as director, source says
South China Morning Post
China's Ping An Insurance Group did not support the reappointment of HSBC CEO Noel Quinn as a director to the bank's board at its shareholder meeting. Quinn, who announced he will step down as CEO once a successor is appointed, defeated Ping An's campaign last year to get HSBC to spin off its Asia business. Ping An lodged a protest vote against Quinn's leadership at the meeting. Quinn will remain CEO until his successor starts and has agreed to remain available through to the end of his 12-month notice period expiring in April 2025.
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