Chinese health chief Ma Xiaowei steps down after steering nation through pandemic and defending strict zero-Covid; Tourism in China surges during May Day holiday but travelers turn frugal
Exclusive Insight: Strategic Shift: Yu Chengdong's Transition and Huawei's Path to IPO
Welcome to this issue of The China Brief. Today is May 6, 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.
Exclusive Insight: Strategic Shift: Yu Chengdong's Transition and Huawei's Path to IPO
Wen Ruolin
Yu Chengdong's shift from CEO of Huawei's Consumer BG to Chairman of Terminal B, alongside He Gang's assumption of the CEO role, has ignited two prominent speculations: one posits it as a promotion for Yu Chengdong, while the other suggests a potential erosion of his influence. Huawei's official explanation attributes this change to a drive for enhanced corporate governance, a rationale that appears both credible and strategic. This governance overhaul aligns with Huawei's broader vision of fortifying its Terminal BG for forthcoming challenges.
Examining the external conjectures:
Is it a Promotion? Huawei's intricately crafted management structure, a product of early collaborations with Western consulting firms, suggests that any substantial elevation in Yu Chengdong's position would entail assuming a rotating chairman role, a move far more substantive than the mere establishment of a new BG chairman post. Marginalization? Despite recent displays of assertiveness by Yu Chengdong, the notion of internal jealousy leading to his sidelining seems unfounded within Huawei's historical context of humility and restraint. Office politics exist but have rarely escalated to significant internal strife. Ren Zhengfei, Huawei's CEO, maintains a firm grip on high-level decision-making, making the likelihood of Yu Chengdong's marginalization exceedingly low. The appointment of a chairman for the Terminal BG serves as a strategic maneuver aimed at reinforcing corporate governance. Unlike other BGs where presidents and directors still preside, this decision signals a targeted effort tailored to the Terminal BG, possibly paving the way for Huawei's Terminal BG to enter the capital market through an IPO.
In light of economic challenges since 2023 and Beijing's efforts to revamp financial markets, the strategic imperative of introducing high-quality listed companies like Huawei to attract long-term investors becomes apparent. Huawei, as China's largest privately-owned unlisted company, is well-positioned to address structural deficiencies in Chinese financial markets.
Under Yu Chengdong's stewardship, Huawei's Terminal BG has exhibited resilience, rebounding from adversity, and resuming growth despite U.S. sanctions. The diversity of Huawei's business units necessitates a strategic approach, with separate listing allowing for optimal value maximization. Moreover, the consumer-facing nature of products from the Terminal BG mitigates concerns about sensitive business information disclosure, making the timing opportune for Huawei's entry into the capital market, showcasing its strength and growth potential.
In essence, Yu Chengdong's transition signifies the initiation of Huawei's new strategic plan, underscored by corporate governance enhancement and potential IPO preparations for the Terminal BG.
(Wen Ruolin, a columnist for "The China Brief".)
South China Morning Post
China's health minister, Ma Xiaowei, has stepped down as he approaches the official retirement age, and will be succeeded by his deputy, Lei Haichao. Ma, who implemented President Xi Jinping's "zero-Covid policy" during the pandemic, will turn 65 in December, the retirement age for ministerial-ranked officials. Lei, a prominent public health expert, has been appointed Communist Party secretary of the National Health Commission (NHC), a step before a formal directorship appointment. He is expected to push for reform of China's health system, which is facing a massive deficit and allegations of corruption.
Tourism in China surges during May Day holiday but travelers turn frugal
CNN
China experienced a surge in tourism during the recent Labor Day holiday, with 295 million trips taken within the country. However, tourists spent less money per trip compared to five years ago, indicating weak consumption in the country. The average spending per trip dropped by 6% to 565.73 yuan ($80). Similarly, the box office saw an increase in visitors, but ticket sales remained at 2019 levels. China's weakening economy and poor job prospects have led to a decrease in consumer spending. The real estate downturn, which accounts for 70% of household wealth, is also impacting consumer sentiment. Retail sales growth slowed in March and consumer inflation increased only slightly.
Winter’s over and Hong Kong stocks are springing back to life
South China Morning Post
The Hong Kong stock market is finally showing signs of a recovery after a prolonged period of decline. The Hang Seng Index is up by nearly a quarter since January, and economic indicators are encouraging. The recent Federal Open Market Committee meeting in the US indicated continued easing, and Beijing's Politburo meeting also indicated further stimulus and regulatory support for the offshore market. The expansion of the Stock Connect scheme is expected to drive more mainland capital into Hong Kong's stock market and close the valuation gap. Foreign investors are also expected to return to the market.
Macron sets Ukraine as top priority as China’s Xi Jinping pays a state visit to France
Associated Press
French President Emmanuel Macron will seek to press China’s Xi Jinping to use his influence to move Russia toward ending the war in Ukraine during a two-day state visit to France. Both leaders were also expected to discuss trade disputes over electric cars, cognac and cosmetics.
South China Morning Post
A recovery in commercial real estate investment in the Asia-Pacific region is expected to be delayed until later this year or early next year, according to CBRE. The property consultancy said that interest-rate cuts, which many buyers were banking on, had not materialised. Investment in the region fell 14% year on year in Q1 2019 as high interest rates kept commercial property prices elevated. CBRE said that most investors in the region, including property companies, real estate funds and banks, were net sellers.
China’s billions help Xi make useful friends in Eastern Europe
Japan Times
China is building a high-speed rail link between Belgrade and Budapest, which will connect Serbia and Hungary. The project, funded and constructed by China, represents China's growing influence in Europe, especially in countries that have embraced it as a strategic partner. The rail link is seen as a backdoor entry for China into Europe, as the continent remains divided over its relationship with China.
China scammer uses 4,600 phones to fake live-stream views and traffic, earns US$415,000 in 4 months
South China Morning Post
A man in China has been jailed for operating 4,600 phones to inflate live-stream viewer counts and making CNY3m ($415,000) in less than four months. The individual, surnamed Wang, was sentenced to one year and three months in prison and fined CNY50,000 for the "crime of illegal business operations". Wang's brushing business involved faking real-time activities such as viewer counts, likes, comments and shares in live-streaming to simulate genuine viewer interactions. The fake viewer accounts were bought in bulk, and Wang said that there were "certain loopholes" in the account management of live-streaming platforms.
South China Morning Post
Countries in Asia are taking steps to strengthen their defense and strategic security as tensions between the United States and China continue to escalate. Last month, the US, Japan, and the Philippines held their first-ever trilateral summit aimed at deepening and revitalizing existing alliances and partnerships. Meanwhile, the US has imposed sanctions on 20 Hong Kong and mainland Chinese companies for their alleged involvement in the development of Russia's industrial base and military. In addition, the US and China have revived military safety talks, but diplomatic observers believe that ties between the two countries are on a "long trajectory of decline" due to deep mistrust.
Several countries in the region are also taking action to counter China's influence. India has delivered its first batch of supersonic cruise missiles to the Philippines, while Japan's coastguard has extended an initiative to help other regional countries counter China's maritime presence near the Marshall Islands and Micronesia. Singapore has offered to host a future visit by nuclear-powered submarines produced under the Aukus alliance, which is widely seen as a bloc to counter Chinese influence. However, South Korea has downplayed its resolve to intervene in the event of a Taiwan crisis, arguing that its focus should be on preventing North Korean provocations.
Despite these moves, some countries are still seeking to maintain good relations with China. Malaysia's foreign minister said that his country opposes external forces meddling in the South China Sea, while Cambodia has agreed to speed up and finalize the long-awaited code of conduct in the area. North Korea has also sent a delegation to Iran amid suspicions of greater military cooperation between the two countries and attempts to draw Tehran into an anti-US alliance.
Is this Macron's moment to shine?
Japan Times
French President Emmanuel Macron has warned that Europe's security, prosperity and culture are under threat. In a speech at the Sorbonne, Macron argued that Russia's aggression against Ukraine is a danger to Europe as a whole. He also highlighted the need for Europe to reduce its reliance on Russia for energy, outsource less to China, and not rely on the US for security. Macron's warning comes as European countries face the rise of populist parties, as well as the actions of Russian President Vladimir Putin, Chinese President Xi Jinping, and US President Donald Trump.
GM-Backed Self-Driving Firm Momenta Said to File for IPO in US
Bloomberg
Chinese self-driving firm Beijing Momenta Technology has confidentially filed for an initial public offering (IPO) in the US. The company, founded in 2016, is working with China International Capital Corp, Goldman Sachs and UBS on the listing, which could raise between $200m and $300m. Momenta was said to be considering an IPO in the US or Hong Kong earlier last year but the plans were delayed. Its backers include General Motors, Temasek Holdings and IDG Capital.
Chinese investment bank CICC to demote senior bankers, cut their pay to reduce costs
China International Capital Corp (CICC) is reportedly planning to demote some of its senior bankers and lower their pay. The actions are part of a new performance-rating system, which could lead to voluntary departures from the Chinese investment bank. The move is viewed as a way for CICC to reduce costs without making bankers redundant. Demotions could lead to resignations, decreasing the bank's headcount through attrition. CICC has been slashing bonuses for the past three years amid a slump in deal making.
What is France’s role in the US-China rivalry?
South China Morning Post
China-France relations have been complicated by the countries' ambitions to be world leaders and France's desire to have an independent foreign policy despite being a US ally. However, Beijing is now hoping that France will push the European Union to adopt a more positive and pragmatic China policy. This comes as China faces increased scrutiny over its products and market access.
South China Morning Post
Inbound tourist spending through mobile payment app Alipay surged during China's recent Labour Day holiday as international tourists slowly return to the country following the pandemic. Spending that international travellers made with Alipay during the holiday increased by 700% compared to the previous year. The surge was attributed to an increased number of international tourists brought in by China's new visa-free entry policies. The number of visitors from 15 countries across Europe and Southeast Asia who used Alipay during the holiday was four times higher than the previous year. Efforts to boost inbound tourism have resulted in a moderate recovery, with foreign passport holders making more than double the number of trips in January and February compared to the previous two months. However, inbound tourism still faces hurdles amid an increasingly challenging international environment. Meanwhile, Chinese travellers' overseas spending has grown as outbound tourism picks up, with total overseas spending through Alipay rising by 10% year-on-year during the Labour Day holiday.
South China Morning Post
A survey by the People's Bank of China has shown that households in China are still struggling with a weak job market, with consumption spending remaining low as people lean more towards saving. The survey, which interviewed 20,000 residents across 50 cities, revealed that 46.5% of respondents described the job situation as "precarious" and "uncertain". Only 10.5% said it was easy to find a job, and nearly 70% said their income had remained unchanged. The survey highlights the challenges faced by policymakers who have been relying on domestic consumption to drive economic growth.
China’s services activity growth eases in April, but new business and export orders accelerate
South China Morning Post
China's services sector growth slightly slowed in April due to rising costs, but growth in new orders and business sentiment remained strong, according to the Caixin/Markit services purchasing managers' index (PMI). The PMI fell to 52.5 in April from 52.7 in March, but remained above the 50-mark that separates expansion from contraction. New business reached its highest level since May 2021, with growth in new export orders at its fastest pace in 10 months. However, companies continued to face cost pressures, leading to an increase in prices charged to customers.
Hungary and Serbia’s autocratic leaders to roll out red carpet for China’s Xi during Europe tour
Associated Press
Chinese President Xi Jinping is visiting Hungary and Serbia this week, two countries that have been increasingly courting economic ties with China. These nations, which have autocratic leaders and are considered friendly towards Russia, have opened their doors to Chinese investments in infrastructure, manufacturing, energy, and technology. Hungary, in particular, has positioned itself as China's gateway into the European Union (EU), being the first EU country to participate in China's Belt and Road Initiative. By establishing bases within the EU, China can avoid costly tariffs. Hungary, for example, will be the site of China's BYD's first European electric vehicle (EV) production factory, potentially upending the competitiveness of the European auto industry. Serbia has also received significant Chinese investments in mines, factories, and infrastructure. The two countries are also cooperating with China on the modernization of the railway connecting Budapest and Belgrade. China has issued loans worth over $22 billion to nine Central and Eastern European countries, with Hungary and Serbia receiving the most significant amounts.
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