Hungary's Orban huddles with Xi on Ukraine during surprise China visit;Chinese risk perilous journey in search of ‘freedom’ in the United States
China AI leader iFlytek dips into red under 'ultimate' U.S. pressure
Welcome to this issue of The China Brief. Today is July 8, 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.
Hungary's Orban huddles with Xi on Ukraine during surprise China visit
Nikkei Asia
Hungarian Prime Minister Viktor Orban met with Chinese President Xi Jinping on Monday in Beijing to discuss the Ukraine crisis and tensions between Russia and the European Union (EU). Orban praised China for its role in helping to create conditions for peace between Russia and Ukraine. Hungary, which currently holds the EU presidency, has strong ties with both Russia and China, diverging from the EU’s stance on Ukraine. Xi expressed hope that Hungary would play a positive role in promoting the development of China-EU relations. Orban’s visit is also believed to relate to Hungary’s growing importance as a production base for Chinese firms. Chinese state media reported that Orban discussed his recent visits to Ukraine and Russia, as well as negotiations between China and the EU over the imposition of tariffs on Chinese electric vehicles (EVs). Hungary has criticised the EU for the imposition of these “brutal” tariffs, and is seen as a potentially useful voice in Beijing’s efforts to pressure European nations to either scrap the tariffs or reduce them. Chinese EV giant BYD is currently building its largest factory in the EU in Hungary.
https://asia.nikkei.com/Politics/International-relations/Hungary-s-Orban-huddles-with-Xi-on-Ukraine-during-surprise-China-visit
Chinese risk perilous journey in search of ‘freedom’ in the United States
Al Jazeera
Middle-class Chinese citizens are increasingly attempting to cross the US-Mexico border illegally, with over 37,000 Chinese nationals being arrested in 2023. Many of these migrants are college-educated and have established careers or businesses in China. They are attracted to the US due to its economic strength and political freedom. The Chinese economy has been hit by the COVID-19 pandemic, leading to business collapse and economic difficulties for many middle-class citizens. China's strict lockdown policies have further exacerbated the situation, causing many to feel suffocated. The Chinese government's tightening political grip and restrictions on freedom of speech have also fueled discontent among citizens. Many Chinese migrants are using the Central America route to reach the US, with Ecuador serving as a gateway. However, Ecuador has recently suspended visa-free entry for Chinese citizens due to the increase in irregular migration. Chinese migrants are now exploring other routes, such as starting their journey from Bolivia or flying into Mexico with a valid Japanese multiple-entry visa. Obtaining a US visa has become increasingly difficult for Chinese nationals, leading to the decision to embark on the dangerous journey through the Americas. Once in the US, undocumented Chinese migrants often struggle to support themselves and face the risk of deportation.
https://www.aljazeera.com/news/2024/7/8/chinese-risk-perilous-journey-in-search-of-freedom-in-the-united-states
China AI leader iFlytek dips into red under 'ultimate' U.S. pressure
Nikkei Asia
Chinese artificial intelligence technology developer iFlytek has announced it expects to record a loss of up to $65m for H1 2021. The Shenzhen-listed company blamed heavy investments it had made under "ultimate" pressure from Washington. iFlytek was one of 28 Chinese companies to be sanctioned by the Trump administration in 2019 for alleged human rights abuses towards Muslim minority groups.
https://asia.nikkei.com/Business/China-tech/China-AI-leader-iFlytek-dips-into-red-under-ultimate-U.S.-pressure
Rural Chinese student sparks awe and suspicion after beating math elites in global contest
CNN
A fashion major from a vocational high school in rural China has amazed the nation by outshining elite students in a global math contest – but the teenager’s underdog story has now been mired by controversy. Jiang Ping, born in a poor village in eastern China’s Jiangsu province, ranked 12th out of 802 shortlisted competitors – mostly from prestigious institutions such as Harvard, Oxford, and MIT – in first-round results released on June 13 by DAMO Academy, the organizer of the Alibaba Global Mathematics Competition. Launched in 2018 by Chinese e-commerce behemoth Alibaba, the free online contest is open to math enthusiasts worldwide, though Chinese math majors typically dominate the top places. This year’s top 85 finishers will win prizes from $2,000 to $30,000. Jiang’s high placement – in the first of the contest’s two rounds – was a remarkable achievement for a student from one of the country’s vocational schools, which suffer deep-seated social prejudices and whose graduates occupy the lowest rungs of China’s educational hierarchy.
https://edition.cnn.com/2024/07/08/china/china-maths-student-controversy-hnk-intl/index.html
What is China’s ‘monster’ coast guard ship and why is the Philippines spooked by it?
CNN
China has deployed one of its largest coastguard ships to a disputed area of the South China Sea, according to the Philippine coastguard. The vessel, CCG-5901, is three times larger than its US equivalent, and anchored within 800 metres of a Philippine patrol vessel. China claims almost all of the South China Sea, but the Philippines, along with other countries, holds competing claims.
https://edition.cnn.com/2024/07/08/asia/china-monster-coast-guard-ship-philippines-intl-hnk-ml/index.html
China comes out swinging at ‘Summer Davos’, but talks up markets and US trade
South China Morning Post
China's Premier Li Keqiang defended the country's new-energy sector and criticized Western decoupling policies in a speech at the World Economic Forum's Annual Meeting of the New Champions. Li referred to the United States' "small-yard, high-fence" approach, which has raised costs in the global economy and sparked disputes. He argued that decoupling and building barriers would reverse progress and hinder global economic growth. Li also stated that China's new-energy products, including electric vehicles, solar panels, and lithium batteries, are helping to ease inflation worldwide. However, new punitive tariffs from the European Union on Chinese EVs came into force this week, and the US is set to impose 100% tariffs next month, putting pressure on China's new-energy sector.
Despite facing internal economic problems, such as weak consumer confidence and mounting local government debt, Premier Li vowed that China would achieve its annual GDP growth target of around 5% this year. The third plenum, which is expected to provide development goals for the next decade, will be held in mid-July and will focus on market-oriented reforms. Li emphasized the need to minimize government intervention in the micro economy and create a better environment for competition, particularly for private firms. China is also committed to deepening cooperation with the United States in trade and investment, despite the ongoing trade war and the US no longer being the largest source of Chinese imports.
In addition to Li's speech, other topics discussed at the World Economic Forum's Annual Meeting of the New Champions included the financial threat of climate change, the need for Chinese EV makers to focus on safety rather than engaging in a price war, the lessons Chinese firms can learn from failed Japanese attempts at globalisation, and Jordan's pitch to attract Chinese investment to the Middle East.
https://www.scmp.com/economy/china-economy/article/3269532/china-comes-out-swinging-summer-davos-talks-markets-and-us-trade?utm_source=rss_feed
Drought, floods, typhoons imperil crops and power as extreme weather spoils China’s summer
South China Morning Post
China is facing extreme weather conditions, including drought, flooding and typhoons, which are threatening crop harvests and increasing power demand. The National Climate Centre has issued warnings that several major waterways, including the Yangtze and Yellow Rivers, are at risk of overflowing due to heavy rainfall. The country is also experiencing above-average temperatures, which pose a threat to crops such as rice and cotton. The National Energy Administration has also warned of risks to power infrastructure and production from extreme weather conditions.
https://www.scmp.com/business/china-business/article/3269556/drought-floods-typhoons-imperil-crops-and-power-extreme-weather-spoils-chinas-summer?utm_source=rss_feed
Little parcels keep China’s factories humming
Reuters BreakingViews
The European Union (EU) and the US are looking to crack down on China's booming low-value e-commerce exports, threatening a significant sector of China's economy. The EU is planning to impose customs duties on low-value goods purchased online through retailers such as Shein and Temu, while US authorities are increasing oversight over a loophole that allows these firms to avoid import duties. Cross-border e-commerce grew 20% YoY in 2023, accounting for 7% of China's overseas goods. However, controlling this trade is complex and any crackdown could have a larger negative impact on consumption in countries trying to erect barriers against China, including non-Chinese companies such as Amazon.
https://www.breakingviews.com/considered-view/little-parcels-keep-chinas-factories-humming/
Why NATO Should Stay Out of Asia
Foreign Affairs
NATO's increased engagement in the Indo-Pacific region, particularly with the aim of countering China's rise, may not be in the best strategic interests of either NATO or its Asian partners. While China's assertiveness presents challenges, NATO is not the correct forum for fostering transregional cooperation to counter China. Drawing NATO into Asia risks fueling Beijing's narrative of a U.S.-led confrontation and could alienate Asian countries without effectively addressing regional security. Instead, policymakers should leverage the European Union's economic and diplomatic power to build transregional cooperation among Asian, European, and North American states, using flexible partnerships and issue-based coalitions. This network of close ties is more effective in countering global threats and would leave both Asia and Europe more secure.
NATO's engagement in Asia is out of sync with regional political dynamics, particularly in South Asia and Southeast Asia, where countries fear it will destabilize the delicate balance they strive to maintain between the US and China. Most Asian countries are unwilling to pick sides in the US-China rivalry and seek to work with both countries depending on the issue at hand. Many regional leaders have expressed concern that NATO's involvement could divide Asia into rival blocs. NATO's growing engagement with Asia could fuel insecurity and instability, as it feeds China's paranoia and risks a conflict outbreak. Asian countries worry about being caught in the crossfire if a conflict were to occur.
Rather than NATO, greater European engagement in the region is critical to countering China's rise. European states should focus on strengthening conventional deterrence and defense on their own territory and building up their military capabilities. NATO should lower its public profile in the region and emphasize tailored, discreet, and useful technical cooperation. Europe should leverage its diplomatic clout, economic power, and technological resources to counter Beijing. The European Union is better equipped than NATO to address a broad array of security concerns and should utilize its existing security and defense tools to build European-Asian cooperation. Additionally, European states should integrate more fully into the region's security architecture and engage in bilateral and multilateral initiatives with Asian partners.
https://www.foreignaffairs.com/world/why-nato-should-stay-out-asia
China’s banker pay crackdown risks Pyrrhic victory
Reuters BreakingViews
Chinese authorities are planning to cap salaries at state-backed financial institutions at CNY3m ($413,000), potentially applied retrospectively. The move reverses a two-decade drive to pay for performance, which will alienate staff and hamper the creation of "top class" global investment banks in Beijing, according to Breakingviews. The restrictions are also unlikely to offer long-term benefits as they could stifle innovation and prompt current employees to consider leaving, the column added.
https://www.breakingviews.com/considered-view/chinas-banker-pay-crackdown-risks-pyrrhic-victory/
China’s localities need debt relief, academic says, backing treasury bonds to ease burdens
South China Morning Post
Policy adviser, Li Daokui, has called for the Chinese central government to issue more treasury bonds to replace local debt. Li argues that high local debt loads have already dampened economic growth and that the central government should shoulder some of the burden weighing down localities. Local government finances in China have deteriorated significantly, as land sales have declined and pandemic prevention measures have generated hefty expenses. Debt sold by local government financing vehicles (LGFVs) was estimated to have reached up to nearly half of China's GDP.
https://www.scmp.com/economy/china-economy/article/3269336/chinas-localities-need-debt-relief-academic-says-backing-treasury-bonds-ease-burdens?utm_source=rss_feed
Why China’s third plenum matters for global investors
Japan Times
China's Communist Party is set to hold its third plenum, a meeting that typically deals with major economic and political policy changes. The meeting has historically been significant, with past leaders using it to announce major shifts in policy. The upcoming meeting is expected to focus on economic reforms and policies to help China navigate its post-pandemic recovery. The decisions made at the plenum will have a significant impact on the world's second-largest economy.
https://www.japantimes.co.jp/business/2024/07/08/markets/china-third-plenum-global-investors/
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