Tech war: China’s top memory chip maker YMTC sees rising domestic demand, defying US curbs
Why China Is Sabotaging Ukraine; China likely to retaliate in targeted ways after Europe raises levies on EVs
Welcome to this issue of The China Brief. Today is June 14, 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.
Tech war: China’s top memory chip maker YMTC sees rising domestic demand, defying US curbs
South China Morning Post
China's leading memory chip manufacturer, Yangtze Memory Technologies Corporation (YMTC), is experiencing a surge in demand for its flash memory chips from local clients, particularly those working on government and military-related projects. The demand is part of Beijing's push to reduce reliance on foreign semiconductor products. YMTC has become a favourite supplier for government-related projects in China and is prioritised over foreign rivals such as Micron Technology and Samsung Electronics. The company defied expectations that it might have to exit the 3D NAND flash memory market after being added to a US trade blacklist in 2022.
https://www.scmp.com/tech/tech-war/article/3266486/tech-war-chinas-top-memory-chip-maker-ymtc-sees-rising-domestic-demand-defying-us-curbs?utm_source=rss_feed
Why China Is Sabotaging Ukraine
Foreign Affairs
China has chosen to help Russia and sabotage Western-led peace proposals in Ukraine, in the hopes of brokering its own lasting agreement. However, this approach is unlikely to succeed, as Russia and Ukraine are not ready for serious peace talks and do not trust China to operate in good faith. Furthermore, China has little experience in major, international negotiations. Despite these obstacles, China will continue to indirectly help Russia, derail Kyiv-led diplomatic initiatives, and pretend to engage in diplomacy instead of genuinely trying to find a solution.
China's ties to Russia are of great strategic significance, as the two countries share a border and Russia provides China with cheap natural resources and military technologies. While China is careful not to cross Washington's red lines and has avoided shipping lethal aid to Russia, many Russian operators and their partners in China and Central Asia use China as a staging ground for products key to Russia's economy. Trade between the two countries has increased by over 60% in two years, to a record $240.1 billion.
China and Russia are also deepening their diplomatic relations and presenting a unified front. Chinese and Russian state railroad companies have signed an agreement to expand cross-border infrastructure, and Russian gas exports to Central Asia are being increased. Beijing and Moscow are also discussing ways to clear sensitive exports from China to Russia, including designating specialized banks that are largely immune to US restrictions. China has the ultimate trump card in its relationship with Russia – the ability to bring Russia to the table. If China can create a cease-fire agreement, it could enhance its geopolitical standing and reduce criticism of its support for Russian aggression. However, this is unlikely to happen as neither Russia nor Ukraine have any appetite to stop fighting, and the two sides are unlikely to reach a bargain. China also lacks a proven track record in complex negotiations.
https://www.foreignaffairs.com/china/why-china-sabotaging-ukraine-peace-agreement
China likely to retaliate in targeted ways after Europe raises levies on EVs
Japan Times
China is likely to respond to the European Union's decision to increase tariffs on Chinese electric cars with limited and targeted retaliation. The EU's move to increase tariffs on Chinese vehicles to as high as 48% has prompted criticism from China's Commerce Ministry and its chamber of commerce in the EU. However, China is wary of responding too strongly, as it risks encouraging further trans-Atlantic alignment against China and undermining Chinese President Xi Jinping's efforts to encourage "strategic autonomy" in Europe.
https://www.japantimes.co.jp/news/2024/06/14/asia-pacific/politics/xi-europe-trade-war-options/
China banks walk narrow path past property crisis
Reuters BreakingViews
Chinese banks have $22tn, or 38% of their assets, in real estate-linked loans, according to analysts at Citi. However, bad debt disposals and low exposure to developers have protected balance sheets. Non-performing loans stood at just 1.59% of total loans at the end of 2023, down from 1.73% two years earlier. Developers make up just a single-digit percentage of banks' real estate exposure, with three quarters of exposure coming from residential mortgages and corporate borrowing collateralised with property. Thus far, defaults have been rare. However, falling net interest margins are becoming a bigger headache for banks, and Beijing's latest property measures are not helping.
https://www.breakingviews.com/considered-view/china-banks-walk-narrow-path-past-property-crisis/
Chinese AI academy vows startup support to take on U.S. rivals
Nikkei Asia
The Beijing Academy of Artificial Intelligence (BAAI) has announced support for domestic generative AI companies in China. The BAAI presented a series of large language models at its annual conference, including a model developed with China Telecom that requires only 10% of the computing power needed for conventional large models. The model is open source, allowing developers to use it for free. The BAAI also revealed that it is working on multimodal models and integrating large AI systems into robots. The move comes as China and the US compete to lead the development of generative AI technologies.
https://asia.nikkei.com/Business/Technology/Artificial-intelligence/Chinese-AI-academy-vows-startup-support-to-take-on-U.S.-rivals
China isn't giving Taiwan's Lai Ching-te any honeymoon
Nikkei Asia
China has increased its threatening rhetoric and activities against Taiwan since the inauguration of new Taiwanese President Lai Ching-te, and this trend may lead to heightened tensions or even full-blown war. Chinese officials have described recent military drills around Taiwan as "punishment" and as a demonstration of China's ability to blockade or invade Taiwan. One reason China views Lai as a problem is his 2017 description of himself as a "pragmatic worker for Taiwan independence," and another is Taiwan's deepening relationship with Washington. US President Joe Biden has repeatedly talked of using American forces to defend Taiwan if China attacks the island. China's resentment of Taiwan's deepening relationship with the US is a problem for Lai, as is China's growing military strength and confidence. Xi Jinping has prioritised the modernisation and professionalisation of the People's Liberation Army, with the goal of being able to conquer Taiwan. The Taiwanese themselves do not seem overly concerned about the situation, but the risk of miscalculation by Chinese pilots or Taiwanese pilots intercepting them remains high.
https://asia.nikkei.com/Opinion/China-isn-t-giving-Taiwan-s-Lai-Ching-te-any-honeymoon
S Korea, US ‘closely monitoring’ potential Putin-Kim meeting in Pyongyang
Al Jazeera
South Korean and US officials have warned that a visit by Russian President Vladimir Putin to North Korea would breach UN Security Council resolutions. The trip, which could occur this month, is expected to deepen military ties between Moscow and Pyongyang. The US has accused North Korea of using Russian-made missiles and artillery shells during its conflict with Ukraine.
https://www.aljazeera.com/news/2024/6/14/s-korea-us-closely-monitoring-potential-putin-kim-meeting-in-pyongyang
For China’s booming EV industry, US and EU markets a tough nut to crack
Al Jazeera
Growing concern in Western capitals is threatening to derail Chinese EVs’ rapid rise. United States President Joe Biden has cast China’s industrial policy as a national security threat, pledging not to allow its manufacturers to “flood” the US market with its vehicles. The EU has echoed Washington’s concerns. On Wednesday, the EU Commission announced that new duties of between 17.4 percent and 38.1 percent would be imposed on Chinese EVs from July 4 unless Beijing offers a “solution” to subsidies that the bloc says are distorting the market. The tariffs, introduced after the launch of a probe in October, come on top of already existing duties of 10 percent. The combined tariffs are close to the 50 percent mark that research provider Rhodium Group has estimated would be necessary for the EU to curb Chinese EV imports. But they also risk setting the EU on the path of a trade war with China, according to Rene Toender, an independent strategic adviser to the car industry in Scandinavia.
https://www.aljazeera.com/economy/2024/6/14/for-chinas-booming-ev-industry-us-and-eu-markets-a-tough-nut-to-crack
Guilty Verdict for Chinese Activists Who Gave #MeToo Victims a Voice
NY Times
A prominent feminist journalist and a labor activist in China have been sentenced to five years and three years and six months in prison, respectively, on charges of endangering national security. The charges stem from their involvement in organizing discussions, providing support to activists, and receiving overseas training. The severity of the sentences, along with the long pretrial detention endured by the defendants, highlights the shrinking space for independent discussion of social issues in the country. The case is seen as an example of China's increasingly zero-tolerance approach to civil society activism. The journalist, Huang Xueqin, was known for her work in the #MeToo movement and for reporting on anti-government protests in Hong Kong. The labor activist, Wang Jianbing, has long been involved in advocacy for workers and people with disabilities, as well as supporting #MeToo victims.
https://www.nytimes.com/2024/06/14/world/asia/china-me-too-verdict.html
US returns US$156 million in looted 1MDB funds to Malaysia
South China Morning Post
The US government has returned $156m to Malaysia, marking the fourth transfer of funds recovered from assets seized in connection with the 1MDB scandal. The US Department of Justice (DOJ) has estimated that $4.5bn was moved through a network of overseas accounts since the state fund’s establishment in 2009. The latest transfer raises the total amount recovered and repatriated to Malaysia to $1.4bn. The 1MDB scandal caused outrage in Malaysia, with investigators revealing that billions of dollars of public funds were used to finance luxury lifestyles. The scandal also led to investigations in other countries.
https://www.scmp.com/week-asia/politics/article/3266566/us-returns-us156-million-looted-1mdb-funds-malaysia?utm_source=rss_feed
A peace summit for Ukraine opens in Switzerland, but Russia won’t be taking part
Associated Press
Switzerland will host a summit this weekend on the war in Ukraine, despite Russia’s refusal to participate. The Swiss government did not invite Russia, as the Ukrainian government did not want them involved, although the Swiss hope that Russia will join the process at a later date. The summit is seen as a symbolic effort by Kyiv to rally international support and project strength in the face of its better-armed adversary. The summit will discuss issues including nuclear safety, humanitarian aid, and food security, but will not cover more complex matters that can only be resolved with Russian involvement. Among the attendees will be French President Emmanuel Macron, Japanese Prime Minister Fumio Kishida, US Vice President Kamala Harris and Canadian Prime Minister Justin Trudeau. The Chinese Foreign Ministry has said that any peace conference should involve both Russia and Ukraine, but China will not attend the summit.
https://apnews.com/article/ukraine-russia-switzerland-summit-peace-burgenstock-zelenskyy-5df2e62407ed50dc324965ad66e3f9ae
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