The Chinese Equities Market's Renaissance: The Wu Qing Doctrine; Alibaba’s Ex-CEO Joins Mystery Beijing Fund Months After Exit
US CEO Angela Chao was drunk when she drove into pond and died; China on track to be ready to invade Taiwan by 2027
Welcome to this issue of The China Brief. Today is March 21, 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.
The Chinese Equities Market's Renaissance: The Wu Qing Doctrine
Li Weijun
In the shadow of a pronounced slump preceding the Lunar New Year, Wu Qing, the recently inaugurated chairman of the China Securities Regulatory Commission (CSRC), disclosed a comprehensive strategic blueprint at a National People's Congress press briefing in March, with the intention of fortifying and refining the mechanisms of the Chinese stock market. This blueprint is structured around a pivotal foundation supported by five principal components: the cultivation of high-caliber listed enterprises, a sophisticated capital structure enriched with value-oriented and long-horizon investors, the strengthening of market infrastructure, the advancement of regulatory effectiveness, the enhancement of professional market engagement, and the rigorous application of legal compliance.
These measures are a response to the idiosyncratic challenges besetting China's equities market, which has historically prioritized financing over investment in its transition from a centrally planned economy towards a market-driven one. The conventional focus has been more on the sheer volume of shares issued and the quantum of financing rather than on the performance of the market or the quality of the corporations, culminating in a chronic languishment around the 3000-point threshold despite the exponential growth in the quantity and financial heft of listed entities, a growth trajectory that outstrips that of venerable indices such as the Dow Jones.
The "1+5" strategy of Wu Qing, elucidated across four pivotal CSRC documents, seeks to ameliorate the quality of companies, tighten regulatory oversight, bolster investment banking and institutional frameworks, and refine the operations of the commission itself. These strategies are tailored to satisfy the dual imperatives of the market: the profitability for investors and the regulatory emphasis on the issuance of shares. By mitigating the proliferation of excessive share issuance and fostering robust investment practices, the policy endeavors to reconcile these forces, heralding the potential metamorphosis of the Chinese stock market into a formidable investment landscape.
In the immediate term, the market has shown signs of stabilization, bolstered by government-supported funds. Nonetheless, a broad swath of investors maintains a stance of cautious optimism, in anticipation of more tangible indicators of progress. While the CSRC's reforms hold the promise of averting further downturns, conjectures of an impending bull market remain speculative at best. The primary objective remains the cultivation of a conducive environment that magnetizes quality capital, facilitating a nuanced transition from bearish to bullish market dynamics.
Should these reforms be consistently upheld and adeptly executed, they could reposition the Chinese stock market from a status of "uninvestability" to that of a modern, investable market. This reinvention hinges on the enduring application of these policies, immune to the vicissitudes of political leadership or external duress, thereby ensuring a balanced and robust trajectory of market growth.
Our optimism is pinned on Chairman Wu Qing's pragmatic stewardship and the prospective vitality of the Chinese stock market.
US CEO Angela Chao was drunk when she drove into pond and died, police say
South China Morning Post
Angela Chao, CEO of the Foremost Group shipping company and sister-in-law of US Senate Minority Leader Mitch McConnell, was drunk when she drove her car into a pond and died last month, according to an investigation by the Blanco County Sheriff’s Office in Texas. The report concluded that Chao’s death was an accident and that her blood alcohol level was nearly three times the state’s legal limit. Chao died on 10 February after dinner at a ranch near Johnson City, west of Austin.
China on track to be ready to invade Taiwan by 2027, U.S. commander says
Japan Times
The top US military commander in the Indo-Pacific, Admiral John Aquilino, has stated that China is actively working towards its goal of being able to invade Taiwan by 2027. Aquilino made the remarks during a testimony to the US House Armed Services Committee, where he highlighted China's efforts to build up its military capabilities. He also noted that China had recently sent its second-largest contingent of warplanes around Taiwan in a single day this year. Aquilino's comments come as tensions between China and Taiwan continue to escalate.
Forget about politics, Chinese Foreign Minister Wang Yi is in Australia for business
ABC
Chinese Foreign Minister Wang Yi's visit to Australia is part of a wider economic strategy designed to solidify business relations and reduce opportunities for dissent, according to an op-ed in the ABC. While China has been accused of using trade as a tool of political diplomacy, the op-ed suggests this is not the case with China's engagement with Australia. Rather, it is a calculated move to ensure economic ties between the two nations strengthen and to reposition China as Australia's key economic partner.
Alibaba’s Ex-CEO Joins Mystery Beijing Fund Months After Exit
Bloomberg
Former Alibaba CEO Daniel Zhang has joined Chinese investment fund Firstred Capital as a managing partner. Zhang, who left Alibaba in 2023, will work alongside founder Liu Xiaodan at the firm, which focuses on M&A opportunities in healthcare, consumer, industrials, and technology. As part of the move, Alibaba will become an anchor investor in Firstred. The investment fund raised CNY6.8bn ($945m) from institutional investors in 2021 for its maiden M&A fund.
UAE Piles Into African Deals to Outdo Rivals Like China, France
Bloomberg
The United Arab Emirates (UAE) is positioning itself as a major investor in Africa, pledging more foreign direct investment (FDI) in the continent's economies than any other country. The UAE's investments are focused on renewable energy, logistics, technology, real estate, and agriculture. The country has pledged $44.5 billion in FDI for 2023, nearly twice that of China, which came in second. The UAE's interest in Africa extends beyond investment, with the country also playing a role in domestic political affairs in countries such as Libya, Sudan, and Ethiopia. UAE-based companies are focusing on Africa's better-developed economies, including Egypt, Morocco, South Africa, and Kenya. The UAE's investments in Africa are driven by the country's desire to secure geopolitical clout and diversify its economy away from oil and gas. The UAE is also seeking to compensate for its weaknesses, such as its reliance on food imports, by investing in agriculture in countries such as Sudan, Zimbabwe, and Angola.
PBOC Still Sees Room for More RRR Cuts After Strong Early Data
Bloomberg
The People's Bank of China (PBOC) still sees room to lower the reserve requirement ratio (RRR) for banks in order to support the country's economy, according to Deputy Governor Xuan Changneng. Xuan stated that the RRR is still an important tool to adjust liquidity in China and that monetary policy can become more "autonomous" as deposit rates trend lower and other major global economies start to ease. The PBOC Governor Pan Gongsheng also recently stressed that there was still room for the central bank to cut the RRR. However, neither Pan nor Xuan provided any indication of when another cut may occur. Earlier reports suggested that policymakers were in an "observation period" after signs of economic strength in the first two months of the year, implying that it may be some time before the PBOC considers adjusting rates.
Grisly teen murder case shocks China and shines a light on ‘left behind’ children
CNN
The alleged murder of a 13-year-old boy by his classmates in rural northern China has shocked the nation, igniting heated debates about school bullying, juvenile crime, and the plight of tens of millions of children raised in the absence of their migrant worker parents. Three teenagers have been detained by police on suspicion of killing the boy at their junior high school in a village on the outskirts of Handan city in Hebei province, after his disfigured body was found buried in an abandoned greenhouse, state media reported last week. Authorities in Handan said the boy, identified by his surname Wang, was killed on March 10, and that all suspects were taken into police custody the following day. The crime had apparently been planned, as investigators had found the suspects started digging Wang’s shallow grave a day before he was killed, according to police.
Microsoft is attracting growing criticism for censoring Bing in China
Japan Times
Microsoft is facing criticism from US Senator Marco Rubio over its operations in China. Rubio stated that there is "no defending" the company's compliance with Chinese censorship, adding that every US company that chooses to work in China gives the Chinese Communist Party an opportunity to "overpower" the US. Rubio's comments follow a Bloomberg investigation that found Microsoft's Bing search engine in China removes information about human rights, democracy, and other sensitive topics to satisfy Beijing.
As China ages, senior citizens see a retirement of striving to get by
Al Jazeera
More than two-thirds of Chinese senior citizens intend to rejoin the workforce after retiring, according to a survey by Chinese recruitment website 51job.com. The trend reflects a pension system that is struggling to meet people’s needs. China’s pension system was initially intended to supplement the caregiving role adult children undertook on behalf of their ageing parents. As China’s population urbanised, family bonds weakened and the elderly population increased, pension coverage was expanded to cover almost the entire population, but major disparities still exist. Retired urban salaried employees receive an average monthly basic pension of about $470, whereas rural and migrant workers can receive as little as $25. As the population shrinks, the number of over-60s in China is expected to rise to nearly 600 million by 2035. China’s main pension fund for urban workers is on track to run out of funds by 2035. Economic analysts have called for the need to consolidate the country’s fragmented pension schemes into a more unified system with greater flexibility. However, any reform to benefits could lead to public backlash. Last year, authorities in the cities of Wuhan and Dalian announced cuts to retirees’ medical benefits, prompting senior citizens to protest.
China’s Imports of Russian Coal Slump as Import Taxes Bite
Bloomberg
Chinese purchases of Russian coal have dropped in the first two months of this year due to the reimposition of import taxes by Beijing. While China's total coal imports for January and February rose 23% to 74.5 million tonnes, imports from Russia fell 22% to 11.5 million tonnes. The import levies were reinstated at the start of the year, affecting Russian supplies but not those from Indonesia and Australia, which have free-trade agreements with Beijing. Russia is still China's second-largest supplier of coal, but the threat of trade actions could impact its exports to China.
Chinese study sheds light on how proteins play a role in ageing process
South China Morning Post
Increased levels of a protein called PAPPA have been found to accelerate ageing in human cells, according to a study by the Chinese Academy of Sciences. Researchers also discovered that the protein was triggered by a family of signalling proteins known as sirtuins, which regulate metabolism. The findings could help to deepen understanding of the ageing process and inform anti-ageing interventions. PAPPA was first identified as a protein found in high levels in the blood of pregnant women, but its function was unknown.
China’s outbound investments to drive demand for private credit: ADM Capital
South China Morning Post
Hong Kong-based private credit manager ADM Capital sees opportunities for non-bank capital providers to fill the financing gap in China. Chinese firms are turning to private credit lenders like ADM Capital for funding due to the complexities of cross-border transactions. Once a borrower is established in the offshore market, local banks could step in to refinance the loan and allow the original lender to exit. ADM Capital has transformed itself from a distressed assets lender to one focused on mid-market companies with strong environmental, social and governance (ESG) credentials.
Nuclear fusion backers meet in U.S. as competition with China looms
Japan Times
Leaders in the Western nuclear fusion industry are meeting in Washington to discuss ways to attract more funding for research in order to compete with China in the development of commercially viable reactors. The US recently allocated $790 million for fusion science programs, but supporters argue that over $1 billion is needed. Fusion, the nuclear reaction that powers the sun, has the potential to provide carbon-free electricity. Unlike fission plants, fusion plants would not produce long-lasting radioactive waste.
China’s automakers try turning Japanese
Reuters BreakingViews
Chinese automakers are setting up factories overseas to avoid potential trade restrictions and expand their presence in global markets. Last year, China exported almost $40 billion worth of pure battery and hybrid cars, with a significant portion ending up in Europe. Chinese automakers are offering relatively sophisticated products at low prices, making them competitive in international markets. However, Western officials, including US President Joe Biden and European Commission President Ursula von der Leyen, have expressed concerns about a potential flood of Chinese electric cars. The European Commission is currently investigating reports that Chinese cars sell for as much as a fifth less than similar EU-made models, potentially leading to the imposition of retrospective tariffs. Chinese automakers have already been setting up factories in smaller markets such as Southeast Asia, Russia, and Latin America, and are now expanding their presence in Europe. However, the US market may prove more difficult to penetrate due to concerns about national security and competition with local automakers.
A police officer was accused of spying for China. The charges were dropped, but the NYPD fired him
Associated Press
Baimadajie Angwang, a former New York City police officer, is fighting his dismissal after criminal charges against him for spying for China were dropped. The police commissioner fired Angwang on 29 January for refusing to submit to questioning by internal affairs investigators about the spying case. Angwang said he declined to appear before the investigators on the advice of his lawyers, who had been denied department documents ahead of the questioning to prepare. Angwang, who was born in Tibet and granted asylum in the US as a teenager, spent six months in detention before being released on bail awaiting trial.
Can anything stop Nvidia’s Jensen Huang?
Economist
Nvidia CEO Jensen Huang is positioning the company as the leader in building the "AI factories" of the future. At the company's recent developers' conference, Huang announced the launch later this year of a new generation of superchips, named Blackwell, that are many times more powerful than its existing GPUs. Nvidia's GPUs are in high demand, particularly from cloud-computing giants and builders of generative AI models, but the company wants to expand its customer base to include firms in all industries. To capture this growth, Nvidia plans to offer self-contained software packages called Nvidia Inference Microservices that rely on its GPUs. However, the company faces challenges, including supply chain issues and geopolitical risks, particularly in relation to tensions between the US and China. There are also concerns about the energy consumption of AI chips and the strain they will put on the power grid, although Huang says the new Blackwell system will be more efficient.
China’s chip executives call for global cooperation despite US curbs
South China Morning Post
Executives from China's top semiconductor companies have called for closer collaboration with their international peers at the annual Semicon China event. However, none of them mentioned the potential impact of US export curbs on advanced chip technology. The Biden administration is considering blacklisting several Chinese semiconductor firms linked to Huawei Technologies. Despite this, Chinese chip executives believe the country will remain a key part of the global semiconductor supply chain and praised progress made by US chip designer Nvidia. Semicon China projected the global semiconductor market to reach $1tn by 2030.
2 years on, still no answer to why a China Eastern Boeing 737 crashed, killing all 132 people aboard
Associated Press
Two years after a China Eastern flight crashed, killing all 132 people on board, investigators have yet to determine the cause of the crash. An update issued by the Civil Aviation Administration of China reiterated previous findings that there were no faults or abnormalities with the aircraft or crew, and that weather conditions were fine. A technical team will continue to investigate the cause of the crash.
China plans to ease visa rules to attract foreign talent and money
Nikkei Asia
China has promised to relax its visa requirements in order to attract overseas workers, as part of a wider liberalisation plan after foreign investments fell to a record low last year. The government has outlined plans to eliminate entry barriers to foreign investment in the manufacturing and financial sectors, as well as issuing long-term work visas to expatriates and their families. The move comes after China’s foreign direct investment (FDI) fell by around 80% since 2012, to $33bn in 2013. The European Chamber of Commerce in China has warned that the “volume, complexity and severity of the risks that member companies face have all grown exponentially in recent years”.
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