Why It’s So Hard for China to Fix Its Ailing Economy;11 killed as bus crashes into students, parents outside school in China; Xi wants bigger returns and fewer headaches from African debt deals
Welcome to this issue of The China Brief. Today is September 3, 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.
Why It’s So Hard for China to Fix Its Ailing Economy
NY Times
A recent survey in China revealed a significant decline in financial optimism among its citizens, with only 39% feeling better off than five years ago, down from a peak of 77% in 2014. This shift reflects the current economic crisis facing China, which has struggled to recover from the pandemic. The government's efforts to reduce reliance on the real estate market have led to a sector crisis, resulting in developer bankruptcies, unsold properties, and job losses. Consumers are saving more, businesses are reducing salaries and hiring, and new graduates are facing tough job prospects. Additionally, China's population has decreased for two consecutive years, contributing to a growing sense of pessimism in a nation that has historically experienced rapid economic growth and improving living conditions.
https://www.nytimes.com/2024/09/03/business/china-economy-consumption.html
11 killed as bus crashes into students, parents outside school in China
CBS NEWS
Beijing — A bus crashed into a group of students and their parents at a school in eastern China early Tuesday, killing 11 people and injuring 13, police said.
The students and parents were at the gate of a middle school in Tai'an city in the eastern province of Shandong just before 7:30 a.m., the Dongping county police department said in a posting on social media. Tuesday was the second day back to school after the summer vacation for children across China.
Six parents and five students were killed, it said. One of the injured was in serious condition while the others were listed as stable, the department said.
The driver was in police custody and the incident was under investigation, it said.
The bus was specially customized for transporting students, it said. It did not say who was responsible for operating the bus. Many schools contract out such services to private companies or individuals.
School safety, including overloaded school buses and poorly designed buildings, has long been a problem in China.
In 2017, a dozen people, including 11 kindergarten pupils, were killed when a school bus crashed and burst into flames in a tunnel in the eastern Chinese city of Weihai, also in Shandong province. The driver, six Chinese children and five South Korean children were killed. It remains unclear whether the crash was deliberate or the result of unsafe driving.
China has cracked down heavily on transportation dangers, adding training and vehicle inspections.
China also has suffered numerous cases in recent years of attacks on school children , often using knives or homemade explosives. The suspects were generally found to be bearing grudges and seeking revenge over personal matters or against society more generally.
https://www.cbsnews.com/news/china-bus-crash-school-students-parents-deaths-driver-questioned/
Xi wants bigger returns and fewer headaches from African debt deals
Japan Times
Chinese President Xi Jinping is set to meet African leaders in Beijing, but this time with a more cautious approach regarding investments. Over the past decade, China has invested over $120 billion in Africa through its Belt and Road Initiative, funding infrastructure projects like hydropower plants and railways. While these efforts have granted China significant influence and access to resources, they have also led to criticisms of debt traps and corruption, particularly as several African countries faced debt crises and defaults. Some projects, like an incomplete $3.8 billion railway in Kenya, highlight the challenges and failures associated with the initiative. Consequently, China is now seeking greater returns and fewer complications from its investments in Africa.
https://www.japantimes.co.jp/news/2024/09/03/asia-pacific/politics/xi-returns-african-debt-deals/
An Incomplete List of Everything Threatening China’s National Security
NY Times
China's Ministry of State Security is urging citizens to be vigilant against potential threats to national security through a social media campaign. Highlighting various dangers, the agency warns about spies posing as benefactors, invasive species shipped in packages, and college students seeking part-time work as potential targets. The campaign aligns with Xi Jinping's push for heightened national security awareness among the populace. Posts caution about everyday objects being used for espionage, emphasizing a "whole of society" approach to fend off foreign threats.
https://www.nytimes.com/2024/09/03/world/asia/china-security-threats.html
Huawei looks to upstage Apple with product launch just hours after expected iPhone 16 unveiling
CNBC
Huawei said Monday it plans to hold a product launch event this month just hours after Apple 's annual iPhone reveal as the Chinese technology giant looks to upstage its U.S. rival.
The event will take place on Sept. 10 at 2:30 p.m. Beijing time, Huawei said in a post on Chinese X-like service Weibo on Monday.
That timing would be late evening on Sept. 9 on the west coast of the U.S., where Apple's event is set to take place.
Apple is expected to unveil its iPhone 16 lineup on the morning of Sept. 9 at its event which features the tagline "It's Glowtime".
It's unclear what Huawei plans to launch at its event. Richard Yu, who heads up Huawei's consumer and automotive technology group, said the company's "leading, innovative, and disruptive product is here," according to a Google translation of his Weibo post on Monday.
"This is an epoch-making product that others have thought of but cannot make," Yu said.
The executive added that after five years of investment, Huawei has "turned science fiction into reality."
Huawei was once the biggest smartphone player in the world but its handset business was crippled by U.S. sanctions that cut it off from access to the latest semiconductors.
Last year, the Shenzhen-headquartered tech firm released a new phone that contained a fairly advance chip, surprising policymakers in Washington and the tech world. Huawei launched another smartphone this year.
Huawei's resurgence has challenged Apple in China. The iPhone maker lost its place among the top five smartphone vendors by market share in China in the second quarter of the year, according to research from Canalys. Huawei meanwhile saw second-quarter smartphone shipments in China rise 41% year-on-year, the fastest among the top five brands.
https://www.cnbc.com/2024/09/02/huawei-plans-sept-10-launch-event-just-hours-after-apple-iphone-launch.html
China launches anti-dumping probe into Canadian canola imports in retaliation for EV tariffs
The Globe and Mail
China announced an anti-dumping investigation into Canadian canola imports, two years after lifting a previous ban, in response to Canada's tariffs on Chinese electric vehicles. The investigation follows significant increases in Canadian canola exports to China, which Beijing claims are harming local producers due to unfair pricing. This move highlights the ongoing tensions in Sino-Canadian relations, exacerbated by political controversies and retaliatory actions from both countries. Despite recent diplomatic efforts, relations remain strained, with China's embassy criticizing Canada for perceived trade protectionism.
https://www.theglobeandmail.com/business/article-china-launches-anti-dumping-probe-into-canadian-canola-imports-in/
How China’s middle class is creating a ‘green gold’ rush in Africa
South China Morning Post
The Forum on China-Africa Cooperation summit highlights China's strategy for inclusive growth by fostering partnerships with the Global South, notably through the booming avocado trade. China's middle class, now exceeding 400 million, has driven demand for avocados, benefiting African countries like Kenya, which became a major supplier. Programs like PIGA support this growth by facilitating trade and providing training for African enterprises. However, the rise of cash crops poses ecological risks, necessitating collaborative efforts for sustainable practices. Southern China's cities are poised to enhance trade and cooperation, making avocados a potential gateway to broader opportunities.
https://www.scmp.com/opinion/china-opinion/article/3276872/how-chinas-middle-class-creating-green-gold-rush-africa?utm_source=rss_feed
China's property woes and U.S. sanctions have hit some cities hard
CNBC
BEIJING — China's property struggles and U.S. sanctions have significantly affected some of its cities, even as others benefit from Beijing's tech push, Milken Institute's best performing cities China index showed Tuesday.
Since 2015, the index has studied China's large- and mid-sized cities for their economic vibrancy and growth prospects. The latest version generally compares data for 2023 with that of 2021. Last year, the institute did not publish a report due to a reassessment of its methodology.
Hangzhou, capital of the eastern Zhejiang province and home to Alibaba and other tech companies, ranked first in this year's rankings.
While other cities, such as Zhuhai, once a "rising star," dropped in the rankings due to the slump in real estate.
The city, in the southern province of Guangdong near Hong Kong, fell 32 places from the previous index published in 2022 to 157th place." Suddenly no one bought houses.
Builders didn't have much money to complete their projects," Perry Wong, managing director of research at the institute, told reporters in Mandarin, translated by CNBC.
Property and related sectors once accounted for more than a quarter of China's gross domestic product. But in 2020, Chinese authorities started cracking down on real estate developers' high reliance on debt.
Wong added that real estate dragged down growth for several of the main cities in that region, except for Dongguan. The city of factories, home to Huawei's sprawling European-style campus, was instead hit by U.S. sanctions. Dongguan dropped 15 places in the Milken index rankings to 199th place.
There are 217 cities in the index. While the nearby metropolis of Shenzhen went up in rankings, the city landed in 9th place, behind Beijing. A majority of the Chinese companies initially blacklisted by the U.S. were based in Shenzhen or Beijing, Wong pointed out in an interview with CNBC.
"Zhuhai is an extremely good place to do service jobs, to do even production jobs, high-end production jobs in biotech," he said. "So \[excluding the real estate impact\] it should have a pretty promising future."
Another city affected by the geopolitical drag on exports is Zhengzhou, capital of the Henan province and home to iPhone manufacturer Foxconn. Zhengzhou fell to 22nd place, down from 3rd.
Historically, Wong pointed out, having control of Zhengzhou, Hefei, and Wuhan have been critical to ensuring control of the country.
From an economic perspective, Hefei, in the Anhui province, and Wuhan, in Central China's Hubei province, fared better in the latest index.
Wuhan surged by nearly 30 places to second, while Hefei remained among the top ten. Wong attributed this to Wuhan's efforts to keep factories running during the pandemic, allowing the city to rebound quickly, while a university in Hefei received direct government support for technological development.
As for Hangzhou's success, the institute's research pointed to the city's growth as a hub for e-commerce, manufacturing and finance.
But asked on CNBC's "Squawk Box Asia" if Hangzhou's success could be replicated, Wong said it would be difficult, partly due to the outperformance of the local property sector that's increased living costs.
https://www.cnbc.com/2024/09/03/chinas-property-woes-and-us-sanctions-have-hit-some-cities-hard.html
JPMorgan economist says China's housing market crash is still not over yet
CNBC
China's troubled housing market will continue to see softness as a slew of government stimulus and support measures have not been "satisfactory" in propping up the sector, according to a JPMorgan economist.
The "housing market crash is still not over yet," Haibin Zhu, chief China economist at JPMorgan told CNBC's "Squawk Box Asia" Monday, adding home prices would not stabilize until 2025 at the earliest.
The average price for new home sales across 100 Chinese cities rose by a modest 0.11% from July, a further slowdown from June's 0.13% growth, according to data released by China Index Academy Saturday. Resale home prices declined 0.71% from the previous month, according to the report.
Both new and resale houses saw average prices drop 1.76% and 6.89% from a year ago, respectively, as the country's housing market remains deeply mired in crisis.
Bloomberg reported Saturday that China is weighing a plan to lower homeowner borrowing costs by allowing refinancing on as much as $5.4 trillion in mortgages.
But analysts are skeptical the proposed measure would be effective in stimulating homebuyer sentiment and overall consumption.
"Some people think it will free up consumption — that's only one side of the story," according to Winnie Wu, chief China equity strategist at BofA Securities. Lower mortgage rates would cause banks to cut deposit rates to protect their margins and ensure stability in the financial system, she said, noting that reduced deposit rates would eventually cut into interest income on household savings.
The mortgage refinancing measure would also do little to boost new home demand, according to JPMorgan's Zhu.
"Even if the mortgage refinancing policy materializes, it's not a policy to revive the housing market," he said, adding that the policy "has nothing to do with the new home demand, mainly benefiting the existing homeowners."
"Rate cut is not the best policy, squeezing banks' margin is not going to go very far," BofA Securities' Wu said, adding the government needs to "create a positive feedback loop rather than this downward spiral."
https://www.cnbc.com/2024/09/03/jpmorgan-economist-says-chinas-housing-market-crash-is-still-not-over-yet.html
Shanghai bets on live-streaming economy to boost China’s anaemic consumption
South China Morning Post
The Shanghai municipal government has unveiled a plan to enhance the city's live-streaming sector, aiming for nearly US$85 million in online sales by 2026. The “Three-Year Action Plan for High-Quality Development of Shanghai’s Live-Streaming Economy (2024-2026)” outlines goals such as generating 600 billion yuan in annual gross merchandise value, establishing 10 top-tier live-streaming platforms, and developing a variety of distinctive live-streaming scenarios. This initiative aims to stimulate consumer spending in response to a sluggish national economy and positions live-streaming as a key driver of economic and social development in Shanghai. The plan builds on previous efforts and aligns with similar strategies in other major Chinese cities. Additionally, it emphasizes supporting e-commerce entities with advanced technology and financial services, while also encouraging international expansion of Shanghai's live-streaming sector as part of China's Belt and Road Initiative. China’s live-streaming e-commerce market reached 4.9 trillion yuan in 2023, with strong growth projected for the coming years.
https://www.scmp.com/tech/policy/article/3276915/shanghai-bets-live-streaming-economy-boost-chinas-anaemic-consumption?utm_source=rss_feed
A ‘patriotic education’: Hong Kong schools begin teaching Xi Jinping Thought
Guardian
The new school year in Hong Kong has introduced a mandatory curriculum for secondary students that includes teachings on Xi Jinping Thought, as part of a new subject called Citizenship, Economics and Society. This move reflects the increasing influence of the Chinese Communist Party in the semi-autonomous city, emphasizing patriotic education, national security, and a sense of national identity. The curriculum, which will be fully implemented by September 2024, aims to instill a sense of loyalty to the country and includes lessons on the political structure and international affairs of China.
Critics have expressed concerns about the curriculum being akin to "brainwashing," with some residents fearing the "mainlandisation" of Hong Kong's culture. Changes to primary education were also announced, with a new curriculum set to include national security and historical events framed within China's nationalist narrative. The introduction of Xi Jinping Thought into education aligns with its earlier incorporation in mainland China and has raised alarms among parents and citizens amidst a backdrop of declining school enrollments and a crackdown on pro-democracy movements in Hong Kong.
https://www.theguardian.com/world/article/2024/sep/03/hong-kong-schools-begin-teaching-xi-jinping-thought
Will US and China be able to lower risks before the new president takes office?
South China Morning Post
The recent visit by senior White House aide Jake Sullivan has opened a pathway for the United States and China to reduce tensions, particularly ahead of the U.S. presidential election in November. This marks the first visit by a U.S. national security adviser in eight years, indicating a potential groundwork for a future meeting between Presidents Xi Jinping and Joe Biden. Both leaders have expressed a desire to stabilize U.S.-China relations and have agreed to discuss matters over the phone in the coming weeks, with a potential in-person meeting at either the Asia-Pacific Economic Cooperation or Group of 20 summits after the election.
China is expected to approach the situation with caution, especially considering the possibility of a Donald Trump victory. Analysts suggest that even if Biden travels to China or a meeting occurs, it may not significantly alter the relationship between the two nations. Experts emphasize the need for both leaders to establish a stable foundation to prevent escalation into conflict, particularly over flashpoints like Taiwan and the South China Sea. Beijing aims to maintain communications and continue working with the Biden administration, as it seeks to navigate the sensitive political landscape ahead of the U.S. elections.
The implications of a potential Xi-Biden summit could be beneficial for both sides, with Biden looking to solidify his foreign policy legacy and Xi hoping to ease international tensions amidst domestic challenges. Both countries recognize the importance of managing their relationship, particularly given ongoing disputes in the South China Sea. As tensions rise in the region, diplomatic dialogues and military communications have become increasingly vital to prevent conflict. Ultimately, both the U.S. and China are motivated to maintain stability in their relationship through high-level discussions, regardless of the outcomes of upcoming elections.
https://www.scmp.com/news/china/diplomacy/article/3276884/will-us-and-china-be-able-lower-risks-new-president-takes-office?utm_source=rss_feed
Xi Jinping speech was call to action against foreign forces ‘Westernising’ Chinese youth
South China Morning Post
The Communist Party's journal has reiterated President Xi Jinping's concerns about "subversive" foreign influences on Chinese youth, citing his 2018 speech. Xi warned that hostile forces aim to "Westernise" young people and promote a "colour revolution," emphasizing the importance of ideological education in schools. He called for cultivating "successors to socialism" and instilling strong beliefs in communism. Xi highlighted the need for patriotism and the removal of politically incorrect textbooks, stressing that the fight for youth ideology is long-term and critical for China's future stability and socialist values.
https://www.scmp.com/news/china/politics/article/3276875/xi-jinping-speech-was-call-action-against-foreign-forces-westernising-chinese-youth?utm_source=rss_feed
Gao Zhen, Artist Who Critiqued the Cultural Revolution, Is Detained in China
NY Times
Chinese artist Gao Zhen, known for his critical works on the Cultural Revolution, has been detained in China on suspicion of slandering the country's heroes and martyrs, a charge that could lead to three years in prison. Gao, who has lived in the U.S. for two years, was arrested while visiting China with his family. His brother, Gao Qiang, reported that police confiscated several of their provocative artworks, including "Mao’s Guilt," which depicts Mao Zedong in a remorseful posture. The arrest occurred after about 30 police officers raided their art studio, demanding Gao Zhen's phone, which he refused to surrender.
https://www.nytimes.com/2024/09/02/world/asia/gao-zhen-arrested-china.html
China threatens to sanction Japan over chip sale restrictions
Yahoo US
China has warned Japan of severe economic retaliation if Tokyo continues to restrict the sale of chipmaking equipment to Chinese companies, amid ongoing pressure from the US. Japan's restrictions are primarily driven by concerns over the potential impact on its car industry, particularly Toyota, which could face limitations on access to critical minerals essential for production. China holds a dominant position in the supply chain for these minerals, producing and processing the majority of rare earth elements and graphite needed for technologies like electric vehicles.
As a result of regional tensions and threats from China, Japan has decided to significantly increase its defense budget, aiming for a record $59 billion. This move is part of a broader strategy to enhance its security posture and address military recruitment challenges. While some analysts believe Japan should develop an independent strategy rather than aligning closely with the US, US officials are optimistic about reaching a minerals agreement with Japan by the end of 2024. The evolving dynamics between the US, China, and Japan could have substantial implications for global supply chains and security.
https://www.yahoo.com/news/china-threatens-sanction-japan-over-111659609.html
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