Why the US-China tech war has put bugs in the academic system back in Beijing’s sights；Where now for China after economy lost momentum ‘across the board’ in August?
Start-up funding in China remains weak, but may see a recovery this year
Welcome to this issue of The China Brief. Today is 09 17, 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 the US-China tech war has put bugs in the academic system back in Beijing’s sights
South China Morning Post
Sun Beicheng, a prominent researcher who led a groundbreaking genetically modified pig liver transplant for a liver cancer patient, faced severe repercussions for misconduct just two months later. The Ministry of Science and Technology (MOST) in China named him among six researchers involved in unethical practices, specifically lobbying reviewers for state funds. This incident reflects China's intensified crackdown on academic misconduct as part of its broader goal to enhance research integrity and compete technologically with the U.S. Sun received a seven-year ban from state-funded research, while others involved received shorter bans for either aiding him or failing to report his actions.
This move aligns with China's ambition to transition from a focus on quantity to quality in research, especially amidst economic challenges and a corruption crackdown within military procurement processes. The government aims to bolster funding for science and technology, increasing investments despite a fiscal revenue decline. However, systemic issues in academia, including competition for limited resources and weak oversight, contribute to misconduct. Experts suggest reforms such as independent checks and conflict-of-interest rules to improve integrity in research.
https://www.scmp.com/news/china/politics/article/3278195/why-us-china-tech-war-has-put-bugs-academic-system-back-beijings-sights?utm_source=rss_feed
Where now for China after economy lost momentum ‘across the board’ in August?
South China Morning Post
China's economic data for August reveals ongoing challenges, with retail sales growing just 2.1%, down from 2.7% in July and short of forecasts. This suggests cautious household spending, particularly in discretionary categories like luxury goods. Property investment remains a significant drag, falling 10.2% year-on-year in the first eight months, mirroring earlier trends. Overall fixed-asset investment growth has slowed to 3.4%, while private investment dipped by 0.2%. Industrial output also declined, rising only 4.5%—the weakest in 13 months—attributed to softer domestic demand despite strong export figures. The urban unemployment rate increased slightly to 5.3%, and new bank lending was below expectations, highlighting weak credit demand. Analysts have downgraded GDP growth forecasts for China, now predicting 4.7% instead of 4.9%, amid concerns over deflation and insufficient fiscal stimulus. Experts argue that without significant policy changes, achieving the government’s growth target of around 5% this year will be challenging. The economic data indicates a broad loss of momentum, necessitating further policy interventions from Beijing to stabilize growth.
https://www.scmp.com/economy/economic-indicators/article/3278695/where-now-china-after-economy-lost-momentum-across-board-august?utm_source=rss_feed
Start-up funding in China remains weak, but may see a recovery this year
South China Morning Post
Funding for start-ups in China remains low, although the amount raised in the first half of 2024 has already surpassed 50% of the total for the year, indicating a potential recovery. In 2021, funding peaked at $132.7 billion, but dropped to $67 billion in 2022 and $45.4 billion in 2023. From January to June 2024, start-up funding reached $25.7 billion. Despite this uptick, the market is still sluggish compared to pre-pandemic levels. A significant shift has occurred with dollar-denominated funds, which contributed only $2.6 billion (2.5% of total funding) in the first half of 2024, down from 44% in 2021. This decline is attributed to increased scrutiny from both Chinese and U.S. regulators, particularly following issues with Didi Chuxing's U.S. listing. However, recent measures by the Chinese government aim to attract foreign venture capital, suggesting a potential revival of foreign investment in the country’s technology sector.
https://www.scmp.com/tech/tech-trends/article/3278431/start-funding-china-remains-weak-may-see-recovery-year?utm_source=rss_feed
US charges employee of Chinese aerospace giant with hacking Nasa, US military
South China Morning Post
A Chinese national named Song Wu, who worked for a powerful state-owned defense contractor, the Aviation Industry Corporation of China (AVIC), has been indicted for attempting to hack into NASA, the US military, and other organizations. The US Attorney's office in Atlanta announced that Song tried to obtain sensitive software and source code from various agencies, including the Air Force, Army, Navy, and the Federal Aviation Administration. He allegedly targeted individuals at major research universities and private aerospace companies across multiple states. The charges against him include 14 counts of wire fraud and 14 counts of aggravated identity theft. AVIC, known for manufacturing military equipment, has faced US sanctions for its connections to the Chinese military. The indictment comes amidst a broader trend of US action against Chinese nationals for technology-related crimes.
https://www.scmp.com/news/world/united-states-canada/article/3278795/us-charges-employee-chinese-aerospace-giant-hacking-nasa-us-military?utm_source=rss_feed
US sent ‘unserviceable’ and expired military equipment to Taiwan in water-damaged pallets
South China Morning Post
The US recently delivered unserviceable military equipment to Taiwan, including mouldy body armor and expired ammunition. The Taiwanese defense ministry is investigating these shipments, which were made under the US Presidential Drawdown Authority. A report by the US Office of Inspector General revealed that the items were damaged, poorly packaged, and included outdated ammunition. The situation has raised concerns about the Pentagon's management of military aid to Taiwan, leading to potential damage to US-Taiwan relations. The Pentagon acknowledged the issues and pledged to improve the process for future deliveries.
https://www.scmp.com/news/china/politics/article/3278767/us-sent-unserviceable-and-expired-military-equipment-taiwan-water-damaged-pallets?utm_source=rss_feed
China’s ‘Silver Economy’ Is Thriving as Birthrate Plunges
NY Times
Li Dongmei, who ran kindergartens and schools in China for over a decade, faced declining enrollments due to the country's decreasing birthrate and the impact of the Covid-19 pandemic. In 2020, she pivoted her focus to the elderly, offering classes in singing, dancing, music, and art at her educational center in Jinan. Unlike children, seniors take classes year-round, leading to full enrollment. Li emphasizes the significance of the "silver economy," which she believes is larger than the children's market. As China's aging population poses challenges for businesses targeting children, many are adapting or reducing their operations.
https://www.nytimes.com/2024/09/17/business/china-economy-seniors.html
China’s retirement delay offers respite as Beijing ‘robs the rich to help the poor’
South China Morning Post
China's northeastern provinces of Liaoning, Jilin, and Heilongjiang are facing significant pension fund shortfalls due to high aging rates and economic slowdowns. In 2022, these provinces received 180 billion yuan (US$25.4 billion) in central government transfers, accounting for over half of their tax revenues. Only four provinces, including Guangdong, reported pension surpluses. To address these challenges, China's legislature approved plans to gradually raise retirement ages by up to five years by 2040 and increase employee contributions to social security starting in 2030. This shift aims to alleviate financial pressures and could reduce the national pension budget shortfall by 20% over the next decade. However, experts warn that simply delaying retirement is insufficient; comprehensive reforms are necessary to ensure the sustainability of pension systems. Concerns also arise regarding job availability for younger workers, as extending retirement ages may limit openings in state-owned enterprises, traditionally a key employer for new graduates. Analysts emphasize the need for a mix of policies to optimize China's human capital and enhance pension fund viability.
https://www.scmp.com/economy/policy/article/3278845/chinas-retirement-delay-offers-respite-beijing-robs-rich-help-poor?utm_source=rss_feed
China's ultra-rich population sees 'dramatic' growth in last decade, outpacing the U.S., report shows
CNBC
The world's super rich club expanded significantly over the past 10 years, with China leading the charge, according to the latest report from New World Wealth and investment migration advisor Henley & Partners.
The number of centimillionaires surged 54% worldwide over the past decade to 29,350, particularly in China and the U.S., according to the report. Centimillionaires are ultra-high-net-worth individuals with investable wealth of $100 million or more.
"America and China have experienced what can only be described as a centi-millionaire boom, significantly outperforming their European counterparts," said Juerg Steffen, chief executive officer of Henley & Partners.
"China's ascent has been the most dramatic, with its centi-millionaire population expanding by 108% over the past 10 years — outpacing even the stellar performance of the U.S., whose super-wealthy ranks swelled by 81% over the same period," the report observed.
China's growth was driven in large part by the emergence of tech centimillionaires and industrial titans, Steffen said. There are currently 2,350 centimillionaires living in China.
But the country's economy has stalled in recent years, dragged down by an embattled property sector, sticky unemployment and weak domestic consumption. Most of China's centimillionaire boom happened between 2013 to 2020, Andrew Amoils, wealth analyst at New World Wealth, told CNBC. Since 2020, the number of ultra-rich has only risen about 10%, he added.
However, Henley & Partners maintained that cities like Hangzhou and Shenzhen still demonstrate potential as emerging tech hubs and were listed among cities "poised for exceptional growth of over 150%" in their centimillionaire populations by 2040.
Economic expansion in these two cities has outpaced that of the country's 5% growth. Hangzhou's GDP grew 6.9% year-on-year for the first half of 2024. Similarly, Shenzhen grew 5.9% year-on-year across the same period, lifted by its industrial sector.
Between now and 2040, Amoils still expects robust centimillionaire population growth in China of between 80% to 100%.
Both the U.S. and China are expected to outperform the global average centimillionaire-growth rate of around 75% by 2040.
The report also noted that a number of Asian and Middle Eastern cities are positioned for 150% growth in their ultra rich populations, including Taipei, Dubai, Abu Dhabi and India's Bengaluru.
Conversely, more established hubs like Zurich, Chicago, Moscow and Madrid are expected to see sluggish super wealth growth of less than 50% in the years through 2040.
Additionally, Steffen attributed Europe's sluggish performance to the slow expansion of key markets like Germany, France and the U.K. That said, while larger European markets lag, smaller ones such as Monaco, Malta, Montenegro and Poland have experienced significant growth in their centimillionaire populations, increasing by 75% or more.
The U.S. remains a top wealth hub, with cities like New York, Los Angeles and the San Francisco Bay Area expected to see further growth of over 50% in their ultra-wealthy populations.
However, America's continued dominance could depend on who wins the upcoming elections.
"Existing centi-millionaire growth and migration trends will depend largely on the upcoming U.S. presidential elections where we anticipate drastic differences in fiscal, monetary, economic, and social policies," said David Young, president of the Committee for Economic Development at think tank The Conference Board.
There has been a surge in affluent Americans considering alternative residence and citizenship options, Henley and Partners' research showed.
https://www.cnbc.com/2024/09/17/chinas-ultra-rich-population-growing-faster-than-the-us-report.html
Who is Singapore’s Shou Zi Chew? A closer look at the Facebook intern turned TikTok CEO
South China Morning Post
TikTok is facing scrutiny from U.S. lawmakers concerned about national security due to its Chinese ownership by ByteDance. President Biden signed a law mandating TikTok's sale to a U.S. owner by mid-January or risk being banned. CEO Shou Zi Chew, who previously worked at Xiaomi and was instrumental in securing funding for the company, is leading TikTok through this crisis. He has testified before Congress, emphasizing the platform's commitment to data security. Chew argues that divestment would not address security concerns and that a ban would harm users and creators.
https://www.scmp.com/news/asia/southeast-asia/article/3278823/who-singapores-shou-zi-chew-closer-look-facebook-intern-turned-tiktok-ceo?utm_source=rss_feed
How to take Taiwan: China’s state TV shows what a PLA attack could look like
South China Morning Post
A Chinese state television documentary has simulated an amphibious assault on Taiwan, highlighting the People’s Liberation Army's (PLA) training efforts. The program featured PLA exercises, including large-scale helicopter assaults and electronic countermeasures from aircraft carriers. It illustrated the deployment of drones and missile systems to support landing operations while facing resistance from Taiwanese forces equipped with man-portable air defense missiles. Beijing views Taiwan as part of its territory, and the documentary emphasizes the PLA's military readiness amidst rising tensions, particularly with U.S. involvement in the region.
https://www.scmp.com/news/china/military/article/3278827/how-take-taiwan-chinas-state-tv-shows-what-pla-attack-could-look?utm_source=rss_feed
Asia's private equity needs to adapt to a new slower growth reality
Nikkei Asia
Asia's private equity industry is experiencing significant challenges, as highlighted in Bain & Company’s Asia-Pacific Private Equity Report 2024. Deal value fell to $147 billion in 2023, a 35% decline from the previous five-year average and a 59% drop from the 2021 peak. Fund-raising has also hit its lowest level in a decade. Previously, the sector thrived due to rapid economic growth, low interest rates, and an expanding middle class. However, high interest rates and reduced market growth have left many firms with unattractive assets and a reliance on outdated strategies.
In response, the industry is evolving, with some firms diversifying away from private equity and focusing on operational value creation. New entrants like Growtheum emphasize thorough pre-investment due diligence and operational control. However, many firms struggle with operational expertise due to divided attention and a top-down management culture, which limits their ability to address unique business challenges effectively.
To succeed, private equity firms must adapt by developing operational skills and strategic foresight, moving beyond financial engineering, to create tangible value within their portfolio companies, or risk falling behind in a changing landscape.
https://asia.nikkei.com/Opinion/Asia-s-private-equity-needs-to-adapt-to-a-new-slower-growth-reality
TikTok has 15 minutes to fight for its life
CNN
TikTok faces a critical moment this week as it argues against a potential U.S. ban of its app, which has 170 million American users. The law signed by President Biden aims to prohibit TikTok on personal devices unless its Chinese parent company, ByteDance, sells it. TikTok is presenting its case in a federal appeals court, where it has only 15 minutes to convince a three-judge panel that the law is unconstitutional under the First Amendment. This expedited legal process bypasses a typical trial, raising the stakes for TikTok as the January deadline for compliance approaches.
The legislation has been fast-tracked due to national security concerns regarding Chinese access to American user data. TikTok and its supporters argue that the law is an overreach that unfairly targets the app due to its Chinese ownership, while ignoring similar data privacy issues with other platforms. TikTok asserts that the law violates free speech rights and emphasizes that there is no concrete evidence of the Chinese government exploiting user data. The company has attempted to address security concerns through its "Project Texas" initiative, which includes moving U.S. user data to Oracle-controlled servers, but claims the U.S. government abruptly abandoned this proposal.
The outcome of this case could significantly impact the interpretation of the First Amendment in relation to digital platforms. While the U.S. government insists that the law is not a ban if TikTok can find a new owner, it faces criticism for singling out the app based solely on its foreign ties, which some argue reflects broader anti-China sentiments. The case has garnered attention from various stakeholders, highlighting the challenges of balancing national security, privacy rights, and freedom of expression in a digital age.
https://edition.cnn.com/2024/09/16/tech/tiktok-has-15-minutes-to-fight-for-its-life/index.html
Foreign policy takes a back seat in unconventional US presidential race
South China Morning Post
The current US presidential race is marked by significant uncertainty regarding foreign policy, particularly concerning China and the Indo-Pacific region. Vice-President Kamala Harris has avoided specific commitments, opting instead for a cautious approach that reflects a broader trend among candidates to prioritize domestic issues. This election cycle features unique dynamics, including a former president with multiple felony charges attempting a comeback and a vice-president stepping into the limelight as the primary candidate after her predecessor's poor debate performance. Analysts suggest that while foreign policy may not dominate voter concerns, there is still interest in how candidates plan to address global challenges, especially given the backdrop of ongoing conflicts and economic tensions.
Regardless of the election's outcome, experts predict that US tariffs on China will likely increase, with deteriorating relations between the two nations expected to continue. Trump is anticipated to adopt a more confrontational stance, advocating for steep tariffs and a hardline "America First" policy that could exacerbate tensions. Conversely, Harris is expected to maintain a more balanced approach in line with Biden’s policies, focusing on strategic alliances and careful management of imports from China. The candidates' recent debate highlighted their differing views on trade and tariffs, with Harris criticizing Trump's proposed increases while also acknowledging the continuation of previous tariffs from his administration.
The implications of the candidates' respective foreign policy strategies extend beyond trade, affecting alliances and international relations. Harris is likely to uphold existing alliances and multilateral efforts, while Trump's skepticism towards such partnerships may complicate future diplomatic initiatives. China, observing the election closely, may have mixed feelings about the candidates, with some analysts believing it prefers Trump’s unpredictability while others see potential stability in a Harris administration. As both candidates prepare for the upcoming election, the lack of clear foreign policy direction raises questions about the future of US engagement on the global stage, especially concerning China and its growing influence.
https://www.scmp.com/news/china/article/3278780/foreign-policy-takes-back-seat-unconventional-us-presidential-race?utm_source=rss_feed
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