Another top executive is being investigated by China’s corruption watchdog; China pushes state banks to accelerate funding for private property developers
CSIS expert: Skepticism about Xi Jinping is sky high, particularly inside China
Welcome to this issue of The China Brief. Today is November 21, 2023. 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.
Another top executive is being investigated by China’s corruption watchdog
CNN
China’s anti-graft watchdog is investigating Zhou Jun, president of state-owned Shanghai Industrial Investment, for “serious violations of discipline and law,” a phrase commonly used to refer to corruption. Zhou, who also held posts at several of the state-owned group’s Hong Kong-listed subsidiaries, has resigned from his positions citing “personal matters.” Zhou is the latest high-ranking executive in China to be investigated by authorities; more than a dozen have gone missing, faced detention or been subjected to corruption probes this year.
Sunac China says debt restructuring conditions ‘satisfied’; stock surges
South China Morning Post
Shares in Sunac China surged 19% in Hong Kong on Tuesday, after the property developer announced it had satisfied conditions for a long-awaited offshore debt restructuring deal. The restructuring plan, the first of its kind since China's property crisis erupted, was approved by the High Court in Hong Kong last month. Sunac has exchanged its existing debt instruments for convertible bonds, dollar-denominated notes, mandatory convertible bonds and shares in its subsidiary Sunac Services Holdings, totalling around $10.2bn. The workout plan was backed by creditors representing over 98% of claims during a September vote.
China pushes state banks to accelerate funding for private property developers
Financial Times
Chinese regulators have reportedly instructed state banks to increase lending to private property developers as part of efforts to revive the country's struggling real estate market. The move comes as a number of private developers have defaulted on their debts, causing concern over the stability of China's economy. Regulators have also pledged to consider unwinding some restrictions on bank loans for property developer mergers. The Chinese government is keen to stabilise the real estate sector, which has been a key driver of economic growth in the country.
Xi comment on 'resolving' Taiwan raises concern, Taipei scholars say
Nikkei Asia
Chinese President Xi Jinping's comment on the need to move toward a "resolution" of the Taiwan issue was the talk of think tanks on Monday, as China watchers analyze last week's summit with U.S. President Joe Biden.
The overall assessment was positive. Jude Blanchette, the Freeman Chair in China Studies at the Center for Strategic and International Studies, said he was surprised that the optics of the summit were "much more positive" than he expected. There was a softness in tone, and Xi seemed happy during and after the meeting, Blanchette said.
"All of the camera shots and videos of the two leaders talking together is by design," he said. That design, "is in and of itself a political signal."
But James Lee, an assistant research fellow at the Taipei-based research institute Academia Sinica, focused on one quote Xi mixed into his messaging. According to a senior U.S. official who briefed reporters after last Wednesday's summit, Xi insisted that Beijing's preference was for peaceful "reunification" with Taiwan, but Xi also said, "At some point we need to move towards resolution more generally."
Meanwhile, analysts on the U.S. side said that Xi probably needed the meeting as much or more than Biden. "Skepticism about Xi Jinping is sky high, particularly inside China," CSIS Senior Adviser Scott Kennedy said.
CSIS's Blanchette said: "This was not just the United States going to Beijing and essentially begging for the meeting. The administration has been saying for weeks that they were seeing lots of signs that China actively wanted this meeting. The visuals coming out of the Chinese side of the language from the statement, and even Xi Jinping's opening statement to President Biden that was captured by news cameras, bore that out."
For Argentina, Dollarization May Work Better on YouTube Than in Reality
WSJ
Argentina's anarcho-capitalist president-elect, Javier Milei, has promised to "burn down" the central bank and adopt the US dollar as the national currency, which he believes will solve the country's economic crisis. However, this plan may not be the best solution, as choosing the wrong conversion rate could be fatal and the country would need to borrow billions of dollars to swap for all peso holdings. Additionally, giving up monetary sovereignty can make economic crises even worse, as was seen during Argentina's hard peg to the dollar between 1991 and 2002. To solve Argentina's economic crisis, the exchange rate must be stabilised and supply-side reforms need to create a sustainable stream of dollars.
Wanda Proposes Extending Payment on a Dollar Bond by 11 Months
Bloomberg
Dalian Wanda Group's unit, Wanda Properties International Co., has proposed extending the maturity date of a dollar bond by 11 months to Dec. 29, 2024. The company is also inviting bondholders to agree on other amendments to the terms, including adding mandatory partial redemptions of the security in January, May, and September 2024. A bondholder meeting will be held on Dec. 13 to discuss the proposed changes.
India Closer to Agreement With Tesla to Import EVs, Set Up Plant
Bloomberg
India is reportedly nearing an agreement with Tesla that will allow the electric vehicle (EV) manufacturer to import its cars to the country from 2023 and build a factory within two years. The US company would invest a minimum of $2bn in the plant and increase its purchases of Indian auto parts to as much as $15bn, according to an unnamed source. Tesla has factories in the US, China and Germany and has plans to make a “significant investment” in India. The country is seeking to increase domestic EV manufacturing and encourage the adoption of cleaner transport.
McDonald’s raises stake in China unit as it eyes bigger bite of ‘crucial’ market
South China Morning Post
Carlyle Group has agreed to sell its entire stake in McDonald’s China back to the fast-food giant. The private equity firm will sell to McDonald’s its 28% stake in the partnership that operates McDonald’s business in mainland China, Hong Kong and Macau. The deal will raise McDonald’s stake in the business from 20% to 48%, with a consortium led by state-backed firm Citic maintaining its controlling stake of 52%. The size of the deal was not disclosed.
Hong Kong must be more proactive as IPO proceeds hit 20-year low, report says
South China Morning Post
Hong Kong's initial public offering (IPO) market is at its lowest level in 20 years, with funds raised by share listings in the city down 59% y-o-y to HKD41.3bn ($5.3bn) as of 17 November, according to an EY report. The number of companies listing fell 19% y-o-y to 61, while global IPO activity was down 35% in proceeds and 12% in the number of deals, said the report. The Hong Kong government and regulators need to enhance market liquidity to boost the attractiveness of the city's capital market, the report added.
Geely Takes On Tesla and BYD in Malaysia With Launch of Smart EV
Bloomberg
Geely Automobile Holdings has unveiled three variants of its Smart #1 electric vehicle (EV) in Malaysia, where it will compete with Tesla and BYD. The Smart #1 EV will be distributed by Pro-Net, a unit of Malaysia's national automaker Proton, in which Geely has a 49.9% stake. The Chinese automaker is also investing in a high-tech automotive city in Tanjung Malim, Perak, where Proton cars are built. Malaysia's EV market is small, with Fitch forecasting sales of about 5,840 units this year.
31,000 Chinese telecoms fraud suspects handed over to Beijing from Myanmar
South China Morning Post
Chinese authorities have stated that Myanmar has handed over 31,000 telecoms fraud suspects to China since a crackdown on online scams began in September. Suspects included 63 "financiers" and ringleaders of crime syndicates that have cheated Chinese citizens out of large sums of money. Chinese police started to crack down on the fraud in September, and this month, police launched attacks on crime gangs in Myanmar. More than 100,000 people engage in telecoms fraud each day in at least 1,000 scam centers in Myanmar, according to Chinese state media.
China’s workforce paradox and how to solve it
SCMP Opinion
China is facing a significant demographic challenge as its population ages rapidly. The National Health Commission predicts that by 2025, over 20% of Chinese citizens will be over the age of 60, making it the country with the largest elderly population in the world. In addition, China's birth rate is at a record low, leading to concerns about a 1:1 worker-to-retiree ratio by 2050. The Chinese government has implemented various policies in an attempt to address this issue, including abolishing the one-child policy and providing incentives for families to have more children. However, reversing demographic trends is proving to be a formidable task. Many young professionals in their 20s and 30s are choosing to opt out of the demanding work culture known as "996", which requires working 12 hours a day, six days a week. Meanwhile, older workers are being forced to leave the workforce despite their willingness and ability to continue working. To address this challenge, workers of all ages must embrace lifelong learning and continuous skill development. Additionally, employers should acknowledge the potential of workers across all age groups and commit to retraining. Artificial intelligence (AI) and automation could also play a role in overcoming China's demographic challenge by enhancing worker productivity and bridging the shortfall in the labor force. However, there are concerns about the potential economic upheaval and social disparities that could be caused by these technologies.
Baidu’s Revenue Beats as ChatGPT-Style AI Starts Monetization
Bloomberg
Chinese internet search leader Baidu has reported better-than-expected Q3 2021 results, with sales growing 6% to CNY 34.4bn ($4.8bn) and net income at CNY 6.7bn. The company's expansion into new businesses, such as artificial intelligence (AI), helped shield it from a potential economic downturn. Baidu's AI platform, Ernie Bot, has attracted 70 million users since its launch three months ago and the company claims it has matched the capabilities of OpenAI's GPT-4. Baidu founder Robin Li has warned against the "war of a hundred models," referring to the vast resources being poured into AI start-ups.
Chinese scientists create smart fingertip that can feel textures
South China Morning Post
Scientists from the Southern University of Science and Technology (SUSTech) in Shenzhen, Xidian University in Xian, and the University of Houston have created a sensory system that mimics a human fingertip. The technology could be used in prosthetics to allow patients to regain the sensation of touch, and it could also be used in robotics and haptic-based virtual reality. The system can recognise different textures and materials with 100% accuracy, and it is hoped that in the future the technology could be used to allow people with prosthetic limbs to feel what the sensor detects.
Beijing urged to be ‘realistic’ and talk to Taiwan’s ruling DPP
South China Morning Post
China should consider opening communication channels with Taiwan's ruling Democratic Progressive Party (DPP), according to a former US envoy to the island. Douglas Paal, who served as head of the American Institute in Taiwan between 2002 and 2006, said that China's decision to cut off communication channels with the DPP following President Tsai Ing-wen's election in 2016 was "counterproductive". Paal's comments came after the DPP's presidential candidate, Vice-President William Lai Ching-te, announced that Hsiao Bi-khim would be his running mate.
South Africa to chair emergency BRICS summit on Gaza crisis
RFI
Leaders from the BRICS countries (Brazil, Russia, India, China, and South Africa) will hold a virtual emergency meeting to discuss the situation in the Middle East, including the conflict between Israel and the Gaza Strip. The meeting will also include leaders from new BRICS members Saudi Arabia, Argentina, Egypt, Ethiopia, Iran, and the United Arab Emirates. The South African government has also requested an investigation by the International Criminal Court (ICC) into the war between Israel and Gaza and has called for an arrest warrant to be issued for Israeli Prime Minister Benjamin Netanyahu.
Yuan Seen Extending Rally to Approach Key 7 Level by Year-End
Yahoo US
Analysts have said the yuan may rally to approach the 7-per-dollar level in the coming weeks as bets that the dollar has peaked and a potential turnaround in the Chinese economy add support. China's widening rates differential with the US this year has put the yuan under pressure, as the PBOC cut rates while the Federal Reserve aggressively hikes.
EV Maker Nio Partners With Changan Auto on Battery Swapping
Bloomberg
Chinese electric vehicle (EV) maker Nio and Chongqing Changan Automobile have signed an agreement to cooperate on battery swapping technology. The companies will collaborate on ownership, technologies, maintenance, and financing of swappable EV batteries. Battery swapping allows EV owners to drive their vehicles into a booth, where the depleted battery is removed and replaced with a charged power pack. Nio introduced its "battery-as-a-service" program in 2020, where owners buy a Nio car shell and pay rental fees for the swappable battery. Nio plans to build 1,000 battery swapping stations this year, more than double its original target of 400. The company has over 2,000 battery swap stations in China and is expanding the business to Europe. Meanwhile, Changan Auto has a partnership with Huawei and makes EVs under the Avatr brand.
Stellantis, China’s CATL in EV Battery Supply Pact for Europe
Bloomberg
Stellantis and China's Contemporary Amperex Technology (CATL) are collaborating to supply lower-cost lithium-iron-phosphate (LFP) batteries for electric vehicles in Europe. The companies are also considering a joint venture where both partners contribute equally. They are seeking a long-term collaboration to identify opportunities to strengthen the battery value chain. As part of the partnership, Stellantis and CATL plan to build an LFP battery factory in Europe, but the location has not yet been decided. LFP batteries are gaining popularity among automakers due to their lower cost and stability compared to nickel-based batteries.
6-nation military drills in China reveal Beijing’s relationship goals
South China Morning Post
China has launched a 10-day joint military exercise with five ASEAN nations, marking Beijing's largest joint anti-terrorism military exercise to date. The drills, which include more than 3,000 military personnel, highlight China's ambition to play "catch-up" to US defence relationships in the region. However, analysts believe that Southeast Asian countries will maintain "cautious engagement" in order to balance between China and the US. The exercise comes at a time when China and the Philippines have been involved in confrontations in the South China Sea.
China Wealth Fund’s Infrastructure Head Resigns in Latest Loss
Bloomberg
Mi Tao, the head of infrastructure investment at China Investment Corp. (CIC), has resigned to pursue other career opportunities. This adds to the talent loss at the $1.4tn sovereign wealth fund, which has seen more than 20 team leaders and managing directors leave in recent years. Some of the departures followed the fund's decision to fold its private equity and infrastructure investment unit, CIC Capital, into its main operations last year. CIC has been hiring senior-level staff since 2020 to combat the exodus. Mi had been with the company since July 2010 and was responsible for building CIC's infrastructure investment platform.
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