Biden’s real reason for wanting to meet Xi at the Apec summit; Country Garden to have offshore debt restructuring plan by year end; Meta strikes deal with Tencent to sell VR headset in China
The Philippines and China report a new maritime confrontation near a contested South China Sea shoal；China’s SMIC increases chip production while warning of global glut
Welcome to this issue of The China Brief. Today is November 10, 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.
Biden’s real reason for wanting to meet Xi at the Apec summit
South China Morning Post
The meeting between US President Joe Biden and Chinese President Xi Jinping is expected to go ahead at the Asia-Pacific Economic Cooperation forum summit in San Francisco next week. Despite the confrontational nature of the US' policy towards China, Beijing seems inclined to agree to the meeting. However, China may have to consider the chances of Biden losing next year's election due to unfolding developments in the Middle East, which are eroding his support among the Democratic voter base.
The Philippines and China report a new maritime confrontation near a contested South China Sea shoal
Associated Press
Chinese and Philippine vessels were involved in a confrontation on Friday which saw a Chinese coast guard ship and accompanying vessels blast a Philippine supply ship with a water cannon. The Philippine government said that the Chinese vessels had "recklessly harassed, blocked and executed dangerous manoeuvres in another attempt to illegally impede or obstruct a routine resupply and rotation mission" and urged China to withdraw the vessels. This latest incident is part of a series of maritime disputes between the two nations over territorial issues in the South China Sea.
China’s SMIC increases chip production while warning of global glut
Financial Times
China's biggest chipmaker, Semiconductor Manufacturing International Corporation (SMIC), is increasing its spending on plants and equipment in 2023 due to geopolitical tensions and supply chain adjustments that are causing a global glut in semiconductors. SMIC has raised its capital expenditure budget for 2023 by 18% to $7.5bn. The company has authorised equipment providers to ship in advance to secure supplies for its new factories in the face of increasingly complex geopolitical tensions. SMIC has been affected by tightening US export controls on advanced chips and the equipment used to make them.
Exclusive: China's sovereign fund appoints new North America chief -sources
Reuters
China Investment Corp (CIC) has appointed Bai Xiaoqing as its new North America head for its New York office, showing the sovereign wealth fund's commitment to maintaining its presence in the US despite tensions between the two countries. The move comes as Washington has increased scrutiny on Chinese investments it considers a national security threat.
Invesco overweight on China, likes some Hong Kong REITs
Yahoo US
Invesco is 'overweight' on Chinese assets in its Asian funds and adding exposure to Hong Kong's beaten-down real estate sector, according to Fiona Yang, one of its Asian portfolio managers. Yang said that China provides attractive single-stock investing opportunities, even given the weaker macro backdrop. The firm's holdings show an allocation of about 42% of the fund to Hong Kong and China companies, against a benchmark weighting of roughly 40%.
Chinese lender ICBC's U.S. unit hit by ransomware attack
Nikkei Asia
The US subsidiary of the Industrial and Commercial Bank of China (ICBC) has been hit by a ransomware attack, resulting in disruption to certain financial services systems. ICBC Financial Services said that it has successfully cleared US Treasury trades executed on Wednesday and repo financing trades done on Thursday. The affected systems have been disconnected and isolated, and recovery efforts are underway. The parent company, ICBC Group, has not been affected as its business and email systems operate independently.
TikTok faces calls for ban as US lawmakers decry anti-Israel ‘brainwashing’
Al Jazeera
US politicians and commentators have accused TikTok of pushing anti-Israel and anti-Jewish content, leading to calls for a ban on the app. Senators Josh Hawley and Marco Rubio and House Representative Mike Gallagher have all voiced concerns about TikTok's alleged bias towards Palestinians and Hamas. Hawley cited a Harvard CAPS-Harris Poll which found that 51% of Americans aged 18-24 believed that Hamas' attacks on Israel were justified. He argued that this disparity in opinion was due to the prevalence of anti-Israel content on TikTok. TikTok, which is owned by Chinese company ByteDance, has previously faced scrutiny over its links to China and allegations that it promotes Beijing's agenda. The app has stated that it "stands against terrorism" and removes hateful and violent content. However, commentators have called on TikTok to do more to moderate content and prevent the spread of misinformation.
Top EU, China climate officials to hold talks next week
Reuters
The European Union's (EU) top climate change official, Wopke Hoekstra, is set to meet with China's top climate envoy, Xie Zhenhua, in Beijing next week ahead of the United Nations' COP28 climate summit. The meeting will be an opportunity for both sides to discuss their positions and lay the groundwork for potential agreements at COP28. The EU and US are hoping to rally support for a deal at COP28 to triple renewable energy capacity by 2030 and are seeking China's backing. However, the EU and China are at odds over other climate issues, with the EU pushing for China and other major emerging economies to contribute to UN climate funds, while China argues that wealthy industrialised nations should fulfil their obligations to provide funding.
Exclusive: Country Garden aims to have offshore debt restructuring plan by year end
Reuters
Country Garden, China's largest private property developer, is planning to restructure its offshore debt by the end of the year and begin talks with offshore bondholders in February or March 2019. The company is aiming to inform key bondholders of its cash flow projections by the end of December. Country Garden has almost $11bn of offshore bonds and has been under scrutiny since its debt issues became public in August. It is one of a number of Chinese property developers that are working on or have presented debt restructuring proposals to creditors in the past two years.
China’s SMIC amasses chip-making tools with spending bump as US escalates curbs
South China Morning Post
Semiconductor Manufacturing International Corp (SMIC), China's biggest foundry, has increased its capital expenditure for this year, reflecting the urgency with which the company is purchasing chip-making tools due to US sanctions on China's access to advanced equipment. SMIC has raised its annual budget to $7.5bn for 2023, an 18% increase from last year. The move comes after the US updated its tech export controls, lowering the threshold for the types of chip-making tools that cannot be sold to Chinese firms.
Tokyo Electron Lifts Outlook After China Chip Growth Quickens
Bloomberg
Tokyo Electron has raised its full-year earnings and revenue targets after strong demand from China for its chipmaking equipment in Q3. Sales to China made up almost half of its quarterly revenue of JPY 428bn ($2.8bn), beating analyst estimates. The Japanese firm has upped its full-year sales outlook to JPY 1.73tn, from JPY 1.7tn, and has raised its projections for net income and gross margins. The company also said that Chinese investment in mature-node chips, such as power semiconductors and automotive chips, is strong and that DRAM investment is gradually recovering.
Chinese EV maker Zeekr, unit of Geely, hastens US IPO to expand product line
South China Morning Post
Geely's EV unit, Zeekr Intelligent Technology Holding, plans to raise $1bn through an initial public offering (IPO) in the US. The company filed public listing documents for the IPO, which it plans to use to expand its product line and compete against rivals in the Chinese EV market. Zeekr is targeting a listing on the New York Stock Exchange within weeks and could be the first major Chinese firm to list in the US since Beijing tightened approval procedures for overseas fundraising in 2021. Zeekr's IPO comes after it posted a net loss of CNY3.87bn ($520.6m) in H1 2023, up 25% YoY, and revenue of CNY21.3bn, more than double last year's figure.
Hong Kong revises down full-year economic growth forecast to 3.2% from 4-5%
South China Morning Post
The Hong Kong government has revised down its forecast for economic growth in 2023 to 3.2%, citing a worsening external environment, rising geopolitical tensions, and high interest rates as challenges. The revised forecast is lower than the previous estimate of 4-5% growth. The government economist also highlighted that the difficult external environment and tight financial conditions would continue to weigh on exports, investment, and consumption sentiment. However, the economist noted that increased visitors, higher household income, and government initiatives could improve the situation. In Q3 2023, Hong Kong's GDP rose by 0.1-4.1% compared to the previous quarter.
China hosts Japanese envoy ahead of possible Xi-Kishida meeting during Apec
South China Morning Post
China's top diplomat, Foreign Minister Wang Yi, met with Japan's top security adviser, Takeo Akiba, in Beijing on Thursday. The meeting was held amidst reports that Chinese President Xi Jinping and Japanese Prime Minister Fumio Kishida may meet in San Francisco during the APEC summit next week. The two diplomats discussed planning for high-level dialogue between their countries and "issues of concern" between them. Talks between Xi and Kishida were being arranged for next Thursday in San Francisco, but nothing has been decided yet. The meeting would be the first one-on-one meeting between Xi and Kishida since November last year.
How ‘old friend’ Russia uses memory diplomacy to build Southeast Asia ties
South China Morning Post
Russia's economic and military ties with Southeast Asia have weakened due to its poor economic prospects and the region's move towards a carbon-neutral future. In response, Russia has been using memory diplomacy to assert its role as a great power. By aligning its historical narratives with those of Southeast Asian countries, Russia aims to create "memory allies". This has paid off in countries like Vietnam and Laos, where memories of Soviet assistance during the Indochina wars have created gratitude and refrained criticism of Russia's invasion of Ukraine. Memory diplomacy is also used by Russia to criticise the US for its arms sales to the region.
US and China reach 'agreements' on climate - Kerry
BBC
The US and China have reached agreements on climate issues ahead of the COP28 Summit in Dubai, according to John Kerry, the US climate envoy. Kerry described the talks with his Chinese counterpart as tough and serious but said they had been successful. Details of the agreements will be shared soon. Cooperation between the two largest polluters is seen as crucial for any consensus at the summit. Kerry also rejected claims that US climate policies and technologies are "anti-China" and stated that every country benefits from new technology. COP28 aims to keep alive the goal of limiting global temperature rises to 1.5C.
Price wars during Chinese shopping fest expose consumer woes
Reuters
China's "Singles Day" shopping event is revealing weakness in household consumption and raising concerns about the country's economic slowdown. The event, which has expanded into weeks of promotions, is being closely watched as a gauge of consumer confidence. E-commerce platforms such as Alibaba's Taobao and Tmall are offering discounts and rock-bottom prices, while Pinduoduo and JD.com are offering cashback deals. However, analysts expect subdued sales figures as macroeconomic headwinds cause consumers to be more value-conscious. Some indicators suggest a slowdown in sales, while others are more optimistic and expect total sales growth of 14%-18%.
China’s Deflation Pressures Are ‘Temporary,’ PBOC Adviser Says
Yahoo US
An adviser to the People's Bank of China has claimed that consumer price deflation is only temporary, despite a worsening drop in consumer prices. Wang Yiming, a member of the central bank's monetary policy committee, said that China is only seeing "a little bit of signs" of deflation, although official data showed that consumer prices fell 0.2% YoY in October. Wang attributed the sluggish prices to a temporary lack of demand and said that the country would not repeat Japan's decline into stagnation in the 1990s.
China to guarantee payments to its coal power producers based on capacity
Reuters
China's state planner, the National Development and Reform Commission (NDRC), has announced that coal-fired power producers will be guaranteed payments based on their installed capacity, regardless of how much energy they actually produce. The move aims to ensure a stable electricity market and comes as China faces increasing scrutiny for its expanding coal power generation amid global efforts to tackle climate change. The capacity payments will be calculated based on fixed costs and will gradually increase from 30% to at least 50% by 2026.
Xi-Biden main event follows flurry of diplomatic talks in the background
South China Morning Post
Diplomatic exchanges between the US and China have intensified ahead of Chinese President Xi Jinping’s visit to the US. Observers have welcomed the engagements as positive signs that bilateral relations are improving and that the two sides are preparing for the upcoming Biden-Xi summit. However, analysts caution that tangible deliverables are needed to prove that the summit can deliver real progress in stabilising ties and avoiding unintended crises. The talks have covered a range of issues, including climate change, nuclear weapons, and maritime tensions in the South China and East China seas. While progress has been made on some fronts, no major breakthroughs have been achieved, and expectations for the summit should not be too high.
Top US General Doubts Xi Planning to Take Taiwan by Force
Bloomberg
Chairman of the Joint Chiefs of Staff, Charles Q. Brown Jr., has said that he doubts China plans to take Taiwan militarily but will instead use other means to do so. Brown stated that the US wants to serve as a "strong deterrent" to any potential move by China's armed forces and will monitor actions by President Xi Jinping that could increase pressure on Taiwan. Taiwan has become a major point of contention in the US-China relationship, with China holding military drills around the island and the US vowing to defend it if attacked. Both countries have also accused each other of military provocations in the South China Sea. Brown's comments come ahead of an expected meeting between President Xi and President Biden next week.
San Francisco bidding to reverse image of a city in decline as host of APEC trade summit
Yahoo US
San Francisco is preparing to host the Asia-Pacific Economic Cooperation (APEC) leaders’ summit, which will be the city’s largest international gathering since the UN was created in 1945. The summit is expected to attract 20,000 visitors and will include a meeting between President Joe Biden and President Xi Jinping of China. The city is keen to use the event to improve its image, which has been tarnished by rising crime, homelessness and the pandemic. San Francisco mayor London Breed wants visitors to return home with memories of a “safe, vibrant and open” city, rather than the grime and homelessness for which it has been known. The state’s governor, Gavin Newsom, expressed excitement at the opportunity to show off California to visiting leaders and refute some of the negative coverage of the state. However, critics argue that events like APEC prioritize corporate profits over everyday people, and doubt that positive press will be enough to fill the city’s empty restaurants and shops.
Putin’s New Story About the War in Ukraine
Foreign Affairs
Since the invasion of Ukraine, Russia has changed its narrative about the war. Initially, Russian President Vladimir Putin justified the invasion by claiming that there was a need to "denazify" Ukraine, alleging that a Nazi junta had seized power. However, as Russian forces suffered defeats, the narrative shifted to portraying the conflict as a proxy war with NATO and the United States. The focus changed from fighting Ukrainian Nazis to fighting against Western hypocrisy. This new narrative has resonated with many in the developing world, who see Putin as a strong leader standing up against American influence.
Russian propaganda now relies heavily on "whataboutism," responding to criticism by pointing out the supposed malice of the other side. This tactic has gained traction both domestically and internationally. Many countries outside of the West see the war in Ukraine as a struggle against American hegemony and view Putin as a strong leader. Putin himself has embraced this role, presenting Russia as a defender against Western colonialism and exclusivity. The recent crisis in the Middle East has further strengthened the Kremlin's propaganda, providing Putin with an opportunity to demonstrate his leadership in the anti-American camp.
Despite his previous close relationship with Israeli Prime Minister Benjamin Netanyahu, Putin has criticized Israeli airstrikes on civilian targets and voiced sympathy for the population of Gaza. The Kremlin's accusations of Western hypocrisy have had a potent effect, resonating with many around the world who view Putin as a situational ally against American influence.
Ransomware attack on China’s biggest bank disrupts Treasury market trades, reports say
Associated Press
Industrial and Commercial Bank of China Financial Services, a financial services business of China's largest bank, has confirmed that it was hit by a ransomware attack this week. The attack reportedly disrupted trading in the U.S. Treasury market. The company stated that some of its systems were affected but it had disconnected parts of them to limit the impact. It has reported the issue to law enforcement and is currently investigating the incident. The company clarified that its banking, email, and other systems were not affected. Reports suggest that the attack was carried out by LockBit, a Russian-speaking ransomware syndicate.
China can raise 2024 budget deficit ratio to spur growth - China central bank adviser
Reuters
China has the capacity to raise its budget deficit ratio next year to support economic recovery, according to Wang Yiming, a policy adviser to the central bank. Wang stated that the central government still has room to issue more debt and that a higher budget deficit would help drive economic recovery. China recently raised its 2023 budget deficit to around 3.8% of GDP, up from 3%, due to the planned issuance of 1 trillion yuan in sovereign bonds. Wang also stated that China is able to achieve economic growth slightly above 5% this year and that weak external and domestic demand are increasing overcapacity pressures in the country.
Meta strikes deal with Tencent to sell VR headset in China - WSJ
Reuters
Meta Platforms has reportedly reached a preliminary deal with Tencent to sell its low-cost virtual reality (VR) headset in China. The deal would make Tencent the exclusive seller of Meta's headsets in China, with sales beginning in late 2024. Facebook and Instagram remain blocked in China, and the VR deal would allow Meta to re-enter the Chinese market and compete with Bytedance, the owner of TikTok, which produces the VR headset Pico. The report did not disclose the potential price of the headset.
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