China Drafts List of 50 Real Estate Firms Eligible for Funding; China’s Early Stage Technology Stocks on Brink of Bull Market
Taiwan presidential frontrunner picks former de-facto ambassador to U.S. as vice president candidate; Australian PM speaks out on ‘dangerous’ Chinese navy incident that injured diver
Welcome to this issue of The China Brief. Today is November 20, 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.
China Drafts List of 50 Real Estate Firms Eligible for Funding
Bloomberg
Chinese regulators are creating a list of 50 developers who will be eligible for financing to support the struggling property market. The list, which includes both private and state-owned developers, is intended to guide financial institutions in providing support to the industry. This effort comes as China's real estate industry has experienced record defaults, unfinished projects, and a contraction in investment, posing a threat to the country's economic growth. Despite various measures to address the challenges in the property market, such as mortgage-easing and infrastructure upgrades, the sector continues to struggle, with a significant decline in home prices and overall industry contraction in the third quarter of the year. There are concerns about the effectiveness of the current measures and a call for bolder actions from policymakers.
China’s Early Stage Technology Stocks on Brink of Bull Market
Bloomberg
China's small and medium-sized companies are experiencing a bull market despite a broader slump in local equities. The Beijing Stock Exchange 50 Index, which tracks early-stage innovative companies, has risen 19% from its October low, outperforming larger tech-heavy indexes. The index's rebound is partly attributed to a wider fluctuation range for its constituents and investors' limited positioning in these companies. Additionally, regulators are considering including eligible securities into the CSI cross-market index system. The Beijing exchange, launched two years ago, was designed to help small firms raise funds and diversify the nation's financial markets.
China Shifts Belt and Road Energy Spending to Renewables, Study Finds
Bloomberg
China's Belt and Road initiative is shifting more towards renewable energy, with 57% of overseas development projects planned or in construction being renewable. This change is due to falling prices of wind turbines and solar panels, as well as pressure to move away from fossil fuels. China's domestic clean energy efforts are also ramping up, with enough capacity to power all of France. While there have been cancellations and suspensions of projects, there are still coal and natural gas developments in planning or construction phases, despite a ban on new overseas coal projects announced by President Xi Jinping in 2021.
Beyond security: U.S. pulls Manila closer via economic cooperation
Japan Times
Philippine President Ferdinand Marcos Jr. has achieved a significant milestone in securing a landmark deal with the United States for the export of nuclear material, technology, and know-how. This agreement will help the Philippines decarbonize and boost energy independence, with plans for nuclear energy to become a part of the country's energy mix by 2032. President Marcos sees this as a major step in enhancing bilateral ties with the United States.
Taiwan presidential frontrunner picks former de-facto ambassador to U.S. as vice president candidate
Associated Press
The frontrunner in Taiwan's presidential race, Vice President William Lai, has nominated Hsiao Bi-ki, a long-term de-facto ambassador to the United States, as his vice presidential candidate. This move is expected to strengthen support for the ruling Democratic Progressive Party, which has resisted Beijing's demands to concede to rule under the authoritarian Communist Party. Lai and Hsiao will face a divided opposition led by the Nationalist Party, also known as the Kuomintang, in the upcoming elections. Although Lai is currently ahead in the polls, China is believed to be trying to influence business groups and media. Hsiao, who was born in Japan to a Taiwanese father and an American mother, has been praised for his crucial role in cooperation with the U.S., Taiwan's chief ally. Lai's post on Facebook emphasized that their team is fully prepared to withstand challenges from both domestic and Chinese sources.
Australian PM speaks out on ‘dangerous’ Chinese navy incident that injured diver
South China Morning Post
Australian Prime Minister Anthony Albanese criticized a Chinese warship for acting in a dangerous and unprofessional manner during an incident with an Australian navy vessel that injured a military diver. The incident occurred during a diving operation in Japan’s exclusive economic zone, and Albanese stated that it has damaged the relationship between the two countries. He did not disclose if he raised the matter with Chinese President Xi Jinping during a meeting at the Asia-Pacific Economic Cooperation (Apec) forum. Defense Minister Richard Marles said that a People’s Liberation Army Navy destroyer posed a safety risk by closing in on the Australian vessel and operating its sonar in a dangerous manner. This incident has strained the relationship between Australia and China, and Albanese emphasized the need for better communication between the two militaries. Despite this, Albanese recently visited China and agreed to restart an annual leaders dialogue, but the Chinese embassy in Australia did not respond to a request for comment.
Multipolar world opens up surprising safe havens
Reuters BreakingViews
The United States is the largest net debtor globally, owing $18 trillion. However, increasing reliance on overseas equity investors has made the country vulnerable. The U.S. fiscal deficit has tripled since 2016, leading to a current account deficit of over $925 billion. The country's net stock of foreign equity investment has turned into a deficit of nearly $6 trillion. This leaves the U.S. vulnerable to the vagaries of foreign investors. Investors may consider emerging markets as an alternative to U.S. stocks due to geopolitical fragmentation and better fiscal policies. Emerging markets have historically outperformed the U.S. during similar periods.
China's Oct coal imports from Russia fall to 8-mth low
Reuters
China's coal imports from Russia declined in October to an eight-month low due to less competitive prices and weak demand from Chinese utilities. Russian coal arrivals were 7.64 million tons, the lowest level since February, partly due to a new export duty making Russian imports more expensive. Prices for Russian coal were higher compared to Australian coal, but still 19% higher than the same period in 2022. Imports from Mongolia and Indonesia also fell, while Australian coal arrivals slightly increased. Chinese traders have been increasing coal purchases from Australia since the ban was lifted in January, but the price has since increased compared to domestic supplies. Chinese coal-fired power plants have high inventory levels, reducing their demand for high-quality thermal coal and focusing on lower quality options.
Chairman of Russian State Duma to lead delegation to China - Chinese state media
Reuters
Vyacheslav Volodin, the Chairman of the State Duma of the Russian Federation, is set to lead a delegation to China from November 21 to 23. This was reported by Chinese state media on Monday.
China and Saudi Arabia central banks sign local currency swap agreement
Reuters
The People's Bank of China and the central bank of Saudi Arabia have signed a local currency swap agreement. The agreement is worth 50 billion yuan or 26 billion Saudi riyals and will be valid for three years, with the possibility of extension by mutual agreement. The purpose of the agreement is to strengthen financial cooperation between the two countries, expand the use of local currencies, and promote trade and investment.
China welcomes Arab and Muslim foreign ministers for talks on ending the war in Gaza
Associated Press
China's top diplomat met with four Arab foreign ministers and the Indonesian foreign minister in Beijing to discuss ending the war in Gaza. The Arab ministers chose to start their world tour in Beijing, demonstrating China's growing influence and support for the Palestinians. China has a history of backing the Palestinians and criticizing Israel's settlements, despite growing economic ties with Israel. The Saudi foreign minister called for a cease-fire and humanitarian aid in Gaza. China has become more involved in international affairs, helping broker an agreement between Saudi Arabia and Iran. The goal of the ministers' tour is to pursue a cease-fire and aid for Gaza. Israel's retaliatory strikes have resulted in numerous casualties and missing individuals.
U.S. and China will team up to cut methane emissions, says Kerry
Nikkei Asia
The U.S. and China have agreed to work together to reduce global methane emissions, a significant greenhouse gas. This agreement was reached ahead of a meeting between President Biden and President Xi Jinping. China will include methane reduction in its 2035 greenhouse gas targets, and the two countries will form a working group to address the issue. The U.S. hopes to cooperate with China on renewable energy as well. However, there are doubts about whether China will follow through on its promises, and the U.S. plans to verify progress. The ultimate goal is to combat climate change on a global scale.
Taiwan's presidential front-runner picks top U.S. envoy as running mate
Nikkei Asia
Lai Ching-te, Taiwan's presidential front-runner, selected Hsiao Bi-khim, a top envoy to the U.S., as his running mate in an effort to appeal to young and progressive voters. Hsiao, known for her influence with U.S. officials and her support for Taiwan, has been praised for her diplomatic efforts. With the opposition in disarray, Lai is comfortably leading in opinion polls ahead of the January elections. The race takes place amidst Chinese threats and economic coercion aimed at Taiwan, with Beijing endorsing the opposition's framing of the election as a choice between war and peace. Hsiao's appointment as Lai's running mate is seen as a smart move and signals a commitment to continue the current administration's moderate path.
3rd release of treated water from Japan’s damaged Fukushima nuclear plant ends safely, operator says
Associated Press
The article discusses the completion of the third batch of treated radioactive wastewater release from the damaged Fukushima nuclear plant into the Pacific Ocean. The release has caused a ban on Japanese seafood imports by China, negatively impacting Japanese seafood producers. Japanese Prime Minister Fumio Kishida has urged China to lift the ban, but only a vague agreement to resolve the dispute through dialogue was reached. The government has set up a relief fund to support Japanese seafood producers, and the plant's operator, TEPCO, is providing compensation to the fisheries industry. The process of releasing the wastewater is expected to continue for decades.
China dusts off state secrets law amid national security push
South China Morning Post
China is undergoing a significant overhaul of its state secrets law, adding a dozen new clauses to expand the reach and depth of the law. The draft revision was unveiled in late October, marking the biggest amendment to the statute in over a decade. The law aims to protect state secrets in various areas, including education, technology, and military facilities, and imposes restrictions on state employees with access to these secrets. This move comes as China perceives an intelligence war with the United States, leading to a focus on information security and the allocation of funds for the development of cutting-edge technologies for data safety.
The amendments to the state secrets law are part of a broader national security push by China, which also includes proposed revisions to the law governing charities and the anti-espionage law. The expansion of Beijing's legal toolkit has raised concerns among foreign businesses operating in China due to the increased uncertainty and potential negative impact on their operations. Additionally, the crackdown on potential threats, including cyberattacks by foreign spies, has led to a sense of paranoia and uncertainty, scaring away foreign capital, which has been a critical engine for China's economic growth over the past four decades.
The changes also signal a prioritization of politics over the economy by the Communist Party leaders, leading to potential chilling effects on the business world. The consequences of these legal amendments are yet to be seen, but they are likely to have a significant macro impact, particularly on foreign businesses and investors operating in China.
China tells top financial institutions to bolster property market
Nikkei Asia
The Chinese government has instructed financial institutions to balance their loan offerings and create credit plans to support the real estate market. They ordered banks to meet the funding needs of property developers, encourage mergers and acquisitions in the real estate sector, and support the delivery of housing projects and construction of affordable homes. Additionally, they directed financial institutions to work with local government financing vehicles to lower local governments' financing costs. Despite government efforts to revive demand, home prices and housing sales continued to decline in October. This article was originally published on Caixinglobal.com.
Ousted OpenAI CEO sought billions in Middle East for chip venture
South China Morning Post
Sam Altman, former CEO of OpenAI, was actively raising funds for a new AI-focused chip venture, codenamed Tigris, to compete with Nvidia. He also worked on an AI-focused hardware device with Jony Ive. Altman had discussions with investors such as SoftBank and Saudi Arabia's PIF. His ousting from OpenAI was due to communication issues with the board. Despite potential pressure to reinstate him, Altman's new ventures may need board approval. Investors, including Microsoft, are interested in backing Altman's new ventures. There may be concerns with US regulators due to overseas investments.
Xinjiang foreign trade hits record despite Western sanctions
Nikkei Asia
Despite Western sanctions over alleged human rights abuses, trade in China's Xinjiang region surged by 40% to a record $409.2 billion in the first 10 months of 2023. The increase was driven by trade with Central Asian countries and Malaysia, Belarus, and Vietnam. The U.S. passed the Uyghur Forced Labor Prevention Act, effectively halting imports from Xinjiang, but China's overall trade outlook remains bleak as exports fell for the sixth consecutive month. Chinese officials have laid out plans for a free trade zone in Xinjiang to attract foreign investors and strengthen trade networks with neighboring countries.
BYD’s Tesla Fighter Leads New EV Launches at Guangzhou Auto Show
Bloomberg
China's BYD unveiled the Sea Lion 07, a rival to Tesla's Model Y, at the Auto Guangzhou car show, along with new electric vehicles from Li Auto, Xpeng, and Geely. Li Auto's Mega MPV, with a 1,000-kilometer capable battery, received 10,000 pre-orders. Geely's Zeekr brand introduced the 007 sedan, with a starting price of 224,900 yuan and a range of 688-870 kilometers. Xpeng launched its first pure-electric MPV, and Cadillac unveiled its Optiq electric SUV. Changan Automobile showcased the Lieshou, an extended-range EV pickup with a 1,031-kilometer range. The car show reflects the competitive push in China's electric vehicle market.
Don’t Cry for Milei’s Argentina
Bloomberg
Javier Milei has won the presidential election in Argentina, with his opponent Sergio Massa conceding before any votes were even published. Milei is an anarcho-capitalist who wants to abolish the central bank and do away with the country’s currency. He represents change and an ambition to make things better, and he has been given the opportunity to do so by the Argentine people. Milei recognizes the critical condition of Argentina's economy and has declared that there is no room for gradual measures. His victory represents a big experiment in libertarian economics, with the Argentine people willing to be the guinea pigs.
Argentina's economy has been plagued by the question of its exchange rate for a generation. The country has experienced sharp devaluations and various attempts to stabilize its currency, with no lasting success. Milei's victory represents a new opportunity for change in Argentina, with a focus on dollarization and libertarian economics. However, there are doubts about his ability to put his plans into action, and it remains to be seen how his policies will affect the country's economy.
In addition to the political developments in Argentina, the fall in the price of oil has been a surprising development. Despite geopolitical shocks and attempts to limit production, the price of oil has reversed and is now back to where it was two years ago. Real world supply and demand continue to dominate over short-term geopolitical events, and the oil price relative to gold may be a vital guide to the economy's future. Additionally, there is excitement around gold, as falling yields could make it more attractive. Overall, there are mixed signals in the commodities market, and the future remains uncertain.
Shares of Foxconn's EV unit slide 9% in market debut
Reuters
Shares of Foxtron Vehicle Technologies, a unit of Foxconn, fell 9% in their market debut due to concerns about competition in the electric vehicle market. Inflation, high interest rates, supply chain issues, and pricing pressure from Tesla are all contributing to the challenges facing EV makers. Tesla CEO Elon Musk and executives from General Motors and Ford have raised concerns about expanding factory capacity. An analyst at Mega International Securities noted that Foxtron has been losing money and is unlikely to turn around in the next two years. However, Foxtron's chairman, Young Liu, expressed confidence in the company's growth strategy, which includes expanding into the North America and Southeast Asia markets.
Era of Total U.S. Submarine Dominance Over China Is Ending
WSJ
China’s advances in submarine technology and undersea detection capabilities are narrowing the gap with the U.S. military. Satellite imagery showed China’s first nuclear-powered attack submarine with noise-reducing technology similar to that used on the latest American submarines. China also has been expanding its underwater sensor networks, giving it the ability to detect enemy submarines more effectively. This has major implications for American military planning for a potential conflict over Taiwan.
The western Pacific is becoming more treacherous for U.S. submarines due to China’s underwater sensor networks, patrol aircraft, and helicopters that can pick up sonar information from buoys in the sea. China has also conducted submarine-hunting exercises in the South China Sea and the Bering Sea, indicating its growing capability in this area. The U.S. Navy and its attack submarines in the Asia-Pacific region are primarily responsible for keeping track of these Chinese submarines.
The U.S. is facing a shortfall in its own submarine fleet, with the Navy needing 66 nuclear-powered attack submarines to meet global missions. The U.S. currently has 67 nuclear-powered submarines, but only 49 of those are attack submarines. China, on the other hand, currently has six nuclear-powered attack submarines, with the Pentagon forecasting that China will have a total fleet of 80 attack and ballistic-missile submarines by 2035. This has led to the U.S. needing new strategies and resources such as patrol aircraft and attack submarines to locate, track, and potentially target a new generation of quieter Chinese submarines.
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