China Hands Ex-Merchants Bank President Suspended Death Sentence; China’s top prosecutors promise financial crime crackdown is about to ramp up
Beijing court gives Australian writer suspended death sentence; China’s Small-Cap Crash Shows What Happens Without Market Rescue
Welcome to this issue of The China Brief. Today is February 5, 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.
China Hands Ex-Merchants Bank President Suspended Death Sentence
Bloomberg
Tian Huiyu, the former president of China Merchants Bank, has been sentenced to a suspended death sentence by Chinese authorities. The sentence, which carries a two-year suspension, comes almost a year after Tian was charged with bribery and insider trading. President Xi Jinping has been cracking down on corruption in the financial sector, and Tian's case is part of this effort. Tian was accused of using his positions at various firms to collect bribes in exchange for loan approvals and projects. Other financial executives, including the president of China Citic Bank and the former chairman of China Huarong Asset Management, have also faced severe punishments for corruption.
Beijing court gives Australian writer suspended death sentence
Japan Times
Australian writer Yang Hengjun has been handed a suspended death sentence by a Beijing court, threatening the recent improvement in bilateral relations between China and Australia. Yang, a pro-democracy blogger and Australian citizen, was detained in China in 2019 and charged with espionage. The details of the case against him have not been made public. The sentence has shocked his family and supporters.
China’s top prosecutors promise financial crime crackdown is about to ramp up
South China Morning Post
China's Supreme People’s Procuratorate (SPP) has pledged a year-long crackdown on financial crimes. Zhang Xiaojin, head of the Fourth Procuratorial Office, responsible for economic crimes, said that the SPP would provide "strong rule-of-law guarantees" to ensure strong growth in China's financial sector. Targets include money laundering, loan fraud, illegal fundraising and crimes involving virtual currencies. Zhang said the crackdown would "provide strong support for accelerating the construction of a standardised, transparent, open, dynamic and resilient capital market".
China Vows Plan to Attract Investment, Offers No New Detail
Bloomberg
China is set to develop an action plan to attract foreign investment, according to Meng Wei, director-general of the National Development and Reform Commission’s legal department. Details about the plan, including its release date and content, have not been provided. The government will also continue to reduce restrictions on foreign investment and eliminate barriers for overseas investment in the manufacturing sector. These promises have been made by Beijing since mid-2023, but have not yet had a significant impact on investment, with new investment dropping in most months last year and many overseas firms remaining pessimistic about the outlook.
US Solar Boom Opens $2 Billion Indian Door to Banned Products From China
Bloomberg
India's largest solar producer, Waaree Energies, has sent millions of solar panels to the US that contain components from a Chinese company that has been repeatedly denied entry to the US market over concerns of forced labor. The components, solar cells produced by Longi Green Energy Technology, are used in Waaree panels installed in solar farms across several states. The imports of these panels raise questions about the enforcement of the US ban on products linked to forced labor in China's Xinjiang region. The US Customs and Border Protection agency has detained thousands of shipments of solar panels made by Chinese-owned companies since the ban was enforced in June 2022. However, the agency's actions have created an opportunity for Indian solar producers, which have significantly increased their exports of solar panels to the US.
IMF’s China gloom gets lost in translation
Reuters BreakingViews
China has rejected the IMF's warnings of a property crisis and high levels of government debt, maintaining an optimistic outlook on the country's economy. The IMF expects China's economy to grow 4.6% this year, down from 5.2% in 2023, due to a real estate crisis and weak external demand. The fund also warned of "existing large imbalances" and urged China to implement a comprehensive strategy to contain these risks. However, Beijing disagrees with the IMF's assessment, stating that the property sector is stabilizing and recovering. The disagreement highlights President Xi Jinping's reluctance to take immediate action.
Australia 'appalled' after China hands writer suspended death sentence
Nikkei Asia
Australia has summoned China's ambassador to express its concerns after a Chinese court handed Australian writer and democracy activist Yang Hengjun a suspended death sentence. The sentence, delivered by a court in Beijing, comes more than five years after the 58-year-old was detained at Guangzhou's main airport in 2019 and almost three years after his closed-door trial in May 2021 over alleged espionage. The sentence is suspended, which means it can be converted to a life sentence after two years if Yang does not commit any "serious crimes" by then.
Classified Japanese diplomatic info leaked after Chinese cyberattacks
Japan Times
In 2020, classified Japanese diplomatic information was leaked as a result of cyberattacks on the country's Foreign Ministry, according to a government source. The source did not disclose the nature of the leaked information, but it was reported that Tokyo and Washington had discussed countermeasures following the leaks. This incident highlights Japan's vulnerability to cyberattacks and the need for enhanced digital security measures.
China’s Small-Cap Crash Shows What Happens Without Market Rescue
Bloomberg
China's small-cap stocks are underperforming larger peers, suggesting that investors are losing faith in the government's ability to rescue the market. The CSI 1000 Index, which tracks small-cap shares, has fallen 27% this year, while the large-cap CSI 300 Index gained 0.7% on Monday. Some exchange-traded funds tracking the CSI 300 have seen record trading volume, leading to speculation that state funds have intervened to support the market. However, the small-cap underperformance indicates that investors believe policy support will be focused on blue-chip stocks.
Alibaba’s DingTalk among Chinese apps launching on Apple Vision Pro
South China Morning Post
Chinese work collaboration platform DingTalk, owned by Alibaba Group Holding, has launched a native app for Apple's Vision Pro headset, allowing users to send messages and hold video meetings in a three-dimensional virtual environment. The DingTalk app on Vision Pro comes equipped with special features, including options to display multiple windows and draw on the screen using hand gestures. The app also supports the Vision Pro's Persona feature, which allows users to create realistic avatars of themselves to be used in video calls. DingTalk is one of several Chinese apps that have announced support for the Vision Pro headset.
China’s Lunar New Year cross-border travel expected to hit pre-pandemic levels
South China Morning Post
China's National Immigration Administration is forecasting that cross-border travel during the Lunar New Year holiday will rebound to pre-pandemic levels, with the number of trips expected to triple compared to last year. Despite concerns about complex winter weather, the administration predicts an average of 1.8 million inbound and outbound trips during the eight-day holiday period. Major airports are expected to experience peak passenger flows between Thursday and Sunday, with Shanghai's Pudong Airport anticipating 830,000 arrivals and departures each day. The travel surge is attributed to post-pandemic enthusiasm and the extended holiday period.
China aid program could help more than 30 Country Garden projects
Nikkei Asia
Chinese property developer Country Garden has said that over 30 of its unfinished projects are in line to receive government support. The company has applied for "white list" projects in various cities across China in a bid to revive its struggling real estate market. The government scheme aims to mobilise banks to make new loans to developers, including distressed ones, to restart unfinished residential projects. Country Garden has said that projects across cities including Henan, Hubei, Sichuan, Shandong and Chongqing have entered the white list.
Analysis-Why China's national team won't save spiralling markets
Yahoo US
Chinese state-backed buyers have reportedly been propping up the country's stock market by pumping money into index-tracking funds, a move that has pulled markets back from recent lows. However, analysts warn the support is likely to be temporary, pointing out that the property sector remains weak and a burden on investor confidence.
China markets regulator promises to protect small investors as stocks hit 5 year lows
Associated Press
Chinese shares fell to 5-year lows on Monday after stock market regulators promised to crack down on stock price manipulation and "malicious short selling." The markets have been struggling due to heavy selling of property shares and a slowdown in China's economy. Despite various measures to boost confidence, including freeing up more than $140 billion for lending to developers, prices have continued to fall. The China Securities Regulatory Commission's announcement on Sunday aimed to reassure individual investors, who account for more than half of trading volume.
German Trade Gap With China Narrows for First Time in Five Years
Bloomberg
Germany's trade deficit with China has shrunk for the first time since 2018, helping to more than double the country's overall surplus. The deficit with China narrowed to €58.4 billion ($63 billion) last year, down from a high of €86 billion in 2022. However, the deficit is still the second-strongest reading on record and the German government is aiming to reduce dependence on China by investing in mining projects outside of the country. The lopsided trade relationship with China remains a concern for Germany, as China's catch-up in mechanical engineering and the automotive sector adds to worries.
China property: Sunac, Country Garden projects added to ‘whitelists’
South China Morning Post
Several Chinese property developers have had their projects included in "whitelists" by local governments, enabling them to qualify for financial support from banks. Sunac China Holdings had 90 projects cleared for loan applications on Monday, Shimao Group and CIFI Group had 16 and 18 respectively, while Country Garden Holdings said more than 30 of its projects had been added to local governments' whitelists. Beijing has been attempting to ease liquidity pressures and boost homebuyer sentiment as new home prices recorded their largest fall in almost nine years in December.
Beware China’s ‘false promise’ with PNG security deal, US official warns
South China Morning Post
The US has urged Papua New Guinea (PNG) to reject China's offer of a potential security pact, warning that any security guarantee with Beijing comes with consequences and costs. The US and Australia have seen the Pacific as their sphere of influence for decades and are seeking to prevent island nations from forming security ties with China. China has offered to assist PNG's police force with training, equipment, and surveillance technology. The US Deputy Secretary of State, Richard Verma, said that China's commitment in defence or investment comes at a high cost and warned of the false promise of authoritarian regimes.
US must impose more tariffs on China, Trump says
BBC
Former US President Donald Trump has stated that if he wins the US presidential election in November, he would impose more tariffs on Chinese goods, potentially exceeding 60%. Trump has long accused China of unfair trading practices and intellectual property theft. During his presidency, he initiated a trade war with China by imposing tariffs on billions of dollars worth of Chinese goods. The current US President Joe Biden's administration has largely maintained these tariffs, despite criticism that they have raised prices and made the US less competitive. Some lawmakers from both parties are now supporting measures to curb US-China economic ties.
Fear and ambition propel Xi’s nuclear acceleration
Japan Times
Chinese President Xi Jinping has called for China to be ready for possible confrontation with a formidable adversary, signalling that he wants a more potent nuclear capability to counter the threat. Xi’s comments behind closed doors reveal that anxiety and ambition have driven his transformative buildup of China’s nuclear weapons arsenal in the past decade. This comes as China has become increasingly assertive on the global stage and tensions with the US have escalated.
Eisai sees 'huge' growth potential for Alzheimer drug in China
Japan Times
Eisai plans to introduce its Alzheimer's drug, Leqembi, to 1,500 people in China later this year, with expectations for significant growth in 2025 as diagnosis methods change. The company believes that more convenient Alzheimer's blood tests expected to be available next year could help them reach a larger portion of China's estimated 17 million people with early-stage disease. China is one of the fastest-aging countries in the world and is considered one of the most important countries for Eisai in terms of Alzheimer's disease.
China bets on open-source chips as U.S. export controls mount
Japan Times
China's People's Liberation Army's (PLA) Academy of Military Sciences has published a patent for a new high-performance chip using an open-source standard called RISC-V. The chip is designed to reduce malfunctions in chips for cloud computing and smart cars. RISC-V is an instruction set architecture used to design chips for various applications, including smartphones and artificial intelligence processors. This patent highlights China's efforts to compete in the global chip market and withstand US sanctions.
Hong Kong stocks fall as mood soured by lack of support measures, geopolitics
South China Morning Post
Hong Kong stocks dropped on Monday, extending last week's losses due to a lack of supportive government measures and potential geopolitical risks. The Hang Seng Index fell 0.2%, while the Hang Seng Tech Index dropped 2.6%. The Shanghai Composite Index also slid 1.8%. Chinese property developer Longfor Group sank 4.5% and Alibaba Group dropped 0.2%. The China Securities Regulatory Commission vowed to crack down on market manipulation and fraudulent listings, but did not indicate how it planned to boost investor confidence.
China's small exporters threatened amid price wars and low demand
Japan Times
Kris Lin, the owner of a lighting factory in China, faced a difficult decision when he received his first order of the year from an overseas client. He had to choose between taking the order at a loss or telling his workers not to come back after the Lunar New Year holiday. Lin ultimately decided to take the order to avoid losing the client and potentially endangering the livelihoods of his workers. He plans to restart his factory at around half its capacity after the holiday break.
Singapore Citizen Accused of Foreign Interference Linked to China ‘Copper King’
Bloomberg
Philip Chan Man Ping, the first Singapore citizen to be tagged as a "politically significant person" under a 2021 law on foreign interference, oversees the multimillion-dollar property portfolio of Chinese metal billionaire Wang Wenyin. The Singapore home affairs ministry invoked the foreign interference law against Chan, who manages the real estate investment arm of a copper conglomerate owned by Wang. The ministry said Chan has "shown susceptibility to be influenced by foreign actors, and willingness to advance their interests," and his activities were "directed towards a political end in Singapore." The ministry did not specify any country or mention Wang in its statement. Chan is the managing director of Wen Way Investments, the Singapore-based property unit of Amer International Group, a Shenzhen-based mining, processing and trading firm. Wang is ranked as China's 35th richest man on the Bloomberg Billionaires Index with a $6.6bn fortune dominated by Amer.
China’s services activity expands at slower pace amid soft start to 2024
South China Morning Post
China's services sector expanded at a slightly slower pace in January, according to a private-sector survey. The Caixin/Markit services purchasing managers' index (PMI) fell to 52.7 in January, down from 52.9 in December. While the figure remains above the 50-mark that separates expansion from contraction, it suggests a soft start to the year for the world's second-largest economy. The survey also showed that new orders expanded at a slower pace and the prices charged subindex fell for the first time since April 2022. The government is expected to maintain fiscal expansion to spur economic recovery.
Chinese Investment Into BRI Nations Hits Highest Since 2018
Bloomberg
China's investment in Belt and Road countries reached its highest level since 2018, with companies investing almost $50bn into overseas projects last year, according to a report by Griffith University in Australia and Fudan University in Shanghai. The report found total investment was almost 80% higher than in 2021 and took engagement with the 150 countries that have signed up to the initiative to over $1tn since 2013. Investment in high-tech projects, including EV manufacturing, also rose, with the battery sector seeing $8bn of engagement.
Chinese companies close R&D spending gap with U.S., led by Huawei
Nikkei Asia
Chinese companies are increasing their spending on research and development (R&D), with tech giant Huawei leading the way. According to a report by the European Commission, Chinese companies accounted for 17.8% of global R&D spending in 2022, surpassing Europe's ratio of 17.5% and trailing only the US at 42.1%. Huawei invested €20.9bn ($23bn) in R&D in 2022, up 11% from the previous year. The company is allocating 10% to 20% of its sales to R&D, focusing on areas such as communications, artificial intelligence and semiconductors. Other major Chinese companies investing in R&D include Tencent and Alibaba.
China Set to Skirt Lunar New Year Cash Crunch on PBOC Injection
Bloomberg
Chinese banks are unlikely to face a cash squeeze over the Lunar New Year holiday due to funding injections from the central bank, according to analysts at Australia & New Zealand Banking Group. The bank has estimated that the liquidity shortage will narrow 25% to CNY 1.5tn ($139bn) due to Beijing pumping CNY 1tn into the financial system to help bolster the economy, and because Chinese people are expected to spend less amid a weak recovery.
Chinese ship's port call flares India tension
BBC
The arrival of a Chinese research ship in the Maldives has increased tensions between China, India and Male. The ship, Xiang Yang Hong 3, is officially there for replenishment and rotation of personnel, but some fear it is collecting data for the Chinese military to use in submarine operations. China has previously sent ships near Indian waters, including two naval submarines to Sri Lanka in 2014. This has led India to strongly object to such visits. In the Maldives, President Mohamed Muizzu, who is regarded as pro-China, wants to reduce Indian influence in the country. This follows his December announcement that a hydrographic survey agreement with India would not be renewed. Relations have become so strained that no senior members of the Maldivian government attended an event organised by the Indian High Commission to mark India's Republic Day. India fears that China will gain access to the strategically important Maldives and has serious reservations about these developments. The opposition Maldivian Democratic Party has called for a course correction, warning that the country should not antagonise India.
China can now monitor state-funded projects 24/7
BBC
Chinese property developers that have received at least CNY30m ($4.2m) of government funding must install monitoring equipment at their projects. The move is part of China's efforts to support its crisis-hit property industry and ensure funds for struggling developers are used correctly. Security devices such as surveillance cameras, drones or satellite equipment must be used to monitor projects if conditions allow, according to the National Development and Reform Commission. The property sector accounts for 25% of China's economy.
China's tumbling prices push some exporters to the brink
Yahoo US
The deflation threat to China's manufacturing industry is putting the survival of smaller Chinese exporters at risk. China's producer prices have been falling for 15 months, making it increasingly difficult for smaller companies to compete with bigger rivals. Companies are cutting product prices, which in turn affects staff salaries, leading to consumers buying less and thus completing a vicious cycle. Deflation in manufacturing is a higher policy priority than reaching the expected growth target of around 5% for this year, says Raymond Yeung, Chief China Economist at ANZ.
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