China Mulls New Property-Market Support Package to Boost Economy
China Ukraine envoy urges governments to ‘stop sending weapons to the battlefield,’ negotiate peace; China Mulls New Property-Market Support Package to Boost Economy
Welcome to this issue of The China Brief. Today is June 02, 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.
Exclusive: The rejuvenation of the Japanese economy necessitates a political consensus
Xin Jisi
When an economic growth paradigm requires a shift towards innovation-driven strategies, the existing economic and financial structures starkly contradict the key pillars of an innovation economy, as outlined in the preceding text.
An innovative economy demands a plethora of (small and medium-sized) businesses engaging in relentless innovation, accompanied by frequent bouts of creative destruction. However, the primary entities in Japan's economy are a limited number of large corporations, which are difficult to displace. Innovation requires financial firms that rely more on equity financing, capable of decisively halting further investment in the event of innovation projects faltering. Conversely, the Japanese government, in its bid to control credit flow, has long favored the development of banks (which can be controlled by the government) while overlooking the growth of the stock market (where capital flow is harder for the government to control). Consequently, a plethora of failing projects in large corporations are not met with an end to further investment, but rather with continuous loans. Innovation necessitates a labor market that combines fluidity with security. However, the Japanese labor market assures security through lifetime employment, disregarding fluidity.
Evidently, if Japan is to achieve economic rejuvenation, it requires a political consensus aimed at shattering the existing economic and financial systems that largely served the Sino-Japanese War and the Pacific War, thereby instigating a thorough bout of 'creative destruction' and erecting the pillars to support an innovation-driven economic growth. Such consensus typically demands a severe financial or economic crisis for its establishment, given that the vested interests of the existing economic and financial systems are immensely formidable. Without a crisis to shatter them, even within a democratic system, it is extremely challenging to establish a political consensus for comprehensive reform. Japan has not experienced a large-scale systematic financial risk, a fact that is undoubtedly fortunate. However, the unfortunate side of this scenario is that without a significant crisis, the political consensus for reform has been persistently elusive.
(This is the third part of "Why hasn't Japan's economic growth model transitioned to innovation-driven yet?". )
China Ukraine envoy urges governments to ‘stop sending weapons to the battlefield,’ negotiate peace
The Toronto Star
China's Ukraine envoy, Li Hui, has called for other nations to cease sending weapons to Ukraine, and instead, to hold peace talks. Li's two-week trip to Ukraine and other European nations has been viewed as an opportunity for China to expand its global diplomatic role, although analysts have given it little chance of success. China has previously released a proposed peace plan for Ukraine, but this is contingent on Russia withdrawing its troops first.
China Mulls New Property-Market Support Package to Boost Economy
Bloomberg
China's regulators are planning a series of measures, including reducing deposits in non-core neighbourhoods, to bolster the struggling property market, according to unnamed traders. Plans are also said to involve easing restrictions on residential purchases under official guidance and lowering agent fees for transactions. The new policies may also see the refinement and expansion of frameworks instituted in a 16-point package of financial support measures launched last year. The plans have not been finalised, however. Signs of further weakness have appeared in the residential markets, with property sales slowing in May to just 6%, from more than 29% in previous months.
Neither Ukraine nor Russia have shut door to talks - China envoy
Reuters
China's special envoy for Eurasian affairs, Li Hui, has said that neither Ukraine nor Russia have "firmly" shut the door to talks despite difficulties in starting negotiations. Speaking about his tour in Kyiv, Warsaw, Paris, Berlin, Brussels and Moscow, Li said Russia appreciated China's wish for a peaceful solution to the Ukraine crisis. The former ambassador - China's most senior official to visit Ukraine since Russia invaded in February 2022 - said China was willing to do anything to ease tensions, noting that the risk of escalation of the Russia-Ukraine war remained high.
US-Taiwan trade deal irks Beijing
Deutsche Welle
The United States recently signed a deal with Taiwan, aiming to strengthen commercial relations with the country. The deal comes at a time when Beijing has been increasingly asserting its claim to the island, which it regards as a breakaway part of its territory that must be united with the mainland by force if necessary. China’s Foreign Ministry has warned against “sending the wrong signals to the ‘Taiwan independence’ secessionist forces” and any agreements “with connotations of sovereignty or of an official nature with China's Taiwan region."
China has tamed the world’s most powerful explosive: military scientists
South China Morning Post
Chinese scientists have developed a means of increasing the safety of the most powerful non-nuclear explosive by a factor of five with new nanotechnology, according to research. CL-20 is the most effective non-nuclear explosive, but its sensitivity to shock has led to it being limited in use. The development of a more stable version of the explosive could in turn make Chinese weapons more effective, leading to fears of an arms race. The development would also have implications for China's nuclear weapons programme.
US$680 to see Messi in China? Fans cry ‘robbery’ at Argentina-Australia prices
South China Morning Post
Chinese football fans are being asked to pay up to $680 to see Lionel Messi play for Argentina against Australia at the Workers’ Stadium in Beijing on 15 June. The match is a repeat of last year’s World Cup in Qatar, which saw Argentina triumph and go on to win the tournament. The game has generated online discontent, with one Twitter user writing: “I’m reporting you for robbery,” whilst another wrote: “For 4,800, will Messi carry us on his back while he plays?”
Japan and South Korea ramp up chip collaboration amid U.S.-China tensions
Japan Times
Japanese and South Korean chipmakers are expected to partner more closely after Samsung appeared to confirm its intention to create a semiconductor research and development hub in Japan worth $215.9m. The move follows the introduction of US legislation aiming to restrict China's ambition in the sector that is threatening the businesses of Samsung, which has a major Chinese production base, and SK Hynix. Japan and South Korea are looking to such measures to dilute their dependence on China, but experts say that Samsung's investment probably follows market, rather than political factors.
Chinese Envoy Says ‘Fruitful’ Talks on Ukraine May be Difficult
Bloomberg
China’s special representative for Eurasian Affairs and its ambassador to Ukraine, Li Hui, has cautioned a gathering of all parties involved in Russia and Ukraine’s conflict may not happen, but urged someone to take the initiative to find a solution. Despite China's long-standing policy of non-interference in the affairs of foreign countries, Chinese President Xi Jinping announced a plan to send an envoy to Ukraine in pursuit of a wider blueprint to broker peace between Russia and Ukraine. Qin Gang, former Chinese ambassador to Ukraine and the current Vice Minister of Foreign Affairs, has also said China is seeking increased co-operation with Ukraine under the Belt and Road Initiative. Ukraine is seen as a key grain supplier for Beijing’s livestock industry and a potential outlet for Chinese goods in Europe.
Li's remarks echo those of US Secretary of State Antony Blinken, who expressed confidence that Ukraine would regain more territory and suggested the Biden administration was open to China playing a mediation role. During Li's visit to Ukraine, he met with the Ukrainian Foreign Minister, Dmytro Kuleba, who made clear that Kyiv would not accept an outcome leading to the loss of territory or a frozen conflict. China’s proposals included a call for a ceasefire, which Washington and its allies have rejected as it would allow Russia to consolidate territorial gains. The risk of escalation remains high as Russia intensifies military activities in Crimea and along the eastern border.
China is Russia’s largest trade partner and has sought to expand investments and partnerships through the Belt and Road Initiative. According to a memo from the low-profile Quadrilateral Cooperation and Coordination Mechanism (QCCM), a grouping composed of embassy-level military attaches from China, Russia, Iran, and Pakistan that holds regular meetings, among its aims is to ensure Afghanistan does not become a launching pad for Uyghur militancy inside China.
TSMC's fate will indeed be at stake if China attacks Taiwan
Nikkei Asia
The US should not use Taiwan's semiconductor industry as a bargaining chip in the event of a Chinese attack on Taiwan, according to Jared McKinney, assistant professor of international security at the US Air Force's Air War College. McKinney said that although the US shouldn't be complacent about the possibility of China gaining control of Taiwan's chipmaking capabilities, using it as leverage would harm national interests because it would serve to drive key industries away from the US, weakening the country's geopolitical position.
Asia's Shangri-La defense summit to talk Ukraine, China
Deutsche Welle
European figures are due to attend the Shangri-La Dialogue, with UK-based think tank the International Institute for Strategic Studies set to host the summit from 2 to 4 June. The dialogue, with a focus on European commitment to Asia, will include German Defence Minister Boris Pistorius, Estonian Prime Minister Kaja Kallas, the UK’s defence and foreign secretaries, the Dutch defence minister, Sweden’s defence minister, and the European Union’s High Representative for Foreign Affairs and Security Policy, Josep Borrell. US Secretary of Defense Lloyd Austin and his Chinese counterpart Li Shangfu will speak in key discussions over the weekend, with Li set to address China's latest military policies.
Farm animals, crops suffer from extreme weather affecting China
CNN
Food security is becoming more of a concern for China as a string of extreme weather events wreak havoc on crops and animal husbandry, with some experts warning there could be more to come. Last summer saw China struggle with the worst drought in a decade, and again this year, parts of China are experiencing soaring temperatures with June just starting. Crops have already been hit with heavy flooding in Henan, China’s biggest wheat-growing region, just days before the harvest, with some grain sprouting or going mouldy. Experts predict more extreme weather for the country, including drought and flooding, which alike occurred in the summer of 2020.
Chinese firm does U-turn on AI-driven fund after touting it as an industry first
South China Morning Post
China's Beijing Zhiyu Zhishan Investment Management backed down from its earlier announcement that it planned to use AI as a finance manager, instead saying the technology would help revamp its investment methodology. The U-turn feels like the technology is still in its early stages of development, said Huichen Asset Management's fund manager Dai Ming, although it will be used more widely for research and quantitative investments. China's stock markets could be a good place for testing AI's ability against humans as sentiment has turned fragile and traders are left with limited investment opportunities, he added.
Nvidia CEO Jensen Huang said to arrive in Shanghai on Tuesday
South China Morning Post
Nvidia CEO Jensen Huang may visit Shanghai next Tuesday, according to Chinese newspaper Shanghai Securities News. The rumoured trip would form part of Huang's first visit to China in four years, and reportedly encompass meetings with executives from companies including ByteDance, BYD and Xiaomi. Nvidia has not commented on reports of the trip. Speaking at the Computex event in Taipei, Huang said China's growing investment in cutting-edge chip technology should not be underestimated, citing ongoing tightening of US export restrictions.
Top American, Chinese defense officials vie for influence in Asia-Pacific
The Toronto Star
Defense officials from the US and China are preparing to attend a security forum in Singapore where they will aim to win the support of regional counterparts, as Beijing and Washington compete to strengthen ties and expand influence with Asia-Pacific nations. Meanwhile, the Ukrainian conflict is also on the agenda at the Shangri-La dialogue, as are growing tensions between China and its allies around Beijing's claim to Taiwan. US Defense Secretary Lloyd Austin and Chinese Defense Minister Li Shangfu will both deliver speeches over the weekend. Austin is also due to travel to New Delhi for talks with Indian counterpart Rajnath Singh.
Fuzhou real estate body retracts commission co-payment decision
South China Morning Post
The Fuzhou Real Estate Intermediary Industry Association in China's Fujian province has retracted its suggestion that home sellers share half of commission costs, which was introduced as part of a one-month pilot programme that required both sellers and buyers to pay 1.5% of transaction prices as commission from 1 June. Currently, homebuyers in Fuzhou bear the full burden of commission fees. The association cited its "inaccurate grasp" of a policy introduced by China's housing and market regulators in May to lower homebuying expenses as the reason for revoking the programme. It pledged to study how to lower transaction costs in future.
Half of China Cities Face Debt Service Difficulty, Rhodium Says
Bloomberg
Half of China's cities are struggling to manage the interest payments on their debt at a time when Beijing needs to employ fiscal policy to support the economy's recovery, according to a report by Rhodium Group researchers. The increase in debt service burden relative to income was exacerbated by widespread pandemic restrictions and a property slump last year which reduced tax and land sales revenues. Economists have been downgrading China's growth expectations since industrial output and investment slid. Rhodium recommends Beijing restructure local government debt to revive fiscal support.
Goldman cuts China stock targets again as recovery falters, funds go bearish
South China Morning Post
Goldman Sachs has cut its bullish forecast for Chinese stocks and its 12-month target for the MSCI China Index to 70 from 80. The reduction was due to a pullback in earnings and valuation forecasts for the country’s stocks traded at home and abroad. The US bank’s previous downgrade for the MSCI China Index last month was its first in nearly two years. The gauge has since fallen 22.4% from a high in January. Ongoing geopolitical tensions have led many investors to question the merits of investing in China equities, according to Goldman Sachs.
Jamie Dimon Plans to Visit Taiwan After High-Profile China Trip
Bloomberg
JPMorgan Chase CEO Jamie Dimon will visit Taiwan, an independent democratic island state that China claims sovereignty over, according to people familiar with the matter. The visit comes amid heightened global tensions over Taiwan and follows visits to Taiwan by Arm CEO Rene Haas and Nvidia CEO Jensen Huang in the past two weeks. It is also part of Dimon's trip across Asia that included an appearance at a JPMorgan summit in Shanghai and a meeting with a senior Chinese government official. JPMorgan's Taiwan operations include corporate and investment banking, commercial banking and asset management business.
Putin’s War Ignites Backlash Against US Dollar Across the World
Bloomberg
Brazil and China are among many countries turning to their own currencies to settle transactions, undermining the primacy of the US dollar, reports Bloomberg. India and Malaysia have signed agreements to increase the use of the rupee in cross-border trading, South Korea and Indonesia have agreed to exchange won and rupiah, France is completing transactions in yuan, while even US ally Brazil has called for an alternative currency to replace the dollar. Concerns are being raised that if the Americans continues to rely on the dollar to fight their political battles, they may damage its status in global markets and their own ability to exert influence. However, while a move away from the dollar is being reported around the world, market players see the currency's place in global trade and finance as solid for the moment, with little urgency among the US's allies to freeze the dollar out of international transactions.
Stay informed about the latest news, analysis, and policy briefs from across the globe related to China with the China brief. Our team aggregates, synthesizes, and summarizes the most important information from various sources, including media outlets, think tanks, government agencies, and industry experts.
Our mission is to provide you with easily accessible and critically valuable information tailored to your specific field of interest. We understand the significance of staying up-to-date on developments related to China and aim to make this information comprehensible for our readers.
Join the conversation and stay informed about the latest news and developments related to China by visiting our website at www.6dobrief.com