China's economy slows further in May as weak demand drags; PBOC Ramps Up Rate Cuts; Exclusive: The Diplomatic Ascendancy of Wang Yi
Analysts say ‘not enough’ to Beijing on stimulus as economy, stocks struggle; How ‘Friend-Shoring’ Could Make America More Like China
Welcome to this issue of The China Brief. Today is June 15, 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 Diplomatic Ascendancy of Wang Yi
Wang Yi was born in Beijing in 1953. His primary education was interrupted due to the Cultural Revolution. Heeding Chairman Mao Zedong's call for educated youths to "go to the countryside" in 1969, he joined the laboring masses in the Heihe region of Heilongjiang Province.
In 1977, when college entrance examinations were restored, Wang Yi was admitted to Beijing's Second Foreign Languages Institute, where he majored in Japanese. During his university years, Wang was the first student in his cohort to join the Chinese Communist Party (CCP).
In 1982, at the age of 29, Wang Yi graduated as the top student in his year, and joined the Japanese Affairs Department of the Asian Bureau in the Ministry of Foreign Affairs. In the following 19 years, Wang ascended from the most basic positions to become the Director of the Asian Bureau and Deputy Minister responsible for Asian affairs. During this period, he set multiple records within the ministry, including the youngest Deputy Director, the youngest Bureau Director, and the youngest Deputy Minister.
In 2004, Wang Yi was appointed as China's Ambassador to Japan. His appointment came at a critical time when the Sino-Japanese relationship rapidly deteriorated following the appointment of Prime Minister Junichiro Koizumi. Wang, who had a good command of Japanese and strong connections in Japan, facilitated Prime Minister Shinzo Abe's visit to China in 2006, followed by a return visit to Japan by then Chinese Premier Wen Jiabao. These diplomatic interactions largely stabilized Sino-Japanese relations.
Following Xi Jinping's appointment as General Secretary in 2013, Wang Yi took over as Foreign Minister. We often saw Wang accompanying Xi Jinping and his wife Peng Liyuan on foreign visits, and participating in high-profile foreign affairs activities within China.
However, the gentle and well-mannered image Wang Yi had established - often seen playing golf with Japanese businessmen and questioning the establishment of close ties between Xi Jinping and Vladimir Putin - faded away, replaced by the globally recognized and fiercely combative "Wolf Warrior" persona. The rhetoric of the entire foreign affairs system shifted from caution to a more aggressive, threatening, and colloquial tone, reminiscent of the Cultural Revolution era, with phrases like "poking eyes", "mad dog", "running dog", and "one party will bear all consequences" frequently making headlines.
This transformation is attributed to Xi Jinping's governance and his personal mission to "Make China Strong", distinguishing it from Mao Zedong's era of "China Stands Up" and Deng Xiaoping's "China Gets Rich". This shift in direction is traceable back to Xi's early days in power, when he initiated a Chinese-characteristic diplomacy aimed at the rejuvenation of the Chinese nation, encouraging CCP diplomats to "dare to draw the sword" at crucial moments.
With the shift in diplomatic strategy, it is not difficult to understand why Wang Yi, as Foreign Minister, would incorporate a significant amount of bravado into his work, demonstrating China's apparent rise in power and pledging allegiance to Xi Jinping through his "Wolf Warrior" posturing.
In reality, Wang Yi's transformation reaped rewards. At the 20th National Congress of the CCP, at the ripe age of 68, a time when many retire, he was promoted to the Politburo Standing Committee and appointed Director of the Central Foreign Affairs Commission, effectively becoming the highest-ranking official in the foreign affairs system.
However, due to the high degree of specialization and homogeneous backgrounds of the foreign affairs staff - most coming from diplomatic colleges or major foreign language universities - and the intricate relationship networks within the leadership through marriages and discipleships, the foreign affairs system is highly insular. Wang Yi himself is tied to the system; his father-in-law worked in the Asian Bureau of the Foreign Ministry and also served as the foreign affairs secretary for Zhou Enlai, the first Premier of the People's Republic of China. Entrusting Wang Yi, who is not his own confidant, with the power to lead foreign affairs is obviously not reassuring for Xi Jinping. As a result, other figures like Qin Gang and Qi Yu have been brought in to share Wang Yi's power and integrate Xi's loyalists into the diplomatic system.
Chinese premier meets with Palestinian president in effort to increase Middle East presence
The Independent
Chinese Premier Li Qiang met with Palestinian President Mahmoud Abbas in a bid to strengthen relations between China and Palestine. The meeting came a day after Abbas met with Chinese President Xi Jinping and the two sides announced the formation of a "strategic partnership." China is seeking to increase its influence in the Middle East at a time when the United States is seen as withdrawing from the region. China is also seeking energy resources, markets for its exports, and closer ties with Israel for access to high technology. The visit follows China's hosting of talks between Iran and Saudi Arabia, which resulted in the restoration of diplomatic relations between the two countries. China has been hosting a growing list of world leaders since reopening its borders in the spring, including French President Emmanuel Macron and European Commission President Ursula von der Leyen. U.S. Secretary of State Antony Blinken is expected to visit Beijing next week.
Analysts say ‘not enough’ to Beijing on stimulus as economy, stocks struggle
South China Morning Post
The People's Bank of China (PBOC) has lowered the rate on its one-year medium-term lending facility (MLF) to financial institutions to 2.65% from 2.75%, injecting CNY 237bn ($33bn) of additional liquidity into the economy. The rate cut is seen as an attempt by policymakers to "fight against deteriorating confidence" amid deflation risks, property market issues and an elevated unemployment rate. While the move is helpful, some analysts believe that more easing measures will be required in the coming weeks to support the economy.
How ‘Friend-Shoring’ Could Make America More Like China
Bloomberg
The US is promoting a policy known as "friend-shoring" to encourage companies to shift manufacturing away from authoritarian regimes and towards allies. However, Morocco is betting that globalization will continue to flourish, as it has become a hub for car manufacturing with companies from China to Russia operating there. Stephanie Flanders speaks with Michael Froman, the former US Trade Representative, about how US trade policy has evolved since China joined the World Trade Organization, noting that instead of China becoming more like the US, the US is becoming more like China with increased government intervention in the economy and constraints on global trade.
Look closely, China’s masterplan for economic domination is faltering
Telegraph
China's President, Xi Jinping, is pushing for China to become the sole superpower in an authoritarian, post-democratic world order. His tactics include forming alliances with enemies of the West, exploiting Western political and economic division, and supporting Russia's invasion of Ukraine. However, Xi still has a long way to go in achieving his goal. China's economy has struggled under Xi's Marxist ideological control, and the country is facing challenges such as human rights abuses, cyber espionage, IP theft, and threats to Taiwan. Major Western companies are leaving China for more reliable regional bases in Southeast Asia, India, and Bangladesh. The Chinese economy is still suffering, with depressed exports, a disarrayed property market, and a traumatized tech sector. Xi's model for economic resurgence, the Dual Cycle economy, aims to stimulate domestic innovation and production while reducing dependency on technical cooperation with the West. However, this protectionist approach undermines claims that China is open for business. Xi is also hoarding gold, securing energy supplies, and building up China's military capabilities. The article suggests that the West needs to exert economic pressure on China and enhance sanctions to counter its global threat.
China's Premier Li to visit Germany, France June 18-23
Reuters
Chinese Premier Li Qiang will visit Germany and France from June 18 to 23. During his visit, Li will hold the seventh round of China-Germany inter-governmental consultation and attend the Summit for a New Global Financing Pact in France.
Top US Chip Gearmaker Accuses China Rival of 14-Month Spy Spree
Bloomberg
US chipmaking equipment supplier Applied Materials has accused Chinese-owned rival Mattson of stealing trade secrets, including employee poaching and the secret transfer of semiconductor equipment designs. Applied Materials claims Mattson hired 17 of its most senior engineers over a 14-month period. The engineers allegedly had access to sensitive information such as chipmaking processes and the company’s technology roadmap, and their departure would give a competitive advantage to Mattson. Applied Materials filed the lawsuit in March 2022. Mattson has denied the allegations and claimed the lawsuit had "no merit". In a declaration to the court, a former employee admitted to sending documents from his Applied email address to a personal account, but said it was to keep "souvenirs" of his work. The lawsuit against Mattson comes amid growing concerns about China’s willingness to acquire the capabilities to build its own chip industry and circumvent US sanctions.
TikTok to invest billions of dollars in Southeast Asia amid growing scrutiny over data security
CNN
TikTok has announced plans to invest billions of dollars in Southeast Asia over the next few years as it looks to grow its presence in the region. The short video app, owned by China's ByteDance, sees Southeast Asia as one of its biggest markets in terms of user numbers. However, it has struggled to translate this large user base into significant e-commerce revenue in the face of competition from rivals such as Shopee and Lazada. TikTok plans to invest in training, advertising, and supporting small vendors on its e-commerce platform, TikTok Shop. The app facilitated $4.4 billion of transactions in Southeast Asia last year, according to consultancy Momentum Works.
Why the Little Mermaid tanked in China
The Sydney Morning Herald
The live-action remake of Disney's The Little Mermaid has faced criticism and racism in China. The film, which stars Halle Bailey, a black R&B singer, has not performed well at the box office in China. Some Chinese viewers argue that the negative response to the film is a rejection of Western progressive politics and ideals of diversity and inclusiveness. Others claim that the response is rooted in anti-black racism and Han supremacism. The film's release has prompted discussions about racism and discrimination in Chinese society and the dominance of certain beauty standards.
Seoul holds firm as Beijing slams South Korea for moving closer to U.S.
Japan Times
South Korea is balancing economic ties with China while deepening its deterrence capabilities with the US and Japan. The push by South Korean President Yoon Suk-yeol to build closer security and economic ties with the US and Japan has both surprised and concerned Beijing. Observers say Beijing is wary of what it calls a US-led policy of “containment, encirclement and suppression,” that includes bringing Seoul on board. Ties between Seoul and Beijing had been simmering for months, but the relationship hit a boiling point after fiery remarks by Chinese Ambassador to South Korea Xing Haiming. Chinese state-run media has lashed out at the Yoon government over the shift, saying it “is gradually falling into a strategic trap orchestrated by the US to contain China.” The tensions between the neighbors have hit the highest levels since 2017 when China slapped South Korean businesses with unofficial sanctions after Seoul deployed the US-made THAAD anti-ballistic missile system.
China, Mongolia to fight sandstorms amid calls to curb economic, ecological harm
South China Morning Post
China and Mongolia are working together to prevent sandstorms that have affected northern China in recent months. A Chinese delegation will visit Mongolia later this month to work on solutions. A joint working group will be established to facilitate the establishment of the China-Mongolia Cooperation Centre for Combating Desertification in Mongolia. The centre will be jointly run by the two countries and will focus on combating desertification, sand and dust storms, and soil erosion. The initiative comes after Chinese President Xi Jinping called for urgent action to combat sandstorms and their ecological damage.
US nears deal to make jet engines in India as allies close ranks against China
South China Morning Post
The US and India are expected to agree to jointly manufacture fighter jet engines in India during Prime Minister Narendra Modi's visit to Washington next week. The deal, which is close to completion, would involve General Electric producing the engines with Hindustan Aeronautics for the Tejas light-combat aircraft. The move signifies closer military cooperation between the US and India as they seek to counter China's growing assertiveness. The agreement would require technology transfer from the US and would need approval from Congress.
The future lies in helping to make China a responsible superpower
Japan Times
The G7 leaders’ communique stated that they stand prepared to build constructive and stable relations with China. And, while saying they don’t seek to thwart China’s economic progress and development, the leaders urged Beijing to play by international rules, addressed the challenges posed by its nonmarket policies and human rights situation, and called for the peaceful resolution of China-Taiwan issues. The term first appeared in 2012 in then-Chinese leader Hu Jintao’s report to the 18th National Congress of the Chinese Communist Party, but there was no explanation as to its meaning. Supposedly the term serves to say that mankind has only one Earth to live on and should share a sense of community and common future, and that mankind needs to cooperate for peace, development and prosperity. The initiative was proposed as a plan to develop and strengthen China’s economic ties with countries along the old Silk Road, the ancient land and sea trade routes that connected China and Europe. However, the criteria or the geographical scope of the projects subject to the initiative were not or have not been made clear. It is now explained that “community with a shared future for mankind” proposed in 2012 should be brought into shape by the Belt and Road initiative announced by Xi in 2013 as well as the Global Development Initiative (GDI), the Global Security Initiative (GSI) and the Global Civilization Initiative (GCI), which were all proposed by Xi after 2021.
Thailand weighs accepting Chinese engine in submarine deal
Nikkei Asia
Thailand is considering using a Chinese engine for a submarine it plans to purchase from China, after Germany refused to supply an engine. Thailand agreed in 2017 to buy a submarine from China, but the deal was halted after Germany objected to the use of its products for Chinese military exports. China's state-owned submarine producer has offered a Chinese-made engine for the submarine, but Thailand initially resisted due to concerns about quality. The Thai navy is now seeking information from Pakistan about the quality of its Chinese-made submarine fleet.
Chinese EV maker Xpeng expands self-driving capability to Beijing
South China Morning Post
Chinese electric vehicle (EV) maker Xpeng has launched its X NGP (Navigation Guided Pilot) software in Beijing, enabling some of its models to drive autonomously in the city. The software update allows Xpeng's P7, G9 and P5 models to achieve level-4 autonomous driving on highways and includes features such as lane changes, overtaking and turning. Xpeng plans to expand the coverage of its autonomous driving software to "dozens of cities" across China this year. The company is competing with other Chinese EV makers, including Nio and Li Auto, in the race to develop autonomous driving technology.
China pushes platform firms to protect consumer, vendor rights
Reuters
China's market regulator has launched a campaign to ensure that platform companies improve their protocols in order to protect the rights of consumers and vendors. The State Administration for Market Regulation will supervise and guide platform firms to conduct self-examination and improve their protocols to address any deficiencies. The campaign will run for five months.
China's May factory output, retail sales growth miss expectations
Reuters
China's industrial output grew by 3.5% in May compared to the previous year, falling slightly short of expectations. This slow growth, the lowest since February, is attributed to faltering demand both domestically and internationally. Retail sales also slowed, with a 12.7% increase in May compared to a year earlier, down from an 18.4% gain in April. Fixed asset investment expanded by 4.0% in the first five months of the year, lower than the expected 4.4% rise. Analysts have warned that the data may be distorted by comparisons with last year's weak performance due to COVID lockdowns. The central bank has responded to the weakening economic recovery by cutting some key interest rates.
US bill would ‘turn off tap’ for TikTok data to China, lawmakers say
South China Morning Post
A bipartisan group of six senators and two members of the House of Representatives in the US have introduced legislation aimed at protecting Americans' data from being used by US adversaries. The bill seeks to address concerns about the data of Americans using foreign-owned social media apps like TikTok. The proposed legislation would direct the Commerce Department to identify categories of personal data that could harm US national security and create a list of high-risk countries where sensitive data exports would be blocked. It would also regulate exports of personal data by data brokers and firms like TikTok directly to restricted foreign governments.
China's economy slows further in May as weak demand drags
Reuters
China's economy showed signs of stumbling in May, with industrial output and retail sales growth falling short of expectations. Industrial output grew by 3.5% in May, slower than the previous month's 5.6% expansion, while retail sales rose by 12.7%, missing forecasts of 13.6% growth. Analysts warn that these figures may be distorted by comparisons with last year's weak performance due to COVID lockdowns. However, other data, such as factory surveys and trade, indicate weakness in the Chinese economy. Policymakers are expected to ramp up stimulus measures to address deflationary risks, rising local government debt, and weakening global demand. The central bank has already cut interest rates and further stimulus measures are anticipated. Investment in the property sector has declined and is expected to continue weakening for years, dragging down economic growth. The labor market remains weak, with youth unemployment at a record high. Despite the need for stimulus, policymakers are cautious about implementing more aggressive measures due to concerns about capital outflows.
China Home-Price Growth Weakens as Housing Recovery Falters
Bloomberg
China's home prices grew at the slowest pace in four months in May, indicating further weakness in the residential property market. New-home prices in 70 cities increased by 0.1% last month from April, compared to a growth of 0.32% in April. Prices in the secondary market declined by 0.23%, ending three months of gains. The weak data adds to evidence of renewed weakness in the property market, prompting the Chinese government to consider a broad package of stimulus measures to boost the world's second-largest economy.
China trims key lending rate to spur economic recovery
Nikkei Asia
China's central bank, the People's Bank of China (PBOC), has cut a key lending rate in an effort to lower borrowing costs. The rate on one-year, medium-term lending facility loans to banks has been reduced by 10 basis points to 2.65% from 2.75%. This move comes as property sales and industrial production weaken and youth unemployment remains a concern. The PBOC's decision to lower the lending rate was widely anticipated by economists after it had already lowered its seven-day reverse repo rate. Despite better-than-expected growth in the first quarter, China's economy has been facing challenges, including sluggish factory activity and a downturn in the property sector. Additionally, the country is grappling with high youth unemployment.
China’s Central Bank Ramps Up Rate Cuts as Economy Weakens
Bloomberg
China's central bank, the People's Bank of China (PBOC), has increased its monetary stimulus in an effort to boost the country's economy. The PBOC lowered the rate on its one-year loans by 10 basis points to 2.65%, following a reduction in a key short-term rate by the same magnitude earlier in the week. This move comes as official data showed a weakening of economic activity in May, with growth in industrial output slowing to 3.5% and retail sales growing below expectations. The PBOC provided 237 billion yuan ($33 billion) of medium-term loans, more than the 200 billion yuan maturing in June. The central bank's stimulus measures follow a series of meetings between senior officials and business leaders and economists to discuss ways to revitalize the economy.
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