China’s Ex-Foreign Minister Ousted After Alleged Affair, Senior Officials Told; U.S. likely to tighten tech curbs as China advances chip production
China's Huawei set to re-enter mid-range 5G phone market -report; Xi says China, US 'should and must' achieve peaceful co-existence
Welcome to this issue of The China Brief. Today is September 19, 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’s Ex-Foreign Minister Ousted After Alleged Affair, Senior Officials Told
WSJ
China's ex-Foreign Minister, Qin Gang, is said to have engaged in an extramarital affair throughout his tenure as Beijing's top envoy to Washington, a Communist Party investigation has found. Senior Chinese officials, including ministers and provincial leaders, were briefed on the findings of the investigation last month. The formal reason given for Qin's dismissal in July was "lifestyle issues," a euphemism for sexual misconduct. The investigation found that Qin had an extramarital affair that resulted in the birth of a child in the US, according to people familiar with the matter. The investigation is ongoing and is now focusing on whether the affair or other conduct by Qin compromised China's national security. The sudden dismissal of Qin is seen as a blow to President Xi Jinping's efforts to uphold the Chinese-style governance as a more stable and effective alternative to the Western model. It also raises questions about whether Xi is truly in control of the overall situation in China.
Xi says China, US 'should and must' achieve peaceful co-existence
Reuters
Chinese President Xi Jinping has called for peaceful coexistence between China and the US, stating that the two countries "should and must achieve mutual respect, peaceful coexistence, and win-win cooperation." Xi made the comments in response to a letter from two US Flying Tigers veterans, who fought for China during World War II. Xi emphasized the shared enemy of China and the US during the war and the "profound" friendship that was formed. His call for stable and peaceful ties comes amid ongoing efforts to reduce tensions and restore channels of communication between the two countries. Chinese Vice President Han Zheng also stressed the importance of stable and healthy China-US relations during a meeting with US Secretary of State Antony Blinken.
China Evergrande debt restructuring at risk from holdout creditors
South China Morning Post
China Evergrande Group is facing resistance from a group of secretive creditors, known as "Class C" creditors, as it seeks to restructure its debt. The Class C creditors, who hold $15bn of claims, are the second-largest group of creditors but did not provide sufficient backing for Evergrande's debt plan. Winning their support is crucial for Evergrande to avoid liquidation. The Class C creditors are challenging due to the wide variety of their borrowings and the prevalence of private debt, making it difficult to identify them and assess their attitudes.
G7 ministers call on China to press Russia to stop aggression in Ukraine
Reuters
The G7 has called on China to put pressure on Russia to stop its aggression in Ukraine. The request was made in a joint statement released by the G7 foreign ministers on the sidelines of the United Nations General Assembly. The statement also welcomed China's participation in a Ukraine-led meeting in Jeddah and urged China to support a peaceful resolution through direct dialogue with Ukraine. The G7 statement did not name any specific countries, but warned that any assistance to Russia's aggression would result in severe costs.
US firms in China say vague rules, tensions with Washington, hurting business, survey shows
Associated Press
Tensions between the US and China are hindering American companies operating in the country, according to a survey by the American Chamber of Commerce in Shanghai. The survey found that companies are decreasing their investment in China this year, with uncertainty over the US-China trade relationship and expectations of slower growth cited as the main reasons. Rising costs, geopolitical tensions, and an economic slowdown were also identified as major challenges. Southeast Asia was the top choice for companies shifting their investments out of China, followed by the US and Mexico.
Foreign Affairs
The Chinese government has been suppressing the use of languages other than Mandarin in an effort to promote a unified Chinese identity. This suppression includes promoting Mandarin as the sole national language and devaluing other languages, such as Cantonese and Tibetan. The government has taken a more uncompromising line in recent years, with policies aimed at flattening the complexity of Chinese identity and extending the hegemony of Mandarin. This includes crackdowns on the use of non-Mandarin languages, such as Cantonese, in both public and private spaces.
The suppression of non-Mandarin languages is evident in various aspects of Chinese society. For example, the government requires all romanization of Chinese characters to be based on Mandarin pronunciation, while other pronunciations are not recognized. Infrastructural and educational priorities also favor Mandarin, with less investment in supporting non-Mandarin languages. The government's efforts to suppress non-Mandarin languages have become more pronounced under Chinese leader Xi Jinping, with increased surveillance and control over private spaces.
Resistance to the government's suppression of non-Mandarin languages can be seen in both mainland China and Hong Kong. In Hong Kong, language has been a core vector of resistance, with Cantonese becoming a language of protest during the 2019 movement. However, the closure of organizations advocating for non-Mandarin languages, such as the Hong Kong Language Learning Association, has had a chilling effect on language rights activism. The suppression of non-Mandarin languages stifles people's ability to express themselves and promotes a homogenous Chinese identity.
Another country has called Xi a ‘dictator’ and China is not happy with that description
CNN
China has summoned the German ambassador in Beijing to protest after the country's foreign minister, Annalena Baerbock, referred to Chinese leader Xi Jinping as a "dictator". China's Foreign Ministry said it was "strongly dissatisfied" with the comments, which it described as "extremely absurd" and a "political provocation". China has previously objected to foreign leaders referring to Xi in similar terms. The incident highlights the delicate relationship between Germany and China, the latter being Germany's largest trading partner. Germany has sought to reduce its economic dependency on China and labelled it a "systemic rival".
South Korea to hold talks with Japan, China on Sept 26
Reuters
Senior officials from China, Japan, and South Korea will meet in Seoul on September 26 to discuss plans for a summit between their leaders. The last time the leaders of these countries met was in December 2019, despite an agreement to hold an annual summit since 2008. The upcoming meeting will be led by senior officials from each country's foreign ministry.
Southeast Asia nations hold first joint navy drills near disputed South China Sea
The Toronto Star
The Association of Southeast Asian Nations (ASEAN) has begun its first joint naval exercise, the ASEAN Solidarity Exercise. The non-combat drills aim to boost military ties among ASEAN nations and enhance interoperability. The exercises, taking place in Indonesia's Natuna waters, are being seen as a signal to China, which has become increasingly assertive in the region. China's "nine-dash line" claim to most of the South China Sea has led to tensions with rival claimants Vietnam, Malaysia, Brunei, and the Philippines. The drills will involve civilian groups involved in humanitarian relief and disaster prevention.
Investors temper pessimism on China, but bullish tilt remains distant prospect
The Globe and Mail
Foreign investors are slowing their exit from the Chinese market as negative sentiment starts to abate; after dumping $12.34bn in Chinese stocks in August, net selling slowed to $2.7bn in September. Six large asset managers, including BNP Paribas Asset Management, Janus Henderson and J.P. Morgan Asset Management, have said they will neither reduce nor add to their China weighting having seen the Chinese government's recent measures to support the economy. The CSI 300 Index is down 4.5% this year, but has steadied at around 3,700 as investors take a "wait-and-see" approach.
U.S. likely to tighten tech curbs as China advances chip production
Japan Times
Huawei has unveiled its new Mate 40 smartphone, which is powered by the company's new Kirin 9000 chip. The chip, which is manufactured by Huawei's subsidiary, HiSilicon, represents a significant advancement in China's chipmaking capability. The launch of the Mate 40 is part of Huawei's efforts to catch up with its rivals in the smartphone market. However, the company's ability to produce more advanced chips may be limited due to US sanctions, which have cut off its access to key technologies.
Beijing orders foreign missions in Hong Kong to submit staff data
Nikkei Asia
China's Ministry of Foreign Affairs has requested that consulates and foreign government offices in Hong Kong share information about locally employed staff, including permanent residents and those living in the city under visa arrangements. The request demands personal data such as names, residential addresses, identity and passport numbers, nationalities, job titles, and dates of employment and departure. The move is seen as another attempt by the Chinese government to scrutinize consulates and is raising concerns over the privacy and protection of employees. The request is said to be in line with the Vienna Convention on Consular Relations, which governs foreign consular services.
Ant Group’s Alipay+ expands support for Asian e-wallet and payment apps in China
South China Morning Post
Ant Group has expanded its "Alipay+-in-China" (A+China) programme to support 10 different Asian e-wallets and payment apps on the mainland. The move is aimed at bolstering its cross-border operations and making it easier for more foreign tourists to pay for goods and services in China. The additions include Macau’s mPay, Mongolia’s HiPay, Singapore’s Changi Pay and OCBC e-wallets, South Korea’s Naver Pay and Toss Pay, and Thailand’s TrueMoney app. The 10 Asian digital payment services supported by Ant on the mainland cover a total population of more than 175 million in Southeast and East Asia.
Shell opens its largest EV charging station globally in China
Reuters
Shell has opened its largest electric vehicle (EV) charging station in Shenzhen, China. The station, operated as a joint venture between Shell and Chinese EV giant BYD, features 258 charging points and solar panels with an annual generation capacity of 300,000 kilowatt-hours. Shell currently operates around 800 EV charging stations in China.
China's Huawei set to re-enter mid-range 5G phone market -report
Reuters
Huawei may release a mid-range 5G smartphone as early as October, according to China's IT Times. The move comes despite US sanctions that have limited Huawei's access to chipmaking tools necessary for producing advanced handsets. The company has been able to launch limited batches of 5G models using stockpiled chips. Huawei has not yet commented on the report. The company recently released the Mate 60 Pro smartphone, which features a domestically-made 7-nanometer processor and is 5G capable.
EU chamber in China lays out ideas to spur growth, hits at self-reliance push
South China Morning Post
The European Union Chamber of Commerce in China has published its annual position paper, in which it made over 1,000 recommendations to help improve China's economic prospects. The chamber called for Beijing to create a "transparent, consistent and predictable" regulatory environment and to clarify policy ambiguities. The chamber's president, Jens Eskelund, commented on the difficulties faced by foreign businesses due to the tightening of security controls and regulations. Foreign direct investment in China fell by 5.1% in the first eight months of 2023.
Taiwan Arms Supply Is Hobbled by Slow Contractors, US Official Says
Bloomberg
The main cause of delays in the delivery of promised weapons to Taiwan is the defense industry's shortcomings rather than government inefficiency, according to a State Department official. Deputy assistant secretary in the Bureau of Political Military Affairs, Mira Resnick, said that "the root cause of delays is insufficient industrial capacity and long production timelines," and called on the defense industry to "step up and play a key role in these efforts." The US has been criticized for a potential backlog of $19bn in military contract deliveries for Taiwan.
After two years in detention, a Chinese #MeToo journalist and a labor activist face trial this week
Associated Press
A Chinese journalist and a labor rights activist, both supporters of the #MeToo movement, are set to go on trial this week after two years in detention. Huang Xueqin, an independent journalist, helped spark China's first #MeToo case in 2018, while Wang Jianbing is known for his labor rights activism. Both have been charged with subversion of state power. China cracked down on the #MeToo movement as it sees social movements as a potential threat to its stability and the Communist Party's hold on power. The trial is scheduled to take place in the southern Chinese city of Guangzhou.
China expected to leave benchmark loan rates unchanged in Sept
Reuters
China is expected to keep its lending benchmark rates unchanged at its monthly fixing on Wednesday, according to a Reuters survey. All participants predicted that the one-year loan prime rate (LPR) would remain at 3.45%, while 90% of respondents expected the five-year LPR to stay at 4.20%. The decision comes as signs of economic stabilisation and a weakening yuan constrain further monetary easing efforts. The widening yield differentials between China's 10-year government bonds and their US counterparts have dragged the yuan down more than 5% this year.
Thailand launches probe into Chinese rolled steel imports
Reuters
Thailand has begun investigating imports of Chinese rolled steel for evading anti-dumping measures. The investigation includes hot-rolled steel sheets in coils and non-coils from 17 Chinese manufacturers. The decision to launch the probe follows a complaint from four Thai steel makers.
Chinese developer Sunac seeks Chapter 15 protection in NY court
Nikkei Asia
Chinese developer Sunac China Holdings has filed for Chapter 15 protection from creditors in a US bankruptcy court. The move comes after creditors of Sunac China Holdings approved its $9bn offshore debt restructuring plan on Monday. Sunac is one of several Chinese property developers that have defaulted on their offshore debt payment obligations this year, sparking a liquidity crisis in the sector and roiling global markets.
EU lobby group: Businesses need to know if China will focus on self-reliance or market opening
Reuters
The European Union (EU) is seeking clarity on China's intentions regarding market opening promises and regulations. Jens Eskelund, president of the European Chamber, stated that EU businesses need to know whether China will prioritize self-reliance and tighten regulations for security reasons or if it will follow through on its commitments to open up its market.
Starbucks bets on China with $220 million roasting and distribution center
CNN
Starbucks has invested over $200m into a new campus in China, demonstrating the importance of the Chinese consumer to the global coffee chain. The facility, located in Kunshan, will serve as Starbucks' main production and distribution center in China, supplying fresh coffee to thousands of stores. The campus includes a large coffee roasting facility and a visitor area where drinks are made. The investment is the largest Starbucks has made for a coffee manufacturing and distribution center outside of the US. China is Starbucks' second-largest market worldwide and its top overseas market. The company sees significant growth potential in China, as coffee consumption in the traditionally tea-drinking nation remains relatively low.
Fewer and cheaper marriages ruining the party for China's massive wedding industry
ABC
The wedding planning industry in China, worth an estimated $770bn annually, is facing a decline in the number of couples willing to get married. The drop in marriage registrations, which hit a record low in 2021, is expected to further exacerbate the decline in the country's birth rates. The trend is partly due to economic weakness and consumer confidence, as well as the perception among younger adults that raising children is too expensive. Local governments are concerned about the decline and are trying to encourage marriage and birth rates to increase.
China’s next chip battle is for the bottom line
Reuters BreakingViews
Chinese semiconductor provider SMIC is under scrutiny as it is unclear whether it can scale supply to meet demand for Huawei's new Mate 60 Pro smartphone series. The device's Kirin 9000s processors were made in China, without the use of extreme ultraviolet lithography tools from Dutch equipment maker ASML, which the US has restricted. However, it remains unclear how accurately SMIC can print designs onto wafers, while the manufacturer's gross margin halved in H1 2021. SMIC reported $111m in government grants in H1, and Beijing is launching a $40bn fund to generate more cash for the industry.
China and Russia’s Top Diplomats Vow to Deepen Coordination
Bloomberg
China's Foreign Minister, Wang Yi, has pledged to strengthen his country's "strategic coordination" with Russia, as the two nations continue to deepen their ties. Wang made the comments during a visit to Moscow for security and foreign policy talks with his Russian counterpart, Sergei Lavrov. The meeting took place at the same time as the annual United Nations General Assembly in New York, which China has sent Vice President Han Zheng to attend. Russian President Vladimir Putin is expected to visit China next month for the Belt and Road Initiative forum, where he will meet with Chinese President Xi Jinping.
Country Garden wins approval to extend another onshore bond
Reuters
Chinese developer Country Garden has gained approval from its creditors to extend the repayment on another onshore bond. The 492 million yuan ($67m) bond has been extended by three years after the company delayed voting on the issue three times. The bond was extended after the issuer, Guangdong Giant Leap Construction, provided a minimum of CNY200m ($27m) as a pledged guarantee. Country Garden has been seeking extensions for a total of eight bonds worth CNY10.8bn. Creditors approved the company's plans for seven of the bonds last week.
Everything We Know About China’s Missing Defense Minister
Bloomberg
Chinese Defense Minister Li Shangfu has disappeared from public view, sparking speculation about potential trouble within the country's leadership. Li's absence follows the ousting of other senior officials, leading to concerns about policymaking in China. This instability is a worry for investors who are already concerned about a property crisis, economic rebound, tensions with the US, and a government focus on national security. Li's disappearance could also clear a key roadblock to military talks between the US and China. Li has no known direct ties to President Xi Jinping.
Chinese yuan's depreciation pressure against dollar is temporary - state media
Reuters
Chinese state media has said that the depreciation pressure on the yuan against the US dollar is temporary and that its value against major trading partner currencies is stable. The comments follow similar statements made by authorities in recent months and come as the yuan continues to weaken against the US currency. However, against a basket of key currencies, the yuan has only lost 0.15% year-to-date. The depreciation has been caused by widening yield differentials with other major economies.
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