China's new home prices fall for first time this year; Intel to walk away from $5.4 bln acquisition of Tower Semiconductor
Investors pulling out of Chinese stocks at faster pace; South Korea calls out China on North Korea escapees; China warns floods could aggravate crop diseases, infestation in northeast
Welcome to this issue of The China Brief. Today is August 16, 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 new home prices fall for first time this year
Reuters
China's new home prices fell by 0.2% in July, the first decline this year, as the government's piecemeal policy support failed to bolster the struggling property sector. This adds pressure on authorities to introduce more aggressive stimulus measures. The decline in home prices comes amid a worsening debt crisis at major developers, sliding property investment and home sales. The data highlights the continued pressure faced by policymakers to increase support measures. The central bank recently cut key policy rates for the second time in three months to support the faltering economic recovery.
Intel to walk away from $5.4 bln acquisition of Tower Semiconductor-sources
Reuters
Intel Corp will abandon its $5.4bn deal to acquire Israeli contract chipmaker Tower Semiconductor after failing to secure approval from Chinese regulators. The two companies' contract is due to expire on Tuesday, and Intel does not plan to negotiate an extension. Instead, it will pay Tower a $353m break-up fee.
South Korea calls out China on North Korea escapees
Nikkei Asia
South Korea has called on China to recognise North Korean escapees as refugees and provide them with protection under international law, instead of sending them back to North Korea where they face potential torture and imprisonment. China currently considers North Koreans who cross the border as unauthorised migrants subject to repatriation. South Korea has a government-funded programme to help North Korean escapees adapt after arriving in the country and grants them citizenship. China is South Korea's largest trading partner, so Seoul is cautious about criticising Beijing, but is now using the language of international norms to make its case.
Investors pulling out of Chinese stocks at faster pace
Nikkei Asia
Investors are pulling funds out of Chinese stocks due to concerns about the country's economy. Around $3.7 billion has been withdrawn from Chinese stocks in the first 14 days of August, marking the second-largest exodus of capital from the country. Financial data for July showed tightening credit, falling retail sales, and weakening business confidence, leading to concerns about deflation. Hong Kong's Hang Seng Index has fallen 6% this year, while the Shanghai Stock Exchange Composite Index has underperformed other major global share indexes. Experts suggest that China may be in a structural slump rather than a cyclical downturn.
Foreign law firms scale back China operations as outlook dims
Nikkei Asia
International law firms are scaling back their operations in China due to an economic slowdown and regulatory uncertainty. Latham & Watkins has shut its Shanghai office, while Ropes & Gray plans to downsize its Shanghai office and has already reduced its team in Hong Kong. Dentons has also separated its China business from its global operations in response to new Chinese government mandates on law firms. The number of foreign law firms registered to do business in China has declined for five consecutive years, falling from 244 in 2017 to 205 at the end of 2022.
China warns floods could aggravate crop diseases, infestation in northeast
Reuters
China's agriculture ministry has called for more measures to protect crops from diseases and infestations following recent floods in the northeast region. The ministry warned that the flooding could worsen diseases that affect corn, rice and soybeans, and could lead to severe pest infestations in cotton, corn and soybean crops. The ministry held a meeting to discuss prevention and control of major autumn grain diseases and pests in the northeast region, known as China's "great northern granary". The recent heavy rain and flooding have affected almost 2% of the sown area in Heilongjiang, China's largest grain producing province.
European shares open lower as China-exposed miners weigh
Reuters
European shares opened lower on Wednesday, with China-exposed miners leading losses following lacklustre economic data from Beijing. The pan-European STOXX 600 was down 0.2%, while the UK's FTSE 100 dropped 0.3% after data showed British inflation slowed as expected in July. European miners lost 0.8% as traders assessed the prospects of a tepid economic rebound in China. However, shares of Alcon gained 1.5% after the Swiss eye-care company raised its outlook for full-year net sales and core diluted earnings per share, while Admiral Group jumped 4.6% after posting a marginal rise in its first-half pre-tax profit.
China Scuttles a $5.4 Billion Microchip Deal Led by U.S. Giant Intel
NY Times
Intel's $5.4 billion merger deal with Israeli chip manufacturer Tower Semiconductor has been terminated after Chinese antitrust regulators failed to rule on the transaction before the deadline set by the companies. This move by China could send a further chill through American companies with deep ties in China amid escalating tensions between the two countries. China has condemned US-led restrictions on the sale of advanced computer chips to China and the ban on certain new investments in sensitive Chinese technology, accusing the US of trying to throttle its tech development and slow its economic growth.
China's Tencent posts weak revenue growth
Reuters
Tencent Holdings, the Chinese social media and gaming company, reported an 11% increase in second-quarter revenue, which fell short of expectations. The company's recovery from last year's downturn was hindered by the slow economic recovery in China. Tencent's revenue for the quarter was 149.20 billion yuan ($20.45 billion), compared to the average analyst estimate of 151.73 billion yuan.
Alibaba’s DingTalk to split from Cloud business group - sources
Reuters
Alibaba's work communication and collaboration platform DingTalk will split from the company's cloud division, according to sources. The exact timing of the split is unknown, but it has been confirmed that DingTalk will operate as a wholly-owned subsidiary of Alibaba Holding Group with no impact on its services. The sources also stated that DingTalk will continue to work closely with the cloud division technology-wise. Alibaba's cloud division is working towards its own IPO, which is expected to take place by May 2022.
China snubs Canada on its approved travel spots, setting back tourism's post-COVID recovery
CBC
The Chinese government has excluded Canada from a list of countries approved as international travel destinations for tour groups. The decision threatens to leave Canada's travel industry at a competitive disadvantage as it continues its post-pandemic recovery. The exclusion comes as a response to Canada repeatedly hyping up the so-called "Chinese interference" and increasing anti-Asian acts and words. China's foreign ministry emphasised the importance of protecting the safety and legitimate rights of overseas Chinese citizens. Prior to the pandemic, outbound tourism from China was a valuable international commodity, with Chinese travellers spending $255bn in 2019. Before the pandemic, roughly 60% of mainland Chinese tourists' spending abroad went to group tours. The exclusion from the list could hinder Canada's tourism industry, as China was Canada's largest source of tourist arrivals from the Asia-Pacific region and Canada's second-largest long-haul market after the UK.
Hong Kong stocks drop to 10-week low as JPMorgan, Barclays see lower China GDP
South China Morning Post
Hong Kong stocks fell to a 10-week low after JPMorgan and Barclays cut their China growth forecasts due to the country's economic struggles and lack of effective stimulus. The Hang Seng Index dropped 1.2% to its lowest level since June 1, while the tech index slipped 1%. Chinese stocks listed in Hong Kong have fallen 9% this month, making it the worst performer among global equity gauges. JPMorgan lowered its 2023 economic growth forecast for China to 4.8%, down from 6.4%, and Barclays cut its GDP growth estimate for this year to 4.5% from 4.9%.
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