China’s Vice Premier He Lifeng Heads Top Financial Policy Bodies; Albanese stops short of saying he completely trusts Xi ahead of meeting with Chinese leader
Yellen to host Chinese vice premier for talks in San Francisco ahead of start of APEC summit; Grief for Li Keqiang reflects wistfulness for China's road not taken
Welcome to this issue of The China Brief. Today is November 6, 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.
Yellen to host Chinese vice premier for talks in San Francisco ahead of start of APEC summit
Yahoo US
US Treasury Secretary Janet Yellen will host Chinese Vice Premier He Lifeng for talks this week, ahead of the Asia-Pacific Economic Cooperation summit in San Francisco. The two nations have an obligation to establish resilient lines of open communication, according to Yellen. While tensions between the two nations remain high, Yellen will raise the administration's concerns with regards to Beijing's unfair economic practices.
China’s Vice Premier He Lifeng Heads Top Financial Policy Bodies
Bloomberg
Chinese Vice Premier He Lifeng now heads up two of the Communist Party’s top financial sector policy making bodies, cementing his position as the nation’s top economic and financial official.
He was described as the office director of the Central Financial Commission, which is responsible for the top-level design and supervision of the country’s vast financial sector, according to a report by Financial News, a central bank-managed publication.
He was also named party secretary of the Central Financial Work Commission, overseeing the ideological and political role of the party in the financial system.
This is the first time the leadership of the two governing bodies was announced since they were set up in a reorganization in March, part of a move to give the Communist Party direct control and supervision over financial affairs. He made a speech at a meeting of the Central Financial Work Commission on Friday, which called for better party-building in the sector, according to the report.
Seen as the successor to former economic czar Liu He , He was also revealed last month to be heading the Communist Party’s top economic decision-making body. He’s a close confidante of President Xi Jinping, and has been tasked with overseeing all financial regulators — including a recently created super financial watchdog — as well as the housing ministry, Bloomberg reported previously.
Albanese stops short of saying he completely trusts Xi ahead of meeting with Chinese leader
ABC
Australian Prime Minister Anthony Albanese has arrived in Beijing for a meeting with Chinese President Xi Jinping. The meeting comes at a time of strained relations between the two countries, with China imposing bans and tariffs on Australian imports. Albanese emphasized the benefits of trade with China but stopped short of saying he completely trusted Xi. He also reiterated Australia's support for maintaining the status quo on Taiwan. Shadow Foreign Minister Simon Birmingham said the test for Albanese would be to hold the line on tough issues. The trip coincides with the 50th anniversary of Gough Whitlam's visit to China and is expected to be heavy with symbolism.
Grief for Li Keqiang reflects wistfulness for China's road not taken
Nikkei Asia
Chinese President Xi Jinping's decision to restrict public celebrations of the life and work of the late premier Li Keqiang reveals a lack of confidence in his own efforts to reshape China, according to Steve Tsang, director of the University of London's SOAS China Institute. Tsang argues that Li, who was widely seen as Hu Jintao's preferred successor as president and party leader until Xi outmaneuvered him, represents a path China could have taken had he been in charge, and that public affection for Li reflects disaffection with Xi and the direction he has set for the country.
Tweaks to Beijing Stock Exchange set off China IPO boom
Nikkei Asia
Chinese investors are showing enthusiasm for new stock offerings on the Beijing Stock Exchange (BSE), as IPO activity on the Shanghai and Shenzhen exchanges cools down. The BSE has seen recent debuts soar in value, with shares of Ahwit Precision gaining 1,008% on its debut and shares of Beijing Paratera Tech gaining 52% on its debut. The BSE was launched in November 2021 to support small businesses, but a lack of high-quality companies has limited liquidity and trading opportunities.
Ant Receives Chinese Government Nod to Roll Out AI Services
Bloomberg
Ant Group, the fintech affiliate of Alibaba, has received approval from the Chinese government to launch products powered by its large language model Bailing. The model will be applied to Ant's various services and help with innovation. Chinese tech firms, including Alibaba, Tencent, and Baidu, are racing to capitalise on the potential of generative AI. Ant can leverage the popularity of its mobile payment service, Alipay, to gain more data and insight on user habits.
Chinese scientists claim anti-ageing breakthrough with spinal cord discovery
South China Morning Post
Scientists in China have discovered a new cell that accelerates the ageing process. The cell surrounds motor neurons in the spinal cord and secretes a protein called chitinase-1 that contributes to the ageing of motor neurons. In tests on monkeys, the researchers found that increasing the amount of the protein caused damage to motor function and promoted other signs of ageing. The researchers also found that neutralising antibodies could block the process, suggesting a potential strategy for the development of new treatments.
Software companies line up for share of generative AI spoils
Financial Times
The global market for generative artificial intelligence (AI) is set to grow from $6 billion this year to $59 billion in 2028, according to forecasts from research firm Omdia. The technology, which can generate media such as text, images and music by learning from online data, is expected to be deployed across a range of industries including marketing, healthcare and automotive. Growth will be fastest in the consumer market, where AI can power search engines, writing assistants and artwork production. The media and entertainment sector is expected to follow, with healthcare, business and automotive markets also adopting generative AI. The generative AI market can be divided into three categories: creators of "foundation models" trained on large amounts of internet data, providers of the necessary infrastructure and providers of software that adapts the technology to specific industries or tasks.
More Semiconductors, Less Housing: China’s New Economic Plan
NY Times
China has gradually begun steering away from real estate and local debt as a means to generate economic growth, and is instead investing in manufacturing and increasing central government borrowing. Banks controlled by the state have reduced real estate lending for the first time since 2005, instead directing vast sums to manufacturers in industries like electric cars and semiconductors. The shift away from real estate loans highlights Beijing’s reluctance to bail out China’s debt-ridden property market, which accounts for around a quarter of the economy and is currently experiencing significant declines in prices, sales, and investment. The move towards manufacturing loans carries risks; China already has a surplus of factories and an increase in exports resulting from greater emphasis on manufacturing could antagonise trading partners. Furthermore, China’s extra lending poses a challenge for the west, which is attempting to foster extra investment in the same industries through legislation like the Biden administration’s Inflation Reduction Act.
China's Nio to ax 10% of staff as domestic EV scene heats up
Nikkei Asia
Chinese electric vehicle startup Nio plans to cut its workforce by 10% this month as it looks to streamline operations and manage costs in the competitive domestic EV market. The company will also postpone or reduce investments in projects that do not contribute to earnings within three years. Nio has been investing heavily in advanced technologies, including EV batteries, and posted a net loss of CNY14.5bn ($2bn) for 2022. The company plans to roll out nine new products from three brands in the coming days.
Chinese hotel recovery sees occupancy, rates return to pre-pandemic levels
South China Morning Post
The hotel industry in mainland China has seen a steady recovery over the past three quarters, thanks to a post-pandemic boom in leisure travel that fuelled demand for hotels and pushed up room rates. The occupancy rate across the country reached 68.4 per cent in the first nine months of 2023, only 2 per cent short of 2019 levels, according to analysts at JLL, a real estate services company. Occupancy even reached a record 83.1 per cent on October 2 during the eight-day “golden week" holiday, with most of the growth coming from lower-tier cities.
Prince William goes dragon boating in Singapore ahead of Earthshot Prize ceremony
Associated Press
Prince William participated in a dragon boat race in Singapore as part of activities for the annual Earthshot Prize awards, which promote solutions for environmental threats. The dragon boat race, a sport originating from China, saw William and 19 other paddlers rowing vigorously to the beat of a drummer. The Prince has previously tried his hand at dragon boating during a tour of Canada in 2011. The Earthshot Prize awards ceremony will take place on 15 March, with winners in five categories being named and receiving £1 million each to expand their projects.
The Battle for the Soul of the Dalai Lama
Foreign Affairs
China's interference in the selection of the next Dalai Lama is a violation of Tibetan religious freedom and a threat to the rich Tibetan culture, writes Tenzin Dorjee, chairman of the U.S. Commission on International Religious Freedom, in an op-ed for Foreign Policy. The Chinese Communist Party has taken an increasing interest in the Tibetan Buddhist tradition of reincarnation and seeks to control the process of selecting the next Dalai Lama. Beijing has convened a committee to oversee this process and has even set up museum exhibitions to promote its claim to legitimacy in supervising the selection. This move by China is seen as an attempt to consolidate its hold over Tibet and undermine the institution of the Dalai Lama.
China's interference in the reincarnation system has led to corruption and abuse. Under Chinese law, all reincarnated lamas must register with the government, leading to a bureaucratic process that has been manipulated for political interests. China's historical distortion also plays a role in its attempts to control Tibetan religious matters. The Chinese government falsely claims that all previous Dalai Lamas were born in China and asserts that the title of "the Dalai Lama" was granted by the Qing Emperor. These claims are not supported by historical evidence.
The next Dalai Lama should be chosen according to the traditions and instructions left by the current Dalai Lama, not by the Chinese government. The international community must take a stand to defend religious freedom and support the Tibetans' right to choose their own spiritual leader. Governments around the world, including the United States, Europe, India, Mongolia, Japan, and Buddhist countries, should make clear statements recognizing the Dalai Lama's sole authority in determining his reincarnation. Failure to defend religious freedom in this matter risks emboldening an expansionist regime and threatens stability in Asia and beyond.
China's first deficit in foreign investment signals West's 'de-risking' pressure
Yahoo US
China saw its first quarterly deficit in foreign direct investment (FDI) during Q3, according to balance of payments data. However, it is the first shortfall since the country began tracking the data nearly 20 years ago. The shortfall has been linked to "de-risking" efforts by Western countries pulling out of China amid rising geopolitical tensions. The figures highlight China's difficulties in attracting foreign firms. Meanwhile, onshore trading of the yuan against the dollar hit a record low volume during October, signalling Beijing's efforts to curb yuan selling.
Global funds dumped another $3 bln in China stocks in Oct -Morgan Stanley
Reuters
Global fund managers sold China equities sharply in October, with $3.1bn of net outflows from active long-only funds. The outflows were mostly due to regional funds rebalancing out of China, with European-domiciled funds leading the trend. Morgan Stanley analysts said that European funds have offloaded about half of their holdings accumulated since late 2020. There has also been an acceleration in outflows from US-domiciled funds. Investors remain cautious on China's economic recovery, particularly after manufacturing activity unexpectedly contracted in October.
Chinese firms are reluctant national team players
Reuters BreakingViews
Chinese companies, led by battery giant CATL, have spent $9bn buying back shares in an attempt to prop up the country's struggling stock market. However, this is only a modest increase from 2022, suggesting that corporate support is half-hearted. The benchmark Shanghai Composite Index has fallen more than 10% in the past six months, despite efforts by regulators to revitalise the market. Private-sector heavyweights, such as Gree Electric Appliances, are also showing less enthusiasm for share buybacks. This suggests that not everyone believes the stock market is bottoming out.
China faces new U.S. chip rules: 5 things to know
Nikkei Asia
Nvidia's business in China has come under scrutiny after the US imposed earlier-than-expected restrictions on the export of its most advanced products, forcing the chip developer to tweak its offerings for the Chinese market. However, the revised export rules, which come into effect on 16 November, threaten Nvidia's sales in one of its most lucrative markets. The rules require companies to apply for a license to ship cutting-edge AI chips to China and other designated markets. The tighter controls expand on export restrictions introduced in October 2020, which aimed to curb Beijing's chip ambitions. The updated rules also apply to more countries, including Iran and Russia. The restrictions are expected to result in higher costs and longer development times for AI chips, as well as making it harder for Chinese AI chip start-ups to work with leading global chipmakers. Chinese chip developers may need to find domestic production partners due to the pressure from the US.
China’s Control of Daily Yuan Level at Degree Last Seen in 2010
Bloomberg
China's tightly controlled reference rate for the yuan could lead to a buildup of currency pressure that may eventually be released, as the People's Bank of China (PBOC) keeps a tight range on the currency. Similar slumps in volatility in the past have often preceded a significant move in the yuan. Traders are watching for an escalation of monetary easing by Chinese authorities or a spike in the US dollar as potential catalysts for breaking the yuan out of its range.
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