Chinese military No. 2 slams U.S. but signals defense channel reopening; China's property foreclosures up by a third so far in 2023
Evergrande told to submit debt plan by Dec. 4 or face liquidation
Welcome to this issue of The China Brief. Today is October 30, 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.
Chinese military No. 2 slams U.S. but signals defense channel reopening
Japan Times
Senior defense officials from China and Russia criticized the US for allegedly causing war tensions at a security forum in Beijing. The officials accused the US of attempting to create instability in the region and within China. The criticism came as China’s military’s No. 2, Gen. Zhang Youxia, expressed a willingness to restore high-level military channels with the US. The Beijing Xiangshan Forum is seen as China’s response to the West’s Shangri-La Dialogue regional security meeting in Singapore.
Exclusive: US military begins Japan seafood purchases to counter China ban
Reuters
The US has begun buying Japanese seafood to supply its military in Japan, following China's ban on imports of such products after Tokyo released treated water from the Fukushima nuclear plant into the sea. US ambassador to Japan Rahm Emanuel said the US should consider how it can help offset China's ban, which he described as part of "economic wars". The first purchase of scallops is a fraction of the 100,000 tons Japan exported to mainland China last year. Emanuel said purchases would increase over time to all types of seafood and the US could also look at its overall fish imports from Japan and China.
More China companies buyback shares as Beijing seeks to stabilise market
Reuters
Over 30 Chinese listed companies have announced share buyback and purchase plans as Beijing attempts to stabilize the stock market. This follows a series of measures announced last week, including share purchases by state fund Central Huijin, aimed at stemming the decline in the stock market. Major mutual fund house E Fund Management also announced plans to invest in its own product, E Fund CSI 300 ETF, and reduce fees on a number of exchange traded products. Central Huijin has been buying ETFs since last Monday and has purchased over CNY 17bn ($2.33bn) worth of ETFs, according to the Shanghai Securities News.
Yahoo US
California Governor Gavin Newsom has said the US and China need to work to ease tensions, adding that “divorce is not an option”. Newsom, the first US governor to meet Chinese President Xi Jinping in six years, said the countries need to “turn down the heat” and “manage our strategic differences”. California, which accounts for 14% of US GDP, relies heavily on trade with China, with the two countries trading $166bn in 2022. Analysts said that Newsom’s meeting with Xi was an indicator that US-China relations were improving.
HSBC sees profits boosted by higher interest rates
BBC
HSBC's quarterly profits have reached $7.7bn, more than double the amount from the same period last year. The growth was driven by higher interest rates, according to the bank. However, the figures were lower than the $8.1bn profit that analysts had predicted. HSBC also confirmed plans to buy back $3bn of shares, bringing the total buybacks for the year to $7bn. The bank also announced a dividend payout to shareholders of 30 cents per share. HSBC generates most of its income in Asia and has taken a $500m hit related to China's property market.
Bank of China Profit Rises 3.3% With Margins Narrowing
Bloomberg
Bank of China has reported a 3.3% increase in Q3 profits, despite a narrowing of net interest margins. The bank’s net interest margin fell to 1.64% from 1.77% a year earlier. Bank of China’s results follow mixed earnings from China’s largest state-owned banks last week, with ICBC’s three-month profit little changed from the previous year and Bank of Communications dropping 3%. China Construction Bank and Agricultural Bank of China managed to offset a margin slide with lower credit impairments.
China's property foreclosures up by a third so far in 2023
Yahoo US
The number of property foreclosures in China increased by 32.3% in the first nine months of the year, according to a survey by China Index Academy. The rise in foreclosures is attributed to the property market slump and shaky economic recovery in China. The survey also found that residential foreclosures increased by 37.9% during the same period. The cities with the highest number of foreclosures were concentrated in the southwestern province of Sichuan. The property sector in China is currently experiencing a liquidity crisis that is causing concern among market participants.
Xi's global agenda will restrain improvement in Australian ties
Nikkei Asia
Australian Prime Minister Anthony Albanese is set to visit China in an attempt to improve relations between the two countries, which have been strained in recent years. Albanese's government has restored trade ties and ministerial dialogues with China, but trust remains fragile. The visit comes after China has taken steps to improve relations, including releasing Australian journalist Cheng Lei, who was unjustly detained, and reviewing tariffs on Australian wine. However, Beijing still has its own agenda, including seeking public backing from Australia for its application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, approval for investments in the critical minerals industry, and a distancing from the US. Beijing argues that Australia should see China as a partner, not an adversary, but there is little prospect of this as China's conduct toward Australia and other nations in the Indo-Pacific region remains a concern. The global context for an improving relationship is one of US-China contestation, economic fragmentation, and concerns about conflict over Taiwan. The Albanese government will have to continue strengthening Australian resilience to further ruptures in the relationship and protect the nation's sovereignty and long-term security interests.
China and Russia take aim at U.S. at Beijing military forum
Nikkei Asia
Chinese and Russian military chiefs criticised the US at the Beijing Xiangshan Forum, a security forum in Beijing, while China's second most senior military commander, Zhang Youxia, vowed to boost defense ties with Washington. Zhang criticised "some countries" for trying to undermine the Chinese government, but also emphasised the need for improved military ties with the US. The US and China have not had any high-level military-to-military communications since March, when the US-sanctioned former Chinese defence minister, Li Shangfu, was appointed. He was sacked last week without explanation and China did not name a replacement.
Taiwan opposition to team up for parliamentary elections
Reuters
Taiwan's opposition parties, the Kuomintang (KMT) and the Taiwan People's Party (TPP), have announced plans to team up for parliamentary elections in January. The move aims to win more seats in parliament, but discussions are still ongoing about a joint ticket for the presidential vote. The issue of China looms over the elections, as the country views Taiwan as its territory. The KMT and TPP have vowed to pursue dialogue with China to restore peace and stability in the Taiwan Strait. The KMT currently controls more seats in parliament and city mayor positions than the TPP.
HSBC Says China Property Sector May Worsen, Sets Aside Funds
Bloomberg
HSBC has warned of the risk of a further deterioration in China’s property sector, setting aside more funds for possible losses on its exposure to the country’s commercial real estate sector. Of $1.1bn expected credit loss charges announced in its Q3 earnings on Monday, around $500m were related to the commercial real estate sector in mainland China. HSBC has charged a total of $800m against the China property portfolio this year.
HSBC’s Quinn Says China Commercial Property Hit Lowest Point
Bloomberg
HSBC's CEO, Noel Quinn, has said that the commercial property sector in China has reached its lowest point, however, he has warned that "it will take quite a while for that market to recover and regain momentum". Earlier this week, HSBC announced that it had charged a total of $800m against its China property portfolio so far this year.
Watch Gavin Newsom accidentally tackle a kid while playing basketball in China
Yahoo US
California Governor Gavin Newsom accidentally knocked over a student while playing basketball in China. Newsom, who was on a week-long trip focused on climate action, was playing basketball at the Beijing Yuying School when he collided with the student. Video footage of the incident shows Newsom breaking the student's fall and both of them laughing afterward. Newsom's representative said the student was not hurt.
US state senator acquitted of illegal firearms possession in Hong Kong
Yahoo US
A Hong Kong court has acquitted US State Senator Jeff Wilson of illegally possessing a firearm in the city, as long as he does not commit any crime for the next two years. Wilson was arrested at Hong Kong Airport on 21 October when he arrived with a pistol in his carry-on luggage. He was travelling with his wife on the first leg of a five-week vacation in Southeast Asia. Carrying a firearm without a license in Hong Kong is illegal and can carry a penalty of up to HKD100,000 ($12,800) and a maximum of 14 years in prison.
Evergrande told to submit debt plan by Dec. 4 or face liquidation
Nikkei Asia
A Hong Kong court has given China Evergrande Group until December 4 to present a revised restructuring plan or face liquidation. Evergrande defaulted on its offshore debt nearly two years ago and has been at the center of China's property sector crisis. The company has been working on a restructuring proposal for nearly two years, but the recent detention of founder Hui Ka Yan, who is under investigation for suspected criminal activities, has complicated the plans. Evergrande's shares fell as much as 23% following the court ruling. The company has been under financial stress due to debt accumulated over the years and slumping sales.
Warning Signs Grow Apple Is Losing Chinese Consumers to Huawei
Bloomberg
Apple's latest iPhone 15 series is reportedly falling short of its predecessor in China, with a 6% decline in sales compared to the previous year. Market researchers GfK and IDC both noted the decline, attributing it to Huawei's return to the mobile arena and strong sales of its Mate 60 series. Counterpoint Research and Jefferies analysts suggested that the slump for Apple in China could be as big as a double-digit percentage. Apple relies heavily on China for revenue and manufacturing, but rising tensions between the US and China, as well as economic challenges, have put the company in a precarious position.
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