Enduring pain: 90% of China equity funds suffer as US$1 trillion of value erased; Time to open its doors wider, or will China fall into a middle-technology trap?
Asian funds’ confidence in regional property markets jumps amid rising bets; Wall Street’s China Stock Bulls Seek Redemption After a Humbling Year
Welcome to this issue of The China Brief. Today is December 17, 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.
Enduring pain: 90% of China equity funds suffer as US$1 trillion of value erased
South China Morning Post
Nearly 90% of money managers in China lost money in 2023, with only 11% of actively managed funds delivering positive returns, according to financial data provider 51iFind. The dismal performance reflects the malaise in China's economy, which has been marked by shrinking manufacturing, declines in consumer and producer prices, and a property-market crisis. The gloom has infected the stock market, with the CSI 300 Index tumbling 14% so far this year.
Time to open its doors wider, or will China fall into a middle-technology trap?
South China Morning Post
China's leading science academy has warned the country of a possible "middle-technology trap" that could hamper its economic growth and innovation. The Chinese Academy of Sciences released a report in December that stated that China's manufacturing sector was still at the lower end of the global value chain and that its technological strength was third tier globally. China's top leaders have now pledged to break technological containment and improve the resiliency and security of key manufacturing chains to prevent it from falling into the trap. Prominent political scientist Zheng Yongnian has called for China to open its doors to attract international talent and to encourage scientific and technological innovation.
Asian funds’ confidence in regional property markets jumps amid rising bets
South China Morning Post
Global investment in Asia-Pacific property markets has stagnated this year, while the proportion of capital from within the region has grown, according to the Urban Land Institute (ULI). Western investors invested $12.76bn in Q3 this year, while regional investors boosted theirs by almost 70% to $24.56bn in the same period. Lingering uncertainties such as geopolitics and high interest rates are likely to weigh on capital flows into regional property markets next year, the ULI said.
Wall Street’s China Stock Bulls Seek Redemption After a Humbling Year
Yahoo US
China's economic growth and property troubles in 2023 were anticipated by some China bulls, but what surprised analysts was the slow and cautious response from Chinese policymakers. Hopes are building that 2024 will be better. While Wall Street's bullishness on China last year may have been misplaced, it does reflect the difficulties in navigating a market where policymaking has become increasingly opaque and unpredictable. “I think a lot of people in the West have stopped looking at corporate earnings for Chinese stocks,” said Jian Shi Cortesi, a fund manager at GAM Investment Management. The market is “very much driven by news flow, and most investors do not have the time or effort to really look deep into it.”
China’s super-small inhalable vaccine shows promise against viral diseases
South China Morning Post
Chinese researchers have developed an inhalable powdered vaccine that could offer better respiratory viral infection protection than injectable vaccines, according to a paper published in the journal Nature. The aerosol-based vaccine produces microscopic spheres, measuring 2.8 microns across, that produce a long, sustained immune response, according to the researchers who tested it on mice, hamsters and monkeys. The team took advantage of the same pathway used by fine pollutants to deliver the vaccine. This could give the vaccine the ability to be deposited into the alveoli, the small air sacs within the lungs, to support sustained release of antigens and induce cellular and mucosal immune responses.
China's Mongolian culture wars backfire in France
Nikkei Asia
A planned Genghis Khan exhibition in France was cancelled after a Chinese partner museum demanded that references to the Mongol emperor and his empire be removed. The demand was part of an ongoing Chinese campaign to rewrite history in order to emphasise Han Chinese dominance and impose a simplified version of the country's history. The Chinese crackdown on Mongol language and culture was an attempt to erase the fact that China was once conquered by the Mongol empire. The French museum was able to proceed with the exhibition after the government of Mongolia offered to provide artefacts from its own museums, resulting in an even larger exhibition than originally planned.
The Genghis Khan exhibition aimed to challenge misconceptions in the West about the Mongol empire and present a more nuanced view of its significance. The Mongols were known not only for their military might, but also for their relatively tolerant and meritocratic system of government, and their promotion of trade, science, and the arts. In contrast, China under President Xi Jinping is attempting to suppress linguistic and cultural diversity and promote a monolithic and simplified version of Chinese history. The Chinese government has intensified its suppression of non-Han cultures in the past decade, reducing minority groups to the realm of folklore and erasing their architectural and cultural heritage. This obsession with controlling history is likely to continue to affect China's museum exchanges with other countries in the future.
Hong Kong district council elections: why weak middle class turnout is troubling
SCMP Opinion
The district council elections held in Hong Kong on 10 December were praised by the Hong Kong and Macau Affairs Office as a key building block in keeping anti-China and anti-Hong Kong forces from participating in district organisations. However, a closer look at the voter turnout reveals that the new dynamics behind the elections are unnerving. The redrawn constituencies are eight to ten times larger than before the reform, which means that candidates who have deep connections with large numbers of public housing residents have an advantage. Middle-class voters living in well-managed private housing estates have limited demand for services from district councillors compared to less well-off residents, and therefore care more about broader issues.
Standard Chartered taps global network to bring investment choices to China’s rich
South China Morning Post
Standard Chartered is planning to strengthen its role as an international service provider in mainland China. The bank aims to facilitate Chinese capital's access to markets in the Middle East and Africa, as Chinese investors seek to diversify their wealth abroad. Standard Chartered will leverage its global network to meet China's demand for international banking services and create a global investment platform for Chinese clients. The bank believes that increasing the quotas for investment schemes such as qualified domestic institutional investor (QDII) and qualified domestic limited partner (QDLP) will be necessary to serve high-net-worth individuals.
Hong Kong Puts No. 1 National Security Target Jimmy Lai on Trial
Bloomberg
Jimmy Lai, the former media mogul and democracy activist, is set to go on trial this week in Hong Kong. The case is seen as a test of the city's legal system and the boundaries of the national security law imposed by Beijing. Lai, who has been denied bail, is facing charges of conspiring to publish seditious information and security crimes. He could spend the rest of his life in prison if convicted. The trial is expected to draw attention from Western governments, with at least three consulates in Hong Kong planning to send observers. The UK has already withdrawn its top judges from the city's top court due to concerns about the national security law. Lai's case has attracted international attention, with politicians in the US, UK, and Canada calling for his release. The trial comes as Hong Kong continues its crackdown on free speech, which has seen three pro-democracy publications shut down and the electoral system revamped to exclude pro-democracy candidates.
China gives Zimbabwe military equipment worth US$28 million to modernise forces
South China Morning Post
China has donated military equipment worth $28m to Zimbabwe to support the country's security operations and modernize its armed forces. The donation includes armored vehicles, personnel carriers, ambulances, water purifiers, patrol boats, minibuses, sniper rifles, machine guns, and pistols. China has become a key ally of Zimbabwe since the US and other Western countries imposed sanctions on Harare over human rights violations and the seizure of land from white farmers during Robert Mugabe's presidency. China has also invested billions of dollars in Zimbabwe's infrastructure projects and mining industry. Zimbabwean President Emmerson Mnangagwa expressed his gratitude to China for its generosity and ongoing relationship between the two countries, emphasizing that the donation will help modernize the Zimbabwe Defence Forces. However, critics argue that Zimbabwe does not need military aid as it is not at war and should instead focus on medical and agricultural equipment. They also raised concerns about China's access to Zimbabwe's natural resources in exchange for the military aid.
Will Japan intervene in a Taiwan contingency? It depends.
Japan Times
Japan has been facing increased threats from Russia, China, and North Korea in recent years. As a result, Japan's defense posture needs to be more aggressive and less passive. While Japan has been gradually adopting a stronger defense posture for decades, it is now focusing on the possibility of intervening in a future conflict in the Taiwan Strait. This marks a shift in Japan's strategic priorities.
Indonesia's new train offers chance to improve views of China
Nikkei Asia
Indonesia's high-speed railway, built by a Chinese company as part of China's Belt and Road Initiative, has seen a strong start in its first two months of operation. The railway, known as Whoosh, connects the capital city of Jakarta to Bandung and has increased service frequency from eight to 40 trains per day. Occupancy rates have remained above 80%, and passengers have praised the train technology from China. The railway is starting to change attitudes towards China in Indonesia, where there has previously been unfavourable feeling.
China publishes rules for supervising, managing non-bank payment firms
Yahoo US
China's State Council has published new rules for the supervision and management of non-banking payment institutions. The rules, which will come into effect on 1 May, implement stricter licensing regulations and call for stronger risk management to prevent criminal activities and misappropriation of funds. The new rules also require institutions to protect user information, clearly mark prices for services and charge reasonable fees. The central bank will impose fines or restrictions on payment operations for violations of the rules, and may even revoke payment business licenses.
Automaker Nissan expands research ties in China as part of bid to regain market share
Yahoo US
Nissan has announced that it is expanding its research ties with China's Tsinghua University as it seeks to regain market share in the important Chinese market. The Japanese automaker plans to launch joint research with the university next year to develop electric vehicles and to study the social responsibility of automakers in relation to battery recycling, charging stations and other EV-related issues. Nissan plans to develop 10 new-energy vehicles for the Chinese market by 2026, including four under its own brand and six for Chinese joint venture partners.
China urges Iran and Saudi Arabia to work together to ‘avoid miscalculation’
South China Morning Post
China's Foreign Minister Wang Yi has called for deeper cooperation between Saudi Arabia and Iran to "avoid miscalculation" as diplomats from the two countries met in Beijing for the first time since a China-brokered deal to normalise relations between the two. Wang also renewed China's call for an immediate ceasefire in the Israel-Gaza war. The meeting was the first of the China-Saudi Arabia-Iran joint committee, a dialogue mechanism to support Riyadh and Tehran's normalisation process. The agreement was brokered by China and was seen by many as a sign of Beijing's ambition to influence the region beyond economics.
Philippines wants to start new energy exploration projects in South China Sea
South China Morning Post
Philippine President Ferdinand Marcos Jnr has stated that his country is working to resolve "exploration issues" in the South China Sea in order to start new energy exploration projects in the resource-rich area. Tensions in the South China Sea have "increased rather than diminished" in recent months, according to Marcos, who said a "more assertive China" posed a "real challenge" to its neighbours. The Philippines and China have resumed discussions about jointly exploring oil and gas resources in the sea, but little progress has been made. Efforts to cooperate on energy exploration have stalled repeatedly, with the previous administration abandoning talks in June 2018, citing constitutional constraints and sovereignty issues.
The secret sauce for Taiwan's chip superstardom
BBC
Taiwan's success in the semiconductor industry is due to a combination of factors, including its efficient manufacturing processes and ability to continuously improve on existing technology, according to an article in the BBC. The country's dominance in chip production has made it a target for China, which is investing billions of dollars to try and replicate Taiwan's success. China's aim is to ensure it is not cut off from the most advanced chips, which it needs for its own technology ambitions, or to take control of the island. However, Taiwan's success is not easily replicated, with the article explaining that its secret sauce is hard to pin down, but may be due to the combination of brand new facilities, up-to-date equipment, skilled workers, absorption of knowledge from US teachers and a focus on continuous improvement.
Taiwan's success has been driven by its mastery of volume, it is able to produce chips in vast quantities in an incredibly efficient manner. It has also been able to shrink the size of chips over time, cramming more and more circuits into smaller spaces. However, the precise reasons for Taiwan's success remain elusive. Some observers suggest that the country is good at taking someone else's idea and making it better, through trial and error and continuous tweaking.
The article also highlights the challenges Taiwan faces, including political pressure to move production away from the island and the risk of being cut off from vital supplies due to the US-China rivalry. The US fears that Taiwan's concentration of high-end chip production makes its economy vulnerable to a Chinese invasion, while China wants to prevent Taiwan from supplying China with cutting-edge chips that could be used for military purposes. Taiwanese companies are reluctant to move production away from the island due to the economic advantage it offers and the resentment they feel about being blamed for their success.
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