From Russia to the Middle East: Why China can’t afford another big conflict; Chinese developer Country Garden misses payment on dollar bond
China’s Xi seeks swift end to Israel-Hamas conflict, calls for two-state solution; Chinese embassy leaves New Zealand landlord with $900 bill
Welcome to this issue of The China Brief. Today is October 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 Xi seeks swift end to Israel-Hamas conflict, calls for two-state solution
CNN
Chinese President Xi Jinping has called for a two-state solution to resolve the Israel-Hamas conflict and establish an independent Palestine. Xi made the comments during a meeting with Egyptian Prime Minister Mostafa Madbouly in Beijing. He emphasized the importance of a ceasefire and expressed China's willingness to work with Egypt and Arab nations to find a comprehensive and lasting solution to the Palestinian issue. Xi also praised Egypt for its efforts to cool tensions and expressed support for its humanitarian aid efforts in Gaza. China has positioned itself as a neutral mediator in the conflict and has deep economic interests in the region.
From Russia to the Middle East: Why China can’t afford another big conflict
CNN
China is once again trying to have it both ways. It has spent over a year tiptoeing over Russia’s war in Ukraine. The Asian superpower has refused to condemn the invasion and instead provided much-needed diplomatic and economic support for Moscow.
Now, as Israel’s war against Palestinian militant group Hamas threatens to spiral into a broader conflict that could shatter stability in the Middle East, China has called for a ceasefire while criticizing Israel’s actions. It has also noticeably not condemned Hamas for carrying out what has been called the worst single day massacre of Jews since the Holocaust, while voicing its support for a two-state solution for Palestine and Israel. The stance is in keeping with China’s decades-long support for Palestinian statehood but also underscores sharp divisions between China and the United States, which has staunchly backed Israel’s right to retaliate against Hamas. It also highlights China’s deep economic interests in both Russia and the Middle East, which it wants to safeguard at all costs.
The world’s second-largest economy depends on Russia and the Middle East for much of its energy needs. They are also an important part of Beijing’s Belt and Road initiative: an ambitious yet controversial undertaking to boost connectivity and trade across the world with Chinese money and know-how in infrastructure development.
Chinese developer Country Garden misses payment on dollar bond, say creditors
Financial Times
China's largest property developer by sales, Country Garden, has missed the deadline for a coupon payment on a dollar bond, according to three creditors. The company, which has international debts worth $11bn and total liabilities of about $200bn, has been battling to stave off default for weeks amid the country's property crisis. The property sector slowdown in China has impacted private developers and dragged on economic growth, with construction delays and a fall in housing transactions. Country Garden's shares have fallen about 70% this year and its bonds are trading at 5 cents on the dollar.
TSMC's quarterly profit falls 25% despite new iPhone launch
Nikkei Asia
Taiwan Semiconductor Manufacturing Co (TSMC) reported a 24.8% year-on-year drop in profit for the July-September quarter, despite the launch of Apple's latest iPhone. The company's net profit for the quarter was TWD 211bn ($6.6bn), while revenue fell 10.8% to TWD 546.73bn. TSMC's gross margin also decreased to 54.3%, down from 60.4% a year ago. Additionally, the US government tightened export controls on shipments of premium artificial intelligence chips to China, a move that is expected to impact TSMC's major clients. TSMC founder Morris Chang warned of intense competition ahead, as some rivals like Intel could leverage the geopolitical trend of diversifying supply chains. However, TSMC is launching overseas expansions in the US, Japan, and Germany to diversify production and increase supply chain resilience.
China’s government bonds to get boost from strong GDP as stimulus odds drop
South China Morning Post
China's benchmark sovereign bond is expected to recover in November as better-than-expected economic figures reduce the likelihood of further fiscal stimulus. The yield on the 10-year government bond rose to 2.717% on Thursday, its highest level since May 30. China needs 4.4% growth in Q4 to meet its full-year growth target of about 5%. Global fund managers say the likelihood of Beijing launching additional fiscal measures is declining for the rest of the year. The recent pullback in the bond market has been triggered by improved sentiment in stocks and speculation the government will increase the fiscal deficit.
Woman jailed for role in Australia's biggest drug bust after $2m cash seizure
ABC
A Chinese national has been sentenced to three years in prison for her involvement in what is believed to be China's largest drug bust. QianQian Hu was arrested in January near Coolgardie, Western Australia, two weeks after a group of men were arrested off the coast north of Perth. The arrest followed the interception of cocaine off the South American coast by the US Drug Enforcement Administration, which was then seized by police and replaced with another substance. Hu initially denied any involvement but later pleaded guilty to one count of money laundering.
Country Garden, Facing Debt Deadline, Says Executives Have Not Left China
NY Times
Chinese property developer Country Garden has denied rumours that its founder and chairwoman had fled the country. The company is facing a potential financial collapse and had a deadline to make a $15m interest payment on an overseas bond on Wednesday. Missing the payment would allow creditors to declare the firm in default. Country Garden is scrambling to raise money to meet its significant debt obligations and said last month that it expected to miss an overseas debt payment, fueling speculation that it was preparing to default on its loans.
Chinese embassy leaves New Zealand landlord with $900 bill
Guardian
A landlord in New Zealand has had a claim dismissed by the country's tenancy tribunal after it ruled that the tenant, the Embassy of the People's Republic of China, was protected by diplomatic immunity. Chandler Investments Limited had sought NZD960 ($620) from the embassy for cleaning, rubbish removal and key cutting. The tribunal ruled that renting a home was "incidental to the daily life of the diplomat" and a commercial dispute was not justified.
TSMC says PC and smartphone markets starting to bottom out
Nikkei Asia
Taiwan Semiconductor Manufacturing Co. (TSMC) has said that demand for personal computers and smartphones has started to stabilise after a long downturn. The CEO of TSMC, C.C. Wei, stated that while it is too early to call a sharp rebound, there are early signs of stabilisation in these two key segments. Demand for automotive-related chips has slowed but is expected to rebound in 2024. Wei also commented on TSMC's competition with Intel, stating that TSMC's technology offers earlier time to market, better technology maturity, and better cost.
China formally arrests Japanese man detained for espionage
Japan Times
Chinese authorities have officially arrested a Japanese businessman who was detained earlier this year on suspicion of espionage, despite repeated calls from the Japanese government to release him. The man, who is in his 50s and works for Astellas Pharma, has been held in Beijing since March. The Japanese government said it will continue to urge Beijing to release him as soon as possible.
Rebuffed by China, Philippines’ Marcos toughens line on contested waters
Washington Post
Philippine President Ferdinand Marcos Jr. has taken a strong stance against Chinese claims to sovereignty in the South China Sea, cutting a floating barrier installed by China in an area under the jurisdiction of the Philippines. Marcos is said to have been angered by Chinese harassment, including one incident in which a Chinese coast guard ship used a “military-grade laser light” on a Philippine vessel. The incident marked the first time in a decade that a Philippine president had publicly complained to the Chinese ambassador, and led to an increase in anti-China sentiment within the country. In response, the Philippines has signed or begun negotiations for new defence agreements with Australia, Japan, the European Union and India.
Hong Kong leader ‘to adjust stamp duty for some home transactions’ in policy address
South China Morning Post
Hong Kong Chief Executive John Lee Ka-chiu is expected to announce measures to revive the city's property market in his upcoming policy address, including potentially scrapping or lowering stamp duty on some transactions. The government has faced pressure to ease property market cooling measures as transactions decline. In addition, Lee is set to unveil plans to boost the city's birth rate and improve its innovation hub status, including attracting companies to conduct biomedical research and speeding up the development of semiconductors. The policy address will also address structural problems in the economy, including an ageing population.
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