Hong Kong, Shenzhen deluged by heaviest rain on record; Will China spoil India’s moment in the international limelight?

China expands iPhone ban to local governments, state-owned firms; Top Beijing Hospital Cuts Doctor Pay During Health Care Crackdown; Huawei Debuts Even More Powerful Phone as Controversy Swirls

Welcome to this issue of The China Brief. Today is September 8, 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.

Hong Kong, Shenzhen deluged by heaviest rain on record

Nikkei Asia

Hong Kong experienced its heaviest rain since records began 140 years ago. One person was killed and 83 injured due to the torrential rain, which caused flooding in narrow streets, malls, metro stations and tunnels. The extreme weather also brought chaos to the nearby tech hub of Shenzhen, disrupting business and transport links. The torrential rain was brought by Typhoon Haikui, which weakened to a tropical depression but still dumped large volumes of rain on areas that were still soaked by a "super typhoon" the week before.

China Bonds Roiled by One-Two Punch on Liquidity, Rate Outlook

Bloomberg

China's short-term government bonds are experiencing their biggest weekly drop this year due to dwindling liquidity and waning expectations for broad-based easing. The yield on one-year yuan securities has jumped 13 basis points since September 1. The selloff comes at a bad time for Beijing, as the country is trying to restore confidence after the economic recovery lost momentum and a property crisis showed few signs of easing. Liquidity is drying up as banks prepare for regulatory checks at the end of the quarter and investors are expected to mop up as much as CNY800bn ($109bn) of special bond issuance this month. The People's Bank of China has withdrawn CNY784bn of short-term cash from the financial system so far this month.

China expands iPhone ban to local governments, state-owned firms

Nikkei Asia

China's restrictions on the use of iPhones by government employees are expanding to local governments and state-owned companies. Since around 2020, central ministries and agencies have restricted the use of foreign-brand products in official business, and these restrictions have now been extended to employees of local governments and state-owned enterprises. The move is expected to have a significant impact on Apple's sales in the Chinese market, with concerns dragging down the company's market capitalization by about $190 billion over two days. The Chinese government has been narrowing its procurement of foreign information technology equipment, and this trend is now spreading to smartphones. China is one of Apple's most important markets, accounting for about 20% of its total sales in the April-June period this year.

China’s economic slump could be the spark that ignites World War Three

Telegraph

The possibility of war between China and the West is increasing due to China's economic slowdown and declining power, according to an op-ed in The Telegraph. China's economic growth is slowing down, and its population is declining, leading experts to believe that it may never overtake the US to become the world's largest economy. As China's power has peaked and still lags behind the US, there is an incentive for China to be aggressive and take action now. The flashpoint for potential conflict is likely to be Taiwan, as China sees the existence of Taiwan as unfinished business from the Chinese Civil War. The US has maintained a policy of strategic ambiguity regarding intervention if China were to invade Taiwan, but it is unclear if future administrations would continue this policy. China's window of opportunity for action is closing as its economy falters and the US prepares Taiwan for conflict. Experts believe that war between China and the West is becoming increasingly possible within the next 10 years.

Philippines Says China Coast Guard Made Dangerous Moves Against Ships

Bloomberg

The Philippines successfully resupplied a stranded ship in the South China Sea, despite dangerous maneuvers by China's Coast Guard vessels and militia. The Philippines' Armed Forces spokesperson stated that China's actions would not prevail over their legal and legitimate operations that support a rules-based international order.

China PE firms bet on mergers in the consumer sector to drive growth

South China Morning Post

China-focused private equity firms are turning to mergers and acquisitions (M&A) in consumer staples and overseas expansion opportunities as the country's slowing economy and geopolitical tensions put pressure on exits. Investors are seeking to diversify their risk portfolio and prioritize "predictable growth" in times of economic uncertainty. Sectors such as consumer staples and advanced manufacturing are becoming more attractive due to their sticky customers, predictable financials, and good cash flow. M&A could help Chinese companies explore synergies and create value, making them more attractive to potential buyers.

Xi's no-show at the G20 is another sign of deepening divisions around the world

CBC

The decision by Chinese President Xi Jinping to skip the G20 summit in New Delhi, and send Premier Li Qiang in his place, is seen as a snub to India. The absence of Xi could be seen as a sign of weakness and fear of being outnumbered or upstaged by India's Prime Minister Narendra Modi. It may also indicate a fear of being absent from China at a time of economic malaise and public discontent. The BRICS alliance (Brazil, Russia, India, China and South Africa) has taken on six new members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE. However, the addition of these new members is unlikely to increase the coherence of the group.

China-US military channels frozen, with no sign of a thaw: Pentagon

South China Morning Post

Military communications between China and the US are unlikely to resume, despite a meeting between defence officials last month, according to a senior Pentagon official. Ely Ratner, US assistant secretary of defence for Indo-Pacific security affairs, said there is no sign of a resumption in military communication between Beijing and Washington. Ratner criticised China for turning the lines of communication “on and off like a light switch for political reasons.” China suspended three main communication channels with the US last August after US House Speaker Nancy Pelosi visited Taiwan.

India to push Global South issues as Modi and Biden set to meet ahead of G20

South China Morning Post

Indian Prime Minister Narendra Modi is set to meet US President Joe Biden on Friday ahead of the weekend G20 summit in New Delhi, likely paving the way for stronger military ties between the two nations and strengthening Washington’s support for the Global South. Biden is expected to back India’s bid to include the African Union in the G20, as well as proposals to reform multilateral development banks – especially the World Bank and International Monetary Fund – to free up development lending and climate finance for low and middle-income nations. Chinese President Xi Jinping’s absence from the G20 may have left the door ajar for Biden to reinforce stronger ties with not just India but several fast-growing nations, analysts say.

Taiwan’s year-long export slump eases amid AI chip demand, cycle bottoming out

South China Morning Post

Taiwan's exports fell by 7.3% in August, marking a full year of monthly declines for the global tech manufacturing hub. However, demand for semiconductors used in artificial intelligence (AI) applications provided some relief, with semiconductor sales up. Analysts said that readying for an AI boom was the main topic of discussion at the world's largest chip conference in Taiwan, where industry executives met to discuss the future of the sector.

Morgan Stanley says China's iPhone curbs could impact Apple's revenue by 4%

Reuters

Morgan Stanley analyst Erik W Woodring has stated that Apple's recent share losses due to China's curbs on the use of iPhones by state employees have been "overdone". Woodring believes that the curbs will not lead to further restrictions and that Apple's revenue will only be hit by a maximum of 4% this year.

‘Brand India’ — and Modi — take at center stage at G-20 summit

Washington Post

As India hosts the G20 summit this weekend, it is attempting to promote itself as a global leader under Prime Minister Narendra Modi. India has been holding events focused on thematic areas, including climate and education, in over 60 cities in the past year and has beautified and illuminated monuments and infrastructure with G20 signage to mark the occasion. The branding effort comes at a time when some members of Modi’s party want to internationally change the commonly used name of the country to Bharat, which could complicate the repackaging effort. Critics have also argued that India is projecting itself in an excessive way, and that the country’s domestic repression of critical voices threatens its global image. However, others have maintained that India is not only promoting its brand but also its priorities for the world. As part of its promotion, India has tried to convince the G7 that poorer countries have priorities beyond the Ukraine conflict, such as debt relief, food and fuel supplies, and climate.

Yuan ends domestic session at weakest since 2007 as outflow pressure builds

Reuters

China's yuan closed at its weakest level since the global financial crisis on Friday, as the economy struggles and capital outflows increase. The yuan has lost 1.0% against the dollar this week and around 6.1% so far this year. Analysts expect the currency to face further selling pressure in the near term, but losses are expected to be measured. The People's Bank of China (PBOC) set the midpoint rate at 7.215 per US dollar, weaker than previous days, suggesting the PBOC may be allowing the yuan to gradually drift lower. The offshore yuan also weakened to its lowest level since October 2022.

China’s premier vows closer ties with Jakarta amid US rivalry, regional tensions

South China Morning Post

Chinese Premier Li Qiang has pledged to strengthen cooperation with Indonesia as Beijing seeks to bolster ties with the Southeast Asian country amid growing geopolitical tensions in the Indo-Pacific and rivalry with the US. Li said China hopes to strengthen strategic mutual trust and multilateral cooperation with Indonesia while continuing close economic cooperation. The push for closer ties with Indonesia comes as China tries to enhance partnerships in the region where its renewed territorial claims in the South China Sea have sparked tensions with several Association of Southeast Asian Nations members.

China seeks to criminalize 'hurting the feelings' of its people

Nikkei Asia

Chinese legal experts have criticized proposed changes to China's Public Security Administration Law that could lead to imprisonment or fines for behavior, clothing, or speech that is considered offensive to the Chinese people or government. The draft amendments do not specify what would be considered offensive, leading to concerns about vague wording and potential abuse of power. The proposed changes reflect President Xi Jinping's strict rule and his crackdown on civil liberties and freedom of expression. The phrase "hurting the feelings of the Chinese people" is frequently used by officials to respond to statements made by adversaries. Social media users have called for clarity on the law following instances where wearing certain clothing resulted in punishment.

Taiwan tries to hold on to eSwatini, its last remaining ally in Africa

RFI

Taiwanese President Tsai Ing-wen has visited eSwatini, a country that recognises Taiwan over China, to sign agreements on economic cooperation. The southern African kingdom, known as Swaziland until 2018, is one of only 13 countries that recognise Taiwan, which China claims as its own territory. The visit comes as China increases pressure on countries to end their diplomatic ties with Taiwan. eSwatini has struggled with fuel shortages in recent years, and Tsai signed agreements including a cooperation agreement on the construction of a strategic oil reserve facility.

Leaders' consensus at G20 summit is difficult to predict -EU's Michel

Reuters

European Council President Charles Michel has said that it is difficult to predict if leaders of the G20 will reach a consensus on a declaration at the end of the summit in New Delhi. Michel stated that the European Union wants the G20 to focus on global challenges to food and energy security. Issues expected to be discussed at the summit include Russia's blockade of grain shipments from Ukraine, which affects food security in many nations. Michel did not expect the summit to solve all major global problems but stated that the EU wants the bloc to accelerate efforts on sustainable development goals and send a message on climate issues and poverty reduction.

Top Beijing Hospital Cuts Doctor Pay During Health Care Crackdown

Bloomberg

Doctors at Beijing Tongren Hospital in China have had their performance-based salaries and late-shift allowances halved for the month of August. This has sparked speculation on social media that the government's crackdown on corruption in the healthcare sector is starting to impact ordinary workers. China's disciplinary watchdog and health authorities launched a campaign in July to crackdown on corruption and bribery in the healthcare industry. Some doctors have said the hospital's senior managers have promised them that any salary cuts will be paid back in January. However, the news has angered many who believe that ordinary employees are bearing the brunt of the anti-graft campaign.

China’s Chip-Gear Makers Soar as US Probe Spurs Development Bets

Bloomberg

Chinese semiconductor equipment makers saw a surge in their stock prices as investors bet on increased state support for the sector. The surge was primarily led by companies related to lithography equipment, which is seen as a weak link in China's chip supply chain. Beijing has been pushing its firms to develop local technologies as top chipmakers in the country rely on foreign-made equipment. The surge in stock prices came after the US launched an official probe into a made-in-China chip used in Huawei's new smartphone, which contained components provided by US-blacklisted Semiconductor Manufacturing International Corp.

Will China spoil India’s moment in the international limelight?

The Independent

Chinese President Xi Jinping's absence from the G20 summit has led to speculation about China's intentions towards India. Some suggest that Xi's absence could be seen as a snub to India amid ongoing border tensions between the two countries. Others suggest that China is downgrading its participation in forums dominated by the US and its allies, and that it is playing the role of a spoiler against countries or forums that it sees as aligning themselves with the US. China's absence from the summit could raise questions about its reliability as a partner in multilateral proceedings and could make it more difficult to resolve differences with Chinese leaders. However, experts also note that China will suffer the biggest loss from Xi's no-show, as it diminishes the spotlight on Beijing. The absence is seen as an opportunity missed for any kind of thaw in Sino-India relations, as there were expectations that the summit could lead to major initiatives and changes at the bilateral level.

India’s Military Studying Options for Any China War on Taiwan

Bloomberg

India is reportedly studying possible responses to a potential Chinese invasion of Taiwan, following discreet inquiries from the US on how India could contribute in the event of a war. Senior Indian government officials have said that a study has been commissioned to examine the wider impact of any war over Taiwan and what action India could take in response. The study will assess various war scenarios and provide options for India in case a conflict breaks out. One option the Indian military will study involves serving as a logistics hub to provide repair and maintenance facilities for allied warships and aircraft, as well as food, fuel, and medical equipment for armies resisting China.

Nanjing scraps home-buying curbs in China's latest property boost

Reuters

Nanjing, one of China's largest cities, has eliminated curbs on home buying in an attempt to support the struggling property sector. This move comes as policymakers are trying to address the deepening crisis in the sector, which accounts for a quarter of China's economic activity. Other major cities such as Beijing, Shanghai, and Shenzhen are also expected to ease housing curbs in the coming months. China's property sector has been in decline since 2021 when the government implemented measures to prevent developers from accumulating debt. Analysts believe that the recent measures taken by authorities are unlikely to reverse the slide.

Xi to Welcome Debt-Burdened Leaders in China as He Skips G-20

Bloomberg

Chinese President Xi Jinping will host the leaders of Zambia and Venezuela for state visits to China this weekend, while skipping the G20 summit in India. The visits send a clear message about how Xi prefers to conduct diplomacy, increasingly receiving dignitaries on home soil or turning to groups where Beijing has more clout, such as the newly expanded BRICS. Zambia and Venezuela have sought economic relief from China as they struggle to service their debts, much of which is owed to Beijing.

G20 Sum­mit: Is In­dia break­ing up with Rus­sia?

Al Jazeera

India's relationship with Russia is showing signs of strain as India seeks to balance its ties with both Russia and the West. India has historically been a close partner of Russia, relying on the country for defense equipment, diplomatic support, and oil imports. However, in recent years, India has been diversifying its defense purchases, turning to the US, France, and Israel instead. Additionally, the price of Russian oil has risen, making it less attractive for India to continue buying from Russia.

India's shift away from Russia is driven by a number of factors. Firstly, India's ties with the West have strengthened, and it does not want to antagonize Western countries by openly supporting Russia's actions in Ukraine. Secondly, India's perception of its national interests is changing, and it sees the US and its allies as better partners in countering China's influence in the Indo-Pacific region. Finally, Russia's close relationship with China is a cause for concern for India, as it views China as a major strategic threat.

While India is unlikely to formally break up with Russia any time soon, it is clear that their friendship is in decline. India's defense purchases from Russia have dropped in the past decade, while purchases from the US and France have increased. The war in Ukraine has also caused India to reconsider its oil imports from Russia, as the price of Russian oil has risen and the payment options have become less favorable. Overall, India's shift away from Russia could have significant implications for the global order as India aligns itself more closely with the West and seeks to counter China's influence.

Xi’s G20 no-show may be part of a plan to reshape global governance

CNN

Chinese President Xi Jinping will skip the G20 summit in New Delhi this weekend. No explanation was given for Xi's absence, leading to speculation about his health and domestic issues. However, analysts suggest that Xi's decision not to attend could be a signal of his disillusionment with the existing global system of governance, which he sees as dominated by American influence. Instead, Xi may be prioritizing multilateral forums that fit into China's own vision for how the world should be governed, such as the recently concluded BRICS summit and the upcoming Belt and Road Forum. Some analysts see Xi's absence as a shift in how China views the G20, with Beijing increasingly seeing the forum as oriented towards the US and its agenda. China is also viewing tensions with other G20 members, such as India, through its difficult relationship with the US. Beijing has refused to condemn Russia's invasion of Ukraine and has continued to provide diplomatic support to Moscow, further straining relations with the West. Chinese analysts suggest that Beijing may see the G20 as a platform with diminishing value and effectiveness.

‘We have to fight’: Europe’s carmakers dig in against China’s electric invasion

Financial Times

Chinese automakers are preparing to challenge European carmakers in the electric vehicle (EV) market, with twice as many Chinese companies exhibiting at the Munich Motor Show this year compared to 2021. China is the world's largest EV market and is now seeking to expand its reach in Europe, where there is great potential for growth due to a ban on petrol or diesel car sales by 2035. Chinese carmakers are focusing on offering models with advanced technology and world-leading batteries at low prices. European automakers are preparing to face their newest rivals and are considering a price war, with Stellantis, the region's second-largest carmaker, even considering manufacturing EVs in cheaper regions outside of Europe. However, European automakers believe that while prices need to come down, there are differences in vehicle specifications that make their products more desirable. Chinese automakers are confident in their technology and manufacturing capabilities, but are realistic about the challenges of breaking into Europe's competitive auto market. Many industry executives believe that it will take years for Chinese automakers to gain significant market share, and European automakers are working to improve their vehicles to meet the challenge.

Huawei Debuts Even More Powerful Phone as Controversy Swirls

Bloomberg

Huawei has released the Mate 60 Pro+, the latest addition to its Mate 60 smartphone family. The upgraded model features satellite messaging and more memory than the Mate 60 Pro, with a 1-terabyte maximum storage option and 4GB more memory. Shares of Huawei suppliers surged following the release. The Mate 60 Pro has attracted international attention for its use of made-in-China components, highlighting the country's progress in developing domestic tech capabilities. The US Department of Commerce is said to be investigating Huawei's new semiconductor technology.

China’s Apple iPhone curbs roil US stocks on tech war fears

South China Morning Post

Apple shares fell 2.9% after the Chinese government told employees at central government agencies to stop using iPhones at work. The curbs show even a company with a good relationship with the Chinese government and a large presence in the country was not immune to rising tensions between the two nations. The wider ban is not surprising and shows how China is trying to limit a Western company’s market access to the nation.

Xi Jinping visits flood damaged crops in China’s valuable northern food bowl

South China Morning Post

Chinese President Xi Jinping visited flood-affected areas in Heilongjiang province in northeastern China. He inspected damaged homes and crops and expressed sympathy for the victims. Heilongjiang is China's biggest grain producer and known as the country's "great northern granary". The region has been severely affected by heavy rain and flooding caused by Typhoon Doksuri. Agricultural land has been damaged, leading to little expectation of a harvest this year. The flooding has killed at least 61 people and displaced millions.

China’s automakers take the world by storm with electric vehicle push

CNN

Chinese electric vehicle (EV) manufacturers are making significant inroads into the global market, with rapid growth in Europe, Australia, and Southeast Asia. European Union imports of Chinese cars have quadrupled in the last five years, and by 2030, Chinese carmakers could double their share of the global market from 17% to 33%, with European firms suffering the biggest loss, according to UBS. Chinese companies exported nearly 350,000 EVs to nine European countries in H1 2023, exceeding the total for all of 2022. Chinese EVs are roughly 30% cheaper than their European and US equivalents, helped by China's dominance of the EV battery supply chain. As well as being cheaper to produce, Chinese EVs are of high quality and offer competitive prices across different price segments, attracting European customers looking for entry-level models. However, geopolitical tensions could complicate Chinese EV firms' global push, with the US and Europe looking to "de-risk" from China, which could create barriers to Chinese imports.

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