How big is Beijing’s war chest, and why does a headline stimulus figure remain elusive?
Chinese President Xi visits Taiwan-facing island after PLA drills simulate blockade
Welcome to this issue of The China Brief. Today is October 16, 2024. 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.
How big is Beijing’s war chest, and why does a headline stimulus figure remain elusive?
South China Morning Post
China's policymakers are reshaping the financial and fiscal system to address economic uncertainties while aiming for long-term sustainability. Despite concerns about the size of Beijing's economic stimulus, some analysts believe the government has sufficient resources for a robust response, potentially exceeding the suggested 10 trillion yuan (US$1.4 trillion) stimulus plan. The central leadership is advised to avoid disclosing specific stimulus figures, instead focusing on actions that boost economic activity. Recent fiscal conditions have deteriorated, particularly at local government levels, due to the pandemic's impact, prompting the central government to tighten budgets while investing in key areas. The Standing Committee of the National People's Congress must approve any adjustments to government budgets, with details expected to emerge in the coming weeks. Fiscal reforms are underway, with an emphasis on managing market expectations and addressing local government debts. Experts note that while stimulus funding may be available, concerns remain about its allocation and effectiveness in stimulating growth. As external challenges, including the US economic landscape, loom, maintaining flexibility in fiscal and monetary policies becomes crucial for Beijing's future strategies.
https://www.scmp.com/economy/economic-indicators/article/3282485/how-big-beijings-war-chest-and-why-does-headline-stimulus-figure-remain-elusive?utm_source=rss_feed
Chinese President Xi visits Taiwan-facing island after PLA drills simulate blockade
South China Morning Post
Chinese President Xi Jinping visited Dongshan county in Fujian, near Taiwan, following extensive military drills by the People’s Liberation Army (PLA) around Taiwan. The exercises, termed "Joint Sword-2024B," focused on combat readiness and blockading key ports, serving as a warning against Taiwan independence. Xi's visit included inspecting rural revitalization efforts and a memorial for a historical figure linked to past conflicts between China and Taiwan. Meanwhile, Taiwan's leader reaffirmed the island's autonomy during a recent speech, as Beijing continues to assert its claim over Taiwan despite international opposition to forceful reunification.
https://www.scmp.com/news/china/politics/article/3282578/chinese-president-xi-visits-taiwan-facing-island-after-pla-drills-simulate-blockade?utm_source=rss_feed
Chinese economist calls for massive stimulus, saying 2008’s 4 trillion yuan not enough
South China Morning Post
Beijing should consider a stimulus package larger than the 4 trillion yuan from 2008 to effectively revitalize China's economy, according to economist Yu Yongding. He emphasizes the need for a detailed plan and a cautious approach, given the long-term issues from past measures. While local government debt and infrastructure investment are concerns, Yu believes China’s fiscal position remains strong. He advocates for increased government spending on infrastructure but warns against waste and corruption. The government must balance fiscal support with debt relief for local governments to ensure operational viability.
https://www.scmp.com/economy/policy/article/3282480/chinese-economist-calls-massive-stimulus-saying-2008s-4tr-yuan-not-enough?utm_source=rss_feed
Investors want China stocks bull run to sustain even without fiscal stimulus figure
South China Morning Post
Investors are optimistic about sustained growth in Chinese stocks after Finance Minister Lan Foan indicated potential government borrowing to support the economy. While no specific fiscal stimulus figures were provided, analysts suggest a package equal to 3% of GDP (over 3 trillion yuan) is necessary for recovery. Recent easing measures have already boosted the markets significantly. The finance ministry's announcements, including a debt swap program and local government bond issuance, aim to stabilize the property market. Upcoming meetings of the National People's Congress and the Central Economic Work Conference will be critical for defining future fiscal policies.
https://www.scmp.com/business/china-business/article/3282408/investors-want-china-stocks-bull-run-sustain-even-without-fiscal-stimulus-figure?utm_source=rss_feed
Xi’s stronger grip on legislature shows lack of checks on power
Japan Times
As China prepares to announce its fiscal stimulus package, there is a noticeable increase in the influence of President Xi Jinping over government and societal matters. A Bloomberg News analysis reveals that nearly 70% of the laws enacted this year explicitly affirm the party's authority, a significant rise from just 4% in 2018. While most of these laws pertain to state operations, national security, and defense, some directly address economic risks.
https://www.japantimes.co.jp/news/2024/10/16/asia-pacific/politics/xi-legislature-lack-checks-on-power/
China looks to tackle problems for debt-ridden local authorities with water tax reforms
South China Morning Post
China's Ministry of Finance will implement nationwide Water Tax Interim Measures starting December 1, expanding from 10 provinces to address local authority debt and safeguard water resources. The tax aims to improve water conservation and efficiency among enterprises, particularly in water-stressed areas. Despite its intentions, the revenue increase is minimal compared to local debts totaling 43.6 trillion yuan. The measures include exemptions for rural organizations and high rates for specific industries, with revenues shared between central and local governments. Past implementation in Hebei province saw significant reductions in water consumption and groundwater extraction.
https://www.scmp.com/economy/policy/article/3282549/china-looks-tackle-problems-debt-ridden-local-authorities-water-tax-reforms?utm_source=rss_feed
What PLA Navy and China Coast Guard drills near Taiwan revealed about Beijing’s plans
South China Morning Post
Beijing's recent military drills around Taiwan, dubbed "Joint Sword-2024B," showcased enhanced coordination between the People's Liberation Army (PLA) and the coastguard, crucial for potential blockade strategies. The exercises involved a record 153 PLA aircraft and 17 coastguard vessels, indicating a wartime posture. The Liaoning aircraft carrier played a significant role, demonstrating high combat readiness. Analysts suggest this improved collaboration could effectively hinder foreign interventions and block maritime access to Taiwan. The drills followed provocative remarks from Taiwanese leader William Lai, reflecting escalating tensions over Taiwan's status and China's military capabilities.
https://www.scmp.com/news/china/military/article/3282493/what-pla-navy-and-china-coast-guard-drills-near-taiwan-revealed-about-beijings-plans?utm_source=rss_feed
Top Chinese developers’ sales up slightly in September following Beijing support
South China Morning Post
Sales for China's largest property developers increased in September following government support measures, with Shimao reporting a 13.1% month-on-month rise in contracted sales. The uptick is attributed to improved sentiment after mortgage rate cuts and relaxed homebuyer restrictions. However, analysts caution that these gains may not be sustainable, as the overall sales for the top 100 builders fell 38.8% year-on-year in the first nine months. While a recovery is anticipated in the final quarter, experts warn that a full rebound in the housing market may not occur until mid-2025.
https://www.scmp.com/property/article/3282410/top-chinese-developers-sales-slightly-september-following-beijing-support?utm_source=rss_feed
China’s ICBM test may well redraw the global security landscape
South China Morning Post
China's recent intercontinental ballistic missile (ICBM) test signifies significant advancements in its military capabilities, revealing challenges within US-led alliances in the Asia-Pacific. The test highlights Japan and Taiwan's reliance on the US for security, raising concerns about their strategic autonomy. China's transparency in notifying the US, while excluding regional allies, underscores shifting dynamics in nuclear diplomacy. The development of advanced missile technology, including multiple independently targetable re-entry vehicles, positions China as a formidable nuclear power. This situation may necessitate a reevaluation of arms control frameworks, promoting a more inclusive approach to global security in a multipolar world.
https://www.scmp.com/opinion/china-opinion/article/3281743/chinas-icbm-test-may-well-redraw-global-security-landscape?utm_source=rss_feed
Lenovo partners with Meta, Nvidia for AI outside China
South China Morning Post
Lenovo is partnering with Meta Platforms and Nvidia to enhance its AI offerings outside China, launching the AI Now personal assistant for PCs that operates offline using Meta's Llama 3.1 model. The assistant can manage documents, generate content, and configure settings through natural language. Lenovo also announced collaborative AI solutions with Nvidia, including a new AI server, while navigating US restrictions on technology sales to China. The company aims to leverage AI for supply chain efficiency and has introduced various AI devices, positioning itself competitively in a challenging market.
https://www.scmp.com/tech/big-tech/article/3282586/lenovo-partners-meta-nvidia-ai-outside-china?utm_source=rss_feed
Hong Kong to enhance IPO rules to give applicants ‘certainty’ in timing, attract listings
South China Morning Post
Hong Kong aims to improve its IPO approval process to attract more listings and regain its status as a top fundraising hub. Chief Executive John Lee announced plans to enhance certainty and efficiency, addressing concerns that current vetting methods prolong timelines and increase costs for IPO applicants. The city's recent recovery in IPO capital raised, along with plans to expand investor access and promote a gold trading market, are expected to enhance its global appeal. HKEX and SFC will provide further details on the regulations to stimulate market activity and attract businesses.
https://www.scmp.com/business/article/3282584/hong-kong-enhance-ipo-rules-give-applicants-certainty-timing-attract-listings?utm_source=rss_feed
China pivot converts more stock bulls, rally saps short-term upside: BofA survey
South China Morning Post
A Bank of America survey reveals that money managers in the Asia-Pacific region have grown more optimistic about China's economic outlook following significant policy easing from Beijing. A net 61% of fund managers now anticipate a stronger Chinese economy in the next year, shifting from previous negativity. Consequently, they have increased investments in Chinese assets while reducing those in India. Despite recent stock market gains, concerns remain about potential overvaluation. Japan continues to be viewed as the most favorable market, with many expecting equity prices to rise there over the next 12 months.
https://www.scmp.com/business/article/3282602/china-pivot-converts-more-stock-bulls-rally-saps-short-term-upside-bofa-survey?utm_source=rss_feed
Horizon Robotics’ US$700 million IPO boosts Hong Kong’s market after Beijing’s stimulus
South China Morning Post
Hong Kong's IPO market is witnessing a surge in activity, with companies like Horizon Robotics aiming to raise up to HK$5.4 billion (US$696 million). Following recent government stimulus measures, 16 companies have applied to list on the Hong Kong stock exchange compared to just nine in the previous three weeks. The market has seen a 20% rise over the past month, indicating improved investor sentiment. Hong Kong officials plan to facilitate more listings from international and large-scale mainland firms, while analysts note the importance of sustained liquidity and market stability for long-term investment success.
https://www.scmp.com/business/banking-finance/article/3282572/horizon-robotics-us700-million-ipo-boosts-hong-kongs-market-after-beijings-stimulus?utm_source=rss_feed
Beijing could soon elaborate Anti-Secession Law for ‘non-peaceful’ Taiwan reunification
South China Morning Post
Former US envoy and Taiwanese lawmaker Vincent Chao warned that China may elaborate on its Anti-Secession Law regarding the "non-peaceful" reunification of Taiwan, potentially next year during its 20th anniversary. The law, enacted in 2005, allows for forceful measures if peaceful unification fails. Chao highlighted Beijing's increasing military drills around Taiwan and its intention to "annex" the island. He called for international recognition of the law's destabilizing nature and emphasized the need for enhanced deterrence from the US and allies. Former US officials echoed the call for a stronger legal and diplomatic response to China's actions.
https://www.scmp.com/news/china/diplomacy/article/3282518/beijing-could-soon-elaborate-anti-secession-law-non-peaceful-taiwan-reunification?utm_source=rss_feed
How China used a ‘paper tiger’ to emerge as a nuclear weapon superpower
South China Morning Post
Sixty years ago, China conducted its first successful atomic bomb detonation in the Lop Nur desert, marking a significant milestone in its nuclear weapons program. The test, which took place on October 16, 1964, occurred during a tumultuous period for China, characterized by the collapse of its alliance with the Soviet Union and a severe economic crisis. Despite these challenges, the test was crucial for China to establish itself as a nuclear power before the Non-Proliferation of Nuclear Weapons Treaty cut-off date of 1967. In addition to developing nuclear weapons, China was also advancing its missile technology, culminating in the launch of the Dong Feng-2 medium-range ballistic missile in 1966.
Following its initial success, China continued to enhance its nuclear capabilities, testing its first hydrogen bomb in 1967. Mao Zedong's government framed the development of nuclear weapons as essential for national security and a means of deterring foreign powers, particularly the United States. Despite internal debates about the feasibility of the nuclear program amidst widespread famine, military leaders emphasized the necessity of nuclear deterrence. By the late 1960s, China had established a "no first use" policy regarding nuclear weapons, asserting that it would not initiate their use in conflict, which remains a cornerstone of its nuclear strategy today.
In the decades that followed, China modernized its nuclear arsenal significantly, transitioning from a focus on minimum deterrence to expanding its capabilities amid rising tensions with the West. The Chinese military has ramped up investments in advanced nuclear delivery systems, including intercontinental ballistic missiles and submarine-launched ballistic missiles. Recent estimates suggest that China possesses over 500 operational nuclear warheads, with projections indicating this number may exceed 1,000 by 2030. As China's military modernization continues, the implications for global nuclear stability and security become increasingly pronounced.
https://www.scmp.com/news/china/military/article/3282498/how-china-used-paper-tiger-emerge-nuclear-weapon-superpower?utm_source=rss_feed
China's 'entrepreneurship for everyone' era ends as state sets agenda
Nikkei Asia
A "digital innovation service center" in Shenzhen, established to support local startups, has encountered significant challenges, with many offices vacant and tenants primarily offering non-tech services like yoga classes. The decline in venture capital and private equity investment in China, which plummeted by 38.7% in the first half of 2024, has raised concerns about China's competitiveness in technology compared to the U.S., where investment fell only 3%. The decrease in funding is attributed to rising tensions between the U.S. and China, increased scrutiny of tech investments, and stricter Chinese regulations, which have made it difficult for startups to list in the U.S. As overseas investors withdraw, local government funding has replaced them, focusing on industries that align with state objectives, such as manufacturing rather than innovative tech startups. This shift indicates a growing state influence in the entrepreneurial landscape of China, leading to a mismatch between government policies and the aspirations of startups. While some signs of easing regulation are emerging, the overall trend suggests a more constrained environment for entrepreneurs, with state-led initiatives dominating the venture capital landscape.
https://asia.nikkei.com/Business/Technology/Tech-Asia/China-s-entrepreneurship-for-everyone-era-ends-as-state-sets-agenda
Does China welcome—or dread—an Iran-Israel war?
Economist
Last month, amid rising tensions between Iran and Israel, China organized a five-day film festival in Tehran, featuring the blockbuster "The Battle at Lake Changjin," which depicts the bravery of Chinese soldiers during the Korean War. The film's message resonated with nationalist sentiments in China, with bloggers expressing support for Iran's stance against the U.S. and Israel.
https://www.economist.com/china/2024/10/15/does-china-welcome-or-dread-an-iran-israel-war
Giant Pandas From China Return to National Zoo in Washington, D.C.
NY Times
A pair of giant pandas, Bao Li and Qing Bao, arrived at the Smithsonian’s National Zoo in Washington, D.C., on Tuesday, marking the return of panda diplomacy after an 11-month absence. The 3-year-old pandas traveled from China and were escorted in a motorcade through the city. Their visit is part of a 10-year agreement with the China Wildlife Conservation Association. The National Zoo was closed for their safe transfer, and the public will be able to see the pandas after a quarantine period. The arrival generated excitement, with media present and local businesses offering panda-themed treats.
https://www.nytimes.com/2024/10/15/us/politics/pandas-china-national-zoo.html
The Gotion effect: will a Chinese company’s project in Michigan help swing the US election?
South China Morning Post
The presidential race between Donald Trump and Kamala Harris is intensifying amid geopolitical tensions, particularly regarding a Chinese battery manufacturer's project in Michigan. Gotion High-Tech's proposed $2.4 billion plant has sparked controversy, leading to the recall of local officials who initially supported it. Following a federal lawsuit that allowed the project to proceed, Harris faces dissent from within her party, especially among Arab-Americans concerned about the Biden administration's stance on Israel. Michigan, a crucial swing state with 15 electoral votes, is pivotal for both candidates. Polls show Harris leading Trump by a narrow margin, but the Republican Party is leveraging the Gotion controversy to galvanize voters. Trump has publicly opposed the project, framing it as a threat to American jobs and security, while emphasizing his commitment to American manufacturing. The Gotion dispute also reflects broader anxieties about China's influence, resonating particularly in rust-belt states where voters prioritize security concerns over climate issues. As the election approaches, the controversy surrounding Gotion could significantly impact Democratic prospects in Michigan, with candidates like Elissa Slotkin seeking to distance themselves from the project.
https://www.scmp.com/news/china/article/3282508/gotion-effect-will-chinese-companys-project-michigan-help-swing-us-election?utm_source=rss_feed
Retired officers can rejoin Hong Kong police as part-timers under scheme to tackle staff crunch
South China Morning Post
Hong Kong's police force is introducing a part-time reemployment scheme for retired officers to address severe manpower shortages. Commissioner Raymond Siu announced that constables who retired within the last three years could return for roles like street patrols and mentorship, enhancing peer learning for new recruits. The initiative aims to relieve pressure on frontline staff and pass on valuable experience. Officers can work one to three days per fortnight, earning up to HK$235 per hour. The force currently faces over 6,000 vacancies amid challenges in recruitment and retention.
https://www.scmp.com/news/hong-kong/law-and-crime/article/3282506/retired-officers-can-rejoin-hong-kong-police-part-timers-under-scheme-tackle-staff-crunch?utm_source=rss_feed
LVMH sales fall 3% as demand in China for luxury goods worsens
The Globe and Mail
LVMH, the French luxury giant, reported a 3% decline in third-quarter sales, marking its first quarterly sales drop since the pandemic. The company generated €19.08 billion ($20.8 billion) in revenue, falling short of the 2% organic growth forecast by analysts. The fashion and leather goods division, which includes major brands like Louis Vuitton and Dior, saw a 5% decline, significantly underperforming expectations. Sales in Asia, particularly in China, worsened, with a 16% drop in revenue. Concerns about the luxury sector's health have increased due to economic uncertainty and a slowdown in consumer spending, especially in China. Analysts predict that this quarter may be the worst for the luxury goods sector in four years.
https://www.theglobeandmail.com/business/international-business/article-lvmh-sales-fall-3-as-demand-in-china-for-luxury-goods-worsens/
BMW, other European EV makers follow China's lead to small models
Nikkei Asia
European automakers, including BMW and Volkswagen, are enhancing their electric vehicle (EV) offerings with smaller models to compete against cheaper Chinese imports. At the Paris Motor Show, BMW revealed new electric vehicles under its Mini brand, while Volkswagen reduced the price of its ID.3 EV. The shift towards smaller EVs responds to declining sales, with a 6% drop in European EV registrations this year. Partnerships with Chinese companies, like Stellantis with Leapmotor, aim to provide affordable options but raise concerns about the future of Europe's automotive industry due to potential outsourcing of manufacturing.
https://asia.nikkei.com/Business/Automobiles/Electric-vehicles/BMW-other-European-EV-makers-follow-China-s-lead-to-small-models
China unveils road map to become world leader in space science by 2050
South China Morning Post
China has announced a comprehensive plan to become the global leader in space science by 2050, targeting 17 priority areas including the search for extraterrestrial life and understanding the universe's origins. The strategy involves three stages: achieving significant advancements by 2027, becoming a leading space power by 2035, and launching 30 missions by 2050. Key projects include lunar and Mars missions, alongside international collaborations for a permanent lunar research station. Despite its late start in space exploration, China aims to address its current shortcomings in space science and enhance its global standing.
https://www.scmp.com/news/china/science/article/3282479/china-unveils-road-map-become-world-leader-space-science-2050?utm_source=rss_feed
Huawei trifold phone's resale frenzy cools shortly after launch
Nikkei Asia
Huawei's new trifold smartphone, the Mate XT, experienced a significant drop in resale prices shortly after its launch on September 20. Initially priced at 23,999 yuan ($3,370), the phone saw resale values soar to around 37,000 yuan, a 50% markup, due to high demand and limited initial supply. However, by October 8, prices fell to between 28,000 and 29,000 yuan, reflecting a 20% markup, as supply increased and production was expected to double, according to Huawei executives. Factors contributing to the price decline included an expected rise in manufacturing, a slowdown in China's economy affecting consumer sentiment, and limited initial availability in certain regions. While resale prices are unlikely to drop to retail levels before the end of the year, further economic deterioration could impact prices negatively.
https://asia.nikkei.com/Business/Electronics/Huawei-trifold-phone-s-resale-frenzy-cools-shortly-after-launch
One day, all matters of state will be decided through Strictly Come Dancing. That day seems near
Guardian
The article discusses the growing cultural significance of the BBC show "Strictly Come Dancing," suggesting it has become a focal point for political and social discourse in contemporary society. The author references a recent incident involving pro dancer Katya Jones and opera singer Wynne Evans, which sparked controversy over their on-screen interactions, leading to public scrutiny and apologies. The situation highlights the absurdity of modern media analysis, with commentary from a body language expert dissecting their apologies in detail. The author also touches on Gregg Wallace’s recent troubles related to past comments on-set, reflecting the intense scrutiny light entertainment figures face. Amidst these controversies, the author questions whether "Strictly" is bearing an undue cultural burden, likening it to battery chickens over-farmed for production. The show, initially intended for entertainment, now carries the weight of contemporary culture wars and social commentary, prompting reflection on the role of such programs in current society. Overall, the article critiques the pressures and expectations placed on entertainment platforms in a post-streaming era, where few shows still unite audiences in significant numbers.
https://www.theguardian.com/commentisfree/2024/oct/15/strictly-come-dancing-row-wynne-evans-katya-jones
India to buy 31 armed drones from the U.S.
Nikkei Asia
India has finalized a deal with the U.S. State Department to purchase 31 MQ-9B SkyGuardian and SeaGuardian drones, enhancing its surveillance and intelligence capabilities. This agreement, which follows discussions that began in 2018, aligns with U.S. efforts to reduce India's reliance on Russian military equipment and counter China's influence. The procurement was approved by India's defense authorities last year ahead of Prime Minister Modi's visit to Washington and received Pentagon approval in February. The drones will primarily be utilized by the Indian navy in the Indian Ocean Region, as China and Pakistan's advanced air defense systems pose challenges for their use along India's land borders.
https://asia.nikkei.com/Politics/Defense/India-to-buy-31-armed-drones-from-the-U.S
CATL, world’s largest EV battery maker, launches R&D centre in Hong Kong
South China Morning Post
Contemporary Amperex Technology (CATL), the leading electric vehicle battery manufacturer, has opened a research and development centre in Hong Kong's Science Park, aiming to enhance the city’s status as a global innovation hub. The centre will initiate 75 R&D projects and hire 200 professionals, collaborating with local universities. CATL plans to invest HK$1.2 billion in new energy technology, focusing on green manufacturing and renewable energy. Amid rising political tensions, the centre offers CATL a strategic foothold in Hong Kong, which is seen as a less sensitive location than the US for its operations and potential listings.
https://www.scmp.com/business/article/3282460/catl-worlds-largest-ev-battery-maker-launches-rd-centre-hong-kong?utm_source=rss_feed
Nobel Prize-winning research pushes Chinese economists to call for institutional reforms
South China Morning Post
Chinese economists have called for institutional reforms following the Nobel Prize in economics awarded to Daron Acemoglu, Simon Johnson, and James Robinson. Their research highlights the importance of "inclusive institutions" for economic success, which promote the rule of law and property rights. Prominent economist Xiang Songzuo emphasized that China should move towards market-oriented reforms, protecting private entrepreneurs' rights to foster sustainable growth. Despite recent stimulus policies, concerns persist about China's slowing economy and the need to address deep-rooted institutional issues. Acemoglu noted that authoritarian regimes struggle with long-term innovation sustainability, questioning China's economic model.
https://www.scmp.com/economy/global-economy/article/3282472/nobel-prize-winning-research-pushes-chinese-economists-call-institutional-reforms?utm_source=rss_feed
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