How China’s Covid-19 self-reliance could lose momentum; Exclusive Insight: Bank of China's executive shakeup has resulted in a major winner
China’s top lenders tout limited exposure to western banking crisis; North Korea may be close to completing new nuclear reactor; Biden may visit Japanese chip plant on G7 summit sidelines
Welcome to this issue of The China Brief. Today is April 4, 2023. Here at The China Brief, we bring you the latest news on China's politics, economy, and society from global media sources and exclusive expert analysis. If you find our content helpful, please subscribe to our newsletter.
And here’s today’s exclusive insight:
Exclusive Insight: Bank of China's executive shakeup has resulted in a major winner
Over the past year, senior executives at China's state-owned large commercial banks have been frequently changed. The recent investigation into the early retirement of Bank of China's former chairman, Liu Liange, sent shockwaves through the industry. These personnel changes are part of Xi Jinping's larger initiative to clean up the financial sector.
Despite the measures taken by China to stabilize financial risks, its financial industry has lagged in market-oriented reforms, creating a space for rent-seeking. Corruption has been rampant, with personnel controlled by Wang Qishan, Zhou Xiaochuan, Chen Yuan, Zhu Rongji, and others.
As China reshapes its financial regulatory system, a significant number of new bankers born around 1970 have replaced the protégés and cronies of these individuals, who are retiring, being arrested, or marginalized. Among these new bankers, Chen Siqing stands out as the biggest winner. Born in Hunan, Chen Siqing served at the Bank of China for a long time, including a brief stint at the Bank of China's Fujian Branch, where he established a direct confidential relationship with Xi Jinping.
Through his special relationship with Xi Jinping, Chen Siqing has cultivated numerous protégés and cronies, successively occupying leadership positions in major commercial banks, central banks, and local governments. His protégés include Zheng Guoyu, the newly appointed chairman of China Postal Savings Bank; Wang Bing, the newly appointed deputy general manager of China Construction Bank; Chen Huaiyu, who will become deputy governor of Hainan at the end of this year; Wang Zhiheng, the president of Everbright Bank since last year; and Zhang Qingsong, who will become deputy governor of the People's Bank of China in August 2022. Chen Siqing's promoted cadres at ICBC have also begun to be transferred to other state-owned commercial banks as leaders, such as Zhang Xiaodong, the newly appointed deputy general manager of the Bank of China.
The success of Chen Siqing's protégés and the relatively weak professional background of some new chairmen, like Ge Haijiao, the new chairman of the Bank of China, indicate Xi Jinping's personnel shortage in the financial sector. As the ongoing personnel cleanup continues, only old subordinates and relatively young, less experienced bankers can occupy positions, suggesting that the leadership of the new generation of state-owned banks will continue to change.
Coincidentally, today is the birthday of the low-key Chen Siqing, which also marks the last day of his professional career. To be able to stand alone amidst turbulence is a rare feat. Before leaving, he mentored and supported a group of younger generations, which is even more commendable.
(This article was written by Liu Xiaohong, a financial practitioner and special analysis expert for "The China Brief".)
Japan protests China's detention of national, seeks early release
Nikkei Asia
Japan's Foreign Minister, Yoshimasa Hayashi, has called for a detained Japanese citizen in China to be released as soon as possible, during his first face-to-face meeting with his Chinese counterpart, Qin Gang, in Beijing. Hayashi also requested consular access and transparency in the judicial process. The citizen, who was arrested last month, is a senior employee of Japanese pharmaceutical firm Astellas Pharma. The two authorities agreed to maintain close communications “at all levels” to improve ties.
Top graduates in Singapore, Malaysia eyeing Hong Kong career path: Paul Chan
South China Morning Post
Hong Kong Finance Minister Paul Chan Mo-po has dubbed the city "the best platform" for improving cooperation between China and the region. Following a visit to Malaysia and Singapore, Chan said many students at both universities he visited had expressed an interest in testing out their careers in the Asian business hub. The trip was intended to strengthen business links, with IT, biomedical, and AI company representatives in Malaysia also showing an interest in Hong Kong's innovation and technology policies. Asked about any negative impacts competition between China and the region might have, Chan said economic growth could only boost the entire economic pie.
Li Auto, Xpeng report second straight month of growth in deliveries
South China Morning Post
Li Auto and Xpeng reported growing sales deliveries for the second consecutive month in March in mainland China, easing a downward trend in the auto market. Li Auto handed over 20,823 cars to Chinese customers last month, a 25.3% increase from February, while Xpeng delivered 7,002 EVs to buyers, up 16.5% from February. Meanwhile, deliveries for Nio fell 14.6% last month to 10,378 EVs. Teslas' sales data for China is not disclosed; however, the US EV maker's Shanghai-based factory delivered 33,923 Model 3s and Model Ys in February, a 26.4% increase from January.
Zelensky Denounces ‘Absurd’ U.N. Security Council Presidency for Russia
NY Times
Ukraine’s President, Volodymyr Zelensky, has slammed the UN Security Council’s decision to allow Russia to hold the presidency for April, describing the situation as “obviously absurd and destructive”. The move comes as the International Criminal Court (ICC) accuses Russian troops of committing war crimes in Ukraine. Senior officials claim Russia has already forcibly taken an estimated 20,000 Ukrainian children from the war-torn region. Despite 450 children being killed as part of the conflict, China, India, and the United Arab Emirates, three of the Security Council’s 15 current members, continue to steer clear of openly accusing Russia of being the main perpetrator. President Zelensky calls on these neutral states to take a “moral position” towards Russia and condemn the accusations. The role of the UN Security Council’s presidency is usually ceremonial. However, the decision to allow Russia to hold this position has been interpreted as controversial by its neighbors and international human rights groups.
China’s top lenders tout limited exposure to western banking crisis
Financial Times
China’s top banks, including the Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of China, have all reported no direct damage to their books from last month’s emergency rescue of Credit Suisse and following the collapse of Silicon Valley Bank. The banks are reporting to regulators the stress-testing results against risk exposure due to the EU and US banking sectors. Concerns remain over Chinese banks’ cash management and liquidity. However, Zhang Yi, Vice President of the Bank of China, said that while his bank had not been affected by the crisis, it still planned to adjust offshore assets and deposits. ICBC, the world’s largest bank, reported a net profit of RMB360bn ($52bn) for 2022, up 3.5% on the prior year.
The scrutinizing highlights lingering market concerns over Chinese banks’ cash management and liquidity against the backdrop of growing geopolitical tension and financial system turbulence, and the biggest lesson for China’s financial system planners and regulators is not to “create the environment” that puts banks into a similar position as SVB and Credit Suisse, according to Beijing-based research company, Plenum. Despite better-than-expected financial results, China’s top lenders each warned of persistent risks stemming mostly from the property sector. At CCB, the non-performing loan ratio for property nearly doubled year on year.
North Korea may be close to completing new nuclear reactor: US think tank
South China Morning Post
New satellite images suggest North Korea may be close to completing a new reactor in its major nuclear complex in Yongbyon. The Washington-based website 38 North, which tracks events in the country, reported that construction crews are working on a support building at the site’s Experimental Light Water Reactor (ELWR) development, and water discharges have been spotted near the ELWR’s pump house, near testing of the reactor’s cooling system. This is perhaps the most substantial evidence so far that the ELWR “is nearing a transition to operational status”. This comes simultaneously as reports emerge that North Korean leader Kim Jong-un visited a facility producing nuclear bombs earlier this week and reiterated his order to expand the North’s nuclear arsenal massively. His visit to the facility came as the nation carried out a series of weapon tests, including ballistic missiles designed to deliver a nuclear warhead.
North Korea already operates a five-megawatt reactor at Yongbyon, which has been running since July 2021. Commercial satellite images from March 2022 show new construction for the reactor’s spent fuel storage building. “Together, these developments seem to reflect Kim Jong-un’s recent directive to increase the country’s fissile material production to expand its nuclear weapons arsenal,” the website said. Officials in Seoul and Washington have warned since early 2022 that North Korea may conduct its seventh nuclear test.
Biden may visit Japanese chip plant on G7 summit sidelines
Japan Times
US President Joe Biden is expected to visit a Micron Technology semiconductor factory in west Japan when he visits for the G7 summit in May. The factory run by Micron Technology’s Japanese unit, began mass producing advanced memory chips last November and will receive subsidies from the Japanese government. The Biden administration is providing huge subsidies to expand its domestic chip industry, seeing it as being important for national security and providing a competitive edge against China. Washington and Tokyo have been strengthening their semiconductor supply chains to address concerns over Beijing's growing military and economic clout. Japan and the Netherlands, home to leading chip-making equipment producers, are expected to limit exports of high-end semiconductor technology to China at the request of Washington.
Sluggish Hong Kong office-rental market shows signs of picking up
South China Morning Post
Hong Kong’s office-rental market is showing signs that the three-year decline in rents may be bottoming out, with more leasing inquiries leading to rents predicted to rise again by the end of the year. The reopening of the border with mainland China has reportedly led to a significant increase in inquiries. The largest landlord, Hongkong Land Central, said inquiries are growing alongside greater landlord confidence. Colliers’ head of office services, Fiona Ngan, agreed that “landlords have greater confidence and are panicking less.” Office rents in Hong Kong have dropped 22% in the last three years, but the decline has shown signs of slowing. Rents are predicted to edge up by about 3% in Q4, according to Ngan. At the end of March, overall office rents had fallen by 0.8%.
For Leaders Abroad, the Prospect of a Trump Revival Is Ever-Present
NY Times
Leaders around the world are preparing for a possible return of Donald Trump to the White House. The American legal system has not prevented leaders from making contingency plans around a possible regime change. Although the indictment of Mr. Trump in New York could potentially impact these plans, foreign leaders believe that Mr. Trump's political resilience renders his prospects of returning to the White House higher. If Mr. Trump's legal troubles depose him from political viability, some fear he could be replaced by candidates like Ron DeSantis, the Republican governor of Florida, who shares many of Mr. Trump's political beliefs.
The fear of a Trump restoration has deep roots in Europe, where leaders are concerned that any fundamental change in US foreign and domestic policies may lead to a resurgence of Trump-like politicians. Although Mr. Trump is unique, Kim Darroch, a former British ambassador to the United States, warns of a new generation of politicians following in Mr. Trump's footsteps. Even if Trump is no longer in the picture, there are plenty of other Republicans looking to push the US down the same road.
The possibility of Mr. Trump returning to power plays into the hands of countries with an agenda discordant with American interests. In the Middle East, countries like Qatar, Saudi Arabia, and the United Arab Emirates are investing in a private-equity fund started by Mr. Trump's son-in-law Jared Kushner. These investments reflect a desire to remain on good terms with the former President or his family in anticipation of his potential return to political power. Moreover, adversaries such as Russia and China are capitalizing on the situation to create propaganda material reinforcing the narrative of an America in decline.
How China’s Covid-19 self-reliance medical goal could lose momentum
South China Morning Post
According to experts, China has a six-month window to authorize mRNA Covid-19 vaccines and antiviral drugs but may struggle to maintain momentum. A wave of winter infections affecting 80% of the population appears to have stabilized, with fewer than 8,000 daily cases reported over the past two weeks, prompting speculation that approvals should be given for more effective and durable treatments. China has pledged to develop its own mRNA vaccines as part of its technological self-reliance drive, with CSPC Pharmaceutical's vaccine estimated to neutralize a range of Covid-19 variants. China's National Medical Products Administration has also authorized two other oral antivirals to combat Covid-19. Meanwhile, a rush to develop domestic clinical trials is facing delays, with firms such as Yisheng Biopharma still waiting for approval to test its vaccine, which the we, Philippines, and United Arab Emirates have already authorized.
China Ready to Speed Up Talks With Asean Over South China Sea
Bloomberg
Chinese Premier Li Qiang said China is ready to help accelerate consultations for a South China Sea code of conduct with Malaysia and other Southeast Asian countries so as to maintain peace and stability in the region jointly. He commented during talks with Malaysian Prime Minister Anwar Ibrahim in Beijing. The Association of Southeast Asian Nations (ASAN) and China have been in talks for nearly 20 years on a code of conduct for the disputed waters. China lays claim to more than 80% of the South China Sea based on a 1947 map. Tensions have risen among several regional countries, including Malaysia, Indonesia, Vietnam, and Brunei, as Beijing builds on disputed islands, reefs, and land formations and militarises them with ports, runways, and other infrastructure.
China’s over-50s cut out of the job market in economic recovery
Financial Times
A growing population of older migrant workers in China are being left behind by the country's economic recovery following three years of pandemic restrictions. In the decade ending 2021, the number of migrants aged over 50 more than doubled to 80 million, compared with a 16% drop in workers in other age groups. China’s unequal social safety net has forced retirement-age migrants to keep working, with a lack of professional skills compounding their difficulties. Employers are prioritizing younger workers for the few low-skill manufacturing jobs on offer while higher-paying positions remain out of reach for most migrants. Factories nationwide have set age limits for job applicants at 40 years old or even lower.
More than two-thirds of migrant workers born in the 1960s only finished middle school, according to official data, while just a fifth have received professional training. Older workers disproportionately lack advanced education and skills that would allow them to transition into higher-paid or lower-intensity work as they age. Beijing has recently launched a campaign to provide free job training for migrant workers to address the skills shortfall, but the initiative is targeted at younger workers.
Insufficient social security coverage and minimal savings have kept many retirement-age laborers in the workforce, often in casual, low-paying jobs. Official data shows less than a quarter of migrant workers, many of whom work informal jobs, have ever paid social security tax. Less than 1% have made the 15 years of monthly payments necessary to qualify for an urban pension worth several thousand renminbi. Most receive a rural pension of less than Rmb200 monthly, a fraction of factory or construction wages.
At Mayan ruins, leaders of Taiwan and Guatemala reaffirm ties
South China Morning Post
The Presidents of Taiwan and Guatemala have sought to reaffirm the friendship between their countries during a visit to the ancient Mayan citadel of Tikal. Alejandro Giammattei called Taiwan “the one and only true China,” while Taiwan's Tsai Ing-wen thanked him for his support last year when China conducted military maneuvers near the island. Guatemala is one of Taiwan's 13 diplomatic allies around the world. In recent days neighboring Honduras has opened diplomatic relations with Beijing. Some Guatemalans believe their country is losing out economically by choosing Taiwan over mainland China. Tsai will now visit the country of Belize, where she will meet Prime Minister John Briceno on Monday before stopping in California on her way home to meet US House Speaker Kevin McCarthy, carrying out an invitation first made four years ago. China has warned the US that it is “playing with fire” through its relationship with Taiwan.
Biden’s Landmark Climate Bill Lures China’s Clean Energy Giants
Bloomberg
Leading Chinese renewables firms are looking to build factories in the US after a landmark bill to support local clean energy manufacturing was passed in August. After the Inflation Reduction Act, the US rebuilt its reputation as a cleantech manufacturing hub last year. China's response to the new climate policies is to explore US production and research facilities. Although deepening tensions between the two nations have led to China's wind turbine company Ming Yang Smart Energy only exploring the country's position, three of its clean energy peers - JA Solar Technology in Arizona, Longi Green Energy Technology in Ohio, and Jinko Solar in Florida - have begun construction in the US. The building boom is due to growing foreign investment incentives under the bill.
The bill also represents President Joe Biden's intention to reduce US reliance on imports and boost the domestic cleantech industry. Biden wants more foreign companies to set up clean energy manufacturing factories in the US, but Chinese companies are concerned. The US has faced accusations of being adversarial towards Chinese firms due to the scrutiny of battery maker Contemporary Amperex Technology's tie-in with Ford Motor and the national security debate on the social media app TikTok. Beijing has even launched its probe of the CATL-Ford deal to protect its position in the industry.
Qihoo 360’s founder shrugs off calls for pause in AI research
South China Morning Post
Zhou Hongyi, the founder and chairman of cybersecurity firm 360 Security Technology, has stated that a potential pause in the development and use of advanced artificial intelligence (AI) will not impact China’s AI progress. This follows calls from major players including Steve Wozniak and Elon Musk for a temporary halt in more advanced AI tech than Microsoft-backed OpenAI’s GPT-4. Zhou argued that such a pause would not hinder China’s development of large language models, stating that the country was two years away from where GPT-4 is currently situated. While tech giants, including Apple and governments such as Germany and France, support the moratorium idea, some experts have said that the Chinese tech industry would suffer if a moratorium were enforced. Andrew Ng, a leading AI expert, called the idea “a terrible idea” that sets “a terrible precedent and is an awful policy for innovation”.
Aid or trade? Is North Korea set to reopen its door to China amid the food crisis?
South China Morning Post
Analysts have said that North Korea may be on the verge of fully restoring cross-border trade with China, as the nation is in dire need of rice, grain, flour, sugar, and cooking oil. The hermit state, which is yet to follow China in relaxing its COVID-19 restrictions, has closed its borders for three years, putting a strain on the economy and creating food shortages. A cross-border trade rail link with China resumed in January last year. Still, cargo trucks have been unable to cross between the border cities of Dandong and Sinuiju, which would typically account for 70% of bilateral trade. Last year, North Korea harvested 4.5 million tonnes of rice while the amount of rice consumption per year is estimated to be 5.8 million tonnes, leaving a shortfall of 1.3 million tonnes.
Experts warn that North Korea needs to fill this gap with international aid or trade with China. China’s General Administration of Customs data said bilateral trade rose by 142.8% YoY to $327.4m in combined figures for January and February, having been slashed due to virus curbs on either side of the border. Pyongyang has distributed military rice to the private sector and ordered each North Korean laborer in China to send ¥1,000 ($145) back to North Korea as it scrambles to find ways to improve its food crisis. The South Korean Ministry of Unification has said that while the current situation is not at the level of the Arduous March (the famine in the mid-1990s that caused up to estimated 3 million deaths), the food crisis has recently led to “deaths from starvation occurring one after another in some areas of North Korea”.
‘Not a secret visit’: WA Premier plans trade trip to ‘reconnect’ with China
The Sydney Morning Herald
Premier Mark McGowan of Western Australia is leading a trade delegation to China, scheduled to start on 17 April. The mission will include high-level discussions with the central government and industry leaders in various Chinese sectors. The visit comes after Western Australia's iron ore and other resources helped form more than half of Australia's total goods trade with China in 2021-22, worth AUD$143.6bn ($110.4bn), according to Reuters. Australian states have been working to strengthen ties with China after legal tensions and trade issues emerged, reducing exports of Australian goods to China. In mid-March, Adelaide-based company Paxton Wines announced it was withdrawing from a state program to boost its exports to China after Chinese distributors dropped the deal. Although the state government said it would support Paxton Wines, the move is part of a wider downturn in exports to China, including barley and beef.
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