Li Qiang’s road to China’s premiership; Exclusive Analysis: Can Immigration be the Solution to Singapore's Aging Population?
China’s New Premier Li Qiang Has Xi’s Ear; Chinese-Brokered Deal Upends Mideast Diplomacy and Challenges U.S.; Biden Administration Set to Further Tighten Chipmaking Exports to China
Welcome to today's issue of "The China Brief", where we summarize the latest news and analysis on China from various sources. In today's issue, we cover topics ranging from China's new premier Li Qiang and his challenges, to China brokering a deal between Saudi Arabia and Iran, to the impact of China's CATL on the electric vehicle battery market, and more. We also examine the Dutch curbs on ASML chip machines, South Korea's increasing engagement with the Quad, and warnings from US cybersecurity officials about China's threat to the US energy industry.
And here’s today’s exclusive insight:
Exclusive Analysis: Can Immigration be the Solution to Singapore's Aging Population?
Singapore, Hong Kong, and numerous countries worldwide are facing a common challenge: aging populations. In Singapore, the proportion of elderly citizens (aged 65 and above) is 18.4%, while in Hong Kong, it is slightly higher at 20.9%.
Singapore has capitalized on its government's adept management and social stability, anchored by its public housing policy. The ratio of residents in public housing to private housing in Singapore is 80:20, effectively mitigating the wealth gap.
In contrast, Hong Kong's public housing policy differs from Singapore's. Despite exceeding development expectations, several waves of population influxes created a housing shortage relative to population growth. Ineffective governance since the return and failed land policies compounded the problem, resulting in social contradictions and an inadequate housing environment.
The ratio of residents in public housing to private housing in Hong Kong is 46:54 (2022), and inadequate public housing supply coupled with a 5.5-year waiting period for citizens to relocate exacerbates social contradictions.
Both regions must grapple with aging populations through immigration policy adjustments and talent attraction. However, Singapore's hard-earned social stability and housing policies require a cautious approach to introducing talent. Most immigrants during the pandemic were high net-worth investment immigrants, which is insufficient to address the future aging problem. Encouraging local births and attracting young immigrants through employment visas, skilled migration, and talent programs are crucial.
The housing supply for new immigrants is a critical consideration for the Singaporean government. The incoming population must have adequate living quarters while preserving valuable housing balance and social harmony. Singapore has consistently maintained a permanent resident population of approximately 500,000, representing a substantial challenge for relying on immigration strategies to combat aging in the future.
(This article is the 3rd in the series "Can Singapore Replace Hong Kong?”. The author of this article, Shen Yeya, is an investor and a special analysis expert for "The China Brief.”)
FT: From wooing Tesla to Xi’s right-hand man: Li Qiang’s road to China’s premiership
China's new premier, Li Qiang, faces a daunting in-tray as he takes over from Li Keqiang, with the nation's flagging debt-fuelled growth model requiring a revamp, and the sweeping restructuring of the state, announced this week, to be overseen. Li must also manage his boss, President Xi Jinping, whose sudden policy changes on issues including cracking down on internet companies to Covid-19 controls have unsettled investors. Li's pro-business credentials, honed as the Communist party boss in Shanghai, will be tested as China's economy faces many challenges including the US sanctions, the real estate crisis, and the ageing of China. As with many in Xi’s inner circle, Li owes his rapid rise to a close association with the Chinese leader when they both served in provincial jobs. Li is "uniquely positioned to lead the new administration" given his experience in heading "the most developed regional economies in China with critical contributions from private, foreign-invested, and state-owned enterprises", said Eric Zheng, head of the American Chamber of Commerce in Shanghai. However, his record was blemished last year after he implemented one of the most stringent and, in the eyes of many, mismanaged Covid lockdowns in China.
NYT: Chinese-Brokered Deal Upends Mideast Diplomacy and Challenges U.S.
China has brokered a deal to restore relations between Saudi Arabia and Iran, upending traditional Middle East alliances and leaving the US on the sidelines. The US has welcomed the re-establishment of diplomatic relations but privately suggested that too much was being made of the breakthrough. Analysts say it is unclear how far the rapprochement will go and whether it will end hostilities. The agreement comes as the Saudis seek more than the US is ready to give in return for opening formal ties with Israel, and as Iran deepens its relations with China and Russia.
WSJ: China’s New Premier Li Qiang Has Xi’s Ear
Li Qiang, China's new premier, has surprised many by showing that he is more than a mere loyalist to Chinese leader Xi Jinping. Since becoming No. 2 in the Communist Party hierarchy last fall, Li has played leading roles in freeing China from zero-Covid and refocusing the government on economic growth. This has kindled cautious optimism among entrepreneurs, investors, and political analysts that he may be able to exert a moderating influence on Xi. Li's close relationship with Xi, dating back to the early 2000s, has led many political observers to speculate that he will function more or less as a yes-man to the Chinese leader. However, Li has taken a leading role in shaping some of the party's most important decisions over the past months, leveraging his trust with Xi to roll back policies that might have otherwise caused more lasting damage to the economy.
Li's ability to collaborate effectively with other senior leaders has been key to finding a path out of zero-Covid and reviving the Chinese economy. He has enlisted the help of He Lifeng, the head of China's top economic planning agency, who joined the party's 24-member Politburo in October. Together, they drafted a plan to pivot away from regulation toward encouraging economic growth. On broader economic policy, Li has suggested Chinese regulators loosen their grip on internet giants to boost confidence.
Li has also made overtures to the business elite, offering assurances about the government's support for the private sector while trying to persuade those who had decamped abroad during the pandemic to return to China. However, Li continues to offer fervent support for some of Xi's policy priorities that have unnerved the business elite, including demands for achieving "common prosperity" - a campaign aimed at making China more egalitarian that some analysts say clashes with Beijing's recent moves to shore up growth.
Li's appointment as premier was rubber-stamped by China's legislature in a vote on Saturday. The 63-year-old, who is constitutionally limited to two terms as premier, is slated to hold his first news conference in his new role on Monday after the legislature concludes its annual session.
WSJ: How Beijing Boxed America Out of the South China Sea
China has gradually built up military outposts in the South China Sea, now dominating the strategic waters through which trillions of dollars in trade pass. Beijing claims nearly all of the disputed sea and has turned reefs into artificial islands and military bases with missiles, radar systems, and air strips, causing problems for the US Navy. China's gains in the waters are now so entrenched that, short of military conflict, they are unlikely to be reversed. The US missed the moment to hold back China's buildup because it was focused on collaborating with Beijing on global issues. The US maintains an active military presence in the South China Sea through strategic patrols, combined and multinational exercises, and upgrading its force posture in the Indo-Pacific.
FT: China’s CATL cements position as EV battery leader with jump in profits
China's Contemporary Amperex Technology (CATL) has announced an increase in annual profits, consolidating its position as the world's largest electric vehicle battery maker, just days after a warning from China's leader, Xi Jinping, regarding the risks of success amid growing geopolitical rifts with the West. Xi's message was interpreted as a caution that CATL could be vulnerable to a reliance on overseas raw materials while the US and China are at odds. The group also faces increasing competition from local rivals, such as BYD, while the US and EU promote their domestic battery industries. Despite this, CATL's full-year revenue surged 152% to a record of CNY328.6bn ($51.2bn), and its annual net income rose 92.9% to CNY30.7bn.
SCMP: China’s ‘two sessions’ 2023: will science shake-up strengthen innovation or ‘shock’ scientists?
China is planning a major overhaul of the Ministry of Science and Technology, which oversees fundamental research and applied science, to make it more efficient and stimulate innovation. The changes will involve many of the ministry’s management and subordinate agencies being handed over to other ministries with specific expertise. The restructuring has been welcomed by scientists, who hope it will mean less emphasis on research publications and awards and more on innovation and in-depth study. However, some have raised concerns about the potential unfairness in funding decisions, which other agencies will now make.
Bloomberg: Biden Administration Set to Further Tighten Chipmaking Exports to China
The Biden administration plans to announce new restrictions on the export of semiconductor manufacturing equipment to China, which could double the number of machines requiring special licenses for export. The move comes after restrictions were imposed in October, requiring licenses for certain machines and limiting US citizens from working in China and other countries that could threaten national security. The latest provisions will involve coordination with the governments of Japan and the Netherlands, two key countries for chip manufacturing gear. The move will further upend a chipmaking industry that the earlier restrictions have already impacted.
FT: MGM China leads casino operator recovery in Macau
According to recent earnings reports, MGM China and Melco Resorts have emerged stronger from the pandemic than their Macau casino operator rivals. While revenues were down more than 75% for both companies compared to 2019, their share prices have soared by 114% and 144%, respectively, over the past six months, while the other four companies saw increases of between 23% and 55%. Analysts predict Macau's gross gaming revenue could return to more than 50% of pre-pandemic levels by the end of 2023. MGM China has gained market share in mass-market gamblers and high-stakes players thus far into the post-Covid recovery, according to an analyst report.
Bloomberg: New Dutch Curbs on China Sales Target Three ASML Chip Machines
According to sources familiar with the matter, the Netherlands plans to add three models of ASML's lithography machines to its export controls to China. The restrictions, announced this week, would prevent the shipment of TWINSCAN NXT:2000i, NXT:2050i, and NXT:2100i models, which are immersion deep ultraviolet lithography machines. The Netherlands faces pressure from the US to limit exports of chipmaking technology to China but is hesitant to cut off one of ASML's biggest markets.
FT Op-ed: China’s reform generation is retiring
Chinese officials, including Premier Li Keqiang and top economic adviser Liu He, are expected to step down during China's annual political congress this weekend. The current cadre of officials became experts at marketing China's opportunities to Western investors. They were defined by their experience of the Reform and Opening Up era spearheaded by Deng Xiaoping in the late 1970s. However, the new group of leaders is not as committed to this direction, and what unites them is their loyalty to President Xi Jinping. According to the author, the new leaders' economic ideologies are difficult to discern, and their focus should be on building social infrastructure.
SCMP: South Korea, under pressure from China, is moving closer to the Quad
South Korea plans to increase its engagement with the Quadrilateral Security Dialogue, or Quad, taking a “gradual approach” to joining the group. South Korea sees its interests as “more aligned” with those of the Quad states amid growing pressure from China. The Quad consists of the US, India, Australia, and Japan. The move is also motivated by South Korea’s desire to diversify its economic exposure to China and increase its commitments to nuclear defense. The Chinese foreign ministry spokeswoman has said that countries should stay away from “exclusionary blocs.”
Bloomberg: China is ‘Big Threat’ to US Energy Industry, Cybersecurity Official Says
Jen Easterly, director of the US Cybersecurity and Infrastructure Security Agency, has warned that the US energy industry needs to protect itself against cyberattacks from China, which she said is a more pressing concern than attacks from Russia amid its war on Ukraine. Speaking at CeraWeek by S&P Global, Easterly stated that China would need to put American infrastructure at risk to increase the chances of a successful campaign against Taiwan. She added that many energy firms need to build redundancies and manual overrides to withstand attacks, and company executives must embrace national security as a matter of corporate governance.
Reuters: SVB’s China Partner Urges Calm, Says Business Not Affected
Shanghai Pudong Development Bank said that its joint venture with Silicon Valley Bank (SVB) in China is not affected by SVB's turmoil, and urged clients to remain calm. SVB's liquidity problems have raised concerns in China, as the joint venture has been lending aggressively to startups and funds that cannot borrow from traditional banks. Several venture funds focusing on China have reached out to their portfolio companies to gauge how much exposure they have to SVB.