Macron put forward July plan for Russia and Ukraine negotiations, enlisting China's help; China expected to lower fine on Ant Group to about $700 million
Blinken says Beijing needs to make its intentions clear; Kremlin says Brazil's Ukraine plan deserves attention, hasn't seen French proposal
Welcome to this issue of The China Brief. Today is April 18, 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.
Kremlin says Brazil's Ukraine plan deserves attention, hasn't seen French proposal
Reuters
The Kremlin has praised Brazil's efforts to mediate in the Ukraine conflict, following Brazilian President Luiz Inacio Lula da Silva's proposal to establish a group of countries to broker peace. However, the Russian government has not seen any peace deal plans presented by France, following reports that French President Emmanuel Macron is looking to approach China with a plan that could form the basis for talks between Russia and Ukraine. As various countries seek to position themselves as possible peacemakers, Russia says it is open to talks, but only on its own terms and with Ukraine accepting the "new realities" on the ground.
China’s economy: five takeaways from first-quarter GDP data
Financial Times
China's economic recovery can be seen from its first-quarter GDP data, which showed that retail sales grew 10.6% in March and exports expanding by 14.8% YoY. However, economists warn that the recovery is still in the early stages, with much of the rise in retail sales being attributed to the low base effect of last year's lockdown of Shanghai. Private sector investment grew only 0.6% in the quarter, "suggesting business confidence still has a long way to go to be fully restored." Many economists expect a weaker outlook ahead due to declining global demand.
Russia's Shoigu: partnership with China is stabilizing influence
Reuters
Russian Defense Minister Sergei Shoigu told his Chinese counterpart Li Shangfu that their countries' military cooperation should be seen as a "stabilizing" force in the world and helps "to reduce the potential for conflict". This comes as China has become Russia's most important international partner in the last 14 months following Moscow's invasion of Ukraine; the countries aim to deepen their military cooperation, with the West concerned about such an alliance. This follows our report yesterday on the continuing build-up of troops, missile systems and defensive infrastructure on both sides of the Russian-Ukraine border.
Hong Kong’s property market to show ‘obvious improvements in September’
South China Morning Post
The head of an association that represents property developers in Hong Kong has called on the government to drop its cooling measures, which have discouraged property speculation, as "they were preventing the earth from spinning." He added that it would take some time before obvious improvements in the city's property market were seen, with first-time home buyers largely driving current movements. Hong Kong's chief executive said that the measures were "still applicable," however, and it is still unknown when, or if, they will be lifted.
G7 top diplomats spotlight unity on China and Russia amid talk of rift
Japan Times
The Group of Seven countries emphasized their unity in tackling geopolitical challenges, including Chinese assertiveness over Taiwan and the ongoing war in Ukraine, in a joint statement closing out three days of talks in Karuizawa, Nagano Prefecture. The G7 foreign ministers stated they had underlined their “strong sense of unity as the world navigates grave threats to the international system” while reaffirming their “commitment to collective action” in addressing these challenges, in a direct response to fears about a rift within the G7 over relations with Beijing ahead of their summit. Comments by French President Emmanuel Macron calling for European powers not to be “followers” of China or the United States had threatened to undermine attempts by Japan, this year’s host and the sole member from Asia, to promote unity in urging China to adhere to global rules-based order.
Xi tells Kim to step up communications with China as Korean tensions rise
South China Morning Post
Chinese President Xi Jinping has sent North Korean supreme leader Kim Jong-un a message calling on the two nations to boost communication amid increasing strains on the Korean peninsula. Xi added that the changing international and regional situations demanded the strengthening of strategic communication between the two countries, with the aim of promoting communication to a higher level. China's new ambassador to North Korea has taken up his post at a time of escalating tensions on the peninsula with North Korea's most recent missile test sparking alarm across the region.
GF Securities investigated for inadequate due diligence amid IPO reform roll-out
South China Morning Post
Chinese brokerage GF Securities is being investigated by the China Securities Regulatory Commission (CSRC) for the inadequate review of a share issuance. GF Securities was taken to task over its sponsorship of the non-public issuance of shares by Misho Ecology & Landscape in 2018, which it "failed to exercise due diligence" over. The company said in a statement that it would "actively cooperate" with regulators and advised investors "to invest rationally and pay attention to investment risks." The brokerage is the latest to be investigated amid China's shift to a market-oriented IPO process.
U.S.'s Blinken says Beijing needs to make its intentions clear
Reuters
US Secretary of State Antony Blinken has called on China to clarify its intentions following President Joe Biden's meeting with leader Xi Jinping last year, saying this is imperative in moving forward with US-China relations. Biden met with Xi in November for a three-hour meeting aimed at preventing strained ties between the two nations from spilling into a new Cold War.
Exclusive: China expected to lower fine on Ant Group to about $700 million
Reuters
Chinese regulators are reportedly set to fine Ant Group approximately 25% less than the originally envisaged $1bn as they seek to bring an end to a multi-year crackdown on leading tech firms. Anonymous reports suggest the anticipated fine is set at CNY5bn ($728m). The payout would pave the way for Ant to gain a new financial holding company license amid efforts to revive its abandoned plans for a market debut.
China's emissions trading system is in need of attention
Nikkei Asia
Asia is expected to see significant progress in the development of emissions trading systems this year, according to Alistair Ritchie, director of Asia-Pacific sustainability at the Asia Society Policy Institute, and Yi Chen, senior program officer at the same organisation. The pair wrote in Eco-Business that 2020 would be the "year OTs are operationalised", meaning it would be the year they began to operate. Ritchie and Chen added that regional trading systems, such as China's national carbon market and the South Korean trading scheme, would expand.
With no evacuation in sight, Chinese citizens in Sudan face food shortages
South China Morning Post
Around 700 Chinese nationals in Sudan are at risk of food shortages following ongoing violent clashes between rival military factions, according to reports. Many are believed to have had no time to prepare for the violence and have limited supplies of food. Although local officials have stated that there have been no casualties among Chinese residents, the embassy in Khartoum has implemented emergency plans and issued alerts. More than 130 Chinese firms operate in Sudan.
China disputes U.S. claims of Chinese 'secret police station' in New York
Reuters
A spokesperson for the Chinese foreign ministry denied the existence of a Chinese "secret police station" in New York, following the arrest of two residents from the Chinatown district on Monday. The US alleges they were operating on behalf of Beijing and targeting dissidents, however, China says it maintains a policy of non-interference in other countries.
EU's von der Leyen addresses lawmakers on China ties
DW
European Commission President Ursula von der Leyen has told the European Parliament that China is moving away from the era of "reform and opening" and entering a new phase of "security and control". She emphasized the need for the EU to carve out its own distinct approach to dealing with China, saying that decoupling was not viable, but that there was a need to "de-risk" parts of the relationship. EU-China trade has become increasingly unbalanced over the past decade, with Chinese exports into the EU dwarfing European exports. Earlier this month, von der Leyen warned Chinese President Xi Jinping against supporting Russia's war in Ukraine.
Chinese households turn to jewellery and gold in flight to safety
Reuters
Chinese consumers' appetite for precious metals is soaring, with jewellery and precious metals consumption up 37.4% YoY in March, according to official data. But while it is a silver lining for businesses in the sector, it underlines the China's fragile economic recovery following earlier Covid restrictions. The trend comes as consumer interest in precious metals rises in the wake of recent global banking crises, as they are viewed as a hedge against inflation. Chinese households are saving more too, with household savings up CNY9.9tn ($1.5tn) in Q1 2021 after rising by CNY9.9tn in 2020.
Drop in China’s Chip, Tech Output Casts Shadow on GDP Recovery
Bloomberg
China's production of electronics, such as semiconductors and smartphones, has fallen this year despite the country's overall economic rebound, according to data from the National Bureau of Statistics. The output of semiconductors fell by nearly 15% in Q1 compared to the same period in the previous year, while smartphones production shrank 13.8%. The downturn in electronics output has slowed overall industrial output growth to 3.9% in March, while trade tensions between Washington and Beijing have caused businesses including Apple to seek production locations outside China, including India and Vietnam.
Macron Wants China’s Help to Bring Russia, Ukraine to the Table
Bloomberg
French President Emmanuel Macron has put forward a plan to open talks between Russia and Ukraine, which would rely on China agreeing to be an intermediary, according to those familiar with the situation. His foreign policy adviser, Emmanuel Bonne, has been tasked with working with China’s top diplomat, Wang Yi, to establish a framework that could be used as a basis for future negotiations. Macron has long believed China could play a role in ending the conflict in Ukraine because of the relationship between it and Moscow, but needs to persuade Ukraine’s allies of its neutrality.
FirstFT: China’s economy beats forecasts to grow 4.5% in first quarter
Financial Times
China has exceeded expectations with its economic growth, with the economy expanding by 4.5% YoY in the first quarter of 2021, as growth in exports and infrastructure investment, as well as a rebound in retail consumption and property prices, drove the nation's recovery. Economists predict that the country's growth will continue to pick up throughout the year, following Beijing's efforts to restore business confidence which was affected by last year's pandemic controls and sudden policy changes.
Xiaomi tops Russia market sales as Western brands retreat after Ukraine invasion
South China Morning Post
Chinese-made smartphones gained market share in Russia to take the top two positions after Samsung and Apple pulled out of the Russian market last year due to the country's invasion of Ukraine. Chinese models rose by 42% and now account for 70% of the market. Globally, virtually all growth in smartphone sales is now concentrated in developing countries as key markets become saturated, according to a report issued last week by Deloitte.
Russia building reserves in assets the West can't sanction - central bank chief
Reuters
Russia is building its international reserves using assets that cannot be targeted by Western sanctions, according to Russian Central Bank Governor Elvira Nabiullina. This is likely due to the fact that Western countries froze around $300bn, or half, of Russia's international reserves after it sent troops into Ukraine last year. The central bank has previously said it considers gold, Chinese yuan and foreign currency held in cash as safe from possible further rounds of Western sanctions.
Chinese province plans 30 bln yuan semiconductor fund to promote chip industry- Securities Times
Reuters
China's southern Guangdong province is set to launch a second phase of a semiconductor fund with a scale of CNY30bn ($4.37bn), investing in auto chips and semiconductor material manufacturing equipment. The country is increasing efforts to build self-reliance in key technologies as it faces US national security restrictions, while a previous semiconductor fund established in 2021 has already invested CNY31bn in 102 companies, 19 of which will seek IPOs in 2023 and 2024, according to the state media Securities Times. Other Chinese government-backed funds focused on the sector include the China Integrated Circuit Industry Investment Fund.
China says it’s willing to facilitate Israeli-Palestinian peace talks
South China Morning Post
China's Foreign Minister, Qin Gang, has stated that Beijing may be prepared to facilitate peace talks between Israel and Palestine. Qin raised concerns over the deepening conflict between the two sides with his Israeli and Palestinian Authority counterparts earlier this week, saying that the solution was to resume peace negotiations. During the telephone conversations Qin went on to say that China had no self-interest in the issue but hoped that Israelis and Palestinians could coexist peacefully and that the region could maintain peace and stability. Israeli-Palestinian peace talks have not happened since 2014.
Investment in China’s property sector remains weak despite home-sales surge
South China Morning Post
China's property market has continued to decline despite a 7.1% increase in sales. Property development investment fell 5.8% YoY to ¥2.6tn ($377.8bn) in Q1 2017, compared to the same period the previous year, according to data from the National Bureau of Statistics. Conversely, residential investment was down 4.1% at 1,976.7 billion yuan. Property investment has been in decline YoY since Q1 2016, in which there was a 0.7% increase, and for the full year fell 10%, its first double-digit drop.
Here's what analysts think of China's growth rebound
Reuters
China's economy grew by 4.5% YoY in Q1 2021, outpacing forecasts that anticipated GDP would expand by 4.0% YoY, according to data from the National Bureau of Statistics. The rate was faster than the 2.9% YoY growth recorded in Q4 2020. A quarterly growth rate of 2.2% YoY was recorded for Q1 2021, matching predictions. Fixed asset investment rose by 5.1% YoY between January and March, slightly less than anticipated, and ahead of a 0.2% drop in the previous quarter. Retail sales grew by 10.6% YoY in March following a rise of 3.5% YoY in the period January-February. Analysts were expecting growth of 7.4%. Industrial output, however, lagged behind expectations, expanding by 3.9% YoY.
Why Nato trains hackers to fight Russia in cyber space
Financial Times
Nato has launched its biggest-ever cyberwar games involving 3,000 participants from 38 countries in a bid to improve members' IT defences from attacks during an era of increased cyber security threat from countries such as Russia. The “Locked Shields” event, held at Nato’s Cooperative Cyber Defence Centre of Excellence in Estonia, is now in its 12th year but this year's event will be more realistic than usual to reflect the increasing number and sophistication of cyberattacks. Since hostilities in the Ukraine began in 2014, cyberattacks targeting European Union countries have risen sharply, accounting for 9.8% of the world total in February last year and 46.5% just seven months later.
Foxconn's Terry Gou makes his case to be Taiwan's next president
Nikkei Asia
Terry Gou, founder of Foxconn, has spoken about his 40-year experience in global industry to support his bid to become Taiwan's next president. Gou has also highlighted how he could improve economic ties with China. During his speech, Gou explained how Beijing's probe into Taiwan's trade barriers on over 2,400 Chinese imports emphasized the need for cross-strait communication.
China Must Show Intention to Keep Engaging With US, Blinken Says
Bloomberg
The US Secretary of State, Antony Blinken, has called on China to clarify its intentions towards the US as tensions between the two countries continue following the shooting down of an alleged Chinese spy balloon in February. Speaking after the close of the G7 Foreign Ministers' meeting, Blinken said that engagement was key, but that such moves would have to be initiated by China itself. A tentative rapprochement following President Joe Biden’s meeting with Chinese leader Xi Jinping last year was halted by the shooting incident, while two months have passed since Biden said he expected to speak with Xi about the issue.
China surveillance giant denies Pentagon spy claim
BBC
Chinese surveillance camera maker Hikvision has denied it is disguising its products when selling to US government suppliers to enable Chinese espionage. The allegations were made in a recently leaked Pentagon document that said the company was providing “vectors for Beijing to compromise DoD [Department of Defense] networks”. Hikvision supplies resellers, which add their branding and supply governments and companies. The US has already banned the use of Hikvision products in its supply chains, while the UK advised against installations in “sensitive sites”.
Exclusive: China Mobile explores acquiring Hong Kong telecom firm HKBN -sources
Reuters
China Mobile Ltd is reported to be considering buying Hong Kong-based telecoms provider HKBN Ltd, currently valued at $1bn. China Mobile has sent out requests to a small number of banks inviting them to advise the company on the potential takeover.
China economy rebounds after Covid measures lifted
BBC
China's economy grew at a faster-than-expected pace of 4.5% in the first quarter of 2021, compared to the same period in 2020, due to rising household spending and factory activity, as well as a rebound in its airline industry, according to official figures. Retail sales jumped 10.6% in March year on year, while output from the nation's factories climbed by 3.9%. Some analysts warn that the pace could decline in the coming months, as people seek to return to normal after the pandemic crisis and demand for manufacturing goods slows in a global economy that is weakening rather than strengthening.
Michael Dell says customers are demanding less reliance on China
Financial Times
Dell is seeking to purchase computer components from outside China in order to allay fears of supply chain disruption, according to the company's founder and chief executive Michael Dell. Customers have urged the company to diversify where it sources components as tensions have risen between China and the US, leading to growing concerns about supply chain disruption. Although many of Dell's components, including print circuit boards and casing are made in China, Dell has previously sought to prioritize diversification, emphasizing the importance of supply chain resilience.
Chinese genetics company targets US despite political tensions
Financial Times
MGI Tech – a subsidiary of BGI that has been blacklisted in the US over concerns about the security of Americans' genetic data – has said it will press ahead with the US rollout of its gene sequencing machines since it is "completely different" to its parent group. BGI founder Wang Jian owns 47% of MGI shares, and the National Counterintelligence and Security Center recently warned about concerns that Chinese genomic firms could acquire data from foreign populations such as those in the US. MGI is entering the US market just as its main rival Illumina is facing a battle with regulators and activist investor Carl Icahn.
Insider Selling Sends Chinese Tech Stocks Slumping After Rally
Bloomberg
Several Chinese tech companies saw a drop in share prices due to plans by major shareholders to reduce their holdings, which came as a shock to analysts ahead of earnings season. Roughly 40 companies announced overnight that shareholders or high level managers would be offloading their stakes, including stocks linked to artificial intelligence, suggesting a drop in China's tech sector. The announcement of insider trading comes amid already existing concerns that certain tech stocks could be overvalued.
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