New classified US military documents on Ukraine, China appear online; Zhejiang's Economic Success: From State-Owned Enterprise Sell-Offs to 'One County, One Industry; One Village, One Product' Model
China launches planes, warships around Taiwan; Xi Jinping wanted China to be a global soccer power. What went wrong?
Welcome to this issue of The China Brief. Today is April 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.
And here’s today’s exclusive insight:
Exclusive Insight: Zhejiang's Economic Success: From State-Owned Enterprise Sell-Offs to 'One County, One Industry; One Village, One Product' Model
Zhejiang is a province in China that has few state-owned enterprises, and those that do exist were sold off quickly. This is due to the fact that Zhejiang is located in the southeast front line and is always prepared for war, but the government does not invest much in the region, including even the roads. As a result, government intervention in the economy is relatively low.
About 20 years ago, during the end of the last century and the beginning of this century, property rights were reformed. At that time, Wang Yang was the mayor of Tongling and became famous for an article he wrote called "Wake up, Tongling." The state-owned enterprises were quickly sold off, like melting ice, to avoid losing their value. While some regions faced difficulties during the state-owned enterprise reform, such as the three northeastern provinces, Zhejiang had few state-owned enterprises to begin with and quickly sold off what they had, leaving only a few major enterprises related to the national economy and people's livelihood.
The government's control over enterprises is relatively limited in Zhejiang due to language barriers, making it difficult to communicate and manage when working in the countryside in the 1980s and 1990s. Furthermore, the government institutions were relatively small, and there were few urban households. For instance, in the author's county, there were only 400 graduates from the 66th and 67th primary school classes, and only about 40 people went to college. Those who entered the system were very rare. However, industrial development in the three northeastern provinces was relatively advanced, resulting in a larger population within the system and a heavier financial burden.
Despite these challenges, Zhejiang province quickly developed on the basis of individual private economy and formed a scale advantage of "one county, one industry; one village, one product" in the market economy reform and opening up. This resulted in the emergence of industrial clusters, such as Yiwu's small commodities, Dongyang's construction and woodcarving, P'an'an's Chinese medicinal materials, Shengzhou's ties and socks, Zhuji's pearls, Shaoxing's textiles, Huangyan's glasses, and Qiaotou's buttons. These small things were made by the entire county, and when one village made money from it, other villages followed, forming a chain of industrialization with low costs and high sales. Although the profit margins were small, it quickly took over the entire market.
(This is the tenth article in the "Zhejiang, Zhejiang People, Zhejiang Economy" series, written by the Zhejiang researcher, Ye Feng.)
Tesla might lose ground as likes of Xpeng, BYD steal a march with made-for-China EVs
South China Morning Post
Tesla is facing increased competition in China from domestic EV makers, who are attracting buyers with advanced digital features and autonomous driving capabilities. In a JD Power survey of Chinese car buyers, Nio's ET7 was ranked as the most desirable EV brand in China, followed by Xpeng's G9 sport utility vehicle in second place and Li Auto's L9 in sixth. Tens of thousands of buyers are switching to Chinese EV makers such as BYD, Nio, Xpeng and Li Auto from Tesla, which was ranked in 10th place. Chinese buyers show a keen interest in new in-car technologies, such as digital cockpit development, interactive entertainment and voice command systems catering for various Chinese accents. The attractions of domestic brands include their superior autonomous driving capabilities, with Chinese smart EVs offering AR, VR technologies and immersive experiences that many Tesla cars lack. Tesla's advanced driver-assistance software full self-driving (FSD) has not been approved for use in China, giving domestic rivals a lead in the race for newer, more sophisticated technologies.
New classified US military documents on Ukraine, China appear online
South China Morning Post
US officials have said that Russia or pro-Russian actors are most likely behind the leak of classified US military documents on social media that offer a partial, month-old depiction of the war in Ukraine. The documents, which appear to have been altered to reduce the number of casualties suffered by Russian forces, represent “secret” US and Nato war plans. A further batch of documents, going into areas including China, was also leaked later on Friday, according to The New York Times. The CIA said that it was “aware” of the posts and was investigating the claims. The US Justice Department said it has begun a separate investigation into the leaks, prompting questions over why the US was doing its own investigation.
Many experts believe that the leaks are part of a much bigger game being played by Russia, over what is actually happening in Ukraine. This point was also reflected by Mykhailo Podolyak, a Ukrainian presidential official, who said that the leaked information contained a “very large amount of fictitious information” and looked like a Russian disinformation operation to sow doubts regarding Ukraine’s planned counteroffensive.
‘Serious warnings’: China launches planes, warships around Taiwan
The Sydney Morning Herald
China began military drills in waters and airspace around Taiwan on 8 April, lasting three days, warning off what it alleged were Taiwanese separatists “colluding with external forces”. The country’s defense ministry reportedly detected 13 aircraft and three naval vessels. The drills, however, appeared less expansive than those China carried out last year after then Speaker of the US House of Representatives Nancy Pelosi visited Taiwan, after which China held missile tests and military activities near Taiwan, and imposed six exclusive zones around the island it banned ships and aircraft from. The latest drills came after the country hit out against US officials' visits to Taiwan, and are further believed to be part of Beijing’s tactics towards Taiwan in what Taipei fears is a process of increasing military domination by the mainland. French President Emmanuel Macron and European Commission President Ursula von der Leyen had just completed a trip to Beijing when the drills were announced.
As the Ukraine war grinds on, the EU finds it needs China more than ever
CNN
The European Union is walking a tightrope in its diplomacy over relations with China amid pressure from the US and tension with Russia. As China seeks to gain strategic and geopolitical ground, particularly in relation to Taiwan, Beijing's strength lies in its economy. However, the EU has declined to punish Putin's Russia – China's close ally – in the same manner, it has Russia, marking a reluctance to divert from its energy and military dependence on Moscow. Contrarily, the EU sees China as an essential partner as it seeks to transition from Russian gas energy to renewables; China's low-cost solar panels would benefit the bloc in achieving its climate goals.
France's President Emmanuel Macron visited China recently to foster ties and asked Chinese President Xi Jinping to help “bring Russia to its senses, and bring everyone back to the negotiating table." China and the EU have had a strained relationship but have reached an investment deal – currently on ice due to political differences and China's clampdown on Uighur Muslims – after years of negotiations. Although there is skepticism among some EU states towards China's geopolitical and military ambitions, many realize that a successful economic relationship is essential for the bloc to become an important geopolitical player.
‘A nightmare for the Five Eyes’: New batch of classified documents leaked to social media
The Sydney Morning Herald
Sensitive documents containing US national security secrets covering Ukraine, China, and the Middle East have been posted on social media sites. Security analysts have been assessing the documents, believed to number more than 100, to examine their significance. The authenticity of the papers has been confirmed. A senior intelligence official called the leak “a nightmare for the Five Eyes”, referring to the US, UK, Australia, New Zealand, and Canada, which share intelligence. The leak could have serious national security implications.
The leakage consists of photographs of weapon delivery charts, troop and battalion strengths, and other classified material. The documents are thought to have been deliberately leaked by someone wishing to damage US, Ukrainian, and NATO efforts. Even as officials were investigating the leak, further documents began to emerge leading to suggestions that this could be the tip of the iceberg. Security experts have opined that modifying stolen documents, in order to change the message, is a common Russian disinformation tactic.
Xi Jinping wanted China to be a global soccer power. What went wrong?
CNN
China's drive to become a soccer superpower has been dealt a blow by the pandemic, leaving the country's soccer fortunes in tatters. China's soccer premier league owed its boom to a surge in spending, thanks to a property boom and state-affiliated firms and developers flooding the league with cash. However, the pandemic has accelerated its downfall, making it impossible to gain revenue from league sponsors and broadcasters, along with stricter pandemic rules resulting in fewer fans watching live games and in turn fewer sponsors. Clubs have struggled to pay wages, with foreign players and coaches brought in to raise the standard of the domestic game quitting because of the government's onerous "zero-Covid" stance that had made seeing their families impossible.
The consequences of these forces combined are hard to overstate, with club after club forced to shut down as they struggle to balance the books or keep up with their superstar wages. China's strict "zero-Covid" policy meant clubs were required to train and compete in "bio-secure" venues that players were unable to leave for months at a time. The pandemic was creating havoc for the firms bankrolling player salaries, with property developers having less cash to splash around. In a bid to foster local talent, the Chinese Football Association in 2017 raised taxation on overseas signings, whereby any club that spent more than $7m would have to pay an equal amount to the CFA, resulting in clubs tightening their wallets, affecting fan turn-out and sponsorship interest.
China's drive to produce local talent and foster local talent is faltering, from the signing of naturalized oversea players to the funding of thousands of football schools to encourage youngsters to take it up. A soccer superpower may take a while, but it's not out of reach.
Chinese football in crisis again as 7 clubs are suspended over unpaid wages
South China Morning Post
Seven Chinese football clubs, including former Super League team Guangzhou City and last year's League One outfit, Shaanxi Chang’an Athletic, have been banned from the forthcoming league season for failing to pay wage arrears. The country's Football Association has disqualified the clubs from league registration and says that players are entitled to unilaterally terminate their contracts. The governing body hopes other clubs will learn from the seven clubs' mistakes and pay attention to long-term planning, safeguarding the legitimate rights and interests of their players, coaches and staff, and promoting the sustainable development of professional leagues. On the international stage, the women’s national team drew 0-0 away to Switzerland ahead of the FIFA Women’s World Cup.
Analysts tip Cainiao to be first Alibaba unit to IPO given pivotal overseas role
South China Morning Post
Cainiao, Alibaba's logistics division, has reportedly held talks with banks regarding a Hong Kong listing later this year, and is now viewed as the likely first for an initial public offering (IPO) under Alibaba's restructuring plan. The firm, the only one of six subsidiaries that is likely to achieve profitability ahead of the other five, is estimated to be worth over $20bn. In Q4 2020, it reported 27% revenue growth to $2.4bn, much of which came from external customers. It covers over 200 countries and regions, and has expanded its international logistics network in the last year, despite global supply chain problems. It intends to construct an air cargo centre to increase cross-border e-commerce opportunities between China and Latin America. Analysts point to the fact it plays a "critical role" in supporting Alibaba's e-commerce operations worldwide.
Asian Banks Are Luring Investors Who Think They’re a Safer Bet
Bloomberg
The US banking crisis is driving investment into Asian assets as investors believe that China and the region's emerging economies are better placed to handle the fallout. Citibank analysis suggests Asian financial markets have tightened less than the US with the majority of Asian currencies performing strongly against the dollar. An index of financial stocks in the region (excluding Japan) has risen since Silicon Valley Bank's collapse, compared to the almost 10% drop in the American banking index over the same period. Following the US, Asia received strong inflows into emerging-market equity funds in March with China receiving over 70% of funds.
HSBC is among those suggesting China's rebound will benefit the whole region. However, there are various risks including China's worsening relationship with the US, its gloomy factory data and a potential spillover from Europe and North American financial instability.
The banking crisis might also lead to Asian tech money invested in the US flowing back into Asian economies. Singapore will be the major beneficiary, according to Prashant Newnaha, macro strategist at TD Securities.
Beijing signals importance of neighbors amid ‘growing weariness’ from the West
South China Morning Post
The visits to China by Southeast Asian leaders Lee Hsien Loong of Singapore and Anwar Ibrahim of Malaysia reflect the importance of the region to Beijing and suggest that it may be willing to maintain good relationships despite tensions with the West. Singapore, which counts China as its main trading partner, upgraded its bilateral relationship to an "all-round, high-quality and future-oriented" partnership, while China and Malaysia agreed to deepen economic cooperation under Beijing's Belt and Road Initiative. Observers believe the visits by Lee and Anwar indicate Chinese efforts to reach out to the region despite any substantial agreements appearing to focus solely on economic cooperation. They also suggest that China is prioritizing bilateral and multilateral relationships with its neighboring countries over those with the Western powers. Anwar has also stated that Kuala Lumpur will negotiate with Beijing over territorial disputes in the South China Sea.
How will Hainan free-trade port affect the Greater Bay Area and Asean?
South China Morning Post
China's Hainan island, referred to as the country's Hawaii, is being turned into a world-class free-trade hub, and by the end of 2025, there will be an independent customs regime in place. A simplified visa policy for nationals from 59 countries will make it easier for foreigners to visit and conduct business, as well as a center for offshore financing and duty-free shopping. Hainan is also seen as an opportunity for Hong Kong and the Greater Bay Area to collaborate in establishing a regional economic hub to rival other global financial centers. Although competition with Hainan's free-trade port is unavoidable, it also presents numerous business opportunities for collaboration. The island's development will complement Hong Kong and Guangdong, as it focuses on tourism, hospitality, and other service sectors, while the Greater Bay Area is focused on financial services. Hainan's free-trade port is also well-placed to increase its ties with the Association of Southeast Asian Nations (ASEAN), which has become China's most significant trading partner. By expanding trade links, Hainan is making visa requirements easier for citizens of RCEP nations and courting investment.
Foreign investors are being enticed by Hainan's relaxed regulations and incentives, with the tax rate in Hainan province lowered to 15%, compared to mainland China's 25% and Hong Kong's 16.5%. Following the relaxation of COVID-19 restrictions on international travel, duty-free rules to encourage spending have given Hainan a reputation as a luxury shopping destination. Tax regulations are set to be loosened even further. Luxury goods companies Moët Hennessy Louis Vuitton (LVMH), Hermès, and Richemont are considering expanding their investment in China, with Hainan's free-trade port as the fulcrum. In 2021, Hainan accounted for 13% of China's domestic luxury spending, compared to 6% pre-COVID-19. In the next few years, Hainan could become the world's largest duty-free market, overtaking South Korea.
Opinion: While America burns, Xi Jinping’s plot to dominate the world is quietly succeeding
Telegraph
China is increasingly taking the initiative for international diplomacy as the US fails to take global leadership, according to Douglas Murray writing in The Spectator. In recent weeks, Chairman Xi helped broker a Middle Eastern deal between Saudi Arabia and Iran and presented the Chinese plan for ending Ukraine's war in Russia, despite the US and other nations' rejection of the plan. Meanwhile, Emmanuel Macron turned to Beijing to pay homage, “trailing bribes that would have embarrassed a medieval monarch” as he asked for President Xi to bring Moscow to the negotiating table. The deal announced between China and Brazil also bypasses the dollar, using both yuan and reais directly exchanged instead. China's institutions are simply trying to become dominant while the West wobbles, said Murray. Murray's new book, The War on the West, has been released in paperback.
Russia arrests Chinese LGBTQ blogger for violating so-called same-sex ‘propaganda’ law
CNN
Russian police have arrested a Chinese LGBTQ blogger for propagating same-sex content online. Haoyang Xu was found guilty during a hearing on Thursday and faces deportation from Russia. He is being held in a temporary detention center for foreigners. Xu's Russian partner, Gela Gogishvili, has also been charged under the same law but has not been arrested. Last year Russian President Vladimir Putin signed a bill that expanded the ban on LGBTQ propaganda in the country. The law has been expanded several times since it was first introduced in 2013. Human Rights Watch has described it as an "unabashed example of political homophobia". Individuals who spread so-called "LGBT propaganda" or attempt to do so, can be fined up to 400,000 rubles. Legal entities can be fined up to 5 million rubles. Foreigners can be arrested for up to 15 days or deported, according to the text of the bill.
The book "Xi Jinping: The World's Most Powerful Man and His Subordinates" offers a comprehensive analysis of Xi Jinping's power structure, delving into his consolidation of control over the Communist Party of China, the military, and the economy, and exploring the systemic changes he has implemented. The book provides a detailed account of the personnel layout of the Communist Party of China's Central Political Bureau and the Central Secretariat, focusing on the 26 individuals who hold the most powerful and important positions in China, and provides readers with a clear understanding of the direction of high-level politics in China's future. The book is available on Amazon in Kindle eBook and paperback formats and in multiple languages.
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