Senior officials to take over China’s football body amid corruption crackdown; Zhejiang's Entrepreneurial Spirit: The Secret Behind Its Economic Success
Macron is EU's best bet for swaying China on Ukraine; EU's von der Leyen to visit China April 5-7; On foreign policy, Biden’s gut is his guide
Welcome to this issue of The China Brief. Today is April 3, 2024. 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:
Zhejiang's Entrepreneurial Spirit: The Secret Behind Its Economic Success
Zhejiang's signature entrepreneurial spirit has always been alive and well, even during Mao Zedong's rule. But what made this province so unique? Let's explore the reasons behind its economic success.
Before China's reform and opening-up policies, Zhejiang was a region preparing for battle, with little to no investment from the government. Its economy lagged behind, hindered by poor infrastructure and limited resources. Despite these obstacles, Zhejiang's private businesses continued to thrive, even during the most extreme leftist era.
For example, in the 1970s, while most areas had eradicated free markets, Jinhua City still boasted one. Farmers traded their surplus grains and economic crops like peanuts, fabric tickets and other vouchers. This market persisted despite government crackdowns and control.
As China's reform policies took effect, Zhejiang's commercial economy boomed like no other. One street in Jinhua City near the train station never closed, catering to customers 24/7. In contrast, during a visit to Beijing in the mid-1980s, I discovered that state-run stores closed for lunch, while shop clerks took naps during the day and were impolite to customers.
Today, Zhejiang is a bustling entrepreneurship hub, with everyone racing to make money. While some are still dragging their feet, Zhejiang has already made incredible strides. Private businesses have always been part of Zhejiang's DNA. When I graduated from middle school in the 1970s, I couldn't find a job, so I became an apprentice at a small collective factory. These small collectives were initially small business owners, such as blacksmiths who had their own shops. Nowadays, these individual business owners can organize themselves into a collective enterprise, and the money they earn from their businesses still belongs to themselves.
(This is part seven of the "Zhejiang, Zhejiang People, Zhejiang Economy" series, written by a Zhejiang researcher named Ye Feng.)
EU's von der Leyen to visit China April 5-7
Reuters
Ursula von der Leyen, President of the European Commission, and French President Emmanuel Macron will travel to China from 5 to 7 April, according to China's foreign ministry. Last week, von der Leyen said that Europe needed to "de-risk" diplomatically and economically with China which was becoming more repressive at home and more assertive abroad. "China stands ready to work with the EU and take this visit as an opportunity to tap further the potential to address global challenges and provide more stability and positive energy to a world fraught with uncertainties," said foreign ministry spokesperson Mao Ning. The EU and China have come into conflict on a range of issues, from its cozy relations with Russia to alleged human rights abuses in recent years. However, Beijing remains one of the EU's biggest trade partners. Von der Leyen will meet with Macron for a working lunch on 5 April to discuss issues ranging from Russia's war on Ukraine to the energy sector and preparations for their joint meetings with Chinese President Xi Jinping.
Oil Prices Jump, Signaling a ‘Proactive, Pre-emptive’ OPEC
NY Times
Saudi Arabia recently announced that it will be cutting its oil production by 500,000 barrels a day in a "precautionary measure aimed at supporting the stability of the oil market." The announcement was unexpected and its immediate result was a spike in oil prices. Brent crude, the international benchmark, rose as much as 8% before settling back to an increase of around 5%, to about $84 a barrel. The decision could be seen as a threat to global efforts to curb inflation and a challenge to the Biden Administration. However, Saudi Arabia's oil minister, Prince Abdulaziz bin Salman, remains determined to keep prices high, possibly in the $90 a barrel range.
The Saudi news and cutbacks announced by big OPEC producers will bring a reduction of over 1 million barrels a day, or about 1% of global oil supplies, starting from next month.
Senior officials to take over China’s football body amid corruption crackdown
South China Morning Post
The Chinese Football Association (CFA) is being placed under the control of a team of senior sporting officials as China's leadership attempts to crack down on corruption in sport. The move follows an announcement that deputy head of the sports administration and CFA vice-chairman, Du Zhaocai, is being investigated for "suspected violations of discipline and law" – in effect an allegation of corruption. The group comprises Li Yingchuan, an author and education professor who was previously dean of the Capital University of Physical Education and Sports in Beijing, as well several other top ranking officials. The General Administration of Sport oversees and regulates sporting activities in China and is also involved in planning big international events such as the Winter Olympics.
On foreign policy, Biden’s gut is his guide
Washington Post
An article in the Washington Post has described US President Joe Biden's approach to foreign policy as being guided by instinct and experience rather than sweeping theories or cut-and-dried principles, despite his articulation of siding with democracies in their global battle with autocracies. The article is based on interviews with nearly two dozen White House aides, administration officials, former Biden staffers, members of Congress, and experts.
Much of Biden’s third year in office will likely focus on foreign policy, given that House Republicans, now in control of the chamber, will likely do all they can to block his domestic agenda. Biden has lined up a busy schedule of foreign travel for 2023, including trips to Japan, Australia, Europe, India, and Africa.
Exclusive: Russia shifts to Dubai benchmark in Indian oil deal - sources
Reuters
Rosneft and Indian Oil Corp have agreed to use the Asia-focused Dubai crude benchmark to deliver Russian oil to India, according to unnamed sources. The deal, announced last week, is part of a broader shift of Rosneft’s oil sales towards Asia following the changing geopolitical landscape since Russia’s invasion of Ukraine. Indian refiners rarely bought Russian oil in the past due to higher freight costs compared to Europe. Still, Urals prices have dropped to historical lows, which Russia has used to replace Iraq as top oil supplier to the country in recent months. The larger volumes and shift from Brent prices to Dubai prices illustrate closer ties between Russia and India and Rosneft is sending a clear message that it is pivoting its trade eastwards from Europe towards Asia, primarily India and China.
Hurun says Kweichow Moutai China’s most valuable brand for fifth straight year
South China Morning Post
Shanghai-listed Kweichow Moutai has been named China's most valuable brand for a fifth consecutive year by the Hurun brand rankings. The liquor maker's value was equivalent to the total value of the next six brands combined on the list, including WeChat's parent Tencent, JD.com and ByteDance’s Douyin. Hurun, which measures brand value using economic data and consumer surveys, found that 62% of ranked companies had been created by the private sector, rising from 61% in the previous year and 39% a decade ago. The brand rankings showed that trust in consumer brands, particularly in Chinese liquor, was holding firm despite economic woes, pandemic pressure and market volatility. The top 300 brands had endured a 14% fall in value to 7tn yuan ($1.07tn), while the entry threshold for the top 100 had dropped to 13.5bn yuan, down 2bn from the previous year.
Sales of TikTok owner ByteDance neared Tencent’s level in 2022
South China Morning Post
ByteDance's revenue exceeded $80bn in 2022, an increase of more than 30% from 2021, according to a memo from the firm seen by The Information. The growth matches that of Tencent following the success of TikTok and Douyin. ByteDance’s business proved resilient despite the increased risk of global recession and other concerns, particularly regarding access to data. TikTok's and Douyin's siphoning of ad spend from other social media platforms is driven by more cost-conscious marketers shifting attention towards faster-growing video services. ByteDance's double-digit margin was stronger than those of Amazon and Meta Platforms, among other global internet leaders. The growth was achieved despite the possibility, and its realisation in India, of a ban or shut down of the popular TikTok, particularly in the US due to concerns over China’s access to gathered data.
Macron is EU's best bet for swaying China on Ukraine
Nikkei Asia
Some European leaders believe that China could act as an intermediary with Russia to resolve the crisis in Ukraine. As the situation in Ukraine becomes more dangerous, Europe’s leaders are under pressure to find ways to resolve it. However, Western European leaders have been hesitant to impose tougher sanctions on Russia, and are beginning to consider China as a partner in resolving the issue. China has carefully avoided taking sides in the Ukraine conflict, and some believe it may be able to use its close ties with Russia to defuse the situation. Furthermore, China has an interest in maintaining stability in the region, and its economic growth is reliant on energy supplies from Russia. As Europe continues to put pressure on Russia, it will be important for European leaders to build closer ties with China to engage it on this issue.
China dissatisfied with Japan's chip export restrictions -spokesperson
Reuters
China has expressed displeasure over Japan's move to impose export controls on semiconductor manufacturing equipment. The restriction affects 23 types of equipment, and comes after Japan aligned its technology trade controls with the US, aimed at curbing China's ability to make advanced chips. China hopes Japan will stand by its previous statements of cooperation and take an unbiased stance on the matter.
Chinese lenders focus on risk management amid global banking crisis
Reuters
China's biggest lenders should have firmer risk-management practices and be more alert to macroeconomic changes, according to China Finance, a magazine affiliated with the China central bank. The comments by Xie Xiaoxue, from the credit management department of China Construction Bank, come after the failure of US banks Silicon Valley Bank and Signature Bank earlier this month. Executives at China's five largest banks recently said that the lenders' exposure to the global banking crisis is limited, though they emphasized the need to manage credit, liquidity and market risks.
‘We are ready to negotiate’: Malaysia open to South China Sea talks, PM says
South China Morning Post
Malaysia is prepared to negotiate with China over their dispute in the South China Sea, according to Prime Minister Anwar Ibrahim. The issue was raised at a meeting between Anwar and Chinese President Xi Jinping, as Malaysia has energy exploration projects in the area. Beijing claims sovereignty over almost the entire South China Sea, through which about $3tn worth of ship-borne trade passes annually. Malaysia, Brunei, the Philippines, Taiwan, and Vietnam all have some overlapping claims. Chinese vessels have, in recent years, passed by or lingered near Petronas operations, prompting protests from Malaysia. China has staked its claim to about 90% of the South China Sea via a U-shaped “nine-dash line” on its maps that was declared invalid in 2016 by an international arbitration ruling which Beijing does not recognize.
China’s Micron probe propels chip firms as investors bet on state support
South China Morning Post
Chips stocks in China surged from an investigation into US chip manufacturer Micron. An index tracking semiconductor-related stocks in Shanghai and Shenzhen rose by as much as 3.9%, boosting the CSI 300 Index by 0.9% for the fourth consecutive day. Memory-chip maker Shenzhen Kaifa Technology and central processing unit maker Ingenic Semiconductors jumped by 10% and 13%, respectively, while designer Dosilicon gained 14.7%. Analysts said the investigation boosted China's bid for self-reliance in the sector, paving the way for its semiconductor firms. Hong Kong-listed Semiconductor Manufacturing International Corporation rose 2.6% to HKD19.08 ($2.42). China's top internet regulator plans to conduct a cybersecurity review of Micron to safeguard the country's "key information infrastructure supply chain security".
China Warns Top Bankers of Deepening Crackdown on Corruption
Bloomberg
Top executives from at least six big state-owned banks were warned that China's banking industry crackdown was far from over as officials from the China Banking and Insurance Regulatory Commission and the Central Commission for Discipline Inspection called them in for a meeting on the day former Bank of China Chairman Liu Liange was officially announced as being under investigation for serious violations. Over 20 financial executives have been probed or penalized for corruption since late February, and Bao Fan, a star banker and chairman of China Renaissance Holdings, disappeared from public view almost two months ago. The newest warning adds credibility to the notion that president Xi Jinping's anti-graft campaign is gaining momentum despite initial success being claimed last year.
China Renaissance delays results citing dealmaker's disappearance
Nikkei Asia
China Renaissance Holdings is delaying the release of its annual results and the suspension of its stock trading after its chairman, Bao Fan, was taken away by authorities. Auditors are reluctant to sign off financial results without being able to contact Bao, prompting China Renaissance to suspend trading until his release occurs. Bao's relationship with leading tech firms such as Meituan and Dianping has given him a high profile, and the initial announcement of his disappearance led to shares in the bank falling as much as 50%. The bank has said that the release of audited results is necessary to resume trading but added that it was now considering splitting the chairman and CEO roles in future. Despite its announcement, Chinese authorities have still made no statement regarding Bao's whereabouts, and the bank's shares remained down by around 10% this year.
China new home sales rise sharply in March - survey
Reuters
China's new home sales spiked by 55.7% month-on-month during March, buoyed by a range of supportive policies in 14 major cities, often dubbed to be first, second, and third-tier cities. Growth outpaced the 31.9% rise in February, according to data from the China Index Academy. Recent stimulus policies have aimed to prevent the country's property industry, a pillar of China's economic growth, from crumbling under the weight of various financial crises throughout 2021. Real estate developers' stocks rose 2.4% on the back of the news. Although the industry has seen some incremental recovery in recent weeks, homebuyers are increasingly returning to the market following the lifting of Beijing's strict "zero-COVID" policy last year. Some local governments continue to ease property curbs to support homebuyers and combat the industry’s troubles. A separate survey from the independent research agency found that the price of new homes across 100 Chinese cities is rising at its fastest pace in nine months.
What Sanna Marin’s defeat means for Finland — and Europe
Financial Times
Despite being one of the most popular prime ministers in Europe, Sanna Marin's party, the Social Democrats, came third in Finland’s general election picking up 43 seats in the parliament of 200. Marin was internationally respected for her progressive views, strong support for Ukraine, and successful campaign for Finland’s membership of NATO. However, she was ultimately undone by her handling of Finland's domestic economy which was out of favor with Finns, who voted with the bloated national debt in mind. Marin's rightward opponents, who pledged to reduce government spending, won the election. That may have lessons for Europe’s other left-wing leaders with the eyes of the polls as the continent’s inflation woes continue, with the cost of living as a significant theme in campaigning for Poland’s upcoming general election.
Meanwhile, Montenegro has elected a centrist president Jakov Milatović with a handsome margin, and Bulgaria has held its fifth parliamentary election in two years. Exit polls suggest a knife-edge result between the centrist We Continue the Change and the center-right Gerb party. As European countries face economic crises, the winning parties will face the challenge of creating a thriving economy while still adhering to societal challenges raised by the populaces.
Private Chinese firm takes big step towards developing reusable rockets
South China Morning Post
Beijing Tianbing Technology has sent into space the first privately owned liquid-propellant rocket, known as the Tianlong-2. Also known as Space Pioneer, Tianbing has received funding to develop an even larger reusable vehicle than its new orbital structure. Reusables more effectively cut the cost of space missions, and China has seen a surge in commercial space firms to support its ambitions. The country currently operates more than 400 satellites in space. Its latest five-year plan (2021-25) includes a mandate for an integrated network of orbiting technology for communication, remote sensing and navigation.
China’s ports dominance undermines western aims to loosen trade ties
Financial Times
Western companies looking to shift manufacturing from China to other Asian countries may struggle to loosen ties with the Chinese, given China's investment in ports, transport infrastructure, and manufacturing capacity. More than 80% of all goods are transported by ship, and western companies have allocated funds to restructure their supply chains away from China due to rising US-China tensions. However, shipping industry figures are warning that other countries in Asia will have to also invest in port infrastructure to handle the mega-container ships that drive world trade, or western countries will find it difficult to move operations out of China effectively.
This is due to the large amount of investment that Beijing has put into its infrastructure. From 2016 to 2021, China invested a minimum of $40bn in coastal port infrastructure, enabling China’s dominance as the world’s manufacturing leader. Large vessels made up around two-thirds of the shipping capacity for services between east Asia and Europe. Still, while China has 76 port terminals able to support large ships carrying over 14,000 20ft containers, other Asian countries have just 31 between them.
How China is winning the race for Africa’s lithium
Financial Times
The global race for lithium, a key raw material for automotive batteries, has led to a mineral cold war between China and the West. China currently holds a dominant position in many minerals that are crucial for the energy transition, such as cobalt, lithium, and rare earth metals. However, the rapid uptake of electric vehicles is expected to drive a nearly fivefold increase in lithium demand by 2030, creating concerns over access to critical minerals at an all-time high after Russia’s invasion of Ukraine and amid escalating tensions between the West and China. The EU and a growing number of US states have plans to stop selling petrol and diesel cars by 2035, a deadline that leaves little lead time to discover good lithium deposits and develop them to consistent production.
China's involvement in the global industrial supply chain is significantly expanding, including the development of refining capacity. Until similar facilities are operational in Europe or Africa itself, China will remain the primary customer for Africa's lithium. China's head start in the development and building of refineries is causing concern for the West who are preparing to spend hundreds of billions of dollars to try to catch up.
UK pledges greater transparency of how it scrutinizes deals
Financial Times
The UK government has vowed to increase transparency over the operation of flagship security legislation giving ministers the ability to block deals on national security grounds. The government is expected to update guidance on the national security and investment act to give businesses more information about what to expect when deals are subject to vetting. Plans to hold roundtables with companies have also been revealed. Cabinet Office Minister Oliver Dowden, who oversees the act has stated that he wants to engage with businesses to convey that “Britain is and should remain open for business and for investment”.
Since the legislation came into force at the start of 2022, around 800 transactions have been scrutinized, of which ten have needed remedies with five blocked or unwound. Advisers have complained that the investment security unit does not provide informal or early guidance to deal makers, as happens under the American equivalent known as the committee on foreign investment in the US. Advisors have also criticized the lack of transparency in the process, which offers limited features for businesses to track a deal’s progress and only provides basic disclosure about findings and remedies.
Taiwan clings to its rare diplomatic friends as China looms large
Financial Times
Guatemalan President Alejandro Giammattei welcomed Taiwan's President Tsai Ing-wen with military honors recently, praising the “historical bond of brotherhood and democratic values” between the countries. Giammattei said the visit “allows us to renew our recognition of the Republic of China (Taiwan) as a sovereign, independent country," adding that the relationship provides relief in the face of China’s unrelenting campaign to rattle and isolate the country. The visit to Guatemala and Belize, Taiwan’s most loyal remaining diplomatic allies, followed Beijing’s recent switch of recognition from Taiwan to China by Honduras.
According to an anonymous Taiwanese diplomat, "what they really want is not more aid but trade and investment," but this is a struggle for Taiwan to provide as Taiwanese companies cannot be forced to invest in Guatemala or Belize. Some Taiwanese diplomatic allies hope to attract investment from Taiwan’s technology companies or receive assistance to build chip-manufacturing capacity, an industry in which Taiwan currently dominates.
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