Sweeping Chinese military purge exposes weakness and could widen
China factory contraction deepens, more stimulus on the cards; China struggles to disperse cheap loans to businesses in economic slowdown
Welcome to this issue of The China Brief. Today is December 31, 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.
Will the world see more wars or unrest in 2024?
ABC
The ongoing conflicts in Israel and Ukraine have overshadowed other countries that are experiencing civil unrest, which could potentially escalate into violence in 2024. Five countries to watch are Myanmar, where a military coup in 2021 has led to armed resistance and ethnic conflicts; Mali, which has a history of insurgent activity and is now at risk of civil war; Lebanon, where an economic crisis and political instability may lead to collapse; Pakistan, where the military has a history of removing elected leaders and upcoming elections may result in civil unrest; and Sri Lanka, where political dissatisfaction and economic hardships could lead to protests.
China factory contraction deepens, more stimulus on the cards
Nikkei Asia
China's manufacturing activity contracted for a third consecutive month in December, with the official purchasing managers' index (PMI) falling to 49.0 from 49.4 in November. The reading was weaker than expected and raises concerns about China's economic recovery. Analysts have said that China may need to implement fresh stimulus measures to boost growth, including interest rate cuts and a reduction in reserve requirement ratios for banks.
China struggles to disperse cheap loans to businesses in economic slowdown
Financial Times
Chinese banks are concerned about credit risk and businesses are reluctant to take on more debt, meaning that authorities are struggling to disperse $740bn in cheap loans to businesses. Half of the 14 People's Bank of China loan programmes have deployed less than 50% of their quotas since they began in 2020. The slow take-up highlights the challenges faced by Chinese policymakers to revive the country's economy, which has been hit by a real estate meltdown and a lack of private sector confidence.
China's first homebuilt superliner to make maiden voyage in January
Nikkei Asia
China's first domestically-built large cruise ship, Adora Magic City, will make its maiden voyage on 1 January 2022, taking passengers from Shanghai to Kyushu and Okinawa in Japan. The ship, built by Shanghai Waigaoqiao Shipbuilding, has 2,125 cabins and can carry 5,246 passengers. While the Chinese cruise market has been struggling since 2017, industry observers are hopeful that the launch of the Adora Magic City will help the market recover to pre-pandemic levels.
Singapore hedge fund eyes ‘big upside’ in Chinese stocks after four-year slump
South China Morning Post
The Hong Kong stock market experienced a turbulent year in 2022, with a significant drop in value and high levels of volatility. However, Singapore-based hedge fund manager Chua Soon Hock sees this as a unique opportunity to invest in Chinese and Hong Kong stocks, stating that "all the worst news is priced into the market" and that "for long-term investors looking for big upside in the future, high-quality Chinese stocks are a no-brainer." Despite the challenges, Chua believes that the risk-reward potential in the market is the best he has seen in 40 years of investing and trading.
World prepares to ring in 2024, bid farewell to a turbulent 12 months
South China Morning Post
As the world welcomes in the new year, it reflects on the challenges and milestones of 2023. The year was marked by a range of events, including climate crises, wars in Gaza and Ukraine, and the rise of artificial intelligence. It was also the hottest year on record and saw India become the most populous country in the world. As the new year begins, many hope for a better year ahead, free from conflict and with a focus on addressing global issues such as climate change.
CNN
North Korea will no longer seek reconciliation and reunification with South Korea, Kim Jong Un has declared, as his nation vowed to put three new military spy satellites into orbit in 2024. Kim said inter-Korean relations had become "a relationship between two hostile countries and two belligerents at war," the state-run news agency KCNA reported. "It's time for us to acknowledge the reality and clarify our relationship with the South," Kim said, adding that if Washington and Seoul were to attempt a military confrontation with Pyongyang, its "nuclear war deterrent will not hesitate to take serious action."
Hong Kong luxury retail sector likely to rebound in 2024 as brands return
South China Morning Post
Hong Kong's luxury retail market is expected to recover some lost ground in 2024 as high-end brands return to the city after being impacted by protests and pandemic restrictions. Hong Kong Land, the largest commercial landlord in the city's main business district, is optimistic about brands and tenants expanding their presence. Luxury brands such as Sotheby's and The Macallan are taking advantage of cheaper rates for premium space. However, the slow recovery in spending by mainland Chinese tourists is still affecting the luxury retail market.
North Korea warns to expect more nuclear weapons and war 'at any time' in 2024
ABC
North Korean leader Kim Jong Un has vowed to launch three new spy satellites, build military drones, and boost the country's nuclear arsenal in 2024. While addressing five days of ruling party meetings, Kim said US policy was making war inevitable and ordered the military to prepare to "pacify the entire territory of South Korea," including with nuclear bombs if necessary. Experts predict that North Korea will maintain a campaign of military pressure in order to increase any leverage ahead of the US presidential elections in November.
China calls Taiwan presidential frontrunner ‘destroyer of peace’
Associated Press
China has criticized Taiwan presidential front-runner William Lai as a "destroyer of peace" after he defended Taiwan's right to rule itself as a democracy. China's Taiwan Affairs Office spokesman, Chen Binhua, accused Lai of having a confrontational attitude and being the "instigator of a potential dangerous war in the Taiwan Strait." Lai, who currently serves as Taiwan's vice president, said he was open to talks with Beijing but emphasized that Taiwan is not subordinate to China. China considers Taiwan a part of its territory and has threatened military force to achieve reunification.
Uganda to start building oil pipeline with pipes from China, as opposition mounts
South China Morning Post
The first shipment of pipes from China has arrived in Uganda, paving the way for construction to start on the $5bn East African Crude Oil Pipeline (EACOP) in January. The 1,443 km pipeline will transport oil from Lake Albert in Uganda to the port of Tanga in Tanzania. Construction of pumping stations and storage facilities along the route is already underway, according to the Petroleum Authority of Uganda. The pipeline has faced opposition from environmental and rights groups, leading to withdrawal from the project by many banks and insurers. Chinese lenders are now funding roughly half the debt needed to construct it.
Hongkongers shun silver screen to travel as Christmas box office takings slump
South China Morning Post
Box office takings in Hong Kong over the Christmas holiday have fallen to a 20-year low, with industry leaders attributing the decline to Hongkongers prioritizing travel over cinema-going. The Hong Kong Theatres Association and Hong Kong Motion Picture Industry Association reported that box office takings reached HK$19.6m ($2.5m) from December 24 to 26, down 40% from the same period the previous year. Hong Kong made more than 1.32 million outbound trips over this period, exceeding pre-pandemic levels. Industry leaders also cited an unattractive movie lineup as a factor in the slump, noting that superhero movies have lost their appeal in recent years. The limited selection of movies available during the holiday period and a declining nighttime economy were also suggested as possible causes. The industry is hopeful for the Lunar New Year holiday but acknowledges that the limited movie selection may impact overall box office performance. The slump in box office takings is part of a longer-term trend in Hong Kong, with industry figures suggesting that people's movie-watching habits have changed after the pandemic, leading to a decline in cinema attendance.
China’s semiconductor industry weathers tough year amid tighter US sanctions
South China Morning Post
China's domestic chip-making industry has made progress despite US tech sanctions blocking access to advanced chip-making tools and AI processors. Although the US moves exposed weak links in China's chip supply chain, they also provided the motivation for renewed efforts at achieving self-sufficiency in semiconductors. While China is far behind in high-end lithography systems, it could make progress in 2024. With China focusing on mature chip technology, the development of a 28-nm lithography system is seen as a significant achievement, paving the way for upgrades to more complex lithography systems.
Taiwan’s covert extended-range missile poses limited threat to Chinese mainland
South China Morning Post
An article in a major Chinese military magazine claims that Taiwan’s extended-range Hsiung Sheng missile, capable of striking mainland China, is limited in its threat. The article argues that the missile’s size, subsonic speed, and lack of stealth technology make it vulnerable to detection. It also suggests that Taiwan has limited capabilities in reconnaissance and missile guidance, making the missile less precise and more prone to interference. Beijing has consistently claimed sovereignty over Taiwan, which it considers a province of China.
Ordinary buyers eye China’s foreclosed home bargains as investors retreat
South China Morning Post
Ordinary homebuyers in China are becoming the leading buyers in the foreclosed home market as they take advantage of oversupply and the country's sluggish economy. These buyers are attracted by the lower prices of foreclosed properties, which typically sell below market value. The supply of foreclosed properties has surged this year due to the lifting of the mainland's zero-Covid rules, resulting in a sharp decline in prices. Previously, investors dominated the market for foreclosed properties, but many have been forced out by purchasing restrictions and the longer reselling period required for repossessed homes.
Sweeping Chinese military purge exposes weakness and could widen
Japan Times
A recent purge of Chinese generals has weakened the People's Liberation Army (PLA) and exposed deep-rooted corruption within the military. This corruption could slow down Chinese leader Xi Jinping's military modernization efforts and hinder his goal of building a "world-class" military by 2050. The purge comes at a time of heightened geopolitical tensions, and the weakening of the PLA could have implications for China's ability to assert its power in the region.
How an impasse in the South China Sea drove the Philippines closer to US
Al Jazeera
The Philippines has strengthened its military alliance with the US, authorising the Pentagon to pre-position equipment and rotate forces through nine sites in the country. This move follows China’s increased militarisation of the South China Sea, with Beijing having fully militarised three islands in the Spratlys and maintaining seven military outposts in the area. The Philippines’ decision to boost military ties with the US and increase the number of Enhanced Defence Cooperation Agreement (EDCA) sites was made in the country’s national interest and will help the Philippines respond to natural disasters. However, some fear that the expansion of EDCA sites could invite conflict and disrupt economic plans, while others say that traditional methods of diplomacy with China have failed and the Philippines has no choice but to work with allies.
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