Three Top China Executives Depart Consulting Firm Control Risks; ‘Systemic’ China-US rivalry could last a decade: Washington envoy Nicholas Burns
China’s Fiscal Stimulus Plan May Be Bigger Than It Appeared; China struggles to arrest slide in home prices as credit crunch keeps buyers away
Welcome to this issue of The China Brief. Today is March 15, 2024. 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.
Three Top China Executives Depart Consulting Firm Control Risks
Bloomberg
Control Risks' China offices have witnessed a number of departures over the past year, with partners Chris Torrens, Rosie Hawes and Kent Kedl all leaving or planning to leave. The exits come at a time when advisory firms are finding the climate increasingly challenging in China, with multinational corporations pulling back and tensions between China and the West rising. Control Risks' China business has fallen 40% in recent years and accounted for 50% of the firm's total business in the Asia-Pacific, according to one person, and the company has not yet replaced the departed partners.
‘Systemic’ China-US rivalry could last a decade: Washington envoy Nicholas Burns
South China Morning Post
The US and China will likely remain "systemic rivals" for the next decade as they compete militarily and in fields including technology, according to Nicholas Burns, Washington’s top envoy in China. Speaking at a virtual seminar, Burns said that the competition between the two countries is "quite profound" and encompasses security, the military and technology. He also highlighted that technology is "at the heart of the battle" between the two nations and will shape the global economy as well as new military technologies. Burns said that the US would continue to restrict China's access to advanced US technology.
China struggles to arrest slide in home prices as credit crunch keeps buyers away
South China Morning Post
Home prices in China fell for the ninth consecutive month in February, indicating weak underlying demand and consumer confidence. Despite measures taken by authorities to loosen buying restrictions and boost lending to struggling developers, new home prices fell 0.4% from a month earlier in 70 medium to large cities. Although this was a slight improvement on January's figures, there were still 59 cities that reported a weakening in prices for new homes from January. Existing home prices also declined in 68 cities, the same as in January.
US TikTok ban bill is going nowhere fast in the Senate
South China Morning Post
US senators have shown little enthusiasm for passing legislation that would force TikTok's Chinese owner to sell the video-sharing app within six months. Senator Richard Blumenthal said he supported separating TikTok from the influence of the Chinese government but warned that the bill's deadline to sell it or shut down its US operations would be too short. Senator Ted Cruz said the Senate should refer the bill to the Commerce Committee for further work. TikTok has framed the bill as an outright ban, arguing that six months wouldn't be enough time for a sale.
Moon miss: Chinese satellites fail to reach planned orbit for lunar test
South China Morning Post
China's attempt to launch a pair of test satellites to the moon failed on Wednesday as the satellites did not reach their planned orbit. The satellites were supposed to enter a distant retrograde orbit (DRO) and work with another satellite to test laser-based navigation technologies between the Earth and the moon. The current orbit of the satellites is unknown, but it is believed that they are not in an orbit high enough to reach the moon. The failure is the first for the Yuanzheng-1S upper stage, which has been used since 2015 to deliver satellites to higher orbits.
China’s Fiscal Stimulus Plan May Be Bigger Than It Appeared
Bloomberg
China's 2024 budget plan, which keeps the official budget deficit target unchanged at 3% of GDP, could pack a bigger punch than initially thought. The fiscal package, in proportion to the size of the economy, is the strongest since 2020, when China moved to shore up growth in the face of the pandemic. Some economists predict that Beijing will add to the spending plan later this year. The 2024 figure is projected at CNY4.06tn ($564bn), but this does not include China's other fiscal accounts, such as the "government-managed funds account", which covers investment in construction projects.
China Signals Liquidity Party Has Limits With Eye Toward Growth
Bloomberg
The People’s Bank of China (PBOC) withdrew $13bn from the banking system on Friday, the first time it has done so since October 2015, as it looks to contain speculative investments in the bond market. The PBOC said that it has already “fully” satisfied the needs of financial institutions and has no plans to proactively reduce liquidity injections. Some analysts have suggested that the move was also aimed at preventing China’s interest-rate discount to the US from widening further and adding further pressure to the yuan.
China to Tighten IPOs, Checks on Listed Firms to Boost Stocks
Bloomberg
China's markets regulator, the China Securities Regulatory Commission (CSRC), has announced plans to tighten listing requirements and increase checks on listed firms in an effort to boost confidence in the country's stock market. The CSRC will introduce more stringent requirements for initial public offerings and will study and re-evaluate listing standards for certain sectors. The regulator will also guide stock exchanges to modify listing rules and raise financial requirements for share sales in certain sectors. This move follows earlier pledges by the CSRC to strengthen oversight of the listing process and tackle financial fraud.
China Urges EV Makers to Buy Local Chips as US Clash Escalates
Bloomberg
The Chinese government has urged local electric vehicle (EV) makers to increase their purchases from domestic chipmakers in an effort to reduce reliance on Western imports and boost China's semiconductor industry. The Ministry of Industry and Information Technology has asked carmakers to expand their buying of Chinese chips to accelerate their adoption. The ministry is instructing firms to avoid foreign semiconductors if possible, meaning overseas chip firms effectively have to manufacture their silicon through a local foundry.
How to navigate China’s stock markets in a US presidential election year
South China Morning Post
Goldman Sachs has said that Chinese domestic consumption stocks are a safer bet than hardware and semiconductor makers should tensions escalate between Beijing and Washington in the run-up to the US presidential election. Goldman Sachs has also said that Chinese small and mid-cap onshore stocks have a high chance of underperforming compared with the overall offshore market, which has more foreign exposure, if tensions rise.
Vanke’s Sales Drop Most Since 2018 Amid Mounting Liquidity Fears
Bloomberg
China Vanke Co., the country's second-largest property developer by sales, has reported its biggest decline in sales in six years. The company's contracted sales for February fell by 53% from a year ago to CNY 14bn ($1.9bn), the largest monthly slide since at least 2018. The slump in sales is expected to worsen the cash crunch for the company, which is in discussions with major creditors over a debt-swap plan to avoid defaulting on public bonds. Some of Vanke's long-dated dollar bonds have fallen below 50 cents on the dollar, indicating a high risk of default. Moody's recently downgraded Vanke to junk status and warned of further cuts.
Xiaomi Shakes Up Chinese EV Sector, Keeping Rival XPeng on Its Toes
Bloomberg
Xiaomi's entry into the electric vehicle market in China will be closely watched as it reports earnings next week. The company's first EV model will go on sale later this month, and its shares rose by 11% following the announcement. Meanwhile, rival XPeng may report deeper losses as it cuts prices to boost sales. Other Chinese firms, including Tencent and Meituan, are expected to perform well, with Tencent benefiting from advertising, international games, and fintech sales, and Meituan likely to see revenue rise due to the success of its meal delivery services. The US bill that may ban Chinese biotech firms from accessing federal contracts could impact the outlook for WuXi AppTec, which gets over half of its revenue from the US.
TSMC’s 110% Rally Draws Caution, Even From the Bulls
Bloomberg
Taiwan Semiconductor Manufacturing Co (TSMC), the world's largest contract chipmaker, is experiencing rapid growth that is making it harder to ignore the risks, according to analysts. TSMC's shares have surged more than 110% since October 2022, as investors have flocked to AI. AI-related revenue accounted for 6% of TSMC's total revenue in 2019, but the market has been pricing in a big jump in that figure on the promise of an explosion in demand. Analysts have expressed concerns over the sustainability of AI growth, geopolitical risk and Apple's ability to counter the smartphone downturn.
US knew Nauru might cut ties to Taiwan before it did, official says
South China Morning Post
The US was aware that the Pacific island nation of Nauru was considering switching its diplomatic ties from Taiwan to mainland China before it formally did so in January, a senior US State Department official has said. Daniel Kritenbrink, assistant secretary for East Asian and Pacific affairs, told the Senate Foreign Relations Committee that the US had been working with partners to meet Nauru's concerns but that the nation had "decided to flip" to China. Kritenbrink warned Taiwan's three remaining Pacific partners, Tuvalu, the Marshall Islands and Palau, to be cautious in their dealings with China.
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