Vietnam Preparing for Possible Xi Visit to Hanoi Next Month; China's Xi sends condolences to Biden over Kissinger's death
Analysts at China's CICC told not to publish bearish views, wear luxury items; China Evergrande seeks to avoid liquidation with last-ditch debt plan
Welcome to this issue of The China Brief. Today is November 30, 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.
Vietnam Preparing for Possible Xi Visit to Hanoi Next Month
Bloomberg
Vietnamese and Chinese officials are making arrangements for Chinese President Xi Jinping's possible trip to Vietnam next month. The visit is tentatively scheduled for December 14 to December 16, with the final dates to be decided by China. Foreign Minister Wang Yi will also be in Vietnam in early December to discuss the trip. The last time Xi visited Vietnam was in 2017. If the trip goes ahead, it would come three months after President Joe Biden's visit, which coincided with Vietnam's decision to elevate US ties to a "comprehensive strategic partnership."
China's Xi sends condolences to Biden over Kissinger's death
Reuters
China's President Xi Jinping and other Chinese officials have expressed their condolences to US President Joe Biden and others following the death of veteran US diplomat Henry Kissinger. Kissinger, who played a key role in normalising US-China relations, passed away at the age of 100. Chinese state media and social media users mourned the loss of Kissinger, with many highlighting his understanding of the Chinese people and his contributions to Sino-US relations. The Chinese foreign ministry called for the continuation of Kissinger's vision and the development of sound and stable China-US relations.
Analysts at China's CICC told not to publish bearish views, wear luxury items -memo
Reuters
China International Capital Corp (CICC) has reportedly told analysts not to publish bearish views on China's economy or its financial markets, according to an internal memo seen by Reuters. The memo also instructed staff to refrain from commenting on issues that are not in line with government policies. CICC, the country's third-largest investment bank by market value, also asked employees not to wear luxury brands or disclose their pay, and to ensure their family members adhere to social and ethical standards. The bank did not respond to Reuters' request for comment.
China to review anti-subsidy tariffs on imports of Australian wine
Nikkei Asia
China has announced that it will review the need for anti-dumping and anti-subsidy tariffs on Australian wine imports, as part of an effort to improve relations between the two countries. The decision comes after China and Australia reached a consensus to settle a World Trade Organization dispute about wine. The anti-dumping tariffs, which are set to expire in 2026, will be reviewed. China's introduction of a 218% tax on most Australian wine earlier this year led to a collapse in the trade, which was previously valued at up to $1.2 billion annually.
What China's graphite export curbs mean for EVs: 5 things to know
Nikkei Asia
China's restrictions on graphite exports are set to impact the global electric vehicle (EV) market. Graphite is a key material used in EV batteries, with China being the world's largest supplier. The export curbs come in response to the US' controls on shipments of advanced chips and chip equipment to China, as Washington aims to limit Beijing's development of its own semiconductor industry. The restrictions require a license for the export of certain synthetic and natural graphite products. The move is seen as a way for China to protect its national security and exert leverage in trade tensions with the US. Countries heavily reliant on China for graphite, such as the US, Japan, and South Korea, are now looking to reduce their dependence. Efforts include defining graphite as a critical mineral and supporting projects to foster domestic supplies. Battery makers are concerned over potential supply chain disruptions, which could result in factory closures, higher battery prices, and slower EV adoption globally. There are fears that if China enforces the curbs too strictly, it may also harm its own companies and damage its mineral market in the long run.
Exclusive: China Evergrande seeks to avoid liquidation with last-ditch debt plan
Reuters
China Evergrande Group, the world's most indebted property developer, is making a last-minute debt restructuring proposal to avert liquidation, according to sources. The company has until a Hong Kong court hearing on 14 November to present a "concrete" revised debt restructuring proposal for offshore creditors. Evergrande, which has over $300bn in liabilities, defaulted on its offshore debt in late 2021. The troubled company's new proposal includes a debt-for-equity swap and the repayment of the rest with non-tradeable "certificates" backed by offshore assets.
Asian hedge funds find it harder to make money in Japan as they pivot from China
Reuters
Many hedge fund managers who shifted from China to Japan this year have struggled to make money, as they lack local insight and a playbook to unlock Japan's economy, according to Reuters. Japan-focused funds overtook China-focused funds for the first time in 17 years this year, with 18 funds targeting Japan and 13 targeting China, according to Preqin. However, hedge funds that focused on Japan have only produced average returns of 5% for the first 10 months of this year, compared with gains of 10% for Japan-focused event-driven funds.
Public investors with $4.3 trln are down on China but in on net zero
Reuters
Public pension funds and sovereign wealth funds managing $4.3tn in assets are pessimistic about investing in China, according to a survey by the Official Monetary and Financial Institutions Forum (OMFIF). The survey of 22 funds also showed that 62% of the 50 largest pension funds and nearly half of the largest sovereign wealth funds suffered losses last year. The funds cited the regulatory environment and geopolitics as factors dissuading them from investing in China. The survey also showed that 73% of the funds have a pledge to achieve net-zero emissions in their portfolios by 2050.
In China's coal country, full steam ahead with new power plants despite climate pledges
Reuters
China has given approval for more new coal power plants in 2023 than it did in the whole of 2021, according to Greenpeace, raising doubts about the country’s commitment to reducing coal use. The country has decommissioned 70.45 GW of coal plants in the past decade and is building more renewable energy capacity than any other nation, with analysts suggesting that coal use may peak this year. However, the sudden increase in approvals for new coal plants suggests that China’s commitment to phasing out the fossil fuel is wavering.
China’s Farmers Forced to Let Vegetables Rot as Demand Wanes
Bloomberg
Chinese farmers are being forced to let fresh vegetables rot in their fields due to weak demand and ample supply. Piles of vegetables such as cabbages and radishes have been left unharvested or destroyed in key producing regions across China. The weak demand is attributed to a sluggish economy, with restaurants and supermarkets slowing their buying of vegetables. Heavy rains this year delayed the harvest of vegetables grown on open land, and when those crops finally hit the market, it coincided with supplies from greenhouses, leading to a glut. Farmers have struggled to sell their vegetables, despite prices sliding to low levels. Chinese farmers have increased vegetable production over the past decade to bolster food supplies.
China factory activity contracts in November for 2nd straight month despite stimulus measures
Associated Press
Factory activity in China contracted for the second consecutive month in November, according to an official survey of Chinese manufacturers. The official manufacturing purchasing managers' index fell to 49.4 in November, down slightly from October's 49.5. A figure below 50 indicates a contraction in manufacturing activity. The index has fallen in seven of the past eight months, indicating weak demand despite various stimulus measures aimed at supporting the economy. China's recovery from the Covid-19 pandemic has faltered after an initial burst of growth earlier in the year faded more quickly than expected.
Hong Kong Looks On Nervously as China Respiratory Illnesses Rise
Bloomberg
Health authorities in Hong Kong are monitoring a rise in respiratory illnesses in China, particularly among children, and are urging schools and the public to take precautions. Common respiratory pathogens, such as mycoplasma pneumoniae, respiratory syncytial virus, adenovirus and influenza, are causing more illness in Guangdong, the province that borders Hong Kong. Some pediatric wards in China are receiving two to three times the number of patients than before. Hong Kong has reported outbreaks of upper respiratory tract infections in schools and has urged those with respiratory symptoms to wear masks and seek medical advice.
China Remembers Kissinger as ‘Valued Old Friend’ in US Relations
Bloomberg
China has paid tribute to former US Secretary of State Henry Kissinger, hailing him as an invaluable figure in building ties between the two countries. Kissinger, who died at the age of 100, was described by China's ambassador to Washington as a "most valued old friend" who will always be remembered by the Chinese people. Chinese state media said Kissinger had visited the country over 100 times since his first trip in 1971, meeting every top Chinese leader since Mao Zedong and serving as China's preferred go-between with the US until his death.
Taiwan reports more Chinese military activity as election nears
Reuters
Chinese warplanes and warships were detected near Taiwan on Thursday, including aircraft crossing the sensitive median line of the Taiwan Strait. Taiwan has complained for the past four years of regular Chinese military patrols and drills near the island. The Chinese activities come ahead of Taiwan's January election, where relations with China are a major point of contention. Taiwan's defence ministry reported J-10 and J-16 fighters as well as ship-borne helicopters operating off central Taiwan and to the island's southwest. Eleven of those aircraft crossed the Taiwan Strait's median line, working with Chinese warships to carry out "joint combat readiness patrols".
Buffett followers contemplate Berkshire without Munger
Financial Times
Shares in Warren Buffett's Berkshire Hathaway fell just 0.5% after the death of Charlie Munger, his long-term business partner. Investors had long wondered what would happen to the conglomerate upon the death of Buffett or Munger, but the muted response suggests the two men's focus on succession planning and training new leaders has been successful. Munger was instrumental in transforming Berkshire Hathaway from a struggling textile maker into a major insurance and industrial company. He also influenced many of the company's biggest deals and helped shape Buffett's investment approach. Although investors believe the company will not make any immediate changes, they will scrutinise Buffett's annual letter next February for any indications of changes at the conglomerate. Berkshire Hathaway has already had to find new directors due to the deaths of several board members and is expected to take a more active role when Buffett is no longer CEO.
How Huawei surprised the US with a cutting-edge chip made in China
Financial Times
Huawei and the Semiconductor Manufacturing International Corporation (SMIC) managed to produce the Kirin 9000S chip, powering the Mate 60 series phone, despite being hit by US sanctions. Huawei's chip and mobile business relied on the deal with SMIC, and the two companies threw vast resources at the project to maintain market share. The Kirin 9000S chip offered performance comparable to chips from Qualcomm. The success of the chip launch has led to increased funding for chip start-ups. Huawei and SMIC are now working on increasing chip production for artificial intelligence systems.
China’s coal habit casts doubt on Xi’s climate promises
Financial Times
China's commitment to fighting climate change is being questioned by western diplomats and experts. As the world's largest emitter of greenhouse gases, China's national climate change policy is crucial to global efforts to reduce emissions. While the country has made significant progress in developing renewable energy, it has also seen a surge in new coal-fired power plants. Concerns have been raised that the Chinese government is prioritising energy security and economic growth over climate pledges. Tensions with the US, blackouts, and a focus on growth and job protection have all contributed to China's wavering commitment to climate change.
Opinion | Behind China’s Plans to Build AI for the World
Politico Opinion
China is taking a different approach to AI development than the Western world, building Chinese-built AI ecosystems in developing economies and potentially setting de facto authoritarian standards for the technology's development globally. China is transforming cities around the world into "safe cities" and "smart cities" that leverage AI for traffic, logistics, and law enforcement. China also dominates exports of AI-powered facial recognition technology and is training AI workers in developing economies through its vocational training program. If China succeeds in building out much of the world's AI systems, its standards will be better positioned to take hold internationally, potentially leading to non-compliance with international agreements on AI. The US must have a more expansive vision of how to empower other nations with the education, tools, and infrastructure needed to jumpstart their own AI efforts in order to compete with China's build-it-first strategy.
China's approach to AI development is similar to its Belt and Road Initiative, in which it finances and builds global infrastructure to create economic reliance and political loyalty. If China's build-it-first AI strategy works, it could be disastrous for American interests abroad. The US needs to empower other nations with AI while advancing democratic principles for its management, similar to President Dwight Eisenhower's "Atoms for Peace" speech that laid the foundation for the International Atomic Energy Agency. By equipping AI "have nots" with the necessary resources to build their own AI economies, the US can send a message that it intends to empower the world with AI and not dominate it. This would help ensure that safety, responsibility, and democratic values remain central to AI development globally. The US has the potential to shape the development of the world's AI ecosystems, but it needs a more active campaign to counter China's push in order to lead the world in the AI revolution.
China seeks 'concrete' roadmap for two-state solution to solve Gaza conflict
Reuters
China has called for the United Nations Security Council to create a "concrete" timetable and roadmap for a two-state solution in order to achieve a "comprehensive, just and lasting" settlement of the Palestinian issue. China has urged the council to relaunch the two-state solution and hold an international peace conference as soon as possible. The country's foreign minister, Wang Yi, also called for a lasting truce in Gaza and said that China will provide a new batch of emergency humanitarian supplies to the region.
China's Bank of Communications makes 'too-big-to-fail' list
Nikkei Asia
China's Bank of Communications has been added to the list of global systemically important banks by the Financial Stability Board (FSB), becoming the fifth Chinese state-owned bank on the "too-big-to-fail" list. The FSB has determined that Bank of Communications is subject to a 1% capital requirement. Agricultural Bank of China and China Construction Bank moved from the 1% category to 1.5%, joining Bank of China and ICBC. China Citic Bank, Industrial Bank, China Merchants Bank and Shanghai Pudong Development Bank are currently under FSB review to be potentially included as G-SIBs.
Chinese Stocks Sit Out November’s Global Rally on Economic Woes
Bloomberg
Mainland China stocks have continued to decline in November, marking a fourth consecutive month of losses. The benchmark CSI 300 Index is down about 2% this month and trading near a 2023 low. This poor performance contrasts with the global rally seen in other markets, such as the MSCI All-Country World Index, which has surged more than 8% in November. The ongoing economic concerns and lack of concrete policy decisions have contributed to the negative sentiment towards mainland China stocks. Additionally, recent data showing a contraction in manufacturing activity and a shrinkage in the services sector have added to the economic strains.
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