What the fall of the ‘world’s factory’ means for global supply chains; Chinese seek cheap wanderlust in economic gloom
Chinese-backed AIIB seeks to boost Ivory Coast’s trade links to Asia；Chinese football in ‘National Day embarrassment’, fans claim ‘curse of Koreaphobia’
Welcome to this issue of The China Brief. Today is October 02, 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.
What the fall of the ‘world’s factory’ means for global supply chains
Telegraph
As Western companies look to diversify their supply chains away from China, central-eastern Europe (CEE) is emerging as an attractive alternative. The region – which includes countries such as Poland, the Czech Republic, and Hungary – offers lower labour costs compared to China, as well as a more favourable business environment. Industrial real estate firms are reporting increased demand for warehouse space in CEE, as companies seek to nearshore production and reduce risk in their supply chains. Foreign direct investment in manufacturing in CEE is growing steadily, with Hungary experiencing a rise from 2.03% to 3.65% of GDP between 2016 and 2022. Demand is particularly strong from electronics and electric vehicle (EV) companies. Hungary is Europe’s second-largest producer of EV batteries, and companies including Audi, Samsung, and Volvo have increased their investments in the region. Chinese firms are also looking to invest in CEE, in order to be closer to the European market and to reduce exposure to political risks in China.
Chinese-backed AIIB seeks to boost Ivory Coast’s trade links to Asia
South China Morning Post
The Asian Infrastructure Investment Bank (AIIB), a Chinese-backed development bank, is financing a $571m project to improve thousands of kilometres of roads in Ivory Coast. The project will enable the predominantly agricultural northern region to improve the transport of goods to major trade hubs and processing centres, including the country's largest city, Abidjan. Ivory Coast is a major producer of cotton, cashew nuts and cocoa. The AIIB is providing $200m, the World Bank $300m and the Ivorian government the rest. The project includes upgrading 7,000km of unpaved roads and maintaining a further 15,000km of rural roads.
Chinese football in ‘National Day embarrassment’, fans claim ‘curse of Koreaphobia’
South China Morning Post
China's national football team suffered a 2-0 loss to South Korea in the Asian Games, failing to register a single shot on target. This result has led to criticism from fans on social media, with many blaming a "fear of Korea" or "Koreaphobia" that has allegedly plagued the team for years. Other fans compared China's performance to that of Hong Kong, who defeated Iran to reach the semi-finals, suggesting that China's lack of success is due to a failure to produce good footballers.
How China-West tensions will shape global markets
Reuters
Tensions between the West and China are impacting global markets. US President Joe Biden is determined to bring manufacturing back to the US, which could lead to inflation if Western manufacturing does not ramp up quickly enough. Washington is also pushing "friendshoring," replacing China's role in supply chains with friendly nations such as Vietnam and Mexico. India is viewed as the most able to compete with China in low-cost, large-scale manufacturing, and its central bank forecasts 6.5% growth this fiscal year. Tensions could also impact luxury goods and technology stocks.
China's Yuexiu Industrial Fund to launch $274m new secondary fund
Nikkei Asia
China's Yuexiu Industrial Fund is planning to launch a CNY 2 billion ($274.2 million) secondary fund. The fund will help the firm "speed up investments in high-quality assets, optimize asset allocations, and improve capital recovery from fund investments." Secondary funds buy stakes in private equity funds from existing investors who want to exit. The move comes as China's PE secondary market is maturing, with a record 405 PE secondary deals worth a combined CNY 102.1 billion completed in 2022, a 52.9% YoY increase, according to ZERONE. Yuexiu Industrial Fund specializes in fund-of-funds investments and its secondary fund strategy focuses on technology, healthcare, and consumption sectors.
China moves to strengthen innovation in smart driving
Reuters
China is backing firms in the smart vehicle supply chain to form groups dedicated to spreading innovation and achieving technological breakthroughs in the development of intelligent connected vehicles (ICVs). The country aims to become a global leader in the autonomous driving industry and has set a target for assisted and autonomous driving standards by 2025. China will support firms in forming "innovation consortia" to learn from each other's strengths. China's push for autonomous driving includes Level 3 automation, in which vehicles can drive by themselves under certain conditions. Baidu's Apollo Go has taken the lead in Level 3 automation and has been granted a licence to run its driverless ride-hailing service commercially in Shenzhen. The country aims to master the core technologies of advanced autonomous driving and put driverless vehicles on its roads. However, Chinese developers face geopolitical challenges, including export curbs on technology from the US, and competition from Western counterparts.
Chinese seek cheap wanderlust in economic gloom
BBC
China is experiencing record travel during its annual 'Golden Week' holiday, with over 21 million people expected to fly during the 10-day break. This includes 14,000 domestic flights a day as young Chinese travellers on a budget explore closer to home. The Golden Week holiday is the second this year and has become the longest break of the year. Despite China's struggling economy, travellers are still eager to explore and are seeking budget-friendly options. Domestic travel bookings have surged compared to last year, and top destinations include Beijing, Shanghai, Chengdu, and Hangzhou.
The Holy See shows how to deal with China
Japan Times
The author reflects on the relationship between religion and politics during a recent trip to southern Europe. They had previously believed that the relationship could be divided into two types: when religion defines politics and when church and state are separate. However, their recent visits to Rome and Malaga made them realize that the relationship is more complex than that. In Rome, they learned about the state of relations between the Holy See and the Chinese Communist Party, highlighting the intersection of religion and politics. In Malaga, they were reminded of the shared history between Catholicism and Islam, further blurring the line between religion and politics.
US condemns China’s reported life sentence of acclaimed Uyghur scholar
CNN
The US has criticised China for sentencing Uighur academic Rahile Dawut to life in prison. Dawut is known for documenting the folklore and traditions of the Muslim minority in China’s Xinjiang region. A report from the non-profit Dui Hua Foundation on 21 September stated that Dawut was serving a life sentence for endangering state security. Dawut is among more than 300 Uighur and other Muslim intellectuals believed to be detained by China’s government. An estimated one million Uighurs and other predominately Muslim people are held in internment camps in Xinjiang, according to the United Nations.
The world is flirting with disaster with its oil crackdown on Russia
The Sydney Morning Herald
The report suggests that the Russian oil price cap should be scrapped to avoid an environmental disaster. The cap, introduced in December 2014, which limits the price of Russian crude oil at $60 per barrel, was designed to hit Kremlin's income by forcing it to sell oil at lower prices, in a bid to keep Russian oil flowing, but the report suggests that the cap lacks enforcement, and results in more Russian oil being forced onto old tankers that are involved in risky ship-to-ship transfers, thus increasing the risk of an environmental disaster.
Taiwan investigating accusation submarine program details leaked
Reuters
Taiwan prosecutors have announced an investigation into accusations that individuals attempted to interfere in the country's submarine program and leaked details about it. The investigation comes after the unveiling of Taiwan's first domestically developed submarine last week. Huang Shu-kuang, who is leading the program, stated that lawmakers had made it difficult for the program to purchase critical equipment and that a contractor had forwarded information to China. Taiwan's Supreme Prosecutors Office has instructed prosecutors to investigate the case in order to safeguard national security. The submarine program is a key part of Taiwan's efforts to modernize its armed forces amid increasing military exercises by China.
Indonesia gets its China-backed ‘Whoosh’ high-speed railway rolling
South China Morning Post
Indonesian President Joko Widodo inaugurated Southeast Asia’s first high-speed railway on Monday as it was set to begin commercial operations, a key project under China’s Belt and Road Initiative infrastructure initiative that will drastically reduce the travel time between two key cities. The project has been beset with delays and increasing costs, and some observers doubt its commercial benefits.
Crisis? What crisis? China’s domestic tourism is booming
South China Morning Post
China's domestic tourism market is thriving, providing a boost to the country's economy. While the weakness of domestic demand has been a concern, particularly due to the crisis in the property sector, domestic travel has rebounded strongly. Chinese consumers have been seeking out new leisure experiences within the country, leading to a more mature and sophisticated domestic tourist market. Travel-related spending has increased, with beach resorts, skiing trips, and staycations becoming popular. This has been a positive for the hotel industry, with occupancy rates and revenue per available room reaching or surpassing pre-pandemic levels in some areas.
Wealthy families from Middle East eye Hong Kong to manage their fortunes
South China Morning Post
Wealthy families from the Middle East, Europe and Asia are increasingly considering investing their riches in Hong Kong following promotional efforts by the government and wealth managers this year. Hong Kong's active capital market, low tax rates and clear legal status have made it an attractive destination for European family offices looking to invest in other Asian countries. The city's status as a green bond and green finance fundraising centre has also helped attract European family offices. The internationalisation of the yuan and Hong Kong's connect schemes for international investors to invest in mainland shares and bonds have also been a draw.
Flights to Thailand from China almost full amid visa waivers, Thai Airways says
South China Morning Post
Flights from China to Thailand are more than 90% full after Thailand temporarily relaxed visa rules for visitors. Thailand is hoping that Chinese tourists will lead a spending recovery as policy changes and new airport infrastructure boost the tourism-dependent nation. Thai Airways plans to increase its flights to five Chinese cities to 56 a week from 49 from 1 December. Chinese tourists have visa-free entry to Thailand from 25 September to 29 February. The country has seen 19.5 million tourists arrive this year, with those from Malaysia, China and South Korea topping the list.
China spurned Pakistan's proposals for new Belt and Road projects
Nikkei Asia
China has rejected calls to invest in new Belt and Road projects in Pakistan, according to the minutes of a high-level meeting between the two countries. The Chinese side reportedly turned down Pakistan's suggestions to add more projects related to energy, climate change, electricity transmission lines and tourism under the China-Pakistan Economic Corridor (CPEC). Beijing also declined Islamabad's proposal to build a 500 kilovolt transmission line to connect the southern port of Gwadar to the national electricity grid from Karachi. China's reticence to invest further in Pakistan is thought to be primarily due to the country's political instability and deteriorating security situation. Experts also suggest that China is becoming more selective about its Belt and Road investments, particularly as its own economy slows down. Pakistan has been in a state of political upheaval since former Prime Minister Imran Khan's government was toppled in April 2022, and militants have repeatedly targeted Chinese interests in the country.
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