Why dangerous encounters by US and Chinese militaries look set to continue; Exclusive Insight: Who is Li Qiang? From Humble Beginnings to Premier
China Asks Big Banks to Cut Deposit Rates Again to Boost Economy; Evergrande services unit reports profit turnaround, says resolving debt pledges; TSMC can help 'stabilize' U.S.-China relations
Welcome to this issue of The China Brief. Today is June 6, 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.
Exclusive Insight: Who is Li Qiang? From Humble Beginnings to Premier
The State Council, functioning as the central government of China, is now under the stewardship of its newly appointed Premier, Li Qiang. Serving as the principal official of the government, Li aids Xi Jinping in leading governmental affairs.
Born in July 1959 in Ruian County, Wenzhou City, Zhejiang Province, Li Qiang was admitted to the Department of Agricultural Machinery of Zhejiang Agricultural University Ningbo School in 1978. Following his graduation in 1982, Li entered the sphere of government, beginning his journey at the most fundamental level in rural townships. For the next two decades, he held various positions within Zhejiang's Youth League System, Civil Affairs System, and Administration for Industry and Commerce, also leading Yongkang City and Wenzhou City. Shortly after Xi Jinping assumed the position of Secretary of Zhejiang Provincial Party Committee in 2002, Li Qiang took on the role of Secretary-General of the Zhejiang Provincial Party Committee, providing direct service to Xi. At that time, for work convenience, Li Qiang prepared a bed in the room next to Xi Jinping's office, where he slept at night. In a public dialogue with netizens, Li Qiang summed up his work ethic as Secretary-General as: "Diligent service reflects cultivation; adhering to principles maintains order; thoughtful consideration enables sound advising; and focusing on practical work ensures effective results."
Soon after Xi Jinping took office as General Secretary at the 18th National Congress of the Communist Party of China in 2012, Li Qiang was promoted to Governor of Zhejiang Province.
In June 2016, Li Qiang's career took him beyond Zhejiang for the first time as he was promoted to Secretary of the Jiangsu Provincial Party Committee. A year later, at the 19th National Congress of the Communist Party of China, Li was promoted to a member of the Politburo of the Communist Party Central Committee and soon became the Secretary of the Shanghai Municipal Party Committee.
In the spring of 2022, an outbreak of the Omicron variant of the novel coronavirus occurred in Shanghai, followed by a painful and controversial city lockdown. Despite this, Li Qiang's career was not impacted. At the end of the year, during the 20th National Congress of the Communist Party of China, he was elected a member of the Politburo of the Central Committee of the Communist Party and promoted directly to Premier. Li Qiang is the only Premier of China, apart from founding Premier Zhou Enlai, who had not served as Deputy Premier.
Li Qiang's political career began in Zhejiang, an area characterized by a light touch of planned economy, a lower proportion of state-owned economy, significant strides in reform and opening-up, and a distinctive governance approach — a 'laissez-faire' style of less government intervention where possible. The places Li Qiang has ruled, including Zhejiang, Jiangsu, and Shanghai — regions with advanced private economies and high degrees of marketization — have governance models broadly similar to Zhejiang's. Li Qiang colorfully describes this approach as the "Waiter Economy": in the face of the market, the government should be as accommodating and unobtrusive as a waiter serving a business, striving to build a world-class business environment.
Given Li Qiang's background, it is anticipated that he will promote the "Waiter Economy" nationwide, as this is the model he is intimately familiar with. However, several provinces have economic foundations that differ from Zhejiang's. Regions like the Northeast or Northwest, with larger state-owned sectors, lower degrees of marketization, and historical issues, might encounter difficulties adapting to the "Waiter Economy" model. Will it be necessary to first reform the economic foundations of such areas? This is a question for Li Qiang to consider.
Li Qiang's own words succinctly summarize his future relationship with Xi Jinping: "Service", "Adviser", "Waiter", and "Practical Worker".
China Asks Big Banks to Cut Deposit Rates Again to Boost Economy
Bloomberg
China's largest banks, including Bank of China, Industrial & Commercial Bank of China, and Bank of Communications, have been requested by Chinese authorities to lower their deposit rates for at least the second time in less than a year. The move has been made following a series of crackdowns on various industries as well as lockdowns linked to Covid-19. After credit and new loans weakened in April, banks may adjust rates this week to bolster lending and support recovery.
Evergrande services unit reports profit turnaround, says resolving debt pledges
South China Morning Post
China Evergrande's beleaguered subsidiary, Evergrande Property Service Group, has said its parent's liquidity crisis hasn't had a profound effect on its revenues and that it plans to look for funds that were used as pledges for loans extended to the indebted developer and that were later seized by creditors. In 2022, the property services unit reported operating revenue of ¥11.8bn ($1.7bn), gross profit of ¥2.7bn and net profit of ¥1.48bn; in 2021, it ran at a loss at the gross and net levels, despite revenue being higher at ¥13.1bn.
TSMC can help 'stabilize' U.S.-China relations: Chairman
Nikkei Asia
The chairman of Taiwan Semiconductor Manufacturing (TSMC), Mark Liu, stated that the company could use its dominant position as the world's largest contract chipmaker to improve relations between China and the US. Liu said if the Taiwanese chip industry continues to thrive, it would positively affect geopolitics. Nevertheless, TSMC's CEO reiterated the firm is committed to keeping the majority of its most advanced production capacity in Taiwan. Liu also stated TSMC is enjoying a boost from artificial intelligence and rush orders for chip production and advanced chip packaging for generative AI needs.
Ukraine war: China, France agree to keep pushing for political settlement
South China Morning Post
The Chinese foreign affairs commission has said that director Wang Yi and French diplomat Emmanuel Bonne coordinated their positions on the Ukraine war during a recent phone call. Both parties agreed to "consistently accumulate and create conditions for the start of political settlement", which followed a Chinese peacemaking trip to Europe that had achieved little. China has been increasing its profile as an international mediator of crises and has been trying to shore up ties with Europe, but Beijing warned against the “de-risking” strategy that Brussels has initiated against China.
China’s first home-grown large cruise liner undocks in Shanghai to start trials
South China Morning Post
China's first domestically made large cruise liner has left its dock in Shanghai to start sea trials after nearly four years of construction. Adora Magic City, a 135,500-tonne vessel built by shipbuilder Shanghai Waigaoqiao Shipbuilding, is also the world’s first cruise liner that provides access to 5G internet. The ship will make two trial trips in July and August and is expected to be delivered by the end of the year. The success of the liner will give China an edge over South Korea, its major competitor.
Explainer: Why dangerous encounters by US and Chinese militaries look set to continue
Reuters
Recent close encounters between US and Chinese military equipment are escalating tensions between the two nations and increasing the chances of armed conflict, particularly as the two sides blame one another for the provocations. Beijing has been further emboldened to act more assertively since President Xi Jinping began his large-scale military buildup. The US and its allies have continued “freedom of navigation” patrols in the South China Sea to defend countries’ right to sail in international waters, while China has complained that such patrols around its islands and claims are provoking risk from the US military.
China's property shares surge as investors bet on stimulus hopes
Reuters
Chinese property stocks listed in Hong Kong surged by up to 7.9% on 1 June, as investors hoped for more supportive government measures to help the embattled sector. Since a brief rally in April, the once-robust sector has suffered from an uncertain economic outlook, despite policy measures enacted at the end of 2018. The state-backed China Economic Times has called for adjustments to home purchase curbs in first-tier cities, whilst investors have anticipated more property stimulus will be forthcoming in June. Despite the hopes of investors, some have adopted a more sceptical stance, citing weak consumer confidence.
Chinese universities raise tuition fees as much as 54%
Nikkei Asia
Chinese universities are increasing tuition fees, some for the first time in over two decades, due to a reduced national budget for tertiary education and tight local government finances. The pandemic, a property crisis and a slow economy left local governments cash-strapped, which drastically affects universities that rely heavily on state funding. Most of the universities in China are public universities, and the financial crunch has forced them to hike tuition fees, with an expected budget expenditure for tertiary education falling by 3.7% to CNY102bn ($16bn).
Macron Tries a Mea Culpa on NATO and Ukraine
Bloomberg Opinion
Emmanuel Macron has voiced his support for Ukraine's bid to join an EU reformed by Brexit and NATO amid a counteroffensive. He aims to build more bridges between EU countries at a time when recession is putting Germany under pressure. If the EU fails to back up action with action or diplomatic investment, this may not be the last mea culpa Macron offers his partners. However, on issues of EU enlargement, there is no real consensus. The bloc has failed to prevent a populist “illiberal wave” in the east and has created new obstacles to decision-making and integration.
Foreign Affairs
Experts are warning of the rising risk of war between China and the US, with both countries preparing for strategic rivalry, building up military forces and aligning partners for future economic, diplomatic, and military contests. An article by John Pomfret and Matt Pottinger, citing recent speeches by Chinese leader Xi Jinping, which appeared to vilify the US, Washington University associate professor of political science Deborah Seligsohn said: “All these speeches give the impression that China is preparing for… that China sees conflict with America as inevitable." However, ex-CIA officer John Culver responded that while China’s leadership was aggressive and military ready, talk of China preparing to go to war could be misleading. China had not yet made the decision to go to war, and Taiwan remained for Xi a crisis to be avoided, not an opportunity he should seize, he said.
China may cut rates further in H2, government researcher says
Reuters
China may reduce banks' reserve ratio and interest rates in the second half of 2015 to support the economy, according to the China Securities Journal, citing policy advisors and economists. China's economy rebounded unexpectedly fast in Q1 2015, but has lost momentum at the beginning of Q2.
A Wave of Delisting Faces Chinese Developers in Risk to Funding
Bloomberg
Over a dozen Chinese property firms face the risk of being delisted from the national stock exchange, which would force firms to shut off a key funding channel for the struggling industry. At least three listed firms may be delisted as soon as August, while a further seven face being removed by year end. Such removals could leave some companies with limited options to remain listed beyond surrendering control at low valuations or restructuring their entire operations. The development is another blow to China's struggling property market, with the government increasing support in recent months to boost demand.
HSBC plans Hong Kong summit to fill gap left by Credit Suisse
South China Morning Post
HSBC is planning to launch its own flagship investor conference in Hong Kong next year, after Credit Suisse dropped its annual event, which had been running since the late 1990s. The bank's event, which will be held at the Conrad Hotel in the Central business district from 8 to 10 April, expects to attract more than 2,000 clients and investors.
China's top VCs warn dollar fundraising will only get tighter
Nikkei Asia
Rising geopolitical tensions and slow economic recovery have made it harder for China-focused venture funds to lure funds from Western investors, according to industry insiders. Steven Wang, a Chinese biotech investor who manages $2.6bn, said he has cut the dominance of US investors in his business in favour of meetings closer to home in Hong Kong, Shanghai and Beijing. First-quarter participation by US and European investors in dollar fundraising for China venture deals fell to its lowest since 2019 amid rising global tensions.
Chinese Unicorn Claims Breakthrough With All-Weather EV Battery
Bloomberg
Chinese battery start-up Greater Bay Technology has said its new Phoenix lithium ion cell features superconducting materials and thermal management technology that can heat the battery back from −4 F to 77 F in five minutes when exposed to cold conditions, highlighting a solution to one of the key drawbacks of electric vehicle use. Chairman and co-founder Huang Xiangdong said the battery operates normally and can be charged in under six minutes in all weather conditions. Greater Bay is a new entrant to China’s battery-making sector, where companies such as Contemporary Amperex, BYD and Gotion High-tech are working to make batteries faster-charging and able to travel longer distances.
China cracks down on online stealth marketing
Nikkei Asia
China is clamping down on "stealth marketing," aimed at taking advantage of China's vast online population. The updated Measures for the Administration of Internet Advertising require consumers to be able to identify the content as advertising. This regulation has wider consequences for tech companies with official WeChat accounts, for example. Chinese media advertisements designed as videos sharing health advice have reportedly already been shut down under these rules. Uncertainty remains over how these rules will work, but they are widely seen as the Chinese authorities attempting to regulate the country's increasingly hands-on tech industry.
Beijing must move to bolster growth, but expect a measured approach
South China Morning Post
As investment banks cut growth forecasts for the Chinese economy this year, Beijing is being urged to take action soon. A gauge of factory activity for May dropped to its lowest level since December, adding to concerns about a weak economy that also features high levels of youth unemployment, low consumer spending, and worsening corporate profits. While the Chinese government has recently lowered its growth ambitions, its official economic data still points to issues and the country's poor fiscal situation has also begun to affect basic public services with an immediate impact on social stability.
China's 100-plus 'secret police stations' span from NY to Tokyo
Nikkei Asia
Over 100 covert overseas police stations, set up by China according to a December report by Safeguard Defenders, are coming under global scrutiny from countries in which they operate. The US Justice Department recently investigated and closed down one such station in New York's Chinatown. The investigation uncovered a police station of China’s national police, which had allegedly been used to harass an activist living in the US. The stations were set up as places for Chinese nationals living abroad to get support but have been used increasingly for activities referred to as “transnational repression”.
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