Why has China launched an anti-corruption probe into top banks and SOEs? Exclusive Insight: Hangzhou's Real Estate Revolution and Zhejiang's Unique Management Model
China jails man who scared chickens to death; The city without TikTok offers a window to America’s potential future; Just how close will Vietnam get to the US to keep China in check?
Welcome to this issue of The China Brief. Today is April 9, 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.
And here’s today’s exclusive insight:
Exclusive Insight: Hangzhou's Real Estate Revolution and Zhejiang's Unique Management Model
House prices in Hangzhou have made it a first-tier city, leading the way in provincial management of counties. In the 1990s, the Zhejiang province began selling land and developing real estate as a means of managing the city and driving the economy. The government became a dealer, treating the city and land as commodities and inflating prices through the real estate industry.
Despite being a small province, Hangzhou's house prices have made it a first-tier city, sometimes even ranking among the top three cities after Beijing, Shanghai, and Guangzhou. This is due to the fact that people in Zhejiang are wealthy and the province has been able to accumulate wealth from various industries through the market economy. Through the government's management of the city and its use of real estate, this wealth has been concentrated in one industry, leading to the rapid development and impressive appearance of Zhejiang's cities. The real estate industry is a significant reason for this success, though its positive or negative impact is debatable.
Zhejiang's management model is the provincial management of counties, with the provincial government directly managing the finances of the county level without a regional level of finance. This makes regional management in Zhejiang relatively weak.
I remember talking to a major city leader in the early 1990s, who complained about the lack of tools available for managing counties. He said, "What can I do? How can I manage when there are no tools available?" This was a legitimate complaint, as the county's finances were entirely related to the province, and the county's leader was appointed by the province. The only influence the city had was over the few people in the leader's circle.
Consequently, the lack of regional-level control over the counties has resulted in a relatively simple bureaucratic structure with reduced friction. As a result, the hierarchical structure in Zhejiang is comparatively weak. Despite this, the majority of Zhejiang's counties are thriving, with many ranking among the top 100 counties in China. This success is largely attributed to the systemic reforms that have been implemented.
(From the "Zhejiang, Zhejiang People, Zhejiang Economy" series, written by Ye Feng, a Zhejiang researcher.)
The city without TikTok offers a window to America’s potential future
CNN
TikTok exited Hong Kong in July 2020, a week after China implemented a national security law. The loss of the platform was felt by creators such as Shivani Dukhande, who had about 45,000 followers when the app left Hong Kong. Companies had approached Dukhande, paying for sponsored content and collaborating on ad campaigns; she believed that she could have made enough to quit her full-time job if the app had continued to operate in the city. Reels, Instagram’s short-form video product with similar features to TikTok, is now filling the void created by TikTok’s departure.
While some people miss TikTok, others value the break from content that they found to be toxic, often breeding narrow thinking, herd mentality, and inappropriate online behavior. They described it as a concerning environment that had a grip on the youth mental health. Hong Kong's Martin Poon, 15, said that "it's just concerning how these accounts have so much impact on the youth, and it has so much grip on what we think and how it affects our behavior."
TikTok recently announced a one-hour daily screentime limit for users under 18 to help with these issues. Meanwhile, young people such as Poon and his friend Ava Chan, also 15, used the opportunity to launch advocacy clubs and explore their passions, improving their mental health and having more face-to-face conversations with their peers. Although Poon and Chan occasionally wonder what’s happening on TikTok outside Hong Kong, they aren’t lured to the platform as anyone around them uses it.
Can Lemon8 replicate TikTok’s success, as ByteDance fights US ban?
South China Morning Post
ByteDance's new social media app Lemon8, which works by letting users share videos, text as well as photos based on what other subscribers might find appealing or interesting to view, has enjoyed an unprecedented surge of popularity in Japan, Thailand, and more recently in the US, particularly since the app relies on the kind of 'interest graph' that is unique to online platforms from Asia. This includes enabling users to search for content using keywords like recipes, tourist destinations, and recommendations for restaurants. As a result, the app has filled a gap in the app market that has not yet been occupied by rivals in the US. ByteDance also operates the Chinese platform Xiaohongshu, which has become popular with young consumers who post content-sharing interests, while the platform is also a popular destination for brands targeting consumers via lifestyle trends.
China jails man who scared chickens to death
CNN
A man in China has been sentenced to prison after being found guilty of killing some 1,100 chickens in a bid to intimidate a neighbor with whom he was quarreling. The feud began when the neighbor cut down trees that belonged to the man, who had been identified only by his surname Gu. The sparring intensified after Gu trespassed onto the property a second time, causing 640 of the resident chickens to die in the resulting crash. It is unclear why Gu shone a flashlight onto the panicked birds but the Hengyang court ruled that he had intentionally caused “property loss” to Zhong, the property's owner. Gu has been ordered to serve six months in prison with one year of probation.
U.S. says it is monitoring China's drills around Taiwan closely
Reuters
The US is closely monitoring China's military drills around Taiwan and is "comfortable and confident" that it has the resources and capabilities in the region to maintain peace and stability, according to the US de facto embassy in Taiwan.
Why has China launched an anti-corruption probe into top banks and SOEs?
South China Morning Post
The Communist Party of China is targeting its financial industry with its latest anti-corruption campaign, designed to de-risk the sector, reduce external shocks on the economy and strengthen funding opportunities for small and private enterprises. Five state-owned enterprises are being examined in the campaign, which coincides with a regulatory shake-up of the sector that is expected to further consolidate the party's control over it. The move aimed to lay the groundwork for stronger tech innovation and economic recovery. The campaign will affect the income earnings of the state-owned enterprises and their affiliated employees.
China's financial sector is one of its most profitable, with the net profits of the country's largest six state-owned banks rising by 6% YoY to CNY1.36tn ($197.8bn) last year. However, it is also a sector that is exposed to high levels of risk from property developers and local financing vehicles. In total, 12 top financial executives or officials have already been investigated this year alone.
The Central Commission for Discipline Inspection (CCDI) is undertaking the investigation and is seeking public and industry feedback on issues such as bad loans, distressed property markets, local government debt, and inadequate funding provisions for small enterprises. As Beijing encourages banks to extend increased lending to the real economy, there could be more liquidity support for heavily indebted property developers. Nevertheless, moves such as this also increase the pressure on the sector to ensure good governance and regulatory compliance.
Just how close will Vietnam get to the US to keep China in check?
South China Morning Post
China has stressed the importance of maintaining “neighborly relations” with Vietnam following the US’s growing interest in the region. Senior diplomats from Vietnam and the US have also been meeting in Washington for political and security talks with the US reaffirming commitments to help the Vietnamese improve its maritime capacity and law enforcement. The two countries are set to “promote, develop and deepen” ties and exchange reciprocal invitations to visit. Vietnam, however, will resist being drawn into the American orbit to counter China. According to the US Excess Defence Articles program, Vietnam is to receive a third patrol boat to support military and security modernization efforts.
Vietnam is growing more rapidly economically, and also has a strategic location in the South China Sea, making it an important location, given China’s increasing projection of geopolitical competition. Observer Collin Koh, from the Institute of Defense and Strategic Studies at S. Rajaratnam School of International Studies, states that given the US Coast Guard’s eagerness to step up its Indo-Pacific presence; there could be more maritime cooperation between the US and its Vietnamese counterparts over time. However, Koh thinks the extent of Vietnam-US maritime security cooperation will be determined, in part, by Vietnam’s desire to stay non-tied and non-allied with third parties. Experts have noted that Vietnam’s security cooperation with the US is, therefore, not expected to increase dramatically, with Hanoi highly unlikely to follow the Philippines, which still has a mutual defense treaty with the US.
Apple at Heart of US-China Selective Decoupling, Gallagher Says
Bloomberg
US businesses such as Apple and Walt Disney could face significant challenges in "selective decoupling" from China, as the world's two largest economies continue to grapple with ongoing tensions, according to US Republican Rep. Mike Gallagher. Gallagher, the chairman of the House committee that focuses on US-China commerce and competition, led a group of half a dozen lawmakers on a tour of technology and entertainment companies in California, meeting with Apple CEO Tim Cook and Disney's Bob Iger. In interviews following the trip, Gallagher said most industry executives wanted clear lines from the US government on which areas of the Chinese economy they should avoid. He felt there was near-unanimous backing for outbound investment restrictions on Chinese-developed artificial intelligence, and curbs on investments in bioengineering, quantum computing, advanced semiconductors, and military technologies in general. However, he said he doubted Congress would act on legislation on outbound investments until after seeing the plans of the new administration led by President Joe Biden.
Blinken to visit Vietnam next week, U.S. senator says
Nikkei Asia
US Secretary of State, Antony Blinken is reportedly due to visit Vietnam next week, according to Senator Jeff Merkley, in a bid to upgrade diplomatic relations with Hanoi this year. Talks of upgrading relations loom over Biden's 10-year partnership with Vietnam due to culminate in July. Although the US is Vietnam's biggest export market, diplomatic ties only rank in the third tier behind China, Russia, India, and South Korea in the top tier, and European countries and Japan, in the second tier. It is said that Vietnam is cautious about upgrading relations fearing it may cause tensions with China, its largest trade partner.
US urges ‘restraint’ as China launches Taiwan military drills
South China Morning Post
The US State Department has called on China to show restraint after Beijing began launching military drills around Taiwan. The US has pledged to meet its security commitments in Asia if needed. The status of Taiwan has long been contested between China and the island nation, which is a self-ruling democracy. The US has been ambiguous as to whether or not it would militarily defend Taiwan, although for decades it has sold arms to the government in Taipei to help it protect itself. China’s announcement of its drills as a “stern warning” to Taiwan followed its President, Tsai Ing-wen, meeting US House Speaker Kevin McCarthy in California last week.
Saudi delegation in Iran to discuss diplomacy after historic deal in Beijing
South China Morning Post
A Saudi Arabian delegation has arrived in Tehran to discuss reopening diplomatic missions in Iran, two days after a historic meeting in Beijing between the foreign ministers of the two countries. The visit follows the Saudi and Iranian officials' agreement last month to restore diplomatic ties, which will involve reopening embassies and missions within two months and implementing security and economic cooperation deals signed more than 20 years ago. The two nations severed ties after an attack by Iranian protesters on Saudi diplomatic missions following the Kingdom’s execution of a prominent Shiite cleric. The US has welcomed the rapprochement between the Saudi Kingdom and adversary Iran but has expressed concerns over the involvement of China, which the US sees as its biggest global challenger.
Memphis Zoo holds a farewell party for Ya Ya the panda ahead of China's return
South China Morning Post
The Memphis Zoo has said goodbye to giant panda Ya Ya, as she is set to be returned to China after a 20-year loan agreement. Visitors at the zoo, where Ya Ya was joined by Le Le, watched Chinese cultural performances during the send-off. Ya Ya was born on August 3, 2000, and is set to depart for China at the end of the month. During their stay in captivity, the giant pandas played a key role in research and conservation projects and helped people to learn about Chinese culture.
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