Why Vladimir Putin needs Xi Jinping more than ever now; Exclusive Insight: Real Estate Rapture: China's Urban Transformation and the Commandeering of its Economy
Shunned in the West, Russian performers turn to China; Ukraine planning to apply for membership in major Pacific trade pact; Italy Rethinks Its Close China Ties as US Backs Stronger Break
Welcome to this issue of The China Brief. Today is April 22, 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: Real Estate Rapture: China's Urban Transformation and the Commandeering of its Economy
In examining the degree to which the real estate industry fuels various sectors, it is evident that these sectors collectively provide financial backing for projects. Upon completion, these projects are then sold to the public. Homebuyers contribute down payments to property developers and secure loans from banks.
As funds flow through this extensive network, developers and related industries progressively share the financial burden. The government, within this framework, initially profits from land sales and subsequently from taxation. As a result, the real estate industry amasses considerable funds, addressing local fiscal challenges and accumulating valuable capital for the government. This facilitates the initial capital accrual for urban and transportation investment companies.
At the dawn of this century, local governments were devoid of economic entities, hindering their capacity to intervene, manipulate, or directly partake in economic activities. Nevertheless, the real estate sector's accumulation of funds supplied them with the means to do so. Over the past decade or so, the government has managed cities, generated revenue, built bridges, paved roads, erected public buildings, and revolutionized the urban landscape.
Urban transportation systems and roads have been established, with periodic renovations taking place. Trees are planted one year, only to be uprooted and supplanted with different species the next. These advancements have transpired amidst the recent real estate boom. Indeed, the past decade has seen significant transformations of Chinese urban landscapes, with the government playing a vital role. Enhancements to the urban environment, transportation, and infrastructure have been substantial, and the government's contributions have been noteworthy. Nonetheless, this process also signifies the real estate sector's commandeering of the Chinese economy from another viewpoint.
This process diverges fundamentally from the impetus propelling China's rapid economic development and the trajectory towards authentic growth. It concentrates society's financial resources into a single industry, culminating in the creation of steel, cement, infrastructure, and fixed assets. At its core, this process consolidates and appropriates China's economic wealth into a singular sector. Once steel and cement have been converted into housing, they cease to re-enter the production process.
Within this context, the government's debt is substantial, and public consumption is suppressed. As a result, while the government's management of cities may offer short-term stimulation to economic growth by driving numerous industries through the real estate sector, this effect remains ephemeral.
(This article is the 15th installment in the series "Zhejiang, Zhejiang People, Zhejiang Economy." The author, Ye Feng, is a Zhejiang researcher.)
Chinese developers spend US$7.5 billion in Shanghai’s first land auction in 2023
South China Morning Post
All 19 plots of land up for auction in Shanghai were sold for a total of CNY 51.9bn ($7.5bn), a 7% increase on their estimated value. The strong interest shown and subsequent bids came from more than 50 property developers, with 15 of the plots selling for above their floor price. State-owned or state-backed firms acquired the largest number of plots, with China Poly Group's subsidiary, Poly Developments, emerging as the auction’s biggest winner after obtaining three parcels for CNY13.2bn.
Ukraine planning to apply for membership in major Pacific trade pact
Japan Times
Ukraine plans to apply for membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) by the end of the year, following in the footsteps of Britain. If accepted, Ukraine would become the second European country to join the trade deal, which currently has 11 members in the Pacific region. Joining the CPTPP would help Ukraine to strengthen its economy, which has been weakened by Russia's war, according to a senior Ukrainian government official. Several other countries, including China, Taiwan, Ecuador and Costa Rica, have also applied for membership in the CPTPP.
The U.S. is cracking down on Chinese 'police stations' with a tool Canada still doesn't have
CBC
The United States has taken legal action against a so-called Chinese police station on US soil, with Canada yet to introduce the registry of foreign agents used in the US crackdown. US authorities have reportedly closed down a Chinese police station in Downtown Manhattan after charging two American citizens with failing to register work done on behalf of the People’s Republic of China. The US indictment against the two men accused them of disguising their foreign contacts during the run-up to arrests. Canadian international development deputy, temporary RCMP commissioner and public safety ministry deputy, testified at parliamentary hearings in March, stating that while no such arrests had been made in Canada, police stations in Canada were being shut down. Former head of Canada’s federal public service, Michael Wernick, suggested Parliament copy the UK’s national security bill, which includes the maximum two-year jail sentence for failure to register political-influence activities on behalf of a foreign power. Australia established a foreign agents’ registry in 2018.
Italy Rethinks Its Close China Ties as US Backs Stronger Break
Bloomberg
Italian Prime Minister Giorgia Meloni is seen as pulling Italy out of China’s Belt and Road Initiative. Italy is the only G7 country to be part of the $900 billion infrastructure plan, which has caused suspicions among other nations over Chinese investment in their countries. The US is keeping an eye on Meloni’s decision as this shows how she can stick with her anti-China rhetoric. Italy is now in a tricky position as it tries to keep good economic ties with both countries. Meloni had hoped to make her decision before May’s G7 summit.
Shunned in the West, Russian performers turn to China
South China Morning Post
Facing boycotts and sanctions in the West, Russian artists are increasingly turning to stages in China. The Mariinsky Theatre Orchestra led by Valery Gergiev kicked off their latest concerts in Beijing with a 1965 Communist Party song "Ode to the Red Flag"; the concert series was the first international performance by the prominent conductor since his termination from the Munich Philharmonic last year because of his ties to Russian President Vladimir Putin and his rejection to criticize Moscow’s invasion of Ukraine causing him to faced boycotts and sanctions in the West. Soft power relations between the two countries have grown in the face of geopolitical pressure. A joint statement between China and Russia was signed in Moscow by Xi and Putin, emphasizing promoting exchanges between museums, libraries, art galleries, theatres, and other cultural institutions.
China and the Philippines discuss ties as Manila opens bases to U.S.
Nikkei Asia
The foreign ministers of China and the Philippines met on Saturday after bilateral relations were affected by Manila's decision to allow the U.S. access to its military bases near Taiwan, which was opposed by Beijing. Chinese Foreign Affairs Secretary Qin Gang's three-day visit to Manila coincided with the largest-ever Philippine-U.S. military drills.
Why Vladimir Putin needs Xi Jinping more than ever now
The Independent
Russian President Vladimir Putin's dependence on Beijing is growing amid the economic sanctions that have been imposed on Russia, according to reports. Experts suggest that Putin and Russia could benefit from inexpensive military equipment imports, especially following Ukraine's ceasefire deal. While Russia does not face the global isolation often spoken of and has trade ties with non-European countries, including Iran, Belarus and North Korea, Putin is also relying on China as a "global partner", according to analysts.
Struggling Hong Kong tourism sector asks why city slashed support by HK$576 million
South China Morning Post
The Hong Kong government has cut subsidies for the tourism industry by almost 40%, even as it granted a large sum to the loss-making Ocean Park theme park, leading to criticism from lawmakers. Permanent Secretary for Culture, Sports and Tourism Joe Wong Chi-cho responded to lawmakers' questions regarding the government's motivations in this decision. With thousands of layoffs and numerous tour agencies going out of business during the pandemic, some business leaders say the reduction in funding is not good, and may hurt the already-struggling industry.
Tesla's California market share tumbles despite aggressive price cuts
Reuters
Despite aggressive price cuts, Tesla's market share in its key Californian area during the first quarter of 2021 fell to 59.6% from 72.7% for the same period last year – the lowest since 2017 – according to Reuters calculations from data collated by the California Energy Commission. The news follows reports of increasing competition from rivals such as Volkswagen, General Motors' Chevrolet and Kia, which all increased their market share in the state during the same period. Tesla has seen its CEO Elon Musk critique the Democratic Party on Twitter and embrace Republicans, sparking concerns about the automaker's brand, particularly in liberal states like California.
China’s Xi Pledges Tech Breakthrough, Private Business Expansion
Bloomberg
Chinese President Xi Jinping is urging companies to expand and break technological barriers to counter US containment efforts. He declared innovation led by companies is key to achieving technological self-reliance and that the government should help them solve core tech challenges facing the country. Xi also called for the state sector to be reformed to ensure economic security while improving efficiency and oversight. The shift represents a change in Beijing’s view of private business following years of intense regulatory crackdown, particularly in the tech sector.
Who were the ancient Xiongnu? Clues to empire found in graves and DNA
South China Morning Post
The nomadic empire of the Xiongnu was highly genetically diverse and showed strong gender equity, according to research published in Science Advances. The Xiongnu Empire dominated the Eurasian steppe for nearly three centuries from 200 BCE. It was characterized by strong trade links and resisted battles with Han China. There was previously a high level of genetic diversity across the population, suggesting that the empire was “multiethnic, multicultural and multilingual”, however, it had not been clear how the diversity was structured. The research showed that high levels of genetic diversity existed not only within the empire but also within its local communities. The study also identified the strong role that women played in the empire.
Seeing Opportunities, World Powers Take Sides in Sudan War
NY Times
The outcome of Sudan’s power struggle has far-reaching geopolitical implications as foreign meddlers jostle to influence the country. Strong global interest in Sudan has been evident since the 2019 #SudanUprising promised a democratic future for the country. Among those looking to benefit are Russia, intent on securing base access in the Red Sea, and private military company Wagner, which paved the way with armored vehicles and gold-mining concessions. The United Arab Emirates encouraged General Mohamed Hamdan to build a private army by channeling business dealings through Dubai. Meanwhile, Egypt backed General Abdul Fattah al-Burhan in a show of strength that revealed its desire for a “formally trained officer like itself” to be in charge. Despite earlier efforts to bring Sudan back to civilian rule, it appears that regional and global powers’ interference has helped to push the country ever closer to war.
WW2 shipwreck from Australia's worst maritime disaster found after 81 years
Telegraph
The wreck of the SS Montevideo Maru, sunk in 1942 by an American submarine in the South China Sea, has been discovered by the Australian defense department, working with Silentworld Foundation and deep-sea survey specialists Fugro. The ship, which was transporting 850 Australian soldiers and 210 civilians from 14 countries, sank within 10 minutes. The wreck is classed as a military gravesite and will not be disturbed, nor will there be an attempt to recover any human remains. Locating the wreck brought closure to hundreds of Australian families, who had been left without information on their loved ones for many years.
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