Xi Jinping’s Russian Lessons; Goldman says stick to high-dividend Chinese stocks as listed firms build record cash piles
China’s C919 jet noses closer to European certification as regulators plan visit
Welcome to this issue of The China Brief. Today is June 24, 2024. 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.
Xi Jinping’s Russian Lessons
Foreign Affairs
The partnership between Russia and China has raised concerns in the West about the possibility of a new alliance similar to the one that existed during the early Cold War. However, the current partnership between Russian President Vladimir Putin and Chinese leader Xi Jinping is different from the past. While the old alliance was driven by communist ideology, the current partnership is based on conservative, anti-Western, and statist attitudes. Furthermore, the personal connection between Putin and Xi has been emphasized and is seen as a feature of the strategic partnership. Overall, the relationship between Russia and China is more flexible and resilient than in the past, although they will never march in lockstep as they did in the early years after the Chinese Revolution.
Xi Jinping's father, Xi Zhongxun, had a career that mirrored the ups and downs of Sino-Russian relations in the 20th century, from the early days of the revolution to the open split in the 1960s. Xi Jinping is aware of this history and believes that the current relationship between Moscow and Beijing is stronger than it was in the past. While the ideological differences that caused the split in the past are absent in the current partnership, Xi Jinping still takes communism's legacy seriously, unlike Putin.
The personal relationship between Putin and Xi is also a factor that strengthens the partnership between Russia and China. They are almost the same age and both have had formative experiences about the dangers of political instability. Their warm relations and personal connection contribute to the resilience of the partnership. Overall, the partnership between Russia and China is a mix of coexistence and competition, with Beijing hoping to benefit economically and technologically from ties with the West, while Moscow sees itself in a purely competitive relationship.
https://www.foreignaffairs.com/china/xi-jinping-russia-lessons-putin
Goldman says stick to high-dividend Chinese stocks as listed firms build record cash piles
South China Morning Post
Goldman Sachs has suggested that investors should focus on buying Chinese stocks that offer good dividends, as a policy push is expected to encourage more payouts and buy-backs. The recommendation is based on a guideline document from the State Council, which promises better returns for investors and a new round of reforms for state-owned enterprises (SOEs). Chinese listed companies generated a record CNY2.6tn ($330bn) in free cash flows last year and amassed CNY18tn of cash on their balance sheets, the report stated. Betting on high-dividend stocks has proven successful over the past three years, with the CSI Dividend Index beating the benchmark CSI 300 Index each year since 2014.
https://www.scmp.com/business/china-business/article/3267789/goldman-says-stick-high-dividend-chinese-stocks-listed-firms-build-record-cash-piles?utm_source=rss_feed
China’s C919 jet noses closer to European certification as regulators plan visit
South China Morning Post
European officials from the European Union Aviation Safety Agency (EASA) are set to visit China in July to conduct field checks and begin the certification process for the C919, China's home-grown passenger jet. The visit represents a step forward for China as it seeks European approval for the aircraft, which would give prospective buyers in Europe and elsewhere greater confidence in the plane. Chinese aviation officials have expressed optimism that certification could come as soon as next year. So far, six C919 aircraft have been delivered to Chinese airlines since May 2023.
https://www.scmp.com/economy/china-economy/article/3267788/chinas-c919-jet-noses-closer-european-certification-regulators-plan-visit?utm_source=rss_feed
Landslide kills 8 in Hunan as extreme rainfall in China continues to wreak havoc
South China Morning Post
At least eight people have died in China after heavy rain caused a landslide in the Hunan province. The landslide hit four houses on Sunday morning, with eight people declared dead after being found on Sunday night. Over 300 rescuers from different emergency services worked to free the victims. Multiple cities in Hunan province have been affected by heavy rain, with Taoyuan county seeing the heaviest rainfall. The area recorded 39.5cm of rain from Friday to Saturday night. Extreme rainfall is expected in other areas this week, with flood alerts being issued to several provinces.
https://www.scmp.com/news/china/article/3267785/landslide-kills-8-hunan-extreme-rainfall-china-continues-wreak-havoc?utm_source=rss_feed
Leader of NATO member Poland visits China, expecting to talk to Xi about Ukraine
Associated Press
Polish President Andrzej Duda has arrived in China for a visit aimed at improving trade relations between the two countries. President Duda said that he wants to maintain friendly relations with China and believes that China holds the key to peace in the Russia-Ukraine conflict. China has blamed NATO's expansion for provoking Russian aggression and has maintained strong trade and diplomatic ties with Moscow. President Duda will also seek a visa waiver for Poles travelling to China and will seek opportunities to increase Poland's exports there.
https://apnews.com/article/china-poland-duda-xi-russia-ukraine-f82b4b95830f908b00d576295f23e329
China's Midea Real Estate shares soar on property development spinoff
Nikkei Asia
Shares in Midea Real Estate, a subsidiary of major Chinese electric appliance maker Midea, increased by 69% after announcing plans to spin off its property development business. The move is seen as an effort to protect against risks from China's property crisis. The Hong Kong-listed entity will be left with property management services, commercial properties and industrial parks, the real estate technologies business, and construction project management.
https://asia.nikkei.com/Business/Markets/China-debt-crunch/China-s-Midea-Real-Estate-shares-soar-on-property-development-spinoff
Philippines says China deliberately used 'illegal force' disrupt resupply mission
Japan Times
The Philippines' defense chief, Gilberto Teodoro, has accused China of using 'aggressive and illegal force' to disrupt a resupply mission in the South China Sea. Teodoro stated that last week's maritime incident, which resulted in a Filipino sailor being injured, was not a misunderstanding or accident. The Philippine military described the incident as an intentional high-speed ramming by the Chinese Coast Guard.
https://www.japantimes.co.jp/news/2024/06/24/asia-pacific/politics/philippines-china-south-china-sea-deliberate/
China, EU are open to talks on plans to hike tariffs on Chinese EVs
Associated Press
China and the European Union (EU) are willing to hold talks regarding the EU’s decision to increase tariffs on Chinese-made electric vehicles, according to officials from both sides. The EU plans to impose provisional tariffs of 17.4% to 38.1% on electric vehicles (EVs) from China for four months from 4 July, on top of existing duties of 10% on all EV imports. The tariffs would apply to vehicles from Chinese and foreign brands, including Tesla. The European Commission said that preliminary results from an investigation into Chinese EV subsidies suggested that the country’s battery EV “value chain” benefits from “unfair subsidisation” that harms EU rivals.
https://apnews.com/article/china-eu-evs-tariffs-801965213d23e8a67452ed6a4a560d49
Chinese arms firm shows Nato-standard artillery with aim of boosting weapon exports
South China Morning Post
China has showcased Nato-standard artillery at a major defence exhibition in France in a bid to boost its land-based weapons exports. Chinese defence contractors displayed two miniature models of major land-based artillery, the PLZ-52 and truck-mounted SH-15 155mm self-propelled howitzers. Both have Nato-standard 155mm calibres. The PLZ-52 has no export record, but the SH-15 has been sold to Pakistan and Ethiopia. China has mainly sold 155mm calibre Nato-standard artillery to Middle Eastern and African countries. Analysts said China could replace Russian arms exports to developing countries, but the display at the European exhibition is unlikely to lead to exports to Europe or other US-allied nations. China's artillery is seen as competitive, but designs are outdated, said Timothy Heath, a senior international defence researcher at the US-based think tank Rand Corporation.
https://www.scmp.com/news/china/military/article/3267813/chinese-arms-firm-shows-nato-standard-artillery-aim-boosting-weapon-exports?utm_source=rss_feed
China’s AI event World Intelligence Expo attracts few foreign firms in Tianjin amid global rift
South China Morning Post
The World Intelligence Expo, a trade exhibition in Tianjin aimed at promoting the integration of artificial intelligence (AI) and industrial equipment, saw limited participation from foreign brands this year. The event, hosted by the Chinese governments of Tianjin and Chongqing, featured booths from 20 foreign firms, or 4% of the 550 exhibitors. Most of the booths were occupied by Chinese state firms and local tech giants, while the speaker list was dominated by Chinese tech executives. The limited participation of Western firms at the expo highlights the trend of technological decoupling between China and the West. Other tech-focused events in China have seen a similar trend.
https://www.scmp.com/tech/big-tech/article/3267795/chinas-ai-event-world-intelligence-expo-attracts-few-foreign-firms-tianjin-amid-global-rift?utm_source=rss_feed
US aircraft carrier arrives in South Korea as Russia-North Korea defense pact deepens regional fears
CNN
The US, South Korea, and Japan have condemned military cooperation between North Korea and Russia, citing concern for peace and stability on the Korean Peninsula and the non-proliferation regime. The condemnation came ahead of the upcoming Freedom Edge exercises, during which the USS Theodore Roosevelt will participate.
https://edition.cnn.com/2024/06/24/asia/us-aircraft-carrier-south-korea-intl-hnk-ml/index.html
Hong Kong man convicted of secession files first legal challenge against Article 23 law
South China Morning Post
A Hong Kong man, Adam Ma Chun-man, has filed a legal challenge against the city's domestic national security law. Ma, who was convicted of inciting secession, claims that the decision to bar his early release is unfair and violates his fundamental rights. Under normal circumstances, a prisoner's sentence can be reduced by a third for good behavior. However, the national security law stipulates that prisoners convicted of national security offenses cannot be granted remission unless it is deemed not to compromise national security. Ma's lawyers argue that the broad discretion given to authorities under the law is prone to abuse and that the retrospective implementation of the rule is problematic. Ma was convicted and jailed for promoting Hong Kong independence through chanting slogans in public and giving media interviews, which is banned under the national security law imposed by Beijing in June 2020.
https://www.scmp.com/news/hong-kong/law-and-crime/article/3267797/man-convicted-secession-files-first-legal-challenge-against-hong-kongs-article-23-law?utm_source=rss_feed
China-backed hackers stepping up attacks on Taiwan, cybersecurity firm says
Al Jazeera
A hacking group, RedJuliett, believed to be backed by the Chinese government, has carried out a series of attacks on Taiwanese organisations in an effort to gather intelligence. Cybersecurity firm Recorded Future stated that the group compromised two dozen organisations between November 2023 and April of this year. The targets included government agencies, tech firms and universities. RedJuliett used vulnerabilities in firewalls and virtual private networks to gain access to its targets. The group also targeted more than 70 Taiwanese organisations, including de facto embassies. Taiwan and China have been at odds over Taiwan's international profile, with Taipei seeking to boost its diplomatic relations.
https://www.aljazeera.com/economy/2024/6/24/china-backed-hackers-stepping-up-attacks-on-taiwan-cybersecurity-firm-says
China is greenlighting possible death penalties for 'diehard' supporters of Taiwan gaining independence
Yahoo US
China has issued guidelines stating that supporting Taiwan's independence can be a crime, punishable by prison sentences of more than ten years and even the death penalty. This is the first time the country has so clearly outlined legal guidelines aimed at Taiwan. China's hardening stance towards Taiwan comes after Taiwan's new president, Lai Ching-te, took office in May. Lai's political faction, the Democratic Progressive Party, has focused heavily on resisting China, prompting aggressive posturing from Beijing. The new guidelines are likely to put a further dampener on Taiwanese business.
https://www.yahoo.com/news/china-greenlighting-possible-death-penalties-051356316.html
China’s bureaucrats can repopulate unicorn herd
Reuters BreakingViews
China is experiencing a decline in the number of new startups valued at over $1bn, prompting President Xi Jinping to question the reasons behind the slowdown. The government's regulatory crackdown on the tech sector and concerns over a sluggish economy have deterred venture capitalists and entrepreneurs. To revive the startup ecosystem, Chinese officials are considering deploying state funds and reopening the IPO markets. The government may tap into state-backed insurance groups and pension funds to attract domestic capital and offset the decline in investments from US-based venture funds. Additionally, officials may approve more IPOs on the mainland to create exit opportunities for venture capital investments.
https://www.breakingviews.com/considered-view/chinas-bureaucrats-can-repopulate-unicorn-herd/
Japan and South Korea Are Fighting Over an App at a Tense Time
NY Times
A joint venture between Japanese company SoftBank Group and South Korean company Naver, which owns the messaging app Line, is causing a rift between Japan and South Korea. The venture, established in 2019, was seen as a symbol of cooperation between the two countries, but disagreements over ownership have emerged. Japan and South Korea have a history of tension, and experts fear that this dispute could strain their diplomatic ties. The stakes are high considering concerns about North Korean nuclear proliferation and regional instability.
https://www.nytimes.com/2024/06/24/business/naver-softbank-line-south-korea-japan.html
China running short of lottery tickets as youth try their luck amid shaky economy
South China Morning Post
The economic slowdown in China has led to a surge in sales of instant lottery tickets, known as gua gua le, as people seek a shortcut to wealth and a way to relieve stress. Sales from all types of nationwide lotteries increased 19.7% year on year in Q1 2022, according to the Ministry of Finance, with gua gua le accounting for 26.1% of the total. However, supply shortages have led to difficulties for some lottery retailers.
https://www.scmp.com/economy/economic-indicators/article/3267765/china-running-short-lottery-tickets-youth-try-their-luck-amid-shaky-economy?utm_source=rss_feed
Hong Kong to rely on tech to replace some frontline civil servants, minister says
South China Morning Post
The Hong Kong government plans to replace frontline roles with technology as part of its efforts to restructure the workforce and eliminate 2,000 positions by the end of next year. Secretary for the Civil Service Ingrid Yeung Ho Poi-yan stated that technology will be used to perform simple tasks more efficiently and with fewer mistakes. The government aims to limit the number of civil service posts to 194,000 by March 2025. Yeung also mentioned that recruitment efforts targeting university graduates will continue, as there are shortages in specific grades of government workers.
https://www.scmp.com/news/hong-kong/politics/article/3267720/hong-kong-rely-tech-replace-some-frontline-civil-servants-minister-says?utm_source=rss_feed
Philippines warns online casinos could be China-linked 'Trojan horses'
Nikkei Asia
Philippine offshore gaming operators (POGOs) or online casinos, which were seen by the previous Duterte government as an economic boon, could turn out to be a "Trojan horse" with far-reaching consequences, analysts warn. Recent raids have exposed potential links to China-related national security concerns, including criminal activity linked to POGOs, such as illegal employment, kidnapping and torture. The geopolitical tensions with China make the issue more complicated and a sensitive issue for Philippine security officials, who already see it as a "concern" to national security.
https://asia.nikkei.com/Politics/International-relations/Philippines-warns-online-casinos-could-be-China-linked-Trojan-horses
China’s state-owned space company beats private sector to reusable rocket test
South China Morning Post
China's state-owned Shanghai Academy of Spaceflight Technology (SAST) has completed a successful test of a reusable rocket, beating privately-owned rivals in the country. The "hop test" saw the rocket take off vertically, move sideways, and land again within six minutes. The test verified the rocket's structural integrity, buffer mechanisms, and high-precision navigation during landing. The rocket, powered by three engines burning methane and liquid oxygen, reached an altitude of 12km before landing precisely on the recovery pad. SAST's next goal is a vertical take-off-vertical landing test at an altitude of 70km.
https://www.scmp.com/news/china/science/article/3267759/chinas-state-owned-space-company-beats-private-sector-reusable-rocket-test?utm_source=rss_feed
How China’s belt-tightening affects the world
South China Morning Post
As China's economy slows down, young professionals and middle-class individuals in the country are reducing their spending. This has led to concerns from foreign governments about China's excess production capacity and its impact on the domestic economy, international relations, and the decisions made by Chinese citizens.
https://www.scmp.com/news/china/article/3267692/how-chinas-belt-tightening-affects-world?utm_source=rss_feed
Hong Kong’s US$8 billion government fund inks deal with Beijing biotech start-up as city aims for tech hub status
South China Morning Post
The Hong Kong Investment Corporation (HKIC), a government-owned fund, has partnered with biotechnology firm Biomap to support over 50 early-stage research and development projects in life science. HKIC will invest in Biomap and lead its current financing round. Biomap provides large AI models for pharmaceutical companies and healthcare firms to speed up the discovery and development of new drugs and other life science products. The partnership is the second public move by HKIC since it was established in October 2022 as Hong Kong seeks to boost its technology sector.
https://www.scmp.com/tech/policy/article/3267756/hong-kongs-us8-billion-government-fund-inks-deal-beijing-biotech-start-city-aims-tech-hub-status?utm_source=rss_feed
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