Yellen, in Beijing, Criticizes China’s Treatment of U.S. Companies; Exclusive: When Will China's Real Estate Sector Loosen its Controls?
Yellen says US wants healthy competition with China, not 'winner-take-all' approach; The rise of the made-in-China movement; China to Wrap Ant Probe With $1.1 Billion Fine
Welcome to this issue of The China Brief. Today is July 07, 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.
When Will China's Real Estate Sector Loosen its Controls?
At the end of 2016, Xi Jinping proposed for the first time that "houses are for living in, not for speculation," a perspective that was included in the theme report of the 19th National Congress of China a year later. This can be seen as Xi Jinping's solemn promise to burst the housing price bubble and reduce the risk in the real estate industry. In subsequent years, Prime Minister Li Keqiang repeatedly mentioned in his annual government work reports that he would "take strong measures to curb credit expansion related to real estate, control housing price increases and financial risks, suppress the investment attributes of real estate, and reduce local government's fiscal dependence on land."
The highest-level political promises are usually difficult to change, unless confronted with significant constraints that make it impossible to continue the promised actions. Taking the United States as an example, the Federal Reserve continues to raise interest rates to combat inflation, and will undoubtedly continue to do so until inflation is thoroughly controlled, provided it does not cause instability in the financial system. Taking China's virus eradication as an example, it would have been hard to stop without protests from students and citizens last winter. In my personal opinion, the following three scenarios would lead the Chinese government to change its current real estate policy:
a) Economic stagnation, a large number of bankruptcies and unemployment, leading to social unrest. At present, China's official unemployment data shows that the unemployment rate for youth (18-24-year-old labor force) is above 20%, equivalent to the level in several Southeast Asian countries such as Indonesia and Thailand after the 1997 Asian financial crisis, but China has not yet experienced social unrest like last winter. b) Instability in the financial system. China's "deleveraging" movement aims to reduce the liabilities of the real economy (the party being financed) and lower the risk of the macroeconomy. However, this process, while ignoring economic costs, has not taken into account that a large amount of bad debt will be generated in the process of the real economy "deleveraging", causing financial institutions (the party lending the funds) to become insolvent, leading to financial panic akin to what was seen with Credit Suisse and Silicon Valley Bank in the United States. When the financial system becomes unstable, the "bubble zeroing" will obviously have to be put on hold. c) An accelerated or even sharp depreciation of the Renminbi (currently depreciating slowly). Because the debt of real estate developers and real estate mortgage loans are all China's domestic debt, if intertwined with exchange rate issues, it will become extremely complex and difficult to handle.
Yellen says US wants healthy competition with China, not 'winner-take-all' approach
Reuters
U.S. Treasury Secretary Janet Yellen has emphasized the need for a healthy competition between the United States and China based on fair rules that benefit both countries. In a meeting with Chinese Premier Li Qiang, Yellen expressed her hope that her visit would lead to more regular channels of communication between the two largest economies in the world. She highlighted the importance of both countries showing leadership on global challenges such as climate change. Yellen also stated that while the U.S. may take targeted actions to protect national security, disagreements over such moves should not harm the broader relationship between the two nations. She quoted Li's remarks from January, where he emphasized the need for communication and exchange despite differences. Yellen expressed her desire for a fair competition that benefits both countries over time.
Xin zhong shi, and the rise of the made-in-China movement
Financial Times
There is currently a surge in popularity for Chinese design, driven by a newfound confidence in Chinese culture and aesthetics, Chinese consumers’ desire to support home-grown brands and a reaction against global brands seen to be boycotting China. Chinese designers are now embracing traditional Chinese fashion and aesthetics and reinterpreting them in contemporary ways. The movement is being called xin zhong shi, or neo-Chinese style, and is seen as a natural progression of letting people own their culture. Chinese design is also increasingly being celebrated internationally, with Western designers and artists drawing inspiration from China. The movement is being described as a turning point and an opportunity to create a new Chinese aesthetic that is not just a copy of Western styles. However, there are also concerns that labelling Chinese design as xin zhong shi or neo-Chinese style is too reductive and overlooks the diversity of Chinese culture. Also, some argue that it is not enough to just reinterpret traditional Chinese design, but that new Chinese design should embrace contemporary influences, such as anime and sci-fi, to create a truly unique and modern Chinese aesthetic.
Washington Raises Pressure on China to Combat U.S.’s Fentanyl Crisis
NY Times
Cooperation between the US and China to crack down on fentanyl, a synthetic opioid responsible for tens of thousands of drug overdoses in the US each year, has stalled due to wider geopolitical tensions between the two nations. In a bid to encourage China to do more to tackle the outflow of precursor chemicals used to produce fentanyl, US Secretary of State Antony Blinken is set to lead a virtual meeting on Friday of a global coalition of nations working to end the threat of synthetic drugs. China has not indicated any plans to participate in the coalition, while Mexico – another country critical in the fentanyl supply chain – will be involved. The issue is also expected to be raised during meetings held this week in Beijing between Treasury Secretary Janet Yellen and Chinese officials. The US Treasury Department’s Office of Foreign Assets Control has already imposed sanctions on Chinese and Mexican firms suspected of producing fentanyl. Despite China’s ban on all variants of fentanyl in 2019, precursor exports to the US fell but enforcement has since weakened.
China’s Central Bank Boosts Gold Reserves for Eighth Month
Bloomberg
China's central bank, the People's Bank of China (PBOC), has added to its gold reserves for an eighth consecutive month. The PBOC's holdings of gold rose by 680,000 troy ounces in June, equivalent to 23 tons. This brings China's total gold stockpile to 2,330 tons, with around 183 tons added in the past eight months. The purchases are driven by economic and geopolitical risks, as well as a desire to reduce reliance on the US dollar. Central banks worldwide bought a record amount of gold in 2020, accounting for nearly a quarter of global demand.
Huawei unveils latest AI model as ChatGPT boom rolls on
Nikkei Asia
Huawei has released an updated version of its artificial intelligence (AI) model for cloud computing services. The Pangu Model 3.0 is aimed at specific industries and is designed to tackle problems in operations, product R&D, and software engineering. The release comes as the company faces US restrictions on accessing American chips and software technologies, limiting its ability to compete with other companies in the AI sector. Huawei Cloud, the company's cloud computing solutions unit, plans to expand its AI-powered cloud services into new areas such as government, finance, and manufacturing.
China upholds ban on food imports from Japan over ‘safety’ fears
The Independent
China has announced that it will maintain its ban on importing food from around 20% of Japanese prefectures due to safety concerns. This comes in response to Japan's plan to release treated radioactive water from the Fukushima nuclear plant into the Pacific Ocean, a move that has faced opposition from China and other countries in the region. China is the largest buyer of Japan's seafood exports and said it would strictly review documents for food imports from other parts of Japan to prevent the export of contaminated food to China.
AIIB refutes allegations over Chinese Communist Party control
Reuters
The Asian Infrastructure Investment Bank (AIIB) has concluded an investigation into allegations made by its former communications chief, Bob Pickard, that the bank is dominated by the Chinese Communist Party. The AIIB found no evidence to support or validate the allegations, calling them "baseless." The AIIB, established in 2016 by Chinese President Xi Jinping as an alternative to Western-led multilateral lending institutions, has 106 members worldwide. Its president, Jin Liqun, has previously stated that the bank will not get involved in political disputes.
Yellen criticizes Chinese treatment of US companies during visit to revive relations
The Independent
US Treasury Secretary Janet Yellen has criticised China's treatment of US companies and new export controls on metals used in semiconductors during her visit to Beijing. Yellen defended US controls on technology exports, saying they are necessary for national security. US-China relations are at their lowest level in decades due to disputes over technology, security, Beijing's military expansion and other irritants.
U.S. Treasury chief says ‘impossible’ to decouple Chinese and American economies
Japan Times
US Treasury Secretary Janet Yellen has said that a complete decoupling of the US and Chinese economies would be “virtually impossible” and would destabilise global markets. She made the comments during a visit to Beijing aimed at strengthening communication and exchange between the two countries. The US has been seeking to limit China’s access to advanced technology, while pushing allies to do the same. Beijing recently introduced new export controls on metals used in semiconductor manufacturing.
Japan delegation wraps up China visit as nations fine-tune ties
Japan Times
China is trying to walk a fine line between nurturing economic and cultural exchange with Japan and hardening its stance on the US-Japan alliance, with Beijing sending repeated warnings during a visit by a Japanese delegation. The visit comes amid strained bilateral ties over Tokyo's alignment with Washington, Beijing's detention of a Japanese businessman, and Tokyo's plan to discharge treated radioactive water into the sea. Despite making its case on diplomatic issues, there have been signals pointing towards improved business and cultural exchanges between the two nations, setting a positive tone for relations that have been simmering in recent years.
China Warns its Tech Giants to Rein in Cyberbullying
Bloomberg
China is planning to implement new guidelines that will require online platforms to crack down on cyberbullying. The guidelines, published by the Cyberspace Administration of China, call for online service providers to monitor and remove cyberbullying content that is defined as illegal and harmful. Failure to comply could result in the suspension of content updates and fines of up to $138,100. The move comes after a woman in Wuhan committed suicide following online harassment. The incident sparked a national conversation about the dangers of cyberbullying.
Yellen Voices Concern Over Metals Controls During China Visit
Bloomberg
US Treasury Secretary Janet Yellen has warned China against using export controls on key technologies and called for diversification rather than decoupling of supply chains. Yellen will meet Chinese Premier Li Qiang and hold discussions with key economic policymakers before leaving on Sunday. She has also met former Vice Premier Liu He and the People's Bank of China Governor Yi Gang. Yellen plans to discuss responsibly managing the US-China relationship and will seek to find areas of common economic ground, while also opening communication channels between the two countries.
Beijing may be facing one of its hottest summers on record
CNN
Beijing is currently experiencing one of the most severe heatwaves on record, with temperatures soaring above 40 degrees Celsius (104 degrees Fahrenheit). This extreme heat has caused the city to issue red alerts for heat, suspend outdoor work, and take emergency measures to prevent heatstroke. The heatwaves have also put stress on the country's power grids as demand for air conditioning has increased. Chinese scientists have warned that more extreme weather events are expected this year due to the onset of El Niño, a natural climate pattern that brings warmer-than-average sea-surface temperatures. The World Meteorological Organization has also warned that the onset of El Niño will increase the likelihood of breaking temperature records and triggering more extreme heat worldwide.
Yellen, in Beijing, Criticizes China’s Treatment of U.S. Companies
NY Times
US Treasury Secretary Janet Yellen has criticized China's treatment of companies with foreign ties, as well as its recent decision to impose export controls on certain critical minerals. Yellen's comments came during a round-table event with executives from US businesses operating in China, and underscored the challenges faced by the two countries as they seek to overcome their differences. Yellen also warned that the US could take further action to ensure that American businesses and workers are treated fairly, and said she would "champion their interests".
Tesla laying off workers at China factory, report says
Al Jazeera
Tesla is reportedly laying off some battery production workers at its Gigafactory in Shanghai. The exact number of workers affected and the reasons behind the layoffs are unclear. The Gigafactory in Shanghai is Tesla's largest and most productive plant, employing around 20,000 workers. In a separate move, Tesla announced that it would offer a cash bonus of almost $500 to new buyers of its Model Y and Model 3 vehicles in China if they have a referral from an existing owner. Additionally, new buyers will have free access to Tesla's enhanced autopilot driver-assistance system for 90 days.
China to Wrap Ant Probe With $1.1 Billion Fine, Reuters Says
Bloomberg
China is expected to fine Ant Group over $1.1 billion as part of a regulatory overhaul, according to Reuters. The fine will allow Ant Group to seek a financial holding company license, revive growth, and potentially restart plans for an IPO. The probe into Ant Group marked the beginning of a crackdown on the Chinese internet industry, which has had a significant impact on the value of sector leaders such as Tencent and Alibaba. The fine on Ant Group could potentially signal a more positive outlook for China's private sector.
Yellen holds talks with China's central bank governor, former economy tsar
Reuters
U.S. Treasury Secretary Janet Yellen met with China's central bank governor Yi Gang and former economy tsar Liu He for informal talks on the global, U.S., and Chinese economies. The meeting aims to ease tensions between the two superpowers, although expectations are low. Officials from both sides accept that safeguarding national security interests now trumps deepening economic ties. Yellen and her Chinese counterparts had a "substantive conversation," but no further details were given. China hopes the U.S. will take "concrete actions" to create a favorable environment for bilateral economic and trade ties. U.S. firms in China hope the visit will ensure trade and commercial lanes between the two economies remain open.
Ukraine latest: Ukraine submits request to join CPTPP trade bloc
Nikkei Asia
The Ukrainian government has submitted a request to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), according to Japan's economy minister, Shigeyuki Goto. The CPTPP is a trade agreement between 12 countries including Australia, Canada, Japan, and New Zealand, and has recently welcomed the UK as its 12th member. Ukraine's request will need to be assessed by existing members to ensure it meets the agreement's standards. If accepted, it would be the first European country to join the CPTPP.
New Zealand PM says he favours ‘tough conversations’ with China
Al Jazeera
New Zealand will continue to engage with China but will disagree with Beijing on issues that challenge its national interests, according to Prime Minister Chris Hipkins. In a speech at the New Zealand Institute of International Affairs, Hipkins said the country's relationship with China would be "open and honest" despite disagreements on issues such as human rights. The comments come after Hipkins' recent visit to China, during which he met with Chinese President Xi Jinping. Hipkins also stressed the importance of economic resilience and maintaining an independent foreign policy.
Binance key executives, many US employees leave crypto exchange amid crackdown
South China Morning Post
Several key executives at cryptocurrency exchange Binance are leaving the company in the midst of a regulatory crisis. The departures include Patrick Hillmann, Binance's chief strategy officer, Steven Christie, senior vice president for compliance, and Hon Ng, Binance's general counsel. Eleanor Hughes, currently Binance's head of legal for APAC and MENA, will become the new general counsel. The US Securities and Exchange Commission has accused Binance and its founder Changpeng "CZ" Zhao of mishandling customer funds and misleading investors. In addition to the SEC probe, Binance is facing investigations from the US Justice Department and the Australian Securities and Investments Commission, among others.
US renews audit inspection of China firms - Bloomberg News
Reuters
The US Public Company Accounting Oversight Board (PCAOB) has initiated a new round of inspections of around a dozen New York-listed Chinese firms, including Tencent Music Entertainment Group, Didi Global, and NetEase. The move comes amid growing tensions between the US and China, including considerations of export controls on AI chips to China. In May, the PCAOB found unacceptable deficiencies in audits of US-listed Chinese companies performed by KPMG in China and PricewaterhouseCoopers in Hong Kong. None of the parties involved have commented on the matter.
Goldman Targeted by China State Media for Bearish Bank View
Bloomberg
The Securities Times, a state-owned Chinese newspaper, has issued a rare rebuttal of Goldman Sachs’ research after the securities firm recommended selling shares in local banks. The paper said that banks in China have been actively reducing their exposure to property loan risks and that local governments have increased efforts to ease debt risks. The public rebuke is seen as another sign of Beijing’s concern about eroding investor confidence at a time when the Chinese economy is slowing. Goldman Sachs analysts noted in a research note that there were risks to banks’ margin from local government debt and further losses in credit portfolios. This could weaken earnings growth, affect dividend payout levels and impact capital accumulation.
China aims to sap Taiwan morale with 'escape plan' misinformation - sources
Reuters
China has launched a misinformation campaign aimed at sapping morale in Taiwan by spreading news reports suggesting the Taiwanese president has an escape plan in the event of a Chinese invasion, according to Taiwanese officials. The campaign also includes reports that Beijing is capable of destroying a US carrier group in the Pacific with ballistic missiles. Taiwan is on high alert for Chinese attempts to influence public opinion on the island ahead of a presidential election next year.
Stay informed about the latest news, analysis, and policy briefs from across the globe related to China with the China brief. Our team aggregates, synthesizes, and summarizes the most important information from various sources, including media outlets, think tanks, government agencies, and industry experts.
Our mission is to provide you with easily accessible and critically valuable information tailored to your specific field of interest. We understand the significance of staying up-to-date on developments related to China and aim to make this information comprehensible for our readers.
Join the conversation and stay informed about the latest news and developments related to China by visiting our website at www.6dobrief.com