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China Launches Ambitious Plan to Upgrade Domestic Equipment and Boost Recycling

China is launching a large-scale initiative to promote equipment upgrades as well as the recycling of consumer goods. The government’s goal is that, by 2027, investment in 7 key industrial sectors should increase by over 25% compared with 2023 levels. The government milestones include doubling the recycling of scrapped vehicles as well as a 30% increase in recycling of used home appliances.

Officials say this push is about transitioning from foreign to domestic products.

The initiative, titled “Action Plan to Promote Large-Scale Equipment Renewal and Consumer Goods Replacement” (“推动大规模设备更新和消费品以旧换新行动方案”), was announced by the Information Office of China’s State Council on April 11th. The government will provide funding support for the initiative, but the exact amount is unclear.

China currently faces overcapacity issues, with exports accounting for much of the country’s economic growth. Shifting to domestic consumption through equipment upgrades and recycling is a potential path to addressing these issues.

The quality of Chinese-made products remains a challenge to adoption. Many Chinese companies prefer to use more expensive imported equipment; domestic products often require more maintenance and repairs, raising production costs. Some industries such as smart tech and precision machinery are still heavily reliant on foreign technology.

Currently, China has over 39 trillion RMB in fixed assets, with 28 trillion RMB comprising industrial equipment. The new action plan aims to spur economic growth through massive replacement of such fixed assets, promoting self-sufficiency and reducing reliance on foreign goods. Feasibility and efficacy of this approach remain to be seen.

Source: Radio Free Asia, April 12, 2024

China’s Gallium Export Restriction Sends Prices Soaring, Heightens Strategic Concerns

The price of gallium has more than doubled since China restricted exports of the metal last summer. The export controls, first announced in July 2023, were to “safeguard national security and national interests.” Demand for gallium has not fallen, as gallium is of strategic importance to the semiconductor industry.

An article from the Radio France Internationale (RFI) “Raw Materials” column notes that China’s decision to restrict gallium exports had immediate consequences. Chinese gallium exports nearly halted in August and September of 2023 before resuming at much lower volumes. In the first two months of 2024, China’s gallium exports were just over 2,700 kg, compared to over 8,800 kg in the same period during the previous year.

The supply disruptions have caused prices to skyrocket, doubling in just 8 months. In late March of 2024, gallium prices reached $575/kg in Rotterdam. Prices have spiked due to concerns over shortages and the need to replenish depleted inventories. Demand remains strong; there are no substitutes for gallium in many high-tech applications.

Currently, gallium supply remains heavily dependent on China. An IFRI (Institut Français des Relations Internationales) researcher noted that, while current prices make gallium production and refining more profitable, this may not fundamentally reshape the industry as the price surge is unlikely to be permanent.

Recognizing the strategic importance of gallium, a French working group has begun exploring Europe-based solutions. While Europe ceased primary gallium production in 2016, the BRGM analysis suggests that Europe still has the technical capabilities to address the current shortage.

Source: Radio France International, April 12, 2024

Chinese Social Media Reaction: Overwhelming Support for Iran, Condemnation of Israel in Response to Iran’s Attacks

On Saturday, the Iranian Islamic Revolutionary Guard Corps launched missile and drone attacks against Israel. Major world powers condemned Iran’s attacks, but China only expressed “deep concern” over the escalating situation, without condemning Iran directly.

On Chinese social media, many netizens continued to express anger towards Israel and support for Iran. A Weibo post claiming “99% of Iran’s missiles and drones were intercepted” gained over 70 million views. Under a CCTV News Weibo post about the attacks, most comments opposed Israel, with some expressing doubts about the reported low numbers of casualties.

Many netizens directly expressed fury towards Israel and support for Iran. One commented “This proves that Iran is kind, humanitarian and conscientious.” Another post about Iran’s first-ever direct attack on Israel also gained over 100 million views. Comments under a Xinhua News post about the U.S. reaffirming support for Israel were overwhelmingly “anti-American” and “anti-Israel.” One user said “Keep attacking, the Chinese people support Iran.”

On less censored platforms like NetEase News, some netizens held “non-mainstream” views. One supported Israel, saying “Israel, keep winning every Middle East war! Destroy the false prophets!” Others took a neutral stance, with one saying “As China navigates global turmoil, it must focus on self-development and strengthening itself to withstand any potential crisis.”

Source: Voice of America, April 14, 2024

Xinhua: Establishment of Nationwide Party Committee Social Work Departments Completed

The Chinese Communist Party established a “Social Work Department” at the 20th National Party Congress. Xinhua News Agency reported that a “Conference of National Party Social Work Department Heads” was held in Beijing on February 22. According to the meeting’s announcement, all provinces have established “Party Committee’s Social Work Departments” and have begun to comprehensively fulfill their responsibilities.

A major responsibility of the Social Work Department is to “lead Party development at the grassroots governance level.” In 2024, “national social work” activities will focus on “developing and enhancing the grassroots-level governance.” It will also “ensure the Party’s comprehensive leadership over industry associations and chambers of commerce, and strengthen the Party work at national industry associations and chambers of commerce.” The plan is to make “solid progress on Party development in mixed-ownership enterprises, private enterprises, new economic organizations, new social organizations, and new employment groups,” and also to “improve the volunteer service system.”

Source: Xinhua, February 22, 2024

Xinhua: China’s E-commerce Platforms Expanding Rapidly Overseas

Xinhua News Agency reported rapid growth in the “going global” trend of China’s e-commerce platforms. This includes the B2B model of Alibaba International or the B2C models of AliExpress, Temu, and TikTok Shop. According to data from China’s Ministry of Commerce, the imports and exports for China’s e-commerce platforms reached 2.38 trillion Yuan (US$ 330 billion) in 2023, an increase of 15.6 percent from the previous year. Exports, specifically, amounted to 1.83 trillion Yuan, an increase of 19.6 percent year-over-year.

Take Japan as an example. Since its launch [in Japan] in July of 2023, Temu has seen its number of users grow at a rate of 2.2 million per month. In January 2024, its number of users in Japan reached 15.5 million, 52 percent of the combined average of the three major e-commerce platforms in Japan — Amazon, Rakuten Market, and Yahoo! Shopping — which is 29.7 million. The number of users on the clothing e-commerce platform SHEIN has also surpassed that of the well-known Japanese clothing e-commerce platform ZOZOTOWN. TikTok, with its millions of users in Japan, may soon become a big player in the e-commerce field as well.

According to Yonhap News Agency, the latest data released by South Korea’s statistical department shows that, in 2023, imports from China’s e-commerce platforms surged by 121.2 percent year-over-year. For the first time, China surpassed the United States to become South Korea’s largest source of e-commerce imports.

Source: Xinhua, February 23, 2024

China Takes Steps to Promote Used Car Exports

To promote used car exports, China’s Ministry of Commerce and four other departments jointly issued a notice on February 5 regarding matters related to the export of used cars. On February 7, they released a “Notice on Further Improving the Practice of Used Car Exports” (the “Notice”), to implement used car export businesses in 10 pilot cities nationwide.

The Notice encourages localities to establish used car export bases, achieving efficient results by integrating functions such as showrooms, handling of transactions, maintenance, inspection and certification, customs clearance, support for exports, warehousing, logistics, and financial services. As after-sales service is the biggest challenge for the used car dealers, the Notice directed companies to establish overseas maintenance service systems through self-construction, resource sharing, or multi-channel cooperation. This means setting up additional after-sales service outlets overseas and ensuring a supply of spare parts through multiple channels. It supports automotive companies further expanding their international marketing networks and fully leveraging brand and channel advantages. It also encourages companies to establish public showroom and sales centers and overseas warehouses in key markets.

China’s customs data shows that the volume of China’s used car exports has repeatedly reached new highs since the used car export pilot launched in 2019. In 2021, China exported 15,000 used cars. This figure soared to 69,000 in 2022. As of 2023, used Chinese cars have been sold in more than 140 countries and regions worldwide. The main markets are the five Central Asian countries, Africa, and some Southeast Asian countries. Since 2022, Russia has also become an important market. Now, the Western and Eastern Europe markets are increasing significantly due to energy shortages; a considerable portion of the used cars exported from China are electric vehicles.

Source: Xinhua, February 27, 2024

China’s Central Banker: China Will Continue Promoting Currency Swaps with Other Countries

On March 27th, at the 2024 Boao Forum for Asia Annual Conference, Pan Gongsheng, Governor of the People’s Bank of China, stated that the People’s Bank of China will continue to promote currency swaps and currency cooperation with Asian economies to maintain regional financial stability.

Currency swap agreements can not only promote the use of a country’s own currency in partner countries, but can also enable reduced reliance on the US dollar. China has signed agreements with ASEAN member states, Japan, and South Korea under the Chiang Mai Initiative. “Currently, the bilateral currency swap scale within ASEAN and the ASEAN+3 (China, Japan, South Korea) framework has exceeded 380 billion US dollars,” said Pan.

According to Pan, the People’s Bank of China has signed bilateral currency swap agreements with central banks or monetary authorities from 29 countries and regions, with a total currency swap scale exceeding 4 trillion Yuan (US$ 553.49 billion).

Source: VOA, March 27, 2024

Six Major Chinese Banks See Significant Decline in Mortgage Loans

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that, amid the “shock waves” of the real estate market downturn and early mortgage repayments, Chinese banks’ personal mortgage businesses continue to face pressure. By the end of 2023, the total mortgage loan balance of the six major state-owned banks was approximately RMB 26 trillion yuan (around US$3.66 trillion), a decrease of approximately RMB 500 billion yuan (around US$70.34 billion) from the end of the previous year.

Among the six major state-owned banks, the balance of personal housing loans of the five largest banks all decreased year-over-year. Only one of the six largest banks — the Postal Savings Bank of China — saw an increase. In terms of asset quality, five of the six major banks had suffered a year-over-year increase in non-performing mortgage loan ratios by the end of 2023. The Chinese central bank’s “Statistical Report on Loan Investment by Financial Institutions in 2023” showed that the balance of personal housing loans at the end of 2023 suffered an overall year-over-year decrease of 1.6 percent.

In response to the significant decrease in mortgage loans on their books, most banks have been intensifying their efforts to issue new mortgage loans. That being said, increasing early mortgage repayments in 2023 brought further pressure on outstanding mortgage loans and banks’ loan yields.

Source: Sina, April 8, 2024