Hong Kong’s Mainland-backed Phoenix New Media recently reported that, based on an analysis that Morgan Stanley Chase completed, the commercial real estate markets in New York, Sydney, and London may face serious challenges in the next two years. The primary cause of this warning is that Chinese investors have started withdrawing from overseas real estate markets. The Chinese government is tightening up capital control and commercial loans very quickly. Statistics showed that, since the beginning of 2017, the total of Chinese overseas real estate investment has declined 84 percent. The expectation is that an additional 18 percent drop will continue into year 2018. The same 2017 number that the Chinese Ministry of Commerce released was an 82 percent decline. According to statistics that the Chinese banking industry published, in the first half of this year, China’s total direct investment overseas showed a decline of 45.8 percent, to US$48 billion. In the second quarter, real estate pricing in Manhattan had already dropped 25 percent.
Source: Phoenix New Media, August 14, 2017
China Central Television (CCTV) recently published a commentary on its official website responding to the Religious Freedom Annual Report that the United States Commission on International Religious Freedom (USCIRF) just released. The report pointed out that China, along with six other countries, had a bad record on respecting religious freedom. The Chinese government officially described this Report as “ignoring the facts and being flat out wrong.” The commentary used the recent Charlottesville, Virginia incident as an example of the “chaotic situation” inside the United States. The author suggested that the U.S. really has no moral authority to judge other countries. Even the U.S.’s own industrial leaders in the area of manufacturing resigned from the Trump Manufacturing Council. The commentator urged the U.S. government to give up its attempt to interfere with other nations’ internal affairs in the name of religious freedom and stated that, “Americans should really just mind their own business.”
Source: CCTV, August 16, 2017
The DailyNK, a South Korean news site that focuses on North Korean activities, recently reported, based on its own sources, that hundreds of trucks filled with industrial equipment from the Rason region were lining up outside of Chinese customs, waiting to return to China. This occurred the second day after China banned two thirds of North Korea’s export products based on the UN sanctions resolution. The Chinese government has not yet ordered the evacuation of industrial factories. However, the Chinese factory managers in those factories have been very much concerned about the potential of becoming the target of North Korean retaliation. Locals worried that, if this trend continues, Rason city could quickly become an empty town. At the moment, many Chinese factory owners are still busy looking for trucks. Not long ago, China unexpectedly supported UN Resolution 2371. This move caused quite a few complaints among Chinese investors in North Korea since they were caught unprepared.
Source: DailyNK, August 17, 2017
According to an article that Duowei published, the outcome from the recent Beidaihe meeting or “summer summit” indicated that Beijing has finished the final stretch of the preparation that has been planned for the upcoming 19th People’s Congress. One unique phenomenon that materialized at this meeting was the “silence” that the elderly members of the Communist Party of China, who held substantial power during the 1980s and 1990s, displayed, compared to the 18th National Congress in 2012 when several of the elderly members made frequent appearances prior to the conference. The article quoted another Duowei article which stated that it was an indication that China (Xi Jinping) is almost free of “elder statesman politics.” However it does not mean that the elderly members are completely out of the picture. One example is Jiang Zemin, who had his 91st birthday on August 17. His health has always been a subject of the public’s attention. The article stated that one of the major agenda items to watch for in the 19th National Congress is the personnel changes and whether Wang Qishan, a member of the seven-man Politburo Standing Committee will still remain in power.
Source: Duowei, August 19, 2017
On August 4, the State Council published a guideline on its website about overseas investments. The Commerce Department of the National Development and Reform Commission, the Bank of China, and the Ministry of Foreign Affairs developed the guideline. The guideline encourages investments that will promote international cooperation, improve research and manufacturing capabilities, compensate for the domestic energy shortage, and improve quality.
The guideline listed investment fields that the State supports: projects that promote the “one belt one road” and infrastructure construction in the region; the export of domestic high quality equipment and technology; the enhancement of cooperation with foreign high tech companies and those with advanced manufacturing technology; the setting up of foreign research centers; natural gas and resources exploration and the development, after careful evaluation, of economic benefits; advances in cooperation in agriculture and the launch of projects that have mutual benefits; and supporting qualified financial agencies to set up branch offices overseas.
The article also listed the areas that are limited in foreign investment: countries with which China does not have foreign diplomatic relations; regions involved in wars; real estate, hotels, movie theaters, or entertainment; sports clubs; investment funds that don’t have a specific project; and technology, environmental standards, energy indexes and safety regulations that do not meet the requirements of the investing country.
The areas that are prohibited in regards to foreign investment include military technology and products that are not approved by the State; technology, skilled products or those that are banned from being exported; gambling and prostitution; and investments banned in accordance with international standards or which endanger the nation’s security interests.
Source: Gov.cn, August 18, 2017
On August 18, the U.S. officially launched an investigation into China’s trade policy on intellectual property under Section 301 of the Trade Act of 1974. On August 20 Xinhua published an analytical article on the “301 investigation.” As to the motive for the investigation, the article stated that it was because Trump wants to fulfill his campaign promise and solve the “so called” unbalanced trade issue. Also the U.S. is taking advantage of the length of the investigation, which may take between six months and one year, to further push China to open its market in service or high value-added industries. As to the impact of the investigation, the article quoted an expert who said that it is unlikely that a trade war between the U.S. and China will take place as the investigated products only account for a small portion of the total U.S. China trade and because the U.S. and China are heavily dependent on each other economically. It further quoted a source that said some believe that the investigation will hurt Chinese companies, their suppliers, and their sales agents, as well as the retail business in the U.S. Others said that China needs to be on the alert for the investigation having a chain effect because other countries may follow the same path. As to how China should react, the article stated that China should monitor the progress closely and use international rules to protect its own interests. According to one expert, in order to minimize the impact of a “301 investigation,” China should change itself from a “factory” into a “headquarters” that is equipped with the capability of doing research, manufacturing, and sales.
Source: Xinhua, August 20, 2017