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China’s Austerity Drive: Provinces Implement “Belt Tightening” Measures

China’s economic slowdown has adversely impacted government fiscal revenues. According to Taiwan’s Central News Agency, there are reports of salary cuts and clawbacks of government allowances. Starting in February, Inner Mongolia, Hunan, and Beijing successively introduced concrete “belt tightening” measures. These measures dictate that, when possible, old office furniture, computers, official vehicles, and other items should be repaired for continued use rather than being replaced.

Beijing took the lead in implementing such measures, announcing 19 initiatives in February. The measures include a directive to fully utilize public property warehouses for resource allocation, aiming to achieve a 50% year-on-year increase in quantity and transfer of stockpiled assets. Other directives include optimizing the use of relocated housing and land as well as improving the efficiency of official vehicle usage.

On March 8th, Hunan province announced 10 specific belt-tightening measures covering office space, official vehicles, receptions, and energy conservation by public institutions. Notably, the measures include a 40% reduction in office maintenance fees, capping property service costs at national standards and budgeted amounts. Additionally, official vehicles can only be replaced after 8 years of use and over 250,000 km driven (provided they remain serviceable).

In mid-March, Inner Mongolia unveiled a multi-part belt-tightening plan including measures for strict budget enforcement, regulation of government procurement, control over certain expenditure categories, lowering of operating costs, promotion institutional frugality, and strengthening of fixed asset management. Projects with favorable performance evaluations are to receive priority funding, while underperforming projects may face budget cuts. The plan emphasizes repair and reuse of office equipment when possible as well as a 20% reduction in external rentals by the local government.

China’s annual central economic meeting in December 2023 called on party and government bodies to “get used to belt tightening.” The Chinese Finance Minister underscored the necessity of fully implementing this requirement, stating “Any money that can be saved should be saved, and not a single cent should be spent unnecessarily. Financial resources should be concentrated on major undertakings.”

Source: Central News Agency (Taiwan), March 24, 2024
https://www.cna.com.tw/news/acn/202403240184.aspx

CNA: China’s Personal Income Tax Revenue Fell Significantly in First Two Months of 2024

Primary Taiwanese news agency Central News Agency (CNA) recently ran a story on statistics released by China’s Ministry of Finance. According to the data, Chinese tax revenue during the first two months of 2024 saw a year-over-year decrease of four percent, and personal income tax revenue suffered a significant reduction of 15.9 percent.

“Personal Income Tax Revenue Decline” quickly became a hot topic on Chinese social media, with more than 170 million topic views on Weibo. In online discussion boards, consensus has emerged among a majority of netizens that the driving reasons behind the decline in personal income tax revenue are lowered wages and widespread layoffs.

In China, generally speaking, those with an annual salary of less than RMB 100,000 yuan (US$14,000) do not need to pay personal income tax. Some experts pointed out that China’s post-COVID economic recovery in 2023 was not as strong as expected, and some companies reduced or did not pay year-end bonuses to employees. In addition, some foreign trade companies have seen business volume fall and staff salaries reduced.

Chinese government officials are optimistic regarding the rest of the year, expecting personal income tax revenue for the whole of 2024 to increase by about 6.3 percent compared with 2023.

Source: CNA, March 22, 2024
https://www.cna.com.tw/news/acn/202403220330.aspx

Lianhe Zaobao: South Korean Direct Investment in China Drops Sharply

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported on data released by South Korea’s Ministry of Finance showing that South Korea’s 2023 new direct investment in China dropped by 78.1 percent year-over-year, falling to US$1.87 billion. This is the largest decline in South Korean direct investment in more than 30 years, and it is the first time since 1992 that China has failed to rank among South Korea’s top five destinations for investment. The manufacturing sector  led the decline in investment.

The declining numbers reflect China’s changing role in South Korea’s economy as Washington seeks to reduce Beijing’s influence on global supply chains. The United States is about to replace China as South Korea’s largest export destination, importing products ranging from semiconductors to automobiles. South Korean companies have extensive exposure to key sectors in the U.S. and have been seeking to increase investment there to take advantage of the United States’ market scale and  government subsidies.

According to statistics from the Korea International Trade Association, China’s imports from South Korea last year were US$162.5 billion, a sharp drop of 18.8 percent from the previous year. This led to a US$18 billion trade deficit between South Korea and China, the first trade deficit seen during the 31 years since the establishment of diplomatic relations between China and South Korea.

Source: Lianhe Zaobao, March 15, 2024
https://www.zaobao.com.sg/realtime/world/story20240315-3160390

RTI: Japanese Company Bridgestone Closes Shenyang Factory

Radio Taiwan International (RTI) recently reported that Bridgestone, Japan’s largest tire manufacturer, announced the closure of its factory in the Chinese city of Shenyang. The company also plans to terminate the production and sales of commercial vehicle tires in China during the first half of 2024. The Bridgestone Group has been operating in China for more than 20 years. Bridgestone closed its tire factory in Huizhou, Guangdong Province at the end of 2021 and transferred production capacity and equipment to Shenyang.

Japan was the first country to have foreign businesses enter China during the modern era. In recent years, foreign companies, including many from Japan, have withdrawn from the Chinese market. Experts have said that Japan is a “weathervane” for foreign investment in China, and that foreign business withdrawals from China are now accelerating. This is quite inconsistent with the Chinese government’s messaging around business-friendliness. Since last year, world-renowned companies including Japan’s Canon, SONY, Toshiba, Nikon and South Korea’s Samsung have withdrawn from China, affecting tens of thousands of Chinese employees.

Source: RTI, March 15, 2024
https://www.rti.org.tw/news/view/id/2199093

China Threatens Paraguay Over Diplomatic Relations with Taiwan

At the Chinese Foreign Ministry’s press conference on March 25, a reporter asked: “According to reports, Paraguayan President Peña said on March 23 in a social media post that the 66 years of diplomatic relations between Paraguay and Taiwan have been ‘deep’ and ‘friendly.’ And this has not hindered Paraguay’s trade with China, as the country is still exporting soybeans to China. What is China’s comment on this?”

Foreign Ministry spokesman Lin Jian stated that there is only one China in the world, Taiwan is an inalienable part of China’s territory, and the government of the People’s Republic of China is the sole legitimate government representing all of China. “China is the world’s top soybean importer. According to official Chinese statistics, China has imported zero soybeans from Paraguay in recent years. If the Paraguayan government truly wants to work for the development of the country and the wellbeing of its people, it should see the big picture and choose to stand on the right side of history, instead of putting its mind on ‘playing smart’ and ‘exploiting loopholes.'”

Source: Xinhua, March 25, 2024
http://www.news.cn/world/20240325/8d6027121dd741cf92f016423ca23259/c.html

Xi Jinping Directly Invites American Youths to China for Exchange Programs, Circumventing U.S. Federal Government

During Xi Jinping’s visit to the United States in November 2023, he announced a plan to invite 50,000 American youths to study and exchange in China during the next five years. Since then, this five-year program has been highly-publicized in Chinese media.

Xinhua News Agency reported on March 17 that a group of 24 middle school students from Washington state, organized by the U.S.-China Youth and Student Exchange Association, left San Francisco on March 16 for an 11-day visit to China. Other Chinese media have published subsequent reports about their trip. A Yibao article titled “Xi Jinping’s recruitment of America’s youngsters,” published on Feb. 16, 2024, stated that at least five groups of U.S. students completed trips to China as of January 2024. These groups include graduate students from Columbia University; table tennis players from Virginia; undergraduates from California State University, Long Beach; high school students from Muscatine, Iowa; and even elementary school students from Utah.

Political observers have remarked that Beijing likely wants to get something out of this exchange program. Since the legislative and executive branches of the U.S. federal government have taken a bipartisan stance against the CCP, Beijing is trying to gain influence through civil exchange as well as through local governments (e.g. winning over agricultural U.S. states by buying agricultural products from them), circumventing the federal government.

Source: Epoch Times, March 25, 2024
https://www.epochtimes.com/gb/24/3/25/n14210335.htm

Alibaba to Invest $1.1 Billion Expanding Business Footprint in South Korea

According to exclusive information obtained by the South Korean news agency Yonhap News Agency, Alibaba Group plans to expand its business footprint in South Korea over the next three years with $1.1 billion in new investment.

Alibaba recently submitted its business plan to the South Korean government. According to the plan, Alibaba will begin construction of a comprehensive logistics center in South Korea this year. The logistics center will comprise an area of 180,000 square meters, equivalent in size to 25 soccer fields.

Alibaba will invest $100 million to help South Korean sellers bring their products to foreign markets. In June, Alibaba will establish a procurement center to source high-quality Korean goods for resale via global sales channels. Alibaba plans to utilize its various e-commerce platforms to sell Korean products, including AliExpress, Lazada (one of the largest e-commerce operators in Southeast Asia), and Spanish e-commerce platform Miravia. Over the next three years, Alibaba aims to support 50,000 South Korean small- and medium-sized enterprises in exporting their products.

Source: Yonhap News Agency, March 14, 2024
https://cn.yna.co.kr/view/ACK20240314000300881

Li Qiang: Resolving Local Government Debts Will be a Protracted Battle

On March 22, the Chinese State Council held a video conference on Preventing and Resolving Local Debt Risks. People’s Daily reported that “Premier Li Qiang gave a speech emphasizing that the work of preventing and resolving local debt is both an offensive assault and a war of attrition. All regions and departments should improve their political stance, strengthen their sense of responsibility and systems thinking, properly resolve risks from existing debts, and strictly prevent new debt risk. We must continue in-depth work to resolve risks from local government debt and resolutely implement requirements regarding tight budgets.”

Source: People’s Daily, March 23, 2024
http://politics.people.com.cn/n1/2024/0323/c1024-40201534.html