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Nippon Steel Exits Joint Venture with Baosteel, Signaling Shift in China Strategy

Nippon Steel Corporation, Japan’s largest steelmaker, announced on July 23rd that it would withdraw from its joint venture with Chinese steel giant Baosteel. The decision came as Japanese automakers struggle with sales in China due to the rising popularity of Chinese electric vehicles. Nippon Steel likely foresees difficulty in increasing its own sales volumes. After exiting the joint venture with Baosteel, Nippon Steel’s steel production capacity in China will decrease by 70%, with Nippon resources focused on the US and India going forward.

In 2004, Nippon Steel, Baosteel, and ArcelorMittal established a joint venture to manufacture and sell automotive steel sheets. The 20-year agreement expires in late August of this year, prompting Nippon Steel’s decision to dissolve the partnership.

Nippon Steel’s current annual steel production capacity in China is about 3.6 million tons, with the joint venture with Baosteel accounting for 70% of that figure. Nippon stated that its initial goal of supporting Japanese automakers’ local production through steel supply has been achieved. Meanwhile, the competitive landscape has changed as Chinese steel companies have improved their technical capabilities.

Starting just after the 1978 Japan-China Peace and Friendship Treaty, Nippon Steel has been a contributor to the modernization of China’s steel industry, providing Japanese technology and expertise in China. At the Chinese government’s invitation, Nippon Steel supported the construction of Shanghai’s Baoshan Iron and Steel Plant.

Source: Kyodo News, July 23, 2024
https://china.kyodonews.net/news/2024/07/bde5daef8687.html

Briefings | | |   Geo-Strategic Trend

China’s Birth Rate Dilemma: Quanzhou’s Controversial Three-Child Policy Push

China’s population has experienced negative growth for two consecutive years, making “rescuing the birth rate” a top priority. A population policy document from Quanzhou, Fujian Province, called for its Chinese Communist Party (CCP) members and officials to have three children, raising public concerns about “undercover coercion to have children.” The Quanzhou Health Commission later explained that the document was still in the internal review stage and was mistakenly published due to staff oversight.

Since the implementation of China’s three-child policy in 2021, local measures to support the policy have garnered attention. The leaked document from Quanzhou outlined work arrangements for implementing the policy, including a call for CCP members, government agencies, state-owned enterprises, and public institutions to take the lead in having three children.

The approach echoes a directive given in 1980, when the Communist Party urged members to have only one child, marking the beginning of China’s one-child policy era. The Quanzhou Health Commission clarified that the document was still in draft form and not yet officially released.

Quanzhou, an economically prominent city in Fujian Province, has seen significant growth, with its public budget revenue exceeding 100 billion yuan in 2023.

As China faces population decline, boosting birth rates has become a government priority. The National Healthcare Security Administration reported that four provinces and cities have included assisted reproductive technology in medical insurance coverage since 2023.

Source: Central News Agency (Taiwan), July 21, 2024
https://www.cna.com.tw/news/acn/202407210065.aspx

Briefings | | |   Economy/Resources

China’s ‘Designated Residential Surveillance’ System: Calls for Reform Amid Controversy

Southern Weekend, a magazine based in China, reported that the “designated residential surveillance” system in China has recently come under scrutiny due to multiple deaths and allegations of torture to extract confessions. Academics and experts are calling for reform of this practice.

Originally intended as a less restrictive alternative to detention, the “designated residential surveillance” system has evolved into a more severe form of custody. It gained popularity among investigators after 2012 when stricter regulations were imposed on detention centers, making it difficult to use coercive interrogation methods there. The “designated residential surveillance” system, being less transparent and more convenient, became a preferred tool, often misused.

Bian Jianlin, honorary president of the China Criminal Procedure Law Society, argues that this system has been controversial since its inception and should be abolished. He suggests reverting to the original non-custodial nature of residential surveillance.

Several legal experts informed Southern Weekend that the revision of China’s Criminal Procedure Law is still in the consultation stage, and the future of the “designated residential surveillance” system remains undecided.

Source: Radio Free Asia, July 22, 2024
https://www.rfa.org/mandarin/Xinwen/jw2-china-house-arreset-07222024121739.html

Briefings | | |   Social Stability

China’s Foreign Direct Investment Drops 29% Amid Economic Slowdown and Policy Concerns

China’s Ministry of Commerce reported that foreign direct investment (FDI) in China in the first half of 2023 decreased by 29.1% year-on-year, totaling 498.91 billion yuan (US$68.6 billion). However, the number of newly established foreign-invested enterprises increased by 14.2%.

Manufacturing sector FDI accounted for 28.4% of total FDI, up 2.4 percentage points from the previous year. High-tech manufacturing FDI made up 12.8% of the total. Investments from Germany and Singapore increased by 18.1% and 10.5%, respectively.

Despite strict COVID-19 control measures, China’s FDI had been strong in recent years, setting records from 2019 to 2021. However, the country’s economic recovery post-pandemic has been slower than expected, with growth rates of 3% in 2022 and 5.2% in 2023.

Analysts suggest that China’s slowing economic growth leaves less room for large-scale foreign investments. Many U.S. tech companies and investors have withdrawn, citing factors such as increased labor costs, slower growth rates, supply chain risks highlighted by the pandemic, and political risks.

The unpredictability of Chinese government policies is also deterring foreign investment. Recent crackdowns on industries like education, entertainment, and gaming have caused losses for companies in these sectors, making long-term investments less attractive to foreign entities seeking policy stability.

Source: Central News Agency (Taiwan), July 14, 2024
https://www.cna.com.tw/news/acn/202407140082.aspx

Briefings | | |   Economy/Resources

Saudi Stock ETFs Make Debut on Chinese Exchanges

On July 16, two new Exchange-Traded Funds (ETFs) linked to the stock price index of the Saudi Stock Exchange (Tadawul) were listed on the Shanghai and Shenzhen stock exchanges in China. This marks the first time Saudi stock ETFs have been listed in mainland China. The move is expected to strengthen financial cooperation between the two countries, aligning with China’s Belt and Road Initiative. For Saudi Arabia, this presents an opportunity to attract Chinese investment.

The two ETFs listed are the “Huatai-PineBridge CSOP Saudi Arabia ETF” and the “China Southern Asset Management CSOP Saudi Arabia ETF.” The total amount raised so far was approximately 1.2 billion yuan (US$ 166 million).

China implements capital controls that generally restrict cross-border securities investments. These two ETFs utilize the Qualified Domestic Institutional Investor (QDII) framework, which allows Chinese domestic investors to invest overseas within certain limits.

Source: Nikkei Chinese, July 16, 2024
https://zh.cn.nikkei.com/china/cfinancial/56153-2024-07-16-15-39-48.html

Briefings | | |   Economy/Resources

China Grapples with Severe Flooding: 20.76 Million Affected

China is facing severe flooding in its southern regions this year, with heavy rains causing widespread damage. As of July 12, 2023, official reports indicate that 20.76 million people have been affected by floods and heavy rains, with 86 people dead or missing.

According to Xu Xianbiao, an official from Ministry of Emergency Management (MEM), this year’s flood season came earlier and more intensely than usual. The southern regions, especially areas south of the Yangtze River, have experienced significantly more rainfall than in previous years. Fourteen numbered floods have occurred in the Yangtze River, Pearl River, and Taihu Lake basins.

The government has implemented four measures to address the situation: “strengthening deployment and scheduling,” “enhancing early warning and evacuation,” “reinforcing rescue operations,” and “providing support to local authorities.”

MEM has raised the flood response level to Level 3 for four provinces along the middle and lower reaches of the Yangtze River. This action has helped prevent mass casualties in some areas.

To support relief efforts, the Ministry of Finance has allocated 848 million yuan (US$117 million) to 12 provinces, municipalities, and autonomous regions affected by the floods.

The Ministry warns of high flood risks in northeastern, northern, eastern, and central China in July, with potentially severe flooding in major river basins including the Yangtze, Huaihe, Haihe, Songhua, Liaohe, and Taihu Lake.

Source: Central News Agency (Taiwan), July 13, 2024
https://www.cna.com.tw/news/acn/202407130119.aspxs

Briefings | | |   Economy/Resources

Chinese Investigative Journalists Expose Food Safety Scandal, Highlighting the Importance of Watchdog Reporting

An investigative report in China has exposed a dangerous practice in the food industry, where tanker trucks are used to transport both edible oils and kerosene without proper cleaning between loads. This revelation has sparked public outrage and prompted official investigations.

The report, published by Beijing News on July 2, was the result of a month-and-a-half-long undercover investigation by three journalists. It implicated major state-owned and private food oil companies, as well as chemical plants and transportation companies.

The lead investigator, Han Futao, is a veteran journalist known for his dedication to undercover reporting. His work has highlighted the importance of investigative journalism in China, with some saying that “five investigative reporters are worth 100 market regulators.”

The report has reignited public interest in investigative journalism, which has been declining in China due to worsening conditions for free speech. A 2017 report indicated that the number of investigative journalists in traditional media had decreased by 58%, with only 175 remaining at that time.

The expose has led to an outpouring of support from Chinese netizens, with many making donations to Beijing News to show their appreciation for the reporters’ courage in revealing the truth. This incident underscores the ongoing challenges faced by journalists in China and the public’s hunger for accurate, investigative reporting.

Source: Central News Agency (Taiwan), July 9, 2024
https://www.cna.com.tw/news/acn/202407090354.aspx

Briefings | | |   Social Stability

China’s ‘Youth Retirement Homes’: A Growing Trend Amid Economic Pressures

“Youth Retirement Homes” have recently emerged across China, offering young people a space to relax and recharge from over competition in urban life. These facilities, which charge only a few hundred yuan per week, provide outdoor activities, social events, and opportunities for like-minded young people to interact.

The primary clientele includes freelancers, artists, photographers, and young people facing life challenges. The topic has gained significant attention on Chinese social media, with over 5 million views on Xiaohongshu.

While some view these homes negatively, labeling them as “lying flat” centers, supporters argue they provide necessary respite from the intense pressures of modern life in China, including high housing costs and demanding work schedules (996 culture).

Surprisingly, Chinese officials have shown a positive attitude towards these facilities, seeing them as potential drivers for rural revitalization.

David Xu, founder of IMC Talent in Hong Kong, attributes the popularity of youth retirement homes to increased competition for jobs, devalued university degrees, and economic downturn, leading to disappointment and a desire to escape among young people.

Wang Guochen, a researcher at Chung-Hua Institution for Economic Research, warns that prolonged absences from work could hinder human capital accumulation and potentially slow China’s long-term economic development.

Source: Central News Agency (Taiwan), July 8, 2024
https://www.cna.com.tw/news/acn/202407080157.aspx

Briefings | | |   Economy/Resources