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Chinese Department Stores Face Challenges Amid Slow Consumer Recovery

Recovery of China’s consumer spending has been slow, impacting not only small shops but also department stores. According to the “2023-2024 China Department Store Retail Industry Development Report,” 70.1% of department stores reported foot traffic has not returned to 2019 levels, and 64.9% say sales have not returned to 2019 levels.

Over 10 department stores have closed so far this year, including Shanghai Meilong Town Isetan Department Store. At least 21 stores closed in 2023, and 35 closed in 2022. Stores reported an 8.8% increase in department store sales in 2023; this increase was due to the low base period in 2022 caused by the COVID-19 pandemic. Challenges persist, including the impact of e-commerce, rising costs leading to staff cuts, and declining foot traffic.

Source: Central News Agency (Taiwan), April 6, 2024
https://www.cna.com.tw/news/acn/202404060151.aspx

Briefings | | |   Economy/Resources

China’s Real Estate Woes: 30% Surge in Non-Performing Loans, Government Responses Conflicted

Financial strains related to real estate in China are increasingly evident in local banks. By December 2023, non-performing loans (NPLs) had risen by about 30% compared to the previous year. This impedes banks’ ability to grow their lending, possibly hindering China’s economic recovery. Hong Kong investors are shying away from trading Chinese local bank stocks due to concerns over the banks’ exposure to real estate woes.

The rise in NPLs is confirmed by 2023 fiscal reports of 27 Hong Kong-listed large and mid-sized banks, with NPLs totaling 106.8 billion yuan, a 27% increase from the previous year. The average NPL ratio for real estate loans reached 6.5%, indicating a surge in bad loans.

Analysis shows a worsening situation for local banks in economically challenged regions, such as the northeastern provinces, with Jiutai Rural Commercial Bank experiencing a 37% increase in real estate-related NPLs.

Government responses have been conflicted, as it is difficult to stimulate the economy while also maintaining stability in the banking sector. The government introduced a mechanism for coordination of real estate financing, potentially aggravating financial risks by pushing banks to lend out funds to whitelisted projects. Meanwhile, concerns have arisen over banks’ ability to handle bad loans in the face of shrinking net interest margins (NIMs). By December 2023, NIMs had reached a historic low of 1.69%, prompting speculation that the People’s Bank of China (PBOC) may cut interest rates in the future to stimulate demand. At the same time, a further reduction in interest rates could lead to further strain on banks’ resources and ability to manage bad loans.

 

Source: Nikkei Chinese, April 9, 2024
https://zh.cn.nikkei.com/china/ceconomy/55288-2024-04-09-05-00-00.html

Briefings | | |   Economy/Resources

Diaspora Groups Testify About Intimidation and Harassment by Home Countries at Canada’s Foreign Interference Hearings

Canada’s Foreign Interference Commission inquiry has recently entered the witness testimony phase. Representatives from diaspora communities originating from China, India, Russia, and Iran testified about their experiences of intimidation and coercion by their countries of origin.

Witnesses representing Canadian diaspora communities included Uyghur rights activist Mehmet Tohti, Winnie Ng from the Toronto Association for Democracy in China, Grace Dai Wollensak from the Falun Dafa Association of Canada, Jaskaran Sandhu from the Indian Sikh Alliance, Yuriy Novodvorskiy from the Russian-Canadian Democratic Solidarity group, and Iranian-Canadian Hamed Esmailion. Each recounted their personal experiences of harassment and threats from their home countries.

Long-time human rights activist Tohti said he has been unable to see his family since arriving in Canada in 1991. Initially, China denied him and his family permission to travel. In 2016, over 30 of his relatives were detained, severing all contact with Tohti. In early 2023, Chinese police called to say that his mother and two sisters had died, his brother was missing, and that an uncle had been hospitalized — these were threats that he should stop his activism lest more relatives face the same fate.

Wollensak broke down as she spoke about the plight of Falun Gong practitioners. She revealed that they have endured persecution by the Chinese government for over two decades, not only within China but also through the authorities’ transnational crackdown abroad. She added that Falun Gong practitioners living overseas are constantly subjected to intimidation, harassment, cyberattacks, and surveillance. “My account has been deleted, and my IP address has been blocked,” she said, “We are not allowed to express anything that contradicts the CCP’s policies. The ’50-cent party’ and the United Front agents are able to interfere with our lives on a daily basis.”

The witnesses noted the US takes far stronger action against foreign interference [than Canada does], levying charges and convictions. Meanwhile, Canada lacks even a foreign agents registry, leaving complaints unaddressed.

The hearings were sparked by Beijing’s alleged interference in the 2019 and 2021 Canadian elections. Federal Judge Marie-Josée Hogue will hear dozens of further witnesses, including Prime Minister Justin Trudeau.

Source: Radio Free Asia, March 28, 2024
https://www.rfa.org/mandarin/yataibaodao/junshiwaijiao/lf-03282024130615.html

Briefings | | |   Geo-Strategic Trend

Charity’s Plan to Donate to Government Sparks Backlash in China

The Beijing Hemophilia Rare Disease Home Care Center recently announced plans to donate 1 million yuan ($143,000 USD) to the Chinese government and 100,000 yuan ($14,300 USD) to the Beijing government for construction purposes. This announcement from the charity organization, which relies on donations for its operations, sparked an outcry of criticism and skepticism online, with some saying “It seems the country has a rare disease.”

According to reports, the Center posted an official document on March 25th stating its decision to donate 1 million yuan to the People’s Republic of China for national construction. The next day, they announced a 100,000 yuan donation to Beijing for municipal construction. The Beijing Hemophilia Care Center was registered as a non-profit in 2012 and is a member of the Beijing Charity Association. It mainly provides aid for hemophilia patients and helps families by providing education, medical care, psychological counseling, and employment. Audits show that the group had total revenue of 24.7 million yuan in 2019. The revenue came almost entirely from donations, with zero government subsidies.

The organization’s announcements drew criticism online, with some questioning the legality of donating funds raised for unrelated purposes without obtaining donors’ consent. Some netizens joked that “It seems the country has a rare disease,” implying that the country is facing financial difficulties.

Legal experts stated that, under China’s charity laws, government agencies cannot directly receive donations meant for public welfare and must transfer such donations to approved charitable groups. Beijing authorities said they had received inquiries on the matter and had ordered the donation announcement to be retracted, which the Hemophilia Care group has now done. Some lawyers argued that the donation likely cannot proceed since no eligible recipient department within the government has been identified, and the charity failed to follow proper procedures like soliciting feedback from donors.

Source: Central News Agency (Taiwan), March 27, 2024
https://www.cna.com.tw/news/acn/202403270418.aspx

Briefings | | |   Economy/Resources

China Unveils J-15D, a Carrier-Based Electronic Warfare Aircraft

China’s state media CCTV recently named and reported on the J-15D electronic warfare aircraft. The new aircraft is based on the Chinese J-15 carrier-based fighter jet. The J-15D is still in testing, and it is expected to appear on the deck of China’s Fujian aircraft carrier in the near future. It is unclear if mass production is planned.

Prior to the unveiling of the J-15D, the Chinese People’s Liberation Army only had one very expensive electronic warfare aircraft, the J-16D. As there is no carrier-based version of the J-16, China’s aircraft carriers lacked an electronic warfare aircraft.

According to footage from CCTV and China Global Television Network, the carrier-based J-15D is equipped with a weapons system similar to the J-16D. Promoted as a fighter jet combined with an electronic warfare aircraft concept, the heavy-duty twin-engine J-15D can carry more air-to-air and air-to-sea/ground munitions than the J-35, serving more of a multipurpose role.

The CCTV report quoted Tencent as stating that the main reason why the Chinese navy chose the J-15 as the base for developing this new electronic warfare aircraft was that the J-15 has mature aircraft carrier capabilities, suitable for integrating electronic warfare capabilities with aircraft carriers.

As the J-15D relies on its own power, it may struggle when taking off from the ski-jump decks of the Liaoning and Shandong carriers. For this reason, analysts suggest that the Fujian carrier, which has an electromagnetic launch system, will be a more suitable host for the J-15D.

Source: Central News Agency (Taiwan), March 31, 2024
https://www.cna.com.tw/news/acn/202403310208.aspx

Briefings | | |   Defense/Military

Chinese Ministry of State Security: ‘Military Fans’ at High Risk of Becoming Espionage Targets

China’s Ministry of State Security has issued another stern warning about the potential national security threats posed by military enthusiasts, or “military fans.” The ministry says this group is a high-risk target for espionage, theft of secrets, and leaks involving military matters.

In an article titled “Another Reminder for ‘Military Fans'” published earlier this month, the ministry outlined several specific risks pertaining to this community’s activities. The article states that military fans could inadvertently “guide” foreign intelligence operations by revealing sensitive military information, their online military forums and groups could become channels for overseas theft of secrets, and individual military fans could become targets for “screening and enticement” by foreign personnel acting as “insiders.”

On March 7th, the ministry’s official WeChat account delved deeper into the risks involved. The WeChat post noted that Chinese military fans obsessively track developments of advanced weapons and equipment, closely following details such as equipment quantities and models, troop locations, and aircraft serial numbers. They establish databases compiling this sensitive information and share it on websites, constantly expanding and refining the available data. “As time goes by, this information will become increasingly rich and professional, to the point of endangering military security,” the Ministry of State Security warned.

This is not the first time that Beijing has raised alarms about the activity of military fans. On December 23rd of 2023, the Ministry cautioned fans against leaking information on construction progress, technical specifications, or deployment details of new military equipment. The Ministry’s communication at that time stated that violations could result in prison sentences of 3 to 7 years. China’s security establishment clearly views information gathering and sharing by these military enthusiasts as a critical risk to be proactively addressed.

Source: Radio Free Asia, March 20, 2024
https://www.rfa.org/mandarin/yataibaodao/zhengzhi/ql2-03202024033509.html

Briefings | | |   Defense/Military

China Expands Security Ties in Indian Ocean, Intensifying Rivalry with India

China has recently intensified efforts to deepen security ties with countries in the Indian Ocean region. It has signed a new security agreement with the Maldives, and it dispatched a military delegation to visit three other countries in the region earlier this month.

On March 4th, the Maldives’ Defense Ministry announced the signing of a military assistance agreement with China to “nurture stronger bilateral ties.” Details were not provided. China’s Defense Ministry also sent a delegation on a 10-day visit to the Maldives, Sri Lanka and Nepal. They met with Maldivian President Mohamed Muizzu and Maldives defense officials to “discuss regional security issues of common concern,” develop bilateral military relations, and promote defense cooperation.

Concurrently, India began withdrawing around 80 security personnel from the Maldives at Muizzu’s request. The Indian personnel had been deployed to operate helicopters and aircraft for surveillance or rescue operations.

Chinese research vessel activity near the Maldives has increased recently. A Chinese research vessel visited the Maldives last month, raising Indian security concerns that Beijing could use gathered data to deploy naval ships to the region.

Analysts suggest that the Indian Ocean region is becoming another arena for geopolitical rivalry over the next decade, with the potential for low-level conflicts between major powers like India and China. According to David Brewster of the Australian National University, China’s recent developments in the area are part of long-term efforts to boost the country’s regional security presence. Brewster said “China has been doing this for about 15 years, seizing opportunities to increase its Indian Ocean presence.”

India has been taking steps to bolster its own presence in the region and partner with like-minded democracies. Indian policymakers may worry about China’s increasing security footprint in the Indian Ocean.

Source: Voice of America, March 19, 2024
https://www.voachinese.com/a/china-presence-in-indian-ocean-20240319/7534315.html

Briefings | | |   Geo-Strategic Trend

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

Briefings | | |   Government/Politics