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Chinese Commercial Spaceflight Industry Poised for Liftoff Despite Lagging 10 Years Behind SpaceX

China’s official state news agency Xinhua has published a long article on the country’s commercial spaceflight industry.

The Chinese rocket industry saw significant growth in 2023. Twelve out of thirteen rocket launches by private companies reached orbit successfully, a record among the 8 years that private rocket companies have been operating in China. However, there still remains a gap between these Chinese companies and SpaceX, which launched 96 times in 2023. SpaceX also dominates in terms of launch mass, accounting for 80% of the 2022 global total. Experts estimate China’s commercial space industry lags SpaceX by about 10 years.

Looking forward, China’s private rocket companies are poised to accelerate development. The central government’s fourteenth 5-year plan puts a strategic focus on commercial aerospace. Multiple commercial companies like i-Space and Blue Arrow are aiming to launch reusable liquid-fueled rockets capable of dramatic cost reductions by 2025. The future holds huge demand for satellite launches, with China Satellite Network Group Co planning a constellation of 13,000 satellites. Further policy and financial support for the industry is expected as well.

Financing remains a current bottleneck for the industry, as innovation within the industry requires costly continuous testing and design and iteration are required. Local governments are now the main investors in commercial spaceflight companies. The industry also hopes to tap public capital markets for funding.

China’s economic work conference specifically called out commercial space as a strategic emerging industry. Experts foresee strong momentum for China’s commercial space industry in the next few years as companies move toward mature reusable rocket technologies. Key players are concentrated in Beijing, which aims to build a strong base for the industry centered around China’s Economic Development Zone.

Source: Xinhua, January 24, 2023
http://www.xinhuanet.com/20240124/4dd09cfced3d4931aee94c0e0ca2ef44/c.html

Briefings | | |   Defense/Military

Chinese Tech Giants Ramp Up Lobbying in Face of US Government Scrutiny

Chinese tech companies like TikTok and SHEIN have rapidly increased their spending on lobbying efforts within the United States. TikTok’s parent company ByteDance spent $8.74 million on lobbying in 2023, a 77% increase over the previous year. SHEIN spent $2.12 million in 2023 on lobbying, a 760% increase. The moves come as the U.S. government ramps up scrutiny and rhetoric targeting the companies amid broader U.S.-China tensions. The statistics on lobbying expense come from mandatory disclosure reports that the companies filed with Congress. TikTok and SHEIN aim to expand in the massive U.S. consumer market as growth slows at home in China.

TikTok now has 170 million U.S. users, gaining popularity despite previous bans. An e-commerce feature was added to the platform in 2023. TikTok’s lobbying focuses on pushing back against bills in Congress that would restrict the company’s U.S. business or ban use on government devices. Starting after U.S. regulator discussion of a possible ban in 2020, TikTok has grown its lobbying staff to about 14 people. TikTok lobbying was likely successful in slowing momentum for a ban as public opposition fell.

SHEIN lobbies on apparel, e-commerce, and trade controls. The company reportedly hired a former U.S. Trade Representative employee to argue SHEIN’s economic benefits to Congress as the company plans a U.S. IPO. Some in Congress claim that SHEIN uses a customs loophole to sell goods that have been produced with forced labor.

Both companies aim to expand within the U.S. while facing more scrutiny over data and economic security.

Source: Nikkei, February 2, 2024
https://zh.cn.nikkei.com/china/ccompany/54759-2024-02-02-10-55-24.html

Briefings | | |   US-China Relations

Survey: German Companies in China Face Stiff Competition, Geopolitical Risks, and Economic Headwinds

A survey by the German Chamber of Commerce Abroad found that 46% of German companies operating in China believe that their Chinese competitors will become leaders in their respective industries within the next 5 years. Some 37% of surveyed companies feel that innovativeness in the Chinese market makes doing business in China increasingly attractive, and 11% of German automotive companies in China view their Chinese competitors as already being the innovation leaders in their industry.

About 83% of German companies surveyed believe that China’s economy is declining, though 64% anticipate this downward trend being just a temporary 2-3 year slowdown. Some 42% of respondents expect positive developments in Chinese industry this year.

The investment outlook among surveyed companies was mixed – 54% think that China’s investment appeal is falling, while a similar percentage plan to increase investment in China over the next 2 years. Risks are top of mind, with about 37% of respondents reportedly taking action to mitigate geopolitical risks and some 20% taking action to mitigate risks related to China’s economy.

Source: German Chamber of Commerce in China, January 24, 2024
https://china.ahk.de/market-info/economic-data-surveys/business-confidence-survey-1

Briefings | | |   Economy/Resources

Chinese Officials Disciplined for Reading “Politically Problematic” Books

Chinese media have reported that several recently-arrested provincial and municipal officials were accused of “reading books and magazines with serious political problems.” Such offenses have been cited alongside more common corruption charges such as acceptance of bribes. The “problematic books”  in question include publications and e-books of foreign origin. Government reports about officials accused of such behavior have been published on the websites of the Chinese Communist Party’s Central Commission for Discipline Inspection (CCDI) and China’s National Supervisory Commission.

One example concerns former Guiyang City deputy mayor Lin Gang, who was expelled from the Communist Party and from public office for “unlawfully seeking benefits for others, illegally accepting property, and confronting the organization’s scrutiny.” He was additionally accused of “not believing in Marxism-Leninism, believing in ghosts and gods, participating in superstitious activities, and reading e-books and magazines with serious political issues for a long time.” Other officials recently accused include a former water company deputy general manager, a former deputy secretary of the Guizhou Provincial Party Committee for Political and Legal Affairs, the former deputy governor of Guizhou Province, and a recently expelled Shanxi City deputy mayor. All have faced charges of possession or reading of “politically-problematic” books or magazines originating from outside of China.

Taiwan’s Central News Agency noted that calling out officials for reading questionable publications or e-books has historically been quite rare, although there have been a few prior such cases.

Source: Central News Agency (Taiwan), January 30, 2024
https://www.cna.com.tw/news/acn/202401300029.aspx

Briefings | | |   Government/Politics

Beijing Office Vacancies Hit 13-Year High as Demand Falls in Slowing Economy

Demand for office space in Beijing has fallen a;s China’s economy weakens and companies are becoming more conservative about expansion. According to Caixin.com, the vacancy rate for Beijing office space has hit a 13-year high of 20.4%. This is the first time in recent years that the rate has topped 20%.

The shrinking technology industry in Beijing, coupled with conservative growth strategies and cost-cutting measures adopted by companies facing stiff economic headwinds, have combined to dampen office rental demand. According to the Caixin report, the high office vacancy rate in Beijing is mainly attributable to the following factors:

  • companies relocating their headquarters out of Beijing over the past year,
  • downsizing and taking less rental space, and
  • an overall lack of new demand to replace surrendered office space.

The market will likely face further challenges until broader economic growth rebounds. Not only are vacancy rates high, but rents have also fallen. Beijing’s office real estate market is highly dependent on state-owned enterprises, whose long-term tenancy have played an important role in stabilizing the local office rental market.

Source: Radio Free Asia, January 26, 2024
https://www.rfa.org/mandarin/Xinwen/5-01262024134758.html

Briefings | | |   Economy/Resources

2023 Saw China’s First Net Capital Outflow in Five Years

Amid a slowing economy in 2023, China saw a net outflow of funds from transactions with foreign countries for the first time in five years. Net outflows totaled 68.7 billion yuan. The outflows were driven by shrinking investments by foreign businesses into China as well as by affluent Chinese households’ increased travel and investment overseas.

China saw a net direct investment outflow of 118.5 billion yuan in 2023, the highest figure since 2010. It is unclear whether a bigger portion of this investment outflow resulted from transfers by Chinese firms or by foreign firms operating in China. On the one hand, Chinese companies’ expansion abroad has led to outflows; on the other hand, foreign companies’ downsizing and capital withdrawal from China has certainly contributed. A late-2023 survey of Japanese companies operating in China found that nearly 50% of respondents either reduced or did not expand 2023 investments in China compared with 2022. The number of foreign manufacturing and foreign industrial companies in China fell in November 2023 to its lowest level since November of 2004, dropping 0.4 percent compared with the same period in 2022.

China’s stock market hit new lows in late January 2024, down nearly 20% from the 2023 market highs. Meanwhile, feverish trading in foreign exchange-traded funds (ETFs) linked to the Nikkei and U.S. indices has led to a temporary suspension of those ETFs’ trading within China.

Following the end of Beijing’s zero-COVID policy in January 2023, affluent Chinese households increased their investment and travel overseas. This contributed to 2023’s capital outflows. The trend of capital flight from China persists in 2024.

China’s ability to attract foreign capital has weakened as the economy has slowed. The government faces challenges in restoring confidence and financial inflows. Ebbing confidence in China’s economic progress is reflected in the country’s investment outflows, foreign corporate downsizing, Chinese travel and investment abroad, and ongoing capital flight.

Source: Nikkei, January 25, 2024
https://zh.cn.nikkei.com/china/ceconomy/54665-2024-01-25-09-53-18.html

Briefings | | |   Economy/Resources

China Leads in Genetic Modification and Cloning of Monkeys

China is leading the world in terms of research on genetic modification and cloning monkeys, aiming to improve scientific understanding of human evolution and disease. In 2023, Chinese researchers published studies on monkeys whose genomes had been modified by adding human brain genes; these monkeys demonstrated better memory abilities compared to unmodified monkeys. The research could help explain millions of years of human evolution and the separation of humans from other primates. The experiments have raised some ethical concerns in the West.

In recent years, China has invested heavily in primate research at both the national and local levels, to the tune of 600 million euros. The country aims to establish monkey models of human diseases. The number of genetically modified monkeys remains small, however, as creating transgenic animals is a costly procedure. According to Pierre Savatier, a researcher at the French National Institute of Health and Medical Research, such a procedure costs around 1 million euros per animal. Although cloning can save some time, it is still a very expensive procedure with low success rates.

Some Western experts argue that, despite China’s demonstrated technological advances in genetic modification and cloning of primates, the scientific results of such experiments have been limited. Roger Le Grand, who leads the principal non-human primate lab at the French Atomic Energy Commission, noted that initial stages of transgenic mouse research were quote laborious before the associated techniques eventually became routine. Pierre Savatier commented that establishing stable lineages of genetically modified monkeys would take at least a decade.

Realizing pharmaceutical profits resulting from primate models would likely take 20-30 years. Currently, China is the only country devoting infrastructure and resources to support such long-term research. Public opinion in the U.S. and Europe generally opposes animal testing; China’s bets in this area, made “at the highest political levels,” are not being matched in Western countries.

Source: Radio France International, January 24, 2024
https://rfi.my/AHaD

Briefings | | |   Economy/Resources

Crackdowns on Comic Conventions Highlight China’s Suppression of Japanese and Western Cultural Influence

Several comic conventions and video game events in China have recently been canceled, including the Qingdao Comic Con, the Zibo comic show, the Qingdao AS New Year’s Party, and miYoSummer 3. The cancellations appear to be due to government restrictions and censorship targeting Japanese and Western cultural influences.

The Qingdao Comic Con scheduled for mid-February was canceled just weeks before the convention’s scheduled start. The cancellation followed online backlash in China criticizing the event for promoting Japanese culture and anime. The organizer cited “safeguarding visitor safety” as the reason for cancellation. The Qingdao AS New Year’s Party, scheduled for early February, faced similar pressure after recent public fomentation over comic shows, leading authorities and organizers to indefinitely postpone the event. Staff from the Zibo comic show said authorities ordered a stop to Shandong province’s animation exhibitions during the Chinese Spring Festival. HoYoverse, scheduled for summer 2024, also abruptly canceled its popular miYoSummer video game show in January.

Interviewees attribute the cancellations to government crackdowns reinforcing nationalistic boycotts of Japanese culture in particular. Some pointed out an incident in 2022 involving a Nanjing temple honoring Japanese war criminals which sparked widespread anti-Japanese sentiment and comic show cancellations last summer. Rigid over-enforcement is also exacerbated by the CCP’s culture encouraging government orders cascading down to the grassroots level.

Source: Radio Free Asia, January 24, 2024
https://www.rfa.org/mandarin/yataibaodao/kejiaowen/gt2-01242024052706.html

Briefings | | |   Social Stability