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All posts by RWZ

RFI Chinese: Five Chinese State-Owned Companies Announced the Start of Delisting US Stocks

Radio France Internationale (RFI) Chinese Edition recently reported that five companies, including PetroChina, Sinopec, Aluminum Corporation of China, China Life, and Shanghai Petrochemical announced separately that they applied for the voluntary delisting of their American Depositary Shares from the New York Stock Exchange. The China Securities Regulatory Commission issued a statement on “Initiating delisting from the U.S. for Individual Chinese Companies.” The Commission explained that, “ever since these companies listed in the United States, they have strictly abided by the rules and regulatory requirements of the U.S. capital market. They made the choice of delisting out of their own business considerations.” The Commission further stated that listing and delisting are the norm in the capital market. Previously, the U.S. Securities and Exchange Commission (SEC) announced on May 4 that it had included more than 80 Chinese companies on its scheduled delisting list, and ordered these companies to submit evidence that they met the listing conditions before May 25. Under the U.S. Foreign Company Accountability Act of 2020, the committee can remove foreign companies from U.S. securities markets if they fail to comply with U.S. auditing standards for three consecutive years. Beijing and Washington are negotiating the resolution of the longstanding audit disputes. U.S. SEC Chairman Gary Gensler said on July 27 that U.S. and Chinese officials must reach an agreement “as soon as possible” to obtain audit papers of Chinese companies in order to avoid the delisting of U.S.-listed Chinese stocks.

Source: RFI Chinese, August 12, 2022

China’s Smartphone Market Fell Significantly in the Second Quarter

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that the International Data Corporation (IDC) has released its latest mobile phone market report. IDC mentioned in the report that, in the context of improving market supply, soaring inflation and economic uncertainty have severely suppressed consumer spending, global mobile phone inventories have grown significantly, and market demand has been limited. The region with the largest decline in global shipments was in China, down more than 14 percent year-over-year. In the global market; the ranking of manufacturers did not change much in the second quarter. Samsung maintained growth in all regions except Europe with a share of 21.8 percent, and Apple ranked second with a share of 15.6 percent. IDC predicts that the Chinese domestic smartphone market will ship about 280 million units in 2022, down more than 40 percent from the peak of 500 million units. The Chinese Q2 decline is the fifth consecutive quarter of declines in shipments and the second consecutive quarter of double-digit declines. IDC expressed the belief that, in the first half of the year, the sluggish Chinese domestic market was a result of the Covid-19 lockdowns and the lack of sufficient differentiation among mid-to-high-end products. Also, China’s huge smartphone market is highly saturated. As of the end of last year, there were more than 1.6 billion active mobile phone accounts in China, surpassing the population of 1.4 billion. The penetration rate is much higher than the global average, resulting in intense competition.

Source: NetEase, July 29, 2022

U.S. Imposed New Technology Export Controls

Well-known Chinese news site Sohu (NASDAQ: SOHU) reported not long ago that, in advanced technology fields such as semiconductors, the United States has recently been intervening frequently in normal market competition. Biden just signed the $280 billion chip bill to restrict semiconductor giants from investing in China. Now the U.S. Department of Commerce announced new export control measures. The U.S. Bureau of Industry and Security (BIS) issued an announcement stating that four “emerging and foundational technologies” were included in new export controls due to national security concerns. The four technologies are: fourth-generation semiconductor materials gallium oxide and diamond that can withstand high temperature and high voltage; ECAD software specially designed for 3nm and below chips; pressure gain combustion technology that can be used in rockets and hypersonic systems. Although BIS did not directly mention China, yet China is now one of the countries that the United States has listed under national security controls. As long as technology items are listed in the import and export control catalogue, the U.S. government will likely impose restrictions on China. This will actually lead to further decoupling between China and the US in the semiconductor field. In its announcement, BIS claimed that the inclusion of four technologies supporting the production of advanced semiconductors and gas turbine engines under export controls was the result of an agreement among the 42 participating countries of the Wassenaar Agreement at the December 2021 plenary meeting. Considering that China is increasing its investment in semiconductors, in order to maintain its own advantages, the United States is trying to hinder the development speed of China’s semiconductor industry.

Source: Sohu, August 13, 2022

CNA: Taiwan Society Remained Calm Despite the CCP’s Military Threats

Primary Taiwanese news agency Central News Agency (CNA) recently reported that, Beijing announced military exercises around Taiwan from August 4 to 7 in response to the House of Representatives Speaker Nancy Pelosi’s visit from the U.S. Foreign media stationed in Taiwan observed that the Taiwanese society was calm as usual and could not feel the tense atmosphere. On the afternoon of the 4th of August, the Chinese Communist Party launched 11 Dongfeng series ballistic missiles in fractional waves towards the waters surrounding the northern, southern and eastern parts of Taiwan. The Japanese Defense Ministry presumed that four of the missiles flew over Taiwan based on five of the missiles falling into the waters of Japan’s exclusive economic zone. Taiwan’s Ministry of National Defense pointed out that it was necessary to  grasp the launch dynamics immediately, activate relevant defense systems and strengthen combat readiness. A report from the Associated Press from Keelung pointed out that, despite the large-scale military exercises by the Communist army, the atmosphere in Taiwan society remained calm. A BBC reporter said that most of the people he interviewed did not believe that the Communist army was going to attack Taiwan this time. Another fisherman said, “They are just a group of bandits. These Communists only talk big and can’t do anything. We have been listening to their threats for 70 years.”

Source: CNA, August 5, 2022

UDN: Biden to Host Pacific Islands Leaders’ Summit at the White House

United Daily News (UDN), one of the primary Taiwanese news groups, recently reported that U.S. Deputy Secretary of State Wendy Sherman said that President Biden will host a summit of Pacific Islands leaders at the White House in September. Facing China’s growing influence, the U.S. looks to strengthen regional ties. The United States is making frequent diplomatic tours in the Pacific, seeking allies to confront an increasingly assertive China. Washington previously also announced plans to open new embassies in the Pacific. US Secretary of State Antony Blinken visited Fiji in February this year, and U.S. Vice President Kamala Harris recently delivered a landmark video speech to the Pacific Islands Forum. Sherman visited the Solomon Islands for a series of commemorations marking the 80th anniversary of the Battle of Guadalcanal in World War II. After China signed a secret security agreement with the Solomon Islands in April this year, Western allies were alerted. The deal, which would allow China to establish military strongholds in the South Pacific, was the focus the U.S.’ concerns.

Source: UDN, August 6, 2022

China Times: UK to Build the Second Largest Rare Earth Refinery Outside China

Major Taiwanese news network China Times recently reported that, the British government stressed the importance of securing the supply chain for rare earth minerals, and is committed to diversifying the supply chain moving it away from market dominators like China. The UK unveiled a new key minerals strategy, and will begin construction of a rare earths refining facility in northern England. Rare-earth elements are used to make magnets to start electric car engines, power windows, and to operate offshore wind turbines and other high-tech devices. China currently accounts for 98 percent of the global supply. Europe and the U.S. have stepped up their efforts to reduce their reliance on China and create safe and independent supply chains for these critical minerals, so as to avoid a repeat of the supply chain crisis. The UK says the Pensana facility will be the second-largest refinery of magnet feedstock outside of China and is expected to begin operations by the end of 2023. The £145 million (approximately US$175 million) facility in Saltend, East Yorkshire, is supported by the government’s Automotive Transformation Fund and is expected to create 126 jobs. With the new strategy, Britain said it would further develop and build the skills base of its local workforce, while supporting domestic production and working with like-minded allies to diversify supply chains.

Source: China Times, July 22, 2022

Lianhe Zaobao: China’s July Manufacturing PMI Showed Both a Production and a Demand Slowdown

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported on an  announcement that China’s National Bureau of Statistics made. China’s manufacturing purchasing managers’ index (PMI) in July declined by 1.2 percentage points from the previous month to 49 percent, falling below the growth line. The Bureau indicated that many factors influence the decline of the manufacturing PMI. For example, it is affected by traditional production off-season, insufficient market demand, and low prosperity of high-energy-consuming industries. Industries like textiles, petroleum, coal and other fuel processing, ferrous metal smelting and rolling processing have continued to be in the contraction range. This was one of the main factors for the decline of PMI. Both manufacturing activities and demand in the manufacturing sector have slowed down. Raw material procurement activities have also tightened accordingly. The purchasing volume index and the import index both decreased by more than two percentage points from the previous month. The international situation has become more complex and severe, and the market demand is under pressure. The new orders index and the index of new export orders both dropped significantly. The manufacturing PMI now is below 50, indicating that China’s economic recovery remains shaky. Challenges to China’s GDP growth in the third quarter may be bigger than earlier expected.

(1) Lianhe Zaobao, August 1, 2022

(2) China’s National Bureau of Statistics, July 31, 2022

Tencent Stock Suffered a Major Decline

Well-known Chinese news site Sohu (NASDAQ: SOHU) recently reported that, on the last trading day of July, Hong Kong stocks fell across the board. The Hang Seng Technology Index plummeted by nearly 5 percent, and Tencent Holdings fell by 4.36 percent. Tencent’s stock price approached the HK$300 mark again, almost returning to the level five years ago. Just over a year ago, Tencent’s per-share price approached a historical peak of HK$750. However, now it has fallen by nearly 60 percent. its market value has evaporated by about HK$4.4 trillion (around US$560 billion). In the past two years, Tencent’s share price has been continuously declining due to the combined effects of multiple factors such as China’s anti-monopoly movement, the government restrictions on online gaming for minors, and China’s strict COVID-19 combat policies, as well as the reduction of shares held by the largest shareholder. Tencent’s financial numbers are indeed slowing over the years, according to its 2021 report. The latest growth rate is the lowest in recent years. Since the end of June, Tencent has launched a share repurchase program. The total scale of this program has reached RMB 3.9 billion (around US$578 million). Tencent Holdings has repurchased a total of about HK$10.01 billion (around US$1.28 billion) dollars this year. Tencent has been China’s largest internet company.

Source: Sohu, July 31, 2022