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China’s 2023 Crude Oil Imports from Russia Exceeded 100 Million Tons for the First Time

China imported more than 107 million tons of crude oil from Russia in 2023, according to data from China’s General Administration of Customs reported by well-known Chinese news site Sina (NASDQ: SINA). This represents a year-over-year increase of 24 percent in Chinese oil imports from Russia, accounting for approximately 19 percent of China’s total crude oil imports last year and marking the first time in four years that Russia was the biggest source of crude oil supplying China.

In the meantime, Saudi Arabia supplied 85.96 million tons of crude oil to China, a year-over-year decrease of 1.7 percent, ranking second among sources of oil supplying China; Iraq exported 59.26 million tons of crude to China, ranking third; Malaysia and the United Arab Emirates supplied China with 54.79 million tons and 41.82 million tons of crude oil, ranking fourth and fifth, respectively.

Following the outbreak of the Russia-Ukraine conflict in February 2022, Russia has responded to Western sanctions by increasing oil and gas exports to China, India and other Asian countries. In 2023, about 90 percent of Russia’s oil and petroleum exports went to China and India. In the past two years India, has accounted for about 40 percent of Russia’s total crude oil exports, Russia supplied almost no crude oil to India before the Russian invasion of Ukraine.

According to the Sina news article, “China and Russia are continuing to deepen energy cooperation.”

Source: Sina, January 22, 2024
https://finance.sina.cn/2024-01-22/detail-inaeknmk4499156.d.html?from=wap

Briefings | | |   Economy/Resources Geo-Strategic Trend

Lianhe Zaobao: More German Companies Considering Withdrawal from Chinese Market

According to Singapore’s primary Chinese language newspaper Lianhe Zaobao, the latest survey by the German Chamber of Commerce in China found that the number of German companies withdrawing or considering abandoning the Chinese market has doubled in the past four years. The survey’s findings, which come as China’s economy continues to weaken, highlight the challenges facing German companies operating in China. Top concerns cited by German companies include increased competition from local Chinese companies, unfair restrictions on market access, economic headwinds, and geopolitical risks.

The survey was conducted from September 5 to October 6 of 2023, with a total of 566 member companies polled. About two percent of German companies in China said they were selling the Chinese arms of their business, and seven percent said they were considering doing so. In contrast, the same survey conducted in 2020 showed that only four percent of German companies operating in China had exited or were considering an exit from China.

According to the survey, 44 percent of responding German companies have taken specific measures to address the risks of operating in China, including establishment of alternative supply chains that are independent of China. Another 54 percent of responding companies believe that the attractiveness of investment in China is declining.

Source: Lianhe Zaobao, January 25, 2024
https://www.zaobao.com.sg/finance/china/story20240125-1464321

Briefings | | |   Economy/Resources Geo-Strategic Trend

Lianhe Zaobao: Hyundai Motor Sells Chongqing Factory at Half Price

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that South Korea’s Hyundai Motor Co.’s joint venture in China sold its factory in Chongqing for RMB 1.62 billion (around US$227.6 million), less than half the original asking price from when the factory was originally put up for sale in August of last year. Hyundai faces fierce price competition and slowing demand in China.

The factory started operations in August 2017 and is the second factory sold by Hyundai Motor in China. In addition to the recent sale, Hyundai Motor sold a Beijing-based factory in 2021. There are now three remaining Hyundai factories in China, down from five at the peak.

Hyundai said the sale was a move to optimize its business structure in China, aiming to shift focus from the volatile Chinese market to other Asian countries such as India and Indonesia. As China rapidly transitions to electric vehicles, South Korean carmakers Hyundai and Kia are facing difficulties in their China strategies. China is the world’s largest auto market. It’s worth noting that sales in the Chinese market accounted for only five percent of the two companies’ total global sales in the third quarter of 2023.

Source: Lianhe Zaobao, January 17, 2024
https://www.zaobao.com.sg/realtime/china/story20240117-1462659

Briefings | | |   Economy/Resources Geo-Strategic Trend

HKEJ: Dimon Said China’s Risk-Reward Profile Has Changed Dramatically

Hong Kong Economic Journal (HKEJ) recently reported that JPMorgan CEO Jamie Dimon said China has been “very consistent” in opening its markets to financial services companies, but calculating the potential benefits for U.S. companies has become more complicated. In an interview with CNBC at the World Economic Forum in Davos, Dimon said investors that are considering expanding into China have to be “a little worried.” He added that he met with Chinese Premier Li Qiang on the sidelines of the Davos conference and “it’s a good thing they’re here.”

In the wide-ranging interview, Dimon also talked about the U.S. economy. In recent months, Dimon has repeatedly said that inflation may not disappear as quickly as the market expects, and that the Fed may have to further raise the benchmark interest rate. He said it would be a mistake to think that the future is all bright given that the U.S. already had so much fiscal and monetary stimulus — he would remain cautious.

Source: HKEJ, January 17, 2024
https://www2.hkej.com/instantnews/article?id=3664469

Briefings | | |   US-China Relations

Mingpao: Moody’s Downgrades China’s Four Major Distressed Asset Management Firms

Mingpao, one of the primary Hong Kong newspapers, recently reported that rating agency Moody’s has just downgraded the credit ratings of the four major Chinese non-performing asset management companies.

  • Huarong’s (HKSE 2799) long-term issuer rating was downgraded by one notch to Ba1, a non-investment grade commonly known as junk level. The rating outlook for Huarong remained negative.
  • Moody’s also downgraded Oriental Asset Management by one level to Baa2.
  • Cinda (HKSE 1359) fell below A3 and was downgraded by one level to Baa1, the same rating as Huarong. The downgrade reflects continued tension in the Chinese real estate market and slowing economic growth. There is pressure on Cinda’s asset profitability, asset quality and capital position.
  • Moody’s also downgraded Great Wall Asset Management’s long-term credit rating by one notch to Baa3, just one notch above junk status. This was mainly due to Great Wall’s continued major deficiencies in corporate governance and pressure on its capital position – they delayed the release of the 2022 annual performance report.

The other two major rating agencies, S&P and Fitch, also downgraded the credit ratings of China’s four major asset management companies in September of last year and January of this year, respectively. According to the Mingpao article, there is a lack of sustainability and transparency in supporting asset management companies that have suffered large losses and capital erosion. Moody’s expects that Chinese officials will prioritize resources to support state-owned enterprises.

Source: Mingpao, January 20, 2024
http://tinyurl.com/mr23wrr5

Briefings | | |   Economy/Resources US-China Relations

Lianhe Zaobao: China’s Weibo Blocked “Taiwanese Election” Search Results on Election Day

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that Taiwan’s presidential and legislative elections took place on January 13, and Mainland Chinese netizens were paying close attention to the election results. After voting began at 8 a.m. that day, the relevant term “Taiwan Election” was on the “hot search ranking list” on Weibo, one of the largest social media platforms in Mainland China. The number of views on the topic quickly reached 163.2 million. However, the popular topic was soon blocked on Weibo.

Before the “Taiwan Elections” topic was blocked, many Mainland Chinese netizens posted comments and discussion on this topic. Some netizens called for improving relations between Mainland China and Taiwan after the Taiwanese election, and some netizens expressed their hopes for the DPP’s presidential candidate Lai Ching-te to win the election so that the Chinese military would “unify by force” sooner. (Taiwan’s DDP party, which won the presidency in the election, is the party that’s most opposed to cooperation with Beijing.)

Since Chinese official media, including Xinhua News Agency, CCTV News and People’s Daily, had very little coverage of the Taiwan election that day, some netizens asked on Weibo: “Is today the voting day for Taiwan? Why is there no news coverage?” Many related topics were blocked on Weibo as well. The Spokesperson of the Chinese Ministry of Foreign Affairs said in a press conference two days earlier that “the United States must not interfere in Taiwan’s elections in any form” – this quote remained visible on Weibo.

Source: Lianhe Zaobao, January 13, 2024
https://www.zaobao.com.sg/news/china/story20240113-1461930

Briefings | | |   Geo-Strategic Trend Social Stability

UDN: China’s Exports Fell 4.6 Percent Last Year

United Daily News (UDN), one of the primary Taiwanese news groups, recently ran a report on official 2023 data published by the China’s General Customs Administration. According the data, which are denominated in U.S. dollars, 2023 exports fell by 4.6 percent year-over-year, imports fell by 5.5 percent year over year, and aggregate imports and exports decreased by 5.0 percent year-over-year. China’s annual trade surplus was US$823.22 billion.

The last time that China experienced a decline in USD-denominated exports was seven years ago, in 2016, when exports fell by 7.7 percent.

At the “2023 Imports and Exports Press Conference” held by China’s State Council Information Office, official RMB-denominated data were released. Priced in RMB, China’s 2023 exports increased by 0.6 percent year-over-year, imports decreased by 0.3 percent year-over-year, and aggregate imports and exports increased by 0.2 percent year-over-year.

 

Chinese YoY Trade Growth, 2023
in USD in RMB
Exports -4.6% +0.6%
Imports -5.5% -0.3%
Aggregate -5.0% +0.2%

 

Wang Lingjun, deputy director of China’s General Customs Administration, said “the complexity, severity, and uncertainty of the external environment have increased. To further promote the stable growth of international trade, China needs to overcome some difficulties and make more efforts.”

Source: UDN, January 12, 2024
https://udn.com/news/story/7333/7703838

Briefings | | |   Economy/Resources Geo-Strategic Trend

China no Longer Top U.S. Supplier, a First in 17 Years

Nikkei Chinese Edition recently reported that U.S. imports from China during the period January to November, 2023, decreased by more than 20 percent compared with the same period in 2022. Although import data for December 2023 have not yet been released, it seems highly probably that U.S. imports from Mexico will surpass imports from China for the calendar year 2023.

There is a clear trend in the United States of “friend-shoring,” i.e. changing the source of imports from China to other countries who are more closely aligned with the U.S. This trend of relocating supply chains has been particularly rapid in categories of imports such as electronic products, previously highly dependent on imports from China. In terms of smartphones, imports from China decreased 10 percent year-over-year during the period from January to November. Meanwhile, electronic product imports from India expanded by a factor of five. For laptop computers, U.S. imports from China decreased by about 30 percent, while imports from Vietnam’s increased by a factor of four.

In 2023, U.S. imports from Europe and Southeast Asia increased, and imports from the European Union (EU) hit a new high during the period January to November, 2023. Although the import volume from ASEAN countries decreased year-over-year, this year’s imports from the ASEAN region were still the second highest in history, with the share of imports from ASEAN countries double that of 10 years ago.

In order to mitigate geopolitical risks, multinational corporations have widely adopted a “China + 1” strategy, diversifying their supply chains to avoid overreliance on China.

Source: Nikkei Chinese, January 10, 2024
https://cn.nikkei.com/politicsaeconomy/investtrade/54529-2024-01-10-09-54-58.html?start=0

Briefings | | |   US-China Relations