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CNA: China’s First-Quarter FDI Fell Sharply

Primary Taiwanese news agency Central News Agency (CNA) recently reported that, according to the latest data released by China’s Ministry of Commerce, China’s actual use of foreign direct investment (FDI) in the first quarter was 301.67 billion yuan (around US$42.5 billion), a year-over-year decrease of 26.1 percent.

{Editor’s note: The Ministry of Commerce press release mentioned several industries in China that saw year-over-year increases in FDI, as well as several foreign countries that increased their direct investment in the country. The release omitted data about which industries’ FDI contracted and which foreign countries decreased their FDI in China.} China’s accommodation and catering industry grew the fastest in terms of FDI in the first quarter, reaching 84.7 percent year-over-year growth, followed by the construction industry, which grew at 17.5 percent year-over-year. The actual use of foreign investment in the medical equipment and instrumentation manufacturing industry increased by 169.7 percent year-over-year. In the first quarter, German investment in China increased by 48 percent year-over-year. ASEAN investment in China increased by 5.8 percent year-over-year. The head of the Foreign Investment Management Department of the Chinese Ministry of Commerce explained that fluctuations in data are common. The official press release did not disclose investment figures for other countries.

Source: CNA, April 19, 2024
https://www.cna.com.tw/news/acn/202404190337.aspx

Briefings | | |   Economy/Resources Geo-Strategic Trend

China’s Three Largest Exchanges to Stop Disclosing Real-Time Trading Volume Data

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that China’s three major stock exchanges (the Shanghai Exchange, Shenzhen Exchange and Hong Kong Exchange) will stop disclosing real-time trading volume data starting in mid-May so as to reduce market volatility. The announcement has triggered concerns about downgraded data transparency in the market.

As part of the Chinese State Council’s recent market guidelines, a key effort is the tightening of control over high-frequency trading in mainland Chinese markets. The Shenzhen exchange regulator said that the move to cut real-time market data disclosures was aimed at “unifying investor practices” so as to ensure “fair access to information”.

The newly-announced exchange rules may further reduce foreign investability in China’s equity markets and restrict Hong Kong’s role as a gateway for investment into China. Since 2014, foreign investors have been allowed to invest in A-shares through the Shenzhen-Hong Kong Stock Connection and the Shanghai-Hong Kong Stock Connection. Real-time data is critical for fund managers, especially hedge funds, to measure liquidity and execute their trades in a timely fashion.

The Shanghai and Shenzhen exchanges are China’s two primary mainland stock exchanges. As of Monday, the A-shares market value on these exchanges was 71.21 trillion RMB (about US$9.84 trillion). A-shares are RMB-denominated shares of mainland Chinese companies, generally only available to trade by domestic investors and certain qualified foreign institutional investors.

Source: Sina, April 19, 2024
https://portal.sina.com.hk/finance/marketdigest/2024/04/19/814828/

Briefings | | |   Economy/Resources

BBC Chinese: New U.S. Land-Based Missile System Deployed in Philippines

BBC Chinese Edition reported on April 19th that the U.S. Army’s new land-based missile launch system, the Typhon Weapon System, was recently deployed in the northern Philippines. This is the first time this new land-based missile system has appeared in the “First Island Chain.” Medium-range missiles have a range of more than 2,000 kilometers. This means the Typhon System is able to reach China’s southeastern coastal areas, the South China Sea, and the Taiwan Strait.

Experts view this development as a warning to China and a message about the United States’ military capabilities in the Indo-Pacific region. In response to the U.S. move, Beijing immediately released a high-profile counter-signal, announcing military dialogue with Cuban military leaders.

The Typhon System has mobile combat capabilities and can be mounted on heavy transport aircraft for quick deployment. The Tomahawk missiles launched by the Typhon system have medium-range strike capabilities. This means it is capable of long-distance deep strikes against high-value targets such as command and control centers, ammunition depots, and airports. The Typhon System has a longer range than the U.S.’s Army Tactical Missile System (ATACMS).

The war in Ukraine has shown how difficult it is to attack a mobile system such as the Typhon. The system can also launch the RIM-174B Standard Extended Range Active Missile, which is able to attack both land and sea targets. This latest deployment appears to serve as a verification that the United States can quickly deploy the system to overseas military theaters.

Source: BBC Chinese, April 19, 2024
https://www.bbc.com/zhongwen/simp/world-68853532

Briefings | | |   Defense/Military Geo-Strategic Trend

Six Major Chinese Banks See Significant Decline in Mortgage Loans

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that, amid the “shock waves” of the real estate market downturn and early mortgage repayments, Chinese banks’ personal mortgage businesses continue to face pressure. By the end of 2023, the total mortgage loan balance of the six major state-owned banks was approximately RMB 26 trillion yuan (around US$3.66 trillion), a decrease of approximately RMB 500 billion yuan (around US$70.34 billion) from the end of the previous year.

Among the six major state-owned banks, the balance of personal housing loans of the five largest banks all decreased year-over-year. Only one of the six largest banks — the Postal Savings Bank of China — saw an increase. In terms of asset quality, five of the six major banks had suffered a year-over-year increase in non-performing mortgage loan ratios by the end of 2023. The Chinese central bank’s “Statistical Report on Loan Investment by Financial Institutions in 2023” showed that the balance of personal housing loans at the end of 2023 suffered an overall year-over-year decrease of 1.6 percent.

In response to the significant decrease in mortgage loans on their books, most banks have been intensifying their efforts to issue new mortgage loans. That being said, increasing early mortgage repayments in 2023 brought further pressure on outstanding mortgage loans and banks’ loan yields.

Source: Sina, April 8, 2024
https://finance.sina.com.cn/wm/2024-04-08/doc-inararwv6421091.shtml

Briefings | | |   Economy/Resources

China’s Imports and Exports Declined Sharply in March

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that, according to Chinese customs data, China’s imports and exports both experienced sharp declines in March, far below market expectations. Export shipments fell 7.5 percent year-over-year, while imports also fell 1.9 percent year-over-year. Chinese policymakers are facing challenges as they try to shore up a fragile economic recovery.

Exports suffered their biggest drop since last August, well above the 2.3 percent decline forecasted by economists. Exports for the period January through February increased by 7.1 percent year-over-year.

Over the past year, China’s exporters experienced many difficulties due to weak overseas demand and a tightening global monetary environment. At this point, with the U.S. Federal Reserve and other developed countries showing no urgency regarding the need for interest rate cuts, Chinese manufacturers may continue to face challenges as they try to boost international sales. Analysts warned that Western concerns about overcapacity in certain Chinese industries [and the impact of such overcapacity on Western markets] could bring more trade barriers to China’s manufacturing sector.

China’s imports for March fell 1.9 percent year-over-year, compared with a growth of 3.5 percent in the previous two months, indicating weakness in domestic demand. Analysts do not believe China’s economy will fully recover any time soon, mainly because the crisis in the Chinese real estate industry has been going on for quite some time.

Global ratings agency Fitch recently downgraded China’s sovereign credit rating outlook to negative, citing risks to public finances as the country’s economy faces growing uncertainty during a shift to a new growth model. Structural flaws in China’s economy have reduced the effectiveness of its central bank’s monetary policy tools.

Source: NetEase, April 12, 2024
https://www.163.com/dy/article/IVJQBCIC055292RI.html

Briefings | | |   Economy/Resources

RFI Chinese: China Asks Telecom Operators to Phase Out Foreign Chips

Radio France Internationale (RFI) Chinese Edition recently reported that, people familiar with the matter said Chinese officials earlier this year directed the country’s largest telecom operators to phase out foreign processors at the heart of their telecom networks by 2027. This would be a hit to U.S. chip giants Intel and Advanced Micro Devices (AMD). China’s Ministry of Industry and Information Technology set the 2027 deadline in order to speed up the government’s efforts to stop using such core chips in its telecommunications infrastructure. Chinese regulators also ordered state-owned mobile operators to check whether “non-Chinese” semiconductors are commonly used in their networks and to draft a timetable for replacement.

In the past, efforts by the Chinese telecommunication industry to wean itself from dependence on foreign semiconductors was to be hampered by a lack of quality chips produced domestically. Now, the quality of domestic chips has improved and their performance has become more reliable.

Currently, U.S. chipmakers Intel and AMD supply most of the core processors used in networking equipment in China and globally; geopolitical concerns now cloud their future business prospects in China. In October of last year, China Telecom purchased approximately 4,000 artificial intelligence servers, 53 percent of which used Intel processors. According to tender documents, the rest of the AI servers use Huawei’s processors. In the past, Intel chips accounted for a much higher share of server procurements.

Source: RFI Chinese, April 12, 2024
https://tinyurl.com/ykpb26j6

Briefings | | |   Geo-Strategic Trend Information/Technology

RFI: Taiwan Rejects China’s Relief Aid After Earthquake

Following the magnitude 7.4 earthquake that struck Taiwan on the morning of April 3rd, Radio France Internationale (RFI) reported that Taiwan’s Mainland Affairs Council quickly rejected aid offered by mainland China, saying it was not needed.

Analysts explained that Beijing’s aid always comes with conditions attached and is not a true gesture of goodwill. Some suggested that, instead of providing aid, it would be better for the mainland to stop interfering with the Taiwanese government’s disaster relief effort.

The report stated that “China has been unwilling to give up the threat of force to expand its control over Taiwan, and the Taiwanese people are naturally highly suspicious of China’s intentions.” The article mentioned that mainland China blocked the United Nations from providing much-needed assistance to Taiwan 25 years ago when it suffered “The Great 921 Earthquake.” In recent years, mainland aircraft and warships frequently disturb the areas surrounding Taiwan. This trend is only intensifying. Because of these ongoing military threats, people in Taiwan are highly suspicious of China’s intentions.

Some scholars expressed the belief that China may have anticipated Taiwan’s reaction. The argument is as follows: When Beijing made an offer that was very likely to be rejected, they were not actually trying to help; they were setting a trap to embarrass Taiwan for rejecting aid that appears to have been offered in goodwill.

Source: RFI, April 5, 2024
https://tinyurl.com/nhdmnk2s

Briefings | | |   Geo-Strategic Trend

Half-Stopped Factories Become Norm in Chinese Lithium Battery Industry

Shanghai-based Chinese financial news site East Money recently reported that, “as the period of frenzied investment has passed, the Chinese lithium battery industry has been shrouded in the shadow of overcapacity and price wars. .. After the Chinese New Year, which is often the peak period for job hunting and employment, many battery companies reported suspensions of production, layoffs, and salary cuts.” Below are some translated excerpts from the article.

The oversupply situation in the lithium battery industry has been reflected in all aspects of the entire supply chain. Some sources told the reporters that, in the new energy industry chain from top to bottom, no orders and half-stopped factories have become the norm. “The bosses themselves are looking to find a more stable job.” Starting this year, even large companies are in danger. Other than the two “super players,” CATL and BYD, the question is: how many battery companies can survive past spring?

The turning point for the lithium battery industry’s sharp decline occurred in the fourth quarter of 2022. The trigger was that the sales growth rate of new energy vehicles began to slow down significantly, which was not expected by the industry. Because of this, since 2023, the battery industry has fought a fierce price war, and capacity utilization has further declined as well. Even for CATL, its 2021 manufacturing capacity utilization rate was as high as 95 percent, dropped to 83.4 percent in 2022, and further dropped to 70.47 percent in 2023, which is still much higher than the industry average capacity utilization rate – around 41.8 percent.

Right now, the lithium battery industry is still facing the challenge brought by the worsen high EV inventories as the result of the rapid expansion of new energy vehicles. In the meantime, the battery inventory of the energy storage industry is piling up too. No one knows when the lithium battery industry will emerge from the bottom. A new round of elimination in the market seems to be just starting.

Source: East Money, April 1, 2024
https://finance.eastmoney.com/a/202404013031165676.html

Briefings | | |   Economy/Resources Information/Technology