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CNA: China’s Foreign Investment Fell to A Five-year Low Last Year

Primary Taiwanese news agency Central News Agency (CNA) recently reported that, as China strengthens its pressure on foreign capital, foreign direct investment in China only reached US$180 billion in 2022, an annual decrease of 48 percent, a new low since 2017. Economists say new investment into China has slowed and will be hard to recover. The outlook for foreign investment in China has become murkier as China revises its anti-espionage law, broadening its scope to potentially cover day-to-day business activities of foreign investors, as well as targeting foreign consulting firms that provide services to multinational corporations. At the same time, growing tensions between China and the United States may also limit investment, and the U.S. government is also preparing to impose new restrictions on U.S. companies investing in China. This may put foreign capital, which can bring innovative ideas and cutting-edge technology to China, at particular risk. The entry of these companies into China is an important channel for China to learn to improve production efficiency and people’s living standards. China’s appeal as a destination for foreign direct investment had waned ahead of recent Chinese pressure on foreign capital, due to China’s clashes with the West over trade, technology, and national security. In the meantime, low-cost manufacturing destinations such as India and Vietnam are growing. Economists say the fragile political environment means foreign capital in China is likely to remain concentrated in only a few big companies willing to maintain or expand existing businesses, especially those eager to tap China’s consumer market, such as McDonald’s and Starbucks.

Source: CNA, May 5, 2023
https://www.cna.com.tw/news/acn/202305050174.aspx

Briefings | | |   Economy/Resources Geo-Strategic Trend

HK01: China Ranked Lower in World Press Freedom Index

Popular Hong Kong online media HK01 Network recently reported that, May 3 is World Press Freedom Day, and Reporters Without Borders (RSF) released the World Press Freedom Index 2023. Among the 180 countries and regions in the world, Mainland China hit a new low with 179th as the second lowest. Taiwan ranked 35th, up from last year’s 38. Hong Kong ranked 140th. The index is scored based on five indicators including politics, law, economy, society, and security in various regions, and through questionnaires from journalists, scholars, and human rights activists. The total score is obtained by quantifying and counting incidents of journalists and media being violated. Norway ranked first with a score of 95.18, followed by Ireland and Denmark. According to RSF, the bottom three places in this year’s ranking are all Asian countries, namely Vietnam (178th), China (179th) and North Korea (180th). It was the first time China had fallen to such a low ranking since the survey began. Over the past year, the rhetoric and approach of the Beijing government’s propaganda has become closer and closer to that of North Korea. In 2002, RSF released the Press Freedom Index for each region of the world for the first time. Hong Kong was ranked 18th at the time. In the following 21 years, Hong Kong’s ranking suffered a freefall to the 140th today.

Source: HK01, May 4, 2023
https://bit.ly/3AXJjNI

Briefings | | |   Social Stability

Concerns Over China’s Newly Passed Anti-Espionage Law

China passed a new Anti-Espionage Law on April 26, which will be enforced on July 1. Epoch Times published an article to analyze the law.

Article 4 defined what is counted as espionage activity. Item 3 broadened it to include “activities conducted, or instructed or financed to be conducted by others, by foreign agencies, organizations, and individuals other than spy organizations and their agents, and activities conducted by domestic agencies, organizations, or individuals in collusion with them, to steal, spy, buy, illegally possess state secrets, intelligence, as well as documents, data, information, and items related to national security and interests, or to instigate, induce, coerce, or buy state employees to mutiny.” This opens the door for the government to claim any foreign organization, company, or individual’s action as spy work.

Article 14 defined “No individual or organization may illegally obtain or hold documents, data, information, or items that are state secrets.” Article 38 defines the authority to interpret “state secrets” is vested in the “confidential department of the state, or the confidential departments of a province, autonomous region, or municipality directly under the Central Government.”

The law also gives the law enforcement agency great power in searching and investigation. Article 24 defined that “State security organs when carrying out the counter-espionage task can show their identify card, and then check the identity card of Chinese citizens or foreign personnel, inquire the relevant individuals and organizations, and inspect the accompanying items of any identity-unknown or suspected individual.” Also, Article 26 and 27 defined that with a district-level (lower than a city) approval, the security staff can search individual’s or organization’s electronic equipment, documents, data, materials, and items.

Sources:
1. China’s government site, April 27, 2023
http://www.gov.cn/yaowen/2023-04/27/content_5753385.htm
2. Epoch Times, May 1, 2023
https://www.epochtimes.com/gb/23/5/1/n13985487.htm

Briefings | | |   Government/Politics

Local Government Called for the Central Governments to Take Over Their Debts

Some China’s local governments admitted that they could no longer handle their debts and called for central government’s help. The Research Center on Development, Guizhou Province said that Guizhou Province “is unable to effectively resolve the (local debt) problem on its own.” The center made the statement in a report “Study on the Resolution of Local Government Debt,” which pointed out that local debt is a significant and urgent problem, but it is extremely difficult for the local governments to resolve it due to their limited financial capability. The report is unavailable on the Internet now.

Some local governments in Yunnan Province also reported desperate debt situation. By end of 2022, Yongping County’s total debt reached 3.44 billion yuan (US$500 million). Its debt ratio reached 991 percent and fiscal self-sufficiency rate was only 15.66 percent. Tengchong City also claimed financial difficulty where its fiscal capability could just keep the government payroll going.

Source: China News Agency (Taiwan), April 28, 2023
https://www.cna.com.tw/news/acn/202304280110.aspx

Briefings | | |   @CS Economy/Resources Government/Politics

Report: China’s Cost of Childrearing the Second Highest in the World

According to a recent report from Chinese think tank Yicai Research, China ranks second only to South Korea as the most expensive country in the world to raise a child. The cost of raising a child in China to the age of 18 is 6.9 times the country’s per capita GDP, which is twice the cost in Germany and three times the cost in France. China’s low birth rate and the now-abandoned one-child policy have resulted in an impending demographic crisis, with India poised to overtake China as the world’s most populous country this year.

The report recommends that China provides more support to families to improve the country’s low birth rate. The measures suggested include cash and tax subsidies, housing subsidies, increasing the number of daycare centers, offering equal maternity leave for men and women, introducing foreign nannies, promoting flexible work arrangements, protecting the reproductive rights of single women, allowing assisted reproductive technologies, and reforming the school and examination system.

A national survey conducted by the National Health and Family Planning Commission in China in 2017 found that 77.4 percent of women of childbearing age felt that the “economic burden is too heavy” is the primary reason for not wanting to have children, except for “being too old” or “having no one to take care of the child.”

Source: Deutsche Welle, May 1, 2023
https://p.dw.com/p/4QjpI

Briefings | | |   Economy/Resources

China Implements New Conscription Regulations

China implemented a revised conscription law as of May 1. It allows for the re-enlistment of retired soldiers and for the conscription of students with high-tech training. According to experts, China’s long-term military preparation is necessary to counter the declining birth rate and prepare for a potential high-tech war. Chen Shih-min, an associate professor at National Taiwan University’s Department of Political Science, stated that manpower is one of the essential resources in warfare. China’s previous one-child policy practice and the high cost of raising children put China into a negative population growth. Facing the conscription difficulty, Beijing tried to revise the relevant laws to bring back retired soldiers. Chen added that a high-tech war requires specialized talent in the field of AI, robotics, and other high-tech areas. Also, conscription should prioritize students with such training. Overall, China is in a state of long-term military preparedness, and any military mobilization serves as a reminder for Taiwan. The Nikkei Asia report directly pointed out that the new conscription law is aimed at the Taiwan Strait conflict.

Source: Central News Agency (Taiwan), May 2, 2023
https://www.cna.com.tw/news/acn/202305020296.aspx

Briefings | | |   Defense/Military

South Korea’s Q1 Exports to China Drop by 28 Percent as Trade Cools Down Between the Two Countries

South Korea’s trade with China has shifted from a surplus to a deficit, drawing attention from various parties. According to the Chinese General Administration of Customs, in the first quarter of this year, South Korea’s exports to China were $38.2 billion, down 28.2% from the same period last year, the largest decline among its major trading partners. The report cites a Bank of Korea (BOK) report, which states that the positive effects of reopening of China’s economy are limited, and the pace of domestic demand recovery has not accelerated, particularly for durable goods such as mobile phones and cars, which have impacted South Korea’s exports.

South Korea remained the second-largest trading partner in China’s import trade for the entire year of 2022. However, in the first quarter of this year, South Korea dropped to fifth place in terms of import trade, following the United States, Taiwan, Australia, and Japan. At the same time, South Korea’s imports from China in the first quarter of this year also fell by 7.1 percent compared to the same period last year.

The BOK report suggests that South Korea’s significant decline in exports to China is largely due to the slump in semiconductor exports. Due to the global decline in semiconductor demand and a sharp drop in memory chips prices, South Korea’s overall semiconductor exports in the first quarter of this year fell by 40 percent compared to the same period last year. In particular to China, South Korea’s semiconductor exports saw a decline of 31.7 percent in the fourth quarter of 2022 and 44.5 percent in the first quarter of this year.

Source: Central News Agency (Taiwan), April 30, 2023
https://www.cna.com.tw/news/acn/202304300200.aspx

Briefings | | |   Geo-Strategic Trend

Australia Announced Large-scale Military Reform

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that Australian Prime Minister Albanese released the final assessment of the Defense Report in the House of Parliament . In November last year, the Australian government decided to conduct a comprehensive evaluation of the  defense capabilities of the Australian military. The final results will be summarized into a new strategy that will help strengthen the national military-industrial complex and ensure that the military has the necessary defensive resources. The national defense strategy that once focused on territorial defense can no longer satisfy Australia’s ambitions. Looking at China from a distance, “Australia must deter potential enemies before they reach the coastline, whether it is at sea, in the air or on the Internet.” According to Australian Defense Minister Richard Marles, this is the first time in 35 years that Australia has redefined the mission of its military. The Defense Report identified the US-UK-Australia Trilateral Security Partnership (AUKUS) as a key priority which aims to help Australia acquire nuclear-powered submarines to strengthen its security and military deterrence in the Indo-Pacific region. The Report also laid out a large-scale reform of the Ministry of Defense and related agencies. It will be carried out in order to  plan the development of the military-industrial complex more accurately and systematically. Another priority is to increase long-range precision strike capabilities. The Australian Army will be the first to have missiles with a maximum range of 300 kilometers. Later it will reach the range of more than 500 kilometers through acquiring precision-guided missiles. The current Army missile range is only 40 kilometers. Australia will also strengthen cooperation with Japan, India and other Pacific and Southeast Asian countries. The Report mentioned China nine times, although the final public version did not list China as a direct military threat to Australia. The Report repeatedly cited China’s military spending and military actions as one of the reasons for Australia’s defense reform.

Source: Sina, April 25, 2023
https://news.sina.com.cn/c/2023-04-25/doc-imyrpwqv4527208.shtml

Briefings | | |   Geo-Strategic Trend