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South Korean Scholar: Chinese Foreign Ministry Official Tells South Korea “Who Is the Boss”

Liu Jinsong (刘劲松), China’s Director-General of the Department of Asian Affairs within the Ministry of Foreign Affairs, visited Seoul in late May. China’s state media only reported that Liu conveyed China’s “stern” position to Korea and did not go into the details of the visit. Choo Jae-woo, a professor at Kyung Hee University in South Korea, wrote to The Korea Times that Liu enumerated “Four Not-allowed” positions to demonstrate to South Korea “who is the boss.” China’s “Four Not-Allowed” positions are:

  1. China will not cooperate with South Korea if it infringes on China’s core interests (e.g., the Taiwan issue);
  2. China will not cooperate with South Korea if it moves toward a pro-U.S. and pro-Japan foreign policy;
  3. China will not engage in high-level exchanges (e.g., Xi Jinping’s state visit to South Korea) if relations between the two countries remain tense; and
  4. South Korea will not be able to play a leading role on the North Korea issue if the situation deteriorates.

Mao Ning, China’s Foreign Affairs Ministry Spokesperson, responded to a question on Liu’s visit at a press conference: “Regarding the current difficulties and challenges in Sino-South Korean relations, responsibility [for the difficulties] does not lie on China’s side. In the recent dialogue, China has expressed its stern position on its core issues to the Korean side. The Korean side should understand the problems in depth and treat them carefully, walk in the same direction that China takes, and put in positive efforts to enhance Sino-South Korean relations.”

Sources:
1. Sina, May 31, 2023
https://news.sina.cn/2023-05-31/detail-imyvscth0982061.d.html?cre=tianyi&mod=wpage&loc=12&r=0&rfunc=78&tj=cxvideo_wpage&tr=214&wm=6090
2. Epoch Times, June 6, 2023
https://cn.epochtimes.com/gb/23/6/5/n14010574.htm

Briefings | | |   @CS Geo-Strategic Trend

Guangxi Plans Investment Management Measures to Shield Government from SOE Liabilities

China’s Guangxi Zhuang Autonomous Region circulated a document titled, “Guangxi Zhuang Autonomous Region Investment Management Measures” for public review and opinion. The review period is June 5 to June 16. The proposed measures would exclude the government from taking on the liabilities of state-owned enterprises (SOE’s). This may indicate that the government no longer has the resources to cover SOE debt.

Article 15 of the measure states:

…

SOE’s and state-controlled enterprises should follow the principle of prudence in external investment and financing, strictly control the asset-liability ratio, and not take on too much debt. … When doing debt financing, they should declare that they do not carry government financing functions, that the debt raised is for corporate use, and that the local government does not assume responsibility for the debt. …

Money which is raised from the market by SOE’s and which results in debt but which lacks (needed) continuous funding or … results from decision-making errors, are the responsibility of the SOE’s to handle. Following the principle of “who raised the debt is responsible for the debt;” the government does not assume any responsibility for debt repayment.”

Source: Guangxi Government Site, June 4, 2023
http://fgw.gxzf.gov.cn/hdjl/yjzj/opinionDetail.shtml?opinionid=6116

Briefings | | |   Economy/Resources Government/Politics

Scholar Discusses Distortion of Chinese Unemployment Statistics

As China’s economy continues to decline, the unemployment rate has been steadily rising. Recently, a Chinese scholar pointed out that the official unemployment statistics are distorted, and it is estimated that around 54 million young people have become unemployed since the outbreak of the pandemic, making the employment situation increasingly severe.

Amidst the ongoing pandemic, China’s economy has faced sluggishness, leading to unemployment becoming a pressing social concern. On June 1, a researcher from the Beijing Reform and Development Research Institute, a government think tank, shed light on three primary issues with China’s current unemployment statistics.

Firstly, the scholar highlighted that China’s official employment standards are set too low. China considers individuals employed if they work for just one hour per week. Meanwhile, the International Labour Organization defines employment as working for at least 10 hours per week, and the United States and France have higher thresholds at 15 and 20 hours per week, respectively.

Secondly, the inclusion of rural household registration holders in urban unemployment statistics skews the data. Many migrant workers, facing the high cost of living, are compelled to return to their hometowns after losing their jobs in cities. This migration makes it challenging to accurately capture this group in urban unemployment surveys, resulting in distorted data.

Thirdly, China has a significant number of “flexible employees” (people who work on flexible work and hours, such as Uber driver or food delivery), totaling 200 million, which accounts for roughly 40% of the urban employed population. However, less than 20% of this group participates in social security programs, making it difficult to assess the true employment situation using indicators such as unemployment benefits and registration.

According to the Ministry of Human Resources and Social Security’s latest data, the number of college graduates in China is expected to reach a record high of 11.58 million in 2023.

According to the analysis presented in the aforementioned WeChat article, after three years of the pandemic, approximately 15 million vocational school and college graduates in China are unable to find jobs. Additionally, the average number of employees in A-share listed companies has decreased by 11.9% over the past three years, indicating that around 10% of employees have become unemployed. The estimated number of employed youth aged 16 to 24 is approximately 25 million. Professor Lu Feng from Peking University estimates that around 23 million migrant workers have returned to their hometowns due to unemployment during the same period. Considering that 60% of this group are young people, there would be around 14 million unemployed young migrant workers. Consequently, “since the outbreak of the pandemic, the number of unemployed young people has increased by approximately 54 million.”

The article conservatively estimates that the absolute number of unemployed youth in China has increased by around 25-30 million compared to the pre-pandemic period. This figure accounts for approximately 6.2% – 7.5% of the total labor force in this age group or 2.8% – 3.4% of the entire working-age population in China.

Source: Radio Free Asia, June 6, 2023
https://www.rfa.org/mandarin/yataibaodao/jingmao/jw2-06062023132743.html

Briefings | | |   Economy/Resources

China’s First-Child Birthrate Drops to 0.5

From 2019 to 2022, China experienced a significant decline in its fertility rate for first children, dropping from 0.7 to 0.5. This decline has raised concerns among population experts, who are now urging attention be paid to the growing trend of lifelong singleness and childlessness. Chinese authorities had previously estimated that the total number of newborns in China last year fell below 10 million for the first time and it is expected to continue declining this year, dropping below 8 million.

The internationally recognized replacement level fertility rate is 1.5, which is considered a critical threshold. When the fertility rate falls below 1.5, a country enters a low fertility trap. The Population and Development Research Center of China, a government think tank, has observed that China’s total fertility rate dropped from 1.52 in 2019 to 1.07 in 2022.

Of particular concern is the decline in the fertility rate for first-child births, which has decreased from 0.7 to 0.5. Additionally, the average age of first-time mothers has increased from 26.4 to 27.4 years old. This decline in the first-child fertility is expected to further reduce the rates of second and third-child births, exacerbating the overall downward trend in fertility levels.

A recent article published by the magazine Chinese Philanthropist estimated that the latest maternal records in Chinese hospitals suggest that the number of newborns this year will be less than 8 million. Some doctors have even estimated that the number of registered pregnant women has decreased by one-third compared to previous years.

An online article highlights the seriousness of a mere 8 million new births. With a total of 3,032 obstetrics and gynecology hospitals in China, an average of only 7 newborns per hospital per day is far from normal. This situation may lead to a crisis in the entire industry, from childbirth to childcare, as it puts immense strain on resources and facilities.

Source: Central News Agency (Taiwan), June 6, 2023
https://www.cna.com.tw/news/acn/202306060108.aspx

Briefings | | |   Economy/Resources

Chinese Local Government Debts Crisis Continues

Local governments in China are grappling with significant financial pressure and are implementing measures to increase revenue and expedite debt collection.

In late May, the city government of Wuhan in Hubei Province issued a debt collection notice, demanding repayment of over 100 million yuan (US$14 million) in debt from 259 debtors, including state-owned enterprises and lower-level fiscal authorities in Wuhan. Around the same time, Kunming in Yunnan Province also reported debt problems with the city’s platform for financing infrastructure projects, which has 27.31 billion yuan (US$3.8 billion) of bonds maturing before the end of this year.

Furthermore, county-level governments in central and western China are actively auctioning off parking lot operating rights many years into the future so that they can get a large one-time payment now (at the cost of not receiving parking income in subsequent years). Companies that win the parking operator’s rights might impose higher parking fees to recoup costs and make money. Nanning City, Guangxi Zhuang Autonomous Region, is under public scrutiny for high parking fees.

Official data reveals that, as of the end of 2022, the balance of local government debt in China stood at approximately 35.07 trillion yuan (US$4.9 trillion).

He Qinglian, an economist living in exile in the United States, recently told Radio Free Asia that the financial strain at the local level could directly impact China’s moderate 5% economic growth target for this year. Local governments that are unable to repay their debts will face potential collapse of local financing platforms and credit defaults.

Source: Central News Agency (Taiwan), June 5, 2023
https://www.cna.com.tw/news/acn/202306050309.aspx

Briefings | | |   Economy/Resources

Chinese Automobile Industry Under High Downward Pressure

Currently, China’s main strategy to boost its economy is to increase domestic consumption, with housing and automobiles being the two main drivers. However, a recent report on the well-known Chinese news site Sina painted a dismal picture of the country’s auto industry.

The report covered the newly published 2023 ranking of China’s Top 100 Auto Dealer Groups. It also included a 2022 report pointing out that China’s auto market is facing big changes. Auto dealer groups are facing the pressure of both transformation and the impact of channel changes. The 2022 report shows that the dealers’ annual profitability was disappointing due to factors including COVID, the decline in demand for transportation, loss of talent, and increased customer acquisition costs. Among all dealers, only 29.7 percent made a profit. This was almost half of the number when compared with the 53.8 percent which profited in 2021. Dealers suffering losses accounted for 45.2 percent, an increase of 27.7 percentage points compared to 2021. Only 25 percent of dealers broke even and three percent suffered a decrease when compared to a year ago. According to the 2022 financial report, out of 11 publicly listed dealer groups, only three have achieved a positive growth in revenue, only two had a positive growth in profit, and only one had both revenue and net profit growth. The downward pressure on the auto market is still great, and the signs of recovery have not yet appeared. Sluggish consumer spending has been the biggest sourced of downward pressure in the auto market. As for new energy automobiles, although the market size continues to grow, most new energy car companies are selling at a loss.

Source: Sina, May 29, 2023
https://finance.sina.com.cn/tech/roll/2023-05-29/doc-imyvnaav5155518.shtml

Briefings | | |   Economy/Resources

BBC Chinese: Mainland Poll on Taiwan Militarily Reunification

BBC Chinese recently reported that the well-known periodical Journal of Contemporary China published the results of a poll of nearly 1,800 Mainland Chinese citizens regarding the military reunification of Taiwan. According to the poll results, 55 percent of respondents expressed support for Beijing’s military reunification of Taiwan and 33 percent disagreed with the use of force. Only 1 percent expressed their desire to launch a war against Taiwan immediately. Studies of Mainland people’s views on cross-Taiwan-Strait issues, due to the political sensitivity of the topic, have been rare. The most important finding of this latest poll was that people in Mainland China are relatively willing to consider different means to solve the Taiwan issue besides military force.

The results of the study show that the military approach did not enjoy overwhelming support among the respondents. At the moment when the situation across the Taiwan Strait is tense and the relationship between the United States and China is not harmonious, the poll has aroused attention.

Some observers outside of China have raised some concern over the results of the survey. Consider that 55 percent, more than half of the respondents, support military action against Taiwan. Thus, even if China were to suddenly become a democracy, Taiwan might still be under threat. It is surprising that 22 percent of the respondents agreed that the two sides of the Taiwan Strait do not necessarily need to be unified. The poll also found that older, male, and highly educated respondents were more supportive of the use of drastic measures, including the military. This Research poll was conducted via an online opt-in panel. The sample respondents were from all across mainland China, ranging across different ages, incomes and genders. The survey was conducted between the end of 2020 and the beginning of 2021. A total of more than 2,000 questionnaires were collected.

Source: BBC Chinese, May 30, 2023
https://www.bbc.com/zhongwen/simp/chinese-news-65745337ight

Briefings | | |   Defense/Military Geo-Strategic Trend

Chinese Manufacturing PMI Continues Decline in May

Xinhua recently reported that the Chinese National Bureau of Statistics and the China Federation of Logistics and Purchasing jointly released China’s May Manufacturing Purchasing Managers Index (PMI) data. PMI is an indicator of financial activity reflecting purchasing managers’ acquisition of goods and services. A PMI number below 50 percent typically reflects business contraction.

The May manufacturing PMI was 48.8 percent, down 0.4 percentage point from the previous month. Statistics show that both production and demand have slowed down. In May, the production index and new order index were 49.6 percent and 48.3 percent respectively, down 0.6 and 0.5 percentage point from the previous month. Chinese market demand for manufacturing is still short, and the release of production capacity is restrained. The raw material inventory index was 47.6 percent, a decrease of 0.3 percentage points from April, showing continued decline in the manufacturing industry’s main raw material inventory. The employment index was 48.4 percent, a decrease of 0.4 percentage point from April, indicating the end of the post-COVID employment boom in manufacturing enterprises. The PMI of large enterprises was 50 percent, 0.7 percentage point higher than the previous month. However, the PMIs of medium and small enterprises were 47.6 percent and 47.9 percent respectively, down 1.6 and 1.1 percentage points from the previous month — the prosperity of small and medium-sized enterprises was still weak.

Sources:
(1) Xinhua, May 31, 2023
http://www.news.cn/fortune/2023-05/31/c_1129658686.htm
(2) Chinese National Bureau of Statistics, May 31, 2023
http://www.stats.gov.cn/sj/zxfb/202305/t20230531_1940267.html

Briefings | | |   Economy/Resources