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Briefings - 119. page

Over 5,700 Chinese Chip Companies Disappeared in 2022

Well-known Chinese news site Sina (NASDQ: SINA) recently reported that China’s “chip gold rush” is now showing signs that the tide is ebbing. Based on the latest statistics, in 2022, China revoked and cancelled the registration of 5,746 chip-related companies, far exceeding previous years. This represented an increase of 68 percent from 3,420 in 2021. Data further showed, in the four months from September to December last year, more than 2,300 chip companies were suspended or deregistered in China. This means that on average, more than 15 chip companies dropped out of the industry. With the U.S. Federal Reserve raising interest rates, inflation, the US-China decoupling, and the global semiconductor industry entering a downward cycle, it has been difficult for the domestic chip industry to remain untouched. The performance reports of the 49 domestic listed chip companies are seeing a year-over-year decline in net profit. These companies are suffering both on the performance side and on the side of the sale of stock prices. In addition, the United States continues to restrict semiconductor exports to China, which has also greatly affected the performance of the Chinese chip companies and industry confidence. China’s integrated circuit industry started and rose in the wave of globalization, and is accustomed to a global resource allocation. Now that the industrial development situation has changed, Chinese companies must adjust their strategies as soon as possible. The new mission is to find out how to reduce imports, increase local production, and strengthen the export of domestically produced chips while ensuring the safety of the supply chains. It is critical for China to form its own product family system and technical standards.

Source: Sina, February 16, 2023
https://cj.sina.com.cn/articles/view/2853016445/aa0d937d02000xqye

Briefings | | |   Information/Technology

Shanghai Lockdown Consequence: China’s Shipping Business Sank to the Bottom

Measured by the volume of goods shipped, China used to be the largest shipping country. It also had a large fleet of ships and sailors. However, its zero-COVID and lockdown policy has ruined this business completely.

On February 24, the Shanghai Shipping Exchange announced that the Shanghai export container price index was $946.68 per TEU (Twenty-foot Equivalent Unit), which has declined for 14 months, setting up the newest and latest low price since 2015. Online pictures showed that the Shanghai port has piled up a large number of empty, unwanted containers; so have the Shenzhen ports.

A veteran shipper said that China’s shipping is like a roller coaster ride. Right after the outbreak of COVID, the U.S. and Europe were trying to implement quarantines. The demand for China’s goods soared and the container price rose four or five times higher. However, since 2022, the U.S. and Europe returned to business as usual, but China has still been locking down, especially with the lockdown of Shanghai in April 2022. This dealt a fatal blowout to Chin’s shipping business.

Source: Radio Free Asia, February 27, 2023
https://www.rfa.org/cantonese/news/economy-02272023035140.html

Briefings | | |   Economy/Resources

Ex PBOC Chief Admits Deficiency of China’s Pension System

The former Governor of the People’s Bank of China, Zhou Xiaochuan, has acknowledged that China’s current pension system is facing challenges due to the country’s large and aging population. Zhou made these comments at the “5th Global Wealth Management Forum” hosted by Caijing Magazine on the 25th. According to Zhou, the expansion of the pension coverage in China has created a shortage of funds, making it difficult for the national pension arrangement to provide adequate coverage. He suggested that, in the future, personal pensions will play a crucial role in supplementing the national pension arrangement.

Zhou stated that China’s personal pension system is good in terms of social discussion, but the incentives are weak. The existing personal income tax has some flaws, as a large proportion of individuals in China do not fall within the scope of paying a personal income tax. Furthermore, Chinese enterprises are not anxious to cooperate with the personal pension system due to the high cost burden. This affects their competitiveness. Although the social security funds paid by Chinese enterprises have been adjusted down by 4 percentage points, at 16 percent, the rate of payment is still high, compared to the world.

Regarding the extension of the retirement age, Zhou believes that while there is room to extend the retirement age, it cannot be extended as many years as desired. This involves the average health level and productivity of the elderly, and companies must also take into account the costs involved.

Source: Central News Agency (Taiwan), February 26, 2023
https://www.cna.com.tw/news/acn/202302260106.aspx

Briefings | | |   Economy/Resources

Workers’ Daily: Promoting Young Elderly to Continue to Work to Benefit from the “Silver-Hair Dividends”

Worker’s Daily published an article to suggest getting the young elderly to continue working. “Young elderly” (低龄老年) refers to people who retired  at a  relatively younger age than others.

It recommends extending the retirement age. Currently China’s retirement age is 60 for male cadres and employees, 55 for female cadres, and 50 for female employees. The article didn’t give a specific age to which to extend the retirement age. Some other articles mentioned to extend it  to  65 years old for males and 60 years old for females.

The article describes this retirement age delay act as a benefit for the “silver-hair dividends” (银发红利).

Source: Sina, February 20, 2023
https://news.sina.com.cn/c/2023-02-20/doc-imyhiqcv5194805.shtml

Briefings | | |   Economy/Resources Government/Politics

China Announced that it Has Built 600 Million Buildings

China’s Ministry of Housing and Urban-Rural Development announced on February 15 that China has nearly 600 million buildings in cities and villages combined. The ministry spent 3 years and mobilized 5 million people (among whom 2.6 million are from the ministry itself), to cover all cities and all natural villages in China to get this result. The ministry has issued a digital ID to each building.

There are multiple interpretations of the 600 million number. One is that China’s housing is over-supplied. The authorities said 90 percent of the housing is from villages and only 10 percent are in cities. Assuming that is right and only 60 million buildings are in cities, and further assuming each urban housing has 16 units (4 floors and each floor has 4 units), that means China has 540 + 60 * 16 = 1500 million units or 1.5 billion units. China’s entire population is only 1.4 billion (without deducting the COVID deaths).

Another interpretation is that this housing census is to prepare the authorities to impose a real estate tax, as the government is running out of money.

Source: Epoch Times, February 24, 2023
https://www.epochtimes.com/gb/23/2/24/n13936935.htm

Briefings | | |   Economy/Resources

ZhouXiaochuan: China’s Pension System Lacks Funding

Zhou Xiaochuan, a former President of the People’s Bank, (China’s Central Banker), recently said that China’s pension system does not have enough funding. Zhou made that  statement on February 25, at the Fifth Global Wealth Management Forum. Zhou said that expansion of the coverage of China’s pension system and the aging trend make the current funding insufficient. The state managed funds can only provide rudimentary coverage. The gap needs to be covered by each person’s own individual retirement account (funded by that person himself).

Zhou said China’s pension fund reserve has a few trillion yuan. One can use the pension reserve as a percentage of the GDP to compare it with other countries. Many countries have a ratio between 50 and 100 percent. But China’s ratio is only 10 percent; some even say 6 percent, and some even say only 2 to 3 percent.

Source: Sina, February 25, 2023
https://finance.sina.cn/2023-02-25/detail-imyhxkkn8300424.d.html?oid=3933064046417508&vt=4&cid=76729&node_id=76729

 

Briefings | | |   Economy/Resources Government/Politics

Local Governments Consolidate Offices to Save Money

As local governments are running out of money, they have started to try creative ways to cut spending. One option is to shrink the government. In Loufan County, Shanxi Province, a pilot reform county in the province, announced that it will cut down the county-level Party offices from nine to six, county-level government offices from 26 to 16, and county-owned business units from 133 to 104.

In Heilongjiang province, Yichun city and Qiqihar city have started converting a Street Office (街道办事处) into a Township Office (镇). China differentiates people into urban dwellers and farmland dwellers, where the former enjoy many more benefits than the latter. Townships are usually set up for farmland residents, while the street offices are inside a city and thus their residents are urban dwellers. Therefore, local governments have decided to convert Township offices into Street offices, which will then enjoy better treatment (government spending) in the areas of education, healthcare, and culture events, etc. However, the recent actions of reverting Street Offices back to Townships indicates that local governments are low on population and therefore are consequently losing revenue (budget). For example, Yichun City lost 270,000 people between the 2010 census and the 2020 census.

Sources:
1. Sohu, February 3, 2023
https://www.sohu.com/a/636769105_12017948423
2. Sina, February 10, 2023
https://k.sina.com.cn/article_6863045962_19911c54a019010kxn.html?from=movie

Briefings | | |   Economy/Resources Government/Politics

New CSRC Regulations Restrict Chinese Companies Overseas Listings from Endangering National Security

The China Securities Regulatory Commission (CSRC) issued a new regulation for overseas listings of domestic companies which explicitly prohibits those overseas listings that may endanger national security and prohibits enterprises from leaking state secrets.

On March 17, CSRC’s official website released the “Trial Measures for the regulation of Overseas Listings and Securities Issuance for Domestic Enterprises,” with five guidelines,

The measures are to be implemented on March 31.

The “Trial Measures” specify that enterprises to be listed overseas should comply with the laws pertaining state secrets and should not disclose state secrets and secrets of state organs.

Companies cannot issue stocks outside China under five scenarios. First, the sectors that laws and regulations explicitly prohibit the listing or financing. Second, authorities under the State Council determine that listing abroad may endanger national security. Third, enterprises or their controlling shareholders or the actual controller are found to have committed corruption, bribery, misappropriation of property, or criminal offenses against the socialist market economic order within the last three years. Fourth, the enterprise is suspected of crimes or major violations of the law and is under investigation. Fifth, there is a major ownership dispute involving controlling shareholders or the actual controller.

The “Trial Measures” also mentioned that enterprises listing abroad should comply with national security laws regarding foreign investment, network security and data security, and “fulfill their obligations to safeguard national security.” “Enterprises should take measures such as timely rectification or divestment of assets in accordance with the requirements of the Chinese authorities to avoid impacting national security in their overseas listings.”

Source: Central News Agency (Taiwan), February 18, 2023
https://www.cna.com.tw/news/acn/202302180169.aspxT

Briefings | | |   Economy/Resources