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Briefings - 14. page

CNA: China’s August PMI Shows Decline for Fourth Consecutive Month

Primary Taiwanese news agency Central News Agency (CNA) recently reported that the Chinese National Bureau of Statistics has announced August manufacturing purchasing managers’ index (PMI) figures. The PMI came in at 49.1 percent, down 0.3 percentage points from July. This marks the fourth consecutive month that China’s PMI has been below the 50-percent line. CNA commented that operating pressure on small and medium-sized enterprises has increased.

The PMI’s production sub-index and new order sub-index came in at 49.8 percent and 48.9 percent, respectively, down 0.3 and 0.4 percentage points from July. This indicates that both manufacturer production and market demand have slowed. The PMI of large enterprises remained in the expansion range, at 50.4 percent, a slight decrease of 0.1 percent from July. The PMI sub-indices for small-sized and medium-sized enterprises, on the other hand, were 48.7 percent and 46.4 percent, respectively, down 0.7 and 0.3 percentage points from July. This indicates that small and medium-sized enterprises have been under heavier pressure. In addition, the PMI’s price sub-index continued to fall due to insufficient demand as well as price fluctuations of bulk commodities like crude oil. With a weak housing market and sluggish household consumption, manufacturing has certainly been negatively impacted.

Source: CNA, August 31, 2024
https://www.cna.com.tw/news/acn/202408310064.aspx

Briefings | | |   Economy/Resources

Lianhe Zaobao: “Substitute” Goods Become Trend in China

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that exact, off-brand replicas of some of the world’s most famous fashion items are popping up in the wardrobes of Chinese consumers. The copycat goods range from clones of Lululemon yoga pants to Hermès handbags. They do not bear the branding of the products that they imitate and are much cheaper.

Manufacturers claim these “substitute products” are not “counterfeit” because their quality is comparable to that of the world’s top brands. For example, a herringbone coat from clothing manufacturer Chicjoc claims to use fabrics from the exact same sources as luxury brands Prada and Bottega Veneta, and their leather bags are said to be made of the very same materials as LVMH and Fendi.

As China’s economy slows, consumers continue to look for more cost-effective products and sales of such domestic “substitutes” have soared. According to Lianhe Zaobao, Chinese consumers are embracing a new era of consumption where luxury goods, which traditionally have symbolized social status, are no longer the only acceptable product. Consumers now “tend to shop rationally,” thus promoting the popularity of such “substitute” goods.

Jessica, a 45-year-old programmer at a financial institution, spent RMB 3,700 yuan (around US$522) on WeChat to buy a Hermès-like wallet that would sell for thousands of dollars if its likeness were purchased from a genuine Hermès counter. She said that the leather of the bag was soft and the stitching was exquisite. It “exceeded her expectation in every aspect” and she said she plans to buy more such products.

Source: Lianhe Zaobao, August 31, 2024
https://www.zaobao.com.sg/news/china/story20240831-4585205

Briefings | | |   Economy/Resources

Chinese Tech Giants Intensify Lobbying Efforts in Europe: Huawei and TikTok’s Growing Influence

According to LobbyControl, a non-government organization that monitors lobbying in Germany and other parts of Europe, China’s Huawei spends €3 million annually on lobbying in Brussels and has 12 full-time lobbyists in the EU. Their focus has been on gaining access to 5G network construction, especially in Germany. Huawei has also implemented “youth sponsorship and scholarship” programs to improve its image.

TikTok spends €1.25 million on lobbying in Brussels, employing five full-time lobbyists. In Germany, they spend about €200,000 and have three full-time representatives. TikTok has invested heavily in advertising and sponsorships to enhance its reputation.

Both companies are members of various professional associations in the EU and Germany, aiming to expand their influence. Relationships with think tanks and friendship associations also play crucial roles in their lobbying efforts.

LobbyControl concludes that Chinese tech companies are intensifying their lobbying efforts in the EU, creating complex networks that sometimes lack transparency. While not as aggressive as American tech companies, Chinese firms are becoming increasingly active and influential. They receive support from official institutions within China as well as from German industry.

The report predicts that more Chinese tech companies will enter the European market in the coming years, potentially leading to large-scale lobbying activities if EU policies conflict with their interests. LobbyControl pledges to monitor these developments and push for increased transparency and anti-corruption measures.

Source: Deutsche Welle, August 20, 2024
https://p.dw.com/p/4jgTv

Briefings | | |   Geo-Strategic Trend

German Investment in China Surges Despite Government Warnings

German direct investment in China has seen a significant uptick in 2023, defying the German government’s calls for economic diversification and reduced dependence on China. According to data from the German central bank, German direct investment in China reached €7.3 billion in the first half of 2023 alone, already surpassing the €6.5 billion recorded for the entire year of 2022.

This trend stands in stark contrast to the German government’s new China strategy which, due to geopolitical concerns, advocates for reduced reliance on the Asian economic powerhouse. German media analysis reveals a complex picture of motivations for and consequences following this investment surge.

Major German companies, particularly automakers like Volkswagen, appear to be disregarding government warnings about geopolitical risks. Many are adopting an “in China, for China” strategy, focusing on localizing production and supply chains to serve the Chinese market directly.
Interestingly, the bulk of these investments stem from profits earned within China, with relatively little new capital flowing from Germany. This suggests a self-reinforcing cycle of investments and returns within the Chinese market.

Some experts have expressed concern that German businesses may have not fully internalized the lessons of the Ukraine war and Germany’s previous overdependence on Russia. They warn of potential risks should China-Taiwan tensions escalate, risks which could have devastating consequences for companies heavily invested in China.

In explaining their increased investment, German firms cite China’s importance as a growth market. They argue that investing in China doesn’t necessarily mean abandoning operations in Germany. Critics contend that this strategy might ultimately benefit job creation in China more than in Germany. Domestic factors in Germany, such as high taxes, bureaucratic hurdles, and a growing shortage of skilled workers, are also pushing companies to look eastward for investment opportunities.

Source Radio France International, August 20, 2024
https://rfi.my/AtDa

Briefings | | |   Geo-Strategic Trend

Impoverished Beijing Graduate Starves to Death in Xi’an, Highlighting Social Inequality and Job Struggles in China

A widely circulated article on Chinese social media disclosed the story of a woman born in a poor, rural area, who graduated from a prestigious university in Beijing. She was not able to find a job, however, and she repeatedly took the public sector tests in Ningxia Hui Autonomous Region and achieved the highest possible score several times. Nevertheless, she was not hired due to lacking social connections. She eventually went to Xi’an City, Shaanxi Province, to seek employment. She rented an apartment but, due to a lack of money, she starved to death at the age of 33. Her body was discovered approximately 20 days after her death.

Source: Epoch Times, August 18, 2024
https://www.epochtimes.com/gb/24/8/18/n14313413.htm

Briefings | | |   Economy/Resources

Chinese Coast Guard Attacks Philippine Supply Ship in South China Sea Amid Rising Tensions

The Philippine government stated on August 25 that a Philippine Bureau of Fisheries ship was rammed and hit with a water-cannon by a Chinese coast guard vessel earlier that day while delivering food, fuel, and medical supplies to Filipino fishermen at Sabina Shoal in the South China Sea. While the Philippine supply ship sailed from Half Moon Shoal to Sabina Shoal, the Chinese vessels’ “dangerous maneuvers” caused the Philippine ship’s engine to fail, forcing it to abandon the supply mission.

In response, Gan Yu, a spokesperson for the China Coast Guard, issued a statement claiming that a Philippine vessel “illegally entered the waters near China’s Xianbin Reef in the Nansha Islands without permission from the Chinese government, and that the China Coast Guard took control measures according to the law.” The statement accused the Philippine vessel of “ignoring China’s stern warnings” and “deliberately colliding with the Chinese coast guard ship in an unprofessional and dangerous manner.” It stated that “responsibility [for the incident] lies entirely on the Philippine side.”

In April of this year, the Philippine Coast Guard accused Chinese vessels of dumping crushed coral on Sabina Shoal, a possible attempt at land reclamation. Since then, the Philippine Coast Guard has stationed one of its largest patrol ships at the shoal to monitor the area.

There have been several intense and dangerous confrontations between China and the Philippines in the South China Sea in August, including a confrontation between vessels near the Second Thomas Shoal; two Chinese military aircraft firing flares at a Philippine Air Force patrol plane over Scarborough Shoal on August 8, and a second occurrence of Chinese aircraft firing flares at a Philippine plane over the Subi Reef on August 22.

Source: VOA, August 25, 2024
https://www.voachinese.com/a/china-philippines-clash-in-south-china-sea-despite-efforts-to-rebuild-trust-20240825/7756250.html

Briefings | | |   Geo-Strategic Trend

Public Questions China’s New Housing Pension System, Suspects Disguised Property Tax Program

China’s Vice Minister of Housing and Urban-Rural Development, Dong Jianguo, stated at a press conference on August 23 that the government is studying the establishment of a system for building inspections, housing pensions, and housing insurance. Currently, 22 cities, including Shanghai, are conducting trials. He stated that, when purchasing a property, homeowners will have already set up a personal account for payment into a public “residential special maintenance fund.” The focus of the trial is for the government to establish such a fund.

Netizens have widely discussed this “Housing Pension System” topic, speculating that the system could be a disguised form of property tax. The official “Construction Magazine” WeChat account of the Ministry of Housing and Urban-Rural Development published an editorial on August 26 stating that Vice Minister Dong’s original statement regarding the new pilot program mentioned that “the focus of the trial is for the government to establish a public account,” and that this public account does not require contributions from the public.

Mainland Chinese netizens are not convinced, however. Some have questioned why there is a rush to raise additional funds as there is already a “residential special maintenance fund” in place.

Source: Epoch Times, August 24, 2024
https://www.epochtimes.com/gb/24/8/26/n14317935.htm

Briefings | | |   Economy/Resources Government/Politics

Chinese Restaurant Industry Faces Crisis: From “Golden Era” to Struggle for Survival

The Chinese restaurant industry is facing significant challenges. For example, Taiwanese dumpling chain restaurant Din Tai Fung will close 14 branches across several cities in China by October 31st. This decision has sparked widespread concern about the industry’s struggles since the pandemic.

China’s restaurant sector is experiencing a collective downturn, despite that fact that COVID-19 restrictions have now been lifted in China. In the first half of 2024, over a million Chinese restaurants closed, nearly doubling the figure seen in 2022. Many business owners have lost their investments and have been forced to exit the market.

Even large restaurant chains are struggling. Nayuki expects losses of 420-490 million yuan (US$59 – 69 million), Haidilao projects losses of at least 260 million yuan (US$36 million), and Luckin Coffee’s profits have dropped by 50% compared to last year.

The industry faces rising costs for taxes, social security, and wages, while prices and profits are declining. Most large restaurant companies are experiencing profit declines, with Xiabu Xiabu seeing the most significant drop – a 133-fold increase in net loss.

Luckin Coffee, despite opening thousands of new stores and increasing revenue by 38%, saw its net profit fall by 50%, illustrating the phenomenon of “increasing revenue but not increasing profit.”

As price wars continue, the Chinese restaurant industry has entered a low-profit era. The once “golden” market is no longer, and experts predict that the situation may become even more challenging in the future.

Source: Central News Agency (Taiwan), August 26, 2024
https://www.cna.com.tw/news/acn/202408260296.aspx

Briefings | | |   Economy/Resources