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Briefings - 27. page

TCL’s Trade Route Shift: Adapting to US Tariffs

TCL Chairman Li Dongsheng addressed the impact of US tariffs on Chinese products at the Summer Davos Forum in Dalian, China. He revealed that TCL has adapted its trade route to maintain sales in the US market, its largest export destination.

Previously, TCL purchased components from the US, manufactured in China, and exported back to the US. However, due to increased tariffs, TCL now buys chips and materials from the US, processes core components like displays in China, then ships semi-finished products to Vietnam, Mexico, and Indonesia for final assembly before exporting to the US.

This new multilateral trade route has maintained TCL’s US sales but has extended the process and increased costs, potentially contributing to US inflation issues.

Li emphasized the importance of balancing interests in economic globalization. He suggested Chinese companies should not only sell products overseas but also invest, create jobs, increase local tax revenue, support local supply chains, and cultivate local suppliers.

Li proposed that Chinese firms should shift from “exporting products” to “exporting industrial capacity,” enhancing awareness and responsibility for promoting local economic development.

Source: Central News Agency (Taiwan), June 25, 2024
https://www.cna.com.tw/news/acn/202406250380.aspx

Briefings | | |   US-China Relations

China-EU ‘Dragon Programme’ Enters New Phase: 20 Years of Earth Observation Cooperation

The 5th Dragon Programme summary seminar and 6th Programme (2024-2028) launch meeting, a scientific cooperation initiative between China’s Ministry of Science and Technology and the European Space Agency (ESA), opened in Lisbon, Portugal on June 24th.

Initiated in 2004, the Dragon Programme is a large-scale Earth observation research cooperation. From 2024, the China Science and Technology Exchange Center will manage the Chinese side of the project.

Both parties signed the 6th Dragon Programme cooperation agreement, covering 10 key areas including land, atmosphere, climate change, and big data. They will promote Earth observation data sharing and application development through collaborative research, academic exchanges, and talent training.

Chinese Ambassador to Portugal Zhao Bentang called the programme a model of China-EU scientific cooperation. Dai Gang from China’s Ministry of Science and Technology highlighted the programme’s achievements in fostering a stable joint research team and providing technological support for global challenges like climate change.

Gao Xiang, Director of China Science and Technology Exchange Center, noted the programme’s expansion in research fields, shared data sources, and participating scientists over its 20-year history.

ESA Director General Josef Aschbacher described the Dragon Programme as one of the longest-standing and most successful projects in EU-China cooperation, promoting in-depth exchange between scientists and advancing technological applications.

The five-day meeting will focus on Earth observation technology developments and satellite remote sensing applications in environmental protection and disaster prevention. Nearly 300 experts from China and Europe are attending.

Source: People’s Daily, June 26, 2024
http://paper.people.com.cn/rmrb/html/2024-06/26/nw.D110000renmrb_20240626_6-13.htm

Briefings | | |   Geo-Strategic Trend

China’s Venture Capital Crunch: Funding Decline Spurs Overseas Shift

China’s venture capital market is experiencing a sharp decline in investment funding. This downturn is attributed to global trends, such as rising U.S. interest rates, as well as specific factors like U.S.-China economic decoupling and a sluggish real estate market. As a result, some investors and entrepreneurs are shifting their focus to overseas markets like Japan.

The Hong Kong Stock Exchange recently celebrated a rare high-profile IPO by XtalPi, an AI-driven drug discovery company. However, despite efforts to attract innovative companies, Hong Kong’s IPO market is struggling, with predictions of falling to 10th place globally in the first half of 2024.

Venture capital investment in China dropped 66% in 2023 compared to its peak in 2021, with foreign investments declining by nearly 90%. This reflects the impact of U.S.-China tensions and increased U.S. scrutiny of investments in sensitive technologies.

Chinese startups are facing difficulties securing funding, with local government and private equity investments becoming scarce. Many are turning to tech giants like Tencent and Alibaba or seeking opportunities abroad.

The current situation is pushing both startups and investors to explore international markets. Japan, in particular, is attracting interest from Chinese entrepreneurs and tech talent. While China’s venture capital industry is not considered to be in decline due to its strong talent base and government support in strategic sectors, the ongoing shift towards overseas markets could reshape the future landscape of the industry.

Source: Nikkei Chinese, June 21, 2024
https://zh.cn.nikkei.com/columnviewpoint/column/55913-2024-06-21-05-00-06.html

Briefings | | |   Economy/Resources

Lianhe Zaobao: China’s Actual Use of Foreign Capital in the First Five Months Declined

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that China’s actual use of foreign capital fell 28.2 percent year-over-year in the first five months of this year, showing that the Chinese government still faces challenges in attracting overseas investment to boost the economy. Data just released by China’s Ministry of Commerce shows that, the actual use of foreign capital in the first four months fell by 27.9 percent year-over-year, and the decline in May further widened. The downward trend in China’s actual use of foreign capital began in June last year, reflecting a decline of 12 consecutive months. China’s business environment is unstable and economic growth prospects are bleak, with overseas capital inflows experiencing a historic decline. The continued decline in foreign direct investment shows that China is no longer attractive to foreign investors. Although foreign investors have not completely withdrawn investment in China, the number has become smaller and smaller. When Chinese Premier Li Qiang held an executive meeting of the State Council on February 23, he said that stabilizing foreign investment should be an important focus of economic work this year.

Source: Lianhe Zaobao, June 22, 2024
https://www.zaobao.com.sg/realtime/china/story20240622-3960937

Briefings | | |   Economy/Resources Geo-Strategic Trend

UDN: China Sanctioned Lockheed Martin Again

United Daily News (UDN), one of the primary Taiwanese news groups, recently reported that, after the United States sold a batch of F-16 fighter jet components to Taiwan, the Chinese Ministry of Foreign Affairs announced that it would take countermeasures against three senior executives of Lockheed Martin and three of its units. China has previously countered arms sales to Taiwan and has repeatedly sanctioned the U.S. arms dealer and its affiliated organizations. The Ministry stated that the United States has recently announced the sale of arms to Taiwan again, seriously interferes in China’s internal affairs, and seriously damages China’s sovereignty and territorial integrity. In accordance with the relevant provisions of China’s “Anti-Foreign Sanctions Law”, it was decided to impose sanctions on Lockheed Martin Missile System Integration Lab, Lockheed Martin Advanced Technology Laboratories, and Lockheed Martin Ventures. Also sanctioned were Lockheed Martin Chairman and CEO, COO as well as CFO. The U.S. Defense Security Cooperation Agency recently announced arms sales to Taiwan, with a total price of US$300 million, including standard spare and repair parts for F-16 fighter jets and related equipment. The F-16 is one of Lockheed Martin’s best-selling products.

Source: UDN, June 21, 2024
https://udn.com/news/story/7331/8046686

Briefings | | |   US-China Relations

Oriental Daily: Hong Kong Bankruptcy Petitions Surged by 35 Percent

Oriental Daily News, Hong Kong’s number one newspaper in circulation since 1976, recently reported that, although the Hong Kong government announced a complete withdrawal of the housing market, the decline in real estate prices has not stopped. Many Hong Kong residents’ assets have evaporated and they have fallen into the black hole of insolvency. Hong Kong’s Official Receiver’s Office just announced the latest bankruptcy and liquidation petition data for May. The number of bankruptcy petitions in May rose to 871, the highest in more than two years, an increase of more than 17 percent month-over-month, and a year-over-year surge of nearly 35 percent. In the first five months to May, a total of 3,797 bankruptcy petitions were filed, an increase of 25 percent from the same period last year. There were 61 compulsory liquidation petitions in May, up nearly 85 percent year-over-year. Experts pointed out that the unemployment rate in Hong Kong is currently at a low level, and the chance of bankruptcy due to unemployment is expected to be low. It is more likely that the increase in the number of bankruptcies may be related to the bank’s collection of loans. The borrowers went bankrupt due to temporary inability to repay.

Source: Oriental Daily, June 22, 2024
https://hk.on.cc/hk/bkn/cnt/news/20240622/bkn-20240622033026593-0622_00822_001.html

Briefings | | |   Economy/Resources

Discrepancies in China’s Trade Surplus Data with the U.S.

On June 20, the U.S. Treasury Department asked China to explain the discrepancy in its two sets of trade surplus data with the U.S.

Data reported by the Chinese customs office shows China’s trade surplus for 2023 being nearly $230 billion higher than the surplus reported by China’s State Administration of Foreign Exchange (SAFE). In prior years (going back to 2000), the average discrepancy between these two sources of trade surplus data was only $7 billion. The U.S. Treasury Department called on China to provide further quantitative evidence clarifying the issue.

One commentator on China affairs gave three possible explanations for the large discrepancy in 2023 trade surplus data:

  1. The Chinese customs office may have exaggerated the country’s export trade figures.
  2. A large number of export enterprises may have, in preparation for potential exit from China, kept their dollars overseas instead of taking them back to China (i.e. instead of converting them to RMB). This could have resulted in those businesses’ trade numbers being counted by the customs but not by SAFE.
  3. There may be an acceleration in people withdrawing money to flee China.

Sources:
1. Radio France Internationale, June 21, 2024
https://www.rfi.fr/cn/美国/20240621-美财政部吁中国提高汇率透明度-并澄清贸易顺差数据出现巨额落差
2. Epoch Times, June 22, 2024
https://www.epochtimes.com/gb/24/6/22/n14275135.htm

Briefings | | |   Economy/Resources US-China Relations

China Publishes Tough Law on ‘Taiwan Independence Elements,’ Including Death Penalty

On May 26, 2024, China’s Supreme People’s Court, Supreme People’s Procuratorate, Ministry of Public Security, Ministry of State Security, and Ministry of Justice jointly issued a document titled “Opinions on Lawfully Punishing Stubborn ‘Taiwan Independence’ Elements for Crimes of Splitting the State and Incitement of Splitting the State.”

The document defines ‘the crime of splitting the state’ as:

(1) Initiating or establishing “Taiwan Independence” separatist organizations, planning or formulating “Taiwan Independence” separatist action programs, plans, or schemes, or directing members of “Taiwan Independence” separatist organizations or other individuals to engage in activities that split the state or undermine national unity.

(2) Formulating, amending, interpreting, or repealing relevant regulations in the Taiwan region or through “referendums”, in attempt to change the legal status of Taiwan as part of China.

(3) Attempting to create “two Chinas,” “one China, one Taiwan,” or “Taiwan independence” in the international community by promoting Taiwan’s membership in international organizations whose members are limited to sovereign states or through official exchanges or military contacts.

(4) Abusing authority power to extensively distort or falsify the fact that Taiwan is part of China in the fields of education, culture, history, or news media, or suppressing parties, groups, or individuals that support the peaceful development of cross-strait relations and national unity.

(5) Other actions attempting to separate Taiwan from China.

It defines the principal offenders or those with particularly serious crimes shall be sentenced to life imprisonment or fixed-term imprisonment of more than ten years. Among them, those causing particularly serious harm to the state and the people, as well as those with particularly heinous circumstances, may be sentenced to death. Active participants shall be sentenced to fixed-term imprisonment of more than three years but less than ten years. Other participants shall be sentenced to fixed-term imprisonment of less than three years, detention, control, or deprivation of political rights.

Source: China Review News, June 21, 2024
https://bj.crntt.com/doc/1069/4/6/0/106946098.html?coluid=7&kindid=0&docid=106946098&mdate=0621155631

Briefings | | |   @CS Geo-Strategic Trend Government/Politics