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Global Times: Beijing Announces Strict Rules Regulating How Stock Holdings May be Reduced

Global Times recently reported that the China Securities Regulatory Commission issued “Interim Measures” for managing “Share Reductions by Shareholders of Listed Companies.” The purpose of the new rules is to strictly regulate the holding reduction behavior of major shareholders and to effectively prevent “detours” to holdings reductions. The Shanghai and Shenzhen stock exchanges released detailed sets of guidelines at the same time. {Editor’s note: These new restrictions by Beijing, which prevent stockholders from selling their shares under certain circumstances, may be motivated by a belief that these measures will help to prop up China’s stock market and economy.}

The new rules clarified the various circumstances under which shareholding reduction is prohibited. Controllers and controlling shareholders of listed companies are not allowed to reduce shareholdings through centralized bidding transactions or large-scale transactions when the shares are broken (i.e. when the stock price falls below the issue price on issuing day), netted (when the stock price falls below net asset value per share), or when dividends are not up to standard. Controllers, controlling shareholders, and persons acting in concert are not allowed to reduce their holdings within the corresponding period if the listed company is involved in violations of any laws or regulations. Disclosure obligations now include 15-trading-day-ahead disclosure requirement. Shareholding reduction plans should include the number and sources of shares to be reduced as well as the time range, price range, method, and reasons for the reduction, etc. The new rules also include restrictions on the reduction process as well as on major shareholder identity management. The China Securities Regulatory Commission also attempted to plug loopholes where shareholder reduction could happen following a refinancing or a company split-up (a divorce).

China’s benchmark CSI 300 index has lost more than a third of its value since 2020 and is now entering its fourth year of decline.

Source: Global Times, May 27, 2024
https://m.huanqiu.com/article/4Hxnqo39nyY

Briefings | | |   Economy/Resources Government/Politics

Wei Jingsheng: China’s Real Estate Problem Caused by System Issues of Planned Economy

Chinese dissident Wei Jingsheng shared his view on the causes of the current problems facing China’s real estate market.

In his view, the real estate crisis stems mainly from two factors. The first factor is that the government encouraged rapid, large-scale development, pursuing big GDP figures. The second, more alarming factor is China’s semi-market-economy system. Instead of embracing a full market economy, China uses government directives (rather than the economic data) to guide market activities. This is, in essence, a “planned economy” system.

Xi Jinping’s advisors have come up with two approaches to saving China’s economy, attempting to alleviate excess production capacity. The first approach is to shift the crisis outward, which means exporting surplus production capacity to the world. The U.S. is currently leading the resistance against this first approach. The second approach is to transfer the crisis onto the Chinese people – asking them to spend money on new houses or to replace/upgrade electric appliances.

Source: Radio Free Asia, May 24, 2024
https://www.rfa.org/mandarin/pinglun/weijingsheng/wjs-05242024075707.html

Briefings | | |   Economy/Resources Government/Politics

CCP Assigns Per-Province Quotas For Monetary Confiscation Under Anti-Corruption Campaign

On May 22, Du Wen, the former Executive Director of the Legal Advisory Office of the Inner Mongolia Autonomous Region Government, stated in an interview with The Epoch Times that the number of corrupt officials arrested under Xi Jinping’s anti-corruption campaign has increased significantly in recent years. Du, who now resides in Europe, stated that the increase in arrests is largely related to the authorities setting targets for the amount of embezzled funds to be recovered. “A former colleague from the Central Commission for Discipline Inspection said last year that Inner Mongolia was given a quota: to recover 10 billion yuan in 2023. At first, everyone wondered if it could be done. But Inner Mongolia completed the annual target within the first three months. By September, they had recovered 30 billion yuan.” Xi’s anti-corruption campaign was initially launched in 2012 following the conclusion of the CCP’s 18th national congress.

Chen Shimin, an associate professor of political science at National Taiwan University, believes the CCP’s quota for anti-corruption efforts across various provinces indicates a lack of funds affecting everything from the central government to the local level. “The fact that Inner Mongolia could recover 10 billion yuan in three months shows that corruption is very widespread. In recent years, local tax revenue has significantly decreased due to local debt and real estate issues. Naturally, the government is short on money and therefore is focusing on recovering embezzled funds.”

Source: Epoch Times, May 23, 2024
https://www.epochtimes.com/gb/24/5/22/n14255520.htm

Briefings | | |   Government/Politics

Chinese EV Executives’ Worries

In the first quarter of this year, the year-on-year growth rate of BYD’s electric vehicle (EV) exports exceeded 150 percent, reaching over 97,000 units. Some 15,700 vehicles were shipped to Brazil during the first quarter, accounting for 16 percent of total exports. There was also a surge of exports to Mexico, which may be attributed to concern over possible upcoming Mexican tariffs or sanctions following the possible election of Trump as U.S. President.

China’s accelerating EV exports triggered a bidding war on cargo shipping costs. The Shanghai Containerized Freight Index showed that, from late January to late April, the cost of shipping from China to the South American destinations, including Mexico and Brazil, rose by 55.8 percent. These rising shipping costs reflect the increased demand for shipping along those routes.

In contrast, during the same period, the freight index for shipments from China to Europe decreased by 31 percent. Possible factors contributing to the lower demand for shipping from China to Europe include the European Commission’s investigation into accusations of unfair subsidies in China’s EV industry as well as EU tariffs starting as early as July.

An executive from a major Chinese electric vehicle manufacturer stated that “We are not worried about the new tariffs the U.S. might impose on Chinese electric vehicles because we do not sell directly to the U.S. However, we are concerned about the signals [U.S. tariffs] sends to other countries, especially to U.S. allies.”

Source: China Times, May 19, 2024
https://www.chinatimes.com/realtimenews/20240519001718-260408?chdtv

Briefings | | |   Economy/Resources

Beijing Sanctions U.S. Defense Contractors and Congressman Mike Gallagher

On May 20, Taiwan’s new President Lai Ching-te was sworn into office. On the same day, Beijing announced sanctions against three American defense contractors: General Atomics Aeronautical Systems, General Dynamics Land Systems, and Boeing Defense, Space & Security, for their involvement in arms sales to Taiwan.

On the next day, Beijing announced sanctions against Republican Congressman Mike Gallagher, who served as the Chairman of the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party before resigning in April this year. The Chinese government said it will “freeze” Gallagher’s movable and immovable assets and other types of property within China; prohibit Chinese organizations and individuals from engaging in transactions, cooperation, or other activities with him; and deny him a visa and entry into China.

Gallagher, 40, has served as a federal congressman from Wisconsin since 2017. He is a staunch China hawk, having strongly condemned Beijing’s malign policies and practices, and having repeatedly expressed firm support for Taiwan. In February of this year, Gallagher led a delegation from the U.S. Congress to visit Taiwan, meeting with then-President Tsai Ing-wen and President-elect Lai Ching-te.

Source: VOA, May 21, 2024
https://www.voachinese.com/a/china-sanctions-ex-us-lawmaker-and-supporter-of-taiwan-20240521/7620716.html

Briefings | | |   @CS US-China Relations

Taiwanese President Responds to Forced Political Statements by Taiwanese Artists in China

{Below is a partial translation of an article by Voice of America (VOA) regarding a statement by Taiwanese President Lai Ching-te on the CCP’s coercion of artists into supporting unification of Taiwan with mainland China.}

After Taiwan’s newly elected President Lai Ching-te spoke about “mutual non-subordination across the Taiwan Strait” in his inauguration speech, the Chinese Communist Party (CCP) launched an exercise in military harassment. It also organized a round of propaganda campaigning, forcing Taiwanese artists to express on Chinese social media site Weibo that they support the CCP’s unification of Taiwan with mainland China and oppose Taiwanese independence. Many Taiwanese celebrities who are developing their careers in mainland China had to post content such as “Taiwan independence is a dead end” and “Taiwan will inevitably return (to the mainland).” Those who did not make such posts in time were named and shamed by the “fifty-cent army” or the Chinese public, facing the threat of the “iron fist of socialism.”

Facing this situation, Lai Ching-te made a rare public statement. He said that this was not the first time, and would likely not be the last time, that Taiwanese cultural workers have been forced to make political statements in China. He said that every time Taiwanese cultural workers face pressure under another’s roof, he feels very distressed. He expressed his hopes that the Taiwanese public would understand that what these cultural workers say under such circumstances is one thing and what they (really) think in their hearts is another thing. He said what they feel in their hearts is more important; they should be given understanding and empathy.

Lai Ching-te’s speech garnered praise from many mainland Chinese netizens who bypassed the firewall on the X platform and commented in simplified Chinese. Some said that the Taiwanese president’s statement immediately made them into fans, and some noted the stark contrast between democracy and autocracy. Some remarked that the current Taiwanese government not only has a high Emotional Quotient (EQ) but also high Intelligence Quotient (IQ), making Beijing’s actions look petty in comparison. Some even praised Lai Ching-te’s move as a masterstroke, leaving the CCP unable to respond.

Source: VOA, May 26, 2024
https://www.voachinese.com/a/china-pressuring-taiwanese-entertainers-into-making-political-statements-20240526/7627359.html

Briefings | | |   Geo-Strategic Trend Government/Politics

Chinese Author: Foxconn’s Departure Greatly Impacts Henan Province

An article posted on Chinese social media portal QQ warned that Foxconn’s departure from China has caused big economic damage to Zhengzhou and Henan, its hosting city and province. Foxconn is headquartered in Taiwan.

Located in Zhengzhou, Henan Province, Foxconn is a major Original Equipment Manufacturer (OEM) for Apple phones. It is Henan’s largest export enterprise. Foxconn has been cutting back on production and exports since 2023. In 2023, Henan province’s phone export decreased by 14.5 percent to 57.61 million units. In the first quarter of 2024, it dropped to only 6.64 million, from the 16.88 million in the same period a year ago.

Foxconn is the backbone of Henan’s economy. In 2023, the import and export volume at the Zhengzhou economic zone, where Foxconn is located, was 407.3 billion yuan (US$ 56.13 billion), accounting for 74 percent of Zhengzhou’s imports and exports and 50.3 percent of Henan’s imports and exports. In the first quarter of this year, Foxconn’s imports and exports decreased by 44.1 percent, dragging down Henan’s foreign trade growth by 23.5 percent.

Since Foxconn came to Zhengzhou in 2010, over 200 upstream and downstream supporting enterprises have followed suit and settled in Henan. Henan’s electronic industry quickly scaled up, and the overall scale of Zhengzhou’s electronic industry grew 25 times. Take Zhengzhou Airport Economic Zone as an example. The GDP of Zhengzhou Airport Economic Zone was only 20.6 billion yuan in 2010. It reached 117.2 billion yuan by 2021. At its peak, Foxconn contributed up to 25% to Zhengzhou’s GDP.

Undoubtedly, Foxconn’s departure will have a major economic impact on Henan. A logic solution is to bring in alternative industries, such as the booming electric vehicle (EV). However, can the EV industry replace everything? With common sense, people know that, no matter how large the EV industry becomes or how promising its future is, it absolutely cannot replace the real estate industry and the mobile phone industry simultaneously.

Source: QQ, May 20, 2024
https://new.qq.com/rain/a/20240520A03Y7H00

Briefings | | |   Economy/Resources Geo-Strategic Trend

Xinhua: China Launches Anti-Dumping Investigation Into Chemical Products From The West

Xinhua recently reported that the Chinese Ministry of Commerce has announced an anti-dumping investigation into imports of copolymer polyoxymethylene originating from the European Union, the United States, Taiwan and Japan. Chinese manufacturers in the copolymer polyoxymethylene industry have officially submitted an anti-dumping investigation application.

According to Xinhua, copolymer polyoxymethylene has good comprehensive mechanical characteristics such as high mechanical strength, fatigue resistance, and creep resistance. It can partially replace metal materials such as copper, zinc, tin, and lead. It can either be used directly or after modification, with applications in auto parts, electronic appliances, industrial machinery, daily necessities, sports equipment, medical equipment, pipe fittings, construction materials and other fields.

Deutsche Welle (DW) Chinese Edition reported that the Chinese anti-dumping investigation will last for one year and might be extended for another 6 months after that “under special circumstances.” Industry analysts expressed the belief that this Chinese government’s investigation is a countermeasure against Western countries’ recent intensification of crackdowns on Chinese electric vehicles and other products. China’s polyformaldehyde production capacity is 590,000 tons/year. Most of this capacity is low-end output. In recent years, China has typically needed to import over 300,000 tons of polyformaldehyde annually, with a large portion of imports being used in the high value-added auto parts industry as well as the high-end electronic and electrical industries.

Sources:
(1) Xinhua, May 19, 2024
http://www.xinhuanet.com/fortune/20240519/7a3f2ddecc404265b18569cb1e0ed119/c.html

(2) DW Chinese, May 19, 2024
https://p.dw.com/p/4g2r7

Briefings | | |   Geo-Strategic Trend