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Briefings - 33. page

China’s Metro Systems Mired in Debt Despite Increasing Revenue and Government Subsidies

An analysis of 2023 financial reports from 29 Chinese cities’ metro companies revealed that all surveyed companies operated at a loss after government subsidies were deducted. The combined debt of these metro firms reached a staggering 4.3 trillion yuan (US$613 billion). Over the past four years, debt levels have risen annually across Chinese metro systems.

Media reports indicate that, while most metro operators saw revenue increases in 2023, many experienced profit declines despite rising government subsidies. In terms of revenue, Shenzhen Metro remained the nationwide leader, earning 25.15 billion yuan (US$3.59 billion) in 2023 – up 1.18 billion yuan (US$168 million) from the prior year. After subtracting 730 million yuan (US$104 million) in government subsidies, however, Shenzhen Metro posted a 180 million yuan (US$25.6 million) net loss.

Beijing Metro was among the most profitable in China, with a 2.4 billion yuan (US$342 million) net profit in 2023. However, it received a massive 25.34 billion yuan (US$3.61 billion) in government subsidies. After Beijing and Shenzhen, the Chinese metro companies with the highest net profits were those of Chengdu, Tianjin, Changchun, Qingdao, Ningbo, Nanjing, and Fuzhou. Of the 29 firms analyzed, 25 saw rising revenues but 17 suffered declining profits. Excluding subsidies, all posted a loss.

Fundamental drivers of ballooning metro debt include poor management, corruption scandals, and local officials pursuing “vanity projects” to boost their political credentials, leading to excessive subway construction and debt accumulation. These issues stem from systemic factors within China.

Source: Radio Free Asia, May 27, 2024
https://www.rfa.org/mandarin/yataibaodao/jingmao/ql-05272024000605.html

Briefings | | |   Economy/Resources

China Establishes $48 Billion Phase III National Semiconductor Fund

China has established a “Phase III National Semiconductor Fund” with a registered capital of 344 billion yuan ($48 billion) as part of efforts to build a national team for the semiconductor industry. The Ministry of Finance is the largest shareholder of the fund, with a 17.44% stake.

According to media reports, the National Integrated Circuit Industry Phase III Investment Fund Co., Ltd. was officially established on May 24th, with Zhang Xin as the legal representative. The company’s business scope includes private equity fund management, venture capital fund management services, equity investment, investment management, and asset management activities.

The fund’s other shareholders include state-owned policy banks, state-owned enterprises, and major commercial banks. The National Semiconductor Phase I and II Funds were established in 2014 and 2019 with registered capital of 98.72 billion yuan and 204.15 billion yuan, respectively.

Analysts suggest that, while the previous two funding phases focused on semiconductor equipment and materials, Phase III may prioritize investment in high-value products like High Bandwidth Memory (HBM) and advanced DRAM chips.

The establishment of national semiconductor funds reflects China’s long-term strategic plan to boost its semiconductor industry through substantial financial support, aiming to achieve self-sufficiency in critical technologies. The Chinese government appears committed to strengthening China’s semiconductor capabilities and reducing reliance on foreign suppliers.

Source: Central News Agency (Taiwan), May 27
https://www.cna.com.tw/news/acn/202405270165.aspx

Briefings | | |   Defense/Military

Exiled Writer Yuan Hongbing Reveals Chinese United Front Strategy Targeting Taiwan’s Legislature

In February, exiled Chinese writer Yuan Hongbing revealed that China aims to use the Kuomintang’s (KMT’s) influence in Taiwan’s legislature to advance its united front strategy, sparking a political storm. Yuan stated in an interview that the information came from a “princeling” (child of a Chinese revolutionary leader) whom Xi Jinping does not dare to challenge. The Chinese Communist Party (CCP) wants to turn the KMT into the vanguard force of the People’s Liberation Army to achieve unification of Taiwan with mainland China from within.

According to Yuan’s analysis, the CCP is not just using military intimidation to destabilize Taiwan; it is also using propaganda, deployment of agents, and expansion of the KMT’s legislative power to override the Taiwanese administration. Yuan said that the CCP wants the KMT to pave the way for Xi Jinping to fully occupy Taiwan, and that the recent military drills are aimed at supporting the CCP’s agents in Taiwan.

While some members of Taiwan’s Democratic Progressive Party may have been co-opted by Beijing, Yuan said that the party as a whole rejects CCP influence. This stands in contrast to the political attitude of the pro-China KMT party.

Yuan stated that the CCP’s Taiwan policy has shifted from coercion and enticement to psychological warfare, aiming to demoralize Taiwanese. He praised the peaceful protests outside the of Taiwan’s Legislature as social forces advocating for self-defense that could resist Beijing’s intimidation.

Yuan, a former Beijing University law professor, was exiled from China for supporting the 1989 pro-democracy movement.

Source: Central News Agency (Taiwan), May 24, 2024
https://www.cna.com.tw/news/acn/202405240174.aspx

Briefings | | |   Geo-Strategic Trend

TikTok Possibly Planning Layoffs

Well-known Chinese news site Sohu (NASDAQ: SOHU) recently published an article saying that “informed sources” have said TikTok is planning large-scale layoffs. Specifically, TikTok’s global user operations department is facing dissolution. “A large part” of the department’s 1,000 employees will be affected by the layoffs, and the remaining employees will be reallocated to content, products, marketing, and security departments. The reasons for these potential layoffs, as well as the specific number of employees to be let go, are currently unclear. TikTok has not yet responded to requests for comment.

Some employees already received termination notices as early as the evening of May 21. TikTok has rarely conducted large-scale layoffs in the past. The move is indicative of the company’s strategy in the face of huge pressures — it intends to cut operating costs and seek long-term strategic changes.

On April 23, the U.S. House of Representatives passed a bill requiring the TikTok platform to divest from its Chinese parent company ByteDance before a nine-month deadline. Failure to comply with this requirement will result in TikTok being banned from operating in the United States. The bill has been signed into law by President Biden. TikTok responded by calling the new law unconstitutional and filing a lawsuit in early May.

TikTok’s performance in the field of non-game applications was outstanding in 2023, with its in-app purchase revenue reaching US$4 billion, ranking first among non-game applications. TikTok’s lifetime cumulative revenue has exceeded the US$10 billion mark, with 80 percent of its revenue coming from the U.S. market.

Source: Sohu, May 23, 2024
https://m.sohu.com/a/780971157_656058

Briefings | | |   Information/Technology US-China Relations

Lianhe Zaobao: China Considers Raising Tariffs on U.S. and European Cars

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that, according to the European Chamber of Commerce in China, China may be considering raising temporary tariffs on imported cars from the United States and the European Union to up to 25 percent. This potential move would have implications for European and U.S. automakers. This news comes after the Biden administration increased tariffs on Chinese electric vehicles to 100 percent, and the EU is investigating the unfair advantages that Chinese automakers receive due to government subsidies.

Liu Bin, chief expert at the China Automotive Technology and Research Center, said in an interview that, according to World Trade Organization rules, China’s temporary tariff rate on imported cars can be raised to a maximum of 25 percent. The Chinese government tariff adjustments may cover imported gasoline cars and sports utility vehicles with engine displacements greater than 2.5 liters.

Amid price wars and a slowdown in China’s domestic economy, Chinese EV makers are expanding overseas, prompting accusations from the U.S. and EU countries that China is exporting excess EV production capacity. China’s auto exports have also raised Western concerns regarding the cybersecurity of China’s high-tech cars. In 2023, China imported 250,000 cars with engine displacements greater than 2.5 liters, accounting for approximately 32 percent of all imported cars. By comparison, China exported 1.55 million electric vehicles last year, according to Chinese customs data.

Source: Lianhe Zaobao, May 22, 2024
https://www.kzaobao.com/cngov/2024-05/22162313.html

Briefings | | |   Geo-Strategic Trend

Guangming Daily: The Importance of Training Legal Talents in Foreign Security Law

Chinese newspaper Guangming Daily recently published an article on the importance of training Chinese talent in foreign security law. The below is a partial translation of the article.

Foreign security (the security in other countries of the assets of a nation or of that nation’s companies) plays a vital role in [China’s] overall national security framework. With the increasing frequency of Chinese enterprises investing overseas, China possesses more and more assets abroad. Facing the turbulent international situation, we need to use legal tools to protect our country’s overseas interests. At the same time, certain Western countries have frequently imposed sanctions and caused interference, strengthened “export controls,” and promoted “decoupling” through a series of bills related to Taiwan, Hong Kong, and Xinjiang. This has challenged the bottom line of our national security and sovereignty.

Thus, the training of legal talents in foreign security law is critical.

Regarding the content of training, we need to enhance the ability to apply international rules. Through globalized curriculum teaching, academic exchanges abroad, etc., students should develop an international perspective and global strategic thinking. They should enhance their ability to propose valuable countermeasure suggestions regarding global security issues and foreign security affairs. We need to get our foreign security legal talents to actively participate in global governance as well as in the formulation of international rules via international organizations.

Regarding the training path, on the one hand, we need to cooperate on joint practical education platforms with international organizations, overseas institutions and companies, multinational corporations, foreign law firms, arbitration institutions, etc. We need to jointly develop core courses, and compile high-quality teaching materials. On the other hand, we need to accelerate the “bringing-in” of top-notch faculty from overseas and at the same time create opportunities to send more of our outstanding students abroad.

Source: Guangming Daily, May 11, 2024
https://news.gmw.cn/2024-05/11/content_37315947.htm

Briefings | | |   Economy/Resources Geo-Strategic Trend

China Reports Technology Breakthrough on Communication Within Drone Swarms

People’s Daily recently reported on a technological advancement in using light (rather than wireless communication) to convey information among drones within a drone swarm.

To achieve efficient collaborative work, drones in a cluster (or swarm) need to be able to “communicate” closely. However, current drone swarms rely mainly on wireless communication, which has obvious electromagnetic characteristics. This makes drone swarms easy to identify and susceptible to electromagnetic interference.

A research team at the Northwestern Polytechnical University reported a technological breakthrough by imitating the communication method of fireflies. They utilized lighting equipment on one drone to emit light signals and employed photodetectors on another drone to capture these signals and perform intelligent analysis. This enables collaborative flight among drones. The transmission of light signals is not affected by electromagnetic interference. Additionally, the energy requirement to emit light is low and generates almost no heat, making it suitable for small drones that have limited amounts of energy.

Source: People’s Daily, May 15, 2024
http://finance.people.com.cn/n1/2024/0515/c1004-40236280.html

Briefings | | |   Information/Technology

PLA Social Media Photo Reveals Taiwan Invasion Training Tactic

A photo posted on Weibo  by the Eastern Theater Command of the People’s Liberation Army (PLA) began circulating on the Internet around March 23rd. The photo showed the reunion of the 12 PLA model units of after a 60-year hiatus. A sharp-eyed netizen found that, in one corner of the photo, there was a sign for a “Juguang Taekwondo Gym (莒光跆拳道館).” It was a training site set at the “Gaolinshan Tactical Training Base” of the 72nd Group Army of the PLA in Jurong, Jiangsu Province. This site completely simulates Taiwan’s “Shangtian Juguang Taekwondo Gym” at No. 18, Section 4, Yangxin Road, Yangmei, Taoyuan. It reveals that the PLA has been conducting exercises with its elite forces to launch a surprise attack on Taiwan, occupying key areas in the Yangmei area for urban warfare and blocking the northward advancement of the Hukou armored division.

The Shangtian Juguang Taekwondo Gym is located at the intersection of County Road 115 and Township Road 81, controlling the bridge over the Shizi River. Less than 700 meters to the west, within the range of a machine gun, is the intersection of Provincial Highway 31 and County Road 115, with Provincial Highway 31 being a vital road built along the high-speed rail that connects Taoyuan and Hsinchu. It is also the critical route for tanks and armored vehicles heading north.

About 4 kilometers east of the gym, across the Yangmei urban area, there is an abandoned mountaintop camp. Retired General Li Zhengjie explained that occupying this high point would cut off National Highway 1, which is 1 kilometer further east. Following this pattern, the PLA’s intention seems to be to set up defense lines along County Road 114 and County Road 115, cutting off all traffic arteries from Yong’an Fishing Port to National Highway 3.

On the southern front is the Shizi River; by guarding the bridges across the Shizi River, the PLA could block the northward support of the Hukou armored brigade to Taoyuan Airport.

Source: Up Media (Taiwan), March 26, 2024

 

Briefings | | |   Defense/Military