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Briefings - 76. page

Chinese Companies Stocked Up as US Chip Export Controls Tighten

On October 17th the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued an announcement expanding the scope of controls on the export of advanced computer chips to China. This action directly affects semiconductor giant NVIDIA’s sale of “special edition” A800 and H800 chips to China and other regions. The expanded export controls also restricts Dutch ASML from exporting certain machine models to China. Additionally, it added Chinese companies Biren Technology and Moore Thread and their subsidiaries to the “Entity List” to restrict export to them.

Many Chinese Artificial Intelligence (AI) startups have already acted to stock up on chips prior to the ban. Through various channels such as service providers, middlemen, and foreign trade agents, these Chinese companies are trying to prevent their previous orders from being cancelled while exploring avenues for obtaining additional chips in the short term.

Market research firm Counterpoint estimated that Chinese companies are now lagging behind global counterparts by about 2.5 to 3 years in fields like generative AI. According to Counterpoint, chip acquisition is not the sole factor driving this lag. The gap between China and its global counterparts is expected to widen over the next few years.

Source: Central News Agency (Taiwan), October 23, 2023
https://www.cna.com.tw/news/acn/202310230203.aspx

Briefings | | |   Economy/Resources US-China Relations

Eighteen Provinces Issue Special Bonds Totaling 840.4 Billion Yuan Over Seventeen Days

China’s provincial governments have accelerated issuance of special refinancing bonds since the beginning of October. These special refinancing bonds are used to repay existing debt, including settlement of government arrears to businesses. Beijing gave the green light to issuance of such bonds so as to mitigate risks associated with local government debt.

On October 9th, Inner Mongolia became the first province to issue special bonds this year. According to local disclosure records regarding special bond issuance, the total issuance of local special bonds reached approximately 840.4 billion yuan (US$ 115 billion) within 17 days. Yunnan, Inner Mongolia, and Liaoning are the top three issuing provinces, with each issuing over 100 billion yuan in special bonds.

During the three years leading up to this wave of special bond issuance, there were two prior waves of special bond issuance by local governments. Both prior waves were longer in duration than the most recent 17-day wave. The first wave occurred over 10 months and amounted to about 627.8 billion yuan and the second one, 9 months in duration, totaled 504.2 billion yuan of issuance.

Source: Security Times (China), October 19, 2023
http://www.stcn.com/article/detail/1008629.html

Briefings | | |   Economy/Resources Government/Politics

Local Government Positions for Chinese Officials’ Children Educated Abroad?

Recently, many local governments have announced government positions hiring Chinese students who obtained degrees from certain qualifying foreign universities. For example, Beijing will selectively hire individuals who have obtained degrees between August 1, 2022, and July 31, 2024 from overseas universities ranked within the top 100 in the world (based on the 2023 Academic Ranking of World Universities by ShanghaiRanking).

Chinese college graduates have been facing a tough job market for years. Moreover, many local governments have struggled to pay their employees on time as they face big fiscal deficits. Chinese netizens have charged that these new government positions are intended to provide jobs to officials’ children who have studied overseas and then returned to China.

Source: Aboluo, October 22, 2023
https://www.aboluowang.com/2023/1022/1968901.html

Briefings | | |   Economy/Resources Government/Politics

Opinion: Chinese Youth Have No Opinions, They Just Follow CCTV Ideology

A a post on Chinese website Zhihu argued that Chinese youth do not have opinions of their own; their opinions are solely based on what the Chinese Communist Party’s mouthpiece China Central Television (CCTV) has taught them. The posting was removed by internet censors. The following translation is based on a copy of the post published to Twitter:

In the Russia-Ukraine War, why do most Chinese people support Russia? In the Israel-Hamas conflict, why do most support Hamas? In pandemic control, why did most people support the zero-COVID approach? The conclusion is the same in all cases: most people are “the New Youth” or “the CCTV Youth.” They believe whatever is said on CCTV. In reality, they don’t [really] support Russia, Palestine, or the zero-COVID approach; they’re simply supporting the CCTV’s news broadcast.

[Back in 2022] these people supported the zero-COVID policy and even had a full-scale online fight against those who suggested alternatives such as “coexistence with the virus.” But when CCTV announced that zero-COVID controls would be lifted and society would open up, what happened? Nothing! The zero-COVID policy supporters held no protests, they did not argue in favor of the policy, and they did not have any inclination to fight for it. There was no resistance at all. Those people did not dare to have an opinion [different from what was on CCTV]. So, in reality, China does not have pro-Russia camp, a pro-Hamas camp, or a zero-COVID camp; these positions are all temporary. The only dominant camp is the “CCTV Youth” camp.

Source: Twitter @zhanglifan, October 22, 2023

Briefings | | |   @CS Geo-Strategic Trend

China Alienates Israel: Picking Sides by Bloc, Not by Country-Level Relationship

Zhang Ping, a Chinese scholar living in Israel, posted a tweet on X about why China has chosen not to condemn Hamas, alienating Israel following the start of the Israel-Hamas war. China made this decision despite good relations between Israel and China in the past.

Zhang Ping said that the world’s nations are now bifurcating into two blocs: the China-Russia-Iran camp, and the opposing camp led by the U.S. and its allies (including Israel). This bloc-based logic is now guiding China’s strategy for international relations.

In the past, China’s modus operandi was something like “which camp you belong to doesn’t matter; what matters is whether our relationship is good.” Recently, however, China’s operating principle has changed to “our relationship does not matter; what matters is which camp you belong to.” According to Zhang Ping, this shift in attitude started during the Russia-Ukraine War and has further developed during the recent Israel-Hamas war. Both Israel and Ukraine had good relations with China in the past. However, once conflicts arose, China chose to use bloc membership as its guiding principle, being unwilling to support either Ukraine or Israel.

During the time of globalization prior to these recent wars, individual relationships between countries held more weight [in Beijing’s eyes] than did bloc allegiances. This enabled countries, including Israel and Australia, to engage with China despite their being U.S. allies. Both Israel and Australia provided strategic port access to the Chinese, with Israel even allowing China a certain amount of control over two of its largest strategic ports in Haifa and Ashdod. Now, however, China will not support these countries no matter how good their past relations have been, as they belong to the Western camp rather than the Chinese camp. Meanwhile, European nations relied on Russia for their energy needs in the past, whereas the West has unified against Russia following the Russian invasion of Ukraine in 2022.

Source: Twitter @pingzhang632, Oct 17, 2023

Briefings | | |   @CS Geo-Strategic Trend US-China Relations

PLA Daily: “Don’t Rely Too Much on High-tech Equipment”

People’s Liberation Army Daily (PLA Daily), the official mouthpiece of the Chinese military has published an opinion article titled “Don’t rely too much on high-tech equipment.” The article, published on October 24 follows the imposition of U.S.-led computer chip sanctions aimed at curbing China’s ability to build out its military force.

The article states “[we should] avoid breeding arrogance through over-reliance (on weapons and equipment). As Engels said, guns do not move on their own; it takes a brave heart and strong hands to use them.” It goes on to say, “Throughout the history of human warfare, the well-equipped army is not always victorious, and the technologically advanced party may not be the ultimate winner of the war. If an army relies too much on advanced technology and excellent equipment to the neglect of physical exercise and the training of fighting spirit, it is easy to breed ‘arrogance’ and ‘squeamishness’. This leads to lack of aggressiveness and combat effectiveness under harsh combat conditions.”

The article says that, during “the War to Resist US Aggression and Aid Korea” (i.e. the Korean War), a captured American company commander said “the U.S. Army troops pay far too much attention to weapons and equipment to the serious neglect of combat strategies, tactics, and the will power of officers and soldiers. This may be the reason why we were often defeated by the Chinese People’s Volunteers (CPV) army”.

The article concludes with the following remark: “In the battlefield of the future, even while in possession of high-tech equipment that can compete with the strongest of enemies, we cannot neglect to sharpen our spirit. Just as it is important to upgrade our weapons and equipment, we should also strengthen the fighting spirit of our officers and soldiers — to have no fear of suffering and death.”

Source: ifeng.com (Phoenix), October 24, 2023
https://news.ifeng.com/c/8U8Vv1CGXMh

Briefings | | |   Defense/Military

Chinese Authorities Detain Employee of Japanese Rare Metal Company

Chinese authorities have detained two Chinese nationals, one of whom was employed by Nippon Kinzoku, a Japanese metal trading company. The other detainee worked for a Chinese state-owned enterprise. Both companies are engaged in the rare metal businesses. {1}

The arrests may have been motivated by suspicion that the detained individuals have leaked technical information related to rare earth metals. Beijing regards such metals as a strategic resource and is tightening its control over export of the metals as well as associated technical knowledge. {2} Such metals are crucial for powering electric vehicles.

These recent detentions may result in increased pressure on the companies in question.

Sources:
{1} Kyodo News, October 23, 2023
https://china.kyodonews.net/news/2023/10/2d08f984450d.html

{2} Chinascope, October 24, 2023

Lianhe Zaobao: China Further Restricts Export of Graphite Products

Briefings | | |   Economy/Resources Geo-Strategic Trend Government/Politics

Mitsubishi Motors to End Car Production and Sales in China

The Japanese Mitsubishi Motors Corporation announced on October 24th that it will end production of vehicles in China, and that it will end car sales in China once the company’s existing inventory is depleted. The company’s decision was driven by the rapid rise of local Chinese electric vehicle (EV) companies (negatively impacting Mitsubishi’s own EV car sales) as well as the downturn in sales of Mitsubishi’s gasoline cars.

Mitsubishi’s board of directors has finalized the withdrawal from China; the company’s 2023 fiscal year statements will include a 24.3 billion yen (approx $172 million) special loss from the departure. Going forward, Mitsubishi intends to focus its resources on the market in Southeast Asian.

Mitsubishi launched a new Outlander hybrid vehicle in China in December 2021 but sales fell short of expectations. From January to August 2022, Mitsubishi’s sales in China almost halved, dropping 47.6% year-over-year. Besides Mitsubishi, other Japanese automakers are also lagging in terms of EV sales within China. Local giant BYD and Tesla dominate China’s EV market. Research firm MarkLines stated that in 2022, Chinese automakers accounted for 51% of passenger car sales within China, while Japanese automakers had only an 18% share of the market.

Mitsubishi’s joint venture GAC Mitsubishi Motors and its plant in China’s Hunan Province, which produced gasoline vehicles, stopped production in March. Mitsubishi will sell its shares in the joint venture and dissolve the partnership, though Mitsubishi’s other joint ventures in China will continue engine production.

Source: Kyodo News, October 24, 2023
https://china.kyodonews.net/news/2023/10/db6e9f1790e0.html

Briefings | | |   Geo-Strategic Trend