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Henan Audit: 10 Billion Yuan of Questionable Spending from Disaster Relief Funds

Chinese officials have a reputation for stealing or improperly handling money. Recently, the Henan Province government published an audit report on 2022 provincial-level spending. According to the report, there were about 10 billion Yuan (US$1.4 billion) in improper spending using the relief and reconstruction funds designated following last summer’s floods in the region.

  1. Nine counties, including Qi County, spent 405 million Yuan improperly. Two counties, including Weihui County, saw at total of 31 million Yuan withdrawn from government accounts for personal use.
  2. Some 162 projects, worth about 3.13 billion Yuan, were carried out at a very slow pace. Twenty four cities and counties, including Boai County, were involved in such practices.
  3. Four cities and counties, including Hengchuan County, provided fake status updates on 22 projects totaling about 1.28 billion Yuan. Four cities and counties, including Xinmi County, reported 15 non-existent projects totaling 432 million Yuan in claimed value.
  4. Nine cities and counties, including Xinyang County, put 24 projects, worth 523 million Yuan, in use without any acceptance inspection. Seventy three counties, including Zhengyang County, were involved in projects that failed quality requirements. There were 242 such projects worth a total of 3.35 billion Yuan.
  5. Three counties, including Jun County, obtained 375 million Yuan for 3 projects that did not qualify for disaster relief funding.

Source: Hanan Provincial Audit Department website, July 28, 2023
https://sjt.henan.gov.cn/2023/07-28/2787185.html

Briefings | | |   Government/Politics

Senior Wanda Executive Arrested for Corruption

Chinese media Jiemian reported that Liu Haibo, the senior vice president of real estate giant Wanda Group, has been arrested for reasons yet to be announced. According to a Wanda insider, the main reason behind the arrest is related to internal corruption within the company, and the amount of money involved is huge. In addition to Liu Haibo, a number of others from Wanda Group have also been taken away.

Liu Haibo graduated from Beijing University of Aeronautics and Astronautics in July 1991, and he joined Wanda Group in 2010. He served in a number of senior positions, including assistant president, executive deputy general manager of the development department, general manager of the development department, regional general manager, group chief vice president, and senior vice president. He has been in charge of Wanda Group’s investment business for a long time.

The news of Liu Haibo’s arrest has sent shockwaves through the real estate industry. Wanda Group is one of the largest real estate companies in China, and its involvement in corruption is a major blow to the industry. It remains to be seen what charges will be brought and what the full extent of the corruption is, but the news is sure to have a negative impact on Wanda Group’s reputation and business prospects.

Source: Central News Agency (Taiwan), August 8, 2023
https://www.cna.com.tw/news/acn/202308080256.aspx

Briefings | | |   Economy/Resources

China Continues Campaign Against Healthcare Sector Corruption, 10 Arrested in a Week

A report from Taiwan’s Central News Agency reported that a crackdown on corruption in China’s medical industry is continuing, with at least 10 more people in the field investigated in the past week. The most recently investigated include hospital directors and CCP secretaries. This brings the total number of people investigated to at least 159 since the beginning of the crackdown.

The report cited a case in which a hospital director pocketed a 16 million yuan in kickbacks after importing a linear accelerator at an inflated price. It also described how pharmaceutical companies are trying to gain a higher market share by infiltrating hospitals through various channels, and how the expectation of large kickbacks is squeezing medical suppliers and sales agents. According to one industry insider, average kickbacks to hospital insiders is 20% to 30%, while sales staff have been squeezed, receiving only very small commissions. This situation comes about because there is typically more than one supplier to a given hospital department for the same product, and the department will choose to purchase the product from the company that offers the highest kickback.

Some pharmaceutical companies have used the pretext of sponsoring scientific research funds and academic conferences to transfer illegal benefits. The industry insider said that some high-level hospital officials drive luxury cars or fly business class when traveling. They are often invited to meetings and travel often “while ordinary people have to face the high cost of medical care.”

The report said that the current medical corruption crackdown is targeting the key links of production, supply, sales, use and reimbursement in the medical field, and pharmaceutical companies have also become a central focus of the campaign.

The National Health Commission of China and the country’s disciplinary inspection and supervision organs have held video conferences to mobilize and deploy efforts in addressing medical corruption nationwide. The meetings stressed the need to “increase the intensity of discipline and law enforcement, focus on leading cadres and key post personnel, persist in investigating bribery, concentrate forces to investigate and deal with corruption cases in the medical field, and form a ‘deterrent'”.

The crackdown on medical corruption is a major initiative by the Chinese government to improve the quality of healthcare and reduce the financial burden on patients. It is a sign that the government is serious about addressing the problem of corruption in the healthcare sector.

Source: Central News Agency (Taiwan), August 8, 2023
https://www.cna.com.tw/news/acn/202308080307.aspx

Briefings | | |   Social Stability

China’s Granary Region Suffers Severe Flooding, Food Security at Risk

The remnants of Typhoon Doksuri caused severe flooding in China’s northeastern provinces of Heilongjiang and Jilin, known as the country’s “breadbasket.” The flooding has killed at least 14 people and displaced tens of thousands more. It has also damaged or destroyed millions of hectares of crops, raising concerns about food security for China’s 1.4 billion people.

The flooding is the latest in a series of natural disasters to hit China’s agricultural sector in recent months. In May, heavy rains in Henan province caused widespread damage to wheat crops. In June, a drought in northern China took a toll on corn and soybean plantings.

The Ministry of Agriculture and Rural Development has warned that the flooding in Heilongjiang and Jilin could have a “serious impact” on China’s agricultural production. The ministry said that the flooding has damaged or destroyed about 10 million hectares of crops, and that it could take several years for the region to recover.

The flooding is also a major blow to China’s efforts to achieve self-sufficiency in food production. China is the world’s largest producer of wheat, and it is among the largest producers of corn and soybeans, but the country still needs to imports significant amounts of these crops to meet domestic demand. This year’s flooding could lead to increased food imports, which would put a strain on China’s economy.

The Chinese government said that it is taking steps to mitigate the impact of the flooding, including providing relief to those affected and investing in infrastructure to help prevent future disasters. It remains to be seen how the flooding will impact China’s food security in the long term.

Source: Voice of America, August 7, 2023
https://www.voachinese.com/a/deadly-floods-hit-china-s-major-grain-producing-region-fueling-food-security-concerns-20230807/7214602.html

Briefings | | |   Economy/Resources

EUCCC: EU Companies in China Experiencing Commitment Fatigue

Primary Taiwanese news agency Central News Agency (CNA) recently reported that Jens Eskelund, chairman of the European Union Chamber of Commerce in China (EUCCC), said that China’s efforts to revitalize the private economy are insufficient and that Chinese officials have been unwilling to seriously discuss how to solve the country’s core economic problems. He also said that EU companies in China are experiencing “commitment fatigue” and are are beginning to doubt whether the Chinese government will enact meaningful economic support policies.

Eskelund said that the EUCCC has yet to see signs that the Chinese government is willing to implement structural reforms to address the fundamental challenges facing the Chinese economy, thus preventing foreign private companies from realizing their potential to support the Chinese economy. He mentioned that the Chamber of Commerce has met with Chinese government officials many times since the Chinese government relaxed its strict Zero-Covid measures, but these officials have not been willing to seriously discuss how to solve the country’s core problems.

China’s overall economy is weak, and the manufacturing and service industries are shrinking. The Chinese government has issued multiple documents in the past month promising to revitalize the country’s private sector. Chinese officials have thus far refrained from enacting large-scale monetary and fiscal stimulus measures, however, instead using relatively modest measures to boost consumption.

Source: CNA, August 5, 2023
https://www.cna.com.tw/news/acn/202308053001.aspx

Briefings | | |   Geo-Strategic Trend

Australia and U.S. Establishing Joint Intelligence Center

Major Australian Chinese language newspaper Australian Chinese Daily recently reported that the agreement just reached at the Annual Meeting of the Australian and US Defense Ministers (AUSMIN) has further deepened the Australia-US military alliance. In response to China’s growing threat to regional stability, U.S. intelligence analysts will be placed in the defense intelligence agency in Canberra, and Australia’s northern air base will be expanded to accommodate more U.S. military aircraft. The talks also reached an agreement to re-expand the deployment of the U.S. military in Australia, including amphibious combat forces and maritime reconnaissance aircraft. As expected, the U.S. will provide advanced technology to aid in Australia’s domestic production of missiles and will ensure that Australia is a secondary supplier of U.S. missiles.

According to the Daily report, the AUSMIN communiqué contains multiple criticisms of China. It accuses China of exacerbating regional tensions with its “excessive maritime claims,” urges China to end its threat of force against Taiwan, and asks Beijing to cooperate with the United States constructively.

The new Australia-U.S. joint intelligence center is likely to track China’s security agreements with countries in the South Pacific and Southeast Asia, as well as to monitor China’s further militarization efforts in the South China Sea.

Source: Australian Chinese Daily, July 31, 2023
https: //www.acd.com.au/australian-news/aomeifangzhangwaizhanghuitangongbaozezhongguo-qianghuajunshilianmengshelianheqingbaozhongxin/

Briefings | | |   Geo-Strategic Trend

Nikkei Chinese: China’s July Manufacturing PMI Below 50 for Fourth Consecutive Month

Nikkei Chinese Edition recently reported that, according to data just released by the Chinese National Bureau of Statistics, China’s Manufacturing Purchasing Managers Index (PMI) for July is 49.3. The Chinese real estate market continued to slump, and the production growth of building materials was sluggish. Although the PMI was 0.3 percentage points higher than last month, it has been below the 50 threshold for four consecutive months. This is the first time since October 2019 that the PMI has seen such a stretch of low prints, when it was below 50 for six consecutive months.

The Chinese PMI is based on a survey of 3,200 manufacturing companies, aggregating data on items such as new orders, production and employees. A reading above 50 indicates expansion in manufacturing activity relative to the previous period, while a reading below 50 indicates contraction.

Looking at the composition of July’s PMI number, new orders as a primary indicator stood at 49.5. Production fell 0.1 percentage points to 50.2, exceeding 50 for 2 consecutive months. The employment index, which reflects employment trends, deteriorated. Numbers also showed smaller businesses are more pessimistic about the economy. Zhang Liqun, a researcher at the Development Research Center of the Chinese State Council, said that more than 60 percent of enterprises believe that current demand is insufficient. Many analysts said that policy makers may be hesitant to use aggressive stimulus to boost domestic consumption amid fears of rising debt risks, despite Beijing’s urgent desire to improve the economy.

Source: Nikkei Chinese, July 31, 2023
https://cn.nikkei.com/china/ceconomy/53092-2023-07-31-14-32-32.html

Briefings | | |   Economy/Resources

Lithuania Winning Standoff Against Beijing on Taiwan Issue

Over a year ago, Lithuania faced unprecedented pressure from China for refusing to toe Beijing’s line on the Taiwan issue. It took the lead in exiting the China-led “17+1” cooperation mechanism with Central and Eastern European countries in 2021 and later allowed Taiwan to open a representative office in Vilnius under the name “Taiwan.” In response, China launched a comprehensive retaliation, including applying economic sanctions, calling back its Ambassador, and downgrading diplomatic relations.

Recently, Matas Maldeikis, Lithuanian Member of Parliament, revealed in an interview with the Voice of America, that the swift and decisive victory the communist regime of China expected did not happen. Lithuania’s economy grew and its exports increased by 45 percent in just a year and a half after Beijing’s sanctions. This demonstrates that countries need not bow to pressure from Beijing.

Maldeikis mentioned Lithuania’s historical tradition of resistance to power and its people’s values as reasons for daring to confront China on the Taiwan issue. Lithuania understood the political dynamics at play and refused to compromise its principles for short-term economic gains, showing a willingness to withstand market pressure and not betray values for profit.

This resilient stance has set an example for other nations on how to navigate relations with China.

Source: Voice of America, August 7, 2023
https://www.voachinese.com/a/lithuania-china-taiwan-european-union-20230804/7212200.html

Briefings | | |   @CS Geo-Strategic Trend