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One Year after “Double Reduction” Policy, China’s Tutoring Industry Goes Underground and Is Unreachable

China attempted to regulate the tutoring industry with a “double reduction” policy to reduce the burden on both students and parents. A year later, the tutoring industry has not disappeared, but has gone underground, with higher tuition fees and more hunting efforts that end up redistributing resources to middle and upper-class families.

For example, a parent surnamed Wu in Beijing said her child’s English class used to cost about $20,000 a year before the “double reduction,” but now it’s twice as much due to a special arrangement for a private tutor. She estimated that her daughter’s extracurricular learning costs are more than $10,000 a month. Such tutoring expenses are affordable for the Wu family. However, most Beijing families earn only a quarter of her family’s income.

Another parent in Shanghai, surnamed Fan, said her daughter can only attend a tutorial class that has been converted to a non-profit organization due to the “double reduction” policy. To cut costs, the classes have switched from physical to online. Her child has not gained much and her grades have slipped.

Fan said that although she saved money on tutoring, she had to spend more time teaching her daughter. She found she could not teach as systematically as the tutoring class and she also said it was difficult for her to find underground tutoring as other parents have been reluctant to share their information. In some cases, parents worry someone might tip off the authorities. In others, it’s because the competition at their children’s schools is so fierce. They don’t want other children to have access to the same tutor.

Source: Central News Agency (Taiwan), July 26, 2022
https://www.cna.com.tw/news/acn/202207260241.aspx

Number of Japanese Companies in China Reaches Ten-year Low

According to a survey released by a Japanese data provider, as of June 2022, the number of Japanese companies in mainland China was 12,706, the lowest for the past 10 years. The survey points out that the “Zero Covid” policy has added to the risk of doing business in China. It also points to a trend involving the growing  exodus of companies from China.

Compared to the last survey conducted in February 2020, there were 940 fewer Japanese companies (about 7 percent less). Among all the previous surveys, the year 2012 saw the highest number (14,394) of Japanese companies in China.

Among all the cities, Shanghai hosts the largest number (6,028) of Japanese companies. However, the number is 272 lower than it was in the previous 2020 survey. Since late March, and for about two months, Shanghai has been under lockdown and has been closed. Factors such as a delayed supply of parts have dealt a huge blow to the operations of Japanese companies.

The data provider, Imperial Database, observes that the extended lockdown under the “Zero Covid” policy has led to work stoppages, production shutdowns, and logistics and supply chain disruptions. There is an ongoing movement of European and American companies leaving China, with Japanese companies also pushing for supply chain adjustments.

Source: Kyodo News, July 23, 2022
https://china.kyodonews.net/news/2022/07/462eb725f11e.htmlS

Beijing Is Buying Lithium Mines Worldwide

The lithium battery is critical for electric cars. Chinese companies have been buying lithium mines around the world.

China’s Ganfeng Lithium announced on July 11 that it will buy 100 percent of Argentina’s Lithium shares for US$962 million. Lithea has two projects at lithium salt lake in Argentina, which can produce 30,000 to 50,000 tons of lithium carbonate. Ganfeng has another four lithium salt lake projects in Argentina, three lithium mines in Australia, two lithium stone projects (one in Mali and one in Ireland) and one lithium clay project in Mexico.

China owns 6 percent of the global lithium reserves and produces 13 percent of the global lithium output. Chinese companies manufacture half of the total lithium batteries.

Chinese companies intensified competition to control the lithium resources outside of China. Six companies, including four Chinese companies, bid for lithium resources in Bolivia. Ganfeng Lithium beat CATL to buy the Canadian company Millennial which has two lithium salt lake projects. BYD, a Chinese electric car company, signed an agreement to buy six lithium mines in Chile. Tianqi Lithium bought 24 percent of the shares of SQM, a lithium mine company in Chile.

Source: Epoch Times, July 17, 2022
https://www.epochtimes.com/gb/22/7/17/n13782559.htm

Many Stores Are Deserted or Closed in Guangzhou & Shanghai; nearly Sixty Percent of Chinese Are Trying to Save Money

In China, more and more businesses are finding it increasingly difficulty to survive and have had to close their doors. The reason is the COVID-19 epidemic coupled with the government’s tough “Zero-COVID” policy. On July 21, China’s Guyu Data reported that the vacancy rate of shops in Shanghai and Guangzhou reached 9.8 percent and 14.1 percent, respectively, (data for most cities are not yet available). In 2019, the vacancy rates in China’s first- and second-tier cities were around 6.1 percent. That rate increased to 11.0 percent and 9.0 percent in 2020 and 2021. Generally speaking, a store vacancy rate of 6 percent is cause for alarm.

From January to April, the total daily shopping mall traffic in China decreased by 19 percent compared to the same period last year. According to China’s National Bureau of Statistics, the total retail sales of consumer goods in April was down by 11.1 percent year-over-year.

In the first quarter of 2022 in Beijing, Shanghai and Guangzhou, the store opening/closing ratios were 0.85, 0.88 and 0.76, respectively, showing more store closures than store openings.

In the second quarter of 2022, the People’s Bank of China conducted a questionnaire survey of 20,000 urban depositors in 50 cities nationwide. The results showed that 23.8 percent of residents tended to “consume more,” while 58.3 percent of residents tended to “save more.” This is 3.6 percentage points higher than the previous quarter.

Source: Creaders.net, July 21, 2022.                                                                                                                                                             https://news.creaders.net/china/2022/07/21/2507106.html percent

Banks in Multiple Chinese Provinces Restrict Depositors’ Withdrawals

Following the protests of thousands of depositors in Henan Province as they could not withdraw their money from a local bank, people in China have discovered that the difficulty in withdrawing money has also occurred in other provinces and cities.

According to China Times, a newspaper based in Beijing, one depositor from Shaanxi province, who opened an account at a Hainan branch of the Industrial and Commercial Bank of China (ICBC), recently found he was unable to withdraw, transfer or spend money from his account. Another depositor from Hunan province also said that he had his bank card frozen after taking out a loan from a bank.

Another mainland Chinese newspaper, Securities Daily, reported that similar cases also took place in Beijing and in Shandong province. In response to media inquiries, the bank involved said the operation was a risk control measure taken by officials to prevent accounts from being used for money laundering.

Source: Radio France International, July 20, 2022
https://rfi.my/8b0E

China’s CPI is Calculated Differently from the U.S.

At a press conference on July 15, China’s National Bureau of Statistics announced that the Consumer Price Index (CPI), the key measure of inflation, was 2.3 percent in the second quarter. It was 2.1 percent for both April and May, and 2.5 percent for June. In the U.S., the CPI in June was 9.1 percent, reaching a 40-year high.

The South China Morning Post (SCMP) has reported on why China’s inflation rate has been relatively lower than that of the West. A major reason for China’s lower inflation rate is that the weight of products included in the CPI calculation is very different.

CPI tracks the prices people pay for a “basket” of goods and services. The list of goods is weighted, with those more often bought for daily consumption getting a higher weight.

While China puts more weight on food and clothing, the U.S. values housing and transportation more, the latter being more susceptible to global energy prices.

According to Huang Wentao, an analyst at the China Securities Finance Corporation (CSF), in China’s CPI calculation, the weight of food is about 18.4 percent, while that weight in the U.S. CPI is 7.8 percent; China’s weight for clothing and apparel is about 6.2 percent, while in the U.S. it is 2.8 percent. The rent for housing accounts for 16.2 percent in China’s CPI, and 32 percent in the U.S. calculation. Transportation accounts for 10.1 percent in China, which is much lower than the 15.1 percent in the U.S. counterpart.

Source: Central News Agency (Taiwan), July 15, 2022
https://www.cna.com.tw/news/acn/202207150277.aspx

Many Chinese Home Buyers Collectively Decide to Stop Paying Their Mortgage on an Unfinished Home

The Chinese real estate industry has faced several ripple effects after many developers struggled or defaulted on their debt payments. Not only do investors and banks face losses, but constructions of many buildings have also been halted for months if not years and home buyers were not sure when they will eventually receive their homes. For some buildings, the builders have no intention to complete the construction and will just leave them in the unfinished status forever; the Chinese call them the “rotten-tail buildings.”

Unlike the U.S. the home-selling practice where the home buyers sign a contract with the builder when the building is constructed and take out a mortgage when the home is delivered, Chinese buyers take out the mortgage at the time of signing the contract and start the payment right away, even though they don’t have the house.

This presents a big, unfair problems for the home buyers.  They are paying mortgages to banks while seeing no progress in the construction of their homes.

Getting no help on these unfinished buildings from the builders, the banks, and the government, many home buyers resolved to a new approach: collectively announcing they would stop their mortgage payment.

On June 30, all home buyers of an unfinished construction project in Jingdezhen City, Jiangxi Province announced jointly on social media that they would stop mortgage payments until the builder resumes construction. This started a wave of home buyers’ stopping their mortgage payments. By June 16, according to NTDTV’s report, home buyers of at least 270 project (a project may consist of multiple buildings) throughout China, including Jiangxi, Anhui, Henan, Hubei, and other provinces, have made similar announcements,

Technically, the unfinished building is a dispute between the home buyers and the real estate developers, not involving the bank. Banks can still hold the buyers accountable for their payments and have the option to freeze and auction buyers’ own personal properties and put them on a bad credit list, if they stop their payment. However, since home purchasing accounts for a significant portion of spending for many Chinese families, these home buyers feel that they have nothing more to lose.

Some home buyers have also found ways to accuse the banks. Some banks didn’t put their payment in proper escrow accounts, some banks released the funds to real estate developers though the construction didn’t reach the required funding stage, and some banks purposely created bad mortgage contracts to steal the home buyers’ money.

This stopping payment wave also spread to real estate developers’ suppliers and contractors. On July 15, an announcement circulated on the Internet that suppliers and contractors in Hubei Province supporting the Evergrande Group decided to stop providing funding and materials and stop doing work if they do not receive Evergrande’s payment up front.

Sources:
1. SINA, July 13, 2022
https://finance.sina.com.cn/chanjing/cyxw/2022-07-13/doc-imizmscv1383585.shtml
2. Epoch Times, July 14, 2022
https://www.epochtimes.com/gb/22/7/14/n13781035.htm
3. NTDTV, July 16, 2022
https://www.ntdtv.com/gb/2in022/07/16/a103480739.html

China’s Second Quarter Economic Growth Slowed Sharply

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that, the newly released official numbers showed Chinese GDP growth slowed to 0.4 percent in Q2. The economy grew at its slowest pace since it was first hit by the coronavirus outbreak two years ago, underscoring the impact on growth of the country’s strict measures to contain the pandemic. The GDP number is far below the 1.2 percent that economists had forecast. That means Beijing is likely to fall well short of its full-year growth target of around 5.5 percent. This will deliver another blow to a global economy battered by recession fears. However, China remains committed to its “dynamic zeroing” approach to eradicating COVID infections. With recent cases of the highly contagious BA.5 COVID variant in some cities, it appears more lock-downs are likely. To make matters worse, data has also shown no signs of improvement in the slump in investment in China’s real estate market, which has driven demand for goods and services that account for about 20 percent of China’s total GDP. It was reported very recently that households in dozens of cities have stopped paying their mortgages as property developers have failed to complete planned construction. The Chinese National Bureau of Statistics said, “The foundation for a sustained economic recovery is not solid.” Also, the Bureau warned of a “rising risk of stagflation” in the world economy. The Chinese stock market reacted flat to the GDP data. In the meantime, the heavy blow of Shanghai’s lockdown is also clearly seen in the data. The city’s economy contracted 13.7 percent year-over-year in the second quarter.

Source: NetEase, July 16, 2022
https://www.163.com/dy/article/HCAR8MPG0553GU6W.html