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Lianhe Zaobao: British Companies in China Expect A Tougher Year Ahead

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported on the latest survey results from the British Chamber of Commerce in China. The business confidence survey of around 300 British companies in China indicated that 60 percent of surveyed companies believe that doing business in China is more difficult this year than last year. The top three reasons that made it more difficult for them are economic factors, geopolitical factors and regulatory factors.

The report pointed out that due to the slow recovery of China’s economy after Covid-19 and the influence of geopolitical issues, British companies in China are in a state of hesitation, and many companies have postponed their investment decisions. About 55 percent of the surveyed companies said they will reduce or maintain investment levels in China operations next year. Around 42 percent of the respondents believe that the uncertainty of other countries’ trade policies towards China in the past year had a negative impact on their business operations.

The report pointed out that 2024 will be a critical year for the development of relations between China and the West, and that China’s relationship with the West is likely to become an important factor driving changes and decisions for companies that are “stagnant.”

Source: Lianhe Zaobao, December 12, 2023
https://www.zaobao.com.sg/news/china/story20231212-1455731

Briefings | | |   Economy/Resources Geo-Strategic Trend

State Security Ministry: “Resolutely Build a Strong Economic Security Fence”

The State Security Ministry has published an article online declaring that it will “resolutely build a strong economic security fence,” echoing a statement from the Chinese Communist Party’s (CCP’s) Central Economic Work Conference held on December 11 and 12.

The article stated that “Currently, the economic sphere is increasingly becoming a crucial battlefield in major power competition. The complexity, severity, and uncertainty of the external environment are rising. To further promote economic recovery, it is necessary to overcome internal difficulties and respond to external challenges. For example, various clichés intending to undermine China’s economy continuously emerge. In essence, they attempt to construct a ‘discourse trap’ or ‘cognitive trap’ regarding ‘China’s decline’ through various false narratives.”

“National security agencies will steadfastly fulfill their duties and mission to safeguard national sovereignty, security, and development interests. They will enhance forward-looking thinking, comprehensive planning, and strategic layout for national security issues in the economic field, implementing a set of measures to maintain economic security. They will resolutely and legally crack down on those illegal and criminal activities in the economic security field that harm national security, creating a safe and stable environment for high-quality development. In coordination with relevant departments, they will continue to effectively prevent and resolve security risks in the economic field, resolutely holding on to the mission of avoiding systemic risks. This will contribute to the comprehensive advancement towards construction of a strong nation and achievement of national rejuvenation through Chinese-style modernization.”

Source: QQ, December 15, 2023
https://new.qq.com/rain/a/20231215A00RVQ00

Briefings | | |   Economy/Resources Government/Politics

RFI: Moody’s Under Fire after Negative Rating of China

Radio France Internationale (RFI) recently reported that ratings firm Moody’s faced a barrage of criticism from China after it changed the country’s credit rating outlook to negative. This rating outlook change resulted in a series of similar changes in Moody’s outlook for China’s state-owned banks, insurance companies, and enterprises, including 22 Chinese local government financing vehicles that have issued international bonds. Moody’s also changed the outlook on the credit ratings of China’s two special administrative regions, Hong Kong and Macau, to negative. In the meantime it downgraded its outlook on a number of other companies as well, including the operator of Hong Kong’s subway system.

Chinese government ministries and officials criticized Moody’s move in various public statements and official media articles, saying that China was “disappointed” and believed that Moody’s rating methodology was “flawed” and that its concerns were “unwarranted.” China’s Ministry of Finance issued a long article rebutting Moody’s rating decision, saying that China’s economy is continuing to recover and that the country’s fiscal revenue has maintained a restorative, positive growth rate.

Eric Chan, the Hong Kong government’s second-ranking figure and Chief Secretary for Administration, said that Moody’s decision to downgrade Hong Kong’s credit rating outlook is being used by Western countries, led by the United States, to discredit Hong Kong and the Mainland. He said in a radio interview that Moody’s “only purpose” in its rating decision on Hong Kong was to suppress the development of the Mainland through Hong Kong.

Source: RFI, December 8, 2023
https://tinyurl.com/5wse2bh8

Briefings | | |   Economy/Resources US-China Relations

Twenty-Five Million Chinese People Drop Medical Insurance

According to Caijing Magazine, the number of people paying for medical insurance in China has declined significantly since last year. Among those considered “residents” (i.e. those who are not employees forced to purchase insurance), 25.17 million people dropped their medical insurance. The net change in number of insured individuals in China in 2022 decreased by 17.05 million compared to 2021.  People have blamed the decrease in insurance on fast-increasing insurance premiums and the need for out-of-pocket payment when applying for reimbursement.

Source: Radio Free Asia, October 25, 2023
https://www.rfa.org/mandarin/yataibaodao/huanjing/gt2-10252023074320.html

Briefings | | |   Economy/Resources

China’s Local Government Debt Soars to $40 Trillion In November; Half of New Issuance is for Refinancing

In the first 11 months of 2023, China’s local governments issued RMB 9.14 trillion (US$1.28 trillion) in bonds, exceeding the RMB 7.4 trillion (US$1.04 trillion) issued throughout all of 2022. Half of the bonds issued this year were used for debt refinancing. The scale of refinancing bonds saw an 82% annual increase to RMB 4.59 trillion (US$643 billion). In contrast, RMB 4.55 trillion (US$637 billion) in new bonds (not for refinancing) were issued, down 4% annually.

Two main factors drove the large increase in refinancing bonds. First, RMB 3.6 trillion (US$504 billion) worth of local government bonds are maturing this year, putting pressure on government finances. Refinancing bonds are helping to repay these old debts. Second, to reduce risk, China’s Ministry of Finance allowed for special refinancing bonds with extended redemption periods. Since October of this year, over 20 provinces/municipalities in China have issued a collective RMB 1.3 trillion (US$182 billion) in these special bonds, far higher than the RMB 200 billion (US$28 billion) issued last year.

By the end of October, 2023, China’s local government debt balance passed RMB 40 trillion (US$5.6 trillion) for the first time ever. This is double the figure from before 2019, when local government debt stood at less than RMB 20 trillion (US$2.8 trillion).

Taiwan’s Central News Agency cited a statement by China’s Ministry of Finance that rapid local debt growth since the pandemic outbreak is related to increased fiscal expansion and local debt scales.

Source: Central News Agency (Taiwan), December 5, 2023
https://www.cna.com.tw/news/acn/202312050237.aspx

Briefings | | |   Economy/Resources

China’s College Graduates to Hit Record High in 2024

Statistics from China’s Ministry of Education show that 11.79 million students are expected to graduate from Chinese colleges and universities in 2024, an increase of 210,000 compared to 2023. This comes at a time when China is facing widespread bankruptcies and layoffs. The Ministry of Education held a meeting with the Ministries of Human Resources and Social Security on December 5th to discuss employment preparations for the record number of graduates.

The Ministry of Education called for an “Action Plan” to promote graduate employment through various measures. It stated that colleges need to equip specialized employment staff, develop market-based employment channels, and continue efforts for college leaders to visit companies to create job opportunities. Other initiatives include expanding the “Ten Thousand Enterprises on Campus Plan” to provide graduates access to more high-quality job information.

On December 5th the Ministry released guidelines with 26 initiatives asking all Chinese universities to make graduate employment a top priority. The notice stressed the challenging economic climate and need for creative solutions to prevent employment difficulties among the high number of graduates. It outlined specific strategies for colleges to realize this goal. These included job fairs, entrepreneurship support, vocational guidance, and tracking graduate employment outcomes.

Source: Radio Free Asia, December 5, 2023
https://www.rfa.org/mandarin/Xinwen/2-12052023103133.html

Briefings | | |   Economy/Resources

China Concedes in Dispute with Lithuania over Taiwanese Representative Office, Lifts Sanctions

China recently lifted the severe trade restrictions imposed on Lithuania after the Baltic state established a “Taiwanese Representative Office” in late 2021.

The sanctions were part of Beijing’s vigorous efforts to prevent  other countries around the world from establishing diplomatic relations with Taiwan. Representatives of the Chinese government said that it would only be permissible for the Taiwanese office in Lithuania to be referred to as a “Taipei Economic and Cultural Representative Office,” and that the terminology “Taiwanese Representative Office” was unacceptable. Under normal diplomatic relations between sovereign states, a similar outpost of one country within another would be called an “Embassy.”

German newspaper Frankfurter Allgemeine Zeitung quoted Lithuanian Foreign Minister Gabrielius Landsbergis on the new development in China-Lithuania relations: the Chinese government has ended its attempt at “economic coercion,” and the name “Taiwanese Representative Office” will remain despite Beijing’s criticism. Frankfurter Allgemeine Zeitung praised Lithuania, saying that the small country had won the principles-based fights.

Lithuania conducts trade with China worth tens of millions of euros. China’s restrictive measures led to an 80% drop in Lithuania’s 2022 exports to China. The EU raised the issue of Chinese-Lithuanian trade with the World Trade Organization at the end of 2022.

Many EU countries, including Eastern European countries, no longer see China as a favorable partner. Last year, Baltic countries Latvia and Estonia followed Lithuania’s lead in withdrawing from the China and Central and Eastern European Countries (China-CEEC) initiative, also known as the 14+1 initiative (formerly 17+1). These Baltic states have established trade offices with Taiwan. The Czech Republic also got closer to Taiwan, deviating from its historically-close ties with China. China’s support of Russia during the Russia-Ukraine war further alienated many countries in the EU.

Facing serious economic challenges domestically, China now seeks to ease relations with Western countries. This recent move on trade with Lithuania is one such effort, potentially lightening tensions with the European Union (EU) ahead of the upcoming China-EU Summit. In another such effort, Beijing has cancelled travel visa requirements for citizens of five different EU countries, enabling easier travel to China.

Source: Back China, December 3, 2023
https://www.backchina.com/news//2023/12/03/889175.html

Briefings | | |   @CS Economy/Resources Geo-Strategic Trend

Lianhe Zaobao: China’s Manufacturing PMI Fell in November

China’s November Manufacturing Purchasing Managers Index (PMI) was 49.4 percent, down 0.1 percentage points from the previous month, indicating that the market demand has declined. Among the five sub-indexes that make up the manufacturing PMI, the new orders index, the raw materials inventory index and the employment index are all lower than the critical level of 50 percent.

The raw materials inventory index for November stood at 48.0 percent, down 0.2 percentage points from the previous month, indicating a decrease in stock levels for major raw materials. The employment index was 48.1 percent, an increase of 0.1 percentage points from the previous month, indicating that the employment situation of the manufacturing companies has recovered slightly. Lianhe Zaobao, Singapore’s primary Chinese language newspaper, reported on the new PMI numbers, saying that the prosperity level in Chinese manufacturing is declining.

PMI is an indicator of financial activity reflecting purchasing managers’ acquisition of goods and services. A PMI number below 50 typically reflects a decline. China’s PMI numbers are jointly published by the China Federation of Logistics & Purchasing and the China Bureau of Statistics.

Source: Lianhe Zaobao, November 30, 2023
https://www.zaobao.com.sg/realtime/china/story20231130-1453217

Briefings | | |   Economy/Resources