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CCP Trials State-Owned Cafeterias

Back in late 1950s, the Chinese Communist Party (CCP) rolled out community-owned cafeterias, providing free food to the populace at a massive scale. This quickly depleted the country’s food stock and led to hunger and famine. It seems that now the CCP is bringing this infamous practice back.

A recent article in China Digital Times criticized a CCP pilot program for state-owned cafeterias, discussing the cafeteria that recently opened in the Yanshi Community of Shijiazhuang city, Hebei Province. Since the start of the cafeteria’s trial operation in early October this year, the cafeteria has served more than 20,000 customers. It targets thousands of residents in the Yanshi community and surrounding areas, aiming to ensure that customers can “eat to a full stomach with 5 yuan (US$ 0.70) and eat well with 9 yuan (US$ 1.25).” Given current market conditions, it is impossible to sustain those prices without continual subsidies from the government.

The article’s author criticized state-owned cafeterias as follows: The government is using tax revenue collected from the populace at large to subsidize food for specific groups of people (i.e. people living in certain communities) — it is not fair to those who are not served. Meanwhile, if the government builds cafeterias to serve the whole populace then it is just taking people’s money (as tax) and giving it back (as subsidy to cafeteria), adding on top the inefficiency (financial waste) resulting from bureaucratic operations.

Source: China Digital Times, November 7, 2023
https://chinadigitaltimes.net/chinese/701932.html

Briefings | | |   Economy/Resources Government/Politics

Sichuan Hospital Job Listing Requires Nurses to Have Master’s or Doctoral Degree

West China Second Hospital recently posted a job ad seeking 34 nurses. Surprisingly, the job posting required that applicants possess a master’s or PhD degree. Typically, nursing roles in mainland China require only an undergraduate degree.

Fierce competition for jobs in China has led to “degree inflation,” with a spiraling trend of employers demanding higher and higher qualifications from job applicants. This year saw a record 4.74 million people take China’s graduate school entrance exam, up from only 2.38 million in 2018. In Beijing there are now over 160,000 individuals who hold a master’s or doctoral degree, surpassing for the first time the roughly 130,000 people in Beijing who hold only an undergraduate college degree. Similar trends are happening across China.

Some Chinese netizens reacted strongly to the Sichuan hospital’s job posting on social media, expressing outrage or lamenting over what they saw as increasingly unrealistic academic requirements for jobs.

Source: Central News Agency (Taiwan), November 14, 2023
https://www.cna.com.tw/news/acn/202311140329.aspx

Briefings | | |   Economy/Resources

RFA: China’s October Exports Continued Trend of Decline

Radio Free Asia (RFA) recently reported that the latest data released by China’s General Administration of Customs shows China’s exports fell in October by 6.4 percent year-over year in US dollar-terms. Imports increased by 3.0 percent during the same period.

Exports from China to major trading partners such as the European Union, the United States, and Japan all declined during the first ten months of 2023. In October, China’s trade surplus was US$56.53 billion, a 30.8 percent reduction year-over-year. China’s exports have now fallen for six consecutive months.

During the first ten months of 2023, China’s exports to the ASEAN group (China’s top trading partner) increased by 0.6 percent. Meanwhile, exports to the EU, the United States and Japan (China’s 2nd, 3rd, and 4th-ranked trading partners), fell by 5 percent, 9.9 percent and 2.9 percent, respectively.

China’s foreign direct investment (FDI) deficit in the third quarter of 2023 was US$11.8 billion. This is the first time that China’s foreign exchange regulatory authorities have recorded an FDI deficit since they began compiling data in 1998. As the United States has ramped up its technology blockade against China, companies have accelerated the relocation of their supply chains away from China, replacing China’s position in the supply chain with countries in Southeast Asia or Mexico. Due to Mexico’s proximity to the North American market, even Mainland China companies have been moving production to Mexico.

Currently, more than US$1 trillion from Wall Street private equity funds is locked up in China, and Chinese companies like Evergrande have refused to repay their bonds. Such debt defaults have greatly shaken foreign businesses’ confidence and willingness to invest in China. Many U.S. investment banks worry that their investments may need to be written off as donations.

Source: RFA, November 7, 2023
https://www.rfa.org/mandarin/yataibaodao/jingmao/hcm-11072023082542.html

Briefings | | |   Economy/Resources

China Introduces New Housing Reform

The CCP recently introduced a significant “housing reform” program, outlining a dual-track system primarily focusing on affordable housing to resolve housing market issues. The policy, titled “Guiding Opinions on Planning and Constructing Affordable Housing,” emphasizes two goals:

  1. increasing the construction and supply of affordable housing in major cities, and
  2. limiting investment-oriented commercial housing.

The policy stipulates that 60% of the housing market be allocated to affordable, public rental, and low-cost housing (保障性住房, affordable housing), and 40% be designated as “improved housing” housing (改善性住房, commercial housing). The policy targets three main groups as recipients of affordable housing: low-to-medium-income earners, new graduates, and “talented persons” recommended by the government for housing. Affordable housing is restricted to one unit per applicant, and it is forbidden from being turned into commercial housing. The reform aims to repurpose unused land and commercial housing inventory.

Beijing will carry out the housing reform in cities with over 3 million residents. There are 35 such cities in China, including Beijing, and Shanghai.

Some have raised concern over potential consequences of this policy:

  • it may put additional pressure on China’s commercial real estate market, pushing more real estate developers to bankruptcy;
  • it may result in financial loss for Chinese investors, who are heavily invested in real estate; and
  • China’s local governments may not have sufficient money to fund the development of affordable housing.

Source: Epoch Times, November 10, 2023
https://www.epochtimes.com/gb/23/11/10/n14114014.htm

Briefings | | |   Economy/Resources Government/Politics

China Recalibrates “Belt and Road” Lending

AidData, a research lab at William & Mary’s Global Research Institute, released a new report titled “Belt and Road Reboot: Beijing’s Bid to De-Risk Its Global Infrastructure Initiative.” The report details how Beijing has recalibrated its financing of overseas development.

China remains the world’s largest source of international financing for infrastructure development, surpassing both the U.S. and the World Bank. The report outlines China’s strategies for mitigating risks in its lending portfolio. To address distressed debts, short-term measures include emergency lending to debtors and sweeping repayments from borrowers’ cash collateral. Meanwhile, China has been de-risking its overseas investment portfolio by outsourcing risk assessment to Western banks that have “stronger due diligence standards and safeguard policies.”

In the face of soft power challenges, Beijing has adapted its allocation of international aid and credit, emphasizing investment in countries where neither China nor the U.S. holds a dominant soft power advantage. Additionally, Beijing has doubled investment in regions where China has gained reputational favor at the expense of the U.S.

Source: AidData, November 6, 2023
https://www.aiddata.org/blog/belt-and-road-bounces-back

Briefings | | |   Economy/Resources Geo-Strategic Trend

Ministry of State Security: Be a Firm Guardian of Financial Security!

China’s Ministry of State Security published an article to state that it will safeguard China’s financial security, and that others should do the same. Commentators suggested that the article indicates China is running out of options for sustaining its financial market and is looking to expand the police forces for support. The following is a translation of the article:

Financial security is an important part of national security. The maintenance of financial security is a major responsibility with strategic and fundamental importance concerning China’s overall economic and social development. To promote high-quality development of China’s financial industry, we must build a solid defensive perimiter for financial security and limit what financial risks we are willing to accept.

Some countries treat finance as a tool for geopolitical games, repeatedly acting as currency hegemon and [threatening others by] waving the “financial sanctions” stick. Some ill-intentioned people [within China] have tried to stir up turmoil and make money during the [resulting] chaos. There are not only people who short-sell Chinese assets when they anticipate China’s financial market will fall, but also people who advocate for the fall of the financial markets or who steal money from the financial markets. They have attempted to shake the confidence of the international community in investing in China and to trigger financial turmoil in China. These factors have brought new challenges to the maintenance of financial security under present circumstances.

State security organs should place greater importance on preventing and resolving financial risks; actively participate in the development of national security systems in the economic and financial fields; closely monitor, accurately predict and effectively prevent national security risks in the financial field; crack down on and punish illegal and criminal activity in the financial field that jeopardizes national security; act as a steadfast protector of financial security; and make contributions for the sake of national security to the advancement of high-quality financial development [of China] and high-level opening up. (Ministry of State Security)

Source: Sina, November 3, 2023
https://finance.sina.cn/2023-11-03/detail-imzthyww3984891.d.html?oid=%E8%B4%A2%E7%BB%8F%20%E6%97%A0%E9%94%99%E7%89%88%E7%BB%B4%E6%8A%A4%EF%BC%88kxys.vip%E7%94%B5%E6%8A%A5%EF%BC%9A@kxkjww%EF%BC%89.smb&vt=4&cid=76654&node_id=76654

Briefings | | |   Economy/Resources Government/Politics

Local Governments’ Illegal Debts Highlight Fiscal Strain on China

China’s Ministry of Finance disclosed eight cases of illegal debt held by local governments, highlighting the seriousness of local debt issues facing the country. Since 2018, local governments have violated national-level policy by forcing state-owned enterprises and banks to advance billions of yuan in funds for urban development, infrastructure projects, and other expenditures that should have been funded by municipal or provincial budgets instead. This has created tens of billions of yuan in “hidden debt” in certain cities.

Examples include Hubei Province’s creation of 21.48 billion yuan (US$2.95 billion) in hidden debt through land development projects, Guangxi Province’s 17.7 billion yuan (US$2.43 billion) of debt for land projects, and Shaanxi Province’s 2.6 billion yuan (US$360 million) for a conference center. Other cases involved hundreds of millions of yuan in illegal advances for flood relief and other spending.

Banks were found complicit in the practice, with the Agricultural Development Bank of China’s Shaanxi branch illegally providing 1.3 billion yuan (US$180 million) that went toward river management projects in Xi’an. The Agricultural Bank’s Wuhu branch was found to have illegally loaned 471 million yuan (US$64.7 million) to the local government.

China’s Finance Ministry released information about these cases to hold local officials and banks accountable and warn others against engaging in the practice. The release highlights the financial difficulties faced by local governments, where even basic infrastructure and public works spending has required procurement of illegal hidden debt, typically via shell companies owned by the local government.

Beijing’s attempt at introducing accountability through publicity will likely be insufficient to resolve the issue absent more comprehensive reforms.

Source: Central News Agency (Taiwan), November 6, 2023
https://www.cna.com.tw/news/acn/202311060331.aspx

Briefings | | |   Economy/Resources

Plummeting Fertility in China Likely to Sustain Population Decline into Next Century

China’s birth rate has fallen sharply, leading to negative population growth that is likely to continue into the next century, according to Chinese economists. This will not only affect the labor supply but also slow economic growth. Zuo Xuejin, former Shanghai Academy of Social Sciences executive, said at a recent economic forum that coping with demographic changes and creating high-quality growth [in the Chinese economy] would require speeding up the country’s transition to a demand-centric economy and increasing investment in human capital.

Since the country’s total fertility hit a record low in 2022, China’s various policies aimed at increasing the birth rate have met with limited success. Experts believe negative population growth will persist as fertility remains far below the replacement level of 2.1 children per woman. Modeling shows that, even with optimistic assumptions regarding a rebound in fertility, China’s population decline could continue through 2097. If current lower fertility rates continue, negative growth may persist into the 2100’s.

The urban concentration of population and economic activity in major coastal and inland city clusters will continue even as cities face depopulation. Local governments would do well to avoid wasted infrastructure investment in the face of population decline.

Source: Central News Agency (Taiwan), November 5, 2023
https://www.cna.com.tw/news/acn/202311050119.aspx

Briefings | | |   Economy/Resources