Skip to content

Economy/Resources - 3. page

Chinese Ambassador to Russia: In Principle There is No Problem With Russia Borrowing Money From China

Russian state-owned news agency Sputnik reported that Zhang Hanhui, China’s Ambassador to Russia, told Sputnik that in principle there is no problem with Russia borrowing money from China by issuing bonds or taking out loans; only technical matters of how to implement such borrowing remain.

Zhang said, “More than 90% of bilateral settlements [between China and Russia] are now denominated in RMB. The percentage may grow even higher in the future. Both sides conduct settlements in RMB as well as in other currencies, including the Ruble. Regarding [Russia] issuing Bonds in China and borrowing money in China, this matter is open for discussion. There is no problem in principle [with Russia taking out debt from China], though the technical matter of how specifically to accomplish this requires further discussion among [financial] professionals.”

Zhang also said that the recent obstacles to cross-border transfers between Russia and China have to do with interference from third-party countries. He said “The obstacles occurred because some countries created troubles for us, but I believe we can find ways to overcome them.”

Russian Finance Minister Anton Siluanov said in an earlier interview with Sputnik that he had been in discussions with his Chinese counterpart about the feasibility of RMB borrowing, with the two countries’ finance ministries touching on the topic near the end of 2023, but as of yet no final decision has been made.

Source: Sputnik, February 28, 2024

All Levels of Government Must Maintain a Tight Budget, Top Chinese Officials at National People’s Conference Repeatedly Emphasize

During China’s National People’s Conference, Premier Li Qiang delivered the annual “Government Work Report” on March 5th. His report stated that “governments at all levels should get used to living with a tight budget, truly tighten their belts, and effectively use fiscal funds where they are most needed and can produce real results.”

At a press conference on March 6th, Chinese Finance Minister Lan Fo’an answered a question about tight budgets, saying that “the Party Central Committee has set the clear requirement that party and government organs must live under a tight budget. Governments at all levels should take the lead in implementing [such financial constraint] and be thrifty in all undertakings. This year’s government work report emphasizes [such restraint] again, further highlighting that this is not just a temporary need but rather a long-term strategy.”

At the Guizhou provincial delegation’s discussion on March 6, Li Bingjun, Governor of Guizhou Province, said, “At the end of last year, [Party] General Secretary Xi Jinping emphasized at the Central Economic Work Conference that Party and government organs should get used to ‘living within a tight budget.’” He added, “In my understanding, ‘living with a tight budget’ is not a temporary measure, but rather the new norm.”

1. Chinese Government Website, March 5, 2024
2. Guancha, March 6, 2024
3. Phoenix, March 6, 2024

Taiwanese Scholar: Wang Huning’s “Spider Strategy” to Slowly Swallow Taiwan

On March 4th, chairman Wang Huning of the Chinese People’s Political Consultative Conference delivered a statement on the topic of China-Taiwan relations. The statement, titled “Work Report of the Standing Committee,” proposed a strategy of “strengthening cross-strait industrial cooperation, building a common market across the straits, holding the sixth Cross-Strait Grassroots Governance Forum, and promoting the integrated development of both sides of the strait.”

Song Guocheng, a Senior Researcher at the International Relations Research Center of Taiwan’s Chengchi University, called Wang Huning’s plan a “spider strategy” to gradually swallow Taiwan. Song published an article on the implications of Wang’s strategy, analyzing four key phrases used in Wang’s statement. Below are translations of the major points from Song’s analysis.

The first key phrase from Wang Huning’s statement was “cooperation” (合作). Cooperation sounds great. By just saying “cooperation,” the Chinese Communist Party (CCP) can sidestep sanctions and allegations over foreign interference, as it is not “changing the status quo across the Taiwan Strait.” Cross-strait cooperation is, however, a “big brother leading the little brother” style. It could lead to the so called “peaceful evolution” of Taiwan – using economic ties to drive political change, using profit to lure Taiwanese people into acting against their country’s best interest, merging with Taiwan [economically], and making its people willing to submit to subjugation [by China].

The second key phrase is “shared marketplace” (共同市場). This term implies “mutual benefit and shared interests.” But the strategy behind this term is to use the “big economy” of mainland China to “melt/dissolve” the “small economy” of Taiwan; this is the “spider strategy,” with the big enveloping the small, trapping Taiwan in a huge “economic spider web,” using honey as poison to slowly consume Taiwan.

The third key phrase is “grassroots cross-strait governance” (兩岸基層治理). Governance sounds neutral, but it is a sovereignty issue when one discusses “cross-strait governance.” Neither side of the [Taiwan] strait is subordinate to the other, and the governance on each side is unrelated to that on the other side. Of course, the CCP will be able to achieve [such governance] if it can rope in Taiwan’s municipal leaders, public figures, community organizations, agricultural associations, guilds, chambers of commerce, student unions, hometown associations… etc. It uses various pretexts such as “exchange, learn, observe, and inspect” to break through the wall of sovereignty between the two sides. This is its softest, most gentle, and most intimate “slow swallowing” policy.

The fourth key phrase is “integrated development” (融合發展). Development sounds so pleasant, and integration sounds wonderful: you are part of me, and I am part of you! But the true meaning behind this phrase is as follows. “Integration” means slow erosion of Taiwan’s anti-communist consciousness, and “development” means gradual subsumption of Taiwan’s sovereignty. This is a “patchwork policy” to unify Taiwan, also known as the “stacking blocks” policy or the “great dissolution” strategy. Once the puzzle is completed and the blocks are stacked, the time will be ripe for natural unification of China.

Source: Up Media, March 7, 2024

Lianhe Zaobao: Moody’s Downgrades Vanke’s Rating to Junk Status

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that international rating agency Moody’s has downgraded Chinese real estate giant Vanke’s credit rating to junk status. Moody’s warned of further downgrades in the future.

The downgrade reflects Moody’s expectation that Vanke’s credit metrics, financial flexibility and liquidity buffers will weaken over the next 12 to 18 months. The company’s contracted sales are declining amid a prolonged downturn in China’s housing market, and uncertainty over financing channels is increasing day by day.

The move by Moody’s may further weaken the world’s confidence in China’s real estate market. Vanke is usually recognized as the third largest real estate company in China, and it was one of the few developers in China with an investment-grade credit rating. Vanke is known to have strong government backing.

Currently, S&P Global Ratings and Fitch Ratings still maintain a non-junk rating for Vanke. Chinese regulators reportedly met with financial institutions to ask major banks to step up financing support for Vanke and called on bondholders to discuss debt repayment extensions with Vanke. However, not long ago, Vanke was rejected after seeking permission from insurance companies to defer debt repayments.

Source: Lianhe Zaobao, March 12, 2024

CNA: China Cancels or Delays Purchase of One Million Tons of Australian Wheat

Taiwanese news agency Central News Agency (CNA) recently reported that China has cancelled or postponed about one million tons of Australian wheat imports and about 500,000 tons of U.S. wheat imports.

Farmers are currently in a cycle of overproduction, and global wheat prices are falling, reaching their lowest point in three and a half years. China, the world’s largest wheat importer, canceled or postponed wheat purchase plans for the end of last year and early this year, anticipating the falling prices.

A Singapore-based commodities trader who sells wheat to Asian countries said that Chinese buyers have canceled some Australian wheat transactions and have delayed shipments from the first quarter to the second and third quarters. Another trader said that trading companies have canceled previously-scheduled shipments at Australian ports that were originally scheduled for transport to China. Since the beginning of this year, the volume for wheat futures on the Chicago Mercantile Exchange has fallen by more than 14 percent, reaching the lowest trading volume since August of 2020.

Australia accounts for 10-15 percent of the global wheat trade of 100 million tons per year. The Australian wheat industry is mainly export-oriented, with 65-75 percent of the country’s total output sold to more than 50 countries around the world. Australia is China’s third largest wheat supplier, following the United States and Canada.

Source: CNA, March 14, 2024

China’s Shifting Strategy: Overseas Investment in the Electric Vehicle Industry

A report from the American think tank Rhodium Group suggests that China likely set a new record in outward direct investment in the EV industry last year. This year, China’s overseas investment in EV will remain strong, but will shift from primarily investing in the battery sector to manufacturing electric cars in Europe, Latin America, and Asia. This shift will aim to appeal to host countries’ demand for high value-added investment and job creation in exchange for market access.

So far, Chinese EV manufacturers have focused mainly on auto exports rather than on overseas production. The volume of Chinese car exports surged in 2022-2023, triggering an EU anti-subsidy investigation into Chinese EV imports. As a result, BYD announced plans to build a car factory in Hungary. This move would bypass potential anti-subsidy tariffs that the EU might impose.

Chinese EV manufacturers realize that the EU welcomes direct investment even though it might block direct auto exports from China. Unlike the U.S., which would strictly scrutinize Chinese EV production on U.S. soil, EU member states compete with each other to provide incentives for Chinese companies. The Rhodium Group anticipates that the EU’s investigation into Chinese EVs will encourage direct investment by the Chinese electric car industry in the EU.

China is also attempting to circumvent U.S. restrictions by investing in US trade agreement partners such as Morocco and Mexico.

Source: Deutsche Well, March 14, 2024

RFI: Chinese EVs Flooding Europe, Will Challenge Core German Industries

Radio France Internationale (RFI) reported that “Chinese goods are pouring into European markets, and the first wave of repercussions for German industry has begun to take shape.” Below are some key points from the report:

Within China, sales of electric vehicles (EVs), consumer goods, and industrial products have stalled. State-owned enterprises are facing overcapacity. China’s plan [to alleviate the overcapacity] is to flood the European market with these products.

Products from China no longer just involve steel batteries and solar panels, which dominated the market for years with unparalleled prices. The mechanical engineering industry is another area where China has over-invested, and Chinese goods are now putting greater pressure on European manufacturers. It is said that Chinese manufacturers can produce around 50 million cars annually, but domestic demand may only be as much as 23 million vehicles. China plans to export the surplus to the rest of the world.

In terms of technical specifications, Chinese cars are at least comparable to most German cars, but they are often much cheaper in terms of price. “In the near future, a wave of industrial products may spread from China to Germany.” This is a harbinger for serious issues potentially facing Germany’s core automotive industry. Businesses and policymakers must find new answers to address these challenges.

Source: Radio France Internationale, March 15, 2024

China Sees Fewer New Unicorn Startups Amid “Contractionary” Policies

Taiwan’s Central News Agency (CNA) recently reported on data from Shandong-based Chinese weekly newspaper Economic Observer, saying that China saw the emergence of only 15 new “unicorn companies” (startups valued at over $1 billion) during 2023. Meanwhile, the United States added 179 unicorns during the same time period.

Lu Ming, executive dean of the China Development Research Institute at Shanghai Jiao Tong University, noted a widening economic gap between China and the US in the digital sector. Although China ranked second globally in terms of number of unicorn companies, with a total of 316 such companies in 2023, the addition of only 15 new unicorns in 2023 represented a sharp decline compared with new unicorn formation in previous years.

Lu cited four reasons for the widening gap between China and the US: technology, talent, capital markets, and policy factors:

  • The US has a strong advantage in generative AI technology and innovation, particularly in language models trained on vast English content.
  • The US remains a talent hub.
  • Foreign capital markets are better at valuing the growth potential of emerging industries, attracting more investment. In contrast, China’s capital markets lack openness and inclusiveness.
  • “While the US government takes a more diversified approach to emerging trends, China sometimes introduces ‘contractionary’ policies. ‘[The Chinese government] is more sensitive to negative sentiments, and uses contractionary policies to avoid problems. This leads companies to become overly cautious, hampering their development and potentially creating vicious cycles.'”

The CNA article went on to say, “Although the [Economic Observer] report did not provide specific examples, China’s recent antitrust crackdown on platform companies and proposed regulations to tighten control over online games have been seen as ‘contractionary policies that suppress industries,’ affecting business expectations and economic growth. Officials have repeatedly stressed the need for caution in introducing contractionary or restrictive measures.”

Source: Central News Agency (Taiwan), March 11, 2024