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Banks Backed by Ant and Tencent to Join China’s Digital Currency Pilots

China Securities Journal  reported that Zhejiang E-Commerce Bank Co., Ltd., (MYBank) backed by the Ant Group and WeBank backed by Tencent may participate in the digital currency pilot projects of six state banks. The status of the two private banks is “coming soon.” 


Beyond these two private banks, most urban small and medium-sized banks in China will connect to the central bank digital currency infrastructure via City Bank Clearing Services Co., Ltd. (“City Bank Clearing”). Rural Credit Bank Clearing will provide a conduit for rural banks to access the digital currency infrastructure. The Digital Currency Research Institute of the Bank of China entered into agreements with the two intermediaries last fall.


The digital currency is issued and regulated by China’s central bank. All transactions will be completely under China’s central bank’s supervision. In contrast, transactions through Alibaba Group’s Alipay and Tencent’s WeChat Pay are electronic payments controlled by the companies. 


Source: The Paper, February 20, 2021

Why Are Chinese People Reluctant to Have Children?

According to the latest data from China’s Ministry of Public Security, there were 10.35 million newborns in 2020 with household registration, a sharp drop of 15 percent from the 11.79 million in 2019. The number compares with the 11.87 million newborns in 1961, one of the years of the great famine in China’s history.

However, the number of newborns with household registration is not exactly the same as the number of births in that year. The main reason is that the household registration was not declared for some newborns. Taking 2019 as an example, the Ministry of Public Security shows 11.79 million, but the National Statistics Bureau shows 14.65 million.

Sanlian Life Week, an influential Beijing-based weekly magazine, recently published an article quoting the recent population data that some Chinese cities released. The birth rate in many places fell sharply last year, showing a decline exceeding 10 percent. It was even more than 30 percent in some areas.

The report said that China’s fertility rate, which measures the average number of children per woman, was once higher than 6, but it is now below 1.5. Why don’t Chinese people want to have children? The most important reason is that they cannot afford to have children. Buying or renting houses has emptied many young people’s pockets of their income. Even for a middle-class family, raising children is a very large expense.

The report continued that compared with those born in the 1970s and 1980s, the relative income of those born in 1990’s and 2000’s dropped significantly. The term “relative income” is the ratio of expected future income level to living expenses. The higher the ratio, the stronger the financial ability to raise children.

In addition, the support that society provides for raising children is also insufficient. The report pointed out that in China, “the number of childcare institutions for the age of 0-3 is almost zero.” Without the help of the grandparents, it is almost impossible for double-income families to raise their children independently.

To alleviate the pressure on pensions, the authorities began to study the policy of delaying retirement. However, the report noted that this may in turn further reduce the fertility rate, because most families need the elderly to help take care of their children. If the elderly delay retirement, the families will lose their support. As a result, many young families choose to give up having children.

Source: Central News Agency, February 14, 2021

CFLD, Once Ranked among Top Ten Real Estate Developers, Is in Debit Crisis

After HNA filed for bankruptcy in January, China Fortune Land Development (CFLD or 华夏幸福), a publicly traded Chinese real estate developer in Beijing, said that the company was in debit crisis. The public notice that the company issued stated that it had 5.255 billion (US$810 million) in outstanding loans due while it had 800 million yuan (US$124 million) in cash available to pay these debts. A creditor committee of financial institutions formed on February 1 to coordinate with all parties to resolve the issues.

Back in 2016, CFLD achieved over 120 billion (US$18.6 billion) in revenue and was ranked the number 8 real estate developer in the country. In March 2017, as the local governments in major cities, including a number of regions outside of Beijing, issued housing purchase restriction orders to curb the overheating real estate market, the housing market in the suburbs and cities near Beijing cooled down. CFLD was hit hard in operating cash. In 2018, it tried to sell the ownership of multiple projects to recoup cash. Between July 2018 and February 2019, the Pingan Group injected 18 billion (US$2.78 billion) in cash into CFLD and became the second largest shareholder of CFLD. In 2019, CFLD’s sales revenue dropped 11 percent to 145 billion (US22.4 billion). Its sales in 2020 were estimated to be 96 billion (US$15 billion). Its industry ranking also dropped to 47th place in the nation. The CFLD Chairman of the Board attributed the cause of the debt crisis to the following reasons: it under-estimated the market decline in the suburban regions in Beijing; new market developments were below expectation; excessive expansion and poor management; and COVID 19.

Source:, February 2, 2021

Experts Warn of Coming Collapse of China’s Population Growth

At a press conference on January 18, China’s National Bureau of Statistics postponed the release of 2020 birth data.

In an article on, Liang Jianzhang, the founder of the Group and a professor at Peking University, quoted data from local governments and media. The number of births in Wenzhou city in 2020 was 19.01 percent lower than in 2019. Hefei city’s new births in 2020 dropped by 23 percent compared to 2019. The same measure in Taizhou City in 2020 saw a decrease of 32.6 percent. Liang suggested that the fertility rate can be fundamentally reversed only by implementing changes in family planning policies, reducing housing costs, and cutting taxes.

Yi Fuxian, a senior scientist at the University of Wisconsin-Madison and author of Big Country with an Empty Nest, recently tweeted that “today’s Northeast region is China’s tomorrow.”

Yi pointed out that the size of the economy in the northeast region as a percentage of the whole country shrank from 13.1 percent in 1980 to 9.1 percent in 2010 and 5.0 percent in 2020. A key contributor is the aging population.

Yi told Radio Free Asia, “(The central government) predicts that the economy will double by 2035 and that the annual growth rate will average 4.7 percent between 2021 and 2035. From the perspective of population, I think this possibility is very low. China’s economy may be able to maintain a growth rate of 4 percent or 5 percent by 2025, after which the growth rate will continuously decline.”

Data from the National Bureau of Statistics shows that the birth rate in the three northeastern provinces in 2019 was only 0.61 percent, even lower than the 0.68 percent birth rate in Japan, the world’s oldest country. The reasons for the decline in the fertility rate in Northeast China, according to Yi, include the high level of urbanization, a high proportion of the population working in the state sector, high compliance with the government’s family planning policy, a low marriage rate and a high divorce rate.

Source: Radio Free Asia, February 2, 2021

China Box Office Revenue Fell Sharply in 2020

China produced a number of patriotic movies last year, including the movies that commemorated the 70th anniversary of the Korean War. Box office revenue, however, still fell sharply due to COVID 19. Revenue was only at 30 percent of what it was in 2019. Among the 28 listed film making companies, only 6 of them had revenue and profit growth compared to 2019.

According to Securities Times, 294 movies were released in China in 2020, with a total box office revenue of 20.417 billion yuan (US$3.18 billion), of which box office revenue for domestically produced movies was 17.093 billion yuan (US$2.66 billion), accounting for about 83 percent of the total revenue. Meanwhile only five companies had stock price increases in 2020.

Even though China’s movie industry was hit hard by COVID 19 in 2020, it still surpassed North America and was the world’s largest movie market.

Source: Central News Agency. January 28, 2021

Holding the Largest Debt in Chinese History, HNA Group Filed for Bankruptcy

On January 22, holding $700 billion (US$109 billion) in debt, the largest in Chinese history, the HNA Group filed for bankruptcy. The High People’s Court of Hainan Province is currently conducting a legal review of the HNA Group.

The HNA Group was formed in 1993 in the airline business. It gradually diversified into real estate, banking, and the Hotel industry. Between 2015 and 2017 alone, it had 40 international mergers and acquisitions having a total value of US$40 billion. At the end of 2017, the HNA Group was in a debt crisis due to excessive expansion. In July 2018, Wang Jian, then chairman of HNA Group, died in an accident in France. Chen Feng, who was a retired HNA board member at the time, took over HNA. In 2018, HNA reported its first loss of 4.9 billion yuan (US$0.76 billion). In the first half of 2019, the HNA Group lost 3.52 billion yuan (US$0.55 billion) with 706.726 billion yuan (US$110 billion) in outstanding debt. In 2019, HNA hired a risk mitigation group that tried to get it out of the liquidity crisis. Since then it has been selling the non-core businesses. On February 29, 2020, Hainan Provincial People’s Government sent a task force team to conduct a financial review and analysis of the HNA Group and its 2,000 subsidiaries. In the past year, HNA has also gone through a number of personnel changes. On January 22, after sorting through the company’s capital, management and debt structure, the task force team announced the bankruptcy decision and stated that HNA will have to go through a restructuring process.

1., January 22, 2021
2. Central News Agency, January 29, 2021
3. Radio Free Asia, January 29, 2021

China Builds its Own Value Chain: Will Overtaking on a Curve Work?

Wu Jiemin, a researcher at the Institute of Sociology, Taiwan Academia Sinica, won the “Humanities and Society Academic Award” issued by the Academia Sinica for his book Rent-Seeking Developmental State in China: Taiwan businessmen, Guangdong Model and Global Capitalism. The book discusses in great detail the connections between China and global capitalism.

In an interview with Voice of America, Wu Jiemin said that China is trying to bypass the global value chain system controlled by Western countries to build a value chain system that Chinese capital can control on its own. The U.S.-China confrontation situation cannot be changed in the short-term. If China wants to succeed in the challenge, it must make a big breakthrough in science and technology. However, scientific and technological development is closely related to academic and free speech and China is currently under a highly authoritarian rule. Without freedom of thinking and speech, Wu doubts such “overtaking on a curve” would be successful.

According to Wu, one of the key features in China is a massive systematic and collective rent seeking undertaking. The so-called rent-seeking is a term in economics. The country is not directly engaged in production activities but intervenes in the industrial chain to extract a certain amount of interest. This interest is called economic rent or political rent.

Wu said that China has a special system design for extracting benefits, including value-added fees, management fees, approval fees for leased land, and social security fees. Further, local governments play an important and unique role. Rent-seeking activities in China are rampant.

“The local government acts like an intermediary or broker, which is to integrate the resources needed in various production processes to a certain extent. … In this process, the local government also obtains a lot of tax benefits from the manufacturers, including economic rents obtained from foreign capital and local manufacturers. This revenue becomes an additional income for the local government outside of its budget. Part of it goes to the hidden coffers for the officials, some goes to the personal pocket of the official and the rest becomes tax revenue to fund construction.” On the other hand, foreign investors in China are disgusted by the rent-seeking behavior of local officials, but they have to deal with them and seek their protection.

Wu believes that in the past 10 years, the Guangdong model transformation and the Chinese model transformation have focused on bypassing global value chain hegemony and trying to build a value chain system that Chinese capital can control by itself.

In Wu’s opinion, one side of China’s development model is its biggest gain in foreign exchanges and fiscal revenues that it has spent on the military, economic modernization, and urbanization. China’s subways, high-speed rails, and highways are examples. However, Wu said that the other side of China’s development model is high exploitation of labor, low welfare, and lack of human rights.

Source: Voice of America, January 20, 2021

China Reduced Lower Mekong Water Level with No Notice until Six Days Later

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that China issued notice to the lower Mekong River countries on January 6 that it reduced Mekong River water level via its dams on upper Mekong. Both Thailand and the Mekong River Committee (MRC, an organization jointly formed by Thailand, Cambodia and Vietnam) confirmed the notification. The reason China provided was power transmission line maintenance. Water volume reduction was expected to be 47 percent from 1904 cubic meters per second to 1000 per second. China made an agreement last October with MRC to share water information. However, the Stimson Centre (sponsored by the United States) and another consulting firm, Eyes on Earth, both said, according to their monitoring data, China has been reducing the Mekong River water level since December 31. The MRC said the water volume reduction was observed on December 31 which was six days before China’s notification. This volume reduction could result in a lower water level of 1.2 meters. The drastic change could impact water transportation and fishing. China promised to restore the water volume “back to normal” without giving the actual cubic meter numbers.

Source: NetEase, January 8, 2021