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Lianhe Zaobao Criticizes Xi Jinping

Singapore-based Lianhe Zaobao used to maintain good relations with the Chinese Communist Party. Recently, however, it published a commentary that openly criticized Beijing’s policy. Two versions of the commentary were published.

The first version has the author’s name in the title: “Liu Mengxiong: the Problem Is Economic, But the Root Cause is Political.” Liu is a Hong Kong businessman and former member of the National Committee of the Chinese People’s Political Consultative Conference. In the past, he had a pro-Beijing stance. The second version of the article, titled “Commentary: the Problem Is Economic, But the Root Cause Is Political,” indicated the author’s name in a footnote.

In the article, Liu listed economic problems faced by China, praised Deng Xiaoping’s policy of economic reform, and criticized Xi Jinping’s policy (without mentioning Xi’s name explicitly). “The first 30-odd years of reform and opening up were characterized by a steady upward trajectory, but in recent years, [China] has fallen into a downward spiral. If we look at the essence of the phenomenon, we will find that the most fundamental reason for the economic reversal lies in politics.”

The article lists many policies that, in the author’s opinion, have had a negative impact. These include stressing the party’s control over companies, policy on COVID, and the CCP’s hostility against the U.S.

The article ends by calling for political reform and stating that “The economic adversity caused by politics must be treated politically. The question is, does the princeling leader have the sense of historical mission and vision necessary to realize economic marketization, the rule of law, and the democratization of politics through reform of the political system?”

Sources:
1. Lianhe Zaobao, August 21, 2023
https://www.zaobao.com.sg/forum/views/story20230821-1425457
2. Lianhe Zaobao, August 21, 2023
https://www.kzaobao.com/mon/keji/20230821/145204.html

China’s Office Vacancies Soar Amid Slowing Economy

China’s economy is showing signs of weakness as business activity slows. According to Chinese media reports, office vacancy rates in major cities have hit multi-year highs in Q2 2023, indicating weak demand. In Beijing the citywide vacancy rate reached 18.3%, the highest level in 13 years. Many of China’s other megacities saw similarly high vacancy rates. Vacancies in Shenzhen and Shanghai were 20.3% and 18.7%, respectively.

Caijing magazine reported that international real estate firm Savills found vacancy rates in Beijing at 13-year highs. Industry sources said the office rental market is struggling with widespread price reductions in 2023. Client demand has dropped significantly, with only 2-3 prospective tenants per month compared with an earlier rate of 2-3 per week.

Negative net absorption of 53,000 sqm in Beijing in Q2 shows a continuous tenant exodus. With weaker demand, rents are falling across major markets. According to Savills, average Beijing office rents dropped 1.5% quarter-over-quarter, now largely back to 2012 levels.

Other top Chinese cities had similar trends. Shanghai, Guangzhou and Shenzhen saw Grade A office vacancy rates of 18.7%, 17.5% and 20.3% respectively in Q2 per Colliers data. Cushman & Wakefield data shows vacancy rates in Beijing, Shanghai, Guangzhou and Shenzhen increased year-to-date, now at 16.9%, 18.6%, 18% and 24.5%, respectively.

The rise in vacancies stems from oversupply amid weaker than expected demand growth, signaling China’s economic downturn.

Source: Central News Agency (Taiwan), August 21, 2023
https://www.cna.com.tw/news/acn/202308210197.aspx

LTN: Tyson Foods to Sell Its China Poultry Business

Major Taiwanese news network Liberty Times Network (LTN) recently reported that Tyson Foods, the largest U.S. meat supplier, is planning to sell the China-based branch of its poultry business, becoming the latest multinational company planning to divest from the country. Tyson Foods has hired Goldman Sachs to advise on the sale and has sent out preliminary information to potential buyers, including private equity firms.

It’s unclear how much Tyson Foods’ poultry business in China is worth and why Tyson Foods is selling the business. Tyson Foods opened its first factory in China in 2001. Currently, it has four R&D centers, several processing plants, and dozens of farms in China. It operates a vertically-integrated pipeline in China, from breeding and slaughtering to processing and distribution. The company sells chicken, beef, pork, and processed foods.

Livestock business margins have been squeezed in China over the past few years. This is due to the government’s Zero Covid policies as well as higher feed price pressure caused by the Ukraine war. Both Tyson Foods and Goldman Sachs declined to comment.

Source: LTN, August 17, 2023
https://ec.ltn.com.tw/article/breakingnews/4399192

Lianhe Zaobao: China Foreign Investment Index Falls to 25-Year Low

Singapore’s primary Chinese language newspaper, Lianhe Zaobao, recently reported on data released by China’s State Administration of Foreign Exchange. The data show, between April and June of 2023, the growth rate of direct investment liabilities, a measure of foreign direct investment in China, dropped to US$4.9 billion.

The reported figure is 87 percent lower than the figure from the same period last year. This was the smallest quarterly total for foreign direct investment since records began in 1998.

The data from the Administration of Foreign Exchange reflects the trend of declining profits for foreign companies and reduction of their scale in China. Beijing’s three-year-long Zero-Covid program hampered the Chinese economy and limited access to Chinese markets, geopolitical tensions have been on the rise, and China’s post-Covid economic recover has been lackluster. As such, foreign companies are reevaluating the risks associated with doing business in China.

According to data previously released by the Chinese Ministry of Commerce, the actual use of foreign investment (FDI) in the country from January to June of this year fell by 2.7 percent year-over-year, the first decline in three years.

Source: Lianhe Zaobao, August 8, 2023
https://www.zaobao.com.sg/realtime/china/story20230808-1421584

Economy of “World Factory” Dongguan City Falters

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that, according to the Dongguan City Bureau of Statistics, the city saw a first half-year GDP growth of 1.5 percent year-over-year. China’s national GDP growth during the same time period was at 5.5 percent, and GDP growth in Canton province (where Dongguan City is located) was 5.0 percent. Dongguan’s growth rate was second to last among major Chinese cities, and it ranked last among cities with an annual GDP of over one trillion yuan.

The Cantonese city of Dongguan, once nicknamed the “World’s Factory,” has manufacturing as the cornerstone of its economy. Last year, the city’s industrial value added reached RMB 624.4 billion (around US$86.7 billion), ninth in the country, and Dongguan ranked third among Chinese cities in manufacturing of computer, communication and other electronic equipment. In this year’s first first half, however, Dongguan’s computer, communication and other electronic equipment manufacturing sector fell by 4.9 percent, and electrical machinery and equipment manufacturing fell by 7.4 percent. The negative growth of these sectors has had a significant impact on Dongguan’s economy.

Take mobile phone production as an example — Dongguan is China’s manufacturing base for mobile phones nationally. Recently, one out of every four smartphones in the world was made in Dongguan. It used to produce 400 million mobile phones a year; production peaked in 2019 and then gradually declined. Last year, the production of mobile phones in Dongguan was only 197.6167 million units, a drop of more than half from the peak.

In the first half of this year, Dongguan’s exports decreased by 9.4 percent. The city’s past rapid growth was the result of globalization — the capital, technology, equipment, and orders driving economic activity in the city all came from abroad. This economic dependency on external factors has become a liability as global trade slumps, directly affecting Dongguan’s economy.

Source: Sina, August 13, 2023
https://news.sina.com.cn/o/2023-08-13/doc-imzhahxz5975357.shtml

Shanghai Police Target China’s Largest Provider of Emigration Services

The Shanghai Police have arrested Chairperson He Mei of Wailian Group (外联出国), Shanghai’s largest China-US immigration intermediary company. The arrest is part of an investigation into illegal foreign exchange transactions totaling over a billion RMB. In addition to He, four others have also been arrested.

Wailian Group has been a prominent firm in enabling emigration from China, facilitating quick approvals for various countries’ visas and residency permits.

Several people posted on the internet citing insiders, saying that the police demanded that He Mei hand over all information on clients for whom the firm has provided immigration services over the company’s several decades of operation. One tweet said that the authorities are targeting rich Chinese who have exited China but who still have a lot of property in the country. This would enable the local and national Chinese government to confiscate those valuable properties. Another social media post, seen on Chinese social media Weibo, speculated that the authorities may be aiming to collect information on emigration of lower-ranking government bureaucrats and their family members.

Source: Epoch Times, August 10, 2023.
https://www.epochtimes.com/gb/23/8/10/n14051577.htm

People’s Daily: Chinese Cars Taking Over “Southern Markets”

People’s Daily stated that cars made in China are taking over the global markets, especially the “Southern World” (non-Western countries).

According to the latest data from the China Association of Automobile Manufacturers, China’s automobile exports reached 2.14 million units in the first half of 2023. This marks a year-on-year increase of 75.7 percent in reported auto exports.

Total reported export value reached $99.97 billion, up by 41.7 percent from the previous year. Total automobile export for this year is anticipated to reach 4 million units, a significant increase from the prior two years. Reported exports were just over 2 million units in 2021 and about 3.3 million units in 2022.

Chinese automakers dominate the fast-growing electric vehicle market in Southeast Asia, contributing three-quarters of the region’s electric vehicle sales in the first quarter of this year. Chinese cars are also gaining traction in markets like the UAE, Africa, the Middle East, and Latin America due to their affordability, features, and comprehensive warranty services.

The main factor driving Chinese car exports is competitive pricing, including the market’s ability to offer more features at the same price as competitors. Chinese car companies have been setting up joint ventures for localized auto production in countries such as Thailand and Brazil.

Source: People’s Daily, August 7, 2023
http://world.people.com.cn/n1/2023/0807/c1002-40051652.html

Senior Wanda Executive Arrested for Corruption

Chinese media Jiemian reported that Liu Haibo, the senior vice president of real estate giant Wanda Group, has been arrested for reasons yet to be announced. According to a Wanda insider, the main reason behind the arrest is related to internal corruption within the company, and the amount of money involved is huge. In addition to Liu Haibo, a number of others from Wanda Group have also been taken away.

Liu Haibo graduated from Beijing University of Aeronautics and Astronautics in July 1991, and he joined Wanda Group in 2010. He served in a number of senior positions, including assistant president, executive deputy general manager of the development department, general manager of the development department, regional general manager, group chief vice president, and senior vice president. He has been in charge of Wanda Group’s investment business for a long time.

The news of Liu Haibo’s arrest has sent shockwaves through the real estate industry. Wanda Group is one of the largest real estate companies in China, and its involvement in corruption is a major blow to the industry. It remains to be seen what charges will be brought and what the full extent of the corruption is, but the news is sure to have a negative impact on Wanda Group’s reputation and business prospects.

Source: Central News Agency (Taiwan), August 8, 2023
https://www.cna.com.tw/news/acn/202308080256.aspx