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HKET: Bank of China Predicts China’s GDP will Grow by 3.2 Percent

Hong Kong Economic Times (HKET), the leading financial daily in Hong Kong, recently reported that, according to a report released by the Bank of China Research Institute, the GDP growth rate of the mainland this year is expected to be about 3.2 percent, which will be lowered by 2.8 percentage points overall due to the Zero Covid control policy. Difficulties in Covid prevention, as well as the control measures disrupting the economy are important reasons for growth  declining. The pressure of demand contraction will remain next year, and fiscal policy will be an important driving force for the economy. According to changes in a number of factors, the report makes three forecasts: pessimistic, baseline and optimistic. In a pessimistic scenario, the pandemic continues to break out, population movement is still largely restricted, and supply and demand are sluggish. Next year’s GDP could grow by about 3.6 percent. Under the baseline situation, the pandemic situation is generally controllable and its impact on the economy will gradually weaken. This may result in an increase of about 5.3 percent. Under an optimistic scenario, the impact of the pandemic control measures are greatly weakened, and the recovery of supply and demand is accelerated, reaching an increase of about 6.6 percent. Although the Chinese economy will continue to recover next year, it still faces challenges such as the weak foundation of domestic demand, the security of the supply chain, and the spillover risks of external economic and financial market fluctuations. Considering that the U.S. Federal Reserve will continue to raise interest rates next year, extra attention should be paid to its policy changes.

Source: HKET, November 30, 2022
https://bit.ly/3Usp3eh

French Chamber of Commerce Called for Removing Excessive Covid Restrictions

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that the “French Embassy in China” posted in Chinese Weibo and pointed out that China’s Zero Covid policy has had an impact on French companies in China, who provide 570,000 jobs in China. French companies very much welcome the recent 20 measures to optimize the Covid control framework announced by China on November 11, which will greatly reduce the negative impact of pandemic prevention on economic activities and people’s lives. However, the French Chamber of Commerce in China has noticed that since the policy was first announced, the actual implementation results have not met the expectations of French companies in China. The Chamber of Commerce called on the Chinese government to truly implement the 20-measure policy and remove unnecessary and excessive covid restrictions. The Chamber of Commerce reiterated that French companies hope to see a clear strategy formulated in the near future to get out of the Zero Covid policy as soon as possible. China still plays a pivotal role for French companies and a transparent, predictable and fair business environment is essential. The announcement issued by the Chamber indicated that the three major obstacles are: severely restricted Chinese domestic business travel, international travel between China and France is still being restricted, and there is a more and more serious trend of restricting local business activities within a city. The French Embassy Weibo received massive comments from Chinese netizens, mainly to support the Embassy. Some thanked the French for the posting since the Chinese government typically don’t delete Embassy content to control speech.

Source: NetEase, November 25, 2022
https://www.163.com/dy/article/HMVR6U2K0534B9EY.html

Only 40 Percent of China’s Movie Theaters Are in Operation due to the Covid Lockdown

Affected by the Covid lockdown, the proportion of Chinese cinemas in operation fell to a new low. Netease Entertainment, an online media covering entertainment news, reported that only 41.7 percent of China’s cinemas are in business compared to the ratio of 59.70 percent a month ago on October 25. The total number of operating cinemas is 5178, the lowest in the past six months.

Caixin.com reported that many theaters continued being inoperable due to the Covid lockdown and the national box office revenue for the week of Nov. 21-27 was RMB 112 million (NT$482 million), down 45.63 percent from the previous week.

Only 14 cinemas remain in operation in Beijing, which used to be a big box office contributor as China’s first-tier city. Now more than 90 percent of Beijing’s theaters are closed. Cinemas in Tibet, Xinjiang, Qinghai, Ningxia and Chongqing are completely shut down; Inner Mongolia, Heilongjiang, Jilin, Liaoning, Shanxi, Hebei and Henan all see less than 50 percent of their cinemas in operation.

Source: Central News Agency (Taiwan), November 28, 2022
https://www.cna.com.tw/news/acn/202211280318.aspx

RFA Chinese: Tencent Launched another Round of Layoffs

Radio Free Asia, Chinese Edition, recently reported that sources said that Chinese tech giant Tencent Holdings has begun a new round of layoffs in its video streaming, gaming and cloud computing divisions. This round of layoffs affects three of Tencent’s six business units. It is difficult to determine the size of the layoffs. China’s tech sector continues to feel the effects of regulatory crackdowns and the Zero Covid government policies that have slowed China’s economic growth. Earlier this year, Tencent had already cut staff along with other well-known tech companies such as the Alibaba Group. Tencent management said they were focused on cutting costs and have closed non-core businesses in some areas. The Shenzhen-based company is eyeing global expansion to offset slowing growth in China. Tencent is recalibrating its mergers and acquisitions strategy, focusing more on buying majority stakes in mostly overseas game companies. Market analysts expressed the belief that Tencent will report flat or slightly smaller revenue for its third quarter. Tencent declined to comment on the matter.

Source: RFA Chinese, November 15, 2022
https://www.rfa.org/cantonese/news/tencent-11152022065627.html

Lianhe Zaobao: Moody’s Risk Management Unit Closed its China Operations

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that Moody’s has closed the risk management unit of its China operations, thus cutting about 100 jobs. People familiar with the matter said Moody’s Analytics closed its offices in Beijing, Shanghai and Shenzhen after discussing operational efficiency and profitability. However, Moody’s credit rating business will continue. Wall Street is now grappling with China’s strict Zero Covid government policy, volatile markets and state intervention. Morningstar had cut its staff in China earlier this year too. In response to inquiries, a Moody’s spokesperson said that, as announced on the most recent earnings call, Moody’s is taking steps to align its global workforce with current and anticipated economic conditions. Moody’s continues to maintain a strong presence in China and make constructive contributions to China’s sustainable growth and the further development of the Chinese domestic market. As a rating agency, Moody’s said Beijing’s support for its domestic real estate sector is not enough to eliminate the pessimistic outlook.

Source: Lianhe Zaobao, November 18, 2022
https://www.zaobao.com.sg/realtime/china/story20221118-1334459

China Uses Big Data to Audit and Tax the Rich

According to some individual social media accounts that focus on economic and financial news, the Chinese government has set up a “High Net Worth Individuals Administration” for people with bank deposits of 10 million yuan (US$1.4 million) or more,  The state has launched a special tax audit operation targeting this group.

In the future, the authorities will adopt the means of “smart taxation” to collect information from and digitally profile each taxpayer. People who are emigrating from the country will have to “settle taxes before the cancellation of their Chinese household registration.” In other words, everyone who wants to leave the “motherland” must go to the tax authority to have it issue a tax clearance certificate.

This news has led to heated debates among netizens. Some ridiculed this as one of Xi Jinping’s “common prosperity” tactics.

As a fact, the Chinese government’s audits targeting high-income and high-net-worth individuals have already quietly begun. In September this year, Hainan province’s Taxation Bureau issued a document stating that it had launched a new type of audit supervision and carried out random checks on the “double-high (high-income and high-net-worth) population.” In June this year, Hou Kai, auditor general of the National Audit Office, reported to at a National People’s Congress session that 544 high-income earners in 22 Chinese provinces and cities had evaded 4.722 billion yuan (US$ 0.66 billion) in personal taxes from 2018 to 2021.

Source: Radio Free Asia, November 9, 2022
https://www.rfa.org/cantonese/news/tax-11092022101644.html

Chinese Companies Ordered to Withdraw from Canadian Lithium Mine Investment

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that, on November 3, Industry Canada required three Chinese companies (China Mining Resources, Shengze Lithium and Zangge Mining) to divest their investment in key Canadian mining companies on the grounds of national security. In the emergency conference call after the incident, China Mining Resources officials said that it seems there is a trend of comprehensive restrictions on China-funded enterprises. Analysts in the financial market revealed that, in the future, China-funded companies will no longer be able to obtain any lithium resources in Canada or the United States, or acquire any companies listed in these two countries. Also, Chinese capital can only acquire up to 10 percent of the shares of lithium resource companies in Australia. In the absence of domestic lithium resources, Chinese companies cannot control the price of critical raw materials such as lithium concentrate. Thus are in a passive state in the upstream and downstream pricing game. China produces about 75 percent of the world’s lithium-ion batteries, but China only accounts for less than 20 percent of the global lithium resources. Most overseas lithium companies are listed in the US, Australia and Canada. This means that lithium resources have become the weakest link in China’s electric vehicle industry supply chain.

Source: Sina, November 3, 2022
https://finance.sina.com.cn/stock/marketresearch/2022-11-03/doc-imqmmthc3147998.shtml

Foreign Money Leaving China: 8.8 Billion Dollars in October and One Hundred Billion in (the previous)Nine Months

The Institute of International Finance estimated that foreign investors pulled out 8.8 billion dollars from China’s financial market in October. Among that, 7.6 billion was from the stock market and 1.2 billion was from the bond market. Several regions were gaining capital investment, including Asia (excluding-China) (5.6 billion dollars), Latin America (2.6 billion dollars), and Europe (2.3 billion dollars).

Since the Russia’s invasion of Ukraine in February, about 105 billion dollars has been pulled out from China’s bond portfolio.

Source: Epoch Times, November 9, 2022
https://www.epochtimes.com/gb/22/11/8/n13862006.htm