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China Extends Grad School Duration: Education Push or Disguised Jobs Program?

In recent years, many Chinese universities have extended their graduate programs from two to three years, citing reasons such as “improving the quality of graduate education.” However, some observers link this change to rising youth unemployment rates, viewing it as a temporary measure to address job market pressures.

Multiple universities, including Guangxi Normal University, Shenyang University of Technology, and Xi’an International Studies University, have announced extensions to their master’s and doctoral programs starting from 2025. The adjustments affect various disciplines, including chemistry, education, literature, and foreign languages.

Experts argue that postgraduate education emphasizes specialization and depth, requiring higher quality standards. They claim that extending the study period provides more space to meet these requirements and optimize the training process.

Supporters of the change suggest it allows for strengthened classroom teaching, improved education quality, and more opportunities for students to engage in practical experiences. It also gives students more time for thesis writing and job hunting.

Critics of the move acknowledge that this extension may be linked to China’s changing employment landscape, with many graduates opting for “slow employment.” While the longer study period may help students find more suitable jobs, some argue that it shouldn’t be a one-size-fits-all approach or merely a stopgap measure to address social employment pressures. They suggest allowing capable and willing students to graduate early.

Source: Central News Agency (Taiwan), July 25, 2024
https://www.cna.com.tw/news/acn/202407250355.aspx

China Considers New Local Tax and Bond Issuance to Address Severe Local Government Debt Crisis

China’s local governments are heavily burdened with debt. To address this financial strain, China’s central government is considering the introduction of a new local tax, potentially amounting to around one trillion yuan. Reports suggest that the Central Committee of the Communist Party is studying a consolidation of existing taxes—such as the Urban Maintenance and Construction Tax, Education Surcharge, and Local Education Surcharge—into a new Local Additional Tax. Local authorities would have some autonomy in setting the tax rate within specified limits.

Data from the Ministry of Finance reveals that in 2023, China’s VAT and consumption tax revenues totaled approximately 8.54 trillion yuan. The combined revenues from the existing taxes to be consolidated are estimated at around 949.6 billion yuan. This reform is aimed at addressing the imbalance between central and local financial powers, which has led to a cycle of fiscal disorder.

Analysts offer two interpretations of this policy shift: one suggests decentralizing fiscal authority, while the other implies strengthening central control. Some experts argue that centralizing fiscal control aligns with President Xi Jinping’s strategy for unified national management, reducing the likelihood of substantial decentralization.

The Wall Street Journal highlights that local governments are facing severe debt issues, with hidden liabilities estimated between 7 to 11 trillion yuan, double the central government’s debt. In the first half of 2024, local debt issuance exceeded 3.5 trillion yuan, with expectations for a peak in the third quarter.

To address these issues, some suggest issuing 2 trillion yuan in national bonds for local use. However, experts like Wang Guocheng believe this amount would be insufficient compared to the vast debts of major property developers and local governments. Without comprehensive tax system reforms, local deficits are likely to persist.

Additionally, economist Li Daokui proposes issuing 500 billion to 1 trillion yuan in consumption vouchers to stimulate spending and economic recovery, citing potential multiplier effects from consumer incentives. However, concerns remain about the effectiveness of such measures given current economic conditions and consumer behavior.

Source: Radio Free Asia, July 25, 2024
https://www.rfa.org/mandarin/yataibaodao/jingmao/hcm1-china-taxation-local-economy-education-07252024054647.html

Beijing Further Boosts Rare Earth Metal Production with Quotas, Hurts Producers’ Bottom Line

On June 29, China announced “Rare Earth Management Regulations” which stipulate comprehensive state supervision and control over the production and sales of rare earth products. China is currently the world’s leading manufacturer of rare earth metals, holding about 70 percent of the global reserves.

Beijing issued a production quota for Chinese companies – 135,000 tons in the first half of 2024, a 12.5 percent year-on-year increase. Market demand for rare earths did not go up as Beijing expected, however, and price dropped dramatically as a result of the government-mandated increase in rare earth production. The rare earth price index published by the China Rare Earth Industry Association on July 18 dropped by about 20 percent compared to late July 2023.

As a result of oversupply in the rare earth markets, all major Chinese rare earth producers saw significant declines in their profits, in the first quarter of this year. Northern Rare Earth’s net profit fell by 94 percent year-on-year, China Rare Earth reported a loss of approximately 289 million yuan (US$ 40 million), Guangdong Rising Nonferrous Metals a loss of 304 million yuan, and Shenghe Resources a loss of 216 million yuan.

Nikkei Asia pointed out that, in recent years, the CCP has continuously increased the production quotas for rare earth metals. In 2023, Beijing increased the quotas threefold, bringing the annual total to 255,000 tons, a 21 percent increase compared to 2022. Many believe this year’s quotas will go even higher. It seems that Beijing wants to use such increasing quotes to maintain its dominant position in rare earth production and export volume so that it can use rare earths as a bargaining chip in diplomatic negotiations.

Meanwhile, other countries are trying to reduce the reliance on China’s production of rare earths. The United States has expanded domestic rare earth production, and many countries have intensified local efforts to identify domestic rare earth deposits.

Source: Epoch Times, July 19, 2024
https://www.epochtimes.com/gb/24/7/19/n14293824.htm

Top Jewelry Store Chow Tai Fook Sees Retail Value Drop 20 Percent, Closes 180 Stores in China

On July 24, Chow Tai Fook Jewlery Group Limited released its unaudited key operating data for the three months ending June 30, 2024. The data show that Chow Tai Fook’s overall retail value for the period April to June of this year decreased by 20.0 percent year-on-year, with retail value in the mainland Chinese market down by 18.6 percent and the in the Hong Kong and Macau markets down by 28.8 percent.

In the first quarter of its 2025 fiscal year (April to June 2024), Chow Tai Fook opened 85 new jewelry stores and closed 176 stores in the mainland Chinese market, resulting in a net decrease of 91 stores. It had a net decrease of 89 stores in the mainland market in the previous quarter. This means that in the first half of this year, Chow Tai Fook has closed a total of 180 jewelry stores in mainland China.

Another Chinese jewelry giant, Luk Fook Holdings, announced on July 19 that the group’s overall retail value in the first quarter of its 2025 fiscal year dropped by 18 percent year-on-year, and that overall retail revenue has decreased by 23 percent year-on-year. Luk Fook Jewelry’s net store count decreased by 108 stores in mainland China.

Source: Epoch Times, July 24, 2024
https://www.epochtimes.com/gb/24/7/24/n14297931.htm

China’s Birth Rate Dilemma: Quanzhou’s Controversial Three-Child Policy Push

China’s population has experienced negative growth for two consecutive years, making “rescuing the birth rate” a top priority. A population policy document from Quanzhou, Fujian Province, called for its Chinese Communist Party (CCP) members and officials to have three children, raising public concerns about “undercover coercion to have children.” The Quanzhou Health Commission later explained that the document was still in the internal review stage and was mistakenly published due to staff oversight.

Since the implementation of China’s three-child policy in 2021, local measures to support the policy have garnered attention. The leaked document from Quanzhou outlined work arrangements for implementing the policy, including a call for CCP members, government agencies, state-owned enterprises, and public institutions to take the lead in having three children.

The approach echoes a directive given in 1980, when the Communist Party urged members to have only one child, marking the beginning of China’s one-child policy era. The Quanzhou Health Commission clarified that the document was still in draft form and not yet officially released.

Quanzhou, an economically prominent city in Fujian Province, has seen significant growth, with its public budget revenue exceeding 100 billion yuan in 2023.

As China faces population decline, boosting birth rates has become a government priority. The National Healthcare Security Administration reported that four provinces and cities have included assisted reproductive technology in medical insurance coverage since 2023.

Source: Central News Agency (Taiwan), July 21, 2024
https://www.cna.com.tw/news/acn/202407210065.aspx

China’s Foreign Direct Investment Drops 29% Amid Economic Slowdown and Policy Concerns

China’s Ministry of Commerce reported that foreign direct investment (FDI) in China in the first half of 2023 decreased by 29.1% year-on-year, totaling 498.91 billion yuan (US$68.6 billion). However, the number of newly established foreign-invested enterprises increased by 14.2%.

Manufacturing sector FDI accounted for 28.4% of total FDI, up 2.4 percentage points from the previous year. High-tech manufacturing FDI made up 12.8% of the total. Investments from Germany and Singapore increased by 18.1% and 10.5%, respectively.

Despite strict COVID-19 control measures, China’s FDI had been strong in recent years, setting records from 2019 to 2021. However, the country’s economic recovery post-pandemic has been slower than expected, with growth rates of 3% in 2022 and 5.2% in 2023.

Analysts suggest that China’s slowing economic growth leaves less room for large-scale foreign investments. Many U.S. tech companies and investors have withdrawn, citing factors such as increased labor costs, slower growth rates, supply chain risks highlighted by the pandemic, and political risks.

The unpredictability of Chinese government policies is also deterring foreign investment. Recent crackdowns on industries like education, entertainment, and gaming have caused losses for companies in these sectors, making long-term investments less attractive to foreign entities seeking policy stability.

Source: Central News Agency (Taiwan), July 14, 2024
https://www.cna.com.tw/news/acn/202407140082.aspx

Saudi Stock ETFs Make Debut on Chinese Exchanges

On July 16, two new Exchange-Traded Funds (ETFs) linked to the stock price index of the Saudi Stock Exchange (Tadawul) were listed on the Shanghai and Shenzhen stock exchanges in China. This marks the first time Saudi stock ETFs have been listed in mainland China. The move is expected to strengthen financial cooperation between the two countries, aligning with China’s Belt and Road Initiative. For Saudi Arabia, this presents an opportunity to attract Chinese investment.

The two ETFs listed are the “Huatai-PineBridge CSOP Saudi Arabia ETF” and the “China Southern Asset Management CSOP Saudi Arabia ETF.” The total amount raised so far was approximately 1.2 billion yuan (US$ 166 million).

China implements capital controls that generally restrict cross-border securities investments. These two ETFs utilize the Qualified Domestic Institutional Investor (QDII) framework, which allows Chinese domestic investors to invest overseas within certain limits.

Source: Nikkei Chinese, July 16, 2024
https://zh.cn.nikkei.com/china/cfinancial/56153-2024-07-16-15-39-48.html

China Grapples with Severe Flooding: 20.76 Million Affected

China is facing severe flooding in its southern regions this year, with heavy rains causing widespread damage. As of July 12, 2023, official reports indicate that 20.76 million people have been affected by floods and heavy rains, with 86 people dead or missing.

According to Xu Xianbiao, an official from Ministry of Emergency Management (MEM), this year’s flood season came earlier and more intensely than usual. The southern regions, especially areas south of the Yangtze River, have experienced significantly more rainfall than in previous years. Fourteen numbered floods have occurred in the Yangtze River, Pearl River, and Taihu Lake basins.

The government has implemented four measures to address the situation: “strengthening deployment and scheduling,” “enhancing early warning and evacuation,” “reinforcing rescue operations,” and “providing support to local authorities.”

MEM has raised the flood response level to Level 3 for four provinces along the middle and lower reaches of the Yangtze River. This action has helped prevent mass casualties in some areas.

To support relief efforts, the Ministry of Finance has allocated 848 million yuan (US$117 million) to 12 provinces, municipalities, and autonomous regions affected by the floods.

The Ministry warns of high flood risks in northeastern, northern, eastern, and central China in July, with potentially severe flooding in major river basins including the Yangtze, Huaihe, Haihe, Songhua, Liaohe, and Taihu Lake.

Source: Central News Agency (Taiwan), July 13, 2024
https://www.cna.com.tw/news/acn/202407130119.aspxs