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Democratic Republic of Congo Halts China’s Control of a Cobalt Mine

Cobalt is a key material in the lithium-ion battery, and critical to electric cars. In the past 10 years, Chinese companies have spent several billion dollars to buy up the cobalt mines in the Democratic Republic of Congo, the largest cobalt supplying country in the world.

Recently a Congo court ordered China Molybdenum Co. to temporarily give up its control of the Tenke Fungurume mine. Gécamines SA, Congo’s state mine company reported that China Molybdenum Co. provided a false, low mine reserve number to the government to evade several million dollars in fees. The Congo authorities stopped the Chinese company’s operation in the mine for six months, until the accounting firm Mazars re-assesses the true value. The investigation has also expanded to a few other Chinese companies.

Last year, Congo President Félix Tshisekedi vowed that his government will continue reviewing mine contracts to ensure the Congo people benefit from the mining. Earlier this year, the Biden administration sent a group to Congo to discuss how the U.S. can obtain cobalt.

Source: Epoch Times, March 12, 2022
https://www.epochtimes.com/gb/22/3/12/n13641727.htm

Briefings | | |   Economy/Resources Geo-Strategic Trend

China’s Small and Medium-sized Private Enterprises Shrink Rapidly: Forcibly Demolished or Had to Establish a CCP Branch

At the end of 2021, the South China Morning Post reported that small businesses, the perennial backbone of China’s economy, are shrinking at a rapid pace. During the first 11 months, 4.37 million small businesses were written off, while only 1.32 million were registered. This is the first time in many years that the number of small business cancellations in China has exceeded the number of registrations.

On March 1, the National Bureau of Statistics of China released the PMI (Purchasing Managers’ Index) operation of February 2022.  In terms of enterprise size, the PMI for large and medium-sized enterprises was 51.8 percent and 51.4 percent respectively, up 0.2 percent and 0.9 percent compared to that of the previous month. However, the small enterprises PMI was 45.1 percent, down 0.9 percent  from last month. This was lower than the critical point. (a PMI below 50 indicates that the economy is in contraction.)

Mr. Li (a pseudonym), a small private enterprise boss from Taizhou, Zhejiang Province, has been uprooted from his hometown and displaced overseas for more than 2 years. He had 10 stores in Xiaoxie old industrial park at Lu’nan Street, Taizhou. In 2018, the Taizhou government demolished four to five hundred enterprises in the industrial park under the name of old city renovation and took away the related land.  The vast majority of those small enterprise owners were not given resettlement funds.

Mr. Li said, “The local government offered a very low price for compensation. That’s ridiculously low, just like a robbery! If you did not agree, the government could use tax, public security, fire, or environmental protection . . . from six or seven departments to deal with you.” Now the industrial parks have moved to remote places, like the new Binhai Industrial Park. He’s not able to afford even one store. “There is no way for the business to go on. Now some people still go to Beijing in order to petition, but the suppression is very serious,” Mr. Li started In1992. They were led to the Xiaoxie industrial park as private enterprises. It’s because the land has appreciated in value, an incrrease of probably dozens or up to a hundred times. The government wants to take the land back forcibly for commercial development and make a big profit. A similar event happened in the Shuanggang Industrial Park in Quzhou, Zhejiang Province. Those companies were auctioned off at low prices, and the owners ended up not having enough money to cover their debts. Some of them even committed suicide with hatred (in their hearts).

Mr. Li revealed, “When they get bigger, the enterprises are forced to establish CCP (Chinese Communist Party) branches ” (the CCP controls everything in China.). There are three purposes: one is to organize some CCP’s activities in two in three days. Its aim is for brainwashing; the second is for donating money easily when necessary; and the third is that the enterprise’s patents will belong equally to the state.

For example, one of  Mr. Li’s friends runs a large enterprise. A few years earlier the local CCP committee let him establish a party branch. He had been shirking it. Later, the CCP’s street office, the mayor and secretary of the town and the party union organizations came to him together. Mr. Li’s friend said that although he had a hundred employees, there were no CCP members in his factory. It’s not enough to set up a branch. (To set up a party branch needs three party members at least). Unexpectedly, they said — it’s okay. We will assign CCP members to you.

Mr. Li also mentioned that another friend’s enterprise produces high-end products directly required by the CCP for military use. It wants the technology. Some private enterprises also have a lot of things that the CCP does not have. So, the friend’s enterprise was acquired by the CCP with generous conditions and enough money. However, his freedom is gone, — two CCP persons were assigned to him plus two armed police officers to be his servants — driving his car and even opening the door for him.

Source: Epoch Times, March 9, 2022
ttps://www.epochtimes.com/gb/22/3/8/n13631574.htm

Reports | | |   Economy/Resources

Local Governments in China Sold Land to Themselves to Maintain the Price

Selling land usage rights is the main source of income for local governments in China. As Chinese private real estate developers are stressed for cash these days, state-owned-enterprises, especially the city investment enterprises, have become the main buyers when governments auction land.

However, the city investment enterprises are the financing platforms that local governments set up to raise money for government spending. They are owned and managed by the government. Government’s selling land to them is in essence to move land from the left hand and give it to the right hand. This shows money on the books. However, in reality, it does not bring money to the government. So this practice just serves to maintain real estate prices. These city investment enterprises still need to find true real estate companies to develop the land. It is at that time that they hope they will make money.

Source: Epoch Times, February 19, 2022
https://www.epochtimes.com/gb/22/2/19/n13590084.htm

Briefings | | |   Economy/Resources Government/Politics

Study Shows Political Connections Give Chinese Companies Preferential Access to Money

Bloomberg reported that researchers at the University of Navarra in Spain and the University of Manchester in the U.K. conducted a study of the Chinese companies that have connections to top-level Chinese Communist Party (CCP) officials. The researchers found that those with connections received more government subsidies that those without such connections.

Between 2012 and 2017, private firms that were listed on Chinese stock exchanges and that had board members who attended college alongside a member of the CCP Politburo, which has the 25 highest-ranking Chinese officials, received  an average of 16 percent more in subsidies relative to their sales when compared with similar companies without those ties. However, these “connected” companies did not have faster sales growth than the others, indicating that the special favors given to them were not the best use of China’s resources.

Source: Bloomberg, February 18, 2022
https://www.bloomberg.com/news/articles/2022-02-18/chinese-businesses-benefit-from-ties-to-elites-study-shows

Briefings | | |   Economy/Resources

Chinese Cities Lowered the Down Payment for Housing

Securities Times, a Shenzhen based financial and economic daily newspaper under People’s Daily reported that China has started to relax its policy on housing this year. For example, in Heze city, Shandong province, the down payment ratio for first-time home buyers has been reduced to 20 percent. Banks in Chongqing city and Jiangxi province have also reduced the down payment ratio to 20 percent for first-time buyers.

The report said that lowering the down payment is a strong policy incentive that stimulates market transactions.

After last year’s stringent housing market control, many places in China have adjusted their mortgage policies. More than 40 cities have announced measures to boost the sector, including lowering the down payment ratio, reducing the mortgage interest rate, and subsidizing home purchases.

Source: Central News Agency (Taiwan), February 21, 2022
https://www.cna.com.tw/news/acn/202202210057.aspx

Briefings | | |   Economy/Resources

CCP’s No. 1 Document: Food Security and Avoiding a Massive Return to Poverty

The Chinese Communist Party (CCP) issued a No. 1 document on February 22, a policy paper that traditionally focuses on the agriculture sector in rural China. This year’s document aims to “to ensure national food security” and “not to return to poverty on a large scale.”

The document “insists that the rice bowls of Chinese people are ‘filled with Chinese food,’ and ensures that the grain output is maintained at over 650 billion kilograms.”

The document also vows to implement hard measures to protect arable land, strictly adhering to the red line of 1.8 billion mu (1.2 million sq kilometers) of arable land.

The CCP announced that it got rid of poverty at the end of 2020. The new document tells the officials to “resolutely hold the bottom line of not returning to poverty on a large scale,” and put the rural households that are at risk of returning to poverty into the scope of monitoring.

Source: Central News Agency (Taiwan), February 22, 2022
https://www.cna.com.tw/news/acn/202202220389.aspx

Briefings | | |   Economy/Resources

China’s Banking Sector Comes to the Rescue of Real Estate Developers

The People’s Bank of China (PBOC), the country’s central bank, and the China Banking and Insurance Regulatory Commission (CBIRC), the chief regulator of the banking and insurance sector, jointly issued a circular at the end last year. It encouraged large state and private enterprises to merge and purchase (M&A) “high-quality projects” from real estate developers who are plagued by operational difficulties. It also urged financial institutions to provide these enterprises with the services that were needed for the acquisition.

At the beginning of this year, with support from the central government, the banking industry started to ease financing restrictions and release funds to support mergers and acquisitions. The number of real estate related M&A cases is on the rise.

The banking industry has injected at least 58 billion yuan ($US 9.15 billion) into the economy by issuing bonds, loans and other securitized assets.

A researcher at PBOC said, “Because of the lack of capital in the real estate industry, it is difficult to see large-scale M&A activities by the industry leaders. For some time in the future, banks will be an important source of funds.”

Source: Central News Agency (Taiwan), February 21, 2022
https://www.cna.com.tw/news/acn/202202210070.aspx

Briefings | | |   Economy/Resources