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China Raises Alarm over Expected Food Shortages

After severe flooding, about one-sixth of China’s land is soaked in water. Much of these lands serve as the main grain growing regions. Both China’s President Xi Jinping and Vice Premier Hu Chunhua recently talked about food security [Editor’s note: meaning food shortages] The pandemic, flooding, the deterioration of Sino-US relations, and the complex international situation are all directly or indirectly affecting food security.

On July 27th, Vice Premier Hu Chunhua spoke at a national food security video conference. Hu asked that food production be strengthened and that China ensure that there would be no mistake about food security. China has a governor’s responsibility system for food security, an institutional arrangement that provincial governments are held accountable for the protection of arable lands and food production in the region.

When Xi Jinping visited Jilin province a week earlier, he also emphasized that safeguarding food security must be placed in a prominent position, and that one “cannot relax” to increase food production.

Among the flooded areas in the southern provinces, substantial parts are major grain producing regions. According to the official statistics, grain production in the summer increased by 0.9 percent. However, the autumn production is a huge challenge. Due to the floods in southern China, some areas may see a “destructive reduction in production or even a total crop failure.” An alarm over food security was raised as autumn grain production accounts for three quarters of the annual total.

Lujiang County, located in central Anhui province, bordering Lake Chao on the north and the Yangtze River on the south, is one of China’s first commercial grain production bases. However, the recent flooding has devastated the vegetable production in Lujiang. The latest statistics show that, as of July 23, the disaster had affected 83,400 mu (13,745 acres) of vegetables, and 55,400 mu (9,131 acres) saw no harvest, causing a reduction of 80,423 tons of production.

Source: World Journal, July 29, 2020
https://www.worldjournal.com/7069933

The Powers Behind Tomorrow Holding Fought Back against Xi Jinping’s Take-Over

Xiao Jianhua is the owner of Tomorrow Holding (trading as the Tomorrow Group), a diversified investment company involved with banking, insurance, real estate development, coal, cement and rare earth minerals. He was involved in crashing China’s stock market in 2015, which was called a “financial coup” against Xi Jinping. He was abducted in Hong Kong and taken back to China in 2017. His whereabouts are unknown.

On July 17, the China Banking and Insurance Regulatory Commission announced it would take over four insurance companies and two trusts from Tomorrow Holding. The China Securities Regulatory Commission also commissioned four institutes to oversee three securities and commodity companies from Tomorrow Holding. Thus, the authorities have taken over all of Tomorrow Holding’s nine core companies in the insurance, trust, and securities fields, with total assets of over 1.2 trillion yuan (US $ 171 billion).

According to New Fortune, a company that specializes in evaluating Chinese financial service companies, Tomorrow Holding holds stocks in 44 financial companies, whose collective financial assets are over 3 trillion yuan (US $430 billion).

On July 18, Tomorrow Holding published a “Solemn Statement” on WeChat. It stated that the authorities “spared no effort to push for the takeover” and questioned the authorities’ underlining agenda. The statement was removed a few hours later.

Tomorrow Holding’s “Solemn Statement” stated that the company has been fully cooperative with the authorities’ investigation since Xiao Jianhua was arrested in 2017. It received several hundred billion yuan through the disposal of assets  and overseas remittances and also raised nearly 300 billion yuan, and thus it paid in full the principle and interest of the wealth management insurance product of the Tianan Property Insurance Co. (so there was no financial risk with the company).

It also pointed out that the regulatory commissions sent “Research and Investigation Teams” into each institute to monitor them closely. The authorities deprived the institutes off operational autonomy, did not allow them to conduct business normally or expand operations, and did not allow employees to enter and leave the company normally. It tried to force the institutes into a state that would “trigger the conditions for a takeover.”

It also stated that the group will report this to the relevant authorities.

He Chun, a Chinese scholar in the China University of Political Science and Law, told Radio Free Asia in an interview, “It is unusual that Tomorrow Holding could issue the statement. Ordinary private business could never do this. We know that the company is not supported by the current leader, but obviously there are political force(s) supporting it. This force is not just a ministerial-provincial level official; it has to be high enough to challenge the top official.”

There are comments that Zeng Qinghong is the power behind Tomorrow Holding. Zeng was the former Vice President of China and the right-hand man of Jiang Zemin, the former Chinese Communist Party (CCP) head. Xi Jinping’s taking over the core assets of Tomorrow Holding is like ransacking  Zeng Qinghong’s home and confiscating his assets.

Independent commentator Wen Zhao said that Xiao Jianhua managed the Tomorrow Holding not only for Zeng Qinghong, but also for several other top ranking officials. Xi Jinping faces strong internal political pressure at the upcoming annual Beidaihe meeting, where the top leaders, both current and retired, will meet to discuss the overall situation that the CCP faces. Xi wants to confiscate the money bag of the top officials as leverage.

Elmer Yuen, a Hong Kong businessman expressed that there is severe infighting among the CCP’s top leaders. The retired former top leaders are pressing Xi Jinping. Xi is pushing Jiang Zemin and his faction to bring back the money that they pocketed earlier. Now that Xi has control over the military, public security, and the armed police, his next battle is the financial power. To take back the financial power, Xi has shown he is willing to destroy Hong Kong and ruin the economy.

Sources:
1. Apple Daily, July 18, 2020
https://hk.appledaily.com/finance/20200718/37PUZ3FTGEGF6D22DVFFM5BWXU/
2. Radio Free Asia, July 21, 2020
https://www.rfa.org/mandarin/yataibaodao/gangtai/ql1-07212020062426.html
3. Have8.tv, July 23, 2020
https://news.have8.tv/2617231.html

RFA Chinese: China’s First Half Year Government Fiscal Deficit Jumped Significantly

Radio Free Asia (RFA) Chinese Edition recently reported that, according to official government numbers, China’s fiscal situation has worsened significantly. In the first half of this year, the fiscal deficit reached a record RMB 3.4 trillion (around US$485 billion). Expenditures exceeded income by 26.6 percent. Experts expect this gap to expand to 30 to 40 percent in the second half of the year. Government income saw an 8.6 percent decline, year-over-year, while government investments increased by 0.6 percent, which is the only hope to sustain the economy. At the same time, national and local government bond issuance reached record highs of 46.2 percent and 22.9 percent, respectively. Four years ago, most economists expressed the concern that, if the local bonds reached RMB 24 trillion, it would become a “nuclear bomb” for the Chinese economy. Now the number has reached RMB 24 trillion and is still growing. In the meantime, personal income tax revenue increased by 2.5 percent, while the largest tax revenue, the Value-Added Tax (VAT), declined by 19.1 percent, and the second largest tax revenue, the Corporate Income Tax, declined by 7.2 percent, year-over-year.

Source: RFA Chinese, July 22, 2020
https://www.rfa.org/mandarin/Xinwen/wul0722a-07222020055450.html

Countries Move Supply Chains from China; Japan to Subsidize 87 Companies to “Exit China”

Relocating manufacturing and supply chains out of China has become a trend amid the COVID 19 outbreak.

Japans’ Ministry of Economy, Trade and Industry announced on Friday July 17 that the first group of Japanese companies had received “exit China” subsidies. These subsidies are designed to help Japanese companies move manufacturing from China to Southeast Asia or back to Japan. According to the Nikkei Asian Review, 87 Japanese companies or groups will receive a total of 70 billion yen ($653 million) in funding. These funds will be used to transfer production lines to reduce Japan’s dependence on China and establish a flexible supply chain. Among them, 30 companies will shift production to Southeast Asia. Hoya, a hard disk components manufacturer, will relocate its factories from China to Vietnam and Laos. Sumitomo Rubber Industries will produce nitrile rubber gloves in Malaysia, while Shin-Etsu Chemical will shift the production of rare earth magnets to Vietnam. The remaining 57 companies will be relocated to Japan.

Household product manufacturer Iris Ohyama currently produces masks in factories in Dalian and Suzhou, China. Non-woven fabrics and other major materials are purchased from Chinese companies. With the help of Japanese government subsidies, the company will start producing masks at the Kakuda plant in Miyagi Prefecture in northern Japan. All materials will be prepared locally, independent of overseas suppliers. Saraya, a manufacturer of sanitary products, is also eligible for subsidies. The company’s products include alcohol-based disinfectants.

The Japanese government allocated 220 billion yen (US$2.05 billion) in the supplementary budget for fiscal year 2020 to establish a subsidy program to encourage companies to relocate factories from China to Japan. Among them, 23.5 billion yen (US$0.22 billion) was used to promote the transfer of production lines from China to Southeast Asian countries.

Aside from Japan, Australian rare earth supplier Lynas has also previously stated that the outbreak of the epidemic highlights the importance of the decentralization of the supply chain from China. Lynas announced back on May 20, 2019 that it would build a rare earth processing plant in the United States, and signed a memorandum of cooperation with Texas manufacturer Blue Line Corporation. The U.S. government has repeatedly stressed the need to move the supply chain out of China. The White House chief economic adviser Larry Kudlow said in May that the Trump administration was willing to compensate American companies to help them move their supply chain out of China and Hong Kong and back to the U.S. The Times reported that British Prime Minister Johnson has ordered the “Project Defend” plan to end Britain’s dependence on the importation of key products from China, including pharmaceuticals and other strategic imported products. According to Agence France-Presse, before the outbreak, an investigation found that 104 German companies have decided or are considering withdrawing production capacity from China. In 2020, many companies in Taiwan made moving their production out of China an operational focus. According to a previous report in Science and Technology News, Quanta, Compal, Pegatron, Wistron, Inventec, Hon Hai, and others will work on relocating their production lines outside of China this year.

Source: Epoch Times, July 19, 2020
https://www.epochtimes.com/gb/20/7/19/n12267649.htm

VOA: China’s Largest Private Enterprise Rare Challenge to the Authorities Takeover Was Quickly Silenced

Tomorrow Holding Group, China’s largest private company, issued a statement on Saturday, July 18, publicly slamming regulators’ takeover of its nine financial companies. However, this rare public challenge was quickly silenced in the social media.

The China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission announced on Friday July 17 that they will take over the nine companies that Tomorrow Holding Group owned: Tian An Property Insurance, Huaxia Life Insurance, Tian An Life Insurance, Yi An Property Insurance, New Times Trust, New China Trust, New Era Securities, Guosheng Securities, and Guosheng Futures. At the end of 2019, the total assets of these companies exceeded 1.2 trillion yuan (US$0.17 trillion). Among them, Huaxia Life Insurance’s assets accounted for nearly half of all assets, about 587.3 billion yuan (US$83.99 billion).

Tomorrow Holding was accused of putting multiple financial assets at risk, that its founder owned them secretly and that the founder illegally owned or controlled a large number of financial licenses through countless shell companies and has sat on a large amount of financial institution funds for a long time. They were said to have caused the major shareholders to be trapped in a debt crisis. The action by the regulatory commissions marked the final collapse of this comprehensive financial enterprise that the once popular character Xiao Jianhua controlled. Chinese industry insiders commented, “Tomorrow has become yesterday.”

The statement that the Tomorrow Holding Group issued said that the company has been actively working on asset disposition, but the regulatory body’s sudden takeover has disrupted their work. The statement said that the companies have no liquidity risk have had no protests from the investors, and that the regulator exaggerated the risks.

In China, it is rare for listed companies, especially private companies, to challenge the authorities’ decisions openly after being investigated and punished by regulatory authorities. The statement Tomorrow Group issued was immediately deleted from all social accounts. The official message from Wechat stated that the contents violated the regulations.

Xiao Jianhua founded the Tomorrow Holding Group in 1999. Over the past 20 years, Xiao has developed the company in many fields including finance, industry, real estate, communication services, energy, and the Internet. At the end of January 2017, Xiao Jianhua was secretly arrested in Hong Kong and then returned to the mainland.

Source: Voice of America, July 18, 2020
https://www.voachinese.com/a/china-s-tomorrow-holdings-slams-seizure-of-its-financial-firms-20200718/5507955.html

China Blasted Open Embankment to Deal with Disastrous Flooding

A new round of heavy rain that started on July 17 is wreaking havoc on the middle and lower reaches along the Yangtze River. With torrential rainfall taking place, areas such as Chongqing, Jiangsu, and Anhui, the Yangtze River, Lake Tai, the Huai River and other waters are experiencing severe flooding.

The Hydrological and Water Resources Survey Bureau of Jingzhou City, Hubei Province issued its highest flood warning on July 19, indicating that, due to heavy rainfall, the water level of Lake Chang has reached 32.84 meters, 0.34 meters above the warning level. The water level of Lake Hong is 26.99 meters, .02 meters above the highest level. It is expected to rise and stay at a high mark for a while. The water level of 12.83 meters of Lake Chao in Anhui province exceeded the historical high of 12.80 meters, which was in 1991. The flooding in the Yangtze River on July 18 also rewrote the record books of Nanjing city’s hydrological history, bringing a water level to 10.26 meters, 0.04 meters higher than the record set in 1954.

According to the official Xinhua News Agency, at 3 a.m. on July 19, the embankment of the Chu River in Anhui province was blasted open in two gaps, and water flowed into two flood storage areas. It was a measure viewed as a last resort to handle the continuously rising water level that would possibly run over the embankments. These two areas were previously used in 1991, 2003, 2008, and 2015.

Affected by the water coming from upstream and local areas, the inflow and water level of the Three Gorges Reservoir continued to rise. On July 17, the upstream of the Qing River, a tributary of the Yangtze River, saw a peak water level of 420.68 meters. It was higher than the historic level of 420.64 meters in 1989. As the water level continued to rise, the urban district of Enshi city was almost soaked. The authorities decided to elevate the emergency response of the urban flood control to the highest level.

Source: Central News Agency, July 19, 2020
https://www.cna.com.tw/news/firstnews/202007190121.aspx

Ministry of Commerce: Investment in countries along the “Belt and Road” Increased in the First Half of the Year

On July 16, the Ministry of Commerce released data that showed results for the first half of this year. Chinese domestic investors made non-financial direct investments in 159 countries and regions around the world, for a total investment of 362.14 billion yuan (US$51.79 billion), a decrease of 0.7 percent compared to the same period in 2019. Meanwhile Investment in countries along the “Belt and Road” increased. In the first half of this year. Non-financial direct investment in countries along the “Belt and Road” was US$8.12 billion, up 19.4 percent year over year. Among them, investment in ASEAN (the Association of Southeast Asian Nations) was US$6.23 billion, a year over year increase of 53.1 percent.

Total foreign contracted projects were 425.99 billion yuan (US$60.92 billion), a year over year decrease of 10.6 percent, and the newly signed contract value was 753.82 billion yuan (US$107.81 billion), a year over year increase of 5 percent. There were 133,000 who worked overseas on a number of labor cooperation projects, a decrease of 102,000 compared with the same period in the previous year. At the end of June, a total of 659,000 people had been dispatched overseas.

Newly signed large-scale foreign projects also increased. In the first half of the year, there were 381 new contracts each having a value of more than US$50 million, for a total value of US$89.03 billion, accounting for 83.1 percent of the total new contracts. Among them, there were 222 projects valued at hundreds of millions of dollars, an increase of 5 projects, compared with the same period of last year. The investments included leasing and business services, manufacturing, wholesale and retail, mining, and construction.

Foreign investments that came from the local enterprises amounted to US$38.21 billion, a year over year increase of 12.1 percent. Among them, 81.8 percent came from10 provinces and cities in the eastern region for a total of US$31.26 billion. The foreign investments from the Yangtze River Economic Belt were US$17.8 billion, a year over year increase of 37.8 percent. Guangdong, Zhejiang and Shanghai are at the forefront of foreign investment.

Source: Guangming Daily, July 17, 2020
https://politics.gmw.cn/2020-07/17/content_34003528.htm

Lianhe Zaobao: Chinese Banks Adjust Plans in Response to U.S. Sanctions

Singapore’s primary Chinese language newspaper, Lianhe Zaobao, recently reported that, according to internal sources from five major China state-owned banks, the Chinese banking industry is updating emergency plans in order to deal with potential new U.S. regulations that may add more sanctions against China after implementing the Hong Kong National Security Law. The Bank of China as well as the Industrial and Commercial Bank of China are preparing for the worst-case scenario which would be losing the source for obtaining U.S. Dollars or the potential of losing the clearing mechanism in the U.S. Dollar system. One source said that one never knows what will actually happen; it is better to hope for the best and prepare for the worst. A new U.S. regulation just passed both chambers (still pending Trump’s signature) which will allow the punishment of banks working with the individuals identified by the U.S. government as having helped destroy Hong Kong’s autonomy. The banks also considered the case of a run on the Bank of China, HK Branch, as well as the lessons that Iranian banks currently suffering from U.S. sanctions have learned. Some Chinese international equipment leasing companies are going through similar exercises.

Source: Lianhe Zaobao, July 10, 2020
http://www.uzaobao.com/shiju/20200710/74557.html

AmCham in Hong Kong: Thirty Percent of Surveyed Members Consider Withdrawal

Radio Television Hong Kong (RTHK), the official broadcasting service in Hong Kong, reported that the American Chamber of Commerce in Hong Kong surveyed 183 businesses regarding the national security law, which accounted for 15 percent of its total membership.

Forty-nine percent of the respondents believed that the national security law has had a negative impact on business. Thirty percent considered divestment or moving their business out of Hong Kong over the medium or long term. Another 5.5 percent were thinking about short-term divestment. The study showed that 41 percent of the interviewees are extremely concerned about the national security laws, including the coverage of the law, the ambiguity of law enforcement, the impact on the judicial independence of Hong Kong, and the weakened status of Hong Kong as a financial center. Another 56 percent believed that the provisions were stricter than expected, and worried about provisions such as extraterritorial jurisdiction, extradition to China, and collusion with foreign forces.

Fifty-one percent of the respondents felt working and living conditions in Hong Kong were less safe after the implementation of the law, and 41 percent were pessimistic about the prospects of Hong Kong.

Source: Radio Television Hong Kong, July 13, 2020
https://news.rthk.hk/rthk/ch/component/k2/1537397-20200713.htm