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Xinhua Commentary Series: Spotlight on the U.S. Presidential Election

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Wu Guoguang: Xi Jinping’s Reversal of the Course, Will China’s Transition be Peaceful or Marked with Bloodshed?

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Cheng Xiaonong: U.S.-China Strategic Relations Have Crystallized

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Xinhua Commentaries: “Exposing the Three Major Political Deficits of the U.S.”

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Party Publications Are Just Junk

A report published by Toutiao, a Chinese news and information content platform, revealed that nobody reads the Chinese Communist Party’s (CCP’s) publications. However, this report, titled, “The Party Newspaper and Party Publications, How Long Can You Survive?” is no longer available due to the CCP’s Internet control.

The article reported a case in which a local postal office signed an agreement with an institution. The agreement was that the post office would stop delivering the party’s newspaper and publications to which that institution had subscribed. Instead, the post office would just keep them in its storage area and after a certain time, sell them as old paper (in China authorities pay a little money for old paper and books for recycling). The postal service would then give the institution the money, including the proceeds from selling the party publications and the cost savings from the delivery service.

In China, the CCP forces government offices and institutions to subscribe to many party newspapers and publications. In some places it even requires individual party members or school teachers to subscribe to party publications using their own money.

Source: Epoch Times, June 18, 2023
https://www.epochtimes.com/gb/23/6/18/n14018188.htm

Briefings | | |   Government/Politics

China’s Hope to Rescue the Housing Market Burst

An Epoch Times article listed five points that suggest that China’s dream to rescue its real estate industry is only an illusion:

  1. The funding for real estate development keeps sliding. According to China’s National Bureau of Statistics, investment in the real estate industry was 13.289 trillion Yuan (US$1.85 trillion) in 2022, 10 percent down from a year ago. Investment in the period of January to May this year was 45.7 trillion yuan, down 7.2 percent from the same period last year. More and more people are selling their homes. Shanghai has an inventory of 200,000 pre-owned homes for sale. It sold 16,000 homes in May, which was  one-third lower than the sales volume in March.  In May, over 100 cities saw the largest price drop  since 2022.
  2. There has been a big jump in the number of foreclosed homes. There were 606,000 foreclosed homes in 2022, but only 118,000 were sold.
  3. The “Guaranteed Delivery” effort did not work. Due to a lack of funding, China put in 500 billion Yuan in July 2022 to help real estate builders to complete their pending housing construction projects . A year has passed. South China and the south China regions completed 56 percent and 46 percent of their housing projects, respectively. Southwest China and the central China regions completed only 15 percent and 16 percent.
  4. Real estate companies are struggling. The total profits of 69 publicly-traded real estate companies dropped in 2021. In 2022, the proceeds even became negative. More than 20 companies have been suspended from trading (they even face the risk of being delisted).
  5. Seven companies had been traded below 1 yuan for over 20 days and thus are likely to be delisted.

Source: Epoch Times, June 19, 2023
http://cn.epochtimes.com/gb/23/6/19/n14019226.htm.

Briefings | | |   Economy/Resources

China’s Universities Conduct Investigations on Multiple Journal Retractions

Chinese universities have launched an initiative to investigate academically unethical papers published in the past five years. They aim to address the country’s high rate of retractions in international journals. Over 30 universities, including Ningbo University, Hangzhou Normal University, and Chengdu University of Information Technology, have announced their intention to participate in the three-month campaign, following a notice by the Ministry of Science and Technology. The focus will be on local research institutes and universities, particularly papers included in personnel assessments or which were awarded performance incentives.

The investigation will target various forms of misconduct, such as plagiarism, duplication, content fabrication, manipulation of peer reviews, ghostwriting for hire, and inappropriate honorary authorship. China ranked second globally in terms of the the number of papers published in top international journals in 2022, but it also had a significant number of retractions. Out of 5,488 retractions indexed in the Science Citation Index (SCI), 2,879 retractions (52 percent of the total) came from China.

This nationwide self-examination and rectification of academic papers is unprecedented in scale, as previous investigations were conducted by individual universities following international retractions. However, there are concerns that relying solely on self-examination may not effectively address the issue, as there is a problem of institutional protection of academic misconduct in China. This protection is attributed to the allocation of research funding, and it suggests that a more comprehensive solution is needed.

Jia Hepeng, a professor at Soochow University, expressed doubts about the long-term impact of this campaign and the centralized research system that heavily relies on quantitative assessment. Despite these concerns, the initiative is seen as a positive step towards addressing academic misconduct and serves as a wake-up call for the academic community in China. While the effectiveness of the campaign-style investigation is expected to be limited, taking action is viewed as preferable to no action at all.

Source: Central News Agency (Taiwan), June 19, 2023
https://www.cna.com.tw/news/acn/202306190066.aspx

Briefings | | |   Information/Technology

China’s Mortgage Crisis Paralyzes Construction as Majority of Unfinished Buildings Remain Unfinished

It has been a year since the wave of unfinished construction projects hit China. Most affected developments have remained unable to resume work or meet delivery dates. Both citizens and banks have lost confidence in developers’ ability to address the issue. The Chinese government has not disclosed the nationwide count of unfinished projects. A survey revealed completion rates of about 56 percent in South China and 40 percent in North China, while Southwest and Central China had rates of only 15 percent and 16 percent, respectively. Henan Province had the lowest rate at 11 percent.

Xu Shirong, a professor at Taiwan’s National Chengchi University sees the unfinished building crisis as a political problem. Local influential figures engage in real estate transactions and development, attracting funds from banks under the influence of local governments. Xu believes relief measures have been aimed at reducing losses for upper-class developers who have influence on public policy.

The crisis emerged in 2019 due to increased government regulations leading to liquidity problems for real estate companies. Homeowners stopped making mortgage payments, triggering a financial crisis. Relief funds were introduced, but developers faced challenges in obtaining them, particularly when some were asked to repay loans. Only a few developers secured financing support from the “16 Financial Measures” policies.

The allocated relief funds of 400 billion RMB ($62 billion) are considered inadequate to address the crisis. Real estate prices have dropped significantly, and banks face risks when holding collateral. The motivation to buy houses has decreased due to factors such as the U.S.-China tech war and the pandemic’s impact on the economy. Commercial properties are difficult to rent out, affecting the sale of residential properties.

Developers’ promotions have not yielded expected results and people lack confidence in unfinished buildings due to their poor quality and a lack of confidence in real estate market policies. Local governments rely on real estate for their economies, and unresolved unfinished projects could burden their finances and create imbalances in urban development.

Source: Voice of America, June 20, 2023
https://www.voachinese.com/a/majority-of-china-s-stalled-residential-projects-yet-to-resume-20230620/7144861.html

Briefings | | |   @CS Economy/Resources

Japanese Air Conditioning Manufacturers Shift Supply Chain Away from China

Japanese home appliance companies like Hitachi, Mitsubishi Electric, and Fujitsu General are taking steps to improve their supply systems for residential air conditioners following the challenges faced during the summer of 2022. The COVID-19 pandemic led to production stoppages and semiconductor shortages, impacting the sale of air conditioners. To avoid missed profit opportunities and meet the high demand for air conditioners in 2023, these companies are enhancing their production capabilities and supply chains.

Hitachi Johnson Controls Air Conditioning has established a new production line for indoor air conditioning units in Tochigi Prefecture, Japan. By increasing production capacity and adding around 200 workers, the company aims to meet the summer demand for air conditioners. Previously, most of their air conditioners were manufactured in China, but the temporary shutdown of the Shanghai factory in 2022 disrupted production and semiconductor procurement. Learning from this experience, Hitachi decided to shift production to Japan, increasing the proportion of air conditioners manufactured in Japan by 20 percentage points.

Mitsubishi Electric’s Shizuoka factory is operating at full capacity to produce lightweight outdoor units for high-demand models. The company incorporated feedback from construction workers and adopted a design that is easier to install. Fujitsu General, on the other hand, is intensifying production at its Shanghai factory targeting the Japanese market. The company implemented measures to overcome pandemic-related restrictions, such as using alternative components.

Japanese companies are collaborating closely in component procurement and production to improve the supply system. They are also implementing long-term measures to ensure a stable supply chain, such as adjusting product designs to reduce the number of components and localizing component procurement in various factories worldwide.

To address rising electricity prices and changing consumer preferences, companies are introducing energy-saving and eco-friendly air conditioner models with higher efficiency. Second-hand air conditioners have also become popular, leading to increased sales in this market segment.

Overall, Japanese home appliance companies are focused on building resilient supply chains and balancing stable supply with profitability. They have learned from the challenges of the past and are taking proactive measures to meet the demand for air conditioners and offer innovative, energy-efficient products to consumers.

Source: Nikkei, June 14, 2023
https://zh.cn.nikkei.com/industry/manufacturing/52674-2023-06-14-10-15-32.html

Briefings | | |   Geo-Strategic Trend

CNA: New Development Bank Aims to Challenge Dollar Now Needs Dollar to Rescue

Primary Taiwanese news agency Central News Agency (CNA) recently reported that the New Development Bank jointly established by China and the BRICS is supposed to reshape international finance and reduce developing countries’ dependence on the U.S. dollar. However, after Russia invaded Ukraine, the bank may now become a “zombie bank.” Chinese President Xi Jinping and the leaders of Brazil, Russia, India and South Africa established the New Development Bank (NDB) eight years ago, headquartered in Shanghai. According to interviews with bankers and others familiar with the matter, NDB has now all but stopped making new loans and is having trouble raising dollar funds to pay its debts. Shortly after Russia’s foray into Ukraine last February, the New Development Bank froze all new loans to Russia to reassure investors. However, Russia owns nearly 20 percent of NDB, and Wall Street was quick to turn wary of it. Since then, NDB has had to take on increasingly high debts to service old debts and meet its own liquidity needs. After the establishment of NDB, members found it difficult to rely solely on China’s banks and capital markets. The bank began borrowing billions of dollars from Wall Street as well as Chinese state-owned banks. About two-thirds of its borrowing is in dollars. Given its own slowing economic growth, China has so far been reluctant to commit more money to boost the NDB’s coffers. To complicate matters further, according to the bank’s charter, the next country likely to be the NDB’s rotating president is Russia.

Source: CNA, June 17, 2023
https://www.cna.com.tw/news/aopl/202306170070.aspx

Briefings | | |   Geo-Strategic Trend

After 27 Years, Carrefour Closed Its First Store in Shenzhen

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that the first Carrefour store in Shenzhen and the second in China ceased operations on June 10. This old store located in the Nantou area of Nanshan has been with the Shenzhen people for 27 years. Just last month (May), Carrefour’s first member store in China, the Shanghai Chengshan Road Store, also suddenly announced it was closing its business. China’s hypermarket crisis has intensified, and Carrefour has been closing its stores nationwide on a large scale. In the first quarter, 33 stores were closed, including the first member store in China. This is just one of the many stores that Carrefour has closed recently. At its peak, Carrefour had a total of 321 stores in China, with sales of RMB 49.8 billion (around US$6.99 billion). Its number of stores, each single store’s performance, its revenue, and other factors., once surpassed its top rival Wal-Mart. As of the end of March, Carrefour China had 114 stores left. Carrefour opened its first foreign-funded supermarket chain in China and became the originator of hypermarkets. In September 2019, the Chinese company Suning spent RMB 4.8 billion (around US$674 million) equivalent to Euros to acquire 80 percent of Carrefour China’s equity, and Suning should have completed the acquisition of all remaining equity by the end of 2022. The transformation and upgrading of Carrefour China may not be worth looking forward to.

Japanese Supermarket AEON also closed its Beijing store, the first one it opened in China back in 2008. US Economist David Huang told the Epoch Times that, based on his visits, retail business in Shanghai, Guangzhou, Shenzhen, and Wuhan cities is running poorly and sales at many supermarket stores are just at the same level as those in the COVID period.

Sources:
1. Sina, June 11, 2023
http://news.sina.com.cn/s/2023-06-11/doc-imywxhhi3381882.shtml
2. Epoch Times, June 19, 2023
http://cn.epochtimes.com/b5/23/6/19/n14019252.htm

Briefings | | |   Economy/Resources