Chinascope – Page 102

EUCCC: European Companies’ Confidence in Doing Business in China Has Deteriorated

Major Taiwanese news network Liberty Times Network (LTN) recently reported that the European Union Chamber of Commerce in China (EUCCC) just released its latest survey. The survey showed that, in the face of growing risks and a more unstable business environment, European companies’ confidence in doing business in China has deteriorated. Companies have begun to review their investment and business strategies in China. According to the survey, 64 percent (a record high) of the respondents said that doing business in China has become more difficult in the past year, and 30 percent of the companies said that their revenue shrank compared with the same period last year. This ratio increased by 20 percentage points and reached the highest level in history. Around 75 percent of the companies have reviewed their supply chain strategy in the past two years, with 24 percent saying they plan to relocate some of their supply chains to China and 12 percent who have already moved some of their supply chains out of China. In addition, 10 percent of the respondents said that they have moved or plan to move their Asian headquarters or business unit headquarters out of China. The number of respondents who regard China as the top three investment destinations in the future has dropped by 13 percentage points compared with the same period last year. Surveys point to increased decoupling between headquarters and China operations, mainly to manage risk. Jens Eskelund, president of the EUCCC, said the negative trends seen from this year’s survey were worrying and reflected challenges posed by an uncertain policy environment in China and heightened geopolitical tensions.

Source: LTN, June 21, 2023
https://ec.ltn.com.tw/article/breakingnews/4340888

Briefings | | June 27, 2023 | Economy/Resources Geo-Strategic Trend

HK01: German Intelligence Agency Identified China as the Biggest Threat to Economic and Scientific Espionage

Popular Hong Kong new online media HK01 Network recently reported that, Germany just released the Report of the Federal Office for the Protection of the Constitution. Although Germany releases this report every year, this time it is extraordinary both in terms of the strength of its warnings and in measuring changes in Germany’s security environment within a year. German Interior Minister Nancy Faeser said at a press conference that Russia’s war on Ukraine is a turning point for Germany’s domestic security. However, the strongest warning in the Report is directed at China, which it calls Germany’s “greatest threat in terms of economic and scientific espionage.” Earlier, the German government released, for the first time, a comprehensive national security strategy aimed at expanding Germany’s efforts to counter new military, economic and geopolitical threats. The Report indicated that Germany was one of the most important targets for Chinese investment in Europe in 2022. Direct investment not only provides opportunities for China to close its innovation deficit and achieve technological leadership, but also opens the door to political influence, espionage, and sabotage. These activities could also jeopardize Germany’s competitiveness as an industrial and technological hub and undermine the legal system of a market economy. Ultimately, this threatens to lead to a loss of prosperity and thus jeopardize democracy, social cohesion and Germany’s independence. Chinese Premier Li Qiang was visiting Germany at the time the Report was published.

Source: HK01, June 21, 2023
https://tinyurl.com/5n92u5pm

Briefings | | June 26, 2023 | Geo-Strategic Trend

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 | | June 24, 2023 | 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:

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.
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.
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.
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).
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 | | June 23, 2023 | 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 | | June 21, 2023 | 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 | | June 21, 2023 | @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 | | June 21, 2023 | Geo-Strategic Trend

China’s Reaction to Trump’s Election Win

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

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

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