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State-owned Companies Hold Shares of Kuaishou and Douyin

Following the cooperation between state-owned telecom companies and Chinese internet giants, state-owned media companies have recently taken stakes in two short video platforms, namely, Kuaishou and Douyin.

According to mainland China’s newspaper reports, on October 26th, Kuaishou, a short video-sharing mobile app with a worldwide user base of over 200 million, initiated strategic financing as the investor with the Beijing Radio & Television Station (BRTV), a subsidiary of Beijing municipal government. At present, the two largest shareholders of Kuaishou are Beijing Huayi Huilong Network Technology Co, holding 99 percent of the shares, and BRTV with 1 percent of the shares.

Another short video-sharing platform giant Douyin, the Chinese version of TikTok, also received an investment from Netinvest Chinese (Beijing) Technology Co. (网投中文北京科技有限公司). At present, Douyin is jointly owned by Douyin Ltd. (99 percent) and Netinvest (1percent).

Netinvest is jointly owned by China Net Investment (Beijing) Technology Co., Beijing Cultural Investment Development Group Co., and China Media Group Mobile. The latter two are both state owned companies, with China Media Group Mobile taking 30 percent of the shares.

There are rumors that the 1 percent of the shares held either by BRTV in Kuaishou or by Netinvest in Douyin is a special management stake with a veto right.

Source: Central News Agency (Taiwan), November 6, 2022
https://www.cna.com.tw/news/acn/202211060183.aspx

Hong Kong’s Third Quarter GDP Continued to Decline

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that the Census and Statistics Department of the Hong Kong Government just released the advance estimate of GDP for the third quarter of 2022. Compared with the same period last year, the real decline was 4.5 percent, while the decline in the second quarter was 1.3 percent. The Hong Kong government spokesman said that the decline in GDP was mainly due to the weak performance of external demand during the third quarter. For a year-over-year comparison, the total value of exports of goods recorded a real decline of 15.5 percent, which was worse than the 8.4 percent decline in the second quarter. Imports of goods fell by 16 percent in real terms in the third quarter after a 5.9 percent drop in the second quarter of this year. The seasonally adjusted GDP for consecutive quarters fell by 2.6 percent in real terms in the third quarter compared to the second quarter. The deterioration of the external environment and the continued obstruction of cross-border land freight traffic have dealt a serious blow to Hong Kong’s exports. Significant interest rate hikes by major central banks tightened financial conditions and weighed heavily on local demand. Looking ahead, the government spokesman said that a marked deterioration in the external environment will continue to put significant pressure on Hong Kong’s export performance for the rest of the year. Geopolitical tensions and the Covid development will also increase downside risks.

Source: Sina, October 31, 2022
https://finance.sina.com.cn/china/dfjj/2022-10-31/doc-imqqsmrp4424943.shtml

BBC Chinese: A Large Number of Zhengzhou Foxconn Workers Fled on Foot

BBC Chinese recently reported that, at the Foxconn factory in Zhengzhou, the capital city of Henan province, there are many workers who have been fleeing this largest Apple iPhone assembly plant in China amid reports that the Covid outbreak has forced a lockdown. It has not been possible to verify how many confirmed cases of Covid-19 were found at the plant. Parts of this big city of about 10 million are now on lockdown as China continues to impose strict government Covid control measures. Taiwan’s Foxconn Group, a top supplier for Apple, has hundreds of thousands of workers at its Zhengzhou factory, but the company has yet to provide official figures on the number of infections. Due to the outbreak at the Zhengzhou factory, iPhone shipments in November may be reduced by as much as 30 percent. Footage shared online, including Chinese social media, showed workers leaving the factory and starting a long walk back home so they could avoid arrest on public transportation. A 22-year-old Foxconn worker surnamed Xia said that the dormitory where he and his colleagues were kept was “chaotic,” so he jumped over the fence and escaped. Under China’s strict Zero Covid policy, local governments have the power to act quickly to contain any outbreak of the virus. This includes anything from total lockdowns to regular testing and restrictions on travel . According to online reports, these workers did not in fact flee at first. After the outbreak came, they were helpless and could only obey orders. If it wasn’t for the unbearable situation, they would have been willing to cooperate. Some reports indicated that, after ten days of not having food and water, many workers broke through the interception of the security guards and managed what can be called, “a great escape.”

Source: BBC Chinese, October 31, 2022
https://www.bbc.com/zhongwen/simp/chinese-news-63455490

Xinhua: In October, Chinese Manufacturing’ PMI Fell

Xinhua recently reported that, according to official numbers released by the National Bureau of Statistics, China’s October manufacturing PMI fell to 49.2 percent. Affected by the frequent domestic spread of Covid, China’s purchasing manager index has declined and the foundation for the economic recovery and development needs to be further strengthened. Statistics show that both production and demand have slowed down. The production index and the new order index were 49.6 percent and 48.1 percent respectively, down 1.9 and 1.7 percentage points from the previous month. The prosperity of manufacturing production and of market demand both declined as well. Large corporations have kept expanding, while the pressure on small and medium-sized enterprises has increased.

At the same time, Caixin released its official Chinese Manufacturing PMI numbers for October. Caixin‘s PMI is a well-respected economic indicator monitored globally by financial institutions. Caixin’s China Manufacturing PMI recorded at 49.2 for October. It was thus in contraction territory for the third consecutive month, indicating that manufacturing figures continued to decline. The demand side of consumer goods and investment goods has been particularly insufficient. International demand also continued to decline. Some companies reported that foreign trade transportation has been encountering difficulties. Employment continues to shrink, and the purchasing price index of manufacturing companies has risen by more than three percent since September. Due to the sluggish market demand, companies have shown a strong willingness to reduce prices to promote better sales. Most companies reported that the government’s Covid control policies have caused transportation delays.

Sources:
(1) Xinhua, October 31, 2022
http://www.news.cn/fortune/2022-10/31/c_1129089205.htm
(2) Caixin, November 1, 2022
https://pmi.caixin.com/2022-11-01/101958657.html

Two Hundred Million Chinese Face the Risk of Being Locked Down

Nomura Securities estimated that by October 24, 28 cities in China, including Guangzhou, Wuhan, and others had various levels of lock down control, impacting a possible 200 million people living in these cities.

Instead of locking down an entire city, China has been locking down sub-regions inside the city based on where the COVID patients live and where they have been. About 1 million people in Wuhan were locked in at home. After reporting 73 cases on October 27, Guangzhou intensified its lockdown. Fuzhou City, Fujian Province locked down 36 colleges and universities.

Xinjiang and Tibet continue to be the major disaster areas. Many hotels have refused to take visitors coming from Xinjiang, Tibet, and Inner Mongolia as hotel guests.

Source: Radio Free Asia, October 28, 2022
https://www.rfa.org/mandarin/yataibaodao/huanjing/gt2-10282022051054.html

 

Berlin May Give Green Light to a Chinese Takeover of German Chip Factory, Ignoring Opposition from Intelligence

On Thursday October 27, the German newspaper Handelsblatt cited government sources that the German Economy Ministry is reviewing a deal that a China-controlled company proposed for German chipmaker Elmos.

Last December, Elmos, headquartered in Dortmund, agreed to sell its production line to Swedish chipmaker Silex, a wholly owned subsidiary of China’s Sai Microelectronics Group. The Federal Office for the Protection of the Constitution (BfV), the country’s chief domestic intelligence agency, gave advanced warning to the government and advised against the deal because China’s mastery of the key technology would enable it to put pressure on Germany. Handelsblatt revealed that the German federal government neglected the advice and was ready to approve the deal.

Aniessa Andresen, Chairperson of the Hong Konger in Germany, told Radio Free Asia that Germany continues to sell its own infrastructure projects and key technological companies to China, even though it has realized that it cannot rely on China. It is puzzling and worrying that the chip deal is still going forward even after warnings from German intelligence agencies. Andresen called on Germany not to become a pawn of the Chinese Communist Party (CCP).

German Economy Minister Robert Habeck, who resisted the acquisition of the Hamburg port terminal by the Chinese state-owned COSCO Group, did not take the same tough stance in the chip deal, giving the reason that “Elmos” technology was “obsolete” and of little value, and that the Chinese could not acquire the needed technology to drive its development.

Taiwanese political researcher Li Youtan pointed out that the “Elmos” incident is similar to China’s acquisition last year of the UK’s chip plant Newport Wafer Fab through the Dutch firm Nexperia, which is controlled by China’s Wintel Technology Corporation. Li believes that the CCP showed its ambition to dominate the world after the 20th National Congress, but is thwarted by its lack of chip technology. If Germany allows the Elmos deal to go through, it will become a weak link in the democratic world.

German Chancellor Olaf Scholz will travel to China and become the first EU leader to meet Xi Jinping since the 20th CCP Congress. This comes after he drew criticism for backing Chinese state-owned COSCO’s stake in the Port of Hamburg amid a boycott by six federal cabinet ministers.

Source: Radio Free Asia, October 28, 2022
https://www.rfa.org/cantonese/news/de-acquisition-10282022112232.html

VOA’s Interview of the Chair of the EU Chamber of Commerce in China

As the 20th Chinese Communist Party (CCP) Congress came to an end on Sunday October 23, Xi Jinping, the Party’s general secretary, not only won his third term as expected, but installed his cronies and supporters in the Standing Committee of the Politburo, the CCP’s highest authority. The result has worried many executives of the foreign companies that operate in China.

In an interview with the Voice of America, Joerg Wuttke, president of the European Union Chamber of Commerce in China, was pessimistic about the future of the Chinese economy. Wuttke is considered to be one of the most knowledgeable Westerners about China. He went to China in 1982 and has lived there on and off for 33 years.

He stated, “It’s definitely a surprise. I had a completely different line-up in mind (of the new leadership). I had of course the Prime Minister Li Keqiang as the head of parliament. I thought about two candidates for Prime Minister. I know both candidates quite well. It was a surprise to see that basically all of them were rooted out. Also, of course, the visual realization that president Hu Jintao was sent out of the room has already painted a picture that an era is gone. We have a greater clarity now that it is obviously Xi Jinping who is calling the shots to an extent which we did not see before. He has aligned a group of people that are totally loyal to him. We have basically left this sphere of achievements and meritocracy. It’s all about loyalty. We have to see where this group of people are leading China.”

“My struggle is I am trying to be realistic in order to give it a taste of which direction this might go. Obviously, Monday (October 24) was a very pessimistic market reaction, and reflects what many of my colleagues are thinking. But again, we have not entered the space in which we know where we are heading.”

“I am a child of the 90’s. I have been here about 30 years. I grew up in the opening up mode of Deng Xiaoping. My first party Congress I witnessed personally was in 1982, where Deng Xiaoping was trying clearly to integrate China and open up. Maybe at the tail of my career in China, I have to witness China actually closing up again to some extent. So, in a way it’s a full circle, which is, of course, disappointing. But at the same time, its their country; it’s their choice.”

“So many of them (the business leaders) put their operation on auto pilot. We have not seen companies moving away, and I don’t expect this. But we have noticed this –  that new investment and new additional activities from those companies that normally would come up in China has been rerouted to other regions. So we see more interest in Thailand, Southeast Asia, India, but even close to home in Turkey and eastern Europe, for the simple fact that executives can fly there in and out easily.”

“They have also realized that the world bank has predicted China will grow this year at 2.8 percent, and rest of Asia 5.3 percent. These leaders follow the money. Hence there will not be an exodus of European business out of China, but we will definitely see an underachiever given the potential of this economy.

Source: Voice of America, October 28, 2022
https://www.voachinese.com/a/voa-interview-joerg-wuttke-china-party-congress-20221028/6810661.html

Student Informer Reported on Chinese University Professor

On October 27, Xu Songyan, a professor at China’s Southwest University (SWU) located in the city of Chongqing, posted on Weibo, a Twitter-like Chinese microblogging platform, that a student informer who, after secretly sitting in his class, told him that Xu will be questioned (by the authorities). The post, which was subsequently deleted from Weibo, received attention from millions of Chinese netizens.

Chinese universities have what are called “information officers,” who are students appointed by the school to collect information on teaching activities, and who regularly file reports with the university. These student “informers” also report faculty members’ views and opinions to the university’s Communist Party and administrative authorities. The academic fields are under close watch including programs of literature, history and philosophy.

Xu Songyan is currently a professor at SWU’s School of History and Culture, where he teaches ancient Greek and Roman history. Recent years have seen criticism of the promotion of ancient Greek culture in mainland China, as ancient Greece was known as the birthplace of western democracy. Communist Party chairman Xi Jinping once said that the “path to socialism with Chinese characteristics must be deeply rooted in the fertile soil of Chinese culture, that one should have a firm confidence in Chinese culture, and that one should not ‘always talk about Greece.’”

This is not the first time that a student “information officer” reported a professor. In May 2018, Zhai Juhong, a professor at the Zhongnan University of Economics and Law, was reported by a student informer and expelled from the Chinese Communist Party (CCP) by the CCP Committee of the university. She was also dismissed from her position and disqualified as a teacher because of her comments on constitutional amendments, the state-owned enterprises and the institution of the People’s Congress.

Source: Ming Pao (Hong Kong), October 28, 2022
https://news.mingpao.com/pns/%E4%B8%AD%E5%9C%8B/article/20221028/s00013/1666895213286/