Skip to content

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

Read More ...

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

Read More ...

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

Read More ...

The CCP’s Performing Arts Troupes in the U.S.

Read More ...

Chinese Manufacturing PMI Continued Decline in July

National Business Daily (NBD), a Chinese national daily newspaper on business news, recently reported that, according to data just released by the Chinese National Bureau of Statistics, the July manufacturing purchasing managers index (PMI) was 49.4%, another decrease of 0.1 percent from June. Among the five sub-indexes that make up the manufacturing PMI, the production index (50.1%) is higher than the critical point of 50 percent, and the new order index (49.3%), raw material inventory index (47.8%), employment index (48.3%) and supplier delivery time index (49.3) are all lower than the critical point. It’s worth noting that the production index is 0.5% below last month’s number. Analysts expressed the belief that the manufacturing PMI remaining in the contraction range for three consecutive months was mainly due to the continued downturn in the real estate industry which directly inhibits demand for steel, cement and other building materials products.

Meanwhile, Caixin released its official Chinese Manufacturing PMI numbers for July. Caixin PMI is a well-respected economic indicator monitored globally by financial institutions. Caixin’s China Manufacturing PMI recorded 49.8 for July. Caixin’s report indicated that the prosperity of China’s manufacturing industry dropped significantly in July, with supply still outpacing demand. Domestic demand has been weak, the purchase volume sub-index has fallen below the critical point, and the raw material inventory sub-index has dropped accordingly. This is the first time for Caixin’s manufacturing PMI to drop below 50 since November 2023. Wang Zhe, Caixin’s senior economist, pointed out that, insufficient domestic effective demand and weak market optimism are still the most prominent problems at present.

Sources:
(1) NBD, July 31, 2024
https://www.nbd.com.cn/articles/2024-07-31/3486571.html
(2) Caixin, August 1, 2024
https://pmi.caixin.com/2024-08-01/102222126.html

Briefings | |

Japanese Automakers Face Uphill Battle in China’s EV-Dominated Market

Honda is reducing car production capacity in China for the first time, as Japanese automakers face declining market share due to competition from local electric vehicle (EV) manufacturers. The slow adaptation to EV technology has proven costly for Japanese companies, leading to a shrinking supply chain in China.

Chinese automakers, particularly BYD, are aggressively pricing their vehicles to gain market share, even in segments traditionally dominated by foreign gasoline-powered cars. In 2023, Chinese brands held 56.2% of the passenger car market in China, while Japanese brands fell to 14.7%. Toyota’s Vice President predicts “difficult years” ahead in the Chinese market.

The Chinese government has been strategically promoting the transition from gasoline to electric vehicles, described as “changing lanes in a race” by a former minister. This includes offering subsidies and preferential policies to encourage the shift to “new energy vehicles.”

Japanese companies supplying parts and materials to automakers in China are also feeling the impact. Some, like Nippon Steel, are withdrawing from joint ventures with Chinese partners. A 2023 survey shows Japanese business expansion in China at its lowest level in a decade.

Japanese firms acknowledge the rapid technological advancement of Chinese companies and stress the need for continuous innovation and cost competitiveness. While Japanese automakers are determined to improve their EV offerings, they face significant challenges in regaining their position in the Chinese market.

Source: Kyodo News, July 26, 2024
https://china.kyodonews.net/news/2024/07/6c47f1ecf945-ev-.html

Briefings | | |   Geo-Strategic Trend

China Launches Qianfan Satellites, Advancing in Space Race and Challenging Starlink

China successfully launched the first group of satellites for its “Qianfan” low-Earth orbit internet constellation using a Long March 6 rocket. This project, managed by the state-owned Shanghai Yuxin Satellite Technology Co., aims to launch 108 satellites this year.

The Qianfan constellation is China’s attempt to compete with SpaceX’s Starlink project, which has launched about 5,500 satellites providing global internet coverage. Low-Earth orbit satellites, operating between 300-2,000 km altitude, are cheaper and more efficient than higher orbit satellites.

These satellites have strategic significance, as demonstrated by Starlink’s crucial communication role in the Russia-Ukraine war. Chinese military-affiliated media have published editorials claiming Starlink threatens China’s interests and represents U.S. attempts to establish space military dominance.

China has made significant strides in the space race recently. Besides the Qianfan launch, the Chang’e-6 mission successfully returned samples from the far side of the moon. In 2022, China sent three astronauts to its Tiangong space station for a six-month mission. With the International Space Station expected to retire in 2031, Tiangong will become the only space station in orbit.

Source: Radio Free Asia, August 6, 2024
https://www.rfa.org/mandarin/yataibaodao/kejiaowen/tj8-china-launches-sattellites-08062024125506.html

Briefings | | |   Defense/Military

China’s Marriage Rate Hits New Low in First Half of 2024, Continuing Decade-Long Decline

According to recent statistics, China experienced a significant decline in marriage registrations during the first half of 2024. The country recorded 3.43 million marriages, which is 498,000 fewer than the same period in 2023, marking a new low in recent years.

The data, reported by The Paper citing the Chinese Ministry of Civil Affairs’ Q2 2024 civil affairs statistics, also showed 1.274 million divorce registrations in the first two quarters of 2024. This represents a decrease of 43,000 divorces compared to the first half of 2023.

This downward trend in marriages continues a pattern observed over the past decade. Marriage rates in China have been declining since 2014, with notable milestones including:

– 2019: Marriages fell below 10 million annually
– 2021: Dropped below 8 million
– 2022: Reached a low of 6.835 million

However, there was a slight uptick in 2023 with 7.68 million marriages registered.

The current figures for the first half of 2024 suggest that the marriage rate in China may continue to face challenges, despite the brief recovery observed in 2023.

Source: Central News Agency (Taiwan), August 4, 2024
https://www.cna.com.tw/news/acn/202408040114.aspx

Briefings | | |   Economy/Resources

Germany’s Dilemma: Chinese Wind Turbines in Sensitive Energy Sector

A recent Deutsche Welle article discussed concerns over Chinese companies’ involvement in sensitive infrastructure projects in Germany, particularly in the telecommunications and energy sectors. The article noted the difficulty Germans face in determining how much influence Beijing has over any given Chinese company, leading to apprehension around cooperation with such companies. The German government recently announced plans to phase out use of Huawei and ZTE components from the country’s core 5G network by 2026, citing national security concerns.

The Deutsche Welle article mentions the controversial plan by German investment company Luxcara to commission an offshore wind farm in Germany to be built by Chinese firm Ming Yang. The plan has sparked debate within Germany because energy supply is considered a sensitive sector. Wind power is becoming increasingly important in Germany’s energy mix, accounting for 38.5% of total electricity generation in the first quarter of 2024.

European suppliers cannot meet the current high demand for wind turbines, leading some German operators to consider Chinese partners. One of Luxcara’s reasons for choosing Ming Yang is the firm’s promised ability to provide high-powered turbines for the project by 2028.

The Deutsche Welle piece discusses concerns about data security as well as the competitive advantage that Chinese companies gain through government subsidies, noting that 99% of Chinese “new energy” companies received direct government subsidies in 2022.

Some argue that Chinese products are necessary for Germany’s green energy transition due to their affordability and availability, despite the associated risks.

Source: Deutsche Welle, July 30, 2024
https://p.dw.com/p/4ivFE

Briefings | | |   Geo-Strategic Trend

China Extends Grad School Duration: Education Push or Disguised Jobs Program?

In recent years, many Chinese universities have extended their graduate programs from two to three years, citing reasons such as “improving the quality of graduate education.” However, some observers link this change to rising youth unemployment rates, viewing it as a temporary measure to address job market pressures.

Multiple universities, including Guangxi Normal University, Shenyang University of Technology, and Xi’an International Studies University, have announced extensions to their master’s and doctoral programs starting from 2025. The adjustments affect various disciplines, including chemistry, education, literature, and foreign languages.

Experts argue that postgraduate education emphasizes specialization and depth, requiring higher quality standards. They claim that extending the study period provides more space to meet these requirements and optimize the training process.

Supporters of the change suggest it allows for strengthened classroom teaching, improved education quality, and more opportunities for students to engage in practical experiences. It also gives students more time for thesis writing and job hunting.

Critics of the move acknowledge that this extension may be linked to China’s changing employment landscape, with many graduates opting for “slow employment.” While the longer study period may help students find more suitable jobs, some argue that it shouldn’t be a one-size-fits-all approach or merely a stopgap measure to address social employment pressures. They suggest allowing capable and willing students to graduate early.

Source: Central News Agency (Taiwan), July 25, 2024
https://www.cna.com.tw/news/acn/202407250355.aspx

Briefings | | |   Economy/Resources

China Considers New Local Tax and Bond Issuance to Address Severe Local Government Debt Crisis

China’s local governments are heavily burdened with debt. To address this financial strain, China’s central government is considering the introduction of a new local tax, potentially amounting to around one trillion yuan. Reports suggest that the Central Committee of the Communist Party is studying a consolidation of existing taxes—such as the Urban Maintenance and Construction Tax, Education Surcharge, and Local Education Surcharge—into a new Local Additional Tax. Local authorities would have some autonomy in setting the tax rate within specified limits.

Data from the Ministry of Finance reveals that in 2023, China’s VAT and consumption tax revenues totaled approximately 8.54 trillion yuan. The combined revenues from the existing taxes to be consolidated are estimated at around 949.6 billion yuan. This reform is aimed at addressing the imbalance between central and local financial powers, which has led to a cycle of fiscal disorder.

Analysts offer two interpretations of this policy shift: one suggests decentralizing fiscal authority, while the other implies strengthening central control. Some experts argue that centralizing fiscal control aligns with President Xi Jinping’s strategy for unified national management, reducing the likelihood of substantial decentralization.

The Wall Street Journal highlights that local governments are facing severe debt issues, with hidden liabilities estimated between 7 to 11 trillion yuan, double the central government’s debt. In the first half of 2024, local debt issuance exceeded 3.5 trillion yuan, with expectations for a peak in the third quarter.

To address these issues, some suggest issuing 2 trillion yuan in national bonds for local use. However, experts like Wang Guocheng believe this amount would be insufficient compared to the vast debts of major property developers and local governments. Without comprehensive tax system reforms, local deficits are likely to persist.

Additionally, economist Li Daokui proposes issuing 500 billion to 1 trillion yuan in consumption vouchers to stimulate spending and economic recovery, citing potential multiplier effects from consumer incentives. However, concerns remain about the effectiveness of such measures given current economic conditions and consumer behavior.

Source: Radio Free Asia, July 25, 2024
https://www.rfa.org/mandarin/yataibaodao/jingmao/hcm1-china-taxation-local-economy-education-07252024054647.html

Briefings | | |   Economy/Resources

People’s Daily: “Weakness of The US ‘Iron Chip Curtain’ Exposed”

People’s Daily published a Chinese translation of an English article from China Daily titled “Weakness of The US ‘Iron Chip Curtain’ Exposed.”

The following are highlights from the original China Daily article:

The Joe Biden administration plans to expand the so-called Foreign Direct Product Rule to more Chinese semiconductor fabrication factories. The Rule gives the US government the power to control the trading of US technologies, including in products made in a foreign country. The Biden administration has employed the provision to ban foreign companies from exporting semiconductor manufacturing equipment and advanced chips that contain US technologies or parts to Chinese companies.

Yet Japanese, Dutch and Republic of Korea companies, including Tokyo Electron and ASML, the two largest chipmaking equipment manufacturers, along with companies from 30 other countries and regions, are to be exempted from the expanded controls. That companies from Malaysia, Singapore, Israel and China’s Taiwan island, are not exempt serves to expose the symbolic nature of the move as part of the Democratic Party’s China-bashing stunts before the presidential election.

The other takeaway from the move is that more and more US allies are starting to distance themselves from the Biden administration’s “chip war” against China in fear of being left high and dry should the former “America-first” US president prove successful in his bid to return to the White House. In other words, instead of showing the success of its “chip alliance” scheme to thwart China’s high-tech progress, the prospective new rule indicates that the “united front” the Biden administration has painstakingly formed over the past more than three years is beginning to collapse.

As a matter of fact, the chip-related deals between China and Japan, the Netherlands and the Republic of Korea have kept rising steadily over the past years as companies from the latter have found plenty of ways to steer clear of the US government’s de facto coercion. Which might be a practical factor spurring the Biden administration to issue the new rule signaling that it will allow them to trade with China, making the move a face-saving attempt.

Source:
1. People’s Daily, August 3, 2024
http://world.people.com.cn/n1/2024/0803/c1002-40291814.html
2. China Daily, August 1, 2024
https://www.chinadaily.com.cn/a/202408/01/WS66ab6e75a3104e74fddb8089.html

Briefings | | |   US-China Relations