{Editor’s Note: Wu Guoguang is presently a Senior Research Scholar at Stanford University, affiliated with the Stanford Center on China’s Economy and Institutions (SCCEI). Continue reading
China to Boost Zimbabwe’s Railway, Targeting Commodities Export Capacity
Sputnik News reported that Zimbabwe plans to modernize its state-owned railways with China’s experience and financial support. Before the end of June, both sides will assess the railway transportation needs and reach a consensus on the engineering workload required for reconstruction. China Railway recently signed an MOU with Zimbabwe to conduct a feasibility study on the project within this timeframe.
China’s assistance will bring Zimbabwe increased opportunities to enter the global commodity market, and infrastructure cooperation between China and Zimbabwe will undoubtedly have an impact on the economies of other African countries as well.
Zimbabwe estimates that the total railway reconstruction cost will be around $533 million, and it hopes to receive funding support from China. Zimbabwe has been unable to borrow from multilateral lending institutions due to its over 20 years of debt; the country’s external debt had reached $12.7 billion by September 2023. China recently wrote off Zimbabwe’s interest-free loans but did not disclose the amount, while still promising to help Zimbabwe find a way out of its long-standing debt crisis.
According to experts cited by Sputnik News, modernizing Zimbabwe’s railways will create favorable conditions for exporting Zimbabwe’s abundant lithium, coal, chrome, granite and other resources to world markets by enhancing the carrying capacity and speed of the nearest ports on the Atlantic and Indian Oceans. The planned joint project “is an extremely reasonable and forward-looking move within the framework of China’s ‘railway diplomacy.'”
The project is expected to facilitate China-Zimbabwe mineral resource cooperation and bilateral trade. With improved infrastructure and logistics efficiency, it will attract more Chinese investment in Zimbabwe across various sectors and promote higher-quality Belt and Road cooperation between the two countries.
Source: Sputnik News, May 21, 2024
https://sputniknews.cn/20240521/1059242414.html
China’s Sovereign Wealth Fund Targets Japanese Small and Medium Enterprises and Services
China’s sovereign wealth fund, China Investment Corporation (CIC), with assets totaling $1.2399 trillion, is targeting Japan’s small- and medium-sized enterprises. The plan is to allow Japanese companies with high-quality services and undervalued corporate value to thrive in China’s massive consumer market. While information disclosed is limited, this move by Beijing could trigger discussions in Japan and abroad around economic security.
In Shenzhen, the Japanese massage parlor “KA·RA·DAfactory” has attracted many Chinese customers seeking out high-quality Japanese services. Priced at 688 yuan for 60 minutes, about 1.7 times higher than in Japan, the parlor requires around 100 hours of training for its therapists to provide consistent, high-quality services. Japanese quality services, honed in years of deflation, are now praised even in the birthplace of massage – China. In the first year since the parlor’s March 2023 opening, around 60% of customers have become regulars, including many customers from Hong Kong who were attracted by the Japanese brand. The company operating the massage parlor is Factory Japan Group, which was 100% acquired by CIC’s Japan-China investment fund in 2022 in partnership with the Nomura and Daiwa Securities groups. Factory Japan Group plans to expand through franchising in China, targeting 53 outlets by 2026 leveraging CIC’s huge influence.
CIC’s Japan fund primarily targets unlisted medium and small enterprises, or businesses that can increase value through joint Chinese-Japanese operations. In April, CIC invested in a Japanese language education institute catering to students aspiring to study in Japan.
Since 2017, CIC has launched overseas funds in collaboration with top financial institutions from the US, UK, Japan, Italy, France and Germany. By 2022-end, they had invested in over 20 companies in advanced manufacturing, healthcare, financial services and consumer sectors.
CIC views Japan’s unlisted medium and small enterprises as highly valuable acquisitions. However, Chinese investments could pose economic security risks for Japan. M&A deals with China as the buyer peaked around 2016 at around 20 annually.
As China enhances sanctions against advanced manufacturing like semiconductors, and as its market matures demanding quality goods and services, Japanese service and manufacturing sectors may become prime acquisition targets.
While CIC has an international advisory board displaying transparency, information on specific investments is limited. Improved transparency and accountability are crucial for CIC’s global acceptance as a trusted investor.
Source: Nikkei, May 15, 2024
https://zh.cn.nikkei.com/china/ccompany/55562-2024-05-16-05-00-14.html
Hong Kong Launches Digital Renminbi Wallet in Collaboration with China
On May 17th, the Hong Kong Monetary Authority (HKMA) announced a collaboration with the People’s Bank of China to expand the use of the digital renminbi wallet in Hong Kong, allowing all Hong Kong residents to open an account.
According to the announcement, Hong Kong residents can register and open a digital renminbi wallet on their mobile phones. After registration, they can use the popular local mobile payment app “Faster Payment System (FPS)” to top up their wallet and exchange for renminbi.
The HKMA stated that the digital renminbi wallet balance is capped at 10,000 yuan. Each payment cannot exceed 2,000 yuan, the cumulative daily payment amount cannot exceed 5,000 yuan, and the annual limit is 50,000 yuan. The wallet also has a function to exchange the digital yuan back into Hong Kong dollars.
In addition to using the digital renminbi wallet in various cities in the Greater Bay Area of Guangdong, Hong Kong residents can also use it in other pilot cities across mainland China.
Eddie Yue, Chief Executive of the HKMA, said Hong Kong is the first place outside mainland China to launch the digital renminbi wallet. The authorities will continue to work closely with the People’s Bank of China to gradually expand the application scope of the digital renminbi and promote acceptance by more retail merchants, facilitating cross-border retail payments for residents in both mainland China and Hong Kong.
The digital renminbi is a digital form of legal tender issued by the People’s Bank of China, exchangeable 1:1 with physical renminbi. It has been piloted in multiple major mainland Chinese cities since 2019.
Source: Central News Agency (Taiwan), May 17, 2024
https://www.cna.com.tw/news/acn/202405170225.aspx
2023 Annual Reports of 58 Listed Banks Raise Serious Concerns
Well-known Chinese news site Sina (NASDAQ: SINA) recently reported a summary of the results from the 2023 annual report disclosure published by 58 listed Chinese banks.
In 2023, while China’s economy was broadly under pressure, the banking sector faced operation and development challenges of its own. Banks’ net interest income suffered a year-over-year decline for the first time since 2017. Also, the average net interest margin of listed banks was 1.69 percent, declining for the fourth consecutive year. Net fee and commission income decreased by 8.05 percent year-over-year, declining for two consecutive years. Listed banks achieved a total revenue of RMB 5.87 trillion yuan (around US$827.8 billion) in 2023, a year-over-year decrease of 0.98 percent.
Digital intelligence capabilities have become the core competitiveness of listed banks. It is worth noting that, in 2023, the banking industry paid a lot of attention to large data models, with more and more listed banks deploying large model technology. For example, in 2023, ICBC (Chinascope Editor’s Note: ICBC, the Industrial and Commercial Bank of China, is the largest bank in the world by total assets) established the industry’s first fully-independently-developed large-scale AI model, with hundreds of billions of parameters, deploying innovative applications to multiple financial business scenarios.
For some small and medium-sized banks, it may be difficult to find the resources required for digital transformation. This could lead to further intensified differentiation within the industry.
Source: Sina, May 15, 2024
https://cj.sina.com.cn/articles/view/2660807713/9e98b421001018rda
SMIC May Have Developed 5nm DUV Process
CNBeta, one of China’s largest technology news sites and a member of Microsoft Chinese Technology Cooperation Network, recently republished an article by Hankyung (The Korea Economic Daily, South Korea’s largest business newspaper by revenue), suggesting that China’s largest semiconductor manufacturer, Semiconductor Manufacturing International Corporation (SMIC), has achieved a new milestone in the use of Deep Ultraviolet Lithography (DUV) technology to manufacture computer chips without the use of more advanced Extreme Ultraviolet Lithography (EUV) equipment. The news claimed that the new 5nm process, which uses legacy DUV equipment, has been completed and SMIC is ready to mass produce a first batch of wafers.
In the meantime, Huawei has also announced that its next-generation Kirin SoC chip will appear in the upcoming Mate 70 series mobile phone this October. There is no word yet on production volumes, but SMIC’s 5nm process has previously been considered expensive to produce due to the lack of next-generation equipment. A current U.S. trade ban prohibits companies like the Netherlands’ ASML from supplying cutting-edge EUV equipment to any Chinese company.
It is estimated that the cost of SMIC’s 5nm chips will be 50 percent higher than Taiwanese TSMC’s chips. Also, Huawei’s HarmonyOS Next operating system will be unveiled with the new Mate 70 mobile phone, aiming to compete head-to-head against Google’s Android platform.
Source: CNBeta, May 15, 2024
https://www.cnbeta.com.tw/articles/tech/1431027.htm
https://www.hankyung.com/amp/2024051366751
CNA: Large Japanese Parliamentary Delegation to Attend Taiwanese Presidential Inauguration
Primary Taiwanese news agency Central News Agency (CNA) recently reported that 35 cross-party members of the Japanese-Taiwanese Parliamentarian Symposium will visit Taiwan to attend the inauguration ceremony for Taiwanese President-elect Lai Ching-te on May 20th. This will be the largest Japanese delegation in history.
Japanese Representative Kishi Nobu Chiyo, the nephew of former Japanese Prime Minister Shinzo Abe, will be among the visiting Japanese delegates. Akie Abe, the widow of Shinzo Abe, will also make a special trip to Taiwan to attend the inauguration ceremony.
CNA reported that president-elect Lai Ching-te has a profound friendship with the Abe family. Immediately after Shinzo Abe’s assassination, then Vice President Lai Ching-te went to Japan to express his condolences to Abe’s family members and friends. At the time, Lai Ching-te was at the highest-level Taiwanese government official to visit Japan since 1972.
When China banned imports of Taiwanese pineapples, Shinzo Abe made a video of himself eating pineapples, calling on the Japanese people to purchase more of the fruit from Taiwan. The fact Japan is now sending its largest delegation in history to attend the Taiwanese inauguration symbolizes the continued warming of Taiwan-Japan relations. After Lai Ching-te takes office, he is expected to continue supporting Taiwan-Japan friendship, with the hope that the two countries can work together to maintain peace and stability in the Indo-Pacific region.
Source: CNA, May 14, 2024
https://www.cna.com.tw/news/aipl/202405140249.aspx
China’s Automobile Industry Sees Strong Q1 2024 Growth in Production and Sales
On April 10th, the China Association of Automobile Manufacturers released automobile production and sales data from January to March 2024. China’s production and sales reached 6.606 million and 6.72 million units, respectively, with year-on-year increases of 6.4 percent and 10.6 percent, respectively. These were the highest quarterly production and sales figures seen since 2019.
Automobile exports for Q1 totaled 1.324 million units, up 33.2 percent year-on-year. In terms of new energy vehicles (electric cars), production and sales during this period were 2.115 million and 2.09 million, respectively, representing year-on-year increases of 28.2 percent and 31.8 percent, respectively.
In the month of March alone, automobile production and sales reached 2.687 million and 2.694 million units, respectively, up 78.4 percent and 70.2 percent month-on-month, and up 4 percent and 9.9 percent year-on-year, respectively. Among these, new energy vehicle production and sales reached 863,000 and 883,000 units, respectively, up 28.1 percent and 35.3 percent year-on-year.
Source: People’s Daily, April 10, 2024
http://finance.people.com.cn/n1/2024/0410/c1004-40213186.html