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Xinhua Commentaries on U.S. “Security Concerns” over Chinese Products

Amidst recent concerns within the U.S. and other Western countries over security threats posed by Chinese electric cars, cranes, 5G equipment, and apps (e.g. TikTok), the official Chinese state news agency Xinhua has published commentaries saying that such concerns are “nothing but baseless excuses to suppress China.”

Xinhua published an article titled “The American Political Spectacle: No More Pretending! Spilling the Beans! American Politicians Have Been Speaking Blunt Truths Recently.” The article said: “Not long ago, Raimondo (U.S. Commerce Secretary) inadvertently revealed a ‘shocking secret’ during a televised interview. She attacked Chinese-made smart cars (EV), claiming they can ‘constantly collect data’ and send it back to China, ‘like iPhones on wheels.’ Something about this statement doesn’t seem right. Netizens exclaimed, ‘It is confirmed that Apple phones monitor the world!’”

Another article titled “Abusing ‘National Security’ Is a Poison to Global Development and Security” hinted that China may retaliate by restricting U.S. products within China over “security concerns”: “When some countries label Chinese products and equipment as ‘unsafe,’ they seem to forget that Chinese people may also worry about whether such countries’ own equipment poses a threat to Chinese national security. Tesla, an American company, is all over the streets of China; is it also collecting sensitive data in China? With over a hundred million users in China, can Apple’s iPhones unknowingly transmit Chinese users’ data back to the U.S.? U.S. Commerce Secretary Raimondo claimed that ‘Beijing can shut down three million Chinese cars driving on American roads simultaneously.’ Shouldn’t China also worry that Washington could simultaneously shut down millions of Apple phones owned by Chinese users? If these devices are deemed unsafe, does it imply that China also needs to take equivalent precautionary measures, ultimately leading to mutual decoupling, with each [party] seeking self-preservation?”

Sources:
1. Xinhua, March 18, 2024
https://app.xinhuanet.com/news/article.html?articleId=aa7f401b5cd60612370be7ecb7aff923
2. Xinhua, March 16, 2024
https://app.xinhuanet.com/news/article.html?articleId=86aa9d6962ef2cb9fac651da50511c1d

China’s Shifting Strategy: Overseas Investment in the Electric Vehicle Industry

A report from the American think tank Rhodium Group suggests that China likely set a new record in outward direct investment in the EV industry last year. This year, China’s overseas investment in EV will remain strong, but will shift from primarily investing in the battery sector to manufacturing electric cars in Europe, Latin America, and Asia. This shift will aim to appeal to host countries’ demand for high value-added investment and job creation in exchange for market access.

So far, Chinese EV manufacturers have focused mainly on auto exports rather than on overseas production. The volume of Chinese car exports surged in 2022-2023, triggering an EU anti-subsidy investigation into Chinese EV imports. As a result, BYD announced plans to build a car factory in Hungary. This move would bypass potential anti-subsidy tariffs that the EU might impose.

Chinese EV manufacturers realize that the EU welcomes direct investment even though it might block direct auto exports from China. Unlike the U.S., which would strictly scrutinize Chinese EV production on U.S. soil, EU member states compete with each other to provide incentives for Chinese companies. The Rhodium Group anticipates that the EU’s investigation into Chinese EVs will encourage direct investment by the Chinese electric car industry in the EU.

China is also attempting to circumvent U.S. restrictions by investing in US trade agreement partners such as Morocco and Mexico.

Source: Deutsche Well, March 14, 2024
https://p.dw.com/p/4dVjM

RFI: Chinese EVs Flooding Europe, Will Challenge Core German Industries

Radio France Internationale (RFI) reported that “Chinese goods are pouring into European markets, and the first wave of repercussions for German industry has begun to take shape.” Below are some key points from the report:

Within China, sales of electric vehicles (EVs), consumer goods, and industrial products have stalled. State-owned enterprises are facing overcapacity. China’s plan [to alleviate the overcapacity] is to flood the European market with these products.

Products from China no longer just involve steel batteries and solar panels, which dominated the market for years with unparalleled prices. The mechanical engineering industry is another area where China has over-invested, and Chinese goods are now putting greater pressure on European manufacturers. It is said that Chinese manufacturers can produce around 50 million cars annually, but domestic demand may only be as much as 23 million vehicles. China plans to export the surplus to the rest of the world.

In terms of technical specifications, Chinese cars are at least comparable to most German cars, but they are often much cheaper in terms of price. “In the near future, a wave of industrial products may spread from China to Germany.” This is a harbinger for serious issues potentially facing Germany’s core automotive industry. Businesses and policymakers must find new answers to address these challenges.

Source: Radio France Internationale, March 15, 2024
https://rfi.my/AQv7

China Sees Fewer New Unicorn Startups Amid “Contractionary” Policies

Taiwan’s Central News Agency (CNA) recently reported on data from Shandong-based Chinese weekly newspaper Economic Observer, saying that China saw the emergence of only 15 new “unicorn companies” (startups valued at over $1 billion) during 2023. Meanwhile, the United States added 179 unicorns during the same time period.

Lu Ming, executive dean of the China Development Research Institute at Shanghai Jiao Tong University, noted a widening economic gap between China and the US in the digital sector. Although China ranked second globally in terms of number of unicorn companies, with a total of 316 such companies in 2023, the addition of only 15 new unicorns in 2023 represented a sharp decline compared with new unicorn formation in previous years.

Lu cited four reasons for the widening gap between China and the US: technology, talent, capital markets, and policy factors:

  • The US has a strong advantage in generative AI technology and innovation, particularly in language models trained on vast English content.
  • The US remains a talent hub.
  • Foreign capital markets are better at valuing the growth potential of emerging industries, attracting more investment. In contrast, China’s capital markets lack openness and inclusiveness.
  • “While the US government takes a more diversified approach to emerging trends, China sometimes introduces ‘contractionary’ policies. ‘[The Chinese government] is more sensitive to negative sentiments, and uses contractionary policies to avoid problems. This leads companies to become overly cautious, hampering their development and potentially creating vicious cycles.'”

The CNA article went on to say, “Although the [Economic Observer] report did not provide specific examples, China’s recent antitrust crackdown on platform companies and proposed regulations to tighten control over online games have been seen as ‘contractionary policies that suppress industries,’ affecting business expectations and economic growth. Officials have repeatedly stressed the need for caution in introducing contractionary or restrictive measures.”

Source: Central News Agency (Taiwan), March 11, 2024
https://www.cna.com.tw/news/acn/202403110306.aspx

China’s Top 100 Real Estate Firms See January and February Sales Cut in Half

Shanghai-based Chinese financial news site East Money recently reported that in February 2024, the top 100 Chinese real estate companies suffered a sales volume decrease of 20.9 percent month-over-month. The year-over-year decrease for February was 60 percent. Single-month performance hit the lowest point seen in recent years.

During the period January through February 2024, total sales of the top 100 real estate companies had a year-over-year decrease of 51.6 percent. Among these companies, only 14 had sales exceeding RMB 10 billion (around US$1.41 billion), a decrease of 12 compared with the same period last year; eight companies had sales exceeding RMB 5 billion (around US$705 million), a decrease of 18 compared with the same period last year.

Both central state-owned real estate enterprises and private enterprises have been facing pressure. 38 of the top 50 real estate companies experienced a year-over-year sales decrease of more than 50 percent in a single month. Only one company achieved year-over-year growth in the month of February, compared with seven companies in January.

Source: East Money, March 1 2024
https://finance.eastmoney.com/a/202403012999671120.html

Lianhe Zaobao: Netherlands Closes Consulate General in Chongqing

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that, as China faces difficulties in attracting foreign investment, the Netherlands announced the closure of its consulate in the city of Chongqing. According to the Dutch Embassy in China, the Consulate General of the Netherlands in Chongqing was officially closed on March 1. The Dutch Embassy in Beijing will now handle consular matters in Chongqing, Sichuan, Shaanxi, Yunnan and Guizhou.

An unnamed source quoted a Dutch representative at a gathering of foreign businessmen in Chengdu as saying that the consulate was closed due to the limited Dutch business activities in the region. Data released in mid-February by China’s State Administration of Foreign Exchange showed that China’s foreign direct investment (FDI) growth last year was at the lowest level since the early 1990s; China is facing challenges as it seeks more overseas funding to boost a sluggish economy.

Recent changes in trade relations between China and the Netherlands have been significant. The Dutch intelligence agency issued a report last year saying that China “posed the greatest threat” to the economic security of the Netherlands. The Netherlands recently decided to withdraw the license of Dutch photolithography giant ASML for export of certain products to China, citing concerns over Chinese use of advanced chip-making equipment for military purposes.

Source: Lianhe Zaobao, March 4, 2024
https://www.zaobao.com.sg/news/china/story20240304-1472075

2023 Saw Record High Purchases of South Korean Real Estate by Foreigners, 70% Were Chinese

According to a report by Yonhap News Agency on March 10th, data from the South Korean court’s property registration website showed that in 2023, over 15,000 foreign nationals applied for property ownership transfers in South Korea after purchasing real estate, accounting for 0.9% of all property registrations. The number of foreigners earning rental income is also increasing.

When the collection of such data began in 2010, only 4,307 foreigners purchased properties in South Korea, making up just 0.2% of total buyers. However, this number has been rising annually since 2014, reaching a new high last year. Among foreign buyers, mainland Chinese accounted for the largest group at 113,840 or 72.9%. They were followed by Americans (7,892), Canadians (1,627), Taiwanese (521), and Australians (510).

By property type, 12,027 foreigners purchased multi-family housing units, comprising 1.21% of all such buyers. The city of Incheon had the highest proportion of foreign-purchased multi-family housing units at 2.09%, followed by South Chungcheong (1.74%), Gyeonggi (1.68%), Jeju (1.53%), and North Chungcheong (1.21%).

As foreign ownership of Korean properties increases, more foreigners are earning rental income. In 2023, 17,786 rental contracts were signed by foreign landlords, the highest number since collection of such statistics began in 2010.

Source: Sputnik News, March 10, 2024
https://sputniknews.cn/20240310/1057570944.html

Hong Kong’s Proposed Article 23 Law Would Sever Foreign Ties, Restrict Information Flow

The Hong Kong government has proposed draft legislation to implement Article 23 of the Hong Kong Basic Law. The proposed law has provisions that increase prison sentences for various crimes if they involve colluding with “foreign forces.” Legal scholars have said that the broad definition of “foreign forces” in the draft, combined with the explicit criminalization of espionage-related activities, forms a stronger “firewall” that could cut off international connections to Hong Kong.

The draft states that “foreign forces” include foreign governments, foreign political parties, overseas organizations pursuing political agendas, and international organizations. “Colluding with foreign forces” refers to cooperating with them or acting under their control or funding. Some crimes would carry heavier sentences if foreign forces are involved.

A new “foreign interference crime” prohibits actions aimed at interfering in policymaking, elections or judiciary operations in Hong Kong using improper means like intentionally making false statements. This is punishable by up to 14 years in prison.

Eric Lai, a research fellow at Georgetown Center for Asian Law, points out that the broad definitions and heavy penalties for collusion appear aimed at severing connections between Hong Kong and overseas entities, impeding the flow of information, resources and funds. The draft also criminalizes illegally obtaining or disclosing state secrets under a broad definition.

Lai argues these measures create a stronger “firewall”, allowing authorities to block outbound information flows on national security grounds while restricting inbound overseas information. Certain provisions also give police powers to restrict detainees’ access to lawyers in national security cases.

Source: Central News Agency (Taiwan), March 12, 2024
https://www.cna.com.tw/news/acn/202403120330.aspx