Chinascope – Page 51

Japanese Government: China’s Distressed Debt Securitization Increased by 46%

According to Nikkei Chinese Edition, the Cabinet Office of Japan has published its semi-annual “World Economic Trends” report. The report pointed out signs of stagnation in China’s economy and warned that they may last – “not only will the economy stagnate in the short term, but there are also concerns about halted growth in the medium-to-long term.”

Based on data from private Chinese databases, the Cabinet Office of Japan annually reports on the amount of securities issuance converted from non-performing loans. In China, loans with delinquent payments over 90 days are considered non-performing. For 2023, such securities issuance amounted to 46.6 Billion Yuan (US$ 6.5 Billion), a 46 percent increase from 2022 (32 Billion Yuan). This increase was significantly higher than in 2021 and 2022; those years saw year-over-year increases of less than 10 percent.

In 2023, half of the security issuance converted from non-performing loans originated from housing loans, amounting to 23.6 Billion Yuan. This figure was 2.5 times higher than the previous year’s metric for converted housing loans.

The Cabinet Office of Japan stated “It is necessary to continue monitoring whether there will arise an excessive transfer of (bad loan) risk onto the financial markets.”

Source: Nikkei, February 29, 2024
https://zh.cn.nikkei.com/china/ceconomy/54956-2024-02-29-09-41-11.html?start=1

Briefings | | March 2, 2024 | @CS Economy/Resources Government/Politics

Xinhua: Foreign Politicians, Scholars, and Media Talking Trash About China’s Economy

China’s Xinhua news agency has published an article countering the numerous reports and predictions by foreign media regarding China’s economic downslide. The article blames Western politicians, scholars, and media for wearing “colored glasses” (having a biased perspective), “doomsaying” China’s economy. The article states that such “doomsaying” has existed for several decades and has always been incorrect. The article does not provide concrete evidence in defense of China’s current economic situation.

Some of the sentiments expressed in the article include:

“Gordon Chang, a ‘China collapse theory expert,’ has become a laughing stock.”
“During the 2008 international financial crisis, some U.S. politicians and scholars blamed the U.S. real estate bubble and global economic imbalances on ‘the high savings rates of China and other emerging market countries.'”
“In 2015, Western media revived the ‘Chinese economic collapse theory'”
“The West has substituted China as a scapegoat, blaming it for economic crises and socioeconomic problems.”
The West has “a stubborn Cold War mentality and ideological bias, aiming to undermine the outside world’s confidence in China’s economy.”

Source: Xinhua, February 22, 2024
http://www.news.cn/mrdx/2024-02/22/c_1310764956.htm

Briefings | | March 1, 2024 | Economy/Resources Government/Politics

People’s Armed Forces Departments Expanding Within Chinese State Owned Enterprises

Several Chinese State-Owned Enterprises (SOEs) have established People’s Armed Forces departments (人民武装部) within their organizations. Examples include the Shanghai Municipal Investment Group (Shanghai’s government financing company), the Mengniu Group in Inner Mongolia, as well as 10 SOEs in Wuhan City, Hubei Province and several SOEs in Huizhou City, Zhejinang Province.

Senior Colonel Wu Qian, the spokesperson of China’s Ministry of National Defense, stated at a press conference on October 26, 2023 that “Our national defense is the defense of the whole people. The People’s Armed Forces departments of state-owned enterprises are part of the national defense system and are the armed work departments of the Party within state-owned enterprises.”

Political observers suggest a few possible explanations for why Beijing is establishing these new People’s Armed Forces departments within state-owned enterprises. Integration between SOEs and the People’s Liberation Army (PLA) could help to quell potential domestic unrest resulting from China’s economic downturn. It could also help to save resources for the PLA and could potentially enhance the military’s ability to mobilize in preparation for an invasion of Taiwan.

Source: Deutsche Welle, February 23, 2024
https://www.dw.com/zh/中企纷纷设立人民武装部为哪般/a-68353845

Briefings | | March 1, 2024 | Defense/Military Government/Politics

China’s Household Bank Deposits Increased by 58 Billion Yuan Over Last Four Years

According to the latest data released by the People’s Bank of China, household bank deposits increased by a total of 58.24 Trillion Yuan (US$ 8 Trillion) during the period from early 2020 to January 2024. Of the increase, 82% was attributable to time deposits. The total increase in deposits over these four years is equivalent to the increase seen during the period from 2009 to 2019.

Commentators have attributed the influx in bank deposits to “the international and domestic situation.” Many affluent families decided to halt investments during the pandemic. Meanwhile, ordinary families, facing reduced income, chose to conserve their resources and earn interest by saving money in banks.

With the increase in deposits, Chinese banks have been under pressure to issue loans and generate returns. Since the start of the COVID-19 pandemic, China has seen reduced demand for bank loans due to the decrease in China’s overseas orders and the rapid shrinkage of the country’s investment in infrastructure / housing construction. Property values have been falling, the Chinese stock market is declining, and private capital investment have seen significant contraction. Apart from export-oriented companies with existing orders, other businesses learned the lesson that they should not make investments, putting banks in a difficult position.

Source: Radio Free Asia, February 26, 2024
https://www.rfa.org/mandarin/yataibaodao/jingmao/gt1-02262024233157.html

Briefings | | March 1, 2024 | Economy/Resources

China’s Foreclosure Market Sees Record Listings, Flat Sales in 2023

Data from China Index Academy, a Chinese real estate research firm, shows 100,400 foreclosed properties were put up for auction in January 2024, a 48.2% year-over-year increase from January 2023. About 12,700 foreclosed properties sold in January 2024 for ¥27.31 billion (US$ 3.8 billion). The transaction rate of 12.63% was lower than the 15.8% seen in January 2023.

Foreclosure transaction rates were higher in economically strong regions. Five provinces/municipalities – Shanghai, Zhejiang, Beijing, Tianjin and Fujian – saw rates of over 20%. Shanghai had the highest rate, at 38.6% (154 out of 399 listings sold). Zhejiang had the second highest rate, 35.94% (1,185 out of 3,297 sold).

China’s foreclosure market has seen increased attention in recent times due to economic headwinds and uncertainty. The China Index Academy estimates that there are about 800,000 foreclosure listings in China in 2023, a record 36.7% year-over-year increase compared with 2022. Only 149,000 of these 2023 listings transacted, however, totaling ¥300.41 billion (US$ 41.7 billion), on par with the total for 2022.

Industry insiders believe foreclosure listings and transactions will keep rising in 2024, indicating a hot foreclosure market. The economic climate and real estate conditions will continue to be key factors influencing supply and demand.

Source: Central News Agency (Taiwan), February 25, 2024
https://www.cna.com.tw/news/acn/202402250010.aspx

Briefings | | February 29, 2024 | Economy/Resources

Chinese E-Commerce Giants Temu and SHEIN Gain Ground in Japan

Chinese e-commerce platforms like Temu and SHEIN have seen large gains in Japan by offering low prices and decent quality. Temu, which focuses on daily essentials, has acquired over 15 million monthly active users in Japan within 6 months of its launch. This figure already exceeds 50% of the average user base of Japan’s top 3 e-commerce sites – Amazon Japan, Rakuten Ichiba, and Yahoo Shopping. Meanwhile, SHEIN has surpassed leading Japanese fashion marketplace ZOZOTOWN with 8.39 million users in January 2024, more than triple the number from a year earlier.

The secret behind behind the business models of Temu and SHEIN is the direct supply chain they have with small and medium manufacturers in China. This allows them to offer competitive pricing without compromising much on quality. Aggressive marketing tactics like heavy discounts and coupons have also helped them to rapidly gain market share.

As growth in the overseas footprint of Chinese ecommerce firms (now including TikTok) continues, they face barriers ranging from national security concerns to consumer rights and competition / IP infringement issues.

Some have voiced concern that the rise of Temu and SHEIN in Japan could threaten existing Japanese players. Moreover, these firms may face issues with the Japanese government over human rights concerns and intellectual property violations affecting the companies’ supply chains. SHEIN is also facing a lawsuit from leading Japanese fashion brand Uniqlo.

In the US, Temu and SHEIN are already in the crosshairs of the US-China Economic and Security Review Commission for links to forced labor in Xinjiang as well as IP theft.

Source: Nikkei Chinese, February 21, 2024
https://zh.cn.nikkei.com/china/ccompany/54870-2024-02-21-05-00-53.html

Briefings | | February 29, 2024 | Geo-Strategic Trend

Foreign Automakers Struggle in China’s Shifting Market

Japanese and Western automakers are struggling in the Chinese market, with steeper sales declines in 2023 compared to the Chinese auto market more broadly.

Honda’s 2023 sales fell 10% to 1.23 million vehicles in China while Nissan’s sales dropped 16% to 790,000 units. Toyota sales were flat at 1.9 million units. Mitsubishi Motors announced in October 2022 that it would cease production in China due to poor sales. Within about two months Mitsubishi’s dealership in Guangzhou was replaced by an outlet for a Chinese auto brand.

Volkswagen’s 2023 sales in China rose 2% to 3.23 million while sales of GM’s Buick brand fell 20% and Cadillac sales dropped by 8%.

Sales in China of electric and plug-in hybrid passenger vehicles increased by 30% in 2023, with Chinese automaker BYD expanding its selection of electric car models. China’s market for gasoline passenger vehicles shrank 7%, while the broader market for passenger vehicles (including electric vehicles) grew 4% to 21.92 million units.

Japanese brands Honda and Nissan lagged in electric vehicle sales even as their gasoline models face fierce price competition from Chinese brands. Japanese automakers face hard choices on where to focus limited resources. They face stiff price competition from Chinese manufacturers, though sales in China remain high enough to warrant continued competition in the electric vehicle segment. The plug-in hybrid segment may get less attention going forward.

Fierce price competition has spread to affect gasoline car models, and major foreign brands have cut prices substantially. Japanese brands offered steep discounts, with discounts on new Hondas averaging $3,500 and Nissan discounts averaging $3,200. Meanwhile, the average discount on BYD vehicles averaged just $750.

Source: Nikkei Chinese, February 22, 2024
https://zh.cn.nikkei.com/industry/icar/54748-2024-02-22-05-00-31.html

Briefings | | February 29, 2024 | 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