Chinascope – Page 78

SMIC’s Net Profits Down Significantly During First Half of 2023

Chinese semiconductor manufacturing company SMIC has released an earnings report for the first half of 2023. Well-known Chinese news site Sohu (NASDAQ: SOHU) reported that SMIC’s revenue was approximately US$3.023 billion during this period, a year-over-year decrease of 19.3 percent. Net profits were approximately US$634 million, a year-over-year decrease of 34.10 percent.

The company’s revenue from wafer fabrication decreased to US$2.759 billion during the reporting period, a 21.0 percent year-over-year decrease. Wafer fabrication represents nearly 90 percent of SMIC total business. Management stated that, due to global changes in the structure of the industrial chain and the re-integration and allocation of resources, it is foreseeable that future competition will be more intense.

SMIC expects that the unfavorable situation of “volume growth with price decline” in the second quarter will continue into the third quarter. This is due to the United States’ intensified pressure on China’s chip industry as well as the laggardly recovery of the global smartphone and consumer electronics industries.

According to the latest 2022 sales rankings released by pure-play foundry companies around the world, SMIC ranks fourth in the world and first among Mainland Chinese companies. As of now, China is still the world’s largest consumer market for integrated circuits and discrete devices.

Source: Sohu, August 25, 2023
https://www.sohu.com/a/714900415_258768

Briefings | | August 28, 2023 | Information/Technology

Large Number of Steel Traders Bankrupt and Liquidated

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that, in August 2023, several cities and regions in China have successively experienced steel trader debt default incidents. Provinces and cities affected include Sichuan, Nanjing, Hangzhou, Guizhou and others. Jiangsu, Henan, Wuhan and some others have issued risk notices to warn all companies to pay attention to risk prevention, not be greedy for low prices, avoid “blind transactions,” and work together to overcome the unfolding financial crisis.

In the meantime, according to information from China’s National Enterprise Bankruptcy and Reorganization Network, a large number of steel traders have entered the stage of bankruptcy and liquidation. In just the first two weeks of August, 21 sizable steel traders received court rulings for bankruptcy and liquidation. Officials from the China Iron and Steel Association said that, in the face of development difficulties, steel companies “should jointly strengthen self-discipline, pay close attention to the total demand and structural changes of the downstream steel consumption industry, and reasonably control the steel inventory level.” The steel companies should jointly “determine production by sales,” i.e. do not turn cash into inventory; “determine production by efficiency,” i.e. do not cause operational cost increase; and “determine sales by cash,” i.e. do not turn sales into collection obligations.

Source: Sina, August 14, 2023
https://finance.sina.com.cn/money/future/wemedia/2023-08-14/doc-imzhemwz4905118.shtml

Briefings | | August 28, 2023 | Economy/Resources

China Restricts What Apps Can be Installed on Mobile Devices

On July 21, 2023, a Chinese government website published a “Notice of the Ministry of Industry and Information Technology on the Filing of Mobile Internet Applications,” stating that Chinese companies are now required to register their mobile Internet Applications (hereinafter referred to as “apps”) with the Chinese government. Unregistered apps will not be supported by Chinese network access providers and content platforms.

Here are some key excerpts from the notice:

II. Task Specification

(1) Any app owners engaged in Internet information services in China should follow the “People’s Republic of China Anti-Telecommunications Network Fraud Law” and “Internet Information Service Management Measures” (State Council Decree No. 292) and other provisions to file their apps for the record. Those who have not filed shall not participate in app services.

(2) The Ministry of Industry and Information Technology will supervise and guide the national task of registering apps. The Communications Bureaus of provinces, autonomous regions, and municipalities are responsible for management of the implementation and supervision of app registration.

…

(9) Network access service providers, content platforms, and smart terminal manufacturers shall not provide network access, distribution, and pre-configuration services for apps that have not been registered.

Source: Chinese Government website, July 21, 2023
https://www.gov.cn/zhengce/zhengceku/202308/content_6897341.htm

Briefings | | August 26, 2023 | Government/Politics Information/Technology

China Starts Assessing Debt Owed by Local Governments

The Economic Observer, a Chinese newspaper focused on economics, reported that Zhengzhou City (Henan Province), Tianjin, and some other places have required district and county governments to make an assessment of money they owe to the private real estate enterprises.

A number of private real estate enterprises told The Economic Observer that local city governments owe them in the range of 1 – 2 billion yuan (US$140 – 280 million). These arrears include commitments to return land premiums, land tax rebates, government-subsidized housing construction deposits, land cleaning advances, et cetera.

On August 3, Pan Gongsheng, the Party Secretary and Governor of the People’s Bank of China, presided over a symposium on financial support for the development of private enterprises. According to a person familiar with the matter, some companies attending the symposium complained about problems with local government debt.

Source: The Economic Observer, August 22, 2023
http://www.eeo.com.cn/2023/0822/602216.shtml

Briefings | | August 25, 2023 | Economy/Resources Government/Politics

For “Humanitarian Reasons,” China Doesn’t Block Philippine Resupply of Grounded Warship in Disputed Waters

On August 7, China blocked two Philippine supply vessels from unloading supplies at the Second Thomas Shoal in the South China Sea. China blocked the supply vessels by firing water cannons at them. The vessels were supposed to deliver supplies to soldiers stationed on a Philippine warship BRP Sierra Madra that has been grounded at the atoll since 1999. Both China and the Philippines claim sovereignty over the Spratly Island area where the Second Thomas Shoal is located.

On August 22, the Philippines sent resupply ships to the shoal again. This time, China didn’t stop them.

Following the event, Xinhua published a statement by the Spokesman of Chinese Coast Guard Bureau: “On August 22, two Philippine supply vessels and two [Philippine] marine police vessels entered the waters adjacent to the Second Thomas Island in the Spratly Islands area without the permission from the Chinese Government. In accordance with the law, the Chinese Marine Police gave the Philippine vessels a stern warning, followed them throughout their entire journey, and effectively restrained them. At the same time, in view of the fact that the Philippine vessels were not carrying large-scale building materials, the Chinese Marine Police made a temporary special arrangement for humanitarian reasons, allowing the Philippine vessels to transport food and other living necessities to the military vessels stranded on the beach. China has indisputable sovereignty over the Spratly Islands and their adjacent waters, including the Second Thomas Island. China firmly opposes the Philippines using the excuse of “resupply” to deliver illegal building materials to the illegally-grounded warship. The Chinese Maritime Police will continue to protect China’s rights and carry out law-enforcement activities in the waters under China’s jurisdiction in accordance with the law.”

Source: Xinhua, August 22, 2023
http://www.news.cn/world/2023-08/22/c_1129816942.htm

Briefings | | August 25, 2023 | @CS Geo-Strategic Trend

China’s Weaponization of Mekong River Dams to Pressure Downstream Countries

For the past decade, the Mekong River has had abnormal water pattern: high flows during the dry season and low flows during the rainy season. This is caused by the upstream Chinese dams, which release water for power generation during the dry season and retain water during the rainy season.

The Mekong River has a total length of more than 4,800 kilometers (~3000 miles) in its main branch. Its 2,139-kilometer (1330 mile) upper section in China is known as the Lancang River. After flowing out of China, the Mekong River flows through five countries in Southeast Asia – Myanmar, Laos, Thailand, Cambodia, and Vietnam. It is a lifeline supporting 65 million people.

By the end of December 2020, the Chinese Communist Party (CCP) had built 12 giant dams on the main branch of the Lancang River, with eight more under construction. In addition, there are 85 dams on hundreds of tributaries to the Lancang River.

On January 1, 2019, China put four newly-constructed dams into operation. As a result, the Lower Mekong has experienced a severe drought starting that year and lasting for more than four years (through the present).

The year 2020 was the driest year for the Mekong on record. Although upstream Chinese reservoirs had sufficient water during the rainy season, some of the Mekong River beds downstream were dry and cracked.

China’s use of dams to exert pressure on downstream countries has been going on since at least 2016. In March of that year, the Mekong River’s water volume was reduced, and Vietnam’s rice region suffered a severe drought, with seawater back filling the river bed. The CCP then took the “generous” step of releasing water for “disaster relief.” A week later, China’s then-Premier Li Keqiang hosted the Lancang-Mekong Cooperation Meeting in Sanya, Hainan. The five thirsty downstream countries signed the Lancang-Mekong Agreement, signing on to Chinese investment, loans, and a special fund to promote China’s Belt Road Initiative in Southeast Asia.

Source: Epoch Times, August 10, 2023
https://www.epochtimes.com/gb/23/8/10/n14051766.htm

Briefings | | August 24, 2023 | @CS Economy/Resources Geo-Strategic Trend

Chinese Author: Chinese Insurance Industry is a Time Bomb

Lao Man (老蛮) is a Chinese writer who publishes on economic topics. He recently published an article warning that Chinese insurance companies are another time bomb that may explode soon.

He gave the following data (in Billions of Yuan):

Year Investment Income Payout Net
2018 7,105 12,298 -5,193
2019 9,152 12,984 -3,832
2020 11,729 13,907 -2,178
2021 12,775 15,609 -2,834
2022 4,640 15,485 -10,845
2023 (Jan – Jun) 3,194 9,151 -5,957

He pointed out that many insurance companies have a cash pool for investment, and that they use their investment returns to cover part of their insurance payouts (with any gap between investment income and insurance payouts being made up by e.g. premiums charged to the insured).

It was a good sign that the gap between the investment income and insurance payouts was shrinking from 2018 to 2020. The gap held steady in 2021, but it shot up dramatically in 2022 and has remained high during the first half of 2023.

The reason is that insurance companies can no longer generate high returns on their investments due to China’s economic downslide. This will inevitably eat into the insurance companies’ cash pools. According to the article, insurers will be forced to take in more customers and use the new customers’ money to pay for the existing customers, essentially running a Ponzi scheme.

Source: China News, August 15, 2023
https://news.creaders.net/china/2023/08/15/2637675.html

Briefings | | August 24, 2023 | Economy/Resources

Lianhe Zaobao Criticizes Xi Jinping

Singapore-based Lianhe Zaobao used to maintain good relations with the Chinese Communist Party. Recently, however, it published a commentary that openly criticized Beijing’s policy. Two versions of the commentary were published.

The first version has the author’s name in the title: “Liu Mengxiong: the Problem Is Economic, But the Root Cause is Political.” Liu is a Hong Kong businessman and former member of the National Committee of the Chinese People’s Political Consultative Conference. In the past, he had a pro-Beijing stance. The second version of the article, titled “Commentary: the Problem Is Economic, But the Root Cause Is Political,” indicated the author’s name in a footnote.

In the article, Liu listed economic problems faced by China, praised Deng Xiaoping’s policy of economic reform, and criticized Xi Jinping’s policy (without mentioning Xi’s name explicitly). “The first 30-odd years of reform and opening up were characterized by a steady upward trajectory, but in recent years, [China] has fallen into a downward spiral. If we look at the essence of the phenomenon, we will find that the most fundamental reason for the economic reversal lies in politics.”

The article lists many policies that, in the author’s opinion, have had a negative impact. These include stressing the party’s control over companies, policy on COVID, and the CCP’s hostility against the U.S.

The article ends by calling for political reform and stating that “The economic adversity caused by politics must be treated politically. The question is, does the princeling leader have the sense of historical mission and vision necessary to realize economic marketization, the rule of law, and the democratization of politics through reform of the political system?”

Sources:
1. Lianhe Zaobao, August 21, 2023
https://www.zaobao.com.sg/forum/views/story20230821-1425457
2. Lianhe Zaobao, August 21, 2023
https://www.kzaobao.com/mon/keji/20230821/145204.html

Briefings | | August 24, 2023 | Economy/Resources Government/Politics

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

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

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