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New rules have China private education firms in a fix.

New rules have China private education firms in a fix.

China’s private education companies had for years been the darlings of investors from New York to Shanghai, building a $100 billion industry on the promise of the world’s largest and arguably most-competitive schooling system. Then they got caught up in the Chinese government’s sweeping efforts to rein in the country’s technology giants, with a regulatory clampdown unveiled in July after months of rumbling that threatens to put an end to years of out-sized growth. The industry’s rise -- and future -- hinges on two of the most powerful and anxiety-inducing forces in China today: the pursuit of wealth and status, and the Communist Party’s enduring obsession with maintaining social order.

 

 

1. How did tutoring become so popular?

Blame it on the Gaokao: the national college admission test, administered in June, that decides which universities one can attend and thereby determining the fates of millions. It’s considered a playing-field leveler for those aspiring to move up the social ladder. Only 1.9% of nearly 11 million students who sat for the Gaokao in 2020 made it to a top-tier institution like Peking, Fudan or Tsinghua universities. Preparations begin many years before, in some cases as early as pre-school, as parents try to give their children every possible edge. Ironically, years of government entreaties to lessen the burden of homework may have driven anxious parents to private companies. After-school tutoring flourished, supplemented by online classes that in turn exploded during the Covid-19 pandemic. China’s market for private tutoring was expected to almost double to 1.17 trillion yuan ($183 billion) in 2023, from 619.1 billion yuan in 2019, according to Macquarie Research.

 

 

2. What do the regulators say?

That some tutoring firms exploited parental paranoia. A marketing free-for-all -- sometimes with false ads and misleading campaigns -- funneled millions of kids into mind-numbing virtual classes with uncertain benefits. As student numbers exploded, venture capital investors who didn’t want to miss out joined Alibaba Group Holding Ltd., Tencent Holdings Ltd. and SoftBank Group Corp. in doling out more than $10 billion of funding last year alone. That exuberance alarmed regulators, who feared tutoring firms empowered by big capital would only grow and exacerbate problems. President Xi Jinping lashed out at the industry’s “disorderly development” at a meeting in May, intensifying a clampdown from agencies including the powerful education ministry.

 

3. What’s the bigger picture?

Officials are also concerned about the destabilizing effects of hundreds of millions of parents plowing their life savings into online classes, while subjecting children to increasingly onerous workloads. As with past booms built on shaky ground -- say, in peer-to-peer lending, online shopping or improperly licensed wealth management products -- Beijing stepped in to defuse what it perceived to be a potential time bomb that threatened to disrupt order and thus the party’s grip on power. In addition, many cite the cost and competition for better education resources as a contributor to China’s declining birthrate. China offered tax breaks -- including tax write-offs for education fees --in 2019 to promote its new two-child policy, but that didn’t help. Now it wants people to consider having up to three. A reform of the education system may seem like a good way to start.

 

4. What has the government done?

Declaring that the industry has been “severely hijacked by capital,” regulators published new regulations on July 24 that, among other things:

  • Require private companies that teach compulsory school subjects to go non-profit.
  • Ban them from going public or raising foreign capital.
  • Ban all tutoring related to the core school syllabus during vacations and weekends -- the prime hours for such companies.
  • Forbid outright acquisitions.
  • Banned foreign firms from acquiring or holding shares in school curriculum tutoring institutions, or using VIEs (variable interest entities) to do so.
  • Those already in violation need to rectify the situation
  • Forbid online tutoring and school-curriculum teaching for children under 6 years old.
  • Ban teaching of foreign curriculums or hiring foreigners outside China to teach.

 

That followed a plethora of restrictions, including caps on fees firms can charge and time limits on after-school programs. Regulators have fined two of the biggest startups for false advertising: Alibaba-backed Zuoyebang and Tencent-backed Yuanfudao. On the flip side, tutoring services that focus on cultivating interests, innovation and practical abilities -- say piano lessons -- are encouraged.

 

5. What’s the impact?

All the major education companies said they would comply with the new rules, including on foreign investment. Global investors such as Tiger Global Management and Temasek Holdings Pte that had poured billions into the industry are reeling. Plans for several mega-IPOs already had been halted, including VIPKid, backed by Tencent and Huohua Siwei. Shares of listed tutoring firms have gotten hammered, including industry bellwethers New Oriental Education & Technology Group Inc., TAL Education Group and GSX Techedu Inc. GSX already said in May it’s closing its pre-school education business for children ages 3 to 8 and cutting staff.

 

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Source: The Washington Post

Evolving Relationships: China’s Growin...

Evolving Relationships: China’s Growing Push into Central America

For nearly 60 years, the preeminent Asian power in Central America was not the People’s Republic of China, but Taiwan. Yet in rapid succession starting in 2017, Panama, the Dominican Republic and El Salvador surprised many by switching their diplomatic recognition to Beijing, joining Costa Rica, which had done so in 2007. While four Central American nations remain today within Taiwan’s shrinking circle of international supporters – Belize, Guatemala, Honduras and, curiously, Nicaragua – it is fair to wonder whether those alliances, too, may now be in danger. 

 

Today, China’s methodical push for a bigger foothold in Central America is no longer surprising anyone. While Beijing’s relationships in the isthmus are not yet as deep as those in South America, the Chinese government clearly sees an opportunity to expand its presence for both commercial and geopolitical reasons. China hopes to turn Panama into another axis of its “Belt and Road Initiative” for the Americas and gain preferential access to the only real strategic asset in the area: the interoceanic canal. Meanwhile, Central American countries’ acute need to recover from the COVID-19 pandemic, as well as some governments’ growing desire for a “more accommodating” alternate partner to the United States, may constitute a favorable context that pushes the isthmus even further into Beijing’s embrace in coming years.

 

 

For many years, the growing Chinese presence did seem to fly somewhat under the radar of the United States and other observers. Even Costa Rica’s 2007 switch of diplomatic status to Beijing did not seem to set off many alarm bells at the time. After all, Costa Rica is a trusted U.S. ally and no other Central American country immediately followed suit. Furthermore, the initial results of Beijing’s foray were scant and problematic, a fact that successive Costa Rican governments did nothing to hide. Issues arose with Beijing-led projects like the enhanced road to the Caribbean port city of Limón, the cancellation of a plan to build an oil refinery, the failed attempts of China to win infrastructure projects, and the inability (or unwillingness) of Costa Rican authorities and entrepreneurs to attract more tourists from China without weakening migration restrictions. Not even the existence of a Free Trade Agreement (FTA) between the two countries since 2011, nor the “strategic relationship” which China and Costa Rica vowed to develop after 2015, was sufficient to generate significant concern from Washington.

 

As president of Costa Rica from 2014-18, I tried to enhance our country’s relationship with China for three main reasons: 1) To further our efforts to develop public infrastructure (roads, ports and bridges in particular) 2) To diversify our export markets using the binational FTA provisions fully; and 3) To consolidate a telecommunications platform whose bases had already been established by previous administrations. During my term only once was I told, towards the end of my mandate and indirectly, that U.S. trade authorities could eventually object to the installment of several donated Chinese scanners in the ports of Costa Rica.

 

But after the triple diplomatic defections in 2017 and 2018, the Trump administration changed course, and identified the Chinese presence in Central America – and Latin America as a whole – as an issue of grave significance. Throughout 2018 both President Trump and then-Secretary of State Mike Pompeo repeatedly expressed their aversion to Chinese activities in Latin America (particularly its diplomatic and economic support for the Maduro regime in Venezuela). They also warned against deals that were “too good to be true” and accused Beijing of carrying out “nefarious” actions in the region. The Chinese retaliated, calling the US criticism “slanderous,” “irresponsible” and “despicable.” After visiting Panama in October 2018, Pompeo said he had warned the local authorities against Chinese “predatory economic activities.”

 

Biden is also on the alert

Today, the Biden administration has so far maintained much of the spirit, if not the rhetoric, of opposing Chinese activities in Latin America. But the ground is clearly shifting due to the pandemic. China has moved fast to display its so-called “vaccine diplomacyin El Salvador and in the Caribbean, while trying to resume business as usual in terms of its economic and diplomatic relationships elsewhere. The United States has so far announced its decision to steer large quantities of vaccines to the region but is delivering them only gradually. Biden’s government has also focused on yet another intense migratory wave from towards the U.S., which has dictated the tone and substance of its relationships with Central America’s Northern Triangle governments, sometimes with contentious overtones.

 

Partly as a result, Central America seems particularly fertile ground for Chinese expansion. The region is currently divided between one dictatorial regime (Nicaragua), two seriously compromised states because of the activities of transnational organized crime (Guatemala and Honduras), one nation on the verge of becoming yet another example of populist, autocratic rule (El Salvador), and three generally stable countries (Belize, Costa Rica and Panama) suffering from the financial and political fallout of long-term systemic dysfunctions exacerbated by the COVID-19 pandemic. 

 

A list of U.S. concerns about Chinese expansion in the region probably will begin with Panama. Linked by 21 major infrastructure projects like ports, telecommunications, rapid trains and roads (plus the enhancement of the already saturated Tocumen airport) Panama could soon become one of China’s most important outposts in the Western Hemisphere. Meanwhile, the president of El Salvador has already hinted, seconded by his colleague from Honduras (who has been repeatedly accused of being associated with a narcotrafficking network) that they could seek the support of new allies who are more “understanding” than the U.S. on issues pertaining to democratic principles and human rights practices.

 

Faced with this changing reality, China has often been content to sit quietly and enjoy the benefits. In fact, while the Russians have been actively providing advanced military logistic support and counsel to Nicaragua and Venezuela for more than a decade, the Chinese have been particularly muted in advancing any military or security related deals in the region except for funds to build a police academy in Costa Rica, and the donation of anti-riot equipment to Panama. Furthermore, they do not seem interested in bringing in too much public attention to their business deals in Central America. This is true of their powerful telecom corporation Huawei, which successfully competes in all the national markets, but especially in Costa Rica and Belize. In these two countries Huawei is not monopolistic, but it is certainly a very competitive player. For example, it controls 37% of the cellular market of Costa Rica. But most importantly, Huawei is ahead of its technological rivals in preparing for the 5G transition. While the resolution of this issue has been delayed by U.S. pressures and debates between different local economic sectors, it will inevitably gain a high profile in the coming months as Costa Rica nears the election of a new president in February 2022 and moves to regain its trade and tourism competitiveness after the pandemic. 

 

 

A push into the military sphere?

A big question lingers: Could China take advantage of the current situation in Central America to accelerate its involvement beyond economic and trade parameters? 

 

In the view of Lt. General Andrew Croft, Deputy Military Commander of the U.S. Southern Command, it already has done so. Mostly because of what he calls “strategic ownership.” In his view, there is no such thing as an economic/political divide in Chinese activities. Given the peculiar nature of Chinese business, which is significantly controlled by the state, the fact is that China simultaneously uses its so called “private” companies to advance political objectives. Chinese opportunism is, in this regard, a given that will use any critical development to enhance its influence. Such was the case with the provision of COVID-19 vaccines, the sustained solidarity of China with Venezuela and its more recent announcement of the future construction of a new port in El Salvador. China has also provided diplomatic sympathy to Salvadoran President Nayib Bukele after receiving justified criticisms from the Biden administration over his increasingly autocratic behavior.

 

It is unlikely that China will attempt to formalize agreements or carry out military exercises or any other activities that could be seen as a direct threat to the U.S. in the Caribbean Basin, as Russia has. Yet, joint military exercises have already been announced in Argentina as part of their 2015 understanding, which includes the possibility of China building military space installations in that country. Would China be willing to risk a major confrontation with the U.S. and emulate the Russians in Venezuela or eventually, in Nicaragua? The Ortega regime, a dictatorship, seems determined not to abandon power through elections anytime soon. What if Nicaragua were to break away from its Taiwan relationship and rush to Beijing to counteract further and more serious U.S. government sanctions resulting from Ortega’s increasingly repressive behavior? 

 

What’s clear is that several Central American governments see Chinese engagement as an opportunity to “build back better” after the pandemic. And this circumstance, in a region that has of late been devastated by COVID-19, two major hurricanes (likely to happen again as the region continues to be gravely affected by climate change), and is suffering from profound, structural democratic deficits, could put strains in the balance of power in a highly sensitive area for the United States. Clearly, Washington continues to enjoy a solid geopolitical predominance in Central America that the Chinese cannot match in the short term. Yet, the challenge is not small nor the outlook optimistic, unless Central America is capable to significantly increase its human development and overcome its deep democratic failings. This is one of the region’s most pressing trials.

 

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Source:By Luis Guillermo Solis for Americas Quarterly

Didi raises $4 billion in US listing...

Didi raises $4 billion in US listing. Updated for data-security probe.


China's ride hailing company Didi Chuxing raised about $4 billion in its IPO on the New York Stock Exchange (NYSE), priced at the top range. Based on the listing, Didi's market valuation will hit a record $67 billion. 



Under the IPO Didi issued 288 million American Depository Shares (AD), priced at $14 each, equivalent to 72 million shares of Class A common stock on the NYSE.



It is the largest IPO by a Chinese firm in the US stock market since 2014 when Chinese internet behemoth Alibaba earned the title of the biggest IPO. It is also likely to be the largest IPO in the US market this year.



According to the company, 30 percent of the funds raised with the IPO will be used to expand international business outside China. Another 30 percent will go to enhance current technologies, and 20 percent will be on improvement of user experience. 



Founded in 2012, Didi has launched operations in 14 countries outside China, hiring thousands of local employees across Africa, Asia-Pacific, Europe and Latin America. The company has consolidated a strong market position as one of the most popular ride-hailing platforms in Latin America and the second largest ride-hailing and food delivery platform in Mexico, in terms of total transactions in 2020, according to the China Investment Corporation and iResearch Consulting Group.

 

DiDi Headquarters in Beijing.


Didi's global platform provided services to over 493 million annual active users and managed an average of 41 million daily transactions for the previous 12 months ending on March 31, 2021, according to the listing prospectus.



In 2020, Chinese companies raised $12 billion from US listings, more than triple the funds raised in 2019, according to data from Refinitiv.



As of May 5, a total of 248 Chinese companies were listed on major US stock markets including NASDAQ and NYSE, up from 217 on October 2 last year, according to a report released on May 13 by the US-China Economic and Security Review Commission. During that period, 17 Chinese companies, including chipmaker SMIC and the China National Offshore Oil Corp, were delisted from US markets.

 

5th July Update:

Didi Chuxing has warned about the impact of a clampdown on its business just days after a US$68bn float on Wall Street. Chinese authorities warned the ride-hailing firm on Friday they were investigating the business and on Sunday banned it from app stores.

 

Didi, which operates predominately in China where it organises 20mln journeys daily, has been accused of illegally using personal data gathered from customers. China’s Cyberspace Administration (CAC) said: "After checks and verification, the Didi Chuxing app was found to be in serious violation of regulations in its collection and use of personal information. The ban means Didi will not be allowed to sign up new users, though existing customers can carry on using the app as normal.

 

In a statement, Didi said: "The company will strive to rectify any problems, improve its risk prevention awareness and technological capabilities, protect users' privacy and data security, and continue to provide secure and convenient services to its users.

 

Didi's shares fell by 5% on Friday to US$15.53

 

The float was the biggest Chinese listing in the US since the 2014 float of Alibaba and saw the company raise US$4.4bn in new money to fund overseas expansion plans.

 

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China’s cryptocurrency crackdown

China’s cryptocurrency crackdown

Moves by the Chinese central bank and government officials to curtail the use of Bitcoin and other digital currencies stretches back almost to their inception. The last week has seen crypto markets battered by news that the Chinese government is firmly clamping down on digital currencies within its borders.

 

Multiple provinces, many of which host large crypto mining operations, have moved to ban or severely restrict the ability of the industry to operate in compliance with the mood in Beijing, while the country’s central bank recently ordered all financial institutions to stop facilitating transactions in digital currency.

 

The actions of China’s authorities sent the price of Bitcoin and several other cryptos tumbling earlier this week, with Bitcoin briefly dipping below US$30,000 on Tuesday afternoon for the first time since January. However, for many long-time observers of the Chinese crypto market, Beijing’s moves are nothing new and such an outcome may have been inevitable.

 

 

Tightening the screws

The Chinese government’s hostile attitude to crypto goes back to when digital currency first rose to prominence in the early 2010s.

 

Bitcoin transactions were banned by The People’s Bank of China (PBOC) all the way back in 2013, while initial coin offerings (ICOs) and cryptocurrency exchanges were halted in 2017 amid worries they could be used in illegal financing and money laundering.

 

Some have even said that the reaction by officials to crypto represents a fundamental concern about whether digital currencies represent a possible challenge to the dominance of the ruling Chinese Communist Party (CCP).

 

Another reason for the renewed crackdown may be the imminent introduction of the Digital Yuan, China's attempt to introduce a digital currency that is both backed and controlled by its central bank, and a joint venture with SWIFT (the international payment and cross-border payment gateway). Although China’s not going to replace its fiat currency with the Digital Yuan completely, it’s too soon to tell as trials are still going on with central banks, like the People’s Bank of China, leading the operation.

 

What is the Digital Yuan?

Officially known as a Digital Currency Electronic Payment (DCEP), China wants to replace its fiat currency with the digital one to encourage cashless transactions, ushering in a new era for world economics. Like Bitcoin, it also relies on blockchain technology to facilitate and verify transactions, but unlike Bitcoin, it is centrally controlled by regulatory authorities and backed up by fiat currency reserves.

 

The rest of the world’s gain?

Novogratz added that while a lot of crypto-related activity and trading is currently focused within Asia and in China specifically, the latest crackdown could result in a shift of the industry elsewhere that could prove a boon for participants in the rest of the world.

 

Possible beneficiaries could be non-China based miners such as Argo Blockchain PLC, which operates Bitcoin mining facilities in Canada and the US, as well as non-Chinese crypto exchanges such as Coinbase Global Inc.

 

Countries with less strict rules around digital currency could also see an influx of miners, particularly those offering cheap electricity or favourable regulation. A notable example may be the Central American nation of El Salvador, which made Bitcoin legal tender earlier this month.

 

Some of China’s biggest players in the sector are also seeking out greener pastures following the latest crackdown, with both mining machine maker Canaan Inc and crypto mining heavyweight BIT Mining setting up bases of operation in neighbouring Kazakhstan.

 

Or the planet’s loss?

There’s also speculation that the Chinese government may be concerned about optics: crypto mining’s reputation as an environmental disaster doesn’t square with the China’s desire to be seen as a leader in green energy, with XiJinPing pledging that the country will be carbon-neutral by 2060. China still accounts for more than half of Bitcoin mining: concerns related to the climate as bitcoin mining requires tremendous amounts of energy to run Application-Specific Integrated Circuits (ASICs) – computers that solve complex cryptographic mathematical problems part of the verification process in the blockchain.

 

The move of mining operators to Kazakhstan may be a particular concern, given the country derives over 90% of its electricity from fossil fuels. By contrast, the Chinese province of Sichuan, which until recently served as a crypto mining hub, derives large portions of its electrical power from hydroelectricity.

 

Any move toward less climate-friendly energy usage is also likely to give institutional investors pause when considering crypto investments.

 

 

Future Cryptocurrency Regulations

There’s no indication that China intends to lift or loosen its ban on cryptocurrencies anytime soon but recent developments suggest that the government intends to position the country as a leader in the crypto space. Those developments include statements by Chinese government officials endorsing blockchain technology, the extensive trial and testing of the central bank’s digital currency.

 

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China is leapfrogging the world when...

China is leapfrogging the world when it comes to the environment.

Earlier this month, one of China's largest conglomerates held a conference in Beijing to address what the company plans to do in support of the government's environmental targets.

 

One by one, every one of the company's dozens of large subsidiaries, from its financial arms to its specialty steelmaking unit, announced ambitious goals.

 

Such events are now a feature of corporate life in China. Beijing's ambitious plans to move to peak carbon emissions by 2030 and net zero emissions by 2060 may be a top-down initiative from Xi Jinping himself, but it is being widely embraced not just by the most privileged economic entities, but private entrepreneurs and civil society at large.

 

Outside China, though, there is widespread questioning of the authenticity of Beijing's commitment, as well as its ability to meet its objectives. Many analysts also question whether a commitment to greener growth inevitably means slower growth.

 

 

"China could be trapped in contradictory goals of economic development and emissions reductions," noted Helen Qiao, chief Asia economist for Bank of America in a recent report.

 

That likely is far too pessimistic. China is well on its way to leapfrogging the rest of the world in everything to do with a cleaner environment. One of Beijing's most powerful tools is by forcing companies to focus on environmental, social and corporate governance, which has become a major catalyst for higher-quality growth, improving the standard of living for its people and retain its edge as the manufacturing workshop of the world.

 

China will use recent technological advances to make itself cleaner and greener, while simultaneously keeping its edge in value-added manufacturing.

 

Before last year, China was spending 2.2 trillion yuan ($341 billion) every year on environment-related investment. Beginning in 2030, it plans to increase that to almost 4 trillion yuan. Moreover, for every unit of gross domestic product, China has been reducing carbon emissions at an accelerating rate, leading some economists to wrongly suggest that growth in China was slowing.

 

Economists calculate that the shift to new, ESG-related technologies could generate 40 million net new jobs.

 

China already is the world's workplace for making solar panels and wind turbines, the innards of the renewables that will inevitably replace fossil fuels, with its companies accounting for up to 80% of all global production. Given their scale, the cost of renewables becomes more affordable and relatively attractive compared to coal with every passing year.

 

China has equally ambitious goals for electric vehicles, indeed analysts estimate that 20% of all car sales will be electric by 2025, at a time when other leading carmakers elsewhere are still more vested in hybrid vehicles. Ongoing urbanization increasingly means smarter cities with new infrastructures such as widely available charging stations.

 

A Seres Huawei Smart Selection SF5 electric vehicle is on display for sale in Shanghai on May 3:
20% of all car sales will be electric by 2025.   © VCG/Getty Images
 

That is good news not only for China and its neighbors -- and the rest of the world. Today, the mainland accounts for 29% of all global carbon emissions.

 

Climb a mountain today in the northern alps of Japan and new snow is covered by acid rain carried by easterly winds from thermal power plants across the sea. Indeed, many analysts contemplating toxic air, polluted rivers and water shortages leading to drought and sandstorms, until recently wondered if China was on the edge of some tipping point into environmental Armageddon.

 

But China has been steadily reducing its dependence on coal, with the carbon emissions that follow set to decline from their peak by 2030. Moreover, China is already in the process of transforming its old economy sectors.

 

In the past, for example, steel making accounted for 17% of the country's total emissions, or 5% of all global emissions, according to data from Goldman Sachs. But the combination of stern edicts on capacity cuts, and cleaner technologies being introduced in steel furnaces, are reducing those emissions over time. The same is also true for aluminum and cement.

 

There will be winners and losers from these trends -- beyond newly unemployed coal miners who number somewhere between 2.7 million and 6 million workers. Fossil fuel-rich regions in China's heartland will inevitably become poorer, leading to widening disparities with ever wealthier coastal provinces.

 

There will be defaults among companies in discredited sectors -- as well as in those new economy companies that are mismanaged. It is hard to imagine that every new electric carmaker or battery producer will succeed. Inflation is already rising as new environmental regulations force capacity cuts in commodities processing, pushing up prices.

 

Still, even as China voices these ambitious targets, it is still building coal-fired plants and -- ironically -- the processes involved in producing things like solar panels are not themselves always the cleanest technology. Despite the inevitable pain, though, most Chinese people believe that green, not oil, is the new gold.

 

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Source: Nikkei Asia

China’s Five Year Plan 2021-2025:...

China’s Five Year Plan 2021-2025: towards carbon neutrality.

The Chinese government has unveiled the summary of the country’s five-year plan for 2021 to 2025, amid a heavy smog in Beijing. Among other things, the plan sets a target of “basically eliminating” heavy air pollution days by 2025.

 

As China is responsible for almost 30% of global energy sector CO2 emissions, and emissions have returned to growth in recent years, the new plan gives critical insight into how fast the country is planning to start limiting emissions growth and making progress towards the goal of achieving carbon neutrality by 2060, announced last autumn.

 

The plan sets a target of 20% non-fossil energy in total energy consumption, and a target to reduce the CO2 emissions per unit of GDP by 18% from 2020 to 2025. Most notable was that two targets that have regularly featured in earlier five-year plans were dropped: a 5-year GDP growth target and a target for limiting total energy consumption. CO2 intensity fell by 18.8% from 2015 to 2020, so the 18% target does not represent an acceleration from past targets and trends.The target for reducing energy consumption per unit of GDP is lower than in earlier plans: 13.5%, compared with 15% in the previous one.

 

 

Less obsessed about GDP?

The abandonment of GDP targets, long the cornerstone of the five-year planning process, is momentous, even if it was largely expected. The government will continue to set annual targets for GDP growth, only doing away with a fixed five-year target. This is potentially good news for the environment, as it should give the government more flexibility to pursue other targets, and reduce the pressure to prop up GDP numbers at all costs. The lack of a GDP target does however mean that the implications of the CO2 intensity target are harder to assess.

 

For 2021, the government is targeting a 6% GDP growth rate. At this rate of growth, the intensity target doesn’t do much at all to limit the growth in CO2 emissions. However, the targeted growth rate in the following years could be lower, as this year is expected to see a rebound from the COVID-19 economic shock and low growth rate last year. China has also tended to significantly over-achieve the intensity targets.

 

Slowing down emissions growth – maybe

China’s CO2 emissions increased by approximately 1.7% per year from 2015 to 2020, and kept growing at 1.5% even in 2020, despite the pandemic. Assuming that GDP growth over the period averages 5.5%, CO2 emissions could grow at 1.1% from 2020 to 2025, and still meet all the targets announced today. This would be a slight deceleration compared with past years. However, if there is a strong rebound in growth this year and the rest of the period averages 6%, CO2 emission growth could even accelerate under these targets, compared with the past five years. 

 

GDP growth, 2022-2025, per year 5% 5.5% 6.0%
Energy intensity reduction 2020-2025 -13.5% -13.5% -13.5%
Total energy consumption growth, 2021-2025, per year 2.3% 2.7% 3.1%
CO2 intensity reduction 2020-20 -18.9% -18.9% -18.9%
Coal consumption growth, 2021-2025, per year 0.1% 0.5% 0.9%
Oil consumption growth, 2021-2025, per year 2.7% 3.1% 3.5%
Gas consumption growth, 2021-2025, per year 5.2% 5.6% 6.0%
Non-fossil energy production growth, 2021-2025, per year 7.1% 7.5% 7.9%
CO2 emissions growth, 2021-2025, per year 1.0% 1.4% 1.7%

 

Indicative calculations of China’s energy consumption and CO2 emissions trends until 2025 under the five-year plan targets, depending on the GDP growth rate. The table assumes that GDP growth in 2021 will be 6.5% and looks at the effect of different growth rates in the following years. The calculations assume that the energy intensity target (-13.5%) and non-fossil energy target (20%) are met but not exceeded – in reality, both could be exceeded. The assumption about the shares of coal, oil and gas is 51%, 19% and 10%, respectively; varying this assumption has only a minor impact on the results for CO2.

 

Without the energy consumption control target, there’s even less in this five-year plan to constrain emissions growth than in the previous ones.  As a result, there’s no guarantee that emissions growth will slow down, let alone stop, by 2025. So it’s leaving the decisions about how fast to start limiting emissions growth to the energy sector five-year plan and other plans expected at the end of the year.

 

The other headline target, a share of 20% non-fossil energy in total energy consumption by 2025, also largely continues the trend of the past years: the share increased from 12.3% in 2015 to 15.9% in 2020, a 3.6%-point gain. Therefore, the targeted 4.1% increase by 2025 signals a modest acceleration.

 

A slightly more promising sign was a recent statement by the China Coal Association that coal consumption in 2025 would be capped at 4.2 billion tonnes – close to current level. This target would likely be included in the energy sector plan later, and indicates that the government could target peaking coal consumption before 2025. However, oil and gas consumption are still expected to grow, so peaking and declining CO2 emissions requires coal consumption to not only stop growing but to begin falling again in absolute terms.

 

A shot in the arm for nuclear?

In a bit of a surprise, the plan includes a target for nuclear power capacity in 2025, of 70 gigawatts, from 52 gigawatts currently. This is less than the increase achieved from 2015 to 2020, but a surprisingly ambitious target given that there is much less capacity under construction currently than is needed to get there. So it can be read as a high-level signal to speed up new projects – such a specific capacity target would usually be relegated to more detailed sectoral plans.

 

A “major push” for clean energy – while also investing in coal

No specific targets were set for wind, solar, hydro, coal or other energy sources, as was expected – this is a high-level “plan of plans”. However, the language in the document promises a “major push” for clean energy. A wind&solar capacity target of 1200GW by 2030 was already announced by Xi Jinping in December – although more will very likely be needed to hit the other targets, particularly the target for 25% non-fossil energy in 2030. The plans also contain language on “promoting the clean use of coal”, so the contradiction between targeting low-carbon development and continuing to invest in coal and fossil fuels still seems stark in China’s plans.

 

Overall, the picture is one of very gradual progress in aligning China’s energy and emissions trends with the target of achieving carbon neutrality by 2060. The overall five-year plan just left the decision about how fast to start curbing emissions growth and displacing fossil energy to the sectoral plans expected later this year – particularly the energy sector five-year plan and the CO2 peaking action plan. The central contradiction between expanding the smokestack economy and promoting green growth appears unresolved.

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Source: EnergyandCleanAir.org

China’s 14th Five-Year Plan, full...

China’s 14th Five-Year Plan, full summary: a blueprint for growth

China’s annual National People’s Congress parliamentary session will take place in March to approve the country’s social and economic development plans for the period 2021-25. This 14th Five-Year Plan (Plan) will be released against a backdrop of a challenging domestic economy, an increasingly complex international environment, and China’s plans to play a bigger role in the global economy.

 

An outline of the Plan was released late last year, so the broad direction is clear. It is ambitious and confident, covering climate, tech self-reliance, promoting domestic demand (featured in the ‘dual circulation’ strategy) and much more. It marks a fundamental shift to China’s economic trajectory, setting out a framework for how China can draw on domestic sources to sustain its growth. 

 

In this update we set out our views on key themes that we expect will shape and underpin the execution of the Plan, and some implications for foreign businesses. 

 

 

But first, some context…

China plans its economy in five-year increments, and this is perhaps one of the more consequential plans in China’s history.

 

It will be released as China celebrates in 2021 building a “moderately prosperous society in all respects”, thus achieving the first of its Two Centenary Goals, and moves towards its second centenary goal of building a “modern socialist country” by 2049 so confirming its status as a fully developed global economy.

 

To reinforce this longer-term intent, the outline Plan was accompanied by Vision 2035, a blueprint for China’s economic trajectory which highlights China’s longer-horizon goals including self-sufficiency in key technologies, a fall in absolute carbon emissions, a universal coverage of basic public services and a 2035 gross domestic product (GDP) per capita on par with “moderately developed countries” (which is generally estimated to be in the US$20-30,000 range). The 14th Five-Year Plan is the first building block to achieve this vision.

 

…and a reality check.

When the 14th Five-Year Plan is released it will be big – expect thousands of pages that will expand upon the themes and goals that have been socialised already.

 

But we will need to look beyond the issued Plan to understand its detail and assess its implications for foreign businesses.

 

More detailed plans will follow in the months and even years ahead for major sectors, ministries, state-owned enterprises, provinces, and regions, although drafts of some of those detailed plans already in circulation.

 

“Dual Circulation” set to be the defining economic strategy for the new era…

The 14th Five-Year Plan adopts the idea of “dual circulation” as its core concept for future economic growth.  The term has been around for several years but now features prominently in policy statements.

 

There is no official interpretation of the policy and we will need to see how it is put forward in the Plan. What is certain, however, are its desired outcomes.

 

The overarching economic goal is to transform the old growth model to a more sustainable path, in the context of a much more complex domestic and international environment.

 

In simple terms, the idea is for China to rely predominately on its domestic system (internal circulation) to drive growth but this will be supported by an international cycle of trade and foreign investment (external circulation).

 

Domestic circulation is expected to focus on:

  • expanding, deepening, and strengthening the domestic demand (consumption) by improving the social safety net, undertaking rural reforms, and generally improving people’s sense of security such that they are willing to spend money; and
  • increasing industrial capacity and productivity by focussing on technological innovation to support domestic growth and self-reliance. Self-reliance in this context is not a push for economic independence, but rather a shift towards a managed integration into global markets and economies that enhances China’s development process while allowing it to build its own capabilities and mitigate the risks it sees in a more uncertain global outlook.

 

External circulation, in the new era, introduces some new concepts. China’s engagement with the global economy has to date been seen through the familiar prism of trade (historically exports but with a more recent focus on imports). It is expected that new policies will emphasise Beijing’s desire to remain deeply engaged in the global economy, but the way in which this takes placed is likely to be reframed.

 

We can expect that there will be efforts to maintain and enhance China’s support for multilateral trade institutions and a rules-based global trading framework but with a push for greater recognition of China’s role in the global trading system and renewed emphasis on the adoption of Chinese standards and protocols.

 

It’s likely that the blockchain, new technologies and digital currencies will be promoted to create more resilient supply chains, Belt & Road 2.0 is likely to appear (perhaps with a new focus on projects that address some of the global health challenges the world faces).

 

Mega economic regions, such as the Greater Bay Area in southern China, will take a more visible role as regions for piloting new domestic policies and new technologies, as well as connecting China to the world and the world to China.

 

…but how it will operate in practice remains to be seen.

China has been attempting to grow the consumption side of its economy for some time. The trend has been generally positive, but to achieve the sort of growth in the domestic economy that will be necessary to ‘move the dial’ away from the investment and export drivers, will require an economic and social transition on a massive scale.

 

What is now looming as a burning platform for more decisive action is the far more challenging external environment China faces.  Amid a changing relationship with the US and an ageing population, the need to focus on reducing vulnerability to international supply chain disruptions, boosting domestic consumption and productivity, and increasing the sustainability of economic growth is becoming greater. 

 

If this shift occurs, China’s sheer size and global engagement will have major and long-term implications for both China and the world. 

 

Increased reliance on domestic supply has the potential to shift China's trade patterns and domestic supply chains and alter the products and services that its consumers and businesses purchase. Productivity growth meanwhile will be supported by an upgrade of manufacturing industries and the development of advanced technologies to reduce reliance on imports and support domestic consumption. 

 

Technology and innovation are elevated to national strategic priorities… 

While innovation and technology development are not new themes, the 14th Five-Year Plan elevates them to core national priorities and critical to achieving technological self-reliance.   

 

This marks a significant shift in priorities towards industrial and national security, as well as reduced reliance on tech imports. 

 

The draft Plan does not define which technologies will be emphasised over the next five years nor what precisely it hopes to achieve. No doubt, this will come later as various ministries elaborate on the plan. 

 

But it is clear that investment in technology will go into overdrive and will undoubtedly focus on frontier fields that have already been highlighted for further exploration: artificial intelligence, quantum information, integrated circuits, life and health science, neuroscience, genetics, deep earth and sea exploration, and aerospace technology. 

 

Alongside this, there will be measures to encourage traditional sectors to move up the value chain; strengthening improved farming quality and competitiveness; as well as a greater emphasis on protecting intellectual property rights and talent attraction. 

 

… which is already influencing the global business landscape. 

The three major industries that have supported China's rapid economic development in the past - traditional manufacturing, construction, and real estate – are being be replaced rapidly by three new pillar industries: strategic emerging industries, services, and modern manufacturing. 

 

Technology and innovation have become the driving forces for this trend. As an emerging tech giant, China has demonstrated it can be a leading innovator both globally and domestically. 

 

Already China is leading the development of entire new industries (built around digitalisation, artificial intelligence, big data, fifth-generation telecommunications networking (5G), nanotechnology, biotechnology, robotics, and quantum computing), new types of businesses (like electric vehicles, e-commerce and payment systems) and new business models (including new digital business-to-consumer (B2C) business-to-business (B2B) applications and channels). 

 

The impact of these changes, and the speed with which they are occurring, is resonating across the world, bringing both extraordinary opportunities and complex challenges. 

 

China is fast becoming a global hub for accelerated innovation, not just for Chinese companies but for foreign firms wanting to leverage its pool of research talent, cost-effective and flexible R&D capacity, and manufacturing ecosystem to efficiently commercialise concepts and designs into products. 

 

On the flip side, security and privacy risks abound; competing visions of digital sovereignty are impacting supply chains, currency usage and cross border financial flows; and the formation of divergent regulatory regimes is presenting barrier to companies’ ability to transfer data across borders and develop globally integrated digital solutions. 

 

Businesses are very much in the crosshairs of these issues, squeezed between conflicting political and policy pressures, public opinions, laws, and regulations. 

 

The challenge ahead for all nations will be to reach a level of understanding and create a common international framework to manage these emerging risks and allow these new technologies and innovations to evolve and be utilised for the benefit of all. The consequences of not doing so could lead to the crippling of global value chains, economies of scale and innovation systems.  

 

Climate change initiatives to support the green economy

China is currently the world’s largest energy user with the highest greenhouse gas output. It consumes 50 per cent. of coal produced worldwide annually and is the top importer of oil and natural gas. 

 

Last September, President Xi reiterated the goal that China will reach peak carbon emissions before 2030 and stunned the climate community by pledging that it would become carbon neutral by 2060.  

 

Unlike most nations that have committed to carbon neutrality, China’s economy is still growing rapidly, and that growth is not yet uncoupled from carbon emissions. Accordingly, how these commitments are integrated into the 14th Five-Year Plan will attract global attention. In many respects, the Plan will be seen by many as a test of whether economic growth and deep decarbonisation can be achieved simultaneously. 

 

The transition to a zero-carbon economy will require a consistent, all-of-government effort. Net zero will have to serve as a guiding principle for policymaking that is comprehensively embedded into structural reforms, investment policies and innovation priorities. 

 

Particular attention will be paid to binding targets on carbon intensity, the proportion of non-fossil fuels in the primary energy mix, and coal power capacity, in both the general 14th Five-Year Plan and the more specific plans that will emerge in due course. 

 

These de-carbonisation policies will have the potential to generate growth and employment in China and accelerate clean energy progress in the rest of the world. 

 

China’s financial reforms likely to accelerate

Financial sector reform has been a key component of China’s multi-decade economic restructuring plan. Indeed, while the speed of the reform process has at times lagged China’s obvious China’s commitment to financial market reforms, the 14th Five-Year Plan will send clear signals to the international community that China is determined in efforts to open its financial markets to the outside world. 

 

There already exists a broad reform agenda, and an understanding of the sequencing required to bring about change, so it’s unlikely that the new Plan will deliver major new developments. However, given the crucial role that the financial markets play in supporting the domestic economy, and in linking China to global capital markets, the likelihood is that this trajectory may even accelerate. 

 

The opportunity for foreign financial institutions and funds to participate actively in this next stage of market expansion in China is something that will undoubtedly be explored by those firms. Sensing this, the flow of investment capital into China from investors in the US, Europe and elsewhere reached record levels in 2020, although aggregate foreign participation in the domestic markets is still relatively low. 

 

The new Plan also reaffirms Beijing’s long-standing desire for its currency, the renminbi (RMB), to become a widely trusted and globally traded and used currency. The disruption of global trade flows and geo-political tensions have hampered the RMB internationalisation process over the last year, but the Plan is likely to contain a range of measures to reinvigorate this process, particularly through efforts to support its use in Asian regional trade and within Belt & Road countries (where the RMB is already widely used as an invoicing and payment currency). 

 

Supporting the RMB internationalisation process, China’s central bank is also moving closer to a full roll out of its sovereign digital currency, with tests having already been conducted in pilot cities. Sovereign digital sovereign currency is one that is used only electronically and (unlike other cryptocurrencies) is backed by the full faith and credit of the country. Central banks around the world are investigating its feasibility, but China remains well advanced in its plans. Its adoption will certainly accelerate the use of RMB in cross-border financial flows. The longer-term implications of this will be significant. 

 

Megacity regions herald a new era of urbanisation

The trend towards urbanisation has been underway for decades and recognised as crucial in supporting China’s economic growth strategies. That trend still has a way to go with forecasters suggesting that the urbanisation ratio could increase to 75 per cent. by 2030 (from 60 per cent. at present), translating into 220 million new urban dwellers.

 

The 14th Five-Year Plan is expected to highlight a new direction for urban growth, with efforts to encourage a significant proportion of those moving from rural areas (perhaps as much as half) to settle in five super-city clusters.

 

The process is already underway. The Greater Bay Area (GBA), the Yangtze River Delta, the Beijing-Tianjin-Hebei region (Jing-Jin-Ji), the Mid-Yangtze River area and the newly announced Chengdu-Chongqing area are the top five clusters that will be promoted to be power-house regions designed not only to promote domestic circulation but also act as bridges to support external circulation between China and the rest of the world.

 

The central and provincial governments are already making massive investments into these regions to support new high-speed rail, autonomous electric vehicles, smart grid technology, shared mobility, powerful 5G networks and big-data technologies.

 

For many observers, the development of the GBA offers insights into this new urban growth strategy. It features prominently in the 14th Five-Year Plan as an initiative to drive deeper regional economic and financial integration between key cities in the Guangdong Province (including Guangzhou and Shenzhen) and Hong Kong and Macau SARs.

With a population of around 70 million people, a GDP equal to that of Australia, the highest per capita GDP in China, the GBA is already moving to become an important global centre for advanced manufacturing, the home to some of the most innovated technology companies in the world, a centre for finance, technology and innovation, trade and tourism and leisure, with Hong Kong SAR seeking to cement its role as the go-to financial centre for capital flows between the markets of mainland China and the global economy.

 

China sees itself at the centre of Asian growth

China is already deeply enmeshed into the global economy.

 

The outline 14th Five-Year Plan calls for “comprehensively improving the level of opening to the outside world and the promotion of trade and investment liberalisation and facilitation” and provides indications around how China sees the world and its emerging role.

 

While the global environment continues to evolve and many views abound, there is a growing consensus that China sees itself moving into a new paradigm where the global system is divided into three main regions: Asia, North America and Europe, with each region being led by a super-regional power.

 

This trend is already evident in Asia, with the ASEAN region surpassing North America, in 2019, as China’s second largest trading partner, after the European Union (pre-Brexit), underscoring the huge potential of economic linkages in the Asian region.

 

Apart from the trade linkages, China engagement with the ASEAN region is developing rapidly. It is seeking to cooperate to support digital trade, and to promote its Health Silk Road initiative as a public health mechanism to fight the COVID-19. Beijing is also encouraging Chinese enterprise to invest in the region and the new Hainan Free Trade Zone is expected to have strong regional focus.

 

At more formal level, the full significance of the recently signed Regional Comprehensive Economic Partnership (RCEP) between China, ASEAN nations, Australia, Japan, and New Zealand has yet to emerge, but over coming years this is likely to stimulate intra-Asian economic integration with China a key driver of economic growth. It’s also signed an investment agreement with the EU and expressed interest in acceding to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). RCEP and CPTPP belong to a more advanced category of ‘next generation’ free trade agreements that regulate not just the free flow of goods and services, but also encompass a set of political and social objective related to free markets and fair competition.

Conclusion

China’s size matters a great deal for the world in coming decades. China will be vying for economic parity with the U.S. in 2035, if not before. 

 

But it’s not just size that matters. The structural economic transformation that China is undergoing matters even more deeply to the future world.

 

China is preparing for a fundamental shift of its economic growth drivers from traditional methods of production to innovation and technology. The growth of its “new economies” - new industries, new types of business, new business models - is growing exponentially and are influencing economies globally.

 

China’s strategic interests are becoming clearer and it is gaining further confidence in its ability to engage more proactively in global affairs.

 

How nations and companies chose to respond to these changes will be matter for them to decide, but what is important is that we don’t cut ourselves off from an understanding of China’s new economic direction and priorities. The upcoming 14th Five-Year Plan and Vision 2035 are a good place to start.

 

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Source: King & Wood Mallesons

 

China tech IPOs to watch in 2021

China tech IPOs to watch in 2021

A slew of Chinese startups went public in 2020, and it looks like Chinese tech IPOs will keep booming through 2021.

Three of China's "four AI dragons" (AI四小龙) are almost certain to go public this year. Some of China's biggest unicorns, such as ByteDance and Didi Chuxing, are also likely to join them. Here are the China tech IPOs you need to know for 2021.

 

 

Companies gearing up for IPOs

Megvii

One of China's largest facial-recognition developers, Megvii is ready for an IPO on the Shanghai Stock Exchange's STAR board, according to an announcement posted by the China Securities Regulatory Commission in mid-January.

 

  • What it does: Megvii is often called one of China's "four AI dragons" alongside SenseTime, Yitu and CloudWalk. The Beijing-based company is the creator of the facial-recognition software Face++, the world's largest open-source computer vision platform. The company provides AI technologies to government agencies and enterprises including Alibaba, Lenovo and Huawei. Megvii was placed on the U.S. Department of Commerce's entity list in 2019 for its alleged role in mass surveillance of Muslim minorities in Xinjiang.
  • Funding: Megvii filed for an IPO in Hong Kong in August 2019, but the application has since expired. In its latest funding round in May 2019, Megvii raised $750 million from investors including Bank of China Group Investment, Alibaba and Australia's Macquarie Group at what Reuters reported was slightly north of a $4 billion valuation.
  • What to watch for: In 2020, Megvii launched Brain++, its own AI productivity platform, and made MegEngine, a major component of Brain++, an open-source deep learning framework. This is largely seen as one element of China's plan to develop home-grown AI tech and reduce Chinese companies' reliance on American open-source frameworks.

 

Yitu Technology

In November 2020, the Shanghai Stock Exchange accepted Yitu Technology's IPO request. The Shanghai-based AI unicorn intends to raise $1.16 billion.

 

  • What it does: Yitu claims to have provided AI tech for more than 800 governments and companies across more than 30 Chinese provinces and regions and more than 10 countries and regions outside China. It's also on the U.S. entity list for its alleged role in aiding the Chinese government's abuse of Uyghurs and other Muslim minority groups.
  • Funding: Valued at about $2.2 billion, the company has financial backing from leading VCs such as Sequoia China, Hillhouse Capital, Gaorong Capital and ZhenFund. Yitu plans to issue 36.4 million shares in the form of Chinese Depositary Receipt on the STAR market.
  • Financials: As disclosed in its prospectus, Yitu's revenue was $111 million in 2019, and it reported a net loss of $567 million in the same period.
  • What to watch for: Yitu has made its name in applying AI to the medical industry and is gradually expanding its business to other fields, including security and finance. The company is expected to lead the AI care sector as major Chinese hospitals continue to embed Yitu's AI products into clinical workflows.

 

CloudWalk Technology

In December 2020, the state-backed facial-recognition developer CloudWalk filed a prospectus with the Shanghai Stock Exchange, seeking to raise roughly $580 million in an IPO on the Star Market.

 

  • What it does: Founded in 2013, CloudWalk Technology is described as the "state team" (国家队) among the four AI unicorns because so many of its investors are state-owned. Its founder and CEO Zhou Xi came from the Chinese Academy of Sciences' Chongqing Research Institute, and a precursor to the company came out of the Chinese Academy of Sciences' facial-recognition research team. CloudWalk was added to the U.S. entity list in May 2020 for allegedly participating in human rights abuses in Xinjiang.
  • Financials: CloudWalk has also been losing money, just like its competitors. Compared with Yitu, CloudWalk's net profit loss is smaller. During the first half of 2020, its net loss reached approximately $44.5 million, and the 2019 annual net loss was about $265 million. Money-losing AI companies all attribute the net losses to business expansion and increasing investments in R&D. Valued at $3.1 billion, CloudWalk ranks No. 3 among the four AI dragons by valuation, according to the 2020 Hurun Global Unicorn Index.
  • What to watch for: Thanks to its state affiliations, CloudWalk will continue to focus on building projects for Chinese government entities, focusing mainly on fintech, smart security and transportation.

 

Rumored IPOs

ByteDance's Douyin and Toutiao

Competitor Kuaishou's $5.4 billion IPO has made people wonder just how big ByteDance's IPO could be. Last November, Bloomberg reported ByteDance was in talks with investors, including Sequoia, over funding that would boost its valuation to $180 billion, and was preparing some of its biggest assets — including Douyin and Toutiao — for an IPO in Hong Kong.

 
  • What it does: ByteDance is the creator of short video-sharing app TikTok, its original Chinese version Douyin and news aggregator Toutiao. The company makes money mainly through advertising, livestreaming and gaming. It has products available in over 150 markets, and has 100,000 employees across 126 offices.
  • Financials: ByteDance is one of the largest Chinese unicorns. While it spent last year at the center of U.S. controversy over data-sharing with Beijing, ByteDance's revenue more than doubled to about $35 billion in 2020, Bloomberg reported. And its operating profit in 2020 grew to around $7 billion, from less than $4 billion the year before.
  • What to watch for: ByteDance has been looking to diversify its revenue stream by expanding its business into fields like education, fintech and SaaS. Last October, ByteDance established an independent education brand, Dali Education (meaning "big power"), whose business encompasses K-12 and adult education software and hardware. Most recently, it reportedly set up a business unit dedicated to expanding the so-called "local life business" in sectors such as culture, tourism and restaurants, where Meituan is winning.

 

Didi Chuxing

The Information reported on Feb. 3 that China's other large unicorn, Didi Chuxing, is in early discussions with Goldman Sachs, Morgan Stanley and JPMorgan Chase about a potential IPO later in 2021, targeting a $100 billion valuation. Reuters previously reported Didi could go public this year in Hong Kong.

 

  • What it does: Didi Chuxing is the dominant carpooling startup in China, founded in 2012. It won a costly turf war with Uber China in 2016 by acquiring the American app's China business. Its other businesses include shuttle bus services, bike-sharing, designated driving, auto after-service, delivery and logistics.
  • Financials: Didi Chuxing has been known as a cash-burner; it didn't turn a profit in its first six years. However, according to The Information, it managed to make an annual profit of about $1 billion in 2020, its first time doing so.
  • Funding: Last valued at $56 billion, Didi's backers include SoftBank, Alibaba and Tencent.
  • What to watch for: In 2020, Didi announced an organizational restructuring, consolidating its services outside its core car-hailing business — including bike-sharing and freight — into a newly established "Urban Transportation and Service Business Group." In an attempt to diversify its revenue stream before its IPO, Didi directed much of its internal resources into community group-buying, which uses grassroots intermediaries to distribute groceries across the "last mile." Its CEO Cheng Wei reportedly said in early November that the company's investment in Chengxin Youxuan, Didi's community group-buying service, would not be capped: that the company would "go all out to take the first place in the market."

 

SenseTime

Tencent News broke the story late January that SenseTime had completed a pre-IPO round of fundraising at the end of 2020 with a valuation of $12 billion. Investors are mostly Chinese state institutions, including state-owned insurance companies and local governments. SenseTime is considering a dual listing in Hong Kong and China, Bloomberg has reported.

 

  • What it does: SenseTime is China's largest artificial intelligence unicorn by valuation. It has developed and established its own deep-learning platform and supercomputing center for its artificial intelligence technologies, which include facial recognition, image recognition, text recognition, video analysis and remote sensing. SenseTime was among eight Chinese tech companies placed on the U.S. entity list in 2019 for allegedly playing a role in massive human rights abuses against Muslim minorities in Xinjiang.
  • Funding: SenseTime has been an investor darling over the past few years, and became the world's most valuable AI startup after it raised over $2 billion in 2018, according to Bloomberg. Its investors include SoftBank, Singapore's Temasek Holdings and Alibaba.
  • Financials: According to Caijing, SenseTime's 2019 operating revenue was $780 million, with a gross margin of 43%, which is lower than Megvii's 64.6% and Yitu's 63.9%.
  • What to watch for: Like other AI unicorns, SenseTime has been getting many government contracts to help build smart cities across China. Caijing reported that its smart city revenue reached approximately $258.6 million in 2019 (nearly 33% of its total revenue). Management expected that in 2020, revenue from smart city projects would reach approximately $621.6 million, comprising about 42.7% of total company revenue.

 

Hellobike

The International Financing Review reported Hellobike is considering a U.S. IPO, seeking to raise up to $1 billion. Chinese-language tech website 36Kr confirmed the bike-sharing company's 2021 IPO plan. It would be China's first bike-sharing company to go public.

 

  • What it does: Hellobike is a mobility service platform based in Shanghai. Founded in 2016, it started as a bicycle-sharing company, later expanded its services to include rented e-bikes and e-scooters, as well as carpooling. Backed by Ant Financial, the company survived the bike-sharing battle that flared up in 2017. Because of its relationship with Ant, Alipay users can rent Hellobike's bikes without downloading a separate app. Hellobike claims to have 400 million registered users.
  • Funding: iFeng Tech reported Hellobike shed 20% of its value over the pandemic, and that the company is now worth $3.2 billion. Fintech giant Ant Financial is a major investor in Hellobike, which powered the startup through Series D to F funding rounds. Other backers include Primavera Capital Group and Fosun International.
  • What to watch for: Local governments distribute very limited compliance quotas to bike-sharing companies. Since 2019, 80% of Chinese cities have adopted quota systems, according to 36Kr. Bicycle-sharing is a business that requires bike distribution scale. Hellobike, even if it's public, will likely face a considerable regulatory challenge.

 

Waterdrop

Online health insurance marketplace Waterdrop plans to file for a U.S. IPO in the first quarter of 2021, with an estimated fundraise of about $500 million, according to IPO Zaozhidao, a WeChat public account tracking IPO scoops. Goldman Sachs and Bank of America are among the underwriters. Last summer, Bloomberg reported Waterdrop was seeking a valuation of about $4 billion.

 
  • What it does: Waterdrop was established in 2016 by Shen Peng, a co-founder of Meituan's meal-delivery unit. The 4-year-old startup focuses on health care crowdfunding. Its major business units include Waterdrop Insurance Mall (its main source of revenue), Waterdrop Mutual Aid (a patient payout platform designed to reduce the financial burden on those afflicted with major injury or disease) and Waterdrop Crowdfunding. Shen Peng boasted more than 250 million paying users across the platforms in 2019. As of September 2020, the cumulative annualized signed premiums of Waterdrop Insurance Mall exceeded $2.8 billion, according to the company. The company has about 140 million users, with 76% from third-tier cities and below.
  • Financials: The startup, which works with China's 30 top insurance companies, announced in August a Series D financing round of over $230 million, co-led by Swiss Re and Tencent. Other backers include IDG Capital, Boyu Capital and Meituan Dianping. TMTPost reported that the valuation of Waterdrop was between $4 billion and $6 billion after its latest round of financing.
  • What to watch for: Waterdrop Mutual Help and Waterdrop Crowdfunding operate somewhat like public services. Waterdrop Crowdfunding allows people to chip in small amounts of money to help those with critical illness, and in return receive payouts when they are in need. But the company is walking on thin ice balancing public welfare and its business interests. The company has encountered scandals where it was accused of mismanaging funds, and a subsidiary was fined last year for deceiving insurers and policyholders and concealing material circumstances related to insurance contracts.

 

BOSS Zhipin

Internet recruitment platform BOSS Zhipin is working with Goldman Sachs and UBS on a U.S. IPO that could occur this year, with the goal of raising $300 million, according to IPO Zaozhidao.

 

  • What it does: BOSS Zhipin means BOSS Direct Recruitment. It's a provider of a recruitment mobile application that matches job candidates and applicants directly with recruiters, human resources staff and company executives. Founded in 2013, it also has features such as customized recommendations, online interview scheduling and candidate screening that enable companies to find ideal candidates with increased efficiency.
  • Funding: According to Qichacha, BOSS has finished five rounds of financing, with the latest round co-led by Tencent in late 2019. In 2019, the company was valued at nearly $500 million.
  • Financials: The company says it broke even in 2017, achieved monthly profitability for the first time in November 2017, and has continued to maintain profitability since 2018, with annual revenue exceeding $150 million in 2019.
  • What to watch for: TalkingData's "2020 College Graduate Job Search Research Report" shows that it was one of the most highly-rated job recruitment apps among Chinese college students and graduates. Between May and October 2020, the app's average number of daily active users was 2.8 million, up 80% from a year ago during the same period. More than 45% of its users spent over 20 minutes on the app each visit.

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Source: By Shen Lu for Protocol

China’s Fintech Revolution

China’s Fintech Revolution

In 2008, Alibaba founder Jack Ma famously declared, “if the banks don’t change, we will change the banks.” His words sparked an entrepreneurial renaissance in China’s fintech industry. ‘Fintech’ (金融科技), a portmanteau of financial technology, refers to the application of new technologies to “improve and automate the delivery of financial services.” Since Ma’s pronouncement, mainland China has produced eight fintech ‘unicorns,’ collectively worth 214.6 billion USD. Although each of these companies works to reimagine a different aspect of banking, on the whole, Chinese fintech has two objectives: to maximize the economic potential of China’s banked, while integrating the country’s remaining unbanked. This piece profiles some of the fintech unicorns engaged in this mission — specifically within two sectors, lending and payments — and explores the global implications of their innovation.

 

 
Empowering China’s Banked
The first half of China’s fintech strategy is to maximize the economic potential of China’s banked.
 
Lending
The largest of all Chinese fintech unicorns, Jack Ma’s Ant Financial (“Ant”) is breathing new life into an outdated lending sector. 39.4% of Ant’s revenue comes from its lending platform, CreditTech, which “addresses the unmet credit demands of unserved consumers and small businesses in China.” Specifically, it leverages Ant’s AI algorithms to more accurately identify default risks and “compress lending costs.” This technological insight allows CreditTech to service individuals and ventures that would otherwise appear too risky to traditional banks.


Lufax is a peer-to-peer (P2P) lending marketplace that matches borrowers with investors. P2P implies that users enter into an agreement with one another, not the company. Lufax simply collects a 4% commission on the total loan for arranging the transaction. Though perhaps riskier for investors, Lufax nevertheless solves a key limitation in the lending sector: capital supply. After all, centralized lenders like Ant can only underwrite so many loans. However, with Lufax, anyone can be a bank. Its decentralized system renders every Chinese saver’s excess deposits available for investment. This fintech breakthrough marks a tremendous democratization of lending services, which until now, had been monopolized by China’s commercial banks, and by extension, the CCP.
 
Payments
China’s innovation in the payments sector is as impressive. Whereas in the U.S., credit cards are the preferred non-cash payment method, in China, ‘e-Wallets’ reign supreme. e-Wallets, as their name suggests, are digital wallets that interact seamlessly with the payments environment. Like regular wallets, they consolidate various payment methods: cash, credit, debit, and more.


China’s e-Wallet space can best be characterized as a duopoly, split between Ant and Tencent. Ant’s product, Alipay, leads slightly with 54.5% market share. The payments giant has 785 million monthly active users and handles upwards of 175 million transactions a day. Tencent’s equivalent, WeChat Pay, comes in at a close second with 39.5% market share. That said, WeChat Pay enjoys one significant advantage over Alipay: compatibility. Unlike Alipay, which is a standalone product, Chinese consumers depend on WeChat for a range of services, from shopping, to food delivery, to ride-hailing. Once in the app, users are unlikely to inconvenience themselves with an external payment method like Alipay.


Even if Alipay and WeChat Pay are industry competitors, from a Western perspective, they represent a united force. Combined, the two e-Wallets processed 20.5 trillion USD in 2016. For reference, PayPal only processed 354 billion USD in 2016. China’s dominance in the e-Wallet space will soon have global implications, with e-Wallets predicted to become the leading payment method globally by 2023.


 
Integrating China’s Unbanked
The second half of China’s fintech strategy is to integrate its remaining 225 million unbanked.
 
In terms of lending, unicorn WeBank specializes in “inclusive finance.” Founded in 2014 by Ant’s rival, Tencent, WeBank provides loans to low-income individuals with little-to-no borrowing records. In fact, 8.2 million of its users had no prior credit. By the numbers, WeBank’s average loan is 8,000 RMB (1,215 USD), the average borrowing period is 52 days, and its self-reported delinquency rate is 0.64%. (U.S.-based Lending Tree’s delinquency rate is 3.3%.) WeBank prides itself on its industry-low borrowing fees: over 70% of borrowers pay less than 100 RMB (15 USD) in interest. As for payments, e-Wallets’ ability to send and receive money via mobile phone makes them perfect for rural unbanked people, who could be miles from the nearest payments terminal.


China is already the largest economy in the world. Integrating the country’s 225 million unbanked — 16% of the total population — would boost its GDP by trillions. This prospect holds not only financial merit, but political significance as well. The World Bank estimates that there are an additional 1.5 billion unbanked beyond China’s borders. Chinese fintech is uniquely positioned to service this demographic. After all, the challenge of delivering financial services to an unbanked farmer in Gansu isn’t all that different from reaching one in Niger or Yemen. As one Tech in Asia reporter notes, “the entire financial system could be due for an overhaul, and China is right at the forefront.”
 
Conclusion
Where exactly China’s fintech revolution will lead is not yet wholly clear. What is clear, in the words of Dr. Julian Gruin, is that “the image of China’s financial system as deeply repressed and dominated by a few large state-owned commercial banks is rapidly becoming outdated.” In its place, a new, decentralized fintech ecosystem is emerging — one better poised to unlock the economic potential of China’s banked, unbanked, and foreigners alike.

 

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Source: CSIS, by Marko Marsans

NIO Selects NVIDIA for Intelligent,...

NIO Selects NVIDIA for Intelligent, Electric Vehicles.

Chinese electric automaker NIO will use NVIDIA DRIVE for advanced automated driving technology in its future fleets, marking the genesis of truly intelligent and personalized NIO vehicles.

 

During a global reveal event, the EV maker took the wraps off its latest ET7 sedan, which starts shipping in 2022 and features a new NVIDIA-powered supercomputer, called Adam, that uses NVIDIA DRIVE Orin to deploy advanced automated driving technology.

 

“The cooperation between NIO and NVIDIA will accelerate the development of autonomous driving on smart vehicles,” said NIO CEO William Li. “NIO’s in-house developed autonomous driving algorithms will be running on four industry-leading NVIDIA Orin processors, delivering an unprecedented 1,000+ trillion operations per second in production cars.”

 

 

The announcement marks a major step toward the widespread adoption of intelligent, high-performance electric vehicles, improving standards for both the environment and road users.

 

NIO has been a pioneer in China’s premium smart electric vehicle market. Since 2014, the automaker has been leveraging NVIDIA for its seamless infotainment experience. And now, with NVIDIA DRIVE powering automated driving features in its future vehicles, NIO is set to redefine mobility with continuous improvement and personalization.

 

“Autonomy and electrification are the key forces transforming the automotive industry,” said Jensen Huang, NVIDIA founder and CEO. “We are delighted to partner with NIO, a leader in the new energy vehicle revolution—leveraging the power of AI to create the software-defined EV fleets of the future.”

 

An Intelligent Creation

Software-defined and intelligent vehicles require a centralized, high-performance compute architecture to power AI features and continuously receive upgrades over the air.

 

The new NIO Adam supercomputer is one of the most powerful platforms to run in a vehicle. With four NVIDIA DRIVE Orin processors, Adam achieves more than 1,000 TOPS of performance.

 

Orin is the world’s highest-performance, most-advanced AV and robotics processor. This supercomputer on a chip is capable of delivering up to 254 TOPS to handle the large number of applications and deep neural networks that run simultaneously in autonomous vehicles and robots, while achieving systematic safety standards such as ISO 26262 ASIL-D.

 

By using multiple SoCs, Adam integrates the redundancy and diversity necessary for safe autonomous operation. The first two SoCs process the 8 gigabytes of data produced by the vehicle’s sensor set every second. The third Orin serves as a backup to ensure the system can still operate safely in any situation, while the fourth enables local training, improving the vehicle with fleet learning as well as personalizing the driving experience based on individual user preferences.

 

With high-performance compute at its core, Adam is a major achievement in the creation of automotive intelligence and autonomous driving.

 

Meet the ET7

NIO took the wraps off its much-anticipated ET7 sedan — the production version of its original EVE concept first shown in 2017.

 

The flagship vehicle leapfrogs current model capabilities, with more than 600 miles of battery range and advanced autonomous driving. As the first vehicle equipped with Adam, the ET7 can perform point-to-point autonomy, leveraging 33 sensors and high-performance compute to continuously expand the domains in which it operates  — from urban to highway driving to battery swap stations.

 

The intelligent sedan ensures a seamless experience from the moment the driver approaches the car. With a highly accurate digital key and soft-closing doors, users can open the car with a gentle touch. Enhanced driver monitoring and voice recognition enable easy interaction with the vehicle. And sensors on the bottom of the ET7 detect the road surface so the vehicle can automatically adjust the suspension for a smoother ride.

 

With AI now at the center of the NIO driving experience, the ET7 and upcoming NVIDIA-powered models are heralding the new generation of intelligent transportation.

 

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Source: NVIDIA

 

Navigating Asia’s B2B e-commerce surge

Navigating Asia’s B2B e-commerce surge

Asia may be leading the transformation in B2B e-commerce but there are still untapped opportunities.

If 2020 becomes known as the year e-commerce erupted, then Asia will be remembered as the epicentre of the transformation. In a region that was already emerging as the global hub for e-commerce in 2019 – the top seven countries for online consumer spending growth were all in Asia – the COVID-19 pandemic accelerated the pace.

 

Now, as broadband access widens, 5G networks mushroom and Asia’s middle-class population eclipses its global counterparts, that dominant position is only likely to strengthen. By the end of 2021, Asian e-commerce sales are forecast to reach USD3.5 trillion1, more than three times higher than those in North America, the second-largest region.

 

 

“The surprise has been the sheer pace at which this has happened,” said Mahesh Narayan, Global Product Lead – Mobile Money & E-Commerce at Standard Chartered. “E-commerce will continue to grow exponentially in Asia. It’s even starting to impact more traditional industries amid a shift in consumer habits, regulatory developments and innovations from banks and FinTech companies.”

 

Undoubtedly, the pandemic has accelerated progress. A Bain-Facebook survey found that 85 per cent of people in the region tried new apps for the first time, with e-commerce, food delivery and digital payments among the most popular categories. Online grocery sales in Southeast Asia grew nearly three times during the outbreak. The “Double Five” online shopping festival in Shanghai in May generated USD2.2 billion in orders in 24 hours. And sales during Alibaba’s annual Singles Day shopping event reached a record USD74 billion.

 

Despite the remarkable pace of transformation, there are still abundant untapped opportunities. According to a Bain & Co. study, three-quarters of micro, small and medium-sized enterprises in ASEAN see the potential of digital integration, but only 16 per cent are realising the full potential of technology. A Google-Temasek Holdings report meanwhile estimated that digital integration could deliver a USD1 trillion rise in the region’s GDP by 2025, while its internet economy alone could be worth USD240 billion by the same year.

 

Role of FI partners

As small and medium-sized businesses start digitising their lending operations, FIs are also expanding existing platforms with new services and technologies to address their needs.

 

“We're doing quite a few things in this space,” said Ankur Kanwar, Managing Director, Head of Cash Management, Singapore and ASEAN at Standard Chartered. “One is we're building a state-of-the -art single scalable payment engine. This is a global payment platform that supports both B2B and B2C domestic and cross border payments. We are also investing heavily in the e-commerce space and providing consistent and scalable solutions for online collections, escrow accounts, QR codes and real time direct debits.”

 

Standard Chartered partnered with Deutsche Post DHL Group to co-create a new online collections solution for their DHL Express Division that would allow their customers across Asia to make online payments in local currencies for shipping charges and duties & taxes, using local payment methods (including instant / QR payments, bank transfers, eWallets and cards). The solution is live across six countries and expanding.

 

We also supported them with digitisation of their in-store collections and payments on delivery using QR code and instant payments powered by our proprietary app and integration with the hand held devices of their couriers. This provided DHL with a cost effective solution, enabling elimination of cash in the last mile service, access to a variety of local payment methods across multiple geographies and automation of their reconciliation, all through a single integration and a single contract with Standard Chartered.

 

There are also opportunities for B2B e-commerce technologies to not only help B2B vendors migrate online, but to also optimise both the selling and purchasing process for business partners. Hence, a big area of focus is B2B payments because establishing payment terms or financing is fundamental to B2B e-commerce transactions.

 

Payments surge

B2B e-commerce revenues rose 20 per cent from the beginning of the crisis. Digital payments surged, both in advanced digital markets and traditionally cash-dominated countries. GCash in the Philippines, for instance, reported a 30 per cent increase in payments. SC Pay – Standard Chartered’s payment-processing engine – saw its share of fast payments in Hong Kong grow to 23 percent in the first half of 2020, from 10 per cent a year earlier. The buildout of SC Pay into a single global payments system will be complete in three years.

 

“One of our clients in Hong Kong is a telco,” Kanwar said. “Traditionally they had sent paper bills customers, which were both businesses and consumers. The customers would then make a payment through cheque or cash electronic payments. We helped them transform by printing a QR code on their paper bills. This enabled customers to simply scan the QR code and make an instant payment, cutting down on cash and cheques. In turn, that made the collections more efficient, cutting down the cycle time.”

 

Singapore mall operator CapitaLand introduced a new e-commerce platform featuring the wares of retailers whose shops had been forced to shut during lockdown. Other businesses used the crisis to develop new digital commercial collaborations. In Indonesia, e-commerce company Bukalapak teamed up with ride-hailing firms Grab and Gojek to run deliveries. Gojek partnered with Indonesia’s Agriculture Ministry to help local farmers and market vendors move their services online – and saw rice sales from partnership markets increase 30 per cent. Vietnamese e-commerce platform Sendo began partnering with overseas companies, including giants like Unilever and Proctor & Gamble, to expand the range of products available to local shoppers.

 

The way ahead

On the B2C front, there has already been a huge amount of innovation,” Kanwar said. “B2B has lagged because it’s more complicated. Going forward, B2B innovation is going to be on how do I digitise my entire supply chain? And how do I start interacting with my suppliers on the one side, as well as let's say distributors and consumers on the other side, completely through digital means.”

 

Moreover, progress is uneven across the region. While countries such as China, Singapore and Thailand have surged ahead in e-commerce, other parts of Asia remain underserved. Internet penetration is still low in countries such as Laos (43 per cent), Cambodia (50 per cent) and Myanmar (39 per cent), and many nations also lack the digital, regulatory and financial infrastructure to drive the growth seen elsewhere in the region. Furthermore, the immediate social and cultural expectations of B2B e-commerce users in some of these countries are not being met by existing technologies that have evolved from the West.

 

But with its extensive experience across Asian markets, Standard Chartered is developing solutions to overcome these obstacles. In India, for example, the bank has backed SOLV, a 360-degree B2B marketplace platform helping the country’s micro, small and medium enterprises (MSMEs) connect and do business with a large network of buyers and suppliers, build their credit scores, source working capital finance and access business services such as logistics.

 

As lockdowns threatened to cripple businesses, SOLV drew on its network of manufacturers and delivery channels to get essential goods to small village shops, resident welfare societies, NGOs and small hospitals, providing supplies to thousands of families through the SMEs on the platform.  The SOLV adoption rate grew threefold during the first four months of the crisis, signalling both a rising affinity for digital platforms and a greater awareness of the need to build future resilience.

 

“While the broad trend is digitisation for every market, the underlying solutions that are being built are very country specific,” Kanwar said. “That's where banks like Standard Chartered are trying to take the lead. We’re not only investing in all of these technologies across the region, we’re also trying to make sure that from our corporate client perspective, we present a standardised set of solutions and use cases no matter which country they deal with.”

 

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Source: Bloomberg Media Studios in partnership with Standard Chartered.

Coronavirus ends China’s honeymoon...

Coronavirus ends China’s honeymoon in Africa.

ADDIS ABABA, Ethiopia — Africa was supposed to be China’s new stomping grounds. Instead, the novel coronavirus has spawned a growing backlash that threatens to unwind the ties Beijing has carefully cultivated over decades.

 

The trigger for the burgeoning diplomatic crisis: Anger over the treatment of African citizens living in China and frustration at Beijing’s position on granting debt relief to fight against the outbreak.

 

China has spent untold billions in Africa since its emergence as a global power, investing in its natural resources, underwriting massive infrastructure projects and wooing its leaders. The campaign has bought China friends and allies in multilateral institutions such as the United Nations and the World Health Organization, undermining the West’s once-reliable lock on the postwar world order while fueling its economy back home.

 
 

But that decadeslong quest for influence in Africa was gravely challenged last week when a group of disgruntled African ambassadors in Beijing wrote to Foreign Affairs Minister Wang Yi to complain that citizens from Togo, Nigeria and Benin living in Guangzhou, southern China, were evicted from their homes and made to undergo obligatory testing for COVID-19.

 

The incident, which caused widespread discontent both within Africa and among the diaspora after videos posted on social media showed people of African descent being evicted from their homes, resulting in a rare diplomatic showdown between Chinese and African officials.

 

It also broke a long-standing tradition of Africa voicing its problems with China — the continent’s biggest trade partner — behind closed doors.

 

In one incident, Nigeria’s speaker of the House of Representatives, Femi Gbajabiamila, posted a video of himself summoning Chinese Ambassador Zhou Pingjian to his office where he expressed his displeasure about a Nigerian man being evicted from his home.

 

While nobody expects China to lose its place as Africa’s biggest bilateral lender and trade partner, analysts and African diplomats say there is a distinct possibility of lasting damage. Reluctance from China to endorse a G-20 decision to suspend Africa’s debt payments until the end of the year has exacerbated the sense of frustration, they said.

 

“There is a lot of tension within the relationship. I think both of these issues are the newest manifestations of long-term problems,” said Cobus van Staden, a senior researcher at the South African Institute of International Affairs. “Africa’s official response [to its citizens in China] took into account popular sentiment a lot more than it usually would have.”

 

Some scholars have documented how politicians in Africa have boosted their electoral base by mobilizing anti-Chinese sentiment, while many ordinary people perceive China’s success in the region as a threat to their own well-being.

 

Although China’s government and the billionaire founder of the Alibaba Group, Jack Ma, have been among the most generous and eager members of the international community to assist Africa in fighting COVID-19, Beijing’s overtaking of the World Bank as the biggest single lender to Africa has made it less inclined to write off the money it is owed. The Chinese government and the China Development Bank lent more than $150 billion to Africa between 2000 and 2018, according to the China Africa Research Initiative at Johns Hopkins School of Advanced International Studies.

 

 

U.S. officials, including Tibor Nagy, assistant secretary for the U.S. State Department’s Bureau of African Affairs, have strongly condemned the treatment of Africans in China, resulting in China snapping back at Washington by accusing it of sowing unnecessary discord between the pair.

 

Chinese officials have moved quickly to seal the emerging rift. Ambassador Liu Yuxi, Beijing’s head of mission to the African Union, released a photo of himself giving a socially distanced elbow bump to his African counterpart — while distancing the Beijing government from the authorities in Guangzhou.

 

At the same time, Zhang Minjing, political counselor at the mission, downplayed the controversy in comments to POLITICO. Beijing had “championed” a debt initiative agreed upon by the G-20, he said, and is “committed to taking all possible steps to support the poor.” As for the recent tumult in Guangzhou, he said, “the rock-solid China-Africa Friendship will not be affected by isolated incidents.”

 

“China is against any differential treatment targeting any specific group of people. China and Africa are good brothers and comrades-in-arms. We are always there for each other come rain or shine,” he added.

 

But there are also growing concerns in Beijing that its multibillion-dollar infrastructure projects in places such as Zimbabwe have now ground to a halt because of the coronavirus. Not only are engineering personnel unable to travel to the continent, but construction materials are running low as supply chains dry up.

 

Africans are going to need all the help they can get. After years of rapid growth, the International Monetary Fund on Wednesday said sub-Saharan Africa’s gross domestic product would shrink this year by 1.6 percent due to the effects of the coronavirus, low oil prices and poor commodity prices. In Ethiopia alone, the government has estimated that 1.4 million jobs will be lost over the next three months, according to a document seen by POLITICO, roughly 3 percent of the workforce. Africa has recorded 17,701 coronavirus cases and 915 deaths — a toll that will likely climb rapidly, and likely underestimates the scale of the continent’s predicament.

 

So far, the rest of the world has done little to help. On Monday, the IMF granted $215 million in initial debt relief to 25 African countries — a relative pittance compared with the vast sums those countries owe. On Wednesday, G-20 nations, which include China, the U.S., India and others, did offer to suspend debt payments until the end of 2020 despite calls from French President Emmanuel Macron to help African countries by “massively canceling their debt.”

 

But Ngozi Okonjo-Iweala, one of four special envoys to the African Union to solicit G-20 support in dealing with the coronavirus, said Africa was still “pushing for more.” In an interview, Okonjo-Iweala said she believed “China is coming along” to provide Africa with debt relief across the board and not simply on a case-by-case basis. “I don’t believe it’s against supporting African countries on this. I’ve heard actually to the contrary,” she said. “What we need from China is not a case-by-case examination, but an across-the-board agreement.”

 

Stephen Karingi, director of the trade division at the U.N.’s Economic Commission for Africa, said support from the international community should be “weighed against the damage COVID-19 will cause” in Africa. “We think that 2020 and 2021 will be difficult and support should have that in mind or such a horizon,” Karingi said.

 

How damaging the latest events will be to the political and commercial ties that have made China Africa’s largest trading partner are unclear.

 

On the official level, there are signs that all will soon be forgotten. A senior African diplomat to the African Union, who spoke on the condition of anonymity due to the sensitive nature of the issue, said, “When it comes to China, I doubt we will see long-term problems.” “They’ve got a lot invested on the continent, in the AU, in this city,” the official added.

 

“They’re everywhere. Realistically, I think it’s important both sides understand why this is happening and try and resolve this mutually.”

 

Still, a host of African officials have made sure China does not get away lightly with its treatment of Africans living in China. Over the weekend, Moussa Faki, chairman of the African Union Commission, said he had “invited” the Chinese ambassador to the AU to express his “extreme concern” for the situation, while Chinese ambassadors in Nigeria and Ghana were summoned to give an explanation.

 

President Cyril Ramaphosa of South Africa said the ill treatment of African nationals in China was “inconsistent with the excellent relations that exist between China and Africa, dating back to China’s support during the decolonization struggle in Africa.”

 

A senior AU official, who spoke on the condition of anonymity due to the sensitive nature of the matter, said Chinese officials were particularly alarmed by the public dimension of the incident that exploded on social media. But, the official said, many African nations were pleased by remarks delivered by Foreign Ministry spokesman Zhao Lijian on Sunday in which he underlined “the African side’s reasonable concerns and legitimate appeals.”

 

Whether the people living on the continent forget so easily is another matter altogether.

 

“It’s going to be contentious among those communities for a lot longer,” said van Staden of the South African Institute of International Affairs.

 

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Sourse: By Simon Marks for Politico

China Tianyan, begins search for extrate...

China Tianyan, begins search for extraterrestrial civilizations

The 500-meter Aperture Spherical Telescope (FAST), known as the "China Tianyan", has officially begun the search for extraterrestrial civilizations, looking for signals from intelligent life deep in the universe, the National Astronomical Observatory of the Chinese Academy of Sciences said today.

 

 

The search for and monitoring of radio pulsars is a core scientific objective of FAST. And the search for extraterrestrial civilizations is one of the scientific goals of the FAST telescope. In September 2018, researchers from the National Astronomical Observatory of the Chinese Academy of Sciences, the University of California, Berkeley, and Beijing Normal University conducted installation tests on the high-resolution extraterrestrial civilization search backend at the FAST site.

 
 
 

In July 2019, the researchers again analyzed and processed the obtained drift scan data to achieve a frequency resolution of 4 Hz and successfully removed most of the RF interference to screen out multiple sets of narrowband candidate signals.

 

 

On April 14, the FAST Scientific Research and Data Processing Center, which will be built in Gui'an New District, has been approved by the National Development and Reform Commission for the feasibility study of the project. The FAST Scientific Research and Data Processing Center project has a total investment of about 170 million yuan and a construction area of 28,000 square meters, including a scientific research center and data processing center. After the completion of the project, "China Tianyan" will finalize the three complete scientific research frameworks of observation, research, and data, providing the conditions for the storage and calculation of the huge amount of data generated by the long-term operation.

 

 

"China Tianyan" was conceived by the Chinese astronomer Nan Rendong in 1994 and took 22 years to build and opened on September 25, 2016. It is a radio telescope led by the National Astronomical Observatory of the Chinese Academy of Sciences, with independent intellectual property rights in China, the world's largest single-caliber, most sensitive radio telescope. Its integrated energy is ten times that of the famous radio telescope Arecibo.Tianyan literally means Eye of the Sky. It is a radio telescope located in the Dawodang depression, a natural basin in Pingtang County, Guizhou.This project is a major national science and technology infrastructure consisting of several parts, such as an active reflector system, a feed support system, a measurement and control system, a receiver and a terminal, and an observation base.

 

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Source: CNTechPost

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