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China Monetary Policy: support for a slowing economy.

China Monetary Policy: support for a slowing economy.

China's top parliament body has approved a 1 trillion yuan ($137 billion) sovereign bond issue and passed a bill to allow local governments to frontload part of their 2024 bond quotas in a move to support the economy. Funds raised from the new sovereign bonds will support the rebuilding of disaster-hit areas in the country and improve urban drainage prevention infrastructure to boost China's ability to withstand natural disasters, state news agency Xinhua said.


That will widen the country's 2023 budget deficit to around 3.8% of gross domestic product from a previously set 3%. Local governments had been told to complete the issuance of the 2023 quota of 3.8 trillion yuan in special local bonds by September to fund infrastructure projects. The government has not disclosed the size of local governments' 2024 frontloaded bond quotas.



The aim is to drive more domestic spending and “further cement the recovery momentum of the Chinese economy,” the official Xinhua News Agency quoted Zhu Zhongming, a vice minister of finance as saying. “This decision suggests a commitment to supporting economic growth and addressing fiscal challenges at various levels of government. It also hints at a potential future shift in China’s fiscal approach.” Chinese state media said the 1 trillion yuan in central government issuance is set to be transferred to local governments in two parts, half for this year and half for next year.


However, officials said the funds would not be channeled into China's ailing property sector, which has weighed heavily on growth as developers struggled to meet repayment obligations for massive debts while demand has weakened.


Property market drag

S&P Global Ratings said in a separate report Monday that if real estate sales drop dramatically next year, real gross domestic product growth will fall to 2.9% in 2024. The firm currently predicts a more modest 5% decline in property sales next year — after an anticipated 10% to 15% drop this year.


After easing a crackdown on property developers’ high reliance on debt for growth, Beijing has focused on ensuring the delivery of apartments, which are typically sold ahead of completion in China.


About 80% of residential sales in 2023 were of homes still under construction, S&P Global Ratings said in a report this month. China’s property slump is closely tied to local government finances. According to [People’s Bank of China] data, the central government’s outstanding debt is currently about RMB27trn, while we estimate local governments owe an exceptional balance of RMB87trn, including both explicit and hidden debt.


The world's second-largest economy grew faster than expected in the third quarter, improving the chances that Beijing can meet its growth target of around 5% for 2023. But economists say persistent drag from the property sector still weighs on the economic outlook. The property market collapse and the continued contraction in land sales revenue has exacerbated debt pressures on local governments, which has prompted Beijing to roll out a raft of measures to reduce the debt risks of local governments.


It is rare for the central governments fiscal plans to be revised outside the usual budget cycle, so this move signals clear concern about near-term growth. China has previously let local governments issue bonds ahead of the annual session of parliament, which approves government budget plans and is usually held in March.


The International Monetary Fund this month also cut its forecast for China’s growth in 2024 to 4.2%.




The Ultra-Wealthy Chinese Youth Redefine...

The Ultra-Wealthy Chinese Youth Redefine Their Perception of Luxury.

The privileged youth of China now perceive luxury in a more nuanced manner. The ultra-wealthy under the age of 40 approach wealth management, investment, and heritage preservation differently from their predecessors.


hina's growing wealth is a topic frequently discussed, often associated with a booming economy, a rapidly expanding middle class, and an increasing number of billionaires. According to the latest Global Wealth Report for 2023, China ranks second in terms of Ultra-High-Net-Worth Individuals (UHNWI), defined as those with assets exceeding $100 million, making up 10.5% of global millionaires, totaling 32 910 ultra-rich individuals by the end of 2023.



However, it's the rise of the new ultra-rich Chinese generation, also known as Fu er Dai (富二代: 富Fu = rich; 二代er Dai = second generation), that's garnering attention. "Compared to luxury consumers in Europe or the United States, the Chinese are much younger. In fact, 80% of Chinese luxury clientele are under 45 years old, whereas in the United States, consumers under 45 make up about 30% of the luxury clientele, and this proportion is even lower in Europe," explains Oscar Sand, CEO of L'Atelier Peony by OSCAR, an expert in luxury marketing and the Chinese market. According to a jointly published report by China Merchants Bank and Bain & Company on private wealth in China in 2021, 42% of High-Net-Worth Individuals (HNWI) with assets exceeding 10 million RMB, approximately $1.4 million, are under 40. China is home to 5.2 million "wealthy families" with assets of 6 million RMB, of which 2.11 million have assets of 10 million RMB, and 138 000 exceed 100 million RMB in wealth. According to the Hurun China Wealth Report 2022, these families will pass on 19 trillion RMB ($2.64 trillion) to the next generation over the next ten years. Currently, their total wealth stands at 164 trillion RMB, with 40%, or 67 trillion RMB, attributed to them.


The "Fu er Dai" are products of a globalized world


The previous generation of ultra-rich Chinese often accumulated wealth through traditional businesses and manufacturing, but the new generation is different. The "Fu er Dai" are products of a globalized world, influenced by technology and digitalization, and they have grown up seeing China rise as a global economic powerhouse. Many have been educated abroad, in prestigious universities, and are often bilingual or trilingual, with a global perspective on business and culture. Their approach to wealth management, investment, and heritage preservation is distinct from that of their parents. According to Oscar, "The older generation is more interested in real estate and tangible assets, but the younger generation no longer sees real estate as the most reliable investment for wealth generation; they are turning to new means and technologies." Young, ambitious, and born in the digital age, these consumers represent a new era of wealth and prosperity.


In the face of unprecedented abundance and opportunities, what are the aspirations, preferences, and investment strategies of this new generation of wealthy Chinese?


In China, the era of 'Experiential Capital' is now dominant

They approach the concept of luxury in a way that goes beyond mere material possessions. Luxury is a multidimensional experience beyond five-star hotels and designer brands; it encompasses a superior quality of life, spiritual well-being, and positive social and environmental impact. Haonan Chen, a student at Glion Institute of Higher Education and an entrepreneur and investor in his spare time, shares," For me, wealth is not just material pleasure, but also self-recognition, self-satisfaction... and fulfilling my social responsibility." Wealth is perceived not only as financial capital but also as ''experiential capital.'' They often associate wealth with self-fulfillment and a balance between personal and professional life. Wilson Wong, CEO of CBWells Group, explains, "Wealth is all the value in the world that I can absorb in my lifetime. Of course, I value material possessions, but I value experiences even more. I consider myself a person rich in experiences.


As for luxury, it has evolved to become a more inclusive and personal concept. Luxury can mean acquiring branded goods and unique experiences like luxury travel or private dinners with Michelin-starred chefs. It can also involve investments in contemporary art, enriching life experiences such as stays in exotic destinations, an appreciation for contemporary art, or pursuing sustainable investments. Haonan invests heavily in contemporary art and places great importance on travel and experience: "I take sabbatical years to explore life and enrich it with limitless possibilities. For example, I plan trips around the world to discover different lives and connect with myself. My passions are travel and staying in different hotels. When I do, I usually stay in a city for about two weeks to immerse myself in the culture, art, and cuisine. A positive approach to life brings me happiness."


While some gravitate towards a lived luxury, others preserve the collector's and material aspects while integrating the experience. "I am a big collector of wines and cigars," says Wilson. "I currently own more than 50,000 bottles of wine in my personal collection, some dating back to 1727!"


The concept of legacy is evolving

Ultimately, for some, luxury is closely tied to sustainability and ethics, reflecting their personal values. In an interview, Li (name changed to protect anonymity) emphasizes the importance of sustainability and legacy for the new generation: "In China, we are very attached to our descendants; people want to pass something on to their children. For my parents' generation, it was about real estate, money, or tangible assets. I don't think those are the most important things for my generation. Sometimes, I devote myself to something, and I like to think it will leave a legacy or have lasting value for our society." Luxury is thus redefined as a complex mix of personal choices, cultural experiences, and global responsibilities.


Chinese culture and family traditions undoubtedly influence the new generation of ultra-rich Chinese who perceive and interact with luxury. Historically, Chinese culture has valued frugality, family, and education as central aspects of life. However, with China's rapid economic ascent and increased exposure to global influences, these affluent young individuals are developing a hybrid perspective on luxury that incorporates both traditional values and modern aspirations. "Due to our culture, because we are a collective culture society, our social norms are of great importance and influence our consumer behavior significantly," adds Oscar. "That's why we used to pay much more attention to the value of things than self-expression or personal preferences in the past. But everything is evolving and changing. The younger generation includes more consumers who aspire to a certain form of well-being and attach more importance to experiences that align with their aspirations."


Influenced by a global education, the new generation has redefined luxury as a quest for self-fulfillment and social responsibility rather than mere ostentation. While deeply rooted in traditional Chinese culture and values, these "Fu er Dai" are products of rapid globalization, international education, and constant exposure to diverse cultural influences. This redefinition of luxury is a trend that offers opportunities for brands and businesses ready to understand and respond to these shifts. The impact of international education on this privileged youth promises to reveal even more unexpected facets of the profound changes occurring among the ultra-rich today.


By Fanny Tang for The Luxury Tribune





Cainiao Logistics.

Cainiao Logistics.

Founded in 2013, Cainiao is a global leader in cross-border e-commerce logistics.

Cainiao was incubated within the world’s largest e-commerce ecosystem fostered by Alibaba. The Company has built a global smart logistics network and tirelessly innovates to meet the complex, rapidly evolving demands of e-commerce logistics.



Cainiao’s leading technology capabilities and deep e-commerce insights set it apart, enabling it to become a leader in each of its business segments. Cainiao was ranked No 3 last year in the premium e-commerce logistics segment with a 16 per cent share (JD Logistics was ranked No 1 in that market segment last year with a 36 per cent share, and SF Express had the No 2 spot with a 20 per cent share in the same period).


While Cainiao continues to directly serve merchants on marketplaces within the Alibaba ecosystem, Tmall Global and Tmall Taobao World, and is the principal logistics service provider for the AliExpress ecosystem, it is also free to build business elsewhere.



Its global cross-border e-commerce logistics solutions cover cross-border express delivery, global supply chain, and overseas local services. Through its disruptive solutions such as “10-day global delivery” and “5-day global delivery”, Cainiao helps small and medium-sized enterprises engage in cross-border trade. Delivery speed is a point of competition among Chinese e-commerce firms as such, Cainiao has started to roll out its half-day express delivery service in eight major Chinese cities, including Shanghai, Hangzhou and Shenzhen, as it ratchets up efforts to help stimulate domestic consumption amid the country’s gloomy economic outlook.


The company has just begun its global five-day delivery service in the United Kingdom, Spain, the Netherlands, Belgium and South Korea, where consumers can receive their parcels within five working days of placing an order on AliExpress.


Cainiao operates logistics facilities in strategic locations around the world, serving over 200 countries and regions, with its technology DNA ingrained into every aspect of the network. Through “Cainiao Post” solution, it also built the largest digital “pick up, drop off” network in the world.


Cainiao's ESG initiatives are deeply embedded in every element of the logistics value chain, revolving around five focus areas, namely green logistics, customer experience, community services, emergency logistics and high-quality employment.


Its revenue from Alibaba accounted for about 30% of its total revenue for the three years ended March 31, 2023 and three months ended June 30, 2023. Cainiao serves over 100,000 merchants and brands and delivered more than 1.5 billion cross-border e-commerce parcels in its last fiscal year.



Sea freight

As parcel volume to South Korea from AliExpress, the global retail online marketplace owned by Alibaba, increased by nearly +100% in the second half of 2021 Cainiao opened up direct sea freight route from China to South Korea. Freight ships chartered by Cainiao  sail six times a week, allowing Korean consumers to receive parcels in three to five days for selected products after placing orders on AliExpress. After leaving ports in Shandong Province, the cargo ship arrive in South Korea within 12 hours, reducing existing shipping costs by up to -30%


Air Freight

China’s Hainan Island, which serves as a free trade port due to relaxed tax policies, serves as the companies international cargo hub.



The company also has a strategic plan to implement global smart supply chain technologies in Hainan constructing the largest smart warehouse on the island, equipped with over 100 AGV robots, developing a digitized logistics system to shorten the processing time from 3 minutes to 70 seconds, providing full-chain logistics services for local duty-free shop Global Premium Plaza, and expanding warehouse space in the island’s bonded zone to 150,000 square meters.


Looking ahead, Cainiao is committed to delivering faster, more cost-effective, and environmentally friendly services to merchants and consumers across the world. Alibaba plans to spin off Cainiao via a global offering of Cainiao shares, comprising a Hong Kong public offering and an international offering in the near future.



Fixing China’s property sector could...

Fixing China’s property sector could take years — if not a decade.
China’s property market has been embattled by faltering consumer confidence in real estate companies as property giants Evergrande and Country Garden remain mired in debt woes. China’s urbanization drive may be drawing to a close — and that could further hurt the already ailing property sector, according to China economist Hao Hong.

“Fixing the property sector may be a multi-year or even a decade’s work in front of us. Reason being, we built way too many housing for Chinese people,” the chief economist of Grow Investment. “Also the Chinese urbanization process, which has been progressing very fast in the past 10 years, is coming to a halt,” Hong added.


China’s property market has been embattled by faltering consumer confidence, as property giants Evergrande and Country Garden are mired in debt problems. Evergrande, which defaulted in 2021 following a liquidity crisis, announced Friday it would delay a debt restructuring meeting which was due Monday. Country Garden is also teetering on default.

Hong noted that 18 trillion yuan ($2.46 trillion) worth of Chinese property were sold two years ago. He said managing 10 trillion this year, or five to six trillion yuan worth of sales further down the road, would be considered “lucky.”


China’s August new home prices dipped 0.3% month-on-month, extending the real estate slump. The figure also marked a 0.1% drop compared to a year ago.


Just over the weekend, a former Chinese official warned that China’s population of 1.4 billion would not be able to fill the unoccupied apartments across the country. “There is now an oversupply of real estate ... 1.4 billion people may not be able to live in them,” said He Keng, a former deputy head of China’s statistics bureau. He was speaking at a conference, according to local media reports.


China’s post-Covid economic recovery story has been disappointing, although August retail sales and industrial production data picked up pace with better-than-expected growth.


“Once people reset their expectation, and also the economy [restructures] to regrow from other industries rather than relying mostly on the property sector for growth, then we will actually have a better, much healthier Chinese economy than before,” said Hong.


“Not having an overbearing Chinese property sector actually is good for the Chinese economy going forward.”


Source: CNBC




Get ready for China’s luxury traveller...

Get ready for China’s luxury travellers
As one of the last countries to remove pandemic-related restrictions, China’s outbound travel sentiments are closely watched. And today, with freedom returning, many affluent Chinese travellers are looking to spend more on travel in the year ahead, and to do so with a renewed need for escapism and exploration.

Having saved money over the past three years, most wealthy Chinese are looking to travel again in style and spend more on more extravagant and unique trips, with international travel set to accelerate in 2023.



Last year, domestic holidays were the most popular choice among wealthy Chinese travellers, many of whom were still concerned about the pandemic. However, there is now a clear shift in willingness to travel internationally. While many are still eager to remain close to China and visit Japan and Singapore, countries farther afield such as France, the US, Australia and Switzerland are cited as their ideal holiday destination for 2023.


There has also been a clear upturn in planned spending on holidays since July 2022. At that time, 55% of affluent Chinese individuals anticipated spending more on holidays than on pre-Covid trips. This figure has now risen to almost three-quarters (73%). Indeed, 26% say they plan to spend much more than before, underlining how travel has become even more important to these wealthy individuals.


Holiday types have also evolved. Multi-generational family trips should continue to show strong growth, with 46% planning to take one. Meanwhile, 41% of Chinese affluent travellers are planning to take a holiday which specifically improves their mental well-being. The pandemic has also meant that relaxing and slower holidays are now more popular than active ones (79% versus 7%) as people look to unwind and recuperate after two trying years.


Moving on, there is little change in priorities when it comes to affluent Chinese travellers’ travel bookings. Overall, the health, safety and hygiene of the destination is the most important factor for upcoming bookings (53%). The retail/food and drink offering and sustainability credentials are the other leading factors, both cited by just under half (49%) as being important for their next bookings.


Seclusion and privacy have also come to the fore, with 31% saying this is important to them and several respondents stating their desire to visit less-crowded destinations. The pandemic has also led many to search for new and unusual experiences, and the development of a more adventurous mindset, where 80% prefer new destinations and experiences. Similarly, 69% say that they prefer holidays where they explore the local area, versus only 17% who prefer trips where they mostly stay at the hotel or resort.


The pandemic appears to have impacted spontaneity when planning holidays. Two-thirds now say that they prefer to plan in advance, with many citing the additional safety and peace of mind which comes from doing so.


There is also a growing desire for longer holidays which last a week or more: 63% prefer these versus just 24% for shorter trips. Holidays are now sometimes also being appended to business trips: one-third of wealthy Chinese individuals took one of these trips last year. Similarly, almost half (52%) say that they prefer to fly less often and stay for longer rather than take whistle-stop, more superficial breaks (25%).


Climate change remains a vital and ever-growing issue globally, and in most luxury categories, consumers continue to be more environmentally aware. For example, 84% of wealthy Chinese travellers are planning to take more sustainable/eco-friendly holidays in the future.


The report also found out that travel advisors will remain integral, with 80% of Chinese affluent travellers saying that they are at least somewhat influential, with 58% planning to use them for half or more of their holiday bookings over the next year.


The projected upturn in the use of travel advisors is a boon for the industry, although this comes with new expectations and demands. Various factors such as monitoring government advice/Covid statuses, getting hygiene information, and taking care of insurance and cancellations are responsibilities that the majority of Chinese travellers now expect to at least be partially taken care of for them.


Overall, travel is the most popular category for affluent spending. A whopping 97% of affluent Chinese individuals spent on travel last year, and 11% spent more than a fifth of their total expenditure on holidays. More than three-quarters (78%) say that they have a bucket list of places and experiences that they are trying to complete.


Source: By Rachel AJ Lee for TTG Asia


BOC rate cut, economic challenges &...

BOC rate cut, economic challenges & data transparency.

In a largely unexpected move, China cut a benchmark interest rate yesterday, marking the most significant rate cut since 2020. The news came not long after the release of disappointing retail sales and industrial production numbers, combined with rising fears around the weakness of China’s broader economy.


The Chinese central bank reduced the rate on its one-year medium-term lending facility loans by 15 basis points to 2.50%. The rate cut was mirrored by a dip in the yuan and bond yields.



Shaky property sector influences wider economy

Further to the less-than-stellar economic figures, the risk of contagion from a debt crisis in the property sector has sent ripples through global markets.


For instance, the revelation that property developer Country Garden Holdings teetered on the edge of default, coupled with the inability of wealth manager Zhongzhi to make certain client payments, sent the Australian dollar and iron ore prices into a tumble.


Nomura China economist Ting Lu described the potential fallout, stating, “The chain reaction triggered by slumping new home sales may lead to a rising number of developers’ defaults, a sharp contraction of government revenue, falling demand for construction materials, declining wages of employees in both the property and government sector, weaker consumption and faltering financial institutions.”


The troubles in the property sector, a significant contributor to China's economic engine, haven't gone unnoticed by global investors. Property investment dipped by 8.5% year-on-year in the January-July period, marking 17 consecutive months of decline.


Economic indicators signal caution

Hit by deflation, amongst a slew of other problems, the latest round of economic data further underscores the challenges China faces, including foreign investment plummeting to levels not seen since 1998. 


Retail sales did see an uptick of 2.5% year on year in July but it lagged behind the projected 4% growth. Industrial production figures also disappointed with a growth rate of 3.7%, down from June's 4.4%. The unemployment rate also marginally increased.


Interestingly, amidst these challenges, China has expressed intentions to relax tariffs and restrictions on pivotal Australian exports. This has sparked discussions about Australia's Beijing trade dependence. With President Xi Jinping’s government exhibiting unpredictable policy shifts, China appears to be a riskier trade partner than a decade ago.


Yet, in a bid to reinvigorate foreign investment, China’s State Council has introduced 24 guidelines to improve foreign investment conditions, with an emphasis on bolstering intellectual property rights.


Despite these efforts, the consensus among economists is that rate cuts and foreign investment initiatives might not suffice to stabilise the economy. Julian Evans-Pritchard from Capital Economics voiced this sentiment, saying monetary stimulus might be insufficient to establish a growth foundation.


This sentiment was echoed by the National Australia Bank (NAB), which suggested that China might fall short of its annual growth target of approximately 5%. The NAB maintained its projection of 5.2% growth for 2023, however.


Concerns over data transparency

While China's economic data has been a guiding tool for global investors, the recent decision to withhold youth unemployment statistics has caused some unease. Gerard Burg from NAB remarked on the lukewarm loan demand, hinting that any modest rate cut by the PBoC may not significantly boost the economy.


Ting Lu from Nomura added, “The declining availability of macro data may further weaken global investors’ confidence in China and impair Beijing’s ability in assessing the real situation of the Chinese economy.”


In addition to the release of the economic data and the rate cut, China also declared it would momentarily halt the publication of youth unemployment statistics. That decision has only increased speculation that youth unemployment now exceeds the last reported figures of 20%.


However, China's National Bureau of Statistics clarified that the jobless rate for the 16-24 age bracket wouldn't be released from August onward until improved surveying methodologies were in place. This means the awaited data for July will remain undisclosed for now.


With such multi-dimensional challenges facing the world's second-largest economy, the coming months will be pivotal in assessing China's economic resilience and adaptability.



China set to overtake Japan as world...

China set to overtake Japan as world’s largest car exporter thanks to surging EVs.

China's total vehicle exports are expected to reach 4.4 million units in 2023, with new energy vehicles (NEVs) expected to account for more than 30 percent of the total, market research firm Canalys said in a report.


China's auto exports have been climbing since 2020, surpassing Germany as the world's second-largest exporter in 2022. In the first quarter, China surpassed Japan as the world's largest auto exporter, with growth in NEVs exports the main reason for the overall increase, Canalys said.



In April, China's vehicle exports rose 142.40 percent to 424,200 units, up 9.61 percent from March, according to the China Passenger Car Association (CPCA).


In January-April, China's auto exports were 1.49 million units, up 71 percent year-on-year, according to the CPCA.


The core regions of China's auto export destinations are shifting from Africa, Central Asia and South Asia to more developed regions, including Europe and Southeast Asia, the report noted.


China's light vehicle exports to these two core regions contributed 5.9 percent and 7.6 percent of the country's vehicle exports in 2020, respectively. In 2022, the share was 22 percent and 14.3 percent, respectively, according to Canalys.


The average selling price of Chinese car exports increased from RMB 112,000 ($15,670) in 2021 to RMB 140,000 in 2022, up by more than 25 percent. In the European market, the figure was RMB 210,000 in 2022.


In 2022, Chinese automotive products had a penetration rate of 2.6 percent in the Southeast Asia region. By 2025, that figure is expected to rise to 12.8 percent, Canalys said.



In Europe, the penetration of Chinese cars is expected to rise to 16.5 percent by 2025, according to the report.


The average selling price of mainstream products in the European market is highly aligned with the average price of Chinese automotive exports, and consumers here are more aware of the NEV market, according to Canalys.


The overall light vehicle market volume in Europe and Southeast Asia is expected to grow to 13.7 million and 3.8 million units, respectively, by 2025, with NEVs penetrating more than 40 percent in Europe, Canalys said.


In 2021, the Covid pandemic caused instability in overseas supply chains and was the core reason for the growth of Chinese vehicle exports. After 2022, the growth of the overseas NEV market presents new opportunities, according to the report.


Chinese automakers have a first-mover advantage in electrification and vehicle intelligence, and have sufficient capacity and short product delivery times, Canalys said, adding that brands in other countries are lagging behind in the NEV transition and are falling short of expectations in core technology development.

($1 = RMB 7.1457)


Source: Canalys



Current Developments of AI in China...

Current Developments of AI in China.

China has emerged as a global leader in the field of artificial intelligence (AI), making significant advancements in recent years. With a combination of government support, research institutions, and thriving tech companies, China has positioned itself at the forefront of AI innovation. This article examines the current developments in AI in China, highlighting key areas of focus, achievements, and challenges.



Government Support and Strategic Planning:

The Chinese government has recognized the potential of AI and its transformative impact on various sectors, including healthcare, transportation, finance, and manufacturing. In 2017, China released its "Next Generation Artificial Intelligence Development Plan," outlining a roadmap for becoming a world leader in AI by 2030. The plan includes ambitious targets, such as building world-class AI innovation hubs, cultivating top talent, and enhancing data availability for AI research and development.


Investment in Research and Development:

China has significantly increased its investment in AI research and development. Major Chinese tech companies, such as Alibaba, Tencent, and Baidu, have established their own AI research labs and are actively involved in cutting-edge research. The government has also set up national-level AI research centers and funds to support AI-related projects. These investments have fueled breakthroughs in various AI subfields, including machine learning, computer vision, natural language processing, and robotics.


Advancements in Facial Recognition and Surveillance Systems:

China has made notable strides in facial recognition technology, leading to the widespread deployment of surveillance systems across the country. Companies like Megvii, SenseTime, and Dahua Technology have developed advanced facial recognition algorithms that can identify individuals with high accuracy. Facial recognition technology is being used for various applications, including public security, access control, and personalized marketing. However, concerns have been raised regarding privacy and the potential for misuse of such technologies.


AI in Healthcare:

China is leveraging AI to revolutionize its healthcare sector. AI-powered medical imaging systems are being used to assist doctors in diagnosing diseases, interpreting medical images, and detecting early-stage cancers. Companies like Ping An Good Doctor and iFlytek are developing AI chatbots that can provide preliminary medical advice based on symptom analysis. Moreover, AI algorithms are being applied to analyze vast amounts of medical data to identify patterns and improve treatment outcomes.


Autonomous Vehicles and Smart Transportation:

China is actively developing autonomous vehicle technology and aims to become a global leader in the field. Companies like Baidu,, and WeRide are conducting extensive research and development on self-driving cars. China's large population and diverse transportation challenges provide an ideal testing ground for autonomous vehicles. Additionally, the integration of AI into traffic management systems is enhancing efficiency, reducing congestion, and improving road safety.


AI Ethics and Regulation:

China recognizes the importance of addressing ethical considerations in AI development. The government has issued guidelines and regulations to ensure responsible and transparent AI deployment. Initiatives such as the "New Generation Artificial Intelligence Governance Initiative" aim to establish ethical norms, promote AI safety, and address potential risks associated with AI technology. China is also actively participating in global discussions on AI governance and ethics.


Challenges and Future Outlook:

Despite remarkable progress, China faces certain challenges in the development of AI. One major concern is the quality and accessibility of data, as AI algorithms require vast amounts of high-quality data for training and validation. Additionally, attracting and retaining top AI talent is crucial for sustaining growth and innovation. The competition for talent both domestically and internationally poses a significant challenge.


Looking ahead, China's AI development is expected to continue at a rapid pace. The integration of AI into various sectors will bring about increased efficiency, economic growth, and societal benefits. However, it is essential to address ethical concerns, privacy issues, and the potential impact on employment. International collaboration and cooperation will also play a vital role in shaping the future of AI development in China and the global AI landscape.


China has made impressive strides in the development of artificial intelligence, driven by government support, significant investments, and a thriving tech ecosystem. From facial recognition and healthcare to autonomous vehicles and AI ethics, China's progress in AI showcases its determination to lead in this transformative technology. By addressing challenges and embracing responsible AI development, China has the potential to shape the future of AI not only within its borders but also on a global scale.



China Begins Nationwide Push to Reveal...

China Begins Nationwide Push to Reveal Hidden Government Debt.

China has begun a fresh round of nationwide inspections to work out how much money local governments’ owe, according to people familiar with the matter, a sign that authorities are preparing to take concrete steps to tackle a key financial risk.

Local officials will be pressed to come clean about their so-called hidden debt as national leaders attempt to get a fuller picture of liabilities across all levels of government, the people said, asking not to be named discussing private information. The campaign is being led by the Ministry of Finance, one of the people said.


It’s not clear when the survey will end or what will follow it, but an accurate accounting of the size of the liabilities would be key to formulating policies to address the problem. The assessment has been underway at least since May, one of the people said. The people asked not to be identified as the discussions were private.


There are more than 3,000 individual administrative units in China, with 31 provinces, 333 cities and almost 3,000 counties. Many of them use companies called ‘local government financing vehicles’ to borrow money to pay for infrastructure and other services that can’t be paid for from their official budgets. The companies are controlled by the local authorities but are not officially part of the government so their debts don’t appear on official balance sheets, making local finances appear to be in better shape than they really are.


The central government officially denies that government is responsible for these debts, but investors and banks lend to the LGFVs at low interest rates because it is assumed that local authorities will not let any of them fail but will eventually repay their debts.


However, many of the investments made by the LGFVs have struggled to make a profit or even enough money to repay their loans, and investors increasingly see the whole sectors as a financial risk. LGFVs were the most frequently cited top risk in a Bloomberg survey earlier this year of 53 economists, money managers and strategists at financial institutions ranging from sovereign wealth funds to banks and pensions.



Official Debts

Ministry of Finance data showed governments across China had 37 trillion yuan ($5.1 trillion) in on-book debt outstanding at the end of April, but there is no official total for how much hidden debt there is and who owes it.


The International Monetary Fund estimated in February that nationwide there was 66 trillion yuan of LGFV hidden debt at the end of 2022, up from 40 trillion yuan in 2019, with that quick increase underscoring how local governments ramped up off-book borrowing and spending during the pandemic to support their local economies.


China has already conducted several audits of local debt over the past decade. After a 2013 audit, Beijing banned local authorities from borrowing except through the sale of official bonds, and then in 2015 launched a campaign to swap local governments’ off-balance-sheet debt for bonds.


The Ministry of Finance more recently allowed some regions to issue bonds to repay LGFV borrowings in an attempt to eliminate the remaining hidden debt, after another round of checks in 2018. Guangdong province became the first to claim it had successfully done so in 2021. Other LGFVs have been allowed to renegotiate their loans, including one in Guizhou province agreeing with its banks in December last year to extend its loans for two decades.


This new audit of local government debt risks comes just as China’s economic recovery is losing momentum. The real estate sector shows no sign of rebounding, global demand for Chinese goods and domestic consumption are both weakening, and local authorities’ ability to spur growth with infrastructure spending has been limited by their massive debt stockpile and falling income.


Expectations for more monetary and fiscal stimulus have risen following the surprise rate cut last week by the People’s Bank of China. The State Council, China’s cabinet, said late last week it was discussing stimulus proposals, and a major policy announcement is expected to come after the July meeting of the Communist Party’s powerful Politburo.


Morgan Stanley analysts expects China to roll out rate cuts, widen the fiscal deficit by expanding government bond quotas, announce more infrastructure investment, provide tax incentives to support high-end manufacturing and ease home purchase restrictions. The government announced Wednesday that it would extend tax breaks for people to buy electric cars through 2027, in an effort to boost both demand and industrial output.


However, more and more domestic economists are urging Beijing to shift the focus of fiscal stimulus toward boosting household income, as the return on investment of infrastructure projects has declined, leaving local authorities struggling to repay the debt taken on to fund the constructions.


Source: Bloomberg



A Sharp Decline in the Number of Foreign...

A Sharp Decline in the Number of Foreigners in China Demands Serious Attention.

Wang Wen, Executive Dean of the Chongyang Institute for Financial Studies at Renmin University of China delivered a speech at “习近平外交思想与‘身边的国际社会’理论研讨会 a seminar on Xi Jinping Thought on Diplomacy and its relevance to the "international community around us" on May 9. Below is a condensed version of his speech:



While the term "international community" may sound sophisticated, it exists right within our own society. Through social media platforms like WeChat, Chinese individuals can engage with a diverse range of foreigners, including diplomats, foreign journalists, businesspeople, international students, and overseas Chinese. These daily interactions, such as likes, comments, and conversations, contribute to the formation of an "international community around us." This community has significant influence over the number of long-term foreign elites residing in China and their integration into Chinese society. Moreover, it plays a vital role in shaping China's relationship with the rest of the world, particularly developed nations, and can contribute to resolving existing tensions.


One crucial challenge that China faces is the insufficient infrastructure to fully leverage the potential of the "international community around us." To establish and strengthen this community and propel China's global influence, breakthroughs and expansion in infrastructure are necessary. This includes developing and enlarging various institutional frameworks related to finance, business, and management. Looking ahead, attracting more global talents and foreign elites is vital for China to become a socialist modernized strong nation.


Furthermore, there is a significant disparity between China's global power status and the current quantity and quality of foreign residents and talents in the country. This disparity raises concerns. On one hand, statistics indicate an overall increase in the number of foreigners in China, but there has been a notable decrease in individuals from developed countries.


According to the seventh national census, the number of long-term residents from developed countries in China showed varying degrees of decline from 2010 to 2020. For example, the number of French citizens residing in mainland China decreased by about 40%, from 15,087 to 9,196. The number of Americans decreased by 23%, from 71,000 to 55,000. The number of German, Italian, and Japanese citizens residing in China has also declined.


As China's most internationalized city, Shanghai experienced a decrease in the number of foreigners from 208,000 in 2011 to 163,000 in 2021. I reside in Beijing's Wangjing Street, a relatively internationalized neighborhood. Ten years ago, nearly 100,000 Koreans were living in Wangjing, but now the number may be only 20,000. The proportion of foreign residents in China is approximately 0.05%, which is significantly low for the world's second-largest economy. It lags behind the percentages in Japan and South Korea, both of which have over 2% of foreign residents. It is even lower than countries like Laos (approximately 0.8%) and Cambodia (approximately 0.5%).


In general, top-tier talents tend to come from developed countries, but the fastest-growing segment of foreign residents in China consists of individuals from developing nations. However, the challenge of effectively accommodating and retaining high-caliber global talents in the long term remains unresolved in China.


The decline in the number of residents from developed countries in China over the past few years can be attributed to various factors, such as the impact of the COVID-19 pandemic and the intensification of the Sino-US competition. However, another significant factor often goes unmentioned: the actual implementation of China's policies and the social-cultural environment still have room for improvement to effectively accommodate foreigners. In light of this, four suggestions are in order to attract a greater number of high-caliber foreign talents.


Firstly, efforts should continue to attract foreign investment and enhance the business environment, ensuring a rapid influx of foreign capital. The rapid increase in foreign investment is crucial for domestic development prospects and countering Western containment. Central and local governments need to address foreign investment access in areas such as tariff barriers, banking and finance, postal services, securities and insurance, construction and tourism, education, and telecommunications.


Secondly, fostering social acceptance and cultural inclusiveness towards foreigners is essential. Regrettably, derogatory comments about foreigners can be found in Chinese public discourse, contradicting China's traditional values of inclusivity and failing to showcase the confidence of a great nation. Particularly in the context of escalating competition between China and the West, approaching foreign individuals, especially those from Western countries, with a fair and balanced mindset is crucial. Treating foreigners equitably based on law rather than cultural biases or social prejudices is a fundamental value for citizens of a modern great nation.


Thirdly, guaranteeing quick and convenient procedures for foreigners in various areas, such as finance and taxation, residence, tourism, and daily life, is crucial. Foreign students, workers, and long-term residents coming to China should receive equal treatment as Chinese citizens, including simplified processes for registering WeChat and Alipay accounts, obtaining credit cards, and accessing social security, medical insurance, and pension. These procedures should be streamlined to ensure convenience and efficiency for foreigners settling in China.


The key to "coordinating security and development" is to promote development while ensuring overall security. It is crucial to maintain overall security while continuously advancing rapid development. An important criterion for testing local governance is if it does NOT prioritize security and in the process stifle development or international exchanges.


Lastly, reforms and innovations can be promoted in China's approval process for intellectual exchanges with foreign countries. Exploring interactions between China's intellectual community and foreign scholars, businesses, embassies, media, and related individuals for greater flexibility can transition from a pre-approval system to a post-reporting system. Requiring pre-approval for every interaction can impede academic and exchange activities, potentially tarnishing China's international image.


Against the backdrop of General Secretary Xi Jinping's continuous call for "comprehensive opening up to the outside world" and the central government's emphasis on openness, it is necessary to reflect on and remind the Chinese government at all levels to pay attention to the specifics of their policies regarding international exchanges. The devil is in the details, as they determine the success or failure and the actual outcome of China's interactions with foreign countries and the construction of the "international community around us."


Amidst ongoing reports in overseas public opinion suggesting a decrease in the number of long-term residents from developed countries in China and claims of China's lack of accommodation towards foreigners or inconvenience in traveling within the country, it is essential to reflect on these issues and ensure that the implementation of policies aligns with the goals of openness and fosters positive international interactions.



Source: Pekingology


China’s state banks cut deposit rates...

China’s state banks cut deposit rates in bid to lift economy.

China’s much-anticipated economic recovery isn’t turning out to be as ebullient as some bullish investors hoped. And yet investors looking to policy makers to power stocks higher with aggressive stimulus might be disappointed. China’s growth is indeed recovering—a contrast to slowing economies in the U.S. and elsewhere—but not at the robust pace expected. That leaves the world’s second-largest economy in a difficult in-between.


Just on Wednesday, data showed that China’s exports fell 7.5% in May from a year earlier, a much steeper drop than economists had projected and the first contraction in three months. That, along with other weaker data points lately, has sparked hopes for more stimulus to rev up growth. But policy makers so far appear more intent on stabilizing the economy rather than supercharging it.



Chinese stocks, in turn, have lost  7% over the past three months. It’s a stark comedown from the fall, when Chinese stocks surged for three months after Beijing lifted its harsh Covid-19 restrictions in late October.


Of course, policy makers have rolled out some efforts to help the recovery—like lowering deposit rates to nudge Chinese savers to spend more. Lenders including Industrial and Commercial Bank of China, China Construction Bank and Bank of China are now offering 2.45% and 2.50%, respectively, on three- and five-year time deposits, down by 15 basis points from September.


But so far, these efforts don’t seem to have persuaded households—or companies—to do so. For that to happen, TS Lombard Chief China Economist Rory Green says employment and income prospects need to improve to help repair confidence.


BCA Research Chief Strategist Arthur Budaghyan in a recent note said consumer spending will likely keep growing since Covid-19 restrictions have lifted, but at a slower pace than in the past.


As for companies, those on China’s mainland are among the most debt-laden in the world, Budaghyan adds. Combine that with a lack of government stimulus and lackluster demand, and these businesses likely won’t rush into investing, expanding, or hiring. That could be yet another obstacle for continued economic momentum.


For now, Chinese policy planners are in a “wait-and-see mode” about whether the economy will regain momentum on its own, says Shehzad Qazi, managing director at research firm China Beige Book.  If growth disappoints in the second quarter, Qazi expects Beijing will roll out more stimulus. TS Lombard’s Green also expects more measures, along the lines of accelerated use of local government bond quotas, cuts to the required reserve requirements at banks to spur lending, and support for the real estate market with reduced down payment requirements.


But it isn’t clear if such measures would jump-start growth. And Beijing remains wary of exacerbating the longer term challenges it has tried to tackle in recent years, such as high levels of debt throughout its economy, including at the local level, financial speculation, and the excesses in the property market.


Another reason China might not be able to rely on its old playbook of leaning on infrastructure and construction to juice its economy: It might not have enough blue-collar workers to take on these projects. By 2025, the manufacturing sector is expected to see a shortfall of 30 million workers, according to Budaghyan. The silver lining: China is likely to keep rolling out efforts to put a floor under its economic growth.


Source: Baron's




Explaining China’s Central Asia pivot...

Explaining China’s Central Asia pivot.

A surge in apprehension followed the establishment last week of a China-Central Asia Summit. “The war in Ukraine has weakened some of Russia’s influence in Central Asia,” warned the New York Times, “and China sees an opening”. Contrasted with the G7 meeting occurring at the same time in Japan, this was said to amount to “duelling summits” for influence.



The Belt and Road Initiative, or BRI, and China’s burgeoning economic partnerships with Central Asian nations, has certainly laid the groundwork for cooperation in areas such as trade, infrastructure and energy. Promises made at the China-Central Asia Summit of extensive financial support to the tune of 26 billion yuan (roughly US$3.8 billion) are indicative of strong economic collaboration, adding to the sense of unease.


This apprehension is exacerbated by Russia’s evident loss of power and influence following its invasion of Ukraine. Yet, despite all signs pointing towards China’s increased cooperation with the Central Asian nations of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, there has not really been any abrupt change in China’s policy towards this region.


China is not aiming to be the dominant player in Central Asia or fill a power vacuum. Instead, by shoring up ties with its neighbours, China appears to be primarily focused on maintaining stability in its western periphery. This, in turn, would help construct a buffer zone to effectively manage its persistent security challenges to the east, in the Asia-Pacific region.


China’s diplomatic priorities offer a valuable insight into its ambitions towards Central Asia. These countries became China’s immediate neighbours following the collapse of the Soviet Union. China’s diplomatic blueprint highlights the significance it places on “major powers, its periphery, developing countries, and multilateral platforms”, and Central Asia plays a critical role in this schema.


But China’s relations with Central Asian countries got off to a slow start. This was largely due to China’s focus on major powers and Southeast Asian neighbours. The lack of dynamic diplomatic mechanisms also hampered the development of closer ties with Central Asian countries, despite security cooperation at the borders. Hence, the inauguration of the China-Central Asian Summit, held in Xi’an, which China’s President Xi Jinping emphasised was a crucial waypoint on the ancient Silk Road.


The bigger focus for China is the relationship dynamics it has with the United States. Washington has declared Beijing a “strategic competitor” and is involved in regional flashpoints centred around the East and South China Seas, including Taiwan. Moreover, US efforts such as its Indo-Pacific Strategy, the Quad grouping involving Australia, Japan and India, and the AUKUS partnership with Australia and the United Kingdom, are seen in Beijing as moves to encircle China, blocking its influence on the first island chain and impeding access to the Indian and Pacific Oceans.


From Beijing’s vantage point, Central Asia and Russia are the gaps in this perceived US encirclement strategy. Despite the withdrawal of US troops from Afghanistan in 2021, China remains wary of US involvement in Central Asia, with the prospect of other powers encouraging “colour revolutions” which it sees as a threat to Chinese interests (the term was explicitly invoked by Xi during his remarks at the China-Central Asia Summit). Anxiety persists about the US Central Asia strategy unveiled by the Trump administration in 2020, which set out as a “primary strategic interest” the aim to “build a more stable and prosperous Central Asia that is free to pursue political, economic, and security interests with a variety of partners on its own terms”.


The stability of the east is paramount for China, yet simultaneously, stronger relations with Central Asian states are integral to China’s national security. Russia’s war with Ukraine has added another layer of complexity, with China concerned about potential US moves in the region. Yet even before Russia’s invasion of Ukraine, Xi chose to visit Central Asian countries for his first overseas trip following the Covid-19 outbreak.


China’s diplomacy in Central Asia should therefore be seen in the context of evolving regional dynamics.



Source: The Lowly Institute


China’s first domestically produced...

China’s first domestically produced passenger jet makes maiden commercial flight.

China’s first domestically produced passenger jet took off on its maiden commercial flight on Sunday, a milestone event in the nation’s decades-long effort to compete with western rivals in the air. Beijing hopes the C919 commercial jetliner will challenge foreign models like the Boeing 737 MAX and the Airbus A320, though many of its parts are sourced from abroad.


Its first homegrown jetliner with mass commercial potential would also cut the country’s reliance on foreign technology as ties with the West deteriorate.“In the future, most passengers will be able to choose to travel by large, domestically produced aircraft,” state broadcaster CCTV said.


China Eastern Airlines flight MU9191 rose into the skies above Shanghai Hongqiao Airport on Sunday morning, footage from CCTV showed. The plane is carried over 130 passengers, the broadcaster said. Passengers received red boarding passes and enjoyed a sumptuous “themed meal” to commemorate the flight, CCTV reported.


China has invested heavily in the production of the homegrown jet as it seeks to become self-sufficient in key technologies. The aircraft is manufactured by the state-owned Commercial Aircraft Corporation of China (COMAC), but many of its parts – including its engines – are sourced from overseas.


From Monday, the C919 will operate on China Eastern’s regular route between Shanghai and the south-western city of Chengdu, CCTV reported.


The first model of the narrow-body jet, which seats 164 passengers, was formally handed over to China Eastern last year during a ceremony at an airport in Shanghai, hailed by state media as “an important milestone” for the country’s aircraft industry. Zhang Yujin, COMAC’s deputy general manager, told state-backed Shanghai outlet The Paper in January that the company had taken about 1,200 orders for the C919. COMAC planned to increase annual production capacity to 150 models within five years, Zhang said at the time.


Asia – and China in particular – are key targets for both Airbus and its American rival Boeing, which are looking to capitalise on growing demand for air travel from the country’s vast middle class. Last month, Airbus said it would double its production capacity in China, signing a deal to build a second final assembly line for the A320 in Tianjin.


The first assembly site in the northern city opened in 2008 and produces four A320s a month, with Airbus hoping to increase that to six a month before the end of the year.



Source: The Guardian



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