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2024 A Vexing Year Ahead for China

2024 A Vexing Year Ahead for China

Economic headwinds. High-level purges. Social discontent. Extreme weather events. Worsening geopolitical environment. The year 2023 was in many ways a very difficult one for China.


Looking ahead to 2024, are matters likely to improve? In short: not by much.


Across the economy, society, politics, the environment, and foreign policy, the team at the Asia Society Policy Institute’s Center for China Analysis largely foresees a vexing year ahead for China as challenges continue to proliferate — though some positive opportunities, at home and abroad, present themselves as possible exceptions. In this inaugural annual report, our analysts forecast ten key developments to watch in the year ahead:



  • China’s economy will continue to struggle: Beijing is likely to again set an official growth rate of around 5% for 2024 but may find meeting this goal a real challenge. Lagging consumer demand, a persistent real estate crisis, and the unlikelihood of a comprehensive government stimulus amid significant concerns about debt and fiscal stability, especially at the local level, will continue to drag heavily on China’s economy in the year ahead.


  • Xi Jinping’s prioritization of security will weigh on growth: An important factor behind China’s economic woes will be President Xi’s overriding emphasis on “comprehensive security” as a paramount policy priority. This laser-like focus on security, stability, and national “self-reliance” makes it more likely that efforts to boost investor confidence may falter and an exodus of foreign capital will persist, potentially leading to stealth controls on international capital to maintain the yuan’s stability.


  • Eroding trust could further undermine confidence in governance and development: A growing “trust deficit” is today reshaping the dynamics among China’s political elites, between the state and society, between central and local governments, and within the general populace. Accentuated by — and contributing to — China’s economic slowdown, this erosion of trust is exacerbating political instability, policy unpredictability, social fragmentation, and other governance challenges and risks leading the country into a uniquely “Chinese-style” modernization trap.


  • A slowing economy will drive growing public discontent: The combination of slowing economic growth and erosion of trust could heighten public discontent and even drive new protests in 2024. Events of nationwide significance — such as the death in late 2023 of former premier Li Keqiang — have the potential to become flashpoints for broader public and elite dissatisfaction.


  • We will see purges in the provinces as local liabilities rise: Worsening fiscal challenges combined with growing central vs. local distrust are leading to intensified scrutiny of local finances and leaders. This is helping trigger a wave of political and anti-corruption purges in the provinces, especially in poorer regions — leading to new levels of political disruption and policy stagnation.


  • Xi will adopt a more oracular leadership style: Xi’s method of governing shows signs of increasingly shifting to one of “delegated centralization,” in which he assigns day-to-day decision-making to trusted aides, while he focuses on a grand strategy. This may further secure Xi’s image and power but will also increase policy fragmentation, amplify tensions between security and development priorities, and reduce the effectiveness of international diplomacy.


  • China will make domestic climate resilience a security priority: Amid a worsening global climate and following recent tragic experiences with climate-induced extreme weather events, China is primed to make climate adaptation and resilience efforts a major priority in 2024. These will be framed as national security issues, overlapping with other high-priority security issues favored by Xi Jinping, including food, water, energy, and infrastructure security.


  • China will act to reestablish its international climate leadership: To respond to growing demands by the international community and shift global climate-related attention away from China, while also advancing its own national interests, China is likely to offer a more concrete climate plan in 2024. This may include ramping up climate-related spending in developing countries and slowing or incrementally ending the construction of new coal plants domestically.


  • China will significantly strengthen its pivot to the Global South: Motivated by deteriorating relations with the advanced Western world and a need to secure greater access to raw materials; develop new markets; garner political support; and bolster its diplomatic, security, and economic influence on the world stage, China will increasingly turn its attention to building relations with the countries of the developing world. In 2024, this will mean additional development aid, high-profile diplomatic extravaganzas, and a larger operational presence by Chinese military and police forces in the Global South.


  • Two big elections will greatly complicate Chinese foreign policy: The January 13 election of Lai Ching-te of the more independence-minded Democratic Progressive Party as president of Taiwan presents a significant early political and policy challenge for Xi in 2024. The U.S. presidential election later in the year may prove similarly pivotal, determining the trajectory of U.S.-China relations for the next four years and beyond. Beijing is likely to continue its freeze on political ties with Taiwan and escalate its military pressure on the island, while using most of 2024 to make what preparations it can to mitigate against and, if possible, capitalize on a possibly chaotic shift in U.S. political leadership.


By Bates Gill, Executive Director, Center for China Analysis & Jing Qian, Co-Founder and Managing Director, Center for China Analysis for The Asia Society.


Gulf Sovereign Wealth Funds Shift Focus...

Gulf Sovereign Wealth Funds Shift Focus to China for Investments.

Currently, Arab Gulf sovereign wealth funds, worth over US$ 4 trillion are looking for more productive investments beside their traditional investments in U.S., British, and EU financial / banking, and real estate markets that are not so secure or productive. China and the BRI are proving to be the new destinations. This process takes three forms: 1) Investments in promising Chinese industries in mainland China; 2) Investments in infrastructure and industries jointly with China in the Arab countries themselves, 3) Investments in BRI projects in Africa and Asia.


This month, a UAE wealth funds invested US$ 3 billion in shares of Chinese electric vehicle companies. Whilst Saudi Arabia has invested upward of US$ 10 billion in Chinese petrochemical industries over the past two years. Saudi Arabia has even a more ambitious plan of relocating Chinese electric vehicle production, petrochemical industries etc. to Saudi Arabia such as in the Jizan Port Industrial City. Saudi Arbia is intending to expand its economic impact into neighbouring countries and into Africa. Several financial cooperation and local currency transaction mechanisms cooperation agreements were signed recently with Chinese counterparts. Nations in the Global South are scouting to figure out where the future of their economy should be.



Abu Dhabi sovereign wealth ADQ is backing a US$3 billion investment of the Emirate’s Department of Finance into Chinese electric vehicle producer NIO, which is among the world’s top five EV producers.


The fund has channelled capital through CYVN Holdings, which appears to be a state-owned investor in its own right. With ADQ’s financial support, CYVN will own a 20.1% stake in the carmaker. It invested US$0.74 billion in July with a further US$2.2 billion this month.


ADQ’s commitment dwarfs PIF’s initial US$1 billion investment into Lucid Motors, which it has continued to pump with capital in order to advance its bid to rival Tesla. It is also an example of Gulf funds remaining invested in the Chinese economy when European and North American counterparts have largely deserted due to geopolitical risks associated with the ongoing rift between Beijing and Washington.



Like other EV producers, NIO is lossmaking but is also falling short of sales targets; in January-November its sales volume was 43% below the 250,000 target for the full-year, prompting it to restructure operations and retrench some of its workforce.


The investment comes amid a push by Beijing to stimulate the production of electric vehicles, as well as the development of new energy and smart-connected autos in a package reportedly valued at over US$70 billion in tax breaks over the next four years. To continue to support the electrification of China's vehicle fleet, the government is expanding the EV charging network, promoting low-carbon fuels and power trains, and expanding cooperation and trade with export markets. Local governments are also subsidising vehicle purchases and self-use charging facilities to support the industry. In November, Bloomberg reported that Chinese authorities were preparing to relax capital requirements for firms and signalled support for more acquisitions. Chinese security regulators are looking to ease risk controls by lowering the capital requirements for some assets to allow brokerages to put more of their reserves to use.


While ADQ is investing in Chinese EV production, PIF’s focus is on building its own EV empire with Lucid set to establish a Saudi plant and the fund launching its own indigenous EV carmaker, Ceer, in a joint venture with Taiwan-based Foxconn that will start production in 2025. PIF and the Saudi government are developing the EV value chain with investments in mining, metals and components.


It is unlikely that Abu Dhabi will seek NIO establishing operations in the Emirate, or utilizing it to spur domestic industrial supply chains. Abu Dhabi’s development goals, the role of SWFs and the path to achieving economic diversification are distinct from Saudi Arabia.



Saudi Aramco (2222.SE) raised its multi-billion dollar investment in China by finalising and upgrading a planned joint venture in northeast China and acquiring an expanded stake in a privately controlled petrochemical group.


The two deals, announced separately, would see Aramco supplying the two Chinese companies with a combined 690,000 barrels a day of crude oil, bolstering its rank as China's top provider of the commodity.


Aramco has agreed to acquire a 10% stake in privately controlled Rongsheng Petrochemical Co Ltd for about $3.6 billion. The deal includes the supply of 480,000 bpd of crude oil to Rongsheng-controlled Zhejiang Petrochemical Corp (ZPC) for 20 years, Aramco added. It follows a preliminary agreement Aramco reached with the Zhejiang provincial government in 2018 for a 9% stake in ZPC.



The deals are the biggest to be announced since Chinese President Xi Jinping visited the kingdom in December where he called for oil trade in yuan, a move that would weaken the U.S. dollar's dominance in global trade.


The Rongsheng deal comes on the heels of Aramco's agreement with Chinese partners on Sunday for an oil refinery and petrochemical project in the northeast Chinese province of Liaoning that is expected to start in 2026 to meet the country's growing demand for fuel and chemicals.


The Liaoning project, in the city of Panjin, will be Aramco's second major refining-petrochemical investment in China and follows the world's top oil exporter reporting a record profit of $161 billion in 2022.


Joint venture Huajin Aramco Petrochemical Company (HAPCO) will build and operate the Panjin complex that will house a 300,000 barrels per day (bpd) oil refinery and a cracker with annual production capacity of 1.65 million tonnes of ethylene and 2 million tonnes of paraxylene, Aramco said in a statement.


Aramco's investments highlight Riyadh's deepening ties with Beijing which have raised security concerns in Washington, Riyadh's traditional ally whilst showing growing competition between Saudi Arabia and its ally Russia in crude supplies to China.



China industrial growth fastest in almos...

China industrial growth fastest in almost two years.

China has reported the fastest monthly expansion of industrial output in almost two years of 6.6% in November, while retail sales grew 10.1%, as the world’s second-largest economy looks to continue its patchy recovery from the pandemic.


The People's Bank of China (PBoC) also announced no change to rates, in line with market expectations, while injecting RMB 1.45 trillion of funds, which was well ahead of market expectations.


According to the latest figures released by the National Bureau of Statistics, November's industrial output surpassed the 5.6% consensus forecast and was up from October's 4.6% rise.



On the retail front, November sales growth was up from October's 7.6% rise and the quickest pace since May but short of an anticipated 12.5% surge.


Analysts had projected a more significant increase, given the low base effect from 2022 when China grappled with stringent zero-Covid policies.


A year ago, China was still being ravaged by the effects of its zero-Covid exit strategy, which provides a low base for comparison. 


"China’s economy remains at a low ebb, despite headline improvement in industrial output," said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.  


He said the headline rise in industrial output growth was due to base effects and utilities output, with manufacturing output pretty steady.


Retail sales growth was disappointing, he said, indicating fading consumption demand as winter approaches.


Fixed asset investment data was "steady", though, he said, "buttressed by policy-supported manufacturing and infrastructure investment, though dire residential construction figures showed a tiny improvement, thanks to rising completions". 


New home price declines were also steady, he noted, but existing home price falls are steepening, in a sign of market adjustment.  


On the PBoC, he said it "probably means the Bank has decided to provide funding to accommodate rapid government bond issuance via MLF [medium-term lending facility] rather than an RRR [reserve requirement ratio] cut", providing a "somewhat lesser signalling effect to the market".  


He added: "Falling global yields mean China theoretically has more room to ease monetary policy, but the impact of rate cuts would be limited given the troubled property sector. The CEWC [Central Economic Work Conference] confirms that policymakers have prioritised restructuring the economy towards high-end manufacturing and innovation, and away from debt-heavy sectors like property. The property sector is showing marginal improvement and indications are that policy will continue to be be stepped up only incrementally, notably on the developer funding side. This means private consumption is likely to remain fairly sluggish in H1, and China will continue to issue dollops of fiscal support to prop up activity."


Source: Oliver Haill, Proactive Investors


Evergrande wins stay of execution but...

Evergrande wins stay of execution but Chinese property market remains on the brink.

Embattled Chinese property developer Evergrade has won an extension until late January to restructure its substantial debts to avert liquidation amidst China’s ongoing property crisis. Hong Kong courts initially gave Evergrande until today to present a concrete debt-restructuring plan to its offshore creditors, after the initial plan to distribute equity stakes in its various subsidiaries failed to cut the mustard.



The company is at risk of being liquidated following a winding-up petition by creditor Top Shine Global. This action, if successful, would transfer control of Evergrande to liquidators tasked with selling assets to repay lenders. 


Evergrande is the most indebted property company on the planet, with some US$300 billion (£237 billion) in liabilities on its books. Its woes started in 2021, when China's communist party imposed stricter leverage requirements as part of its ‘Three Red Lines’ rule, thus limiting Evergrade’s access to funding. Since the vast majority of Evergrande’s portfolio consists of incomplete developments, this has led to indefinite delays of its past vast portfolio of residential and commercial developments across China.


Evergrande has faced protests from existing customers and a withdrawal of demand due to fears of their houses never being completed.Evergrande’s woes are a symptom is a wider crisis in China’s massive real estate market.


Following decades of substantial growth in property prices, China is awash with incomplete developments left to crumble after speculative property investments turned sour and construction ground to a halt.


The BBC estimates that Evergrande had up to 1.5 million unfinished homes in its portfolio in September 2021, when China’s real estate crisis was beginning to attract international attention. Comprising more than a quarter of gross domestic product (GDP), China’s property market is one of the world’s largest asset classes and is considered a proxy for the country’s economy as a whole. Property is also intrinsically linked to individual wealth, comprising a remarkable 70% of household wealth.


So it came as a major concern when China’s other major property developer Country Garden missed a $15 million interest call on its debts in August. The group is now considered in default on its overseas bonds.


As hundreds of thousands of properties across China remain unfinished, would-be homeowners have seen their life savings trapped in deposits for houses they may never see the inside of.




China Monetary Policy: support for a...

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



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