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Major Challenges for China’s Chemical Industry

Major Challenges for China’s Chemical Industry
Any review of China’s chemical industry in 2021 is dominated by the two big issues the industry had to wrestle with: climate neutrality and Corona. These are the same issues that will dominate the year 2022. The industry as a whole in the People’s Republic is facing enormous challenges and changes — while at the same time there are great growth opportunities for certain sectors. However, the ongoing global epidemic, including in China, continues to create uncertainty.

The past year 2021 started with a big bang — or perhaps the word warning shot would be more appropriate — when 17 of China’s largest petrochemical companies signed a document on January 15 committing to the climate protection targets announced by the government in Beijing shortly before. CNOOC, Sinopec, Wanhua Chemical and other industry giants pledged to support the central planners' plans for emissions reductions.


Market observers are by majority convinced that China’s chemical executives were largely unprepared when state and party leader Xi Jinping promised in autumn 2020 that China aims to have passed the peak of its carbon dioxide emissions by 2030 and will be carbon neutral by 2060.


So, the chemical industry wants or needs to help meet Beijing’s climate targets, but the painful transformation needed to achieve this has only begun. It will hit larger corporations, especially large state-owned enterprises, less hard because they are able to handle the necessary investments in new technology better than private, especially medium-sized and smaller chemical companies. “The strong will become stronger,” writes the investment house Cinda Securities in its outlook for the current year.


Growth under difficult conditions

Major changes are on the horizon in the medium to long term. By 2025, the capacity of all processed crude oil in China is to be limited to a maximum of one billion tons. At the same time, capacity utilization for important products is to be increased to more than 80 percent.



China’s chemical industry is therefore promising a switch to low-carbon energy sources wherever possible, improvements in energy efficiency, an increased focus on low-carbon products and accompanying measures such as carbon storage and recycling (CCUS for ‘Carbon Capture, Use & Storage’). This is according to the document of January 15, published by the China Petroleum and Chemical Industry Federation.


However, since a large part of chemical production involves breaking down complex carbon compounds using large amounts of energy, it is rather uncertain at this stage how the sector can continue to grow in view of Beijing’s climate targets.


A particular problem for China’s chemical industry against this backdrop is the relative strength of coal chemistry — and in macroeconomic terms, the huge dependence of the entire industry on electricity generated by coal. More than 56 percent of all energy in the People’s Republic comes from coal. The chemical industry is the sector that consumes the most energy in China after the power and steel sectors.



In July, there was bad news for ‘Shaanxi Coal and Chemical’ when the largest coal chemical project on earth — in Yulin, Shaanxi province, with an investment of 20 billion dollars — was put on hold by the government. The reason was the new energy-saving and environmental regulations imposed by the central government. It looked like local governments in China were particularly targeting coal chemistry.


Coal dilemma plays a role in deciding the future

However, the headquarters in Beijing is currently sending mixed signals about the future of the chemical industry as well as coal chemistry. On the one hand, it has announced — among other things in a document published in Glasgow — the strict limitation of new refinery and conventional coal chemical projects. On the other hand, modern coal chemistry should certainly continue to play an important role in China, it said.


While the supply side is facing all kinds of risks for the year which has just begun, demand for chemical products in China, on the other hand, is very robust. In the first three quarters of 2021, cumulative GDP growth in China was 9.8 percent, and the key chemical industry is again forecast to grow in 2022 in most analyses, despite all the upheavals.


According to most observers, the impact of the Corona epidemic will continue to weaken China's chemical industry in 2022. Beijing is pursuing a strategy of strict, but also regionally narrow lockdowns that have a limited impact on production in macroeconomic terms.


“Looking ahead, to 2022, price volatility for chemical products will continue to increase. Against the background of climate neutrality, concentration in the industry will continue to increase. On the other hand, driven by strong demand in downstream industries, attention to new materials and those for semiconductors will continue to grow,” says a market outlook by ‘BOC International’, a subsidiary of the Bank of China.


Winners and chances

The winners of the current transformation trends include new energy carriers such as hydrogen, in which many Chinese chemical companies are currently investing massively, and above all the production of new chemical materials for photovoltaics and other ‘green’ technologies.


Nowhere are new industries such as e-mobility, energy storage or energy production with wind and solar power growing as fast as in China, resulting in enormous growth opportunities, especially for modern high-performance materials. It is no coincidence that Hengli Petrochemical (Dalian), for example, is currently investing in new production facilities for new materials with an annual capacity of 1.6 million tons. Many other companies in China are also investing in the sector.


Another example of a company with a lot of optimism for the new year is Baofeng Energy, one of the largest coal-to-olefin producers in China. The company is “accelerating the construction of hydrogen electrolysis projects with solar power nationwide”, according to a market report by Sealand Securities.


Overall, all major chemical companies in China continue to invest heavily in new production lines this year. Wanhua Chemical, for example, is investing in new capacities of 12.45 million tons per year. Taken together, the picture is one of a national chemical industry in transformation pain, but with continued good growth opportunities.



Source: By Henrik Bork for Process Worlwide


Systemic Rivals: America’s Emerging...

Systemic Rivals: America’s Emerging Grand Strategy toward China

Under the Joe Biden administration, a new American grand strategy is coming into view. It is focused on the emergence of China as a peer competitor and organized for long-term strategic rivalry with Beijing to shape the rules, institutions, alliances, alignments and values that undergird world order in the 21st century. For three decades, the United States has watched the rise of China and debated its implications for American interests and the future of the US-led international order. Will China’s rise be peaceful? Will it be a “responsible stakeholder”? Will it seek integration into the world capitalist system dominated by the leading liberal democracies, or seek to contest and overturn it? Will “engagement” with China lead to a more open, pluralistic rule-of-law regime? What kind of challenge does China pose to the US and its allies and partners — military, economic, technological and ideological, or all of these? Will China use its growing power and wealth to try to “push” the US out of East Asia? In an era of intensified US-China competition, how will countries inside and outside of East Asia react and align themselves? Can the US and China find a way to coexist in a two-superpower world?



In the last several years, the answers have become increasingly clear, at least to the US foreign-policy establishment. As a result, a core set of convictions about the rise of China has crystallized to shape Biden administration strategy. First and foremost, China is now seen as a full-spectrum challenger to the US global position and the US-led liberal democratic world. In announcing the creation of a new China Mission Center, the CIA described China as “the most important geopolitical threat we face in the 21st century.” China is deeply embedded in the global system and world economy, and US-Chinese co-operation will be essential to manage problems of security, economic and environmental interdependence. But the US and China are also hegemonic rivals with very different visions of the world order, rooted in increasingly divergent developmental and order-building interests. The US wants to make the world safe for democracy, and China wants to make the world safe for the Chinese Communist Party (CCP) and political autocracy. The US believes — as it has done for more than two centuries — that it is safer in a world where the liberal democracies predominate.1 China contests such a world. Therein lies the deep roots of Sino-American rivalry.


The Biden administration has thus moved to place long-term strategic competition with China at the center of its grand strategy. The abrupt and chaotic end of the American war in Afghanistan was seen by many as a decision by Biden to step back from global security leadership. But it is better seen as a strategic rebalancing of resources and commitments, repositioning the US to focus on East Asia and competition with China. The post-9/11 grand strategy of fighting a global war on terror has ended, giving way to a China-centered grand strategy organized around the balance of power, hegemonic competition and a struggle to shape the organizing logic of the global system. The Biden administration’s efforts to build counterweights to China in the Indo-Pacific — the Quad and the AUKUS agreement — are harbingers of this strategic reorientation.


Several convictions inform this new grand strategy. First, as China grows in wealth, power and global influence, it is increasingly turning into a “systemic rival” of the US, offering alternative leadership and order-building agendas. As Gideon Rachman notes, “the Biden team believe that China is determined to displace the US as the world’s pre-eminent economic and military power, and they are determined to push back.”2 Fundamentally, China seeks to contest, weaken and shrink America’s liberal hegemonic presence in the world, paving the way for the elevation of its hegemonic leadership that champions an international order more congenial with its own illiberal regime principles and interests. Chinese President Xi Jinping seems to share this view, telling legislative officials in Beijing in April 2021 that “China can already look at the world on an equal level,” suggesting that it no longer sees the US as a superior force. China is a “systemic rival” because it challenges the full spectrum of US power, interests and values. This competition will play out over many decades and across a wide array of areas — military power, alliances and alignments, markets and trade, money and finance, next-generation technology, science and research, and democratic versus autocratic ideology and values.


Second, the engagement strategy of the 1990s that sought to integrate China into the liberal international order mostly failed. Welcoming China into the US-led system — capped by its membership in the WTO in 2001 — did not lead to the hoped-for liberal outcomes. China became more integrated into the world economy, and mutually beneficial trade and growth followed, but Beijing did not continue on its path of reform, opening and liberalization. 2018 was a turning point, when the Deng Xiaoping-era term limits on the Chinese presidency were dropped, making President Xi, in effect, “ruler for life.” The attack on democracy in Hong Kong, the oppression of the Uyghurs, the intimidation of Taiwan, the territorial aggrandizement in the South China Sea, the internal crackdown on Western influences, the cult-like elevation of “Xi Jinping thought” — these are markers of the path China is traveling. Under Xi, China has become more autocratic, anti-liberal, anti-democratic and internationally aggressive. Glimmerings of openness, reform, the rule of law and civil society outside the reach of the communist state have essentially disappeared. 


Third, the US is not capable of balancing against China’s illiberal hegemonic ambitions on its own. It will need to work with a coalition of like-minded states and associated partners to create alignments that strengthen the underpinnings of the liberal international order. In his recent UN General Assembly speech, Biden mentioned “allies” eight times and “partners” 16 times. After all, the China challenge is not just aimed at America’s global position. It is a challenge to the wider world of liberal democracies and their longstanding military, economic and ideological dominance in the global system. By working together, liberal democracies can exploit their power to shape global rules and institutions. This strategy of fostering co-operation among the democracies is not a project to build a unified Cold War-era “free world” bloc — this is not possible or even desirable. The goal is to build a wide variety of ad hoc groupings to aggregate military, economic and diplomatic capabilities in various zones of competition. Within East Asia, as Kurt Campbell and Rush Doshi have argued, the “purpose of these different coalitions — and this broad strategy — is to create balance in some cases, bolster consensus on important facets of the regional order in others, and send a message that there are risks to China’s present course.”3


Fourth, the most important step in countering Chinese ambitions is to make liberal democracy work at home. Demonstrating that liberal societies can function effectively and solve problems — this is the goal upon which everything else depends. American internationalism is only sustainable if it advances the life opportunities of the middle class. This means a New Deal-type effort to renew and rebuild American society and institutions, investing in a modernized economy, infrastructure, research and technology and clean energy. The competition between China and the US is really a competition over “modernity projects,” alternative models and ideologies of global development and socioeconomic advancement. America succeeded as a global power in earlier eras because its capitalist democratic model seemed to outperform its rivals. We are entering an era where this competition will again play out.


The ambitious proposals of the Biden administration — with massive funding plans for infrastructure, R&D, education and the social safety net — are driven by this deep worry about the future of liberal democracy in the US and abroad. In this sense, Biden’s grand strategy is an echo of Franklin Roosevelt’s New Deal-era agenda for domestic renewal.4 Today, as in the 1930s, the future of liberal open societies is uncertain. The emerging hegemonic rivalry between the US and China is really a competition to see which superpower can lead in solving the great problems of the 21st century. The viability for American and Chinese hegemony depends, in the final analysis, on the solutions and public goods that each generates for the world. It is a contest to see who can offer the world a better hegemonic deal.


Fifth, the struggle between China and the US will also center on competition to shape global rules, regulations, technological platforms, and the values and principles enshrined in global institutions and regimes. Multilateral institutions and regimes are not value-neutral. They can be more or less friendly to liberal democracy and human rights and more or less friendly to authoritarianism and autocracy. Technology platforms and their network externalities also can give one side or the other advantages. This struggle favors first movers and countries that work together with other countries to create “critical mass” coalitions. The US will seek to build coalitions with liberal democracies to strengthen their position in these diverse, technology-driven areas of global rule and regime-making.


Here, the Trans-Pacific Partnership (TPP) trade accord, negotiated by President Barack Obama, and later rejected by Donald Trump, is a model. It restricts state-owned enterprises from subsidized dumping, protects intellectual property rights, outlaws human trafficking and requires the legalization of independent trade unions and collective bargaining. The world trade system will have rules, and the question is whether they will or will not incorporate human rights and liberal democratic protections. This piece of the Biden strategy still hangs in the balance, endangered by anti-TPP factions on both the left and the right.


Finally, the US will need to build working relations with China, even as it competes. There are critical and growing “problems of interdependence” that can only be tackled through superpower co-operation. After all, even during the Cold War, the US and the Soviet Union worked together through the World Health Organization on finding a cure for small pox, and the two countries engaged in sustained efforts at arms control. The US should not need to “buy” co-operation from China on solving problems such as global warming by pulling its punches on issues such as human rights and Taiwan. The two superpowers will need to identify red lines and establish crisis diplomacy mechanisms to keep competition from spiraling out of control. Both sides will have incentives to build restraints and guard rails into their regional and global rivalry.


The emerging “systemic rivalry” between the US and China will shape world politics for decades. But there are restraints that will limit its intensity and dangerous consequences. One is on the Chinese side: the growth of Chinese power and its aggressive “wolf warrior” actions have triggered a regional and global backlash. If China’s foreign policy continues to become more aggressive and belligerent, it will generate even more pushback. In effect, China faces the problem that post-Bismarck Germany faced, and what historians call the problem of “self-encirclement.” Germany under Bismarck undertook elaborate efforts to reassure and diplomatically engage its neighbors. But by the turn of the century, post-Bismarck Germany began to destabilize and threaten Europe through its economic growth and military mobilization. For the same reasons, China should worry about how it exercises power and look for ways to avoid backlash and self-encirclement. At some point, China will want to moderate its ambitions and signal restraint.


For the US, restraint comes from the fact that most of its alliance partners are deeply tied economically to China. Across both Northeast and Southeast Asia, countries are simultaneously dependent on China for trade and investment and the US for security protection and the maintenance of the military balance. Remarkably, 100 countries in the world have twice as much trade with China as they do with the US. The US needs to worry that if it pushes too hard on its allies to confront or contain China, they will jump off the American bandwagon. The US will have incentives to pursue a “not too hot and not too cold” strategy in East Asia.5 It will need to reassure allies that America “is back” and that it intends to remain a provider of regional security and military balance. But it will also need to convey reassurance in the other direction, that it will not push frontline states into a war with China — or even force these states to make existential choices about which side they are on.


By G. John Ikenberry for Global Asia

Why the fallout from the Evergrande...

Why the fallout from the Evergrande crisis is worrying.

The 2020-2022 Chinese property sector crisis is an current financial crisis sparked by the financial difficulties of Evergrande Group and other Chinese property developers, in the wake of new Chinese regulations on these companies' debt limits. Following widespread online sharing of a letter in August 2021, in which Evergrande supposedly warned the Guangdong government that it was at risk of experiencing a cash crunch, shares in the company plunged, impacting global markets and leading to a significant slow-down of foreign investment in China during the period August to October 2021.


After rumours of financial difficulties at Evergrande surfaced in the summer of 2021, the company attempted selling assets to generate money. This strategy failed in October 2021, however. After numerous missed debt payments by Evergrande and a number of downgrades by international ratings agencies, Evergrande finally defaulted on an offshore bond at the beginning of December, after a one-month grace period had elapsed. The ratings agency Fitch then declared the company to be in "restricted default".



Thousands of retail investors, as well as banks, suppliers, and foreign investors are owed money by the company. In September 2021 the developer had 2 trillion RMB (310 billion USD) in liabilities.


Beijing is intervening to prevent a disorderly collapse of the indebted real estate group that could wreak havoc on the world's second biggest economy. Fitch Ratings declared that the embattled property developer has entered "restricted default," reflecting the company's inability to pay overdue interest earlier this week on two dollar bonds. The payments were due a month ago, and grace periods lapsed Monday.


Evergrande's apparent failure to pay that interest has revived fears about the future of the company, which is reeling under more than $300 billion of total liabilities. Evergrande is massive — it has about 200,000 employees, raked in more than $110 billion in sales last year, and owns more than 1,300 developments in more than 280 cities, according to the company.
Analysts have long been concerned that a collapse could trigger wider risks for China's property market, hurting homeowners and the broader financial system. Real estate and related industries account for as much as 30% of GDP.
There's already plenty of evidence that Beijing is taking a leading role in guiding Evergrande through a restructuring of its debt and sprawling business operations. The local government in Guangdong province, where Evergrande is based, said late last week that it would send officials into the firm to oversee risk management, strengthen internal controls and maintain normal operations. Earlier this week, Evergrande announced it would set up a risk management committee, including government representatives, to focus on "mitigating and eliminating" future risks. Among its members are top officials from major state-owned enterprises in Guangdong, as well as an executive from a major bad debt manager owned by the central government.
Chinese authorities have taken other steps as well. The central bank on Monday announced that it would pump $188 billion into the economy, apparently to counter the real estate slump.

The massive restructuring is going to come with some pain.

Beijing has made it clear that its priority is protecting the thousands of Chinese people who have bought unfinished apartments, along with construction workers, suppliers and small investors. It also wants to limit the risk of other real estate firms going under. Investor fears over Evergrande's default have pushed up financing costs for other developers, as yields on offshore Chinese corporate debt surge. At the same time, the government has been trying for more than a year to rein in excessive borrowing by developers — and so won't want to dilute that message. That means the government may be "happy to see the firm itself go under and investors take a haircut," said Louis Kuijs, head of Asia economics at Oxford Economics, in a research note on Friday.
Chinese regulators have blamed Evergrande's crisis on the company's leaders. Its problems were the result of "poor management and blind expansion," the central bank and the country's securities regulator said Monday in public statements, reiterating previous criticisms.

Spillover to growth

It's a "delicate balancing act" to allow Evergrande to fail while minimizing any economic or financial impact, especially given the broader downturn in real estate that has already seen several other developers default, including Kaisa Group this week.
New home prices in China fell in October for the second consecutive month, according to figures from the National Bureau of Statistics. The fall in September was the first in six years on a month-on-month basis. A major slowdown in the property sector, along with other factors, could drag China's GDP growth next year down to 4.3%, according to Ting Lu, Nomura's chief China economist. That's much lower than the firm's estimated growth for 2021 of 7.8%.


China’s New Regulatory Requirements...

China’s New Regulatory Requirements for Imported Food Products

Makers of Irish whiskey, Belgian chocolate and European coffee brands are scrambling to comply with new Chinese food and beverage regulations, with many fearful their goods will be unable to enter the giant market as a Jan 1 deadline looms. On 12 April 2021, the General Administration of Customs of China (“GACC”) issued Order No. 248, which sets out new requirements for the registration of qualified foreign food producers that are allowed to export food products to China, effective from 1 January 2022. This Order represents a significant move toward tightening up the regulation of foreign made food products imported into China.



As the date of coming into force of the Order is fast approaching, one of the key challenges faced by foreign food producers is in ensuring that the registration process can be completed in a timely manner so that they have sufficient time to take transitional actions such as reprinting of product labels with the relevant registration number under the new scheme. But detailed procedures explaining how to get the required registration codes were only issued in October, while a website for companies allowed to self-register went online last month.


China's food imports have surged in recent years amid growing demand from a huge middle class. They were worth US$89 billion in 2019, according to a report by the United States Department of Agriculture, making China the world's sixth largest food importer.


China has tried to implement new rules covering food imports for years, triggering opposition from exporters. The General Administration of Customs of China (GACC), overseeing the latest iteration of the rules, has provided little explanation for why all foods, even those considered low-risk such as wine, flour and olive oil are covered by the requirements. Experts say it is an effort to better oversee the large volumes of food arriving at Chinese ports and place responsibility for food safety with manufacturers rather than the government.


Food, especially chilled and frozen food, has already faced severe delays clearing Customs in China in the last year due to coronavirus testing and disinfection measures


Foods including unroasted coffee beans, cooking oil, milled grains and nuts are among 14 new categories deemed high risk that were required to be registered by the end of October by food authorities of the exporting countries. Facilities making low-risk foods can register themselves on a website that launched in November.


We highlight below a number of areas that may warrant attention and specific consideration as businesses make necessary adjustments to comply with the Order:


1. The term “food products” for the purpose of Order is not clearly defined, although it expressly excludes food additives. Further scope clarification and discussion with GACC may be necessary.


2. An increasingly large share of food imports into China are now made through the cross-border e-commerce (“CBEC”) regime, which waives most licensing and registration requirements for ordinary imports. CBEC’s status as a trade “safe harbour” has already been challenged recently, as China is now subjecting Australia wines imported through CBEC to anti-dumping and countervailing duties resulting from a trade remedies action decided in December 2020.


3. There are concerns that the Order may give rise to non-trade barriers for imported food products. In fact, a number of countries including Australia, Europe, United States, Canada, South Korea and Japan have raised concerns at a WTO SPS Committee meeting in July 2021, stating that the new registration requirements may be overly onerous in expanding the scope of control beyond high-risk food products to cover a greater scope of imported food products.


4. In view of the evolving trade relationships involving China, there are also concerns that the Order may become a tool in the toolbox employed by the Chinese government to address geopolitical or trade tension, as the broad provisions and lack of detailed implementation rules could potential allow room for the exercise of discretion in the practical implementation of the Order. On the other hand, it would be interesting to observe how the Chinese government will balance the overall compliance regime for foreign food producers with American food producers covered under the Phase One Deal between China and the United States, which provides for higher transparency and certainty with respect to non-tariff trade barriers for U.S.-origin food and agriculture products, including the registration of U.S. factories listed by U.S. Food and Drug Administration (FDA) in its list of qualified producers forwarded to GACC.


5. Last but not least, notwithstanding the controversy surrounding the justifiability of the new Order under the multilateral or bilateral trade frameworks, the Chinese government is obviously looking to expand its scope of supervision over food supply chains to include operations outside of China. As a result, insofar as the Chinese market is concerned, the compliance strategy for multinational food suppliers should also address the China law compliance risks and challenges involved in such pre-importation operations.


Source: Reuters.

New Energy Storage 2021-2030

New Energy Storage 2021-2030

China aims to install more than 30 gigawatts (GW) of new energy storage capacity by 2025, and 100 GW finished by 2030 as part of efforts to boost renewable power consumption, with energy storage and electrochemical storage remaining critical for China’s energy transition and ensuring a stable electric grid system.


New energy storage refers to electricity storage processes that use electrochemical, compressed air, flywheel and super capacitor systems but not pumped hydro, which uses water stored behind dams to generate electricity when needed. Among all energy storage technologies, electrochemical storage is popular due to its maturity, simple structure, and deployment convenience and will very likely represent the majority of energy storage in future


China currently has total energy storage capacity of about 35 GW as of 2020, of which 31.79 GW is pumped hydro, and 3.269 GW is electrochemical storage. Lithium battery contributed 2.9GW, over 90% of the electrochemical capacity, according to the China Energy Storage Alliance. China is aiming for renewable power to account for more than 50% of its total electricity generation capacity by 2025, up from about 42% now.



Rising giants in storage technology.

CATL: Contemporary Amperex Technology Ltd. (CATL), the largest lithium-ion battery manufacturer in China, provides batteries for electric vehicles, and more recently, products and solutions for energy storage.


In 2018, CATL participated in a 50 MW/100 MWh storage project in Haixi prefecture, Qinghai province. In the same year, the sales revenue from its storage business increased by almost 12 times over the previous year. In 2019 and 2020, it recorded more than 200% growth year on year, reaching CNY 1.9 billion ($295 million) in 2020.


CATL’s storage solution covers major storage scenarios such as storage for power generation, grid storage, and storage on the consumption side. With high-quality battery cells and a in-house battery management system (BMS), CATL provides power generation customers accurately optimized assistance for grid-friendly power output. On the grid side, CATL’s storage system can help greatly in peak shaving and frequency regulation, to boost capabilities for renewable energy fluctuations. Meanwhile, the storage products have been applied in large-scale industrial, commercial and residential areas, and expanded to emerging scenarios such as base stations, UPS backup power, intelligent charging stations, and off-grid and island/isolated systems.


Sungrow: As one of the more significant solar inverter manufacturers and earliest enterprises involved in energy storage, Sungrow has applied its energy storage systems across China, the United States, Great Britain, Canada, Germany, Japan, Australia, India and more. By the end of June 2020, the company had taken part in more than 1,000 energy storage projects globally.


Based on its inverter technology, Sungrow concentrated on R&D to help customers to better support grids with fast power control/adjustment. To help customers minimize the levelized cost of electricity (LCOE), Sungrow promoted a storage system of 1,500 V and with a DC coupling scheme of PV and storage, which can significantly reduce the overall cost of a system.


According to China Energy Storage Alliance statistics about global energy storage projects, Sungrow is becoming the leading enterprise for providing the most comprehensive energy storage products in the field. The company has ranked first in China for storage installations for the past four consecutive years.


Veteran state-owned equipment manufacturer Shanghai Electric established a 2017 joint venture with Gotion Hi-tech, a lithium-ion battery supplier, for market exploration in energy storage and system solutions. The joint venture has expanded its R&D and sales in lithium battery precursors, cells, and battery management systems, and has delivered customized integration solutions for energy storage systems.


At end of 2018, the joint venture, Shanghai Electric-Gotion, began to build its own lithium battery production base in Nantong, Jiangsu province, for the future development of storage. Following 10 months of construction and equipment adjustments, the new facility started production of its first-stage project, with an annual capacity of 5 GWh.


At the 2021 SNEC expo in Shanghai, the company launched its latest storage solution. And its BMS for electrochemical energy storage won the Megawatt Jadeite Award for its innovative design.


Similar to Sungrow, Huawei commenced its expansion into storage by building on its significant inverter product expertise. However, the difference is that Huawei sees the move within a much bigger picture for the future of energy.


From Huawei’s string inverters, the company saw the possibility for its products to build up a network of solar PV, wind power, and smart energy grids. Based on this network, the future energy world, in Huawei’s view, will be centered on data and digital technologies.


In the future, the current grid will still provide physical support for electricity power transmission. Power consumers and generators will connect into the grid for power consumption, or contribution, through bidirectional inverters. Meanwhile, the inverter is also connected to a storage system to store surplus electricity or supply power to the grid based on price levels and grid demand.


The overall ambition is that these nodes are all connected via a cloud network. It’s possible that millions of interconnected nodes could then provide functionality and data. Huawei is aiming to become a platform that can provide all the necessary technologies, hardware, software, solution, and services. Storage system solutions are a starting point for Huawei in this wide-scale effort to reimagine energy infrastructure.


In summery, battery storage investment remains critica and long-term perspective of energy storage investment remains buoyant. The industry remains one of the most critical parts of China’s carbon neutrality plan.

EV upstart Xpeng is expanding beyond...

EV upstart Xpeng is expanding beyond China

Like Nio, Chinese electric car maker Xpeng has kickstarted its international expansion. But unlike its rival, which put on a series of splashy campaigns in Norway, Xpeng launched quietly in the Scandinavian country last month.


In Norway, Xpeng has begun shipping its G3 SUVs and P7 sedans. The Chinese EV startup aims to enter more European markets in 2022, a company spokesperson told TechCrunch.



Xpeng has stayed low-key with its overseas expansion probably because it was waiting to launch its first “international” model, the G9 SUV that came to light today.


“G9 is our first model to be conceived and developed from the ground up for both the international and Chinese markets, bringing our most sophisticated designs to our customers worldwide,” the firm’s co-founder and president Henry Xia said at an auto exhibition on Friday.


The SUV is Xpeng’s fourth production model and will be the first to possess the carmaker’s latest advanced driver assistance system. The ADAS, called Xpilot 4.0, is built for urban driving, as Xpeng explained at its Tech Day last month. Baking Xpilot 4.0 into a passenger car is ambitious, as the version aims to assist anything from “vehicle start-up to parking,” a big step closer to fully autonomous driving.


Xpilot 4.0’s computing power comes from two Nvidia Orin-X system-on-the-chip units. Its hardware includes a mix of cameras, lidar, millimeter-wave radar and a 3D visual perception network.


In other words, G9 will be layered with sensors. But Xpeng tries to make them inconspicuous. Its dual-lidar units, for example, have been integrated into the headlights. Lidar had traditionally been too expensive for mass-produced cars, but Xpeng and other industry players are working to make the sensing tech affordable.


G9 is not launching in China until the third quarter of 2022, according to a person familiar with the matter, so European customers won’t likely get to try the SUV until 2023.


In the meantime, Xpeng has much work to do before its highly autonomous passenger cars are ready to ship internationally. It will need to set up charging networks in its target markets, a process that is prone to COVID disruptions. Xpilot also relies on high-definition mapping, so the Chinese firm will probably need to team up with local navigation providers.


Xpeng may also be questioned by local governments regarding the safety of its smart cars. Governments around the world vary in their attitude toward vehicle autonomy, and episodes of collisions involving Tesla’s ADAS have only increased their skepticism about the tech’s readiness.


Xpeng has done some preparation in this regard. For instance, it will be testing drivers and giving them a safety score before letting them activate Xpilot. Its vehicles’ built-in monitoring system will also keep vetting drivers and may revoke Xpilot access if it determines a driver is acting irresponsibly.



Global expansion

[Update on Nov 24] During the firm’s earnings call on Nov 23, founder and CEO He Xiaopeng declared that Xpeng’s target between 2020 to 2022 is to “lay a good foundation” for “software and hardware R&D development, our safety, and data protection, and also our team and organization structure revamp.” Sales, on the other hand, “is not our priority in the international market.”


Norway is just the first step, and it already is eyeing Sweden, Denmark, and the Netherlands. It will no doubt be interesting to see how Xpeng structures its operations and supply chains as it starts shipping at a greater scale globally.


Other specs

The G9 is compatible with Xpeng’s “superchargers”, 800V high-voltage mass-production SiC (silicon carbide) that’s able to charge a car for up to 200 km of range within five minutes.


The SUV comes with a “fault detection” system that can identify the fault location after a breakdown. The system will then display the service center with available inventory as well as estimated repair time and cost.


Lastly, the G9 uses the Gigabit Ethernet communications architecture, which “improves communications and support” for higher-level autonomous driving, smart cockpits and OTA upgrades.


Source: TechCrunch

JD Health, Digitalizing health care...

JD Health, Digitalizing health care in China is perhaps known best as the biggest online retailer in China, with an extensive logistics network that can reach all corners of China. But the tech giant is much more than that. The JD ecosystem contains JD Logistics, JD Technology (formerly JD Digits) and JD Health. The latter is now the largest retail pharmacy in China, sitting on more than 15% of the total market share and growing on average four times as fast as its competitors. JD Health provide round retail pharmacy services and round the clock health care services via in-house doctors and external partners.



Pharmacy retail on speed

Imagine that you can get your medicine delivered in 30 minutes. That is the reality and the norm in China´s largest cities now. Only a few years ago, this was not possible. JD Health officially sold its first pharmaceutical product online in 2013, and since then the business have taken off. With more than 14 drug warehouses and over 300 other warehouses nationwide, JD Health can deliver medicine from over the counter to prescription drugs fast and easy for its users. They launched a “Family Medicine Kit” service which provides families a one-stop health care management service platform offering drug recommendations, health knowledge sharing and pharmaceutical after-sales services. It is linked with JD´s insurance business team and JD Logistics and offers replacement services for expired drugs.

But JD Health also cover B2B, as they aim to build the complete retail ecosystem. For drugstores in China’s rural areas in fourth tier cities, it has long been a struggle to compare medicine prices, incomplete variety of drugs and long procurement times. JD’s marketplace has an extensive range of products, ranging from OTC (over the counter) drugs to medicine for chronic diseases, medical equipment, and nutritional products.




Consultations online

In China, primary care such as family doctors and general practitioners is not commonplace, and people must go to a hospital for serious illnesses or a community clinic for less complicated issues. This creates extremely long lines, waiting times and uncertainty for those who do not live near hospitals. Therefor telemedicine is high on the national agenda, and the central government has over the past many years launched several key policy documents like “Healthy China 2030” outlining the priorities for commercial players to tap into. JD Health was the first company to offer both retail pharmacy and online health care services, and in 2020 JD Health launched a family-doctor service. It is an annual subscription service, that can cover a family unit of up to eight people, who can get quality care, monitor health conditions of family members afar and access online and offline consultations. Online consultations were on the rise before Covid-19, but the pandemic made the number of users explode, and surveys show a significant increase in citizens willing to accept online consultations for basic issues as well as long term health conditions.



An expanding ecosystem

The ambition for JD Health is to build a closed loop ecosystem, making it possible for patients to have easier access to better health care, no matter their geographical location. As the retail pharmacy business is growing and profitable, it is less so in general with online services. However, experts and investors in the area expect to see this become profitable in 5-10 years. The overall strategy of the closed loop system is also to drive traffic from patients on the online pharmacy platform to the health management services, and in turn drive traffic back to the retail pharmacy business. JD Health has a clear advantage in its extensive logistics network and advanced cold chain supply chain capabilities as well as its services in finance and insurance.


Making Sense of China’s Pledge to...

Making Sense of China’s Pledge to Stop Building Coal-Fired Power Plants Abroad

Speaking to the United Nations General Assembly on September 21, Chinese President Xi Jinping made what could become the most significant change to China’s Belt and Road Initiative (BRI) to date, pledging Beijing “will not build new coal-fired power projects abroad.” This announcement, depending on how it is interpreted and implemented, could mark a watershed moment in China’s overseas investment practices. While this is a welcome step, it is far more important for China to begin to phase out coal-fired power domestically.



China has complicated global efforts to reduce greenhouse gas emissions, as it has used BRI to finance and build coal-fired power plants around the world. The ten largest funders of coal-fired power globally are Chinese banks, which have financed nearly seventy percent of the world’s coal power projects over the past five years (to include projects both domestically and internationally). In BRI countries, China has financed nearly $45 billion of coal projects.


China’s investments in fossil fuel projects along the Belt and Road have the potential to lock countries into decades of carbon-intensive growth. Modern coal-fired plants have an operating lifespan of more than thirty-five years, yet environmental groups suggest that coal needs to be entirely phased out by 2040 if the world is to meet the Paris Accords’ emissions reduction goals. Echoing that sentiment, United Nations Secretary-General Antonio Guterres stated last month that “accelerating the global phase out of coal is the single most important step to keep the 1.5-degree goal of the Paris Agreement within reach.”


Responding to international criticism of its BRI practices, China released a “Guidance on Promoting Green Belt and Road” in 2017. That same year, speaking at the Belt and Road Forum, Xi proposed to establish “an international coalition for green development on the Belt and Road” and “provide support to related countries in adapting to climate change.” Two years later, Xi went further, pledging to pursue an “open, green and clean” BRI. To date, such rhetoric has not been matched by the reality on the ground, and investments in fossil fuels have continued.


Recently, there have been some indications that Beijing may be working to change that reality. China is now taking steps to overcome a major flaw in its past approach to “greening” BRI: its reliance on local environmental standards, no matter how low those standards might be. This past July, China’s ministries of commerce and the environment jointly issued Guidelines for Green Development in Foreign Investment and Cooperation that recognize problems with host countries’ environmental rules and suggest that companies “follow international green rules and standards.” Even on a voluntary basis, the push to bypass local standards in favor of more stringent and transparent international ones could be a big step.


There have also been some signs of a shift in Beijing to move away from funding coal-fired power abroad, at least in some places. In February 2021, China informed Bangladesh that it would no longer fund coal-fired power plants in the country. After China made its Bangladesh announcement, however, it signed new deals to build coal-fired power plants in Vietnam and Indonesia.


With a pledge directly from Xi, China might finally be getting serious about sustainability along the Belt and Road. Billions of dollars of “dirty” projects will now hopefully be shelved and then cancelled. One report estimated that Xi’s statement could lead to the cancellation of forty-four coal plants worth a combined $50 billion, which would reduce future carbon dioxide emissions by two hundred million tonnes per year.


Still, Xi’s vague wording can be read in a narrow or expansive way, and how China’s ministries interpret his policy directive will ultimately determine its significance. For instance, Xi pledged not to “build” new coal-fired power plants abroad, but it is unclear whether this also includes financing. In addition, do “new” projects include those where financing has closed but construction has not yet begun? What will happen to the seventeen coal-fired power plants currently in the planning phase? Will China offer green alternatives to those countries that had committed to a Chinese-built coal-fired power plant?


Following Xi’s announcement, Bank of China, the world’s largest supporter of coal-fired power over the past five years, stated that beginning in the fourth quarter of this year it would no longer provide financing for new coal mining and coal-fired power projects abroad, but it would continue to support those projects whose contracts it has already signed. This may indicate that Chinese banks will not walk away from deals where financing has already been committed.


It appears that China’s bureaucracy has yet to work out the specifics of Xi’s pledge. When asked to clarify whether China intended to halt financing new coal-powered plants abroad in addition to stopping building them, the spokesperson for China’s ministry of foreign affairs merely repeated Xi’s statement.


While Xi’s pledge is a step in the right direction, the fact that it does not extend to projects within China’s borders will greatly lessen its impact. China, the world’s largest emitter of greenhouse gases, generates one thousand gigawatts of coal power domestically, accounting for over half of the globe’s total and more than four times that of the second- and third-largest users (India and the United States).


China continues to add coal-fired power plants within its borders, bringing forty-one gigawatts of coal power on line in 2020 alone, which accounted for seventy-five percent of the global total. Even if Xi’s announcement reduces future carbon dioxide emissions by two hundred million tonnes per year, that is only half a percent of annual global emissions. Until China moves away from coal-fired power domestically in addition to fulfilling Xi’s pledge to stop backing coal power abroad, it will be much more difficult to address climate change.


The United States and its partners should urge China to move away from coal power at home and abroad. Public efforts to hold China to account may have played a role in Xi’s pledge, but more needs to be done to encourage China to implement this new commitment in a meaningful way, so that it covers not only the building of coal-fired plants but also the financing of them.


If China fails to curtail building coal-fired power plants, the United States should consider imposing import taxes related to the amount of carbon burned to produce goods so that all imports produced by taking advantage of dirty coal-based power would pay a polluter fee. The United States should also join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) while negotiating to include stricter provisions regulating carbon emissions. Given China’s stated interest in joining the  CPTPP, this presents an opportunity to make strong environmental standards a price of admission for Beijing.


In his speech, Xi also pledged to “step up support for other developing countries in developing green and low-carbon energy.” As one of the world’s largest producers of solar, wind, and hydropower, it will be critical for China to share its green energy technology with its BRI partners by increasing its financing for and construction of renewable energy.


The world is watching. Xi made his commitment on the world’s stage and it is world leaders that need to hold China to it while urging that China also begin to phase out coal power domestically and that this specific pledge be combined with previous commitments to move BRI in a more environmentally sustainable direction.


Source: Council on Foreign Relations. By J.Hillman & D.Sacks

New rules have China private education...

New rules have China private education firms in a fix.

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



1. How did tutoring become so popular?

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



2. What do the regulators say?

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


3. What’s the bigger picture?

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


4. What has the government done?

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

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


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


5. What’s the impact?

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



Source: The Washington Post

Evolving Relationships: China’s Growin...

Evolving Relationships: China’s Growing Push into Central America

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


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



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


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


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


Biden is also on the alert

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


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


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


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



A push into the military sphere?

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


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


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


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



Source:By Luis Guillermo Solis for Americas Quarterly

Didi raises $4 billion in US listing...

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

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

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

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

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

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


DiDi Headquarters in Beijing.

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

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

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


5th July Update:

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


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


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


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


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



China’s cryptocurrency crackdown

China’s cryptocurrency crackdown

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


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


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



Tightening the screws

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


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


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


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


What is the Digital Yuan?

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


The rest of the world’s gain?

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


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


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


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


Or the planet’s loss?

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


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


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



Future Cryptocurrency Regulations

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



China is leapfrogging the world when...

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

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


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


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


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



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


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


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


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


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


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


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


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

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


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


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


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


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


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


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



Source: Nikkei Asia

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