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28 Most Innovative Robotics Startups in Asia

28 Most Innovative Robotics Startups in Asia

Asia is the world’s fastest-growing market for robotics solutions, and for good reason. As the region’s quickly-growing countries industrialize and begin making more goods than ever, robots help them do so at a comparatively lower cost than doing so with human capital. The region has long been seen as an innovator in the consumer robots space as well. China is now arguably the global leader in the industrial robotics space, while Japan has long been the perennial home of consumer-focused robots like the ill-fated Aibo or the popular Pepper.

As the region’s most innovative robotics startups continue developing their products, they’re increasingly looking to expand globally. Startups like Makeblock and Rokid have already signaled their international ambitions, and others are quickly following. Read on to learn more about the region’s most innovative robotics startups, and how they’re making their mark on one of the world’s fastest-growing industries.



1. UBTECH Robotics

UBTECH is already one of the world’s leading robotics startups, but it has plans to grow even faster. The Shenzhen-based robotics company recently announced $820M in Series C funding (led by Tencent’s venture arm), which now values the startup at more than $5B. UBTECH specializes in building humanoid robots and offers both commercial and consumer models.

With the fresh round of funding, UBTECH will continue developing its next generation of robots, which will leverage AI technology and integrate with other home appliances and robots already on the market.


2. Geek+

Chinese robotics startup Geek+ is quickly becoming a major player in the fast-growing industrial robots sector. Its diverse line of logistics-focused robots provides companies with a full suite of automation capabilities, ranging from warehouse automation to automated order fulfillment. The company has raised more than $60M in funding to date and is planning a major international expansion for later this year.

Geek+’s most recent innovation is what it calls the world’s first “interweaving sorting robot”, an automated system that boosts parcel sorting efficiency. This technology is already proving integral to boosting the logistics capabilities at ecommerce powerhouses like Alibaba and Taobao, proof of the growing market at stake here.


3. Robot 3T

China’s robotics market is so large that sometimes it’s easy to forget that startups in other Asian countries are making significant strides in the space too. Enter Robot 3T, a Vietnamese robotics startup that’s building industrial-grade robots for quickly-growing SMEs in the region. While most of its robots are designed for manufacturing facilities, Robot 3T has also created several humanoid robots which it markets to the service industry.

In addition to its line of industrial robots, the Ho Chi Minh-based Robot 3T has also designed a separate set of automated weapon stations designed specifically for military use.


4. Coolso

Coolso is the Taiwanese company behind some of the most innovative gesture-control devices on the market today, with use cases in everything from VR systems to medical rehabilitation. Coolso’s gesture-control products operate based on muscle movement alone, making them far more sensitive than the average AR/VR gesture controller.

Just over a year old, the company’s award-winning products use a patented form of proprietary bio signal technology, making them truly unique in the robotics space. In 2016, the firm won the Grand Prize in the OpenStack Application Hackathon in Taipei.


5. Makeblock

Makeblock is a Shenzhen-based startup that is creating the next generation of educational robots for children around the world. The startup offers a diverse line of robotics products designed to teach children how to code, and it most recently raised $30M in Series B funding from investors like Sequoia Capital late last year to help it reach that goal – valuing at over $200M just five short years into its existence.

In addition to developing the robots themselves, Makeblock has also forged technology partnerships with other tech companies (such as Microsoft) to bring its robots to students in higher-education robotics programs.


6. Youcan Robotics

Youcan Robotics is a startup that’s designing an underwater robot that anyone can use to capture HD video and explore the depths of the world’s oceans. Youcan’s underwater ROV Drone is saltwater-resistant and has a 4K video camera built-in, along with a battery life of up to 5 hours. It’s also able to lock onto and track underwater objects, just like an air-based drone.

The Shanghai-based startup has primarily grown using seed funding so far, and has been conducting crowdfunding rounds on platforms like Indiegogo to fuel its earliest stages of growth.


7. CloudMinds

CloudMinds is a startup that’s developing connected cloud-based systems for robots. With dual headquarters in Beijing and Silicon Valley, CloudMinds wants to build the world’s first cloud computing network designed specifically for intelligent robots. In addition to what it calls “cloud-connected smart machines”, the startup is also building a cloud-based software layer that will allow robots to interface with their “cloud brain” to make decisions effectively.

CloudMinds has also developed a wearable helmet that allows visually impaired people to interface with robots via its cloud-based platform.


8. DJI

Now one of the world’s largest consumer drone makers (with more than 70% of the consumer drone market already secured), DJI is still in hyper growth mode with plans to roll out ever more advanced drones in the coming months. Many of its drones (like the Phantom 4) already have semi-autonomous flying capabilities, and DJI is currently working on several drones that it hopes will be fully autonomous.

In recent months, DJI has been more aggressive about seeking funding, and earlier this year it was reported as seeking $500M in funding to help it grow even further ahead of an anticipated IPO, which would likely be early next year.


9. SG Robotics

South Korea-based SG Robotics is looking to disrupt the world of robotics with its revolutionary self-powered exoskeleton devices. The startup’s robots, which are designed for people with disabilities or paralyzed individuals, give any person extra strength when walking, and also have the ability to carry heavy loads.

The startup recently won 3rd place at the world’s first Cybathlon held in Switzerland, a competition of the world’s most advanced exoskeleton robots.


10. Borns Robotics

Borns Robotics is a medical robotics startup based in Chengdu, a bustling business hub in western China. Its line of robotic surgery tools give doctors the ability to conduct highly complex and risky surgeries with unprecedented precision and accuracy. Earlier this year, the startup announced the raise of $18M in financing in a funding round led by Swiss China Capital.

The funding is expected to fund the startup’s research and development efforts through the completion of its first clinical trials, as well as the wide-scale rollout of BMR5000, its next-generation automated surgery system.



11. Rokid

Rokid is a Hangzhou-based startup that produces a diverse range of smart devices and robots, ranging from AI-powered voice assistants to robotic smart glasses. Earlier this year, the startup raised $100M in Series B extension funding in a round led by Credit Suisse to help it expand in the US, its second largest market after China.

In addition to its technology-focused R&D team, Rokid also boasts a highly-qualified scientific advisory committee to help inform its work. The committee is comprised of dozens of members from a diverse range of industries.


12. Ascent

Tokyo-based Ascent is building the next generation of AI-powered robotic vehicles. Ascent’s research team is intensely focused on developing highly advanced neural models and machine learning algorithms to be the “brains” of its intelligent vehicles, which range from autonomous vehicles being manufactured by major carmakers, to boutique projects.

The Ascent team has raised more than $11M in funding to date, and continues to work with a wide range of technology partners in the automotive industry to develop its technology.


13. Softbank Robotics

Though a subsidiary of Japanese conglomerate Softbank, the team at Softbank Robotics operate as their own startup. The startup is perhaps best known for its humanoid emotion-reading robot, Pepper, which is already in widespread use around the world (primarily in the service industry, for which it was originally designed).

The robotics startup recently announced a landmark partnership with HSBC, which will see it become the first to roll out the robot in HSBC bank branches across the United States.


14. LifeRobotics

Founded in 2007, Tokyo-based LifeRobotics develops industrial robots that help businesses automate manufacturing and warehousing processes. The LifeRobotics team also develops what it calls “cooperative working robots” – automated machines that are able to learn advanced functionality and tasks provided they have a user’s guidance.

LifeRobotics was recently acquired by robotics behemoth Fanuc in a multimillion dollar deal that will allow the startup to continue operating as an independent entity under the Fanuc umbrella.


15. Insight Robotics

Insight Robotics is a Hong Kong-based startup that’s developing robots to improve the obscure (but critical) forestry management industry. Its data collection robots, which are designed to be deployed in heavily forested regions or national parks, give operators the ability to detect potential problems (such as forest fires or tree diseases) more quickly than ever.

The startup has closed more than $12M in funding to date, and earlier this year announced an additional $9M in funding in a new investment round led by Linear Capital and Beyond Ventures.


16. AI Nemo

The China-based team at AI Nemo has developed one of the world’s first home companion robots, the Nemo. The startup, which has raised more than $10M in funding to date, is presently building the next generation of its robot, which integrates with a number of consumer appliances and can also make video calls. The robot is marketed as a way to improve communication between family members, and can be remotely controlled by a proprietary mobile app as well.


17. AUBO

Beijing-based AUBO is a rising star in the growing cobots (collaborative robots) industry. Its robotics products are targeted towards warehousing and manufacturing facilities, and are designed to work in conjunction with humans to perform complex manufacturing tasks. The company’s flagship robot arm sells for around $18K, and has found a loyal customer base in the automated manufacturing sector.

The startup has dual research and development centers in Beijing and the United States, and has established technology partnerships with manufacturing companies in both countries.


18. PLEN Robotics

PLEN Robotics is an Osaka-based startup that’s building the Cube, what it bills as a “portable personal assistant robot”. The Cube is a robot designed for the consumer space that’s equipped with a smart camera, motion tracking and facial recognition technology, as well as speech recognition capabilities. The startup recently announced a partnership with Softbank which will see it work with the technology giant to develop a smart speaker.


19. Slamtec

Shanghainese startup Slamtec builds localization and navigation services for smart robots. Using cutting-edge AI technology, the startup is developing a “robot cerebellum” that will have the ability to autonomously make agile movements, as well as have increased depth perception. Last year, Slamtec raised $22M in Series C funding to develop the next generation of automatic positioning algorithms for its robots.


20. ZongMu

ZongMu is building software that helps autonomous vehicles “see” while on the road. Last year, the startup secured $14M in Series B funding to help it improve its self-driving technology, which is already being used by some of China’s largest automakers (like Geely and Yema Auto). This month, ZongMu announced a strategic partnership with automotive electronics manufacturer Visteon to develop the next generation of automated parking technology.


21. Aether Biomedical

Aether is a medical robotics startup that’s based in New Delhi. The team at Aether is building next-generation robotics solutions for the future of healthcare, including its flagship product Zeus – a bionic limb for amputees. The startup partners with doctors and medical researchers around the world to develop additional technology solutions through its “medical device innovation platform”.


22. Mitra

Bangalore-based Mitra has quickly risen to become the most advanced humanoid robot manufacturer in India’s startup ecosystem. Its 5-foot-tall Mitra robot was first showing off at India’s 2017 Global Entrepreneurship Summit, where it greeted Indian Prime Minister Narendra Modi. The robot is designed for the service industry, and can interact with customers as well as provide autonomous navigation.


23. Robostar

Robostar is one of South Korea’s foremost industrial robots companies, and it has created a diverse range of robots that are designed for wide-scale manufacturing. Robostar recently announced a $48M investment from LG, which will see the electronics giant take a significant stake in the startup and collaborate with it on future products.


24. Rotimatic

Singaporean startup Rotimatic distinguishes itself from the competition by being the world’s only fully automated kitchen robot that makes roti, a popular bread found throughout India and Southeast Asia (that also happens to be incredibly labor-intensive to cook). The startup recently raised $30M in Series C funding in a new investment round led by private equity fund Credence.


25. SenseTime

Rooted in a research team investigating deep learning at the Chinese University of Hong Kong, SenseTime earned early renown by occasionally beating Google and Facebook in image-recognition competitions. Rapidly expanding on the back of massive rounds of VC, it currently supplies face-recognition tech that the Chinese government plans to use to track citizens through its network of 170 million CCTV cameras, and with which state-owned telecoms behemoth China Mobile will monitor its 300 million users. Banks, prisons, airports, police and retailers are already on the SenseTime client list; it may add autonomous driving and augmented reality to that roster soon.

26. Cambricon

Only two years old, this state-backed semiconductor and AI chip specialist has big ambitions. “We hope to take 30% market share of China’s high-performance smart chip market and to have 1 billion smart devices worldwide integrating our processors in three years’ time,” Chen Tianshi, one of its founding brothers, said recently. Optimized for deep learning capabilities, Cambricon chips are currently being slotted into Huawei smartphone products. If the company realizes its ambitions, it will help China achieve self-sufficiency in digital components and reduce dependency on imports.

28. Cloudwalk

Another facial-recognition giant, Guangzhou-based Cloudwalk started in business supplying technology to border-control agents. Now 24 Chinese provinces employ its public-security solutions – facial recognition terminals, scanning during door entry – and it has had particular success supplying software to the banking industry. It recently signed a deal to export its capabilities to Zimbabwe, in order to build a national facial-recognition database; the first Chinese AI initiative in Africa. Pushing into new areas, like 3D face-scanning, should ensure it continues to fight its corner of the AI playing field.


China How To: Design a website for China

China How To: Design a website for China

Given the capital and time-intensive process of establishing a physical office in China, online channels are a popular option for international retailers and especially SME’s to reach Chinese     consumers. E-commerce platforms such as Tmall are a popular entry point for international consumer brands to test market demand, develop brand penetration and outsource operations, including online payment and customer delivery. Listing on a Chinese e-commerce platform offers   enormous market potential for overseas brands. Meanwhile, given that low barriers to entry (in comparison to offline retail) and growing competition, brand trust  and reputation are  becoming  increasingly more important than country of origin in determining long-term success. Chinese consumers pay a considerable amount of attention to product quality, safety and brand reputation.  As a result, new customers typically crosscheck and browse multiple touch points before buying a   product or service. Popular touch points include online forums, social media channels, online   question and answer platforms, family and friends, and of course the brands’ official website.



Having a company website optimized for China is a vital touch point to build trust and improve   online and offline conversions. As Chinese customers are thousands of miles away from your production facilities or offices, having a China-friendly website is one way to validate that your business is legitimate and to communicate your brands credentials. Remember it’s not uncommon for potential clients to want to visit your offices, simply to check you really exist and have a business licence.



What is a China-ready website?


A China-ready website is a dedicated online portal with localized content for Chinese consumers to access information about your business or brand. Your China website should ideally be a stand-alone   website with a China (.cn) domain name, integrated with  at least one Chinese social media account   and hosted on a China-based hosting server (or Hong Kong server is you don’t have a legal presence in China) for optimal performance. At China Web Designers, we can arrange the optimal set up to get your business or brand in front of your potential clients.


 Can I just add a few pages translated into Chinese to my current website?


This is an alternative option and works as a quick fix from a content perspective.  However you will run into a series of compatibility and design issues. Firstly, many foreign website use technology that is simply incompatible with China, namely the Google API.  Secondly, websites which are integrated with Facebook, Instagram, YouTube, Google Fonts etc. will experience delayed load speed as these elements are inaccessible in China. This can have an adverse effect on the user experience and aesthetics of your website. Thirdly, your website load speed in China will be delayed if your website is hosted outside of China, and especially if hosted outside of Asia. Finally, website design fundamentals differ widely between western and Chinese websites: clean minimalistic design, is not the norm, Chinese users expect very detailed orientated websites, focusing on content. Take a look at what we did for London Designer Outlets as an example of this:  



Website platforms.


Popular international website building platforms such as Wordpress, Drupal, WooCommerce, are all accessible in China. However if you want to use a website builder such as WIX with integrated web hosting, you will run into trouble. These days, Wordpress and WooCommerce are the two best   international options to create an expandable China business or e-commerce site. Strikingly has a   strong emphasis on mobile design and offers the option of integrated China hosting. Wordpress can also be used as a website builder but hosted on a third-party web hosting platform in China.   Magento, Strikingly and Wordpress are our suggested platforms for building an e-commerce integrated website. However, for all of these you will need to ensure that you disable the Google API. English Heritage and SAM Labs China are a couple of examples of optimised Wordpress sites for China.




Website design


Website design priorities are somewhat different when catering to a Chinese audience. Chinese   corporate websites tend to veer from minimalistic website design found in the West, and instead  focus on content-heavy designs, as well as vibrant colours with traditional significance and Flash  promotional banners. We at China Web Designers, generally try to find a middle ground, focusing on content but maintaining Western design principles. James Cropper Paper is a site we particularly like for this, also Brand Energies.



Chinese consumers tend to trust corporate websites based on the depth and authority of the content provided rather than on navigational and aesthetic design. As an international business your main focus should be building a website that    communicates your brand credentials and values to potential customers.  Important features to highlight via text, images and video include your business registration, compliance certificates, awards, government relationships, customer testimonies, strategic partners and memberships of industry-based organizations.



When translating content into Chinese characters it is important that you use a quality translation service to translate and localize your content. Machine translations are simply not good enough yet to provide fluid and colloquial/formal texts. 


Localising your website design and content for a Chinese audience may seem daunting and time-consuming, but it all adds up to a competitive edge over rival brands in China. As mentioned,     Chinese consumers are extremely street-smart  and detail orientated when it comes to brand and company research, skipping corners on your online presence can cost your company potential   business. In order to build trust and generate enquiries from your website, it pays to employ a professional service provider to assist with design, content editing, translations, social media integration and SEO optimization.




By Saurav Bhattacharyya

Managing Director, China Web Designers.

All the best China Podcasts for 2022

All the best China Podcasts for 2022

Simply a list of the best China related podcast's currently running: topics include: tech, internal politics, engagements with other Asian neighbors, foreign policy in general, the Belt and Road Initiative, culture, economics, current trending affairs on social media, society, history and food:


A weekly conversation exploring China's economy and tech scene. Guests include a wide range of
policy analysts, business professionals, journalists, and academics.
Host: Jordan Schneider

The Sinica Podcast
Founded in 2010, this podcats offers a weekly discussion of current affairs in China.
Hosts: Kaiser Kuo and Jeremy Goldkorn

China in the Americas
A podcast exploring the growing economic, political and social relationships between China and
the Americas
Host: Rasheed Griffith

ChinaPower Podcast
This podcast dissects critical issues underpinning China’s emergence as a global power. By
bringing together the leading experts on China and international politics, the series offers our
listeners critical insights into the challenges and opportunities presented by China’s rise.
Host: Bonnie S. Glaser

South China Morning Post – Inside China Podcast
For those who wish to learn more about China first-hand from reporters on the ground, SCMP’s
"Inside China" takes deep-dives into a specific topics, mixing independent reporting and exclusive
interviews to bring you unique insights into an emerging potential superpower.
Host: Mimi Lau and other SCMP reporters
Link :

China in Africa Podcast
Twice-weekly discussion about China's engagement across Africa and the Global South.
Hosts: Eric Olander and Cobus van Staden

The History of China
Over two hundred episodes of curated topics from China's antiquity to modern times.
Host: Laszlo Montgomery

Techbuzz China
Tech Buzz China by Pandaily is a biweekly technology podcast that is all about China's
innovations. The hosts share and analyze the most important tech news from China every other
Hosts: Rui Ma and Ying Lu


Asia Matters
Asia Matters Podcast, goes beyond the headlines with experts from around the globe to help
explain what's shaping the region.
It does not only focus on China but it does talk about China quite often
Host: Bill Hayton

China Global
Another excellent podcast hosted by Bonnie Glaser which features a range of perspectives along
with insightful analysis on China and its influence around the world.
Host: Bonnie S. Glaser

China Tech Investor
The China Tech Investor podcast is a weekly show where the hosts look at their watchlist and talk
about what's happening with listed Chinese tech companies.
Hosts: Elliott Zaagman and James Hull

China in the World
The Carnegie-Tsinghua China in the World podcast is a series of conversations between Director
Paul Haenle and Chinese and international experts on China’s foreign policy, China’s international
role, and China’s relations with the world.
Hosts: Various

Pekinology – On Chinese Politics
True to the name Pekingology, or the study of the political behavior of the People’s Republic of
China, this podcast aims to unpack the behavior of the Chinese Communist Party and implications
these actions have within China and for U.S.-China relations.
Host: Jude Blanchette

The China Jedi Podcast
An inside look into Chinese life as foreigners living, working, crying and laughing in China. A light-
hearted insight into all things good and bad with a little bit of extra wit added on top. With regular
special guests from across China and creative educational games thrown in for fun, this podcast is
a must for those interested in learning more about the middle kingdom or just wanting a good
Host: Chris J. Bradshaw

The Little Red Podcast
Interviews and chats combining journalistic sensibilities with academic rigour; it discusses the
pressing issues of Xi Jinping’s China and how their impact is felt far beyond the Beijing beltway.
From East Timor to Eastern Qinghai, it take listeners to forgotten places that are missed in
mainstream narratives of modern China.
Host: Graeme Smith and Louisa Lim


The China Smart State Podcast
A monthly show discussing the digital transformation of China. How does this transformation affect
the politics, economy and society of this rapidly emerging cyber power?
Host: Rogier Creemers, Adam Knight, Linda van der Horst and Straton Papagianneas

Chinese Whispers
A fortnightly podcast, hosted by Cindy Yu, offering an in-depth look into Chinese politics, society,
history and much more.
Host: Cindy Yu

China Explained
This channel will show you that because of China’s continued success in industrial upgrading,
technological innovation and realizing its huge potential, it is an unstoppable process. The
inevitable rise of China may feel intimidating and some simply reject it. Don’t be. More importantly,
this channel will answer the million-dollar question: how can you, as an individual or a small
business owner, also profit from the rise of China ?
Host: Mimi

Mosaic of China Podcast
An English-language podcast showcasing people who are making their mark in China
Host: Oscar Fuchs

Of Course China! Podcast
A weekly podcast hosted by two long-time China expats with a combined 37 years experience of
living and running businesses in the middle kingdom. Talks include life in China as they know it,
interviews of interesting characters about their China jobs and opportunities, and an exploration of
what it means to live in China in 2020 and beyond!
Host: Ziv Glikman & Fernando Munoz

South China Morning Post - China Geopolitics
The South China Morning Post political economy team analyses the latest economic data from
China, delve deep into the ongoing US-China trade and tech war, and examine China's changing
economic relationship with Europe, Africa and the Indo-Pacific. Hear deep background on Beijing's
political machinations and how they affect policy and its global diplomacy.
Host: Finbarr Birmingham and other SCMP reporters

The Wo Men Podcast
Bi-weekly discussion on a variety of topics by hosts that share a diversity of voices from on the
ground inside contemporary China.
Host : Zhang Yajun and Zhang Jingjing
Link :


China Business Cast
China Business Cast is a podcast featuring experienced entrepreneurs and business people
making things happen in China. If you want to learn from on the ground accounts of how business
actually gets done in China, this is the program for you.
Host : Jons Slemmer, Simon de Raadt and others
Link :

Caixin Global Podcast - China Business Insider
Want to keep up with all the news from China’s business scene but short on time? Then tune into
the Caixin China Biz Roundup! Each weekday, they break down the biggest developments in the
Asian giant’s economy, financial world and tech sphere — all in around 15 minutes!
The Caixin-Sinica Business Brief offers a weekly roundup of the top news bulletins from the
world’s second-largest economy and features interviews with Caixin journalists.


Development of China’s logistics indus...

Development of China’s logistics industry

The COVID-19 pandemic has only accelerated development of China’s logistics industry, which was already moving at breakneck speed. For decades, the country has been a crucial node in the supply chain of companies around the globe. And while many customers in other countries only awakened to the convenience of online shopping and delivery during the pandemic, millions of drivers have long been zipping through Chinese cities to deliver parcels of all sizes.


How has the Chinese logistics market fared during the pandemic, and what’s the outlook for 2022?

In this article, we present five insights global investors, logistics companies, and shippers should be aware of. Generally speaking, surging demand for logistics services coupled with supply chokeholds resulting from pandemic lockdowns and travel restrictions have translated into a profitable year for many logistics players. The COVID-19 pandemic also sped up the industry’s sophistication. While we see greater consolidation and integration in some subsectors such as third-party logistics and express-delivery carriers, we’re also expecting growth in other areas such as warehouse automation and air cargo.


1. Most logistics players are looking forward to another bumper year in 2022

If you’re a logistics provider, chances are 2021 was a profitable year. While the initial shock of the pandemic depressed freight volume growth in early 2020, the world recovered its appetite for more physical goods shortly thereafter. Increased savings from staying home more and government financial aid boosted people’s purchasing power for tangible products such as furniture—partly because they couldn’t spend this money on services like eating out, traveling, or getting their nails done. So as more people bought more products (many of them made in China) to upgrade their homes and convert their living spaces to offices, shipping volumes soared across all modes last year, including road freight, container, and air freight (Exhibit 1). In China, freight volumes have risen by between 1 and 14 percent since 2019 and were higher in some key trade lanes such as between the country and North America.



Even though demand soared through most of 2021, the supply of effective freight capacity struggled to keep up. Ports globally, and especially those on the US West Coast, became congested due to elevated import volumes. This, coupled with pandemic-imposed port lockdowns and the Suez Canal blockage, took capacity out of the market and sent shipping costs skyrocketing to unprecedented levels. Furthermore, fewer passenger flights coming in and out of China meant a reduction of belly cargo-carrying capacity. Between November 2020 and 2021, air freight rates between Hong Kong and Europe rose by 47 percent, from $5.40 to $7.90 per kilogram. All this translated to better profit margins for freight forwarders and increased returns for their shareholders (Exhibit 2). The average earnings (before taxes and interest) rose by 36 percent for forwarders, and even more so for carriers that owned ships and aircraft.



The same dynamics will probably continue into 2022, as supply chain challenges are unlikely to be resolved immediately. The emergence of Omicron and other potential coronavirus variants, along with China’s continuing zero-case policy, means that Chinese borders will remain largely closed. Container supply chain congestion and limited cargo-belly capacity should probably allow logistics suppliers to keep their high profit margins for 2022, which spells good news for their investors and shareholders.


2. The flurry of mergers among third-party logistics players will probably continue

Freight forwarders and third-party logistics (3PL) providers have been eagerly searching for ways to quench the seemingly insatiable thirst for their services. Many companies have sought to lock in longer-term capacity, expand their digital capabilities, and move toward omnichannel integration. The value of M&A activity, IPOs, and start-up deals in China shot up by more than $7 billion in 2021 compared with the previous year. The lines between freight forwarders and contract logistics providers are being increasingly blurred.


One of the most significant deals was the birth of a new Chinese logistics juggernaut in December 2021. The China Logistics Group, with a registered capital (the amount of capital that a company is allowed to get from selling shares) of $4.7 billion, was formed by a merger of five state-owned companies and is the country’s largest logistics player by revenue. By bringing together the former China Railway Materials Group, China National Materials Storage and Transportation, CTS International Logistics, China Logistics, and China National Packaging, the newly formed China Logistics Group directly owns 120 railway lines, 42 warehouses, and 4.95 million square meters of other storage facilities. It also has a fleet of three million vehicles across the world. 


Other examples of the broader trend of logistics players expanding their capacity include Cainiao buying a 15 percent stake in Air China Cargo last year and entering into long-term partnerships with LATAM Airlines Group and Atlas Air. Likewise, the express firm SF Holding bought a majority stake in Kerry Logistics, a $2.3 billion deal that would allow SF Holding to use Kerry Logistics as a platform for international business. SF Holding also added seven planes in 2021, bringing its total fleet size to 68 aircraft. 


Global companies have been looking to make bigger plays in the region too. The Danish shipping company Maersk bought LF Logistics, a Hong Kong-based contract logistics company, last December in a bid to shore up its omnichannel fulfillment capabilities in the Asia–Pacific region. 3 Earlier in the year, Kuehne+Nagel acquired Apex, a leading air freight forwarder in Asia, to offer “customers a compelling proposition in the competitive Asian logistics industry, especially in e-commerce fulfillment, hi-tech and e-mobility.” 


3. The express-delivery sector is beset by intense price competition

Once the bright spark in the Chinese logistics landscape, the express market has not fared so well during the pandemic. While the express market has continued its meteoric growth, expanding by 30 percent each year since the pandemic started, intense price competition has caused the average revenue per item delivered via express channels to drop by between 12 and 27 percent last year. It now costs $1.40 on average to send a parcel, which is much less than in the United States, where the average delivery cost is $9.


Many express players saw their margins shrivel to less than 5 percent (Exhibit 3), with some falling into unprofitability. While regulators have stepped in and introduced price floors as a temporary respite, we expect greater consolidation in the near future. In a market landscape where many logistics players are embracing omnichannel integration, not having direct control over assets can prove disadvantageous. A Chinese logistics solutions provider that was built on an asset-light business model struggled to effectively control operations at its suppliers’ outlets. Operational problems ensued and the company started to lose market share in the express-delivery sector. By the end of the year, the company announced it was selling its express-delivery business to a global company looking to make inroads in China.



Right now, the top eight express-delivery providers account for around 94 percent of the market share (Exhibit 4). ZTO Express has managed to hold on to its market lead by offering the lowest parcel unit prices and by having a network that reaches more than 98 percent of the country’s districts and counties.



The fierce price competition will probably continue to weaken the smaller players. We therefore see continued consolidation, with smaller logistics players being acquired by larger groups, such as domestic logistics players, international players, or e-commerce players looking to control their supply chains. If the international express market is any indication, greater consolidation could be more profitable for the players that remain. The top three companies in the international express-delivery market control around 90 percent of the market share and enjoy profit margins more than three times of those achieved by China’s domestic express providers.


4. Air-cargo demand is taking off, thanks to mass customization

Shifts in e-commerce patterns are fueling demand for air freight, an often underappreciated value driver in the logistics sector. Traditionally, e-commerce supply chains relied mostly on maritime shipping to transport products in bulk to destination countries in advance, before local express providers take over the final leg of the delivery to the end customer. This model is already—and will continue—shifting.


This shift is due to digital advances in e-commerce, which has empowered mass customization, especially in fast fashion. For example, Shein, one of China’s largest fast-fashion e-commerce retailers, uses data analytics to inform the production of a huge range of trendy apparel (150,000 separate items in 2020) at extremely low price points and small volumes. These items are then targeted and marketed to specific demographics around the world via social media. When customers buy a product, they get a sense that their purchase is personalized according to their specific preferences. While its manufacturing base is in China, Shein’s core markets are the United States, Europe, Australia, and the Middle East.


It’s more efficient to deliver such orders from the product supplier to the customer in what is termed the “direct line” model. This refers to transporting products in bulk via air freight to local postal companies in the final destination, empowering swift last-mile deliveries to the final customers. Before 2016, postal companies fulfilled the end-to-end deliveries of small parcels, which accounted for about 40 percent of China’s total outbound direct-to-customer market. But companies are increasingly turning to the direct-line delivery model. By being able to offer much lower prices than traditional express companies, e-commerce behemoths like Wish, Lazada, Shoppe, and Shein in China have catalyzed the prominence of the direct-line model.


Many Chinese companies including JD Logistics, Cainiao, SF Express, and YTO Express are actively growing their freighter fleets. This is a sign that the direct-line model is gradually replacing traditional postal and express delivery (Exhibit 5). Between 2016 and 2020, the demand for direct-line delivery has risen by 84 percent.



Tariffs in the European Union and the United Kingdom may dampen growth of the direct-line market especially for small-ticket items. Duties are now applied across all imports, and there is no longer a de minimis threshold. However, the United States—which is the largest recipient of China’s outbound e-commerce parcels—continues to have a high de minimis with no tariffs for goods below $800, and measures have been introduced to facilitate customs clearance. The new Universal Postal Union tariffs will cause many of China’s bilateral postal rates to rise, in turn hastening the shift from postal to the direct-line model. Furthermore, mass customization supports the supply chain logic of minimizing inventories.


As the direct-line model becomes more ubiquitous in e-commerce, we expect it to drive the growth of air-cargo demand in China and account for 33 percent of total outbound air cargo by 2025. Additionally, air cargo is also projected to increase from 1.3 million tons in 2020 to nearly 2.0 million tons by the middle of the decade. To cope with the startling surge in direct-line volumes, 15 additional freighter aircraft may need to be deployed from China every week.


5. Warehouse and omnichannel are the next frontiers of automation technology

Despite an abundance of labor at relatively low costs, China has one of the highest degrees of logistics automation, especially in e-commerce. But there is much potential that is still untapped in omnichannel integration and warehouse technology.


New consumption trends and expectations are raising new logistical challenges, such as the effective coordination and management of omnichannel fulfillment. Not only are logistics providers struggling to handle a vast range of SKUs, as shippers cater to the increasing diversity of customer preferences, they are also finding themselves with excessive inventory resulting from information silos between brands and channels. As online shopping normalizes, customers not only expect greater visibility but also the right to regret and return the products they buy, which means logistics providers have to shore up their reverse logistics capabilities.


As more retailers pursue the direct-line delivery model for international fulfillment, warehouse operations need updating. Digitizing the end-to-end delivery chain can also help ameliorate the financial reality of rising labor costs in China. Logistics companies operating in large cities face the additional challenge of limited real estate for large warehouses, which is controlled by local government. Investing in warehouse automation and other digitalization technologies could help them optimize the use of space and reduce unnecessary rental costs.


Two types of players can make the most impact in this space. The first are ecosystem platforms such as the Cainiao (which was spun off from Alibaba) and JD Logistics (which was launched by the Chinese e-tailer The second category includes pure logistics businesses such as Eternal Asia and Feima.


These players may invest in comprehensive transportation and warehouse management systems that leverage advanced-analytics capabilities to route orders intelligently and optimally. They could also enhance data collection and monitoring systems to provide more granular tracking of the stock levels across various channels in real time. Another area for development: the capability to process scattered orders, which are often small, more rapidly.


JD Logistics has invested heavily in warehouse automation. The company opened up an intelligent-logistics center in 2019 in China’s Guangdong Province that boasts a single-day processing capacity of 1.6 million orders, powered by a three-dimensional automation system that can organize more than 20 million units of medium-size goods at the same time. 


How should global investors, shippers, and logistics providers respond to these trends?

An awareness of the trends in the Chinese logistics landscape could help global investors, logistics providers, and shippers make more informed decisions regarding which areas to invest in, which Chinese market subsectors to enter, or how to plan for their supply chain.


Shippers. With China’s borders remaining highly constrained and belly capacity not returning in sufficient enough levels, it’ll be another tight year across supply chains. The risks of recurring COVID-19 outbreaks continue to threaten the supply of logistics services in air cargo, maritime shipping, and land-based deliveries. For shippers, diversifying suppliers and ports of export is a prudent solution. Some large shippers may consider expanding their ownership of logistics assets. We expect major e-commerce companies to buy air capacity and commit to long-term dedicated agreements for trucking.


Logistics providers. This will probably be another strong financial year, but one with significant operational challenges. Winners may be able to distinguish themselves by meeting their customers’ needs flexibly in times of constrained supply chains. Digitization and automation are critical, and logistics providers should double down their investments in these areas. We expect to see a rise in R&D investment into direct platforms with suppliers and with customers. While larger players may be able to manage this, smaller logistics players are at risk of being squeezed out. They might have to be extra entrepreneurial to seek out the financial backing they need (or the right kind of partnerships) to equip themselves with critical digital capabilities. Otherwise, they might find that the next best step would be to get their business ready for sale to clinch the best valuation.


Investors. 2022 presents a wide range of opportunities. For those that have previously bought logistics assets, 2022 could be a great year to sell to reap plump margins—many international and domestic logistics companies are on the lookout for consolidation opportunities in the market. There could also be select opportunities for investment. As mentioned earlier, smaller logistics players in the express market would likely be seeking financial support to digitalize their businesses.


The pandemic has ushered the Chinese logistics market into an interesting stage of its evolution. While the five trends outlined here take place within China’s borders, their implications are far-reaching and global. Whether it’s doubling down on omnichannel and warehouse innovation or reassessing their supply chain for direct-line deliveries, stakeholders familiar with these trends should be informed in their decision making as they look ahead in 2022.



Source: McKinsey Insight




Development of the semiconductor industr...

Development of the semiconductor industry 2022

The Fifth Session of the 13th National People’s Congress and the Fifth Session of the 13th National Committee of the Chinese People’s Political Consultative Conference (the “Two Sessions”) were held in Beijing as scheduled. From the “Government Work Report” to the proposals of representatives from all walks of life, the semiconductor industry is one of the most important technology topics.  


To keep you updated on the key developments in China’s semiconductor industry, this article summarizes the discussions on the development of the semiconductor industry at this year’s Two Sessions and draws out the following four keywords. 



Encourage Investment 

In 2021, the global IC industry will continue to be in the predicament of shortage of upstream production capacity and insufficient downstream supply. Although global semiconductor companies continue to expand production capacity, the inflection point of supply and demand balance has not yet been seen in the short term. In this context, the chip industry has received unprecedented attention. At this year’s two sessions, many representatives also put forward suggestions for promoting investment in the semiconductor industry. The overall attitude is to encourage domestically and welcome externally.


Deng Zhonghan, an academic, commander-in-chief of the Starlight China Chip Project, and founder of Vimivro, suggested further expanding the investment scale of the National IC Industry Investment Fund and further accelerating the pace of listing and financing of core chip and vertical innovation enterprises in the “post-Moore era” on the “Science and Innovation Board.”


Tian Yulong, chief engineer and spokesman of the Ministry of Industry and Information Technology, stated: “We should also continue to provide a good policy and market environment for domestic and foreign IC enterprises, treat all kinds of market players equally, give equal treatment to domestic and foreign investors according to the law, especially strengthen the protection of intellectual property rights, jointly promote the innovative development of the IC industry, and maintain the stability of the global IC industry chain and supply chain.”


Increasing Support  

This year’s “Government Work Report” clearly pointed out that it is necessary to accelerate the development of the industrial Internet, and cultivate and expand digital industries such as integrated circuits and artificial intelligence. The report also proposes to further support China’s localities and enterprises to increase investment in scientific and technological research and development and increase the additional deduction ratio of research and development expenses for technology-based small and medium-sized enterprises from 75% to 100% to stimulate technological innovation.


Zhang Zhanbin, director of the College of Marxism at the Party School of the Central Committee of C.P.C, suggested that new types of infrastructure should be promoted following development needs and industrial potential. Focus on key areas to actively expand new infrastructure application scenarios and explore the planning of sustainable business models.


Independent Control of Chips

Due to the impact of the international trade war and the problem of chip shortage in 2020, the independent control of chips has become a concern for China’s semiconductor industry. Among them, the shortage of serious automotive chip localization issues has been hotly discussed.


Li Biao,  a representative of the National People’s Congress and CEO of Hite Group, pointed out that high-quality private integrated circuit enterprises, especially private integrated circuit manufacturing enterprises play an important role in the localization and independent control of chips, which is an important link in China’s integrated circuit industry chain, but also the weakest. The compound semiconductor manufacturing industry meets long build lines and high technical barriers. Some enterprises are in long-term loss and need  the government to formulate targeted policies to help.


Zhang Xinghai, a deputy to the National People’s Congress and founder of Xiaokang, said that it is urgent to improve the localization rate of automotive chips and achieve import substitution. National ministries and departments in charge of automotive chips need to develop top-level design and support measures to promote the development of domestic automotive chips.


Chen Hong, a deputy to the National People’s Congress and CEO of SAIC, said  that: policy guidance can be used to establish unified technical specifications and standards for vehicle-grade chips, and establish a third-party testing and certification platform; in addition, the government can take the lead in setting up special funds to encourage chip companies and automotive enterprises to participate together to accelerate the formation of domestic large-calculus chip research and development, manufacturing and application capabilities.



Filling the Gap

The industry chain of the semiconductor industry is complex and interlocked. To achieve independent control, China first needs to fill the gaps in the industry to start. This is also one of the topics of concern to the delegates.


Shao Zhiqing, a deputy to the National People’s Congress and a full-time vice chairman of the Shanghai Committee of the Zhigong Party, is concerned about chip materials and suggests building a platform for IC material characterization and testing and application research to provide R&D institutions and enterprises with a “one-stop” solution for material characterization and testing. The combination of process and material development solves the problem of missing application scenarios for IC materials, especially for forward-looking specific materials, providing a total solution that integrates the “material-process-equipment-test” to fill the industry gap.


Following the industrial development trend and the current situation in China, Wang Yu, a member of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC) and a researcher at the Institute of Microelectronics, Chinese Academy of Sciences, suggested that – the development of silicon optical chip industry should be listed as the scope and list of government support. China should encourage and support relevant enterprises, around silicon optical chip design automation, mass production manufacturing, other industry chain gaps, and capital. The country ought to accelerate investment and entrepreneurship, and actively guide local governments to create policy and resources to support and promote the project to take effect. He also points out opening the industrial chain as early as possible, supporting the industry to develop sustainably, and having strong capabilities in negotiations internationally.


China “Chip” Attitude

IC Insights estimates that global semiconductor industry capital expenditures will reach a record high of $190.4 billion in 2022, up a whopping 24% year-over-year. Various regions of the world, such as the European Commission, the U.S. Department of Commerce, and the South Korean government, have provided financial support to semiconductor companies to enhance the competitiveness of the local semiconductor industry. In China, the IC industry is a strategic, fundamental, and pioneering industry that supports the country’s economic and social development, and its importance is gradually gaining more recognition due to the trade war and chip shortages. With the convening of the two sessions this year, China’s next phase of development goals and directions for the IC industry has become clearer. Overall, encouraging the industry’s development and enhancing independence through various means will become the keynote of China’s semiconductor industry next.


Source: Influence Matters/ IC Insights


Why have Chinese foreign listed shares...

Why have Chinese foreign listed shares performed poorly in 2022?

Shares in Alibaba  (NYSE:BABA)NIO (NYSE:NIO), and XPeng (NYSE:XPENG) were surging yesterday. The jump at the market open was the largest that shares in these Chinese companies have seen since 2008. The catalyst for the move is an announcement from the Chinese government that it intends to do four things: 


  1. Support overseas stock listings
  2. Stabilise capital markets
  3. Resolve risks around property developers
  4. Speed up the process of regulating big tech companies



In doing so, the Chinese authorities have addressed three of the biggest risks that investors who have exposure to Chinese stocks face.  The market’s response to today’s announcement indicates that investors are generally feeling more comfortable about the risks. Let’s take Alibaba as an illustration of all three.


VIE structure

Investors who buy the NYSE-listed entity with the ticker symbol ‘BABA’ aren’t buying shares in Alibaba. Instead, they’re buying shares in a ‘variable interest entity’ (VIE) that is a separate company that has contracts that give it a claim on Alibaba’s assets and earnings. Why does such a thing exist? Because under Chinese law, it’s illegal for Alibaba to have non-Chinese shareholders. The VIE structure is intended to allow foreign capital access to Chinese companies (albeit indirectly) and to allow Chinese companies access to foreign capital.


The risk comes from the fact that a VIE is designed to circumvent Chinese law. As such, its contracts — which are the only things it has of any value or that connect it in any way to Alibaba, the company — might not be enforceable. That would mean that shares in the VIE could be worthless if the Chinese authorities ever decided to clamp down on VIE structures. Today’s announcement that China intends to support overseas stock listings goes some way towards limiting concerns about this possibility.



A second source of concern comes from the possibility of the US delisting Chinese stocks from the NYSE. The Holding Foreign Companies Accountable Act of 2020 requires Alibaba to submit audit documents in support of its financial statements. Otherwise, it can be delisted from the US exchanges. The trouble is, Chinese regulation prevents them from doing this. 


This concern is assuaged somewhat by the announcement that the Chinese authorities are prepared to support overseas stock listings. The details are still to be worked out, but the idea that there might be the will to work towards resolving the impasse is encouraging for investors.



The third major risk associated with Alibaba is the threat of government regulation. Alibaba has more history than most with this threat, after it picked up a record fine last year for abusing its dominant market position. But it’s far from unique. Various other Chinese tech companies have also faced similar sanctions.


The risk of further interventions against Alibaba and China’s other big technology firms has been a source of uncertainty around the stocks. Today’s announcement that the Chinese regulators intend to make things more transparent is positive news for investors.



Crisis in China’s Property Industr...

Crisis in China’s Property Industry Deepens.

Almost exactly a year after China’s property-market debt squeeze sparked the first in a wave of defaults by developers, the industry is fighting for survival. Home sales continue to plunge and elevated borrowing costs mean offshore refinancing is off the table for many developers. Global agencies are pulling their ratings on property bonds, while a string of auditor resignations is adding to doubts over financial transparency only weeks before earnings season. An 81% stock plunge in Zhenro Properties Group Ltd. highlighted the risks of margin calls as companies struggle to repay debt.



Yu Liang, chairman of China Vanke Co. -- one of the country’s largest developers -- urged staff to prepare for a battle that could make or break the firm, according to the South China Morning Post, which cited an internal document from last month. “We are on our last legs, which means there are no other options,” he said.


A Bloomberg index of Chinese junk dollar debt fell every day this week through Thursday, driving yields above 20%. A gauge of Chinese property shares is down 3.4% this week, taking its losses over the past 12 months to 28%, even after rallying on Friday.


As the cash crunch for developers worsens, so does the housing slowdown that’s become one of the biggest drags on China’s economy. Attempting to deflate a speculative market is a risky strategy that -- if uncontrolled -- could threaten Beijing’s pledge to prioritize economic stability this year. Regulators have quietly tweaked some rules to engineer a soft landing for the property industry, such as encouraging mergers and acquisitions, but so far officials have refrained from any substantive easing of curbs.


“While the government has become more supportive, measures have remained marginal and have not solved the liquidity crisis,” said Paul Lukaszewski, head of corporate debt for Asia Pacific at abrdn Plc in Singapore, which has portfolios with exposure to developers. “The market turmoil and ongoing uncertainty have pushed traditional investors to the sidelines.”



China Fortune Land Development Co. failed to repay a $530 million dollar bond due Feb. 28., 2021, becoming the nation’s first real estate firm to default since Beijing drafted new financing limits for the sector in 2020. Since then, at least 11 developers defaulted, according to a Feb. 3 report by Standard Chartered Plc.


More may follow. Property firms have to find almost $100 billion to repay debt this year, even as their income streams shrink. Sales at China’s 100 biggest developers fell about 40% in January from a year earlier, compared with a 35% decline in December, according to preliminary data by China Real Estate Information Corp.


Developers are selling more onshore bonds to fund project construction, but not enough to cover maturing debt. Onshore issuance by Chinese developers fell 53% in January to 23 billion yuan ($3.6 billion), while dollar note sales were down 90% from a year earlier to just $1.6 billion, according to China International Capital Corp. Net financing, which subtracts maturities from issuance, was a negative $7.3 billion, CICC analysts led by Eric Yu Zhang wrote in a Friday note.



Investors also need to worry about off-balance sheet debt. Fallen angel Shimao Group Holdings Ltd. recently proposed delaying repayment of about 6 billion yuan of high-yield trust products due between this month and August, people with the matter said this week. Its bonds sank on concern the company will prioritize these liabilities over money owed to offshore creditors.


Auditor resignations are sowing further doubt about the financial health of property firms. Auditors for Hopson Development Holdings Ltd. and China Aoyuan Group Ltd. resigned in late January, citing insufficient information and a disagreement over fees, respectively. Shimao’s onshore unit changed its auditor for the first time in 27 years. Failure to publish results before the Hong Kong stock exchange’s March 31 deadline may lead to long trading halts.


“Changing accounting firms just ahead of year-end results raises questions about the quality of a firm’s governance,” S&P Global Ratings analysts wrote in a Feb. 16 report.


Investor distrust of management is becoming entrenched. Rumors about Zhenro’s ability to repay a perpetual bond sent the note from near par to drop below 23 cents in a matter of days, while its shares sank amid reports holder Ou Zongrong had been forced to liquidate. The stock didn’t recover even as the company said such speculation was “untrue and fictitious.”


Zhenro said late Friday it may be unable to repay debt due in March, including its perpetual bond. The company had earlier pledged to redeem the securities.


Authorities are taking steps to ease funding restrictions for the sector, although these measures are largely targeted and incremental, rather than broad-based. The government recently issued rules to standardize the use of presale funding, banks extended more loans to the sector and some lenders in several cities have cut mortgage downpayments, according to multiple local media reports in the past week.


A Bloomberg Intelligence index of Chinese property stocks rose as much as 3% on Friday following the mortgage report, while high-yield dollar bonds halted their decline.


Even so, credit stress remains “acute” and funding channels aren’t showing much of an improvement, according to Goldman Sachs Group Inc. analysts.


That means defaults are likely to pile up for developers that struggle to sell assets fast enough. State-owned companies have emerged as potential buyers, though the pace of deals so far has been slow.


Any distressed-debt investor buying defaulted bonds now is likely to face a lengthy wait before recovery. Among the past year’s defaulters, only Fortune Land has released a preliminary restructuring framework for its debt. An estimated $48.9 billion is outstanding pending debt resolution, according to Standard Chartered.


While Chinese authorities have told state-owned bad-debt managers to participate in the restructuring of weak developers, it’s unclear what such support might mean for bondholders. In China’s property sector, court-led restructurings are rare, data compiled by Bloomberg show. Since 2018, 27 firms have failed to honor their bonds, and only two entered such a process.


“Price volatility in the sector is unlikely to subside,” wrote Citigroup Inc. strategists including Dirk Willer in a Friday note. “Even the recent rebound in new real estate loans did not provide much relief to the deteriorating sentiment.”


Source: Bloomberg Businessweek.

Pakistan becoming increasingly reliant...

Pakistan becoming increasingly reliant on Chinese cash.

Pakistani Prime Minister Imran Khan is visiting China this week to attend the opening ceremony of the Winter Olympics and meet with Chinese leaders.


A spokesman for Pakistan's Foreign Ministry told media last Friday that Khan's visit would reinforce the all-weather strategic cooperative partnership between the two countries, in addition to advancing the objective of building a closer China-Pakistan bond with a shared future. Khan's trip is his first in nearly two years. However, some people are skeptical over the reasons for his visit.



Although Pakistani Foreign Minister Shah Mahmood Qureshi claimed last Thursday that the visit was aimed at expressing solidarity with Beijing, as some countries have boycotted the Olympics, some Pakistani media outlets report that Islamabad is eyeing a $3 billion (€2.6 billion) loan from China, the world's second-largest economy after the United States, in addition to pinning hopes on Chinese investment into six sectors.


The English daily Express Tribune recently reported that the government was considering requesting that China approve another $3 billion loan, which could be kept in China's State Administration of Foreign Exchange (SAFE) so as to boost its foreign exchange reserves.


Pakistan seeks investment in six industries

Islamabad is also seeking Chinese investment in the industries of textiles, footwear, pharmaceuticals, furniture, agriculture, automobile and information technology. The newspaper further wrote: "The government is expected to tell the 75 Chinese companies that it could provide access to trade routes to the Middle East, Africa and the rest of the world, offering greater incentives in the shape of reduction in freight costs."


Pakistan relies heavily on China for economic assistance and cooperation. The communist country has already pumped billions of dollars into the Islamic republic under the China-Pakistan Economic Corridor. Islamabad completed a number of energy and infrastructure projects under the CPEC.


Economist Kaiser Bengali believes that Pakistan is now 100% dependent on China for financial and economic assistance. He told DW that the immediate purpose of the visit is to seek the loan from Beijing, reflecting Pakistan's growing reliance on China.


"While the conditions of the IMF are made public, China keeps the terms and conditions of loans and projects secret, which leads to suspicions," he said.


Many nationalists in Pakistan's western province of Balochistan are skeptical of the Chinese investment, which they say does not benefit the residents of the region that houses the Chinese-run strategic Gwader port.


The residents of Gwader recently erupted in protest against the scarcity of drinking water, complaining that Chinese investment did not help improve access or help the province in other ways.


Some Baloch nationalists fear that, if Pakistan defaults on its loans, China would seek mining contracts in the mineral-rich province at an extremely discounted rate — or possibly take over the port.


Bengali said such suspicions are exacerbated by the secrecy surrounding Chinese development projects and the terms of the loans.


During the Cold War, the United States was the main ally of Pakistan, supplying the country with weapons and military training. Islamabad also joined western military alliances to counter communism.


Strained ties with West

Pakistan's ties with the United States were somewhat strained during the 1990s, but the country again became Washington's ally in the "war on terror" after the September 11, 2001, attacks. However, following the US pullout from Afghanistan, the South Asian country is now looking to the East for strategic alliances.


Talat Ayesha Wizarat, a Karachi-based expert in international relations, told DW that Pakistan is heavily dependent on China because the West did not turn out to be a reliable ally, abandoning Islamabad and instead cozying up to New Delhi, a common foe of both Pakistan and China.


Wizarat said loans from the International Monetary Fund came with strings attached, and added that Western-backed financial institutions asked about the details of CPEC projects.


She said that in contrast, China didn't put conditions on its loans. "It has already pumped billions of dollars into the CPEC but did not attach strings," Wizarat told DW.


The US has no interest in the region after pulling out from Afghanistan, she said. As a result, she added, Pakistan will need China's assistance to bolster its economy, stabilize Afghanistan, promote trade in the region and consolidate its defenses.


Pakistan offers access to Indian Ocean

Wizarat said Pakistan could reciprocate by granting China access to the Indian Ocean and supporting the country at international forums.




China Nears Fully Cashless Economy

China Nears Fully Cashless Economy

China has taken two steps closer to a fully cashless economy after two small private Chinese banks announced last month that they would end services related to bank notes and coins, according to a South China Morning Post report Friday (Feb. 4). Beijing-based Zhongguancun Bank will end cash services, including over-the-counter deposits and withdrawals and cash services on ATM machines, in April, while NewUp Bank of Liaoning will end its cash services in March, the report says.


Chinese residents have long relied on Tencent Holdings’ WeChat Pay and Alibaba Group Holding’s Alipay over cash and Beijing has been conducting a nationwide pilot scheme for digital currency known as e-yuan. So far, more than 261 million people having downloaded the wallet app since it launched last year.



Many Chinese businesses are transitioning to a more digital yuan-centric payment system during the Lunar New Year this week, the report says. Tencent recently added e-yuan as a payment option to WeChat Pay while eCommerce giant now supports e-yuan payments in its online stores.


Meanwhile, Chinese on-demand services provider Meituan last week allowed more than 200 types of offline merchants — including restaurants, grocery stores, movie theaters and hotels — to accept e-yuan payments, even as the country’s central bank says merchants must accept bank notes and coins. Some private banks in China hope to become internet banks, but China’s crackdown on the internet in the past year could make that an uphill battle, the report says. So far, China has granted four private banks the right to conduct cross-regional banking services on the internet.


Last month, the Cyberspace Administration of China (CAC) began promoting blockchain projects in as many as 15 “zones” and throughout more than 160 government entities, including government departments, schools and car companies. The goal is to use blockchain in data sharing to make business processes more effective and to ease any frictions across trade finance, equity markets and cross-border finance.


By launching widespread (geographically speaking), wide-ranging (in terms of the use cases) blockchain initiatives, China’s official efforts this week hint at a further crowding out of non-state-sanctioned development of digital ledgers — which would include private blockchains.


It seems that the explorations in equities, trade finance and cross-border finance would include the exchange of data, yes. But it would also help smooth the path for the digital yuan to be more fully embraced in all manner of transactions, particularly commercial ones.


China’s digital yuan trials saw $8.3 billion of the country’s payments market in the past six months and $13.68 billion in the past two years. The country’s full-scale rollout is expected during the 2022 Winter Olympics, which kicked off last Thursday.




China business outlook 2022: towards...

China business outlook 2022: towards domestic consumption for sustainable economic growth.

Exports will continue to drive China’s economy for the rest of the year as the domestic market remains sluggish, according to analysts.


Chinese leaders have indicated for many years that they want to move away from exports as the main source of growth and toward domestic consumption for sustainable economic growth, said Mattie Bekink, China director at the Economist Intelligence Corporate Network. 


“But that’s certainly not what’s happened during the pandemic. So China’s economic recovery has largely been dependent upon on return to its old export driven model, while consumption has really lagged,”


“In 2020, for example, net exports contributed the largest share of Chinese GDP growth since 1997 and consumption is not even recovered yet to its pre-Covid trend, according to China’s National Bureau of Statistics,” Bekink said.



Despite global disruptions of supply chains during the pandemic, China’s trade surplus rose to $676.43 billion in 2021— up from $523.99 billion in 2020, and the highest on record going back to 1950, according to official data from Wind information.“Exports will still continue to be a very important growth driver for the Chinese economy in 2022.”


Last week, China’s central bank cut its benchmark lending rates again amid rising concerns of slowdown in the economy, and reduced the one-year loan prime rate as well as the five-year LPR. Loan prime rates affect the lending rates for corporate and household loans in the country.


The world’s second largest economy grew 8.1% in 2021 as industrial production rose steadily through the end of the year, according to official data from China’s National Bureau of Statistics released Monday. GDP in the fourth quarter rose 4% from a year ago, faster than analysts expected.


“China’s economy is almost running on two tracks. The export-based economy actually is fine, but the domestic economy is quite soft,” Steve Cochrane, chief Asia-Pacific economist at Moody’s Analytics, told CNBC’s “Squawk Box Asia” on Wednesday.


Lackluster spending in China

Still, domestic demand will continue to be a drag on the economy due to China’s zero-Covid policy, which has prompted multiple travel restrictions within the country including the lockdown of Xi’an city in late December. Official data from Monday showed that retail sales missed expectations and grew by 1.7% in December from a year ago. 


“Given the zero-Covid policy and the difficulty in terms of traveling tourism, even spending over the upcoming holiday season is going to be quite weak,” Cochrane added.


With consumer sentiment uncertain and hiring still soft, China is expected to continue its policy easing measures to boost the domestic economy.


“This is why the PBOC has been front loading on monetary policy easing, including policy rate cuts well as net injection of medium to long-term liquidity,” said Zeng, referring to the People’s Bank of China’s recent surprise move to cut its loan rates.China’s central bank cut the borrowing cost of medium-term loans for the first time since April 2020. It also cut the seven-day reverse repurchase rate, another lending measure. The PBOC also injected another 200 billion yuan ($31.5 billion) of medium-term cash into the banking system.



Source: CNBC

Major Challenges for China’s Chemical...

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%.


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