China Quote
“If we allow someone, just because they’re economically strong or militarily strong, to ride roughshod over other nations, then ultimately we will all be worse off,”
-Senator David Fawcett, on motion he recently co-led criticizing China’s attempts to claim sovereignty over Taiwan.
De/Cypher Data Dive📈
China’s second-hand car market is growing rapidly. Some 16.26 million vehicles changed hands in China during the first half of this year (2024), half as many again as the same period in 2023. (Caixin)
A Yiche Research survey found that the willingness of consumers under 35 to buy used cars has jumped from 40% in 2019 to 60% by the first half of 2024.
In 2023, China exported nearly 300,000 used cars, a dramatic increase from 15,000 in 2021, according to customs data.
Asia View🌏
Summary of the key developments in EU-China relations after the 2024 European elections, based on the timeline provided:
These developments show a complex and evolving relationship between the EU and China, characterized by both cooperation and competition in various sectors, particularly in trade and technology. The timeline reflects ongoing tensions over issues such as EV tariffs and market practices, while also highlighting efforts to maintain and strengthen economic ties.
Quick China: Unmissable Stories 📜
IBM Pulls R&D Units Out of China in Latest Withdrawal by U.S. Firm
IBM Corp. is shutting down two major research and development (R&D) units in China, amid declining business in the country and mirroring a broader trend of U.S. tech firms scaling back their presence in China. The units affected by the pullback are IBM’s China Development Lab (CDL) and China Systems Lab (CSL), both established in 1999. CDL, which focused on application software development, has more than 1,000 employees, while CSL, which focused on system development such as mainframe database, has a team of 695, one IBM worker told Caixin.
Some China-based colleagues found themselves locked out of the company’s intranet virtual private network (VPN) and shared cloud drive on Friday, and subsequently received verbal layoff notices from their managers that evening, the worker said. The company held a brief online staff meeting on Monday morning to relay the news, the worker said. Frontline managers and human resources staff are currently negotiating severance packages with the affected employees, the person said.
“We are exiting all of the development mission in China,” said IBM’s Global Enterprise Systems Development Vice President Jack Hergenrother, according to a transcript of the online meeting obtained by Caixin. The company will be shifting the development work to other IBM infrastructure locations overseas, Hergenrother said. (Caixin)
PBOC Starts Bank Stress Tests to Avoid Stampede Out of Bonds
China has initiated stress tests with financial institutions on their bond investments, to make sure they can handle any market volatility should a record-breaking rally reverse, according to state-run media.
The People’s Bank of China (PBOC) has made a gradual start to the tests recently, wary that a bull run might lead to one-sided bets in long-term government bonds, according to a front-page report by Financial News. Its intention may not necessarily be to significantly push yields higher, the central bank-backed newspaper said citing an unidentified source.
Financial institutions should be able to cope with large drops in bond prices, as crowded holdings in debt positions could easily turn into a “stampede” in the event of a sharp yield reversal, Financial News said. That can raise the likelihood of a liquidity crisis and threaten financial stability, it added. (Bloomberg)
Canada imposes tariffs on Chinese-made EVs, aluminum, steel
The federal government is imposing tariffs on Chinese-made electric vehicles as well as aluminum and steel from China in an effort to protect domestic manufacturing. Prime Minister Justin Trudeau announced in Halifax today that Canada will impose a 100-per-cent tariff on electric vehicles, along with 25 per cent tariffs on aluminum and steel. Chinese brands are not a major player in Canada’s EV market right now but imports from China have exploded in the last year as Tesla switched from U.S. factories for its Canadian sales to its manufacturing plant in Shanghai. (Electric Autonomy Canada)
China’s Used-Car Dealers Face a Bumpy Ride as Price Wars Intensify
China’s second-hand car market is growing rapidly as more motorists take to the road. Industry players have little to celebrate, however, as the fledgling sector is still like the Wild West while profit margins are shrinking.
Some 16.26 million vehicles changed hands in China during the first half of this year, half as many again as the same period in 2023. Sales of used cars grew 7% year-on-year to 9.38 million, while 9.84 million new passenger vehicles were sold, according to the China Automobile Dealers Association (CADA).
With the gap between used and new car sales narrowing, some industry experts predict that the sale of used cars in China could match that of new cars by 2025. (Caixin)
The party wants to perhaps ban Guandan?
Earlier this month the Beijing Youth Daily, a mouthpiece of the city’s Communist Youth League, ran three opinion pieces over three days criticising the “poisonous” game. One piece implied that shady businessmen were using it to establish connections and make corrupt deals. Another blasted the game for promoting a “lying-flat culture”, slang for laziness. “The guandan addiction has become a social phenomenon worthy of attention and vigilance,” said the paper. A party newspaper in Jiangsu, where guandan originated, has defended its benefits and condemned the moral posturing of critics. Other papers have since chimed in with similar commentaries. If corruption and laziness are problems, then target the root causes, not guandan, say some. Or, as one headline put it: “Oppose the game of throwing eggs? Stop talking nonsense!” (The Economist)
Vatican: China recognizes Catholic bishop of Tianjin
After five years of refusal, the Chinese government has officially recognized Bishop Melchior Shi Hongzhen as bishop of Tianjin, the Vatican said, in what it called “a positive fruit of the dialogue established over the years between the Holy See and the Chinese government.”
“The Holy See has learned with satisfaction that today, 27 August 2024, Bishop Melchior Shi Hongzhen has been officially recognized under civil law as bishop of Tianjin (Municipality of Tianjin, People’s Republic of China),” the Vatican said in a statement. (VOA)
Chinese Hackers Breach US, India Internet Firms, Lumen Says
The state-sponsored Chinese hacking campaign known as Volt Typhoon is exploiting a bug in a California-based startup to hack American and Indian internet companies, according to security researchers. Volt Typhoon has breached four US firms, including internet service providers, and another in India through a vulnerability in a Versa Networks server product, according to Lumen Technologies Inc.’s unit Black Lotus Labs. Their assessment, much of which was published in a blog post on Tuesday, found with “moderate confidence” that Volt Typhoon was behind the breaches of unpatched Versa systems and said exploitation was likely ongoing. (Mercury News)
Beyond The Great Wall 🧱
Exploring News About China in Depth
De/Cypher Lighthouse
China and US Race for Tech Control
Written By Shivani Singh, Program Coordinator for Law & Critical Emerging Technologies
The space race of the 1960s is a tale many have grown up hearing—two global superpowers, the United States and the Soviet Union, competing for dominance through space exploration. The moon landing remains a defining moment in American history. Although the U.S.-Soviet rivalry effectively ended in the 1990s, the idea that technology can serve as a gateway to power has grown significantly, shaping the power dynamics of the 21st century. This concept is most evident in the modern-day tech race between the United States and China.
In recent decades, global power assessments have shifted from traditional measures like GDP or military might to a new benchmark: technological prowess. This high-stakes competition, particularly between the United States and China, has intensified with ground-breaking policy shifts from President Joe Biden and President Xi Jinping. However, to understand the current landscape of this race, it is crucial to recognise how the United States competes with China on this technological front. The United States emerged as a technological and economic superpower after World War II.
The Cold War era saw significant U.S. technological investments, driven by the rivalry with the Soviet Union, especially in military and space exploration; this period brought about substantial advancements in computing, aerospace, and telecommunications. Institutions like NASA and DARPA (the Defense Advanced Research Projects Agency) were established, leading to innovations that eventually spilt over into the commercial sector. Meanwhile, under Mao Zedong, China remained largely agrarian and technologically underdeveloped, constrained by isolationist policies and the disruptions of the Cultural Revolution. This changed in 1978 when Deng Xiaoping introduced economic reforms and opened China to foreign investment and technology. These reforms aimed to modernise China’s economy and close the technological gap with the West. The globalisation wave of the 1980s and 1990s played a pivotal role in shaping the tech race.
China’s accession to the World Trade Organisation (WTO) in 2001 was a turning point, integrating it into the global economy and giving it access to advanced technologies and markets. American companies, seeking cost-effective production, outsourced manufacturing to China, facilitating the transfer of technology. Over time, China climbed the value chain from low-tech manufacturing to high-tech production. Xi Jinping’s rise to power in 2012 marked a critical shift, with a renewed focus on technological advancement. In 2015, China launched the “Made in China 2025” initiative, aiming to position itself as a leader in sectors such as robotics, artificial intelligence (AI), and biotechnology.
The Chinese government has since directed substantial resources toward research and development, leveraging public-private partnerships to boost innovation. The United States, in turn, formalised its strategic competition with China in 2017 under the “Great Power Competition” doctrine. Central to this rivalry is the race for technological innovation, viewed as a key to achieving global dominance. During this period, the emergence of Chinese tech giants like Huawei, Tencent, and Alibaba, along with China’s rapid advancements in AI and 5G technology, raised alarms among U.S. policymakers. Concerns over intellectual property theft, espionage, and the potential for Chinese dominance in critical technologies led the U.S. to adopt a more confrontational stance, including implementing tariffs, sanctions, and restrictions on Chinese companies’ access to American technology. The rivalry has escalated to what some analysts call a “technological decoupling,” with the U.S. and China building separate technological ecosystems, each striving for self-sufficiency. This has sparked a new era of accelerated technological development, raising the stakes even higher. The future of this tech race promises significant developments. China’s recent lunar missions showcase Beijing’s ambition to not only match but surpass its rivals’ achievements. Meanwhile, NASA’s continued efforts reflect America’s resolve to maintain its leadership in space exploration and technological innovation.
China’s early lead in 5G infrastructure could grant it a strategic edge in setting global standards. However, concerns over cybersecurity and data privacy have led the U.S. to restrict Chinese tech influence, contributing to the bifurcated global tech ecosystem we see today. Quantum computing has emerged as a focal point of this competition. Quantum computing, which uses principles of quantum mechanics to process information differently from traditional computers, holds the potential to solve problems once considered unsolvable. This technology promises revolutionary advancements in cryptography, materials science, and complex system modeling. U.S. and China are investing heavily in quantum research, aiming for breakthroughs that could provide significant economic and military advantages. The race in quantum technology is likely to influence policy decisions on intellectual property, international research collaborations, and cybersecurity. Despite impressive technological achievements, the societal implications of this tech race are significant and must be addressed.
The drive for dominance in AI, quantum computing, and 5G networks heightens the risk of cyber espionage and intellectual property theft. This escalating mistrust could lead to retaliatory measures that threaten global stability. Nations worldwide may be forced to choose sides in this tech rivalry, navigating a complex web of alliances and economic dependencies. Protectionist policies, trade wars, and supply chain disruptions could stifle international collaboration, increase costs for consumers, and impede global technological progress. The production and disposal of advanced technologies pose environmental challenges, which must be managed responsibly to prevent ecological damage. The rapid deployment of new technologies raises ethical questions, particularly regarding AI and surveillance. Innovations can lead to increased government control and privacy erosion. Both the U.S. and China have faced criticism for their approaches to data privacy and civil liberties, fueling fears about the potential misuse of technology for authoritarian purposes.
The growing prominence of AI has sparked global debate. While AI offers undeniable benefits, such as increased convenience and efficiency, it also presents significant risks. However, these risks can be mitigated with responsible use. The impact of AI technology is determined not by the technology itself but by the manner in which it is utilised. While AI has the potential to significantly enhance human capabilities, its use must be guided by a commitment to support, rather than supplant, human effort. In 2018, Chinese President Xi Jinping spoke about the transformative power of “disruptive technological innovation” and its ability to change the course of history. He pointed to the milestones of the past: the “mechanisation” of the First Industrial Revolution, the “electrification” of the Second, and the “informatisation” of the Third. Now, Xi argued, breakthroughs in cutting-edge technologies like artificial intelligence (AI) had ushered the world to the brink of a Fourth Industrial Revolution. Those nations that lead in these innovations, Xi suggested, will shape the future. Following Xi’s remarks, Chinese scholars and analysts delved deeper into the connection between technological disruption and geopolitical power.
An official publication from the Chinese Communist Party reflects on the historical significance of previous industrial revolutions: “Britain leveraged the first industrial revolution to gain a leading edge in productivity on a global scale. Following the second industrial revolution, the United States emerged as the new leader in advanced productivity.” In this context, Jin Canrong, a well-known Chinese scholar in international relations, suggests that China may have a stronger potential than the United States to become the leading power in the Fourth Industrial Revolution. However, this perspective is not unique to Chinese thinkers. U.S. policymakers also view technological innovation as a crucial factor in global leadership. In his first press conference, President Joe Biden emphasised the need to “own the future” in emerging technologies, declaring that China’s ambition to become “the most powerful country in the world” would not happen “on [his] watch.”
In 2018, Congress established the National Security Commission on Artificial Intelligence to explore the implications of AI. Comparing AI’s potential impact to transformative innovations like electricity, the commission warned that the United States would lose its technological leadership to China if it did not prepare adequately for the “AI revolution.” Both Chinese and American leaders are fixated on dominating future technologies, believing that the nations that pioneer key innovations will control the global economy. With a strong foundation in manufacturing, its own vast domestic market, and a top-down approach that directs substantial state resources towards technological adoption, China has positioned itself as a formidable competitor to the United States. This ongoing race, spanning a range of industries and technologies, will likely shape the economic and political landscape of the coming decades. For countries around the world, this tech race poses both challenges and opportunities. As the global balance of power continues to shift, the outcome of this competition will have far-reaching implications for the future of innovation and international relations.
China Manufacturing Tracker: 2024-25
Written by Arendse Huld, China Briefing; Summarized by Abhilasha Semwal, Deputy Director- Operations & Programs
With 26.2% of China’s GDP coming from the manufacturing sector in 2023, the sector is essential to the country’s economy. Manufacturing continues to be a major force behind economic development, job creation, innovation, and export income, even in the face of a change towards a high-tech, service-oriented economy.
As the world’s industrial powerhouse, China generated around 30% of the added value in manufacturing globally in 2023. The manufacturing sector in China is a major source of foreign investment. It remains a favored location for international corporations because of its highly qualified workforce, well-functioning supply networks, and sophisticated infrastructure.
The Manufacturing Export Delivery Value (FAI) and the Manufacturing Purchasing Managers’ Index (PMI) are valuable indicators of the sector’s long-term confidence and growth prospects. Foreign direct investment (FDI) is still intensely attracted to the manufacturing sector, which accounted for 28.64% of all FDI in the first seven months of 2024. Growing FDI signals a stable and profitable environment for long-term investments, and China’s manufacturing sector is a significant barometer of global confidence. However, a drop in FDI might indicate declining confidence brought on by cost increases, regulation difficulties, or geopolitical unrest.
The cost of labor in this business has increased dramatically in the previous ten years, with typical earnings more than tripling. Since 2013, the average annual growth rate for public-sector manufacturing pay has been 9.1% for the private sector and 9.5% for the non-private sector. China’s power grid is split into six main areas, except Southern China, which is supplied by China Southern Power Grid (CSG). All regions are served by the State Grid Corporation of China (SGCC). China has a more dispersed water utility sector, with several enterprises offering services in various regions and at different supply chain stages. China has over 2,000 industry clusters concentrating on electronics, textiles, automobile production, and aviation. Companies in the manufacturing sector can take advantage of many favorable regulations and tax breaks offered by China, such as reduced corporate income tax (CIT), value-added tax (VAT), and tax deductions for R&D.
Economy
China’s Silicon Valley Benefits from Hi-Tech Focus as Output, Investment Shine
Mia Nulimaimaiti writes in the SCMP that Shenzhen, known as China’s Silicon Valley, has seen significant growth in high-tech manufacturing and investment amidst a sluggish national economy. The city’s advanced industries, particularly in electronics and communications, posted robust output and investment increases, reflecting China’s push for tech self-reliance and global competitiveness. This growth contrasts sharply with China’s broader economic slowdown and underscores Shenzhen’s role as a model for technological advancement.
China’s Economic Malaise Stirs Rising Protests on Labor, Housing
Rebecca Choong Wilkins writes in Bloomberg that economic protests in China are increasing amid a slowing economy and real estate crisis. According to Freedom House’s China Dissent Monitor, dissent cases rose 18% in the second quarter of 2024, with labor and housing grievances accounting for most protests. These economic challenges, coupled with heightened censorship and surveillance, pose a governance issue for the ruling Communist Party, highlighting public dissatisfaction despite the government’s efforts to stimulate growth.
China’s JD.com Announces $5bn Share Buyback Plan
Nikkei Asia reports that JD.com has approved a $5 billion share repurchase programme, effective September, to be executed over the next 36 months. This follows a $3 billion buyback announced in March and comes amid intense competition in China’s e-commerce sector. The announcement boosted JD.com’s U.S.-listed shares by 5.1% in premarket trading. The company aims to address investor concerns over a sluggish retail market amidst broader economic challenges in China.
Internal Politics 🏛️
Politburo Meets Earlier Than Anticipated
Xinhua reports that the Political Bureau of the Communist Party of China (CPC) Central Committee held a meeting to review strategies for advancing development in China’s western region. Chaired by Xi Jinping, the meeting emphasised understanding the strategic intent of this initiative, focusing on environmental conservation, economic openness, and high-quality development. The plan includes enhancing scientific innovation, promoting sustainable growth, and fostering ethnic unity. The CPC aims to ensure no large-scale poverty relapse and strengthen regional development with targeted policies and measures.
Macao Judge Announces Bid to Become Casino City’s Chief Executive
Nikkei Asia reports that Sam Hou-fai, a top judge in Macao, announced his candidacy for the territory’s chief executive election set for 13 October. Following the current leader Ho Iat-seng’s decision not to seek a second term, Sam, the head of Macao’s highest court since 1999, resigned to run. Born in Guangdong and fluent in Portuguese, he would be Macao’s first chief executive not born in the city if approved by Beijing. Despite concerns about his lack of economic experience, experts believe his ties to Portugal could enhance Macao’s cultural and economic links with Portuguese-speaking countries.
China’s Top Legislature to Convene Standing Committee Session in September
China Daily reports that the 14th National People’s Congress (NPC) Standing Committee will hold its 11th session from 10 to 13 September in Beijing. Lawmakers will review several draft laws, including those on energy, public health emergencies, and national parks, and consider amendments to existing laws on national defence education, infectious disease control, anti-money laundering, and statistics. The session will also address personnel-related bills and a decision on national honours for the 75th anniversary of the People’s Republic of China.
China Unveils Three-Year Business Environment Plan for Beijing-Tianjin-Hebei Region
Giulia Interesse writes in China Briefing that China’s National Development and Reform Commission has introduced a Three-Year Action Plan to enhance the business environment in the Beijing-Tianjin-Hebei region. The plan aims to standardize regulations, improve regional integration, and promote innovation, targeting key challenges such as market fragmentation and regulatory inconsistencies. The initiative seeks to attract investment, boost international trade, and support enterprise growth, aiming to elevate the region’s global competitiveness.
China Issues White Paper on Energy Transition
Xinhua reports that China’s State Council Information Office has released a white paper titled “China’s Energy Transition,” detailing the country’s energy reforms and achievements over the past decade. The document outlines China’s strategy for a clean, low-carbon energy system, emphasizing green energy development and cooperation on global climate change. The white paper highlights significant reductions in energy intensity and carbon emissions and positions China as a leading investor in global energy transition efforts
China Adds 2 New Multi-Use Firefighting Planes to Emergency Fleet
William Zheng writes in SCMP reports that China’s Ministry of Emergency Management has added two new MA60 firefighting aircraft to its fleet. Built by the Aviation Industry Corporation of China, these planes can carry up to 6 tonnes of water and perform multiple roles, including fire monitoring and communications. The aircraft are part of China’s effort to enhance its disaster relief capabilities.
Alarming Increase in Obesity-Related Cancers Among Young People in China
News-Medical reports that obesity-related cancer rates in China have been rising at an alarming 3.6% annually between 2007 and 2021. A study published in the Cell Press journal Med reveals a significant increase in obesity-related cancers, particularly among young people, highlighting the urgent need for effective public health policies to tackle rising obesity rates in China.
China And The World🌐
President Xi: China, U.S. Should Be Source of Stability for World Peace
CGTN reports that Chinese President Xi Jinping met with U.S. National Security Advisor Jake Sullivan in Beijing, emphasizing that China and the United States should act as stabilising forces for global peace and development. Xi called for mutual respect, peaceful coexistence, and win-win cooperation, reiterating China’s commitment to a stable relationship. Sullivan echoed the sentiment, stating that the U.S. does not seek conflict with China and hopes for peaceful coexistence and sustainable relations between the two nations.
Wang Yi Hopes Talks with Jake Sullivan Can ‘Remove Obstacles’ for China-U.S. Relations
CGTN reports that China’s Foreign Minister Wang Yi met with U.S. National Security Advisor Jake Sullivan in Beijing to discuss stabilising bilateral relations. Wang Yi emphasised the need to adhere to the “San Francisco vision” for mutual respect, peaceful coexistence, and win-win cooperation. Sullivan agreed to collaborate in mutually beneficial areas to avoid turning competition into conflict. During his visit, Sullivan also met with Zhang Youxia, Vice-Chair of the Central Military Commission, marking the highest-level military engagement with a U.S. official from the Biden administration.
China’s Top Diplomat Meets Delegation of Japan-China Friendship Parliamentarians’ Union
Xinhua reports that Wang Yi, director of the Office of the Central Commission for Foreign Affairs and a member of the Political Bureau of the Communist Party of China Central Committee, met with a delegation led by Toshihiro Nikai, chairman of the Japan-China Friendship Parliamentarians’ Union, in Beijing. Wang emphasized the importance of peaceful coexistence and mutually beneficial cooperation between China and Japan, and expressed hope for the continued positive development of bilateral relations.
US military open to escorting Philippine ships in the South China Sea, senior admiral says
The Albertan reports that Admiral Samuel Paparo, head of U.S. Indo-Pacific Command, stated that the U.S. military is open to discussions about escorting Philippine ships in the disputed South China Sea. This comes amid increasing tensions between Beijing and Manila. Philippine Defense Secretary Gilberto Teodoro Jr. urged for stronger international condemnation of China’s actions in the region.
China Ships Ram, Blast Water at BFAR Vessel
Nestor Corrales writes in Philippine Daily Inquirer that the Chinese Coast Guard attacked a Philippine Bureau of Fisheries and Aquatic Resources (BFAR) vessel in the West Philippine Sea, using water cannons and ramming the ship multiple times. The incident caused significant damage to the BFAR ship, disrupting its humanitarian mission. Philippine officials have called for legal action against China for these aggressive actions. China’s state media claims the Philippine vessel illegally entered Chinese waters.
Violation of Japan’s Airspace Reflects Growing Tension; China May Have Been Testing Vigilance, Surveillance Abilities
Naohiro Tamura writes in The Japan News that the unprecedented violation of Japan’s airspace by a Chinese military aircraft has heightened tensions in the East China Sea. The incursion, near the Danjo Islands, might have tested Japan’s surveillance capabilities as part of China’s Anti-Access/Area-Denial (A2/AD) strategy. Japan, along with the U.S., is enhancing its defence posture to counter any unilateral changes by China in the region.
PLA to Conduct Live-Fire Drill Near Myanmar Border
China Daily reports that the People’s Liberation Army’s Southern Theater Command will begin a joint live-fire drill near the China-Myanmar border, involving both ground and air forces. The exercise aims to enhance capabilities in reconnaissance, early warning, blockade, and firepower strike, demonstrating the command’s readiness to safeguard national sovereignty and border stability.
Expiration of Major US-China Science Treaty Signals Deep Uncertainty Amid High Tensions
Holly Chik and Khushboo Razdan write in the SCMP that the US-China Science and Technology Agreement (STA), first signed in 1979, has expired following delays caused by US concerns over China’s use of the treaty. The expiration reflects growing tensions and the need for updated agreements that consider modern security issues like data protection. Despite the expiry, both nations remain in communication, suggesting ongoing negotiations.
Can NATO Ice Out China and Russia in the Arctic?
Matthew P. Funaiole and Aidan Powers-Riggs write in Foreign Policy that NATO has launched the Icebreaker Collaboration Effort (ICE Pact) involving the United States, Canada, and Finland to counter China and Russia’s growing presence in the Arctic. The ICE Pact aims to build a fleet of icebreakers for NATO, leveraging the technological expertise and shipbuilding capacities of these nations. However, geopolitical challenges, such as the U.S.-Canada dispute over Arctic waters, and partnerships with companies involved in Chinese shipbuilding, may pose hurdles to the initiative’s success.
Australian senator upholds motion denying China’s U.N. claim to Taiwan
Sophie Mak writes in Nikkei Asia that Australian Senator David Fawcett has defended a motion rejecting China’s sovereignty claim over Taiwan, citing the need to maintain the regional status quo. The motion clarifies that U.N. Resolution 2758 does not establish Chinese sovereignty over Taiwan. Despite potential backlash, Beijing has not publicly condemned the move, likely to avoid straining economic ties. The motion has been praised by Taiwan for countering China’s narrative.
ASML’s China Chip Business Faces New Curbs From Netherlands
Cagan Koc and Jenny Leonard write in Bloomberg that the Netherlands plans to further restrict ASML Holding NV’s ability to repair and maintain its semiconductor equipment in China. This decision, influenced by US pressure, may prevent ASML from servicing its advanced deep ultraviolet lithography machines in China, impacting China’s chip-making capabilities and ASML’s sales. The move aligns with the US’s broader efforts to limit China’s semiconductor sector advancements.
Tech🧑💻 in China
China Invests $6.1 Billion in Computing Data Center Project
Reuters reports that China has invested over 43.5 billion yuan ($6.12 billion) in a nationwide project to build computing data centres, according to Liu Liehong, head of China’s National Data Bureau. The “Eastern Data, Western Computing” initiative aims to construct eight major data hubs, leveraging abundant energy resources in western regions and transferring computing power to eastern economic hubs. The project has attracted over 200 billion yuan in total investment and is part of China’s response to US tech export restrictions.China Invests $6.1 Billion in Computing Data Center Project
Temu Owner PDD Plunges 29% on Warning of Slowing Sales
Bloomberg reports that PDD Holdings Inc.’s shares fell by 29%, the largest drop since its 2018 IPO, after the company warned of slowing revenue growth. Temu’s owner cited fierce competition from ByteDance and Alibaba, along with a saturated market, as reasons for the downturn. Despite a strong global presence, PDD’s recent financial performance has lagged, missing revenue estimates and facing backlash from merchants and regulatory scrutiny.
Is Xi Jinping an AI Doomer?
The Economist reports that China’s leadership is divided over artificial intelligence (AI), with some officials fearing its potential existential risks. While some advocate for rapid development akin to the nuclear arms race, a faction influenced by leading scientists, including Turing Award winner Andrew Yao, is pushing for stricter regulations. Xi Jinping has signalled concerns over AI safety, suggesting a cautious approach might shape China’s future AI policies. Discussions on AI risks have even reached the Party’s central committee, highlighting the growing importance of balancing technological progress with safety. This could lead to new restrictions on advanced AI research and development in China.
De/Cypher Risk View
Cross-Border Dispute Resolution in China
Written By Qian Zhou, China Briefing, Summarized by De/Cypher Team
Cross-border disputes in China have been increasing in recent years, particularly since the onset of the COVID-19 pandemic. This increase is due to various geopolitical and economic challenges creating uncertainty for businesses operating in China, affecting their ability to fulfill contractual obligations. Here’s a comprehensive overview of cross-border disputes in China:
- Common Types of Cross-Border Disputes:
a) Disputes between suppliers and buyers:
- Late payments
- Failure to meet delivery deadlines
- Product quality issues
- Breaches of confidentiality agreements
- Losses due to force majeure events
b) Disputes with joint venture (JV) partners:
- Equity distribution
- Control issues
- Business plan disagreements
- Deadlock scenarios
- Exit strategies and termination mechanisms
c) Disputes with other business partners:
- Disagreements with local economic development bureaus, chambers of commerce, industrial parks
- Issues related to preferential treatment, investment amounts, project progress
d) Administrative investigations and penalties
e) Disputes arising during the disposal of assets in China
- Challenges for Foreign Investors:
a) Complexity of China’s legal system:
- Distinct characteristics from both civil and common law systems
- Local variations in laws and regulations
- Rapidly evolving legal landscape
b) Diverse range of disputes:
- Each type requires different knowledge and expertise
- Case-specific analysis needed for timing and strategy
c) Unique dispute resolution practices:
- Emphasis on mediation throughout the litigation process
- Challenges related to language, evidence, and service of court documents
d) Enforcement challenges:
- Historically low enforcement rates for judicial judgments and arbitration awards
e) Limited resources:
- Difficulty in understanding and anticipating opposing party actions
- Lack of comprehensive understanding of various business aspects
- Strategies for Optimized Dispute Resolution:
a) Careful drafting of dispute resolution clauses in contracts:
- Consider factors like cost, efficiency, and enforceability
b) Early engagement of qualified legal professionals:
- Helps in analyzing and predicting potential dispute developments
- Assists in formulating effective strategies
c) Comprehensive approach to disputes:
- Consider the broader context rather than treating issues as isolated incidents
- Conduct thorough background checks
d) Utilization of third-party dispute resolution support services:
- Coordinates various stages of the dispute resolution process
- Offers timely support and legal expertise
- Recent Amendments to China’s Civil Procedure Law:
a) Expansion of Chinese jurisdiction over foreign-related cases:
- Broadens scenarios under “exclusive jurisdiction” of Chinese courts
- Allows for interpretation of “appropriate connections” to China
b) Clarification on jurisdiction in cases involving foreign courts:
- Outlines scenarios where Chinese courts may hear cases also filed overseas
c) More methods for serving entities without domicile in China:
- Allows service through wholly owned enterprises or affiliates in China
- Shortens the period for service through public notice
d) Facilitation of evidence collection for foreign-related cases
e) Clarification on recognizing and enforcing rulings of foreign courts or arbitration tribunals
These amendments aim to improve efficiency in cross-border dispute resolution but may raise concerns for foreign companies about being unexpectedly summoned to Chinese courts. To mitigate risks, foreign businesses should:
- Familiarize themselves with the new provisions
- Review their dispute resolution strategies
- Ensure robust dispute resolution clauses in contracts
- Seek professional advice when dealing with cross-border disputes in China
By understanding these aspects and implementing appropriate strategies, foreign investors can better navigate the complexities of cross-border dispute resolution in China.
China’s Civil Procedure Law, which took effect on January 1, 2024. These amendments significantly impact cross-border dispute resolution involving foreign companies in China. Here are the key changes:
- Expansion of Chinese jurisdiction over foreign-related cases:
- Extends jurisdiction to non-property rights disputes whose defendants have no domicile in China.
- Allows for cases with “other appropriate connections” to China to be heard in Chinese courts.
- Expands scenarios under the “exclusive jurisdiction” of Chinese courts.
- Clarification on jurisdiction in cases involving foreign courts:
- Outlines when Chinese courts can hear cases also filed in overseas courts.
- Specifies conditions for dismissing or refusing cases where foreign courts have jurisdiction.
- More methods for serving entities without domicile in China:
- Allows service through wholly owned enterprises in China.
- Enables service through affiliates for certain natural persons or unincorporated organizations.
- Shortens the period for service through public notice from three months to 60 days.
- Other revisions:
- Adds provisions for collecting evidence located outside of China.
- Clarifies recognition and enforcement of foreign court rulings or arbitration awards.
- Includes provisions regarding civil litigation involving foreign states.
These amendments aim to improve the efficiency of cross-border dispute resolution, particularly when enforceable properties are in China. However, they may also raise concerns for foreign companies about being unexpectedly summoned to Chinese courts. The law emphasizes the importance of robust dispute resolution clauses in contracts to secure legal certainty.
