China in Quotes
“China could claim back the Russian Far East when it deems the time is right”
Steve Tsang, Director of the China Institute at the University of London’s School of Oriental and African Studies
De/Cypher Data Dive📈
Asia View
What the Long Term China Bond Yields Tell Us About Chinese Economic Sentiment?
Written by Amogh Rai, Research Director, ASIA
Wherever you look in China there is a palpable gloom about the state of economy but there has been a rare bright spot. The long term government bonds have become a darling of investors and have been in demand since January, insurers, fund managers, and rural banks have been the biggest participant in the rush to acquire these bonds, the demand has gone up significantly compared to the previous two years, but the supply of these instruments has been severely controlled by the ministry of finance and therefore stoking investor interest in them.
This month the work report of the ministry has introduced a plan over multi-years to issue ultra-long special bonds amounting to a total of US$ 138 Billion (1 Trillion Yuan). This issue will stop the decline in yield of ultra long government bonds. This is important as the yield on the bond presents a picture about the long term economic health of a country.
Currently the yield for these Chinese bonds stands at about 2.5%. Researchers looking at the data for long term US and Japanese bonds and GDP growth found out that a yield below 2.5% coincides with a GDP growth around 2%. However, even though the Chinese economy has decelerated significantly in the last few years it still managed to grow at 4.6% last year, the current analysis from the yield of the bonds suggests that the investors are overtly bearish on the Chinese economy.
This largely negative sentiment stems from an expectation from the business world that there will be a prolonged deflationary pressure in the Chinese economy. Xu Xiaoqing a macro-strategist for an investment fund writing in Caixin has argued that the deflationary pressure is largely in industrial and real-estate, there is an oversupply rather than a lack of demand. This is an interesting argument as the measure of M1 supply has remained at around 1 to 2 % since last year and M2 an indicator of broad supply of money in the economy both in cash and term deposits is hovering at 9%, so the possibility of the deflationary pressure is considerably overblown, but the rate at which fiscal deposits have slowed indicates that the government is conscious of raising the sentiments in the investor community this is a thaw from its hostile stance till last year but the yield data will have to be looked at to understand if the confidence is returning to its previous levels.
Quick China: Unmissable Stories 📜
Ukraine is worries about China reverse engineering the weapons it receives
Ukrainian intelligence services are stepping up their investigations into Chinese nationals who may be looking a little too closely at the manufacturing secrets of Western weapons supplied to Ukraine. Read more: Intelligence Online
China’s commerce minister heads to Europe for making EV Case
China’s commerce minister will travel to Europe in April for discussions about the European Commission’s investigation into whether China’s electric vehicle industry has benefited from unfair subsidies, four people briefed on the plan told Reuters. Read more: Reuters
China lifts Australian Wine Embargo
China has announced it is lifting punishing tariffs on Australian wines more than three years after imposing penalties that devastated the industry and were a major point of friction between the trading partners.
China’s Ministry of Commerce on Thursday said that “in view of the changes in the wine market conditions in China,” it was “no longer necessary to impose anti-dumping duties and countervailing duties on imported wines originating from Australia.” Read more: CNN
China is changing key financial personnel, this time at China Development Bank
Chen Mengmeng, president of the Shandong branch of the Agricultural Development Bank of China (ADBC), is slated to become a vice president of fellow policy lender the China Development Bank (CDB), sources told Caixin.
Chen is now a member of the CDB’s Communist Party committee along with Wang Kebing. Wang was also appointed a vice president and will assume the role after all the regulatory procedures are handled, Caixin previously reported. Read more: CAIXIN
Saudi Aramco Eyes China Cooperation Beyond Oil
Saudi Aramco sees opportunities to invest in and cooperate with China in the fields of chemicals, green materials, energy transition and digital innovation, said Amin Nasser, president and CEO of the Saudi Arabian oil giant. While energy remains “a strategic pillar” of Aramco’s relationship with China, future opportunities extend beyond investing and cooperating in energy alone, he said Monday at the China Development Forum in Beijing. Read more: CAIXIN
Beyond The Great Wall 🧱
Exploring News About China in Depth
De/Cypher Lighthouse 🔦
China and its Nationalist Imagination
Written By Priyanka Garodia & Farheen Yousuf
“China will surely be reunified, and all Chinese on both sides of the Taiwan Strait should be bound by a common sense of purpose and share in the glory of the rejuvenation of the Chinese nation. Our goal is both inspiring and simple. Ultimately, it is about delivering a better life for the people.” declared Xi Jinping in his New Year’s address to the people of China in 2024. This ran in tandem with the aggressive posturing of the PRC in claiming the right to the only Chinese-speaking democracy – Taiwan. China has ardently believed that it has a legitimate claim over the island and has not been shy in promising open aggression in what it believes is reunification with Taiwan. However, given its growing economic crisis, the Chinese people want nothing to do with this nationalist aspiration if it comes at the cost of economic stability and prosperity.
Public opinion on the Taiwanese question in China has been slipping in priority. The people have taken to sites like Weibo, the Chinese-authorised social media platform resembling Twitter, to voice their concerns over potential war with rising economic woes. This leads one to question the aggressive nationalism that the Communist Party of China (CPC) has been pushing for concerning Taiwan.
The CPC has a mechanical understanding of annexing Taiwan – an operation where one enters the island and exits without trouble. Taiwan has also evoked a romantic picture in the Chinese imagination, one where the apparent might of the PLA would lead to a peaceful surrender by the Taiwanese. However, this was not the case as the repeated electoral victory of the Democratic Progressive Party (DPP) has shown. Taiwan will fight against Chinese annexation and the Chinese state is also faltering in gaining domestic consensus on any possible aggression. The nationalist imagination of the Chinese people is preoccupied with issues of economic failure rather than border and territorial aggressions.
In the last two years, China’s economy faced slow growth due to systemic issues, declining property construction, and disruptive “zero-COVID” policies. Despite years of strong investment-led growth, averaging 7.7% annually from 2010 to 2019, China’s economic progress stalled. Experts anticipated the National People’s Congress might provide a strategic shift to revive growth and transition from an investment-led to a consumption-led economy. However, the NPC’s outcome, which concluded on March 11th, 2024, has done little to assuage concerns among domestic and international observers.
A major point of contention is China’s significant trade surplus, which ballooned due to a fall in domestic demand, leading to exports exceeding imports by $1.7 trillion over 2022 and 2023. This has raised alarms across advanced economies and developing countries alike, who fear China might be aiming to export its way out of the economic slowdown at their expense. Beijing’s hesitance to promote domestic consumption and support for export-driven industries may worsen trade imbalances, potentially harming foreign businesses and jobs. This could lead to protective trade measures from other nations, such as anti-dumping policies and tariffs, fostering a more polarized global trade climate.
China’s increase in defence budget while its domestic economic problems loom close to a crisis is a clear indicator of military priority over domestic needs and human capital development. This can prove to be dangerous given that the legitimacy of the People’s Republic of China has been built on a contract between the state and the people that rests on a clear barter – economic development for unchallenged political rule.
With economic growth expected to stall for the first time since China’s market reforms and a nation disenchanted with the idea of war and expansion when higher taxes, reduced income and limited consumption capacities occupy immediate concern, the CPC will have to shift its immediate attention to appeasing its population and ensuring economic security rather than nationalist expansion.
Internal Politics 🏛️
Xi Jinping to China’s central bank: restart treasury-bond trade, after 2-decade hiatus
President Xi Jinping instructed China’s central bank to resume treasury-bond trading, a move not seen in more than two decades, in order to increase liquidity and fuel economic growth. The decision, detailed in a new book on Xi’s financial ideas, reflects China’s evolving monetary policy toolkit as it faces challenges in stimulating the economy. While controversial, purchasing treasury bonds is viewed as a strategic move by Beijing as it seeks balanced liquidity, fosters innovation, and navigates economic headwinds on its path to a 5% growth target. Read more: SCMP
China’s ‘low-altitude economy’ on the rise as southern city named focal point
China designated Guangzhou’s Nansha district as a hub for its “low-altitude economy,” focusing on unmanned vehicles and autonomous tech. The National Development and Reform Commission highlighted Nansha’s role in city-wide management systems and industry standards. Plans for pioneering research in drones, autonomous vehicles, and civil aviation align with the Greater Bay Area’s tech advancement goals. The sector’s value surpassed 500 billion yuan last year, projected to reach 2 trillion yuan by 2030, showing China’s strategic commitment to this emerging industry. Read more: SCMP
Strategic Support Force: China’s mission to win future wars hinges on this shadowy military branch
Established in 2015, China’s Strategic Support Force (SSF) aims to enhance military capabilities in space, cyber, electromagnetic, and psychological warfare. With departments for space and cyber forces, it integrates civilian AI innovations for military readiness and intelligence. Recent exercises, like those in Taiwan, highlight its evolving role, yet US export restrictions on advanced tech pose challenges to China’s military-civilian strategy and future capabilities. Read more: SCMP
Dubai prince vows to open family office in Hong Kong by end of May after abruptly postponing earlier launch
Dubai prince Sheikh Ali Rashed Ali Saeed Al Maktoum intends to open his family office in Hong Kong by the end of May, following a postponement earlier this week. The 28-year-old, who is said to be the nephew of Dubai’s ruler and prime minister, expresses heartfelt gratitude to the Hong Kong government for its assistance. Questions were raised about his $500 million investment pledge, as well as his background and connections to the UAE’s ruling family. Read more: SCMP
China And The World🌐
Xi stresses irreversible trend of economic globalization to Dutch PM Rutte
Chinese President Xi Jinping emphasized the irreversible trend of economic globalization during a meeting with Dutch Prime Minister Mark Rutte in Beijing. Despite challenges such as the Dutch export ban on chip machines to China, discussions focused on mutual benefits, with the goal of stabilizing bilateral ties and promoting cooperation in technology and education. Rutte echoed the sentiment, stating that actions against China’s interests would eventually harm the Netherlands. Read more: Global Times
U.S., U.K. accuse China over spy campaign that may have hit millions
US and UK officials accuse China of a global cyberespionage campaign that targets millions of people, including White House staffers, senators, British parliamentarians, and dissidents. APT31, the hacking group, allegedly compromised work accounts and personal data in order to silence critics and steal trade secrets. Both countries imposed sanctions on a Chinese firm involved in the activity, heightening tensions between Beijing and Western powers over cybersecurity issues. Read more: Nikkei Asia
Nineteen companies, including five from China, accused of IP infringement
US Conec Ltd. has filed complaints against 19 companies, including 5 Chinese firms, for alleged unfair competition and import trade practices, with a focus on intellectual property rights such as patent and trademark infringement involving fiber-optic connectors, adapters, and jump cables. The US-based company sought exclusion orders against these firms under Section 337 of the Tariff Act of 1930. The United States International Trade Commission (USITC) may issue cease and desist orders based on the evidence presented, pending decisions from both the USITC and the United States District Court for the Eastern District of Texas. Read more: Caixin Global
China’s patent figures reveal it’s closing the gap on US quantum dominance
China’s patent data show a significant shift in its quantum technology focus, with quantum computing patents outnumbering those for quantum communication. This shift calls into question the long-held US lead in the field, with China accounting for 37% of global quantum patent applications from 2003 to 2022, surpassing the US by slightly more than 28%. While China has excelled in quantum communication, milestones in quantum computing and sensing still place the United States ahead, though recent reports indicate a closer competition. Read more: SCMP
News From Asia 🌏
Friday
- An Israeli strike in northern Syria’s Aleppo province killed at least 36 Syrian soldiers on Friday, according to a war monitor. According to the Syrian Observatory for Human Rights, the attack was carried out in close proximity to Hezbollah rocket depots. Read more: Arab News
- Russia’s veto on Thursday effectively ended the United Nations’ monitoring of sanctions against North Korea, citing concerns about biased reporting and the sanctions’ ineffectiveness. This move, made amid tensions over Ukraine, drew criticism from Western nations, which accused Moscow of violating sanctions by purchasing weapons from Pyongyang. Read more: AP News
- Japan intends to upgrade Nagasaki and 15 other airports into emergency hubs for potential conflicts, particularly with China, through a $230 million initiative. This is consistent with Japan’s National Security Strategy, which calls for swift military responses. Read more: The Eurasian Times
- Vietnam’s GDP growth in Q1 slowed to 5.66%, down from 6.7% the previous quarter, due to reduced trade and a corruption crackdown affecting businesses. The country, a manufacturing hub, is dealing with low foreign demand, loan difficulties, and a cautious business climate as a result of the anti-corruption drive. Read more: Nikkei Asia
Thursday
- Bus drivers in Seoul went on strike on March 28, 2024, due to failed negotiations for a wage hike, affecting the commute for 9 million city residents and another million from the outskirts. The full-scale strike, the first in 12 years, followed the dismissal of the union’s demand for a 12.7% wage increase. Read more: Bloomberg
- Myanmar’s annual Armed Forces Day parade featured fewer personnel and weaponry, indicating a shift toward combating escalating offensives by ethnic minority armed groups. The event, which had 7,750 participants down from 8,424 in 2023, lacked large military displays and was shortened. Senior General Min Aung Hlaing cited armed group disruptions as justification for military conscription, which will begin in late April. Read more: Nikkei Asia
- Interpol states human trafficking tied to Southeast Asia cyber scam centers has become a global crisis, with estimated annual profits reaching US$3 trillion. These crime rings, expanding post-pandemic, exploit millions of victims, diversifying income alongside drug trafficking. Singapore’s success in busting a S$3 billion money laundering case was also noted. Read more: CNA
- Japan has announced a $33 billion investment in a hydrogen-powered next-generation airliner, aiming to compete with China’s COMAC. The initiative, in collaboration with the private sector, focuses on advanced propulsion systems that aim to outperform conventional jet engines by 2035. Japan aims to revitalize its aviation industry following setbacks such as the Mitsubishi SpaceJet project, in line with global carbon neutrality goals. Read more: The Eurasian Times
Wednesday
- The yen dropped to its lowest level in 34 years, trading near 152 to the dollar on Wednesday morning, about a week after the Bank of Japan ended its negative interest rate policy. Read more: Nikkei
- Vietnam on Tuesday (Mar 26) called on the United States to recognise it as a market economy, saying stronger trade ties would benefit Washington in key areas as it seeks to diversify from China. Read more: CNA
- Belarus President Alexander Lukashenko said on Tuesday that the gunmen who attacked Moscow’s Crocus City Hall music venue on Friday tried initially to flee to Belarus, not Ukraine as Russian officials including President Vladimir Putin have insisted. Read more: SCMP
- Amid geopolitical tensions and economic shifts, American businesses, including tech giants and automakers, are seeing a decline in trade and revenue in China. Companies such as Nvidia and Qualcomm are impacted, whereas Apple’s sales increased following competitor disruptions. Read more: WSJ
Tuesday
- Japanese banks have a stellar year but the pay for bankers does not keep pace with dealmaking. Read more: Bloomberg
- China publishes guideline designating southern provincial capital Guangzhou as major staging ground for research, development in ‘low-altitude economy’. Read more: SCMP
- Japan on Tuesday eased its strict defense equipment transfer rules to allow a worldwide export of next-generation fighter jets set to be jointly developed with Britain and Italy, removing a hurdle for the trilateral project. Read more: Nikkei
- Israeli Prime Minister Benjamin Netanyahu has canceled a planned visit to Washington by a high-level delegation to protest Monday’s UN Security Council decision calling for an immediate ceasefire in Gaza. Read more: Haaretz
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