China Quote
“It came as a surprise to me, as I expected the PBOC to follow the Fed and cut the loan prime rate by 10 basis points,” – Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.
De/Cypher Data Dive📈
China: Power generation increased in June, reflecting the heatwaves that swept across China. The residential and service sectors drove the increase in electricity use. With the ongoing heatwaves, power consumption is expected to rise significantly.
Asia View🌏
China’s Crackdown on Research Misconduct
Written By Shivani Singh, Program Coordinator for Law & Critical Emerging Technologies
The case of Sun Beicheng, a prominent figure in xenotransplantation, highlights a significant change in China’s stance on research integrity. Sun, known for his pioneering work in transplanting a genetically modified pig liver into a human, faced serious consequences after being accused of academic misconduct. His breach of the Ministry of Science and Technology’s (MOST) 2020 regulations, attempting to secure favorable reviews for his state funding application led to a seven-year ban from state-funded research.
This incident reflects a broader shift in China’s academic and research landscape. Historically, the environment has been marred by misconduct and intense competition for limited state resources, resulting in systemic pressures that often lead to ethical violations. The recent actions taken against Sun and other researchers demonstrate the government’s increased commitment to integrity and the responsible use of research funding.
MOST’s crackdown is part of a larger initiative to emphasise quality over quantity in scientific innovation. As China aims to bolster its technological capabilities, especially in critical areas like semiconductors, the focus on research integrity becomes essential. Despite significant investments, such as the US$97 billion earmarked for the semiconductor sector, inefficiencies and mismanagement have hindered progress, partly due to past misconduct.
The economic backdrop adds further complexity to this situation. With a 10 percent rise in science and technology funding to 370.8 billion yuan (US$51.5 billion) in 2024, China is pushing for innovation amid broader economic challenges, including a 2.8 percent decline in fiscal revenue and a 1.4 percent drop in science spending. The competition for state funds has intensified, with a 26 percent increase in research program applications and only 13 percent receiving funding.
Sun Beicheng’s case serves as a warning and highlights China’s dedication to reform. The emphasis on strict research standards shows a national priority to make sure that government investments lead to real innovation, with the goal of enhancing China’s technological independence in the face of geopolitical challenges.
Quick China: Unmissable Stories 📜
China Weighs Removing Major Homebuying Curbs to Boost Demand
China is considering removing some of the largest remaining restrictions on home purchases after previous measures failed to revive a moribund housing market, according to people familiar with the matter. Regulators are working on a proposal that would allow mega cities such as Shanghai and Beijing to relax restrictions for non-local buyers — those who don’t have a so-called Hukou residence permit for that location, the people said, asking not to be identified because the matter is private. It’s a barrier many smaller cities have already removed. (Bloomberg)
Punishing People for Their Relatives’ Crimes Comes Under Scrutiny in China
Legal experts in China are pushing to reform a longstanding practice that can cause law-abiding citizens to lose their shot at joining the civil service, getting into certain university programs or the military if they happen to be related to a convicted criminal.
The reform push has the potential to curtail the practice — known as collective punishment — that has been criticized for violating basic legal norms and putting a vast share of China’s population at risk of being punished for the actions of another.
China had nearly 25 million recorded criminal offenders from 2000 to 2022, according to data from the National Bureau of Statistics. If each one had an average of just three relatives, some 100 million people would be at risk of repercussions from collective punishment. That’s one out of every 14 people in China. (Caixin)
China’s Central Bank Delays One-Year Loan Operation Again
People’s Bank of China (PBOC) has postponed its one-year loan operation, opting to inject liquidity on September 25 instead. This delay comes amidst broader reforms in the central bank’s policy framework, aiming to align more with global peers and influence market borrowing costs more effectively. (The Business Times)
Chinese Chip Stocks Jump After Claims of Equipment Breakthrough
Chinese semiconductor stocks surged following the announcement of a breakthrough in homegrown chipmaking equipment. Changchun UP Optotech gained 10%, while Sai Micro Electronics rose 5.3%. The new laser-based lithography machine with 65nm resolution, developed by domestic companies, represents progress in overcoming U.S. sanctions. However, China still lags behind global leaders like ASML in advanced chipmaking technology. (Bloomberg)
US FBI strikes second Chinese hacking group, director says
FBI disrupted a second major Chinese hacking group, “Flax Typhoon,” according to FBI Director Christopher Wray. Flax Typhoon, run by the Chinese firm Integrity Technology Group, allegedly performed reconnaissance for Chinese security agencies. This follows earlier concerns about another group, “Volt Typhoon,” targeting critical US infrastructure. China has denied these allegations, labelling Volt Typhoon as a ransomware gang. (CNA)
Chinese Researcher Pushes US Ahead in Race to Build Ultra-Precise Nuclear Clock
Zhang Chuankun, a graduate student from Shandong, China, has made a significant contribution to building a nuclear clock at the University of Colorado Boulder. Zhang developed a crucial laser device, a vacuum ultraviolet frequency comb, enabling precise time measurements. This breakthrough enhances the possibility of nuclear clocks surpassing atomic clocks, allowing unprecedented precision in measuring fundamental constants and testing physics foundations. (SCMP)
Beyond The Great Wall 🧱
Exploring News About China in Depth
De/Cypher Lighthouse
Hong Kong’s AI Regulation: Balancing Innovation and Geopolitical Challenges
Written By Farheen, Trust and Policy Analyst
Hong Kong’s financial services and treasury bureau is said to release framework for integrating AI into financial services, as well as standards for ethical AI usage in algorithmic trading, investment banking, and cryptocurrency handling. This, in part, is driven by the exclusion of Hong Kong from the major AI service platforms coming from the West, particularly OpenAI’s ChatGPT and Alphabet’s Google Gemini, and from the Chinese side, Baidu’s Ernie Bot. Positioned at the crossroads between the US and China, Hong Kong is exposed to special territorial complications, which requires it to create its own AI framework and to seek ways for the mitigation of geopolitical constraints. These policies will be developed in order to demonstrate stability and encourage international investment in the midst of the US-China technology competition.
However, Hong Kong continues to fall behind in terms of the amount of data and talent necessary to do this. According to a recent PwC poll, 60% of respondents listed data shortages and cybersecurity concerns as important difficulties. To this end, it has signed a Memorandum of Understanding with China’s Cyberspace Administration to facilitate cross-border data flow and establish regulatory sandboxes for testing AI technologies.
While Hong Kong prepares its AI policy declaration for Fintech Week, the issue remains whether it will be able to foster AI innovation or risk strangling development while geopolitical tensions linger.
Economy
Goldman Sachs, Citigroup cut China’s 2024 growth forecast to 4.7%
Kanchana Chakravarty writes in Reuters that Goldman Sachs and Citigroup have cut China’s 2024 economic growth forecast to 4.7%. This revision follows weaker-than-expected industrial output and retail sales in August, which slowed to a five-month low. The reduced growth forecasts reflect concerns over China’s sluggish economic recovery, prompting calls for further stimulus and demand-side policy measures to meet the government’s 5% target.
China crypto trading thrives in ‘OTC’ market despite restrictions
Echo Wong writes in Nikkei Asia that despite strict regulatory crackdowns, cryptocurrency trading is surging in China’s over-the-counter (OTC) market. A Chainalysis report reveals that trading volumes tripled from 2021 to 2024, as investors seek alternatives amidst a sluggish stock market. The rise in OTC inflows aligns with economic downturns, with increasing usage tied to circumventing official capital controls.
Internal Politics 🏛️
Xi urges continuous efforts to uphold, improve people’s congresses
CGTN reports that President Xi Jinping emphasised the importance of sustaining and improving China’s system of people’s congresses during the 70th anniversary celebration of the National People’s Congress (NPC). Xi highlighted the system as a unique political invention, pivotal to China’s rapid development and stability. He stressed the need for continued adherence to the CPC’s leadership, promoting legislation in emerging sectors, and enhancing the congresses’ role in governance and public engagement.
Typhoon Bebinca lashes Shanghai in strongest storm since 1949
Reuters reports that Typhoon Bebinca, the most powerful storm to hit Shanghai in over 70 years, struck the city on September 16 with winds reaching 151 kph. Over 400,000 residents were evacuated, and more than 10,000 trees were felled. The storm caused widespread disruptions, including the cancellation of 1,400 flights and the closure of parks, highways, and metro services.
China And The World🌐
China relations ‘a top priority’, Vietnamese leader To Lam tells new Beijing envoy
Laura Zhou writes in SCMP that Vietnamese leader To Lam emphasised China’s importance in Hanoi’s foreign policy while receiving Chinese envoy He Wei. He pledged to enhance political trust and cooperation on defence and security, despite ongoing tensions in the South China Sea. Both sides aim to strengthen bilateral ties and resolve maritime disputes collaboratively.
China Welcomes More Indian Investments, Ambassador Says
Reuters reports that Chinese Ambassador Xu Feihong expressed China’s willingness to welcome more Indian investments and commodities while speaking at an event in New Delhi. He also encouraged India to create a favorable business environment for Chinese firms, despite tensions from a 2020 border clash. Xu further highlighted potential cooperation in science and technology and called for the resumption of direct flights and visa facilitation for Chinese citizens.
Chinese vice premier talks with UK chancellor of exchequer on economic cooperation
Xinhua reports that Chinese Vice Premier He Lifeng held a phone conversation with British Chancellor of the Exchequer Rachel Reeves to discuss enhancing trade and economic cooperation. He highlighted China’s readiness to restart the China-UK Economic and Financial Dialogue and to align development strategies with Britain. Reeves affirmed the UK’s willingness to strengthen dialogue and cooperation to build long-term, mutually beneficial relations.
Student at Japanese school in China’s Shenzhen stabbed by man
Kyodo News reports that a male student at a Japanese school in Shenzhen was stabbed by a man on Wednesday. The student, who is in stable condition, was attacked on a street near the school. The 44-year-old suspect was apprehended, and Japanese authorities have urged China to ensure the safety of Japanese nationals following the incident.
US-China military leaders hold routine talks to discuss South China Sea tensions and other issues
Huizhong Wu writes in AP News that military leaders from the U.S. and China met in Beijing to address ongoing tensions, including the South China Sea and Taiwan. While significant differences remain, the talks aimed to reduce the risk of conflict. Discussions also covered China’s support for Russia in the Ukraine war. These routine talks resumed in January after a two-year suspension amid heightened tensions.
US military companies sanctioned for arms sales to Taiwan
Zhang Yunbi writes in China Daily that Beijing has imposed sanctions on nine US military-industrial companies after the US approved a $228 million arms sale to Taiwan. China condemned the sale, stating it violated the one-China principle and undermined its sovereignty. The sanctions include freezing assets and banning cooperation with these companies, effective immediately. Beijing warned that US support for Taiwan’s independence will ultimately backfire.
China frees American pastor US claims was wrongly jailed, State Department says
Reuters reports that China has released U.S. pastor David Lin, who had been imprisoned since 2006 on charges of contract fraud. The U.S. government claimed Lin was wrongfully detained, and his release was welcomed by the State Department. Lin’s family expressed joy at his return to the U.S. after nearly 20 years. U.S. officials had long advocated for his release alongside other Americans detained in China.
Chinese Cargo Cranes at U.S. Ports Pose Espionage Risk, Probe Finds
Dustin Volz writes in The Wall Street Journal that a U.S. congressional investigation has found Chinese-made cargo cranes at U.S. seaports equipped with technology that could allow Beijing to access and potentially disrupt port operations. ZPMC, a Chinese manufacturer, has pressured American ports for remote access to cranes, raising national security concerns. The report highlights the risk of espionage through cellular modems embedded in cranes, potentially bypassing firewalls.
China aircraft carrier briefly enters Japan’s contiguous waters: Report
The Star reports that a Chinese aircraft carrier, Liaoning, briefly entered Japan’s contiguous waters for the first time. According to NHK, the carrier sailed between the Yonaguni and Iriomote islands in Okinawa. This incident follows rising maritime tensions between China and Japan, with recent protests from Japan over Chinese naval activity in its territorial waters. The Japanese Defence Ministry has yet to confirm the report.
Lenovo to Make AI Servers in India as Nation’s Tech Push Deepens
Saritha Rai writes in Bloomberg that Lenovo has begun manufacturing AI servers in southeastern India, marking a milestone in the country’s growing tech manufacturing sector. The servers, which power generative AI apps like ChatGPT, are part of India’s strategy to attract tech investments as geopolitical tensions rise. Lenovo’s move further emphasizes India’s importance in high-tech production, positioning the country as an alternative to established markets.
Japan nears China chip curbs deal with ‘Bad Cop, Very Bad Cop’ US
Vishakha Saxena writes in Asia Financial that Japan is close to imposing stricter restrictions on chipmaking technology exports to China, following U.S. pressure. The U.S. has urged Japan and the Netherlands to tighten chip tech sales to China, creating tensions between Tokyo and Beijing. While Japan fears retaliation from China, it also risks falling afoul of the U.S. “foreign direct product rule,” complicating negotiations as the U.S. seeks a deal before its upcoming elections.
China, Thailand aiming to create ‘ecosystem using digital technologies’
Kandy Wong writes in SCMP that Thailand’s Digital Economy Promotion Agency is collaborating with Chinese cities such as Shenzhen and Hangzhou to develop smart cities using digital technologies. This partnership, part of China’s Belt and Road Initiative, focuses on infrastructure like railways and digital solutions. However, data flow challenges remain a concern for seamless cross-border trade, highlighting the complexities of developing the digital economy in the region.
China’s low-priced EVs reign in Spain, make gains in Europe’s lanes
Mia Nulimaimaiti writes in SCMP that Chinese electric vehicles (EVs) are gaining popularity in Spain due to their competitive pricing, with models like MG4 and BYD Atto 3 becoming bestsellers. However, new EU tariffs of up to 38% on Chinese EVs may hinder their growth. Analysts suggest this pressure could push European manufacturers to innovate, although the lack of charging infrastructure remains a challenge for EV adoption in Europe.
Tech🧑💻 in China
China Claims Chipmaking Gear Advance Despite Tightening US Curbs
Yuan Gao writes in Bloomberg that China has reported progress in developing its own chipmaking equipment, marking a breakthrough amid U.S. sanctions aimed at hindering its semiconductor ambitions. The new laser-based lithography machine, with a 65nm resolution, is a significant improvement over previous models. While China’s technology still lags behind global leaders like ASML, the development reflects China’s efforts to overcome barriers imposed by U.S. export restrictions.
Innovation drives Anhui’s smart plants
China Daily reports that Hefei, the capital of Anhui province, continues to show robust economic growth, with its GDP surpassing 1.27 trillion yuan in 2023. Anhui’s provincial GDP reached 4.71 trillion yuan, marking a 5.8% year-on-year increase. Mohamed Noureldin, an Egyptian post-doctoral researcher, highlights Hefei’s innovative advancements in areas like artificial intelligence and cloud computing, attributing its success to cutting-edge technology and a steady influx of international researchers.
ByteDance Denies Collaboration with TSMC on AI Chips
Pandaily reports that ByteDance has refuted claims of partnering with Taiwan Semiconductor Manufacturing Company (TSMC) on AI chips. While ByteDance is exploring chip development, its focus is on cost optimisation for its recommendation and advertising businesses. The company emphasised that all activities comply with trade regulations. Earlier rumours suggested ByteDance’s collaboration with Broadcom on AI processors, which the company had also denied.
Rest of World
HEADLINES
Friday
- Israeli warplanes carried out late on Thursday their most intense strikes on southern Lebanon in nearly a year of war, heightening the conflict between Israel and Lebanese armed group Hezbollah amid calls for restraint. (Reuters)
- Two people from Taiwanese companies were questioned multiple times as part of a probe into pagers that exploded while being used by Hezbollah operatives in Lebanon. (Arab News)
- Ukrainian President Volodymyr Zelenskyy will travel to Washington next Thursday for talks with President Joe Biden and Vice President Kamala Harris as he presses for the U.S. to allow Ukraine to use Western-provided weapons to strike deeper into Russia. (AP)
- Republican presidential candidate Donald Trump said that Jewish-American voters would be partly to blame if he loses the Nov. 5 election to Vice President Kamala Harris, the Democratic candidate. (Politico)
Thursday
- Israeli warplanes launched an attack on southern Lebanon after 32 people were killed and over 3,000 injured by exploding pagers and walkie-talkies across the country. (Sky News)
- Iranian hackers targeted President Biden’s campaign, sending unsolicited emails about stolen Trump campaign information, aiming to interfere in the 2024 election, according to the FBI. (Arab News)
- Venezuela’s former opposition candidate, Edmundo González, claimed he was coerced into signing a letter acknowledging his defeat in July’s presidential election won by President Maduro. (AP)
- Vietnam’s president and Communist Party chief, To Lam, will visit the U.S. next week for the 79th UN General Assembly, then travel to Cuba. (Reuters)
Wednesday
- Israel’s Mossad espionage service planted explosives in thousands of Hezbollah pagers before they were detonated around Lebanon. (BBC)
- North Korea launched a barrage of short-range ballistic missiles, marking Pyongyang’s second such weapons test in a week according to Seoul’s military. (France 24)
- Vietnam’s president and ruling Communist Party chief, To Lam, is scheduled to meet with representatives from several US corporations, including Google and Meta, during a visit to the United States next week, according to two people familiar with the plans. (SCMP)
- The IMF has postponed its planned consultation mission with Russia indefinitely due to technical issues. (Reuters)
Tuesday
- Thousands of activists and politicians from the opposition Bangladesh Nationalist Party marched in the country’s capital on Tuesday to demand a democratic transition through an election, as an interim administration has yet to set a timetable for new voting. (Arab News)
- North Korean Foreign Minister Choe Son-hui has left for an official visit to Russia, where she will attend a number of international events. (Andalou Ajansi)
- A Pakistani man with apparent ties to Iran pleaded not guilty on Monday to attempting to assassinate a US official in retaliation for the US military’s execution of Revolutionary Guards commander Qassem Soleimani. (Al Arabiya)
- Myanmar’s military administration has increased deaths and arrests in an apparent drive to silence opponents and recruit soldiers in an expanding conflict, with tens of thousands arrested since the 2021 coup, according to a United Nations assessment. (CNA)
Monday
- A high-level US team met with Nobel laureate Muhammad Yunus, the leader of Bangladesh’s interim administration, on Sunday to reiterate “dedication to fostering inclusive economic growth,” according to the US Embassy in Dhaka. (AP)
2. According to the UN, the Taliban have ceased polio immunisation programs in Afghanistan. (ABC)
3. President Vladimir Putin ordered on Monday that the regular size of the Russian army be boosted by 180,000 personnel to 1.5 million active servicemen, making it the world’s second largest army behind China. (Reuters)
4. A man suspected of attempting to assassinate Donald Trump was charged with two gun-related felonies in federal court on Monday, a day after being discovered with a weapon hidden in the woods at the former US president’s golf property in Florida. (Arab News)
