Mistral点评

• Chinese team finds first trace of lunar water, a big step towards understanding the moon
• China’s timely tax reforms will help local governments deliver stability
• India’s finance minister in favour of more Chinese direct investment, despite strained ties
• Global demand for Chinese e-commerce goods boosts low-value trade untouched by tariffs
• China’s non-financial debt growth slows with firms and households unwilling to leverage up
• China rolls out strict new measures for government sector to protect state secrets
• Feeling besieged, security-obsessed China struggles to win friends and tell its story well
• Palestinian factions agree to end divisions after talks in China
• [Sport] China seeks to unite Palestinian factions with unity deal
• China moves closer to launching flying taxi services as EHang seeks Beijing’s go-ahead
• Disgraced China professor fired after PhD student exposes forced kissing, breast groping
• Port wars: India’s Bangladesh deal seen as bid to curb China’s maritime ambition
• Palestinian factions agree to end division in pact brokered by China
• Hamas and Fatah sign declaration in Beijing on ending yearslong rift, Chinese state media says
• China auto giant decries EU’s ‘illegal’ anti-subsidy probe, hints at challenge
• China seeking hi-tech solutions to disaster relief challenges
• China firms issue record US$14 billion convertible bonds as market revives
• China hopes US firms can ‘play a strong role’ after top executives visit Beijing
• China loses maths Olympiad to US but genius student Shi Haojia remains on top of the game
• China says Hamas and Fatah sign ‘Beijing declaration’ on Palestinian unity
• Why does China care about a rust bucket in the middle of the sea?
• Chinese method of making ultrathin semiconductors could lead to faster microchips
• Deal or no deal? China and Philippines at odds over Second Thomas Shoal resupply agreement
• Hong Kong entrepreneur urges schools to better support non-Chinese speakers
• Is Vietnam losing its appeal for China’s manufacturers bypassing US tariffs?

Chinese team finds first trace of lunar water, a big step towards understanding the moon

https://www.scmp.com/news/china/science/article/3271585/chinese-team-finds-first-trace-lunar-water-big-step-towards-understanding-moon?utm_source=rss_feed

Chinese scientists have found water molecules in lunar soil for the first time, a discovery that could be fundamental for understanding how the moon evolved and how to exploit its resources.

Samples brought back by American Apollo astronauts decades ago revealed no sign of water and led scientists to conclude that lunar soil must be completely dry, according to Nasa.

Now, based on lunar soil samples returned by China’s Chang’e-5 mission in 2020, Chinese scientists have found a hydrated mineral “enriched” with molecular water, according to the Chinese Academy of Sciences (CAS) on Tuesday.

The research – carried out jointly by researchers from the Beijing National Laboratory for Condensed Matter Physics and the Institute of Physics of CAS and other domestic research institutions – was published in the peer-reviewed journal Nature Astronomy on July 16.

Using a sample provided by the China National Space Administration, the team isolated more than 1,000 mineral “clasts”. The researchers said that among them was a platelike transparent crystal, dubbed “unknown lunar mineral” (ULM-1), that contained water molecules.

The researchers ruled out the possibility that the water-bearing mineral was contaminated by terrestrial sources or rocket exhaust.

But one geochemist said he expected the team to find more evidence in their further study.

“If this water-bearing mineral is present in the lunar samples, more than one piece should be found,” said the scientist who asked not to be named and was not associated with the study.

The search for water on the moon has been a decades-long quest for lunar scientists.

When the United States’ Apollo mission first took humans to the moon in the 1960s, researchers had the chance to search directly for signs of water on the lunar surface.

However, initial analyses of their soil samples were disappointing and led to the prevailing notion of a “dry moon”. The prospect of lunar water was not seriously considered again for decades.

In recent years, the dry moon concept has been challenged thanks to technological advances, such as microanalysis techniques and remote sensing, according to the Nature Astronomy paper.

In 2009, for example, the Indian Space Research Organisation’s Chandrayaan-1 spacecraft detected signs of hydrated minerals in the form of oxygen and hydrogen molecules in sunlit areas of the moon.

More recently, in 2020, Nasa announced the discovery of water on the sunlit surface of the moon based on data from the airborne Stratospheric Observatory for Infrared Astronomy, which detected water molecules in the Clavius crater, one of the largest craters visible from Earth, in the moon’s southern hemisphere.

But the lack of returned lunar samples from high latitude and polar regions means that “neither the origin nor the actual chemical form of lunar hydrogen has been determined”, according to the Nature article.

After the Chang’e-5 mission retrieved the first lunar samples in decades from the moon’s near side in 2020, researchers had a fresh chance to investigate a number of lunar mysteries – including the presence of water on the moon – because the samples were much younger than those brought back by the Apollo and Soviet Luna missions five decades ago, and from a much higher latitude.

And in 2022, the Chang’e-5 lunar lander sent back the first on-site evidence of water on the surface of the moon.

More discoveries could follow with the return to Earth in June of China’s Chang’e-6 moon mission with up to 2kg (4.4lbs) of material scooped and drilled from the moon’s oldest basin on the lunar far side.

China’s timely tax reforms will help local governments deliver stability

https://www.scmp.com/opinion/china-opinion/article/3271203/chinas-timely-tax-reforms-will-help-local-governments-deliver-stability?utm_source=rss_feed

China’s latest tax reform plans, focused on raising income for local governments, as well as support from the central government, are long overdue. The property crisis triggered by the “three red lines” policy introduced in 2020 led to a wider economic downturn, but the deeper cause is the reliance of local governments on land-based financing.

This reliance is a product of China’s unbalanced fiscal architecture, where local governments shoulder a disproportionate share of the fiscal responsibility (over 80 per cent of spending last year) relative to their share of fiscal income (just over half). All this, while tasked with delivering unending economic growth, drove local governments to exploit the key resource at their disposal – land.

The rapid unravelling of the property sector might have surprised the central government but this unsustainable fiscal architecture was long due for a reckoning.

The lot was cast decades ago when mainland China adopted a local fiscal model inspired by Hong Kong’s reliance on land sales. It was an expedient choice which fuelled rapid, but ultimately unsustainable, economic growth. A rebalanced fiscal architecture is crucial to China’s next stage of sustainable growth.

In recent years, local government financing vehicles (LGFVs) have been central to this model, where infrastructure investments and rising land values created mutually reinforcing circles. This has come to an abrupt end. Now, such “off balance sheet” municipal financing, estimated at US$7-11 trillion, poses a significant financial risk to the economy.

Local governments, in chasing economic growth, have engaged in a vast range of business activities, habitually pursuing trendy sectors. This led to overinvestment and surplus production in sectors from solar panels to electric vehicles. While global consumers benefit from ever lower prices on these exportable goods, less fungible assets like ghost towns and failed tourism projects are stark reminders of the value destruction that can result.

Given the far-reaching economic impact of property woes, a coordinated rescue has been called for to rebuild buyers’ confidence and re-energise the economy. But the huge investment this entails would go to waste unless the government reforms its unbalanced fiscal architecture.

The decision taken at the third plenum to not just rebalance fiscal architecture but also strengthen social services and reorient housing policies means that regional and local governments should get a greater share of fiscal revenue while the central government assumes greater fiscal responsibility.

China’s model of state-driven development worked well in some regions for a time, as seen from the Greater Bay Area to Chengdu. But the costs are also in plain sight, with incomplete or abandoned projects from Guangxi to Guizhou.

Through differences in geography, history, human capital and economic networks, regions are not equally endowed for development. In starting China’s economic reforms, Deng Xiaoping leveraged such differences through special economic zones, which resulted in the rapid growth of coastal regions.

The state is right in many ways to broaden economic development. The same bold initiatives in Guizhou would clearly have a different chance of success in Guangxi. A more nuanced strategy that tailors resource allocation and development responsibilities to each region’s circumstances, while mitigating excessive risk-taking, would be more effective.

From healthcare to social housing, the central government should assume greater responsibility. While Beijing and Shanghai have world-class healthcare, too many rural regions have rudimentary services. Left on their own, it would take too long to narrow the disparity.

The central government has started to push for the creation of social housing through local governments buying up excess commercial housing inventory, but these governments lack the means and incentive to effectively implement this. Regional and local governments can be quite adaptive in shaping economic growth but they do not have enough motivation to provide more social welfare.

The era of the entrepreneurial local states may be drawing to a close for much of China. Where high levels of economic development have been reached, they may continue to thrive; where this is not the case, they may face further value destruction.

In this period of economic slowdown, amid an ageing population, there needs to be a transition to a greater focus on providing social welfare to ensure stability. Local governments can deliver on social services only when adequately funded by the central government.

Stability encourages consumption, so this may be the most effective way to stimulate economic growth. In the longer term, property tax should become foundational to municipal finance. However, this is not the time for a widespread roll-out, not until the property market recovers.

With the fiscal shortfall from dwindling land sales, many local governments have problems paying salaries. Some have resorted to collecting discretionary taxes or fees to make ends meet. Some entrepreneurial local states have started to degenerate into extractive ones. The latest announced reforms indicate that Beijing will not allow this to happen. The positive moves should go some way to restoring business confidence and maintaining social stability.

The central government has signalled that local governments are to be adequately funded. How may Beijing provide the fiscal resources? One is through deficit financing, by issuing long-term bonds. The other is through partially monetising state-owned enterprises – for the sake of people in a time of need.

Having largely completed their historical mission as entrepreneurial local states, China’s regional and local governments must now transition to providing essential social welfare services. Faced with fiscal challenges, there is a risk that some may become inward-focused and fail to serve the people effectively. At this juncture, the central government’s tax reforms are crucial to ensuring China’s long-term stability and prosperity.

India’s finance minister in favour of more Chinese direct investment, despite strained ties

https://www.scmp.com/news/asia/south-asia/article/3271593/indias-finance-minister-favour-more-chinese-direct-investment-despite-strained-ties?utm_source=rss_feed

India’s Finance Minister has backed her economic adviser’s suggestion to allow more Chinese investment in the country, after flows were disrupted by New Delhi’s increasingly strained ties with Beijing since 2020.

On Monday, Chief Economic Adviser V. Anantha Nageswaran said New Delhi should focus on Foreign Direct Investments from China to boost India’s exports to the US, and other western countries and help keep India’s growing trade deficit with Beijing in check.

Finance Minister, Nirmala Sitharaman, said at a press conference on Tuesday that the adviser’s office works at an “arm’s distance” but “that doesn’t mean I am disowning the suggestion,” becoming the first minister to back such a move.

India tightened its scrutiny of investments from Chinese companies and halted major projects since 2020, as relations between the two nuclear giants soured after clashes on their largely undemarcated Himalayan frontier left 20 Indian and four Chinese soldiers dead.

Western countries are looking for alternative import avenues to reduce their reliance on China in global manufacturing and supply chains, and India should aim to benefit from it, the adviser’s report had said.

A senior Indian official said in January that investment curbs could be lifted if the border between the nuclear-armed Asian giants remains peaceful.

However, diplomatic and military talks to resolve the border issues have remained unsuccessful.

Along with investments scrutiny, India has also virtually blocked visas for all Chinese nationals since 2020, but it is considering easing them for Chinese technicians, as it had hindered investments worth billions of dollars.

India’s net FDI inflow dropped by 62.17 per cent to US$10.58 billion in 2023-24 (FY24), a 17-year-low, from US$27.98 billion the previous year, central bank data showed.

---

Global demand for Chinese e-commerce goods boosts low-value trade untouched by tariffs

https://www.scmp.com/economy/economic-indicators/article/3271583/global-demand-chinese-e-commerce-goods-boosts-low-value-trade-untouched-tariffs?utm_source=rss_feed

Manufacturers in China’s cross-border e-commerce sector are gaining momentum in the global market for general merchandise as the rising popularity of Chinese shopping apps fuels demand.

In June, China reported a 68 per cent year-on-year increase in the export value of “low-value simple clearance goods”, primarily representing cross-border e-commerce, according to customs authorities.

Cross-border e-commerce exports grew by 7.1 per cent, month on month, becoming China’s second-largest export category by value in June. In comparison, China’s overall exports in June grew by 8.6 per cent, year on year.

In the first half of the year, the value of China’s exports of cross-border e-commerce products saw a year-on-year rise of 36.72 per cent to US$38.16 billion.

Cross-border e-commerce is enjoying a rapid boom in China, benefiting from a rise in global demand and affordable prices as Chinese manufacturers offer discounts in a price war targeting bargain-hunting consumers. The sector has also gained support from various levels of government in China.

The latest support was demonstrated in a 22,000-word resolution released after the much-awaited third plenum that concluded last week, as Beijing vowed to build comprehensive pilot zones and global distribution centres for cross-border e-commerce. Leadership also pushed for regions with the right conditions to build international logistics and commodity allocation hubs to spur growth.

“China’s disinflationary environment and weak domestic demand have pushed more firms to enter the overseas market at competitive prices,” said Gary Ng, senior economist with Natixis Corporate and Investment Banking.

For global consumers, buying Chinese products online has also become an attractive option, as goods under a certain value are exempt from import tariffs, Ng said.

“However, challenges may emerge as more countries view duty-free options online as a way to bypass taxes,” Ng noted, adding that “this may create unfair competition for local businesses”.

With the likelihood of a Trump presidency increasing after Biden’s election dropout, Chinese manufacturers are front-loading their exports amid fears of a deeper tariff war.

In the first half of the year, the US was the main export destination for China’s cross-border e-commerce products, accounting for 25.2 per cent of the total export value, according to customs data.

In June, exports of cross-border e-commerce to US increased by 42.45 per cent, year on year.

“It is hard to say how much of the demand comes from the US election, but it is clear that China is probably still the most accessible one-stop shop for low-value goods,” Ng added.

As a global factory, China is expanding its presence in the global e-commerce market, and it has nurtured brands such as Pinduoduo’s Temu, Shein, TikTok and AliExpress. AliExpress is owned by Alibaba, which also owns the South China Morning Post.

The southern Chinese city of Shenzhen saw the volume of airborne cross-border e-commerce business at its international airport reach 138,000 tonnes in the first half of the year, a year-on-year increase of 68.5 per cent, the local Shenzhen Economic Daily reported on Tuesday.

---

China’s non-financial debt growth slows with firms and households unwilling to leverage up

https://www.scmp.com/economy/economic-indicators/article/3271556/chinas-non-financial-debt-growth-slows-firms-and-households-unwilling-leverage?utm_source=rss_feed

Growth of debt within China’s non-financial sectors fell to the lowest level in more than two decades in the second quarter as corporations and households remained reluctant to borrow, according to a Beijing-based think tank.

The non-financial sectors – mainly referring to manufacturing and services sectors – saw their outstanding debt increase by 8.3 per cent in the second quarter compared to a year earlier, representing the slowest pace since 2001, with borrowing data showing enterprises, consumers and homebuyers are shunning cheaper funding on offer.

Meanwhile, China’s macro leverage ratio in the second quarter – as measured by the proportion of debt in nominal gross domestic product – edged from 294.8 per cent in the first quarter to 295.6 per cent given the slower-than-expected economic expansion in the second quarter, which triggered calls to stabilise prices and better manage the national macro balance sheet to fend off risks.

The macro leverage ratio had stood at 287.8 per cent at the end of last year.

The macro leverage ratio has been widely used by China’s policymakers to monitor the debt risks.

“China’s macro leverage ratio is now higher than other major economies, which is due to years of persistently weak price increase,” the report published by the Beijing-based National Institute for Finance and Development said on Monday.

“We need to crank up countercyclical adjustment to bring about inflation to counter the rising leverage trend, boost business confidence and tackle risks.”

China’s consumer price index, a key gauge of inflation, grew by 0.2 per cent year on year in June, compared to an increase of 0.3 per cent in May.

The report added that a breakthrough is overdue in macroeconomic management reforms.

It also tipped a 10 percentage point increase in the macro leverage ratio in 2024 compared to 2023, although funding demand from businesses and households would remain tepid, it said.

A host of data has pointed to a reluctance among businesses and households to borrow more money, even though they have access to cheaper funding.

M2 money supply -an aggregate value of a country’s liquid assets, including currency in circulation and private banking deposits – and total social financing growth dropped to 6.2 per cent and 8.1 per cent, respectively.

“The willingness to leverage up among businesses and households in the second quarter is even weaker than last year,” the report said.

China’s nominal GDP growth has also been trailing real growth for five straight quarters after standing at 4 per cent in the second quarter compared with the 4.7 per cent real growth.

Fiscal income also dipped by 2.8 per cent year on year in the first half of 2024 to 11.59 trillion yuan (US$1.59 trillion), while stock trading stamp duty tax more than halved from a year ago to 50.9 billion yuan, data from the Ministry of finance showed.

The National Institute for Finance and Development report said the third quarter may see a big spike in local government special bond issuance to make up for the slow progress in the first half of the year, while the central government would continue to see its leverage rise in the rest of the year.

Warning that the beleaguered property sector is having a major drag on household borrowing and consumption, the report said it is crucial for Beijing to stabilise home prices as part of its management of the national macro balance sheet.

Beijing identified national macro balance sheet management as one of the new reforms at the third plenum last week.

“Property sector distress has been dragging down the value of non-financial assets of households and crimping consumption … stabilising home prices is a natural requisite for macro management of the balance sheet and to stave off risks of a balance sheet recession,” the report said.

Beijing’s policy loosening, including lowering upfront payments and cheaper mortgages, has yet to deliver the effect in boosting transactions and new home loan growth.

“The biggest problem plaguing China’s economic growth is property sector woes. The decline has a large spillover effect on other industries,” the report added.

China rolls out strict new measures for government sector to protect state secrets

https://www.scmp.com/news/china/politics/article/3271566/china-rolls-out-strict-new-measures-government-sector-protect-state-secrets?utm_source=rss_feed

China has rolled out a new set of regulations designed to better protect sensitive information, including tighter screening of government officials who work with state secrets.

The rules, published on Monday, cover implementation of the Law on Guarding State Secrets, which has just had its biggest revision in a decade, greatly expanding its scope and depth. They are also meant as a guide to officials working in China’s vast government sector.

The changes come as Beijing sees potential vulnerabilities in foreign competitors being able to obtain data on China – ranging from political and economic statistics to environmental information.

The 74 articles in the regulations address the dozen-plus new provisions in the revised state secrets law, which took effect in May.

Under the regulations, heads of government departments with the authority to determine state secrets will be responsible for defining them. Those officials are required to draw up a “list of state secrets” within their respective areas of responsibility and receive special training on how to identify and protect secrets.

All central Communist Party organs and governmental bodies must also set up an office responsible for securing secrets, to be staffed by officials exclusively tasked with overseeing state secrets.

Government departments are also required to identify “positions involved with secrets” and screen officials before they begin work in these positions, as well as regularly conduct confidentiality training during their work.

Employees who handle state secrets will be banned from travelling abroad without prior permission under the state secrets law. The restrictions remain in effect even after the employee leaves their job, and in some cases may be permanent.

The revised regulations also specify how top-level state secrets must be handled, including appointing specialised personnel to receive and send items containing the secrets. At least two people must be present when carrying such items, which can only be opened, read or used in designated places, and cannot be copied or downloaded, according to the new regulations.

The regulations, which will go into effect in September, also urge manufacturers to “innovate security and secrecy products and confidential technical equipment using new technologies, methods and processes”.

Under one of the new provisions, individuals and organisations that have made outstanding contributions to developing such technologies will be rewarded.

Companies must obtain specific qualifications to work on products related to state secrets, and the nationality of personnel working in those related positions must be Chinese, according to the new regulations.

“State secrets are becoming more digital and internet-based, and the risks of leaks and theft are also more diverse and hidden,” state news agency Xinhua reported on Monday, citing officials from the Ministry of Justice and the National Administration of State Secrets Protection. The battle to protect state secrets was a “competition and confrontation of science and technology”, the report added.

Under the revised Law on Guarding State Secrets, the National Administration of State Secrets Protection, an office under the State Council, and its various branches have been given wider scope to investigate state secrets cases in areas ranging from education and technology to internet use to the military.

In February, Li Zhaozong, the head of the administration, said in an article published in People’s Daily, a party mouthpiece, that China needed to build a “more scientific and comprehensive” national secrets management system so that “information security work will cover wherever national security is expanded”.

Last year, President Xi Jinping highlighted “more complex” security concerns for the country, and urged officials to prepare for “worst-case and most extreme scenarios”.

Feeling besieged, security-obsessed China struggles to win friends and tell its story well

https://www.scmp.com/news/china/diplomacy/article/3271581/feeling-besieged-security-obsessed-china-struggles-win-friends-and-tell-its-story-well?utm_source=rss_feed

Not surprisingly, the Communist Party’s much-anticipated third plenum did not end with the big bang last week, especially for those who had hoped for economic stimulus measures and groundbreaking structural reforms.

At the end of the four-day party conclave, Beijing did promise to deepen reforms in a wide range of sectors to boost the economy and root out corruption, while renewing a pledge to give the market a “decisive role” in allocating resources.

In a message clearly aimed at disgruntled foreign and Chinese investors, it also vowed to open Chinese markets wider and “create an institutional environment that is transparent, stable, and predictable”.

But the meeting’s communique released on Thursday and a detailed document published on Sunday have so far failed to spell out concrete plans about how those lofty goals can be achieved.

And the party’s growing obsession with security in the midst of economic slowdown and external challenges may have also disappointed foreign and private firms looking for meaningful changes.

Security was referred to 16 times in the 5,000-word communique, underlining yet again how Chinese leaders and officials feel besieged in the midst of the increasingly acrimonious US-China feud.

China was facing “a grave and complex international environment and the arduous tasks of advancing reform and development and ensuring stability at home”, said the communique, without mentioning the United States or its allies by name.

The plenary session came on the heels of Xi’s trip to Kazakhstan and Tajikistan and the annual summit of the China-led Shanghai Cooperation Organisation, where the Chinese president met his Russian counterpart Vladimir Putin for the second time in two months.

One of Xi’s key messages on the trip was to “resist external interference”. China is seeking to expand its presence in the resources-rich Central Asia, Russia’s traditional backyard, and the two countries share concerns about regime stability in the face of Washington’s inroads into the region.

On a wider front, Beijing is facing an intense international backlash over its strategic pivot toward Moscow in the midst of Putin’s aggression against Ukraine, while its forceful posturing in its South China Sea dispute with Manila is also subject to close scrutiny.

That partly explained Beijing’s struggle for the balance between development and security and between the state and the market in its plenum statements.

“We must ensure both development and security,” the plenum communique said. “We will improve public opinion guidance and effectively deal with risks in the ideological domain. We will properly respond to external risks and challenges, strive to play a leading role in global governance, and actively work to foster a favourable external environment.”

Instead of heeding calls for self-reflection and self-criticism, the all-important meeting of the party’s elite Central Committee, which usually sets policy priorities for the years to come, has placed an unusually big focus on how to reshape the world order.

Echoing Xi’s ambitious messaging at the Central Conference on Foreign Affairs Work in December, the Sunday document said China would “get involved in leading the reform and development of the global governance system”.

It was rare confirmation from Beijing of its global ambitions.

Xi called on foreign policy officials and diplomats to seize “strategic opportunities” and “break new ground”, while adhering to the “fighting spirit” in the face of “bullying” and “hegemonism” from the US-led West.

While the third plenum appeared to have dialled down anti-US rhetoric, in line with the recent détente with Washington, the document said China would “enhance the mechanisms for safeguarding China’s maritime rights and interests” – a reference to its South China Sea dispute.

It also pledged that China would “actively participate in the formulation of international rules” and “establish sound coordination mechanisms for promoting security in neighbouring regions”.

In a rare admission of Beijing’s inadequacies in getting its messages across, the document vowed to restructure the country’s “international communication framework” and “move faster to develop China’s discourse and narrative systems with a view to making our international communication more effective”.

Three years ago, Xi launched a campaign to “tell China stories well” and seize global narratives in its rivalry with the US-led West, efforts he said were aimed at making more friends, not enemies.

But so far it has yet to see tangible results, as views of China around the world continue to decline and the perceived China threats galvanise many countries to side with the US on political and economic security and military issues.

While it is commendable for Beijing to set grand policy goals and moderate nationalist rhetoric, it may also need to do some soul-searching when its own efforts to create a less hostile external environment have often been hampered by its Wolf Warrior diplomacy and actions.

Its obsession with secrecy and information control has made it even harder for Beijing to come up with an effective communication strategy to dispel suspicion and hostilities.

For example, while speculation has been rife for months about when the third plenum would convene, the preparations for the meeting, led by Xi himself, officially started in November, according to a report by state news agency Xinhua on Monday.

The gathering also failed to shed light on the whereabouts of former foreign minister Qin Gang and the reason for his mysterious disappearance from public view for over a year.

Some analysts predicted long ago that if Beijing remained silent, the outside world may never know what happened to Qin, even if China’s reputation rested on an explanation. Unfortunately, their words may come true, which would inevitably deal a blow to the dwindling confidence about Beijing’s sincerity and ability to honour its own promises.

Palestinian factions agree to end divisions after talks in China

https://www.theguardian.com/world/article/2024/jul/23/palestinian-factions-accord-china-talks

Various Palestinian factions, including rivals Hamas and Fatah, have agreed to end their divisions and form a national unity government during negotiations in China.

The Beijing declaration was signed at the closing ceremony of a reconciliation dialogue among the factions held in the Chinese capital from 21-23 July, state broadcaster CCTV said.

Senior Hamas official Husam Badran said the most important point of the Beijing declaration was to form a Palestinian national unity government to manage the affairs of Palestinians.

The Israeli prime minister, Benjamin Netanyahu, has said his goal is to destroy the Iran-backed Hamas group and opposes it having any role in a post war Gaza administration.

A total of 14 Palestinian factions, including the leaders of Fatah and Hamas, also met with the media, with China’s foreign minister, Wang Yi, present, CGTN said in a social media post.

The agreement marks a diplomatic coup for Beijing and its growing influence in the Middle East, after it brokered a breakthrough peace deal between longstanding regional foes Saudi Arabia and Iran last year.

Badran praised China in a statement for its significant effort to host the talks and reach such a declaration.

“This declaration comes at an important time as our people are facing a genocidal war, especially in the Gaza Strip,” the statement quoted Badran as saying. He said the agreement was an “additional positive step towards achieving Palestinian national unity”.

Badran said a national unity government would manage the affairs of Palestinians in Gaza and the West Bank, oversee reconstruction, and prepare conditions for elections. This was the position of Hamas, which has proposed this since the first weeks of the battle.

“This creates a formidable barrier against all regional and international interventions that seek to impose realities against our people’s interests in managing Palestinian affairs post-war,” said Badran.

Hamas and Fatah first met in Beijing in April to discuss reconciliation efforts to put an end to about 17 years of disputes, the first time a Hamas delegation was publicly known to have visited China since the war in Gaza began.

The long-feuding Palestinian factions previously failed to heal their political disputes after Hamas fighters expelled Fatah from Gaza in a short war in 2007.

Chinese officials have ramped up advocacy for the Palestinians in international forums in recent months, calling for a larger-scale Israeli-Palestinian peace conference and a specific timetable to implement a two-state solution.

---

[Sport] China seeks to unite Palestinian factions with unity deal

https://www.bbc.com/news/articles/crgm147lzv1o

Getty Images

China moves closer to launching flying taxi services as EHang seeks Beijing’s go-ahead

https://www.scmp.com/tech/tech-trends/article/3271569/china-moves-closer-launching-flying-taxi-services-ehang-seeks-beijings-go-ahead?utm_source=rss_feed

Chinese flying taxi maker EHang has moved a step closer to launching commercial service on the mainland after regulator the Civil Aviation Administration of China (CAAC) accepted the firm’s application for an air operator certificate.

Based in Guangzhou, capital of southern Guangdong province, EHang said in a statement on Monday that the CAAC has started to review its application for a licence to provide domestic air-transport service.

“We are … one step closer to realising our goal of commercially operating unmanned passenger-carrying aerial vehicles, representing the final step for urban air mobility entering the consumer market,” EHang founder, chairman and chief executive Hu Huazhi said in the statement.

Hu said EHang is working closely with the CAAC to establish a new operating system for pilotless aerial vehicles, and that the formal acceptance of the world’s first such operator certificate application has significant implications for the electric vertical take-off and landing (eVTOL) industry.

The CAAC earlier this year granted EHang’s EH216-S the country’s first production certificate for a passenger-transport eVTOL aircraft. The same pilotless aircraft obtained its type and standard airworthiness certificates – both required for commercial operations – from the CAAC last year.

Nasdaq-listed EHang’s successful certification initiatives mark a breakthrough in mainland China’s multipronged effort to establish the nation’s low-altitude economy, covering a wide range of industries related to manned and unmanned eVTOL aircraft operating below an altitude of 1,000 metres.

While the CAAC’s review process may take some time to complete, this latest certification process for EHang reflects the potential of flying taxis in the domestic market amid Beijing’s support for the low altitude economy.

Recognised as a strategic emerging industry at the tone-setting central economic work conference in December, the low-altitude economy has seen heavy investment and policy support from Beijing – in similar fashion to the country’s electric vehicle sector.

In March, EHang put its EH216-S up for sale at a unit price of 2.39 million yuan (US$332,000) on e-commerce giant Alibaba Group Holding’s primary domestic retail platform Taobao. Alibaba owns the South China Morning Post.

EHang the previous month announced that the EH216-S would be sold at a suggested retail price of US$410,000 outside the mainland from April 1.

The autonomous flight capabilities, fully electric propulsion, comprehensive redundancy safety features, and intelligent command-and-control systems of the EH216-S make it an ideal solution for various urban air mobility applications, including air taxi services, aerial tourism, airport shuttles and cross-island transport, according to EHang.

---

Disgraced China professor fired after PhD student exposes forced kissing, breast groping

https://www.scmp.com/news/people-culture/trending-china/article/3271526/disgraced-china-professor-fired-after-phd-student-exposes-forced-kissing-breast-groping?utm_source=rss_feed

A professor at the prestigious Renmin University of China has been dismissed after one of his PhD students exposed him online as a sexual predator.

Wang Guiyuan, 65, a professor at the School of Liberal Arts, was accused online of sexually harassing his student, Wang Di, and threatening to block her graduation after she firmly rejected his advances.

On July 21, Wang posted a one-hour-long video with herself holding her ID card to report her tutor’s behaviour, backed up by evidence such as voice recordings.

Wang said she was forced to expose the academic because he made her work 18 hours a day doing his chores, and left her with no time to work on her own graduation dissertation, which was due in December.

At one point, Wang said, she begged the academic to let her graduate and received a chilling response.

“What kind of student are you, not doing a little favour for your tutor? You wait and see,” the academic said, calling her graduation a “joke”.

In China, tutors have a big say over whether or not a PhD student graduates.

The student said the demanding tasks and harsh comments from Wang Guiyuan had lasted for two years. All of them were the result of her rejection of his request for sex, she said.

In May 2022, Wang Guiyuan invited her to his office to discuss “academic questions”.

When she arrived, he took off his shirt and asked her if “my body looks fit”, then he asked to kiss and touch her before demanding sex.

Wang said she had inflammation of the lips which could not be irritated. Knowing that fact, professor Wang asked to kiss her, then groped her breast.

The academic had previously asked to be “father and daughter” with her.

In fear of irritating him, Wang said she agreed to this request.

She said she tried to use this relationship to help rebuff his sexual advances, but the professor hinted that he could be her “sugar daddy”.

Wang Guiyuan also tried to entice her with “precious academic materials”, saying he would only show them to special people.

Wang Di kept saying no, while still remaining polite in the recorded conversations.

Renmin University reacted to the young woman’s video within 24 hours.

On July 22, it said it had confirmed her report and decided to fire him, strip him of his professor title and qualification to tutor graduate students.

The academic has also been expelled from the Communist Party of China.

The university added that it will also pass the information and materials relating to the case to “relevant institutions”.

Later the same day, Beijing police said they had begun investigating the case.

According to China’s Criminal Law, molesting a woman by violence or coercion can be punished with a jail term of up to five years.

The Post reached out to Wang Guiyuan but has not received a response.

Port wars: India’s Bangladesh deal seen as bid to curb China’s maritime ambition

https://www.scmp.com/week-asia/politics/article/3271542/port-wars-indias-bangladesh-deal-seen-bid-curb-chinas-maritime-ambition?utm_source=rss_feed

India has scored a strategic win by securing the operating rights to a terminal at Bangladesh’s Mongla port amid China’s growing influence in the Indian Ocean, according to observers.

The deal is seen as part of New Delhi’s efforts to catch up with Beijing in a global maritime race to gain quasi-control of foreign ports.

Mongla port, Bangladesh’s second largest seaport after Chittagong, is India’s third successful bid to run overseas ports in recent years, after Chabbar in Iran and Sittwe in Myanmar. The details of the Mongla port deal are yet to be made public.

According to media reports, quoting a senior Indian official from the Ministry of Ports, Shipping and Waterways, the terminal will be operated by Indian Port Global Limited (IPGL).

Former Indian naval officer Commodore C Uday Bhaskar told This Week in Asia: “Mongla is a potentially major opportunity for India to establish its credibility as an equitable port partner for Indian Ocean littorals seeking such expertise.”

Bhaskar, a director of the Delhi-based think tank Society for Policy Studies, pointed out that India did not figure in the world’s top 10 ports based on container traffic, whereas China had six on the list.

“Globally India is a relatively lightweight nation when it comes to ports, and it is only in the last few years that this sector has received attention and investment,” the honorary fellow of India’s National Maritime Foundation said. Quasi-control of key ports globally could enhance a country’s capacity to project its maritime power as evident in China’s investments in more than 100 ports in 63 countries, Bhaskar added.

“The progress [by Indian companies] in Iran and Myanmar has been uneven due to other geopolitical factors, and hopefully Mongla will allow for speedy execution of the agreement.”

The Indian Ocean region is pivotal in China’s Maritime Silk Road initiative. Beijing is making substantial investments in ports ranging from US$78 million in Djibouti to US$1.6 billion in Gwadar, Pakistan.

Chinese companies are currently involved in 17 Indian Ocean ports, constructing 13 of them and holding stakes in eight of the projects. Beyond the Indian Ocean, Chinese companies have also signed leases for ports or terminals in countries such as the United Arab Emirates.

The Mongla port deal comes after a two-day visit last month by Bangladesh’s Prime Minister Sheikh Hasina to India where she met her Indian counterpart, Narendra Modi. Both countries signed several cooperation agreements including in maritime.

Earlier this month, Hasina travelled to China and met President Xi Jinping. According to a report by The Diplomat, Hasina failed to secure a US$5 billion loan from Beijing to support Bangladesh’s budget and instead only received financial assistance of US$137 million.

Management of the Mongla port terminal will boost India’s influence over key maritime locations on the western and eastern sides of the Indian Ocean and reinforce its role in regional security, according to experts.

“Building and managing ports is a form of ‘port diplomacy’ – a refurbished national power tool – which is acquiring strategic significance and China has pursued this path with great success,” Bhaskar said.

In 2018, Bangladesh granted India full access to the Chittagong and Mongla ports for transit and cargo shipping. Gaining operational control of the terminal at Mongla would further enhance India’s trade connectivity, Bhaskar said.

Over the next 25 years, strategically located ports in the Indian Ocean region would acquire greater importance for the major powers, according to Bhaskar. China already has a large footprint even though it is not one of the ocean’s littoral states, he added, citing its port investments in the Maldives, Djibouti, Gwadar in Pakistan and Hambantota in Sri Lanka.

About 80 per cent of China’s energy imports pass through the Indian Ocean region, and ports have become crucial for its strategic investments, according to media reports.

“China’s ambitious Belt and Road Initiative mega-project is predicated on efficient management of critical connectivity nodes in the global supply chain and this is a high priority area for Beijing,” Bhaskar said.

As such, India would have to review its port diplomacy and boost its competence in maritime management, he added.

“If India does not deliver on Mongla in a manner that Bangladesh expects, Dhaka may well turn towards Beijing. This happened in the case of Hambantota.”

Srikanth Kondapalli, the dean of the School of International Studies and a professor of China studies at Jawaharlal Nehru University, said India and other countries had noticed the spurt in China’s maritime port construction activities in the past two decades not just in the Indian Ocean region but also in other parts of the world.

“In general, such infrastructure projects are conducive to trade. However, China’s motives have come under scrutiny,” Kondapalli said.

Amid China’s maritime expansion, companies from countries such as the US, Japan, India and others have also been increasingly involved in port investments although their motives differ from that of Beijing, Kondapalli said.

“Private companies like Adani Group today are bidding for maritime projects in Indonesia, Vietnam, Sri Lanka, Israel and other countries. These are private companies driven by profit motive with hardly any state or navy role. This cannot be said about China as there is not much difference between private and state,” Kondapalli said.

Sohini Bose, an associate fellow at Kolkata-based Observer Research Foundation, cited three reasons why the Mongla port was crucial for India.

“Firstly, it will be instrumental in enhancing bilateral trade with Bangladesh. Secondly, it will allow India’s landlocked northeast opportunities for maritime trade through alternative access to the Kolkata port, bypassing the narrow and congested Siliguri corridor,” Bose said.

With their proximity to each other, the Mongla port and the Kolkata port could shorten shipment time for goods, compared with delivery between Benapole town in Bangladesh and Petrapole land port in India in the border region, where consignments could get delayed for up to 15 days, Bose added.

“Thirdly, investments in Mongla Port would give India another foothold in the Bay of Bengal and the wider Indian Ocean region which is increasingly becoming an arena for geopolitical competition,” Bose said.

Harsh V Shringla, a former Indian ambassador to Bangladesh and ex-foreign secretary, said the Mongla deal should be seen as a move by India to help Bangladesh upgrade its port infrastructure rather than to counter China.

“India is assisting in developing the port through a line of credit. We shouldn’t read too much into this. India can move a significant amount of goods through this port, which otherwise need to be transported by road. Shipping is a much easier and cheaper option,” Shringla said.

Palestinian factions agree to end division in pact brokered by China

https://www.scmp.com/news/china/diplomacy/article/3271553/palestinian-factions-agree-end-division-pact-brokered-china?utm_source=rss_feed

Rival Palestinian factions including Fatah and Hamas have signed an agreement aimed at ending their division and building unity following talks in Beijing, marking a diplomatic win for China.

Senior representatives of 14 Palestinian factions reached the agreement – called the Beijing Declaration – after reconciliation talks that began on Sunday.

The pact aims to unite Palestinians in their conflict with Israel, which launched a war on militant group Hamas in Gaza in October.

The Chinese foreign ministry said the agreement was a first step to promote a “comprehensive, durable and sustainable ceasefire” in the Gaza Strip that would eventually lead to Palestine being admitted to the United Nations as a fully fledged member and becoming an independent state.

Foreign Minister Wang Yi on Tuesday said the signing of the agreement was “an important, historic moment in the Palestinian cause”.

He said that under the deal the rival groups had agreed to set up an “interim national reconciliation government” to govern post-war Gaza.

Signatories included senior Hamas official Mousa Abu Marzouk and Fatah envoy Mahmoud al-Aloul along with emissaries from 12 other Palestinian groups.

The Chinese foreign ministry said it was the first time the 14 rival groups had gathered together in Beijing for reconciliation talks.

“Reconciliation is an internal matter for the Palestinian factions, but at the same time it cannot be achieved without the support of the international community,” Wang said.

He added that China was keen to “play a constructive role in safeguarding peace and stability in the Middle East”.

Hamas and the Palestinian Authority – the two dominant Palestinian political parties in the Palestinian territories – have held multiple rounds of unity talks since Hamas defeated President Mahmoud Abbas’ Fatah party in parliamentary elections in 2006.

In 2007 Hamas became de facto ruler in the Gaza Strip while Fatah led the Palestinian Authority in the Israel-controlled West Bank.

But reconciliation efforts have floundered, with tensions between Fatah and Hamas escalating and spilling over in the region.

Hamas and Fatah have tried and failed several times to reach an agreement to unite the two separate Palestinian territories under one governance, with a 2017 agreement brokered by Egypt quickly falling apart. A 2022 agreement to hold elections within a year was not followed through.

The West has refused to accept any government that includes Hamas unless it expressly recognises Israel.

Tuesday’s agreement comes as China has sought to position itself as a mediator in Gaza after it brokered a peace deal between Middle East rivals Iran and Saudi Arabia in March last year.

It is also trying to mediate in Russia’s war in Ukraine. Ukrainian Foreign minister Dmytro Kuleba is in Beijing this week to discuss China’s role in ending the war as well as economic cooperation.

Hamas and Fatah sign declaration in Beijing on ending yearslong rift, Chinese state media says

https://apnews.com/article/china-palestinians-hamas-fatah-declaration-4bef2615307b656b99cb0e18f6b6d796This is a locator map of Israel and the Palestinian Territories. (AP Photo)

2024-07-23T06:06:04Z

BEIJING (AP) — Palestinian factions Hamas and Fatah signed a declaration in Beijing on ending yearslong rift, Chinese state media said Tuesday, without providing further details.

The two groups signed the Beijing Declaration on “ending division and strengthening Palestinian unity,” according to state broadcaster CCTV. While Hamas and Fatah have said they would work together many times before and failed, the signing of the declaration coincides with U.S. Secretary of State Antony Blinken saying that a cease-fire between Israel and Hamas appears within sight.

The two rival Palestinian groups, along with 12 other political factions, met with Chinese Foreign Minister Wang Yi, concluding talks that started Sunday, according to a post on Weibo from Chinese TV network CGTN.

Hamas and the Palestinian Authority have had multiple rounds of unity talks since Hamas routed Fatah forces from Gaza in a violent takeover of the territory in 2007. But each time, unity efforts have been wrecked by the factions’ own bitter rivalry over power and the West’s refusal to accept any government that includes Hamas unless it expressly recognizes Israel.

China auto giant decries EU’s ‘illegal’ anti-subsidy probe, hints at challenge

https://www.scmp.com/economy/global-economy/article/3271536/china-auto-giant-decries-eus-illegal-anti-subsidy-probe-hints-challenge?utm_source=rss_feed

A Chinese automaking behemoth facing a 37.6 per cent tariff on exports of electric cars to Europe is pushing back against what it sees as an “unfair and illegal” probe by European authorities into subsidies from Beijing, while hinting that Brussels’ ruling will face opposition.

Shanghai-based SAIC Motor, the largest of China’s “big four” state-owned carmakers, also said that the EU’s executive arm carried out an anti-subsidy probe “involving commercially sensitive information, such as a request to cooperate in providing battery-related chemical formulas”.

The comments were made in a WeChat post on Monday, after the company had said during a special EU hearing on Friday that the actions were “beyond the normal scope of investigation”.

SAIC said that the European Commission had “made errors” in identifying subsidies, such as by mistaking an auto-financing company under a foreign joint venture as an affiliate of SAIC.

The automaker said it reserved the “right to take further legal measures” in response to the commission’s preliminary decision and expects a final ruling in November, per the WeChat statement.

“SAIC has submitted thousands of written documents during the investigation,” the statement added. “However, the European Commission ignored some key information and defence opinions submitted by SAIC – and inflated the subsidy rates for multiple projects.”

The EU placed the highest tariff rate on SAIC among all Chinese automakers investigated over possible Chinese government subsidies. European officials announced the investigation in October after the commission’s president, Ursula von der Leyen, cautioned against a “flood” of Chinese EVs into Europe.

On June 12, the commission released a preliminary ruling with additional duties of 38.1 per cent on SAIC, the statement adds. After SAIC objected, it said, the commission lowered the rate to 37.6 per cent on July 4.

The level of tariff increases on Chinese electric vehicles as a result of the probes has stirred debate about whether China is being singled out.

Beijing’s Ministry of Commerce on July 10 launched an investigation into whether the EU’s Foreign Subsidy Regulation had unfairly targeted Chinese companies. The ministry’s move followed a request by the China Chamber of Commerce to the EU that Beijing take “stringent” measures over the European anti-subsidy proceedings.

SAIC had said previously that the EU had overlooked some information and counterarguments that the carmaker had provided for the investigation.

Alicia Garcia-Herrero, chief economist for the Asia-Pacific region at French investment bank Natixis, speculated that declining to cooperate with European investigators could have affected the tariff rate imposed on SAIC.

Asking a company for its product formulas, Garcia said, is consistent with the World Trade Organization (WTO) rules that the commission has used for its probe. SAIC may find it hard to pass on any new tariffs to European consumers amid current demand levels, she added.

“They probably felt this wasn’t going to happen, and that the EU would back off, but they didn’t,” Garcia-Herrero said.

The European Commission has still come up with little evidence based on WTO rules to show any problems with subsidies, said Lu Xiang, a research fellow at the Chinese Academy of Social Sciences.

“The causal link between export volume and subsidies is an imaginary assumption made by the European side,” Lu said.

Last year, the EU imported 9.7 billion euros (US$10.57 billion) worth of electric-battery vehicles from China, up 70 per cent over the 2022 total, to become the top taker of the Chinese goods, according to the European Automobile Manufacturers’ Association.

China seeking hi-tech solutions to disaster relief challenges

https://www.scmp.com/news/china/science/article/3271523/china-seeking-hi-tech-solutions-disaster-relief-challenges?utm_source=rss_feed

China is stepping up its use of technology such as satellites and radar in disaster relief work as extreme weather events become more frequent.

Lessons have been learned from the rescue efforts of the devastating 2008 earthquake in Sichuan in 2008 that killed more than 69,000 people and wounded more than 370,000, according to Weng Qihao, chair professor at the Department of Land Surveying and Geo-informatics of the Hong Kong Polytechnic University.

At the time satellite coverage of the area affected was patchy and many of the images that were provided were of a poor quality.

“Therefore the rescue team couldn’t know at first where the disaster areas were and which roads were still passable. China learned a big lesson from that,” Weng said.

China now has more than 900 satellites in orbit which are widely used to monitor natural disasters and help with relief and reconstruction efforts.

Weng cited the use of the technology when a dyke was breached in Dongting Lake during heavy rains in the central province of Hunan earlier this month.

Satellites were used to carry out real-time tracking of rainfall patterns while remote sensing satellite images helped keep track of floodwaters and local traffic conditions during an operation to seal the breach, state broadcaster CCTV reported.

China has now established a complete system of operational satellites for disaster relief and prevention, although improvements are still needed, according to Bo Yanchen, a professor of geographical science at Beijing Normal University.

“China’s meteorological satellites are important in the forecasting of typhoon movements and agricultural droughts. And China’s Gaofen satellites serve an important role in risk zoning and damage assessment during heavy natural disasters.”

But Bo said: “China needs more satellites capable of obtaining clear images, as well as further synergies with data from multi-source satellites, in order to improve the timeliness and accuracy of the monitoring of natural disasters.”

Weng also said satellites could prevent disasters recurring in areas affected by extreme weather. “By observation of satellite images and computer modelling, scientists can assess the areas and populations which are vulnerable to re-exposure to disasters.” he said.

Drones have also been used to reduce the impact of the recent heavy flooding in Hunan, where more than 1,400 communications base stations were disrupted in Pingjiang county during the worst flooding seen in 70 years on July 4.

The disruption happened during a crucial period for college entrance applications and students risked losing out if communications were not restored, prompting the local government to use a communications drone with a public network base station.

Meanwhile, a new weather radar operating system ROSE3.0 – which is designed to improve the accuracy of severe weather warnings and rainfall monitoring – has been installed in 123 radar stations including in Beijing and the surrounding province of Hebei for a three-month trial.

Extreme weather will become more frequent in the future due to global warming, Weng said.

“China has done very well in building high-speed rail, highway networks and aerospace. If these experiences can be used in building infrastructure to cope with extreme weather, China will do a better job of preventing and responding to disasters.”

He also said the Hong Kong authorities need to step up their efforts in this area. “Hong Kong needs to do better in early warning and mitigation for the next possible similar natural disaster, including the placement of infrastructure like ground-based monitors, and the establishment of relevant computer models to tell drivers which roads are passable,” Weng said.

---

China firms issue record US$14 billion convertible bonds as market revives

https://www.scmp.com/business/banking-finance/article/3271510/china-firms-issue-record-us14-billion-convertible-bonds-market-revives?utm_source=rss_feed

China’s top companies have raised a record US$14 billion in offshore convertible bonds so far this year as they diversify future funding needs while interest rates stay high.

Offshore convertible bonds from mainland China accounted for 22 per cent of global deals, LSEG data showed, after Alibaba Group raised US$5 billion in May and Ping An Insurance finalised a US$3.5 billion transaction last week.

The amount raised so far this year from China is up 1,588 per cent on the same period in 2023, the data showed, when just US$829.3 million was raised in convertible bonds.

The pickup in Chinese convertible bond issuance is giving deal makers hope that capital market activity will start to lift, especially in Hong Kong, where IPOs are at the lowest point in 15 years. The previous 12-month high was US$10.9 billion in 2021.

“If you think about the typical sequence in which the markets reopen, it’s typically blocks, primary equity and convertibles that will lead and the last product to reopen is IPOs,” said Saurabh Dinakar, co-head of Asia-Pacific global capital markets at Morgan Stanley

“In the past two years, we didn’t see activity across any of the products. And frankly, there was a lack of conviction from international investors around investing in Hong Kong and China. I think what’s changed over the last three months is that some of the confidence has returned.”

Dinakar said international investors have shown renewed interest in recent Chinese deals since they exited the market as China recovered from the pandemic.

“Investors want to talk about China, and they want to understand what’s going on in China. There has been an uptick in the dialogue. It’s not that they are going to rush back in, given there’s still a degree of caution, but at least there is a dialogue which was not the case 12 months back,” he said.

Globally, there has been US$64.2 billion worth of convertible bonds issued in 2024, and in Asia aside from China, Japan’s deal value has increased by 486.2 per cent, according to LSEG.

Investors buy convertible bonds because they offer the prospect of equity gains while still paying a coupon, and with their principal repaid at maturity if the option to convert into shares is not exercised.

Bank of America recently upgraded its full-year global convertible bond issuance forecast by 11 per cent and now expects there to be up to US$110 billion worth of deals in 2024.

China hopes US firms can ‘play a strong role’ after top executives visit Beijing

https://www.scmp.com/economy/global-economy/article/3271511/china-hopes-us-firms-can-play-strong-role-after-top-executives-visit-beijing?utm_source=rss_feed

A heavyweight group of US executives, including FedEx Corporation CEO Raj Subramaniam, met with Chinese Vice-Premier He Lifeng and Foreign Minister Wang Yi in China on Monday, with Beijing hoping the influential lobby group can help US firms “play a strong role” in the world’s second-largest economy.

The official People’s Daily newspaper confirmed that US-China Business Council board chair Subramaniam had led the delegation for its meetings with He and Wang.

The visit confirmed an earlier Post report that the group would travel to Beijing to obtain first-hand insight following the conclusion of China’s widely-watched third plenum.

The four-day third plenum concluded on Thursday, with a 22,000-word resolution document unveiled on Sunday containing a wide range of measures approved by the Central Committee of the ruling Communist Party.

Vice-Premier He said that China hoped the US-China Business Council could “play a strong role” to encourage American firms to seize the opportunities offered during the process of modernisation with China, which would lead to win-win cooperation and development.

In an official statement from the Ministry of Foreign Affairs, Wang said that the group came to Beijing “at the right time” because they could feel the “new vibe” of China as it undergoes deep and comprehensive reforms.

“A pleasant environment for the US and China will let everybody benefit, but an unpleasant environment between both countries will naturally lead to the suppression of cooperation and exchanges,” Wang added.

“[We] hope the US-China Business Council will make use of its connections and influence, in conjunction with their real experiences in China, to talk about China to the US government and Congress in a realistic, objective and rational manner.”

US-China relations have been brought further into the spotlight as November’s US presidential election nears, with Republican Party candidate and former president Donald Trump having already proposed high tariffs on Chinese products.

Trump’s running mate J.D. Vance has also taken aim at China, which he described as “the biggest threat” to the United States.

Roberta Lipson, the CEO of healthcare company Chindex International, Boeing Global president Brendan Nelson, Amit Sevak, the president and CEO of Educational Testing Service, and US-China Business Council president Craig Allen also attended the meetings in Beijing.

Subramaniam said that the US business sector would “continue to explore the Chinese market with confidence”, and that the US-China Business Council hoped it could “make more contributions” in the bilateral trade and investment relationship, according to the People’s Daily.

Before the delegation arrived in Beijing, the Guangzhou government said that the US business representatives had also met with mayor Sun Zhiyang on Friday, as the southern city is the “first choice destination” for American firms if they want to invest in China.

Commercial data company Dun & Bradstreet Holdings, General Electric, industrial manufacturer Milliken & Company, FedEx, food company Kraft Heinz, medical device company Becton, Dickinson and Company, as well as agriculture firm Cargill, took part in the meeting, according to the Guangzhou government.

On the same day, the delegation also met with Guangdong governor Wang Weizhong, according to a report by the Southern Daily newspaper.

China loses maths Olympiad to US but genius student Shi Haojia remains on top of the game

https://www.scmp.com/news/china/science/article/3271516/china-loses-maths-olympiad-us-genius-student-shi-haojia-remains-top-game?utm_source=rss_feed

China lost its sixth consecutive International Mathematical Olympiad (IMO) on Monday, trailing the US by two points, but young genius Shi Haojia once again achieved a perfect score in the world’s premier high school maths competition.

The 16-year-old topped the individual rankings for the second year in a row to win another gold medal and become the fourth Chinese competitor to achieve this record, following in the footsteps of mathematical genius Wei Dongyi.

Shi, from the eastern province of Zhejiang, scored a perfect seven points in each of the competition’s six problems – the only one to do so out of the 609 students from 108 countries who gathered in Bath, Britain for the 65th IMO.

In the team rankings, the US took first place with 192 points while the Chinese team came second, with a total score of 190.

Since the first IMO was held in 1959 in Romania with teams from seven countries taking part, the competition has gradually expanded to more than 100 countries from five continents, with each country sending a team of up to six high school students.

China has maintained a competitive momentum at the event over the past three decades, winning its first title in 1989 and taking the top spot a total of 24 times.

Shi is a second-year student at the privately owned Hailiang Senior High School in Shaoxing city, Zhejiang. His competition coach Zhang Xiaoming, who is also the school’s principal, last year described him as a rare mathematical genius.

In an article published by the school after Shi’s achievement at the 2023 IMO, Zhang said that if Shi has an outstanding characteristic, “it is that his driving force for learning comes from his love for mathematics rather than other external things”.

According to publicly available information, Shi was born in a rural part of the central inland province of Henan, moving to Zhejiang when he was nine years old.

He showed a keen interest and talent for mathematics from a very young age. While he was still a primary school student, Shi was already helping his junior high school sister with her maths homework.

At the age of 10, he won a gold medal in a national primary school maths competition. His gift for maths was discovered when he was in grade 5, and since then he has been systematically trained for maths competitions.

In 2021, Shi was selected for the YAU Mathematical Sciences Leaders Programme at Tsinghua University, which recruits middle and high school students with outstanding potential from around the world and trains them continuously from undergraduate to doctoral studies.

Robotics scientist Geng Tao, who used to work at a British university and is now the founder of a start-up, believes that China’s loss of first place this time is likely to be temporary.

China has a large talent pool, and Chinese families tend to take such competitions more seriously, he said.

The Chinese government is also more willing to mobilise the country’s resources to achieve certain goals – such as winning gold medals at the Olympics – which will also help the country maintain its lead in the mathematics race in the long run, Geng said.

According to Geng, students from China and India also show more interest in science, technology, engineering and mathematics (STEM) than their US counterparts, who are more likely to major in subjects such as finance, law and medicine.

The Economist last month published an article that assessed China’s strength in the sciences, noting that Chinese universities awarded 1.4 million engineering degrees in 2020 – seven times more than the US.

China is a main source of STEM talent, producing a large number of scientists, engineers and technicians working in the US today.

But despite China’s outstanding performance, some academics – including celebrated Chinese-American mathematician Yau Shing-Tung – warn that the country still lags the United States in mathematics research.

Speaking in April on the status and future of Chinese mathematics, Yau, who retired from Harvard University in 2022 to teach full-time at Tsinghua University, said that China’s level of maths research had not yet reached that of the US in the 1940s.

China says Hamas and Fatah sign ‘Beijing declaration’ on Palestinian unity

https://www.washingtonpost.com/world/2024/07/23/china-hamas-fatah-palestine-beijing-declaration/2024-07-23T04:25:55.445Z

Senior representatives of Palestinian political factions Fatah and Hamas on Tuesday signed a joint statement aiming at ending divisions and building Palestinian unity to conclude three days of meetings in Beijing.

The agreement signed by 14 Palestinian factions was hailed as a by Chinese state media as a breakthrough and a sign of China’s emerging role as a mediator in faraway conflicts.

Initial reports did not immediately disclose details of what they called the “Beijing declaration” or the full list of Palestinian leaders who took part in negotiations hosted by Wang Yi, the Chinese foreign minister.

But photos from the talks showed Wang talking to Mahmoud al-Aloul, vice chairman of the central committee of Fatah, and Mussa Abu Marzuk, a senior member of Hamas.

An earlier attempt by Beijing to broker talks in April concluded without a joint statement, but the negotiations nevertheless help the Chinese Communist Party portray itself as an international mediator at a time of intense rivalry with the United States, including in the field of diplomacy.

Beijing last year brokered a détente between Iran and Saudi Arabia last year, forcing Washington into the awkward position of applauding a major Middle East accord secured by its main geopolitical rival.

Why does China care about a rust bucket in the middle of the sea?

https://www.washingtonpost.com/world/2024/07/23/china-philippines-south-china-sea-sierra-madre/2024-06-23T23:07:12.249Z

A dilapidated World War II-era vessel, the Sierra Madre, run aground on a tiny reef in the South China Sea has emerged as a potential flash point that could trigger a regional war, with the Chinese coast guard repeatedly swarming and ramming into Philippine vessels to stop them from resupplying the ship.

Beijing and Manila have now forged a provisional agreement that would allow the Philippines to take supplies out to the ship, hoping that it will end the recent escalation in tensions in the contested waters of the South China Sea.

The intensifying territorial dispute had threatened to drag the United States, a security ally of the Philippines, into another global conflict.

“Both sides continue to recognize the need to de-escalate the situation in the South China Sea and manage differences through peaceful means,” the Philippines’ Foreign Ministry said in a statement Sunday.

The Chinese foreign minister confirmed the two sides had reached a “temporary arrangement on the transportation of humanitarian supplies” and to “jointly manage maritime differences and promote the cooling of the situation in the South China Sea.”

The territorial dispute centers on Beijing’s claims of sovereignty over the vast majority of the South China Sea — claims that neighboring countries reject, leading some Southeast Asian nations, including the Philippines, to exert their economic and maritime interests.

Here’s how Beijing views this conflict.

Why does China care so much about the Sierra Madre?

In 1999, the Philippines grounded the Sierra Madre on a half-submerged reef known as the Second Thomas Shoal, part of the Spratly Island chain, to lay claim on the islands. Manila now uses it as a naval outpost for a small group of troops stationed there — serving as an extension of Philippine sovereignty — and it sends resupply shipments of food, water and fuel for the Marines posted there.

The Second Thomas Shoal, which the Chinese call Ren’ai Jiao, is located in the Philippines’ exclusive economic zone but also falls within China’s “ten-dash line,” a swath of the South China Sea that Beijing claims as its territorial waters. The U-shaped area goes from China’s southernmost Hainan province, down past Vietnam to Malaysia, then up past the Philippines and behind Taiwan, incorporating the island into Beijing’s territory.

A 2016 arbitration ruling by the U.N. Convention of the Law of the Sea overwhelmingly sided with the Philippines, finding that China’s territorial claims to the Second Thomas Shoal were unlawful and that the reef lies inside the Philippine exclusive economic zone. Beijing rejects the ruling as “null and void” and has refused to adhere to it.

Chinese experts claim the other countries are the ones in the wrong.

“These countries illegally occupied these islands and reefs, so they tried to rationalize it and win international recognition. So this is the true intention behind internationalizing and escalating the South China Sea issue,” Wu Shicun, chairman of Hainan-based Huayang Research Center for Maritime Cooperation and Ocean Governance, said in a Chinese media documentary about the conflict.

China has repeatedly tried to block Philippine resupply missions that Manila calls “humanitarian” and wants to watch the disintegration of the ship so that Manila can no longer lay claim using the ship, experts say.

Both sides want the “status quo” in the South China Sea, but sharply differ in how they define it, said Yun Sun, senior fellow and director of the China program at the Washington-based think tank Stimson Center.

For the Philippines and the United States, the existence of Sierra Madre where it is now is the status quo. For the Chinese, it is how things were pre-1999 — which they believe the Philippines violated, Sun said.

Why has this come to a head now?

Beijing views the delivery of construction materials to the ship, part of an effort to reinforce it and prolong its life, as a deliberate act designed to escalate tensions. China claims such shipments have increased in recent years, leaving it no choice but to act.

The Financial Times reported last week that the Philippines has secretly conducted missions to extend the life of the ship by sending construction materials to it “in recent months.”

Philippine officials say they are making “superficial repairs” so that soldiers can live on the boat. Beijing has rejected this characterization.

Chinese analysts say Manila has become more hostile toward Beijing under President Ferdinand Marcos Jr., who took office two years ago. In contrast to his predecessor, Rodrigo Duterte, who had forged closer ties with China, Marcos has increasingly asserted his nation’s claims in the South China Sea and has drawn closer to Washington.

Marcos is framing China as a threat to bolster his own domestic image, said Ding Duo, associate research fellow at the National Institute for South China Sea Studies, also based in Hainan. But for China, Marcos’s actions — including drawing closer to the Biden administration, which wants to counter China’s influence in the Indo-Pacific region — symbolizes a provocative stance toward Beijing, Ding said.

“The United States and other countries outside the region view the South China Sea issue as a security issue and a geopolitical issue, while China views it as an issue of safeguarding its own territorial sovereignty,” Ding said.

Chinese officials allege that the resupply trips under Marcos run afoul of an unwritten “gentlemen’s agreement” through which Duterte agreed not to bring in construction materials without Beijing’s approval or inspection.

The Chinese also claim that they had reached a “consensus” with the Philippines that Manila would tow the ship away, and that servicing the ship violates that agreement. (Philippine officials deny the existence of any such agreements, and Marcos has rejected “secret” arrangements that Duterte may have made with the Chinese.)

Why is the Second Thomas Shoal strategically important for China?

For China, its core interest in the Second Thomas Shoal conflict is territorial sovereignty and integrity, which is critical to maintaining its centuries-long claim over the waters, experts say.

“What is more important to China may be that it involves the honor of the country, the reputation of the country, the obligation … to safeguard its sovereignty,” said Hu Bo, director of the Center for Maritime Strategy Studies at Peking University in Beijing.

Amanda Hsiao, senior analyst for China the International Crisis Group, said it is also important for Beijing to signal to the Philippines and other governments with whom it has territorial dispute that it’s willing to “impose costs on those who publicly defy Beijing.”

“In doing so, it seeks to deter bolder assertions of sovereignty by Manila and others,” Hsiao said.

China also may want to use the conflict to test Washington’s security commitment to Manila and the region, especially during a time when the United States is engaged in prolonged global conflicts elsewhere and facing a presidential election that could upend both domestic and international politics.

“If China is able to grab the shoal from the Philippines … and the United States fails to directly intervene and help the Philippines retain its occupation of the shoal, the credibility of U.S. security commitments to its allies in the region may be damaged,” said Li Mingjiang, nonresident scholar at the Singapore-based Carnegie China. “This may be the strategic calculation in the minds of Chinese decision-makers.”

What are China’s wider ambitions?

The South China Sea is so important to China because it is the entry point into the Pacific Ocean, where it has ambitions to eclipse the United States’ post-World War II military dominance in the Asia-Pacific region. It has been gradually building its military presence throughout the Pacific — an effort the United States is trying to counter alongside its Asian security allies like Japan, Australia and the Philippines.

China has already demonstrated its ability to militarize tiny coral reefs, even turning them into artificial islands that it claims as its own.

In 1994, China seized Mischief Reef, located northwest of Second Thomas Shoal, and built small huts on stilts that it said were shelters for fishermen. Over two decades, China has built that reef into a major military outpost, which has given Beijing the ability to influence and monitor events across the sea, said Hsiao, of the International Crisis Group.

China views it necessary to establish dominance in the South China Sea, especially in the face of what it perceives as a growing security threat from the United States, Chinese experts say.

Chinese method of making ultrathin semiconductors could lead to faster microchips

https://www.scmp.com/news/china/science/article/3271376/chinese-method-making-ultrathin-semiconductors-could-lead-faster-microchips?utm_source=rss_feed

Chinese scientists have produced an ultrathin semiconductor material in a development that could lead to the creation of faster and more energy-efficient microchips.

A team led by Liu Kaihui of Peking University, Liu Can of Renmin University, and Zhang Guangyu of the Institute of Physics at the Chinese Academy of Sciences developed a fabrication method to produce a semiconductor material just 0.7 nanometres thick.

The researchers’ findings, which were published in the peer-reviewed journal Science on July 5, address a key barrier to reducing the size of traditional silicon-based chips – as devices shrink, silicon chips run into physical limits that affect their performance.

The scientists explored two-dimensional (2D) transition-metal dichalcogenides (TMDs) as an alternative to silicon, with a thickness of just 0.7 nanometres compared to silicon’s typical 5-10 nanometres.

TMDs also consume less power and have superior electron transport properties, making them ideal for the ultra-scaled down transistors that will be a feature of next-generation electronic and photonic chips.

However, producing TMDs has been challenging – until now. According to the paper, the technique developed by the scientists allows them to quickly produce high-quality 2D crystals in seven different formulations, making mass production feasible.

The traditional fabrication process, which involves layer-by-layer assembly of atoms on a substrate – like building a wall with bricks – often results in crystals with insufficient purity, Liu Kaihui told state news agency Xinhua.

“This is due to uncontrollable atomic arrangements in crystal growth and the accumulation of impurities and defects,” he said.

The team arranged the first layer of atoms on the substrate as if they were following the traditional process. However, subsequent atoms were added between the substrate and the first crystal layer, pushing upwards like bamboo shoots to form new layers.

The pioneering “grow at interface” method ensures that each crystal layer’s structure is determined by the underlying substrate, which also effectively prevents the accumulation of defects and enhances structural controllability.

A statement on Peking University’s website said the technique demonstrated in the study achieved a crystal layer formation rate of 50 layers per minute, with a maximum of 15,000 layers.

“Each layer’s atomic arrangement is perfectly parallel and precisely controlled,” the university said.

The team’s high-quality 2D crystals included molybdenum disulfide, molybdenum diselenide, tungsten disulfide, tungsten diselenide, niobium disulfide, niobium diselenide, and molybdenum sulfoselenide.

These materials meet international standards for integrated circuit materials, including the International Roadmap for Devices and Systems’ electron mobility target and frequency conversion capabilities, the researchers said.

“These 2D crystals, when used as materials for transistors in integrated circuits, can significantly enhance chip integration. On a chip the size of a fingernail, the density of transistors can be substantially increased, thus boosting computing power,” Liu said.

Deal or no deal? China and Philippines at odds over Second Thomas Shoal resupply agreement

https://www.scmp.com/news/china/diplomacy/article/3271454/deal-or-no-deal-china-and-philippines-odds-over-second-thomas-shoal-resupply-agreement?utm_source=rss_feed

Beijing urged Manila to keep its word on Monday as the two countries disputed key elements of a deal over resupply missions to a South China Sea shoal within hours of it being struck.

“We hope that the Philippine side will honour its commitments, work with the Chinese side and jointly manage the situation at sea,” Chinese foreign ministry spokeswoman Mao Ning said.

The Philippines said late on Sunday that it had reached an agreement with China on resupply missions to Second Thomas Shoal, a disputed reef controlled by Manila. The statement did not refer to any conditions.

The Philippines grounded the ageing BRP Sierra Madre on the shoal in 1999 and has stationed troops there to assert its claims over the area.

Beijing confirmed early on Monday that a deal had been struck, adding that it was subject to three conditions: that the Sierra Madre be towed away, prior notification and “on-site verification” be given, and no construction materials be included in the supplies.

“If the Philippines were to send large amount of construction materials to the warship and attempt to build fixed facilities or permanent outpost, China will absolutely not accept it and will resolutely stop it in accordance with the law and regulations to uphold China’s sovereignty, ” the ministry said.

However, Manila disputed Beijing’s suggestions that the two had agreed to prior notification and on-site verification by China.

Philippine foreign ministry spokeswoman Teresita Daza said the principles and approaches laid out in the agreement were reached through consultations “that paved the way for a convergence of ideas without compromising national positions”.

“The [Chinese] spokesperson’s statement therefore regarding prior notification and on-site confirmation is inaccurate,” Daza said.

In Beijing, Mao said the “provisional arrangement on humanitarian resupply of living necessities” with the Philippines had demonstrated “the goodwill of China”.

Observers said the dispute between the rival claimants remained deep and there was no sign that either would back down. But the deal could be seen as an effort to manage the maritime crisis.

“China’s positions have not changed, and the deal could be seen as a continuation of previous verbal deals such as ‘gentlemen’s agreements, that have now been put in words’,” said Ding Duo, deputy director of the Institute of Maritime Law and Policy at National Institute for South China Sea Studies.

Beijing has said in the past that the two parties had struck gentlemen’s agreements for the resupply missions – agreements that Manila has disputed, only for China to accuse the Philippines of reneging on its commitments.

China has since stepped up countermeasures, including the use of water cannons, to block the Philippine resupply missions.

During what Manila called the worst confrontation in recent years, the Chinese coastguard boarded two Philippine navy boats last month to stop personnel from transferring food and other supplies, including firearms, to troops stationed on the shoal.

Eight Philippine sailors were injured in the subsequent clashes, including one who lost a thumb. The Philippines has not carried out any resupply missions since then.

Collin Koh, a senior fellow at the S. Rajaratnam School of International Studies at Singapore’s Nanyang Technological University, said Beijing might benefit more by striking a deal with Manila, especially after the June 17 confrontation, which dealt a blow to China’s reputation in the region.

“It certainly allows China to put forth a narrative that is still keen on dialogue and to peacefully manage the dispute with the Philippines,” Koh said.

“If the agreement does help to constrain Filipino freedom of action in some way, it is still a win for China.”

He said the deal could also be part of Beijing’s “long game” by forestalling any potential moves by the Philippines to rehabilitate the Sierra Madre, which is falling apart.

“If the deal helps China to drag the issue all the way to 2028, which is the Philippine presidential election, then it will still achieve the purpose of China.”

Neither side has released the full text of the deal, and observers agreed that the next resupply mission would be watched closely.

“What I will envisage is any such resupply mission will fall under the watchful eye of the Chinese forces,” Koh said. “In other words, we’re not going to see Beijing withdrawing maritime forces from the Second Thomas Shoal.”

Meanwhile, White House national security adviser Jake Sullivan said on Saturday that the US “will do what is necessary” to support resupply missions.

However, Philippine National Security Council spokesman Jonathan Malaya said on Sunday that the country preferred the resupply missions to be purely Philippine operations.

---

Hong Kong entrepreneur urges schools to better support non-Chinese speakers

https://www.scmp.com/news/hong-kong/education/article/3271459/hong-kong-entrepreneur-urges-schools-better-support-non-chinese-speakers?utm_source=rss_feed

An education sector entrepreneur has urged Hong Kong schools to take greater responsibility for ensuring pupils from ethnic minority backgrounds succeed academically as his charity launched its first kindergarten to support non-Chinese speakers.

Manoj Dhar, co-founder of NGO Integrated Brilliant Education Limited (IBEL), said the government had done a “fantastic job” funding education for ethnic minority youth but the school system remained “ghettoised”.

“Every year there’s so much money that goes in, and every year there’s additional massive amounts of money … but the net result is the kids are still struggling,” said Dhar, an Indian-born naturalised Hong Kong permanent resident.

“The schools aren’t doing justice by the children … There has to be accountability.”

Proficiency in Cantonese is widely considered a key driver of success in Hong Kong, creating a hurdle for many of the city’s 33,000 non-Chinese-speaking students.

The government set aside a record HK$589 million (US$75.1 million) in the 2022-23 academic year for measures to support such students, including Chinese enhancement programmes and hiring more teachers.

The figure was nearly triple the HK$216 million allocated to similar initiatives in 2014-15.

Dhar said that despite the increase in government funding, many schools were not adhering to key performance indicators set out by the Education Bureau.

He cited a 2021 Audit Commission report that showed schools at the time had been slow to apply for the funding and many of the teachers involved had faced a lack of professional development.

To help address the “cause” of the problem, Dhar’s charity opened its first kindergarten, the IBEL Rusy and Purviz Shroff Charitable Foundation Kindergarten, in April.

The site had a soft opening in November of last year as a learning centre before it received a licence to operate as a kindergarten.

Thanks to HK$1.5 million in funding from Sino Group’s philanthropic arm, the Ng Teng Fong Charitable Foundation, and additional support from other organisations, the 5,000 sq ft facility currently provides instruction to 56 students, most of whom are ethnically Nepali.

The new facility also teaches students from mainland China, Italy, Australia and South Korea, among other nationalities.

While the organisation already operated a pair of learning centres dedicated to underprivileged children in Jordan and Sham Shui Po, Dhar said it was harder to influence the education system solely through such institutions.

“We realised that [opening the kindergarten] was the only proper solution to this problem,” he said.

The entrepreneur said the kindergarten aimed to enhance students’ Chinese-language proficiency from a young age, while also providing programmes that bridged educational and cultural experiences.

The school is licensed to teach up to 172 students, evenly split across a morning session and an afternoon one.

Dhar said he hoped to increase the site’s intake, with the charity having applied for a Child Care Centre (Nursery) Licence.

Lessons at the kindergarten are mostly taught in Cantonese, except for a daily 20-minute English lesson and a Mandarin class every other day.

Dhar said the decision to teach children all three languages was based on studies showing that kids had an easier time picking up languages the earlier teaching started.

“So the end game and the end objective is to create a generation of six-year-olds who are equally proficient in all three languages,” he said.

“That is the way you are going to be able to integrate into society, appreciate the culture and develop your career objectives.”

Is Vietnam losing its appeal for China’s manufacturers bypassing US tariffs?

https://www.scmp.com/economy/global-economy/article/3271391/vietnam-losing-its-appeal-chinas-manufacturers-bypassing-us-tariffs?utm_source=rss_feed

With China long established as the world’s factory, the United States has led a push to divert manufacturing and supply chains away from the world’s second-largest economy. In this three-part series, we look at whether the so-called China plus one strategy is working for the world’s manufacturers.

Chervon, a Chinese manufacturer of power tools and outdoor power equipment, launched a small factory base in Vietnam three years ago with high hopes for cutting costs.

The plant pumps out 1.5 million tools per year to avoid a 25 per cent tariff that Chervon would pay if it shipped straight from its Nanjing plant in China to the United States, executive deputy general manager Ren Jianjun said.

But the 31-year-old firm that draws about two-thirds of its business from the US is making less money from Vietnam than expected, with Ren blaming a 10 per cent rise in raw material costs and a smaller increase in operating costs.

“Overall, costs are about 7 per cent higher than in China, which basically equals the 7.5 per cent tariff previously,” he said during a Chinese government-organised media tour in June, referring to the US tariff rate before the US-China trade war, which began in July 2018 and eventually led to tariffs on some US$550 billion of Chinese goods and US$185 billion of US goods.

And Ren is not the only Chinese executive to have tried Vietnam to save production costs or as a workaround for US tariffs that went up in 2018 and 2019 as part of Washington’s trade dispute with Beijing.

He is also not the only one wondering whether Vietnam returns the promised dividend in the “China plus one” strategy, which seeks to reduce reliance on China as a production base, as companies in Taiwan face a similar situation.

“Taiwanese investors are largely making existence the priority,” said Chieh Hao-chuan, a food company operator and representative for the Council of Taiwanese Chambers of Commerce in Vietnam.

“Raw material prices are rising and increases in basic wages are a definite reality.

“If [the companies] don’t respond with their own increases, our companies’ profits will be impacted.”

For Chervon, the toolmaking supply chain in Vietnam also lags compared to China, while each Vietnamese province has its own investment rules, Ren said.

“So, we’re only crossing the river by feeling the stones. We have to take one step and look around before taking another,” he said, using the popular metaphor used by Chinese leaders to describe the path they have followed in economic reform.

Vietnam has dangled low costs for more than 15 years to attract tens of thousands of foreign-invested projects, with capital coming from Japan, Singapore, South Korea, Taiwan and mainland China.

Vietnam had grown in popularity because of rising costs in China even before the US-China trade war.

But as inflation edges up in Vietnam like much of the world, and as the Southeast Asian country also lacks the scale of China’s resources, Chinese firms like Ren’s may be particularly surprised because many have arrived just recently compared to peers from elsewhere in Asia.

“The investments needed to start production in Vietnam are not insignificant,” said Vivie Wei, Vietnam country director with Dezan Shira & Associates.

“Labour costs might look low on paper, but retention, increasing wages, generous schemes for paid leave or employer benefits need to be looked at in a way that Chinese investors are not familiar with from their own country.”

Land costs in Vietnam show a “significant upwards trend” in major cities and industrial zones because of urbanisation and demand for property, Wei said.

Over the past four years, she said, average rent had increased by 7 per cent per year in the north and 13 per cent in the south.

Labour in Vietnam costs 23 per cent less than in China, with wages as low as US$150 per month, said Ralf Matthaes, managing director at market intelligence firm IFM Research in Ho Chi Minh City.

But Chinese manufacturers, such as Chervon, may be surprised that the supply chain is less mature than that of China – a function of its relatively small economic scale – with labour being chased by multiple investors, said Frederick Burke, the American Chamber of Commerce’s Vietnam representative to the Vietnam Business Forum’s management board.

“The labour force is, while big, still a finite number and a company who can offer a higher wage will attract the workers,” said Jack Nguyen, CEO for professional services firm InCorp in Ho Chi Minh City, adding that hi-tech normally pays more than other fields.

Chervon’s frustration with uneven policies in Vietnam are common and may intensify later this year when a national land law changes, Burke added.

Some provincial authorities already delay the licencing of factory projects – in effect raising costs for investors – which is intended to appear cautious and is not a way to seek illicit financial reward, he said.

Local governments may set aside land for South Korean investors only or prioritise certain industries over others, said Winnie Lam, general secretary to the board of the Hong Kong Business Association Vietnam.

South Korea is Vietnam’s top foreign investor, while Chinese investors have registered 4,667 projects in Vietnam for a combined US$28.23 billion in capital since the late 1980s.

Proposals for factories that are labour-intensive or use older equipment receive extra scrutiny, Lam added.

And Lou Zhongping, founder of the Yiwu-based Soton Daily Necessities and dubbed the “King of Straws”, concluded that Vietnam is “not cheap” at all, with manufacturing costs 10 to 20 per cent higher than in China.

Lou recently led a group of more than 30 small and medium-sized entrepreneurs from Jiangsu and Zhejiang provinces to Vietnam for a week-long inspection tour, the state-backed Global Times newspaper reported on Saturday.

Land prices are already several times higher compared to China due to the influx of businesses from China, South Korea and Japan, he added.

The group visited Ho Chi Minh City, Da Nang and Hanoi and talked with more than a dozen Chinese and local companies.

Lou said that all the Chinese businesses he spoke to said the major reason they chose Vietnam was due to geopolitical risks.

“I have also visited many places around the world. Basically, there are few places with lower overall comprehensive costs than China. Because of China’s industrial chain advantages, no one can compete with it in the short term,” he said.

A post-pandemic drop in orders of manufactured goods from Western countries, a pullback in Vietnam’s domestic consumption and distrust in Vietnam about the quality of Chinese products further eroded some foreign investors’ profits, analysts said.

Vietnamese consumers, who represent a rising middle class, prefer Chinese brands only with “longevity, brand image and price points”, Matthaes said.

Economic planners in Hanoi have long focused on fostering value-added foreign investment, such as hi-tech, rather than the production of tools, footwear or garments.

But Vietnam remains a viable option for Chinese firms to seek to bypass US tariffs, analysts said, although the US government may eventually take action to plug that channel.

“Americans can figure this out,” Nguyen said. “I don’t know how long [investors] can do this before they say ‘hey, stop.’”

The US government already placed tariffs of more than 400 per cent on Vietnamese steel exports in 2019.

Chervon is aiming to expand investment in its Vietnam operation to US$20 million, Ren said.

“There may be some expansion in the future, but nothing is certain yet,” he said.

“Depending on the external environment, we may prepare a plan B.”

Vietnam’s Ministry of Planning and Investment data showed that the number of Chinese “newly registered projects” reached 477 in the first half of 2024 worth a combined US$1.01 billion.

They launched 233 projects in the first half of 2023 and 707 last year following 283 in 2022 and 204 in 2021.

But the story is different in neighbouring Malaysia, which traditionally attracts high-value sectors rather than traditional industries.

The approach works because of Malaysia’s relatively mature hi-tech cluster, British common law and prevalence of English-language skills, analysts said.

A tech hardware sector in the northern city of Penang has a “mature” ecosystem for semiconductors, particularly in assembly, testing and packaging, said Jaideep Singh, an analyst with the Institute of Strategic and International Studies Malaysia.

Malaysia contributes 13 per cent of all such processes worldwide, Singh said, with HP and Intel among the multinationals operating in Penang.

Manufacturing wages of about US$760 per month in Malaysia compare to US$1,100 in China, but average wages exceed China’s migrant worker average of US$680 per month, according to ING Greater China economist Lynn Song.

Bangladesh, Cambodia and Sri Lanka “are more attractive” than Vietnam for manufacturers that conduct labour-intensive and lower value-added work, said Song.

The textiles and apparel industry can thrive in the three countries, added Song.

But workers lack the skills available in Vietnam, meaning it is better for higher value added work.

Infrastructure and logistics in Bangladesh, Cambodia and Sri Lanka are also less developed than in Vietnam, which Song calls an “impediment”.

According to a study released by a group of professors at Hong Kong Polytechnic University, Renmin University in Beijing, Australian National University and Singapore Management University in May, only 20 per cent of transactions from 343 buyer-supplier relationships surveyed since 2018 had been diversified.

“Low-tech industries are easier to find replacements of suppliers. It would be harder for hi-tech industries [to diversify],” said Fan Di, associate professor and assistant dean in fashion and textiles at the Hong Kong Polytechnic University.

“Firms sometimes can’t find their cooperating partners if clusters are not yet developed.”

But Fan added that companies see tariffs and geopolitics as “evolving crises and long-term uncertainties”, while they are balancing diversification and complexities when considering the China plus one strategy by comparing whether moving parts of their operations out of China is cheaper than absorbing the tariffs.

“The trend of ‘China plus one’, however, won’t stop and manufacturers will find an equilibrium for the long term,” he said.

“It’s about how many per cent of their operations should stay in China and how many per cent should move out to other places that can help optimise efficiency and product development.”

Additional reporting by Kandy Wong