"China’s Services Slow, Xi Warns of ‘Rough Seas,’ CIA Targets Informants in East Asia"
This edition of China De/Cypher covers top global stories involving China, along with insights into key national developments.
China Quote
"The Chips and Science Act is about ensuring that the United States is not overly dependent on any one source, namely Taiwan, for such a critical technology, and about ensuring that the United States can remain competitive, not only as an innovator but also as a manufacturer. So at the heart of the Chips and Science Act is bringing back advanced manufacturing to the United States, and ensuring US competitiveness and supply chain resilience." - Elizabeth Economy is a senior fellow at Stanford University’s Hoover Institution, an expert on Chinese politics and foreign policy, and was a senior adviser on China at the US Department of Commerce.
De/Cypher Data Dive📈
Chinese government announced a series of measures aimed at stimulating the economy. Indices of major stock markets in the country have seen their values soar. The CSI 300 Index, which tracks the top 300 stocks on the Shanghai and Shenzhen exchanges climbed more than 15% last week, the biggest weekly gain since 2008. (Caixin)
Quick China: Unmissable Stories 📜
China Services Activity Grows at Slowest Pace in a Year, Caixin PMI Shows
China's manufacturing sector experienced a sharp decline in September, as revealed by the Caixin/S&P Global manufacturing PMI, which fell to 49.3 from 50.4 in August. This drop is attributed to cooling domestic and international demand, pulling down factory confidence to near-record lows. New orders, especially from abroad, decreased at the fastest pace in over a year, with manufacturers citing weakening foreign demand. The slowdown has led to reduced prices and job cuts, while China's government has recently introduced aggressive stimulus measures to boost economic growth, targeting a 5% annual goal. Despite the measures, manufacturers remain concerned about the global trade outlook, particularly given ongoing trade tensions with the U.S. and the EU over tariffs. (Caixin)
China Ready for $1.4 Trillion Fiscal Bazooka, Top Economist Says
A leading economist in China said the country has room to ramp up fiscal support for the economy by issuing as much as 10 trillion yuan ($1.4 trillion) in special debt, reflecting rising expectations for Beijing to expand public spending as part of its stimulus package. Jia Kang, a former head of a research institute affiliated with the Ministry of Finance, said authorities could lift confidence by drastically raising government investment in public projects. He spoke in an interview with Chinese publication The Paper published Tuesday.
“As these projects get underway, they will create jobs, increase income for citizens, and unlock consumption potential,” said Jia, who now leads the China Academy of New Supply-Side Economics, a private think tank. Without giving a possible timeline, he said “scaling up the bond issuance now to 4 trillion or even 10 trillion yuan would not be excessive.” (Bloomberg)
Hedge Funds’ Big China Bets Score 25%-Plus September Gains
In September 2024, some hedge funds saw substantial gains of over 25% thanks to China's stock market surge driven by a significant government stimulus. Triata Capital's China fund surged 44%, Blue Creek achieved a 31% gain, and Yunqi Capital jumped 26%. These funds benefited from China's broader equity rebound, with the MSCI China Index rising 23%, the largest increase since November 2022. The gains helped some funds recover from earlier losses in the year. (Bloomberg)
Like it or not, miners are still a China proxy
The mining sector has long anticipated a shift towards an "energy transition supercycle," where global demand for raw materials would drive growth. However, the industry's fortunes remain closely tied to China. Recent developments underscore this connection, as shares of major mining companies like BHP, Rio Tinto, Anglo American, and Glencore rose by about 10% after China announced economic stimulus measures, including support for its property market. Before this, mining stocks had followed China's economic slowdown, highlighting the sector's continued dependence on the world's second-largest economy. (FT)
Chinese outbound investment surges to record on clean energy ‘tsunami’
China's outbound investment is accelerating, driven by its booming clean energy technology sector, which is increasingly expanding abroad to counter U.S. and EU tariffs. According to government data, Chinese overseas investment grew by 12.5% in renminbi terms, reaching Rmb789.45 billion ($112.5 billion) in the first eight months of 2024 compared to the previous year. This follows a 6% increase in 2023. Analysts from Climate Energy Finance report a significant surge in investments in renewable energy and transport electrification, with Chinese companies committing $109.2 billion to 130 clean tech transactions since early 2023. (FT)
Paint makers say EU tariffs on Chinese imports risk bankrupting them
Paint manufacturers are pushing for a rethink of EU anti-dumping measures against Chinese exports of a key raw material, saying they will lead to factory closures and further erosion of the region’s industrial base.
The bloc’s paint producers fear that tariffs of up to 39.7 per cent on Chinese exports of titanium dioxide (TiO₂) would bankrupt smaller producers and push bigger manufacturers to shift production outside the bloc.
The provisional duties imposed in July have yet to be confirmed by member states. (FT)
Chinese Drugmaker on Trial for Contamination Still Sells in US
Zhejiang Huahai Pharmaceutical, a key player in China's drug industry, is set to face a U.S. jury in New Jersey over allegations that it sold contaminated pharmaceutical ingredients to the U.S. six years ago, potentially causing cancer. The case involves missing emails that could clarify when the company became aware of the contamination. Despite the Chinese Communist Party preventing Huahai's CEO from testifying, and the company claiming key emails were lost due to a damaged hard drive, Huahai has continued to receive U.S. FDA approval to produce various drugs, including generics for Vyvanse and Cialis. (Bloomberg)
Beyond The Great Wall 🧱
Exploring News About China in Depth
Economy
China economists trim GDP forecast to 4.8%, highlighting stimulus battle
Peggy Ye and Kensaku Ihara write in Nikkei Asia that economists have reduced China's 2024 GDP forecast to 4.8%, citing deflationary pressures and a sluggish property market. Despite recent stimulus measures, including rate cuts and stock market boosts, the outlook remains uncertain. Weakened consumer confidence and external challenges, like tariffs on Chinese exports, are further hindering growth. Economists warn that Beijing’s goal of "around 5%" growth may be difficult to achieve without more radical interventions.
Internal Politics 🏛️
Xi Jinping forecasts ‘rough seas’ on 75th anniversary of People’s Republic of China
Helen Davidson writes in The Guardian that Xi Jinping warned of difficult times ahead for China during his speech marking the 75th anniversary of the People's Republic of China. Amid economic struggles and rising tensions with Taiwan and the US, Xi urged vigilance and preparation for potential challenges, while reiterating plans for Taiwan's "reunification." The muted celebrations reflect the country’s current economic downturn.
China on track to break 2023 ‘tigers’ record as top anti-corruption watchdog nets 44
William Zheng writes in SCMP that China’s anti-corruption campaign is poised to surpass last year’s record, with 44 senior officials, or “tigers,” detained by September 2024. The latest to fall include top figures like Li Gang from the Central Commission for Discipline Inspection. President Xi Jinping’s ongoing crackdown has targeted both powerful leaders and lower-level officials since 2013.
China And The World🌐
Over 200 Chinese nationals evacuated from Lebanon
CGTN reports that the Chinese government has evacuated over 200 Chinese nationals from Lebanon due to rising tensions with Israel. The first group of 80 evacuees, including Chinese nationals and their non-Chinese family members, left for Cyprus by ship, while a second group of 151 people was flown back to Beijing. The Chinese Embassy in Lebanon coordinated the evacuation from the Lebanese National Higher Conservatory of Music near Beirut.
German Foreign Minister Annalena Baerbock expected to visit China ‘in coming days’
William Zheng writes in SCMP that German Foreign Minister Annalena Baerbock is set to visit China in the coming days amid tensions over Ukraine, the Middle East, and European discussions on electric vehicle tariffs. The visit comes at a critical time, with Germany and China both advocating for continued dialogue and cooperation, despite growing international concerns about China’s stance on global conflicts.
Russia's Lavrov says stands alongside China on Taiwan, other issues
The Japan Times reports that Russian Foreign Minister Sergei Lavrov reaffirmed Russia's support for China's stance on Taiwan, criticising U.S. efforts to extend influence in Asia. Lavrov praised Beijing’s approach to the war in Ukraine and echoed China’s calls to address the conflict’s root causes. Lavrov's comments coincide with the 75th anniversary of Russia-China diplomatic ties, emphasising close cooperation between the two nations in the Asia-Pacific.
China, Serbia sign agreement for Novi Sad pedestrian, bicycle bridge
Xinhua reports that Serbia has signed a contract with China Shandong International Economic & Technical Cooperation Group for the construction of a pedestrian and bicycle bridge in Novi Sad. Serbian Prime Minister Milos Vucevic and Chinese Ambassador Li Ming praised the partnership, which aims to enhance quality of life and symbolize China-Serbia friendship. The 450-meter-long bridge is expected to be completed by 2027, featuring a tunnel and elevator to Petrovaradin Fortress, a key landmark.
Vietnam protests Chinese attack on fishing vessels in South China Sea
An Hai writes in VOA that Vietnam lodged a protest after Chinese personnel allegedly attacked Vietnamese fishermen near the disputed Paracel Islands. Vietnamese media reported that Chinese vessels boarded a fishing boat, injuring crew members with iron pipes. Vietnam’s Foreign Ministry condemned the actions and demanded respect for its sovereignty. China, however, stated that the fishing boats were operating without permission, defending its actions as professional. The incident reflects increasing tensions in the region.
US Sends Warships to Meet China, Russia Presence Near Alaska
Newsweek reports that the US deployed three warships near Alaska as China and Russia conducted joint patrols in the Northern Pacific. The USS Kidd, USS Sterett, and USS Lake Erie carried out homeland defense operations. Meanwhile, Chinese and Russian warships completed a joint exercise in the Sea of Japan and Sea of Okhotsk, with patrols moving into the Northern Pacific. This marks escalating maritime activity in the region, heightening tensions between the US and its strategic competitors.
Germany arrests woman for passing defense info to China via EU lawmaker’s aide
Csongor Körömi writes in Politico that German authorities have arrested Yaqi X., who is accused of passing sensitive defense information to China through a Chinese agent working for a far-right European Parliament member, Maximilian Krah. The espionage operation involved the transfer of details about defense equipment and personnel. The scandal has intensified scrutiny on Krah, who had previously hired the Chinese agent, Jian G., as his assistant in 2019.
5 Chinese nationals charged with covering up midnight visit to Michigan military site
Ed White writes in AP that five Chinese nationals have been charged for covering up their visit to Camp Grayling, a military site in Michigan. The individuals, former University of Michigan students, are accused of lying to investigators and attempting to delete photos taken during the trip. The charges highlight concerns over Chinese nationals accessing U.S. defense sites, though the men claimed they were there to see a meteor shower.
CIA Seeks Informants in North Korea, Iran, and China
Nick Marsh writes in BBC News that the CIA has launched a new social media recruitment drive targeting informants in North Korea, Iran, and China. The campaign, similar to one aimed at Russians post-Ukraine invasion, uses platforms like X, YouTube, and LinkedIn to offer secure communication methods. CIA officials aim to reach dissatisfied citizens within these authoritarian regimes. However, experts question its effectiveness, particularly in North Korea, where internet access is limited. The CIA sees this as part of adapting to increasing global surveillance and repression.
Volkswagen calls on Germany to vote against EU tariffs on Chinese cars
Reuters reports that Volkswagen has urged the German government to oppose proposed EU tariffs on Chinese electric vehicles (EVs). The EU Commission has been investigating whether Chinese EVs benefit from unfair subsidies. Volkswagen warned that such tariffs could harm Germany's economy and its competitive position in the global automotive industry. The company’s appeal highlights growing tensions between Europe's car industry and policymakers over the potential impacts of trade restrictions on Chinese imports.
China files complaint at WTO over Canada's unilateralism, trade protectionism practices
Xinhua reports that China has lodged a complaint with the World Trade Organization (WTO) in response to Canada’s recent trade restrictions, including surtaxes on Chinese electric vehicles and steel products. China's Ministry of Commerce accused Canada of violating international trade rules and warned of significant harm to bilateral relations. China has also launched an anti-discrimination probe into Canada’s measures, vowing to protect its enterprises' rights and oppose what it deems as protectionist actions.
US bans new Chinese firms over forced labor claims in Uyghur region
CNBC reports that the US has added a Chinese steel manufacturer and an artificial sweetener maker to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List, accusing them of using forced labor in the Xinjiang region. This move expands the list to 75 entities and follows growing tensions between the US and China over human rights violations. Beijing retaliated by investigating US companies like PVH, owner of Tommy Hilfiger and Calvin Klein, for "discriminatory measures."
Tech🧑💻 in China
China Chip-Packaging Giant JCET Takes Over SanDisk’s Shanghai Plant
Digitimes Asia reports that JCET has acquired an 80% stake in SanDisk's Shanghai plant for $624 million. This acquisition strengthens JCET’s position in China's data storage market and deepens its partnership with Western Digital, SanDisk's parent company. The deal, approved by China’s antitrust body, highlights shifts in the global semiconductor industry as China bolsters its domestic capabilities amid international tensions.
Chinese start-up Numemory claims memory chip breakthrough amid US tech sanctions
Xinmei Shen writes in SCMP that Wuhan-based semiconductor start-up Numemory has launched a 64GB storage-class memory (SCM) chip, a notable advance in China’s technology self-sufficiency efforts. The NM101 chip is claimed to rival global products in capacity and performance, providing fast, non-volatile memory solutions for data centres. This development comes as China continues to push innovation despite US sanctions hampering its semiconductor industry.
Shanghai’s robot startup wants to brew up a coffee revolution with automated kiosks
Coco Feng writes in The Star that Shanghai Hi-Dolphin Robot Technology aims to cut costs in the coffee industry through fully automated kiosks called Cofe+. These robotic booths, featuring a four-axis arm, can make coffee in 50 seconds without human baristas. Founder Philip Han believes the kiosks will reduce operating costs by 90% and help revive the struggling coffee sector in China and globally.
Rest of World
HEADLINES
Friday
United States President Joe Biden said he did not believe there is going to be an "all-out war" in the Middle East, as Israel weighs options for retaliation after Tehran's largest-ever assault on its arch-enemy. (CNA)
North Korean leader Kim Jong Un said the country would not hesitate to use all available offensive forces including nuclear weapons if the enemy attempted to use force to encroach on its sovereignty, state news agency KCNA reported. (The Star)
Malaysia's Prime Minister Anwar Ibrahim is set to arrive in Bangladesh on Friday for talks primarily focused on labour issues, according to Dhaka officials. (Reuters)
Afghanistan’s Daesh group is staging a growing number of bloody international attacks, presenting a rare but complicated opportunity for foreign cooperation with the Taliban government to counter the jihadists. (Arab News)
Thursday
A Singapore court sentenced a former minister to 12 months in prison for obstructing justice and receiving more than $300,000 worth of gifts, in the first jailing of an ex-cabinet member in a city-state famous for its clean governance. (Reuters)
Bangladesh's interim government has recalled five envoys, including the ambassador to neighbouring India, in a major diplomatic reshuffle, a foreign ministry official said. (CNA)
The Israeli military said that it killed a senior Hamas leader in an airstrike in the Gaza Strip around three months ago. It said that a strike on an underground compound in northern Gaza killed Rawhi Mushtaha and two other Hamas commanders. (AP)
The Philippines expressed concerns over media reports alleging foreign covert operations in the country, saying it is coordinating with relevant agencies to address the matter. (GMA News)
Wednesday
Russia has dismissed the possibility of nuclear talks with the United States citing Washington’s stance on NATO expansion, Russian Foreign Ministry spokeswoman Maria Zakharova said. (Reuters)
Israel declared UN chief Antonio Guterres “persona non grata”, accusing him of failing to specifically condemn Iran’s missile attack on Israel. (Arab News)
Malaysia’s prime minister arrived in Pakistan’s capital Wednesday on his first official visit which authorities say is aimed at strengthening ties between the two countries and boosting bilateral economic and trade ties. (Dawn)
British Prime Minister Keir Starmer said it is “right” that he has paid back more than 6,000 pounds ($8,000) worth of gifts and hospitality, following a row over freebies. (AP)
Tuesday
Japan's newly minted prime minister, Shigeru Ishiba, formed his first Cabinet, and like the Liberal Democratic Party leadership election he just won, the outcome was unexpected. (Japan Times)
Israel has launched what it has described as "limited, localised and targeted ground raids" in southern Lebanon, marking an escalation in its continuing offensive against Hezbollah. (BBC)
South Korea unveiled its most powerful ballistic missile and other weapons targeting North Korea during a massive Armed Forces Day ceremony, as the South’s president warned the North’s regime would collapse if it attempts to use nuclear weapons. (Arab News)
One of NATO’s longest serving top officials, Secretary-General Jens Stoltenberg, stepped down, handing over the reins to former Dutch Prime Minister Mark Rutte. (AP)
Monday
The chief of the UN Palestinian Refugee Agency (UNRWA), on Monday, denied knowing that its employee, Fateh Sherif Abu El-Amin, was a Hamas commander in Lebanon and called on states to push back against Israeli attacks on the Agency. (Middle-East Monitor)
Austria entered uncharted territory Monday after the far right scored a historic national election win, with parties facing an uphill task to form a new government. (Arab News)
A Pakistani court denied on Monday a bail application by imprisoned former prime minister Imran Khan and his wife in a graft case, their lawyer said, another blow to the popular opposition leader who has been held in prison for more than a year after being convicted on multiple charges. (Gulf Today)
The International Monetary Fund said Bangladesh's quick formation of an interim government has helped stabilise the country, and that the country's new authorities have helped address the economy even as challenges remain. (CNA)
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