Manufacturing, not consumption, key for China’s economy – Victor Shih

 

Victor Shih

China will continue to focus on supporting its manufacturing power, instead of changing to household subsidies, says economist Victor Shih, out of line with many other economists who expect support for consumption, as reported by Al Jazeera. Shih added: “There are 1.4 billion people in China, so comprehensive social assistance would be extremely expensive, especially in a deflationary context.”

Al Jazeera:

Analysts expect the National People’s Congress, China’s rubber-stamp parliament, to again set an annual growth target of about 5 percent when it meets in March.

While many economists have exhorted Beijing to stimulate growth through household transfers, Victor Shih, an expert on the Chinese economy at the University of California, San Diego, expects investment-driven growth to continue to hold sway.

“Marxist ideology, which valorises industrial production, remains the fundamental basis for policymaking in Beijing,” Shih told Al Jazeera.

“In all likelihood, the government will continue to subsidise manufacturing. Consumption, by contrast, is viewed as indulgent.”

Shih added: “There are 1.4 billion people in China, so comprehensive social assistance would be extremely expensive, especially in a deflationary context.”

Shih said Beijing could raise household consumption by urging companies to pay higher wages but that “China’s manufacturing edge is partly based on subdued worker income”.

As such, “higher wages would undermine Chinese exports, which is an important source of output”, he said.

“I don’t think the government will shift budgetary priorities in favour of the Chinese people… which will likely result in a period of economic weakness.”

More at Al Jazeera.

Victor Shih is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

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China and the US need no war on AI, but cooperation – Alvin Wang Graylin

 

Alvin Wang Graylin (right)

Behind all the geopolitical shuffles between China and the US, the war on AI and the metaverse is raging, says AI expert Alvin Wang Graylin in an interview with Cyrus Janssen. And that is a wrong signal for the rest of the world, as both forces should not try to contain the other, for national security reasons or whatever, but work together, he argues.

Alvin Wang Graylin is a speaker at the China Speakers Bureau. If you need him at your meeting or conference, get in touch or fill in our speakers request form.

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You can order Alvin’s upcoming book here: Our Next Reality: Preparing for the AI-powered Metaverse,

You can read the full interview here: 12:28 – Introduction to Alvin Wang-Graylin

Can China deal with debts and property crisis? – Arthur Kroeber

 

Arthur Kroeber

China’s economy is dealing with some tough years, writes leading economist Arthur Kroeber, author of China’s Economy: What Everyone Needs to Know®, in ChinaFile, especially now that it does not have enough tools with debts and the property crisis like it did in the past. “So we need to brace for the consequences of the Xi model: slower growth in China, a big rise in Chinese technology exports, and more protectionism in the rest of the world,” he writes.

Arthur Kroeber:

China’s economic malaise results from a combination of political decisions, structural factors, and policy mistakes. The central reason for it is that Xi Jinping has decided to make national security and technological upgrading—not economic growth—his policy priorities.

The broadening definition of national security, and the increased influence of security interests in economic policy, have soured private investor confidence. The focus on technological upgrading has led to an economic strategy that relies almost exclusively on industrial policy. This means that the government devotes most of its attention to the supply side of the economy: boosting production of semiconductors, clean energy equipment, electric vehicles, industrial machinery, ships, and other products seen as needed to increase the country’s technological capability and self-sufficiency. Virtually no serious effort goes into figuring out how to unlock domestic demand—especially from households, which now save about a third of their income, one of the highest savings rates in the world.

These policies mean that China’s economy will have two faces in the coming years. The chronic shortage of demand will mean disappointing GDP growth—probably 3-4 percent on average over the rest of the decade—and a constant struggle to shake off deflation. But at the same time, its technology-intensive sectors will thrive, thanks to both government support and China’s uniquely competitive manufacturing ecosystem. The result will be persistent high trade surpluses and, probably, a strong wave of protectionism from countries that want to preserve their own industrial capacity.

This policy stance also makes it very hard for China to solve two of its biggest structural problems: the collapsing property market and the huge and growing debt burdens of local governments. The last time China faced a challenge of this scale was the late 1990s, when nearly half of all bank loans went bad. At that time, it responded with a combination of financial engineering to postpone the reckoning of bad debts, well-targeted infrastructure stimulus, and aggressive deregulation of manufacturing and housing which unlocked huge new sources of entrepreneurship and household demand. As a result, China grew out of its problems and by 2010 became the world’s second-biggest economy.

A similar approach today would recognize that deregulation of services—which account for more than half the economy, and all net new employment—is the main path to boosting consumer demand and accelerating economic growth. Too much of the service economy is either in state hands, or burdened by stunting regulations. But such a policy would conflict directly with Xi’s desire to keep the state’s finger on all economic levers. So we need to brace for the consequences of the Xi model: slower growth in China, a big rise in Chinese technology exports, and more protectionism in the rest of the world.

More views of other economists in ChinaFile.

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

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What you should not miss at the new PRC company law – Mark Schaub

 

Mark Schaub

China will implement a new PRC company law and veteran lawyer Mark Schaub expects most people will doze off before they make it to the end of that law. In his China Chit-Chat website, he summarizes the main changes and insists you should pay attention. He covers important issues like: “The new PRC Company Law sets a 5-year deadline to make promised capital contributions. Crucially this requirement will apply retrospectively. Ouch!” And who is the boss in a company, and how to fire a director.

Mark Schaub:

Being an external director of a WFOE was always quite a lark. You would go to board meetings (often in Hainan), were treated with great respect and as someone external to daily operations you did not really know why you were there, so you did not need to concentrate. Sometimes you would daydream about what superpowers it would be good to have.

Sadly, these halcyon days of daydreaming about being a superhero are consigned to the past as the PRC Company law ramps up (again) personal liability for directors. The threat of personal bankruptcy somewhat outweighs the pleasure of an occasional Gin and Tonic at a board meeting where all you need to do is nod and ask the occasional question to show you are awake even if such questions showed you to be not very well informed.

Much more at the China Chit-chat.

Mark Schaub is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

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Post-pandemic China will be different – Gabor Holch

 

Gabor Holch

Why business will never be the same in China again, tells consultant Gabor Holch in a wide-ranging overview of how business in China has changed after the pandemic, and how Western businesses can face those changes.

Gabor Holch is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

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China: manoeuvering between local debts and slowing revenue – Victor Shih

 

Victor Shih

Financial expert Victor Shih looks at the dilemma China faces as local debts run out of hand, while revenue is dropping, and consumer confidence is low, at a panel discussion at the Ray School of Management at the UC San Diego.

Victor Shih is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers request form.

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A plea for solid labor relations – Zhang Lijia

Zhang Lijia

Former rocket factory worker and author Zhang Lijia discusses labor relations in China in an opinion piece at the South China Morning Post after a video about a dismissal of a worker caused an online uproar. “The government’s commitment to protect its workers is on the line here,” she argues.

Zhang Lijia:

This month, a short video attracted a huge amount of attention on China’s social media. In the clip, a female executive was seen sacking a male employee. When he protested that she had violated the country’s labour law, she spoke rudely to him, admitting: “I’ve violated the law – so what?” He could go ahead and sue her, she said, but he would never get anywhere because she “knew people” in labour arbitration.

The video has caused a public outcry and widespread condemnation. There is heated debate over how she could blatantly disregard the law, whether China’s labour laws were working well enough and how China can better protect worker rights.

Having once been a factory worker for 10 years, I maintain a keen interest in labour relations; I also feel for my fellow workers.

China enacted comprehensive labour legislation only in 2008, with the Labour Contract Law, the Labour Dispute Mediation and Arbitration Law, and the Employment Promotion Law – all important legal milestones aimed at addressing workers’ grievances and protecting their rights. In particular, the Labour Contract Law states that companies must provide each employee with a written contract and stipulates guidelines on termination: there should be a 30-day notice or an extra month’s salary in lieu.

After outraged netizens started digging around for the identity of the woman and the company, the Beijing-based chip design company issued a statement on January 8, apologising for causing the furore. It said its executive had been reprimanded and suspended from work. It also said the sacked worker was let go about five months into his six-month probation because of a lack of competence, and that the termination was lawful.

Labour disputes in China are a relatively new phenomenon and it is not uncommon for companies to fire workers just before the end of their probation. As economic and social inequalities increased with China’s opening up, so have labour tensions…

Given the circumstances, the authorities must try harder to protect workers’ rights to fulfil their duty of care. They should thoroughly investigate the latest allegation of unfair dismissal and severely punish those who violate labour laws.

They should also introduce more legal aid, work to simplify the arbitration procedure, and ensure all verdicts are obeyed and wronged employees are properly compensated.

The government’s commitment to protect its workers is on the line here. China is a socialist country, built as a state for and of the workers. A failure to protect workers undercuts the Communist Party’s credibility, especially if the poor enforcement of labour laws is allowed to continue and cases start to mount.

More at the South China Morning Post.

Zhang Lijia is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers’ request form.

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Plea

No quick fixes for China’s economy – Shaun Rein

 

Shaun Rein

Business analyst Shaun Rein dives deeper into the China economy as consumer confidence in first-tier cities is lower than he has seen in 27 years and the government’s economic targets focus on the next 3-5 years, he tells CNBC. The government is unwilling and unable to rely on stiff financial bazookas as it did in the previous crisis of 2008. Economic growth of 5 percent is enough for the government now, as it wants to diminish the gap between haves and have-nots, he adds.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

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Sparks of hope from China – Ian Johnson

 

Book reviews of Sparks: China’s Underground Historians and their Battle for the Future by China veteran and Pulitzer prize winner Ian Johnson start to come in, rightfully, like this overview in Public Discourse by Robert Carle. “In Sparks, Ian Johnson tells the stories of people such as Lin Zhao and Hu Jie—Chinese journalists and filmmakers who explore the darkest episodes of Chinese communism, often at great risk to themselves.”

Public Discourse

A poet named Lin Zhao, who contributed to Spark, was the subject of Hu’s 2004 film Searching for Lin Zhao’s Soul. When Lin wasn’t handcuffed to chairs and beaten by guards, she wrote poems and essays on scraps of paper by piercing her finger with a hairpin and using her blood as ink. When she ran out of paper, she wrote on her clothing.

With her blood, Lin drew images on prison walls of an incense burner and flowers. From 9:30 to noon each Sunday, she held what she called grand church worship, singing hymns and saying prayers that she learned in her Methodist girls’ school. The prison guards put a tight-fitting hood on Lin that made it difficult for her to breathe and impossible for her to speak.

Lin was executed on April 29, 1968. On May 1, a Communist Party official visited Lin’s mother to demand that she pay a fee for the bullet used to kill her daughter.

Prison guards meticulously saved Lin’s writings to document her counter-revolutionary spirit. After Mao’s death, Lin’s files were declassified and sent to her family.

In Sparks, Ian Johnson tells the stories of people such as Lin Zhao and Hu Jie—Chinese journalists and filmmakers who explore the darkest episodes of Chinese communism, often at great risk to themselves. In Sparks, we meet Ai Xiaoming, who interviewed dozens of survivors of the Jiabiangou forced labor camp and their families to make her seven-hour documentary film, Jiabiangou Elegy (夹边沟祭事). We also meet Journalist Tan Hecheng, who uncovered the story of a 1967 Communist Party–led massacre of nine thousand innocent men, women, and children in Hunan Province. Tan devoted forty years of his life to researching the story of the systematic murders, finally publishing the book The Killing Wind in 2010. “Documenting this wasn’t quixotic,” Johnson writes. “It was a hard-nosed calculation that it would pay off—not for Tan personally but for his country.”

More in Public Discourse.

Ian Johnson is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers request form.

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The ugly face of deflation – Shaun Rein

 

China’s consumers are trading down because of deflation, and are looking for cheap prices, says Shanghai-based business analyst Shaun Rein to CNBC. China’s government is unlikely to use financial support for the economy, he adds, as it finds the current growth of 5 percent quite enough, as its priority is dealing with the gap between the haves and have-nots, not at trying to increase that economic growth.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more financial experts at the China Speaker Bureau? Do check out this list.

 

China’s demographic timebomb – Shaun Rein

 

Shaun Rein

China’s aging population is leaving the labor force while dropping consumer confidence discourages youngsters from marrying or having children. Business analyst Shaun Rein tells Reuters the country is heading for a demographic disaster, and raising the pension age is one inevitable measure the government should take.

Reuters:

A record low birth rate in 2023 and a wave of health crisis-related deaths resulted in a second consecutive year of population decline, accelerating concerns about China’s demographic downturn.

Large groups of the 1.4 billion people living in the world’s second-largest economy will exit the labor pool and age past a prime period of their lives for consumption, exacerbating structural imbalances that policymakers have vowed to address.

“The world should be worried about China’s economic slowdown. It’s going to impact the profits of the world’s largest companies. When Chinese consumers are cutting back on their spending, that’s going to impact the Starbucks, the Nike’s, the Apples of the world,” Rein told Reuters.

More – including a video – at Reuters.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

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The current state of US-China relations – Victor Shih

 

Victor Shih (left) at the discussion

China expert Victor Shih, Director of the 21st Century China Center at the University of California San Diego School of Global Policy and Strategy, discusses the current state of US-China relations with Bill Gertz of the Washington Post, covering questions like, “Is China an existential threat or a competitor?” and “Is China trying to replace the US as hegemon?” at PNYX.

Victor Shih is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more experts on managing your China risk? Do check out this list.

Pleas

China’s changing approach of data and AI – Winston Ma

 

Winston Ma

China’s industrial policy towards data and Artificial Intelligence (AI) is changing, writes Winston Ma, adjunct professor at the New York University at Europeansting.com. “The fresh approach could be a model for developing economies to follow — but the nature of AI innovation and expansion means they also risk being left behind.”

Winston Ma:

Now the Generative AI boom in 2023 is further driving Chinese companies — in about every sector — to invest heavily in research and development of the latest digital technologies. They are rushing to learn how new digital technologies, also including the internet of things, blockchain, cloud computing and data analytics (dubbed “iABCD”) can be integrated into their businesses to unlock value from non-traditional angles.

This powerful trend is real and accelerating. In early January, China’s 17 government departments and ministries issued a three-year “Data Element X” action plan, one month after the “Data X” concept was introduced. The action plan will promote “high-level application of data”, highlighting “high quality” data supply, data circulation, data analytics and data security.

For example, enterprise leaders use data and metrics to assess performance, identify gaps and update plans. In almost all companies, this is historical data about what has already happened, and leaders may get away with that (the figurative equivalent of driving forward with your eyes fixed on the rearview mirror) when the world is stable and business conditions are certain.

But today’s tumultuous post-pandemic world is riven with macroeconomic, geopolitical and technology disruptions. In addition to the need for more real-time data, the businesses further need the predictive capabilities of AI that can help them anticipate and shape the future. As such, the new data capabilities of businesses and industries will result in more profound transformation than from the mere addition of internet.

In short, the main task of “Data X” is to activate the data market, enabling data to realize its full value. This happens at a time when data is created at an increasing pace. In addition to the data creation by the existing digital economy, in August 2022, the number of connected “things” (mobile IoT devices) exceeded that of connected “people” for the first time in China. More data will be created by “things” in the future than “humans”.

More at the Europeansting.com.

Winston Ma is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

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Bridging cultures after the golden age of foreign companies in China – Gabor Holch

 

Gabor Holch, interviewed by Ashley Dudarenok

Bridging cultures between Chinese and international companies is harder, now the golden age of foreign companies in China is over, says international coach Gabor Holch in an interview with marketing guru Ashley Dudarenok.

Both Gabor Holch and Ashley Dudarenok are speakers at the China Speakers Bureau. Do you need either of them at your meeting or conference? Do get in touch or fill in our speakers’ request form.

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Why China’s tea makers rush for a Hong Kong IPO – Ben Cavender

 

Ben Cavender

China’s leading bubble tea makers including Mixue Bingcheng and Guming, each with thousands of stores, are rushing for an IPO in Hong Kong. A quick move now to collect capital might define the winners of the future, tells business analyst Ben Cavender to Reuters.

Reuters:

Mixue Group and Guming Holdings, China’s largest and second-largest freshly-made bubble tea chains by store count as of 2023, submitted applications for initial public offerings (IPO) in Hong Kong on Tuesday, Hong Kong Stock Exchange filings showed.

Mixue, which has roughly 36,000 stores, is looking to raise $500 million to $1 billion in its Hong Kong IPO, while Guming, with 9,000, is aiming to raise $300 million to $500 million, according to a source with direct knowledge of the matter…

Bubble tea is one of the few bright spots on the consumer front in China, with low-price operators doing particularly well.

According to a China Chain Store & Franchise Association study, the country’s 486,000 bubble tea stores were expecting a 40% rise in yearly sales in 2023, reaching a market size of around 145 billion yuan.

But with low product differentiation, competition has been fierce among players. Another industry giant, ChaBaiDao, also submitted its Hong Kong IPO application just a few months ago.

“I think there is a big rush to IPO right now, as generally speaking these chains have been expanding aggressively but have had to be willing to lose money to do so,” said Ben Cavender, managing director at China Market Research Group.

“Whoever can IPO the fastest and get to a stable operating position may be the winner over the long term.”

More in Reuters.

Ben Cavender is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.

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