Xi Jinping, China's supreme leader, has recently visited the site of Xiongan New Area, a satellite city 100km south of Beijing, praising the progress of what he sees as his pet project. The development, once completed, will cover an area three times the size of New York City, and Xi plans to move many non-essential government departments and state-owned enterprises from Beijing to the area. However, some experts question whether Xiongan will be comparable to Shenzhen, China's first special economic zone, or to Shanghai's glittering financial district, Pudong. Critics say that those areas were granted much more freedom to create a market-oriented environment that would attract foreign and domestic businesses. Xi has expressed the desire for Xiongan's aspirations to be similar to Shenzhen's, but he also sees it as part of his aim to create "common prosperity", which has spooked entrepreneurs and investors. Incentives such as tax breaks, bonuses, or guarantees of educational opportunities for the children of people who move from Beijing or Tianjin are being discussed to encourage people to relocate to Xiongan.
Xi Jinping says no to ‘street stall economy’ in Beijing
CNN
23-05-18 11:04
Chinese President Xi Jinping has opposed the recent lifting of curbs on street vendors in Beijing, expressing concerns about the impact of the “street stall economy” on the city’s image. The policy shift had been aimed at tackling rising unemployment, however, Beijing is the first city to have the policy opposed publicly by top government officials. It’s unclear whether the city will now need to comply with the president’s views and outlaw street vending once again. Analysts have said that street vending was previously viewed by the Chinese president as something that tarnished the image of a successful and modern China. However, the recent policy reversal was made against the backdrop of growing challenges facing the world’s second largest economy.
Hong Kong stocks, including Alibaba, Tencent Holdings, and Baidu, fell following disappointing revenue growth of 2% for the fourth quarter at Alibaba, and concerns that China's post-Covid recovery is losing momentum. The Hang Seng Index slumped by 0.9%, with the Tech Index falling by 1.8%. While the Shanghai Composite Index was little changed. Goldman Sachs warned that rising government debt levels would limit China's ability to roll out additional pro-growth policies through fiscal policy. Major Asian markets were trading higher, however, with Japan's Nikkei 225 up by 1% and South Korea's Kospi rising 0.7%.
Chinese Premier Li Qiang has embarked on a two-day inspection tour in the eastern province of Shandong to assess how authorities can boost consumer confidence in the struggling Chinese market, following a release of lower-than-expected economic data. Li aims to boost spending and export orders, as well as improving purchasing policies for new-energy vehicles to stimulate consumption potential, particularly in rural areas. He is also promoting the Belt and Road Initiative to encourage Chinese businesses to develop customised products to expand international markets.
Investors should look beyond a stumbling Chinese economy and take advantage of opportunities in retail and travel services, according to Tiffany Hsiao from Artisan Partners Asset Management. The rebound in China's economy looks to have been hit by the re-emergence of Covid, with consumer retail stocks leading the way down, and some are "completely overlooked", Hsiao said. She's more interested in platform advertising stocks, such as Focus Media Information Technology, and travel shares, arguing that Chinese consumers don't immediately jump back into discretionary spending as quickly as their American counterparts. Hsiao looks at alternative data to guide her decisions, including foot traffic in China's main cities, which suggests the economy is "recovering just fine".
The Shanghai Stock Exchange has proposed plans to increase the valuation of Chinese state-backed banks, which are currently discounted by around 36% to their book value. The exchange's General Manager, Cai Jianchun, outlined the plans to executives at a recent meeting, which included the suggestion of businesses holding more investor relations events and the development of index-based fund products. China's banking sector remains one of the most distressed industry groups. Despite a 5.3% gain for 43 banks on the exchange, and a 16% climb in the shares of China's largest listed banking organisations this year, ICBC is trading at 44% below its net asset value.
China's first domestically built cruise ship, built by a joint venture between China State Shipbuilding and US firm Carnival, has been named Magic City, a nickname for Shanghai. The 323-metre-long ship will be tested before it is delivered at the end of 2023 and can carry up to 5,246 passengers. The CSSC-Carnival joint venture, called Adora, is 60% owned by China State Shipbuilding. The Magic City is seen as a way of boosting the tourism sector and China's position as a global powerhouse in developing and operating luxury cruise ships.
China will build an international science and technology innovation complex in Beijing to compete with Silicon Valley by 2025. The Beijing International Science and Technology Innovation Centre's plan is to offer attractive visa, work permit and long-term residency options for foreign talent, and to build world-class scientific and technological infrastructure clusters. National research institutions and private companies will be expected to make advancements and China aims to remain spending 6% of the country's gross domestic product on research and development by 2025. However, US sanctions are blocking China's technological progress, prompting Beijing to embark on a quest for technological self-reliance.
The Democratic Republic of Congo's president Felix Tshisekedi will travel to China from 24 May to 29 May. The two nations are seeking to conclude a renegotiation of a $6.2bn mineral-for-infrastructure deal. Congo is a key producer of cobalt, which is vital in electric vehicle batteries. Tshisekedi has previously suggested the agreement was "badly drawn up" and not beneficial. Tshisekedi will head to Beijing, Shanghai and Shenzhen, meeting officials including China's President Xi Jinping and representatives of energy, mining, battery and tech companies. China and Congo conducted $21.7bn in trade in 2022.
As China-US relations become more strained and geopolitical complexity rises, Hong Kong businesses are recognising the investment possibilities in Saudi Arabia. Hong Kong business trips to Saudi Arabia have resulted in the recognition of the potential benefits the country possesses for foreign investment and diversification. During a trip to Saudi Arabia, the chairman of the non-profit Better Hong Kong Foundation, Ronnie Chan, and a local business delegation had first-hand interactions with senior Saudi officials, business leaders and academics. They returned with insights that should provide food for thought as Hong Kong seeks to compete in the global market. While Saudi Arabia is keen to welcome Hong Kong investors, major projects are government-driven and Saudi Arabia actively seeks foreign direct investment. However, the Hong Kong business sector differs from other investors; it is privately owned and the Hong Kong government needs to make it easier for local entrepreneurs to venture into the relatively unknown Saudi market.
The southern Chinese economic hub of the Greater Bay Area, which includes Hong Kong, Macau and nine mainland cities in Guangdong province, has a combined gross domestic product (GDP) that is now comparable to Italy’s at close to $2tn. The GDP of the area climbed 25% from $1.65tn in 2019, according to Financial Secretary Paul Chan Mo-po. If considered as a standalone economy, the Greater Bay Area would have been the world’s ninth-largest economy in 2021, just below Italy, according to the IMF.
Chinese air-conditioning company Gree Electric is reportedly closing down its smartphone unit due to low consumer spending on electronics. Gree's smartphone team in the southern tech hub of Shenzhen had reached 100 members at its peak, but the company has now disbanded its core team. The home appliance maker unveiled smartphone ambitions in 2015, aiming to compete with China's popular brands including Oppo, Vivo, Huawei and Xiaomi, but the Chinese smartphone market has experienced continuous headwinds.
Chinese companies involved in critical information have been ordered to stop purchasing products from Micron Technology following a cybersecurity review of the US-based manufacturer of memory chips that found its products posed "relatively serious cybersecurity problems." Many analysts view China's move as retaliation against the US following its efforts to cut off China's access to high-end chips. The company's Chinese customers are likely to seek homegrown or South Korean alternatives to Micron's US memory chips, potentially having a knock-on effect on Chinese supply chains.
China has launched Swap Connect to allow more overseas investors access to its interest rate swaps market, hoping it can offset ongoing local debt sales as US rates rise, while also broadening its integration with global finance. Many view the programme as necessary for foreign investors using Hong Kong’s Bond Connect scheme. However, most do not see this offering as a solution to the outflows of Chinese government debt, which have reached RMB903bn ($130bn) since the start of 2018.
