A Letter From the Editor

Today we see an alarming and different decoupling-the decoupling between the Western political wish and Chinese economic realities. 

Countries representing more than 50% of the world’s economy in GDP terms crafted unfavorable policies towards China this week. The Belt and Road Initiative was ended in Australia, the UK Prime Minister confirmed Xinjiang genocide, the US calls for the boycott of Beijing Winter Olympics, US Congress legalized the 280-page Strategic Competition Act of 2021 to comprehensively outcompete China’s power, Japan joined the US in developing 6G supply chains, and Germany passed a new IT law,  analogous to announcing the door-closing for Huawei in its 5G. 

China’s first-quarter data tells a completely different story. 

The National Bureau of Statistics confirms a first-quarter YoY growth of 18%, and the customs confirms a YoY growth in export by 30%.  In fact, the export growth to Australia and Canada both exceeded 40%, and to the US more than 60%.

Comedically, Xinjiang cotton, the most acute item on the sanctioned list, is among the most dynamic export sectors. Chinese garment industry experienced a spike of 37.5% in exports.

In the face of the thesis of reframed globalization validated by Chinese data, the validity of dominant western media and political narratives are brought to question. 

Western political actors and Western economic actors appear decoupled. 

How do the Chinese garment exports experience a huge jump when 80% of Chinese cotton - originated from Xinjiang - are under Western sanctions? 

Western politics aimed at dwindling the economic juggernaut may end up being a half-baked strategy: their very own businesses continue to show enormous interests in China.

Stephen Schwarzman and Ray Dalio have been regular celebrity guests streamed across Chinese think tank platforms amid thorny US-China relations. Dalio is a fierce advocate of China’s financial rise. Schwarzman’s Blackstone is actively investing in data storage in southern China per his own speech, the very digital infrastructure the US needs and essential for the leadership in the 4th Industrial Revolution. Elon Musk appeared at Boao Forum last week. Not only is Tesla restricted in China due to the camera security, but it’s under a nationwide media attack this week over its user safety. A proud man as Elon Musk, the economic power of China makes humility a possibility. Apple’s Tim Cook told its developers not to anger China at some point. 

Would the political push of the West garner the support of some of its own brightest? The trend seen from China is that the economic appeal attracts global trade and investment unabated so far. 

China has been the world’s largest foreign direct investment destination since 2020. Many of the West’s most powerful have chosen to operate inside China’s economic orbit. China’s trade and investment ecosystem will recalibrate, without a doubt. But what about the odds of isolating China from becoming a rich and more prosperous country? Probably not very high. 

Climate change talks fashioned in a flashy style this week. President Biden managed to invite the Chinese and Russian presidents to his climate summit. We noted one theme at this Summit. Leaders of the US, the UK, Russia, India, and China all stated they had been exemplary and ahead of others in fulfilling the climate pledge. If all the major carbon emitters have been exemplary, as the leaders expressed, we seem to be no longer in a climate crisis. China expressed it will be peaking carbon emissions in 2030. The US does not believe it is fair game that the US will be reducing emissions while China will be adding emissions in the current decade. 

A joke circles the social media sphere this week that perhaps says it all. When a couple is fighting day and night over every subject matter, how serious can they be in trying to conceive a child? 

Climate Leaders Summit itself appears eerily redundant: there is a multilateral forum COP 26 (delayed by the COVID in Nov 2020). Why invent another minilateral one? Does the world see much hope after this week’s climate summit? Not really. 

Perhaps the biggest breakthrough we have seen in the US-China sphere this week is the joint photo opportunity of the world’s two important state leaders for the first time since the US presidential inauguration and the mutual placements of the US and Chinese ambassadors. The US ambassadorship to China has been vacant for months, virtually leaving no top envoy representing the world's single most important bilateral relationship today. This is a small step forward in the right direction.  

If political actions drive the opposite economic outcomes, can we really stop for a second and ask why they are not working? 

Join us for this week’s edition of China BIG Idea! 

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Summary of Articles: 

Government in Action

  1. 1. China Doubles Down on Vaccine Production
  2. 2. China Opens More Chip Schools as a National Strategy
  3. 3. Key Messages from Boao Forum for Asia 2021

Economy

  1. 1. Key Economic Indicators: Latest Data Shows Income Disparity in China
  2. 2. Key Economic Indicators on Q1 GDP
  3. 3. Key Economic Indicators: Q1 Rural Parameters
  4. 4. Countries Face Challenges Surrounding Digital Economy Taxation
  5. 5. China’s Steel Overcapacity
  6. 6. China Releases Key Energy Goals for 2021

International Relations

  1. 1. China-US Moved Soberly on Climate Change

Capital Markets

  1. 1. Citi Seeks Major China Expansion
  2. 2. STAR Market Bans Real Estate and Financial Firms; Restricts Fintechs Listings

Technology

Huawei Launches EV for Autonomous Driving Leadership

Unicorn in Spotlight

Company Profile: Telai New Energy

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Government in Action

1. China Doubles Down on Vaccine Production

Feng Duojia (冯多佳), President of the China Association for Vaccines (中国疫苗行业协), has stated that the Chinese pharmaceutical industry will aim to produce doses to vaccinate 70% of the Chinese population (980 million people) and produce the same amount of doses for global export by the end of 2021, for a total of roughly 5 billion doses of COVID-19 vaccines. (source)

In order to scale up the production, Feng announced that China is currently building 18 new production facilities. These enhancements are necessary to meet the aforementioned goals. For instance, until now, Biotec, a subsidiary of the state-owned Sinopharm (国药集团), has only produced 250 million doses. (source)

The increase in vaccine production capabilities is of great strategic significance to Beijing. Not only would enhanced production boost the domestic vaccination campaign, but it would also enable China to increase its exports of vaccines to developing countries.

China has emerged as a key COVID-19 vaccine supplier to developing countries, particularly in Southeast Asia. At a ministerial meeting in Nanping between Foreign Minister Wang Yi (王毅) and his Indonesian counterpart Retno Marsudi, Beijing committed its pledges regarding vaccine supplies and has endorsed Jakarta’s proposal to become a production hub for Chinese vaccines. (source)

Moreover, Beijing is on the cusp of launching its first mRNA vaccine, which is currently ready for Phase III trials. (source

The development of mRNA technology would boost Beijing’s vaccine quality further, dissipating allegations about the inefficacy of the Chinese vaccines. Previous interim data at facilities overseeing the Phase III trial rollout in Brazil, for example, have registered an efficacy rate barely crossing the 50% threshold for Chinese vaccines, and, more recently, the Chilean Health Ministry has found that China’s Sinovac (科兴生物) is effective for 67% of the symptomatic cases, a clear discrepancy with the Chinese company’s claimed efficacy rates. (source

No Chinese vaccines so far have been approved by the WHO for emergency COVID-19 use so far. 

The BioNTech Vaccine

In the race for vaccine production and distribution, China does not seem to rely solely on its own means. Fosun Group in Shanghai has secured the sole distribution right of Germany’s BioNTech/Pfizer COVID-19 vaccine, the first foreign vaccine to be authorized and shipped to China in July. (source) While the production and distribution of affordable vaccines aim to increase China’s vaccine influence in developing countries, importing the BioNTech/Pfizer vaccines is kept very low-key.

2. China Opens More Chip Schools as a National Strategy

Chinese universities are pushing to cultivate talents for the development of China’s Integrated Circuits Industry. During President Xi Jinping’s visit to Tsinghua University, he called for universities to “accelerate the training of talents that are in short supply,” and in particular, the development of key technologies to overcome barriers. 

Tsinghua University announced the establishment of the Institute of Integrated Circuits (IC) right after Mr. Xi’s visit. The Institute of Integrated Circuits (IC) will be dedicated to the teaching and research of the IC industry at Tsinghua, housed at the School of Information Technology.

With a major push to break barriers against Chinese tech rise, Xi has called for universities to “think what the country wants, worry about what the country needs, and respond to the needs of the country” (read more here in Chinese).

Chip education as a national strategy

Earlier than Tsinghua, Nanjing had already established a chip university to tackle the science and R&D of the entire IC supply chain. More Chinese universities are expected to follow suit to establish more chip departments, schools, and universities.

In response, the Academic Degree Committee of the State Council and the Ministry of Education has revised the “Integrated Circuit Science and Engineering” course to be a first-class discipline (source).  

3. Key Policy Actions from Boao Forum for Asia 2021

China signals it is open for business as the Davos-style Boao Forum for Asia opens in Hainan, celebrating its 20th anniversary.

Although most foreign delegates joined online, 4,000 participants marked a record registration this year.US business leaders who attended this year’s Boao Forum include Apple’s Tim Cook, Tesla’s Elon Musk, Bridgewater’s Ray Dalio, and Blackstone’s Stephen Schwarzman.

The theme for this year’s Forum is

A World in Change: Join Hands to Strengthen Global Governance and Advance Belt and Road Cooperation.”
Green BRI

Chinese central bank governor Yi Gang confirmed the Bank would limit carbon investment from the Chinese foreign currency reserves.

Jin Liqun, China‘s AIIB president, stated in a separate forum that AIIB will aim to stop financing coal projects along the BRI.

Ban Ki-moon (반기문), chairman of the Forum and former UN Secretary-General, stated that countries in Asia are "taking the lead" towards carbon neutrality.“ It was once perceived that there were trade-offs between economic development and environmental protection, but today we live in an era where the response to climate change serves as a new important strategy for economic development.”

Jin Liqun (金立群), president of the Asian Infrastructure Investment Bank, echoed Ban’s remarks that many people viewed the climate issue as a tradeoff between high emissions and economic slowdown. This mindset “has adversely affected international efforts to promote investment for the transition from high-carbon to low-carbon to zero-carbon.”

China’s new financing methodology will ensure that the BRI region has a better chance of sustainable development.

Digital currency
  • Chinese digital currency is not to be used for cross-border anytime soon. 
  • China has no intention to challenge the hegemony of the Dollar with the digital RMB.
  • The launch of the sovereign digital currency will not pose threats to Chinese commercial banks. The digital currency in phase 1 will only replace cash in circulation and affect consumers
Financial opening


China welcomes wealth management, insurance, and fund management companies to enter the Chinese retail markets.

Fang Xinghai, deputy governor of China’s Securities Regulatory Commission, said that foreign capital has come into China in large volumes through the Stock Connect programs in recent months. The Securities Regulator has the tools in place to stop large capital inflow into China to maintain financial stability.

CPTPP

Long Yongtu, the former Chinese WTO chief trade negotiator, expressed China’s desire to join the CPTPP while welcoming the US to return to the CPTPP. Because the CPTPP is a high-bar free trade agreement, it would mean significant opportunities for Chinese tech companies.

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