• Hi-tech Hong Kong development near border with mainland China will destroy wetland and could affect area’s ecology, conservationist warns
• Hard times for China’s micro-industrialists | China
• South China Sea: Beijing keeps close eye on Philippine supply mission to Second Thomas Shoal
• How North Korea eyelashes make their way to West, Japan, South Korea, as ‘made in China’
• Why China hopes the US won’t touch a century-old trade rule affecting imports under US$800
• China’s Spring Festival travellers brace for freezing rain and blizzards
• China’s EVs could turbocharge recovery – but trade curbs threaten to stall growth at the starting line
• China’s Fujian province steps up defence mobilisation reforms in bid to improve war readiness
• Lift-off for China’s pocket Jielong 3 rocket launches another busy year of commercial missions
• Singapore invoking foreign interference law against businessman Philip Chan shows readiness to curb meddling despite China ‘backlash’ fears: analysts
• ‘Nothing you cannot overcome’: crying China woman in seaside town gets uplifting note written in lipstick on tissue from kind mother and boy
• Strange 7,700-year-old China bottle find offers insights into transition between ancient cultures
• China plays peacemaker in Myanmar, but high expectations, ‘trust issues’ and belt and road projects thwart progress
• What the Marcos-Duterte feud means for the Philippines, US and China
• Explainer: what is a Widow Year, why do Chinese believe it is a bad time to marry, and how to break the curse
• Watching “The Shawshank Redemption” on stage in China | China
• China has made Mexico a premier investment destination. Is it a US detour, or something more?

Hi-tech Hong Kong development near border with mainland China will destroy wetland and could affect area’s ecology, conservationist warns

https://www.scmp.com/news/hong-kong/health-environment/article/3250856/hi-tech-hong-kong-development-near-border-mainland-china-will-destroy-wetland-and-could-affect-areas?utm_source=rss_feed

Hong Kong’s plan to build an innovation and technology (I&T) hub near the border with mainland China will mean the loss of 89 hectares (220 acres) of wetland, an environmental impact assessment report has said, and an expert warned the move may put the area’s ecology at risk.

The report added about 1.7 hectares of woodland would be lost, with 56,000 trees either cut down or transplanted to make way for the proposed San Tin Technopole in Yuen Long, close to Shenzen.

The government has said it would create a 338 hectare San Po Shue Wetland Conservation Park to make up for the site’s loss, but experts in the field on Saturday said they feared it could be an empty promise.

“The report is disappointing … the whole world is moving towards greater conservation of wetlands, but the government is moving in an opposite direction,” Kristy Chow Oi-chuen, a campaign officer at the Conservancy Association, said.

“The conservation park will only be finished in 2039. This may run the risk of becoming an empty promise and fail to serve its conservation purposes.

“In the end, society may suffer from ecological damage in the district.”

Chow was speaking a day after the Civil Engineering and Development Department released its environmental impact assessment report on the tech hub’s construction with proposed mitigation measures following the authorities’ plan to fill in 90 hectares of fish ponds as part of the project.

The technopole is part of the Northern Metropolis development, which was designed to attract top tech firms to set up in Hong Kong.

The government said on Friday, despite 240 hectares of the proposed San Tin Technopole being in the wetland area, more than 60 per cent of it was already brownfield land, filled fish ponds or developed sites.

The remaining areas cover about 90 hectares of fish ponds, but almost half of them are abandoned or no longer used for fish production.

Hong Kong scales back proposed wetland park to make way for a technology hub

The report said the technopole development would lead to a permanent loss of 89 hectares of contiguous pond habitat on the northern part of the site, and indirect disturbance to 63 hectares of ponds nearby.

It added the Conservation Park would be built as a mitigation measure to achieve “no-net-loss in ecological function and capacity of the wetlands”.

“The government will enhance the ecological function and capacity of 288 hectares of wetlands and fisheries resources of 40 hectares of fish ponds by establishing the park with active conservation management and modernised aquaculture,” the report said.

It added the park’s construction would start in the 2026/27 financial year and was scheduled for completion in 2039.

The report promised a woodland compensation plan would be drawn up and submitted before construction on the forested area started.

It added the 1.7 hectares of woodland would be removed with more than 56,000 trees, 87 per cent of the 64,490 on the site, either felled or transplanted elsewhere.

Extensive damage found in Hong Kong wetlands, environmental groups warn

New tree planting will be carried out on a one-for-one basis to compensate for the loss of trees because of site development work.

The report also identified a potential impact on bird colonies, roosting sites and also on wildlife.

It proposed an open zone and a buffer area around the bird colonies and roosting spots to minimise disturbance from construction work.

The report said it had identified measures to ensure compliance with environmental legislation and standards and insisted the San Tin Technopole project would be “environmentally acceptable” after they were introduced.

But the Bird Watching Society said it had concerns about the way the report divided the assessments of the wetland into seven areas.

The society said such an approach would mislead people into underestimating its ecological importance of the area in its entirety.

“The ecological impacts on the wetland should be measured together, as a whole, as they affect each other,” the society said. “We are afraid people may have a low view of the pond habitat’s ecological value.”

About half of the 627-hectare San Tin Technopole is expected to house leading innovation and technology companies. The rest will become a residential area with about 50,000 flats.

Hard times for China’s micro-industrialists | China

https://www.economist.com/china/2024/02/01/hard-times-for-chinas-micro-industrialists

THERE ARE lots of upsides to making bikes for kids, explains Mr Li, a young entrepreneur from Pingxiang, a scruffy county in northern China that has become a centre for the children’s bicycle industry. For one thing, they are easy to build, he says, nodding at a toddler-sized machine parked near his desk, held upright by tiny stabilisers. Teenage mountain bikes are a bit fiddly, but smaller ones “need no special machinery at all”. Also, he grins, children grow. Sell a three-year-old their first ride and two years later their parents have to buy a bigger one, and so it goes on for years to come. The downside? China is running out of children.

Pingxiang, in the province of Hebei some 400km south of Beijing, is a revealing place to see the country’s demographic future playing out today. Like many industrial clusters in China, it grew over decades as businesspeople forged networks, helped by local officials offering tax breaks and other subsidies. Initially, small firms assembled frames, pedals and other parts bought from established manufacturers in coastal cities. Over time complete supply chains were created in Pingxiang. Today, the county is a sprawl of large industrial plants linked to smaller suppliers, many of them tucked away in rural sheds and barns. There are traffic jams as lorries and three-wheelers piled high with bicycle cartons inch down narrow village lanes.

County officials report that 10m bicycles a year are built there, by thousands of firms. Official media credit Pingxiang with supplying 40% of the children’s bicycles sold worldwide. It also produces half the wheeled toys sold inside China, including bicycles, tricycles, scooters and ride-along toy cars. This targeted approach to globalisation made Pingxiang prosperous, if not lovely. The county is a drab, dusty spot, though officials have painted cycling-themed murals on walls and erected a giant sculpture of a bicycle wheel in a public square. Then came China’s fertility crash.

In 2023 the number of Chinese newborns hit a record low of just over 9m, after falling for seven years in a row. That compares with nearly 19m babies born in 2016. Mr Li quit his job as a quality controller in a big factory a few years ago, and began selling hand-assembled bikes in street markets. Today he rents a small factory with a former colleague. He employs 15 people who can make hundreds of bicycles a day, when orders are good. Orders are not good right now and his staff are on short hours. Huddled in a freezing office in one corner of their steel-walled factory, he and his business partner look anxious. This is understandable, given that their main customer base—namely, Chinese toddlers—has shrunk by half over the past decade. The change “started slowly, a few years ago”, he recalls. Now the impact on sales is unmistakable.

Mr Li’s plight reveals a lot about the large forces that are battering China’s private sector, and about the solutions being proposed by officials in both the local and central governments. Coverage of China’s economy often focuses on a handful of national champions making world-class products, from smartphones to electric vehicles. But small firms with fewer than 300 employees accounted for 79% of China’s job creation and 68% of exports, the OECD, a club of mostly rich countries, reported in 2022. Though the Communist Party puts great stock in large state-owned enterprises and groundbreaking technology, China needs its backyard entrepreneurs, too. The supreme leader, Xi Jinping, calls China’s mastery of the complete array of industrial sectors a source of national strength. Last year he urged officials to upgrade, not eliminate, industries deemed “low-end”.

Sluggish domestic demand, notably since the end of the covid-19 pandemic, has led officials to urge manufacturers of all types to seek new markets abroad. Still, exports are not a cure-all. A bicycle-industry veteran in Beijing notes that China’s manufacturers saw roaring domestic and foreign sales during the pandemic, as people abandoned public transport for their own two wheels. The industry now faces a hangover, as inventories are cleared and many covid-era riders lose interest. In ageing societies, e-bikes for adults are selling well. But even in markets that still have children, many want to play video games, not play outdoors. Chinese consumers lack the confidence to spend but demand is weak in many foreign markets too, says the veteran. “In some of our enterprises, production is down by a third.”

A slowing China bets on exports

Back in Pingxiang, Mr Li is struggling to survive. During pandemic lockdowns, many Chinese consumers had bills to pay but no income. They have not yet shaken the fear that they felt then, he says. Compared with last year, his firm’s sales are down by more than half. Local officials urge businesses like his to look abroad, with a focus on countries signed up to China’s Belt and Road Initiative. In 2020 less than a tenth of the firm’s sales went abroad. Now exports account for 40-50% of turnover, with customers in Russia, Malaysia and Indonesia. He is grateful to county officials who subsidised his stand at a trade fair in Shanghai, where he met foreign buyers. But exports are hard work. The Russians are from that country’s far east near the Chinese border, he thinks. They ask for more time to pay when the rouble is weak, though helpfully they settle their bills in Chinese yuan. Europe and America are richer markets, but the firm cannot meet their product standards.

After lunch, Chaguan is taken to a nearby village to see Plan B. In a farmyard workshop guarded by honking geese, Mr Li’s business partner has a team assembling pedal tricycles for old people. These are built to order in batches of 50, which middlemen sell to domestic customers online. Compared with children, who need new bikes as they grow, the disadvantage is that pensioners “stop riding” when they get older, says the partner earnestly. But at least China will have more and more of them. A larger tricycle-assembly line is planned for next year. These are grim times for China’s micro-industrialists. Their resilience is a wonder to behold. ■

Read more from Chaguan, our columnist on China:
Xi Jinping looks abroad for confidence (Jan 25th)
How China’s public views Taiwan’s elections (Jan 18th)
Nostalgia for China’s boom years drives a TV hit (Jan 11th)

Also: How the Chaguan column got its name

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South China Sea: Beijing keeps close eye on Philippine supply mission to Second Thomas Shoal

https://www.scmp.com/news/china/diplomacy/article/3250850/south-china-sea-beijing-keeps-close-eye-philippine-supply-mission-second-thomas-shoal?utm_source=rss_feed

Chinese coastguard authorities have tracked another Philippine supply mission to a South China Sea shoal at the centre of confrontations between the two countries.

The China Coast Guard said on Saturday that it monitored a Philippine civilian boat that conducted a supply mission on Friday to a vessel grounded “illegally” at the Second Thomas Shoal.

“The China Coast Guard has been following, monitoring, and managing the whole process,” the agency said.

“The China Coast Guard continues to carry out law enforcement activities to safeguard our rights in waters under China’s jurisdiction in accordance with the law.”

The Armed Forces of the Philippines said on Friday it completed a “flawless” resupply mission to the Second Thomas Shoal.

Beijing and Manila both claim the disputed reef in the South China Sea, known as Renai Reef in China and Ayungin Shoal in the Philippines.

The incident comes after a heated exchange over a “special arrangement” that China claimed it made for an airdrop of supplies by the Philippines to the shoal on January 21, days after they agreed to lower tensions in a consultation in Shanghai.

The China Coast Guard said last weekend it temporarily allowed the Philippines to provide food and water to soldiers stationed at the BRP Sierra Madre, a vessel grounded in 1999 on the shoal to assert Manila’s territorial claims.

China has often said it will allow the Philippines to transport supplies to the reef “out of humanitarian considerations” if the Philippines reports to China in advance and accepts China’s on-site supervision.

On Monday, Manila rejected suggestions that Beijing had a “temporary special arrangement” with Manila to allow the deliveries, saying it had the right to supply its troops.

The Philippines has stepped up efforts to assert its claims over various disputed reefs in the South China Sea. Last month, it announced plans to upgrade facilities on nine land features in the disputed waters, including the Second Thomas Shoal.

The Philippine Congress also approved funding to build a “permanent structure” that could be used as a shelter for fishermen on the shoal.

At a Lunar New Year event in Manila on Friday, Chinese ambassador to the Philippines Huang Xilian called on Manila to meet Beijing “halfway” and put ties between the two countries back on the path of “healthy and stable” development.

“China and the Philippines are close neighbours separated by a strip of water. Maritime issues should be properly handled through friendly consultations, and maritime differences should not dominate the entire relationship between the two countries,” Huang said.

How North Korea eyelashes make their way to West, Japan, South Korea, as ‘made in China’

https://www.scmp.com/news/asia/east-asia/article/3250852/how-north-korean-eyelashes-make-their-way-west-made-china?utm_source=rss_feed

Millions of dollars in sales of North Korean false eyelashes, marketed in beauty stores around the world as “made in China”, helped drive a recovery in the secretive state’s exports last year.

The processing and packaging of North Korean false eyelashes – openly conducted in neighbouring China, the country’s largest trading partner – gives Kim Jong-un’s regime a way to skirt international sanctions, providing a vital source of foreign currency.

Reuters spoke to 20 people – including 15 in the eyelash industry, as well as trade lawyers and experts on North Korea’s economy – who described a system in which China-based firms import semi-finished products from North Korea, which are then completed and packaged as Chinese.

The finished eyelashes are then exported to markets including the West, Japan and South Korea, according to eight people who work for companies directly involved in the trade.

Some of the people spoke on condition that only their last names be used because they were not authorised to talk to the media.

North Korea has long been a major exporter of hair products like wigs and false lashes, which enable people to avoid the hassle of mascara and to achieve a dramatic look. But exports tumbled during the Covid-19 pandemic, when North Korea slammed its borders tightly shut.

Significant trade in North Korea-made lashes via China resumed in 2023, according to customs documents and four people in the industry.

Chinese customs data showed that North Korea’s exports to China more than doubled in 2023, when borders reopened. China is the destination for nearly all of North Korea’s declared exports.

Wigs and eyelashes comprised almost 60 per cent of declared North Korean exports to China last year. In total, North Korea exported 1,680 tonnes of false eyelashes, beards and wigs to China in 2023, worth around US$167 million.

In 2019, when prices were lower, it exported 1,829 tonnes at a value of just US$31.1 million.

The US State Department and international experts estimate that North Korea seizes up to 90 per cent of foreign income generated by its citizens, many of whom live in poverty. Reuters was unable to determine how much of the revenue from eyelash sales flowed back to Kim’s government, or how it was used.

“We have to assume that … millions of dollars every month that North Korea is making through this eyelash trade is being used for the Kim Jong-un regime,” said Seoul-based sanctions lawyer Shin Tong-chan. His view was corroborated by two other international trade experts, though none provided specific evidence.

North Korea did not respond to requests for comment for this story sent to its UN missions in New York and Geneva, its embassy in Beijing and its consular office in the Chinese border city of Dandong.

A spokesperson for the Chinese Foreign Ministry said Beijing and Pyongyang “are friendly neighbours” and that “normal cooperation between the two countries that is lawful and compliant should not be exaggerated”.

Since 2006, the United Nations Security Council has sought to stall Pyongyang’s nuclear weapons programme through nearly a dozen sanctions resolutions that restrict its ability to trade products such as coal, textiles and oil. It also imposed strict restrictions on North Koreans working abroad.

Sanctions passed by the Security Council are supposed to be enforced by UN member states – all of whom are legally bound to implement them – using local legislation.

But there is no direct ban on hair products, so trading false eyelashes from North Korea does not necessarily violate international law, three sanctions experts told Reuters.

Reuters presented its findings to the Chinese Foreign Ministry, which said it was “not aware of the circumstances” described but that any alleged violations of UN sanctions are “completely without foundation”.

Japan’s foreign ministry did not comment on Reuters’ findings, but said Tokyo, which bans trade with Pyongyang, would continue to consider “the most effective approach” toward North Korea. The European Union’s diplomatic service did not return requests for comment on North Korean-made eyelashes being sold in its jurisdiction.

The United States has since 2008 separately expanded its own measures against North Korea, which include sanctions on any company stocking or selling products whose sales fund the Kim regime: a restriction that also applies to non-American firms using the US dollar.

But there are practical and political limitations on Washington’s ability to enforce such sanctions unilaterally on entities such as foreign businesses that have minimal exposure to the US financial system and do not sell primarily to American clients, according to two international sanctions lawyers.

A US Treasury spokesperson said it “actively enforces the range of our broad North Korea sanctions authorities against both US and foreign firms” and would “continue to aggressively target any revenue generation efforts” by Pyongyang.

The Treasury also referenced its nearly US$1 million settlement with e.l.f. Cosmetics in 2019 over allegations that the US-based firm inadvertently sold false eyelashes containing materials from North Korea.

e.l.f.’s parent company said in a 2019 filing that it discovered two suppliers had used North Korean materials during a “routine, self-administered audit” and that it quickly addressed the issue, which it determined was “not material”.

North Korea’s war talk is a cry for deft diplomacy from the US

The company, which has since stopped selling false eyelashes, reiterated its commitment to making products legally and responsibly in a statement to Reuters for this article.

Reuters was unable to establish whether any Western companies are currently involved in the North Korean eyelash trade.

The people involved in the industry said that Pingdu, an eastern Chinese town that bills itself the ‘eyelash capital of the world’, is a key node in the supply chain from North Korea.

Many Pingdu-based companies, such as Monsheery, package false eyelashes that are produced primarily by North Koreans, said Wang Tingting, whose family owns the firm, which exports products to the US, Brazil and Russia.

Wang said in an interview from her factory that North Korean goods had helped build Monsheery up from a small family workshop. The company was founded in 2015, corporate records show.

“The quality of the North Korean product is much better,” said Wang, who said that she was not aware of any sanctions-related issues with using North Korean false eyelashes. She declined to name her international clients.

Others in Pingdu said they are conscious of the role sanctions play in the complicated distribution chain.

Pyongyang may use ‘fake news’ to influence South Korea polls, Yoon warns

“If not for these sanctions, there would be no need for (North Koreans) to export through China,” said Gao, who owns Yumuhui Eyelash.

Cui Huzhe, who represents a North Korean factory that works with a Chinese partner in a venture called the Korea-China Processing Joint Trading Company, said the North Korean firm sends semi-finished eyelashes to China, where they are sold to markets including the US, Europe, Japan and South Korea.

He declined to identify the two companies involved in the partnership or their clients. Subsequently, he couldn’t be reached for comment on the sanctions implications.

Chinese manufacturers began working with North Korean eyelash plants in the early 2000s, according to three Chinese factory managers. They said they prize the country’s labour force for its low cost and the high quality of the eyelashes.

About 80 per cent of Pingdu’s eyelash factories purchase or process false eyelash raw materials and semi-finished products from North Korea, according to a 2023 estimate published by Kali, a Chinese manufacturer of eyelash boxes, on its website.

Pingdu’s government says the town of roughly 1.2 million accounts for 70 per cent of global output of false eyelashes, which are often made of synthetic fibres but may also be created from mink fur or human hair.

Trading company Asia Pacific International Network Technology, based in the Chinese border city of Hunchun, advertises on its website the services of three North Korean eyelash processing factories with images of workers arranging hairs and pasting them on paper.

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Reached by phone, a company employee, who would not give her name, declined to comment.

Seoul-based businessman Johny Lee imports products like chicken-feet shaped lashes used for extensions through Dandong into South Korea.

Those lashes are made by North Koreans, packaged in China, and then sold locally or exported to Asian countries like Japan, said Lee, who chairs a trade group in Seoul that includes eyelash extension technicians from the West and South Korea.

Asked about legal risks, Lee – who began sourcing eyelashes from China a decade ago – said he was not selling “sophisticated technology like semiconductors.” North Korean workers “are trying to make a living there”, he said.

South Korean law states that if two or more countries are involved in the production of imported goods, the place where the products gained “essential characteristics” will be deemed the country of origin.

Reuters described how eyelashes made by North Korean workers are packaged and completed in China to Shin Min-ho, a South Korea-certified customs lawyer. He said North Korea would likely be considered their country of origin because it gave the raw materials “essential characteristics”.

Seoul’s Korea Customs Services said that “importing North Korean products disguised as Chinese can be punished,” but that it was “difficult to determine” country of origin based solely on Reuters’ description of the supply chain between North Korea and China and that it was not investigating the issue.

Despite the quality of the eyelashes, North Korean labour is poorly paid. North Korean salaries can be a tenth of Chinese wages, four Chinese factory owners and managers said.

In addition, Wang, a manager for Pingdu-based manufacturer Co-Lash, which ceased North Korean operations during the pandemic, said the workers gave up most of their income to the state. He did not supply proof. Another Chinese manufacturer, PD Lush, pays workers at its factory in the North Korean border town of Rason – whose work is sold internationally – an average monthly salary of 300 yuan (US$42), said Pingdu-based manager Wang.

The centrality of North Korea to the industry became clear when the country’s borders closed during the pandemic.

Monsheery’s Wang Tingting said that after North Korea closed its borders in 2020 due to the pandemic, ships carrying over the small amount of eyelashes exported during that time were often held up. “We have very high demand on our side,” she said.

In the wake of the pandemic, supply was still not at full capacity and shipping delays were common, she added.

South Korean false eyelash brand Cinderella Amisolution typically procures supplies from Chinese traders of semi-finished North Korean products, which it then sells to customers. But when North Korea sealed its border, contractors sent samples that weren’t made by North Koreans.

“I thought, ‘this isn’t going to work’,” said chief executive Choi Jee-won. “They were completely different.”

Why China hopes the US won’t touch a century-old trade rule affecting imports under US$800

https://www.scmp.com/news/china/article/3250797/why-china-hopes-us-wont-touch-century-old-trade-rule-affecting-imports-under-us800?utm_source=rss_feed

Like many entrepreneurs handling exports in the business powerhouse that is China’s Guangdong province, Victor Wang’s freight company has leapt into cross-border e-commerce.

Transitioning away from placing large containers of bulk cargo on overseas-bound ships, Wang over the past year has embraced a sea change in volume and scale that has proved lucrative.

Now, Wang sends small parcels – usually containing a jacket, two pairs of earrings or a rice bucket – via air directly from local factories to shoppers in the United States.

The company’s dramatic shift seemed inevitable: its customer base comprising hundreds of thousands of manufacturing factories in the region had already been flocking to e-commerce.

It strives to fill a void created by dwindling wholesale orders from foreign retailers, especially Americans, resulting from punitive tariffs imposed by former US president Donald Trump.

Then came efforts by Joe Biden, Trump’s successor, to get US companies to relocate their supply chains outside China.

“Foreign trade, gloomy as it is overall, actually has little impact on cross-border e-commerce,” Wang said, noting the US was the leading destination for these parcels “by a large margin”.

A look at recent Chinese government data illustrates how crucial small-item trade has become in shoring up a decline in the country’s traditional export channels, with such parcels surpassing a quarter of a trillion dollars in value annually.

At the heart of the growth – and controversy – lies a long-time American trade provision known as the de minimis rule.

It allows companies to ship packages stateside worth under US$800 without paying import duties, taxes or fees, or undergoing tedious screening procedures. In 2016, the amount was raised from US$200 to relieve burdens on American customs officials.

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However, in the ensuing years, marked by antipathy towards the world’s second-largest economy, US critics have claimed the rule has given Chinese e-commerce platforms and sellers an unfair advantage and squeezed out American retailers.

That puts China’s booming e-shopping industry and, by extension, countless manufacturing factories in the country, at risk of huge financial loss, especially as momentum in America gathers to overhaul the century-old trade rule.

Two bipartisan bills introduced in the US Congress call for lowering the thresholds or closing the provision to keep shipments from specific countries like China from benefiting.

“How the de minimis rule might change will be a critical issue to watch in 2024,” said Sheng Lu of the University of Delaware.

Meanwhile, far from Washington, Annie Yuan, a Beijing-based e-commerce veteran, has enjoyed some of her busiest days ever.

Every day, Yuan’s company handles customs clearance and last-mile delivery for hundreds of thousands of packages originating in China and bound for the US and Canada.

The company is just one of many logistics firms contracted by major e-shopping platforms in the US, including fast-growing Chinese-backed companies Temu and Shein.

“The purchasing power of US consumers is quite impressive,” said Yuan, who has worked in cross-border e-commerce for 10 years.

Parcel volumes exploded after Temu’s high-profile launch in 2022, when its slogan “shop like a billionaire” entered the daily lives of American consumers, evidenced by its landing pricey ad slots last year during the National Football League’s annual Super Bowl, a broadcast that drew 115.1 million viewers.

US House panel renews push to punish trade fraud by Chinese companies

For many products on Temu worth under US$10, last-mile door-to-door delivery in the US accounted for the lion’s share of the total price shoppers paid.

Production expenditures plus freight costs within China as well as from the mainland to the US could be kept to a minimum owing to massive manufacturing capacity in the “world’s factory” and the platform operating an efficient supply chain, Yuan said.

In 2023, US Customs and Border Protection cleared about one billion de minimis shipments for the financial year, a 46 per cent surge compared to a year earlier, the agency said.

And rapidly expanding Temu and Shein are hardly alone. Traditional players like Amazon and AliExpress still retain market shares, with short-video platform TikTok also joining the battleground.

AliExpress is an online retail service owned by Alibaba, which also owns the South China Morning Post.

By any measure, these shipments are becoming increasingly indispensable to China’s economy, of which exports make up nearly 20 per cent.

Weak global trade amid high inflation hit China’s export sector hard in the past year, as did receding demand for goods in the post-coronavirus pandemic era.

To compound the challenge, the West has turned to “de-risking” supply chains away from China, with multinational corporations in turn implementing strategies that no longer rely solely on the country for production.

Exports to the US in 2023 recorded their steepest decline in almost three decades. Yet China’s e-commerce exports have been booming.

In yuan terms, the country’s overall exports last year grew by a modest 0.6 per cent compared to a year earlier.

Despite China’s debt and population woes, top cities aim for over 5% GDP growth

But those from small e-commerce parcels skyrocketed by 19.6 per cent, reaching 1.83 trillion yuan (US$258 billion) and comprising more than 7 per cent of total exports, according to preliminary Chinese customs estimates.

China’s e-commerce exports have “become a new foreign trade format with the fastest development speed, the greatest potential and the strongest driving effect”, the Communist Party mouthpiece People’s Daily said in an article on Monday.

In Guangdong, which accounts for one-third of the industry’s overall turnover in China, the total value of exports and imports via e-commerce last year was 57 times that of 2015, according to provincial government data.

Export expansion via e-commerce came up at an annual central government conference in December. Many local governments have pledged to bolster development, such as by building more warehouses for small-parcel exports.

Of the total number of e-commerce packages shipped overseas in 2022, more than one-third were destined for the US, and one-third were categorised as “clothing, shoes and bags”, a Chinese customs report revealed.

The proliferation of US-bound e-commerce shipments occurred as the Uygur Forced Labour Prevention Act dented China’s overall garment exports to the country.

Forced-labour allegations in the Xinjiang Uygur autonomous region led to the American law taking effect in June 2022. In essence, it bans imports of products with any input from the far-west region that produces 80 per cent of China’s cotton.

Beijing has vehemently denied that any human rights abuses are taking place in Xinjiang.

Complaints in the US soon followed, alleging the de minimis rule was granting entry to forced-labour products.

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In June last year, US senators Bill Cassidy and Tammy Baldwin unveiled the De Minimis Reciprocity Act to bar Chinese imports from “exploiting customs procedures that allow duty-free entry into the US”.

“A trade loophole is allowing Chinese companies to import goods in the US with no oversight, letting them bring in cheap, counterfeit goods that undercut American manufacturers and traffic drugs into our communities,” Baldwin said.

The Wisconsin Democrat argued the bipartisan bill would “close this loophole” and “help ensure Americans are not supporting goods made with forced labour”.

Days later, US senators Marco Rubio and Sherrod Brown introduced the Import Security and Fairness Act, proposing to end de minimis treatment for goods from China and Russia.

The same month, a congressional select committee on the Chinese Communist Party published a report saying Temu and Shein were likely responsible for more than 30 per cent of all packages imported to the US under the de minimis provision.

“These results are shocking,” said committee chairman Mike Gallagher, a Wisconsin Republican. “Temu is doing next to nothing to keep its supply chains free from slave labour.”

“Temu and Shein are building empires around the de minimis loophole in our import rules, dodging import taxes and evading scrutiny on the millions of goods they sell to Americans.”

Temu told the Post its growth did not depend on the de minimis policy, ascribing its rapid expansion and market acceptance to supply-chain efficiencies and operational proficiencies.

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“We are open to and supportive of any policy adjustments made by legislators that align with consumer interests,” Temu said. “We believe that as long as these policies are fair, they won’t influence the outcomes of competitive business dynamics.”

A Shein spokeswoman said the company was working closely with industry peers and policymakers to help reform de minimis.

“We believe the exemption needs a complete makeover, which is critical to holding all retailers accountable for responsible business practices,” she said.

Despite bipartisan support for the bills, analysts said election-year politics, coupled with a divided Congress facing an already busy agenda, would make final passage formidable.

Lu reckoned it was “highly uncertain” whether change would happen.

“Not everyone agrees on how to reform the de minimis [rule],” he said. “Furthermore, US e-commerce businesses and influential logistics companies that benefit from the de minimis rule may oppose attempts to revoke the benefits they currently enjoy.”

And US policymakers may lack sufficient data to support potential rule changes and evaluate the impacts, as de minimis shipments were exempted from customs review, Lu added.

Andy Tsay of Santa Clara University believed the election year would make it tough to predict if any laws would be passed, even if such an outcome were widely desired.

“The thing about US customers, if you asked them directly, they would say, ‘yes, we’re opposed to forced labour, yes, we want to be tough on China’,” Tsay said.

“But they also want cheap stuff, especially as inflation has been a big problem in the US in the past two years.”

‘Growth nothing to write home about’: 7 takeaways from China’s economic data

“When politicians make decisions on whether something helps them get re-elected, they have to figure out the differences between what US customers say they want and what they actually want,” he added.

Eliminating de minimis could double costs for America’s small businesses and consumers and require US customs to hire 22,000 additional personnel, according to the National Foreign Trade Council, an advocacy group.

Looming legislation aside, businesses like Yuan’s are already confronting obstacles arising from new export tactics.

Since December, Yuan has been warning her clients about potential delays in package- clearing and delivery.

US customs commenced stricter scrutiny of de minimis packages last Saturday. Now, when a flight arrives at a port, cargo movement is not permitted until customs personnel is on site, reviewing the information and placing any necessary holds.

Alibaba’s AliExpress, PDD-owned Temu face supply chain challenges in South Korea

“The new customs procedure just started, so we’re still observing the impacts,” Yuan said. “We can only say that it will definitely affect logistical efficiency.”

More uncertainties hinge on the fate of the two Senate bills. Meanwhile, Trump, the Republican front runner in the US 2024 presidential race, vowed to impose a 10 per cent tariff on all imported goods if he won the White House again.

“It’s very unclear for us now, and to be honest, this is beyond our control,” Yuan said, calling the matter “mainly for the largest stakeholders to lobby”.

“And if lobbying doesn’t work, [de minimis rule changes] would definitely affect the entire industry chain.”

China’s Spring Festival travellers brace for freezing rain and blizzards

https://www.scmp.com/news/china/politics/article/3250844/chinas-spring-festival-travellers-brace-freezing-rain-and-blizzards?utm_source=rss_feed

Much of China is on alert for extreme weather as snowstorms and freezing rain disrupt traffic across some of the most populous parts of the country during the annual mass human migration for the Lunar New Year.

An orange alert for freezing rain – the second-highest warning in the China Meteorological Administration’s (CMA) three-tier system – remained in effect on Saturday for central and eastern parts of the country.

It was issued on Thursday for the first time since the system was introduced in 2010 and will continue until Sunday.

Freezing rain is an unusual phenomenon that occurs when falling snow encounters a layer of warm air deep enough for the snow to completely melt and become rain.

If the rain then lands on objects colder than 0 degrees Celsius, it forms a smooth, clear layer of ice.

The CMA said Anhui province in the east and Hubei province in central China were expected to be particularly hard hit by freezing rain.

An orange blizzard alert was also issued for central and eastern China on Saturday, with Henan, Hubei, Anhui, Jiangsu and Guizhou provinces as well as Chongqing expected to be affected.

Orange is the second-highest level in the four-tier blizzard warning system and some areas could have up to 200 millimetres (8 inches) of snow.

The CMA said the rain and snow had sent temperatures in most parts of central and eastern regions below normal for this time of year, and from Monday, the mercury would plunge in the southeast as well.

The warnings come just over a week into the 40-day Spring Festival travel season known as chun yun.

During this period, which began on January 26, tens of millions of people make their way back and forth across the country to see family and friends for the Lunar New Year, which falls on February 10 this year.

By Saturday, eight days into chun yun, more than 1½ billion trips on all forms of transport had already been made, according to state broadcaster CCTV.

The Ministry of Transport forecast that a record 9 billion trips would be made during the holiday season.

But legions of these travellers have already been stranded as many train services to and from major cities have been disrupted by the winter weather, including in Shanghai where at least 39 trains for Saturday and Sunday were suspended.

In Wuhan, capital of the central province of Hubei, 159 train services were suspended on Saturday due to the extreme weather.

A weather-induced power failure stopped one train into Wuhan in its tracks, leaving passengers without heating for around eight hours before finally reaching its destination on Saturday morning, according to Guangdong-based Southern Metropolis News.

Wuhan railway authorities said more than 100 extra rail services would be added when the weather improved.

The municipality of Chongqing also said it would suspend 14 trains on Saturday.

The snow and ice forced closure of more than a dozen highways in eight provinces and regions last week, including in Inner Mongolia, Henan, Hubei and Guangdong, according to the Transport Ministry’s Highway Monitoring and Response Centre.

Hubei and Anhui provinces also said they would close many tourist attractions due to the extreme weather.

The extreme conditions have also prompted Anhui and Hubei to ramp up preparations for potential disasters, with the Ministry of Emergency Management sending disaster relief supplies to the two provinces to bolster their stockpiles.

The CMA has warned that this year’s Lunar New Year weather could be the most “complex” since 2008.

That year a severe storm killed 107 people, stranded more than 5.8 million passengers and affected water and power supplies to more than 100 million people, according to CCTV.

China’s EVs could turbocharge recovery – but trade curbs threaten to stall growth at the starting line

https://www.scmp.com/economy/china-economy/article/3250811/chinas-evs-could-turbocharge-recovery-trade-curbs-threaten-stall-growth-starting-line?utm_source=rss_feed

Possible US restrictions on Chinese imports of electric vehicles (EVs) – a potential base of growth in the years to come as the industry develops – may deal another blow to Beijing’s efforts to regain momentum in its economic recovery, analysts said.

US Commerce Secretary Gina Raimondo said on Tuesday that China’s EVs could pose a risk, as they collect a “huge amount of information about a driver”.

The remarks came as the Joe Biden administration is considering heavier import tariffs on some Chinese goods, including EVs. Currently, they are set at 25 per cent – a by-product of tariffs levied during the tenure of his predecessor Donald Trump, as well as the present “high fence small yard” strategy to restrict China’s access to hi-tech products.

“If [the industry is] unable to export products to foreign countries regularly, [it] will enhance China’s current deflationary environment [and] weaken household and enterprise sentiment for economic recovery,” said Dong Jinyue, a senior economist at BBVA Research.

Dong said that the EV issue, which has escalated into a question of national security in the US, will lead to another round of geopolitical tension and generate more uncertainty over China’s growth prospects.

The European Union’s October announcement that it would conduct an anti-subsidy investigation into Chinese EVs was the first major blow to a potential bedrock sector, one which has risen rapidly in recent years and could drive exports and growth for the world’s second-largest economy.

Chinese EV maker Geely woos mainstream buyers with pure electric Galaxy model

China became the world’s top automobile exporter in 2023, in no small part thanks to heightened demand for EVs. But the sector is already facing pressure from Brussels and Washington, and overcapacity worries have cropped up domestically.

Any large-scale increases in economic activity would be welcome at the moment, both to power growth and offset the drag of an embattled real estate sector weighing down the country’s post-pandemic recovery.

Sarah Tan, an economist at Moody’s Analytics, said that shipments of automobiles jumped 69 per cent year over year across 2023, showing China’s competitive advantage in lithium-ion battery cell production and low labour costs compared to Japan and South Korea.

“Foreign carmakers have also set up factories in China to tap some of these benefits,” she added. “Manufacturers threw an extra 6.5 per cent into investment through 2023, largely for the auto, electrical equipment and hi-tech electronics industries.

“At a time when officials are desperately trying to reorient the economy away from property,” Tan said, “such a development will certainly be a damper.”

However, companies in the EV value chain should be well aware of the regulatory risk which accompanies entry into the US market, said Yang Wang, senior analyst at Counterpoint Research. He cited trade restrictions handed down on other Chinese companies in recent years.

“Further technological restrictions from the US are unlikely to have the same effect [as they had in] areas such as semiconductors and AI, as China is far ahead in the EV field, particularly battery technology,” he said.

Direct competition from the US is also likely. As it has pushed measures to restrict China’s trade in EVs and semiconductors, the Biden administration has invested billions of dollars into domestic production for both.

Heron Lim, assistant director and economist at Moody’s Analytics, said Chinese carmakers have lagged behind their US and South Korean counterparts in the American market with key customers in Asia and Europe.

“But the concern is whether the US’ efforts towards such bans will have their own ripple effect,” he added, noting there are already some reports indicating Mexico has been asked to be cautious when taking investment from Chinese manufacturers.

“This could ring fence off markets and cap what looks to be the next frontier of growth for China.”

Wang Zichen, research fellow at the Beijing-based Centre for China and Globalisation think tank, said the contribution of Chinese EVs to the economy should not be exaggerated, as it still counts for a relatively small share.

“China’s total exports in 2023 amounted to 23.77 trillion yuan (US$3.3 trillion), and Beijing’s much-touted ‘new three products’ – electric vehicles, lithium batteries and solar cells – totalled one trillion yuan, less than 5 per cent of overall exports,” he added.

“Chinese EVs are admittedly world-leading, but their contribution to the Chinese economy …[should] not [be] exaggerated. The housing industry makes up a far larger percentage.”

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China’s Fujian province steps up defence mobilisation reforms in bid to improve war readiness

https://www.scmp.com/news/china/military/article/3250840/chinas-fujian-province-steps-defence-mobilisation-reforms-bid-improve-war-readiness?utm_source=rss_feed

China’s Fujian province is stepping up defence mobilisation reforms in response to Beijing’s order for local officials to push for “military-civilian fusion” to improve war readiness.

The southeastern province merged its military-civil fusion office, which is tasked with integrating civilian resources as part of China’s military build-up, with its defence mobilisation department in a structural reform this week, according to Fujian’s provincial government website.

The move echoed the central government’s policy to boost coordination between the military and civilians, which has been a priority of President Xi Jinping’s broader strategy to deepen reforms of China’s national defence mobilisation system. This system includes political, economic, and defence resources the country can allocate or use in the event of war or security threats.

Chinese officials in flurry of visits to PLA command to support war plans

Provincial governments opened local defence mobilisation offices after Beijing called for improvements to the defence mobilisation system during the 20th Party Congress in October 2022. Fujian launched its own in December of the same year.

Beijing, Shanghai, Guangdong, and Hunan are among the other municipalities and provinces that have set up their own offices.

One major change under the reform was to have provincial governments take over coordination of defence mobilisation from local military districts, which previously oversaw the task. The provincial governments, which can more easily coordinate between different administrative agencies, are expected to be able to carry out mobilisation more efficiently.

With the cooperation of provincial governments, local defence mobilisation offices have ramped up efforts such as holding educational events and joint training with emergency departments.

Xiamen, a coastal city in Fujian, held over 1,200 national defence education activities attended by more than 860,000 participants in total over the past year, according to Xiamen TV.

Last month, local defence mobilisation officials in Liu’an, a city in the southeastern province of Anhui, held joint training with civilian units from the city’s water and power supply, wartime rescue, psychological counselling agencies.

In Shijiazhuang, provincial capital of the northern Hebei province, local officials turned a residential area into a “national defence mobilisation community” with air defence emergency signs and posters about where to find shelters during wartime.

Local government officials across China have also increased exchanges with military officials to forge “military-political relations” in response to Xi’s call for high quality defence development.

Communist Party chiefs from Fujian, Anhui, and Jiangxi have made tours over the past month to the Eastern Theatre Command, which is responsible for missions in the Taiwan Strait and the East China Sea while having authority over military districts in these provinces.

Last month, Sichuan’s party chief Wang Xiaohui and other provincial officials appeared in military uniform at a “defence day” event at a local military base.

China has pushed for more military and civilian integration, including the development of dual-use technologies, to modernise its army in the face of growing geopolitical challenges and a rivalry with the US.

Last month, Beijing imposed export controls on key technologies, including laser radars, drones and biotechnology products, in response to US restrictions limiting China’s access to advanced technology.

The Pentagon this week added more Chinese firms, including memory-chip maker Yangtze Memory Technologies Corp and a handful of artificial intelligence companies, to a list of entities deemed to be “military-linked” and a national security risk.

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Lift-off for China’s pocket Jielong 3 rocket launches another busy year of commercial missions

https://www.scmp.com/news/china/science/article/3250829/lift-chinas-pocket-jielong-3-rocket-launches-another-busy-year-commercial-missions?utm_source=rss_feed

A small but powerful Chinese rocket capable of sending payloads at competitive costs delivered nine satellites into orbit on Saturday, Chinese state media reported, in what is gearing up to be another busy year for Chinese commercial launches.

The Jielong 3, or Smart Dragon 3, blasted off from a floating barge off the coast of Yangjiang in southern Guangdong province. It was the third launch of the rocket, developed by China Rocket, a commercial offshoot of a state-owned launch vehicle manufacturer, since December 2022.

President Xi Jinping has called for the expansion of strategic industries including the commercial space sector, deemed key to building constellations of satellites for communications, remote sensing and navigation.

Also on Saturday, Chinese carmaker Geely Holding Group launched 11 satellites to boost its capacity to provide more accurate navigation for autonomous vehicles.

Critical to the construction of commercial satellite networks is China’s ability to open more launch windows, expand rocket types to accommodate different payload sizes, lower launch costs, and increase the number of launch sites such as building more spaceports and using sea launch vessels.

The Jielong 3 can carry a 1,500kg (3,300-pound) payload into a 500km (310-mile) sun-synchronous orbit. China Rocket has previously said the rocket could carry more than 20 satellites at a launch cost of under US$10,000 per kilogram – a globally competitive rate for small-lift rockets.

The cost is similar to the launches of other Chinese small-lift rockets including the Long March 11, but their payload sizes are significantly smaller.

The Jielong 3 is comparable to the powerful Lijian 1, which first flew in 2022.

Developed by CAS Space, a Guangzhou-headquartered commercial spin-off of the Chinese Academy of Sciences, Lijian 1 can also send a 1,500kg payload to a 500km sun-synchronous orbit.

Other commercial companies in the Chinese vehicle launch sector include Galactic Energy, whose Ceres 1 rocket made its debut flight in November 2020.

Ceres 1 can deliver a 300kg payload to a 500km sun-synchronous orbit.

Beijing-based Galactic Energy made at least seven Ceres 1 launches in 2023, up from four in 2020-2022.

Also in the fray is LandSpace, whose launch of the Zhuque 2 in last year marked the world’s first successful payload delivery by a liquid oxygen-methane rocket and a breakthrough in China’s use of low-cost liquid propellants.

In the realm of larger rockets, Orienspace in January launched Gravity 1 from a ship off the coast of eastern Shandong province.

The rocket is capable of sending a payload of up to 6,500kg into low-Earth orbit, making it the most powerful launch vehicle developed by a private Chinese enterprise.

A small-lift rocket carries payloads of up to 2,000kg, while medium ones deliver up to 20,000kg and heavy rockets can easily carry in excess of 20,000kg. SpaceX’s Falcon Heavy can lift up to 64,000kg into orbit.

Singapore invoking foreign interference law against businessman Philip Chan shows readiness to curb meddling despite China ‘backlash’ fears: analysts

https://www.scmp.com/week-asia/politics/article/3250832/singapore-invoking-foreign-interference-law-against-businessman-philip-chan-shows-readiness-curb?utm_source=rss_feed

Singapore’s decision to serve a notice under the republic’s foreign interference law to one of its naturalised citizens for reportedly advancing Chinese interests in the country signalled the government’s strong stance against external actors despite potential “backlash” from other states, analysts have said.

The Ministry of Home Affairs said Philip Chan Man Ping, 59, will be designated as a “politically significant person”, after having assessed that he has “shown susceptibility to be influenced by foreign actors, and willingness to advance their interests”.

“The Registrar has assessed that Chan’s activities are directed towards a political end in Singapore, and that it is in the public interest for countermeasures under FICA (Foreign Interference Countermeasures Act) to be applied to Chan,” it said in a statement on Friday.

The ministry did not explicitly mention which country Chan, who is the first person to be served a notice of intended designation under the anti-foreign interference law, was acting for. However, a background check on Chan suggests that he was seen to be advancing China’s interests.

A close associate of Chan, who spoke on the condition of anonymity, said that the news came to a shock to many in the business community and stressed the need for the authorities to “draw a line” on what actions would constitute promoting the interests of another country.

Is China the ‘Country X’ Singapore’s foreign meddling law dare not name?

Checks by This Week in Asia also revealed that a person with the same name as Chan holds a Hong Kong identification card and is a director of two companies, including China Link Group (HK) Limited, whose registered address belongs to a company in Hong Kong’s Central.

A ground-floor unit in the upscale residential area of Kowloon Tong has also been linked to the name Philip Chan Man Ping.

Analysts who spoke to This Week in Asia said that Singapore had shown its readiness to take action against foreign actors despite potential “backlash” but suggested that Chan is merely one of many others who may be acting under the influence of other states in the financial hub.

“I think the Singapore authorities are mindful – or perhaps fearful – of backlash, so do not explicitly mention the contemporary PRC in this case,” said Chong Ja Ian, a political scientist from the National University of Singapore, referring to the People’s Republic of China.

“In discussions leading up to and surrounding the passage of FICA, there appeared to be less hesitancy in speaking about the United States or Malaysia.”

While Chan appears to be a “one-off case for a FICA notice involving a foreign power directly”, it is hard to detect other foreign actors in Singapore, as there are no public designated entities list or income, assets, donations and lobbying contact disclosure requirements, he added.

Nydia Ngiow, managing director of BowerGroupAsia in Singapore, said Chan’s case is likely to be set as a “precedent in terms of the thresholds being used to determine” what actions qualify as a politically significant person advancing foreign interests.

“There is a sentiment in the business community that some of these things have to be made clearer, also because of all these multilateral ties [between China and Singapore]”, Chan’s associate told This Week in Asia, describing his actions as “not unusual” and “harmless”.

Without clear boundaries, businessmen with links to other countries would feel as though they have to walk on eggshells over fears of running afoul of anti-foreign interference laws, the person said.

“[Singapore] is such an international market and people interact and where do you draw the line? So far, not much has been revealed and so it would bear quite a lot of implications, so people will be paying close attention to how it’s going to turn out.”

When This Week in Asia called Chan on Friday night, he said that he will respond to the authorities and the notice next week, but declined to comment further.

Anyone involved in Singapore’s political processes, parties, officeholders and MPs, can come under the category of defined “politically significant persons”.

Chinese-American academic denies recruiting Singaporean as a spy

While this is the first instance of the city state’s anti-foreign interference law being used since its implementation in October 2021, Singapore has detained spies working for other nations.

In 2020, a 39-year-old man who spied on the US for China, was arrested by the Internal Security Department and sentenced to 14 months’ jail in America for espionage.

Chan’s case, which broke on Friday evening, dominated headlines and has spotlighted alleged Chinese political interference in Singapore, analysts said.

“I think it is significant that attention has been drawn explicitly to what looks like alleged PRC political interference in Singapore,” NUS’ Chong said.

“There were obviously relatively recent past incidents, but the case of Philip Chan suggests that the situation persists, which should be unsurprising since other locations in Europe, North America, Oceania and Asia also have indications of such behaviour by individuals and groups aligned with the Chinese Communist Party,” he said.

Bilveer Singh, a political scientist from NUS, said Chan drew significant attention to himself, given that he was seen as advocating for Chinese interests in a very public manner.

“He decided to act like a swan on a lake,” Singh said. “I suspect the government had to act because it is also a warning to others who may be championing [the interests of] the US or other countries. It is also for the credibility of FICA and the entire mechanism.”

“If the government does not do anything, then it would appear as condoning actions like these,” he said, stressing that neutrality has always been a key pillar of Singapore’s foreign policy and the government will seek to maintain that image.

This had not been Chan’s first brush with the law. He was warned by Singapore’s authorities for facilitating an illegal public gathering in 2019 to discuss Hong Kong’s anti-government protests and had his passport impounded during the course of investigations, according to a report by government-owned The Straits Times.

In a video of the event, Chan and about 10 other attendees were seen chanting in Cantonese: “Support Hong Kong police, protect Hong Kong, justice will win,” the report said.

Chan wrote about 30 articles for Lianhe Zaobao, the largest Chinese-language newspaper in Singapore, from 2011 to 2019 primarily within his capacity as the president of the Kowloon Club, a non-profit organisation, Goh Sin Teck, an editor at the daily said.

“Mr Chan’s writings were often his personal reflections, insights gleaned through his real estate profession, as well as immigrant issues, such as assimilation of new immigrants into local society,” Goh said in response to queries.

In an interview with Huaren Toutiao, a Chinese media outlet, Chan, who is also president of the Hong Kong Singapore Business Association, said he had published articles in Lianhe Zaobao but his influence remained “limited” and called for greater unity among overseas Chinese to tell China’s story well.

He said that Western media has “smeared” China and discredited its belt and road infrastructure programme, and urged other Chinese to debunk these false claims and described it as an “unshirkable responsibility” to promote a positive narrative about China.

Singapore reputation fears after citizen admits being Chinese spy in US

Chan was also one of the 30 representatives invited by the Chinese People’s Political Consultative Conference to attend Beijing’s “two sessions” parliamentary meetings in March last year.

He had also been a patron of the Kampong Chai Chee Citizens’ Consultative Committee and the Bukit Timah Community Club management committee, which are run by a government statutory board.

The People’s Association told This Week in Asia that Chan has since stepped down from all grass roots appointments.

A member, who spoke to This Week in Asia on the condition of anonymity, said that many were caught by surprise by the news but were “scared” to speak to the press, fearing that they may be associated with him.

Once designated as a “politically significant person”, Chan must make annual disclosures to the authorities of political donations of S$10,000 (US$7,439) or more that he has received and accepted, on top of declaring his foreign affiliations and any migration benefits.

He has 14 days from February 2 to submit representations to the registrar and can appeal to the minister of home affairs against the decision, if he is designated a “politically significant person”.

Can Beijing leverage overseas Chinese in struggle with US?

Moving forward, Ngiow from BowerGroupAsia, said that it was important that the appeal process remains transparent.

She said: “Given the concerns of overreach expressed in parliament during the tabling of the bill, both from the opposition and party backbenchers, it would be important to see transparency throughout the process should Chan decide to appeal against his designation as a politically significant person.”

Chan said in previous interviews with other news websites that he had moved to Singapore in 1990, just after the city state relaxed its permanent residency rules to attract skilled workers from Hong Kong a year earlier.

He is also the managing director of property firms Wen Way Investments, Mutual Benefits Realty and C&H Properties, as well as the founder of China Link Education Consultancy.

The Hong Kong Singapore Business Association, where Chan is the president, facilitates networking among businessmen from both cities and is a part of 47 other groups in 36 countries.

Additional reporting by Kahon Chan

‘Nothing you cannot overcome’: crying China woman in seaside town gets uplifting note written in lipstick on tissue from kind mother and boy

https://www.scmp.com/news/people-culture/trending-china/article/3249694/nothing-you-cannot-overcome-crying-china-woman-seaside-town-gets-uplifting-note-written-lipstick?utm_source=rss_feed

The story of a woman searching for the mother and son who gave her an encouraging note when she was crying in a corner on her own, has warmed hearts on mainland social media.

The woman, surnamed Jiang, who works in Qingdao, Shandong province, eastern China, shared her story online in an effort to find the woman and her little boy to thank them for their kindness, Bandao Daily reported.

The good deed took place in October last year.

At the time, Jiang felt overwhelmed trying to decide whether she should move to the seaside city of Qingdao or Jinan, also in Shandong, for work.

After a day of interviews in the city, she felt tired and anxious, so she took a trip to a nearby seaside town to relax.

The place was full of visitors, but she found a quiet corner and sat down, not noticing the mother and son watching her.

“I was in a low mood, so I was crying on my own,” she said in a video she made in the hope it would be seen by family or friends of the pair so she can find them.

After a while a little boy aged about five or six years old stood in front of Jiang, passed her a tissue, then returned to his mother. A surprised Jiang saw it contained a message written with lipstick.

“There is nothing you can’t overcome, everything will be fine,” it said.

She was so moved, she wanted to thank them for their kindness, so she ran to the nearest food stall and bought a roasted sausage, which she gave to the boy.

The mother then offered her a few words of comfort but Jiang became emotional and left abruptly.

Later, she shared the heartwarming story with her mother, Sun, who was also moved by the woman’s thoughtfulness.

“It might seem like a few simple words, but it was an act of love to our family,” Sun said.

She thought the note was such a wonderful gift that she has kept it in a picture frame.

The story has captivated many people on mainland social media.

“It’s very warm,” one person said.

“When hearts with kindness meet hearts with gratitude, everything is fine,” said another.

Good Samaritan stories involving kind strangers are popular in China.

In February last year, a man in the northwest with a disability tried to warn a shop owner about a fire, when a sudden blast left him badly hurt.

In the same month, a woman in northwestern China kept a driver talking when he was trapped in a mangled car after an accident, in an attempt to keep him awake until help arrived.

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Strange 7,700-year-old China bottle find offers insights into transition between ancient cultures

https://www.scmp.com/news/people-culture/trending-china/article/3249617/strange-7700-year-old-china-bottle-find-offers-insights-transition-between-ancient-cultures?utm_source=rss_feed

Archaeologists in China have unearthed an unusually-shaped 7,700-year-old bottle that offers unique insights into the relationship between two neolithic Chinese cultures.

The container was unearthed in Henan province, central China at a site associated with the Peiligang culture, which existed from around 7000BC to 5000BC and is considered one of the birthplaces of Chinese agriculture.

The Peiligang people were also one of the oldest in China to make pottery, but the recent discovery is more similar to pieces made by the Yangshao culture (5000BC-3000BC).

The Yangshao were an ancient people who lived along the Yellow River, considered the cradle of Chinese civilisation.

“This discovery provides fresh and crucial material evidence for exploring the origin and development relationship between the Peiligang culture and Yangshao culture,” said Li Yongqiang, associate researcher at the Institute of Archaeology, Chinese Academy of Social Sciences, in mainland press reports.

The bottle has a small mouth and pointed triangular bottom and similar objects have been discovered in Yangshao burial sites, ash pits and homes.

The Yangshao culture, which succeeded that of the Peiligang, was famous for its development of pottery, and excavations suggest that the people buried their young in painted pottery jars.

However, at 10cm long, the most recent bottle is shorter than similar objects from the Yangshao, and there is still debate about whether those bottles were used to carry water, help in fermentation or were simple burial treasures.

Li hypothesised that, combined with previous evidence that the Peiligang had discovered how to make red yeast mould for fermentation, the bottles could have been a container used for making the yeast.

Evidence of red rice yeast fermentation was presented in October 2023 in the Journal of Archaeological Science: Reports.

Archaeologists argued that the presence of rice and a mould made of Monascus fungi indicated the Peiligang people were making a fermentation starter, called qu, which ancient people used to make alcohol.

The alcohol could have been made using various ingredients, ranging from rice, millet, yams and Job’s tears, a type of grass.

For the Peiligang people, rice was not overly important for subsistence, and it was often used to make alcohol, usually as part of a mortuary ritual.

Making alcohol was a crucial reason rice cultivation began spreading through China around 9,000 years ago.

Scientists believe the process started in the lower Yangtze River valley and spread northward to the northern Yellow River.

“The Peiligang and Shuiquan sites in the middle Yellow River region serve as early examples of this diffusion process,” the study authors wrote.

Other artefacts discovered at the recent Peiligang site, believed to be around 7,600 to 8,000 years old, included ostrich shells, red iron ore and stone items.

These are important because the Peiligang site is one of the oldest villages discovered in China, meaning it provides a crucial piece of evidence in understanding how people transitioned from hunter-gatherer societies in the Paleolithic period to agricultural cultures in the Neolithic era.

The village was first inhabited in 7000BC, and it was believed to have been abandoned in 5700BC after flooding.

China plays peacemaker in Myanmar, but high expectations, ‘trust issues’ and belt and road projects thwart progress

https://www.scmp.com/news/china/diplomacy/article/3250796/china-plays-peacemaker-myanmar-high-expectations-trust-issues-and-belt-and-road-projects-thwart?utm_source=rss_feed

Three years after it seized power, Myanmar’s military junta faces a huge challenge as ethnic insurgent groups rebel across the country.

The Three Brotherhood Alliance – a coalition of three armed rebel groups – has taken control of over a dozen towns and trade ports in Myanmar’s northern Shan state. It has also made advances in Rakhine state despite a ceasefire agreement brokered by China.

Beijing, which is seen to have considerable influence over both sides in the conflict, has facilitated peace talks in southwest China’s Yunnan province in recent months. Through these meetings, the junta and the rebels agreed to suspend fighting. But the truce fell apart as the two sides continued to fight and the rebels gained more territory.

Beijing is likely to continue using its influence to seek a permanent ceasefire as it views stability as a priority, but the divergent interests of the parties could complicate these efforts, analysts said.

China brokers Myanmar truce, calls for ‘maximum restraint’ from junta, rebels

Zhou Shixin, a Southeast Asia specialist at the Shanghai Institutes for International Studies, said the fact that China had been able to broker a ceasefire during talks in Yunnan last month indicated the warring sides were willing to talk, but the truces were short-lived and fragile given the volatile situation.

“The window for peace is very short, and the window for maintaining peace is also very short, so we have seen that a breakout quickly occurred after the temporary reconciliation,” he said.

Zhou said the temporary reconciliation reached during the Yunnan talks meant the parties “basically had few additional demands”, and therefore tensions were likely to ease further.

“So I think breakouts in the future will be regional or sporadic and these breakouts may be limited in scope.”

According to Zhou, Beijing has “great patience and sincerity” in helping Myanmar to restore peace, but it is under pressure as both the junta and armed groups have high expectations for China’s role in the process.

“Both the junta and the ethnic armed groups expect us to put pressure on the other side. The high expectations could make things very difficult for China. China does not want to pressure any party, and these [expectations] undermine China’s neutrality and role as a peace maker,” he said.

Dan Seng Lawn, executive director of the Myanmar-based Kachinland Research Centre (KRC), said that while both the junta and the rebels saw China as the only viable peacemaker, Beijing could not meet the demands of the two sides.

“China cannot really dictate the outcome of the negotiations,” he said, adding that no outside power could meet the parties’ expectations at the moment because both sides were in a “zero-sum game” mindset.

He added that it would be difficult for the rebels to accept a permanent ceasefire agreement with the junta because of public opinion, “and if they stop fighting now and start talking with the [military government], they will have a lot to answer to the people”.

China’s trade with Myanmar has suffered since the rebels began their attacks in October. China is Myanmar’s biggest trading partner and its key investor.

Last month, the junta government and China renewed their commitment to developing a deep water port in Kyaukphyu – a key project of Beijing’s Belt and Road Initiative. Progress on the port, which will serve as a gateway for China’s trade with Europe and the Middle East, had been stalled since the 2021 coup, and the junta’s recommitment to the project was seen as a gesture to win China’s support.

Meanwhile, the Three Brotherhood Alliance has vowed to protect China’s assets during the conflicts in a bid to win Beijing’s trust.

Christina Fink, a George Washington University professor specialising in Myanmar studies, said prolonged instability could prevent the Chinese government from fully realising its belt and road projects, but branches of the Chinese government were in “close communication” with both Myanmar’s military government and a number of the ethnic armed organisations operating in areas where China had already developed projects.

“Understandings between the ethnic armed organisations and the Chinese government have meant that such projects have not been targeted to date,” she said.

Zhuang Guotu, a Xiamen University professor specialising in Southeast Asia, said while prolonged conflict would have an impact on China’s border security and long-term cooperation with Myanmar, it did not mean Beijing would have to pick sides for the sake of its infrastructure projects.

“I believe that only a fair solution to the Myanmar issue will benefit China’s belt and road projects in the long run,” he added.

China and Myanmar vow to maintain border security as rebels claim victory

Many in Naypyidaw have speculated that Beijing has backed the rebel groups’ offensives. Pro-junta media and supporters staged rallies against China, accusing Beijing of supporting the rebels, according to news site The Irrawaddy.

Beijing has repeatedly said it would not interfere in Myanmar’s internal affairs. In response to the pro-junta rallies, the Chinese foreign ministry said any actions attempting to undermine the friendship between China and Myanmar “will not succeed”.

Observers noted there may be some trust issues between China and the junta over the latter’s inaction in fighting cross-border fraud targeting Chinese citizens. Hundreds of thousands of Chinese are believed to have been lured to Myanmar by the promise of high-paying jobs but were instead held hostage and forced to work in operation centres.

Chinese officials have made several trips to Myanmar over the last year, calling on Naypyidaw to work with Beijing to crack down on cybercrime.

Over the past year, the junta has handed over members of notorious crime syndicates in Myanmar and extradited more than 40,000 cyber fraud suspects back to China.

But Fink said that while the Chinese government would appreciate the junta’s gesture, it’s “unlikely to change its overall assessment that the current military government is doing a poor job of running the country”.

“China is unhappy with [junta leader] Min Aung Hlaing’s leadership,” she said. “Members of Myanmar’s parallel National Unity Government (NUG), formed by politicians elected in 2020, are seeking to convince China to trust them.”

The NUG, Myanmar’s shadow government composed of elected lawmakers ousted in the 2021 coup, proposed protecting Chinese investments in the country and working with Beijing on cross-border crime while supporting the “one China” principle in a position paper last month.

The NUG-backed People’s Defence Forces have also cooperated with the Three Brotherhood Alliance on local attacks against the junta.

Amara Thiha, a doctoral researcher specialising in Myanmar issues at the Peace Research Institute Oslo, said while the junta’s forces suffered from low morale, “a total collapse” was unlikely.

“Should the current situation persist, we may see the emergence of ‘rump states’ over a few years, characterised by decentralised authorities and varied attempts at secession.”

“This fragmentation likely deviates from what China would prefer. Indeed, there is a perception of a Chinese strategy akin to ‘watching the fire burn from across the river’, with some stakeholders suggesting that China is following this approach.”

He noted that China’s investments in the China-Myanmar Economic Corridor, which includes the deep port project, signify a level of commitment showing Beijing was likely to continue supporting the “central de facto administrations in Myanmar”.

Last week, Chinese Foreign Minister Wang Yi and US National Security Jake Sullivan met in Thailand for a new round of talks on US-China relations. The pair also discussed Myanmar and agreed to hold follow-up meetings to discuss the conflict in the country.

China demands border security guarantee from Myanmar as rebels gain ground

But Thiha said the prospect of US-China cooperation was low.

“For China, involving the US in discussions on Myanmar could be seen as an expansion of US power. The strained China-US relationship further complicates this possibility,” he said.

Dan Seng Lawn said he did not think any “Western power” could play a role in Myanmar’s peace process at the moment, and the best thing the US and China could do is to reach a mutual understanding to bring Myanmar back to the “2011 scenario”.

In 2011, the junta, which had ruled the country for decades, started a series of democratic reforms, beginning a transition to civilian leadership.

“If possible, that’s the best case scenario at the moment,” Dan Seng Lawn said. “You open up for the civilian leadership, you open up to the West … But that too is really difficult now.”

What the Marcos-Duterte feud means for the Philippines, US and China

https://www.scmp.com/comment/opinion/article/3250477/what-marcos-duterte-feud-means-philippines-us-and-china?utm_source=rss_feed

A week in politics used to be considered a long time. In the Philippines, much has happened over just one weekend, with all the condensed melodrama of one of the country’s hugely popular telenovelas.

The gloves are off between President Ferdinand Marcos Jnr and his predecessor, Rodrigo Duterte, their oft-rumoured rift seemingly laid bare. The vaunted Uniteam alliance that swept Marcos Jnr into power lies in tatters, as both factions vie to shore up support ahead of elections. In the run-up to the important midterm senate and congressional elections next year, the outlook for the political atmosphere and the country is deteriorating fast.

But as much as the feud exposes the vagaries of the Philippines’ fascination with dynastic rule, the outcome will also affect Manila’s crucial position in the geopolitical chess between the US and China in the South China Sea. Amid what is set to become a titanic struggle, the Philippines runs the risk of serious instability down the road that could upend regional geopolitics.

If Marcos prevails, the Philippines is likely to remain an undiminished ally of Washington. If Duterte emerges victorious, Beijing may have pulled off a geopolitical fool’s mate that could see it emboldened. Given Beijing’s response to Marcos Jnr’s congratulation of Taiwan’s new leader, it is clear Beijing would like to see the back of Marcos. The trouble is, for all the courting of Beijing, Duterte had little to show in economic terms.

Marcos has unapologetically ditched Duterte’s largely China-friendly foreign policy, instead firmly locking the Philippines in a pro-US embrace. That policy reversal has increasingly drawn the ire of Beijing amid a distinct ratcheting up of tensions in the disputed West Philippine Sea and growing unease over Beijing’s hardline approach to Taiwan.

By expanding defence ties with the US, Marcos has placed the Philippines front and centre of strained US-China relations, critics say, a development that could render the country a target in any conflict.

Yet any move by either the US or China to consolidate their positions may have unintended consequences, and fuel popular discontent in the Philippines. The unravelling of the Marcos-Duterte alliance puts both Washington and Beijing in a funk and throws up another geopolitical black swan.

With the Middle East teetering on the brink of a regional conflict, Washington looks stretched, and the prospect of a sudden change in the geopolitical matrix in the South China Sea would, at best, be unwelcome.

Marcos’ desire to overhaul one of Southeast Asia’s most protectionist economies was the catalyst that brought the cold war between the two rival families into the open, exposing Duterte’s simmering grievances.

Marcos launched or New Philippines, billing it as a master plan to improve government services, at a rally in Manila last Sunday that the police said attracted as many as 400,000 people. Marcos has also backed controversial moves to amend the 1987 constitution to attract more foreign investment, moves Duterte is fiercely opposed to.

Duterte claims Marcos’ allies are hell-bent on lifting term limits, including that of the president, stoking fears Marcos could seek another six-year term, something not permitted under the constitution. Duterte held an opposing rally and in a vivid reminder, rekindled memories of the 1986 ousting of the dictator Ferdinand Marcos, the current president’s namesake.

In what appears to be an orchestrated political attack, the Duterte clan laid into Marcos, with former president Duterte accusing him of being a drug addict, a claim he has indirectly made in the past. In his tirade, Duterte claimed the Philippine armed forces were aware of Marcos Jnr’s alleged addiction. It is perhaps not beyond the realms of possibility that Duterte will try to draw in the military.

His outrage was followed by comments by his son, Davao city mayor Sebastian Duterte, who demanded that Marcos Jnr resign over an alleged increase in crime, accusing the president of being lazy.

Duterte senior’s outburst and drive to unseat Marcos is also fuelled by the president’s vacillation over the International Criminal Court (ICC) investigation into Duterte’s war on drugs. Arguably, Marcos has thrown Duterte to the wolves, ruling out cooperation with the ICC even as claims emerge that ICC investigators have been in the country, infuriating Duterte’s supporters.

The stakes are extremely high for the Dutertes. The ICC investigation and the expectation that the Hague-based tribunal may issue arrest warrants threaten not only Duterte senior, but potentially draws in Sara Duterte, the sitting vice-president. The ICC’s probe covers the period between November 1, 2011, and March 16, 2019, during which Sara served as the Davao city mayor. There is a cruel irony in Marcos countering Duterte’s drug addiction allegation by suggesting his predecessor binged on fentanyl.

For now, the economy looks set to be the immediate casualty of the warring Marcoses and Dutertes. Markets hate uncertainty and investors are likely to be deterred, dampening hopes of much-needed reforms. Any increase in economic hardship felt by Filipinos could be bad news for either Marcos or the Dutertes, if their theatrics are judged to be responsible.

Meanwhile, in the battle for regional hegemony, the US and China find themselves saddled with a problem that is likely to intensify. With the lack of an elder statesman in the Philippines, the possibility of reaching a compromise acceptable to both rival factions seems a distant prospect.

For now, unfolding events in the Philippines have the urgent attention of both Washington and Beijing.

Explainer: what is a Widow Year, why do Chinese believe it is a bad time to marry, and how to break the curse

https://www.scmp.com/news/people-culture/trending-china/article/3249490/explainer-what-widow-year-why-do-chinese-believe-it-bad-time-marry-and-how-break-curse?utm_source=rss_feed

The fast-approaching Year of the Dragon is also infamously known as a “Widow Year” and there is much chatter on mainland social media about the year ahead being an unlucky one in which to get married.

As the name suggests, superstition has it that a woman who weds during a Widow Year has a greater chance of losing her husband.

It is said that the Widow Year, or gua fu nian in Chinese, got its name due to misinformation surrounding its original name, gua nian, which means “the year lacking Spring Commences” - a much-valued solar term seen by ancient Chinese people as the sign of a blessed year.

Some also linked spring to the energy of the sun, the translation of which in Chinese, yang, is also associated with masculine energy. Thus, lacking spring means lacking masculine energy, which justifies the Widow Year name.

Pronounced gua fu nian in Chinese, the term refers to a lunar year without Spring Commences, or the first day of spring, the first of the 24 solar terms known as li chun.

The Chinese calendar is lunisolar in form, which means it combines lunar months based on the cycle of the moon, which either has 29 or 30 days and solar terms based on the 365 days the Earth takes to go around the sun.

While a lunar year composed of 12 months does not add up to a solar year in number, the lunar calendar needs to add seven leap months every 19 years to match the two measurements.

This results in some lunar years having two Spring Commences, or two first days of spring, and others having none.

While superstition holds that people should wed in “double spring years” and avoid tying the knot in Widow Years, past statistics suggest otherwise.

The Year of the Snake in 2013, which was also a Widow Year, has the highest number of marriages since public records became available in 1978.

The fact that every 19 years contains seven such years also makes the avoidance of them unrealistic for newlyweds.

For many Chinese couples, the desire to have a baby with a specific zodiac sign trumps the notion of getting married in a particular year.

Babies born in the Year of the Dragon are traditionally thought to be endowed with good fortune.

While the numbers fluctuate, demographer and professor at China Renmin University, Zhai Zhenwu, said the desire among Chinese people to have a dragon baby could lead to a rise in birth rates in the year ahead.

Superstition also dictates that it is ominous to build a new house in a Widow Year, as the lack of a first day of spring is considered bad feng shui.

It is also thought that these years are inauspicious, and disrespectful to ancestors when it comes to erecting a tombstone or memorial.

Despite an increasing number of young people tying the knot regardless of traditional beliefs, a number of customs perceived as lucky persist.

Much of this folklore, which stretches back centuries, revolves around auspicious dates and times – even down to the specific hour the event begins – which can determine how well everything goes.

Other tips include the placement of auspicious ornaments in the wedding room such as red bed sheets, and the wearing of red string bracelets or jade accessories.

Watching “The Shawshank Redemption” on stage in China | China

https://www.economist.com/china/2024/02/01/watching-the-shawshank-redemption-on-stage-in-china

IS HOPE A dangerous thing in China? Theatregoers in Beijing have been mulling that question, with two new stage adaptations exploring themes of injustice, freedom and renewal. “The Shawshank Redemption” (pictured) is set in mid-20th-century America, while “Les Misérables” takes place in 19th-century France. Both feature characters who are unjustly imprisoned and suffer under cruel jailers and corrupt systems.

The plays, performed in Mandarin, might seem a bit too on the nose for Chinese censors. After all, the Communist Party has been known to play the role of cruel jailer in real life. The party also disputes the notion that freedom and human rights are universal values.

“The Shawshank Redemption”, based on a novella by Stephen King, was made into an award-winning film in 1994. Though it was not shown in Chinese cinemas, it became hugely popular with locals who bought bootleg VHS or DVD copies. It also caught the attention of censors. In 2012 a blind human-rights lawyer called Chen Guangcheng pulled off a daring night-time escape from house arrest in the village of Dongshigu. (He ended up in America.) This gave rise to chatter about the “Dongshigu Redemption”—and led the government to block online searches for “Shawshank”.

In 2019 “Les Misérables”, which is based on a novel by Victor Hugo, got similar treatment. This came after pro-democracy demonstrators in Hong Kong adopted as their anthem a tune from the musical version of the story. The song, “Do You Hear the People Sing?”, was subsequently censored.

Yet people involved in the Chinese stage productions of “Shawshank” and “Les Misérables” report no problems gaining approval. This is not all that surprising. Censors worry less about plays than films or online content, which can be shared widely. Another factor is the foreign settings of the works, which make their messages easier to dismiss by Chinese officials. The production of “Shawshank” even has a foreign cast (all of whom speak Mandarin).

But Chinese theatregoers are not being obtuse. “Of course you start to think China is a bit like the prison,” says an audience member at the Beijing premiere of “Shawshank”. One of its stars is Mark Rowswell, a Canadian who has enjoyed fame in China under the stage name Da Shan. He admits that the play veers into sensitive territory. “Sure, it’s about a corrupt system that makes you think you’re trapped and you’ll never get out,” he says. “But really, it’s mostly about hope. What’s wrong with that?” ■

Subscribers can sign up to Drum Tower, our new weekly newsletter, to understand what the world makes of China—and what China makes of the world.

China has made Mexico a premier investment destination. Is it a US detour, or something more?

https://www.scmp.com/economy/china-economy/article/3250695/china-has-made-mexico-premier-investment-destination-it-us-detour-or-something-more?utm_source=rss_feed

Though sidestepping Washington’s tariffs has been a prime incentive for Chinese manufacturers to boost their investments in Mexico, the United States’ southern neighbour offers far more than an alternate route into the world’s richest country – as well as its fair share of risk, analysts warned.

The escalation has been unmistakable. Export value for automotive components sent to Mexico, for instance, surged 35 per cent in 2018 – the same year strict trade restrictions were imposed by Washington – followed by a 48 per cent jump in 2021. In the subsequent two years, value went up annually at a rate of 14 per cent according to China’s General Administration of Customs (GAC).

China’s exports of auto components to Mexico have also increased by volume, up 2.6 times in 2023 compared to the eve of the US-China trade war in 2017.

These figures are in alignment with the global tendency toward “nearshoring”, where manufacturers relocate their business operations or production to a nearby country or one close to a major market. Chinese firms, in this case, are eager to avoid geopolitical disruptions to the supply chain and make use of a more cost-effective labour force.

The same trend is seen in China’s battery exports to Mexico, particularly the lithium batteries used in electric vehicles.

China’s battery exports to Mexico rose 35 per cent year on year in 2018, followed by 32 per cent in 2021 and 11 per cent in 2022. Last year, the figure saw a 6 per cent drop, according to the GAC.

China cuts tariffs on 143 Argentine products amid tense bilateral ties

Overall flows into Mexico, a forerunner in the global automotive industry and a country with a vast, young and relatively inexpensive labour force, are following a similar trajectory.

Direct investment from China to Mexico, which reached a single-year high of $587.2 million in 2022, declined by $21 million in the first three quarters of 2023 according to Mexican government data.

But in 2018, Chinese direct investment in Mexico doubled from the 2017 figures.

The investment landscape in Mexico is also undergoing a transformation. More Chinese companies are investing in the US border state of Nuevo Leon, shifting away from the capital Mexico City.

In 2018, Chinese investment in Nuevo Leon rose to 3.4 per cent of all investment in Mexico, up from 0.16 per cent in 2017. Last year, inflows of Chinese direct investment into Nuevo Leon reached 48.3 per cent of net inflows to Mexico.

“One senses that the lion’s share of that orientation is to position those companies to maintain access to the US market and follow major suppliers in that US supply chain,” said Evan Ellis, research professor of Latin American studies at the US Army War College’s Strategic Studies Institute. “While certainly recognising as well that the Mexican market continues to be important.”

China ‘more investible than ever’ for Middle East, Latin America, but West wary

Monterrey, capital of Nuevo Leon, was one of the first cities in Mexico to develop an automotive industry and hosts factories for many multinational companies, including Elon Musk’s Tesla Inc.

In October, construction equipment maker Lingong Heavy Machinery Co. of the eastern province of Shandong said it plans to open a 10 sq km (3.86 square miles) industrial estate near Monterrey. The park will include manufacturing sites, warehouse space and logistics services, the company said in a statement.

That site, some 220km from the US border, “serves as an exceptional gateway to North America and Latin American markets,” Lingong said.

Chinese telecoms giant Huawei Technologies, home appliances maker Hisense and battery company Contemporary Amperex Technology have already sited in Mexico. All are under the US government’s microscope; Huawei has been sanctioned, and the other two are presently under investigation.

More outposts may be on the way. In November, the Investment Research Centre at Beijing’s Cheung Kong Graduate School of Business led a 40-person team of executives in manufacturing and logistics on a business trip to Mexico.

Mexico still faces “rule-of-law issues” and investors may find a young yet “untrained” labour force, centre director Liu Jing said following a survey of interested entrepreneurs.

“The biggest obstacle to setting up shop in Mexico is that companies will mostly lose money in the beginning, because the costs in Mexico are estimated to be 30-40 per cent higher than in China,” he said. “Many [have] indicated willingness to set up shop [there], but not on a large scale.”

Besides those expensive start-up costs, Chinese manufacturers will have to contend with Mexican labour groups and possibly crime, said Ilaria Mazzocco, trustee chair in Chinese business and economics with the Centre for Strategic and International Studies, a Washington-based think tank.

“Companies will need to be flexible and adapt quickly to adjust to the Mexican environment, but there are obviously significant draws for them as they make plans to enter the American market,” Mazzocco said.

Latin America expert takes over as head of Chinese friendship association

Factory operators based in China have diversified into other countries so they can access the American market without paying tariffs on the cumulative US$550 billion in goods affected by the trade dispute.

China’s total outbound direct investment grew 11.4 per cent in 2023 to US$130.1 billion, Beijing’s Ministry of Commerce said Thursday.

Latin America is a major destination for those outflows – especially countries like Argentina, Brazil and Honduras, which have strengthened ties with China after changes in government.

Mexico, meanwhile, has urbanised close to the level of developed countries, with a rate of 81 per cent – 15 percentage points higher than China. This means Chinese firms can sell to a population of 129 million with a per-capita income that has risen steadily since 1990.

Access to the US remains the chief motivator for most Chinese investors, but the Mexican market also offers an “insurance policy” because of its rising middle class, said Jayant Menon, a senior fellow at the ISEAS-Yusof Ishak Institute in Singapore.

Chinese cars represented 19.5 per cent of the Mexican domestic market early last year – a 5.8 per cent increase from 2018 according to research by Jose Ignacio Martinez Cortes, coordinator of a trade laboratory at the Centre for International Relations under the National Autonomous University of Mexico.

“Cheaper Chinese products will be competitive there,” said Yun Sun, director of the China programme at the Stimson Centre think tank in Washington. “The population is large and it’s a young demographic, both of which suggest large market potential.”

BYD, China’s automotive behemoth, announced last month it has already deployed 20 electric buses in Mexico City, a dense metropolis with high levels of pollution. This represents the largest fleet of such vehicles sent to the city in a single delivery.

Chinese carmakers are also looking to take advantage of Mexico’s preferential tariff status in the North American market.

The United States–Mexico–Canada Agreement (USMCA) trade deal, ratified in 2018 and entered into force in 2020, mandates automotive companies have 75 per cent of their components manufactured in Mexico, the United States or Canada to qualify for total tariff exemption.

Chinese firms have been encouraged to find sites in Mexico as well as Latin America over the past 10 years, said Enrique Dussel Peters, professor of economics at the National Autonomous University of Mexico.

“This has been one of the most outstanding and dynamic effects of the Latin America-China relationship in the last decade,” he said.

However, tensions between the US and China may eventually spill into Mexico, a long-time US ally.

“The Mexican government will be particularly sensitive to pressure from Washington because of the close relationship with the United States,” Mazzocco said.

The US and Mexico signed a memorandum of intent in December that pledges to maintain an “open investment climate”, but also emphasises the need to screen third-country operations in case they cover “certain technologies, critical infrastructure, and sensitive data”, the US Department of the Treasury said in a statement.

China sees great potential and room for growth in ties with Mexico: Wang Yi

“I don’t think there will be a blanket ban or restrictions on Chinese investment,” Sun said.

Rules under the USMCA encourage North American sourcing, so if Chinese investment prioritises Mexican sourcing over that of home, “it can avoid potential risks”, said Hale Utar, an associate professor of international economics at Grinnell College in the US.

China’s Ministry of Commerce said at a December news conference that its cooperation with Mexico on new energy vehicles is “normal commercial activity between two sovereign countries”, adding the US has no right to intervene.

Officials in Beijing will support offshoring to Mexico as long as it brings revenue back home, said Chong Ja Ian, an assistant political science professor at the National University of Singapore.

“A lot of Chinese firms are going to be more keen to invest in foreign markets because domestic demand is slowing,” Chong said. “China wouldn’t see it as a [loss of] growth momentum, because location is not as important as ownership.”

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