This episode contains segments on China’s August macroeconomic data that indicated a slight improvement in the country’s economic performance; on the European Commission’s announcement regarding an anti-subsidy investigation into Chinese electric vehicles; on the Rhodium Group’s newly published research note on the challenges of diversifying away from the Chinese market and on China’s gradually increasing R&D expenditure. From the Chamber’s side: the European Chamber published its European Business in China Position Paper 2023/2024 on 20th September. The report details the challenges faced by European companies operating in China and provides more than 1,000 constructive recommendations to the Chinese Government on how they can be resolved.
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China official macroeconomic data, August (in Chinese)
2023 State of the Union Address by President von der Leyen
Rhodium Group research note on diversification away from China
NBS statement on China’s 2022 R&D spending
European Business in China Position Paper 2023/2024 download for free
XINHE: Hello and welcome to China Shortcuts,
XINHE: August macroeconomic data indicated some warming in China’s economic performance as industrial production and retail sales both expanded at a faster pace than expected.
MARIANN: Industrial activity for larger companies grew 4.5 per cent year-on-year, which was the strongest pace of growth recorded in the past four months. Production picked up at an especially strong rate in the manufacturing sector. Retail sales also fared better than in the previous two months, expanding 4.6 per cent year-on-year in August. The sales of goods improved from the previous month, and grew at the fastest pace since May. At the same time, the rate of expansion of catering sales—while still higher than the sales of goods—has been on a decline for four months in a row. China’s surveyed urban unemployment rate stood at 5.2 per cent in August, which was slightly milder than in the previous month.
XINHE: On 13th September, European Commission President Ursula von der Leyen announced an anti-subsidy investigation into Chinese electric vehicles.
MARIANN: In her annual state of the Union address to EU lawmakers, von der Leyen highlighted concerns about the distorting impact state subsidies can have on fair competition. The European Chamber has been consistently advocating for fair competition and a level-playing field and believes that subsidies, if and when used, should be done in a limited capacity and should be transparently and fairly applied so that they are available to all players in a given industry. As free and open markets depend on rules-based trade practices, the Chamber expects that the EU’s investigation will be fact based, with the aim of ensuring that these principles remain intact.
XINHE: In a research note published on 13th September, the Rhodium Group finds that even though several companies have already begun diversifying away from China, this is a challenging endeavour even in the long-term.
MARIANN: The New York-based research provider found that as China is deeply intertwined with global value chains, diversifying away from the country might not result in reduced reliance on Chinese inputs and suppliers in the short- to medium term. Even if companies shift a significant proportion of their production out of China, given its dominant manufacturing sector, the country’s share of global exports, manufacturing or supply chains is not expected to suffer a substantial blow. Therefore, the Rhodium Group warned that it will take years for advanced economies to achieve the objectives behind their ‘de-risking’ policies, and policymakers should adjust their timeframes for reducing dependencies accordingly.
XINHE: According to China’s statistics bureau, the country spent over 3 billion yuan on research and development in 2022, up 10 per cent from the previous year.
MARIANN: In its push for high-quality development, China has been gradually increasing its R&D expenditure. At constant prices—which are adjusted to take into account the effect of inflation—R&D spending edged up 7.7 per cent year-on-year, which is above the annual growth target rate of 7 per cent set out in the 14th five-year plan. The total innovation expenditure in 2022 was equivalent to 2.54 per cent of China’s GDP. While the largest amount of money was channeled towards experimental development, funding of basic research increased at the fastest pace in 2022.
XINHE: On 20th September, the European Chamber published its European Business in China Position Paper 2023/2024. The report details the challenges faced by European companies operating in China and provides more than 1,000 constructive recommendations to the Chinese Government on how they can be resolved.
MARIANN: It provides a blueprint for attracting and retaining foreign investment in China, while also addressing many of the structural issues that are hindering the country’s economic development.
XINHE: You can download the full report from the Chamber’s website for free.
MARIANN: Thanks for listening. Tune in again next week.
XINHE: In the meantime, please find useful links in the episode notes.