This episode contains segments on:
- China’s 2023 environmental targets;
- EU’s new regulation to ban products with forced labour;
- Foreign direct investment data for Q1;
- Capital market reforms;
Also, listeners are invited to join an event on 29th April in Beijing or online to understand Chinese overcapacity.
Contact:
We’d love to hear your feedback. Contact us at website@europeanchamber.com.cn.
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Read more:
2023 environmental targets (State Council)
https://english.www.gov.cn/news/202404/23/content_WS6627b2edc6d0868f4e8e658f.html
EU to ban products made with forced labour
2024 Q1 FDI (MOFCOM)
http://www.mofcom.gov.cn/article/xwfb/xwrcxw/202404/20240403504349.shtml
Li Qiang on capital market reforms
https://english.www.gov.cn/news/202404/22/content_WS66265028c6d0868f4e8e64e2.html
European Chamber event: Bursting at the Seams – Understanding Chinese Overcapacity
Transcript:
RUI: Hello and welcome to China ShortCuts,
MARIANN: the European Chamber’s weekly catchup on China’s business landscape.
RUI: According to the State Council’s official report, China met all its annual targets for environmental indicators in 2023, as well as the relevant deadlines of the 14th Five-Year Plan.
MARIANN: Improvements were recorded in several key areas, including air and water quality. For instance, in the Beijing-Tianjin-Hebei region, the average concentration of PM2.5 dropped 2.3 per cent compared to 2022. Another positive highlight was that the water quality in the Yellow River Basin improved from good to excellent. The report acknowledged some of the key challenges ahead of China’s efforts at environmental protection, including the high energy consumption of its industries, which leads to high carbon emissions due to the predominance of coal in the country’s energy mix. The 2024 target for reducing carbon emissions per unit of GDP was set at about 3.9 per cent. The report pointed out that in order to reach China’s green targets, environmental legislation and enforcement of relevant regulations will both need to be strengthened.
RUI: The European Chamber has been actively highlighting that European companies operating in China are well-placed to contribute to China’s efforts at decarbonisation. This is partly due to their experience in reducing their carbon footprint in other markets, and partly because they have made globally binding pledges to achieve carbon neutrality well ahead of China’s 2060 deadline. However, European companies face a number challenges currently preventing them from greening their operations in China. These include limited access to renewable energy, a lack of clear policy guidance, a scarcity of necessary technology and issues related to China’s emissions trading system.
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RUI: On 23rd April, the European Parliament voted in favour of a new regulation that allows the European Union to ban products from its Single Market that were made using forced labour.
MARIANN: According to the regulation, member state authorities and the European Commission will have the right to investigate goods, supply chains and manufacturers suspected of relying on forced labour, based on factual and verifiable information. If a product is deemed to have been made with forced labour it will no longer be permitted to be sold on the EU market but may be allowed back once the manufacturer has proved that it has eliminated forced labour from its supply chains.
The text of the regulation still has to be approved by the European Council before it is published in the EU’s Official Journal. Member states will then have to start enforcing it within three years of its publication.
RUI: In the first quarter of 2024, China’s actual use of foreign direct investment dropped more than 26 per cent year-on-year, amounting to over 300 billion yuan.
MARIANN: Data released by China’s Ministry of Commerce on 19th April revealed that while the year-on-year decrease in the actual use of FDI was still significant, the first quarter total showed an almost 42 per cent uptick compared to the final quarter of 2023. A breakdown of the data indicated that over a quarter of FDI in the first quarter—or more than 81 billion yuan—was utilised in the manufacturing sector. Almost half of this amount went into high-tech manufacturing. The Ministry’s statement highlighted that within high-tech manufacturing, utilisation of FDI in the medical equipment manufacturing sector increased almost 170 per cent year-on-year. However, the actual figures were not disclosed.
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RUI: Chinese Premier Li Qiang called for strengthening oversight of the capital market, echoing the key points listed in a recent guideline issued by the State Council on the matter.
MARIANN: Li Qiang was presiding over a State Council study session on 22nd April, which focused on capital market reforms. The Premier called for efforts to accelerate steady and healthy development of the capital market, for instance through improving systems for listing, trading and delisting. He also highlighted the need to improve the quality of listed companies and to introduce stricter punishments for illegal and non-compliant activities.
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RUI: Throughout the past several months, various actors have been sounding alarm bells over overcapacity in several key sectors in China. The issue has already prompted actions from some of China’s trade partners, including the investigation into Chinese-made electric vehicles launched by the European Commission in late 2023. In China, policymakers have, to some extent, already acknowledged that subsidisation and the current structural rebalancing in investments could have negative effects on manufacturing.
MARIANN: Despite this acknowledgement, in March, China’s National People’s Congress concluded with an explicit focus on industrial policy favouring high-tech industries, and very little fiscal support for household consumption. There are growing concerns that this policy mix could potentially exacerbate the growing imbalance between domestic supply and demand.
RUI: Join us on 29th April online or in person in Beijing to learn fresh insights from the Rhodium Group on China’s overcapacity outlook and its bearing on the country’s trade relations with its key partners. European industry representatives will also share their on-the-ground experience dealing with overcapacity in their respective sectors.
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MARIANN: Thanks for listening, and don’t forget to tune in again after the Labour Day holiday.
RUI: In the meantime, please find useful links in the episode notes.