This episode contains China’s import and export data in May; China-European Business Forum organised by the Tianjin Municipal Government, with comments from Christoph Schrempp, chair of the European Chamber’s Tianjin Chapter; manufacturing and services activity data in May released by Caixin; and Rhodium Group’s report on local government debt and China’s economic growth prospect. From the Chamber side, join the event on 13^th June on the latest status and trends of COVID-19 in China and hear from experts about health and HR advice.

Read more:

May foreign trade data (in Chinese):

http://www.customs.gov.cn/customs/xwfb34/302425/5069175/index.html

China-European Business Forum in Tianjin

https://english.www.gov.cn/news/202306/04/content_WS647bc624c6d0868f4e8dc9bb.html

Caixin China General Manufacturing PMI

https://www.pmi.spglobal.com/Public/Home/PressRelease/f01e3d3c8c8d4ff4a751cea5b2f56630

Caixin China General Services PMI

https://www.pmi.spglobal.com/Public/Home/PressRelease/37bc430af729488c9d7751d50c5cd681

Rhodium Group report on local government debt

Chamber event: COVID again? Latest insights and business advice from experts

https://www.europeanchamber.com.cn/en/upcoming-events/24169

Transcript:

RUI: Hello and welcome to China Shortcuts,

MARIANN: the European Chamber’s weekly catchup on China’s business landscape.

(MUSIC)

RUI: China’s exports unexpectedly dropped sharply year-on-year, while the contraction of imports continued at a softer pace in May.

MARIANN: Data released by China’s General Administration of Customs on 7^th June showed that the total value of China’s exports in US dollar terms fell 7.5 per cent in May compared to a year ago. This was contrary to analysts’ forecasts that predicted a deceleration of growth following two months of continued expansion. The total value of imports shrank 4.5 per cent in May. While this was milder than the decline recorded in April, notably, imports have been contracting for the seventh month in a row. China’s foreign trade deficit dropped to the lowest level in over a year, amounting to 65.8 billion US dollars.

(MUSIC)

RUI: On 2^nd June, Tianjin’s municipal government held an event to promote European-Chinese business cooperation.

MARIANN: According to the organisers, the China-European Business Forum was meant to provide a platform for exchange between European and Chinese entrepreneurs and strengthen communication between European businesses and the municipal government.

RUI: Sharing his insights about the event is Christoph Schrempp, chair of the European Chamber’s Tianjin Chapter.

CHRISTOPH SCHREMPP: On June 2^nd, together with the national vice president and chairman of the South [China] Chapter, Klaus Zenkel, I attended the China-European Business Forum in Tianjin. The officials from the Tianjin Municipality highlighted the various benefits of settling down as a foreign-invested company in Tianjin, and the preferential policies in place. They also reported 5 billion RMB for investment in Tianjin and a GDP growth that fort the first quarter in 2023 was 5.5 per cent. Vice President Zenkel highlighted that after COVID-19 and under the given geopolitical circumstances, European trust in China must be regained as a basis for further investment. I was referring to the second Tianjin local position paper and highlighted the enhancement of the cooperation between universities and the European companies in the field of R&D and further support to attract and retain talent.

(MUSIC)

RUI: After China’s official statistics indicated a contraction in manufacturing activity in May, the Caixin manufacturing purchasing managers’ index or PMI showed a different picture.

MARIANN: Released on 1^st June, the Caixin data signaled that manufacturing activity expanded for the first time in three months in May, and at a pace that exceeded market expectations. The discrepancy in the results might be due to the different sample sizes and scope of the surveys that the data is derived from. China’s National Bureau of Statistics surveys over 4,000, mostly larger, companies to calculate the official PMI, while the Caixin PMI is based on data from a panel of about 650 private and state-owned manufacturers. The Caixin dataset indicated an uptick in demand, which led to a strong rise in production. Despite the better-than-expected performance, however, business confidence about the year ahead slipped to a seven-month low. This was reflected in manufacturing companies’ hiring activity as well, with staffing levels falling at the fastest pace in over three years in May.

The Caixin services PMI, released separately on 5^th June, signalled an increasingly strong recovery in services activity in May. Survey respondents indicated a sharp rise in demand and improved business confidence about the 12-month outlook.

(MUSIC)

RUI: According to a report launched by the Rhodium Group on 1^st June, the financial distress of China’s top cities is the primary reason that there has been no meaningful fiscal support for the country’s recovery this year.

MARIANN: The Rhodium Group found that in 2022, of the top 20 cities, 19 were facing worse conditions than in the year prior. Their interest coverage ratio, which is used to determine how easily they can pay interest on their outstanding debt, has decreased sharply. This happened mainly as a result of official fiscal revenues taking a hit from tax exemption measures last year. Although interest rates have declined, total interest expenses still increased in 2022 along with the rise in overall debt levels. The Rhodium Group predicts that over the next two years, local government debt restructuring and Beijing’s approach to the role of local government investment within China’s economy will be key factors impacting the country’s economic growth.

(MUSIC)

RUI: China declared victory over COVID-19 on 16th February this year, and indicated its borders would reopen to the world. And in early May, the World Health Organization announced that the COVID-19 pandemic would no longer be considered a public health emergency of international concern.

MARIANN: However, since the reopening of the country, a second wave of COVID-19 infections has recently hit China. This wave is expected to peak in June, with estimates that 65 million people a week will be infected by the end of the month.

RUI: Join our event on 13^th June to find out about the latest status and trends of COVID-19 in China. Experts will answer questions about vaccinations and medicines and give advice on related HR practices.

(MUSIC)

MARIANN: Thanks for listening. Tune in again next week.

RUI: In the meantime, please find useful links in the episode notes.

This episode covers the Chamber’s newly elected executive committee; manufacturing and services activity in May; and profits of China’s larger industrial firms in the first four months of 2023. From the Chamber side, join the first episode of a new event series on global industrial strategies on 8^th June, focussing on the United States’ Chips Act and the global semiconductor ecosystem.

This episode covers the resumption of international cruises, with comments from Tiger Young, chair of the European Chamber’s Maritime Manufacturing and Industrial Services Working Group; government plans for establishing a unified national market; and foreign direct investment into China in the first four months of 2023. From the Chamber side, the inaugural Government Affairs Conference will be held on 7^th June in Beijing.

This episode covers China’s carbon emissions in the first quarter of 2023, with comments from Clement Lix, vice chair of the European Chamber’s Energy Working Group; producer and consumer prices in April; industrial production activity, retail sales and urban unemployment data in April. From the Chamber side, South China Chapter attended a meeting with the Guangdong governor.

This episode contains manufacturing activity in April; the direction of China’s economy in the first quarter of 2023 outlined in a third-party report; signals from April Politburo meeting on China’s economy; and foreign trade data in April. From the Chamber side, recent high-level engagements with key interlocutors were introduced.

This episode covers the Shanghai International Automotive Industry Exhibition, with comments from Mr Zhang Hongzhuo, chair of the Automotive Working Group; China’s foreign direct investment in the first quarter of 2023; a high-level meeting between the European Union and China; and measures aimed at stabilising foreign trade. From the Chamber side, a new report and a new issue of EURObiz magazine on research and development in China are introduced.

This episode covers China’s first quarter Gross Domestic Product (GDP) growth, macroeconomics indexes and foreign trade data in March. From the Chamber side, join the Nanjing Position Paper 2023/2024 launch on 27^th April to learn more about the Chamber’s recommendations on improving Jiangsu’s business environment.

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This episode covers European Commission President Ursula Von der Leyen’s visit to Beijing, China’s manufacturing and services activity in March, and policies and measures to stabilising China’s exports growth and employment.

From the Chamber side, the second report on China’s innovation system will launch on 21^st April, focusing on the localisation dilemma that European companies face.

This episode covers new measures for further optimising the management of cosmetics raw material safety information, with comments from Jacky Zhang, chair of the Cosmetics Working Group; reported profits of large industrial companies in China in January and February; and Shanghai’s Hongqiao Airport resumption of international flight services. Join our event on China’s economic recovery beyond the Two Sessions in Beijing on 31^st March.

This episode covers China lowering its required reserve ratio; a report on China-US trade decoupling; and foreign direct investment in China in January and February.

Join the Chamber’s Human Capital Conference on 27th March in Beijing, to learn more about integrating environmental, social and corporate governance into your company’s human resources strategy.

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Read more:

PBOC reserve requirement ratio (in Chinese)

http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4821841/index.html

Overview of RRR cuts since 2018 (in Chinese)

http://www.pbc.gov.cn/rmyh/4027845/index.html

PIIE report on US-China trade decoupling

https://www.piie.com/blogs/realtime-economics/five-years-trade-war-china-continues-its-slow-decoupling-us-exports

Official January-February FDI data (in Chinese)

2023年1-2月全国吸收外资2684.4亿元人民币，同比增长6.1% (mofcom.gov.cn)

Chamber event: Human Capital Conference¾ESG In Human Capital Strategy Development

https://www.europeanchamber.com.cn/en/upcoming-events/23635

Transcript:

RUI: Hello and welcome to China Shortcuts,

MARIANN: the European Chamber’s weekly catchup on China’s business landscape.

(MUSIC)

RUI: On 17^th March, China’s central bank announced that it would lower the amount that banks are required to keep in reserve for deposits in order to maintain sufficient liquidity in the interbank system.

MARIANN: The decision to cut the reserve requirement ratio for banks by 25 basis points will take effect on 27^th March, and is expected to inject about 500 billion yuan worth of liquidity into the market. This in turn will provide lenders with more cash to pay out loans, and open up the possibility for reducing lending rates. According to data from the central bank, since 2018, the reserve requirement ratio has been lowered 14 times already, with the average ratio decreasing from 14.9 per cent to 7.8 per cent by the end of last year.

(MUSIC)

RUI: According to a new report published on 16^th March by the Peterson Institute for International Economics, China has continued to decouple from US exports amid tense bilateral relations.

MARIANN: The Washington-based research organisation highlighted that as both sides fear that the other would suddenly weaponise trade flows in the name of security, to mitigate risks, they are attempting to diversify. The report points at 2022 data showing that US exports are falling farther and farther behind foreign peers also selling into the Chinese market. This trend is seen in all key areas: US manufacturing exports have for the most part disappeared, semiconductor sales dwindled and may not return due to new US export control policy, while services exports that were tarnished by the pandemic have not made a comeback. The report stressed that worrying signs have emerged even in the field of agriculture, where US sales to China hit record highs in 2022. According to the Peterson Institute, the uptick in US farm sales to China was largely due to higher prices and concerns over global food security in light of the war in Ukraine. As for the other side, the report says that US imports from China tell a similar story, and concludes that the two economies are becoming less directly interdependent through trade.

(MUSIC)

RUI: According to a note published by the Ministry of Commerce on 17^th March, actual use of foreign direct investment increased 6.1 per cent in yuan terms in the first two months of 2023, compared to the same period a year ago.

MARIANN: The ministry highlighted that FDI in high-tech manufacturing picked up sharply, expanding almost 69 per cent year-on-year, while the service industry also saw a substantial increase in FDI inflow. The overall data, however, shows some slowing from January, when actual use of FDI grew 14.5 per cent year-on-year. Furthermore, the ministry’s note points out that investment from Belt and Road countries and the Association of Southeast Asian Nations increased more than 10 per cent in January-February. However, without a clear breakdown of the data, it is difficult to gauge foreign investors’ sentiment, especially since the official FDI data also includes investments from Hong Kong or tax havens like the Cayman Islands, even if the money comes from subsidiaries of Chinese companies – a phenomenon known as round-tripping investment.

(MUSIC)

RUI: Environmental, social and corporate governance or ESG is fast becoming the global standard for investors seeking responsible investment opportunities. This framework requires companies to provide data on several aspects of their operations, such as carbon emissions, employee health and safety, diversity and business ethics. More and more companies are embedding ESG in their corporate strategy to pursue sustainable development. At the same time, younger generations entering the workforce are highly motivated by an employer’s ability to demonstrate the purpose and value of its social impact.

MARIANN: It is therefore important for companies to understand how to integrate ESG into their corporate human resources strategy, and how to develop talent with ESG skills.

RUI: Join this year’s Human Capital Conference on 27^th March to hear CEOs and HR leaders from top-tier companies discuss the latest trends and best practices in ESG.

MARIANN: Thanks for listening. Tune in again next week.

RUI: In the meantime, find useful links in the episode notes.