Beijing urges Chinese EV makers to avoid investments in countries like India and Turkey；Young Chinese Émigrés Confront America’s Brutal Visa Lottery

Welcome to this issue of The China Brief. Today is September 12, 2024. Here at The China Brief, we bring you the latest news on China’s politics, economy, and society from global media sources, along with exclusive expert analysis. If you find our content helpful, please subscribe to our newsletter.

Beijing urges Chinese EV makers to avoid investments in countries like India and Turkey

South China Morning Post

Chinese electric vehicle (EV) manufacturers face challenges in their global expansion due to government warnings against investing in countries like India and Turkey. The Ministry of Commerce advised companies to protect their assets and technology, suggesting a focus on local assembly rather than large-scale overseas facilities. Concerns over rising geopolitical tensions and the potential for technology theft were highlighted. Additionally, Chinese EV makers are grappling with trade barriers, including increased tariffs from the U.S. and EU. The competitive domestic market is also pressuring profitability, leading to fears of negative margins.

https://www.scmp.com/business/china-business/article/3278236/beijing-urges-chinese-ev-makers-avoid-investments-countries-india-and-turkey?utm_source=rss_feed

Young Chinese Émigrés Confront America’s Brutal Visa Lottery

NY Times

David Zheng, a Chinese national and recent computer science graduate, has faced challenges in securing an H-1B work visa in the United States, a common experience for many immigrants due to the limited number of visas available. With his education visa set to expire, Zheng enrolled in another master’s program to maintain his legal status while expressing uncertainty about whether the U.S. values immigrants like him. Historically, the U.S. has attracted many young Chinese students, but recent geopolitical tensions and a challenging immigration process have led many to reconsider staying in the U.S. Instead, some express regret and contemplate moving to countries like Canada, where the path to permanent residency is clearer. The experiences shared by Zheng and others highlight the frustrations and emotional toll of navigating the U.S. immigration system.

https://www.nytimes.com/2024/09/12/business/chinese-h1b-visa.html

America Is Fighting the Wrong Trade War

Foreign Affairs

Kamala Harris and Donald Trump present starkly contrasting visions for America, particularly regarding social issues, tax policies, and foreign relations. However, both candidates share a commitment to protectionism, evidenced by Trump’s proposal for significant tariffs on imports and Harris’ intent to implement targeted tariffs to bolster American workers and the economy. Despite the bipartisan support for protectionist measures over the past decade, the effectiveness of such policies in enhancing U.S. employment and manufacturing remains questionable.

Recent research indicates that the narrative linking protectionism to job creation is flawed. The decline of American manufacturing jobs in the face of Chinese competition halted well before the imposition of tariffs by Trump. In fact, the period of significant job loss ended in the early 2010s, and subsequent tariffs did not revive the manufacturing sector. Emerging economies have contributed positively to U.S. manufacturing jobs, suggesting that import competition can actually benefit American employment by allowing manufacturers to access necessary components more affordably.

Instead of prolonging protectionist policies, which may hinder economic growth and stability, the U.S. should focus on reducing trade barriers and strengthening global economic ties. Prioritizing workforce development and equipping workers with the skills needed to thrive in an interconnected economy is essential. The CHIPS and Science Act, which promotes vocational training and support for community colleges, exemplifies a constructive approach. By fostering skills rather than imposing tariffs, Washington can build a resilient economy that benefits all workers while promoting long-term success in a globalized market.

https://www.foreignaffairs.com/united-states/america-fighting-wrong-trade-war

China’s police chief urges ‘new chapter’ of Pacific Island security cooperation

South China Morning Post

China’s Minister of Public Security, Wang Xiaohong, urged for enhanced law enforcement cooperation with Pacific Island nations to strengthen security ties and assert China’s leadership in global governance. Speaking at a police cooperation forum, he emphasized creating a more professional law enforcement team for lasting regional security. This initiative follows Australia’s recent Pacific Policing Initiative aimed at countering Chinese influence. Wang’s discussions with Pacific leaders included commitments to tackle transnational crime and improve mutual trust. China’s efforts in the region have raised concerns among Australia and other Western nations regarding its growing security presence.

https://www.scmp.com/news/china/diplomacy/article/3278225/chinas-police-chief-urges-new-chapter-pacific-island-security-cooperation?utm_source=rss_feed

China’s attempt to boost demand is stifled by wall of austerity

Japan Times

Finance chiefs in Beijing are experimenting with new strategies to stimulate the economy by boosting demand, diverging from traditional practices as growth threats increase. However, this shift towards a more expansionary policy in the capital is being undermined by provincial authorities who are tightening their budgets. Beijing has allocated a significant portion of this year’s special sovereign bond proceeds to subsidize households and companies purchasing new equipment, a move that is unprecedented. Historically, growth was primarily driven by provincial spending on infrastructure projects like roads and railways.

https://www.japantimes.co.jp/business/2024/09/12/economy/china-demand-boost-wall/

Tech war: US-sanctioned Chinese AI chip rival to Nvidia, Biren Technology, plans IPO

South China Morning Post

Biren Technology, a Chinese AI chip start-up valued at $2.19 billion, is preparing for an initial public offering (IPO) by hiring Guotai Junan Securities for a mandatory “tutoring” process required for IPO applicants in China. This process typically lasts between three to 12 months. Biren’s decision comes as more Chinese chip designers seek to raise capital publicly, following a similar move by rival Enflame. Despite raising over $780 million from various funding rounds, Biren has faced challenges due to US sanctions that restrict its access to advanced chip manufacturing services, impacting its production capabilities. Founded in 2019 by Zhang Wen, Biren aims to capitalize on the absence of advanced chips from Nvidia and AMD in China, having launched its BR100 GPU in 2022, which garnered significant attention. However, the BR100 is no longer featured on their website, as the company shifts to its Bili GPU series, now in mass production.

https://www.scmp.com/tech/tech-war/article/3278210/tech-war-us-sanctioned-chinese-ai-chip-rival-nvidia-biren-technology-plans-ipo?utm_source=rss_feed

China wants to challenge the U.S. in AI — here’s what Chinese giants are doing with the tech

CNBC

Global attention around generative artificial intelligence has been focused on big U.S. companies like OpenAI, Alphabet ‘s Google and Meta .

But some of China’s giants, from Alibaba to Tencent, have launched their own AI models over the past 18 months, looking to capitalize on the hype around the technology.

China’s ambitions to become a world leader in AI adds another layer to the country’s technology battle with the U.S. China has been seen as playing catchup to the U.S. but the race is heating up.

Generative AI includes applications like OpenAI’s ChatGPT, which has the ability to generate text, images and even video based on user prompts. These applications are powered by large AI models which are trained on huge amounts of data, such as Google’s Gemini.

Chinese technology firms have had to tread carefully in releasing their technology as Beijing has strict requirements for AI models and their uses.

CNBC runs through the big Chinese AI models developed by the country’s biggest tech firms.

Baidu , one of China’s biggest internet companies, was among the first in the country to launch generative AI applications. Its model powers Ernie Bot, an AI chatbot designed to rival OpenAI’s ChatGPT and which the Chinese company says has 300 million users.

Before the “Turbo” version of the model, Baidu said that its latest version — Ernie 4.0 — has capabilities on par with OpenAI’s GPT-4. The foundational model can understand and reason, according to Baidu.

Like other companies, Baidu is selling the ability to use its AI model via its cloud computing division.

Alibaba launched its set of foundational models, Tongyi Qianwen, last year. Often shortened to Qwen, Alibaba has developed various versions that can carry out different tasks. For example, one model is focused on creating content or solving math problems. Another can understand audio-based inputs and give text-based outputs.

Some versions of its Qwen models are open-sourced, meaning they can be openly downloaded, with some limitations, and used by developers.

Alibaba said in May its Qwen models have been deployed by over 90,000 enterprise users.

Last year, Tencent launched its own foundational model called Hunyuan.

Companies can access Hunyuan’s capabilities via Tencent’s cloud computing business. Tencent has said Hunyuan has strong Chinese language processing abilities and “advanced” logical reasoning. The model can support functions including image creation and text recognition.

Tencent has positioned the model as one that can be used by companies in industries from gaming to social media and e-commerce.

Tencent runs China’s biggest messaging app, WeChat. The company this year launched an AI chatbot based on its Hunyuan model. The AI assistant, known as Yuanbao, can pull information and content from WeChat, as Tencent looks to differentiate its offering from rivals.

Huawei has taken a slightly different approach to rivals with its Pangu AI models. It has created a number of AI models aimed at customers in specific industries including government, finance, manufacturing, mining, and meteorology.

For example, Huawei said its Pangu Meteorology Model can predict the trajectory of a typhoon over 10 days in around 10 seconds, rather than the four-to-five hours it took previously.

These models, sold through the firm’s cloud computing business, can also support generative features such as the ability to generate code and virtual human avatars.

TikTok owner ByteDance launched an AI model this year, marking a late entrance into the race against competitors like Baidu and Alibaba.

ByteDance, however, brought out its AI model at a price much cheaper than the other companies.

The Doubao model has the ability to generate voices as well as generate code for developers, among other capabilities.

https://www.cnbc.com/2024/09/12/china-tech-companies-ai-models-vs-openai-google-meta.html

A CEO went missing. Then his bank got a mysterious bill for $11 million

CNN

China Renaissance, a prominent investment bank, revealed it received an $11 million bill linked to the disappearance of its founder and star banker, Bao Fan. Bao was reported missing in February 2023 amid an anti-corruption crackdown, with allegations of involvement in corporate bribery. The bank, which has faced scrutiny and a loss of auditor confidence, disclosed the bill as “other receivables.” The opaque circumstances of Bao’s case have unsettled the Chinese financial and tech sectors, highlighting concerns over executive disappearances in the country. No official charges have been made against Bao, and the situation remains unclear.

https://edition.cnn.com/2024/09/12/tech/china-bao-fan-missing-mystery-bill-hnk-intl/index.html

Profits for Chinese firms fall in second quarter; trend seen reversing in fourth

South China Morning Post

Mainland-listed companies in China experienced a 1.5% decline in profits for the second quarter, with revenue dropping 2%, attributed to a weak domestic economy. This follows a 4% profit decline in the first quarter, highlighting investor concerns amid disappointing economic data. Analysts anticipate a potential recovery in the final quarter, despite continued struggles in sectors like property and steel, while carmakers and electronics showed some resilience. Predictions suggest that overall profits could grow by 7% in the second half of the year, driven by fiscal spending and improved market conditions.

https://www.scmp.com/business/china-business/article/3278207/profits-chinese-firms-fall-second-quarter-trend-seen-reversing-fourth?utm_source=rss_feed

Bill reviving US Justice Department’s ‘China Initiative’ passes House of Representatives

South China Morning Post

The House of Representatives passed two Republican bills aimed at reviving the Justice Department’s “China Initiative” and increasing scrutiny of Chinese property purchases during a week dedicated to China-related legislation. The first bill, sponsored by Rep. Lance Gooden, seeks to establish a six-year “CCP Initiative” to combat intellectual property theft and espionage linked to China. It passed with a vote of 237-180, despite opposition from the Biden administration, which criticized the previous initiative for leading to racially motivated prosecutions. The second bill, led by Rep. Dan Newhouse, adds the agriculture secretary to the Committee on Foreign Investment in the United States (CFIUS) to monitor foreign acquisitions of U.S. agricultural land, passing 269-149. This bill has also faced criticism, particularly for its potential to unfairly target immigrants based on nationality. The White House has expressed strong opposition to both bills, emphasizing that they would complicate existing processes and foster an atmosphere of fear among Asian American communities. Additionally, the House passed another bill requiring Senate supermajority approval for U.S. participation in World Health Organization agreements, which prompted further criticism from Democrats.

https://www.scmp.com/news/china/article/3278161/bill-reviving-us-justice-departments-china-initiative-passes-house-representatives?utm_source=rss_feed

US, EU raise alarm over China’s ‘very substantial’ support for Russia in Ukraine war

South China Morning Post

The United States and the European Union have expressed serious concerns over China’s substantial military support for Russia, which they believe is enabling the Kremlin’s ongoing war against Ukraine and poses a threat to global security. Following high-level discussions in Brussels, U.S. officials highlighted China’s provision of dual-use goods and direct assistance to bolster Russia’s military capabilities. This cooperation reportedly includes Russia sharing advanced military technologies with China, raising alarms for countries in the Indo-Pacific region. Meanwhile, calls from U.S. lawmakers for stronger actions against China’s support for Russia reflect bipartisan concerns about Beijing’s influence in Europe, particularly in light of its ties with Eastern European nations. The discussions also addressed the importance of peace in the Taiwan Strait and the need for China to respect human rights, particularly in Tibet and Xinjiang. Both U.S. and EU officials emphasized a unified stance against China’s actions and announced plans for further talks in Washington in 2025.

https://www.scmp.com/news/china/diplomacy/article/3278160/us-eu-raise-alarm-over-chinas-very-substantial-support-russia-ukraine-war?utm_source=rss_feed

The Coming Clash Between China and the Global South

Foreign Policy

Chinese President Xi Jinping has committed to opening China’s economy to emerging nations by introducing zero tariffs for the least developed countries, a move announced during the China-Africa summit on September 5. This initiative contrasts with the U.S.’s shift towards protectionism and aims to alleviate concerns among emerging countries about the influx of cheap Chinese goods threatening their economic progress. As China invests heavily in advanced manufacturing, Western nations have responded with tariffs on various items, prompting fears in emerging markets of a “China Shock 2.0.” Countries like Indonesia and Chile have already enacted protective measures against Chinese imports. This shift marks a significant change, as emerging markets have historically viewed China as a vital economic partner. However, the growing wave of tariffs could undermine China’s influence in the global south, especially if Western nations, led by a potentially reinvigorated Trump administration, impose higher tariffs. The challenge for China lies in balancing its need for export-driven growth with the potential geopolitical fallout of alienating emerging economies. Xi faces a difficult decision: strengthen ties with developing nations or continue focusing on an advanced manufacturing strategy that could further strain these relationships.

The Coming Clash Between China and the Global South

Top Chinese general to visit US as militaries step up engagement

Financial Times

General Wu Yanan, the commander of the People’s Liberation Army Southern Theatre, is set to visit the US Indo-Pacific command in Hawaii next week to attend a defense conference hosted by Admiral Samuel Paparo. This visit marks a significant step in re-establishing military communications between the US and China, particularly amidst rising tensions over Taiwan and the South China Sea. Last week, Wu and Paparo engaged in a video call, marking the first formal interaction between their commands since China suspended several military communication channels following Nancy Pelosi’s visit to Taiwan in 2022.

The Pentagon has been advocating for increased engagement with the Southern Theatre command due to China’s assertive military activities. President Biden and President Xi Jinping previously agreed to restore communication lines to stabilize relations. Bonnie Glaser, a China expert, views Wu’s participation in the conference as a positive development that could lead to sustained communication and discussions on pressing security issues.

The Indo-Pacific command described the recent video call as constructive, with Paparo urging Wu to reconsider aggressive tactics in the South China Sea. The US is particularly concerned about China’s military actions around Taiwan and rising coastguard aggressiveness toward the Philippines. Additionally, Michael Chase, a top Pentagon official, is currently in Beijing for defense policy talks, marking a renewed effort at military engagement between the two nations.

https://www.ft.com/content/52adec25-51a6-4634-8439-50f1cc13792f

Lawmakers discuss plan to gradually lift retirement age in China

South China Morning Post

China’s top legislature is considering a plan to gradually increase the retirement age, which has remained unchanged since 1951 and is one of the lowest globally. Currently, the retirement age is 60 for men, 55 for white-collar women, and 50 for blue-collar women. This proposal follows a recommendation from the Communist Party’s Central Committee to implement a “voluntary and flexible” increase in retirement age due to concerns over a declining birth rate and an aging population.

Discussions were held among lawmakers about a draft decision submitted by the State Council, which emphasizes the need for reform in light of the increasing life expectancy and education levels among the workforce. The average education duration has risen from eight years in 1982 to 14 years in 2023, creating concerns about the “utilization rate of human capital” if retirement ages remain unchanged.

The proposed changes have sparked significant debate among the public, particularly on social media, with many expressing dissatisfaction over the possibility of working longer. Experts argue that delaying retirement is necessary to address demographic challenges, as projections indicate that by 2035, over 400 million people in China will be over 60 years old, representing more than 30% of the population. Additionally, the main urban state pension fund is expected to be depleted by 2035, adding urgency to the reform discussions.

https://www.scmp.com/news/china/politics/article/3278121/lawmakers-discuss-plan-gradually-lift-retirement-age-china?utm_source=rss_feed

China playing it safe with capital, researchers say, as SOEs get hefty payout

South China Morning Post

A report by the Rhodium Group highlights that excessive capital in China is being directed towards “safe” companies rather than innovative firms that could stimulate economic growth, contrary to Beijing’s industrial policy goals. The report notes that banks are primarily lending to established industries and state-owned enterprises (SOEs), resulting from decades of misallocation, which is compounded by the current slow economic growth. While the Chinese Communist Party has pledged more support for private companies leading technological advancements, funding continues to favor large, established firms in sectors where China is already dominant, such as batteries and solar energy. This trend is problematic as it undermines productivity growth and hinders both short-term and long-term economic development. The report emphasizes the need for a shift towards more inclusive industrial policy funding to support smaller, innovative companies. However, a cautious investment climate has led many funds to prioritize safer investments, limiting the potential for growth in newer industries.

https://www.scmp.com/economy/china-economy/article/3278052/china-playing-it-safe-capital-researchers-say-soes-get-hefty-payout?utm_source=rss_feed

Chinese students face more national defence education in drive to raise military awareness

South China Morning Post

Chinese schools are being urged to enhance national defence education to raise students’ awareness about military service, according to proposed amendments under review by the National People’s Congress (NPC) Standing Committee. The amendments focus on the contents of military training for students and the responsibilities of military units. The draft emphasizes integrating military service knowledge into school curriculums to foster a culture that views military service as honorable. It also outlines that military training for students must adhere to specific manuals created by education and military authorities, aiming to improve students’ military skills, character, and discipline.

The NPC Standing Committee believes these amendments are necessary due to recent domestic and global changes, and they aim to strengthen national defence education. Currently, China’s military service system includes both compulsory and voluntary service, with voluntary service being predominant since 2021. The National Defence Education Law, originally adopted in 2001, mandates military training in higher education and senior high schools, and the current review is the first significant amendment since a minor revision in 2018. NPC Chairman Zhao Leji has highlighted the revision of this law as a key legislative priority for modernizing China’s national security capabilities.

https://www.scmp.com/news/china/politics/article/3278103/chinese-students-face-more-national-defence-education-drive-raise-military-awareness?utm_source=rss_feed

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