Chindia Alert: You’ll be Living in their World Very Soon
aims to alert you to the threats and opportunities that China and India present. China and India require serious attention; case of ‘hidden dragon and crouching tiger’.
Without this attention, governments, businesses and, indeed, individuals may find themselves at a great disadvantage sooner rather than later.
The POSTs (front webpages) are mainly 'cuttings' from reliable sources, updated continuously.
The PAGEs (see Tabs, above) attempt to make the information more meaningful by putting some structure to the information we have researched and assembled since 2006.
Pou Chen makes footwear for the likes of Nike and Adidas, but says it has suffered from a lack of orders as global value chains strain under the impact from the virus
Chinese workers moved to Vietnam to help set-up new factories as the company expand its production, but have now become expendable
With the likes of Nike and Adidas closing retail stores around the world to comply with social distancing requirements, analysts also said orders plummeted 50 per cent in the second quarter, although the company declined to comment on the media reports. Photo: Bloomberg
A group of 150 Chinese workers believe the world’s largest maker of trainers used the coronavirus as an excuse to fire them, having helped Taiwanese firm Pou Chen successfully expand its production into Vietnam for more than a decade.
Pou Chen, which makes footwear for the likes of Nike and Adidas, informed the group in late April that they would no longer be needed as they were unable to return to
from their hometowns in China due to the coronavirus lockdowns.
“We believe we contributed greatly to the firm’s relocation process, copying the production line management experience and successful model of China’s factories to Vietnamese factories,” said Dave Zhang, who started working for Pou Chen in Vietnam in 2003.
“Now, when the factories over there have matured, and there is a higher automation level in production, our value has faded in the management’s eyes and we got laid off, in the name of the automation level.”
Rush hour chaos returns to Vietnam’s streets as coronavirus lockdown lifted
The group claims the firm began to fire Chinese employees several years ago, with the total number dropping from over 1,000 at its peak to around 400 last year.
“We 150 employees were the first batch of Chinese employees to be laid off this year. We are all pessimistic and expect more will be cut,” added Zhang.
In its email on April 27, Pou Chen said it was forced to terminate the contracts of the Chinese employees across five of its factories due to an unprecedented decline in orders and financial losses.
The Chinese employees, many of whom have been working for the shoemaker for decades, said the compensation offered was unfair and below the levels required by labour law in both Vietnam and China.
In a further statement to the South China Morning Post, Pou Chen stood by the move as the coronavirus pandemic had reduced demand for footwear products and so required an “adjustment of manpower.”
“[The dismissals were] in accordance with the relevant labour laws of the country of employment … and employee labour contracts,” added the statement from Pou Chen, which employs around 350,000 people worldwide.
Company data showed Pou Chen’s first quarter revenues tumbled 22.4 per cent year-on-year to NT$59.46 billion (US$1.99 billion), the weakest in six years.
With the likes of Nike and Adidas closing retail stores around the world to comply with social distancing requirements, analysts also said orders plummeted 50 per cent in the second quarter, although the company declined to comment on the media reports.
Last month, the company was also mulling pay cuts and furloughs that would affect 3,000 employees in Taiwan and officials based in its overseas factories, according to the Taipei Times.
Andy Zeng, who had worked for the firm since 1995, said the group were “very upset” when they received the news last month as the impact of the coronavirus pandemic began to reverberate around the world, disrupting global value chains.
“Most of us joined Pou Chen in the 1990s when we were in our late teens or early 20s, when the Taiwan-invested company started investing and setting up factories in mainland China. Now more than two decades have passed,” he said.
Zeng was among the first generation of skilled workers in China as Pou Chen developed rapidly, enjoying the benefits of cheap labour, although the workers themselves were rewarded with regular pay rises.
The company needed a group of skilled Chinese workers to go to its new factories in Vietnam. I said yes because I thought it was a good opportunity to see the outside world – Andy Zeng
“I worked at the Dongguan branch of Pou Chen for 11 years from 1995.” Zeng added “In the 1990s and early 2000s, the company expanded rapidly in Dongguan with a growing number of large orders, and every worker had to work hard around the clock. I remember I earned 300 yuan (US$42) a month in 1995, and my monthly salary rose to 1,000 yuan (US$141) in 1998.”
Zeng’s salary eventually rose to over 3,000 yuan in 2005 as China’s economy boomed, leading Pou Chen to seek alternative production sites in Vietnam and Indonesia where labour and land were even cheaper. However, in the early 2000s, the new locations lacked skilled shoe manufacturing workers like Zeng.
“The company needed a group of skilled Chinese workers to go to its new factories in Vietnam. I said yes because I thought it was a good opportunity to see the outside world and the offer of US$700 per month was not bad.” Zeng said.
“We actively cooperated with their plans. Over the past decade, we have been away from our families and hometowns, and followed the company’s strategy to work hard in Vietnam.
With no deaths and cases limited to the hundreds, Vietnam’s Covid-19 response appears to be working
“In 2005, the company sent me to its newly-built factory in Vietnam. This year was my 14th year in Dong Nai in Vietnam. I have witnessed the company’s production capacity in Vietnam become larger and larger. When I arrived, there were only a few production lines, and now there are at least dozens of them, employing more than 10,000 workers in each factory.”
According to a report in the Taipei Times on April 14, citing both Reuters and Bloomberg, Pou Chen was ordered to temporarily shut down one of its units in Vietnam over coronavirus concerns, according to Vietnamese state media.
The company was forced to suspend production for two days after failing to meet local rules on social distancing, Tuoi Tre newspaper reported.
“We Chinese employees actually were pathfinders for the company’s relocation from China to Vietnam,” said Zhang, who was in charge of a 1,700-worker factory producing 1.7 million shoe soles per month.
What our Chinese employees have done in Vietnam for more than a decade can be said to be very simple but very difficult – Dave Zhang
“We were sent to resolve any ‘bottlenecks’ in the production lines that were slowing down the rest of the plant, because during the launch of every new production line, Vietnamese workers would strike and get into disputes. As far as I know, there were over a thousand Chinese employees managing various aspects of the production lines in the company’s Vietnamese factories.
“In fact, what our Chinese employees have done in Vietnam for more than a decade can be said to be very simple but very difficult. That is to teach Vietnamese workers our experience of working on a production line, improve the productivity of the Vietnamese workers, and help the factories become localised.”
Overall, Pou Chen says it produces more than 300 million pairs of shoes per year, accounting for around 20 per cent of the combined wholesale value of the global branded athletic and casual footwear market.
“Because of cultural shock and great pressure to expedite orders, Vietnamese workers were not used to the management style of Taiwan factories,” Zhang added.
“Many of our Chinese employees were beaten by Vietnamese workers [due to cultural differences about work]. During anti-China protests in Vietnam, we were still under great pressure to keep the local production lines operating.”
Beijing’s Chaoyang district remains the last high-risk area in China, with virus preventive measures continuing to impact on travel and shopping plans
China faces the dilemma of preventing a re-emerge of the pandemic, while also pushing to get its economy back to normal
China’s continued pandemic prevention measures, coupled with still hesitant consumer demand, will inevitably lead to persistent limitations on the nation’s economic recovery, analysts said. Photo: Bloomberg
After nearly three months of being quarantined by herself in Beijing, Mary Zhao was looking forward to the upcoming long weekend at the start of May to be able to finally reunite with her parents.
But Zhao was forced to abandon her plan for the Labour Day holidays as Beijing’s upmarket Chaoyang district, where she lives, remains the only high-risk zone for coronavirus in the entire country.
If she travelled the five hours by car, or two hours via bullet train, to the neighbouring Hebei province, she would first have to undergo a 14-day quarantine before seeing her parents. Her parents would also have the same two week quarantine to look forward to once they returned home if they came to visit their daughter in Beijing.
These strict controls to prevent a re-emergence of the coronavirus outbreak are making a return to normal life impossible for many, and mean the final economic and social cost
from China’s draconian preventive measures could be much larger than expected.
Wuhan declares ‘victory’ as central Chinese city’s last Covid-19 patients leave hospital
It underscores the dilemma facing China’s leaders on how to balance the need to
and to avoid a fresh outbreak. On the surface, China may be able to declare victory as even Wuhan, the city where the virus was first detected, announced that the last Covid-19 patient had left hospital on Sunday. But fears of a renewed outbreak have kept the country’s cinemas and most schools closed, with travel between provinces discouraged.
China’s national borders also remain largely closed, with flights being cut to a minimum, and a mandatory 14-day quarantine for every arrival. In the number of places where new cases have been reported, quarantine requirements have been tightened, including Harbin and a few other cities near the border with Russia.
Chaoyang, the home to one of Beijing’s main business districts and most foreign embassies, changed its risk rating to high from low in the middle of April after three new cases were reported, dealing a fresh blow to the district’s
and forcing many of the 3.5 million residents to cancel their travel plans.
On the outskirts of Beijing, near Beijing Capital International Airport, returning migrant workers to Picun village were ordered to stop at entrance and could only be escorted inside by their landlord, with many villages and residential compounds remaining closed to outsiders.
In the high-end shopping district of Guomao, some shops also remain closed as there are few potential customers, while over in the popular Sanlitun area, metal barriers restrict access and temperature checkpoints are still required.
The landmark Apple Store in the popular Taikoo shopping centre is open, but with limited customers allowed inside, there are long queues outside. Customers are required to scan a QR code to check their movements over the last few days before entering.
Coronavirus: More schools reopen in China for students preparing for university entrance exams
“Why do I have to spend 20 minutes just to get into the Apple Store? The sun has almost melted me down,” one visitor complained to the security guards at the front of the shop.
China’s continued pandemic prevention measures, coupled with still hesitant consumer demand, will inevitably lead to persistent limitations on the nation’s economic recovery, analysts said.
Ernai Cui, an economist at research firm Gavekal Dragonomics, said on Monday that China’s cautious approach to lifting restrictions “points to a weak second quarter for consumer services”, adding additional pressure to the economic recovery.Mao Zhenhua, a researcher at the China Institute of Economics at Renmin University, said China’s preventive measures will inevitably be a drag on production, employment and exports.
SEOUL (Reuters) – South Korean and Chinese officials on Tuesday cast doubt on reports North Korean leader Kim Jong Un was ill after media outlets said he had undergone a cardiovascular procedure and was in “grave danger”.
Daily NK, a Seoul-based speciality website, reported late on Monday, citing one unnamed source in North Korea, that Kim was recovering after undergoing the procedure on April 12. The North Korean leader is believed to be about 36.
CNN cited a U.S. official with direct knowledge of the matter as saying Washington was “monitoring intelligence” that Kim was in grave danger after surgery. Bloomberg quoted an unnamed U.S. official as saying the White House was told that Kim took a turn for the worse after the surgery.
However, two South Korean government officials rejected the CNN report without elaborating on whether Kim had undergone surgery. The presidential Blue House said there were no unusual signs coming from the reclusive, nuclear-capable state.
Kim is the unquestioned leader of North Korea and the sole commander of its nuclear arsenal. He has no clear successor and any instability in the country could be a major international risk.
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Factbox: Questions hang over North Korea succession amid reports on Kim health
The state KCNA news agency gave no indication of the whereabouts of Kim in routine dispatches on Tuesday, but said he had sent birthday gifts to prominent citizens.
An official at the Chinese Communist Party’s International Liaison Department, which deals with North Korea, told Reuters the source did not believe Kim was critically ill. China is North Korea’s only major ally.
Chinese foreign ministry spokesman Geng Shuang said Beijing was aware of reports about the health of Kim, but said it does not know their source, without commenting on whether it has any information about the situation.
South Korean shares exposed to North Korea tumbled and the Korean won fell on the reports. The won traded down more than 1% against the dollar even as South Korean government sources said Kim was not gravely ill.
U.S. stock futures were trading 0.5% lower, but it was not clear how much of that weakness was owing to the collapse in U.S. oil prices and consequent concerns over global demand.
Daily NK said Kim had been admitted to hospital on April 12, just hours before the cardiovascular procedure, as his health had deteriorated since August due to heavy smoking, obesity and overwork.
It said he was now receiving treatment at a villa in the Mount Myohyang resort north of the capital Pyongyang.
“My understanding is that he had been struggling (with cardiovascular problems) since last August but it worsened after repeated visits to Mount Paektu,” a source was quoted as saying, referring to the country’s sacred mountain.
Accompanied by senior North Korean figures, Kim took two well-publicised rides on a stallion on the snowy slopes of the mountain in October and December.
KIM’S HEALTH KEY TO STABILITY
An authoritative U.S. source familiar with internal U.S. government reporting on North Korea questioned the CNN report that Kim was in “grave danger”.
“Any credible direct reporting having to do with Kim would be highly compartmented intelligence and unlikely to leak to the media,” a Korea specialist working for the U.S. government said on condition of anonymity.
Japan’s top government spokesman, Yoshihide Suga, declined to comment on the reports of Kim’s health.
“We are regularly gathering and analysing information about North Korea with great concern,” he said. “We will keep gathering and analysing information regarding North Korea by collaborating with other countries such as the U.S.”
Kim’s potential health issues could fuel uncertainty over the future of the reclusive state’s dynastic rule and stalled denuclearisation talks with the United States, issues in which Kim wields absolute authority.
With no details known about his young children, analysts say his sister and loyalists could form a regency until a successor is old enough to take over.
Speculation about Kim’s health first arose following his absence from the anniversary of the birthday of its founding father and Kim’s grandfather, Kim Il Sung, on April 15.
On April 12, North Korean state media reported that Kim Jong Un had visited an airbase and observed drills by fighter jets and attack aircraft.
Two days later North Korea launched multiple short-range anti-ship cruise missiles into the sea and Sukhoi jets fired air-to-surface missiles as part of military exercises.
The missile launches were part of the celebrations for Kim’s grandfather, Seoul officials said, but there was no North Korea state media report on his attendance or the tests.
Reporting from inside North Korea is notoriously difficult, especially on matters concerning the country’s leadership, given tight controls on information. There have been false and conflicting reports in the past on matters related to its leaders.
Kim is a third-generation hereditary leader who rules North Korea with an iron-fist, taking over the titles of head of state and commander in chief of the military since late 2011.
In recent years Kim has launched a diplomatic offensive to promote both himself as a world leader and his hermit kingdom, holding three meetings with U.S. President Donald Trump, four with South Korean President Moon Jae-in and five with China’s President Xi Jinping.
He was the first North Korean leader to cross the border into South Korea to meet Moon in 2018. Both Koreas are technically still at war, as the Korean War of 1950-53 ended in an armistice, not a peace treaty.
Kim has sought to have international sanctions against his country eased, but has refused to dismantle his nuclear weapons programme, a steadfast demand by the United States.
China is now making more than 100 million masks a day, up from 20 million before the coronavirus outbreak, and may start to export more to other countries
Mask shortages elsewhere once more raise the debate about an over-reliance on China, with critics pointing to a lack of US industrial policy
China was producing 116 million masks per day of February 29, including a mix of disposable and high-end masks like the American-designed N95 model worn by President Xi Jinping on his trip on Tuesday to Wuhan. Photo: Xinhua
The Liu family factory has been making diapers and baby products in the Chinese city of Quanzhou for over 10 years, but in February, for the first time, it started making face masks, as demand soared spectacularly due to the coronavirus outbreak.
The business – which employs 100 people in the Southeastern Fujian province – has added two production lines to make up to 200,000 masks a day.
And while the decision was primarily commercial, “encouragement” from the Chinese government – in the form of subsidies, lower taxes, interest-free loans, fast-track approvals for expansion and help alleviating labour shortages – made the decision an obvious one, said Mr Liu who preferred only to give his family name.
“The government is advocating an expansion in production,” Liu said. “With faster approvals, producers need to prioritise the government’s needs over exports.”
WHO declares coronavirus crisis a pandemic
The factory is one of thousands of refitted pop-ups around China making masks and other protective equipment for the first time, part of a massive industrial drive to respond to the spread of the coronavirus.
Before the outbreak, China already made about half the world’s supply of masks, at a rate of 20 million units a day. That rose to 116 million as of February 29, according to China’s state planning agency, a mix of disposable and high-end masks like the American-designed N95 model worn by President Xi Jinping on his trip on Tuesday to Wuhan, the epicentre of the outbreak.
This exponential jump is the result of a wartime-like shift in industrial policy, with Beijing directing its powerful state-owned enterprises to lead the nationwide mask-making effort, and the country’s sprawling manufacturing engine following their lead.
For me, this is the big advantage of China, the speed Thomas Schmitz
“For me, this is the big advantage of China, the speed,” said Thomas Schmitz, president of the China branch of Austrian engineering giant Andritz, which has seen a big uptick in demand for its wet wipe-making machines in recent weeks, also due to the virus. “When you need to run, people know how to run, and this is something which has been lost in other countries since their industrial heydays.”
Chinese oil and gas major Sinopec upped production of mask raw materials such as polypropylene and polyvinyl chloride in January. This week, it set up two production lines in Beijing to produce melt-blown non-woven fabric, intended to make four tonnes of the fabric each day, which can then be used to produce 1.2 million N95 respirators or six million surgical masks a day.
The maker of China’s new J-20 stealth fighter jet, Chengdu Aircraft Industry Group, repurposed part of its factory to design a mask production line, according to local media reports. The SichuanDaily said 258 of the company’s engineers spent three days fast-tracking development of an assembly line with more than 1,200 components.
Coronavirus: From mysterious origins to a global threat
More than 2,500 companies in China have reportedly started making masks, among them 700 technology companies including iPhone assembler Foxconn and smartphone makers Xiaomi and Oppo, in an extraordinary mobilisation of resources.
The result resembles “the war effort” in the middle of the last century in the United States and western Europe, but arguably no other nation could undergo such a transformation so quickly today.
It is a reminder of what can happen in a centrally-planned economy with a strong manufacturing base, but also brings into sharp focus some of the geopolitical issues which have characterised China’s at-times difficult relationship with the rest of the world, particularly the European Union and US, over the past couple of years.
China’s dominance in manufacturing has become all the more evident as the rest of the world scrambles to shore up their own dwindling medical supplies, leading many to wonder why the world is so dependent on it for vital supplies.
The lesson for Washington is not that we need to emulate the Chinese economic model, but rather that we need to better steward the industrial base in key sectors Rush Doshi
The Italian government, which is dealing with the highest number of coronavirus cases and deaths after China, is to take shipment of 1,000 ventilators, 2 million masks, 100,000 respirators, 200,000 protective suits and 50,000 testing kits from China.
Italian foreign minister Luigi Di Maio said after a phone call with Chinese counterpart Wang Yi, they had agreed the export deal in the same week that European neighbours France and Germany banned masks from being exported because of low domestic supplies.
The Italy export deal showed that “China is emerging as a global public goods provider as the US proves unable and unwilling to lead,” said Rush Doshi, the director of the China Strategy Initiative at the Washington-based Brookings Institute think tank.
“China’s ability to produce what is needed to fight coronavirus is not simply a product of its economic model – it’s also a product of its industrial capacity,” Doshi said. “The US once had this capacity too, but it has lost important parts of it. The lesson for Washington is not that we need to emulate the Chinese economic model, but rather that we need to better steward the industrial base in key sectors.”
The frustration is felt acutely by Michael Einhorn, president of medical equipment distributor Dealmed-Park Surgical in New York, who has been trying to source stock from China for weeks, “but cannot get straight answers” from vendors.
Einhorn said he placed an order with a private seller in China’s virus-stricken city last week, but that the goods had not been shipped.
“Everyone is running out here, people are panicking in hospitals and we want to be able to help our most important customers,” Einhorn said. “We are dealing with hospitals that do not have products, how in the United States of America in 2020 did this happen?”
With the number of confirmed coronavirus cases in China falling daily, it is not inconceivable that the sort of export deal struck with Italian leaders becomes commonplace, although for now, it deal can be chalked up as a significant public relations coup for Beijing.
The World Medical Association is unable to specify how many masks are required to supply frontline medical staff in virus-hit areas, but said that “this crisis should be a wake up call for politicians and societies to make the necessary investment in emergency preparedness and to look into the vulnerability of our supply chains”.
Australian-listed manufacturer Eagle Health announced on Friday that it had installed production lines at its Xiamen factory in southern China to make 300 million masks a year and said it had already received orders from China and would be securing further larger orders internationally.
The group, which normally makes products including amino acids, protein supplements and lozenges in China, said it would prioritise meeting the large domestic demand, but was aware of an impending global shortage.
Eagle Health has already commenced production of its first order of 3.2 million medical masks for the Yiling Hospital Management Group in China, a process which will take 10 days. It has other smaller orders from Chinese government agencies and expects to receive more orders outside China.
The decision to make more masks came from increased demand. These are opportunities. The global demand for high quality masks will be significant Xu Gang
“The decision to make more masks came from increased demand. These are opportunities,” said chief executive Xu Gang. “The global demand for high quality masks will be significant. Imagine when the schools open. The situation will take some time to peak.”
Last week, the Australian Dental Association said supplies of masks at many practices were expected to run out within four weeks. The Australian government has since arranged a supply of 54 million masks for both the dental and medical industries.
At the same time, the US only has 1 per cent of the 3.5 billion masks it would need to counter a serious outbreak, Bloomberg reported.
While China has no quota on the volume of masks that had to be hived off for local consumption, the government has said domestic demand needs to be prioritised.
Businesses are free to export but overseas demand has yet to explode like it has in China, said Fujian factory owner Liu.
Wendy Min, sales director of Pluscare, a manufacturer based near the virus’ epicentre in Hubei province, said her company is making 200,000 masks per day, much of which are sold to the government, with exports still restricted by partial lockdown of workers and cargo transport.
“We previously exported to Europe, South America and other parts of Asia,” Min said. “But at the moment we can’t export. We are trying to discuss this with the government, but we cannot wait any more – we have to export soon.”
Min said that while she was receiving countless cold calls up until last week from people in China looking for masks, these have stopped, perhaps unsurprising given the abundance in supplies becoming available.
An influx of Chinese-made masks, though, is likely to be welcomed in other virus-stricken parts of the world.
Self-quarantine of all international travellers to Beijing as China fights import of coronavirus
Miguel Luiz Gricheno, CEO of Brazilian mask manufacturer Destra, said that his company is making 30,000 masks a day, but cannot meet local demand due to a lack of supplies, including the non-woven fabric from which masks are made.
“In disposable masks, most Brazilian companies are paralysed due to the lack of raw materials,” Gricheno said. “With the arrival of the coronavirus in Brazil, the demand has increased a lot but the main raw material comes from abroad.”
However, a short-term supply fix will not answer underlying questions about how so many countries found themselves in such dire straits,meaning the geopolitical fallout of the coronavirus will be extensive.
Decades of weak industrial policy helped elect US President Donald Trump, who said he would bring manufacturing jobs back to America at China’s expense. While he has waged a bruising two-year trade war with China in response, the current situation shows just how difficult it will be to change the global manufacturing processes, which are so heavily controlled by China.
One of the great flaws of globalisation is that everyone wanted things cheaper, but did you compromise your health care infrastructure in the process? Stephen Roach
“In the guise of trying to improve efficiency and create value for price-sensitive consumers, we’ve created a global production network that is very difficult to unwind,” said Stephen Roach, a professor of economics at Yale University and a veteran China watcher. “One of the great flaws of globalisation is that everyone wanted things cheaper, but did you compromise your health care infrastructure in the process.
Reuters reported that Trump is considering invoking the emergency provisions of the Defence Production Act, which would allow the government to instruct companies to alter production to help address the domestic shortage of medical supplies like masks. If a company is producing 20 per cent N95 masks and 80 per cent standard masks, the White House could order them to rejig the ratio, an unnamed official said.
The New York Times reported on Wednesday that the White House is preparing an executive order that would allow the government to buy medical supplies from overseas in the hope that it will incentivise companies to make them within the US.
But these changes still do not give Trump the sort of sweeping powers enjoyed by Chinese counterpart Xi.
“When you have a pluralistic, democratic situation that Trump is overseeing, it becomes more unwieldy” to take the steps necessary to address a crisis situation, said Harry Broadman, chair of the emerging markets practise at the Berkeley Research Group and a senior US government official in the 1980s and 1990s.
“That is why I think Trump looks at Xi with envy, because he doesn’t have to deal with a disparity of views or democratic interests,” Broadman said. “I think Trump is at heart a bilateral guy, as you saw with the phase one [US-China] trade deal and the state-to-state purchases. That is why he likes dealing with [Russian President Vladimir] Putin and Xi, because each of them can move mountains. I think Trump is very envious of that ability.”
The manufacturing purchasing managers’ index, released by the National Bureau of Statistics on Saturday, was 49.5 in August
Figure adds to a month of woe for policymakers in Beijing, even ahead of planned US tariff increases on September 1, October 1, and December 15
China’s manufacturing purchasing managers’ index fell by 0.2 points in August as the trade war continued to bite. Photo: Xinhua
As the trade war with the United States continues to gather pace, manufacturers in China remain gloomy about their prospects, with the sector activity contracting for the fourth successive month in August.
The manufacturing purchasing managers’ index (PMI), released by the National Bureau of Statistics (NBS) on Saturday, stood at 49.5 in August, down from a reading of
, and below analysts’ expectations. The median result of a survey of analysts by Bloomberg expected a reading of 49.6.
The PMI is a gauge of sentiment among factory operators, with 50 being the demarcation line between expansion and contraction in sector activity. In the survey, manufacturers are asked to give a view on business issues such as export orders, purchasing, production and logistics.
That the index has remained in contractionary territory for six of eight months this year shows that the effects of US tariffs are resonating through the Chinese economy. The manufacturing PMI only showed expansion in March and April of this year.
New and higher US tariffs scheduled to enter force on September 1, October 1 and December 15 could provide some very temporary boost to Chinese exports and therefore manufacturers, should they inspire American buyers to make early purchases to pay lower tariff rates. However the long term trajectory is negative, with many manufacturers scoping out or already relocating to production sites outside the world’s second largest economy.
Also released on Saturday was the official non-manufacturing PMI, a survey of the construction and services sectors. This stood at 53.8, up from 53.7 in July, showing that these sectors have remained more robust in the face of a general slowdown in China’s economy. The Bloomberg survey of analysts had expected non-manufacturing PMI in August to remain unchanged.
Composite PMI, a combined reading of both manufacturing and non-manufacturing, was 53, down from 53.1 in July.
The August PMI decline “indicates downward pressure on the economy,” said Zhang Liqun, an analyst with the China Federation of Logistics and Purchasing, which produces the index with the NBS.
“Corporations’ forecasts of the market outlook were quite poor while being cautious on their production operations,” Zhang said. The PMI indicated a drop in new orders, which also reflected a lack of domestic demand. Given that the US is escalating tensions with China, downward pressure on external demand is also apparent, Zhang said.
August was a month to forget for policymakers in Beijing, with a series of negative data highlighting the serious economic challenges facing the nation. With the trade war threatening to tip the global economy into a recession, China remains heavily exposed.
The trade war is having a significant impact on Chinese manufacturing. Photo: Xinhua
While exports grew by 3.3 per cent in July, a sign of front-loading, imports fell by 5.6 per cent, emphasising the issues with consumption in China. This problem was also clear in retail sales figure, which came in at a disappointing 7.6 per cent for July, down from 9.8 per cent growth in June.
Switching first face-to-face gathering since G20 summit from Beijing sends message that ‘trade should be trade, and politics should be politics,’ analyst says
Trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are set to meet counterparts Vice-Premier Liu He and Commerce Minister Zhong Shan
Shanghai is China’s global financial hub, while Beijing is viewed as more of a political centre. Photo: Bloomberg
China’s decision to hold next week’s negotiations with the United States in Shanghai could be a fresh sign that Beijing is revising its strategy as it prepares for a protracted trade war, analysts said.
By choosing global financial hub Shanghai rather than the political centre of Beijing, China is trying to play down the political aspects of the talks and emphasise the commercial elements, analysts suggested.
The meeting will be the first face-to-face gathering of the two countries’ trade negotiators since talks collapsed in May without a deal as the US blamed China for renegading on earlier promises, while China blamed the US for being too demanding.
The trade teams have held two phone conversations in July, although neither Washington or Beijing have confirmed the venue or schedule for the talks next week.
Shen Jianguang, the chief economist at JD Digits and a veteran Chinese economy watcher, said China is changing the location of the talks to send a message that “trade should be trade, and politics should be politics”.
He added that the choice of Shanghai implies that China is trying to focus on the technical issues such as the US relaxation of sales restrictions to
and Treasury Secretary Steven Mnuchin are expected to lead the US delegation to meet their Chinese counterparts headed by Vice-Premier Liu He and Commerce Minister Zhong Shan, the South China MorningPostreported earlier this week.
The Shanghai talks will only result in a small stepShen Jianguang
Bloomberg and The Wall Street Journal reported on Wednesday that the talks will take place in Shanghai, and a source confirmed the location to the Post. Hua Chunying, China’s foreign ministry spokeswoman, said on Wednesday that she had no information to provide on the location of the talks.
Chang Jian, chief China economist at Barclays, said that the choice of Shanghai is a sign that the initial goal of the talks would be “smaller”, focusing more on specific import and export arrangements rather than wholesale institutional changes in China’s economic model.
“It shows that China is preparing for a protracted trade talks for years to come,” Chang said. “For China, a precondition for a grand deal is that the US has to lift all tariffs, which the US will find very hard to do.”
Aidan Yao, a senior emerging Asia economist at AXA Investment Managers, said the fact that it took almost a month after the ceasefire agreement reached between President Xi Jinping and US counterpart Donald Trump at the G20 summit in Japan for a face-to-face meeting to take place is already a confirmation of “the deep divide” that remains.
“Without a clear strategy to tackle them, I doubt anyone should hold their breath for a breakthrough” despite certain goodwill gestures in recent days, Yao said.
Without a clear strategy to tackle them, I doubt anyone should hold their breath for a breakthroughAidan Yao
The initial arrangements for the meeting came after the US announced that it would offer exemptions to 110 Chinese products, including medical equipment and key electronic components, from import tariffs. China, meanwhile, said that several companies would buy American agricultural products having already applied for exemptions from the tariffs imposed by Beijing.
Liao Qun, the chief economist at China Citic Bank International, said a change of location could pump “fresh air” into the talks.
“Shanghai is the window of China’s reform and opening up and the country’s economic heart,” Liao said. “It could be a positive change”.
Larry Hu, chief China economist of Macquarie Capital, noted that Shanghai has played a unique role in US-China relations.
“The important Shanghai Communiqué was inked in the city,” Hu said, referring to the diplomatic document signed between China and US in 1972 during president Richard Nixon’s visit to China to meet Chinese chairman Mao Zedong.
The document, which is part of the Three Joint Communiqués, paved the way for Beijing and Washington to establish official diplomatic relationships later that decade.
The Three Joint Communiqués are a collection of joint statements made by the governments of the US and China from 1972, 1979 and 1982.
UN counterterrorism chief Vladimir Voronkov not expected to make statement after visiting region last week
Trip prompts calls for independent observation in Muslim-majority area where an estimated 1 million people are held in detention facilities
Residents go through a security checkpoint at the entrance to a bazaar in Hotan, Xinjiang. The UN’s counterterrorism chief visited the far western region last week. Photo: AP
Human rights group Amnesty International has joined growing criticism of a top UN official’s visit to China’s
, echoing calls for more independent investigations of detention facilities for ethnic Uygurs.
The invitation to the United Nations envoy to visit was Beijing’s latest attempt to show it has nothing to hide in what it calls “re-education facilities” that hold an estimated 1 million people in the Muslim-majority area in western China.
But critics have warned that state-led media tours and diplomatic visits lack the unfettered access needed to make a proper assessment of alleged rights abuses in the region.
from Thursday to Saturday and met Le Yucheng, the vice foreign minister, according to a statement from the foreign ministry on Sunday. The statement said the two sides had reached a “broad consensus”.
UN human rights chief ‘is welcome to visit Xinjiang’
Voronkov’s visit follows months of pressure to allow the UN to investigate alleged human rights abuses in Xinjiang. China has so far only allowed guided tours of the region for foreign journalists and diplomatic envoys.
Reuters reported on Saturday that Voronkov’s itinerary was planned by China and that his UN office did not expect to make any public statement about the trip, according to an email from Voronkov’s office seen by the news agency.
The United Nations said in August last year it had credible reports that detention facilities in Xinjiang held 1 million Uygurs and other Muslims. Beijing says the facilities are for “vocational training” and tied to deradicalisation and anti-terrorism efforts.
Patrick Poon, a Hong Kong-based researcher with Amnesty International, said he was “very much concerned” about how the UN envoy’s visit had been arranged.
“From what we saw in the previous visits orchestrated by the Chinese government for diplomats, it’s very difficult for anyone to believe how this visit will be able to show any authentic situation on the ground,” Poon said.
“If the Chinese government is sincere, let independent UN experts, such as the special rapporteurs, have independent observation of what’s happening in Xinjiang.”
Xinjiang’s vanishing mosques highlight pressure on China’s Muslims
His remarks followed criticism of the trip from Human Rights Watch on Friday.
“The UN allowing its counterterrorism chief to go to Xinjiang risks confirming China’s false narrative that this is a counterterrorism issue, not a question of massive human rights abuses,” Human Rights Watch UN director Louis Charbonneau told Agence France-Presse.
Also on Friday, US Deputy Secretary of State John Sullivan called UN Secretary General Antonio Guterres to express “deep concerns” about Voronkov’s visit, according to the State Department website. Sullivan called for “unmonitored and unhindered access to all camps and detainees in Xinjiang by UN human rights officials”.
The United States has been increasingly vocal about China’s human rights abuses. Vice-President Mike Pence is due to give a speech on China’s “control and oppression” of citizens on June 24, but according to Bloomberg it could be postponed to avoid inflaming tensions with Beijing ahead of a possible meeting between US President Donald Trump and his Chinese counterpart Xi Jinping at the Group of 20 leaders summit in Japan on June 28-29. The speech was originally scheduled for June 4 but was delayed by Trump, Bloomberg reported, citing sources familiar with the matter.
The manufacturing purchasing managers’ index (PMI), a gauge of sentiment among factory operators, fell to 49.4 in May
This was a decrease on April’s performance of 50.1, and below the median expectations of a poll of Bloomberg analysts, which had predicted a drop to just 49.9
An index reading above 50 indicates growth, while anything below 50 indicates a contraction. Photo: AFP
China’s manufacturing purchasing managers’ index fell further in May, suggesting the economy is continuing to slow amid the escalating trade war with the United States.
The manufacturing purchasing managers’ index (PMI), a gauge of sentiment among factory operators, fell to 49.4 in May, a decrease on
of 50.1, and well below the median expectations of a poll of Bloomberg analysts, which had predicted a drop to 49.9. A reading of below 50 means that the activity in the sector is contracting.
The 49.4 reading was the lowest since February’s 49.2.
Non-manufacturing PMI, which covers the services and construction sectors, remained the same as last month at 54.3, in line with the expectations of the Bloomberg poll.
“The fall in the headline index was mostly driven by weaker new orders. Export orders dropped back particularly sharply, which suggests that [US President Donald] Trump’s latest tariff hike may already be undermining foreign demand,” said Julian Evans-Pritchard, senior China economist at Capital Economics.
“Stocks of raw materials continued to decline, reversing the build-up of inventories ahead of the 1 April VAT cut that helped to temporarily boost output in March.”
The composite PMI, which combines both manufacturing and services activity, was 53.3 in May, a slight decrease on 53.4 a month earlier.
An index reading above 50 indicates growth, while anything below 50 indicates a contraction.
The fall in the headline index was mostly driven by weaker new orders. Export orders dropped back particularly sharply, which suggests that [US President Donald] Trump’s latest tariff hike may already be undermining foreign demand.Julian Evans-Pritchard
The dip into contractionary territory for China’s manufacturing sentiment will be a concern to policymakers in Beijing, as they struggle to contain the effect the trade war is having on both economic mood and investment sentiment. While both composite and non-manufacturing PMIs remained above contraction levels, their stagnation points to continued challenges facing China’s economy.
The new data, released by the National Bureau of Statistics (NBS), combined with weaker economic data readings for April, suggest that Chinese growth slowed in the second quarter after stabilising at 6.4 per cent in the first quarter.
Details of the data show that within the manufacturing PMI, new orders were 49.8, down from 51.4 in April. Output also fell to 51.7, from 52.1 last month, while employment fell to 47.0 from 47.2 and new export orders plunged to 46.5 from 49.2.
Within the non-manufacturing PMI, the service sector was up to 53.5 from 53.2 in April, which the NBS said showed that “the service industry continued to maintain rapid growth”.
Details of the data show that within the manufacturing purchasing managers’ index, new orders were 49.8, down from 51.4 in April Photo: AFP
“China’s non-manufacturing business activity index was 54.3 per cent, which was the same as last month, indicating that the non-manufacturing industry continued to develop steadily and rapidly,” said the NBS statement.
Zhao Qinghe, senior statistician at the Service Industry Research Centre at the NBS, said that “there was some fluctuation in the manufacturing boom” and pointed to slowing demand as the cause of the slump.
“In May, the manufacturing PMI fell back. Among the 21 industries surveyed, 13 of the industry’s production indices are located in the expansion range, indicating that most industries in the manufacturing industry are relatively stable in production and operation,” said Zhao.
Among the 21 industries surveyed, 13 of the industry’s production indices are located in the expansion range, indicating that most industries in the manufacturing industry are relatively stable in production and operation.Zhao Qinghe
Zhao added that “the overall production and operation activities of Chinese enterprises have maintained a stable development trend”.
The deterioration in the PMI sentiment data was expected after the US escalated the trade war on May 10. From Saturday, a higher tariff of 25 per cent – increased from the earlier 10 per cent rate – will apply to US$200 billion of Chinese imports to the US. The US is also processing a tariff of up to 25 per cent on a further US$300 billion of Chinese goods, which would put significant further pressure on the Chinese economy. China has already retaliated by placing variable tariffs on US$60 billion of US imports.
Even before the escalation of the trade war, Chinese economic data in April was disappointing.
Retail sales growth slowed to 7.2 per cent in April – the lowest rate in 16 years – from 8.7 per cent in March, while industrial production growth slowed markedly to 5.4 per cent from 8.4 per cent. Exports fell 2.7 per cent in April compared with the same period in 2018, a sharp reversal from the 14.2 per cent rise in March.
While many private analysts expected the Chinese government to enact further
to offset the slowdown in growth, Beijing has so far refused to commit to doing so.
In part, the government is counting on already implemented personal and business tax cuts – including the trimming of the value-added tax rate for manufacturing firms – to gradually provide support for the economy.
Industrial profits stood at 515.39 billion yuan (US$74.7 billion) last month, down 3.7 per cent compared to a year earlier. Photo: AFP
The PMI rounds off a poor week for China’s economy after Monday’s industrial profits released by the NBS showed the fastest slump in almost three and a half years in April.
stood at 515.39 billion yuan (US$74.7 billion) last month, down 3.7 per cent compared to a year earlier, the largest percentage decline since December 2015. With further tariffs about to kick in on
this month, said that the escalation could lead to half a per cent being detracted from the Chinese economy this year, which would bring it to the lower limits of Beijing’s target growth range of between 6.0 and 6.5 per cent.
It is expected that a surge in orders will lead to a bumper month of exports in May and June as US importers and Chinese exporters attempt to front-load their stocks to beat the tariffs.
In European countries outside the EU, investment also dropped in 2018.
What and where is China investing?
A large proportion of Chinese direct investment, both state and private, is concentrated in the major economies, such as the UK, France and Germany combined, according to the Rhodium Group and Mercator Institute.
Analysis by Bloomberg last year said that China now owned, or had a stake in, four airports, six maritime ports and 13 professional soccer teams in Europe.
It estimated there had been 45% more investment activity in 30 European countries from China than from the US, since 2008.
And it said this was underestimating the true extent of Chinese activity.
For example, China is financing the expansion of the port of Piraeus in Greece and is building roads and railways in Serbia, Montenegro, Bosnia-Herzegovina and North Macedonia.
This could prove attractive to poorer Balkan and southern European countries, especially as demands for transparency and good governance can make EU funding appear less attractive.
Globally, China’s outward direct investment has slowed over the last year or two, after more than a decade of expansion.
“This is mainly the result of stricter controls on capital outflows from China, but also of a changing political environment globally concerning Chinese investment,” says Agatha Kratz of the Rhodium Group.
China’s global investment slows
The Trump administration is taking a tougher line towards China’s economic activities.
Governments elsewhere are more cautious – particularly when it comes to investment in sensitive areas of the economy, such as telecommunications and defence.
But there’s little doubt China is now a significant player in Europe, whether through direct investments or via the new Silk Road project.
(Reuters) – China has offered to go on a six-year buying spree to ramp up imports from the United States in order to reconfigure the relation between the two countries, Bloomberg reported on Friday, citing people familiar with the matter.
By raising annual goods imports from the United States by a combined value of more than $1 trillion (£776 billion), China would seek to reduce its trade surplus, which last year stood at $323 billion, to zero by 2024, one of the people told Bloomberg. bloom.bg/2RBsiEL
It was unclear how the offer differed from what China pledged when U.S. President Donald Trump and Chinese President Xi Jinping met in Buones Aires in December. At that meeting, China offered more than $1.2 trillion in additional commitments on trade, Treasury Secretary Steve Mnuchin said.
Reuters reported on Jan. 9 that U.S. officials used three days of trade talks with Chinese counterparts in Beijing to demand more details on China’s pledge to make big purchases of American goods. China offered similar commitments, albeit on a smaller scale, during talks in Washington last May.
The Bloomberg report on Friday helped drive a rally on Wall Street where main stock indexes were on track for their fourth week of gains, in part on hopes the United States and China would strike a deal to end a trade war between the world’s two biggest economies. The two sides have imposed tit-for-tat tariffs that have disrupted hundreds of billions of dollars of commerce.
While increased purchases of U.S. goods have been part of the talks, American negotiators have also focused on issues that would require structural change in China. Those include finding ways to end the misappropriation of intellectual property from U.S. companies and halting industrial subsidies.
Halfway through a 90-day truce in the U.S.-China trade war agreed to on Dec. 1 when Trump and Xi met during the G20 summit in Argentina, there have been few details provided of any progress made. On Tuesday, a Republican senator said U.S. Trade Representative Robert Lighthizer had told him he had seen no progress on structural issues.
Data on Monday showed China’s exports unexpectedly fell the most in two years in December and imports also contracted, pointing to further weakness in the world’s second-largest economy in 2019 and deteriorating global demand.
The Wall Street Journal reported on Thursday that U.S. Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports and suggested offering a tariff rollback during trade discussions scheduled for Jan. 30.
Lighthizer has resisted the idea, and the proposal had not yet been introduced to Trump, according to the Journal.
Chinese Vice Premier Liu He will visit the United States on Jan. 30 and 31 for the latest round of trade talks aimed at resolving the bitter trade dispute. The Trump administration is scheduled to increase tariffs on $200 billion worth of Chinese goods to 25 percent on March 2 from 10 percent.
The Trump administration has urged China to take steps to protect U.S. intellectual property, end policies that force American companies to turn over technology to a Chinese partner, allow more market access for U.S. businesses and reduce other non-tariff barriers to American products.
China has repeatedly played down complaints about intellectual property abuses, and has rejected accusations that foreign companies face forced technology transfers.
Reporting by Rishika Chatterjee in Bengaluru; Writing by Nick Zieminski in New York; Editing by Chizu Nomiyama and Jonathan Oatis
CHINDIA ALERT: You'll be living in their world, very soon 
Coronavirus: Chinese workers in Vietnam cry foul after being fired by Taiwanese firm making shoes for Nike, Adidas
A group of 150 Chinese workers believe the world’s largest maker of trainers used the coronavirus as an excuse to fire them, having helped Taiwanese firm Pou Chen successfully expand its production into Vietnam for more than a decade.
Pou Chen, which makes footwear for the likes of Nike and Adidas, informed the group in late April that they would no longer be needed as they were unable to return to
from their hometowns in China due to the coronavirus lockdowns.
“We 150 employees were the first batch of Chinese employees to be laid off this year. We are all pessimistic and expect more will be cut,” added Zhang.
In its email on April 27, Pou Chen said it was forced to terminate the contracts of the Chinese employees across five of its factories due to an unprecedented decline in orders and financial losses.
The Chinese employees, many of whom have been working for the shoemaker for decades, said the compensation offered was unfair and below the levels required by labour law in both Vietnam and China.
“[The dismissals were] in accordance with the relevant labour laws of the country of employment … and employee labour contracts,” added the statement from Pou Chen, which employs around 350,000 people worldwide.
Company data showed Pou Chen’s first quarter revenues tumbled 22.4 per cent year-on-year to NT$59.46 billion (US$1.99 billion), the weakest in six years.
With the likes of Nike and Adidas closing retail stores around the world to comply with social distancing requirements, analysts also said orders plummeted 50 per cent in the second quarter, although the company declined to comment on the media reports.
Andy Zeng, who had worked for the firm since 1995, said the group were “very upset” when they received the news last month as the impact of the coronavirus pandemic began to reverberate around the world, disrupting global value chains.
“Most of us joined Pou Chen in the 1990s when we were in our late teens or early 20s, when the Taiwan-invested company started investing and setting up factories in mainland China. Now more than two decades have passed,” he said.
Zeng was among the first generation of skilled workers in China as Pou Chen developed rapidly, enjoying the benefits of cheap labour, although the workers themselves were rewarded with regular pay rises.
The company needed a group of skilled Chinese workers to go to its new factories in Vietnam. I said yes because I thought it was a good opportunity to see the outside world – Andy Zeng
What our Chinese employees have done in Vietnam for more than a decade can be said to be very simple but very difficult – Dave Zhang
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