Your contact for new licenses
CO2 emissions in China’s transport sector are rising rapidly. Despite the commercial success of e-cars, four out of five new cars sold are still internal combustion vehicles. It is therefore not surprising that China is also considering phasing internal combustion vehicles out. So far, Beijing has not decided on a deadline for new registrations of climate-damaging cars. The authorities are still relying on other measures to reduce emissions. This is also because the dependence on coal-fired power negates the climate advantage of electric cars.
In the People’s Republic, too, artificial aids are often used in the endeavor for a beautiful appearance. Surgical beauty clinics and the sale of cosmetics are booming. The CCP does not like this superficiality at all. They complain of an exaggerated veneration of appearance. And so the state is increasingly cracking down on the beauty industry, too, reports Ning Wang. The authorities are regulating cosmetic surgery advertising, but they are also strengthening consumers’ rights by enforcing uniform product standards. A market worth billions could be shaken up.
Have a good start to the week!
China is one of the largest markets for cars with alternative drives. Vehicles with electric, hydrogen or hybrid drive (New Energy Vehicles – NEV) now account for 18 percent of all car sales in the People’s Republic. The switch to e-cars is proceeding faster than planned. Beijing’s target of 20 percent NEV sales by 2025 has already almost been reached (China.Table reported). At the same time, CO2 emissions from the transport sector are growing massively. After all, a good 80 percent of all cars sold are still climate-damaging internal combustion vehicles. What measures is Beijing pursuing to reduce this share further?
So far, China has not announced a date for phasing out the internal combustion engine. However, a high-level advisory body to the Chinese government recently proposed “clear path markers” for the “gradual elimination of internal combustion engine vehicles”. The China Council for International Cooperation on Environment and Development (CCICED) has issued a report outlining how China should contribute to climate change mitigation. Analysts at Trivium China call the study “groundbreaking”. CCICED is directly linked to the State Council and is chaired by Deputy Prime Minister Han Zheng.
Back in 2017, the government discussed a possible timetable for phasing out internal combustion cars – but had not decided at the time. Official government documents, however, envisage battery-powered e-cars making up the majority of cars sold by 2035, but without setting clear targets, Barbara Finamore, energy expert and author of the book “Will China Save the Planet?” told China.Table. Public fleet vehicles such as buses, taxis, and delivery vehicles are expected to go completely electric by 2035.
At first glance, several industrial policy arguments favor China phasing out the internal combustion engine soon. Forty-four percent of the e-cars manufactured worldwide were produced in China in the last ten years. The People’s Republic dominates the production of e-car batteries and the supply chains for necessary battery raw materials. Its own auto industry is more competitive in the NEV sector than in the production of internal combustion vehicles.
The People’s Republic would cut off access to an important market for Western competitors who still sell many combustion engines in China or force them to offer only electric cars. However, this would also affect Western carmakers’ domestic joint venture partners and destroy jobs in China.
China is also very well positioned in terms of infrastructure for e-cars in an international comparison. In recent years, the People’s Republic has built two out of three charging points worldwide. In China, the equivalent of six cars share one charging point, while in Germany, there are currently 17 cars per public charging point (China.Table reported).
But there are numerous and more substantial arguments against a rapid phasing out of combustion engines by China.
Finamore points out that China’s current economic worries are significant. She, therefore, doubts that “the Chinese leadership would be willing to take the economic risk of stopping the sale of cars with internal combustion engines as soon as possible”. The auto industry is far too important an economic factor for the government to take any risks.
When it comes to charging points for e-cars, the principle of “mass instead of class” applies in China. Especially in rural areas, some charging points are often defective and difficult to operate (China.Table reported). Finamore says, “In any case, it will be challenging for EVs to penetrate beyond China’s major cities.” She writes that the government needs to provide “strong support, including expansion of the country’s already vast public EV charging network”.
Ilaria Mazzocco, a China energy expert at the Center for Strategic & International Studies, also believes that the internal combustion engine phase-out is unlikely. China is the largest car market globally, so a phase-out would not be easy to achieve. Mazzocco also points out, “China has many poorer rural regions with limited EV penetration, making a phase-out a big challenge.” However, more prosperous provinces and especially boom cities could consider measures such as a ban on internal combustion vehicles when decarbonizing the transport sector, Mazzocco told China.Table.
The phasing out of the internal combustion engine is also currently being discussed in the EU. In July of this year, the EU Commission proposed reducing CO2 emissions from new vehicles by 100 percent by 2035. De facto, this would mean a phase-out of the internal combustion engine from 2035. Accordingly, a phase-out of the internal combustion engine in China would no longer be an industrial policy advantage, as the international car companies would have to change over anyway.
To slow down the increase of CO2 emissions in the transport sector, China is considering other instruments. At the ministry level, it is being discussed to include the transport sector in the trading of CO2 certificates (China.Table reported). Reuters speculates that this could also replace the “Green Car Credit System“. Under this system, automakers receive credits for selling electric vehicles or fuel-efficient vehicles, which they can use to offset penalties for their more carbon-intensive models. The credit system is in place until at least 2023.
In recent years, China has also tightened emissions standards for internal combustion vehicles. From 2025, the fleet consumption average must be four liters per 100 kilometers. Until 2020, the target for an average of new cars from one supplier was five liters per 100 kilometers.
China’s e-car makers have significantly benefited from these measures, Mazzocco said. “From a purely industrial policy perspective, it is unclear whether a ban on internal combustion car sales is even necessary,” Mazzocco said.
In addition, little would be gained in terms of climate policy if China were to ban internal combustion engines in the near future. China’s transport sector is indeed very energy-hungry. It is already responsible for ten percent of its CO2 emissions and is the second-largest energy consumer behind the industry. Emissions from the transportation sector increased by 23 percent between 2013 and 2018. Internal combustion cars account for the largest share of CO2 emissions from the transportation sector. This makes a switch to e-cars all the more urgent if China wants to achieve its climate targets.
But there is one hurdle standing in the way of zero-emission transport: China’s dependence on coal. The most climate-damaging of all energy sources still accounts for almost two-thirds of China’s electricity mix. In very simplified terms, this means that two out of every three kilometers that an e-car currently travels in China cause CO2 emissions. Even if China succeeded in charging its growing fleet of e-cars exclusively with renewable energies, the climate goals would not be served if other sectors continue to consume fossil energies because not enough electricity is generated from renewable energies. This shows the immense challenges China faces in developing renewable energies. Therefore, a phase-out of the internal combustion engine would have to be accompanied by far-reaching measures to be more than just symbolic climate policy.
Do you know the so-called A4 waist? It’s a beauty ideal that is shared via selfies on messenger or photo platforms on the Internet. With the shorter side of an A4 sheet of paper, influencers cover their waist – completely.
Whether slim waists, plump lips, prominent cheekbones, or a double eyelid crease – China’s beauty industry offers numerous services. And demand is rising – both among women and increasingly among men as well.
With the prosperity now achieved in the middle class, a greater need for free and personal development arose. Especially the young people no longer strive for happiness only through consumption. They also want to perfect their outer appearance. In many big cities, flawless skin, an athletic figure, full lips, and a tight chin have become status symbols. The Chinese investment bank Citic estimates that the Chinese beauty industry will generate the equivalent of more than 44 billion euros in revenue by 2020. Since 2015, the total market value for cosmetic and beauty treatments has grown by around 30 percent annually, according to a joint study by Deloitte and food delivery service Meituan. Globally, by contrast, the market value in the sector has only increased by an average of eight percent.
The fact that the (social) media and the film and entertainment industry define what is considered beautiful prompts the CCP to take vigorous action. In mid-September, Beijing banned advertising for cosmetic surgery. TV commercials, but also ads on social media and in buses and trains are to be more tightly regulated, the authorities say.
The move comes two weeks after regulatory watchdog SAMR issued a new stipulation that advertisements for beauty procedures be classified as “medical advertising.” Beauty clinic operators will now have to obtain a license before they can publicly advertise their services. Licenses were previously reserved for medical facilities and are difficult to obtain. It can often take up to nine months to apply for such a license, industry insiders said.
The reason for these regulations, according to the People’s Daily newspaper and several other state media, is that the advertised aesthetic standards have led to a kind of exaggerated reverence for appearance and thus to an “appearance anxiety” among young people, according to the literal translation from Chinese. This means that “in a social environment where their appearance is extremely important, many people are not confident enough about their appearance,” writes the state-run website China.org.cn. State media also recently accused the beauty industry of attacking “Chinese masculinity“(China.Table reported).
Beauty clinics are exploiting the fact that good looks are associated with success and happiness. The country’s competition watchdog – which has already recently issued fines against the business practices of ride service provider Didi or food delivery company Meituan (China.Table reported) – now also wants to take action against the beauty industry. Customers are being made false promises, authorities said. Social media reactions to the crackdown on the beauty industry have been very positive in some cases.
In the past year alone, more than 5,000 new cosmetic surgery facilities have sprung up – adding to the estimated 80,000 beauty clinics already in the country. But 2019 data from consultancy iResearch shows that only 13,000 of the clinics are licensed. The rest are operating illegally.
China is expected to soon become the world’s largest market for cosmetic surgery. The market volume could already exceed the 400 billion yuan mark (53 billion euros) in the next five years.
But there is a lack of uniform standards for many beauty services. This is evident, for example, among e-commerce merchants who are increasingly offering cosmetic products. Only in April of this year, the short video platform Kuaishou expanded its e-commerce business and has since also offered medical beauty services. Via livestream and influencers, all kinds of products from hair tonic to toothpaste for white teeth are offered on the platform. Often, products are advertised that do not meet the usual quality standards, as industry insiders told the business magazine Caixin. There are no clear regulations for products for cosmetic use any more than there are for medical beauty procedures.
An overarching regulatory body is needed to regulate the medical beauty industry effectively, Jiang Han of the think tank Pangoal Institution told Caixin. For that, he said, all agencies need to work together.
That Beijing is serious can be observed in the market value of the three largest listed medical aesthetics companies in the People’s Republic. Their market value has plummeted by a third since the beginning of July, which corresponds to a total loss of the equivalent of more than 14.7 billion euros, as calculations by the Financial Times show.
Meanwhile, even the Shanghai and Shenzhen stock exchanges have banned structured debt instruments linked to consumer loans for cosmetic procedures. To afford the costly surgeries, consumers have been getting loans from financial institutions that cooperate with the beauty clinics.
The fact that consumer protection is being strengthened in China is a welcome development. Too often, reckless business practices still endanger the health of the population and the common good. Behind this, however, there is probably still a discussion of values that is closer to the CCP’s ideals. The individualism of cosmetic self-optimization was probably also a thorn in the side of the Party. Confucius, at any rate, said: “Everything has beauty, but not everyone sees it.”
Michael Pettis has been around a lot in his life. The cosmopolitan came to Wall Street in 1987. From a simple debt trader at Manufacturers Hanover, he rose to the position of Managing Director at Bear Stearns. In the 1990s, his linguistic and cultural skills helped him to head the investment bank’s Latin American business, where he advised the Mexican government, for example.
Given his resume, it is probably not surprising that Pettis developed an intense interest in China after his time at Bear Stearns in 2001. He quickly moved there to teach at universities and devote himself to his work as an author. The 63-year-old is now known for his expertise in the financial markets and for never mincing his words – whether it’s about Washington or Beijing policy.
Pettis has been at home in Beijing for many years. As a professor of finance, he works at the Guanghua School of Management at Peking University. But simply sitting in an academic ivory tower would be too dull for him in the long run. That’s why he founded the punk club D22 in Wudaokou in 2005 together with a few comrades-in-arms. “It’s the biggest student neighborhood in Beijing. Although it’s a difficult area to make money, we had managed to attract a large student crowd – even if we had to let students in for free,” Pettis recalls. Before he was a banker on Wall Street, he ran Club SIN in New York. So he wasn’t entering entirely new territory.
The reason for founding D22 was his love for music and his will to support the scene in Beijing. His music label “Maybe Mars” developed around the club, giving punk and experimental bands a chance to make a name for themselves. “I figured the underground music scene could only grow with the support of Chinese students,” he says. Because Pettis himself is a sometimes conflicted character, it was fitting that he closed the club in 2012 at the height of its popularity. Since then, he has devoted himself to new projects, as long as there is time for them alongside his work as a professor and author.
Music is his passion; capital markets his specialty. With regard to China’s financial policy, Pettis is currently concerned. “Beijing has opened up its financial markets to foreign investment in recent years. This was mainly done to promote the international reputation of these markets and the global use of the renminbi,” he explains. However, there is a price to pay for this kind of prestige enhancement, he says. If China wants to open up its capital markets, it will have to relinquish some control over its own currency and the inflow of money from outside.
Beijing’s decision-makers have been trying for some time to offset foreign investment by encouraging Chinese companies, as well as ordinary households, to invest abroad. However, according to Pettis, this would create an imbalance between investments coming in and going out. “The risk is that foreign investors in China suddenly withdraw their money, while Chinese investors are unwilling or unable to repatriate their investments,” he explains.
That is why the recent turbulence on the Chinese stock markets is even positive in a way because it could make foreign investors more cautious about buying up Chinese assets. Lower inflows of “hot money”, investments that are quickly withdrawn during turbulence, are desirable as long as Beijing has not reformed its own financial system. Pettis is a much sought-after interlocutor when it comes to China’s financial and debt policies. He will not hold back with his criticism of Chinese economic policy in the future. Constantin Eckner
CO2 emissions in China’s transport sector are rising rapidly. Despite the commercial success of e-cars, four out of five new cars sold are still internal combustion vehicles. It is therefore not surprising that China is also considering phasing internal combustion vehicles out. So far, Beijing has not decided on a deadline for new registrations of climate-damaging cars. The authorities are still relying on other measures to reduce emissions. This is also because the dependence on coal-fired power negates the climate advantage of electric cars.
In the People’s Republic, too, artificial aids are often used in the endeavor for a beautiful appearance. Surgical beauty clinics and the sale of cosmetics are booming. The CCP does not like this superficiality at all. They complain of an exaggerated veneration of appearance. And so the state is increasingly cracking down on the beauty industry, too, reports Ning Wang. The authorities are regulating cosmetic surgery advertising, but they are also strengthening consumers’ rights by enforcing uniform product standards. A market worth billions could be shaken up.
Have a good start to the week!
China is one of the largest markets for cars with alternative drives. Vehicles with electric, hydrogen or hybrid drive (New Energy Vehicles – NEV) now account for 18 percent of all car sales in the People’s Republic. The switch to e-cars is proceeding faster than planned. Beijing’s target of 20 percent NEV sales by 2025 has already almost been reached (China.Table reported). At the same time, CO2 emissions from the transport sector are growing massively. After all, a good 80 percent of all cars sold are still climate-damaging internal combustion vehicles. What measures is Beijing pursuing to reduce this share further?
So far, China has not announced a date for phasing out the internal combustion engine. However, a high-level advisory body to the Chinese government recently proposed “clear path markers” for the “gradual elimination of internal combustion engine vehicles”. The China Council for International Cooperation on Environment and Development (CCICED) has issued a report outlining how China should contribute to climate change mitigation. Analysts at Trivium China call the study “groundbreaking”. CCICED is directly linked to the State Council and is chaired by Deputy Prime Minister Han Zheng.
Back in 2017, the government discussed a possible timetable for phasing out internal combustion cars – but had not decided at the time. Official government documents, however, envisage battery-powered e-cars making up the majority of cars sold by 2035, but without setting clear targets, Barbara Finamore, energy expert and author of the book “Will China Save the Planet?” told China.Table. Public fleet vehicles such as buses, taxis, and delivery vehicles are expected to go completely electric by 2035.
At first glance, several industrial policy arguments favor China phasing out the internal combustion engine soon. Forty-four percent of the e-cars manufactured worldwide were produced in China in the last ten years. The People’s Republic dominates the production of e-car batteries and the supply chains for necessary battery raw materials. Its own auto industry is more competitive in the NEV sector than in the production of internal combustion vehicles.
The People’s Republic would cut off access to an important market for Western competitors who still sell many combustion engines in China or force them to offer only electric cars. However, this would also affect Western carmakers’ domestic joint venture partners and destroy jobs in China.
China is also very well positioned in terms of infrastructure for e-cars in an international comparison. In recent years, the People’s Republic has built two out of three charging points worldwide. In China, the equivalent of six cars share one charging point, while in Germany, there are currently 17 cars per public charging point (China.Table reported).
But there are numerous and more substantial arguments against a rapid phasing out of combustion engines by China.
Finamore points out that China’s current economic worries are significant. She, therefore, doubts that “the Chinese leadership would be willing to take the economic risk of stopping the sale of cars with internal combustion engines as soon as possible”. The auto industry is far too important an economic factor for the government to take any risks.
When it comes to charging points for e-cars, the principle of “mass instead of class” applies in China. Especially in rural areas, some charging points are often defective and difficult to operate (China.Table reported). Finamore says, “In any case, it will be challenging for EVs to penetrate beyond China’s major cities.” She writes that the government needs to provide “strong support, including expansion of the country’s already vast public EV charging network”.
Ilaria Mazzocco, a China energy expert at the Center for Strategic & International Studies, also believes that the internal combustion engine phase-out is unlikely. China is the largest car market globally, so a phase-out would not be easy to achieve. Mazzocco also points out, “China has many poorer rural regions with limited EV penetration, making a phase-out a big challenge.” However, more prosperous provinces and especially boom cities could consider measures such as a ban on internal combustion vehicles when decarbonizing the transport sector, Mazzocco told China.Table.
The phasing out of the internal combustion engine is also currently being discussed in the EU. In July of this year, the EU Commission proposed reducing CO2 emissions from new vehicles by 100 percent by 2035. De facto, this would mean a phase-out of the internal combustion engine from 2035. Accordingly, a phase-out of the internal combustion engine in China would no longer be an industrial policy advantage, as the international car companies would have to change over anyway.
To slow down the increase of CO2 emissions in the transport sector, China is considering other instruments. At the ministry level, it is being discussed to include the transport sector in the trading of CO2 certificates (China.Table reported). Reuters speculates that this could also replace the “Green Car Credit System“. Under this system, automakers receive credits for selling electric vehicles or fuel-efficient vehicles, which they can use to offset penalties for their more carbon-intensive models. The credit system is in place until at least 2023.
In recent years, China has also tightened emissions standards for internal combustion vehicles. From 2025, the fleet consumption average must be four liters per 100 kilometers. Until 2020, the target for an average of new cars from one supplier was five liters per 100 kilometers.
China’s e-car makers have significantly benefited from these measures, Mazzocco said. “From a purely industrial policy perspective, it is unclear whether a ban on internal combustion car sales is even necessary,” Mazzocco said.
In addition, little would be gained in terms of climate policy if China were to ban internal combustion engines in the near future. China’s transport sector is indeed very energy-hungry. It is already responsible for ten percent of its CO2 emissions and is the second-largest energy consumer behind the industry. Emissions from the transportation sector increased by 23 percent between 2013 and 2018. Internal combustion cars account for the largest share of CO2 emissions from the transportation sector. This makes a switch to e-cars all the more urgent if China wants to achieve its climate targets.
But there is one hurdle standing in the way of zero-emission transport: China’s dependence on coal. The most climate-damaging of all energy sources still accounts for almost two-thirds of China’s electricity mix. In very simplified terms, this means that two out of every three kilometers that an e-car currently travels in China cause CO2 emissions. Even if China succeeded in charging its growing fleet of e-cars exclusively with renewable energies, the climate goals would not be served if other sectors continue to consume fossil energies because not enough electricity is generated from renewable energies. This shows the immense challenges China faces in developing renewable energies. Therefore, a phase-out of the internal combustion engine would have to be accompanied by far-reaching measures to be more than just symbolic climate policy.
Do you know the so-called A4 waist? It’s a beauty ideal that is shared via selfies on messenger or photo platforms on the Internet. With the shorter side of an A4 sheet of paper, influencers cover their waist – completely.
Whether slim waists, plump lips, prominent cheekbones, or a double eyelid crease – China’s beauty industry offers numerous services. And demand is rising – both among women and increasingly among men as well.
With the prosperity now achieved in the middle class, a greater need for free and personal development arose. Especially the young people no longer strive for happiness only through consumption. They also want to perfect their outer appearance. In many big cities, flawless skin, an athletic figure, full lips, and a tight chin have become status symbols. The Chinese investment bank Citic estimates that the Chinese beauty industry will generate the equivalent of more than 44 billion euros in revenue by 2020. Since 2015, the total market value for cosmetic and beauty treatments has grown by around 30 percent annually, according to a joint study by Deloitte and food delivery service Meituan. Globally, by contrast, the market value in the sector has only increased by an average of eight percent.
The fact that the (social) media and the film and entertainment industry define what is considered beautiful prompts the CCP to take vigorous action. In mid-September, Beijing banned advertising for cosmetic surgery. TV commercials, but also ads on social media and in buses and trains are to be more tightly regulated, the authorities say.
The move comes two weeks after regulatory watchdog SAMR issued a new stipulation that advertisements for beauty procedures be classified as “medical advertising.” Beauty clinic operators will now have to obtain a license before they can publicly advertise their services. Licenses were previously reserved for medical facilities and are difficult to obtain. It can often take up to nine months to apply for such a license, industry insiders said.
The reason for these regulations, according to the People’s Daily newspaper and several other state media, is that the advertised aesthetic standards have led to a kind of exaggerated reverence for appearance and thus to an “appearance anxiety” among young people, according to the literal translation from Chinese. This means that “in a social environment where their appearance is extremely important, many people are not confident enough about their appearance,” writes the state-run website China.org.cn. State media also recently accused the beauty industry of attacking “Chinese masculinity“(China.Table reported).
Beauty clinics are exploiting the fact that good looks are associated with success and happiness. The country’s competition watchdog – which has already recently issued fines against the business practices of ride service provider Didi or food delivery company Meituan (China.Table reported) – now also wants to take action against the beauty industry. Customers are being made false promises, authorities said. Social media reactions to the crackdown on the beauty industry have been very positive in some cases.
In the past year alone, more than 5,000 new cosmetic surgery facilities have sprung up – adding to the estimated 80,000 beauty clinics already in the country. But 2019 data from consultancy iResearch shows that only 13,000 of the clinics are licensed. The rest are operating illegally.
China is expected to soon become the world’s largest market for cosmetic surgery. The market volume could already exceed the 400 billion yuan mark (53 billion euros) in the next five years.
But there is a lack of uniform standards for many beauty services. This is evident, for example, among e-commerce merchants who are increasingly offering cosmetic products. Only in April of this year, the short video platform Kuaishou expanded its e-commerce business and has since also offered medical beauty services. Via livestream and influencers, all kinds of products from hair tonic to toothpaste for white teeth are offered on the platform. Often, products are advertised that do not meet the usual quality standards, as industry insiders told the business magazine Caixin. There are no clear regulations for products for cosmetic use any more than there are for medical beauty procedures.
An overarching regulatory body is needed to regulate the medical beauty industry effectively, Jiang Han of the think tank Pangoal Institution told Caixin. For that, he said, all agencies need to work together.
That Beijing is serious can be observed in the market value of the three largest listed medical aesthetics companies in the People’s Republic. Their market value has plummeted by a third since the beginning of July, which corresponds to a total loss of the equivalent of more than 14.7 billion euros, as calculations by the Financial Times show.
Meanwhile, even the Shanghai and Shenzhen stock exchanges have banned structured debt instruments linked to consumer loans for cosmetic procedures. To afford the costly surgeries, consumers have been getting loans from financial institutions that cooperate with the beauty clinics.
The fact that consumer protection is being strengthened in China is a welcome development. Too often, reckless business practices still endanger the health of the population and the common good. Behind this, however, there is probably still a discussion of values that is closer to the CCP’s ideals. The individualism of cosmetic self-optimization was probably also a thorn in the side of the Party. Confucius, at any rate, said: “Everything has beauty, but not everyone sees it.”
Michael Pettis has been around a lot in his life. The cosmopolitan came to Wall Street in 1987. From a simple debt trader at Manufacturers Hanover, he rose to the position of Managing Director at Bear Stearns. In the 1990s, his linguistic and cultural skills helped him to head the investment bank’s Latin American business, where he advised the Mexican government, for example.
Given his resume, it is probably not surprising that Pettis developed an intense interest in China after his time at Bear Stearns in 2001. He quickly moved there to teach at universities and devote himself to his work as an author. The 63-year-old is now known for his expertise in the financial markets and for never mincing his words – whether it’s about Washington or Beijing policy.
Pettis has been at home in Beijing for many years. As a professor of finance, he works at the Guanghua School of Management at Peking University. But simply sitting in an academic ivory tower would be too dull for him in the long run. That’s why he founded the punk club D22 in Wudaokou in 2005 together with a few comrades-in-arms. “It’s the biggest student neighborhood in Beijing. Although it’s a difficult area to make money, we had managed to attract a large student crowd – even if we had to let students in for free,” Pettis recalls. Before he was a banker on Wall Street, he ran Club SIN in New York. So he wasn’t entering entirely new territory.
The reason for founding D22 was his love for music and his will to support the scene in Beijing. His music label “Maybe Mars” developed around the club, giving punk and experimental bands a chance to make a name for themselves. “I figured the underground music scene could only grow with the support of Chinese students,” he says. Because Pettis himself is a sometimes conflicted character, it was fitting that he closed the club in 2012 at the height of its popularity. Since then, he has devoted himself to new projects, as long as there is time for them alongside his work as a professor and author.
Music is his passion; capital markets his specialty. With regard to China’s financial policy, Pettis is currently concerned. “Beijing has opened up its financial markets to foreign investment in recent years. This was mainly done to promote the international reputation of these markets and the global use of the renminbi,” he explains. However, there is a price to pay for this kind of prestige enhancement, he says. If China wants to open up its capital markets, it will have to relinquish some control over its own currency and the inflow of money from outside.
Beijing’s decision-makers have been trying for some time to offset foreign investment by encouraging Chinese companies, as well as ordinary households, to invest abroad. However, according to Pettis, this would create an imbalance between investments coming in and going out. “The risk is that foreign investors in China suddenly withdraw their money, while Chinese investors are unwilling or unable to repatriate their investments,” he explains.
That is why the recent turbulence on the Chinese stock markets is even positive in a way because it could make foreign investors more cautious about buying up Chinese assets. Lower inflows of “hot money”, investments that are quickly withdrawn during turbulence, are desirable as long as Beijing has not reformed its own financial system. Pettis is a much sought-after interlocutor when it comes to China’s financial and debt policies. He will not hold back with his criticism of Chinese economic policy in the future. Constantin Eckner