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The financial world came up with some funny nicknames for their products. Dim sum is no longer just a delicious Guangdong specialty, but a special type of bond. Borrowers from southern China can use them to raise money on the international financial market. The city of Shenzhen now has issued such a bond to foreign investors – breaking new ground. Until now, municipalities were not allowed to borrow money from outside China.
Frank Sieren analyses why this bond is a historic game-changer for the opening of the Chinese capital market. Permeability will increase in both directions in the future. The yuan will thus become a global currency after all.
Our second analysis today also covers international capital flows. But the direction of capital flows is quite different. It is about China’s spending on development aid. Researchers investigated where in China it’s coming from, where it goes, and what strings are attached. Beijing, after all, gives out aid loans worth $85 billion a year.
An event organized by the Kiel Institute for the World Economy (IfW) now concludes: While loans to low-income countries are often granted under regular market conditions, the Chinese bureaucracy behind it is reminiscent of the Byzantine Empire.
And now for a public service announcement: There is a time change on the weekend. Please keep this in mind when you call your Chinese contacts on Monday: the difference will then be seven hours instead of six.
The local government of southern China’s tech hub Shenzhen and the provincial government of the southern province of Guangdong now issued yuan offshore bonds in the special administrative regions of Hong Kong and Macau for the first time:
The maturities are two, three, and five years. The bonds with maturities of three and five years are so-called green bonds, the proceeds of which are to be used to finance environmental protection projects.
This is the first time that a city or provincial government from the mainland has received permission to issue such offshore bonds. Beijing gave the go-ahead for the Southbound Link to Hong Kong in late September. The northern route of the program, which allows international investors to trade in mainland China’s bond market, was launched in 2017. At the time, however, cities were not yet allowed to use such instruments.
China has long intended to open its financial markets, but its leadership has always hesitated. Intertwining with international capital markets creates uncertainties that do not exist when lending is a purely internal matter. If necessary, state banks can be instructed to show mercy in repayment. Moreover, the hurricanes of global crises have so far always left China unscathed precisely because there was no interdependence with the rest of the world. Large investors tend to withdraw their funds once the figurative weather changes. This creates instability – and China’s economic planners shun that.
Nevertheless, interest on both sides has been huge. Investors around the world want to participate in China’s rise and are ready to pump capital into the country. Since there are hardly any interest rates left for safe global investments, participation in the Chinese bond market would also be highly attractive. China, with its great economic power and a high degree of government security, could position itself as a haven for fixed-income investments, just like Germany or Japan.
China’s hesitation to engage in municipal finance on a global scale also has historical reasons, dating back more than nearly a quarter of a century. At that time, the bank-like institutions of its cities and regions had taken on international debt. Beijing knew about this but had not officially approved.
But when the Asian crisis hit in 1997, international investors wanted their money back. Debtors were institutions like the Guangdong International Trust and Investment Corporation (GITIC), China’s second-largest investment house at the time. The central government had to crack down swift and hard.
After difficult negotiations led by Wang Qishan, who later became anti-corruption chief, Western banks got back only a fraction of their deposits and GITIC was closed. Beijing was thus able to prevent the Asian crisis from bringing China to its knees as well. The Chinese yuan did not have to be dramatically devalued. China, conversely, was able to act as a savior to other countries. Through the IMF, Beijing even gave Thailand a billion US dollars in aid, which the country still remembers with gratitude today.
But municipalities and regions were forbidden ever since to borrow independently on the international capital market. In the meantime, China’s financial system has become so stable that people are feeling lucky once more.
As expected, investors jumped at the first chance. According to the Guangdong provincial government, the Hong Kong bonds were oversubscribed by 2.5 times by domestic and foreign investors, and those from Macau by as much as three times. The bonds, also known as “Dim Sum Bonds”, were said to be subscribed by 89 investors from eight countries and regions, including Europe and the Middle East, including insurers and asset managers.
For Beijing, the bonds are a way to gradually open up the Chinese financial market. Above all, the government wants to internationalize the yuan. It also wants to establish the so-called Greater Bay Area (GBA), a $1.65 trillion economic cluster consisting of nine cities and two special administrative regions in southern China, as a global hub between international currency markets and the yuan. Shenzhen is the richest of the nine cities in the province of Guangdong, home to many important start-ups and tech giants such as Tencent and Huawei.
In early September, Beijing launched the cross-boundary Wealth Management Connect (WMC) pilot scheme to enable Hong Kong citizens to invest in the Greater Bay Area. At the same time, it will allow mainlanders in the GBA to invest in certain assets and financial products sold by the banks of Hong Kong and Macau through the Southbound Link. These mainly include low and medium-risk investments. These are funds and bonds that have been approved for this purpose by the Hong Kong Securities Regulatory Commission. Under certain banking partnerships, investors can open an offshore investment account and transfer capital remotely.
This shows that financial market opening should go both ways. With Shenzhen’s bond issuance, China is offering international investors access to borrowers from China. But Chinese investors should also have more opportunities to invest their money outside the country’s borders.
The target group for the test program in the Greater Bay Area is therefore middle-market customers who want to diversify their investment portfolio. Until now, the Chinese have had few opportunities to diversify their assets due to China’s strict capital controls. As a result, real estate has a dangerously high weight in Chinese household assets, accounting for 70 percent, while it is only 30 percent in the US. Beijing is nevertheless cautious.
The upper limit for individual investment will now be restricted to ¥1 million, the equivalent of about €130,000. In total, no more than ¥150 billion (about €20 billion) may flow in one direction at a time. Mainland investors must also have at least two years of investment experience and net private financial assets of at least ¥1 million.
To reduce the risk of capital outflows, funds are settled in a “closed-loop” by grouping the remittance account and investment account. Transactions, both northbound and southbound, go through the Cross-Border Inter-Bank Payments System (CIPS), China’s cross-border clearing and settlement system for yuan-denominated transactions.
For Hong Kong investors, the cross-boundary Wealth Management Connect scheme (WMC) expands access to assets in post-pandemic emerging mainland industries such as online retail and healthcare. “WMC will inject new vitality into the development of the financial industry in Hong Kong and Macau and promote Hong Kong’s development as an international financial center,” said Pan Gongsheng, deputy governor of the Chinese central bank.
Hong Kong’s Chief Executive Carrie Lam said: “It will enhance Hong Kong’s role as an international financial center and as an offshore yuan trading center” This reinforces a trend in Hong Kong that can also be observed on the Chinese mainland: While the political space of civil society is getting narrower, the financial system is opening up more and more.
China is still officially an emerging market, but at the same time, it is the world’s largest donor in development cooperation. It lends enormous sums, especially in the scope of the New Silk Road. However, the details of the cash flows are shockingly unclear. “Even Chinese state actors usually can’t see the whole picture,” says development economist Brad Parks of AidData, a research group that conducts data research on development aid. Parks presented his group’s latest research findings at an event hosted by the Institute for the World Economy (IfW) on Thursday.
There is no database, neither in China nor on an international level, that clearly shows which Chinese commercial and development banks funds what overseas project. Parks considers the lack of data to be a significant problem. Politicians can only make the right decisions about China’s development initiatives based on facts. The public and the media can only understand China’s activities if they know their scope and form. AidData aims to remedy this situation.
The project is based at the US College of William & Mary. It meticulously collects publicly available information on loans that China grants to recipient countries. Data sources include announcements from central governments, local authorities, projects, or the banks themselves. From this, AidData uses modern data analysis to put together an overall picture.
Its researchers have already recorded more than 13,000 projects for which China has provided $843 billion. In an average year, China transfers around $85 billion in development funding. This is the first time AidData has uncovered a reasonably reliable figure on the actual scope of the Silk Road Initiative. There are no official publications from the People’s Republic.
An analysis of the projects yields even more valuable insights. “It’s not just the amount of aid that matters, but its coloration,” Parks says. Almost all aid is granted in the form of loans, not donations. Notably, these loans are not made at outstandingly favorable rates, as one might expect. The average interest rate is 4.2 percent. Aid loans from Germany, France, and Japan come in at 1.1 percent. So China’s aid tends to resemble loads issued by banks at regular market rates. The recipients also have to provide collateral.
Why do these countries accept loans at these rates in the first place? They are often debtors with a higher risk of default, who cannot easily procure money. Moreover, the loans come bundled with Chinese expertise for respective projects.
According to Parks, China itself benefits in several ways from the strategy of committing large sums of money. It is a way to utilize its high dollar stocks, which are owed to the trade surplus. In addition, the development of new overseas markets solves the problem of overcapacity and overproduction.
China’s government agencies, for their part, grow increasingly concerned about the quality of the loans granted (China.Table reported). The Ministry of Finance in particular is paying close attention to the issue of hidden debt. Attempts are being made to overhaul the system. But responsible officials also suffer from the lack of processed data. “Their internal statistical system is often not sophisticated enough to provide China’s own officials with the data they need,” Parks has observed. At times, they ask AidData for help – but without the will to share in-house figures with the Americans.
At the IfW event, sinologist Marina Rudyak from the University of Heidelberg gave insight into the reasons for the lack of transparency. In the Beijing government apparatus, dozens of actors are involved in the Silk Road loans. These include ministries, authorities, commissions – and not the least party committees, which ultimately have the most influence.
For example, the China International Development Cooperation Agency (CIDCA) is located under China’s Ministry of Commerce (Mofcom) responsible for coordinating activities. CIDCA also was to ensure greater professionalism. However, it competes with the Ministry of Foreign Affairs and the Ministry of Finance for control over funds. And in the end, party committees for international cooperation have the final say.
The actual allocation then takes place via two different development banks and several state-owned commercial banks. This all leads to complex processes between the various agencies, says Rudyak. Here, again, no one has an overview of who has lent what to whom. Mirroring this, many recipient countries also list the donors simply as “China”, without distinguishing between the different channels.
According to Parks and Rudyak, this lack of transparency leads to numerous misconceptions about China’s aid programs. Often, it is not development aid according to the international definition, but rather project loans at market-like conditions. And sometimes, it is just mainly about business interests.
The researchers hope that China will provide better access to information and create a unified database in the future. That would benefit all sides. China would have a better overview of its payments, and the rest of the world would be able to assess its initiatives more objectively.
China.Table is a media partner of the IfW event series Global China Conversations. The next set of expert talks will take place on November 25. The topic is “Innovation Made in China” – How effective is Beijing’s innovation policy?
Aggressive “wolf warrior” diplomats rant on Twitter. Videos about Xinjiang suggest everything is hunky-dory. Supposed independent citizens aggressively oppose anything that is even remotely criticizing China. Disinformation campaigns and misinformation spread by the People’s Republic on Western social media have various faces. According to experts, however, Beijing has not yet been very successful with its efforts.
At a German Marshall Fund webinar on Chinese disinformation campaigns in Eastern and Central European states, NATO Communications Director Jānis Sārts, head of Lithuania’s Cyber Security Center, Rytis Rainys, and Polish China analyst Alicja Bachulska shared their observations.
On the Chinese side, there was apparently little knowledge about the target group, Sārts explained. So far, actions from the People’s Republic in Western social media have been rather counterproductive. According to Särts, posted content primarily comes from official state accounts and virtually begs for a “strong backlash”. However, there were hardly any positive responses. Moreover, the existing cyber infrastructure is not being used in a particularly sophisticated way, Särts said. Its authors are easier to track than is the case with campaigns from Russia, despite China’s technological capabilities currently outclassing Russia’s.
The NATO communications expert generally registers a sharp increase in Chinese disinformation campaigns, especially since the start of the Covid pandemic. This is also the opinion of analyst Bachulska, who keeps an eye on Polish networks. But even before the pandemic, attempts were made to improve the image of the People’s Republic on social media.
However, according to Bachulska, the execution is often rather poor: Supposed users spread Beijing’s official line in poor Polish or English. The poor language skills suggest that bots are mostly at work here, Bachulska explained. This hasn’t done the public opinion on China any favors. If anything, it has worsened.
Sārts and Bachulska are concerned about the aggressive reactions to content critical of China in Western media. “People are saying, ‘You can’t talk about China like that’,” explained NATO communications expert Sārts. Such public interventions could have an impact on values and freedoms in debates in Europe. Experts are also concerned about a potential increase in dependence on Chinese technology.
Such an example was recently presented in Lithuania: Its state-run Center for Cybersecurity had discovered built-in censorship functions in Chinese smartphones made by Xiaomi and Huawei (China.Table reported). During the investigation, these phones were examined for more than three months, the head of the center explained the procedure. When downloading applications from app stores, lists with blocked phrases had found their way onto the phones. This list was deactivated within the EU, but it was on the phone regardless, Rainys said.
Meanwhile, the allegations against Xiaomi and Huawei have been addressed, Rainys said. There are no more blacklists for words in the EU region. This is a good example that the behavior of Chinese tech giants can also be influenced, he said. His agency will continue to examine Chinese smartphones, Rainys said. He expects an increase in cyberattacks in Lithuania, also in connection with the dispute over the Taiwanese trade mission in Vilnius (China.Table reported).
The conclusion of the three experts: The European Union must decrease its dependence on Chinese technology and expand its capabilities in the tech sector. To counter continuing disinformation campaigns by China, citizens also need to become more aware.
The wheels of Chinese bureaucracy can sometimes grind slowly, just as they do in Germany. Klaus Zenkel has taken the position of Chairman of the European Chamber of Commerce in South China in April this year and represents the interests of its members in the region. The power shortage, in particular, has hurt European companies in China in recent months. “It’s extreme that some companies have only been able to operate for three days in the past two weeks,” explains Zenkel.
The 63-year-old is a long-standing member of the chamber as managing director of the Chinese branch of Imedco Technology. The Swiss company manufactures shielding for medical technology. Its products are used, for example, in magnetic resonance imaging in hospitals. For a manufacturer like Imedco, the blackouts caused by the power shortage are a nuisance, but tolerable. But it is a completely different story for companies that work with sensitive substances. In the worst case, toxic gases could leak.
The reasons for the power shortage are manifold. Droughts weaken hydropower, the coal phase-out increases prices. Zenkel is familiar with power outages from the early days of Imedco in China. “Back then, we had bought a diesel generator,” Zenkel says. With the rapid Chinese upswing, the grid became stable and Imedco got rid of the generator. “The fact that there are now bottlenecks again does surprise us a little,” says Zenkel. From a European perspective, the sledgehammer approach of energy rationalization seems bizarre. “But if you’ve lived in China for a long time, you’re no longer surprised by the pragmatism. They just cut off the power,” says Zenkel. Foreign companies and Chinese companies alike suffer from these shortages.
The native of Middle Franconia also knows the positive side of Chinese pragmatism. He has lived in Shenzhen since 2002. “Back then, there was no subway here and only one western shopping center,” says Zenkel. The following development, however, was rapid. The early skyscrapers of Siemens or telecommunications company ZTE have long since been swallowed up by a new, even taller skyline.
Zenkel’s first stop in China, however, was Hong Kong, back in the mid-1990s. Even then, he was already working in the healthcare industry, albeit for Siemens. This was followed by a two-year stint in Malaysia. “Back in Germany, however, I noticed that something was missing,” says Zenkel. Many things are easier in Asia. “Plus the pleasant climate and the good food.” So he took the first chance and went back in 2002.
Imedco employs around 50 people at its Shenzhen site. Even China is no stranger to the problem of a shortage of skilled workers. However, the reason is a different one than in Germany. “Our principle is to pay attention to quality, yet there is still no training similar to that in Germany,” says Zenkel. Often, learning-on-the-job still applies. China is planning to establish a dual training system like the one in Germany. But there is still a long way to go before that happens. “It’s almost impossible to find employees who have already undergone the relevant training. That is why we pay particular attention to whether someone works conscientiously,” explains Zenkel. Know-how and quality in workmanship are still an advantage for Imedco over its competitors. David Renke
China’s Ministry of Agriculture is declaring war on the hoarding of vegetables. The reason is rapidly rising prices. The price for water spinach increased by 157 percent in the last month, while prices for cauliflower and broccoli climbed by 50 percent. At the Xinfadi market in Beijing, half a kilo of lettuce or water spinach already costs eight yuan. The question remains what households do with their hoarded vegetables. But as long as they eat them while they are still fresh, everything should be fine.
The financial world came up with some funny nicknames for their products. Dim sum is no longer just a delicious Guangdong specialty, but a special type of bond. Borrowers from southern China can use them to raise money on the international financial market. The city of Shenzhen now has issued such a bond to foreign investors – breaking new ground. Until now, municipalities were not allowed to borrow money from outside China.
Frank Sieren analyses why this bond is a historic game-changer for the opening of the Chinese capital market. Permeability will increase in both directions in the future. The yuan will thus become a global currency after all.
Our second analysis today also covers international capital flows. But the direction of capital flows is quite different. It is about China’s spending on development aid. Researchers investigated where in China it’s coming from, where it goes, and what strings are attached. Beijing, after all, gives out aid loans worth $85 billion a year.
An event organized by the Kiel Institute for the World Economy (IfW) now concludes: While loans to low-income countries are often granted under regular market conditions, the Chinese bureaucracy behind it is reminiscent of the Byzantine Empire.
And now for a public service announcement: There is a time change on the weekend. Please keep this in mind when you call your Chinese contacts on Monday: the difference will then be seven hours instead of six.
The local government of southern China’s tech hub Shenzhen and the provincial government of the southern province of Guangdong now issued yuan offshore bonds in the special administrative regions of Hong Kong and Macau for the first time:
The maturities are two, three, and five years. The bonds with maturities of three and five years are so-called green bonds, the proceeds of which are to be used to finance environmental protection projects.
This is the first time that a city or provincial government from the mainland has received permission to issue such offshore bonds. Beijing gave the go-ahead for the Southbound Link to Hong Kong in late September. The northern route of the program, which allows international investors to trade in mainland China’s bond market, was launched in 2017. At the time, however, cities were not yet allowed to use such instruments.
China has long intended to open its financial markets, but its leadership has always hesitated. Intertwining with international capital markets creates uncertainties that do not exist when lending is a purely internal matter. If necessary, state banks can be instructed to show mercy in repayment. Moreover, the hurricanes of global crises have so far always left China unscathed precisely because there was no interdependence with the rest of the world. Large investors tend to withdraw their funds once the figurative weather changes. This creates instability – and China’s economic planners shun that.
Nevertheless, interest on both sides has been huge. Investors around the world want to participate in China’s rise and are ready to pump capital into the country. Since there are hardly any interest rates left for safe global investments, participation in the Chinese bond market would also be highly attractive. China, with its great economic power and a high degree of government security, could position itself as a haven for fixed-income investments, just like Germany or Japan.
China’s hesitation to engage in municipal finance on a global scale also has historical reasons, dating back more than nearly a quarter of a century. At that time, the bank-like institutions of its cities and regions had taken on international debt. Beijing knew about this but had not officially approved.
But when the Asian crisis hit in 1997, international investors wanted their money back. Debtors were institutions like the Guangdong International Trust and Investment Corporation (GITIC), China’s second-largest investment house at the time. The central government had to crack down swift and hard.
After difficult negotiations led by Wang Qishan, who later became anti-corruption chief, Western banks got back only a fraction of their deposits and GITIC was closed. Beijing was thus able to prevent the Asian crisis from bringing China to its knees as well. The Chinese yuan did not have to be dramatically devalued. China, conversely, was able to act as a savior to other countries. Through the IMF, Beijing even gave Thailand a billion US dollars in aid, which the country still remembers with gratitude today.
But municipalities and regions were forbidden ever since to borrow independently on the international capital market. In the meantime, China’s financial system has become so stable that people are feeling lucky once more.
As expected, investors jumped at the first chance. According to the Guangdong provincial government, the Hong Kong bonds were oversubscribed by 2.5 times by domestic and foreign investors, and those from Macau by as much as three times. The bonds, also known as “Dim Sum Bonds”, were said to be subscribed by 89 investors from eight countries and regions, including Europe and the Middle East, including insurers and asset managers.
For Beijing, the bonds are a way to gradually open up the Chinese financial market. Above all, the government wants to internationalize the yuan. It also wants to establish the so-called Greater Bay Area (GBA), a $1.65 trillion economic cluster consisting of nine cities and two special administrative regions in southern China, as a global hub between international currency markets and the yuan. Shenzhen is the richest of the nine cities in the province of Guangdong, home to many important start-ups and tech giants such as Tencent and Huawei.
In early September, Beijing launched the cross-boundary Wealth Management Connect (WMC) pilot scheme to enable Hong Kong citizens to invest in the Greater Bay Area. At the same time, it will allow mainlanders in the GBA to invest in certain assets and financial products sold by the banks of Hong Kong and Macau through the Southbound Link. These mainly include low and medium-risk investments. These are funds and bonds that have been approved for this purpose by the Hong Kong Securities Regulatory Commission. Under certain banking partnerships, investors can open an offshore investment account and transfer capital remotely.
This shows that financial market opening should go both ways. With Shenzhen’s bond issuance, China is offering international investors access to borrowers from China. But Chinese investors should also have more opportunities to invest their money outside the country’s borders.
The target group for the test program in the Greater Bay Area is therefore middle-market customers who want to diversify their investment portfolio. Until now, the Chinese have had few opportunities to diversify their assets due to China’s strict capital controls. As a result, real estate has a dangerously high weight in Chinese household assets, accounting for 70 percent, while it is only 30 percent in the US. Beijing is nevertheless cautious.
The upper limit for individual investment will now be restricted to ¥1 million, the equivalent of about €130,000. In total, no more than ¥150 billion (about €20 billion) may flow in one direction at a time. Mainland investors must also have at least two years of investment experience and net private financial assets of at least ¥1 million.
To reduce the risk of capital outflows, funds are settled in a “closed-loop” by grouping the remittance account and investment account. Transactions, both northbound and southbound, go through the Cross-Border Inter-Bank Payments System (CIPS), China’s cross-border clearing and settlement system for yuan-denominated transactions.
For Hong Kong investors, the cross-boundary Wealth Management Connect scheme (WMC) expands access to assets in post-pandemic emerging mainland industries such as online retail and healthcare. “WMC will inject new vitality into the development of the financial industry in Hong Kong and Macau and promote Hong Kong’s development as an international financial center,” said Pan Gongsheng, deputy governor of the Chinese central bank.
Hong Kong’s Chief Executive Carrie Lam said: “It will enhance Hong Kong’s role as an international financial center and as an offshore yuan trading center” This reinforces a trend in Hong Kong that can also be observed on the Chinese mainland: While the political space of civil society is getting narrower, the financial system is opening up more and more.
China is still officially an emerging market, but at the same time, it is the world’s largest donor in development cooperation. It lends enormous sums, especially in the scope of the New Silk Road. However, the details of the cash flows are shockingly unclear. “Even Chinese state actors usually can’t see the whole picture,” says development economist Brad Parks of AidData, a research group that conducts data research on development aid. Parks presented his group’s latest research findings at an event hosted by the Institute for the World Economy (IfW) on Thursday.
There is no database, neither in China nor on an international level, that clearly shows which Chinese commercial and development banks funds what overseas project. Parks considers the lack of data to be a significant problem. Politicians can only make the right decisions about China’s development initiatives based on facts. The public and the media can only understand China’s activities if they know their scope and form. AidData aims to remedy this situation.
The project is based at the US College of William & Mary. It meticulously collects publicly available information on loans that China grants to recipient countries. Data sources include announcements from central governments, local authorities, projects, or the banks themselves. From this, AidData uses modern data analysis to put together an overall picture.
Its researchers have already recorded more than 13,000 projects for which China has provided $843 billion. In an average year, China transfers around $85 billion in development funding. This is the first time AidData has uncovered a reasonably reliable figure on the actual scope of the Silk Road Initiative. There are no official publications from the People’s Republic.
An analysis of the projects yields even more valuable insights. “It’s not just the amount of aid that matters, but its coloration,” Parks says. Almost all aid is granted in the form of loans, not donations. Notably, these loans are not made at outstandingly favorable rates, as one might expect. The average interest rate is 4.2 percent. Aid loans from Germany, France, and Japan come in at 1.1 percent. So China’s aid tends to resemble loads issued by banks at regular market rates. The recipients also have to provide collateral.
Why do these countries accept loans at these rates in the first place? They are often debtors with a higher risk of default, who cannot easily procure money. Moreover, the loans come bundled with Chinese expertise for respective projects.
According to Parks, China itself benefits in several ways from the strategy of committing large sums of money. It is a way to utilize its high dollar stocks, which are owed to the trade surplus. In addition, the development of new overseas markets solves the problem of overcapacity and overproduction.
China’s government agencies, for their part, grow increasingly concerned about the quality of the loans granted (China.Table reported). The Ministry of Finance in particular is paying close attention to the issue of hidden debt. Attempts are being made to overhaul the system. But responsible officials also suffer from the lack of processed data. “Their internal statistical system is often not sophisticated enough to provide China’s own officials with the data they need,” Parks has observed. At times, they ask AidData for help – but without the will to share in-house figures with the Americans.
At the IfW event, sinologist Marina Rudyak from the University of Heidelberg gave insight into the reasons for the lack of transparency. In the Beijing government apparatus, dozens of actors are involved in the Silk Road loans. These include ministries, authorities, commissions – and not the least party committees, which ultimately have the most influence.
For example, the China International Development Cooperation Agency (CIDCA) is located under China’s Ministry of Commerce (Mofcom) responsible for coordinating activities. CIDCA also was to ensure greater professionalism. However, it competes with the Ministry of Foreign Affairs and the Ministry of Finance for control over funds. And in the end, party committees for international cooperation have the final say.
The actual allocation then takes place via two different development banks and several state-owned commercial banks. This all leads to complex processes between the various agencies, says Rudyak. Here, again, no one has an overview of who has lent what to whom. Mirroring this, many recipient countries also list the donors simply as “China”, without distinguishing between the different channels.
According to Parks and Rudyak, this lack of transparency leads to numerous misconceptions about China’s aid programs. Often, it is not development aid according to the international definition, but rather project loans at market-like conditions. And sometimes, it is just mainly about business interests.
The researchers hope that China will provide better access to information and create a unified database in the future. That would benefit all sides. China would have a better overview of its payments, and the rest of the world would be able to assess its initiatives more objectively.
China.Table is a media partner of the IfW event series Global China Conversations. The next set of expert talks will take place on November 25. The topic is “Innovation Made in China” – How effective is Beijing’s innovation policy?
Aggressive “wolf warrior” diplomats rant on Twitter. Videos about Xinjiang suggest everything is hunky-dory. Supposed independent citizens aggressively oppose anything that is even remotely criticizing China. Disinformation campaigns and misinformation spread by the People’s Republic on Western social media have various faces. According to experts, however, Beijing has not yet been very successful with its efforts.
At a German Marshall Fund webinar on Chinese disinformation campaigns in Eastern and Central European states, NATO Communications Director Jānis Sārts, head of Lithuania’s Cyber Security Center, Rytis Rainys, and Polish China analyst Alicja Bachulska shared their observations.
On the Chinese side, there was apparently little knowledge about the target group, Sārts explained. So far, actions from the People’s Republic in Western social media have been rather counterproductive. According to Särts, posted content primarily comes from official state accounts and virtually begs for a “strong backlash”. However, there were hardly any positive responses. Moreover, the existing cyber infrastructure is not being used in a particularly sophisticated way, Särts said. Its authors are easier to track than is the case with campaigns from Russia, despite China’s technological capabilities currently outclassing Russia’s.
The NATO communications expert generally registers a sharp increase in Chinese disinformation campaigns, especially since the start of the Covid pandemic. This is also the opinion of analyst Bachulska, who keeps an eye on Polish networks. But even before the pandemic, attempts were made to improve the image of the People’s Republic on social media.
However, according to Bachulska, the execution is often rather poor: Supposed users spread Beijing’s official line in poor Polish or English. The poor language skills suggest that bots are mostly at work here, Bachulska explained. This hasn’t done the public opinion on China any favors. If anything, it has worsened.
Sārts and Bachulska are concerned about the aggressive reactions to content critical of China in Western media. “People are saying, ‘You can’t talk about China like that’,” explained NATO communications expert Sārts. Such public interventions could have an impact on values and freedoms in debates in Europe. Experts are also concerned about a potential increase in dependence on Chinese technology.
Such an example was recently presented in Lithuania: Its state-run Center for Cybersecurity had discovered built-in censorship functions in Chinese smartphones made by Xiaomi and Huawei (China.Table reported). During the investigation, these phones were examined for more than three months, the head of the center explained the procedure. When downloading applications from app stores, lists with blocked phrases had found their way onto the phones. This list was deactivated within the EU, but it was on the phone regardless, Rainys said.
Meanwhile, the allegations against Xiaomi and Huawei have been addressed, Rainys said. There are no more blacklists for words in the EU region. This is a good example that the behavior of Chinese tech giants can also be influenced, he said. His agency will continue to examine Chinese smartphones, Rainys said. He expects an increase in cyberattacks in Lithuania, also in connection with the dispute over the Taiwanese trade mission in Vilnius (China.Table reported).
The conclusion of the three experts: The European Union must decrease its dependence on Chinese technology and expand its capabilities in the tech sector. To counter continuing disinformation campaigns by China, citizens also need to become more aware.
The wheels of Chinese bureaucracy can sometimes grind slowly, just as they do in Germany. Klaus Zenkel has taken the position of Chairman of the European Chamber of Commerce in South China in April this year and represents the interests of its members in the region. The power shortage, in particular, has hurt European companies in China in recent months. “It’s extreme that some companies have only been able to operate for three days in the past two weeks,” explains Zenkel.
The 63-year-old is a long-standing member of the chamber as managing director of the Chinese branch of Imedco Technology. The Swiss company manufactures shielding for medical technology. Its products are used, for example, in magnetic resonance imaging in hospitals. For a manufacturer like Imedco, the blackouts caused by the power shortage are a nuisance, but tolerable. But it is a completely different story for companies that work with sensitive substances. In the worst case, toxic gases could leak.
The reasons for the power shortage are manifold. Droughts weaken hydropower, the coal phase-out increases prices. Zenkel is familiar with power outages from the early days of Imedco in China. “Back then, we had bought a diesel generator,” Zenkel says. With the rapid Chinese upswing, the grid became stable and Imedco got rid of the generator. “The fact that there are now bottlenecks again does surprise us a little,” says Zenkel. From a European perspective, the sledgehammer approach of energy rationalization seems bizarre. “But if you’ve lived in China for a long time, you’re no longer surprised by the pragmatism. They just cut off the power,” says Zenkel. Foreign companies and Chinese companies alike suffer from these shortages.
The native of Middle Franconia also knows the positive side of Chinese pragmatism. He has lived in Shenzhen since 2002. “Back then, there was no subway here and only one western shopping center,” says Zenkel. The following development, however, was rapid. The early skyscrapers of Siemens or telecommunications company ZTE have long since been swallowed up by a new, even taller skyline.
Zenkel’s first stop in China, however, was Hong Kong, back in the mid-1990s. Even then, he was already working in the healthcare industry, albeit for Siemens. This was followed by a two-year stint in Malaysia. “Back in Germany, however, I noticed that something was missing,” says Zenkel. Many things are easier in Asia. “Plus the pleasant climate and the good food.” So he took the first chance and went back in 2002.
Imedco employs around 50 people at its Shenzhen site. Even China is no stranger to the problem of a shortage of skilled workers. However, the reason is a different one than in Germany. “Our principle is to pay attention to quality, yet there is still no training similar to that in Germany,” says Zenkel. Often, learning-on-the-job still applies. China is planning to establish a dual training system like the one in Germany. But there is still a long way to go before that happens. “It’s almost impossible to find employees who have already undergone the relevant training. That is why we pay particular attention to whether someone works conscientiously,” explains Zenkel. Know-how and quality in workmanship are still an advantage for Imedco over its competitors. David Renke
China’s Ministry of Agriculture is declaring war on the hoarding of vegetables. The reason is rapidly rising prices. The price for water spinach increased by 157 percent in the last month, while prices for cauliflower and broccoli climbed by 50 percent. At the Xinfadi market in Beijing, half a kilo of lettuce or water spinach already costs eight yuan. The question remains what households do with their hoarded vegetables. But as long as they eat them while they are still fresh, everything should be fine.