Beijing sends its regards to Olaf Scholz. The Finance Minister is in deep trouble over Wirecard, which has slipped through the financial regulator’s grates. The Chinese government, as Finn Mayer-Kuckuk reports, now wants to regulate the financial arm of the Alibaba Group according to the rules of a financial institution rather than those of a tech company.
Everyone in the West now knows about TikTok and its video app. That Kuaishou (“quick hand”) is just as successful in China is not known here in Germany. That could change tomorrow – the company is going public in Hong Kong. Gregor Koppenburg and Joern Petring take us into the Koaishou world with its 300 million users.
There is no end to the criticism of the EU-China Comprehensive Agreement on Investment (CAI). The focus is on the conventions on the abolition of forced labor. Amelie Richter analyses what is actually behind the ILO agreements.
Can the West deal with the superpower China through sanctions? The experienced foreign policy expert Juergen Trittin says: no. I would like to recommend Trittin’s ten theses on the relationship between the Americans, the Chinese and the Europeans. He presented them recently at the Heinrich Boell Foundation’s foreign policy conference – and I think you will find them useful.
Technology holding company or financial group? As the internet industry proliferates into more and more business areas, it is often impossible to draw clear lines. In Ant Group’s case, the Beijing government has apparently decided to regulate the payment service provider like a bank, as reported by the news agency Bloomberg with reference to well-informed circles. The authorities plan the official announcement of the decision before the Chinese New Year on Feb. 12. According to the report, a modification of the shareholding structure is necessary for Ant Group to fit under the umbrella of banking supervision.
Ant Group’s classification as a financial holding company may be out of line with the wishes of its parent company Alibaba. But it would be logical: Ant already originates over a fifth of China’s consumer loans. The company owes its success to Alibaba’s rise as the country’s largest online retailer. It is the Paypal of China – and much more. With its money market fund Yu’e Bao, the company has entered the market for money investments – upon request easily via mobile phone. Installment payments are also possible. This explains the company’s large share of the consumer loan market. Sesame Credit, the credit rating subsidiary that uses particularly sophisticated algorithms, has also gained a certain notoriety.
The registration of the Ant Group by the financial supervisory authority also corresponds to a trend currently running in Germany. After the spectacular bankruptcy of the payment processor Wirecard, the German government wants to expand the jurisdiction of the Federal Financial Supervisory Authority (BaFin) to include such holding structures from the tech world. In Germany, the reform is too late – Wirecard gambled and cheated in its regulatory gap until the damages ran into billions.
In great contrast to Wirecard, Ant’s business is admittedly very real, solid, and comprehensible. Still, the sheer size of the young giant has made government agencies increasingly nervous. According to stock market information, the company processes €15 trillion (yes, €15,000 billion) in payments each year.
About one billion customers are registered with Ant – after all, the majority of Chinese have already ordered something on Alibaba’s pages. In a planned IPO in Hong Kong, the company should receive a valuation roughly equal to that of Volkswagen, Allianz, Deutsche Telekom and Daimler combined.
For the leadership in Beijing, all this went too far. It is happy to allow such conglomerates to grow as long as they create added value. When they become competition for state power, mistrust increases – as it does in the US. Washington also wants to treat Google and Facebook more strictly in the future. Ant has now not simply monopolized knowledge but has made competition for the communist state economy where it hurts: in financial transactions.
Banks are the linchpin of organized economic success in China. In the early 1980s, they began to drive growth with loans. Purely private institutions are almost non-existent. The big banks are state-owned enterprises under the direct control of the central government. In crises like 2009, planners can rely on the system to remain stable and financial players to do their part to prevent company failures and preserve jobs. It is not economically efficient, but it works. Ant Financial is now just as systemically important but does not have a banking license. It could not have stayed that way in the long run.
Distrusting the financial power from the internet, Beijing has sabotaged the IPO of Ant Financial, which was to take place in November. In September, lawmakers had already created a new legal form that will now be applied to Ant Group. Bloomberg reports that the company is now looking for ways to make up for the IPO. But to do so, the required reorganization must first be completed – after all, it must be clear which subunit will be issuing the share certificates in the first place. Even more critical for a new attempt at the stock exchange, however, would be for the leadership in Beijing to once again send visibly positive signals in the direction of Ant Financial. After all, little works in China without the party’s support – or even against its will.
Ant Group will also probably have to adjust its capitalization. So far, it has relied on the fact that only parts of the corporate construct are considered financial institutions. In the future, a similar lower limit will presumably apply to capital resources in relation to loans granted to banks.
The world’s largest IPO since the outbreak of the Covid pandemic is expected to take place this Friday in Hong Kong. Chinese video app provider Kuaishou Technology is looking to raise the equivalent of $5.4 billion from investors and is targeting a market valuation of around $60 billion at the start of trading. According to analysts, interest in the company founded nine years ago in Beijing, is even greater among investors than in the IPO of Alibaba’s financial subsidiary Ant Financial, which fell through at short notice in October.
Kuaishou, which literally means “quick hand,” is the biggest competitor in China with its video app of the same name to the Chinese app Douyin, which goes by the name TikTok in the West. Anyone who travels on the subway in major Chinese cities is familiar with this image: virtually every crowded passenger is engrossed in their smartphones. But something has changed on their displays. Whereas for years, they devoted their attention almost exclusively to WeChat, now more and more videos are flickering across their screens. Kuaishou, with more than 300 million active users, is one of the best-positioned providers in the market. Douyin came to about 400 million users in China last year who use the app daily.
On Kuaishou, short videos can be created and shared with other users. However, live-streaming is more important for the app’s success. Influencers create programs on Kuaishou, sometimes for hours, which are sometimes watched by millions, sometimes only by a few hundred viewers. Makeup tips are offered, and there is cooking or dancing. Fitness instructors flaunt their six-packs on camera. Sometimes a young woman just sits on the sofa for hours and lolls about, hoping that fans will send her stickers at the touch of a button.
In the app, Money is earned by viewers sending paid stickers or images to the creators of the videos or live streams. An animated flower costs the equivalent of only about 15 cents. But some of the most expensive emoticons, such as a yacht or a villa, can quickly cost several hundred euros. Kuaishou and the respective provider of the video split the revenue between them. These small tips are the most important revenue generator for Kuaishou, even before traditional advertising.
In addition, Kuaishou, like other live-streaming services, has its own online shops. In a live video, a fisherwoman from the eastern Chinese city of Qingdao advertises her fresh crabs, a portion of which can be ordered directly as home delivery for the equivalent of €5. In another video, a man from the central Chinese city of Wuhan tries to sell his self-printed T-shirts.
Despite increasing user numbers, Kuaishou has recently had to accept high losses, partly due to the intense competition with market leader Douyin. As is so often the case in China’s Internet industry, the battle is fought hard. Both companies have been overrun with countless lawsuits. And when Douyin announced a few days ago that it would be distributing cash gifts of around ¥2 billion (about €250 million) to its users for the Chinese New Year, Kuaishou promptly followed suit by announcing its intention to raise ¥2.1 billion.
Similar to Douyin parent ByteDance with Tiktok, Kuaishou Technology is also trying to expand internationally. With its video app Zynn, the Chinese even briefly topped the download charts for Android and iPhone apps in the US last year after promising new users money for signing up and watching videos. However, influencers contracted to TikTok complained that their videos were also being posted on Zynn without their permission. Google and Apple then briefly removed Zynn from their stores until the issues were resolved. Expansion abroad is also proving difficult for Kuaishou amid increasing skepticism and security concerns about Chinese apps from foreign governments. Just recently, for example, India ordered 200 Chinese apps to be deleted. Four of them belonged to Kuaishou.
But Kuaishou also faces challenges in its home market, where regulators are increasingly cracking down on live-streaming platforms. For example, China’s National Radio and Television Administration announced new live-streaming rules in November prohibiting minors from buying emoticons on the platforms. There will also have to be limits on the amount of tipping an individual user can do. Platforms may also have to adapt to even more rules in the future. Just days before the IPO, the China Audio-Video Copyright Association (Cavca) came on the scene, accusing Kuaishou of infringing thousands of users’ music copyrights in their videos.
What speaks in favor of Kuaishou despite all these problems is that Tencent, one of the country’s largest Internet companies, holds a 21.5 percent stake in the startup. With such a strong partner even turbulent phases are easier to get through. Gregor Koppenburg/Jörn Petring
Criticism of the investment agreement between the EU and China (CAI) has not ceased since the publication of a part of the text at the end of January – especially deficiencies regarding human and worker protection are criticized. A coalition of more than 100 China experts, activists and academics is thus calling for a halt to the EU-China deal. In a public letter, they point to violations of human rights and the suppression of the democracy movement in Hong Kong.
Andreas Fulda, a Senior Fellow at the University of Nottingham’s Asia Research Institute, who helped initiate the letter, does not believe the CAI is doing anything to improve workers’ rights in China. “The behavior of China’s Communist Party under Xi Jinping gives no more reason to believe it can be constrained by international agreements, let alone through this EU-China investment agreement,” Fulda tells China.Table. The commitments in the agreement are “so vague that they are essentially useless,” Fulda criticizes. In his view, the leadership in Beijing will not abide by the deals: “The party regularly violates WTO rules and disregards international law in the South China Sea.”
The signatories of the letter see the CAI as a mistake: “Despite evidence of ethnic cleansing, forced labor, and other gross human rights violations, the leadership of the European institutions chose to sign an agreement that does not require meaningful commitments from the Chinese government to guarantee an end to crimes against humanity or slavery,” the letter says.
Particularly in focus are two conventions of the International Labour Organization (ILO), which are explicitly mentioned in the text of the agreement: the Forced Labour Convention (C029) and the Convention on the Abolition of Forced Labour (C105). In both conventions, ILO members that have ratified them pledge to suppress and not use any form of forced or compulsory labor – including “as a means of political coercion or education or as a punishment for holding or expressing political views or views ideologically opposed to the established political, social or economic system” – neither of which China has yet ratified. However, the CAI text available so far states that China must make “continued and sustained efforts on its own initiative” to move forward with the ratification of the two conventions. How this is to be verified remains open.
The ratification of ILO requirements is voluntary for the member states – even a trade policy agreement cannot nail the respective signatories down to this – as was recently also seen in a dispute between Brussels and South Korea: The EU had initiated proceedings at the end of 2018 because South Korea had not yet fulfilled some ILO core obligations on freedom of association eight years after the free trade agreement came into force. In 2019, the establishment of a panel of independent experts was also requested in this regard. They concluded at the end of January: South Korean labor law contradicts the principle of freedom of association in some aspects. However, the experts could not establish that the “continued and sustained efforts” stipulated in the agreement to ratify the relevant ILO conventions had not been made. “The body has neither the jurisdiction nor the authority to require Korea to ratify the main ILO conventions,” the final report states.
Critics fear that even the only voluntary commitments in the CAI text offer Beijing a loophole. A fatal judgment was made by someone who once held the reins in Brussels himself: Former EU Commission President Jean-Claude Juncker called the CAI “cheap” on labor standards and commitments under the deal earlier this week. “I spent a very long time trying to conclude this investment agreement with the Chinese president, with the Chinese prime minister,” Juncker said at a virtual event hosted by the state of Baden-Wuerttemberg on Monday evening, according to a media report. However, he said he always ultimately failed because Beijing had been unwilling to ratify ILO conventions. “We must not compromise here,” the former EU Commission president said.
Given the ongoing debate around the issue, a tweet from the European Commission’s Directorate-General for Defence Industries and Space also caused a stir this week: In it, aerial photos taken by a satellite of the Copernicus space mission Sentinel-2 were published, showing the expansion of a camp in Dabancheng in Xinjiang province between January 2017, 2019 and 2021. A spokeswoman for the General Directorate told China.Table on request, that it was a topical issue and thus of interest to social media users. The spokesperson did not comment on the thoroughly political content of the tweet.
Hong Kong has dropped several places in the Economist Intelligence Unit’s (EIU) 2020 Democracy Index. In the updated list released on Wednesday, the former British crown colony fell from 75th to 87th place. The index status was also changed: Hong Kong was previously classified as a “flawed democracy”. Now, the city, which was returned to the People’s Republic of China in 1997, is classified only as a “hybrid regime” with equal elements of democracy and autocracy. This status places Hong Kong only one category above the “authoritarian regimes” of the Democracy Index, which includes the People’s Republic of China.
The main reason for the decline of Hong Kong’s democracy is the introduction of the National Security Act. In the summer, a dozen democratic candidates were excluded from the parliamentary elections, which were later postponed. Subsequently, four opposition politicians were removed from office. They were accused of having violated their oath to be loyal to the Hong Kong government. As a result, 15 other opposition politicians resigned.
Myanmar was the only country to fall lower on the index than Hong Kong last year. Myanmar fell 13 places to 135th even before the latest military coup. Meanwhile, the island nation of Taiwan achieved “full democracy” status for the first time in 2020, rising from 31st place to eleventh. Beijing considers Taiwan an “inseparable part” of the People’s Republic of China.
The index covers 167 states in the world and is determined by a point system in which 60 democracy indicators are assessed in five categories. These include functioning electoral processes and governance, political culture and participation and general civil rights. grz
The official start of the 2022 Winter Olympics in Beijing is one year from today. While the International Olympic Committee (IOC) was promoting the countdown with short videos of participating athletes during prime time yesterday in China’s state media, US President Joe Biden is reportedly preparing a US boycott of the Olympics. “Advisers to Biden are currently observing European governments to see if they would support the boycott,” Wirtschaftswoche reported, citing diplomatic circles. The White House spokeswoman did not confirm this. In Europe, reactions have been reserved so far.
Last autumn, 160 human rights groups had already sent a letter to IOC President Thomas Bach calling on him to withdraw the Games from Beijing. “In the course of the 2008 Summer Games, the government had already shown that, contrary to its own statements, it does not intend to respect the rights of the Chinese people or to do more to protect these rights,” says Jasna Causevic, a consultant of the Society for Threatened Peoples, in a statement one year before the start of the Winter Games. “It would be fatal if the IOC were to once again approve of this behavior by ignoring China’s policy of oppression,” says Causevic.
Mandie McKeown, Director of the International Tibet Network, which coordinated the letter to Bach in the fall of 2020, announced last week on the news channel CNN that the number of groups participating in a renewed call would now “undoubtedly” be higher – she was correct about this: In an open letter yesterday, more than 180 human rights groups called for a diplomatic boycott of the games. In the letter, the organizations point to human rights violations in Tibet, Xinjiang and Hong Kong.
The IOC initially did not comment on the boycott speculation. IOC President Bach recently thanked Chinese President Xi Jinping for “taking the time to visit all the venues despite all the other important issues.” In an interview with the state news agency Xinhua, Bach said it was “almost a miracle” that the preparations went “so smoothly” despite the pandemic. niw
Last year, China connected three times more coal-fired power plants to the grid than the rest of the world. This is according to a brief analysis by the Global Energy Monitor and the Centre for Research on Energy and Clean Air. Excluding retirements, China added nearly 30 GW of new coal-fired power to the grid in 2020. By contrast, the rest of the world reduced its coal capacity by 17.2 GW.
The authors of the analysis write the coal plants also served to stimulate the economy. The central government in Beijing “encouraged investment to offset the economic impact from Covid-19“. But while coal capacity has been expanded, power plant utilization has been falling since 2015, the analysis says. It said average capacity utilization is currently only 50 percent – down from 61 percent in 2011. This is also due to the strong expansion of Renewable energies. Nevertheless, China must massively reduce coal capacities to achieve the goal of decarbonizing the energy sector by 2050, the authors say.
At the same time, the analysis points to a paradox: Although capacities at coal and renewables increased, there were power shortages at the end of last year. The authors say this was because power plants were “operational or unwilling to generate” electricity due to high coal prices. Another reason cited was insufficient transmission capacity. The New York Times had also reported on power rationing affecting millions of people: Factories were asked to produce only intermittently and businesses were asked not to heat offices. nib
According to insiders, the Chinese BMW partner Brilliance is on the verge of a takeover by the second-largest Chinese carmaker FAW Group. According to a Reuters report, the background is the precarious financial situation of Brilliance’s largest shareholder, Huachen Automotive. The group is in insolvency proceedings, and restructuring has begun. So far, FAW already produces vehicles for the Chinese market with Volkswagen and Audi.
The joint venture between Brilliance and BMW – both companies still hold a 50 percent stake in the joint venture – is an important source of revenue for both sides, the news agency writes. BMW sells a good third of its cars in China – much of which comes from the joint venture with Brilliance. BMW plans to increase its stake in the joint venture to 75 percent, the report added. According to the report, the Munich-based carmaker stated that a possible FAW entry into Brilliance would not jeopardize this plan. nib
– Geo-economics largely replaced the age of the arms race. In the Sino-American struggle for hegemony, the global economy has become the primary battleground, in which the issue of economic interdependence is one of the main weapons.
– The Covid crisis has changed the geo-economic balance of power. China emerged economically as a winner from the pandemic, increasing its share of the global GDP. The USA and the EU have lost economic weight.
– We see strategies of deterrence in the geo-economic power game. But the old Cold War recipes no longer work. Instead, imposing sanctions has become the main tool of the US, based on a bipartisan consensus. But what failed for half a century in little Havana will also fail with a superpower like China.
– Sanctions, such as the ban on Huawei and TikTok, aim to decouple the US and China economically. Even in the globalized world, decoupling is not impossible – but it comes at a very high price. In geo-economic terms, decoupling means deterring your opponent with the threat of shooting yourself in the knee.
– The bipolar world no longer exists. Two blocs and a so-called “Third World” will no longer exist. We live in a world of comprehensive globalization, in which not only markets and information but also cultures and challenges have become global – from flight to terrorism.
– Global challenges need global solutions. Global problems will not be solved by nations – even if they join together in coalitions of the willing. Without China, without the USA, without Europe, the world will not overcome the current recession. Without these three poles, it will be impossible to fight global poverty or ensure access to water and sanitation. Sustainable development goals can only be achieved in cooperation.
– Without the US, China, and Europe, we will not get on the 1.5-degree path to limiting the climate crisis. The Paris Climate Agreement was only made possible by the US-China agreement brokered by John Podesta. The US’s return to the Paris Climate Agreement is critical to addressing the climate crisis. But even without the Green Deal and decarbonizing Europe before 2050, global warming will exceed critical limits. And even if China fails to meet its commitments to peak carbon emissions before 2030 and become carbon neutral before 2060, the climate crisis will continue. Global crises need global cooperation.
– Joe Biden wants to form a new US-led alliance to confront China together with its European allies. But American interests do not equal European interests – from state-led trade for Midwestern farmers to a dominant financial and information industry to Europe’s auto and engineering industries. The same goes for conflicts over subsidies, taxes and procurement.
– Europe needs to strengthen its geo-economic weight. And Europe must learn to deal with other difficult partners. Europe must finally treat China as the partner, competitor and system rival that it is. And Europe must also see the US as a cooperation partner and economic competitor.
– China and the US simultaneously present different challenges and opportunities in different policy areas. Therefore, we need different strategies for each policy field. One way could be to identify common interests in these policy fields. Geo-economic times call for “case-by-case” alliances – not new blocs in a globalized world.
These days, Michael Lackner can look back on the hard work of the past ten years. But unfortunately, not in the way he imagined. In 2009, the renowned Sinologist from the Friedrich Alexander University of Erlangen-Nuremberg founded the International Research Consortium in the Humanities with other academics. “Since that time, we have been researching traditional future management in China,” the 68-year-old says. Traditional future management includes aspects such as superstition and fortune-telling. However, hardly anyone in China would speak of “superstition” because horoscopes and predictions are still an established part of religious life there. For example, many young couples get a forecast from a fortune teller before marriage.
The funding for the international college, which is entitled “Destiny, Freedom and Prognosis”, was extended once again for three years in 2020. Nevertheless, an important milestone could be reached for Michael Lackner these days: namely, a major exhibition at the Germanisches National Museum in Nuremberg entitled “Signs of the Future. Divination in East Asia and Europe.” Currently, visitors cannot stroll through the well-known museum in Nuremberg but can only view the exhibition via an online tour. However, Michael Lackner sees the positive side. “I am very pleased that there is also an open-access catalog,” he explains. This is the first exhibition catalog of its kind in the National Museum.
Now, one might think that research on oracles in China would represent the pinnacle of the academic ivory tower, but Michael Lackner disagrees. “This also has important relevance to the present. There is still an oracle in Taiwan, for example,” he says. Many a general secretary of the Communist Party is also said to have consulted fortune tellers.
Michael Lackner himself is something of a luminary in his field of research, but other chairs – for example, at the FU Berlin – also research and teach on superstition and mysticism in China. He has held the chair at Erlangen-Nuremberg for over 20 years. He came to his research interest by chance. As a student in Heidelberg in the 1970s, Lackner initially enrolled in Arabic studies, but an encounter with the well-known Sinologist Wolfgang Bauer was a seminal moment for him. “That’s when I knew what I wanted to study,” Lackner recalls. “It should definitely be a mirror culture” – a culture whose language and beliefs, for example, contradict ours completely – “which is why I was first interested in Arabic studies.”
As a sinologist, Michael Lackner is a scientific “all-purpose weapon”. His list of publications is long and, at the same time, characterized by diverse fields of research. When he does not deal with superstition and fortune-telling, he writes, among other things, on the Chinese image in European comics. “I spent a long time in France. There, comics have a prominent position. And I noticed that China was almost over-represented in comics,” he says. So he researched more intensively and dealt with it in a journalistic way. And if the 68-year-old has his way, he won’t be finished for a long time. First of all, there are more years ahead of him at the International Research Consortium in the Humanities. Constantin Eckner
For the New Year celebrations, something sweet can not be missed. According to the Chinese lunar calendar, winter is over since yesterday. Now spring can come.
Beijing sends its regards to Olaf Scholz. The Finance Minister is in deep trouble over Wirecard, which has slipped through the financial regulator’s grates. The Chinese government, as Finn Mayer-Kuckuk reports, now wants to regulate the financial arm of the Alibaba Group according to the rules of a financial institution rather than those of a tech company.
Everyone in the West now knows about TikTok and its video app. That Kuaishou (“quick hand”) is just as successful in China is not known here in Germany. That could change tomorrow – the company is going public in Hong Kong. Gregor Koppenburg and Joern Petring take us into the Koaishou world with its 300 million users.
There is no end to the criticism of the EU-China Comprehensive Agreement on Investment (CAI). The focus is on the conventions on the abolition of forced labor. Amelie Richter analyses what is actually behind the ILO agreements.
Can the West deal with the superpower China through sanctions? The experienced foreign policy expert Juergen Trittin says: no. I would like to recommend Trittin’s ten theses on the relationship between the Americans, the Chinese and the Europeans. He presented them recently at the Heinrich Boell Foundation’s foreign policy conference – and I think you will find them useful.
Technology holding company or financial group? As the internet industry proliferates into more and more business areas, it is often impossible to draw clear lines. In Ant Group’s case, the Beijing government has apparently decided to regulate the payment service provider like a bank, as reported by the news agency Bloomberg with reference to well-informed circles. The authorities plan the official announcement of the decision before the Chinese New Year on Feb. 12. According to the report, a modification of the shareholding structure is necessary for Ant Group to fit under the umbrella of banking supervision.
Ant Group’s classification as a financial holding company may be out of line with the wishes of its parent company Alibaba. But it would be logical: Ant already originates over a fifth of China’s consumer loans. The company owes its success to Alibaba’s rise as the country’s largest online retailer. It is the Paypal of China – and much more. With its money market fund Yu’e Bao, the company has entered the market for money investments – upon request easily via mobile phone. Installment payments are also possible. This explains the company’s large share of the consumer loan market. Sesame Credit, the credit rating subsidiary that uses particularly sophisticated algorithms, has also gained a certain notoriety.
The registration of the Ant Group by the financial supervisory authority also corresponds to a trend currently running in Germany. After the spectacular bankruptcy of the payment processor Wirecard, the German government wants to expand the jurisdiction of the Federal Financial Supervisory Authority (BaFin) to include such holding structures from the tech world. In Germany, the reform is too late – Wirecard gambled and cheated in its regulatory gap until the damages ran into billions.
In great contrast to Wirecard, Ant’s business is admittedly very real, solid, and comprehensible. Still, the sheer size of the young giant has made government agencies increasingly nervous. According to stock market information, the company processes €15 trillion (yes, €15,000 billion) in payments each year.
About one billion customers are registered with Ant – after all, the majority of Chinese have already ordered something on Alibaba’s pages. In a planned IPO in Hong Kong, the company should receive a valuation roughly equal to that of Volkswagen, Allianz, Deutsche Telekom and Daimler combined.
For the leadership in Beijing, all this went too far. It is happy to allow such conglomerates to grow as long as they create added value. When they become competition for state power, mistrust increases – as it does in the US. Washington also wants to treat Google and Facebook more strictly in the future. Ant has now not simply monopolized knowledge but has made competition for the communist state economy where it hurts: in financial transactions.
Banks are the linchpin of organized economic success in China. In the early 1980s, they began to drive growth with loans. Purely private institutions are almost non-existent. The big banks are state-owned enterprises under the direct control of the central government. In crises like 2009, planners can rely on the system to remain stable and financial players to do their part to prevent company failures and preserve jobs. It is not economically efficient, but it works. Ant Financial is now just as systemically important but does not have a banking license. It could not have stayed that way in the long run.
Distrusting the financial power from the internet, Beijing has sabotaged the IPO of Ant Financial, which was to take place in November. In September, lawmakers had already created a new legal form that will now be applied to Ant Group. Bloomberg reports that the company is now looking for ways to make up for the IPO. But to do so, the required reorganization must first be completed – after all, it must be clear which subunit will be issuing the share certificates in the first place. Even more critical for a new attempt at the stock exchange, however, would be for the leadership in Beijing to once again send visibly positive signals in the direction of Ant Financial. After all, little works in China without the party’s support – or even against its will.
Ant Group will also probably have to adjust its capitalization. So far, it has relied on the fact that only parts of the corporate construct are considered financial institutions. In the future, a similar lower limit will presumably apply to capital resources in relation to loans granted to banks.
The world’s largest IPO since the outbreak of the Covid pandemic is expected to take place this Friday in Hong Kong. Chinese video app provider Kuaishou Technology is looking to raise the equivalent of $5.4 billion from investors and is targeting a market valuation of around $60 billion at the start of trading. According to analysts, interest in the company founded nine years ago in Beijing, is even greater among investors than in the IPO of Alibaba’s financial subsidiary Ant Financial, which fell through at short notice in October.
Kuaishou, which literally means “quick hand,” is the biggest competitor in China with its video app of the same name to the Chinese app Douyin, which goes by the name TikTok in the West. Anyone who travels on the subway in major Chinese cities is familiar with this image: virtually every crowded passenger is engrossed in their smartphones. But something has changed on their displays. Whereas for years, they devoted their attention almost exclusively to WeChat, now more and more videos are flickering across their screens. Kuaishou, with more than 300 million active users, is one of the best-positioned providers in the market. Douyin came to about 400 million users in China last year who use the app daily.
On Kuaishou, short videos can be created and shared with other users. However, live-streaming is more important for the app’s success. Influencers create programs on Kuaishou, sometimes for hours, which are sometimes watched by millions, sometimes only by a few hundred viewers. Makeup tips are offered, and there is cooking or dancing. Fitness instructors flaunt their six-packs on camera. Sometimes a young woman just sits on the sofa for hours and lolls about, hoping that fans will send her stickers at the touch of a button.
In the app, Money is earned by viewers sending paid stickers or images to the creators of the videos or live streams. An animated flower costs the equivalent of only about 15 cents. But some of the most expensive emoticons, such as a yacht or a villa, can quickly cost several hundred euros. Kuaishou and the respective provider of the video split the revenue between them. These small tips are the most important revenue generator for Kuaishou, even before traditional advertising.
In addition, Kuaishou, like other live-streaming services, has its own online shops. In a live video, a fisherwoman from the eastern Chinese city of Qingdao advertises her fresh crabs, a portion of which can be ordered directly as home delivery for the equivalent of €5. In another video, a man from the central Chinese city of Wuhan tries to sell his self-printed T-shirts.
Despite increasing user numbers, Kuaishou has recently had to accept high losses, partly due to the intense competition with market leader Douyin. As is so often the case in China’s Internet industry, the battle is fought hard. Both companies have been overrun with countless lawsuits. And when Douyin announced a few days ago that it would be distributing cash gifts of around ¥2 billion (about €250 million) to its users for the Chinese New Year, Kuaishou promptly followed suit by announcing its intention to raise ¥2.1 billion.
Similar to Douyin parent ByteDance with Tiktok, Kuaishou Technology is also trying to expand internationally. With its video app Zynn, the Chinese even briefly topped the download charts for Android and iPhone apps in the US last year after promising new users money for signing up and watching videos. However, influencers contracted to TikTok complained that their videos were also being posted on Zynn without their permission. Google and Apple then briefly removed Zynn from their stores until the issues were resolved. Expansion abroad is also proving difficult for Kuaishou amid increasing skepticism and security concerns about Chinese apps from foreign governments. Just recently, for example, India ordered 200 Chinese apps to be deleted. Four of them belonged to Kuaishou.
But Kuaishou also faces challenges in its home market, where regulators are increasingly cracking down on live-streaming platforms. For example, China’s National Radio and Television Administration announced new live-streaming rules in November prohibiting minors from buying emoticons on the platforms. There will also have to be limits on the amount of tipping an individual user can do. Platforms may also have to adapt to even more rules in the future. Just days before the IPO, the China Audio-Video Copyright Association (Cavca) came on the scene, accusing Kuaishou of infringing thousands of users’ music copyrights in their videos.
What speaks in favor of Kuaishou despite all these problems is that Tencent, one of the country’s largest Internet companies, holds a 21.5 percent stake in the startup. With such a strong partner even turbulent phases are easier to get through. Gregor Koppenburg/Jörn Petring
Criticism of the investment agreement between the EU and China (CAI) has not ceased since the publication of a part of the text at the end of January – especially deficiencies regarding human and worker protection are criticized. A coalition of more than 100 China experts, activists and academics is thus calling for a halt to the EU-China deal. In a public letter, they point to violations of human rights and the suppression of the democracy movement in Hong Kong.
Andreas Fulda, a Senior Fellow at the University of Nottingham’s Asia Research Institute, who helped initiate the letter, does not believe the CAI is doing anything to improve workers’ rights in China. “The behavior of China’s Communist Party under Xi Jinping gives no more reason to believe it can be constrained by international agreements, let alone through this EU-China investment agreement,” Fulda tells China.Table. The commitments in the agreement are “so vague that they are essentially useless,” Fulda criticizes. In his view, the leadership in Beijing will not abide by the deals: “The party regularly violates WTO rules and disregards international law in the South China Sea.”
The signatories of the letter see the CAI as a mistake: “Despite evidence of ethnic cleansing, forced labor, and other gross human rights violations, the leadership of the European institutions chose to sign an agreement that does not require meaningful commitments from the Chinese government to guarantee an end to crimes against humanity or slavery,” the letter says.
Particularly in focus are two conventions of the International Labour Organization (ILO), which are explicitly mentioned in the text of the agreement: the Forced Labour Convention (C029) and the Convention on the Abolition of Forced Labour (C105). In both conventions, ILO members that have ratified them pledge to suppress and not use any form of forced or compulsory labor – including “as a means of political coercion or education or as a punishment for holding or expressing political views or views ideologically opposed to the established political, social or economic system” – neither of which China has yet ratified. However, the CAI text available so far states that China must make “continued and sustained efforts on its own initiative” to move forward with the ratification of the two conventions. How this is to be verified remains open.
The ratification of ILO requirements is voluntary for the member states – even a trade policy agreement cannot nail the respective signatories down to this – as was recently also seen in a dispute between Brussels and South Korea: The EU had initiated proceedings at the end of 2018 because South Korea had not yet fulfilled some ILO core obligations on freedom of association eight years after the free trade agreement came into force. In 2019, the establishment of a panel of independent experts was also requested in this regard. They concluded at the end of January: South Korean labor law contradicts the principle of freedom of association in some aspects. However, the experts could not establish that the “continued and sustained efforts” stipulated in the agreement to ratify the relevant ILO conventions had not been made. “The body has neither the jurisdiction nor the authority to require Korea to ratify the main ILO conventions,” the final report states.
Critics fear that even the only voluntary commitments in the CAI text offer Beijing a loophole. A fatal judgment was made by someone who once held the reins in Brussels himself: Former EU Commission President Jean-Claude Juncker called the CAI “cheap” on labor standards and commitments under the deal earlier this week. “I spent a very long time trying to conclude this investment agreement with the Chinese president, with the Chinese prime minister,” Juncker said at a virtual event hosted by the state of Baden-Wuerttemberg on Monday evening, according to a media report. However, he said he always ultimately failed because Beijing had been unwilling to ratify ILO conventions. “We must not compromise here,” the former EU Commission president said.
Given the ongoing debate around the issue, a tweet from the European Commission’s Directorate-General for Defence Industries and Space also caused a stir this week: In it, aerial photos taken by a satellite of the Copernicus space mission Sentinel-2 were published, showing the expansion of a camp in Dabancheng in Xinjiang province between January 2017, 2019 and 2021. A spokeswoman for the General Directorate told China.Table on request, that it was a topical issue and thus of interest to social media users. The spokesperson did not comment on the thoroughly political content of the tweet.
Hong Kong has dropped several places in the Economist Intelligence Unit’s (EIU) 2020 Democracy Index. In the updated list released on Wednesday, the former British crown colony fell from 75th to 87th place. The index status was also changed: Hong Kong was previously classified as a “flawed democracy”. Now, the city, which was returned to the People’s Republic of China in 1997, is classified only as a “hybrid regime” with equal elements of democracy and autocracy. This status places Hong Kong only one category above the “authoritarian regimes” of the Democracy Index, which includes the People’s Republic of China.
The main reason for the decline of Hong Kong’s democracy is the introduction of the National Security Act. In the summer, a dozen democratic candidates were excluded from the parliamentary elections, which were later postponed. Subsequently, four opposition politicians were removed from office. They were accused of having violated their oath to be loyal to the Hong Kong government. As a result, 15 other opposition politicians resigned.
Myanmar was the only country to fall lower on the index than Hong Kong last year. Myanmar fell 13 places to 135th even before the latest military coup. Meanwhile, the island nation of Taiwan achieved “full democracy” status for the first time in 2020, rising from 31st place to eleventh. Beijing considers Taiwan an “inseparable part” of the People’s Republic of China.
The index covers 167 states in the world and is determined by a point system in which 60 democracy indicators are assessed in five categories. These include functioning electoral processes and governance, political culture and participation and general civil rights. grz
The official start of the 2022 Winter Olympics in Beijing is one year from today. While the International Olympic Committee (IOC) was promoting the countdown with short videos of participating athletes during prime time yesterday in China’s state media, US President Joe Biden is reportedly preparing a US boycott of the Olympics. “Advisers to Biden are currently observing European governments to see if they would support the boycott,” Wirtschaftswoche reported, citing diplomatic circles. The White House spokeswoman did not confirm this. In Europe, reactions have been reserved so far.
Last autumn, 160 human rights groups had already sent a letter to IOC President Thomas Bach calling on him to withdraw the Games from Beijing. “In the course of the 2008 Summer Games, the government had already shown that, contrary to its own statements, it does not intend to respect the rights of the Chinese people or to do more to protect these rights,” says Jasna Causevic, a consultant of the Society for Threatened Peoples, in a statement one year before the start of the Winter Games. “It would be fatal if the IOC were to once again approve of this behavior by ignoring China’s policy of oppression,” says Causevic.
Mandie McKeown, Director of the International Tibet Network, which coordinated the letter to Bach in the fall of 2020, announced last week on the news channel CNN that the number of groups participating in a renewed call would now “undoubtedly” be higher – she was correct about this: In an open letter yesterday, more than 180 human rights groups called for a diplomatic boycott of the games. In the letter, the organizations point to human rights violations in Tibet, Xinjiang and Hong Kong.
The IOC initially did not comment on the boycott speculation. IOC President Bach recently thanked Chinese President Xi Jinping for “taking the time to visit all the venues despite all the other important issues.” In an interview with the state news agency Xinhua, Bach said it was “almost a miracle” that the preparations went “so smoothly” despite the pandemic. niw
Last year, China connected three times more coal-fired power plants to the grid than the rest of the world. This is according to a brief analysis by the Global Energy Monitor and the Centre for Research on Energy and Clean Air. Excluding retirements, China added nearly 30 GW of new coal-fired power to the grid in 2020. By contrast, the rest of the world reduced its coal capacity by 17.2 GW.
The authors of the analysis write the coal plants also served to stimulate the economy. The central government in Beijing “encouraged investment to offset the economic impact from Covid-19“. But while coal capacity has been expanded, power plant utilization has been falling since 2015, the analysis says. It said average capacity utilization is currently only 50 percent – down from 61 percent in 2011. This is also due to the strong expansion of Renewable energies. Nevertheless, China must massively reduce coal capacities to achieve the goal of decarbonizing the energy sector by 2050, the authors say.
At the same time, the analysis points to a paradox: Although capacities at coal and renewables increased, there were power shortages at the end of last year. The authors say this was because power plants were “operational or unwilling to generate” electricity due to high coal prices. Another reason cited was insufficient transmission capacity. The New York Times had also reported on power rationing affecting millions of people: Factories were asked to produce only intermittently and businesses were asked not to heat offices. nib
According to insiders, the Chinese BMW partner Brilliance is on the verge of a takeover by the second-largest Chinese carmaker FAW Group. According to a Reuters report, the background is the precarious financial situation of Brilliance’s largest shareholder, Huachen Automotive. The group is in insolvency proceedings, and restructuring has begun. So far, FAW already produces vehicles for the Chinese market with Volkswagen and Audi.
The joint venture between Brilliance and BMW – both companies still hold a 50 percent stake in the joint venture – is an important source of revenue for both sides, the news agency writes. BMW sells a good third of its cars in China – much of which comes from the joint venture with Brilliance. BMW plans to increase its stake in the joint venture to 75 percent, the report added. According to the report, the Munich-based carmaker stated that a possible FAW entry into Brilliance would not jeopardize this plan. nib
– Geo-economics largely replaced the age of the arms race. In the Sino-American struggle for hegemony, the global economy has become the primary battleground, in which the issue of economic interdependence is one of the main weapons.
– The Covid crisis has changed the geo-economic balance of power. China emerged economically as a winner from the pandemic, increasing its share of the global GDP. The USA and the EU have lost economic weight.
– We see strategies of deterrence in the geo-economic power game. But the old Cold War recipes no longer work. Instead, imposing sanctions has become the main tool of the US, based on a bipartisan consensus. But what failed for half a century in little Havana will also fail with a superpower like China.
– Sanctions, such as the ban on Huawei and TikTok, aim to decouple the US and China economically. Even in the globalized world, decoupling is not impossible – but it comes at a very high price. In geo-economic terms, decoupling means deterring your opponent with the threat of shooting yourself in the knee.
– The bipolar world no longer exists. Two blocs and a so-called “Third World” will no longer exist. We live in a world of comprehensive globalization, in which not only markets and information but also cultures and challenges have become global – from flight to terrorism.
– Global challenges need global solutions. Global problems will not be solved by nations – even if they join together in coalitions of the willing. Without China, without the USA, without Europe, the world will not overcome the current recession. Without these three poles, it will be impossible to fight global poverty or ensure access to water and sanitation. Sustainable development goals can only be achieved in cooperation.
– Without the US, China, and Europe, we will not get on the 1.5-degree path to limiting the climate crisis. The Paris Climate Agreement was only made possible by the US-China agreement brokered by John Podesta. The US’s return to the Paris Climate Agreement is critical to addressing the climate crisis. But even without the Green Deal and decarbonizing Europe before 2050, global warming will exceed critical limits. And even if China fails to meet its commitments to peak carbon emissions before 2030 and become carbon neutral before 2060, the climate crisis will continue. Global crises need global cooperation.
– Joe Biden wants to form a new US-led alliance to confront China together with its European allies. But American interests do not equal European interests – from state-led trade for Midwestern farmers to a dominant financial and information industry to Europe’s auto and engineering industries. The same goes for conflicts over subsidies, taxes and procurement.
– Europe needs to strengthen its geo-economic weight. And Europe must learn to deal with other difficult partners. Europe must finally treat China as the partner, competitor and system rival that it is. And Europe must also see the US as a cooperation partner and economic competitor.
– China and the US simultaneously present different challenges and opportunities in different policy areas. Therefore, we need different strategies for each policy field. One way could be to identify common interests in these policy fields. Geo-economic times call for “case-by-case” alliances – not new blocs in a globalized world.
These days, Michael Lackner can look back on the hard work of the past ten years. But unfortunately, not in the way he imagined. In 2009, the renowned Sinologist from the Friedrich Alexander University of Erlangen-Nuremberg founded the International Research Consortium in the Humanities with other academics. “Since that time, we have been researching traditional future management in China,” the 68-year-old says. Traditional future management includes aspects such as superstition and fortune-telling. However, hardly anyone in China would speak of “superstition” because horoscopes and predictions are still an established part of religious life there. For example, many young couples get a forecast from a fortune teller before marriage.
The funding for the international college, which is entitled “Destiny, Freedom and Prognosis”, was extended once again for three years in 2020. Nevertheless, an important milestone could be reached for Michael Lackner these days: namely, a major exhibition at the Germanisches National Museum in Nuremberg entitled “Signs of the Future. Divination in East Asia and Europe.” Currently, visitors cannot stroll through the well-known museum in Nuremberg but can only view the exhibition via an online tour. However, Michael Lackner sees the positive side. “I am very pleased that there is also an open-access catalog,” he explains. This is the first exhibition catalog of its kind in the National Museum.
Now, one might think that research on oracles in China would represent the pinnacle of the academic ivory tower, but Michael Lackner disagrees. “This also has important relevance to the present. There is still an oracle in Taiwan, for example,” he says. Many a general secretary of the Communist Party is also said to have consulted fortune tellers.
Michael Lackner himself is something of a luminary in his field of research, but other chairs – for example, at the FU Berlin – also research and teach on superstition and mysticism in China. He has held the chair at Erlangen-Nuremberg for over 20 years. He came to his research interest by chance. As a student in Heidelberg in the 1970s, Lackner initially enrolled in Arabic studies, but an encounter with the well-known Sinologist Wolfgang Bauer was a seminal moment for him. “That’s when I knew what I wanted to study,” Lackner recalls. “It should definitely be a mirror culture” – a culture whose language and beliefs, for example, contradict ours completely – “which is why I was first interested in Arabic studies.”
As a sinologist, Michael Lackner is a scientific “all-purpose weapon”. His list of publications is long and, at the same time, characterized by diverse fields of research. When he does not deal with superstition and fortune-telling, he writes, among other things, on the Chinese image in European comics. “I spent a long time in France. There, comics have a prominent position. And I noticed that China was almost over-represented in comics,” he says. So he researched more intensively and dealt with it in a journalistic way. And if the 68-year-old has his way, he won’t be finished for a long time. First of all, there are more years ahead of him at the International Research Consortium in the Humanities. Constantin Eckner
For the New Year celebrations, something sweet can not be missed. According to the Chinese lunar calendar, winter is over since yesterday. Now spring can come.