Table.Briefing: China

Meta investigating disinformation + Hukou reform

Dear reader,

Chinese efforts in spreading disinformation and fake news on Western social media platforms have typically been characterized by their shallowness. Videos of dancing minorities or praise for Xi Jinping in comment sections are often easily identifiable as agenda-driven. However, this doesn’t make these campaigns any less dangerous. Not every user is aware of the propaganda interests originating from Beijing.

Meta has now blocked thousands of accounts belonging to a disinformation network from China on its platforms like Facebook and Instagram. The accounts from this network typically praised China and specifically the Xinjiang province in their posts while also criticizing the USA, Western foreign policies and government critics, as Marcel Grzanna reports. Yet, Facebook is just the tip of the iceberg in this “Spamouflage”. Experts also warn that disinformation is becoming increasingly subtle.

The Chinese government has repeatedly aimed to fundamentally reform the hukou system, which is particularly despised by migrant workers. This strict household registration system, designed to prevent uncontrolled rural-to-urban migration, is now set to be relaxed to some extent: Rural residents will be allowed to officially settle in medium-sized cities, as explained by Frank Sieren. Beijing aims to boost the economy with this move.

However, migrant workers in cities like Beijing, Shanghai or Guangzhou will still remain without urban rights.

Your
Amelie Richter
Image of Amelie  Richter

Feature

Meta investigates ‘Spamouflage’ on Facebook

During lunch break, national interests in China take a back seat for a short while. This might sound like satire, but US internet giant Meta has provided empirical evidence for it. The activities of a multitude of fake accounts on Meta’s social networks, like Facebook, regularly decrease significantly when the midday call is sounded in the People’s Republic. Activities then pick up again shortly after hunger has been satisfied. This pattern holds reliably from Monday to Friday.

The eating habits of the operators behind such fake accounts are part of a mosaic that Meta has pieced together since spring 2022 to expose Chinese disinformation campaigns – coined as “Spamouflage” – on its own platforms. According to the company’s latest Adversarial Threat Report published on Tuesday, “Spamouflage” has been the largest and most productive covert online campaign worldwide.

Meta has responded, blocking 8,000 Facebook accounts, 954 pages, 15 groups, and 15 Instagram accounts more than a year before the US presidential elections. The network was also exposed because many comments from different accounts were identical in wording: criticism of the US and other Western governments, downplaying human rights abuses against Uyghurs in Xinjiang, or rumors that the coronavirus had spread from the US to the world instead of originating in Wuhan.

Meta: limited effect

Facebook as a multiplier is, however, just the tip of the iceberg. Meta identified over 50 platforms and forums where the campaigns were spread and often originated. TikTok, Twitter (now X), Reddit and YouTube were flooded, but also entirely apolitical platforms were used, such as Soundcloud, Pinterest, TripAdvisor or the art website Artstation.

The actual impact of such influence campaigns is difficult to gauge. Meta believes its effect is limited since the network largely revolves around itself. The report indicates that a large portion of the over half a million Facebook accounts subscribing to the now blocked pages were from Vietnam, Bangladesh and Brazil, “which we do not believe are the target of this operation”.

Direct influence on company policy

Underestimating the influence of such networks, however, would be reckless. “The main risk I see is the potential for authoritarian influence in democratic information spaces,” says Rebecca Arcesati, who researches China’s digital policy at the Berlin-based Merics Institute, to the industry publication Netzpolitik.org.

Since the enactment of the Data Security Law in 2021, the Chinese government not only possesses a powerful lever to access data collected by Chinese companies but, through the mandatory integration of party cells into executive boards, Beijing can also directly influence corporate policies. “Content control is something the Communist Party of China is very interested in. It is the idea of influencing public opinion not only within its own country but also outside,” says Arcesati.

Manipulation on TikTok and Instagram

Take TikTok, for example: The globally popular video platform is an important tool for spreading targeted information, as studies have shown, as part of Spamouflage. Through the transferability of TikTok content to Facebook, Instagram or X, these contents theoretically have the potential to spread rapidly around the globe.

The influence of algorithms on a user’s political stance can be individually underestimated. While unsuspecting youngsters, as well as adults, consume vast amounts of content approved by the authorities of the People’s Republic, they are not necessarily aware that they may be subtly but consistently manipulated.

Political messages hidden in lifestyle tips

“I am just using the apps for lifestyle inspiration … I certainly can’t be influenced [about politics],” explains a 16-year-old from Taiwan in an interview with The Guardian, which examined China’s influence on the youth of the island nation.

Yet, political influence from the Chinese government does not always come in the form of clear statements but through subtle messages conveyed within a larger context. “In my opinion, we should be concerned about algorithmic manipulations and about how TikTok might prioritize content sponsored by the Chinese government,” said Merics analyst Arcesati to Netzpolitik.org.

However, as the Meta report shows, TikTok is just one cog in the machinery. “The pattern of spreading the same article across many different platforms and accounts gave Spamouflage a significant level of resilience, as it requires actions from many different platforms to permanently delete their articles.”

  • Digitalpolitik

Hukou relaxation to attract workers to medium-sized cities

Migrant workers in Chongqing in January 2023. So far, mega-cities have been the primary migration destination.

As early as the 14th Five-Year Plan in 2021, China announced relaxations of the hukou system. The household registration system has divided people along urban-rural lines for decades, determining their access to social benefits, education and services. Changes to these restrictions are now expected primarily in small and medium-sized cities. Beijing hopes this will also give a boost to economic growth.

In cities with a population between three and five million residents, the rules would be “completely relaxed,” announced Yuan Xiguo, a spokesperson for the Ministry of State Security. For cities with fewer than three million residents, which are naturally many more, the rules will be “comprehensively eased” for the first time. Additionally, the points system for obtaining hukou in mega-cities will be improved, and migration quotas will be increased.

Hukou relaxation

He Wenlin, the ministry’s deputy head of research, said the changes were designed to promote the “free movement” of people, vehicles, information and data. How these new regulations will impact internal migration remains to be seen. The government hopes that these relaxations will help revive China’s struggling economic growth. Therefore, it is likely that Beijing will instruct provinces to quickly implement the regulations.

The relaxations mainly involve making it easier to obtain residential permits within the permanent residence control system in small cities. Social benefits, including the entitlement of children to attend school for free, are tied to this hukou.

For a long time, parents could work in a big city if they found a job, but their children had to stay with grandparents at home because they couldn’t get a hukou school place in the metropolis when migrant quotas in the cities were exhausted. Similarly, for medical treatments, migrant workers had to return to their village or small town, which was particularly harsh as healthcare provision there is generally much poorer.

Cities still attractive due to higher wages

The influx into cities has been unbroken in recent years. In 2020, the People’s Republic counted around 376 million internal migrants, almost 27 percent of the country’s population of over 1.4 billion.

This number had more than doubled compared to 2010 (around 154 million). “Hardly anyone expected such a strong increase,” says Bettina Gransow, a professor at the Institute of Chinese Studies at the Free University of Berlin. Most migrants want to go to mega-cities in the affluent coastal regions. The government still wants to prevent this. It fears that the cities will be overwhelmed by the influx.

In cities, household incomes are 2.5 times higher. On average, one earns 250 percent more and often still has money left despite higher living costs. This is enticing. However, the government aims to prevent more people from streaming into the cities without regulation. “The extent of migration within China is greater than that of global cross-border migration movements,” Gransow points out.

Economic growth through deregulation

Zhejiang, one of the affluent coastal provinces south of Shanghai with nearly 60 million inhabitants, has already taken the lead in early August. It lifted restrictions across the province, except for the city of Hangzhou, which is home to over ten million people. Alibaba’s headquarters, the Chinese Amazon, with a turnover of 126 billion dollars last year, is located there.

Geely, one of China’s leading car manufacturers, also has its headquarters there. Geely owns Volvo and is involved with Daimler. In Hangzhou and other cities in Zhejiang, the points system will now be improved to make it easier for top talents to obtain a hukou there.

Rules are also being relaxed in the Greater Bay Area around Guangdong, Hong Kong and Macau to facilitate more efficient growth for one of the world’s most important boom regions. “That’s a good thing,” says Michael Pettis, Senior Fellow at the Carnegie Foundation for International Peace based in Beijing. Some had feared that given China’s economic weakness, the government would tighten hukou rules. In this light, the relaxation is a “reason to be optimistic”.

News

Cleverly engages in difficult talks

For half a decade, no British foreign minister has visited the People’s Republic – such were the strained relations. On Wednesday, Britain’s Foreign Minister, James Cleverly, met his Chinese counterpart Wang Yi in Beijing and also Vice President Han Zheng. Observers noted that the relationship remained tense.

Even before this, Cleverly had announced his intention to address China’s human rights violations against the Uyghurs in Xinjiang, as well as against pro-democracy advocates in the former British colony of Hong Kong. This might not have put the hosts in a conciliatory mood. Additionally, the British Foreign Minister declared his intention to urge China to influence Moscow to end the Russian war of aggression against Ukraine. Cleverly also aimed to discuss China’s role in the geopolitical tensions in the South China Sea.

The leadership in Beijing responded coolly to these announcements. China hopes that the British side works to “uphold the spirit of mutual respect, deepen exchanges, promote mutual understanding and ensure a stable development of Sino-British relations,” according to Foreign Ministry spokesperson Wang Wenbin.

Parliament refers to Taiwan as ‘independent country’

The extent to which a statement from the British Parliament has caused additional irritation in Beijing was not known by Wednesday evening. On Wednesday, the Foreign Affairs Committee declared that Taiwan is an independent country. “Taiwan possesses all the attributes of statehood, including a permanent population, a defined territory, government, and the capacity to enter into relations with other states – it lacks only greater international recognition,” the report on British foreign policy in East Asia states.

Committee Chair Alicia Kearns, who, like Cleverly, is a member of the ruling Conservative Party, stated, “We recognize China’s position, but we do not accept it.” She urged Cleverly to make it clear to the hosts during his visit to Beijing that “Britain supports Taiwan’s right to self-determination“. flee

  • Geopolitics
  • Great Britain
  • Human Rights

DIHK: Germany suffers from dependency

According to Volker Treier, Chief Executive of Foreign Trade at the German Chamber of Commerce and Industry (DIHK), the German economy is particularly affected by the economic downturn in China. “This is hitting Germany particularly hard due to its dense economic integration with the People’s Republic. German exports to China fell by 8.5 percent in the first half of 2023 compared to the same period last year. Imports declined by 16.6 percent,” Treier told the Funke Media Group’s newspapers. “Overall, nearly a million jobs in Germany depend on exports to China.”

The Chinese economy has not yet managed to escape the “Covid sclerosis“, the DIHK foreign trade chief added. “The purchasing restraint of Chinese people during the erratic lockdown measures is still ongoing. German product providers are also feeling the effects,” Treier said. “Furthermore, the real estate boom bubble may burst at any time. This also increases the savings tendency of many Chinese people. If consumption declines, there will be no investment either.”

The weakness of China’s economy affects not only classic German export domains like the automotive industry, the chemical industry, or mechanical engineering. “In important areas like the energy transition, the mobility transition or the digitization of the economy, the dependence on China is particularly significant” – especially when supply is interrupted in the short term. “In these sectors, we need imports from China that we cannot replace quickly,” explained Treier.

Despite the problems in the Chinese economy, Treier sees growth opportunities for German companies. “Even if the People’s Republic increasingly produces domestically, it will still rely on foreign technology. The next two decades will see weaker but significant growth of two to five percent.” rtr

  • Autoindustrie
  • Energie

Beijing promises improved market access again

After Western criticism of the investment climate in China, the Beijing government is offering foreign companies easier market access. According to the Chinese Embassy in Washington, this move is due to the lack of economic recovery following the coronavirus pandemic. “China is actively advancing its opening-up at a high level and making efforts to create a world-class market-oriented business environment regulated by a solid legal framework,” said Embassy spokesperson Liu Pengyu. “China will only open its doors even wider to the outside world.”

Liu’s statement was in response to a remark from US Secretary of Commerce Gina Raimondo. During her visit to Beijing on Tuesday, Raimondo stated that US companies had informed her that China is no longer an investable country for them. France’s Minister of Finance, Bruno Le Maire, also expressed concerns about the investment location China recently. China had also criticized the US government for obstructing the People’s Republic’s access to particularly powerful semiconductors through export controls. In turn, the leadership in Beijing announced export controls for important raw materials for chip production.

Meanwhile, the European Union Chamber of Commerce in China stated that it does not endorse the term “uninvestable” used by Raimondo. However, Chamber President Jens Eskelund pointed out that China, relative to the importance of its economy, attracts too few direct investments from Europe.

A restricted market access and restrictions by authorities were cited as problems, as well as a lack of fair competition between domestic and foreign companies. More than a quarter of companies complained about forced technology transfers. rtr

Guangzhou supports real estate market

In order to bolster the ailing real estate market, the city of Guangzhou became the first metropolis to loosen the rules for mortgage allocation. Homebuyers can now enjoy preferential loans regardless of their previous creditworthiness, as announced by the city government. Beijing, Shanghai and Shenzhen may follow this example, as well as a dozen smaller cities.

The measure caused enthusiasm in the stock market. The Hong Kong Hang Seng Mainland Property Index of real estate companies rose by up to 3.3 percent after the announcement. The People’s Republic also intends to support the struggling real estate sector and boost the economy with other measures. Several state banks want to lower interest rates for existing mortgages, according to three individuals familiar with the matter who spoke to Reuters. This would be the first reduction since the global financial crisis in 2008/09.

Beijing hopes that this will boost consumer demand for real estate. The industry was a significant driver of economic growth for years, but now it is being hindered by weak home sales and defaults by construction companies.

China’s mortgage loans totaled 38.6 trillion yuan (4.9 trillion euros) at the end of June. That corresponds to around 17 percent of the banks’ total credit portfolio. Lowering interest rates may increase pressure on the banks’ profit margins. Three of China’s largest banks announced in their interim reports that their net interest margins – a key measure of profitability – had already declined in the second quarter of the previous year.

Experts doubt whether the real estate sector can be stabilized with the measures known so far – also because they are coming too late. “The impact on developers’ sales could be much larger if regulatory authorities had implemented the policy six to nine months ago,” said Raymond Cheng, an analyst at financial firm CGS-CIMB Securities in Hong Kong. rtr

Unabated expansion of coal power

China continued to build and approve coal-fired power plants unabated in the first half of 2023. From January to June 2023, the construction of new coal-fired power plants with a capacity of 37 gigawatts (GW) began, according to the Centre for Research on Energy and Clean Air (CREA) on X (formerly Twitter). During this period, Beijing also approved 52 GW of new coal capacity, of which 10 GW are already under construction. An additional 41 GW were announced by various actors, and eight GW of previously suspended coal projects were revived.

If China’s expansion of coal-fired power plant capacity continues in this manner, CREA states that it will either lead to a massive increase in coal power generation – and thus emissions – or a significant decrease in power plant utilization, resulting in losses for operators. Meanwhile, most new coal-fired power projects in China do not meet the conditions for central government approvals. The provinces where most new coal-fired power plants are being built are not using them, as intended, to promote clean energy or cover peak demand. This demonstrates, according to CREA, that there is “no effective enforcement of approval restriction policies”.

“The approvals need to be stopped immediately if China wants to reduce its coal power capacity between 2026 and 2030,” writes CREA expert Lauri Myllyvirta. Starting from this period, coal consumption is expected to decline based on previous plans. China has approved a total of 152 GW of coal power capacity since the beginning of the current coal construction boom. In 2022, Beijing approved two new coal-fired power plants per week – a total of about 100, four times as many as in 2021. The decommissioned capacity was significantly lower. ck

Opinion

Why hasn’t China rushed to bail out its economy?

By Zhang Jun
Zhang Jun, Dean of the School of Economics at Fudan University, is Director of the China Center for Economic Studies, a Shanghai-based think tank.

China’s aggregate demand has weakened significantly over the past three years. In addition to the enduring effects of China’s anti-COVID policy, the country has also been weighed down by the decrease in global demand. Exports fell by 14.5 percent year on year in July, a stark contrast from the robust 17.2 percent export growth recorded in July 2022. Given these downturn pressures, the government’s reluctance to announce a massive stimulus package, as many had anticipated, has left foreign and Chinese observers deeply perplexed.

While China’s leaders are certainly aware of the ongoing economic slowdown, they may be estimating that the risk of a bailout is worse than the risk of inaction. Or perhaps they have more confidence in the domestic economy’s resilience against a global recession and believe that the economy will recover quickly on its own.

Regardless, China seems to have chosen not to take further action. In fact, China currently faces significant roadblocks to any additional economic intervention. After all, the accumulation of massive debts, particularly among local governments, has left China with limited room for maneuver. Moreover, the external environment has become increasingly unfavorable to China since at least 2018,  presenting challenges unlike any it has faced over the past 40 years.

Cautious approach to macroeconomic management

Consequently, China has adopted an increasingly cautious approach to macroeconomic management. Monetary policy is an interesting case in point. At the onset of the COVID-19 pandemic in March 2020, for example, the US Federal Reserve immediately cut interest rates to near zero. By contrast, the People’s Bank of China lowered interest rates by only 0.2 percentage points. Similarly, while the Fed has raised interest rates rapidly in response to surging inflation, hiking rates by five percentage points since March 2022, the PBOC has pursued a series of modest rate cuts to accommodate GDP growth and reduced demand.

This approach is also the main reason why China has avoided runaway inflation over the past two years. This was made clear in an April speech by former PBOC Governor Yi Gang during his visit to the Peterson Institute for International Economics in Washington, DC. During his speech, Yi highlighted the PBOC’s adherence to the so-called “attenuation principle,” which suggests that central bankers should refrain from taking drastic actions under uncertain circumstances. While this well-known concept was first introduced by Yale economist William Brainard in 1967, Yi’s speech offered valuable insights into the shift in China’s economic-policy thinking in recent years.

Interest rate = growth rate

In theory, a more conservative monetary policy could better align short-term measures and long-term goals. To this end, central banks should set real interest rates as close as possible to the potential growth rate of output. Nobel laureate economist Edmund S. Phelps‘s pioneering work on the golden rule savings rate illustrates the benefits of this approach.

To the extent that Yi’s speech reflects current ways of thinking and changed policy style among China’s top policymakers, it helps explain why China’s economy has become less volatile in recent years. With the scaling back of countercyclical policies, China has managed to sustain growth even without a demand surge. This may align with the government’s development plan, which aims to minimize the huge costs associated with achieving unbalanced growth, such as the rapid pile-up of short-term financial risks.

Moving away from aggressive macroeconomic policy

Indeed, China’s move away from aggressive macroeconomic policy could be attributed to the leadership’s recognition of the threat posed by the country having reached a critical threshold of systemic financial risk a few years ago. Given the nature of the Chinese political system, such risks would be deemed to pose an unacceptable threat to social and political stability.

As a result, China launched a comprehensive “de-risking” effort in 2016. Policymakers adopted de-risking as a guiding principle, shifting from aggressive macroeconomic policies to a more prudent approach. To mitigate risk and address the excessive financialization of the real economy, China initiated a wave of deleveraging and targeted financial interventions, cracking down on the asset-management industry and triggering a correction in the heavily leveraged financial and real-estate sectors.

Pressure from outside

Risks and uncertainties increasingly stem from external pressures as well. Two decades ago, when the Chinese economy was relatively small and had a fixed exchange rate, its domestic policy was largely insulated from external influences. But the Chinese economy has become too large and its relations with the world’s economies have changed dramatically, prompting China to adopt a more cautious approach in response to uncertainty. The PBOC, for example, must now closely monitor shifts in the US-China interest-rate differential and assess the potential impact on China’s capital markets and the renminbi exchange rate.

Having said that, China’s move away from aggressive macroeconomic policy should not come as a surprise. De-risking policies might have proved effective in preventing a financial or debt crisis, but the pandemic and subsequent COVID-19 policies have hampered the economy’s capacity to rebalance and rebound, resulting in further demand reduction.

Delicate balancing act

Bringing aggregate demand back to pre-pandemic levels is crucial for accelerating China’s economic recovery. To this end, China’s fiscal and monetary policies can be more proactive, given that de-risking policies have remained in place for so long. While policymakers face a delicate balancing act, the growing risk of a protracted downturn underscores the need to find more effective solutions to the pressing challenges facing the Chinese economy.

But China could still do more to rebalance its economy. By committing to carrying out structural reforms, removing barriers to entry, and opening up sectors that are currently closed to foreign competition – such as education, training, consulting, and health care – China could create numerous market opportunities for the private sector and move closer to achieving long-term economic stability.

www.project-syndicate.org

Executive Moves

Claire Li is the new head of China business at communications agency Hill+Knowlton Strategies, starting in September. Li was previously responsible for Starbucks’ communications in China.

Daisuke Tsukagoshi is the new COO at Japanese clothing company Uniqlo from September. As COO, Tsukagoshi oversees procurement, among other things. Uniqlo has also been in the headlines recently for its use of cotton from Xinjiang.

Is something changing in your organization? Let us know at heads@table.media!

Dessert

China and other East Asian countries observed the Hungry Ghost Festival on Wednesday. The Zhongyuan Festival (中元节) is a festival of forgiveness commemorating ancestors and their wandering spirits. It falls on the 15th day of the seventh lunar month, which coincides with the day of the full moon.

China.Table editorial office

CHINA.TABLE EDITORIAL OFFICE

Licenses:
    Dear reader,

    Chinese efforts in spreading disinformation and fake news on Western social media platforms have typically been characterized by their shallowness. Videos of dancing minorities or praise for Xi Jinping in comment sections are often easily identifiable as agenda-driven. However, this doesn’t make these campaigns any less dangerous. Not every user is aware of the propaganda interests originating from Beijing.

    Meta has now blocked thousands of accounts belonging to a disinformation network from China on its platforms like Facebook and Instagram. The accounts from this network typically praised China and specifically the Xinjiang province in their posts while also criticizing the USA, Western foreign policies and government critics, as Marcel Grzanna reports. Yet, Facebook is just the tip of the iceberg in this “Spamouflage”. Experts also warn that disinformation is becoming increasingly subtle.

    The Chinese government has repeatedly aimed to fundamentally reform the hukou system, which is particularly despised by migrant workers. This strict household registration system, designed to prevent uncontrolled rural-to-urban migration, is now set to be relaxed to some extent: Rural residents will be allowed to officially settle in medium-sized cities, as explained by Frank Sieren. Beijing aims to boost the economy with this move.

    However, migrant workers in cities like Beijing, Shanghai or Guangzhou will still remain without urban rights.

    Your
    Amelie Richter
    Image of Amelie  Richter

    Feature

    Meta investigates ‘Spamouflage’ on Facebook

    During lunch break, national interests in China take a back seat for a short while. This might sound like satire, but US internet giant Meta has provided empirical evidence for it. The activities of a multitude of fake accounts on Meta’s social networks, like Facebook, regularly decrease significantly when the midday call is sounded in the People’s Republic. Activities then pick up again shortly after hunger has been satisfied. This pattern holds reliably from Monday to Friday.

    The eating habits of the operators behind such fake accounts are part of a mosaic that Meta has pieced together since spring 2022 to expose Chinese disinformation campaigns – coined as “Spamouflage” – on its own platforms. According to the company’s latest Adversarial Threat Report published on Tuesday, “Spamouflage” has been the largest and most productive covert online campaign worldwide.

    Meta has responded, blocking 8,000 Facebook accounts, 954 pages, 15 groups, and 15 Instagram accounts more than a year before the US presidential elections. The network was also exposed because many comments from different accounts were identical in wording: criticism of the US and other Western governments, downplaying human rights abuses against Uyghurs in Xinjiang, or rumors that the coronavirus had spread from the US to the world instead of originating in Wuhan.

    Meta: limited effect

    Facebook as a multiplier is, however, just the tip of the iceberg. Meta identified over 50 platforms and forums where the campaigns were spread and often originated. TikTok, Twitter (now X), Reddit and YouTube were flooded, but also entirely apolitical platforms were used, such as Soundcloud, Pinterest, TripAdvisor or the art website Artstation.

    The actual impact of such influence campaigns is difficult to gauge. Meta believes its effect is limited since the network largely revolves around itself. The report indicates that a large portion of the over half a million Facebook accounts subscribing to the now blocked pages were from Vietnam, Bangladesh and Brazil, “which we do not believe are the target of this operation”.

    Direct influence on company policy

    Underestimating the influence of such networks, however, would be reckless. “The main risk I see is the potential for authoritarian influence in democratic information spaces,” says Rebecca Arcesati, who researches China’s digital policy at the Berlin-based Merics Institute, to the industry publication Netzpolitik.org.

    Since the enactment of the Data Security Law in 2021, the Chinese government not only possesses a powerful lever to access data collected by Chinese companies but, through the mandatory integration of party cells into executive boards, Beijing can also directly influence corporate policies. “Content control is something the Communist Party of China is very interested in. It is the idea of influencing public opinion not only within its own country but also outside,” says Arcesati.

    Manipulation on TikTok and Instagram

    Take TikTok, for example: The globally popular video platform is an important tool for spreading targeted information, as studies have shown, as part of Spamouflage. Through the transferability of TikTok content to Facebook, Instagram or X, these contents theoretically have the potential to spread rapidly around the globe.

    The influence of algorithms on a user’s political stance can be individually underestimated. While unsuspecting youngsters, as well as adults, consume vast amounts of content approved by the authorities of the People’s Republic, they are not necessarily aware that they may be subtly but consistently manipulated.

    Political messages hidden in lifestyle tips

    “I am just using the apps for lifestyle inspiration … I certainly can’t be influenced [about politics],” explains a 16-year-old from Taiwan in an interview with The Guardian, which examined China’s influence on the youth of the island nation.

    Yet, political influence from the Chinese government does not always come in the form of clear statements but through subtle messages conveyed within a larger context. “In my opinion, we should be concerned about algorithmic manipulations and about how TikTok might prioritize content sponsored by the Chinese government,” said Merics analyst Arcesati to Netzpolitik.org.

    However, as the Meta report shows, TikTok is just one cog in the machinery. “The pattern of spreading the same article across many different platforms and accounts gave Spamouflage a significant level of resilience, as it requires actions from many different platforms to permanently delete their articles.”

    • Digitalpolitik

    Hukou relaxation to attract workers to medium-sized cities

    Migrant workers in Chongqing in January 2023. So far, mega-cities have been the primary migration destination.

    As early as the 14th Five-Year Plan in 2021, China announced relaxations of the hukou system. The household registration system has divided people along urban-rural lines for decades, determining their access to social benefits, education and services. Changes to these restrictions are now expected primarily in small and medium-sized cities. Beijing hopes this will also give a boost to economic growth.

    In cities with a population between three and five million residents, the rules would be “completely relaxed,” announced Yuan Xiguo, a spokesperson for the Ministry of State Security. For cities with fewer than three million residents, which are naturally many more, the rules will be “comprehensively eased” for the first time. Additionally, the points system for obtaining hukou in mega-cities will be improved, and migration quotas will be increased.

    Hukou relaxation

    He Wenlin, the ministry’s deputy head of research, said the changes were designed to promote the “free movement” of people, vehicles, information and data. How these new regulations will impact internal migration remains to be seen. The government hopes that these relaxations will help revive China’s struggling economic growth. Therefore, it is likely that Beijing will instruct provinces to quickly implement the regulations.

    The relaxations mainly involve making it easier to obtain residential permits within the permanent residence control system in small cities. Social benefits, including the entitlement of children to attend school for free, are tied to this hukou.

    For a long time, parents could work in a big city if they found a job, but their children had to stay with grandparents at home because they couldn’t get a hukou school place in the metropolis when migrant quotas in the cities were exhausted. Similarly, for medical treatments, migrant workers had to return to their village or small town, which was particularly harsh as healthcare provision there is generally much poorer.

    Cities still attractive due to higher wages

    The influx into cities has been unbroken in recent years. In 2020, the People’s Republic counted around 376 million internal migrants, almost 27 percent of the country’s population of over 1.4 billion.

    This number had more than doubled compared to 2010 (around 154 million). “Hardly anyone expected such a strong increase,” says Bettina Gransow, a professor at the Institute of Chinese Studies at the Free University of Berlin. Most migrants want to go to mega-cities in the affluent coastal regions. The government still wants to prevent this. It fears that the cities will be overwhelmed by the influx.

    In cities, household incomes are 2.5 times higher. On average, one earns 250 percent more and often still has money left despite higher living costs. This is enticing. However, the government aims to prevent more people from streaming into the cities without regulation. “The extent of migration within China is greater than that of global cross-border migration movements,” Gransow points out.

    Economic growth through deregulation

    Zhejiang, one of the affluent coastal provinces south of Shanghai with nearly 60 million inhabitants, has already taken the lead in early August. It lifted restrictions across the province, except for the city of Hangzhou, which is home to over ten million people. Alibaba’s headquarters, the Chinese Amazon, with a turnover of 126 billion dollars last year, is located there.

    Geely, one of China’s leading car manufacturers, also has its headquarters there. Geely owns Volvo and is involved with Daimler. In Hangzhou and other cities in Zhejiang, the points system will now be improved to make it easier for top talents to obtain a hukou there.

    Rules are also being relaxed in the Greater Bay Area around Guangdong, Hong Kong and Macau to facilitate more efficient growth for one of the world’s most important boom regions. “That’s a good thing,” says Michael Pettis, Senior Fellow at the Carnegie Foundation for International Peace based in Beijing. Some had feared that given China’s economic weakness, the government would tighten hukou rules. In this light, the relaxation is a “reason to be optimistic”.

    News

    Cleverly engages in difficult talks

    For half a decade, no British foreign minister has visited the People’s Republic – such were the strained relations. On Wednesday, Britain’s Foreign Minister, James Cleverly, met his Chinese counterpart Wang Yi in Beijing and also Vice President Han Zheng. Observers noted that the relationship remained tense.

    Even before this, Cleverly had announced his intention to address China’s human rights violations against the Uyghurs in Xinjiang, as well as against pro-democracy advocates in the former British colony of Hong Kong. This might not have put the hosts in a conciliatory mood. Additionally, the British Foreign Minister declared his intention to urge China to influence Moscow to end the Russian war of aggression against Ukraine. Cleverly also aimed to discuss China’s role in the geopolitical tensions in the South China Sea.

    The leadership in Beijing responded coolly to these announcements. China hopes that the British side works to “uphold the spirit of mutual respect, deepen exchanges, promote mutual understanding and ensure a stable development of Sino-British relations,” according to Foreign Ministry spokesperson Wang Wenbin.

    Parliament refers to Taiwan as ‘independent country’

    The extent to which a statement from the British Parliament has caused additional irritation in Beijing was not known by Wednesday evening. On Wednesday, the Foreign Affairs Committee declared that Taiwan is an independent country. “Taiwan possesses all the attributes of statehood, including a permanent population, a defined territory, government, and the capacity to enter into relations with other states – it lacks only greater international recognition,” the report on British foreign policy in East Asia states.

    Committee Chair Alicia Kearns, who, like Cleverly, is a member of the ruling Conservative Party, stated, “We recognize China’s position, but we do not accept it.” She urged Cleverly to make it clear to the hosts during his visit to Beijing that “Britain supports Taiwan’s right to self-determination“. flee

    • Geopolitics
    • Great Britain
    • Human Rights

    DIHK: Germany suffers from dependency

    According to Volker Treier, Chief Executive of Foreign Trade at the German Chamber of Commerce and Industry (DIHK), the German economy is particularly affected by the economic downturn in China. “This is hitting Germany particularly hard due to its dense economic integration with the People’s Republic. German exports to China fell by 8.5 percent in the first half of 2023 compared to the same period last year. Imports declined by 16.6 percent,” Treier told the Funke Media Group’s newspapers. “Overall, nearly a million jobs in Germany depend on exports to China.”

    The Chinese economy has not yet managed to escape the “Covid sclerosis“, the DIHK foreign trade chief added. “The purchasing restraint of Chinese people during the erratic lockdown measures is still ongoing. German product providers are also feeling the effects,” Treier said. “Furthermore, the real estate boom bubble may burst at any time. This also increases the savings tendency of many Chinese people. If consumption declines, there will be no investment either.”

    The weakness of China’s economy affects not only classic German export domains like the automotive industry, the chemical industry, or mechanical engineering. “In important areas like the energy transition, the mobility transition or the digitization of the economy, the dependence on China is particularly significant” – especially when supply is interrupted in the short term. “In these sectors, we need imports from China that we cannot replace quickly,” explained Treier.

    Despite the problems in the Chinese economy, Treier sees growth opportunities for German companies. “Even if the People’s Republic increasingly produces domestically, it will still rely on foreign technology. The next two decades will see weaker but significant growth of two to five percent.” rtr

    • Autoindustrie
    • Energie

    Beijing promises improved market access again

    After Western criticism of the investment climate in China, the Beijing government is offering foreign companies easier market access. According to the Chinese Embassy in Washington, this move is due to the lack of economic recovery following the coronavirus pandemic. “China is actively advancing its opening-up at a high level and making efforts to create a world-class market-oriented business environment regulated by a solid legal framework,” said Embassy spokesperson Liu Pengyu. “China will only open its doors even wider to the outside world.”

    Liu’s statement was in response to a remark from US Secretary of Commerce Gina Raimondo. During her visit to Beijing on Tuesday, Raimondo stated that US companies had informed her that China is no longer an investable country for them. France’s Minister of Finance, Bruno Le Maire, also expressed concerns about the investment location China recently. China had also criticized the US government for obstructing the People’s Republic’s access to particularly powerful semiconductors through export controls. In turn, the leadership in Beijing announced export controls for important raw materials for chip production.

    Meanwhile, the European Union Chamber of Commerce in China stated that it does not endorse the term “uninvestable” used by Raimondo. However, Chamber President Jens Eskelund pointed out that China, relative to the importance of its economy, attracts too few direct investments from Europe.

    A restricted market access and restrictions by authorities were cited as problems, as well as a lack of fair competition between domestic and foreign companies. More than a quarter of companies complained about forced technology transfers. rtr

    Guangzhou supports real estate market

    In order to bolster the ailing real estate market, the city of Guangzhou became the first metropolis to loosen the rules for mortgage allocation. Homebuyers can now enjoy preferential loans regardless of their previous creditworthiness, as announced by the city government. Beijing, Shanghai and Shenzhen may follow this example, as well as a dozen smaller cities.

    The measure caused enthusiasm in the stock market. The Hong Kong Hang Seng Mainland Property Index of real estate companies rose by up to 3.3 percent after the announcement. The People’s Republic also intends to support the struggling real estate sector and boost the economy with other measures. Several state banks want to lower interest rates for existing mortgages, according to three individuals familiar with the matter who spoke to Reuters. This would be the first reduction since the global financial crisis in 2008/09.

    Beijing hopes that this will boost consumer demand for real estate. The industry was a significant driver of economic growth for years, but now it is being hindered by weak home sales and defaults by construction companies.

    China’s mortgage loans totaled 38.6 trillion yuan (4.9 trillion euros) at the end of June. That corresponds to around 17 percent of the banks’ total credit portfolio. Lowering interest rates may increase pressure on the banks’ profit margins. Three of China’s largest banks announced in their interim reports that their net interest margins – a key measure of profitability – had already declined in the second quarter of the previous year.

    Experts doubt whether the real estate sector can be stabilized with the measures known so far – also because they are coming too late. “The impact on developers’ sales could be much larger if regulatory authorities had implemented the policy six to nine months ago,” said Raymond Cheng, an analyst at financial firm CGS-CIMB Securities in Hong Kong. rtr

    Unabated expansion of coal power

    China continued to build and approve coal-fired power plants unabated in the first half of 2023. From January to June 2023, the construction of new coal-fired power plants with a capacity of 37 gigawatts (GW) began, according to the Centre for Research on Energy and Clean Air (CREA) on X (formerly Twitter). During this period, Beijing also approved 52 GW of new coal capacity, of which 10 GW are already under construction. An additional 41 GW were announced by various actors, and eight GW of previously suspended coal projects were revived.

    If China’s expansion of coal-fired power plant capacity continues in this manner, CREA states that it will either lead to a massive increase in coal power generation – and thus emissions – or a significant decrease in power plant utilization, resulting in losses for operators. Meanwhile, most new coal-fired power projects in China do not meet the conditions for central government approvals. The provinces where most new coal-fired power plants are being built are not using them, as intended, to promote clean energy or cover peak demand. This demonstrates, according to CREA, that there is “no effective enforcement of approval restriction policies”.

    “The approvals need to be stopped immediately if China wants to reduce its coal power capacity between 2026 and 2030,” writes CREA expert Lauri Myllyvirta. Starting from this period, coal consumption is expected to decline based on previous plans. China has approved a total of 152 GW of coal power capacity since the beginning of the current coal construction boom. In 2022, Beijing approved two new coal-fired power plants per week – a total of about 100, four times as many as in 2021. The decommissioned capacity was significantly lower. ck

    Opinion

    Why hasn’t China rushed to bail out its economy?

    By Zhang Jun
    Zhang Jun, Dean of the School of Economics at Fudan University, is Director of the China Center for Economic Studies, a Shanghai-based think tank.

    China’s aggregate demand has weakened significantly over the past three years. In addition to the enduring effects of China’s anti-COVID policy, the country has also been weighed down by the decrease in global demand. Exports fell by 14.5 percent year on year in July, a stark contrast from the robust 17.2 percent export growth recorded in July 2022. Given these downturn pressures, the government’s reluctance to announce a massive stimulus package, as many had anticipated, has left foreign and Chinese observers deeply perplexed.

    While China’s leaders are certainly aware of the ongoing economic slowdown, they may be estimating that the risk of a bailout is worse than the risk of inaction. Or perhaps they have more confidence in the domestic economy’s resilience against a global recession and believe that the economy will recover quickly on its own.

    Regardless, China seems to have chosen not to take further action. In fact, China currently faces significant roadblocks to any additional economic intervention. After all, the accumulation of massive debts, particularly among local governments, has left China with limited room for maneuver. Moreover, the external environment has become increasingly unfavorable to China since at least 2018,  presenting challenges unlike any it has faced over the past 40 years.

    Cautious approach to macroeconomic management

    Consequently, China has adopted an increasingly cautious approach to macroeconomic management. Monetary policy is an interesting case in point. At the onset of the COVID-19 pandemic in March 2020, for example, the US Federal Reserve immediately cut interest rates to near zero. By contrast, the People’s Bank of China lowered interest rates by only 0.2 percentage points. Similarly, while the Fed has raised interest rates rapidly in response to surging inflation, hiking rates by five percentage points since March 2022, the PBOC has pursued a series of modest rate cuts to accommodate GDP growth and reduced demand.

    This approach is also the main reason why China has avoided runaway inflation over the past two years. This was made clear in an April speech by former PBOC Governor Yi Gang during his visit to the Peterson Institute for International Economics in Washington, DC. During his speech, Yi highlighted the PBOC’s adherence to the so-called “attenuation principle,” which suggests that central bankers should refrain from taking drastic actions under uncertain circumstances. While this well-known concept was first introduced by Yale economist William Brainard in 1967, Yi’s speech offered valuable insights into the shift in China’s economic-policy thinking in recent years.

    Interest rate = growth rate

    In theory, a more conservative monetary policy could better align short-term measures and long-term goals. To this end, central banks should set real interest rates as close as possible to the potential growth rate of output. Nobel laureate economist Edmund S. Phelps‘s pioneering work on the golden rule savings rate illustrates the benefits of this approach.

    To the extent that Yi’s speech reflects current ways of thinking and changed policy style among China’s top policymakers, it helps explain why China’s economy has become less volatile in recent years. With the scaling back of countercyclical policies, China has managed to sustain growth even without a demand surge. This may align with the government’s development plan, which aims to minimize the huge costs associated with achieving unbalanced growth, such as the rapid pile-up of short-term financial risks.

    Moving away from aggressive macroeconomic policy

    Indeed, China’s move away from aggressive macroeconomic policy could be attributed to the leadership’s recognition of the threat posed by the country having reached a critical threshold of systemic financial risk a few years ago. Given the nature of the Chinese political system, such risks would be deemed to pose an unacceptable threat to social and political stability.

    As a result, China launched a comprehensive “de-risking” effort in 2016. Policymakers adopted de-risking as a guiding principle, shifting from aggressive macroeconomic policies to a more prudent approach. To mitigate risk and address the excessive financialization of the real economy, China initiated a wave of deleveraging and targeted financial interventions, cracking down on the asset-management industry and triggering a correction in the heavily leveraged financial and real-estate sectors.

    Pressure from outside

    Risks and uncertainties increasingly stem from external pressures as well. Two decades ago, when the Chinese economy was relatively small and had a fixed exchange rate, its domestic policy was largely insulated from external influences. But the Chinese economy has become too large and its relations with the world’s economies have changed dramatically, prompting China to adopt a more cautious approach in response to uncertainty. The PBOC, for example, must now closely monitor shifts in the US-China interest-rate differential and assess the potential impact on China’s capital markets and the renminbi exchange rate.

    Having said that, China’s move away from aggressive macroeconomic policy should not come as a surprise. De-risking policies might have proved effective in preventing a financial or debt crisis, but the pandemic and subsequent COVID-19 policies have hampered the economy’s capacity to rebalance and rebound, resulting in further demand reduction.

    Delicate balancing act

    Bringing aggregate demand back to pre-pandemic levels is crucial for accelerating China’s economic recovery. To this end, China’s fiscal and monetary policies can be more proactive, given that de-risking policies have remained in place for so long. While policymakers face a delicate balancing act, the growing risk of a protracted downturn underscores the need to find more effective solutions to the pressing challenges facing the Chinese economy.

    But China could still do more to rebalance its economy. By committing to carrying out structural reforms, removing barriers to entry, and opening up sectors that are currently closed to foreign competition – such as education, training, consulting, and health care – China could create numerous market opportunities for the private sector and move closer to achieving long-term economic stability.

    www.project-syndicate.org

    Executive Moves

    Claire Li is the new head of China business at communications agency Hill+Knowlton Strategies, starting in September. Li was previously responsible for Starbucks’ communications in China.

    Daisuke Tsukagoshi is the new COO at Japanese clothing company Uniqlo from September. As COO, Tsukagoshi oversees procurement, among other things. Uniqlo has also been in the headlines recently for its use of cotton from Xinjiang.

    Is something changing in your organization? Let us know at heads@table.media!

    Dessert

    China and other East Asian countries observed the Hungry Ghost Festival on Wednesday. The Zhongyuan Festival (中元节) is a festival of forgiveness commemorating ancestors and their wandering spirits. It falls on the 15th day of the seventh lunar month, which coincides with the day of the full moon.

    China.Table editorial office

    CHINA.TABLE EDITORIAL OFFICE

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