Facing the currently low COVID-19 infection numbers, many countries around the world are currently reopening cautiously. China is choosing the opposite direction in its COVID-19 policy – and is continuing to close down its borders. The reason is that China’s domestic vaccines such as Sinopharm are apparently not very effective against the rapidly spreading delta variant. Thus, Beijing continues to pursue a strict “zero-covid” strategy. As our team of authors in Beijing found out, this decision has serious consequences for German business travelers.
Meanwhile the price of pork is falling rapidly. Dishes like 鱼香肉丝 (fish-scented pork) available in restaurants are not only delicious, but also particularly cheap right now. But while this pleases consumers, it worries the Chinese government, as Ning Wang analyzes in her latest feature. Authorities actually strive for price stability. But with its economic interventions, the government contributes to price fluctuations.
It’s a move of rare unity against China that was displayed Monday. The US, EU, UK and numerous other allies joined forces to criticize the People’s Republic for its criminal cyberattacks. The scale of state-sponsored attacks from Chinese territory shows that no country or industry is safe, as Washington, Brussels, and London agreed on.
I wish you many new insights while reading.
Pigs as heavy as polar bears or even small hippos. Pictures of breeding animals fattened up to 200 kilograms and more were recently shown on several news broadcasts of the Chinese state media. But these were not reports of acknowledgment. Rather, farmers were denounced for having triggered an oversupply thanks to excessive overfeeding of pigs. They are to be blamed for dropping prices for pork – much to the farmers’ disadvantage.
In contrast, consumers are happy to see low prices. In the past, prices had doubled at times due to the outbreak of African Swine Fever (ASF). Beijing attempted to stabilize prices. The government increased imports from Brazil, the US and Spain, and also utilized their national meat reserves. But high fluctuations in pork prices show clearly that recent measures are on shaky ground.
The fact that pork prices in the People’s Republic have been dropping since the beginning of the year has several causes, but international agricultural experts see one main reason: the pig breeding herds of the past have been successfully rebuilt. Due to the ASF outbreak in 2018 and 2019, more than a third of all Chinese pig livestock had been culled.
Subsequently, the authorities had announced the rebuilding of the country’s pig herds as a primary goal in the agricultural sector – partly to restore self-sufficiency and thus become less dependent on imports from abroad. But Beijing is still far from being independent.
The EU Commission recently stated that the 27 member countries (excluding trade with the UK) sold a record 1.6 million tonnes to third countries in the first quarter of 2021. China was the biggest buyer with 323,250 tonnes of pork – an increase of more than 26 percent, as trade magazine Agrarheute calculated. In 2020, China imported a record 4.4 million tons of pork, twice the amount of the previous year. And as the latest customs data for the current year shows; imports from January to May were 14 percent higher than in the same period last year, according to Bloomberg.
Incidentally, Germany is currently not benefiting from increased meat exports to China at all. Once again, the reason is the ASF. After the disease was detected in wild boars in Brandenburg and Saxony, China ceased all imports of German meat. The Federal Ministry of Agriculture hopes for a resumption of meat exports from ASF-free regions to China.
Meanwhile, smaller pig farmers in China have been able to put up their pigs as collateral to receive loans through government programs, after China’s Banking Regulatory Commission and the Ministry of Agriculture called on state banks and insurers to help. Analysts at Fitch Ratings report massive investment in major breeders. Agricultural enterprise Wens Foodstuff Group of southern Guangdong reportedly spent about 40 percent of its last year’s revenue to upgrade and expand breeding capacities and to increase the number of processing plants. Other local suppliers such as Muyuan Food and New Hope Liuhe also followed suit, spending an amount ranging from 24 percent to more than 80 percent of their 2020 revenue on investment. Pork prices, which have now been dropping for the past months, are the first signs that rebuilding efforts of past pig herds across the country is a success.
However, another reason for the recent price drop was the emergency slaughtering due to diseases and recurring outbreaks of ASF. The resulting panic sales flooded the market and thus influenced prices further, which in turn ultimately has an impact on the profit margins of livestock farmers.
That’s how the prices for live pigs dropped by 60 percent since the beginning of the year, averaging at 14.68 yuan (€1.92) per kilogram – the lowest in two years, according to agricultural data services provider Shanghai JC Intelligence, as Bloomberg reported.
Meanwhile, “expenses on pig farming have increased by 36 percent before the virus outbreak due to rising costs of corn, labor and waste disposal,” Yang Zhenhai, head of animal husbandry at China’s Ministry of Agriculture, told state media. “The average cost is about 280 yuan (about €37) per pig, or 17 yuan (€2.25) per kilogram, up from 12.5 yuan before the country reported the virus in 2018,” Yang said.
A recent directive by the National Development and Reform Commission shows how dramatically the government in Beijing rates the situation: it now called on pig farmers to “keep their pig production capacity at a reasonable level” and criticized the excessive drop in prices for live pigs.
According to a recent study the government’s usual interventions to prevent rising inflation when prices were still high are not producing the desired result, but are only causing more damage. China’s National Pork Reserves – a network of frozen meat storage used by the government to cushion fluctuations in the supply and demand for pigs – has resulted in increased price volatility rather than to reduce it, explains Li Yu, an agriculture professor at Nanjing Agricultural University. According to Yi, in doing so, the government was sending the wrong signals, and producers were beginning to rely on government intervention. According to Bloomberg, Beijing flooded the market with 670,000 tons from its state reserves last year, an equivalent of approximately 15 percent of the total pork import volume.
However, the farmers’ greed is probably also to blame. They breed pigs with a weight of 150 to 200 kilograms and more instead of the usual 125 kilograms. Last year, in particular, farmers started over fattening their pigs, betting that pork prices would continue to rise, and then kept their animals as prices fell, hoping that prices would recover. Now they are only able to sell their pigs at a loss.
Lastly, farmers are double burdened by every additional kilo of their livestock, since obese pigs also require more feed and their sale price does not even cover the purchase of a new piglet.
On 30 June 2020, the National People’s Congress in Beijing promulgated the so-called National Security Law for Hong Kong. Many observers interpreted this unilateral act as a fundamental departure from the “one country, two systems” principle promised for Hong Kong under the Sino-British Joint Declaration signed in 1984.
With regards to the economy, laws such as Hong Kong’s Security Act are usually perceived as being primarily aimed at political dissent. However, this is a dangerous assumption. In the People’s Republic of China, national security concerns can also affect every aspect of the economy, from finance to energy to technology and infrastructure. Thus, the international community can expect further, far-reaching changes to the status quo in Hong Kong as well – especially as the Chinese leadership is currently massively expanding its absolute authority in the private economic sector, in mainland China as well as in Hong Kong.
According to Hong Kong’s Security Law, the central government in Beijing has the responsibility for Hong Kong’s national security affairs. Hong Kong’s Chief Executive Carrie Lam is accountable to the central government on all matters of national security. Given the broad and extensive nature of the concept of national security, this represents a fundamental change in the legal landscape in Hong Kong.
The Hong Kong Security Law does not offer a definition of “national security”. Individuals and companies that continue to operate in Hong Kong and mainland China, therefore, need to understand the definition of “national security” within the legal framework of the People’s Republic. This is because the Hong Kong “security law” must be understood and interpreted in the context of the broader legal framework of the People’s Republic.
The legal framework of the People’s Republic allows for a broad definition of national security and does not limit the concept to traditional issues such as terrorism, separatism, or extremism. Rather, the leadership in Beijing requires all actors to protect key industries vital to the national economy, including the financial industry, the energy sector, food safety companies, culture, technology, cybersecurity, ecological and environmental protection, nuclear technology, and the exploration and utilization of outer space.
This expansive definition of national security and its cross-industry application has been embraced by senior Hong Kong government officials, including Chief Secretary John Lee, who is a member of the National Security Commission. Security laws of the People’s Republic and the Hong Kong Special Administrative Region apply to both government and private entities.
International companies with business and interests in the People’s Republic and the Special Administrative Region face new risks and challenges in light of the Hong Kong Security Law. First, the extraterritorial effect of the law means that individuals and companies may be held criminally liable for documents, work or activities conducted outside Hong Kong but which “jeopardize” the national security of the People’s Republic. This could include obtaining information about meetings if they are attributed to a key industry.
As could the purchase of documents that are at a later point classified as state secrets, or hosting of a website or server outside Hong Kong whose contents violate Hong Kong security law. In addition, given the variety of industries under Beijing’s leadership that are linked to national security concerns, intellectual property claims to technologies could be at risk.
The recent crackdown on the Hong Kong newspaper Apple Daily, including the freezing of HK $18 million in assets, the suspension of trading in shares of Apple Daily’s parent company, and the arrest of senior staff, illustrate the broad powers of the authorities under the new law, as well as the potential penalties that the Hong Kong Security Law allows. “Apple Daily” eventually ceased operations entirely on June 24. Many Hong Kong citizens still managed to get a hold of the last edition of the newspaper. International media outlets operating outside mainland China and Hong Kong are also affected by the security law.
In the People’s Republic, trade secrets often overlap with state secrets, particularly in the context of state-owned enterprises or Beijing’s economic development strategy or the country’s competitiveness in the international market. The alleged “unlawful” disclosure of state secrets to a foreign institution, organization or individual outside Hong Kong or the People’s Republic, can be punished by life imprisonment.
The Hong Kong Security Law could provide an important procedural advantage to a state-owned enterprise or Chinese conglomerate that raises the national security issue in litigation. In addition, commercial disputes may arise from the merger or acquisition of companies if their businesses are now covered by national security, unlike at the time the contract was signed.
Due to the interpretation of the Hong Kong Security Law, which is determined by the Standing Committee of the National People’s Congress together with the Chinese government, the question of whether or not a matter is in fact a matter of national security is no longer a legal decision, but a political one.
Geopolitical tensions also play a role in determining whether a commercial matter is of national security. Other laws passed by the central government in Beijing further suggest that commercial entities may be playing a role in national security matters. For example, the People’s Republic Data Security Law, passed on June 10, 2021, categorizes data and data flows as national security issues and gives authorities broad powers to punish companies and their employees for illegal data transfers. In addition, the Standing Committee of the National People’s Congress recently revised the Criminal Law to target corporate espionage and punish anyone who “steals, spies on, buys, or illegally supplies trade secrets to foreign institutions, organizations, and individuals.”
Finally, the Chinese government issued new measures to expand the national security screening of foreign investment, which took effect in January 2021. As tensions between China and other countries continue to rise, it is foreseeable that national security issues will arise in many more areas than before. When relocating businesses, individuals and international companies should pay close attention to inadvertent disclosure of state and trade secrets or intelligence information to foreign companies, which could constitute a violation of Hong Kong’s security law.
According to China’s Data Security Law, companies face harsh penalties if they transfer “sensitive” data outside China’s borders. This means if companies are asked to hand over data by foreign judicial or law enforcement authorities, they cannot transfer that data without the permission of the Chinese authorities. In light of these legal and regulatory changes, it is becoming increasingly difficult for international companies to simultaneously comply with laws and regulations in the People’s Republic and elsewhere. Under the recent amendment to Hong Kong’s Immigration Ordinance, Hong Kong’s authorities can impose exit bans on anyone.
As the Chinese government continues to aggressively “reclaim” its role as a global leader in social, political and economic terms, Hong Kong is likely to move even further away from its past liberal traditions. It is imperative that the international community understands this paradigm shift and considers these new risks in its future operations and business in Hong Kong and the People’s Republic.
Dennis W. H. Kwok served as a member of the Hong Kong City Council (Legislative Council), chairing the “Committee on Judicial Administration and Legal Services” and the “House Committee”. In July 2020, he was excluded from new elections along with other representatives of the democratic opposition.
This article is a summary of a paper published by the ASH Centre for Democratic Governance and Innovation at the Harvard Kennedy School as part of a series of articles. It appeared first in the China Bulletin of Friedrich Naumann Foundation.
Lunch behind glass: China’s Olympic women’s soccer team has arrived at its base in the Miyagi Prefecture. The team’s athletes had to travel 350 kilometers north by bus from Tokyo’s Narita Airport. The team will face Brazil in the preliminary round on Wednesday. Meanwhile, in the town of Rifu, where the stadium is located, residents worry that new Covid infections could be brought in from outside, despite masks, mandatory vaccinations and tests. And despite glass screens.
Facing the currently low COVID-19 infection numbers, many countries around the world are currently reopening cautiously. China is choosing the opposite direction in its COVID-19 policy – and is continuing to close down its borders. The reason is that China’s domestic vaccines such as Sinopharm are apparently not very effective against the rapidly spreading delta variant. Thus, Beijing continues to pursue a strict “zero-covid” strategy. As our team of authors in Beijing found out, this decision has serious consequences for German business travelers.
Meanwhile the price of pork is falling rapidly. Dishes like 鱼香肉丝 (fish-scented pork) available in restaurants are not only delicious, but also particularly cheap right now. But while this pleases consumers, it worries the Chinese government, as Ning Wang analyzes in her latest feature. Authorities actually strive for price stability. But with its economic interventions, the government contributes to price fluctuations.
It’s a move of rare unity against China that was displayed Monday. The US, EU, UK and numerous other allies joined forces to criticize the People’s Republic for its criminal cyberattacks. The scale of state-sponsored attacks from Chinese territory shows that no country or industry is safe, as Washington, Brussels, and London agreed on.
I wish you many new insights while reading.
Pigs as heavy as polar bears or even small hippos. Pictures of breeding animals fattened up to 200 kilograms and more were recently shown on several news broadcasts of the Chinese state media. But these were not reports of acknowledgment. Rather, farmers were denounced for having triggered an oversupply thanks to excessive overfeeding of pigs. They are to be blamed for dropping prices for pork – much to the farmers’ disadvantage.
In contrast, consumers are happy to see low prices. In the past, prices had doubled at times due to the outbreak of African Swine Fever (ASF). Beijing attempted to stabilize prices. The government increased imports from Brazil, the US and Spain, and also utilized their national meat reserves. But high fluctuations in pork prices show clearly that recent measures are on shaky ground.
The fact that pork prices in the People’s Republic have been dropping since the beginning of the year has several causes, but international agricultural experts see one main reason: the pig breeding herds of the past have been successfully rebuilt. Due to the ASF outbreak in 2018 and 2019, more than a third of all Chinese pig livestock had been culled.
Subsequently, the authorities had announced the rebuilding of the country’s pig herds as a primary goal in the agricultural sector – partly to restore self-sufficiency and thus become less dependent on imports from abroad. But Beijing is still far from being independent.
The EU Commission recently stated that the 27 member countries (excluding trade with the UK) sold a record 1.6 million tonnes to third countries in the first quarter of 2021. China was the biggest buyer with 323,250 tonnes of pork – an increase of more than 26 percent, as trade magazine Agrarheute calculated. In 2020, China imported a record 4.4 million tons of pork, twice the amount of the previous year. And as the latest customs data for the current year shows; imports from January to May were 14 percent higher than in the same period last year, according to Bloomberg.
Incidentally, Germany is currently not benefiting from increased meat exports to China at all. Once again, the reason is the ASF. After the disease was detected in wild boars in Brandenburg and Saxony, China ceased all imports of German meat. The Federal Ministry of Agriculture hopes for a resumption of meat exports from ASF-free regions to China.
Meanwhile, smaller pig farmers in China have been able to put up their pigs as collateral to receive loans through government programs, after China’s Banking Regulatory Commission and the Ministry of Agriculture called on state banks and insurers to help. Analysts at Fitch Ratings report massive investment in major breeders. Agricultural enterprise Wens Foodstuff Group of southern Guangdong reportedly spent about 40 percent of its last year’s revenue to upgrade and expand breeding capacities and to increase the number of processing plants. Other local suppliers such as Muyuan Food and New Hope Liuhe also followed suit, spending an amount ranging from 24 percent to more than 80 percent of their 2020 revenue on investment. Pork prices, which have now been dropping for the past months, are the first signs that rebuilding efforts of past pig herds across the country is a success.
However, another reason for the recent price drop was the emergency slaughtering due to diseases and recurring outbreaks of ASF. The resulting panic sales flooded the market and thus influenced prices further, which in turn ultimately has an impact on the profit margins of livestock farmers.
That’s how the prices for live pigs dropped by 60 percent since the beginning of the year, averaging at 14.68 yuan (€1.92) per kilogram – the lowest in two years, according to agricultural data services provider Shanghai JC Intelligence, as Bloomberg reported.
Meanwhile, “expenses on pig farming have increased by 36 percent before the virus outbreak due to rising costs of corn, labor and waste disposal,” Yang Zhenhai, head of animal husbandry at China’s Ministry of Agriculture, told state media. “The average cost is about 280 yuan (about €37) per pig, or 17 yuan (€2.25) per kilogram, up from 12.5 yuan before the country reported the virus in 2018,” Yang said.
A recent directive by the National Development and Reform Commission shows how dramatically the government in Beijing rates the situation: it now called on pig farmers to “keep their pig production capacity at a reasonable level” and criticized the excessive drop in prices for live pigs.
According to a recent study the government’s usual interventions to prevent rising inflation when prices were still high are not producing the desired result, but are only causing more damage. China’s National Pork Reserves – a network of frozen meat storage used by the government to cushion fluctuations in the supply and demand for pigs – has resulted in increased price volatility rather than to reduce it, explains Li Yu, an agriculture professor at Nanjing Agricultural University. According to Yi, in doing so, the government was sending the wrong signals, and producers were beginning to rely on government intervention. According to Bloomberg, Beijing flooded the market with 670,000 tons from its state reserves last year, an equivalent of approximately 15 percent of the total pork import volume.
However, the farmers’ greed is probably also to blame. They breed pigs with a weight of 150 to 200 kilograms and more instead of the usual 125 kilograms. Last year, in particular, farmers started over fattening their pigs, betting that pork prices would continue to rise, and then kept their animals as prices fell, hoping that prices would recover. Now they are only able to sell their pigs at a loss.
Lastly, farmers are double burdened by every additional kilo of their livestock, since obese pigs also require more feed and their sale price does not even cover the purchase of a new piglet.
On 30 June 2020, the National People’s Congress in Beijing promulgated the so-called National Security Law for Hong Kong. Many observers interpreted this unilateral act as a fundamental departure from the “one country, two systems” principle promised for Hong Kong under the Sino-British Joint Declaration signed in 1984.
With regards to the economy, laws such as Hong Kong’s Security Act are usually perceived as being primarily aimed at political dissent. However, this is a dangerous assumption. In the People’s Republic of China, national security concerns can also affect every aspect of the economy, from finance to energy to technology and infrastructure. Thus, the international community can expect further, far-reaching changes to the status quo in Hong Kong as well – especially as the Chinese leadership is currently massively expanding its absolute authority in the private economic sector, in mainland China as well as in Hong Kong.
According to Hong Kong’s Security Law, the central government in Beijing has the responsibility for Hong Kong’s national security affairs. Hong Kong’s Chief Executive Carrie Lam is accountable to the central government on all matters of national security. Given the broad and extensive nature of the concept of national security, this represents a fundamental change in the legal landscape in Hong Kong.
The Hong Kong Security Law does not offer a definition of “national security”. Individuals and companies that continue to operate in Hong Kong and mainland China, therefore, need to understand the definition of “national security” within the legal framework of the People’s Republic. This is because the Hong Kong “security law” must be understood and interpreted in the context of the broader legal framework of the People’s Republic.
The legal framework of the People’s Republic allows for a broad definition of national security and does not limit the concept to traditional issues such as terrorism, separatism, or extremism. Rather, the leadership in Beijing requires all actors to protect key industries vital to the national economy, including the financial industry, the energy sector, food safety companies, culture, technology, cybersecurity, ecological and environmental protection, nuclear technology, and the exploration and utilization of outer space.
This expansive definition of national security and its cross-industry application has been embraced by senior Hong Kong government officials, including Chief Secretary John Lee, who is a member of the National Security Commission. Security laws of the People’s Republic and the Hong Kong Special Administrative Region apply to both government and private entities.
International companies with business and interests in the People’s Republic and the Special Administrative Region face new risks and challenges in light of the Hong Kong Security Law. First, the extraterritorial effect of the law means that individuals and companies may be held criminally liable for documents, work or activities conducted outside Hong Kong but which “jeopardize” the national security of the People’s Republic. This could include obtaining information about meetings if they are attributed to a key industry.
As could the purchase of documents that are at a later point classified as state secrets, or hosting of a website or server outside Hong Kong whose contents violate Hong Kong security law. In addition, given the variety of industries under Beijing’s leadership that are linked to national security concerns, intellectual property claims to technologies could be at risk.
The recent crackdown on the Hong Kong newspaper Apple Daily, including the freezing of HK $18 million in assets, the suspension of trading in shares of Apple Daily’s parent company, and the arrest of senior staff, illustrate the broad powers of the authorities under the new law, as well as the potential penalties that the Hong Kong Security Law allows. “Apple Daily” eventually ceased operations entirely on June 24. Many Hong Kong citizens still managed to get a hold of the last edition of the newspaper. International media outlets operating outside mainland China and Hong Kong are also affected by the security law.
In the People’s Republic, trade secrets often overlap with state secrets, particularly in the context of state-owned enterprises or Beijing’s economic development strategy or the country’s competitiveness in the international market. The alleged “unlawful” disclosure of state secrets to a foreign institution, organization or individual outside Hong Kong or the People’s Republic, can be punished by life imprisonment.
The Hong Kong Security Law could provide an important procedural advantage to a state-owned enterprise or Chinese conglomerate that raises the national security issue in litigation. In addition, commercial disputes may arise from the merger or acquisition of companies if their businesses are now covered by national security, unlike at the time the contract was signed.
Due to the interpretation of the Hong Kong Security Law, which is determined by the Standing Committee of the National People’s Congress together with the Chinese government, the question of whether or not a matter is in fact a matter of national security is no longer a legal decision, but a political one.
Geopolitical tensions also play a role in determining whether a commercial matter is of national security. Other laws passed by the central government in Beijing further suggest that commercial entities may be playing a role in national security matters. For example, the People’s Republic Data Security Law, passed on June 10, 2021, categorizes data and data flows as national security issues and gives authorities broad powers to punish companies and their employees for illegal data transfers. In addition, the Standing Committee of the National People’s Congress recently revised the Criminal Law to target corporate espionage and punish anyone who “steals, spies on, buys, or illegally supplies trade secrets to foreign institutions, organizations, and individuals.”
Finally, the Chinese government issued new measures to expand the national security screening of foreign investment, which took effect in January 2021. As tensions between China and other countries continue to rise, it is foreseeable that national security issues will arise in many more areas than before. When relocating businesses, individuals and international companies should pay close attention to inadvertent disclosure of state and trade secrets or intelligence information to foreign companies, which could constitute a violation of Hong Kong’s security law.
According to China’s Data Security Law, companies face harsh penalties if they transfer “sensitive” data outside China’s borders. This means if companies are asked to hand over data by foreign judicial or law enforcement authorities, they cannot transfer that data without the permission of the Chinese authorities. In light of these legal and regulatory changes, it is becoming increasingly difficult for international companies to simultaneously comply with laws and regulations in the People’s Republic and elsewhere. Under the recent amendment to Hong Kong’s Immigration Ordinance, Hong Kong’s authorities can impose exit bans on anyone.
As the Chinese government continues to aggressively “reclaim” its role as a global leader in social, political and economic terms, Hong Kong is likely to move even further away from its past liberal traditions. It is imperative that the international community understands this paradigm shift and considers these new risks in its future operations and business in Hong Kong and the People’s Republic.
Dennis W. H. Kwok served as a member of the Hong Kong City Council (Legislative Council), chairing the “Committee on Judicial Administration and Legal Services” and the “House Committee”. In July 2020, he was excluded from new elections along with other representatives of the democratic opposition.
This article is a summary of a paper published by the ASH Centre for Democratic Governance and Innovation at the Harvard Kennedy School as part of a series of articles. It appeared first in the China Bulletin of Friedrich Naumann Foundation.
Lunch behind glass: China’s Olympic women’s soccer team has arrived at its base in the Miyagi Prefecture. The team’s athletes had to travel 350 kilometers north by bus from Tokyo’s Narita Airport. The team will face Brazil in the preliminary round on Wednesday. Meanwhile, in the town of Rifu, where the stadium is located, residents worry that new Covid infections could be brought in from outside, despite masks, mandatory vaccinations and tests. And despite glass screens.
