The chip industry has long had a geopolitical dimension due to the technological rivalry between the USA and China. If anything, this will increase in 2023.
By Experts Table.Briefings
It remains uncertain how fast China's economy will recover throughout the year. Consumer confidence has been damaged by the strict Covid policy. Ideology-driven policies could further inhibit growth.
By Experts Table.Briefings
In December 2022, China’s newly added “Total Social Financing” (TSF) declined significantly compared to the same period in 2021. Although China lifted its strict three-year-long zero-Covid policy in early December, the momentum for China's economic growth remained relatively weak so far, signified by the slow credit growth.
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Since 2020, the Chinese government has strengthened its regulation of the real estate sector and issued “three red lines”, aiming to lower the high debt ratio of real estate companies and reduce the economic reliance on the real estate sector. However, the largest companies failed to reach this target. Reasons include weakening purchasing demand and operational difficulties primarily caused by strongly restrictive policies during the economic downturn.
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Workers are being laid off as China's tech sector is struggling due to the country's weak economic performance in recent times. Throughout 2022, Chinese tech companies have faced a decline in revenues and profits, resulting in cost-cuts in form of massive layoffs. The tech sector's crucial importance as a massive job generator for China’s educated youth makes this a particularly concerning development, especially since industry expectations indicate that the trend will continue in 2023 as well.
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China’s Ministry of Industry and Information Technologies (MIIT) has recently issued new regulations mandating companies to step up their data management practices. The new rules emerge at a time when data is hailed as “the most active new factor of production” in China’s digital economy. Data security has become a decisive building-block of a broadened understanding of China’s national security
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Amidst mounting social frustration and protests and record-low Q4 economic data, China’s government further relaxed its Covid control measures with the 7 December announcement of the “ten new measures” – a 180-degree turn-around from the “doubling down on zero” strategy less than a month ago. This abrupt exit from Zero-Covid has already led to a hike of positive cases in Beijing and other major cities, over-priced cold medicines and over-stretched medical resources.
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The crackdown on tech companies was a clear signal to China's super-rich that even their power has limits. On the other hand, many super-rich retain close relationships with the political elite. And the state needs them to provide growth and employment.
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The Social Credit System Establishment Draft Law reiterates the focus of the Social Credit System on companies and their compliance performance. Nonetheless, the System also covers several other legal persons, most significantly individuals and government organs. The level of impact on individuals strongly depends on their profession.
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The draft of the “Social Credit System Establishment Law” confirms the key purpose of the Social Credit System: To achieve integrity and trustworthiness of market players. Across all players, companies are by far most affected. It is likely that significant time will pass until the Social Credit System Law itself will come into effect. However, all areas outlined by the draft law are already covered by legally effective rules and regulations. and impact companies with registered entities in China.
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