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Sinolytics Radar

Sinolytics Radar

At the expensive end of the value chain

China is deeply integrated into and participated in the global chains of value creation. However, the nature of China’s integration has significantly changed over time: China has steadily increased its value contribution to export to third countries while gradually reducing the reliance on foreign value-add in immediate goods imports. This is by design: China’s top leadership has the ambition to maintain this trajectory, creating more global leverage through trade.​

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Sinolytics Radar

20th Party Congress: changes in Xi Jinping's wake

The 20th party congress in fall 2022 will see some major personnel shakeups in China’s central political system. Xi will likely receive a third term. A generational change is underway, as about half of the Central Committee members have hit the age ceiling for nomination. Before this political transition is done, don’t expect policy surprises. But do watch out for the themes highlighted in the post-congress presidential speech. ​

Von Redaktion Table

Sinolytics Radar

Securing supply chains remains challenging in 2022

Supply chain management will continue to have hard times in 2022. Given the Winter Olympics and Party Congress, China’s government will not veer away from its Zero-Covid strategy, risking closure of production sites and delivery delays. In addition, geopolitical tensions increasingly put companies at the crossroads between complying with US/EU laws and avoiding the ire of the Chinese government. ​

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Sinolytics Radar

'Common Prosperity': Focus on improved worker benefits and social welfare​

Common prosperity will guide the Chinese government's policies towards a more equal society. China is expected to issue substantial policies improving workers’ benefits and providing more comprehensive social welfare while strengthening prosecution of illegal incomes of the wealthy. In 2022, the negative short-term effects for businesses caused by higher labor costs might dominate, but a growing middle-class with high purchasing power can create a new customer base in the long term. ​

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Sinolytics Radar

Cybersecurity: Focus on a more digital economy

Enforcement of cyber and data security regulations will further ramp up in 2022 and beyond as China prepares for launching its digital economy into a higher orbit. While China moves along its digital path, it also fortifies its regulatory framework, creating significant compliance and operational challenges that companies need to be keenly aware of.​​

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Sinolytics Radar

Expansion plans for renewable energies

In order to achieve carbon neutrality by 2060, China needs to adopt a rapid decarbonization strategy including a massive expansion of renewable energy (RE). According to projections by the International Energy Agency (IEA), China’s RE share of total power generation can reach 80% by 2060, if sufficient measures are implemented. To turn this projection into reality, China’s government is pushing decarbonization efforts, ranging from expansion of installed RE capacity to promotion of corporate-level green energy purchasing.

Von Redaktion Table

Sinolytics Radar

Decoupling is reflected in statistics

Given the current geopolitical situation and domestic sentiments in the US as well as China, technological decoupling between the two powers is progressing. While hard barriers for technology exchange like export and investment controls capture the media headlines, research cooperation between the US and China has also been heavily affected by the increasingly antagonistic relationship. One of the results is decreasing bilateral research funding and increasing scrutiny on scientific exchange.​

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Sinolytics Radar

China between state and market economy

Compared to other bond markets, China’s default rate is astonishingly low. This is largely caused by the government’s implicit promise to bail out SOEs that are in trouble, creating a typical “moral hazard” situation. Recent SOE defaults, however, show that China’s financial regulators are trying to move more strictly against this “moral hazard”. But their task is difficult: Other political goals, like employment and social stability, still often restrain financial regulators from allowing SOEs to fail.​

Von Redaktion Table

Sinolytics Radar

Authorities push cyber laws

In recent years, China’s regulatory framework for cyber and data governance has developed rapidly. The Personal Information Protection (PIP) Law took effect on January 1, 2022. More regulations and standards will follow. The intensity of the enforcement is catching up with the rules, inspections are increasing. Companies need to act now to ensure compliance and mitigate risks, but also to leverage new opportunities for data usage and monetization.

Von Redaktion Table