Newsletter header



metrix 92018 enAlmost half of all working women in China have no children. That’s according to statistics published by Xinhua news agency. More than one third of these women said they lacked time and energy to consider motherhood. Many others said the financial burden of raising children was too high. 

Topic of the week: Sino-US trade talks

Image by ImagineChina


Sino-US trade talks could hinge on ZTE

A lot is at stake this week as a high-level Chinese delegation began talks in Washington on a deal to avoid a full-blown trade war between the world’s two largest economies. The delegation, led by Chinese vice premier Liu He, arrived in Washington on May 15 and was scheduled to discuss issues ranging from intellectual property protections to agricultural goods to steel capacity. The talks come after weeks of rising trade tensions and just days after US President Donald Trump stated his willingness to work with China to rescue tech giant ZTE. 

Although the ZTE case is officially independent from the trade disputes, which started to escalate last month, media reports say the talks in Washington could hinge on finding a solution for the troubled company.  

ZTE’s operations ground to halt after the US imposed punitive measures against China’s second largest telecommunications company for violating the terms of a settlement reached last year after ZTE broke US sanctions against Iran and North Korea. ZTE was effectively cut off from its main US-based suppliers of microchips for its mobile phones and other products for the next seven years, exposing the company’s and China’s dependency on foreign technology. Trump's unexpected move to rescue ZTE, announced via Twitter last Sunday, can be seen as a step toward winning concessions from China on other trade issues. 

Trump’s olive branch was offered after weeks of escalating trade tensions. In April Washington threatened to impose tariffs on up to 150 billion USD worth of imports from China, prompting Beijing to retaliate.  

While China’s trade surplus with the US is a one of the key topics in the Washington talks, Beijing’s industrial strategy “Made in China 2025” is at the heart of the trade dispute. The plan aims to help Chinese firms become market leaders in sectors such as artificial intelligence and new energy vehicles. The US government demands an end to state subsidies to these industries and wants to put tariffs on Chinese tech exports to the US.  

Yet leading up to the Washington talks, both sides have stressed the need to cooperate. In addition to Trump’s tweet on ZTE, White House economic adviser Larry Kudlow said on Tuesday he backed efforts to reach an agreement with Beijing and that both countries must take action. In another sign of goodwill Chinese regulators have reportedly resumed the review of US chipmaker Qualcomm’s bid to buy local rival NXP. The deal has already received approval from eight of nine global regulators.  

Max J. Zenglein, Senior Economist at MERICS: 

“The developments in the run-up to the Washington meeting highlight the complexity of the issues at stake. The US and China are highly interconnected – not just economically but also on other international issues such a North Korea. There are strong indications that both sides are keen to avoid an escalation of the trade conflicts that could have global repercussions.”  

China and the World

China and Iran hail "strategic partnership"

China has emphasized that it wants to stick to the Iran nuclear deal despite the US withdrawal. Chinese foreign minister Wang Yi reiterated his support for the agreement during a visit to Beijing by Iranian foreign minister Mohammad Jaraf Zarif on May 13. Beijing was the first leg of a diplomatic tour by Zarif that also took him to Moscow and Brussels to consult with the remaining signatories to the 2015 agreement. 

After the talks in Beijing, Wang Yi said he believed Zarif’s tour would “improve countries’ understanding of Iran’s position” and help Tehran protect its “legitimate national interests.” Wang and Zarif hailed the “comprehensive strategic partnership” between their countries. 

China was one of the six powers – with the US, Russia, France, the UK and Germany – that signed the historic pact, which saw sanctions lifted in return for the commitment by Tehran not to acquire nuclear weapons.  

China has wide-ranging economic interests in Iran and is the biggest importer of Iranian oil. State-owned energy company CNPC holds a 30 percent stake in a major Iranian natural gas project. Media reports say CNPC is ready to increase its stake should French company Total pull out due to new US sanctions. Such a move by CNPC could further strain Sino-US relations. But US sanctions could also affect Chinese companies’ activities in Iran with international suppliers becoming wary of selling equipment to Iran-based projects.  

China intensifies neighborhood diplomacy

A flurry of high-level meetings between China, South Korea, and Japan suggest closer cooperation among the three East Asian countries whose ties have been strained by territorial and historical disputes for many years.   

Chinese premier Li Keqiang and his Japanese counterpart Shinzo Abe met in Japan on May 10 and agreed to launch several initiatives to foster closer cooperation. The most significant agreement is on a new security hotline to be effective in June to avoid maritime clashes in the East China Sea where both countries claim the Senkaku or Diaoyu islands. Li also urged Abe to join the Belt and Road Initiative (BRI), China’s ambitious plans for improved transport and trade links between Asia, Africa and Europe.  

In a separate meeting on May 9 that also included the South Korean leader Moon Jae In, the three Asian powers agreed to cooperate in seeking the denuclearization of the Korean peninsula. They also voiced support for trilateral free trade.  

The meetings are seen as an attempt on the part of China to improve relations in its immediate neighborhood and manage any backlash to its more assertive foreign policy. Last month, a summit between Chinese president Xi Jinping and Indian premier Narendra Modi in Wuhan was also billed as a move to improve neighborhood relations and address concerns about the BRI.   

Politics, Society and media

Van drivers and crane operators protest over pay and working conditions

Logistics and the construction sector saw an upsurge in labor disputes in recent weeks. Van drivers working for the Hong Kong-based logistics company Lalamove staged protests in at least five cities over pay cuts that were announced without warning. The largest protest was reported on May 6 in the southern city of Shenzhen where a row of at least 50 vans carrying banners moved slowly down an avenue. Similar protests took place in Changsha, Chengdu, Kunming and Xi’an in the last few weeks. 

Crane operators also staged strikes and protests across China demanding better pay and working conditions. China Labour Bulletin, a Hong Kong-based NGO, recorded at least a dozen such strikes and protests since 25 April, including incidents in Sichuan, Gansu, Henan, Fujian, Hunan, Jiangsu, Guizhou, Jiangxi, Hubei and Guangxi. Some media described the strikes as the biggest sectoral labor protests in recent years. 

The workers organized their protests online via closed groups on instant messaging apps like QQ and WeChat to discuss strategies and make announcements. 

The logistics sector and the construction industry employ many low-skilled migrant workers. Working conditions are often harsh and pay is low. Contracts and social security contributions can be scant. Digitalization, especially in logistics, puts van drivers under further pressure through apps that monitor delivery times and routes. 

Xi Jinping calls for better coordination between central and local institutions

Chinese president and party leader Xi Jinping has called on central and local government institutions to better coordinate their activities. Xi made the remarks on May 11 in Beijing when presiding over the second meeting of the central committee for deepening overall reform.  

Xinhua news agency reported that institutions at the provincial or lower levels would be granted greater autonomy but must uphold the central and unified leadership of the Communist Party (CCP). 

The meeting approved ten official documents on areas ranging from reform of local institutions to state-owned enterprises to pension provisions and health care.  

The central committee for deepening overall reform was set up in March 2018. It had started as an advisory small leading group (领导小组) in 2013. Its transformation into a committee is part of the CCP’s efforts to extend its control over state institutions. 

Strengthening the central role of the CCP has greatly increased the party’s influence in recent years. However, this was often achieved at the expense of local innovation and experimentation. 

Mareike Ohlberg, Research Associate at MERICS: 

“The CCP cannot rely on its central authority and leadership alone to implement reforms. The party needs strong provincial and local institutions that are familiar with local conditions and can implement reforms accordingly.”  

Sino-German media dialogue: Some connections, many differences

The Sino-German media dialogue is meant to bring journalists from China and Germany together to discuss common concerns and maybe find common ground. This year’s topic was carefully chosen: Social media and globalization. Roughly 40 media representatives from China and Germany met on May 7 in Berlin. But while some connections were found, fundamental differences remained. 

The different approaches to media and journalism were obvious from the outset. Andreas Michaelis of the German Foreign Ministry stressed media freedom and freedom of expression as “fundamental pillars” of Germany’s political order and society. For the Chinese side, Guo Weimin, vice minister at the State Council Information Office, stressed that media of both countries should work towards strengthening the Sino-German strategic partnership and promote economic globalization. 

The Chinese participants were mainly CCP cadres and representative from state media outlets. Among the German participants were many journalists from a more diverse background – from public broadcaster ARD, Reuters news agency, the economic daily Handelsblatt, the weekly “Die Zeit”, and others. 

The discussions often centered on the role of the media in society and there was little common ground to be found. But in the age of social media, journalists in both countries also face new challenges such as fake news. Yet what exactly is fake? And what to do about fake news? Opinions differed on how to deal with the problem. Under Chinese regulations even posting vaguely defined “rumors” is prohibited and can carry hefty prison sentences. 

The Sino-German media dialogue started in 2011 and almost always led to difficult, sometimes acrimonious discussions. Against this backdrop, some participants viewed this year’s exchange with cautious optimism and commented positively on the relatively open atmosphere – despite the many opposing views and fundamental differences.  

MERICS-Analysis: German-Chinese media dialogue: some connections amid fundamental differences. Blogpost by Didi Kirsten Tatlow, MERICS Visiting Fellow and one of the moderators at this year’s media dialogue.

What do Germans know about China?

China has become an important partner for business, politics and science, but what do Germans know about the People’s Republic? Education experts met on May 7 with officials from the Federal Ministry of Education and Research (BMBF), the German foreign ministry (AA) and the Standing Conference of the Ministers of Education and Cultural Affairs of the Länder (KMK). They and representatives from schools, universities and research institutions discussed ways to advance the teaching of Mandarin in Germany and general knowledge about China. 

MERICS presented an analysis of German competencies on China at the conference. The study, “China kennen, China können,” which was commissioned by the education ministry, is based on more than 50 interviews with politicians, business representatives and other stakeholders who regularly deal with China. The researchers also collected data on China Studies at German universities and China as part of school curricula.  

The researchers concluded that more schools and universities offer either exchange programs or cooperate with Chinese schools and universities than in the past. However, many Germans still have a rather clichéd view of China. In comparison with other European countries, fewer German pupils learn Mandarin and the number of students who chose China Studies at university is not going up despite demand for graduates with China expertise.   

While several conference participants shared positive experiences of their exchanges with China, it also became clear why young people sometimes have little interest in China: air pollution, internet censorship and the grip of the Communist Party on all aspects of society puts them off.   

The education and the foreign ministry and the KMK representatives said they would draw up joint measures to increase China competencies in Germany. 

Merics Analysis: Europe needs a Mandarin excellence strategy. Blogpost by Andrea Frenzel, co-author of the MERICS study calls for a European excellence strategy for Mandarin. 

Economy, Finance and Technology

Foreign banks welcome PBOC’s steps to financial opening

Foreign banks have welcomed moves by China’s central bank, the PBOC, to gradually remove restrictions on securities companies. Several banks said they are now going to increase their stakes in Chinese brokerage joint ventures.  

In late April, PBOC governor Yi Gang announced at the Bo’ao Forum that foreign banks will be allowed to increase their stakes in brokerage companies to 51 per cent. He said the cap would be entirely removed within three years. 

JPMorgan Chase said it plans to take a majority in its joint venture with China International Fund Management. UBS and Nomura have also applied to get majority stakes in their respective joint ventures. HSBC was allowed to take a majority stake last year under special rules for Hong Kong-funded institutions. 

China is under pressure, particularly from the US, to open its financial markets. The government in Beijing has promised reforms for a long time but has been slow in taking action. 

Securities joint ventures are still fairly small in China. Consequently, it might take a while before foreign banks take on a more prominent role in the domestic market. It is likely that the government held back on relaxing the joint-venture rules to protect domestic banks from international competition.

State Council promises to cut red tape for new businesses

Starting a business in China could soon become easier for both domestic and foreign-invested companies. The State Council, China’s cabinet, published new regulations on May 2 aimed at simplifying and speeding up the process of starting new domestic businesses. On May 16, the State Council announced that from June 30 foreign-invested businesses will be able to register on a central website by filling out just one form. This should shorten the registration period and make it easier to start business operations.  

According to statistics from the Ministry of Commerce, 35,000 new foreign-invested companies were founded in China in 2017 alone. That is an increase of 27.8 percent in comparison with 2016. Foreign investment in China rose by 7.9 percent and reached 877.7 billion CNY (about 117 billion EUR). 

Under the new regulations for domestic companies, registering a new business should take 8.5 days, less than half the current average of 20 working days. After a trial phase in selected cities, the new measures will be rolled out nation-wide in the first half of 2019.  

Last month, the State Council had already promised a series of tax cuts worth more than 60 billion CNY to support innovative small and micro-sized enterprises. 

The measures are meant to create a positive business environment and show that the government recognizes the role of small enterprises and start-ups in the push towards a more innovation-driven economic growth model.  

The European View

United Kingdom and Chinese internet giant Tencent team up for cultural cooperation

The UK Department of International Trade (DIT) and the Chinese internet giant Tencent have signed a Memorandum of Understanding (MOU) on broad cultural and research cooperation. While substance and scope of the agreement remain vague, some elements of the deal have been publicized, including a plan to share content with the BBC, cooperation on research and online gaming with Oxford University as well as possible projects with the British Tourist Authority and the British Fashion Council. 

Britain’s Secretary of State for International Trade Liam Fox and Tencent Senior Executive Vice President Seng Yee Lau announced the deal at an event in London on May 9. Fox said at the ceremony the next few years offered “a golden opportunity for the UK to work with companies such as Tencent to drive innovation and shape the future of global trade.” Lau told Reuters news agency the trade deal gave Tencent a “landing pad” into Europe and could lead to further commercial and investment prospects in time.  

The internet giant has cooperated with UK institutions in the past. The company worked with the BBC to produce Blue Planet II, a nature documentary that was extremely popular not only in the UK and China but also worldwide. Tencent also signed an MOU with the Royal Opera House in London in late 2017 to collaborate on live-stream technology and intellectual property. 

Tencent is China’s second most valuable company. Its billion user-strong WeChat messaging app sits at the heart of China’s booming internet economy. Yet concerns have been raised about Tencent’s protection of user data and its close collaboration with the Chinese government.