CRG Weekly: Historic droughts hit China and Beijing forgives African loans
News from the China Research Group
Explainer: United Front in the UK. The CRG published an explainer on United Front operations in the UK, highlighting the need for attentive framing around this anti-democratic strategy with which the CCP interacts with Britain’s open society.
Newport Wafer Fab review. Research Lead Chris Cash commented on the likelihood of the takeover of Britain’s largest semiconductor foundry by a Chinese-backed entity being blocked under the National Security and Investment Act for the Pekingnology newsletter.
The stories driving the week
Historic drought and heatwave continue to damage industry and agriculture
China announced a national drought alert for the first time in nine years, with temperatures reaching a high of 43.4C in Chengdu.
The extreme weather in China’s southwest has increased household energy consumption as hydropower dries up. The demand for electricity in Sichuan province has increased by 25% this summer, local media reported.
The drought also places strain on China’s climate change commitments as the failure of hydropower to meet the higher power load in the summer has pushed China towards coal.
Limits to industrial and commercial electricity supplies introduced in Sichuan last week have continued and been extended to other provinces. This has impacted the production at key lithium battery and solar panel plants located in the southwest.
The drought is also threatening the supply of fresh produce and livestock as grain and oil feeds are given priority in agriculture. In response, drones have been deployed in cloud-seeding operations to create rainfall.
What’s on Weibo provides an intriguing visual account of life in drought-hit China.
China forgives matured loans to 17 African countries
Chinese foreign minister Wang Yi announced plans to forgive 23 matured interest-free loans for 17 African countries at the end of the Forum on China-Africa Cooperation last week. No details were provided on the value of the loans.
Other support measures announced include the rechannelling $10 billion of China’s Special Drawing Rights to Africa through the IMF and further Chinese investment to support Africa’s supply chain development.
The Economist analysed the challenge Sri Lanka’s crisis poses to China, testing Chinese willingness to coordinate with other creditors. In an interview with Nikkei Asia, the Sri Lankan President appealed to China to restructure its loans and reach a compromise with other creditor parties.
Meanwhile, Erick Manga and Tristan Kenderdine discussed the potential impact of Kenya’s President-elect promising to review loan contracts with the Chinese in The Diplomat. Debt, corruption, and the use of Chinese labourers have become areas of concern for the Kenyan electorate.
China continues to grapple with economic slowdown and Beijing and Washington reach audit deal
Beijing announced an additional $44bn in credit support through its state-controlled policy banks. These measures are in line with the Chinese government’s continued effort to balance using central government stimulus to address slowing growth without saddling the country with more debt.
The property slump remains a central concern, with the People’s Bank of China making significant cuts in mortgage rates to shore up the real estate sector.
However, Professor Keyu Jin suggests that the impact of the property slump on the international economy is likely to be limited since less than 5% of Chinese equity and bonds are held by foreigners.
Bloomberg’s Daniel Moss views Beijing’s efforts to arrest China’s economic slump as overly cautious, arguing that bigger policy shifts are required.
In other news, Beijing and Washington have reached a landmark deal allowing US regulators to access audits of Chinese companies listed on US exchanges.
Huawei founder issues warning over firm’s prospect as companies move to reduce dependence on China
In a leaked internal memo, Huawei’s founder Ren Zhengfei gave a stark warning on the firm’s prospects, citing concerns over the global recession and US trade sanctions.
Huawei’s global launch of its Mate-series smartphone will go ahead despite its restricted access to vital components due to US sanctions.
A long read in The Sunday Times offered fresh insights into the US pressure on the UK government to remove Huawei from the UK’s 5G network.
Separately, an oversupply of low-end semiconductors and weak demand from firms producing consumer appliances is worsening the slump in China’s chip market. Other contributing factors include weak economic performance and a failure to replace Taiwan and US chips with domestic ones.
Apple is set to ramp up the manufacturing of the iPhone 14 in India to shorten the production lag between China and India.
Weekend reads
I’d be the perfect communist shill - The Spectator’s Cindy Yu discusses the current problems when discussing China in the UK and the need for greater understanding of China within Westminster.
Podcast: Is China’s bubble finally about to pop? - Kaiser Kuo and Tom Orlik discuss whether China’s real estate crisis, fraying foreign relations and zero-Covid policies will bring about the ‘crash’ in China’s economy on SupChina’s Sinica podcast.
China’s Looming Water Crisis: A Chinese Drought Would Be a Global Catastrophe - Writing in Foreign Affairs, Gabrielle Collins and Gopal Reddy look at China’s endemic water crisis and its potential ripple effects across the global economy.