CiCM 23rd November 2023

NEWS IN CHINA

Uruguay and China elevated their ties to Comprehensive Strategic Partnership: Uruguayan President Luis Alberto Lacalle Pou held talks with Xi Jinping on Wednesday in Beijing. The two leaders elevated bilateral ties to comprehensive strategic partnership. The two heads of state witnessed the signing of Belt and Road Cooperation Plan, and Bilateral Cooperation on digital economy, trade and investment, health, education, culture, technological innovation, customs investigation, agriculture, and green development. Xi also stated the importance of Uruguay in developing China-Latin America ties, with China’s active support to Mercosur (Southern Common Market). He also called upon both sides to cooperate, even among legislature, political parties, and utilise the Belt and Road Plan to synergise development strategies. Lacalle said that the Uruguayan government recognizes that there is only one China, and the peaceful reunification is a matter of internal affairs. He further stated that Uruguay actively supports the Belt and Road Initiative, Global Development Initiative, Global Security Initiative, and Global Civilisation Initiative and hopes for further cooperation with China. This year marks the 35th Anniversary of diplomatic ties established between China and Uruguay, while it also marks a 5th year anniversary of Uruguay joining the Belt and Road Initiative.

Broadcom and VMware deal was approved by China’s market regulator: US-based Broadcom Inc, announced acquisition of VMware, a cloud computing company, for a historic tech deal of $61 billion after a confirmation from both global regulators, as well as Chinese market regulators. The request was initially placed to the Chinese market regulator State Administration for Market Regulations (SAMR) on September 6, 2022. Some analysts are of the opinion, that this approval was a result of the recent San-Francisco meeting, while Wang Peng, an associate researcher, at the Beijing Academy of Social Sciences, mentioned that the domestic regulatory cycles and processes are relatively standardized, and this outcome by the regulator was not a reflection of the recent meeting between Xi and Biden. SAMR, approved the merger but with restrictive conditions, as it believed that this merger would have effects like restricting competition, monopoly practices, in the global and Chinese market in the field of virtual computing, storage adaptors, and network cards. These conditions will ensure that VMware’s server software and Broadcom’s hardware can interoperate with other competitors as well. Broadcom already has 60%- 65% share of the global fibre channel adaptor market.

Lawmakers issue warning over unreliable data on non-performing assets: The Standing Committee of the National People’s Congress, issued a warning that the data on non performing assets (NPAs) of small and medium financial instiutions does not reflect the actual situation”. This warning comes, after China’s top legislature reviewed the State Council Report on financial work, presented by governor of People’s Bank of China Pan Gongsheng. Statement by NPCSC stated that the data of Non Performing Assets, of small and medium sized financial institutions, are inflated, and does not reflect the actual situation. The non-performing Loan ratio for China’s commercial banks was 1.61% at the end of September, while 1.27% for state owned institutions. This ratio is more severe for rural banks with 3.18 percent. Non-payment of Loans can represent a huge challenge for the banking sector, as they reduce profitability. Ding Shuang, chief Greater China economist at Standard Chartered Bank, states that this discrepancy in data could be due to evergreening, which implies extending new loans or providing additional loans to borrowers who are struggling to pay existing loans. This evergreening loans are not included in the Non-performing Loan calculation. According to the minutes of the meeting of the Central Legislature, priority must be given to of not only look into the problem of the defaulter, but also into the inadequacy of internal management of the financial institution providing the loan, and issue of corruption. This statement by the Central Legislature comes just after a month of a meeting held by the Central Legislature Standing Committee to intervene and speed up the disposal of bad loans by small and medium financial institutions which are grappled with problems like property crisis and rising local government debts.

China’s carbon footprint management for products was announced by NDRC: The National Development and Reform Commission (NDRC), and four other government organs released a joint guideline, to establish a carbon footprint management system. This system would establish a carbon footprint database, promote the construction of product carbon labelling, and certification system. Product carbon footprint is an accounting of sum carbon emission generated during the procedure of manufacturing, processing raw material, transportation, and sales. This would act as an indicator to measure green and low carbon level of products, and enterprises. According to NDRC, this would help the enterprises to save energy and reduce carbon footprint and enhance competitiveness of domestic products in international market. Several countries have already established carbon footprint accounting, evaluation and certification system, and many multinational companies have incorporated product carbon footprint into their supply chain management.

Mekong River joint patrol began: The 135th Mekong River joint patrol began on Tuesday. The four countries, China, Myanmar, Laos, and Thailand have begun conducting this river patrol since 2011. A fleet of seven vessels was sent by the four countries, to battle against various cross border crimes, and maintain region’s security and stability in the Mekong River basin. Two law enforcement vessels left the Guanlei Port in the Xishuangbanna Dai autonomous prefecture in Southwest Yunnan province, marking the official start of the patrol. China also sent a medical team to provide free medical treatment. During the patrol, the task force would undertake search and rescue exercise on the river in Munag Mo, Laos, to practise dealing with emergencies effectively.

SOCIAL MEDIA CHATTER IN CHINA

Peak flu season with crowded hospitals: Chinese social media have flooded with discussion on the notable surge in flu cases. This flu season is particularly affecting children and contributing to respiratory infections. Prevalent infections among children are Mycoplasma pneumoniae infections, influenza, and Adenovirus infection. A scene captured in a video showed aboard at a local hospital which warned parents that over 700 patients are waiting in line. At the Xi’an children’s hospital, parents were queuing not for a doctor’s appointment but rather for the removal of IV needles. There were several pictures of children doing homework while being treated with an IV. The spike in flu cases has resulted to overcrowding of children’s hospital in Beijing and other Chinese cities. One Weibo user wrote “We’re all running a fever in our home. But I didn’t dare to go to the hospital today, although I want my child to go to the hospital tomorrow. I heard waiting times are up to five hours now”, while another person commented “Half of the kids in my child’s class are sick now. The hospital is overflowing with people,”

INDIA WATCH

In China, the recent warning by the Central legislature, to manage the discrepancy of inflated data on Non-Performing Asset (NPA) is a welcoming move. This seriousness to control its NPA, is to increase the overall profitability of its banks, and prevent a creation of an artificial demand in the market, which could later lead to economic problems. While the NPA of urban banks were just 1.91%, rural banks were 3.18%. Most cases of increased NPA were seen among small and medium scale financial institution. But China’s total NPA stood at 1.66% at the end of September. To improve its NPA in the small and medium financial sector, the legislature recommended for disposal of NPA, and capital consolidation, and improve internal governance of financial institution. In the case of India, the SARFAESI Act 2002, regulates NPAs. By the end of 2023-24, NPA were projected to drop to 4.5%, while a report from S&P global said that by the end of 2024-2025 the ratio might further drop to 3.5%. This future improvement was predicted on the basis of structural improvement, healthy corporate balance sheets and improved risk management practices. Despite this positive note, RBI Governor Shaktikanta Das also mentioned that there is a rise of personal loans, especially for retail loans. These personal loans are generally unsecured credit, and this could lead to a risk of increased NPA. Thereby to manage its problem of rising NPA risk from unsecured personal loan, Governor of RBI urged lenders to strengthen their internal surveillance mechanisms and address the build-up of risks. India and China are both powerful economies, and do overall possess a better Non-Performing Asset management, than other major global economies. While China has targeted the small and medium financial sector to improve its NPA situation, India has focused on efforts like managing problem of rising NPA risk from unsecured personal loans, strengthening their internal surveillance mechanisms and addressing the build-up of risks.