Gloom

• The value for overseas shipments from China, measured in U.S. dollar terms, plunged by 14.5% in July from a year earlier, marking the biggest year-over-year decline since a 17.2% drop in February 2020, when China’s economy was battered by shutdowns caused by COVID.
• On a year-to-date basis, Chinese exports for the first seven months of the year were down 5% at just over $1.9 trillion.
• Tuesday’s data also showed that China’s imports slid 12.4% last month due to weakening domestic demand, a figure that widely missed a forecast 5% drop in a Reuters poll of analysts and was one of the worst declines in recent years.

The grim trade numbers could spell further trouble for policymakers in Beijing, whose efforts to shore up business, boost consumer activity, and generally bolster China’s economy have been hampered by a prolonged property sector slump and disappointing domestic demand since the government listed most anti-epidemic measures last December.

• The economy’s waning recovery has also damped confidence among overseas investors. According to figures released by the State Administration of Foreign Exchange (SAFE) on Friday, foreign direct investment (FDI) fell to a 25-year low in China in the three months through June.

Here are all the gloomy details.

Zhao Yuanyuan and Nadya Yeh

New draft rules for facial recognition were published today by the Cyberspace Administration of China for public comment. The rules ban the use of face recognition technology to “analyze race, ethnicity, religion, and…health status,” bar property management companies from using face scans as the only way to exit and enter buildings, and discourage companies from widespread adoption of such technologies where alternatives exist.

The Wall Street Journal says the “stipulations bring China’s stance on private and commercial uses of facial recognition closer to Western norms, including rules proposed in the European Union and by local governments in the U.S.,” but notes the “exceptions for national-security-related uses of the technology, a common feature among China’s data and security regulations.”

India has barred domestic makers of military drones from using Chinese parts over national security concerns, Reuters reported today. Indian defense officials are worried that efforts to gather intelligence could be compromised by Chinese-made parts in drones’ communication functions, cameras, radio transmission, and operating software, the report stated.

China again called for the Philippines to “immediately remove” a grounded warship in the Second Thomas Shoal — known as the Ayungin Shoal in the Philippines, but which China calls the Ren’ai Reef (仁爱礁 Rén’ài Jiāo) — in the South China Sea, China’s foreign ministry said in a statement (in Chinese) today.

The renewed demand to tow the vessel comes as maritime tensions heat up over the disputed Spratly Islands, which China calls the Nansha Islands (南沙群岛 Nánshā Qúndǎo). A few days earlier, the Philippines accused the Chinese Coast Guard of “dangerous maneuvers” and “illegally” firing water cannons at its boats during what Manila claimed was a resupply mission in the disputed waters.

A senior executive at Chinese conglomerate Dalian Wanda was taken away by security police for suspected corruption, state-owned media outlet the Paper reported today (in Chinese). The report stated that Liú Hǎibō 刘海波 was last seen in public on August 1. He was still at the firm as of July 25, according to an earlier company statement.

Chinese state media: The Party and government press are enjoying the dog days of summers, it seems:

• Party paper the People’s Daily leads with a puff piece on People’s Liberation Army and People’s Armed Police “resolutely implementing Chairman Xí Jìnpíng’s 习近平 important instructions” and continuing to assist in flood disaster relief.
• Xinhua News Agency’s website is headlined with a story comprising propaganda posters that exhort citizens to learn from Xi Jinping and stay fit and healthy, and reduce the numbers of “little fatties” (小胖墩 xiǎo pàngdūn) and “little spectacles wearers” (小眼镜 xiǎo yǎnjìng).

• From April to June 2023, the Xiamen-headquartered company earned 6.2 billion yuan ($862 million), marking a 88% jump compared to the same period a year ago, per Luckin’s quarterly revenue report released last week.
• Starbucks, which reported its sales results around the same time, said that while sales at locations open at least a year soared 51% year-over-year in the three months that ended on July 2, its net income for the period stood around 5.9 billion yuan ($820 million).

Luckin has also surpassed Starbucks in store count in China.

• In June, Luckin reached its 10,000-store milestone. Starbucks currently operates around 6,000 locations.
• In racing past Starbucks, Luckin has not only dethroned a foreign brand that’s been synonymous with coffee for more than two decades in China, but it has also declared a new chapter of its business as it tries to move on from a $300 million accounting scandal that led to its delisting from Nasdaq in 2020.

This is how Luckin won the hearts and yuan of Chinese coffee drinkers.

Zhao Yuanyuan

• China’s precedents in the Sahel — a region that runs horizontally south of the Sahara, recently plagued by political instability — suggest it won’t offer much intervention.
• Niger has no shortage of hardships already, consistently sitting at the bottom of the UN Human Development Index from 1990 through to 2018.

For China, there is business to be done, with whichever Nigerien government comes out on top.

• PetroChina — the commercial arm of state-owned oil company CNPC — single-handedly built Niger’s oil industry, and has bold plans for the future.
• In May this year, another major Chinese oil company, SINOPEC, signed an MoU with Niger for oil blocks of its own. No doubt they and CNPC will try to make friends in this new government if it remains in place once the dust has settled.

Click through to read Alex Colville’s latest China Ties column.

Alex Colville

• In the latest China Book Chat, Christopher Marquis speaks with the co-authors of Developmental Environmentalism: State Ambition and Creative Destruction in East Asia’s Green Energy Transition about East Asia’s transition into clean energy and how countries like China, Japan, and Korea are more similar in their approaches than one would expect.

Below are links from our NewsBase to other noteworthy reports published in the last 24 hours from and about China.

BUSINESS AND TECHNOLOGY:

Facial recognition
China to tighten the rules on use of facial recognition technology / SCMP (paywall)
“China plans to tighten the rules on facial recognition technology while giving the green light to its use for national security purposes, including analysis of personal data on race and religious beliefs.”
China issues draft rules for tighter facial recognition oversight / Caixin (paywall)
China drafts rules for facial-recognition use / WSJ (paywall)

Exports
Chinese exports suffer worst fall since start of pandemic / FT (paywall)
“China’s exports and imports fell more sharply than expected in July, adding to a prolonged trade slump that is fuelling concerns over growth prospects for the world’s second-largest economy.”
Chinese exports fall at steepest pace since February 2020 / WSJ (paywall)

Electric vehicles
CATL confronts triple threat to its EV battery leadership / Nikkei Asia (paywall)
“China’s Contemporary Amperex Technology (CATL), the world’s leading supplier of electric-vehicle batteries, is trying to head off three risks to its business by securing crucial minerals, seeking out more overseas buyers, and expanding beyond the auto industry.”
CATL to sue intellectual property rights regulator over patent invalidation / Caixin (paywall)
“Contemporary Amperex Technology Co. Ltd. (CATL), China’s biggest electric-vehicle (EV) battery-maker, is planning to sue the intellectual property rights regulator to overturn its decision to invalidate two of its patents at the heart of a years-long legal tussle with a smaller rival.”
Huawei partners with Chery on new electric vehicle / Caixin (paywall)
“Huawei Technologies Co. Ltd. unveiled a new electric car featuring the software giant’s most advanced operating system and built in collaboration with leading carmaker Chery Automobile Co. Ltd.”

Succession in China
Can China’s second-gen factory owners give ‘made in China’ a second chance in crisis? / SCMP (paywall)
“Like young monarchs, suddenly thrust at the helm of their family’s legacy, Gen Z and millennials are returning to oversee decades of business growth in difficult times.”

Mining
What has China’s state iron ore giant achieved in its inaugural year? / Caixin (paywall)
“It’s been just over one year since the Chinese government created China Mineral Resources Group — a single entity to house the country’s vast mining assets and act on behalf of local steelmakers and traders in negotiations with suppliers to exert stronger bargaining power in the iron ore market.”

Talks of decoupling
Opinion: The truth about decoupling / FT (paywall)
Rana Foroohar writes: “The U.S. and China are tightly linked in more problematic ways than anyone had ever imagined.”

Unemployment
China’s bleak employment data ‘could be worse’, as education authorities crack down on falsified figures / SCMP (paywall)
“China is taking stringent measures to ensure the authenticity of employment data among university graduates, as universities are reportedly under pressure to fudge employment rates amid a challenging job market that poses one of the most significant threats to China’s already struggling economy.”
Don’t be so picky about a job, China’s college graduates are told / NYT (paywall)
“Under pressure from Beijing, Chinese schools have been told to do more to secure jobs for students, who are facing bleak prospects.”

Development and real estate
Investors bet on state-backed developers as Chinese property begins recovery / Reuters
“Investors betting on recovery in China’s battered property sector are favouring the stocks and bonds of state-backed firms that are more likely to benefit from government support, market participants said.”

TikTok
U.S. tech groups back TikTok in challenge to Montana state ban / Reuters
“Two tech groups on Monday backed TikTok in its lawsuit seeking to block enforcement of a Montana state ban on use of the short video sharing app before it takes effect on January 1.”

SCIENCE, HEALTH, AND ENVIRONMENT:

Typhoon Doksuri
Dozens die in China floods as typhoon remnants batter north / WSJ (paywall)
“Dozens of people died and millions more have been displaced after the remnants of Typhoon Doksuri battered China’s northeast, dumping torrential rain and causing widespread flooding, according to local governments and state media.”

POLITICS AND FOREIGN AFFAIRS:

Taiwan trade agreement with U.S.
Biden signs law implementing first part of U.S. trade pact with Taiwan / Reuters
“U.S. President Joe Biden signed legislation on Monday implementing the U.S. and Taiwan’s ‘21st Century’ trade initiative and issued a statement saying certain sections of the law ‘raise constitutional concerns [and may] impermissibly infringe upon my constitutional authority to negotiate with a foreign partner.’”
Joe Biden signs into law bill approving U.S.-Taiwan trade agreement to boost bilateral economic ties / SCMP (paywall)

India
India bars makers of military drones from using Chinese parts / Reuters
“India in recent months has barred domestic manufacturers of military drones from using components made in China over concerns about security vulnerabilities, according to four defense and industry officials and documents reviewed by Reuters.”

The Philippines
China, Philippines’ dispute over grounded warship heats up / Reuters
“China again asked the Philippines to tow away a grounded warship – a World War Two-era vessel now used as a military outpost – from a disputed shoal on Tuesday, after Manila rejected Beijing’s earlier demand.”
Beijing defends its ‘professional, restrained’ moves driving away Philippine boats in South China Sea / Caixin (paywall)
Philippines should secure new trade deals to pivot away from China, lawmakers urge / SCMP (paywall)
“Philippine senators have heaped pressure on the Ferdinand Marcos Jnr administration to shun Chinese companies and products, in retaliation against Beijing’s increasingly hostile actions in the disputed South China Sea.”

Hong Kong
Hong Kongers are bracing for an even wider clampdown on dissent / The Economist (paywall)
“Officials are sowing fear with vaguely worded warnings against ‘soft resistance.’”

U.K.
Opinion: Britain’s Chinese student diaspora should not live in fear / FT (paywall)
Lyndon Li Shixiang writes: “Fear and apprehension stalks Chinese students in the U.K., where the Chinese Communist Party’s influence is rapidly growing. As a member of this diaspora, I know that though many of us remain deeply committed to our culture and heritage, we are also highly anxious about the extent to which the Party is surveilling our actions overseas.”

Japan
Japanese political leader Taro Aso calls for peace in the Taiwan Strait as Tokyo expands defense / AP
“A senior Japanese politician advocated Tuesday for increasing his country’s deterrence ability to ensure peace in the region, and called for that message to be clearly conveyed globally — particularly in China.”
Japan’s former leader says Tokyo and allies must show ‘resolve to fight’ to stop attack on Taiwan / SCMP (paywall)
In Taiwan, Aso says Japan must show ‘will to fight’ to deter China / Nikkei Asia (paywall)

Indonesia
Indonesia delays China-funded rail project’s trial run for passengers / Reuters
“Indonesia has delayed until next month a free trial launch of its $7.3 billion high-speed rail line, the consortium behind it said on Tuesday, the latest in a series of setbacks for the flagship, China-funded project.”
Indonesia delays free trial run of China-funded rail project / Nikkei Asia (paywall)

Ukraine
China’s Ukraine envoy helped ‘consolidate international consensus’ at peace summit in Saudi Arabia / Caixin (paywall)
The “Chinese foreign ministry said the country’s special envoy helped to ‘consolidate international consensus’ during a peace summit held in Saudi Arabia this weekend, where participants discussed ways to peacefully resolve the Ukrainian crisis, media reports said.”

European Union
EU struggles to ‘de-risk’ trade with China / FT (paywall)
“Imports from China to the EU, including of sensitive technology and critical minerals, have increased in recent years, despite lawmakers’ attempts to ‘de-risk’ economic links amid deteriorating diplomatic relations with Beijing.”

SOCIETY AND CULTURE:

What happened to rural influencer Li Ziqi?
Li Ziqi’s online pastoral poetics / New Uorker (paywall)
In 2020, The China Project profiled Lǐ Zǐqī 李子柒, whose idyllic pastoral online videos shot in mountainous, rural Sichuan had by then earned her over 50 million subscribers across Chinese streaming platforms. As of 2023, she has more than 17 million subscribers on YouTube. But she has not posted since July 2021. This New Yorker article explains both Li’s charm, and some of the reasons she is no longer posting.

Taiwanese cuisine and cultural identity
What cuisine means to Taiwan’s identity and its clash with China / NYT (paywall)
“Chefs and restaurant owners are using a multiplicity of ingredients and tastes to reflect Taiwan’s roots, shaping a distinct culinary culture.”

Drinking for fame
Extreme drinking challenges kill yet another livestreamer in China / Sixth Tone
“Feeling limited with choices in life, 26-year-old Huang Zhongyuan found livestreaming his ‘drinking battles’ with other influencers a quick way to make a living, only to find that they were toasting to their death.”

Baby-boosting policies
Hangzhou to pay parents 25,000 yuan for third child from September / Sixth Tone
“The eastern tech hub of Hangzhou announced on Monday that, starting Sept. 10, couples having a third child may receive a one-time payment of 25,000 yuan ($3,466) in an effort to boost low birthrates in the city.”