Italy wants to withdraw from China’s Belt and Road

Four years ago, Italy became the first and only G7 country to join China’s Belt and Road Initiative (BRI). But now Rome is considering an exit from Beijing’s global infrastructure project as the five-year memorandum of understanding (MoU) comes up for renewal in March 2024.

• On July 30, Italian Defense Minister Guido Crosetto said in an interview with local newspaper Corriere della Sera that Italy made an “improvised and atrocious” decision in joining the BRI. He said that the deal had done little to boost Italian exports to China, whereas Chinese exports to Italy had soared.
• Italian Prime Minister Giorgia Meloni has also said that joining the BRI was a “big mistake.” She has indicated over the past year that her administration was considering how to withdraw from the deal.
• China has since dispatched a senior diplomat to Italy in hopes of persuading the country to renew the BRI deal, claiming that Rome had initially made the “right choice” to join the BRI.

Rome has alleged that Beijing’s trade promises have fallen short in the four years since becoming a BRI member. It has claimed that it has not seen any economic sweeteners since signing onto the deal.

• Trade figures vary, but according to some estimates, Italy’s exports to China logged a modest increase of €14.5 billion ($15.9 billion) in 2019 to €18.5 billion ($20.2 billion) in 2022. However, Chinese exports to Italy saw a much larger uptick from €33.5 billion ($36.6 billion) to €50.9 billion ($55.6 billion) over the same period.
• Data from Rhodium Group show that China’s foreign direct investment (FDI) in Italy also fell sharply from $650 million in 2019 to just $20 million in 2020, before rising back up to $33 million in 2021.
• Meanwhile, China’s biggest investments in the region are in Germany, France, the U.K., and the Netherlands — none of which are BRI members.

Italy has sought to reassure the U.S. and European Union that its BRI deal with Beijing is not legally binding, and doesn’t undermine Italy’s commitment to its alliances with Western countries. But as Italy’s economic recovery falters, reeling from Russian sanctions over the war in Ukraine, Rome must find a way to extricate itself from the BRI without burning bridges with Beijing.

Nadya Yeh

China and India agreed to “maintain the peace and tranquility” along their disputed border in the latest round of talks aimed at diffusing three years of tensions along the de-facto Line of Actual Control (LAC), according to a joint statement released yesterday. Both sides had “positive, constructive and in-depth discussion” to help “resolve the remaining issues,” and agreed to maintain open lines of communication.

China vowed to crack down on corruption in its medical sector, according to the country’s National Health Commision (NHC) yesterday. It’s the latest sign that Chinese authorities are building momentum on a sweeping anti-graft campaign in China’s healthcare industry, which will target everything from pharmaceutical companies, hospitals, and even the country’s massive medical insurance fund.

Beijing called Taiwanese Vice President William Lai (賴清德 Lài Qīngdé) a “complete troublemaker” in response to Lai’s interview with Bloomberg, according to a statement (in Chinese) from China’s Taiwan Affairs Office yesterday. Lai, the leading candidate in Taiwan’s presidential election next year, is drawing Beijing’s ire for his stopover visits to the U.S. on his trip to Paraguay.

Canada is probing Ralph Lauren over forced labor concerns, the country’s corporate ethics watchdog announced yesterday. The Canadian unit of the fashion giant is being investigated over allegations that its supply chains and operations in China have “benefitted from the use of Uyghur forced labor” filed by a coalition of 28 civil society organizations in June 2022.

China’s defense minister Lǐ Shàngfú 李尚福 warned against “playing with fire” when it comes to Taiwan yesterday during his speech at the 11th Moscow Conference on International Security.

Li, who has been sanctioned by the U.S. since 2018 for purchases of Russian weapons, is currently on a six-day visit to Russia and Belarus. He also met with his Russian counterpart Sergei Shoigu, as well as the defense chiefs of Iran, Saudi Arabia, Kazakhstan, Vietnam, and other countries, Chinese state media reported.

Chinese state media: Party paper the People’s Daily continues its focus this week on the environment after yesterday’s inaugural National Ecology Day with an essay on how all the people need to understand that blue water and green mountains are mountains of gold and silver (i.e. of value), an article on the protected ecology status of 3.19 million square kilometers (1.23 million square miles) of land, and two other similar pieces.

There’s also an announcement of the first Swahili-language version of ​​The Governance of China, a book by Xí Jìnpíng 习近平.

Xinhua News Agency today leads with a piece about the Party’s theory journal Qiúshì 求是 (“seeking truth”) publishing “an important article” by Xi on how “Chinese-style modernization is a broad road to building a strong country and rejuvenating the nation.” The People’s Daily also has this article on its front page.

• They can be a tool of the military-first firebreathers, the liberal internationalists, or the doves.
• They can be a weapon of war or an alternative to fighting.
• Everyone keeps sanctions tucked in their back pocket without bothering to figure out if they would accomplish anything.

In this piece for The China Project, Dylan Levi King discusses the history of sanctions levied against China, and dives into futurology: What if, spurred perhaps by an invasion of Taiwan, the international community were to levy sanctions against China in the next great war?

Dylan Levi King

James Carter

Welcome to the Jing is a photobook project shot by French photographer Laurent Hou (罗鸿 Luó Hóng) between 2013 and 2017. The photobook captures a special moment in the city’s history: after the Olympics and before the citywide demolition of illegal buildings that began in 2017, Hou snapped around 100,000 shots, mostly of quirky people and happenings inside the city center.

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

BUSINESS AND TECHNOLOGY:

Economic gloom
Venture capital firms struggle to raise funds in China / The Information (paywall)
“Global investors are also turned off by the Communist Party’s tightening control over domestic tech companies and the perceived capriciousness of Chinese policymaking. At the same time, China’s inventors are also getting hit by economic forces affecting VC fundraising everywhere, such as rising interest rates and inflation.”
China’s economic woes mount as trust firm misses payments, home prices fall / Reuters
“Zhongrong International Trust Co., which traditionally had sizable real estate exposure, missed payments on dozens of investment products since late last month.”
China stocks slump as economic gloom spreads / NYT (paywall)
“About three weeks ago, at a meeting chaired by Xí Jìnpíng 习近平, China’s leader, officials acknowledged that China’s economy was facing ‘new difficulties and challenges.’”
China turns to well-honed playbook: cut rates, hide data / WSJ (paywall)
“China’s authorities responded to another burst of dire news on the economy with a well-honed playbook: They cut interest rates and withheld some potentially embarrassing economic data.”

More gloom: real estate and property development
China’s home prices decline in July as property crisis worsens / SCMP (paywall)
“More cities in China reported a decrease in home prices in July, dragging overall prices lower by 0.2 per cent month on month, as a deepening debt crisis weighs on the property sector.”
China’s housing market is . . . not good / FT (paywall)
China new-home prices drop at faster pace as downturn worsens / Caixin (paywall)
“China home prices dropped for a second month in July, a further sign of the deepening property downturn that’s weighing on the world’s second-largest economy.”

Yet more real estate gloom: Evergrande and Country Garden
China Evergrande to delay creditors’ meetings amid fresh restructuring plan / Reuters
“Embattled property developer China Evergrande Group on Wednesday resolved to delay its meetings for the Hong Kong CEG class A and class C holders of debt to provide them more time to consider its fresh restructuring plan.”
Country Garden undone by promise to bring 5-star life to China’s hinterland / Reuters
“China’s financially beleaguered property developer Country Garden promised “five-star living” to the masses in less popular, smaller cities but focusing on those areas has come back to haunt it.”
China home price survey shows wider fall amid Country Garden woes / Nikkei Asia (paywall)
“Condo prices are sinking due to a continued dearth of buyers amid concerns over employment and the economy’s prospects. Anxiety over the tight finances of some real estate developers is also weighing on market sentiment, highlighted by leading developer Country Garden’s missed coupon payments on offshore bonds.”
Why this company’s financial crisis threatens China’s economy / NYT (paywall)
“Country Garden was China’s biggest real estate developer. Now it is staring down default, facing billions of dollars in losses and $200 billion in unpaid bills.”

And more gloom again: Tencent
Tencent sales squeezed by slowdown in domestic gaming / FT (paywall)
“Tencent’s cost-cutting measures helped boost profit by a third but revenues missed estimates as anemic domestic gaming sales and weak consumer confidence fed into the Chinese tech giant’s patchy performance.”
Tencent revenue disappoints in warning for China tech sector / Bloomberg (paywall)

Electric vehicles
Tesla cuts vehicle prices in China for the second time in 3 days amid fears of an accelerating price war / SCMP (paywall)
“Tesla made its second round of price cuts in China this week, further fuelling concerns the carmaker is reigniting a price war.”
Tesla slashes model prices in China as electric vehicle price war accelerates / FT (paywall)
Tesla cuts China prices for the second time in three days / Bloomberg (paywall)
Geely, Baidu hitch up on new EV brand / Caixin (paywall)
“Chinese automaker Zhejiang Geely Holding Group Co. Ltd. and Baidu Inc. have launched a new electric-vehicle (EV) brand, marking a restructuring in the partnership between the companies forged in 2021.”

International law firms in China
Foreign law firms scale back China operations as outlook dims / Nikkei Asia (paywall)
“International law firms are cutting back operations in China as an economic slowdown and regulatory uncertainty cloud their business outlooks.”

Semiconductors
China scuttles a $5.4 billion microchip deal led by U.S. giant Intel / NYT (paywall)
“Intel calls off its planned acquisition of Tower Semiconductor, an Israeli chip maker, after waiting in vain for 18 months for a review by Chinese regulators.”

State-owned enterprises
China’s state-owned firms overtake private sector in economic slump / Nikkei Asia (paywall)
“China’s private sector has been hit hard by the sluggish economy, with production and investment both underperforming figures from state-owned companies in new economic data out Tuesday.”

Supermarket price war
Discount duel: China’s top retail giants go head-to-head on prices / Sixth Tone
“With several traditional supermarket chains shutting shop, Sam’s Club and Freshippo are locked in a race to expand their market share and adapt to a new consumer landscape in Beijing and Shanghai.”

Shadow banks
China shadow bank crisis sparks protest by angry investors / Bloomberg (paywall)
“Chinese investors protested outside the office of one of the country’s biggest shadow banks, in a rare show of public outrage after the firm skipped payments on dozens of investment products.”

Alibaba
Alibaba’s DingTalk to split from Cloud business group — sources / Reuters
“Alibaba Group’s work communication and collaboration platform DingTalk will split from the company’s cloud division, according to two sources close to the company.”

Boeing
Boeing China appoints new president amid Sino-US tensions / Reuters
“Boeing named Alvin Liu head of its China unit on Wednesday, picking a Chinese-born representative recently hired from the auto industry as the aircraft maker grapples with a drought in U.S. imports to the crucial aviation market.”

SCIENCE, HEALTH, AND ENVIRONMENT:

U.S.-China science collaboration
The U.S. is turning away from its biggest scientific partner at a precarious time / WSJ (paywall)
“U.S. moves to cut research ties with China over security concerns threaten American progress in critical areas, some scientists warn.”

Space
Latest China satellite Ludi Tance to survey one-third of Earth in high-orbit breakthrough / SCMP (paywall)
“China will have a permanent view of nearly one-third of the Earth’s surface, with the launch of the world’s first geosynchronous orbit synthetic aperture radar (SAR) satellite.”

Copycat weight-loss drug
Chinese drugmakers develop copycat versions of ‘miracle’ weight-loss drug / FT (paywall)
“Chinese pharmaceutical companies are developing domestic versions of “miracle” weight-loss drugs as they take on western drugmakers selling anti-obesity medication in one of the world’s biggest markets.”

Healthcare costs
China’s healthcare costs fuel consumption in aging society, but alarms are blaring in the medical insurance fund / SCMP (paywall)
“In difficult economic times, Chinese people have become increasingly reluctant to tap into their savings, but they also care more about their health, and for that they’ll spend.”

POLITICS AND FOREIGN AFFAIRS:

Economic planning
China will strengthen policy coordination to meet growth target — state media / Reuters
“China will strengthen the coordination of various policies to boost growth and meet this year’s economic target, according to a cabinet meeting cited by state media on Wednesday.”

Military
China’s defense chief pushes PLA as force for peace during Russia trip, blames US for ‘chaos and disaster’ / SCMP ( paywall)
“China’s military will work more closely with other countries on hi-tech weapons and equipment, logistics support and international counterterrorism, the country’s defense minister said on Tuesday during a trip to Moscow.”
China’s defense chief in Belarus as tensions with NATO mount / Bloomberg (paywall)

Tracking China’s military and fishing fleets
Keeping tabs on China’s murky maritime maneuvers / Economist (paywall)
“America and its allies are using whizzy new tools to track China’s military activity and illegal fishing.”

Corruption
China specifies targets of sweeping anti-graft probe into medical, drug sectors / Caixin (paywall)
“​​Authorities have specified the direction of a recently launched year-long anti-graft probe into China’s medical and pharmaceutical sectors, with rent-seeking, kickbacks and other forms of bribery, as well as misuse of health insurance funds in particular areas of focus.”

Taiwan: William Lai in the U.S.
China military action to U.S. stopover would be election interference, Taiwan VP says / Reuters
“Any Chinese military action in response to stopovers in the U.S. by Taiwan Vice President William Lai (賴清德 Lài Qīngdé) would be an attempt by China to interfere in the island’s elections, Lai said during a trip to Paraguay.”

Taiwan in Southeast Asia
Taiwanese investing more in South Asia, Asean than mainland China amid global supply chains reshuffle / SCMP (paywall)
“Investments from Taiwan in South Asia and the Asean bloc surpassed the capital parked in mainland China in the first half of 2023, Taipei said, amid continued cross-strait tensions and economic woes that have weighed down the Chinese business landscape.”

#MeToo and Taiwan election
Taiwan changes law in swift response to Netflix-inspired #MeToo wave / WSJ (paywall)
“Island’s U.S.-friendly ruling party fast-tracked amendments after sexual-misconduct allegations threatened to weaken it ahead of close election.”

U.S.-China competition and tensions
Americans back tariffs, military prep against China — Reuters/Ipsos poll / Reuters
“Bipartisan majorities of Americans favor more tariffs on Chinese goods and believe that the United States needs to step up preparations for military threats from the country, according to a new Reuters/Ipsos survey.”
U.S. Air Force holds China war drill rehearsing evacuation of thousands from Pacific / SCMP (paywall)
“The U.S. Air Force practiced evacuating thousands of casualties from the Pacific in a drill last month seen as a direct response to the threat of a conflict with China.”

Korea
South Korea calls out China on North Korea escapees / Nikkei Asia (paywall)
“A South Korean minister on Wednesday called on China to help North Korean escapees make their way to the South, instead of sending them back to potentially face torture and imprisonment.”

Japanese seafood restrictions
Chinese restaurants see Japan seafood supply dry up on import curb / Nikkei Asia (paywall)
“More than a month after China tightened radiation testing on seafood from Japan, Chinese businesses that used to rely on fresh fish from the country are finding themselves under growing pressure as imports grind to a near halt.”

The Philippines
Philippines ‘not on a war footing’ with Beijing despite South China Sea tensions / SCMP (paywall)
“The Philippines has stressed it is not on a ‘war footing’ with Beijing amid heightened tensions in the contested South China Sea, where senators want the country to build permanent structures on a reef to assert its sovereignty.”

Ukraine
Denmark calls on China to ‘speak up’ to Russia over Ukraine / Reuters
“Danish Foreign Minister Lars Lokke Rasmussen said on Wednesday that he plans to ask China to take a stronger position on Ukraine and to speak to Russian President Vladimir Putin about the war.”

Iran
China is buying the most Iranian oil in a decade, Kpler says / Bloomberg (paywall)
“Chinese imports of sanctioned Iranian oil are running at the highest level in at least a decade as rising global prices make the discounted crude more attractive, according to data intelligence firm Kpler.”

Southeast Asia
China’s grip on Southeast Asia tightens as U.S. influence wanes / Nikkei Asia (paywall)
“Southeast Asia is the cockpit of a geopolitical rivalry between China and the U.S. It is a region that Beijing considers to be its backyard and natural sphere of influence, but which Washington, along with its allies and partners, is determined to contest.”
Flooring-maker’s U.S. customs problem could spell trouble for Chinese manufacturing in Southeast Asia / Caixin (paywall)
“A Chinese flooring producer’s warning over affected revenues and production at its established factories in Vietnam is fueling some concerns that the U.S.’ recent stepped up enforcement of tougher import rules could hurt Chinese manufacturing in Southeast Asia.”

SOCIETY AND CULTURE:

E-bike safety
Guangzhou’s e-bike plight / Caixin (paywall)
“The southern metropolis has clamped down on the illegal modification of electric bikes and their use in certain areas, as traffic accidents involving the two-wheelers surged by 63% in the first half of this year from the same period in 2022.”