Good or bad economic news?

Dear reader:

Our China Agenda for this week is out, with a rundown of the diplomatic, political, and business events for the week of July 17 to 23.

China’s Foreign Minister Qín Gāng 秦刚 Qin Gang is still missing from public view with no official explanation of his whereabouts after last week’s statement that he was ill. There has been continued speculation that Qin’s disappearance is connected to an extramarital affair.

Our Word of the Day is: The economy showed good momentum of recovery, which is China’s Naitonal Bureau of Statistics’ translation of: 经济恢复向好 jīngjì huīfù xiàng hǎo.

—Jeremy Goldkorn, Editor-in-Chief

CURRENT AFFAIRS

China’s GDP grew by 6.3% in second quarter but youth unemployment hits record high

China’s released official economic statistics for the first half of 2023. The numbers are not too bad, but don’t seem to have reassured the markets about the country’s post-pandemic recovery.

China’s economy showed “good momentum of recovery” in the first half of 2022, says the headline of the latest data dump (English, Chinese) from the National Bureau of Statistics (NBS).

Market reactions and media commentary were somewhat less enthusiastic:

• Bloomberg said “China’s economic recovery lost momentum in the second quarter, putting Beijing’s growth target for the year at risk and adding to concerns about a slowdown in the world economy.”
• “The market reaction was disgruntled,” said Reuters, “with Chinese shares down and the yuan easing,” and the “market hungry for stimulus,” although there is no sign of government plans to significantly juice the economy.

These are the major numbers:

• Gross domestic product (GDP) grew by 6.3% in the second quarter from a year ago, and 5.5% over the first half of the year. These numbers are lower than many had expected. However NBS spokesperson Fù Línghuī 付凌晖 said China can still achieve its full-year growth target of 5% which was set in March, despite international geopolitical and economic complexities.
• Youth unemployment in China hit a new record high, with the jobless rate of 16 to 24 year olds in urban areas rising to 21.3% in June. The general unemployment rate for people in cities was 5.2% in June.
• Retail sales for June rose by 3.1%, slightly lower than expected. The biggest growth in retail was in catering, sports, entertainment , alcohol, and tobacco. Sales of autos, office products and daily use goods declined in June from a year ago.
• Deflation is a major risk, noted both by official reports on the numbers and foreign media.

—Jeremy Goldkorn

NEWS BRIEFING

China’s latest economic stats and Kerry in Beijing

Here’s what else you need to know about China today:

Top story: China’s GDP grew by 6.3% in the second quarter of 2023, but youth unemployment hits record high.

U.S. climate envoy John Kerry is in China. He arrived yesterday and stays until July 19 in a bid to revive stalled climate talks after a year-long hiatus, as China battles another summer of extreme weather that has caused widespread destruction and a number of deaths across the country.

Kerry and his Chinese counterpart Xiè Zhènhuá 解振华, who have spoken with one another for over two decades, kicked off their rounds of talks today on a warm note: Both referred to the other as “old friend.”

Even warmer, however, was the temperature at Sanbao township in Xinjiang’s Turpan Depression in China’s arid northwest, which endured temperatures of more than 52ºC (126ºF) on Sunday, state media reported, setting a record for a country that was battling minus 50ºC weather just six months ago.

China and Russia are deepening military cooperation with a series of joint naval drills, as Beijing shows no signs of backing away from its tacit support of Moscow despite its invasion of Ukraine.

A Chinese naval flotilla set sail yesterday to rendezvous with Russian naval and air forces in the Sea of Japan for exercises aimed at “safeguarding the safety of strategic maritime routes,” the Chinese Defense Ministry stated. Less than a week ago on July 11, Russian naval vessels departed from a military port in Wusong, having completed a seven-day “friendly” visit to Shanghai.

China said India should “not let specific issues define the overall relationship” during a meeting on Friday (in Chinese) between China’s top diplomat Wáng Yì 王毅 and India’s External Affairs Minister S. Jaishankar in Jakarta.

India has previously stated that its relationship with China “cannot be normal” until there is peace along their disputed border, the Line of Actual Control (LAC).

A Chinese naval hospital ship arrived in Tarawa, the capital of Kiribati, on July 15 for a seven-day “goodwill visit” to provide humanitarian medical services to locals, the Chinese military said in a statement.

Known as the “Peace Ark,” the vessel is the first institutionalized ocean-going hospital ship independently designed and built by China. It will also pay visits to Tonga, Vanuatu, Solomon Islands, and Timor Leste — the first time a Chinese naval vessel will visit Kiribati and Solomon Islands — as China courts Pacific Island nations amid an ongoing battle for influence with the U.S.

Taiwan Vice President Lai Ching-te (赖清德 Lài Qīngdé) of the Democratic Progressive Party (DPP) will stop in the U.S. next month on his way to South America, in a visit that will likely stoke brewing tensions with Beijing just months before the island’s presidential election.

Lai, 63, is one of the top three candidates in Taiwan’s 2024 election, along with the Kuomintang’s (KMT) Hou Yu-ih (侯友宜 Hóu Yǒuyí) and Ko Wen-je (柯文哲 Kē Wénzhé) of the Taiwan People’s Party (TPP). Last week, Lai stated that Taiwanese presidents should be allowed to step foot in the White House, but also separately stressed that he “will support the cross-strait status quo” and his “top priorities remain pragmatism and consistency” in an op-ed for the Wall Street Journal on July 4. Beijing registered disapproval of Lai’s plans at the Foreign Ministry’s daily press conference today.

Taiwan’s Defense Ministry last week reported that 16 Chinese warships and 15 aircraft were spotted in waters around Taiwan in a 24-hour period late last week, the island’s reported, in what analysts said was the latest sign of an intimidation, which CNN called a record high.

Chinese state media: Xinhua News Agency today leads with a very short piece on Xí Jìnpíng 习近平 meeting with former Philippine President Rodrigo Duterte today at the Diaoyutai State Guesthouse in Beijing (English, Chinese).

The Party paper the People’s Daily’s top story focuses on China quest — led by Xí Jìnpíng 习近平 of course — to build an “ecological civilization,” and to realize the “harmonious coexistence of humanity and nature,” which is linked to another Xi catchphrase, “Chinese-style modernization.”

Another article on the front page touts the success of a project to divert water from the Han River to the Wei River, which will supply the city of Xi’an.

BOOKS AND POLITICS

Xi Jinping is ‘an idiot’ and ‘my biggest promotor’ — writer Liao Yiwu

The Sichuan-born writer and street musician who spent four years in prison for “Massacre,” his poem about Tiananmen Square in 1989, talked to fellow author Ian Johnson about exile in Germany at an event in New York last week.

• Liao shared his stories of his time in prison, from sharing a cell with gang members to sleeping between two people on death row, and how it inspired his book Interviews with the Lower Strata of Chinese Society.
• Liao also talked about his views on the future of China and on questions of identity.

Here is a lightly-edited transcript of the conversation.

SOCIETY AND CULTURE

10 Chinese-language podcasts you should listen to

Andrew Methven, who runs a newsletter about learning Chinese, is always looking for ways to improve his conversational Chinese. One of his preferred methods? Listening to podcasts, and here are his 10 favorites.

• They include interview shows, bite-sized news programs, and simply conversations between hosts.
• The shows in the list all relate to contemporary life, and none are state-owned or sponsored. All are available on Apple and Spotify, as well as major Chinese podcasting platforms, such as Ximalaya.

No. 1 on the list is Story FM, hosted by Kòu Àizhé 寇爱哲, whom we’ve previously profiled.

• Other notables include Bumingbai, run by New York Times journalist Li Yuan (袁莉 Yuán Lì).

Click through for the full list.

MORE FROM THE CHINA PROJECT

• China has been lauded by many in recent years for its accomplishments in environmental protection but according to Denise van der Kamp, author of the book Clean Air at What Cost? The Rise of Blunt Force Regulation in China, China’s efforts at emission reduction and environmental sustainability may have inadvertently sowed seeds of long-term challenges. Click through to read her conversation with Christopher Marquis.

FROM THE NEWSBASE

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

BUSINESS AND TECHNOLOGY:

Bond market
Dark arts of fund manager in China’s bond market lift lid on debt mess / Caixin (paywall)
“China is doubling down on stymying the murky fund raising practices in the structured bond market that is exploited by shady fund managers and risky borrowers, as the government steps up efforts to tackle the debts amassed by local government financing vehicles (LGFV), which by some estimates have ballooned to 50% of the nation’s GDP.”

Electric vehicles
China’s fuel cell vehicle push stalls out amid EV boom / Nikkei Asia (paywall)
“Beijing SinoHytec, China’s largest fuel cell maker, is struggling to find its way in the world’s largest electric vehicle market, with languid passenger car sales forcing a shift to commercial trucks and buses.”

Youth unemployment
Youth unemployment rises as jobs dwindle / Caixin (paywall)
“More and more graduates in China have struggled to land a job in recent years, official data show, with two in every three unemployed young people in urban areas in 2021 holding at least an associate degree.”

China’s troubled economic recovery
Does Xi Jinping need a plan B for China’s economy? / FT (paywall)
“As growth has failed to pick up post-COVID, calls are growing louder for the president to launch a weighty stimulus package.”
China’s fading recovery tests policy makers’ economic playbook / WSJ (paywall)
“More stimulus is on the way to boost China’s sputtering economy, economists say. Just not the kind the country needs.”
One reason China is willing to engage again: Its troubled economy / NYT (paywall)
“China was on track to recover after closing itself off during the pandemic. Now the country’s growth is staggering and Beijing is signaling it is open to talking.”
China’s rebound falters, tripped up by debt and weak exports / NYT (paywall)
“China’s economy slowed markedly in the spring from earlier in the year, official numbers released on Monday showed, as exports tumbled, a real estate slump deepened and some debt-ridden local governments had to cut spending after running low on money.”

Semiconductors
China’s top chipmaker loses chairman in latest executive exit / Bloomberg (paywall)
“Semiconductor Manufacturing International Corp.’s chairman has resigned about a year after formally assuming his role, marking the latest high-profile departure from a company rocked by U.S. chip sanctions.”
The treacherous silicon triangle / Foreign Affairs (paywall)
“How to strengthen the semiconductor supply chain without endangering Taiwan.”

Stimulus by reducing government scrutiny of companies
Henan city introduces monthly “tranquility period” of no business enforcement actions / Sixth Tone
“Several cities around China have introduced a policy of not having local enforcement actions taken against businesses during a set period each month.”

Generative AI rules
China issues final guidelines for managing generative AI services / Caixin (paywall)
“China on Thursday issued finalized guidelines to regulate the country’s generative artificial intelligence (AI) industry, as Chinese tech giants continued their fevered pursuit to capitalize on the emerging technology.”
China unveils new rules for AI content, softens earlier stance / Sixth Tone
“Experts believe the new rules, effective Aug. 15, attempt to strike a balance between fostering innovation and ensuring oversight.”

Development and real estate
Massive stimulus to revive China’s ailing property market is a fool’s hope / SCMP (paywall)
“It is a testament to how bleak market sentiment towards China is that ‘double dip”’ has become one of the most frequently used terms to describe the performance of the economy, just seven months after Beijing scrapped its ‘zero-COVID policy, putting an end to three years of self-imposed isolation.”
Beijing struggles to revive China’s paralyzed property market / FT (paywall)
“For decades, private developers such as Shimao, Evergrande, Kaisa and Sunac had spearheaded China’s urbanization process. But from late 2021 onwards, they began defaulting on the vast debts they had accumulated. Ever since, they have struggled to raise funds or have failed to relieve the pressure on themselves through sales of assets.”

Internet
Xi Jinping calls for ‘solid’ security barrier around China’s internet / Reuters
“Chinese President Xí Jìnpíng 习近平 said China must build a ‘solid’ security barrier around its internet under the supervision of the ruling Communist Party, in his latest call to safeguard online data and information.”

Can China’s workers afford to retire?
How to make retirement a reality for China’s migrant workers / Caixin (paywall)
“China’s first-generation of migrant workers, a group generally made up of rural residents who found jobs in cities in the 1980s and 1990s, have begun to reach the retirement age, yet they cannot afford to retire.”

SCIENCE, HEALTH, AND ENVIRONMENT:

Climate change
Global temperatures near record highs as US, China meet on climate / Reuters
“Global temperatures were soaring to historic highs as the world’s two biggest carbon emitters, the United States and China, sought on Monday to reignite talks on climate change.”
Climate change menaces China’s ancient heritage sites / Reuters
“Ancient Buddhist murals in northwestern China are under ‘direct threat’ as a result of unprecedented levels of rainfall brought about by climate change, researchers said on Monday.”
In Gansu, climate change threatens China’s ancient silk road relics / Sixth Tone
Heavy rain in China’s Chongqing threatens rivers, mass evacuations continue / Reuters
“Chongqing, a sprawling municipality in southwest China, issued heightened warnings for heavy rain in 24 districts and counties on Friday, according to state media, as downpours pummel the area and numerous rivers threaten to overflow their banks.”

Chinese scientists in the U.S.Chinese scientists are leaving the United States / Foreign Policy (paywall)
“Facing an increasingly suspicious research climate, a growing number of Chinese scientists are leaving the United States for positions abroad, the latest indicator of how worsening U.S.-China relations are complicating academic collaboration and could hamstring Washington’s tech ambitions.”

POLITICS AND FOREIGN AFFAIRS:

Chinese influence operations in Canada

Canadian politicians who criticize China become its targets / NYT (paywall)

“As China increases its reach in diaspora communities, Chinese Canadian politicians in Vancouver are the focus of Chinese state interference in Canadian politics.”

Xinjiang propaganda push

Xinjiang officials say they will fight back against Western efforts to ‘use region to contain China’ / SCMP (paywall)
“The authorities in the far-western Chinese region of Xinjiang have pledged to mount a ‘proactive struggle’ against what they described as U.S.-led efforts to use the region to contain China.”

Anti-corruption actions

Ex-senior education official pleads guilty to embezzlement and bribery / Caixin (paywall)
“A former senior education ministry official in charge of promoting youth soccer has pleaded guilty to embezzlement and bribery involving more than 50 million yuan ($7 million), as China’s sweeping corruption crackdown on the sport continues.”

Another ex-chairman of China Everbright group investigated for suspected corruption / Caixin (paywall)
“A former chairman of China Everbright Group Ltd., who has been unreachable since last week, has been placed under investigation by the country’s top anti-graft watchdog as regulators continue to crack down on misconduct in the financial industry.”

China’s data and anti-espionage laws
Multinationals in China accelerate push to decouple data / FT (paywall)
“Global companies are accelerating their push to decouple China data in response to the country’s increasingly stringent data and anti-espionage laws, as relations between Washington and Beijing deteriorate.”

Censorship
Why Chinese entities are turning to People’s Daily censorship AI to avoid political mines / SCMP (paywall)
“People’s Daily — mouthpiece of the ruling Communist Party and arguably best placed to identify Beijing’s shifting and often vague red lines — is also offering to sell its expertise to companies wishing to eliminate potential political risks.”

Hong Kong

Hong Kong takes its crackdown abroad / WSJ (paywall)
“After crushing dissent at home, Hong Kong is turning its focus to activists who have continued their resistance to the Beijing-led crackdown from overseas.”

• Last week on The China Project: The best-connected people the Hong Kong government can buy are lobbying the U.S. government.

Taiwan
China slams planned U.S. visit of ‘separatist’ Taiwan presidential frontrunner / Reuters
“China reacted with anger on Monday to a planned visit next month to the United States by ‘separatist’ Taiwan presidential frontrunner Vice President William Lai (賴清德 Lài Qīngdé), as the government in Taipei said it saw no reason to overreact to mere transit stops.”
Taiwan election candidate risks China’s anger with planned U.S. trip / FT (paywall)
U.S. Looks to Head Off Trouble Over Visit by Taiwan Vice President / WSJ (paywall)

Taiwan presidential hopefuls woo Southeast Asian diaspora / Nikkei Asia (paywall)
“Lai, Taiwan’s vice president and head of the ruling Democratic Progressive Party (DPP), is leading the pack in the run-up to the January poll, widely seen as a vote on relations with China. He is also at the forefront of a new push to draw political support from Taiwanese people living across Southeast Asia — including those at the Trust Lai Taiwan Friendship Association event in the Indonesian capital — as Taipei pivots toward the region.”

John Kerry in China

China-U.S. climate progress could hinge on new methane deal / Reuters
“This week’s visit by U.S. climate envoy John Kerry to China after years of diplomatic disruptions could boost cooperation between the world’s two biggest carbon polluters on the key issue of methane emissions.”
U.S., China aim to revive climate talks as planet reels under extreme weather / Reuters
“U.S. climate envoy John Kerry said it was ‘imperative that China and the United States make real progress’ in the four months before U.N.-sponsored climate talks begin in Dubai, as waves of extreme heat and rainfall hit large parts of the globe.”
Kerry says U.S. and China must set aside politics to tackle climate change / NYT (paywall)
China-U.S. climate talks reopen with vow to take ‘big steps’ / Caixin (paywall)
John Kerry visits Beijing to restart stalled US-China climate talks / FT (paywall)
“U.S. climate envoy John Kerry will arrive in China on Sunday to restart stalled negotiations over global warming between the world’s two largest polluters after a year long hiatus.”
U.S. climate envoy John Kerry spars in heated exchanges with House Republicans ahead of Beijing trip / AP
“ U.S. climate envoy John Kerry defended his negotiations with China — and angrily rebuffed what he called a ‘stupid’ lie that he routinely travels by private jet — during a grilling by House Republicans on Thursday before he sets out on his next climate mission to Beijing.”
Climate envoy John Kerry is in China for talks the U.S. hopes will raise relations from historic low / AP
“U.S. climate envoy John Kerry was holding talks Monday with his Chinese counterpart in Beijing, as the U.S. seeks to restore contacts that were disrupted by disputes over trade, Taiwan, human rights and China’s territorial claims.”

U.S.-China competition and tensions
U.S. Senate leader Schumer wants to sanction China over fentanyl / Reuters
“U.S. Senate Majority Leader Chuck Schumer will push to include in upcoming defense policy legislation a bipartisan amendment to sanction China over its alleged role in producing the synthetic opioid fentanyl, he said on Sunday.”
Yellen ‘eager’ to work with China on debt, other global challenges / Reuters
“U.S. Treasury Secretary Janet Yellen said on Sunday she was ‘eager’ to work with China on areas of mutual interest, including debt restructurings for poorer countries, and that multilateral development banks needed reforms before capital increases could be considered.”
Yellen says China slowdown risks spillovers but no U.S. recession / Bloomberg (paywall)
“Treasury Secretary Janet Yellen said that China’s economic slowdown risks causing ripple effects across the global economy, though she doesn’t expect a recession in the US.”
Blinken meets Wang Yi in Indonesia. But the region remains wary of the U.S.-China rivalry / AP
“U.S. Secretary of State Antony Blinken met China’s top diplomat to discuss thorny issues as part of efforts to nurture talks on the sidelines of regional diplomatic meetings in Indonesia, whose president called on rival powers Friday to avoid turning the region into a ‘competition arena.’”
U.S. expected to get around China’s export controls on gallium, an essential component for American military radar tech / SCMP (paywall)
“Beijing’s recent export controls on gallium – an essential component in US military radars – could have a limited impact on the Pentagon’s supply chain because American defense leaders will look for alternative supplies, experts say.”
Opinion: One-way easing of U.S.-China tensions does not help much / Nikkei Asia (paywall)
Brian P. Klein writes: “It would do a world of good if Beijing announced it was sending high level officials to Washington too and, even more, that it was taking concrete action in an area where U.S. and Chinese interests align”
U.S. officials downplay hopes of end to restrictions on China trade / FT (paywall)
“Top Biden administration officials dimmed hopes of an immediate easing of tariffs against China on Sunday even as they signaled scope for a more constructive relationship with Beijing.”
House committee targets U.C. Berkeley program for China ties / NYT (paywall)
“A House select committee is requesting more information about a university collaboration that it said could help China gain access to cutting-edge research.”
The upside of U.S.-Chinese competition / Foreign Affairs (paywall)
“How institutional balancing promotes stability in Asia.”
Trump trade war mastermind is back with a dangerous new plan / Foreign Policy (paywall)
“Robert Lighthizer wants total decoupling from China — without thinking through the consequences.”

Germany
China criticizes German call for reducing dependency on Chinese products as ‘protectionism’ / AP
“China on Friday criticized a German government call for reducing dependency on Chinese products and decreasing other potentially unstable factors in bilateral relations, calling it a form of protectionism.”

Middle East
The multialigned Middle East / Foreign Affairs (paywall)
“These states are well aware of Washington’s military investments in the Middle East — though they increasingly doubt its willingness to deploy those capabilities on their behalf. Rather, they are engaging China in areas — such as infrastructure and technology — where they perceive that the United States is less able or willing to help them.”

Japan
U.S. military chief praises Japan’s defense funding boost as a buttress against China and North Korea / AP
“The highest-ranking U.S. military officer on Friday encouraged Japan’s commitment to doubling its defense spending over the next five years, calling Tokyo’s controversial push for a stronger military crucial to confront rising threats from North Korea and China.”
Beijing says it warned Japanese fishing boat in waters near Japan-held islands claimed by China / AP
“China says its coast guard issued a warning to a Japanese fishing boat operating in waters surrounding uninhabited East China Sea islands that are controlled by Japan but claimed by China.”

Australia, Solomon Islands, and New Zealand
Solomon Islands PM returns from Beijing, calls Australia ‘unneighbourly’ / Reuters
“Solomon Islands Prime Minister Manesseh Sogavare returned to Honiara on Monday after a week-long official visit to China, telling reporters Beijing would provide more budget support, and that criticism by Australia was ‘unneighbourly.’”
New Zealand prime minister says Pacific region less secure due to China’s assertiveness / Reuters
“The Pacific region is becoming more contested and less secure as China becomes more assertive, New Zealand Prime Minister Chris Hipkins said on Monday, outlining the country’s need to work with like-minded partners while still engaging with Beijing.”
Solomon Islands leader hits back at criticism of deepening security ties with China / AP
“The leader of Solomon Islands on Monday hit back at criticism of his nation’s deepening security ties with China, saying the United States and Australia had nothing to fear.”

South Korea
South Korea asks China to play ‘constructive role’ against North’s threats / Reuters
“South Korea’s Foreign Minister Park Jin on Friday called on China to play a ‘constructive role’ in curbing North Korea’s threats, after Pyongyang launched an intercontinental ballistic missile (ICBM) this week.”

India
China’s top diplomat urges stable ties with India as military tensions simmer / Reuters
“China’s top diplomat Wáng Yì 王毅; told the Indian foreign minister that bilateral ties need to be stabilized, as the two Asian neighbors searched for ways to ease simmering military tensions along their vast border.”

Russia
China, Russia to start joint air and sea drill in Sea of Japan / Reuters
“A Chinese naval flotilla set off on Sunday to join Russian naval and air forces in the Sea of Japan in an exercise aimed at ‘safeguarding the security of strategic waterways,’ according to China’s defense ministry.”
Why Wagner revolt is such a nightmare to Xi Jinping / Nikkei Asia (paywall)
“Any significant blow to Putin’s grip on power is bound to have serious implications for the geopolitical landscape. In particular, it could profoundly affect China’s foreign policy.”

Europe
China’s Wang Yi urges EU to ‘clarify’ its position on partnership / Reuters
“The European Union must further ‘clarify’ its position on its strategic partnership with Beijing, China’s top diplomat Wang Yi told European Union foreign policy chief Josep Borrell, as EU leaders called for reduced dependence on China.”

SOCIETY AND CULTURE:

Gas explosion at Jiangsu restaurant
China cooking gas explosion kills one at barbeque restaurant / Reuters
“A gas tank explosion at a restaurant in eastern China’s Jiangsu province killed one and wounded another on Monday, officials said, triggering concern over gas safety after a series of similar accidents last month.”

Catholic Church
Pope approves Shanghai bishop as Vatican chides China for lack of consultation / Reuters
“Pope Francis has approved a new bishop of Shanghai as the Vatican chided China for transferring him there without consultation, in violation of bi-lateral accords.”

Social media
China’s new wave of ‘live commerce’ relying less on influencers / Nikkei Asia (paywall)
“Livestreaming, including live commerce, has become deeply entrenched in Chinese social media. The livestreaming audience topped 750 million viewers in December, according to Chinese research company Wind. This represents 70% of Chinese internet users.”
China’s TikTok launches campaign to protect parents from ‘anxiety marketing’ during summer / Sixth Tone
“Education influencers are tapping into parents’ anxieties about their children falling behind during the summer holiday to sell textbooks and learning courses. Douyin, China’s hugely popular short-video app, is cracking down on the practice.”