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China

China’s stake in the euro crisis

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Author: Jonas Parello-Plesner, ECFR

Chinese leaders had a packed Valentine’s Day this year. Xi Jinping, the new leader-in-waiting, toured the US in an effort to develop a rapport with American leaders, while back in Beijing, Wen Jiabao hosted Herman Van Rompuy and José Manuel Barroso as part of the EU-China Summit.

The main question was whether China’s Valentine gift would be a larger financial stake in Europe, at a time when the EU is struggling to secure the continuity of the euro. Wen signalled the possibility of increased support for Europe’s ailing rescue fund, the European Financial Stability Facility, but added that China does not have the capacity to ‘buy up Europe’.

In light of these recent events, discussing China’s stake in the euro crisis calls for some preliminary myth-busting.

First, if China takes a larger stake in Europe’s debts, it does not mean that Europe’s free will is going to be sold off to China in a Faustian deal. Even though the US has a much larger debt with China, for example, no one is inclined to question whether US foreign policy is decided in Beijing. The same goes for Europe; fears that reaching out to China is akin to a ‘financial Munich agreement’ are overblown.

Another myth, relayed by the press, is that every positive word on Europe from a Chinese leader will translate into a buying of bonds. But when China says it has confidence that Europe will resolve the crisis and that China will do its part to assist, it does not necessarily mean that Chinese money will flow in. China discloses its total holdings of currency reserves, but these figures are not broken down into countries and currencies. And neither the EU nor its individual member states have sufficient monitoring systems to track foreign holders of treasury bonds. As a result, one way or the other, it is hard to know exactly how much European debt China holds.

Nevertheless, China has a fundamental interest in seeing the euro crisis recede, as it is dependent on the EU for the largest part of its exports. China is also seeking to move beyond dollars in its currency intake, and a world without the euro would be a return to a completely dollar-dominated system.

The top priority for China in pursuing this interest is risk-aversion — and this is no myth. Hence Beijing is seeking stable and secure returns on foreign currency reserves; it burnt its fingers by investing in Wall Street in 2007 through its sovereign wealth fund and by buying too many dollars relative to other currencies, with the former now showing dwindling returns as the US resorts to printing money. Also, with Chinese public awareness on the rise and the country’s wealth colloquially baptised the ‘blood and sweat’ of the Chinese people, many Chinese netizens are questioning why China has to bail out ‘lazy’ Europeans at a time when social inequality is rampant in China. Wen Jiabao’s remarks that helping Europe is in China’s best interest are partly meant to placate this blog-fuelled dissatisfaction.

An additional complicating factor for China is that its currency reserves are declining for the first time in years, and 2012 could be a bumpy year economically. China might need to draw on its reserves to pull up growth to the magical 8 per cent that will help ensure a smooth political transition at the end of the year.

This helps explain the tight balancing act to which Chinese leaders have committed, showing some public support for the EU’s currency ills while showing an equal dose of risk-averse reluctance at throwing too much money into the EU’s piecemeal solutions. For example, the head of China’s central bank, Governor Zhou, recently stated that China’s helping hand amounted to not reducing ‘the proportion of euro exposure in its reserves’ — hardly the same as a massive purchase. The announcement sends the message that Europe should work out its own solutions without waiting idly for an inflow of Chinese money. But at the same time it does not rule out additional Chinese financial support. The most likely scenario is that China will put additional money into the EU through an international body such as the IMF. This would presumably be in cooperation with other partners like Japan and the BRIC countries, meaning China would not stand alone with the risk. Yet here both the US and paradoxically also Germany are reluctant since it could enhance China’s say in the IMF.

Still, China’s support for Europe is not yet a done deal. A public commitment from China’s leaders quoting actual figures would help dispel myths both in Europe and China and would allow ordinary Chinese currency earners to track where their funds go.

Also, while China might also favour risk-aversion when it comes to buying euros, it is more than willing to accept a stake in Europe’s crisis by buying up companies. Chinese Commerce Minister Chen Deming said he looked forward to a sale of European assets, and China recently purchased a large stake in Portugal’s formerly state-owned energy company, which was sold off because of austerity cuts. This rapid move into European acquisitions could well be the most startling change in the relationship between the EU and China in recent years — and is likely to significantly affect the relationship for many more years to come.

Jonas Parello-Plesner is Senior Policy Fellow at the European Council on Foreign Relations. He has worked as a senior advisor with the Danish government on Asian affairs. He is on the board of editors of the Danish magazine Raeson.

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China’s stake in the euro crisis

China

Overview of China’s New Guidelines for Enhanced Payment Services for Foreigners

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The People’s Bank of China has released guidelines on payment services for foreign visitors and businesses in China, offering information on mobile payments, bank cards, and cash usage. The aim is to improve inclusivity, address barriers, and promote acceptance of various payment methods to enhance the experience for international users.


Following continuous efforts for optimized payment services for foreign visitors and businesses in China, the People’s Bank of China has recently released a set of guidelines detailing the array of payment methods currently accessible to foreign nationals across the mainland. Spanning from mobile payments to bank cards, and cash, these guidelines also offer clear instructions on utilizing each method.

The People’s Bank of China (PBOC) has recently released a comprehensive set of illustrated guidelines titled “Guide to Payment Service in China”, (hereinafter the Guidelines) available in both Chinese and English.

These Guidelines represent the latest step in China’s ongoing effort to optimize payment services for foreign visitors, underscoring policymakers’ dedication to addressing difficulties international users face on the mainland.

Recognizing the importance of inclusivity in payment services, the Guidelines aim to address these barriers by advocating for broader accessibility to cater to diverse consumers’ needs. To successfully achieve this goal, a concerted effort among authorities is crucial to promote the acceptance of foreign bank cards, ensure the use of cash, improve mobile payment convenience, further protect consumers’ rights to choose payment methods and optimize account services.

In this article, the key directives outlined in the Guidelines will be presented, along with their implications on foreigners’ payment experience.

In recent years, China has witnessed a radical change in payment habits. Mobile payments, in particular, registered a significant surge in popularity among locals, with 86 percent of consumers embracing digital wallets such as Alipay and WeChat Pay as their preferred payment method, as these were considered more efficient and convenient.

Amid this digital transformation, traditional payment methods, meaning bank cards and cash, declined in popularity. Many establishments, accustomed to the efficiency of digital transactions, have been reported to even refuse to accept RMB cash, while also not accommodating international cards. These conditions already set a great barrier for international visitors.

This article is republished from China Briefing. Read the rest of the original article.

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.

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Trends and Future Prospects of Bilateral Direct Investment between China and Germany

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China and Germany experienced a decline in direct investment in 2023 due to global economic uncertainty and policy changes. Despite this, China remains an attractive destination for German FDI. Key industries like automotive and advanced manufacturing continue to draw investors, although FDI outflows from Germany to China decreased by 30% in the first three quarters of 2023. Despite this, the actual use of foreign capital from Germany to China increased by 21% in the same period according to MOFCOM. The Deutsche Bundesbank’s FDI data and MOFCOM’s actual use of foreign capital provide different perspectives on the investment trends between the two countries.


Direct investment between China and Germany declined in 2023, due to a range of factors from global economic uncertainty to policy changes. However, China remains an important destination for German foreign direct investment (FDI), and key industries in both countries continue to excite investors. We look at the latest direct investment data between Germany and China to analyze the latest trends and discuss key factors that could shape future business and commercial ties.

Direct investment between China and Germany has undergone profound changes over the past decade. An increasingly complex investment environment for companies in both countries has led to falling two-way FDI figures in the first three quarters of 2023, in stark contrast to positive trends seen in 2022.

At the same time, industries with high growth potential, such as automotive and advanced manufacturing, continue to attract German companies to China, and high levels of reinvested earnings suggest established firms are doubling down on their commitments in the Chinese market. In Germany, the potential for electric vehicle (EV) sales is buoying otherwise low investment among Chinese companies.

According to data from Deutsche Bundesbank, Germany’s central bank, total FDI outflows from Germany to China fell in the first three quarters of 2023, declining by 30 percent to a total of EUR 7.98 billion.

This is a marked reversal of trends from 2022, when FDI flows from Germany to China reached a record EUR 11.4 billion, up 14.7 percent year-on-year.

However, according to China’s Ministry of Commerce (MOFCOM), the actual use of foreign capital from Germany to China increased by 21 percent year-on-year in the first eight months of 2023. The Deutsche Bundesbank’s FDI data, which follows standards set by the IMF, the OECD, and the European Central Bank (ECB), includes a broader scope of transactions within its direct investment data, including, broadly, direct investment positions, direct investment income flows, and direct investment financial flows.

Meanwhile, the actual use of foreign capital recorded by MOFCOM includes contracted foreign capital that has been concluded, including the registered and working capital paid by foreign investors, as well as the transaction consideration paid for the transferred equity of domestic investors.

This article is republished from China Briefing. Read the rest of the original article.

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.

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Manila blasts China’s ‘unprovoked aggression’ in latest South China Sea incident

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China’s coast guard on Saturday fired a water cannon at a Philippine supply boat in disputed waters in the South China Sea, causing “significant damages to the vessel” and injuring its crew, the Philippine coast guard said.

Manila was attempting to resupply troops stationed on a ship at the Second Thomas Shoal, known locally as Ayungin Shoal, when the Chinese coast guard and maritime militia “harassed, blocked, deployed water cannons, and executed dangerous maneuvers against the routine RoRe (rotation and resupply) mission,” said the Philippine National Task Force for the West Philippine Sea.

The West Philippine Sea is the part of the South China Sea that Manila claims as its jurisdiction.

The Chinese coast guard also set up “a floating barrier” to block access to shoal where Manila ran aground an old warship, BRP Sierra Madre, to serve as a military outpost.

The Philippine task force condemned China’s “unprovoked aggression, coercion, and dangerous maneuvers.”

Philippines’ RoRe missions have been regularly blocked by China’s coast guard, but this is the first time a barrier was set up near the shoal. 

The Philippine coast guard nevertheless claimed that the mission on Saturday was accomplished.

Potential consequences

The Second Thomas Shoal lies within the country’s exclusive economic zone where Manila holds sovereign rights. 

China, however, claims historic rights over most of the South China Sea, including the Spratly archipelago, which the shoal forms a part of.

A Chinese foreign ministry’s spokesperson on Saturday said the Philippine supply vessel “intruded” into the waters near the shoal, called Ren’ai Jiao in Chinese, “without permission from the Chinese government.”

“China coast guard took necessary measures at sea in accordance with law to safeguard China’s rights, firmly obstructed the Philippines’ vessels, and foiled the Philippines’ attempt,” the ministry said.

“If the Philippines insists on going its own way, China will continue to adopt resolute measures,” the spokesperson said, warning that Manila “should be prepared to bear all potential consequences.”

Chinese Maritime Militia vessels near the Second Thomas Shoal in the South China Sea, March 5, 2024. (Adrian Portugal/Reuters)

U.S. Ambassador to the Philippines MaryKay Carlson wrote on social media platform X that her country “stands with the Philippines” against China’s maneuvers.

Beijing’s “interference with the Philippines’ freedom of navigation violates international law and threatens a free and open Indo-Pacific,” she wrote.

Australian Ambassador to the Philippines Hae Kyong Yu also said that Canberra shares the Philippines’ “serious concerns about dangerous conduct by China’s vessels adjacent to Second Thomas Shoal.” 

“This is part of a pattern of deeply concerning behavior,” Yu wrote on X.

Edited by Jim Snyder.

Read the rest of this article here >>> Manila blasts China’s ‘unprovoked aggression’ in latest South China Sea incident

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