China News
Most countries worldwide would be happy at the moment to have an inflation rate of 2.8%, but not China, where it represents the fastest consumer inflation since April 2020 and is slightly higher than the 2.5% year-on-year level seen in August.
China has been quite good about managing inflation over the past few years, even as everywhere else suffered with higher rates. But the recent rise, while small by most standards, is likely to create problems for China's central bank and regulators, as it will complicate their current efforts to ease monetary policy to boost the troubled economy.
In what will be a surprise to no one, China's real estate sector continued to give off warning signals, with 45 of 50 cities tracked in a monthly survey by Shanghai E-House reporting declines in home prices over the last month, while a different survey revealed home sales plunged during the recent Golden Week holiday. China has been pulling out all the stops to support its housing market, from demanding banks issue more mortgages to giving cash to developers to revive shelved projects. But nothing is having much effect, likely due to the current prices being way too high for many Chinese to buy property even if they wanted to.
After a short reprieve, China stocks returned to their losing ways again last week. The Hang Seng China Enterprises Index tumbled 7.4% over the week, while the iShares MSCI China ETF also dropped 7.4%, compared with a similarly high 6.6% fall for the Hang Seng Index.
This seems like a time for some to start sensing bargains and rush in to pick up shares that appear massively undervalued. However, the real issue is that China's struggling economy remains a giant unknown, especially with no signs of an end to Beijing's zero Covid policy, which puts a massive dampener on everything from demand to logistics.
Last week's biggest news in the chip sector was the new restrictions imposed by the United States against Chinese chip producers, the most recent action by the U.S. to throttle China's chip-making aspirations. The move targets U.S. companies that sell hi-tech tools used to manufacture chips to Chinese buyers, forcing the sellers to apply for special licenses if they want to sell to China. Until recently, many of the U.S. policies were targeted at individual companies such as Huawei and intended to stifle their advance. But this latest announcement shows the U.S. is taking a more expansive approach, which many feel will substantially hamper the progress of a sector that China is very keen to expand. Unsurprisingly, Chinese semiconductor chip companies didn't respond well to the move.
Curtailing Chinese chip-making ambitions was not Washington's only action this week, with their Commerce Department adding 30 Chinese companies to the "unverified" list. Companies are put on this list when U.S. inspectors cannot confirm what they are doing with technologies from the United States. Being added to the list can lead to a company's inability to source components needed in production.
This list differs from the "entity" list, which restricts any company from procuring technology unless the U.S. supplier has special government approval. As an indication that the U.S. has some flexibility in its arrangements, it removed WuXi Biologics from the unverified list last week after inspectors could visit the company and verify it was legitimately using the technology it imports from the U.S.
Samsung and TSMC received one-year exemptions from the ban on sales of U.S. chip-making equipment to China-based firms. While Samsung is South Korean and TSMC is Taiwanese, both have substantial chip-making footprints in China.
This move wasn't unexpected as Samsung and TSMC are already world chip-making leaders and critical in the supply chain for leading-edge chips. But it shows there are still some gray areas when discussing China's chip makers, a mixed bag of local and foreign companies producing semiconductors.
Most probably believed that crypto trading was over in China after it was banned around a year ago, but a few apps had continued operating. However, these last 13 apps have now been officially closed by the Beijing government.
China is well known for tightly controlling the apps available to its citizens. Still, with hundreds of thousands of apps to monitor and more being added constantly, it seems these final 13 apps had managed to survive unnoticed – until now.
Last week, Ant Group mysteriously disappeared from the Shanghai government's list of high-tech companies qualifying for local tax breaks and financial subsidies. The government website that manages this list reported that Ant had been taken off because the company had not met its R&D spending requirements.
This disappearing act came after Ant's much more noticeable removal from financial markets two years ago when the company's enormous IPO, which was on track to become the biggest-ever listing, was withdrawn at the last minute. In addition, the founder of Ant and e-commerce behemoth Alibaba, billionaire Jack Ma, has also been out of the public gaze over the last few years in one of the most significant falls from grace.