Market News

By Bloomberg News

September 6, 2024 at 5:42 AM GMT+1

Hello this is Colum Murphy in Beijing.

Traffic in the capital is usually pretty lousy but this week it’s been brutal as President Xi Jinping rolled out the red carpet for a who’s who of African leaders in town for the Forum on China-Africa Cooperation.

No country is too small and no leader too insignificant for an audience with Xi. He held dozens of meetings with figures from all over the continent, most of them looking for help developing their economies.

To that end, Xi vowed to provide Africa with $50 billion in financial support over the next three years, while also boosting diplomatic and military links.

The only fly in the ointment is Eswatini. That nation’s leader, King Mswati III, was notably absent because the nation landlocked between Mozambique and South Africa has diplomatic ties with Taipei, much to Beijing’s annoyance.

Bonding with Africa helps Beijing’s strategy of positioning itself as the leader of the Global South, a term for the world’s developing nations, while challenging the US for influence around the world.

Underscoring China’s deep interest in Africa, Xi has traveled to the continent five times since taking power. Neither Joe Biden nor Donald Trump have gone as president, and the latter was heavily criticized for making racist comments about Africa.

Paul Nantulya, a research associate at the US government-funded Africa Center for Strategic Studies in Washington, said leaders from the continent may not even meet the president when they go to Washington. “The US really needs to do a better job,” he added.

Or as Djibouti’s foreign minister, Mahamoud Ali Youssouf, put it: “African nations, the African Union, rely on Chinese cooperation. This is No. 1 because other partners have actually failed us.”

There’s ample signs China’s efforts are paying off in Africa, including growing trade.

The Asian nation also reins supreme as the major foreign power with the biggest positive influence on Africa’s youth, according to a recent survey. While it’s just ahead of the US, Beijing’s standing has been rising in recent years while Washington’s has been falling.

Still, China’s strategy to get more sway – and energy and minerals – has its challenges. There’s accusations of debt traps, exploitation and corruption. Beijing now seems to be changing tack on investment in Africa, seeking smaller, smarter deals that are more profitable.

Also, China’s trade surplus with Africa rose to a record $64 billion last year, an issue that could become more of a problem as Beijing tries to export its way out of an economic funk.

South African leader Cyril Ramaphosa hinted at tension on that front, telling Xi that he’d like to see “more sustainable manufacturing and job-creating investments.”

In a speech at the forum, Premier Li Qiang signaled that China will open up more to African businesses, comments likely aimed at fending off criticism over the trade imbalance.

Despite the problems, Beijing is on a roll in Africa. Given the US doesn’t make the continent much of a priority, China seems poised to expand its influence even more in the coming years.

Carrots, Please

The US wants to further restrict China’s access to advanced chipmaking tools and is considering what stick to wield to get South Korea on board with its plans. Seoul says to remember the carrots.

Washington has reportedly been working on several restrictions aimed at limiting sales of artificial intelligence chips and equipment. Just this week it proposed imposing new export controls on critical tech including quantum computing and semiconductor goods.

South Korea is already unable to send China the types of chipmaking equipment that would enable next-gen technology, said Trade Minister Cheong Inkyo, who anticipates overall semiconductor trade between the countries to decline in the long run due to various limitations.

“For countries or companies trying to comply with the US in good faith, there should be some kind of carrots,” he said. “That would help US policy be embraced more easily.”

Cheong wouldn’t say what US incentives would be welcome, or whether Seoul and Washington were in talks over export controls on the latest technology.

South Korea has a history of winning concessions from the US over its tech operations involving China. Last year, Washington gave SK Hynix and Samsung indefinite waivers to ship equipment to their chip plants in China.

China is of course very displeased with the US campaign, and has repeatedly threatened Japan with severe economic retaliation if it further limits sales and servicing of chipmaking equipment to Chinese firms.

One specific worry has apparently been voiced by Toyota, which fears that Beijing could react to new chip controls by cutting Japan’s access to critical minerals that are essential for automotive production.

By adding more export controls, the US is raising the price its allies have to pay. South Korea’s Cheong is signaling his nation wants a little recognition for that.

Brand Backlash

• $100 That's the price of a Sitoy Group handbag that the Hong Kong-listed company says is almost identical to ones costing over $1,000 from brands like Prada, Tumi and Michael Kors. The popularity of the near-facsimiles reflects a backlash among Chinese shoppers against big brands as the economy falters.

Public discontent at the promotion of a low-level official who once came under fire for his actions during the pandemic provided a fresh reminder this week of the lingering anger over the government’s harsh Covid Zero strategy.

Back in 2022, Dong Hong accused people who journeyed home of “maliciousness,” apparently because they risked spreading Covid-19, making his job harder.

That remark angered some people, who pointed out they had the right to travel if they went to the trouble of getting yet another Covid test and waited anxiously for a special code to appear on their smartphone.

At the time, China Central Television criticized Dong by name for abuse of power but getting called out by the state broadcaster apparently doesn’t hurt a Communist Party official’s chances at promotion. Dong was recently tipped to become party head of a county in the central province of Henan.

The news angered people who felt the government’s actions were unfair. One person summed up the sentiment on Weibo by saying: “As long as you’re loyal to the party and the higher-ups, that's enough, right?”

The incident echoes a similar one a few weeks ago when an official was promoted despite manipulating pandemic-era health codes — apparently to restrict the movements of investors who wanted to voice concern about being swindled.

The episodes show that while China started undoing its system of tough rules meant to curb the spread of Covid-19 in late 2022, its people clearly remember ordeals such as months-long lockdowns of their cities or, say, riding a dirty old bus late one night to some quarantine facility in the middle of nowhere for a long spell of splendid isolation.

For one thing, the public has shown stepped up worries about their digital privacy, as evidenced by resistance to a recent proposal for a nationwide digital identification system.

For another, consumer sentiment is still in the dumps, hampering an economic recovery that’s overly reliant on manufacturing and exports – an arrangement causing friction with major trade partners.