China Research

A discussion forum on emerging markets, mainly China – from a macro, micro, institutional and corporate angle.

China’s high scientific ambitions

October 12, 2023

China is a country with outspoken scientific ambitions, particularly expressed by President Xi Jinping. This is certainly a logical approach in order to achieve the important Chinese goal of “of raising domestic content of core components and materials to 40 percent by 2020 and 70 percent by 2025” which  means that “reducing reliance on foreign technologies involves creating and developing companies that can innovate through research and development, dominate domestically, and produce competitive exports…” (https://isdp.eu/content/uploads/2018/06/Made-in-China-Backgrounder.pdf). To get there, strong technological progress is certainly needed – based on successful scientific research.

“Science” – a key word in today’s China

A few days ago, I saw an article in People’s Daily that made me very curious. The headline was “China surpasses U.S. in publishing most influential academic papers: report” (http://en.people.cn/n3/2023/0921/c90000-20074482.html). According to this report, China counts for almost one third of all academic papers that were published in 2022 in the most influential international journals (i.e. 16348 Chinese contributions out of totally 54 002). Among these publications were 1929 Chinese papers described as “hot” compared to 1592 from the U.S.

Regarding the size and ambitions of academic China, the rise to number one in the publication area may be plausible. However, some questions and uncertainties remain in my mind, particularly since my trust in Chinese statistics has been limited for many years. Some comments should be mentioned according to my understanding of the report (see also more about the publishing institution “Istic” – Institute of Scientific and Technical Information of China, https://www.istic.ac.cn/html/1/529/558/index.html):

  • The analysis of giving China the first place in this ranking of global scientific publications is made in China and therefore extremely difficult to go through and check out. At least in my view, transparency still seems insufficient.
  • It would be interesting to know which journals that have been selected as high-level international journals and to what extent Chinese journals are included in this ranking process.
  • It would be good to be informed about the criteria of a “hot” research paper.

I have been trying during quite a long time to understand more about China’s international research standing. Sure, there should have been interesting progress in the past 10-20 years. But why is access to the details so difficult to find and obtain?

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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Increasing worries about China’s real estate and financial markets

September 25, 2023

Occasionally, I get a feeling that global financial markets get strongly worried about Chinese real estate markets – real estate markets that indeed are not very transparent. Most of the time, however, these worries still seem to be suppressed too much on global financial markets. In my view, the current real estate crisis may be much more serious than usually understood by many/most Western analysts.

So much has gone wrong in the real estate market

The share of real estate amounted in the past decade on average to 7-8 % of GDP. But it should not be forgotten that the total real estate sector runs up to 25 percent of GDP or somewhat more when all services and other activities linked to the real estate sector are included. Different percentage numbers can be found as well since real estate statistics in China most probably have substantial shortcomings.

To clarify further the dimension of the real estate crisis: Apartment prices have come down sharply more recently, up to 100 million apartments are empty and many of their developers and owners have lost a fortune. Personally, I would not apply changes of official apartment prices since price downturns may be much higher in reality than in official statistics.

A brief remark: Already 10-15 years ago, I could see huge empty apartment units in Chinese metropolitan cities without light in dark evenings (which – by the way – shows that human eyes sometimes can give or receive better information than screens).

A major problem for private apartment owners is also that buyers of apartments usually have to borrow money even before the start of their own residential project.

Real estate is by far the biggest single Chinese contributor to GDP and has therefore also importance for global GDP growth. We already know that real estate companies have come increasingly under pressure. This may or will affect negatively both banks/non-banks and the financial situation of municipalities – the latter now losing a lot of tax income from shrinking sales of real estate.

Furthermore, the real estate crisis in China also means increasing social challenges in a country where apartment ownership functions as a kind of necessary private pension, and where the difficult demography outlook indicates that total future need of apartment areas looks quite limited in a macro sense, particularly when youth unemployment – also for academics – will dampen demand at least for some time.

Yes, China is currently sliding more and more into a critical situation – very worrisome for the whole (financial) world!

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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BRICS II – another BRICK in China’s global strategy

August 31, 2023

We recently noticed the BRICS summit in South Africa. Expectations in our part of the world were not hopeful before the summit in a sense that decisions from Johannesburg would mean an encouraging injection for the global economy. However, it was recognizable that China managed to launch another brick in its global political economic strategy by establishing its de facto leadership for the new and enlarged BRICS II organization.

Democracy clearly underrepresented …

I have been watching BRIC(S) from its start in the early days of this century – i.e. before South Africa was invited to join – as quite an unnecessary organization. BRIC(S) was initially launched as a smart financial marketing idea of an American investment bank without any other logical unifying argument than putting together Brazil, Russia, India and China as the four largest emerging markets with – then – potentially good economic prospects.

Then, two of these four founding countries were not democratic (China -and at least partly – Russia), and two others could be described as democratic (India and Brazil, plus joining South Africa some years later).

Now, when BRICS II will come into force in a few months time, this previously quite balanced democratic participation in BRICS will not be maintained when the six invited new members will become part of BRICS II as well.

These six new BRICS countries are:

Iran, Saudi Arabia, United Arab Emirates (UAE), Egypt, Ethiopia and Argentina.

It is indeed very obvious that none of these invited six countries can offer democratic standards and/or economic strength. There is all reason to believe that democracy in the new BRICS II will become clearly underrepresented.

… and weak economies totally overrepresented

Another angle may be a pure economic one. Also in this context there is nothing encouraging to find – apart from currently more or less healthy macroeconomic stability in India, Brazil and the oil producers of Saudi Arabia and UAE.

So what can the 11-nation BRICS II finally offer themselves and the rest of the world? In my view not very much. There are too many internal imbalances.  May be some increase of intra-trade (mainly for oil and other commodities) could show up. An obvious disadvantage is the missing positive homogeneity between the countries.

However, one more aspect still remains to be considered in the BRICS II context: China’s global political and trade economic strategy with BRICS II as perfect tool.

Application of the old and new Chinese diversification efforts

As I have written before in this blog, China has been starting to work more ambitiously on its intensified and revised geopolitical strategy. I have followed China’s internationalization and globalization for many years and have to admit that China since the start of the opening-up reform policy by the prominent reformer Deng Xiaoping had a logical strategy in their search for enlarged international partnership through all the years.

The international reform steps in the opening-up context were during the years about FDI and more foreign investment in China, the move of Western labor force (experts) to China, increasing exchange of students with abroad both from and to China, mutual cooperation in research –> altogether different steps to improve skills, technology, products and productivity with ideas from outside China. So far about the traditional diversification objectives.

Gradually after China’s important WTO entry, Chinese political leaders also announced objectives for developing China into a technological superpower and for increasing its global political power, more lately very much by focusing on (emerging) countries that appreciate incoming Chinese investments and (expensive) financial support (https://blogg.lnu.se/china-research/?paged=3, from February 17, 2023). Thus, we also have some examples of China’s modern diversification strategy, happening to a high extent geographically.

When summing up some international/global organizations below with obvious strategic interest, you can find some obvious examples where China already is or will become the dominant player, such as:

BRICS II – certainly an organization ready for increasing Chinese influence

Belt & Road Initiative (BRI) – infrastructure projects, fully led by China

RCEP (The Regional Comprehensive Economic Partnership RCEP) includes 14/15 East Asian and Pacific nations working for free trade among each others in a longer perspective (without having the U.S. in the organization). It is quite easy to imagine that China at some point will become more active within RCEP as well.

Looking at these examples clarifies well that China wants to expand its global influence. This will happen via bilateral action or via international organizations. Strengthened global platforms will become even more important to President Xi Jinping and the CP, since China nowadays domestically performs insufficiently after many years of boom.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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