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A surge of Chinese plastic supply is threatening to overflow in the face of weak domestic demand, morphing into a fresh trade challenge for the rest of the world.

“Everyone in China has this notion that if they are fast enough, if they are the first in the industry, able to burn cash long enough, then they will become the survivor that takes market share. And then they can raise the price,” said Ms Vivien Zheng, Asia chemicals analyst with Bloomberg Intelligence.

• Plants have mushroomed along the country’s eastern coast over the last decade, built in a race to satisfy China’s hunger for plastic and to help refiners counter an expected downturn in transport fuels, as electric vehicles take off. Vast volumes and lacklustre post-pandemic demand mean margins are paper thin – but companies have kept producing, hoping to cling to existing market share.

• “This is yet another example – after steel and solar panels – where China’s structural imbalances are clearly spilling over into global markets,” one expert for Chinese industries said. In an echo of its predicament from batteries to green-energy technology, the world’s second-largest economy is staring down a situation of dramatic industrial excess.

• Factories currently navigate the supply surge with brief shutdowns and low run rates, but as production capacity continues to be added, petrochemical executives and sector analysts say surpluses will grow – enough in many products to turn China into a significant exporter, often selling into a glut and potentially exacerbating existing trade tensions.

• “China’s substantial investments between 2020 and 2027 have reshaped global supply dynamics, leading to a structural surplus in Asia and persistent low or negative profit margins,” said Ms Kelly Cui, principal petrochemicals analyst at Wood Mackenzie. The consultancy estimates that almost a quarter of global ethylene capacity is at risk of closure, even as China is still adding more.

• Between 2019 and the end of 2024, China will have completed construction of so many plants to turn crude oil and gas into products such as ethylene and propylene – materials behind everything from plastic bottles to machinery – that nameplate capacity is now equal to Europe, Japan and South Korea combined, according to the International Energy Agency (IEA).

• Part of the reason is that smaller plants do not require approvals from Beijing, as large refineries do. The local authorities were quick to see the opportunity to use cheap land and fiscal perks to encourage job creation and investment. All sought to feed demand for a plastic known as polypropylene, used for plastic packaging, automobile parts and electrical appliances.

• But as supply flowed, domestic demand faltered. Now the trouble is that financial and market-share pressures are also adding up.

• China is already a net exporter of polyester products such as PVC and PET, used in clothing or food containers, shipping them to countries like Nigeria, Vietnam and India, according to an expert, again creating or worsening trade surpluses.

• Most of the new facilities in China were installed in the last three or five years despite slowing demand, which makes this economic development harder and harder to sustain.

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Taiwan said the Chinese coast guard boarded a Taiwanese fishing boat Tuesday before steering it to a port in mainland China, and demanded that Beijing release the vessel.

The Tachinman 88 was intercepted by two Chinese vessels Tuesday evening near the Kinmen archipelago, which lies a short distance off China’s coast but is controlled by Taiwan, Taiwanese maritime authorities said in a statement.

Taiwan dispatched three vessels to rescue the Tachinman 88, but the one that got close to the fishing boat were blocked by three Chinese boats and told not to interfere, the statement said. The pursuit was called off to avoid escalating the conflict after Taiwan’s maritime authorities detected that four more Chinese vessels were moving closer, the statement added.

“The Coast Guard calls on the mainland to refrain from engaging in political manipulation and harming cross-strait relations, and to release the Tachinman ship and crew as soon as possible,” the statement read.

The boat had six crew onboard, including the captain and five migrant workers, according to Taiwan’s official Central News Agency. The vessel was just over 20 kilometers (12 miles) away from Jinjiang in mainland China when it was boarded, Taiwanese authorities said.

China claims self-governing Taiwan as its territory and says the island must come under its control. The Chinese military regularly sends warplanes and ships toward the island and staged a large exercise with dozens of aircraft and vessels in May.

Fishermen from both Taiwan and China regularly sail the stretch of water near the Kinmen archipelago, which has seen a rise in tensions as the number of Chinese vessels — including sand dredgers and fishing boats — have notably increased in the area.

In February, two Chinese fishermen were drowned while being chased by Taiwan’s Coast Guard off the coast of Kinmen, prompting Beijing to step up patrols in the waters.

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Over the past 40 years, the Chinese government has carried out several programs to reduce and eliminate extreme poverty in the Country. On 25 February 2021, the National media announced that extreme poverty had been almost eliminated in China.

There were, however, many human rights issues that came up along the way. And many even argue some measures of China's poverty reduction strategy should rather be viewed as a way to gain leverage in its border disputes with its neighbors.

• The Targeted Poverty Alleviation (TPA) program was officially implemented in 2015, it was structured to follow the whole process: from poverty identification to poverty exit.

• TPA developed five core methods to lift the poor out of poverty: industry, relocation, ecological compensation, education, and social assistance. Despite its innovative approach to eradicating extreme poverty, TPA methods have some harsh side effects, especially for ethnic minorities.

• the relocation strategy is not new to the Chinese government. However, after launching the TPA, it was mainly directed toward regions where most people belong to China’s ethnic minorities. Tibet is one of the regions where the mass relocation programs are more controversial, mainly because of the numerous human rights violations perpetrated by China’s government against Tibetans since the creation of the Tibet Autonomous Region (TAR) in 1951.

• the PRC is carrying out a “Sinicization” campaign whose objective is to eradicate any trace of Tibetans’ autonomy’s desire. Mass relocation programs are part of this strategy, even if the government maintains that it is the most effective strategy to reduce poverty and, at the same time, to stop environmental degradation.

• Tibetans are moved to locations where they cannot continue their former livelihoods or lifestyles. Often, for example, herders are moved to farming areas and farmers are moved to urban areas where they will be entering the labor market without the experience to do so. Part of the TPA indeed is to provide relocated people with initial subsidies and social assistance to facilitate their adjustment to new lifestyles, but for what concerns Tibetan herders, this kind of assistance is not enough.

• If Tibetans do not agree to relocate, authorities are allowed to exert different forms of pressure that range from intrusive home visits to implicit threats. After the relocation, the Chinese government demolishes their former homes once they have been relocated to prevent them from coming back. The UN Basic Principles and Guidelines on Development-based Evictions and Displacement provides that states should, when circumstances allow, prioritize the rights of restitution and return.

• In recent years, the relocation of Tibetans has been accurately directed towards villages along the contested territories between China and its neighbors. It involved building 628 border villages called “well-off border defense villages” which were selected for their remote location, very sparse population, and poor conditions.

• For China’s government, these villages have multiple objectives: reduce the poverty rate in the country, and keep an eye on the movements of populations and activities across the border. Moreover, the location of these villages, and the development of bridges and railway lines in the same regions, should be viewed as a way to gain leverage in its border disputes with its neighbors.

• China is particularly concerned about one of its neighbors: India. Although trade between the two nuclear powers surpassed $136 billion in 2023, relations between Beijing and New Delhi remain tense. China reclaims large parts of Indian territory, including the entire state of Arunachal Pradesh which was recently renamed “Southern Tibet” by China’s government.

• The response of the newly elected National Democratic Alliance (NDA) government, led by Prime Minister Narendra Modi, was the renaming of 30 places in Tibet, signaling its willingness to confront China, at least theoretically. Indian and Chinese troops stationed along the border regularly engage in conflict, sometimes resulting in casualties.

• As China focuses more on border defense and security in Tibet, the situation between India and China at the borders is likely to escalate and possibly result in more clashes. China is investing heavily and strategically in border-related infrastructure and in relocating and re-educating residents. The Indian Government may follow suit and bolster its borders by investing more, securing them, and ensuring their safety.

• For India, the Himalayan problem is a bilateral affair, but recently Modi seems more willing to let China know that he is looking for new allies. Modi thanked Lai Ching-te, the newly elected President of Taiwan, for his message of congratulations after being re-elected. Nevertheless, the Taiwan-India relationship remains unofficial, and their political connections seem to be directed at deepening economic cooperation.

cross-posted from: https://feddit.org/post/380048

Taiwan's government raised the travel alert for Mainland China, Hong Kong and Macau to “orange” level and advised people to avoid non-essential travelling. The Council claimed that because the Mainland China, Hong Kong and Macau have continued to amend or issue legal documents relating to national security in recent years, there are reported cases in which Taiwanese travelling to mainland China have been subjected to unlawful detention, retention and interrogation, as the Straits Exchange Foundation deputy secretary general Tsai Meng-chun suggested.

One week ago, China published new judicial guidelines to introduce the death penalty for “particularly serious” cases involving supporters of Taiwanese independence, which included severe punishments for activities deemed as fragmenting the country or inciting secession. According to the Council, this poses a serious threat to the personal safety of Taiwanese travelling to mainland areas. Hence, it strongly recommended that Taiwan people should not enter China mainland, Hong Kong and Macau unless it is necessary, and should avoid discussing sensitive issues, photographing military sites, or carrying books on politics, history and religion.

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• Communities in Indonesia’s Dairi district continue to protest a zinc and lead mine being developed by a Chinese-backed company.
• They warn the PT Dairi Prima Mineral (DPM) mine poses unacceptable risks to human life and the environment, given the potential for its waste dam to collapse in the earthquake-prone region.
• There are 11 villages located around or downstream of the proposed tailings dam, making the prospect of its collapse potentially disastrous. Some homes and houses of worship lie less than a kilometer (0.6 miles) from the dam, while an entire village of 2,010 people, called Pandiangan, is just 1.8 km (1.1 mi) from the dam.
• This would make the project illegal if it was built in China, since that country’s regulations prohibit the construction of a tailings dam within a kilometer of a populated area, according to Emerman.
• These concerns are borne out in a series of independent analyses of the project’s environmental impact assessment, which experts say fails to live up to the standards the developers claim to follow.
• Despite the questions over the assessment, the Indonesian government has issued environmental approval for the project, which local communities are now challenging at the Supreme Court.

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• The Chinese government’s rejection of recommendations to end its deepening human rights crisis reflects its disdain for international human rights reviews at the United Nations, human rights nongovernmental organizations said in a joint statement released on June 25, 2024.
• In a disingenuous effort to paper over its refusal to engage to improve its appalling record made clear by latest Universal Periodical Review (UPR) in January 2024, the Chinese government said it would accept 290 of the 428 recommendations, partially accept 8, note 32, and reject 98 of the recommendations made. The 290 accepted ones include those the government said it “accepted and being implemented” and those “accepted and already implemented.”
• However, none of the “accepted” recommendations address concerns raised by UN member states about crimes against humanity, torture, forced disappearance, persecution of human rights defenders and journalists, or other grave and well-documented violations.
• In this context, the numerous acceptances by the Chinese government does not mean actual intention to improve its rights record. No one should confuse a high number of accepted recommendations with any real commitment by Beijing on human rights.
• Beijing’s responses to UPR recommendations also include hostility towards the process and towards UN human rights mechanisms. The government has challenged the authority of the UPR to address topics Beijing insists are a matter of “sovereignty,” and disparaged the professionalism of UN human rights experts.
• The Chinese government also falsely proclaimed the August 2022 OHCHR report on human rights abuses in Xinjiang, which that office alleged may constitute crimes against humanity, as “completely illegal and void.”

JD.com founder Richard Liu warned employees against prioritizing work-life balance during a recent video conference, stating those who "put life first and work second" were not welcome at the company. This stance reflects a broader trend in China's tech sector as executives face slowing growth and increased competition.

Major tech firms, including Alibaba and Tencent, have cut tens of thousands of jobs since 2021. Companies are now seeking younger, cheaper workers and demanding longer hours from existing staff. Pinduoduo, an e-commerce group known for its high productivity and grueling work culture, is seen as a model by some in the industry. In 2021, two Pinduoduo employees died in incidents linked to overwork by colleagues.

Older tech professionals, typically over 35, face the greatest risk of redundancy and struggle to find new positions. Employers often view them as expensive and less flexible due to family responsibilities. A 2023 survey of 2,200 professionals in China's largest cities revealed widespread anxiety about career prospects and work-life balance. Many in the industry report experiencing depression and high stress levels.

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• A residence priced $15 million was sold within hours
• Buyers snatch 200 large flats priced from nearly $5 million

Shanghai’s luxury real estate market is a bright spot in China’s bleak property sector. It’s the only one among the country’s mega cities that’s still attracting people to put down money in an asset class that has otherwise been abandoned.

[...] The move is driven by rich Chinese — many dwelling in the Yangtze River Delta region that Shanghai is part of — who are parking their money only in surefire investments [...] buyers are a mixture of locals and outsiders, many from the neighboring Zhejiang and Jiangsu provinces, according to sellers and developer advisers. Shanghai allows non-local homebuyers if they’ve paid income taxes for three years.

[...] Shanghai’s more affluent and entrepreneurial demographic is helping with the rebound, whereas the capital has more people working for state-owned enterprises and the government, meaning they already have access to government-subsidized housing.

[...] the trend is expected to cool down in the second half, after pent-up demand is released, according an analyst.

Zhang Jianchun (张建春), a deputy minister at the CCP’s powerful Central Propaganda Department, was accused on Friday of “severe violations of discipline and law” — a signal that a corruption investigation is underway.

[...]

Zhang, 59, had a lengthy career in the CCP’s Organization Department, the body that essentially serves as the human resources heart of the Party, arranging for official appointments and personnel assignments.

[...]

In the wake of the 2022 CCP congress he presided over a gathering of publishing houses to stress the importance of releasing published teaching materials about Xi Jinping’s political report. The month before he had officiated at a gathering of Party-run newspaper publishers, where he blandly emphasized the importance of adhering to the leadership of “comrade Xi Jinping as the core.”

[...]

Prior to the news of his downfall, Zhang Jianchun had not made a public appearance in two months.

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Lai Ching-te once again called on China to accept the existence of Taiwan, a self-governing democracy that is claimed by Beijing but where its courts have no jurisdiction.

Democracy is not a crime and autocracy is the real “evil,” Taiwan President Lai Ching-te said Monday after China threatened to impose the death penalty in extreme cases for “diehard” Taiwan independence separatists.

China, which views Taiwan as its own territory, has made no secret of its dislike of Lai, who took office last month, saying he is a “separatist,” and staged war games shortly after his inauguration.

On Friday, China ramped up its pressure on Taiwan by issuing new legal guidelines to punish those it says support the island’s formal independence, though Chinese courts have no jurisdiction on the democratically governed island.

Asked about China’s move at a news conference at the presidential office in Taipei, Lai first reiterated his sympathy for recent flooding in southern China before responding.

“I want to stress: Democracy is not a crime; it’s autocracy that is the real evil. China has absolutely no right to sanction Taiwan’s people just because of the positions they hold. What’s more, China has no right to go after Taiwan people’s rights across borders,” he said.

According to China, anyone who does not uphold “reunification” is therefore a Taiwan independence supporter, Lai added.

“I also want to call on China to face up to the existence of the Republic of China and have exchanges and dialogue with Taiwan’s democratically elected, legitimate government,” he said, using Taiwan’s formal name. “If this is not done, relations between Taiwan and China will only become more and more estranged.”

Taiwan said that since Thursday, there has been a sharp increase in Chinese military flights as Beijing carried out a “joint combat readiness patrol” near the island.

From Thursday to Sunday, Taiwan says it detected 115 Chinese military aircraft operating nearby, getting as close as 31 nautical miles from the southern tip of the island.

Taiwan has said that for the past four years China has carried out regular military activity around the island as part of a “gray zone” pressure campaign.

Lai rejects Beijing’s sovereignty claims and says only Taiwan’s people can decide their future. He has repeatedly offered talks with China but been rebuffed.

China says any move by Taiwan to declare formal independence would be grounds to attack the island.

The government in Taipei says Taiwan is already an independent country, the Republic of China, and that it does not plan to change that. The Republican government fled to Taiwan in 1949 after losing a civil war against Mao Zedong’s Communists.

Lai also faces domestic challenges, as his Democratic Progressive Party (DPP) lost its majority in parliament in the same election in January that brought him to power.

Speaking at the same news conference, Lai said he would ask the constitutional court to stay a package of contested parliament reforms the opposition has passed and consider whether they comply with the constitution.

The opposition says the reforms, which among other things criminalize contempt of parliament by government officials, are needed to bring more accountability, but the DPP says they were forced through without proper discussion.

• Citizens express concern over downturn as pressures mount
• Flurry of stabbings unusual in country where violence is rare

The reaction of Chinese social media users to a spate of recent violent attacks has exposed widespread discontent about the nation’s downturn, as economic pressures mount.

Shanghai police reported a stabbing Wednesday morning in one of the city’s metro stations, which — like other subway lines in major Chinese cities — has security checks at its entrances. The suspect was detained after injuring three people and the case is under investigation, police said in a statement.

In a country where violence is relatively rare, the incident became a top trending item on social media platform Weibo, garnering some 164 million reads with users speculating on the attacker’s motive. Some suggested the culprit was a stocks investor, a group battered during China’s $7 trillion market meltdown earlier this year.

“The pressure of this economic environment is cascading down to everyone, who may be pushed to the brink by a slight change in circumstances,” one user wrote. “Don’t provoke or bully others; you don’t know where their limits of outbursts are. Don’t let yourself become a victim of the economic climate.”

Another user posted: “When the economy is bad, social problems grow, people are becoming more aggressive.”

Police didn’t provide details of the culprit’s motive, and it was unclear if the attacks represented a surge in such incidents. But the public reaction underscored growing fears over China’s economic downturn, as a slump deepens in the property market where the bulk of household wealth is stored.

“It’s possible the attackers were themselves suffering from the economic slowdown and such anxiety,” said Hanzhang Liu, an assistant professor of political studies at Pitzer College in California. “But it’s even more likely that people are projecting their own anxiety when trying to understand why these incidents happen.”

Protests over the economy, especially the housing crash, have become more frequent and made up 80% of publicly recorded dissent last year, according to Freedom House’s China Dissent Monitor. Almost a third of office workers saw their salaries fall in that period, according to recruitment platform Zhaopin.

The Shanghai incident followed similar reports from across China. Four teachers from a US college were stabbed by a local man in the northeastern city of Jilin last week. The chairperson of a political consultative body in a county in Shanxi was killed at the start of June in a dispute over the cleanup of illegally-occupied state housing. In May, two died in another knife attack in a primary school in the southeastern Jiangxi province.

The Jiangxi attack was viewed more than 390,000 times on Weibo, with one user asking for tougher penalties as “the economy slows down, life becomes more torturing, and crazy people become more frequent.”

While authorities did not provide details of the motives for the Jiangxi and Shanghai attacks, one of the teachers injured in Jilin told Iowa Public Radio that the attacker was “unemployed and down on his luck,” attributing that information to local police.

China has long touted itself as the world’s safest nation. Authorities have rolled out at least four rounds of “strike hard” anti-crime campaigns since the 1980s. The Public Security Ministry said at a press conference in May that social order had been steadily improving over the past five years, with severe violent crime dropping 10.7% in 2023 compared to 2019.

That makes rare outbursts of public violence stand out. People across China were outraged two years ago, for example, when video clips appeared online showing men beating female diners at a barbecue restaurant.

Socially Disadvantaged

Chinese authorities are aware of the link between economic changes and rises in violence. The Guangdong Police College analyzed 140 high-profile cases of violent attacks from 2000 to 2021, concluding last year that most of the culprits didn’t have a prior criminal record.

Instead, China’s rapid economic transformation had put some segments of society at more of a disadvantage, leading them to vent their frustration through violence, according to the research. Due to tight controls of guns and explosives in China, knifing and car-ramming incidents have become more common.

Despite severe crime falling, Chinese authorities listed the prevention of extreme violence as a top priority for law enforcement in a work plan last year. The country is entering a time with a “large amount of social conflict and disputes that are difficult to discover, prevent and handle,” China’s security czar Chen Wenqing stressed in December.

Mental Health Issues

Beijing has even mobilized ordinary people to help stabilize society. Known as the “Fengqiao experience,” that system aims to get local residents to resolve conflicts at the grassroots level to prevent them from spilling over into broader troubles that bubble up to higher level officials.

The ruling Communist Party also created a social work department last year to strengthen its grip on community organizations. The low-key body, which now leads the national ombudsman office, vowed to help better coordinate social relationships and resolve conflicts in an article in March.

Mental health issues that built during China’s three years of Covid isolation, are being compounded by economic pressures including high youth unemployment, said Lynette Ong, professor of political science at the University of Toronto, who’s also a senior fellow at the Asia Society Policy Institute’s Center for China Analysis.

“Acts of random violence could be seen as expression of pent-up social grievances in a high-pressured society,” she added.

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Even by conservative measures, researchers say that China's subsidies green-tech products such as battery electric vehicles and wind turbines is multiple times higher compared to the support granted to countriesin tbe European Union (EU) and the Organisation for Economic Co-operation and Development (OECD).

The researchers conclude that the EU should use its strong bargaining power due to the single market to induce the Chinese government to abandon the most harmful subsidies.

TLDR:

• Quantification of overall Chinese industrial subsidies is difficult due to "China-specific factors”, which include, most notably, below-market land sales, but also below-market credit to state-owned enterprises (SOEs), support through state investment funds, and other subsidies for which there are no official numbers.
• Even when taking a conservative approach and considering only quantifiable factors of these subsidies, public support for Chinese companies to add up to at least €221.3 billion, or 1.73% of GDP in 2019. Relative to GDP, public support is about three times higher in China than in France (0.55%) and about four times higher than in Germany (0.41%) or the United States (0.39%).
• Large industrial firms such as EV maker BYD are offered disproportionately more support. The industrial firms from China received government support equivalent to about 4.5% of their revenues, according to a research report. By far the largest part of this support comes in the form of below-market borrowing.

Regarding electrical vehicles, the researchers write:

China’s rise to the world’s largest market and production base for battery electric vehicles has been boosted by the Chinese government’s longstanding extensive support of the industry, which includes both demand- and supply-side subsidies. Substantial purchase subsidies and tax breaks to stimulate sales of battery electric vehicles (BEV) are, of course, not unique to China but are also widespread within the EU and other Western countries, where (per vehicle) purchase subsidies have often been substantially higher than in China. A distinctive feature of purchase subsidies for BEV in China, however, is that they are paid out directly to manufacturers rather than consumers and that they are paid only for electric vehicles produced in China, thereby discriminating against imported cars.

By far the largest recipient of purchase subsidies was Chinese NEV manufacturer BYD, which in 2022 alone received purchase subsidies amounting to €1.6 billion (for about 1.4 million NEV) (Figure 4). The second largest recipient of purchase subsidies was US-headquartered Tesla, which received about €0.4 billion (for about 250,000 BEV produced in its Shanghai Gigafactory). While the ten next highest recipients of purchase subsidies are all Chinese, there are also three Sino-foreign joint ventures (the two VW joint ventures with FAW and SAIC as well as SAIC GM Wuling) among the top 20 purchase subsidy recipients.

Hacking group RedJuliett compromised two dozen organisations in Taiwan and elsewhere, report says.

A suspected China-backed hacking outfit has intensified attacks on organisations in Taiwan as part of Beijing’s intelligence-gathering activities on the self-governing island, a cybersecurity firm has said.

The hacking group, RedJuliett, compromised two dozen organisations between November 2023 and April of this year, likely in support of intelligence collection on Taiwan’s diplomatic relations and technological development, Recorded Future said in a report released on Monday.

RedJuliett exploited vulnerabilities in internet-facing appliances, such as firewalls and virtual private networks (VPNs), to compromise its targets, which included tech firms, government agencies and universities, the United States-based cybersecurity firm said.

RedJuliett also conducted “network reconnaissance or attempted exploitation” against more than 70 Taiwanese organisations, including multiple de facto embassies, according to the firm.

“Within Taiwan, we observed RedJuliett heavily target the technology industry, including organisations in critical technology fields. RedJuliett conducted vulnerability scanning or attempted exploitation against a semiconductor company and two Taiwanese aerospace companies that have contracts with the Taiwanese military,” Recorded Future said in its report.

“The group also targeted eight electronics manufacturers, two universities focused on technology, an industrial embedded systems company, a technology-focused research and development institute, and seven computing industry associations.”

While nearly two-thirds of the targets were in Taiwan, the group also compromised organisations elsewhere, including religious organisations in Taiwan, Hong Kong, and South Korea and a university in Djibouti.

Recorded Future said it expected Chinese state-sponsored hackers to continue targeting Taiwan for intelligence-gathering activities.

"We also anticipate that Chinese state-sponsored groups will continue to focus on conducting reconnaissance against and exploiting public-facing devices, as this has proved a successful tactic in scaling initial access against a wide range of global targets,” the cybersecurity firm said.

China’s Ministry of Foreign Affairs and its embassy in Washington, DC did not immediately respond to requests for comment.

Beijing has previously denied engaging in cyber-espionage – a practice carried out by governments worldwide – instead casting itself as a regular victim of cyberattacks.

China claims democratically ruled Taiwan as part of its territory, although the Chinese Communist Party has never exerted control over the island.

Relations between Beijing and Taipei have deteriorated as Taiwan’s ruling Democratic Progressive Party has sought to boost the island’s profile on the international stage.

On Monday, Taiwanese President William Lai Ching-te hit out at Beijing after it issued legal guidelines threatening the death penalty for those who advocate Taiwanese independence.

“I want to stress, democracy is not a crime; it’s autocracy that is the real evil,” Lai told reporters.

Lai, whom Beijing has branded a “separatist”, has said there is no need to formally declare independence for Taiwan because it is already an independent sovereign state.

Canada's ambassador to Beijing visited the region of Xinjiang last week and expressed concerns about human rights violations directly to local leaders, the Canadian foreign ministry said in a statement on Sunday.

A 2022 report by the then U.N. human rights chief said China's treatment of Uyghurs, a mainly Muslim ethnic minority in Xinjiang, in the country's far west, could constitute crimes against humanity. Beijing denies the allegations.

Ambassador Jennifer May visited Xinjiang from June 19-22, the first such visit by a Canadian envoy in a decade. "(This) served as an opportunity to communicate Canadian concerns about the human rights situation directly to the leadership of Xinjiang," the ministry statement said.

"Ambassador May raised concerns over credible reports of systematic violations of human rights occurring in Xinjiang affecting Uyghurs and other Muslim ethnic minorities, including those raised by U.N. experts," it continued.

The Chinese embassy in Ottawa was not immediately available for comment. May visited Xinjiang a few weeks after Canada said it had warned China against meddling in its elections. In April, Prime Minister Justin Trudeau said Beijing had tried to interfere in the last two national votes, a charge China dismissed.

Campaign groups on Saturday urged U.N. human rights chief Volker Turk to take more action over what they said were documented abuses against Uyghurs and other Muslims.

May also reiterated Canada's calls for China to allow U.N. independent experts unfettered access to all regions of China, the statement said. Canada, like the United States, has imposed sanctions on individuals and entities over alleged rights abuses in Xinjiang.

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Taiwan's Mainland Affairs Council (MAC) on Friday evening denounced a new guideline issued by the Chinese authorities threatening to punish "diehard" advocates of Taiwan independence with the death penalty, calling the move detrimental to bilateral people-to-people exchanges.

In a press release, the MAC called the guideline laid out by Chinese officials earlier the same day "regrettable" and described it as provocative and detrimental to exchanges between people on both sides of the Taiwan Strait.

"The Beijing authorities have no jurisdiction over Taiwan," said the MAC, the top government agency handling cross-strait affairs, adding that China's "so-called laws and regulations have no binding force on our people."

However, the MAC also urged Taiwanese living in China or considering travel there to exercise caution.

At a press conference in Beijing, Chinese officials unveiled the guidelines on punishing "Taiwan independence diehards" convicted of "inciting secession," under which those involved in serious cases against the country could receive the death penalty.

The guideline, drafted in accordance with existing Chinese laws, such as the 2005 Anti-Secession Law, detail the offences of splitting the country and inciting secession and the penalties those found guilty of such offences can face.

The United Nations High Commissioner for Human Rights, Volker Türk, should provide a public update of measures taken by the Chinese government and by his office to address the human rights situation in Xinjiang, Human Rights Watch, Amnesty International, the International Service for Human Rights, and the World Uyghur Congress said today, releasing a series of translations of the report by his office on Xinjiang published in 2022.

The Office of the High Commissioner’s 2022 report concluded that violations in the region “may constitute international crimes, in particular crimes against humanity.” The ongoing absence of public reporting by the high commissioner to follow-up the atrocity crimes documented by his own office, risks undermining the trust placed in his office by victims and survivors. At the same time, UN member states need to take more determined action to fight against impunity.

“The publication of the UN human rights office’s report was a landmark moment for highlighting the gravity of human rights violations in Xinjiang,” said Elaine Pearson, Asia director at Human Rights Watch. “Now it’s up to the UN high commissioner to make full use of that report to improve the situation for Uyghurs and other Turkic Muslims in Xinjiang.”

After a court in China handed prison terms to two activists, DW looks at the motivations behind Beijing's crackdown on social justice campaigners and rights activists' struggle for accountability.

Leading Chinese women's rights advocate Huang Xueqin was sentenced to five years in prison on Friday for "inciting subversion of state power," according to a group campaigning for her release and a copy of the verdict issued by a court in Guangdong.

The#MeToo activist was sentenced alongside labor rights activist Wang Jianbing, who was given three years and six months in prison on the same charge. Wang has spoken out in support of women reporting sexual harassment.

The two have already been detained for over 1,000 days after being arrested in September 2021. They have maintained their innocence throughout their detention and trial.

'Zero tolerance for independent thinking'

Huang and Wang often held gatherings for Chinese youth during which they discussed social issues. It is widely believed that Chinese authorities viewed their meetings as a threat to national security.

"It reflects the zero tolerance the [Chinese] government has over people who show any kind of independent thinking," Wang Yaqiu, Research Director for China at Freedom House, a US-based human rights organization, told DW.

Beijing's crackdown on social movements

Wang Yaqiu warned that the convictions of the two activists, affectionately nicknamed "XueBing" by their friends and supporters, would further narrow "the almost non-existent civil society space."

The decline of China's civil society landscape has been a long and challenging process for local activists.

In 2015, over 300 lawyers and human rights defenders were arrested in a nationwide sweep called the "709 crackdown." The name derives from the date it began: July 9. The arrests targeted legal professionals and activists advocating for human rights and the rule of law.

Over the past decade, Beijing has also restricted overseas NGOs from operating in the country and suppressed feminist and LGBTQ+ movements by arresting leading advocates.

China's #MeToo campaign

Huang emerged as a key voice for women's rights in China during the 2018 #MeToo movement, which originated in the United States — but unlike its Western counterpart, the Chinese campaign was initially introduced and promoted by university students who accused professors of sexual abuse and harassment.

Huang helped spark China's first #MeToo case in 2018 when she publicized allegations of sexual harassment made by a graduate student against her PhD supervisor at one of China's most prestigious universities.

Later, Huang collaborated with Wang to organize social gatherings for activists at his apartment in the southeastern Chinese city of Guanzhong.

Efforts to rebuild civil society

Wang wanted to rebuild the civil society community and provide support to young NGO workers and activists because many of them faced obstacles working in a highly censored environment.

Rio, a friend of the two activists who regularly attended the gatherings in Wang's apartment, told DW they never thought such informal events would be a problem to the Chinese government until a police raid.

Rio described how the attendees supported each other by sharing their work challenges, learning from guest speakers — and simply unwinding by playing board games together.

"It was not meant to criticize the government privately … it's a very constructive conversation," Rio said, speaking under a pseudonym due to safety concerns. Why does Beijing seem 'insecure' about social events?

It was not the first time Chinese authorities targeted people involved in social gatherings.

In 2019, dozens of lawyers and activists who attended a private meeting in Xiamen, a port city on the southeast coast of China, were also summoned and questioned by the police. Some of them were arrested and have remained incarcerated ever since.

Lü Pin, a Chinese feminist activist currently living in the United States, said this was a "preemptive measure" against dissidents or activists building connections with one another — which could form the foundation of social resistance in the future.

Wang Yaqiu, the Freedom House researcher, also told DW that Chinese authorities found social connections "very threatening" as they usually led to solidarity and empowerment.

The "XueBing" case once again "speaks of how insecure Xi Jinping and the CCP are," she said, referring to the Chinese president and the country's ruling Communist Party.

A huge setback for Chinese civil society

Rio is one of the core members of the online support group Free Huang Xueqin and Wang Jianbing, which was formed after the duo's arrest to provide information on the case. So far, Chinese authorities have only made a few details public.

Most of the group's members were frequent participants in the gatherings, and according to Rio, more than 70 of them have been interrogated by the police.

At least 10 people have been forced to move to other cities, and some were reportedly coerced into signing documents with false statements during their interrogations. These documents may have been used as evidence to charge Huang and Wang, some group members told Rio.

"This is a big attack for many young activists in Guangzhou," Rio said. "We have cultivated the community for many years, but the government cracked down on everything very easily."

Lü told DW that the case had had "a huge impact" on feminist communities as well. They feel "an overwhelming sense of anger… and fear" whenever they think about it.

She said that the authorities intended to demonstrate that "its arbitrary actions essentially have no boundaries" by suppressing activists.

'You never know when the next peak will come'

Following the sentencing on Friday, Beijing's foreign ministry spokesman, Lin Jian, said that China "guarantees the legitimate rights of every citizen in accordance with the law."

He added: "At the same time, anyone who breaks the law will receive legal punishment."

But the momentum of activism in some areas, such as calling for women's rights and addressing sexual harassment, will not be easy to quench.

"You never know when the next peak will come," Lü said, referring to the #MeToo movement, "because this system continuously produces victims, and the victims will resist and prompt those around them to speak out."

"This will not stop."

By Kuan-Wei Chen, Researcher, Air and Space Law, McGill University

Taiwan recently saw yet another peaceful transition of power with the inauguration of President Lai Ching-Te, who was elected to office in January.

In his inaugural speech, Lai called on neighbouring China to cease its acts of intimidation and to “choose dialogue over confrontation.”

China responded by launching a simulated blockade of Taiwan. The People’s Liberation Army released images boasting its ability to rain missiles on one of the most densely populated countries in the world as “strong punishment.”

Democracy under threat

Beijing’s standard reaction to the democratic voting rights of 24 million people is to threaten to “break skulls and let blood flow.” For China, Taiwan as a renegade province that must “return to the embrace of the motherland” despite the fact China does not have any authority over Taiwan.

In recent years, China has been trying to use its diplomatic clout and influence at the United Nations to rewrite history and legitimize its claim of sovereignty over Taiwan.

While Taiwan ranks highly on the Human Freedom Index (just one spot ahead of Canada), China is a techno-authoritarian state that has regressed even further under the reign of Xi Jinping.

Millions of Uyghur Muslims remain in re-education and forced labour camps, while Tibetans are forced to “Sinicize” and lose their cultural and religious heritage. Reaching beyond borders

Political dissidents, journalists and foreign nationals are not immune from intimidation or imprisonment.

In what has been termed transnational oppression, aided through Chinese so-called police stations operating with impunity overseas, the Chinese government targets and threatens Chinese nationals and critics of China wherever they are.

Reaching beyond borders

Political dissidents, journalists and foreign nationals are not immune from intimidation or imprisonment.

In what has been termed transnational oppression, aided through Chinese so-called police stations operating with impunity overseas, the Chinese government targets and threatens Chinese nationals and critics of China wherever they are.

Many governments, including Canada’s, caution against travel to China and Hong Kong due to the “risk of arbitrary enforcement” of laws prohibiting activities or speech critical of the Chinese Communist Party.

China’s censorship, surveillance and arbitrary arrests are widespread, and such tactics and technologies are alarmingly being exported worldwide.

While the Chinese government condemns the forced divestment of TikTok, the app — together with Facebook, WhatsApp and Google — are all banned within the great firewall of China.

War games

When former United States House Speaker Nancy Pelosi visited Taiwan in 2022, China conducted similar war games.

Known as “grey-zone” tactics, they fall short of the use of force, which is prohibited under international law. Also referred to as “salami slicing,” grey-zone tactics that are not strictly attacks make it hard for others to respond without potentially escalating a situation to a conflict.

But not responding to threats of force or military intimidation risks normalizing such aggressive behaviour and emboldening China to further destabilize international peace and stability.

Such acts of harassment and threats can happen not just on Earth but in cyberspace and outer space, all of which can have severe repercussions on civilian life and infrastructure.

Pattern of reckless behaviour

Closely allying with Russia, and actively supplying weapons to sustain its war in Ukraine, China has not concealed its desire to reshape the world order.

Taiwan is not alone suffering China’s increasingly brazen naval and aerial military operations. Canadian and Australian aircraft enforcing United Nations sanctions against North Korea have also been repeatedly harassed on international waters, where states supposedly enjoy the freedom of navigation.

Meanwhile, China is continuously engaged in violent border clashes with India, is challenging the sovereignty of islands that belong to Japan and militarizing islands in the disputed waters of the South China Sea.

Deliberate jamming of navigation and emergency distress signals in the Asia-Pacific, which threatens the safety of international aviation, has also been attributed to China.

Why Taiwan matters

Tech executives around the world were recently in Taiwan to talk about the future of AI and innovative technologies. With Taiwan’s prowess in computing technologies and chip production, Jensen Huang — the Taiwanese-born NVIDIA CEO — described his homeland as “the unsung hero, a steadfast pillar of the world.”

But Taiwan is also on the front lines of an increasingly aggressive and assertive China. On a daily basis, Taiwan experiences the highest rate of cyberattacks in the world originating from China, all aimed at disrupting government services and sowing social distrust.

Taiwan has much to share with the world on how to enhance citizen participation in the digital age, counter foreign influence and dispel misinformation and disinformation that undermine trust in democratic institutions and processes.

The latest war games surrounding Taiwan are just another reminder of the various ways China tries to undermine liberal democracies and international peace and security. Today it may be a simulated attack. But the world must stand together and prevent it ever becoming reality.

Philippines soldiers used their "bare hands" to fight off Chinese coast guard personnel armed with swords, spears and knives in the disputed South China Sea, the country's top military commander has said.

General Romeo Brawner accused Chinese vessels of ramming Philippine boats, then boarding them and seizing weapons.

One Filipino soldier lost a thumb when his vessel was rammed, the general said. China denied its personnel were to blame, saying they had been "restrained".

There have been a string of dangerous encounters as the two sides seek to enforce their claims on disputed reefs and outcrops - this appears to be an escalation.

The skirmish happened as the Philippine navy and coast guard were delivering supplies to Filipino troops stationed in the Second Thomas Shoal.

Gen Brawner said soldiers reported seeing the Chinese coast guard armed with knives, spears and bolos, Filipino for sword. He said it's the first time Filipino troops had seen the Chinese using this type of weapon in the area.

"We saw in the video how the Chinese even threatened our personnel by pointing their knives at our personnel," Gen Brawner said.

Chinese personnel also seized a number of guns and destroyed items - including motors - and punctured inflatable vessels.

The incident, he added, amounted to "piracy".

"They have no right or legal authority to hijack our operations and destroy Philippine vessels operating within our exclusive economic zone," Gen Brawner told reporters.

But Beijing dismissed the allegations, saying its personnel were aiming to block an "illegal transportation" of supplies. "No direct measures" were taken against the Filipino soldiers, foreign ministry spokesman Lin Jian told reporters in Beijing.

"Law enforcement measures taken by the China Coast Guard at the site were professional and restrained," he added.

In an earlier statement, the Chinese coast guard said the Philippines was "entirely responsible" for the incident, as troops “ignored China’s repeated solemn warnings... and dangerously approached a Chinese vessel in normal navigation in an unprofessional manner, resulting in a collision”.

China has routinely attempted to block re-supply missions to the shoal. Filipino officials say the Chinese employ "dangerous manoeuvres" such as shadowing, blocking, firing water cannons and shining lasers to temporarily blind Filipino crews.

Monday's confrontation took part in an area at the heart of the sea encounters: the Filipino outpost in Second Thomas Shoal, where the country grounded a decrepit navy ship to enforce its claim.

A handful of soldiers are stationed there and require regular rations.

Analysts say choking the flow of supplies to the outpost, which could lead to its collapse into the sea, would allow Beijing to take full control of the area.

Observers fear any escalation in the South China Sea could spark a conflict between China and the US as it is treaty-bound to come to the Philippines' defence, should it come under attack.

Philippine President Ferdinand Marcos warned security forum in Singapore last month that if a Filipino died as a result of China’s wilful actions, Manila would consider it as close to “an act of war” and would respond accordingly.

But Gen Brawner said the Philippines military did not want to spark a war.

"Our objective is that while we want to bring supplies to our troops following international law, our objective is to prevent war," he said.

The Albanese government has formally expressed its displeasure to the Chinese embassy over Chinese officials trying to impede camera shots of journalist Cheng Lei during Premier Li Qiang’s visit to Canberra this week.

Prime Minister Anthony Albanese told the ABC on Tuesday: “When you look at the footage, it was a pretty clumsy attempt […] by a couple of people to stand in between where the cameras were and where Cheng Lei was sitting”.

Albanese said Australian officials had intervened to ask the Chinese officials to move, “and they did so.” Australian officials had “followed up with the Chinese embassy to express our concern,” he said.

At his press conference later on Monday, which Cheng attended, Albanese said he was “not aware” of the incident. The opposition questioned his response.

On Tuesday, he said Cheng, who works for Sky, was “a very professional journalist. And there should be no impediments to Australian journalists going about their job. And we’ve made that clear to the Chinese embassy.”

Opposition leader Peter Dutton welcomed the government raising the issue with the embassy. But he said: “I do want to point out that the prime minister clearly misled the Australian people yesterday when he got up and did a press conference and said that he heard nothing of it […] it’s completely inconceivable”.

Meanwhile, Albanese has indicated he believes there is no impediment to media organisations again posting correspondents to China.

The China correspondent for The Australian Financial Review, Mike Smith, and the ABC’s correspondent, Bill Birtles, were forced out in 2020.

They left after Chinese security officials visited their homes late at night, telling them they needed to be questioned over “a national security case”. Before departing, they spent several days under Australian diplomatic protection, while negotiations between officials of the two countries for their departure took place.

This followed immediately after the Chinese government confirmed Cheng’s detention in Beijing. She was later tried in secret for what she said was breaking an embargo on a story by a few minutes. She was released only last year [after three years in Chinese detention].

Asked on Monday whether he had raised the question of the Australian media getting back into China, Albanese said he’d done so in his China visit late last year.

“The Chinese side say that they are willing to grant that access. And speaking to some media organisations as well, it’s a matter of whether they wish to send people in there. I think that is the point,” he said.

A spokesman for the ABC said, “The ABC remains very interested in basing a correspondent in China”.

The incident on Monday took place when Albanese and Li were together at an agreement-signing event at parliament house in Canberra.

Chinese authorities in Xinjiang have been systematically changing hundreds of village names with religious, historical, or cultural meaning for Uyghurs into names reflecting recent Chinese Communist Party ideology, Human Rights Watch said.

"The Chinese authorities have been changing hundreds of village names in Xinjiang from those rich in meaning for Uyghurs to those that reflect government propaganda,” said Maya Wang, acting China director at Human Rights Watch. “These name changes appear part of Chinese government efforts to erase the cultural and religious expressions of Uyghurs.”

In joint research, Human Rights Watch and Norway-based organization Uyghur Hjelp (“Uyghur help”) scraped names of villages in Xinjiang from the website of the National Bureau of Statistics of China between 2009 and 2023.

The names of about 3,600 of the 25,000 villages in Xinjiang were changed during this period. About four-fifths of these changes appear mundane, such as number changes, or corrections to names previously written incorrectly. But the 630, about a fifth, involve changes of a religious, cultural, or historical nature.

The changes fall into three broad categories. Any mentions of religion, including Islamic terms, such as Hoja (霍加), a title for a Sufi religious teacher, and haniqa (哈尼喀), a type of Sufi religious building, have been removed, along with mentions of shamanism, such as baxshi (巴合希), a shaman.

Any mentions of Uyghur history, including the names of its kingdoms, republics, and local leaders prior to the founding of the People’s Republic of China in 1949, and words such as orda (欧尔达), which means “palace,” sultan (苏里坦), and beg (博克), which are political or honorific titles, have also been changed. The authorities also removed terms in village names that denote Uyghur cultural practices, such as mazar (麻扎), shrine, and dutar (都塔尔), a two-stringed lute at the heart of Uyghur musical culture.

China's commerce ministry said on Wednesday that it had urged Britain to stop sanctioning Chinese firms after the country sanctioned five Chinese companies over their links to Russia.

In a statement, the ministry said China "firmly opposes Britain's actions on the grounds that the Chinese companies are "related to Russia."

Britain last week imposed its first sanctions targeting vessels in Russian President Vladimir Putin's "shadow fleet" that it said was used to circumvent Western sanctions on the trade in Russian oil.

The action, part of 50 new sanctions and coordinated with G7 partners, also targeted suppliers of munitions, machine tools, microelectronics, and logistics to Russia's military, including entities based in China, Israel, Kyrgyzstan and Turkey, the British government said.

Britain's approach has ignored China's representations and the momentum and had a negative impact on economic and trade relations between China and the UK, China's commerce ministry said.

"Britain's approach is a unilateral sanction that has no basis in international law," it added. "We urge Britain to immediately correct its erroneous practices."

Japan and Canada on Tuesday, June 18, joined the Philippines’ treaty-ally the United States and strategic partner Australia in expressing support for Manila following the latest – and worst, thus far – incident between Chinese and Filipino personnel and vessels in the West Philippine Sea.

“Japan reiterates serious concern over repeated actions which obstruct freedom of navigation and increase regional tensions including recent dangerous actions that resulted in damage to the Filipino vessel and injuries to Filipinos onboard,” the Japanese Ministry of Foreign Affairs (MOFA) said in a statement late June 18.

On June 17, a Philippine military mission to bring supplies for and rotate troops assigned to the BRP Sierra Madre in Ayungin Shoal was disrupted by Chinese maritime personnel.

The Philippines’ National Security Council (NSC) said China used “dangerous maneuvers, including ramming and towing” in disrupting the mission. The Armed Forces of the Philippines (AFP), a day after the incident, confirmed that a soldier was “severely injured” because of China’s “intentional ramming.”

Japan and Canada are the latest countries to issue statements in support of the Philippines after the June 17 incident in Ayungin Shoal. The US State Department and Australia’s Department of Foreign Affairs and Trade also earlier released statements from Washington and Canberra, respectively.

In its statement, Japan said that issues in the South China Sea are “directly related to the peace and stability of the region and is a legitimate concern of the international community.”

“Japan opposes any unilateral attempts to change the status quo by force as well as any actions that increase tensions in the South China Sea,” said the MOFA.

Japan also reiterated its concern over “unlawful maritime claims and steadfastly opposes the dangerous and coercive use of Coast Guard and maritime militia vessels in the South China Sea.” A similar statement was made following the historic trilateral meeting between United States President Joe Biden, Japanese Prime Minister Fumio Kishida, and Philippine President Ferdinand Marcos Jr. in April 2024.

Tokyo said it “appreciates” Manila “for having consistently complied with the [2016] Arbitral Tribunal’s award,” and for its “commitment to the peaceful settlement of disputes in the South China Sea.”

Japan and the Philippines enjoy close economic, political, diplomatic, and security ties. Japan has helped the modernize the Philippine Coast Guard, among the units in the frontlines of the Philippines’ push to defend its sovereign rights and claims in the West Philippine Sea.

The two countries are also in the process of concluding a Reciprocal Access Agreement, a deal that would set terms for visits and deployment of troops to each others’ territories.

Canada also scored China for its “dangerous and destabilizing actions” against Philippine vessels during the June 17 resupply mission.

“The PRC’s use of water cannons, dangerous maneuvers and ramming of Philippine vessels is inconsistent with the PRC’s obligations under international law, including the UN Convention on the Law of the Sea [UNCLOS],” said Global Affairs Canada in a statement on its website.

“Canada opposes escalatory and coercive actions, including the unilateral declaration of authority over disputed features. Disputes must be resolved through dialogue rather than through force or coercion,” added the North American nation.

“We call upon the PRC to comply with its obligations, including implementation of the 2016 UNCLOS arbitral tribunal ruling, which is binding on the parties.”

Ayungin Shoal is among a flashpoint in tensions between China and the Philippines. The June 17 incident is the first confrontation between the two since China unilaterally imposed a new “regulation” for its coast guard that allows it to detain for up to 60 days persons they deem as “trespassers” in waters they consider theirs.

Canada is among a growing list of countries that have been eager to further improve ties – particularly covering defense and security – with the Philippines. It recently gave Philippine maritime agencies access to its dark vessel detection system.

Ottawa is also keen on forging a visiting forces-like agreement with Manila, following the signing of a defense cooperation memorandum in January 2024.

Local governments in China have asked several companies to pay tax bills dating back as far as the 1990s, underscoring their need for funding given the uneven economic recovery and persistent housing slump.

A number of listed firms have said in exchange filings in recent months that they’ve gotten government demands to pay tens of millions in back taxes and warned investors this could impact their earnings.

V V Food & Beverage Co. said last week that a liquor-making unit was told to pay some 85 million yuan ($11.7 million) on income it “failed to disclose” for about 15 years starting in 1994. ChinaLin Securities Co., Ningbo Bohui Petrochemical Technology Co., Zangge Mining Co. and PKU HealthCare Corp. have issued similar statements.

China’s local governments are facing unprecedented pressure to expand revenues because economic growth is slowing and the contracting real estate market has sent income from land sales plunging. Their already elevated debt stockpile is limiting their ability to leverage up further, forcing the central government to borrow more and give them the funds.

The tax recovery is “likely due to the fiscal distress of local governments,” said Xing Zhaopeng, an analyst at Australia & New Zealand Banking Group. “I think they need some money to pay by quarter end” because regional authorities usually pay contractors of government projects then, he added.

Local governments booked less than 5.8 trillion yuan in revenues under the general public budget and the government-fund account, which include taxes and land sales income, in the first four months of the year. That figure was less than the more than 5.9 trillion yuan in the same period last year, according to data from the Finance Ministry.

Their spending also fell to just under 10 trillion yuan from 10.4 trillion yuan a year earlier.

China’s economy is buried under a great wall of debt and Xi Jinping’s answer is to add more bricks. The president has sanctioned an extraordinary programme of borrowing by the central government to steer the $18 trillion behemoth to “high quality development”. In doing so, he is piling risk onto the country’s last decent balance sheet.

There is nothing new in the Chinese central government taking on more debt in a time of crisis. But the latest plan, outlined in March by the State Council, to sell special sovereign bonds with maturities of up to 50 years is a departure from a tested formula.

Such debts used to be indeed special, with only three new issuances by the People’s Republic before last month. All had a one-off policy goal or specific emergency to deal with, such as bailing out insolvent state-owned banks in 1998. This time, the government will sell 1 trillion yuan ($138 billion) in ultra-long-dated, special sovereign bonds. These issues will continue over “each of the next several years”, and the policy goals are broad.

Much of the proceeds will be used for investment to support “major national strategies”, per the State Council. Beijing would help finance the construction cost of schools and hospitals in grain-producing counties, for instance, to reinforce food security and thereby China’s self-sufficiency. Additionally, new industries such as semiconductors, electric vehicles and artificial intelligence will be prioritised as China races to establish a growth model led by domestic consumption, a green economy and innovation, rather than one that depends on infrastructure, land and labour.

Taking on more borrowing at the central government also will consolidate Xi’s grip on economic planning and resource allocation, potentially helping China to reduce wasteful investments. Crucially, expanding the central government’s balance sheet will ease the future burden on cash-strapped local governments that are responsible for most spending.

Heavy lifting

Xi’s borrowing plan addresses a problem created by a tax-sharing system introduced in the 1990s which allows Beijing to take a lion’s share of the national tax revenues. By 2022, per Ministry of Finance data, local governments were responsible for nearly 90% of total government expenditure but they needed to make do with about 50% of total government revenue.

The squeeze gave rise to local government financing vehicles, known as LGFVs, and prompted municipalities to lean on property market income including land sales to balance their books. Property incomes accounted for more than 40% of local government income in 2020. It dwindled quickly thereafter due to Xi’s “three red lines”, a deleveraging campaign that ultimately led a Hong Kong court to order the liquidation of Evergrande, the world’s most indebted real estate developer.

Borrowing binge

The additional borrowing is riskier this time. In 1998 China was on the verge of joining the World Trade Organization. Powered by robust exports and a youthful workforce, its trajectory was firmly on the up. Geopolitical tension, however, has taken steam out of the world’s second largest economy. Its sheer size and its existing indebtedness are an issue too.

The central government’s balance sheet remains tidy for now. Its outstanding borrowings amounted to 24% of GDP at the end of 2023, the International Monetary Fund estimates, among the lowest of major economies. If all else remains equal and China issues special sovereign bonds to the tune of 1 trillion yuan each year for the next decade, its borrowings would rise nearly 8 percentage points to almost 32% of last year’s GDP, Breakingviews calculates.

The problems stack up elsewhere, however. Explicit local government debt amounted to another 31% of GDP by the end of 2023, per the IMF, LGFVs account for a further 48%, and other government funds another 13%, bringing the augmented debt up to 116 trillion yuan, about $16 trillion, or 116% of GDP – a 35% increase on 2018, the IMF calculates.

Corporate debt adds another 123% of GDP, much of it issued by state banks and owed by state-owned enterprises, plus there’s household debt at 61% of GDP, per Fidelity which calculates gross debt at over 300% of GDP.

Borrowing more doesn’t sound like “a basket of comprehensive measures” to resolve risks stemming from local government debts, as the ruling Communist Party’s Politburo called for last year. The potential costs of bailing out those authorities and making the shift to the new growth model is why Moody’s and Fitch, two of the three major rating agencies, have put China’s sovereign rating on negative outlook since December.

More than two decades ago Zhu Rongji reacted indignantly to Hong Kong newspapers’ assessment that he was China’s “deficit premier” when his government started selling long-term construction bonds at smaller amounts. He insisted his cabinet was investing in quality assets, for future generations of the People’s Republic. This gamble paid off and the projects, including a power grid and an extensive mobile telecommunication network, laid the foundation for decades of growth.

By the time the new wave of sovereign debt matures, the People’s Republic would be celebrating its 100th anniversary and, if all goes well according to Xi’s plan, it will be a “strong and modern socialist country”. Long before then, however, it will be clear whether China can defy a debt crisis, as it has done so for decades, and simultaneously revive growth. There will be even less room to borrow its way out of problems next time.