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How to predict the unpredictable: Doing business in China in 2022 – Verdict

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By Elles Houweling
To say that 2021 has been an eventful year for businesses in China would be an understatement. Apart from coping with the ongoing consequences of the Covid-19 pandemic, a constant flow of regulatory changes coming from Beijing rocked countless industries from real estate to gaming, ecommerce, edtech and many more. Given the speed and seemingly arbitrary nature at which new laws have been introduced, it can be difficult to understand what is happening in China and what the future may look like.
Verdict talks to business executives and analysts specialised in China to discuss what the next year might have in store for the Middle Kingdom.
In 2022 two major national events will dominate the narrative — first, the winter Olympics in Beijing in February. Then, after that global spectacle wraps up, the Chinese People’s Political Consultative Conference (CPPCC) will meet in March to start with preparations for the Communist Party’s (CCP) most important event in 2022: the 20th Congress in November.
The outcomes of that event will shape China not only in the next year but in the next decade — perhaps even the decades — to come.
In 2021, news in China was dominated by a slew of regulatory changes aimed at curbing Big Tech’s power.
“China has allowed things to develop very fast. But now they’re balancing things out from a regulatory point of view, and they’re taking action on monopolies,” David Messenger, CEO at China-based fintech company LianLian Global, tells Verdict.
It all began in November of last year, when, at the last minute, the CCP torpedoed the hotly-anticipated initial public offering (IPO) of Ant Group, retail giant Alibaba’s financial arm.
Since then, hardly any big name in the Chinese tech industry was spared. In May, Alibaba was slapped with a record-breaking US$2.8bn antitrust fine. Soon after, Tencent was probed by the Chinese government. Ride-hailing app Didi Chuxing experienced a disastrous New York IPO, which prompted countless firms to rethink their plans of going public in the US.
The saga goes on: In the summer, a ban on online private tutoring wiped out a multi-billion dollar industry almost overnight. In addition, the notion of “common prosperity” was introduced, which saw the likes of Alibaba and Tencent pledge significant sums of money to foster fairer economic growth in China.
Within just a year, Xi effectively changed corporate China.
At the end of 2022, the CCP will hold its 20th Party Congress, which in all likelihood, will see Xi Jinping re-elected as General Secretary for at least another five years. As a result, we can expect to see Xi more openly exercising the power he has accumulated over the past decade.
Going into 2022, large conglomerates and business moguls still need to be on their toes. GlobalData analyst Emilio Campa predicts that the property and banking sectors will be the new targets on Beijing’s watchlist.
Indeed, the ongoing crisis surrounding China’s most indebted real estate developer, Evergrande, has become a cause for concern among Chinese lawmakers. Earlier this year, Evergrande missed several foreign and domestic bond payments deadlines. Recently, the firm was officially labelled as a defaulter.
At the same time, another Chinese property developer, Kaisa Group, also defaulted on a US$400m offshore bond payment.
Arguably, these examples are but the tip of the iceberg in what could be a massive restructuring of China’s highly indebted real estate industry. Given the risk this poses to the country’s economic stability, it is likely that Xi and his team will go after property developers next.
Similarly, online brokerages like Futu Holdings and UP Fintech Holding, which offer offshore trading services to mainland clients, have also become recent targets in China’s clampdown campaign.
Nevertheless, early indicators show that in 2022 regulators may scale back on their aggressive crackdown strategy. In the latest economic plan revealed by the Politburo of the CCP, the keyword seemed to be stability.
The party stipulated that “actions should be taken to safeguard macroeconomic stability, keep major economic indicators within an appropriate range and maintain social stability to prepare for the Party’s 20th National Congress.”
The CCP further emphasised that economic plans for 2022 should prioritise stability and prudence, noting that China will “continue to adopt proactive fiscal policies and prudent monetary policies.”
The Chinese economy will likely experience its slowest growth rate in decades. In 2021, GDP growth was already far more modest than several years ago. In the third quarter, China’s economy grew by 4.9%, lower than analysts’ expectations.
GlobalData, a data analytics company, forecasts China’s real GDP to grow at an average annual rate of 7% between 2021 and 2023.
Maintaining stability and safeguarding economic expansion appears to be a logical and necessary goal to keep national spirits high. As such, Beijing will need to focus on boosting key economic areas.
“The Chinese government will support the companies that align with its priorities and will either shun or force other companies to realign,” says Campa.
This means that firms engaged in upstream high-tech sectors, such as semiconductors, artificial intelligence, quantum computing, robotics and similar industries, will continue to see support from the government.
In its latest move, China’s legislature is updating the country’s science and technology progress law to allow for more government spending on next-generation technologies.

Although it may become more difficult for foreign businesses to operate in China, the market remains one of the most lucrative ones in the world.
“Undoubtedly, China will be the biggest growth market for the next 20 years until India comes along, and India is in no way close to the growth prospects that China will exhibit. On the other hand, investing in almost any industry is a bit of a risk because the Chinese government has shown that it’s favouring social cohesion and social stability well above investors’ interests,” GlobalData analyst Cyrus Mewawalla recently said in an interview with CNBC.
One of the first problems is that, in a lot of cases, “the west doesn’t understand China,” argues Campa.
Messenger agrees, adding that one of the big challenges that companies face is not knowing how market regulation in China works.
“The process in China round regulations is fundamentally different. Even though I would argue that the goals of the regulators are actually very similar to the goals of the regulators in other countries.”
Traditionally, new industries in new sectors were given significant leeway to operate. They were given the freedom to test the waters and build up China’s infrastructure. For instance, that is how the likes of Alibaba and Tencent were able to grow exponentially over the past two decades.
“They allow a lot of grey areas. It’s not white, it’s not black. They observe and they let things develop. Once it develops, they will then take action. Everything in China happens at China speed,” says Messenger.
These regulatory grey areas can actually be an advantage for smaller companies. There are still many undeveloped industries where foreign businesses can find their niche in China, for instance, in areas of specialised fintech, says Messenger.
In addition, as these large tech companies are now being forced to play fair, it opens up the space for startups and venture capitalists to come in and expand into areas that these tech giants previously dominated, argues Campa.
The key, however, is to find the right partner. “If you’re a foreign company, one of the key things is, you’ve got to find the right partner in China who actually is China-born and they know how this works,” emphasises Messenger.
Of course, it’s not all rainbows and sunshine. Doing business in China has never been easy, and it will likely only become trickier henceforward. Data protection and areas that are deemed sensitive to national security will be the biggest hurdles.
“New regulations are really going to push companies to make sure they have the right data architecture so that data is stored and backed up in China. That is going to require some additional investment,” explains Messenger.
Companies have to keep their “eyes wide open”, he adds.
Then, of course, there is the risk of bad press of doing business in China. More and more companies are being caught between the West and China over human rights issues, being forced to choose between capitulating to Beijing or facing a backlash from western consumers.
Western brands such as H&M, Nike, Burberry, and Converse, which have openly voiced concerns about human rights abuses against China’s Uyghur Muslim minority in the western Xinjiang region, were quickly boycotted on Chinese soil.
Successfully doing business in China increasingly means knowing how to navigate between the opposing positions held by Chinese and Western consumers. “Maybe that’s what I would recommend; really good PR,” says Campa.
The latest international conglomerate that had to learn this lesson the hard way was Intel. After it told suppliers to ensure that no products or labour was sourced in Xinjiang, Chinese consumers threatened to boycott the US chipmaker. Soon after, Intel posted a letter on its Chinese social media accounts apologising to the Chinese public.

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Beijing Surging Equipment to Moscow to Help War…

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Beijing Surging Equipment to Moscow to Help War…

WASHINGTON (AP) — China has surged sales to Russia of machine tools, microelectronics and other technology that Moscow in turn is using to produce missiles, tanks, aircraft and other weaponry for use in its war against Ukraine, according to a U.S. assessment.

Two senior Biden administration officials, who discussed the sensitive findings Friday on the condition of anonymity, said that in 2023 about 90% of Russia’s microelectronics came from China, which Russia has used to make missiles, tanks and aircraft. Nearly 70% of Russia’s approximately $900 million in machine tool imports in the last quarter of 2023 came from China.

Chinese and Russian entities have also been working to jointly produce unmanned aerial vehicles inside Russia, and Chinese companies are likely providing Russia with nitrocellulose used in the manufacture of ammunition, the officials said. China-based companies Wuhan Global Sensor Technology Co., Wuhan Tongsheng Technology Co. Ltd. and Hikvision are providing optical components for use in Russian tanks and armored vehicles.

The officials said Russia has received military optics for use in tanks and armored vehicles manufactured by Chinese firms iRay Technology and North China Research Institute of Electro-Optics, and China has been providing Russia with UAV engines and turbojet engines for cruise missiles.

Russia’s semiconductor imports from China jumped from $200 million in 2021 to over $500 million in 2022, according to Russian customs data analyzed by the Free Russia Foundation, a group that advocates for civil society development.

Beijing is also working with Russia to improve its satellite and other space-based capabilities for use in Ukraine, a development the officials say could in the longer term increase the threat Russia poses across Europe. The officials, citing downgraded intelligence findings, said the U.S. has also determined that China is providing imagery to Russia for its war on Ukraine.

The officials discussed the findings as Secretary of State Antony Blinken is expected to travel to China this month for talks. Blinken is scheduled to travel next week to the Group of 7 foreign ministers meeting in Capri, Italy, where he’s expected to raise concerns about China’s growing indirect support for Russia as Moscow revamps its military and looks to consolidate recent gains in Ukraine.

President Joe Biden has previously raised his concerns directly with Chinese President Xi Jinping about Beijing indirectly supporting Russia’s war effort.

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While China has not provided direct lethal military support for Russia, it has backed it diplomatically in blaming the West for provoking Russian President Vladimir Putin’s decision to launch the war and refrained from calling it an invasion in deference to the Kremlin.

China has repeatedly said it isn’t providing Russia with arms or military assistance, although it has maintained robust economic connections with Moscow, alongside India and other countries, amid sanctions from Washington and its allies.

“The normal trade between China and Russia should not be interfered or restricted,” said Liu Pengyu, spokesman of the Chinese Embassy in Washington. “We urge the U.S. side to refrain from disparaging and scapegoating the normal relationship between China and Russia.”

Xi met in Beijing on Tuesday with Russian Foreign Minister Sergey Lavrov, who heaped praise on Xi’s leadership.

Russia’s growing economic and diplomatic isolation has made it increasingly reliant on China, its former rival for leadership of the Communist bloc during the Cold War.

Treasury Secretary Janet Yellen, who returned to Washington this week from a visit to Beijing, said she warned Chinese officials that the Biden administration was prepared to sanction Chinese banks, companies and Beijing’s leadership, if they assist Russia’s armed forces with its ongoing invasion of Ukraine.

The Democratic president issued an executive order in December giving Yellen the authority to sanction financial institutions that aided Russia’s military-industrial complex.

“We continue to be concerned about the role that any firms, including those in the PRC, are playing in Russia’s military procurement,” Yellen told reporters, using the initials for the People’s Republic of China. “I stressed that companies, including those in the PRC, must not provide material support for Russia’s war and that they will face significant consequences if they do. And I reinforced that any banks that facilitate significant transactions that channel military or dual-use goods to Russia’s defense industrial base expose themselves to the risk of U.S. sanctions.”

The U.S. has frequently downgraded and unveiled intelligence findings about Russia’s plans and operations over the course of the more than 2-year-old war with Ukraine.

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Such efforts have been focused on highlighting plans for Russian misinformation operations or to throw attention on Moscow’s difficulties in prosecuting its war against Ukraine as well as its coordination with Iran and North Korea to supply it with badly needed weaponry. Blinken last year spotlighted intelligence that showed China was considering providing arms and ammunition to Russia.

The White House believes that the public airing of the intelligence findings has led China, at least for now, to hold off on directly arming Russia. China’s economy has also been slow to emerge from the COVID-19 pandemic. Chinese officials could be sensitive to reaction from European capitals, which have maintained closer ties to Beijing even as the U.S.-China relationship has become more complicated.

Meanwhile, China on Thursday announced rare sanctions against two U.S. defense companies over what it called their support for arms sales to Taiwan, the self-governing island democracy Beijing claims as its own territory to be recovered by force if necessary.

The announcement freezes the assets of General Atomics Aeronautical Systems and General Dynamics Land Systems held within China. It also bars the companies’ management from entering the country.

Filings show General Dynamics operates a half-dozen Gulfstream and jet aviation services operations in China, which remains heavily reliant on foreign aerospace technology even as it attempts to build its own presence in the field.

The company also helps make the Abrams tank being purchased by Taiwan to replace outdated armor intended to deter or resist an invasion from China.

General Atomics produces the Predator and Reaper drones used by the U.S. military.

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AP writers Didi Tang and Fatima Hussein contributed reporting.

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China’s gambling hub of Macao holds its its final horse race, ending a tradition of over 40 years

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China’s gambling hub of Macao holds its its final horse race, ending a tradition of over 40 years

MACAO (AP) — After more than 40 years, Macao’s horse racing track hosted its final races on Saturday, bringing an end to the sport in the city famous for its massive casinos.

In January, the city’s government said it would terminate its contract with the Macao Jockey Club in April. The decision came at the request of the Macao Horse Race Company, which cited operational challenges as part of the reasons for the closure.

On Saturday, gamblers congregated in the half-full stands and placed their final bets. Some tourists also visited the track.

Mai Wan-zun, a student from mainland China in Macao, said she wanted to get a taste of the atmosphere. “We could come to see horse racing here in Macao, but not in mainland China,” she said.

Helena Chong, a Macao resident, decided to visit the race course for the first and last time to see what it’s all about.

“It’s a pity to see the end of all this gambling and entertainment,” she said.

Horse racing in the former Portuguese colony has struggled with economic challenges in recent years and has yet to rebound from the impacts of the COVID-19 pandemic. Its jockey club had accumulated operating losses of over $311 million, the Macau News Agency earlier reported.

Under the termination arrangement, the horse racing firm had pledged to arrange for transportation of owners’ horses to other locations by March 2025, and handle the company’s employees according to the law, the government said.

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In neighboring Hong Kong, horse-racing remains popular and profitable. Its jockey club runs various gambling activities and is the city’s major donor of many charity works.

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Migrant workers who helped build modern China have scant or no pensions, and can’t retire

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Migrant workers who helped build modern China have scant or no pensions, and can’t retire

BEIJING (AP) — At 53, Guan Junling is too old to get hired at factories anymore. But for migrant workers like her, not working is not an option.

For decades, they have come from farming villages to find work in the cities. Toiling in sweatshops and building apartment complexes they could never afford to live in, they played a vital role in China’s transformation into an economic powerhouse.

As they grow older, the first generation of migrant workers is struggling to find jobs in a slowing economy. Many are financially strapped, so they have to keep looking.

“There is no such thing as a ‘retirement’ or ‘pensions’ for rural people. You can only rely on yourself and work,” Guan said. “When can you stop working? It’s really not until you have to lie in bed and you can’t do anything.”

She now relies on housecleaning gigs, working long days to squirrel away a little money in case of a health emergency. Migrant workers can get subsidized health care in their hometowns, but they have little or no coverage elsewhere. If Guan needs to go to hospital in Beijing, she has to pay out of pocket.

As China’s population ages, so are its migrant workers. About 85 million were over 50 in 2022, the latest year for which data is available, accounting for 29% of all migrant workers and up from 15% a decade earlier. With limited or no pensions and health insurance, they need to keep working.

About 75% said they would work beyond the age of 60 in a questionnaire distributed to 2,500 first-generation migrant workers between 2018 to 2022, according to Qiu Fengxian, a scholar on rural sociology who described her research in a talk last year. The first-generation refers to those born in the 1970s or earlier.

Older workers are being hit by a double whammy. Jobs have dried up in construction due to a downturn in the real estate market and in factories because of automation and the slowing economy. Age discrimination is common, so jobs tend to go to younger people.

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“For young people, of course, you can still find a job, positions are available, though the wage is not high enough,” said Zhang Chenggang of Beijing’s Capital University of Economics and Business, where he directs a center researching new forms of employment.

“But for older migrant workers, there simply are no positions,” said Zhang, who conducted field studies at four labor markets across China late last year. “Now, the problem is that no matter how low the wage is, as long as someone pays, you will take the job.”

Some job recruiters contacted by AP said older workers don’t work well or have underlying illnesses. Others declined to answer and hung up.

Many are turning to temporary work. Zhang Zixing was looking for gigs on a cold winter day late last year at a sprawling outdoor labor market on the outskirts of Beijing.

He said he was fired from a job delivering packages because of his age about three years ago, when he reached 55. In December, he was earning 260 yuan (about $35) a day installing cables at construction sites.

Zhang Quanshou, a village official in Henan province and a delegate to China’s National People’s Congress, said some older migrant workers are just looking for work near their hometowns, while others still head to larger cities.

“Some older migrant workers are finding temporary jobs, so it is important to build the temporary job market and provide a better platform for such services,” Zhang, the Communist Party secretary of the village, said in an emailed response to questions during a recent annual meeting of the Congress.

Guan, who comes from a rice-farming region in the north, worked on a clothing factory assembly line until she was laid off when she was in her 40s. She then worked various jobs in different cities, winding up in Beijing in 2018.

She works seven days a week, partly because she’s afraid labor agencies won’t call again if she turns an offer down.

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Over February’s Lunar New Year holiday, when migrant workers traditionally go home to visit their families, she stayed in Beijing as a caretaker for an elderly woman, because the woman needed help and she needed the money.

“People either want someone who’s educated or young, and I don’t meet either of those requirements,” said Guan, who dropped out after middle school because her parents had only enough money to educate their son. “But then I think, regardless of how other people look at me, I have to survive.”

Guan worries jobs will be even harder to find when she reaches 55. The retirement age for women in China is 50 or 55, depending on the company and type of work. For men, it is 60.

Lu Guoquan, a trade union official, has proposed relaxing age limits for jobs, judging workers by their physical condition instead of their age and making it easier for older people to find work through labor markets and online platforms.

“A large number of farmers have entered cities, making an important contribution to the modernization of our country,” said his proposal, made to an advisory body during the recent national congress and seen by the AP.

As workers grow older, “they are gradually becoming a relatively vulnerable group in the labor market and face a number of thresholds and problems in continuing to work,” it said.

Lu, director of the general office of the All-China Federation of Trade Unions, declined an interview request.

Duan Shuangzhu has spent 25 years collecting trash in one Beijing neighborhood after giving up a life of raising sheep and cows in north China’s Shanxi province when he was in his 40s. He gets up at 3:30 a.m. seven days a week to make his rounds. For that, he earns 3,300 yuan ($460) a month and has a basement room to live in.

Duan’s wife stayed on the farm, where she looks after their grandchildren. Duan has managed to save money for himself, his children and his grandchildren, but never paid into a pension system, directing what little he earns to his family.

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That fits the pattern Qiu found in her research, which she published in a book last year. Older migrant workers moved to the cities to improve the lives of their children and other relatives, not themselves, she found. Most have limited or no savings, and few have climbed the economic ladder. They hoped their children would, but most ended up as migrant workers, too.

Most migrant workers’ earnings were spent on their children’s marriages, homes and education, Qiu said in her talk. “Basically, they did not begin working for themselves and planning for their own late years until the age of 55.”

Duan, at 68, has no plans to quit.

“As long as I can work every day, it’s enough to survive,” he said, standing next to a set of community rubbish bins, color-coded for recycling. “I didn’t grow up in a wealthy family — just filling my stomach each day is enough for me.”

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Associated Press researcher Wanqing Chen contributed to this story.

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