SwedCham China Insights for the Week of July 3 - July 7 , 2023

Top news of the week:

China imposes export restrictions on gallium and germanium

July 3, 2023

On July 3rd, China announced to impose export controls on certain gallium and germanium-related items, which will take effect on August 1^st, 2023. Over 14 chemical products will not be allowed for export without permission. The export control is widely recognized as a retaliatory measure by China in response to the economic and technological sanctions imposed by the United States.

Xi Jinping attends the 23rd SCO Meeting of the Council of Heads of State

July 4, 2023

Xi Jinping delivered a speech when attending virtually at the 23rd meeting of the Council of Heads of State of the Shanghai Cooperation Organization (SCO), and pointed out that the concept of a community with a shared future for humanity is transitioning from an idea to action, and the SCO is at the forefront of the times, building a community with a shared future. He emphasized that unity and mutual trust are crucial for realizing the security and development interests of all member states and called for strengthening strategic communication and cooperation, advocating dialogue to dispel differences and collaboration to go beyond competition.

Premier Li Qiang met with the delegation of the Japan Trade Association

July 5, 2023

Premier Li Qiang met with a visiting delegation led by Yohei Kono, Chairman of the Japan Association for the Promotion of International Trade (JAPIT), in Beijing. Li Qiang stated that both China and Japan should adhere to the principles established in the four political documents between the two countries. China-Japan pragmatic cooperation is solid, complementary, and has significant potential. The two countries have extensive common interests, and China will continue to support Japanese companies in expanding investment and cooperation in China.

PBOC extends Yuan support after offering reassuring rhetoric

July 6, 2023

The People's Bank of China (PBOC) has strengthened the daily reference rate to support the renminbi (RMB) and stated that it has sufficient tools to stabilize the currency market. The PBOC set the RMB's central parity rate at a level that was 360 basis points higher than the average estimate, marking the largest gap since November. This move aims to control RMB exchange rate fluctuations and prevent excessive speculation.

U.S. Treasury Secretary Janet Yellen visits China

July 7, 2023

Janet Yellen, the U.S. Secretary of the Treasury visited China from July 6-9. This is the first visit by a U.S. Treasury Secretary to China in nearly five years and the second visit to Beijing by a high-ranking U.S. official since Secretary of State Antony Blinken's recent visit. Yellen's four-day "economic diplomacy" faced many critical issues while the visit was seen as a positive action to sustain the tendency of communication between the two countries. While Yellen's visit to China had been brewing for a long time, it seemed that both the U.S. and China did not have high hopes for a single trip to break the deadlock in U.S.-China relations.

Insight of the week:

On July 3, China implemented export restrictions on gallium-related and germanium-related products. This move is seen as a countermeasure against Washington's restrictions on chip exports to Beijing. To ease the tension in the market, the spokesperson Ministry of Commerce of China emphasized that China's latest export control on gallium and germanium-related items is not a ban on relevant exports during a press conference. According to the spokesperson, permits will be given when the exports comply with the relevant regulations and the purpose of the export restriction is to safeguard the national security of China.

Days after the export restrictions were announced, U.S. Treasury Secretary Janet Yellen began her visit to China, meeting with Premier Li Qiang, Deputy Governor of the People's Bank of China Pan Gongsheng, and Vice Premier He Lifeng, among other high-ranking officials. In addition, she also had meetings with American businesses in China, and climate financing experts.

Although no specific breakthroughs were achieved during Yellen’s visit, China's official media stated that Yellen's meeting with Vice Premier He Lifeng involved "in-depth, frank, and practical exchanges on the economic and financial situation of both countries and cooperative responses to global challenges," and the talks were constructive. Yellen herself acknowledged the "significant differences" between the two countries but described her discussions with Chinese officials as "direct, substantive, and fruitful." In a press conference after the meeting, she also stated that Washington does not seek to decouple from the Chinese economy, as doing so would be "disastrous for both countries and unstable for the world." Climate cooperation became a focal point of Yellen's visit, and the two countries reached some consensus on this issue. However, the tariff issue, which Yellen has long been concerned about, did not appear as a publicly discussed topic, possibly due to divergent viewpoints within the U.S. government regarding tariffs.