Illustration of Joe Biden having dinner with Chinese guests

In this week’s issue Xi-Biden meeting looks likelier, airlines offer “all-you-can-fly” promotions and Foxconn gets probed. On a scale of 1 to 100, we give the week a 50 for offshore-listed China stocks.

Doug Young, Editor in Chief

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More U.S.-China Warming as Xi, Biden Meet Each Other’s Emissaries

The ongoing thaw in U.S.-China relations continued in earnest last week, first as Xi Jinping gave a surprise audience to visiting California Governor Gavin Newsom in Beijing, and then as Joe Biden granted a similar audience to Chinese Foreign Minister Wang Yi. In addition, a U.S.-China working group on economic issues held its first round of talks.

Wang was the first cabinet-level Chinese official to visit the U.S. since the thaw began earlier this year. Before that, it was all U.S. cabinet-level officials visiting China. Xi’s decision to meet with the California governor also raised eyebrows, given Newsom’s lower ranking. The U.S. confirmed the two sides will try to work towards a Xi-Biden meeting at the APEC summit in the U.S. next month.

China Cracks Open the Debt Floodgates Wider

In what’s being described as a rare mid-year move, China has officially raised its limit on the amount of sovereign debt it can issue. The latest tweak now allows China to issue sovereign debt worth up to 3.8% of its GDP, compared with a previous limit of 3% set in March. The plan allows China to issue an additional 1 trillion yuan, or about $137 billion, in sovereign debt.

Beijing says it needs the new debt to support disaster relief and construction, and we suspect the big majority of that will go to construction. This seems to be the latest signal that as many of its other stimulus measures fail to have much effect, China will return to its old playbook of trying to stimulate the economy through new infrastructure spending.

China Stocks Post Weekly Gains after Friday Rally

A Friday rally helped offshore-listed Chinese stocks to post gains for all of last week, though the rally didn’t seem to have any major foundation. The gains came after a sharp selloff the previous week. The Hang Seng China Enterprises Index rose 1.8% during the week, while the iShares MSCI China ETF rose 0.5%, compared with a 1.3% rise for the broader Hang Seng Index.

Markets may have been moved by the latest signs of warming China-U.S. ties, and the growing possibility of a Xi-Biden meeting, which looked more likely at the end of the week when Joe Biden unexpectedly met with visiting Chinese Foreign Minister Wang Yi. Still, it will take quite a bit more than improving U.S.-China relations to fix what ails the Chinese economy right now.

An airliner of China Southern Airlines


China to Identify ‘Too Big to Fail’ Insurers

When it comes to “too big to fail,” China has been quite vigilant about naming its biggest banks that are systemically so important that the government would rescue them no matter what if a major crisis occurred. But Beijing has been less proactive in defining which of its insurers are also “too big to fail,” or at least until now.

The People’s Bank of China and the National Administration of Financial Regulation (NAFR) have just issued criteria to identify which insurers should get such status, meaning we will probably see a list of names soon. This looks prudent, given that China has some very large insurers by now, most notably China Life and Ping An, whose collapse could ripple throughout the financial system.

Airline Goes Global in Recent Wave of ‘All You Can Fly’ Promotions

Chinese airlines have recently begun selling “all you can fly” packages for their best customers in a bid to boost sales, and now at least one, China Southern, is adding international flights into its mix. One of the earlier original packages came from budget carrier Spring Airlines, which offered unlimited flights from October to next March for just 3,399 yuan, or $465.

Airlines were one of the hardest hit groups during the pandemic, and they may have suffered longer in China due to the country’s strict Covid controls that lasted about a year longer than the rest of the world. International flights, in particular, were slashed at the height of the pandemic, and still are only at a fraction of their pre-pandemic levels.

Funding Dries Up for Healthcare Startups

Airlines aren’t the only ones looking for some love out there. China’s hungry field of healthcare startups is also starting to feel abandoned by investors who once fawned over the group for their big potential. After peaking at $34 billion in 2021, funding for healthcare startups fell to $15.6 billion last year and was on track to fall further still with just $5.7 billion in the first half of this year.

The drop isn’t too surprising, since China’s healthcare market has become a bit of a bloodbath these days, especially for the many drug startups that are big cash burners. Even when such companies finally bring their drugs to market, they are suddenly finding themselves earning far less than they hoped due to the low prices paid by China’s national health plan.

A Foxconn factory in Hehan, China


Foxconn Gets Probed

National champion one day, scapegoat the next. That’s the story of Foxconn these days, as the Taiwanese company that’s one of Apple’s key manufacturing partners confirmed that it’s getting probed for something. Foxconn said the reasons were unclear for the recent visits to some of its Mainland-based units by investigators, but did confirm the visits occurred.

It’s quite possible that these probes are directed against individuals and not the company, since China appears to be cracking down on company officials who accept bribes. But it also shows how far Foxconn has fallen from Beijing’s graces. The company was untouchable at one time as one of China’s biggest employers, but lately has been moving jobs to nearby India.

Stellantis Buys Into Struggling EV Maker Leapmotor

Struggling Chinese electric vehicle (EV) maker Leapmotor got thrown a lifeline last week when Euro-American carmaker Stellantis announced it would pump $1.6 billion into the Chinese company in exchange for a 21% stake. Stellantis hopes it can slap its name on Leapmotor’s cars to help it gain a toehold in the booming Chinese market that accounts for more than half of all global EV sales.

The deal comes just months after Volkswagen made a similar move, paying a more modest sum of up to $700 million for 5% of the similarly struggling Xpeng. Both Leapmotor and Xpeng are part of a bumper crop of Chinese startups that were speeding toward the scrap heap of EV history when they received their lifelines. The money may buy them another year or two, but probably not much else. Lands Big Saudi Investment

Also from the world of new-economy cars, autonomous driving startup got a nice cash infusion of its own last week courtesy of a $100 million investment from Saudi Arabia. The deal will see and Saudi Arabia’s Neom urban development project set up a joint venture to develop robotaxis for the Middle East.

This looks like a nice validation for’s technology, which will be used in a new $500 billion megacity set to rise in the Saudi Arabian desert. It also shows how the Middle East is becoming an important investor in China’s tech startups as their traditional Western funding sources increasingly avoid the market.


China Property Contagion Hits Linklogis

Last week we turned our spotlight on a lesser-known fintech called Linklogis, whose plight is showing how non-property companies are getting sucked into China’s growing real estate crisis. Linklogis, which helps small suppliers get financing by securitizing their receivables, reported the volume of supply chain assets processed over its platforms fell in the first nine months of this year.

One of the main culprits behind the decline – you guessed it – was real estate companies, which are suffering through their worst downturn in the market’s relatively short history. Real estate enterprises represented as much as 42% of Linklogis’ customers at the end of 2021, but the number fell to just 15% by the end of June.
WH Group Offers Up Smithfield for U.S. Listing

We also turned our spotlight on a higher-profile story involving Smithfield, the famous U.S. pork producer that was gobbled up by China’s WH Group a decade ago. Now it seems that WH has had its fill of Smithfield, and is reportedly planning to float shares for the company through a separate listing in New York.

This particular story nicely illustrates how Chinese companies that thought they were getting bargains by buying Western assets on the cheap are now discovering otherwise. Smithfield was never a very sexy company to begin with, and lately it’s been getting hit by a double whammy of falling pork prices in the U.S. combined with higher feed prices as a result of the Russia-Ukraine war.

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