- BRICS has announced its expansion by inviting six countries to join
In a landmark move on the morning of August 24th, leaders at the fifteenth BRICS summit unveiled a significant expansion of the organization. Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates have been invited to join the BRICS cooperation framework.
Long recognized as a pivotal force among developing nations, the BRICS enlargement is anticipated to bolster the collective growth of its member states. This expansion is seen as a groundbreaking stride, broadening the organization’s reach and influence.
Over the past 14 years, BRICS has evolved from a financial market acronym to a robust political platform championing intergovernmental cooperation. Its primary aim has been to amplify the voice of the Global South in international affairs. As of 2020, data from the International Monetary Fund (IMF) revealed that the combined GDP (adjusted by purchasing power parity) of the original five BRICS nations had surpassed that of the G7 countries. With this expansion, BRICS is forecasted to represent 36.9% of the global GDP in 2023, with projections indicating a rise to 38.6% by 2028.
In contrast, the combined output of the G7 nations – comprising Canada, France, Germany, Italy, Japan, the UK, and the US – is predicted to decline from 29.9% in 2023 to 27.8% in 2028.
But the expanded BRCIS still largely trails the G7 in terms of per capita GDP, and only the UAE ranks in the upper-middle range when compared to the group of advanced economies, based on IMF data.
2. General Administration of Customs has announced the complete halt to the import of aquatic products from Japan
On 24th August, the website of General Administration of Customs published General Administration of Customs Announcement on the Comprehensive Suspension of Importation of Japanese Aquatic Products:
In order to prevent the risk of radioactive contamination of food safety resulting from Japan’s discharge of Fukushima nuclear contaminated water into the sea and to safeguard the health of Chinese consumers while ensuring the safety of imported food, we will take appropriate measures based on the “Food Safety Law of the People’s Republic of China” and its implementing regulations. “Based on the ‘People’s Republic of China Import and Export Food Safety Management Measures’ and the ‘Agreement on the Application of Sanitary and Phytosanitary Measures’ of the World Trade Organisation, applicable regulations state that the General Administration of Customs will be suspending the importation of aquatic products with origins from Japan (including aquatic animals for consumption) beginning from 24th August 2023 (inclusive).”
With China halting imports, Japan’s aquaculture industry may have lost almost 40% of its market. Furthermore, countries such as South Korea, the Philippines, Indonesia, and Malaysia are all exceedingly cautious of Japanese aquaculture products. Consequently, Japan’s losses extend beyond the Chinese market.
Japanese Prime Minister Fumio Kishida said on Thursday his government had demanded China “immediately eliminate” its import ban on seafood from Japan.
Tepco has been filtering the contaminated water to remove isotopes, leaving only tritium, a radioactive isotope of hydrogen that is hard to separate. Tepco will dilute the water until tritium levels fall below regulatory limits before pumping it into the ocean from the coastal site.
The IAEA said earlier that the release would have a “negligible” impact on the environment. While it also mentioned in the report “the release of the treated water stored at Fukushima Daiichi Power Station is a national decision by the Government of Japan and that this report is neither a recommendation nor an endorsement of that policy. “
3. Japanese restaurants and more are impacted by the discharge of Fukushima nuclear contaminated water
The controversy surrounding Japan’s discharge of radioactive contaminated water has impacted the business of Japanese restaurants in China. In response to growing concerns, several prominent Japanese food chains in China have taken swift measures to reassure their customers.
From 15-19 August, leading Japanese food chains including Daio Sushi, Toropeng Yakitori Izakaya, and Toriken Izakaya released official statements. They emphasized their commitment to sourcing ingredients through verified channels that meet safety standards. These establishments have pledged to prioritize “food safety first”, explicitly avoiding ingredients from Japan’s nuclear radiation-affected zones.
Aquatic experts suggest that the impact of Japan’s decision to release radioactive contaminated water on Chinese-Japanese restaurants remains manageable. Japan’s primary seafood exports to China include pond fish, sea urchins, and scallops. Alternatives are available: for instance, if sea urchins from Japan are deemed unsafe, they can be sourced from Canada, the United States, or other Pacific island nations. Similarly, Hokkaido metabasic scallops can be substituted with those from Dalian. Many other staple ingredients in Japanese cuisine don’t necessarily need to be imported from Japan.
The decline in the Japanese food market is apparent, according to a restaurant owner who runs a Japanese restaurant in Changning, Shanghai, on 24 August. “Even businesses like ours, which are mainly private domains, are affected by the negative publicity. A lot of my peers were ready to change their business as soon as they heard the news that Japan would discharge nuclear waste, and today the dust has settled and I have made up my mind”.
The negative publicity is not only harming Japanese restaurants but also local seafood restaurants and China’s entire fishing industry.
4. China boosts the stock martet by slashing Securities Stamp Duty and other measures
After Northbound funds (check out our CW31 newsletter for explanation) have reduced their holdings for 13 consecutive days, with a cumulative reduction of nearly 750 billion yuan since August, China’s Ministry of Finance and the State Administration of Taxation (SAT) issued a notice in the evening of 27th August,. The statement declared that as a means of invigorating the capital market and inspiring investor confidence, a 50% reduction on the stamp duty for securities transactions will be put in place from 28th August 2023.
From a market impact perspective, the gradual decrease in stamp duty rates for securities transactions has had a positive boost on China’s capital market.
On 24th April 2008, the stamp duty rate on securities transactions reduced from 3 per thousand to 1 per thousand, resulting in a 9.29% increase in the Shanghai Composite Index. On 19th September 2008, the stamp duty on securities transactions shifted from bilateral to unilateral levy, which led to a 9.45% surge in the Shanghai Composite Index.
From a tax policy perspective, reducing the stamp duty rate for securities transactions helps decrease market transaction costs and ease the burden for most investors. This policy aligns with the aim of reducing taxes, fees, and benefiting the public.
Combined with 3 other measures: slowing the pace of initial public offerings, further regulate major shareholders’ share reductions and lowering the minimum margin ratio of financing for purchasing securities from 100 percent to 80 percent, Chinese stocks jumped by more than 5% on Monday (28th August) morning. While publishing this newsletter on Monday 2pm Beijing time, the increase on Chinese stocks narrowed to only 2%.
5. 2023 Chengdu Auto Show Kicks Off Amidst Changing Market Dynamics
On 25 August, the curtains were raised on the 2023 Chengdu Auto Show, a 10-day automotive extravaganza spread across 11 exhibition halls. With an expansive display area exceeding 200,000 square meters, the event will host 129 car brands showcasing close to 1,600 vehicles, maintaining the same amount as the previous year.
Electric Vehicles (EVs) continue to dominate the spotlight. Notably, Shanghai Volkswagen has chosen to exclusively display its EV lineup. Among the luxury brands, BMW leads the charge, launching five new EVs and unveiling the anticipated i5. Mercedes-Benz isn’t far behind, introducing the new EQE among other models. However, apart from FAW-Volkswagen’s ID 7 VIZZION and Kia’s EV6, joint venture brands presented limited new offerings, resulting in subdued media interest.
The backbone of the Chengdu Auto Show remains the independent brands and their emerging sub-brands. Several rugged off-road vehicles at the Chengdu Auto Show received significant attention, such as BYD’s Equation Leopard, Yangwang U8, Great Wall Hi4.
While Japanese brands have been facing worse than ever perspectives due to the recent discharge of Fukushima nuclear contaminated water.
Unlike the other International Auto Show which focus on displaying new vehicles and technology, an important aspect of the Chengdu Auto Show is the sale of vehicles. However, China’s January-July 2023 passenger car retail sales were 11.304 million units, up only 2.18% year-on-year. The lack of demand can be attributed to the recent macroeconomic environment, which may also impact the sales during the Chengdu Auto Show.