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SINOLOGIX provides objective, economic, technological, and political analysis of Eastern and Central Asian countries, with a primary focus on the People’s Republic of China and in particular, its burgeoning tech sector. We strive to provide fact-based research that is independent of any ideological bias so that our readers can better understand the opportunities and challenges of working with and in Chinese markets.

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2022-09-07

NOTE – the confluence of the contentious relationships between the US and Russia and the US and China, coupled with rapidly developing collaboration among the BRICS and SCO countries in general, and China and Russia in particular, is material in any discussion of China’s economic, political and military situation – therefore, we’re adding coverage of Russia, the Ukraine War, and Central-East Asian geographies.

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ARTICLES

Research | Commentary | News

Featured research, commentary, news, and weekly summaries on mainland China, APAC, and Central Asia by SINOLOGIX staff and contributing subject matter experts.

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Map of Afghanistan
2023-01-01 – Historic Sino-Afghan Oil Deal

On January 6, 2023, the Afghanistan Ministry of Economic Affairs and the Chinese Ambassador to Afghanistan held a joint press conference to announce a historic deal for the first major foreign investment since the Taliban takeover to open up Afghanistan’s potentially vast energy and mineral resources. While the initial investment by the Xinjiang Central Asia Petroleum and Gas Company is a relatively paltry $150 million, it demonstrates what western analysts have feared – China will bypass western sanctions against the Taliban to secure access to critical energy, lithium and other rare earth minerals, and conversely, the Taliban has opened the door to obtain much-needed foreign currency to support an economy teetering on the brink of disaster.

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Image of the People's Republic of China Flag (overlaid over image of Russian Federation flag)
Pivotal Xi-Putin Summit in Moscow

On March 22, China’s President Xi Jinping concluded a very visible state visit to Moscow, where he met for three days of discussions with Russia’s President Vladimir Putin on a number of topics of interest not only to both China and Russia, but the US and its EU allies as well.

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Image of Computer Chip
China Semi Sector – 2022 Sanctions – Part 2

Recent news coverage in western media suggests that US sanctions against China’s semiconductor sector have caught the CCP and mainland industry leaders off guard. In this Part 2 of our two-part series on China’s semiconductor market, we do a deep(er) dive on the mainland Chinese chip sector, examine the Chinese government’s strategic plan to decouple China’s reliance on western technology suppliers, and evaluate the outcomes of that strategy.

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Image of 2 Chinese Businessmen Shaking Hands
China and De-dollarization – Part 3 – Trade Agreements

As the multi-polar Global South movement accelerates, there is now a consensus that the time is right for strategic alternatives – banks, financial messaging systems, and possibly even a new currency. In this Part 03, we examine recent changes to the financial infrastructure proliferating amongst BRICS+ and SCO+ members.

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Image of the People's Republic of China Flag (overlaid over image of Brazilian flag)
Sino-Brazil Leadership Summit – 2023

While not as closely watched as the recent summit in Moscow, where President Xi tacitly threw his weight behind Russia and its SMO in Ukraine, Brazil’s newly (re)elected President Lula da Silva’s recent state visit to China was in many respects much more significant, as it further pulls the US’ most powerful Latin American ally away from its sphere of influence and into China’s orbit.

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Photo of Xi Jin Ping
Xi Of Arabia and The PetroYuan Drive

Pepe Escobar provides an interesting take on the historic Sino-Saudi and Sino-GCC summits that took place this last December. His ability to place these meetings in a broader geopolitical and geoeconomic context makes this report a worthwhile read – above and beyond the multi-billion-dollar trade agreements that were inked in December, “Xi of Arabia” is now on the forefront of a massive pivot away from the petrodollar to the internationalized use of China’s renminbi (yuan).

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Image of US Currency
China and De-dollarization – Part 1 – Overview

The so-called “de-dollarization” phenomenon is really a reflection of China’s ascendancy to superpower status – there can be no question it is the main driver behind the emergence of increasingly powerful inter-regional economic organizations, innovative trade agreements that circumvent the USD’s role as the world’s primary currency for trade settlement, and conceivably, the demise of the USD as the world’s de facto reserve currency. In this Part 1, we summarize the key factors that might trigger a future change in currency usage by China and its trading partners.

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Image of Computer Chip with Chinese Flag
China Semi Sector – 2022 Sanctions – Part 1

Recent news coverage in western media suggests that US sanctions against China’s semiconductor sector have caught the CCP and mainland industry leaders off guard. In this research article, we examine this issue in the context of the global supply chain to analyze the short-term and long-term impact of US sanctions and the implications for both China and key industry players.

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Map of Eurasian Economic Union
Global South Spawns Game Changing Payments System

Challenging the western monetary system, the Eurasia Economic Union (EAEU) is leading the Global South toward a new common payment system that bypasses the USD…in this report, Pepe Escobar discusses recent progress toward a non-USD based trading system and the impact of such a system on the global economy.

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Data Insights

Debt to GDP Ratios - A Mounting Issue

The contrast between the debt-to-GDP ratio for China and Russia vs. Japan and the US is yet another stark reminder that economic power is shifting away from the traditional G7 countries to the BRICS – notwithstanding questions regarding the accuracy of China’s numbers, it should be clear that both China and Russia are in a much stronger position to continue their economic growth, while both Japan and the US have maxed out their credit cards.

In 2022, the US government will pay $305B in interest (to service the national debt) – roughly 5% of the total federal budget. By 2030, that number is expected to grow to $829B, or roughly 10.6% of the total federal budget. Note – this estimate was calculated before the 2022 adjustments to the Fed funds target rate.

Japan and the US are going to find it increasingly difficult to find buyers for JGB and US Treasuries – and that is going to have a profound impact on the value of their respective currencies. China and Russia, on the other hand, have initiated two initiatives that will further erode the US control of global trade – commodity-based currencies and trade settlement using a basket of currencies (other than the USD).

(swipe left on column 2 to scroll)

Data Source – World Bank

Debt to GDP Ratios - China vs Other MDC's

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Debt to GDP Ratios - China vs Other MDC's

Data Source – World Bank

GDP Growth - China vs Other MDC's

(click/tap legend to filter data)
GDP Growth - China vs Other MDC's

Data Source – World Bank

Other Data Insights

"Things change gradually at first...

...then all at once..."

China GDP vs UST Holdings (2010-22) (billions)

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China GDP vs UST Holdings (2010-22) (billions)

Data Source – World Bank

Global FX Exchange Reserves (2001-22) (% of total)

(click/tap legend to filter data)
Global FX Exchange Reserves (2001-22) (% of total)

Data Source – World Bank

Global FX Exchange Reserves (2001-22) (% of total)

(click/tap legend to filter data)
Global FX Exchange Reserves (2001-22) (% of total)

Data Source – World Bank

Western media is starting to pay attention to China’s efforts to influence members of the so-called Global South, or more specifically the BRICS+ and Shanghai Cooperation Organization (with substantially overlapping membership), to denominate international trade in the Chinese Renminbi (RMB), aks the Chinese Yuan (CNY) and/or other local currencies. For very different reasons, Russia has promoted the idea of an entirely new currency for trade settlement. This is an accelerating trend among countries that have formed close economic and political relationships with China.

Coincident with the pivot to the RMB for trade settlement is a growing sentiment among the BRICS+ and SCO members that holding USD as their primary reserve currency poses a risk in the event the US declares sanctions and/or freezes a country’s assets, as happened with Russia and Belarus in 2022.  

The combined effect of these two trends should be observable in a country’s US Treasuries holdings, and that’s exactly what we’re seeing in the chart above – China’s USD and Treasuries holdings peaked at $1.277 trillion in 2013 and declined by more than 32% in 2022.

Things change “slowly at first, then all at once”...

Related Posts

China and De-dollarization – Part 1 – Overview

The so-called “de-dollarization” phenomenon is really a reflection of China’s ascendancy to superpower status – there can be no question it is the main driver behind the emergence of increasingly powerful inter-regional economic organizations, innovative trade agreements that circumvent the USD’s role as the world’s primary currency for trade settlement, and conceivably, the demise of the USD as the world’s de facto reserve currency. In this Part 1, we summarize the key factors that might trigger a future change in currency usage by China and its trading partners.

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(click/tap legend to filter data)
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Newsfeeds

International and APAC

Sino-Brazil Leadership Summit – 2023

While not as closely watched as the recent summit in Moscow, where President Xi tacitly threw his weight behind Russia and its SMO in Ukraine, Brazil’s newly (re)elected President Lula da Silva’s recent state visit to China was in many respects much more significant, as it further pulls the US’ most powerful Latin American ally away from its sphere of influence and into China’s orbit.

China and De-dollarization – Part 2 – BRICS and SCO

While China is a driving force in the Global South’s pivot away from the USD, the rapid expansion of inter-regional economic organizations made up of Asian, Central Asian, Middle East, African and Latin American countries has accelerated the shift in political and economic power that threatens to upend more than 70 years of US dominance on the world stage.

China and De-dollarization – Part 1 – Overview

The so-called “de-dollarization” phenomenon is really a reflection of China’s ascendancy to superpower status – there can be no question it is the main driver behind the emergence of increasingly powerful inter-regional economic organizations, innovative trade agreements that circumvent the USD’s role as the world’s primary currency for trade settlement, and conceivably, the demise of the USD as the world’s de facto reserve currency. In this Part 1, we summarize the key factors that might trigger a future change in currency usage by China and its trading partners.

Pivotal Xi-Putin Summit in Moscow

On March 22, China’s President Xi Jinping concluded a very visible state visit to Moscow, where he met for three days of discussions with Russia’s President Vladimir Putin on a number of topics of interest not only to both China and Russia, but the US and its EU allies as well.

China’s Ascendant Diplomacy – Saudi-Iran Agreement

In a historic turn of events, China has successfully brokered a groundbreaking agreement between long-standing rivals Saudi Arabia and Iran, marking a significant shift in the geopolitical landscape of the Middle East. The agreement, which focuses on reestablishing diplomatic ties, ending proxy conflicts, and enhancing economic cooperation, highlights China’s growing influence in the region and its expanding role as a global power.

2023-01-22 – China Q4 GDP Beats Estimates

The last few weeks have seen remarkable changes in China – the (reported) COVID numbers have stabilized and even declined in some provinces, 2022 Q4 GDP numbers (vastly) exceeded analysts’ expectations, a projected 5.2% GDP growth target for 2023 is driving demand for oil, and the latest Bureau of Statistics reports confirm a population decline. A lot to digest…

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Due to the recent COVID outbreak in the downtown Puxi District, the Shanghai office is closed to outside visitors. Please feel free to contact us via email or phone to schedule an online meeting.

Due to the recent COVID outbreak in the downtown Puxi District, the Shanghai office is closed to outside visitors. Please feel free to contact us via email or phone to schedule an online meeting.

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In Chinese culture, the dragon symbolizes power, strength, and good luck. Unlike in Western mythology, where dragons are often seen as malevolent creatures, the Chinese dragon is benevolent and associated with prosperity, the power of transformation, and the bringing of rain to the crops. 

Best wishes to all in 2024!

In Chinese culture, the dragon symbolizes power, strength, and good luck. Unlike in Western mythology, where dragons are often seen as malevolent creatures, the Chinese dragon is benevolent and associated with prosperity, the power of transformation, and the bringing of rain to the crops. 

Best wishes to all in 2024!