CX Weekly Briefing: Panama Port Dispute Heats Up

Here is a summary of the main headlines concerning recent developments in and around China, as reported over the past week:

Panama Port Dispute: Panama has taken legal action against CK Hutchison Holdings Ltd., a Hong Kong-based company that operates two significant ports at either end of the Panama Canal. The Panamanian comptroller general filed the cases with the country’s supreme court, challenging the company's rights to operate these ports. CK Hutchison has been seeking to sell the ports, which have been under its management since 1997, and attempted a sale earlier this year to a consortium including BlackRock Inc. The issue has gained further geopolitical prominence after U.S. President Donald Trump declared in his inaugural address his intention to reduce Chinese influence over the Panama Canal. Panamanian President Jose Raul Mulino stated the government may reclaim the ports, converting them into public-private partnerships, if the court finds the port rights invalid. [para. 2]

Starbucks China Sale: Starbucks Corp. is exploring the sale of its China business, with CEO Brian Niccol reporting that over 20 institutions have shown interest. The company is seeking a strategic partner to foster further growth in China and plans to maintain a significant ownership stake. Previously, Starbucks engaged in preliminary discussions with at least ten potential private equity buyers, including Hillhouse Capital and FountainVest Partners, marking a strategic shift towards courting outright buyers rather than merely seeking partners. [para. 3]

Nvidia Summoned in China: The Cyberspace Administration of China (CAC) summoned executives from Nvidia Corp. regarding security risks associated with the company’s H20 computing chips. The CAC alleges that the H20s contain a backdoor vulnerability due to built-in tracking and remote shutdown technology. These chips were designed to comply with U.S. export restrictions but have come under scrutiny as U.S. lawmakers insist exported advanced chips possess tracking capabilities. [para. 4]

EU Investigation into Temu: The European Commission has preliminarily accused Temu, the international arm of PDD Holdings, of breaching EU rules on illegal product sales. The company allegedly failed to manage the risks of illegal items—like non-compliant baby toys and small electronics—being sold on its platform, violating the Digital Services Act. Should Temu be found guilty, it could face a fine up to 6% of its global annual turnover and be compelled to make corrective changes. [para. 5]

China’s Childcare Subsidy: China announced a national childcare subsidy effective January 1, 2025, granting annual cash payments to families with children under three: up to 10,800 yuan for the first child, 21,600 yuan for the second, and 32,400 yuan for the third. The annual cost is estimated to be around 100 billion yuan, based on approximately 9 million newborns each year—an effort to counter the nation’s declining birth rate following the introduction of the three-child policy in 2021. [para. 6]

Deadly Floods in Beijing: Severe rainstorms in Beijing resulted in at least 44 deaths, including 31 residents of an elderly care home, and left 9 people missing. The flooding forced tens of thousands to evacuate. [para. 7]

Upcoming Chinese Policy Meeting: The Communist Party’s Politburo announced an October meeting to discuss the 15th Five-Year Plan (2026-2030), with economic and social development as the main agenda. [para. 8]

Macro Leverage Hits Record: China’s macro leverage ratio, which measures total household, corporate, and government debt versus GDP, exceeded 300% for the first time in the second quarter of 2024. Persistently low prices have contributed to weak nominal GDP growth, dropping to 3.9%. [para. 9]

Investment Fund Guidelines: The National Development and Reform Commission issued draft guidelines to optimize government investment fund usage, focusing on supporting national strategies and emerging sectors, curbing fund redundancy, and preventing excessive speculative activity. [para. 10]

Industrial Profits Improve: Profits of major Chinese industrial firms dropped 4.3% year-on-year in June, a narrower decline compared to May. Equipment manufacturing, especially automakers, led the industry’s June rebound, with profits almost doubling due to sales promotions and better investment returns. [para. 11]