Newsletter 39 - October 2, 2020
Welcome to Newsletter 39, the latest edition of Trade War, and what a week it was….
First came the travesty of a presidential debate that saw Trump repeatedly interrupt and mock Democrat candidate Joe Biden. Then early Friday morning was the real shocker: both the U.S. president and his wife Melania have tested positive for the coronavirus, announced in a Trump tweet.
That has set off a scramble to check the many others who might also have been exposed in various venues to the mask-avoiding Trump. (Biden and his wife Dr. Biden and vice president Mike Pence have all tested negative.) It has also emerged that after hearing that his aide Hope Hicks was positive, Trump continued with a full schedule of events, including a fundraiser at his New Jersey resort.
Meanwhile, Beijing and Washington continue to target each other’s companies, with China’s anti-trust regulators about to start investigating Google, Reuters reports, and U.S. sanctions now being expanded to target SMIC, China’s largest semiconductor company.
Before own positive diagnosis, Trump continues travel despite close aide having coronavirus
Even after Trump was told Thursday morning that his aide Hope Hicks had tested positive for coronavirus-and before his own positive diagnosis—the U.S. president continued with planned events, traveling and meeting people, including at a fundraiser at his New Jersey resort, reports Bloomberg News.
“Trump’s movements are being closely scrutinized since he later tested positive for coronavirus, announcing the news shortly before 1 a.m. Friday, Washington time,” reports Bloomberg, noting that his decision to continue with scheduled events “would appear to contradict the Centers for Disease Control and Prevention’s guidance on COVID.”
Astonished, bewildered and stressed
In Asian countries where the debate was shown live “audiences and interpreters alike were left astonished, bewildered and stressed,” reports the South China Morning Post.
“The translators quickly found themselves speaking and shouting over each other, mirroring the debaters, as Trump hectored Biden and the challenger reacted with exasperation.”
Elevating infantile thuggery and incoherence
“If any spin-masters in Beijing needed material announcing the denouement of American governance, Donald Trump provided all they needed,” Gordon H. Chang, a Stanford University historian, tells Politico’s China Watcher. “What kind of system can elevate such infantile thuggery and incoherence to its national leadership?”
Tariffs cover 75% of China sales to the US
“Biden would inherit tariffs on three-quarters of what China sells the the U.S.,” tweets Wall Street Journal reporter Bob Davis. Biden however would likely end some tariffs in exchange for China’s help on global issues including climate change and public health, reports the Journal.
Made in China 2025 has become a red flag
“Since Made in #China 2025 has become such a red flag, [China has] stopped mentioning it, but just continues with its policies” supporting next generation industries, tweets Bert Hofman, former head of the World Bank in China.
Hofman cites as evidence a new document called “Guiding Opinions on Expanding Investment in Strategic Emerging Industries and Cultivating Strengthened New Growth Points and Growth Poles,” issued by the National Development and Reform Commission, China’s state planning agency.
The guiding opinions aim to “expand policy deployment for investment in strategic emerging industries” to make them “better play their important role as an engine for growth,” according to a translation by Stanford University’s DigiChina, New America, and the Center for Security and Emerging Technology (CSET) at Georgetown University.
China to launch antitrust case against Google
China is about to launch an antitrust investigation into Google, says Reuters in an exclusive report.
“The case was proposed by telecommunications equipment giant Huawei Technologies Co Ltd last year and has been submitted by the country’s top market regulator to the State Council’s antitrust committee for review,” sources told Reuters.
“A decision on whether to proceed with a formal investigation may come as soon as October and could be affected by the state of China’s relationship with the United States.”
Sinophobic policies pushing self-reliance
U.S. policies targeting Chinese companies are hurting China but at the same time driving efforts to become self-reliant, argues a column in the China Daily, the official English language paper of the Chinese government.
“The Sinophobic policies of the United States are causing losses to China in the near term, but in the long run, China could benefit from them" the article says.
“As the US administration picks fights with Chinese high-tech giants such as Huawei, Chinese enterprises have realized they have to develop their own key technologies instead of buying them from US companies, so they no longer have to rely on the whims of US politicians. Such changes could cause irreparable and irreversible damage to the US high-tech sector.”
China’s SMIC hit by US sanctions
The U.S. Department of Commerce has banned American companies from selling technology to China’s top semiconductor company SMIC, without first getting a license to do so. Commerce said this action was necessary after a review showed the Chinese company “may pose an unacceptable risk of diversion to a military end use in the People’s Republic of China,” reports the New York Times.
SMIC’s semiconductor manufacturing relies heavily on software and machines from American companies and the Chinese company “could struggle to stay in business if those partners cannot service and upgrade the company’s manufacturing equipment.”
China’s deeply imbalanced recovery
More evidence is emerging of China’s deeply imbalanced recovery with sales of luxury cars up 32% in August, while the overall auto industry shrank by 15%, reports the South China Morning Post, citing a Nomura report. And while overall retail sales eked out a 0.5% expansion in August, industrial production grew by a much stronger 5.6% over the same period.
“The spending ‘imbalance’ could hinder the nation’s goal of firing up domestic consumption to propel the economic rebound. So far, China’s consumption recovery story has lagged behind other sectors of the economy,” reports the SCMP.
With more than 40 million migrants stuck in smaller cities (shown by data tracking the location of one billion mobile phone users),“Covid-19 dealt a more severe blow to low-income groups, while leaving wealthier households largely unscathed,” says the Nomura report cited by SCMP.
Deep dive report by the Peterson Institute for International Economics on the global semiconductor industry, its importance to the U.S. and the impact of sanctions on companies doing business with Chinese firms.
Some interesting new papers on trade, the Belt and Road Initiative, and the role of state enterprises in the Chinese economy, published by the just-launched Penn Project on the Future of US-China Relations.
Dramatic chart and story from Paulson Institute’s MacroPolo showing rapid growth in China’s AI talent base, but which also notes that over half of AI talent has left China for countries including notably the U.S. (from 2019).
Recent media appearances
We covered a lot of ground in this Winning in Asia podcast including the future for China's migrants workers, the new "dual circulation" strategy, why Mao-era "self-reliance" is now again a thing, troubled trade relations and why China maybe doesn't need Detroit cars anymore. Click on the link here to listen.
While the New York Times reports that China’s economy is “roaring back,” it’s not helping China’s most vulnerable people who are facing job losses and stagnating incomes, I tell Politico’s China Watcher.
And in case you missed it…
Earlier this summer I gave a book lecture and talk about what actually powers the Chinese manufacturing machine. Moderated by the New Yorker’s Evan Osnos, it was just released onto Youtube.