Welcome to the 108th edition of Trade War.
Deaths in an elderly care center suggest pandemic worse in locked-down Shanghai. Rare protest censored on web. And cost of nationwide Covid Zero policy already reaching $46 billion a month.
Overseas investors flee Chinese stocks and bonds. Beijing may open books of U.S.-listed Chinese companies to American auditors. And the EU and China at loggerheads over Russian invasion of Ukraine.
Shanghai elderly may be Covid victims
Deaths in recent days in an elderly care center suggest the pandemic is hitting locked-down Shanghai much harder than official reports say, reports the Wall Street Journal’s Wenxin Fan.
“Six replacement orderlies at the city’s Donghai Elderly Care Hospital, brought in after previous caretakers were sent away to quarantine, told The Wall Street Journal that they had witnessed or heard of the recent removal of several bodies from the facility, where they said at least 100 patients had tested positive for Covid-19,” reports the business paper.
“Public health experts have warned about the danger Omicron poses to China’s elderly population, with barely half of people over 80 having had two or more doses of vaccine,” writes Fan. “With four million residents above age 65, Shanghai is home to one of China’s largest, and oldest, urban populations.”
Entering a barter economy
“Shanghai is entering a barter economy. My friend, a fund manager living in Pudong, traded two bags of crisps for 4 soft drinks, strawberries, a cabbage and oolong tea. In her words, this is the transaction with the highest rate of return she has ever made: up to 400 percent” tweets journalist Chenyu Liang.
‘Food is the key thing on people’s minds’
“Day 16 of our Covid lockdown in Shanghai today and food is the key thing on people’s minds,” tweets Jared Nelson, a Shanghai-based lawyer. “We aren’t allowed to leave home so delivery is the only way. I was up at 6 am yesterday trying to get any kind of delivery but nothing was available all day.”
Neighborhood vegetable deliveries
“Our neighborhood has just been given a 10 tonne produce donation for families who are sealed in their homes. It will be distributed to us later today,” tweets Shanghai-based music education specialist Sarah Peel.
‘We want to eat’ chant Shanghai protestors
A video of a protest against the strict Covid control policies in Shanghai, home to 25 million residents, was taken offline, reports Bloomberg News’ Shirley Zhao.
“China is struggling to manage growing public unhappiness over tough Covid Zero measures in Shanghai, one of its wealthiest and most globalized cities, as some residents revolt against lockdown orders which have stretched in some instances to a month,” writes Zhao.
Tech giant Tencent took down videos from WeChat and from its video publishing platform of the protest in a Shanghai housing compound. Demonstrating residents chanted phrases including “we want to eat,” “we want the right to know,” and “we want freedom.”
“People there have been confined to their homes since March 2 and residents have undergone more than 10 rounds of mass virus testing, according to official notices from the compound’s WeChat account,” reported the financial news service.
Widespread Covid frightening prospect for China
Low elderly vaccination rates make China particularly vulnerable to Covid fatalities, while the economic cost of lockdowns grows, reports Bloomberg News.
"China, like Hong Kong, has fallen short in vaccinating its oldest people. With the health system overwhelmed, the fatality rate in Hong Kong reached 37.4 per million on March 16. In mainland China, this would translate into 50,000 deaths in a single day," reports the financial news service.
“Authorities are fighting to curb the spread of the omicron variant among a population that lacks natural immunity and only has access to home-grown vaccines that are less effective than some of the global alternatives.”
China’s Covid lockdowns are already costing at least $46 billion a month, or 3.1 percent of GDP; that impact could double if more cities tighten restrictions, a Chinese University of Hong Kong economist has predicted, reports another Bloomberg News article.
Overseas investors bail
“Global investors have turned bearish on China as they carefully navigate the changing global dynamics induced by the Ukraine-Russia conflict,” writes Institutional Investor’s Hannah Zhang.
In the third week of March, global investors dumped more than $3 billion of Chinese equities, the most in over a year, while bond funds saw outflows of over $1 billion for the first time ever, according to Emerging Portfolio Fund Research.
“The sizable capital outflow is in sharp contrast to the bullish consensus assessment of Chinese securities not long ago,” writes Zhang. “From September to the first week of March, over $50 billion was pumped into EPFR-tracked China equity funds and $11 billion into Greater China fund groups.”
“There is a rising fear that the ongoing Western sanctions against the Kremlin may be extended to Beijing for its ‘implicit’ support for Russia’s invasion of Ukraine,” said Marko Papic, chief strategist at the Clocktower Group. “Investing in a country that sides with an aggressor is not only morally unacceptable, but also faces tremendous investment risk.”
“Decoupling by global capital adds to risks facing Xi at a time when the spread of Covid and a property slump are undermining the outlook for the world’s second-largest economy,” reports Bloomberg News.
China to open overseas-listed company books?
“China's securities regulator CSRC has proposed material changes to standing rules, including deleting a clause that says "on-site inspections must primarily rest with Chinese regulators, or rely upon the inspection results of Chinese regulators," tweets Xinhua reporter and author of Pekingnology newsletter Zichen Wang.
“The draft rules, announced by China's securities watchdog, mark Beijing's latest attempt to resolve a long-running audit dispute with Washington that could lead to roughly 270 Chinese companies being forced to delist from U.S. exchanges in 2024,” reports Reuters.
“Saturday's proposal scraps requirements that on-site inspection of overseas-listed Chinese companies be conducted mainly by Chinese regulators. That could open the door to inspections by U.S. regulators, who demand complete access to such firms' audit working papers,” the news service writes.
Here is a statement (Chinese) summarizing the China Securities Regulatory Commission proposal. And here is a statement in English.
Phase One trade talks ‘unduly difficult’
Calling discussions with China on its unfulfilled Phase One purchase commitments “unduly difficult,” United States Trade Representative Katherine Tai tweeted it is time to “turn the page on the old playbook.” Her office is “also realigning the U.S. – China trade relationship,” Tai wrote.
New US ambassador on the job
The new U.S. ambassador to China started working in Beijing late last month.
“First day on the job after 21 days of quarantine. I am honored to represent President Biden and look forward to leading our stellar team at the Embassy in Beijing and our Consulates General in Shanghai, Guangzhou, Wuhan and Shenyang. Ready for all the challenges ahead,” tweeted Ambassador Nicholas Burns on March 28.
EU & China’s ‘frosty meeting’ over Ukraine
The European Union-China video conference summit on April 1 led to little agreement and was a “frosty meeting,” writes Janka Oertel, director of the Asia program at the European Council on Foreign Relations, in a tweet thread.
“The EU leadership has made its positions and expectations with regard to China’s approach to the war in the Ukraine and China’s discriminatory practices vis-à-vis Lithuania very clear, but they also seem to not have received any significant response or assurances from Beijing,” writes Oertel.
“The future of EU-China relations will be determined to a significant degree by China’s approach to the war in Ukraine. If China openly undermines the sanctions regime that has been imposed there will be serious consequences. This could not be clearer now,“ writes Oertel. “Systemic rivalry is a new reality.”
Premier Li Keqiang told EU leaders that China would push for peace in "its own way," reported Reuters. Here is the EU’s statement after the meeting.
Teachers must toe Beijing line on war
Provincial government officials are ordering teachers from primary school through university to attend "lectures correcting one's thoughts on [the Russia-Ukraine] situation," where attendees are told Russian military action is understandable and the blame for the conflict lies with NATO, the U.S. and Ukraine, writes Yao Lin, a former Columbia and Yale political science and law student, in a tweet thread.
Meanwhile, students are reporting on their teachers who “have expressed sympathy for [Ukraine] in the classroom to relevant authorities,” who then face possible suspension or even firing, writes Yao.
Notable/In depth
“The popular narrative is that during the Xi Jinping era the state is coming back. But when we look at the largest companies, private companies are advancing," says Tianlei Huang, co-author of a new report by the Peterson Institute for Economics.
“But: the trend reversed last year as Beijing launched tough regulation of internet, education and real estate sectors,” tweets Bloomberg’s Tom Hancock.
More than a few American companies have failed in China, as shown here in chart from Visual Capitalist.
The Chinese Communist Party has been busy appointing new provincial party chiefs, common in the run-up to party congresses, report Caixin’s Lin Yunshi and Zhenhua Lu.
“Espionage and spy hunts animate the most dramatic - and little known - aspects of US-China tech rivalry. We spoke to Chinese academics accused of spying, FBI agents in Silicon Valley and US counter-intel officers,” writes the Financial Time’s Global China editor James Kynge in his introduction to the first of a new podcast series. Listen to it here.
Here is an interesting interview on the Shanghai lockdown, with a longtime Shanghai-based American. Listen to it on Here & Now.
Check out this fascinating Vice News documentary on the long history and present role of triads in Hong Kong, including notoriously, during the protests of recent years.
Oregon scenery
Some shots from southern Oregon from my recent vacation.
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