Welcome to newsletter 48 of Trade War. One day late, but here for some enjoyable and illuminating weekend reading I hope..
The Trump administration continued to pile new restrictions on China this week including notably the decision to limit CCP members to one-year visas and strengthening rules to ensure Chinese companies listed on US exchanges allow open audits.
A deal may be reached soon on the long-running dispute between the U.S. and China over a Huawei executive being held in Canada. And as China touts the end to extreme poverty, some - including yours truly - are asking how sustainable this accomplishment is likely to be. Finally, some detail on which countries are the largest markets for controversial Chinese surveillance companies.
Has China really ended poverty?
China announces it has wiped out extreme poverty, a multiyear project that has been a top priority of Xi Jinping. But have they really succeeded? It’s not as simple a question as it sounds. Here’s a fast podcast (six minutes) between me and Matthew Chitwood, author a new piece in Foreign Affairs discussing this.
CCP members’ visas limited
The Trump administration says it is going to limit members of the Chinese Communist Party and their family members to one-month long, single-entry visas when entering the U.S., report the New York Time’s Paul Mozur and Raymond Zhong. That in theory could affect 270 million people—92 million party members and their families—but only if the State Department can figure out who they are, not an easy thing to do.
Many of China’s low-level party members have joined simply to get ahead in their workplaces and include those not just working for state-owned companies but also private ones. Before, party members, like other Chinese citizens, could get visas that lasted as long as ten years.
“The visa restrictions and the likely Chinese response will be yet another challenge to President-elect Joseph R. Biden Jr., who is inheriting a U.S.-China relationship that is in its worst state since the normalization of diplomatic ties in 1979,” the Times reports.
Goodbye American exchanges?
It’s been a week of new actions in Washington aimed at China. Along with the new visa restrictions and more sanctions on cotton produced in Xinjiang, a bipartisan bill is now heading to the White House where it will likely be signed by Trump, which could see Chinese companies leave U.S. stock exchanges, reports Bloomberg News.
The bill requires that Chinese companies allow U.S. regulators to review their financial audits, as required of U.S. companies as well as others from more than 50 jurisdictions around the world. The bill also mandates that Chinese companies disclose whether they are under government control—not necessarily an easy determination in China where the state and party increasingly are playing a role in private business.
More than 150 Chinese companies including giants like Alibaba and Baidu with a total value of $1.2 trillion, were traded on U.S. stock exchanges as of last year, according to the SEC. More have listed in 2020.
Huawei breakthrough
Big news on the Huawei front: the U.S. government is considering a deal that would allow Huawei senior executive Meng Wanzhou to leave Canada and return to China in exchange for admitting wrongdoing, reports the Wall Street Journal.
Meng, who is the daughter of company founder Ren Zhengfei, was charged with breaking sanctions on doing business with Iran, and has been banned from leaving Canada for two years, while living in her home in Vancouver. By contrast, two Canadians have been held on state security charges in Chinese prisons with limited access to family or counsel for two years, in a case that Chinese authorities have hinted is in retaliation.
China credit raters: beholden to government
Even as bond defaults rise amongst state-owned companies, China’s rating agencies are avoiding making downgrades, reports the Financial Times’ Hudson Lockett.
“Just five Chinese companies out of more than 5,000 have been downgraded to below double A ratings by domestic rating agencies since Yongcheng Coal and Electricity Holding Group, one of the country’s largest coal groups, kicked off a spate of defaults last month,” reports the Financial Times.
“China’s rating agencies are even worse than [those] in the US,” Andrew Collier, managing director of Orient Capital Research in Hong Kong told the FT. “They’re not only beholden to the customer but also [to] the government.”
Playing by authoritarian rules to keep access
Citing China’s recent economic retaliation against Australia, guilty of banning Huawei 5G equipment and calling for an investigation into the origins of the coronavirus, the Economist’s David Rennie points out that Beijing increasingly is ready to punish and even humiliate foreign countries it perceives as unfriendly to China.
“China bullies other countries because it works. Once told that they have crossed a ‘red line’ by harming China’s interests or calling out its misdeeds, many governments crumble swiftly.” writes Rennie, while noting that Australia has not yet backed down.
“True, some Western leaders pay public lip-service to their own country’s values as they land in far-off Beijing. Once the press is shooed from the room, however, the foreign visitors get down to dealmaking. They bow to China’s mix of market power, geopolitical importance and ruthlessness.”
And Rennie does to my mind a very good job of explaining the purpose of what appears initially to be crude tactics by China.
While the purpose in part aims to show the Chinese people how tough they are and please domestic nationalists, the intention is also “to demonstrate China’s strength and to provoke such a sense of crisis that Australian political and business leaders are desperate to seek a truce. China’s outlandish attacks are pseudo-populism: a calculated ploy to press elites into cutting a deal,” Rennie writes.
Decade-long ‘China Shock’ job loss dwarfed by pandemic
The impact of the so-called China Shock, which reportedly caused the U.S. to lose some 2 million jobs over more than a decade, is dwarfed by the job-destruction wrought by the pandemic, tweets Bloomberg’s Shawn Donnan.
“The pandemic has caused the loss of almost 600k manufacturing jobs over a single year…Even after the recovery of recent months,” writes Donnan.
Chad Moutray @chadmoutray
Manufacturing employment rose by 8,000 in November, October, increasing for the seventh straight month but continuing to slow, according to ADP estimates. Despite growth since the spring, the sector has lost roughly 585,000 workers over the past 12 months. https://t.co/aFlMEWjSs3U.S. best market for Chinese surveillance cameras
Guess which country uses the most monitoring cameras produced by two controversial Chinese surveillance firms, best known for their business in Xinjiang? Well that would be the U.S. where Hikvision and Dahua have sold more of their systems than anywhere else other than China, reports TOP10VPN.
“The U.S. has more than twice as many camera networks as Vietnam, the country with the next most networks. Over 17% of all the Hikvision and Dahua networks we detected outside China were located in the U.S.,” the report says.
Interestingly, amongst U.S. cities, New York City has the most, 75% more camera networks than in Los Angeles, which in turn is followed by Houston, TX.
Notable/In depth
Why have Chinese companies had almost no influence over global business and management practices, in direct contrast to Japan’s success, asks Damien Ma of MacroPolo in this intriguing piece.
China’s CO2 emissions are reaching an all time high as the country’s economic recovery relies on heavy industry, reports environmental analyst Lauri Myllyvirta.
Carbon Brief @CarbonBrief
NEW - Analysis: Surge in China’s steel production helps to fuel record-high CO2 emissions | @laurimyllyvirta https://t.co/3KkOgqGFyn https://t.co/VQmJhZaumSNothing will improve in the US-China relationship without Beijing also addressing American business concerns, says Paul Haenle, Carnegie-Tsinghua Center director and former China director at the National Security Council under Presidents Bush and Obama, in this interview with NPR’s John Ruwitch.
Big book news!
The Myth of Chinese Capitalism has been selected as an Economist book of the year, I am delighted to report. Joins heady company including former president Barack Obama’s new book A Promised Land.
Is China socialist or capitalist?
Is China socialist or capitalist was the topic of a discussion I was part of yesterday on Muslim Network TV hosted by Imam Malik Mujahid.
Joined by The Center for International Private Enterprise’s Eric Hontz and author and journalist John Pomfret we touched on everything from China’s Stalinist economic origins to the recent decision to halt Alibaba subsidiary Ant Group’s massive IPO.
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