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Trade War

Newsletter 48 - December 5, 2020

Dexter Roberts
Dec 5, 2020
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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.

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
Has China really ended poverty? Listen to this fast podcast (six min) between me and @mmchitwood on @ConvSix to hear our thoughts on a topic that isn't actually easy to definitively answer.
conversationsix.comConversation SixSpontaneous short-form podcasts
10:15 PM ∙ Dec 2, 2020
9Likes4Retweets

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.

Twitter avatar for @paulmozur
Paul Mozur 孟建國 @paulmozur
SCOOP: US State Department now limiting travel visas for Chinese Communist Party members and family to one month, single entry. Down from 10 year multiple entry. Aimed squarely at China's ruling elite, this will not go down well in Beijing.
nytimes.comU.S. Tightens Visa Rules for Chinese Communist Party MembersNew guidelines mean that China’s 92 million party members will be limited to one-month, single-entry U.S. permits — if the State Department can figure out who they are.
6:31 AM ∙ Dec 3, 2020
754Likes264Retweets

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.

Twitter avatar for @CSISCBE
CSIS Chinese Business & Economics @CSISCBE
The House of Representatives approved legislation that could lead to #Chinese companies getting kicked off American exchanges if regulators aren’t allowed to review their financial audits. The bill won bipartisan support in the House. @business
bloom.bgBloomberg - Are you a robot?
7:26 PM ∙ Dec 4, 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.

Twitter avatar for @Rover829
Vincent Lee @Rover829
WSJ reports that the US is negotiating with detained Huawei CFO Meng Wanzhou that would allow her to return to China in exchange for ad admission of wrongdoing
on.wsj.comWSJ News Exclusive | U.S. in Talks With Huawei Finance Chief Meng Wanzhou About Resolving Criminal ChargesJustice Department is discussing an arrangement that would allow her to return to China in exchange for admitting wrongdoing
11:36 PM ∙ Dec 3, 2020
2Likes5Retweets

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.”

Twitter avatar for @KennedyCSIS
Scott Kennedy @KennedyCSIS
Why aren't China's SOEs being downgraded? “China’s rating agencies are even worse than [those] in the US. They’re not only beholden to the customer but also [to] the government.” ft.com/content/7cebe0… via @FinancialTimes
ft.comChina rating agencies stand by SOEs despite default spreeRankings reflect politics and implicit government backing for state-owned companies
5:08 AM ∙ Dec 3, 2020
11Likes2Retweets

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.

Twitter avatar for @DSORennie
David Rennie 任大伟 @DSORennie
China bullies other countries because it works - foreigners hold noses and play by authoritarian rules in China to keep access. Now China seems bent on changing how institutions work in the West, cf its demands to Australia. That may have costs. My Chaguan
economist.comHow China’s bullying could backfireHumiliating those who defy it does not make them love China’s government
1:09 AM ∙ Dec 4, 2020
35Likes15Retweets

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.

Twitter avatar for @sdonnan
Shawn Donnan @sdonnan
Context: The China Shock caused the loss or roughly 2m US jobs over more than a decade, according to the literature. The pandemic has caused the loss of almost 600k manufacturing jobs over a single year... Even after the recovery of recent months...
Twitter avatar for @chadmoutray
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/aFlMEWjSs3
2:32 PM ∙ Dec 2, 2020
12Likes13Retweets

U.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.

Twitter avatar for @isaacstonefish
Isaac Stone Fish @isaacstonefish
Hikvision and Dahua, two controversial Chinese surveillance firms that are heavily invested in Xinjiang, have a massive global network. Where is their second largest number of networks, outside of China? The United States, especially New York City.
top10vpn.comHikvision and Dahua Surveillance Cameras: Global Locations ReportWe identified and mapped 2 million surveillance camera networks globally that use hardware from controversial Chinese firms Hikvision and Dahua.
4:40 PM ∙ Dec 3, 2020
57Likes40Retweets

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.

Twitter avatar for @neilthomas123
Neil Thomas 牛犇 @neilthomas123
"Much talk has centered on China’s influence in the West. But one important area where China barely registers influence is on Western industry’s practices and management thinking." Intriguing comparison w/Japan by my @MacroPoloChina colleague @damienics
macropolo.orgChina Inc. Raises Eyebrows but Japan Inc. Is Much More InfluentialMuch talk has centered on China’s influence on the West. But when compared to Japan, China’s influence is notably weak in the corporate realm.
5:57 PM ∙ Dec 4, 2020
18Likes5Retweets

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.

Twitter avatar for @laurimyllyvirta
Lauri Myllyvirta @laurimyllyvirta
Breaking: China's CO2 emissions reached an all-time high on the third quarter of 2020 as government's economic recovery approach favored heavy industry and steel mills skirted capacity controls. THREAD j.mp/2Jwrq18 @CREACleanAir
Twitter avatar for @CarbonBrief
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/VQmJhZaumS
6:13 AM ∙ Dec 3, 2020
101Likes73Retweets

Nothing 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.

Twitter avatar for @paulhaenle
Paul T. Haenle @paulhaenle
Nothing will improve in the US-China rel'p if Beijing is not willing to come to the table ready to address legitimate concerns shared by the US and a growing list of countries. My discussion with @jruwitch @NPR Morning Edition.
npr.orgWhat A Biden Presidency May Mean For U.S. Firms Doing Business In ChinaU.S. business people with operations in China are hoping for at least a change in tone, if not a rollback of tariffs, from President-elect Joe Biden’s administration.
4:25 PM ∙ Dec 3, 2020
6Likes5Retweets

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.

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
“The Myth of Chinese Capitalism” makes the @TheEconomist books of the year list - and in heady company including with @BarbaraDemick, @anneapplebaum, @sarahfrier, and @BarackObama!
economist.comOur books of the yearThey were about corruption, revolutionaries, Glasgow in the 1980s, John Maynard Keynes and musical lives
7:56 PM ∙ Dec 3, 2020
91Likes8Retweets

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.

Twitter avatar for @eric_hontz
Eric Karl Hontz @eric_hontz
Will be on soon: youtube.com/watch?v=pbAm6a…
Image
4:46 PM ∙ Dec 4, 2020

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