Trade War
Newsletter 132 - September 18, 2022
Welcome to the 132nd edition of Trade War.
Xi meets Putin in Uzbekistan, after almost 1,000 days without leaving China — check out this edition’s extended section on the visit, everything you need to know and better understand what went down:
>One thing to know re the China-Russia relationship: it’s not about the money
>Was Xi more standoffish putting Putin in the hot seat or are the reports exaggerated?
>Hear from experts plus links to the official readouts from both sides
Meanwhile, speculation rises that Xi trip signals easing of Zero Covid (not so fast, rolling pandemic lockdowns likely to stay into 2023, says one smart analyst)
Chip industry suffers more setbacks with record number of closures and falling sales. Cash-strapped local governments turn to use of arbitrary fees and penalties to cover costs. And some 70 percent of fund managers - up from 57 percent last month - predicting China will see 4 percent or lower growth this year.
Plus:
China’s better-off, better-educated, urban hukou holders biggest supporters of a social credit system
Chinese companies setting up shop in Mexico, Thailand and Vietnam to evade U.S. tariffs and shorten supply chains
And Phase One trade deal update: China never met buying commitments; energy purchases from U.S. way down, those from Russia way up
Xi-Putin meeting: not about the money
So why is Xi meeting with Putin, on this first visit in almost 1,000 days, I write in a commentary in The China Project.
After all, given the tense relations with the U.S. over Taiwan, the South China Sea, Hong Kong, Xinjiang, and much more, an argument could be made that a sit-down with American president Joe Biden should happen first.
The first thing to know: it’s not about economics or money - that despite the fact Moscow wants to keep buying Chinese electronics, and China undoubtedly will keep buying Russian oil and gas (Russia is China’s top source of energy imports).
“The reality is that Russia’s $1.78 trillion economy is only the 11th largest in the world, smaller than those in France, Italy, and South Korea, and insignificant when compared with those of the U.S., the world’s largest at $23 trillion, and number two China at $17.7 trillion. And while only about 2% of China’s total exports go to Russia, more than eight times that, or 17%, go to the U.S.,” I write in The China Project.
“How about the theory that despite their relatively small economic relationship, the two countries have a deeply disruptive plan: They aim to run an endgame around the global financial system by setting up a joint financial payments system that is invulnerable to any punitive actions taken by the U.S. China and Russia are “consistently expanding settlements in national currencies” and working to “offset the negative impact of unilateral sanctions,” Putin wrote in a commentary in Xinhua earlier this year.”
Nope, that’s not happening, either, no matter how many times Russian officials say it is.
“Russia wants a sanctions-proof payments system, which can only mean one walled off from the U.S. and Europe. China’s goal is to build a payments infrastructure that makes transactions in renminbi more convenient for the rest of the world. These objectives are mutually exclusive,” explains Gavekal Dragonomics analyst Yanmei Xie.”
Instead, it is all about politics.
“The obvious closeness of the Xi-Putin relationship seems more to do with the two leaders’ mutual distaste for U.S. power and what they view as Washington’s meddling around the world than pretty much anything else. For Beijing, Moscow was justified to a large degree in its invasion of Ukraine.”
“For Beijing, there is a parallel to what it is facing with the U.S. military presence in the Asia-Pacific, and in particular, with U.S. support for Taiwan. Like the Russians who were forced “into a corner” by NATO and so quite naturally had to “fight back,” China’s leaders also feel they are being challenged by the U.S. over Taiwan, and so have no choice but to strike back. Having Russia on their side, including perhaps at the UN, when they decide to move more forcefully against Taiwan, is also important.”
Keep reading with a 7-day free trial
Subscribe to Trade War to keep reading this post and get 7 days of free access to the full post archives.