Newsletter 41 - October 17, 2020
Welcome to Newsletter 40 of Trade War and apologies for the one-day lateness. An urgent personal matter made publication yesterday impossible. I will continue with Friday publication going forward.
On to the events of the week:
China is about to pass a new law limiting sensitive exports while it threatens Canadians and Americans for behavior it perceives as unfriendly. Even as China reports a surprising surge in trade, Xi shows no intention of stepping back from his focus on Chinese self-reliance.
Meanwhile a top Bloomberg Tech reporter calls out TikTok for blatantly untrue statements asserting its independence from its parent company, and an interesting article explains what’s behind close Chinese ally Pakistan’s ban on the app.
Adding to Beijing’s regulatory arsenal
China is about to pass a new law, likely this weekend, that will put restrictions on exports of sensitive exports, including those made in China by foreign-invested companies, reports Bloomberg News.
“The measure would add to Beijing’s regulatory arsenal, which also includes a tech export restriction catalog and an unreliable entity list. The law would also help put China on a similar footing to the U.S., which regularly uses export controls and licenses strategically against its adversaries,” says Bloomberg.
Import surge as firms stockpile key components
China saw a strong uptick in trade, with exports growing 9.9 percent in the month of September, over the previous year, in large part driven by sales of health equipment and technology goods, reports Bloomberg News.
Imports grew by an unexpected 13.2%, probably spurred by companies front-loading sales to avoid soon-to-be-imposed Huawei sanctions. (Taiwan purchases surged 35.8%, while imports from Japan and South Korea rose 13.4% and 17.2%, respectively.)
“Geopolitical tensions were probably one reason for the imports bump as technology firms stockpiled key components ahead of the imposition of sanctions,” reports Bloomberg.
Self-reliant innovation: Xi does Mao redux
In a sign that China isn’t sure that the trade recovery can last however, Xi Jinping has once again stressed the need for “self-reliance,” an old catchphrase from the Maoist autarchic era.
Xi, however, has added a new twist to mesh with his country’s technological goals in the face of global frictions: China must focus on “self-reliance through innovation,” he told employees of a Shenzhen mobile phone supplier.
自由亚洲电台 @RFA_Chinese【国际围堵下的南巡】 【习近平四字赠科企：自力更生】 世界各国频频对中国科企实施制裁，习近平是次南巡，外界期待他会为企业的未来指明方向 结果，他周一参观潮州一家科企时，就道出了四个字：自力更生 这四个字，出自毛泽东闭关锁国年代，提倡“独立自主，自力更生，艰苦奋斗” #你们自己看着办 https://t.co/CLjmeMc4Ob
Health and safety of 300,000 Canadians
The Chinese ambassador to Canada may have threatened the well-being of Canadians in Hong Kong, in comments where he criticized Ottawa’s policy of offering refuge to Hong Kong democracy activists, reports The Guardian.
“If the Canadian side really cares about the stability and prosperity in Hong Kong, and really cares about the good health and safety of those 300,000 Canadian passport holders in Hong Kong, and a large number of Canadian companies operating in Hong Kong, you should support those efforts to fight violent crimes,” Chinese ambassador to Canada Cong Peiwu said.
When asked about the ambassador’s comments a day later, Prime Minister Justin Trudeau pushed back. “We will stand up loudly and clearly for human rights, all around the world,” Trudeau said, citing the Xinjiang Uighurs, the situation in Hong Kong, as well as “calling out China for its coercive diplomacy.”
More hostage diplomacy?
Meanwhile, in another alarming development for foreigners resident in China, the Wall Street Journal is reporting that Chinese officials have been threatening to detain Americans in response to the Justice Department’s prosecution of Chinese scholars with military connections.
“The Chinese officials have issued the warnings to U.S. government representatives repeatedly and through multiple channels, the people said, including through the U.S. Embassy in Beijing,” write reporters Kate O’Keeffe and Aruna Viswanatha.
TikTok claim ‘just isn’t accurate’
Bloomberg tech reporter Shelly Banjo in a tweet thread called out TikTok’s head of security Roland Cloutier when he said that it didn’t matter what parent a company has and claimed that Bytedance’s employees in China don’t work at all with TikTok employees.
That “just isn’t accurate according to the folks I know who are on regular calls with staff in China,” Banjo tweeted.
China-reliant Pakistan can’t stand TikTok
Pakistan’s decision to ban TikTok earlier this month had a very different motivation from the earlier U.S. and India ones - which focused on perceived national security risks from the Chinese app - reports Rest of World, a media company that focuses on less well-reported regions of the world.
“Unlike India and the United States, Pakistan’s dependence on China is nearly absolute: Beijing’s investment in the struggling country is valued at more than $87 billion. In Pakistan, banning TikTok isn’t about geopolitics or protecting user data from the Chinese Communist Party. Instead, it’s part of a wider wave of censorship.”
Fascinating thread and piece on how China sees Trump pushing U.S. decline, and how that is encouraging a new PRC grand strategy.
What’s happening with global supply chains with Covid-19? Listen to this conversation with trade expert Wendy Cutler and Asia Society’s Tom Nagorski in this podcast.
Here’s a brief but information-filled podcast on the future of U.S.-China trade relations.
Join experts including Randall G. Schriver, Michael Mazza, Bethany Allen-Ebrahimian and yours truly, for this panel at the Atlantic Council’s Scowcroft Center, on how Taiwan fits into the U.S.-China strategic competition. More information in the link.