Trade War

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Trade War

Newsletter 63 - April 10, 2021

Dexter Roberts
Apr 11, 2021
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Trade War

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Welcome to the 63rd edition of Trade War.

Regulators hit Alibaba with the largest anti-trust fine in China’s history and a university run by founder Jack Ma is forced to suspend plans to admit a new class.

Multinationals face challenges dealing with nationalist consumers and Hong Kong business elites may be losing their special status in the territory.

China struggles to overcome its planning legacy. And the Biden administration is making it easier for U.S. officials to meet with their Taiwanese counterparts.

China’s largest ever anti-trust fine: ‘a kind of love’

Regulators have slapped Alibaba with the largest anti-trust fine in China’s history; at 18.2 billion yuan, it is three times the previous record, reports the Wall Street Journal’s Keith Zhai.

“China’s State Administration for Market Regulation said Saturday in Beijing that Alibaba punished certain merchants who sold goods both on Alibaba and on rival platforms, a practice that it dubbed ‘er xuan yi’—literally, ‘choose one out of two,’” the Journal reports.

The market regulation body also mandated that Alibaba “carry out a comprehensive revamp of its operations and submit a ‘self-examination compliance report’ within the next three years.” The 18.2 billion yuan fine amounts to four percent of Alibaba’s domestic annual sales, according to the regulator, with antitrust fines not to exceed 10 percent of any company’s annual sales.

“The regulator’s punishment of Alibaba Group is a move to standardize the company’s development and set it on the right path, to purify the industry and to forcefully protect fair competition in the market,” the People’s Daily wrote in a commentary, adding that the penalty is “also a kind of love.”

Twitter avatar for @joshchin
Josh Chin @joshchin
Alibaba gets slammed with antitrust fine almost three times the previous record fine. People's Daily calls it "a kind of love." via @QiZHAI
wsj.comAlibaba Hit With Record $2.8 Billion Antitrust Fine in ChinaPenalty comes amid regulatory scrutiny on business empire of Alibaba founder Jack Ma
3:37 AM ∙ Apr 10, 2021
30Likes18Retweets

Reading the tea leaves

Here is a link to the People’s Daily piece plus a tweet thread from the Journal’s Zhai, where he advises a careful reading of the party paper’s article “for anyone who wants to figure out the future” of Alibaba. [Chinese]

Twitter avatar for @QiZHAI
Keith Zhai @QiZHAI
For anyone who wants to figure out the future of @AlibabaGroup , this @PDChinese commentary worth to read very closely: opinion.people.com.cn/n1/2021/0410/c…
Twitter avatar for @joshchin
Josh Chin @joshchin
Alibaba gets slammed with antitrust fine almost three times the previous record fine. People's Daily calls it "a kind of love." via @QiZHAI https://t.co/jRzsPpuY7R
3:41 AM ∙ Apr 10, 2021
35Likes13Retweets

Alibaba’s sincerity and determination

Whether the fine signals the end to punitive actions against Alibaba or whether more are in the offing, is unclear, reports Bloomberg’s Coco Liu.

“Regulators are said for instance to be concerned about Alibaba’s ability to sway public discourse and want the company to sell some of its media assets, including the South China Morning Post, Hong Kong’s leading English-language newspaper,” Liu writes.

“Alibaba accepts the penalty with sincerity and will ensure its compliance with determination. To serve its responsibility to society, Alibaba will operate in accordance with the law with utmost diligence, continue to strengthen its compliance systems and build on growth through innovation,” an Alibaba company statement proclaimed on Saturday.

Twitter avatar for @cocojournalist
Coco Liu @cocojournalist
China slapped a record $2.8 billion fine on #Alibaba for violating #antitrust rules, triple the previous high of almost $1 billion that Qualcomm had to pay in 2015 bloomberg.com/news/articles/… via @technology w Natalie Lung and Clarie Che
bloomberg.comBloomberg - Are you a robot?
5:38 AM ∙ Apr 10, 2021

Organized entrepreneurs weakening the government?

A business university set up by Alibaba founder Jack Ma has been ordered to suspend new enrollment, reports the Financial Times.

“Hupan University, an executive training program that is reputedly as hard to get into as Harvard, has suspended a first-year class that was set to begin at the end of March, according to people close to the institution,” the Financial Times reports.

“The government thinks Hupan has the potential to organize China’s top entrepreneurs to work towards a common goal set by Jack Ma instead of the Communist party,” a person identified as close to the school, told the paper. “That cannot be allowed.”

“Some high-ranking officials in Beijing have begun to view the school as a modern-day version of the Donglin Academy, one person said. The private academy was a powerful 17th century debating ground that spawned like-minded thinkers who eventually influenced politics and weakened the Ming Dynasty government.”

Twitter avatar for @BillKirbyHBS
William C. Kirby @BillKirbyHBS
Hupan Academy has real promise. Competition and diversity are keys to excellence in universities. This is a backward, insular move for Chinese higher education.
ft.comSubscribe to read | Financial TimesNews, analysis and comment from the Financial Times, the worldʼs leading global business publication
7:36 PM ∙ Apr 10, 2021

If the Party doesn’t trust Jack Ma, why trust HK elites?

Hong Kong’ political and business elites, long accustomed to being treated well under both British and Chinese rule, are in for a rude awakening, writes Claremont McKenna government professor Minxin Pei in Nikkei Asia.

Rather than consult with Hong Kong’s elites over the 2019 national security law, and more recently with anti-democratic electoral reforms, Beijing has left them out and “relied mostly on its own senior officials.”

“If the party would not trust Jack Ma to run his business, it is hard to imagine that it would trust Hong Kong's elites to undertake the task of turning their city into just another party-controlled Chinese town,” writes Pei.

Meanwhile, “Chinese efforts to bring to Hong Kong its much-feared surveillance state will not just infringe on the liberties of ordinary citizens. More importantly, Hong Kong's elites will also be subject to such surveillance, since the CCP is more worried about the troublemaking potential of elites,” he writes.

“In the coming years, Hong Kong's elites will have to make a painful decision. If they don't' want to accept their marginalized status and growing insecurity, it is time to draw up a Plan B. Those still unsure may want to hear from their elders who fled the victorious Communists marching into Shanghai in 1949.”

Twitter avatar for @mbrookerhk
Matthew Brooker @mbrookerhk
“Hong Kong political and business elites, many of whom have supported, cheered or abetted China's crackdown, should think again... [they] will also find themselves marginalized” Hong Kong's elites should think about an exit strategy
asia.nikkei.comHong Kong’s elites should think about an exit strategyBeijing already moving to sideline China loyalists within the city’s establishment
6:47 AM ∙ Apr 4, 2021
26Likes16Retweets

Leniency for those who confess, severity for the rest

Multinationals are facing the growing challenge of doing business in China while not upsetting nationalist Chinese consumers and a prickly CCP, writes Isaac Stone Fish, CEO and founder of Strategy Risks.

“The old Communist maxim — “leniency for those who confess, severity for those who resist” — informs how the Party treats foreign brands today,” writes Stone Fish, citing the ongoing boycotts of multinational companies that have spoken out on Xinjiang forced labor and the earlier punitive actions taken against the NBA after the Houston Rockets manager tweeted in support of Hong Kong protesters.

“The more economically powerful Beijing grows, the more worrisome the Party’s influence over foreign businesses will become. Global brands face the unenviable task of placating Chinese consumers and the Party while holding true to both U.S. ethical standards and Washington’s increasingly tough regulatory positions.”

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
"Global brands face the unenviable task of placating Chinese consumers & the Party while holding true to both US ethical standards & (DC’s] increasingly tough regulatory positions..Companies have no choice but to try to walk those lines-most often, poorly"
politi.coForeign firms under fire for condemning rights abuses in China
5:23 AM ∙ Apr 9, 2021

IMF: China isn’t catching up any faster

“Somewhat surprising result from the IMF - by 2022 the economies of both the U.S. and China will be back where they were expected to be before the pandemic. So China isn't catching up any faster,” tweets Bloomberg News reporter James Mayger. Here is the link to the International Monetary Fund report Mayger references.

Twitter avatar for @JDMayger
James Mayger @JDMayger
Somewhat surprising result from the IMF - by 2022 the economies of both the U.S. and China will be back where they were expected to be before the pandemic. So China isn't catching up any faster. imf.org/en/Publication…
Image
5:12 AM ∙ Apr 7, 2021
9Likes8Retweets

The struggle to abandon planning targets

As China’s economy has become far larger and more sophisticated, Chinese officials are struggling with how to change the long-established practice of setting GDP and other economic growth targets, writes University of Michigan political scientist Yuen Yuen Ang in the South China Morning Post.

That became apparent at the March “two sessions,” China’s annual legislative meetings, when Beijing didn’t set a GDP target for the next five years, only announcing the annual one of at least six percent, sparking “feverish debates on whether Beijing will abandon GDP targets altogether,” writes Yuen Yuen Ang.

“Beijing’s shift in emphasis from quantity to quality of development is a natural progression as China grows more affluent. More GDP cannot satisfy the growing aspirations of the Chinese people, nor can it boost China’s competitiveness vis-à-vis the United States, an economic and technological superpower,” the political scientist writes.

“Given its reorientation of goals, it makes sense for Beijing to dilute and perhaps even ditch GDP targets. Setting annual GDP targets can discourage local leaders from pursuing quality investments that do not quickly translate into GDP growth, for example, supporting tech start-ups and protecting the environment. It may also drive officials to ignore financial risks, as borrowing funds to build infrastructure is the quickest way to stimulate growth during an economic slowdown.”

Twitter avatar for @yuenyuenang
Yuen Yuen Ang @yuenyuenang
Setting narrow, clear targets turbocharged China's rapid industrial growth 📈 But as 🇨🇳 grows richer and aims for "quality development, central planners struggle to set targets, not only for GDP but everything else 🔢 things to know about targets scmp.com/comment/opinio…
scmp.comChina’s economic headache: setting targets for quality developmentWhen a country is poor, everything is tough, but at least the goal is crystal clear: raise gross domestic product (GDP). But when a country becomes richer, it turns out that problems do not end – they only become harder to pin down, juggle and solve. This is the struggle facing the Communist Party l…
2:40 PM ∙ Apr 8, 2021
27Likes11Retweets

U.S.-Taiwan officials can more freely meet

The Biden administration has relaxed restrictions on U.S. officials meeting with their counterparts from Taiwan, reports the Financial Times Demetri Sevastopulo.

”Under the new guidelines, US officials will be able to regularly host Taiwanese officials at federal government buildings. They will also be permitted to meet their counterparts at Taiwan’s economic and cultural offices, which serve as de facto embassies and consulates. US officials will also be able to attend events at Twin Oaks, a 17-acre estate in Washington that served as the residence of the Republic of China (Taiwan) ambassador until the US switched diplomatic recognition to Beijing.”

“Ned Price, state department spokesperson, said it underscored how “Taiwan is a vibrant democracy and an important security and economic partner that is also a force for good in the international community.””

Twitter avatar for @Dimi
Demetri Sevastopulo・FT @Dimi
#SCOOP - Biden administration has relaxed restrictions on US officials meeting counterparts from #Taiwan, in yet another example that taking tough stance towards Beijing. #China
on.ft.comSubscribe to read | Financial TimesNews, analysis and comment from the Financial Times, the worldʼs leading global business publication
7:03 PM ∙ Apr 9, 2021
287Likes136Retweets

Notable/In Depth

A hotline has been launched to combat that Xi Jinping bugbear “historical nihilism.” Here is the link with information [Chinese].

Twitter avatar for @gaodawei
高大伟 David Cowhig @gaodawei
PRC: Are Your Neighbors Distorting History or Spreading Politically Incorrect Ideas Online? Report Them!
gaodawei.wordpress.comPRC: Are Your Neighbors Distorting History or Spreading Politically Incorrect Ideas Online? Report Them![For background on China’s fight against historical nihilism see 2016: CASS World History Institute Director Zhang Shunhong in Party Theoretical Journal Warns of Historical Nihilists in Pay o…
12:38 AM ∙ Apr 11, 2021
6Likes6Retweets

Who else can be reported on? Those who have defamed Chinese Communist Party “heroes and martyrs” or anyone who has “denied the excellence of Chinese traditional culture, revolutionary culture, and advanced socialist culture,” tweets the BBC’s Stephen McDonell.

Twitter avatar for @StephenMcDonell
Stephen McDonell @StephenMcDonell
Others worthy of being reported are those who have defamed the Communist Party’s “heroes and martyrs” or anyone who has “denied the excellence of Chinese traditional culture, revolutionary culture, and advanced socialist culture”. #China
6:38 AM ∙ Apr 11, 2021

“In 2020, China’s population as [a percentage of the world population] finally matches its GDP as [a] portion of global GDP: both stood at 18 percent,” tweets MacroPolo’s Damien Ma.

Twitter avatar for @damienics
Damien Ma @damienics
In 2020, China's population as % of world pop finally matches its GDP as portion of global GDP: both stood at 18%.
1:02 AM ∙ Apr 11, 2021
71Likes23Retweets

Upcoming speech

I will be speaking on challenges to China’s economic development next week in Manila (virtually), my first ever in the Philippines. Hosted by International Development and Security Cooperation.

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
Unequal and Unbalanced: China’s Challenge as Told Through ‘The Myth of Chinese Capitalism’,” on April 14 2200 ##MST USA and April 15 1200 Manila, PH. Come and join us! lnkd.in/gAscDkk
Image
7:06 AM ∙ Apr 11, 2021

And in case you missed it…

We discussed everything from the early days of Beijing's push to enter the WTO, the Trump to Biden China policy transition, rebuilding alliances, & the unanswered question of the origin of the pandemic in this interview with Wall Street TV.on my book…

New preface for Chinese edition of book

The preface for my book《低端中國》examines how China's economic bounce-back from the pandemic hides deep vulnerabilities with a lopsided recovery that has left many of its people behind. Here is link [Chinese]

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
The preface for my book《低端中國》examining how China's economic bounce-back from the pandemic hides deep vulnerabilities w/ a lopsided recovery that has left many of its people behind. Also includes a shout-out to Taiwan where I was lucky to live 4 years
upmedia.mg《低端中國》:中國經濟危機即將到來--上報二〇二一年三月十六日二〇一九年底我完成這本書的時候,新冠病毒疫情還沒有席捲全球。事實上,直到二〇二〇......
1:37 AM ∙ Apr 10, 2021
10Likes2Retweets

I enjoyed discussing my book and the economic costs of China’s continuing discrimination against its migrant workers with RFA’s Jane Tang. [Chinese]

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
I enjoyed discussing my book 《低端中国》and the economic costs of China’s continuing discrimination against its migrant workers. A big thanks to @ccjanetang and @RFA_Chinese
rfa.org专访罗谷: 中国农民工是被党利用的“二等公民”常驻中国超过二十年的前《彭博商业周刊》中国社长罗谷近日出版中文新书《低端中国:党、土地、农民工,与中国即将到来的经济危机。他特别研究了中国社会底层农民工群体的真实面貌。
6:21 PM ∙ Apr 7, 2021
2Likes2Retweets

Finally, I am delighted that my book has been featured as the “best of the month” selection on Taiwan’s largest online book site.

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
This is pretty cool: Taiwan's largest online book site is featuring 《低端中國》- the Chinese edition of my book "The Myth of Chinese Capitalism," as a "best of the month" selection. books.com.tw/web/books_topm…
Image
4:38 AM ∙ Apr 6, 2021
62Likes8Retweets

Picture from a recent walk looking over the Missoula Valley.

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
Nice morning
Image
4:25 PM ∙ Apr 9, 2021
8Likes1Retweet

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