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Trade War

Newsletter 107 - March 19, 2022

Dexter Roberts
Mar 20, 2022
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Trade War

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Welcome to the 107th edition of Trade War.

During a two-hour virtual meeting between Biden and Xi, U.S. warns China not to help Russia, while Beijing criticizes Washington over Taiwan policy. And Chinese official says in speech that the U.S. Indo-Pacific strategy could push Asia Pacific over the “edge of an abyss.”

China turns to ‘closed-loop’ bubble for factories as Covid spreads. Chinese health official calls for elderly to get vaccinations. Beijing pledges market-friendly policies to boost economy. And Chinese stocks move from rout to recovery.

A note on publication schedule: Trade War will take a one-week hiatus for spring break with no edition published on March 26. We will resume weekly publication with our next issue coming out on April 2.

Biden - Xi meeting underscores deadlock

The two-hour video call between U.S. president Joe Biden and China’s President Xi Jinping exposed a “deepening divide” between the two countries, reports Politico’s Phelim Kine.

“Biden’s outreach failed to prod Xi to commit to leveraging Chinese influence to end Russia’s aggression in Ukraine or to even use the term “invasion,”” writes Kine.

“The call instead provoked Xi’s implicit criticism of the alleged U.S. role in fomenting the crisis, perceived U.S. meddling in Taiwan and bitterness toward threatened U.S. sanctions against China if it aids Russia’s war effort.”

“The personal relationship was never going to override national interests, which are in conflict, but what it did do was provide a basis for partial communication, but that’s basically been undone,” Chas Freeman, former deputy chief of mission at the U.S. Embassy in Beijing, told Politico.

Twitter avatar for @PhelimKine
Phelim Kine “老 康“ @PhelimKine
"The call suggest the two leaders have exhausted any residual goodwill created by their virtual meeting in November and will likely reaffirm the Biden China policy that hinges on rallying allies to counter its influence in the Indo-Pacific and beyond"
politico.comBiden’s call with Xi underscores deepening bilateral deadlockThe lack of any substantive results from the discussion calls into question whether the two leaders’ personal relationship can bridge deep differences in their positions.
12:03 AM ∙ Mar 19, 2022
3Likes1Retweet

Chinese readout tougher on US than English version

The Chinese and English versions of Beijing’s readout of the Biden-Xi meeting differ substantially, points out Hofstra University law professor Julian Ku.

The Chinese version “includes Xi blaming Biden's team for undermining the two leaders' consensus, and Xi blaming the US in general for causing problems in the relationship and the world,” notes Ku.

(Here is the very short White House readout.)

Twitter avatar for @julianku
Julian Ku 古舉倫 @julianku
This is pretty different from the English version put out by China earlier. It includes Xi blaming Biden's team for undermining the two leaders' consensus, and Xi blaming the US in general for causing problems in the relationship and the world. wap.peopleapp.com/article/657889…
Twitter avatar for @WilliamYang120
William Yang @WilliamYang120
Here's the complete translation of the readout issued by #China by me, following the talk between #Biden and #XiJinping. https://t.co/NcKf6WNFn7
4:26 PM ∙ Mar 18, 2022
193Likes106Retweets

How far will Putin & Xi take ‘no limits’ partnership?

How far will Putin and Xi take their “no limits” partnership? Here are some thoughts from three Atlantic Council experts, including yours truly, this Trade War author.

Putin is a critical partner in China’s “deepening rivalry” with Washington, notes Global China Hub director David Shullman who previously worked as a senior intelligence official focused on East Asia. Beijing will “pair its rhetorical claims to neutrality with financial assistance for Putin’s regime at levels deemed unlikely to draw a serious response” from the United States and NATO. 

China continues to operate under the assumption “that the United States is an adversarial declining hegemon, Russia is the strategic partner, and they don’t know how this ends and can’t yet adjust,” says John Culver, a nonresident senior fellow with the Global China Hub and a former CIA senior intelligence officer.

Meanwhile, “Beijing believes that Moscow is right to feel aggrieved” and see the NATO-Russia standoff as comparable to perceived US meddling in the Indo-Pacific and with Taiwan, says Scowcroft Center senior fellow Dexter Roberts. And China’s leaders “hope to have Russia’s support, including at the UN if necessary, when they eventually move more forcefully to rein in Taiwan.”

Finally, Beijing knows perfectly well that pressuring Putin won’t warm relations with Washington—whose perceived broader intent is “to stymie China’s rise,” adds Roberts. That means “China’s role in any concerted peace effort is likely to be half-hearted, of limited value in affecting Russia’s behavior, and possibly even counterproductive.”

Twitter avatar for @AtlanticCouncil
Atlantic Council @AtlanticCouncil
#FastThinking⚡️ How far will these autocrats take their “no limits” friendship? @DaveShullman, @dtiffroberts, @JohnCulver689 weigh in:
atlanticcouncil.orgFAST THINKING: What China stands to gain—and lose—by wading into the Ukraine warHow far will these autocrats take their “no limits” friendship?
9:30 PM ∙ Mar 15, 2022
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Beijing’s balancing act

Listen to this podcast with Bloomberg Radio’s Carol Massar and Tim Stenovec for more of my thoughts on what motivates Beijing’s approach to the Russian invasion of Ukraine, as well as our conversation on recent moves to boost Chinese stocks and the U.S.-China trade relationship.

Twitter avatar for @ACGlobalChina
ACGlobalChina @ACGlobalChina
Three weeks after the Russian invasion of Ukraine began, what does Beijing's balancing act tell us about the future of China-Russia ties? @ACScowcroft's @dtiffroberts joined @carolmassar and @timsteno to discuss on the @BW podcast. Listen here 👇 open.spotify.com/episode/6lhLD5…
12:40 PM ∙ Mar 17, 2022
2Likes2Retweets

Washington’s “dangerous” Indo-Pacific Strategy

Washington's "Indo-Pacific Strategy is as dangerous as the NATO strategy of eastward expansion in Europe. If allowed to go on unchecked, it would bring unimaginable consequences, and ultimately push the Asia-Pacific over the edge of an abyss," said vice foreign minister Le Yucheng in a March 19 speech in Beijing.

Twitter avatar for @PaulJHeer
Paul Heer @PaulJHeer
@niubi So Beijing thinks Washington's "Indo-Pacific Strategy is as dangerous as the NATO strategy of eastward expansion in Europe. If allowed to go on unchecked, it would bring unimaginable consequences, and ultimately push the Asia-Pacific over the edge of an abyss."
8:43 PM ∙ Mar 19, 2022

Hong Kong struggles with lethal Covid wave

“I’m not sure people appreciate quite how bad the Covid situation is in Hong Kong, nor what might be around the corner,” writes the Financial Times’ John Burn-Murdoch, in an alarming tweet thread with graphs. (Here is the FT original story.)

“Comparing Hong Kong to its peers, all of whom kept Covid largely at bay for the best part of two years, it’s extraordinary the extent to which it is an outlier in terms of the lethality of this wave. So what’s driving this?”

“Vaccines. Or more specifically: the elderly vaccination rate. When Omicron hit, *more than two-thirds of people aged 80+ in Hong Kong were still unvaccinated*, compared to a couple of percent in New Zealand and Singapore. This was a year after vaccines became available,” tweets Burn-Murdoch.

Twitter avatar for @jburnmurdoch
John Burn-Murdoch @jburnmurdoch
NEW: I’m not sure people appreciate quite how bad the Covid situation is in Hong Kong, nor what might be around the corner. First, an astonishing chart. After keeping Covid at bay for two years, Omicron has hit HK and New Zealand, but the outcomes could not be more different.
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5:19 PM ∙ Mar 14, 2022
25,755Likes9,953Retweets

Chinese official urges elderly vaccination

“Chinese COVID-19 vaccines are safe for the elderly, and it is imperative for this highly vulnerable demographic to be inoculated so as to avoid becoming critically ill, Zheng Zhongwei, head of China's COVID-19 vaccine development task force, said at a news briefing on Saturday,” reports the People’s Daily app.

While some seniors believe staying at home can protect them and so there is no need to be vaccinated, Zheng called this "extremely dangerous,” particularly given the frequency of asymptomatic cases of Omicron.

"When these asymptomatic family members come back home they introduce the risk of infection to the elderly," Zheng said.

Twitter avatar for @PeoplesDailyapp
People's Daily app @PeoplesDailyapp
Chinese #COVID19 #vaccines are safe for the elderly, and it is imperative for this highly vulnerable demographic to be inoculated so as to avoid becoming critically ill, head of China's COVID-19 vaccine development task force said on Saturday.
peoplesdaily.pdnews.cnVaccination imperative for seniors, official saysChinese COVID-19 vaccines are safe for the elderly, and it is imperative for this highly vulnerable demographic to be inoculated so as to avoid becoming critically ill, Zheng Zhongwei, head of China’s COVID-19 vaccine development task force, said at a news briefing on Saturday.
2:02 AM ∙ Mar 20, 2022

Factory worker bubble to protect supply chain

In an effort to minimize supply chain disruptions, China is allowing some companies including iPhone maker Foxconn to restart production in locked-down Shenzhen, reports Bloomberg News.

In what is being called a closed-loop system, workers are driven directly between company dormitory and factory floor, while being regularly tested for Covid. Similar measures used two year ago “enabled China to emerge swiftly from the initial pandemic economic hit, despite fears restarting factories would contribute to the virus’s spread.”

“The system -- which effectively puts factory workers in a bubble, insulated from outside infection -- is also being used in nearby Dongguan, a manufacturing center that pumps out shoes, toys and textiles for export around the globe, but has restrictions in place to quell a virus outbreak, as well,” reports Bloomberg.

Still, the system, similar to what was used during the recently closed Beijing Olympics, is not easily replicable to the rest of the economy.

“Most people in China do not work in factories, but in offices, shops, restaurants and the like. In those type of workplaces it is much harder to set up a closed-loop bubble,” said Louis Kuijs, Asia Pacific chief economist at S&P Global Ratings.  

Twitter avatar for @ek_obrien
Emma OBrien @ek_obrien
Factory employees can go to work, but nowhere else. How China is insulating it’s supply chains from its Covid absolutism.
bloomberg.comBloomberg - Are you a robot?
10:54 PM ∙ Mar 17, 2022
2Likes1Retweet

Officials’ sweeping promises aim to roust China growth

“A sweeping set of promises this week from Xi’s government to make regulation more transparent and predictable -- as well as a commitment to overseas markets including Hong Kong -- suggests authorities are appealing to investors abroad,” writes Bloomberg’s Sofia Horta e Costa.

“The ruling Communist Party is seeking to regain the trust of international funds and the global business community after the country was lumped in with Russia as an “uninvestable” destination,” Bloomberg reports.

Efforts to soothe worried overseas and domestic investors included Xi pledging to limit the economic impact of China’s zero-Covid policy, officials signaling an end to the crackdown on tech companies while announcing plans for a property tax have been put on hold, as well as Beijing considering finally allowing U.S. regulators to audit Chinese firms listed on American exchanges.

“The market was in freefall -- a clear signal was needed from a senior level to clear the air,” said University of California San Diego professor Victor Shih. “I think unclear and even deleterious policy conditions were beginning to create an all-out panic.”

—If you are not already, I highly recommend you start following Bloomberg’s Sofia Horta e Costa on Twitter, most notably for her valuable weekly China economy and finance roundups.

Twitter avatar for @SofiaHCBBG
Sofia Horta e Costa @SofiaHCBBG
And here's what it all means - a shortcut if you want to read only one article. A big shift on almost everything, but will China follow through with real measures? There's certainly a lot of money counting on it. 10/10
bloomberg.comBloomberg - Are you a robot?
9:22 AM ∙ Mar 18, 2022
534Likes52Retweets

Stocks go from rout to recovery

“The Nasdaq China index surged 33 percent with Alibaba [sealing its] biggest gain since 2014, closing 37 percent higher, after China’s securities regulator vowed to spare no effort to maintain the stable operation of the capital market and keep overseas listing channels open,” tweets Die Welt’s Holger Zschaepitz.

Twitter avatar for @Schuldensuehner
Holger Zschaepitz @Schuldensuehner
The Nasdaq #China index surged 33% w/Alibaba seals biggest gain since 2014, closing 37% higher, after China’s securities regulator vowed to spare no effort to maintain the stable operation of the capital market and keep overseas listing channels open.
Image
8:17 PM ∙ Mar 16, 2022
138Likes46Retweets

Notable/In Depth

“China in recent years absorbed the bulk of global capital flows to EM,” tweets Robin Brooks, chief economist at the Institute of International Finance.

“But since Russia's invasion of Ukraine, there's very large outflows from China, which have already pulled our total for Q1 2022 negative (red). Putin has made global markets look at China in a new light...”

Twitter avatar for @RobinBrooksIIF
Robin Brooks @RobinBrooksIIF
China in recent years absorbed the bulk of global capital flows to EM. But since Russia's invasion of Ukraine, there's very large outflows from China, which have already pulled our total for Q1 2022 negative (red). Putin has made global markets look at China in a new light...
Image
2:29 PM ∙ Mar 19, 2022
111Likes37Retweets

“While the Ukraine invasion is still in its early days, it has already demonstrated how the United States and its allies can prevent a Chinese invasion [of Taiwan] from becoming the world’s next big crisis,” writes Rand Corporation’s Jeffrey W. Hornung, in War on the Rocks.

“Rather than treat a Chinese victory as inevitable, Washington should begin preparing in peacetime to ensure a rapid, coordinated military and economic response to any potential attack.”

Twitter avatar for @pjmooney
Paul Mooney 慕亦仁 @pjmooney
Ukraine’s Lessons for Taiwan - War on the Rocks
warontherocks.comUkraine’s Lessons for Taiwan - War on the RocksToday, Ukraine is the site of a violent struggle between an embattled democracy and a repressive, irredentist, authoritarian regime bent on subduing it.
4:23 PM ∙ Mar 18, 2022

Watching Putin’s difficulties in Ukraine, “a logical and dispassionate analysis would suggest that Chinese war planners are having second and third thoughts [about moving on Taiwan],” says former deputy National Security Advisor Matt Pottinger, in an interview in the Wall Street Journal.

“But logic and dispassionate analysis are not the hallmarks of Xi Jinping. Xi is viewing the world in the reflection of fun-house mirrors at this point.”

Pottinger says Taiwan must unwind its economic ties with China and that President Tsai Ing-wen “has made significant progress in really taking charge of the military services that she commands and getting them to focus on truly asymmetric capabilities, by which I mean ones that are not only quite lethal to China, but also quite affordable for Taiwan.”

The Taiwanese “need to show China that the war doesn’t end at the beaches. It will continue in the ports, in the cities, in the countryside and in the mountains,” says Pottinger.

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
Tsai getting Taiwan military to focus on "asymmetric capabilities,” says Pottinger. Taiwanese “need to show China that the war doesn’t end at the beaches. It will continue in the ports, in the cities, in the countryside and in the mountains.” @WSJopinion
wsj.comOpinion | Russia, China and the New Cold WarMatt Pottinger, an architect of Trump’s security strategy, sees Ukraine as analogous to Korea, a ‘hot opening salvo’ in a global conflict between the free world and a bloc of dictatorships.
1:28 AM ∙ Mar 20, 2022

“Chinese evaluations of the bilateral relationship and of the USA slumped during the Trump era but rebounded somewhat after Biden took office,” write Rice University’s Songying Fang, University of British Columbia’s Xiaojun Li, and Adam Y Liu, of the National University of Singapore, in The Chinese Journal of International Politics.

“In addition, the majority of Chinese respondents believed their country to be the world’s largest and leading economy and favored China being the world’s leading power, either by itself or alongside the USA. Furthermore, younger and more educated respondents held more negative views, although these were mitigated by personal connections with and experiences in the USA.”

Twitter avatar for @AdamYLiu1
Adam Y. Liu @AdamYLiu1
How do ordinary Chinese view China-US relations? Check out our findings. @nujoaixil @LKYSch @CAG_LKYSPP @cjip_journal
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1:51 AM ∙ Mar 15, 2022
101Likes36Retweets

China’s often dangerous gig economy now employs one quarter of the labor force, or some 200 million workers, writes Masha Borak in Wired.

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
*China gig economy employs 1/4 of labor force or 200 million workers *2011-2020, online food delivery industry grew from $3.4 to $105 billion *First six months of 2017, a courier involved in a deadly traffic accident in Shanghai every 2.5 days @MashaBorak
wired.co.ukChina’s Gig Workers Are Challenging Their Algorithmic BossesFood delivery drivers are using platforms’ data-powered systems, mass WeChat groups, and unofficial unions to fight unfair conditions.
3:29 AM ∙ Mar 15, 2022
4Likes1Retweet

Montana picture

We got what may be our last big snowstorm of the spring.

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
Extra nice dog walk this morning
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9:33 PM ∙ Mar 16, 2022
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