Welcome to newsletter 47, the latest edition of Trade War. And to those who celebrate, a belated happy Thanksgiving.
The Trump administration (a phrase we will soon be done with) plans to crack down on some 89 Chinese companies that have military connections. Apple is pushing its top supplier Foxconn to diversify outside of China. And Chinese dissidents have become the unlikely supporters of Trump conspiracy theories.
Meanwhile, China has announced that it has ended poverty within its borders. And a new “globalization with Chinese characteristics” is emerging.
Thanksgiving street scenes in 2014 Ürümqi, Xinjiang
For a change, I will start with some photos I took on the streets of Urumqi on a Thanksgiving day six years ago. I hadn’t looked at them for long time until yesterday. Sad to think what has happened to Xinjiang and its people since then.
Making the world as dependent as possible on China
China’s approach to globalization is taking on a distinct character—touting its engagement with the world as it joins new trading pacts while using its market to punish countries that have upset it, report the New York Times’ Steven Lee Meyers and Keith Bradshaw.
“It’s globalization with Communist characteristics: The Chinese government promotes the country’s openness to the world, even as it adopts increasingly aggressive and at times punitive policies that force countries to play by its rules,” the Times writes citing how China recently banned Australian coal, wine, barley and cotton, punishment for Sydney’s calls for an investigation into the origins of COVID.
“China wants to become less dependent on the world for its own needs, while making the world as dependent as possible on China,” the reporters write.
iPad to be build in Vietnam, first time outside China
Apple has asked its top supplier Foxconn to move some production out of China and into Vietnam, in part to lessen its vulnerability in a U.S.-China trade war, reports Reuters’ James Pearson.
The Taiwanese contractor is already building assembly lines for Apple’s MacBook laptop and iPad tablet at a factory in Vietnam’s northeastern Bac Giang province, which will start operation in the first half of next year.
“According to Taipei-based research group TrendForce, all iPads are assembled in China and so Foxconn’s move would mark the first time that the iPad has been made outside China,” Pearson writes.
China Boeing and Airbus wannabe rival to be blacklisted
The Trump administration’s commerce department will blacklist 89 Chinese aerospace and other industrial companies for their ties to the Chinese military, blocking them in most cases from buying U.S. goods and technology, reports Reuters.
“Commercial Aircraft Corp of China Ltd (COMAC), which is spearheading Chinese efforts to compete with Boeing and Airbus, is on the list, as is Aviation Industry Corporation of China (AVIC) and 10 of its related entities,” Reuters reports. That could affect U.S. companies General Electric and Honeywell International, both of which sell to COMAC and joint venture with AVIC.
Chinese dissidents attack US election with conspiracy
Some of China’s most influential human rights activists have been pushing Trump’s election fraud conspiracy theories online, reports the Wall Street Journal.
Rights advocates including blind legal activist Chen Guangcheng has tweeted regularly claiming Trump won the election, while religious leader Bob Fu has tweeted support for the outlandish and laughable allegation of lawyer Sidney Powell, who claimed Chinese and Cuban “communist money” meddled in the election.
Poverty ends in China/one-quarter still impoverished
China has announced the end to absolute poverty, meeting its goal of 2021, the 100th anniversary of the founding of the Chinese Communist Party, reports the Wall Street Journal.
“Nine Chinese counties, all in the mountainous province of Guizhou, have recently been certified as poverty-free, officials said. They were the last counties to make it over a threshold China has set based on a matrix of indicators including income, health, education, shelter and other human needs,” writes reporter Jim Areddy.
The impressive claim however, isn’t the full story, tweets Journal reporter Chao Deng. “Eliminating poverty for the government is a numbers game. China's poverty threshold is ~$600 a year, while World Bank's standard is ~$2000 a year. By the latter, more than a fourth of China's population is still impoverished.”
Doubling China’s economy a fantasy
China’s newest goal of doubling GDP by 2035, recently announced by Xi Jinping, is a “fantasy,” reports Peking University finance professor Michael Pettis in a commentary in the Financial Times.
”Will China double the size of its economy by 2035, as President Xi Jinping proposed at a Communist party conference three weeks ago? To do so, the Chinese economy must grow annually by just over 4.7 per cent on average for the next 15 years,” writes Pettis. “It grew by 6.1 per cent last year, and by 6.7 per cent annually over the previous five years. In that context, 4.7 per cent a year seems quite manageable. But while the calculations may seem straightforward, there are economic and demographic constraints that are not.”
Pettis compares China’s experience to the history of high savings and investment-led economies Japan and Brazil, while also noting falling productivity in China’s shrinking workforce, and concludes the new goal will be extremely difficult.
“Assume conservatively that the relationship between debt and growth doesn’t change, and China’s debt-to-GDP ratio will have to rise to over 400 per cent by 2035 if it is to double GDP again. This is a level that would be unprecedented in history. Everywhere else, growth collapsed long before debts reached levels close to this.”
Alibaba filled with gratitude
Chastened by the abrupt halting of its planned massive Ant Group IPO, Alibaba is “filled with gratitude,” and has pledged to “positively respond” to new rules controlling fintech in China, reports the Global Times.
"Development and regulatory governance always go hand in hand, and help foster the development of platform companies, serving to increase the sustainable and healthy development of all society," said Alibaba chairman Zhang Yong, reported the Chinese state-owned paper.
Notable/In Depth
Here’s an excerpt from my recent book looking at one major problem in Xi Jinping’s touted end to poverty: its reliance on large, forced population transfers. More in the twitter thread below.
Here’s an interesting Financial Times article looking at the life of an early Chinese entrepreneur and philanthropist, now being lauded by Xi Jinping as a “sage and role model” for Chinese entrepreneurs today.
And the Economist’s Gady Epstein discusses the Biden administration’s likely China policies, in “The Intelligence” podcast.
Speaking engagements
Next week I will be talking with award-winning writer Mei Fong about my book and how income inequality, demography and social tensions affect China’s development. At San Francisco’s Commonwealth Club on Wednesday at 9 am PST, please register here.
In case you missed it..
Only a few days left for you to catch my recent talk with New Yorker’s Jiayang Fan at the Hong Kong International Literary Festival. Details on how to watch in this link.