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Southern tiger - China’s regional gap is worsening 

Southern tiger - China’s regional gap is worsening  | ANALYSIS Stream | Scoop.it

The Economist

China’s southern provinces are outperforming the north in nearly every economic dimension.

  • The south’s share of gdp has risen to a peak of 65%, from 59% in 2015. 

The north-south imbalance is likely to outlast the pandemic.

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Rethinking 2020: What’s Overlooked and What’s Overhyped

Rethinking 2020: What’s Overlooked and What’s Overhyped | ANALYSIS Stream | Scoop.it

MacroPolo

Damien Ma & Houze Song | MacroPolo

Overlooked

  1. ‘Closing the Curtain on the GDP Obsession Era’
  2. ‘Decoupling Is Everywhere Except in Reality’

 

Overhyped 

  1. ‘China Slams Door on The World
  2. ‘BRI Is Down but Not Out’
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Dual Circulation, Consumption Stimulation or Regional Economic Integration... Which is the Way Forward for China’s Economy in 2021? | CEIBS

Dual Circulation, Consumption Stimulation or Regional Economic Integration... Which is the Way Forward for China’s Economy in 2021? | CEIBS | ANALYSIS Stream | Scoop.it

In May 2020, Chinese President Xi Jinping proposed for the first time a new ‘dual circulation’ strategy in which domestic and foreign markets would reinforce each other, with the domestic market serving as the mainstay.

  • This strategy can be summed up as: dual circulation centering on the domestic market.

Consumption, investment and exports are often referred to as the troika stimulating China’s aggregate demand (i.e. the sum of its internal and external demand).

  • Internal demand refers to domestic demand for domestic products and can be subdivided into consumption demand and investment demand.
  • External demand refers to foreign demand for domestic products, which is not as important to us as it used to be. In the next five to ten (or more) years, we hope that domestic consumption will drive the internal economy and produce internal dividends.
  • Nevertheless, there is still an urgent problem to be solved in that we must currently rely on domestic investment.
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How can companies align their businesses with China’s ‘dual circulation’ strategy? | CEIBS

How can companies align their businesses with China’s ‘dual circulation’ strategy? | CEIBS | ANALYSIS Stream | Scoop.it

The statement of “domestic circulation as the mainstay” should be interpreted as a long-term direction for China’s economic restructuring, instead of a barrier to our way of seeing the world.
To promote domestic circulation, it is essential to match domestic demand and supply more effectively.

From the supply side, despite the growing supply chain capability of major industries in China, the country still has a long way to go before it can become self-sufficient in cutting-edge sectors such as semi-conductor chips.

  • More importantly, Chinese companies are overshadowed by international peers in brand power.
  • They are in dire need of a boost to their brand power so as to satisfy the demand of domestic customers. Aware of this, Chinese companies have made conscious efforts over recent years, giving birth to a wealth of homegrown brands.

Many supply chain enterprises have launched their own brands and conceived of innovative business models such as C2M (Customer-to-Manufacturer).

  • All of these initiatives are in line with the strategic adjustment required by domestic circulation.
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China’s ‘Dual Circulation’ Strategy to Divert More Money to Domestic Market | CEIBS

China’s ‘Dual Circulation’ Strategy to Divert More Money to Domestic Market | CEIBS | ANALYSIS Stream | Scoop.it

Domestic circulation requires reforms on both the demand and supply sides.

To spur domestic consumption, the Chinese government has rolled out a string of policies, including stricter housing market regulations in line with the principle that “houses are for people to live in, not for speculation,” to crowd out spending ability from the housing market.

  • The establishment of the Hainan Free Trade Zone, for example, now also allows Chinese people to enjoy duty-free shopping without traveling abroad, thus further bolstering domestic consumption.

On the supply side, China, as the world’s largest manufacturer, has a complete but imperfect industrial chain.

  • In addition, deeper reforms are needed in five key factor markets – namely, the land, labour, capital, technology and data markets – to further unleash market potential and vitality, and pave the way for supply-side structural reform.
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China's new plan to counter the US economy | Nikkei Asian Review

China's new plan to counter the US economy | Nikkei Asian Review | ANALYSIS Stream | Scoop.it

Minxin Pei | Claremont College

Since 2021 is the first year of the CCP's 14th five-year plan, the priority tasks for the year set by last year's Central Economic Work Conference naturally reflect the two prongs of China's new economic strategy:

  • technological self-sufficiency and
  • growth based mainly on domestic consumption.

Therefore, China's number one and two priority tasks for 2021 are, respectively,

  • "strengthening the nation's scientific and technological capabilities" and
  • "strengthening [China's] capabilities of maintaining the self-reliance and control of production and supply chains."
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Global trade - How to deal with China | The Economist

Global trade - How to deal with China | The Economist | ANALYSIS Stream | Scoop.it

The world’s democracies desperately need a coherent approach to dealing with China. It is the 21st century’s ascendant power, but also an autocracy that mistrusts free markets and abuses human rights.

However, recent events show how ineffective Western policy has become.

  • On December 30th the European Union agreed on an investment pact with China that secured puny gains and gave China a diplomatic coup. The eu did so despite doubts among Joe Biden’s team.
  • New York’s stock exchange banned several Chinese firms’ shares, only to change its mind twice in a few days.
  • Congress has so far failed to pass a bill to protect Uyghurs from forced labour.

As the West stumbles, China is busy cracking down at home and expanding its influence abroad.

  • On January 6th more than 50 democracy activists were arrested in Hong Kong.
  • In November China signed a trade pact with 14 Asian countries, including American allies such as Japan and Singapore.
  • It continues to threaten Australia with its thuggish diplomacy and a partial trade embargo.
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Xi Jinping and the Future of Chinese Power | Foreign Affairs

Xi Jinping and the Future of Chinese Power | Foreign Affairs | ANALYSIS Stream | Scoop.it

Rana Mitter | University of Oxford

Does China want to transform the global order to advance its own interests and to reflect its own image?

  • That may be the most important question in geopolitics today, yet the answers it elicits tend to reveal more about modern biases than they do about what a future Chinese superpower would look like.

Those who want to project forward to a malevolent, expansionist China point to evidence of aggression in Beijing’s posture today.

  • Those with a less apocalyptic view highlight more accommodating features in Chinese policy or note that China will face plenty of challenges that will keep it from reshaping the world even if it wants to.
  • Many Western observers see a burgeoning new Cold War, with China serving as a twenty-first-century version of the Soviet Union. 

Such projections are far too rigid and sweeping to usefully describe the complexity of China’s rise—either to capture the inherent uncertainty in China’s future aims or to recognize the essential elements that have shaped its aspirations.

  • Chinese power today is a protean, dynamic force formed by the nexus of authoritarianism, consumerism, global ambitions, and technology.
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Cai Xia: An Insider Breaks with the Chinese Communist Party | Foreign Affairs

Cai Xia: An Insider Breaks with the Chinese Communist Party | Foreign Affairs | ANALYSIS Stream | Scoop.it

Cai Xia | former Professor at the Central Party School of the Chinese Communist Party

But the atmosphere in China was growing darker. Ren, the dissident real estate tycoon, disappeared in March and was soon expelled from the party and sentenced to 18 years in prison.

Meanwhile, my problems with the authorities were compounded by the unauthorized release of a private talk I had given online to a small circle of friends in which I had called the CCP “a political zombie” and said that Xi should step down.

  • When I sent friends a short article I had written denouncing Xi’s repressive new national security law in Hong Kong, someone leaked that, too.

I knew I was in trouble.

  • Soon, I was expelled from the party.
  • The school stripped me of my retirement benefits.
  • My bank account was frozen.

I asked the authorities at the Central Party School for a guarantee of my personal safety if I returned.

  • Officials there avoided answering the question and instead made vague threats against my daughter in China and her young son.
  • It was at this point that I accepted the truth: there was no going back.
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"Road Kill in a Game of Chicken": China, Canada, and the United States | Council on Foreign Relations

"Road Kill in a Game of Chicken": China, Canada, and the United States | Council on Foreign Relations | ANALYSIS Stream | Scoop.it

Not surprisingly, China’s detention of the two Michaels and its broader campaign of “coercive diplomacy” in response to Meng’s arrest—including restrictions on Canadian canola exports, and temporary bans on Canadian pork and beef—have only backfired.

  • Prime Minister Justin Trudeau, who once considered making Canada the first G7 country to negotiate a free trade agreement with China, has refused to intervene in Meng’s extradition proceedings or negotiate a “prisoner exchange” with Beijing, despite calls from former senior officials—including some in his own party.

Moreover, public attitudes towards China have hardened as well. 

  • According to a recent Pew survey, 73 percent of Canadians have an unfavorable view of China, up from 45 percent in October 2018, just before the two Michaels’ detention.
  • Similarly, a study by the Asia Pacific Foundation of Canada found only 35 percent of Canadians now see China’s economic power as more of an opportunity than a threat—down from 60 percent two years ago.

More surprising, however, is how many Canadians also blame the United States for the two Michaels’ predicament.

  • As Roland Paris from the University of Ottawa put it, Canada has become “road kill in a game of chicken” between Washington and Beijing. 
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Financial Technology Is China’s Trojan Horse | Foreign Affairs

Financial Technology Is China’s Trojan Horse | Foreign Affairs | ANALYSIS Stream | Scoop.it

Chinese fintech firms function like a geoeconomic Trojan horse.

  • First, Alipay and WeChat Pay—companies that make up 95 percent of China’s mobile payments market—integrate themselves into daily economic life in another country.
  • Then, piggybacking off this financial infrastructure, they and other Chinese firms acquire digital banking licenses and rapidly expand into other sectors, including digital insurance, consumer credit, remittances, and lending.
  • These companies soon become too embedded in their host country to remove.

China’s bid for fintech hegemony in Asia is a step toward an even bigger goal: achieving global reserve currency dominance.

  • Beijing is challenging the sway of the U.S. dollar over Southeast Asia and parts of Africa as it prepares to launch, likely within the next year, a sovereign digital yuan, which would make transactions easier and also enable China to better track how its currency is used.

China’s digital yuan could siphon transactions away from Western-dominated money exchange platforms such as SWIFT, the key mechanism that maintains U.S. dollar dominance in global trade.

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What Are Biden’s Actual Prospects for Reviving Trans-Atlantic Relations? | World Politics Review

What Are Biden’s Actual Prospects for Reviving Trans-Atlantic Relations? | World Politics Review | ANALYSIS Stream | Scoop.it

Biden has promised a restoration, and Europeans have reciprocated.

  • If the Trump era energized European calls for “strategic autonomy,” the prospects of a Biden presidency seem to herald a strategic realignment.
  • To make this work, though, Washington will need to work toward a more equal strategic partnership with Europe, rather than continue to assume U.S. leadership.

The biggest geopolitical challenge is adopting a united EU-U.S. front in standing up to Beijing, something Europeans have long resisted and which the Trump years complicated.

  • The terrain has begun to shift, however, as many in Europe become alarmed at China’s military modernization, regional ambitions, diplomatic bullying and domestic repression, including in Hong Kong.
  • The EU’s strategy document on a “new agenda” with Washington calls for closer coordination on the “strategic challenge” posed by China, while NATO’s draft “strategic concept” calls on the alliance to push back on Chinese assertiveness.

Whether Europeans are prepared to walk this talk is unclear, in part because different EU states diverge on the dangers the emerging superpower presents and the risks they are prepared to run in antagonizing Beijing.

  • Last week, the EU overrode objections from Biden’s transition team in approving a major trade deal with China. While Brussels claimed the timing was coincidental, it was a slap in the face to the incoming administration.

A truly unified trans-Atlantic stance will emerge only if the two sides reach a common assessment of the various threats China poses and coordinate their policies accordingly across multiple dimensions.

  • Yet many Europeans remain wary of being drawn into a new Cold War, the terms of which are defined by Washington.
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2020 in Review: Chinese Companies Suffer as Global Technology Tensions Intensify | Council on Foreign Relations

2020 in Review: Chinese Companies Suffer as Global Technology Tensions Intensify | Council on Foreign Relations | ANALYSIS Stream | Scoop.it

2020 was not an easy year for Chinese tech companies. Officials around the world became warier of the potential national security threats posed by their growing power.

  • A slew of bans, restrictions, and sanctions on Chinese tech companies strengthened China’s resolve to shore up indigenous innovation and self-reliance.

And while the Biden administration will likely take a more measured policy approach than the Trump administration, it is unlikely that things will get much easier for Chinese tech companies in 2021.

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Avoiding the climate canard in US-China relations | Brookings

Avoiding the climate canard in US-China relations | Brookings | ANALYSIS Stream | Scoop.it

Ryan Hass | Brookings

As this transition unfolds, so too will debates about how — and on what issues — to coordinate with China.

  • Already, climate issues have become a symbol of this debate.

Outgoing Trump administration officials have warned anyone who will listen that China is setting a trap for the Biden administration on climate issues, and that the Biden team would be suckers to fall for it. 

  • Such fears are overwrought, built on a false narrative of the past, and focused on the wrong question.
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PODCAST | Ryan Hass on the Biden administration's China direction

PODCAST | Ryan Hass on the Biden administration's China direction | ANALYSIS Stream | Scoop.it

Thoughtful and measured as always, Ryan makes a good case for why the Biden team is not, in fact, boxed in by Trump’s antagonism toward China, and will chart a path that will diverge substantially from the one taken during four years of Trump without retreading the path taken during the Obama presidency.

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After lifting restrictions on US-Taiwan relations, what comes next? | Brookings

After lifting restrictions on US-Taiwan relations, what comes next? | Brookings | ANALYSIS Stream | Scoop.it

Ryan Hass

Already, the Biden transition team appears to have struck a balanced public posture.

  • It has reiterated Biden’s support for the “One China” policy and also for “peaceful resolution of cross-Strait issues consistent with the wishes and best interests of the people of Taiwan [emphasis added].”
  • (Previous U.S. policy called for “peaceful resolution of cross-Strait issues consistent with the wishes of people on both sides of the Taiwan Strait.”)

The Biden transition team’s statement simultaneously reassures Beijing and reaffirms to the Taiwan people that his approach will be guided by concern for their well-being.

  • Such an approach might not anger or excite, but maybe that is not all bad at this current moment.   
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What the Cold War can teach Washington about Chinese tech tensions | Brookings

What the Cold War can teach Washington about Chinese tech tensions | Brookings | ANALYSIS Stream | Scoop.it

Many, if not all, of the challenges encountered by academia and the U.S. government and its allies while trading and collaborating with the Soviet Union throughout the Cold War are repeating today with China.

The dilemmas of engaging with a strategic competitor on matters of science—from concerns regarding dual-use technologies and research to industrial espionage, academic exchange, and visas—are continuations of debates that went dormant in 1989.

For the most part, updating export controls to reflect new knowledge, incorporating the role of data, and ensuring there is a united, democratic front on technology standards is appropriate and overdue.

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Europe’s China Gambit 

Europe’s China Gambit  | ANALYSIS Stream | Scoop.it

Dani Rodrik

The new EU-China agreement underscores a fundamental question of the post-pandemic world order:

  • How should strategic and economic relations between major powers with very different institutional and political arrangements be managed?
  • Can democracies remain true to their values while engaging in trade and investment with China?
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What Does Vietnam Want from the US in the South China Sea? | The Diplomat

Vietnam is doubling-down on its delicate balancing act as U.S.-China competition throughout the Indo-Pacific dramatically heats up.

  • Although Hanoi feels compelled to counter China’s bad behavior in the South China Sea, it also understands that its future is inextricably tied to peaceful relations with Beijing.
  • Thus, Hanoi typically avoids publicly airing policy preferences, and even privately, the Vietnamese are notoriously subtle and difficult to read.
    That leaves Washington in the dark most of the time.
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Europe’s disappointing investment deal with China | Bruegel

Alicia Garcia-Herrero

The European Union and China have reached a deal for their Comprehensive Agreement on Investment.
The deal is important politically as it shows the EU’s commitment to its own economic sovereignty without constraints from the U.S. and it follows the example set by the 10-members of the Association of Southeast Asian Nations, Australia, Japan and South Korea in signing the Regional Comprehensive Economic Partnership back in November.

  • Suddenly, it looks as if U.S. President-elect Joe Biden has been left alone in his pursuit to contain China even before he is sworn in on Jan. 20.

Still, RCEP and now the CAI have their limitations.

  • When it comes to CAI, much of what has been written relates to the lack of enforcement for China regarding international conventions on labour — including forced labour — but much less attention has been paid to the economic consequences of this deal.
  • Alas, the reason for that might be because the deal amounts to so little.

To start, the purpose of CAI is limited to foreign direct investment and contains no trade clauses.

  • While some aspects of the deal are about more than market access, including sustainability, climate change, international conventions and labour, those provisions remain general and contains limited enforcement possibilities.
  • Within that narrower scope the main objective, from the European perspective, really is to improve market access for European companies operating — or intending to operate — in China and to ensure a level playing field when they do, as well as reciprocity.

Based on that yardstick, the question is whether CAI fulfils such expectations?

  • The answer is a resounding no.
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A China Strategy to Reunite America’s Allies 

A China Strategy to Reunite America’s Allies  | ANALYSIS Stream | Scoop.it

China’s autocratic ways and its strategic ambition are prompting the world’s democracies to band together against it.

But, as the European Union’s recent decision to sign an investment accord with China makes clear, China’s geopolitical heft and the allure of Chinese trade and investment are tempting many to curry favor with it.

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Risk, resilience, and recalibration in global value chains 

Risk, resilience, and recalibration in global value chains  | ANALYSIS Stream | Scoop.it

China’s swift and strong recovery seems to indicate that Chinese firms are more resilient to global shocks than most others.

In fact, the value chains Chinese firms are deeply involved in seem to be more resilient.

  • One reason for this might be China’s success in quickly containing the local spread of Covid-19.
  • Another reason could be that the country has more regionalised value chains compared to other countries.

China has become a particularly attractive investment destination and trading partner for neighbouring economies over the years, especially the Association of Southeast Asian Nations (ASEAN).

  • It has also focused on building international economic relationships within its own ‘neighbourhood’, through, for example, the Belt and Road Initiative, and the negotiation and conclusion of the Regional Comprehensive Economic Partnership (RCEP).
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Lagging but motivated: The state of China’s semiconductor industry

Lagging but motivated: The state of China’s semiconductor industry | ANALYSIS Stream | Scoop.it

How the Chinese and global semiconductor industry evolves from here depends largely on the strategic moves and the engineering execution of Chinese companies—but also on the policies of the incoming Biden administration.

  • The move toward indigenization within China, coupled with widespread fears of American dependence on Chinese hardware and manufacturing, will pose a unique challenge for Biden’s foreign policy team.

Along with their counterparts in Congress, the Biden administration will need to carefully

  • weigh the benefits that come from U.S. semiconductor companies competing in one of the world’s largest markets against the risk of American-sourced technology being used to endanger national security;
  • clarify the often blurry line between “primarily state-driven” and “primarily market-driven” operators in China;
  • balance the benefits of having the best Chinese scholars studying in top engineering schools and collaborating with our national labs against the risks of industrial espionage and the infringement of intellectual property rights; and
  • author a semiconductor industrial policy that continues to let the market decide winners and losers.  
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US-China phase one tracker: China’s purchases of US goods

US-China phase one tracker: China’s purchases of US goods | ANALYSIS Stream | Scoop.it

Through November 2020, China's year-to-date total imports of covered products from the United States were $86.9 billion, compared with a prorated year-to-date target of $153.8 billion.

  • Over the same period, US exports to China of covered products were $82.3 billion, compared with a year-to-date target of $141.7 billion.

Through the first eleven months of 2020, China's purchases of all covered products were thus only at 58 percent (US exports) or 56 percent (Chinese imports) of their year-to-date targets.

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Raising a caution flag on US financial sanctions against China

China’s policies in Xinjiang, Hong Kong, and the South China Sea and its ongoing support for Iran, North Korea, and Venezuela pose major challenges for the United States, where bipartisan pressure is growing to ramp up punitive sanctions against leading Chinese firms and financial institutions.

  • Financial sanctions freeze the US assets or bar US entry of the targeted individuals and firms and prohibit US financial firms from doing business with them.

US officials should carefully weigh the risks to international financial markets and US economic interests before imposing punitive sanctions on major financial institutions engaged with China.

The collateral costs of such sanctions would be sizable, damaging US producers, financial institutions, and US alliances.

  • By restricting access of major banks to international payments in US dollars and barring use of messaging systems like SWIFT, tougher US financial sanctions would effectively “weaponize” the dollar; friends and foes alike would be pushed to seek alternatives to dollar transactions that, over time, would weaken the international role of the dollar.

Instead of doubling down on current unilateral financial sanctions, US policy should deploy sanctions in collaboration with allies and calibrate trade and financial controls to match the expected policy achievements.

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