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Why China's Economy is Growing Faster than Others

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Malcolm Riddell | CHINADebate

Malcolm Riddell: ‘Why is China’s economy doing so much better than other economies?’

Shang-Jin Wei: ‘The IMF is projecting negative growth rates for every major economy. Every major economy except China.’

  • ‘The United States is projected to have a growth rate on the order of minus 8%.’
  • ‘Spain, France, Italy, Mexico, and others are projected to have growth rates of minus 10% or close to minus 10%.’
  • ‘China, according to IMF, is likely to grow at 1% - and major investment banks are higher at 2-3%.’

‘Some argue that China has positive growth because it started at a higher growth rate of 6-7%, than the G20 countries growing at say 2% or so.’

  • ‘So if we have consistent downward reduction of growth rate by 4% across all major economies, G20 economies go into negative growth but China is positive.’

‘The problem with this explanation is a country like India.’

  • ‘India last year had a growth rate very close to China.’
  • ‘Yet the IMF and the investment banks are projecting big negative growth on the order of minus 4.5%.’

‘Others look to China’s stimulus efforts for the answer.’

  • ‘Virtually every major economy rolled out more supportive monetary policies, more supportive fiscal policies. China’s were in line with these.’
  • ‘So comparatively it’s more or less a wash.’

Malcolm: ‘Then what accounts for China’s positive growth?’

Shang-Jin: ‘Four factors, I think.’

‘First is China's relatively aggressive and decisive measures on the COVID public health crisis itself that managed to get the pandemic under control much faster than the other large economies.’

  • ‘‘The relative success in controlling the pandemic translates into how much people are willing to go back to their normal lives, to their jobs, and the like.’

‘The second thing is technology, especially digital technology in two aspects.’

‘First, online shopping, online ordering, and digital payments  offset the reduction in brick & mortar consumption.’

  • ‘This is much like what happened in many other economies, but China seems to be doing a bit more of that, and China’s delivery system is very competitive.’

‘Second, perhaps more importantly, is the use of this health app on the smartphones, the so-called ‘green code.” ’

  • ‘This is an initiative of some technology companies like Alibaba, together with local governments.’
  • ‘Different cities and regions rolled out those health apps at different times, but they rolled out fairly quickly within in a two- or three-week period.’
  • ‘Now virtually every region has their own version of green health codes.’

‘The green health code does two things.’

  • ‘One is it allows contact tracing very quickly, mapping who is in close contact with whom in the last say two weeks or so.’

‘So when a person is discovered to be infected or self-report to be infected, my code will go from green to red.’

  • ‘But the app also tracks others I have been in contact with.’

‘When my code turns red, the codes of the people who have had close contact with me in the last few weeks automatically changes to red too.’

  • ‘When this happens, they cannot go out, or leave their residential compound, or go to shopping malls, and so on for two weeks.’

‘This of course limits the risk of infection spread.’

  • ‘But perhaps more importantly, when you go to a mall, you have greater confidence that the people they will run into are not unlikely to be infected.’
  • ‘So you are more willing to consume. You are more willing to go to restaurants. And you are more willing to go back to the office and the factory.’

‘And the third factor is economic structure.’

  • ‘Although China's more service-oriented than before, manufacturing still dominates.

‘China’s relying relatively more on the manufacturing share, than say the U.S., actually helps in its economic recovery.’

  • ‘The service sector depends on person-to-person contact; factories don’t.’
  • ‘So China has been able to get its larger manufacturing sector open faster than economies where services dominate and start generating GDP sooner and faster.’

‘Finally, China went into the pandemic recession earlier than other countries, and it ended the pandemic earlier than other economies.’

  • ‘As China recovered, those other countries’ were now locked down; but people needed to eat, needed to buy stuff, and so on.’
  • ‘Because of this, China actually received better than usual orders for its exports.’

‘Chinese exports have boomed starting from late March to now.’

  • And this helped to compensate for the loss of the GDP growth in other sectors.’
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China Macro Reporter Archive

Greetings!

In today’s issue:

Where in the World is Jack Ma?

  • 'The CCP's Ambivalence about the Private Sector’
  • ‘Jack Ma Misreads Xi Jinping’

China’s Fintech Threat

  • ‘Financial Technology Is China’s Trojan Horse’

2021 Economic Outlook: Sunrise in a Fractured World’ | CHINA

  • ‘China: Taming the Overshoot’

CHINADebate, the publisher of the China Macro Reporter, aims to present different views on a given issue.

Including an article here does imply agreement with or endorsement of its contents.

 

For the past several months - since the much-criticized speech, the Ant Financial IPO debacle, the regulatory dressing down, and the anti-monopoly probe into Alibaba - Jack Ma has not been seen in public.

  • ‘Where in the world is Jack Ma?’ has become a question both in the international press as well as on Chinese social media.

What reporting there is says he’s not under detention, and he’s not been ‘disappeared.’

  • Instead, it is said that, with shareholder, employees, regulators, and apparently even Xi Jinping all mad at him, he has made the decision to hunker down in Hangzhou and stay out of sight.
  • It’s hard to see how he could do himself any good saying anything right now.

Casting doubt on this explanation are the number of Chinese billionaires and well-known figures who have fallen afoul of Xi Jinping and the Chinese Communist Party and come to bad ends.

  • So even if Mr. Ma is out of official clutches for the moment, it doesn’t mean his time isn’t coming.

As provocative as Mr. Ma’s plight is, more important is its place in the context of Xi Jinping’s efforts to bring the private sector generally and the fintech industry more specifically under tighter Party control.

  • Weaving these together, along with the story of CITIC founder and stay-behind capitalist, Rong Yiren, Neil Thomas has produced a terrific essay, ‘The Red Capitalist,’ in The China Wire.  

He examines the changing fortunes of China’s private sector since the founding of the PRC.

  • And he contrasts the difference in the skills in navigating these changes between Mr. Rong (generally successfully) and Mr. Ma (to be determined).
  • [Note: I have omitted Mr. Rong’s story from the posts below because of length not interest – the entire essay is well-worth reading.]

Mr. Thomas says: ‘Beijing has grown increasingly suspicious of powerful business elites.

  • ‘Under Xi Jinping, the Party has begun to exert greater control over the private sector, with plans announced last September to cultivate a “backbone team” of business executives who “unswervingly follow the Party” and cooperate in “major national strategies.”

'There’s little doubt that business elites who defy the Party will be dealt with harshly.'

  • 'In recent years,

Beijing has hunted down entrepreneurs, seized their assets, and broken up and occasionally even nationalized firms deemed a systemic risk to the economy.'

  • ‘Perhaps no other nation has arrested more billionaires and brought them to heel.’ 

‘Even Jack Ma, the country’s best-known entrepreneur, seems to have fallen out of favor with the Party.’

  • ‘He’s been upbraided

by Beijing and denounced in state media.’

  • ‘Xi is reported to have personally intervened to cancel the global stock offering of Ma’s Ant Group on the eve of what was expected to be the biggest IPO in history, following a strident speech Ma made in October.’
  • ‘In the aftermath, banking and antitrust regulators are threatening to carve up parts of Ma’s $400 billion empire amid reports the 56-year-old internet tycoon has gone missing.’

‘But in addition to brazen contempt for Party officials [especially in that speech in October 2020], Ma’s transgression was made worse by his seeming obliviousness to the Party’s economic goals, which have shifted considerably in recent years.’

  • ‘De-risking China’s debt-laden financial system became one of Xi’s top priorities.’

‘ “The reason why Jack Ma and others could build enormous Internet companies is because the Party had no idea what they were doing,” says Jim McGregor of APCO China.'

  • ‘ “Things changed

once the Party-State started to see them as a potential source of financial risk, and therefore as a potential source of risk to social stability.” ’ says Harvard’s Meg Rithimire.

‘Xi, of course, is not Mao.’

  • ‘He 

believes the private sector is an “intrinsic element” of China’s economy and refers to entrepreneurs as “our people.” ’

  • ‘Xi does not want to socialize business; he mostly wants private firms to support Party policies.’
  • ‘And if the decision to rein in Ma is any indication, he will likely succeed.’

Stay tuned.

 

Depending on how you look at it, the argument in 'Financial Technology Is China’s Trojan Horse' in Foreign Affairs by Nadia Schadlow and Richard Kang of Prism Global Management, either:

  • Contradicts the narrative outlined just now that the Party is out to control fintech regardless of the cost to industry, or
  • Presents a sort of flipside to that narrative, with Party co-opting fintech in a plan for China’s geoeconomics dominance.

Either way the argument is provocative. Here goes:

First, ‘Chinese fintech firms function like a geoeconomic Trojan horse.’

  • ‘First, Alipay [one of Jack Ma’s companies] 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.’

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

  • How? Expansion of the digital Yuan.

So third, ‘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.’

  • ‘Consumers and merchants throughout Southeast Asia

will soon be able to use the digital yuan on Alipay and WeChat Pay.’

  • ‘Later, the apps will serve as distributors of the digital yuan as local businesses find it more efficient to use the yuan than the dollar in transactions with Chinese companies.’
  • ‘The CCP could then push for the digital yuan to be used instead of the U.S. dollar by bigger institutions and businesses conducting large transactions, such as making interest payments and financing supply chains.’
  • ‘China’s digital yuan could also siphon transactions away from Western-dominated money exchange platforms such as SWIFT, the key mechanism that maintains U.S. dollar dominance in global trade.’

I don’t have the knowledge to judge how likely these scenarios are or to what extent they might succeed.

  • That said, from what little I know, I can see Chinese fintech leading to at least perhaps a modest erosion of the dollar in Southeast Asian transactions.
  • But nothing in my studies show the Yuan as a serious threat to the dollar, from fintech or any other Chinese effort.
  • And while the Chinese government no doubt welcomes fintech’s expansion in Southeast Asia, I find it difficult to imagine that that would trump the Party’s aim of exerting more control over the industry and of lowing risks to China’s financial system.

More disturbing is the essay’s pointing out that U.S. firms have not been ‘serious about offering other countries alternatives to China’s fintech companies, tapping the strength of U.S. technology firms.’

  • ‘Either Alibaba or Tencent has invested in every single one of the 13 technology unicorns—startups valued at $1 billion or more—in Southeast Asia.’
  • ‘Facebook and PayPal, by contrast, invested in their first Southeast Asian fintech player, Gojek, just last March.’

The essay concludes: ‘U.S. companies such as Facebook, Google, and PayPal must not get boxed out of the world’s most significant growth markets, which are mostly in the Indo-Pacific region.’

  • Unlike the rest of the essay, that strikes me as unarguably true.

 

This issue concludes with another great analysis of the global economy from CreditSuisse, ‘2021 Economic Outlook: Sunrise in a Fractured World.’

  • As usual, I have just included the section on China, but the entire report is worth careful reading.

A few bottom lines:

  • Estimated 2021 GDP growth: 7.1%
    • ‘With the recovery already underway, a GDP growth overshoot in 2021 appears inevitable.'
    • ‘From a policy perspective, we expect that authorities will likely avoid a pro-cyclical policy stance and, to the extent possible, rein in the overshoot in 2021.’
    • ‘They would most likely prefer to avoid an aggressive overshoot in one particular year in exchange for a smoother and more sustainable growth profile over the next five years.’
    • Translation: Even if GDP is 7.1%, the number reported this year will be lower, with the difference carried over.
  • ‘We expect a moderation to M2 growth on the monetary front from 10.4% in 2020 to 9.3% in 2021.’
  • ‘On the fiscal front,

we expect a tighter fiscal stance.’

  • ‘We revised our expectation for 2021 headline CPI downward, from 2.5% yoy to 1.1% yoy, mainly due to pork deflation.’
  • ‘As per the exchange rate, the CNY is expected to experience additional appreciation over the coming 12 months.’
    • ‘We forecast USDCNY to reach around 6.3 by the end of 2021.’

You’ll find the analysis of each of these and more in the report.

Go deeper into these issues - Browse the posts below.

To read the original article, click the title.

Let me know what you think. And please forward the China Macro Reporter to your friends and colleagues.

All the best,

Malcolm 

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The Red Capitalist

The Red Capitalist | ANALYSIS | Scoop.it

The China Wire

‘The reason why Jack Ma and others could build enormous Internet companies is because the Party had no idea what they were doing. They became famous globally and made China look very good, but then the Party had to figure out how to get their arms around them.’

‘Even Jack Ma, the country’s best-known entrepreneur, seems to have fallen out of favor with the Party.’

  • ‘He’s been upbraided by Beijing and denounced in state media.’
  • ‘Xi is reported to have personally intervened to cancel the global stock offering of Ma’s Ant Group on the eve of what was expected to be the biggest IPO in history, following a strident speech Ma made in October.’
  • ‘In the aftermath, banking and antitrust regulators are threatening to carve up parts of Ma’s $400 billion empire amid reports the 56-year-old internet tycoon has gone missing.’

‘It was the fall of 2020, and Jack Ma had reason to worry.’

  • ‘Recent moves by Beijing would tighten controls on digital finance and could stymie the business model of his digital payments company, Ant Group.’
  • ‘With Ant’s upcoming debut on Shanghai’s STAR market expected to be the biggest in history — a record $37 billion listing — Ma felt like he should speak up.’

‘At the Bund Forum in Shanghai last October, he blasted China’s financial regulators as a “geriatric club” and argued that the tools they were using to control China’s financial system were misguided and out of touch.’

  • ‘The imposition of reserve requirements on micro-lenders such as Ant, he said, would be like “feeding dementia medication meant for seniors to a child suffering from polio.” ’
  • ‘People close to Ma told Reuters that he rejected suggestions to soften his remarks at the Bund Forum because the tech titan believed that “he should be able to say what he wanted.” ’

‘Ma is a Party member and once boasted to fellow entrepreneurs about his closeness with Xi Jinping.’

  • ‘But while the national business hero has prevailed against regulators in the past, observers say his speech contravened the prevailing wisdom for business leaders in China since Rong’s time.’ 
  • ‘That is, “serve the Party — within whatever limits the current Party line allows, but don’t get too far out in front,” says Jerome A. Cohen, a legal scholar.’
  • ‘ “Towing the party-line in public statements is safer than expressing independent opinions about China’s political economy,” says Kellee S. Tsai, a professor at Hong Kong University of Science & Technology.’
  • ‘ “Look what happened to Ren Zhiqiang [the real estate tycoon recently sentenced to 18 years in prison for criticizing the Party].” ’

‘But in addition to brazen contempt for Party officials, Ma’s transgression was made worse by his seeming obliviousness to the Party’s economic goals, which have shifted considerably in recent years.’

  • ‘In 2015, a stock market crisis combined with unexpectedly volatile experiments in RMB devaluation “played a huge role in convincing Xi Jinping that the private sector was not under control, that the Party-State had not even close to sufficient insight into what corporate finance was like in China and into what financial innovation was happening,” says Harvard’s Rithmire.’

‘De-risking China’s debt-laden financial system became one of Xi’s top priorities.’

  • ‘Even though Ma may be right about the need for more innovation in China’s financial sector, Rithmire says his speech highlighted how the fissures between profit-maximization and Party priorities have widened in recent years.’
  • ‘ “It used to be that, within limits, capitalists were allowed to do what they wanted to do because their pursuit of profits was producing economic growth for China,” Rithmire says.’
  • ‘ “But things changed once the Party-State started to see them as a potential source of financial risk, and therefore as a potential source of risk to social stability. For a long time, we thought that growth was the bottom line for the CCP, but the bottom line is actually social stability.” ’
  • ‘ “The reason why Jack Ma and others could build enormous Internet companies is because the Party had no idea what they were doing,” says Jim McGregor of APCO China. “They became famous globally and made China look very good, but then the Party had to figure out how to get their arms around them.” ’

 

‘After Ma’s speech, Xi went further.’

  • ‘He ordered an investigation into Ant’s lending practices, and just two days before Ant’s planned debut on November 5, the Shanghai Stock Exchange suspended Ant’s listing — the stated reason being the sudden approval (with Xi’s blessing) of tough new rules that require Ant to guarantee up to $20 billion more of its loans.’
  • ‘In a sensational report published in late December, The Wall Street Journal said that just before the authorities canceled the Ant Group IPO in November, Jack Ma offered to hand over to the government parts of his online financial emporium. 

‘Then a week later, Beijing also announced antitrust measures for tech firms.’

‘Xi, of course, is not Mao.’

  • ‘He believes the private sector is an “intrinsic element” of China’s economy and refers to entrepreneurs as “our people.” ’
  • ‘Xi does not want to socialize business; he mostly wants private firms to support Party policies.’
  • ‘And if the decision to rein in Ma is any indication, he will likely succeed.’
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'The CCP & the Private Sector'

'The CCP & the Private Sector' | ANALYSIS | Scoop.it

The China Wire

‘Analysts say the shift away from private enterprises is a sign Beijing felt that the private sector was getting ahead of the Party’s ability to control things.’

Beijing has grown increasingly suspicious of powerful business elites.

  • Under a new paramount leader, Xi Jinping, the Party has begun to exert greater control over the private sector, with plans announced last September to cultivate a “backbone team” of business executives who “unswervingly follow the Party” and cooperate in “major national strategies.”

There’s little doubt that business elites who defy the Party will be dealt with harshly.

  • In recent years, Beijing has hunted down entrepreneurs, seized their assets, and broken up and occasionally even nationalized firms deemed a systemic risk to the economy.
  • In Hong Kong, the authorities kidnapped the billionaire Xiao Jianhua from the Four Seasons Hotel and then smuggled him across the border into mainland China, before dismantling his financial empire.
  • Just last week, the government handed down a life sentence for one corrupt state executive and a death sentence to another.

‘The Chinese Communist Party, of course, has never been entirely comfortable with capitalists.’

  • ‘Throughout its 71-year-history, even when the Party has relied heavily on market-driven growth, it has viewed private firms as a source of inequality, a rival to state enterprises, and perhaps an independent force that could undermine Party rule.’

‘ “The Party likes to control everything,” says Bruce J. Dickson of George Washington University.’

  • ‘ “They worry about independent sources of wealth as a threat to the government. And there are two ways of dealing with that threat: you co-opt it or you crush it.” ’

‘China, through the decades, has done both.’

  • ‘It has invited businessmen to become members of the Communist Party, when that suited the goals of the leadership.’

‘And it has ousted and imprisoned them in strikingly large numbers, and then publicly pilloried them, as Jack Ma is now experiencing.’

  • ‘Perhaps no other nation has arrested more billionaires and brought them to heel.’ 

‘Analysts say the shift away from private enterprises is a sign Beijing felt that the private sector was getting ahead of the Party’s ability to control things.’

  • ‘They say Beijing is now reasserting control over the economy and private entrepreneurs, bringing to an end a decades-long period of free-wheeling capitalism and globe-trotting business tycoons.’

‘The Party has generally succeeded in eliciting support from entrepreneurs by giving them a greater stake in the system.’

  • ‘But as the private sector has ballooned in China — private firms comprised 84 percent of all companies in 2018, up from 17 percent in 1996 — the Party has felt its influence over business wane.’
  • ‘A 2017 study by the Unirule Institute of Economics, a Chinese think tank since shut down by Beijing, found that 92 percent of private entrepreneurs believed political involvement helped their business, but only a small minority actually cared about the political goals of the Party.’

‘For Xi, such ambivalence is alarming.’

  • ‘He has been clear about the need for risk-taking executives to respect control-oriented policies, including new regulations that strengthen United Front work in private firms and stress the need for “ideological and political education” of entrepreneurs.’

‘He has also made moves to elevate the role of corporate Party committees from simply organizing political trainings for a firm’s Party members to “monitoring” whether business choices respect Party policy.’

  • ‘To that end, his campaign to achieve “comprehensive coverage” of Party committees in private firms has led to is the strictest supervision since the Mao era.’
  • ‘According to an official survey, the proportion of private firms with Party committees rose from just 4 percent in 1993 to 48.3 percent in 2018, with a growth rate that’s more than doubled under Xi.’ 
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Kurt Campbell & Biden Asia Policy

Greetings!

In today’s issue:

1. Kurt Campbell: Biden's 'Indo-Pacific Coordinator'

2. 'How America Can Shore Up Asian Order' by Kurt Campbell

  1. 'Restoring Balance'
  2. 'Restoring Legitimacy'
  3. 'Forging Coalitions'

CHINADebate, the publisher of the China Macro Reporter, aims to present different views on a given issue.

Including an article here does imply agreement with or endorsement of its contents.

With President-elect Biden’s nomination of Kurt Campbell to be 'Indo-Pacific Coordinator' (a new title) at the National Security Council, we finally have clearly indications about the direction of China policy and Indo-Pacific policy more broadly under a Biden administration.

  • We have this because Dr. Campbell, who has served in many senior international relations positions, has written extensively and recently about his Asia policy views.

The most recent was an essay in Foreign Affairs on January 12, 2021, which is presented in the posts below.

  • And given Dr. Campbell’s experience, seniority, and influence, we can also expect that he will be a key driver of Asia policy in the Biden administration.

In that recent essay, 'How America Can Shore Up Asian Order,’ co-authored with Brookings Rush Doshi, he writes: ‘Two specific challenges, however, threaten the Indo-Pacific order’s balance and legitimacy.’

‘The first is China’s economic and military rise.’

  • ‘China alone accounts

for half the region’s GDP and military spending, a gap that has only grown since the COVID-19 pandemic.’

  • ‘And like any rising state, China seeks to reshape its surroundings and secure deference to its interests.’
  • ‘The way Beijing has pursued these goals—South China Sea island building, East China Sea incursions, conflict with India, threats to invade Taiwan, and internal repression in Hong Kong and Xinjiang—undermines important precepts of the established regional system.’
  • ‘This behavior, combined with China’s preference for economic coercion, most recently directed against Australia, means that many of the order’s organizing principles are at risk.’

‘The second challenge is more surprising because it comes from the original architect and longtime sponsor of the present system—the United States.’

  • ‘Despite determined efforts

by the Trump administration’s Asia experts to mitigate the damage, President Donald Trump himself strained virtually every element of the region’s operating system.’

  • ‘He pressed allies such as Japan and South Korea to renegotiate cost-sharing agreements for U.S. bases and troops and threatened to withdraw forces entirely if he was unsatisfied with the new terms.’
  • ‘Both moves undermined alliances the Indo-Pacific needs to remain balanced.’
  • ‘Trump was also generally absent from regional multilateral processes and economic negotiations, ceding ground for China to rewrite rules central to the order’s content and legitimacy.’
  • ‘Finally, he was cavalier about support for democracy and human rights in ways that weakened the United States’ natural partners and emboldened Chinese authorities in Hong Kong and Xinjiang.’

‘This combination of Chinese assertiveness and U.S. ambivalence has left the region in flux.’

To address these, he writes: ‘A strategy for the Indo-Pacific today would benefit from satisfying three needs:’ 

  1. ‘the need for a balance of power;’
  2. ‘the need for an order that the region’s states recognize as legitimate; and’
  3. ‘the need for an allied and partner coalition to address China’s challenge to both.’

I have included Dr. Campbell’s comments on each of these in separate posts below.

Josh Rogin of The Washington Post writes:

  • ‘President-elect Biden has announced a new Asia-related position inside the National Security Council and has chosen former State Department official Kurt Campbell to fill it.’
  • ‘The move should reassure nervous Asian allies that the Biden administration is taking the China challenge seriously.’
  • ‘Campbell will join the administration with the title of “Indo-Pacific coordinator,” a job that will give him broad management over the NSC directorates that cover various parts of Asia and China-related issues.’

‘The announcement is viewed favorably by those Asia experts in Washington who hope the Biden administration will take a more competitive approach to dealing with China than the Obama administration did.’

  • ‘ “China hawks have a healthy skepticism about how the Biden administration will approach Beijing, but bringing in Kurt to play this senior role, and all the more junior, competitive-minded people who will work for him, is a very encouraging sign,” said Eric Sayers, visiting fellow at the American Enterprise Institute.’
  • ‘ “It will be bureaucratically tricky to make this position work smoothly in our government, but if anyone has the personality and drive to pull it off, it’s Kurt.” ’

Mr. Rogin notes: ‘Asia watchers in Washington and America’s Asian allies should be reassured that Biden is planning to elevate the importance of the Indo-Pacific region by creating this coordinator role and staffing it with someone so senior.’

  • ‘But the real test

will be whether the Biden administration actually devotes the time and resources needed to complete the “Pivot to Asia” Campbell first pitched a decade ago.’

Given the way Asian nations remember the failed ‘Pivot,’ Dr. Campbell will have to give them a lot of reassurance to gain their support in the competition with China.

  • Stay tuned.

Go deeper into these issues - Browse the posts below.

To read the original article, click the title.

Let me know what you think. And please forward the China Macro Reporter to your friends and colleagues.

All the best,

Malcolm 

 

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'3. Forging Coalitions'

'3. Forging Coalitions' | ANALYSIS | Scoop.it

Foreign Affairs

Kurt Campbell | nominee, Indo-Pacific Coordinator, NSC

Rush Doshi | Brookings

‘The principal challenge facing the United States is to bridge European and regional approaches to Chinese challenges.’

‘Although the idea that the United States should “work with allies” is almost a cliché, the challenges to doing so are significant.’

  • ‘Maintaining the existing Indo-Pacific order will inevitably require a broad coalition, and the very members that might join may not see the value of such a combined approach until the present system is irreversibly damaged.’
  • ‘The need for allies and partners is often evident only after the status quo is overturned.’

‘Distant European leaders are inevitably less concerned about China’s assertiveness than the Indo-Pacific states next door.’

  • ‘The principal challenge facing the United States is to bridge European and regional approaches to Chinese challenges.’
  • ‘That task is made more difficult by Beijing’s economic power: last month, China used last-minute concessions to successfully pull the EU into a major bilateral investment agreement despite concerns that the deal would complicate a unified transatlantic approach under the Biden administration.’

‘Given these limitations, the United States will need to be flexible and innovative as it builds partnerships.’

  • ‘Rather than form a grand coalition focused on every issue, the United States should pursue bespoke or ad hoc bodies focused on individual problems, such as the D-10 proposed by the United Kingdom (the G-7 democracies plus Australia, India, and South Korea). These coalitions will be most urgent for questions of trade, technology, supply chains, and standards.’ 
  • ‘Other coalitions, though, might focus on military deterrence by expanding the so-called Quad currently composed of Australia, India, Japan, and the United States, infrastructure investment through cooperation with Japan and India, and human rights through the two-dozen states that criticized Beijing’s internment camps in Xinjiang and its assault on Hong Kong’s autonomy.’ 

‘The purpose of these different coalitions—and this broader strategy—is to create balance in some cases, bolster consensus on important facets of the regional order in others, and send a message that there are risks to China’s present course.’

  • ‘This task will be among the most challenging in the recent history of American statecraft.’
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'How America Can Shore Up Asian Order': 2. Restoring Legitimacy

'How America Can Shore Up Asian Order': 2. Restoring Legitimacy | ANALYSIS | Scoop.it

Foreign Affairs

Kurt Campbell | nominee, Indo-Pacific Coordinator, NSC

Rush Doshi | Brookings

‘Negotiating Beijing’s role in this order is the most complex element of the overall endeavor.’

‘Military and material balance alone, however, will not sustain a renewed regional order.’

  • ‘The stability of any international system, wrote Kissinger, ultimately relies on what he termed “generally accepted legitimacy.” ’
  • ‘Any international framework needs buy-in from the powers within it.
  • ‘Here, the United States will again need to play a central role.’

‘Unlike prewar Europe, legitimacy in the Indo-Pacific is not only a matter of international politics and security.’

  • ‘Trade, technology, and transnational cooperation are also vital.’

‘As Evan Feigenbaum argues, there are “two Asias” that together constitute the region’s order: one focused on politics and security and the other on economics.’

  • ‘China’s territorial adventurism undermines the former, its coercive economic policies undermine the latter, and U.S. ambivalence under Trump undermines both.’

‘If those trends continue and Indo-Pacific states begin to view the current order as illegitimate, they may drift into China’s shadow.’

  • ‘Were that to occur, the dynamic region might split into spheres of influence: outside powers shut out, disputes resolved through force, economic coercion the norm, U.S. alliances weakened, and smaller states without autonomy and freedom to maneuver.’

‘Reversing these trends will be challenging and require diplomatic finesse, commercial innovation, and institutional creativity on the part of U.S. policymakers.’

  • ‘In the political and security realm, bolstering the present order’s legitimacy will, at minimum, require serious U.S. reengagement: an end to shaking down allies, skipping regional summits, avoiding economic engagement, and shunning transnational cooperation.’
  • ‘This new posture will give the United States a greater regional role and empower Indo-Pacific states in the face of China’s growing clout.’

‘In the economic realm, strengthening the present order means ensuring the system continues to deliver material benefits for its members, even as China grows more sophisticated in its use of economic carrots and sticks.’

  • ‘In contrast to prewar Europe’s negotiations, which emphasized borders and political recognition, those in the Indo-Pacific will inevitably revolve around supply chains, standards, investment regimes, and trade agreements.’

‘Even as the United States works to reshore sensitive industries and pursue a “managed decoupling” from China, it can reassure wary regional states that moving supply chains out of China will often mean shifting them to other local economies, creating new growth opportunities.’

  • ‘Moreover, as China provides infrastructure financing through the Belt and Road Initiative, the United States should develop ways to provide alternative financing and technical assistance.’ 

‘Negotiating Beijing’s role in this order is the most complex element of the overall endeavor.’

  • ‘Although Indo-Pacific states seek U.S. help to preserve their autonomy in the face of China’s rise, they realize it is neither practical nor profitable to exclude Beijing from Asia’s vibrant future.’
  • ‘Nor do the region’s states want to be forced to “choose” between the two superpowers.’

‘A better solution would be for the United States and its partners to persuade China that there are benefits to a competitive but peaceful region organized around a few essential requirements:’

  • ‘a place for Beijing in the regional order;’
  • ‘Chinese membership in the order’s primary institutions;’
  • ‘a predictable commercial environment if the country plays by the rules; and’
  • ‘opportunities to jointly benefit from collaboration on climate, infrastructure, and the COVID-19 pandemic.’

‘Marginal buy-in from China has played a central role in the region’s success thus far.’

  • ‘It will remain important in the years ahead.’
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How America Can Shore Up Asian Order: 1. Restoring Balance

How America Can Shore Up Asian Order: 1. Restoring Balance | ANALYSIS | Scoop.it

Foreign Affairs

Kurt Campbell | nominee, Indo-Pacific Coordinator, NSC

Rush Doshi | Brookings

‘China’s growing material power has indeed destabilized the region’s delicate balance and emboldened Beijing’s territorial adventurism. Left unchecked, Chinese behavior could end the region’s long peace.’

‘ “The balance of power,” Kissinger writes in A World Restored, “is the classic expression of the lesson of history that no order is safe without physical safeguards against aggression.” Applied to the Indo-Pacific, such a warning is prescient:’

  • ‘China’s growing material power has indeed destabilized the region’s delicate balance and emboldened Beijing’s territorial adventurism.’
  • ‘Left unchecked, Chinese behavior could end the region’s long peace.’

‘The growing material imbalance between China and the rest of the region is notable.’

  • ‘Beijing spends more on its military than all its Indo-Pacific neighbors combined.’
  • ‘China has invested in anti-access/area-denial weapons (including supersonic missiles and “smart” mines) that threaten the viability of U.S. regional intervention.’
  • ‘It has also invested in blue-water, amphibious, and power-projection capabilities that Beijing could employ for offensive missions against India, Japan, Taiwan, Vietnam, and others.’

‘In response to these threats, the United States needs to make a conscious effort to deter Chinese adventurism.’

  • ‘Washington can start by moving away from its singular focus on primacy and the expensive and vulnerable platforms such as aircraft carriers designed to maintain it.’
  • ‘Instead, the United States should prioritize deterring China through the same relatively inexpensive and asymmetric capabilities Beijing has long employed.’

‘Real regional balance, however, also requires action in concert with allies and partners.’

  • ‘The United States needs to help states in the Indo-Pacific developtheir own asymmetric capabilities to deter Chinese behavior.’
  • ‘Although Washington should maintain its forward presence, it also needs to work with other states to disperse U.S. forces across Southeast Asia and the Indian Ocean.’
  • ‘This would reduce American reliance on a small number of vulnerable facilities in East Asia.’
  • ‘Finally, the United States should encourage new military and intelligence partnerships between regional states, while still deepening those relationships in which the United States plays a major role—placing a “tire” on the familiar regional alliance system with a U.S. hub and allied spokes.’
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'How America Can Shore Up Asian Order'

'How America Can Shore Up Asian Order' | ANALYSIS | Scoop.it

Foreign Affairs

Kurt Campbell | nominee, Indo-Pacific Coordinator, NSC

Rush Doshi | Brookings

‘This combination of Chinese assertiveness and U.S. ambivalence has left the Indo-Pacific region in flux.

‘A strategy for the Indo-Pacific today would benefit from satisfying three needs:’ 

  1. ‘the need for a balance of power;’
  2. ‘the need for an order that the region’s states recognize as legitimate; and’
  3. ‘the need for an allied and partner coalition to address China’s challenge to both.’

‘Such an approach can ensure that the Indo-Pacific’s future is characterized by balance and twenty-first-century openness rather than hegemony and nineteenth-century spheres of influence.’

  • ‘The challenge for U.S. policy is not to create order out of chaos, but to modernize and strengthen elements of an existing system.’

‘The Indo-Pacific has evolved an “operating system,” that is as much about promoting commerce as preventing conflict.’

  • ‘Constructed in the aftermath of World War II, the region’s system is a combination of legal, security, and economic arrangements that liberated hundreds of millions from poverty, promoted countless commercial advances, and led to a remarkable accumulation of wealth.’
  • ‘At its heart are time-tested principles: freedom of navigation, sovereign equality, transparency, peaceful dispute resolution, the sanctity of contracts, cross-border trade, and cooperation on transnational challenges.’
  • ‘The United States’ long-standing commitment to forward-deployed military forces, moreover, has helped underscore these principles.’

‘Two specific challenges, however, threaten the order’s balance and legitimacy.’

‘The first is China’s economic and military rise.’

  • ‘China alone accounts for half the region’s GDP and military spending, a gap that has only grown since the COVID-19 pandemic.’
  • ‘And like any rising state, China seeks to reshape its surroundings and secure deference to its interests.’
  • ‘The way Beijing has pursued these goals—South China Sea island building, East China Sea incursions, conflict with India, threats to invade Taiwan, and internal repression in Hong Kong and Xinjiang—undermines important precepts of the established regional system.’
  • ‘This behavior, combined with China’s preference for economic coercion, most recently directed against Australia, means that many of the order’s organizing principles are at risk.’

‘The second challenge is more surprising because it comes from the original architect and longtime sponsor of the present system—the United States.’

  • ‘Despite determined efforts by the Trump administration’s Asia experts to mitigate the damage, President Donald Trump himself strained virtually every element of the region’s operating system.’
  • ‘He pressed allies such as Japan and South Korea to renegotiate cost-sharing agreements for U.S. bases and troops and threatened to withdraw forces entirely if he was unsatisfied with the new terms.’
  • ‘Both moves undermined alliances the Indo-Pacific needs to remain balanced.’
  • ‘Trump was also generally absent from regional multilateral processes and economic negotiations, ceding ground for China to rewrite rules central to the order’s content and legitimacy.’
  • ‘Finally, he was cavalier about support for democracy and human rights in ways that weakened the United States’ natural partners and emboldened Chinese authorities in Hong Kong and Xinjiang.’

‘This combination of Chinese assertiveness and U.S. ambivalence has left the region in flux.’

  • ‘The contemporary Indo-Pacific feels like prewar Europe—drifting out of balance, its order fraying, and with no obvious coalition to address the problem.’
  • ‘If the next U.S. administration wants to preserve the regional operating system that has generated peace and unprecedented prosperity, it needs to begin by addressing each of these trends in turn.’ 
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'Kurt Campbell, Biden’s pick for a new NSC Asia position, should reassure nervous allies'

'Kurt Campbell, Biden’s pick for a new NSC Asia position, should reassure nervous allies' | ANALYSIS | Scoop.it

The Washington Post

Josh Rogin | The Washington Post

‘Asia watchers in Washington and America’s Asian allies should be reassured that Biden is planning to elevate the importance of the Indo-Pacific region by creating this coordinator role and staffing it with someone so senior. But the real test will be whether the Biden administration actually devotes the time and resources needed to complete the “Pivot to Asia” Campbell first pitched a decade ago.’

‘President-elect Biden has announced a new Asia-related position inside the National Security Council and has chosen former State Department official Kurt Campbell to fill it. The move should reassure nervous Asian allies that the Biden administration is taking the China challenge seriously.’

  • ‘Campbell will join the administration with the title of “Indo-Pacific coordinator,” a job that will give him broad management over the NSC directorates that cover various parts of Asia and China-related issues.’

‘The announcement is viewed favorably by those Asia experts in Washington who hope the Biden administration will take a more competitive approach to dealing with China than the Obama administration did.’

  • ‘ “China hawks have a healthy skepticism about how the Biden administration will approach Beijing, but bringing in Kurt to play this senior role, and all the more junior, competitive-minded people who will work for him, is a very encouraging sign,” said Eric Sayers, visiting fellow at the American Enterprise Institute.’
  • ‘ “It will be bureaucratically tricky to make this position work smoothly in our government, but if anyone has the personality and drive to pull it off, it’s Kurt.” ’

‘Campbell, one of the most senior Asia hands in the Democratic foreign policy ranks, last served in government as assistant secretary of state for East Asian and Pacific affairs under Hillary Clinton.

‘In late 2019, Campbell and Sullivan laid out their theory of the case for dealing with China in an essay for Foreign Affairs titled “Competition Without Catastrophe: How America Can Both Challenge and Coexist With China.” ’

  • ‘They argued that the Trump administration had it right when it identified China as a “strategic competitor” in its 2017 National Security Strategy, but they said this competition must be waged with vigilance and humility, structured around the goal of coexisting with China rather than expecting to change it.’
  • ‘ “Although coexistence offers the best chance to protect U.S. interests and prevent inevitable tension from turning into outright confrontation, it does not mean the end of competition or surrender on issues of fundamental importance,” they wrote.’
  • “Instead, coexistence means accepting competition as a condition to be managed rather than a problem to be solved.” ’

‘Campbell believes the United States must not return to a strategy based on engaging China in hopes that China will liberalize.’

  • ‘The United States must acknowledge that strategy didn’t work, he wrote in a 2018 Foreign Affairs essay with Ely Ratner, Mr. Biden's nominee to be assistant secretary of defense for Indo-Pacific Security Affairs.’

‘On Tuesday, Campbell and Rush Doshi, director of the Brookings Institution's China Strategy Initiative, released a new Foreign Affairs essay [see the next post] focused on how the United States can “shore up” the international order in Asia, by restoring a balance of power with China, bolstering alliances and then using those alliances to push back on Beijing’s aggressive actions.’

  • ‘Through a network of overlapping coalitions, the United States should join with like-minded partners to “send a message [to Beijing] that there are risks to China’s present course,” they wrote.’
  • ‘ “This task will be among the most challenging in the recent history of American statecraft.” ’

‘Asia watchers in Washington and America’s Asian allies should be reassured that Biden is planning to elevate the importance of the Indo-Pacific region by creating this coordinator role and staffing it with someone so senior.’

  • ‘But the real test will be whether the Biden administration actually devotes the time and resources needed to complete the “Pivot to Asia” Campbell first pitched a decade ago.’
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Financial Technology Is China’s Trojan Horse

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

Foreign Affairs

Nadia Schadlow and Richard Kang | Prism Global Management

Chinese fintech firms function like a geoeconomic Trojan horse.’

‘In one of his last acts as president, Donald Trump issued an executive order banning eight Chinese software applications, including Alipay and WeChat, the world’s largest mobile payment app.’

  • ‘Trump’s ban, issued on January 5, sought to address concerns that these popular Chinese apps might allow Beijing access to sensitive data about Americans.’

‘But China’s emerging dominance in financial technology, also known as “fintech,” poses an even more fundamental problem for the United States.’

  • ‘Beijing will use fintech to occupy the high ground in global commerce, bolster its surveillance state, and lay the groundwork to challenge the U.S. dollar as the world’s reserve currency.’

Embed Fintech in Economies. ‘China’s dominance in fintech promises to boost the CCP’s expansionist ambitions in another way, hardwiring other countries to China’s economy. 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.’

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

  • ‘Last fall, analysts at the U.S. financial services firm Morgan Stanley forecast that the yuan could surpass the Japanese yen and the British pound sterling to become the world’s third-largest reserve currency by 2030, accounting for between five and ten percent of global foreign exchange reserve assets.’
  • ‘Countries in the Southeast Asia may soon begin to increase the share of yuan in their foreign currency reserves.’

Digital Yuan. ‘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.’

  • ‘Consumers and merchants throughout Southeast Asia will soon be able to use the digital yuan on Alipay and WeChat Pay.’
  • ‘Later, the apps will serve as distributors of the digital yuan as local businesses find it more efficient to use the yuan than the dollar in transactions with Chinese companies.’
  • ‘The CCP could then push for the digital yuan to be used instead of the U.S. dollar by bigger institutions and businesses conducting large transactions, such as making interest payments and financing supply chains.’

‘That shift has already begun—even before the release of China’s new sovereign digital currency.’

  • ‘As bilateral trade between China and Southeast Asian countries has grown in recent decades, so has the share of trade that is conducted in Chinese yuan, eating into the U.S. dollar’s share of bilateral trade.’

‘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.’

  • ‘CCP officials have described SWIFT as a means for the United States to maintain “global hegemony” and reap “huge profits by virtue of the monopoly platform.” U.S. officials must take Chinese moves in this area seriously.’
  • ‘Max Levchin, a co-founder of PayPal, believes that if the United States does not make a digital version of the dollar more readily available, “we run the risk of letting China become the digital reserve currency of the world.” ’  
  • ‘The United States will lose the leverage and influence it has over many countries if they increasingly opt for the yuan over the dollar.’

‘The United States must get serious about offering other countries alternatives to China’s fintech companies, tapping the strength of U.S. technology firms.’

  • ‘And yet these firms have been slow to involve themselves in the growing competition with China.’

‘Either Alibaba or Tencent has invested in every single one of the 13 technology unicorns—startups valued at $1 billion or more—in Southeast Asia.’

  • ‘Facebook and PayPal, by contrast, invested in their first Southeast Asian fintech player, Gojek, just last March.’
  • ‘U.S. companies such as Facebook, Google, and PayPal must not get boxed out of the world’s most significant growth markets, which are mostly in the Indo-Pacific region.’
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'China: Taming the overshoot'

'China: Taming the overshoot' | ANALYSIS | Scoop.it

 

CreditSuisse

‘We expect GDP growth to improve to 7.1% in 2021 from 2.2% in 2020. Realized growth will likely overshoot potential growth in 2021, but from a policy perspective, we expect that the authorities would prefer to avoid an aggressive overshoot in one particular year in exchange for a smoother and more sustainable growth profile over the next five years.’

‘The Chinese economy is coming out of the pandemic slump earlier than other economies, but the recovery has been uneven.’

  • ‘Starting in Q320, production-side indicators have been rebounding faster than expenditure-side indicators.’

‘There has however been a noticeable unevenness on the expenditure side.

  • ‘The infrastructure and real estate sectors have disproportionately benefited from the stimulus, while in contrast, private manufacturing, services, and parts of the household sector have lagged due to fragmented credit allocation mechanisms.’

‘We anticipate the divergence between production and expenditure-side indicators to fade going into 2021, a process that recent indicators suggest is already underway.’

  • ‘The fashion of the convergence is expected to rely more on the acceleration of the expenditure-side recovery, but it will also include a moderation to production momentum.’

‘Even with anticipated growth of 7.1% in 2021, the risk is actually skewed to the upside.’

  • ‘For the unevenness within the expenditure side, we anticipate manufacturing fixed-asset investment (FAI) growth, which has been lagging other FAI components, to catch up (Figure 46).’
  • ‘In addition, we also expect the ongoing rebound in services consumption to continue as disposable income growth recovers (Figure 47).’

‘With the recovery already underway, a GDP growth overshoot in 2021 appears inevitable.

  • ‘From a policy perspective, we expect that authorities will likely avoid a pro-cyclical policy stance and, to the extent possible, rein in the overshoot in 2021.’
  • ‘They would most likely prefer to avoid an aggressive overshoot in one particular year in exchange for a smoother and more sustainable growth profile over the next five years.’

‘Specifically, we expect a moderation to M2 growth on the monetary front from 10.4% in 2020 to 9.3% in 2021.’

  • ‘On the fiscal front, we expect a tighter fiscal stance.’
  • ‘The one-time COVID-19 treasury issuance, which accounted for about 1% of GDP, will almost certainly not be repeated in 2021.’
  • ‘Special purpose bonds will remain, but we expect their annual quota to decrease by roughly half a percentage point of GDP relative to that of 2020.’
  • ‘There will likely also be modest downward adjustments to the official fiscal deficit target of about 0.3- 0.5% of GDP in 2021 relative to the 3.6% target in 2020.’
  • ‘Abstracting away from any multiplier effect, the fiscal drag in 2021 relative to that of 2020 would be approximately 2% of GDP.’

‘To be clear, even with the tightening policy stance, overall GDP growth and its various key components are still expected to have above-trend growth in 2021.’

  • ‘For example, we expect real estate investment (REI) to grow by 6.5% in 2021, faster than the anticipated growth rate for 2020 (4.1%) but slower than pre- COVID-19 growth in 2019 of 10.0%.’
  • ‘REI growth in 2020 will likely fall below the implied growth rate based on macroeconomic factors such as M2 growth and house price inflation, predominantly attributed to the COVID-19-induced contraction experienced in Q120.’
  • ‘Hence, despite the anticipated slowdown to M2 growth in 2021 and authorities’ ongoing effort to curb house price inflation, we expect REI growth in 2021 to be higher than the implied growth rate normally associated with such macro conditions.’

‘We revised our expectation for 2021 headline CPI downward, from 2.5% yoy to 1.1% yoy, mainly due to pork deflation.’

  • ‘After looking at sequential price momentum instead of year-over-year numbers, which are distorted by the base effect, we believe that headline CPI is about to enter a reflationary cycle.’

‘As China continues to reduce its production-expenditure rebound gap, there might be a modest improvement to core inflation.’

  • ‘We do not think that the PBoC will react to the disinflation in CPI with a more accommodating monetary stance.’
  • ‘For the same reason that the PBoC did not tighten when pork drove up inflation during 2019, it will most likely not respond to pork-driven disinflation.’

‘As per the exchange rate, the CNY is expected to experience additional appreciation over the coming 12 months.’

  • ‘We forecast USDCNY to reach around 6.3 by the end of 2021.’

‘Moving beyond 2021, we anticipate three key policy categories to be emphasized in the next five-year plan:’

  1. ‘Technology Advancement. The technology category encompasses the ongoing efforts to establish “new infrastructure,” innovate and enhance capabilities in the key strategic sectors, and secure essential inputs.’
  2. ‘Labor Productivity. The labor category aims to increase labor productivity, including labor market reforms to facilitate labor movement, educational reform to improve the quality of the labor force, and a further opening of Chinese markets to foreign participation and competition.’
  3. ‘Land Reform. Finally, the land reform category aims to clarify land usage rights and the transfer of usage rights.’
  • ‘The scope of this reform would cover at least farmland and land used for residential and commercial properties.’
  • ‘Land reform will directly affect the pace of urbanization, which in turn would provide ongoing support to sectors such as real estate and traditional infrastructure in avoiding cliff-like decelerations.’

‘Finally, we view China’s participation in the recently signed RCEP as a positive development for multilateralism and trade within the region.’

  • ‘This should also slow down the decoupling forces between China and the rest of the world.’
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Foreign Ministry Spokesperson Hua Chunying's Regular Press Conference on January 8, 2021

Foreign Ministry Spokesperson Hua Chunying's Regular Press Conference on January 8, 2021 | ANALYSIS | Scoop.it

Ministry of Foreign Affairs of the PRC

Hua Chunying | Ministry of Foreign Affairs of the PRC

‘Besides, facts are there, beyond anyone's denial, regardless of whether they came up in the Chinese media reports or not.’

Regular Press Conference, January 7, 2021

Beijing Youth Daily: ‘Some American media reported that China is taking advantage of the chaos in the United States to expand China's influence, and the United States is even more unable to stop China's development. What is your comment on this?’

Hua Chunying:What's happened at the Capitol Hill has been extensively covered by the US media.’

  • ‘We've seen TV programs playing out violent scenes 24/7.’
  • ‘We've heard world leaders commenting on it.’
  • ‘People from all walks of life in the United States are talking about it.’
  • ‘Then why, when the Chinese media are following this widely-reported event, it suddenly became propaganda?’

When I responded to a foreign journalist's question yesterday, I invited all of you to seriously think about why some people reacted differently to similar scenes played out in the United States and Hong Kong and why they termed them differently. Why are factual reports by the Chinese media being labeled propaganda or even disinformation?’

  • Is it simply because some people in the United States find them unpalatable?’
  • I don't think this complies with the truthfulness principle of journalism.’
  • Besides, facts are there, beyond anyone's denial, regardless of whether they came up in the Chinese media reports or not.’

However, this does uncover the ubiquitous existence of double standard when it comes to Chinese media and reflect the sense of superiority and ideological prejudice long harbored by some individuals.’

  • For some people in the west, they pride themselves on their democracy and freedom, even though deep down they have their grievances and dissatisfaction; they criticize China as being authoritarian and totalitarian, even though deep down they may hope they could lead a life as the Chinese do.’

For those issues that have come up in the United States or in other western countries, they in the west can argue, debate and comment in ways whatever they want.’

  • ‘But if the Chinese side pitches in, then it suddenly morphs into "propaganda" or "disinformation".’

AFP: ‘The media has noted some similarities and some differences between what happened in Hong Kong and in the United States. I think one issue that news reports pointed out was also the intent behind the unrest. In the U.S. case they were trying to overturn the results of an election, while in Hong Kong they were demanding for more democracy. I'm just wondering if you could clarify your take on this?’

Hua Chunying: ‘The two are very similar in terms of subjecting legislature to violence.’

  • ‘On July 2019, radical protesters stormed the legislature, trashed the place, defaced the Hong Kong emblem, fan up anti-police sentiment, and hurled toxic liquid and powder at and even stabbed police force.’
  • ‘But the Hong Kong Police Force responded with maximum restraint.’

‘Similar scenes played out in the United State but were reported by some press in different words.’

  • ‘Protesters were "thugs" and "domestic terrorists" when they stormed the Capitol Hill, but were "democratic fighters" and even "heroes" when they stormed the Hong Kong Legco.’
  • ‘It would be difficult if not impossible to find a better definition for double standard.’
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'How Western media would have covered the storming of the U.S. Capitol if it had happened in another country' 

'How Western media would have covered the storming of the U.S. Capitol if it had happened in another country'  | ANALYSIS | Scoop.it

The Washington Post

Karen Attiah | The Washington Post

‘Of course political and racial violence have played a part in the history of the former British colony for centuries and have particularly been inflamed in the past four years.

If we talked about the storming of the Capitol in Washington the same way we talk about political violence in a foreign country, here’s how Western media would have covered it.

‘Political violence and rioting exploded in the United States on Wednesday as extremists loyal to right-wing leader Donald Trump stormed the legislative building in the nation’s capital, Washington, forcing lawmakers to go into hiding in secure locations.’

 

  • ‘The mob was incited to act by Trump himself.’ 
  • During a speech before thousands of his supporters earlier in the day, the president called the outcome of the November election an “egregious assault on our democracy” and urged people to “walk down to the Capitol” because "you will never take back our country with weakness.” ’

‘Soon a crowd was breaking into the Capitol, charging police barricades and breaking windows to try to disrupt the certification of the presidential election that resulted in a clear defeat for Trump.’

  • ‘A woman was fatally shot by security forces inside the Capitol, and three other people died under unspecified circumstances.’
  • ‘An IED was found at the headquarters of the ruling Republican National Committee, and the nearby headquarters of the opposition Democratic National Committee was evacuated after the discovery of a suspicious package.’

‘As observers wrestled with whether to call the actions a “coup” or a “sparkling authoritarian takeover," Trump supporters terrorized lawmakers and forced them to stop the certification of the election.’

  • ‘Hundreds were seen looting and chanting slogans while some police officers passively looked on.’

‘Many Americans, including prominent journalists, politicians and security officials, expressed dismay at the unfolding events, even though right-wing groups had described their plans online and some had even printed “CIVIL WAR” T-shirts with the date ‘January 6’ to mark the occasion.’ 

‘Of course political and racial violence have played a part in the history of the former British colony for centuries and have particularly been inflamed in the past four years.

‘World leaders expressed concern about the violence, but there have been no public commitments to send peacekeeping forces to Washington.’

  • ‘The United Nations did not issue a statement.’
  • ‘The African Union followed the European Union’s position of non-intervention in America’s fragile democracy, saying: “We, too, believe in American solutions to American problems.” ’

‘The coup attempt unfolded as the former British colony continues to struggle with a dysfunctional response to the deadly coronavirus pandemic — on Wednesday, the United States suffered a record of more than 3,800 covid-19 deaths.

‘Meanwhile, the political backlash for Trump was swift:’

  • ‘He was banned from Twitter and other social media platforms.’
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Chinese netizens jeer riot in US Capitol as 'Karma,' say bubbles of 'democracy and freedom' have burst - Global Times

Chinese netizens jeer riot in US Capitol as 'Karma,' say bubbles of 'democracy and freedom' have burst - Global Times | ANALYSIS | Scoop.it

Global Times

The Global Times is a daily newspaper under the auspices of the Chinese Communist Party's People's Daily newspaper.

‘Words like "Karma," "retribution" and "deserving" were frequently mentioned in Chinese netizens' comments when they saw the latest episode of the US' real version of House of Cards - which saw Trump supporters storming the Capitol, messing up House of Representatives Speaker Nancy Pelosi's office, clashing with police officers and looting items.’

  • ‘The pictures went viral in US, Chinese and international news outlets after the riots began Thursday morning.’ 

‘Chinese web users still remember the distress and anger they felt when they saw rioters in Hong Kong storming the Legislative Council Complex, scrawling graffiti, smashing and robbing items.’

  • ‘And, instead of condemning the violence, US politicians hailed the "courage" of these mobs, Western media praised the "restraint" of the rioters, and House Speaker Nancy Pelosi even called it a "beautiful sight."

‘Now, this "beautiful sight" is taking place in the US.’

  • ‘A Chinese netizen commented, "Pelosi can enjoy the beautiful sight - even at her office desk! For such a long time, US politicians called rioters 'freedom fighters' in other countries. Now, they finally have retribution!" ’ 
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'Matt Pottinger resigns, but his China strategy is here to stay'  

The Washington Post

Josh Rogin | The Washington Post

‘Even though Pottinger’s name was largely unknown to the public, his influence on U.S. foreign policy will be felt for years to come.’

‘As President Trump’s devotees stormed the U.S. Capitol Wednesday afternoon, several senior administration officials took the opportunity to resign.’

‘Most Americans will likely see him as yet another fed-up Trump official, without realizing the greater significance of his four years of White House service.’

  • ‘Even though Pottinger’s name was largely unknown to the public, his influence on U.S. foreign policy will be felt for years to come.’
  • ‘The incoming Biden administration is set to preserve many of the changes in the government’s approach to China that Pottinger, along with other like-minded officials, worked to implement.’

‘Starting on the administration’s first day, Pottinger served as senior director for Asia on the National Security Council staff under his former commander in Afghanistan, Mike Flynn, who picked him for the post. Pottinger remained after Flynn was fired.’

‘Pottinger continued under national security adviser John Bolton and was elevated to deputy national security adviser under Bolton’s replacement, Robert C. O’Brien, crafting key speeches and traveling the world to explain the Trump administration’s often misunderstood China strategy.’

  • ‘Pottinger deliberately kept a low profile, but he occasionally stepped out in public to explain the thinking behind the administration’s approach.’

‘Pottinger is a hard-liner on China but not as hawkish as officials such as former White House chief strategist Stephen K. Bannon and White House trade adviser Peter Navarro.’

  • ‘But Pottinger often opposed accommodationists such as Treasury Secretary Steven Mnuchin.’
  • ‘Pottinger believed in restoring the balance of power between China and the United States in Asia after many years of drift due to lax policy in Washington.’

‘Pottinger has also focused on raising awareness of Chinese Communist Party efforts to spread influence and interfere in various U.S. institutions, including academia, the tech sector and Wall Street.’

  • ‘Inside the bureaucracy, he expanded the NSC’s Asia staff and pushed all national security agencies to rethink their assumptions and greatly increase their focus on China.’

‘The incoming Biden administration is planning to continue much of the basic China approach Pottinger and others set in place, albeit with some changes.’

  • ‘That reflects the bipartisan consensus in Congress and growing calls from voters in both parties for a strategy that more forcefully confronts Beijing’s external aggression and internal repression.’
  • ‘Biden is expected to name his own “Asia czar” inside the NSC staff, recognizing the importance of having a senior official such as Pottinger in charge of coordination on the issue.’

‘Trump’s own views on China have run the gamut, sometimes focusing on his friendship with Chinese President Xi Jinping and sometimes portraying China as a bitter enemy.’

  • ‘But Pottinger helped translate those impulses into lasting institutional change that will long outlive the Trump administration.’

 ‘“It’s impossible to overstate the impact Matt has had on American national security,” said Rep. Mike Gallagher (R-Wis.), who served with Pottinger when they were both Marine intelligence officers in Iraq.’

  • ‘ “He leaves behind a four-year legacy as impactful as any American strategist before him.” ’
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China Macro Reporter Archive

Greetings!

In today’s issue:

1. Eurasia Group| ‘Top Risks of 2021’

  • ‘Top Risks of 2021’: CHINA

2. Biden & the EU-China Investment Agreement

  • 'With Concessions and Deals, China’s Leader Tries to Box Out Biden' 
  • 'China and E.U. Leaders Strike Investment Deal, but Political Hurdles Await'

3. The EU-China Investment Agreement: Pro & Con

  • PRO | 'The Importance of the EU, China Investment Deal'
  • CON | 'Europe has handed China a strategic victory'

4. China's Antitrust Investigation into AliBaba

  • 'Mo money, Ma problems - Chinese trustbusters’ pursuit of Alibaba is only the start'
  • 'China’s Pro-Monopoly Antitrust Crusade'

CHINADebate, the publisher of the China Macro Reporter, aims to present different views on a given issue.

Including an article here does imply agreement with or endorsement of its contents.

Each New Year brings with it a slew of predications about what’s coming up in that year.

  • Among the best of these is the Eurasia Group’s ‘Top Risks,’ written in part by Ian Bremmer.
  • I’ve included just the China section, which concludes that, ‘On balance, this year will see a bilateral rivalry as intense as that of last year, and that’s dangerous.’
  • Eurasia Group’s business is risk assessment – and it is very good at it. So the whole report is worth a read.

While I am not one for making New Year’s predictions, two events over the holidays have caused me to relent.

  1. The EU’s signing an investment agreement with China, despite signals from the incoming Biden administration to hold off until the Biden team could weigh in.
  2. China’s starting an antitrust investigation into Alibaba for ‘alleged monopoly conduct.’

You haven’t seen much in these pages about the EU-China investment agreement.

  • That’s because it’s been dead in the water for the seven years the EU and China have been negotiating it.

The EU in various contexts have made this lack of progress one its major complaints against China.

  • Even though Angela Merkel, during her 2020 term as EU president, made the agreement a priority, not much happened.

China, for its part, had little incentive to conclude a deal – it already had a fairly free hand investing in the EU.

  • And it had little to gain from acceding to the EU’s demands.
  • Besides, as the EU leaders also often lamented, China is focused on the U.S. and sees the EU as a relative pipsqueak.

Then Joe Biden, with his talk of coalitions of allies against China, won the presidency, and Xi Jinping changed his tune.

  • In December, Xi instructed his negotiators to agree to many of the EU’s demand and get the deal done.
  • Merkel, quick to secure this for her legacy and to advance the interests of the German auto industry, began lobbying fellow EU countries to sign on.

Jake Sullivan, National Security Advisor-designate, posted a somewhat oblique (incoming administration are prohibited from meddling in foreign affairs) but nonetheless clear Tweet, saying that hey, why don’t you guys wait until we’re in office, and we’ll work on this China thing together. 

  • Ignoring this entreaty, Merkel plowed ahead, and the deal was signed.

This has led to speculation that the EU is now going its own way and that Mr. Biden will have a difficult time forging any coalition, about China or otherwise, with the EU.

  • And with regard to China specifically, ‘Reinhard Bütikofer, chairman of the European parliament’s delegation on China, says: “We’ve allowed China to drive a huge wedge between the US and Europe.” ’

On the other hand, Joerg Wuttke, president of the EU Chamber of Commerce in China said:

  • ‘We should not have waited for the Biden administration to sort things out. Wait for what?’
  • ‘We don't know if China will be more responsive if the three parties sit together.’
  • ‘We don't have a timeline. Shall we wait another two or three years?’

‘This doesn't exclude our meeting, putting together a program, and talking to the Chinese in a coherent manner, the OECD countries, possibly all together, and the U.S.’

  • ‘But this happening is very much unknown.’
  • ‘We like the fact that there could be a coalition, but at this stage, get the investment deal done and move on.’

My impression is that Mr. Wuttke is on the right track.

  • Yes, it would have better, from a U.S. point of view, if a new Biden administration had had a chance to weigh in.
  • But the deal, from an EU point of view, was more important.
  • And acting in what the EU considered its own interest, especially after four years of being kicked around by the U.S., seems pretty reasonable.

My prediction: This will be a speed bump to U.S.-EU cooperation on China – it is not a signal of EU reluctance to join a coalition.

  • The deal will not come up for a final ratification for a year or so.
  • Given opposition within the EU and the opportunity for the Biden administration to have its voice heard, there is a better than even chance that the EU will not ratify it anyway.

The story to watch is China’s antitrust investigation into Alibaba.

My prediction: Expect a broad and thorough Chinese government effort to assert control over China’s fintech industry.

 

  • Chinese fintech companies have control of masses of data on individuals that the Party believes should only be in its hands, and they have the ability to generate narratives that don’t conform to those of the Party.
  • Xi has demonstrated time and again that Party control trumps GDP.
  • So even if this effort to rein in fintech harms the drive for tech autonomy and global dominance, Mr. Xi will persevere and prevail.
  • This will be one of the biggest and most consequential stories of 2021.

Go deeper into these issues - Browse the posts below.

To read the original article, click the title.

Let me know what you think. And please forward the China Macro Reporter to your friends and colleagues.

All the best,

Malcolm 

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'The Importance of the EU, China Investment Deal'

'The Importance of the EU, China Investment Deal' | ANALYSIS | Scoop.it

Bloomberg

Joerg Wuttke | president, EU Chamber of Commerce in China

‘But we should not have waited for the Biden administration to sort things out. Wait for what? We don't know if China will be more responsive if the three parties sit together. We don't have a timeline. Shall we wait another two or three years?’

Bloomberg: ‘How significant is this investment treaty in reality for European businesses?’

Joerg Wuttke: ‘Well, it's a deal, after seven years of discussions.’

  • ‘So we're very happy about the fact that they stopped talking and now we can walk.’

‘The other thing is, of course, we have to look into the details.’

  • ‘But, this deal will be hashed out by the, vetted by the lawyers over 2021.’
  • ‘And then we have to get this deal passed through European parliament.’

‘But business is happy that this has concluded.’

Bloomberg: ‘Do you think it gets passed ultimately by the European parliament?’

Joerg Wuttke: ‘Well, I hope it will be passed - business really can't wait forever.’

‘Of course, I know the concerns by parliamentarians about the human rights situation in China. That will not go away anytime soon.’

  • ‘But I really hope that our parliamentarians are pragmatic and actually pass this deal through the system in order for us to implement more jobs in Europe and get more business done with China.’

Bloomberg: ‘Joerg, you touched on the question of human rights and of course that has been a criticism from some members of parliament in Brussels, members of the European parliament.’

  • ‘The question for some will be: Should the Europeans be striking an investment deal with a country that is jailing journalists, that according to the United Nations has as many as a million people held in camps in Xinjiang, that is involved and engaged in what the Canadians call hostage diplomacy?’

Joerg Wuttke: ‘You know, this is what I would call “system inherent.” ’

  • ‘As European, of course, we cannot welcome this.’
  • ‘But again this is a market access deal.’

‘We have, for example, seen that Australia, Japan, Korea sign the Regional Comprehensive Economic Partnership which included China at the beginning of December with none of these sustainability baskets being mentioned.’

  • ‘The Phase One US-China Deal has much less language on forced labor than the European.’
  • ‘So in a way, European negotiators managed to push the envelope for the first time on this one.’

‘But, the parties have made it very clear: This is first step; this is market access.’

  • ‘When it comes to these human rights issues, we really have to find a better toolbox to deal with China and a separate occasion.’

Bloomberg: ‘What is your response to some within the incoming Biden administration who have said, "Look, the EU should have waited. They should have waited until Biden was in office, and then they should have pursued a coordinated approach with the US when it comes to China?" ’

Joerg Wuttke: ‘I can understand the anxiety.’

  • ‘But the EU and the U.S. have a lot of common grievances with China.’
  • ‘We are happy that Biden team looks more favorable at teaming up with us on these.’

‘But we should not have waited for the Biden administration to sort things out. Wait for what?’

  • ‘We don't know if China will be more responsive if the three parties sit together.’
  • ‘We don't have a timeline. Shall we wait another two or three years?’

‘Angela Merkel expressed her intent to get this done in 2020 in the beginning of 2020, when it was not clear who was going to win the U.S. elections.’

  • ‘To actually finalize something, get over it, get it done is very much welcomed by European business. Why wait?’

‘That doesn't exclude our meeting, putting together a program, and talking to the Chinese in a coherent manner, the OECD countries possibly altogether and the U.S.’

  • ‘But this happening is very much unknown.’
  • ‘We like the fact that there could be a coalition, but at this stage, get it done and move on.’
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'China and E.U. Leaders Strike Investment Deal, but Political Hurdles Await'

'China and E.U. Leaders Strike Investment Deal, but Political Hurdles Await' | ANALYSIS | Scoop.it

The New York Times

‘China appeared eager to reach an agreement before Mr. Biden takes office in January, calculating that closer economic ties with the Europeans could forestall efforts by the new administration to come up with an allied strategy for challenging China’s trade practices and other policies.’

‘Political opposition in Europe and Washington could ultimately derail the landmark an investment agreement between China and the European Union, the “Comprehensive Agreement on Investment.” ’

‘A large faction in the European Parliament, which must ratify the agreement before it can take effect, opposes the accord on the grounds that it does not do enough to stop human rights abuses in China.’

  • ‘ “Public opinion was very disillusioned with the Chinese regime,” because of Hong Kong and the pandemic, said Philippe Le Corre, a research fellow at the Harvard Kennedy School who tracks Chinese investment in Europe.’
  • ‘ “And now we have this deal, which is mainly designed to please a handful of German multinational companies.” ’
  • ‘The opponents may be able to muster enough votes to block ratification in the European Parliament.’

‘In addition, a top aide to President-elect Joseph R. Biden Jr. has signaled that the incoming administration is not happy with the deal.’

  • ‘Mr. Biden, in a speech on Monday, said that on any issue that mattered to the U.S.-China relationship, the United States was “stronger and more effective when we are flanked by nations that share our vision for the future of the world.” ’
  • ‘The Europeans’ decision to overlook objections from the Biden camp was an indication that relations with the United States will not automatically snap back to the relative bonhomie that prevailed during the Obama administration.’
  • ‘European diplomats said this week that while they hoped for a more cooperative relationship with the Biden administration, they could not subordinate their interests to the U.S. election cycle.’

‘Negotiators for China and the European Union had been working on a deal for almost seven years, but progress accelerated suddenly after Mr. Biden defeated Mr. Trump in the election.’

  • ‘Unlike Mr. Trump, who has often been hostile to Europe, Mr. Biden is expected to try to cooperate with the European Union to rein in Chinese ambitions, but those efforts could take many months to materialize.’
  • ‘China appeared eager to reach an agreement before Mr. Biden takes office in January, calculating that closer economic ties with the Europeans could forestall efforts by the new administration to come up with an allied strategy for challenging China’s trade practices and other policies.’
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'With Concessions and Deals, China’s Leader Tries to Box Out Biden' 

'With Concessions and Deals, China’s Leader Tries to Box Out Biden'  | ANALYSIS | Scoop.it

The New York Times

‘Mr. Biden has pledged to galvanize a coalition to confront the economic, diplomatic and military challenges that China poses. China clearly foresaw the potential threat.’

‘China’s leader, Xi Jinping, has in recent weeks made deals and pledges that he hopes will position his country as an indispensable global leader, even after its handling of the coronavirus and increased belligerence at home and abroad have damaged its international standing.’

  • ‘A trade pact with 14 other Asian nations, the Regional Comprehensive Economic Partnership.’
  • ‘A pledge to join other countries in reducing carbon emissions to fight global warming.’
  • ‘Now, an investment agreement with the European Union, the “Comprehensive Agreement on Investment.” ’

‘In doing so, he has underlined how difficult it will be for President-elect Joseph R. Biden Jr. to forge a united front with allies against China’s authoritarian policies and trade practices, a central focus of the new administration’s plan to compete with Beijing and check its rising power.’

  • ‘The image of Mr. Xi joining Chancellor Angela Merkel of Germany, President Emmanuel Macron of France and other European leaders in a conference call on Wednesday to seal the dealwith the European Union also amounted to a stinging rebuke of the Trump administration’s efforts to isolate China’s Communist Party state.’

‘Around September, Mr. Xi showed renewed interest in wrapping up discussions for the European investment agreement, which had been dragging on for seven years.’

  • ‘Only months before, a deal seemed all but dead amid rising animosity toward China in Europe.’

‘A breakthrough came after the American presidential election.’

  • ‘Mr. Trump showed disdain for America’s traditional allies in Europe and Asia.’
  • ‘But Mr. Biden has pledged to galvanize a coalition to confront the economic, diplomatic and military challenges that China poses.’

‘China clearly foresaw the potential threat.’

  • ‘In early December, after phone calls with Ms. Merkel and Mr. Macron, Mr. Xi pushed to finish the investment agreement with the Europeans.’
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'Europe has handed China a strategic victory'

'Europe has handed China a strategic victory' | ANALYSIS | Scoop.it

Financial Times

Gideon Rachman | Financial Times

“We’ve allowed China to drive a huge wedge between the US and Europe.”

‘Ursula von der Leyen, the president of the European Commission, says she wants to lead a “geopolitical commission”.’

  • ‘But Ms Von der Leyen concluded 2020 by sending a truly awful geopolitical message — as her commission signed off on an investment treaty between the EU and China.’

‘Over the past year, China has crushed the freedom of Hong Kong, intensified oppression in Xinjiang, killed Indian troops, threatened Taiwan and sanctioned Australia.’

  • ‘By signing a deal with China nonetheless, the EU has signalled that it doesn’t care about all that.’
  • ‘As Janka Oertel, director of the Asia programme at the European Council on Foreign Relations think-tank, puts it: “This is a massive diplomatic win for China.”

‘It is also a considerable kick in the teeth for Joe Biden.’

  • ‘The US president-elect has stressed that, after Donald Trump, he wants to make a fresh start with Europe.’

‘In particular, the Biden administration wants to work on China issues together with fellow democracies.’

  • ‘Jake Sullivan, Mr Biden’s national security adviser, issued a last-minute plea for the Europeans to hold off on signing the deal — at least until they had a chance to discuss it with the new administration. He was ignored.’ 

‘EU officials offer several justifications for their decision.’

  • ‘They say that many of the concessions the EU has got from China have already been granted to the US, as part of America’s own “phase-one” trade deal. (These include sectoral openings in several industries, as well as changes to joint-venture requirements.) ‘
  • ‘Brussels officials point out that the US did not ask for European permission before concluding its own deal with China.’
  • ‘They justify the EU’s decision as a demonstration of “strategic autonomy”. 

‘These EU arguments sound tough-minded. But, in fact, they are naive.’

  • ‘It is naive to believe that China will respect the agreement it has signed.’
  • ‘It is naive to ignore the geopolitical implications of doing a deal with China right now.’
  • ‘And it is naive to think that the darkening political climate in Beijing will never affect life in Brussels or Berlin.’

‘The EU says that this deal will “discipline the behaviour” of China’s state-owned enterprises, which will now be required “to act in accordance with commercial considerations”.’

  • ‘But China made very similar commitments when it joined the World Trade Organization in 2001.’
  • ‘Pledges to rein in state subsidies made 20 years ago are now being offered up again as fresh concessions.’

‘Beijing’s promise to “work towards” enforcing international conventions on labour standards are also laughably weak.’

  • ‘As Shi Yinhong, a prominent Chinese academic, pointed out: “On labour, it’s impossible for China to agree. Can you imagine China with free trade unions?” ’ 

‘Over the past year, China has repeatedly demonstrated its willingness to ignore treaty commitments.’

  • ‘Its new national security law violates an agreement with Britain that guaranteed the autonomy of Hong Kong.’
  • ‘China has also imposed tariffs on Australian goods in violation of the China-Australia free trade agreement.’ 

‘The timing of this deal is exquisite for Beijing, since it presents the Biden team with a fait accompli.’

  • ‘Reinhard Bütikofer, chairman of the European parliament’s delegation on China, says: “We’ve allowed China to drive a huge wedge between the US and Europe.” ’

‘The EU-China deal was pushed hard by Angela Merkel, the German chancellor, and concluded right at the end of her country’s presidency of the EU.’

  • ‘Ms Merkel is seen as a champion of liberal values.’

‘But her approach to China is largely driven by commerce.’

  • ‘She knows that the German car industry has had a rough few years, and China is its largest market.’ 

‘Ms Merkel’s determination to press ahead may also reflect her own scepticism about the future of the US.’

  • ‘In a speech in 2017, she said that Europe could no longer rely on America.’
  • ‘The election of Mr Biden has probably not changed that view.’
  • ‘Many Europeans also believe that the US is on the brink of a new cold war with China — and want little part of that.’ 

‘Some of these arguments are reasonable enough.’

  • ‘It is hard to look at current events in Washington and feel totally confident about the stability of the US or the Atlantic alliance.’
  • ‘A European desire to avoid military confrontation in the Pacific is also rational.’ 
  • ‘But relying on an American security guarantee in Europe, while undermining American security policy in the Pacific, does not look like a wise or sustainable policy over the long run.’

‘The Europeans are also kidding themselves if they think they can be blind to the increasingly authoritarian and aggressive nature of Xi Jinping’s China.’

  • ‘For the past 70 years, Europeans have benefited from the fact that the world’s most powerful nation is a liberal democracy.’
  • ‘If an authoritarian nation, such as China, displaces America as the dominant global power, then democracies all over the world will feel the consequences.’ 

‘Even in the current geopolitical order, China has repeatedly demonstrated its willingness to use its economic power as a strategic weapon.’

  • ‘By deepening their economic reliance on China — without co-ordinating their policy with fellow democracies — European nations are increasing their vulnerability to pressure from Beijing.’
  • ‘That is a remarkably shortsighted decision to make, for a “geopolitical commission”.’
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ccc

ccc | ANALYSIS | Scoop.it

‘China's rapid economic recovery from the COVID-19 pandemic reflects the profitability of Chinese industry, which is driving its strong equity market performance.’

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XXX

XXX | ANALYSIS | Scoop.it

5. 'The renminbi appreciated about 6 percent vis-à-vis the dollar between January and early December 2020; from its low point in late May, it appreciated 8 percent (figure 4).'

  • 'Foreign investors can now both earn higher returns on Chinese bonds and convert their RMB earnings back into dollars at a more favorable rate.'
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XX

XX | ANALYSIS | Scoop.it

Chinese stock and bond markets have grown rapidly since 2014 and have become too big for global investors to ignore.

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‘Reasons for Increases In Cross-Border Capital Flows into China’

‘Reasons for Increases In Cross-Border Capital Flows into China’ | ANALYSIS | Scoop.it

Peterson Institute for International Economics (PIIE)

Nick Lardy & Tianlei Huang | PIIE

'Cross-border portfolio capital flows into China have been rising since 2014.'

'Cross-border portfolio capital flows into China have been rising since 2014.'

  • 'Foreign ownership of onshore (excluding Hong Kong) Chinese stocks and bonds reached RMB5.7 trillion ($837 billion) at the end of September 2020, a nearly eightfold increase from January 2014 levels.'
  • 'Several factors have contributed to the rapid increase in foreign holdings of onshore renminbi-denominated Chinese securities.'
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‘China’s Easing of Regulations Restricting Foreign Ownership of Financial Firms’

Peterson Institute for International Economics (PIIE)

Nick Lardy & Tianlei Huang | PIIE

'Foreign firms have only a tiny slice of most segments of this market; they control less than 2 percent of banking assets, for example, and less than 6 percent of the insurance market.'

'The best example of China’s deepening integration into global financial markets is the substantial increase in the role of US and other foreign financial institutions in China.'

  • 'This was made possible when Chinese market regulators, starting in 2017, gradually eased long-standing restrictions on foreign ownership, most of which were incorporated into the US–China Phase One agreement signed in January 2020.'

'Historically, foreign financial firms were largely restricted to operating in joint ventures with a minority ownership stake—meaning that in most cases, the Chinese partner had ultimate control over the enterprise.'

  • 'This has led to a substantial increase in the number of majority and wholly foreign-owned financial institutions operating in China, including many US institutions.'
  • 'The attraction of the Chinese financial market for foreign firms is substantial and will only grow.'
  • 'The total assets of China’s financial sector at the end of the second quarter of 2020 stood at RMB340 trillion ($48 trillion).'

'Because of previous restrictions, foreign firms have only a tiny slice of most segments of this market; they control less than 2 percent of banking assets, for example, and less than 6 percent of the insurance market.'

  • 'Given the large size of China’s domestic financial industry, if foreign firms can increase their shares in these market sectors, they stand to generate large profits.'

'Doing so will be far from automatic, however, as Chinese financial institutions have built up strong positions in many of these markets.'

  • 'China’s regulators have allowed some US financial institutions to gain majority ownership of existing joint ventures and licensed other firms to access the Chinese market for the first time.'
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