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| Ashley Dudarenok |
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| Harry Broadman |
With every passing day it’s getting increasingly difficult to not overstate the potentially profound corrosive effects on the opportunities and risks for continued growth in the U.S. and across the globe of the Trump Administration’s handling of international economic policy. As in his campaign, the President has been successfully—at least to date—pursuing a divide and conquer strategy domestically and internationally to try to achieve his goals. The result is an absence of a robust set of checks and balances to ensure that the best economic interests of the U.S. and the world will be served.
The state of affairs is a triple whammy of divisiveness at home and abroad: the overarching direction and content of many of Trump’s policies is pitting firms in one sector against those in another, and business interests against consumers and workers--a strategy that will serve to distort and shrink the size of the economic pie, not one towards enhancing overall prosperity; the White House’s policy-making process of "America-go-it alone" on a bilateral basis is out of whack with both the actual multinational production structure of world markets and the companion long-standing multilateral protocol of teaming up with friendly countries through existing international alliances (for which the U.S. was the chief architect) to smooth out bad conduct by national actors who don’t play by global rules; and the seemingly moment-by-moment upheavals, in-fighting and reversals of the Administration’s stance on the economy is generating unprecedented policy uncertainty, which is only serving to destabilize long-term investment incentives (running counter to the objectives of the White House's earlier push for cutting corporate tax rates).
The unmistakable substance of the Administration’s economic policy—echoing of course, Trump’s slogan of "making America great again"—is one of both significant protectionism and castigating those outside of the United States as the primary source of any woes evident in the domestic economy.
It’s fundamentally counterproductive for Trump to ignore that there is in fact plenty of blame to be had at home if he truly wants to achieve his stated objectives. And, finger-pointing at foreigners, no matter how well it might sell at rallies or on television, distracts attention from where it needs to be focused.More at Harry Broadman's column here republished with the kind permission of the author.
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| Paul Gillis |
Hurun Research Institute reports that 151 companies in China have attained unicorn status by the end of the first quarter, with half of these unicorns incubated or backed by industry titans such as Alibaba and Tencent Holdings. Their combined valuations exceeded 4 trillion yuan (about US$630 billion).
Moreover, according to a professor of accounting at Peking University Paul Gillis, there’s a fear of missing out and Chinese tech companies might receive pressure from investors to join in and join big. He added that Meituan-Dianping’s valuation target of US$60 billion is hard to understand, given that the company has revealed a steep loss of US$2.9 billion last year from share-based compensation.More at Next Unicorn Ventures.
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| Matthew Brennan |
Matthew Brennan — co-founder of consultancy China Channel, which provides insight into WeChat for foreign firms — agrees that WeChat is “pretty much unavoidable” for anyone who wants to function normally in Chinese society. He cites the case of Alibaba founder Jack Ma, who famously announced in 2013 that he would be quitting WeChat and launching the company’s own messaging app. The app turned out to be a total failure, and Ma ended up reluctantly admitting in a livestreamed interview last year that he was back to using his competitor. “Even if you hate it as much as Jack Ma does, you have to use WeChat,” Brennan tells Sixth Tone.More in Sixth Tone.
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| Shaun Rein |
“The risks for Sheldon Anderson’s Sands casinos are quite high,” China Market Research Managing Director Shaun Rein told Forbes. “It is quite possible that China will target his casinos specifically … It is possible they will ratchet up police surveillance of his Macau properties in order to spread fear among high rollers and even middle-class gamblers that they are being checked in on by the authorities. Or they will launch an audit of their books.More in Casino.com
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| Rupert Hoogewerf |
Twelve Chinese investors attended the event as part of a weeklong tour of the United Kingdom in search of opportunities.
Rupert Hoogwerf, chairman of Hurun and organizer of the trip, said the fact that Britain is in the process of leaving the European Union does not trouble Chinese entrepreneurs at the individual level.
“Most of the interest today is either to send children to school here, or to buy real estate for long-term investments,” he said. “Not one of these entrepreneurs this year and last year was particularly concerned, so it wasn’t really relevant.”
At this year’s event, the companies making pitches were scale-ups, rather than start-ups. Hoogwerf said the event focused on start-ups last year but that “was actually a little bit too much for these people to swallow, so we think that the idea of scale-ups is potentially a much better way of doing it”.
Hoogwerf said several investors had shown interest in some of the presentations.More in the China Daily.
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| Ian Johnson |
How did someone like you manage to open a public account on WeChat?
I had such a hard time. I changed the name but nothing worked. Finally, I got in touch with someone from Tencent [the company that runs WeChat]. In recent years, I‘d done some research with them on the effect of the Internet on society. So I knew people from their research department. I asked, “why can’t I open a public account?”
They said they’d look into it and got back to me and said, “You’re right, you really can’t.” I asked why and they said, “You’re restricted but let’s do it like this. You open the account and we’ll assign a person behind the scenes who will accompany you.” So I did as they said and when it started that person said, “I’m your first follower!”
Your personal censor! Why does Tencent do it? What’s in it for them?
They want to have readers. If it’s just boring stuff being published it’s not interesting for them, either. We had contact and they knew me. They know that my stuff isn’t extreme. It’s fairly academic. But the restrictions are still strict. For every five articles, two or three are cut. Sometimes, I have to argue with them—like over the Xi article—I say, “I can publish it in that academic magazine, so why not with you?”
More in the NY Review of Books.So that’s the way it is. The space gets smaller and smaller. If you want to publish your own work, it’s harder and harder. If you struggle, you might not have any [space]. But if you don’t struggle, you definitely won’t have any. So my motto is: “If you can say a bit more, say a bit more.”
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| William Bao Bean (right) |
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| Sara Hsu |
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| Arthur Kroeber |
So I think the position of [Chinese President] Xi Jinping is that reform is a game that the Chinese don't really have to play. The current balance in China has as much to do with optimizing the performance of the state sector than it does optimize the performance of the market.
I think there was a lot of wishful thinking in the West that the universal laws of economics would inevitably force the Chinese state to liberalize the economy because otherwise, they wouldn't be able to forge economic growth. But China has shown that it's perfectly able to achieve six to seven percent growth annually with large state sector involvement, and as long as that keeps happening they won't be forced to do anything.
The grand strategy for the U.S. and the West over the past three decades has been to integrate China into the global economy. Given the recent struggles of working-class people in the West, was this strategy, in retrospect, a mistake?
Absolutely not. I think that this was absolutely the correct strategy. Having China as a constructive player in the global economy, with their interests aligned with peace and stability and not with stirring the pot, is a gigantic achievement. Only people who were willfully ignorant of the problems that existed before and willfully blind to the enormous benefits could make that kind of statement.
However, bringing China into the global economy — which involved moving hundreds of millions of low-wage, poorly-educated workers into the manufacturing sector — was a huge shock and one of the things that contributed to the reduction of manufacturing employment and wage reduction in the U.S.
To my mind, that's an understandable and practical cost of bringing China into the global economy, which was a massive achievement. But the U.S. has done a terrible, terrible job of helping people adjust to that trauma. The failure wasn't in the China policy. It was in the domestic policy. There could have been a lot more investment in education and infrastructure.More at the Asia Society.
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| Rupert Hoogewerf in Shenzhen |
This is the first time in the history of the Hurun that blockchain technology has been embraced. As the starting point to enhance the value of the blockchain technology, blockchain projects have become the focus of this awards ceremony. Waltonchain, as the winner of the Hurun Blockchain Innovators 2018 award, was invited to attend the awards ceremony.
More than 1,000 industry leaders from all over Asia gathered at the conference. These included blockchain practitioners, experts, investors and big names such as Huawei, Ant Financial and Xiaomi. The focus was on new trends and how to construct a brand-new blockchain ecosystem with a new mindset — thinking outside of the box. Some hot topics were innovative applications, future development trends and risks of blockchain.
As the winner of the Hurun Blockchain Innovators 2018 award, Waltonchain was also invited to attend. Waltonchain CSO Welson Wong accepted the award on behalf of Waltonchain. It is a fact that, having its excellent technical strength, Waltonchain has already become a leader in the blockchain + IoT industry.
At present, the blockchain industry is rife with chaos and hype. Fortunately there are projects that are consistently recognized for their solid foundations and what they have actually accomplished in the real world. The Hurun Blockchain Companies List focuses on the essence of “chains” and helps serve the real economy and energize the blockchain ecosystem.
More at the Medium.com.As a leader in blockchain + IoT, Waltonchain aims to promote the healthy development of blockchain technology and strives to build a brand-new business ecosystem.
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| Matthew Brennan |
In its native China, Tencent is a household name responsible for an app that has become a part of daily life – it’s called WeChat (“Weixin” in Mandarin).
“It’s the universal connector in China,” says Matthew Brennan, who is writing a book on the history of WeChat, and regularly gives presentations about the app. “It’s the pipework for information. Everyone uses it, and people open WeChat around 40 to 50 times a day.” WeChat has more than a billion users and has features such as messaging, video conferencing, a social news feed, e-commerce, payment functions, smart city apps and transport booking, and much more.
Mr Brennan believes it’s a common misconception – reported recently in the likes of The Guardian newspaper in the UK for example – that WeChat came to dominate in China because of state censorship of Western social media like Facebook and Instagram.
“If you look at Line in Japan, or Kakao in South Korea, or Zalo in Vietnam, it’s been strong local competitors in Asia that have won,” Mr Brennan says, referencing the dominant messaging apps used in different Asian countries.
“It’s winner takes all, and WeChat won [in China],” he says.
Tencent is the world’s fifth-largest tech company by market capitalisation, overtaking Facebook this year and sitting behind only Apple, Alphabet, Microsoft and Amazon. It has flourished, mostly domestically, through the likes of WeChat, its app store and content provision with Tencent Video and Music, but in another important domain it has become a powerful player on a global scale.More in the National.
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| Ian Johnson |
Sitting in an underground storeroom near the Washington Mall is a tiny silk parchment. Written 2,300 years ago, it is a Chinese version of the Dead Sea Scrolls, with text that swirls like the stars through the firmament and describes the relationship between humans and heaven.
For decades, the ancient document, known as the Chu Silk Manuscript, has fascinated people seeking an understanding of the origins of Chinese civilization. But it has been hidden from public view because of its fragility — and the uncertain circumstances by which it ended up in the United States.
Now, a prominent Chinese historian and archaeologist has pieced together its remarkable odyssey in a meticulously documented analysis that has caused a stir in the rarefied world of Chinese antiquities and raised broader questions about collectors who profit from pillaging historic sites.
The 440-page study traces the provenance from tomb raiders who discovered it during World War II, to an antiques dealer whose wife and daughter died fleeing Japanese troops, to American spies who smuggled it out of China and finally to several museums and foundations in the United States.
The findings have put new pressure on the manuscript’s current owner, the Arthur M. Sackler Foundation, to return it to China after decades of on-again, off-again efforts to sell it to Chinese institutions. According to people briefed on the discussions, the foundation is now in renewed talks with Beijing and indicated that it was willing to settle for a “finder’s fee.”
Much more in the New York Times.
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| Sara Hsu |
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| Arthur Kroeber |
In spite of policy and political uncertainty under the Trump administration, the liquidity and security that US Treasuries offer continues to be unrivalled by any other form of asset.
Arthur Kroeber, co-founder and research head of Gavekal Dragonomics, said a Beijing sell-off of US Treasuries, which was utterly unlikely, would only make Beijing look reckless and foolish – the last thing Xi would want as China seeks to play the “good guy” in contrast to the unpredictable Trump.
In addition, a big sale from China of US Treasuries in the open market would mean China would have to buy replacement assets, but none constituted a viable alternative, Kroeber said.
More in the South China Morning Post.It is not surprising then, that during the three rounds of trade talks between Beijing and Washington, neither Beijing nor Washington publicly made China’s holding of Treasuries as an issue for negotiation.
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| Harry Broadman |
At its roots, China isn’t a market-based economy. It’s separation of business and government remains ephemeral; private property rights are still fuzzy, and rarely protected; identification of the beneficial owner(s) and who has ultimate control over decisions within some of the country’s key enterprises is opaque. The large state-owned banks hold little check, if any, over the large backbone state-owned enterprises to whom they lend and often never pay off debts owed.
Communist Party officials occupy some of the most senior positions in the enterprise and financial sectors, including most recently naming the country’s top banking regulator as the party chief and deputy governor of the Central Bank; and foreign investors must transfer technology to Chinese firms if they wish to invest in the country.
At the same time, Trump’s insistence on handling China in a US go-it-alone manner is just plain wrong-headed. We know from his many statements that anything but negotiating on a bilateral basis is anathema to him — a man whose career was built on doing one-off real estate deals in New York. But international trade negotiations are far more nuanced and complex.
Rather than using the “power of collective action” and building a coalition of other major trading powers — many of whom like the US have been exposed to China conducting trade inconsistent with prevailing international norms — Trump’s efforts will have him falling flat on his face.
What’s needed is a fundamental alteration of the treatment of China within the WTO framework — that is, if the WTO is to have any further meaning and survive. It’s finally time to call a spade a spade.
And, it’s also high time for the US to change its trade tactics towards Beijing. It needs to form a coalition of WTO members who make it clear that it really is Beijing’s choice to decide the type of economy it believes China’s population wants.
But that as of now, China has forfeited its right to be treated as a WTO market economy and it has three options: renegotiate its WTO Accession; gracefully exit the WTO; or diplomatically be shown the WTO door.More at Gulfnews.
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| Mark Schaub |
China is embarking on bold moves to re-shaping its auto industry policy. This follows recent announcements in relaxation of key restrictions on foreign investment in the auto sector.
The National Development and Reform Commission (NDRC) is the body tasked in China with laying the direction for industrial policy. On May 17, 2018 the NDRC circulated the draft Administrative Rules on Auto Industry Investment (“Draft Rules”) to local governments and industry stakeholders for comment. The Draft Rules when passed will replace the current car industry development policy that has been in place since 2004.
In short the Draft Rules reform the China approval system for auto investment projects by delegating more authority to local governments, expressly prohibit any new production capacity for fossil-fuelled vehicles and raise the threshold for establishing electric vehicle manufacturing companies.
The Draft Rules set 25 May 2018 as the deadline for feedback from local governments and industry participants. Accordingly a tight timeline and sorry if you missed it! This does, however, hint that feedback will be limited and that NDRC has clear ideas as to the direction it intends to take. Generally, longer feedback periods are granted...
The Draft Rules continue and extend existing policies in place.
On the one hand China has announced relaxation of restrictions on foreign investment in auto sector with a 5-year transition plan and also reducing import tariffs on autos to 15% from 25% and on auto parts to 6%.
On the other hand China is clearly putting in place policies to allow it to have a strong domestic auto market in which it will compete head to head with international competitors. This future competition will be in respect of NEVs and autonomous cars.
The Draft Rules are expected to be officially issued within 2018 but their impact on the China’s auto industry will reach into the next decade.More at the China Law Insight.
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| Ann Rutledge |
Indeed, China’s “top-down approach to market building” stands in contrast to the private sector’s way, where companies use assets and resources within their control guided by institutional market knowledge, says Ann Rutledge, adjunct associate professor at the Hong Kong University of Science and Technology.
The key for foreign firms is to understand the raison d’etre of China’s securitization market, Rutledge says. It’s not about creating a market for its own sake but hitting another milestone towards modernization in service of its national goals. “Money is good but the needs of the people and the state come first.”
Not to be overlooked is China’s desire to control its currency and one reason for its inward focus, Rutledge says. But its quest to internationalize the renminbi — where the currency is widely held by investors outside of China for use in payments, settlements, investments and reserves — has slowed down sharply since 2014 due to changes in economic conditions, BNP’s Lo says. It was once a high policy priority in facilitating China’s financial liberalization.More at Knowledge@Wharton.
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| Tom Doctoroff |
Most companies targeted appear to have tried to accommodate Chinese demands by apologizing and amending references to Taiwan, for example, to read “Taiwan, China.”
“There’s a lot of fear. Companies are all trying to figure out if anything they’ve done is wrong,” says Shaun Rein, founder of China Market Research Group, a Shanghai-based consultancy. “They are looking at their websites … not just their own but also their suppliers’,” he adds.
The White House waded into the dispute in early May, calling Beijing’s demands “Orwellian nonsense,” and stating that Beijing’s demands were “part of a growing trend by the Chinese Communist Party to impose its political views on American citizens and private companies.”...
Tom Doctoroff, a partner at Prophet, a U.S.-based marketing consultancy, says Beijing’s intervention has so far been just a “minor irritation” to multinationals. “China has always been extremely sensitive when it comes to its territorial integrity,” he says. Recent events underlined the importance of making sure that marketing and other materials were vetted by staff with knowledge of the Chinese market, Doctoroff adds. “China is a market with a completely different worldview from the West … it’s imperative that how you go to market is localized,” he says.More in OZY.
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| Wang Haiyan |
