CHINADebate

Cheng Li

|

Brookings Institution

‘Among the many forces shaping China's domestic transformation and its role on the world stage, none may prove more significant than the rapid emergence and explosive growth of the Chinese middle-class.’

  • ‘At the heart of this story is Shanghai. Nowhere in China has this new socioeconomic force been more transformative — and more intriguing — than in this pace-setting city.’

This from Cheng Li, Director of the John L. Thornton Center at Brookings.

  • Dr. Li is the author of the important new book, Middle Class Shanghai: Reshaping U.S.-China Engagement,.
  • And today's issue recaps our recent interview about his insights not just about the middle-class in China with a focus on Shanghai but also about its broader implications for U.S.-China relations.

Dr. Li: 'A growing number of Chinese citizens - currently estimated between 400 and 500 million - enjoy a middle-class lifestyle with private property, personal automobiles, improved health care, accumulation of financial assets, and the ability to afford overseas travel and foreign education for their children.’

  • ‘They live like the middle-class, consume like middle-class, feel like middle-class, and they are middle-class.’
  • ‘They have already transformed China's socioeconomic structure and the world economy.’

With trillions of dollars to spend, the Chinese middle-class is a huge market for foreign businesses.’

  • ‘In fact, Western business groups earlier than anyone else – whether academics, journalists, or policy makers - identified the Chinese middle-class.’

As for Shanghai: As of 2018, over 5 million households shared this lifestyle and could be considered middle-class families, constituting 91 percent of the total registered households of the city.’

  • ‘In 2020, per capita GDP in Shanghai already exceeded U.S.$23,000.’
  • ‘According to a 2019 report by the People’s Bank of China, almost all registered families in Shanghai owned residential property, with a significant number of families owning two or three properties.’
  • ‘The average value of household assets among Shanghai residents was 8.07 million yuan (U.S.$1.2 million).

Beyond his explanation of the Chinese middle-class, Dr. Li discusses the implications for U.S.-China engagement:

  • ‘My fear is that Washington and Beijing are heading toward a dangerous pass, increasingly shaped by a zero-sum game mindset on both sides.’
  • ‘In the United States today, the ongoing policy and political discourse on China in the United States today disproportionately focuses on Beijing, on the Chinese authoritarian system, on the so-called China threat, and on the fatalistic view that often treats the most populous country in the world in a monolithic way.’

‘My book, Middle Class Shanghai, is a humble effort to provide a different angle, based the cultural and the educational fronts, from the perspective of shared middle-class lifestyles, aspirations, concerns, and values.’

  • ‘These are quite similar between China and United States, and I use the Shanghai middle-class as an example of this.’

‘By looking at Shanghai, we can really see the marked contrast to Beijing in the ways the two cities approach things – and begin to see that China is in no way monolithic.’

  • ‘The dynamism and diversity of middle-class Shanghai challenge the caricature of the People’s Republic of China as a burgeoning hegemon with a Communist apparatus set on disseminating its singular ideology and development model.’

‘Still, in the past few years, both Chinese nationalism and anti-American sentiment have indeed skyrocketed at an alarming speed and scope. I'm actually quite worried about this trend.’

  • ‘But this is largely a reaction not only to Washington hawks who have labelled China as a “whole-of-society threat,” but also to a new McCarthyism targeting Chinese and Chinese-American scientists, as well as growing anti-Asian hate crimes and racism in the U.S.’
  • ‘Washington should neither underestimate the role and strength of the Chinese middle class nor ostracize and alienate this force with policies that push it towards jingoistic nationalism and anti-American authoritarianism to the detriment of both countries and the global community.’

‘Middle-class exposure to foreign influences and the cosmopolitan culture could provide a force for a new mechanism for reshaping U.S.-China engagement.’

  • ‘We should remember that U.S.-China relations are not just state-to-state relations, but also shared people-to-people relations.’
  • ‘We should also remember that Beijing is not China.’

But perhaps the most important parts of a very important book are Dr. Li’s arguments supporting his view that:

  • ‘It is premature to conclude that the U.S. engagement policy with China under the eight presidents prior to the Trump administration has failed.’
  • There’s a lot to cover today so I will let you read, below, how Dr. Li explains and provides convincing evidence to support his contention.

Better still, read Cheng Li’s Middle Class Shanghai: Reshaping U.S.-China Engagement.

  • It covers far more than we discussed here, and I can't recommend it more highly.

Cheng Li is one of the leading experts on China – and, as I have mentioned often, my go-to when I want to know what the leadership in Beijing is thinking.

  • He knows because he has been friend, advisor, and confidante to them for decades.

Dr. Li grew up in Shanghai during the Cultural Revolution.

  • In 1985 he came to the United States, where he received an M.A. in Asian Studies from the University of California, Berkeley and a Ph.D. in Political Science from Princeton University.
  • Dr. Li’s CV has more activities and honors than I have room for here.

1 | 'Middle Class Shanghai: Reshaping U.S.-China Engagement'

BIG IDEA | ‘Among the many forces shaping China's domestic transformation and its role on the world stage, none may prove more significant than the rapid emergence and explosive growth of the Chinese middle-class.’

Malcolm Riddell: ‘Cheng, why is it important to understand China’s growing middle-class?’

Cheng Li: ‘Among the many forces shaping China's domestic transformation and its role on the world stage, none may prove more significant than the rapid emergence and explosive growth of the Chinese middle-class.’

‘A growing number of Chinese citizens - currently estimated between 400 and 500 million - enjoy a middle-class lifestyle with private property, personal automobiles, improved health care, accumulation of financial assets, and the ability to afford overseas travel and foreign education for their children.’

  • ‘They live like the middle-class, consume like middle-class, feel like middle-class, and they are middle-class.’
  • ‘They have already transformed China's socioeconomic structure and the world economy.’

‘In Shanghai, as of 2018, over 5 million households shared this lifestyle and could be considered middle-class families, constituting 91 percent of the total registered households of the city.’

  • ‘In 2020, per capita GDP in Shanghai already exceeded U.S.$23,000.’
  • ‘According to a 2019 report by the People’s Bank of China, almost all registered families in Shanghai owned residential property,, with a significant number of families owning two or three properties.’
  • ‘The average value of household assets among Shanghai residents was 8.07 million yuan (U.S.$1.2 million).'

‘In 2002, 40% of China's middle-class live in four cities; Beijing, Shanghai, Shenzhen and Guangzhou. The rapid expansion of the middle-class has gradually extended beyond these megacities.’

  • ‘According to McKinsey, by 2022, the proportion of China’s middle-class that resides in second- and third-tier cities will reach 76%.’

With trillions of dollars to spend, the Chinese middle-class is a huge market for foreign businesses.’

  • ‘In fact, Western business groups earlier than anyone else – whether academics, journalists, or policy makers - identified the Chinese middle-class.’
  • ‘They saw how profoundly the middle-class changed China's economic structure and the global economy.’

‘China's the middle-class development has a wide range of implications for every domain of a Chinese society: economic roles, political stability, social cohesion, environment protection, and the culture changes.’

  • ‘On the international front, the emerging Chinese middle-class has already begun changing the ways in which the PRC interacts with the outside world, for better or worse, by expanding Chinese socioeconomic outreach and soft-power influence.’

‘I hope that the people in the United States will have a thoughtful intellectual and policy debate about the role and the implication of the Chinese middle-class as you and your signature platform, CHINADebate, wisely call for.’

2 | ‘My Humble Effort’

From my interview with Cheng Li. We'll publish the video soon.
BIG IDEA | ‘My book, Middle Class Shanghai, is a humble effort to provide a different angle, based the cultural and the educational fronts, from the perspective of shared middle-class lifestyles, aspirations, concerns, and values.’

Malcolm Riddell: ‘Would please tell us your overriding reason for your book, Middle-Class Shanghai.’

Cheng Li: ‘I have message to share by emphasizing Shanghai.’

‘My fear is that Washington and Beijing are heading toward a dangerous pass, increasingly shaped by a zero-sum game mindset on both sides.’

  • ‘In the United States today, the ongoing policy and political discourse on China in the United States today disproportionately focuses on Beijing, on the Chinese authoritarian system, on the so-called China threat, and on the fatalistic view that often treats the most populous country in the world in a monolithic way.’

‘My book, Middle Class Shanghai, is a humble effort to provide a different angle, based the cultural and the educational fronts, from the perspective of shared middle-class lifestyles, aspirations, concerns, and values.’

  • ‘These are quite similar between China and United States, and I want to use the Shanghai middle-class as an example of this.’
  • ‘But looking at Shanghai, we can really see the marked contrast to Beijing in the ways two cities approach some things – and begin to see that China is in no way monolithic.’

‘Middle-class exposure to foreign influences and the cosmopolitan culture could provide a force for new mechanism for reshaping U.S.-China engagement.’

  • ‘For that reason, more broadly, my book emphasizes the similarities rather than differences between Americans and Chinese people.’

‘Neither country should be driven by ultra-nationalistic sentiments to demonize each other.’

  • ‘We should remember that U.S.-China relations are not just state-to-state relations, but also shared people-to-people relations.’

‘We should also remember that Beijing is not China.’

  • ‘Nothing illustrates that quite as well the contrast between and Beijing’s jingpai culture and Shanghai’s haipai.

3 | The ‘Haipai’ - ‘Jingpai’ Divide

Test question: Which qipaos reflect haipai culture, and which jingpai? For extra credit, explain your choices.
BIG IDEA | ‘Just as New York and Washington are profoundly different from each other, the same can be said about Shanghai and Beijing.’

Malcolm Riddell: ‘In your book, you distinguish between Shanghai as haipai culture and Beijing as jingpai culture. Could you explain that and how is it important in our understanding of China's middle-class overall?’

Cheng Li: ‘You earlier made a comparison between Shanghai and New York.’

  • ‘Indeed, Shanghai is to China what New York City is to the United States.’
  • ‘And just as New York and Washington are profoundly different from each other, the same can be said about Shanghai and Beijing.’

‘The Chinese have illuminated the differences between jingpai and haipai for over a century, ever since the 1919 May 4th movement, if not earlier.’

  • ‘Beijing culture, jingpai, is characterized as aristocratic, conservative, elitist and bureaucratic.’
  • ‘Shanghai culture, haipai, as pragmatic, entrepreneurial, innovative, leisurely, holistic, and forward-looking.’
  • ‘Malcolm, you and our viewers can tell I come from Shanghai with all these terrible biases.’

‘Chinese scholar, Yang Dongping, has described politics as the salt in Beijing, without which life has no taste, no flavor.’

  • ‘People in Shanghai don't bother to discuss politics so much. They love to talk about doing business and entrepreneurship.’
  • ‘Even during times of tensions with Taiwan, for example, in 1996, and also more recently, Shanghai's leaders reached out to the Taiwanese - actually there's huge Taiwanese community living in Shanghai - and said, "Don't leave. Shanghai will continue to do business with you." ’
  • ‘That’s haipai in contrast to jingpai.’

‘Shanghai’s distinct entrepreneurial spirit and cultural identity (haipai culture) quickly gained prominence after Deng Xiaoping’s economic reform and opening up took root in the 1980s and 1990s.’

  • ‘Many of the important changes that have taken place over recent decades — the establishment of a stock market, foreign investment, the rise of private firms, land leasing, property booms, and expansion of higher education — either began in Shanghai or have otherwise affected this born-again city in a deep and enduring way.’

‘These developments have contributed to the birth and growth of a new socioeconomic stratum, the members of which enjoy a middle-class lifestyle with private property, cars, accumulated financial assets, and the financial freedom to travel overseas and educate their children abroad.’

4 | The Shanghai Paradoxes

Paradox: site where the CCP was founded, flanked by modern Shanghai skyscrapers.
BIG IDEA |Middle-Class Shanghai actually reveals China's unsettled future because Shanghai embodies what I call two tales of a city. Now in my view, Shanghai was, is, and will be paradoxical.’

Malcolm Riddell: ‘Your book is Middle-Class Shanghai, but that's a lot like saying middle-class New York. Why did you choose Shanghai as the focal point of your analysis for China’s middle-class?’

Cheng Li: ‘The rapid emergence and explosive growth of the Chinese middle-class is one of the world’s most stunning developments.’

  • ‘At the heart of this story is Shanghai.’
  • ‘Nowhere in China has this new socioeconomic force been more transformative — and more intriguing — than in this pace-setting city.’

‘The dynamism and diversity of middle-class Shanghai challenge the caricature of the People’s Republic of China as a burgeoning hegemon with a Communist apparatus set on disseminating its singular ideology and development model.’

  • ‘China today, as exemplified and led by Shanghai, is also a crucible of change driven by a growing middle-class.’

‘Middle-Class Shanghai also reveals China's unsettled future because Shanghai embodies what I call two tales of a city.’

  • ‘Now in my view, Shanghai was, is, and will be paradoxical. Consider these three paradoxes:

First, the 'was' paradox: 'Historically, Shanghai was the most westernized Chinese city.’

  • ‘But it was also the birthplace of the CCP, the Chinese Communist Party, and the center of Maoist radicalism during the Cultural Revolution (during which myself, as a young boy and also my family suffered a great deal).’

Second, the 'is' paradox: 'Today, Shanghai is often regarded as the frontier city of market reform, opening up, and indeed cosmopolitanism.’

  • ‘But, at the same time, the city is also what the Chinese call the head of a dragon in China's industrial policy and also state capitalism.’

Third, the 'will be' paradox: 'In the future, Shanghai can serve as the vanguard of a middle-class of worldly voices, views, and the values.’

  • ‘But the city may increasingly become the showcase of China's growing nationalism and the mercantilist global outreach, driven by a growing middle-class.’

‘My point here is that we should place Shanghai's future and China's future in an ever-changing domestic and international context.’

  • ‘It is neither predetermined nor stagnant.’
  • ‘Shanghai is not a monolithic entity, and certainly China is not either.’

‘China today, as exemplified and led by Shanghai, is also a crucible of change driven by a growing middle-class.’

5 | 'It is premature to say that engagement has failed.'

BIG IDEA | ‘It is premature to conclude that the U.S. engagement policy with China under the eight presidents prior to the Trump administration has failed.’

Malcolm Riddell: 'One of your most interesting and important points is your contention that it is premature to say the engagement policy toward has failed. Would you please explain?

Cheng Li: ‘Many believe that America’s long-standing engagement policy towards China has failed on two major grounds.’

‘First, the premise that global integration would lead China to a sort of free-market capitalism.'

  • Instead, China has retained much of what Chinese Communist Party leaders call “socialism with Chinese characteristics” or what critics describe as “state capitalism.” ’

‘And second, the premise that four decades-long, multi-dimensional American-Chinese cultural and educational exchanges would make China more democratic.'

  • 'This has turned out to be just the opposite. Members of China's middle class are often seen as political allies rather than challengers to authoritarian rule.’

‘I contend, as you say, that it is premature to conclude that the U.S. engagement policy with China under the eight presidents prior to the Trump administration has failed.’

‘That's because the two pessimistic views, just noted, overlook the complexities and contradictions of China’s ongoing transformation.’

  • ‘Let me focus on the Chinese middle-class to challenge a few of the underlying assumptions of these views.’

‘First is the so-called “whole of society threat” championed by some U.S. policy makers.

  • 'This assumes that China is a monolithic entity with no distinction between state and society.’
  • 'But there is an actual – and very real – distinction that exists.’

‘True, China’s nascent middle class tends to emphasize the status quo and is risk-averse in political views and behavior.'

  • 'But this may be only a transitory phase.’

‘We saw, for example, the nationwide criticism of the government response to the tragic death of Dr. Li Wenliang, a whistle-blower who exposed the coronavirus at the outset of the outbreak, displayed in part the middle class’ intriguing political role.’

'So, the relationship between the middle-class and the Chinese communist government is, in fact, not stagnant but ever-changing.'

  • 'Rather than seeing a "whole of society threat," U.S. policy makers should be aware that China's middle-class is not necessarily in step with the state on any given issue - and never to the extent that the middle-class constitutes a part of a seamless alignment between it and the state that endangers America.'

‘Second is the belief that the Chinese middle-class is the political ally of the party state.'

  • 'This belief arose, I believe, because, in the past few years, both Chinese nationalism and anti-American sentiment have indeed skyrocketed at an alarming speed and scope.'
  • 'But both nationalism and anti-American sentiment are largely reactions, not only to Washington hawks who have labeled China as a “whole-of-society threat”, but also to a new McCarthyism targeting Chinese and Chinese-American scientists, as well as growing anti-Asian hate crimes and racism in the US.

As for nationalism: Yes, a high degree of nationalistic sentiment certainly exists among members of the Chinese middle-class, including foreign-educated returnees who studied in the U.S. or west.'

  • 'But remember, these views among the Chinese middle-class co-exist with cosmopolitan perspectives on various important issues, such as climate change, public health, food and drug safety, and the non-proliferation of weapons of mass destruction, as well as middle-class values such as the protection of property rights, entrepreneurship, government transparency and accountability, and consciousness of taxpayer rights.’
  • ‘These are universal aims and values shared by the middle-classes of both China and America - and are at odds with nationalistic fervor.'

'As for anti-American sentiment: This is largely a reaction, as I said, to the U.S.'

  • ‘U.S. policy makers should recognize that Chinese middle-class views of America are neither homogeneous nor fixed.’
  • 'And those views could change with changes in U.S. attitudes and actions - and this perceived alliance between the middle-class and the state would diminish accordingly.'

‘Third is the belief that paints the large number of PRC students and scholars in the U.S. as spies, who are being weaponized by Beijing, and therefore, assuming bilateral educational exchanges benefit only China and may even undermine American supremacy and American security.’

  • ‘National security and the intellectual property rights should be vigorously protected on the part of the United States.'
  • 'But racial profiling of PRC-born scientists, Chinese-American researchers, and young Chinese students fails to serve the interests of America and also does not align with American values.’
  • 'And, as mentioned, this stokes both nationalistic and anti-American sentiments.

‘In sum, unlike the view of foreign business that China's middle-class presents an opportunity, the pervasive view in Washington about middle-class development in China is no longer one of hope for positive change but rather one of fear that this development may undermine American supremacy and security.’

  • ‘But I say again, U.S. policy makers should neither underestimate the role of the Chinese middle-class nor alienate this force with policies that push it toward ultra-nationalism and anti-American authoritarianism.’

'Then perhaps they will come to agree that it is premature to conclude that the U.S. engagement policy with China has failed.’

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December 7, 2021

Look Through the Rights Lenses

Getting down more to the nitty-gritty, if you’re evaluating a sector or a company, get your lenses right to get the details right.. Stonehorn’s Sam Le Cornu gives a good example of this in a Bloomberg interview.
December 7, 2021

Sometimes You Just Have to Roll the Dice

Telling someone to align him or herself with Beijing's priorities still is generally good advice.And, when I tell you what those priorities are, I know I am right - until I'm not.
December 7, 2021

'Xi Jinping has made sure history is now officially on his side'

‘While there are murmurs of opposition, the historic plenary session would suggest that the future is in Xi’s hands. However, when politics is so deeply personalised and centralised, there is only one person to blame if things go wrong. Unless, of course, we get a new resolution on history that tells us who led the party astray, despite Xi’s earnest attempts to keep policy on the straight and narrow.’
November 23, 2021

'Biden Has a Summit With Xi, but No Strategy for China'

‘Neither Taiwan nor strategic arms are a hot campaign topic, and China is not yet at the forefront of public consciousness. To ensure America’s eventual strategy is workable, political leaders need to debate the challenges so citizens can appreciate the implications of the choices they will have to make.’
November 23, 2021

Xi Jinping's Leadership: 'The Inevitable Outcome of History'

Mr. Xi is the hero of a Resolution on the history of the Chinese Communist Party that painted his leadership as the inevitable outcome of history and all but gave him his third term. Tony Saich of the Harvard Kennedy School did a terrific analysis on this - you'll find it below, after my take.
November 23, 2021

'America's China Plan: A Proposal' by Clyde Prestowitz

Outcompeting China and avoiding global extension of its authoritarian and coercive policies and practices is not really about China. It’s about America.
November 9, 2021

Why China Won't Invade Taiwan - Yet

Forget Evergrande and the energy crunch. After the recent flurry of alarming headlines, here’s the question I get most often these days from CEO’s and institutional investors: Will China invade Taiwan in the next few years?
October 27, 2021

An Energy Crunch. China's Latest Crisis. They Just Keep Piling Up.

‍‘Over the next six months or more, the energy crunch in China will be an even bigger challenge than Evergrande. Will make the Evergrande problem look tiny and has huge global implications. The lights go out in China!’ one experienced and very well-respected reader of long residence in China wrote to me in response the last issue on Evergrande.
October 17, 2021

Just How Contagious is Evergrande?

Just as a personal crisis can lead you to dig deeper into yourself, so the rapid-fire events in China - with trillions of dollars of business and investment on the line - have led us to (finally) go deeper into how China works – and to come to grips with uncertainties caused by Xi Jinping’s recent moves to reshape the Chinese economy and the Party’s social contract with the Chinese people.
October 7, 2021

'This Time Feels Different'

Just when we thought we were getting used to Xi Jinping’s tech reforms and social-engineering regulations, the Evergrande crisis heats up.
September 27, 2021

AUKUS: A New World Order?

‍In case you passed over the news of AUKUS, the new strategic alliance among the U.S, the U.K., and Australia, here a few headlines to encourage a deeper look.
September 19, 2021

Xi Jinping: Today, video games. Tomorrow, well ... just be good.

Today's issue is a heads up on what may be Xi Jinping's efforts to reshape Chinese society.
September 7, 2021

The Taliban: 'China's Perfect Partner'?

Breaking through the blow-by-blow reporting that started when the Taliban began its sweep to victory are the geopolitical analyses of who gains and who loses in Afghanistan.
August 28, 2021

'China Signals More Regulation for Businesses in Coming Years'

‘The State Council’s statement provides a guiding context to interpret current regulatory thrusts. The blueprint as an attempt by Chinese authorities to help investors understand the motives behind the regulatory push.’
August 15, 2021

China Economy: Industrial Production Down, Demand Resilient

China’s industrial production down 10%. Demand resilient.
August 15, 2021

'Xi’s Dictatorship Threatens the Chinese State'

‘Mr. Xi is determined to bring the creators of wealth under the control of the one-party state.’
August 15, 2021

'Are you tired of losing yet, America?'

As I write this, Taliban forces have entered Kabul and are reportedly occupying the Presidential Palace.
August 15, 2021

‘Global investors shocked to have discovered that China is run by Communists.’

‘Global investors are shocked to have discovered that China is run by Communists.’
August 5, 2021

'Shocked Investors Scour Xi’s Old Speeches to Find Next Target'

‘While China’s policy moves can feel ad hoc particularly to foreign investors, the changes are quite targeted on certain sectors.’
August 5, 2021

'China Wants Manufacturing—Not the Internet—to Lead the Economy'

‘Social media, e-commerce and other consumer internet companies are nice to have. But in his view national greatness doesn’t depend on having the world’s finest group chats or ride-sharing.’
August 5, 2021

Don't Say Xi Jinping Didn't Warn You

‘Global investors are shocked to have discovered that China is run by Communists.’
August 5, 2021

'Xi's Four Pillars of Regulation'

‘Broadly, Beijing is concerned about four pillars of stability: banking, anti-trust regulation, data security and social equality. All of Beijing’s major interventions reflect these concerns.’
August 1, 2021

'Why China Is Cracking Down on Its Technology Giants'

‘Why, you may ask, is China crushing some of its most innovative unicorns? We’re in a new era led by President Xi Jinping, and politics are in command.’
August 1, 2021

China's Tech Crackdown: 'Nobody Saw It Coming.' — Huh?

‘Carnage in China's financial markets signals the beginning of a new era as the government puts socialism before shareholders, and regulatory changes rip apart the old playbook,’ writes Reuters’ Tom Westbrook.
August 1, 2021

'The most significant philosophical shift since Deng'

‘Carnage in China's financial markets signals the beginning of a new era as the government puts socialism before shareholders and regulatory changes rip apart the old playbook. According to some analysts, it is the most significant philosophical shift since former leader Deng Xiaoping set development as the ultimate priority 40 years ago.’
August 1, 2021

'Stock Market: China Doesn’t Care How Much Money Investors Lose'

‘Does Beijing not care how much money foreign investors have lost? Does the government really want to close China Inc.’s access to the deep pool of global capital? The short answer is, no, the government doesn’t care.
August 1, 2021

How China's Middle-Class China is Transforming China and the World

‘Among the many forces shaping China's domestic transformation and its role on the world stage, none may prove more significant than the rapid emergence and explosive growth of the Chinese middle-class.’
July 25, 2021

Part 2 | The DiDi VIE (as an example)

‘The prospectus has a diagram, above, of the corporate structure, which looks almost normal. But everything below the double arrow — the actual ride-hailing business, etc. — is slightly askew.’
July 22, 2021

Part 3 | Revising the Rules

‘The Chinese government could declare “all these VIE contracts are actually a disguised form of foreign ownership, which is not allowed by the rules, so they are all void and your Didi and Alibaba shares are worthless.” ’
July 22, 2021

Part 1 | 'Owning Chinese Companies Is Complicated'

‘ “Variable interest entities”(VIEs): The problem with this is that it sort of sounds like you’re kidding. But this is a standard method for mainland Chinese internet companies to go public, and the market has come to accept it.’
July 22, 2021

China: Signals Blinking Red & Oops, We Missed the Risks

I had intended to make this issue all about ‘Variable Interest Entities’ (VIEs) and the emerging risks to about $1.8 trillion dollars’ worth of Chinese shares listed on U.S. exchanges – that is, 4% of the capitalization of the U.S. stock markets.
July 22, 2021

'Crackdown on US listings: Will China close $1.6tn VIE loophole?'

‘If Chinese authorities start to question “Variable interest entities”(VIEs), amid the crackdown that has already battered ride-hailing company Didi Global -- another VIE user -- the resulting loss of investor trust could send shock waves through global financial markets.’
July 22, 2021

'China Plans to Exempt H.K. IPOs From Cybersecurity Reviews'

‘China plans to exempt companies going public in Hong Kong from first seeking the approval of the country’s cybersecurity regulator, removing one hurdle for businesses that list in the Asian financial hub instead of the U.S.’
July 18, 2021

'I will aim for Mao's Status.'

‘There on the gate was Xi Jinping, Chinese president and party general secretary, in a gray Mao suit. Just below his feet was the portrait of Mao Zedong, also dressed in a gray Mao suit.’
July 18, 2021

Why the U.S. Lacks Leverage over China

During the celebration of the Chinese Communist Party’s Centennial celebration, Mr. Xi stood in the same place on the balcony facing Tiananmen Square where Mao Zedong stood when he announced the founding of the PRC; Mr. Xi wore a gray Mao suit, among a sea of blue western suits; and he centered himself right above the portrait of Mao, who is similarly attired.
July 18, 2021

'Biden’s Warning on Hong Kong'

‘The pretense of Chinese and Hong Kong authorities is that their crackdown on the rule of law and dissent will have no effect on Hong Kong’s viability as an international center for trade and finance.’
July 18, 2021

Hong Kong and the Limits of Decoupling

‘The United States’ inability to make China regret—much less reverse—its transgressions in Hong Kong suggests that financial separation, sanctions, and economic barriers are less reliable tools than many in Washington believe.’
July 18, 2021

'US warns companies of risk of doing business in Hong Kong'

“In the face of Beijing’s decisions over the past year that have stifled the democratic aspirations of people in Hong Kong, we are taking action,” said Antony Blinken, US secretary of state. “Today we send a clear message that the US resolutely stands with Hong Kongers.”
July 18, 2021

'What's Wrong with Biden’s new China doctrine'

‘Mr Biden’s aides invariably start any discussion of China strategy with the need to restore American greatness after decades of decline.’
July 15, 2021

Part 2 | Joe Biden is determined that China should not displace America

‘Mr Biden’s aides invariably start any discussion of China strategy with the need to restore American greatness after decades of decline.’
July 15, 2021

The Biden Doctrine and Its Discontents

President Biden has framed China as a threat both to the U.S. and the liberal world order.
July 15, 2021

Part 1 | 'Joe Biden is determined that China should not displace America'

‘Biden’s emerging China strategy, while still protean, sounds of a kind with Mr Doshi’s prescription for “blunting and building”.’
July 15, 2021

Didi: Xi Surprises Us Again

Beijing shocked the financial world when it pulled the rug out from under Didi days after its IPO on the New York Stock Exchange and also announced new regulations reigning in overseas IPOs and Chinese companies already listed.
July 8, 2021

The Chinese Point of View

Here are a few of my thoughts on the importance of Wang Jisi’s ‘The Plot Against China.’ Yuen Yuen Ang’s ‘The Evolution of Chinese Corruption’ speaks for itself - but note especially how Mr. Xi's anti-corruption campaign could hurt China's economy. I have now lived long enough that when a friend complains about his or her spouse, I say to myself, ‘There are no doubt two sides to this story.’
July 4, 2021

'How Corruption Powers China's Economy'

‘China has managed to sustain four decades of economic growth despite levels of corruption that even Xi has described as “grave” and “shocking.” Why does it seem to have bucked the trend?’
July 4, 2021

'How Beijing Sees U.S.-China Relations'

‘In Chinese eyes, the most significant threat to China’s sovereignty and national security has long been U.S. interference in its internal affairs aimed at changing the country’s political system and undermining the CCP.’
July 4, 2021

Five Themes that Point to Where the Chinese Communist Party & China are Heading

As the Chinese Communist Party begins its second century, it’s useful to identify enduring patterns that might aid us in understanding China today and the directions it might be heading.
July 1, 2021

From Rebel to Ruler: One Hundred Years of the Chinese Communist Party by Tony Saich

‘In our discussions, you've identified five themes that have been more or less consistent throughout the history of the party but have oscillated between different points on a continuum:’
July 1, 2021

'From Rebel to Ruler': Tony Saich on Chinese Communism at 100

‘At so many points during its century-long existence, the CCP appeared to be in its death throes, whether as a result of external attack or self-inflicted internal strife.’
July 1, 2021

'Jimmy Lai & the Death of Free Speech in Hong Kong'

Jimmy Lai’s tabloid, the Apple Daily, with its peculiar blend of scandal, gossip, and serious political reporting, was Hong Kong’s indispensable voice of free speech. Now that voice has been silenced, and Lai is in prison with others who tried to protect the right of Hong Kong’s citizens to speak and write freely, to be ruled by law, and to vote for their own autonomous government. Their politics are diverse Yet they stand together. When freedom is under siege, people cannot afford the narcissism of small differences that is tearing apart liberal politics in countries where people think democracy can be taken for granted.
June 27, 2021

'European Companies in China: Between Decoupling and Onshoring'

‘Instead of leaving the market, European companies are exploring ways to separate their China operations from their global ones.’ ‘Following the Covid-19 outbreak, European companies in China spent the first few months of 2020 solemnly appraising their investment strategies.’
June 27, 2021

'How China & America Should Compete'

‘China and the West urgently need a new framework for understanding the state of the world and their place in it. Such a framework must recognize, first and foremost, that properly regulated economic competition is not a zero-sum game.’
June 27, 2021

European Chamber in China: 'Business Confidence Survey'

A mere 9% of European companies are considering moving any current or planned investment out of China, the lowest level on record. Instead, companies are strengthening their positions in JVs, onshoring supply chains and increasing spending to secure market share. The ambition not only to stay but also to expand their China footprint is more than justcapital flooding in due to optimism about growth. Companies are taking action to secure their operations in China and mitigate exposure to geopolitical trends in order to have a better chance of navigating a future that looks to be fraught with risk, at least in the near- to medium-term.
June 27, 2021

Bitcoin’s growing energy problem: ‘It’s a dirty currency'

“Bitcoin alone consumes as much electricity as a medium-sized European country.”
June 24, 2021

The End of 'Apple Daily' - and Freedom of the Press in Hong Kong

Through arrests and freezing of assets, Beijing has forced the closing of Hong Kong’s last pro-democracy newspaper, the Apple Daily.
June 24, 2021

'Hong Kong’s Apple Daily newspaper folds under government pressure'

Apple Daily was much more than a newspaper. To its fans, it was a defender of freedoms. To its foes, it was the defiler of national sovereignty.’
June 24, 2021

'Congress on China: Then and Now'

‘With the Senate voting on June 8, 2021, to adopt the United States Innovation and Competitiveness Act, it is safe to say that this is the most comprehensive action by Congress on China policy EVER.’ ‘The language of the United States Innovation and Competitiveness Act is about a long-term competition with China as opposed to war with an enemy.’
June 24, 2021

'China steps up crackdown on bitcoin mining industry'

‘China’s latest intervention places further pressure on what was once one of the world’s most vibrant markets for trading and mining digital currencies.’ ‘It comes at a time when many governments are scrutinising the industry’s effect on the environment and determining the types of financial oversight that should be applied to cryptocurrencies.’
June 24, 2021

'Apple Daily closed, but press freedom stays in Hong Kong'

‘Freedom of the press is a good thing. The West's freedom of speech must be consistent with national interests and public security.’
June 24, 2021

‘Why do business and political leaders in the West persist in getting China so wrong?’

From that I suggested that to invest successfully in China, you have to understand – and be aware of - what those differences are.
June 20, 2021

‘Why do business and political leaders in the West persist in getting China so wrong?

‘Why do business and political leaders in the West persist in getting China so wrong?’
June 20, 2021

Part 2 | 'Is China exporting inflation?'

“Is China exporting inflation? In renminbi terms, it’s not so obvious. But in U.S. dollar terms, it starts to get more sizable.” ’
June 17, 2021

Part 1 | 'Is China exporting inflation?'

‘Beijing is moving swiftly to protect its factories and workplaces from rising costs.’ ‘Still, rising prices in China, by far the world’s biggest manufacturer and exporter, could be felt around the world.’
June 17, 2021

'Back-to-Back Rebukes of China Mark a Turning Point'

‘The one-two punch of public criticism smacks directly into Mr. Xi’s assertion that China won’t stand for lecturing by other nations, suggesting anxiety in key capitals is prompting governments to seek alignment with the U.S. over attempting to manage the relationship with Beijing on their own.’
June 17, 2021

Bernie Sanders: 'Don’t Start a New Cold War With China'

‘The pendulum of conventional wisdom in Washington has now swung from being far too optimistic about the opportunities presented by unfettered trade with China to being far too hawkish about the threats posed by the richer, stronger, more authoritarian China that has been one result of that increased trade.’
June 17, 2021

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