CHINADebate

Malcolm Riddell

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CHINADebate

from the cover of The Economist

The Zero Coivd campaign and the ‘New Development Concept.’

  • These are ‘twin blows to the Chinese economy,’ says The Economist.
  • And for both, it asserts, Xi Jinping bears responsibility.

The question then:

  • If those two policies are so damaging to the economy, why is Mr. Xi sticking with them? – some insights below.

And heads up for an important report. The EU Chamber of Commerce in China has just published another excellent and timely report:

China is the biggest emitter, and if you are concerned about whether or not it will be able to meet its carbon goals, you may find this report disturbing.

  • The obstacles are daunting.

The good news:

  • ‘Driven by stringent environmental regulations and consumer demand, and guided by their global corporate carbon neutrality pledges, European businesses are well placed to help China peak carbon emissions before 2030, and push towards carbon neutrality in 2060.’ – If China will only accept the assistance.

1 | Is Xi the problem?

On the Chinese economy, I’ve never been a bear (or a bull, for that matter). When the echo chamber magnifies an apparent weakness into the coming collapse of China, I ask two questions:

  1. Is the affected industry or the Chinese government or both capable of working through that immediate weakness?
  2. Does the economy overall look to be on a good trajectory?

And the answer has always been yes to both, if often with varying degrees of conviction.

  • Yes, China’s economy encounters challenges, but none that seem greater than those that every economy faces in some form or other - and gets through.

Then last week an institutional investor asked me where I saw the bright spots in the Chinese economy – and I realized that, unlike before, I don’t really see any.

  • Not that the economy is collapsing, but the number and magnitude of problems appear greater than I have ever seen.

Then he asked, ‘What is the biggest problem in China’s economy?’

  • Without thinking, I blurted, ‘Xi Jinping.’

As if on cue, The Economist this week put the illustration above on the cover.

The lead story, ‘Ideology versus prosperity: How Xi Jinping is damaging China’s economy,’ contends: ‘China’s economy is in danger.’

The result:

  • ‘If it stays on this path China will grow more slowly and be less predictable, with big consequences for it and the world.’

But, as I went through The Economist’s listing of the woes of China's economy – which repeated those cited by many others – and laid at Mr. Xi’s feet, I began to wonder if I had stumbled into the China bear’s latest echo chamber without realizing it.

  • Still, as the cliché ‘even paranoids have enemies’ implies, just because it’s an echo chamber doesn’t mean it’s wrong.

2 | ‘Xi has maneuvered himself into a dead-end’

‘Xi has made clear that his success in containing the virus and avoiding the mass deaths seen in other major countries is the legacy he’s riding on heading to the party’s leadership conclave [and on securing a third term there] later this year,’ says ‘China’s Premier Warns of Calamity. But Will Anyone Listen? in Bloomberg.

  • And he seems not inclined to change.

As Joerg Wuttke, president of the EU Chamber of Commerce in China, notes (and we have published before) in his answer to the question: ‘Do you see any indication that the Zero Covid policy, which is behind the lockdowns, is being reconsidered?’

  • ‘No, nil’

‘The authorities have made the Chinese population genuinely afraid of the virus.’

  • ‘The authorities do not inform that the Omicron variant is milder, they do not inform that other countries have learned to live with the virus - they can’t admit that people in Europe can fly on vacation again and live largely a normal life.’
  • ‘The authorities have spent a year bad-mouthing Western mRNA vaccines, with the result that people in China don’t trust the vaccination - and the authorities can’t admit that it would make sense to use mRNA vaccines in addition to the Chinese vaccines.’

‘For the past two years, the party leadership and government have spun the narrative that China has handled the pandemic much better than the decadent West.’

  • ‘Now this narrative is blowing up in their faces.’

‘President Xi wants to be confirmed for a third term at the 20th Party Congress in the fall, so he cannot change his narrative this close to the finish line.’

  • ‘Until the 20th Party Congress, they will stick to the Zero Covid policy.’

‘In short, President Xi has maneuvered himself into a dead-end:’

  • ‘He can’t change his Covid policy.’
  • And so he won’t save the Chinese economy.

A more charitable and China-centric view of the Zero COVID policy comes from Jun Zhang of Fudan University in ‘What Justifies China’s Zero-COVID Policy?’:

  • ‘This [Xi's] approach is characteristic of Chinese policymaking.’

‘China’s political leaders always have long time horizons and are more willing to incur short-term high costs to advance long-term development goals.’

  • ‘Especially in the midst of crises, they find solutions which – though often costly in the short term – enable the country to return to its path.’

This brings us to The Economist’s second issue:

  • Just what path will China return to?

3 | The ‘New Development Concept’

The Economist pegs the second of the ‘the twin blows to the economy’ as ‘a series of economic initiatives that form what Mr Xi calls his “new development concept.’ ”

‘Xi Jinping has been advancing a new overarching economic policy framework over the course of this year entitled the “New Development Concept” — a concept which incorporates within it a range of different elements, including:’

  • ‘Xi’s 2020 idea of a “dual circulation economy,” which seeks to reduce China’s future dependency on export-driven growth, and instead have Chinese domestic consumer demand become the principal growth driver; thereby leveraging the enormous “gravitational pull” of the Chinese domestic economy on the rest of the global economy;’
  • ‘Second, his 2021 prioritization of the idea of “Common Prosperity,” which emphasizes income redistribution away from China’s billionaire class to low- and middle-income earners; and’
  • ‘Third, the continued expansion of China’s “industrial policy,” led by a revamped state-owned sector, as China seeks to take the commanding heights of new technology platforms as the drivers of the 21st century global economy, including semi-conductors, artificial intelligence, quantum computing, and new forms of advanced manufacturing.’

‘For many in the international community, as well as China’s own entrepreneurial class, this has been received as a surprising, bewildering, almost scattergun series of announcements — from the micro to the macro.’

  • ‘I would argue, however, that there is a common “red thread” to all of the above — particularly when seen through the political lens of Xi Jinping’s office in Zhongnanhai.

4 | The ‘Red Thread’

The ‘red thread’ gives the hint about what Xi Jinping is up to. Another hint comes from one of my favorite headlines from Bloomberg that appeared soon after investors lost over a trillion dollars in China’s tech ‘crackdown.’

We ‘have told themselves a comforting story,’ it says:

  • ‘China was no longer truly Communist after late paramount leader Deng Xiaoping embraced markets in the late 1970s and kicked off the country’s spectacular economic rise.’
  • ‘The wealth and growth generated by capitalist techniques had converted the government and people.’
  • ‘While the ruling party continued to wrap itself in the rhetoric of Communism, its members knew they were paying lip service to a bankrupt ideology, or so the thinking ran.’

In fact, from Deng to Xi, as the Chinese put it:

  • 社會主義是個目的,資本主義是個手段, ‘socialism is the goal; capitalism is a tool (or method).’

And in Marxist theory itself, capitalism is a stage on the inevitable and historic path to socialism.

5 | Deng said so himself

Deng himself made this clear many times. In 1984, he said:

  • ‘It is crucial for us to adhere to Marxism and socialism.’
  • ‘We have said that socialism is the primary stage of communism and that at the advanced stage the principle of from each according to his ability and to each according to his needs will be applied.’
  • ‘This calls for highly developed productive forces and an overwhelming abundance of material wealth.’
  • ‘Poverty is not socialism, still less communism.’
  • ‘We believe that the course we have chosen, which we call building “socialism with Chinese characteristics,” is the right one.’

To attain ‘an overwhelming abundance of material wealth,’ Deng’s ‘socialism with Chinese characteristics’ incorporated elements of capitalism.

  • To our eyes – and indeed to many Chinese eyes – this looked more pragmatic than ideological, no matter how theorists tried to shoehorn it into Marxist thought.

But, as I have written before, when Deng Xiaoping introduced capitalist elements into China’s economic model, he was not abandoning the goal of moving China along the Marxist path to socialism.

6 | And Xi said so too

Like Deng, Xi Jinping is a true believer, as his writings and speeches (and now his actions) show. Here's just a snippet:

  • ‘China has entered a new stage of development,’ he declared in a speech in January.’
  • ‘The goal,’ he said, ‘is to build China into a “modern socialist power.” ’

The ‘New Development Concept’ and many other policies demonstrate that, for Mr. Xi, China has achieved such an 'overwhelming abundance of material wealth' that China’s capitalist stage may have reached its use-by date.

  • And the time has come to begin moving China toward to the next stop on the road to socialism - even if it means slower economic growth.

7 | To the left

More from Kevin Rudd:

  • ‘What we have seen since 2012 at the beginning of his first term is Xi Jinping progressively moving the center of gravity of Chinese politics further to the left.’
  • ‘What we have seen during Xi Jinping’s second term since 2017 is evidence of a parallel move toward the left on the Chinese economy.’

‘This move to the left has been reflected in a number of specific domains:

  • ‘The reassertion of Chinese industrial policy led by the state across all branches of technology;’
  • ‘The reinvigoration of state-owned enterprises more broadly as a dominant player in the Chinese economy (and now empowered to take extensive equity in Chinese private firms as part of Xi Jinping’s so-called “mixed economy model”); and’
  • ‘Xi Jinping’s chiding of China’s private entrepreneurial elite for not being sufficiently patriotic when what the Party requires is a brigade of Chinese corporate leaders walking in partnership with the Chinese state and under the ultimate direction of the Party.’

‘None of these things have happened by accident.’

  • ‘They have, by and large, occurred as a result of a change in China’s overall strategic course — through what Xi Jinping himself lauds as “top-level design” (or “dingceng sheji”), an approach which also happens to sit comfortably with Xi Jinping’s personal style.’

8 | The ‘Decider’

If we have learned anything about Mr. Xi over the past year, it is that he favors health and ideology over prosperity.

  • Since he is, as President George W. Bush put it, the ‘decider,’ then the outcomes from his preferences will be his.

So if The Economist (and the others in the echo chamber) is right when it says that the Zero Covid campaign and the ‘New Development Concept' are 'twin blows to the economy'...

  • ...then my kneejerk response that Mr. Xi is China's biggest problem may not be so far off.

And while the impact of Zero Covid may be relatively short-lived, the impact of Mr. Xi’s return to the socialist path will be felt for a very long time, both in China and the world.

  • So the impact will no doubt be felt as long as Mr. Xi leads China.

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Understanding the drivers of China’s rise to supply chain prominence gives (me anyway) insights to help analyze the changes – or not – of ‘decoupling.’
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Wang Jisi notes that the views are his own, and certainly we don’t know how closely, if at all, they reflect the thinking of anyone in the leadership. But given his straightforward and thorough analysis, free of canned arguments and slogans, I hope they do. I also hope the Biden administration pays heed.
June 5, 2022

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‘The bad news is that very few corporations engaged in China have contingency plans or long-term strategies to hedge against the downside risks of growing geopolitical competition.’
May 22, 2022

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May 14, 2022

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Joerg Wuttke is the president of the EU Chamber of Commerce in China - the 'official voice of European business in China.'
May 1, 2022

China: 'Sleep Walking into Sanctions?'

A looming risk is Russia-like sanctions on China. The sanctions on Russia are causing plenty of disruptions. But those disruptions would be nothing compared to the catastrophe of Russia-like sanctions on China. The good news is that if China does violate the sanctions, the violations would likely be narrow and specific - even unintentional. So secondary sanctions - if they come at all - likely won't hit China’s economy and financial system deeply – or (fingers crossed) U.S.-China relations.
April 17, 2022

China Coup: How Worried Should Xi Be?

September 26, 2022
‘Xi and the phrase #ChinaCoup trended on social media after tens of thousands of users spread unconfirmed rumors that the president was detained and overthrown by the China's People's Liberation Army.’
keep reading

'How do you spy on China?'

Many of you have asked about my own take on the issues I analyze in these pages and about my background. Today is some of both.I am honored to have been interviewed by the terrific Jeremy Goldkorn, editor-in-chief of The China Project. Below is part of that interview.
September 18, 2022

Xi’s Dangerous Radical Secrecy

In a world of political hardball, investigative reporting, and tabloids, we know a lot (if not always accurate or unspun) about world leaders, especially those in functioning democracies. Not so with Xi Jinping.
September 5, 2022

Building Biden's 'Great Wall' Around China

Whether you view it as an aggressive adversary or a nation asserting itself in ways commensurate with its rising status, China is creating risks – some subtle, some obvious - that, along with reactions of the U.S. and its allies, have to be factored, into every related business, investment, and policy strategy.
July 10, 2022

A Debt Crisis of its Own Making

Ever since Xi Jinping announced ‘One Belt, One Road’ in 2013, I watched it expand China’s economic and geopolitical influence and lay the foundation for projecting its military power – and become by many accounts an exploiter of the developing world itself.
July 1, 2022

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Ukraine won't speed up or delay Mr. Xi's timetable. (But it may cause him to work harder to strengthen China's military and insulate its economy from external pressure.)
June 22, 2022

'The competitiveness of China is eroding.'

Understanding the drivers of China’s rise to supply chain prominence gives (me anyway) insights to help analyze the changes – or not – of ‘decoupling.’
June 12, 2022

U.S.-China Relations: A Chinese Perspective

Wang Jisi notes that the views are his own, and certainly we don’t know how closely, if at all, they reflect the thinking of anyone in the leadership. But given his straightforward and thorough analysis, free of canned arguments and slogans, I hope they do. I also hope the Biden administration pays heed.
June 5, 2022

Is Xi Jinping China's Biggest Problem?

And while the impact of Zero Covid may be relatively short-lived, the impact of Mr. Xi’s return to the socialist path will be felt for a very long time, both in China and the world. So the impact will no doubt be felt as long as Mr. Xi leads China.
May 30, 2022

The Next U.S.-China Crisis: CEOs & Boards Are Not Ready

‘The bad news is that very few corporations engaged in China have contingency plans or long-term strategies to hedge against the downside risks of growing geopolitical competition.’
May 22, 2022

China GDP: 'A very long period of Japan-style low growth.’

Here are some of the insights from ‘The Only Five Paths China’s Economy Can Follow’ by Peking University’s Michael Pettis. This excellent analysis of China’s economy is worth a careful reading.
May 14, 2022

'Zero Covid' & the Shanghai lockdown

Joerg Wuttke is the president of the EU Chamber of Commerce in China - the 'official voice of European business in China.'
May 1, 2022

China: 'Sleep Walking into Sanctions?'

A looming risk is Russia-like sanctions on China. The sanctions on Russia are causing plenty of disruptions. But those disruptions would be nothing compared to the catastrophe of Russia-like sanctions on China. The good news is that if China does violate the sanctions, the violations would likely be narrow and specific - even unintentional. So secondary sanctions - if they come at all - likely won't hit China’s economy and financial system deeply – or (fingers crossed) U.S.-China relations.
April 17, 2022

Is China's Tech 'Crackdown' Really Over?

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Russian Sanctions' Impact on China

In the meantime, some contend, China has a payment system, the Cross-Border Interbank Payment System or CIPS, that could make it independent of SWIFT.
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Faint Cracks

For some time now we’ve taken it for granted that Xi Jinping has so consolidated his power that his will is China policy.
March 21, 2022

Is China in a Bind?

It wants to support Russia, but also wants to support the international order from which benefits and doesn’t want to alienate the major economies its own economy is intertwined with.
March 13, 2022

Under Construction: Two (Opposing) World Orders

Years ago, before the so-called ‘New Cold War,’ when asked what China issue interested me most, I said, ‘China and the liberal world order.’
February 19, 2022

'A Fateful Error'

As the 1904 cartoon from Puck magazine shows, this isn’t the first time in the past 100 or so years that Russia has shattered the peace. [Or has been defeated, as it was in 1905 by the Japanese in the Russo-Japanese War.]
February 17, 2022

Ukraine, Taiwan, & the 'Nightmare Scenario'

This in no way diminishes the calamity of a war with China. But the ability of the U.S. to wage that war would not be diminished by having to fight Russia at the same time.
February 2, 2022

This is Mr. Xi's Big Year - and Nothing Better Spoil It

Every politician going into an election wants a strong economy. Xi Jinping is aiming to be reelected (and all indications are he will be) to a third five-year term at the National Party Congress this autumn. So Mr. Xi will ease (and stimulate ) as much as he can without creating major headaches to deal with after his reelection - all in the name of 'stability.'
January 18, 2022

Bachelors, Mother-in-Laws, & China's Economy

‘In the long-term, demographics is one of the most important forces that will shape the growth momentum of China for the next decades. Two demographic features that are especially worth paying attention:’
January 5, 2022

Q&A 7 | Why Did Beijing Ban Online Tutoring?

‘Each policy in isolation – whether its banning online tutoring or protecting data or enforcing anti-monopoly regulations or any other - has its rationale.’
December 30, 2021

Q&A 3 | Property 2022: Stabilization or Growth?

‘The goal is to stabilize housing prices while having housing sector grow.’
December 30, 2021

What Are Your Top of Mind Concerns?

I asked the participants what are their top of mind concerns about China.
December 30, 2021

Q&A 6 | China Reverse Its Declining Birthrate?

‘A lot of people feel like the ideal, the optimum number of children is a maximum of two children. So it's not a surprise to me that the three-child policy hasn’t had a high response in the short term. But I think in the long term it will be much better.’
December 30, 2021

Q&A 5 | Will Xi Continue to Favor the State Over the Private Sector?

‘He wants to see a bigger role for the state in the economy. But in the last two years, he has done some course correction. For example, after talking up the role of state-owned firms and building stronger, bigger state-owned firms, he is talking about the equal importance for the private sector.’
December 30, 2021

Shang-jin Wei Presentation-1 | Drivers of Growth Momentum

‘In the last year and a half we saw a spate of government actions all contributed to not just falling stock prices for companies in certain sectors but a deterioration in investor sentiment more broadly. These include:...’
December 30, 2021

Q&A 4 | Is China Exporting Inflation?

'‘China has its own issues. If you look at the CPI inflation, it looks more moderate. ‘If you look at the producer price inflation, it looks more severe.’
December 30, 2021

Q&A 2 | Will the Gender Imbalance Keep Housing Prices Firm in the Medium Term?

‘The part of housing prices caused by gender-ratio imbalance is not going to go away in the medium term. But the government has ways to create volatility in the housing market.’
December 30, 2021

Shang-jin Wei Presentation-2 | Gender Imbalance as a Driver of Housing Prices

‘Why does gender imbalance have such an outsize impact on China’s housing prices?'
December 30, 2021

Q&A 1 | How Much Does the Gender Imbalance Contribute to China’s Rising Housing Prices?

‘Gender imbalance accounts for about one-third of the increase in China’s housing prices in the last two decades or so.’
December 30, 2021

Shang-jin Wei Presentation-3 | Analyzing the Gender Imbalance Data

‘Compare these with graph showing the impact of the same factors on rental prices...'
December 30, 2021

Watch What Beijing Says - and Does

Besides listening to Xi Jinping, you can discern Beijing’s priorities and its likely actions through its big policies - and this is my point here.
December 7, 2021

Getting (Xi Jingping's) Priorities Straight

How do you make investment or business decisions in the face of the uncertainties created by Xi Jinping's reshaping China's economy? In this issue, I'll give you a few different ideas on how you might deal with that uncertainty.
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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