Trump will decide the TikTok ban, Plus China's economy will remain in the doldrums for 2025, analysts say -- China Boss 12.20.24

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What happened

The US Supreme Court has “granted cert” to TitTok’s last-ditch arguments against a possible ban or sale in the US despite a lower court's finding that permitted it on national security grounds.

The D.C. Circuit court earlier said that the government's ban does not violate free speech since it focuses on foreign control rather than censorship.

TikTok's legal team consists of seasoned attorneys - several who’ve argued before the Supreme Court before - experienced in contesting government actions on data privacy and content regulation. Alexander A. Berengaut of Covington's government litigation practice has successfully challenged federal and state TikTok bans, including one from Montana.

Another key member is Andrew J. Pincus, of Mayer Brown, known for his Supreme Court victories in privacy cases.

For TikTok creators, Ambika Kumar, of Davis Wright Tremaine, is leading efforts to protect their market presence, arguing against the federal ban on First Amendment grounds. She successfully blocked a Montana ban that had been set to take effect on Jan. 1, 2024.

But TikTok went even one better by hiring Noel Francisco, a former US solicitor general during Trump’s first administration, now a partner at Jones Day, to aid its legal efforts.

That said, what struck this China watcher is how many folks in officialdom submitted briefs against TikTok in the D.C. appellate case which TikTok lost.

In sharp contrast to the number of TikTok’s supporters who filed their endorsements, which took about a page on the Court’s opinion, the number of current and former local and federal officials - many of whom are Republicans - and legal representatives for non-profits and activists that submitted briefs in support of the respondent filled nearly three pages.

In other words, it looks crystal clear what outcome the states, the legislative branch, and the much of the executive thinks should happen.

Whether or not it will, has become the question. You can see who submitted briefs to the lower court and read the entire court opinion here.

Why it matters

At whose discretion?

America's highest court didn't have to "grant cert" in the first place.

As Cornell law professor Sarah Kreps told BBC, "The case has already gone through the executive branch, the legislative branch, and the lower court, all of which upheld the argument that TikTok's ownership by China-based Bytedance poses a national security risk."

That raises the question of why it did, especially on a national security issue - which it usually defers to the government - and when key lawmakers, like senior Senate Republican Mitch McConnell, who this week filed his own brief with the Supreme Court urging it to reject TikTok's case as "meritless and unsound," are adamantly against it.

But it seems TikTok's case could splinter GOP national security hawks from President-elect Donald Trump's "transactional" people.

Earlier this week, Trump met with TikTok CEO Shou Zi Chew at his Mar-a-Lago estate in Florida to discuss the ban.

Trump has met with various tech leaders this month, including Apple CEO Tim Cook, Meta CEO Mark Zuckerberg, and Google CEO Sundar Pichai, with appointments also set for Netflix CEO Ted Sarandos and Amazon CEO Jeff Bezos.

Some believe these meetings aim to win over Trump for his second term, influenced by his partnership with Elon Musk. Meta and Amazon each donated $1 million to Trump's inauguration fund, and OpenAI’s Sam Altman plans to contribute the same amount personally.

But at a Monday press conference, Trump didn’t mention them.

Instead, he said his administration would "take a look at TikTok."

"I have a warm spot in my heart for TikTok because I won youth by 34 points. There are those that say that TikTok has something to do with that. TikTok had an impact," he said.

Trump’s "cozy relationship" with Jeff Yass, whom Fortune described as his "billionaire mega-donor” is also problematic.

Jeff Yass, cofounder of Susquehanna International Group with a net worth of nearly $50 billion, has invested heavily in TikTok, and has also contributed more than $96 million to Republican causes in the current election cycle, making him one of the top donors.

His past involvement has linked him to Trump’s changes in tone regarding TikTok, Fortune staff say. Recently, Trump expressed concerns about the negative impact of banning TikTok on small businesses and mentioned his opposition to boosting Facebook’s business.

Sun Tzu and Moscow

Legal scholars say Trump cannot directly reverse the law but can influence it through other means, potentially leveraging his relationship with Yass to advocate for TikTok's future.

But the issue has now reached the Supreme Court, filled with Trump appointees.

Law professor Anupam Chander said that although Trump can’t reverse the law with an executive order, the incoming president can still “implore either the judges to side with him or to implore the various companies to not actually obey the law.”

🦨🙄 If China's - er - TikTok's lawfare in America couldn't get any more dystopian, there are also its new partnerships with former competitors and a whiff of Moscow in the air.

In August Barron’s reported that TikTok has made a significant move to enhance its role in e-commerce in the US by allowing users to purchase items from Amazon without leaving the app.

The effort highlights TikTok and its owner, ByteDance's, goal to attract more American consumers while facing possible bans. Amazon is also seeking new ways to grow its e-commerce business.

TikTok is not exclusive to Amazon; it previously formed similar deals with platforms like Facebook, Instagram, Snapchat, and Pinterest.

However, Amazon's partnership with TikTok is noteworthy as the app has become a direct competitor, launching its e-commerce platform last year and aiming for $17.5 billion in US sales this year.

That might be why Dan Ives, an analyst at Wedbush, a privately held financial services firm based in Los Angeles with $4.5 billion under management told Barron’s “he sees a 1% chance of a [TikTok] ban happening.”

“We believe there is a better chance of me playing in the NFL than a TikTok ban. Trump will use executive powers to squash this and that is the view of many on the Street,” he added.

A question for Sun Tsu’s Art of War: When does a competitor who has become your partner go back to becoming your competitor again?

But I digress, and add another gnarly element that may - or may not - be a source of angst for some GOP members.

On Tuesday, Politico reported that the European Commission is investigating TikTok for interference in Romania’s presidential elections.

There, ultranationalist and pro-Russian candidate Călin Georgescu blew past his opponents, despite being an outsider without a political party or much of a campaign.

The results have been annulled by the nation's top court "after security services warned Russia was mounting 'aggressive' hybrid attacks" and there were "irregularities" linked to Chinese-owned social media.

The Kremlin, as we know, is run by lying, thieving former KGB operators who can't let the Cold War go.

But it's entirely possible that Nikolai Patrushev, the foul-mouthed, testy spook feared by all, including President Vladimir Putin, spoke frankly last month when he told Kommersant: "To achieve success in the elections, Donald Trump relied on certain forces to which he has corresponding obligations."

The US Supreme Court—where Trump's placements have already impacted future generations—is set to review TikTok's case on January 10 before the ban takes effect.

This Week's China News

The Big Story in China Business

"FEELS LIKE" A DEPRESSION, MORE MERCANTILISM, ANALYSTS WEIGH IN ON CHINA'S 2025 ECONOMIC OUTLOOK: Over the past week, despite leaders attempting to stimulate optimism with support talks, China's 10-year bond yield has dropped to around 1.7%, a significant decrease in just over a year, Wall Street Journal's Lingling Wei reported.

The 30-year government bond yield has also fallen below 2%.

Both figures indicate deepening economic stress, though official data shows a 4.6% economic growth during the third quarter.

But Wei says the story on the ground is even more dismal.

Businesses are struggling, many people can't find jobs, and local governments are heavily in debt. Government employees are also facing payment issues.

It feels like a depression, one citizen said.

Deflation spiral continues: Deflation is in a spiral that will be "hard to fix," Bloomberg staff wrote.

"Prices in the world's second-biggest economy have fallen for six consecutive quarters, and if they fall for one more quarter, the run would equal a record deflationary streak set in the Asian Financial Crisis in the late 1990s," they added.

In "Prices Won't Stop Falling in China, and Beijing Is Grasping for Solutions," Hannah Miao at the Wall Street Journal wrote that the possibility of a new trade conflict with President-elect Donald Trump may further complicate matters, making it harder for China to export its surplus goods to the US.

The fear is that persistent deflation could hurt companies' profitability, leading them to delay investments and lay off workers, which would, in turn, decrease consumer spending.

Miao said the consumer price index showed a minimal increase of only 0.2% in November, well below the healthy level of around 2% recommended by many central banks.

More borrowing and mercantilism: George Magnus, a member of the Advisory Board of the China Observatory at the Council on Geostrategy, summarized the recent Central Economic Work Conference readout on Substack.

The conference is held every December to set the government's main economic objectives and policy plans for the following year. Decisions are published in March.

This year's readout reflected Chinese policymakers' ongoing economic anxiety and the lack of successful initiatives to boost growth despite several attempts, Magnus said.

The government identified nine key tasks, with boosting consumption and improving investment efficiency as top priorities, shifting from the previous focus on technology and industrial development.

The readout described the monetary policy as "moderately loose" instead of "prudent," indicating potential future measures such as lower interest rates, reduced bank reserve requirements, and increased fiscal deficits to stimulate the economy.

However, Magnus noted that recent data showed that credit growth remains very low. Even with easier access to credit, demand from consumers and businesses has not increased as expected.

"Monetary policy is, to a significant extent, impotent. Interest rates can't fall fast or far enough to compensate for deflation," Magnus said on LinkedIn.

"There's nothing about demand and income - save some refs to private pensions. That leaves fiscal policy and higher borrowing next year. But how the government deploys additional leverage is a moot point, given its preoccupation with mercantilist industrial and export policies that are turning the world upside down," he added.

The trade war has “changed”: In Foreign Affairs last week, Rhodium Group's Daniel Rosen, Reva Goujon & Logan Wright said that "China remains an investment-led economy" but that its "domestic economy cannot generate nearly enough demand to absorb everything China produces.”

“To create growth, therefore, Beijing has come to rely even more on exports of excess industrial output that cannot be absorbed in the domestic market,” but the "slowdown" in China's economy has "changed the trade war," giving the US "the upper hand,” they said.

In "We Are All Mercantilists Now," which was published last week by the Wall Street Journal, Jensen blamed China for "turn[ing] a slow drip into a death spiral" and said its policies have returned to roost.

In addition to the US, Jensen highlighted that Europe faces pressure to respond and has begun to balance WTO principles with competition.

"While many countries had pushed the boundaries before China did, its economic size and the effectiveness of its mercantilist policies broke the pre-existing order," he said.

Law and International Xi

CHINA LASHES OUT AT NEW EU SANCTIONS: China has lashed out at new EU sanctions on Chinese companies for supporting Russia in its ongoing war against Ukraine.

Chinese Foreign Ministry spokesperson Lin Jian decried the penalties as "unilateral" while falsely claiming they lack international legal basis and UN Security Council authorization. The UN does not control sanctions imposed by individual countries.

According to Newsweek, the EU's new restrictions target companies from China, India, and other nations for sending technology and drones to the Russian military.

Most of the sanctioned firms are foreign Russian defense contractors and shipping companies helping to bypass oil sales caps, essential to funding Moscow's wartime efforts.

The newly sanctioned Chinese firms include Juhang Aviation Technology Shenzhen Co. Ltd., which provides parts used in Russian drones. A Chinese individual, Li Xiaocui, known as Sophia Li, was also added to the sanctions list for exporting banned goods to a Russian military-industrial firm.

😤China got real mad: But MOFA's Lin wasn't having any of it.

He claimed that Chinese export controls are the strictest worldwide and criticized European countries for continuing to trade with Russia, accusing Brussels of a "double standard."

This is the most significant action to date taken by the EU against China for its support of Russia's war in Ukraine.

Rare moment of unity: Europe's 15th sanctions package added 84 entries, including 54 individuals and 30 firms. It marks the first time full sanctions have been imposed on Chinese entities providing drone and microelectronic components to Russia.

The sanctions involve travel bans, asset freezes, and economic restrictions, and they show that Europe will raise the stakes for China if it continues to support Moscow.

It's also a clear signal that, while agreement is always a work in progress in Europe —there is European unity on China policy when it comes to Ukraine.

Finally, it’s proof that the EU can effectively address complex geopolitical issues in tense times.

PHILIPPINES RATIFIES DEFENSE PACT WITH JAPAN: The Philippine Senate ratified a reciprocal access agreement (RAA) with Japan that allows their militaries to deploy on each other's land, reflecting concerns about China's actions in the region, Reuters reported.

All 19 senators voted in favor, with Japanese Ambassador Kazuya Endo present.

Experts call their new engagement a "landmark initiative," "unprecedented," and "historic."

This is Japan's first such agreement in Asia, facilitating military cooperation for training and disaster response. The agreement with Manila was signed in July.

RAAs are bilateral defense and security pacts that allow shared military training and operations. Their framework helps countries move military forces as needed and facilitates importing and exporting defense equipment and technology.

In case Trump bails: The agreement between Japan and the Philippines is also intended as a bulwark against threats to security in case the US, under Trump, withdraws from the IndoPacific.

Amid escalations with China's military in the South China Sea and disputes over islands in the East China Sea, Japan and the Philippines also worry about conflict over Taiwan.

As Xi Jinping leads the charge to Make China Great Again, defense pacts are gaining popularity in the region.

Active RAAs have also recently been established between Japan and Australia and Japan and the United Kingdom. An agreement between Japan and France is currently being negotiated. 🏝

Geopolitics

ALLEGED PRC SPY IN PRINCE ANDREW'S CIRCLE COMES FORWARD: Following days of speculation, Chinese businessman Yang Tengbo has identified himself as the suspected spy at the center of a scandal involving the UK government, Politico said.

The 50-year-old publicly acknowledged his relationship with the Prince after reports indicated that he had been banned from entering the UK in 2023 due to his alleged involvement in "covert and deceptive activity" on behalf of the Chinese state.

Yang also interacted with former prime ministers David Cameron and Theresa May during his nearly two decades in the UK before being barred.

The scandal gained momentum when it was revealed that Yang had a friendship with Prince Andrew, who has faced scrutiny due to his connections to the late Jeffrey Epstein.

Linked to United Front: According to the Financial Times, MI5 linked Yang, a Chinese citizen, to the United Front Work Department, which Beijing sees as a key tool for influence.

China's embassy in London responded by urging the UK to cease its criticisms and accused MPs of having a distorted view of Yang's situation.

In a statement, Yang claimed he had "done nothing wrong" and refuted the "spy" label, expressing his affection for the UK as his second home.

Born in China, Yang studied in the UK and established himself by helping Chinese businessmen network internationally.

He led the Chinese segment of Prince Andrew's business venture, Pitch@Palace, while running his company, Hampton Group.

The revelations have heightened scrutiny of Prince Andrew's contacts, as he also faced blowback for his association with Yang.

Best Reads

Testimony of a Chinese human rights defender: inside China's brutal prison system (Human Rights in China): "Killing someone here is as meaningless as killing a dog. We wouldn't even need to bury you. We'd just take you straight to the crematorium and burn you. It's very near here, you know." Those are the chilling words of a Chinese prison official, as reported by Xie Wenfei (谢文飞), a Chinese human rights defender "whose courage and suffering expose the horrifying depths of the Chinese Communist Party's (CCP) oppression."

Kilts and qipaos in Britain: Nearly 400 China' United Front' Groups thrive (Didi Kirsten Tatlow, Newsweek): A report by Newsweek reveals numerous organizations in the UK associated with the Chinese Communist Party's United Front.

What is the United Front Work Department? (Charles Parton, China Observatory): China Observatory published an explainer of the Chinese Communist Party's United Front Work Department to provide more insight into the Prince Andrew spy scandal.

Middle Kingdom Surreal

REPORT REVEALS MAJOR CONCERNS REGARDING CHINESE TAKEOVER OF UK CHIP COMPANY: An astounding new report from UK-China Transparency, How China Stripped Assets from a Key British Tech Company, reveals serious concerns regarding Chinese investors' takeover of Imagination Technologies, a major UK chip design company.

Imagination, known for designing GPUs essential for AI and advanced technology, was purchased in 2017 by Canyon Bridge, which is linked to Chinese state interests, and previously blacklisted by the US.

After 2020, a senior executive claims the company began secretly transferring technology to Chinese firms, including providing access to key engineers and extensively training staff.

Since the takeover, the UK has seen job cuts and a shift of expertise to China.

The report suggests the takeover is part of the Chinese government's apparent strategy to enhance its semiconductor capabilities and strengthen military development. It raises concerns over national security and the implications of Chinese control over Western tech companies.

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China Boss will be on holiday break Dec. 23 - Jan. 6th. The next post will hit your inbox on January 10, 2025. I wish you love, joy and happy holidays from Portugal!