Hey, China Boss!
Welcome to this first edition of China Boss News where I sum up the week’s most important news from my LinkedIn feed of over 80 weekly posts - that’s over 4000 news articles a year! - with China-related news stories in business, law, and geopolitics.
Stay up-to-date
The geopolitical dimension of China business is changing at lightning speed, and global managers must carefully watch the development of foreign policies and laws for signs of power moves that could impact international business.
As I’ve discovered over the past year of posting top China-related news stories daily on LinkedIn, it’s easy to get lost in the 24/7 news cycle. So, I created China Boss News to help keep track of larger themes that can be pulled from all that information so we can make an informed guess about where things might be headed next. It’s a tough job, but some China Boss has to do it!
In China Boss News, I not only distill must-know China facts from the latest headlines, but I also give special attention to relevant publications from top international China academics - as well as from think-tanks focused on the public and private sectors - for context and broader perspective. Think of each weekly issue as your private Master’s class in understanding the China we have today, post-Covid19, with its many new and unfamiliar features that play a vital role in how the international community will proceed going forward. And, if the Middle Kingdom-linked events of 2020 can be taken as a single indicator, then I can promise China news in 2021 will be anything but boring.
Cheers,
Shannon
The Big Story in China Business
Analysis is coming in on the EU’s 11th hour (2020) Comprehensive Agreement on Investment (CAI) with China. Heavy criticism on this deal, but arguably the most poignant headline was South China Morning Post’s China-EU investment deal: ‘landmark’ treaty greeted with a shrug by underwhelmed analysts. Major points:
The European economy is going to be in much worse shape than the Chinese one. There is a sense in Europe that China is only going to get so much bigger, so that’s the idea behind this – ‘Let’s get whatever we can get’ – and that’s ultimately the reason they signed this. —Alicia Garcia Herrera, chief economist for the Asia-Pacific region at investment firm Natixis
Europe is already open to Chinese investment, and China’s pledged liberalisations are pretty shallow. We might see some big deals, but probably not much that could immediately lift gross domestic product numbers. —Nick Marro, global trade lead analyst at the Economist Intelligence Unit
Why do you oversell something that it seems people are getting already, that in your case is limited by the treaty? It says you can only set up if you’re a new investor, but what kind of investor? Are we going to create a new auto company that is not present in China that can build electric cars. — Garcia Herrera asked, arguing that the pressure on the European economy had backed policymakers into a corner
The SCMP Global Economy article is chock-full of additional insight and analysis. Highly recommend.
Law and International Xi
US-China Lawfare
Last week, we saw a potentially significant update in US-China lawfare, when “China fired back at the Trump administration with new rules that would punish global companies for complying with Washington’s tightening restrictions on doing business with Chinese companies.”
The rules, which went into effect immediately, are intended to counter foreign laws that “unjustly prohibit or restrict” people or companies in China from doing normal business, by allowing government officials to issue orders saying that companies do not have to comply with certain foreign restrictions. Chinese companies that incur losses because of another party’s compliance with those laws can sue for damages in Chinese courts, according to the Commerce Ministry’s notice. According to the New York Times, “Such a case would be likely to result in a victory for a Chinese plaintiff, since China’s courts are ultimately answerable to the Communist Party.”
The Financial Times took a more reserved view with its analogy to China’s 2019 unreliable entities rules “intended to help Beijing counter the Trump administration’s ability to punish Chinese companies by placing them on various blacklists.” Instead, the commerce ministry failed to follow up on its threat and, analysts believe China “is wary of punishing large multinationals that have large investments and workforces in China.” Angela Zhang, director of the Center for Chinese Law, University of Hong Kong, said:
The [new rules] and unreliable entities list are more bark than bite. China is acutely aware of the costs of imposing these countermeasures, which also explains why it has taken it so long to introduce these sanctions rules.
🤓But I’d point to President Xi’s history of risk-taking and nationalist politics-first policies, where nothing - it seems - is off the table.
Alibaba and Tencent excluded from US Treasury Department Blacklist
The Treasury Department on Friday issued an updated list of companies on its blacklist, including a number of state-run Chinese firms.
China stocks immediately got a boost as investors reacted to the news that Alibaba and Tencent were left off the Trump Administration's blacklist prohibiting Americans from investing in Chinese companies with alleged ties to China’s military and security services.
In recent weeks, State and Defense Department officials had discussed expanding the blacklist to include Alibaba and Tencent, according to a Wall Street Journal report. But, Alibaba and Tencent stocks are widely popular with US investors and the ensuing backlash may have influenced the Treasury Departments’s decision to exclude them.
Geopolitics
EU’s strategic autonomy?
Both the Financial Times and Washington Post call the EU-China investment deal a “diplomatic coup” for China, with WaPo stating that China has driven a wedge between Europe and the United States, one that is “an indicator that President Trump’s belligerent “America First” approach may have done lasting damage to transatlantic relations.”
Similarly, Theresa Fallon, founder and director of the Centre for Russia Europe Asia Studies (CREAS) in Brussels and nonresident senior fellow of the Chicago Council on Global Affairs, said: “For the EU, this was an opportunity to display its “strategic autonomy” in foreign relations before the new U.S. administration set in. For China, it was a way to drive a wedge between the EU and the United States.”
Jake Sullivan, the national security adviser to Biden told CNN that the new administration in Washington would recognize China as a serious strategic competitor to the US, and that president-elect Biden would work out the economic differences between the US and its European allies to improve their relations and jointly counter China on multiple fronts.
Observers said that by naming Beijing as a strategic competitor, the Biden administration will not just put more economic and trade pressure on China but also apply pressure in other key areas, including control over the Indo-Pacific, technology and the military for the long term. That assessment appears to have merit, since - on the subject of working with European allies - Sullivan did not limit cooperation to international trade. He stated:
We are confident that we can develop a common agenda on issues where we share deep concerns about China. And it’s not just on trade. It’s on technology. It’s on human rights. It’s on military aggression.
Pompeo ends State Department restrictions on interactions with Taiwan
In a historic China policy move, US Secretary of State Mike Pompeo lifted decadeslong self-imposed restrictions on the US-Taiwan Relationship:
Today I am announcing that I am lifting all of these self-imposed restrictions. Executive branch agencies should consider all “contact guidelines” regarding relations with Taiwan previously issued by the Department of State under authorities delegated to the Secretary of State to be null and void.
Additionally, any and all sections of the Foreign Affairs Manual or Foreign Affairs Handbook that convey authorities or otherwise purport to regulate executive branch engagement with Taiwan via any entity other than the American Institute in Taiwan (AIT) are also hereby voided. The executive branch‘s relations with Taiwan are to be handled by the non-profit AIT, as stipulated in the Taiwan Relations Act.
The United States government maintains relationships with unofficial partners around the world, and Taiwan is no exception. Our two democracies share common values of individual freedom, the rule of law, and a respect for human dignity. Today’s statement recognizes that the U.S.-Taiwan relationship need not, and should not, be shackled by self-imposed restrictions of our permanent bureaucracy.
China’s state media immediately lashed out at the new policy, accusing U.S. Secretary of State Mike Pompeo of “seeking to maliciously inflict a long-lasting scar on China-U.S. ties.”
The Week’s Best China Reads
IMF Article IV Executive Board Consultation, December 17, 2020 (China)
Summary: The Chinese economy continues its fast recovery from the health and economic crisis as a strong containment effort and macroeconomic and financial policy support have mitigated the crisis impact and helped the economy rebound. However, growth is still unbalanced as the recovery has relied heavily on public support while private consumption is lagging. Rising financial vulnerabilities and the increasingly challenging external environment pose risks to the outlook. Important reforms have progressed despite the crisis, but unevenly across key areas.
Key recommendations:
• Fiscal policy should shift its focus towards strengthening social safety nets and promoting green investment.
• With public debt high and rising, improving the macro-fiscal framework and intergovernmental coordination while leveraging digital technologies to deliver support to vulnerable groups will make fiscal policy more effective.
* My note & emphasis added. This could be the IMF sounding a post-Covid19 alarm at China’s hundreds of millions of poor who are migrants or who live in the interior, away from the more developed coastal regions and cities. Local governments are fast sinking in public debt and will be unable to provide financial support and stimulate growth if macro-fiscal policy is not readjusted. See also Diana Choyleva’s China’s local government debts should be the real worry.
• As the recovery takes hold, exceptional policy support measures should be replaced with proactive efforts to address problem loans and strengthen regulatory and supervisory frameworks.
• Simultaneous implementation of key reforms—a further opening up of domestic markets, reforming SOEs, and ensuring competitive neutrality with private firms while promoting green investment and strengthening social safety nets—will support a job-rich and balanced recovery and help boost potential growth, reduce external imbalances, and build a more resilient, green, and inclusive economy.
• China should continue to lead multilateral efforts to address global challenges. This includes supporting global efforts to expand vaccine access, providing debt relief to low-income countries and sustainable financing for global infrastructure investment, and tackling climate change.
Countering Chinese disinformation reports (Atlantic Council)
Five new reports from the Atlantic Council on how to counter the Chinese government's efforts to spread propaganda and disinformation.
All but the last are the published work of the Digital Forensic Research Lab (DFRLab) of the Atlantic Council, described as a "start-up incubated at the Atlantic Council and leading hub of digital forensic analysts whose mission is to identify, expose, and explain disinformation where and when it occurs."
Titles:
1. Chinese discourse power: China’s Use of Information Manipulation in Regional and Global Competition
2. Descendants of the dragon: China targets its citizens and descendants beyond the mainland
3. Chinese messaging across the strait: China-friendly narratives and the 2020 Taiwan presidential election
4. Targeting the anti-extradition bill movement: China’s Hong Kong messaging proliferates on social media
5. China’s disinformation strategy: Its dimensions and future
China’s economic coercion - theory vs. practice
A short read.
Abstract: Mutually beneficial trade links may appear tempting to use as political leverage in theory, but there are a number of reasons why the reality of attempting to put theory into practice is more complicated. Recent events in the Australia-China context make for a salient case study of why this is the case.
Middle Kingdom Surreal
A number of tabloids and business news sites have been circulating reports that Jack Ma is missing since he has not been “seen publicly in more than two months and …was abruptly replaced as a judge on the African talent show he founded.”
Longtime China watcher, Edo Naito, commented on Peter W. Humphrey’s LinkedIn share of the story:
Go back 25 years and see how every Chinese billionaire who reached fame and fortune globally ended up - unless they were inner circle CCP. If you learned to know their name then where are they now? Did they retire rich and famous? Or did they disappear? Making money in the CCP world is fine. Getting very rich is also fine. Getting TOO rich where you seem to be projecting a success story different than the CCP has never been allowed. They then step in and suddenly you have broken some laws and then they find you are "corrupt" and then they chop you off at the knees. They then disappear you and divide up the spoils among the CCP elite. Go back and please find me a happy retired non-CCP elite billionaire. No, cannot find one? Me either.
Quartz similarly notes that Ma’s absence raises “uneasy memories about other Chinese tycoons and celebrities who vanished from the public eye before” in its profile of 5 Chinese business tycoons who’ve recently gone missing.
Since Ma disappeared from public life, the CCP has stepped up its efforts to control the narrative by ordering the country’s media to censor reporting on the government’s antitrust probe into Alibaba. Analysts at Financial Times say the move shows that the issue has become a matter of national political sensitivity in China.
Greatest Hits (most popular posts)
Weighing in at nearly 16k views, at time of writing, is this post where I argue that the EU-China investment deal will fail because Xi will never ban forced labor - he needs it to anti-competitively prop up, both, the Xinjiang economy AND Chinese companies in various domestic and international industries.
My post sharing SCMP’S reporting of China’s last minute attempt to add a Huawei revenge clause to the EU-China investment deal (CAI) has received nearly 9k views so far. According to SCMP:
The insertion appeared in a draft negotiating text dated December 11, just weeks before the parties finalised their bilateral investment pact, but was struck-through by EU negotiators, suggesting it did not make the final agreement.
...The footnote, which is highlighted in yellow and struck-through with a blue line reads: “China reserves the right not to open this service to investors from countries that block or arbitrarily discriminate against Chinese telecommunications enterprises in law or policy.”
An effective translation is that China would freeze cloud computing access to firms from European states which do not grant firms like Huawei access to their 5G networks.
The popularity of this straight news share post, over 5k views at time of writing, caught me by surprise. Telegraph reports that “intense paranoia inside China has sent country into overdrive to restore [its] international reputation. Not all that jolting to me, as, over the course of 20+ years, I’ve observed a number of instances where the party-state’s paranoia appeared to morph into a dysfunction that defies reason. Maybe trying to control the Covid19 narrative will, indeed, push it over the edge this time. For the sake of 1.4 billion people and the rest of the world, pray not.
I’ll be back again with bonus updates and another newsletter next Monday. Enjoy the rest of your week.
What you did in one year about finding the right information about China is almost unbelievable. I don't lie, the trustable information about China. The quantity and quality that you discussed and found is remarkable. Persons like you could make it possible to close the camp the Uighurs are in. Because the world now knows what's going on. Respect is an understatment for your work. You are an example for human rights and woman rights.