China Press Review – December 9, 2019

Press review

China’s exports fall again in November as trade war continues to bite
Shipments down 1.1 per cent in month, but imports grow for first time since April    Figures come just a week before US is set to impose fresh tariffs on imports of Chinese goods

The US and China beware: trade war tariffs are a double-edged sword
Recent rhetoric over the punitive duties suggests they have become the main stumbling block in trade negotiations between Beijing and Washington    But while the US holds the upper hand for now, it should know from its history that a double-edged sword has global ramifications

Will the trade war lead to US-China decoupling? In an increasingly interconnected world, that would be next to impossible
Global supply and value chains are more enmeshed than ever, even as disruptive technologies erase boundaries in space and time, making decoupling a practical impossibility, never mind a viable threat

Large European firms sidestepping ‘futile’ tariffs, not moving from China to US, survey suggests
‘Repetitive swings of the tariff hammer have proven anything but strategic,’ according to EU Chamber of Commerce   But smaller European companies ‘taking a steady beating’ as a result of tariffs

No ‘arbitrary deadline’ in US-China trade talks as new tariffs loom, says White House economic adviser Larry Kudlow
Trump’s adviser confirms December 15 still ‘important date’ for new round of US tariffs on Chinese goods    US government looking for agreement on enforcement procedures to get a deal done

US President Donald Trump urges World Bank to stop lending money to China
Beijing ‘has plenty of money, and if they don’t, they create it’, he says   Tweet comes after bank agrees five-year low-interest loan programme worth US$1 billion to US$1.5 billion annually

World Bank says lending to China to drop
The Trump administration has argued China is too rich to receive World Bank loans. The global financial institution said it was reducing lending to China.

The US will regret breaking WTO’s dispute settlement mechanism
From December 11, the WTO’s Appellate Court will stop hearing disputes, forcing the growing number of countries subject to US tariff wars to take their own defensive actions    As disputes stack up over trade, climate change and tech taxes, one thing is for certain: the US will rue the day it broke the mechanism to settle disputes multilaterally

European companies minimise risks from US-China trade war
companies in China have been able to minimise the effect from the tariff war between Beijing and Washington, although some are considering relocating their businesses, the EU Chamber of Commerce said Monday (Dec 9). The world’s two biggest economies have been entangled in a lingering trade war for over a year, which has weighed on the global economy and resulted in hundreds of billions of dollars in punitive tariffs slapped on two-way trade.

How can the Chinese economy maintain growth of around 6% in 2020
Amid the slowing global economy, the bruising China-US trade war and the decline in internal demand, China’s economy in 2019 has continued the weak trend seen since 2018, and this is expected to continue in 2020. In the year that China aims to secure the victory of building a moderately prosperous society in all respects, how will the country deal with the negative factors and maintain growth? Here is some advice from Chinese economists:

China should slash business tax rates if it wants to compete with the United States, study says
Report sponsored by industry ministry recommends cutting corporate income tax rate to 20 per cent to bring it in line with US     VAT should also be reduced by a further three points following similar cut in April

China reportedly bans foreign technology in its government and public offices
China is reportedly planning to ban all government offices and public institutions from using foreign software and computers in a move that could dent sales by US tech companies and increase tensions at a crucial moment in the trade war.   Beijing had ordered that all hardware and software be removed within three years, according to a report by the Financial Times. It cited brokerage firm China Securities as estimating that as many 30 million pieces of hardware would need to be replaced as a result. China’s Ministry of Foreign Affairs and the State Council Information Office did not respond to requests for comment.

Lack of quality data, tech talent hinder wider AI adoption in China
Those issues challenge the conventional thinking that China has a strong advantage in AI because of its huge internet population

Is Alibaba’s mega listing in Hong Kong the prelude to an exodus of Chinese technology stocks from US capital markets?
Hong Kong changed its listing rules two years ago to lure more Chinese technology, biotechnology firms to the city      Secondary listing could give mainland Chinese first chance to buy shares in some of China’s tech giants

Savvy New York Alibaba traders bagging profits through a temporary arbitrage opportunity
Alibaba’s Hong Kong-traded shares have cost as much as US$7.68 more than its US stock certificates   More confidence in the e-commerce giant by investors closer to home explains the gap

China’s corporate social credit system blacklist that companies pay US$2,500 an hour to avoid
Companies fear inclusion in China’s corporate social credit system, which can result in punishment for bad behavior   Beijing says system is designed to scare companies straight

Despite Donald Trump’s attack on the international postal system, he might be in for a nasty surprise in the mail next year
Tying US Postal Service’s losses to Chinese e-commerce, the Trump administration forced the Universal Postal Union to allow the US to set its own international postal fees from July next year. However, this is likely to make only a small dent in the country’s mail woes

Huawei’s overseas retreat squeezes Chinese rivals
Xiaomi, Vivo and Oppo forced abroad to offset weaker domestic sales

China poised to name another technocrat to helm top lender with focus on greasing growth engine
Wang Jiang is expected to become the president of Bank of China soon following postings in party’s WeChat account    Move follows the appointments of financial technocrats in China Construction Bank, China Development Bank

E-commerce in 2019: Year of the livestreamer
2019 was the year livestream e-commerce took off, with 71.2% year over year growth from 2018’s RMB 126.6 billion (around $18.0 billion), according to Chinese financial services firm Everbright Securities (in Chinese) and an estimate by Coresight. The livestreaming e-commerce market is worth an estimated RMB 440 billion (around $63 billion) in 2019, according to Everbright. This equates to almost 9% of China’s total estimated e-commerce sales this year ($723 billion), or roughly 1% of the 2019 official estimate for total consumer good sales. According to the company, Everbright’s estimated sales revenues generated by livestreaming is based on industry forecasts, and surveys with major industry players, such as Taobao Live.

E-commerce startup Taojiji may file for bankruptcy
Cash-strapped Chinese e-commerce startup Taojiji is slated to declare bankruptcy after failing to attract badly needed investment, the company announced Monday in a post on its official Weibo account  Taojiji’s troubles highlight the risks of its business model—adopted by many Chinese tech firms—in which cash is burned at an unsustainable rate through consumer discounts in order to grab market share.

The Case Against China ‘Panic’
President Trump is lashing out against the World Bank for lending to China, the US and China still don’t have a trade deal, and global investors are back to fretting the trade war between the world’s two largest economies will drag on forever. In other words, it’s a pretty slow week in China news. So permit me to use this space to direct your attention to two thoughtful China analyses published yesterday—one in Foreign Affairs by CNN’s Fareed Zakaria on U.S.-China relations, and the other by Fortune’s own Grady McGregor on the epic boom and bust of China’s bike sharing industry. Zakaria’s essay bears a provocative title: “The New China Scare.” It opens by challenging the received wisdom among just about everyone in Washington these days that “China is now a vital threat to the United States both economically and strategically, that U.S. policy toward China has failed, and that Washington needs a new, much tougher strategy to contain it.”

China’s car sales slump 4.2 per cent in November as reluctant consumers stay away from big ticket purchases
China’s car market, the world’s largest, is heading for a second consecutive annual drop   For the first 11 months of the year, car sales have slumped 10.2 per cent to 19.27 million units

Baidu restructures self-driving unit amid serious competition
Baidu announced Friday the reshuffling of its intelligent driving business, including the establishment of a V2X (Vehicle-to-Everything) department. The government is backing V2X to make China a world leader in driverless tech. The announcement is the Beijing-based search giant’s latest move to kick-start the business amid serious challenges from emerging domestic rivals targetting the full-scale deployment of robotaxi pilot services.

China’s third-wealthiest man is set to become US$2 billion richer, thanks to the record dividend payout at his property company
Hui Ka-yan, chairman of China Evergrande Group, will pocket the money after the property developer and electric-car wannabe declared a record dividend for fiscal 2018   The board proposed a 1.42 yuan per-share payout for the year ended December 31, according to a statement late Sunday

Sri Lanka wants its ‘debt trap’ Hambantota port back. But will China listen?
Critics view the deal as a symbol of the problems associated with Chinese lending and the Belt and Road Initiative, but Beijing so far shows little sign of changing its mind   Newly elected President Gotabya Rajapaksa promised on the campaign trail to revisit the agreement, but observers say he will need to offer China something else in return

China’s pig numbers rise but supplies still tight before Lunar New Year holiday, agriculture ministry says
National herd grows by 2 per cent as authorities under pressure to ensure there is enough pork for the holiday

China’s clampdown on illegal Indian buffalo meat puts US$2 billion trade at risk
India scrambles to find new buyers for it buffalo meat as China tightens controls due to African swine fever outbreak   South Asian nation cannot directly sell buffalo meat to China due to a ban introduced by Beijing in 2001 following an outbreak of foot-and-mouth disease

What does it take for the oldest French fashion brand Lanvin to get a shot at China’s 350 million millennial hearts and minds?
Lanvin marked its 130th anniversary with a concept store at the Bund Finance Centre on Shanghai’s famous riverfront Bund     China will be its key market where it is hoping to make 40-50 per cent of its turnover in the medium term

China’s one-child policy left countless children bereft. It can help to ease the pain of loss
Beijing should face up to the repercussions of its strict population policy. For the many thousands of children abandoned then adopted overseas, the government can begin to make amends by helping to bring together those it has separated

Hong Kong will never be Macau. Beijing’s comparison of the two shows it is in denial
A big part of Beijing’s problems with Hong Kong is its consistent misreading of public sentiment. Calls for it to be more like trouble-free, compliant Macau only show that China’s leadership remains out of touch

Doing Business With China: The Only Guarantee is That There Are No Guarantees
From this we started talking about how so many of the red flags we see in Chinese contracts are not so simple because they so often involve things entirely outside the contract. As an example, we talked about how it is common in the West for a buyer of products to require the product seller to have product liability insurance that protects the buyer should the product prove defective and injure people. But a provision like this in a Chinese manufacturing contract should be red flagged because this sort of provision almost certainly will not provide any real protection and yet it also very likely will be used by the Chinese factory to increase its prices. See The China Price and Product Liability Insurance: Never the Twain Shall Meet. At the very end of our lunch, one of the lawyers talked about how he had been talking with a client earlier that same day who was just incredulous about how its Chinese counter-party had so blatantly and blithely violated a guarantee in their contract. We concluded that the only guarantee when doing business with China is that there are no guarantees.

Top China Diplomat Says U.S. Violating Domestic Affairs …
Top Chinese diplomat Yang Jiechi said U.S. bills regarding Hong Kong and Xinjiang are gross violations of China’s domestic affairs.

Hong Kong Protest, Largest in Weeks, Stretches Several Miles
Throngs of people poured into Hong Kong’s major thoroughfares for an authorized march meant to coincide with the United Nations’ Human Rights Day.

At least 5,600 retail jobs to go in Hong Kong and 7,000 firms to fold in coming six months as protests land heavy blow on economy, survey finds
About 30 per cent of the 176 companies which responded to survey said they would lay off 10 per cent of their staff in the coming six months   Hong Kong Retail Management Association, which carried out the survey, says doom and gloom in industry will cause a chain reaction for economy

Western democracy and the Chinese model have one thing in common: both are flawed
Hong Kong’s protest movement is only the latest battleground where the contest of ideologies is being played out    Supporters on either side should not only recognise the strengths of their opponents’ system, but also admit the weaknesses of their own

Beijing hits out at U.S. over speech on China’s defense expenditure
Beijing hit out at Pentagon chief’s reaction to China’s rising defense expenditure, urging the U.S. to abandon the zero-sum Cold War mentality and don’t make enemies everywhere.

Alain Gillard
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