China Press Review – July 8, 2020

Press review

China’s economic bullying will never work
Beijing has threatened Australia, Japan and others with tariffs and tourism cuts  China’s arrival as an economic superpower may be a recent phenomenon, but the country already appears to have the habit of practicing economic coercion against its neighbors for geopolitical objectives.  Unfortunately, China has little to show for deploying economic coercion to advance its geopolitical objectives. Japan did not capitulate to Chinese pressure. Instead, it immediately began to invest in new suppliers and seek substitutes. Economic coercion also rarely works because most countries overestimate the leverage they have. No single country possesses the capacity to inflict crippling damage on another country’s economy because all countries have diversified markets and suppliers. While sanctions incur real costs, such as reduced exports and disruption of supply of critical technology, they are seldom fatal.  Even the U.S., which accounts for 24% of global gross domestic product and wields unrivaled financial clout because of the dollar, is unable to induce an economic collapse in Iran despite years of maximum pressure. China, which has a GDP two-thirds the size of the U.S. but no equivalent technological and financial muscle to flex, is far less capable of deploying economic coercion successfully.  Finally, commercial ties can only be weaponized under most circumstances once. Targeted countries will respond by reducing their economic vulnerabilities. After China cut the number of mainland tourists to Taiwan in 2016 to pressure the new Democratic Progressive Party government into accepting the “One China” principle, Taipei reacted not with capitulation but with a program to attract tourists from elsewhere, and it is now much less dependent on mainland tourists.
If Beijing expects Canberra to kowtow, it should think again. China is almost certain to achieve the opposite of its goals: its economic coercion will only succeed in alienating and pushing Australia further into the U.S.-led anti-China coalition.

China approves plan to boost prominence of state firms, despite complaints from trade partners
China has rolled out a three-year plan to boost the standing of state firms, despite complaints from trade partners these companies have unfair advantages    Analysts say the initiative is unlikely to significantly improve efficiency among the China’s 130,000 state-owned companies

As coronavirus strains US-China relations, ensuring ‘phase one’ trade deal works is crucial
With US-China relations at a low point and large-scale decoupling of the two economies a destabilising possibility, a pragmatic realignment of the agreement is the need of the hour

What China’s uneven recovery means for the U.S.
China and much of Southeast Asia look to be bouncing back strongly from the coronavirus pandemic as stock markets and much of the country’s economic data are returning to pre-pandemic levels.

Germany’s reluctance to speak out against China
Pressure is growing on Germany to take a tougher stance towards China over human rights abuse. For a long time, business interests have stood in the way. But a united European stance is increasingly imperative.

Merkel is under pressure to cut Germany’s ties with China as the Hong Kong crisis triggers a European backlash against Beijing
German Chancellor Angela Merkel accused of being too close to China – Business Insider
Amid international outrage against China’s crackdown in Hong Kong, German Chancellor Angela Merkel insisted on the need for ‘dialogue’ with Beijing.

China’s grip on Hong Kong eroding its status as financial hub, investors believe
Money has already started leaving Hong Kong, with US$5bn quitting the territory last year, according to Bank of England figures

Will decentralized e-commerce save brands?
We have all dreamt about e-commerce saving the traditional retail business, turning an asset-heavy industry reliant on expensive square meters and armies of ground sales staff into light online front stores managed by a few tech-savvy marketers.   Well, it happened, and e-commerce has become the new normal—at least in China. By next year, with a predicted 50.5% penetration rate (versus 17.1% worldwide), China will be the first market in the world to sell more goods online than in offline stores. In some industry verticals such as cosmetics, e-commerce has already surpassed traditional retail. And with offline retail stores being forced to close, Covid-19 has accelerated the shift toward a so-called “post-e-commerce era” where consumers are empowered to buy “ATAWAD”—at any time, from anywhere, and with any device.

The Future of Trade Shows in a Post-COVID-19 Fashion Industry
The fashion sector woke up recently to yet another trade show cancellation – the newly launched footwear show Sole, due to take place in August after its February success, announced that the decision had been taken to cancel for now, with 2021 dates to be announced soon. And today, Hyve Fashion has announced that their upcoming events Pure, Pure Origin, Scoop and Jacket Required will also be cancelled until next year. They’re just another in a long line of cancelled shows this Summer, including Premium Berlin, Modefabriek, Tranoï and Scoop International to name but a few.

China’s interest in trans-Pacific trade deal met with scepticism by those who helped negotiate it
China’s Premier Li Keqiang voiced openness to joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)    Negotiators sense ‘a bit of mischief’ in wanting to ‘stick it to the US’ without making required changes to its state-led economy, including state-owned enterprises

China’s interest in trans-Pacific trade deal met with scepticism by those who helped negotiate it
China’s Premier Li Keqiang voiced openness to joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)    Negotiators sense ‘a bit of mischief’ in wanting to ‘stick it to the US’ without making required changes to its state-led economy, including state-owned enterprises

It pays to have China exposure, even during two years of the trade war, MSCI index shows
MSCI index that covers global companies with biggest exposure to China has risen almost 14 per cent since the trade war started in 2018      US chip makers Qualcomm, Broadcom pace gains on the index, have risen at least 29 per cent over the past two years

China’s car sales still showing signs of growth as world’s largest market recovers from coronavirus impact
China’s car sales in June dropped 6.5 per cent, although sales in June 2019 were boosted by discounts to push models that risked becoming redundant by new emission standards    Sales in June increased 2.6 per cent from May, offering some encouragement after demand had slumped amid the coronavirus outbreak

How US restrictions drove Huawei and Deutsche Telekom closer together
Internal documents illustrate leading European operator’s special relationship with Chinese tech giant     Huawei has pledged to shoulder burdens and costs of US measures, offering Deutsche Telekom a ‘care-free package’

Bumbling, wasteful US should learn from China’s coronavirus response
China has Covid-19 under control with draconian measures and tech-based monitoring while the US is struggling with uncoordinated and premature reopenings    The disease has exposed many institutional weaknesses in US society and economy, which, despite their strengths, are not structured to withstand pandemic shocks

Topshop to close last Hong Kong store, joining growing list of foreign retailers leaving city amid coronavirus sales slump
Topshop will close its two-storey flagship store in Central when the lease runs out in October    The closure comes even after the lease on Topshop’s store was reduced to HK$1.5 million a month in 2017 from HK$3.4 million earlier

Luxury Market Recoveries: South Korea Versus China
China and South Korea are the two countries that have recovered from COVID-19 the fastest, but their luxury market rebounds look quite different.    China and South Korea are the two countries that recovered from COVID-19 the fastest, but their luxury market rebounds look quite different. Even though South Korea’s market and appetite for luxury are both smaller than China’s, understanding the similarities and unique differences between them can help brands with their regional post-COVID-19 merchandising plans. Below are some key takeaways from recent industry reports.

Tesla takes fifth of China EV market; market fall 40%: industry group
Sales of Chinese all-electric vehicles fell 40% year-on-year to 67,000 units in June, while Tesla grew to account for 23% market share, the Chinese Passengers Car Association (CPCA) said Wednesday.    Tesla’s dominance in the Chinese EV market has driven its share price to record highs, and it is leading a market recovery during the post-Covid period.

China power firms suspend publication of coal data, frustrating analysis of industrial production
Five of China’s largest power companies have halted the release of data on daily coal consumption, without providing a reason    The decision has frustrated economists and analysts who have been using the information to monitor factory production and China’s economic recovery

Hong Kong actor Nicholas Tse’s former home sells for US$1.8 million loss, casts shadow on city’s luxury housing market
House in The Redhill Peninsula sells for ‘shocking price’ of HK$60 million    The national security law and social unrest have cooled the market, agent says

Now, Mumbai overtakes China in corona deaths and cases
The country’s commercial capital, Mumbai currently has 4,938 COVID-19 deaths and 85,724 cases, while China has a total of 4,634 fatalities and 83,565 patients, and stands 22nd on the Worldometer.

Coronavirus: Trump formally pulling US out of WHO over ‘China puppet’ claims. Biden promises to rejoin it if he wins
Letter submitted to UN secretary general triggers one-year withdrawal timeline   US nears 3 million known infections as coronavirus surges in many states

For Young Chinese, the Coolest Thing to Do in 2020 Is Retire
After months of lockdown, Chinese millennials are reassessing their priorities. And that’s leading to a surge of interest in Western early-retirement advocates like Mr. Money Mustache.    Stuck in coronavirus-induced isolation through spring, Thea Tang drew up a new set of life goals. The list was short and extremely specific: Acquire 2 million yuan ($280,000), plus two unmortgaged houses, and retire by the age of 35.

Investors Rush to China’s Stock Market as Bull Rally Continues
The stock market on the Chinese mainland started recovering around the beginning of the second quarter this year after plunges in the first three months. The turnaround in market sentiment has been spurred by eased monetary conditions and a recovering domestic economy after the fallout from the Covid-19 pandemic, multiple analysts said.
The benchmark Shanghai Composite Index closed up 1.74% on Wednesday, rising for the seventh trading day in a row. The mainland entered a technical bull market on Monday.

Six months into coronavirus pandemic, scientists say exact source may never be identified
WHO team is expected to meet Chinese health officials this weekend to set parameters for an international investigation     But how, where and when the pathogen was first transmitted to a human could remain a mystery, according to experts

Updated warning to Australians in China reflects souring relationship
Shanghai | Australia has warned its citizens in China are at risk of being arbitrarily detained as relations between the two countries sour and Beijing tightens its clampdown on national security.
The Department of Foreign Affairs and Trade (DFAT) updated its travel advice to China to include a warning that foreigners had been detained because they are “endangering national security

In Australia, concerns mount that China could use TikTok to spy on users
Hypothetically, the app could enable Chinese authorities to use biometric data to identify people using facial recognition    It could also be possible to map rooms and locations by using ‘feature extraction’ on videos

Foreign firms in Hong Kong face ‘huge insecurity’ over national security law
Vague language, broad provisions and clause stating they could be punished for imposing sanctions has companies concerned     Sources say legislation could be a wake-up call for businesses to re-evaluate their engagement with China

China’s home security chief attends Hong Kong national security office opening
Chen Siyuan’s presence shows Beijing regards the city as a serious threat to stability on the mainland, experts say    Law enforcement veteran poses for group photo but delivers no official speech at opening ceremony

One country, one Internet?; TikTok; Gaokao; Floods in China; US FBI head on China
One Country, Two Internets may have died along with One Country, Two Systems in the Hong Kong National Security Law. The new law makes it clear that the Internet as we knew it in Hong Kong no longer exists but rather is now moving towards something much closer to what is behind the Great Firewall, though without the blocking of foreign websites, so far.  Facebook, Twitter, Google are among the American Internet companies that have announced a temporary moratorium on responding to requests for user data from the Hong Kong government.

China Becoming a Land of High-Tech ‘Rebels’ and ‘Mutants’
Still, the fact that Chinese companies comply with government requests with little hesitation, since they really have no recourse like an independent judiciary, can hardly be reassuring for foreign governments. Personally speaking, I really couldn’t imagine Huawei or ByteDance refusing to carry out a government order. So in that regard, concerns by foreign governments are probably within the realm of reason. That will leave Chinese companies with two choices. Either they go along and comply with Beijing’s wishes, in which case they will probably be shunned outside China forever and will evolve into “mutants” that can only survive in China’s unique high-tech landscape; or they can take a very public stand about asserting their lack of ties to Beijing and perhaps even go so far as to move their headquarters offshore to stay out of Beijing’s legal grasp. In that case they become “rebels” that are pushing back against their odd parent.  ByteDance is already taking some of the “rebel” steps I mentioned by trying to build firewalls between its China and offshore operations. I could even envision Zhang someday moving his company’s headquarters offshore, for example by creating a holding company in a more neutral territory.  But only the boldest and most progressive companies are likely to take that path, and could easily get their wings clipped for their efforts. At the end of the day, I do expect to see ByteDance take some unusual and perhaps radical steps to try and salvage its early global success. One or two others like Tencent may follow suit if they start to find their own global success as well. But for the most part, China’s high-tech realm, especially the internet, will probably belong to the home-grown “mutants” for the foreseeable future, since few foreign firms will want to venture inside this unusual market and none of the Chinese names will have what it takes to survive outside.

Vietnam’s outlook is ‘one of the brightest’ in Asia, UBS says
A rebounding economy and a new trade deal are reasons why the outlook for Vietnam is positive despite the coronavirus pandemic, said Edward Teather of UBS Research.
“Retail sales, imports (and) industrial production were all actually up on the year in the month of June, which is better than you can say for most economies in the region,” he said.
Vietnam was successful in containing its Covid-19 outbreak and has reported 369 cases in a population of under 100 million.

Coronavirus: new US online university rule sends Chinese students scrambling
International students will not be granted visas if they are enrolled in American college courses that are completely online  Students must find a programme with in-person classes to be able to stay in the United States

Why Beijing must respect Hong Kong courts’ interpretation of national security law
It is neither practical nor necessary to obtain expert evidence or an NPC Standing Committee interpretation each time an ambiguity arises in a national security case    Respect for Hong Kong’s authority to discharge its duties under the new law requires the NPC exercise restraint in its power of interpretation

China’s Class of COVID-19
Like their peers around the world, new graduates in China face a battered job market and intense uncertainty.   The Chinese government shares fears about the unemployment rate and the difficulties fresh graduates may face while seeking job openings in an era of worker retrenchment and furloughing. The government has directed state-owned firms to increase their recruitment quotas while initiating tax cuts and loose monetary policies to help firms maintain buoyancy. Likewise, the People’s Bank of China (PBOC) reduced its targeted medium-term lending facility (MLF) rate by 20 basis points to 2.95 percent, injecting 56.1 billion yuan ($7.9 billion) into the banking system.   These policies were essential. China’s urban unemployment rate was 5.9 percent in May 2020, down from 6.2 percent in February. This slight drop and China’s efforts to curb the virus may be good news, hinting at the possibility to negate the projection by the Economist Intelligence Unit that China’s urban unemployment may hit 10 percent this year.

Chinese academics claim US has started cold war as tensions simmer over South China Sea, Xinjiang, Tibet, Hong Kong
Survey published by the Chongyang Institute for Financial Studies at Renmin University contacted 100 Chinese researchers    Survey offers a glimpse into China’s perception of its growing rivalry with the US over the South China Sea, Xinjiang, Tibet and Hong Kong

Alain Gillard
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