CHINAwatch

Substantial 100 Day-gains avert US-China trade war for time being

A Ming Pao Daily (Chinese-language 明報) editorial of 17 July 2017 suggests that substantial 100-Day gains may augur well for a positive outcome in the upcoming (19th July) U.S.-China Comprehensive Economic Dialogue in Washington-D.C. These gains are derived from an agreed list of quid pro quo liberalizations following the Mar-a-Lago meeting between President Trump and President Xi. 

The editorial points out that since 1979, US-China trade has increased 270 times. US export to China has helped generate 910,000 American jobs in 2015. Oxford Economics data suggest that in the same year, import from China increased US GDP by 0.9%, supporting 1.8 million US jobs. Similarly, export to the US in 2015 accounted for 20 million Chinese jobs.

The combined US-China GDP represents 40% of the world's, US-China trade accounts for a quarter of global trade, and total Foreign Direct Investments (FDI) and Outbound Direct Investments (ODI) amount to a third of the global total. So US-China economic relationship is simply "too big to fail", according to the editorial. 

Early harvest of the 100-Day deal includes the import of US beef to China, substantial progress in safety tests of US bio-technology imports, and license issuance for US e-commerce operators and bond issuers in China. In particular, the first five months in 2017 saw dramatic upsurge of US oil exports to China, amounting to 100,000 barrels a day, ten times more than last year. This paves the way for similar expansion of American Liquefied Natural Gas (LNG) exports to China, a commodity in abundance as a result of the US "shale gas revolution".

Moreover, the RMB, the Chinese currency and China's foreign currency reserve have reversed into an upward trend, debunking accusations of currency manipulations to boost China's exports. So the prognosis seems positive for a US-China Bilateral Investment Treaty (BIT), if the Trump administration is able to de-link economic relations from geopolitical rivalry with China and the unrealistic hope of using trade to force China to solve the North Korea problem. 

 

Making sense of Chinese outbound M & A

A McKinsey article of July 2017 tries to debunk five common myths of Chinese outbound M & A - (a) wave of cheap capital (b) the invisible hand of the Party (c) capital flight (d) crazy gamblers and (e) integration not important. The McKinsey research shows that reality is relatively mixed. 

Digital China - The Middle Kingdom of Cyber Space?

The above think-piece of 26 June 2017 by Dr Jean Michel Valantin of the Red (Team) Analysis Society shows how China has rapidly transformed itself into a middle kingdom of global cyber connectivity. 

In 2016, the world's internet users reached 3.6 billion. More than 710 million were Chinese, including 656 million mobile users. 250 million of them are already using 5G network. It is expected that the the Chinese Internet market will almost double during the coming decade.

In 2017, for example,WeChat attracted 889 million users per month, with over 100 million users outside China. During the first quarter, Alibaba recorded 545 million active buyers, over 80% more than Amazon's 300 million.

During the “One Belt, One Road” Forum for International Cooperation that took place in Beijing on 14- 15 May 2017, myriads of deals were signed related to the expansion of the Chinese New Silk Road in cyberspace, reinforcing China's centrality in the global flows of trade, money and cyber connectivity.  

According to a technology report of 10 July by Bloomberg, San Francisco-based start-up Stripe Inc. has unveiled a partnership deal with Alipay's and WeChat's vast digital payment services to access hundreds of millions of Chinese customers hungry for more foreign goods and services. So, Jack Ma's earlier pitch to Trump that Alibaba could use its global platform to help small and medium sized American businesses to create a million US jobs is not all hot air. 

Much of China's One Belt, One Road initiative now embraces ecological sustainability. For example, China initiated the “Joint Initiative to Establish the International Coalition for Green Development on the Belt and Road” with the United Nations Environment Program, as well as the Belt and Road Environmental Cooperation plan, while setting up the “Big Data Service Platform on Ecological and Environmental Protection”. See my Op-ed in the South China Morning Post. 

The Red Team Analysis article contends that China's efforts to achieve centrality of global flows with a stake in sustainability reflects as much its Middle Kingdom tradition as its Taoist world vision, in which the Qi, the “matter energy” and the “Li” the principle of universal order, are different, entwined and must be nurtured and kept in harmony.  

China starts to build its military-industrial complex and is launching an "unhackable" quantum network

As part and parcel of the China Dream of global renaissance, in addition to creating a middle-kingdom of cyberspace, China is starting to enlist private sector start-ups in the development and provision of weaponry from robot gunboats to anti-drone systems, according to a report of 9 July in the Financial Times. 

The new strategy has been pioneered by President Xi Jinping. This year he has created a Military-Civil Integration Development Commission with himself as head. 

“This is what everyone is doing now, especially the US. That is why we must do this as well,” says a representative of China Aerospace Science and Industry Corporation ,according to the FT report. However, it's not just keeping up with the Joneses. Apart from greater efficiency, there are many spin-offs for the broader economy, including revolutionary inventions such as the internet, if America's military-industrial complex is a guide. 

Separately, China is launching an "unhackable" quantum computing network for the first 200 users in the government, military, finance and electricity sectors, according to a report in the South China Morning Post.  The quantum network uses particles of light to encrypt information. If a third party tries to intercept the information, the particles change characteristics, making it impossible to steal the information. 

              

INDO-CHINA RELATION: Border standoff, what’s the way forward?

My guest appearance on 8 July, 2017 on The Big Fight, a full-length debate program with NDTV 24x7, India’s most respected satellite news network covering Europe, North America and the Middle East.