CHINAMacroReporter

'Mo Money, Ma Problems'

In today’s issue: 1. Eurasia Group| ‘Top Risks of 2021’ / 2. Biden & the EU-China Investment Agreement / 3. The EU-China Investment Agreement: Pro & Con / 4. China's Antitrust Investigation into AliBaba
by

|

CHINADebate

January 6, 2021
'Mo Money, Ma Problems'

In today’s issue:

1. Eurasia Group| ‘Top Risks of 2021’

  • ‘Top Risks of 2021’: CHINA

2. Biden & the EU-China Investment Agreement

  • 'With Concessions and Deals, China’s Leader Tries to Box Out Biden'
  • 'China and E.U. Leaders Strike Investment Deal, but Political Hurdles Await'

3. The EU-China Investment Agreement: Pro & Con

  • PRO | 'The Importance of the EU, China Investment Deal'
  • CON | 'Europe has handed China a strategic victory'

4. China's Antitrust Investigation into AliBaba

  • 'Mo money, Ma problems - Chinese trustbusters’ pursuit of Alibaba is only the start'
  • 'China’s Pro-Monopoly Antitrust Crusade'

Each New Year brings with it a slew of predications about what’s coming up in that year.

  • Among the best of these is the Eurasia Group’s ‘Top Risks,’ written in part by Ian Bremmer.
  • I’ve included just the China section, which concludes that, ‘On balance, this year will see a bilateral rivalry as intense as that of last year, and that’s dangerous.’
  • Eurasia Group’s business is risk assessment – and it is very good at it. So the whole report is worth a read.

While I am not one for making New Year’s predictions, two events over the holidays have caused me to relent.

  1. The EU’s signing an investment agreement with China, despite signals from the incoming Biden administration to hold off until the Biden team could weigh in.
  2. China’s starting an antitrust investigation into Alibaba for ‘alleged monopoly conduct.’

You haven’t seen much in these pages about the EU-China investment agreement.

  • That’s because it’s been dead in the water for the seven years the EU and China have been negotiating it.

The EU in various contexts have made this lack of progress one its major complaints against China.

  • Even though Angela Merkel, during her 2020 term as EU president, made the agreement a priority, not much happened.

China, for its part, had little incentive to conclude a deal – it already had a fairly free hand investing in the EU.

  • And it had little to gain from acceding to the EU’s demands.
  • Besides, as the EU leaders also often lamented, China is focused on the U.S. and sees the EU as a relative pipsqueak.

Then Joe Biden, with his talk of coalitions of allies against China, won the presidency, and Xi Jinping changed his tune.

  • In December, Xi instructed his negotiators to agree to many of the EU’s demand and get the deal done.
  • Merkel, quick to secure this for her legacy and to advance the interests of the German auto industry, began lobbying fellow EU countries to sign on.

Jake Sullivan, National Security Advisor-designate, posted a somewhat oblique (incoming administration are prohibited from meddling in foreign affairs) but nonetheless clear Tweet, saying that hey, why don’t you guys wait until we’re in office, and we’ll work on this China thing together.

  • Ignoring this entreaty, Merkel plowed ahead, and the deal was signed.

This has led to speculation that the EU is now going its own way and that Mr. Biden will have a difficult time forging any coalition, about China or otherwise, with the EU.

  • And with regard to China specifically, ‘Reinhard Bütikofer, chairman of the European parliament’s delegation on China, says: “We’ve allowed China to drive a huge wedge between the US and Europe.” ’

On the other hand, Joerg Wuttke, president of the EU Chamber of Commerce in China said:

  • ‘We should not have waited for the Biden administration to sort things out. Wait for what?’
  • ‘We don't know if China will be more responsive if the three parties sit together.’
  • ‘We don't have a timeline. Shall we wait another two or three years?’

‘This doesn't exclude our meeting, putting together a program, and talking to the Chinese in a coherent manner, the OECD countries, possibly all together, and the U.S.’

  • ‘But this happening is very much unknown.’
  • ‘We like the fact that there could be a coalition, but at this stage, get the investment deal done and move on.’

My impression is that Mr. Wuttke is on the right track.

  • Yes, it would have better, from a U.S. point of view, if a new Biden administration had had a chance to weigh in.
  • But the deal, from an EU point of view, was more important, and actingin what the EU considered its own interest, especially after four years of being kicked around by the U.S., seems pretty reasonable.

My prediction: This will be a speed bump to U.S.-EU cooperation on China – it is not a signal of EU reluctance to join a coalition to counter China.

  • The deal will not come up for a final ratification vote for a year or so.
  • Given opposition within the EU and the opportunity for the Biden administration to have its voice heard, there is a better than even chance that the EU will not ratify it anyway.

The story to watch is China’s antitrust investigation into Alibaba.

My prediction: Expect a broad and thorough Chinese government effort to assert control over China’s fintech industry.

  • Chinese fintech companies have control of masses of data on individuals that the Party believes should only be in its hands, and they have the ability to generate narratives that don’t necessarily conform to those of the Party.
  • Mr. Xi has demonstrated time and again that Party control trumps GDP.
  • So even if this effort to rein in fintech harms the drive for tech autonomy and global dominance, Mr. Xi will persevere and prevail.
  • This will be one of the biggest and most consequential stories of 2021.
CHINADebate, the publisher of the China Macro Reporter, aims to present different views on a given issue. Including an article here does imply agreement with or endorsement of its contents.

More

CHINAMacroReporter

February 7, 2021
'Remarks by President Biden on America's Place in the World'
“We’ll confront China’s economic abuses; counter its aggressive, coercive action; to push back on China’s attack on human rights, intellectual property, and global governance.”“But we are ready to work with Beijing when it’s in America’s interest to do so. We will compete from a position of strength by building back better at home, working with our allies and partners, renewing our role in international institutions, and reclaiming our credibility and moral authority, much of which has been lost.”“That’s why we’ve moved quickly to begin restoring American engagement internationally and earn back our leadership position, to catalyze global action on shared challenges.”
keep reading
February 7, 2021
'In Search of Today’s George Kennan'
‘Kennan provided a framework to break through the bitter divide between those who believed America should return to its prewar isolationism, and those who believed the USSR was itching for a dramatic showdown with the capitalist west.’
keep reading
February 7, 2021
' "Longer Telegram" Sets Off Fierce Global Debate'
'The fierce global debate set off this week by a thought-provoking paper - “TheLonger Telegram: Toward a New American China Strategy” – has underscored the urgency and difficulty of framing a durable and actionable U.S. approach to China as the country grows more authoritarian, more self-confident and more globally assertive.'
keep reading
May 7, 2021
'Another China-Related Risk for Investors & Corporations: Taiwan'
"Taiwan poses the biggest geopolitical risk in Asia and is likely to only increase, a reason it has to be built into investors’ [and corporates' models]" according to Arthur Kroeber, head of research at Gavekal.
keep reading
May 5, 2021
'Western companies in China succumb to Stockholm syndrome'
‘Senator Marco Rubio of Florida has a point when he calls Delta Air Lines “the height of hypocrisy” for opposing voter legislation in the US state of Georgia while partnering with a government he accuses of being “actively engaged in genocide” in Xinjiang.’
keep reading
May 4, 2021
'The Surprising Strength of Chinese-Japanese Ties'
At their summit in April, ‘after years of veiled messaging Japanese Prime Minister Yoshihide Suga U.S. President Joe Biden, ‘formally acknowledged that they are working together to deter China’s military power in Asia and compete with China economically.’
keep reading
May 3, 2021
'How Will the Digital Renminbi Change China?'
‘China's new digital renminbi by itself will not help the currency to challenge the US dollar’s global dominance.’ ‘Its true significance instead lies in its potential to shift the competitive balance of power between the country’s technology giants and traditional banks.’
keep reading
May 2, 2021
'Fanning the Flames of War'
I recently received an email from a former U.S. ambassador and influential senior foreign policy expert taking me to task for publishing so many hawkish posts about U.S. policy toward China in the ‘China Macro Reporter.’ These are, he said, ‘in some ways fanning the flames of a potential war. Please back down, at least a bit.’ ‘This is not the Malcolm I remember or know,’ he ended.
keep reading
May 2, 2021
‘A trend for hostility toward China, inflamed under Trump, is a recipe for American failure’
‘A trend for hostility toward China, inflamed under Trump, is a recipe for American failure.’ ‘Hostility toward China, much of it misinformed historically and strategically, has deepened in the United States in recent years, with a consensus hardening among both Republicans and Democrats that China is at root an adversary that must be thwarted.’ ‘Four years under President Donald Trump have enlarged and inflamed that trend, but it is a recipe for American failure.’ ‘The Joe Biden administration needs to seriously rethink Washington’s approach to Beijing.’
keep reading
April 30, 2021
'World Economic Outlook, April 2021: Managing Divergent Recoveries'
‘The upgrades in global growth for 2021 and 2022 are mainly due to upgrades for advanced economies, particularly to a sizeable upgrade for the United States (1.3 percentage points) that is expected to grow at 6.4 percent this year.
keep reading
April 29, 2021
Biden China Policy: What We Know at the 100 Day Mark
Friday, April 30, marks 100 days of the Biden Presidency.On Thursday, President Biden gave a speech to a Joint Session of Congress that summed up many of policies – including those on China - as he nears the 100-day mark.And several major media outlets and think tanks are getting an early start on their analyses.Here's Senator Lindsey Graham: "I'm not very impressed with the first 100 days.”‘ "He's been a disaster on foreign policy.” ’‘ “Russia and China are already pushing him around, so I'm very worried." ’
keep reading
April 29, 2021
'Biden’s First 100 Days: Setting the Table for U.S.-China Strategic Competition'
‘Biden is focused on accumulating as much leverage as possible to deal with China from a position of strength and to dispel the growing Chinese perception that the United States is a power in decline.’
keep reading
April 29, 2021
'What Joe Biden Said About China in His First Speech to Joint Session of Congress'
“We’re in competition with China and other countries to win the 21st Century.”
keep reading
April 29, 2021
'Biden's Speech Calls for U.S. to Take On China and Russia'
‘President Biden justified his broad vision to remake the American economy as the necessary step to survive long-run competition with China
keep reading
April 29, 2021
'What does Biden’s first 100 days tell us about his approach to China?'
‘What we have learned from the first 100 days is that we are likely to have both a confrontational and competitive relationship with China, similar to Trump’s policy but with some important nuances.’
keep reading
April 29, 2021
'China's Response to Biden's Speech'
‘It is natural for the two sides to have competition in some fields, but we should advocate fair competition, like competing with each other for excellence in a racing field, not beating each other on a wrestling arena.’
keep reading
April 26, 2021
'The New Age of Autarky'
‘The United States, China, and India are each now engaged in what seems like a paradoxical enterprise: the quest to increase their global status while also turning inward to become more self-sufficient.’
keep reading
April 26, 2021
'China Inside Out: A Conversation with Susan Shirk & Tony Saich'
‘The centralization of power, quite predictably, leads to this kind of echo chamber effect, which is really quite dangerous. And it's something that we should be factoring in when we think about how to deal with China now.’
keep reading
April 24, 2021
'Xinhua News Agency on the "Strategic Competition Act of 2021" in the U.S.' | 新华社评美“2021年战略竞争法案”
‘The bill is full of Cold War mentality and ideological prejudice, wantonly misinterpreting, slandering and discrediting China's development strategy and domestic and foreign policies, and grossly interfering in China's internal affairs.’
keep reading
April 23, 2021
'A new era of bipartisanship on China in Congress?
‘The Strategic Competition Act codifies a bipartisan U.S. position on a range of China-related issues and telegraphs to U.S. allies the federal government is unified.’
keep reading
April 23, 2021
'Xi at the Climate Summit: Domestic Obstacles to Carbon Neutrality'
‘Xi’s reticence at the summit could be driven by domestic considerations. He needs to balance divergent interests between domestic industrial groups and international expectations, the need to show China’s green image and also not be seen as caving to U.S. diplomatic pressure.’
keep reading
April 21, 2021
‘Scenario One & Two: Xi Steps Down'
‘In this scenario, Xi thwarts the current consensus by handing over his leadership positions to at least one individual from the current Politburo Standing Committee (as per existing regulations).’
keep reading
April 21, 2021
'Threat of Chinese sanctions tests Japan's resolve on Taiwan'
"We advise Japan to stay away from the Taiwan question. The deeper it is embroiled in, the bigger the price it will pay." Communist Party-backed Global Times' editorial.
keep reading
April 21, 2021
‘Scenario Four: Unexpected Death or Incapacitation'
‘Even if the CCP’s claim that Xi Jinping has no designs to remain in office for life is true, his evisceration of succession norms leaves the country ill-prepared for his sudden death or incapacitation.’
keep reading
April 21, 2021
‘Scenario Three: Leadership Challenge or Coup
‘By removing de jure term limits on the office of the presidency — and thus far refusing to nominate his successor for this and his other leadership positions — Xi has solidified his own authority at the expense of the most important political reform of the last four decades: the regular and peaceful transfer of power.’
keep reading
April 20, 2021
'Xi calls for new world order (again)'
‘We must not let the rules set by one or a few countries be imposed on others, or allow unilateralism pursued by certain countries [read America] to set the pace for the whole world.’
keep reading
April 20, 2021
'Beijing won total control of Hong Kong. Now, the "brainwashing" begins.'
April 15 was not a normal Thursday in Hong Kong. That occasion, the first “National Security Education Day” since China imposed a tough security law in June, was the most visible display of Hong Kong’s fall from a relatively free, boisterous territory to an ­Orwellian place that resembles the repressive mainland.’
keep reading
April 19, 2021
‘The US-Japan Joint Statement grossly interferes in China's domestic affairs'
‘The US-Japan Joint Leaders' Statement grossly interferes in China's domestic affairs and severely violates basic norms governing international relations. China deplores and rejects it.’
keep reading
April 19, 2021
'Tokyo Flexes Its Talons'
‘The alliance with Japan is the single most important international relationship America has.’
keep reading
April 18, 2021
'Taiwan in US-Japan statement: show of resolve or diplomatic calculus?'
"The statement shunned more specific language like 'defend Taiwan' to avoid unnecessarily provoking China."
keep reading
April 17, 2021
'Is growth in China soaring or slowing?: The answer depends on how you calculate growth'
‘It was China’s fastest growth on record, underlining the strength of its recovery. Yet it also illustrates the oddities in how GDP is reported.’
keep reading
April 17, 2021
'Margaret Ng's Statement at Conclusion of Today's Trial'
‘There is no right so precious to the people of Hong Kong as the freedom of expression and the freedom of peaceful assembly.’
keep reading
April 16, 2021
U.S.-Japan Joint Leaders’ Statement: “U.S. - JAPAN GLOBAL PARTNERSHIP FOR A NEW ERA”
‘President Biden and Prime Minister Suga exchanged views on the impact of China’s actions on peace and prosperity in the Indo-Pacific region and the world, and shared their concerns over Chinese activities that are inconsistent with the international rules-based order, including the use of economic and other forms of coercion.’
keep reading
April 16, 2021
'Breaking China’s Stranglehold on the U.S. Rare Earth Elements Supply Chain'
‘China’s control of the supply of usable, refined rare earth elements undermines U.S. security and that of its allies.’
keep reading
April 16, 2021
'China’s economy springs back from pandemic hit with record growth'
“The headline year-on-year data really doesn’t tell us the story of how the economy has performed in the first quarter . . . in fact that performance was a bit disappointing. The silver lining is that March was better than the first two months.”
keep reading
April 16, 2021
'Hong Kong Newspaper Tycoon Jimmy Lai Jailed Over Role in Peaceful Protests'
“The wrongful prosecution, conviction and sentencing of these activists underlines the Hong Kong government’s intention to eliminate all political opposition in the city,”
keep reading
April 15, 2021
'Biden’s Afghanistan Withdrawal Is a Blow for China'
‘President Joe Biden’s decision to withdraw U.S. and NATO troops from Afghanistan at the end of summer is likely to confound Chinese calculations, both economic and geopolitical.’
keep reading

Heading

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.