Chinese Economics Thread

[Gatekeeper]

Well well, I'm not sure who this action will hurt the most. Reduce capital for Chinese firms to expand, or..... Lack of returns for the US pension funds.

My money is on the pension funds not being able to generate enough returns or diversification for the fund managers.

It really looks like a desperate move from Trump's adminstration. So much for FREE market theory!

This from Financial Times in the UK. Enjoy:

US politics & policy Trump orders federal pension fund not to invest in Chinese stocks White House cites risk of ‘future sanctions’ over pandemic

May 12, 2020 7:25 pm by Demetri Sevastopulo in Washington

President Donald Trump has ordered the main federal government pension fund not to invest its portfolio in Chinese companies, which his administration says pose a serious national security risk to the US.

The intervention comes as the Federal Retirement Thrift Investment Board, an agency that manages almost $600bn in its “Thrift Savings Plan”, prepares to shift the international component of the fund into an index that includes Chinese companies.

Robert O’Brien, US national security adviser, and Larry Kudlow, the White House economic adviser, said using the MSCI All Country World ex-US Investable Market index would “expose the retirement funds to significant and unnecessary risk” because they would be investing in Chinese companies that pose both national security and humanitarian concerns by operating in violation of US sanctions.

The FRTIB in November rejected a request from a bipartisan group of senators not to invest in the index, saying that such a move would disadvantage the roughly 5.5m federal employees who invest in the retirement fund.

But the White House stepped up pressure this week, as Mr Trump blamed China for the Covid-19 pandemic.

The decision is of historic importance because of its vast knock-on effects for the US and global capital markets vis-à-vis China

Roger Robinson, RWR Advisory Group

In a letter to Eugene Scalia, the labour secretary who has oversight of TSP, Mr O’Brien and Mr Kudlow said the risks of having Chinese stocks in the portfolio included the “possibility that future sanctions will result from the culpable actions of the Chinese government with respect to the global spread of the Covid-19 pandemic”.

As Mr Trump has been criticised for his handling of the pandemic, he has blamed China and suggested that Beijing would pay a price. The White House officials said the FRTIB should consider China’s actions regarding Covid-19, which came after the board’s November refusal to reverse course.

“The Chinese government concealed critical information from the United States and the rest of the world regarding Covid-19 and exacerbated the ensuing global pandemic,” Mr O’Brien and Mr Kudlow wrote.

In response to the White House concern, Mr Scalia told Michael Kennedy, FRTIB chairman, in a separate letter that Mr Trump wanted the board to “immediately halt all steps associated with investing” in the index. While Mr Scalia cannot force a reversal, he noted that Mr Trump had recently nominated three people to replace three of the five board members.

Mr Scalia said deferring the change would “enable a newly-constituted board” to determine what fund should be used instead of the MSCI index. Kim Weaver, the FRTIB spokesperson, said the board had received the two letters but declined further comment.

The White House said the Chinese companies in the index include businesses that supply the People’s Liberation Army, companies that make surveillance equipment to help China repress religious minorities and groups that violate US sanctions by dealing with Iran and North Korea.

Roger Robinson, a former National Security Council official and ex-chairman of the Congressional US-China Economic and Security Review Commission who has been pushing for action, said the White House move was significant.

“The TSP decision is of historic importance because of its vast knock-on effects for the US and global capital markets vis-à-vis China,” said Mr Robinson, who runs RWR Advisory Group, a research and risk consultancy.

“The White House letter ending this Thrift Savings Plan debacle clearly implicates the broader issues of US-sanctioned and other Chinese corporate bad actors in our capital markets and China's non-compliance with federal securities laws,” he added.

Marco Rubio, the Florida Republican senator and China hawk, praised Mr Trump for “taking action and putting a stop to this misguided and deeply flawed decision by five unelected bureaucrats”.

Mr Rubio and Jeanne Shaheen, a New Hampshire Democratic senator, have sponsored legislation that would bar TSB from investing in Chinese companies.

 

[Gatekeeper]

NZ farming is not subsidized since the introduction of Rogernomics in 1984. Its been swim or sink for us farmers since then, however we have gone on to be amongst the best in the world.
Meanwhile the Australian apple growing industry is highly protected from imports from NZ As a consequence, Australians have a limited choice of apple varieties to choose from with many of their apples being the varieties grown many decades before.

This is a cross over between Covid 19 and economics. So I post here since we are talking about New Zealand.

New Zealand is really trying to have it's cake and eat it. It openly, as per foreign secrtary Winston Peters, support Taiwan's entry into WHO as an observer, thus implicitly backing US foreign policy stance.

But at the same time it is worry about hurting it's economic ties (advantages of trading with its largest trading partner) trading situation with China. As witness by the prime minister Jacinder, re-confirming the ONE CHINA POLICY!

This just goes to show the two smallest nations in the five eye community is really have very little to no clout in the group. It's foreign policy is not of their own choice. It's a kin to being a Vassal state.

Here's the article:

New Zealand backs Taiwan joining the WHO despite China rebuke

Foreign minister says ‘we have to stand up for ourselves’ after Beijing protests against calls for Taiwan to join the WHO as an observer

Coronavirus – latest updatesSee all our coronavirus coverage

Reuters

Tue 12 May 2020 00.27 EDT

New Zealand’s foreign minister has said the country has to stand up for itself after China warned its call for Taiwan’s participation in the World Health Organization (WHO) could damage bilateral ties.

Taiwan, with the strong support of the United States, has stepped up its lobbying to be allowed to take part as an observer at next week’s World Health Assembly (WHA), the WHO’s decision-making body – a move that has angered China.

Taiwan is excluded from the WHO due to the objections of China, which views the island as one of its provinces.

Senior ministers in New Zealand said last week Taiwan should be allowed to join the WHO as an observer given its success in limiting the spread of the novel coronavirus, drawing China’s ire which asked the Pacific country to “stop making wrong statements”.

Ardern thanks 'team of 5 million' as New Zealand reopens schools and offices

“We have got to stand up for ourselves,” Winston Peters, New Zealand’s foreign minister, said at a news conference when asked about China’s response to New Zealand’s position on Taiwan. “And true friendship is based on equality. It’s based on the ability in this friendship to nevertheless disagree.”

Peters said he did not think the issue would harm diplomatic ties with China, which is New Zealand’s biggest trading partner.

Taiwan has reported only 440 coronavirus cases and seven related deaths, relatively low figures attributed to early and effective disease prevention and control work.

Peters praised Taiwan’s response to Covid-19 and said there was a lot for other countries to learn from. “New Zealand’s position on Taiwan is about its tremendous success against Covid-19,” Peters said.

Dying too young: coronavirus, my Māori family and me

When asked about China’s response later in the day, Prime Minister Jacinda Ardern said New Zealand’s position on Taiwan was only related to its health response to Covid-19. “We have always taken a ‘One China’ policy, and that continues to be the case,” Ardern said.

Ties between neighbouring Australia and China have frayed in recent months after Canberra called for an international investigation into the origins and spread of the coronavirus that was first reported in the Chinese city of Wuhan late last year.

China has dismissed such a probe as groundless, saying the country has been open and transparent about the outbreak.

 

[hullopilllw]

Both you and manqiangrexue have hit the nail on the head. Considering that there are over 50 million members of the Chinese diaspora, and the fact a good proportion of members in SDF are likely to be overseas Chinese, we should also consider our own massive purchasing power to help change economic attitudes/perspective both outside of china and even within china.

Many of us are now in highly successful careers in the west, and to be honest, I'm not going to stop consuming just because of COVID/trade war. But I've shifted my spending so this year, I purchased a Lenovo Thinkpad X1 to replace my old Dell, I've ordered a One-plus to replace my iphone, and I am seriously considering the Polestar 2 once its available in Canada, even though my current Acura is only 4 years old. Ideally I would like to buy electronics from Huawei and an EV from xpeng (china's Tesla), but they are not widely available in North America. If you also consider the impression Huawei and xpeng currently conveys in the west, there is much more blowback than if you try to buy goods from "safer china" brands like Lenovo, One-Plus, Polestar/Volvo. Its easier to change westerner's narratives/stereotypes if you sport these brands, since they aren't clouded by as large negative perceptions.

Totally agree on the thousand dollar bags being worthless blood-suckers of the economy. Side-rant: as one of the "positives" of COVID-19, I convinced my girlfriend to sell one of her LV bags. I committed to buy her a T97 rifle with tricked-out holosun accessories for her birthday this August, since we both got our PALs back in Feb and this would make a nice get-out-of-COVID present. To be honest... I just wanted to spend at least ~$2,000 on a firearm so that I didn't look cheap, but its hard to do that with chinese firearms, and Trudeau did forget this gun in his firearm ban. Its nice "reparations" for convincing her to give up the LV.

Many times we talk about a need for people in china to change their mentality to stop blindly pursuing western luxury goods. Considering these people have more familial/business/civic ties to overseas diasporas than the average person in China, overseas chinese have an excellent opportunity to "virtue signal". Imagine a meeting of a middle-management executive in Beijing with a chinese-canadian business owner in Toronto, and the first thing he sees is the canadian picking him up at the airport in a Polestar 2. The executive knows damn well a person driving a Polestar 2 could have just as easily bought a Benz/BMW/Audi. Sitting in that Polestar 2 halfway around the world for 30 minutes probably convinces this businessman more than any online forum or Xinhua news-piece that chinese products are as good as any and that "china has arrived". Those are the types of occurrences/instances that tank sales of foreign luxury cars in china the moment the executive landed back in Beijing...

Same for me. Used to be all Toyota, Isuzu and Lexus, next car will most likely be MG Motors or Wuling. Samsung is out, Xiaomi is out, now full time Huawei. Dell to Lenovo, hopefully Kunpeng based PC will launch here in the future. Forgoing EVO ssd, getting Hikvision. Even my home pc is using Wuhan Deepin OS now.

 

[hullopilllw]

Well well, I'm not sure who this action will hurt the most. Reduce capital for Chinese firms to expand, or..... Lack of returns for the US pension funds.

My money is on the pension funds not being able to generate enough returns or diversification for the fund managers.

It really looks like a desperate move from Trump's adminstration. So much for FREE market theory!

This from Financial Times in the UK. Enjoy:

US politics & policy Trump orders federal pension fund not to invest in Chinese stocks White House cites risk of ‘future sanctions’ over pandemic

May 12, 2020 7:25 pm by Demetri Sevastopulo in Washington

President Donald Trump has ordered the main federal government pension fund not to invest its portfolio in Chinese companies, which his administration says pose a serious national security risk to the US.

The intervention comes as the Federal Retirement Thrift Investment Board, an agency that manages almost $600bn in its “Thrift Savings Plan”, prepares to shift the international component of the fund into an index that includes Chinese companies.

Robert O’Brien, US national security adviser, and Larry Kudlow, the White House economic adviser, said using the MSCI All Country World ex-US Investable Market index would “expose the retirement funds to significant and unnecessary risk” because they would be investing in Chinese companies that pose both national security and humanitarian concerns by operating in violation of US sanctions.

The FRTIB in November rejected a request from a bipartisan group of senators not to invest in the index, saying that such a move would disadvantage the roughly 5.5m federal employees who invest in the retirement fund.

But the White House stepped up pressure this week, as Mr Trump blamed China for the Covid-19 pandemic.

The decision is of historic importance because of its vast knock-on effects for the US and global capital markets vis-à-vis China

Roger Robinson, RWR Advisory Group

In a letter to Eugene Scalia, the labour secretary who has oversight of TSP, Mr O’Brien and Mr Kudlow said the risks of having Chinese stocks in the portfolio included the “possibility that future sanctions will result from the culpable actions of the Chinese government with respect to the global spread of the Covid-19 pandemic”.

As Mr Trump has been criticised for his handling of the pandemic, he has blamed China and suggested that Beijing would pay a price. The White House officials said the FRTIB should consider China’s actions regarding Covid-19, which came after the board’s November refusal to reverse course.

“The Chinese government concealed critical information from the United States and the rest of the world regarding Covid-19 and exacerbated the ensuing global pandemic,” Mr O’Brien and Mr Kudlow wrote.

In response to the White House concern, Mr Scalia told Michael Kennedy, FRTIB chairman, in a separate letter that Mr Trump wanted the board to “immediately halt all steps associated with investing” in the index. While Mr Scalia cannot force a reversal, he noted that Mr Trump had recently nominated three people to replace three of the five board members.

Mr Scalia said deferring the change would “enable a newly-constituted board” to determine what fund should be used instead of the MSCI index. Kim Weaver, the FRTIB spokesperson, said the board had received the two letters but declined further comment.

The White House said the Chinese companies in the index include businesses that supply the People’s Liberation Army, companies that make surveillance equipment to help China repress religious minorities and groups that violate US sanctions by dealing with Iran and North Korea.

Roger Robinson, a former National Security Council official and ex-chairman of the Congressional US-China Economic and Security Review Commission who has been pushing for action, said the White House move was significant.

“The TSP decision is of historic importance because of its vast knock-on effects for the US and global capital markets vis-à-vis China,” said Mr Robinson, who runs RWR Advisory Group, a research and risk consultancy.

“The White House letter ending this Thrift Savings Plan debacle clearly implicates the broader issues of US-sanctioned and other Chinese corporate bad actors in our capital markets and China's non-compliance with federal securities laws,” he added.

Marco Rubio, the Florida Republican senator and China hawk, praised Mr Trump for “taking action and putting a stop to this misguided and deeply flawed decision by five unelected bureaucrats”.

Mr Rubio and Jeanne Shaheen, a New Hampshire Democratic senator, have sponsored legislation that would bar TSB from investing in Chinese companies.

This is good, Chinese companies should also reject US funding and remain commited to domestic investment. Funnily, against this backdrop, US is attempting to force China to open up her capital market like what she did to Japan in the 80s and Korea in 1998 that led to Wallstreet fund owning majority shares of Samung Group.

 

[localizer]

This is good, Chinese companies should also reject US funding and remain commited to domestic investment. Funnily, against this backdrop, US is attempting to force China to open up her capital market like what she did to Japan in the 80s and Korea in 1998 that led to Wallstreet fund owning majority shares of Samung Group.

The current global economy hinges on US being reserve currency.

That means the dollar must be versatile and unrestricted.

Things like investment restrictions and maybe eventual property confiscation from Chinese will make the dollar lose its status and value.

Only people that suffer in the end are those holding dollars and Chinese holding US property. They will lose everything and they deserve it.


80% of my family’s assets are in China. 20% in the US just for doing business.


I often wonder how the rich Chinese allocate their wealth.

 

[hullopilllw]

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If signs are heading that direction my prediction Trump will be in a rush to cancel the deal first to make it look like he's the one in control.

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A sign of desperation because if the US carries out their threat to punish all countries that use its technology to make products they in turn sell to China, there will be a huge backlash against the US by the world. It's better if the world "voluntarily" does it. It shows how dependent not independent the US is to the world because they would end up isolating themselves.

US materials being part of the supply chain of semicon industry doesnt mean it is totally dependent on US, just like how ASML originated from the Dutch. It only means US is inherently a cheat that will retort to any means to bring down an innovative non-US players and the world should be wary of even the tiniest part of their crucial tech being US based. Free Market is merely a jargon used to make US feel good when they lead the world.

 

[hullopilllw]

This is a cross over between Covid 19 and economics. So I post here since we are talking about New Zealand.

New Zealand is really trying to have it's cake and eat it. It openly, as per foreign secrtary Winston Peters, support Taiwan's entry into WHO as an observer, thus implicitly backing US foreign policy stance.

But at the same time it is worry about hurting it's economic ties (advantages of trading with its largest trading partner) trading situation with China. As witness by the prime minister Jacinder, re-confirming the ONE CHINA POLICY!

This just goes to show the two smallest nations in the five eye community is really have very little to no clout in the group. It's foreign policy is not of their own choice. It's a kin to being a Vassal state.

Here's the article:

New Zealand backs Taiwan joining the WHO despite China rebuke

Foreign minister says ‘we have to stand up for ourselves’ after Beijing protests against calls for Taiwan to join the WHO as an observer

Coronavirus – latest updatesSee all our coronavirus coverage

Reuters

Tue 12 May 2020 00.27 EDT

New Zealand’s foreign minister has said the country has to stand up for itself after China warned its call for Taiwan’s participation in the World Health Organization (WHO) could damage bilateral ties.

Taiwan, with the strong support of the United States, has stepped up its lobbying to be allowed to take part as an observer at next week’s World Health Assembly (WHA), the WHO’s decision-making body – a move that has angered China.

Taiwan is excluded from the WHO due to the objections of China, which views the island as one of its provinces.

Senior ministers in New Zealand said last week Taiwan should be allowed to join the WHO as an observer given its success in limiting the spread of the novel coronavirus, drawing China’s ire which asked the Pacific country to “stop making wrong statements”.

Ardern thanks 'team of 5 million' as New Zealand reopens schools and offices

“We have got to stand up for ourselves,” Winston Peters, New Zealand’s foreign minister, said at a news conference when asked about China’s response to New Zealand’s position on Taiwan. “And true friendship is based on equality. It’s based on the ability in this friendship to nevertheless disagree.”

Peters said he did not think the issue would harm diplomatic ties with China, which is New Zealand’s biggest trading partner.

Taiwan has reported only 440 coronavirus cases and seven related deaths, relatively low figures attributed to early and effective disease prevention and control work.

Peters praised Taiwan’s response to Covid-19 and said there was a lot for other countries to learn from. “New Zealand’s position on Taiwan is about its tremendous success against Covid-19,” Peters said.

Dying too young: coronavirus, my Māori family and me

When asked about China’s response later in the day, Prime Minister Jacinda Ardern said New Zealand’s position on Taiwan was only related to its health response to Covid-19. “We have always taken a ‘One China’ policy, and that continues to be the case,” Ardern said.

Ties between neighbouring Australia and China have frayed in recent months after Canberra called for an international investigation into the origins and spread of the coronavirus that was first reported in the Chinese city of Wuhan late last year.

China has dismissed such a probe as groundless, saying the country has been open and transparent about the outbreak.

Trade relation is only possible because it is build atop mutual respect for each other's sovereign integrity. If one party blatantly disrespect the other's sovereign integrity, then the foundational basis upon which trade relation can be healthily build will no longer exist.

So i am confused with the behavour of OZ and NZ, on one hand they poked and dont seems bothered to have mutal respect with China, yet they demand China to remaim commited to giving their nation enormously imbalanced economic gains. Do they does this knowingly? Or are they not aware of the situatiom objectively? Is the One China policy merely a piece of excuse card for them to remain leeching off China for growth while retaining the rights to continue stepping down on China?

 

[AssassinsMace]

China shouldn't think like the US where they can go it alone. That's not possible. China can still trade with the rest of the world minus the US and whichever countries dare follow the US which I guarantee you won't be many if any at all. Why? Because China is the engine of the world economy. No matter what they may be feeling about China because of coronavirus, they still want China buying their stuff. Why do you think the US gets a pass so many times? The US is working to end any dependency on another country because of arrogance. The US has a lot of resources within its territory but they don't have them all or enough in order to maintain an industrial based economy.

The 2008 Western Financial Crisis exposed how European countries where living beyond their means. They were borrowing money to maintain the standard of living they were use to. And the citizens were resistant to any attempts to reduce spending that would affect what social programs they had already. Japan would not be the high tech giant it was if they lived just within their means. All of them need to sell their products to other countries in order to maintain their lifestyles. That's why the US is going to have a hard trying to stop China because that means their closest allies will have to stop selling their products to China meaning they lose money.

The West didn't develop Africa which nearly has all resources an industrial economy needs because they were keeping it like a bank keeps money waiting for the right time to make a withdrawal. Then China came along and alarm bells rang. All those resources they were saving to exploit for later, now were threatened by China buying them. When there's competition to buy resources, prices rise. The West is no longer going to get them for free or cheap with China in the picture. That's why even close allies will start to remove the US equation themselves eventually in their industries where the US doesn't have a say meaning they're not going to buy from the US if it means the US can dictate who they can sell to.

 

[B.I.B.]

This is a cross over between Covid 19 and economics. So I post here since we are talking about New Zealand.

New Zealand is really trying to have it's cake and eat it. It openly, as per foreign secrtary Winston Peters, support Taiwan's entry into WHO as an observer, thus implicitly backing US foreign policy stance.

But at the same time it is worry about hurting it's economic ties (advantages of trading with its largest trading partner) trading situation with China. As witness by the prime minister Jacinder, re-confirming the ONE CHINA POLICY!

This just goes to show the two smallest nations in the five eye community is really have very little to no clout in the group. It's foreign policy is not of their own choice. It's a kin to being a Vassal state.

Here's the article:

New Zealand backs Taiwan joining the WHO despite China rebuke

Foreign minister says ‘we have to stand up for ourselves’ after Beijing protests against calls for Taiwan to join the WHO as an observer

Coronavirus – latest updatesSee all our coronavirus coverage

Reuters

Tue 12 May 2020 00.27 EDT

New Zealand’s foreign minister has said the country has to stand up for itself after China warned its call for Taiwan’s participation in the World Health Organization (WHO) could damage bilateral ties.

Winston was contacted by China's ambassador who informed him of China's concern with his POV as foreign minister. To which he later told news reporters " I told her to go back and talk to her master " though I doubt that he really spoke like that to her like that. Winston is the Deputy Prime Minster in a coaltion government and because we are due for parliamenty elections in a few months he is pandering to his support base which mainly consists of the elderly, anti immigration , anti china and bring back jobs to NZ brigade. Last week he actually said that President Xi had told him that there was no intention to use trade restrictions against NZ.

Meanwhile, I think our Govt wants to avoid antagonizing China while we are looking at some sort of recession.

I finding it hard to comprehend why our politicians suggest that we have a lot to learn from Taiwan. What they did right was immediately close the borders, enforced isolation good testing and contract tracing. All we did was to have selective border closing, voluntary unchecked self isolation, keep a written diary on where we had been every day.

 

[localizer]

One thing that I suspect might happen is US offers Chinese traitors refuge in exchange for all their assets being moved to US soil. *cough Guo Wengui