Trade War with China

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Commentary: Chinese economy, short sellers' nightmare
Xinhua| 2019-05-28 22:29:54
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Those interested in short selling the Chinese market believe the trade war will force the Chinese economy into a hard landing. They might be in for a surprise, however, when the Chinese economy deals the first blow.

Their bearish tone was halted by a slew of China's positive economic indicators since the start of China-U.S. trade disputes over a year ago.

China's economic output exceeded 90 trillion yuan (13.03 trillion U.S. dollars) by the end of 2018, with per capita GDP nearing 10,000 U.S. dollars. Foreign trade volume hit a record high of over 30 trillion yuan last year, and consumption has contributed over 75 percent of China's GDP growth.

Contrary to short sellers' claims that China will be hurt very badly if the two countries do not reach a trade deal, global organizations and foreign enterprises have unwavering faith in the world's second-largest economy.

The International Monetary Fund (IMF) in April revised up the 2019 growth projection for China to 6.3 percent from 6.2 percent, while downgrading global growth forecast to 3.3 percent. Global index provider MSCI has recently added 26 China A shares to the MSCI China index.

China has been one of the most popular destinations for global investment with foreign direct investment (FDI) into China ranked first among developing countries for 27 consecutive years in 2018.

China short sellers are disappointed to find that the trade war has not stopped the pace of China's technological advancements but highlighted its innovation strength.

Following restrictions on the sale or transfer of technologies from the U.S., Chinese telecom giant Huawei said it would use backup chips it has independently developed for years to cope with the ban.

Huawei Founder and CEO Ren Zhengfei told the press that even a setback to the company finances would not affect its spending on research and development.

The total number of R&D personnel in China was estimated at 4.18 million in 2018, the highest in the world. China's number of patent applications and approvals both rank first in the world, while the contribution rate of technology is as high as 58.5 percent.

Short sellers need to face the reality that China's breakthroughs in science and technology are not because of the U.S. having its technology IPR stolen, but China's transition from being the world's factory to being the world's innovation platform.

Instead of living in a bubble of disillusion, China short sellers should do their homework: it is not the time to short sell the Chinese market, and it will never be.
 
now I read this
Commentary: Trade war, a turning point for China's technological innovation
Xinhua| 2019-05-28 20:12:47
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The U.S. government's decision to blacklist Huawei is ill-intentioned. But it could also be a turning point for the world's second-largest economy to strengthen independent innovation and reduce its dependence on imported technology.

Huawei, along with other Chinese technology companies, has become an easy target for the United States to contain China, a strategic rival in the eye of the current U.S. administration.

It is a shame to see the United States, once the trumpeter of the open economy, took a unilateral and protectionist approach and used its state power against Huawei, a Chinese multinational company.

The U.S. hostility is built upon the prominence of the Chinese technology heavyweight. Huawei has excelled in the development of 5G technology. It seems that the United States is far away from getting accustomed to a "new normal" that state-of-the-art technology does not originate from America, but China.

Even U.S. telecom carriers are with Huawei, as they benefit from safe, reliable and low-priced Huawei products and services.

The U.S. ban on Huawei underlines a new U.S. mentality full of anxiety, jealousy and lack of confidence.

In fact, the United States may be too anxious about China's technology prowess. China has made stunning progress in technology development, but realistically, it still has a long way to go before it becomes a major technology power.

The U.S. restriction is a wake-up call for China to cast away illusion, cut off dependence on the U.S., and become self-reliant on the supply of core technology. Good to hear the news that Huawei has been developing its own operating system.

In fact, China has many leverages to use in order to master its own fate: a complete industrial chain, a vast consumer market, and an abundant young talent pool... With these resources, China must seriously promote indigenous innovation by ditching any blind faith to authority and the so-called foreign model, guarding against complacency, and immerse itself in basic research while turning knowledge into productivity.

It is unrealistic for the United States to stop China's technological rise simply through bans and blacklists. It is difficult to imagine that Washington would be able to stop the development of the world's most dynamic economy.

It is time for the United States to focus on its own business and compete with China in a decent way.
 

styx

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quite simple for china: stop selling rare earths to cpu fabs that comply with us ban to huawei. And if ARM doesn't give their licenses to huawei ban all the fabs that produces ARM based chips. And ban completely intel (wich own 7nm fabs in usa) from purchasing chinese rare earths. This move in my opinion will destroy the complex patent system tha usa uses to guarantee the chip market dominance. Give instrunctions to chinese foreing agents to disrupt the usa supply chains abroad through sabotage and covert actions, use chinese navy to disrupt commerce between usa and vietnam through force inspections of cargo ships. Use foreign agents to export some afrcan swine fever infected pigs in usa.
 
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Quickie

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Huawei's smartphone Android OS replacement will launch in June



  • RYqiU3byPDDFvXMxvn9kNm-320-80.jpg
Image Credit: Huawei
Huawei's home-grown operating system - code-named HongMeng - set to replace Android once Google's ban comes into full effect, will be commercially rolled out next month, a Middle East head for the firm revealed exclusively to TechRadar Middle East.

On May 20, Google announced that it would partially cut off Huawei devices from its Android operating system but was given an extension till August 19 by the US White House.

Other tech companies also followed suit, including Intel, Qualcomm, Micron, ARM, etc. Even the Bluetooth, SD and WiFi alliances also restricted Huawei.

"Huawei knew this was coming and was preparing. The OS was ready in January 2018 and this was our 'Plan B'.

"We did not want to bring the OS to the market as we had a strong relationship with Google and others and did not want to ruin the relationship. Now, we are rolling it out next month" said Alaa Elshimy, Managing Director and Vice President of Huawei Enterprise Business Group Middle East.

While the ban will come into place towards the end of August, Huawei is already prepped with its new operating system arriving two months earlier, in June.

The OS, internally known as HongMeng, is expected to be compatible with mobile phones, computers, tablets, TVs, connected cars, smartwatch, smart wearables and others.

All applications that work with Android are expected to work with this new OS without any need for further customization, Elshimy claims, adding that users will be able to download apps from the Huawei AppGallery.

Whether all apps available via Google's Play Store will also feature in Huawei's store remains to be seen, as we've seen numerous operating systems before (Windows Phone, BlackBerry OS etc) fail to match the volume of Google's and Apple's app store offerings.

If the HongMeng OS misses out on key apps, it could be difficult for Huawei to convince users to switch to handsets running the software.

Huawei is self reliant


"The US sanctions won't affect the company's operating system and the chipsets in any way as we are self-reliant in many aspects.

"We have all the chipsets expect the Intel chips for PCs and servers. Every single storage player in the market is using Qualcomm chipset and we are the only one using our own chipset. That is why we can go at the speed we want" Elshimy said.

Moreover, he said that Huawei has its own ARM-based processor to replace Intel chips and will be launching its own database similar to Oracle soon.

According to industry reports, Huawei buys more than $11 billion in goods and services from US companies each year. However, the Chinese player will now have to get government approval to buy parts or technology from US suppliers.

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What about WiFi?
When asked about how Huawei phones are going to handle WiFi and Bluetooth issues, he said that WiFi is an international standard and Huawei is one of the biggest contributors to the WiFi Alliance.

"In my view, the biggest loser will be the alliance if they keep us out of the alliance" Elshimy explained. "From an industry point of view, it is a standard and it is good if you meet the standard [but you] don’t need to be part of the alliance. The same answer applies to Bluetooth and SD cases.".

However, he said that keeping Huawei out of the alliance is just putting pressure on Huawei as part of the trade war.

Ren Zhengfei, Huawei’s CEO, recently stated that no one can catch up with Huawei in the next two or three years and being a private company gives it the advantage because it can make large investments more easily.


"In my view, the biggest loser will be the alliance if they keep us out of the alliance" Elshimy explained. "From an industry point of view, it is a standard and it is good if you meet the standard [but you] don’t need to be part of the alliance. The same answer applies to Bluetooth and SD cases.".

Exactly what we've been saying.
 

localizer

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It is a prospect that could leave vast swaths of rural America with no cell service.

In response, a bipartisan group of senators proposed legislation that would create a pool of $700 million to help local carriers replace their technology.

I was listening to NPR and they said realistically the cost would be north of $1 billion to replace all the Huawei equipment.

I guess as long as there's bipartisan support it should be fine.
 

Brumby

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China has introduced its own script. It is ruled by a Communist Party that refuses to leave the commercial fate of its companies to the gods of competition, competence and chance. On a scale far beyond that of any other economy, Beijing uses state power, laws, regulations and resources to ensure that state-owned enterprises and “national champions” such as Huawei dominate in targeted sectors, domestically and internationally.

Beijing seeks to lock in guaranteed external markets for those entities, including through its Belt and Road Initiative. The Communist Party supports and enables the use of forced intellectual property transfers, or else outright theft, to maximise the chances its preferred firms will dominate. It relies on opaque and even corrupt political deals to create economic footholds for Chinese entities such as occurred in Malaysia, under the previous Najib Razak government, and in the Maldives.

The Trump administration’s discontent with global economic institutions such as the World Trade Organisation stems from this reality. Existing WTO rules are not designed to deal with a Chinese political economy that is neither an old-fashioned command economy nor a market economy as established under existing rules. The complex networks of relationships and connections between the party, state, regulatory entities, administrative entities, businesses and individuals are unique to China and unprecedented in scale and density among nations.

How do we legally determine whether an entity is associated with the Communist Party or the Chinese state? According to its company law, even supposedly private Chinese firms must establish committees to ensure firms carry out activities in accordance with the wishes of the party.

The national intelligence law demands that all organisations and individuals support and assist national intelligence work — which is broadly defined in China’s authoritarian political economy. Even so, WTO rules cannot legally decide whether such Chinese entities qualify as an extension of the state. The WTO prohibits certain subsidies provided by governments and their associated entities but cannot rule on whether Chinese firms ought to be considered “associated entities”. This means there can be no adjudication on the cross-subsidisation between Chinese firms that allows them to outspend, outlast and eventually eliminate international competitors.

Most grievances cannot be brought before the WTO because it doesn’t have the jurisdiction or the body of case law to resolve these basic questions. The opacity of the Chinese system makes gathering evidence distinctively difficult. The WTO is largely powerless to deal with the forced transfer or theft of IP on a massive scale. China is unwilling to reform or renegotiate the text of the Marrakesh Agreement, which established the WTO, in a manner that would address these issues.

Indeed, important aspects of the modern Chinese political economy are deliberately organised in a manner that enables Chinese firms to circumvent WTO and other prohibitions.

US President Donald Trump’s economic offensive is supported by the Democrats, business groups and most Americans surveyed on the issue, meaning discontent with China will outlast this administration. Nor is it just a disagreement between the US and China. Other major economies, such as the EU and Japan, have expressed identical concerns and are increasing their support for US insistence on free and “fair” trade vis-a-vis China.
 

Hendrik_2000

Lieutenant General
So what is wrong with supporting national champion every country does it See DARPA basically provide apple with the technology And Darpa, NASA support all the aerospace and defense industry

Here is the reason why there is deficit in trade. Like tar article said US want to have cake and eat it too. there is no way to have balance budget if you overspend on military, give tax cut and increase health spending All those accusation of technological theft is Dejavu with no solid evidence other than hearsay. The ploy is succeeded in brow beating the Japanese to submission. But against China it is not going to work

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Opinion: America is in denial about the trade deficit — it’s not China, it’s us
By Stephen S. Roach
Published: May 28, 2019 4:06 p.m. ET


U.S. trade deficit is made at home with appalling low savings rate

NEW HAVEN, Conn. (Project Syndicate) — “When governments permit counterfeiting or copying of American products, it is stealing our future, and it is no longer free trade.” So said President Ronald Reagan, commenting on Japan after the Plaza Accord was concluded in September 1985.

Today resembles, in many respects, a remake of this 1980s movie, but with a reality-television star replacing a Hollywood film star in the presidential leading role — and with a new villain in place of Japan.


Back in the 1980s, Japan was portrayed as America’s greatest economic threat — not only because of allegations of intellectual-property theft, but also because of concerns about currency manipulation, state-sponsored industrial policy, a hollowing out of U.S. manufacturing, and an outsize bilateral trade deficit.

The tough macroeconomic constraints facing a saving-short U.S. economy are ignored for good reason: there is no U.S. political constituency for reducing trade deficits by cutting budget deficits and thereby boosting domestic saving.
In its standoff with the U.S., Japan ultimately blinked, but it paid a steep price for doing so — nearly three “lost” decades of economic stagnation and deflation. Today, the same plot features China.

Notwithstanding both countries’ objectionable mercantilism, Japan and China had something else in common: They became victims of America’s unfortunate habit of making others the scapegoat for its own economic problems.

Like Japan bashing in the 1980s, China bashing today is an outgrowth of America’s increasingly insidious macroeconomic imbalances. In both cases, a dramatic shortfall in U.S. domestic saving spawned large current-account and trade deficits, setting the stage for battles, 30 years apart, with Asia’s two economic giants.

Deficits made in America
When Reagan took office in January 1981, the net domestic saving rate stood at 7.8% of national income, and the current account was basically balanced. Within two and a half years, courtesy of Reagan’s wildly popular tax cuts, the domestic saving rate had plunged to 3.7%, and the current account and the merchandise trade balances swung into perpetual deficit.


In this important respect, America’s so-called trade problem was very much of its own making.

Yet the Reagan administration was in denial. There was little or no appreciation of the link between saving and trade imbalances. Instead, the blame was pinned on Japan, which accounted for 42% of U.S. goods trade deficits in the first half of the 1980s.

Japan bashing then took on a life of its own with a wide range of grievances over unfair and illegal trade practices. Leading the charge back then was a young deputy U.S. trade representative named Robert Lighthizer.

Fast-forward some 30 years and the similarities are painfully evident.

Predictable decline in savings
Unlike Reagan, President Donald Trump did not inherit a U.S. economy with an ample reservoir of saving. When Trump took office in January 2017, the net domestic saving rate was just 3%, well below half the rate at the onset of the Reagan era. But, like his predecessor, who waxed eloquently of a new “morning in America,” Trump also opted for large tax cuts — this time to “make America great again.”


The U.S. national savings rate has fallen from 7.8% of GDP when Reagan took office to just 2.8% today.
The result was a predictable widening of the federal budget deficit, which more than offset the cyclical surge in private saving that normally accompanies a maturing economic expansion. As a result, the net domestic saving rate actually edged down to 2.8% of national income by late 2018, keeping America’s international balances deep in the red — with the current-account deficit at 2.6% of gross domestic product and the merchandise trade gap at 4.5% in late 2018.


And that’s where China assumes the role that Japan played in the 1980s. On the surface, the threat seems more dire.

After all, China accounted for 48% of the U.S. merchandise trade deficit in 2018, compared to Japan’s 42% share in the first half of the 1980s. But the comparison is distorted by global supply chains, which basically didn’t exist in the 1980s.

Data from the OECD and the World Trade Organization suggest that about 35%-40% of the bilateral U.S.-China trade deficit reflects inputs made outside of China but assembled and shipped to the U.S. from China. That means the made-in-China portion of today’s U.S. trade deficit is actually smaller than Japan’s share of the 1980s.



Like the Japan bashing of the 1980s, today’s outbreak of China bashing has been conveniently excised from America’s broader macroeconomic context. That is a serious mistake. Without raising national saving — highly unlikely under the current U.S. budget trajectory — trade will simply be shifted away from China to America’s other trading partners.

With this trade diversion likely to migrate to higher-cost platforms around the world, American consumers will be hit with the functional equivalent of a tax hike.

Lighthizer as clueless today as he was then
Ironically, Trump has summoned the same Robert Lighthizer, veteran of the Japan trade battles of the 1980s, to lead the charge against China. Unfortunately, Lighthizer seems as clueless about the macro argument today as he was back then.


In both episodes, the U.S. was in denial, bordering on delusion.

Basking in the warm glow of untested supply-side economics — especially the theory that tax cuts would be self-financing — the Reagan administration failed to appreciate the links between mounting budget and trade deficits.

Today, the seductive power of low interest rates, coupled with the latest strain of voodoo economics — Modern Monetary Theory — is equally alluring for the Trump administration and a bipartisan consensus of China bashers in the Congress.

The tough macroeconomic constraints facing a saving-short U.S. economy are ignored for good reason: there is no U.S. political constituency for reducing trade deficits by cutting budget deficits and thereby boosting domestic saving.


America wants to have its cake and eat it, with a health-care system that swallows 18% of its GDP, defense spending that exceeds the combined sum of the world’s next seven largest military budgets, and tax cuts that have reduced federal government revenue to 16.5% of GDP, well below the 17.4% average of the past 50 years.


This remake of an old movie is disconcerting, to say the least. Once again, the U.S. has found it far easier to bash others — Japan then, China now — than to live within its means. This time, however, the movie might have a very different ending.

This article was published with permission of Project Syndicate — Japan Then, China Now.
 
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manqiangrexue

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First of all, America subsidizes the crap out of all its national industries with Trump actively threatening companies that don't follow his agenda with withdrawal of subsidies. That and the US is being called out by Airbus for refusing to follow WTO rulings on providing subsidies to Boeing. For the US to complain about Chinese subsidies is really a case of a fat person shoving burgers down his throat telling others to not eat.

Secondly, John Lee must be watching current events on rewind if he thinks that support for the US is increasing because it was quite higher at the beginning of Trump's administration when Europeans stressed that Europe and the US must work together to counter China and that Europe is not seeking new alliances and now, that's all silent. Europe is now focused on getting the deal they need from America and protecting their own interests with France saying that there should be a middle ground between Chinese and American style (in other words, they're neutral or moving there). Polls indicate that more Germans trust China than America and French newspapers are cheering the Chinese headlines on when China said it is now ready to dig in for the Long March. If anything, support for the US is waning by the day and one can only hope this goes through 2024.
 
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