Appendix 2 China

Please link to and share. 1/14/20


In the News 2/10/20 Did U.S. Start Computer Chip Spying? The CIA secretly controlled a company that provided encryption equipment to many foreign companies for decades, as detailed in a fascinating special report in the Washington Post. The agency first used the company, Crypto AG, to keep the most sophisticated equipment out of the hands of some countries, before expanding its operations into active surveillance of secret communications. It finally sold off the company's assets in 2018. The story is particularly relevant as the Trump administration continues to raise concerns about China using Huawei as a tool of espionage.
2/3/20 The White House 5G plan to build on efforts by some U.S. telecom and technology companies to agree on common engineering standards that would allow 5G software developers to run code on machines that come from nearly any hardware manufacturer. This could include Nokia and Ericsson because they have big U.S. presences.” Huawei is the world’s top seller of telecom equipment because of the quality of its equipment and technical support. WSJ's Bob Davis and Drew FitzGerald
1/14/20 Now the Europeans are saying that, though they regret the US withdrawal from the deal, they also can no longer ignore Iran's non-compliance. France, Germany, and the UK can extend this process indefinitely to prevent UN sanctions from coming into force. So, the main impact of the move, for now, will be to pressure Iran to come back to the negotiating table. We're watching for Tehran's next move.	5 questions for Lori Ann LaRoccoon the long-term consequences of the trade war James Pethokoukis \| AEIdeas
12/1/19 Trump is threatening to impose a 100 percent import tariff on $2.4 billion in French luxury products. This adds to his September threat to do so on wine. This heightened fears in Europe that he	follow through on his threat to impose import tariffs on European automobiles. Also, his now feels in no hurry for a deal before the election which followed his support of the Hong Kong protestors.
11/12/19 Adidas plans to close its only sneaker factories in the U.S. and Germany, shifting cutting-edge automated footwear production to Asia and reversing an effort to make products closer to shoppers	in the West. The closure of the facilities in Ansbach, Germany, and suburban Atlanta—both opened within the past three years—raises questions about the feasibility of bringing manufacturing jobs back to developed markets, Sara Germano reports.
11/01/19 China Regional Comprehensive Economic Partnership (RCEP) alternative to the much more ambitious Trans Pacific Partnership (TPP) led by the United States, without China, a hot ticket when	Trump ditched the TPP in early 2017. Beijing is hoping to move the deal forward by getting India, the main holdout, to agree to a "substantial conclusion" of the deal.
10/8/19 Trump signs limited deal with Japan: “... that would win back benefits American farmers lost when [Trump pulled] out of a broader Asia-Pacific pact his first week in office,” “While rewarding American farmers, the new U.S.-Japan mini-deal does not resolve differences over trade in autos. Trump has said the two countries continue to work on a more comprehensive agreement.”	The US blacklisted 28 Chinese state security bureaus and tech companies for their alleged involvement in suppressing China's Uighur Muslims and other ethnic minorities. China will hit back after the U.S. placed eight of the country's tech giants on a blacklist over alleged human rights violations against Muslim minorities. bloomberg.com/news/articles
9/30/19 Trump's proposal to limit U.S. investment into China's mainland markets pushes the trade war to a new level of folly that is bound to fail, Shuli Ren writes for Bloomberg Opinion Source "...the bilateral trade deficit has little importance... But China's ability to generate hard international currency is vital. External 2018 debt of $1.96 trillion is approaching the psychologically important threshold $2 trillion. China needs more than $100 billion annually with continued low interest rates to service foreign debtors. The hard currency requirements of offshore borrowing/investing is creating a dollars banking shortage. The Renminbi devaluation to maintain exports creates the real risk of capital flight and makes it more difficult for China to service its dollar denominated debt.

“Japan agreed to cut or eliminate tariffs on beef, pork and other commodities on a level similar to what Tokyo agreed to in the Trans-Pacific Partnership — a trade deal that the president withdrew from during his early days in office. What about the auto tariffs: “...both nations will refrain from taking measures against the spirit of these agreements..." “Tokyo interprets that sentence..." "... that the U.S. won’t pursue auto tariffs as long as the agreement is ‘faithfully implemented,’

— WTO rules U.S. can tariff EU over Airbus aid. "The U.S. duties, which could hit as soon as October...

The digital aspects: The digital trade provisions will prohibit customs duties on digitally transmitted videos, music, software and would also prohibit barriers to cross-border data flows and data localization requirements.
washingtonpost 9/26/19

Key components of U.S., Mexico immigration deal were already agreed to 6/10/19

"It was unclear whether Mr. Trump believed that the agreement [dropping Mexican] tariffs truly represented new ... concessions, or whether the president understood the limits of the deal but accepted it as a face-saving way to escape from the political and economic consequences of imposing tariffs."

As the president just demonstrated, he is now willing to use tariffs as a cudgel to secure policy aims outside the trade arena. That means a country could make painful sacrifices to secure a trade pact only to be left staring down the barrel of a fresh tariff threat over a non-trade matte

Trade Problems
Are Complex

The Heritage Foundation
"Why is trump trying to Protect the Industries that we want to get Rid of?" 5/23/19

Landmark EU trade deals. 6/30/19 The European Union has signed its first free trade agreement with Vietnam, which could eliminate nearly all tariffs between the country and its second-biggest export market. Another free trade treaty between the European Union and the South American bloc Mercosur was agreed last week after 20 years of negotiations. It will form the largest global market for goods and services, by total population.

40,000 US beer jobs lost since 2016
5/28/19 because Trump's aluminum tariffs raised the price of beer cans cutting into profit Source

China makes a veiled key exports threat: 5/28/19 China could use its dominance in rare earth minerals as a weapon in the trade war intensified after a Chinese warned products using rare materials should be excluded from negotiations CNBC Patti Domm

Trump Hands China an Easy Win in the Trade War
5/29/19 Kevin Rudd wrote in the NYT

May 5 when President Trump tweeted the trade deal was off was 100 years after China’s 1919 “May Fourth Movement”. President Wilson had promised China, the return of German Shandong colonies, but instead handed them to Japan. China exploded with anti-American, nationalist sentiment. The establishment of the Chinese Communist Party followed. Thus, Mr. Trump has handed Xi Jinping a much needed nationalist card to counter pressure from a slowing economy. Also, Mr. Xi visited Jiangxi, the starting point of the Long March in 1934, in which the Communist Party endured many hardships but emerged victorious. Combined with Economic resilience and patriotism the media began the tools to use against the US.

INSIDESORCES 6/6/19

Ignore Global Economic Risks at Your Peril

Emerging market economies.
Argentina and Turkey are in the grips of full-blown currency crises fueled by political uncertainty.
Iranian and Venezuelan economies are literally collapsing because of as U.S. sanctions.

Large Economies
United Kingdom, the world’s fifth-largest economy,
could choose a hard-Brexiter prime minister meaning a hard October United Kingdom exit with all of its disastrous
economic consequences. A parliament forces election would prolong uncertainty.

In Italy, the Euro zone's third-largest economy, the far-right League Party's crushing victory gives
Salvini the upper hand in determining economic policy.
This raises the risk of another round of its sovereign severe debt problems centered on Italy with its world’s third-largest sovereign bond market.
With an economy in recession, a mountain of public debt mountain and a shaky banking system, Salvini's proposed income tax cut which could undermine Italian bond market confidence.

China, the world's second-largest economy is in an economic slowing trade war the
US, the world's largest economy.

North Korean and Iran geopolitical tensions

Brazil and Mexico economic mismanagement

China has no desire to scale back its winner-take-all industrial ambitions or
to make fundamental changes to its authoritarian capitalism.

A mix that includes subsidies for state industrial champions and economic policy
favoring local over foreign players, has succeeded.

Any final agreement will have Chinese pledges to buy more U.S. products
but few promises to restructure the economy.

A trade deal won’t end China-U.S. frictions. In fact, the conflict has only just begun.

Three small numbers are making big waves in China. 4/17/19 Source
The digits 9-9-6, a shorthand for 9am to 9pm, six days a week,
have become a rallying cry for tech workers frustrated with their bruising work schedules

Kevin Rudd Analysis 3/14/19

Trump wants stronger economy.

Xi's economic slowdown cause by trade related export decline and
non-trade related lower emphasis in internal private company investment.

China will give Trump easier access to agriculture and financial service industries,
Laws to slow Intellectual Property Theft which are difficult to enforce.
Aid to state owed companies compositing with US will not slow
because they are part of China's economic structure.

Trump's Tariffs gave China a political warning,
have increased the cost to middle class consumer,
and increased geopolitical tensions. See Understanding Xi's China
Editor 6/20/19: Added to world wide business uncertainty and lowering investment.

Trump's 90-day Tariff Deal 12/18

A 2018 report from Freedom House, a democracy watchdog, noted that 18 countries (so far)
now use Chinese-made intelligent monitoring systems and 36 have received training in topics like
"public opinion guidance," a euphemism for censorship. The list of countries includes the UAE,
Zimbabwe, Uzbekistan, Pakistan, Kenya, and Germany.

The worldwide infrastructure-building project "has pushed China’s huge construction,
telecommunications and shipping companies to go global at a time when a cooling
domestic economy means less business at home."

Editor's Note: A common problem in centrally planned economies.
Where is the data on the cost of China's overbuilding housing at home.
Japan rushed into HDTV while US, very profit dependent, waited for digital technology.

The Impact of Chinese Trade on U.S. Employment:
The Good, The Bad, and The Apocryphal

Chinese competition on US manufacturing had a striking regional variation from 2000-2015.

In high-human capital areas like West Coast or New England, manufacturing job losses saw industry switching to services.
Companies changed to research, design, management or wholesale. Hence, redistributed of jobs went from manufacturing
in lower income areas to services in higher income areas.

In the low human-capital areas like the South and mid-West, manufacturing plants closed without much increased service employment.

Offshoring appears to drive these manufacturing job losses.

Ling Chen: New Insights on the 'Made in China' Model
1. Began with Top Down Trade which succeeded using cheap labor
2. Success cause companies to move to other Asian companies
3. Bottom up home grown Gorilla Investors will contribute to Made in China_2025
4. Ling Chen's analysis supports the Beijing Model. See Washington Consensus vs. Beijing Consensus/

This employment impacts was strongest between from 2000 to 2007

Miscellaneous Updates

6/17/19 UBS is suffering more fallout from its cultural faux pas. China Railway Construction Corp. excluded the Swiss bank from a bond deal after its global chief economist sparked a furor with his use of the phrase "Chinese pig," people familiar said. The signaling effect is potentially more concerning than lost fees as other Chinese companies may follow suit. The response may seem a bit strong, but that's the cost of doing business in emerging markets, Shuli Ren writes for Bloomberg Opinion.

6/10/19 Two bipartisan bills going after Chinese companies that don’t comply with auditing rules in the U.S. listed Chinese firms three years to come in compliance with oversight requirements of the PCAOB, a non-profit corporation Congress created in 2002, in an effort to restore reporting credibility.”

6/11/19

Apple has a backup plan if the trade war gets out of hand. There's enough capacity to make all iPhone's bound for the U.S. outside of China if necessary, according to its main manufacturing partner Hon Hai. Most are currently made in the Chinese mainland. Hon Hai also said it will hire up to 13,000 in Wisconsin as promised.

Nintendo is moving some production out of China: “Nintendo Co. is shifting some production of its Switch video game console to Southeast Asia from China to limit the impact of possible U.S. tariffs on Chinese-made electronics,

U.S. storage device maker Western Digital froze its partnership with Huawei and halted shipments to the company to comply with the U.S. ban

CEO Steve Milligan is considering a license to resume trade with Huawei.

6/12/19 Japanese firm follows Washington’s trade blacklist

“Japan’s Tokyo Electron, the world’s No. 3 supplier of semiconductor manufacturing equipment, will not supply to Chinese clients blacklisted by Washington, a senior company executive told Reuters,” Makiko Yamazaki reports.

http://econi

6/13/19 Oil surged after two tankers were damaged in a suspected attack in the Gulf of Oman, near the Strait of Hormuz, just weeks after a previous incident in the region.

6/7/19 China’s Gloves Are Beginning to Come Off

Trump Has Gotten China to Lower Its Tariffs. Just Toward Everyone Else

3 History of China

History of China: What is China, Anyway?

Modern Western Civilization Economic History

China was part of the Colonial Empire of Great Britain

Opium Trade was a Big Money Maker.

Trade Policy as Foreign Policy

The U.S. vs. China: A Trade War?

he U.S. vs. China: A Trade War (II)?

Specialization and Trade: A Re-introduction to Economics
A Libertarian View
A concise reexamination of economics, which shows how
the economy is an evolutionary system, with constantly
changing patterns of specialization and trade.

6 Times Foreign Powers Meddled in Our Elections

Post WW II US Foreign Policy

20th Century U.S. Foreign Policy

Source