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TRIVIUM CHINA: Tip Sheet on China


“[We] exchanged views on how to achieve fairness, balance, and reciprocity in the economic relationship.”

-The White House

Some context:  That was part of the readout from the US side after trade talks concluded in Washington on Thursday. Expectations for the meetings were low, and those low expectations were met. There doesn’t seem to be an offramp in sight. More in the Tip Sheet below.




1. Expected, but still disappointing trade talk outcome

Almost everyone had extremely low expectations for any progress to come from the US-China trade talks that took place on Wednesday and Thursday.

Those low expectations were met.

Both side issued vapid statements upon concluding the meetings(Bloomberg):

“The White House said the countries “exchanged views on how to achieve fairness, balance, and reciprocity in the economic relationship, including by addressing structural issues in China” identified by the U.S. in an investigation into Chinese IP practices.”“The two nations had "constructive, candid" communication, and will keep in touch about the next steps, the China commerce ministry said in a statement released Friday.”

Despite the low expectations,markets had been trading on the glimmer of hope that progress could be made.

But the poor outcome reignited dollar strength and CNY weakness– sending the Chinese currency down 1.1% in early trading on Friday (although it recovered some ground throughout the day).

The most telling sign that there was little movement: the fact that no follow up meetings are currently scheduled.

Get smart: The two parties are no closer to a deal today than they were last week. And there is no off ramp in sight.

Bloomberg: U.S.-China Talks Draw a Blank, Bringing Fresh Tariffs Into View


2. Data visualiztion, for your weekend pleasure

China’s economy is slowing – everyone knows that.

But focusing on headline numbers like national GDP growth obscures the volatility and increasing economic divergence from province-to-province and city-to-city – the places where business and investment decisions actually play out.

That reality got us thinking about GDP per capita at the provincial level. 

To do some comparisons, we generated the chart below – which looks at the rankings of provincial GDP per capita as they have evolved over the past 40 years.

From a birds-eye view, the whole thing looks like a bad cross stitch, but look a little closer, and you can see some interesting developments.

Click the link below to see some of our highlights. 

Trivium China: 40 years of growth: Ranking China’s provinces by GDP per capita, 1978-2017


3.  More moves on financial opening

China continues to make good on its promises to open the financial sector.

Late on the Thursday, the banking regulator (CBIRC) announced that foreign banks will now be treated just like domestic banks.

The specifics:

The CBIRC scrapped the rules that previously governed the ownership and management of foreign banks – those entities will now operate under the same regulations as domestic entities.The CBIRC also indicated that foreign equity investment in a Chinese bank will be regulated the same as a domestic investment.

Why it matters: Given the growing global frustration with Chinese trade and investment practices, it’s easy to overlook the areas where China is making genuine progress – the financial sector is one key area.

Get smart: We are hearing that working level regulators – the ones who actually approve applications and grant licenses – are still not fully on board. Approvals are being held up, so the actual implementation of opening policies is lagging behind the announcements.

Yes, but: It is only a matter of time before the high-level decisions filter down to working-level implementation. Once that logjam breaks, approvals and on-the-ground market openings tend to proceed quickly.

21st Century Biz: 银保监会:废止《境外金融机构投资入股中资金融机构管理办法》
Bloomberg: China Removes Foreign-Stake Limits in Banks, Asset Managers


4. China’s inflation picture gets complicated

Chinese authorities are already worried that the trade war is going to push up prices.

Now they have even more reason to worry:

Four cities in China have discovered cases of African swine fever (ASF) in the past three weeks.The government has culled tens of thousands hogs as a result.And it could get worse – authorities have yet to identify the fever’s source. That means that it might spread further.

Experts are pessimistic (Science):“’The entry of ASF into China is really a very serious issue,’ says Yang Hanchun, a swine viral disease scientist at China Agricultural University in Beijing.”“Given the scale of China's pork sector, the economic impact could be devastating.”

Some context: China produces almost half of the world's pork. 

Why it matters:  Pork constitutes the largest share of China’s consumer price index (CPI).

What to watch: Pork prices have tanked as farmers rush to sell while consumers refuse to buy, out of fear. But in the medium term, prices could rise sharply thanks to the contraction in pork supply. That would be a problem for the central bank.

Science: Can China, the world’s biggest pork producer, contain a fatal pig virus? Scientists fear the worst
Reuters: China pig cull tops 20,000 as African swine fever deepens farm crisis
Yicai: 四起非洲猪瘟,源头难索,扑杀成本高昂,对行业冲击巨大


5. Australia dumps Huawei and ZTE

The Australian government has banned Chinese ICT giants Huawei and ZTE from selling 5G technology inside the country.

The announcement came from Huawei, via Twitter, when the company said:

"We have been informed by the Govt that Huawei & ZTE have been banned from providing 5G technology to Australia.""This is a (sic) extremely disappointing result for consumers. Huawei is a world leader in 5G. Has safely & securely delivered wireless technology in Aust for close to 15 yrs."The Aussie government was somewhat more oblique in its public statement (CNBC):"Australia's government did not name the Chinese firms, but said companies with 'extrajudicial directions from a foreign government' may not adequately protect a mobile network."Why it matters: This is a massive blow to the two companies. But Huawei, especially, has been heavily investing in 5G technology in order to become a key global provider."5G next generation mobile internet technology is touted as being the backbone of future cities and even driverless cars."

Our take: This is just the beginning when it comes to foreign countries shutting out Chinese technology providers. National security concerns around Chinese investment will only intensify, and it’s hard to see how the dynamic can be reversed.

CNBC: Huawei and ZTE banned from selling 5G equipment to Australia


6. Li Keqiang promotes infrastructure in western China

On Monday (but only announced Wednesday), Premier Li Keqiang chaired a meeting of the State Council leading small group for developing China’s western regions.

He was joined by other top politicians (

"In attendance at the meeting were Vice-Premiers Han Zheng, Sun Chunlan and Liu He, State Councilor Wang Yong, Secretary General Xiao Jie, Minister of the National Development and Reform Commission He Lifeng, and Bater, minister of the State Ethnic Affairs Commission."Li proposed a familiar development strategy – build infrastructure.“Western regions…need to…accelerate the construction of large-scale channels such as the Sichuan-Tibet Railway and the Chongqing-Kunming Railway.”“At the same time, western regions should also promote the construction of such backbone networks as electricity, oil and gas, and information.”

Get smart: The government is worried that if it doesn't develop China' western region, even more people will migrate to the developed eastern part of the country, overloading eastern cities. That's one big impetus behind the infrastructure build out.

READ MORE 李克强主持召开国务院西部地区开发领导小组会议 Premier Li leads meeting on western development


7. Sino-Russian ties deepen

Chinese troops are headed to Moscow (SCMP):

"The Chinese military will send about 3,200 troops to take part in Russia’s biggest war games in more than 35 years, putting their combat-readiness to the test after a massive overhaul of the People’s Liberation Army.""The troops, equipped with an array of weaponry including 30 fixed-wing aircraft and helicopters, will participate in the Vostok 2018 exercises in the Tsugol training range in Russia’s Far East Trans-Baikal region later this month, China’s defence ministry said."These war games will be big:"Russian Defence Minister Sergei Shoigu said this week that the war games would be the biggest drills since 1981, when as many as 150,000 Soviet Army troops were mobilised for exercises."

What it means: This is a strong signal of deepening ties between China and Russia.

Why it matters: Under Xi Jinping and Russian President Vladimir Putin, the two countries are increasingly supporting each other in pushing alternatives to democratic capitalism on the world stage.

SCMP: China’s elite troops head to Russia for massive Vostok 2018 war games


8. The good and the bad of big data

The Chinese government is increasingly using big data to aid in governance – and surveille its people.

That has stoked fears of a burgeoning digital totalitarianism.

But MIT’s Yasheng Huang takes an interesting perspective:

“China is a repressive, authoritarian society with or without big data.”“Technology has made the repression more precise, but precise repression might be an improvement over indiscriminate repression.”And Huang points out that, the government is using big data for good:“In 2016, [Alibaba] introduced a traffic management system called City Brain in Hangzhou.”“ City Brain is a collaborative project with the city government; it can tap into the traffic and transportation bureaus’ systems for video footage of traffic incidents.”“The municipal government relies on City Brain to identify the best routes for emergency vehicles and to plan new roads and bus routes.”“According to the Chinese transportation ministry, traffic congestion in 2017 cost about 20 percent of total urban disposable income, or about 5 to 7 percent of China’s GDP."Huang ends with a question:“The social benefits gained through big-data technology don’t obviate the political downsides.”“The question is: just how ‘down’ is the downside, and how ‘up’ is the upside?”

We will let you ponder that one over the weekend…

MIT Tech Review: China’s use of big data might actually make it less Big Brother-ish


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