There’s a lot happening in the tech world in China at the moment, and many of the developments involve Huawei in one way or another. The fintech world is being shaken up, with the digital money duopoly of Alibaba and Tencent being reconfigured, which seems to mean there will be room for more players, and Huawei is one of a number of players that are acquiring the relevant licenses. How would Chinese consumers react to the existence of digital cash alternatives beyond WeChat Pay and Alipay? Probably by shrugging their shoulders. But it’s interesting to see the Center looking for once to inject diversity into a situation rather than the reverse.
Also on tech, the Chinese central bank said it is expanding tests on the digital yuan with certain trial users in the Hong Kong market, but while we’re watching it all closely, our view remains that a digital yuan currency is unlikely to pose a serious challenge to the USD unless it is freely convertible, which just doesn’t seem like a plausible scenario from a systemic perspective.
This is an important year for the Center—the 100th anniversary of the founding of the CCP is Topic Number One all round, and a healthy economy will be supportive. Indicators released this week continue to basically paint a picture of a strengthening Chinese economy, including in the services sector. But Huawei announced an 11% fall in revenues for 2020 Q4, which indicates the sanctions and pressures are really having an impact.
Speaking of which, it increasingly looks like the Biden administration’s approach to China issues is going to be not significantly different in basic principles from that of its predecessor. The tone has changed, but the view being taken in DC on the Chinese system appears to be almost identical. The tariffs imposed on Chinese imports will remain in place, US Trade representative Katherine Tai was quoted as saying. The US position on a range of other issues as expressed during the week took the same line. If Beijing ever thought that the Biden administration would be easier to deal with, then it now clearly sees that it’s not going to be the case. An interesting case to watch is that of the UK-based semi-conductor designer ARM, which announced this week that its latest chips were not subject to sanction controls and could be sold to Huawei. ARM has an ownership structure that involves China, and we would guess a clarification of controls will shortly be forthcoming from Washington to address the loophole. But on the other hand, Huawei still has the China market and is not standing still, and it looks like it is heading into new business areas including electric cars. As is its competitor Xiaomi. Could it be that Apple ends up being late to the car party?
Enjoy the weekend.