Things got murky on a couple of fronts this week. The deadline for a sale of TikTok to an American entity resulted in Bytedance proposing a deal with Oracle which would give the US software company a small stake in TikTok’s US operation and provide some oversight of its data and code. Is this enough to solve the problem that the video-sharing app is said to pose? It’s now up to Trump and his boys to decide. The Chinese side has clearly decided at the highest level to not allow a sale of TikTok, which would mean providing access to all its code and processes.
Then there is ARM, a semi-conductor company based in the UK which has close links to China. The US company Nvidia is making a bid for the company of $40 billion dollars, and China is screaming “No.” This is clearly an important deal, as we have pointed out before, and it is well worth paying close attention to how it plays out. It is a core part of the tech decoupling landscape. Just how total a tech decoupling could conceivably be is not clear, but our reading of the situation is that if it does happen, it is going to be difficult for China to rely on the self-reliance option to keep at the top of the global game.
In other news, China’s economy continues to perform well, in spite of the borders still being closed. The total lockdown and economic recovery all reflect well on Those in Command and a way in which the virus fallout has been handled will be useful in keeping things in an even keel domestically as China moves into more tricky waters internationally in the next couple of years. For we do not expect relations to turn rosy any time soon. Exports have been doing well, and the RMB has strengthened. But is there a brick wall out there in the mist? Who knows? The latest on international ties is the EU-China investment agreement talks this week. China kicked off by banning pork imports from Germany, and as expected, the talks did not go well. The EU has been looking for years for reciprocity on investment terms, but it is hard to see it happening in the foreseeable future. This is an important part of the financial decoupling, and Germany now seems to be shifting its view on basic nature of the relationship – partner or competitor.
Fundamental to so many issues is the US presidential election, and the latest sense here is still that Biden ends up as president, but that Trump will throw the system into chaos as much as possible to try to avoid that from happening. The resulting turmoil will impact on the US and its position in the world for long into the future. But if Biden does become president on January 20, then there will be many changes that should help to move the world back towards a healthier place. Next step is the first of the debates on September 29, and China for sure will be a topic.
This year is just never-ending. But enjoy the weekend anyway.