How much borrowed time do we have here on the US-China relationship? Pompeo and others in the Trump administration are pushing hard to put the relationship into a new ballpark ahead of the US election, and the Chinese leadership are being remarkably restrained in their response. Tech and finance are the key arenas – Trump signed an executive order prohibiting any US transactions with the Chinese-owned parent companies of TikTok (and also WeChat), and declaring that the TikTok app will be banned from the US if it is not sold to a US company by September 15. Microsoft is negotiating and the deadline presumably gives them the opportunity to push for a low price. Pompeo also urged Apple and Google to stop offering WeChat on their app stores. All the bluster and tweets aside, the core is whether these apps operate in a way that could provide a foreign government with access to US user information. Answer: what about Zoom? And where is it all going? Towards a complete tech decoupling, it would seem. It’s all a great scenario for VPN providers.
On the finance front, there were further statements from Trump administration people about forcing Chinese companies listed in the United States to be subject to the same auditing access and rules as other companies. And the HSBC situation moved forward a bit, with the bank announcing it plans to hire about to 3,000 extra wealth managers for the China market. The bank makes most of its revenues and profits from the HK and China mainland markets, but we still wonder what the view of the US and UK governments would be if HSBC was to firmly take sides, as it appears it is being encouraged to do. After all, it’s a bank that is deeply embedded in all sorts of financial arrangements and channels that are significant for the West. This is a tricky one, and worth watching closely.
How’s the Chinese economy doing? At least superficially it is doing okay, it seems. Hotels and resorts are doing good business because the Chinese middle class can’t travel abroad this summer and exports recorded a surprisingly good July, although one factor in that was PPE goods. On the other hand, the Chinese authorities announced they would let the Baoshang Bank go bankrupt, the first bank to the allowed to fail in nearly two decades. The general state of other small regional banks is not known.
And finally, the US election edged a week closer, with China an even more up-front target. Trump rants on and on about the China virus, and the rhetoric, always strong in an election year, is this year is just off the charts. How much does it help him deflect blame? We will find out in 90 days or so. Those whose opinion we value are still of the view that Biden will win, but it could be a very close-run thing as closet Trump supporters not being honest with the pollsters come out to vote. And what happens between Nov 3 and Jan 20 with Trump still in the seat of power? Are there decisions he could make, executive orders he could issue, which would constitute a list of favors to be repaid later? Let your imagination run riot — there’s nothing which is impossible this year.
Have a good weekend.