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Seven Days in China
Taking the pulse of the world’s most exciting economy
April 22, 2018 www.chinaeconomicreview.com
CER's cheeky recap of the weekly news
Things really seem to be gathering steam, and neither the US or Chinese side seem likely to be in a mood for compromise any time soon. It could all be solved with good old reciprocity, but that's a concept that seems further than ever from a possibility. Hence the core problem, of course. The US, and interestingly the UK as well, imposed limits on the China telecom company ZTE for having violated trading sanctions on Iran and slapped a seven-year ban on doing business with the firm. Too stiff a penalty? It would be if it was just about ZTE. But clearly whoever made the decision was using ZTE as a proxy to send a message beyond ZTE. China's decision to crack down on US agricultural produce including soybeans was similarly aimed wider than just soybean farmers - the Midwest is a key bastion of Trumpist support. There are those lining up to warn of nasty consequences if such a tit-for-tat really gets rolling. Michael Bloomberg, former mayor New York and the acceptable face of American capitalism, was one of them this week, and so was IMF Chief Christine Lagarde. The Chinese weighed in to say that they were in favor of fair trade too, although the word reciprocity was unsurprisingly not raised. One commentator, Scott Kennedy, made the case this week that the US is going into this in the knowledge that it is going to be a serious and lengthy slugfest, but that there is no long-term alternative. Meanwhile, one of the Wall Street's Journal's readers, in a letter to the editor, proposed a more focused approach: "The Chinese are aiming their tariffs at those states that voted for president Trump. We should do the same. Let's put tariffs on those products from the areas of China that voted for Xi Jinping." With the WSJ, you just don't know if tongue was in cheek or not. But in the end, it's all about who needs who more. Watch this space to find out, but don't be impatient.
The rate of news developments is definitely speeding up. This week, nothing more than a brief summary can be accomplished here, but the top developments cover all bases, domestic, periphery and international. The party chief promised economic reforms which are absolutely not an effort to reduce the threat of measures from the US. Then, he reviewed the largest Chinese naval exercise in history in the South China Sea. Possibly of more significance are developments on the Taiwan issues where there are plans for live-firing practices in the Taiwan Strait and voices in Washington taking a break from Trumpwatch to raise the likelihood of upgraded US arms sales and official visits to the island. Then on the domestic scene, the further coming out of the party was highlighted by Bytedance, owner of the news app Toutiao, which performed an extraordinary public self-criticism over a joke site and promised to knuckle down and abide by party guidelines.  Bottom line: things feels more in flux than at any time since... when? Let's say January, 1979.
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