Selections from Godfree Roberts’ extensive weekly newsletter: Here Comes China. You can get it here: https://www.herecomeschina.com/#subscribe

Further selections and editorial and geopolitical commentary by Amarynth.


If you do not know about the wandering elephants that are firing up imaginations, you cannot possibly be up on your reading on China.

 


The launch of the Huawei Harmony operating system is the first serious competition for Apple and Google in the world.  Yet again China has done a spectacular segue since 2019, when Google pulled Huawei’s Android license, then came an Intel and Qualcomm ban, and finally the news that ARM had halted all business with Huawei  as a result of a US executive order.  The expectation was this would be a death blow to Huawei and in the technical circles, regular reports foretold of ‘doomed to fail’.  Yet, as we’ve come to expect from technology China, with a spectacular segue, HMS will compete with Google and Apple, the HarmonyOS will roll out to 300 million devices this year, and six digital technology ecosystems will upgrade as a result of the new OS, and the modern problems that it solves.

The deeper benefit for China of course is that with this development, they have concurrently developed a mass of now experienced software designers, project leads, programmers, skilled in software development methodologies, with a much more mature skillset than before the inelegant and frankly uneducated calls in 2019 that this move will doom Huawei to fail.

HMS will compete Google and Apple, HarmonyOS to run 300 million devices, and six dominating technologies: Huawei


What is China saying about the G7 meeting that has just completed?  It is not flattering.

BEIJING, June 14 (Xinhua) — At their just-concluded gathering, an exclusive club of wealthy developed economies has once again shown to the whole world their so-called “common values” are no more than deeply-entrenched ideological prejudice and sense of arrogance.

http://www.xinhuanet.com/english/2021-06/14/c_1310007114.htm


Big Finance

Yes, we’ve heard it all – China and its supposed debt trap and over-leverage and one after the other scare phrase.  But even the very well-known publications with inserts of ‘investors are concerned’ and ‘corporate default fears’ have to report some of the numbers of China’s sovereign bonds.

Foreign holdings of Chinese government bonds reach $327.3 billion and reached $564.6 billion in Chinese stocks in April. Chinese 10-year bonds offer high yields (3.089%) than US Treasuries (1.576%); foreign ownership of Chinese bonds is expected to increase from 10% to 15% by 2024.

https://asia.nikkei.com/Business/Markets/China-debt-crunch/China-lures-foreign-debt-buyers-despite-corporate-default-fears2

Three Gorges Renewables soars in China’s biggest IPO in 17 months

Shares of the company surged up to 3.82 yuan apiece in early trading, surpassing its IPO price of 2.65 yuan.  The renewables unit of China Three Gorges Corp raised 22.7 billion yuan ($3.6 billion) in May, becoming the largest listing in 2021 so far in China. The parent company said proceeds from the listing would be used to invest in offshore wind power projects and replenish liquidity.

https://finance.yahoo.com/news/china-three-gorges-renewables-group-015805708.html


Little Finance

In line with Beijing’s wish to bolster credit for micro and small enterprises, MSEs, loans reached $2.63 trillion in April, up 32.5%YoY. China’s 44 million MSEs and 95 million self-employed individuals are primary national job providers.

https://news.cgtn.com/news/2021-05-30/Inclusive-loans-to-micro-small-firms-in-China-up-32-5-YoY-in-April-10G8sa85vyM/index.html


Trade Warnings

Despite European media blowing hot and cold, there is a concern about pure trade.  The business environment and the political environment may tell a proverbial tale of Two Cities.

Europeans increasing China investments and move supply chains there. 60% of European companies plan to expand their China operations in 2021, up from 51% last year. 50% reported higher China profits, up from 38% last year.

https://www.bloomberg.com/news/articles/2021-06-08/european-companies-plan-to-invest-more-in-china-after-pandemic

EU companies warn Beijing-Brussels political tensions are hurting business. “An ‘alarming’ 41% of respondents believe business has become more political in the past year, adding that there is ‘growing concern’ over further tensions during 2021.”

https://www.caixinglobal.com/2021-06-08/eu-companies-warn-beijing-brussels-political-tensions-are-hurting-business-101724682.html

Boeing CEO Dave Calhoun warned that a prolonged trade deadlock between the U.S. and China threatens the comeback of its 737 Max and, ultimately, his company’s longstanding role as a U.S. industrial champion.

https://www.bloomberg.com/news/articles/2021-06-03/boeing-warns-china-trade-impasse-threatens-company-s-global-sway


More trade in a different world

Russia-China trade jumped 25% in 2021 to $50.65 billion. In May, Russia-China trade reached $10.5 billion. Exports of Chinese goods to Russia increased by 35.3% to $23 billion, while imports of Russian products surged 15.4%, to $28 billion. Read full article →

The first China-Pakistan Economic Corridor(CPEC) industrial park, Rashakai SEZ, broke ground in Pakistan’s Khyber Pakhtunkhwa Province, on the Afghanistan border. It occupies 4 square kilometers, will be built in 3 stages, and host manufacturers in mechanical equipment, food processing, electronic appliances, and more. Read full article →

An 18,000 m2 international exposition center, scheduled for completion in 2022, is being built in the China-Belarus Industrial Park. With meeting spaces, a hotel, catering halls, and support for large meetings, it lets companies from around the world set up operations and enjoy tax benefits and free access to Russian and Kazakh markets under the Eurasian Economic Union free trade block. The park’s transport links east and west are a major lure for the German and Austrian companies that are key investors in it. Read full article →

Shein beat Amazon as the top shopping app, ahead of Nike, Zara, H&M, and Uniqlo in May. Last year, it sold $10 billion worth of apparel, nearly half of Inditex, Zara’s parent company. The Chinese app is a global force with over 22 million users shopping daily. Who is behind Shein? Read full article →


Long Read

RCEP’s Market is 2.5 Times Larger than that of the EU and USMCA 

Op/ed by Chris Devonshire-Ellis

Understanding Asia’s Regional Comprehensive Economic Partnership in the context of the United States and Europe

Are you aware of the implications?

The significance of the Regional Comprehensive Economic Partnership (RCEP) agreement has flown somewhat under the radar as concerns its impact upon future global and regional trade. Often referred to as a Free Trade Agreement – which it is – comparisons have tended not however to be made on a global scale, and especially with the United States or Europe. Yet in fact, RCEP is in many ways Asia’s equivalent of these blocs.

Although the world is divided up into various regional trade blocs, some are more effective than others. South Asia’s SAARC has long been rendered less effective than it ought to be by intra-bloc quarreling over product inclusions, South America’s Mercosur has similar issues, yet on the other hand has agreements with more Latin American countries than are full members. There are additional multi-lateral FTA between blocs themselves, such as the EAEU’s agricultural trade agreement with AfCFTA, and negotiation of deals with China and India. ASEAN exists between the ten nations of South-East Asia (identified here as part of the complete RCEP agreement) with the ASEAN bloc having agreements with India and other countries, and so on. Identifying where these agreements are and intersect would require a complicated map with hundreds of sections.

n this article however we concentrate on the largest by trade volume – and point out the global significance of RCEP by comparing it with the USMCA (NAFTA) and European Union free trade areas.

USMCA 

The USMCA (previously known as NAFTA) includes Canada, the United States and Mexico. It originally entered into force in 1994. It has a population of 490 million, a GDP of US$24.8 trillion, with annual per capita income at US$50,700. GDP growth the past three years has averaged 2%.

EU

The EU began life through the Treaty of Rome in 1958, has a population of 448 million, a GDP of US$17.13 trillion and an annual per capita income at US$38,256. GDP growth the past three years has averaged 2.1%.

RCEP  

RCEP was agreed in 2020, with ratification of members still underway. When completed, it will have a population of 2.6 billion, a GDP of US$26.58 trillion and an annual per capita income at US$17,059. GDP growth the past three years has averaged 6.5%.

As can be seen, while the USMCA, mainly through the wealth of the United States, has the wealthiest consumer population, closely followed by the EU. RCEP however has by far the lowest per capita GDP but displays a wider internal variety of income levels among its members – from a high of US$58,484 (Singapore) to a low of US$1,308 (Cambodia). However, GDP growth amongst the RCEP nations has been three times higher the past three years (factoring in Covid) than in either the USMCA or EU blocs. When this is combined with a total population that is 2.5 times larger than that of the EU and USMCA combined, it becomes obvious to see where the continuing future consumer growth and wealth development will be.

However, the emergence of RCEP also presents global trade and political challenges. While Washington dominates the USMCA, and Berlin to some extent the EU, the RCEP power base will be Beijing, although it will require diplomatic tact in a manner not always recently shown by Chinese diplomats – a point picked up by President Xi Jinping earlier this week when he called for expanding its circle of friends.
While the Western media automatically assumed those comments were directed at Washington and Brussels, they were more likely to have been with a more regional focus in mind – and to Tokyo and New Delhi in particular, neither of whom have particularly close relations with China. Yet Beijing needs them both onside to develop RCEP to its potential – Japan as a member state, while India contemplates inclusion. The door for India participation remains open, even though India dropped out of RCEP in 2019.

RCEP+  

China though has plans to develop the Asian bloc – a kind of RCEP plus – still further. It has already signed a free trade agreement with the Eurasian Economic Union, which when tariff reductions are agreed will push the Asian bloc in a north-westerly direction and into Central Asia, while the Indian RCEP position remains negotiable. A new, more approachable Beijing could then oversee the development on an Asian region growing west and north to become a continental bloc during the first half of this century. In time, Asia will become a full Free Trade Area backed by a comprehensive protected digital currency with an international (and non-US controlled) financial structure. Whilst the nation states will still be sovereign, the economic development will be transnational and green.

Asia will then stand with two other global regions – North America’s USMCA and the European Union. But new Asia will be the geographically largest, wealthiest, and most innovative. At its core will be the Chinese domestic economy, by then the worlds largest. With a strong currency, partially backed by gold rather than US debt, it will suck in huge imports mainly from Asia but also North America and Europe. This new reality – described as a ‘specter’ in the West, is what US President Joe Biden is actively trying to prevent in his G7 meetings this weekend. In fact, it is a de facto G11, as India, South Korea, Australia, and South Africa are also attending.
As mentioned, RCEP is often thought of as a regional East Asian free trade agreement. In actuality, its rise will come to dominate Asian, and significantly impact upon North American, European, and other regional trade blocs, on a global basis. The question for businesses executives globally is: Are you prepared to take advantage of this – or wait until it arrives on your doorstep?


This is but a fraction of what I gleaned from the Here Comes China newsletter.  If you want to learn about the Chinese world, aka Zone B as seen from China, get Godfree’s newsletter here: https://www.herecomeschina.com/#subscribe


And once you start seeing old-style Hitler humor done by an Indian comedian on the German reaction to China’s success in its space program, you know that the propaganda against China is now beginning to be seen for what it is. On a lighter note, Enjoy the humor!

Hitler learns about China’s Zhurong Mars rover’s success.

https://www.youtube.com/watch?v=_HIJODQdlB4