Greetings from Hong Kong. Alan noted in this space yesterday that the proposition cooperative economic relations between the United States and China must be preserved is an idea that enjoys scant support in America.
That’s a crucial observation, not least because it applies to U.S. politicians on both sides of the aisle. President Trump recently suggested Chinese leader Xi Jinping is betting Trump’s re-election bid will fail—and hopes China will be able to negotiate a more favorable trade deal with a Democratic president. And yet leading Democratic presidential contenders seem frantic to convince voters they’re every bit as hawkish on China as Trump, if not more so. In fact, hostility to China seems to be one of the few things about which both Republicans and Democrats agree.
True, Trump’s rivals are keen to highlight consequences of his China tariffs, which are beginning to inflict severe pain on farmers in key battleground states like Iowa, Minnesota and Wisconsin.
But Democratic presidential hopefuls want to eat their cake and have it. As a Washington Post analysis of Thursday’s Democratic presidential debate points out: “[W]hile many criticized Trump’s handling of the trade war, none of the candidates would say they would move to quickly repeal the wide-ranging tariffs Trump has put in place on Chinese imports. Some suggested that they would keep the tariffs in place for their own trade negotiations.”
Vox put it more succinctly: “When it came to delivering their plans on how to handle China, the candidates sounded a bit like, well, Trump.” Reason skewered candidates Bernie Sanders, Andrew Yang, and Pete Buttigieg for decrying Trump’s lack of a China strategy when they clearly don’t have one themselves.
One Democratic contender, Elizabeth Warren, advocates policies that would impose far more Draconian conditions on U.S.-China trade relationship than those advocated by Trump. SUP China‘s Daniel Schoolenberg notes that Warren would require China to meet international standards on labor and human rights, and demonstrate compliance with the environmental commitments Beijing made under the Paris Climate Agreement.
Even so, Business Insider argues the problem for Democrats is that, when it comes to China, Trump has stolen their playbook. CNBC.com political analyst Jake Novak says Democrats aren’t bashing China hard enough.
So far no one on the Democratic side, including frontrunner Joe Biden, has mustered the courage to campaign for free markets.
Clay Chandler
– Clay.Chandler@Fortune.com
– @ClayChandler
Economy and Trade
Big deal? President Trump said he favors a “whole deal” over the “interim deal” Bloomberg reports his advisors have been mulling, but “would consider” the stepping-stone option. Days earlier, Trump announced a two-week delay to a tariff increase on $250 billion of goods, claiming Beijing had asked for the levies to be pushed back from October 1—China’s National Day. Meanwhile, China’s Vice Premier Liu He said “trade balance, market entry and investor protection” were top of the agenda for trade talks next month. All fairly soft topics. The Hill
Soy Argentina. China signed a deal with Argentina to import soymeal from the South America country, which is the world’s largest exporter of the animal feed. China, the world’s largest consumer of soymeal, manufactures most of its feed at home but imports the bulk of soy it uses to do so. The trade war has limited China’s options for soybean imports, allowing Argentina an opportunity to crack into the market. Reuters
The doldrums. A spokesperson for the IMF said that trade tensions between China and the U.S. could shave 0.8% off of global economic growth in 2020, higher than the 0.5% decline previously predicted for next year. Asked about the forecast, Treasury Secretary Steven Mnuchin said he doesn’t see “that big an impact” in the U.S. Reuters
Piggy to market. China will exempt U.S. soy and pork imports from some of its tariffs, state-run Xinhua reports. Some see that as a conciliatory gesture from China as the trade war cools a little, but China is also in desperate need of pork. A swine fever epidemic has decimated domestic livestock, wiping out a third of China’s pig stock. Pork prices have doubled since July. The vice minister for agriculture said China should pursue self-sufficiency for pork production but, with the holidays approaching, China is desperate for supply. Caixin
Innovation and Tech
Smoke signals. E-cigarette giant Juul faces a backlash in its U.S. home market over severe health concerns, but the nicotine vapor maker has just expanded into China, opening storefronts on China’s largest e-commerce sites, Alibaba and JD.com. State-owned China Tobacco has a monopoly on the lucrative cigarette market in China but a number of prominent Juul-like competitors have popped up in recent years. E-cigarette regulations are lax but Beijing has said it might match E.U rulings on vapor pens next year. Wall Street Journal
Designed in California. The day before Apple’s iPhone 11 launch, China Labor Watch released a report blasting the company and its manufacturer, Foxconn, for violating Chinese labor laws. The companies admitted to one violation—hiring too many “temporary” workers, who are cheaper than perma-staff—but denied allegations that included forcing laborers to perform overtime and failing to report injuries. Bloomberg
In Case You Missed It
CEO Jack Ma bids farewell in rock star style Asia Times
Ren Zhengfei may sell Huawei’s 5G technology to a Western buyer Economist
China Scraps Foreign Investment Limit in Stocks and Bonds Bloomberg
Protests? Brexit? Hong Kong Stock Exchange CEO Downplays Crises in Bid for London Rival Fortune
Microsoft Says Trump Is Treating Huawei Unfairly Bloomberg
Politics and Policy
Enlisting SOEs. During a meeting in Shenzhen, north of Hong Kong, government officials directed close to 100 executives of state-owned firms to invest more in Hong Kong, Reuters reports, hoping it will help quell unrest in the city. According to the report, one of the attending executives said Hong Kong’s clutch of local tycoons—who wield great power in the SAR—are “not doing enough” to resolve the situation. Reuters
Listing SOEs. U.S. lawmakers have asked the Pentagon to release a list of Chinese companies operating in the U.S. that are owned by or affiliated with the People’s Liberation Army—China’s military. In a bipartisan letter to Defense Secretary Mark Esper lawmakers warned that Chinese SOEs were “stealing” U.S. proprietary tech through legitimate means, such as purchasing U.S. companies. Reportedly, the Pentagon is preparing such a list already, albeit not for public consumption. Companies on the list could be targeted with import-export restrictions. Financial Times
