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Good morning. David Meyer here in Berlin, filling in for Alan.
Where next for relations between China and the West? Right now, it seems tensions are just going to keep on escalating.
The U.S. targeted China twice over this week: firstly by indicting two Chinese hackers over the alleged theft of foreign military secrets (as well as criminal hacking for personal profit); and then by abruptly ordering the closure of China’s Houston consulate.
Not long before, China slapped symbolic sanctions on U.S. senators Marco Rubio and Ted Cruz, in retaliation for sanctions the U.S. applied to Chinese officials who were apparently involved in the repression of the Uighur minority.
Now we have to wait and see what China will do in retaliation for the consulate move–its foreign ministry has promised “firm countermeasures.”
Meanwhile, after the U.K. last week banned Huawei from its 5G networks, Beijing hit back by targeting one of the most British of exports: football. Chinese state television reportedly did not show yesterday’s match between Liverpool and Chelsea, and its schedule no longer includes this weekend’s Premier League matches.
Petty? Sure. But it’s not hard to see how these tit-for-tat moves might ratchet up in future.
Even if President Trump loses November’s U.S. election, the Democrats are still hawkish on China–just look at the report issued this week by the Senate Foreign Relations Committee’s highest ranking Democrat, Robert Menendez, in which China is accused of exporting its mania for surveillance and online censorship around the world.
There’s even potential fallout for China from last week’s bombshell data-protection ruling in the European Union’s highest court. While that ruling mostly involved the U.S.—ending the Privacy Shield mechanism for sending Europeans’ data to U.S. servers—it also paved the way for the suspension of data flows to any country that has insufficient safeguards attached to government surveillance.
That means, if somebody in the EU asks their local privacy regulator to look into what happens to their TikTok or WeChat data, there’s a possibility of those companies becoming unable to legally serve European users. Retaliation would surely follow.
Does this make for a new cold war, as many suggest? Some hope that U.S. Defense Secretary Mark Esper’s proposed visit to Beijing this year could help smooth tensions. But saber-rattling in the U.S. is hardly likely to die down in an election year where nobody wants to appear soft on China.
The U.K. also appears to have accepted the route of confrontation in its banning of Huawei, even though its reasons for that ban (U.S. sanctions on Huawei will probably make its products less secure and reliable) are quite, well, reasonable. And then of course there’s the question of how draconian China’s national security law will be in practice, when applied in Hong Kong. The imposition of that law led the U.K. to suspend its extradition treaty with Hong Kong this week, and the EU is also planning some sort of “comprehensive and coordinated” response.
Interesting times ahead. And more news below.
David Meyer
@superglaze
david.meyer@fortune.com
TOP NEWS
Uighur exploitation
Activist groups including Anti-Slavery International and AFL-CIO are urging brands such as Apple and Nike to cut ties with suppliers that allegedly use "forced labor" in China's Xinjiang province, home to the persecuted Uighur Muslim minority. The province produces around 80% of China's cotton, and China supplies around 20% of the world's cotton. Nike says it has made one supplier stop recruiting employees from Xinjiang. Gap says it's examining how its supply chain might use Xinjiang cotton. Apple denies any issues in its supply chain. BBC
Tesla profit
Tesla is about to join the S&P 500, after posting its fourth straight quarterly profit. In Q2, Elon Musk's electric-vehicle firm made $104 million in net income on over $6 billion in revenues. Analysts had expected a $250 million loss on revenues of $5.4 billion. Tesla's value has nearly quadrupled this year, with a current market cap around the $300 billion mark. Tesla
Dollar status
Former Morgan Stanley Asia chief Stephen Roach says the U.S. dollar is under pressure from both a decline in domestic saving and the U.S.'s "squandered global leadership." Roach told Fortune that the dollar's status as the world's dominant reserve currency could be ceded to the euro or perhaps even the Chinese yuan. Fortune
Unilever results
Unilever just experienced its first quarterly sales drop (-0.3%) in 14 years. Nonetheless, it handily beat the forecasts of analysts who expected to see a 4.3% drop, and its shares popped 8% as a result. And why were its sales better than expected? Unilever's hygiene products did a roaring trade, as people bought more soap and hand sanitizer to combat COVID-19. Financial Times
AROUND THE WATER COOLER
Faster tests
Virginia Tech researchers say they've come up with a COVID-19 test that produces results in minutes. The test uses nanotechnology and laser beams to analyze liquid droplet samples, rather than RNA as is the case in the most widely-used tests right now. The researchers claim their test is more accurate and can identify the coronavirus even if the patient has only had it for a very short period of time. Fortune
Slack vs. Microsoft
Slack has lobbed an antitrust complaint at Microsoft in the EU, over Microsoft's bundling of its Teams enterprise communications service with its Office suite. Teams has been frantically growing its user base during the pandemic; Slack says this is because Microsoft is abusing Office's market-dominant position, but Microsoft says this is because people like Teams' video-conferencing capabilities, which Slack does not have. Fortune
"Trump troops"
Fortune's Jeff John Roberts took a look at what the law has to say about the "Trump troops"–a.k.a the new breed of federal law enforcement wearing Army-style garb–that have been snatching citizens off the street in Portland and driving them away in unmarked vans. In short, it's hard to say if what the troops are doing is legal, but they aren't obliged to identify themselves. Fortune
Gates conspiracy
Bill Gates has denied the conspiracy theory that holds he wants to use coronavirus vaccines as a way to implant tracking chips into people. "We need to get the truth out there," said the Microsoft co-founder. "I hope it'll die down as people get the facts." Good luck with that; more than a quarter of American adults apparently believe the conspiracy theory. CNBC
This edition of CEO Daily was edited by David Meyer.
