A blockage in the Chinese money pipe to Manhattan – China’s latest top news

Jeremy Goldkorn’s selection of the top stories from China on August 2, 2017. Part of the daily SupChina newsletter, a convenient package of China’s business, political, and cultural news delivered to your inbox for free. Subscribe here.

Retreat of Chinese money from global real estate?

Maybe you will be able to afford that apartment in Manhattan after all.

Bloomberg says that China’s campaign against capital outflows and debt “is rippling across the world, and will likely spur an 84 percent slump in Chinese overseas property investment this year, and a further 18 percent drop in 2018,” according to a report by Morgan Stanley.

The report says that the New York borough that is home to Wall Street is particularly vulnerable to a slowdown of Chinese money: about 30 percent of real estate transactions in Manhattan involved “Chinese parties” in 2017. Outside of New York, many other U.S. cities are likely to be affected. Globally, the U.K., Hong Kong, and Australia are also vulnerable if investors from China stop buying.

Donald beats the drums of trade war

On August 15, 2015, Huffington Post uploaded an amusing YouTube video mashup of Donald Trump saying “China” in dozens of different speeches at different times: Bashing China is something Trump enjoyed long before he even entered the presidential campaign (see ChinaFile’s Trump-China tracker for a regularly updated feed of everything Trump says about the Middle Kingdom). But the aggressive rhetoric almost completely disappeared as soon as he took office.

Now it’s coming back:

  • In the last few days of June, American pressure on China ratcheted up, with news of several moves, including arms sales to Taiwan, a denunciation of China’s human rights record, sanctioning a Chinese bank for handling North Korean money, and allowing the U.S. Navy to make port calls in Taiwan.
  • On June 30, Axios reported on a meeting in Washington, D.C., attended by Trump and more than senior 20 officials, at which “the president and a small band of America First advisers made it clear they’re hell-bent on imposing tariffs” on Chinese steel, and possibly other imports such as aluminum, semiconductors, paper, and appliances.
  • On July 30, Trump tweeted (1, 2), “I am very disappointed in China. Our foolish past leaders have allowed them to make hundreds of billions of dollars a year in trade, yet… they do NOTHING for us with North Korea, just talk. We will no longer allow this to continue. China could easily solve this problem!”
  • On August 2, Axios said that Trump is “spoiling for a fight,” and reported that the president “is considering an aggressive step against China over its theft of U.S. intellectual property and China’s other industrial policies that harm American companies.” The New York Times has a similar story (paywall). It seems that an announcement could come as soon as this week.
  • Reuters reports that U.S. Senate Democratic leader Chuck Schumer wrote a letter to Trump urging the suspension of approval for “all mergers and acquisitions in the U.S. by Chinese entities…to help rein in North Korea’s threatening and destabilizing behavior.”

Apple woes

Apple has faced criticism this week for removing some virtual private network (VPN) apps from its China App Store.

  • In the New York Times, Farhad Manjoo argues (paywall) that “Apple’s quiet capitulation to tightening censorship in one of its largest markets is still a dangerous precedent.”
  • CNN reports that Apple CEO Tim Cook on Tuesday “addressed the controversy, emphasizing that his company was simply complying with Chinese regulations. He added: “We’re hopeful that over time the restrictions we’re seeing are lessened, because innovation really requires freedom to collaborate and communicate.”
  • Amazon has also told Chinese customers to “cease using any software that would allow Chinese to circumvent the country’s extensive system of internet blocks,” but I am not aware of any statements from the company on the matter.  

Foreign internet companies dealing with censorship in China have been making accommodations with the Chinese government since the earliest days of the web in the 1990s. Google has been out of the game in China since 2010. The companies that remain are not likely to choose this hill to die on.

In other Apple news, CNBC quotes an analyst who says that the iPhone has “gone out of fashion” in China, after the Californian company’s filings showed that Chinese revenues fell ten percent in the last quarter compared to the same period in 2016.