Trump fumes as yuan breaks seven

Access Archive

Dear Access member,

Breaking — update to our techno-trade war section below: The U.S. Treasury has designated China as a currency manipulator.

On a happier subject in a day of gloomy news about China: We have at least one story today that shows how people can adapt and find their own space while living in an authoritarian country. While gay marriage remains a far-off rainbow dream in China, same-sex couples are naming their partners as legal guardians to give them some of the protections afforded to married couples. 

It’s also a nice illustration of the Chinese saying 上有政策下有对策 shàng yǒu zhèngcè xià yǒu duìcè — “Those who govern make policies while their subjects find ways of getting around them.”  

You can read about it on SupChina, or in summary below. 

—Jeremy Goldkorn, Editor-in-Chief 


1. Yuan breaks past seven-dollar valuation, Trump fumes

Alexandra Stevenson of the New York Times reports (porous paywall): 

China’s currency weakened past the psychologically important point of 7 to the American dollar for the first time in more than a decade, a move that reflects the growing severity of the trade war with the United States and that could indicate Beijing’s growing desire to find ways to retaliate against President Trump. 

The renminbi traded in mainland China on Monday morning at roughly 7.02 to the dollar, compared with about 6.88 late on Friday. A higher number represents a weaker currency. The last time China’s currency was weaker than 7 to the dollar was in 2008, as the financial crisis mounted. 

Why did China do it? “The People’s Bank of China attributed the weakening of the currency beyond 7 yuan per U.S. dollar on Monday to factors including unilateral and protectionist measures, as well as the expectation of additional tariffs on Chinese goods, according to an online statement,” according to Xinhua (or see this detailed Q&A in Chinese). 

In another act of retaliation, China canceled purchases of soybeans and other crops that Trump had earlier cheered plans for, according to Bloomberg (porous paywall).

Today’s news “sparked a worldwide sell-off in markets,” reports CNN. “The Dow closed down 767 points, and the Nasdaq Composite — a proxy for the technology companies that will be most harmed by a trade war — suffered its longest losing streak since November 2016.” Further gloom from the financial sector: “China retaliation is ‘11’ on scale of 1 to 10, Wall Street warns,” says Bloomberg (porous paywall), citing a number of nervous analysts. “Morgan Stanley thinks a global recession will come if the trade war escalates through the U.S. raising tariffs to 25 percent ‘on all imports from China for 4-6 months,’” reports CNBC.

“A forever trade war looms as Trump deepens battle with China” is the headline of a Bloomberg piece (porous paywall) on the latest state of play. Looms? We’ve been pessimistic since July 6, 2018, when the first Trump tariffs were placed on Chinese goods. For many months now, we have been arguing that there that there is no end in sight.

Trump is fuming. He still does not understand how tariffs work. From his Twitter account

China dropped the price of their currency to an almost a historic low. It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!

Based on the historic currency manipulation by China, it is now even more obvious to everyone that Americans are not paying for the Tariffs – they are being paid for compliments of China, and the U.S. is taking in tens of Billions of Dollars! China has always used currency manipulation to steal our businesses and factories, hurt our jobs, depress our workers’ wages and harm our farmers’ prices. Not anymore!

China is intent on continuing to receive the hundreds of Billions of Dollars they have been taking from the U.S. with unfair trade practices and currency manipulation. So one-sided, it should have been stopped many years ago!

Reports from other fronts of the U.S.-China techno-trade war: 

Pharma security: “The Trump administration sees the increasing use of Chinese-made active ingredients in drugs taken by U.S. troops and civilians as a national security risk,” reports Bloomberg (porous paywall). China is “the world’s largest supplier of active pharmaceutical ingredients, or API, providing key components to drugmakers worldwide.” See also this January 2019 story from the Military Officers Association of America: How U.S. dependence on Chinese medicines and components could pose a security threat.  

“Taiwan’s Foxconn is exploring the sale of its new $8.8 billion display panel factory in China, people familiar with the matter told Reuters, as demand for the product wanes amid an intensifying U.S.-China trade war,” reports Reuters.  

U.S. Defense Secretary Mark Esper “on Sunday warned of China’s ‘destabilizing’ behavior in the Indo-Pacific region,” according to The Hill. The U.S. won’t “stand by idly while any one nation attempts to reshape the region to its favor at the expense of others, and we know our allies and partners will not either,” Esper said.

2. Hong Kong strikes escalate into city-wide clashes

In Hong Kong, antigovernment protesters “from across society…mounted their fiercest challenge to the authorities on Monday, disrupting more than 200 airline flights, occupying malls and blocking roadways and rail lines to snarl the commute for hundreds of thousands of workers,” reports the New York Times (porous paywall). 

  • “More than 2,330 aviation workers joined the strike, according to the Hong Kong Confederation of Trade Unions, leading to the cancellation of more than 100 flights to and from one of the world’s busiest airports,” according to CNN. “Strikers included teachers, lifeguards at beaches, security workers, construction workers — and almost 14,000 people from the engineering sector.

  • The strike “escalated into city-wide skirmishes between protesters and riot police,” reports Hong Kong Free Press. “Police fired tear gas in at least seven different districts.” Also from HKFP, “Hong Kong police say they have fired some 1,000 rounds of tear gas, 160 rubber bullets and 150 sponge grenades since large-scale anti-extradition bill protests erupted on June 9. 420 people have been arrested.”

  • Today’s protests are not over yet. To see what is going on right now, click here to find video livestreams from multiple locations in Hong Kong. 

  • Rhetoric from Beijing and the Hong Kong government is hardening. “Beijing has reiterated its “unflagging support” for embattled Hong Kong Chief Executive Carrie Lam (林鄭月娥 Lín-Zhèng Yuè’é) and warned that the city was entering “a most dangerous phase” with rampant violence on the streets,” reports the South China Morning Post.

  • Party mouthpiece the People’s Daily published a front page editorial (in Chinese) on August 5 expressing support for the Hong Kong police, while a separate commentary (in Chinese) said that said ongoing “chaos” in Hong Kong “will not be tolerated.” Xinhua News Agency droned on that “any attempt to endanger China’s sovereignty and security, challenge the authority of the central government and the sanctity of the Basic Law of the HKSAR, or use Hong Kong as a channel for infiltration and sabotage against the mainland is an act that crosses the bottom line, and is absolutely impermissible.” 

3. Same-sex couples name their partners as legal guardians   

For gay and lesbian couples in China, being denied the right to marry is not only an indication of the country’s unwillingness to grant them the status and dignity that heterosexual couples enjoy, but it also poses real-life challenges that make the community even more vulnerable: the lack of clarity around property rights after death, and the question as to who can make medical decisions for them if they are incapacitated. 

Sohu News reports (in Chinese) that more and more same-sex couples of all age ranges in China are naming their partners as their legal guardians, a practice that is common among frail seniors in China but not among young adults.

For details, please click through to SupChina

—Jiayun Feng

4. Weak tea from the Canadian government 

The Canadian government appears to be too timid to confidently challenge China on the arbitrary detention of two Canadians, Michael Kovrig and Michael Spavor. Reuters reports:

Canadian Foreign Minister Chrystia Freeland said on Friday she met her Chinese counterpart, Wáng Yì 王毅, to discuss tensions following Canada’s December arrest of a Huawei Technologies Co executive on a U.S. warrant, and the subsequent detention of two Canadians by China.

“The fact that we were able to speak and discuss these issues face-to-face, directly with one another, absolutely is a positive step,” Freeland said in a teleconference from Bangkok, where she was attending an annual east Asia summit.

Trudeau, who spoke briefly to Chinese President Xi Jinping on the sidelines of a G20 summit in Japan in June, has faced repeated attacks from Conservative leader Andrew Scheer, his main rival, over his handling of the affair…

“Canadian families, Canadian workers, Canadian farmers, and Canadian job-creators are paying the price for your weak leadership,” Scheer wrote in a letter to Trudeau last month, calling on the government to take tough countermeasures, including examining retaliatory tariffs.

5. Absurd censorship 

Here are two stories that illustrate the pervasive and invasive nature of Party control of media in China:

Not even Mickey Mouse and Pleasant Goat can breathe without the icy hand of the censor around their throats in this year of sensitive anniversaries. The South China Morning Post reports:

In a meeting with top censors last week, Niè Chénxí 聂辰席, deputy director of the Communist Party’s Propaganda Department and head of the National Radio and Television Administration, said they had to stay alert “every second” to make sure content in cartoons and documentaries supported the leadership of President Xi Jinping, state media reported on Wednesday.

The production of maps is highly regulated in China, and woe to anyone who produces a book, tourist souvenir, or TV program that does not include every single piece of territory claimed by the People’s Republic. The South China Morning Post reports on another case of the Party’s paranoid micromanagement of information: 

The Ministry of Natural Resources is investigating popular Chinese television drama Go Go Squid! after a map was seen in an episode last week that did not show Taiwan and Hainan Island as part of China.

It was pointed out by Chinese social media users after the episode — which showed the map for 19 seconds — aired on Wednesday.


BUSINESS AND TECHNOLOGY:

Although Chinese customers can get their hands on a 5G device starting today, they won’t have access to a 5G network to run it on until around October. 

In a video recorded by sales staff at Suning’s offline store, Yang can be seen planting a kiss on the phone before testing it out by downloading a few apps on the store’s built-in 5G network in a matter of seconds.

China is planning a pilot project to drop all duties and ease procedures at its Shanghai Free Trade Zone, three people familiar with the matter said, as Beijing looks to position itself as a leader in promoting free trade amid its grinding trade war with Washington. 

Didi Chuxing, the Chinese ride-hailing group, has spun out its autonomous driving unit as an independent business as the lossmaking company attempts to raise funds with a “capital winter” unsettling technology companies across the country.

Experts agree AI will be important in 21st-century education—but how? While academics have puzzled over best practices, China hasn’t waited around. In the last few years, the country’s investment in AI-enabled teaching and learning has exploded. Tech giants, startups, and education incumbents have all jumped in. Tens of millions of students now use some form of AI to learn — whether through extracurricular tutoring programs like Squirrel’s, through digital learning platforms like 17ZuoYe, or even in their main classrooms. It’s the world’s biggest experiment on AI in education, and no one can predict the outcome.

Stock investors have never been so downbeat on the world’s biggest banks. China’s “big four” state-owned lenders, which together control more than $14 trillion of assets, tumbled to record-low valuations on Monday amid mounting concern that Beijing will encourage them to bail out smaller peers. 

Chinese authorities proposed rule changes that would for the first time allow local investors to buy shares of some popular technology companies listed in Hong Kong — including, potentially, Alibaba Group Holding Ltd.

The country’s stock exchanges on Friday published draft regulations that would bring stocks with different classes of voting rights into the trading links between the mainland and the former British colony, giving onshore traders access to some of China’s hottest startups.

SCIENCE, HEALTH, AND THE ENVIRONMENT: 

  • Swine fever
    Russia reports ASF outbreak near its border with China / Reuters
    “An outbreak of African Swine Fever (ASF) has been detected at a small farm in Russia’s Primorsk region near its border with China, Russia’s agriculture safety watchdog said on Monday.” 

POLITICS AND CURRENT AFFAIRS:

No wonder Russia and China are so interested in the Arctic. By some estimates, the Arctic contains: 

  • 30% of the world’s natural gas 

  • Over $1 trillion in strategically important rare-earth minerals  

SOCIETY AND CULTURE:

Chinese animation Nézhā 哪吒 has proven itself China ’s surprise hit of the summer, and is on track outstrip “Avengers: Endgame” to become China ’s third highest-ever grossing film… 

As of early Monday evening, the dark horse 3-D title from an unknown new director who goes by the name of Jiǎozi 饺子, or “Dumpling,” has already grossed $348 million (RMB2.45 billion), cracking the top 10 of the mainland’s highest-grossing films of all time.


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