Prepared for Trump’s final madness, hysteria on China policy

  

More than two dozen psychiatrists Think Trump is dangerous and unfit for office

The Chinese are making physical and psychological preparations for a US-initiated war

US President Donald Trump arrives to speak in the Brady Briefing Room at the White House, in Washington DC on Thursday. Democrat Joe Biden is leading Trump in the race for the 270 electoral votes as of press time. Photo: AFP
 

 China has been prepared for a "final act of the madness" from the Trump administration and its staged hysteria on China-related issues, as it is highly likely that the incumbent US president will take much more extreme measures on issues such as the South China Sea, the island of Taiwan and China's high tech sector, the moves which are also seen as "setting obstacles" for Biden in his foreign policies, experts said.

After imposing new restrictions on US investment in 31 Chinese companies and Secretary of State Mike Pompeo's remarks of denying Taiwan island is part of China, US President Trump will enact a series of hardline policies during his final 10 weeks, including a crackdown on China over so-called "forced labor" in Xinjiang, as well as sanctions on officials and companies with connections to Hong Kong, according to US news site axios.com.

The move also aims to cement Trump's legacy on China, the media report said, citing senior US officials. His political legacies on China will be widely known for its toughness including the launching of a yearlong trade war, leading the global suppression against Chinese high tech companies, smear and blame campaign over the coronavirus epidemic, and consulate closure. During his four-year tenure, the China and US relationship has hit its lowest point in decades, while his all-out anti-China stance has been supported by GOP and his voters.

"Being tough on China is seen as Trump's diplomatic achievement, which has been widely applauded in the US. Any turnaround at the point would be seen as a 'slap in the face' and it's now his final chance to play this card to the maximum extent," Xin Qiang, deputy director of the Center for US Studies at Fudan University, told the Global Times on Monday.

While Trump refused to concede the US election, tweeting that Biden "won" but that the election was rigged, thousands of his supporters protested in downtown Washington DC over the weekend, according to media reports. They also chanted Trump's campaign slogan such as "Make America Great Again" as the number of COVID-19 cases in the country crossed the 11-million mark, "reaching yet another grim milestone," some reports said.

Some Chinese experts believed that Trump does not want to disappoint his supporters, and continuing to be tough on China-related matter is one of his strategies, which has also been echoed by some of his "anti-China" group including Pompeo, FBI Director Christopher Wray, Attorney General William Barr and National Security Advisor Robert O'Brien.

China urged the US to manage the differences on the basis of mutual respect and explore cooperation in reciprocity but will firmly defend its own interests of sovereignty, security and development, Chinese Foreign Ministry spokesperson Zhao Lijian said on reports about Trump will come up with final measures targeting Chinese firms and human rights issues.

A healthy and stable China-US relationship is in line with the fundamental interests of people from the two countries, which also echoes common expectation of the international community, Zhao said.

The Trump administration is also expected to stage its final hysteria toward China by coming up with measures to stir up conflicts in the South China Sea, the Taiwan island, and may launch a crackdown on more Chinese scientific and research staff, Xin predicted. "It's also likely that the US will shut down all the Confucius Institutes in America, casting shadow over future people-to-people exchanges between China and the US," he said.

A trap for Biden?

Diao Daming, an associate professor at the Renmin University of China in Beijing, told the Global Times on Monday that "Although Trump is becoming a lame duck president in his last days in the White House, he can still create more legacies by signing executive orders, although the executive organs under different departments are unlikely to cooperate."

"Trump is actually setting a trap or planting a landmine for the Biden administration," Shen Yi, a professor at the School of International Relations and Public Affairs of Fudan University, told the Global Times.

According to the White House website, "the Executive Order on Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies" that the Trump administration issued on Thursday will take effect on January 11.

"The date tells everything. By that time, the election will be concluded with a final result, so Trump is throwing a problem into the hands of Biden - if Biden cancels the order, Trump can assert Biden is a Panda Hugger [a Western politician who is being supportive to China]; if Biden keeps the executive order, Trump believes that China would be disappointed and hit back, so the China-US ties will remain tense or even get worse," Shen said on Monday.

Before the election, Trump made great efforts to stigmatize China as he thought the COVID-19 epidemic situation was the biggest obstacle to his reelection, and after the election, he has become more angry as he believes it was the coronavirus that made him lose the reelection, so he has directed his anger toward China again, Diao said.

Shen said that before the COVID-19 pandemic, Trump made many friendly remarks about China and the Chinese national leader, "but he is such an emotional and unpredictable person that we can't use a normal person's mentality to judge him. The current hostility toward China and the friendly remarks of the past are all the reflections of his unusual personality."

Joe Biden in Beijing on December 5, 2013 Photo: AFP  

 A long fight

Between retaliation against US provocations and de-escalation of tensions with the US, Chinese analysts said China needs to be careful and cautious, and there will be no surprises as long as China is fully prepared for a long fight with the US whether it is governed by Trump or Biden.

On one hand, China needs to precisely retaliate against the Trump administration and make it feel the pain if the provocations harm Chinese core interests; on the other hand, if the provocations are just bluffing with no concrete damage, China can ignore them and focus on communicating with Biden's team to minimize the damages, Diao noted.

"The current situation is even more complicated than the time before and during the election," because sometimes it will be hard to tell which force is behind the new provocations and offensives between November and January, Diao said, "so China's retaliation against the US should precisely hit the Trump administration, and minimize the difficulty for fixing the bilateral ties with the next administration."

The US military is unlikely to support the "final madness" of the Trump administration as they know the risks of a war with China, but in the fields of trade and investment, Trump is likely to leave some legacies, and the Biden administration would also likely inherit these legacies and use them as leverage to bargain with China, Diao further noted.

Shen said that "we can't expect Biden to cancel all policies made by the Trump administration. That would be na?ve. China is fully prepared for more conflicts with the new administration. The Biden administration will only fix Trump's policies if it finds them damaging US interests. Being prepared for a long fight is always the wise choice for China."

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US technology sector faces triple threat

Uncertainty over the future of US-China economic relations has derailed the once high-flying global equity market, which rose almost 15 per cent in the January-April period.

Clive McDonnell, head of Equity Strategy at Standard Chartered Bank, looks at the causes behind the decline.

The technology sector, now facing challenges on a number of fronts, is supposedly the main cause behind the decline.

While President Trump’s policies get blamed for a lot of events impacting global equity markets, he is probably less responsible for the upset in the technology sector than many would have you think.

There are three primary challenges facing the US technology sector:

      1. The sector’s high overseas revenue share: over 60% of total revenue comes from abroad.

      2. The threat of regulation on accessing and using personal data.

      3. Monopoly powers and the risk of an antitrust investigation.

Let’s consider each factor. US economic growth appears resilient in the face of weaker growth prospects in the euro zone and emerging markets.

However, since US technology companies generate more than 60% of their revenue from overseas, they are acutely sensitive to slower growth prospects outside the US. In the past, they have been able to offset slower growth in the euro zone with robust growth in emerging markets led by China.

The next downturn may witness slower growth in both regions, which would leave US technology companies exposed relative to US banks and utilities which have the lowest overseas revenue exposure amongst US companies.

Additionally, there is a risk that China responds in kind to the US President’s targeting of Chinese technology companies. There is also a risk that US dollar strength creates a negative effect on US technology sector earnings once overseas revenue is converted into US dollars.

The threat of regulation on accessing and use of personal data looms large for technology companies, particularly those in the social media space. Europe has been at the forefront of regulating use of personal data via the General Data Protection Regulation (GDPR).

These regulations changed the balance of power between individuals and companies over the use of personal data. The rules give EU citizens more control over their personal data held by companies and the right to have their data removed from databases, the so-called “right to be forgotten” law.

The challenge for US companies is these rules cover their processing of personal data in Europe, regardless of the residential location of the individual generating the data.  

The rules give EU citizens more control over their personal data held by companies and the right to have their data removed from databases.

Similar to the long arm of US financial regulators – which impact banks regardless of where they are incorporated once they engage in US dollar transactions – European rules on personal data are impacting US technology companies in ways that are not covered by domestic laws.

The central business challenge for US technology companies, in particular those in the social media sector, is their business models are built on free access to consumer data in exchange for free use of their software, including search, email and productivity tools, such as those available on Google Drive.

If these companies lose unfettered access to personal data, they would likely start charging consumers for use of the same software.

This, in turn, will have a significant impact on their advertising revenues, as the precision they have been able to offer companies targeting customers would decline. No doubt their business models would evolve, but this could be at the cost of lower net margins relative to the near-20% margins they currently enjoy.

Finally, the perceived monopoly power of some of the sector’s leaders and the resultant risk US technology companies face from antitrust investigations is probably the biggest risk to the sector.

The definition of monopoly power in the US, focusing on the short-term price impact on consumers from company actions, has been unchanged for over 40 years.

Specifically, if company actions lead to higher prices, it could be designated as a monopoly (and importantly, the reverse also applies). This is relevant for technology companies as many have helped to lower prices for consumers.

The definition of monopoly power is changing. This is led by Lina Khan, a Legal Fellow at the Federal Trade Commission and an academic Fellow at Columbia Law School.

In a paper, entitled “Amazon’s Antitrust Paradox (1)”, she challenged the current interpretation of antitrust law which is designed to curb monopolistic power. She proposed that lower prices were not necessarily good for consumers if prices were used as a tool to choke off competition and eventually restrict consumer choice.

The primary tool available to technology companies to manipulate consumer choices (and some would say restrict competition) is their search algorithm.

Whenever a social media or e-commerce company implements a change to their search algorithm, the ensuing uproar amongst its users and customers is a measure of the importance this tool has to drive sales and choices for consumers.

The search algorithm assumes unique power once a platform becomes dominant in an industry and consumers no longer look at other platforms as they believe that their chosen one offers them all the choice they need.

The risk is: their choices are being determined by companies who pay more to appear higher up the search results than those which pay less, even though the latter companies may offer lower prices.

If regulators’ definition of monopoly power evolves, as Lina Khan suggests, there is a risk of antitrust investigations against US technology sector leaders, with penalties ranging from fines to reversal of prior acquisitions.

The challenges facing the US technology sector have converged at a time when valuations are elevated and earnings growth has weakened.

They are shining a light on their business model, which can undoubtedly evolve, but may require changes that the market is not currently anticipating.

Clive McDonnell is Head of Equity Strategy at Standard Chartered Private Bank.

The views expresssed here are entirely the writer’s own.

Read more:

US block spurs tech independence drive by Chinese companies

The latest US blacklisting of the Chinese supercomputing companies will not reduce domestic technology companies' resolve to pursue innovation and research and development (R&D) as they strive to make up for shortcomings in certain segments to pursue further growth despite “irrational assaults” by Washington, industry insiders said.

Innovation is a driving force within China's economy today. Yet behind that innovation, what's the role of research and development?

https://youtu.be/xo_OLlL7XqI
https://youtu.be/xo_OLlL7XqI?t=199

US technology sector faces triple threat

Uncertainty over the future of US-China economic relations has derailed the once high-flying global equity market, which rose almost 15 per cent in the January-April period.

Clive McDonnell, head of Equity Strategy at Standard Chartered Bank, looks at the causes behind the decline.

The technology sector, now facing challenges on a number of fronts, is supposedly the main cause behind the decline.

While President Trump’s policies get blamed for a lot of events impacting global equity markets, he is probably less responsible for the upset in the technology sector than many would have you think.

There are three primary challenges facing the US technology sector:

      1. The sector’s high overseas revenue share: over 60% of total revenue comes from abroad.

      2. The threat of regulation on accessing and using personal data.

      3. Monopoly powers and the risk of an antitrust investigation.

Let’s consider each factor. US economic growth appears resilient in the face of weaker growth prospects in the euro zone and emerging markets.

However, since US technology companies generate more than 60% of their revenue from overseas, they are acutely sensitive to slower growth prospects outside the US. In the past, they have been able to offset slower growth in the euro zone with robust growth in emerging markets led by China.

The next downturn may witness slower growth in both regions, which would leave US technology companies exposed relative to US banks and utilities which have the lowest overseas revenue exposure amongst US companies.

Additionally, there is a risk that China responds in kind to the US President’s targeting of Chinese technology companies. There is also a risk that US dollar strength creates a negative effect on US technology sector earnings once overseas revenue is converted into US dollars.

The threat of regulation on accessing and use of personal data looms large for technology companies, particularly those in the social media space. Europe has been at the forefront of regulating use of personal data via the General Data Protection Regulation (GDPR).

These regulations changed the balance of power between individuals and companies over the use of personal data. The rules give EU citizens more control over their personal data held by companies and the right to have their data removed from databases, the so-called “right to be forgotten” law.

The challenge for US companies is these rules cover their processing of personal data in Europe, regardless of the residential location of the individual generating the data.  

The rules give EU citizens more control over their personal data held by companies and the right to have their data removed from databases.

Similar to the long arm of US financial regulators – which impact banks regardless of where they are incorporated once they engage in US dollar transactions – European rules on personal data are impacting US technology companies in ways that are not covered by domestic laws.

The central business challenge for US technology companies, in particular those in the social media sector, is their business models are built on free access to consumer data in exchange for free use of their software, including search, email and productivity tools, such as those available on Google Drive.

If these companies lose unfettered access to personal data, they would likely start charging consumers for use of the same software.

This, in turn, will have a significant impact on their advertising revenues, as the precision they have been able to offer companies targeting customers would decline. No doubt their business models would evolve, but this could be at the cost of lower net margins relative to the near-20% margins they currently enjoy.

Finally, the perceived monopoly power of some of the sector’s leaders and the resultant risk US technology companies face from antitrust investigations is probably the biggest risk to the sector.

The definition of monopoly power in the US, focusing on the short-term price impact on consumers from company actions, has been unchanged for over 40 years.

Specifically, if company actions lead to higher prices, it could be designated as a monopoly (and importantly, the reverse also applies). This is relevant for technology companies as many have helped to lower prices for consumers.

The definition of monopoly power is changing. This is led by Lina Khan, a Legal Fellow at the Federal Trade Commission and an academic Fellow at Columbia Law School.

In a paper, entitled “Amazon’s Antitrust Paradox (1)”, she challenged the current interpretation of antitrust law which is designed to curb monopolistic power. She proposed that lower prices were not necessarily good for consumers if prices were used as a tool to choke off competition and eventually restrict consumer choice.

The primary tool available to technology companies to manipulate consumer choices (and some would say restrict competition) is their search algorithm.

Whenever a social media or e-commerce company implements a change to their search algorithm, the ensuing uproar amongst its users and customers is a measure of the importance this tool has to drive sales and choices for consumers.

The search algorithm assumes unique power once a platform becomes dominant in an industry and consumers no longer look at other platforms as they believe that their chosen one offers them all the choice they need.

The risk is: their choices are being determined by companies who pay more to appear higher up the search results than those which pay less, even though the latter companies may offer lower prices.

If regulators’ definition of monopoly power evolves, as Lina Khan suggests, there is a risk of antitrust investigations against US technology sector leaders, with penalties ranging from fines to reversal of prior acquisitions.

The challenges facing the US technology sector have converged at a time when valuations are elevated and earnings growth has weakened.

They are shining a light on their business model, which can undoubtedly evolve, but may require changes that the market is not currently anticipating.

Clive McDonnell is Head of Equity Strategy at Standard Chartered Private Bank.

The views expresssed here are entirely the writer’s own.

Read more:

US block spurs tech independence drive by Chinese companies

The latest US blacklisting of the Chinese supercomputing companies will not reduce domestic technology companies' resolve to pursue innovation and research and development (R&D) as they strive to make up for shortcomings in certain segments to pursue further growth despite “irrational assaults” by Washington, industry insiders said.

Innovation is a driving force within China's economy today. Yet behind that innovation, what's the role of research and development?

https://youtu.be/xo_OLlL7XqI
https://youtu.be/xo_OLlL7XqI?t=199