Commentary from the Web, Week 35, 2020

US-China relations and global growth

On August 28 I attended this virtual roundtable, organized by the Official Monetary and Financial Institutions Forum (OMFIF), and featuring James McGregor, former chairman of the American Chamber of Commerce in China (he lives in Shanghai but is currently marooned in San Francisco), and Andy Rothman, investment strategist at Matthews Asia. Some insights I gained from the session included the following.

  • The extent of Covid control in China: there are now only 300 people in hospital in the entire country, and there have been no deaths from Covid for months.
  • China’s growth is no longer driven mainly by exports; exports remain important, but domestic demand is more important. 
  • Most countries that are allies of the US actually do more trade with China than with the US.
  • General Motors, the US car company, sells more cars in China than it does in the US.
  • China appears to be in V-shaped recovery: businesses are up and running, domestic travel is almost back to normal, and in many places masks are considered unnecessary.
  • Decoupling the US from China makes no sense: China is responsible for most of the world’s overall growth, most American companies in China are there to serve the Chinese market, and flows between Silicon Valley and China are very strong.
  • Chinese investors who are discouraged from the US market are seeking investment opportunities in SE Asia and Europe. 
  • Hong Kong also stands to benefit from a switch from the US, both of finance and university students.


China’s mysterious dollar dealings

In a commentary on the OMFIF website on 21 August 2020, Herbert Poenisch, Senior Fellow at the Academy for Internet Finance, Zhejiang University, observed that “Considering China’s tensions with the US, Chinese authorities’ and banks’ dollar business is somewhat puzzling. China’s US Treasury holdings decreased to $1.07tn at end-2019, from $1.112tn in mid-2019. Chinese-owned banks globally reduced their reliance on dollar funding by $42.5bn.

“Since then, China’s holdings of US treasuries have risen to $1.084 as of May, and banks’ dollar funding climbed $40.7bn in this year’s first quarter. This represents a swing of $80bn, around 8% of Chinese banks’ total cross-border funding. This is particularly surprising as global liquidity, and especially dollar liquidity, started drying up in March in view of the virus-induced global downturn.” He goes on to speculate about the implications of this move.


Contested future: What next for the West?

In a review in the August 27 issue of the Financial Times, Edward Luce says “[Jeffrey Sachs’] latest book, The ages of globalization is a magisterial chronicle of globalization in seven stages from the Paleolithic age to the digital. The further back you look, the clearer key trends of history become. Global integration is the human story, both good and bad.Medicine is one facet. Covid-19 is another. We cannot stop the shrinking of the world. We can only try to shape it. It goes without saying that humanity must void the bottomless pit of mutually recriminating nationalisms. …

“…  [Sachs] quotes E O Wilson, the American evolutionary biologist, who said that we have stumbled into the 21st century with ‘Stone Age emotions, medieval institutions and God-like technology’.”, Best books of the week.


Ambassador Jackman tells Chinese about Barbados

Rasheed Griffith sent me this clip of Ambassador Jackman on Chinese social media. The introduction and commentary are all in Chinese, but the Ambassador speaks English.