driving the day
1. TikTok is Tikked Off
The Trump administration is set toMake Microsoft Cool Again.
On August 2, the US seemed to dial back threats to ban Chinese video platform TikTok, reportedly granting the app’s parent company ByteDance 45 days to negotiate a sale to Microsoft.
Some context:ByteDance has had a rough go of its international expansion campaign, facing an investigation for its purchase of social network musical.ly, a national Tiktok ban in India, and intense scrutiny from US regulators due to national data security concerns.
More context: On Friday in the US, the company’s troubles culminated with the Trump Administration announcingit would ban the app from the US market forthwith– before relenting a bit over the weekend.
ByteDance founder Zhang Yiming is not happy about the possibility of a forced sale (cnBeta):
- “We do not agree with this decision because we have always insisted on ensuring user data security, platform neutrality and transparency.”
Get smart:Given Chinese tech companies’ increasing success in global markets, a confrontation over cross-border data transfer was inevitable.
What to watch:Will the US construct a regulatory framework applicable to all international tech platforms? Or are Chinese tech companies set to become a proxy punching bag in deteriorating US-China relations?
What else to watch:This Tiktok videoof Gummy Bears singing Adele.
Banning TikTok is a terrible idea
2. Banks get some breathing room
China’s banks will have another year to comply with the new-(ish) wealth management rules.
- The rules, issued in April 2018, were due to take effect in December.
- But on Friday, the central bank (PBoC) said that banks would have until the end of 2021 to comply.
Some context: The new rules are designed to rein in shadow banking by forcing banks to curb their off-balance sheet activities.
More context: Regulators have been hinting since the beginning of the year that the deadline would be extended, seemingly recognizing that many lenders just wouldn’t be able to meet the deadline – especially small and medium-sized lenders.
In a statement issued on Friday, the PBoC said that given the COVID-19 pandemic, it was necessary to cut everyone some slack and extend the deadline.
According to Caixin, banks had been betting on a reprieve:
- “Amid talk of a possible extension, banks have made little progress in overhauling their [wealth management products].”
Get smart:The regulators have bowed to the inevitable.
Get smarter:Banks have been sweating bullets over these rules for years, so this extension is welcome. But an extra year isn’t that much breathing space in this environment.
3. Politburo studies military modernization
You know what time it is? It’s Politburo study session time.
The topic: Military modernization.
At a session last Thursday, Xi Jinping told the pen-and-notebook-ready group that he sees threats to the Party and the country in the changing global order (Xinhua):
- “Noting that the world today is undergoing profound and fast-evolving changes unseen in a century, and that the COVID-19 pandemic is exerting a far-reaching influence on the international landscape, Xi said China’s security situation faces growing uncertainties and destabilizing factors.”
Xi’s solution: A great leap forward in military development.
To get things going, he called for a well formulated military development plan for the 2021-2025 time frame.
- “Xi underscored implementing the military strategic guideline for the new era, formulating the 14th five-year (2021-2025) plan for building the military, drawing a scientific road map, and cultivating a new type of high-caliber and professional military talent.”
Get smart: Making the PLA a world-class military has been one of Xi’s top priorities since coming to power in late 2012.
Get smarter:The quickly deteriorating external environment will make Xi double down on these efforts.
4. MIIT gets a new boss
On Friday,Xiao Yaqing took over as Party secretary of the Ministry of Industry and Information Technology (MIIT).
- Xiao is taking the reins from formerMIIT Party secretary and minister Miao Wei, who is stepping down afterreachingthe mandatory retirement age of 65.
What to watch:With this promotion Xiao looks set to also be appointed minister of MIIT soon.
So, who is Xiao Yaqing?
- For the past 15 months, Xiao’s been heading China’s mighty market regulator (SAMR).
- Before then, Xiao served as head of the body overseeing state-owned enterprises (SASAC), between January 2016 to May 2019.
- Formerly, he headed up the state-owned aluminum giant Chalco, where hewasknown as China’s (arguably) most famous SOE boss.
- Xiao also served for seven years (2009-2016) as a deputy secretary-general at the State Council, where he served directly under former vice premiers Zhang Dejiang and Ma Kai.
Get smart: If Xiao excels at MIIT, he could be a contender to replace Wang Yong as State Councilor in 2023. If Xiao is not promoted to a state-level position, he will retire in 2025.
5. New draft of encouraged FDI catalogue released
Last Friday, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MofCom) released the draft version of the 2020 Encouraged Industries for Foreign Investment Catalogue.
- The draft is open for public commentuntil August 30.
Some context:Updated from its 2019 version (seeJuly 1, 2019 Tip Sheet), the catalogue specifies industries where foreign direct investment (FDI) will receive preferential policy treatment.
The proposed 2020 catalogue contains two lists:
- A nationwide list that includes 471 encouraged industries, of which 56 are new and 40 are modified as compared to last year’s catalogue.
- A list for the central, western, and northeastern regions, which have 69 encouraged industries added and another 36 industries modified as compared to the 2019 version.
Just like last year, the draft catalogue calls for more FDI in:
- High-end manufacturing
- Production-oriented service industries
- China’s central, western, and northeastern provinces
But this is different.Noticeable additions in the proposed 2020 catalogue include:
- Certain raw materials
- Certain parts and components
- End product manufacturing
- Research and development services
- Commercial services
- Modern logistics
- Information services
Get smart: Amid tensions with the US and economic challenges brought on by the pandemic, Chinese officials arelooking shore up supply chains, via domestic and foreign inboundinvestment.
6. Leveling off
Aaaaaand at last. Your daily coronavirus update.
Over the weekend, China reported (NHC):
- 45 new confirmed cases on Friday – of which, six were imported, 31 were in Xinjiang, and eight were in Dalian.
- 49 new confirmed cases on Saturday – of which,16 were imported, 30 were in Xinjiang, and three were in Dalian.
- 43 new confirmed cases on Sunday – of which, seven were imported, 28 were in Xinjiang, and eight were in Dalian.
Some context:These numbers mark a significant improvement from the 100+ levels we saw between Tuesday and Thursday last week.
Get smart:The major source of China’s current COVID-19 growth – Urumqi, Xinjiang – looks to be past its peak.
- On Sunday, there were still 590 COVID-19 patientshospitalized in Xinjiang.
- Another 14,939 people in the region are currently under isolated medical observation – up from 12,416 onThursday.
The bottom line:The continued slow burn of newcases in select areas will not deternational efforts tofully restoreeconomicactivity.