GOOD MORNING FROM LONDON
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US TRADE SANCTIONS RE CHINA; CONSEQUENCES
CHINESE WOMAN IN WORLD FIRST TYPE 1 DIABETES REVERSAL
BIG BOOST FOR CHINA’S ECONOMY
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#1 US-CHINA RETALIATION TRADE CONSEQUENCES
NIKKEI ASIA
“Republicans in the U.S. Congress introduced a bill last week to end Permanent Normal Trade Relations [PNTR] with China, claiming that the trade status granted to Beijing has led to unfairly imbalanced relations between the world’s two largest economies.
The new bill, introduced by Sens. Tom Cotton, Marco Rubio and Josh Hawley, would seek to end the status and phase in tariffs for Chinese products over five years. Proponents claim removing this status would defend the U.S. from China’s predatory economic behavior and improve supply chain resilience.”
GRAHAM PERRY COMMENTS;-
Does hitting China hurt China?
- Ed Brzytwa Vice President of The Consumer Technology Association in the U.S. said “Some policymakers in Washington seem to think that revoking China’s normal trade relations status is a way to ‘stick it’ to China, but our report shows that they’d really be ‘sticking it’ to American consumers,”
- The Cato Institute Think Tank have warned that removing the trade status could hike the costs of goods for American consumers, contributing to inflation, and cause a decline in U.S. gross domestic product. And the situation could worsen if China retaliates, with the trade deficit potentially widening further.
- Oxford Economics, commissioned by the U.S.-China Business Council, said revoking the status would mean the removal of all exclusions to Section 301 tariffs of the U.S. Trade Act, subjecting Chinese imports to tariff rates similar to countries without normalized trade relations such as North Korea and Cuba. The advisory firm estimated a cumulative loss of $1.6 trillion in GDP over five years from 2025 and a loss of 744,000 jobs, assuming China does not retaliate.
- The Peterson Institute for International Economics said impacts would be felt unevenly across the US economy with sectors such as agriculture, manufacturing and mining suffering the biggest losses. “Revocation of PNTR would reduce employment in these sectors and encourage the redeployment of labor into the services sector – presumably not the outcome advocates of PNTR revocation seek,” the authors wrote. The Peterson report said the move would widen the U.S. trade deficit, the antithesis of what proponents look to achieve.
- Aside from implications for the U.S. and China, Deborah Elms from trade advocacy group Hinrich Foundation said such a unilateral move could impact the globalized trading system and trigger actions by other members of the World Trade Organization. “Once the genie is out of the bottle by even considering such an action, it is highly likely that other WTO members will follow suit in whole or in part by imposing a range of new tariff restrictions against each other,” she wrote in a note.
So why do it? Why do politicians take the wrong course of action? Because they are politicians with a political message to convey. “The time has come to put China in its place. We need to bring them down a peg or two. We need to hit them where it hurts. Action not Words”
And what is the big picture? The US reads China very wrong. As this Column has previously stated the US thinking was this “We have seen off the USSR. Our stronger economy and greater international military reach meant that our policy of Guns and Butter could not be equalled by the USSR. Gorbachev waved the White Flag. The USSR conceded and became Russia. If we are just as strong with China they too will crumble and give up their goals of creating a Socialist Society. The US will again by #1.”
The USA – Washington, Congress, the Pentagon, West Point – all suffered from the same myopia. China, they said, is the USSR Mark Two. Stand up to China and they will buckle. It worked with the USSR. It will work with China. But China – its property sector apart – has grown in strength. Its economy has developed. It has leant USD1 trillion to 100+ countries. Its trade relations have surged. The people of China have kissed goodbye to poverty.
China still has a long way to go before it meets the US standard of living but it is catching up fast. The future for the US is not to close its eyes but to recognise that China cannot be blown off course. Accept reality and treat China as a partner and not as a foe. There is room for both.
But if powerful voices within the US see only US dominance then War beckons. The US has to realise the changes that are taking place and adjust to them. The first step is for the US to desist from its policy of confrontation. Can it change?
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#2 CHINESE WOMAN FINDS TYPE 1 DIABETES REVERSED AFTER STEM CELL TRANSPLANT IN WORLD FIRST.
SOUTH CHINA MORNING POST
“The patient, a 25-year-old who had the chronic condition for over a decade, was able to naturally regulate her blood sugar some 2½ months after undergoing the minimally invasive surgery, Shanghai-based news outlet The Paper reported on Saturday.
According to the report, the surgery took just half an hour.
The team behind the breakthrough published their findings in the peer-reviewed journal Cell on Wednesday. Researchers from Tianjin First Central Hospital and Peking University were among those who took part in the study.
Diabetes is a major health threat worldwide. According to the International Diabetes Federation, China has the highest number of cases globally, with over 140 million patients and a prevalence rate exceeding 12 per cent.
Following the CiPSC islet transplant, the patient’s fasting blood glucose levels gradually normalised, and her need for external insulin steadily decreased. She completely stopped needing insulin injections 75 days after the transplant, and the improvement has lasted for over a year.
She used to experience significant swings in blood sugar levels and also suffered multiple episodes of severe hypoglycaemia. By five months post-transplant, her sugar levels stayed within the target range more than 98 per cent of the time, and this stability has been maintained.
The team also simplified the surgery and chose to transplant the cells into the abdominal muscles instead of the liver and avoid the inflammation risks associated with traditional islet transplants.
The injection was minimally invasive, the shallow site facilitated imaging monitoring, and the cells could be retrieved anytime if needed. The entire procedure took less than half an hour.
GRAHAM PERRY COMMENTS;-
This is a significant item of news for different reasons. In the West there was much anti-China propaganda alleging sexual mistreatment of women in the Xinjiang Autonomous Region. Based on quite transparent evidence produced by German researcher, Adrian Zenz, Uighur women were meant to be victims of gross behaviour by the Xinjiang authorities. It was part of an attempt to portray China as perpetrators of crimes of invasive violence against Uighur women. The intention was to damage China’s reputation and to challenge politicians and businessmen to continue their political and trade links with China.
In summary the events in Xinjiang were issues of security and not issues of race. In all the years of doing business in China, there were no reports from diplomats, businessmen, or tourists of any incidents of racial prejudice against the Uighurs. In contrast there has always been a group – ETIM, The East Turkestan Independence Movement – who have fought the Chinese authorities in pursuit of secession from China.
There was violence and deaths and executions. This was a matter of politics and security and not of race or sexual prejudice against women.
It is against this background that – following stem cell transplant – a woman patient has been able to reverse type 1 diabetes, apparently a world first. The findings have received much attention in China being written up by Researchers from Tianjin First Central Hospital and Peking University who were among those who took part in the study. The patient completely stopped needing insulin injections 75 days after the transplant, and the improvement has lasted for over a year.
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#3 BIG BOOST FOR CHINA’S ECONOMY
THE FINANCIAL TIMES
“Chinese markets have given a short-term welcome to an “unprecedented” toolbox promised by Beijing to stabilise capital markets and revive animal spirits, but the bigger concern is whether the measures will be enough to stimulate the faltering real economy. The People’s Bank of China on Tuesday unveiled an Rmb800bn ($114bn) war chest to boost the stock market by lending to asset managers, insurers and brokers to buy equities, and to listed companies to buy back their stock. This was the first time the PBoC had “innovated” and used these types of monetary policy tools to support capital markets, central bank governor Pan Gongsheng said at a briefing flanked by financial regulators.”
GRAHAM PERRY COMMENTS;-
China faces two big problems. The first is Corruption and this topic will be addressed in detail in the next issue of Good Morning From London. The second is the Economy and here China is paying a penalty for big failings in its Property Sector.
There is no secret about this matter. It has been addressed at length in China and in the foreign media. The contrast between the two is intriguing. The West does not like the China challenge. It tolerates it because it has to but Western academics, thinkers, and politicians do not approve. By Western standards China is not a democracy. The people are not free. There is no Rule of Law, no Electoral Mandate, no Separation of Powers. This much is known because they feature prominently in critical media comment on China.
Notwithstanding, the West is puzzled. China seems to be creating a society that benefits its people. The most intriguing figures will be familiar to readers – first a billion Chinese citizens have been lifted out of poverty and at the other end of the economic scale 137 million Chinese travelled to foreign countries in the last 12 month period before COVID – a sign of prosperity and relaxed political well-being. There were no reports in the media that any Chinese visitors applied for asylum in any of the many countries they visited across the globe.
But China has hit a major problem. Its property sector has led to major bankruptcies of two substantial companies – Evergrande and County Garden – and the repercussions for the economy are not small. Critics of China hope that this problem will damage China below the water line and stall its economic advance with the follow -up expectation that this will lead to major problems for the Chinese leadership and an abandonment of the policies that have until recently led to the country’s confident progress towards becoming the largest economic power in the world.
China has made advances in several domains, particularly in infrastructure development, renewable energy, and productivity, leading to its ascension as a leading global force. Concurrently, the country has achieved commendable results in regulating housing prices, reducing leverage, and addressing local government debt. These actions have addressed the real estate bubbles and financial risks but more needs to be done and this week the Government unveiled an Rmb800bn ($114bn) war chest to boost the stock market by lending to asset managers, insurers and brokers to buy equities, and to listed companies to buy back their stock.
As the FT has noted this is the first time the People’s Bank of China has “innovated” and used these types of monetary policy tools to support capital markets, as Central Bank Governor Pan Gongsheng said at a briefing in Beijing.
Markets need reassurance and the response to PBoC’s robust action is expected to bring the injection of capital that the economy needs if it is to recover and continue to provide growth and development.
The West will hope that the economic setback will blow China off course and bring a significant change in political priorities. Only time will tell but this Column expects China to confound its critics and remain consistent to its political and economic priorities.
GRAHAM PERRY
