Decoupling Shouldn't Be A "Thing"
BRAmble Daily: 5 news items, 2 comments from me and 1 random musing, book or quote
5 News Items
Trump Sows Doubt on Trade Talks With Pushback on Tariff Unwind
Trump hints tariffs not all going away. Says he wants “the right deal” for the US
The great U.S.-China "decoupling” dilemma
China's Xi Jinping visits Greece eyeing deeper economic ties
China's mood chills on new Belt and Road projects in Pakistan
2 Comments
The Singles Day sales party keeps getting bigger, when does the hangover come?
For the last decade, year over year, Alibaba has managed to beat its own record during the biggest shopping festival on the planet. On 11/11/2019, gross merchandise volume (GMV) on Tmall surpassed 268 billion RMB (38 billion USD) within 24 hours, resulting in 26% YOY growth.
Just when everyone expected Alibaba couldn't pull it off again, the GMV grew 26% over last year. Incredibly, Tmall managed to maintain pretty much the same growth rate as it did last year.
Tmall scored another record-breaking year and showed there was still potential for growth for its Single's Day event.
Livestreaming was what did the trick this year. Over half of online merchants saw an increase in GMV caused by live-streaming. The total number of transactions driven by live-streaming grew by 400% YOY.
A broadcast by one of the biggest anchors on Taobao Live, Wei Ya, reached 42 million viewers at 2am at night. Over 24 hours, Wei Ya drove the sales of 330 million RMB of merchandise. - WalkTheChat Blog
Another reason Alibaba has kept its leadership is its massive push to get foreign brands and foreign influencers on Tmall. Tmall Global has recruited a network of hundreds of Western influencers or foreign-based Chinese influencers on various Chinese and Western social networks. These efforts include partnering with established Western celebrities (such as Kim Kardashian) to launch their brands on the Tmall Global platform.
How do we rectify all this consumer activity with the underlying economic fundamentals? And what steps will the Chinese government take to address it? According to statistics published last week by the National Bureau of Statistics (NBS), China's economy is in a deflation-inflation trap. Producer prices are falling, as consumer prices rise.
Stated simply, prices China's factories charge to their clients are in a deflationary spiral, while prices charged by retailers to consumers are in an inflationary spiral.
Stated simply, prices China’s factories charge to their clients are in a deflationary spiral, while prices charged by retailers to consumers are in an inflationary spiral.
“The simultaneous decline in PPI and rise in the rise in CPI create a deflation-inflation trap for China’s policy makers,” says Finance Professor Christos Giannikos of Baruch College and Columbia University. “An effort to stimulate the economy and push PPI higher could also push CPI higher raising the cost of living.”
Could it be that Chinese consumers are spending beyond their means, attracted by the extreme ease of buying the Chinese online marketplaces foster? Will this attract money and investment to the wrong places, inflating further the housing bubble, which makes it impossible for young people to buy a home and raise a family in Tier 1 cities?
That thing they call “decoupling”
In a recent speech delivered at the University of California San Diego, former Australian Prime Minister and China hand Kevin Rudd said that while a complete severing of economic ties is unlikely, there are several telltale signs of decoupling of the U.S. and China economies.
Technology: China has made eliminating its reliance on U.S. tech a top national priority, the U.S. is attempting to block Huawei's global 5G rollout and each country is racing to defeat the other in artificial intelligence.
"Human talent": Rudd fears we are "entering a new McCarthyism" in which Chinese students, experts and others are blocked from visiting the U.S. (and vice versa), while even Chinese Americans could face "a veil of suspicion."
Currencies: China is deeply concerned about its dependence on the dollar and "senses a serious opportunity" to reduce it via digital currencies, Rudd writes.
Investment: Chinese investment in the U.S. is declining, and many believe "the investment door to the United States is closing."
reported by David Lawler, Axios
Right now, on the brink of a self-described "phase one deal," it seems that clearer heads are starting to prevail. Rudd commented, "After an 18 month-long trade war, it appears that both sides have stopped, stared into the abyss, concluded that its a very long way down there and a lot people on both sides could get seriously hurt — and without any real lasting benefit to anybody."
Sitting where I am in Beijing, it is clear to me that China is prepared for any outcome. As an American citizen, I worry that the U.S. can't see past its nose to really grasp just how important a chance both countries have right now for setting things right and determining a go-forward process by which many more future decades of joint prosperity and cooperation can be realized.
1 Quote
“Coupling is frenzy; decoupling is farce.”
from The Bone Clocks: A Novel by David Mitchell.
Thanks for reading,
James