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Chinese Scholar: Recession Is Inevitable

Xu Xiaonian, a professor of economics and finance at the China Europe International Business School, said that as long as the pandemic in Europe and America is not over, Chinese export companies will have no orders, and a recession is inevitable. Xu made the remarks at the CEIBS Alumni Association on the evening of March 26 when discussing the outlook for the recent pandemic and the Chinese economy.

Xu Xiaonian said in his speech that the current rate of resumption of work is actually meaningless. “Where are the orders?”  He asked.

Xu believes that many of the online discussions about an international pandemic are “foolish.” As long as the pandemic in Europe and America is not over, China has no orders; workers have no wages and there is no consumption. “We are not able to finish the rest of the course by ourselves. We have to accompany the whole world to finish the entire journey. Only when the world economy returns to normal can China be normal. ”

“We can’t close the door and play by ourselves. We are not only short of food and oil, but we are also short of markets; we are short of orders. Our per capita GDP is one-fifth of that of the United States and one-fourth that of Europe. The domestic purchasing power cannot support our enormous manufacturing capacity.”

He also said, “We still lack raw materials, especially the technology-intensive basic raw materials, which must be imported from South Korea, Japan and Germany. We lack technology, and technology cannot be developed rapidly when we close the door.”

Source: Sina, March 30, 2020

https://cj.sina.com.cn/articles/view/2662090253/9eac460d01900lzr0?cre=tianyi&mod=pcpager_fintoutiao&loc=18&r=9&rfunc=100&tj=none&tr=9

“World Leader”: EU Is Concerned with China’s “Mask Diplomacy”

The South China Morning Post reported that, since Europe suffered the outbreak of the Novel Coronavirus, the Chinese Communist Party (CCP) has been conducting “Mask Diplomacy.” That is, through supplying the European Union (EU) countries with face masks and other medical equipment and materials, it is trying to boost its global leadership position and to control the discourse power. Beijing has blocked the shipping of medical supplies to other countries so that it can totally control which country it will help.

Italy, Spain, France, Austria, and many other EU countries, with Hungary being the latest, received aid or permission from China to import medical supplies from China. Some big Chinese corporate names – including billionaire Jack Ma and tech giant Huawei Technologies – have also sent medical equipment to the EU.

Josep Borrell Fontelles, the Minister for Foreign Affairs of the EU, warned that Beijing “struggles for influence” in a “global battle of narratives.”

“There is a global battle of narratives going on in which timing is a crucial factor. China is aggressively pushing the message that, unlike the US, it is a responsible and reliable partner.

“In the battle of narratives we have also seen attempts to discredit the EU as such and some instances where Europeans have been stigmatized as if all were carriers of the virus.

“The point for Europe is this: we can be sure that perceptions will change again as the outbreak and our response to it evolves. But we must be aware that there is a geopolitical component, including a struggle for influence through spinning and the ‘politics of generosity.’”

Two recent developments have driven EU officials closer to the rhetoric of regarding China as a “systemic rival,” a phrase first used under the President of the European Commission, Ursula von der Leyen’s predecessor, Jean-Claude Juncker.

First, there is the sense that China’s leadership prefers to deal directly with European countries, rather than through the EU. Von der Leyen was the only major European leader who did not receive a phone call from Chinese President Xi Jinping.

Second, the EU was startled by the reaction of Serbia, which was on course to begin accession talks at some stage to join the EU. When the EU hastily enacted an export ban on medical equipment, Serbian President Aleksandar Vucic lambasted EU solidarity as a “fantasy,” turning instead to Xi, whom he called a friend and a brother.

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Source: South China Morning Post, March 24, 2020
https://www.scmp.com/news/china/diplomacy/article/3076728/eu-fires-warning-shot-china-coronavirus-battle-narratives

“World Leader”: Netherlands Found China’s Face Masks Were Defective

The Netherlands bought face masks from China. A shipment of face masks of grade level “KN95” arrived on March 21. However, the Dutch Ministry of Health found that these face masks did not meet the quality standard, though they had a quality inspection certificate from China. The problem with the face masks was that they couldn’t cover the face correctly and also the membranes that were supposed to capture the virus particles did not work properly.

The Holland government decided not to use these face masks.

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LTN: The U.S. Aims to Cut Huawei’s Global Supply Chain

Major Taiwanese news network Liberty Times Network (LTN) recently reported that officials in the U.S. Trump administration have agreed to take new steps to reduce the global chip supply to Huawei significantly. The plan directly points to Huawei’s largest chip supplier TSMC. Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest dedicated independent semiconductor foundry, headquartered in Hsinchu, Taiwan. According to the newly proposed rules, the United States will have to certify any foreign companies that use U.S. chip-making technology or equipment before they can sell chips to Huawei. According to anonymous sources, the new effort was designed to stop TSMC from manufacturing chips for Huawei. It is still unclear whether President Trump gave the OK to this plan or not. He may have some hesitation because the implementation of this plan may not only hurt TSMC, but may also impact U.S. companies. Huawei refused to comment on the news and TSMC said it cannot comment on hypothetical questions and won’t discuss matters regarding any specific customer.

Source: LTN, March 27, 2020
https://ec.ltn.com.tw/article/breakingnews/3114302

Taiwan Liberty Times Net: Taiwan Launched Joint Air Defense Exercise in Response to the Threat the PLA Poses

Taiwan Liberty Times Net reported that, since the beginning of this year, despite the on-going spread of the Wuhan Coronavirus, the PLA has performed night time training activities and even flew across the Taiwan Straits Midline a minimum of five times. In response to the threat, on the morning of March 24, the Taiwan Ministry of National Defense launched the “Lianxiang” joint air defense combat training. The upgraded F-16V fighter was reported to have participated in the training. The “Lianxiang” exercise is normally done quarterly each year however it was performed specifically to target the excessive military actions that the PLA has performed.

Source: Taiwan Liberty Times Net, March 25, 2020
https://news.ltn.com.tw/news/politics/paper/1361242

The Paper: Beijing to Increase Deficit Rate and Issue Special Government Bond

According to The Paper, China’s Politburo held a meeting on March 27. For the first time, it proposed to “appropriately raise the fiscal deficit rate and issue special government bonds” to deal with the impact of the epidemic on the economy. A number of economists recommended a deficit rate of 3.5 percent versus 2.8 percent in 2019. It would bring in 700 billion yuan (US$99 billion). Meanwhile they also recommended issuing a special government bond of no less than 1 trillion yuan (US$140 Billion). Moreover, they reiterated that the local government could increase the scale of their special debt limit from 2.15 trillion yuan (US$300 billion) for 2019. If the deficit rate for 2020 were to increase to 3-4 percent, it would mean that the local government debit limit could go up to 4 trillion yuan (US$560 billion).

Source: The Paper, March 27, 2020
https://www.thepaper.cn/newsDetail_forward_6721099

Trump Signed Taipei Act and Beijing Promised Retaliation

Major Taiwanese news group Eastern Media International recently reported that, on March 26, U.S. President Donald Trump signed the Taipei Act into law. Mainland Ministry of Foreign Affairs spokesperson Geng Shuang said at a press conference that China urged the United States to correct its mistake and stop the implementation of this wrongful bill. The United States should not set roadblocks for other countries that want to develop a relationship with China. Otherwise, Geng emphasized, the United States will have to face China’s decisive retaliation. Geng said the so-called Taipei Act is yet another example of a serious violation of the One-China principle and the provisions of the three China-US joint communiques, a serious violation of international law and basic norms of international relations, and a gross interference in China’s internal affairs. According to the Taipei Act, the United States will reduce the economic, security and foreign relation ties with the countries that bring severe damage to Taiwan. The Act also supports Taiwan’s observer status in international organizations.

Source: Eastern Media International, March 27, 2020
https://www.ettoday.net/news/20200327/1678300.htm

If We Cannot Change China, We Should Stay Away from It

The ongoing pandemic has taught us a hard-learned lesson. The fact that China is an authoritarian regime that refuses transparent governance and freedom of speech, compounded by the reality that it is deeply ingrained in the global economy, makes the current crisis a worst-case scenario.

If China were more isolated, the outbreak in Wuhan might not have escalated into a once-in-a-century catastrophe. When the SARS epidemic burst out in November 2002, the government did not acknowledge it until five months later. When the disease was finally contained in July 2003, a total of 8,000 cases were confirmed, resulting in 774 reported deaths in 17 countries. That pales in comparison to the Wuhan virus. As of today, there have been over 30,000 reported deaths among 650,000 confirmed cases in more than 170 countries, and the figures continue to climb by leaps and bounds. The high fatality rate of SARS may have been attributed to the slow transmission, but one cannot overlook the fact that China’s interaction with the world was relatively inconsequential back then. Only one year into the WTO, China’s share of the world economy was 4 percent instead of the 16 percent it is today; and its position as the world’s factory hadn’t taken shape.

If Beijing were transparent and allowed freedom of speech, the situation could also have been different. A March study by researchers at the U.K.’s University of Southampton showed that, if an intervention took place just three weeks earlier, 95 percent fewer people would have been infected. Three weeks is exactly the time period between the end of December, when the whistleblower doctor Li Wenliang and his colleagues sent out warnings on social media, and January 23, when a lockdown of Wuhan was ordered. By January 20, the official word was that the disease “doesn’t spread from person to person.” In early January, according to the Chinese media Caixin, the Health Commission of Hubei province ordered medical institutions and professionals to destroy all samples of the Wuhan pneumonia virus and not to share the information with the public. On January 3, the National Health Commission issued a notice stipulating that “biological samples and related information must not be provided to other institutions and individuals without approval.” It is less likely that a democratic government in an open society would cover up such a major epidemic and miss the best time to contain the virus.

Unfortunately, neither of these suppositions is true. The world faces high stakes when an anti-democracy regime that routinely suppresses the free flow of information is also an important component of the global economy.

Based on an unproven idea that trade and economic prosperity promote freedom and democracy, the West has, for decades, provided China money, technology, and market access. Be it an excuse for the corporations to profit from the country’s cheap labor or policymakers’ naivety and wishful thinking, the theory turned out to be wrong. China’s economy has grown, but so has the Chinese Communist Party’s (CCP’s) domestic control and its global ambitions. People in China shun and shy away from sensitive political topics on social media. “Spreading rumors” or “groundless criticism of the central authority” is a crime punishable by years in jail. Overseas, the regime has been trumpeting its “Belt and Road Initiative,” an infrastructure investment project and a vehicle to expand its ideological influence. In a word, the West’s trade and investment has built a most formidable authoritarian machine. With a larger economy, greater global influence, and a strong position as the world’s factory, Beijing has little to fear when resisting Western ideas.

China has therefore refused to change. In its handling of infectious diseases 17 years ago, it covered up SARS and arrested Dr. Jiang Yanyong, who exposed the outbreak to the outside world. 17 years later, it covered up the Wuhan virus, silenced Dr. Li Wenliang, and detained activists who leaked uncensored coverage of the disaster. Even worse, China denied the cover-up, fueled anti-American propaganda, expelled the journalists who could report to the rest of the world, and blamed the U.S. for originally spreading the virus, while not providing any evidence.

The West must come to terms with the reality that the Chinese regime has not changed and will never change. If another epidemic happens, it will still cover it up and deny all responsibility for it. Delinking China may be the only option to protect ourselves and mitigate the potential damage to the world. If history has proven that the engagement policy is wrong, why not correct it by reversing course? Why should we make friends with someone who refuses to share our values? Why should we trust someone who has repeatedly lied to the world? Why continue to allow a bad government to hold the world hostage? These are all the million-dollar questions we need to ask ourselves.

It’s time to give up the fantasy and learn the lesson that is being taught to us at such a great cost of human lives. If we cannot change China, we should stay away from it!