GLOBAL GAB #17 – The Jerks Are Jerking Us Around

Good afternoon from Canada – land of the stockpiled canola and the embargoed pork.

 

Well, those of us concerned with international trade can breathe a little easier (but probably not for long). China and the USA have agreed to talk some more and, in the interval, Huawei gets a lifeline for parts and everyone else gets a lifeline from the shelving of The Donald’s imposition of more tariffs. But that could change in 5 seconds and not even The Donald knows when those 5 seconds will be – so my suggestion is to buy what you need and buy it soon, with the understanding that these tariffs, if and when implemented, are implemented immediately on the day that they come into effect – orders placed before, or merchandise on the water, don’t qualify for exemption; the goods have to be physically on US soil and entered. Just saying!

 

Nikkei came out with something on June 18th/19 that I had mentioned months ago – the central banks of both China and Russia are both buying gold. What Nikkei did not mention is that many of their state-associated agencies, through cut-outs of course, are also buying gold, and have been doing so for a long time, with the result that the market has finally woken up to the fact that there is no ‘freely available’ gold in the market, so prices have been rising accordingly. Gold is now at a 6-year high and is expected to keep going. And you can take that nugget for what it’s worth!   Just saying!

 

As problems mount everywhere, there seems to be more and more knee-jerk reactions….ie. the jerks are jerking us around. When China took over the Baoshang Bank of Inner Mongolia, it took them about 3 days to disseminate this news in China and then only because people outside were telling people inside until finally the story could not be ‘ignored’ (sic). That is not healthy and it is no way to run an economy. Yes, certain Party apparatchniks squandered the people’s money and did not fulfill their fiduciary duties to the people or the state, but ignoring it as if the transgressions never happened is not the responsible answer. As another interesting vignette into the apparatchnik mindset in China, The Financial Times reported on June 19th/19 that “government officials” in the Civil Affairs Bureau of Hainan have demanded that the Vienna International hotel chain “rectify” its name because of it’s being suggestive of the ‘worship of foreign things’. The Vienna Hotel chain has 100’s of outlets in China and they are majority owned by the Jinjiang Group, which is a State-Owned Enterprise (just FYI, it also owns a majority stake in Radisson Hospitality). And Jinjiang of course registered a formal objection. Sounds like the right hand and the right hand’s fingers are independently lodged where the sun don’t shine…Just Saying!

 

On June 20th/19, The Financial Times expressed an opinion that “US companies should fear China’s consumers more than its government” – I think that this comment is misplaced, at least at this point in time. China’s consumers should be divided into 2 groups – those who can afford to buy US-derived (whether of foreign or China-based manufacture) products and those that cannot. The latter are in lower income groups which, for the most part, are in very rural areas of the country. While those areas are rapidly getting more sophisticated in their shopping tastes as availability increases thanks to Alibaba, JD.com etc., it’s still not ‘there’ yet. It is all too easy for the foreign observer to point to the issues that afflicted Lotte Department Stores and D&G but the former was a government squeeze play on a number of levels (just as an example, all Lotte stores in the country numbered close to 100 – on the same day, they were all found to be in violation of the fire code – in every city in every province, on the same day!) and the latter was a self-inflicted shot between the eyes by an apparently arrogant and prejudiced co-owner. The average Chinese consumer who can afford the better designed and higher quality products offered by US know-how is, in addition to having more disposable income, better-educated and less inclined to buy into an anti-US program, at least at this time. There is not the deep-seated feeling that there is still against Japan but there is a deep seated feeling that Chinese manufacturers deliberately make products that don’t work as they should (eg: melamine in milk, defective vaccines that kill children, tires that split, building products with formaldehyde). In the end, the consumer wants value for his/her money and safety for his/her family and any attempt to involve that in what is being increasingly viewed as a government battle (the same government that didn’t really prosecute anyone to any great degree for the milk scandal, or most of the pharmaceutical scandals, or for the failure of the train switches) with another government is not going to sell well. Just saying!

 

So Donald walked back his threats against Huawei and his threats of immediate extra tariffs and is even considering letting Erdogan off the hook for buying a Russian missile system. So now he’s left making threats and (some) actions against Iran – but words, for DT at least, are meaningless and, as Bloomberg reported on June 19th/19, China is still buying Iranian LPG on an ongoing basis.

 

Just to highlight what I said before about the Chinese Government seeking to control the narrative irrespective of the facts – in April 2019, the IMF raised their projection of the growth in the Chinese economy to 6.3% from 6.2% the month before …the next month  ie. in May, they reverted back to 6.2%. And that was before all this bad news surfaced – bank takeover, declining foreign reserves, company closures, supply chains leaving China permanently etc. – but, on June 24th/19, Global Times (a Chinese Government mouthpiece) reported that, “economists at the Institute for China’s Economic Practice and Thinking at Tsinghua University issued a report…..predicting the economy will stabilize and grow by 6.3 percent this year, meeting the Chinese government’s target of between 6 and 6.5 percent announced in March”. No information was offered as to the availability of the work sheets or how the calculations were derived – enough said. Just saying!

 

Have a great week.

 

Comments?

 

[email protected]

About the Author
Bennett

Bennett

Bennett Little is one of our experts in the Global From Asia VIP network. Get to know more about him here.

Leave a Reply

avatar
  Subscribe  
Notify of