TWS: Dec. 14, 2020

Graph of the Week | Trade

Hot Exports in a Chilly November

Back in April, we boldly declared that China may be the ‘last viable trade partner standing’ after the pandemic took its toll. While steady export growth has been commonplace for China this year, November numbers may have finally confirmed our outlook.

According to the latest data, Chinese traders shipped an all-time high US$268 billion of goods in November – clocking in 21% higher than the same time last year. And, due to slowing imports from countries across the globe, China is basking in its largest trade surplus since 1990 at US$75.4 billion.

Why the sudden uptick in November? In the run-up to the holiday season, foreign importers worried about a seasonal lockdown due to key US holidays, resulting in a spike of urgent orders to Chinese factories for general consumer products like electronics – a sector that saw exports rise by 25% year-over-year last month.

Bottom line: At the end of the day, the virus remains the primary driver behind China’s export success. While general exports have performed well, medical supply exports continue to shine above all else, rocketing up 42.5% year-over-year. As Western economies continue to grapple with the pandemic, China’s PPE distributors, mask makers, and medical device producers will continue to rake in more Benjamins.

Business | Industry

Faux Meat Goes Above and BEYOND in China

The world’s largest market for pork may be forking in a fresh new direction as Beyond Meat brings its unique plant-based pork alternative to China.

With the highest pork consumption rates around the globe, the average Chinese foodie chows down on about 30kg of pork a year – 4kg more than the average American. What’s more, China and its hunger for pork is only expected to continue to grow after leading the world in both pork imports AND production in 2019.

However, alternative meats have had to fight over table scraps in the Chinese market. The country has seen a slop of meat alternatives over the years, though industry growth has remained tepid at a meager 33.5% since 2014. Regardless, Beyond Meat is throwing its hat into the ring, as its pork-less pork release follows the company’s June debut of a meatless burger restaurant and July opening of a Beyond Meat grocery store in Shanghai.

Bottom line: Cuisine is deeply entrenched in Chinese culture and palates will not be easily changed. Still, the realities of widespread pork shortages due to natural disasters, contamination, and the trade war are hogging the conversation in China, and this faux pork puts a new option on the table for those adventurous enough to try it.


Chinese Theaters Top the Charts in 2020

Grab your popcorn and watch as China’s movie ticket sales surpass North America’s in 2020, overtaking it as the victor in the “War of the Worlds – Box Office Edition.”

Between ticket sales, theater capacity—even the number of domestically produced films—China’s cinema industry is seeing all-time highs. With the nation’s early recovery, Chinese theaters are reeling in movie-goers at ~75% capacity, whereas North American counterparts are still stuck between 20-50% capacity, if at all.

But let’s not get too starstruck. Even before the pandemic threw a wrench in box office results, the script had shown that China would dethrone North America as the largest market. While an expanding middle class had grown demand for entertainment, Chinese film producers’ significant investment in Hollywood had revealed Beijing’s push to become a global film power by 2030.

Bottom line: While China’s growth was inevitable, a speedy recovery from the pandemic rolled out the red carpet for domestic cinema sales to rebound sharply. With muted Western sales and Chinese viewers driving a larger portion of Hollywood’s revenues, Beijing’s censors are sitting in the director’s seat as the producers of the blockbuster films adopt a more nuanced approach to their portrayals of China.

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Finance | Markets

Say Buh-Bye to Bullion for Now, Beyoncé

To all the single ladies in China, have patience. He may not be able to put a ring on it…at least for now. Chinese banks have temporarily closed the bedazzled floodgates and suspended trading for gold, silver, and other precious metals.

The metals, commonly known as safe-haven assets, are typically expected to maintain or increase in value during times of market volatility. It’s no wonder, then, that investors were fair-weather friends to gold’s shiny shores over the summer, driving prices to near record highs in July. Now, excitement over US elections and the COVID vaccine are once again creating choppy waters for bullion.

Unlike in US markets, Chinese regulators are allowed shut the valve on trading during periods of higher risk to protect investors from heavy losses. With gold prices beginning to bob more than a ship on stormy seas, regulators are stepping in for some quick damage control.

Bottom line: Damming the free flow of cash into specific areas is a glaring reminder that Beijing is still an ocean away from embracing free markets. Harkening back to TCG’s assessment of China’s impossible trinity, Beijing’s heavy-handed capital controls ultimately serve to distort prices and ironically make markets riskier for investors over time.

Business | Industry

Out for Trout and Selfish Over Shellfish

Swimming alongside China’s rapid urbanization and expanding middle class is a growing hunger for creatures from the deep. From crayfish to squid, Chinese consumers are increasingly taking the bait for imported, wild caught seafood.

At the current pace, it’s expected that demand will exceed supply in 2030. To fill the appetite, China’s seafood industry is going through a sea of change. Domestic saltwater fisheries are exploding in scale while suppliers look to distant waters as boats fish further from home and orders for seafood imports overflow.

The pandemic and China’s crackdown on contaminated frozen foods have also thrown the seafood industry into the deep end. One of mankind’s oldest professions is quickly meeting the 21st century as e-commerce builds a bridge between vendors and customers across China, offering online streaming for fishermen to hawk their wares while promising 24-hour delivery to over 100 cities.

Bottom line: The pandemic has given us a glimpse of a future in which Chinese demand can no longer be reeled in. Expect an ocean of geopolitical conflict, with governments floundering as fishers infringe upon sovereign borders, threaten populations through overfishing, and partake in other fishy practices – all in pursuit of RMB.

Policy | Trade

Hainan, an Island Paradise for Foreign Trade and Investment

As Hong Kong’s economy continues to decline, retail, tourism, and foreign investment dollars have assumed a newfound importance to the Chinese economy. An up-and-comer is rising from the shadows to challenge Hong Kong’s regional stature in the form of an island paradise. The newly designated free trade port of Hainan and Beijing’s aptly named Master Plan strive to usher in a new center for global trade and investment for the island-province.

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