TWS: Feb. 22, 2021

Graph of the Week | Economics

Pearl of the Orient Sinks to New Depths

While many Chinese workers in the Mainland have resumed working, swathes of jobless Hong Kongers continue to find their applications left on read. By the end of 2020, the Mainland economy had logged a full economic recovery and then some; the “Pearl of the Orient,” however, has faced a tougher macroeconomic landscape.

By mid-February 2021, Hong Kong had experienced four major spikes in coronavirus cases. The upswings have translated into fluctuating restrictions on domestic business operations, muted consumer activity, and extended border closures.

Despite multiple rounds of economic stimulus, including a government handout of HK$10,000 (~US$1,300) to permanent residents, an economic rebound remains out of sight. As of January 2021, unemployment rates had crept past 7%, the highest level since 2004, and, for 2020 as a whole, GDP had shrunk by 6.1%.

Bottom line: While economic woes continue to broil in HK, there is cause for optimism on the horizon. Vaccinations are slated to begin later this month and the government is considering renewing the now expired Employment Support Scheme, an HKD$81 billion (~US$10.5 billion) program that provides a financial lifeline for employers to retain staff.


Economics | Markets

Porking Up the Economy

In the country that consumes nearly 50% of the world’s pork, it’s not simply good enough for little piggies to go to the market – they need one of their very own. Traders are squealing over new contracts that allow them to buy and sell hogs—16 metric tons at a time—on China’s commodities exchange.

It’s no secret that China goes ham for ham. In 2020, the Chinese pork market swelled to ~US$310 billion. The craving to pig out over pork has led to a hard-to-swallow truth, though: pork prices are the largest single contributor to China’s consumer price index.

So, when prices are stable, life is good. But, ever since an on-again, off-again dance with African swine flu rocked China’s pig farms in 2018, wild price swings have porked up officials’ ability to control inflation. In 2020, pork prices rose to a record high, only to plummet 13% y/y in November and send inflation down for the first time in over a decade.

Bottom line: Futures contracts allow traders to lock in prices for a commodity—in this case hogs—in advance, which helps to minimize the impact of price swings and makes markets more efficient. China’s new hog futures should help put a pen around volatility in one of its most important markets while lending more predictability to the economy.


Technology

No More Taboo Talk for Average Zhous

It’s “Closing Time” for yet another social media platform in China. Officials just added Clubhouse to the list of blocked apps in the Mainland, turning off the lights on the popular app that’s taken the world by storm.

The exclusive invitation-only social network found a new beginning in China after gaining tremendous popularity in the US recently. After its meteoric rise in the app store, Clubhouse has now climbed its way past a US$1 billion valuation.

The real star of the show, though, was the rare uncensored conversation between users from the Mainland, Hong Kong, Taiwan, and even Uyghur exiles from the northwestern region of Xinjiang. Unbridled from the limitations of the Great Firewall, some of the hottest chatrooms were those that discussed topics deemed taboo in the Mainland, including Xinjiang, the Tiananmen Square Massacre, and cross-strait relations.

Bottom line: Given the prerequisites to accessing the app, the average Chinese user on Clubhouse was, in reality, anything but average. Still, it was encouraging to hear the earnest dialogue taking place between (relatively) average Zhous from four increasingly estranged populations. While it may be closing time for Clubhouse in China, who knows what new beginnings may come from its end.


Join the Guys and Gals at TCG

Want to Join The Crew?

We’re always on the lookout for fellow China Watchers and budding business leaders passionate about their area of expertise. We have positions that span research, operations, marketing – and everything in between. If you’re eager to take that next step in bridging the East and the West, you might just be the person we’ve been looking for. Continue on to learn about our current openings.

Apply Here


Business | Industry

Profiting off Polluters

Pretty soon, it’ll pay to play cleanly in China. The world’s biggest polluter has released rules for its long-awaited emissions trading scheme, an initiative meant to cut carbon emissions.

If ETS sounds familiar, that’s because it’s been around since 2017. After a nearly 4-year delay and as global momentum for addressing the climate crisis builds, China is getting seriously serious about cleaning up its act.

The ETS won’t immediately clear China’s smoggy skies, but starting in mid-2021, over two thousand power operators that account for 14% of the world’s carbon dioxide output will be allocated pollution “credits” for the year. Polluters will then be encouraged to go green, as energy savers that emit less than their allowance can sell their extra credits to dirtier players.

Bottom line: China satisfies ~25% of its energy needs with petroleum and natural gas, much of which is transported through shipping lanes controlled by the US Navy. By tapping market-based incentives to curb emissions and naturally reduce reliance on foreign imports, Beijing is taking the first step on a long journey to address a looming threat to national security vis-à-vis energy security.


Industry | Technology

China’s Tech Giants Take to the Ring

The championship belt is up for grabs as the gloves come off between two of China’s top tech giants. The popular short video app Douyin is suing rival Tencent in a Beijing court for alleged monopolistic behavior.

Douyin, the Chinese version of TikTok, is hoping to deliver a knockout punch by accusing Tencent of “abusing its market dominance.” Tencent owns the popular instant messaging apps, WeChat and QQ, and according to Douyin, has restricted the platforms’ combined 1.9 billion monthly active users from sharing Douyin links.

For the bruises it sustained to its bottom line, Douyin is seeking US$14 million in compensation from the reigning Shenzhen-based heavyweight. The final bell hasn’t rung yet, though, with Tencent taking the brawl up a notch by threatening to counter sue Douyin for illegally acquiring user information and harming consumer rights.

Bottom line: Douyin’s lawsuit is just the latest development between the two companies after their slugfest erupted in 2018. Opening a new bout are China’s newly drafted anti-monopoly laws, which are likely to start a fresh round for the two companies to throw hooks at each other – particularly as Douyin expands into gaming and other areas traditionally dominated by Tencent.


Business | Industry

Wuhan’s Recovery: From Epicenter to Economic Center in 365 Days

As the early epicenter of the pandemic, 2020 brought Wuhan countless challenges. One year later, the city is cautiously optimistic about its recovery. Despite COVID’s lingering impression on local consumer habits—particularly in the service industry—Wuhan’s slow but steady re-emergence as the tremendous industrial hub it once was serves as an excellent model for cities across the globe.

Full Article

Further Reading

China Business Newsletter

TWS: July 26, 2021

China Business Newsletter

TWS: July 19, 2021

China Business Newsletter

TWS: July 12, 2021

Scroll to Top
Teacup_250x233

The Weekly Steep

Arm yourself with bite-sized insights to stay in the know on all China business news. Leave your translator at home – our free weekly newsletter will keep you current on local news updates and top industry developments in the time it takes to drink a cup of tea!