Blinken in Shanghai; Putin to the PRC; TikTok; Huawei; New report on the Wuxi Group
Summary of today’s Essential Eight:
1. Xi visits the Army Medical University - Xi’s inspection tours usually include a meeting with local PLA officers, and his visit to Chongqing was no different. He inspected the Army Medical University.
2. Putin confirms May trip to the PRC - Vladimir Putin has said he will travel to China in May. The PRC side has not confirmed the trip but expect it to be after Xi has returned from his European tour.
3. Blinken in the PRC - From the public readouts at least US Secretary of State Blinken’s first full day in the PRC seemed a bit boring. His more important meetings are Friday. I will be surprised if Blinken does not get at least a short meeting with Xi Jinping this trip, like he did last June. It would be a significant snub and signal if Xi blows him off.
4. More on EU-PRC tensions - It feels as if something has snapped in parts og the EU, between the spy arrests, the Nuctech raids, the medical devices probe, growing concerns about the PRC exporting overcapacity, the increasingly likely imposition of tariffs on PRC auto imports, and especially the PRC’s support for Russia in its war on Ukraine. German Chancellor Scholz’s visit came and went without any signs of progress, Xi will see Macron soon in France, but then go to Serbia, likely on the May 7th 25th anniversary of the NATO bombing of the PRC embassy in Belgrade, and the Putin goes to the PRC.
5. TikTok - Early Thursday The Information reported that ByteDance had started exploring scenarios for selling TikTok with the algorithm. ByteDance issued a statement saying that “media reports about ByteDance exploring the sale of TikTok were false. ByteDance has no plans to sell TikTok”. Later in the day Reuters reported that “ByteDance would prefer shutting down its loss-making app rather than sell it if the Chinese company exhausts all legal options to fight legislation…The algorithms TikTok relies on for its operations are deemed core to ByteDance overall operations, which would make a sale of the app with algorithms highly unlikely”.
Uncertainty can destroy a business, especially when your employees, key users like your creators, and advertisers all have no idea if you will even be in business in a year. Of course the TikTok CEO is doing his best to project confidence externally and internally, but I think ByteDance must be very worried that as this process plays out the US business will deteriorate as employees look for new jobs and key users hedge to similar platforms like Instagram and Youtube Shorts and advertisers, as they start working on 2025 budgets later in the year, can not commit money for next year since TikTok may not be around. And it will be really hard for ByteDance to IPO until this uncertainty is resolved, as the likelihood of material damage to the US business increases the longer this process drags out.
6. Growing US concerns about Huawei’s success - The US government appears to have realized that Huawei is making real progress in recovering from US sanctions against the company, and so is now considering more actions, though so far key allies have not been willing to join in new efforts. How many fabs has Huawei built and fully equipped, with a lot of US equipment, since the original October 7 export controls? How did SMIC make the chip for Huawei’s Mate 60 Pro?
7. New report on the WuXi Group - James Mulvenon is out with a very interesting new report titled “The Wuxi Group: The National Security Risks Associated With Its Government and Military Connections, Data Privacy Issues, and Corporate Reach [PDF]”. Policymakers may find it interesting, shareholders and management may hate it.
8. HeyTea’s origin story - This is a fun read by someone who used to frequent the original HeyTea shop in Jiangmen, Guangdong years ago, and now it is a juggernaut with stores globally.
The Politburo should hold its monthly meeting in the next few days. The April one usually discusses the economy, so we will be all be looking for any signs of policy shifts. I do think there will be any significant shifts, or any mention of the Third Plenum, which I believe will be held well into the second half of 2024. Last year's April Politburo meeting was on the 28th, in 2022 it was on the 29th, and in 2021 it was on the 30th.