Cases and lockdowns; Birth rate; US-China meetings; More regulatory pressure for tech firms; Apple Daily

Summary of today’s Essential Eight:

1. Covid - Lockdowns by another name continue in parts of several cities as daily cases are approaching the level of the Shanghai disaster earlier this year. Right now it feels like we are seeing a repeat of Shanghai in late March, when local officials tried targeted and precise measures, before realizing that Omicron overwhelms all those efforts, leaving officials with the choice between letting it start to rip or instituting suffocating lockdowns. Near term I think they will have to choose the latter as they are not where they need to be with vaccinations and hospital capacity. But even then they have a massive problem with virgin immunity, so until they are willing to tolerate larger numbers of serious illness and death, or have better therapeutics, I do not think there is a specific end date. I know it is popular now to say March, pegged to the "two meetings", but I am not sure why that is really an end date. They really seem stuck.

2. Record low birth rate in 2021 - The demographic trends are really bad and so far none of the policies the government has tried to spur more births have worked. And it is hard to imagine people are willing to have more kids this year given the collapse in consumer confidence.

3. US-China - The US Secretary of Defense met with the PRC Secretary of Defense, in another sign of some sort of a thaw. It is interesting how the PRC side is re-engaging after cutting off engagements in the wake of the Pelosi visit to Taiwan. I do not believe the US side "conceded" anything since then to bring the PRC side back to some dialogues, if anything the US has kept up the pressure with moves like the semiconductor-related controls.

4. EU-China - The South China Morning Post reports that the EU is set to extend the sanctions it placed on four PRC individuals and one entity in 2020.

5. More regulatory pressure for tech firms - The State Administration of Market Regulation (SAMR) has issued a draft revision of the Anti-Unfair Competition Law that would expand activities by Internet platforms that could fall afoul of the SAMR and trigger large fines. Perhaps the worst of the regulatory storm has passed but the regulatory environment has fundamentally shifted against the big Internet platforms, and the more that shift is codified the less likely it will ever loosen.

6. Regulators soon to let Ant crawl out of its hole? - Reuters reports that Ant Group may be fined more than $1 Billion by Q2 of 2023. If the report is correct then it sounds like in the best case Ant would get its needed financial holding company license in late Q2/early Q3, and then perhaps if things go really well an IPO in Q4 2023, though that may be ambitious.

7. Apple Daily guilty pleas - Six Apple Daily executives and journalists have pleaded guilty in Hong Kong to conspiring to collude with foreign forces, several will now testify against Jimmy Lai in a trial that starts next week. The Lai trial is going to be grim, and I can only imagine the pressure these former employees have been under to implicate their boss.

8. Tragic fire in Henan - A fire in a clothing workshop in Anyang, Henan killed at least 38. Someone was welding while cotton wool was floating around.