Summary of today’s Essential Eight:
Biden-Xi meeting - The Xi-Biden was constructive, and it is better they met than did not, but based on conversations in the last day I would caution about getting overly optimistic about yesterday's Biden-Xi meeting. Yes, it is another possible start towards putting a floor under the relationship, but nothing substantive or structural has changed yet, and this language in the US readout Monday - “They welcomed ongoing efforts to address specific issues in U.S.-China bilateral relations, and encouraged further progress in these existing mechanisms, including through joint working groups” - is not about new working groups but rather existing ones run out of the US embassy in the PRC to handle more day to day, not high-level strategic issues. In the wake of the Pelosi visit to Taiwan the PRC had mostly stopped engaging in them, the hope now is at least those will restart. But nothing has changed over Taiwan, a GOP Speaker McCarthy may visit the island as promised, Congress may authorize a lot more military sales to Taiwan, the Biden Administration continues to work on outbound investment rules, the semiconductor controls are likely not the last of tech-related restrictions…
Covid - Cases continue to increase but still no new deaths have been reported. Just a few weeks ago the local officials would have locked down much or all of several major cities that had new case numbers been this high. Now they are running a real time optimization experiment on how high new cases can go without getting out of control. The next week or so is a key period; if they can resist broader lockdowns in some of these cities, and especially Beijing, then the top leadership really has changed the approach to managing Covid in a material way, even if they still call it "Dynamic zero-Covid". As I suggested in the Monday newsletter, the Tuesday People's Daily published the third in the People’s Daily “Zhong Yin 仲 音” commentary series on the Covid messaging from the circular on optimizing the Covid response last week, on “坚定不移贯彻“动态清零”总方针 tenaciously pursue the general policy of "dynamic zero-COVID".
Xi at the G-20 - Xi’s speech at the G-20 criticized the US without mentioning it by name and again offered an alternative view for global governance, heavy on “community with a shared future for mankind”, Global Development Initiative and Global Security Initiative. He also reiterated the “principle of indivisible security”.
PRC stance on Ukraine - China sided with Russia to oppose calling Russia-Ukraine war a “war” at the G-20, and voted against a UN draft resolution on Ukraine-related compensation.
Weak economic data - Retail sales growth fell year over year for October. Consumer confidence will not improve until people can get back to near normal lives without fear of Covid or capricious Covid restrictions.
US Congress has a say in US-China relations too - The US-China Economic and Security Review Commission annual report recommends a series of steps and measures that could lead to a suspension of normal trade relations with the PRC and would direct the US government to start more systematic planning for some kind of conflict with the PRC. Congress does not have to act on these recommendations, but they fit the general mood on Capitol Hill.
Caixin on the downfall of CMB’s Tian Huiyu - Caixin says it is related to a side pocket investment Tian made when he also led the China Merchants Bank’s investments in battery giant CATL. Other bank investment execs may be nervous, as this kind of behavior was not uncommon in the previous era.