Xi´s new regulations from educational reform to hi-tech monopolies- preparations for the Sino-American „protracted war“

Xi´s new regulations from educational reform to hi-tech monopolies- preparations for the Sino-American „protracted war“

Today I spoke to a German stock exchange trader to whom I sent the educational reform article. He said many strange regulations were being passed in China at the moment, including the hi-tech industry and other corporations. He mentioned the case of Ever Grande and Ant, but also others as well as now The Japan Times had an article headline today that Xi had passed new regulations for large and hi-tech companies and monopolies as well as new environmental protection requirements, the scope of which was not yet foreseeable. The German stock market trader thinks that the CCP does this because she wants  avoiding bad loans from Ever Grande or the fear of too much foreign stock exchange listing, which can be explained by capital exports, capital flight, fear of foreign influence and the diminishing role of the state, but this drastic approach was rather counterproductive for China, since these are systemically important companies, half of which could become bankrupt and make losses which could not be in the interest of the Chinese state and its party, and these measures were declared loudly and proudly and were shaking the stock markets. Perhaps the CCP also wants to show that it is the master of the state, willing to make losses if it serves itself, he said also that the prohibiion of the private tutorials is probably because they do not want private schools with their own non-state ideas, but maybe a motive of the CCP is an increasingly egalitarian ideology, in addition to the apparently increasing insight, that the private schools not only produce technical idiots, have an impact on the mental and physical health of the students, but also increase social inequality and are an obstacle to development.

With the stricter regulations , the CCP is mobilizing ideologically. After the Xi Jingping thoughts became fundamental part of the party and the state constitution, they are also taught now as part of the educational reform from elementary school onwards. As The Economist reports the CCP is founding now Xi thought research centers all over in China:

“Research centres promoting Xi Jinping’s ideas are proliferating

When will his philosophy get a snappier official name?

China´s President, Xi Jinping, is hardly ever grilled in public about what he thinks. The few interviews he has given have been highly staged. But his propagandists have been building a network of institutes devoted to studying his thoughts. In June one was established to research “Xi Jinping thought on the rule of law”. The following month, two others were founded to analyse, respectively, his pronouncements on economics and green development. It is the biggest mobilisation of academic effort to parse the speeches of a serving leader since the era of Mao Zedong.

China now has 18 Xi-thought research centres. Many of them focus on a particular topic such as politics, culture, science, education, religion, diplomacy or national security. Mr Xi’s ideas about these matters make up what is officially known as “Xi Jinping Thought on Socialism with Chinese Characteristics for the New Era”.”


However it is interesting that the Japan Times has three articles about the new Chinese regulations amid the escalaing Sino-American conflicht. One article to what extent the new Xi regulations on Chinese monolpolies will be broadened, one article asks if Wall Street could loose its function due to the SinoAmerican economic war and a third article asks whter US ally Japan could become the economic hub for Russia and China to neutralize the US sanctions against China. Here the three articles:

“Xi approves action on everything from monopolies to pollution

Chinese President Xi Jinping chaired a high-level meeting that “reviewed and approved” measures to fight monopolies, battle pollution and shore up strategic reserves, all areas that are crucial to his government’s push to improve the quality of life for the nation’s 1.4 billion people.

Few details were released about the guidelines discussed on Monday at the meeting of the central committee for deepening overall reform, which includes some of China’s most powerful leaders and has wide powers to shape government policy. Xi in particular stressed the importance of strengthening anti-monopoly regulations, a push that has already cost tech giants hundreds of billions of dollars in market value over the past year.

Putting those regulations into practice was “an intrinsic requirement for improving the socialist market economic system,” the official Xinhua News Agency reported, citing Xi. The changes would create a level playing field for businesses, benefit consumers and promote “high-quality development and common prosperity,” Xinhua added, citing a broader drive by the Xi administration to narrow China’s wealth gap.

The meeting emphasized the need for policy measures to serve the interests of the Communist Party, while paying heed to domestic and international markets. Leaders also said policies should be “more transparent and predictable,” Xinhua said. The meeting explicitly called for officials to “guide and urge companies to obey the leadership of party.”

Chinese authorities have taken aim at some of the nation’s largest tech companies, including Alibaba Group Holding Ltd., signaling unease with their rapid growth and influence. Meituan, China’s largest food delivery platform, said Monday it could face significant fines amid an anti-trust probe into its operations.

Here are some of the other key points from the meeting that was also attended by Premier Li Keqiang and fellow members of the ruling party’s Politburo Standing Committee, Wang Huning and Han Zheng:

  • Optimize management of strategic and emergency response supplies to guard against major risks Prevent and rein in abuses of administrative power in restricting competition
  • Bolster the anti-monopoly supervision force Strengthen law enforcement in areas including the platform economy, technological innovation and information security
  • Strictly control projects that consume large amounts of energy and that are big polluters Take steps to enforce a total ban on imported garbage
  • Ensure data accuracy to assess China’s major development strategies


“Why the U.S.-China conflict is threatening the future of Wall Street

the U.S. presidential campaign last year, Jake Sullivan, who is now national security adviser to President Joe Biden, criticized the administration of then-President Donald Trump for having prioritized policies beneficial to Wall Street.

“Why, for example, should it be a U.S. negotiating priority to open China’s financial system for Goldman Sachs?” he asked.

Similar sentiments were expressed by Biden himself. In his address to a joint session of Congress in April, he received a round of applause when he said, “Wall Street didn’t build this country. The middle class built this country.”

Trump had former executives of Goldman Sachs Group Inc. in his administration, including Gary Cohn, who served as head of the National Economic Council, and Treasury Secretary Steven Mnuchin.

Mnuchin was the Trump administration’s top negotiator in the U.S.-China trade talks along with U.S. Trade Representative Robert Lighthizer.

In a “phase one” trade agreement signed by the two nations at the beginning of 2020, China agreed to loosen restrictions on foreign financial services companies, eliminating foreign equity limits in the country’s financial services sector, among other measures.

The Trump administration was also focusing on the working class, as getting support in the industrial Rust Belt regions is indispensable in winning the presidential election.

Both the Democrats and the Republicans attach importance to workers in the manufacturing industry, but the Biden administration has leaned even more in their direction.

There are some former executives of asset management firm BlackRock Inc. in the Biden administration, such as Brian Deese, head of the National Economic Council, and Deputy Treasury Secretary Wally Adeyemo, but few former executives of investment banks like Goldman Sachs.

Gary Gensler, chair of the U.S. Securities and Exchange Commission (SEC), is a former Goldman Sachs executive, but he is known for his harsh stance against Wall Street as chair of the Commodity Futures Trading Commission (CFTC) in former President Barack Obama’s administration.

Insufficient inspections

The general public in the United States casts a stern eye on Wall Street, where wealth is concentrated as a result of globalization.

The challenges faced by Wall Street amid rising U.S.-China tensions can be discussed from two perspectives: the U.S. financial market and the financial markets in Hong Kong and mainland China.

Chinese firms’ initial public offerings in the U.S. market are an attractive business for U.S. investment banks.

As many as 34 Chinese companies filed an IPO in New York in the first half of this year, raising a total of $12.4 billion, leading to commission income of $460 million.

But there have been concerns that inspections of Chinese firms are insufficient.

The Public Company Accounting Oversight Board (PCAOB) has the authority to inspect auditors of firms listed in the U.S., but Chinese accounting firms have rejected the board’s inspections, citing Chinese laws that treat such corporate information as state secrets.

While there were criticisms over their treatment, they continued to be exempted from the rules backed by Wall Street which saw great business opportunities in IPOs of Chinese firms.

However, it was revealed in April last year that Chinese coffee chain Luckin Coffee Inc., which was listed on the Nasdaq, fabricated its sales.

The incident, along with the deepening confrontation between the two nations, led the U.S. to sign into law the Holding Foreign Companies Accountable Act in December, banning transactions of the securities of a company listed in the U.S. if the firm can’t prove it is not under the control of a foreign government and if the PCAOB cannot inspect its audit papers for three consecutive years.

Also in November, Trump signed an executive order barring U.S. investors from buying exposure to firms thought to be linked to the Chinese People’s Liberation Army (PLA). The Biden administration has basically maintained the same stance.

Entities identified by the U.S. as being linked to China’s military include major firms such as Huawei Technologies Co., China Mobile Ltd., China Telecommunications Corp. and China United Network Communications Group Co. (China Unicom).

Cybersecurity probes

The U.S. moves are based on the belief that all the companies listed in the U.S. must follow the country’s rules and that local markets should not help provide funds for the strengthening of the PLA, which would be detrimental to the U.S.

Meanwhile, Beijing is also becoming nervous about Chinese firms listing in the U.S.

China’s largest ride-hailing app operator, Didi Global Inc., went public on the New York Stock Exchange on June 30. Two days later, the Cyberspace Administration of China announced that it would launch an investigation into the firm.

And on July 4, the CAC ordered China’s app stores to remove Didi’s app, citing serious violations on its collection and usage of customer information.

U.S. investors who suffered losses due to a plunge in Didi shares filed class action lawsuits against the firm, claiming that Didi’s disclosure of risk information was insufficient.

Chinese authorities also opened cybersecurity probes into other firms, including subsidiaries of New York-listed truck-hailing app operator Full Truck Alliance.

On July 30, the Chinese Communist Party’s politburo decided in its midyear meeting to tighten oversight of overseas share listings by Chinese firms in order to prevent an outflow of data to other countries such as the U.S.

When going public in the U.S, Chinese firms often use a scheme known as a Variable Interest Entity (VIE) to get around China’s foreign ownership restrictions.

Under the scheme, a Chinese firm sets up a shell company in a tax haven, such as the Cayman Islands, and establishes a relationship in which the VIE receives a contractual right to the Chinese company’s profits.

That shell company then issues in the U.S. market an American depositary receipt — a way for U.S. investors to purchase stocks in overseas companies.

The scheme, which has existed for decades, might come into Chinese regulators’ crosshairs in the future — and if that happens, the impact will be huge.

Wary of such a possibility, SEC head Gensler issued a statement on July 30, referring to recent developments in China to strengthen restrictions on firms raising capital offshore, and called on offshore issuers associated with Chinese companies to prominently and clearly disclose the overall risks, including those related to the VIE structure.

Human rights

U.S. financial institutions are eager to expand business in the Chinese market with its high savings rate and large population of wealthy people.

In May, Goldman Sachs received approval in China to set up a wealth management venture with Industrial and Commercial Bank of China (ICBC), as did BlackRock with a unit of China Construction Bank Corp.

And in August, JP Morgan Chase & Co. was granted permission to take full control of a securities business in China — a first for an international firm.

Morgan Stanley saw assets in its Hong Kong unit surge 70% in the last year and Citigroup has announced plans to hire up to 1,700 people in Hong Kong this year.

However, China’s National Security Law passed in Hong Kong in June last year has led to a denial of Hong Kong’s autonomy and to a wide range of human rights violations.

The U.S. government issued an advisory this July to warn U.S. businesses about risks to their operations and activities in Hong Kong.

“Businesses operating in Hong Kong may face heightened risks and uncertainty related to PRC (People’s Republic of China) retaliation against companies that comply with sanctions imposed by the United States and other countries,” the advisory said.

“A failure to comply with U.S. sanctions can result in civil and criminal penalties under U.S. law,” it added.

In July last year, the Hong Kong Autonomy Act was signed into law in the U.S., authorizing sanctions on foreign financial institutions that conduct significant transactions with foreign people involved in undermining Hong Kong’s autonomy.

U.S. authorities are said to be cautious about imposing full-scale sanctions on major Chinese banks, as such moves can have wide-ranging consequences for international financial markets.

But the Biden administration has pledged to put human rights at the center of its foreign policy, while in June China passed the Anti-Foreign Sanctions Law aimed at retaliating against sanctions imposed by foreign governments.

Such a series of actions could lead to an escalation of U.S.-China confrontation.

Where Japan stands

Trump used to think of the U.S.-China confrontation as an issue of U.S. goods trade deficits with China.

But the confrontation is not only about goods. Nor is it something that can be described only by trade balance.

It involves a wide range of issues, including services, technology, people’s movements and values, as well as the financial market.

Wall Street — the financial market — influences Main Street, the real economy.

If the flow of funds from China to the U.S. stops, it will become one of the factors to push up U.S. interest rates.

Delisting Chinese firms from the U.S. market may become a cause of lower returns on pension funds.

Attempts to crack down on Chinese interests on Wall Street could have an adverse effect on workers in the United States’ manufacturing industry.

Japan is not unrelated to this issue.

The fall of Didi’s shares — one of the factors that pushed down prices of other Chinese shares — has also impacted its largest investor, SoftBank Group Corp.

In January, U.S. Customs and Border Protection blocked imports of Uniqlo cotton shirts for possible violation of a U.S. ban related to forced labor in China’s Xinjiang autonomous region.

Japanese businesses and financial institutions are feeling the risks of being caught in between the U.S. and China.


“Will Japan become a hub for Russia and China to evade sanctions?

A desire for strategic relationships while retaining neutrality may backfire on Tokyo


However, it makes clear what the consequences of the Sino-American conflict could be and especially as Xi already said that China has to prepare for a “protracted war” against the USA at all fronts. German sinologist and president of the Max Weber Foundation, Professor van Ess comments Xi´s new regulations as follows:

„China wants to show that it is capable of acting and that the large corporations are also committed. The gateway for American propaganda is so frightening that Xi seems ready to let his own economy jump over the edge. Apparently they no longer want to rely on legitimation through economic success alone. But can ideology really replace that? And on the US side, exactly the same problem, as the Japan Times quite rightly writes. This struggle can have ruinous consequences. If Europeans were smart, they could probably benefit from this. But they are not. That’s probably already priced in. The signs point to differentiation.“

However, parts of the Anglosaxon elite think that China´s rise won´t be that automatically and that the USA will be strengthened after it freed itself from the chains of the never-ending wars like Afghanistan as a piece by Minxin Pei in The Economist documents:

The future of American power
Minxin Pei on why China will not surpass the United States

China will continue its rapid growth for a time, but it faces big obstacles—not least its ageing population and the stifling rule of the current regime”


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