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Next China: The wolf warrior’s bite

Next China
Bloomberg

For those who hadn't noticed the increasingly assertive style with which China has pressed its interests around the world, this week offered a blunt introduction to wolf-warrior diplomacy.

It began with a tweet from Chinese foreign ministry spokesman Zhao Lijian, one of Beijing's more prominent wolf warrior diplomats. In his post, Zhao commented on allegations that Australian soldiers serving in Afghanistan were involved in a number of unlawful killings. He included a picture depicting an Australian soldier holding a knife to the throat of an Afghan child.

The picture would have been provocative in more amicable times. But with ties between Australia and China at the worst they've been in decades, it was explosive.

Zhao Lijian

Photographer: Greg Baker/AFP/Bloomberg

The first thing the tweet did was to push any hopes for détente further into the future. Indeed for a brief moment last week, it looked like ties might be improving. Australian Prime Minister Scott Morrison had given a speech in which he praised China for pulling millions out of poverty and Beijing had publicly acknowledged his "positive" comments.

Now those ties look more frigid than ever, especially after Morrison demanded Beijing apologize for Zhao's tweet and China's foreign ministry shot back that it should be Australia that apologies to Afghanistan.

The episode also brought on outpouring of support from Australia's traditional allies. New Zealand, which has worked hard to preserve trade ties with China, expressed its concerns about the tweet. British lawmakers condemned it. Jake Sullivan, who U.S. President-elect Joe Biden has named his National Security Adviser, tweeted that America would stand with Australia.

By defending its interests more forcefully, Beijing could in fact be helping to coalesce an alliance of countries against it, and that would be to China's disadvantage. But it's not so simple as deciding to stop.

President Xi Jinping has made one of the pillars of his administration standing "tall and firm" in the world. That has made him more popular with many in China and also meant that diplomatic concessions have become more difficult.

And so even if it's obvious that this more assertive style of diplomacy is making enemies abroad, there is an equally important factor in Beijing's thinking about how to proceed: China's wolf warrior diplomats have a budding fan club at home.

Hong Kong Spike

A recent resurgence of Covid-19 infections in Hong Kong forced it and Singapore to announce this week that they were pushing back an arrangement for quarantine-free travel between the two cities to at least next year. Hong Kong also closed night clubs, banned parties on yachts and told civil servants to work from home. The most controversial move, however, was Hong Kong's decision to close schools for a third time this year. More than a million students began taking classes virtually from home even though none of the city's virus clusters have been linked to schools and with concern growing in other parts of the world that closures will extract a major social and mental toll on children. Adding to the frustration for parents is the city's decision to allow gyms and beauty parlors to stay open.

Ant IPO

The chances that Ant Group, Jack Ma's fintech behemoth, will be able to revive its stalled IPO next year are looking increasingly slim. That's according to Chinese officials working across regulators with oversight of financial services and the securities industry. They point out that Ant won't be allowed to list until it adjusts its businesses to comply with sweeping new financial regulations in areas such as consumer lending. The problem though is that the final details of those rules have yet to be released. What's more, Ant will also need to secure a financial holding company license from the central bank and also a permit for its micro-lending business. And it will need to do these things amid a significant increase in regulatory scrutiny of the fintech industry. That's why what was once set to be a record-breaking IPO may end up getting pushed into 2022.

Worry in Macau

It's been a tough year for Macau. The city's casinos, the only ones operating legally on Chinese territory, have seen their combined revenue plunge by $27 billion so far this year as punters from the mainland have stayed away amid the pandemic. And now, there's a new issue for the gaming industry to worry about: the digital yuan. It was revealed this week that local authorities have been speaking with the casinos about rolling out China's new crypto currency for purchasing the chips gamblers use to make their wagers. The concern, of course, is that the digital yuan, which is controlled by the Chinese central bank, will introduce a level of transparency that scares off the high roller from mainland China who account for half the city's gambling revenue. That's an outcome Beijing would welcome. Policy makers have never been a fan of Macau's dependence on wealth gamblers betting big sums and would much rather the enclave became more mass market and family friendly. The digital yuan's ease of use and transparency would fuel such a transformation.

Made in China

Chinese consumer brands have long struggled with the perception that the quality of their products lagged a step behind those of their American and European rivals. There are signs that perceptions are starting to change, at least at home. The combined value of China's top 500 brands has doubled in the past four year to about $3.8 trillion as local consumers have shown a growing willingness to give them a try. The clothing and shoe manufacturer Anta Sports, for example, passed Nike in 2018 to become China's no. 2 sports apparel brand behind Adidas. Two factors behind this shift are that local brands often have better understanding of local tastes and have been faster to embrace e-commerce. Also helping is a growing sense of nationalism that's been stoked by China's ever-more tense relationship with America.

What We're Reading

And finally, a few other things that caught our attention:

 

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