CRG Weekly: Calls for break up of HSBC, rare political criticism of Xi's policies
News from the China Research Group
Co-chair of the China Research Group Tom Tugendhat wrote in City AM on China’s zero Covid is another reminder of why we need more resilience.
Next event: China's Energy Security. China's energy system has been described as “the whale in the global energy economy.” How is Beijing’s quest for energy security impacting global energy markets and geopolitics? Join Tom Tugendhat MP, Helen Thompson, Dr Michal Meidan and Lara Dong on 11 May at 10:30am. Register here.
The stories driving the week
Major Liz Truss speech on foreign policy, call for economic NATO
Foreign secretary Liz Truss gave a major speech at Mansion House, where she set out her vision for the UK’s foreign policy.
While the speech started with a focus on Ukraine and Russia, a significant chunk was dedicated to China and its challenge to economic security.
It included a reference to the G7 taking the role of an “economic NATO, collectively defending our prosperity” by supporting economic partners which are “targeted by an aggressive regime”.
Last year, the CRG published a paper by Rob Atkinson of ITIF on how a ‘NATO for Trade’ could deter Chinese trade aggression.
HSBC’s largest shareholder calls for the UK bank to break itself up
Another big FT scoop: HSBC’s largest shareholder, Chinese insurance company Ping An, has called for the UK bank to break itself up.
According to the FT, Ping An has argued that an independent Asia business listed in Hong Kong would have ‘higher profitability, lower capital requirements and greater local management control and autonomy to make decisions.’
The Sunday Times also ran a long read last weekend asking if it was time to break up HSBC, noting that a standalone Asian bank would easily be consumed by a rival.
Zero Covid in China continues, but with rare political criticism
With Shanghai now a month into its lockdown, attention is shifting to Beijing, which is teetering on the edge of a lockdown.
139,000 people in Beijing have been mobilised to test 22 million of the city’s residents three times in five days. All schools in Beijing have closed. The city has reported about 200 cases.
Xi Jinping has doubled down on zero Covid but also emphasised that China needs to hit its GDP growth targets - not least in order to outperform the US.
Yet as reported by the FT, one of Asia’s biggest private equity investors Weijian Shan warned that “we think the Chinese economy at this moment is in the worst shape in the past 30 years”, with large parts of the Chinese economy, “semi-paralysed” by “draconian” zero-Covid policies.
What makes this critique particularly interesting is that Weijian Shan is a highly respected analyst who has often defended China’s economic policies, such as the derailed Ant IPO.
Arm regains control of its Chinese arm
After two years, Arm has finally succeeded in ousting Arm China’s rogue CEO, Allen Wu. Regaining control of Arm China was seen as essential to an IPO following Nvidia’s failed takeover.
This astonishing piece on Semi Analysis lays out the chequered history of Arm’s joint venture in China, calling it the ‘tech heist of the century’. Wu even hired security paid for by Arm China that kept Arm out of the Arm China offices.
Arm is the world’s most important semiconductor IP firm, and one of the UK’s few >£10bn tech companies. Almost every mobile phone uses Arm chip designs.
Weekend reads
Hong Kong, my vanishing city. An essay on life exiled from Hong Kong by Louisa Lim in the FT.
Kevin Rudd: Is War With China Inevitable? Rudd unpacks the logic of a future war, warns of Xi's biggest vulnerability and predicts a rocky few months ahead on the Little Red Podcast.
China's Leadership Is Prisoner of Its Own Narrative. An interview worth reading with Joerg Wuttke, President of the EU Chamber of Commerce in China.