America and Europe join forces against China? Not a good idea, says Emmanuel Macron, warning that such a scenario, in which “everyone joins forces against China”, carries the highest potential for conflict and is therefore “counterproductive”. Last night, the French president was a guest at the US think tank Atlantic Council, where he suggested that a united front against Beijing could lead to China reducing cooperation on climate action and tightening its regional agenda in Asia.
In today’s China.Table, I would like to recommend a topic with the greatest relevance for Germany. The trend towards electric cars is unmistakable. But what happens to the batteries when they are no longer needed? There are already more than four million EVs on the roads in China. For Christiane Kuehl, this was reason enough to take a closer look at Beijing’s legislation on battery recycling, the technologies and the market.
Finn Mayer-Kuckuk calls Webull the “financial app of the mighty dwarves”. His finding: The Chinese trading app is one of the hitherto unnoticed winners in the US in the turmoil surrounding Gamestop.
Felix Lee spoke with China researcher Adrian Zenz about forced labor among the Uyghur minority. “It is very likely that much of the cotton production in Xinjiang is tainted with forced labor,” says Zenz. The first fashion companies are already responding. They don’t want to taint their brands with the stain of genocide.
Christiane Kuehl wrote in the first issue of China.Table in mid-December that Beijing wants to enter the billion-dollar business of building nuclear power plants around the world. As it now turns out, the competitors are not asleep. The Czech Republic wants to exclude the Chinese bidder for the construction of a new reactor in Dukovany from the tender.
A wave of spent batteries is rolling toward China: Worn-out or badly slowed batteries from the country’s ever-growing EV fleet. These are not simply allowed to go to waste. EV makers are obligated to take care of recycling – to use raw materials sparingly and to protect the environment and climate. Worn-out but still functional batteries can be used as stationary energy storage units. After the battery dies, however, there is only one thing left to do: recycling the battery cells – and thus break them down into their usable components and raw materials such as cobalt, lithium, nickel, manganese or graphite.
Since the beginning of 2020, targets have been in place that call for a recovery rate of at least 98 percent for nickel, cobalt and manganese; lithium is to be recycled at 85 percent, and rare earths at 97 percent. These recovered materials are expected to go straight back into new batteries.
China’s EV pioneer BYD from the southern Chinese economic special zone Shenzhen already operates a battery recycling factory in Shanghai and recycles battery cells there as a source of raw materials for itself. The company also supplies customers who build energy storage systems from old batteries that can still be used – such as the state-owned company China Tower, which builds telecommunications base stations and also receives old batteries from other companies.
However, the scope of BYD’s recycling business is still small and largely limited to China. But the company wants to expand the business. In December, BYD entered into a partnership with the Japanese trading house Itochu to build electricity storage systems from used batteries. According to the agreement, BYD will collect end-of-life batteries from its dealers as well as its e-buses and e-taxis and have them tested for performance at Pandpower, a company founded by former BYD engineers. Suitable batteries will then be delivered to Itochu, which will install 160 of each in a specially prepared 20-foot container. These containers will be used as temporary storage for renewable energy and, according to a report in Japan’s Nikkei Asia newspaper, will each have 1000 kilowatts of capacity – enough to power about 100 homes in a day. Itochu estimates that the cost will be 20 to 30 percent lower than for new temporary storage facilities of the same capacity.
EV companies in China are required by law to collect their used batteries wherever they sell cars. To do so, they must have smaller facilities for temporary storage and larger facilities with a minimum capacity of 30 tons for long-term operation. These facilities – operated by manufacturers themselves or specialist companies – are supposed to collect, sort, store, pack and ship used batteries. For safety reasons, however, they are only allowed to dismantle them for inspection purposes. Producers must also ensure full traceability. Such standards are important to ensure the safety and environmental sustainability of the potentially hazardous process. Companies that meet these standards are placed on a “white list” by the Ministry of Industry and receive subsidies from the government. 22 companies were added to this list by the MIIT in January 2021 – where only five names had previously been on it. BYD’s recycling plant in Shanghai is the only one of the automakers on this list.
BYD is predestined for the role of pioneer. The privately held company had been making cell phone batteries for many years before entering the car battery business. Today, it is China’s second-largest car battery maker. It was also among the China EV pioneers. Its functional electric models like the Qin EV are among the best-selling in the e-volume segment; BYD sells its e-buses all over the world. So it has to act fast – even if that costs money first and foremost.
Energy storage from old batteries also exists in Europe and the USA – but China is, as so often, far ahead in terms of sheer size. In 2018, according to a study by the Global Battery Alliance, there were 10 megawatts of such storage in North America, 100 MW in Europe – and 1000 MW in China. And there will soon be many more. By mid-2020, about 4.17 million EVs were rolling on China’s roads, according to officials. Typically, their batteries last five to eight years. “We see a tidal wave of old EV batteries coming,” says Ada Kong of Greenpeace East Asia.
Unlike smartphone batteries, for example, electric car batteries still have up to 80 percent of their capacity when they become unsuitable for cars due to an increasingly limited range, according to market researcher IDTechEx. Such batteries could be used in China’s 5G telecom stations or the rental e-bikes popular in China, according to Greenpeace. This would avoid 63 million tons of CO2 emissions that would otherwise result from the production of new batteries, Greenpeace estimates.
Besides BYD, a few other car companies are active in battery recycling, including state-owned Beijing and Shanghai Automotive. In addition, there are specialist companies or intermediate product manufacturer,s such as China’s largest nickel and cobalt producer Jinchuan, which has built two battery recycling plants. In principle, companies from the entire supply chain can participate: In addition to car, battery or recycling companies, there are metal suppliers and cathode manufacturers.
However, little is currently known about the future profitability of recycling lithium-ion batteries from the automotive sector, for example. “Currently, China is the only market where we can secure the volume to achieve profitability,” Nikkei Asia quoted a representative of BYD partner Itochu as saying. So some volume is important. The market will probably get that in the foreseeable future.
Southern Xinjiang is arid and barren. The Taklamakan, one of the most barren deserts in the world, is located in the area. Thanks to gigantic irrigation systems built by China’s government in recent decades, the region is nevertheless now one of the largest cotton-growing areas in the world. 87 percent of China’s cotton comes from Xinjiang, around one-fifth of the world’s production. Now the international fashion industry has to justify itself precisely for this. Because a large part of the cotton is apparently harvested under duress – by Muslim Uyghurs.
According to a study by the Center for Global Policy in Washington, more than half a million Uyghurs are sent to pick cotton in the fields for months at harvest time. “Most of them involuntarily,” says China researcher Adrian Zenz, author of the study. “It is very likely that much of the cotton production in Xinjiang is tainted with forced labor,” he says.
The German scientist, who lives and researches in the USA, had already pointed out in 2018, with a study also prepared by him, that up to one million Uyghurs are temporarily interned in re-education camps in Xinjiang. The United Nations Human Rights Committee referred to him. The US government, meanwhile, calls it a “cultural genocide” that China’s leadership is committing in Xinjiang. So now Zenz has evidence of forced labor in the region.
The picking of cotton is physically demanding work and is usually poorly paid. Until a few years ago, the farms, many of which are state-owned, hired migrant workers from the Chinese heartland. But they stayed away in ever greater numbers because of the low wages. For some time now, the government has been relying on a so-called labor transfer program. Uyghurs are visited in their home villages, loaded into buses and taken to the cotton fields, where they then pick the cotton balls under police supervision.
Officially, the Chinese leadership denies this practice. The authorities in Xinjiang claim that agricultural workers of different origins are working in the fields of their own free will. They receive a monthly wage of the equivalent of almost €1,200. In any case, a large number of workers is not necessary, as the harvest is largely mechanized.
Zenz paints a completely different picture. 70 percent of the cotton harvest is picked by hand for quality reasons. In evaluating the study, he relied on documents that the local authorities themselves have published in part. Some of the local governments even boast about the successful implementation of the program.
The human rights organization Uyghur Human Rights Project (UHRP) denounces the actions of the Chinese leadership and calls on international fashion companies to refrain from producing cotton from Xinjiang. It is true that very few companies operate plantations in the region themselves, but they would very well purchase cotton from Xinjiang via Chinese intermediary companies. And by no means only in China itself. Textile factories in Bangladesh, Vietnam or the Philippines also use cotton from Xinjiang. “It is very likely that every German has at least one garment with cotton from Xinjiang in their closet,” Zenz suspects.
Britain and Canada have responded by imposing a ban on at least those imports from China that are suspected of having been forced labor manufactured by Uyghurs. And also the USA ordered an import ban on cotton from Xinjiang in December, citing “slave labor” in the fields.
The international fashion companies, on the other hand, are reacting rather cautiously. When the Australian Strategic Policy Institute (Aspi) denounced companies such as Adidas, Puma, H&M, Zara, Gap and Nike on the basis of its own investigations a year ago, the companies initially rejected the accusations. A direct connection with forced labor could not be proven, they initially said.
H&M has meanwhile terminated its cooperation with a Chinese producer. Adidas has also instructed its suppliers not to use cotton from the region for the time being. At the same time, however, H&M admitted to a commission of the British parliament that it could not fully trace the origin of the cotton in view of the “complexity of the supply chains” and the production process.
The human rights organization UHRP considers this an excuse. It is “untrustworthy” when the large chains emphasize that they do not tolerate forced labor among their suppliers but at the same time continue to source cotton from a region “where forced labor is widespread“.
There’s a revolution going on in investing – and a Chinese app is leading the way. Young small investors are currently driving the prices of individual stocks ahead of themselves and causing an uproar on Wall Street. They are not sitting down at their PCs to do this but are trading in line with the times using their smartphones. The origin of the uprising of the investment dwarfs lies in the USA. There, in turn, two mobile phone applications play a central role: Robinhood and Webull. And Webull comes from China.
This anchors a Chinese financial app among young clients in the world’s largest investment market. Also, in Germany such developments could accelerate the move away from traditional financial institutions. Anyone who got started in investing with a trading app is unlikely to set up a custody account at a savings bank later on, only to pay high fees there for the first time and have their own certificates forced on them by pushy advisors.
Apps like Webull also look really good. The prices flash in real time, the color scheme and design convey the atmosphere of a professional trading venue. At the same time, the apps are easy to use and thus lower the entry threshold into the world of investing. In general, the younger generation likes to do everything with their mobile phones. Now also stock trading.
It is, therefore, no surprise that a provider from China is one of the international pioneers here. As is generally known, China stays ahead of the USA – and well ahead of Germany. Webull is operated by the company Fumi Technologies. The founder is a former Alibaba employee, Wang Anquan. An early backer of the project was Xiaomi – so Webull is networked with the elite of the Chinese tech industry. Wang Anquan’s idea from the start was: We chase away clients from the established investment industry with the means of the Internet scene. This was followed as early as 2017 by the founding of a US subsidiary based in New York, which operates there as a domestic company and holds a proper broker license.
In those three years, Webull has gained two million customers in America. So the strategy seems to be paying off – and the furor over Gamestop and other stock market stocks has given the app another powerful boost. Members of internet forums had set out to drive up the share price of the chain of computer games stores with in-app purchase orders. They had previously caught wind that hedge funds on Wall Street were speculating against Gamestop. “I dumped my savings into GME, paid my rent for this month with my credit card”, user “ssauronn” wrote on Reddit. He said he wanted to help teach Wall Street’s hated financial sharks a lesson.
The backlash from the army of small investors has been so resounding that it is now driving major Wall Street institutions to near ruin. But for hedge funds, the high potential gains are matched by unlimited potential losses if their bets go awry. Gamestop’s stock price has now risen by as much as a factor of 50 overall instead of falling as expected. The hedge funds have lost billions and have had to prop each other up to avoid immediate insolvency.
In response, major American competitor Robinhood, also a trading app, has suspended trading with Gamestop. The activist investors guess: Wall Street bosses called friends who were backers of Robinhood. The anger was huge. The joy was then just as great when they realized that trading with Gamestop on Webull was still possible after a brief suspension.
As a result, the recommendation to switch to Webull, whose Chinese background is known to very few people there, spread across the web. In the era of Donald Trump, there was temporary speculation about a ban on the app as part of his campaign against everything Chinese. However, there was a lack of hand-holding. US customer data remains domestic, the team is American-dominated, and all rules for proper oversight are followed. With Joe Biden taking office, these mind games are now off the table anyway.
Webull is available in the App Store in Germany, but it does not contain any deposit functions; it only serves to monitor the market. The well-functioning German counterpart is Trade Republic, a start-up from Berlin, which was founded by Fumi one year ago. Trade Republic’s functions can absolutely keep up with those of Webull, but it lacks the international approach of a company with headquarters in Changsha and New York. Mobile traders in Germany can also rely on established offerings like the apps from Comdirect and Flatex.
When the billionaire investor Ray Dalio recently predicted that the Chinese renminbi will become a global reserve currency, the world took notice. It’s a prediction that the Chinese government has encouraged through its own efforts. The question now is whether the coming “Year of the Ox” will bring the decisive shifts needed to position the RMB to fulfill policymakers’ ambition.
Like a beauty pageant, the contest for reserve-currency status is one of relative attractiveness. International traders and investors must decide which among the currencies available to them is most convenient to use, is supported by the strongest financial system, and – perhaps most important – enjoys the backing of a trustworthy sovereign. What is new today is that both of the world’s major sovereigns also seem to be competing to reduce their own trustworthiness.
Relative attractiveness is difficult to quantify. But underlying this concept is one factor that can be measured precisely: the size of the issuing country’s economy. As the economist Paul Krugman explained in a 1984 paper, “the currency of a country which is important in world markets will be a better candidate for an international money than that of a smaller country.” In other words, a globally dominant economy is the “hardware” for an international reserve currency.
China, clearly, has the necessary hardware. It been the world’s largest trader since 2013, its economy is now larger than that of the United States in purchasing power parity terms, and soon it will pull ahead in terms of market exchange rates, too. For these reasons, one of us (Subramanian) pointed out a decade ago that the renminbi would come to rival and eventually eclipse the dollar.
Since then, China has made great progress in boosting the renminbi’s relative attractiveness. Its economy has continued to grow much more rapidly than US GDP and emerged more resilient from the COVID-19 crisis. Its central bank has started developing and testing a digital currency. And its “Belt and Road” clients across the developing world are beginning to use the renminbi in their growing trade and financial transactions with China.
But the dollar has proved stubbornly resistant. As Gita Gopinath, the International Monetary Fund’s chief economist, and her colleagues have shown, an overwhelming preponderance of trade continues to be invoiced in dollars, and the dollar still plays a prominent role in cross-border funding as well.
A key reason for the dollar’s resilience vis-à-vis the renminbi is that America’s economic hardware is complemented by powerful software: all of the intangible qualities that underpin investor confidence – not least a strong banking system backed by a reliable sovereign. China still has a long way to go in these areas.
To build trust in its financial system, China needs to shore up its highly leveraged, overextended banks. After that, it should remove its capital controls and ensure greater transparency so that investors can enter Chinese financial markets with confidence that they know what they are buying. Chinese authorities then must commit to keeping capital controls lifted, so that investors can be confident that they will always be able to move their money out of the country. None of this can be accomplished quickly, and convincing investors that the changes are irreversible will take even longer still.
Next comes the task of building confidence in the sovereign. China will need to convince other countries that it is and will remain a reliable economic partner. This will require even more time and effort, especially given that the Chinese government has been moving in the wrong direction. China may have helped negotiate the recently agreed Regional Comprehensive Economic Partnership, but it has also used trade sanctions as a form of political punishment against one of its main trading partners, Australia.
Moreover, China has been cracking down on free speech and democracy activists in Hong Kong, with scant concern about the implications for the city’s standing as an international financial center. It has also acted punitively against one of its leading financial-sector entrepreneurs, Alibaba founder Jack Ma, while publicizing a new “dual-circulation” development strategy that unmistakably signals an inward turn for economic policy.
To be sure, the US has raised questions about its own reliability as a financial partner, particularly under President Donald Trump. For example, the Trump administration’s sanctions against Iran prohibit US banks from dealing not only with that country directly, but also with any foreign banks that operate there. As a result, other countries – including many US friends and allies – now recognize how vulnerable they are to US unilateral action. While the dollar’s dominance provides convenience, it now comes at a high potential cost – so high that Europe had to scramble to create its own cross-border clearing mechanism for trade.
More recently, the Trump administration has again taken direct action against China, ordering that US financial institutions and investors cut ties with certain state-run Chinese firms and that three Chinese companies be delisted from the New York Stock Exchange. Chinese authorities have since been planning a response to protect Chinese companies from the slings and arrows of US financial dominance.
It is not clear which country has done more to undermine confidence in its own software, so one should not confidently assume that the dollar’s reign is unshakeable. China could still win the reserve-currency contest, either because the renminbi becomes more attractive, or simply because the dollar has become less so.
Moreover, it is worth remembering that history is not on the dollar’s side. The late MIT economic historian Charles P. Kindleberger famously predicted that “the dollar will end up on history’s ash heap, along with sterling, the guilder, florin, ducat, and if you chose to go way back, the Levantine bezant.”
It is an open question whether any decisive transition from the dollar to the renminbi will begin this year. But when it comes to the long term, China’s rulers are confident in their currency’s prospects. They already seem convinced that their hardware will prove attractive, regardless of the shortcomings of their software. The not-so-subtle message to the world is that, regardless of what China does, the renminbi will rule.
Arvind Subramanian, a senior fellow at Brown University, is a distinguished non-resident fellow at the Center for Global Development and the author of Of Counsel: The Challenges of the Modi-Jaitley Economy. Josh Felman is Director of JH Consulting.
Copyright: Project Syndicate, 2021.
www.project-syndicate.org
No sooner had Hong Kong’s new chief justice, Andrew Cheung, 59, been enthroned than the Court of Final Appeal (CFA) under his leadership became the focus of public interest. The court had convened on Monday to decide whether or not to release currently jailed pro-democracy media tycoon Jimmy Lai on bail. The ruling is seen as a finger-pointing move on the handling of the new security law, which allows bail only under certain conditions. However, the court did not make a decision yet. It adjourned until a later date.
Meanwhile, some Hong Kong media and legal experts are surprised that the Chief Justice met with Chief Executive Carrie Lam four days before the hearing. Nothing has been revealed about the content of the conversation so far, except “that it was not about individual cases”, as Carrie Lam stressed. It was merely a routine working meeting, she said. Lam had said last year that there was no separation of powers in the city. The executive, legislature and judiciary are accountable to the central government in Beijing.
Andrew Cheung should be aware of his responsibilities to the central government anyway. Chinese state media and those from Hong Kong that support Beijing’s policies have been firing endless salvos toward Hong Kong’s judiciary about what it should and should not do since the implementation of the National Security Law in the summer of 2020. At the heart of the issue is whether Hong Kong judges are interpreting the National Security Law in line with the authoritarian People’s Republic of China, or whether they are rebelling against it.
Former Hong Kong lawyer Alvin Cheung of New York University, among others, believes the new chief justice will live up to expectations from Beijing. “There is either a Hong Kong that respects the rule of law or a Hong Kong that does what Beijing wants. Given the political environment, it should be a very easy decision,” Cheung says. It is “painfully obvious” that neither the Hong Kong nor Beijing governments will continue to pretend that the city’s judiciary is independent, he said.
Andrew Cheung had already been a permanent member of the Supreme Court since 2018. Prior to that, he had spent many years in numerous positions in the city’s legal system. As a lawyer in the 1990s, he gained the necessary experience to qualify for public posts. He later presided over the high court for seven years. More recently, he caused concern among opposition forces when, for example, he gave Beijing sole responsibility for interpreting the Basic Law, a kind of fundamental law of the city of Hong Kong, and stressed that customary law had no role to play. His conservative views on gay and lesbian rights were strongly criticized by human rights activists.
Cheung, on the other hand, has received support from the local bar association HKBA, the Law Society of Hong Kong and politicians from the government camp. Under the new chief justice, “the rule of law will be enshrined and human rights and freedom will be protected,” commented MP Priscilla Leung.
Cheung is the first jurist to hold the post of Chief Justice, having graduated from law school in Hong Kong. He later earned a master’s degree from Harvard University in the United States. He is married and has three children. Marcel Grzanna
America and Europe join forces against China? Not a good idea, says Emmanuel Macron, warning that such a scenario, in which “everyone joins forces against China”, carries the highest potential for conflict and is therefore “counterproductive”. Last night, the French president was a guest at the US think tank Atlantic Council, where he suggested that a united front against Beijing could lead to China reducing cooperation on climate action and tightening its regional agenda in Asia.
In today’s China.Table, I would like to recommend a topic with the greatest relevance for Germany. The trend towards electric cars is unmistakable. But what happens to the batteries when they are no longer needed? There are already more than four million EVs on the roads in China. For Christiane Kuehl, this was reason enough to take a closer look at Beijing’s legislation on battery recycling, the technologies and the market.
Finn Mayer-Kuckuk calls Webull the “financial app of the mighty dwarves”. His finding: The Chinese trading app is one of the hitherto unnoticed winners in the US in the turmoil surrounding Gamestop.
Felix Lee spoke with China researcher Adrian Zenz about forced labor among the Uyghur minority. “It is very likely that much of the cotton production in Xinjiang is tainted with forced labor,” says Zenz. The first fashion companies are already responding. They don’t want to taint their brands with the stain of genocide.
Christiane Kuehl wrote in the first issue of China.Table in mid-December that Beijing wants to enter the billion-dollar business of building nuclear power plants around the world. As it now turns out, the competitors are not asleep. The Czech Republic wants to exclude the Chinese bidder for the construction of a new reactor in Dukovany from the tender.
A wave of spent batteries is rolling toward China: Worn-out or badly slowed batteries from the country’s ever-growing EV fleet. These are not simply allowed to go to waste. EV makers are obligated to take care of recycling – to use raw materials sparingly and to protect the environment and climate. Worn-out but still functional batteries can be used as stationary energy storage units. After the battery dies, however, there is only one thing left to do: recycling the battery cells – and thus break them down into their usable components and raw materials such as cobalt, lithium, nickel, manganese or graphite.
Since the beginning of 2020, targets have been in place that call for a recovery rate of at least 98 percent for nickel, cobalt and manganese; lithium is to be recycled at 85 percent, and rare earths at 97 percent. These recovered materials are expected to go straight back into new batteries.
China’s EV pioneer BYD from the southern Chinese economic special zone Shenzhen already operates a battery recycling factory in Shanghai and recycles battery cells there as a source of raw materials for itself. The company also supplies customers who build energy storage systems from old batteries that can still be used – such as the state-owned company China Tower, which builds telecommunications base stations and also receives old batteries from other companies.
However, the scope of BYD’s recycling business is still small and largely limited to China. But the company wants to expand the business. In December, BYD entered into a partnership with the Japanese trading house Itochu to build electricity storage systems from used batteries. According to the agreement, BYD will collect end-of-life batteries from its dealers as well as its e-buses and e-taxis and have them tested for performance at Pandpower, a company founded by former BYD engineers. Suitable batteries will then be delivered to Itochu, which will install 160 of each in a specially prepared 20-foot container. These containers will be used as temporary storage for renewable energy and, according to a report in Japan’s Nikkei Asia newspaper, will each have 1000 kilowatts of capacity – enough to power about 100 homes in a day. Itochu estimates that the cost will be 20 to 30 percent lower than for new temporary storage facilities of the same capacity.
EV companies in China are required by law to collect their used batteries wherever they sell cars. To do so, they must have smaller facilities for temporary storage and larger facilities with a minimum capacity of 30 tons for long-term operation. These facilities – operated by manufacturers themselves or specialist companies – are supposed to collect, sort, store, pack and ship used batteries. For safety reasons, however, they are only allowed to dismantle them for inspection purposes. Producers must also ensure full traceability. Such standards are important to ensure the safety and environmental sustainability of the potentially hazardous process. Companies that meet these standards are placed on a “white list” by the Ministry of Industry and receive subsidies from the government. 22 companies were added to this list by the MIIT in January 2021 – where only five names had previously been on it. BYD’s recycling plant in Shanghai is the only one of the automakers on this list.
BYD is predestined for the role of pioneer. The privately held company had been making cell phone batteries for many years before entering the car battery business. Today, it is China’s second-largest car battery maker. It was also among the China EV pioneers. Its functional electric models like the Qin EV are among the best-selling in the e-volume segment; BYD sells its e-buses all over the world. So it has to act fast – even if that costs money first and foremost.
Energy storage from old batteries also exists in Europe and the USA – but China is, as so often, far ahead in terms of sheer size. In 2018, according to a study by the Global Battery Alliance, there were 10 megawatts of such storage in North America, 100 MW in Europe – and 1000 MW in China. And there will soon be many more. By mid-2020, about 4.17 million EVs were rolling on China’s roads, according to officials. Typically, their batteries last five to eight years. “We see a tidal wave of old EV batteries coming,” says Ada Kong of Greenpeace East Asia.
Unlike smartphone batteries, for example, electric car batteries still have up to 80 percent of their capacity when they become unsuitable for cars due to an increasingly limited range, according to market researcher IDTechEx. Such batteries could be used in China’s 5G telecom stations or the rental e-bikes popular in China, according to Greenpeace. This would avoid 63 million tons of CO2 emissions that would otherwise result from the production of new batteries, Greenpeace estimates.
Besides BYD, a few other car companies are active in battery recycling, including state-owned Beijing and Shanghai Automotive. In addition, there are specialist companies or intermediate product manufacturer,s such as China’s largest nickel and cobalt producer Jinchuan, which has built two battery recycling plants. In principle, companies from the entire supply chain can participate: In addition to car, battery or recycling companies, there are metal suppliers and cathode manufacturers.
However, little is currently known about the future profitability of recycling lithium-ion batteries from the automotive sector, for example. “Currently, China is the only market where we can secure the volume to achieve profitability,” Nikkei Asia quoted a representative of BYD partner Itochu as saying. So some volume is important. The market will probably get that in the foreseeable future.
Southern Xinjiang is arid and barren. The Taklamakan, one of the most barren deserts in the world, is located in the area. Thanks to gigantic irrigation systems built by China’s government in recent decades, the region is nevertheless now one of the largest cotton-growing areas in the world. 87 percent of China’s cotton comes from Xinjiang, around one-fifth of the world’s production. Now the international fashion industry has to justify itself precisely for this. Because a large part of the cotton is apparently harvested under duress – by Muslim Uyghurs.
According to a study by the Center for Global Policy in Washington, more than half a million Uyghurs are sent to pick cotton in the fields for months at harvest time. “Most of them involuntarily,” says China researcher Adrian Zenz, author of the study. “It is very likely that much of the cotton production in Xinjiang is tainted with forced labor,” he says.
The German scientist, who lives and researches in the USA, had already pointed out in 2018, with a study also prepared by him, that up to one million Uyghurs are temporarily interned in re-education camps in Xinjiang. The United Nations Human Rights Committee referred to him. The US government, meanwhile, calls it a “cultural genocide” that China’s leadership is committing in Xinjiang. So now Zenz has evidence of forced labor in the region.
The picking of cotton is physically demanding work and is usually poorly paid. Until a few years ago, the farms, many of which are state-owned, hired migrant workers from the Chinese heartland. But they stayed away in ever greater numbers because of the low wages. For some time now, the government has been relying on a so-called labor transfer program. Uyghurs are visited in their home villages, loaded into buses and taken to the cotton fields, where they then pick the cotton balls under police supervision.
Officially, the Chinese leadership denies this practice. The authorities in Xinjiang claim that agricultural workers of different origins are working in the fields of their own free will. They receive a monthly wage of the equivalent of almost €1,200. In any case, a large number of workers is not necessary, as the harvest is largely mechanized.
Zenz paints a completely different picture. 70 percent of the cotton harvest is picked by hand for quality reasons. In evaluating the study, he relied on documents that the local authorities themselves have published in part. Some of the local governments even boast about the successful implementation of the program.
The human rights organization Uyghur Human Rights Project (UHRP) denounces the actions of the Chinese leadership and calls on international fashion companies to refrain from producing cotton from Xinjiang. It is true that very few companies operate plantations in the region themselves, but they would very well purchase cotton from Xinjiang via Chinese intermediary companies. And by no means only in China itself. Textile factories in Bangladesh, Vietnam or the Philippines also use cotton from Xinjiang. “It is very likely that every German has at least one garment with cotton from Xinjiang in their closet,” Zenz suspects.
Britain and Canada have responded by imposing a ban on at least those imports from China that are suspected of having been forced labor manufactured by Uyghurs. And also the USA ordered an import ban on cotton from Xinjiang in December, citing “slave labor” in the fields.
The international fashion companies, on the other hand, are reacting rather cautiously. When the Australian Strategic Policy Institute (Aspi) denounced companies such as Adidas, Puma, H&M, Zara, Gap and Nike on the basis of its own investigations a year ago, the companies initially rejected the accusations. A direct connection with forced labor could not be proven, they initially said.
H&M has meanwhile terminated its cooperation with a Chinese producer. Adidas has also instructed its suppliers not to use cotton from the region for the time being. At the same time, however, H&M admitted to a commission of the British parliament that it could not fully trace the origin of the cotton in view of the “complexity of the supply chains” and the production process.
The human rights organization UHRP considers this an excuse. It is “untrustworthy” when the large chains emphasize that they do not tolerate forced labor among their suppliers but at the same time continue to source cotton from a region “where forced labor is widespread“.
There’s a revolution going on in investing – and a Chinese app is leading the way. Young small investors are currently driving the prices of individual stocks ahead of themselves and causing an uproar on Wall Street. They are not sitting down at their PCs to do this but are trading in line with the times using their smartphones. The origin of the uprising of the investment dwarfs lies in the USA. There, in turn, two mobile phone applications play a central role: Robinhood and Webull. And Webull comes from China.
This anchors a Chinese financial app among young clients in the world’s largest investment market. Also, in Germany such developments could accelerate the move away from traditional financial institutions. Anyone who got started in investing with a trading app is unlikely to set up a custody account at a savings bank later on, only to pay high fees there for the first time and have their own certificates forced on them by pushy advisors.
Apps like Webull also look really good. The prices flash in real time, the color scheme and design convey the atmosphere of a professional trading venue. At the same time, the apps are easy to use and thus lower the entry threshold into the world of investing. In general, the younger generation likes to do everything with their mobile phones. Now also stock trading.
It is, therefore, no surprise that a provider from China is one of the international pioneers here. As is generally known, China stays ahead of the USA – and well ahead of Germany. Webull is operated by the company Fumi Technologies. The founder is a former Alibaba employee, Wang Anquan. An early backer of the project was Xiaomi – so Webull is networked with the elite of the Chinese tech industry. Wang Anquan’s idea from the start was: We chase away clients from the established investment industry with the means of the Internet scene. This was followed as early as 2017 by the founding of a US subsidiary based in New York, which operates there as a domestic company and holds a proper broker license.
In those three years, Webull has gained two million customers in America. So the strategy seems to be paying off – and the furor over Gamestop and other stock market stocks has given the app another powerful boost. Members of internet forums had set out to drive up the share price of the chain of computer games stores with in-app purchase orders. They had previously caught wind that hedge funds on Wall Street were speculating against Gamestop. “I dumped my savings into GME, paid my rent for this month with my credit card”, user “ssauronn” wrote on Reddit. He said he wanted to help teach Wall Street’s hated financial sharks a lesson.
The backlash from the army of small investors has been so resounding that it is now driving major Wall Street institutions to near ruin. But for hedge funds, the high potential gains are matched by unlimited potential losses if their bets go awry. Gamestop’s stock price has now risen by as much as a factor of 50 overall instead of falling as expected. The hedge funds have lost billions and have had to prop each other up to avoid immediate insolvency.
In response, major American competitor Robinhood, also a trading app, has suspended trading with Gamestop. The activist investors guess: Wall Street bosses called friends who were backers of Robinhood. The anger was huge. The joy was then just as great when they realized that trading with Gamestop on Webull was still possible after a brief suspension.
As a result, the recommendation to switch to Webull, whose Chinese background is known to very few people there, spread across the web. In the era of Donald Trump, there was temporary speculation about a ban on the app as part of his campaign against everything Chinese. However, there was a lack of hand-holding. US customer data remains domestic, the team is American-dominated, and all rules for proper oversight are followed. With Joe Biden taking office, these mind games are now off the table anyway.
Webull is available in the App Store in Germany, but it does not contain any deposit functions; it only serves to monitor the market. The well-functioning German counterpart is Trade Republic, a start-up from Berlin, which was founded by Fumi one year ago. Trade Republic’s functions can absolutely keep up with those of Webull, but it lacks the international approach of a company with headquarters in Changsha and New York. Mobile traders in Germany can also rely on established offerings like the apps from Comdirect and Flatex.
When the billionaire investor Ray Dalio recently predicted that the Chinese renminbi will become a global reserve currency, the world took notice. It’s a prediction that the Chinese government has encouraged through its own efforts. The question now is whether the coming “Year of the Ox” will bring the decisive shifts needed to position the RMB to fulfill policymakers’ ambition.
Like a beauty pageant, the contest for reserve-currency status is one of relative attractiveness. International traders and investors must decide which among the currencies available to them is most convenient to use, is supported by the strongest financial system, and – perhaps most important – enjoys the backing of a trustworthy sovereign. What is new today is that both of the world’s major sovereigns also seem to be competing to reduce their own trustworthiness.
Relative attractiveness is difficult to quantify. But underlying this concept is one factor that can be measured precisely: the size of the issuing country’s economy. As the economist Paul Krugman explained in a 1984 paper, “the currency of a country which is important in world markets will be a better candidate for an international money than that of a smaller country.” In other words, a globally dominant economy is the “hardware” for an international reserve currency.
China, clearly, has the necessary hardware. It been the world’s largest trader since 2013, its economy is now larger than that of the United States in purchasing power parity terms, and soon it will pull ahead in terms of market exchange rates, too. For these reasons, one of us (Subramanian) pointed out a decade ago that the renminbi would come to rival and eventually eclipse the dollar.
Since then, China has made great progress in boosting the renminbi’s relative attractiveness. Its economy has continued to grow much more rapidly than US GDP and emerged more resilient from the COVID-19 crisis. Its central bank has started developing and testing a digital currency. And its “Belt and Road” clients across the developing world are beginning to use the renminbi in their growing trade and financial transactions with China.
But the dollar has proved stubbornly resistant. As Gita Gopinath, the International Monetary Fund’s chief economist, and her colleagues have shown, an overwhelming preponderance of trade continues to be invoiced in dollars, and the dollar still plays a prominent role in cross-border funding as well.
A key reason for the dollar’s resilience vis-à-vis the renminbi is that America’s economic hardware is complemented by powerful software: all of the intangible qualities that underpin investor confidence – not least a strong banking system backed by a reliable sovereign. China still has a long way to go in these areas.
To build trust in its financial system, China needs to shore up its highly leveraged, overextended banks. After that, it should remove its capital controls and ensure greater transparency so that investors can enter Chinese financial markets with confidence that they know what they are buying. Chinese authorities then must commit to keeping capital controls lifted, so that investors can be confident that they will always be able to move their money out of the country. None of this can be accomplished quickly, and convincing investors that the changes are irreversible will take even longer still.
Next comes the task of building confidence in the sovereign. China will need to convince other countries that it is and will remain a reliable economic partner. This will require even more time and effort, especially given that the Chinese government has been moving in the wrong direction. China may have helped negotiate the recently agreed Regional Comprehensive Economic Partnership, but it has also used trade sanctions as a form of political punishment against one of its main trading partners, Australia.
Moreover, China has been cracking down on free speech and democracy activists in Hong Kong, with scant concern about the implications for the city’s standing as an international financial center. It has also acted punitively against one of its leading financial-sector entrepreneurs, Alibaba founder Jack Ma, while publicizing a new “dual-circulation” development strategy that unmistakably signals an inward turn for economic policy.
To be sure, the US has raised questions about its own reliability as a financial partner, particularly under President Donald Trump. For example, the Trump administration’s sanctions against Iran prohibit US banks from dealing not only with that country directly, but also with any foreign banks that operate there. As a result, other countries – including many US friends and allies – now recognize how vulnerable they are to US unilateral action. While the dollar’s dominance provides convenience, it now comes at a high potential cost – so high that Europe had to scramble to create its own cross-border clearing mechanism for trade.
More recently, the Trump administration has again taken direct action against China, ordering that US financial institutions and investors cut ties with certain state-run Chinese firms and that three Chinese companies be delisted from the New York Stock Exchange. Chinese authorities have since been planning a response to protect Chinese companies from the slings and arrows of US financial dominance.
It is not clear which country has done more to undermine confidence in its own software, so one should not confidently assume that the dollar’s reign is unshakeable. China could still win the reserve-currency contest, either because the renminbi becomes more attractive, or simply because the dollar has become less so.
Moreover, it is worth remembering that history is not on the dollar’s side. The late MIT economic historian Charles P. Kindleberger famously predicted that “the dollar will end up on history’s ash heap, along with sterling, the guilder, florin, ducat, and if you chose to go way back, the Levantine bezant.”
It is an open question whether any decisive transition from the dollar to the renminbi will begin this year. But when it comes to the long term, China’s rulers are confident in their currency’s prospects. They already seem convinced that their hardware will prove attractive, regardless of the shortcomings of their software. The not-so-subtle message to the world is that, regardless of what China does, the renminbi will rule.
Arvind Subramanian, a senior fellow at Brown University, is a distinguished non-resident fellow at the Center for Global Development and the author of Of Counsel: The Challenges of the Modi-Jaitley Economy. Josh Felman is Director of JH Consulting.
Copyright: Project Syndicate, 2021.
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No sooner had Hong Kong’s new chief justice, Andrew Cheung, 59, been enthroned than the Court of Final Appeal (CFA) under his leadership became the focus of public interest. The court had convened on Monday to decide whether or not to release currently jailed pro-democracy media tycoon Jimmy Lai on bail. The ruling is seen as a finger-pointing move on the handling of the new security law, which allows bail only under certain conditions. However, the court did not make a decision yet. It adjourned until a later date.
Meanwhile, some Hong Kong media and legal experts are surprised that the Chief Justice met with Chief Executive Carrie Lam four days before the hearing. Nothing has been revealed about the content of the conversation so far, except “that it was not about individual cases”, as Carrie Lam stressed. It was merely a routine working meeting, she said. Lam had said last year that there was no separation of powers in the city. The executive, legislature and judiciary are accountable to the central government in Beijing.
Andrew Cheung should be aware of his responsibilities to the central government anyway. Chinese state media and those from Hong Kong that support Beijing’s policies have been firing endless salvos toward Hong Kong’s judiciary about what it should and should not do since the implementation of the National Security Law in the summer of 2020. At the heart of the issue is whether Hong Kong judges are interpreting the National Security Law in line with the authoritarian People’s Republic of China, or whether they are rebelling against it.
Former Hong Kong lawyer Alvin Cheung of New York University, among others, believes the new chief justice will live up to expectations from Beijing. “There is either a Hong Kong that respects the rule of law or a Hong Kong that does what Beijing wants. Given the political environment, it should be a very easy decision,” Cheung says. It is “painfully obvious” that neither the Hong Kong nor Beijing governments will continue to pretend that the city’s judiciary is independent, he said.
Andrew Cheung had already been a permanent member of the Supreme Court since 2018. Prior to that, he had spent many years in numerous positions in the city’s legal system. As a lawyer in the 1990s, he gained the necessary experience to qualify for public posts. He later presided over the high court for seven years. More recently, he caused concern among opposition forces when, for example, he gave Beijing sole responsibility for interpreting the Basic Law, a kind of fundamental law of the city of Hong Kong, and stressed that customary law had no role to play. His conservative views on gay and lesbian rights were strongly criticized by human rights activists.
Cheung, on the other hand, has received support from the local bar association HKBA, the Law Society of Hong Kong and politicians from the government camp. Under the new chief justice, “the rule of law will be enshrined and human rights and freedom will be protected,” commented MP Priscilla Leung.
Cheung is the first jurist to hold the post of Chief Justice, having graduated from law school in Hong Kong. He later earned a master’s degree from Harvard University in the United States. He is married and has three children. Marcel Grzanna
