FAO Global publishes “The Weekend Brief,” a weekly newsletter highlighting the latest current events impacting the business climate between the United States, China, and Emerging Markets around the world. FAO Global promotes global strategy development through market intelligence and expert political assessments.
“The Weekend Brief” covers trends in geopolitics, aviation, AI/Blockchain, automotive, and investment opportunities & risks in the above markets.
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Exclusive: Some big tech firms cut employees’ access to Huawei, muddying 5G rollout – Reuters
Our Analysis: The prohibition of certain companies’ decision to restrict even informal discussions between employees and Huawei is likely a response to non-public political pressure and part of their crisis management and public relations strategy. Those that see Huawei as being a direct competitor may be using this opportunity to shut Huawei out of future markets. What is likely to happen is the divergence between a U.S. led 5G network and a Chinese led network. If companies that build the products are not able to agree on international standards and norms, that may force Huawei and the Chinese government to move in absence of U.S. involvement. This reduces the competitiveness of both U.S., Korean, and Chinese firms who operate in the space, as reduced interoperability will lead to reduce competitiveness. This presents opportunities for competitors to shape the discussion and create solutions that re-engage both sides through technology solutions.
Hengli trying to become China’s first private jet fuel exporter – Reuters
Our Analysis: The ecosystem for private enterprise in the aviation sector is expanding. 310 new airports around China, the expanding capacity in aviation manufacturing (via international firms), and increasingly robust supply chain are all positive indicators that the commercial and general aviation industries are moving in the right direction. The efforts to privately sell and export jet fuel by Hengli still face competition by state owned companies and barriers from legislative organizations, such as the Civil Aviation Administration of China (CAAC). If Hengli is only moderately successful in its endeavor, this could open a whole new marketplace for both Chinese and foreign firms to take part in. The reduction of state-owned competition could strengthen China’s domestic capacity long-term and promote engagement in a fast-growing sector.
Hong Kong slowly returns to normal after protests, but public told to allow extra time for travel – South China Morning Post
Our Analysis: The protests and rioting in Hong Kong over the last week highlight a growing divide between an increasingly conjoined Hong Kong-Beijing government and Hong Kong citizens growing discontent with the changing dynamics. The most recent demonstration and subsequent clashes with police officers is due to a controversial bill that would allow extradition of those in Hong Kong to be tried in the Chinese legal system. This bill not only undermines Hong Kong’s more independent judiciary, but also puts the integration of the “two systems” in focus. The full integration of Hong Kong to the mainland system is not until 2047, following the end of Britain’s 100-year lease of the territories in 1997. For businesses, Hong Kong still ranks as one of the top locations in Asia for ease of business. However, the political risk and possible implications should be considered when planning long-term strategic vision. Nobody truly knows what will come in 10-30 years but expect change. Planning for eventualities now and periodically updating those strategic plans makes your executive team and departments more prepare should a best- or worst-case scenario play out.
Alibaba files for HK listing that may raise $20 billion as soon as third quarter: source – Reuters
Our Analysis: Alibaba’s choosing to raise $20 billion in Hong Kong may serve multiple purposes. One may be to insulate itself from the U.S. financial system due to the increasing targeting of “Chinese Champion” companies (i.e. Huawei). Another reason is that doing a raise in Hong Kong provides a layer of safety for mainland Chinese investors due to the increasingly overlapping legal systems. A third could simply be diversification and expansion. Alibaba shares would be traded nearly 24 hours a day allowing for increased value. A fourth scenario is that Alibaba is facing internal pressure from Chinese government officials to pull out of the U.S. system. Many Chinese listed companies are delisting or looking at delisting from U.S. exchanges. Higher levels of scrutiny are being applied, a negative perception environment is being created by the U.S.-China trade war, and overall Chinese confidence in the U.S. system being fair and impartial has significantly waned over the course of a year. The likely explanation for Alibaba’s situation converges all four reasons (and likely many more) that fit their narrative and company goals.
Analyst Bio’s
Brandon Hughes: Brandon is the Senior Analyst and Founder of FAO Global. He served as a government adviser and led military teams in Afghanistan, supported peace keeping operations in Europe, led corporate security teams in Las Vegas, and conducted strategic U.S.-China focused research for the prestigious Carnegie Endowment & Asia Society. Brandon leads FAO Global to conduct cross-border international business ventures between the U.S., China, and emerging markets in Asia.
Edits by Kelli Sullivan
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