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January 7, 2025 13 mins
An update on China's new virus outbreak, China's stock market, & US-China technology competition

China Update provides listeners with the most up to date political, economic, and geostrategic analysis on China - so that you are on top of the world's number 2 economy.   These podcasts are based on hundreds of articles, think tank reports, government statements and other resources in English and Chinese every week. The views and analysis are all my own and I produce the podcasts. 
My Patreon: https://www.patreon.com/chinaupdate 
 
Disclaimer: China Update is not a financial advisory channel. While I take great care in researching everything discussed in these podcasts, nothing I say should be taken as investment advice. Please speak to a professional before making any investment decisions. #China
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Transcript

Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Happy Tuesday, everybody. Welcome to another episode of China Update,
where it provides you with the most up to date political, economic,
and geostrategic analysis on the world's number two economy. My
name is Tony. Let's jump in. Over the weekend, we
did two videos discussing very concerning online reports of huge
outbreaks of HMPV, a respiratory virus causing flu like symptoms

(00:23):
across China, with stories of hospitals and crematoria overwhelmed. HMPV,
part of the same family as respiratory virusRSV, has been
known since two thousand and one. It primarily circulates in
colder seasons and can cause complications such as bronchitis and pneumonia,
especially in the elderly, young children, and immunocompromised individuals. In

(00:47):
my weekend videos, I warned that we are quite blind
on the ground in China and it is hard to
verify the reports, especially considering the sensitivity of such things
within China itself. As such, we needed to cautiously follow developments.
After several days of speaking to dozens of contacts across China,
many of whom I connected with during my coverage of China,
during the zero COVID years. I can cautiously make a

(01:10):
few points here. One, China is indeed seeing higher than
normal rates of people experiencing flu like symptoms, but that two,
the initial online reports of seriously overwhelmed hospitals across the
country with sites similar to what we saw during the
COVID days appear to be largely exaggerated and in some

(01:31):
cases sensationalized, though some hospitals, including in Beijing, do appear
to be strained by the numbers. However, the HMPV spread
is a real thing, and neighboring countries from Japan to
Vietnam to India are watching the situation closely as it
spreads to their own populations. Indeed, cases have been found

(01:52):
in neighboring countries already, including now Malaysia, and of course,
with memories of the pandemic still fresh in many minds,
many experts in these countries do not trust Beijing statements
on the nature of the spread. With that said, what
are health experts in these neighboring countries saying, unlike COVID nineteen,
HMPV is not a novel virus. Global immunity exists due

(02:14):
to prior exposures, making pandemic levels spread unlikely. However, its impact,
particularly on vulnerable groups, remains notable. Currently, there is no
vaccine or anti viral treatments for HMPV, though researchers ongoing
experts emphasize the importance of preventive measures to manage transmission.
Practicing good hygiene or staying home when sick are good strategies.

(02:37):
These simple actions can protect high risk groups and reduce
the virus's spread. Epidemiologists caution that currently the world is
not facing a major health emergency. Jacqueline Stephens, an Australian epidemiologists,
for example, expressed yesterday quote the increased prevalance is likely
the normal seasonal increase seen in winter. The reported high
prevalence amongst children also reflects what we know about the virus.

(03:02):
It is a common cause of childhood respiratory illness. End quote.
So it appears that China is just experiencing a particularly
nasty winter flu season, and there currently is not any
reason to worry too much if the facts on the
ground change. However, if things become more serious, I continue
to speak to my contacts in China and do visits

(03:24):
myself here, then We will discuss the situation again immediately
here on China Update, So make sure you're subscribed if
you want to keep on top of these updates. Specifically
for now, however, let's continue with regular developments. Chinese Technology
Giant ten cents US listed shares plummeted nearly ten percent
in trading on Monday following the Pentagon's announcement designating the

(03:47):
Chinese technology company as a quote Chinese military company end quote.
This move is part of Washington's ongoing efforts to counter
China's military expansion by targeting entities allegedly linked to itsy
civil fusion strategy. Ten Cent, owner of the widely used
messaging app we chat, was among several firms added to

(04:07):
a Defense Department blacklist citing indirect or direct ties to
the Chinese military, the PLA, or People's Liberation Army. The list,
unveiled in a federal document, aims to curb the flow
of advanced technology to China's military, which the Pentagon alleges
benefits from civilian industries like technology firms, universities, and research programs.
Despite the designation, being on the list does not carry

(04:29):
immediate legal consequences, but poses significant reputational risks. Ten Sence
spokesperson called the inclusion quote a mistake, quote, asserting the
company has no military affiliations while the designation has no
direct impact on its operations. Ten Cent pledged to work
with the Department of Defense to resolve the what it
called misunderstanding. Other notable additions to the list include CATL,

(04:54):
the world's largest EV battery maker and key supply to Tesla,
as well as chip maker chung Sin, Memory text Anologies
and drone maker Alteal Robotics. CATL, like ten Cent, disputed
the classification, emphasizing its non military focus. Of course, as
regular viewers know, it has been long known that many
of these large national champions that operate in the civilian

(05:17):
civil realm in China do have varying degrees of formal
and informal connections to the state and in some cases
the military. Starting next year, companies on the list will
face restrictions on business, with the Pentagon escalating to a
complete procurement ban by twenty twenty seven. These measures underscore

(05:37):
heightened US China tensions, as both nations impose export controls
on critical technologies. We will return to this later in
today's episode. For now, let's move to the next development,
which is related to the economy. In recent days, China's
top stock exchanges have met with foreign money managers. I
should point out the top exchanges that Shahai e changin

(05:59):
an investment bank to explore ways to boost sentiment among
international investors following the worst start to the year for
the markets since twenty sixteen. Beijing leadership always talks about
getting a good start to the new year, but in
the first three trading days of twenty twenty five, the
PRC stock markets have gone down every day. The discussions
come after a shift in monetary and fiscal policy aimed

(06:21):
at easing economic conditions, which has raised expectations for the
country's economic outlook. In separate statements, the Shanghai and Chinjin
stock markets highlighted that the meeting involved sixteen overseas institutions,
which expressed optimism about the government's resolve to stabilize growth.
Participants suggested that more presentations on Chinese policies and road

(06:42):
shows by blue chip companies would help foreign investors better
understand the country's economic dynamics. The exchanges reported a consensus
that a combination of existing and new policies would strengthen
long term investor confidence. That's what they said at least now.
Despite this would be positive outlook. The Chinese stock market
has faced a lot of volatility. The CSI three hundred index,

(07:03):
which tracks on shore stocks, for nearly three percent on
the first trading day of the year, continuing a trend
of uncertainty. However, foreign investors remain important players in China's market,
holding significant stakes in yen denominated stocks. Meanwhile, in a
move that likely will not help with market confidence, whether
with international investors or domestically, UK based writers reports today,

(07:26):
citing three unnamed sources, that China's main stock exchanges, again
Shnjin and Shanghai, asked some large mutual funds in the
country to restrict stock selling at the start of the year.
Quote at least four large mutual funds received calls from
the Shanghai and Shinjin stock exchanges on December thirty first

(07:46):
and January second and third, asking them to buy more
stocks than they sold each day, end quotes not a
positive sign. The markets opened down again today, with the
CSI three hundred now down almost six percent over the
last five trading days. Next up, we have one more

(08:09):
development to cover, but just quickly. If you're getting some
value from today's episode of China Update, don't forget to
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This channel is also primarily supported by you subscribers. I'm

(08:32):
often asked in the comment where do you get your
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Thank you so much everybody for the ongoing support. Next

(08:52):
up and final for today, we continue with our coverage
of the ongoing US China technology and trade competition. China
has escalated economic countermeasures against the US starting twenty twenty
five by blacklisting ten American defense contractors as so called
unreliable entities and barring twenty eight others from purchasing dual
use components that could serve civilian and military purposes, very

(09:15):
similar to what we just saw with the Pentagon in
the US. The moofollows increased U s ARM sales to
Taiwan under the Bayne administration and serves as a warning
to President elected Donald Trump about Beijing's willingness to protect
its national interests. The targeted companies include defense giants General Dynamics, Lockhead, Martin,
and Raytheon's RTX, along with Boeing's Defense Space and Security Unit.

(09:38):
While most of these firms conduct limited business with China,
the blacklist signals the tools Beijing could deploy more broadly
against American corporations in future conflicts. Indeed, Elon Musku was
very close to the upcoming Trump administration, sold forty percent
of Tesla's in China in twenty twenty four. Beijing's actions

(09:58):
reflected long standing opposition U s ARMED sales to Taiwan.
General Secretary Shooting Ping reiterated the stance in his New
Year's Address, emphasizing the inevitability of China's reunification with Taiwan.
To use his words, Despite Beijing's warnings, US administrations have
consistently provided Taiwan with defensive weapons under the nineteen seventy
nine Taiwan Relations Act. The later sanctions could prelude further

(10:20):
economic confrontations, particularly as President elect Trump has vowed to
increase pressure on China through tariffs and a transactional approach
to Taiwan. Experts warned that Beijing's ability to restrict four
hundred and seventy seven billion US dollars in goods exported
to G seven nations and jeopardize four hundred and sixty
billion UIs dollars in foreign investments could have significant global repercussions,

(10:40):
though China must also weigh the impact on its own
domestic economy. Indeed, I would personally argue that as exports
remain one of the only bright spots on China's growth
performance over the last twenty four months, Beijing would lies
to risk undermining its trade, especially considering it is facing
trade conflicts with made partners including the US, the EU,

(11:02):
and others. Bill Reisch, a former Commerce Department official and
now a shoal tier in International business at the Center
for Strategic and International Studies, a Washington based think tank,
says that these sanctions are mostly symbolic expressing over the
weekend quote, I think that's why they're doing it. It
is a shot across the bow. These are things that
are designed to remind the current administration and the next

(11:23):
one that they have a lot of influence on the
supply chains, and they have a lot of influence on
the global economy, in part by virtue of their interaction
with US. Meanwhile, China has also employed broader economic strategies
in recent years, and this escalated in recent days too,
with China stepping up scrutiny on the export of advanced
technologies used in producing battery materials, aiming to safeguard its

(11:47):
dominance in the global battery and electric vehicle supply chain.
Over the weekend, the Chinese Ministry of Commerce proposed adding
specific lithium refining and battery chemical production technologies to its
list of controlled exports, inviting public feedback on the draft
regulations until the first of February. The move reflex Bejing's
intend to protect critical innovations developed during its ascent as

(12:08):
a leader in battery production. The proposed restrictions focus on
emerging methods like direct lithium extraction and advanced chemical compounds
used in carthode production, which are vital for battery performance.
Analysts see this as a strategic effort to shield China's
proprietary technologies from international competitors, particularly amid escalating trade tensions

(12:30):
with the United States and others. While the controls are
limited to high end products, they could affect future overseas investments,
particularly joint ventures with foreign firms. Analysts That City Group
noted that the measures aimed to preserve China's leadership in
premium lithium ion phosphate LFP batteries rather than broadly restricting exports.

(12:52):
The announcement follows China's recent bands on exporting materials with
high tech applications, including gallium and germanium, as global competition intensifies.
These moves underline China's strategic approach to retaining its edge
in critical industries while responding to mounting pressures from Western nations. Okay,

(13:14):
that is today's episode of China Update. Thank you so
much everybody for watching. Have a good Tuesday, and I
will see you all tomorrow.
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