On the first trading day of the new year, it is clear that the raging cold war between China and the United States isn't slowing down.
Progress in thawing tensions remains the hope of investors in both nations and around the world, but 2021 might not see any such detente.
As Donald Trump leaves office, he leaves an active volcano bubbling for the 46th president. Even Secretary of State Michael Pompeo expressed regret on Monday that Washington hadn’t come closer to resolving “hard issues” with China in The David Rubenstein Show: Peer-to-Peer Conversations.
On the last day of 2020, the New York Stock Exchange said it would delist China’s three major telecoms: China Telecom Corp. Ltd. (NYSE: CHA; HKEX: 0728), China Mobile Ltd (NYSE: CHL; HKEX: 0941). and China Unicom Hong Kong Ltd. (NYSE: CHU; HKEX: 0762). The trading of these companies will be suspended between Jan. 7 and Jan. 11, according to AP News.
Beijing followed with threats of its own, saying on Saturday that countermeasures will follow. A spokesperson for the Chinese Commerce Ministry said in a statement that China opposes the list of “Communist China Military Companies” and that the move will “greatly weaken all parties’ confidence in the U.S. capital market.” The Ministry did not specify on what the countermeasures will be, but some analysts expressed doubts that these will be significant.
On Monday afternoon, China Telecom and China Mobile both tumbled 6% to $25.22 and $26.71 per share, respectively; Unicom was down 4%, at $5.48 per share. As CNBC reported, investors in these stocks may be able to convert them to Hong Kong-listed shares.
The delisting follows the order Trump signed in November that bans U.S. investment in companies it alleged are owned or controlled by Chinese military. Potentially, the next to face delisting may be oil stocks CNOOC Ltd. (NYSE: CEO; HKEX: 0883), PetroChina (NYSE: PTR; HKEX: 0857), and Sinopec, or China Petroleum and Chemical Corp. (NYSE: SNP; HKEX: 0386), according to Bloomberg Intelligence analyst Henik Fung.
Blame for Covid-19
While Trump has long spit fire at China, blaming it for the Covid-19 outbreak, his officials now claim to have evidence. Deputy National Security Adviser Matthew Pottinger said that the coronavirus’ “leak or an accident” at a laboratory in Wuhan is the most “credible” theory, as reported by The Mail on Sunday.
“There is a growing body of evidence that the lab is likely the most credible source of the virus,” Pottinger said in a call with world politicians. The lab is the secret Wuhan Institute of Virology that’s 11 miles from the market, he said.
Pottinger also said Chinese leaders are “admitting” to the chance that the virus did not originate at a market.
U.S. authorities are rumored to be talking to an ex-scientist from the Wuhan lab.
The U.S. case against a top manager of Chinese telecoms giant Huawei continues into 2021, though Washington has offered a deal to Huawei’s chief financial officer. Under the proposal, Meng would admit to the wrongdoing and in return be allowed to return to China, The Wall Street Journal reported in early December.
Since her arrest in Vancouver, two years have passed. Meng is charged for wire and bank fraud related to Huawei’s alleged violations of U.S. sanctions on trade with Iran. If she agrees to the deal, the prosecutors would defer and potentially drop the charges altogether, writes the WSJ. At the time, Meng resisted the offer.
However, the deal is seen by some experts as a trap. Vancouver barrister Gary Botting, an expert on extradition law, has just said in the National Post, “If Meng admits to wrongdoing, she would have a criminal record and any number of countries (including Canada) could use this against her.”
At the end of the troubled year, China again urged Washington to stay out of its internal affairs. This was after the U.S. demanded the release of a Uyghur doctor, sentenced to 20 years in jail for her relative’s human rights activism.
Earlier in December, BBC released a research report titled “China’s ‘tainted’ cotton” alleging China is “forcing hundreds of thousands of Uighurs and other minorities into hard, manual labour in the vast cotton fields of its western region of Xinjiang.” The report claims to reveal for the first time the massive scale of coerced cotton picking by use of half a million minority workers a year.
Beijing has denied the allegations. Earlier, it called what looks like concentration camps in Xinjiang “vocational training schools” and a project aiming to alleviate poverty.
Now, the U.S. is considering marking China’s repression of ethnic Uyghurs in Xinjiang as “genocide,” proposed for review by U.S. outgoing Secretary of State Mike Pompeo. As Foreign Policy writes, the move “could trigger a final determination from the United States, following years of pressure from U.S. lawmakers and human rights organizations, and would be a significant symbolic and diplomatic message by itself.”