Good evening. It seems like a distant and naive age now, but there was a time when the conventional wisdom in both Beijing and Washington was that the world’s two most powerful nations could be complimentary partners rather than zero-sum enemies. That benign view was reflected in both capitals’ enthusiasm for Chinese corporate listings on the New York and Nasdaq stock exchanges, via which Chinese companies — state and private-sector alike — could raise precious capital and master the best practices demanded by institutional investors. But now the Chinese firms that were once welcomed to New York are seen by some U.S. politicians as Trojan horses concealing dangerous threats, while in the Xi Jinping era the Communist Party wants China’s best companies listed at home. Noah Berman tracks the “delisting” fever that could force Chinese companies off U.S. exchanges and the risks this poses to investors.
Also in this week’s issue: The Israel-Iran War hits China’s “teapot” refineries; Rachel Cheung on the Labubu craze; an update on the TikTok ban that isn’t a ban; Ely Ratner on confronting and containing China; and the Chinese government’s “deep tech” surge.
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China Inc’s American Exodus
First it was the test cases, such as Brilliance Automotive. Then came the big state-owned enterprises that commanded the heights of the Chinese economy, followed by the private sector technology giants that so successfully stormed those same heights. All were invited to list their shares on the New York and Nasdaq stock exchanges. But these once welcome arrivals are now pariahs in Washington and moving back home as the U.S. and Chinese financial industries — like the two countries’ technology, education and so many other sectors — are forcibly decoupled.
The Big Picture: A Middle East tempest threatens China’s “teapot” refineries
As jet-fighters and missiles scream between Israel and Iran, few countries are as exposed to the conflict’s fall-out as China. Over the past decade China has become an indispensable economic partner for Iran, importing discounted crude through opaque supply chains that help Tehran sidestep U.S. sanctions. Much of that oil ends up in China’s independent “teapot” refineries, which thrive in regulatory gray zones. But the teapots’ bargain-barrel business model now faces an existential crisis, writes Dean Minello, as Iran’s energy infrastructure comes under attack and the U.S. tries to sanction the teapots directly.
The world goes gaga for Labubu
Move over Barbie and Hello Kitty because here comes Labubu, a quirky elf with a toothy grin. From New York to Hollywood and Sydney to London, the designer toy is all the rage. Labubu fever has propelled the share price of its maker, Hong Kong-listed Pop Mart, to record highs. While Pop Mart appears to be the lucky beneficiary of an unlikely overnight success, Rachel Cheung traces how the once little known company brought Labubu to market — and whether more Chinese creative successes could follow.
When the law of the land isn’t the law of the land
Where did all those China hawks who wanted TikTok shut down in the U.S. go? On June 18 President Trump said he would extend, for the third time, his deadline for finally enforcing the law banning the app — a law the Supreme Court has upheld. Extension No. 3 for TikTok was hardly front-page news, even though it is not clear that these extensions are legal. The lack of political will to enforce the law follows a shift in U.S. public opinion, which was previously in support of banning the app, Noah Berman writes. That’s good news for the millions of Americans who enjoy or reap profits from the short-video platform, and bad news for parents who dread its addictive effects on their children.
A Q&A with Ely Ratner
Ely Ratner served in the Biden administration as Assistant Secretary of Defense for Indo-Pacific Security Affairs and also headed the Pentagon’s China Task Force, roles in which he focused on ways to counter China’s military rise.
In this week’s Q&A, Ratner tells Bob Davis that East Asia needs a NATO-inspired counterpart — built around the U.S., Japan, the Philippines and Australia — to replace an “outdated” series of U.S. bilateral alliances in the region. He also believes that while most policy makers in Washington recognised the magnitude of “the China challenge”, it is not yet sufficiently “embedded in our national security strategies”. The U.S., Ratner warns, “doesn’t have primacy like it once did in the western Pacific”.
Ely Ratner
Illustration by Lauren Crow
Deep Pockets for Deep Tech
Facing a unicorn gap with the U.S., the Chinese government recently earmarked 1 trillion RMB ($138 billion) for investment in “deep tech” start-ups. Michael Laha writes that while big spending is no guarantee of big breakthroughs, the U.S. should respond in kind.
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