China In Your Hand

If one billion people are to be believed, a video app owned by ByteDance, just one of several Chinese Decacorns, is a key part of their daily lives. TikTok has minted millionaires from teenagers just editing their lives and playful pranks into short bursts of music-backed mayhem. 

Tik-Tok goes the clock for one of ByteDance’s subsidiaries

In some ways, it is a shame that the app is too complicated for boomers (for whom Twitter and Instagram are the far-flung-end of the digital universe, and who never got to grips with Snapchat). If Trump used TikTok as his go-to medium for spreading his version of the world rather than Twitter, then ByteDance’s progeny may have been spared the tick-tock countdown of 45 days before its forced sale or shutdown. 

I fear this is just the tip of an iceberg in the battle for global supremacy. One hegemon’s attempts to turn the tide back. Trump channeling those who pushed King Canute to show it was not possible. There is much at stake. In addition to 2019’s tirade on trade, the accusations of coronavirus warfare in early 2020 have spiraled into a cold-war of words and actions that threatened to pull the rug from under the table of globalization. Trump seems able to push on this topic in his election year, in part as there is bipartisan support against China. The dominance of the US and all it stands for is at stake.

This is exemplified in the hitherto unrivaled dominance of the US dollar. The US has enjoyed a monopoly on currency for many years, and the status of the US dollar as the global reserve currency has afforded it tremendous direct and indirect advantages. Direct, as it can simply print more of the stuff, safe in the knowledge that the world needs dollars for trade. Indirect, as the US is the clearing-house for much of the worlds’ financial transaction flow. As banks such as Standard Chartered and HSBC have found out to their shareholders’ great costs, if you upset the US by playing with people they do not like (Iranians, Cubans to name but two) the threat of having your global business torn down, is enough to have you penitently writing billion-dollar cheques to the US treasury.

The days of the dollar may be numbered. The recent rapid rise in the price of Gold may be the moment where the world tries to wean itself off the mighty greenback. Emerging market currencies, including the Chinese Renminbi, may enter a period of strengthening, after a decade of weakness. The Euro has also risen in recent months, in a period where France’s President Macron is also envisioning a world where the US is not, unthinkably perhaps, Europe’s BFF.

Given the bi-partisan support in the US for China-bashing, further declines in the US-China relations are likely. Go-to Apps such as WeChat and TikTok will be removed from the Appstore — so new App stores will emerge. Apple’s stranglehold and 30% shakedown on App-developers will be challenged further. The US will no longer be an exit for US private equity investors in China growth technology stocks, they will list in Shanghai and Hong Kong instead. It’s not all lost. China and the US will not go to actual war — there is too much at stake. The war will be a war of Apps and market dominance and ultimately the winner will be determined by the users, themselves. China is indeed in your hand, as T’Pau once sang. 

Myanmar has Jaded Western eyes – now China’s opportunity?

Myanmar is a complex country at the geographic crossroads of India and China and the temporal crossroads of a frontier economy and a failed state. After several years of being wide-open to Western admirers, there is now a potential pivot to China.

In Pakistan, as an example, China has agreed to invest around $70 billion in infrastructure development in recent years, in Myanmar only $15 billion has been invested by China over the past three decades. In 2012 when Myanmar opened up more, it was in part to pivot towards the West, and not become dependent on China. The West eagerly pounced on the opportunity, with Hillary Clinton and President Obama, welcoming the reforms and putting Aung San Su Kyi on a very high pedestal.

The November 2015 elections initially appeared to be a milestone for Myanmar’s reform, and a legacy for the then President Thein Sein, with a sweeping win for Aung San Su Kyi’s party, but the fact that the Generals retained a key 25% block in Parliament quickly started to cast a shadow. Despite that, Billions of dollars of aid and investment flowed into the country, with dramatic impact seen in several areas. Land prices sky-rocketed, and everybody looked at putting a toe in the water.

The shine came off the Golden Land very quickly in 2017 when the problems in Rakhine state illuminated more issues than the West was really keen to know. Firstly, the Military is very good at reacting swiftly and fiercely to any challenge on its borders, as it has been hardened for many years in its battles with Ethnic groups in the northern Shan states. Secondly, the ruling party has little visible power, particularly as it has to contend with the blocking 25% stake held by the Military. Thirdly, Aung San Su Kyi has disappointed many in her apparent inability to act decisively, being the politician first and Nobel Laureate and icon of hope second. Lastly, perhaps more worryingly, is the attitude of the general population themselves to the Rohingya issue.

The Rohingya have little support among Myanmar’s 135 distinct ethnic groups, across the spectrum of religious, economic or educational levels. They are not valued as citizens of Myanmar. Their land sits in an important geographical area which promises access to resources for foreign investors, particularly the Chinese. They do, of course, have different religious beliefs to the majority of the predominantly Buddhist Myanmar people, but the problem is not only about religion.

The refugee crisis that is emerging as a result of the clearing of the Rohingya is possibly the worst in the world, on par with Syria. The world is unprepared. Bangladesh, the recipient of much of the recent influx, possibly numbering close to one million displaced people, is unable to cope and contain these starving and maltreated people.

The pressure on Myanmar will almost certainly increase. Its golden shine has been indelibly tarnished, and the next few years will bring domestic political change, possibly a coalition, or worst still a more pro-Military led parliament, once more, but almost certainly consigning the legacy of Aung San Su Kyi to disgrace. What this means for investors is unknown. There have been some positive improvements for Myanmar’s 60 million people, in particular, a dramatic improvement in its connectivity – now more than 80% of the population have access to a data-enabled phone. Information is more free-flowing, at least for now, for as long as the Military does not interfere too much (It controls one of the four mobile telecoms company, MPT, and is friendly to the fourth, controlled by Vietnam’s military.)

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The Chinese are willing to protect Myanmar’s Generals and may become the source of financing for infrastructure development that is much needed, and which Japan and some of the multilateral agencies may be unwilling or unable to provide if targetted sanctions are re-imposed.