On July 16, 2020 Anonymous introducedthe following interesting summary of a discussion on Hong Kong, China, US, Currency and Semiconductor Matters matters [1]and [2].
(Presenter) How does market think the US Presidential Election?
Hong Kong
(Presenter) Economic prosperity of Hong Kong is based on three factors:
i) free trade port (=zero tariff on all goods)
ii) low corporate tax rate, and
iii) reliable Hong Kong Dollar (HKD) is 100% endorsed by USD and 1USD is fixed to 7.75-7.85 HKD. Does it change?
i) free trade port (=zero tariff on all goods)
ii) low corporate tax rate, and
iii) reliable Hong Kong Dollar (HKD) is 100% endorsed by USD and 1USD is fixed to 7.75-7.85 HKD. Does it change?
(Suzuoki) No tariff and low corporate tax rate policy will be maintained, but problem is HKD. USA might sell HKD.
(Sanada) As currency is sovereignty of nation, existence of HKD itself is unpleasant for China.
China is going to change one country two system, and HKD becomes unreliable in the international society. This definitely results in exchange rate depreciation of HKD. China accepts unreliability of HKD and changes rather intentionally present status of HKD, because China’s base currency is CNY and it is going establish CNY economy against USD. Experts of international finance may say it will take time to establish CNY economy, but, if combination of AIIB (Asian Infrastructure Investment Bank) and (the Belt and Road Initiative) successfully spreads under situation of coronavirus disaster, it might not take time.
(Presenter) Under CNY economy, what should we do?
(Sanada) We have to adopt to ambiguous situation.
(Suzuoki) CNY economy sounds strange, but, there were [Soviet/Russian] Ruble and USD blocks in the Cold War. China intends this situation.
(Presenter) There is rumor that leaders of CCP accumulate wealth such as money laundering and profit return through Hong Kong as loophole. Is this rumour true? Does this money accumulation change?
(Suzuoki) I do not know whether the rumour is true or not, but, USA believes it is true and tries to bully China. Leaders of CCP insist officially CNY economy, but they think it is difficult. USA does not admit rule violation, which USA have overlooked, any more by China through Hong Kong,
(Sanada) USA aims to stop flow of technologies, products and capital to China through Hong Kong, but, this is within expectations of China. China can obtain them through Europe, especially Germany.
(Presenter) Dispute over semiconductor between USA and China is escalating. USA invited plant of Taiwan Semiconductor Manufacturing Company, Ltd (TSMC).Though South Korea is an ally of USA [3] it has a strong trade connection with China.
(Suzuoki) USA directly threated Samsung not to sell semiconductor to Huawei[2].Japan and USA manufacture raw materials such as fluorinated polyimide, photoresistand hydrogen fluoride for 5Gsemiconductor of Samsung, and photoresist is a key material. Dutch semiconductor company (ASML) stops to supply its product to Huawei by threat of USA. Japan and USA can jointly prohibit to export raw materials to South Korea.
(Sanada) Semiconductor related market share of Huawei is 35% and is surprisingly a bit increasing under current severe sanction. The total share of Huawei and Samsung is nearly 50% and integration of Huawei and Samsung is a serious matter for USA. To prevent this, USA made Taiwan to its side.
However, it is not enough because the share of Taiwan is small. Japanese government starts, receiving the intension of USA, to give a subsidy (10 trillion JPN = 9 billion USD) to Fujitsu, Rakuten Mobile and NEC for development of 5G semiconductor. South Korea may be going to China side.
(Presentor) Does Samsung put a distance from Moon Jae-inn administration?
(Sanada) It wants to put a distance, but, cannot. South Korea government might arrest Lee Jae-yong, head of Samsung.
(Suzuoki) Samsung is multinational corporation, but, its HQ is in Seoul and owner family is Korean to whom South Korean law is applied.
(Presentor) Is it a threat by using law?
(Suzuoki) That’s right. Successive South Korean governments have controlled "Chaebols" in this manner. As South Korean government has enormous power, it can do anything. Samsung can not go to USA because owner family and executives are Korean.
(Sanada) In common sense, Biden wins because he is 10% advantageous to Trump at this time. In the last election, Hillary Clinton was overwhelmingly advantageous to Trump, but lost. Therefore, market doubts a result public opinion poll. Trump is appreciated in the economy. Market doubts to what extent Biden secures national interests of USA. Trump will criticize a pro-China orientation of Biden, and will point out issues of WHO and Hong Kong, and this tactics is effective on the public.
[1]Hong Kong strategy by Xi Jinping and future of free trade: thorough analysis by Sanada* and Suzuoki**, PRIME news*** Part 1 https://www.fnn.jp/articles/-/61029
* Yukimitsu Sanada, Professor of Aichi Shukutoku University, expert of east Asian regional economy and international finance
** Takabumi Suzuoki, Journalist and ex-editor of Nikkei Inc., expert of politics of South Korea.
*** BS Fuji PRIME news, past performers (status at the time): Y. Nakasone (ex-PM), Shinzo Abe (PM), S. Shii (Chairman of Japan Communist Party), Y. Koike (Governor of Tokyo), Y. Yoshihide (Chief Cabinet Secretary), etc.
In resent exclusive interview of the Under Secretary of State by “The Dong-a Ilbo”, he requested South Korea to join EPN (Economic Prosperity Network = anti-China network), and suddenly said “Samsung is a good company.” This was a direct threat to Samsung if you sell semiconductor to Huawei, USA will crush you”( this part was omitted in this article).
Anonymous