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The trade war’s not over yet

The trade war’s not over yet

Hello! Today: What's next for the U.S.-China trade war under Biden, Singapore's getting in on SPACs and your earnings calendar for next week.

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Overheard

  • "The shorts were getting killed, so they started covering. And that was a feeding frenzy ... I've never seen anything like this in my life." —Wedbush Securities analyst Michael Pachter explained what's behind GameStop's gigantic stock surge.
  • "[SGX] may not be able to compete with the Hong Kong exchange in terms of tech IPOs so it's trying to find another edge." —DailyFX strategist Margaret Yang explained why Singapore's stock exchange is looking to become the home for Asia's SPACs.
  • "If they got stuck with a larger bill than anticipated, the debt market would still be relatively favorable." —CreditSights analyst Davis Hebert said low interest rates may have boosted telecom spending in the record-breaking 5G auction.

The Big Story

What's next for the trade war?

In his first few days in office, President Biden has already undone a slew of Trump's actions. Diversity training is back, immigration is being reformed and the U.S. has recommitted itself to tackling climate change. But there's one thing that doesn't look like it's changing anytime soon: the China trade war.

Since Biden's inauguration, Chinese firms have signaled that they're hoping for a change in attitude.

  • China Mobile, China Unicom and China Telecom all asked the NYSE to reverse its decision to delist their stocks (again).
  • Huawei made public a letter from last year calling the U.S. a "beacon of technology."
  • Even officials got in on the mood, with a Chinese foreign ministry spokeswoman saying "the better angels in China-U.S. relations will beat the evil forces."

But they might be over-optimistic. As much as the Biden administration might seem like a redux of the Obama years, Trump appears to have permanently changed the U.S.–China trade relationship.

  • Most obviously, Trump's recent actions have locked America into an anti-China stance that's hard for Biden to come back from. In just the last couple weeks, the U.S. reportedly revoked Intel's license to supply Huawei; pressured the NYSE to delist the aforementioned telecom firms; blocked American investors from owning Xiaomi stock; and declared China's actions against the Uighurs a "genocide."
  • As consultant Mark Natkin told Bloomberg, Biden "may end up getting stuck enforcing any measures Trump [put] in place on his way out." Biden could undo most of Trump's actions, but doing so might not look great, politically: While it's easy to justify inaction against China, justifying action that's favorable to China is harder.

There's also a notable China-skeptical sentiment in the new administration.

  • Secretary of State Tony Blinken said this week that Trump was "right in taking a tougher approach to China," and agreed with the previous administration's genocide designation.
  • Meanwhile, new Treasury Secretary Janet Yellen said "China is undercutting American companies," and that the U.S. was prepared to use the "full array of tools" to respond.

So don't expect a full rollback of the China sanctions, at least not in the near term. That said, some things may change.

  • Rather than just taking action against China in the battle for tech supremacy, Biden seems set to put more of a focus on domestic investment. "I want to make sure we're going to fight like hell by investing in America first," he said. Obvious areas for that investment include climate tech, biotech and semiconductors.
  • Biden will also try to team up with allies to take on China, with officials signaling that cooperation will be a key difference from the Trump administration. It may have difficulty doing so, though: Despite a plea from new national security advisor Jake Sullivan, the EU recently agreed an investment deal with China — reportedly due to a lack of desire in Germany to pick sides between the U.S. and China.
  • Investors also hope that Biden's anti-China actions will be a bit more ... stable. The trading algorithms probably won't have to monitor @POTUS nearly as much as they did @realDonaldTrump, in other words.

For now, investors and companies are in wait-and-see mode. An anonymous Hong Kong-based banker told Nikkei Asia that there is still "some trepidation" toward Chinese companies listing on U.S. exchanges, with the coming weeks determining whether that trepidation starts to dissipate.

  • Some upcoming decisions will help set the tone. For one, we'll see what the NYSE does about the telecom delistings. Then next month, the government will be back in court over the TikTok ban (remember that?).
  • Expect the entire tech community to closely watch those decisions. They could shape the U.S.-China relationship for the next four years, and potentially decades to come.

Related: Protocol | China, our new vertical on the people, power and politics of Chinese tech, launches next week. Sign up here.

A MESSAGE FROM MICRON

Micron

For Raj Hazra, who is senior vice president of corporate strategy and communications at Micron, there has never been a more thrilling time than this golden age of data. In this interview, Hazra describes how "we are now at the doorstep of taking things that we thought were science fiction and making them real, and it's only going to be exponentially faster going forward". Read more from Micron's Raj Hazra.

Up to Speed

  • Monday: Grab was reported to be considering a U.S. IPO, which could raise over $2 billion. It's thinking about listing this year. Also Monday: Personio raised $125 million at a $1.7 billion valuation; and Gary Gensler was nominated to head the SEC.
  • Tuesday: Netflix earnings beat expectations, and shares soared on news that it expects to be free cash flow positive soon. That should bring an end to its constant borrowing. Also Tuesday: Citrix bought Wrike for $2.25 billion; Naver bought Wattpad for $600 million; Cruise raised $2 billion at a $30 billion valuation; Rivian raised $2.65 billion at a reported $28 billion valuation; and PPRO raised $180 million at an over $1 billion valuation.
  • Wednesday: The People's Bank of China proposed new rules that would allow antitrust probes and possible breakups of non-bank payment companies with more than 50% market share. That could halve Ant's valuation. Also Wednesday: Alibaba-backed Best was reported to be considering a sale.
  • Thursday: Intel earnings beat expectations, though share activity was tempered by suggestions that it would keep chip manufacturing in-house. It released earnings information early, after it was hacked. Also Thursday: IBM earnings missed estimates; Patreon was reportedly considering an IPO; Plaid was reportedly raising at a $15 billion valuation; and IG acquired Tastytrade for $1 billion.
  • Today: Tencent was reported to be talking to banks about a $6 billion loan, at an interest margin of 80 basis points over Libor. Alibaba was previously reported to be looking to sell $8 billion worth of bonds. Also: Huohua Siwei reportedly picked banks for its IPO; Samsung was reported to be considering a $10 billion fab in Texas; and NXP and Renesas reportedly raised car chip prices amid the global shortage.

Coming Up

  • Earnings season heats up next week. We've got Microsoft, AMD and Texas Instruments on Tuesday; Facebook, Apple, Tesla, AT&T and ServiceNow on Wednesday; Samsung, Visa, MasterCard and Comcast on Thursday; and SAP on Friday.
  • Kuaishou kicks off its IPO roadshow, aiming to go public at a $60 billion valuation.

A MESSAGE FROM MICRON

Micron

For Raj Hazra, who is senior vice president of corporate strategy and communications at Micron, there has never been a more thrilling time than this golden age of data. In this interview, Hazra describes how "we are now at the doorstep of taking things that we thought were science fiction and making them real, and it's only going to be exponentially faster going forward". Read more from Micron's Raj Hazra.

Thoughts/feedback/tips? Email me — shakeel@protocol.com — or tips@protocol.com. And subscribe to get Index in your inbox every week. Thanks for reading — have a great weekend, and see you next week.