Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Beijing's bid to join mega trade pact

Written by Li-Ann Chin, associate
Edited by Iain Gibson, associate partner

22 September 2021

Good morning,

Last Thursday, headlines were made when the US, Australia and the UK announced a controversial trilateral security pact, Aukus, designed to counter the rise of China’s influence in the Indo-Pacific region, according to anonymous White House sources.
 
Less than 24 hours later, Beijing submitted a formal application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement signed in by Australia, New Zealand, Japan, Canada and seven other countries. Chinese officials have insisted there is “no connection” between the two announcements, but the timing does feel too on the nose to ignore.
 
A seat at the table is far from guaranteed for China. Beijing will first have to win support from Japan, Australia and Canada – member countries that it has antagonised in recent years.
 
Chinese officials angered by Canberra’s call last year for an international inquiry into Beijing’s handling of the Covid-19 pandemic, sought to impose hefty tariffs and import bans on Australian agricultural goods. And in retaliation to Canada’s 2018 detention of Huawei executive Meng Wanzhou pending her possible extradition to the US on fraud charges, the Chinese government charged two detained Canadian nationals – one a former diplomat – on the grounds of alleged espionage . The Senkaku and Diayu Islands dispute has long been a source of contention between Japan and China.
 
How the tables have turned.
 
“We believe that China joining the CPTPP would help promote economic integration in the Asia-Pacific and facilitate post-Covid economic recovery, trade development and investment,” said Zhao Lijian, China’s foreign ministry spokesperson. “China works for economic co-operation and regional integration. What the US and Australia push for is wars and destruction.”
 
Not everyone is wholly convinced of Beijing’s intentions. Indeed, some have dismissed this move as yet another example of China’s political grandstanding. Given its known penchant for strong-arming smaller nations, others have raised concerns that Beijing would use the size of the Chinese market to get its own way on issues. Members of the CPTPP notably include economies of a smaller size and less developed nature, namely, Malaysia, Vietnam and Brunei. Japan is expected to challenge China on CPTPP’s cross-border data transfer provisions, which Beijing’s newly tightened data security laws restrict.
 
Whether China’s inclusion in the CPTPP is approved by its existing signatories remains to be seen. But if approved, and if China’s desire for participation genuinely is on the basis of good faith, this sends a very important signal on Xi Jinping’s plans for economic and financial reforms, as well as the country’s unprecedented willingness to integrate with the international community.
 
We can only wait and see.

News

The Financial Times reported that Labour party leader Sir Keir Starmer is proposing to scrap its one-member-one-vote approach to leadership elections which will give MPs a bigger role in the process in a bid to prevent a repeat of the UK Labour party’s Corbyn era. Most Labour MPs are seen as more centrist than the membership, so the move seeks to lock out the “hard left” and is expected to cause outrage in the grassroots. (£)
 
The UK government signed a deal with US company CF Industries to restart production of carbon dioxide at plants in the UK after warnings of food shortages. CF Industries had previously halted work at two of its fertiliser factories, which supplies most of the carbon dioxide used in food production, due to soaring gas prices. Worryingly, however, the agreement is only expected to last for three weeks.
 
Speaking in the Oval Office at the start of a face-to-face meeting with prime minister Boris Johnson, president Joe Biden cautioned Johnson on the importance of maintaining the delicate balance achieved by the Good Friday agreement, warning that peace in Northern Ireland must not be jeopardised by tensions over post-Brexit trade rules.

Business and economy

Speaking to Sky News political editor Beth Rigby in New York, prime minister Boris Johnson described Britain’s energy crisis as a “short-term problem” and said he does not think there will be disruption to food supplied at Christmas. Soaring global gas prices have thrown the industry into crisis, with a great number of energy companies predicted to go bust in the next few weeks.
 
Heathrow Airport chief executive John Holland-Kaye warned MPs that “the UK aviation sector will go from one of the strongest in the world to one of the weakest in the world” as a result of the country’s strict travel rules relative to the rest of Europe. The recovery of UK’s airlines and airports are said to be severely “lagging behind Europe.”
 
Sandwich chain Pret a Manger confirmed plans to open more than 200 UK shops in the next two years, in a bid to become more than a “office worker’s staple”. The company’s focus is expected to shift away from city centres to residential and suburban areas as well as transport hubs and motorways.
 
The Department for Digital, Culture, Media and Sport wrote to the Competition & Markets Authority calling for it to conduct an investigation into the UK music industry as a result of the overdominance of major labels Universal Music, Warner Music and Sony Music and streaming service Spotify, amid concerns that the benefits of the streaming boom are not being passed on to musicians. (£)

Columns of note

Gideon Rachman writes in the Financial Times on why the Australia-UK-US security pact, Aukus, is welcome in the Indo-Pacific. Despite China and France having greeted the agreement with flamboyant outrage, many others in the region – the likes of India and Japan – are quietly applauding in agreement. (£)
 
Last week, US congresswoman Alexandra Ocasia-Cortez caused quite a stir at the buzzy Met Gala when she wore a white dress emblazoned with the slogan “Tax the Rich.” Some loved it, others criticised it as performative. Writing in The Guardian, Nesrine Malik argues that while grand political gestures can be inspiring, let’s not mistake them for victory.

Cartoon source: J.A.K

Markets

What happened yesterday?

Stocks in London recovered from heavy losses in Monday’s session by ending in the green yesterday, with solid performances from the likes of Pershing Square, IAG and Shell helping to boost markets.
 
The FTSE 100 ended the session stronger at 1.12% at 6,980.98, and the FTSE 250 was up 0.9% at 23,611.39.
 
Sterling was a mixed bag, last trading 0.01% weaker against the dollar at $1.3656, whilst gaining 0.02% on the euro to change hands at €1.1648.
 
Major indices put on a mixed performance on Tuesday as Wall Street;s attempt at rebounding from Monday’s heavy sell-off fell flat.
 
At the close, the Dow Jones Industrial Average was 0.15% weaker at 33919.84 and the S&P 500 was down 0.08% at 4,354.19, while the Nasdaq Composite closed down the session 0.02% stronger at 14,746.60.
 
In company news:
 
Uber indicated it is on course to report its first-ever profitable quarter, on an adjusted basis, after more than a decade since its inception.
 
Revolut, the UK’s most valuable fintech, scored a win yesterday as its “Revolut Securities” arm was officially approved as a licensed broker-dealer in the US, which will enable it to launch commission-free stock trading for its US customers in Q4 of 2021.
 
After overseeing a tenfold increase in its portfolio in the last year, the British Business Bank is expected to request for more cash in the chancellor’s budget for regional development to support the government’s “levelling up” agenda.
 
Streaming giant Netflix is reportedly in talks to acquire the whole business that owns and manages Roald Dhal’s works.

What’s happening today?

Interims

Deepmatter, Ecsc Group, Igas Energy, Oxford Biomedica, Pennant International, Quixant, Strix Group, Ten Ent Grp, The Mission Group, Trellus Health, Wandisco

AGMs

Babrock, Civitas Social Housing, Ig Group Holdings, IIika Plc, Miton Uk, Odyssean Inves., Seed Innov, Shearwater, Srt Marine Sys., Stanley Gibbons, Studio Ret, Worsley Inv Ltd

Int. Economic Announcements
(12:00) MBA Mortgage Applications
(15:00) Existing Home Sales (US)
(15:30) Crude Oil Inventories (US)

Source: Financial Times

did you know

Although the French croissant began originally as the Austrian–Viennese Kipfel, it became a uniquely French innovation only when French bakers and pastry chefs tinkered with the Kipfel recipe and replaced the brioche type dough with leavened puffed pastry dough. This leavened puff pastry dough can only be achieved by laminating the dough in butter, which gives French croissants their unique buttery flavour and flaky texture and differentiates it from the Austrian Kipfel.

Parliamentary highlights

House of Commons

Oral questions
Women and Equalities
 
Ten Minute Rule Motion
Hen Caging (Prohibition)
 
Legislation
The Compensation (London Capital & Finance PLC and Fraud Compensation Fund) Bill: Remaining Stages
The Subsidy Control Bill: Second Reading
 
Motion
Motion to appoint an external member of the Parliamentary Works Sponsor Body

Adjournment
Government support for Keyham in response to the shootings on 12 August 2021

House of Lords 

The House of Lords is in recess. The House will next sit on 11 October 2021.

Scottish parliament 

Portfolio Questions
Covid-19 Recovery and Parliamentary Business
 
Ministerial Statement
Diversion from Prosecution
 
Scottish Labour Party Debate
Health
Net Zero, Energy and Transport
 
Members’ Business
National Eye Health Week 2021

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