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Showing posts with label High-tech sector. Show all posts
Showing posts with label High-tech sector. Show all posts

Tuesday 18 December 2018

When Will the U.S. Dollar Collapse?


https://youtu.be/N8IyDSrMY3w

collapsing dominos with international currency symbols on them
A dollar collapse is when the value of the U.S. dollar plummets. Anyone who holds dollar-denominated assets will sell them at any cost. That includes foreign governments who own U.S. Treasurys. It also affects foreign exchange futures traders. Last but not least are individual investors.

When the crash occurs, these parties will demand assets denominated in anything other than dollars. The collapse of the dollar means that everyone is trying to sell their dollar-denominated assets, and no one wants to buy them. This will drive the value of the dollar down to near zero. It makes hyperinflation look like a day in the park.

Two Conditions That Could Lead to the Dollar Collapse

Two conditions must be in place before the dollar could collapse. First, there must be an underlying weakness. As of 2017, the U.S. currency was fundamentally weak despite its 25 percent increase since 2014. The dollar declined 54.7 percent against the euro between 2002 and 2012. Why? The U.S. debt almost tripled during that period, from $6 trillion to $15 trillion. The debt is even worse now, at $21 trillion, making the debt-to-GDP ratio more than 100 percent. That increases the chance the United States will let the dollar's value slide as it would be easier to repay its debt with cheaper money.

Second, there must be a viable currency alternative for everyone to buy. The dollar's strength is based on its use as the world's reserve currency. The dollar became the reserve currency in 1973 when President Nixon abandoned the gold standard. As a global currency, the dollar is used for 43 percent of all cross-border transactions. That means central banks must hold the dollar in their reserves to pay for these transactions. As a result, 61 percent of these foreign currency reserves are in dollars.

Note:  The next most popular currency after the dollar is the euro. But it comprises less than 30 percent of central bank reserves. The eurozone debt crisis weakened the euro as a viable global currency.

China and others argue that a new currency should be created and used as the global currency. China's central banker Zhou Xiaochuan goes one step further. He claims that the yuan should replace the dollar to maintain China's economic growth. China is right to be alarmed at the dollar's drop in value. That's because it is the largest foreign holder of U.S. Treasury, so it just saw its investment deteriorate. The dollar's weakness makes it more difficult for China to control the yuan's value compared to the dollar.

Could bitcoin replace the dollar as the new world currency? It has many benefits. It's not controlled by any one country's central bank. It is created, managed, and spent online. It can also be used at brick-and-mortar stores that accept it. Its supply is finite. That appeals to those who would rather have a currency that's backed by something concrete, such as gold.

But there are big obstacles. First, its value is highly volatile. That's because there is no central bank to manage it. Second, it has become the coin of choice for illegal activities that lurk in the deep web. That makes it vulnerable to tampering by unknown forces.

Economic Event to Trigger the Collapse

These two situations make a collapse possible. But, it won’t occur without a third condition. That's a huge economic triggering event that destroys confidence in the dollar.

Altogether, foreign countries own more than $5 trillion in U.S. debt. If China, Japan or other major holders started dumping these holdings of Treasury notes on the secondary market, this could cause a panic leading to collapse. China owns $1 trillion in U.S. Treasury. That's because China pegs the yuan to the dollar. This keeps the prices of its exports to the United States relatively cheap. Japan also owns more than $1 trillion in Treasurys. It also wants to keep the yen low to stimulate exports to the United States.

Japan is trying to move out of a 15-year deflationary cycle. The 2011 earthquake and nuclear disaster didn't help.

Would China and Japan ever dump their dollars? Only if they saw their holdings declining in value too fast and they had another export market to replace the United States. The economies of Japan and China are dependent on U.S. consumers. They know that if they sell their dollars, that would further depress the value of the dollar. That means their products, still priced in yuan and yen, will cost relatively more in the United States. Their economies would suffer. Right now, it's still in their best interest to hold onto their dollar reserves.

Note: China and Japan are aware of their vulnerability. They are selling more to other Asian countries that are gradually becoming wealthier. But the United States is still the best market (not now) in the world.

When Will the Dollar Collapse?

It's unlikely that it will collapse at all. That's because any of the countries who have the power to make that happen (China, Japan, and other foreign dollar holders) don't want it to occur. It's not in their best interest. Why bankrupt your best customer? Instead, the dollar will resume its gradual decline as these countries find other markets.

Effects of the Dollar Collapse

A sudden dollar collapse would create global economic turmoil. Investors would rush to other currencies, such as the euro, or other assets, such as gold and commodities. Demand for Treasurys would plummet, and interest rates would rise. U.S. import prices would skyrocket, causing inflation.

U.S. exports would be dirt cheap, given the economy a brief boost. In the long run, inflation, high interest rates, and volatility would strangle possible business growth. Unemployment would worsen, sending the United States back into recession or even a depression.

How to Protect Yourself

Protect yourself from a dollar collapse by first defending yourself from a gradual dollar decline.

Important:  Keep your assets well-diversified by holding foreign mutual funds, gold, and other commodities.

A dollar collapse would create global economic turmoil. To respond to this kind of uncertainty, you must be mobile. Keep your assets liquid, so you can shift them as needed. Make sure your job skills are transferable. Update your passport, in case things get so bad for so long that you need to move quickly to another country. These are just a few ways to protect yourself and survive a dollar collapse.

US Trade Deficit With China and Why It's So High

The Real Reason American Jobs Are Going to China 


The U.S. trade deficit with China was $375 billion in 2017. The trade deficit exists because U.S. exports to China were only $130 billion while imports from China were $506 billion.

The United States imported from China $77 billion in computers and accessories, $70 billion in cell phones, and $54 billion in apparel and footwear. A lot of these imports are from U.S. manufacturers that send raw materials to China for low-cost assembly. Once shipped back to the United States, they are considered imports.

In 2017, China imported from America $16 billion in commercial aircraft, $12 billion in soybeans, and $10 billion in autos. In 2018, China canceled its soybean imports after President Trump started a trade war. He imposed tariffs on Chinese steel exports and other goods. 

Current Trade Deficit

As of July 2018, the United States exported a total of $74.3 billion in goods to China. It imported $296.8 billion, according to the U.S. Census Bureau. As a result, the total trade deficit with China is $222.6 billion. A monthly breakdown is in the chart.
US$211.1
Jul 18
US$202
Jan 18
US$205
Feb 18
US$210
Mar 18
US$210
Apr 18
US$214
May 18
US$213
Jun 18
US$211
Jul 18

Causes

China can produce many consumer goods at lower costs than other countries can. Americans, of course, want these goods for the lowest prices. How does China keep prices so low? Most economists agree that China's competitive pricing is a result of two factors:
  1. A lower standard of living, which allows companies in China to pay lower wages to workers.
  2. An exchange rate that is partially fixed to the dollar.
If the United States implemented trade protectionism, U.S. consumers would have to pay high prices for their "Made in America" goods. It’s unlikely that the trade deficit will change. Most people would rather pay as little as possible for computers, electronics, and clothing, even if it means other Americans lose their jobs.

China is the world's largest economy. It also has the world's biggest population. It must divide its production between almost 1.4 billion residents. A common way to measure standard of living is gross domestic product per capita. In 2017, China’s GDP per capita was $16,600. China's leaders are desperately trying to get the economy to grow faster to raise the country’s living standards. They remember Mao's Cultural Revolution all too well. They know that the Chinese people won't accept a lower standard of living forever.

China sets the value of its currency, the yuan, to equal the value of a basket of currencies that includes the dollar. In other words, China pegs its currency to the dollar using a modified fixed exchange rate. When the dollar loses value, China buys dollars through U.S. Treasurys to support it. In 2016, China began relaxing its peg. It wants market forces to have a greater impact on the yuan's value. As a result, the dollar to yuan conversion has been more volatile since then. China's influence on the dollar remains substantial.

Effect

China must buy so many U.S. Treasury notes that it is the largest lender to the U.S. government. Japan is the second largest. As of September 2018, the U.S. debt to China was $1.15 trillion. That's 18 percent of the total public debt owned by foreign countries.

Many are concerned that this gives China political leverage over U.S. fiscal policy. They worry about what would happen if China started selling its Treasury holdings. It would also be disastrous if China merely cut back on its Treasury purchases.

Why are they so worried? By buying Treasurys, China helped keep U.S. interest rates low. If China were to stop buying Treasurys, interest rates would rise. That could throw the United States into a recession. But this wouldn’t be in China's best interests, as U.S. shoppers would buy fewer Chinese exports. In fact, China is buying almost as many Treasurys as ever.

U.S. companies that can't compete with cheap Chinese goods must either lower their costs or go out of business. Many businesses reduce their costs by outsourcing jobs to China or India. Outsourcing adds to U.S. unemployment. Other industries have just dried up. U.S. manufacturing, as measured by the number of jobs, declined 34 percent between 1998 and 2010. As these industries declined, so has U.S. competitiveness in the global marketplace
.

What's Being Done

President Trump promised to lower the trade deficit with China. On March 1, 2018, he announced he would impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum. On July 6, Trump's tariffs went into effect for $34 billion of Chinese imports. China canceled all import contracts for soybeans.

Trump's tariffs have raised the costs of imported steel, most of which is from China. Trump's move comes a month after he imposed tariffs and quotas on imported solar panels and washing machines. China has become a global leader in solar panel production. The tariffs depressed the stock market when they were announced.

The Trump administration is developing further anti-China protectionist measures, including more tariffs. It wants China to remove requirements that U.S. companies transfer technology to Chinese firms. China requires companies to do this to gain access to its market.

Trump also asked China to do more to raise its currency. He claims that China artificially undervalues the yuan by 15 percent to 40 percent. That was true in 2000. But former Treasury Secretary Hank Paulson initiated the U.S.-China Strategic Economic Dialogue in 2006. He convinced the People's Bank of China to strengthen the yuan's value against the dollar. It increased 2 to 3 percent annually between 2000 and 2013. U.S. Treasury Secretary Jack Lew continued the dialogue during the Obama administration.

The Trump administration continued the talks until they stalled in July 2018.

The dollar strengthened 25 percent between 2013 and 2015. It took the Chinese yuan up with it. China had to lower costs even more to compete with Southeast Asian companies. The PBOC tried unpegging the yuan from the dollar in 2015. The yuan immediately plummeted. That indicated that the yuan was overvalued. If the yuan were undervalued, as Trump claims, it would have risen instead.

Source: The Balance


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Saturday 15 December 2018

How should China adjust its industrial policy?

Made in China 2025 will boost manufucturing

http://www.chinadaily.com.cn/a/201804/14/WS5ad15aa0a3105cdcf6518423.html

US misreading Made in China 2025 by design

http://usa.chinadaily.com.cn/a/201804/10/WS5acbf11ba3105cdcf6517163.html


Made in China 2025: The domestic tech plan that sparked an international backlash
https://youtu.be/E7Jfrzkmzyc https://youtu.be/DQe61RNOttI

According to media reports, China is drafting a replacement for the "Made in China 2025" plan, with a new program promising greater access to China's markets for foreign companies and playing down China's bid to dominate manufacturing.

The "Made in China 2025" plan is a key concern of the US. The high tech products made by Chinese companies have been targeted amid the US-provoked trade war against China.

All major industrial countries have their own industrial policy that aims to promote high tech development, such as Germany's "Industry 4.0" strategy.

The intent in drafting the "Made in China 2025" plan is obviously justifiable. The discontent and concern it has stirred among the US and other Western countries shows the plan has unique implications for those countries.

The "Made in China 2025" plan emphasizes support to State-owned enterprises (SOEs) and the investment of huge amounts of capital. China's private enterprises have faced difficulties for quite some time and there has been talk of a trend known as "the State advances while the private sector retreats." Therefore, it has become necessary and urgent to create an environment that provides fairer competition between SOEs and private firms.

The objections to the "Made in China 2025" plan made by the US have been beyond China's expectations.

Drafting the plan is a matter of China's sovereign right and China can totally ignore the attitude of the US and focus on its own decision. But China is now deeply intertwined with the world and there are practical reasons to mutually coordinate China's interest and those of Western countries including the US. Expanding areas of common interest is an important way that China has adopted to continuously move forward its reform and opening-up.

China will likely adjust its future industrial plan and policies accordingly while insisting on its right to develop the country's high technology sector.

The major direction of the adjustment could be granting the market a bigger role and creating an environment for fairer competition between enterprises with different forms of ownership.

Regarding whether or how China should adjust its industrial plan, we would like to analyze the key changes of the overall environment and the principles China should stick to in adapting to these changes.

First, the external environment of China's development and the dynamic of internal and external economic interactions have undergone major changes since the beginning of this year. We need to adopt a pragmatic attitude toward these changes and respond actively.

Second, external pressure has always been a driving force for China's domestic reforms. The more open China is, the more it needs to respond to external demands. China's interaction with the outside world is a result of the need to better realize national interests, rather than being pushed to make humiliating concessions in which sovereignty is oppressed. In the 21st century, China should no longer hold the belief that being tough and confrontational is more politically correct than making concessions.

Third, China's development must lead to win-win results for the world. This is the lifeline of our peaceful development and cannot be a mere slogan. China needs to be more open to the world, increase its momentum of development through expanding foreign cooperation, and bring more benefits to the world.

Fourth, China should not fear taking economic or political risks in further expanding its opening-up policy. Fair competition between all types of companies will force SOEs to reform. In fact, many SOEs are not short of funds, but lack a competitive management mechanism. By unleashing the vitality of various enterprises, China's technological innovations will usher in a new chapter. If a more robust development is achieved, we will have more resources to maintain the political cohesion of the country, avoiding greater ideological risks.

Reform and opening-up is the only path China should follow. We have achieved successful results over the past 40 years, as will we do in the future. We must effectively emancipate our minds and resolutely overcome all the difficulties on the road to success - this should be the motto of Chinese society from generation to generation.- Global Times

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Risk of rising McCarthyism warned amid China-US spat

Photo: VCG

China’s business people, researchers, scholars say they ‘feel the chill’ in US


Growing China-US tensions have affected technology cooperation as Chinese scientists and researchers in cutting-edged sectors such as big data and artificial intelligence have seen rising obstacles in working with US counterparts this year.

Tensions have intensified after Canada announced the detention of Huawei Chief Financial Officer Meng Wanzhou at the request of the US.

This move is believed to be part of the US' intentions of dampening Chinese companies and investment, which aroused worries that McCarthyism is back in Washington.

"Some open-sourced platforms developed by American firms, such as in the machine learning algorithm sector, have started to limit access or charge fees for tapping into those platforms," a senior scientist in a Shenzhen-based AI company, who asked for anonymity, told the Global Times on Thursday.

"Some Chinese scientists were denied visas this year when they planned to attend academic meetings in the US, and the US' cautious attitude toward Chinese engineers has become more obvious," he said.

The Chinese academic community has felt the chill in relations since the beginning of this year, and the recent arrest of Meng has escalated conflict between the US and China. Some industry representatives even deemed the arrest as a long-term plan by the US to curb China's rise in high technology.

Meanwhile, the effects of the tension have also expanded to business. Hong Kong political risk consultancy SVA said they noticed a remarkable increase in inquiries from US-based companies about potential problems of traveling to China after Meng's detention for fear of China's retaliation, the Japan-based Nikkei Asian Review reported on Tuesday.

A Hong Kong-based financial technology company also moved two investor meetings from Shanghai to Manila to avoid being affected by Meng's case in consideration of its US co-founder, according to the Nikkei report.

The Trump administration has been restricting visas for the Chinese academic community studying in sensitive research fields to one year since June 11, reflecting its efforts to stop alleged intellectual property theft and hinder China's push for technological supremacy, the New York Times reported in July.

"The consensus of curbing China's influence has been forged inside the US government, and Chinese companies should be well prepared for confrontation in the long term," Sun Qingkai, partner of the major Chinese AI firm CloudWalk, told the Global Times on Thursday.

Sun's remarks are echoed by the tendency of Americans to habitually doubt anything related to China, particularly to Huawei at this moment.

The Brookings Institution, a Washington-based think tank, released a report in October 2017 on safe cities. The report, supported by Huawei, speaks highly of a new policing technology implemented in the Kenyan capital of Nairobi and the Chinese city of Lijiang but failed to mention that the technology was provided by Huawei.

An opinion piece of The Washington Post published on December 7 listed financial support from Huawei to Brookings and interactions between the writer of the report, Darrell M. West, who is also Brookings vice president, and Huawei founder Ren Zhengfei.

It then said that such relationship raises doubts over West's scholarship practices and represents "a worrying example of China's influence on one of America's leading think tanks" without providing any hard evidence.

China's cooperation with other countries was also negatively affected, especially those in high-tech sectors. An example is the Japanese government's recent ban on Huawei and ZTE from official contracts. The move followed an earlier warning from the US about security risks involved in using Chinese-made equipment, Washington Post reported on Monday.

McCarthyism warning

The current US strategy of blaming China for its own domestic economic and social problems reflects the country's anxiety and myopia facing these problems, which would only worsen the situation, Zha Xiaogang, a research fellow at the Shanghai Institute for International Studies, told the Global Times on Thursday.

Zha warned that although it seems impossible for the US to return to the McCarthy-era "red scare," when the anti-communism campaign penetrated all aspects of US society, such risks remain if the situation continues to escalate.

"There is already a dire ripple effect from the US-China trade war, which will hurt the US itself and global technology collaboration," said the Shenzhen-based senior scientist.

However, technology companies have been urging more cooperation instead of confrontation, which would hurt global advancement in this sector.

Major tech giants such as US firms Google and Apple, and China's Huawei have highlighted the importance of global collaboration, which will be the driving force for technology advancement.

Google Vice President Jay Yagnik told the Global Times in an earlier interview in September that technology has been a greater "uniter" globally from a historical view. Instead of thinking about competition, companies should think about it in terms of bringing the world together and taking society to the next level.

It is in everyone's best interest that the US and China reach an agreement on trade and future intellectual property and technology collaboration, Chris Dong, global research director at International Data Corporation, told the Global Times on Thursday.

"A more open market with less government intervention, and with mutual respect and reciprocity, will benefit not only a healthier US and China trade relationship, but also the talent and knowledge exchanges," Dong said.- Global Times

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Thursday 13 December 2018

Huawei founder and CEO Ren Zhengfei survived a famine, but can he weather President Trump?

https://youtu.be/rqRItBZOp5g
  • Ren Zhengfei leads Huawei Technologies, one of the world's largest manufacturer of telecommunication hardware and mobile phones.
  • Ren is the son of school teachers and grew up in a mountainous town in southern China's Guizhou Province.
  • Ren held technician posts in China's military and worked for Shenzhen South Sea Oil before establishing Huawei with the equivalent of $3,000 in 1987.
  • Huawei today does business in more than 170 countries with 180,000 employees.
https://youtu.be/IlYpF4-UMII
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https://youtu.be/IThPR22gTjM
https://youtu.be/kpQuSvdFu5A
https://youtu.be/0qcP6jgGxxk



    Mr Ren Zhengfei survived Mao Zedong's great famine and went on to build a telecom giant with US$92 billion in revenue that strikes fear among some policymakers in the West.PHOTO: EPA-EFE
    HONG KONG (BLOOMBERG) - At the sprawling Huawei Technologies campus in Shenzhen, the foodcourt's walls are emblazoned with quotes from the company's billionaire founder and chief executive Ren Zhengfei.

    Then there's the research lab that resembles the White House in Washington. Perhaps the most curious thing, though, are three black swans paddling around a lake.

    For Mr Ren, a former People's Liberation Army soldier turned telecom tycoon, the elegant birds are meant as a reminder to avoid complacency and prepare for unexpected crisis. That pretty much sums up the state of affairs at Huawei, whose chief financial officer, Ms Meng Wanzhou, who's also Mr Ren's daughter, is in custody in Canada and faces extradition to the United States on charges of conspiracy to defraud banks and violate sanctions on Iran.

    The arrest places Huawei in the cross-hairs of an escalating technology rivalry between China and the US, which views the company, a critical global supplier of mobile network equipment, as a potential national security risk.

    Hardliners in President Donald Trump's administration are especially keen to prevent Huawei from supplying wireless carriers as they upgrade to 5G, a next-generation technology expected to accelerate the shift to Internet-connected devices and self-driving cars.

    Mr Ren is a legendary figure in the Chinese business world. He survived Mao Zedong's great famine and went on to build a telecom giant with US$92 billion (S$126 billion) in revenue that strikes fear among some policymakers in the West. Huawei is the No. 1 smartphone maker in China, and this year eclipsed Apple to become second maker globally, according to research firm IDC.

    Though it has a low profile compared with China's Internet giants, Huawei's revenue last year was more than Alibaba Group Holding, Tencent Holdings and and Baidu Inc combined. About half of its revenue now comes from abroad, led by Europe, the Middle East and Africa.

    The company's high-speed global expansion has come under fire for years, starting with the Committee on Foreign Investment in the US' derailing of an acquisition in 2008. More recently, Australia, New Zealand and the US have blocked or limited the use of Huawei gear.

    The arrest and prosecution of Ms Meng in US courts comes amid a far bigger US-China struggle for technology dominance in the decades ahead - and could have huge, and potentially severe, consequences for Huawei. Mr Ren declined an interview request from Bloomberg News.

    "It gives Trump a bargaining chip," said Mr George Magnus, an economist at Oxford University's China Centre. "She's the daughter of the CEO, Ren Zhengfei, himself a former PLA officer, and Huawei's alleged dealings with Iran are just the latest in a string of concerns."

    An outright ban on buying American technology and components, should it come to that, would deal Huawei a crushing blow. Earlier this year, the Trump administration imposed just such a penalty on ZTE Corp, also a Chinese telecom, and threatened its very survival before backing down.

    Both Huawei and ZTE are banned from most US government procurement work.

    A full-blown, commercial ban in the US would not only apply to hardware components, but also cut off access to the software and patents of US companies, Mr Edison Lee and Mr Timothy Chau, analysts with Jefferies Securities, wrote in a report.

    "If Huawei cannot license Android from Google, or Qualcomm's patents in 4G and 5G radio access technology, it will not be able to build smartphones or 4G/5G base stations," they note.

    The company's legal troubles in the US may also spill into other markets.

    "Government telecommunication infrastructure requirements are essentially locking out the Chinese supplier in critical growth markets," noted Morningstar Research equity analyst Mark Cash in an e-mail. "Additionally, telecom providers without government imposed restrictions may start limiting their usage of Huawei equipment for their 5G network build-outs."

    If there's a Darth Vader in the minds of Chinese national security hawks in Washington worried about China's rising tech power, it's Mr Ren. In China, though, he's feted as a national hero, who rose from humble beginnings to the pinnacle of wealth and status in Chinese society.

    His grandfather was a master of curing ham in his village in Zhejiang province, which afforded Mr Ren's father the chance to become the village's first university student, according to a 2001 essay by Mr Ren about his upbringing, which was published on a website linked to the Chinese Academy of Social Sciences.

    His father, Mr Ren Moxun, was a Communist Youth League member, who later worked as a teacher and an accountant at a military factory, but who kept up his rebel fervour under the Kuomintang by selling revolutionary books.

    After moving to rural Guizhou province, he met his wife Cheng Yuanzhao and gave birth to Mr Ren Zhengfei, the oldest of two sons and five daughters.

    The family lived on modest teaching salaries. In one of Mr Ren's speeches, he remembered how his mother read him the story of Hercules, but withheld the ending until he came home with a good report card.

    Famine Years

    During the Great Leap Forward campaign that started in the late 1950s, a famine came to his home town after Communist Party industrialisation and collectivisation policies went off the rails. Mr Ren recalled in his essay how his mother stuffed into his hand each morning a piece of corn pancake while asking about his homework. His good grades gained him entry to the Chongqing Institute of Civil Engineering and Architecture.

    After graduation, he worked in the civil engineering industry until 1974, when he joined the PLA's Engineering Corps as a soldier, and worked on a chemical fibre base in Liaoyang. Huawei says he rose to become deputy director, but did not hold military rank. He does, however, often pepper his speeches with military references.

    "Our managers and experts need to act like generals, carefully examining maps and meticulously studying problems," Mr Ren said in a speech posted on a website for Huawei employees.

    Mr Ren's Communist Party credentials aren't as deep as his father's. He attended the 12th National Congress of the Communist Party in 1982, and once cited the party's dogma of "a struggle that never ends" when defending the company's tough work hours.

    But Mr Ren was a bookworm as a child and was denied acceptance into the Communist Youth League, according to the book Huawei: Leadership, Culture And Connectivity, a book co-authored by David De Cremer, Tian Tao and Wu Chunbo.

    He didn't become a Communist Party member in the PLA until late in his military career. However, a 2012 House permanent Select Committee on Intelligence report on Huawei asked why a private company had a Communist Party Committee, which has become common among China's Internet giants.

    Mr Ren retired from the army in 1983, and joined his first wife to work at a Shenzhen company involved in the city's special economic zone. It was around then that he had to sell off everything to pay a debt related to a business partner, and lost his job at Shenzhen Nanyou Group, as well as his first marriage, according to Ren Zhengfei And Huawei by author Li Hongwen.

    Comeback Play

    After a period of sleepless nights while living with family members, Mr Ren saw an opportunity. When China began its economic opening under Deng Xiaoping, the telephone penetration rate was lower than the average rate in Africa, or 120th in the world. He founded Huawei with four partners in 1987 with 21,000 yuan in initial working capital, just above the minimum threshold required under Shenzhen rules.

    Huawei started out as a trader of telecom equipment, but the company's technicians studied up on switchboards and were soon making their own. Workers put in long hours in Shenzhen's swampy heat with only ceiling fans. Mr Ren kept up morale with subtle gestures, like offering pigtail soup to workers putting in overtime.

    The company became known for its "mattress culture" in which workers would pass out on office mattresses from exhaustion. In 2006, a 25-year-old worker Hu Xinyu, who had made a habit of working into the wee hours and then sleeping at the office, died of viral encephalitis. Some Huawei employees subsequently committed suicide.

    The deaths triggered a revision of the company policy on overtime, and the creation of a chief health and safety officer role.

    It wasn't the only move Mr Ren made to stabilise morale. He used to pay his workers only half their salaries on payday, but eventually decided to convert the other half of employee salaries and bonuses into shares. The company's 2017 report shows that he has a 1.4 per cent stake, giving him a net worth of US$2 billion.

    Wolf Culture

    Huawei struggled for market share, with foreign companies using so-called "wolf culture" of aggressive salesmanship, which sometimes materialised in the form of Huawei employees flooding sales events with several times more salespeople than competitors.

    The company ventured into international markets in the 2000s, with telecom equipment that was more affordable than products of competitors such as Cisco Systems. Huawei later admitted to copying a small portion of router code from Cisco and agreed to remove the tainted code in a settlement.

    Mr Ren since stepped up the company's research and development. Of its 180,000 employees, about 80,000 are now involved in R&D, according to the company's 2017 report, and the company has been known to recruit some of China's top talent out of universities.

    The company recently refocused on existing markets after the US government called Huawei a national security threat, and cited concerns over its possible control of 5G technologies. Mr Trump signed a Bill banning government use of Chinese tech including Huawei's, and has even contacted allies to get them to avoid using Huawei equipment.

    Collectively owned by its employees, the company is known for a culture of discipline, in which no one, Mr Ren included, has their own driver or flies first class on the company dime. Lately, Mr Ren has been warning employees against using fake numbers or profit to enhance performance. The company set up a data verification team in 2014 within the finance department, which was overseen by Mr Ren's daughter.

    In a recent speech posted on the Huawei employee network, however, he called for patience with critics, but rejected foreign intervention. "We will never give in or yield to pressure from outside," he said.

    That maxim is going to be soon put to the test by the US Department of Justice.


    Source: Bloomberg

    Related:


    Huawei CFO 'unlikely' to be extradited

    Meng Wanzhou, the chief financial officer of Chinese tech giant Huawei, who was granted a $7.5 million bail, is unlikely to be extradited to the US because she is charged for political reasons, analysts said.


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    Wednesday 12 December 2018

    Did Huawei violate Iran sanctions? No, it shows deeper US-China battle for global influence as power coming from high-tech sector

    https://youtu.be/3z58zHmz-6k

    https://youtu.be/17KDxqffVFI
    Professor Dr. Wang
    Former Executive of Halliburton

    DID HUAWEI VIOLATE IRAN SANCTIONS?

    No, they didn’t.

    CFO Meng was arrested supposedly for “violating Iran sanction”. This has to be the most grotesque distortion of justice since the US was the country who unilaterally pulled out IN VIOLATION of an agreement they had signed with multiple nations earlier !!! In other words, the guy who broke a solemn promise made, violated the agreement, then made sanction an American domestic law is now force feeding this law arbitrarily on the rest of the world by arresting someone who refuses to violate the agreement ! Is this making any sense to anybody?

    Huawei created a subsidiary to do business with Iran, and the CFO is being charged with lying about the relationship between Huawei and the subsidiary.

    This seems totally ridiculous to me since when I worked at Halliburton, we did EXACTLY the same thing ! Not only was our CEO never arrested, he was invited to join the government & became Vice President Dick Cheney !!!!!!!

    The moral of this story is for normal businesses to be extremely vigilant & recognise the true faces of America & Saudi! One tosses you in jail for breaking twisted laws they make up as they go along & the other goes after you with a bone saw. Both are gangsters, far worse than the Mafia, because the Mafia at least have the decency to commit crimes secretively, while the thugs in American & Saudi governments commit their crimes blatantly in the open, with complete disregard to the laws & sovereignty of another country, bullying their way through, trying to justify their actions by smearing the victims... then run publicity campaigns to sway public opinions while accusing others of crimes against human rights.. ??!!

    I am sure there are nice people in USA & in Saudi & i don’t want to generalise, but i have seen time & again in the States that if ever their oversized egos feel threatened, they can turn into totally evil, nefarious subhumans capable of the most despicable deeds.

    The arrest of Meng is a case in point.

    I went to the States starry eyed with high hopes & expectations, ready to learn a democratic system far superior than ours. Well, after my Ph.D and a few working years, I stand corrected.

    Life in the States has taught me to be proud of my people and my country. Grass is definitely NOT greener on the other side. America is very strong in “hypes”, they talk big but deliver little. China does the opposite. American government spends on military, lives in “now”, supports the rich, & works for re-election. The Chinese government spends on infrastructure, works for the people, eradicated poverty & follows 5-30 year plans. These are facts, not propaganda, not campaign promises.

    I can’t tell you how happy I am to be home again. Not only is the food much better, more importantly, I can finally stop worrying myself sick... about my elderly mom getting mucked, my attractive wife getting raped...my children getting bullied, drugged or shot in schools...Having to live in constant fear everyday is the ultimate violation of my human rights.

    Gosh, it’s good to be back in civilisation.

    Dr. Wang Wins Halliburton


    Huawei clash shows deeper US-China battle for global influence as power coming from high-tech sector


    Bail hearings proceeded this week after Meng Wanzhou(pic), the chief financial officer of Huawei Technologies Co, was arrested in Canada on Dec 1 because of alleged violations of US sanctions against Iran. The case threatens to derail a trade truce struck the same day between Donald Trump and Xi Jinping.

    HONG KONG: The Trump administration has insisted the arrest of a top Huawei executive has nothing to do with trade talks. In Beijing, it’s just the latest US move to contain China’s rise as a global power.

    Bail hearings proceeded this week after Meng Wanzhou, the chief financial officer of Huawei Technologies Co, was arrested in Canada on Dec 1 because of alleged violations of US sanctions against Iran. The case threatens to derail a trade truce struck the same day between Donald Trump and Xi Jinping.

    Even if the two leaders manage to strike a broader deal, the arrest shows that the US-China conflict goes far beyond trade. The world’s biggest economies are now engaged in a battle for global influence that will ultimately determine whether the US remains the globe’s predominant superpower, or China rises as a viable counterweight.

    “The sentiment in Washington now is not just a Trumpian mercantilism – the desire to bring back factory jobs to Wisconsin or wherever,” said Nick Bisley, a professor of international relations at La Trobe University in Melbourne who has written books on great-power politics. “It is a desire to significantly cut ties with China because of that larger perception it presents a strategic risk.”

    A bipartisan consensus has emerged in Washington that China’s entry into the World Trade Organisation hollowed out US manufacturing and allowed it to grow rich. That increased economic power is now at a point where it risks eroding key American military advantages around the globe.

    China insists it plays by the rules, and doesn’t challenge US dominance. Even so, three areas in particular worry American strategic planners: Technology, the dollar and the ability to project military power overseas.

    A year ago, the White House identified China’s growing technological prowess as a threat to US economic and military might. American companies have long argued that China forces them to transfer intellectual property and sometimes steals trade secrets – all of which Beijing denies.

    In justifying tariffs, Trump’s team has cited Beijing’s “Made in China 2025” strategy to become a global leader in state-of-the-art technologies from aerospace to robotics. So far, China has resisted those demands, arguing that doing so would crush its economic potential.

    Huawei in particular epitomises the threat. Earlier this year, Trump blocked Broadcom Inc’s US$117bil hostile takeover bid for Qualcomm Inc over concerns that Huawei would end up dominating the market for computer chips and wireless technologies.

    The fear is that wireless carriers may be forced to turn to Huawei or other Chinese companies for 5G technology, potentially giving Beijing access to critical communications. Those concerns have prompted the US to ban Huawei’s products for government procurement, and Australia, Japan and New Zealand have reportedly followed.

    China has fought back, with foreign ministry spokesman Lu Kang saying this week that Huawei didn’t “force any enterprise to install forced backdoors.”

    “The competition is really focused in the areas where future strategic and economic dominance come from,” said Michael Shoebridge, director of the defense and strategy programme at the Australian Strategic Policy Institute.

    “The Huawei arrest is right in the middle of this because both America and China see their future global power as coming from the high-tech sector.”

    The dominance of the dollar has allowed the US to effectively control the world’s financial system, underpinning its superpower status. Yet Trump’s increased use of sanctions to assert its foreign-policy goals has prompted a wide range of nations – from China to Russia to the European Union – to look for an alternative.

    The Trump administration added nearly 1,000 entities and individuals to its sanctions list in its first year, almost 30% more than the Obama administration’s last year in office, according to law firm Gibson Dunn. The complete list now runs to more than 1,200 pages.

    Sanctions are a key tool for the US to subdue potential adversaries like North Korea, but they also can affect friends and allies. The EU, which objected to reimposing sanctions on Iran, this month unveiled plans to mitigate the so-called “exorbitant privilege” of the dollar.

    During a visit to China last month, Russian Prime Minister Dmitry Medvedev said the two nations were looking at ways to boost the use of their currencies through allowing the use of China’s UnionPay credit card in Russia and Russia’s Mir card in China. “No one currency should dominate the market,” he said.

    “We are potentially at the beginning of a systemic shift that may take some time to play out,” said Gregory Chin, associate professor at York University in Toronto, and a political economy specialist. “The political will is building and coalescing.” — Bloomberg

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