US-China, Election 2016, Business Trends, and Books
August 26, 2016
Marc A. Ross
I am about to head off on summer vacation to a land where the newspapers are endlessly great, the best coffee bars make you stand, and the biggest daily decision I plan to make is where to have lunch.
But before I load up the iPod with some new tunes and stuff my tote bag with months of unread magazines, I wanted to share are some thoughts, ideas, and predictions as we enter the final stretch of 2016.
The state of US-China commercial relations is not great: The long-mentioned reform of the Chinese economy is stalled and mired down in the factional fight between the Xi Jinping and Li Keqiang camps. This intraparty spat between the Princelings and Youth League factions of the Communist Party has negatively impacted the Chinese economy more than the data suggests. With numerous projects in various parts of the country being delayed or stalled, this continued delay of letting the market play a greater role in the Chinese economy is depressing growth, investment, and business sentiment.
The just released US-China Business Council (USCBC) member survey is a sober document and the bloom of the early part of the decade is off. Nearly 20% of survey respondents expect revenue to decline this year and plan a contraction in staffing. Also, 10% of respondents are flat out pessimistic. This number might not sound horrible, but consider USCBC members are the biggest cheerleaders for US-China relations and this number typically floats around 1% or 2% of the respondents.
Finally, exports from the US to China has dropped below $120 billion for the first time since 2012 with a 17% drop since last year. At this point this is lagging data of 12–18 months, so the current export number is certainly more depressed.
Multinational companies won’t leave China by any means, but the challenging policy and regulatory environment coupled with slowing market growth will force companies to think smaller regarding revenue and profit. In a market where many times your regulator is your competitor, global corporations and the C-suite will need more fortitude and even greater patience for the Chinese market to reach its full economic potential.
The G-20 meeting will be a bust and a missed opportunity: Did you know the G-20 meeting is starting in seven days Hangzhou, China? Don’t worry; few people know it is happening either. Taking place over Labor Day weekend and at the start of the college football season, even the most dedicated geoeconomic geeks will be distracted.
There was a time, many old China hands saw this event as a platform for Chinese economic reform. The Chinese tend to like to put on a good show and use multilateral events as a vehicle to make subtle changes in the management of their economy. However, due to the intraparty factional fight in China mentioned above and the serious geopolitical challenges that Russia and China are forcing on their neighbors, don’t expect any meaningful movements that are positive for the global or the American economy. Instead, expect press releases stating progress was made, agreements were forged, commitments were made, etc., etc., etc. This gathering will be an all fluff affair and sadly a missed opportunity.
The race to 150: It is clear Hillary Clinton will win in November. What is in doubt will be the size of her victory in terms of the popular vote and more importantly the Electoral College. At the end of the Democratic convention, I had the Electoral College at Clinton 327 — Trump 211. Now, nearly a month later I score the race at Clinton 339 — Trump 197 — and this number is being insanely generous and giving Florida to Trump.
In a nutshell, it is so bad for Team Trump that Roll Call currently only has one state (North Carolina) as a toss-up.
The big question — will Trump debate? I give it 30% chance he does at least one and 2% chance he does all three. The debates will be a total and complete disaster for Trump. He will be woefully overmatched in knowledge, substance, and depth. Also, the subdued NPR-like format will suppress his WWE persona and Trump won’t be able to feed off the energy of the audience. With the knowledge a landslide is coming, why would Trump go through the trouble and allow himself to be embarrassed? He gains little by debating Clinton and can only lose, and lose big.
When I say Trump, what word comes to mind? Known in communications parlance as triggers, these word associations are powerful and embedded into our thoughts. From peanut butter and … to rum and … to cream and …, these triggers are built into how we see and understand the world. All the word triggers with Trump are cynical, harsh, and ugly. Frankly, they are so bad, even if Trump had a billion dollars to spend on paid advertising they would be impossible to overcome.
Speed round predictions: Chuck Schumer will be Senate Majority Leader. Speaker Paul Ryan will be ambushed daily by his caucus demanding politics over policy. Lael Brainard will be the next Secretary of the Treasury. Hillary Clinton will be a one-term president.
The gig economy will be under review in the United States: Placating the Unions who helped propel her to the White House, Clinton’s administration will take a much harsher view of the gig economy unicorns of Uber and Airbnb. From increased Federal Trade Commission (FTC) oversight to pressure from the European Union (EU), the business models of the gig economy will be under the spotlight. The possibility of a full-blown Department of Justice (DOJ) antitrust case can’t take off the table.
The search economy will be under review in the United States: Under a Clinton administration, the FTC, EU, and DOJ will all increase efforts to reshape Google’s business model to make it more consumer friendly — whatever that means. This oversight won’t be as distracting for Google as it was for Microsoft, but it is still a heavy exercise that sucks resources and takes years to sort out.
Full autonomous driving is more a regulatory than a technical problem: The necessary cameras and computer processing is available right now to make this a reality. However, what you really need to scale autonomous driving is a government oversight body to set the rules, build the infrastructure, constrain the routes, and establish a policy to help deal with transitioning the millions of truck drivers who will lose their job.
What I am reading right now:
Creativity, Inc.: Overcoming the Unseen Forces That Stand in the Way of True Inspiration
Magic and Loss: The Internet as Art
The Year of Living Biblically: One Man’s Humble Quest to Follow the Bible as Literally as Possible