Highlights of the week: UK parliamentarians are less accountable than Ukrainian ones, will China bite as loudly as it barks, and how it circumvents American sanctions
Overview of the main events of the past seven days and the international press' reactions to them
The Guardian has published a list of over 50 British MPs who currently hold shares in banks, construction companies, defence firms, energy suppliers, and supermarkets – companies that may be influenced by legislation or new policies introduced by the Parliament. Among the companies are Barclays, HSBC, BP, and Sainsbury's.
British MPs have not violated any rules. It's just that the rules are so lenient
It appears that parliamentary rules in the United Kingdom stipulate that information about the ownership of parliament members, including former Prime Minister Theresa May and former Education Secretary Gavin Williamson, does not have to be disclosed in parliamentary registers. MPs are only required to register shareholdings in a company if they collectively own more than 15% of its shares or if their holdings in it exceed £70,000.
The list of MPs who own shares includes Robert Goodwill, Chairman of the Environment, Food and Rural Affairs Select Committee, Conservative MP Desmond Swayne, Shadow Minister for Business and Consumers Seema Malhotra, and Brendan O'Hara, the leader of the Scottish National Party (SNP).
An investigation also revealed that Prime Minister Rishi Sunak had a financial stake in National Grid just two days before he was selected as the Conservative candidate in his constituency. The Prime Minister stated that in July 2019, he placed his current investments into a blind trust – a mechanism used by MPs to distance themselves from their financial interests.
Theresa May owned shares in BP when she was Home Secretary, and her husband held shares in BP, Barclays, BT, and Centrica. Four months after becoming Prime Minister, these shares seemingly were also transferred to a blind trust. Meanwhile, as Home Secretary, May had meetings with representatives of BT, a British telecommunications holding company, while her husband, Philip May, owned shares in the same company, which was not publicly disclosed.
Attorney General Victoria Prentis and her close family members hold shares in BP, Tesco, HSBC, Lloyds, the multinational beverage producer Diageo, and defence contractor Rolls-Royce worth over £130,000, which were never disclosed publicly.
Interestingle enough, that previously, shareholder registers were accessible to the public upon request. However, in 2006, changes were made to the Companies Act that significantly restricted access to the registers. The reason behind this change was the concern that these registers were being used to target directors and shareholders of companies involved in animal rights violations.
The Guardian expresses astonishment that there is no requirement for MPs to declare any income from dividends or proceeds from the sale of shares, which contrasts with rules regarding income from employment, where anything exceeding £300 per year must be declared.
"Remember the atomic bomb." The trade war between the US and China reveals many blind spots in sanctions
The Centre for European Policy Analysis (CEPA) conducted an analysis of how the US is intensifying export controls on advanced semiconductors and expresses concern that Western companies will lose market share while China develops its own technologies to replace Western ones.
As a result of the sanctions, Chinese companies are facing a decline in profits. Memory chip manufacturer YMTC has lowered its annual growth forecast from 60% to 7%. SMIC, another company, experienced a 5% quarterly decline in revenue for the first time in the last three years.
Therefore, China has decided to retaliate. Since July, it has announced restrictions on the export of gallium and germanium – metals widely used in the semiconductor industry. It has already banned chips from American manufacturer Micron Technology, claiming without evidence that American chips failed the "network security review." The ban on Micron chips was announced the day after the G7 summit in Japan, where democratic leaders agreed to reduce dependence on China.
Beijing is attacking Western companies, ranging from wood pulp manufacturers to telecommunications equipment, confirming that its actions have a political nature. An escalation is expected soon. The Biden administration is considering the possibility of imposing additional restrictions on the export of artificial intelligence chips, which could halt the supply of chips from NVIDIA and other manufacturers to Chinese clients. After the initial round of American restrictions, NVIDIA ceased selling its most advanced A100 chips to China and released a less powerful version called A800 for the Chinese market. The new restrictions could even prohibit the sale of A800 chips without a licence. Chinese AI companies' stocks dropped nearly 4% upon hearing this news.
"Remember the atomic bomb. Once the US unleashed it, the Soviet Union raced to catch up. It succeeded, thanks in no small part to spying – setting off the dangerous nuclear arms race. Will we now face a counterproductive chip race?" CEPA expresses concern.
Chips and cloud technologies vs. gallium and silicon. Will there be a balanced 'tit-for-tat'?
However, concerns arise over another thing. On July 3rd, China announced export controls on gallium and germanium, two metals widely used in high-quality semiconductors. China supplies approximately 80% of the world's gallium and germanium production. According to investment bank Jefferies, the US may receive up to 50% of its germanium supply from China.
As reported by the British outlet, The Economist, a complete ban on these metals could disrupt the production of a wide range of products, including chips, displays, fibre-optic equipment, and solar panels. It could also hinder the development of next-generation technologies. Chip manufacturers are hoping to gradually replace silicon, which is used in most processors, with gallium nitride or silicon carbide, which can withstand higher voltages. Gallium and germanium are also used in electric vehicles, nuclear energy, and other devices, including weaponry.
However, the outlet suggests that there is hope that "China's bite is weaker than its bark." Similar to certain US restrictions, the new Chinese rules will require exporters to obtain government approval and export licences.
The Chinese government can indeed provide them quite freely; after all, a complete ban would harm Chinese exporters who sell a significant amount of germanium and gallium to American clients. "But Mr Biden should make no mistake. China is showing that it will not roll over – and that it can strike back. Expect an increasingly evenly balanced tit-for-tat," warns The Economist.
Overall, most media outlets have given serious attention to the visit of US Treasury Secretary Janet Yellen to China. After ten hours of meetings with Chinese officials, she stated that both sides will seek "more frequent communication" despite deep divergences. This represents a significant softening of Washington's previous rhetoric towards China.
However, as reported by The New York Times, a significant easing of economic tensions is unlikely. Janet Yellen made it clear that the Biden administration has serious concerns about many of China's commercial practices, including its treatment of foreign companies and policies that the United States views as attempts at economic coercion. There was no mention of support for russia in the war against Ukraine.
Meanwhile, just a few hours before Janet Yellen's press conference, Beijing expressed its disagreement through the state news agency Xinhua regarding the emphasis the Biden administration places on preserving American national security through trade restrictions
Beijing fears that multinational companies will relocate their complex supply chains and millions of jobs from China to other countries. Beijing is also concerned about future American restrictions on investments in China (note that for the second year of the war, Ukraine's ally continues to invest in a country that supplies sanctioned goods to russia) and attempts by the Biden administration to restrict China's access to certain technologies (note that it's not the sanctions that worry China, but only the attempts).
However, as other global media outlets explain, China has managed to bypass sanctions thus far. The Economist reminds us that on June 30th, under pressure from the White House, the Netherlands announced restrictions on the sale of certain equipment for microchip production to China. The Dutch manufacturer of the world's most advanced lithography machines, ASML, will now only sell low-productivity etching devices for cutting-edge microchips to Chinese clients. Furthermore, on July 4th, the Wall Street Journal reported that the US government is considering limiting China's use of American cloud computing services, which have allowed Chinese firms engaged in artificial intelligence to bypass previous US sanctions by leveraging the capabilities of top-tier cloud providers without relying on their own chips.
The WSJ also reminded us that China processes nearly two-thirds of the world's lithium and cobalt, essential for electric vehicles. The country is the source of almost 60% of the aluminium used in electric vehicle batteries and 80% of polysilicon, a component of solar panels. According to the International Energy Agency, China has even stronger control over rare earth minerals used in smartphone touchscreens and missile defence systems, accounting for 90% of their processing.
Overall, last week, global media provided enough reasons to be concerned about China, reinforcing a sense of gloom. Even the drop in copper prices cannot negate the fact that due to US sanctions, American manufacturers will be forced to leave cheap China and build factories in the US or Europe, significantly increasing the future cost of chips. Or the fact that the US is constructing new factories, but there is no one to work in them. The triumphant moves of Threads by Zuckerberg and Musk's anger do not improve the mood either. Complaints about the censorship of the new social network, which gained 70 million registered users in two days, are abundant. Moreover, while Zuckerberg is building a 'friendly' platform for communication, Elon Musk's SpaceX has already created a de facto monopoly on rocket launches. Perhaps this week will be better, but last week, there was certainly no good news in the global media for us.
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