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This Will Probably Be Blocked In China

Image via Markus Spiske on Unsplash

It's no secret that the Communist Party of China (CPC), the ruling political party in the People's Republic of China, has close ties to Chinese companies. The country's socialist market economy is defined as a "system based on the predominance of public ownership and state-owned enterprises within a market economy." However, the system has been described in the West as state capitalism, which is defined as "an economic system in which the state undertakes commercial economic activity and where the means of production are organized and managed as state-owned business enterprises."

For example, Jack Ma, the co-founder of Chinese e-commerce giant Alibaba Group, was revealed to be a member of the Communist Party last year. Also, Chinese national security laws are said to require companies to hand over data if asked to do so. So it's not surprising that 100 Chinese government officials are being sent to work inside private Chinese companies. Chinese state media reported the Hangzhou Municipal Government would send representatives to “key enterprises such as Alibaba, Geely Holdings and Wahaha.”

The state representatives are being transferred to companies in the tech hub of Hangzhou as part of China's "Made in China 2025" economic plan. The goal of the plan is to transform China's economy by catching up to other developed countries in high-value industries such as robotics and aerospace.

The CPC maintains the move is an "innovative" economic strategy, but it only reinforces concerns of their influence on Chinese companies. The list of theft and spying incidents between China and the U.S. yields plenty of examples. From using LinkedIn to recruit spies in the U.S., to hacking technology of aviation companies and even putting surveillance chips the size of a grain of rice in servers used by American companies.

With the trade war dragging on, and resolving intellectual property theft remaining one of the largest roadblocks, this development could make the U.S. side question how serious China is about reaching an agreement on the issue. In the meantime, expect markets to rally on hope of a trade deal for the 100th time over the last year.

Leftover Crumbs

  • Designed by Apple in California. Assembled in Texas. Apple has received approval for 10 out of 15 requests for tariff exemptions by the U.S. government and will begin assembling the Mac Pro desktop in Texas at the same facility it previously used. Apple moved production of the Mac Pro, which is one of the most expensive computers in their product lineup, earlier this year to China amidst criticism. In its most recent full fiscal year, Mac sales accounted for less than 10% of total sales, with the Mac Pro likely accounting for a fraction of that. With more than $200 billion in cash on its balance sheet, Apple would likely win some brownie points by moving production of more popular products to the states as well. 

  • Alexa, did I burn off those cookies from Whole Foods? Amazon is coming for Apple and Fitbit as it is reportedly set to release Alexa-powered wireless earbuds that also act as a fitness-tracking device. The earbuds, codenamed "Puget," will be able to monitor how far and fast you run as well as calories burned. In what has become Amazon's go-to strategy, they plan to price them under $100, undercutting Apple's popular Airpods. This product fits into Amazon's strategy of taking Alexa outside of your home. It's unclear when they will be released, but Amazon will be holding its annual hardware event tomorrow. 

  • No soup for you! Last week, Netflix acquired the rights to stream Seinfeld for five years, reportedly at a cost of more than $500MM. Since the announcement, the company has lost about $12.9 billion in market capitalization. Although the stock is down for reasons other than Seinfeld, particularly upcoming competition from Apple and Disney, it appears Wall Street is not too happy about them spending so much on the "show about nothing." Netflix's stock is now negative for the year, giving up a gain of 44%.

  • It's not White Claw, but it's close enough. An analyst at Guggenheim upgraded shares of Boston Beer due to its spiked seltzer brand Truly riding the coattails of White Claw's success. White Claw and Truly are 1-2, respectively, in the hard seltzer category with a combined 85% market share. “Truly is far outpacing our estimates with additional room to run next year, even as White Claw remains the category leader” said Guggenheim analyst Laurent Grandet. With a nationwide shortage of White Claw, Truly could benefit as consumers will look elsewhere for their spiked seltzer fix. 

  • Welcome to 2019. Commuters will now be able to take a nonstop Amtrak train between Washington, D.C. and New York City. The cost of the 2 hour and 35 minute ride will range from $130 for a business class seat to $276 for a first-class seat. For now, Amtrak is only offering service once per day, each direction during weekdays. The daily southbound train departs New York City at 6:35 a.m. so you can get to D.C. for breakfast, with the daily northbound train departing D.C. at 4:30 p.m. so you can be home for dinner. The route makes sense, as New York Penn Station and Washington Union Station are Amtrak's two busiest stations across its national network.