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CFIUS, Economic Sanctions, And China Export Controls In 2021

A look back to 2020 and a look ahead to 2021 regarding CFIUS, Economic Sanctions, and Export Controls from Lawrence Ward. Q3 2020 hedge fund letters, conferences and more Lawrence Ward is a partner at the international law firm Dorsey & Whitney (and..



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A look back to 2020 and a look ahead to 2021 regarding CFIUS, Economic Sanctions, and Export Controls from Lawrence Ward.

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Q3 2020 hedge fund letters, conferences and more

Lawrence Ward is a partner at the international law firm Dorsey & Whitney (and head of its Seattle office) in international business focusing on U.S. national security law, CFIUS, and international trade compliance law and licensing. He's looked at the landscape for 2021 and of it says:


"The last year has seen sweeping changes at CFIUS. In February, CFIUS implemented its real estate regulations and also made filings mandatory for certain investment transactions in so-called TID U.S. Businesses (businesses involved in critical technologies, critical infrastructure, or sensitive personal data). These changes were implemented as a result of FIRRMA, which passed the U.S. Congress in August 2018. In addition, CFIUS established a new Office of Monitoring and Enforcement (Monitoring & Enforcement) that is tasked with, among other things, monitoring transactions that were not notified to CFIUS.

Although CFIUS has always monitored such transactions, throughout 2020, Monitoring & Enforcement made outreach in dozens of non-notified transactions for more information about those transactions. Over the last year, CFIUS also continued to make waves with Chinese investment by ordering divestiture of ByteDance's interest in TikTok," Ward says.

"It is important to note that FIRRMA passed with overwhelming bipartisan support and so there is every indication that the incoming Biden Administration will be supportive of the recent CFIUS regulatory changes and the importance of Monitoring & Enforcement. One shift that CFIUS and M&A practitioners saw this year is a focus on U.S. export controls. CFIUS has now linked its mandatory critical technology filings to U.S. export control considerations. Accordingly, U.S. companies that had never considered export controls in the past were required this past year to think through export control considerations before accepting foreign investment. Undoubtedly, that focus will continue as a compliance challenge for U.S. companies in the coming year.

Over the last year, there have been reports that U.S. companies have lost out on foreign investment because those U.S. companies did not understand their export control obligations. Foreign investors in the new year will continue to be savvy on these new requirements and may be hesitant to invest in U.S. companies that have not squarely addressed export controls compliance. With funding coming in part from the newly imposed filing fee in connection with voluntary CFIUS filings, Monitoring & Enforcement will almost certainly continue zealous outreach to companies with non-notified transactions. We also expect that the U.S. Government will continue its laser focus on certain investments in U.S. companies by Chinese investors, particularly those with clear ties to the Chinese Government," Ward says.

Economic Sanctions

"President Trump walked the United States away from the JCPOA and, in doing so, damaged the U.S. relationship with the other signatories to that agreement and with Iran. With that said, we are likely to see a measured approach by the Biden Administration as to Iran. It is unlikely that the Biden Administration will immediately return to the Iran deal. Nevertheless, President-Elect Biden likely will try to resurrect some elements of the JCPOA. In particular, the aerospace industry, which has been particularly hard-hit by COVID-19, may find relief again if the Biden Administration were to loosen its licensing policy for exports of aircraft parts and components to Iran," Ward says.

"In the run-up to the 2020 election, President Trump made some sweeping changes as to U.S.-Cuban foreign policy. President-Elect Biden has made clear that he believes the Trump Administration's Cuban policy changes have caused harm on Cubans and their families. It is almost certain that the Biden Administration will seek to restore various of the OFAC Cuban travel licenses revoked by the Trump Administration. Additionally, the Biden Administration may find ways to allow telecom and tech companies to do work in Cuba," Ward says.

"Over the last year, the Trump Administration took an increasingly hostile approach as to Hong Kong and has slowly ratcheted up sanctions against powerful individuals in Hong Kongâ's Government. With that said, there has largely been bipartisan support of these sanctions. It is unlikely that the Biden Administration will make any sweeping changes as to Hong Kong in the near term but if the Biden Administration seeks to cool tensions with Beijing, then some loosening as to Hong Kong may take effect," Ward says.

Export Controls

"It's been two years since the Commerce Department initially announced its efforts to examine emerging technologies for export control purposes. During the last year, we've seen some minor additions. However, it is widely anticipated that more sweeping emerging technologies controls will come in the next year. Companies in the biotech, nanotech, AI/ML spaces may see the biggest impact of such controls since these companies have largely operated without major export controls in the past. Additionally, given the linkage between export controls and CFIUS, any new emerging technology controls will also impact foreign investment in such companies," Ward says.

"The Trump Administration also used export controls as a way to sanction Chinese companies like Huawei. Again, those sanctions have tended to have significant bipartisan support. It's therefore unlikely to imagine that the Biden Administration will immediately ease sanctions on such Chinese companies. However, it is equally unlikely to imagine that the so-called U.S./China trade war will be quite as intense under the Biden Administration," Ward says.

The post CFIUS, Economic Sanctions, And China Export Controls In 2021 appeared first on ValueWalk.

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COVID-19 Testing Resumes In Beijing, Shandong, As Reinfection Cases Surge

COVID-19 Testing Resumes In Beijing, Shandong, As Reinfection Cases Surge

Authored by Alex Wu via The Epoch Times,

China has resumed COVID-19…



COVID-19 Testing Resumes In Beijing, Shandong, As Reinfection Cases Surge

Authored by Alex Wu via The Epoch Times,

China has resumed COVID-19 PCR testing in Beijing and Shandong Province amid rising re-infections, while the regime’s top health advisers have warned of a new wave of mass infections.

Since May 29, mainland netizens have posted on Chinese social media platforms that PCR test kiosks in Beijing are quietly back in business.

Mainland media “City Interactive,” a subsidiary of Zhejiang “City Express,” reported on May 30 that one of the PCR testing booths that netizens posted about was in Beijing’s Xicheng District, where the central government and the Beijing municipal government are located.

The staff of that testing kiosk said that the PCR test there has never stopped, reported “City Interactive”, without being clear how long it had been open.

“We have been doing nucleic acid testing in Xicheng District, but I’m not sure about other districts in Beijing,” a staff member said.

The staff member said the laboratory she works for is mainly responsible for nucleic acid testing within Xicheng District. Currently, there are more than ten testing points outdoors, and one person is on duty for each booth from 9:00 am to 5:00 pm.

Residents get swabbed during mass COVID-19 testing in the Chaoyang District in Beijing on June 14, 2022. (Andy Wong/AP Photo)

A testing kiosk in Chaoyang District, Beijing’s central business district, has been operating since March, reported “City Interactive.” The testing booth staff said it is in the health center near Jinsong Middle Street.

Ms. Wang, a Beijing resident, told The Epoch Times on May 28 that some people have taken the PRC test while others have chosen not to.

She said many people around her, including her child, have already re-infected twice.

“This time, the symptoms seem to include a high fever and then sore throat, very painful,” she said.

“Most people are just resting at home now. Seeing a doctor is very expensive, and now many medicines are paid for by ourselves.”

Gao Yu, a former senior media person in Beijing, confirmed what Wang said. She told The Epoch Times that the relatives around her have been re-infected two or three times, and most are just resting it off at home.

Shandong Resumes Testing

PCR testing booths in Qingdao City, Shandong Province, have also reopened.

A “Peninsula Metropolis Daily” report included a screenshot of an online notice posted by the Laoshan District Health Bureau in Qingdao, which announced that from May 29, the district will conduct COVID-19 PCR testing for “all people who are willing.”

It also listed the working hours of the testing sites, from 7:00 am to 4:00 pm, seven days a week.

Another mainland Chinese media, “Xinmin Evening News,” reported on May 31 that the staff in the district bureau confirmed that the testing has resumed and is for free.

Next Wave

Zhong Nanshan, China’s top respiratory disease specialist, predicted on May 22 that a new wave of COVID-19 infections in China will likely peak in late June when weekly cases could reach 65 million. Then, one Omicron-infected patient will be able to infect more than 30 people,  Zhong said, adding that the infection is difficult to prevent.

A security personnel in a protective suit keeps watch as medical workers attend to patients at the fever department of Tongji Hospital, a major facility for COVID-19 patients in Wuhan, Hubei Province, China, Jan. 1, 2023. (Staff/Reuters)

Chinese citizens across the country have said on social media that infections have been swelling since March.

Zhong also said there had been a small peak in infections at the end of April and early May.

Most COVID-19 infections in mainland China are currently caused by the XBB series mutant strains of Omicron. Among the locally transmitted cases, the percentage of XBB series variants increased to 83.6 percent in early May from 0.2 percent in February.

Zhang Wenhong, China’s top virologist and director of China’s National Center for Infectious Diseases, also warned in late April at a conference that COVID-19 infections would reoccur after six months when immunity gained from prior infections has worn out.

Tyler Durden Fri, 06/02/2023 - 11:20

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Florida ‘freakishness’: why the sunshine state might have lost its appeal

Florida’s image as a safe sun and theme park destination may be threatened by recent political divisions and gun crime.




Florida's Clearwater Beach. Viaval Tours/Shutterstock

Florida is known worldwide for its beaches, resorts and theme parks, but has recently made headlines for a different reason. The state has been rocked by political controversies, bitter debates and fatal shootings at odds with its previously laid back holiday destination image.

In his 1947 book, Inside USA, writer John Gunther described Florida’s “freakishness in everything from architecture to social behaviour unmatched in any American state”. If Gunther had been writing today, he might be just as judgemental.

Florida’s recent political turmoil can be attributed to some highly contentious policies. The state has witnessed heated debates and legislative battles on issues including abortion, gun control, education, LGBTQ+ rights and voting rights.

Florida has been derided as “the worst state” in which to live, one of the worst in which to be unemployed or a student, and not a good place to die.

Even Donald Trump, who moved to his Florida Mar-a-Lago home during his presidency, has called it “among the worst states” to live in or retire to. This was an attack on Florida governor Ron DeSantis, who is also running for the Republican presidential nomination.

What was once considered by many to be a purple state – one that could either be Republican or Democrat – is now fiercely Republican. In recent years, the divide between those of different political beliefs has become toxic.

Importance of international image

International tourism and trade is huge business for Florida. In 2022, more than 1.1 million people visited Florida from the UK, the second largest group of international visitors on an annual basis. The UK is also Florida’s eighth largest trade partner with bilateral trade reaching $5.8 billion (£4.6 billion) in 2022. So state leaders might worry about tarnishing its image abroad.

Business leaders are already fretting about a fall in international visitor numbers linked to COVID and negative media coverage of the state. Around US$50 million was invested in marketing the state to tourists in 2023, this is expected to rise dramatically in 2024. The state’s ability to attract workers to keep its tourism and other industries going is weakening, reports suggest.

Heather DiGiacomo, chief of staff at the Florida Department of Juvenile Justice, told Florida senators that applications for jobs at state-run agencies were down and staff retention was down too. “These turnover rates … impacts the number of well-trained staff available to mentor new staff and puts additional strain on current staff without longer shifts in detention.”

Republican governor Ron DeSantis, now a presidential candidate, has been at the centre of Florida’s significant political divisions. The Republican state legislature’s controversial partisan bills, such as the recent redrawing of the electoral map to benefit the Republican party, was signed into law despite intense opposition.

While his conservative policies on taxes, regulation and immigration have won strong support from conservatives, critics argue that he prioritises partisan politics over the needs of all Floridians. His outspoken handling of the COVID pandemic sparked controversy, with accusations of downplaying the severity of the virus and prioritising economic interests.

Florida’s restrictive abortion laws have also attracted national and international attention. In April 2023, the state passed the foetal heartbeat bill, which prohibits abortions once a foetal heartbeat is detected, typically at around six weeks gestation. This law has faced significant backlash from reproductive rights advocates, who argue that many individuals may not even be aware of their pregnancy at such an early stage.

School shootings and gun laws

The Marjory Stoneman Douglas High School Public Safety Act was passed into Florida state law after the tragic Parkland school shooting in 2018, in which 17 people were killed. But it was controversial because it did not place restrictions on gun ownership or introduce background checks before gun purchases, but allowed schools to employ armed “guardians”. Critics argued that it fell short of addressing the root causes of gun violence in Florida.

There were seven mass shootings in Florida in the first two months of 2023. Despite this, the state has just passed a law that will come into effect on July 1 that will allow anyone who can legally own a gun in Florida to carry one without the need for a permit.

Florida’s partisan divide has been exacerbated by the introduction and passage of several laws that discriminate against the LGBTQ+ community. These laws cover areas including adoption, education, and transgender rights.

This year a massive LGBTQ event in a Florida theme park, which typically attracts 150,000 people, is taking out extra security measures, after new “don’t say gay” state laws were introduced in 2022. These rules ban teachers from discussing topics including sexual orientation. More generally, travel advisory warnings have been issued on the risks of travel to the state for LGBTQ+, African American and Latino people. A recent federal ruling overturned municipal bans on conversion therapy.

Although the “don’t say gay” bill was originally only aimed at third grade students and under, the bill has since been extended by Florida’s Board of Education to apply to all school pupils.

DeSantis has also become embroiled in a long legal and political battle with the Walt Disney Company, a major state employer, over the “don’t say gay” legislation. Disney recently announced it was cancelling a US$1 billion office complex project in the state.

Bills that restrict transgender students’ participation in school sports teams consistent with their gender identity have also sparked heated debate.

Meanwhile, changes in voting laws brought in by the state, including stricter identification requirements and limitations on the drop boxes where voters can leave mail-in ballots, have been criticised for making it more difficult for some people to vote.

Florida’s recent political turmoil has thrust the state into the national, and global, spotlight. Its deeply partisan divide, controversial policies and gun laws have created a toxic political climate, which has the ability to significantly damage the sunshine state’s appeal.

Dafydd Townley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Monetary Conditions Index Is Working Against The Fed

Could monetary conditions be supportive of the "soft landing" scenario? While the "recession" versus "no recession" debate rages, there is a precedent…



Could monetary conditions be supportive of the “soft landing” scenario? While the “recession” versus “no recession” debate rages, there is a precedent for a “soft landing” scenario. Such is where the economy slows substantially but avoids a deeper contraction. However, the problem with that is that it works against the Fed’s mission of bringing down inflation.

In 2011, the world faced a manufacturing shutdown as Japan was shuttered by an undersea earthquake creating a tsunami. The flooding of Japan also sparked a nuclear meltdown. Simultaneously, the U.S. was entrenched in a debt ceiling debate, a debt downgrade, and threats of default. Given the combination of events, the economy’s manufacturing sector contracted, convincing many of an impending recession.

However, as shown, that recession never happened.

The reason such was possible is that the service sector of the U.S. economy kept the economy afloat. Unlike in the past, where manufacturing was a significant component of economic activity, today, services comprise nearly 80% of each dollar spent.

Breakdown of US Economy between manufacturing and services

This isn’t the first time we have seen the manufacturing side of the economy contract, but services remained robust enough to keep the overall economy out of recession. The economy similarly avoided a “recession” in 1998, 2011, and 2015.

ISM Manufacturing vs Services index

Another consideration is that the economy has already contracted sharply. A recession would be assured if the economy ran at its previous 2% rate. The difference is the contraction occurred with the economy at nearly 12% due to $5 Trillion in liquidity. The contraction from the peak is as significant as the Pandemic recession and the “Financial Crisis.”

GDP quarterly change at annualized rate of growth.

Such will keep inflation above the Fed’s target rate without an economic contraction.

Monetary Conditions Providing Support

There is another problem facing the Fed. In a previous article on why the “Bulls May Not Like The Pivot,” I introduced a composite index that tracks changes to monetary conditions. Monetary conditions tightened significantly in 2022 as the Fed hiked rates and inflation surged from massive tranches of monetary support. 

The “monetary policy conditions index” measures the 2-year Treasury rate, which impacts short-term loans; the 10-year rate, which affects longer-term loans; inflation which impacts the consumer; and the dollar, which impacts foreign consumption. Historically, when the index has reached higher levels, it has preceded economic downturns, recessions, and bear markets. To visualize the correlation, I have inverted the monetary conditions index so that “easier” monetary conditions correspond to rising economic growth.

Monetary conditions vs GDP

It is worth noting that the monetary conditions index typically precedes Federal Reserve rate cuts.

Monetary policy conditions vs Fed funds

Importantly, if the monetary conditions index suggests that economic growth will pick up later this year, such does explain the rally in the stock market since October of last year. As shown, there is a decent correlation between the monetary conditions index and the annual change in the S&P 500.

Monetary conditions vs S&P 500 Index

The reason for the optimism in the stock market is the expectation that earnings will increase over the next. If monetary conditions point to strong economic growth, earnings should follow. Already, Wall Street analysts are boosting earnings expectations for 2023 and 2024.

Monetary conditions index vs earnings

The problem for the Fed is that higher asset prices ease monetary conditions, which will keep inflation elevated. Such works against the Fed’s goal of slowing economic growth, increasing unemployment, and reducing economic demand.

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Working Against The Fed

At the next Fed meeting, the Federal Reserve is widely expected to “pause” on hiking rates. Such was what the Fed alluded to at the last FOMC meeting suggesting the tighter bank lending standards are doing the work of additional rate hikes to slow economic growth. The chart below, which inverts the bank lending standards index, shows that tighter lending standards precede slower economic activity.

Bank lending standards vs GDP

As noted above, the monetary conditions index suggests that financial conditions are indeed easing in the economy. Such is problematic for the Fed, which needs the opposite tighter conditions to bring down inflation towards their target rate.

From the market’s perspective, it has been rallying since October, hoping the Fed would pause its rate-hiking campaign and start cutting rates in the latter half of this year. However, the bullish case hinges upon:

  • The economy avoiding a recession.
  • Employment remains strong, and wages will support consumption
  • Corporate profit margins will remain elevated, thereby supporting higher market valuations.
  • The Fed will “pause” the tightening campaign as inflation falls.

So far, those supports have allowed investors to chase stock prices higher this year despite higher rates from the Fed. However, there is also a problem with those supports.

If the economy avoids a recession and employment remains strong, the Fed has no reason to cut rates. Yes, the Fed may stop hiking rates, but if the economy is functioning normally and inflation is falling, there is no reason for rate cuts.

However, sustained economic growth and low unemployment will keep inflation elevated, such leaves the Fed little choice but to become more aggressive in tightening monetary accommodation further.

I don’t know who eventually wins this particular tug-of-war, but the Monetary Conditions Index suggests that the Fed’s fight is far from over.

The post Monetary Conditions Index Is Working Against The Fed appeared first on RIA.

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