Brief China: China Strategy of Promising to Buy Stuff Just Might Work on Trump as He Looks for an Easy “victory” and more

In this briefing:

1. China Strategy of Promising to Buy Stuff Just Might Work on Trump as He Looks for an Easy “victory”
2. Koolearn: Marketing Expenses Have Taken Operating Profits Down the Drain

1. China Strategy of Promising to Buy Stuff Just Might Work on Trump as He Looks for an Easy “victory”

• US-China trade negotiations are focusing on the easy parts to avoid truly difficult discussions on thornier structural issues.
• Beijing is trying to buy their way to a compromise by taking out their checkbook and promising to buy more US products.
• A truly comprehensive trade pact will be difficult, perhaps even impossible, to reach.
  That’s because many of the problems Washington wants resolved in China will require more than a few regulatory tweaks.
• The bureaucratic harassment, theft of intellectual property, and overt favoritism toward local firms that make doing business in China difficult for American chief executives are caused by the very way the Chinese economy works.
• Changing these procedures means changing China’s basic economic system. Beijing’s leaders cannot possibly achieve such an overhaul in the short term—assuming they even want to.

CNBC Interview of David Riedel on US-China Trade

2. Koolearn: Marketing Expenses Have Taken Operating Profits Down the Drain

• Koolearn updated its IPS prospectus and posted operating losses for 1H2019 (ended Nov. 2018).
• The company spent significantly on online promotion, but we believe that online promotion is not useful.
• We also believe online marketing expenditures are not a productive use of the Company’s cash, as Koolearn’s brand was already well known among consumers due to its parent company, New Oriental.