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No reprieve for Huawei; Protracted war; PRC buying Ukrainian military tech

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There appears to be a misreading of the US Department of Commerce’s decision to grant Huawei a license to buy some U.S. goods until Aug. 19. This is not a "reprieve for Huawei", this is a reprieve for operators in the US and other countries who rely on Huawei equipment and need more time to adjust.

The propaganda organs have not yet released the fully packaged report on Xi’s Jiangxi inspection tour, but the snippets out today give more insight on at least some of the key messages, that China and the Communist Party can not forget its revolutionary past, its martyrs, the struggles and sacrifices of the past, and the struggles and sacrifices still to come as China approaches its inevitable National Rejuvenation that can not be stopped by any foreign power.

These inspection tours are usually planned well in advance and so it may have been originally scheduled to give propaganda momentum to the recently announced commemoration activities for the upcoming 70th anniversary founding of the PRC, but clearly it has its symbolic value in the intensifying struggle with the US as well.

The breakdown in the trade talks and the Huawei measures are just another reminder that the trajectory of the US-China relationship has changed fundamentally, and even if there is a happy Trump-Xi call or meeting and some sort of trade deal, the strategic shifts on both sides are likely permanent.

Last May in the wake of the ZTE sanctions and then reversal I wrote:

the vulnerability to US technology was made crystal clear to everyone in China and has spurred even more focus on and popular support for ending reliance on US technology.

Perhaps more relevant, I wrote in August after a visit to China that:

While we have no public idea what if anything happened at Beidaihe, I heard consistently that the key theme of any discussions about US-China relations that may have occurred was whether it made sense to find a way to make concessions to the US without looking weak, or whether the trade pressure is just one piece of a multi-dimensional strategy to “thwart China’s rise”. Before you dismiss the idea that President Trump could be strategic remember that there are some very knowledgeable, “hawkish” and experienced “China hands” working in key parts of the bureaucracy. And even if there is not one the Chinese side will always lean towards embracing the idea of a broader conspiracy and strategy.

I believe that Xi has decided the US is intent on keeping China down, and while there may be some exploratory efforts to see if a palatable deal exists that mitigates some of the worst of the trade tensions for as long as possible, I do not expect the PRC side to make concessions approaching those demanded by the US in May, even if they are now being slightly watered down. Assuming President Trump holds firm, the tariffs and other measures will likely only increase in intensity over the coming months, perhaps until one or both sides have felt enough pain to reconsider. 

Outside the trade issues I see little reason for optimism. If Xi and his team have come to believe the real goal of the US is to keep China down across all dimensions then we should expect much more friction and competition.

While Xi and the Party would prefer to defer intensifying US-China competition as long as possible, they have been preparing.

I have been heating a rumor that last year Xi instructed senior officials to study Mao's writings on dealing with America. If you were to construct such a syllabus, which of Mao's writings would you put on it? The rumor may be false, but his writings still have resonance for Xi and many of his cadres, and perhaps relevance for China’s approach to the US.

Thanks for reading.


The Essential Eight

1. US-China

As trade war grinds on, Chinese authorities ready the populace for a long fight - The Washington Post

Earlier this year, the state-run People’s Publishing House printed “Rereading On Protracted War,” an updated collection of speeches that Mao gave in 1938 amid a Japanese invasion that would take eight years for China to repel. It appeared to be a sign that authorities were preparing the people for a long and difficult trade war.

Trump Vows China’s Economy Won’t Surpass U.S. on His Watch - Bloomberg

President Donald Trump said he was “very happy” with the trade war and that China wouldn’t become the world’s top superpower under his watch.

“We’re taking in billions of dollars,” Trump told Fox News Channel’s Steve Hilton when asked about the end game on the trade war. “China is obviously not doing well like us.”

China-US Trade War Song Goes Viral on Weibo - Bloomberg

Perhaps nothing captures the growing anti-U.S. sentiment in China better than a song about the trade war that is going viral in Beijing: “If the perpetrator wants to fight, we will beat him out of his wits.”

战略误判,后果严重--国际--人民网

正告那些对中国充满敌意的美国政客:你们总在疑虑中国的发展是为了什么,其实答案并不难找到。习近平主席多次讲过,人民对美好生活的向往,就是我们的奋斗目标。过去、现在、将来,中国的发展都是为了更好满足中国人民对美好生活的需要,而不是要与谁“零和博弈”,争个你死我活。世上本无“修昔底德陷阱”,但大国之间一再发生战略误判,就可能自己给自己造成陷阱,而那是谁也不愿看到的。

Op-ed: U.S. should stop accusations on intellectual property issues - People's Daily Online

In a word, China’s achievements are the precious fruit of the persistent and painstaking hard work of the Chinese people, and the people who make lies about it will finally come to no good. - Zhong Sheng

Shoe Companies Write Letter Urging Trump to Remove Footwear Tariffs – Footwear News

According to the Footwear Distributors & Retailers of America, which released the letter today, each U.S. family would have to spend an extra $131.93 on footwear annually should the threatened tariff increase take effect. It added that consumers overall would pay $7 billion in additional costs each year for shoes.

As Huawei Loses Google, the U.S.-China Tech Cold War Gets Its Iron Curtain - The New York Times

Others in China point to the country’s own barriers against competitors as a strategy that was going to provoke retaliation sooner or later. At some point, the United States was bound to use reciprocity in dealing with a closed Chinese internet market. One popular blog post explained that reciprocity has been translated into “mutual benefit” in Chinese, which explains why many in China didn’t understand that the idea could be used in retaliation.

Another popular blog post drives the point even more clearly.

“You’ve been opposing the U.S. for many years,” said the headline. “You should be long prepared that the U.S. will oppose you one day.”

U.S. Slows Hiring of Chinese Nationals by Chip Makers - WSJ $$

The disruption, which started last year, has affected hundreds of jobs across the industry at companies including Intel Corp, Qualcomm Inc. and Globalfoundries Inc., impeding their ability to hire Chinese employees or move existing employees to key projects in the U.S., these people said. It is significant in part because Chinese nationals account for a large share of non-U.S. citizens hired for such technical roles, where the talent supply domestically is often scarce…

Approvals for so-called deemed-export licenses once took a matter of weeks, whereas a wait of six to eight months isn’t unusual today, a person familiar with the process said.

Trump Calls for Inquiry Into Ties Between Biden Family and China - The New York Times

100 percent — it’s a disgrace,” Mr. Trump said in an interview with Steve Hilton, a Fox News host, when asked if the Biden family’s supposed financial ties with China should be investigated. “And then he says China’s not a competitor of ours,” he added. “China is a massive competitor of ours. They want to take over the world.”


2. Huawei

U.S. eases curbs on Huawei; founder says clampdown underestimates Chinese firm - Reuters

On Monday, the Commerce Department granted Huawei a license to buy U.S. goods until Aug. 19 to maintain existing telecoms networks and provide software updates to Huawei smartphones, a move intended to give telecom operators that rely on Huawei time to make other arrangements.

Huawei is still prohibited from buying American-made hardware and software to make new products without further, hard-to-obtain licenses.

Huawei founder Ren Zhengfei on Tuesday told Chinese state media that the reprieve bore little meaning for the company as it had been making preparations for such a scenario.

Blame U.S. Politicians, Not Companies, Huawei Founder Says, Dismissing Blind Nationalism - Caixin

“It is wrong to say that purchasing Huawei’s products equals being patriotic … don’t link that with politics,” said Ren Zhengfei in a group interview in Shenzhen on Monday with multiple Chinese media, including Caixin. “At Huawei, we won’t resort to nationalism and populism, because that is harmful to our country,” he said...

Ren said today that Google has been trying to persuade the U.S. government to “solve the problem,” and also said his company was working on a “rescue solution,” but did not elaborate.

Huawei CEO addresses US ban, 5G and users' rights - China Daily

Highlights of remarks by Ren Zhengfei, founder and CEO of Huawei

The US government's 90-day extension "doesn't mean much".

We can make chips as good as those made by US companies, but it does not mean that we will not buy chips from them.

Huawei's 5G plan will not be affected by the US ban.

Don't fan nationalist sentiment.

Tuesday CCTV Evening News gives the Ren Zhengfei interview nearly 2:30, report starts out with Ren's comments thanking US firms for all their help over the last 30 years - [视频]华为创始人接受媒体采访_CCTV

Huawei founder Ren Zhengfei says clash with the US was ‘inevitable’ | South China Morning Post

Huawei Technologies founder Ren Zhengfei said he foresaw the clash with the US government, saying it was a matter of time before the Chinese telecommunications equipment maker threatened US interests and attracted retaliation.

“We sacrificed [the interests of] individuals and families for the sake of an ideal, to stand at the top of the world,” Ren said in interview with Chinese state media on Tuesday. “For this ideal, there will be conflict with the United States sooner or later.”..

Ren said the US ban has no impact on Huawei’s 5G plans and that its rivals cannot catch up with the company for at least two to three years, adding that US politicians have underestimated the company.

China Warns About ‘Unwavering Resolve’ After Trump Huawei Move - Bloomberg

"This is wrong behavior, so there will be a necessary response," Zhang Ming, China’s envoy to the EU, said in an interview in Brussels on Monday. "Chinese companies’ legitimate rights and interests are being undermined, so the Chinese government will not sit idly by."..

He also emphasized the longevity of Chinese civilization.

“We have been holding on for 5,000 years,” Zhang said. “Why not another 5,000 years?”

Chinese Diplomat Jokes That Huawei `Has Cut Apple Into Pieces' - Bloomberg

Zhao Lijian, deputy chief of mission at the Chinese embassy in Islamabad, tweeted a picture Tuesday of a carved-up apple. “It has been just revealed why @realDonaldTrump hated a private company from China so much,” he joked. “Look at the logo of Huawei. It has cut APPLE into pieces...”

Huawei BBS, open to the public - 游客门户_心声社区

Huawei's Yu Chengdong says the HUawi mobile OS will be out this Fall at the earliest, will be compatible with existing Android apps - 余承东:华为自主操作系统最快今年秋天面世,兼容安卓web应

We Went Inside The Chinese Telecom Giant That Trump Just Banned - Vice - YouTube

Shanghai to give tax incentives and funds to nurture home-grown chips industry as China enters next battlefront over technology | South China Morning Post

“We have made some achievements in the industries that face the prospect of being strangled [by other countries],” Wu said, adding that the municipal authority will soon announce the details in a document called Shanghai Programme.


3. Australia sparked the Huawei 5G fears?

Special report - Hobbling Huawei: Inside the U.S. war on China's tech giant - Reuters

Washington is widely seen as having taken the initiative in the global campaign against Huawei Technologies Co Ltd, a tech juggernaut that in the three decades since its founding has become a pillar of Beijing’s bid to expand its global influence. Yet Reuters interviews with more than two dozen current and former Western officials show it was the Australians who led the way in pressing for action on 5G; that the United States was initially slow to act; and that Britain and other European countries are caught between security concerns and the competitive prices offered by Huawei.

The Australians had long harbored misgivings about Huawei in existing networks, but the 5G war game was a turning point. About six months after the simulation began, the Australian government effectively banned Huawei, the world’s largest maker of telecom networking gear, from any involvement in its 5G plans. An Australian government spokeswoman declined to comment on the war game.

After the Australians shared their findings with U.S. leaders, other countries, including the United States, moved to restrict Huawei...

The Huawei conflict isn’t only about U.S.-China superpower rivalry: The activities of Meng and Huawei were under scrutiny by U.S. authorities long before Trump began a trade war with China, according to interviews with people familiar with those probes.


4. More on Xi’s Jiangxi inspection tour

Xi Jinping calls for ‘new Long March’ in dramatic sign that China is preparing for protracted trade war | South China Morning Post

“We are here at the starting point of the Long March to remember the time when the Red Army began its journey,” Xi told cheering crowds on Monday, in footage posted on state broadcaster CCTV’s website on Tuesday. “We are now embarking on a new Long March, and we must start all over again!”

【独家V观】习近平深入赣南老区考察调研_中国经济网——国家经济门户

2019年5月20日,中共中央总书记、国家主席、中央军委主席习近平深入赣南老区考察调研。在中央红军长征出发纪念馆里,习近平亲切会见了于都县红军后代、革命烈士家属代表。他动情地说,这里是中央苏区,是红军长征的出发地。建立中华人民共和国,70年了,千万不能忘了过去。我们要饮水思源,不要忘了党的初心和使命,不要忘了我们的革命宗旨、革命理想,不要忘了我们的革命前辈、革命先烈,不要忘了我们的父老乡亲们。

Xi visits village of old revolutionary base - Xinhua

visited Tantou Village in Yudu County, Ganzhou City, during an inspection tour of east China's Jiangxi Province on Monday afternoon.

At the home of veteran Sun Guanfa, a descendant of a Red Army martyr, Xi chatted with Sun's family and local officials, and learned in detail about the production developments and life improvements of people in the old revolutionary base.

习近平江西考察第一天:行程背后有深意 - 中华人民共和国国防部

一周前的5月13日,习近平主持中共中央政治局会议,会议决定从今年6月开始,在全党自上而下分两批开展“不忘初心、牢记使命”主题教育。在主题教育开展前夕,习近平亲赴革命热土,在红色起点感悟共产党人的初心和使命,这正是对这场全党教育最有效的“动员”。

Xi visits the Nanchang Army Academy - 习近平视察陆军步兵学院并发表重要讲话 - 中华人民共和国国防


5. More on rare earths

Xi Jinping Flexes China's Trade Muscle With Visit to Rare-Earths Hub - WSJ $$

More important than China’s mining of the elements was the ability of its factories to turn rare earth into useful intermediate materials, including metals and magnets, via the environmentally damaging processes that other countries shunned. Other Chinese companies sprang up to apply the metals and magnets to more sophisticated items like micromotors, further entrenching China’s rare-earth ecosystem...

A company Chinese President Xi visited, JL MAG Rare-Earth Co., is located in the Jiangxi city of Ganzhou, which boasts half the world’s so-called heavy rare earths. JL Mag is a significant producer of magnets using rare-earth elements “and sells a lot of magnets into the U.S.A. and Europe,” according to Gareth Hatch, managing director of U.K. consulting firm Strategic Materials Advisors Ltd.

Rare-earth shares surge following top leader visit, sparking market expectations for policy support - Global Times

Wu also said that recently China has cut rare-earth imports from Myanmar, and the decreasing supply has meant a rise in prices, which is driving relevant shares up. 

At a time when China and the US are engaged in trade and technology battles, some have suggested that China can use rare earths as leverage in the trade war, limiting exports to the US. 

Wu agreed that rare earths could be used as a card for China to talk with the US, as so far the US is reliant upon China for importing and processing rare-earth products, which are important elements in making military defense products such as tank night vision goggles and aviation gyroscopes. 

Xi highlights China’s dominance of rare earths market | Financial Times $$

JL Mag makes a type of magnets used in power steering, brakes and windmills, with most of its export market in Europe. Globally, production is dominated by Hitachi of Japan but competitors such as JL Mag are gaining market share. After Mr Xi's visit, its stock surged by 10 per cent, the daily limit.

This March article by James Kennedy is getting play inside China, translated as 中国稀土加工:扼住美国命运的咽喉 - Viewpoint: China Solidifies Dominance in Rare Earth Processing - National Defense:

Today, the disparity between China and the United States continues in part because the Pentagon, government agencies, and the finance and mining industries measure the extraction of rare earths at the mining and oxide production level. Hundreds of rare earth mining projects outside of China have been initiated, giving the erroneous impression that Western rare earth dependence on China may be declining. However, most ultimately fail.

Out of more than 400 rare earth startups publicly listed in 2012, less than five reached production. Of those, only two reached significant volumes. Of those two, one is bankrupt and resurrected with Chinese financing and the other lost its operating permit for a short period.

During this time, China has taken significant equity and debt positions in many of these failed or faltering projects and will control them if they begin production.

China's latest trade war card isn't as strong as Beijing thinks - CNNPolitics

China's monopoly on rare earths is also not what it seems. While it plays a major role in current global trade, this is largely due to relatively lax environmental regulations in the past which made extraction and refinement in China cheaper and easier than other countries. That advantage, if it could be described as such, has shrunk in recent years as Beijing has cracked down on domestic companies and illegal extractors.

Comment: I am hearing mixed messaging about how vulnerable the US really is to a sudden ban on rare earths and rare earth manufacturing outputs to the US. If the US is still seriously vulnerable then it is another failure of policymakers vis a vis China, and just as China has learned the lesson from ZTE and now Huawei that it can not rely Huawei, so should the US about relying on anything from China, in this New Era of US-China relations.


6. PRC buying Ukrainian military tech

China has what Ukraine wants: Business for its military factories. - The Washington Post

Motor Sich, dubbed the “Czar of Engines” in the Chinese media, has what Beijing wants: It can supply warplane engines and the know-how to one day possibly make a Chinese-built version.

The Chinese, in turn, have what Motor Sich wants: reliable buyers.

The company lost its biggest market — supplying engines for military helicopters and other aircraft in Russia — after war broke out in eastern Ukraine in 2014. Now it sells mainly to China...

“What we care about right now is the following: Is America ready to buy our goods? No. Period,” said Gennadiy Chyzhykov, president of the Ukrainian Chamber of Commerce and Industry. “China does buy our goods.” ...

He said he hears frequently from Ukrainian government officials that the United States is unhappy with his dealings with China. His response: “Then how about the State Department gives us work?”


7. US worries about Chinese drones

DHS warns of 'strong concerns' that Chinese-made drones are stealing data - CNNPolitics

Chinese-made drones may be sending sensitive flight data to their manufacturers in China, where it can be accessed by the government there, the US Department of Homeland Security warned in an alert issued Monday obtained by CNN.

The drones are a "potential risk to an organization's information," the alert from DHS's Cybersecurity and Infrastructure Security Agency states. The products "contain components that can compromise your data and share your information on a server accessed beyond the company itself."

The report does not name any specific manufacturers, but nearly 80% of the drones used in the US and Canada come from DJI, which is headquartered in Shenzhen, China

Comment: DJI has been trying to ramp up its work in DC, guess it needs to do more. At least in the short-term the increase in US-China tensions should be great for lobbyists/lawyers/communications professionals in DC...

DJI allays security fears after U.S. issues warning - China Daily

"We provide all our customers full and complete control over how their data is collected, stored and transmitted. For government and critical infrastructure customers that require additional assurances, we provide drones that do not transfer data to DJI or via the internet, and our customers can enable all the security steps DHS recommends," the Shenzhen-based company said.


8. Xinjiang

The German Data Diver Who Exposed China’s Muslim Crackdown - WSJ $$

Research by a born-again Christian anthropologist working alone from a cramped desk in this German suburb thrust China and the West into one of their biggest clashes over human rights in decades.

Doggedly hunting down data in obscure corners of the Chinese internet, Adrian Zenz revealed a security buildup in China’s remote Xinjiang region and illuminated the mass detention and policing of Turkic Muslims that followed. His research showed how China spent billions of dollars building internment camps and high-tech surveillance networks in Xinjiang, and recruited police officers to run them...

Xinjiang launches new apprenticeship system to cultivate talent - Global Times

The move was taken amid the strengthening development phase of Xinjiang, the core area of Belt and Road Initiative, and talent cultivation is the foundation of its economic development. 

Also, it is a follow-up to the Comprehensive Implementation of the New Enterprise Apprenticeship System, which was jointly announced by China's Ministry of Human Resources and Social Security (MOHRSS) and Ministry of Finance in October 2018.


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Business, Economy and Trade

China, EU aviation regulators sign landmark deal, paving road for home-made C919 - Global Times "They are framework agreements and more details are expected to come soon," said Diao Weimin, an international aviation law expert and a professor at the Civil Aviation Management Institute of China. Diao told the Global Times on Monday the deal is related to the airworthiness certification of China's home-built C919.  "At least it can pave way for C919's entering the EU market in terms of normalization," said Diao.

Xinhua Headlines: Milestone deal on civil aviation to enhance China-EU cooperation - Xinhua The move, which came amid uncertainties worldwide furthered by U.S. unilateralism and trade protectionism, reaffirms the EU commitment to safeguarding openness, free trade and multilateralism while enriching the content of the China-EU comprehensive strategic partnership.

Renminbi volumes surge as speculators take on People’s Bank | Financial Times $$ In the week ending May 10, trading volumes in the offshore renminbi were 120 per cent higher than averages over the previous month, according to London-based EBS, one of the key systems that banks use to deal with each other. The shift comes as speculative investors square off with China’s central bank over whether the renminbi will sink to Rmb7 against the dollar, a low that has not been broken since 2008.

Saudi Oil Colossus Wants to Shift Its China Business Downstream - Caixin A flurry of state visits has helped Saudi Arabia nudge ahead in its long-running tussle with Russia to be China’s main supplier of crude oil this year. Yet the kingdom has larger ambitions. It looks to take advantage of China’s push to develop its petrochemical sector by diving into downstream petrochemicals production.

Nepal bans China's Alipay and WeChat Pay - Nikkei Asian Review The Nepal Rastra Bank, the central bank, on Tuesday announced a ban on the two Chinese services, operated by Tencent Holdings and Alibaba Group Holding's Ant Financial Services Group affiliate, respectively, citing their failure to secure licenses to operate in the country.

Yicai Global - Chinese Carmakers Offer Staff Discounts Ahead of New Standards Beijing plans to enforce the Sixth Stage National Vehicle Emission Standards, supposedly the world's toughest, on July 1 next year. But big cities, including Beijing, Shenzhen, Guangzhou and Shanghai, intend to implement them this July 1. More than 20 provinces and cities have followed suit, announcing plans to launch the new standards ahead of schedule.

Plan to remove expressway toll booths unveiled - Gov.cn The General Office of the State Council released a circular on May 21, outlining the implementation plan to remove expressway toll booths at provincial borders and promote a fast, nonstop toll collection system to reduce logistics costs and increase transportation efficiency.

Bloomberg’s economic forum invited to Beijing | Financial Times $$ “The fact the meeting is taking place in Beijing is a positive sign and a sign China remains interested in a dialogue,” said Henry Kissinger, an adviser to the event. // Comment: Surprised there is not an HBS case study on how Bloomberg worked its way back into Beijing’s good graces

China Debt Iceberg Shows Most Risk in State-Dominated Areas - Bloomberg In China’s financial system, the bigger the role of the state, the cheaper the funding costs. As a rule. But in one corner of the country’s $13 trillion bond market, something different has happened. The highest yields in the 7.5 trillion yuan ($1.1 trillion) worth of debt sold by local government financing vehicles are found on the securities sold in regions where the public sector dominates the economy.

China Eastern asks Boeing for compensation over 737 MAX grounding - Reuters 

A delicate balance - Toyota took care to make offering to U.S. before China deals - Reuters 

Politics and Law

加快推进社会治理现代化--理论-人民网 Chen Yixin, secretary general of the central politics and law committee on page 13 of the Tuesday People's Daily on accelerating the modernization of social management, lists safeguarding national political security as the primary task, also mentions the importance of developing the "fengqiao experience"

Official stresses promotion of ideological, political theory education - Xinhua Huang Kunming, a member of the Political Bureau of the CPC Central Committee and head of the Publicity Department of the CPC Central Committee, made the remarks during an inspection and research tour to Shanghai Monday. Huang said teachers and researchers on ideological and political theories should combine history with reality and theories with practices to provide insightful answers to questions such as why Marxism works, why the CPC can achieve so much and why socialism with Chinese characteristics is well-developed. Efforts should also be made to step up the building of national high-end think tanks and better tell the stories of China, he noted.- 黄坤明:增强自觉自信 用心咨政育人 推动党的创新理论走进青年深入人心

CPC releases disciplinary inspection progress list - Xinhua Inspection teams stayed in Party organizations in 13 provincial-level regions, 11 central government departments and two financial institutions for inspection between October and November last year. The problems found were exposed this January and the progress list started being released on May 16. The second round disciplinary inspections, specifically targeted at poverty alleviation, marks the first time that the central leading group on disciplinary inspection has focused on a specific subject. The third round of disciplinary inspection launched by the 19th CPC Central Committee is underway.-中央脱贫攻坚专项巡视整改进展情况全部公开

中共中央印发《中国共产党党员教育管理工作条例》 - 国内 - 新京报网

Ministry launches English-language legal service website - Xinhua The website will help solve legal problems that foreign entities or persons may have in China, such as in the areas of investment, trade, finance, environmental protection, border entry and exit, employment and marriage, according to vice minister Xiong Xuanguo.

Foreign and Defense Affairs

Shangri-La Dialogue attendance shows China sincere in engaging with US: expert - Global Times The Chinese defense minister will speak at an annual international defense forum in Singapore, marking the first time in eight years for China to send a senior military leader to the forum at the end of this month...An Gang, a senior research fellow at the Pangoal Institution, a Beijing-based think tank, told the Global Times on Tuesday that "the backdrop of this year's forum is the worsening China-US relationship, and the US is clearly executing a strategy to comprehensively compete with China." Washington will definitely ramp up its accusations and attacks against China at different international forums, An noted.

Chinese officials, executives abandon Schulich training program amid dispute with Canada - The Globe and Mail An 18-year Ontario program to train Chinese officials and executives has been gutted since the arrest of Huawei executive Meng Wanzhou gave rise to a deepening dispute between Canada and China. The Schulich School of Business estimates it has lost $500,000 in bookings for training from China since Dec. 1, 2018, the day Ms. Meng’s arrest put a caution sign on Canada for the Chinese political establishment.

Netizens hail FM Spokesperson Office’s new Weibo account - Global Times The account has attracted more than 530,000 followers in the first 24 hours of its debut Monday. and zoomed to the top 10 hot trending topics on Sina Weibo.  The account

Taiwan

US backs calls for Taiwan to get role at UN health assembly - AP The United States is backing calls for Taiwan to be granted observer status at the U.N. health agency’s biggest annual gathering, the U.S. health secretary said Monday. Secretary of Health and Human Services Alex Azar spoke to reporters in Geneva on the sidelines of the start of the World Health Organization’s annual assembly, which China’s government has prevented Taiwan from attending.

Rejection of Taiwan to WHA shows wide acceptance of one-China principle: FM - Global Times The WHA General Committee on Monday again decided to leave out the proposal of "inviting Taiwan to participate in the WHA as an observer," Chinese Foreign Ministry Spokesperson Lu Kang said at a routine press conference on Tuesday. "The Taiwan region's participation at international activities must and can only be handled in accordance with the one-China principle," Lu said. He reiterated that the decision shows that the one-China principle is embraced by international society.

Tech and Media

Sheryl Sandberg says not to break up Facebook because of China - Vox Facebook chief operating officer Sheryl Sandberg in an interview with CNBC on Friday pushed back against growing calls for the social media giant to be broken up by suggesting that such a maneuver would disadvantage it against China. “Let me share with you something else I heard in my meetings in DC. And I heard this in private meetings from both sides of the aisle, that while people are concerned with the size and power of tech companies, there’s also a concern in the United States with the size and power of Chinese companies, and the realization that these companies are not going to be broken up,” Sandberg said.// Comment: This is a scripted talking point from Facebook. Zuckerberg used it last year in Congressional hearing, now hearing it regularly, clearly part of Facebook's campaign to thwart momentum towards breaking up the company

China film funding crunch boosts Hollywood offerings | Financial Times $$ After a decade of rapid expansion in China’s movie market, local film producers are facing a funding crunch. A government crackdown on tax evasion, a squeeze on the shadow banking sector and a pullback in consumer spending have hit new projects. The movies in the latest week’s box office top 5 in China were all foreign. At Beijing’s annual film festival last month, the atmosphere was gloomy. “The era of barbaric growth has ended,” said Lin Zhan, chair of a committee that organised the event.

TikTok Owner to Challenge Spotify and Apple With Music Service - Bloomberg ByteDance expects to introduce the new app as early as this fall in a handful of territories, mostly poorer countries where paid music services have yet to garner large audiences

Huya is looking at US expansion as Chinese tech firms go global - CNBC 

Society, Arts, Sports, Culture and History

Novelist Known for Gay Content Sentenced for ‘Illegal Publishing’ - Caixin Global China’s burgeoning “danmei” novels have hit an obstacle. An author of the genre, which features homoerotic love stories between two men aimed at a young female audience online, has been sentenced to prison for “illegal publishing.”

Blood Letters of a Martyr – China Channel Lian Xi’s book Blood Letters: The Untold Story of Lin Zhao, a Martyr in Mao’s China is not a hagiography, yet it is more than a biography. Lian Xi, a professor or world Christianity at Duke Divinity School, emphasizes the role of the religious in heroic struggles against totalitarian systems and compares Lin to famous Christian prisoners such as Dietrich Bonhoeffer

A Chinese Millennial Looks Back on Her Life - The New York Times Her account has much of value to offer us as we seek to understand how China has been changing and look for help in explaining these shifts to others. “Under Red Skies” follows on the heels of several recent English-language books about Kan’s generation, but, unlike those, it has actually been written by a member of the complicated cohort in question. This gives a fresh feel to its handling of by-now familiar topics, like the tension produced when a jingoistic education is confronted with a longing to participate in global popular culture.

Energy, Environment, Science and Health

China calls out big state firms, others on pollution violations amid slowing economy fears - Reuters The ministry has continued to warn that China’s slowing economy had given some regions an excuse to “loosen their grip” on environmental protection.

Beijing to restore ecology of Yongding with Yellow River diversion - Global Times 

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Target Huawei; No new trade talks scheduled?; Canadian hostages formally arrested

Hi everyone, I decided to make today’s issue of the newsletter free. If you like what you see please sign up for the Sinocism China Newsletter here. Group and education discounts are available. —Bill

The US has significantly intensified its efforts to thwart China and Huawei’s 5G dream while dramatically raising the heat in the trade war.

President Trump finally signed the long-rumored executive order that will block purchases of Huawei equipment in the US but the move with far more serious implications for Huawei is the addition of Huawei to the Department of Commerce’s “Entity List”. The US government will soon require any American firms selling to Huawei to get a license, and if the US decides not to grant licenses for key technology components Huawei’s business globally could be severely damaged. It may not be quite as bad as the ZTE death sentence last year but it looks close.

Perhaps Trump has no intention of implementing these new controls any time soon and instead is using them as another lever to get China to agree to the trade deal terms. Perhaps General Secretary Xi will give Trump a call and work out a reprieve. We will find out soon enough I guess, though the mood in the US towards China is much darker now than it was a year ago, and even more bipartisan.

And the mood in China appears to be hardening as well, and certainly the propaganda since the last round of talks failed looks to be painting Xi into a no-surrender nationalist corner.

I am not sure the Chinese understand what looks to be growing support here for Trump’s tariffs and more broadly his tougher line on China, and how Trump and his team increasingly see this fight as a political winner into the 2020 election.

The Huawei move had been delayed as the trade talks progressed. Sanctions under the Magnitsky Act for the Xinjiang human rights disaster have also been held back. Will we start seeing tougher initiatives from the US across several dimensions now that the trade talks look busted?

It is starting to feel like we are on the verge of a very sharp downturn in the US-China relationship.

Thanks for reading.


The Essential Eight

1. US targets Huawei

Trump administration cracks down on giant Chinese tech firm, escalating clash with Beijing - The Washington Post

The Trump administration on Wednesday slapped a major Chinese firm with an extreme penalty that makes it very difficult for it to do business with any U.S. company, a dramatic escalation of the economic clash between the two nations.

The Commerce Department’s Bureau of Industry and Security said it was adding Huawei Technologies Co. Ltd. to its “Entity List,” known to some as the “death penalty.”

This listing makes it virtually impossible for companies to survive once U.S. firms are discouraged from doing business with them. The Commerce Department said it had reached this decision because Huawei “is engaged in activities that are contrary to U.S. national security or foreign policy interest.”..

Huawei smartphones use the Android operating system. With this listing, Google would be barred from exporting Android to Huawei unless it got a waiver from the Commerce Department. The chips in the phones are also made by U.S. companies, which would need waivers to sell to Huawei, said an official familiar with the matter .

Executive Order on Securing the Information and Communications Technology and Services Supply Chain | The White House:

I, DONALD J. TRUMP, President of the United States of America, find that foreign adversaries are increasingly creating and exploiting vulnerabilities in information and communications technology and services, which store and communicate vast amounts of sensitive information, facilitate the digital economy, and support critical infrastructure and vital emergency services, in order to commit malicious cyber-enabled actions, including economic and industrial espionage against the United States and its people.  I further find that the unrestricted acquisition or use in the United States of information and communications technology or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries augments the ability of foreign adversaries to create and exploit vulnerabilities in information and communications technology or services, with potentially catastrophic effects, and thereby constitutes an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States.

Department of Commerce Announces the Addition of Huawei Technologies Co. Ltd. to the Entity List | U.S. Department of Commerce:

This action by the Commerce Department’s Bureau of Industry and Security, with the support of the President of the United States, places Huawei, a Chinese owned company that is the largest telecommunications equipment producer in the world, on the Entity List. This will prevent American technology from being used by foreign owned entities in ways that potentially undermine U.S. national security or foreign policy interests,” said Secretary of Commerce Wilbur Ross. “President Trump has directed the Commerce Department to be vigilant in its protection of national security activities. Since the beginning of the Administration, the Department has added 190 persons or organizations to the Entity List, as well as instituted five investigations of the effect of imports on national security under Section 232 of the Trade Act of 1962.”

Trump's Huawei Threat Is Nuclear Option to Halt China's Rise - Bloomberg

“The Trump administration action is a grave escalation with China,” Eurasia Group analysts Paul Triolo, Michael Hirson and Jeffrey Wright wrote in a note. If fully implemented, the blacklist would “put at risk both the company itself and the networks of Huawei customers around the world, as the firm would be unable to upgrade software and conduct routine maintenance and hardware replacement.”

China urges U.S. to stop executive order on Huawei - CGTN

China urges the U.S. to stop the mistake of carrying out the executive order barring U.S. companies from using telecommunications equipment made by Chinese company Huawei and its 70 subsidiaries, Chinese Ministry of Commerce spokesperson Gao Feng said in a media conference.

"The executive order is an abuse of national security and unilateral trade sanctions," Gao said, adding that the U.S. should respect market economy rules and build a transparent and unbiased commercial environment for foreign companies.

China has always asked Chinese enterprises to follow the laws of the countries where they are based and will take necessary measures to protect Chinese companies' rightful interests.

Huawei: US will lag in 5G if it is blocked after Trump executive order - CNBC

In a statement to CNBC on Thursday, Huawei said that further moves to block it from the U.S. market could have a damaging impact on America’s 5G development.

“Huawei is the unparalleled leader in 5G. We are ready and willing to engage with the US government and come up with effective measures to ensure product security,” a spokesperson for the company told CNBC.

“Restricting Huawei from doing business in the US will not make the US more secure or stronger; instead, this will only serve to limit the US to inferior yet more expensive alternatives, leaving the US lagging behind in 5G deployment, and eventually harming the interests of US companies and consumers,” the statement said. “In addition, unreasonable restrictions will infringe upon Huawei’s rights and raise other serious legal issues.”

Blacklist mess: Huawei's $105 billion business at stake after U.S. broadside - Reuters

The ban is not yet effective.

A similar U.S. ban on China’s ZTE Corp had almost crippled business for the smaller Huawei rival early last year before the curb was lifted...

Out of $70 billion Huawei spent for component procurement in 2018, some $11 billion went to U.S. firms including Qualcomm, Intel Corp and Micron Technology Inc, and they could see that revenue disappear.

Huawei has been building its substitute to Android for a rainy day. Is that day looming? | South China Morning Post

The company has been developing and perfecting its own smartphone OS, according to four people familiar with the company’s plans.

The company started building its own operating system after a US investigation into Huawei and ZTE in 2012, one of the people said, asking not to be named discussing confidential matters. Huawei also has its own OS for tablets and personal computers, the person said.

Huawei’s day of reckoning arrives – but it has been preparing for almost a year | South China Morning Post

The Shenzhen-based company, which claims to be the “unparalleled leader in 5G” and recently overtook Apple in global smartphone sales, has been stockpiling critical US components for almost a year, according to separate reports by research houses Haitong and Canalys. The move was to ensure it can continue making its products that rely on core technology from US suppliers such as Intel and Qualcomm.

The Cybersecurity 202: Trump officials and lawmakers say China is the problem not Huawei - The Washington Post

On Tuesday, Sen. Josh Hawley (R-Mo.) introduced a bill to bar exporting large categories of technologies to China including artificial intelligence, robotics, semiconductors and advanced construction equipment.

Hawley and five other Republicans also proposed another bill to bar Chinese students from science or engineering schools connected with the People’s Liberation Army from receiving U.S. visas.

Graham warns of 5G security threat from China | TheHill

Another bill around 5G and supply chain threats introduced Tuesday was the Supply Chain Act, sponsored by Sens. Marsha Blackburn (R-Tenn.) and John Cornyn (R-Texas). This legislation would require “long-term scenario and strategic planning” between the government and private sector to assess the risk vulnerability of the nation’s information and communications technology marketplace, and to develop strategies to mitigate these risks.

Huawei poses security threat to UK, says former MI6 chief | The Guardian

In a report from the Henry Jackson Society (HJS), the authors go on to claim Huawei “has long been accused of espionage” – a claim denied repeatedly by the firm – and notes that “while there are no definitely proven cases”, a precautionary principle should be adopted.


2. US-China trade

China says 'no information' on US trade team trip to Beijing - AFP

China said on Thursday (May 16) it "does not have information on the US plan" to come to Beijing to continue trade talks amid escalating trade tensions between the two giants.

Foreign Ministry Spokesperson Geng Shuang's Regular Press Conference on May 15, 2019

Q: You had been using the word "trade disputes" when replying to questions related to the China-US trade talks previously. But you began saying "trade war" from yesterday. What is the reason for such change? Is it because China believes the trade disputes have escalated?

A: I think you may have over-interpreted our words.

As I kept saying, China doesn't want a trade war, but is by no means afraid of fighting one. It is the US, not China, that defined the trade friction as a trade war and started it. The countermeasures China has taken are entirely for legitimate self-defense.

The latest "Taoran Notes", says no point in talking if the US is not sincere and does't respect China's bottom lines, again brings up the Korean War - 没诚意,来也白来,谈也白谈

此外,如果有人觉得中方在虚张声势,那只会是抗美援朝战争之后的又一重大误判。

当年我们说,谁要是越过三八线,我们一定出兵。

有人不信,产生了误判,然后被事实教育,又退回三八线。

现在我们说,谁要是拿关税来耀武扬威,我们一定反制。

信不信?..

那么这些温和的中国人也肯定会用尽全力,把自己变成1776年以来对方遇见过的最值得尊敬,也是最难缠的对手。

既然已经开始打了,不如就让一些人清楚认识到,极限施压的现实成本会远超臆想的收益。

Excerpts via a slightly edited Google translate:

In addition, if anyone thinks that China is bluffing, it will only be another major miscalculation after the war to resist U.S. aggression and aid Korea.

In those days, we said that if we cross the 38th parallel, we must send troops.

Some people did not believe that they had misjudged, and then they were educated by facts and returned to the 38th parallel.

Now we say that we will take countermeasures against anyone who imposes tariffs on us.

Do you believe it or not?...

The piece concludes by saying that if the US insists on pursuing this trade war and trying to force China to surrender then:

"these gentle Chinese people will certainly use their best to turn themselves into the most respectable and most difficult opponents they have ever met since 1776.

Now that you have started playing, it is better to let some people clearly realize that the actual cost of extreme pressure will far exceed the benefits of delusion."

China is a ‘kung fu master’ and can deliver ‘deadly punch’ to US economy in trade war, ex-official says | South China Morning Post

China has many options for retaliating against the US and is likely to implement tariffs that go beyond trade in goods, a former top government official says

Wei Jianguo, a former vice-minister in the Ministry of Commerce, says China has the ‘willingness to act to fight a prolonged war’

Commentary: China doesn’t hope to have a trade war, but is never afraid of fighting a trade war - People's Daily Online

China’s sincerity and kindness to move forward the negotiations have been seen by all over the last year, and it always keeps promises. Regrettably, the US went back on its words and attempted to make profit from raising unreasonable trade demands and exerting extreme pressure on China. This is nothing but miscalculation.

China’s forbearance is never weakness and its sincerity is not to be trampled on by the US. China will never make concessions on issues of major concerns or allow its core national interests and interests of its people to be hurt. China is resolute to safeguard its national interests and dignity.

The US is doing nothing but tarnishing its own reputation and image through imposing extreme pressure and proposing unreasonable requirements.

人民日报署名文章:谁在“出尔”,谁在“反尔” ——“中国出尔反尔论”可以休矣-新华网

美国编织的所谓“中国出尔反尔论”的大帽子完全是颠倒黑白。中美经贸磋商一年多来,中方一直抱着最大的诚意推动磋商,希望在平等相待、互相尊重的基础上,达成一份互利双赢的协议。即使在美方威胁加征关税的情况下,中方工作团队仍从大局出发,赴美举行第十一轮中美经贸高级别磋商,最大程度展现了中方推动谈判的诚意。

China has three trump cards to win trade war with US - Global Times - Jin Canrong

China has three trump cards to deal with the US on trade.

The first one is a total ban on the export of rare earths to the US. Rare earths are the raw materials for non-ferrous metals, which are indispensible in chip-making. China's rare-earth production accounts for a majority of the world's total.

The US has its own rare-earth reserves but it would take years for the US to restore its own rare-earth industry to meet its needs for chip production. Even when the US finishes re-establishing the industry, China would have completed R&D on high-end chips and started to export its own products.

US national debt is the other card.

Walmart says higher tariffs on China goods will increase prices for U.S. shoppers - Reuters

Walmart Chief Financial Officer Brett Biggs told Reuters that higher tariffs will result in increased prices for consumers. He said the company will seek to ease the pain, in part by trying to obtain products from different countries and by working with suppliers’ “costs structures to manage higher tariffs.”

Cisco beats earnings target, says has cushioned supply chain from tariffs - Reuters

the company said it had been working for six months to change its supply chain and that it expects minimal impact at this point.

“We still have some manufacturing happening in China. But we’ve greatly, greatly reduced our exposure working with our supply chain and our suppliers,” Chief Financial Officer Kelly Kramer said on a post-earnings conference call.

Trump administration to delay auto tariffs amid trade war - CNBC

The Trump administration plans to delay auto tariffs by up to six months, stopping itself for now from widening global trade disputes, four sources told CNBC


3. Xi’s “New Vision of Development” from 2016

Xi's article stresses deep understanding of new vision of development - Xinhua

An article by Xi Jinping, general secretary of the Communist Party of China Central Committee, entitled "Deepening Understanding of the New Vision of Development," was published Thursday in the 10th issue of the Qiushi Journal this year...

"We must base our development on innovation, cultivate new impetus for development through innovation, and create development models that give full play to our first-mover advantages," the article reads...

The article places emphasis on the establishment of a new system for opening up and the improvement of the quality and level of opening up, noting that efforts must be made to follow the trend of economic globalization and make full use of the advanced scientific and technological achievements and management experiences of human society.

Lack of innovation is 'Achilles heel' for China's economy, Xi says - Reuters

Xi’s comments, carried in the latest issue of the ruling Communist Party’s influential bimonthly theoretical journal Qiu Shi, were made in a speech in January 2016, and originally published a year later in a collection of Xi’s speeches.

In the piece, re-published as the economy faces strains during a protracted trade war with the United States, Xi takes an unvarnished look at the problems the country faces.

“Though our economy has vaulted to second place in the world, it is big and not strong, and its bloatedness and frailty are quite prominent,” Xi said.

“This is mainly reflected in the lack of strength in innovation ability, which is the ‘Achilles heel’ of this lug of an economy of ours.”

Xi's article is an excerpt from a speech he gave in January 2016 to ministerial and provincial-level officials - 深入理解新发展理念 - 求是网:

(这是习近平总书记2016年1月18日在省部级主要领导干部学习贯彻党的十八届五中全会精神专题研讨班上讲话的一部分。)

Comment: Interesting that Qiushi keeps republishing Xi’s speeches from a few years ago, making the point that Xi has been right all along?

China encourages enterprises to enhance innovation capabilities | english.scio.gov.cn

China will further support local enterprises to increase their innovation capabilities as the country is embracing a new round of industrial reform and aiming for high-quality development, according to an executive meeting of the State Council.

The meeting chaired by Premier Li Keqiang Tuesday called for better use of fiscal and financial policies to inspire enterprises to enhance their input on research and development (R&D).


4. Canadian hostages formally arrested

Two Canadians detained in China, Michael Spavor, Michael Kovrig, formally arrested - The Globe and Mail

The Chinese government has formally arrested Michael Kovrig and Michael Spavor, two Canadians it says provided state secrets to foreign organizations, after holding them incommunicado for months.

Mr. Kovrig, a former diplomat, has been accused of gathering state secrets and intelligence for overseas entities. Mr. Spavor, an entrepreneur who helped people travel to North Korea, is accused of stealing and illegally providing state secrets to foreign entities.

The two men were arrested “recently,” said China’s foreign ministry spokesman Lu Kang. He would not comment on where the men are being held or whether they have been provided access to a lawyer.

The men have “been officially arrested” for state secrets-related crimes, Mr. Lu said. However, he said they have been “accused” of wrongdoing rather than formally indicted. The offences he described are, in the most serious of cases, punishable by death...

Both men are now being held in a formal detention centre, which is more akin to a jail, according to two people familiar with their situation


5. Pigs, worms and Hu Chunhua

Pig Fever Branded a National Crisis In 'Stunning' Blow to China - Bloomberg

The full extent of the damage to the country’s $128 billion pork industry is still being fathomed, and any estimate of the economic impact from the virus on the swine industry will be “stunning,” Li Xirong, director of the China Animal Agriculture Association, told more than 400 people involved in the sector at a meeting in the eastern city of Wuhan Thursday.

China Tells Farmers to 'Grab Crops From the Mouth' of Armyworms - Caixin Global:

Signaling the danger posed by the innocuous-looking grub to China’s corn, cotton and soybean industries, a major pest prevention center under the country’s Ministry of Agriculture and Rural Affairs (MOA) on Tuesday warned of a "visible increase" in the pace of the invasion, and urged farmers to “grab crops from the mouth of the pest.” 

The insects were first detected on the Chinese mainland in January in the southwestern border province of Yunnan. They are believed to have passed from Southeast Asia into China, where they have ravaged around 1,080,000 mu (720 square kilometers) of farmland in 13 provincial-level regions. 

Those figures, from the MOA unit, are far higher than the 127,000 mu figure given in a U.S. government report last week.

Ear to Ear: China’s Farming Authority Warns of Corn-Eating Pest

An invasive pest that feeds mainly on corn has devoured 720 million square meters of crops in 13 Chinese provincial-level regions, mostly in the south and southwest, and is moving northward at an alarming pace, the National Agro-Tech Extension and Service Center warned Tuesday [草地贪夜蛾侵入13省份为害春玉米] ...

The fall armyworm was first detected in China on Jan. 11 in Pu’er — a city in the southwestern Yunnan province that’s famous for its eponymous variety of tea. “The insects have been expanding rapidly across the country and will (soon) establish their breeding grounds, which would pose a serious risk,” said the agro-tech center

Hu Chunhua has a tough job - Senior official stresses all-round revitalization of rural China - Xinhua:

A symposium was held Wednesday calling for in-depth study and implementation of the discourses of Xi Jinping on agriculture, rural areas and rural residents to achieve all-around rural revitalization.

Hu Chunhua, a member of the Political Bureau of the Communist Party of China (CPC) Central Committee and chief of the central rural work leading group, attended the symposium and made a speech.


6. Chinese and the Australian election

Chinese media mocks Australia and Prime Minister in WeChat posts - Australian Broadcasting Corporation)

"Our evidence suggests that accounts aligned more closely with the Government in Beijing have a clear anti-Liberal (Government) story coming out of them," said Dr Jensen, a senior research fellow at the University of Canberra's Institute for Governance and Policy Analysis.

Across a period of five months from November 2018 to March 2019, the researchers analysed the Australian content on 47 of the most visited WeChat Official accounts in mainland China, 29 of which were aligned with the CCP.

Outlet barred from Labor press conference for ‘anti-China’ stance - The Australian

Organisers of a Chinese-language press conference for Labor’s Banks candidate Chris Gambian, Chinese internet company NetEase, confirmed they barred the Vision China Times in Australia for their stance on the Chinese Government.

Chinese Immigrants Emerge as Key Bloc in Australian Election - WSJ

The Chinese community accounts for 1.2 million of Australia’s 25 million people and makes up as much as 15% of the voter base in some battleground contests...

To reach Chinese-Australian voters, the main parties are hitting the streets and turning to Chinese messaging app WeChat. The prime minister used the platform to highlight an interview with a Chinese-language media outlet in April. Labor enlisted its Mandarin-speaking former Prime Minister Kevin Rudd to voice WeChat videos, and Mr. Shorten in March invited 500 Mandarin-speaking voters to interact live on the platform before the election was called.

Comment: WeChat is the primary channel for information consumption by much of the Chinese diaspora. Any government worried about CCP influence and interference needs to be paying much more attention to WeChat.


7. Mapping a hack

Single server ties hacked diplomatic cables to Chinese cyberattacks worldwide | ZDNet

According to the report, the Ministry of Foreign Affairs of Cyprus and the overall COREU diplomatic network -- used to facilitate communication between all 28 EU countries -- had been compromised, leading to the exposure of diplomatic cables and far more besides. Over 100 organizations are believed to have been targeted, including trade unions and think tanks.

The infiltration of the network was attributed to the Strategic Support Force (SSF) of the People's Liberation Army (PLA), China's elite hacking team.

Reaver: Mapping Connections Between Disparate Chinese APT Groups

When the New York Times published a story in December based on a combination of hacked diplomatic cables belonging to the European Union, as well as sensitive information belonging to the United Nations, we, the BlackBerry Cylance Threat Intelligence team, took notice...

As we will demonstrate in greater detail below, we connected this domain to a host of other, disparate Chinese APT groups whose tasking, targeting, and toolsets have been literally all over the map. We also found evidence suggesting that different Chinese APT groups have also been using the same malware - and in some cases, the same exploit builder.


8. Facebook can’t quit its China dream

Facebook eyes new path around China’s great wall – Breakingviews

Facebook is eyeing an indirect path around China’s great wall. Blocked from operating there directly, the $520 billion social network is considering alternatives that include taking minority stakes in local tech firms, people familiar with the matter have told Breakingviews..

Facebook has discussed potential minority stakes with investment funds and other companies, according to people familiar with the matter, though it is moving slowly and has yet to make any decisions.

Comment: Taking local stakes was a suggestion I made to an FB exec during a meeting in Beijing several years ago. It was dismissed out of hand.


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Business, Economy and Trade

China US Treasury Holdings March 2019: 1st Decline Since Nov - Bloomberg It was only a slight reduction -- the stake slipped by $10.4 billion, the first drop since November -- but that was enough to bring the position down to a two-year low of $1.12 trillion, according to data the U.S. Treasury Department released Wednesday.

Western Companies Get Tangled in China’s Muslim Clampdown - WSJ $$ Adidas AG, Hennes & Mauritz AB, Kraft Heinz Co. , Coca-Cola Co. and Gap Inc. are among those at the end of the long, often opaque supply chains that travel through China’s northwest region of Xinjiang. Residents there are routinely forced into training programs that feed workers to area factories, according to locals, official notices and state media.

Exclusive: Elite New Committee to Chart Future Course at Alibaba - Caixin Alibaba Group Holding Ltd. has set up a 13-person committee to make and execute economic strategy for the e-commerce giant and its Ant Financial affiliate, as founder and internet mogul Jack Ma gets set to retire later this year, Caixin has learned...The elite new committee’s formation — part of the broader overhaul — occurred in the first quarter of this year, several company sources told Caixin. It will include five sub-committees as well as several other divisions.

China Proposes First Amendments to Outdated Copyright Law in Nearly a Decade-Caixin The revisions are expected to include provisions on live broadcasts, new rules for digital products, and regulations on users’ rights over digital works they’ve paid for. Provisions for increasing compensation for those whose copyright is violated and greater punishments for violators may also be included. Drafts of amendments to the law were presented in 2011 and 2014, but progress has been slow. The revision process has revived as China faces an extraordinary number of copyright lawsuits. A Supreme People’s Court source told Caixin that copyright cases account for 70% of intellectual property matters that come before the court.

Former JPMorgan Banker Charged With Bribery in ‘Sons and Daughters’ Program - WSJ $$ The city’s antigraft agency said Catherine Leung Kar-cheung, a former vice chairwoman of JPMorgan’s Asia-Pacific investment banking business, bribed the chairman of a logistics company by offering to employ his son at the bank. The Independent Commission Against Corruption said Ms. Leung made two employment offers in connection with an initial public offering of the logistics company, which it didn’t name. The offers, it said, were made between 2010 and 2011. The agency said Ms. Leung has been released on bail and is due in court on May 20.

Brokers brave China's FX market crackdown in hunt for household high rollers - Reuters In a statement to Reuters, China’s State Administration of Foreign Exchange (SAFE) reiterated that forex margin trading is illegal in China. “The Internet knows no national boundaries, but there must be national boundaries for financial licenses. Cross-border financial service providers cannot operate without a license,”

In Depth: Banks Go to War to Meet Beijing’s Goal of Lowering Rates for Small Businesses - Caixin A price war has broken out among banks competing to offer the lowest rates on loans to small businesses as the government has made supporting these companies a greater priority since last year. The price war among lenders is just one of several side effects of a government drive to lower funding costs for small businesses, which has also ratcheted up the competitive pressure on smaller lenders and sparked concerns that companies receiving low-rate loans could abuse their privilege by relending the cheap funds at higher rates.

China regulates user deposits held by new mobility providers - ECNS ix central government departments have jointly released a regulation on the use of deposits from users of new forms of mobility...It also said deposits are limited to 100 yuan for shared bikes and 8,000 yuan for ride-hailing services. Operators of platforms need to clarify the conditions for deposit refunds, it was added, and are banned from using deposits in investment and lending.

Faster and cheaper internet services to benefit Chinese economy - Xinhua China will extend gigabit broadband connection to more than 300 cities and cut the average service rates by 15 percent for small and medium-sized enterprises this year. The decision was made at the State Council's executive meeting chaired by Premier Li Keqiang on Tuesday in an effort to achieve multiplying effects of expanding domestic demand, boosting employment and improving people's lives.

Listed Company Denies Media Report, Says Truth is Worse - Caixin Global A WeChat subscription account specializing in workers’ rights said Sino Great Wall owed a total of 56 million yuan ($8.14 million) in backpay to its staff. The company denied the report on Tuesday, and clarified that due to liquidity problems, the unpaid salaries in fact total more than 81 million yuan, including those owed to staff from subsidiaries

Politics and Law

Henan Expands Control Over Christian Churches - Bitter Winter Bitter Winter received a document, adopted in March by the “leading group on ethnic and religious work” of a locality in China’s central Henan Province, that calls for the increased governance of all Christian venues. It lists a variety of control measures: from taking over ad repurposing of house churches, the management of churches’ finances to preventing the already closed down churches from reopening. All actions should be accompanied by praising the “kindness of the Communist Party” and making sure that all believers follow its leadership.

Foreign and Defense Affairs

‘The Chinese are our No 1 enemy’: why Beijing’s US$62 billion investment in Pakistan is the top target for Balochistan separatists | South China Morning Post Government officials say Islamabad has set aside US$9.1 million for security in the China-Pakistan Economic Corridor But the Balochistan Liberation Army has vowed to continue its attacks on Chinese projects and nationals, as they fear being turned into a minority in their own province

Hong Kong and Macao

Occupy poster boy Joshua Wong returns to jail in Hong Kong despite winning appeal for lighter sentence | South China Morning Post Activist was previously found guilty of contempt after not leaving a site in Mong Kok that judges had ordered cleared Wong’s sentence has been reduced from three to two months

Tech and Media

Microsoft opens largest AI & IoT lab in Shanghai - Xinhua Located in a 2,800-square-meter building in the Zhangjiang Hi-Tech Park of the Pudong New Area, the lab, which began operation Wednesday, is established in partnership with the state-run Zhangjiang Group. It is the fourth and also the largest such lab run by Microsoft around the world. Microsoft said the lab provides "all-around support" for enterprises inside and taps into the Internet of Things and AI technologies to fuel the digital transformation taking place across industries, including manufacturing, retail, healthcare, finance and urban construction.

NetEase overseas gaming, e-commerce businesses offset regulatory squeeze · TechNode Driven by strong performance in online game services and e-commerce, gross profit also jumped by nearly 36% year on year to RMB 8 billion, continuing growth from the previous quarter. Net revenues grew close to 30% year-on-year to RMB 18.36 billion ($2.74 billion), driven by increased online game service and e-commerce revenues and beating analyst estimates by a notable margin.

Didi reprimanded for introducing new shared bikes in Beijing in red tape snafu · TechNode Didi, which owns bike-rental services Qingju and Bluegogo, said it had removed 10,000 old Bluegogo bikes from the area a month earlier after being granted permission from the Zhongguancun administrative committee to better meet demand and help relieve traffic in the area. Xierqi belongs to Zhongguancun Technology Park. However, Didi did not obtain approval from the Beijing Transport Bureau, which banned in August new shared bikes.

Society, Arts, Sports, Culture and History

China set to host 2023 Asian Cup as South Korea scraps bid - Xinhua China last hosted the Asian Cup in 2004, reaching the final of that year's tournament. At the most recent edition of the tournament earlier this year, China advanced to the quarterfinals, where they lost 3-0 to Iran.

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Lighthizer-Liu dinner; Urban Party building; China stressing US-UK relationship

Liu He is back in DC today, best case outcome I can see is an agreement to delay the increased tariffs to keep talking for a specified period of time, but clearly the US side is ready to pull the trigger in just about 12 hours, and if that happens there are few brakes to keep the relationship from deteriorating rapidly.

I was on CNBC Squawk Box for about 5 minutes this morning talking about the trade deal. You can watch the clip here, my thoughts have not changed since a few hours ago.

Liu’s dinner with USTR head Robert Lighthizer tonight should be interesting, and perhaps one of the more important meals in US-China relations in a long time.

Thanks for reading.


The Essential Eight

1. US-China trade talks

Why China Decided to Play Hardball in Trade Talks - WSJ $$

The new hard line taken by China in trade talks—surprising the White House and threatening to derail negotiations—came after Beijing interpreted recent statements and actions by President Trump as a sign the U.S. was ready to make concessions, said people familiar with the thinking of the Chinese side...

In particular, these people said, Mr. Trump’s hectoring of Federal Reserve Chairman Jerome Powell to cut interest rates was seen in Beijing as evidence that the president thought the U.S. economy was more fragile than he claimed.

Beijing was further encouraged by Mr. Trump’s frequent claim of friendship with Chinese President Xi Jinping and by Mr. Trump’s praise for Chinese Vice Premier Liu He for pledging to buy more U.S. soybeans...

[Liu] is scheduled to have a one-on-one dinner with U.S. Trade Representative Robert Lighthizer Thursday.

Trump Says China ‘Broke’ Trade Deal as Hawks Cheer Tough Stance - Bloomberg

At a campaign rally Wednesday night in Panama City Beach, Florida, the president noted that top Chinese trade negotiator Liu He was traveling to Washington for further talks. “Good man,” Trump said, “but they broke the deal,” leading him to raise tariffs...

Trump and his trade team discussed the next steps in the dispute and who should meet with Liu while he’s in Washington in a heated debate at the White House on Tuesday, people familiar with the internal deliberations said. The meeting became contentious when Treasury Secretary Steven Mnuchin made his case for putting trust in Liu that China would come back with a satisfactory offer to close the deal.

The president and his advisers concluded that he should only meet with Liu if the two sides make progress in the talks and that the decision would be made on short notice, the people said.

As tariff hike looms, China asks U.S. to meet it halfway, denies backtracking - Reuters

“The U.S. side has given many labels recently, ‘backtracking’, ‘betraying’ etc...China sets great store on trustworthiness and keeps its promises, and this has never changed,” Commerce Ministry spokesman Gao Feng said on Thursday.

Hu Xijin of the Global Times says the US is preparing a "Hongmen Feast" [Think Game of Thrones “Red Wedding”] for Liu He and his team, but they will be coming to DC armed... - 胡锡进:华盛顿将办“鸿门宴”,中国人佩剑入席_国际新闻_环球网

China makes statement on U.S. planned measures to raise tariffs - Xinhua

"China deeply regrets this, and will be forced to take necessary countermeasures if the U.S. side puts the tariff measures into effect," says a statement released Wednesday.

Trump Could Raise Tariffs on China. Here’s How China Could Respond. - The New York Times

“We expect China to quickly retaliate with matching tariffs,” said Jake Parker, a vice president in Beijing for the U.S.-China Business Council, a business advocacy group representing 200 mostly large American companies that do business with China. “We are also advising our members to prepare for increased customs scrutiny, regulatory enforcement at the local level, and diversification away from U.S. products.”

US tariffs threat strikes raw nerve on 20th anniversary of Nato bombing of Chinese embassy in Serbia | South China Morning Post

Nationalist sentiment is brewing on Chinese social media after the Office of the US Trade Representative chose Wednesday – the 20th anniversary of the lethal US-led Nato bombing of the Chinese embassy in Belgrade, Serbia, during the Kosovo War – to announce increased tariffs on US$200 billion worth of Chinese goods.

Trade War Only Getting Worse for Soy Farmers Fearful for their Future | American Soybean Association

“After so many threats and missed deadlines for concluding negotiations, this ongoing uncertainty is unacceptable to U.S. farmers,” Stephens continued. “With depressed prices and unsold stocks forecast to double before the 2019 harvest begins in September, we need the China market reopened to U.S. soybean exports within weeks, not months or longer.”

Voracious pest threatens China's crops, could boost need for imports - CNBC

A crop-eating pest first detected in China about five months ago is spreading rapidly and could hurt production of key crops critical to the populous nation's food supply, according to the U.S. Department of Agriculture.

Damage from the so-called fall armyworm, which gorges on corn, soybeans, cotton, rice, and dozens of other crops, could force China to import more corn, rice or soy to makeup for the shortfall.


2. Taoran Notes 陶然笔记

Today’s installment of "Taoran Notes" says China is willing to talk if the US is, also willing to fight a trade war if that is what the US wants. It also notes that in two of the nearly three years of the “war to resist US aggression and aid Korea” the US and Chinese sides were both talking and fighting... - 陶然笔记 - 愿谈则谈 要打便打

其实抗美援朝近三年,有整整两年的时间,是在边打边谈。

What Is Taoran Notes? Mysterious WeChat Intrigues China Watchers - Bloomberg

As most of China’s media fell into collective silence Monday following Trump’s threat to escalate the trade war, Taoran Notes, a once obscure account on Tencent Holdings’ WeChat platform, somehow escaped the intensified censorship...

The blog is associated with the Economic Daily, an official newspaper backed by the State Council, according to people in various state media organisations. Taoran might refer to the Taoranting Park, which is a short walk from the newspaper’s headquarters in Beijing.


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3. Weaker April credit

China’s Credit Growth Slows After March Surge - Caixin

China's new loans and overall credit rose by less than analysts estimated last month, bolstering expectations that the central bank will have to further loosen monetary policy amid slowing economic growth and the risk that the trade dispute with the U.S. will intensify.

China’s total social financing (TSF), the broadest official measure of credit and liquidity in the economy, grew by a net 1.36 trillion yuan ($200 billion) in April, below analysts' expectations and less than half the 2.86 trillion yuan increase the previous month, data from the People’s Bank of China (PBOC) showed Thursday. New bank loans also missed expectations, and growth in M2, a measure of money supply, slipped slightly...

Seasonal factors account for some of the decrease and after a record first-quarter a slowdown in April was expected — the median forecast of analysts polled by Bloomberg was for an increase of 1.65 trillion yuan. But the figure was more than 400 billion yuan lower than the 1.78 trillion yuan increase in April 2018.

Comment: If the trade war deepens Beijing clearly we will need to push out more credit 


4. Urban Party building

CPC stresses improving Party building in urban communities - Xinhua

Stressing the importance and urgency of the work, the document calls for stronger and more powerful community-level Party organizations.

Community-level Party committees should improve their ability to coordinate various aspects and focus on fulfilling the main duties and responsibilities of Party building, social governance and providing services, it says...

The document also expects support for communities to be beefed up to ensure that community-level Party organizations have the resources and ability to serve the people.

China will expand effective coverage of Party building in emerging areas through innovations in the way Party organizations are set up and operated and establish building-based, business area and market-based Party organizations, the circular says.

中共中央办公厅印发《关于加强和改进城市基层党的建设工作的意见》_中央有关文件_中国政府网

Comment: "Government, military, society and schools, north, south, east and west — the party is the leader of all”, and clearly Party organizations have lost some of their focus and efficacy and impact in the rapid urbanization.


5. Former Yunnan Party Secretary under investigation

Former Provincial Party Chief Under Investigation For Law Violations - Caixin Global

Qin Guangrong, former Communist Party chief of Southwest China’s Yunnan province, is now under investigation on suspicion of “serious violations of laws and discipline” after giving himself up to the Central Commission for Discipline Inspection, the ruling party’s top anti-graft watchdog announced late Thursday...

Qin’s predecessor, Bai Enpei, who served as Yunnan’s party chief from 2001 to 2011, was sentenced in 2016 to death with two years reprieve for taking bribes and possessing a large amount of assets that could not be accounted for.

Caixin says the investigation of Qin Guangrong is related to the trouble his son Qin Ling got into while working at Huarong and the Lai Xiaomin case, and that Qin Guangrong turned himself in, the first provincial level official to do so...clearly deep waters around this and the Huarong case - 独家|云南省委原书记秦光荣主动投案 概因其子涉案被查_财新网:

据财新记者多方确认,秦光荣主要是因为其独子秦岭在华融履职期间犯下严重案件而被查(参见财新我闻|金融人·事2019年4月16日“秦光荣父子共犯案 华融投资秦岭因何被查|华融案调查之十八”);此案势必牵涉秦光荣的其它违法情节,还需等待调查结果的进一步披露。


6. Huawei CFO and US-Canada stress

Huawei CFO extradition case: Canada arrested Meng for the U.S. As China retaliates, it’s on its own - The Washington Post

The U.S. officials seeking to extradite Huawei Technologies’ chief financial officer, Meng Wanzhou, offered Canada a polite “thanks” for arresting her. But as China punishes Canada for fulfilling the U.S. request, there has been little help from the White House, which is focused, for now, on cutting a trade deal with China...

“Not only are we navigating around a hostile China, but we need to do that without all the guarantees and protections that we have had in the past,” said David Mulroney, who served as Canada’s ambassador to China from 2009 to 2012.

The Canadian conundrum raises a question familiar to small countries that have found themselves in China’s bad books: How do you stand up to a soon-to-be-superpower, particularly without clear, consistent U.S. support?

Huawei Executive Seeks Dismissal of U.S. Extradition Request - WSJ $$

Associate Chief Justice Heather Holmes of the British Columbia Supreme Court said she would hear evidence from prosecutors and Ms. Meng’s lawyers about the extradition case starting Sept. 23. In the meantime, she said she would allow Ms. Meng to move from her current residence in Vancouver’s West Side neighborhood into a more secluded and secure mansion she owns with her husband on the same block as the residence of the U.S. consul general.

Comment: This sucks for Kovrig and Spavor, it seems clear they will be held hostage so long as the Meng case is unresolved, and they don’t get to spend their days in a multimillion dollar villa.

China ignores overtures from Ottawa amid Huawei dispute - The Globe and Mail

Canadian leaders have been unable to communicate with Chinese decision-makers in the midst of the worst diplomatic crisis between the two countries in decades, with Beijing not responding to Ottawa’s entreaties to talk amid mounting damage to trade with the world’s second-largest economy.

Five different Canadian federal ministers have requested conversations with top-level Chinese officials since the Vancouver arrest of Huawei executive Meng Wanzhou on Dec. 1. None has been successful.

China has not refused those approaches, four sources with knowledge of the situation told The Globe and Mail. It has merely ignored them

Huawei case puts two-way strain on Canada-China business confidence | South China Morning Post

More than half of Canadian companies operating in China have changed, postponed or cancelled their business plans in the wake of the arrest of Huawei executive Sabrina Meng Wanzhou in Vancouver six months ago, according to a new report into business sentiment by Canada’s de facto chamber of commerce in Beijing.

Chinese court delays ruling on Canadian Robert Lloyd Schellenberg’s death penalty appeal | AFP

A Chinese court adjourned a hearing of a Canadian man’s appeal against his death sentence for drug smuggling without a decision on Thursday in a case that has deepened a diplomatic spat between Beijing and Ottawa.

Robert Lloyd Schellenberg, 36, was sentenced to death in January after a court deemed his previous 15-year prison sentence too lenient.


7. China stressing US-UK relationship

No time to go 'wobbly': Pompeo scolds Britain over China and Huawei - Reuters

“Now is not the time for either of us to go wobbly,” Pompeo said in a speech of the so-called special relationship, paraphrasing what Thatcher once famously told late U.S. President George H.W. Bush.

“In China, we face a new kind of challenge; an authoritarian regime that’s integrated economically into the West in ways that the Soviet Union never was,” Pompeo said..

“Ask yourself: would the Iron Lady be silent when China violates the sovereignty of nations through corruption or coercion? Would she allow China to control the internet of the future?” Pompeo said.

“Insufficient security will impede the United States’ ability to share certain information within trusted networks. This is just what China wants – to divide Western alliances through bits and bytes, not bullets and bombs.”

Full text of Pompeo's remarks - The Special Relationship - Michael R. Pompeo Secretary of State Lancaster House

UK has concerns about 'significant and widespread' Chinese cyber intrusion - Reuters

“We have a strong relationship with China in many areas but there are several areas where we have expressed our concerns about China’s behavior and that includes significant and widespread cyber intrusions against the UK and our allies,” a spokesman for Theresa May told reporters.

Senior Chinese official meets British cabinet secretary - Xinhua

Yang Jiechi, a member of the Political Bureau of the Communist Party of China (CPC) Central Committee, met with British Cabinet Secretary Mark Sedwill here on Thursday...

Sedwill, who is also the national security advisor to the British prime minister, said Britain attaches great importance to developing relations with China, supports the Belt and Road Initiative, and stands ready to deepen cooperation with China to promote the "golden era" relationship.


8. More details in Jerry Lee spy case

The saga of the Chinese mole reads like a spy thriller - The Washington Post - David Ignatius

The hunt for a Chinese mole began after the CIA started losing its key sources in China in 2010. [Jerry Chun Shing] Lee, who first met with Chinese intelligence officers in April 2010, according to prosecutors, soon came under suspicion. Another suspect was a former senior case officer who had served in China when the blown network of spies was recruited.

The senior case officer was eventually cleared, thanks to Chinese tradecraft mistakes that revealed their contact with Lee, a source said. The bungling came in Thailand in 2013, when Chinese spies made a sudden recruitment pitch to a former CIA operative who had worked with the senior case officer. She figured that someone had given the Chinese operative her name and told him it must have been Lee.

Her Chinese would-be recruiter then foolishly blurted out: “No, I’m not handling Jerry. It’s another team,” according to a knowledgeable source...

The damage from this case still makes the intelligence community wince. “They wiped us out in China. All the networks we had were gone,” one former official said...

Experts say that in the Thailand meeting, the Chinese operative asked the former CIA officer about cases that Lee shouldn’t have known about. Which leads to an eerie question: Was there another Chinese mole, buried even deeper?

Comment: The destruction of the CIA networks in China, just as Xi started his rule, could not have come at a worse time for the US.


Business, Economy and Trade

Yicai Global - Yicai Chief Economist Confidence Index Hits Yearly High This Month The Yicai Chief Economist Confidence Index was 50.23 this month, above the halfway mark in the highest reading thus far this year. Over 90 percent of economists were optimistic about economic performance over the next month, the Yicai Chief Survey unveiled yesterday shows.

Cyberattack Strikes Investors as Too Well-Timed to Be ‘Accident’ - Caixin Global After battery-maker Pride Power reported a hack into its servers of parent manufacturer Dongfang Precision, the parent company released a statement Wednesday saying it feared that accounting data may have been lost. The announcement raised suspicion among investors that the attack’s timing was too perfect to be coincidental, as the companies are embroiled in financial disputes.

China to bid on D.C. Metro rail deal as national security hawks circle - Reuters It plans to bid this month on the D.C. Metro rail car contract, worth more than $500 million, Dave Smolensky, a spokesman for the company’s Chicago-based CRRC Sifang subsidiary told Reuters. And it has also set its sights on winning an order to supply 1,500 cars as part of New York City’s massive subway system upgrade, according to an industry source familiar with the matter.

China inflation: March PPI and CPI released amid trade tiff with US - CNBC China's April consumer inflation was in line with expectations, but a spike in pork prices contributed to higher food prices, the National Bureau of Statistics data showed on Thursday.

China Slams Brakes on Electric Bus Subsidies - Caixin Several ministries and state planner the National Development and Reform Commission announced this week that bus subsidies will be dramatically reduced later this year, with a view to possibly phase them out entirely in 2020. According to the notice, the ministries of finance, transportation and industry and information should prepare to introduce subsidy cuts for electric buses that match subsidy rules for general electric vehicles that were published in March.

China launches green subsidies to spur investment in hinterland provinces - Reuters China is to provide subsidies of up to 60 percent for some “green” investment projects in the Yangtze River Economic Belt, the latest measure to underpin growth while spearheading an anti-pollution drive.

China to Host WTO Mini-Ministerial Meeting in Shanghai in November - Caixin Global Representatives from different parties will discuss the multilateral trading system and WTO reforms, according to the spokesperson. Beijing is keen to push for reforms at the WTO, as well as maintain an effective multilateral trading system for what it calls an open world economy, Gao said.

Apple supplier Dialog Semiconductor reports first-quarter earnings - CNBC In an interview on CNBC's "Squawk Box Europe" Thursday, Dialog Semiconductor CEO Jalal Bagherli expressed optimism in his outlook for the Chinese mobile phone market.

Chinese bank employee convicted of ‘leaking state secrets’ after sharing policy draft on WeChat | South China Morning Post The draft was widely circulated on social media and later reported by Bloomberg and “had a disastrous impact on China’s financial regulation,” the court’s written ruling said. The document, drafted by the central bank and titled “Guidance on Regulating the Asset Management Business of Financial Institutions”, aimed to apply macroprudential oversight to China’s unwieldy asset management industry, which controls over 100 trillion yuan in assets. Specifically, it banned financial institutions from guaranteeing that investments would break even or offering excessively high returns on wealth management products. // She got a one-year suspended sentence

Moutai Maker’s Shares Plunge on Direct-Sales Plan - Caixin Kweichow Moutai Co., the publicly traded maker of Moutai liquor, received a letter from the Shanghai Stock Exchange Tuesday night asking for an explanation of why the state-run parent company, Kweichow Moutai Winery Group, established a direct sales unit. Investors and analysts said they are worried that the move could siphon off profits from the listed company.

Exclusive: Private Equity Firm Fuxing Mired in $2.9 Billion Black Hole - Caixin Five more senior executives at Shanghai-based private equity firm Fuxing Group have been detained by police on charges of fundraising fraud as investigators found a black hole of more than 20 billion yuan ($2.9 billion) left by the defunct conglomerate...Fuxing’s downfall unfolding since last summer has turned into a financial scandal that has become one of the biggest crises ever to hit China’s private equity industry. The company controls four private equity funds that have registered 160 asset management products that took in money from private investors and banks.

China to extend tax preferences for IC, software companies - Xinhua The State Council, China's cabinet, on Wednesday decided to continue the preferential corporate income tax policies for integrated circuit (IC) and software companies. The country will also attract more investment from home and abroad to participate in and promote the development of the two sectors, according to a statement made public after a State Council executive meeting presided over by Premier Li Keqiang

New measures to boost national development zones for further opening up - Xinhua The decision was made at a State Council executive meeting chaired by Premier Li Keqiang. The Chinese government puts high importance on the innovation-driven development of the national economic and technological development zones. Premier Li Keqiang required that the demonstrative role of the national economic development zones be fully harnessed for better use of foreign investment and relevant policies consistent with law be rolled out to make these zones pacesetters in attracting foreign investment.

‘Why Is This So Cheap?’ Chinese Shopping App Falls for American Bargains - WSJ ShopShops, which works on a commission basis with many of its partner stores, now hosts 220 streams a month—from various cities in the U.S., as well as a handful of others, including Dubai and London—averaging about $6,000 in sales each session. ShopShops then facilitates delivery to China.


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Politics and Law

Chinese University Staff 'Must Study' Marxism, Maoist and Xi Jinping Ideology - RFA The Ministry of Education released on Monday a five-year training plan for teachers via a series of "political theory" courses in colleges and universities. According to the ministry, "it is necessary to train dozens of ideological and political scholars with extensive influence ... as well as hundreds of leaders in ideological and political education."

China tries to thwart CNN probe into detention camps - CNN Video CNN's Matt Rivers explains why his investigation into Chinese facilities that the US says are detention camps is so difficult and why it's important

Security cameras and barbed wire: Living amid fear and oppression in Xinjiang - CNN In late March, CNN traveled to Xinjiang for six days to get a first-hand look at the camps, attempting to see three different facilities in three cities hundreds of miles apart.

Tiananmen Square: China steps up curbs on activists for 30th anniversary | The Guardian Some expect the campaign to last longer than usual this year because of the significance of the anniversary. Gao Yu, a journalist who attended the protests in 1989, said controls on her had been more severe than in previous years. She was placed under house arrest for almost three months from 17 January, the anniversary of the death of the reformist leader Zhao Ziyang, who opposed sending tanks into Beijing, and she expects to be “travelled” next week and again over 4 June, probably for a week.

‘A taste of freedom in China’: Tiananmen Square crackdown commemorated in New York | South China Morning Post Hundreds gathered in a New York cathedral on Tuesday to pay tribute to the protesters that were brutally suppressed in Beijing’s Tiananmen Square crackdown three decades ago, kick-starting commemoration of its approaching anniversary in the United States. At the Cathedral of St John the Divine near Columbia University, around 300 people assembled for an evening of poetry, music and speeches to celebrate the courage - and mourn the sacrifice - of students who led a wave of pro-democracy demonstrations that swept China in 1989.

China detains 3 social workers in widening crackdown | Financial Times $$ Police on Wednesday arrived unannounced at the offices of Hope college, a community centre in the southern city of Guangzhou that helps migrants attending vocational schools and detained social worker Liang Zicun, the group’s founder. They also took away documents, computers, hard disks. Similar raids were carried out at the offices and homes of two more social workers, Li Changjiang in Shenzhen and Li Dajun in Beijing, both of whom were detained, according to the friends and colleagues of the three.

Xi Focus: Xi stresses police loyalty, competence, discipline - Xinhua The police should ensure that the Party's lines, principles, policies, and major decisions and plans are implemented to the letter, he said. He also noted the need to proactively prevent and properly defuse various kinds of social contradictions to guarantee a society of vitality, stability and order...Big data should be used as an engine to power the innovative development of public security work and a new growth point for nurturing combat capabilities, said Xi.

Buddhist statue with Confucius head to be redesigned: local government - Global Times A Buddhist statue with the head of Confucius is being renovated and will become a statue of Confucius after completion, a municipal authority in East China's Shandong Province said, after the statue with Confucius' head and a Buddhist body sparked controversy. Chinese experts hailed it as promoting religious equality, as regulating religious statues in public gives every religion the opportunity to develop equally in accordance with laws and regulations.  The 21-meter Buddhist statue in Chengdongbu village, Pingdu, East China's Shandong Province, which was built eight years ago by the village committee, is undergoing renovation after it violated a newly revised religious regulation

Foreign and Defense Affairs

U.S., partner navies sail together in South China Sea | Commander, U.S. Pacific Fleet A U.S. Navy guided-missile destroyer joined ships from the Indian Navy, Japan Maritime Self-Defense Force, and the Philippine Navy to sail through the South China Sea, May 2-8.

Hiding in Plain Sight: Chinese Expansion in Southeast Asia - Charles Edel Beijing’s geopolitical moves continue to obfuscate its larger designs, surprise observers, and render the United States and its allies reactive. The prospect of a Chinese naval base in Cambodia offers a case in point...For Beijing, the strategic dividends of acquiring a military base in southeast Asia are numerous: a more favorable operational environment in the waters ringing southeast Asia, a military perimeter ringing and potentially enclosing mainland southeast Asia, and potentially easier and less restricted access to the Indian Ocean. These benefits are not all of equal value to Chinese strategists, nor does China need any of them immediately. But the logic of Chinese expansion suggests that sooner or later, Beijing will need such a military outpost in southeast Asia, and Hun Sen’s Cambodia presents especially fertile geographic and political soil.

Chinese Defense Minister meets with Zimbabwean counterpart - China Military Chinese State Councilor and Minister of National Defense General Wei Fenghe met with visiting Oppah Muchinguri, chairperson of Zimbabwe African National Union-Patriotic Front (ZANU-PF) and Zimbabwean Defense Minister in Beijing on Wednesday.

Dialogue of civilizations can iron out cultural creases - Global Times The Conference on Dialogue of Asian Civilizations will kick off in Beijing soon. It is China's attempt to promote understanding among different civilizations, inclusive development, and to respond to the theory of the Clash of Civilizations with the philosophy of building a community with a shared future for mankind.

Beijing blasts U.S. Congress for Taiwan defense bill - China Daily Yuan Zheng, director of U.S. foreign relations research at the Institute of American Studies under the Chinese Academy of Social Sciences, said the recent passage of U.S. naval vessels through the Taiwan Straits, arms sales and political support to Taiwan are meant to help Taiwan separatists and pressure Beijing.

American siblings trapped in China make public plea for help: "We wake up every morning terrified" - CBS News Their estranged father, Liu Changming, is one of China's most wanted fugitives. Liu, who fled the country in 2007, is the former executive of a state-owned bank and is linked to a $1.4 billion fraud case.

China says 'fed up' with hearing U.S. complaints on Belt and Road - Reuters In Beijing, Foreign Ministry spokesman Geng Shuang said various people in the United States had been making “irresponsible comments” on the program, especially before the summit when, he said, such criticism reached a crescendo...“But what was the result? One hundred and fifty countries, 92 international organizations and more than 6,000 delegates from various countries attended the second Belt and Road Forum for International Cooperation, including 50 delegates from the United States,” Geng told reporters.

Nepal Inching Toward China | The Diplomat Two significant developments in recent weeks clearly show that Nepal wants to join China’s Belt and Road Initiative (BRI) and use Chinese routes and ports in order to lessen its heavy dependence on India. Though there has been some delay in the selection of specific projects under BRI, with the exception of the cross-border Kerung-Kathmandu railway, Nepal has shown unwavering attraction to BRI.

Xi to address Conference on Dialogue of Asian Civilizations- China.org.cn Chinese President Xi Jinping will deliver a keynote speech at the opening ceremony of the Conference on Dialogue of Asian Civilizations to be held on May 15 in Beijing, a senior official said Thursday.

Taiwan

Taiwan delegation led by Hung Hsiu-chu to visit Beijing - Xinhua Hung Hsiu-chu, former chairperson of the Chinese Kuomintang party, will lead a delegation of personages from various circles in Taiwan to visit Beijing from May 12 to 15, a Chinese mainland spokesperson said Thursday.

Tech and Media

Proposed Guidelines Highlight China's Fragmented Protection of Online Privacy The guidelines from the National Information Security Standardization Technical Committee (TC260), which were released for public comment this week, state that mobile apps should not collect and use personal information without user consent, collect and use personal information unrelated to the services they provide, or provide personal information to third parties without user consent. While the guidelines are not legally binding, they provide a baseline that future privacy laws from the Cyberspace Administration of China (CAC) can be built on. However, there is a concern that the decentralized nature of China’s current system for managing online privacy — divided between the State Administration for Market Regulation (SAMR), the Ministry of Public Security, and the CAC — will hinder its ability to enforce user protections.

Co-chiefs of China’s top chipmaker SMIC fighting over strategy | Financial Times $$ Zhao Haijun, co-CEO of Semiconductor Manufacturing International Corporation, is considering leaving the company because Beijing policymakers are prioritising the work of co-CEO Liang Mong-song to develop more advanced chip production at 14-nanometre resolution (14 billionths of a metre) and smaller.  This is taking priority over Mr Zhao’s own efforts to expand commercially viable operations using older generations of process technology, according to seven people familiar with the situation. Scores of executives are being replaced to align management more closely with Mr Liang’s goals, the people said.

Headlines from China: China to Remake War Classics 'The Bridge’ and ‘Walter Defends Sarajevo’ | China Film Insider Recently, Chinese film production company Huahua Media, Sarajevo Film Center, and a Serbian production company signed a deal to remake 1969 war classic The Bridge. The three parties have also reached an agreement to remake Walter Defends Sarajevo together. Ambassador of Serbian to China Milan Bacevic and ambassador of Bosnia Herzegovina Anton Rill attended the deal-signing event

Society, Arts, Sports, Culture and History

China issues plan to protect, inherit Grand Canal heritage - Xinhua A cultural belt will be built along the canal’s existing main river course and those used in recent history, according to the plan’s outline, which was issued by the general offices of the Communist Party of China Central Committee and the State Council.

Rural and Agricultural Issues

Slaughterhouse Test Blitz Ordered to Stem China's Pig Contagion - Bloomberg From July 1, abattoirs must routinely test all batches of hogs representative of the property from which they came. The order Tuesday adds to a suite of measures the Ministry of Agriculture and Rural Affairs has instituted to arrest an increase this year in the number of villages reporting cases of the viral disease.


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Tweet-bombing the trade war; RRR cut; Urban-rural development plan

So much for a quiet return from the May Day holiday. President Trump’s Sunday tweets threatening increased tariffs on China by Friday unless the Chinese make more trade concessions crashed PRC stock markets the most in three years and added huge uncertainty back into what most people had assumed would basically be a done deal by the time Liu He left DC this week.

The Chinese have become confident - overconfident if you ask me - that their economy has stabilized enough that they have more leverage in the trade talks. They were much more worried last year q3/q4. Trump sees the US economy going from strength to strength while still believing from what I hear that the Chinese economy is too weak to withstand more US pressure.

Liu He’s trip to DC this week is now uncertain. From what I can gather the Chinese have not cancelled the trip but have also not decided it is happening. They are waiting to learn more from the US side today and tomorrow before making a decision on whether to send Liu and his delegation later this week, a lower-level delegation without Liu, or to postpone past Friday. I would not be surprised if we do not know the answer for another day.

It looks like this week will not be the season finale in the series “The US-China Trade Wars”, and if Trump does follow through on his Friday threat it could continue well into the summer, after a hiatus during which both sides reconsider their positions and likely mutually retaliate.

Thanks for reading.

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The Essential Eight

1. US-China trade

Trump ratchets up U.S.-China trade war with new tariff threat - Axios:

A source familiar with the situation told me that the Chinese had been backing off of agreements the U.S. negotiating team believed they had already made. Trump's view, the source said, is that he's negotiating from a position of clear economic strength, especially with the latest strong U.S. jobs numbers. 

"You guys want to mess around with us? Be my guest," the source said, characterizing the president's thinking.

Trump Tweets Corner China’s Xi—Get a Trade Deal Without Looking Weak - WSJ $$

Following Mr. Trump’s renewed warning of raising tariffs, China’s leadership on Monday was considering canceling the trip, said a person briefed on the matter. That hews to a line Beijing has maintained throughout the year-old trade battle that it wouldn’t negotiate under threat.

At a press briefing on Monday afternoon, Chinese Foreign Ministry spokesman Geng Shuang said China’s trade team is still “preparing to travel to the U.S. for consultations.” He didn’t say when the team would depart or if Mr. Liu would still lead it.

Negotiations were initially scheduled to resume Wednesday. Some working-level Chinese officials who were supposed to leave for Washington on Monday were staying put instead, waiting for further instructions, according to the person and another with knowledge of the plan...

Before making a final decision on whether Vice Premier Liu should travel to Washington, the Chinese side is trying to get clarity from the U.S. about Mr. Trump’s intentions regarding the tweets, said the people with knowledge of the plans.

Trump’s Trade War Threat Poses Problems for China and Investors - The New York Times

The Trump administration has reacted much more strongly than the Chinese government expected to an issue that came up in negotiations last week in Beijing between senior Chinese and American officials, the people familiar with the trade talks said. That was when Chinese negotiators said that any concessions in the trade agreement would need to be done through regulatory and administrative actions by the Chinese government, and not cemented in place through actual changes in Chinese law through the country’s legislature.

Question: Did his negotiators know he was going to send this tweet threat?

Yicai Global - Chinese Mainland Stock Markets Close at Two-Month Low, Biggest drop in three years

The Shanghai Composite finished down 5.6 percent at 2,906.46, while the Shenzhen Component Index had fallen 7.56 percent to 8,943.52. The ChiNext Price Index, which tracks growth enterprises listed in Shenzhen, ended 7.94 percent lower at 1,494.89.

Goldman Sachs on Trump's threat of trade tariff on China - CNBC

“The most important near-term indicator to watch will be whether the large delegation of Chinese officials comes to Washington on May 8, as scheduled. If they do, this would indicate that they believe a deal is still reasonably likely,” Goldman said.

Worst Yuan Drop Since 2016 Catches Options Traders Off Guard - Bloomberg

The offshore yuan tumbled as much as 1.3 percent, the most since January 2016, before paring losses to trade 0.68 percent lower at 6.7815 a dollar as of 5:04 p.m. in Hong Kong. The onshore currency -- which hadn’t traded since April 30 due to a holiday -- dropped 0.47 percent, the most in nearly three months, to 6.7667.

‘Is it fake news?’: China censors Trump’s US$200 billion tariff tweets | South China Morning Post

Despite sharp market reactions, the three major official state media outlets – newspaper People’s Daily, broadcaster CCTV and Xinhua news agency – had by noon made no mention of the developments in Washington or market reaction to them.

Meanwhile, Caixin and Sina news – the biggest finance news outlets in the country – said the markets were “affected by information”, but did not elaborate.

Comment: It takes a while for the propaganda department to get its orders, especially after a holiday and a weekend

After latest threats, Chinese see Trump as a Marvel villain out to destroy them - The Washington Post

“Move my fingers, wipe out half of Chinese investors,” said one popular meme circulating on Chinese social media Monday, showing Trump with one real hand and one jewel-encrusted metal hand like the movie villain. “Trump led to global panic with his Thanos-like presence,” said a post on Weibo, showing Trump in full bad-guy suit.

Chinese people turn to ‘Art of the Deal’ to interpret Trump’s latest threats - Inkstone

Chinese speculators called Trump’s move a scare tactic. By making a bold threat, they said, the president was trying to pressure Beijing into making a bigger compromise than it otherwise would.

“A complete collapse of the US-China talks is unlikely. This is just final posturing before reaching a deal,” said Wang Wen, a stock commentator with a million followers on the site who cited Trump’s book.

Trump's Trade War | S38 E1 | FRONTLINE | PBS - May 7, with comments from your truly from Sinocism HQ, as well as several Sinocism subscribers


2. Other US-China issues

In Push for Trade Deal, Trump Administration Shelves Sanctions Over China’s Crackdown on Uighurs - The New York Times

In the fall, the United States was on the verge of imposing sanctions on top Chinese individuals and companies but pulled back after some administration officials said doing so would jeopardize trade talks with Beijing, according to three American officials.

Outrage over China’s repressive practices has grown among officials not working on trade. On Friday, Randall G. Schriver, the assistant secretary of defense for Indo-Pacific security affairs, said at a news conference that the Pentagon had significant concerns about the “mass imprisonment of Chinese Muslims in concentration camps,” which he said could have up to three million people.

The discussion on sanctions had gone through the interagency process, and officials at the State Department and at the National Security Council had voiced their support for the action. The sanctions languished at the Treasury Department, however, as some senior administration officials believed that they should shelve them during the trade talks. The sanctions would have been imposed under the Global Magnitsky Act

Transcript: Secretary of State Mike Pompeo on "Face the Nation," May 5, 2019 - CBS News

MARGARET BRENNAN: I want to ask you about China. Chinese officials are headed here to Washington for trade talks. We heard from a Pentagon official on Friday, a pretty stark description of what is underway right now in China. He- he said that there are 3 million Muslims being rounded up into concentration camps in China. Why hasn't the administration taken any kind of action or sanction against Beijing for this?

SEC. POMPEO: Oh goodness. The- President Trump has pushed back against China in a way that no previous president had--

MARGARET BRENNAN: Concentration camps--

SEC. POMPEO: --they'd- they'd given- they- they had given the Chinese a free pass in every dimension. President Trump is now pushing back on the enormous trade abuses. You've seen me personally speak out about the same situation that you're describing, this- this number certainly up to a million people held in reeducation camps. The Trump administration is going to hold every nation accountable--

MARGARET BRENNAN: You're okay with that term, reeducation camps, not concentration camps, which the Pentagon used?

SEC. POMPEO: We can- we can use lots of different terms to describe what's taking place. This is an enormous human rights violations. I've spoken about it repeatedly-

China denounces U.S. 'concentration camps' remarks - Reuters

Speaking in Beijing, Chinese Foreign Ministry spokesman Geng Shuang said Schriver’s remarks “absolutely did not accord with the facts”, and that Xinjiang was stable and its people were living in harmony in peace.

Pompeo aims to counter China’s ambitions in the Arctic - POLITICO

The Trump administration will throw a spotlight this week on America’s presence in the Arctic, a region the president’s team sees as “an arena of global power and competition,” as Secretary of State Mike Pompeo will put it in a speech Monday in Finland. “Just because the Arctic is a place of wilderness does not mean it should become a place of lawlessness,” he’ll say, according to advance excerpts obtained by POLITICO...

Pompeo’s address, which comes ahead of meetings with officials from the seven other countries with Arctic territory, will take aim at America’s two main strategic rivals, Russia and China. Pompeo will put special emphasis on Chinese behavior, suggesting that Beijing is using the region as the latest venue for its territorial aggression.

“Do we want the Arctic Ocean to transform into a new South China Sea, fraught with militarization and competing territorial claims?” Pompeo will ask.

Two U.S. warships sail in disputed South China Sea - Reuters

The U.S. guided-missile destroyers Preble and Chung Hoon traveled within 12 nautical miles of Gaven and Johnson Reefs in the Spratly Islands, a U.S. military spokesman told Reuters.

Commander Clay Doss, a spokesman for the Seventh Fleet, said the “innocent passage” aimed “to challenge excessive maritime claims and preserve access to the waterways as governed by international law”.

PLA on high alert to safeguard national sovereignty: spokesperson - Ministry of National Defense

Senior Colonel Li Huamin, spokesman for the PLA Southern Theater Command, said that the US guided-missile destroyers USS Preble(DDG-88) and USS Chung Hoon(DDG-93) entered the waters adjacent to the islands and reefs in the South China Sea, without permission of the Chinese government on May 6. In response, the PLA Southern Theater Command soon sent naval ships and aircraft to conduct whole-process monitoring and warned it to leave.

Li pointed out that China has indisputable sovereignty over the South China Sea islands and their adjacent waters. No matter how the foreign warships and planes are provocative, they cannot change this fact.


3. Targeted RRR cut

Central Bank to Cut Reserve Requirement Ratio for Smaller Locally Focused Lenders - Caixin

China’s central bank said Monday it will cut the amount of cash banks must keep in reserve for some small and midsize locally focused lenders from May 15, in a new easing measure to support the economy as external uncertainties increase.

The move is expected to unleash 280 billion yuan ($41.4 billion) in long-term funds into the market, the People's Bank of China said in a statement (link in Chinese http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/3820253/index.html ).

“All the funds will be loaned to private and small companies,” the statement said...

The market has become increasingly concerned with potential policy tightening since mid-April, after a central bank monetary policy committee meeting and a gathering of the Politburo, the group of the ruling Communist Party’s 25 top leaders, both indicated a “neutralization” of the monetary policy stance, economists with investment bank China International Capital Corp. said in a note.

However, “the RRR cut this morning has eased these concerns. It is clear that the overall monetary policy stance is unlikely to revert to a ‘de facto’ tightening mode we experience in 1H2018,” they wrote.

Comment: In a note this morning Capital Economics wrote that "The PBOC is requiring that all lending funded by the cut go to small and private firms. Our calculations suggest that the net RMB280bn liquidity injection can be used to expand bank lending by RMB3500bn, enough to boost the stock of outstanding loans to small firms by 10% and overall bank loans by 2.5%."

央行对部分中小银行定向降准 降低小微企业融资成本_中国经济网——国家经济门户


4. Urban-rural development plan

China announces guidelines to promote integrated urban-rural development - Xinhua

The Central Committee of the Communist Party of China (CPC) and the State Council, or China's Cabinet, on Sunday announced guidelines on the promotion of integrated urban-rural development...

The systems and mechanisms for promoting integrated urban-rural development should begin to take shape by 2022. The country will also gradually eliminate restrictions on urban settlement, according to the guidelines.

China aims to put in place more sound systems and mechanisms for promoting integrated urban-rural development by 2035. The urban-rural gap in development and living standards will be remarkably reduced.

By the middle of the century, China will meet the goal of realizing the comprehensive integration of urban-rural areas and rural revitalization and basically realize the target of achieving shared prosperity for everyone.

To achieve these ambitious goals, China will break barriers that restrict the free flow of resources — such as capital, talents, information — between urban and rural areas, and inject new impetus to the countryside.

China will deepen household registration reforms, relax restrictions on urban settlement except for several mega-cities, promote coordinated development between cities and towns, as well as increase the population carrying capacity and attractiveness of mid- and small-sized cities.

中共中央 国务院关于建立健全城乡融合发展体制机制和政策体系的意见


5. New regulation on government investment

Drafting started in 2001…

China releases regulation on government investment - Xinhua

The regulation, made public through a State Council decree signed by Premier Li Keqiang, will go into effect on July 1.

It clearly defines the scope of government investment to ensure the investment focuses on key areas and goes where it is targeted...

According to the regulation, government investment should be channeled to the public sectors where resources cannot be effectively allocated by the market, and mainly target non-operational projects.

As government investment concerns the relations between government and market, the government must "know what to do and what not to do with its investment" and "eliminate inefficiency, waste while avoiding scrambling for profit with the people," the statement explained…

These public sectors, it said, include social services, public infrastructure facilities, agriculture and rural sectors, ecological and environmental protection, significant technical advancement, social management and national security.

Local Governments Face Fresh Curbs on Investment_Caixin

To prevent uneconomic investment and vanity projects, the rules stipulate that authorities must take into account their own fiscal revenue and spending as well as local economic and social development needs. And in an effort to curb illicit borrowing that is still taking place despite earlier bans by the central government, the regulations specify that funding can only come from the fiscal budget and prohibit local authorities from signing deals that effectively lead to projects being funded through capital advances from the companies contracted to build them...

The regulations have taken almost two decades to finalize partly as a result of changing economic, financial and fiscal conditions, including the surge in local government investment and debt. The government started to draft the regulations in 2001, but didn’t solicit public feedback until January 2010 and the final rules were not approved by the State Council until December 2018.


6. Former Sri Lanka spy chief a Chinese spy?

Gota’s Intelligence Czar Caught Red Handed As Chinese Mole – Colombo Telegraph

Colombo Telegraph can exclusively reveal that Hendawitharana, Gotabaya Rajapaksa’s right-hand man in the Defence Ministry, is an agent of the Chinese Intelligence. We can today reveal audio recordings of Hendawitharana, who is also the security head of Shangri-La, telling a Chinese Intelligence Officer to use diplomatic means as a “deterrent action” to sabotage the relationship between the US and Sri Lanka.

Hendawitharana is privy to American involvement in Sri Lanka’s new war against terror because of his role in security at Shangri-La, but his concern is not for his employer, in whose hotel so many innocents died, but instead for his handlers in Chinese Intelligence and his political contacts in the Joint Opposition.

In the audio recording, available exclusively below, Hendawitharana tells his Chinese handler to “appraise your diplomatic channels to work on the US-Sri Lanka relationship.”

“There is some development taking place for which the opposition parties, joint opposition, are making hell of a fit,” he warns. “They want to give Americans free passage for any requirement if the requirement arises for them to occupy Sri Lanka, even making use of the harbours and airports.”


7. Airbnb in China

Airbnb listings in China are littered with racist discrimination | WIRED UK

As the listing reads: “We do not have the permission of the police station” to host Uyghurs, so “please do not book”. Another ad for a flashy Chengdu condo complete with a flat screen TV and a painting of a bulldog explains in English that Tibetan and Uyghur guests are not allowed “Due to local regulation [sic]”.

We found 35 separate Airbnb listings in China with similar clauses explicitly barring certain ethnic minorities, mostly Uyghurs but in many cases Tibetans, another troublesome minority with separatist leanings in Beijing’s eyes. After WIRED contacted Airbnb’s press team for this story, 15 of the 35 were suddenly taken down.

Comment: Airbnb also in the news in China because of the discovery of a hidden camera in a Qingdao listing. Airbnb has apologized - Airbnb致歉青岛民宿装摄像头:永久撤出涉事房源


8. Hermits and regulators

The Hermit Culture Living On in China’s Misty Mountains - Sixth Tone

In the past decade, thousands of young people like Zhang have come to the Zhongnan Mountains hoping to connect with around 600 modern-day hermits, or yinshi, according to estimates by Zhongnan Cottage, a local civic organization...

The Zhongnan Mountains emerged as a popular retreat during the Tang dynasty due to their location near the then imperial capital, Chang’an. Indeed, so many hermits came here that the phrase “take a Zhongnan shortcut” is still used in Chinese to refer to people who get rapidly promoted to high positions...

Since last summer, a high-profile environmental protection campaign in Shaanxi province has demolished illegally built homes across the Qinling Mountains, where the Zhongnan Mountains are located. Although the hermits were not the original targets, some of their homes and temples were razed as part of the campaign.


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Business, Economy and Trade

China State Funds Are Said to Cushion Blow as Stocks Tumble - Bloomberg Signs of government support also emerged outside the stock market on Monday. At least one big Chinese bank offered to sell the U.S. currency as the onshore yuan fell toward 6.80 per dollar, according to traders, limiting depreciation in the Chinese currency after it dropped the most in nearly three months.

China targets steel industry as latest front in its war on pollution | South China Morning Post On Sunday, the Ministry of Ecology and Environment and four other ministries released a joint directive intended to ensure steel mills in the country’s most polluted regions meet “ultra-low” emission standards by 2025. The announcement cited a leading environmental scientist’s estimate that the measure could reduce particulate emissions in areas around Beijing and the Yangtze River Delta by around 20 per cent, and lower the concentration of PM2.5, the deadliest small particles, by as much as 9 per cent.

23% of Major Chinese Cities Post "Overheating" Housing Prices in First Quarter - China Banking News According to the report 23 out of the 100 cities monitored fell into the category of “overheating” in the first quarter, with the Guangdong province city of Zhongshan seeing the largest average price increase at 61%. The report sees a high likelihood of tighter real estate market controls in these cities during the second quarter, with Chinese regulators continuing to stress the policy setting that “houses are for occupation not speculation.”

Chinese banks quietly lower daily limit on foreign-currency cash withdrawals From late last year, the “scrutiny benchmark” for US dollar withdrawals was cut to US$3,000 from US$5,000, according to an official at the Bank of Communications, who requested anonymity. Meanwhile, banks were required to keep a “watch list” monitoring clients who made frequent foreign exchange withdrawals, said the official. Previously, any withdrawals of US$5,000 or more in a single transaction required proof of need, such as an airline ticket for overseas travel or a health certificate for overseas medical care.

Local Governments Cut Pension Contribution Rate to Lower Corporate Burden - Caixin Of the 31 provincial-level regions on the Chinese mainland, at least 27 released plans as of April 30 to cut the pension contribution rate, according to Caixin’s calculation based on government files.

Trump Indonesia Real Estate Project Gets Chinese Government Ally - The New York Times The Trump Organization’s partner in a lavish Indonesian development project boasting a six-star hotel and golf course with President Trump’s name has brought on a new ally: a Chinese state-owned company. The Indonesian partner, the MNC Group, said Tuesday that it had struck a deal with an arm of Metallurgical Corporation of China

China Cashes In on the Cannabis Boom - The New York Times Two of China’s 34 regions are quietly leading a boom in cultivating cannabis to produce cannabidiol, or CBD, the nonintoxicating compound that has become a consumer health and beauty craze in the United States and beyond.

In Depth: Tropical Paradise Turns Demolition Zone - Caixin The Meiya and Guomao communities are part of industrial investment projects invited in by local authorities when Hainan’s property market was booming. Egged on by local government officials, developers pushed forward construction despite lacking necessary documentation, Caixin learned. As a nationwide campaign to cool the property market unfolded and Hainan province shifted policies to reduce reliance on the property industry, Meiya, Guomao and other similar projects lost government support and became the targets of crackdowns // Abridged translation of latest Caixin cover story 海南去地产化风暴 新建海景房被推倒

Liquor Giant Moutai’s Ex-Chairman Booted From Government Advisory Body - Caixin Yuan Renguo, the ex-chairman of Kweichow Moutai Co. Ltd., has been dismissed from his position as a standing committee member of the Guizhou Committee of the Chinese People’s Political Consultative Conference (CPPCC). Yuan has also been relived from two other positions on the committee, according to an official statement (link in Chinese) released Sunday. The statement didn’t offer a reason for Yuan’s dismissal, but Caixin has learned from a source that it may have been related to Yuan abusing his power to designate dealers, leading to an artificial inflation in the price of Moutai liquor during his tenure as chairman from 2011 to 2018.

After Fatal Explosion, Jiangsu Chemical Firms Ordered to Relocate Away From People - Caixin According to the plan, the government will speed up the relocation of smaller chemical companies away from densely populated urban areas, and those that stay open will have to beef up security standards or close their doors by 2020. Chemical plants located within a kilometer (0.6 miles) of the Yangtze River will also have to relocate or close by the same date.

Yicai Global - CSRC Goes High-Tech to Rein In Margin Trading CSRC will infer whether an account is used for asset allocation based on artificial intelligence, algorithms, computing power and data with this program

Admissions scandal puts pharmaceutical empire under spotlight - Global Times The company's history and financial situation have been subjected to intense scrutiny, including its so-called "miracle-making" founder, former instances of bribery and massive sales expenses. Zhao Tao, chairman of Shandong Buchang Pharmaceuticals (Buchang Pharma), was reported to have paid $6.5 million to an admissions consultant to get his daughter into Stanford University, California.

Luckin Coffee IPO: More a Tech Startup Than a Drinks Company - Bloomberg Luckin posted 841 million yuan ($125 million) in revenue last year, exploding from 250,000 yuan the year prior. But its operating expenses were three times higher than sales at 2.4 billion yuan. And it wasn’t even materials, store rentals or admin expenses that blew out the bottom line.  Marketing costs were 746 million yuan last year. To make every 100 yuan from selling coffee, Luckin spent 152 yuan to produce and market that cup – not including rent and general expenses.

China sees 195 mln domestic tourist trips during May Day holiday - Xinhua China saw a total of 195 million domestic tourist trips made during the four-day May Day holiday, up 13.7 percent from last year, according to the Ministry of Culture and Tourism. Tourism revenue reached 117.67 billion yuan (about 17.48 billion U.S. dollars) during the holiday which lasts from Wednesday to Saturday, up 16.1 percent, according to the ministry.

China bank card transactions surge in holiday - Xinhua Total transactions through the China UnionPay network soared to 1.29 trillion yuan (around 192 billion U.S. dollars) between May 1 and 4, up 42 percent on a daily basis from last year's May Day holiday, the Shanghai-based agency said. Thanks to the extended holiday and sunny weather in many parts of the country, tourism-related consumption was greatly boosted.


Politics and Law

Ex-Big Oil Bosses Aid Provincial Chief Investigation - Caixin He Jiuchang, 58, who was chairman of the state-owned Shaanxi Yanchang Petroleum (Group) Co. Ltd. from 2015 to 2017, began aiding the investigation in late January, the sources said. His predecessor Shen Hao, 66, who was chairman from 2007 to 2015, began assisting the investigation in early February, they said. The sources said they believe both men were helping with the investigation of Zhao Zhengyong

Provincial Party Chief’s Childhood Pal Made Millions From Deals With State Oil Giant-Caixin Yu Wei, chairman of chemical-maker Shaanxi Haian Industry Co. Ltd., was detained as part of the investigation into Zhao Zhengyong just days after the former chief of Northwest China’s Shaanxi province fell from grace in January, Caixin has learned from multiple sources with knowledge of the matter.

Missing Chinese student activist accuses police of abusing him in detention | South China Morning Post In a video and written testimony published after he disappeared last week, Peking University student Qiu Zhanxuan said local police “tormented” him over a five-day period in late February. Intimidation tactics included a forced strip-search and listening to Xi’s marathon speech from the Communist Party’s five-yearly congress in 2017 on high volume.

空降地方的省部级要员回京 曾在“老虎”落马后补位_凤凰网资讯 Cai Zhenhong returns to Beijing after 4 years as propaganda head in Hunan Province. Cai is joining the All China Federation of Supply and Marketing Cooperatives as a member of its Party Committee. Liu Shiyu also went to the ACFSMC when he was replaced as head of the CSRC. Is the ACFSMC a dumping ground for cadres without a political future, or is Xi looking to revitalize it?

中共中央办公厅 国务院办公厅印发《法治政府建设与责任落实督察工作规定》-新华网 Central Committee General Office and State Council Office issue "Rule of law government construction and responsibility to implement supervision work regulations"

Senior CPC official stresses curbing "formalities for formalities' sake" practices - Xinhua A senior Communist Party of China (CPC) official on Monday urged central and state institutions to curb the practice of "formalities for formalities' sake" so as to alleviate burdens on primary-level authorities. Ding Xuexiang, a member of the Political Bureau of the CPC Central Committee, member of the Secretariat of the CPC Central Committee and secretary of the working committee for central and state organs, made the remarks when presiding over a meeting on the issue.

Senior CPC official stresses role of IT in promoting high-quality development - Xinhua Senior official of the Communist Party of China (CPC) Huang Kunming on Monday called for advancing the building of a digital China and smart society, stressing the role of information technology in promoting high-quality development in the country. Huang, a member of the Political Bureau of the CPC Central Committee and head of the Publicity Department of the CPC Central Committee, made the remarks in a keynote speech at the opening ceremony of the second Digital China Summit.

Security lapse exposed a Chinese smart city surveillance system | TechCrunch The system monitors the residents around at least two small housing communities in eastern Beijing, the largest of which is Liangmaqiao, known as the city’s embassy district. The system is made up of several data collection points, including cameras designed to collect facial recognition data. The exposed data contains enough information to pinpoint where people went, when and for how long, allowing anyone with access to the data — including police — to build up a picture of a person’s day-to-day life. // By the US embassy in the new embassy district. This deployed all over Beijing or just around embassies? It must be much harder for foreign intel services in operate in China now, and I doubt Chen Guangcheng could have been brought into the US embassy now

Language Log » More misreadings by Xi Jinping Two of Xi's recent báizì 白字 ("miswritten / mispronounced character") that the CCP propaganda machine tries awkwardly to cover up: Reading “jīngzhàn xìnì 精湛细腻” ("consummately exquisite") as “jīng shén xìnì 精甚细腻" ("very refined and exquisite”). Reading“shànyǎng 赡养” ("support; provide for") as “zhānyǎng 瞻仰” ("pay respect").

First five volumes of major academic project on Marxism unveiled - Xinhua 


Foreign and Defense Affairs

Fed up Canada tells U.S. to help with China crisis or forget about favours - Reuters With no cards to play against China without risking significant economic damage, Canada has launched a full-court press in Washington, which is negotiating its own trade deal with Beijing...“It’s a very challenging situation. When we raise it with the Americans they just say, ‘Dealing with the Chinese is tough’,” said a Canadian government source.“It’s also not clear who we should be targeting since you never know who is up and who is down in the administration at any given point,” said the source, who requested anonymity given the sensitivity of the matter.

With lives at stake, Canada’s misguided vision of China demands a careful reboot - The Globe and Mail It’s also time to re-examine the received wisdom that shapes our China strategy, purging it of a sort of malware encouraged by China to delude the naive. This includes such fictions as the idea that China is inherently peaceful and has no territorial ambitions, that it abides by a policy of non-interference in other countries, that trade is a favour it bestows on friendly nations, and that access to its leaders is an end and reward in itself. - David Mulroney was Canada’s ambassador to China from 2009 to 2012

Sack 'nutter' spy chiefs to fix relations with Beijing, Paul Keating urges - The Age Former prime minister Paul Keating has launched an extraordinary attack on Australia’s spy chiefs, calling them “nutters” and urging Bill Shorten to sack them to improve relations with China if he wins the election...He praised China as "a great state" and the world's soon-to-be-largest economy, saying: "If we have a foreign policy that does not take that into account, we are fools. He attacked the role of John Garnaut, a former Sydney Morning Herald and Age China correspondent who became an adviser to former prime minister Malcolm Turnbull and co-wrote an influential, classified report on Chinese influence in Australia.

Foreign interference laws: Paul Keating may have to declare as foreign agent Former Prime Minister Paul Keating might have to register on the Turnbull government's agents of foreign influence list because he sits on an advisory council for a Chinese government development bank, Fairfax Media understands.

China says it won't take part in trilateral nuclear arms talks - Reuters “China opposes any country talking out of turn about China on the issue of arms control, and will not take part in any trilateral negotiations on a nuclear disarmament agreement,” Geng told a daily news briefing, when asked about Trump’s remarks.

Andrew Batson's Blog | Musings on China, books, economics, jazz, history, et cetera It’s become increasingly clear that the “debt-trap diplomacy” meme started by Indian commentator Brahma Chellaney is not an accurate description of how the Belt and Road actually operates

US steps up belt and road offensive saying it offers fairer deals than China’s ‘debt trap’ | South China Morning Post The video – which has been subtitled in six other languages, including Chinese – repeated warnings from the Centre for a New American Security, a US think tank, that taking part countries would face the risk of excess debt, environmental problems and losing control of their strategic assets if they signed up for the transcontinental infrastructure project.

U.S. must cultivate Central America or lose out to China: Panama president-elect - Reuters The U.S.-educated former agriculture minister and businessman said that if the United States neglected a region it has long considered its backyard, it was inviting China to fill the gap. “We need, and we have asked, that they look toward the region more - the region, not just Panama,” Cortizo said in an interview with Reuters before voting on Sunday.

Senior legislators study Xi Jinping Thought on Diplomacy - Xinhua Members of the National People's Congress (NPC) Standing Committee Chairpersons' Council on Sunday studied Xi Jinping Thought on Diplomacy. As the latest theoretical achievement and precious spiritual wealth of Chinese diplomacy, the Thought provides fundamental principles and a guide to action for the work of foreign affairs in the new era, according to a statement issued after the meeting, presided over by Li Zhanshu, chairman of the NPC Standing Committee.

Hunter Biden Invested in Chinese Surveillance Technology - The Intercept Hunter Biden’s investment company in China, known as Bohai Harvest RST, has pooled money, largely from state-owned venture capital, to buy or invest in a range of industries in the U.S. and China…In 2017, Bohai Harvest bought into Face++, part of a $460 million haul in the company’s Series C investment round. Bohai Harvest’s website features Face++ in its portfolio of investments.

As Chinese Flock to Siberia’s Lake Baikal, Local Russians Growl - The New York Times “If we let them, the Chinese will take over,” said Mr. Sukhanov, 57, who fled St. Petersburg decades ago for a bucolic life by the Siberian lake, the world’s largest, deepest body of fresh water. “They will just steal all the money and the local people will get nothing.”

Russia struggles to attract Chinese capital to its Far East | Financial Times $$ “The amount of Chinese investments in the Russian Far East fully corresponds with the state of the market and infrastructure in the region,” said Ivan Zuenko, a research fellow at the Center for Asia Pacific Studies of the Far Eastern Branch of Russian Academy of Sciences. “It seems small only in comparison to the inflated expectations that Moscow and Beijing have set for the cross-border investment co-operation in recent years.”

Cyber officials call for coordinated 5G security approach - AP The proposals reflected the U.S. concerns, though some wording also appeared to be aimed at raising the bar for Chinese suppliers. The document said “security and risk assessment of vendors and network technologies” should be taken into account, as well as “the overall risk of influence on a supplier by a third country,” especially its “model of governance.” “Security and risk assessments of vendors and network technologies should take into account rule of law,” it said.

‘Mysterious' nuclear institute opens to public - Global Times 

China regulates granting of subsidies on military scientific research - Xinhua 

CMC issues guideline on advancing military vocational education - Xinhua 


Taiwan

Foxconn chief Gou tells China to recognise Taiwan’s independence | Financial Times $$ China “must acknowledge the existence of the Republic of China”, Mr Gou told reporters on Monday, referring to the official name of Taiwan in a move that highlights his challenge of not being seen as pandering to Beijing.  He added that he would not consider meeting Chinese president Xi Jinping unless he had received clarification from Beijing on its policy towards Taipei and had become Taiwanese president himself.


Tech and Media

Huawei to build chip plant near Arm Holdings HQ in Cambridge | Financial Times $$ Huawei’s decision to make chips in Cambridge will create powerful competition for the region’s semiconductor talent. The company said it might eventually also develop artificial intelligence software there.

China PC online game market report 2019 | PC Gamer If you're surprised by the size of China's PC gaming market, you shouldn't be. It's been exploding in growth since 2001, when the total market was only worth $100 million, Niko Partners' founder Lisa Cosmas Hanson told me in an interview. What is surprising, however, is how the Chinese PC games market has remained resilient in spite of heavy government regulations.

‘Avengers: Endgame’ Crowned Top Foreign Title of All Time in China – Variety 

Sequoia China to cut up to 20 percent of investment staff as tech growth slows - sources - Reuters 

Baidu and Bytedance in Legal War Over Stolen Search Results- PingWest


Energy, Environment, Science and Health

Association nominates Baidu CEO as CAE academician, causing heated debate - ECNS The nomination of Robin Li for the country's most acclaimed academic title in engineering has triggered heated debate following some fraudulent medical advertising found on the major Chinese search engine he leads. But some supporters suggested Li was nominated for his role in promoting artificial intelligence in China, which now seems to be rejected by CAST.

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