Good Morning. Today’s newsletter is a test of a free, weekly version of the top issues I have seen over the last week. Please let me know in the comments if this is something you would like to see on a regular basis.
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Xi loves Party construction; Hong Kong; US-China talks; PRC cryptocurrency;
Zhong Shan joins US-China trade call; Massive Camsing fraud unfolding; Hong Kong; Xinjiang;
Thanks for reading.
1. US-China
The trade negotiating teams held a call earlier this week. While there were no breakthroughs I hear there was some softening of positions, and that the US side may now accept interim administrative directives before the Chinese side codifies promises in law. There had been some talk of the US side going to China next week but I do not expect that to happen so quickly.
Trump team fears new face on China trade team signals tougher stance - The Washington Post
The Trump administration is increasingly concerned about prospects for a trade deal with China, amid an unexpected reshuffling of the Chinese negotiating team and a lack of progress on core issues since the Group of 20 summit in Japan, according to U.S. officials and senior Republicans briefed on the discussions...
Trump told his trade team before the Tuesday call to secure the new Chinese orders for soybeans and wheat he believed he had been promised in Osaka, Japan. But Zhong and Liu offered no specific commitments, leaving negotiations at a virtual standstill, according to a White House official..
Chinese officials may be delaying any trade concessions until they see how Trump’s G-20 change on Huawei’s purchases from U.S. companies is implemented and how the administration reacts to continuing protests in Hong Kong, according to one Trump supporter who has been briefed by administration officials
China and U.S. Differ Over Agricultural Purchases Trump Boasted About - The New York Times
People familiar with the negotiations say China has denied making any explicit commitment to buy American farm products during those discussions and instead saw large-scale purchases as contingent on progress toward a final trade deal that is still nowhere in sight.
That is raising questions among trade experts about whether the United States gave up more than it got during Mr. Trump’s recent efforts to de-escalate the trade war.
Peter Navarro calls the Wall Street Journal 'garbage,' says don't believe China or US press - CNBC
“There’s just going to be a lot of garbage coming out of the Wall Street Journal and the People’s Daily and everything in between,” Navarro said. “I’ve seen this movie before. There were all sorts of stories written and they were designed to shape the negotiations and they didn’t have any insight into them,” Navarro said.
Navarro said the trade war is “in a quiet period,” adding that U.S. Trade Representative Robert Lighthizer will travel to Beijing with Treasury Secretary Steven Mnuchin in the near future.
Exports fell by 1.3 per cent year-on-year after tariffs on US$200 billion of Chinese goods were raised from 10 per cent to 25 per cent by Washington in May
Over the first half of the year, China’s exports to the US fell by 8.1 per cent to US$199.4 billion, while imports dropped by 29.9 per cent to US$58.9 billion
U.S. officials push for sanctions on China over oil purchases from Iran
Senior administration officials now agree that China defied U.S. sanctions when it imported more than a million barrels of crude oil from Iran last month. But they are grappling with whether — and how — to hit back, according to three U.S. officials.
Another response to last week’s open letter - Why the United States doesn’t need to return to a gentler China policy - The Washington Post - John Pomfret
I was reminded of this story last week when I read the open letter signed by scores of prominent experts on China. Like Tuchman, they deny agency to the Chinese Communist Party by placing the bulk of the blame for the current crisis in U.S.-China relations at the feet of the Trump administration. The letter nods to China’s misbehavior but focuses far more attention on what it calls the "many U.S. actions” that “are contributing directly to the downward spiral in relations.”..
Last week’s letter continues in this wrongheaded vein by repurposing the tired trope that we should tailor our China policy to support “Chinese leaders who want China to play a constructive role in world affairs.” But all the evidence I have seen from living in China for nearly 20 years indicates that there are no such “Chinese leaders” waiting in the wings. Xi has purged many of them, and others — reading the tea leaves — have changed their tune...
At root, the letter seems to misunderstand the nature of power in a Marxist-Leninist system such as China’s.
Few things worry China’s elite more than getting their kids into Harvard - Chaguan - Economist $$
when Chinese officials meet Westerners, America’s treatment of Chinese students and scholars comes up time and again. For many, the issue is personal: in China as elsewhere, few things matter more to the elite than getting their offspring into Stanford. Chaguan spent July 8th and 9th at the World Peace Forum, a conference attended by Chinese leaders and foreign grandees, hosted by Tsinghua University in Beijing. In public debates and in private corridor conversations, Americans were repeatedly scolded by Chinese government ministers, professors and retired generals, and even ambassadors from Western allies. The charge is that, in the name of national security, America is treating Chinese students and scholars as a new “Yellow Peril”, in a witch-hunt worthy of Senator Joseph McCarthy...
America has a story worth telling. It is one about open societies, and how openness to people and ideas, though it can be seen as a vulnerability, represents their greatest strength. That America is losing a propaganda war, unbeknown to most Americans, is an extraordinary failure. Some day, China’s brightest youngsters may no longer want to come.
Trump’s Asia Gamble: Shatter Enduring Strategies on China and North Korea - The New York Times
Trump administration officials argue that economic engagement without appropriate guardrails created a tyrannical behemoth that could supplant American supremacy. Some call for long-term tariffs to “decouple” the economies of China and the United States by breaking supply chains and other business ties.
“We seem to be at a unique confluence of Xi and Trump,” said Bill Bishop, an analyst in Washington who publishes Sinocism, a China briefing. “And Make China Great Again meets Make America Great Again is a recipe for friction.”
The Art of Wait and See by Keyu Jin - Project Syndicate
In the emerging Chinese view, any leverage or advantage the US has over China in trade is far exceeded by the Chinese people’s willingness to withstand the pressure. They will make the sacrifices necessary to maintain national pride and avoid the appearance of subservience to the West. This patriotic impetus has been fueled further by studying the US-Japanese trade conflict of the 1980s...
At the same time, China is taking advantage of doubts about Western liberalism by pushing a new worldview of its own. The West’s vulnerability has been exposed by its slow economic recovery since the 2008 financial crisis, declining life expectancy among some cohorts, stagnant standards of living, and the breakdown of traditional alliances. In exporting an alternative agenda, China is unapologetically advocating increased state intervention to improve livelihoods, as well as a value system that ranks collective welfare above individual desires. It is also making efforts to bypass or otherwise mitigate the effects of the exclusionary military alliances that underpin the Western-led order.
Take, for example, what happened in the last 30 minutes of trading on Friday, June 28 at the Chicago Mercantile Exchange. By that time Trump was already in Osaka, Japan—which is 14 hours ahead of Chicago—where he would meet for more than an hour with China’s President Xi Jinping. According to the trader, who has decades of experience trading options, while they were meeting on Saturday morning, someone, or a group of people, bought 420,000 so-called “e-minis”—electronically traded futures contracts tied to a wide range of stock indexes—in the last 30 minutes of trading in Chicago on Friday afternoon. The big bet could appear to be that Trump might announce a deal of some sort with Xi about the tariff negotiations, and that on Monday morning, or soon thereafter, the S&P 500 stock index would trade up.
The total volume Friday of the September e-minis was a little more than one million contracts, so a purchase of 420,000 contracts, or about 40% of the day’s volume, in the last few minutes would likely be noticed by astute market watchers.
2. Taiwan
China to impose sanctions on U.S. companies involved in arms sales to Taiwan - Xinhua
China will impose sanctions on U.S. companies involved in arms sales to Taiwan, foreign ministry spokesperson Geng Shuang said on Friday.
Geng's comments came after the United States earlier announced a plan of selling weapons worth 2.22 billion U.S. dollars to Taiwan.
U.S. attempts to play off Taiwan against China will be in vain - People's Daily Zhong Sheng
Given the current cross-strait relations, the irresponsible practice of the U.S. has sent a wrong signal to “Taiwan independence” forces, aggravated the tension and complexity of the situation across the Taiwan Strait, and created greater uncertainties for China-U.S. relations...
It’s better for the U.S. to have a clear understanding of the current situation and seriously abide by the one-China principle and the three joint communiqués. It should immediately cancel the planned arms sale to Taiwan, stop selling weapons to Taiwan and terminate military contact with Taiwan, and exercise caution and prudence when handling Taiwan-related issues to avoid serious damage to China-US relations and cross-strait peace and stability.
Taiwan president leaves for U.S., warns of threat from 'overseas forces' - Reuters
She is spending four nights in the United States in total, two on the way there and two on the way back on a visit to four Caribbean allies. Tsai will go to New York on her way there, and then is expected to stop in Denver on the way back.
Tsai was last in the United States in March, but her stops this time will be unusually long, as normally she spends just a night at a time in transit...
analysts said the extended stopovers served to emphasize the Trump administration’s support for Tsai
Comment: Risky for Taiwan to believe that President Trump cares about the island. Certainly many of his advisors do, as do many on Capitol Hill. PRC officials will not likely to get any more upset than normal so long as she stays out of DC and the Trump Administration does not send any senior officials to meet with her.
There were some fights outside Tsai’s New York Hotel as she arrived:
More scenes of the brawling on New York streets:
3. Harassment of American executives in China increasing?
A Koch Executive’s Harassment in China Adds to Fears Among Visitors - The New York Times
A Koch Industries executive was told he could not leave China. An ex-diplomat who helped organize a technology forum in Beijing was hassled by authorities who wanted to question him. An industry group developed contingency plans, in case its offices were raided and computer servers were seized...
“In a very not-so-subtle manner, the Chinese government has upped the ante by detaining Americans at the borders and at their hotels, and with the obvious intent to send a message to the Trump administration that they can engage in hostage diplomacy if push comes to shove,” said James Zimmerman, a partner in the Beijing office of the law firm Perkins Coie, which works with American companies in China…In late June, one American industry group sent an email to its members detailing how it was trying to mitigate its own risks.
“Foreign staff in particular have reported a high level of anxiety about the current environment,” it said in the message, which was reviewed by The Times. It said it was “in the process of finalizing a detailed crisis plan to be used in the event that one of our offices is raided and/or one of our staff is detained.”
4. Hong Kong
China's top official in Hong Kong says Beijing backs city's leader - Reuters
the central government firmly supports Chief Executive Carrie Lam and the Special Administrative Region government continue to govern effectively and actively make a difference in accordance with the law, firmly supports Hong Kong Police to do their duties in accordance with the law.”
Trump softened stance on Hong Kong protests to revive trade talks | Financial Times $$
Donald Trump told Chinese president Xi Jinping last month that the US would tone down criticism of Beijing’s approach to Hong Kong following massive protests in the territory in order to revive trade talks with China.
The US president made the commitment when the two leaders met at the G20 summit in Osaka, according to several people familiar with the meeting. One person said Mr Trump made a similar pledge in a phone call with Mr Xi ahead of the G20 summit.
Comment: Another reminder that to Trump everything is just a bargaining chip for a trade deal, from Hong Kong, to Xinjiang, to Taiwan and Huawei. The signaling to China and to US allies is not constructive.
Video of assault on Hong Kong activist spurs outrage - Inkstone
Makeshift displays of sticky notes, known as Lennon Walls, have sprung up across the city to support protests against a government plan that critics said could erode the city’s autonomy from mainland China.
In the widely circulated video, a young man guarding one such wall in the city’s Kowloon Bay neighborhood was seen being punched by an older man who complained about the notes and accused the younger man of taking part in a “revolution.”
The activist, later identified as surnamed Mak, 36, did not fight back as the older man repeatedly landed blows to his face. Mak at one point tumbled to the ground.
A group of anti-extradition law activists in Admiralty have been on hunger strike for more than 180 hours, with pro-democracy lawmaker Fernando Cheung also joining the protest.
Last Wednesday, Roy Chan – a preacher at the Good Neighbourhood North District Church – began the hunger strike, which has since evolved into a ten-person protest. Participants are aged between 16 and 73.
HK Protests Show Expanding Focus, Sustained Momentum – China Digital Times (CDT)
Long and excellent recap
Hong Kong youth need guidance - Global Times
Foreign forces are deeply involved and even dominate the media and education in Hong Kong, and they select negative information and news about the mainland to mislead the Hong Kong public and students. Objective and positive reports and education about the mainland were excluded by these pro-West forces, said Victor Chan Chi-ho, 33, vice chairman of the Hong Kong Association of Young Commentators.
“Given the current political situation, discussions like enrolling Hong Kong people into the army and the civil service system are going to be very difficult to carry on at the moment,” an official who is close to Beijing policymakers responsible for Hong Kong’s affairs told the South China Morning Post.
5. Party construction
China's Xi tells officials not to be lazy and 'spend whole day eating' - Reuters
Chinese officials must not use the fight against corruption as an excuse to sit around and do nothing, idling their time away and “spending the whole day eating”, President Xi Jinping told a meeting of senior Communist Party leaders on Tuesday.
Xi highlights Party building in central Party, state institutions - Xinhua
Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee, on Tuesday urged central Party and state institutions to make themselves exemplary institutions that the CPC Central Committee trusts and people are satisfied with.
Xi, also Chinese president and chairman of the Central Military Commission, told a meeting that central Party and state institutions should comprehensively improve the quality of Party building
CCTV Evening News - 习近平在中央和国家机关党的建设工作会议上强调 全面提高中央和国家机关党的建设质量 建设让党中央放心让人民群众满意的模范机关
Just days after the meeting reviewing the reform of Party and state institutions Xi also convened a meeting from July 7-9 on Central Party and state institutions.
习近平指出，加强和改进中央和国家机关党的建设，必须切实加强党的领导，牵住责任制这个“牛鼻子”。各部门党组（党委）要强化抓机关党建是本职、不抓机关党建是失职、抓不好机关党建是渎职的理念，坚持“书记抓、抓书记”，领导班子成员和各级领导干部要履行“一岗双责”，做到明责、履责、尽责。机关党委要聚焦主责主业，真正发挥职能作用
It did not have the full grouping of officials that the earlier meeting this week had. Standing Committee members in attendance were Xi, Wang Huning, Zhao Leji and Han Zheng.
Some highlights from the meeting, as noted by the "Study Xi Small Group"
针对一个时期以来一些地方和领域“为官不为”的现象和所谓“官不聊生”的说法，习近平态度明确——必须正确处理干净和担当的关系，决不能把反腐败当成不担当、不作为的借口。
local officials must not use anti-corruption as an excuse for not doing any actual work. This seems to confirm some reports about how local governments have been all paralyzed in recent year because the anti-corruption campaign was so harsh..
把对党忠诚纳入家庭家教家风建设。Officials staying loyal to the Party is not enough, their families also need to be loyal to the Party
This meeting came just after Xi convened a meeting last Friday of top Party, State and PLA officials to discuss progress in the bureaucratic reforms from last year’s Third Plenum, reforms whose main goal is to increase Party control (Xi stresses consolidating achievements in reform of Party, state institutions - Xinhua).
For the the meeting last Friday Xi looks to have convened same audience as he did for the risk prevention study seminar Xi chaired in January, with the exception of the representatives of the other democratic parties and All-China Federation of Industry and Commerce, who were listed as attending the opening ceremony of the January seminar.
Who needs a Fourth Plenum when Xi can convene everyone who matters when he wants to?
6. South China Sea
On July 12, 2016, an arbitral tribunal at the Permanent Court of Arbitration in The Hague issued its ruling in Manila’s case against Beijing’s claims in the South China Sea. Convened under the compulsory dispute settlement provisions of the United Nations Convention on the Law of the Sea (UNCLOS), the tribunal’s five arbitrators ruled overwhelmingly in the Philippines’ favor. Beijing refused to participate in the arbitration and rejected the outcome.....
AMTI has compiled a list of actionable findings from the tribunal and assessed whether China’s recent actions are in-line with them. Overall, China is in compliance with just 2 of 11 parts of the ruling, while on another its position is too unclear to assess.
“Cowardly,” the Philippines’ defense secretary said.
Military commanders followed suit, telling reporters it was time for President Rodrigo Duterte to get tough with China after years of increasingly cozy ties.
Instead, the Philippine leader sided with Beijing...
A senior Philippine Navy official, who spoke on the condition of anonymity because he was not authorized to speak to the media, said he had logged the activities of China’s maritime militia every day for more than a year, but felt the reports he filed went nowhere.
A former senior official at the Armed Forces West Command, the unit monitoring the South China Sea, said his Facebook feed is filled with laments from his contemporaries.
THE SINKING OF GEM-VER: Rappler
On June 9, 2019 Philippine fishing boat Gem-Ver was anchored near Recto Bank, ready for deep-sea fishing in the West Philippine Sea. They planned to remain there for 12 days. On the 9th day, a Chinese vessel rammed, sank, and abandoned Gem-Ver and its fishermen in the open seas in the dead of night. The Philippine government has since downplayed the incident, even casting doubt on the account of the Filipino fishermen.
Rappler spoke to all 22 fishermen of Gem-Ver who agreed to put their testimonies on the record. This is their story.
China Is Winning the Silent War to Dominate the South China Sea - Bloomberg
“You can call it a silent war,” said Le Hong Hiep, a fellow at Singapore’s ISEAS–Yusof Ishak Institute. The Chinese “are contesting waters. There is violence. It happens all the time.”
While China appears to be the biggest offender due to its size and resources, it’s not alone in seeking to protect fishing grounds as stocks get depleted and rules remain lax. Other claimants such as Malaysia, Indonesia and Vietnam have taken action against fishing crews from China and other nations, sometimes even making a show of destroying vessels that were impounded.
Heads of U.S. And Chinese Navies Discuss Decreasing South China Sea Risks - USNI News
As officials in Washington and Beijing charged each other with ratcheting-up the militarization of the South China Sea recently, Chief of Naval Operations Adm. John Richardson discussed ways to decrease risk in the region during a video teleconference with his counterpart from China’s People’s Liberation Army Navy, Vice Adm. Shen Jinlong. The call focused on the importance of maintaining regular dialogue between the two sides as a means of reducing the chance either side will make a miscalculation that could quickly escalate a potential conflict, according to the Navy...
Tuesday’s video teleconference was the fourth such call between Richardson and Shen. The two have also met twice in person, most recently during Richardson’s January visit to China
7. US tech coupling with PRC surveillance
How U.S. Tech Giants Are Helping to Build China’s Surveillance State - The Intercept
The OpenPower Foundation — a nonprofit led by Google and IBM executives with the aim of trying to “drive innovation” — has set up a collaboration between IBM, Chinese company Semptian, and U.S. chip manufacturer Xilinx. Together, they have worked to advance a breed of microprocessors that enable computers to analyze vast amounts of data more efficiently.
Shenzhen-based Semptian is using the devices to enhance the capabilities of internet surveillance and censorship technology it provides to human rights-abusing security agencies in China, according to sources and documents. A company employee said that its technology is being used to covertly monitor the internet activity of 200 million people...
Semptian employee sent documents showing that the company — under the guise of iNext — has developed a mass surveillance system named Aegis, which it says can “store and analyze unlimited data.”…
Aegis can provide “a full view to the virtual world,” the company claims in the documents, allowing government spies to see “the connections of everyone,” including “location information for everyone in the country.”...
By 2013, Semptian had begun promoting its products across the world. The company’s representatives traveled to Europe, where they appeared at a security trade fair that was held in a conference hall in the northeast of Paris. At that event, documents show, Semptian offered international government officials in attendance the chance to copy the Chinese internet model by purchasing a “National Firewall,” which the company said could “block undesirable information from [the] internet.”
Just two years later, Semptian’s membership in the OpenPower Foundation was approved, and the company began using American technology to make its surveillance and censorship systems more powerful.
Read the whole infuriating piece here.
U.S. tech on guard against China as scrutiny increases on security, human rights-NBC News
Concern about how U.S. tech firms, unwittingly or not, may enable Chinese military capabilities or domestic surveillance is now top of mind in Washington. Scrutiny of U.S. tech companies and their customers, partnerships and personnel may well intensify, with the Huawei case being only one example.
“For tech companies, the operating environment is now highly politicized,” said Adam Segal, chair of emerging technologies and national security at the Council on Foreign Relations, a think tank. “They have to be a lot more sensitive to the potential uses there are in China and the types of technologies they’re involved in.”
What Trade War? U.S. Tech Firms Cozy Up to China Despite Turmoil - Bloomberg
Tech companies "must now live in a world where their Chinese business partners and global value chains at any given day could blow up," said James Lewis, director of the tech and public policy program at the Center for Strategic and International Studies, a Washington think-tank. “Trump might have backed off Huawei for now but next week it could be something different and any of these companies are fair game.”
Lewis, who previously served as the U.S. Commerce Department’s lead for national security and espionage concerns related to high-technology trade with China, said Chinese firms are also racing to become less reliant on the very American firms bending over backwards to keep their business.
8. PRC-Ireland “Emerald Age” coming?
China's NPC delegation visits Ireland - Xinhua
A delegation headed by Zhang Chunxian, vice chairman of the Standing Committee of the National People's Congress (NPC), China's top legislature, on Wednesday wrapped up a visit to Ireland, which aims to further promote the bilateral relations between the two countries....
The Irish side told the Chinese delegation that the current relationship between Ireland and China is growing strongly. They also said that Ireland firmly supports multilateralism, views China's development as a significant opportunity for Ireland, and is willing to actively participate in the international cooperation under the Belt and Road initiative and serve as a gateway for Chinese businesses to enter the European Union.
Comment: Head of the United Front Work Department You Quan visited in June. From the PRC embassy readout of You's visit:
Mr. Coveney and Mr. Ó Fearghaíl both expressed their esteem for China’s great development in various fields under the leadership of President Xi Jinping and emphasized that Ireland cherishes its traditional friendship with China. Ireland supports the Belt and Road construction and is ready to join hands with China to deepen the cooperation in fields of economic and trade, investments, education, tourism and so on. Ireland is committed to work together with China to uphold multilateralism and free trade. As a partner of China and member of EU, Ireland could be a gateway for the cooperation and exchanges between EU and China. The Irish political parties are also ready to strengthen exchanges and mutual understanding with the Communist Party of China.
Question: Does Brexit mean more PRC love and attention for Ireland? Are we on the cusp of a PRC-Ireland "Emerald Age"?
Ireland-China business booms as 40th anniversary of diplomatic relations marked
While relations can be complex, business between the two nations was booming and bilateral trade hit €17 billion in goods and services last year, according to Eoin O’Leary, Ireland’s ambassador to China.
“That figure has more than doubled over the past five years,” he told The Irish Times, “and we are one of the few countries to enjoy a trade surplus with China.”
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