This week’s free issue of the newsletter is an excerpt from Matt Sheehan’s new book The Transpacific Experiment: How China and California Collaborate and Compete for Our Future.

Matt is a Fellow at the Paulson Institute's think tank, MacroPolo, where he covers the China-US technology relationship with a focus on artificial intelligence. Prior to that he worked as The Huffington Post's first China correspondent in Beijing, where he was one of my favorite foreign reporters in China. Since moving back to the Bay Area in 2016, he's worked as a journalist, analyst and consultant on projects connecting California and China. His new book covers China-California issues across several dimensions: students, technology, Hollywood, green investment, real estate, and local politics.

I hope you enjoy the excerpt, and you can buy the book here on Amazon.

Today, the central axis of China–U.S. competition runs through frontier technologies: artificial intelligence (AI), 5G networks, and quantum computing. These technologies hold the potential to reshape the geopolitical balance of power—economic, cybersecurity, and military—and each country brings a different set of strengths and weaknesses to them. For a better picture of these strengths and weaknesses, let’s zoom in on the technology that’s making the most waves in both countries today: AI.

AI acts as an umbrella term for an incredibly diverse range of technologies that involve machine learning. Those technologies have more applications than there are industries in the world, making a one-dimensional analysis of “which country leads in AI” impossible. Instead, assessing the relative capabilities of China and the US requires breaking down these two AI ecosystems into their key inputs: research talent, data, semiconductors, private sector companies, and government policy. Looking at how the two countries compare along each of these inputs can provide a first approximation of their strengths and weaknesses in the field, and serve as a basis for well-grounded technology policymaking going forward.

Research talent constitutes one of the most important—and the most directly quantifiable—inputs for AI systems. Researchers around the world compete for the opportunity to publish and present their papers at top AI conferences, with the selections made by leading figures in the field. By looking at which researchers and institutions are selected for publication at these conferences, we can get a sense of where top AI researchers believe the most important research is happening today.

As part of a study for The Paulson Institute’s think tank, MacroPolo, my colleague Joy Dantong Ma broke down publications at what many agree is the top AI conference in the world: NeurIPS 2018. Looking at the most elite papers at the conference—those selected for oral presentations, with a 1% acceptance rate—the United States holds an overwhelming advantage. A full 60% of authors of these papers are currently working or studying at US institutions, compared with just 1% currently at Chinese institutions. Those findings were in line with a similar study of NeurIPS 2017, and echoed the qualitative assessments I’ve heard from many Chinese and American researchers in the field: while China is producing an increasing amount of AI research, the vast majority of cutting-edge breakthroughs are still coming out of places like Google or Carnegie Mellon University.

But examined from another angle, the global distribution of AI talent appears much flatter. If you look at where these elite researchers completed their undergraduate degrees (a rough proxy for where they grew up), over half of America’s top AI research talent comes from abroad. The top source country for that talent? China. While Chinese institutions publish just a tiny fraction of top AI research, researchers who grew up in China make up sizeable chunks of this body of work: 15% in 2017, and 9% in 2018.

The deltas between where these top researchers come from and where they work today (29% to 60% for the U.S., 9% to 1% for China) represent the gains and losses from highly skilled immigration, a major brain gain for the U.S., and substantial brain drain for China. Data from the NeurIPS conference gives us just one window into the multi-dimensional landscape of AI research capabilities. We need to deepen and broaden these datasets by examining more conferences, building alternative metrics, and regularly assessing how ever-shifting policies in the U.S. and China are affecting this population of highly-educated, internationally mobile AI researchers. For the U.S. government, these are some of the international students subject to new restriction and heightened scrutiny of their visas. For the Chinese government, these overseas researchers represent a population of potential “sea turtles” that they hope will bring their talents back to China.

Creating useful metrics for the other key AI inputs—data, semiconductors, companies and government policy—is less straightforward, but no less important. Data is often cited as an overwhelming advantage for China, but the reality is far more complex. While Chinese companies have access to rich data from a large pool of relatively homogenous domestic users, leading American companies draw on diverse data from users around the globe. The result is a mixed bag when it comes to comparative advantages in data, one that requires a far more granular analysis of specific use cases and settings to determine advantage.

For advanced semiconductors—the crucial chips powering AI functions in phones, computers and cars—U.S. companies maintain a near stranglehold on the industry. That dominance was powerfully illustrated by the threat of banning these exports to Chinese telecoms ZTE and Huawei, a move that likely would have shaken those companies to their foundations. But that same threat has now catalyzed greater investment in China’s domestic semiconductor capabilities, and some top research labs at places like Tsinghua University have begun publishing attention-grabbing research on developing new hybrid chips.

The intersection of private sector companies and government policy presents a similarly mixed bag. The Chinese government’s 2017 national plan for AI helped push domestic activity in AI to a new level. It encouraged even greater levels of private investment, and acted as a high-profile signal for local officials around the country: AI was the next big thing, and they were to do whatever they could to accelerate adoption. Those officials began adapting public infrastructure, subsidizing private investment, and procuring products, all in an attempt to stimulate their local AI industry. That then fed into a huge boom in venture capital funding as investors and entrepreneurs sought to apply AI to government priorities: transportation, "city brains," medical care, and largest of all, surveillance and public security.

The ripple effects of that initial push are still being felt—but so are its limitations. After the early frenzy of Chinese venture capital investment in AI faded, some sobering realities set in: many of China’s “AI startups” use hardly any AI in their products, and they have no sustainable business model beyond raising more money. And while government subsidies and procurement can help gin up demand for the AI products of today, it remains unclear if they can plant the seeds for the AI breakthroughs of tomorrow.

China and the United States enter the age of AI like a study in contrasts. While the U.S. leads in game-changing research, China shows strength in practical applications. Where American companies draw data from diverse users around the globe, China’s AI giants have a wealth of relatively homogenous data at home. And while Silicon Valley sometimes actively rejects entanglements with the U.S. government, Chinese companies often work with local officials to bring large-scale AI projects to life.
Those contrasts are challenging some American technologists and policy makers to rethink the connection between government policy and innovation. A relatively light-touch approach has served the U.S. well during the internet revolution, turning Silicon Valley into a global mecca for software engineers and ambitious entrepreneurs. But real-world applications of AI—driverless cars, automated factories, and intelligent cities—have a much larger physical footprint, one that often requires the government adopt, or at least adapt to, the technology. In that context, how can the American government be proactive enough to ensure it fully leverages the technology, but without smothering the organic sources of American AI strengths?

But as AI systems become more capable and more omnipresent, U.S.– China competition could raise questions far deeper and more troubling than the current round of geopolitical wrangling. Today, AI systems have the power to do extraordinary things when they are trained to perform a single, narrow task (e.g., winning at Go, or recommending a song). But a single narrow AI system doesn’t yet have the general intelligence of humans that allows a single brain to perform the full range of complex human tasks: conducting innovative research, raising a child, or writing a bestselling novel. Estimates of when we will be able to build powerful AI systems up to these complex tasks, often called "artificial general intelligence" (AGI) or "high-level machine intelligence (HLMI), vary widely. The most aggressive estimates from leading AI scientists say that achieving AGI in under ten years should be taken as a "serious possibility," while median estimates from surveys of researchers have projected HLMI in around forty years.

Whatever the timeline is for HLMI or AGI, its arrival would pose profound questions for humanity—questions that could be further complicated by a tense U.S.–China relationship. Such AI systems could be put to almost limitless uses—curing disease, automating jobs, or designing complex cyber-weapons that cripple an entire country. What happens if the United States and China are engaged in spiraling competition to build ever more intelligent machines, AI systems that we might not know how to control? Former U.S. Secretary of the Navy Richard Danzig has described that rush toward building increasingly autonomous systems as like playing a game of "technology roulette." Many scientists familiar with the field, from elite AI researchers such as Stuart Russell to the late astrophysicist Stephen Hawking, fear that if not designed with foolproof safety mechanisms, such AI systems could potentially threaten the very existence of humanity.

Given the potential risks from AGI systems, the move toward disentanglement of the two technology ecosystems raises serious questions. Should the U.S. government attempt to silo America’s top scientists, walling off new AI breakthroughs from China? Or would we be made safer by a two-way dialogue around AI safety, one that allows for communication around international best practices in safety? Can two superpowers that find themselves at geopolitical loggerheads avoid a potentially destructive technology-fueled arms race? And can the thousands of technologists who are at the center of the Transpacific Experiment—the students, researchers, and entrepreneurs crisscrossing the Pacific Ocean—play a role in mitigating these threats? END

"Excerpted and adapted from The Transpacific Experiment: How China and California Collaborate and Compete for Our Future, copyright © 2019 by Matt Sheehan. Reprinted by permission of Counterpoint Press."

You can buy the book here on Amazon.

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18 years since the 9/11 attacks.

As I wrote on the anniversary last year, Washington in 2001 increasingly saw China as a competitor. George W Bush referred to China as a "strategic competitor" during the 2000 Presidential campaign, early in 2001 his administration took steps to move closer to Taiwan, and of course the Hainan Island Incident occurred on April 1. But whatever momentum may have been building in DC against China wavered after the 9/11 attacks. 

18 years later we are well into a fundamental, structural change in official US views towards the PRC, though I have yet to see a good articulation of what “victory” would look like, and it is quite possible the shift has come too late for the US to achieve anything like "victory", as the costs are so much higher now that few may be willing to bear them, especially in the absence of a well-articulated strategy and theory of victory.

In spite of the problems China and the Party face, and all the risks and struggles Xi is exhorting the Party to battle, there is a reason Xi, officials, official documents and authoritative propaganda pieces keep repeating the phrase "当今世界正处于百年未有之大变局 the world today is undergoing major changes unseen in a century".

Xi and his theoreticians see massive global opportunities for Xi, many created by the US response to the 9/11 attacks, the decision to invade Iraq, the 2008 financial crisis and now the US foreign policy under President Trump. You see it in all sorts of utterances, most recently in the Qiushi essay by Yang Jiechi, and while the risks Xi keeps highlighting are real, and potentially existential, there may be too much focus on why the Party is destined to fail and not enough on how it may survive, and with that survival how it will reshape the world to fit its expanding interests.

Thanks for reading.

The Essential Eight

1. China tariff expeditions don’t look like concessions

China unveils lists of U.S. products to be excluded from additional tariffs - Xinhua

The exemption will be effective from Sept. 17, 2019 to Sept. 16, 2020, the Customs Tariff Commission of the State Council said in a statement.

Two lists of goods will be excluded from China's first round of tariff countermeasures against the U.S. Section 301 measures...

Next, the commission will continue to work on the exemption process and release subsequent lists in due course, according to the statement.

CNBC’s Eunice Yoon tweeted details of the list:

Eunice Yoon@onlyyoontv

#China publishes tariffs exemption list for U.S. products. List goes into effect Sep 17 for one year. Some tariffs already imposed refundable. Food, lubricants included. China will consider exemptions for additional products.

September 11th 2019

11 Retweets13 Likes

China Starts Tariff Exemptions, Keeps Pressure on U.S. Farms - Bloomberg

Pharmaceuticals and lubricant oil are among exclusions to levies on imports announced by the Ministry of Finance on its website on Wednesday. The exemptions, effective from Sept. 17 to Sept. 16 2020, will cover 16 categories of products worth about $1.65 billion, according to Bloomberg calculations based on China’s 2018 trade data. Other products on the list include alfalfa, fish meal and pesticides.

CCTV commentary on the tariff exemptions - 国际锐评：中方公布排除清单缓解经贸摩擦对在华企业影响_CCTV

The purpose of imposing tariffs on us imports is to safeguard China's core interests and the fundamental interests of its people. China is firmly opposed to escalation of the trade war and will not resort to countermeasures for the sake of countermeasures. Instead, we will take into account both domestic and external factors, continue to assess the impact on all kinds of enterprises, make full use of self-imposed tariff reduction and other fiscal and tax measures, and do our utmost to help enterprises ease their difficulties. The list of tariff exclusions shows that China has a better policy mix to deal with economic and trade frictions.

中方对美进口商品加征关税是为了捍卫国家核心利益与人民根本利益。中方坚决反对贸易战升级，不会为反制而反制，而是内外兼顾，综合考量，持续评估各类企业所受的影响，充分运用自主降低关税等财税措施，尽最大努力帮助企业缓解困难。此次关税排除清单出炉，表明中国应对经贸摩擦的政策组合更加完善。

2. US-China

Trump Plans Crackdown on Fentanyl Shipments from China, Others - Bloomberg

The draft order would target foreign shippers routing deliveries through the U.S. Postal Service -- not the two-largest U.S. couriers United Parcel Service Inc. and FedEx Corp., according to the people, who spoke on the condition of anonymity. One person familiar with the proposal said that China is a focus for the action, though the presidential order is not limited to that nation.

Trade war: AmCham survey shows tariffs weigh on U.S. businesses in China - CNBC

More than a quarter of the respondents – or 26.5% – said that in the past year, they have redirected investments originally planned for China to other regions. That’s an increase of 6.9 percentage points from last year, the AmCham report said, noting that technology, hardware, software and services industries had the highest level of changes in investment destination

U.S. firms sour on their future in China as trade war bites: AmCham - Reuters

The annual poll by the American Chamber of Commerce in Shanghai found that while most of its member companies remained profitable in 2018, the number reporting revenue growth fell. Projections for future revenue also dropped, highlighting the corrosive impact of the escalating tit-for-tat tariffs.

Five-year optimism sunk for the first time since 2015, when China’s stock markets nosedived and the authorities fumbled their response.

“Revenue growth projections have lowered, optimism about the future has waned, and many companies are redirecting investment originally planned for China,” AmCham said in a report on the survey published on Wednesday.

The 2019 China Business Report (PDF)

Hu Xijin of the Global Times says more policy support coming:

Hu Xijin 胡锡进@HuXijin_GT

Based on what I know, China will introduce important measures to ease the negative impact of the trade war. The measures will benefit some companies from both China and the US.

September 11th 2019

216 Retweets458 Likes

Chinese premier exchanges views with U.S. entrepreneurs on trade - Xinhua

The American entrepreneurs said that U.S. companies, which were inspired by China's new measures to open up, are looking at the current U.S.-China trade frictions from a long-term perspective, opposing actions to weaken economic relations with China and economic decoupling between the two countries.

Sen. Cruz urges Trump administration to block China’s next UN power play | Fox News

Sen. Ted Cruz is calling on the Trump administration to block China from installing a controversial former head of the Hong Kong police force at the helm of a United Nations office meant to fight drug trafficking, organized crime and corruption.

China’s candidate Andy Tsang-Wai-hung was nominated by Beijing earlier this summer to be the next executive director of the Vienna-based U.N. Office on Drugs and Crime (UNODC). His candidacy, critics warn, marks yet another sign of China’s growing influence at the world body.

US Representatives Anna Eshoo and Adam Schiff: China’s grip on pharmaceutical drugs is a national security issue - The Washington Post

There is no single accounting of the percentage of active ingredients in U.S. drugs that are manufactured in China, but it’s significant and growing. The Food and Drug Administration has said approximately 80 percent of active-ingredient manufacturers are located outside the United States, and for some key drugs, China is the only supplier. For instance, China produces the ingredients found in almost every antibiotic and blood pressure medicine and hundreds of other drugs. Thus, China has a virtual monopoly on the ingredients required to manufacture critical medicines.

China Ambassador to South Africa Attacks Trump Over Trade War - Bloomberg

“The Chinese culture emphasizes that ‘gentlemen keep their words.’ Honoring the promises and commitments is the basic ethical code and requirement for state leaders and businessmen,” he said in the advert titled ‘Voice of China.’ His comments were also published in the Star newspaper.

Chinese vice premier meets with Citigroup CEO - Xinhua

Chinese Vice Premier Liu He on Tuesday met with Chief Executive Officer of Citigroup Michael Corbat in Beijing at the latter's request...

China opens soymeal market to No. 1 exporter Argentina in 'historic' deal - Reuters

China will allow the import of soymeal livestock feed from Argentina for the first time under a deal announced by Buenos Aires on Tuesday, an agreement that will link the world's top exporter of the feed with the top global consumer.

Peer pressure: 60 science groups call for end to Washington’s crackdown on foreign-born researchers | South China Morning Post

In a letter to top science policy officials, 60 eminent groups – including such powerhouses as the American Association for the Advancement of Science (AAAS) and the Federation of American Scientists – called for a better balance between national security concerns and scientific inquiry. Collectively, the groups represent hundreds of thousands of scientists, engineers and educators worldwide...

The wording, which involved extensive negotiation given the large number of groups and varied interests, does not mention China by name. But “it’s about China”, Nouri, a molecular biologist by training, acknowledged.

“When you get a briefing from the administration about their concerns, they tell you it’s China and the Thousand Talents Programme.”

A review of Larry Diamond’s new book, Ill Winds: Saving Democracy from Russian Rage, Chinese Ambition, and American Complacency - Democracy Is Fighting for Its Life – Foreign Policy - Charles Edel

Ideology cannot explain everything, but ignoring ideology is its own form of blindness. Both Beijing and Moscow believe that they would be more secure in a world where illiberalism has displaced liberalism, and both are seeking to undermine democracies by spreading fake news, constraining public debate, co-opting or bribing leading political figures, and compromising the intellectual freedom of foreign academic institutions. China is exporting its technologically enabled authoritarianism to like-minded regimes and struggling democracies alike, while Beijing’s internal propaganda describes the Western liberal values of constitutional democracy, the universality of human rights, freedom of the press, and judicial independence as existential threats to its hold on power. The struggle today is not the same as it was during the Cold War, but it is clear that in the space between democratic and authoritarian systems, ideology is playing a larger role now that at any time over the past three decades.

社评：18年，世界帮了美国，美国有愧世界

Global Times said in the 18 years after 9/11, the US as the most powerful country has been a bad example for the world given its selfish, short-sighted and bullying foreign policies that erodes international institutions and creates more uncertainty. 

3. Hong Kong

Govt weighing up using emergency law: Teresa Cheng - RTHK

Justice Secretary Teresa Cheng has confirmed media reports that officials have been studying the various issues involved in any move to use emergency powers to try to bring the city's months-long protests to an end.

China Confirms Holding Taiwan National For 'Harming State Security' - RFA

Chinese officials have confirmed that they are holding a Taiwanese man who "disappeared" in the southern Chinese city of Shenzhen after reportedly handing out photos of troops gathering near the border with Hong Kong after weeks of anti-extradition protests.

Lee Meng-chu, a volunteer activity organizer from Pingtung county in southern Taiwan, is currently the subject of a criminal investigation and suspected of "harming state security,"

FM spokesperson quotes Mao poem to slam US lawmakers for slandering China over HK affairs - Global Times

Hua quoted two verses in Mao's poem Reply to Comrade Guo Moruo (Tune: "the River All Red") in 1963, which said "an ant on a locust would boast it was a big country; a pismire could not find it easy to shake one tree." It is a metaphor, referring to those who have little power but try to shake powerful things. It mocks the behavior of self-approbation and overconfidence.

US act adding fuel to the Hong Kong fire - China Daily OpEd by Zhu Feng

The Hong Kong insurrectionists' aim is to stage another "color revolution", but even they know that they cannot succeed in their evil design. And by introducing the so-called Hong Kong human rights act, the US Congress will add fuel to the fire in Hong Kong. This should prompt China to take immediate measures to stop the US and other Western countries from interfering in its internal affairs.

Zhu Feng, dean of the Institute of International Relations of Nanjing University

Hong Kong Protests Scare Away 90% of Mainland China Tour Groups - Bloomberg

The number of Chinese group tours to the city fell 90% compared to a year ago in the first ten days of September, according to data compiled by the Travel Industry Council of Hong Kong. In the month of August, the decline was 63% compared to a year ago.

Question: What will happen with mainland visitors during the October holiday, usually a big week for visits from mainlanders? Will Beijing "encourage" people to not go to Hong Kong, and will protestors devise more ways to target those who are visiting from the mainland?

Macau proves One Country, Two Systems works: Xi - RTHK

At a meeting with Macau's next Chief Executive, Ho Iat-seng, at the Great Hall of the People, Xi said the framework proves to be feasible, workable and rational.

The president said Macau's previous and current leaders, Edmund Ho and Fernando Chui, managed to unite society and had achieved high economic growth.

Hong Kong’s tycoons do not always serve the Communist party well | Financial Times $$

the problem is not that there is a dearth of patriotic tycoons running Hong Kong Inc. It is that the executives the party recognises as patriots and, therefore, listens to are so scared of the party — and so bent on preserving their enormous economic monopolies in the city — that they only tell the party what they think it wants to hear.

Hong Kong activist Joshua Wong calls for more support from Europe | Financial Times $$

Speaking during a visit to Berlin that has already angered the Chinese authorities, Mr Wong on Wednesday urged Europe to halt the export of crowd control equipment to the Hong Kong police and make human rights a core part of trade talks with China. Germany, he added, had in the past supplied water cannons and other riot control gear to Hong Kong.

“We are strongly aware that Hong Kong is the new Berlin in a new cold war,” Mr Wong said. “Hong Kong people stand in the front line to confront authoritarian suppression.” 

China summons German ambassador to Beijing | DW | 11.09.2019

The Chinese Ambassador to Germany said on Wednesday that a recent meeting between the German foreign minister and Hong Kong activist Joshua Wong had sent "very negative signals." 

Wu Ken confirmed that Beijing had officially summoned the German ambassador in protest. He claimed foreign forces had been involved in the ongoing protests in Hong Kong.

Hong Kong’s Summer of Discontent and U.S. Policy Responses | Congressional-Executive Commission on China

Joshua Wong and Denise Ho will testify before the US Congress next week

Hidden Emotional Toll of Covering Hong Kong - Chinese Storytellers

In this issue of Rock the Boat, we will hear from a few journalists who have reported on the protests extensively for the past three months.

Cathay Pacific suffers 38 per cent plunge in passengers travelling to Hong Kong in August as busy holiday month hit by anti-government protests | South China Morning Post

“August was an incredibly challenging month, both for Cathay Pacific and for Hong Kong,” Ronald Lam Siu-por, chief customer and commercial officer at the Cathay Pacific Group, said.

“Overall tourist arrivals were nearly half of what they usually are in what is normally a strong summer holiday month, and this has significantly affected the performance of our airlines.”

‘Big Brother’ in the Sky: Cathay Pacific Staff Feel China’s Pressure - The New York Times

Flight crews who travel to China face even more scrutiny from local regulators, said several employees, though they noted that the attention had eased in recent days. Some workers described longer-than-normal flight delays at Chinese airports and regulators searching cabins for periodicals that cover the protests. Others have had to go through searches by security officials, even for those who had to fly out again.

Amid protests, U.S. lawmakers say Hong Kong rules could leak tech to China - Reuters

“We believe it is critical that the United States take appropriate measures to ensure China does not abuse Hong Kong’s special status under U.S. law to steal or otherwise acquire critical or sensitive U.S. equipment and technologies in support of its strategic objectives or to infringe on the rights of people in Mainland China, Hong Kong, and elsewhere,” the senators said in a letter to Secretary of Commerce Wilbur Ross and Secretary of State Mike Pompeo.

Hong Kong Stock Exchange Bids Nearly $37 Billion for London Rival - WSJ $$

Hong Kong Exchanges & Clearing Ltd. 388 0.33% has picked this moment to launch what would be its biggest deal. A combination with the London Stock Exchange LSE +5.06% would create a global leader in capital flows and financial data by connecting developed and emerging markets in the East and West. It would also thwart the LSE’s ambitions to transform itself from an exchange into a full-fledged data business by acquiring financial-information provider Refinitiv Holdings Ltd., which used to be part of Reuters, for $14.5 billion in stock...

“Any regulator would need to think carefully about the implications of the political situation and Beijing’s increasing control over Hong Kong,” said David Webb, an outspoken private investor in Hong Kong. “This strikes me as an aspirational proposal that probably won’t go through.”

US lawmakers introduce bill to stop tear gas sales to Hong Kong | South China Morning Post

If passed, the bill would prohibit US companies from exporting so-called non-lethal crowd control items like tear gas, as well as defence articles and services, to Hong Kong

路透社社长表示将核实近期有关涉港报道的真实性问题

In meeting with Shen Haixiong, head of China Media Group, Thomson Reuters president Michael Friedenberg said he will re-verify the authenticity of the agency’s reporting on Hong Kong. Friedenberg said so after Shen accused Reuters for spreading rumors about Beijing rejecting Carrie Lam’s request to withdraw the bill. 

4. Huawei

Inside Huawei's secret plan to beat American trade war sanctions - Nikkei Asian Review

In the first few weeks of 2019 [ just weeks after CFO Meng Wanzhou was detained], 20 engineers from Huawei Technologies arrived in the riverside town of Jiangyin in eastern China on a secret mission. They took up stations at the state-backed Jiangsu Changjiang Electronics Technology, China's largest chip packaging and testing company, where they went to work upgrading the facilities and increasing the site's capacity, ahead of a production surge in the autumn...

All across Asia, companies in the computer chip industry were receiving similar messages from Huawei: Boost your production, and we will buy your product. In a slowing global market, Huawei made a commitment that was impossible to resist: The company guaranteed up to 80% utilization rates for the next two years to potential and current suppliers...

Some suppliers confirmed that Huawei has also been secretly preparing its own technologies for years, but has not put them into large-scale use. The company has been trialing its own radio frequency components for a decade, one tech executive with direct knowledge of the trials told Nikkei. The Chinese company began to put several of those designs into mass production in the spring of 2019.

China 'must clean up its cyber act' for Huawei to be used in 5G network | The Guardian

The defence secretary has said China needs to modify its cyber-behaviour and adopt a code of “fair play” if Beijing wants the British government to allow Huawei technology to be used in future 5G mobile networks.

Ben Wallace said a long-awaited decision on Huawei was coming soon, although he could not give a firm date, and told a defence industry audience any conclusions about the company had to be “more than just technical”.

Tom Friedman talks to Ren Zhengfei - Opinion | Huawei Has a Plan to Help End Its War With Trump - The New York Times

Ren told me: “If the U.S. reaches out to us in good faith and promises to change their irrational approach to Huawei, then we are open to a dialogue. The U.S. shouldn’t try to destroy Huawei over something trivial. If the U.S. feels we have done something wrong, then we can discuss it in good faith and find a reasonable solution. I think we can accept that approach."

He added for emphasis, “There are no restrictions on what we would be willing to discuss with the Department of Justice.”

5. Stricter Internet management coming

CAC releases internet rule targeting terrorism, subverssion messages - Global Times

The draft, which was opened for public opinions on Tuesday by the Cyberspace Administration of China (CAC), banned illegal online content that endangers national security, promotes terrorism, incites ethnic hatred, damages national religious policies, spreads falsehoods or information related to obscenity, gambling or violence.

The regulation also targets information that threatens national security, subverts state power or destroys national unity.

Harmful information will be also banned for containing vulgar, sexual seduction and blood, hyping celebrity scandals, inciting discrimination against certain groups, using exaggerated headlines or harming juveniles' health, according to the draft.

CAC is soliciting public opinions on the draft until October 10.

China’s internet regulator orders online AI algorithms to promote ‘mainstream values’ | South China Morning Post

Chinese social media platforms, websites and apps that use algorithms powered by artificial intelligence to recommend or suggest content to their users must ensure the technology steers people towards material that adheres to “mainstream values”, the country’s top internet regulator said.

The Cyberspace Administration of China released its draft regulations on “managing the cyberspace ecosystem” on Tuesday in another sign of how the ruling Communist Party is increasingly turning to technology to cement its ideological control over society...

The government’s long list of “encouraged” content includes resources that promote Xi Jinping Thought, party policies and socialist core values, that showcase the country’s economic and social development, and which help to promote Chinese culture and stability.

The draft- 国家互联网信息办公室关于《网络生态治理规定（征求意见稿）》公开征求意见的通知-中共中央网络安全和信息化委员会办公室

6. Wang Yang on United Front and religious work

Top political advisor stresses religious affairs management - Xinhua

Wang Yang...made the remarks during an inspection and research tour to eastern China's Jiangxi Province on Monday and Tuesday...

It is important to schedule religious work into agendas of Party committees at all levels and to strengthen education for cadres, so that officials at all levels can recognize the importance of religious work, master basic policies and establish institutionalized working methods for religious affairs, he said.

Wang required strengthened primary-level Party organizations to improve the publicity of the Party's policy on religious affairs, guide the public to hold a rational perspective toward religion and promote self-conscious resistance to all kinds of illegal religious activities.

Wang also stressed the importance of improving the training of young religious figures and religious staff and ensure the platforms and channels for religious figures to play their roles.

汪洋在江西调研宗教工作时强调 坚持不懈做好打基础管根本利长远工作 全面提升新时代宗教事务管理水平

Top political advisor stresses consolidating, developing patriotic united front - Xinhua

China's top political advisor Wang Yang on Wednesday stressed consolidating and developing the broadest possible patriotic united front to pool strength for the Chinese dream of national rejuvenation.

Wang...made the remarks when addressing a seminar held to mark the 70th anniversary of the founding of the People's Republic of China (PRC).

The seminar was held in the name of the "united front," a term used by the CPC to describe its policy of uniting the political forces representing people of various circles.

7. Never-ending struggle against formalism

I wish I knew the identity of Youshu, he/she is clearly a very knowledgeable foreigner. I prefer not to send you to anonymous pieces but in the interests of furthering my goal of people reading in its own words what the Party is saying I think in this case it is useful.

The author looks at the "学习小组 Xuexi Xiaozu" Wechat account, which he/she thinks is "supposedly set up by someone very, very close to Xi Jinping", and translates a recent article on combatting formalism.

Some highlights from the translation:Come join the Study Small Group - Credibletarget.net

As the times develop, information technology is increasingly commonly used, but formalism has turned up in few new places. Those technologies should have made it easier to do work and innovate have become burdens. They’ve introduced app download targets, some have hassled stay-behind old people who can’t use smartphones to download apps. Some cadres have a few dozen work chat-groups, they have an “avoid trouble model”, but they cant escape life...

Our survey found that the large majority of group members detest formalism, but it exists near them, why does formalism still have such a market, it’s like smelly doufu, it smells rotten, but tastes good, it reflects misplaced attitude to political achievement.

丁薛祥主持召开专项工作机制会议 以斗争精神持续深入推进整治形式主义为基层减负工作--党建-人民网

Ding Xuexiang chairs a meeting on fighting formalism, bureaucratism and reducing burdens for grassroots officials. What dynasty didn't have these problems?

准确理解新时代斗争精神的核心要义

Hu Min of the central party school wrote on the People’s Daily website telling cadres we must accurately understand Xi Jinping’s speech on struggle and combat spirit, that it is not about being hostile and combative, but staying on high alert to risks and being diligent in our work.

8. Chinese farms in Uganda

Chinese farms in Uganda disappoint, with little to show after fanfare - CSMonitor

By Peter Ford, who used to be in Beijing as CSM's China correspondent

Rising Chinese agricultural investments in Africa have sparked fierce international controversy, excoriated by critics as colonial plunder and hailed in Beijing as productive and beneficial to local farmers. The view from Luwero, 50 miles north of the Ugandan capital, Kampala, suggests that neither version is accurate. The picture here, at two different Chinese-owned farms, is rather one of inaction and incompetence. 

Such disappointing results are “not unusual at all” among Chinese agricultural investments in Uganda, says Josh Maiyo, an expert in Chinese-Ugandan relations at the University of Radboud in Nijmegen, Netherlands. “Very often they do not pan out” as promised, he adds.

Business, Economy and Trade

China’s August Credit Growth Accelerates More Than Expected - Bloomberg “The government’s recent easing measures, including the reserve-ratio cut and initiatives to bring forward more local government bond issuance, should help to support total-social financing growth to rebound in the rest of the year,’’ said Wang Tao, chief China economist at UBS AG in Hong Kong. “This credit rebound should then help to offset the additional negative impact from additional tariff hikes that will hit Chinese exports in October and December.’’

菜价稳定，有基础有条件（“身边物价”怎么看③）--社会--人民网 People's Daily assures readers that food prices can be stabilized and will return to normal levels in the second half of the year

China says pork supply will be enough for upcoming holidays - Reuters Peng Shaozong, a manager in the pricing department of the National Development and Reform Commission, however, told reporters that supplies will be sufficient for this week’s Mid-Autumn festival, as well as for the upcoming October holidays and Lunar New Year, which falls in January next year.

Yicai Global - Dalian Commodity Exchange Is Getting Closer to Having Live Pig Futures Despite being given the green light by the China Securities Regulatory Commission in February last year, the exchange is still determining standards and regulations for the financial contracts and resolving some logistical issues. According to reports, last year it set up a number of warehouses to test live hog deliveries.

银行收紧开发贷, 华东个别分行已暂停放贷 Caixin reported that following orders from the government, several major Chinese banks have reduced or stopped issuing new loans for real-estate developers, to make sure the recent economic stimulus would not lead to another hike of housing prices.

China out in force at Frankfurt car show, led by battery builders - CNA Chinese suppliers and manufacturers have stepped up their presence at the Frankfurt auto show, capitalizing on a strong position in electric technologies forced on European carmakers by regulators seeking to curb pollution.

China’s Anbang to Sell U.S. Hotels for More Than $5.8 Billion - WSJ $$ A Chinese insurer has agreed to sell a luxury hotel portfolio for more than $5.8 billion, overcoming an unusual stumbling block: A California individual secretly created a series of fake deeds to transfer ownership for up to a half dozen of the hotels. Mirae Asset Global Investments, part of a South Korean financial services company, agreed this week to buy the 15-hotel portfolio from Anbang Insurance Group Co., people familiar with the matter said

How Cash-Hungry Property Developers Are Skirting Curbs on Trust Loans - Caixin Because perpetual loans do not ever need to be repaid, accounting regulations allow them to be treated as equity rather than debt on a company’s balance sheet. That has allowed the trust companies to skirt regulatory limits on the scale and growth of loans to developers. The classification also helps, at least on paper, to reduce a company’s liability-to-asset ratio.

In Depth: Stricter Regulations Push China’s Money Market Funds For Major Makeover - Caixin It’s unclear whether conventional money market funds will be subject to the new asset management rules, which require a cleanup of opaque assets before 2020. However, the direction of the reform is already set: Going forward, the value of money market funds will be calculated based on their floating net-asset value (NVA), meaning their value must be based on the underlying worth of the assets they invest in. The U.S. has required the same of money markets fund there since October 2016, and the EU since last year. An inspector at a Shenzhen-based fund sees this as the beginning of the end.

JPMorgan Tells Staff: Make It Clear Taiwan Is Part of China - Bloomberg The regions should on first reference be Hong Kong SAR, Macau SAR and Taiwan, China, Stuart Marston, supervisory analyst global manager, said in a recent email, which was seen by Bloomberg News. JPMorgan has also added a note in its disclosures section to clarify usage, according to the email. The language wasn’t used in numerous prior research notes published over the past few months though reports in recent days are incorporating the changes.

Consumers question Shanghai Disney’s bag check policy, citing encroachment of privacy - Global Times An explanation by the Shanghai Disney Resort over the weekend about its entry policy, which asks all visitors to open their bags and have all items checked by staff, has been challenged by Chinese consumers, who said the policy is an invasion of privacy and is commercially motivated.

China sets up 36,877 national standards in 70 years - Xinhua China has established 36,877 national standards over the past 70 years, and standardization in China has experienced three key changes, said Tian Shihong, head of the Standardization Administration, Wednesday...China has adopted more than 10,000 international standards in its national standards. It is also one of the most active countries submitting proposals for international standards, Tian said.

Politics and Law

China: Uyghur academic faces execution in China: Tashpolat Tiyip | Amnesty International Fears are mounting that the Chinese authorities will imminently carry out the execution of Tashpolat Tiyip, a prominent Uyghur academic who was convicted in a secret and grossly unfair trial. Subjected to an enforced disappearance in 2017, he has been arbitrarily detained since then. No information has been made available about charges and proceedings against him and his current whereabouts remain unknown

新京报社原社长戴自更被撤销北京政协委员资格 Three months after being put under investigation for corruption, Dai Zigeng, former editor in chief of Beijing News, is formally stripped of the membership of Beijing Political Consultative Conference. Rumors said his downfall is linked to the case of Wu Xiaohui, former chairman of Anbang Insurance.

Chinese Banking Executives Grab Top Spots in Provincial Government - China Banking News The ap­point­ment of se­nior bank­ing ex­ec­u­tives to lead­ing ad­min­is­tra­tive po­si­tions in the Chi­nese provinces has be­come in­creas­ingly com­mon of late, with at least seven such ap­point­ments tak­ing place over the past sev­eral years.

人民日报：学好吃透用足《中国共产党宣传工作条例》--舆情频道--人民网 学好吃透用足《条例》，才能唱响时代主旋律、壮大社会正能量，为干事创业营造良好舆论环境。中国共产党为什么“能”，马克思主义为什么“行”，中国特色社会主义为什么“好”？这是全世界高度关注的问题，也是中国故事最精彩的主题。

Central Inspection Group inspecting the Supreme People’s Court (again) | Supreme People's Court Monitor The inspection appears to be one example of the strengthening of Party leadership in the SPC. The inspection appears to be linked to language in earlier documents to strengthen the leadership of the Communist Party (加强党的领导) and to strengthen Party political construction (党的政治建设).  The Party Center issued a document on political construction earlier this year.

Law Explainer: China’s State Medals and State Honorary Titles – NPC Observer In line with our earlier prediction, the NPC Standing Committee (NPCSC) will convene for a one-day special session on September 17, the Council of Chairpersons decided on Tuesday. The sole item on the special session’s agenda is a draft decision to confer State honors and honorary titles, presumably on this list of 33 nominees, to celebrate the 70th founding anniversary of the People’s Republic. Below we briefly overview the history of China’s State honors system and the current legal scheme

Senior official stresses rectification of poverty relief problems - Xinhua Hu Chunhua, a member of the Political Bureau of the Communist Party of China Central Committee, has called for more efforts to rectify problems found in the country's poverty alleviation campaign. Hu, also chief of the State Council leading group of poverty alleviation and development, made the remarks during an inspection tour in northwest China's Shaanxi Province.

Foreign and Defense Affairs

Incoming EU chief Ursula von der Leyen vows to ‘define’ relations with increasingly assertive China | South China Morning Post European Commission president-elect Ursula von der Leyen spoke to reporters in Brussels on Tuesday as Sweden, an EU member with strained China relations, is to unveil a new strategic paper on the Asian superpower this week.

China, Kazakhstan agree to forge permanent comprehensive strategic partnership - Xinhua The decision came as Chinese President Xi Jinping held talks with Kazakh President Kassym-Jomart Tokayev at the Great Hall of the People in Beijing. Tokayev is paying a state visit to China from Tuesday to Thursday

Is this a turning point in India's foreign policy towards China? - CGTN Is Minister Jaishankar signaling a more hardline approach as the future of Modi administration's foreign policy towards China? Given that it has already unilaterally changed the status of Kashmir, it would be hard to dispute that India is getting tougher by the day. We may need to wait and see where this goes. But, enough has happened already to raise the alarm on the possibility of a rockier China-India relationship.

Philippines' Duterte says Xi offering gas deal if arbitration case ignored - Reuters “Set aside the arbitral ruling,” Duterte was quoted as telling reporters late Tuesday in remarks provided by his office on Wednesday. “Set aside your claim,” he said, quoting Xi. “Then allow everybody connected with the Chinese companies. They want to explore. If there is something, they said, we will be gracious enough to give you 60%, only 40% will be theirs. That is the promise of Xi Jinping.”

Canada sails warship through Taiwan Strait for second time in three months | South China Morning Post “The Royal Canadian Navy does not conduct so-called freedom of navigation operations aimed at challenging the territorial claims of other nations, and the ship’s transit was conducted in accordance with international law, including the United Nations Convention on the Law of Sea.”

In a first for Beijing in Europe, Serbia to receive Chinese armed drones - Stripes “The Chinese have very good pilot-less aircraft, probably second only to the United States,” Belgrade military analyst Miroslav Lazanski said in a TV interview. “They obviously copied some American systems (but) Chinese drones are very effective and very cheap.”

Chinese VP meets former Austrian president - Xinhua Chinese Vice President Wang Qishan on Wednesday met with former Austrian President Heinz Fischer, who is also president of the Austria-China Friendship Association (ACFA).

Senior CPC official calls for contribution to mutual learning and benefit between China and world - 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 remark when delivering a keynote speech at the opening ceremony at the Eighth World Forum on China Studies. China has provided a strong driving force to the development of the world economy and contributed Chinese wisdom to the people of all countries in pursuing a better life, said Huang, noting that China has continued its efforts to safeguard world peace, contribute to global development and uphold international order.

Liberal Party bars wife from vying to replace MP husband embroiled in dispute with ex-girlfriend | National Post Dong rejected any suggestion that he was the pro-Beijing candidate, noting that he is also being supported by Liberal MP Adam Vaughn and Gerry Phillips, the former Ontario Liberal cabinet minister he considers his political mentor.“I see myself as a Canadian running for Canadian public office,” he said.

Hong Kong and Macao

Rental charges at Hong Kong’s ultra-luxury abodes fall by 30 per cent as expatriates and mainland Chinese renters stay away | South China Morning Post “Besides expatriates, mainland Chinese renters are also hesitating to move to Hong Kong, and those living in Hong Kong are also considering whether to continue living here,” he said. “Some who were looking for places have also stopped.”

Taiwan

Should I stay or should I go now? Inside the Solomons’ Big Switch - The Little Red Podcast - Omny.fm In this episode, Graeme speaks to all the major players in the Solomon Islands, including the Prime Minister, to investigate the reasons behind the switch.  He found the background to the switch was far murkier and more complicated than has been previously reported.

Tech and Media

Yicai Global - Tencent Piles Into Chinese Online Flea Market Zhuanzhuan via USD300 Million B Round 58.Com will remain as Zhuanzhuan's majority shareholder, the Beijing-headquartered parent said in a statement on its website today, without disclosing the shareholder ratio.

Baidu invests $200 million in tech investment firm Neusoft Holdings · TechNode Search giant Baidu will invest RMB 1.4 billion (around $200 million) in technology investment firm Neusoft Holdings, as the pair look to develop smart city, healthcare, and education solutions.

TikTok narrows focus to US, Japan, and India as key growth markets · TechNode TikTok has removed the UK from a group of four countries it had previously deemed strategically important. The US, Japan, and India markets have been assigned their own general managers while others only have product managers at present

Energy, Environment, Science and Health

Photo Essay: Boats Stranded as Drought Dries China’s Canals - Caixin River shipping is rarely this dangerous, but the worst drought in decades has left rivers in East China at their lowest level for decades. This has created congestion on canals, as vessels loaded with cargo crowd the gates to locks, waiting for them to fill with enough water so they can travel along the waterway.

Local people challenge coal plant expansion in Bali | China Dialogue Villagers have launched a legal case to halt the doubling of the Celukan Bawang power plant’s capacity

Education

Private Tutoring Firm Opens First Center Overseas Amid Sluggish China Demand One of China’s largest private tutoring companies has made a foray into the U.S. as it looks to tap into rising demand from the surging number of Chinese students studying abroad. The New York-listed TAL Education Group will open its first tutoring center in Silicon Valley, the company announced last week on social media

The next round of US-China trade talks is set for “early” October, not September as some had been speculating. While I am not optimistic for any big breakthroughs there are signs in the announcement and some of the propaganda coverage that there may be some positive news in the run up to the talks, perhaps some sort of agreement for the US to drop some of the tariffs scheduled to go into effect October 1 and for China to finally make an agricultural purchase to satisfy President Trump.

Thanks for reading.

The Essential Eight

1. US-China

China, U.S. agree to jointly create favorable conditions for trade talks in October - Xinhua

Chinese and U.S. chief trade negotiators agreed on Thursday to jointly take concrete actions to create favorable conditions for further consultations in October.

The agreement was reached in a phone conversation Chinese Vice Premier Liu He, also a member of the Political Bureau of the Communist Party of China Central Committee and chief of the Chinese side of the China-U.S. comprehensive economic dialogue, held upon invitation with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.

The two sides agreed to hold the 13th round of China-U.S. high-level economic and trade consultations in early October in Washington and maintain close communication before that.

Working groups of the two sides will conduct consultations in earnest in mid-September to make full preparations for the high-level talks to achieve substantial progress.

Chinese Commerce Minister Zhong Shan, Governor of the People's Bank of China Yi Gang, and Vice Chairman of the National Development and Reform Commission Ning Jizhe also took part in the phone conversation.

The official Chinese statement - 中美经贸高级别磋商双方牵头人通话-新华网

9月5日上午，中共中央政治局委员、国务院副总理、中美全面经济对话中方牵头人刘鹤应约与美国贸易代表莱特希泽、财政部长姆努钦通话。双方同意10月初在华盛顿举行第十三轮中美经贸高级别磋商，此前双方将保持密切沟通。工作层将于9月中旬开展认真磋商，为高级别磋商取得实质性进展做好充分准备。双方一致认为，应共同努力，采取实际行动，为磋商创造良好条件。商务部部长钟山、中国人民银行行长易纲、国家发改委副主任宁吉喆等参加通话。

Taoran Notes on the October trade talks news - 速读 | 重启磋商 有何看点？

Taoran Notes again is cautious in saying that the public should have a “normal heart” toward the trade talks, and that 打打谈谈 “fight and talk and fight” is already the new normal of the trade war. But it added that it has been quite a while since any statement about US-China trade talks mentioned “substantial progress”, so it is expected that the two sides would make some “new moves” to address each other’s “core concerns” before the talks.

One set of moves, I think maybe hinted at by the following section about what it may take to create "favorable conditions", may be the US delaying tariffs scheduled for October 1 in exchange for agricultural buys from China?

此次中美双方确认将为磋商创造良好条件，彼此将采取的实际行动就值得密切关注。

什么样的实际行动，才能够创造良好条件？看看中美双方的关切，其实不难判断。

对中方而言，此前已经明确提出“坚决反对贸易战升级”。如果美方关税措施一再升级，又谈得上什么“良好条件”呢？

对美方而言，对中方采购美农产品这事十分上心。但过去一段时间美方的态度和行动，对中方采购美国农产品带来不利影响，这对美方磋商也谈不上“良好条件”。

I hear that the author of Taoran Notes travels with Liu He on his trade tripss to the US, so another data point that this account is worth listening to.

On Taoran Notes -- China insiders hint this round of trade talks could lead to a 'breakthrough' - CNBC

On Thursday, in a 1,200-word commentary, Taoran said it’s “very likely” there will be “new developments” in the upcoming trade talks.

The blog highlighted the statement from China’s Ministry of Commerce saying both sides will make consultations in mid-September in preparation for “meaningful progress” in the ministerial-level talks in October. “Meaningful progress” is an expression that hasn’t been used at all since the talks in May fell apart, Taoran noted.

Remarks by President Trump in Briefing on Hurricane Dorian | The White House

We can predict the path, but so far, the predicting has been very tough with this particular hurricane. But we have a lot of — we’ve taken in tens of billions of dollars in tariffs from China. Prices have not gone up, or they’ve gone up very little. China has paid for most of that, and I say paid for all of it. China has now had the worst year that they’ve had in 57 years. This is the worst year they’ve had in 57 years. And they want to make a deal; we’ll see what happens....

Huawei is a big concern of our military, of our intelligence agencies.  And we are not doing business with Huawei.  It’ll stop almost completely in a very short period of time.  And we’ll see what happens with respect to China.  But Huawei has been not a player that we want to discuss, we want to talk about, right now.  We’re not going to be doing business with Huawei.  We’re going to do our own business, you know, the old-fashioned way.  We’ll do right from within the United States, which is what I’ve been saying for a long time.

Thursday CCTV Evening News previews a Friday People's Daily "Zhong Sheng" commentary on the US-China trade talks - "Create conditions with concrete actions and solve problems through consultation" - 人民日报钟声文章：用实际行动创造条件，通过磋商解决问题_CCTV

'For some time, the cloud of escalating economic and trade frictions between China and the United States has not only affected the two economies, but also brought negative effects to the world economy with various uncertainties,' the article said. The issue between China and the United States cannot and should not be allowed to escalate. Therefore, the two sides must take actions, make every effort to prepare enough preconditions for talks, create conditions for talks to continue, and strive for substantive progress.

文章说，一段时间以来，中美经贸摩擦升级的阴云不仅影响着两国经济，而且频频以多种不确定性给世界经济带来负面效应。中美之间的问题不可能也不应该任由其激化下去，因此双方必须采取行动，尽最大努力备足谈起来的前提，创造谈下去的条件，力争谈出来实质性进展

The article pointed out that China has always been rational, calm and restrained to create conditions for the resumption of consultations. The world expects China and the United States to work together in the same direction. US media described the October trade talks as "the latest attempt to defuse a trade war that has engulfed the global economy and damaged business investment and confidence". It is expected that the consultation will demonstrate the power of calmness and vision, bring about opportunities for win-win cooperation and contribute to world stability and prosperity.

文章指出，中方始终保持理性、冷静、克制，为恢复磋商创造条件。世人皆盼中美双方共同努力，相向而行。美国媒体将10月经贸磋商称为“试图平息一场席卷全球经济、损害商业投资和信心的贸易战的最新尝试”。世人期待，本次磋商能够彰显冷静与远见的力量，带来合作共赢的机遇，助力世界的稳定与繁荣。

The full Zhong Sheng commentary - 钟声：用实际行动创造条件，通过磋商解决问题

CCTV International sharp commentary on the trade talks - "Only rational consultation can solve problems responsibly" - 【国际锐评】理性磋商才能负责任地解决问题_CCTV节目官网-CCTV-1_央视网(cctv.com)

The commentary said that China and the United States should always follow the consensus reached by the two heads of state at the meeting in Argentina and the consensus reached at the meeting in Osaka to deepen mutual understanding, seek common ground while reserving differences, meet each other half way, and properly resolve issues on the basis of equality and mutual respect. China will continue to do its best to push forward the consultation with the utmost sincerity. At the same time, China will continue to handle its own affairs well and calmly handle all possibilities.

锐评说，中美双方应当始终以中美两国元首阿根廷会晤共识与大阪会晤共识为指导，加深相互理解，求同存异，相向而行，坚持在平等和相互尊重的基础上妥善解决问题。中方会一如既往尽最大努力、以最大诚意推动磋商，同时也会继续办好自己的事，从容淡定地应对一切可能性。

稳中有进，见中国底气（钟声）

An earlier Zhongsheng commentary (published before the phone call) said China’s economy is in good shape despite the trade war while the US shows signs of recession. That gives China the confidence to deal with the trade war, it said.

China abides by consensuses with concrete action - People's Daily Zhong Sheng

The economic and trade consultations must be based on equality and mutual respect, and both sides are called on to honor credibility and keep the commitment. The US politicians have to meet China halfway to implement the consensuses and get back to the right track with sincerity, if they truly want to reach a mutually beneficial agreement with the Chinese side.

China’s expanding opening up indicates responsibility of major country - People's Daily Zhong Sheng

China, responding to external uncertainties by continuous efforts to expand opening-up amid the US-provoked trade frictions, is contributing Chinese wisdom and schemes to safeguarding free trade and building an open world economy.

America's trade war is spreading harm around the world - Chinese Ambassador to Australia Cheng Jingye OpEd in Australian Financial Review

China will unswervingly deepen reform and opening up. Our huge market will bring more opportunities to the world. 

We stand ready to step up communication and coordination with other stakeholders, fight against trade bullying, safeguard the rules-based multilateral trading system with the WTO at its core, and work for an international economic and trade regime which is more open, balanced and inclusive.

Maldives: US Ambassador's scathing attack rattles China at IOC

US Ambassador to South Korea Harry Harris on Wednesday launched a scathing attack on China in his address at the Indian Ocean Conference (IOC) here, leading to a tense environment which saw a Chinese diplomat in the crowd rebutting his claims.

Harris severely criticised China on a number of issues including its treatment of Uighurs, the One Belt One Road (OBOR) initiative and its behaviour in the South China Sea during his speech. This resulted in the Chinese official, Wei Hongtian, interrupting the consequent question and answer session to voice his disagreement to strong statements of Harris, also a former commander of US Pacific Command.

Chinese citizens find Trump 'perplexing' on trade war: China TV host - CNBC

“After a couple of years of President Trump’s term, I think the Chinese people have found a way to understand him,” China Global Television Network anchor Liu Xin told CNBC’s Seema Mody in a “Squawk on the Street” interview. “We’re not going to follow what he says every day because that is going to be very perplexing and exhausting actually, to a certain degree.”

Xi Jinping rallies China for decades-long ‘struggle’ to rise in global order, amid escalating US trade war | South China Morning Post

Wu Qiang, a political commentator in Beijing, said that the speech was a “political declaration of antagonism” towards those trying to change China’s model or thwart its rise.

“It is a fundamental political statement,” said Wu. “China will adopt an antagonist stance, position and approach to handle the deterioration in China-US relations.”..

An opinion piece on Xiakedao, a social media account run by the overseas edition of People’s Daily, said that China would be forced to engage in a number of different struggles.

“Struggle is always an uninvited guest and it will not go away because of our good intentions,” it read. “The trade war between China and US, for instance, broke out all of a sudden. Nobody officially notified us, even one day in advance, about the upcoming trade war,” the editorial reads. “It just came. That is a struggle.”

The Xiake Dao article - 侠客岛：关键时间节点，习近平专题长篇谈“斗争”

2. Hong Kong

HK leader says bill withdrawal own decision, not Beijing's - AP

Lam told a news conference that China’s central government “understands, respects and supports” her government in the entire process...

Lam reiterated that the government cannot accede to the protesters’ other demands. She said the police watchdog agency will be impartial and best suited to investigate alleged police misconduct, and that releasing detainees without charges would be “unacceptable.”

Hong Kong's Carrie Lam says 'no voting' on extradition bill withdrawal, but police probe faces criticism | Hong Kong Free Press HKFP

Chief Executive Carrie Lam has said the extradition bill can be withdrawn from the legislature with “no debate and no voting,” in a bid to reassure the public a day after she announced the decision.

Netizens on Wednesday noted that Lam said her security chief will “move a motion” in the legislature to formally withdraw the controversial bill. Sceptics — including the protester-organised Citizens Press Conference — said that the motion could be blocked by the pro-Beijing majority in the Legislative Council, meaning the bill would not be axed.

As Hong Kong Protesters Push On, No Sign of More Concessions by Government - The New York Times

The city’s chief executive, Carrie Lam, said she was optimistic that pulling the bill, along with other measures she offered on Wednesday, would help Hong Kong break its “impasse.” At a news conference, she called on peaceful demonstrators not to legitimize “the really violent protesters,” in what some saw as an attempt to divide the movement.

But there was little evidence that withdrawing the bill, which would have allowed extradition to mainland China, would satisfy even the more moderate demonstrators.

Home of Hong Kong pro-democracy publisher firebombed | Financial Times $$

Mr Lai, the publisher of Apple Daily, who was unharmed in the attack, is a vocal supporter of the democracy movement that has brought protesters on to the streets for 13 consecutive weeks.

Joshua Wong Calls For Renewed Campaign For Fully Democratic Elections in Hong Kong - RFA

"The Hong Kong government decided [to announce] it would withdraw the amendments to the Fugitive Offenders Ordinance on Sept. 4," Wong said.

"That is hugely different from doing so in June, because 1,200 people have now been arrested, and charges brought against more than 100 of them. Seven young Hong Kong people even took their own lives because of the protests."

"So, our protests will continue for as long as we are facing police violence, and an unelected chief executive," he said.

留学生国内本科都没毕业，成为“美国喉舌”就能拿绿卡换国籍？

College Daily, the nationalist and influential WeChat account, targets Xu Xiuzhong, a Chinese journalist in Australia, for her reporting on China and Hong Kong. College Daily labeled her as a traitor because it said her reporting/comments/tweets supports HK separatists and humiliates China. It suspects she is doing it to get the Australian citizenship and green card.

China opts for low-key coverage of Hong Kong extradition bill withdrawal | South China Morning Post

Observers also noted that none of the central government agencies with responsibility for Hong Kong – the Hong Kong and Macau Affairs Office, the foreign ministry commissioner’s office and the central government’s liaison office in Hong Kong – have made statements since Lam’s remarks. This is in contrast to their immediate responses after she announced the bill’s suspension on June 15.

Controversial Hong Kong mooncakes ‘to be destroyed’ in mainland China - Inkstone

A mainland Chinese company that sells a popular brand of mooncakes caught up in the maelstrom of Hong Kong politics said it would have to destroy its stock of the cakes.

This week, state media denounced a director of Hong Kong-based Taipan Bread and Cake for supporting the ongoing protests in Hong Kong.

Taiwan’s refugee bill does not apply to Hong Kong protesters for now, Taipei says | South China Morning Post

Taiwan’s existing laws provide adequate opportunities for Hongkongers to relocate to the self-ruled island, but a refugee bill before the island’s legislature does not apply to protesters seeking to flee the city, Taipei said on Thursday.

The statement by the interior ministry came after visiting pro-democracy activist Joshua Wong Chi-fung appealed to Taiwanese lawmakers for more concrete support for his fellow protesters in Hong Kong.

3. Don’t call it stimulus 

More policy support for the economy coming, certainly not like the flood-like stimulus of previous downturns, but drips of stimulus continue to dribble out.

China to take targeted measures for steady economic growth - Xinhua

Further steps will be taken to ensure the stability of employment, the financial sector, foreign trade, foreign investment, domestic investment and expectations, according to a statement released after a State Council executive meeting chaired by Premier Li Keqiang...

Policy tools such as overall and targeted cuts of required reserve ratios will be taken in a prompt manner to encourage financial institutions to channel more capital into inclusive financing, enhancing support for the real economy, small and micro firms in particular.

The meeting urged acceleration in issuance and use of special local government bonds. New additional bonds quota for the next year can be delivered ahead of the original schedule.

The bonds should be mainly used to finance transport infrastructure projects like railways and urban parking lots, energy projects such as natural gas networks and storage facilities, as well as environmental protection and social security projects.

The fund must not be used for land stocking, real estate development, debt swaps and projects that can be commercially operated, the statement said

China to accelerate the issuance and use of special local government bonds to catalyze effective investment

Accelerating the issuance and use of special local government bonds can help deepen supply-side structural reform, counter the downward economic pressure, and boost effective investment. General Secretary Xi Jinping emphasized at the Central Economic Work Conference last year the need to increase the size of special local government bonds by a fair amount to support major projects under construction and strengthen areas of weakness. Premier Li Keqiang underscored in the Government Work Report the imperative to make effective use of local government bonds and expand their scope of use as necessary...

“Our measures must be well-targeted. There needs to be solid activities in the real economy before the end of the year,” Premier Li said. “The scenario where the ‘funds chase after projects’ must be avoided.”

The meeting urged greater efforts in project management and preventing “half-finished projects”. ..

According to statistics from the Finance Ministry, between January and August, a total of 2.0057 trillion yuan in special bonds were issued in China, accounting for 93.3 percent of this year’s planned quota.

China’s Local Governments Asked to Submit 2020 Borrowing Needs - Caixin

Usually, local governments submit their borrowing needs for the following year in October and November. The National People’s Congress (NPC), China’s top legislature, generally approves a quota at its annual session in March of the next year. Then after the Ministry of Finance assigns approved quotas, local governments normally start bond issuance as early as April.

In an unusual move, the NPC passed a bill last December allowing the cabinet to assign bond quotas so that local governments could start issuing debt as early as January as part of efforts to stimulate the economy.

刘鹤出席全国金融形势通报和工作经验交流电视电话会议并讲话

Liu He attended a nationwide teleconference discussing the “financial situation” and policies to address financial risks. The meeting again said the economy now faces more downward pressure given the “new situation” inside and outside China, and that officials must stay alert to the risks and preempt the crisis.

4. Beijing buying away another Taiwan ally

Solomon Islands to sever ties with Taiwan, shift alliance to Beijing - Reuters

The switch, which still needs to be formalized, would be a prize for China in its bid to peel away allies from what it considers a wayward province with no right to state-to-state ties. Only 17 countries now recognize Taiwan.

Solomons lawmaker Peter Shanel Agovaka told a parliamentary committee that after four decades of independence and a long-term alliance with Taiwan, it was time to make a change.

“We cannot sit for the next 40 years with our friends Taiwan. It is time that we make new friends - it’s time that we should move on with our life,” Agovaka said on Wednesday, according to a recording of the meeting in the capital Honiara...

Anti-graft agency Transparency Solomon Islands has urged caution in changing ties over concerns that the Solomons will not be able to hold firm against Beijing’s interests.

China is offering to bankroll a development fund for the Solomons to help with a transition away from Taiwan, which currently provides an annual $8.5 million contribution to the island nation.

5. Canada and China appoint new envoys

Dominic Barton to Beijing, Cong Peiwu to Ottawa.

Dominic Barton named Canada's next ambassador to China | CBC News

During a news conference in Toronto, Foreign Affairs Minister Chrystia Freeland was asked about past controversies involving the company for which Barton worked...

"Our government has had, obviously, very detailed and extensive conversations with Mr Barton about what the role of ambassador to China for Canada entails, and that absolutely has included long discussions about the centrality of human rights, of women's rights, to Canada's foreign policy," Freeland said...

Guy Saint-Jacques, who served as Canada's ambassador to China from 2012-2016, called Barton an "interesting choice."

"Trudeau wanted him to replace me in 2016 but he declined," he said.

Beijing: Canada solely responsible for difficulties in relations - CGTN

China-Canada relations have met serious difficulties, and the Canadian side is solely responsible for this, Chinese Foreign Ministry spokesperson Geng Shuang said Thursday, urging Canada to reflect upon its mistakes and take concrete measures to put bilateral relations back on the track.

Geng made the remarks after China accepted the appointment of Dominic Barton as Canada's next ambassador to China. Barton, an economic adviser who used to work in Shanghai, vowed to work hard and to "resolve the challenges that currently exist" according to his statement...

According to Geng, China will name Cong Peiwu as the next ambassador to Canada. He will also perform his duty to promote China's relations with Canada.

Canada appoints ex-McKinsey chief as new China ambassador | Financial Times $$

Mr Barton has strong links to China. He was previously based in Shanghai as the firm’s Asia chairman and sits on the advisory board of China Development Bank Capital Group. He has also served as an adjunct professor at Tsinghua University in Beijing. 

He has long advocated strong commercial ties between Canada and China, telling Bloomberg shortly after the arrest of Ms Meng: “I think there remains lots of business to be done together. That’s what I think we should keep focused on.”

New China envoy Dominic Barton shows Trudeau’s intent to re-engage Beijing - The Globe and Mail

Two Canadians are in Chinese jails, and Beijing’s official mouthpieces regularly fire derisive and bullying shots at Canada. Mr. Trudeau’s tone in dealings with China has gotten tougher. So the fact that Mr. Barton, a silver-tongued charmer with extensive contacts in Asia, is being sent to Beijing as Canada’s ambassador says something.

Mr. Barton is a believer in the importance of engagement with China, so it’s pretty clear he is being sent there to try to re-engage. Conservative Leader Andrew Scheer is calling for a strategic pullback from China, arguing Canada needs to accept that China doesn’t share our interests, and look to develop trade elsewhere. The appointment of Mr. Barton, only days before the start of an election campaign, is a sign that Mr. Trudeau believes Canada can’t afford to do that.

China urges new Canadian ambassador to ‘reflect on mistakes’ Ottawa has made - The Globe and Mail

Canada’s corporate community has enthusiastically welcomed the nomination of Mr. Barton, a globe-trotting consultancy chieftain who has occupied some of the world’s most exclusive business circles — a trusted confidant of the Justin Trudeau government who also possesses a keen understanding of the intricacies of doing work in China.

Observers have long bemoaned Canada’s comparatively anemic economic relationship with China, relative to other allies and democratic powers.

Mr. Barton has lived in Shanghai, and his experience in China has given him rarefied access. McKinsey has worked for large numbers of China’s top state-owned entities.

6. Porcine threat to stability

Dim Sums: Rural China Economics and Policy: Vice Premier: Pork Shortages Must Not Spoil the Party

On August 22, Vice Premier Hu Chunhua told communist party officials to prioritize the rebuilding of pork production capacity and preservation of pork supplies as an important "political task." The full transcript posted on a pork industry site warned officials that widespread pork shortages could occur during the upcoming moon festival, National day, New Year, and spring festival holidays if they fail to take measures. Shortages would affect the "happy and peaceful atmosphere" during the upcoming 70th anniversary of the Peoples Republic, the vice premier said. Furthermore, Hu warned that a gaping hole in the pork supply and unaffordable pork for low-income people would impair the image of the communist party in 2020 when the "well-off society" is scheduled to be achieved...

According to Hu, unannounced investigations found large numbers of dead pigs where no disease had been reported, indicating that the actual number of ASF cases exceeds the number reported.

Hu acknowledged that China's pork supply situation will be "extremely severe" during the 4th quarter of this year and first half of 2020

The Chinese government estimates that the country will have a 10-million-metric-ton deficit in pork supply this year.

Premier Hu said the projected 10-mmt deficit exceeds the amount of pork traded in international markets...

After years of prioritizing control of manure pollution by closing or moving farms, local officials are now accused of over-zealous enforcement and are ordered to pare back zones where livestock farms are banned and pay for re-building hog farms. ..

Comment: Sounds like another poorly considered order from above that helped create this crisis.

The elevation of promoting pork production as a "political task" reveals the constantly changing crisis-driven priorities kicked down to local officials...

In his teleconference, Premier Hu also seemed to admit that little had been done to promote treatment and utilization of pig manure although it was a feature of the 2016-2020 plan for the swine sector. Environmental control seems to have been pushed aside as a priority now that there's a pork supply crisis.

猪栏空荡荡

China Business Journal said Chinese pig farmers are going into heavy debt because of African Swine Fever and the government earlier policies to kill all the pigs without giving them many subsidies. They are cautious in raising more pigs although these is a major shortage and the price is soaring.

7. Fake meat bubble coming?

I used to eat a lot of fake meat at Buddhist restaurants in China. Was fake meat invented in China?

Impossible Foods Eyes Chinese Dining Table for Faux Meats - Caixin

“Asia in general, and China in particular, are essential markets for us,” Brown said Wednesday at the Fortune Global Sustainability Forum in Yunnan. The company is counting on the China market, which accounts for 25% of global meat consumption, as a key driver of its vision to completely replace animal meats with plant-based meats by 2035...

Impossible Foods is in early talks with government agencies in the southwest Yunnan province for a potential partnership, in hopes to open its first China factory in the province, Caixin learned.

But Impossible Foods will need to clear regulatory hurdles to enter the Chinese market because of the country’s cautious attitude toward genetically modified (GMO) crops, Brown said. The company uses GMO soy to create a key substance that gives its faux meat products a meaty taste.

Inside the Battle for China’s Meatless Future - SixthTone

Like most of the domestic players, Whole Perfect only recently woke up to the market potential for fake meat in China. Founded in 1993, the company discovered its niche producing soy-based imitation chicken, fish, and shrimp for specialist Buddhist and vegetarian restaurants — a market the Shenzhen-based firm now dominates. But the hype over Beyond and Impossible convinced the firm to target a much larger market...

Chinese Buddhists began developing vegetarian versions of popular Chinese meat dishes as early as the Tang dynasty (618 – 907 A.D.), and vegetarian restaurants today offer a huge variety of options, from mock pickled fish to imitation braised pork belly. Though these dishes do not look as realistic or replicate the nutrient composition of meat as well as U.S.-style plant-based protein, this can sometimes be an advantage.

Impossible’s bleeding burgers can be a turn-off for Buddhists, for example, who make up a large chunk of the country’s approximately 50 million vegetarians.

Yicai Global - Shuangta Food Shares Gain After Chinese Pea Protein Firm Develops Artificial Meat

It has produced vegetarian-meat mooncakes and products with veggie meat fillings made from pea protein, filling a domestic technology gap, the Yantai, Shandong province-based company said in a statement late yesterday. It didn't say when and where the products will appear in the market.

In early June, Shuangta Food said that its protein raw materials were being supplied through distributors to Beyond Meat, a meat substitutes producer based in the US, and that its pea protein can be used as the raw ingredient for fake meat.

8. More on the “Sinicization” of religion

The Sinicization of Chinese Religions under Xi Jinping | China Leadersip Monitor - Richard Madsen

Overall, the story of religious policy under the Xi Jinping regime is one of increasing control and repression. The Marxist ideology that underlay the policy framework of the Deng Xiaoping era has largely been replaced by the nationalist ideology of Sinicization. Mao Zedong’s version of the Marxist idea of class struggle, which led to so much suffering during the Maoist era, has now been replaced by an ideology of ethno-religious struggle. The suffering continues, but with new victims. Because Sinicization basically requires adaptation to an idealized version of Han Chinese culture, outsiders to this culture, such as Christians, Tibetan Buddhists, and Muslims, and especially Uighurs, are subject to even harsher repression than they were under the former Marxist ideology. Han Chinese Daoism and Mahayana Buddhism fare somewhat better, although they too are still subject to restrictions by a watchful state.

As for religious policy among the Han, the new goal of Sinicization still relies on the earlier instruments developed during the Deng Xiaoping era: the party’s United Front Work Department, various state agencies for public security and religious affairs, and “patriotic associations” to oversee the various recognized religions. Although there has been a streamlining of this apparatus, there are enough cracks in the system that many religious believers can still find ways to evade some of its controls. A more fundamental problem with these instruments—originally developed by Stalin to control the hierarchical Orthodox Church[29]— is that they focus on controlling the leaders of clearly organized religious institutions, whereas most religious life in China is communal, diffused throughout the social institutions of ordinary life. Control over the leaders does not necessarily lead to control over the practicing masses. Thus, a complex religious ecology continues to evolve, producing an irrepressible diversity that the homogenizing project of Sinicization is failing to contain.

Business, Economy and Trade

China economy woes owe more to domestic issues than trade war, experts tell Washington hearing | South China Morning Post Experts on US-China relations have advised that the 14 month-long trade war has had “little direct impact on China's economy” and warned that “it would take a truly massive economic shock to threaten” Chinese President Xi Jinping’s power. Instead, experts told a congressional hearing, China’s underlying structural challenges – such as high debt levels – pose greater problems to Beijing’s long-term economic goals. However, it was also suggested that the trade war could cause damage to the Chinese economy as it continues and escalates.

China's Small-Cap ChiNext Index Poised for Bull Market - Bloomberg The ChiNext Index rose 1.2% Thursday, taking its rally since a June 6 low to 19.3%. Investors have piled into technology shares, which dominate the gauge, on hopes for further monetary easing and renewed trade talks between Beijing and Washington.

In U-turn, Ford ditches plan to unify China sales system after partners push back - Reuters Ford Motor Co has scrapped a plan to create a unified national sales company for China that stoked mistrust of the automaker at its joint venture partners and contributed to a spectacular collapse in sales in the world’s biggest car market. // Or not, per next article?

Yicai Global - Ford Denies Ditching Plan for National Distribution Services Division In China Ford Motor dismissed a report by Reuters today that it has nixed its plan to set up a National Distribution Services Division responsible for the marketing, sales and service of all the company's passenger vehicles sold in China. It is carrying out the plan in an orderly manner, the firm said.

Senators Scrutinize U.S.-China Ethane Supply Deals - WSJ $$ West Virginia’s Joe Manchin, the ranking Democrat on the Senate Energy and Natural Resources Committee, and Debbie Stabenow, a Michigan Democrat who also sits on the committee, have asked American Ethane Co. to submit for review by federal regulators its contracts with Chinese buyers, which the firm says are worth $72 billion. The probe is part of a broader push by the lawmakers to apply a similar level of regulatory scrutiny to the export of natural-gas liquids, such as ethane and propane, as there are on overseas sales of crude oil and liquefied natural gas

The Unlikely Chinese Cities Where House Prices Rival London - Bloomberg A 1,000-square-foot apartment in downtown Xiamen, a port city on China’s southeast coast, is almost as expensive as the average home in London, even though local wages are a quarter of what’s on offer in the U.K. capital. In Hangzhou, home to the headquarters of tech giant Alibaba Group Holding Ltd., prices per square foot now rival Seattle, where Amazon.com Inc. is based.

Shanghai Threatens Didi With App Removal as Ride-Hailing Violations Mount - Caixin Since July, the commission has cited Didi’s Shanghai operation for at least 100 violations, amounting to 10 million yuan ($1.44 million) in fines, according to the statement. The commission announced the latest citation on Wednesday night after local officials caught a Didi driver in an “unqualified” vehicle on Tuesday.

Vuitton to hire more French handbag makers as Chinese sales boom - Reuters “Demand in China is exceptionally high,” Vuitton’s CEO Michael Burke told reporters at the Beaulieu workshop, where it assembles bags like the $2,970 “Lock Me” model.

Walmart allegedly created “fictitious” Chinese JV to avoid US tax — Quartz “The goal of Project Flex was to create something from nothing, that China would say is nothing, but which the US tax rules would be required to embrace,” the former executive wrote in the presentation. Tax law experts confirmed the executive’s thesis that the structure does not exist in Chinese law and said the IRS would have grounds to challenge Walmart.

J CAPITAL RESEARCH - J Capital Research We believe that BeiGene has no future, and management knows it. We have clear evidence that the company is faking sales in order to persuade investors that it can develop a successful sales platform in China for pharmaceuticals; we suspect management may also be skimming R&D and capital budgets. At best, this is a poorly managed company pursuing commoditized drugs, with internal controls, even in the context of Chinese companies, that we find to be lax. At worst, BeiGene executives may be robbing shareholders.

Jiangxi to build national independent innovation demonstration area - Gov.cn The State Council approved Jiangxi province’s plan to build the hi-tech industrial development zones of Nanchang, Xinyu, Jingdezhen, Yingtan, Fuzhou, Jian and Ganzhou into a national independent innovation demonstration area, on Sept 5.

Online P2P lending to be recorded at central bank credit reference system - China Daily Information of online peer-to-peer or P2P lending platforms, whether operating or not, will be collected by the credit reference system of the People's Bank of China, the central bank said on Wednesday, Xinhuanet.com reported. Borrowers with poor credit in P2P lending sector will face disciplinary measures such as higher lending rates and restrictions on accessing loans, the report said.

China’s Private Bond Defaults Climb to Record $4.4 Billion - Bloomberg The nation’s issuers have missed repayments on a record 31.8 billion yuan ($4.4 billion) of private bonds this year through August, compared with 26.7 billion yuan for all of 2017 and 2018 combined, according to data by China Chengxin International Credit Rating Co., one of China’s biggest rating firms.

Politics and Law

陕西公安厅发布战时禁酒令，违反将追究领导和当事人责任 - 综合 - 新京报网 Shanxi Public Security Bureau head issues "wartime" order banning alcohol consumption by all provincial PSB employees from September 15 to October 4, to ensure nothing goes wrong during the October 1 70th anniversary celebration period

Xinjiang party chief Chen Quanguo orders officials to keep up the pressure in the run-up to China’s National Day | South China Morning Post The Communist Party chief in Xinjiang has told security forces and officials to “maintain high pressure” in the region ahead of the 70th anniversary celebrations for the People’s Republic of China.
In a speech on Monday, Chen Quanguo said they had to “resolutely implement measures to maintain stability” in the region

Xinjiang Authorities Arrest Sibling Uyghur Real Estate Moguls, Jail One For Decades - RFA Two ethnic Uyghurs who run what is widely considered the most successful real estate firm of the past decade in northwest China’s Xinjiang Uyghur Autonomous Region (XUAR) have been arrested, with at least one sentenced to a lengthy prison term, according to their brother.

Meanwhile, CCTV's Yang Rui finds happy Uyghurs in his trip to Xinjiang:

Bill Bishop@niubi

CCTV host Yang Rui finds happy people in Xinjiang.

September 5th 2019

1 Retweet1 Like

把准斗争方向 明确斗争任务 —论学习贯彻习近平总书记在中青班开班式上重要讲话精神 本报评论员 The people’s Daily wrote another front page editorial rephrasing Xi’s big speech on combat and struggle, urging officials to stay alert and combat against the risks and challenges in their work.

Xi stresses efforts to raise cultural-ethical standards - Xinhua Xi...made the instruction concerning the selection and honoring of national-level ethical role models. Extending congratulations to the role models, Xi said the honoring is of great significance in improving social norms, promoting positive energy and encouraging people to strive for excellence and virtue.

Foreign and Defense Affairs

China hacked Asian telcos to spy on Uighur travelers: sources - Reuters As part of the campaign, different groups of Chinese hackers have compromised telecoms operators in countries including Turkey, Kazakhstan, India, Thailand and Malaysia, the four sources said.

Giant China crane ship turns up near Vietnamese coast | South China Morning Post A Chinese giant crane vessel has been tracked to 90km (56 miles) from the Vietnamese coastline – in an area claimed by Hanoi as its exclusive economic zone – fuelling the risk of further maritime confrontation between the two countries...Vessels from both countries have been facing off since a Chinese survey ship, the Haiyang Dizhi 8, arrived near the Vietnamese-controlled Vanguard Reef in the Spratly Islands in July. At the climax of the stand-off, up to 20 armed vessels from both sides were at the scene.

'Any suggestion?' Philippine leader Duterte asks after China's Xi refuses to budge on South China Sea claims, SE Asia News & Top Stories - AP Mr Duterte said he raised the arbitration ruling in a meeting with Mr Xi and other Chinese officials and he quoted the Chinese leader as replying almost in a whisper: “You know, our statement was ‘We will not budge.’ We don’t want to discuss that because it’s ours. We own the property. Why should we talk to you?”

Property Firms Rally as Duterte Bucks China Ban on Online Gaming - Bloomberg Philippine property shares got a boost after President Rodrigo Duterte said his country benefits from online casinos, standing pat on the industry despite China’s call for a total ban.

俄外长：不应该称中国是俄罗斯的“老大哥” China used to refer to USSR as “big old brother” for its aid and support and its bossy attitude, now reporter asked Russian foreign minister Lavrov if the Russia should call China its “big old brother” given how the country is increasingly depending on Beijing. Lavrov said no, and that it is an equal relation.

普京总统会见胡春华 Putin met with China’s vice premier Hu Chunhua who attends the economic forum in Vladivostok. Hu said the Chinese government is working hard to implement the Xi-Putin consensus in boosting bilateral trade.

As Beijing and Moscow Grow Closer, the Neighbors Grow Wary - WSJ $$ Alarmed by Russia’s growing partnership with China, Beijing’s Asian neighbors are increasingly looking for ways to court Moscow away. That is exactly what Indian Prime Minister Narendra Modi and Japanese Prime Minister Shinzo Abe aim to do at the annual Eastern Economic Forum in Vladivostok this week. Chinese leader Xi Jinping will be notably absent from the event, Russian President Vladimir Putin ’s showcase for investment opportunities in his country’s Far East.

郑永年：中国如何回应美国“国际秩序”定义权？Zheng Yongnian of National University of Singapore gives recommendation for China to challenge the US-led world order. He suggests China reach out to more of US’ allies so to reduce the opposition, and when China sets up some new mechanism, such as the Asia Investment Infrastructure Bank, it should do it in an open manner so western countries can also join.

Experts Warn U.S. Should Prepare For Election Interference From China : NPR Social media giants such as Facebook revealed a Chinese government information operation in real time targeting protesters in Hong Kong. There are worries the 2020 U.S. election may also be a target. // Regulators worried about this should be paying attention to Wechat and how it is used to target Chinese-speaking voters in America

Local board candidate offers virtual cash credits to potential supporters on WeChat - NZ Herald A pro-China local board candidate has confirmed giving virtual cash credits to potential supporters to attend his team's campaign launch on Saturday. Morgan Xiao, 34, who is standing for the Howick Local Board under the Labour-aligned East Vision ticket, said the virtual money handed out on Chinese social media message app WeChat was for advertising purposes.

Argentine President meets with Chinese Defense Minister - China Military Argentine President Mauricio Macri met with visiting Chinese State Councilor and Defense Minister General Wei Fenghe in Buenos Aireson Wednesday afternoon, local time.

China-Australia-US Joint Exercise “KOWARI 2019” held - China Military Exercise KOWARI-2019 is the 6th of the annual joint exercises organized by the three countries’ Special Forces. The airborne troops of the Chinese PLA Air Force participated in the survival training exercise by mixing into a number of groups with their counterparts from the Australian Army and the United States’ Marine Corps.

Axios AM - 1 big thing: Bahamas aid could pit superpowers The Bahamas soon will seek billions in post-Dorian foreign aid, and the Trump administration is considering the national security implications if China rushes to help. Why it matters: China has projected power around the globe through infrastructure spending, and this will create an opening for massive investments just off U.S. waters.

BJP MP cries incursion, army denies - Telegraph India A BJP parliamentarian from Arunachal Pradesh has claimed that Chinese troops had entered Indian territory last month and built a log bridge over a stream, but the Indian Army denied the allegation.

Taiwan

Bilibili found to be renting server space in Taiwan - Taipei Times Video-on-demand (VOD) provider Bilibili (嗶哩嗶哩) has become the second Chinese service to draw the attention of security officials after it was found to be renting server space in Taiwan. The Institute of National Defense and Security Research in April confirmed its findings that China’s largest VOD provider, iQiyi (愛奇藝), which operates in Taiwan, is used by China’s Taiwan Affairs Office as part of Beijing’s “united front” efforts.

Tech and Media

People’s Daily wrote three commentaries this week bombarding Apple and other tech companies for “eavesdropping” and violating users’ privacy. The articles broadly discuss b the privacy issue, but the headlines were written in a way that targets only Apple. - 人民网三评“苹果偷听”之一：Hi Siri，我还敢信你吗; 人民网三评“苹果偷听”之二：住手，不许动我的隐私; 人民网三评“苹果偷听”之三：请让我们的隐私静享安宁

Pioneering Master of Chinese Animation Dies at 89 | Sixth Tone Dai Tielang, the famed creator of one of China’s oldest and most beloved cartoons, died Wednesday at the age of 89...Dai is best-known for directing the “Black Cat Detective” cartoon series, which aired from 1984 to 1987

Rhetoric aside, what do China’s semiconductor insiders really think about the nation’s self-reliance drive? | South China Morning Post “China’s industry watchdog has stepped up its efforts to support the development of chips over the past two years,” said Wayne Dai, founder and chief executive of chip design services company VeriSilicon. The new Shanghai tech board also “offers an excellent fundraising platform to attract more and more talented entrepreneurs”. Dai predicts that China will enter a “golden decade” for chip development, with the country producing 40 per cent of the chips that it needs by the end of the decade, up from 14 per cent now.

After Barren 2018, Game Publishers’ Revenue Shows Signs of Recovery For the six-month period, 37 Interactive Entertainment Technology Co. Ltd. and Zhejiang Century Huatong Group Co. Ltd. recorded revenue of 6 billion yuan ($839 million) and 6.9 billion yuan respectively, an increase of 83.83% and 22.97%. Both firms are listed in Shenzhen.

Society, Arts, Sports, Culture and History

Controversy over Scene in Anti-Japanese War Drama Featuring Black U.S. Soldier and Chinese Nurse | What's on Weibo A black soldier comes to China from afar during WWII and falls in love with a Chinese villager who sacrifices her life for him. This war drama is sensationalizing the Sino-Japanese War in the wrong way, many netizens say.

Energy, Environment, Science and Health

Chinese demand threatens to wipe out Kenya’s donkeys | China Dialogue Growing demand for donkey meat and skin in China is causing a sharp decline in the animals in Kenya. Animal rights campaigners warn that donkeys could soon disappear in the east African country, where they play a vital role as beasts of burden, especially in rural areas.

His Cat’s Death Left Him Heartbroken. So He Cloned It. - The New York Times China’s first duplicate cat marks the country’s emergence in gene research and its entry in a potentially lucrative and unregulated market for cloning pets.

Hundreds Fall Ill From Dengue Fever in East China - Caixin Health services are scrambling to deal with an outbreak of dengue fever in East China’s Jiangxi province, where about 200 people have been diagnosed with the virus since June.

Education

China regulates educational apps - ECNS China's Ministry of Education joined seven other governmental departments to roll out a guideline on the use of educational apps in schools, following consideration of teacher and parent opinions, according to a news conference in Beijing on Thursday.  The guideline states students or parents should not pay to use apps required by schools and there should be no commercial advertising or games involved.

Ministry of Commerce spokesman Gao Feng’s comments about holding off on further retaliation towards US tariffs excited markets this morning. I am not sure Gao’s comments signal any softening, and maybe the recent RMB drop has mitigated the short-term need for another response from Beijing, but when things look so dark any slight glimmer of hope gets magnified, especially in the days before a major US holiday (Labor Day) when most traders are on vacation and market volume is usually light.

There is still talk that Liu He and Zhong Shan will come to DC in September. Nothing is confirmed but I am hearing the week of September 16 is the likely window for a visit. It is positive if he comes though as we saw with the Lighthizer and Mnuchin’s visit to Beijing in August just showing up does not mean there will be progress. The Chinese have been very clear they see this as a process of fighting and talking, and are comfortable doing both simultaneously.

As for President Trump’s claim of phone calls last weekend, CNN reports they did not happen:

Though Trump and Treasury Secretary Steven Mnuchin insisted there had been "communication," aides privately conceded the phone calls Trump described didn't happen they way he said they did. Instead, two officials said Trump was eager to project optimism that might boost markets, and conflated comments from China's vice premier with direct communication from the Chinese. 

I had heard that when told of Liu He's "calm" comments he confused "calm" with "call".

The annual rotation of PLA troops in and out of Hong Kong last night has triggered jitters. Xinhua called it normal, though there are indications and rumors that there are now more PLA forces, PAP forces and equipment in Hong Kong than there were yesterday. The official statements in previous years specified that the number of forces and equipment had not changed as a result of the rotation (部队轮换后，驻军在香港特别行政区的部队员额和装备数量保持不变). This year’s statement did not include that language and the Ministry of Defense spokesperson dodged a question about the discrepancy.

Folks I know who are paying close attention are worried this weekend’s protests could be a watershed, given the holiday in the US and the time between the weekend and the October 1 celebration. I hope they are wrong.

Thanks for reading.

The Essential Eight

1. US-China

China Indicates It Won’t Retaliate Against Newest U.S. Tariffs - Bloomberg

“China has ample means for retaliation, but thinks the question that should be discussed now is about removing the new tariffs to prevent escalation of the trade war,” Ministry of Commerce spokesman Gao Feng told reporters in Beijing on Thursday. “China is lodging solemn representations with the U.S. on the matter.”..

If Chinese officials go to the U.S. for talks next month, the two sides should work together to create conditions for talks to progress, Gao said 【中方认为，如果中方赴美谈判，双方应该共同努力、创造条件，推动磋商取得进展】. Both sides are currently discussing the trip, and information on that will be released in a timely manner when available, according to Gao, indicating that the schedule isn’t set yet.

Comment: Noteworthy Gao said “if Chinese officials go to the US”

China hopes U.S. will create conditions necessary for September trade talks - Reuters

He did not answer directly when asked if his remarks suggested China would not retaliate against the latest U.S. tariff threat.

Gao Feng's comments: 商务部召开例行新闻发布会（2019年8月29日）

【凤凰卫视记者】:针对美方提出要对5500亿美元的中国输美商品加征关税再提高税率，中方是否打算采取相应的反制措施？

【高峰】:中方的反制手段是充足的。但在当前形势下，我们认为应该讨论的问题是取消对5500亿美元中国商品进一步加征关税，防止贸易战继续升级。中方正就此与美方进行严正交涉。正如中方一再强调，贸易战升级不利于中国，不利于美国，也不利于全世界人民的利益，甚至有可能给世界带来灾难性后果。

[视频]【国际锐评】中国有能力消化贸易摩擦影响

CCTV “sharp commentary” said Beijing’s trade retaliation has been necessary but restrained, and Chinese economy is doing well to absorb all the negativity. It again urged the US side to calm down and work with China, and Beijing will fight till the end if it chooses otherwise.

人民日报人民论坛：应战敢战善战方能止战--观点--人民网

People's Daily Zhong Sheng on the US-China trade war "The only way to stop fighting is to face the fight, fight bravely and fight well"

U.S. underestimates China’s resolve, capability to take countermeasures - People's Daily Zhong Sheng

The tariff threat is a total lose-lose decision that disrupts global industrial and supply chains, and impedes the growth of international trade and world economy.

Even so, some “naïve” U.S. politicians are still thinking that China would not take countermeasures and raise tariffs on American products. But such “naivety” only revealed their misjudgement of the current situation, especially the underestimation of China’s resolve and capability to fight back.

In the face of continuous extreme pressure from the U.S., China has always stayed rational and exercised restraint. Resolving to safeguard its core interests and the fundamental interests of its people, China will never compromise on major issues of principle. The country is determined to counter any provocation and has the capability to fight to the end.

[视频]新华社“辛识平”文章：硬要“撤资中国”坑的是美国企业

CCTV Evening News broadcast the Xinhua commentary by “Xinshiping”. Without naming Trump, it said the idea of having US companies pulling out from China would only hurt these companies, as non-US companies would soon fill their place in the market.

US-China Trade War: The Guns of August | PIIE - Chad Brown

There are a number of contributing factors behind why only 56 percent of US exports to China are currently covered by China’s retaliatory tariffs.[2] But one of the most important is that Beijing had stopped retaliating over most autos and parts—covering roughly $14 billion of US exports—as a goodwill gesture on January 1, 2019.

China’s upcoming retaliation targets relatively few new products. Only $3.2 billion of petroleum products are added to China’s retaliation with its September 1 list (figure 2). Its December 15 list expands the scope of covered products, but mostly through the reapplication of its retaliatory tariffs on autos and parts that had been suspended on January 1. Chemicals ($1.1 billion) and handful of other products are also added to the retaliatory list as of December 15.

China to start new tariff exemption process for U.S. imports - Xinhua

Enterprises, business associations or chambers of commerce in China can file product exclusion applications online starting Sept. 2 until Oct. 18, according to the Customs Tariff Commission of the State Council.

Apple iPhone, Amazon Echo Production Moving From China to India - Bloomberg

In late August, Trump ratcheted up the rhetoric—ordering American companies to start pulling out of China and citing a national security law as justification. He backed off two days later, but many companies have resigned themselves to an inevitable and costly rethinking of their global supply chains. 

“It’s a good business principle not to put all your eggs in a single basket,” says Josh Foulger, who runs Foxconn’s India operations. “We have to find viable and reliable alternatives. Obviously the alternative location has to be competitive. We can’t put a factory in Mexico for manufacturing mobiles. It might have worked 10 years ago, it just won't work today.”

Google to shift Pixel smartphone production from China to Vietnam - Nikkei Asian Review

Working with a partner, Google started work this summer to convert an old Nokia factory in the northern Vietnamese province of Bac Ninh to handle production of Pixel phones, two people familiar with the company's plans said. This is the same province where Samsung developed its smartphone supply chain a decade ago, so Google will have access to an experienced workforce.

Trump’s New Trade War Weapon Might Just Be Antique China Debt - Bloomberg

The Trump administration has been studying the unlikely prospect of reviving century-old claims on Chinese bonds sold before the founding of the communist People’s Republic...

Perhaps the only thing more peculiar than the story of the Chinese debt and the unlikely bid to seek payment on it, is the cast of characters drawn into its orbit. President Trump, U.S. Treasury Secretary Steven Mnuchin, and U.S. Commerce Secretary Wilbur Ross have met with bondholders and their representatives.

White House slams China's 'highly dubious' infrastructure project as Bolton warns Ukraine | Fox News

“China’s Belt and Road Initiative purports to address the legitimate infrastructure demands of the world’s less-developed economies, but primarily aims to export China’s own economic imbalances – industrial overcapacity, excess labor, large foreign currency reserves – and to convert these into political influence and strategic military access,” a senior administration official told Fox News on Wednesday.

Has America’s China Backlash Gone Too Far? - WSJ - Greg Ip $$

These experts worry that if the U.S. assumes conflict with China is inevitable and thus it should decouple now, that could unleash dynamics that make conflict more likely. “If we treat China like an enemy, they might become one,” says Mr. Paulson.

One reason China’s leaders backed away from a trade deal in May, he says, is that hostile rhetoric from Washington led them to question how it would fit their long-term relationship: “You don’t trade with enemies.”

Comment: The CCP is happy to trade with what it considers its enemies.

2. Hong Kong

Chinese military’s morning move into Hong Kong a ‘routine annual rotation’ | South China Morning Post

State news agency Xinhua reported the rotation at 4am on Thursday. The People’s Liberation Army (PLA) Hong Kong Garrison has a rotation every year, but on previous occasions state media released a report only when the handovers were completed.

This was the 22nd rotation since the PLA began garrisoning Hong Kong in 1997, Xinhua reported. Xinhua photos showed that troops in military vehicles had passed into Hong Kong via the Huanggang Port border checkpoint, while marine forces of the PLA Navy arrived at the Stonecutters Island naval base before sunrise.

Later on Thursday morning, a squadron of armed helicopters from the garrison’s air force flew from the Southern Theatre Command to Shek Kong Airfield in Hong Kong. Unlike the arrival of the ground force and navy, which entered Hong Kong before dawn, this was a relatively high-profile move.

国防部回应“驻香港部队轮换”：是例行性安排，时间与往年大体一致

China’s defense ministry dodged the question on whether the number of soldier and equipment has increased after rotation, said only that it is an annual routine. 

Organiser of banned Hong Kong protests attacked by masked men with baseball bats on same day demonstration bids are rejected | South China Morning Post

Jimmy Sham Tsz-kit and his friend were attacked by two masked men with baseball bats at a restaurant in Jordan.

Sham was not hurt in the incident, but the friend, who tried to protect him, suffered injuries to his left arm and was taken to Queen Elizabeth Hospital in Yau Ma Tei.

Hong Kong protest organiser Max Chung beaten up in Tai Po, shortly after police grant him unconditional release | Hong Kong Free Press HKFP

Activist Max Chung was assaulted by four men after leaving Tai Po Police Station on Thursday, shortly after he was granted unconditional release by police.

Chung was walking along Tai Wo Road when four men “attacked him with metal rods and umbrellas,” according to Truth Media Hong Kong (TMHK) reporter Jeffrey Cheng, who was interviewing Chung at the time.

Hong Kong police strongly oppose independent investigation into conduct, says Chief Exec. Carrie Lam in leaked recording | Hong Kong Free Press HKFP

Lam was speaking with a group of young people on Monday behind closed doors. Following the meeting, multiple news outlets claimed that Lam refused to set up an independent commission of inquiry into the recent protests – a main demand of protesters – owing to opposition from the police. Lam’s stance was cited by multiple unnamed sources, but she denied the claim on Tuesday.

述评：香港乱象背后的教育“病因”

Xinhua comment blames problems in Hong Kong's education system, including not enough patriotic education and proper Chinese history education, as a "pathogen" behind the protests. It says Hong Kong’s regulation over teachers and textbooks have been way too lax for too long and hat some of the “radical” teachers have been encouraging students to join the protests, or “distorting Chinese history” in their class. It said the government has done nothing to review the textbooks or publish uniform textbooks, when it should have confidently done so.

海外版望海楼：美国在港搞“颜色革命”注定徒劳--观点--人民网

People's Daily Overseas edition "Wanghai Lou" column says the US attempts to foment "color revolution" in Hong Kong are destined to fail

人民网评：《苹果日报》就是香港社会的一只“毒苹果”--观点--人民网

People's Daily Online comment attacks Jimmy Lai's Apple Daily, calls it a "poison apple", says it is trying to sow chaos in Hong Kong and split China

US's double standard way out of line - People's Daily

The double standard held by some US politicians can only reveal their sinister intention of destabilizing Hong Kong in order to raise the wave against China.

We sincerely advise these people to stop meddling in other countries’ internal affairs. History will prove that they will only end up in failure if they have a finger in every pie. It will never work to stir up "color revolution" on China's Hong Kong.

London violates commitment of Sino-British Joint Declaration - Global Times

The legitimacy of Hong Kong's governance today comes from the Basic Law, and the Sino-British Joint Declaration has no role in that. The big logic behind the rule of law in Hong Kong today is to implement the Basic Law. The right to interpret the Basic Law is the exclusive prerogative of the standing committee of the National People's Congress of the People's Republic of China. Britain has no right to say anything about it.

Taiwan Urges China, Hong Kong for Answers on Missing Activist - Bloomberg

Morrison Lee traveled to Hong Kong for a vacation on Aug. 18 and attended one of the city’s anti-extradition protests, Archer Chen, chief of Fangliao Township in the southern Taiwan county of Pingtung, told Bloomberg News. Lee serves as an unpaid adviser to the township, according to Chen. Lee was scheduled to travel to the southern mainland city of Shenzhen for business two days later.

[视频]英知名学者：香港暴力示威受外部煽动_CCTV

CCTV Evening News Thursday interviews "famous English scholar" John Ross, who says the Hong Kong protests are stirred up by foreign forces, western media

Faith in Hong Kong leader and gov't dips to lowest point in post-colonial history - survey | Hong Kong Free Press HKFP

Chief Executive Carrie Lam’s popularity rating has dipped to 24.6 points out of 100 – a record low among any post-colonial chief executive, according to the latest public survey.

The Hong Kong Public Opinion Research Institute, the successor of the University of Hong Kong’s Public Opinion Programme, interviewed 1,023 people between August 15 and 20.

Former Hong Kong leader Tung Chee-hwa nominated for China’s highest title of honour ahead of 70th anniversary of founding of the People’s Republic | South China Morning Post

The first chief executive after the end of British rule, Tung nominated for contribution to city’s smooth transition to Chinese sovereignty

刘sir等10名香港警员受邀参加十一庆典

Global Times said about 10 Hong Kong police would be invited to Beijing to attend the national day gala. That includes one policeman who is hailed as hero in China for aiming gun at the protesters.

3. Good Luck shorting the Hong Kong dollar

Hong Kong Dollar Tempts Hedge Funds Again - Bloomberg

Crispin Odey has some advice for the traders ramping up wagers against Hong Kong’s currency: try something else.

“There are lots of good bets around at the moment,” said Odey, whose penchant for bold trades has made his hedge fund one of the world’s most volatile in recent years. “Hong Kong dollar is not there.”..

Traders including Hayman Capital Management’s Kyle Bass, Crescat Capital’s Kevin Smith and Trium Capital’s Thomas Roderick are betting the unrest will spur capital flight, drive up interest rates and force the abandonment of a currency policy that has underpinned Hong Kong’s economy for more than three decades.

Here is a good Twitter thread on the HKD and shorts by Rodney Jones, now of Wigram Capital Advisors, previously at Soros Fund in the 1990s:

Rodney Jones@rodneyatwigram

The idea that Soros was short HKD in 1998 is an urban legend. In 1997/98 Quantum Fund was short the HSI futures not the HKD. The view was that the peg meant that domestic prices fell (property & equities) but that the HKD peg itself would hold (thread 1/) Bloomberg - Are you a robot?bloomberg.com

August 28th 2019

62 Retweets133 Likes

4. People’s Leader 人民领袖

Comment: I have had a lot of problems with Nikkei's reporting on Chinese politics. But given that this newsletter has written about the "People's Leader" twice this week I thought it made sense to include this article. The factional claims I think are a bit too clean and cherry-picked, and the assumption that the 4th Plenum has been delayed over a year because Xi could not convene it is not something I agree with. Regardless, the broader point is that "People's Leader" is a big deal, though why and how it reappeared now we may never really know. 

Xi scores coup and grabs party backing to be 'people's leader' - Nikkei Asian Review

Why the return of the phrase?

The tacit understanding reached at Beidaihe seems to be: China needs a people's leader on a par with Mao to fight the protracted trade war with the U.S. under the unpredictable President Donald Trump and to deal with the Hong Kong situation, which could lead to a crisis for communist rule.

One source said, "For Xi, Trump's endless trade war and the Hong Kong issue have become unexpected gifts from heaven." Said another, "For China to fight a protracted war, it first needs stability and solidarity."

Therefore, the Chinese sources say, what was widely believed to be a double whammy for Xi has turned into a political jackpot.

5. More on  Preparations for October 1 Party

Xi to Deliver Speech as Pressure Builds at Home and Abroad - Bloomberg

The speech on Oct. 1 will be accompanied by a national day parade showcasing China’s advances in military technology, Wang Xiaohui, executive vice minister for the Communist Party’s Publicity Department, said at a press briefing in Beijing. “The purpose is to motivate and mobilize the whole party, the whole military, and all of the people to unite closely around the CCP Central Committee with Xi at the core,” Wang said...

The scale of the parade will be larger than those held to celebrate the 50th or 60th anniversaries of the PRC, Major General Cai Zhijun, who is vice director of the office for parade organization, said at the press conference. Cai said the parade would show China’s “great achievements” in national defense and the “accumulation of power for promotion of national rejuvenation.”

Xi Jinping to give important speech at National Day celebrations - Xinhua

A military parade and mass pageantry will be held following the gathering, said Wang Xiaohui, executive deputy head of the Publicity Department of the CPC Central Committee.

Xi to present Medals of the Republic, Friendship, national titles of honor - Xinhua

Chinese President Xi Jinping will present the Medals of the Republic, Medals of Friendship and national titles of honor to outstanding people at an event to mark the 70th anniversary of the founding of the People's Republic of China.

China to hold grand celebration, military parade on National Day - Xinhua

The military parade is an important part of the National Day celebration and is not aimed at any other countries or specific situations, Cai Zhijun, deputy head of the office of the leading group for the military parade, said at a press conference held in Beijing.

Some advanced weapons will make their debut in the military parade, the scale of which is scheduled to be greater than the ones commemorating the 50th and 60th founding anniversary of the PRC, as well as the V-Day military parade in 2015.

The military parade is expected to showcase China's achievements in building its national defense and armed forces in the past 70 years and reflect the outcomes of the reform of the people's armed forces, according to Cai.

庆祝中华人民共和国成立70周年 首都北京将举行隆重热烈的庆祝活动-新华网

As discussed in yesterday’s newsletter Beijing is heading into lockdown. Even dogs should be worried - Major Crackdown on Dog Ownership Laws Approaching National Week | beijingkids online | beijing-kids

From September 1 – October 1 key areas around Beijing are going to be subject to strict enforcement of current dog ownership laws. The areas that are going to experience the biggest crackdown are Haidian, Fengtai, Chaoyang, and Shijingshan

6. More worries about financial risk

China considers new rules for smaller banks to limit risk - Reuters

China is considering new rules for the country's small-to-medium financial institutions to reduce risk in the wider economy, following a number of state bailouts of smaller lenders, the state-run Economic Information Daily reported on Thursday.

The report, citing a source in the People's Bank of China(PBOC), said the rules could require high-risk financial institutions, local governments and the country's regulators to jointly take on the responsibility of risk resolution for smaller banks.

The PBOC, the country's central bank, would also encourage merger talks, instead of bankruptcies, when dealing with problematic financial institutions, the report added.

The Economic Information Daily report - 中小金融机构风险处置路线图浮现 _ 经济参考网 _ 新华社《经济参考报》官方网站

高风险中小金融机构风险处置路线图日渐清晰。《经济参考报》记者从央行独家获悉，根据防范化解重大风险攻坚战部署，目前在化解和处置中小银行风险时要从压实金融机构自救的主体责任、地方政府的风险处置属地责任和监管部门的监管责任三方面着手。在处置方式上，根据不同风险成因和性质，分类施策精准拆弹。而在处置过程中，始终坚持早发现、早处置和市场化、法治化原则，风险处置坚持依法合规，遵循成本最小化原则，并严格防范道德风险，注重在改革发展中化解风险。此外，记者也从多个渠道获悉，目前相关监管部门正在酝酿制定高风险金融机构风险处置的相关文件。

Exclusive: Regulators Target P2P Lenders’ Payment Service Providers - Caixin

Several local regulators, including in Beijing and Shanghai, have told some third-party payment companies to be more prudent about offering payment and settlement services to P2P lending companies, and in some cases to cease doing so, people familiar with the matter told Caixin.

The first batch of lending platforms to be cut off from such services is likely to be the handful without custodian banks, Caixin understands. Regulators ordered every lending platform to appoint one bank as a custodian of investors’ funds back in 2015. Without payment channels and custodian banks, the platforms’ funds won’t be able to flow in and out, effectively shutting them down.

7. Feminist movement overseas

Thwarted at Home, Can China’s Feminists Rebuild a Movement Abroad? | ChinaFile - Shen Lu

In February, an activist named Liang Xiaowen appeared on the widely-watched American comedy show Patriot Act to talk about China’s battered #MeToo movement. Liang, who now resides in the U.S., talked about her efforts to combat discrimination and sexual harassment in China and the threats from police her family received when she once tried to host a feminist salon. The show’s host, Hasan Minhaj, asked if anyone in China watched his show. “If I’m in it,” Liang replied, “I promise that at least some people will see it.”

Liang’s confidence stems in part from her belief in the importance of her mission. The Guangzhou native is one of the key leaders of a loose coalition of Chinese expatriates organizing what they describe as a “Chinese feminist movement” in the United States. And while Liang and her fellow activists may be little known in the U.S. outside a small circle of sympathizers and women’s studies scholars, in China their activities command large audiences among supporters of the cause who might be championing the same ideals if their political surroundings didn’t make it so dangerous.

8. Mao-era figures die

Nie Yuanzi died Wednesday - 毛泽东拍赞全国第一张马列主义大字报人聂元梓今传逝世 - 中国 - RFI

2006 New York Times profile of her - Hearts Still Scarred 40 Years After China's Upheaval:

Nie Yuanzi was an ambitious college professor whose "big character poster," displayed on the grounds of Beijing University, was said to have ignited the Cultural Revolution, a prairie fire of violent purges and denunciations that quickly spread across the nation.

Now, she is an 85-year-old who survives on the charity of friends. Looking back, she insists that she had no idea that the poster she made would have such terrible consequences. "I didn't know we were heading toward disaster," she said, describing herself as a party loyalist who executed orders. "Once I understood, I stopped following them. I opposed them, and for that I was punished."

Wang Guodong, Who Painted Mao Year After Year, Dies at 88 - The New York Times

Few have heard of Wang Guodong, the Chinese artist who for years was responsible for painting the enormous portrait of Mao Zedong — replaced annually — that gazes down on Tiananmen Square in Beijing.

Mr. Wang, who was 88 when he died on Friday at a hospital in Beijing, was chosen in 1964, when he was in his early 30s, to be the official painter of the 15-by-20-foot oil portrait of Mao that hangs steps from the party’s central seat of power, at the Gate of Heavenly Peace...

In a sign of Mr. Wang’s stature in Communist Party circles, a funeral was held for him on Sunday at Babaoshan, the cemetery in Beijing reserved for party elite, Beijing Youth Daily reported. Mao Xinyu, Mao’s grandson, was said to have sent a wreath.

Business, Economy and Trade

China Banks See Margins Squeezed by Efforts to Spur Economy - Bloomberg In response to government requirements, the big banks increased loans to small businesses by 35% in the first six months, while cutting their financing costs by more than the 1 percentage point that authorities wanted, according to the industry regulator.

Tencent scraps plan to invest $150 million in Chinese education firm VIPKid: sources - Reuters Tencent scrapped the plans after Beijing last month issued regulations targeting online education platforms, stipulating teachers need to hold valid teaching qualifications and the firms must publicize information such as foreign teachers’ certificates and work experience

Enlight Media’s Profits Fade Out on China’s Movie Industry Slowdown - Caixin The Chinese film studio behind the recent animated hit “Nezha” reported plunging profits for the first half of this year as it grapples with a slowdown in the domestic movie industry.

China cuts 91.78 bln yuan in road tolls in 2018 - Xinhua The toll cut increased by 9.61 billion yuan compared with 2017, up 11.7 percent year on year, according to the Ministry of Transport. China saw a net mileage addition of 5,239 km in expressways in 2018, while the country's toll roads reported slower debt growth last year, data from the ministry showed.

Vice premier stresses data authenticity for economic census - Xinhua Chinese Vice Premier Han Zheng on Thursday stressed data authenticity and reliability as the country's fourth national economic census makes steady progress.

Hikvision, a surveillance powerhouse, walks U.S.-China tightrope - Reuters Foreign investors who once piled into the company, including UBS AG, have dumped at least 300 million shares of its stock in the last five months, shareholder data shows, with some citing concerns about its involvement in China’s expanding surveillance state in the Xinjiang region. ]

China expands market access to industrial products - Xinhua China's State Council decided Wednesday to further ease market access by scrapping production permits for some industrial products. An additional 13 categories of industrial products including internal combustion engines and brake fluid will be exempted from applying for a permit for production, according to a statement released after a State Council executive meeting chaired by Premier Li Keqiang.

Fiery liquor maker Wuliangye rises to record after Citic Securities raises price target | South China Morning Post Shares of Wuliangye, whose Chinese name means liquor distilled from five types of grains, climbed 1.2 per cent to 133.92 yuan at the close on Wednesday, the highest since the Sichuan province-based company went public two decades ago. Wuliangye is valued at 519.8 billion yuan (US$72.6 billion), placing it behind brand leader Kweichow Moutai with a market cap of 1.38 trillion yuan.

Chinese Central Bank Sources Deny Forbes Report of Digital Currency's November Release - China Banking News Sources from the Chinese central bank have since denied the report, telling Sina that they the information is “inaccurate speculation.”

Politics and Law

China honors outstanding builders of socialism with Chinese characteristics - Xinhua One hundred individuals from the non-public sector of the economy or belonging to new social groups were awarded the title of "Outstanding Builders of Socialism with Chinese Characteristics" Thursday. Wang Yang, chairman of the National Committee of the Chinese People's Political Consultative Conference, stressed the importance of promoting healthy growth of the non-public sector of the economy, encouraging those working in this sector to achieve success, and uniting them for the endeavors to revitalize the Chinese nation, while addressing an honoring ceremony held in Beijing.

News Control, In the Palm of Your Hand | China Media Project The Media Oversight Office (传媒监管局) of the Central Propaganda Department announced through a notice on August 23 that online training and testing of news personnel nationwide would now be handled through the “Study Xi, Strong Nation” mobile app, and that testing would take place during the first half of October for the issue of press cards (新闻记者证). The notice has ordered “news units” — meaning in this case central Party media outlets, including top Party-run newspapers, television and radio, as well as 14 central-level news websites authorized to issue press cards — to create and authorize study groups through the app before September 15 in order to prepare staff for study and eventual testing.

Book of Xi's discourses on staying true to founding mission published - Xinhua The book, which was compiled by the Institute of Party History and Literature of the CPC Central Committee and the central leading group office for the CPC education campaign themed "staying true to our founding mission," will be distributed across the country. It contains 362 discourses, extracted from over 130 documents including speeches, reports, articles and instructions given by Xi between Nov. 15, 2012 and July 16, 2019.

加强高校党委对思政课建设的领导--党建-人民网 Party Secretary of Jin University writes in Thursday's People's Daily on "Strengthening the Leadership of College Party Committees on the Construction of Ideological and Political Courses". How are foreign universities with partnerships with PRC schools dealing with this trend, mandated by Xi?

Staff of NGO linked to Hong Kong arrested in southern China | The Guardian On Monday, lawyers for the three staff members of Changsha Funeng, a public welfare organisation focusing especially on disability rights, said the three had been formally arrested on suspicion of state subversion...According to co-founder Yang Zhanqing, now in the US, the group had set up a company in Hong Kong through which it received funds from overseas. Cheng Yuan, who lived in Shenzhen near China’s border with Hong Kong, regularly traveled to Hong Kong for meetings related to the NGO’s work.

Canada Deports Chinese Dissident Yang Wei, Brushing Off Concerns He Faces Jail - The New York Times Mr. Yang had been arrested repeatedly, including for possession of a knife, aggravated assault and various other offenses. He regularly threatened people with violence, including assaulting a bus driver who asked him to produce a transfer ticket and a worker in a mobile phone store who refused him a refund. In another case, he stabbed a bus driver 13 times.

Hengqin breaches the Great Firewall - Greater Bay Insight Hengqin’s moment in the spotlight is coming. Its massive new railway station is around three months from opening, but already the special economic zone opposite Macau’s Cotai district is gearing up to play a leading role on the Greater Bay Area’s main stage: This week it rolled out China’s first experiment with a city internet network that sits outside the Great Firewall.

Foreign and Defense Affairs

Xi meets Duterte on bilateral ties - Xinhua "At present, the international and regional situations are undergoing profound and complex changes. However, peace, development, cooperation and mutual benefit are still an irresistible trend of the times," said Xi. Xi said he is willing to work with Duterte to continue to grasp the trend of the times from a strategic and long-term perspective, to lead the sound development of bilateral ties. "This will not only benefit the two countries and their peoples, but will also add positive energy to regional peace and stability."

China sends new naval fleet for escort mission - Xinhua The 33rd fleet from the Chinese People's Liberation Army (PLA) Navy on Thursday left the port city of Qingdao in east China's Shandong Province for the Gulf of Aden to escort civilian ships. The fleet is mainly composed of naval forces from the the Northern Theater Command of the Chinese navy, including a destroyer, a frigate and a supply ship

Uighur intellectual nominated for top European rights award - Arab News Europe's top rights body, the Council of Europe, has nominated a jailed academic from China's Uighur minority, Ilham Tohti, for one of the continent's top human rights awards.

Scrapped intelligence pact draws United States into deepening South Korea-Japan dispute - Reuters U.S. Secretary of Defense Mark Esper said on Wednesday he was “very disappointed” with the decision and hoped Seoul and Tokyo would overcome their differences to face common threats, such as North Korea and China.

China, ROK vow broader cooperation - Global Times Chinese State Councilor and Foreign Minister Wang Yi met with ROK Foreign Minister Kang Kyung-wha ahead of the ninth meeting of foreign ministers of China, Japan and the ROK, the first three-way meeting since August 2016. Wang said China-ROK relations have developed well, expressing the hope that the ROK side could actively participate in the Belt and Road cooperation, jointly develop third-party markets and speed up the second phase of the Sino-ROK Free Trade Agreement talks.

Sam Dastyari told Kaila Murnain to 'cover your arse' about dubious NSW Labor donation, Icac hears | The Guardian The former Labor senator Sam Dastyari said he advised NSW Labor boss Kaila Murnain to “cover your arse” when she told him of potential fundraising misconduct and mentioned the name of Chinese billionaire and banned donor, Huang Xiangmo. Murnain broke down on Thursday morning while explaining to the Independent Commission Against Corruption that she kept quiet about potentially illegal donations because she was “scared” for the “reputation of the party”.

China’s state broadcaster set for UK launch | Financial Times $$ The broadcaster has about 100 journalists in London, who will from late September be expected to produce around one hour of programmes for its global 24-hour channel. The channel currently broadcasts 13 hours of content from Beijing, seven from Washington and four from Nairobi each day. A tech programme and a weekend talk show will be among the first programmes produced by CGTN Europe. One person briefed on its plans said production would be expanded in October and again in early 2020.

What Would a Larger Chinese Presence Mean for the Middle East? | ChinaFile Conversation

Bridging Perceptions: China in Mozambique - MacroPolo

Taiwan

President Tsai's video address to the 101st American Legion National Convention As we all know too well, the struggle for domination and control has played out throughout human history, even though it has taken on new forms. Today, just across the Taiwan Strait, we struggle with a giant that has chosen to use new tools of technological advancement not for the greater good, but to sow disinformation, division, and discord in free and open societies.

Tech and Media

Huawei's next flagship phone blocked from using Google apps | The Guardian The Chinese telecoms firm is expected to launch its Mate 30 line of smartphones in the autumn. Google has said that, under the US restrictions on trade with Huawei, the phones cannot be sold with licensed apps such as Google Maps or Gmail, which form part of Google’s Android operating system.

Huawei Boosted Research Spending at Berkeley Before Sanctions, Documents Show — The Information $$ Huawei sharply increased its spending on research projects at the University of California, Berkeley last year and this year, immediately before the university cut ties with the Chinese telecom manufacturer amid U.S. government sanctions, according to documents obtained by The Information.

Tianma Gets Government Boost for High-Tech Flexible Display Plant - Caixin Tianma is one of several Chinese companies aggressively building such lines for display panels that are a major component of TVs, smartphones and a growing number of electronic devices. Such efforts have been strongly encouraged by Beijing and local governments as China tries to move away from its roots as a low-end manufacturer and into higher-tech, bigger-margin products.

China Adds Huawei, Hikvision to National AI Innovation Platform - Caixin China’s Ministry of Science and Technology has added 10 companies including telecommunications giant Huawei and surveillance-technology maker Hikvision to a major national artificial intelligence (AI) development program, the state-run People.cn reported.

The Time a Jet-Lagged Musk Made Alibaba’s Jack Ma Sound Grounded - Bloomberg Ma, the more polished and down-to-earth speaker, also invoked familiar stances on education and the need for “Love-Q” or LQ in addition to IQ to survive the future. But overall, the Alibaba honcho came across as more reasonable than the erratic Musk, who several times trailed off into poorly articulated tangents such as the timeline of civilization or pace of technological change

West’s attempt to slander Huawei will fail - Global Times - He Wenping The Wall Street Journal published on August 15 an article, not only accusing China's telecom giant Huawei of selling "security tools that governments use for digital surveillance and censorship" in Africa, but also alleging that Huawei employees have personally "helped African governments spy on their political opponents." Such absurd accusations were soon denied by the countries and Huawei...China is cooperating with Africa wholeheartedly. The West's scheming is bound to achieve nothing.

The author is a senior research fellow of the Charhar Institute and China Africa Institute

After blacklisting, U.S. receives 130-plus license requests to sell to Huawei: sources - Reuters But the Trump administration has not yet granted any licenses for sales to the blacklisted company, said the people familiar with the process who spoke to Reuters on the condition of anonymity.

Energy, Environment, Science and Health

China’s Newest Cram School Craze: Sex Ed Camps - Sixth Tone Many parents are turning to extracurricular cram schools to give their kids a more thorough grounding in the facts of life, and this is opening the door for lecturers like Jiang who advocate a radically different approach. Last year, the national government began issuing certifications to sex education lecturers, and it has already issued more than 330 licenses.

This Chinese Startup Is Bringing AI to Heart Disease Treatment — The Information $$ Shukun uses software, a database of millions of images of healthy and diseased hearts and machine learning algorithms to make heart CT scans more accurate. The company hopes its product will help doctors diagnose a heart patient’s condition and plan surgery faster than they can now.