Wang Yi at the UN; Fu Zhenghua sentenced; Nvidia China sales

Summary of today’s Essential Eight:

1. Wang Yi at the UN - Among Wang YI’s meetings was one with Russian Foreign Minister Lavrov. There was nothing in the readout from the Lavrov meeting that would indicate a shift in the PRC position in the Russian invasion of Ukraine. Wang will meet US Secretary of State Blinken Friday.

2. Two more sentences in “Sun Lijun clique” case - Authorities are wrapping up the Sun Lijun "clique" case before the 20th. Today both Fu Zhenghua and Wang Like were sentenced death with a two year reprieve, and both releases said they had no possibility of parole or reduction in sentence. Sun has yet to be sentenced but it feels like it will happen imminently. Given his leadership role he should at least get life in jail, if not the actual death penalty, though he was promoted for years by people above him in the system so perhaps he performed “meritorious service” and ratted out other senior officials.

3. Weekly State Council Executive Meeting - This meeting did not offer any significant economic boosts, among other things it reviewed reports of the inspection teams sent to several provinces to check on implementation of economic stabilization measures, promised more administrative reforms, and cut toll fees for freight trucks by 10% and government-designated cargo port charges by 20% in Q4.

4. Why this economic downturn may be different - Two good pieces, one from Logan Wright and another from “China Charts”. The real estate boom is over and it is not coming back any time soon, if ever. That is the outcome the policymakers have been targeting for years, though they may have been overconfident in their ability to rein in real estate without creating dangerous domino effects throughout the economy. We are all waiting for the 20th Party Congress outcomes, but I see no reason to think there will be outcomes from that meeting that reverse the trajectory of the real estate sector.

5. PCAOB Audit inspections in Hong Kong - The trial audits of PRC firms are underway, so far the signs are positive that the PRC side understands the concessions needed to keep the PRC firms listed in the US, but as the PCAOB chair said today “The Holding Foreign Companies Accountable Act demands complete access. The agreement we signed with our Chinese counterparts guarantees complete access. And the PCAOB will accept nothing less than complete access when we make our determinations by the end of this year. When I say no loopholes and no exceptions, I mean none.” Having a law that allows little room for concessions has been very helpful to US negotiators.

6. Nvidia CEO does not sound too worried about China sales - The CEO told Caixin that ““There will be versions that are going to be not restricted and serve the needs of the vast majority of our market very comfortably” and he told Stratechery that “The limitations and the restrictions are very specific to a combination of computation level and multi-chip interconnection level. That restriction gives us plenty of envelope to go and run our business and for the vast majority of our customers in China”.

7. US-PRC scientific relations - There are two new reports of note, one on scientists who worked at Los Alamos labs and then returned to the PRC and contributed to PRC weapons development, and another on the outflow of Chinese scientists from the US.

8. Another scandal in the film and TV sector

Thanks for reading.