Happy Tuesday from Wyoming..as promised this week’s issues are shorter and fewer in number. There should be one more this week and then two next week, before returning to normal publishing in the New Year.

The Essential Eight

1. Central Economic Work Conference To Pull Back From Deleveraging

Comment: This does not mean easier times for financial institutions or their executives, but is a recognition of the economy's unbreakable addiction to debt..and another scoop from Lingling Wei.

China, Seeking Growth, Softens Focus on Cutting Debt - WSJ:

In the blueprint to be unveiled on Wednesday, past talk of bringing down debt, the priority for the past two years, is gone in favor of a pledge to just control the rise in borrowing, according to these people...
China’s ruling 25-member Politburo decided on the shift on Dec. 8 as it set the agenda for the annual Central Economic Work Conference this week, where economic priorities are laid out in greater detail.
A statement after the Politburo meeting listed control of the “macro-leverage ratio,” or the country’s debt-to-GDP ratio, as a major piece of the government’s effort to fend off risks next year. That contrasted with its statement ahead of last year’s economic conference, which described debt reduction as a key task.

2. Trump Administration Updates National Security Strategy, Declares End To "China Fantasy"

Comment: Talk is cheap, the real question is whether the NSS signals the start of a new era of US approach to China. Certainly this reframing of America's engagement policy indicates an overdue recognition of reality:

For decades, U.S. policy was rooted in the belief that support for China’s rise and for its integration into the post-war international order would liberalize China. Contrary to our hopes, China expanded its power at the expense of the sovereignty of others. China gathers and exploits data on an unrivaled scale and spreads features of its authoritarian system, including corruption and the use of surveillance. It is building the most capable and well-funded military in the world, after our own. Its nuclear arsenal is growing and diversifying. Part of China’s military modernization and economic expansion is due to its access to the U.S. innovation economy, including America’s world-class universities.

President Donald J. Trump Announces a National Security Strategy to Advance America's Interests | The White House

The PDF of the public version of the NSS

Comment: But much of the strategy around China looks incoherent, as Mike Green points out in The NSS and the China Challenge – Foreign Policy - Mike Green:

The second shortcoming in ways and means is the utter lack of a coherent trade strategy. The NSS identifies the problem posed by China’s aggressive economic policies, but the solution set is far too unilateral. The administration will rightly roll out a series of punitive duties against China for forced technology transfer and intellectual property violations in the coming months, and then Beijing will retaliate against major U.S. firms. What then?
The answer has to be concerted pressure on China in conjunction with our allies. There was a hint of what is possible in the Japanese and EU statements of support for U.S. actions against China under Section 301 last week, but much more collective effort is needed. It was bad enough that the administration withdrew from the Trans-Pacific Partnership (TPP) and took the United States out of the rule-making game in Asia. Now the president risks being even further isolated and outflanked by China as he puts NAFTA, KORUS, and the WTO itself at risk for no appreciable gain for American exporters (quite the opposite, since the loss of market share would be a blow, especially for U.S. farmers and cattlemen).

China committed to global peace, development, order: Chinese embassy in Washington - Xinhua:

For Beijing and Washington, cooperation leads to win-win outcomes whereas confrontation results in mutual losses, the spokesperson said, adding that the United State would be better advised to get accustomed to China's development and accept it. The official suggested it is high time that the United States abandoned its outdated zero-sum mentality and worked with China on a common goal of prosperity and progress for all.

外交部敦促美国停止故意歪曲中方战略意图 --国际--人民网:

华春莹回应道：中国人民对自己选择的发展道路中国特色社会主义充满信心。历史和现实已经证明，这是一条符合中国国情、实现国家富强和人民幸福的成功之路。中国取得的发展成就是举世公认的，任何人、任何国家想歪曲事实都只能是白费心机。任何人、任何国家都阻挡不了中国人民沿着中国特色社会主义道路坚定不移地走下去，取得更大的成就。

A useful annotation of the China sections of the NSS-China policy in Trump’s new National Security Strategy: Excerpts and commentary – Transpacifica

3. Focus On CCP Influence Operations Going Mainstream

How China’s “sharp power” is muting criticism abroad - At the sharp end - The Economist Cover Story:

China’s approach could be called “sharp power”. It stops well short of the hard power, wielded through military force or economic muscle; but it is distinct from the soft attraction of culture and values, and more malign. Sharp power is a term coined by the National Endowment for Democracy (NED), a foundation and think-tank in Washington, DC, funded mainly by Congress. It works by manipulation and pressure. Anne-Marie Brady of the University of Canterbury in New Zealand refers to China’s intrusions as a “new global battle” to “guide, buy or coerce political influence”. The result is different from the cold war—less dangerous, but harder to deal with. Whereas the Soviet Union and the West were sworn enemies, China is a keenly courted trading partner that is investing huge sums beyond its borders (see chart 1). This naturally gives it influence, which it is using to shape debate abroad in areas where it wants to muzzle criticism, such as its political system, human-rights abuses and expansive territorial claims.

West grows wary of China’s influence game - FT:

“Chinese operations are much more subtle, less targeted and more about long-term influence-building than Russian operations,” says Christopher Johnson, the former head of the China desk at the Central Intelligence Agency and now a senior fellow at the Center for Strategic and International Studies in Washington.
“But as we start to realise that China intends to socialise us rather than become more like us, the debate in the west has taken on a harder edge and people are asking whether 40 years of engagement might have been a sham.”

Comment: Another in an ongoing series of pieces from Josh Rogin on PRC influence in the US. This one lacks a smoking gun but is still interesting—How China got a U.S. senator to do its political bidding - The Washington Post:

In Washington, political and policy leaders are just waking up to the scope and scale of China’s efforts to interfere. But if the Chinese government can claim U.S. lawmakers as defenders of its repression in Tibet, it’s clear the problem is much worse than we realize.

CPC’s role cannot be detached from Chinese influence - Global Times:

Some China observers in the West are emphasizing what they say is a "CPC influence operation," not "Chinese influence" and warned it is a dangerous conflation to mix the two conceptions.

Looks like The Global Times reads my tweets. This is what I wrote a couple of days ago:

It is a mistake to talk about “Chinese influence”. That is a dangerous conflation that can spark anti-Chinese sentiment. The issue is “Chinese Communist Party influence operations”. Warning against those is not anti-Chinese. Don’t be lazy, and don’t let CCP media conflate the two

Calling it "Chinese influence" raises the risks of a racist backlash, and given the history of anti-Chinese racism in the West, especially in America, it is important to try to separate the Communist Party influence work from broader racial overtones.

The upper Han - Who is Chinese? - The Economist:

Ethnicity is central to China’s national identity. It is the Han, 1.2bn of them in mainland China alone, that most people refer to as “Chinese”, rather than the country’s minorities, numbering 110m people. Ethnicity and nationality have become almost interchangeable for China’s Han, says James Leibold of La Trobe University in Melbourne, Australia. That conflation is of fundamental importance. It defines the relations between the Han and other ethnic groups. By narrowing its legal labour market almost entirely to people of Han descent, ethnicity is shaping the country’s economy and development. And it strains foreign relations, too. Even ethnic Han whose families left for other countries generations ago are often regarded as part of a coherent national group, both by China’s government and people.

David Cameron given special dispensation to broker talks between Britain and China in new role leading £750m investment fund:

He is expected to spend two to three days a month on work for the fund. A spokesman for Mr Cameron said he remained "very proud of his work as Prime Minister launching the ‘Golden Era’ between the UK and China with President Xi.

4. PRC Spies In Taiwan’s Pro-unification New Party? Officials Under Investigation

New Party decries arrest of members - Taipei Times:

Investigation Bureau officers at about 6:30am yesterday raided the homes of New Party spokesman Wang Ping-chung (王炳忠) and party members Hou Han-ting (侯漢廷), Lin Ming-cheng (林明正) and Chen Ssu-chun (陳斯俊) in Taipei and New Taipei City, seizing documents, computers and cellphones, and taking the four to the bureau for questioning on the grounds that they allegedly collected and provided intelligence to the Chinese Communist Party (CCP).

Taiwanese prosecutors search homes of pro-unification New Party officials | South China Morning Post:

Prosecutors searched the homes of four officials from Taiwan’s pro-unification New Party on Tuesday morning before questioning them as “witnesses” in a case involving “violation of the national security law”, judicial authorities said.
While the justice ministry’s Investigation Bureau would not give further details, local media reports said it was related to the case of mainland Chinese man Zhou Hongxu, who is serving a 14-month jail sentence for trying to bribe a diplomat and recruit spies for Beijing.

5. Xinjiang As The Testbed For The Panopticon 2.0

Comment: The Associated Press and the Wall Street Journal have long stories on the suffocating surveillance in Xinjiang. Buzzfeed had a similar story earlier this Fall. Is Xinjiang sui generis or will these technologies and methods be deployed throughout China? My money is on much broader deployment given the stability maintenance needs and the focus from Xi on social governance innovations and the use of technology and big data.

Also, How long until foreigner access to Xinjiang is restricted as it is to Tibet, especially for journalists?

Twelve Days in Xinjiang: How China’s Surveillance State Overwhelms Daily Life - WSJ:

China’s efforts to snuff out a violent separatist movement by some members of the predominantly Muslim Uighur ethnic group have turned the autonomous region of Xinjiang, of which Urumqi is the capital, into a laboratory for high-tech social controls that civil-liberties activists say the government wants to roll out across the country.
It is nearly impossible to move about the region without feeling the unrelenting gaze of the government. Citizens and visitors alike must run a daily gantlet of police checkpoints, surveillance cameras and machines scanning their ID cards, faces, eyeballs and sometimes entire bodies.

AP: Digital police state shackles Chinese minority:

The campaign has been led by Chen Quanguo, a Chinese Communist Party official, who was promoted in 2016 to head Xinjiang after subduing another restive region — Tibet. Chen vowed to hunt down Uighur separatists blamed for attacks that have left hundreds dead, saying authorities would “bury terrorists in the ocean of the people’s war and make them tremble.”
Through rare interviews with Uighurs who recently left China, a review of government procurement contracts and unreported documents, and a trip through southern Xinjiang, the AP pieced together a picture of Chen’s war that’s ostensibly rooting out terror — but instead instilling fear.

6. Carbon Trading Market To Launch As Campaign To Reduce Pollution Continues

China is launching the world’s largest carbon market — Quartz:

In the lead up to the 2015 Paris climate summit, premier Xi Jinping announced China would launch a carbon market in two years. Today (Dec. 19), Xi delivered on his promise, opening up what will become the world’s largest carbon market. If wielded wisely, it could help the world’s biggest emitter of greenhouse gases hit the goals set under the Paris accord and avoid catastrophic climate change.

Five things to know about China’s national carbon market | China Dialogue:

the NDRC today outlined a roadmap for the development of a national-level carbon market over the coming years. In 2018, the legal basis for the ETS is expected to be strengthened and allowances will be allocated to power companies, according to analysis by Energy Foundation China. The market will then enter a trial period in 2019. While many details have yet to be revealed, here are five key facts about the emerging market.

China Announces New Goals for Ambitious Clean Air Campaign - Caixin Global:

China has announced an ambitious plan to phase out coal-fired winter heating systems in dozens of smog-prone northern cities by 2021, but this has been overshadowed by recent chaos linked to coal curbs in these areas.
Twenty eight cities including Beijing, Tianjin and Shijiazhuang, which were identified as “the most polluted” in North China, should stop burning coal for winter heating in urban areas and weed out 60% of the dirty coal used in their rural areas over a four-year period, according to a policy document viewed by Caixin.
The blueprint, dated Dec. 5, was drafted by multiple central government agencies including China’s top economic planner, the National Development and Reform Commission (NDRC), the National Energy Administration and the finance and environmental protection ministries

7. Great Leader Xi For The Young Pioneers

In an inspection of Young Pioneers in Beijing, Fu Zhenbang, Secretary of the Communist Youth League Secretariat, tells the kids that “our Communist Party is a Great Party, the era we are living in is a great era, and Grandpa Xi Jinping is a Great Leader.”

团中央书记处书记:少先队员要热爱党热爱伟大领袖|少先队|少先队员|新时代_新浪新闻:

傅振邦指出，少先队员学习了解党的十九大，重点要记住三句话：中国共产党是伟大的党，我们所处的新时代是伟大的时代，习近平爷爷是伟大的领袖。少先队员要牢记习爷爷的关怀和教导，拥抱新时代，争做好队员，听党的话、跟党走。

8. China Human Rights White Paper

China Focus: White paper hails "remarkable progress" in human rights protection - Xinhua:

A white paper issued by China's State Council Information Office on Friday lauded "remarkable progress" in the law-based protection of human rights over the past five years. According to the white paper, titled "New Progress in the Legal Protection of Human Rights in China," the country has opened a new era of human rights protection.

UN rights chief: China, White House seem 'hostile' on rights - AP:

The U.N.’s human rights chief says China’s Communist Party has taken a “hostile position” on the universality of human rights and that “the rhetoric from the White House” is heading in the same direction.

Politics, Law And Ideology

A Secret Visit and Sino-Tibetan Dialogue | The Diplomat the visit of Samdhong Rinpoche to Gyalthang suggests that something may be brewing in the background. Rumors that his visit may have been facilitated by the newly appointed head of the United Front Works Department, You Quan, increase the possibility of a formal meeting between the two sides sooner than later.

Xi Gets Research Centers to Match His Thought | China Media Project the Central Committee of the Chinese Communist Party has approved the creation of 10 special research centers devoted to “Xi Jinping Thought,” the top leader’s brand new “banner term,” or core political ideas and legacy, introduced at the 19th Party Congress back in October.

Artist Who Filmed Beijing Crackdown Is Reportedly Freed on Bail - The New York Times Ji Feng, a friend, said Mr. Hua [Yong] had been held on suspicion of “gathering the masses to disturb traffic order.” He was released on a form of bail known as “qubao houshen,” which allows the police to continue investigating for up to a year. Often the suspect won’t face charges, but can be monitored and face restrictions on his ability to travel and speak publicly.

Former senior Chinese diplomat Cao Baijun latest to be caught up in anti-graft campaign | South China Morning Post A former senior Chinese diplomat who used to oversee Western Europe and Africa relations has been placed under investigation five years after he left his post, the Communist Party’s anti-graft watchdog said on Sunday.

Foreign and Military Affairs

China set to move into United States’ backyard with national development plan for Grenada | South China Morning Post The Chinese foreign ministry told the South China Morning Post this month that “China Development Bank, at the request of the Grenadian government, is helping them draft a national development strategy”. It said the Grenadian government “assumed the primary responsibility for the development of their own country” and that China was “willing to provide necessary assistance to their economic and social development upon request”.

US and China broach sensitive topic of N Korea regime collapse - FT $$ Meanwhile, South Korean media reported on Monday that China last year conducted a military exercise where it practised taking control of nuclear facilities similar to North Korea’s Yongbyon reactor. China’s ministry of defence did not immediately respond to request for comment.

Chinese air force planes fly through Tsushima Strait for first time - Xinhua Chinese air force planes Monday flew through Tsushima Strait for the first time and conducted drills in international airspace over the Sea of Japan, an air force spokesperson said. The drills, involving bombers, fighters, reconnaissance planes and other aircraft, were aimed to examine the high-sea combat ability of the air force, said Shen Jinke, spokesman for the Chinese People's Liberation Army (PLA) Air Force.

Hong Kong, Macao

Carrie Lam throws support behind college that removed two students from graduation ceremony over anthem disrespect | South China Morning Post Hong Kong’s leader on Monday weighed in on the brewing row over two college students being kicked out of their graduation ceremony for refusing to stand for the national anthem, affirming the school’s handling of the case.

Tech And Media

Bytedance-Musical.ly Merger Ushers in New Age for Content Companies While the reality is that most Chinese tech companies are still locally focused, more and more Chinese companies are trying to go global by developing cross-border teams and acquiring assets. The globalization effort of Alibaba and Tencent are well-documented. Cheetah Mobile has produced many top-ranking utility apps outside of China. Xiaomi has become the No. 1 smartphone brand in India. Apus’ utility apps have experienced rapid growth worldwide. Garena (NYSE: SE), the highest-valued publicly traded Internet company in Southeast Asia, was founded a China-born entrepreneur and took inspirations from Tencent. Wish, the No. 2 shopping app in the US, was co-founded by China-born engineer who adapted a model partially inspired by Alibaba’s Taobao to the US and other markets.

Apple Watch Series 3 eligible for refund in China due to LTE setbacks · TechNode The ban is essentially caused by the new technology that Apple uses in the Series 3 called an eSIM, a tiny chip that allows users to subscribe to any carrier they choose, and thus loosing the government’s ability in tracking the users.

Google’s Hardware Push Complicates Ties With China — The Information To build the new team in Shanghai, Google hired away part of the founding team from Beijing-based software startup Jide Technology, which was founded by three former Google engineers, according to people familiar with the deal. Jide designs Android-based personal computers and operating systems that integrate with smartphones.

Energy, Environment, Science And Health

Science journal Nature recognizes Chinese quantum pioneer - China Daily Pan Jianwei, a leading Chinese quantum scientist, has been listed by science magazine Nature as one of the 10 "people who mattered" in 2017. Nature said Pan, the so-called father of quantum, "has been widely hailed for leading China to the forefront of long-distance quantum communication: harnessing quantum laws to transmit information securely".

Education

China to further improve ideological, political work at colleges - Xinhua: A symposium on further improving the ideological and political work at colleges is held in Beijing, capital of China, Dec. 14, 2017, on the occasion of the anniversary of Chinese President Xi Jinping's remarks at a national conference on ideological and political work in China's universities and colleges in December 2016. Chinese Vice Premier Liu Yandong presided over the symposium. Chen Xi, head of the Organization Department of the Communist Party of China (CPC) Central Committee, attended the symposium. Huang Kunming, head of the CPC Central Committee Publicity Department, delivered a speech at the symposium.

Central Economic Work Conference To Pull Bac…

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