China Tariff Day In DC; Party Leads Everything; Trump Shifting Taiwan Policy?; Jokhang Fire; Best Buy Bids Bye Bye To Huawei
|Bill Bishop||Mar 22, 2018|
Happy China tariff day!
I hear the announcement will be this afternoon at 5 PM, and the number is $50 Billion, on traded goods, a big number but much more modest than it might have been.
Enjoy your day, and thanks for reading.
The Essential Eight
1. Trump To Announce Tariffs On China Today
The measures will be targeted at imported Chinese goods in as many as 100 categories — hitting everything from shoes and clothing to consumer electronics — and will impose restrictions on Chinese investments in the United States, people briefed on the measures said.
Mr. Trump will instruct the Treasury Department to pursue restrictions on certain types of Chinese investments to counter China’s ambitious industrial policy, which aims to dominate cutting-edge sectors like artificial intelligence and mobile technology, officials said...
Last August, Mr. Trump ordered an investigation into four types of Chinese trade practices, including requiring companies to share trade secrets to gain access to the Chinese market, forcing them to license their technology in China at below-market rates and cyberintrusions to steal technology. China also uses state funds to buy American high-tech companies.
On Wednesday, a senior official at the United States trade representative’s office said the investigation, which is now complete, found ample evidence of abuses in all these areas. The official said China had not changed its behavior, despite years of negotiations in the World Trade Organization and economic dialogues with the last three administrations.
If anything, the administration said, its failure to honor the obligations it made when it joined the World Trade Organization has gotten worse.
Why it matters: Trump forced his team to go big. Corporate America is nervous, wondering what the Chinese are going to do to retaliate. This could start a tit-for-tat trade battle between the world's two largest economies, with unknowable economic consequences.
Behind the scenes: This is the first time Trump's team has crafted policy through a proper interagency process to match his most aggressive rhetoric. Trump’s team — which has been bitterly divided on trade — agreed on this action more than they have any other so far.
Both nationalists and globalists on Trump’s team agree China is a bad actor, and has got away with murder for decades under presidents of both parties. They agree China needs to be punished for stealing American intellectual property.
In Wednesday’s statement, the [Commerce] ministry called the U.S. a repeat abuser of international trade rules and accused it of undermining the stability of the global trade system.
The ministry also urged the U.S. to provide Chinese companies with a “fair and stable international trade environment,” and rectify its previous “misconduct” in anti-subsidy investigations on Chinese exports.
China blamed U.S. export restrictions for its record trade surplus with the United States, but expressed hope that a solution can be found to settle trade issues between the world’s two biggest economies as U.S. tariffs loom.
Beijing was bracing on Thursday for an announcement from U.S. President Donald Trump of tariffs
Mnuchin also told Reuters that the administration would keep a dialogue open with senior government officials in Beijing to try to open China’s economy to U.S. companies and help shrink a gaping U.S. trade deficit.
“Our objective is to reduce it by us selling more goods to them, not us importing less goods,” Mnuchin said. “So I think to the extent they open up their markets on a free and fair reciprocal basis, we’ll reduce the trade deficit. That’s our objective.”...
Leaving open the possibility that Beijing can forestall implementation of what is to be announced today?
“I think when the president makes his decision, we’re going to move forward with that decision, but we’ll be open to listening to commitments that they may be willing to make,” Mnuchin said.
Mnuchin said smaller, private discussions with high-ranking Chinese officials will likely prove more productive than the large, public U.S.-China dialogues, such as the Comprehensive Economic Dialogue meetings last July.
“I don’t think the president is looking for a trade war, but he won’t back down from an issue he’s been talking about, and believed in, for 40 years,” said former White House Chief of Staff Reince Priebus, in an interview with the South China Morning Post at the Credit Suisse Asian Investment Conference in Hong Kong. “This is a signature issue that he’s not going to let go of. He’s like a dog with a bone on this trade issue.”
China has been a good student of international trade law and is a formidable foe for the US at the WTO.
This article builds from original fieldwork to show what lies behind China’s remarkably successful use of international trade law to take on the United States and Europe. The World Trade Organization (WTO) is unique in China’s international relations as it is the only forum where China, with its anti-legalist traditions, has resolved its disputes through law and the use of third party dispute settlement. After China acceded to the WTO in 2001, it invested massively in building trade law capacity to transform itself and defend itself externally. Through these investments and its increased market power, China became a serious rival to the U.S. and Europe in the development and enforcement of international trade law. This article provides the most complete account of this important development, which has had significant political impacts within the United States and Europe. The article first explains China’s significant trade law capacity-building efforts in government, academia, law firms, and business. It then assesses the broader implications for the international trade legal order. It shows that global economic order itself is at stake, affecting citizens around the globe. The article builds from research involving over a decade of original fieldwork in China, Washington D.C., Brussels, and Geneva.
2. Party Leadership Over Everything
The Party will command everything, though the re-org was likely tightly held and so there must be much shock and uncertainty inside the system right now.
Remember, Xi has been very vocal that “党政军民学，东南西北中，党是领导一切的 the party, government, military, society, education, north, south, east, west—the party leads everything”.
Four of the party’s “leading groups” – on financial and economic affairs, cybersecurity, reforms and foreign affairs – have been upgraded to become commissions.
“The purpose is to strengthen the party’s concentrated leadership in major affairs that concerns the party and the state,” according to the statement.
All four of those groups are chaired by Xi, and the reforms and cybersecurity bodies were set up after he took the party’s top job in 2012.
“These leading groups were more like a temporary arrangement, and the commissions will obviously have a higher authority,” said Li Tuo, a politics professor at the Chinese Academy of Governance, the central government’s top institute
Turning these key leading group into commissions, but keeping them under the Party not the State, as appears is happening, is significant.
The plan calls for subsuming management of civil servants under the party’s personnel department and giving party policy-making committees—used by Mr. Xi to dictate economic and foreign policies—outright authority over government agencies that carry out those plans. The party will also take full control over supervising religion and managing policies governing Tibetans and other minority groups...
Overall, the goal is to “strengthen the party’s ability” to set and implement policy and “ensure that the party’s leadership extends over everything,” said the directive issued by the party’s Central Committee...
The directive also calls for upgrading some of the party’s policy-making panels, known as “central leading groups,” into commissions—effectively placing them over regular government ministries. Mr. Xi heads these groups and has used them to accrue decision-making powers over economic, financial and cyberspace policies, as well as foreign affairs.
The Central Politics and Law Commission was once an extremely powerful body, and until 2012 was run by then security tsar Zhou Yongkang. But after his retirement, and subsequent expulsion from the party and imprisonment on corruption charges, the organisation was downgraded.
Now that is all set to change, as three coordination groups, with responsibility for the maintenance of law and order, social stability and the Falun Gong crackdown, will be merged into it, according to the plan released by Xinhua on Wednesday...
Under the plan, which was approved by the party’s 200-strong Central Committee in late February, the commission will be responsible for coordinating inter-agency work on upholding law and order, consolidating information and intelligence related to domestic security, coordinating the handling of major incidents, analysing and preventing social stability risks, and formulating an anti-cult policy.
A central leading group on education will be established to enhance the CPC Central Committee's centralized and unified leadership in the area, speeding up modernization of China's educational system and meeting the people's demands for education.
A new Party School of the CPC Central Committee will be established with the merger of the current Party School of the CPC Central Committee and the Chinese Academy of Governance.
The Publicity Department of the CPC Central Committee will take charge in the unified leadership over media and published works, and also will administer movie issues, including the import and export of films.
The National People's Congress, China's top legislature, will be reformed with the creation of a social building committee and the renaming of two other committees, according to the plan.
3. More On China’s Reorganized Propaganda System
Former CCTV President Shen Haixiong was appointed to lead the organization.
China Radio International is a Chinese news agency broadcasting in more than 60 languages.
The new platform will come under the Publicity Department, and is tasked with the enhancement of China’s international broadcasting capacities and promoting the convergence of the three platforms.
Internally, the three entities will keep their names. CGTN is a part of the new media group.
The creation of the Central Radio and Television Network (中央广播电视总台). Adherence to correct guidance of public opinion (坚持正确舆论导向), placing a high priority on the building and innovation of dissemination methods (传播手段), raising the dissemination force (传播力), guiding force (引导力), influence (影响力) and credibility (公信力) of news and public opinion — these are the key starting points in firmly grasping the right of leadership in ideological work. In order to strengthen the Party’s concentrated development and management of important public opinion positions, in order to enhance overall strengthen in radio and television media, in order to promote the integrated development of radio, television and newly emerging media, accelerating the disseminating capacity of international broadcasting, China Central Television (China Global Television Network), China National Radio and China Radio International will be combined to form the Central Radio and Television Network, which will serve as an institution (事业单位) directly under the State Council, returning to the leadership of the Central Propaganda Department.
Its principal responsibilities will be to propagate the theories, political line and policies of the Party; to plan and manage major propaganda reports; to organize the production of radio and television; to produce and broadcast premium radio and television products; to channel hot social topics; to strengthen and improve supervision by public opinion (舆论监督), to promote the integrated development of multimedia; to strengthen the building of international broadcasting capacity; to tell China’s story well.
China has brought its frontier troops, including those guarding its border with India, directly under the military command removing civilian control over them, a state-run daily reported today. Communist Party of China (CPC), headed by President Xi Jinping, announced complete withdrawal of civilian-oriented frontier defence troops from the People’s Armed Police (PAP)
4. US State Department Official In Taiwan, Another On The Way
Something is happening here, what it is is not exactly clear, but it sure looks like there is a significant shift on Taiwan policy underway in the Trump Administration. The appointment of officials with deep ties to Taiwan and the possibility of more, like Bolton, joining could presage a much more significant shift in US policy. As a very savvy reader told me this morning: “watch this space”.
Alex Wong (黃之瀚), deputy assistant secretary at the department’s Bureau of East Asian and Pacific Affairs, made the remarks in a speech at the 50th annual Hsieh Nien Fan (謝年飯) banquet hosted by the American Chamber of Commerce (AmCham) in Taipei…
Taiwan’s constitutional democracy is an example for the entire Indo-Pacific region, because dynamic, broad-based and sustainable economic growth can only arise in the stable and certain conditions created under a constitutional government, Wong said.
“For that example to have the most force, for that example to do the most good, Taiwan can no longer be excluded unjustly from international fora,” Wong said…
“The final thing I am certain of is the US’ support for Taiwan,” Wong said, adding that Washington would continue to bolster Taiwan’s ability to defend its democracy and ensure that its people can travel on their chosen path free from coercion.
Is Wong the most senior State Department official to visit Taiwan since normalization?
In Taipei, Mr. Wong praised Taiwan’s democratic path and took a shot at Mr. Xi’s tightening grip on power. “Dynamic, broad-based and sustainable growth can never hinge on the whim of a dictator,” he said…
Mr. Trump has nominated Mike Pompeo, the director of the Central Intelligence Agency, who is widely viewed as pro-Taiwan and tough on China, to succeed Rex W. Tillerson as secretary of state. And the confirmation of Randall Schriver, who is also seen as pro-Taiwanese, as assistant secretary of defense for Asian and Pacific security affairs also suggested a closer and more open relationship with Taiwan.
Ms. Tsai said Wednesday night that she was “grateful to the Trump administration” for pushing ahead with the Taiwan Travel Act.
The Global Times said in an editorial China had to “strike back” against the law, for example by pressuring the United States in other areas of bilateral cooperation like over North Korea and Iran.
“The mainland must also prepare itself for a direct military clash in the Taiwan Straits. It needs to make clear that escalation of U.S.-Taiwan official exchanges will bring serious consequences to Taiwan,” said the paper, which is published by the ruling Communist Party’s official People’s Daily.
Underscoring China’s concerns, Taiwan’s government and the de facto U.S. embassy on the island said a second senior U.S. official would be visiting Taiwan this week, Deputy Assistant Secretary of Commerce for Manufacturing Ian Steff.
In Beijing, foreign ministry spokeswoman Hua Chunying reiterated China’s opposition to official contacts between the two, urging people to reread Xi’s comments from earlier in the week.
"Despite coming from the Department of State, Wong's government rank is not very high. Exactly how much sway he holds in US' Asia policy development isn't known but his visit to Taiwan has symbolic implications. Taiwan may even view it as a breakthrough," Zhang Wensheng, a professor at the Taiwan Research Institute of Xiamen University, told the Global Times.
Analysts fear that Wong's visit is part of efforts by Washington and Taipei to pave the way for higher-level meetings.
Beijing is also concerned that other countries, such as Japan and European nations, might follow suit and establish high-level official exchanges with Taiwan.
"One of the options is to ban US officials that have visited Taiwan from visiting the Chinese mainland. Beijing can also downgrade official communications with specific US bodies that interact with Taiwan, for example, reducing or suspending interaction with the Bureau of East Asian and Pacific Affairs," Zhang said.
5. Silence on the Jokhang Fire In Lhasa
On February 17 there was a large fire at Lhasa’s Jokhang Temple, the holiest temple in Tibet. The Chinese government has enforced a ban on discussion of the true damage to the temple and its treasures. We visited it in 2014 and 2015; it is beautiful but very cramped, and the risk of fire was clear.
The Jokhang and its principal statue, the Jowo, are thus precious not just for foreigners, architectural historians and specialists in Buddhism as rare witnesses to ancient Buddhist architecture, but as the quintessential symbol for Tibetan Buddhists of their civilisation. The depth of this feeling is captured by this message sent by one Tibetan in Tibet when the news of the fire first broke: “On the evening of the second day of the New Year, while all black-headed Tibetans were celebrating the New Year joyously, a sudden misfortune brought them down. With their eyes filled with terror and fixed on their phones, their thoughts turned towards Lhasa, the land of gods, they spent a horrible and unending night in silence, full of fear and dread, wondering whether they would hear the awful news that could make their hearts explode”...
Whatever may be the case, over a month after the fire, almost no information has filtered out: the temple was reopened briefly to pilgrims after a few days, but not the part that includes the chapel itself or the upper sections. One official picture was published showing the Jowo, and a few others were circulated on social media, but experts who have studied them have pointed out new features or incongruous items in the picture, suggesting that much has been hidden.
6. No Way For Huawei In The USA
Even Best Buy wants nothing to do with the firm…
Best Buy will stop selling Huawei’s devices over the next few weeks, according to the person with knowledge of the matter, a setback for the Chinese telecommunications giant as it looks to expand in the U.S. market.
Two people familiar with the memo’s creation say the White House is worried that U.S. wireless carriers lack the financial muscle to build four separate networks and that China will beat the U.S. to deploying the new technology unless Washington takes drastic action. In this context, the Broadcom deal’s scuttling stands as an escalation of hostilities between the two countries that some have compared to the beginning of the Cold War. “This is a major concern,” says a senior U.S. telecom executive involved in 5G policy discussions. “This is the new battleground, not F-35 fighters.”...
One reason American policymakers are so mindful of this sort of scenario is that U.S. intelligence agencies have routinely exploited domestic companies for exactly the same purpose. AT&T so freely aided National Security Agency eavesdropping that the agency praised it for an “extreme willingness to help” in a document leaked by former contractor Edward Snowden and published by the New York Times. Suspicions of Huawei’s ties to the Chinese government appear in the leaked Snowden files, but so do frustrations that Huawei encryption was too good for U.S. spies to crack. “The irony,” a Huawei executive said at the time, “is that exactly what they are doing to us is what they have always charged that the Chinese are doing through us.”
7. PRC Punters May Be Able To Trade JD.com And Alibaba CDRs By June
Beijing has long wanted to bring the overseas-listed tech champions back home. The CDRs are a first step. Some founders still prefer overseas listings and fundraising offshore in US dollars because that way much of their net worth is already outside of China…
U.S-listed tech giants Alibaba Group Holding Ltd. and JD.com Inc. are expected to become the first companies to make secondary listings on the mainland market through the issue of China Depositary Receipts (CDRs), several sources close to the matter told Caixin.
New York Stock Exchange-listed Alibaba and Nasdaq-listed JD.com may be able to issue and trade CDRs on domestic markets as early as June, as mainland authorities move to bring the stocks of China’s high-tech leaders home.
Alibaba has picked Citic Securities, China’s largest brokerage firm, as one of its sponsors for the CDR issuance, a person close to Alibaba told Caixin. China International Capital Corp. (CICC) is also seeking to become an Alibaba sponsor, the source said.
8. Naspers Turns $32 Million Into $175 Billion
Is Naspers’ investment in Tencent the greatest corporate VC investment of all time?
The company is selling $10.6 billion of shares in Tencent Holdings Ltd., equal to 2 percent of the stock in the Chinese operator of the WeChat messaging service, the Cape Town-based company said in a statement Thursday.
The sale comes hours after Tencent, Asia’s most valuable company, warned it will sacrifice short-term margins, spending on content and technology in pursuit of growth. While the forecast led to a 5 percent slump in Tencent’s stock, Naspers said it still considers the company “to be one of the very best growth enterprises in any industry in the world, managed by an exceptionally able team.”..
Naspers might have remained an obscure publisher of South African newspapers and operator of pay-TV services if not for its decision in 2001 to invest $32 million in Tencent, a then little-known Chinese startup. The stake is now worth $175 billion and given that Naspers has a market value of about $125.5 billion, it means investors place no value on Naspers’ other operations and investments.
Business, Economy, Finance And Trade
China Follows U.S. in Raising Short-Term Borrowing Costs - Caixin Global The central bank’s Thursday move is aimed at keeping the difference between Chinese and U.S. interest rate rates stable to support the Chinese currency’s value and head off abrupt rises in capital outflows, ANZ Research economists Betty Wang and Raymond Yeung said in a note.
China’s young consumers are snubbing foreign brands amid growing national pride, says Credit Suisse | South China Morning Post The old adage that foreign brands are superior no longer holds true for young Chinese shoppers, who are increasingly showing a “domestic brand bias” amid “a degree of nationalism” in the world’s biggest consumer market, the study found. More than 90 per cent of Chinese consumers in the 18 to 29 age bracket said they would prefer to buy domestic home appliance brands in the next six to 12 months, Credit Suisse’s eighth annual emerging consumer survey found.
China's HNA Group clears $475 million fuel bill - Reuters Facing a cash crunch following $50 billion in acquisitions, the aviation-to-financial services group settled the bill last week with a cash transfer to China National Aviation Fuel Group Ltd (CNAF), said one of the sources. In an email to Reuters, an HNA Group spokesman said: “Hainan Airlines Holdings Co. Ltd has always cherished its sound cooperative relationship with China National Aviation Fuel Group Limited and all business is being carried out as usual.”
Politics, Law And Ideology
Chinese rights activists fearful as policeman takes charge of legal affairs - Reuters: Chinese rights lawyers and activists say the promotion on Monday of former police official Fu Zhenghua to head China’s justice ministry signals an even deeper freeze on attempts to use the country’s legal system to defend against rights abuses.
谢伏瞻出任中国社会科学院院长--人民网 Xie Fuzhan, most recently Henan Provincial Secretary, is the new head of CASS. He was in the news after the 19th Party Congress for leading officials to pay homage to a tree Xi had planted in Henan.
Shanghai orders citizens to give up their local residence rights if they have a foreign green card - South China Morning Post Shanghai has become the first mainland city to enforce a ban on its registered citizens from holding permanent residency in other countries – for example the US green card. The new rule was announced on the municipal public security authority’s website earlier this month and said Chinese citizens “settling down abroad or obtaining other nationalities” should report to the police to revoke their permanent residency, which is known as hukou.
Foreign and Military Affairs
A Holy Week deal between Rome and Beijing? - UCA News One of the biggest critics of a potential deal between Beijing and the Holy See on the appointment of bishops, Hong Kong-based Cardinal Joseph Zen Ze-kuin, believes that the landmark agreement could be signed as early as March 23. In a lengthy blog post that attacked his growing list of critics, the retired prelate, 86, noted that such an agreement is rumored to be inked on "March 23 or 27." And while he claimed to remain unsure if a final agreement could be reached, he reiterated recent promises to respect any deals reached by Pope Francis and fall silent if it is completed.
China influence debate needs to calm down amid stigma - Sydney Morning Herald More than 30 China scholars in Australia, including world-renowned sinologist Geremie Barme, have urged the Turnbull government to delay its foreign influence legislation amid warnings that Chinese Australians are being stigmatised.
China provides tracking system for Pakistan’s missile programme - South China Morning Post Tracking system could allow Islamabad to speed up development of missile that can target multiple cities or military sites
India's Seychelles military base plan hits choppy waters - Al Jazeera India's plans for building military facilities in Seychelles have hit choppy waters, with the Indian Ocean island's political opposition blocking efforts to ratify a deal reached by the two governments. Seychelles and India signed a 20-year agreement in January to build an airstrip and a jetty for its navy on Assumption Island.
China’s Private Army: Protecting the New Silk Road | The Diplomat--By Alessandro Arduino, author of China’s Private Army: Protecting the New Silk Road—There are more than 5,000 Chinese PSCs in business today. Of these, fewer than 20 have the capability to operate in foreign countries and most of the time they subcontract international and local contractors. These companies have approximately several hundred to several thousands of unarmed security personnel. Their footprint abroad is still relatively small and Chinese law prohibits them from using weapons outside of China. Two important questions are therefore: when does the number of Chinese personnel in a foreign country become one too many? And will the Chinese law on firearms be changed in favor of allowing PSCs to project more assertive power?
China’s Trojan Horse Human Rights Resolution - The Diplomat A China-backed UN resolution on “mutually beneficial cooperation” might not be all it seems.
Tech And Media
Forget Millennials, the Internet’s Most Wanted Users Are Older—and Poorer-WSJ $$ “The Chinese internet is experiencing the third wave of [a] demographic dividend,” said Wang Hua, a partner at venture-capital firm Sinovation Ventures, at a speech in December. The first wave, he said, were early adopters, while the second was driven by young people in major cities. “About half of the Chinese population is not yet heavy internet users, and they’re the third wave of the demographic dividend,” he says. “And they’re usually the ones that are in charge of a family’s daily consumption.”
Credit Suisse: China will win the AI race due to lack of 'serious laws' on data protection - CNBC China will be number one in artificial intelligence due to the country's lack of "serious law" about data protection, said Dong Tao, vice chairman for Greater China at Credit Suisse Private Banking Asia Pacific.
Former CAA China Boss Jonah Greenberg on His New Beijing Production Company | Hollywood Reporter After seven years as head of CAA China, consummate Beijing insider Jonah Greenberg is branching out on his own. Greenberg exited CAA in February to launch the Beijing-based boutique development and production company Salty Pictures. The transition from agent to producer is something of a homecoming for the 42-year-old executive. A fluent Mandarin speaker, Greenberg got his start in the Chinese industry producing local-language projects for Chinese film company Ming Productions in the early 2000s.
New restrictions on online video were just announced, per the editor of PingWest:
China just banned videos which fall into re-edits of a movie/"xxx movie in 3 minutes" styles and such. This affects Youku, Bilibili and many other online video sites. Video source will include movie, TV drama and basically all legally published offline and online video content.March 22, 2018
Energy, Environment, Science And Health
Hong Kong shops defy ban on trade in pangolin scales - AFP The reclusive pangolin, also known as the scaly anteater, has become the most trafficked mammal on earth due to soaring demand in China and Vietnam. While its scales are prized for their supposed medicinal properties in treating everything from acne to liver disease and cancer, its flesh is considered a delicacy. Trade in the animals was banned in 2016 to protect remaining populations, but AFP found traditional Chinese medicine shops in Hong Kong still selling bags of pangolin scales, stashed away out of sight.