China Trade Week; Foreign Affairs Commission of the CPC Central Committee Meets; Zhao Leji Reiterates CCDI's Political Disciplinarian Role; Political Re-education Camps In Xinjiang; Bloomberg's New China Forum
President Trump's Season Two version of "Shark Week" appears to be "China Trade Week"...
Liu He arrives in DC today to an angry mood towards China and confusion about what President Trump wants and will do next. Loyal Trump supporters are turning on him in the media as his ZTE flip-flop has yet to be publicly paired with any meaningful concessions by China.
I hear Liu He is arriving with an open checkbook to buy down the deficit but that progress on anything structural will be much harder. Trump tweeted about the negotiations earlier today:
Trade negotiations are continuing with China. They have been making hundreds of billions of dollars a year from the U.S., for many years. Stay tuned!May 15, 2018
Thanks for reading, and stay tuned!
The Essential Eight
1. China Trade Week
The president has now greenlighted a fast-moving negotiation that could affect a number of U.S. industries and companies.
In exchange for easing restrictions on ZTE, U.S. officials are pressing China to relax tariffs on agricultural products and allow a U.S. technology company, Qualcomm, to acquire NXP Semiconductors. Chinese officials had effectively blocked that deal by imposing regulatory hurdles, U.S. officials familiar with the matter said..
The president does not view easing penalties on ZTE as a major concession, according to one current and one former administration official, both of whom spoke on the condition of anonymity given the sensitivity of the subject.
However, lawmakers from both parties Monday warned that the action would undermine U.S. national security and erode the U.S. position at the outset of high-stakes trade talks with China...
But talks with China had bogged down in recent days, a potential problem for Trump because he needs Chinese help with the upcoming North Korea summit.
The president has asked several White House advisers recently what the Chinese want and what must be done to advance the trade talks, according to two people briefed on the discussions, who spoke on the condition of anonymity to talk about sensitive matters.
Trump is determined to make a deal with China and has been told in recent days that relaxing restrictions on ZTE was a “prerequisite” to get the Chinese to engage in substantive discussions.
The unfolding deal is already kicking up criticism from trade allies of the administration. “It’s outrageous,” said American Enterprise Institute scholar Derek Scissors, a China critic. “We are giving up on punishing ZTE for the Chinese restoring the trade status quo.”
Mr. Scissors, who has consulted with the Trump administration on China policy said, the prospective deal “shows we have nothing like the resolve necessary to take on the Chinese.”
With Ross marginalized, Mnuchin’s influence with the president is on the rise, according to current and former administration officials. The president has warmed to the idea of reaching an agreement with China meant to avert a lengthy trade war ahead of the midterm elections, a position backed by Mnuchin and other moderates in the administration.
Trump’s new openness to a deal is a sharp departure from his fiery rhetoric against China’s trade practices, and it would mark a major defeat for Navarro and Lighthizer, the administration’s strongest critics of Beijing.
“There are many areas where China has promised to do but haven’t. We want to see a timetable. We want to see these things happen sooner than later,” he said at a conference in Tokyo.
China will continue to deepen reforms, further open up its economy and improve the investment environment, Wang said in remarks to a U.S.-China business forum in Beijing.
Tuesday CCTV Evening News report on the meeting - 王岐山会见中美工商领袖和前高官对话美方代表 . I hear there was a history lesson from Wang but not much else interesting.
"I see this as a positive step and hope it will create a better atmosphere for the ongoing discussions between the two countries," said Henry Levine, a former US deputy assistant secretary of commerce. "I hope Beijing can respond with a positive step of its own and hope that both Beijing and Washington can begin a ... process where each takes positive steps and the other one responds with its own positive steps," he said.
China’s approval would likely depend on the progress of broader trade discussions, three people with knowledge of the deal said, as senior Chinese and U.S. officials meet this week in Washington for their second round of high-stake talks.
U.S. companies and business groups are lining up to oppose the Trump administration’s plan to slap tariffs on Chinese imports, as the two nations step up efforts to resolve their trade dispute.
About 120 firms and industry groups are scheduled to testify at a hearing beginning Tuesday on the administration’s plan to impose tariffs on $50 billion in Chinese goods. So many groups signed up that the U.S. Trade Representative’s Office extended the hearing by two days until Thursday. The USTR has received more than 2,700 comments.
Mr. Trump tends to think of global politics as a perpetual negotiation, and perhaps he figures his ZTE reprieve will cause Mr. Xi to help more on North Korea. China has agreed to restart its regulatory review of Qualcomm’s bid to acquire NXP Semiconductors , which had been put on hold amid trade friction. And the Journal reports that China may forgo the tariffs on U.S. farm goods it has threatened to impose in response to U.S. steel tariffs.
So the U.S. is giving a reprieve to ZTE in return for China lifting tariffs it imposed in response to misguided U.S. tariffs. In other words, Mr. Trump is undermining U.S. credibility on sanctions in order to dodge tariff retaliation on the U.S. Farm Belt that Mr. Trump invited with his protectionism. Meanwhile, there’s no sign so far that Mr. Xi is bending on IP theft or other predatory Chinese behavior.
“I just think there’s a lot of people tripping over there,” Rubio said. “You know, every day some group of CEOs comes marching into the White House and tries to talk the president down from the strong stand that he has taken on China. There’s a lot of voices in the administration that want to back down a little bit on the China thing. This confrontation with China is by far the most important thing facing this country on a global scale. This is going to define the next 80 years … They intend to replace us.
They expect to be treated the same way our treaty allies are treated, which is ridiculous,” Scissors said. Many of the demands in the document are crazy, he said, “But we actually accepted one of China’s crazy demands.”
If Trump concedes to Beijing’s other demands, he would be declaring the United States’ surrender in the economic struggle against China before the fight really begins. Trump administration officials are now saying that won’t happen. But Trump’s unforced error on ZTE undermines the entire effort.
2. April Econ Data Soft As Steel Output Soars
Fixed asset investment grew the slowest since 1999 while the pace of retail sales softened to a four-month low, suggesting a long-anticipated slowdown in the world’s second-largest economy may finally be setting in even as protectionism is on the rise.
The lone bright spot on Tuesday’s activity data was industrial output, which jumped more than expected as automobile and steel production surged.
“Industrial activity was buoyed by the easing of pollution controls (imposed over the winter). But there are signs in the rest of today’s data that the economy is losing momentum,” Capital Economics senior China Economist Julian Evans-Pritchard wrote in a note following the data.
Overall steel output in the world’s top producer climbed to 76.7 million tonnes in April, up 3.7 percent from March and up 4.8 percent from April a year ago, according to data from the National Bureau of Statistics (NBS).
Daily average output reached 2.56 million tonnes last month, the strongest since at least May 2014.
3. First Meeting Of The Foreign Affairs Commission of the CPC Central Committee
Xi Jinping, general secretary of the Central Committee of the Communist Party of China (CPC), on Tuesday called for enhancing the centralized and unified leadership of the CPC Central Committee over foreign affairs and opening up new prospects of major-country diplomacy with Chinese characteristics.
Xi, also Chinese president, chairman of the Central Military Commission and head of the Foreign Affairs Commission of the CPC Central Committee, made the remarks when presiding over the first meeting of the Foreign Affairs Commission.
The meeting was also attended by Premier Li Keqiang, also member of the Standing Committee of the Political Bureau of the CPC Central Committee and deputy head of the commission, and Vice President Wang Qishan, also member of the commission.
Wang Huning, member of the Standing Committee of the Political Bureau of the CPC Central Committee and member of the Secretariat of the CPC Central Committee, and Vice Premier Han Zheng, also member of the Standing Committee of the Political Bureau of the CPC Central Committee, were also present at the meeting.
Wang Qishan is mentioned in the Chinese and English official releases ahead of PBSC members Wang Huning and Han Zheng. I assume that is because he is a member of this commission. Interesting that Li Keqiang is the deputy head of the commission, not Wang?
4. Beijing Lost One SE Asia Strongman But Has Cultivated Another?
Riding the wave of anger at Mr Najib, new premier Mahathir Mohamad has promised to review all Chinese projects and renegotiate any “unequal treaties”, threatening to destroy the image of Malaysia as the poster-child for Mr Xi’s signature Belt and Road policy and upset China’s position in a strategic crossroads for Asia.
“China had a long experience in dealing with unequal treaties and China resolved it by renegotiation,” said Mr Mahathir. “So, we feel we are entitled to study and, if necessary, renegotiate the terms.”
Chinese President Xi Jinping promised to protect President Rodrigo Duterte from any plan to remove him from office, the Philippine leader said on Tuesday, May 15.
"The assurances of Xi Jinping were very encouraging. 'We will not – ,' eh nandiyan naman sila (anyway they're there). 'We will not allow you to be taken out from your office, and we will not allow the Philippines to go to the dogs," Duterte said.
"Siguro kasi freely elected leader naman ako (Probably because I'm a freely elected leader anyway), it could be a very justified statement," said Duterte.
The Philippine leader earlier claimed that the Central Intelligence Agency of the United States was plotting to oust him – an accusation denied by the US.
5. Zhao Leji Reiterates CCDI's Political Disciplinarian Role
Not that anyone really needed reminding, but for a while some seemed to have forgotten that the CCDI has always been about also enforcing political and ideological discipline, not just anti-corruption.
China's top anti-graft official on Monday explained the essence of disciplinary inspection as he called for stepping up work in the new era.
"It is the 'guiding principle' and 'soul' of disciplinary inspection in the new era to safeguard the core status of Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee, the authority of the CPC Central Committee and its centralized, unified leadership," said Zhao Leji, secretary of the CPC Central Commission for Discipline Inspection...
Zhao emphasized that any violation of political discipline, the Party's principles and policies, the principle of democratic centralism, and the rules of official selection and promotion should be spotted promptly. Issues damaging the Party's political ecosystem should also be dealt with.
A senior official in Deng Xiaoping's birthplace ignored the study sessions and is hating life about now--Secretary Yan: China’s Latest Symbol of Lawless Privilege - Sixth Tone:
The discipline inspection and supervision committees of southwestern Sichuan province announced on Monday that they would investigate the case of Yan Chunfeng, deputy secretary of the municipal Party committee in Guang’an. Yan has inadvertently found himself embroiled in scandal after a woman invoked his government title to bully and intimidate staff at her child’s kindergarten.
6. Data On Massive Scale Of Political Re-education Camps In Xinjiang
And yet few people inside or outside China, and especially in the Muslim world, seem to care...why?
The existence of these camps is denied by the Chinese government...This article demonstrates that there is, in fact, a substantial body of PRC governmental sources that prove the existence of the camps. Furthermore, the PRC government’s own sources broadly corroborate some estimates by rights groups of number of individuals interred in the camps. While estimates of internment numbers remain speculative, the available evidence suggests that a significant percentage of Xinjiang’s Muslim minority population, likely at least several hundred thousand, and possibly just over one million, are or have been interned in political re-education facilities.
Overall, it is possible that the region’s re-education system exceeds the size of China’s entire former “education through labor” system that was officially abolished in 2013. The article also examines the evolution of re-education in Xinjiang, empirically charting the unprecedented re-education drive initiated by the region’s Party secretary, Chen Quanguo. Information from 73 government procurement and construction bids valued at around RMB 680 million (approximately USD 108 million) along with public recruitment notices and other documents provide unprecedented insights into the evolution and extent of the region’s re-education campaign...
While there is no published data on re-education detainee numbers, information from various sources permit us to estimate internment figures at anywhere between several hundred thousand and just over one million. The latter figure is based on a leaked document from within the region’s public security agencies, and, when extrapolated to all of Xinjiang, could indicate a detention rate of up to 11.5 percent of the region’s adult Uyghur and Kazakh population (Newsweek Japan, March 13). The lower estimate seems a reasonably conservative figure based on correlating informant statements, Western media pieces and the comprehensive material presented in the long version of this article. It is therefore possible that Xinjiang’s present re-education system exceeds the size of the entire former Chinese re-education through labor system.
This article is condensed from a longer paper, available for download here
Last week, the company agreed to join an “intelligent security industry” innovation lab in Urumqi, the capital of Xinjiang, as part of a government bid to create a cluster of expertise in that field. Such expertise, the local government has said, can serve not only China, but dozens of countries involved in the “Belt and Road Initiative,” Beijing’s sweeping plan to extend elements of its development model and corporate reach far outside its borders.
Huawei will provide the region’s police with technical support, help build up human technical expertise and “meet the digitization requirements of the public security industry,” a local government website paraphrased Fan Lixin, deputy director of the Xinjiang Public Security Bureau, as saying. Such co-operation would guarantee “Xinjiang’s social stability and long-term security.”
7. Bloomberg Starts The China Center for International Economic Exchanges
Michael Bloomberg, the former New York mayor, is launching a rival to the World Economic Forum’s annual gatherings in Davos, aimed at addressing a changed global order in which China’s rise challenges the primacy of the US.
The financial data billionaire has enlisted two long-term China watchers, former US secretary of state Henry Kissinger and former US Treasury secretary Hank Paulson, to design the New Economy Forum. They have partnered with the China Center for International Economic Exchanges, a self-described “think-tank with Chinese characteristics” which is overseen by the central planning ministry and led by former vice premier Zeng Peiyan. The forum will hold its first two-day meeting in Beijing in November...
“Davos has been around for a long time: it’s a very big conference and it’s focused on lots of world problems. This conference is focused on the world and China as an emerging power and how we all work together,” he said.
Andrew Browne, formerly of the Wall Street Journal, is the editorial director for this. I miss his weekly "China's World" column, hope he writes occasionally for Bloomberg.
8. The Gap’s Turn To Grovel To Beijing
Another US firm to cave outside of the PRC to PRC pressure over Taiwan...
US retailer Gap has apologised for selling a T-shirt showing what it called an incorrect map of China, adding it would implement “rigorous reviews” to prevent it happening again.
The apology came after a person posted pictures of the T-shirt on Chinese social media network Weibo saying that Chinese-claimed territories, including south Tibet, the island of Taiwan and the South China Sea were omitted. The user said the photo of the T-shirt was taken at an outlet store in Canada.
“Gap Inc. respects the sovereignty and territorial integrity of China. We’ve learned that a Gap brand T-shirt sold in some overseas markets failed to reflect the correct map of China. We sincerely apologize for this unintentional error,” it said in a statement posted on its Weibo account on Monday.
How should American companies respond to these types of requests from the Chinese government? And does the White House’s response help American interests in China?
The Mayor of Rockhampton, Margaret Strelow published a revealing statement in response to the controversy, which implicates Chinese Vice Consul of Brisbane, Zhou Li, in the decision to ruin the high schoolers' artwork
Business, Economy, Finance And Trade
China’s giant monetary fund Yu’e Bao lower same day withdrawal limit to RMB 10k Alibaba’s Yu’e Bao announced on May 14th that the monetary fund is going to lower its daily T+0 (same day) withdrawal limit (in Chinese) from RMB 50,000 ($7,882) to RMB 10,000 since June 6. This means that depositors who want to transfer money to their bank accounts can only receive up to RMB 10,000 worth of assets on the same day.
Chinese Commercial Banks Post First Rise in Non-performing Loan Ratio Since 2016 - China Banking News The NPL ratio of Chinese commercial banks lifted to 1.75% in the first quarter of 2018, from 1.74% at the end of last year, for the first increase since the fourth quarter of 2016. The ratio had previously held at 1.74% for five successive quarters, from the Q4 2016 until Q4 2017, prompting speculation in some quarters that China’s dud loans had tapped a peak.
Why China's crypto traders call bitcoin "big pancake," and other secrets of local slang — Quartz While crypto enthusiasts in the West have created a lexicon of their own, a parallel slang is flourishing in the crypto trading community in China, a country that once dominated global bitcoin trading before authorities cracked down on local exchanges in September.
Beijing must remain alert to threat of financial crisis, senior adviser says | South China Morning Post In a speech made in the Chinese capital, Xia Bin, who has been advising the State Council – China’s cabinet – on financial policy since 2009, painted a far less rosy picture of the country’s financial industry than the one presented by Beijing. “Systemic risks are elusive and spread fast” in China, said the 67-year-old, who was a key figure in a clean-up campaign of non-banking financial institutions two decades ago, when he was a senior official at the People’s Bank of China.
Xia Bin in 2013 -China Govt Advisor Says Economy In Crisis As Debt Costs Spiral: Xia Bin, an economist with the State Council's Development Research Center and government advisor, said Beijing needs to stop using bland rhetoric about "stabilizing the economy" and focus on tackling a debt burden whose interest payments alone tally nearly CNY6 trillion a year. Although monetary printing presses have kept the worst of the crisis at bay, the central government needs to face up to China's debt problem and brace the market for a deep and painful adjustment, he told a forum here at the weekend. "We need to find ways to let the bubble burst and write off the losses we already have as soon as possible to avoid an even bigger crisis," Xia said. "Deep adjustment means economic growth slows as costs are paid, it means hard days, it means the bankruptcy of some companies and financial institutions and it means reform," he said.
‘China’s Hawaii’ looking for 1 million new residents, more than the population of Stockholm | South China Morning Post With a current population of about 9.3 million, the southern province, which was recently chosen by President Xi Jinping to become China’s largest free-trade zone, is hoping to woo its first 200,000 newcomers by 2020, according to a plan released on Sunday by the provincial government. Of the 1 million people it wants to attract by 2025, a “large number” will be foreigners, it said.
Chinese bitcoin mining gear makers set sights on world's largest bitcoin IPOs | Reuters Canaan Creative has applied to the Hong Kong stock exchange for an IPO while Zhejiang Ebang Communication has started working with advisers on a Hong Kong float, according to IFR, a Thomson Reuters publication.
Beijing fails to match US on tax cuts, as fiscal revenue soars in first four months to US$1.4tn | South China Morning Post Despite Beijing’s repeated promises to reduce the tax burden on companies and individuals, China’s fiscal revenue in the first four months of 2018 surged 16.5 per cent from the same period of last year to 8.9 trillion yuan (US$1.4 trillion).
Didi Chuxing Quietly Pilots Online Lending Service 'Dishuidai,' Offering USD31,400 in an Instant | Yicai Global China’s leading ride-hailing firm Didi Chuxing Technology Co. has released an online lending product dubbed “Dishuidai,” offering users substantial amount of loan in an instant, Securities Daily found on Didi Chuxing app. Didi claims on its app that users can borrow up to CNY200,000 (USD31,400) instantly at ultra-low interest rates, which they can repay at any time, the report said. The product is reportedly undergoing a trial period and might be made available to more customers in the future.
Government Shuffles Supervisors for Local Financing Businesses - Caixin Global The Ministry of Commerce has transferred oversight over financial leasing companies, commercial factoring firms and pawnshops to the China Banking and Insurance Regulatory Commission (CBIRC). The move is the latest measure to strengthen financial supervisory coordination and address regulatory shortcomings — goals stressed during the National Financial Work Conference last year. While the People’s Bank of China and the CBIRC will formulate unified supervisory policy and provide guidance on how to implement it, they will give local authorities the scope to decide how best to implement the policy.
Politics, Law And Ideology
War on Human Rights Lawyers Continues: Up to 16 More Lawyers in China Face Disbarment or Inability to Practice « China Change China Change has reported several recent cases of disbarment, such as that of Sui Muqing (隋牧青), Yu Wensheng (余文生) and Zhu Shengwu (祝圣武). The following is an overview of 16 more cases of lawyers who are facing imminent disbarment or forms of harassment that prevent them from practicing law.
Wang Wentao elected governor of Heilongjiang Province - Xinhua Wang was born in Nantong, Jiangsu Province in 1964. He was appointed vice governor and acting governor of Heilongjiang in March.
谭秦东再被内蒙古警方讯问 突发精神疾病_政经频道_财新网 Inner Mongolia police interrogate Dr Tan again in the Hongmao Medicinal Liquor case, his wife says after he returned home he locked himself in his room, sobbed, slapped himself and banged his head against the wall. He has now gone to a mental hospital
强人王三运：甘肃王的权钱往事_财新周刊频道_财新网 Caixin cover story on the fall of Wang Sanyun
Foreign and Military Affairs
North Korean delegation visited Beijing to learn about China's reforms: Foreign Ministry, - AFP A North Korean delegation has visited Beijing to learn about China's experience in economic reform and opening up, the foreign ministry said Tuesday (May 15), the latest diplomatic outreach by the isolated regime.
Ng Lap Seng gets 4 years prison in UN bribery case | MACAU DAILY TIMES The judge ruled Ng could remain under 24-hour guard at a Manhattan apartment on $50 million bail until he has to report to prison in mid-July. One of his defense attorneys indicated the sentence would be appealed.
U.S. criticizes China for shielding Myanmar from U.N. action | Reuters he United States indirectly criticized China on Monday for shielding Myanmar from strong U.N. Security Council action over a military crackdown against mainly Rohingya Muslims that the U.S. and other countries have denounced as ethnic cleansing.
Two Chinese among 19 killed in fighting in Myanmar, foreign ministry says - AFP Two Chinese nationals were among the 19 people killed in northern Myanmar on Saturday when ethnic rebels attacked security force posts and a casino in an area bordering China, Beijing said.
AsiaGlobal Online – China and the Building of Africa’s Information Societies Despite suspicions, China's engagement in developing Africa's telecom infrastructure has not led to an imposition of an authoritarian model of information control on the continent.
Japan shifts oceans policy to national security - FT $$ Japan has made a radical shift in its oceans policy to concentrate on national security instead of economic development as maritime tensions with China rise. The country’s latest “basic plan on ocean policy”, updated every five years, plays down hydrocarbon exploration in favour of improved radar coverage, satellite surveillance and measures to protect uninhabited islands.
Hong Kong, Macao
3.51-mln-USD central gov't funding in place for Hong Kong research institutions - Xinhua The first batch of funding, totalling 22 million Chinese yuan (about 3.51 million U.S. dollars), from China's central government to support research institutions in Hong Kong Special Administrative Region (HKSAR) is already in place, an official from the Liaison Office of the Central Government of China in the HKSAR said here Tuesday.
Taiwan court hands former president Ma Ying-jeou 4-month jail term over information leak - Reuters A court in Taiwan on Tuesday sentenced former president Ma Ying-jeou to four months jail over a leak of information related to national security, legal documents showed, but he vowed to appeal, and could avoid jail altogether by paying a fine.
Navy and ground troops to join air force in drills around Taiwan as China increases pressure on President Tsai Ing-wen | South China Morning Post Military analysts say increasingly aggressive ‘island encirclement’ exercises are designed to send message to independence-leaning leadership
Tech And Media
China's iFlytek To Raise $567M To Expand Artificial Intelligence Investment – China Money Network Chinese artificial intelligence company iFlytek Co Ltd., best known for its voice-recognition technology, plans to raise up to RMB3.6 billion (US$567 million) through private placement to expand its artificial intelligent investments, according to its security filing. The proceeds of the fund will be used for the development of the new generation of cognitive technology, AI speech open platform, smart robots, sales and service upgrade, as well as improving liquidity, the company said.
Xiaomi Cements Spot as India’s Top Smartphone Brand - Caixin Global Xiaomi boosted its share of the India smartphone market to 30.3% in the first three months of 2018, up more than 3 percentage points from the previous quarter when it ousted South Korea’s Samsung to take the market’s crown, IDC said on Monday
Society, Art, Sports, Culture And History
China to bar India-educated Tibetan monks from teaching | IndiaToday county in southwest China near Tibet has said it will ban India-trained Tibetan monks, who were "wrongly educated" from teaching in Tibetan monasteries in China because of the "severe separatist situation".
Manuscripts of Marx and Engels to be auctioned in Beijing - ECNS In one handwritten note mainly in English and occasionally German, Marx talked about A Practical Treatise on Banking by James William Gilbart. The note was later used by the German philosopher in his studies multiple times. The work was one of 24 notes about economic studies left by Marx from 1850 to 1853 in London. The auction house said the one-page manuscript is estimated to be worth 1 million yuan ($157,000) to 1.2 million yuan.
Chinese double amputee conquers Everest on fifth attempt - The Guardian A Chinese mountaineer who lost both feet trying to summit Everest 43 years ago and then had his legs amputated due to cancer has successfully climbed the mountain on his fifth attempt. Xia Boyu on Monday reached the top of the world’s highest peak with a group of 13 others more than four decades after his first crack at it.
Teacher Who Left Students Behind in Sichuan Earthquake Looks Back - Caixin Global In 2008, netizens were outraged when the Chinese-language teacher confessed to fleeing to safety, almost on all fours, leaving behind a packed classroom of students after the deadly quake struck. He was demonized in an online song and became known nationwide as “Runner Fan.” A decade later, Fan, now a 46-year-old stay-at-home father, maintains that he did nothing wrong by taking care of himself first. He refuses to apologize, as many have called for, dismissing the whole saga as absurd. 范跑跑