I am a bit under the weather so apologies that today's issue is a bit late and a bit thin.

President Trump is keeping everyone guessing in the second episode of "China Trade Week". His three tweets this morning are just what we can see publicly:

Donald J. Trump@realDonaldTrump

The Washington Post and CNN have typically written false stories about our trade negotiations with China. Nothing has happened with ZTE except as it pertains to the larger trade deal. Our country has been losing hundreds of billions of dollars a year with China...

May 16, 2018

Donald J. Trump@realDonaldTrump

...We have not seen China’s demands yet, which should be few in that previous U.S. Administrations have done so poorly in negotiating. China has seen our demands. There has been no folding as the media would love people to believe, the meetings...

May 16, 2018

Donald J. Trump@realDonaldTrump

...haven’t even started yet! The U.S. has very little to give, because it has given so much over the years. China has much to give!

May 16, 2018

Actually the Chinese did present their demands two weeks ago in Beijing. But as Axios' Jonathan Swan noted on Twitter:

Jonathan Swan@jonathanvswan

China presented POTUS’ team with a list of demands in their meeting two weeks ago. Mnuchin, Navarro, Kudlow and Lighthizer were all in the team. POTUS thinks meetings aren’t real unless he’s in them. (Which is actually a fairly good operating principle as a Trump WH reporter). https://t.co/XjNbuB3Lh2

May 16, 2018

Liu He arrived Tuesday and his delegation is approaching 160 people. They look like they are here to make some deals. Per Xinhua the delegation includes:

Governor of the People's Bank of China Yi Gang;
Vice Chairman of the National Development and Reform Commission Ning Jizhe;
Deputy Director of the Office of the Central Commission for Financial and Economic Affairs Liao Min [newly promoted according to Caixin-Veteran Regulator Made Deputy to Xi’s Adviser Liu He] ;
Vice Foreign Minister Zheng Zeguang;
Vice Minister of Industry and Information Technology Luo Wen;
Vice Finance Minister Zhu Guangyao;
Vice Minister of Agriculture and Rural Affairs Han Jun,
Vice Minister of Commerce and Deputy International Trade Representative Wang Shouwen.

Thanks for reading, and stay tuned!

The Essential Eight

1. China Trade Week

Larry Kudlow puts faith in Trump-Xi "bromance" - Axios:

On ZTE: "It's a very poorly run company. It has many internal flaws. This is principally an enforcement issue. They have been proven guilty not once not twice but three times."
Kudlow acknowledged that Trump blends economic negotiations with national security and that everything is up for negotiation.

Deal or no deal, NAFTA edition - POLITICO:

Chinese Vice Premier Liu He is expected to meet with both Senate Finance Chairman Orrin Hatch and House Ways and Means Chairman Kevin Brady to discuss issues in the U.S.-China economic relationship. Both lawmakers support Trump’s efforts to address the wide array of problems that U.S. companies face in China’s market, but have expressed concern about his threat to impose tariffs on up to $150 billion worth of Chinese goods.

Xi Jinping says ‘China can come out of trade war in better shape than US’ | South China Morning Post:

President Xi Jinping has told the British ambassador to China that the Communist Party has “the levers and the country had the resilience” to come out of a trade war in better shape than the United States.

This seems like a huge stretch to me, but who wants is giving the US President the benefit of the doubt given his history?--Trump helps sanctioned Chinese phone maker after China delivers a big loan to a Trump project - Vox:

Trump stands to gain from an Indonesian project that got a $500 million loan right before he flip-flopped on ZTE.

Zheng Yongnian, writing for the WorldPost, a partnership of the Berggruen Institute and The Washington Post, plays down Made in China 2025. Isn't Jeff Bezos rich enough to stop running CCP propaganda like this and the China Daily inserts in his newspaper?--China’s technology plan has been distorted by nationalistic sentiments - The Washington Post:

What the dispute is really about is America’s fear of losing dominance in the technologies of the future. For China, it’s a conviction that its national rejuvenation will stall if it does not upgrade its economy. Addressing this overarching contest requires a more level-headed understanding of the non-offensive intentions behind China’s strong rhetoric of techno-nationalism and how high-tech modernization bears on America and the world.
What makes China’s rapid high-tech advances remarkable has less to do with transfers from developed economies than with the innate scientific character of its culture. Historically, as shown in Joseph Needham’s multi-volume “Science and Civilization in China,” China was leading many scientific and technological advancements before the West surpassed it. Part and parcel of Xi’s “new era” therefore aims to restore this once-hallowed character of Chinese civilization.

2. Trump-Kim Summit In Doubt?

North Korea Threatens to Call Off Summit Meeting With Trump - The New York Times:

North Korea threw President Trump’s planned summit meeting with its leader, Kim Jong-un, into doubt on Wednesday, threatening to call off the landmark encounter if the United States insisted on “unilateral nuclear abandonment.”
The warning, made by the North’s disarmament negotiator, caught Trump administration officials off guard and set off an internal debate over whether Mr. Kim was merely posturing in advance of the meeting in Singapore next month or was erecting a serious new hurdle.

Comment:The May 8 issue of Sinocism, just after the Xi-Kim meeting in Dalian, wrote:

Is the Trump-Kim summit now at risk of at least a delay because of the US conditions around complete, verifiable and irreversible denuclearization (CVID), and the maintaining of sanctions until that is achieved? Did Kim go meet Xi to brief him on this and did Xi bring it up on his call with Trump this morning? The reference to phased and synchronous measures 分阶段、同步性的措施 may be a tell.
My guess: Don't hold your breath for a US-North Korea summit in the next few weeks.

Is Beijing sending a senior emissary to Washington in the near future to try to keep things on track? And is there any chance Kim coordinated with Xi and that this latest DPRK move is part of a plan to help China squeeze trade concessions from Trump? Or is that giving to much credit to an apparent budding Kim-Xi bromance?

Xi meets DPRK's WPK friendship visiting group - Xinhua:

Xi Jinping, general secretary of the Central Committee of the Communist Party of China (CPC) and Chinese president, on Wednesday met with a friendship visiting group of the Workers' Party of Korea (WPK) of the Democratic People's Republic of Korea led by Pak Thae Song, member of the Political Bureau and vice-chairman of the WPK Central Committee.

3. China Has No Friends In The US Congress

House to Probe China Threat - Bill Gertz:

The House Permanent Select Committee on Intelligence will begin a major inquiry into the threat from China this week in a shift from its past attention on Russian subversion.
The committee will hold a series of hearings, both open and in secret, examining threats posed by China in the military sphere, economic and industrial realm, technology arena, and Beijing's significant influence operations against the United States, said committee aides...
The inquiry on influence operations could go beyond China's use of cultural language centers on American universities called Confucius Institutes and Chinese student associations.
"Why is it acceptable for China to dominate and coerce Hollywood and publishing houses through these so-called, façade private companies that are basically controlled by the Communist Party?" the aide asked, noting two major think tanks in Washington are "beholden" to Chinese interests.

Which two think tanks?

Lawmakers seek $7.5 billion to counter China’s rise - DefenseNews:

The bipartisan Asia Reassurance Initiative Act, or ARIA, would authorize $1.5 billion annually for five years to deter and defend against China. A mix of State Department and Defense Department funds would bolster the U.S. military presence and readiness in the region, improving defense infrastructure and critical munitions stockpiles.
The bill would also support regular arms sales to Taiwan, and fund the enforcement of freedom-of-navigation and overflight rights — moves to defy Beijing’s calls to keep out of the contested South China Sea.

Beyond the economic and national security reasons for taking a tougher line towards China, it is also clear that there is only domestic political upside for increasing hawkishness.

4. Xinjiang Crackdown Coming Into Focus

Opinion | What Really Happens in China’s ‘Re-education’ Camps - The New York Times - Rian Thum:

Surveillance was markedly heightened during my last trip to Xinjiang in December — so much so that I avoided talking to Uighurs then for fear that just being in contact with a foreigner would get them sent away for re-education. Meanwhile, my Uighur contacts outside China were pointing to the quota-based purges of the Communists’ Anti-Rightist campaign of 1957-59 and ever-shifting rules during the Cultural Revolution to explain that even if Uighurs in Xinjiang today wanted to submit wholly to the security regime, they no longer knew how to. Joining the security services used to be a rare way to ensure one’s personal safety. Not anymore...
There is every reason to fear that the situation will only worsen. Several accounts of Uighurs dying in detention have surfaced recently — a worrisome echo of the established use of torture in China’s re-education camps for followers of the spiritual movement Falun Gong. And judging by their camp-building spree in Xinjiang, the Chinese authorities don’t seem to think they have come close to achieving whatever their goal there is.

Chairs Ask Commerce Secretary Ross About Sale of Surveillance Technology to Chinese Police | Congressional-Executive Commission on China:

U.S. Senator Marco Rubio (R-FL) and U.S. Representative Chris Smith (R-NJ), chair and co-chair of the bipartisan Congressional-Executive Commission on China respectively, released today a letter to U.S. Commerce Secretary Wilbur Ross seeking answers about the sale by U.S. companies of surveillance and crime control technology used by Chinese security forces and police. The Chairs raised concerns about the Chinese government’s use of technologies to “severely limit the freedoms of movement, expression, and religion” of the ethnic minority Uyghur population of western China. China has detained an estimated 500,000 to 1 million Uyghurs and other ethnic minorities in “political education centers,” including over a dozen family members of U.S.-based Radio Free Asia (RFA) Uyghur Service journalists.

Are some in Congress considering a bill banning US companies from selling hardware or software to firms who work with China's security services?

5. Regulators Continue To Pressure The Housing Market

Home Price Decline Accelerates in First-Tier Cities in April - Caixin Global:

Of the 70 major cities tracked by the NBS, new home prices fell in seven cities from March to April. The number was unchanged from March.
However, compared with April 2017, new home prices fell in 10 of the cities last month, up from nine in March.
There were several areas of China where home prices rose despite government efforts to keep them in check. In Hainan, real estate prices have surged since the central government announced in April that the southern island province would be developed into a free trade port by 2035.

North Korea Border Town Leads Gains in Chinese Home Prices - Bloomberg:

New-home prices in Dandong, which sits across the Yalu River from North Korea and is the nexus of trade between the two countries, gained a record 2 percent in April from March, according to data from the National Bureau of Statistics on Wednesday. The Dandong price gain dwarfed the 0.57 percent average rise in the 70 cities tracked by the government, the report showed.

Dandong among the cities out with tighter housing purchase restrictions- 6个被约谈城市楼市调控升级或为纠偏此前人才政策_行业_地产频道首页_财经网

朝韩关系缓和以来，一批炒房客前往丹东，引起了当地房价的较大波动。5月14日晚间丹东紧急出台楼市限购措施，明确规定限制区域范围为振兴区中心南路以东、江湾西路以西、黄海大街（浪东线）以南、鸭绿江大道（滨江西路）以北。在购房资格上，规定非本地户籍人员在限制区域内购买的新建商品住房，自签订商品房买卖合同备案满2年并取得不动产权证书后，方可上市交易。非本地户籍人员申请商业性个人住房贷款，在限制区域内购买新建商品住房，根据金融风险情况，按照银行相关规定分类执行。

6. LA Times Beijing Bureau Chief Suspended

LA Times suspends Beijing chief amid sexual misconduct probe - AP:

The newspaper said it has launched an investigation into allegations against Jonathan Kaiman made by a former Wall Street Journal editor. In January, another woman accused Kaiman, who was hired by the LA Times in China in 2015, of sexual misconduct.
Felicia Sonmez, who has reported for the WSJ and Agence France-Presse in China, detailed what she called Kaiman’s “problematic behavior” in an email shared Tuesday with the Foreign Correspondents’ Club of China.

The details of the allegation--Second allegation of sexual misconduct against LA Times Beijing Bureau Chief Jonathan Kaiman surfaces | Hong Kong Free Press HKFP

L.A. Times suspends Beijing bureau chief while it investigates sexual misconduct allegation - The Los Angeles Times:

In a statement to The Times, Kaiman, 31, said "all of the acts we engaged in were mutually consensual."
"My perception and Ms. Sonmez's perception of that night's events differ greatly," he said. "It's unfortunate that, in hindsight, she feels the way she does about that night. I am a proponent of women's rights and believe that every woman has a right to be heard and to tell her truth."

Awful on many levels..and from a CCP propaganda perspective, more fodder to discredit foreign journalists

7. The Tencent Juggernaut Steams Ahead

Tencent's Record Profit Soothes Fears It's Throwing Margins Away - Bloomberg:

While worried investors had sold off more than $90 billion of stock since January, Tencent posted a 61 percent jump in net income to 23.3 billion yuan ($3.7 billion) in the March quarter, outstripping estimates by almost a third. That’s partly thanks to a one-time gain of almost 7.6 billion yuan from its investments in arenas like video and news.

How China’s Tencent Uses Deals to Crowd Out Tech Rivals - WSJ:

By amassing stakes in hundreds of companies, internet giant Tencent Holdings Ltd. of China has quietly become one of the world’s largest and most active technology investors, a calculated strategy that is crowding out rivals and bolstering its profits.
The social-media and videogame company has bought stakes in 277 startups since 2013 and its pace of deal-making accelerated last year, according to data from Dow Jones VentureSource. In 2017 alone, Tencent invested in more than 80 private and public companies, participating in far more deals than its main rival Alibaba Group Holding Ltd. , which took part in about 40, data from Bernstein Research shows...
In many transactions, startups that accept cash from Tencent have to agree in deal documents not to take money from or enter into strategic partnerships with Tencent’s rivals such as Alibaba, according to people close to the deals.

WeChat Impact Report 2018 shows impressive social impact - WalktheChat:

WeChat-driven information consumption reached RMB 209. 7 billion
WeChat accounted for 34% of the total data traffic of users
WeChat drove RMB 333.9 billion traditional consumption, covering travel, food, shopping, tourism, etc.
WeChat contributed the employment of 20.3 million persons in 2017, more than twice the 2014 figure

8. China Coffee Wars

Starbucks is far in the lead, but can it stay there?

Flush With Nestle Cash, Starbucks Unveils Ambitious China Plan - Bloomberg:

Starbucks plans to weather trade tensions by focusing on its Chinese employees and customer base, Chief Executive Officer Kevin Johnson said in an interview in Shanghai on Tuesday. The coffee giant laid out plans to compete with KFC in the race to become China’s fastest-growing foreign food chain by opening a new store every 15 hours through 2022. It plans to have 6,000 stores on the mainland then, compared with a previous target of 5,000 by 2021.
“China has a long runway of opportunity for Starbucks,” Johnson said as the chain kicked off a two-day investor conference in Shanghai, the first to be held outside of the U.S. “We can’t control what happens in the geopolitical situation. We are not immune to it, but we take a long-term view.”

Meteoric cafe startup Luckin Coffee threatens Starbucks with unfair competition lawsuit · TechNode:

Luckin Coffee, the coffee shop startup using market acquisition tactics borrowed from China’s internet companies, has written an open letter to Starbucks accusing it of monopolistic practices in the country and proposing a possible lawsuit, according to Tencent News (in Chinese). Luckin has taken issue with Starbucks’ exclusivity rights with property owners and putting pressure on suppliers not to work with other brands.

Business, Economy, Finance And Trade

"Investing Means Bearing Risk, Bad Deeds Mean Paying a Price": Liu He - China Banking News China’s senior-most government economist has emphasised the need for education and guidance of the country’s investing public during a key speech delivered at an official meeting on “Improving Systemic Financial Risk Prevention” (健全系统性金融风险防范体系) held in Beijing on 15 May. Liu He (刘鹤), director of the General Office serving the Central Financial and Economic Affairs Commission of the Communist Party of China, said at the meeting that China had made significant progress in the development of the financial regulatory system and the disposal of financial risk since the 19th National CCP Congress in October last year, as well as markedly accelerated the pace of financial sector opening. 全国政协召开“健全系统性金融风险防范体系”专题协商会汪洋主持

Veteran Regulator Made Deputy to Xi’s Adviser Liu He - Caixin Global: Veteran banking regulator Liao Min has been promoted to a key post in China’s top economic policymaking body, according to the official Xinhua News Agency. Liao, now deputy director of the general office of the Central Financial and Economic Affairs Commission, is part of the Chinese delegation now in the U.S. for trade talks, Xinhua reported Wednesday.

Chinese Tea-Based Blockchain Project Defrauds $48M From 3,000 Victims – China Money Network The company, Shenzhen Puyin Blockchain Group, raised money via issuing a type of tea token backed by one billion pieces of high-quality precious tea called Pu’er, a variety of fermented tea produced only in Yunnan province, local police department disclosed the information yesterday. Good-quality Pu’er tea can be valued as much as RMB20,000 (US$3,140) a piece. The firm said the value of the token it issued corresponds to the value of its underlying assets. The company claims that as the value of its Pu’er tea increases, its Puyin token price will appreciate accordingly, offering attractive returns to investors.

U.S. Could ‘Fatally Undermine’ the WTO: China's Ambassador - Bloomberg “The U.S. is blocking selection of new Appellate Body members, taking restrictive trade measures under Section 232 and threatening to impose tariff measures of $50 billion of goods imports from China under Section 301 of U.S. domestic law,” said Zhang Xiangchen, China’s envoy to the WTO since last year. “Any one of these, if left untreated, will fatally undermine the functioning of the WTO.”

China to further streamline procedures for establishing foreign firms - Xinhua China will further streamline procedures for the establishment of foreign companies in order to promote trade and facilitate investment. Measures will be taken to dramatically reduce time foreign firms need for business registration, according to a statement released after a State Council executive meeting presided over by Premier Li Keqiang on Wednesday.

Banks Scale Back Wealth Management Products After New Rules - Caixin Global Fewer than 100 new WMPs were sold in the three days following the release of the Guidelines on Standardizing Asset Management Businesses of Financial Institutions on April 27, according to a monthly report by online financial service platform Rong360.com. In contrast, “several hundred” products were issued daily before the publication of the rules, the report said. Banks were already beginning to adjust their product offerings in April when the number of new WMPs declined 20.4% from the previous month to 10,849, the lowest since October, when issuance is traditionally small due to the weeklong national holiday, while on a year-on-year basis, the decline was a more modest 7%. Although seasonal factors were the main reason for April's drop, the unveiling of the new rules also played a role, the report said.

China's Tianqi nears $4.3 billion deal to buy stake in Chile's SQM - sources | Reuters Chile’s former government in March asked antitrust regulator FNE to block the stake sale to Chinese firms, saying it would distort the global lithium market and give China an unfair advantage in securing strategic resources. FNE has until August, with the possibility of extensions, to determine whether to launch an investigation.

Exclusive: Iran asks Chinese oil buyers to maintain imports after U.S. sanctions - sources | Reuters A senior official at Iran’s state-owned oil supplier met Chinese buyers this week to ask them to maintain imports after U.S. sanctions kick in, three people familiar with the matter said, but failed to secure guarantees from the world’s biggest consumer of Iranian oil.

Politics, Law And Ideology

Doctor Held for Three Months in Inner Mongolia Develops PTSD - Caixin Global The Guangdong province doctor whose arrest and three-month detention for criticizing a well-known medicinal liquor brand sparked public outrage has been hospitalized with post-traumatic stress disorder following a recent interrogation session. Tan Qindong was admitted to Guangdong General Hospital last week when he began showing symptoms that included insomnia and self-harm after being interrogated at a Guangzhou police station by police from the Inner Mongolia autonomous region on Friday, Tan’s wife, Liu Xuan, told Caixin.

Hong Kong Journalist Is Roughed Up and Detained by Police in Beijing - The New York Times Mr. Chui and another Now TV journalist were covering a hearing for Xie Yanyi, a prominent rights lawyer. Mr. Xie was among the first detained in China’s broad crackdown on human rights lawyers in 2015. He was later released, but has now been accused of “conduct violations” that could result in his losing the right to practice law.

《共产党宣言》是马克思主义诞生的标志--理论-人民网 《人民日报》（ 2018年05月16日 07 版）

思想纵横：用好马克思主义这一强大思想武器--理论-人民网 《人民日报》（ 2018年05月16日 07 版）

Foreign and Military Affairs

Xi urges to build high-level research institutions for strong military - Xinhua Xi, also general secretary of the Communist Party of China Central Committee and chairman of the Central Military Commission, made the remarks during an inspection of the People's Liberation Army Academy of Military Science. Noting that military science was an important force in guiding military practices and spearheading transformations, Xi said relevant research should be combat-oriented, meet the needs of the armed forces and be forward-thinking. He also called for better integration of military theories and technologies, research and practices, as well as military and civilian uses.//CCTV Evening News on the visit 习近平在视察军事科学院时强调努力建设高水平军事科研机构为实现党在新时代的强军目标提供有力支撑 at about 4:55 the camera lingers on Mao Xinyu, Mao Zedong's grandson, who is a researcher at the Academy of Military Science

Xi stresses centralized, unified leadership of CPC Central Committee over foreign affairs - Xinhua On the Belt and Road Initiative, Xi said the initiative was an important platform for promoting the building of a community with a shared future for humanity. Hailing the achievements on the Belt and Road Initiative in the past years, Xi called for the effective implementation of the results of the first Belt and Road Forum for International Cooperation held last May, gaining consensus of all sides, planning a vision of cooperation, expanding opening up and enhancing communication, coordination and cooperation with other countries so as to promote the initiative to make more progress and benefit more people. On local foreign affairs, Xi said they were important components of the foreign affairs of the Party and the country, and of great significance to advancing exchanges and cooperation with foreign countries and promoting local reform and development.

Chinese military’s rising star falls back to earth ‘over links to disgraced senior commanders and daughter’s marriage to Frenchman’ | South China Morning Post Former rising star Cai Yingting is demoted by eight grades with sources blaming doubts about his loyalty and failure to disclose foreign family ties

A Chinese Town’s Deep Bonds With Japan Bring Wealth and Hatred - The New York Times The town was once so proud of its connections to Japan that it erected Japanese-language shop signs, and sent a fifth of its population to live and work in Japan. But when rivalries between Japan and China flared, people in Fangzheng found themselves branded as traitors.

China approves $1 bln loan for Sri Lanka highway - Sri Lanka PM's office | Reuters The Chinese government has approved a $1 billion loan to Sri Lanka to build a highway and its export-import bank has been instructed to process the borrowing, Sri Lankan Prime Minister Ranil Wickremesinghe’s office said on Monday. It will be one of the largest projects undertaken by the China in the island nation, which is backing China’s Belt and Road Initiative (BRI).

Tech And Media

‘China’s Uber’ changes service blamed for flight attendant’s death - Inkstone Didi has vowed to remove the most controversial feature at Hitch: a rating system which was often used by the mostly male drivers to comment on the physical attractiveness of passengers.

Xiaomi's Real IPO Killer Just Arrived From Beijing - Bloomberg To be sure, one big thing in Xiaomi’s favor is that it’s a private entity. In China, cash-cow, government-backed firms are often called upon for national service. Regardless, China Tower’s IPO is a nuisance Xiaomi could do without. It raises serious questions about how much the smartphone maker is really worth.

今日头条回应"暴走漫画"侮辱英烈:已下架视频,封禁账号_新民社会_新民网 Jinri Toutiao shuts an account that came under fire for a video mocking martyr Dong Cunrui

Society, Art, Sports, Culture And History

China Bans Tibetan Schoolchildren from Participating in Tibetan Buddhist Holy Month Festivities | Central Tibetan Administration As the month-long Saka Dawa festival, one of the holiest festivals of Tibetan Buddhism began today, China has imposed a series of measures prohibiting Tibetan schoolchildren from participating in the festival. A leaked document reveals Chinese authorities’ enforcement of heightened restrictions on Tibetan families from observing the holy month. Parents and particularly their children are barred from performing and engaging in Buddhist practices and religious proceedings this month that Tibetans deem the most auspicious period of a year.

The Neon-Lit World of China’s Foreign Dancers - Sixth Tone Lured by the prospect of adventure, travel, and money, foreigners have long flocked to China’s thriving nightlife scene to work as club dancers and entertainers. About 15 years ago, when foreigners were a scarce resource, go-go dancers could earn as much as 40,000 yuan a month, according to one current performer. Nowadays, the pay is less impressive, and two distinct subtypes of go-go dancers have emerged: an A-team of professional dancers, and a B-team who are mostly employed to drink and play games with customers. While some experienced dancers, like Strogaya, score jobs in respectable venues, many others work illegally in bars of varying repute that require their dancers to drink with guests. Even for the most seasoned performers, the risk of physical danger or scams is ever-present.

Beijing

Traffic Surveillance Cameras Now Installed at Nearly 1,000 Beijing Intersections | the Beijinger Beijing has installed traffic surveillance cameras at 945 of the city's busiest intersections in order to maintain traffic safety and order. In keeping with transparency regulations, the city updated its full list

China Trade Week, Trump-Kim Summit Doubts; C…

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