Disharmony between PBoC and Finance officials; CPPCC body declares ageing population a "national crisis"; Xinjiang crackdown expanding to other areas?; Real estate rules not working so well

Welcome to the first day of the 三伏天, the dog days of summer. It certainly feels like it here in DC.

Two big things are on my radar today:

• There has been a remarkable public airing of a debate between officials of the PBoC and the Ministry of Finance. It appears that the growing economic stress is also pressuring Liu He and the finance and economic bureaucracies over which he presides. Policy disagreements are not necessarily unhealthy but this kind of public airing may point to some continued underlying dysfunction;

• Based on further conversations and work I am more convinced that the recent round of "Xi is in trouble" rumors are BS. I of course could be wrong, but I would not recommend making any policy decisions based on the latest spate of rumors, especially as head into Beidaihe season. Xi leaves for Africa and the Middle East July 24 for a five day trip. If he is willing to leave the country in a week he is probably not feeling too insecure. If he changes that schedule then maybe something is up...

Housekeeping note: I am driving up to Maine Thursday to pick up our kids from camp and so there will be no Sinocism newsletter Thursday or Axios China Weekly on Friday. Normal publishing will resume Monday. I am always happy to get tips, either over email or Signal +13012460858.

Thanks for reading.

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The Essential Eight

1. Disharmony between monetary and finance officials

This back and forth is remarkable for its appearance in public, not sure it reflects well on Liu He and his control of the economic policymaking apparatus. 

Debate Over China’s Fiscal Policy Heats Up as Growth Slows - Caixin Global:

Xu Zhong, director-general of the research bureau of the People’s Bank of China, in a speech Friday criticized fiscal policy for failing to play the “countercyclical role” of bolstering economic growth, particularly at a time when the central government is pushing to deleverage the financial sector and rein in local government debt.

“There is ample room for fiscal policy, but evidence shows that the policy is not being implemented actively enough,” Xu said. Fiscal policy involves spending and taxation as set by central and local governments while monetary policy refers to interest rates and money supply as determined by central banks. Both kinds of policymaking affect economic growth and inflation.

An official of the Ministry of Finance, which oversees fiscal policy, disputed Xu’s comments, though the ministry itself didn’t publicly respond.

Xu’s comments sparked heated market discussion as it is rare in China for a senior monetary official to openly criticize fiscal policy. Some market analysts said it signaled an attempt by the central bank to press fiscal departments to shoulder more responsibility for balancing the economy...

An official of the Ministry of Finance published an article Monday in Caixin to rebut Xu’s comments, saying that the budget deficit is not a precise way to measure fiscal policy.

“Regardless of the budget deficit figures, fiscal departments have expanded active fiscal policies through various measures in practice,” the official wrote, using the pseudonym Qingchi and asserting that the article represents only personal opinion.

In the Friday speech, Xu also criticized fiscal department rules that disconnect local governments from the responsibility to repay borrowing by state-owned enterprises and local government financing vehicles that is often implicitly guaranteed by governments.

“Such moves may lead to moral hazard, lowering local authorities’ willingness to pay off debt, which would pass the fiscal risks to the financial sector, give rise to bad loans, and even trigger systemic risks,” Xu said.

The piece written under the pseudonym 青尺 - 财政政策为谁积极？如何积极?:

China’s central bank and finance officials clash over fiscal policy, local debt online - Global Times:

Such open spat between the central bank and the finance ministry implies that some problems could be brewing, testing policymakers' will and wisdom to align the country's fiscal policy with its economic development, analysts said.

It sure sounds like there is a big and ongoing debate about how to deal with the local government debt problem that is bigger than has been publicly admitted (as Caijing noted in its most recent cover story (See the July 10 newsletter).

How worried is the top leadership? Last week's meeting of the Central Committee for Financial and Economic Affairs focused on " improving innovation capabilities for key and core technologies " according to Xinhua.

China Has Ammunition Beyond PBOC to Bolster a Slowing Economy - Bloomberg Quint:

China accelerated government spending in June, with spending on environmental protection and science and technology leading the splurge. That resulted in a fiscal deficit of 726.1 billion yuan ($109 billion) by the end of June, about 30 percent of the total budgeted deficit of 2.38 trillion yuan this year, according to Bloomberg calculations using data from the Ministry of Finance.

Even as spending has been recently ramped up, this means that policy makers will have more ammunition in the second half than in the same period last year to counter any slowdown without breaking the budget constraints that they’ve set themselves.

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2. Urban rail projects may not be part of any increased fiscal stimulus

China hits brakes on urban rail projects to address debt - Global Times:

Urban rail restrictions, don't look like these projects will be part of any hoped for (but I think unlikely) infrastructure stimulus package

In the latest move, the State Council, China's cabinet, on Friday issued a guideline that substantially raised the bar for local rail projects and barred local governments from issuing too much debt through hidden channels for such projects.

While the country has been slashing infrastructure spending to curb soaring local government debt, the new measures further blocked loopholes that some local governments had taken advantage of in starting new rail projects, experts noted.

In the guideline, the State Council raised requirements in 12 areas such as population, public budget revenue, GDP and current debt level of cities applying for approval for new railway projects.

Most notably, the guideline requires that the GDP of the city reach at least 300 billion yuan ($44.88 billion) to be eligible for new rail projects. That is triple the previous level.

Such a level is aimed at disqualifying many Chinese cities that had been planning rail projects, according to Sun Zhang, a rail expert and professor at Shanghai Tongji University, who participated in drafting the guideline.

21st Century Business Herald on the adjusted rules - 严控地方债务风险，地铁项目申报门槛提高到三倍

The State Council guideline 国务院办公厅关于进一步加强 城市轨道交通规划建设管理的意见 国办发〔2018〕52号 

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3. Real estate crackdown not keeping prices down

China Home Prices Rose in June at Fastest Pace in 21 Months - Bloomberg:

So-called second-tier cities led the price gains, which are picking up even as officials extend more than two years of efforts to cool the housing market. In late June, the authorities announced a six-month campaign against property speculation in 30 cities, tightened approvals for loans for shanty-town redevelopments, and looked into further restricting developers’ sales of offshore debt.

“All these second-tier cities are growing phenomenally right now, we see huge population inflows which see huge demand for housing,” CLSA Ltd. analyst Nicole Wong told Bloomberg Radio.

Investing in Chinese Stocks—投资大中华地区股市: Chinese Cities Implementing Price Controls:

Some Chinese cities have given up on various housing regulations and gone straight to price controls. One city has enacted limits similar to the stock market, only allowing an annual increase of 6 percent. The article discusses the cost of regulation, but doesn't mention the biggest: market distortions that will create artificial scarcity as demand exceeds supply

Bulls Decide China Builder Stocks Aren't Terrible After All - Bloomberg:

Major developers are set to benefit from further consolidation in the Chinese property industry, analysts at JPMorgan and CGSCIMB Research say. China’s 30 largest developers accounted for about half of the nation’s home sales in the first six months of the year, up from 38 percent a year earlier. Another reason not to panic: developers’ funding costs are still below past highs despite a spike for offshore debt. And their revenue continues to grow, with China Evergrande Group forecast by analysts to post a 44 percent gain in 2018, after a 47 percent increase last year.

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4. Population ageing and internal migration changing

Rare study from top advisory body shows population issue a 'national crisis' - Global Times:

China's labor supply is estimated to drop by 100 million every 15 years after 2020, while more incentives are urged to better implement the second-child policy to address a shrinking labor force and aging society, according to a study from China's top political advisory body.

The labor supply of China will continue to decrease. It is estimated that the working population of the country will be 631 million in 2020, and the number will drop to 523 million in 2035, and 424 million in 2050, said a survey from the population commission of the National Committee of Chinese People's Political Consultative Conference (CPPCC).

The survey, which lasted one month and ended in June, said that the fast developing AI technology of China can help solve the problems brought by the shrinking labor force.

人口三问——全国政协“中长期人口变动与经济社会发展”专题调研综述--人民政协报：

国家统计局数据显示，2017年末我国总人口13.90亿人，就业人员总数7.76亿人。根据分析，未来一个时期，我国劳动力供给将保持高位但规模持续减少，同时结构将发生深刻变化。预计到2020年、2035年、2050年，劳动力有效供给将分别为6.31亿人、5.23亿人、4.24亿人。

从国际经验和人口发展进程看，人口老龄化是经济社会发展不可逆转的必然趋势。人社部就业促进司副司长刘宇文建议，应从人口与经济社会发展的关系变化、人口发展的实际出发，全面、客观、发展地认识和评估就业影响，早做准备，积极采取有针对性措施，确保经济社会发展与人口变动趋势相适应。

劳动年龄人口的减少，不意味着生产能力的必然下降，这其中还有着科技进步对劳动效率的的贡献因素。当前，我国以智能制造、分享经济为特征的新产业、新业态、新经济发展十分活跃，以新能源、新材料、信息技术、生物技术、人工智能为特征的技术革命正在进行。

Regional China: internal migration - EIU:

Patterns of migration within China are changing. The Economist Intelligence Unit expects the volume of future internal migration to be much smaller than in the recent past, reflecting a reduced supply of surplus rural labour and the introduction of policies designed to limit migrant flows to China's biggest cities. We also anticipate some reverse migration from the east coast to inland regions that offer better economic opportunities than in the past. A national initiative to create city clusters will divert resources to such areas, promising significant investment in connectivity projects.

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5. New study on Chinese investment in US tech startups 

China Targets U.S. Tech Startups in Investment Loophole - WSJ $$:

Chinese foreign-direct investment into the U.S., made through deals such as acquisitions, fell into negative territory during the first five months of the year, according to data that takes asset sales into account from the Rhodium Group, a New York consulting firm.

Yet the figures belie China’s sustained interest in U.S. technology, which it is continuing to target through relatively unrestricted investments in startups in Silicon Valley and elsewhere, Rhodium said in a new report reviewed by The Wall Street Journal...

Over the period from January to May 2018, Chinese venture capital investment in the U.S. had already reached nearly $2.4 billion, which was its previous full-year record set in 2015, according to Rhodium’s analysis.

From 2000 through May 2018, Rhodium found more than 1,300 funding rounds of U.S. startups with at least one Chinese-controlled investor, representing an estimated $11 billion in Chinese investment. Around three-quarters of those transactions have occurred since 2014, the report by Thilo Hanemann, Adam Lysenko and Daniel Rosen, says.

Macro Polo has created a handy tool to see all aspects of PRC investment into the US--The China Footprint - MacroPolo:

The nature and texture of the US-China economic relationship is changing. As Chinese students, tourists, homebuyers, and investors pour into every corner of the United States, they are moving the relationship beyond just trade linkages, and ushering in a new era of face-to-face economic and social engagement.

The China Footprint captures this evolving dynamic by piecing together a composite picture of Chinese consumption and investment on US soil. The flows represented here span analytical categories—trade and investment, goods, and services

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6. Nationwide war on Islam?

Is China’s atheist Communist Party trying to eradicate Islam? | AFP:

In what locals said they fear is a deliberate move to eradicate Islam, the atheist ruling Communist Party has banned children under 16 from religious activity or study in Linxia, a deeply Islamic region in western China’s Gansu province that had offered a haven of comparative religious freedom for the ethnic Hui Muslims there...

“The winds have shifted” in the past year, said a senior imam who requested anonymity. “Frankly, I’m very afraid they’re going to implement the Xinjiang model here.”..

“They want to secularise Muslims, to cut off Islam at the roots,” the imam said, shaking with barely restrained emotion. “These days, children are not allowed to believe in religion: only in communism and the party.”

Authorities Force Uyghur Students to Return to Xinjiang From Mainland For Propaganda Drive - RFA:

Authorities are requiring Uyghur pupils studying in mainland China universities to return to their homes in the Xinjiang Uyghur Autonomous Region (XUAR) during their summer break to take part in propaganda tours promoting ethnic unity and lauding central government policies. In a statement dated July 6 and posted at the University of Information Technology in Sichuan province’s capital Chengdu, the Ministry of Education’s Ethnic Education Department announced a decision to “organize the students from Xinjiang in the mainland returning to their hometowns to speak out in the summer.”

Uyghurs Deplore China’s Unkind Cuts to Local Women’s Skirts - RFA:

Officials in the Xinjiang region of northwestern China have been cutting the skirts of Uyghurs on the spot in the streets to enforce a ban on ethnic minorities wearing long skirts, sparking an outcry among Uyghurs worldwide over the latest example of heavy state intrusion in their lives. The Turkic-speaking Uyghurs already face tight government restrictions on men’s facial hair, the naming of children, kitchen cutlery and burial rites. The restrictions on Islamic practices, and curbs on the culture and language of the Uyghur people, including videos and music are purportedly aimed at combatting religion extremism.

China’s ‘prison-like re-education camps’ strain relations with Kazakhstan as woman asks Kazakh court not to send her back | AFP:

Secretive “re-education camps” allegedly holding hundreds of thousands of people in a Muslim-majority region in western China are the focus of an explosive court case in Kazakhstan, testing the country’s ties with Beijing.

On trial is Sayragul Sauytbay, an ethnic Kazakh Chinese national who is accused of illegally crossing the border to join her husband and two children in Kazakhstan.

But it is the 41-year-old’s testimony about her forced work in the camp system in the Xinjiang Uygur autonomous region that has drawn the most attention.

Hikvision Wins Chinese Government Forced Facial Recognition Project Across 967 Mosques - IPVM:

Hikvision won a 2017 government contract for a ~$46 million USD to build an extensive surveillance system in Xinjiang province's Moyu County. The project is called "Moyu County Social Defense System" (墨玉县社会面防控体系 PPP 项目)...

The project includes even more provisions for video-based surveillance and censorship systems specific to mosques, such as a video conferencing system for “unified” sermons to be broadcast in mosques from a “video conferencing hub” in Moyu County’s Ethnic Affairs Commission. Such a system would effectively eliminate the need for any preachers to hold their own sermons.

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7. Death by tainted Chinese medical ingredients?

Blood Pressure Medicine Is Recalled - The New York Times:

Three companies that sell the generic drug, valsartan, in the United States agreed to recall it after the F.D.A. said it might be tainted by N-nitrosodimethylamine (NDMA), considered a probable human carcinogen. The agency is still investigating, but said the contamination was believed to be related to changes in the way that valsartan was manufactured.

All of the valsartan that is being recalled was made in China by the same company, Zhejiang Huahai Pharmaceutical Co. Ltd. It is distributed in the United States by three companies: Major Pharmaceuticals; Teva Pharmaceutical Industries, Ltd.; and Solco Healthcare. Solco, which is owned by Huahai Pharmaceutical, had about 45 percent of the market in 2017, according to John Brito, of Fore Pharma, the market research firm.。。

“It’s not just valsartan,” Dr. Lever said. “It’s becoming very difficult for me to write prescriptions at all. There are so many drugs that are coming in from India and China and companies are buying and selling each other and you don’t know what’s what.”

Comment: Have pharma firms done a China supply chain analysis both for safety and for contingencies in the event of a significant break in US-China relations?

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8. The Arsenal-BYD advertising scam

Arsenal Confirm Fraud Investigation over BYD Partnership | Bleacher Report | Latest News, Videos and Highlights:

A statement on the Chinese version of the Premier League club's website read:

"BYD has informed Arsenal that they believe they have been the victim of a fraud in relation to various advertising agreements. This includes our partnership with BYD which was formally launched by both parties at an event at Emirates Stadium on 8th May.

"We are investigating the situation and discussing it with senior level BYD representatives who were involved in the launch of the partnership. We will make no further comments on this matter."

In a statement, the electric-car manufacturer said a person, named as Li Juan, is suspected of undertaking business in the name of BYD despite not being an employee

Caixin on the mess--比亚迪深陷“广告门” 多面李娟为何做局阿森纳 

根据各方描述，李娟用双重身份攒了一个局。阿森纳以635万英镑（约合人民币5600万元）出售了赞助商权益，比亚迪以人民币120万元拿下其中一部分。二、三级供应商以为比亚迪要大展拳脚，多家公司垫资入场。

事实上，不止是阿森纳赞助案，李娟搭建的广告体系持续运转了至少一年时间。

在广告领域，供应商垫资开展营销活动是行业惯例，双方约定账期，合同执行完毕后，汽车整机厂再向广告商付款。现在，李娟以假冒身份跟下游供应商签署的合同，得不到比亚迪认可。而供应商自认为比亚迪提供了服务，却讨债无门。双方矛盾正愈演愈烈。

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Business, Economy, Finance And Trade

China refutes U.S. criticism on unfair trade - Xinhua: Chinese Foreign Ministry spokesperson Hua Chunying said on Monday protectionism cannot protect those who adopt it and unilateralism will harm everyone's interests in today's world where every country is interdependent with a shared destiny.... She said the United States is the main rule-maker of global trade and the U.S. dollar is the primary settlement currency for international trade, while China is a latecomer to global trade and a rule-follower of the World Trade Organization (WTO). "Does anyone believe that a rule maker would make rules that only benefit others, not itself?" Hua asked... She pointed out that trade imbalances do not equal trade unfairness, saying that fairness means all parties make global rules through equal consultations rather than based on a particular country's own interests, or even at the expense of other countries' interests.

Six Leading State-owned Enterprises Unveil Fresh Deleveraging Plans - China Banking News According to state-owned media six  of China’s top SOE’s have already completed their deleveraging plans and submitted them for approval to the State Asset Supervision and Administration Commission (SASAC). These companies include China Railway Construction Corporation, China State Construction Engineering Corp, China Merchants Group, Huaneng, Huadian and Sinopec Group. SASAC itself will soon release a “work” plan for capping the debt ratios of the 96 SOE’s that currently fall under its jurisdic

China’s official figures: lies, damned lies, or just changing statistical methods? | South China Morning Post Economist Ma Guangyuan said on Weibo, China’s Twitter-like microblogging service, that by changing its calculation methods without warning, the government was making it difficult for economists and analysts not only to do their work but also to trust the data. “The new methodology is so magical it can transform a sharp drop to an increase,” he said. By changing its calculation methods without warning, the government was making it difficult for economists and analysts not only to do their work but also to trust the data.

Sinology by Andy Rothman - Is China Tanking? I still think there is a high probability that Xi Jinping will follow the non-confrontational path I described in the last Sinology, leading to negotiations with Trump which will resolve the bilateral dispute in the fall. But, if I'm wrong, and the tariff dispute escalates into a real trade war, there are a few key points to keep in mind. First, the Chinese economy is no longer export-driven, so the impact of a trade war will be modest. Net exports (the value of a country's exports minus the value of its imports) account for only 2% of China's GDP, down from a peak of 9% in 2007. In contrast, domestic consumption now accounts for the majority of China's economic growth and more than half of its GDP. Second, because Trump would be fighting a trade war without the support of America's allies, the impact on China's exports would be relatively small. Last year, Chinese exports to the U.S. accounted for only 19% of total Chinese exports.// Rothman’s optimism is unshaken

U.S. Hits Back at Allies, China on Metal Tariffs in WTO Move - Bloomberg The U.S. Trade Representative said it launched formal challenges at the World Trade Organization on Monday against China, the European Union, Canada, Mexico and Turkey for retaliating against steel and aluminum tariffs. The Trump administration earlier this year imposed 10 percent duties on aluminum and 25 percent on steel after finding imports of the metals pose a risk to national security.

Panic Roils China's Peer-to-Peer Lenders - Bloomberg In some cases, savers are turning up at the offices of P2P operators to demand repayment, spooked by reports of defaults, sudden closures and frozen funds. At least 49 platforms have failed in the past two weeks, adding to 80 cases in June, the biggest monthly tally in two years, according to Shanghai-based Yingcan Group. The researcher defines failed platforms as those that have halted operations, come under police investigation, missed investor payments, moved into other businesses, or had operators flee with client money.

China Snubs Xiaomi With Pushback Against Dual-Class Shares - WSJ $$ Xiaomi shares fell as much as 9.6% on Monday before closing less than 2% lower. James Wei, an analyst at Yuanta Securities, said the shares were helped by hopes that Hong Kong’s exchange and its counterparts could reach a resolution.

Chinese investors take advantage of cheap Greek real estate - CGTN But it’s not only the cheap prices that make Greek real estate appealing to foreign investors (much cheaper than other European countries like Portugal, Spain, Italy and Germany). Greece’s residence-for-investment program, introduced in 2013 and one of the cheapest in Europe, has been luring thousands of foreign buyers who, when they buy real estate property worth at least 250,000 euros (292,625 US dollars), get a five-year residence permit that also allows them and their families to freely travel in most of Europe.

BMW Strikes Deal for Potential Stake in China Battery Giant - Bloomberg BMW AG is the first overseas carmaker to get a potential toehold in Chinese electric-car battery maker Contemporary Amperex Technology Co. Ltd., obtaining the right to make an equity investment of as much as 2.85 billion yuan ($427 million).

Trip Giant Booking Holdings Invests $500 Million in China's Didi - Bloomberg Booking Holdings Inc., owner of the Priceline and Kayak travel websites, will invest $500 million in Chinese car-hailing giant Didi Chuxing as part of a global alliance that’ll blend room reservations and rides on demand for their customers  //  Comment: Another sign Didi serious about coming in to the US market?

U.S. ban on China’s ZTE forces telecoms to rethink business: sources | Reuters One industry expert said operators may start using multiple vendors to avoid being stuck with a supplier that comes under trade sanctions or suffers other extended disruptions. “Many supplier strategies will be reviewed,” said Bengt Nordstrom, a telecoms industry consultant based in Sweden who advises operators on equipment purchasing strategies. “Wind Tre was the first example so far. This is a wake-up call to the industry that if you have a single vendor dominating your network supply chain – ZTE for now, but other vendors eventually – you are leaving yourself exposed.”

Operator of Beijing-Shanghai High-Speed Railway Preparing for Listing - Caixin Global Beijing-Shanghai High-Speed Railway Co. Ltd., in which China Railway Corp. (CRC) is the largest shareholder with a 46% stake, has started to prepare a public flotation, multiple sources familiar with the matter told Caixin. It is not yet clear where the listing might take place. Previously, CRC was not interested in listing the unit, as the Beijing-Shanghai rail line — one of the nation’s busiest — was not short of capital, the sources said. But CRC has now decided to use the unit as a pilot project to push forward its “asset securitization” plan amid Beijing’s national deleveraging campaign to reduce corporate debt, according to the sources.

Scaramucci's Path to $20 Billion Runs Through a Hot China Market - Bloomberg Funds of hedge funds, which allocate client money across multiple managers, are opening at a record pace in Asia’s largest economy even as their numbers dwindle globally after 10 straight years of outflows. While investors in the U.S. and Europe have grown disillusioned with the funds’ fees and spotty performance, China’s rich are looking past those concerns as they hunt for alternatives to increasingly risky domestic asset-management products.

Latest Sign of China’s Slowdown: A Technology Cash Crunch - The New York Times Venture capital is a small part of the Chinese economy, which by most accounts is still growing at a quick pace compared with that of many other countries. But the industry’s fund-raising problems may be a symptom of a widening malaise...“We ended up with a lot of dumb money, managed by inexperienced investors,” said Ran Wang, chief executive of the investment bank CEC Capital Group in Beijing.  //  Comment: a shakeout has been long overdue, far too many amateurs set up show as "VCs", and raised money from unsophisticated investors who had no understanding of VC or the time horizons

UBS Abandons Call for Yuan Gain in '18; Trims China GDP View - Bloomberg “With underlying pressures on CNY set to intensify and China’s current-account surplus likely to decline notably, we see CNY coming under more depreciation pressures” despite the People’s Bank of China’s efforts to stabilize it, Wang Tao, head of China economic research at UBS in Hong Kong, wrote in a note

China's top steel city extends pollution measures until July 21 | Reuters Tangshan, China’s top steel city, has extended recent emergency pollution control measures until July 21 because a smog warning for the area may reach its second-highest level, according to a document seen by Reuters and a source familiar with the matter.

Why millennials are driving cashless revolution in China | Financial Times $$ Surging use of mobile payment apps WeChat and Alipay has transformed daily life

China money market funds’ rush into bank credit worries investors | Financial Times $$ in recent months China’s central bank has tightened monetary policy and access to credit, forcing down the funds’ once-attractive yields. At the biggest funds, average returns have dropped to an annualised to 3.7 per cent from about 4.5 per cent at the start of the year. In response, funds have rushed into bank credit, such as negotiable certificates of deposit, as a means to boost returns and continue attracting retail investments.

China's cobalt dominance meets blockchain-backed resistance - Nikkei Asian Review The latest sign of China's determination to corner the market came on July 8. Citic Metal, a subsidiary of state-owned investment company Citic, finalized a decision to acquire a 19.5% stake in Ivanhoe Mines, a Canadian resources developer. Ivanhoe intends to use the money to develop mines in Africa. The prizes are mines in the copper belt of southern Congo. Cobalt is usually produced as a byproduct of copper and nickel mining.

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Politics, Law And Ideology

推进新时代市域社会治理现代化（人民要论）--观点--人民网 - 陈一新  Politics and Law Commission Secretary Chen Yixin in People's Daily on modernizing social governance in urban areas// 提高舆论导控能力。互联网就是新战场，新媒体就是新战力。要下决心把工作重心转移到互联网新媒体上来，不断提高新媒体的品牌创新能力、话题设置能力、“引关圈粉”能力，让亿万网民在众声喧哗中听到党的声音。做好预知预警预置工作，有效化解重大舆情风险，坚决维护网络意识形态安全。善于运用新媒体开展政法工作和社会治理宣传，最大限度凝聚人心，赢得广大人民群众的理解、关心、支持。 -（作者为中央政法委秘书长）

China Holds Father, Supporters of Woman Detained For Inking President's Image - RFA Authorities across China have detained the father and supporters of a woman who splashed ink on a public poster of President Xi Jinping in recent days, amid a slew of copycat protests that prompted the removal of public images of the president. Dong Yaoqiong, who hails from the central province of Hunan and used the Twitter handle @feefeefly, streamed the live video of herself splashing ink on the ruling Chinese Communist Party propaganda poster in protest at "authoritarian tyranny."

Hunan officials deny racy nature of neon signs on government building - SHINE Officials from Yongzhou City of Hunan Province have defended the neon designs on an official building which a netizen claimed looked like a stripper, btime.com reported. A netizen expressed doubts over the new neon effects on the façade of a procuratorate building in the city’s Dong’an County on Weibo on July 14. The netizen said the blinking lights at night, along with music, looked a bit racy and went against the "solemn and inviolable" image of a legal supervision organ. The netizen also asked officials to declare the cost of the new neon effect.

What do you think?

Journalist, Family, Assistants Under Probe by China's New Supervisory Agency - RFA Authorities in the central Chinese province of Hunan are investigating six people connected to a prominent freelance journalist detained earlier this month on suspicion of "fraud" and running an "illegal business." Chen Jieren was taken away from his home in Hunan’s Shaoyang city on July 6, and has been incommunicado since. However, media sources told RFA that Chen and six other people are being held under "residential surveillance at a designated location."

纪检监察机关严查涉黑涉恶腐败和"保护伞"综述————要闻——中央纪委国家监委网站 long piece in "China's Discipline and Supervision Magazine" on rooting out gangs and corruption and local government "protection umbrellas"

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Foreign and Military Affairs

Chinese president eyes closer China-EU partnership - Xinhua: Pledging more reform and opening-up outcomes, Xi said China and the EU should follow the trend of world multi-polarization and economic globalization, increase strategic communication and coordination, join hands with each other to safeguard multilateralism and the rule-based system of free trade as well as an open world economy, push ahead with trade and investment liberalization and facilitation, improve global governance and promote the cause of peace and development. Hailing the significance of the EU-China comprehensive strategic cooperation, Tusk and Juncker expressed their gratitude for China's support for European integration.

The 'great-grandmother of all scandals' comes to China - BBC News The ministry's new leaders were staggered to discover that 88% of the contract cost had been paid to the Chinese company in charge, China Petroleum Pipeline Bureau - but only 13% of the work had been completed. Mr Pua said building work had not even started; only consultancy studies had so far been completed. "The entire project smelt like a scam. [There were] clearly elements of money laundering taking place," he said. "We were giving money out - to a Chinese company - and we suspect this money is being funnelled to parties related to the previous administration."

China-related investigation underway: Sri Lanka PM | Economynext Sri Lanka’s police are investigating nearly 1.4 billion rupees paid to former president Mahinda Rajapaksa’s re-election campaign, including payments from the China Harbour Engineering Company, the Prime Minister said Monday. Ranil Wickremesinghe told legislators from his United National Party (UNP) that 82 cheques amounting to some 1,398 million rupees had been drawn out in the names of officials of the Presidential Secretariat in the five week period leading to Rajapaksa’s defeat in January 2015. // Comment: Corruption and Belt & Road seem to go hand in hand...shocker...

President Xi Jinping meets World Bank president in Beijing - MoFA "We put forward the Belt and Road Initiative to facilitate international development and cooperation by achieving shared growth through discussion and collaboration on the basis of international rules," said Xi, stressing that China is willing to further cooperate with the World Bank under the framework of Belt and Road... "The Belt and Road Initiative proposed by President Xi reflects farsightedness and greatly contributes to international development and cooperation and cause of poverty reduction," Kim said. "The World Bank is willing to deepen cooperation under the initiative."

Revealed: The 5000- strong Chinese army powering the SGR :: Kenya - The Standard President Uhuru Kenyatta's legacy project, the Standard Gauge Railway is being powered by an army of 5,000 Chinese nationals. Among this massive workforce are civil and structural engineers, accountants, dieticians, cooks, self-taught locomotive operators as well as welders and carpenters. Their upkeep is part of the Sh1billion a month wage bill footed by the Kenyan taxpayer.

Wuhan effect: India, China to jointly train Afghan diplomats - The Economic Times New Delhi: India and China will jointly train Afghan diplomats. The decision follows Prime Minister Narendra Modi’s meeting with Chinese President Xi Jinping at an informal summit in Wuhan on April 27-28, where the two sides decided to explore joint projects in Afghanistan.

China builds unmanned weather station in Tibet near India border - The Economic Times The station in Yumai township under Lhunze county of Shannan Prefecture in Tibet will eliminate a blind area of meteorological services, state-run Global Times reported. It will also provide strong meteorological support for national defence and further promote border development as well as military-civilian integration, according to a statement by the Tibet weather bureau.

India raises trade deficit issue with China at WTO - The Economic Times Trade is skewed in favour of China at a trade surplus of $63 billion. Bilateral trade was $89.6 billion in 2017-18. “This large and growing deficit is difficult for India to sustain, and serious efforts need to be made to remedy the situation,” India said in its submission to WTO, commenting on China’s trade policy, which EThas seen.

ONI’s New 2018 China Recognition & Identification Guide Shows 3 Different Types of Maritime Militia Vessels | Andrew S. Erickson

The Modern Creation Of China's ‘Historic Rights’ Claim In The South Chins Sea: Asian Affairs: Bill Hayton The overlapping territorial and maritime claims in the South China Sea threaten to spark conflict in East Asia. On several occasions in recent years, disputes over the right to extract oil and gas have caused clashes between Chinese and Southeast Asian vessels. The United Nations Convention on the Law of the Sea (UNCLOS) was agreed by almost all countries in 1982 to try to resolve such disagreements. However, the People's Republic of China is currently trying to claim rights that go beyond UNCLOS and infringe on the UNCLOS-based rights of the other claimants. It deploys two arguments in particular: that the archipelagos in the South China Sea collectively generate rights to maritime resources and that China enjoys ‘historic rights’ in the sea. Neither of these arguments is found within UNCLOS, however. This article explores the origin of these Chinese arguments and finds that the ‘historic rights’ claim can be traced to a single Taiwanese academic writing in the 1990s during a period of intense debate in Taiwan over its relationship with the PRC.

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Hong Kong, Macao

Hong Kong May Ban Political Party That Seeks Independence From China - The New York Times The two-year-old political party targeted by the government, the Hong Kong National Party, is small, claiming at most a few dozen members and no elected lawmakers...John Lee, the Hong Kong security secretary, said on Tuesday that the government was reviewing whether to ban the party under the territory’s societies ordinance, which authorizes the prohibition of groups for reasons such as national security, public safety and public order...When it was a British colony, Hong Kong prohibited branches of the Chinese Communist Party and the Kuomintang, the party that had long ruled Taiwan.

Mainland-born scholar Zhang Xiang takes office as University of Hong Kong chief and vows to pursue talent for institution | South China Morning Post The new president and vice chancellor, now an American, strode onto campus at 9am and in brief remarks to reporters, said he was honoured to “serve this great institution”. “We are going to build a great university here that is not only [going to] train and prepare our next generation of leaders, but also make a societal impact in Hong Kong, Greater China and the world,” the former professor of mechanical engineering at the University of California, Berkeley said.

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Taiwan

Chinese President Xi Jinping takes pacifying line on Taiwan as hawks call for force | South China Morning Post On Monday, Taiwan’s top official on cross-strait ties, Mainland Affairs Council Minister Chen Ming-tong, set off for the United States on a nine-day visit to improve communication between Taipei and Washington, Central News Agency reported.

Mainland expedites preferential policy for Taiwan compatriots - Xinhua The new measures issued this month by north China's Tianjin Municipality, east China's Zhejiang Province, central China's Hubei Province and Kunshan City in east China's Jiangsu Province, will make it easier for Taiwan compatriots in terms of employment, housing, investment, business, education for children and other fields.

PLA drill in East China Sea ‘tailored for Taiwan separatists’ - Global Times The six-day exercise will start on Wednesday at 8:00 am and is due to end at 6:00 pm on July 23. Unrelated vessels are prohibited from entering the designated live-fire drill area and must follow the guidance of guard ships to ensure safety, reads a notice released by Zhejiang Maritime Safety Administration on Monday. According to the coordinates provided by the administration, the drill zone spans from sea areas close to east of Zhoushan, East China's Zhejiang Province to sea areas east of Wenzhou, also in Zhejiang Province. The drill zone has a similar size to the island of Taiwan. The drill is designed to warn the "Taiwan independence" forces, Song Zhongping, a military expert and TV commentator, told the Global Times on Tuesday.

The official announcement of the exercise- 解放军明日起将在东海海域进行实际使用武器训练 

DPP reaffirms support of Taiwan Independence, rejects proposal to alter party platform | Taiwan News At the annual congress of the Democratic Progressive Party (DPP) on Sunday, July 15, delegates unanimously vetoed a proposal to alter the party platform by rescinding previously affirmed pro-Taiwan Independence resolutions. The proposal to amend the DPP’s charter was brought forward by delegate Hsu Han-sheng (許瀚升), who claimed that shifting the party away from its pro-independence platform would prove politically expedient in maintaining the status-quo, which Tsai Ing-wen has consistently emphasized is a priority of her administration. The party leadership and majority of delegates overwhelmingly disagreed with proposal, reaffirming the DPP’s advocacy for a sovereign Taiwan, which was articulated in a 1991 party resolution calling for “an autonomous Republic of Taiwan.”

Palace Museum should be more local: new boss - Taipei Times The National Palace Museum (NPM) should reflect the history of East Asia from a Taiwan- centric perspective to make it more relatable to Taiwanese, instead of allowing it to remain “a Chinese enclave,” newly inaugurated museum Director Chen Chi-nan (陳其南) said yesterday.

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Tech And Media

Behind Qualcomm’s Retreat From Data Center Business — The Information $$ It isn’t known why the deals fell through, but a delicate geopolitical dance between Qualcomm and Chinese authorities might be a factor, multiple people close to the situation said. Qualcomm, which is based in San Diego, says the new focus of its data center business is a joint venture with a regional Chinese government, a partnership that supplies chips to big providers of cloud computing services in China. The company can ill afford to cross Chinese authorities—by, say, shutting down its data center business or selling it—as it awaits regulatory approval in the country for Qualcomm’s pending acquisition of chipmaker NXP.

Andreessen Horowitz Names Connie Chan A General Partner, Ending VC Firm's No-Promotion Policy With Chan’s promotion announced on Tuesday, Andreessen Horowitz has a dozen general partners. But Chan is the first to be promoted internally, seven years after she joined to focus on consumer internet investing and provide the firm with expertise into the Chinese tech scene. Chan says she plans to invest particularly in startups focused on mobile innovation, including the use of smartphone cameras in new and better ways, as well as real estate and ecommerce.

Microsoft Seeks Spot on China’s Cloud - Caixin Global During his visit to China last week, Microsoft President and Chief Legal Officer Brad Smith sat down with Caixin to discuss the technological climate in China, as well as Microsoft’s ambitions to expand into the domains of AI and cloud computing services.

Live From Beijing: A Disappearing ‘Saturday Night Live’ - The New York Times Now, just weeks after “Saturday Night Live China” made its debut — with no overtly political content — its future looks even more doubtful. Viewers who tuned in over the weekend discovered that the show was not available from its host, the Chinese video-streaming platform Youku. “The site you were searching for has just gone to explore Pluto,” a notice at the show’s Youku page said.

From Wi-Fi to AI: Shenzhen’s first ‘smart road’ is on the way - Global Times Slated for completion next year, Qiaoxing Road's smart systems will include traffic lights that adjust signals based on traffic flow, LCD signs, and motion-detecting street lamps. Lampposts in high pedestrian traffic areas will have Wi-Fi hotspots and come prepared for 5G.    AI-enabled video recognition cameras will be installed throughout - from intersections to the LCD road signs and lamp posts. Qiaoxing Road was chosen for its high volume of truck traffic. Weight and speed sensors on the street's surface will monitor for common violations such as overloading and spills.

Douyin reaches 500 million monthly active users worldwide · TechNode The platform, owned by Bytedance, announced on July 16 that it has 500 million monthly active users around the world two years after its initial launch, according to their official account on Jinri Toutiao. Apart from Chinese domestic users, others mainly are in Asian countries like Korea, Japan, Indonesia, and Vietnam. The platform operates official Instagram accounts in these countries and will re-post highlights of videos from its users.

Tibet Among The Jealous Gods | Rukor The movie’s producers, in publicising its midsummer release, emphasized that the plot is based on unspecified Tibetan Buddhist mythology, as if that endears the asura realm, like Tolkien’s Shire of medieval England’s rural origins. Top CCP officials from Ningxia province, base of the movie’s makers, attended a special advance screening. Not even a classic hero, destined to win back his kingdom, played by a 19 year old hot heart throb, Wu Lei, could save this attempt at instant myth. He plays a herdsman, but don’t for a moment think this too is a nod to Tibet, to the drogpa pastoralists who (still) use the actual Qinghai landscapes in the movie to pasture their yaks, sheep and goats. This herdman is dressed to look more like an extra from Life of Brian, from a sword and sandal epic of the Euro mythos of lost origins, a shepherd destined for greatness.

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Energy, Environment, Science And Health

'Random', 'Shocking', 'Pointless': Female Military Doctor Stabbed to Death in Tianjin Hospital | What's on Weibo The fatal stabbing of a female military doctor in Tianjin on July 12th has shocked Chinese netizens. The Tianjin Affiliated Hospital of The Chinese People’s Armed Police Forces, where the stabbing took place, issued a statement on Weibo about the incident (image below), saying that the 47-year-old Zhao Junyan (赵军艳) was violently attacked by three people at the outpatient clinic on Thursday morning.

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Agriculture And Rural Issues

Famous Supplier at Center of Illegal Genetically Modified Corn Scandal - Caixin Global The company at the center of the latest scandal is Yuan Longping High-Tech Agriculture Co. Ltd., named after Yuan Longping, credited for helping bolster China’s grain security with his research into so-called super hybrid rice. Yuan, 88, is also the honorary chairman of the Shenzhen-listed firm. The super-hybrid rice he developed is considered superior to other varieties of the grain in terms of yield, quality and resistance to disease.

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Education

China’s elite Tsinghua University is now screening visitors using facial recognition | South China Morning Post The prestigious college in Beijing has made it compulsory for individuals to have their faces scanned before being allowed on campus

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Beijing

Officer Sentenced to 10 Years for ‘Hukou’ Profiteering - Sixth Tone Between 2002 and 2015, the Tongzhou District officer, surnamed Liu, reportedly received more than 2.6 million yuan ($389,000) in bribes from 19 people who did not meet the capital’s application criteria for hukou — a form of household registration in China that comes with education, health care, and property entitlements. Liu successfully secured their hukou for a price and spent the earnings on himself and his lover, according to the newspaper’s report.