This "statement of offense" by the Singaporean National who just pled guilty to helping PRC intelligence services in the US is a fascinating read, should really be required reading for anyone doing china-related work... https://www.justice.gov/opa/press-release/file/1297486/download
1) Yes it is happening. The staff there has already been informed that they must leave China within 30 days. There is no "reshuffling" or assignment to other missions. Many of the staff who evacuated literally just returned to China a few days ago and are still in quarantine. They will have to turn around and leave as soon as their quarantine ends. My thoughts go out to them as I know many of them truly love Chengdu and were looking forward to getting back to work.
2) US Consulate Chengdu is not a small consulate by world standards. They had dozens of Americans assigned there and about twice as many locally hired staff. Similar to when the international newspapers had to close shop earlier this year, many of those local staff members will be out of a job unexpectedly in a tough market. These are experienced professionals that have dedicated many years, even decades to advancing U.S.-China relations. Very sad to contemplate.
3) Chengdu's district covered Tibet and while access is extremely restricted there had been some success in recent years gaining permission to visit. While still closely monitored, sending an officer to meet with Tibetan Americans in the area or to meet with local officials was a much more organic type of access than a dog and pony show for high-level U.S. officials visiting from Beijing. The loss of access will hurt.
4) Shenyang, Chengdu, and Wuhan were the U.S.'s only consulates in tier 2 cities. With Chengdu shuttered and Wuhan effectively if not officially closed, we have lost almost all of our visibility on China outside of the big three. This is not good news for on the ground reporting or for conducting public diplomacy (such as it is in China). It will also make providing support for U.S. citizens in these areas difficult if not impossible.
All that being said, I believe the significance of this action is going to involve significant pain for the CCP side. Chengdu is one of China's fastest growing cities economically and a lot of that came from direct foreign investment. You can feel it when you travel there. Drawing down the diplomatic community and forcing business travelers to go to Beijing or Guangzhou for visas will impact the international stature of the city in a way that won't really be the case in Houston.
Totally agree with your first 4 points, though I really think you're overestimating the economic impact of this move. Chengdu is a very vibrant and fast growing city and gateway of a massive region of China. No foreign business or investor is going to shy away from it just because the consulate is further away. That's just not how investors make decisions.
Yeah I was mainly trying to draw a comparison with the Houston consulate, it's not going to be a major economic impact in a general sense. But taken together with all the other challenges that region and international business in general are facing in China it's not going to help.
In areas where there is a significant foreign business community the presence of consulates and diplomatic officials is symbiotic because it contributes to the creation of good international schools, expat themed restaurants, mutually beneficial social networks, etc. This is especially true in China where there are relatively few foreigners in the tier 2 cities. The U.S. mission is usually the largest foreign mission in these cities and the staff form a small but important clientele for local businesses and schools.
After talking to a lot of foreign executives, they often mention the lack of these types of schools and businesses as the major factor preventing them from settling down in China for longer than a year or two or bringing their family over while assigned there. So in that sense I think these consulates serve a function there that they don't in say, Chicago or Strasbourg.
Good points about the expat community effects, I didn't consider that. I've never stayed in Chengdu long enough to get a feel for the difference between the expat community there and other Tier 1 cities.
The biggest loss might be the Chengdu Research Base of Giant Panda Breeding, which still allowed foreigners to play with the Pandas with a certification of health, which the consulate used to provide on site. Though probably COVID changed these rules already.
1) Tibet is lost and there is nothing a consulate in Chengdu can do about that. One reason Tibet is lost is the failure, over the last forty years, of western governments and businessmen to press the CCP for something approaching real autonomy in Tibet for fear of being denied access to the Chinese market. Sound familiar? We abandoned principle for money and got none of the former and little of the latter.
2) The only reason there are US consulates in the tier 2 cities is to grease the visa machine; that is, to make it as easy as possible for Chinese businessmen and students to get US visas. If this were not the case , the CCP would insist on a strict quid pro quo to avoid losing face. The CCP want as little “public diplomacy” or “on the ground reporting” as possible.
The Information is just out with a story that ByteDance Investors Discuss TikTok Purchase:
A small group of ByteDance’s U.S. investors is discussing with the company’s top management the possibility of joining forces to buy a majority stake in TikTok, said people familiar with the situation, as it grows more difficult for the Chinese-owned company to keep control of the fast-growing video app.
The talks appear to be preliminary, and the idea is just one possible scenario ByteDance is examining as it explores ways of dealing with a possible U.S. ban or forced divestiture of the app, the people said. U.S. government pressure on ByteDance is growing steadily: On Wednesday, the House of Representatives voted to bar all federal employees from loading TikTok onto their government-issued phones. ByteDance founder and CEO Zhang Yiming is open to a sale if that’s what is best for the future of the app, The Information previously reported.
I wrote on July 7 about the increasing possibility that the US would block the app:
Perhaps the best route for TikTok is to find a buyer before even more value is destroyed. Such a buyer would have to be one that is palatable to the US government, big enough to buy the entire company and then make the investment to truly separate the entire company from any PRC entanglements, but also able to avoid possible antitrust issues. It is a short list.
But simply changing ownership will likely not be enough. All the data and code, including the content recommendation algorithms, will have to be moved out of China and be made inaccessible to anyone in the PRC, what I meant by “any PRC entanglements”. Is that even possible? I do not know, but simply shuffling around share certificates without addressing the core concerns of the US government is unlikely to persuade US policymakers.
Bill - A structured transaction which can appease US policymakers is executing a spin-off of US TikTok into a separate entity, and simultaneously conducting an equity public offering on an US exchange. Subsequently, a certain percentage of ByteDance shareholders can exchange their stock for US TikTok shares, and can conduct a secondary sale (either block to private shareholder or public follow on offering).
This structure satisfies the concerns you listed above, as US TikTok now possesses a separate and independent Board, management team, operations, and data which already lives in Virginia. The transaction also creates tremendous value for ByteDance shareholders, allowing them to share in minority ownership of the newly created (valuable) public entity and cash out via IPO / secondary sale.
The key risk to the transaction is the horse trading between US TikTok and ByteDance Parent behind structuring the Services / Operating Agreement. Important topics will be IP rights, the content algorithms you referenced, and how ByteDance Parent will provide transition services until US TikTok's future state of technology will be able to stand up. This transaction cannot live if the US TikTok entity perpetually leases the master algorithm from ByteDance Parent, for obvious reasons.
I think an outright sale would set a hard to control narrative for the CCP, and generate a poor precedent for future Chinese technology companies who want to expand to the US market. This solution allows Chinese shareholders to monetize and participate in the upside, while cutting out CCP influence. Of course, there is always risks of bad actors e.g. data theft by individuals influenced by the CCP.
I've dived into a few more details surrounding other strategic alternatives, feel free to take a look!
one way or another, TikTok would be part of a historic moment, a first ever for PRC also US. 2 points come to mind. one is the warnings and ban talks from US gov could actually boost popularity of TikTok in west given how the defiant nature of US people are (thou usually in a good way). the other is I doubt CCP really has leveraged TikTok in any way; they could but truth be told if you look at pro-CCP Youtubers and those millions pro-CCP Twitter bots you know TikTok is just one of million ways that CCP could exploit. In terms of "people's war" or "united front", US is light years behind CCP.
One possible solution would be a split of Douyin vs TikTok Global where Bytedance shareholders who are foreign flip into shares in TikTok and Chinese domiciled shareholders flip into shares in Douyin using some agreed ratios so that Douyin ends up with pure Chinese shareholding and minimum allowable foreign shareholding and local listable legal structure allowing it to go for listing in China on STAR vs TikTok ends up with majority foreign shareholder base and minority Chinese and similar BoD and goes for NASDAQ. I can see TikTok getting a European domicile or possibly Singapore as a more acceptable to outright move to US. However it would have to also address the software and algorithm and where the software team is based going forward otherwise all this legal structuring could be for nought.
No matter what they do, there is no change of the basic nature of the software. Anyway, the software is trivial and expendable, there was life before it and there will be life after it, no need to make a big fuzz over it.
- criticism of US companies engagement with China undermined by complete unwillingness to use federal government as organizer of collective action: "Look, every business leader has got to make decisions for themselves." "We will see if these companies hold firm. I hope they do. If they stand together, they will provide a worthy example for other American companies"
- Pompeo both calls for a "new alliance" yet stresses that each country must go-it-alone, choose their own path. "Not every nation will approach China in the same way, nor should they." If US is so sure of its vision on China, shouldn't it lead the nations of the world to react the same way?
- they've ended engagement, but haven't seemed to put forward a new doctrine?
I don't think putting forth a new doctrine is high on the agenda of the China hawks in the administration. Not necessarily these guys, but there's a growing sense among the hawks like Esper, Pottinger, Navarro that their window of opportunity may be closing, as an administration change becomes more and more likely.
While China hawks have always been present in US government and intelligence communities, never have so many been elevated so quickly to positions of power. However the bulk of them are likely to be replaced in a Biden administration. The current feel from this camp seems to be a focus on getting as much done on their wishlist as possible, with a focus on enacting changes that are not easily undone by a more diplomatic successor in their seat.
So by design, they are trying to disengage in as many ways as possible without really offering a replacement plan, which they likely won't be around to see anyway. If somehow they are still in their seats next year, they can discuss formulating a more structured new doctrine.
The recent moves are all along these veins, arresting hackers and spies, shuttering consulates, are all "permanent" moves unlikely to be undone by the next administration, and all high on the wishlists of the hawks.
As far as I understand, very little of this actually comes from Trump himself, who is really only concerned with China as a scapegoat for COVID and the economy. The "security" side hawks pushing these actions have, if anything, been trying to keep it under his radar.
Very interesting. They've turned up the rhetoric and harassment, but have utterly failed to put together a real strategy to compete against China in advanced technologies like 5G or to create a strategy with U.S. companies to stop the hacking and espionage. There have been modest steps such as the Pentagon investing in the former Mountain Pass rare earths facility in California to ease dependence on China, but nothing of sufficient scale to alter the underlying realities. I suspect the four top guns sense, incorrectly, that if they name and shame, it will force a Chinese response. They are fundamentally misreading Chinese culture and mentality.
It's a little more complicated on the 5G side, but there have been many attempts to put together a playbook. Andy Keiser at NSI has put together several LITERAL playbooks on this that have influenced the overall strategy a lot at different times. (You can google "The race to 5G" and his name, I think they're public).
The issue is that the US semiconductor industry is deeply entwined already with Huawei, so there has been counter-influence from lobbyists and adjustments from how other countries, particularly Five Eyes allies, wanted to treat Huawei at different points in time. Particularly the UK and India have gone back and forth on this issue a lot and lack their own coherent strategies.
Anyway, 5G and tech security/supremacy is a major focus of the hawks, I would actually characterize that as one of the more coherent parts of the US's China policy.
In your view, do the hawks believe they're locking in a potential Biden administration to a more confrontational policy? Or is it that they are locking the CCP into their confrontation against the United States (i.e. no warm overtures for incoming Biden admin, harden view that America's new hawkishness is both bipartisan and structural)?
The former, more about locking in Biden appointees to their course of action, or just doing fairly permanent changes. If you arrest 2 hackers, that makes US interests safer on net. Biden appointees aren't going to pardon them. But if you didn't arrest them, there's a chance a Biden appointee won't pull the trigger to go after them and they slip away.
Things like that. CCP would definitely happily 180 with a smile and handshake if they sensed a more amicable new administration.
On 24 July, State Councilor and Foreign Minister Wang Yi had a video conference with German Foreign Minister Maas and briefed on the current China-US relations at the other's request.
2020年7月24日，国务委员兼外长王毅同德国外长马斯举行视频会晤时，应询介绍了当下的中美关系。
Wang Yi pointed out, the current difficulties are completely created by the US side. Its purpose is to disrupt China's development; it unscrupulously resorts to all means to this end. Some anti-China forces in the US lately have been deliberately creating ideological opposition, blatantly coercing other countries to pick sides and confronting China for US' self-interests. But any country with conscience and independent spirit will not play a part in such actions.
Wang Yi noted, China still hopes to achieve no conflict, no confrontation, mutual respect and win-win cooperation with the US. But we will firmly uphold national sovereignty and national dignity, resolutely safeguard our legitimate rights to development and unswervingly uphold basic norms governing international relations. China will neither dance to the US' tune, nor let the US have its way.
I would translate that last sentence as “China will not dance to America’s tune , nor will China allow the US to mess/screw things up.” Of course the CCP does not want to see the gravy train derailed. The policies of the past 40 years have resulted in a massive transfer of treasure from North America to China. The Chinese are laser focused on ensuring that this transfer continues. We must be equally as focused in seeing that it does not. 老共吃硬不吃軟。
Big new campaign out there to convince the textile industry to end forced labor in Xinjiang.
Meanwhile there are four countries (Guatemala, Honduras, Nicaragua, Haiti) that both have giant textile industries that produce for the US market AND recognize Taiwan over Beijing.
This seems to me to be a potential geopolitical weapon for Taiwan to grab on to. They can use the anger at the abuses of the Uighurs to help their allies grow economically and regain marketshare. It's potentially low cost, high impact, and wins them gratitude to help them maintain recognition. But I haven't seen any indications that they'll go that route.
There are two issues here. First, social accountability (SA) programs in labor intensive industries (garments, shoes, toys) and second industrial capacity in Central America (CA).
The identification of Esquel Xinjiang as a violator of SA with regard to forced labor seems to me to indicate the degree to which the manufacturers have managed to work around the SA systems after 20 odd years of living under them. Esquel is a massive operation and its clients, notably Nike, have robust SA programs. Looks a lot like "regulatory capture".
Most of the CA garment ops were set up initially on an 807 basis (using fabric cut in the US) or using imported fabric. Most of the imported fabric was from China. The problem with CA is that the industry is not vertical and is reliant on imported raw materials. Given the state of the Taiwan garment industry, there is not a lot to work with here for Taiwan. Moreover, building capacity in textiles and garments at this time when there is considerable excess global capacity and when so many retailers are headed for bankruptcy seems a dubious strategy.
What are people hearing about ordinary Hongkongers' reactions to the Security Law?
To my surprise I spoke to a HK friend last night and she said that most people are glad that the protests are over as they were making the city unlivable. One of her friends runs a building business and he has the contract to maintain MTR stations. He said that the turnstiles/card readers had been damaged so many times they had run out of spare parts.
Secondly, as reported on Sinocism, the HK SFC is unable to give a definitive opinion as to whether shorting stocks or producing negative analysis on mainland companies amounts to subversion. How is this going to impact Western banks etc in HK?
I think western media and some of the younger passionate HK protestors fed off each other in an unfortunate echo chamber for most of the year, with the West feeding a narrative of mass oppression and heroic revolutionary fighters pushing a "free Hong Kong" message.
While there were many legitimate grievances and issues that led to the mass protests last year, the bulk of the HK public never supported a full decoupling from China, but was about keeping their level of autonomy and economic grievances.
Back when the protests were about that, I estimate it had the support of 50-60% of the population of the island. But the movement continued to get more radicalized and violent and lose popular support. Once the extradition law was withdrawn, and goals changed to the 5 demands, support dropped to around 30-40% of the population, which is still significant but becoming a vocal minority.
By early 2020, most locals could see where the trajectory was going. Pushing China for freeing Hong Kong is a non-starter, and only going to result in stronger security measures. The more the US cut HK's special status, the less China has to lose by clamping down control, and the more HK's future and economy would suffer. By the time COVID hit, popular support for further protests, especially as the goals shifted to some form of independence movement, had dropped to around 10-20%. You can see it in the low turnouts of recent protest attempts.
A better question to ask Hong Kongers is not necessarily do they support the protests today, because certainly most people are not on the "side" of the police and CCP either. A better question would be, would you go back to the way HK was 2 years ago if you could undo the last 2 years of protests completely?
Almost everyone in HK would answer in the affirmative. All the protests achieved was a massive loss of their remaining freedoms, loss of economic advantages, and a much deeper recession, which most Hong Kongers can see and feel each day. A lot of HKers privately blame the US for encouraging and continuing to radicalize the young protestors, as if any other outcome was possible here. There were local news interviews with high school aged protestors near the end who believed that US would sail in an aircraft carrier and liberate them.
This is a reasonably accurate picture of sentiment toward the protests in HK. The one caveat to add is that sentiment toward the protests in Hong Kong is very dependent on income levels, business interests and age. Among most of my friends, who are professionals, gainfully employed or themselves successful business owners, there was a sense of horror and bewilderment at the violent turn that protests took beginning around June 2019 with the trashing of the Legislative Council chambers, and later the burning and destruction of mainland Chinese bank branches and businesses with mainland Chinese ties, including Starbucks, a popular sushi chain and a chain of snack shops. I shared their shock at seeing the long peaceful Hong Kong I have lived in for decades descend into chaos.
At the same time, some of my staff and other middle-income people I knew tended to believe protesters were pushed toward extreme violence by the excesses of the police and the implacability of the government. As in the US, different perceptions of reality were reinforced by social media bubbles that filtered out opposing views and solidified existing biases.
Today, the same people who were horrified by the direction in which the protests ultimately went are relieved at the fact that they have largely stopped, and willing to accept the existence of red lines defining the limits of free speech and protest activities as a fair price to pay for social stability. Others who once sympathized with the protesters or took part in protests are not supportive, but most are resigned to the fact that the NSL is a fait accompli. Some are looking at their options, such as emigration. Most will probably make peace with the new reality and stay.
The concern that remains for the financial sector is that the red lines are more like gray zones of ambiguity. The questions regarding short-selling and publishing of financial or economic research critical of China and its interests remain and it will take time to see how any such cases play out in the enforcement or non-enforcement of the NSL.
Another urgent question for the financial sector is how financial institutions comply simultaneously with US sanctions against Chinese officials or others and the NSL, under which enforcement of foreign sanctions against China is illegal. Closing the account of a US-sanctioned Chinese official might be necessary to avoid being shut out of the USD clearing system. But it could lead to equally dire consequences under the NSL.
The ultimate underlying grievances behind the protests were economic, in particular related to two major but connected areas: property prices pricing out young and middle aged residents from property ladder and stagnation in median incomes since 1997 which was much worse than anything reported in the West with top 1% capturing all and more of the GDP increase in that period. PRC is aware about these issues as seen in some Global Times editorials back in 2019 and one can hope that something will be done to address them however the visible reaction from the tycoons seems to be one of exhilaration that protests are shut down and going back to old ways (for example reports yesterday that hard hit shops are getting pretty bad lease renewal terms from landlords like Wharf Holdings - Woo Family). My forecast would be that if the economic issues are not partially addressed (say massive expansion of social housing Singapore-style or property price controls) then the protests will be back within 2-3 years but with purely economic demands - say higher minimum wages, rent controls or something similar.
My take regarding the underlying grievances of the protests, that started years earlier:
-socio-economics already explained in other posts here,
-fear of an increasing authoritarian China and encroachment, (btw anyone heard of concrete influences/violation of Basic Law into HK before and during protests, aside from the bookseller abductions?)
-psychology, identity (changing relationship between HKers and Tier 1 mainlanders in terms of being special, and competition for jobs) and
-local policy/policing mistakes that were re-enforced by populists and social media bubbles
eg
-local economy and services being transformed by businesses catering for an increasing number of visiting mainland tourists and the little benefit that gave to the ‘normal’ HKer in contrast to tycoons),
-the stress to social services perceived due to immigration of mainlanders (eg gaining HK ID cards with crossing the border in late pregnancy),
-the issues illegal parallel/cross border traders brought - eg during the milk powder shortage.
-the mainland ‘dama’ singers...
-sensationalized individual cases of mainlander ‘poor behavior’ - eg that defecation of a child in the streets, or some eating behaviors ....feeding a narrative of separation, tribalism.
-slow progress towards more political participation/universal suffrage - perceived to be a right under Basic Law - but debatable IMHO.
All this contributed in various ways until it bursted out and kept escalating also driven by the poor government response.
HK has always been part of China and always will be. Yes, the local political interests are strong but they don’t trump “being Chinese”. I don’t think there was ever a majority even against the extradition law, and the argument was you can’t commit murder in Taiwan and get away with it by running to HK or China. That being said, now that the HK people have made their decision 一國一制，they must accept the consequences. All tariffs must be brought in line with those of mainland China and all special quotas eliminated. Put a dent in the re-export trade and they’ll feel it. It won’t kill them but it will make life less comfortable and that should be the goal. 港人吃硬不吃軟。It’s the only language they understand. Think of it as our form of non violent protest.
All very good points. I am long term HK resident with long stays in the PRC. I think all the issues around policies which drove greater income inequality are the key sparks that lit the fire - all old Colonial policies. Government is shameless in promoting business and property interests over average workers. Where is the socialism with Chinese characteristics? Strange how Communist regime counts on tycoons to control the masses.
Thanks for sorting out all the confusing threads on this issue. It's unfortunate that, as you've usefully reminded us, the ham-handed US handling of the situation has not been helpful. More lost opportunities !
What would happen had the protests not gone radical?
Suppose there existed a spectrum of "protest levels" from which Hongkongers could make a choice. Would it be possible for them to achieve a "perfectly balanced" protest such that: (1) the extradition bill was shelved, and (2) Hong Kong's freedoms and economic advantages were still intact long after the protest had ended?
The original comment in this thread appears to suggest an affirmative answer to this question. In that case, the other side (i.e., the CCP) would be open to negotiations and willing to make compromises. It would not mind "losing face," for it must acknowledge that it was its own bad policy that caused the protest in the first place and that whatever agreement reached was to "right the wrong."
Given the current CCP leadership, would it be able to do the above?
Remember that the extradition bill was indeed shelved before things went very, very south. The key objective had been achieved, except that it had now become only one of "the five demands," with "not one less" open to discussion. (Anyone who doesn't get the reference can look it up.)
The HK Chief Executive had already set herself up as a sacrificial lamb, taking full responsibility for the failed extradition bill. In theory CCP could have let her step down, sticking to the script that she had acted on her own, and a return to status quo might have been possible.
This would still have required some CCP willingness to compromise, but the withdrawal of the proposed Article 23 bill in 2003 and CH Tung's eventual resignation was a precedent. The violent metastasizing of the protest movement, and in particular the direct attacks against Chinese sovereignty e.g. attacks against the liaison office, combined with calls for US/UK intervention more or less removed that option from the table.
Suppose that at the time when the extradition bill was shelved the intensity of the protests was "optimal," would people be confident enough to believe that Hong Kong's freedoms and economic advantages would be intact if the protesters put a stop to their demands "right there?" Were most Hongkongers feeling confident when they heard that specific piece of news from the Chief Executive of Hong Kong?
It appears that the historical event in 2003 is the sole point of reference from which one might deduce the possibility of "returning to normal" after some large-scale political and social turmoil in Hong Kong. Is there something else that lends support to such a possibility?
On top of that, is it reasonable to assume that today's CCP is still the same CCP in 2003, in terms of its views on China, Hong Kong, 1C2S, civil liberties, the rule of law, as well as of its decision-making processes?
The problem was that the bill was not withdrawn. There was widespread legal consensus well known to protesters that “shelved” bill could be reintroduced in Legco at a moment’s notice. The bill was eventually withdrawn but by that time the protests have exploded and there was a lot of bad blood between protesters and police. In alternative history, if the bill was simply withdrawn when government decided to do a u-turn, there was a significant chance that the protests would run out of steam and deprive the more radical elements of momentum. Shelving the bill was a tactical mistake in hindsight and officials say it off record.
Agree shelving the bill, not withdrawing the bill was a tactical mistake. But the government did the same thing in 2003 -- they first shelved the Article 23 proposal before formal withdrawing it two months later. The outcome was obviously different in the two cases.
One key difference is that the old guard of Pan-Democrats were leading the protests in 2003. In 2019, a new generation of protesters had taken charge -- a generation sophisticated in its "be water" organizational tactics but unwilling/unable to negotiate with authorities on a compromise.
I agree with your statement. However I would still put onus of responsibility on the government’s strategy. The trends within protest movement (sidelining of old guard) have been very clear and known since 2014. However decision makers within government have clearly not considered this evolving situation. Since in my view, understanding evolving social situation and calibrating response is clearly with the expectations of responsibilities of key government leaders, they have failed at their task. I hope that going forward they will do better and not rest on the laurels.
Are the 5 demands and the universal suffrage (including of candidates) from Occupy Central in 2014 just the trigger points or the underlying root causes? I found little debate, or willingness of compromise (not one less/'climbing the mountain' approach) of the former during the protests. Would like to learn more about the actual root causes (within the one country/two systems framework) that may lead to solutions.
I wrote elsewhere here that in my view the underlying economic grievances are key to understanding the lack of stability and widespread support that the protests had among population as seen in large attendance by middle aged people that you normally do not see at protests elsewhere. There was a core of protesters of course that was absolutist in their political demands as there are always is in any movement however the masses were primarily driven by perceived lack of responsiveness of existing political set up to long standing issues. The key, related, issues in my mind are (1) out of control property prices that make it extremely difficult to get on property ladder for young and even middle aged and (2) the fact that median incomes (and below) have stagnated since 1997 with over 100% of GDP growth going to top 1% (median pay is about what it was in 1997). These issues have been known for long time and it can be argued that the trends were in place before handover however nothing has been done to address them. People are well aware that for example Singapore has done much better job with housing issue through massive social housing program and people know that places in PRC such as Shanghai are more proactive. As to wages, immigration tends to be blamed as being used by business to depress incomes - government has a track record of fighting tooth and nail against any demands to increase wages. The political activists can get mass support primarily because of those economic raw feelings. As to what can be done within current framework I would focus on trying to at least be seen attempting solving this issues and possibly pick on some particularly onerous tycoons/monopolists. Government could also be more open in accepting economic demands as opposed to political demand to create a better channels to air issues.
quite spot-on. It looks like a movement started with good will and clear goal, but then led into riots by younger gen without strategic plans or objectives, and ultimately disrupted HKers themselves, and ended up accelerating the unification of 2 systems. It reminds me some other protests that are still going on, hopefully they would be handled better...
I also think seeing the US police response to the BLM protests/riots in the US took a lot of the wind out of HK protestors' sails. The BLM protests were so widely promoted and publicized in China (so CCP can say, look at the chaos and civil unrest in the US). But rightfully it highlighted how relatively reserved HK police had actually been relative to some US cities' militarized police response, arresting journalists on camera, shooting people in the face with rubber bullets, outright beating protesters etc.
I think it made some HKers realize maybe things are not so bad, that actually police brutality against protests/riots can occur in democracies too...
Most of the countermeasures have already happened. Sure, the west will stop selling equipment to Hong Kong police, but it's not like that really makes a difference.
From an economic and especially security stand point, the west will accelerate integration of Hong Kong into their China policies, eg end any differentiation of special benefits that Hong Kong enjoyed. In turn this will accelerate the integration of Hong Kong into mainland China's policy structure, with "rule by law" encroaching on "rule of law".
The biggest unknown is how much economic rules and laws change internationally for Hong Kong, which will affect how much of the capital markets rule of law is kept. If the rest of the world keeps most of the existing treatments of HK listed securities, financial entities, and global market access, then China will likely reciprocate and leave HK's non-securities related laws intact. Then that can settle into a stable equilibrium for a while and maybe see HK recover a bit as a hub again. That's maybe my base case for now.
Not entirely sure where this UK passport issue is going to go.
As with any law, it s all in the interpretation and one must heed both the spirit of the law and the letter of the law.
In my experience (in finance), I find European companies far more concerned with compliance to the spirit of the law/regulation than their Wall Street counterparts, who deliberately and perhaps cleverly focus on the letter of the law...the cause of much friction between European staff and New York ones... leading to bust ups and resignations. It d be interesting to see how this plays out in HK.
On your HK friend, am surprised by your surprise, especially it being so late.
The movement left common sense and, some would say, common decency, sometime last summer.
And I fear the same might be said of the current efforts out of Washington on multiple issues, not least regarding China/Chicom, irrespective of will and intentions.
Some might dismiss those as being secondary to lofty ideals, but losing those usually hampers one's ability to achieve one's objectives.
Many of my friends in HK are actually very tired of the incessant protests spiraling into major disruptions and violence. Concerns around the Natl Security Law is felt differently on the ground there vs those viewing at it from abroad, in that many local HKers see the social rationale even if they are mindful that there may be political implications that don't really impact them as materially.
It's true that we don't really hear much about the negative reaction of many people to the protests here in the West. However, I do think that Hongkongers even now have a faith in their independent legal system which may not stand the test of time.
The CCP seems to be in a reactionary, defensive, and submissive posture as it relates to the Trump administration moves against it. The strategy seems to be to wait out the election and only respond reciprocally, the latest being the Chengdu embassy. One thing that occurs to me is that a move down in global markets could be seen as a way to hurt Trump, and this is certainly within the CCP's abilities. Though, cutting off USD inflows to China would sting particularly right now.
Interested in the group's thoughts about how the CCP is contemplating its stance here.
As others have said, the CCP's clearly aware of the US election pressures and populist backlash against China that puts a lot of pressure on leaders to respond and one-up any Chinese response. So their strategy is to just match and never escalate, to try to delay as much as possible the speed of the decoupling while attempting to play the victim if possible (like with this consulate shutdown).
There's little to gain from attacking global markets outright. First of all it's difficult to do in a stealthy manner, and any overt moves are likely to hit their own fragile recovery efforts and economy. The "tail risks" and potential blowback of any such move against China are way too extreme. Secondly, it's likely China is aware that the best way to help Trump be re-elected right now is to show the American voter that China does NOT want him re-elected.
I would point to the August 2015 experience though and say that China did not understand the market implications of the RMB devaluation. Maybe this time is different, but they have a lot more USD denominated foreign capital.
As to Trump's reelection, I've been consistent in saying that if he attacks the CCP communists instead of China he will win handily. Not clear he's ever really gotten it until now. We'll see but I won't hold my breath.
Probably reading too much into the August 2015 experience, in my view.
This, and many other actions by the PRC Gov, were likely driven by domestic policy needs where western media tends to over interpret as some "grand PRC strategy". These domestic needs include deleveraging of the credit system and reduce system risks, specifically regarding the shadow banking system which was growing out of control and outside PBOC/BCRC monitoring, mostly going to real estate sector and doesn't show up in banks' balance sheet, so regulators needed to clamp that down and bring that back into the regulated financial systems. Other factors also include vast overseas asset purchase (Waldorf, soccer teams, InFront sports agencies) by the likes of Anbang, Wanda, HNA and Fosun, at inflated valuation and backed by domestic debt, again many from the shadow banking system. All of these had massive potential impact on the overall financial systems. One thing you can say about PBOC and CBRC is that, unlike their global counter parts, they actually try to prevent credit/asset bubble and take actions when irrational exuberance goes out of hand.
Yes the RMB deval was a total fiasco that led to multiple errors (even with how they were setting the fixings in Jan 2016). That's a good example of CCP wanting but failing to control both the level and trajectory of a market asset. If you tell people you want the RMB to depreciate by 10% by the end of the year, nobody will wait for it to depreciate in a nice gradual line. Everyone will run to sell their RMB today while it's still above 90% value.
Anyhow, I'm sure we agree that 2015 wasn't an attack on global markets on purpose, but an unforced error (that also cascaded with things like crowded positions in Risk Parity funds and lack of liquidity in a few markets). I thought above you were asking whether China would attack capital markets on purpose, in order to influence the US election outcome, which I deem very very unlikely.
Whether China can accidentally affect the trajectory of global markets to the downside is another, more complicated question. They're clearly trying to control both the level and rate of their equity markets again right now, trying to create "a bull market but not a bubble".
This is all valid and I appreciate the distinction between a market mistake and an attack. Its rumor, but I've heard that the March 2020 blowup in the treasury/risk parity markets were caused by aggressive China-based selling and the PBOC were threatened by Powell/Mnuchin with losing SWIFT access at that time.
Similarly, I believe that the August 2015 devaluation was politically calculated prior, even though it blew up spectacularly in China's face.
Also worth pointing out that the August 2015 incident immediately preceded Xi's trip to the White House in September (and major lie on the SCS islands in the Rose Garden). One can never determine cause and effect, but, markets and politics are connected in every way and especially right now.
Of course I agree with your last point wholeheartedly. Check out the China A share market performance in Jan-Feb 2020. That is not a market that was pricing in a draconian shutdown, and I believe was a big reason the financial world was caught so off guard when the virus left China's shores.
CCP is clearly waiting for the results of the upcoming election. They are hoping for a more relaxed posture by Biden and a return to business as usual. They see our political system as a weakness they can exploit.
I would look at the WSJ article this morning on i-banking in Hong Kong. Getting USD is not an issue for Chinese companies through the HKG exchange. I do not think that USD inflows are an issue at all.
As far as I see, CCP leadership may actually prefer Trump's reelection and believes that post election he would quickly pivot away from the confrontation while maintaining relative isolation of US from its long term allies plus he is a known quantity and his term oversaw a period of increasing influence for China as seen in China and this trend is expected to continue if he stays in power. Biden administration is not expected to significantly improve relations and has potential to make life more difficult with better international alliances. That is the gist of what is said often.
I always wondered, what the point was of having a consulate in Chengdu in 1985, of all places in China. Lots of Americans to take care of? Overwhelming demand of Chinese travelers? Or rather that Chengdu is a center of the military-industrial complex and also an ideal point to gather information from Tibetans?
So in China there are 1 embassy (Beijing) and 5 consulates, Guangzhou, Shanghai, Shengyang, Wuhan and Chengdu. Now if you then look at China on map, it's clear that Chengdu covers almost the entire west side geographically that no other consulates nearby.
Think 1985. No passports for Chinese, as once they leave they wouldn't come back, very little foreign investments, may be a handful US English teachers in the entire west of China.
interesting idea, but the CCP is no match for the Fed. in a closer fight, they'd be better off targeting his base, such as buying soybeans from someone else, that sort of thing. but there's really not much to do, as it won't be close 🤷♂️
Interesting point. I would argue that with so many trillion in flows into China (ETFs, bonds, etc), the shock of an RMB move could easily overwhelm a Fed that has shot many of its bullets. An argument made to me privately is that the CCP is scared to provoke Trump in this respect, as they would risk losing access to the USD clearing system as a response.
still a non-starter, in my view. even if they successfully engineer a rout, which won't happen, how sure are they it won't come back to the Chinese markets. they barely have any experience with their own - it would be crazy to sit at a different table, and try to win a game they are not used to playing. better off elsewhere
Thanks. I find Xi's love/hate relationship with the markets interesting to observe. He's nothing if not unpredictable on capital markets, with the general qualifier that he has been very consistent on "opening up" to foreign investment in local markets these past few years. His need for USD may outweigh Marxist leanings.
What is going to happen to Apple in the next few years? I certainly would be close to panicking by now if I was Tim Cook. It will take years to move the expertise of assembling iphones abroad, and I don't see how he could avoid doing that if he were a responsible CEO, at this point he needs backup options.
But he must be in a terrible position, he is hugely dependent on China for both production and customers, yet by the day that relationship is worsening due to the politics of the world.
Does China have the capability to go nuclear on Apple production in China when they're still trying to attract and retain foreign businesses in the country? One imagines that if China were to sever Apple production lines as political retaliation for Huawei bans that most Western multinationals in China would then be compelled to move for the exits at the earliest possible date to avoid a similar fate.
Thinking about it, China probably has more to lose if Apple leaves China. Apple might have huge supply chain disruptions, and a lot of customers lost in china, but they'll recover in a few years. For China it would be a massive loss of employment, massive loss of face for other multinationals.
One reason it happened so quickly is because Foxconn (宏海）is still running the show. Another reason is that the phones are being assembled in Chennai from Chinese and Taiwanese parts. A good first step, but still under Chinese control. The Indian engineers at Foxconn need to break free and form their own company. That will take more time.
They also have many accessories coming out of Vietnam now. Apple tier 1 contractors work all through SE Asia and now moving into India. I expect further diversification - but they are not under much pressure
Pretty late to the discussion here, but a somewhat popular theme on Chinese Twitter regarding the current affairs, closure of the US CG, and the concept 经济内循环/内部大循环 the internal economic cycle/main domestic cycle is a sign that China will revert to the closed state (i.e. prior to reforming & opening up) and maybe also bring back planned economy in a few years as the country gets more and more alienated by the rest of the world (in order to conserve FX reserves and to ensure the survival of the Party). To me the idea seems quite unlikely, but I'm no China expert. Does this scenario sound plausible to you?
Does anyone have any thoughts on potential for Three Gorges Dam collapse? In the short-term what would this actually look like as far as supply chain disruption, other economic effects etc. Intermediate-longer term what are the political ramifications for Xi/CCP? Maybe the first question should be how likely do you view a collapse? Any thoughts much appreciated.
I gather more or less everyone will have seen China’s Ambassador to the UK, Liu Xiaoming, squirm through his interview with Andrew Marr on the BBC last weekend (if not, you can still watch it here: https://twitter.com/BBCPolitics/status/1284784810200838145).
I know Liu’s antics weren’t exactly anything new. Nevertheless, as I watched I was reminded of Orwell’s essay, “Notes on Nationalism” (1945), and particularly Orwell’s observation that:
“The nationalist not only does not disapprove of atrocities committed by his own side, but he has a remarkable capacity for not even hearing about them.”
Incidentally, I’d say that the ambassador’s attempts to plead ignorance (“I cannot see...” and “I do not know—where did you get the video?”) were rather undercut by the fact that he’d obviously been briefed in advance to pivot away (toward saying things like: “Xinjiang is the most beautiful...,” and so on, and henceforth).
As appalling as his performance was, I kind of feel sorry for the guy. Clearly he is required to drink Xi's Kool Aid like everyone else in the system and he actually seemed a reasonable guy / representative to the UK before he went down that route. The feeling of the UK population towards the CCP right now is probably not too far off the US even if we might be more reserved here; the Government's response on the NSL has been robust and commendable. So no wonder they see the UK as a target.
Possibly a career requirement to get publicly crucified on an indefensible position by counter-revolutionary elements and hostile foreign forces. Quite possibly we saw an incumbent (vice-) foreign minister in action.
There may be some truth in what he said, though.
There apparently were many, many more acts of legitimate resistance against foreign imperialist oppression, pardon, I meant of course hideous acts of terrorism in Xinjiang over many years, that went completely unreported, in order to follow general protocol not to report on things that officially must not happen and, more importantly, not to scare off and reduce the flow of Han-Chinese returnees to the sacred lands of their forefathers.
Of course it is difficult now to justify the final solution of the Uyghur problem, basing on events that officially never happened, so all you get from Chinese officials is hints about that, no full disclosure.
For what it's worth, I went to a reception organised for him when he was appointed ambassador in 2010. He struck me as a very tough and clever apparatchik. He made an amusing speech in good English which was very un- Chinese as it contained some good jokes, so he knew how to appeal to a British audience.
His predecessor, Fu Ying, is now a vice foreign minister, so perhaps he will follow her into a similar post.
Julian Ku: “China keeps saying the US violated intl law when it ordered the closure of the Houston Consulate, but China's closure of the Chengdu Consulate is perfectly legal," he said. "It's not clear what intl law the US violated?"
There was no law violated. It’s just the CCP twisting language to suit their own propaganda needs. Last time I was in 廣州 , I saw many big inspirational posters with words like peace, harmony, prosperity, etc. One said “democracy” (民主). I had to laugh.
In Wednesday’s newsletter, Bill included this clip from an RFA commentary by Laing Jing, translated by David Kelly:
Trump's hawkish ministers are playing a big game. They know that due to his major mistakes in the epidemic and the Hong Kong issues, Xi is in his most dangerous predicament since taking office. The US has a chance that it dared not imagine: to force Xi to step down, completely changing the confrontation between the US and China.
Bill commented: This is interesting speculation that jibes in part with what I have heard. However, how vulnerable may Xi really be?
I’m interested to know what others have heard about this: specifically, do the hawks really think this is possible? And if so, How would they see that playing out?
It seems highly implausible, unless I, with my relatively limited knowledge, am missing something. Any thoughts on this?
It’s night here in China so I’m always confused if this thread is ET or GMT+8... anyway. We’re stuck in China (we can get out, but then our work visas are cancelled and we need a temporary visa to get back in and then apply for a new work visa, super 麻烦）so my question is: when we will be able to travel back to Europe / US? My guess woul be after CNNY 2021. What’s yours?
I hear that currently if you have a negative test result from a designated lab in the relevant locale within 5 days of flying then u can enter china (still subject to a two-week quarantine on arrival).
How are ordinary Chinese consumers reacting to the changing geopolitics? Are foreign goods generally declining in popularity? Are Chinese luxury brands taking market share from perennial European favourites?
How turbulent do you all predict the Chinese consumer market will become for western goods in the next couple of years?
US goods are still held pretty high among Chinese consumers, partly thanks to numerous quality problems Chinese goods have had. so at least among consumers don't think they'd be willing to abandon it for patriotism especially for the affluent families.
I'm curious to get the takes of the more plugged-in folks here on the San Francisco consulate harboring a PLA member being pursued by the FBI for espionage. From the layman's perspective, this seems like a potentially very serious flashpoint. Where do you folks see this going?
It's a tough call because it seems this particular individual is not the only person fitting this profile the FBI has spoken to in recent months. You may be able to squirrel one person out of the country or post them up for a couple months in your consulate, but what about the other two dozen? Unlike China, when a spy network collapses the U.S. can't just quietly execute everyone, all these people will be headed to court on visa fraud charges and probably convicted. Gonna be seeing things like this very often for the foreseeable future:
As far as a "flashpoint", I guess it's like trying to pick one specific star out of the night sky. There are ten other things at least as serious going on right now.
According to CNN, this particular individual has now been "taken into custody" (https://us.cnn.com/2020/07/24/politics/us-china-consulate-accuse-espionage-network/index.html), but no details are yet available as to how, exactly, this arrest was effected. I can't imagine that FBI agents were allowed onto PRC Consulate grounds, which means there must have been some kind of agreed-upon hand-over at the door, which in turn implies some kind of direct negotiation leading up to that. The tale is pretty tangled, in other words, and getting more so.
Honestly it sounds like a "positive" or at least stable outcome. Either they were given up by the Chinese govt or in any case going to be tried under US law, so there's no risk of a standoff or accusations of diplomatic overreach.
I'd like to think so, but how would the PRC's "giving up" one of their mil/dip personnel be in any way "positive" for their side? I'm also unclear as to how int'l or domestic law operate concerning harboring of wanted fugitives on consular premises? Please correct me if I'm misinformed, but it would seem that *any* government would resist that kind of cooperation with local law enforcement, at least under the guise of "protecting" their own citizens on foreign soil, regardless of pending legal action. Would the US "surrender" one of their nationals in the PRC if the situation were reversed? Once the person is in local custody, or if they never managed to make it into the consular safe haven in the first place, it's a whole different ball game of course. Is the case of Kovring and Spavor of any illustrative value? (Sorry for the wordy reply !)
Maybe someone better versed in international criminal law can answer your questions, I'm not a lawyer.
From the political side it just smells like someone high up in China said "We don't want another consulate incident right now, so just give her up." If she was guilty, then she would have known of the risks of discovery.
It's positive in the sense that it's a de-escalation and probably a move towards stability.
If the roles were reversed and we had a US national who was caught spying in China under false pretenses and fled to a consulate, I'd absolutely agree that they should be surrendered to face the Chinese authorities, provided that they weren't facing something beyond the pale like life in prison or execution. I'm glad to see that China took the off-ramp here and gave their person up.
The U.S. decision to demand that China close its Houston consulate dominated the news cycle this week, but an even more important case may have been the indictment of two Chinese hackers, working at times with China’s Ministry of State Security. The indictment, available on the Department of Justice website, is breathtaking for two reasons: the hackers revealed amazing sophistication and they were able to steal an incredible volume of secrets. This revelation, combined with many others I chronicled in The New Art of War, such as the APT10 case, suggest the Chinese have mastered world computer systems. They appear to have access to anything they want.
Tech sophistication: we know from the APT10 case that the hackers were able to use malware to fool intrusion detection systems and then capture the keystrokes of legitmate users. They were able to log in as legitimate users. The new twist is this: the hackers placed “web shells” including something called the China Chopper web shell onto the computers of target computers. “It provides an easy-to-use interface through which the user can control web shells installed on multiple victim computers,” the Department of Justice charged. The hackers can use innocuous file names to hide the shells and can even equip them with password-protection. Once hackers find what they want, they compress the files inito encrypted Roshal Active Compressed files. They save these RAR files in the recycle bins of computers, where system administrators are much less likely to look. Then they are exfiltrated.
Scale: The victims of the latest hacks were in the United States, Australia, Belgium, Germany, Japan, Lithuania, the Netherlands, South Korea, Spain, Sweden and the United Kingdom.
The hackers were inside these systems starting in 2009 through 2020. It’s just incredible that they weren’t caught. In addition to stealing information related to Covid-19 treatments, they stole information about radar systems, educational details, Air Force research projects, the works. The thefts extended across dozens of sensitive technology fields.
We are left with this stunning possibility: the Chinese government and affiliated hackers have reached the point of sophistication that they can hack virtually any computer in the world, sight unseen, and stay inside for years. We have yet to awaken to the full dimensions of this challenge
I am of the view that Russia has comparable or even superior capabilities especially combined with its human intelligence strengths. I would be surprised if NSA is deficient in this as well - there is simply much less info coming out of China or Russia about any hacks on infrastructure or other targets due to lack of independent new sources and the general "embarrassment" factor.
Alarming, to say the least. Now that the horse has been so comprehensively stolen, are the IC, and the corporate/government sector more generally, taking any meaningful countermeasures to lock the stable door?
A related concern: Is there any indication that “the Chinese government and affiliated hackers” have achieved, or are interested in achieving, broader penetration of general civilian networks and/or individual machines at the (reputed, at least) level of the NSA and other US domestic-security entities?
The short answer is that the American private sector is not doing enough by itself or in cooperation with the U.S. government. The reasons are: CEOs want to use computing systems to make money. That's their job. If the Chinese penetrate their systems and steal intellectual property, that's a long-term problem. But because most CEOs think in terms of quarters or annual earnings, my analysis is that they have not opted to spend the millions of dollars that would be necessary to harden their IT systems. They don't want anything to go public because it would anger the Chinese government and it probably would cost them their jobs in a blitz of angry shareholder lawsuits. For similar reasons, very few U.S. companies have cooperated with the U.S. government in tackling human espionage cases, with the exception of GE. In general, the private sector has taken the view that national security is the government's job. Clearly the Chinese have exploited this gap in the American political and economic system.
You ask a fascinating question about the NSA/CIA networks. No one really knows, but my guess is that those guys are still secure. They have invested in relatively new systems and are sensitive to these issues. But the Pentagon is massively behind. Which is why it is such a tragedy that the Defense Department's $10 billion JEDI project is tied up in political knots.
Thank you for this. I would certainly hope that NSA/CIA will have hardened their own IT infrastructure, but my question could perhaps be better phrased along the lines of "Does CPC surveillance/penetration of *general civilian networks and/or individual machines* now approach or even surpass that which we can assume NSA/CIA currently can or do exercise?" Again, this has become a much more immediate concern in the context of NSL Article 38, which attempts to "criminalize violations of the law committed by *anyone anywhere in the world*" (my emphasis). See, for example, Donald Clarke's recent posts at the China Collection blog:
This is mostly guesswork, but I would say that Chinese entities have comparable capabilities with the NSA/CIA. Plus they control part of the world's telecom infrastructure through Huawei and ZTE. They are building a high-tech authoritarian infrastructure not just for China but also for the world.
Megan 說得沒錯. Whether there’s a breach or not is meaningless. Chinese businessmen/fishermen don’t care about NK sanctions unless they have assets in the US that can be seized. In addition, they can transact business in 人民幣, they don’t need US dollars. NK will gladly accept yuan. The main block to China NK trade now is the virus.
Interesting article, but honestly, even if there is, I'm not sure how much it matters in the broader political calculus. There is plenty of evidence that China is at a minimum tolerating the smuggling of oil into NK which is clear violation of the sanctions it voted for via ship to ship transfers off their own coast. The legal grey zone leads to alot of this ambiguity... some of the ships are also legally providing fuel to the Chinese fishing fleet.
As things now look Trump will be replaced by Biden in less than six months. How will Biden run the ship? He is very much of a professional on international relations, very much an insider and very much a politician. And he will be mortally insulted by the rather clumsy interventions and attempted interventions of the CPR. He has no motive at all to be friendly or kind to the Chinese. Furthermore being kind even in appearance to them exposes him to a political risk of the first order on the right, the old Republican cry of Soft on Communism. Biden is likely to follow thje old political adage: Don't get mad. Get even. Xi has outsmarted himself by intervention---he has put himself into a box. And when attacked Xi hits back. Fasten your seat belts.
how much was the closing of the Houston consulate a electoral politics move vs having some caught spying/stealing IP red handed? forcing the closure of a consulate is a dramatic and, in normal times, highly calculated move.
Does anyone believe there was something specific about the operations of the Houston consulate that led to its closure by the US, or was it simply that the US wanted to send a signal and Houston was the consulate with the least foot traffic? Furthermore, are the tit-for-tat consulate closures window dressing since there are a plethora of other communication channels, or is this truly a major escalation?
According to press call with admin officials this morning, the decision to close down the Houston consulate was "not random." FBI official said that Houston consulate was particularly aggressive when it came down to acquiring U.S. research via a thousand talents program and other initiatives to infiltrate U.S. academia. China has heavily targetted Texas AM for TTP, so this is not a surprise. (https://www.wsj.com/articles/chinas-funding-of-u-s-researchers-raises-red-flags-11580428915)
I heard through unofficial sources that the Houston consulate was targeting the oil and natural gas industries and also the large medical complex in Houston. The consulate was located very close to very advanced medical research.
There was a remark in the WSJ article yesterday that consular officials tried to put some people onto one of the student repatriation charter flights from Houston that was not a student. Unfortunately, there was nothing beyond this brief comment.
I think it's pretty clear by now from the folks doing United Front research that the consulates serve as a launching point for all kinds of influence operations, clandestine activity, and harassment of foreign dissidents. There were some old cables and reports floating around about CCP agents throwing their weight around in Oil and Gas to keep exploration of South China Sea area on their terms. Then the Medical Center IP investigations and just recently an incident at George Bush International where consulate staff played some games with the manifest to get people out of the U.S. on assumed identities. It was probably a straw that broke the camel's back situation.
Unlike the U.S. consulates in China, which regularly conduct thousands of passport renewals, visa approvals, and other routine services each day, the consular function of Chinese consulates is an afterthought at best. I don't think foot traffic is part of the calculation.
"Unlike the U.S. consulates in China, which regularly conduct thousands of passport renewals, visa approvals, and other routine services each day" You mean to say, that this was the main activity of the US Consulate in Chengdu since 1985? Get real, please.
I'm saying it's the main reason they are allowed to continue to operate, at least for the last 10 years. Having foreign diplomats snooping around outside of the "everything is awesome" parts of China is not something they are comfortable with, but it's tolerated as long as it gives them convenient access to the United States via consular services. This is where having the vast majority of your political and business class deeply dependent on access to a foreign country starts to make life complicated.
So I guess that's my roundabout way of saying I agree with you, but there are competing priorities that the CCP has to balance. The U.S. side has no equivalent balancing to do on their side since the Chinese consulates don't provide any service that is particularly valuable to the USG or your average American.
Does anyone think Xi's trip to Jilin this week will lead to any changes in agricultural policy? He talked about modernizing farming, but it feels like that's a perennial goal that never seems to make much progress due the difficulty with land reforms in rural areas.
China's ag sector is well behind that of much of the world, especially compared to the U.S., Brazil and Argentina. Given how critical food supply is for any country, much less China, it is absolutely the case that there will be significant changes in the sector. Frankly, a lot of it is very low hanging fruit stuff, but without a doubt the progress we will see over the next several years will have far ranging trading and even geopolitical implications.
Purpose of this is to create large scale (state-owned) farms, as the current leadership deems that much more efficient than individual small scale farming. Experts are divided on the efficiency point and some may view it as a great leap backwards, but such l-scale farms can be socialist model enterprises, also good for photo-ops.
The US has tried diplomatic solutions to rampant Chinese IP and data theft for years and the CCP has lied to our faces repeatedly while apparently continuing to zealously encourage it. If diplomatic solutions fail because China has no interest in them, we're unfortunately left with no choice but to move to more overt steps.
Maybe they could have just asked to see the documents?
Honestly, though, they would have had to be confrontational no matter how they handled it. This may actually have been less dramatic than other options?
This "statement of offense" by the Singaporean National who just pled guilty to helping PRC intelligence services in the US is a fascinating read, should really be required reading for anyone doing china-related work... https://www.justice.gov/opa/press-release/file/1297486/download
WeChat is encrypted, based on P6?
A few notes regarding the Chengdu closure:
1) Yes it is happening. The staff there has already been informed that they must leave China within 30 days. There is no "reshuffling" or assignment to other missions. Many of the staff who evacuated literally just returned to China a few days ago and are still in quarantine. They will have to turn around and leave as soon as their quarantine ends. My thoughts go out to them as I know many of them truly love Chengdu and were looking forward to getting back to work.
2) US Consulate Chengdu is not a small consulate by world standards. They had dozens of Americans assigned there and about twice as many locally hired staff. Similar to when the international newspapers had to close shop earlier this year, many of those local staff members will be out of a job unexpectedly in a tough market. These are experienced professionals that have dedicated many years, even decades to advancing U.S.-China relations. Very sad to contemplate.
3) Chengdu's district covered Tibet and while access is extremely restricted there had been some success in recent years gaining permission to visit. While still closely monitored, sending an officer to meet with Tibetan Americans in the area or to meet with local officials was a much more organic type of access than a dog and pony show for high-level U.S. officials visiting from Beijing. The loss of access will hurt.
4) Shenyang, Chengdu, and Wuhan were the U.S.'s only consulates in tier 2 cities. With Chengdu shuttered and Wuhan effectively if not officially closed, we have lost almost all of our visibility on China outside of the big three. This is not good news for on the ground reporting or for conducting public diplomacy (such as it is in China). It will also make providing support for U.S. citizens in these areas difficult if not impossible.
All that being said, I believe the significance of this action is going to involve significant pain for the CCP side. Chengdu is one of China's fastest growing cities economically and a lot of that came from direct foreign investment. You can feel it when you travel there. Drawing down the diplomatic community and forcing business travelers to go to Beijing or Guangzhou for visas will impact the international stature of the city in a way that won't really be the case in Houston.
Totally agree with your first 4 points, though I really think you're overestimating the economic impact of this move. Chengdu is a very vibrant and fast growing city and gateway of a massive region of China. No foreign business or investor is going to shy away from it just because the consulate is further away. That's just not how investors make decisions.
Yeah I was mainly trying to draw a comparison with the Houston consulate, it's not going to be a major economic impact in a general sense. But taken together with all the other challenges that region and international business in general are facing in China it's not going to help.
In areas where there is a significant foreign business community the presence of consulates and diplomatic officials is symbiotic because it contributes to the creation of good international schools, expat themed restaurants, mutually beneficial social networks, etc. This is especially true in China where there are relatively few foreigners in the tier 2 cities. The U.S. mission is usually the largest foreign mission in these cities and the staff form a small but important clientele for local businesses and schools.
After talking to a lot of foreign executives, they often mention the lack of these types of schools and businesses as the major factor preventing them from settling down in China for longer than a year or two or bringing their family over while assigned there. So in that sense I think these consulates serve a function there that they don't in say, Chicago or Strasbourg.
Good points about the expat community effects, I didn't consider that. I've never stayed in Chengdu long enough to get a feel for the difference between the expat community there and other Tier 1 cities.
The biggest loss might be the Chengdu Research Base of Giant Panda Breeding, which still allowed foreigners to play with the Pandas with a certification of health, which the consulate used to provide on site. Though probably COVID changed these rules already.
1) Tibet is lost and there is nothing a consulate in Chengdu can do about that. One reason Tibet is lost is the failure, over the last forty years, of western governments and businessmen to press the CCP for something approaching real autonomy in Tibet for fear of being denied access to the Chinese market. Sound familiar? We abandoned principle for money and got none of the former and little of the latter.
2) The only reason there are US consulates in the tier 2 cities is to grease the visa machine; that is, to make it as easy as possible for Chinese businessmen and students to get US visas. If this were not the case , the CCP would insist on a strict quid pro quo to avoid losing face. The CCP want as little “public diplomacy” or “on the ground reporting” as possible.
I wrote this in the Tuesday newsletter https://sinocism.com/p/xi-chairs-symposium-with-entrepreneurs about TikTok. Is there any way Bytedance and investors can restructure TikTok to satisfy the US government?
The Information is just out with a story that ByteDance Investors Discuss TikTok Purchase:
A small group of ByteDance’s U.S. investors is discussing with the company’s top management the possibility of joining forces to buy a majority stake in TikTok, said people familiar with the situation, as it grows more difficult for the Chinese-owned company to keep control of the fast-growing video app.
The talks appear to be preliminary, and the idea is just one possible scenario ByteDance is examining as it explores ways of dealing with a possible U.S. ban or forced divestiture of the app, the people said. U.S. government pressure on ByteDance is growing steadily: On Wednesday, the House of Representatives voted to bar all federal employees from loading TikTok onto their government-issued phones. ByteDance founder and CEO Zhang Yiming is open to a sale if that’s what is best for the future of the app, The Information previously reported.
I wrote on July 7 about the increasing possibility that the US would block the app:
Perhaps the best route for TikTok is to find a buyer before even more value is destroyed. Such a buyer would have to be one that is palatable to the US government, big enough to buy the entire company and then make the investment to truly separate the entire company from any PRC entanglements, but also able to avoid possible antitrust issues. It is a short list.
But simply changing ownership will likely not be enough. All the data and code, including the content recommendation algorithms, will have to be moved out of China and be made inaccessible to anyone in the PRC, what I meant by “any PRC entanglements”. Is that even possible? I do not know, but simply shuffling around share certificates without addressing the core concerns of the US government is unlikely to persuade US policymakers.
Bill - A structured transaction which can appease US policymakers is executing a spin-off of US TikTok into a separate entity, and simultaneously conducting an equity public offering on an US exchange. Subsequently, a certain percentage of ByteDance shareholders can exchange their stock for US TikTok shares, and can conduct a secondary sale (either block to private shareholder or public follow on offering).
This structure satisfies the concerns you listed above, as US TikTok now possesses a separate and independent Board, management team, operations, and data which already lives in Virginia. The transaction also creates tremendous value for ByteDance shareholders, allowing them to share in minority ownership of the newly created (valuable) public entity and cash out via IPO / secondary sale.
The key risk to the transaction is the horse trading between US TikTok and ByteDance Parent behind structuring the Services / Operating Agreement. Important topics will be IP rights, the content algorithms you referenced, and how ByteDance Parent will provide transition services until US TikTok's future state of technology will be able to stand up. This transaction cannot live if the US TikTok entity perpetually leases the master algorithm from ByteDance Parent, for obvious reasons.
I think an outright sale would set a hard to control narrative for the CCP, and generate a poor precedent for future Chinese technology companies who want to expand to the US market. This solution allows Chinese shareholders to monetize and participate in the upside, while cutting out CCP influence. Of course, there is always risks of bad actors e.g. data theft by individuals influenced by the CCP.
I've dived into a few more details surrounding other strategic alternatives, feel free to take a look!
https://balancedview.substack.com/p/a-ticking-conundrum
one way or another, TikTok would be part of a historic moment, a first ever for PRC also US. 2 points come to mind. one is the warnings and ban talks from US gov could actually boost popularity of TikTok in west given how the defiant nature of US people are (thou usually in a good way). the other is I doubt CCP really has leveraged TikTok in any way; they could but truth be told if you look at pro-CCP Youtubers and those millions pro-CCP Twitter bots you know TikTok is just one of million ways that CCP could exploit. In terms of "people's war" or "united front", US is light years behind CCP.
One possible solution would be a split of Douyin vs TikTok Global where Bytedance shareholders who are foreign flip into shares in TikTok and Chinese domiciled shareholders flip into shares in Douyin using some agreed ratios so that Douyin ends up with pure Chinese shareholding and minimum allowable foreign shareholding and local listable legal structure allowing it to go for listing in China on STAR vs TikTok ends up with majority foreign shareholder base and minority Chinese and similar BoD and goes for NASDAQ. I can see TikTok getting a European domicile or possibly Singapore as a more acceptable to outright move to US. However it would have to also address the software and algorithm and where the software team is based going forward otherwise all this legal structuring could be for nought.
No matter what they do, there is no change of the basic nature of the software. Anyway, the software is trivial and expendable, there was life before it and there will be life after it, no need to make a big fuzz over it.
Wanted to be sure this group was aware of Jianying Zha's masterful new long read on Xi, Legalism, and so much else:
http://chinaheritage.net/journal/chinas-heart-of-darkness-prince-han-fei-chairman-xi-jinping-prologue/
http://chinaheritage.net/journal/chinas-heart-of-darkness-prince-han-fei-chairman-xi-jinping-part-i/
http://chinaheritage.net/journal/chinas-heart-of-darkness-prince-han-fei-chairman-xi-jinping-part-ii/
http://chinaheritage.net/journal/chinas-heart-of-darkness-part-iii/
http://chinaheritage.net/journal/chinas-heart-of-darkness-part-iv/
A Bloomberg Next China headline reads:
“Beijing takes over firms linked to disappeared financier.”
To my mind, that should read: “Beijing disappears financier and takes over his firms.”
reminds me of 打土豪 分田地 of red army era
a crude translation of that is "taking down the local tycoon and distribute their wealth"
The four speeches that are Trump Admin's attempt to iterate a new China policy are all out. What does everyone think?
June 24, 2020 — National Security Advisor Robert O'Brien — "The Chinese Communist Party’s Ideology and Global Ambitions" — https://www.whitehouse.gov/briefings-statements/chinese-communist-partys-ideology-global-ambitions/#_ftnref1
July 7, 2020 — FBI Director Christopher Wray — "The Threat Posed by the Chinese Government and the Chinese Communist Party to the Economic and National Security of the United States" — https://www.fbi.gov/news/speeches/the-threat-posed-by-the-chinese-government-and-the-chinese-communist-party-to-the-economic-and-national-security-of-the-united-states
July 16, 2020 — Attorney General Bill Barr — "Attorney General William P. Barr Delivers Remarks on China Policy at the Gerald R. Ford Presidential Museum" — https://www.justice.gov/opa/speech/attorney-general-william-p-barr-delivers-remarks-china-policy-gerald-r-ford-presidential
July 23, 2020 — Secretary of State Mike Pompeo — "Communist China and the Free World’s Future" — https://www.state.gov/communist-china-and-the-free-worlds-future/
My own quick thoughts:
- criticism of US companies engagement with China undermined by complete unwillingness to use federal government as organizer of collective action: "Look, every business leader has got to make decisions for themselves." "We will see if these companies hold firm. I hope they do. If they stand together, they will provide a worthy example for other American companies"
- Pompeo both calls for a "new alliance" yet stresses that each country must go-it-alone, choose their own path. "Not every nation will approach China in the same way, nor should they." If US is so sure of its vision on China, shouldn't it lead the nations of the world to react the same way?
- they've ended engagement, but haven't seemed to put forward a new doctrine?
I don't think putting forth a new doctrine is high on the agenda of the China hawks in the administration. Not necessarily these guys, but there's a growing sense among the hawks like Esper, Pottinger, Navarro that their window of opportunity may be closing, as an administration change becomes more and more likely.
While China hawks have always been present in US government and intelligence communities, never have so many been elevated so quickly to positions of power. However the bulk of them are likely to be replaced in a Biden administration. The current feel from this camp seems to be a focus on getting as much done on their wishlist as possible, with a focus on enacting changes that are not easily undone by a more diplomatic successor in their seat.
So by design, they are trying to disengage in as many ways as possible without really offering a replacement plan, which they likely won't be around to see anyway. If somehow they are still in their seats next year, they can discuss formulating a more structured new doctrine.
The recent moves are all along these veins, arresting hackers and spies, shuttering consulates, are all "permanent" moves unlikely to be undone by the next administration, and all high on the wishlists of the hawks.
As far as I understand, very little of this actually comes from Trump himself, who is really only concerned with China as a scapegoat for COVID and the economy. The "security" side hawks pushing these actions have, if anything, been trying to keep it under his radar.
Very interesting. They've turned up the rhetoric and harassment, but have utterly failed to put together a real strategy to compete against China in advanced technologies like 5G or to create a strategy with U.S. companies to stop the hacking and espionage. There have been modest steps such as the Pentagon investing in the former Mountain Pass rare earths facility in California to ease dependence on China, but nothing of sufficient scale to alter the underlying realities. I suspect the four top guns sense, incorrectly, that if they name and shame, it will force a Chinese response. They are fundamentally misreading Chinese culture and mentality.
It's a little more complicated on the 5G side, but there have been many attempts to put together a playbook. Andy Keiser at NSI has put together several LITERAL playbooks on this that have influenced the overall strategy a lot at different times. (You can google "The race to 5G" and his name, I think they're public).
The issue is that the US semiconductor industry is deeply entwined already with Huawei, so there has been counter-influence from lobbyists and adjustments from how other countries, particularly Five Eyes allies, wanted to treat Huawei at different points in time. Particularly the UK and India have gone back and forth on this issue a lot and lack their own coherent strategies.
Anyway, 5G and tech security/supremacy is a major focus of the hawks, I would actually characterize that as one of the more coherent parts of the US's China policy.
and one area in which appears the have made progress, at least with the other 5 eyes countries.
Thanks. Most useful.
In your view, do the hawks believe they're locking in a potential Biden administration to a more confrontational policy? Or is it that they are locking the CCP into their confrontation against the United States (i.e. no warm overtures for incoming Biden admin, harden view that America's new hawkishness is both bipartisan and structural)?
The former, more about locking in Biden appointees to their course of action, or just doing fairly permanent changes. If you arrest 2 hackers, that makes US interests safer on net. Biden appointees aren't going to pardon them. But if you didn't arrest them, there's a chance a Biden appointee won't pull the trigger to go after them and they slip away.
Things like that. CCP would definitely happily 180 with a smile and handshake if they sensed a more amicable new administration.
Wang Yi says the "The Current Difficulties in China-US Relations Are Completely Created by the US Side" https://www.fmprc.gov.cn/mfa_eng/wjb_663304/wjbz_663308/activities_663312/t1800501.shtml
On 24 July, State Councilor and Foreign Minister Wang Yi had a video conference with German Foreign Minister Maas and briefed on the current China-US relations at the other's request.
2020年7月24日，国务委员兼外长王毅同德国外长马斯举行视频会晤时，应询介绍了当下的中美关系。
Wang Yi pointed out, the current difficulties are completely created by the US side. Its purpose is to disrupt China's development; it unscrupulously resorts to all means to this end. Some anti-China forces in the US lately have been deliberately creating ideological opposition, blatantly coercing other countries to pick sides and confronting China for US' self-interests. But any country with conscience and independent spirit will not play a part in such actions.
王毅表示，中美关系目前面临的困难完全是美方一手造成的，其目的就是企图彻底打断中国的发展进程，为此可以不择手段，甚至毫无底线。最近美方一些反华势力还蓄意制造意识形态对立，公开胁迫别国选边站队，为了美方的私利与中国对抗，但任何有良知和独立精神的国家都不会与之为伍。
Wang Yi noted, China still hopes to achieve no conflict, no confrontation, mutual respect and win-win cooperation with the US. But we will firmly uphold national sovereignty and national dignity, resolutely safeguard our legitimate rights to development and unswervingly uphold basic norms governing international relations. China will neither dance to the US' tune, nor let the US have its way.
王毅表示，中国仍希与美国实现不冲突、不对抗、相互尊重、合作共赢，但我们必将坚定维护国家主权和民族尊严，坚定维护自身正当发展权利，坚定维护国际关系基本准则。中国不会随美方起舞，但也绝不容美方胡来。
I would translate that last sentence as “China will not dance to America’s tune , nor will China allow the US to mess/screw things up.” Of course the CCP does not want to see the gravy train derailed. The policies of the past 40 years have resulted in a massive transfer of treasure from North America to China. The Chinese are laser focused on ensuring that this transfer continues. We must be equally as focused in seeing that it does not. 老共吃硬不吃軟。
I think “胡來” means something a little stronger than “to have one’s way”.
Big new campaign out there to convince the textile industry to end forced labor in Xinjiang.
Meanwhile there are four countries (Guatemala, Honduras, Nicaragua, Haiti) that both have giant textile industries that produce for the US market AND recognize Taiwan over Beijing.
This seems to me to be a potential geopolitical weapon for Taiwan to grab on to. They can use the anger at the abuses of the Uighurs to help their allies grow economically and regain marketshare. It's potentially low cost, high impact, and wins them gratitude to help them maintain recognition. But I haven't seen any indications that they'll go that route.
There are two issues here. First, social accountability (SA) programs in labor intensive industries (garments, shoes, toys) and second industrial capacity in Central America (CA).
The identification of Esquel Xinjiang as a violator of SA with regard to forced labor seems to me to indicate the degree to which the manufacturers have managed to work around the SA systems after 20 odd years of living under them. Esquel is a massive operation and its clients, notably Nike, have robust SA programs. Looks a lot like "regulatory capture".
Most of the CA garment ops were set up initially on an 807 basis (using fabric cut in the US) or using imported fabric. Most of the imported fabric was from China. The problem with CA is that the industry is not vertical and is reliant on imported raw materials. Given the state of the Taiwan garment industry, there is not a lot to work with here for Taiwan. Moreover, building capacity in textiles and garments at this time when there is considerable excess global capacity and when so many retailers are headed for bankruptcy seems a dubious strategy.
What are people hearing about ordinary Hongkongers' reactions to the Security Law?
To my surprise I spoke to a HK friend last night and she said that most people are glad that the protests are over as they were making the city unlivable. One of her friends runs a building business and he has the contract to maintain MTR stations. He said that the turnstiles/card readers had been damaged so many times they had run out of spare parts.
Secondly, as reported on Sinocism, the HK SFC is unable to give a definitive opinion as to whether shorting stocks or producing negative analysis on mainland companies amounts to subversion. How is this going to impact Western banks etc in HK?
I think western media and some of the younger passionate HK protestors fed off each other in an unfortunate echo chamber for most of the year, with the West feeding a narrative of mass oppression and heroic revolutionary fighters pushing a "free Hong Kong" message.
While there were many legitimate grievances and issues that led to the mass protests last year, the bulk of the HK public never supported a full decoupling from China, but was about keeping their level of autonomy and economic grievances.
Back when the protests were about that, I estimate it had the support of 50-60% of the population of the island. But the movement continued to get more radicalized and violent and lose popular support. Once the extradition law was withdrawn, and goals changed to the 5 demands, support dropped to around 30-40% of the population, which is still significant but becoming a vocal minority.
By early 2020, most locals could see where the trajectory was going. Pushing China for freeing Hong Kong is a non-starter, and only going to result in stronger security measures. The more the US cut HK's special status, the less China has to lose by clamping down control, and the more HK's future and economy would suffer. By the time COVID hit, popular support for further protests, especially as the goals shifted to some form of independence movement, had dropped to around 10-20%. You can see it in the low turnouts of recent protest attempts.
A better question to ask Hong Kongers is not necessarily do they support the protests today, because certainly most people are not on the "side" of the police and CCP either. A better question would be, would you go back to the way HK was 2 years ago if you could undo the last 2 years of protests completely?
Almost everyone in HK would answer in the affirmative. All the protests achieved was a massive loss of their remaining freedoms, loss of economic advantages, and a much deeper recession, which most Hong Kongers can see and feel each day. A lot of HKers privately blame the US for encouraging and continuing to radicalize the young protestors, as if any other outcome was possible here. There were local news interviews with high school aged protestors near the end who believed that US would sail in an aircraft carrier and liberate them.
This is a reasonably accurate picture of sentiment toward the protests in HK. The one caveat to add is that sentiment toward the protests in Hong Kong is very dependent on income levels, business interests and age. Among most of my friends, who are professionals, gainfully employed or themselves successful business owners, there was a sense of horror and bewilderment at the violent turn that protests took beginning around June 2019 with the trashing of the Legislative Council chambers, and later the burning and destruction of mainland Chinese bank branches and businesses with mainland Chinese ties, including Starbucks, a popular sushi chain and a chain of snack shops. I shared their shock at seeing the long peaceful Hong Kong I have lived in for decades descend into chaos.
At the same time, some of my staff and other middle-income people I knew tended to believe protesters were pushed toward extreme violence by the excesses of the police and the implacability of the government. As in the US, different perceptions of reality were reinforced by social media bubbles that filtered out opposing views and solidified existing biases.
Today, the same people who were horrified by the direction in which the protests ultimately went are relieved at the fact that they have largely stopped, and willing to accept the existence of red lines defining the limits of free speech and protest activities as a fair price to pay for social stability. Others who once sympathized with the protesters or took part in protests are not supportive, but most are resigned to the fact that the NSL is a fait accompli. Some are looking at their options, such as emigration. Most will probably make peace with the new reality and stay.
The concern that remains for the financial sector is that the red lines are more like gray zones of ambiguity. The questions regarding short-selling and publishing of financial or economic research critical of China and its interests remain and it will take time to see how any such cases play out in the enforcement or non-enforcement of the NSL.
Another urgent question for the financial sector is how financial institutions comply simultaneously with US sanctions against Chinese officials or others and the NSL, under which enforcement of foreign sanctions against China is illegal. Closing the account of a US-sanctioned Chinese official might be necessary to avoid being shut out of the USD clearing system. But it could lead to equally dire consequences under the NSL.
The ultimate underlying grievances behind the protests were economic, in particular related to two major but connected areas: property prices pricing out young and middle aged residents from property ladder and stagnation in median incomes since 1997 which was much worse than anything reported in the West with top 1% capturing all and more of the GDP increase in that period. PRC is aware about these issues as seen in some Global Times editorials back in 2019 and one can hope that something will be done to address them however the visible reaction from the tycoons seems to be one of exhilaration that protests are shut down and going back to old ways (for example reports yesterday that hard hit shops are getting pretty bad lease renewal terms from landlords like Wharf Holdings - Woo Family). My forecast would be that if the economic issues are not partially addressed (say massive expansion of social housing Singapore-style or property price controls) then the protests will be back within 2-3 years but with purely economic demands - say higher minimum wages, rent controls or something similar.
My take regarding the underlying grievances of the protests, that started years earlier:
-socio-economics already explained in other posts here,
-fear of an increasing authoritarian China and encroachment, (btw anyone heard of concrete influences/violation of Basic Law into HK before and during protests, aside from the bookseller abductions?)
-psychology, identity (changing relationship between HKers and Tier 1 mainlanders in terms of being special, and competition for jobs) and
-local policy/policing mistakes that were re-enforced by populists and social media bubbles
eg
-local economy and services being transformed by businesses catering for an increasing number of visiting mainland tourists and the little benefit that gave to the ‘normal’ HKer in contrast to tycoons),
-the stress to social services perceived due to immigration of mainlanders (eg gaining HK ID cards with crossing the border in late pregnancy),
-the issues illegal parallel/cross border traders brought - eg during the milk powder shortage.
-the mainland ‘dama’ singers...
-sensationalized individual cases of mainlander ‘poor behavior’ - eg that defecation of a child in the streets, or some eating behaviors ....feeding a narrative of separation, tribalism.
-slow progress towards more political participation/universal suffrage - perceived to be a right under Basic Law - but debatable IMHO.
All this contributed in various ways until it bursted out and kept escalating also driven by the poor government response.
HK has always been part of China and always will be. Yes, the local political interests are strong but they don’t trump “being Chinese”. I don’t think there was ever a majority even against the extradition law, and the argument was you can’t commit murder in Taiwan and get away with it by running to HK or China. That being said, now that the HK people have made their decision 一國一制，they must accept the consequences. All tariffs must be brought in line with those of mainland China and all special quotas eliminated. Put a dent in the re-export trade and they’ll feel it. It won’t kill them but it will make life less comfortable and that should be the goal. 港人吃硬不吃軟。It’s the only language they understand. Think of it as our form of non violent protest.
All very good points. I am long term HK resident with long stays in the PRC. I think all the issues around policies which drove greater income inequality are the key sparks that lit the fire - all old Colonial policies. Government is shameless in promoting business and property interests over average workers. Where is the socialism with Chinese characteristics? Strange how Communist regime counts on tycoons to control the masses.
Thanks for sorting out all the confusing threads on this issue. It's unfortunate that, as you've usefully reminded us, the ham-handed US handling of the situation has not been helpful. More lost opportunities !
What would happen had the protests not gone radical?
Suppose there existed a spectrum of "protest levels" from which Hongkongers could make a choice. Would it be possible for them to achieve a "perfectly balanced" protest such that: (1) the extradition bill was shelved, and (2) Hong Kong's freedoms and economic advantages were still intact long after the protest had ended?
The original comment in this thread appears to suggest an affirmative answer to this question. In that case, the other side (i.e., the CCP) would be open to negotiations and willing to make compromises. It would not mind "losing face," for it must acknowledge that it was its own bad policy that caused the protest in the first place and that whatever agreement reached was to "right the wrong."
Given the current CCP leadership, would it be able to do the above?
Remember that the extradition bill was indeed shelved before things went very, very south. The key objective had been achieved, except that it had now become only one of "the five demands," with "not one less" open to discussion. (Anyone who doesn't get the reference can look it up.)
The HK Chief Executive had already set herself up as a sacrificial lamb, taking full responsibility for the failed extradition bill. In theory CCP could have let her step down, sticking to the script that she had acted on her own, and a return to status quo might have been possible.
This would still have required some CCP willingness to compromise, but the withdrawal of the proposed Article 23 bill in 2003 and CH Tung's eventual resignation was a precedent. The violent metastasizing of the protest movement, and in particular the direct attacks against Chinese sovereignty e.g. attacks against the liaison office, combined with calls for US/UK intervention more or less removed that option from the table.
Suppose that at the time when the extradition bill was shelved the intensity of the protests was "optimal," would people be confident enough to believe that Hong Kong's freedoms and economic advantages would be intact if the protesters put a stop to their demands "right there?" Were most Hongkongers feeling confident when they heard that specific piece of news from the Chief Executive of Hong Kong?
It appears that the historical event in 2003 is the sole point of reference from which one might deduce the possibility of "returning to normal" after some large-scale political and social turmoil in Hong Kong. Is there something else that lends support to such a possibility?
On top of that, is it reasonable to assume that today's CCP is still the same CCP in 2003, in terms of its views on China, Hong Kong, 1C2S, civil liberties, the rule of law, as well as of its decision-making processes?
The problem was that the bill was not withdrawn. There was widespread legal consensus well known to protesters that “shelved” bill could be reintroduced in Legco at a moment’s notice. The bill was eventually withdrawn but by that time the protests have exploded and there was a lot of bad blood between protesters and police. In alternative history, if the bill was simply withdrawn when government decided to do a u-turn, there was a significant chance that the protests would run out of steam and deprive the more radical elements of momentum. Shelving the bill was a tactical mistake in hindsight and officials say it off record.
Agree shelving the bill, not withdrawing the bill was a tactical mistake. But the government did the same thing in 2003 -- they first shelved the Article 23 proposal before formal withdrawing it two months later. The outcome was obviously different in the two cases.
One key difference is that the old guard of Pan-Democrats were leading the protests in 2003. In 2019, a new generation of protesters had taken charge -- a generation sophisticated in its "be water" organizational tactics but unwilling/unable to negotiate with authorities on a compromise.
I agree with your statement. However I would still put onus of responsibility on the government’s strategy. The trends within protest movement (sidelining of old guard) have been very clear and known since 2014. However decision makers within government have clearly not considered this evolving situation. Since in my view, understanding evolving social situation and calibrating response is clearly with the expectations of responsibilities of key government leaders, they have failed at their task. I hope that going forward they will do better and not rest on the laurels.
Are the 5 demands and the universal suffrage (including of candidates) from Occupy Central in 2014 just the trigger points or the underlying root causes? I found little debate, or willingness of compromise (not one less/'climbing the mountain' approach) of the former during the protests. Would like to learn more about the actual root causes (within the one country/two systems framework) that may lead to solutions.
I wrote elsewhere here that in my view the underlying economic grievances are key to understanding the lack of stability and widespread support that the protests had among population as seen in large attendance by middle aged people that you normally do not see at protests elsewhere. There was a core of protesters of course that was absolutist in their political demands as there are always is in any movement however the masses were primarily driven by perceived lack of responsiveness of existing political set up to long standing issues. The key, related, issues in my mind are (1) out of control property prices that make it extremely difficult to get on property ladder for young and even middle aged and (2) the fact that median incomes (and below) have stagnated since 1997 with over 100% of GDP growth going to top 1% (median pay is about what it was in 1997). These issues have been known for long time and it can be argued that the trends were in place before handover however nothing has been done to address them. People are well aware that for example Singapore has done much better job with housing issue through massive social housing program and people know that places in PRC such as Shanghai are more proactive. As to wages, immigration tends to be blamed as being used by business to depress incomes - government has a track record of fighting tooth and nail against any demands to increase wages. The political activists can get mass support primarily because of those economic raw feelings. As to what can be done within current framework I would focus on trying to at least be seen attempting solving this issues and possibly pick on some particularly onerous tycoons/monopolists. Government could also be more open in accepting economic demands as opposed to political demand to create a better channels to air issues.
well written - the protests achieved the opposite of what they wanted
quite spot-on. It looks like a movement started with good will and clear goal, but then led into riots by younger gen without strategic plans or objectives, and ultimately disrupted HKers themselves, and ended up accelerating the unification of 2 systems. It reminds me some other protests that are still going on, hopefully they would be handled better...
I also think seeing the US police response to the BLM protests/riots in the US took a lot of the wind out of HK protestors' sails. The BLM protests were so widely promoted and publicized in China (so CCP can say, look at the chaos and civil unrest in the US). But rightfully it highlighted how relatively reserved HK police had actually been relative to some US cities' militarized police response, arresting journalists on camera, shooting people in the face with rubber bullets, outright beating protesters etc.
I think it made some HKers realize maybe things are not so bad, that actually police brutality against protests/riots can occur in democracies too...
I agree that BLM didn't give confidence to HKers. though HK police has been pretty aggressive as well, using rubber bullets is pretty common there too - https://readhop.com/weekly/2020/06/14/weekly-reading.html#hong-kong-protests-the-full-story-in-infographics---scmp
Where do you think will the countermeasures to the national security law from US and now EU lead to? https://www.scmp.com/economy/china-economy/article/3094637/national-security-law-eu-proposes-cutting-hong-kongs-access
Most of the countermeasures have already happened. Sure, the west will stop selling equipment to Hong Kong police, but it's not like that really makes a difference.
From an economic and especially security stand point, the west will accelerate integration of Hong Kong into their China policies, eg end any differentiation of special benefits that Hong Kong enjoyed. In turn this will accelerate the integration of Hong Kong into mainland China's policy structure, with "rule by law" encroaching on "rule of law".
The biggest unknown is how much economic rules and laws change internationally for Hong Kong, which will affect how much of the capital markets rule of law is kept. If the rest of the world keeps most of the existing treatments of HK listed securities, financial entities, and global market access, then China will likely reciprocate and leave HK's non-securities related laws intact. Then that can settle into a stable equilibrium for a while and maybe see HK recover a bit as a hub again. That's maybe my base case for now.
Not entirely sure where this UK passport issue is going to go.
About the SFC and the law, this might add color,
https://fundselectorasia.com/sfc-says-business-as-usual-in-hk/
As with any law, it s all in the interpretation and one must heed both the spirit of the law and the letter of the law.
In my experience (in finance), I find European companies far more concerned with compliance to the spirit of the law/regulation than their Wall Street counterparts, who deliberately and perhaps cleverly focus on the letter of the law...the cause of much friction between European staff and New York ones... leading to bust ups and resignations. It d be interesting to see how this plays out in HK.
On your HK friend, am surprised by your surprise, especially it being so late.
The movement left common sense and, some would say, common decency, sometime last summer.
And I fear the same might be said of the current efforts out of Washington on multiple issues, not least regarding China/Chicom, irrespective of will and intentions.
Some might dismiss those as being secondary to lofty ideals, but losing those usually hampers one's ability to achieve one's objectives.
Many of my friends in HK are actually very tired of the incessant protests spiraling into major disruptions and violence. Concerns around the Natl Security Law is felt differently on the ground there vs those viewing at it from abroad, in that many local HKers see the social rationale even if they are mindful that there may be political implications that don't really impact them as materially.
Thanks for this.
It's true that we don't really hear much about the negative reaction of many people to the protests here in the West. However, I do think that Hongkongers even now have a faith in their independent legal system which may not stand the test of time.
I think that s true. Only time can tell. Our ability to forcast the long term is nonexistent in such matters. Luckily it usually develops slowly.
The CCP seems to be in a reactionary, defensive, and submissive posture as it relates to the Trump administration moves against it. The strategy seems to be to wait out the election and only respond reciprocally, the latest being the Chengdu embassy. One thing that occurs to me is that a move down in global markets could be seen as a way to hurt Trump, and this is certainly within the CCP's abilities. Though, cutting off USD inflows to China would sting particularly right now.
Interested in the group's thoughts about how the CCP is contemplating its stance here.
As others have said, the CCP's clearly aware of the US election pressures and populist backlash against China that puts a lot of pressure on leaders to respond and one-up any Chinese response. So their strategy is to just match and never escalate, to try to delay as much as possible the speed of the decoupling while attempting to play the victim if possible (like with this consulate shutdown).
There's little to gain from attacking global markets outright. First of all it's difficult to do in a stealthy manner, and any overt moves are likely to hit their own fragile recovery efforts and economy. The "tail risks" and potential blowback of any such move against China are way too extreme. Secondly, it's likely China is aware that the best way to help Trump be re-elected right now is to show the American voter that China does NOT want him re-elected.
These are good points.
I would point to the August 2015 experience though and say that China did not understand the market implications of the RMB devaluation. Maybe this time is different, but they have a lot more USD denominated foreign capital.
As to Trump's reelection, I've been consistent in saying that if he attacks the CCP communists instead of China he will win handily. Not clear he's ever really gotten it until now. We'll see but I won't hold my breath.
Probably reading too much into the August 2015 experience, in my view.
This, and many other actions by the PRC Gov, were likely driven by domestic policy needs where western media tends to over interpret as some "grand PRC strategy". These domestic needs include deleveraging of the credit system and reduce system risks, specifically regarding the shadow banking system which was growing out of control and outside PBOC/BCRC monitoring, mostly going to real estate sector and doesn't show up in banks' balance sheet, so regulators needed to clamp that down and bring that back into the regulated financial systems. Other factors also include vast overseas asset purchase (Waldorf, soccer teams, InFront sports agencies) by the likes of Anbang, Wanda, HNA and Fosun, at inflated valuation and backed by domestic debt, again many from the shadow banking system. All of these had massive potential impact on the overall financial systems. One thing you can say about PBOC and CBRC is that, unlike their global counter parts, they actually try to prevent credit/asset bubble and take actions when irrational exuberance goes out of hand.
Yes the RMB deval was a total fiasco that led to multiple errors (even with how they were setting the fixings in Jan 2016). That's a good example of CCP wanting but failing to control both the level and trajectory of a market asset. If you tell people you want the RMB to depreciate by 10% by the end of the year, nobody will wait for it to depreciate in a nice gradual line. Everyone will run to sell their RMB today while it's still above 90% value.
Anyhow, I'm sure we agree that 2015 wasn't an attack on global markets on purpose, but an unforced error (that also cascaded with things like crowded positions in Risk Parity funds and lack of liquidity in a few markets). I thought above you were asking whether China would attack capital markets on purpose, in order to influence the US election outcome, which I deem very very unlikely.
Whether China can accidentally affect the trajectory of global markets to the downside is another, more complicated question. They're clearly trying to control both the level and rate of their equity markets again right now, trying to create "a bull market but not a bubble".
This is all valid and I appreciate the distinction between a market mistake and an attack. Its rumor, but I've heard that the March 2020 blowup in the treasury/risk parity markets were caused by aggressive China-based selling and the PBOC were threatened by Powell/Mnuchin with losing SWIFT access at that time.
Similarly, I believe that the August 2015 devaluation was politically calculated prior, even though it blew up spectacularly in China's face.
Also worth pointing out that the August 2015 incident immediately preceded Xi's trip to the White House in September (and major lie on the SCS islands in the Rose Garden). One can never determine cause and effect, but, markets and politics are connected in every way and especially right now.
Of course I agree with your last point wholeheartedly. Check out the China A share market performance in Jan-Feb 2020. That is not a market that was pricing in a draconian shutdown, and I believe was a big reason the financial world was caught so off guard when the virus left China's shores.
https://obamawhitehouse.archives.gov/the-press-office/2015/09/25/remarks-president-obama-and-president-xi-peoples-republic-china-joint
CCP is clearly waiting for the results of the upcoming election. They are hoping for a more relaxed posture by Biden and a return to business as usual. They see our political system as a weakness they can exploit.
I would look at the WSJ article this morning on i-banking in Hong Kong. Getting USD is not an issue for Chinese companies through the HKG exchange. I do not think that USD inflows are an issue at all.
As far as I see, CCP leadership may actually prefer Trump's reelection and believes that post election he would quickly pivot away from the confrontation while maintaining relative isolation of US from its long term allies plus he is a known quantity and his term oversaw a period of increasing influence for China as seen in China and this trend is expected to continue if he stays in power. Biden administration is not expected to significantly improve relations and has potential to make life more difficult with better international alliances. That is the gist of what is said often.
I always wondered, what the point was of having a consulate in Chengdu in 1985, of all places in China. Lots of Americans to take care of? Overwhelming demand of Chinese travelers? Or rather that Chengdu is a center of the military-industrial complex and also an ideal point to gather information from Tibetans?
So in China there are 1 embassy (Beijing) and 5 consulates, Guangzhou, Shanghai, Shengyang, Wuhan and Chengdu. Now if you then look at China on map, it's clear that Chengdu covers almost the entire west side geographically that no other consulates nearby.
Think 1985. No passports for Chinese, as once they leave they wouldn't come back, very little foreign investments, may be a handful US English teachers in the entire west of China.
Chengdu is as close to Tibet as you can get satisfying the criteria to have a consulate
Whose criteria?
interesting idea, but the CCP is no match for the Fed. in a closer fight, they'd be better off targeting his base, such as buying soybeans from someone else, that sort of thing. but there's really not much to do, as it won't be close 🤷♂️
Interesting point. I would argue that with so many trillion in flows into China (ETFs, bonds, etc), the shock of an RMB move could easily overwhelm a Fed that has shot many of its bullets. An argument made to me privately is that the CCP is scared to provoke Trump in this respect, as they would risk losing access to the USD clearing system as a response.
still a non-starter, in my view. even if they successfully engineer a rout, which won't happen, how sure are they it won't come back to the Chinese markets. they barely have any experience with their own - it would be crazy to sit at a different table, and try to win a game they are not used to playing. better off elsewhere
Thanks. I find Xi's love/hate relationship with the markets interesting to observe. He's nothing if not unpredictable on capital markets, with the general qualifier that he has been very consistent on "opening up" to foreign investment in local markets these past few years. His need for USD may outweigh Marxist leanings.
What is going to happen to Apple in the next few years? I certainly would be close to panicking by now if I was Tim Cook. It will take years to move the expertise of assembling iphones abroad, and I don't see how he could avoid doing that if he were a responsible CEO, at this point he needs backup options.
But he must be in a terrible position, he is hugely dependent on China for both production and customers, yet by the day that relationship is worsening due to the politics of the world.
Does China have the capability to go nuclear on Apple production in China when they're still trying to attract and retain foreign businesses in the country? One imagines that if China were to sever Apple production lines as political retaliation for Huawei bans that most Western multinationals in China would then be compelled to move for the exits at the earliest possible date to avoid a similar fate.
Thinking about it, China probably has more to lose if Apple leaves China. Apple might have huge supply chain disruptions, and a lot of customers lost in china, but they'll recover in a few years. For China it would be a massive loss of employment, massive loss of face for other multinationals.
https://www.livemint.com/companies/news/not-in-china-but-chennai-apple-starts-manufacturing-of-iphone-11-in-india-11595574997264.html
Thanks! I didn't see that, I'm quite impressed how quickly that's happened.
One reason it happened so quickly is because Foxconn (宏海）is still running the show. Another reason is that the phones are being assembled in Chennai from Chinese and Taiwanese parts. A good first step, but still under Chinese control. The Indian engineers at Foxconn need to break free and form their own company. That will take more time.
They also have many accessories coming out of Vietnam now. Apple tier 1 contractors work all through SE Asia and now moving into India. I expect further diversification - but they are not under much pressure
Pretty late to the discussion here, but a somewhat popular theme on Chinese Twitter regarding the current affairs, closure of the US CG, and the concept 经济内循环/内部大循环 the internal economic cycle/main domestic cycle is a sign that China will revert to the closed state (i.e. prior to reforming & opening up) and maybe also bring back planned economy in a few years as the country gets more and more alienated by the rest of the world (in order to conserve FX reserves and to ensure the survival of the Party). To me the idea seems quite unlikely, but I'm no China expert. Does this scenario sound plausible to you?
Does anyone have any thoughts on potential for Three Gorges Dam collapse? In the short-term what would this actually look like as far as supply chain disruption, other economic effects etc. Intermediate-longer term what are the political ramifications for Xi/CCP? Maybe the first question should be how likely do you view a collapse? Any thoughts much appreciated.
I gather more or less everyone will have seen China’s Ambassador to the UK, Liu Xiaoming, squirm through his interview with Andrew Marr on the BBC last weekend (if not, you can still watch it here: https://twitter.com/BBCPolitics/status/1284784810200838145).
I know Liu’s antics weren’t exactly anything new. Nevertheless, as I watched I was reminded of Orwell’s essay, “Notes on Nationalism” (1945), and particularly Orwell’s observation that:
“The nationalist not only does not disapprove of atrocities committed by his own side, but he has a remarkable capacity for not even hearing about them.”
Incidentally, I’d say that the ambassador’s attempts to plead ignorance (“I cannot see...” and “I do not know—where did you get the video?”) were rather undercut by the fact that he’d obviously been briefed in advance to pivot away (toward saying things like: “Xinjiang is the most beautiful...,” and so on, and henceforth).
As appalling as his performance was, I kind of feel sorry for the guy. Clearly he is required to drink Xi's Kool Aid like everyone else in the system and he actually seemed a reasonable guy / representative to the UK before he went down that route. The feeling of the UK population towards the CCP right now is probably not too far off the US even if we might be more reserved here; the Government's response on the NSL has been robust and commendable. So no wonder they see the UK as a target.
Possibly a career requirement to get publicly crucified on an indefensible position by counter-revolutionary elements and hostile foreign forces. Quite possibly we saw an incumbent (vice-) foreign minister in action.
There may be some truth in what he said, though.
There apparently were many, many more acts of legitimate resistance against foreign imperialist oppression, pardon, I meant of course hideous acts of terrorism in Xinjiang over many years, that went completely unreported, in order to follow general protocol not to report on things that officially must not happen and, more importantly, not to scare off and reduce the flow of Han-Chinese returnees to the sacred lands of their forefathers.
Of course it is difficult now to justify the final solution of the Uyghur problem, basing on events that officially never happened, so all you get from Chinese officials is hints about that, no full disclosure.
For what it's worth, I went to a reception organised for him when he was appointed ambassador in 2010. He struck me as a very tough and clever apparatchik. He made an amusing speech in good English which was very un- Chinese as it contained some good jokes, so he knew how to appeal to a British audience.
His predecessor, Fu Ying, is now a vice foreign minister, so perhaps he will follow her into a similar post.
Julian Ku: “China keeps saying the US violated intl law when it ordered the closure of the Houston Consulate, but China's closure of the Chengdu Consulate is perfectly legal," he said. "It's not clear what intl law the US violated?"
there is this Vienna Convention which Nations signed some agreement on how to deal with diplomatic matters, but don't know the details
There was no law violated. It’s just the CCP twisting language to suit their own propaganda needs. Last time I was in 廣州 , I saw many big inspirational posters with words like peace, harmony, prosperity, etc. One said “democracy” (民主). I had to laugh.
They said "legitimate and necessary", but did they say "legal"?
The PRC claims the US closure of the PRC’s Houston Consulate violates international law.
In Wednesday’s newsletter, Bill included this clip from an RFA commentary by Laing Jing, translated by David Kelly:
Trump's hawkish ministers are playing a big game. They know that due to his major mistakes in the epidemic and the Hong Kong issues, Xi is in his most dangerous predicament since taking office. The US has a chance that it dared not imagine: to force Xi to step down, completely changing the confrontation between the US and China.
Bill commented: This is interesting speculation that jibes in part with what I have heard. However, how vulnerable may Xi really be?
I’m interested to know what others have heard about this: specifically, do the hawks really think this is possible? And if so, How would they see that playing out?
It seems highly implausible, unless I, with my relatively limited knowledge, am missing something. Any thoughts on this?
Bill, you are well-read on Chinese history and politics.
What are the most cultural factors that create patterns of conflict in Chinese history and in daily life today?
What factors should we china watchers and Governments be aware of as tip-offs for potential conflicts in the future?
Any thoughts on the Pompeo speech yesterday? After all the buildup I was expecting more... guess I need to read the transcript!
here is the full text - Communist China and the Free World’s Future https://www.state.gov/communist-china-and-the-free-worlds-future/
What was that reference to infiltrating PTA meetings? Is that referring to some specific incident?
I am not sure, struck me too, wonder if it involves wechat
I knew it, Jenny's mom accused me of not remembering to bring the snacks because she's a CCP thug advancing their tyrannical policy.
It’s night here in China so I’m always confused if this thread is ET or GMT+8... anyway. We’re stuck in China (we can get out, but then our work visas are cancelled and we need a temporary visa to get back in and then apply for a new work visa, super 麻烦）so my question is: when we will be able to travel back to Europe / US? My guess woul be after CNNY 2021. What’s yours?
I hear that currently if you have a negative test result from a designated lab in the relevant locale within 5 days of flying then u can enter china (still subject to a two-week quarantine on arrival).
How are ordinary Chinese consumers reacting to the changing geopolitics? Are foreign goods generally declining in popularity? Are Chinese luxury brands taking market share from perennial European favourites?
How turbulent do you all predict the Chinese consumer market will become for western goods in the next couple of years?
US goods are still held pretty high among Chinese consumers, partly thanks to numerous quality problems Chinese goods have had. so at least among consumers don't think they'd be willing to abandon it for patriotism especially for the affluent families.
I'm curious to get the takes of the more plugged-in folks here on the San Francisco consulate harboring a PLA member being pursued by the FBI for espionage. From the layman's perspective, this seems like a potentially very serious flashpoint. Where do you folks see this going?
Josh Rogin at WAPO is reporting that the individual has left the San Fran consulate now and has been arrested by U.S. authorities.
Phew! I'm glad cooler heads prevailed on the Chinese end on this one. Best to take your licks when you get stuck with your hand in the cookie jar.
When you get caught, that is!
It's a tough call because it seems this particular individual is not the only person fitting this profile the FBI has spoken to in recent months. You may be able to squirrel one person out of the country or post them up for a couple months in your consulate, but what about the other two dozen? Unlike China, when a spy network collapses the U.S. can't just quietly execute everyone, all these people will be headed to court on visa fraud charges and probably convicted. Gonna be seeing things like this very often for the foreseeable future:
https://www.justice.gov/opa/pr/researchers-charged-visa-fraud-after-lying-about-their-work-china-s-people-s-liberation-army
As far as a "flashpoint", I guess it's like trying to pick one specific star out of the night sky. There are ten other things at least as serious going on right now.
According to CNN, this particular individual has now been "taken into custody" (https://us.cnn.com/2020/07/24/politics/us-china-consulate-accuse-espionage-network/index.html), but no details are yet available as to how, exactly, this arrest was effected. I can't imagine that FBI agents were allowed onto PRC Consulate grounds, which means there must have been some kind of agreed-upon hand-over at the door, which in turn implies some kind of direct negotiation leading up to that. The tale is pretty tangled, in other words, and getting more so.
Shockingly amateurish, that these "agents" kept personal stuff on their phones or anywhere near them.
What did they pretend to research? The mating habits of the North American hedgehog?
It seems they don't know Moscow Rules. Too good to be true. FBI-bait?
Honestly it sounds like a "positive" or at least stable outcome. Either they were given up by the Chinese govt or in any case going to be tried under US law, so there's no risk of a standoff or accusations of diplomatic overreach.
I'd like to think so, but how would the PRC's "giving up" one of their mil/dip personnel be in any way "positive" for their side? I'm also unclear as to how int'l or domestic law operate concerning harboring of wanted fugitives on consular premises? Please correct me if I'm misinformed, but it would seem that *any* government would resist that kind of cooperation with local law enforcement, at least under the guise of "protecting" their own citizens on foreign soil, regardless of pending legal action. Would the US "surrender" one of their nationals in the PRC if the situation were reversed? Once the person is in local custody, or if they never managed to make it into the consular safe haven in the first place, it's a whole different ball game of course. Is the case of Kovring and Spavor of any illustrative value? (Sorry for the wordy reply !)
Maybe someone better versed in international criminal law can answer your questions, I'm not a lawyer.
From the political side it just smells like someone high up in China said "We don't want another consulate incident right now, so just give her up." If she was guilty, then she would have known of the risks of discovery.
It's positive in the sense that it's a de-escalation and probably a move towards stability.
Got it, thanks. That makes sense, as much as anything does in “these challenging times”... !
If the roles were reversed and we had a US national who was caught spying in China under false pretenses and fled to a consulate, I'd absolutely agree that they should be surrendered to face the Chinese authorities, provided that they weren't facing something beyond the pale like life in prison or execution. I'm glad to see that China took the off-ramp here and gave their person up.
Does China Have a Commanding Lead in Computing?
The U.S. decision to demand that China close its Houston consulate dominated the news cycle this week, but an even more important case may have been the indictment of two Chinese hackers, working at times with China’s Ministry of State Security. The indictment, available on the Department of Justice website, is breathtaking for two reasons: the hackers revealed amazing sophistication and they were able to steal an incredible volume of secrets. This revelation, combined with many others I chronicled in The New Art of War, such as the APT10 case, suggest the Chinese have mastered world computer systems. They appear to have access to anything they want.
Tech sophistication: we know from the APT10 case that the hackers were able to use malware to fool intrusion detection systems and then capture the keystrokes of legitmate users. They were able to log in as legitimate users. The new twist is this: the hackers placed “web shells” including something called the China Chopper web shell onto the computers of target computers. “It provides an easy-to-use interface through which the user can control web shells installed on multiple victim computers,” the Department of Justice charged. The hackers can use innocuous file names to hide the shells and can even equip them with password-protection. Once hackers find what they want, they compress the files inito encrypted Roshal Active Compressed files. They save these RAR files in the recycle bins of computers, where system administrators are much less likely to look. Then they are exfiltrated.
Scale: The victims of the latest hacks were in the United States, Australia, Belgium, Germany, Japan, Lithuania, the Netherlands, South Korea, Spain, Sweden and the United Kingdom.
The hackers were inside these systems starting in 2009 through 2020. It’s just incredible that they weren’t caught. In addition to stealing information related to Covid-19 treatments, they stole information about radar systems, educational details, Air Force research projects, the works. The thefts extended across dozens of sensitive technology fields.
We are left with this stunning possibility: the Chinese government and affiliated hackers have reached the point of sophistication that they can hack virtually any computer in the world, sight unseen, and stay inside for years. We have yet to awaken to the full dimensions of this challenge
I am of the view that Russia has comparable or even superior capabilities especially combined with its human intelligence strengths. I would be surprised if NSA is deficient in this as well - there is simply much less info coming out of China or Russia about any hacks on infrastructure or other targets due to lack of independent new sources and the general "embarrassment" factor.
Alarming, to say the least. Now that the horse has been so comprehensively stolen, are the IC, and the corporate/government sector more generally, taking any meaningful countermeasures to lock the stable door?
A related concern: Is there any indication that “the Chinese government and affiliated hackers” have achieved, or are interested in achieving, broader penetration of general civilian networks and/or individual machines at the (reputed, at least) level of the NSA and other US domestic-security entities?
The short answer is that the American private sector is not doing enough by itself or in cooperation with the U.S. government. The reasons are: CEOs want to use computing systems to make money. That's their job. If the Chinese penetrate their systems and steal intellectual property, that's a long-term problem. But because most CEOs think in terms of quarters or annual earnings, my analysis is that they have not opted to spend the millions of dollars that would be necessary to harden their IT systems. They don't want anything to go public because it would anger the Chinese government and it probably would cost them their jobs in a blitz of angry shareholder lawsuits. For similar reasons, very few U.S. companies have cooperated with the U.S. government in tackling human espionage cases, with the exception of GE. In general, the private sector has taken the view that national security is the government's job. Clearly the Chinese have exploited this gap in the American political and economic system.
You ask a fascinating question about the NSA/CIA networks. No one really knows, but my guess is that those guys are still secure. They have invested in relatively new systems and are sensitive to these issues. But the Pentagon is massively behind. Which is why it is such a tragedy that the Defense Department's $10 billion JEDI project is tied up in political knots.
Thank you for this. I would certainly hope that NSA/CIA will have hardened their own IT infrastructure, but my question could perhaps be better phrased along the lines of "Does CPC surveillance/penetration of *general civilian networks and/or individual machines* now approach or even surpass that which we can assume NSA/CIA currently can or do exercise?" Again, this has become a much more immediate concern in the context of NSL Article 38, which attempts to "criminalize violations of the law committed by *anyone anywhere in the world*" (my emphasis). See, for example, Donald Clarke's recent posts at the China Collection blog:
-- https://thechinacollection.org/hong-kongs-national-security-law-first-look/
-- https://thechinacollection.org/hong-kongs-national-security-law-dangerous-article-38/ and
-- https://thechinacollection.org/article-38-hong-kongs-national-security-law-yes-want-get/
Clarke and his group do not strike me as particularly alarmist.)
This is mostly guesswork, but I would say that Chinese entities have comparable capabilities with the NSA/CIA. Plus they control part of the world's telecom infrastructure through Huawei and ZTE. They are building a high-tech authoritarian infrastructure not just for China but also for the world.
I'd suspected as much, but it's pretty astonishing nonetheless. I guess most of us here won't be heading to Hong Kong anytime soon!
I am interested to hear people's thoughts on this article about Chinese fishing in North Korean waters: https://newsinteractives.cbc.ca/longform/china-at-sea
Is there enough information here to show a breach of UN sanctions?
Megan 說得沒錯. Whether there’s a breach or not is meaningless. Chinese businessmen/fishermen don’t care about NK sanctions unless they have assets in the US that can be seized. In addition, they can transact business in 人民幣, they don’t need US dollars. NK will gladly accept yuan. The main block to China NK trade now is the virus.
Interesting article, but honestly, even if there is, I'm not sure how much it matters in the broader political calculus. There is plenty of evidence that China is at a minimum tolerating the smuggling of oil into NK which is clear violation of the sanctions it voted for via ship to ship transfers off their own coast. The legal grey zone leads to alot of this ambiguity... some of the ships are also legally providing fuel to the Chinese fishing fleet.
https://www.zerohedge.com/news/2019-04-15/inside-un-operation-bust-north-korean-oil-smugglers-high-seas
As things now look Trump will be replaced by Biden in less than six months. How will Biden run the ship? He is very much of a professional on international relations, very much an insider and very much a politician. And he will be mortally insulted by the rather clumsy interventions and attempted interventions of the CPR. He has no motive at all to be friendly or kind to the Chinese. Furthermore being kind even in appearance to them exposes him to a political risk of the first order on the right, the old Republican cry of Soft on Communism. Biden is likely to follow thje old political adage: Don't get mad. Get even. Xi has outsmarted himself by intervention---he has put himself into a box. And when attacked Xi hits back. Fasten your seat belts.
The norm is to expel suspect "diplomats", but I guess the aim was to send a domestic political message as well.
how much was the closing of the Houston consulate a electoral politics move vs having some caught spying/stealing IP red handed? forcing the closure of a consulate is a dramatic and, in normal times, highly calculated move.
Does anyone believe there was something specific about the operations of the Houston consulate that led to its closure by the US, or was it simply that the US wanted to send a signal and Houston was the consulate with the least foot traffic? Furthermore, are the tit-for-tat consulate closures window dressing since there are a plethora of other communication channels, or is this truly a major escalation?
According to press call with admin officials this morning, the decision to close down the Houston consulate was "not random." FBI official said that Houston consulate was particularly aggressive when it came down to acquiring U.S. research via a thousand talents program and other initiatives to infiltrate U.S. academia. China has heavily targetted Texas AM for TTP, so this is not a surprise. (https://www.wsj.com/articles/chinas-funding-of-u-s-researchers-raises-red-flags-11580428915)
I heard through unofficial sources that the Houston consulate was targeting the oil and natural gas industries and also the large medical complex in Houston. The consulate was located very close to very advanced medical research.
There was a remark in the WSJ article yesterday that consular officials tried to put some people onto one of the student repatriation charter flights from Houston that was not a student. Unfortunately, there was nothing beyond this brief comment.
I think it's pretty clear by now from the folks doing United Front research that the consulates serve as a launching point for all kinds of influence operations, clandestine activity, and harassment of foreign dissidents. There were some old cables and reports floating around about CCP agents throwing their weight around in Oil and Gas to keep exploration of South China Sea area on their terms. Then the Medical Center IP investigations and just recently an incident at George Bush International where consulate staff played some games with the manifest to get people out of the U.S. on assumed identities. It was probably a straw that broke the camel's back situation.
Unlike the U.S. consulates in China, which regularly conduct thousands of passport renewals, visa approvals, and other routine services each day, the consular function of Chinese consulates is an afterthought at best. I don't think foot traffic is part of the calculation.
"Unlike the U.S. consulates in China, which regularly conduct thousands of passport renewals, visa approvals, and other routine services each day" You mean to say, that this was the main activity of the US Consulate in Chengdu since 1985? Get real, please.
I'm saying it's the main reason they are allowed to continue to operate, at least for the last 10 years. Having foreign diplomats snooping around outside of the "everything is awesome" parts of China is not something they are comfortable with, but it's tolerated as long as it gives them convenient access to the United States via consular services. This is where having the vast majority of your political and business class deeply dependent on access to a foreign country starts to make life complicated.
So I guess that's my roundabout way of saying I agree with you, but there are competing priorities that the CCP has to balance. The U.S. side has no equivalent balancing to do on their side since the Chinese consulates don't provide any service that is particularly valuable to the USG or your average American.
If you get one sentence, to describe China, CCP and world affairs from this day until next friday. What would it be?
"Germany sends aid to flood-stricken areas in China, possibly to bolster diplomatics relations"
Does anyone think Xi's trip to Jilin this week will lead to any changes in agricultural policy? He talked about modernizing farming, but it feels like that's a perennial goal that never seems to make much progress due the difficulty with land reforms in rural areas.
China's ag sector is well behind that of much of the world, especially compared to the U.S., Brazil and Argentina. Given how critical food supply is for any country, much less China, it is absolutely the case that there will be significant changes in the sector. Frankly, a lot of it is very low hanging fruit stuff, but without a doubt the progress we will see over the next several years will have far ranging trading and even geopolitical implications.
Exactly. And the major land reform issue is allowing farmers to buy and sell agricultural land.
Purpose of this is to create large scale (state-owned) farms, as the current leadership deems that much more efficient than individual small scale farming. Experts are divided on the efficiency point and some may view it as a great leap backwards, but such l-scale farms can be socialist model enterprises, also good for photo-ops.
The US has tried diplomatic solutions to rampant Chinese IP and data theft for years and the CCP has lied to our faces repeatedly while apparently continuing to zealously encourage it. If diplomatic solutions fail because China has no interest in them, we're unfortunately left with no choice but to move to more overt steps.
Any evidence of IP theft?
Maybe they could have just asked to see the documents?
Honestly, though, they would have had to be confrontational no matter how they handled it. This may actually have been less dramatic than other options?