Hong Kong; US-China; Erdogan tells Xi what he wants to hear about Xinjiang; Li Keqiang talks more opening
No commentary up top today, not feeling particularly incisive.
Yesterday I wrote that the restart of the US-China trade talks felt less like a ceasefire and more like a political pause. A PRC reader sent me a much better description, saying it seems more like a one minute break between boxing rounds. For all the doom and gloom about US-China relations in DC I have to say that I find my Chinese contacts almost universally even more pessimistic about the next several years in the relationship.
Thursday is the July 4 Holiday in the US so the newsletter will not publish that day.
Thanks for reading.
The Essential Eight
1. Hong Kong
The masked protesters vandalised the interior, spray-painted anti-government graffiti on the walls and unfurled a colonial flag in the main chamber. They departed before midnight, when riot police deployed tear gas to clear the surrounding roads which were occupied by thousands of demonstrators.
“I am concerned,” said Anson Chan, a former chief secretary of Hong Kong who backs full democracy for the territory. “I hope that the chief executive will speak on behalf of the Hong Kong people and tell Beijing that they have nothing to fear from Hong Kong’s prosperity or from allowing us one man, one vote.”
Ronny Tong, a member of Hong Kong’s cabinet and a legal adviser to chief executive Carrie Lam, issued an even sterner warning.
“When there is trouble in Hong Kong, when things turn sour and there is violence in the streets, our fear is that if the police are unable to control what is happening here, there’s a remote risk that the [Chinese army] would get involved,” Tong said before Monday’s escalation.
n a symbolic moment, protesters spray-painted Hong Kong’s official emblem in black shortly after they took over the Legislative Council chamber...
Although desecrating the emblem carries a maximum penalty of three years in prison, protesters directed their anger at it by defacing the flower and the characters “People’s Republic of China,” while leaving “Hong Kong Special Administrative Region” untouched...
The appearance of this colonial-era flag at the legislature has sparked heated debate online among the protesters themselves.
Opponents of the gesture say it could cause misconceptions and allow the Chinese government to blame local activism on “foreign forces.”
on Tuesday, Chinese government statements criticizing the protests received blanket coverage across major Chinese state media outlets alongside editorials that blamed the unrest on hostile western forces bent on fomenting a revolution in the territory. The protesters were portrayed as hooligans motivated by mob violence, with state-run outlets omitting details of their broader political demands.
Geng Shuang also said that if the violent attack on the Legislative Council in Hong Kong occurred in the United States or Europe, what would they do and would they let it go? Everyone has seen law enforcement scenes of violence against American and European police on television. Why when the same thing happened in Hong Kong, they not only did not oppose and condemn, but also jumped out to make irresponsible remarks...This is completely naked double standard, extremely hypocritical and ugly!
China Radio International Online says outside efforts to interfere in Hong Kong will fail 对于外部势力的干预，中国政府的态度鲜明而坚定：香港事务纯属中国内政，任何国家、外部组织和个人都无权干预。若是执迷不悟、一意孤行，中国必然会作出进一步反应。不要低估中国维护国家主权事务的坚定决心与意志，任何干预香港事务搞乱中国的图谋都绝不会得逞。
The unrest is among those, particularly Hong Kong's youth, who feel unable to benefit from the SAR's development and excluded from its decision-making process - sentiments that have led to populist movements elsewhere - and those who are using these grievances and disturbances as a means to serve their own agendas and put pressure on Beijing...
Looking ahead, the only way for the SAR to sustain economic growth and maintain stability is for it to further integrate its own development into the nation's overall development, especially by playing its part in advancing the Belt and Road Initiative and Guangdong-Hong Kong-Macao Greater Bay Area.
Tuesday CCTV Evening News coverage of Hong Kong government's press conference, plus comments form various "representatives" of Hong Kong groups...key themes: the protestors are destroying the rule of law in Hong Kong and threatening HK's prosperity and stability
Tuesday CCTV Evening News coverage of comments on Hong Kong by the State Council Hong Kong and Macau Affairs Office spokesperson
China Radio International Online said the US congress reintroducing the Hong Kong Human Rights and Democracy Act is a “grave interference” of China’s internal affairs, and if Hong Kong lose its special trade status with the US, it will hurt American companies as well.
British foreign minister Jeremy Hunt condemned violence on both sides but said China needed to stick to commitments it made when it took back Hong Kong to allow freedoms there not enjoyed in mainland China, including the freedom to protest.
“People on the street understand that President Tsai took the anti-extradition law episode as a boost for her campaign,” said Andrew Huang, strategic studies professor at Taiwan’s Tamkang University.
The largely student-led demonstrations in Hong Kong have found broad support among their Taiwanese counterparts, prompting sympathy protests outside Hong Kong’s representative office in the capital, Taipei.
“The date is not set. The city is not set,” said one person close to the talks, when asked by Morning Trade about when U.S. Trade Representative Robert Lighthizer might sit down with Chinese Vice Premier Liu He.
“There has to be an assessment or understanding of what the two leaders agreed to in their 60 minute talk,” said the source...
Sources briefed on the talks said the U.S. still wants China to change its laws to implement commitments to combat forced technology transfers and other intellectual property transgressions. It’s unclear whether Beijing is willing to undo its accused backtracking that halted the talks in May.
A source briefed by Chinese officials before the G-20 said China wants the U.S. to also amend its laws that Beijing views as hostile to Chinese companies.
Wu Yue He back with another People's Daily comment on US-China trade relations, says there are already signs the US already going back on the spirit of the Trump-Xi meeting, Calls Larry Kudlow’s remarks Sunday on Huawei and China’s IP theft and cyber-attack “a clown show” that goes against the consensus reached by Xi and Trump at the G20 meeting, calls on the US side to keep its words and cooperate with China.
In a draft open letter to US President Donald Trump and Congress seen by Reuters Saturday, some 80 Asia specialists, including former veteran US diplomats and military officers, called Washington to rethink policies that "treat China as an enemy," warning the approach could put US interests and the global economy in jeopardy,,,
The US policy toward China has been heavily influenced by right-wing politicians and hawks who are pushing to decouple the US and China economically and technologically. However, with the pain brought by strained bilateral relations increasingly felt in the US, opposition is also rising to prevent politicians from leading bilateral relations into a dead end.
U.S. military encroachments and surveillance missions close to Chinese territory spur a daily high-stakes game of cat and mouse, and U.S. officials assert publicly that Washington and Beijing are already in a “cyber war.” U.S. district attorneys travel the country to warn about talking shop to ethnic Chinese co-workers. Rafts of anti-China legislation spew from the printers of congressional staffers. And there are many other, more risky gambits being unspooled behind the black curtain. Even during the most hair-trigger days of the Cold War, the Soviet Union was not treated to such mindless and peripatetic hostility from the U.S. government....
It is impossible to say at this point what China’s future will be. It is still an open question. Those who would claim that China’s future course is set and unchanging are mistaken. If, due to our own ideological blinders and shortsighted political narratives, we abandon the effort and miss the opportunity to help shape China toward a better future, our children will rightly blame us. Even if China does not become an electoral democracy, the power of American influence in the world will surely change China, just as China’s growing influence will change America. It is delusional to think otherwise.
the internal directive to Huawei workers is clear: Strip out anything from the U.S. across the company’s sprawling product lines.
Within two years, Mr. Ren said, “we will no longer face a threat to our survival.”
As I wrote two weeks ago:
...it is folly to think that a reprieve for Huawei will change the view among the people that matter in China, starting with Xi, that the US and China are in an existential technology competition. I know there are senior Trump Administration who understand this, but it is not clear President Trump does, or that he sees Huawei as anything more than a bargaining chip for a trade deal.
As I wrote last month, I believe Xi now views the US-China relationship as "fighting while embracing", or 缠斗, and wants to keep the embrace going until China is strong enough to push back much harder against the US.
“Huge amounts of capital and talent are going to be thrown at building self-reliance and establishing a kind of parallel ecosystem here without dependence on U.S. chips, operating systems,” said Ben Harburg, managing partner of MSA Capital, a Beijing-based venture capital firm.
“The rationale is that this moment created demand. Previously, it didn’t have demand for those Chinese chips,” Harburg told CNBC Monday at the World Economic Forum in Dalian, China...
A homegrown Chinese semiconductor industry will likely hurt American chip makers as China will aggressively push their chips not just domestically but to other markets, said Harburg.
On a frigid morning in January, Polish internal security officers entered the Warsaw apartment of a foreign businessman, confiscated photographs, seized his electronic devices and detained him. The allegations leveled against him were sensational: An ex-diplomat who speaks Polish, he and a former Polish security official had spied on behalf of a foreign power...
Since announcing the arrests, Polish prosecutors have said little about the case; it is mostly classified. But in lengthy responses from jail to questions from Reuters, the Chinese businessman at the center of the case, Wang Weijing, said he was innocent.
4. Made in China 2025 still on track
MIC25 has fueled concerns that foreign competitors would be pushed out of the lucrative Chinese market and face fierce competition in third markets, while China becomes not only more competitive in innovative sectors of its own domestic economy, but also as the market shares of Chinese companies abroad grow.
China has responded to this criticism from abroad by toning down its references to the plan. Beijing directed media coverage and official statements on MIC25 to be dialed back. Even the name “MIC25” and trigger words such as “self sufficiency rate”, considered indicative of China’s efforts to replace foreign products and tech, were largely dropped from policy papers. Xi did not mention “Made in China 2025” at this year’s Central Economic Work Conference, nor did Premier Li Keqiang in the Government Work Report for the annual National People’s Congress – two key events Chinese leaders traditionally use for setting strategic directives
China has not at all abandoned its economic – and strategic – goal of catching up with Western industrialized countries and gaining a competitive edge in high-tech and emerging technologies. Four years after its official launch, the strategy has moved from blueprint to implementation. The MIC25 program is here to stay and, just like the GDP targets of the past, represents the CCP’s official marching orders for an ambitious industrial upgrading. Advanced economies around the globe will have to face this strategic offensive.
5. Premier Li promises more opening
Li made the remarks when addressing the opening ceremony of the Annual Meeting of the New Champions 2019, also known as the Summer Davos Forum, in the city of Dalian.
"China will unswervingly promote opening-up on all fronts," Li said.
The country will support foreign investment in advanced manufacturing industries such as electronic information, equipment manufacturing, medicine and new materials, and in the central and western regions, Li said, adding that favorable policies will be unveiled concerning the equipment imported for self-use, corporate income tax and land supply.
The premier said China will remove caps on foreign ownership of brokerages, futures dealers and life insurers by 2020, a year ahead of the previous plan, as part of efforts to further open up the financial and other modern service industries.
Foreign investors' access to value-added telecommunications and transportation will also face fewer restrictions, he said.
Li also pledged to implement the commitment to give national treatment to foreign-funded institutions in areas of credit information, credit rating and payment. The two-way opening of China's bond market will also be expanded, he said.
The Chinese government has long set restrictions for foreign investors’ shareholdings in financial firms, which analysts say aims to protect the country’s comparatively young financial industry. Yet such limits have led foreign companies to complain of an unfair playing field in the country. In November 2017, Beijing promised to loosen the restrictions during U.S. President Donald Trump’s visit to China.
Mr. Li’s remarks to the foreign executives were the Chinese government’s most public effort so far to persuade them not to move supply chains out of China. In welcoming television cameras into the afternoon meeting, a rare move for a Chinese leader, he also sought to reassure the Chinese public that even if some supply chains were moved elsewhere, the Chinese economy would not be much affected.
“While investors relocate some parts of their production lines to other countries, they have also increased investment in other parts of production capacity here in China,” he said.
6. Erdogan visits Beijing, tells Xi “all ethnicities in Xinjiang are living happily”
Tuesday CCTV Evening News on Xi's meeting with Erdogan. Xi urged Turkey to respect China’s “core interests” and have more cooperation on anti-terrorism and the Belt and Road Initiative. Erdogan said, according to CCTV, “it is a fact that people of all ethnicities in Xinjiang are living happily as China develops prosperously.” He also said “Turkey will not allow anyone to sow discord in the Turkey-China relations”, and the country is willing to work with China on anti-terrorism and BRI.
Erdogan told Xi on Tuesday that Turkey and China have “great potential to grow our relationship” based on historical trading ties and that the two would “contribute to regional and global stability.”
Erdogan is seen as drifting closer to Russia and China despite Turkey’s treaty ties with the U.S.
7. Auto sales and new energy vehicles
With a new round of scientific and technological revolution and industrial transformation in the making and rising, the new energy vehicle industry is entering a new stage of accelerated development, which not only adds strong new drivers to the economic growth of various countries, but also helps reduce greenhouse gas emissions, cope with climate change and improve global ecological environment, Xi noted in the letter.
With explosive growth of more than 30 percent, sales could surpass 10 million in 2025, The Paper cited Wang Chuanfu as saying at the 2019 World New Energy Vehicle Conference in Boao on China's southern island province of Hainan.
The Boao Consensus, which describes the strategic results of the congress, foresees e-cars accounting for 50% of annual global car sales by 2035. Within the Chinese market, Volkswagen commits to that goal as well, making China pivotal for Volkswagen Group’s decarbonization strategy. Volkswagen intends to offer 14 electrified models to Chinese customers this year. By 2028, more than half of the Group's planned 22 million electric cars will be produced in China. At the same time, Volkswagen is strengthening its local R&D. More than 4,500 engineers work on future technologies in the country.
China’s vehicle sales picked up last month after provincial governments announced stimulus plans of their own to revive demand in the world’s biggest automobile market, the commerce ministry said.
The crux of the problem: a June 30 deadline for cars built to so-called China-5 emissions standards to be sold. After that only vehicles meeting new standards could be put up for sale.
People were still coming in but weren’t buying the stage-5 cars, Li said.
“Customers didn’t know how long they could drive China-5 cars or whether they would be able to resell them in the future. And to be honest, we didn’t know either.”
To cope, his dealership in May slashed stage-5 vehicle prices by as much as 30%
Sales and registrations of new vehicles in regions including Beijing, Shanghai, Tianjin, Hebei Province and Guangdong Province now have to comply with what is believed to be one of the world's strictest rules on automobile pollutants.
8. Zhou Yongkang’s daughter-in-law can’t leave in China
Huang Wan is known as Fiona and is married to the son of imprisoned former Chinese security chief Zhou Yongkang. In recent days, she has published documents and testimonials on Twitter that she said, in an interview, show how Chinese authorities have used legal maneuvers to keep her in the country...
In May 2016, she wrote, a court in Hubei province, where her father-in-law and husband were prosecuted, found her guilty of embezzlement but released her on probation considering time served...
She said her efforts to appeal the conviction went nowhere, and that when her three-year probation ended this June, a new legal challenge appeared. A Beijing rural organization filed a lawsuit alleging that a company linked to Ms. Huang, her mother and associates of her husband owed hundreds of thousands of dollars in rent for land
Question: As US citizens did Huang and her husband Zhou Bin, also a US citizen, pay all the taxes they owed the US government from all their income in China? Zhou Bin is a truly evil person and Ms. Huang and her family benefited from his family’s power for many years.
Business, Economy and Trade
央行：当前要特别关注外部输入风险-新华网 PBoC leaders agreed in a meeting last week that the bank now needs to pay extra attention to the external risks that may bring shocks inside China
China’s Bizarre May Intervention Numbers | Council on Foreign Relations - Brad Setser There are a couple of potential explanations for the positive settlement number: One is that, in anticipation of outflows, China really ratcheted up enforcement of its controls. Importers and others who wanted foreign exchange couldn’t buy it easily. Demand for foreign currency (at the current price) was effectively rationed. Another is that in between China’s $40 billion May trade surplus, bond index inclusion, and reserve diversification (not just out of the dollar—those wanting to hold something other than dollars and get a positive interest rate have limited choices these days) there was a bit of foreign exchange coming into China in May. All in all, though, it does suggest that China is firmly in control of its financial account (and its exchange rate).
China to Weld Its Biggest Shipbuilders Into Single State-Run Giant - WSJ $$ If approved, the merger of China Shipbuilding Industry Corp. (CSIC) and China State Shipbuilding Corp. (CSSC), announced in stock filings late Monday, would create the world’s second-largest shipbuilder. Last year their combined orders by tonnage accounted for roughly 13% of the global total, according to their annual reports.
Two Brokerages Approved to Issue Bonds Amid Baoshang Bank Fallout - Caixin Two of China’s major brokerages got the green light to issue a combined 10 billion yuan ($1.45 billion) in bonds, as policymakers work to counter the ripple effects in the financial system in the wake of a government takeover of a private bank. The approvals are just the latest sign that policymakers remain concerned about distress in the interbank market after May’s takeover of Baoshang Bank
Kenya court stops China-backed Lamu coal plant project — Quartz Africa The environmental court also faulted the Chinese-backed power plant for failing to adequately consult the public about the initiative, and cited insufficient and unclear plans for handling and storing toxic coal ash.
New Economy Index Rebounds to Seven-Month High in June - Caixin The Mastercard Caixin BBD New Economy Index (NEI) rose to 30 in June from the previous month’s 28, indicating that new economy industries accounted for 30% of China’s overall economic input activities — the highest reading since November. The index measures labor, capital and technology inputs in 10 emerging industries relative to those of the whole economy.
In Depth: China Tests Seismic Shift in How Investment Advisers Earn Their Bucks - Caixin China is about to launch a pilot program that will allow investment advisers to take full discretionary control of their clients’ accounts, with third-party sale agencies expected to be the first to participate, industry insiders have told Caixin.
Investors Flood Into High-Tech Board Shares - Caixin Investors are making a frantic scramble for shares in companies to be listed on China's new high-tech board, with some initial public offerings (IPOs) oversubscribed more than 300 times, amid expectations their prices will surge when they start trading.
Founder of Chinese AI Pioneer SenseTime Named Board Member of Malaysia's SWF- PingWest Malaysia's sovereign wealth fund (SWF) has appointed the founder of Chinese artificial intelligence pioneer SenseTime as a board member, marking the first time for the Southeast Asian country to formally appoint a foreigner to such a position at Khazanah Nasional.
Yicai Global - Walmart Will Invest USD1.2 Billion to Upgrade China Supply Chain, SVP Says Government incentives for foreign investment explicitly encourage firms to develop logistics technologies and services and this is of great benefit to the retail sector, Ryan McDaniel, SVP of Walmart's China supply chains, told Yicai Global yesterday
有信心让亿万百姓端稳“饭碗”（中国经济纵深谈②）--财经--人民网 page 1 People's Daily Tuesday on why people should have confidence the employment situation and economy are stable
China's GNI higher than middle income countries - China Daily Last year, China's per-capita gross national income (GNI) hit $9,732, higher than that of middle income countries, according to a report released by the National Bureau of Statistics Monday.
Politics and Law
Xi Jinping, Leader of the G20 | China Media Project When reading high praise in the context of Chinese political discourse, it is always important to remember that praise, particularly when excessive, can be a way of damning as much as cheering. One wonders, when Wang Yi voices praise so insistently in the wake of the G20 Summit — is this a sign of confidence, or a sign of unease at home? Should we read this as an act of high-level satire, or gaojihei (高级黑), through an act of clumsy and ill-wrought Chinese Communist Party verbiage (低级红)?
暑期红色旅游人次或破亿，前三大客源地为上海北京广州_浦江头条_澎湃新闻-The Paper ThePaper reports that this summer more than 100 million will travel to revolutionary tourist sites like Yan’an where they can revisit the CCP history. Most of these tourists are young Chinese below 34.
别拿“大麻文化”为违法犯罪开脱-中青在线 China Youth Daily warned foreigners and Chinese students who just returned from overseas that smoking and selling marijuana is still illegal in China and they should not expect the authorities to go lenient on them despite the legalization of marijuana in some foreign countries. // And remember, if you test positive in China you will get into trouble, even if you are just visiting and had only consumed the drug somewhere overseas where it is legal
Chinese religion official in corruption spotlight ‘in aftermath of mosque demolition protest’ | South China Morning Post Anticorruption investigators have detained an official in charge of religious affairs in a part of northwest China rocked last year by a mass protest against the demolition of a mosque. Gao Zhenyu, 61, head of the Religious and Ethnic Affairs Commission in the Ningxia Hui autonomous region, was under investigation for alleged “serious violations of law and discipline”
Chinese prisoner got other inmates to dig a tunnel so he could come and go from jail | South China Morning Post And he got away with it – and more – because former warden and 15 other officials turned a blind eye to his activities, corruption watchdog says They have been expelled from the party, sacked or demoted, while Xi Guijun, freed in 2007, is back behind bars for blackmailing a coal mine operator
China's secret internment camps - Vox ...and the internet detectives working to find them.
全国统战系统宣传工作负责人培训班在云报集团“中央厨房”开展现场观摩教学--中国统一战线新闻网--人民网-United Front propaganda officials take a study tour to Yunnan Daily
Draft law may tighten adoption control - China Daily China plans to forbid all de facto single people from adopting children of the opposite sex who are less than 40 years younger as part of the efforts to prevent sexual abuse. Experts hailed the latest review of the draft civil code as necessary but added that insufficient government oversight lies at the root of the problem.
Foreign and Defense Affairs
Did Duterte’s detente with Beijing sink with a Philippine fishing boat in the South China Sea? | South China Morning Post Richard Heydarian, a Manila-based academic and author, said Chinese interests were hurt by a weaker Duterte, who was “haemorrhaging political capital” as political allies and the Philippines defence establishment criticising his position.
China’s digital imperialism: Shaping the global internet - SupChina China has been quietly exporting its system of online control — in both technique and proprietary technology — to governments across the world. This proliferation is a key component of China’s geopolitical strategy and represents a sweeping bid to own the infrastructure and ideology supporting the world’s future economic powers.
Chinese military conducts anti-ship missile tests in hotly contested South China Sea The Chinese carried out the first test over the weekend, firing off at least one missile into the sea, one official said. The window for testing remains open until July 3, and the official expects the Chinese military to test again before it closes. While the U.S. military has ships in the South China Sea, they were not close to the weekend test and are not in danger, the official said, adding that the test however is "concerning."
Xi proposes easing sanctions on NK to Trump at G20: Chinese FM - Global Times Chinese President Xi Jinping proposed to ease sanctions on North Korea at the right time to Donald Trump during the G20 summit in Osaka, Chinese Foreign Minister told the press on Tuesday. Chinese State Councilor and Foreign Minister Wang Yi said President Xi introduced China's position on the Peninsula issue during the G20, encouraging the US to act flexibly, including easing sanctions on North Korea at the right time and trying to solve concerns through dialogue.
Senior official calls on military to learn from hero - Xinhua A senior military official on Tuesday called on the whole military to learn from the heroic deeds of Du Fuguo, a soldier who lost his eyes and arms in an explosion during a mine clearance operation. Zhang Youxia, a member of the Political Bureau of the Communist Party of China (CPC) Central Committee and vice chairman of the Central Military Commission (CMC), made the remarks at a meeting on listening to reports of the deeds of Du.
Taiwan to crack down on unauthorized research collaborations with mainland China According to Taiwan’s Central News Agency, the island’s government is investigating seven researchers for allegedly joining a prestigious programme sponsored by the mainland China government to lure academics to the mainland without the necessary permissions.
Tech and Media
China to Inspect Hundreds of Popular Apps for Data Security - Caixin The inspection, which will also cover the country’s three big telecom network operators, China Mobile, China Unicom and China Telecom, is part of a national data security campaign to be rolled out over the next 12 months, the Ministry of Industry and Information Technology (MIIT) announced Monday. The MIIT, which didn’t name the internet companies or the 200 apps it said it would inspect, also plans to put in place at least 15 sets of industrywide standards and regulations for data and cybersecurity over the next 12 months.
Energy, Environment, Science and Health
署名文章：习近平能源安全新战略的浙江探索-新华网 Xinhua publishes an article by Tong Yahui, Chairman and Party Secretary of the Zhejiang Provincial Energy Group, on Xi's exploration of new strategies for energy security when he was in Zhejiang
Mortality, morbidity, and risk factors in China and its provinces, 1990–2017: a systematic analysis for the Global Burden of Disease Study 2017 - The Lancet We used the methods in GBD 2017 to analyse health patterns in the 34 province-level administrative units in China from 1990 to 2017.