Liu He Coming to DC; Kim Flies To Dalian To Meet Xi; Trump-Kim Summit To Be Delayed?; Sen. Rubio On Warpath Against CCP Interference; Sun Zhengcai Gets Life; Tech Wars

Happy Tuesday, commentary embedded below. Thanks for reading.

The Essential Eight

1. Liu He Coming To DC

It is good news that he is coming, as yesterday's newsletter predicted. I still think the structural issues around the Chinese economic model and technology development are unresolvable, but hope I am wrong. Perhaps enough will be conceded on both sides to avoid tit for tat tariffs in the near-term. It may be hard though for either side to concede much given that both sets of demands from last week were leaked. My understanding is that the US government believes the Chinese leaked them.

Chinese Vice Premier Liu He to visit Washington next week to talk trade: White House - CGTN:

Chinese Vice Premier Liu He will visit Washington next week to "continue the discussions" with U.S. President Donald Trump's economic team, the White House said on Monday, after the two countries agreed to set up a work mechanism to keep close communication in Beijing last week.

"We are working on something that we think will be great for everybody," said White House spokeswoman Sarah Sanders at a regular White House press briefing.

Update: China’s Exports, Imports Accelerate as Surplus Grows with U.S._Caixin:

China logged a surplus of $22.2 billion against the United States in April, according to Caixin’s calculation based on customs figures. That widened from a surplus of $15.4 billion in the previous month, marking its first month-on-month rise since November.

China ramps up checks on U.S. pork imports in potentially costly slowdown | Reuters:

The stepped-up checks have even hit China’s WH Group Ltd (0288.HK), the world’s largest pork company and owner of Smithfield Foods in the U.S., and come amid increasing scrutiny of other U.S. farm goods, including fruit and logs.

Ports are opening and inspecting every cargo that arrives, said Luis Chein, a director at WH Group, China’s top importer of U.S. pork.

2. Kim Jong Un Flies To Dalian To Meet Xi Jinping

Is the Trump-Kim summit now at risk of at least a delay because of the US conditions around complete, verifiable and irreversible denuclearization (CVID), and the maintaining of sanctions until that is achieved? Did Kim go meet Xi to brief him on this and did Xi bring it up on his call with Trump this morning? The reference to phased and synchronous measures 分阶段、同步性的措施 may be a tell. 

My guess: Don't hold your breath for a US-North Korea summit in the next few weeks. But Kim did show he can fly, so maybe this was also a useful test of the plane before an eventual meeting with Trump.

And if Kim were really willing and able to squeeze out Beijing why would he make the pilgrimage to China yet again? 



Xi Jinping, Kim Jong Un hold talks in Dalian - Xinhua:

Speaking highly of Xi's profound vision and extraordinary wisdom, Kim expressed his gratitude to China for its long-standing and significant contribution to realizing denuclearization on the Korean Peninsula and safeguarding peace and stability in the region. It has been the DPRK's consistent and clear stand to achieve denuclearization of the Korean Peninsula, Kim said. As long as relevant parties abolish their hostile policies and remove security threats against the DPRK, there is no need for the DPRK to be a nuclear state and denuclearization can be realized, he said.

Kim expressed the hope that the DPRK and the United States would build mutual trust through dialogue and relevant sides would take phased and synchronous measures in a responsible manner so as to comprehensively advance the political settlement of the Korean Peninsula issue and eventually achieve denuclearization and lasting peace on the peninsula.

Some video of the meetings, in English-Xi, Kim meet for 2nd time amid fast developments on Korean Peninsula - CGTN 

Xi Jinping, Kim Jong Un hold talks in Dalian - Xinhua:

Wang Huning, member of the Standing Committee of the Political Bureau of the CPC Central Committee and member of the Secretariat of the CPC Central Committee, attended related activities...

Comrade Chairman made a special trip to China to meet me again just after 40-odd days, Xi said, at a crucial time when the Korean Peninsula situation is undergoing profound and complex changes. This embodies the great importance that Comrade Chairman and the WPK Central Committee have attached to the relations between the two parties and the two countries, and to their strategic communication. "I speak highly of it," Xi said...

For his part, Kim said both the DPRK-China friendship and the Korean Peninsula situation have undergone meaningful progress since March this year. "These are the positive outcomes of the historic meeting between me and Comrade General Secretary," he said.

At a crucial time when the regional situation is developing rapidly, Kim said he came to China again to meet with General Secretary and inform him of the situation, hoping to strengthen strategic communication and cooperation with China, deepen DPRK-China friendship, and promote regional peace and stability.

Kim Jong-un Returns to China, Bolstering Ties With Xi Jinping - The New York Times:

Chinese analysts had speculated that Mr. Kim went to Dalian to ask Mr. Xi for sanctions relief. At the urging of the Trump administration, China grudgingly voted last year for United Nations sanctions that have hurt the North’s economy, draining its reserves of foreign currency.

Mr. Kim recently met Mr. Moon, who is eager to help the North with economic aid. Their meeting also gave the North Korean leader new leverage with Mr. Xi. In essence, Mr. Kim can say that if China does not help ease the North’s economic pain, South Korea will.

Kim Jong-un confirmed as Xi Jinping's 'mystery guest' in surprise northern China summit | South China Morning Post:

Xi would also use the trip to Liaoning province to oversee the first sea trial of China’s first domestically built aircraft carrier, two independent sources told the South China Morning Post.

A third source said a plane carrying high-ranking North Korean officials had landed in the city. State-run CCTV confirmed on Tuesday that Xi had held talks with Kim.

Kim Jong Un Is Watching Trump's Iran Decision, Chinese Envoy Says - Bloomberg:

North Korean leader Kim Jong Un will be eyeing closely what Donald Trump decides on the Iran nuclear deal, with potential repercussions for their upcoming summit, according to China’s former ambassador to Pyongyang.

“The DPRK is watching,” said Liu Xiaoming, China’s current envoy to the U.K., who served in the Democratic People’s Republic of Korea from 2006-2009. “If you walk away from a deal agreed to by your previous administration, it will set a bad example.”

3. Trump-Xi Call

Readout of President Donald J. Trump’s Call with President Xi Jinping of China

President Donald J. Trump spoke today with President Xi Jinping of China. The two leaders discussed issues of mutual interest, including recent developments on the Korean Peninsula and President Xi’s meeting today with North Korean leader Kim Jong Un. President Trump and President Xi agreed on the importance of continued implementation of sanctions on North Korea until it permanently dismantles its nuclear and missile programs. President Trump affirmed his commitment to ensuring that the trade and investment relationship between the United States and China is balanced and benefits American businesses and workers.


Xinhua and CCTV have slightly different readouts of the Trump-Xi call. This one from CCTV also emphasizes "phased" actions for denuclearization of the Korean peninsula, among other differences


This one from Xinhua does not. Wonder why:


4. US-China Tech War

US-China tech wars threaten global sector disruption - FT $$:

The resulting conflict, say analysts, strikes at the heart of China’s ambitions and is likely to curb revenues as well as disrupt supply chains at foreign multinationals, many of which see the country as a key market. But it is also prompting a rethink at the corporate level in China, with tech companies looking to develop their own chips.

“The complexity of this issue is mind-boggling because the electronics value chains are much more complex and globally integrated than they were in the past,” said Christopher Thomas, partner in McKinsey’s Beijing practice.

But what an opportunity for McKinsey and other consulting firms to help create supply chain disruption mitigation strategies…

Mattis urges anti-China measure to be included in U.S. defense bill | Reuters:

In the letter dated Friday, which was seen by Reuters and has not been previously reported, Mattis urged the Republican chairmen and top Democrats on the Armed Services committees in the House and the Senate to include in the National Defense Authorization Act (NDAA) measures that would broaden the powers of the Committee on Foreign Investment in the United States.

Mattis said in the letter that he supported foreign investment but added: “DOD (the Department of Defense) also believes we must be clear-eyed that our adversaries have studied the weaknesses of our current laws and regulations and are exploiting them today.”

The Revolution China Intends to Lead | China Media Project:

But if we understand how the Chinese Communist Party perceives the need to secure the technologies of the future through the lens of the past, we can better understand just how much it has invested in the idea of Chinese dominance — and how difficult it likely will be to arrive at a compromise of the kind Trump’s negotiators are hoping for.

The following text is a very partial translation of a piece appearing yesterday on page 11 in China’s Guangming Daily, a newspaper published by the Central Propaganda Department. The piece, which was also posted at People’s Daily Online and other sites, was written by Zhi Zhenfeng (支振锋), a researcher in the Socialism With Chinese Characteristics Theoretical System Research Center of the Chinese Academy of Social Sciences...

The basic sense in Zhi Zhenfeng’s piece, which mirrors much official writing on new technologies, is that China, while globally pre-eminent in the agrarian phase of human history, missed out on the industrial revolution and therefore lost its rightful position in the world.

China — or so goes the story — will not make the same mistake again, as the world is on the brink of the next great revolution.

5. US-China WTO Battle

U.S. says something 'terribly wrong' at WTO, attacks China | Reuters:

Addressing the WTO’s General Council for the first time, Dennis Shea said the WTO’s rules had substantial value and the rules had “generally contributed” to global economic stability...

Shea said he was “perplexed” by China’s assertion that it was a victim.

“Mr. Chairman, we have now entered the realm of Alice in Wonderland. White is black. Up is down,” he said.

“It is amazing to watch a country that is the world’s most protectionist, mercantilist economy position itself as the self-proclaimed defender of free trade and the global trading system. The WTO must avoid falling down this rabbit hole into a fantasy world, lest it lose all credibility.”

The WTO must not shield countries that undermined the global trading system, he said.

“If the WTO wishes to remain relevant, it must – with urgency - confront the havoc created by China’s state capitalism.”

U.S. holds hostage the nomination to WTO appellate body: Chinese diplomat - Xinhua:

The United States abuses the decision-making mechanism of consensus of the World Trade Organization (WTO), by holding hostage the selection process of new members to the WTO appellate body, said Chinese Ambassador to the WTO, Zhang Xiangchen, in a meeting here on Tuesday.

6. Life Sentence For Sun Zhengcai

Xi Jinping is President For Life, Sun Zhengcai is Prisoner for life. Don’t cross the Boss…

Sun Zhengcai gets life sentence for bribery - Global Times

Sun Zhengcai, former secretary of the Chongqing Municipal Committee of the Communist Party of China (CPC), has been sentenced to life in prison for taking bribes of over 170 million yuan (26.7 million US dollars).

The sentence was announced Tuesday by the First Intermediate People's Court of Tianjin Municipality.

He was deprived of his political rights for life, and all his personal property was confiscated. ..

The court found that between 2002 and 2017, Sun had taken advantage of various posts to provide help for certain units and individuals in project bidding, project approval, enterprise operation and personnel promotion and arrangement, and accepted money and property worth over 170 million yuan, either by himself or with "certain affiliated persons."

During that period, his posts included CPC chief of Shunyi District in Beijing, Standing Committee member and secretary general of the CPC Beijing Municipal Committee, agriculture minister, secretary of the CPC Jilin Provincial Committee, Political Bureau member of the CPC Central Committee and Party chief of Chongqing Municipality.

CCTV Evening News on the sentence, video from inside the courtroom 孙政才受贿案一审公开宣判:


Sun could have faced a more severe punishment but was given leniency because he showed remorse and provided evidence of crimes the investigators were not aware of...

7. Sen. Rubio Stepping Up Fight Against CCP Influence

Rubio Questions D.C. Panel on China Influence – Foreign Policy:

The May 9 panel is slated to discuss Chinese political interference activities conducted by the United Front Work Department, a Chinese Communist Party agency designed to shape the political discourse in foreign countries to more closely align with the party’s interests. The panel description states that “the ‘influence’ issue is often poorly defined, exaggerated, and abused.”

But the event notice fails to mention that one of the panelists, Wang Huiyao, holds an official position in the United Front Work Department itself. It merely describes Wang as the founder and president of the Center for China and Globalization, a Beijing-based think tank.

Rubio, who is chairman of the Congressional-Executive Commission on China, asked the Wilson Center if it was aware of Wang’s affiliation with the department and requested that the center disclose that affiliation publicly…

The Wilson Center tells FP that the center is aware of Wang’s affiliation and that it would be disclosed during the panel.

“A lot of people are rightly worried about Chinese Communist Party influence on American communities and institutions,” says Robert Daly, director of the Wilson Center’s Kissinger Institute, in an interview with FP. Wang was invited to sit on the panel because “you have to know what Chinese government views are if you are going to respond to them.”

Here is the event, now without Dr. Wang. 

Dr. Wang is on quite a US tour. He spoke last week at the Committee of 100 Annual Gala and is still slated to participate at the CSIS conference "Forty Years of US-China Relations" on Friday in DC.

I think his participation in these events is fine so long as his bio/introduction properly disclose all of his affiliations. The audience can then decide for themselves what they think of his comments.

Here is part of his official bio on the web site of his Center for China & Globalization 全球化智库:

Dr. Wang currently is also the Vice Chairman of China Association for International Economic Cooperation (CAIEC) under Ministry of Commerce (MOFCOM); Vice Chairman of China Talent Society under Ministry of Human Resources and Social Security; Expert Committee Member of China State Council Overseas Chinese Office; Vice Chairman of China Western (Overseas) Returned Scholars Association, Vice Chair of Expert Committee of All-China Federation of Returned Overseas Chinese;. In addition, he is also Dean of Institute of Development Studies at Southwestern University of Finance and Economics.

Dr. Wang was a Senior Fellow at Harvard Kennedy School and a Visiting Fellow at Brookings Institution. He has taught at Peking University, Tsinghua University, University of Western Ontario. He is a Policy Fellow of IZA and was a Senior Fellow at Asia Pacific Foundation of Canada. Dr. Wang sits on the Migration Advisory Board of International Organization of Migration (IOM) of the United Nation and is an advisory expert for the International Labor Organization(ILO) (CCG Report: Attracting skilled international migrants to China) and World Bank. Dr. Wang is also a member of Yale University Asia Development Council, a member of advisory board of Richard Ivey School of Business in Asia, an advisor for Laureate Education Group, a steering committee member of Metropolis International Network. He is a well sought after speaker at different international forums and frequently interviewed by influential global media

According to the Chinese version of his bio he is a member of the central committee of the Jiusan Society (one of the eight official political parties in the PRC; my grandfather-in-law was on its standing committee back in the day.):


I am all for pushing on Chinese Communist Party interference in the US, but is Senator Rubio perhaps overdoing it a bit lately?

Just a reminder that a President Clinton would likely been at least as hawkish on China as President Trump--Hillary Clinton warns of Chinese influence in New Zealand | Newshub:

She said alarm bells of Chinese influence here are ringing and the information war is raging.

"Experts are sounding the alarm about Chinese efforts to gain political power and influence policy decisions. And it's just getting started," she said.

"Anne-Marie Brady of the University of Canterbury has rightly called this a new global battle. And it is just getting started. And we need to take it seriously."

Chinese media is already attacking Clinton for her comments--希拉里又鼓吹中国威胁论 被她表扬的学者竟这么黑中国_凤凰资讯:



And the Confucius Institutes won't get a break until they are in strip malls and not academic institutions--George Mason University's Confucius Institute: A Letter to GMU's President | National Association of Scholars:

NAS president Peter Wood sent the following letter to the president of George Mason University, who is investigating all gifts to the university after it came to light that some gifts from the Koch Foundation had strings attached. GMU's Confucius Institute has many more strings attached, and we would like to bring this to the president's attention

8. Stephen Colbert Weighs In On China's Social Credit Scores

Beijing will hate this, starting with the map at the open...

Business, Economy, Finance And Trade

Big four banks raise first-home mortgage rates in Beijing - ECNS All four lenders—Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of China—started charging no less than 110 percent of the central bank's long-term benchmark rate.

Two More Mainland-Listed Firms Default on Bonds_Caixin Shenzhen-listed Kaidi Ecological and Environmental Technology Co. Ltd., a biomass power generation company, defaulted on 657 million yuan in bonds, while Shanghai-listed China Security & Fire Co., an electronic security products provider, defaulted on 91 million yuan in debt in the past week. The two companies still have a combined 3.9 billion yuan in outstanding bonds.

Former Tiger Global Partner Jason Tan Joins Jeneration Capital As CIO – China Money Network As CIO, Tan is responsible for managing Jeneration Capital’s overall portfolio and strategy. Prior to joining Jeneration Capital, Tan was a global partner at Tiger Global Management, a technology and consumer-focused global investment management firm.

Dimon Lays Out 100-Year China Vision With Trade Spat on Horizon - Bloomberg Jamie Dimon laid out his long-term vision for JPMorgan Chase & Co.’s expansion in China, while expressing hopes that mounting trade tensions won’t derail the plans. “We’re building here for a hundred years,” Dimon, chief executive officer of the largest U.S. bank, said Tuesday in a Bloomberg Television interview in Beijing. “One day you’ll probably have a tower here that looks like the tower we have in New York.”


Politics, Law And Ideology

Top Finance Official Being Probed for Corruption_Caixin China’s longest-serving finance vice minister is under investigation for alleged corruption, two years after rumors of his misconduct surfaced. Zhang Shaochun is being probed for “serious violations of party discipline and law” — a common euphemism for bribery, embezzlement and influence peddling — according to a joint statement released by China’s two top anti-graft bodies, the Central Commission for Discipline Inspection (CCDI) and the National Supervisory Commission.

人民日报学习贯彻习近平总书记纪念马克思诞辰200周年大会讲话精神系列评论_共产党员网 People's Daily commentaries on XI's speech at the Marx 200 birthday party

Xi's Huzhou trip: The birth of 'Two Mountains' theory | In August 2005, Xi Jinping, then-Party chief of Zhejiang province, visited Yucun village in Anji, Huzhou city. Xi hailed the village's move to close mines that pollute and adopt ecological tourism by taking advantage of natural scenic views. "We should never follow outdated modes of development. In fact, clear waters and lush mountains themselves mean gold," he said. It was during this trip Xi proposed the important "Two Mountains" theory, calling clear waters and lush mountains invaluable assets comparable to the gold and silver of legend.


Foreign and Military Affairs

China, Indonesia leaders hold fruitful talks - Xinhua The statements were made at a joint press conference attended by Li and Indonesian President Joko Widodo, after witnessing the signing of cooperation documents. The two sides agreed to stick to peaceful development, safeguard regional and global peace and stability based on widely-accepted international laws and rules. The two leaders agreed that the comprehensive strategic partnership between the two countries is mutually beneficial and will produce win-win results. Such a partnership is significant for peaceful and stable development of the region and the whole world at large.

Chinese premier arrives in Tokyo for official visit, China-Japan-ROK leaders' meeting - Xinhua Li's visit to Japan is the first by a Chinese premier in eight years, coinciding with the 40th anniversary this year of the signing of the China-Japan Treaty of Peace and Friendship. Li will attend the 7th China-Japan-ROK leaders' meeting on Wednesday, together with Japanese Prime Minister Shinzo Abe and ROK President Moon Jae-in. This year also marks the 10th anniversary of the China-Japan-ROK trilateral meeting outside the framework of the Association of Southeast Asian Nations.

S.China Sea ‘a must-pass region’ in submersible’s 2020 expedition: scientist - Global Times The deep-sea manned submersible, named after a mythical dragon, is scheduled to start year-long global expedition in July 2020, Ding Zhongjun, deputy chief engineer at the National Deep Sea Center in Qingdao, East China's Shandong Province, told the Global Times on Tuesday. The submersible will cover the Pacific, Indian and Atlantic oceans, while the South China Sea region, which has a significant role in China's deep sea research, would be a must-pass region during the expedition, Ding said. The South China Sea mission is expected to focus on exploring and sampling natural resources in the region, as well as on environmental protection in the deep sea, Ding added.


Tech And Media

World Robot Conference to be held in Beijing - Xinhua The 2018 World Robot Conference will be held in Beijing from Aug. 15 to 19, authorities said Tuesday. The event will see more than 12,000 competing teams from more than 10 countries and regions take part. More than 50,000 participants are expected to attend.

China's misses on profits as logistics crops margins | Reuters is investing heavily in logistics and offline retail, squaring off against Alibaba Group Holding Ltd (BABA.N), in a costly battle as China’s urban e-commerce market is showing signs of saturation. The company reported a 33 percent increase in quarterly revenue, its slowest quarterly revenue growth since listing, indicating China’s second-largest e-commerce firm is feeling the heat from mounting competition as it looks to new businesses and technology investments to drive growth.

Netflix Buys China’s Disputed Box Office Champion ‘Us And Them’ – Variety Netflix has picked up multi-territory rights to “Us and Them” a Chinese romance that is currently topping the China box office. The film is the directorial debut of Taiwanese actress Rene Liu. It features male heartthrob Jing Boran and rising female star Zhou Dongyu in a story of strangers who meet on a train as they head home for the holidays.


Society, Art, Sports, Culture And History

The Significance of Crane Operators Across China Going on Strike « China Change The letter caused an uproar in the WeChat group, and when shared around came along with expressions of concern for the safety of the crane operators. As expected, the following afternoon, one of the workers who posted the message said: “Terrifying. Because I forwarded a post about a worker strike on May 1 yesterday, the Changsha Ministry of State Security collected all possible information about me within a day, including my address, telephone number, work unit and more. Two hours ago they came to my workplace and demanded that I come to the police station and explain myself.” The worker promised to the MSS agents that he would not participate in any of the activities and was then allowed to leave, though he’s now worried that his employer is going to fire him because of it.


Energy, Environment, Science And Health

China sends supervisors to inspect urban water pollution control - Xinhua Chinese authorities on Monday launched a campaign against water pollution in cities, with inspection teams sent to provincial regions to check on progress in urban water pollution control. The first batch of teams have been sent to inspect 20 cities in Guangdong, Guangxi, Hainan, Shanghai, Jiangsu, Anhui, Hunan and Hubei, focusing on "black odorous water," or sewage and garbage discharge issues, said the Ministry of Ecology and Environment.

Paulson Institute launches Green Finance Center – Paulson Institute The Paulson Institute today announced the launch of a new Green Finance Center, marking a significant step forward in its efforts to promote sustainable economic growth and environmental protection in China and the United States. Led by Deborah Lehr, Vice Chairman of the Paulson Institute, the Green Finance Center will promote market-based solutions to support the development of a robust green finance market in China.

With Huadian Deal, Bangladesh Shows It’s Fired Up About Coal_Caixin A subsidiary of power giant China Huadian Corp. has signed a deal to build a 1,320-megawatt (MW) coal-fired power station in Bangladesh, as China aims to help its energy-hungry neighbors build up their coal-fired capacity while shedding its own. China Huadian Hong Kong Co. Ltd. and Bangladesh Power Development Board signed an agreement on Sunday to form a new joint venture that will be in charge of constructing the plant, according to Bangladesh’s national news agency.