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There appears to be a misreading of the US Department of Commerce’s decision to grant Huawei a license to buy some U.S. goods until Aug. 19. This is not a "reprieve for Huawei", this is a reprieve for operators in the US and other countries who rely on Huawei equipment and need more time to adjust.
The propaganda organs have not yet released the fully packaged report on Xi’s Jiangxi inspection tour, but the snippets out today give more insight on at least some of the key messages, that China and the Communist Party can not forget its revolutionary past, its martyrs, the struggles and sacrifices of the past, and the struggles and sacrifices still to come as China approaches its inevitable National Rejuvenation that can not be stopped by any foreign power.
These inspection tours are usually planned well in advance and so it may have been originally scheduled to give propaganda momentum to the recently announced commemoration activities for the upcoming 70th anniversary founding of the PRC, but clearly it has its symbolic value in the intensifying struggle with the US as well.
The breakdown in the trade talks and the Huawei measures are just another reminder that the trajectory of the US-China relationship has changed fundamentally, and even if there is a happy Trump-Xi call or meeting and some sort of trade deal, the strategic shifts on both sides are likely permanent.
Last May in the wake of the ZTE sanctions and then reversal I wrote:
the vulnerability to US technology was made crystal clear to everyone in China and has spurred even more focus on and popular support for ending reliance on US technology.
Perhaps more relevant, I wrote in August after a visit to China that:
While we have no public idea what if anything happened at Beidaihe, I heard consistently that the key theme of any discussions about US-China relations that may have occurred was whether it made sense to find a way to make concessions to the US without looking weak, or whether the trade pressure is just one piece of a multi-dimensional strategy to “thwart China’s rise”. Before you dismiss the idea that President Trump could be strategic remember that there are some very knowledgeable, “hawkish” and experienced “China hands” working in key parts of the bureaucracy. And even if there is not one the Chinese side will always lean towards embracing the idea of a broader conspiracy and strategy.
I believe that Xi has decided the US is intent on keeping China down, and while there may be some exploratory efforts to see if a palatable deal exists that mitigates some of the worst of the trade tensions for as long as possible, I do not expect the PRC side to make concessions approaching those demanded by the US in May, even if they are now being slightly watered down. Assuming President Trump holds firm, the tariffs and other measures will likely only increase in intensity over the coming months, perhaps until one or both sides have felt enough pain to reconsider.
Outside the trade issues I see little reason for optimism. If Xi and his team have come to believe the real goal of the US is to keep China down across all dimensions then we should expect much more friction and competition.
While Xi and the Party would prefer to defer intensifying US-China competition as long as possible, they have been preparing.
I have been heating a rumor that last year Xi instructed senior officials to study Mao's writings on dealing with America. If you were to construct such a syllabus, which of Mao's writings would you put on it? The rumor may be false, but his writings still have resonance for Xi and many of his cadres, and perhaps relevance for China’s approach to the US.
Thanks for reading.
The Essential Eight
Earlier this year, the state-run People’s Publishing House printed “Rereading On Protracted War,” an updated collection of speeches that Mao gave in 1938 amid a Japanese invasion that would take eight years for China to repel. It appeared to be a sign that authorities were preparing the people for a long and difficult trade war.
President Donald Trump said he was “very happy” with the trade war and that China wouldn’t become the world’s top superpower under his watch.
“We’re taking in billions of dollars,” Trump told Fox News Channel’s Steve Hilton when asked about the end game on the trade war. “China is obviously not doing well like us.”
Perhaps nothing captures the growing anti-U.S. sentiment in China better than a song about the trade war that is going viral in Beijing: “If the perpetrator wants to fight, we will beat him out of his wits.”
In a word, China’s achievements are the precious fruit of the persistent and painstaking hard work of the Chinese people, and the people who make lies about it will finally come to no good. - Zhong Sheng
According to the Footwear Distributors & Retailers of America, which released the letter today, each U.S. family would have to spend an extra $131.93 on footwear annually should the threatened tariff increase take effect. It added that consumers overall would pay $7 billion in additional costs each year for shoes.
Others in China point to the country’s own barriers against competitors as a strategy that was going to provoke retaliation sooner or later. At some point, the United States was bound to use reciprocity in dealing with a closed Chinese internet market. One popular blog post explained that reciprocity has been translated into “mutual benefit” in Chinese, which explains why many in China didn’t understand that the idea could be used in retaliation.
Another popular blog post drives the point even more clearly.
“You’ve been opposing the U.S. for many years,” said the headline. “You should be long prepared that the U.S. will oppose you one day.”
The disruption, which started last year, has affected hundreds of jobs across the industry at companies including Intel Corp, Qualcomm Inc. and Globalfoundries Inc., impeding their ability to hire Chinese employees or move existing employees to key projects in the U.S., these people said. It is significant in part because Chinese nationals account for a large share of non-U.S. citizens hired for such technical roles, where the talent supply domestically is often scarce…
Approvals for so-called deemed-export licenses once took a matter of weeks, whereas a wait of six to eight months isn’t unusual today, a person familiar with the process said.
100 percent — it’s a disgrace,” Mr. Trump said in an interview with Steve Hilton, a Fox News host, when asked if the Biden family’s supposed financial ties with China should be investigated. “And then he says China’s not a competitor of ours,” he added. “China is a massive competitor of ours. They want to take over the world.”
On Monday, the Commerce Department granted Huawei a license to buy U.S. goods until Aug. 19 to maintain existing telecoms networks and provide software updates to Huawei smartphones, a move intended to give telecom operators that rely on Huawei time to make other arrangements.
Huawei is still prohibited from buying American-made hardware and software to make new products without further, hard-to-obtain licenses.
Huawei founder Ren Zhengfei on Tuesday told Chinese state media that the reprieve bore little meaning for the company as it had been making preparations for such a scenario.
“It is wrong to say that purchasing Huawei’s products equals being patriotic … don’t link that with politics,” said Ren Zhengfei in a group interview in Shenzhen on Monday with multiple Chinese media, including Caixin. “At Huawei, we won’t resort to nationalism and populism, because that is harmful to our country,” he said...
Ren said today that Google has been trying to persuade the U.S. government to “solve the problem,” and also said his company was working on a “rescue solution,” but did not elaborate.
Highlights of remarks by Ren Zhengfei, founder and CEO of Huawei
The US government's 90-day extension "doesn't mean much".
We can make chips as good as those made by US companies, but it does not mean that we will not buy chips from them.
Huawei's 5G plan will not be affected by the US ban.
Don't fan nationalist sentiment.
Tuesday CCTV Evening News gives the Ren Zhengfei interview nearly 2:30, report starts out with Ren's comments thanking US firms for all their help over the last 30 years - [视频]华为创始人接受媒体采访_CCTV
Huawei Technologies founder Ren Zhengfei said he foresaw the clash with the US government, saying it was a matter of time before the Chinese telecommunications equipment maker threatened US interests and attracted retaliation.
“We sacrificed [the interests of] individuals and families for the sake of an ideal, to stand at the top of the world,” Ren said in interview with Chinese state media on Tuesday. “For this ideal, there will be conflict with the United States sooner or later.”..
Ren said the US ban has no impact on Huawei’s 5G plans and that its rivals cannot catch up with the company for at least two to three years, adding that US politicians have underestimated the company.
"This is wrong behavior, so there will be a necessary response," Zhang Ming, China’s envoy to the EU, said in an interview in Brussels on Monday. "Chinese companies’ legitimate rights and interests are being undermined, so the Chinese government will not sit idly by."..
He also emphasized the longevity of Chinese civilization.
“We have been holding on for 5,000 years,” Zhang said. “Why not another 5,000 years?”
Zhao Lijian, deputy chief of mission at the Chinese embassy in Islamabad, tweeted a picture Tuesday of a carved-up apple. “It has been just revealed why @realDonaldTrump hated a private company from China so much,” he joked. “Look at the logo of Huawei. It has cut APPLE into pieces...”
Huawei BBS, open to the public - 游客门户_心声社区
Huawei's Yu Chengdong says the HUawi mobile OS will be out this Fall at the earliest, will be compatible with existing Android apps - 余承东：华为自主操作系统最快今年秋天面世，兼容安卓web应用
“We have made some achievements in the industries that face the prospect of being strangled [by other countries],” Wu said, adding that the municipal authority will soon announce the details in a document called Shanghai Programme.
3. Australia sparked the Huawei 5G fears?
Washington is widely seen as having taken the initiative in the global campaign against Huawei Technologies Co Ltd, a tech juggernaut that in the three decades since its founding has become a pillar of Beijing’s bid to expand its global influence. Yet Reuters interviews with more than two dozen current and former Western officials show it was the Australians who led the way in pressing for action on 5G; that the United States was initially slow to act; and that Britain and other European countries are caught between security concerns and the competitive prices offered by Huawei.
The Australians had long harbored misgivings about Huawei in existing networks, but the 5G war game was a turning point. About six months after the simulation began, the Australian government effectively banned Huawei, the world’s largest maker of telecom networking gear, from any involvement in its 5G plans. An Australian government spokeswoman declined to comment on the war game.
After the Australians shared their findings with U.S. leaders, other countries, including the United States, moved to restrict Huawei...
The Huawei conflict isn’t only about U.S.-China superpower rivalry: The activities of Meng and Huawei were under scrutiny by U.S. authorities long before Trump began a trade war with China, according to interviews with people familiar with those probes.
4. More on Xi’s Jiangxi inspection tour
“We are here at the starting point of the Long March to remember the time when the Red Army began its journey,” Xi told cheering crowds on Monday, in footage posted on state broadcaster CCTV’s website on Tuesday. “We are now embarking on a new Long March, and we must start all over again!”
visited Tantou Village in Yudu County, Ganzhou City, during an inspection tour of east China's Jiangxi Province on Monday afternoon.
At the home of veteran Sun Guanfa, a descendant of a Red Army martyr, Xi chatted with Sun's family and local officials, and learned in detail about the production developments and life improvements of people in the old revolutionary base.
Xi visits the Nanchang Army Academy - 习近平视察陆军步兵学院并发表重要讲话 - 中华人民共和国国防部
5. More on rare earths
More important than China’s mining of the elements was the ability of its factories to turn rare earth into useful intermediate materials, including metals and magnets, via the environmentally damaging processes that other countries shunned. Other Chinese companies sprang up to apply the metals and magnets to more sophisticated items like micromotors, further entrenching China’s rare-earth ecosystem...
A company Chinese President Xi visited, JL MAG Rare-Earth Co., is located in the Jiangxi city of Ganzhou, which boasts half the world’s so-called heavy rare earths. JL Mag is a significant producer of magnets using rare-earth elements “and sells a lot of magnets into the U.S.A. and Europe,” according to Gareth Hatch, managing director of U.K. consulting firm Strategic Materials Advisors Ltd.
Wu also said that recently China has cut rare-earth imports from Myanmar, and the decreasing supply has meant a rise in prices, which is driving relevant shares up.
At a time when China and the US are engaged in trade and technology battles, some have suggested that China can use rare earths as leverage in the trade war, limiting exports to the US.
Wu agreed that rare earths could be used as a card for China to talk with the US, as so far the US is reliant upon China for importing and processing rare-earth products, which are important elements in making military defense products such as tank night vision goggles and aviation gyroscopes.
JL Mag makes a type of magnets used in power steering, brakes and windmills, with most of its export market in Europe. Globally, production is dominated by Hitachi of Japan but competitors such as JL Mag are gaining market share. After Mr Xi's visit, its stock surged by 10 per cent, the daily limit.
This March article by James Kennedy is getting play inside China, translated as 中国稀土加工：扼住美国命运的咽喉 - Viewpoint: China Solidifies Dominance in Rare Earth Processing - National Defense:
Today, the disparity between China and the United States continues in part because the Pentagon, government agencies, and the finance and mining industries measure the extraction of rare earths at the mining and oxide production level. Hundreds of rare earth mining projects outside of China have been initiated, giving the erroneous impression that Western rare earth dependence on China may be declining. However, most ultimately fail.
Out of more than 400 rare earth startups publicly listed in 2012, less than five reached production. Of those, only two reached significant volumes. Of those two, one is bankrupt and resurrected with Chinese financing and the other lost its operating permit for a short period.
During this time, China has taken significant equity and debt positions in many of these failed or faltering projects and will control them if they begin production.
China's monopoly on rare earths is also not what it seems. While it plays a major role in current global trade, this is largely due to relatively lax environmental regulations in the past which made extraction and refinement in China cheaper and easier than other countries. That advantage, if it could be described as such, has shrunk in recent years as Beijing has cracked down on domestic companies and illegal extractors.
Comment: I am hearing mixed messaging about how vulnerable the US really is to a sudden ban on rare earths and rare earth manufacturing outputs to the US. If the US is still seriously vulnerable then it is another failure of policymakers vis a vis China, and just as China has learned the lesson from ZTE and now Huawei that it can not rely Huawei, so should the US about relying on anything from China, in this New Era of US-China relations.
6. PRC buying Ukrainian military tech
Motor Sich, dubbed the “Czar of Engines” in the Chinese media, has what Beijing wants: It can supply warplane engines and the know-how to one day possibly make a Chinese-built version.
The Chinese, in turn, have what Motor Sich wants: reliable buyers.
The company lost its biggest market — supplying engines for military helicopters and other aircraft in Russia — after war broke out in eastern Ukraine in 2014. Now it sells mainly to China...
“What we care about right now is the following: Is America ready to buy our goods? No. Period,” said Gennadiy Chyzhykov, president of the Ukrainian Chamber of Commerce and Industry. “China does buy our goods.” ...
He said he hears frequently from Ukrainian government officials that the United States is unhappy with his dealings with China. His response: “Then how about the State Department gives us work?”
7. US worries about Chinese drones
Chinese-made drones may be sending sensitive flight data to their manufacturers in China, where it can be accessed by the government there, the US Department of Homeland Security warned in an alert issued Monday obtained by CNN.
The drones are a "potential risk to an organization's information," the alert from DHS's Cybersecurity and Infrastructure Security Agency states. The products "contain components that can compromise your data and share your information on a server accessed beyond the company itself."
The report does not name any specific manufacturers, but nearly 80% of the drones used in the US and Canada come from DJI, which is headquartered in Shenzhen, China
Comment: DJI has been trying to ramp up its work in DC, guess it needs to do more. At least in the short-term the increase in US-China tensions should be great for lobbyists/lawyers/communications professionals in DC...
"We provide all our customers full and complete control over how their data is collected, stored and transmitted. For government and critical infrastructure customers that require additional assurances, we provide drones that do not transfer data to DJI or via the internet, and our customers can enable all the security steps DHS recommends," the Shenzhen-based company said.
Research by a born-again Christian anthropologist working alone from a cramped desk in this German suburb thrust China and the West into one of their biggest clashes over human rights in decades.
Doggedly hunting down data in obscure corners of the Chinese internet, Adrian Zenz revealed a security buildup in China’s remote Xinjiang region and illuminated the mass detention and policing of Turkic Muslims that followed. His research showed how China spent billions of dollars building internment camps and high-tech surveillance networks in Xinjiang, and recruited police officers to run them...
The move was taken amid the strengthening development phase of Xinjiang, the core area of Belt and Road Initiative, and talent cultivation is the foundation of its economic development.
Also, it is a follow-up to the Comprehensive Implementation of the New Enterprise Apprenticeship System, which was jointly announced by China's Ministry of Human Resources and Social Security (MOHRSS) and Ministry of Finance in October 2018.
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Business, Economy and Trade
China, EU aviation regulators sign landmark deal, paving road for home-made C919 - Global Times "They are framework agreements and more details are expected to come soon," said Diao Weimin, an international aviation law expert and a professor at the Civil Aviation Management Institute of China. Diao told the Global Times on Monday the deal is related to the airworthiness certification of China's home-built C919. "At least it can pave way for C919's entering the EU market in terms of normalization," said Diao.
Xinhua Headlines: Milestone deal on civil aviation to enhance China-EU cooperation - Xinhua The move, which came amid uncertainties worldwide furthered by U.S. unilateralism and trade protectionism, reaffirms the EU commitment to safeguarding openness, free trade and multilateralism while enriching the content of the China-EU comprehensive strategic partnership.
Renminbi volumes surge as speculators take on People’s Bank | Financial Times $$ In the week ending May 10, trading volumes in the offshore renminbi were 120 per cent higher than averages over the previous month, according to London-based EBS, one of the key systems that banks use to deal with each other. The shift comes as speculative investors square off with China’s central bank over whether the renminbi will sink to Rmb7 against the dollar, a low that has not been broken since 2008.
Saudi Oil Colossus Wants to Shift Its China Business Downstream - Caixin A flurry of state visits has helped Saudi Arabia nudge ahead in its long-running tussle with Russia to be China’s main supplier of crude oil this year. Yet the kingdom has larger ambitions. It looks to take advantage of China’s push to develop its petrochemical sector by diving into downstream petrochemicals production.
Nepal bans China's Alipay and WeChat Pay - Nikkei Asian Review The Nepal Rastra Bank, the central bank, on Tuesday announced a ban on the two Chinese services, operated by Tencent Holdings and Alibaba Group Holding's Ant Financial Services Group affiliate, respectively, citing their failure to secure licenses to operate in the country.
Yicai Global - Chinese Carmakers Offer Staff Discounts Ahead of New Standards Beijing plans to enforce the Sixth Stage National Vehicle Emission Standards, supposedly the world's toughest, on July 1 next year. But big cities, including Beijing, Shenzhen, Guangzhou and Shanghai, intend to implement them this July 1. More than 20 provinces and cities have followed suit, announcing plans to launch the new standards ahead of schedule.
Plan to remove expressway toll booths unveiled - Gov.cn The General Office of the State Council released a circular on May 21, outlining the implementation plan to remove expressway toll booths at provincial borders and promote a fast, nonstop toll collection system to reduce logistics costs and increase transportation efficiency.
Bloomberg’s economic forum invited to Beijing | Financial Times $$ “The fact the meeting is taking place in Beijing is a positive sign and a sign China remains interested in a dialogue,” said Henry Kissinger, an adviser to the event. // Comment: Surprised there is not an HBS case study on how Bloomberg worked its way back into Beijing’s good graces
China Debt Iceberg Shows Most Risk in State-Dominated Areas - Bloomberg In China’s financial system, the bigger the role of the state, the cheaper the funding costs. As a rule. But in one corner of the country’s $13 trillion bond market, something different has happened. The highest yields in the 7.5 trillion yuan ($1.1 trillion) worth of debt sold by local government financing vehicles are found on the securities sold in regions where the public sector dominates the economy.
Politics and Law
加快推进社会治理现代化--理论-人民网 Chen Yixin, secretary general of the central politics and law committee on page 13 of the Tuesday People's Daily on accelerating the modernization of social management, lists safeguarding national political security as the primary task, also mentions the importance of developing the "fengqiao experience"
Official stresses promotion of ideological, political theory education - Xinhua Huang Kunming, a member of the Political Bureau of the CPC Central Committee and head of the Publicity Department of the CPC Central Committee, made the remarks during an inspection and research tour to Shanghai Monday. Huang said teachers and researchers on ideological and political theories should combine history with reality and theories with practices to provide insightful answers to questions such as why Marxism works, why the CPC can achieve so much and why socialism with Chinese characteristics is well-developed. Efforts should also be made to step up the building of national high-end think tanks and better tell the stories of China, he noted.- 黄坤明：增强自觉自信 用心咨政育人 推动党的创新理论走进青年深入人心
CPC releases disciplinary inspection progress list - Xinhua Inspection teams stayed in Party organizations in 13 provincial-level regions, 11 central government departments and two financial institutions for inspection between October and November last year. The problems found were exposed this January and the progress list started being released on May 16. The second round disciplinary inspections, specifically targeted at poverty alleviation, marks the first time that the central leading group on disciplinary inspection has focused on a specific subject. The third round of disciplinary inspection launched by the 19th CPC Central Committee is underway.-中央脱贫攻坚专项巡视整改进展情况全部公开
Ministry launches English-language legal service website - Xinhua The website will help solve legal problems that foreign entities or persons may have in China, such as in the areas of investment, trade, finance, environmental protection, border entry and exit, employment and marriage, according to vice minister Xiong Xuanguo.
Foreign and Defense Affairs
Shangri-La Dialogue attendance shows China sincere in engaging with US: expert - Global Times The Chinese defense minister will speak at an annual international defense forum in Singapore, marking the first time in eight years for China to send a senior military leader to the forum at the end of this month...An Gang, a senior research fellow at the Pangoal Institution, a Beijing-based think tank, told the Global Times on Tuesday that "the backdrop of this year's forum is the worsening China-US relationship, and the US is clearly executing a strategy to comprehensively compete with China." Washington will definitely ramp up its accusations and attacks against China at different international forums, An noted.
Chinese officials, executives abandon Schulich training program amid dispute with Canada - The Globe and Mail An 18-year Ontario program to train Chinese officials and executives has been gutted since the arrest of Huawei executive Meng Wanzhou gave rise to a deepening dispute between Canada and China. The Schulich School of Business estimates it has lost $500,000 in bookings for training from China since Dec. 1, 2018, the day Ms. Meng’s arrest put a caution sign on Canada for the Chinese political establishment.
Netizens hail FM Spokesperson Office’s new Weibo account - Global Times The account has attracted more than 530,000 followers in the first 24 hours of its debut Monday. and zoomed to the top 10 hot trending topics on Sina Weibo. The account
US backs calls for Taiwan to get role at UN health assembly - AP The United States is backing calls for Taiwan to be granted observer status at the U.N. health agency’s biggest annual gathering, the U.S. health secretary said Monday. Secretary of Health and Human Services Alex Azar spoke to reporters in Geneva on the sidelines of the start of the World Health Organization’s annual assembly, which China’s government has prevented Taiwan from attending.
Rejection of Taiwan to WHA shows wide acceptance of one-China principle: FM - Global Times The WHA General Committee on Monday again decided to leave out the proposal of "inviting Taiwan to participate in the WHA as an observer," Chinese Foreign Ministry Spokesperson Lu Kang said at a routine press conference on Tuesday. "The Taiwan region's participation at international activities must and can only be handled in accordance with the one-China principle," Lu said. He reiterated that the decision shows that the one-China principle is embraced by international society.
Tech and Media
Sheryl Sandberg says not to break up Facebook because of China - Vox Facebook chief operating officer Sheryl Sandberg in an interview with CNBC on Friday pushed back against growing calls for the social media giant to be broken up by suggesting that such a maneuver would disadvantage it against China. “Let me share with you something else I heard in my meetings in DC. And I heard this in private meetings from both sides of the aisle, that while people are concerned with the size and power of tech companies, there’s also a concern in the United States with the size and power of Chinese companies, and the realization that these companies are not going to be broken up,” Sandberg said.// Comment: This is a scripted talking point from Facebook. Zuckerberg used it last year in Congressional hearing, now hearing it regularly, clearly part of Facebook's campaign to thwart momentum towards breaking up the company
China film funding crunch boosts Hollywood offerings | Financial Times $$ After a decade of rapid expansion in China’s movie market, local film producers are facing a funding crunch. A government crackdown on tax evasion, a squeeze on the shadow banking sector and a pullback in consumer spending have hit new projects. The movies in the latest week’s box office top 5 in China were all foreign. At Beijing’s annual film festival last month, the atmosphere was gloomy. “The era of barbaric growth has ended,” said Lin Zhan, chair of a committee that organised the event.
TikTok Owner to Challenge Spotify and Apple With Music Service - Bloomberg ByteDance expects to introduce the new app as early as this fall in a handful of territories, mostly poorer countries where paid music services have yet to garner large audiences
Society, Arts, Sports, Culture and History
Novelist Known for Gay Content Sentenced for ‘Illegal Publishing’ - Caixin Global China’s burgeoning “danmei” novels have hit an obstacle. An author of the genre, which features homoerotic love stories between two men aimed at a young female audience online, has been sentenced to prison for “illegal publishing.”
Blood Letters of a Martyr – China Channel Lian Xi’s book Blood Letters: The Untold Story of Lin Zhao, a Martyr in Mao’s China is not a hagiography, yet it is more than a biography. Lian Xi, a professor or world Christianity at Duke Divinity School, emphasizes the role of the religious in heroic struggles against totalitarian systems and compares Lin to famous Christian prisoners such as Dietrich Bonhoeffer
A Chinese Millennial Looks Back on Her Life - The New York Times Her account has much of value to offer us as we seek to understand how China has been changing and look for help in explaining these shifts to others. “Under Red Skies” follows on the heels of several recent English-language books about Kan’s generation, but, unlike those, it has actually been written by a member of the complicated cohort in question. This gives a fresh feel to its handling of by-now familiar topics, like the tension produced when a jingoistic education is confronted with a longing to participate in global popular culture.
Energy, Environment, Science and Health
China calls out big state firms, others on pollution violations amid slowing economy fears - Reuters The ministry has continued to warn that China’s slowing economy had given some regions an excuse to “loosen their grip” on environmental protection.