Patriotism campaign for intellectuals; Xi's position; Politburo meeting and the economy; Google's secret China plans, Potty politics; US-China

Good morning from Sinocism. Here are some of the top things I am following:

  • The Party has announced a new patriotism campaign for intellectuals;

  • News that the US is now considering additional tariffs on Chinese goods came just after Bloomberg and the Wall Street Journal reported that Liu He and Treasury Secretary Mnuchin were working to find ways back to the negotiating table;

  • Google is planning to re-launch a search engine in China;

  • I am stubbornly (stupidly?) sticking to my view that reports of real challenges to Xi’s authority are over-egged; see comments in the Essential Eight.

For the August 1 91st anniversary of the founding of the PLA CCTV released a short video “我是中国军人 [I am a Chinese soldier]" that almost looks like it was made by Apple's ad agency. It tugs at the heartstrings and then it goes hard on patriotism and China’s rise. But the phrase at the 1:16 mark “我身后是和平,我面前是战争“—behind me is peace, in front of me is war” takes away some of the warm and fuzzy feeling:

Housekeeping note: I am off to China Thursday so there will be no newsletter August 2. I am not sure yet how the publishing schedule will shake out while I am in China. I am planning to do a few issues before I return to DC August 17 and normal publishing should return August 20. I will be in Beijing, maybe Shanghai, not sure where else. If people want to get together please ping me, and if schedules align and there are enough maybe we can pull together a Sinocism dinner.

Thanks for reading.

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The Essential Eight

1. Xi’s trouble?

As China’s Woes Mount, Xi Jinping Faces Rare Rebuke at Home - The New York Times - Chris Buckley:

Censorship and punishment have muted dissent in China since Mr. Xi came to power. So Xu Zhangrun, a law professor at Tsinghua University in Beijing, took a big risk last week when he delivered the fiercest denunciation yet from a Chinese academic of Mr. Xi’s hard-line policies, revival of Communist orthodoxies and adulatory propaganda image.

“People nationwide, including the entire bureaucratic elite, feel once more lost in uncertainty about the direction of the country and about their own personal security, and the rising anxiety has spread into a degree of panic throughout society,” Professor Xu wrote in an essay [许章润:我们当下的恐惧与期待 ] that appeared on the website of Unirule Institute of Economics, an independent think tank in Beijing that was recently forced out of its office...

Color me skeptical that Xu's letter will do anything other than lead to investigations of and crackdown on anyone associated with it.

The undercurrent of discontent does not pose any immediate threat to Mr. Xi’s hold on power. He and the Communist Party remain firmly in control. And many Chinese people endorse his tough campaign against corruption and his vows to build China into a great power that will not compromise over territorial disputes...

But speculation shared among some of Mr. Xi’s critics in Beijing and on the internet that unhappy party officials and elders had forced a full-scale retreat from the adulation appears to be unfounded.

Mr. Xi’s name has appeared on the front page of the People’s Daily as often as ever; the frequency of appearances in July was not markedly down, according to counts made by Qian Gang, a media expert at the University of Hong Kong. As well, a party campaign to study Mr. Xi’s years as a youth in Liangjiahe Village in northwest China has continued to inspire rhapsodic reports.

And the CCDI has just launched a fancy new feature on Xi’s “red footprints”. Will Xi’s “red footprints” become a political correct itinerary for cadres?—八一特别策划】习近平总书记的“红色足迹”

Remember this from two years ago?--Loyal Party Members Urge Xi’s Resignation – China Digital Times (CDT) 2016 

Xi Jinping’s efforts to maintain ideological conformity in the Party and the nation have recently met with opposition. After the president emphasized government control of the media with a visit to top state media outlets where he stressed that news must “speak for the Party,” famously outspoken commentator Ren Zhiqiang responded by posting to his Weibo account that state media should first speak for those who fund it: the people (Ren’s comment was answered with a banishment from Chinese social media platforms). After Caixin Media found an article in state censor’s crosshairs for quoting CPPCC delegate Jiang Hong on a lack of freedom to offer unrestrained suggestions at top political meetings, they pushed back with an English article on the original article’s deletion (which too was quickly removed from the Internet). Last week, a Xinhua employee posted an open letter denouncing the increasingly tight media constraints for “triggering tremendous fear and outrage among the public” (the letter, unsurprisingly, didn’t remain online for long).

An even more brazen act of resistance to the control of public and Party opinion was an open letter calling for Xi Jinping’s resignation from all state and Party leadership positions, posted to state-linked Wujie News website on March 4, the day that the annual “Two Sessions” political meetings began in Beijing. Signed by a group of “loyal Party members,” the letter blames Xi for an atmosphere of political, economic, ideological, and cultural anxiety currently sweeping China, and mentions that the “personal safety” of the president and his family could be in jeopardy if he does not comply. CDT has translated the letter below.

The Chinese report on this Politburo study session meeting was in yesterday's newsletter but I thought it worthwhile to put in again. It seems unlikely that on the eve of the PLA's 91st anniversary Xi would hold such a high-profile meeting on a campaign that has hurt so many PLA vested interests if he were at all concerned about his authority--Xi requires resolute ending of military's paid services - Xinhua:

Xi made the call while presiding over a group study session of the Political Bureau of the CPC Central Committee on this issue.

Military's paid services generally refer to those provided by the armed forces such as kindergarten education, publishing services, and real estate rentals to the civilian sector.

The implementation allows no exception, discount or makeshift compromise, Xi said, noting that such work is a major decision made by the CPC Central Committee and the Central Military Commission (CMC) aiming to strengthen the armed forces as well as an important part in reforming national defense and the armed forces.

He also stressed that ending military paid services would create a sound environment for building a strong military in the new era.

On behalf of the CPC Central Committee and the CMC, Xi extended Army Day greetings to the personnel of the People's Liberation Army, the Armed Police Force, the militia and the reserve force. China's Army Day falls on Aug. 1.

Xi stressed that the group study session was arranged to get a better understanding of the situation and mobilize all forces to promote the work in ending military paid services.

If I had to bet on how Xi and the Party will react to US pressures, the slowing economy and the growing dissatisfaction among parts of the elite, my money would be on intensifying crackdowns, more appeals to nationalism, and something akin to a rectification among some of those elite, and especially intellectuals.

Sorry to not have much positive energy on this...I could certainly be wrong and maybe I am being too obtuse but I am so far not seeing anything I would consider convincing to support the idea that Xi is coming under meaningful pressure.

2. New patriotism campaign for intellectuals

Meanwhile, the Party is launching a new patriotism campaign for intellectuals. Here is the notice from the Organization and Propaganda departments about a new campaign to promote “patriotic striving spirit” [open to ideas for a better translation], make great contributions in the new era” among intellectuals- 中共中央组织部 中共中央宣传部关于在广大知识分子中深入开展“弘扬爱国奋斗精神、建功立业新时代”活动的通知: 


Officials from the Organization and Propaganda departments answer Xinhua questions about the new patriotism for intellectuals campaign -中央组织部、中央宣传部负责人就在广大知识分子中深入开展“弘扬爱国奋斗精神、建功立业新时代”活动答记者问-新华网 

First in a series of commentaries in the People's Daily on the intellectual patriotism campaign - 人民日报评论员:砥砺家国情怀 激发使命担当--理论-人民网 

Xinhua commentary--新华社评论员:弘扬报国志 建功新时代-新华网 

3. US may increase proposed tariffs on Chinese goods

Trump officials consider more than doubling tariffs on Chinese goods, ramping up trade war with Beijing - The Washington Post:

President Trump is considering a plan to impose a 25 percent tariff on $200 billion in Chinese imports, more than double what he had initially proposed, a person briefed on the matter said.

The deliberations could be a sign that Trump is looking to intensify pressure in the trade standoff with Beijing even if it could significantly drive up costs on a wide range of products for American consumers.

A final decision has not been made, and a number of Trump’s threats toward China have been designed more to bring Chinese President Xi Jinping to the negotiating table than to fundamentally change U.S. economic policy, said the person, who insisted on anonymity to discuss White House deliberations.

If Trump follows through with the plan, it could significantly raise prices on televisions, clothing, bedsheets, air conditioners and other consumer products.

China warns of retaliation if US takes more trade steps - AP:

A foreign ministry spokesman, Geng Shuang, said Beijing was ready for “dialogue and consultation” to defuse the escalating dispute.

“If the United States takes further measures that escalate the situation, China will definitely fight back,” said Geng. He gave no details of possible measures but said, “we are determined to safeguard our legitimate and lawful rights and interests.”

U.S. Talks With China Over Trade Dispute Show Little Progress - WSJ $$:

Treasury Secretary Steven Mnuchin and Chinese envoy Liu He and their staffs continue to talk about a possible meeting, said officials in both capitals, but the talks remain at a very preliminary stage. Both sides argue that it is up to the other to make the first move after several preliminary Chinese offers, mainly involving the purchase of more U.S. goods, were rejected by President  Trump as inadequate...

The Trump administration remains deeply divided over how best to deal with the Chinese, and the two main factions are moving in different directions. China trade hawks, led by U.S. Trade Representative Robert Lighthizer, believe that China will make concessions only if it feels the brunt of heavy tariffs, said U.S. officials...

Trade doves, led by Messrs. Mnuchin and Kudlow, have been looking for a solution short of massive tariffs, fearful that those levies, plus Chinese retaliatory tariffs on American goods, could slow U.S. growth and tank financial markets. Mr. Mnuchin and Mr. Liu have continued to discuss U.S.-China relations, but some of those conversations have gone poorly.

In one indication of the strain between the two countries, Qualcomm last week had to scuttle its agreement to purchase Dutch company NXP Semiconductors after China didn’t give the deal the green light. Days earlier, Mr. Mnuchin called Mr. Liu to lobby for its approval, according to people familiar with the matter. Mr. Mnuchin didn’t believe the call had gone well, the people said.

Comment: First, it is remarkable that the US government did not insist on the Qualcomm deal being officially, publicly approved BEFORE the ZTE deal was signed. Someone dropped the ball…And how can the Chinese believe that Mnuchin has any credibility left? The timing of the stories of efforts between Mnuchin and Liu to restart talks, just before news about possible additional tariffs, is certainly interesting, and will likely be seen by Liu and his team as another indication that Mnuchin can not deliver.

And here is Lighthixer reiterating his views in recent Congressional testimony--Lighthizer Lights Up Senator Schatz Over China Trade War | Breitbart :

“If your conclusion is that China taking over all of our technology and the future of our children is a stupid fight, then you are right. We should capitulate. My view is that’s how we got to where we are. I don’t think it’s a stupid fight,” Lighthizer responded.  “I don’t think it is a stupid fight to say China should not be able to come in and steal the future of American industry.”

Trump Says China May Be ‘Getting in Our Way’ on North Korea - Bloomberg:

Trump’s remark at a political rally Wednesday in Tampa, Florida, was the latest sign of friction between the U.S. and North Korea, as they attempt to implement on Kim’s June 12 agreement to “work toward complete denuclearization.” The president made the claim during a long defense of his trade war with China.

“We are doing well in North Korea, although I happen to think that we’re doing so well with China that China maybe is getting in our way,” Trump said, noting that Kim has continued to refrain from launching missiles. “No tests. No rockets flying. We’ll see what happens.”

Comment: One, those betting that Trump will back down from tariffs on Chinese goods because of the midterm elections may be disappointed; it increasingly looks like the President believes his hard line is a winner with his base. Two, if it becomes too publicly obvious that North Korea is not doing what Trump says he and Kim agreed to, perhaps with renewed testing, and/or that China is no longer enforcing sanctions in a serious way, then the risk of US action against PRC financial institutions and/or major SOEs like oil firms may increase significantly.

Remember, the US-China trade conflict is just one part of a much deeper, structural shift in the relationship--U.S. Defense Bill Seeks to Counter China - WSJ $$

Congress is preparing to enact a defense-policy bill that some lawmakers say is tougher on China than any in history, as a bipartisan movement to confront Beijing gathers steam.

The measure, an annual policy bill that will authorize $716 billion in total defense spending for the coming fiscal year, seeks to counter a range of Chinese government policies, including increased military activity in the South China Sea, the pursuit of cutting-edge U.S. technology and the spread of Communist Party propaganda at American institutions.

Xi’s Right-Hand Man Is Message-Bearer in China-U.S. Trade Dispute - WSJ $$:

At his May meeting with U.S. businessmen in the Zhongnanhai leadership compound in Beijing, Mr. Wang denied being in charge of managing ties with the U.S., said the people familiar with his remarks. Rather, according to the people, Mr. Wang said his job as vice president is to do whatever President Xi wants him to do.

4. Politburo meeting and the economy

The Politburo lays out the plan for H2 - Trivium:

The key to yesterday’s readout was the heavy emphasis on stability – it called for “stable employment, stable financial [markets], stable foreign trade, stable foreign investment, stable [domestic] investment, and stable expectations.” Stability is always top of mind for Chinese leaders, but the frequent repetition of the word in this readout was telling – policymakers are clearly concerned about the state of the economy.

It should be noted, however, that in this case a policy mix designed to ensure economic stability is not a truly stimulative policy mix..

Coming policy changes are all a matter of degree. And while markets want to interpret the Politburo meeting as a significant swing toward growth support, the language is restrained. The key idea is that China’s leaders want policy efforts to be better coordinated and more flexible to adapt to developments on the ground.

State Media Outlines Six Key Signals of Chinese Politburo's Latest Economic Work Meeting - China Banking News:

i) Stability, and raising the foresight, flexibility and effectiveness of policy.; 

ii) Making up for inadequacies, using the deepening of supply-side structural reforms to abet high-quality growth; 

iii) Risk prevention – finance must better service the real economy.; 

iv) Breaking through difficulties, firmly deepening reform and opening to stimulate economic vitality.; 

v) Contain price gains, firmly and effectively resolve problems on the real estate market.; 

vi) Stable employment, effectively undertaking work to ensure the livelihood of the people and maintain social stability.

China easing threatens to derail debt-cutting efforts  | Financial Times $$:

“Throughout this year, the voices for supporting growth and for cutting debt have been locked in a debate,” said Guan Qingyou, chief economist at Reality Institute of Advanced Finance, an independent macroeconomic research group in Beijing. “Policymakers are trying to find a middle path.”..

In a front-page editorial last week, People’s Daily, the Communist party mouthpiece hailed the results of the deleveraging campaign while indicating that the party was no longer seeking an absolute decline in the economy’s debt ratio but rather a levelling off.

“Preliminary results of deleveraging have been achieved, and China is entering the stage of stabilising leverage,” the paper said. 

China’s Leadership Vows Stable Growth - Caixin Global:

The Politburo’s policy statement essentially endorsed a call last week by the State Council for more-active fiscal policy measures without resorting to massive stimulus. China will maintain a proactive fiscal policy and a prudent monetary policy to ensure ample liquidly. Fiscal policy should play a greater role in expanding domestic demand and promoting structural adjustments, the Politburo said.

Based on recent statements by the leadership, analysts said there would not be fundamental changes in macroeconomic policy. But marginal adjustments will be made to offset pressures from external uncertainties and the domestic deleveraging campaign to avoid sharp deceleration, said Zhang Ming, a researcher with Chinese Academy of Social Sciences (CASS), in a research note.

5. Google's secret plan to relaunch in China

Google Plans to Launch Censored Search Engine in China, Leaked Documents Reveal:

The project – code-named Dragonfly – has been underway since spring of last year, and accelerated following a December 2017 meeting between Google’s CEO Sundar Pichai and a top Chinese government official, according to internal Google documents and people familiar with the plans.

Teams of programmers and engineers at Google have created a custom Android app, different versions of which have been named “Maotai” and “Longfei.” The app has already been demonstrated to the Chinese government; the finalized version could be launched in the next six to nine months, pending approval from Chinese officials...

Documents seen by The Intercept, marked “Google confidential,” say that Google’s Chinese search app will automatically identify and filter websites blocked by the Great Firewall....

The search app will also “blacklist sensitive queries” so that “no results will be shown” at all when people enter certain words or phrases, the documents state. The censorship will apply across the platform: Google’s image search, automatic spell check and suggested search features will incorporate the blacklists..

The documents seen by The Intercept suggest that Google will operate the search app as part of a “joint venture” with an unnamed partner company

How a Pentagon Contract Became an Identity Crisis for Google - The New York Times May 30, 2018:

Fei-Fei Li is among the brightest stars in the burgeoning field of artificial intelligence, somehow managing to hold down two demanding jobs simultaneously: head of Stanford University’s A.I. lab and chief scientist for A.I. at Google Cloud, one of the search giant’s most promising enterprises.

Yet last September, when nervous company officials discussed how to speak publicly about Google’s first major A.I. contract with the Pentagon, Dr. Li strongly advised shunning those two potent letters...

It has fractured Google’s work force, fueled heated staff meetings and internal exchanges, and prompted some employees to resign. The dispute has caused grief for some senior Google officials, including Dr. Li, as they try to straddle the gap between scientists with deep moral objections and salespeople salivating over defense contracts.

Comment: Google ultimately decided to not renew the Pentagon contract that so upset some employees. So what is the state of the China debate internally at Google? It will certainly raise eyebrows in DC that Google won't work with the US military but will work with the PRC to satisfy its censorship demands.

Google will have to deal with a new Internet chief--Beijing names new internet watchdog as China keeps door closed to global tech giants | South China Morning Post:

China has officially named Zhuang Rongwen as the new chief of the agency supervising China’s internet...

Zhuang, 57, who earlier worked under Xi in the province of Fujian, is rising quickly in the official hierarchy.

He was just promoted in April to head of the State Administration of Press and Publication. Earlier this month, Zhuang assumed a new title as the director for National Office Against Pornographic and Illegal Publications.

The official announcement: 庄荣文任中央网信办主任 

The CAC also has a new deputy director--刘烈宏 Liu Liehong. Liu spent years at the Ministry of Electronics Industry and most recently was the President and Deputy Secretary of Party leadership group of the China Electronics Technology Group--刘烈宏任中央网信办副主任(图/简历)--组织人事-人民网. Interesting choice. 

6. Apple has a good quarter in China

Apple Reports 3Q 2018 Results: $11.5B Profit on $53.3B Revenue and 41.3M iPhones - Mac Rumors:

Tim Cook: Top 3 selling phones in Urban China. iPhone X was #1 and has been for a couple quarters...

Cook: This is the fourth consecutive quarter we've hit double-digit growth in Greater China. I mentioned how well iPhone X is selling. We did pick up share in iPhone and iPad. If you look more holistically at our whole line… it did extremely well… there. In terms of tariffs themselves, our view on tariffs is that they show up as a tax on the consumer, and wind up resulting in lower economic growth, and sometimes can bring about significant risk and unintended consequences. That said, the trade agreements the U.S. has with other major economies, they're very complex, and it's clear some are in need of modernization. We've made it clear that tariffs aren't the right approach to that. We're sort of encouraging dialogue related to that. In terms of recent passages, U.S. imposed tariffs on imported steel. Two others that impact about $50B worth of goods from China. If you look at those 3 tariffs, none of our products were directly affected by the tariffs. A fourth includes goods valued at $200B, also focused on goods imported from China, that one is out for public comment. Probably like everyone else, we're evaluating that one, and we'll be sharing our views on it with the administration before the comment period. It's a tedious process.

But Huawei is booming - Huawei Passes Apple in Smartphone Share for the First Time - Bloomberg:

Huawei shipped 54.2 million phones in the quarter, 41 percent more than a year earlier, to jump ahead of the iPhone maker for the first time, according to market research firm IDC. The telecoms giant accounted for 16 percent of the market, compared with 21 percent for South Korea’s Samsung and 12 percent for Apple. Xiaomi Corp. and Oppo, both based in China, rounded out the top five.

Apple’s Chinese future challenged by lurking threats | Financial Times $$:

Alongside the iPhone’s higher average selling prices and its surging online services, a key component of Apple’s renewed momentum over the past 12 months has been its recovery in China. It has now posted four consecutive quarters of double-digit revenue growth from its Greater China division, which includes Hong Kong and Taiwan.

7. More on the June Central Foreign Relations Work Conference

China Prepares for an International Order After U.S. Leadership - Lawfare - Timothy Heath:

At China’s Central Foreign Relations Work Conference—an infrequently-held high level strategy session for the nation’s foreign policy—convened on June 23, 2018, Chinese leaders outlined an array of foreign policy directives designed to reinforce Chinese President Xi Jinping’s authority over all foreign policy. As State Councilor Yang Jiechi stated, “The most important outcome of this conference is that it established the guiding position of Jinping thought on diplomacy.”

The event further strengthened the activist foreign policy outlined by Xi at the previous foreign affairs work conference held in 2014. Since that previous conference, key geopolitical developments have added to the urgency with which Chinese leaders view global governance strategy. In Beijing’s estimation, these developments have also increased the possibility that China will face a power transition with the United States in coming years—and in response, Chinese officials are working to establish a new dominance over the international order...

Xi directed greater efforts to study power transitions at the recent foreign affairs work conference, calling for “in-depth analysis of the law of how the international situation changes when the world comes into its transitional period.” In language tellingly omitted from English translations, Xi indirectly referred to potential disruptions and uncertainties in the U.S.-China relationship, stating that in light of the “accelerated development of multipolarization,” it had become necessary to “attach great importance to the tendency of extensive adjustments in major-country relations”..

China’s strategy aims to deter war with the United States while also steadily undermining U.S.authority in global institutions and discourse and building a broad base of political support around the globe

8. Potty politics

A good look at how top-level initiatives can move through the PRC system.

China’s “Toilet Revolution” Shows Us That Politics Still Matters in the Xi Era - MacroPolo:

More than just a singular issue of improving public bathrooms, it is a prism through which to examine how the central government takes account of popular opinion, how bureaucratic interests are championed by China’s top leaders, and how agencies can effectively implement national policy campaigns.

It’s also an interesting window on Xi’s leadership. His personal championing of the Toilet Revolution, which began as a campaign by the National Tourism Administration (NTA) but has since expanded its scope to become part of Xi’s broader rural development strategy, means that the initiative will likely continue to grow. The evolution of this policy also suggests that the government apparatus has not frozen entirely or ceased innovating under Xi, who has rewarded bottom-up initiative that aligns with his broader political goals.

Business, Economy, Finance And Trade

Summer 2018 — The China Dashboard Summer 2018 — Asia Society Policy Institute and Rhodium Group The question on every China watcher’s mind is whether Beijing will water down this clean up to stoke the economic hearth. Though the WMP regulations have retained their teeth, policymakers are of two minds about implementation, some counseling easing, others austerity. One can still make a strong case that despite signals of relaxing, the main attribute of Chinese policy through this year will remain austerity, relative to past practice. A full-blown market rout is in no one’s interest, including reformers. In June and July, selling pressures swept markets for China’s currency, equities, and debt, eliciting signs of easing to avert a freefall. But nothing about current policy signals, and nothing likely to be introduced over the coming quarters, will restore bank asset growth to the 15%–16% range seen two years ago. At most, we expect that pace to reach 9%–11% in 2018, as bank asset growth in the first half of the year is only half that in the first half of 2017.

Short Seller Who Slammed Samsonite Takes Swipe at New Target - WSJ Soren Aandahl, who runs Texas activist investment fund Blue Orca Capital LLC, said he is shorting, or betting against, GDS Holdings Ltd. , a provider of data-center infrastructure and services in China. The U.S.-listed company, which fetches a $4.3 billion market value, has risen more than 50% this year through Monday and has more than tripled since its initial public offering in November 2016. In a 53-page report published Tuesday, Mr. Aandahl said the Chinese company’s interest payments exceed its gross profits and investors have “indulged GDS’s staggering debt burden because of the belief in its supposedly impressive growth.” 

Trade war with US to plant seeds of change in China’s cotton industry – one way or another | South China Morning Post With both China and the US slapping tariffs on imported products, people operating businesses in the two nations are bracing for impact. In the first of a series of articles exploring how the trade war affects various sectors in China, The South China Morning Post looks at how those involved in textile production are caught up in a waiting game

China’s Social Security Fund Quintupled Its ROI Last Year | Yicai Global The sovereign wealth fund, which pays for pension insurance and similar social benefits, reaped CNY184.6 billion (USD27 billion) in 2017, its operator the National Council for Social Security Fund said in a report online. The figure dwarfs the CNY32.9 billion gains from a year earlier, which returned just 1.73 percent...Established in August 2000, the fund has averaged gains of 8.44 percent over its lifespan to date with accumulated investment income topping CNY1 trillion (USD147 billion), the report added. As of the end of last year, its total assets stood at CNY2.2 trillion and were nearly 92.5 percent made up of domestic assets.

Probe ordered into Pinduoduo counterfeit goods claim - China Daily The State Administration for Market Regulation is paying close attention to media reports about counterfeit goods sold by Pinduoduo. The administration asked relevant authorities to investigate the claim. If any illegal activity is detected then the guilty will be punished.

Tesla Weighs Chinese Funding for $5 Billion Factory - Bloomberg The electric-car pioneer is considering raising some of the $5 billion it intends to invest in the plant near Shanghai from local partners, according to a person familiar with the plans, who asked not to be identified as the matter is private. Chief Executive Officer Elon Musk secured a preliminary deal to build the factory last month, just days after China’s retaliation against President Donald Trump’s tariff hikes boosted the cost of exporting cars made in the U.S.

State-Owned Firm to Buy Stake in Luxembourgian Energy Company - Caixin Global State-owned China Southern Power Grid Co. Ltd. has agreed to purchase a minority stake in Luxembourg-based energy company Encevo SA, bolstering the presence of Chinese energy giants in Europe. China Southern Power will buy the 25.5% stake in the utilities company from French private investment firm Ardian, the latter announced in a statement on Tuesday. One of Encevo’s subsidiaries runs electricity and gas grids, while the other sells energy across Luxembourg and Germany, the statement said.

Chinese consortium snaps up Ireland’s oldest stockbroker | Financial Times $$ A consortium of Chinese companies has agreed to buy Ireland’s oldest stockbroker, Goodbody, choosing a toehold in Dublin over one in London for an expansion in Europe. The acquisition by a group of investors including Zhongze Group and state-backed JIC Trust marks the latest change of hand for the 140-year-old firm, and one of a series of Chinese investments in European financial services companies.

Berlin signals readiness to use new takeover veto after Chinese bid for Leifeld | Reuters Berlin signaled on Wednesday that it was prepared to use its new power to veto foreign takeovers of German companies in the case of a Chinese bid for toolmaker Leifeld. Earlier on Wednesday Leifeld’s majority owner Georg Koffler told Reuters that China’s Yantai Taihai had dropped its attempt to buy the company ahead of an expected veto by the German government.

China’s Plan to Win Friends and Influence Includes Ski Slopes and Spas - The New York Times “There are wacky deals that occur under the banner of Belt and Road because this is how every entrepreneur signals that they are in line with the leadership’s political objectives,” said Arthur Kroeber, managing director of Gavekal Dragonomics, an independent economic research firm. “It certainly is a very capacious arena for opportunists, that’s for sure,” Mr. Kroeber added.

Germany's 'China City': how Duisburg became Xi Jinping's gateway to Europe | | The Guardian If in 2018 Duisburg is slowly rediscovering its cosmopolitan past, it is not just because four centuries after Mercator, traders are still trying to find the most direct route from A to B. As the threat of Donald Trump’s tariffs and Brexit-related trade barriers is driving wedges between the EU and the Anglosphere, this former rust-belt town town allows one to see in real time how Germany and China are intensifying their economic ties.

China’s Paper City Could Become a House of Cards - Caixin Global he county-level city in the southern province of Hunan hit the headlines in June after admitting it didn’t have enough money to pay the salaries of its civil servants in May because of a sharp decline in revenue from the real estate and coal industries. In the latest blow, one of China’s top domestic credit ratings companies has warned it may cut the ratings on a seven-year 1.2 billion yuan ($177 million) bond issued by the city’s main local government financing vehicle (LGFV), Leiyang City State Owned Assets Investment Operation Co. Ltd. to build an underground pipeline network.

Cabinet Positions State-Backed Investment Vehicles - Caixin Global The guidance document issued Monday clarified two types of state-backed companies focusing on investment and asset management using state-owned capital, based on different investment strategies and responsibilities.

Shenzhen Tightens Grip on Property Transactions - Caixin Global The Shenzhen government Tuesday blocked corporate buyers from purchasing residential properties, following similar moves by Changsha and Xi’an to prevent corporate investors from speculative investments that could further drive up housing prices. Shenzhen is one of China’s most expensive housing markets. Individual residential buyers will also be barred under the newest Shenzhen policy from reselling properties for three years from the date of obtaining a real estate deed. Those who buy serviced apartments — fully furnished apartments that are often designed for rental — will not be allowed to resell them for five years, according to the new housing policy.


Politics, Law And Ideology

习近平主持召开中共中央政治局会议 严明党的纪律 强调“三性”“四要”-新华网 Xinhua infographic on the political discipline measures passed at the recent Politburo meeting

China to accelerate launch of one-stop govt service platform - Xinhua The State Council, China's cabinet, has unveiled a guideline to accelerate the development of a one-stop platform for online processing of the country's government services. The platform will help improve the business environment, energize the market, and allow people to have easier access to services, according to the guideline signed by Premier Li Keqiang.

Chinese Police Block Lawyer Hired For Ink-Splash Woman in Mental Hospital - RFA Authorities in the central Chinese province of Hunan have prevented the family of a woman incarcerated in a psychiatric hospital from hiring a lawyer to represent her. Dong Yaoqiong was sent for "compulsory treatment" after she streamed live video of herself splashing ink on a poster of Chinese president Xi Jinping in a protest at "authoritarian tyranny" on July 4.

Govt to auction off fugitive tycoon’s Beijing properties - Global Times Properties once owned by fugitive Chinese billionaire Guo Wengui will be auctioned off at the end of August, authorities announced. Forty-one apartments and 19 offices worth eight billion yuan ($1.2 billion) in Pangu Plaza, a landmark near the Beijing Olympic Park in northern Beijing, owned by the real estate company of fugitive billionaire Guo Wengui, will be auctioned off starting August 31, judicial sale website announced.

Activist and Former Inmate Calls for Hot Showers in Prisons - SixthTone “From my experience, most women’s detention facilities don’t provide hot water for showers,” Jia Lingmin wrote in her letter, mailed Monday, in which she argues for improved bathing conditions at jails, prisons, and other places of enforced supervision. “Taking years of cold showers is extremely harmful to a woman’s health and could lead to long-term medical issues,” she continued. “This places an additional burden on [the inmates], their families, and the entire social welfare system.”


Foreign and Military Affairs

Pakistan hits back at US resistance to IMF bailout | Financial Times $$ Officials in Islamabad have accused Washington of trying to strong-arm Pakistan into scaling back billions of dollars’ worth of Chinese investment in their country’s infrastructure as part of a potential bailout by the IMF. One senior Pakistani government adviser told the Financial Times: “The US is trying to spoil China's biggest contribution to our future.” Another added: “The Americans are trying very hard to put pressure on Pakistan because they have their own interests. But making it so hard for Pakistan to successfully negotiate a new program with the IMF makes no sense. Ultimately, Pakistan will search for other options if the road to the IMF is blocked.”  //  Comment: If the IMF won't bailout profligate Pakistan because the US does not want it to be a bailout of Chinese loans, will the Chinese just do the bailout themselves, while extracting more strategic assets from Pakistan?

Positive outcomes still possible on suspended projects as Chinese FM Wang Yi heads to Malaysia: expert - Global Times Negotiations over suspended multi-billion dollar connectivity projects are "almost inevitable" and positive outcomes can still be expected, a Chinese expert said as Chinese Foreign Minister Wang Yi visited Malaysia on Tuesday. High-level talks between senior diplomatic officials from both sides have been underway in Malaysia since Friday ahead of the 93-year-old Malaysian leader Mahathir Mohamad's trip to China in August. Wang began his two-day official visit to Malaysia on Tuesday en route to a meeting of regional ministers in Singapore.

Regulations on intra-Party supervision, accountability in China military take effect - Xinhua The regulation on intra-Party supervision in the military establishes a system of internal scrutiny, comprising the unified leadership of the CMC, overall supervision by Party committees, specialized supervision by discipline inspection commissions, routine supervision by grassroots Party organizations, and democratic scrutiny by Party members. The regulation that holds Party officials accountable for poor leadership in the military improves the accountability system and mechanism, and intensifies their implementation. The latter regulation encourages Party members to be loyal to the Party and have moral integrity and a keen sense of responsibility, the statement said.中央军委印发《军队实施党内监督的规定》《军队实行党的问责工作规定》

Australia yet to strike deal with China for foreign minister's visit: sources | Reuters A schedule for Australian Foreign Minister Julie Bishop to visit China has yet to be agreed, although dates were proposed more than two months ago, two sources said on Wednesday, an impasse in Canberra’s efforts to repair strained relations. //Comment: Getting the silent treatment until Canberra sees the error of its ways?

Chinese warship to join Australia naval exercises | Financial Times $$ Canberra extended an invitation to Beijing last year for it to take part in Exercise Kakadu, naval manoeuvres that will involve 27 nations, including the US.

South China Sea Draft Pact Set to Be Welcomed by Southeast Asian Nations - AP Southeast Asian nations are expected to welcome an initial negotiating draft of a nonaggression pact with China on the South China Sea, but critics warn that the protracted talks provide a diplomatic cover for Beijing's tenacious aggression in the disputed waters. Top diplomats of the Association of Southeast Asian Nations will also praise the rapprochement between the Koreas, along with that of President Donald Trump and North Korean leader Kim Jong Un, when they gather for four days of annual summitry in Singapore starting Wednesday.

U.S. Imposes Export Restrictions on 44 Chinese Entities - Caixin The U.S. has added 44 Chinese entities to a list of firms and research institutes that allegedly act contrary to its national security or foreign policy interests, according to a document released Wednesday by the U.S. Commerce Department’s Bureau of Industry and Security...Among the entities, 17 were accused of being involved in the illicit procurement of U.S. commodities and technologies for unauthorized military end-use in China. For the other 27, the U.S. believes that “there is an unacceptable risk of use in (or diversion of U.S.-origin items to) military end-use activities in China.”

Plan adopted to promote integration of military, civilian standards - Xinhua  A general working plan to integrate military and civilian standards covering a number of fields and industries was adopted at a high-level meeting Tuesday. The plan specified the goals of integrating military-civilian standards in the next three to five years, including the elimination of conflicting standards and timely upgrading of outdated standards. At least 60 percent of newly-introduced standards in key areas should be universal in both military and civilian sectors, said the document. 统筹推进标准化军民融合工作部署会在京召开

China expands family plaques honoring military service - Xinhua The State Council released a circular on the implementation of extending its honor to soldiers’ families for supporting the military and making great contributions to the country and its people. Families of martyrs, and of soldiers who died on duty or due to illness, and families of veterans and of those currently serving will receive the honor. According to the circular, the work should be done before May 1, 2019, and the final results on implementation will be reported to departments handling affairs related to veterans.



Taiwan, ’Still Fighting’ for Democracy, Gets Nod to Host Human Rights Event - The New York Times Taiwan has been chosen as the first Asian host for the Oslo Freedom Forum, an international human rights conference. The forum hosts rights campaigners, dissidents, philanthropists and tech entrepreneurs from around the world. Speakers at the Nov. 10 event in Taipei, Taiwan’s capital, are scheduled to include Mu Sochua, a Cambodian opposition politician living in exile, and Yeonmi Park, a North Korean defector.


Tech And Media

Market Localization of the Highest Valued Unicorn with Sam Gellman, First Foreign Employee of Uber China | The China Startup Pulse Sam shared his past experience in redesigning Uber’s playbook to adjust to China’s unique ecosystem, channels for communication and user acquisition

Alibaba’s Gears Up for Costly Subsidy War With Meituan, Didi — The Information $$ To deepen’s pockets, Alibaba is in talks to bring in outside investors and aims to raise as much as $3 billion for at a valuation of $25 billion, people briefed on the matter said...By comparison, when Alibaba signed its deal to acquire in April, it valued the business at $9.5 billion.

China Baidu's second quarter exceeds expectations, powered by ad sales growth | Reuters Baidu said online advertising revenue rose by 25 percent to 21.1 billion yuan ($3.10 billion) in the second quarter ended June 30, partly driven by growth attributed to its growing newsfeed product, an app similar to Facebook Inc’s (FB.O) feed. Total revenue rose by nearly a quarter to 26.0 billion yuan, topping estimates of a 22.4 percent rise.

China’s battle with the ‘internet water army’ | Financial Times $$ In corporate China, the practice of hiring fake commenters is widespread. As one former employee of a big Chinese tech company put it: “Hiring water armies is part of every public relations manager’s toolkit.”

Live streaming platform Douyu to enforce 'patriotic education' after state criticism · TechNode Live streamer Chen Yifaer (陈一发儿) landed in hot water after netizens reported her to authorities. Local internet content and security department of the police in Jiangsu province published a release on Chinese Twitter-like platform Weibo stating that in 2016, Chen joked about historical content including the country’s war trauma (in Chinese).

The secret to WeChat mini-games' success: Interview with Li Qing, director of mini-games department · TechNode 100 days after the launch of mini-games, WeChat published its commercialization statistics: daily ad views on its platform were over 10 million, eCPM (earnings on every 1000 ad views) were more than RMB 80. From just 17 mini-games initially (exemplified by the game Tiao Yi Tiao), there are now over 2000 mini-games.

Alibaba Discloses Increase in Ofo Stake - Caixin Global Alibaba pumps $343 million into Ofo through acquisition of existing and newly issued preferred shares; Move comes amid speculation that Ofo will sell itself to Didi Chuxing, a claim that both companies deny


Society, Art, Sports, Culture And History

Religious sites in China to raise national flag to enhance national identity - Global Times All religious venues should raise China's national flag to strengthen awareness of respect to the flag and preserve the flag's dignity, China's major religious associations said on Tuesday. Chinese experts hailed the initiative for seeking to assimilate religion into a socialist society and as progress for religious development.

China's Marriage Rate Plummets As Women Choose To Stay Single Longer : NPR "What's happening on the ground with these particularly urban, educated women is completely at odds with what the Chinese government wants the women to be doing," says Leta Hong Fincher, author of the forthcoming book Betraying Big Brother: The Feminist Awakening in China. Hong Fincher says China's Communist Party has tried propaganda campaigns, matchmaking events, and even ended the decades-old one-child policy in 2016 to persuade educated young women to marry and start families. But declining birthrates show none of this is working.

Beijing NGOs, law firm launch anti-sexual harassment network - Global Times The Maple Women's Psychological Counseling Center, Beijing-based NGO Equality, and Qianqian Law Firm established the network on Monday following recent allegations of sexual harassment and assault against prominent Chinese media professionals, charity activists and intellectuals. The network will provide help in several aspects, including legal consultations, legal aid, psychological counseling and media assistance. Training courses would be given to help protect women from sexual harassment.


Energy, Environment, Science And Health

Greenpeace responds to China's $2.5bn loan for Kusile power station Senior climate and energy campaign manager at Greenpeace Africa, Melita Steele, has said: "With China's emerging and ever-strengthening leadership on climate change and her competitive advantage on renewable energy, Greenpeace Africa is disappointed that China is choosing to support dirty coal in a country like South Africa.”

Nobel laureate to build medical laboratory in Shenzhen - Xinhua Randy W. Schekman, a 2013 Nobel Prize winner in Physiology or Medicine, announced Tuesday that he, along with two Chinese hospitals, would build a medical laboratory in the city of Shenzhen, south China's Guangdong Province.


Agriculture And Rural Issues

Andrew Ng's Partners With Zoomlion To Empower China's Agricultural Manufacturing – China Money Network After applying artificial intelligence in electronics manufacturing, Andrew Ng, former chief scientist at Baidu and co-founder of the Google Brain, now wants to empower China’s agriculture sector with AI. Ng’s company has signed a strategic partnership with Chinese construction machinery manufacturer Zoomlion Heavy Industry Science and Technology Co., Ltd., yesterday.