"Peking Duck Summit"; Wang Qishan In People's Daily, New Head of United Front, Wang Huning As Xi's Brain; Deleveraging with Chinese Characteristics-Sinocism 11.07.17

President Trump will get a tour of the Forbidden City Wednesday afternoon and then have a family dinner with Xi Jinping and Peng Liyuan. It is not clear if Jared Kushner will attend the family dinner. First Lady Melania Trump is apparently scheduled to return to the US from Beijing on Friday afternoon, after some additional sightseeing Friday.

North Korea will be at the top of the agenda. Trump just said in South Korea that “President Xi has been very helpful. You’ll find out how helpful soon.” It would make sense that Xi may try to take some initiative, to get out front of the US. There is no question that the Trump administration pressure has moved Beijing further than any previous US administration, so for that Trump deserves credit.

Expect lots of yuge, happy trade deal announcements but do not fully fall for the hype as many will just be MOUs. It will be a waste of US leverage if no structural changes are agreed upon. Xi, as powerful as he is coming out of the 19th Party Congress, does not want a bad US-China relationship and while he will not move on what China calls its "core interests" like Taiwan and the South China Sea, appropriately applied US leverage and pressure could result in some real movement on structural trade issues.

Human rights should be on the agenda, and especially the plight of Liu Xia, widow of Liu Xiaobo. This visit may be the best chance she has to leave China, and I am hopeful that the Trump team will push to make that happen.

Expect a fairly happy summit, but, as yesterday's newsletter also discussed, the hangover from the Party may be quick. Orville Schell, covering the Asia trip on assignment for Vanity Fair, is not optimistic that any happy Beijing times for Trump will last--On the Road with Trump in Asia | ChinaFile - Orville Schell:

In talking with U.S. officials, I think we can expect few important public deliverables from China at this summit. Perhaps more important, we should carefully watch what happens down the line after Trump returns to Washington, in terms of how the White House responds to the reality that, in too many ways, the playing field is out of level for Americans in China. Whether you’re a businessman, a media rep, a scholar, a civil society actor, or a religious leader, the notion of reciprocity is being sorely stretched. The U.S. has been open to China, while China has been increasingly closed to us. In the weeks going forward, it would not surprise me to see the Trump Administration, despite all the niceties of Trump’s Mar-a-Lago friendship with Xi, begin to play a much harder, even confrontational, game with China in ways that may surprise us.

Such a shift would be long overdue, and could be quite effective so long as it is done as part of a coherent and consistently implemented strategy.

Thanks for reading.

The Essential Eight

1. Trump Goes To Beijing

Senator Rubio and Representative Smith send Trump a letter ahead of his Beijing visit--Chairs Urge President to Challenge Chinese Government To Abide by Its International Commitments | Congressional-Executive Commission on China:

The letter contains recommendations that can be used to frame discussions with Chinese leaders during the trip and after, including emphasizing issues of reciprocity, digital protectionism, Internet freedom, Hong Kong’s autonomy, and the release of political and religious prisoners, such as Liu Xia, the widow of Nobel Prize Laureate Liu Xiaobo.  The Chairs also urged an end to China’s support for the Maduro regime in Venezuela.

Wakeup Call for Chinese Banks on North Korea Sanctions | Foundation for Defense of Democracies:

The most significant element of the advisory is Treasury’s finding “that bank accounts used by [Chinese and Hong Kong-based] sanctioned persons are maintained predominantly at major Chinese financial institutions.” This is a clear warning shot intended for the Chinese banking sector, which includes some of the largest banks in the world. Treasury just told those banks they are exposed to North Korea sanctions activities, which could result in sizable penalties.

Comment: The US may have more visibility into some of the account holders at PRC banks than the PRC banks themselves do given how convoluted some of their systems are. My understanding is that the banks Treasury has approached to discuss problematic accounts have been very serious about trying to address the issues as they are quite worried about massive fines or even a cut off from the US financial system. This newsletter a couple of times in recent months has suggested a likely target is China Merchants Bank. It is big enough to send a serious message, not quite as nuclear a move as targeting one of China's big four.

China downplays role in US opioid epidemic - CNN:

US President Donald Trump last week declared the opioid crisis a public health emergency and promised to make the issue a top priority when he meets with Chinese counterpart Xi Jinping in Beijing next week. Trump said he expected Xi to "do something about it."

"While we don't deny that some fentanyl substances abused in the US have come from China, we don't see sufficient evidence ... that most of them have come from China," said Wei Xiaojun, deputy secretary-general of National Narcotics Control Commission, China's top drug enforcement agency.

Forbidden City to welcome Trump, first lady on Wednesday: ambassador - Global Times:

The doors of the Forbidden City in Beijing will open to the first family of the US on Wednesday when President Donald Trump visits Beijing, according to the US ambassador to China.

"The Forbidden City in the first night will include the first families of China and the US, and I believe that will be very personal and special occasion," Branstad told reporters on Monday...

Vice Foreign Minister Zheng Zeguang said Trump and his family will be treated to a "state visit-plus" experience.

"There will be significant interactions between the two leaders. The First Lady [Melania Trump] and Madame Peng [Li Yuan] will be together and visit schools," Branstad said.

Nagging Question: What is the difference between a "state visit" and a "state visit plus"?

2. Wang Huning, Xi's Brain?

Meet the mastermind behind Xi Jinping’s power - Yi Wang:

Wang’s writing over the years is so strikingly parallel to the policies Xi has adopted that he is regarded by many as the brain behind the throne, the mandarin behind the emperor. What Wang has written offers huge clues to understanding where China is headed.

The Hidden Ruler: Wang Huning and the Making of Contemporary China: Journal of Contemporary China—By Yi Wang:

The article provides the first comprehensive examination of the life and thought of Wang Huning, member of the Politburo, advisor to three Chinese leaders and important contributor to major political conceptual formulations in contemporary China. In doing so, it seeks to derive insights into the role of intellectuals in China, and what this says about Chinese politics. It argues that, although initially reluctant to enter politics, Wang has become in effect a ‘hidden leader’, exercising far-reaching influence on the nature of Chinese politics, thereby revealing the fundamental tensions in contemporary Chinese politics, shaped by major political debates concerning stability, economic growth and legitimacy.

The meaning of the man behind China’s ideology - Banyan - The Economist $$:

But in ways that would be understood by another adviser who reached the pinnacle of power, Donald Trump’s former strategist, Stephen Bannon, Mr Wang sees a world divided by fundamentally different values and cultures. Mr Wang’s book prophesies that, following the rise of Japan, other races would challenge American primacy, and the American system based on “self-defeating” notions such as liberty and democracy would find itself in crisis. Mr Xi does not yet say this. But he has started to claim that China should “take centre stage in the world” and that its model of development presents “a new choice for other countries”. That is Wang-think. Don’t say you were never warned.

3. Wang Qishan Chapter Excerpt Runs In People's Daily

China's former top graft-buster warns of plots to seize power - Reuters:

Writing in the party’s official People’s Daily, Wang said the fight against corruption went beyond battling the pilfering of assets or hedonism and was a political battle.

“Political corruption is the biggest corruption,” Wang wrote in comments drawn from a collection of essays released after the congress, but not previously published in full by state media....

Wang explicitly linked some of the most notorious cases to political crimes, mentioning not only Zhou but also the former party bosses of the southwestern city of Chongqing, Bo Xilai and Sun Zhengcai, two former top generals and a former top aide to retired president Hu Jintao.

王岐山:开启新时代 踏上新征程- 人民日报:



Comment: If I am Wen Jiabao I am starting to get nervous for myself and my family…

Potential next act for trusted Xi adviser - Axios - Deborah Lehr:

Rumor has it that he will be announced as China's next vice president — a clever move by President Xi if true. Wang had hit the informal retirement age on the standing committee, but the vice presidency has no upper age limit, nor a requirement that the officeholder be a standing committee member. Its incumbent, Li Yuanchao, was once a rising star but has lately been sidelined.

Comment: Wang is an expert barbarian handler and an especially good American whisperer so this could make sense. I highly doubt he would get the top job at the forthcoming National Supervision Commission; Zhao Leji seems the logical choice for that role.

4. You Quan Takes Over The United Front Work Department

Comment: You Quan is the new head of the United Front Work Department. He recently transferred to Beijing after serving as Fujian Party Secretary. You is another member of Team Xi, and this move is likely another good indication of just how seriously Xi views United Front work.

Head of China's united front work stresses consistency with CPC - Xinhua:

You Quan, head of the United Front Work Department of the Communist Party of China (CPC) Central Committee, said Tuesday the united front should always remain consistent with the CPC Central Committee. You, who is also member of the CPC Central Committee Secretariat, made the remarks at a meeting for people with no party affiliations, non-Communist intellectuals, and those from new social classes to study and implement the spirit of the 19th CPC National Congress.


5. Deleveraging With Chinese Characteristics?

Are Urban Investment Firms Really Going Solo? - Caixin Global:

As Beijing continues to rein in excessive government borrowing, several companies set up by local officials to act as financing platforms for infrastructure projects have announced they are cutting official ties. ..

In May, six central government bodies, including the Ministry of Finance, the central bank and the National Development and Reform Commission issued a circular on local government debt management that required urban investment companies to promise not to engage in financing for governments before they can issue new bonds. Companies have rushed to make such promises with an eye on skirting financing restrictions, said Xu Hanfei, an analyst at Merchant Securities.

Another fixed-income analyst told Caixin that some financial institutions already require urban investment companies to provide such a statement as a prerequisite of getting a new loan.

“These announcements are merely symbolic,” said the analyst, as most of the companies have retained their close government ties.


China Firms Have Found a Way to Cut Debt, at Least on Paper - Bloomberg:

Sales of perpetual notes -- long-dated securities that can be listed as equity rather than debt on balance sheets given that in theory they could never mature -- have soared to a record this year as Beijing zeros in on leverage and the threat it poses to the financial system. The bonds are so popular that issuance by non-bank firms has jumped to the equivalent of 433 billion yuan ($65 billion), more than seven times sales by companies in the U.S.

6. Patriotism, Protests, Grim Times in Hong Kong

Their Sons Sought a More Democratic Hong Kong, and Got Prison - The New York Times:

On Tuesday, the city’s highest court said it would hear their appeals. All three — Joshua Wong, 21; Alex Chow, 27; and Nathan Law, 24 — are free on bail pending the outcome of the appeal.

For the young men, the sentences are time lost from studies or budding careers, and a black mark on their futures.

But they are also a burden for their parents, who have endured the anguish of seeing their sons taken away in handcuffs. In rare interviews, they shared the heartbreak and pride of watching their children come of age as leaders of a protest movement for free elections.

Ex-chief exec. CY Leung says young Hongkongers have incorrect understanding of 'country' | Hong Kong Free Press HKFP:

Another speaker, Hang Lung Properties chair Ronnie Chan, said Hong Kong people were of the group with the least idea of their country in the world. He blamed the colonial government for creating generations of people without any concept of the country, because the British did not want Hongkongers to move to the UK, or know China.

Comment: Is that why he became a US citizen?

7. Air Pollution Crackdown Making Progress?

Air pollution battle is crucial to China's public health, study says - Phys.org:

Lead author Yixuan Zheng said: "Exposure to PM2.5 can cause adverse health effects including cardiovascular and respiratory morbidity and mortality, and outdoor PM2.5 exposure contributed to approximately 1.22 million deaths in China in 2013.

"The Chinese government has made well-publicised moves to improve air quality and reduce pollution across the whole country, through its Air Pollution Prevention and Control Action Plan (the action plan). Our study marks the first estimates of the impact of this stringent action plan on pollution levels and mortality rates from 2013 to 2015."

The research confirms the effectiveness of China's clean air action. The results show that the action plan led to a 21 per cent reduction of population-weighted mean PM2.5 concentration in just two years.

8. An Interview With Jia Yueting, Founder of The LeEco Conglomerate

Tencent's "Prism" interviews LeEco founder Jia Yueting on November 2 in California. Jia says he will not return to China until he has raised more funds for Faraday Future because if he returns to the PRC he may be prevented from leaving and that would hurt Faraday...Did he mention he has a Beijing for sale too?

The LeEco conglomerate may turn out to be one of the great tech frauds of this era. Several Chinext officials have been detained, rumored to be in part due to arppoving the Leshi IPO-Former Leshi IPO committee members detained over troubled video content firm’s 2010 fundraising | South China Morning Post

Jia at one point left the country around the time of the Ling Wancheng flight and Ling Jihua arrest. His connections with the Ling brothers has never fully come to light but there is no way he raised so much money so fast without some sort of higher level support.

《棱镜》独家对话贾跃亭:赴美这四月我想了些什么|界面新闻 · 科技

Business, Economy, Finance And Trade

Foreign credit card firms hit JV obstacle in China push - Reuters China is pressing foreign payment card companies to form local joint ventures for onshore operations, said three people familiar with the matter, a move that would counter a pledge on market access Beijing made to U.S. President Donald Trump.

China Dealmaker Pays Koch Industries $2 Billion for Lycra Empire - Bloomberg China’s Shandong Ruyi Group is paying more than $2 billion to buy the owner of Lycra, the form-fitting elastic material used in everything from skinny jeans to yoga pants, people with knowledge of the matter said.

The root cause of China’s financial fragility – according to its central bank chief | South China Morning Post Qingdao University economics professor Yi Xianrong said such a blunt accusation was rare from a Chinese official. Yi said China’s monetary policy had been held hostage by “the investment impulse of local governments”. “It has been that way for a long time and I don’t see signs of change as long as GDP remains key to assessing local officials’ performance,” he sai

China Hongqiao tries to block negative reports by short-sellers The attempt to remove reports circulating for months was uncommon, people in the hedge fund industry said. However, short-sellers have faced setbacks this year when taking on Hong Kong-listed Chinese groups, highlighted by the ruling against US-based Citron Research over a report on Chinese property developer Evergrade.

Chinese police to step up crackdown on financial crime - Reuters The ministry has launched a number of targeted actions to clamp down on illegal fundraising, financial frauds, pyramid schemes, fake currencies, underground banks and bank card crimes, it said. 公安部:依法严厉打击金融犯罪 坚决维护国家金融安全

Hottest Asia Stock Evergrande Fuels 500% Rally With Stake Sale - Bloomberg Once China’s most-indebted developer, Evergrande has surged more than 500 percent this year, the top performer in the MSCI Asia Pacific Index, partly through its efforts to reduce leverage. Also in the mix: the prospect of a higher valuation through a backdoor listing of Hengda’s assets in China, share buybacks to fight off short-sellers, and signs of industry consolidation.

Central Bank Wants to Regulate Fintech Like Banking - Caixin Global Financial technology (fintech) companies, especially the sizable ones, should fall under the same risk assessment framework as banks, an official from China’s central bank said. Back in August, the People’s Bank of China (PBOC) for the first time said it wanted to include internet finance companies in its Macro Prudential Assessment framework, a risk monitoring and mitigation system designated for banks.

Former Minsheng Executive Expelled From Party for Allegedly Taking Bribes - Caixin Global  Lin Xiaoxuan, who last worked at China Minsheng Bank as chief information officer, has been expelled from the Communist Party of China due to allegations of bribery, the country’s top graft-buster said in a statement Monday.

Politics, Law And Ideology

Second volume of Xi's book on governance published - Xinhua The second volume of "Xi Jinping: The Governance of China" collects 99 of Xi's speeches, conversations, instructions and letters, as well as 29 photos of the Chinese leader, between Aug. 18, 2014 and Sept. 29, 2017, the Foreign Languages Press said in a statement. The articles are divided into 17 topics and the book also adds some necessary annotations to improve readers' understanding, according to the statement. 《习近平谈治国理政》第二卷中英文版出版发行  // Comment: Did Mark Zuckerberg get an advance copy on his recent trip to Beijing?

NPCSC Criminalized National Anthem Disrespect, Applied National Anthem Law to SARs & Authorized Nationwide Supervision System and Armed Police Reforms – NPC Observer Decision to authorize reform of the People’s Armed Police (PAP). This decision authorizes the suspension of provisions in the National Defense Law and the People’s Armed Police Law that relate to the PAP’s “leadership and command structure, functions and missions, rank system, safeguard system, and troop deployment and mobilization” (领导指挥体制、职能任务、警衔制度、保障体制、部队部署和兵力调动). According to previous media reports (now censored), the reform seeks to eliminate the existing dual-leadership structure—that is, the PAP now answers to both the Central Military Commission and the State Council—by removing the latter from the chain of command. Explanation (not yet available). This should potentially include a lot more details of the reform.

People's Republic of China Supervision Law (draft translation) - Chain Law Translate Article 2: Uphold the leadership of the Communist Party of China over supervision work, building a supervision system with Chinese characteristics; establish a centralized and unified, authoritative, authoritative and effective anti-corruption system; strengthening the Party and national self-supervision, advancing modernization of the national governance system and governance capacity.

Foreign and Military Affairs

Xi sends condolences to Trump on deadly Texas shooting - Xinhua In his message of condolences, Xi expressed his deep sorrow to the innocent victims, extended sincere sympathy to the injured and the families of the victims, and wished the injured a quick recovery. // Comment: Report on the condolences was top right of Tuesday People's Daily. You know the editors were gleeful that they could post it...the propaganda writes itself sometimes

Chinese fear rising US gun violence - Global Times Many Chinese parents have started to put more importance on security in deciding whether to send their children overseas for studies, Vivi, a Shenzhen-based consultant advising  Chinese students who wish to study in the US, told the Global Times. "Some parents prefer to send their children for studies in Canada, Australia and the UK instead of the US," Vivi said. But Vivi added that the US remains attractive to parents for its quality of education.

Military pledges total loyalty to Xi - China Daily "We must carve the word 'war' into our hearts, and be prepared to fight at any moment," Cui Jiabin, a brigade commander of an aviation unit, told Xinhua News Agency. "We have to fuse the duties of preparing and training for war into our minds, and be a part of our consciousness," he said.

Ex-Spy On What His CIA Experience Taught Him About China : NPR Randy Phillips spent 28 years with the CIA, most recently serving as the chief CIA representative in China. He talks about what the U.S.'s leverage is when it comes to managing China's ambitions.

General Secretary of the CPV Central Committee and Prime Minister of Vietnam Meet with Wang Yi Wang Yi thanked Vietnam for its high attention and sincere congratulation to the 19th CPC National Congress. He introduced the main spirit of the 19th CPC National Congress, and said that the destination of General Secretary and President Xi Jinping' first visit is Vietnam after the 19th CPC National Congress, which fully reflects the high importance China has attached to China-Vietnam relations

Bolton: China Has Been ‘Cheating, Stealing Intellectual Property, Discriminating Against Foreign Investors’ - Breitbart “I think what Trump needs to do here is say, ‘Look, we can solve this the hard way or we can solve this the easy way. The easy way is, we cooperate either to reunite the peninsula, bring down the North Korean regime, and substitute it with somebody who’s really prepared to give up nuclear weapons, or the United States is not going to leave North Korea in possession of nuclear weapons.’ That’s what Trump said in his U.N. speech in September. Denuclearization is the only way forward,” he advised.  //  Comment: Bolton seems to frequently be mentioned as a possible next National Security Advisor

What do Chinese people really think about Donald Trump? | South China Morning Post “For us it’s not much different from the [TV show] House of Cards. It’s like we [in China] are just like watching a fire from across a river,” he said. “The chaos is theirs. The more dramatic it gets, the more fun it is to watch.”

China Aerospace Studies Institute CASI's mission is to advance understanding of the capabilities, development, operating concepts, strategy, doctrine, personnel, organization, and limitations of China's aerospace forces, which include: the PLA Air Force (PLAAF); PLA Naval Aviation (PLAN Aviation); PLA Army Aviation; PLA Rocket Force (PLARF); the Strategic Support Force (PLASSF), primarily space and cyber; the civilian and commercial infrastructure that supports the above.

China Wants Its Eye in the Sky to See More of the World - Caixin Global  There are 23 Beidou satellites in orbit, but their coverage is limited to China and its neighbors. The expanded system will allow China to reduce its reliance on foreign services such as GPS, which was developed by the U.S., or Russia’s Glonass, which is consists of 24 satellites. The Chinese system will also compete with the Galileo navigation system that is currently being developed by the European Space Agency.

Tech And Media

Stan Lee's Chinese Panda Hero to Meet Global Audience in 2018 | CFI The animation is still in the making and will be released globally in 2018, according to sources familiar with the matter. Fully funded by Chinese investors, ‘Panda vs. Aliens’ is executive produced by Stan Lee and produced by a Hollywood crew.

Tencent's Honour Loses Top Spot in China After Year-Long Run - Bloomberg The new game from NetEase Inc., which translates roughly as “survival in the wilderness,” took the top spot on Nov. 4, according to researcher App Annie. It features similar game play to PlayerUnknown’s Battlegrounds, including parachuting 100 players onto an island, having them scavenge for armor and weapons before a battle to the death.

Bilibili and regulation: How one video company is thriving on youth-generated content - TechNode In the past eight years, Bilibili has evolved from an obscure and sometimes marginalized community for anime, comic, and gaming (ACG) fans into a “spiritual home” for over 7,000 culture groups that has turned the heads of Chinese tech titans. A whopping 90% of its users are under 25, who post, view, and comment on videos in the form of danmu, real-time audience commentaries that roll across and atop the streamed videos.

Bargaining chip? China seen closely scrutinizing Qualcomm, Broadcom deal - Reuters “This is a critical industry for China and Qualcomm has been fined by the Ministry of Commerce (Mofcom) before so it’s on its radar,” said Wendy Yan, Shanghai-based partner at law firm Faegre Baker Daniels.

Reality TV Show Sends Chinese Stars Back to Acting School - Sixth Tone “The Birth of Actors” — or “Yanyuande Dansheng” in Chinese — debuted on Zhejiang Satellite TV in October and has already received 330 million online views for just its first two episodes. The show has reignited debate on social media about the dubious acting skills of some millennial stars.

Huawei Holds On to China Smartphone Crown - Caixin Global Oppo gained ground on Huawei in the Chinese smartphone market during the third quarter, as the former tried to regain the title of top dog in the world’s largest market, according to new data released on Monday. At the same time, U.S. giant Apple Inc. recaptured some ground, ending nearly two years of decline in a market that accounts for about a fifth of its global sales

Society, Art, Sports, Culture And History

China's Official 2018 Holiday Calendar Announced Earlier Than Ever! | the Beijinger 2018's calendar has been announced a full three weeks ahead of last year's release

Energy, Environment, Science And Health

Doctor Ordered to Pay $2,300 for Telling Man to Stop Smoking - Sixth Tone A doctor in central China has found himself 15,000 yuan ($2,300) out-of-pocket after an elderly man he chastised for smoking in an elevator had a fatal heart attack. A district court in Zhengzhou, the capital of Henan province, ordered him to pay compensation to the deceased smoker’s family, Beijing Youth Daily reported Saturday, despite concluding that he did not cause the older man’s death.


Experiment-Chinese Proficiency and Vocabulary Tests (Introduction) The goal of the project is to understand the language abilities of experienced second language learners of Mandarin Chinese. There are two phases to this study. First, you will be asked to take some short tests (about 10 minutes total time) to check your eligibility for the study. If you are eligible after taking the online tests, we will contact you and arrange for you to come to the language lab at Beijing Normal University to participate in further research involving longer tests using EEG (a cap that reads neural activity) and computer administered tests. Participation in that research would take between 2 and 3 hours, and you would be compensated with $15.00 (100RMB) per hour

Books And Literature

China Reinvents Literature (Profitably) - Bloomberg On Wednesday, China Literature Ltd., the country's biggest online publisher, will go public in Hong Kong, with a market value expected to exceed $6 billion. Its success should put the rest of the publishing industry on notice that the future of the book is being written in China -- and it looks nothing like the past.


Beijing first failed land sale in two years shows developers’ woes | South China Morning Post It is the first failed residential land sale since September 2015 after the central and local governments rolled out a slew of measures across Chinese cities to dampen land and property prices, which have hurt developers’ expansion and sales income.