Rare earths; US-Taiwan; Tomorrow Group bank seized; Peking U crackdown

Hi everyone, the downside of long weekends is I find myself way behind. Today’s newsletter is a long one, apologies but there is a lot going on.

Some things on my radar:

  • China looks to be seriously considering using rare earth export restrictions as a countermeasure against the US, based on comments Tuesday out of the NDRC;

  • The propaganda rhetoric against the US shows no signs of waning, the key messaging appears to be, unsurprisingly, that China is the innocent victim of American bullying and hegemony in furtherance of America’s plot to thwart China’s rise, all while China remains open to the world and is now the responsible power;

  • It is a week until the 30th anniversary of the June 4th massacre, expect a slower Internet in China and a lot of twitchy security workers until it has passed;

  • The next leg down in US-China relations may come on June 4th if, as I understand, US Vice President Pence will deliver another speech on China, and this one may be even fierier than the one he gave last October;

  • The Taiwan National Security Advisor visited DC last week and met with John Bolton, and the Taiwan’s de facto embassy here changed its name from the Coordination Council for North American Affairs (CCNAA) to the Taiwan Council for U.S. Affairs (TCUSA). The visit, and the publicizing of it, is another sign the US is flexing the US-China relationship across many dimensions, not just trade.

Thanks for reading.


The Essential Eight

1. Rare earths threats

China indicates it may use rare earths as weapon in trade war - Global Times

China indicated Tuesday night that it may weaponize its rare earths in an escalation of the trade war with the US, according to a Chinese official from the country's top state economy planner.

"If any country wants to use products made of China's rare earth exports to contain China's development, the Chinese people would not be happy with that," said a spokesperson from the National Development and Reform Commission (NDRC), China's state planner, when asked about whether rare earths will be used as a countering weapon in the China-US trade war..

Scaling down rare-earth exports to the US is "a smart hit" against the US crackdown on Huawei and the US-China trade war, Wu Chenhui, an independent rare-earth analyst, told the Global Times on Tuesday. The latest move is also seen as China's retaliation for the US export control of its high technologies to China, and as a strategic material, the export of China's rare earths has to be adjusted now, analysts said. 

"It could inflict substantial damage on the US military and tech industry, as rare earths are a key material in manufacturing chips, radar, fiber optics, night vision goggles, missile guiding systems, and tank armor," he said. "Just name a few big name US companies like Apple, Qualcomm and Raytheon… they could suffer a lot from the countermeasures."

The NDRC’s spokesperson’s comments-[稀土可能成为中国对美反制的重要筹码?发改委回应_网易新闻

你提出稀土是否会成为中国反制美方无端打压的反制武器,我可以告诉你的是,如果有谁想利用我们出口稀土所制造的产品,反用于遏制打压中国的发展,那么我想赣南原中央苏区人民、中国人民都会不高兴的。

China to prioritize domestic demand for rare earths: planning official - Reuters

A senior official from China’s state planner said the country would give priority to domestic demand for rare earths, but is willing to meet other countries’ reasonable demand of for resources, state media report on Tuesday.


2. US-China trade

U.S. `Not Ready' to Make a Trade Deal With China, Trump Says - Bloomberg

“I think they probably wish they made the deal that they had on the table before they tried to renegotiate it,” Trump said Monday at a joint press conference in Tokyo alongside Japanese leader Shinzo Abe. “They would like to make a deal. We’re not ready to make a deal.”

China says U.S. demand on its state-owned enterprises is 'invasion' on economic sovereignty - Reuters

“At the negotiating table, the U.S. government presented a number of arrogant demands to China, including restricting the development of state-owned enterprises,” Xinhua said in a commentary...

“Obviously, this is beyond the scope of trade negotiations and touches on China’s fundamental economic system,” Xinhua said.

“This shows that behind the United States’ trade war against China, it is trying to invade China’s economic sovereignty and force China to damage its core interests.”

The original commentary - 5 major global threats from the trade war the US has launched against China 述评:美国发动对华贸易战的五大世界性危害

The one on violating China's sovereignty - 恣意侵犯别国经济主权:

在谈判桌上,美国政府向中国提出了多项蛮横要求,其中包括限制国企经营发展等。显然,这超出了贸易谈判的领域和范畴,触及了中国的基本经济制度。

这表明,美国发动对华贸易战的背后,是试图侵犯中国经济主权,逼迫中国损害自身核心利益。

The other 4:

重挫世界经济增长 ; setting back global economic growth

严重破坏国际经济秩序; severely damaging the global economic order

制造全球经济新失衡; creating a new imbalance in the global economy

“破坏性政府变量” becoming a "destructive government variable"

Was this the moment US-China trade talks fell apart? | South China Morning Post

Two separate Chinese sources told the South China Morning Post that the talks hit a snag because the US side “kept adding new demands in the late stages of the negotiations”. They said “some of these would directly affect China’s political and social stability”. Beijing was particularly angered by the additional tariffs and what it saw as the US’ attempt to shift the blame to China.

“The real reason is that the US side keep changing their demands,” one source said. “There were so many changes that we can’t [keep giving in]. And then they turned around and accused us of backtracking.”

Comment: This story definitely jibes with the daily claims from Beijing that America is to blame.

China Regulator Downplays Trade War Impact, Warns on FX - Bloomberg

Higher U.S. tariffs will have a “very limited” impact on China’s economy even if it raises levies to the maximum level, and would hurt the U.S. about as much, according to a speech by Guo Shuqing, head of China’s banking and insurance regulator, and delivered at a forum in Beijing by a spokesman for the agency Saturday.

Guo, also the People’s Bank of China’s Party Secretary, is the highest-ranking financial official so far to publicly comment on the trade war since bilateral negotiations deteriorated earlier this month. His speech warned speculators that shorting the yuan would cause them to suffer great losses.

U.S. Is Learning That China Likes Its Own Model - WSJ $$

“China sees itself less as slotting into an existing system and more as a creator and shaper of a new system,” says Keyu Jin, a professor at the London School of Economics and an expert on the Chinese economy. “It finds the so-called Western financial wisdom and the liberal democratic model unappealing and unconvincing, and in the process of breaking down.”

Chinese Film Studios Are Blacklisting Americans – Foreign Policy

As yet, there’s no official order to forbid the casting of Americans, according to sources close to the matter. Instead, the decision has been made by TV chiefs acting in anticipation or fear of such a condition being imposed or expected of them in the future, the sources said

US trade hawk hunts bigger fish in Trump’s China battles | Financial Times $$

Ms Nikakhtar is the acting head of the commerce department’s bureau of industry and security...

“There’s no question she’s hawkish. She believes that far too much of the supply chain has moved to China and that whether pursuing self-interest or not, companies have prioritised the short term over the national interest,” said one person familiar with her views.

Trump planning more restrictions on tech exports to China - POLITICO

The Commerce Department will soon recommend rolling back regulations making it easier for U.S. companies to export certain goods that have both civilian and military purposes, the people said. Commerce will also recommend ending a general policy of approving export licenses for that group of goods if they go to civilian use and instead require reviews on a case-by-case basis.


3. Propaganda reactions

After trade talks, China press crafts a controlled nationalist narrative - Columbia Journalism Review

Cheng Yizhong, a veteran Chinese journalist, considers the media treatment of the trade war to feed into a narrative that the public is increasingly buying into: China has become so rich and powerful that it is now a real threat to America, and America wants to contain it. “The message from the Chinese government is: ‘There will be tough times ahead, and Americans are responsible. Blame America, not us,’” Cheng says.

Commentary: China's utmost sincerity in trade talks a sign of strength - Xinhua

Scapegoating China for its trade imbalance and even some of its domestic economic issues, the United States is attempting to squeeze an unequal trade deal out of China, using measures such as tariff hikes and targeting its tech companies...

China is clear about the United States' intentions and well-prepared for any potential challenges. U.S. hawks should abandon their Cold War mentality, return to reason and show sincerity in their trade negotiations with China.

Friday CCTV “International sharp commentary”, this one on America's Huawei actions. Nice threats about companies losing access to the market of 1.4 billion, Remarkable attention from central party media in rallying around a private company... - 国际锐评】企图封堵十四亿人口的大市场,是痴人说梦!_CCTV

Saturday CCTV "International sharp commentary" - "The big stick of tariffs will not scare foreign enterprises to pull out of China" -【国际锐评】关税大棒吓退不了在华外企_CCTV

Sunday CCTV "International sharp commentary" "Paranoid delusions are impacting the cornerstone of US-China relations" on the growing pressures on ethnic Chinese in the US - [视频]国际锐评:“被害妄想症”作祟 冲击中美关系基石_CCTV

Monday Zhong Sheng says "American Exceptionalism" is a dangerous theory of civilization superiority, and its double standards are destined to fail - 人民日报署名文章:“美国例外”是有害的文明优越论——双重标准必将失败-新华网

Hegemonic practices of US will finally lead to failure - Zhong Sheng - People's Daily

Why the US politicians are still dreaming about the "chosen nation" and "shining city upon a hill"? It's because they still believe in the old philosophy that might is right, and perceives the world with a "law-of-the-jungle" mentality. Besides, they are taking international relations as a "clash of civilizations".

This explains why the US government always calls itself a monitor of global orders and a judge of international relations.

The original 玩弄强权注定失道寡助(钟声)——唯我独尊必将失败

Tuesday CCTV "International sharp commentary" - International capital is placing a firm vote of confidence about China's economy - 国际锐评:国际资本再次对中国经济投下坚定的信任票_CCTV

INTERVIEW: Liu Mingfu: China dreams of overtaking U.S. in 30 years:The Asahi Shimbun

"The China Dream" was written by Liu Mingfu, a professor at China's National Defense University and a retired colonel in the People's Liberation Army.

Liu, who has long been known as a hawkish proponent of Chinese military power, was recently interviewed by The Asahi Shimbun in Beijing...

Over the next 30 years, the strategic competition between China and the United States will be at a major scale that we have never experienced before.

In fact, I feel a 'new Cold War' between China and the United States started a number of years ago.

The rebalancing strategy used by the Barack Obama administration placing emphasis on the Asia-Pacific region was the first move toward a new Cold War with China.

The Trump administration's vision for a 'free and open Indo-Pacific' can be considered the second such move.

It has now started a 'trade war' and a 'science and technology war.' Applying pressure on Huawei, which is only a single Chinese corporation, is going way out of line.

The new Cold War is becoming even more serious because not only has a trade war been added, but pressure is also being applied over a wider range, including on the Taiwan issue...

A further worsening of China-U.S. relations will be unavoidable. The most dangerous period will be the next 10 years.

Spotlight: Renowned American scholar urges U.S. to stop scapegoating China - Xinhua

China's remarkable development during the past decades has been done in a fair, reasonable way, and the United States should stop making China a "scapegoat" for its own problems of inequality, said a world-renowned U.S. expert.

"China has been playing by Western rules for the past 40 years, gradually catching up the way that America's Asian allies did in the past," Jeffrey David Sachs, a senior UN advisor and director of the Center for Sustainable Development at the New York-based Columbia University, wrote in an article published on CNN's website over the weekend.

Anchors from China’s state TV and Fox are facing off - The Washington Post

After weeks of back-and-forth sniping on television and Twitter, Trish Regan from the Fox Business Network and Liu Xin from China Global Television Network are facing off Wednesday night on Regan’s show to argue on behalf of their respective governments about tariffs and technology. ..

Hashtags about the upcoming debate have been viewed upward of 150 million times, with some Weibo posts retweeted tens of thousands of times. 

Nearly all of China’s tightly controlled state media outlets have covered the Liu vs Regan showdown, often framing the anchor as a symbol of Chinese toughness and rationality. 

Comment: We hired Trish Regan for our TV business at Marketwatch.com in 2001, will admit did not see this side of her. From her segment "Trish Regan exposes China's playbook":


And I definitely need to watch more Fox News China coverage, especially going into the 2020 US election

The Chinese state media anchor taking on Fox News - Inkstone

While Americans regard Liu Xin as a spokeswoman for the Communist government, in China, she has emerged as an intrepid national heroine who is defending her homeland against an increasingly hostile West...

Chinese President Xi Jinping has urged media workers to tell China’s story better and promote its global image. And in the 2017 interview, Liu said she had for years been “telling China’s stories” to her Turkish-German husband and two Western-educated children.

Liu said during these family interactions, she realized the best way to persuade foreigners was not through aggression, but reasoning.


4. Taiwan-US

Taiwan and U.S. National Security chiefs meet... | Taiwan News

For the first time since Taiwan and the United States ended formal diplomatic relations in 1979, the two countries’ national security chiefs, David Lee (李大維) and John Bolton, met each other, reports said Saturday (May 25).

The meeting occurred during National Security Council Secretary General Lee’s May 13-31 visit to the U.S., the Central News Agency reported. Apart from National Security Adviser Bolton, Lee also exchanged views with experts at various prominent think tanks and universities.

During meetings with U.S. officials, representatives of Taiwanese diplomatic allies were also present to hear Lee confirm the island nation’s support for a free Indo-Pacific, according to the Ministry of Foreign Affairs.

Media reports speculated that the representatives hailed from Palau and the Marshall Islands, two island nations in the Pacific, where China has been trying to expand its influence at Taiwan’s expense.

Comment: I have heard that the visit was originally set as a secret, but the US side encouraged Taiwan to go public with it. Interesting if true, certainly raises the question of what kind of role some US officials see Taiwan as playing in the intensifying deterioration of US-China relations, and whether Taiwan officials risk walking into a bigger mess as a disposable bargaining chip for President Trump, as I have heard nothing to counter the idea that Trump cares little about Taiwan?

Organization's new name signifies trust between US, Taiwan: Tsai | Taiwan News

A Taiwan government organization has been renamed to include for the first time the terms "U.S." and "Taiwan," a development that President Tsai Ing-wen (蔡英文) said Saturday was a reflection of the solid mutual trust between the two countries.

On her Facebook page, Tsai said the Coordination Council for North American Affairs (CCNAA) will now be called the Taiwan Council for U.S. Affairs (TCUSA), following discussions between the two countries.

Lu Kang's comments at his Tuesday press conference:

Q: Recently there have been reports on a warming relationship between Taiwan and the US. For instance, US warships sailed through the Taiwan Strait; the Coordination Council for North American Affairs (CCNAA) was renamed the Taiwan Council for US Affairs (TCUSA); Taiwan's security chief David Lee met with US National Security Adviser John Bolton. Since the phrase "maximum pressure" has been frequently used in the context of China-US trade consultations, do you think the closer ties with Taiwan is part of the US "maximum pressure" on China? Second question, besides expressing strong opposition and urging the US to abide by the one-China principle and the three China-US joint communiques, has China taken diplomatic countermeasures?

A: You know the Chinese government's position very well.

Let me reiterate that the one-China principle is the political basis for the development of China-US relations in the past four decades. Only when the US strictly abides by this principle and the three joint communiques can there be sound development in bilateral relations and good cooperation on important issues. The US knows that very well. Therefore, regarding the recent wrong moves relating to Taiwan, China has stated its solemn position to the US side and urged it to honor its commitment under the bilateral political framework to avoid disrupting our relationship and cooperation in key areas.

Taiwan’s Online ‘Opinion War’ Arrived|Politics & Society|2019-04-27|web only

The many fake news stories that have permeated Taiwan’s media have drawn the attention of the United States.

When the flowers of spring bloom, it usually means Taiwanese political figures are flocking to the U.S. One of them who quietly went to Washington visited the State Department’s Global Engagement Center (GEC)...

According to the U.S.’s 2017 National Defense Authorization Act, the mission of the GEC is to coordinate efforts to “expose and counter foreign state and non-state propaganda and disinformation efforts aimed at undermining United States national security interests,” especially Chinese and Russian and misinformation. The Taiwanese political figure who visited was invited to share how Taiwan has been attacked and adversely affected by disinformation.


5. Huawei

Huawei’s Yearslong Rise Is Littered With Accusations of Theft and Dubious Ethics - WSJ $$

Huawei has been dogged by allegations that its gains came on the back of copying and theft. A review of 10 cases in U.S. federal courts, and dozens of interviews with U.S. officials, former employees, competitors, and collaborators suggest Huawei had a corporate culture that blurred the boundary between competitive achievement and ethically dubious methods of pursuing it.

...Cisco General Counsel Mark Chandler flew to Shenzhen to confront Mr. Ren with evidence of Huawei’s theft, which included typos from Cisco’s manuals that also appeared in Huawei’s, according to a person briefed on the matter.

Mr. Ren listened impassively and gave a one-word response: “Coincidence.”...

Huawei settled Cisco’s lawsuit in July 2004, after admitting it had copied some of Cisco’s router software

Huawei v the US: Trump risks a tech cold war | Financial Times $$

Two sources familiar with the situation say the president decided to sign the order against Huawei after his negotiators accused China of reneging on a trade deal. At a hastily-called meeting in the White House, he said he wanted to hit Huawei hard to create leverage for the trade talks. And he ordered the commerce department to add it to the so-called entity list, which makes it harder for US companies to provide hardware and software to the Chinese group.

Comment: This story also notes that "Non-US companies that sell products with at least 25 per cent American content are also caught by the new restrictions.". I hear that 25% threshold may be lowered to single digits, which would cause more problems for Huawei

Meanwhile, Ren Zhengfei appears to be reading up on legal battles with the US:

Commentary: Trade war, a turning point for China's technological innovation - Xinhua

The U.S. restriction is a wake-up call for China to cast away illusion, cut off dependence on the U.S., and become self-reliant on the supply of core technology. Good to hear the news that Huawei has been developing its own operating system.

In fact, China has many leverages to use in order to master its own fate: a complete industrial chain, a vast consumer market, and an abundant young talent pool...

It is unrealistic for the United States to stop China's technological rise simply through bans and blacklists. It is difficult to imagine that Washington would be able to stop the development of the world's most dynamic economy.

It is time for the United States to focus on its own business and compete with China in a decent way.

Huawei and the U.S. Constitution - WSJ - OpEd by Song Liuping, Huawei Chief Legal Officer $$

Congress passed a bill of attainder against us, and we’re suing.

Huawei's voice in future tech standards restricted - Nikkei Asian Review

Huawei Technologies on Friday suffered another setback in its battle against Washington's technology offensive after its access to several global standards-setting bodies was curtailed.

Huawei Ban Threatens Wireless Service in Rural Areas - The New York Times

Huawei is essential for many wireless carriers that serve sprawling, sparsely populated regions because its gear for transmitting cell signals often costs far less than other options.

No threat, only good partnership -- Huawei in eyes of U.S. rural telecom carrier - Xinhua


On top of a potential cut-off of wireless signals because of the Huawei ban, U.S. farmers have also been struggling to cope with the escalation of the U.S.-initiated trade war with China, which is depriving their products of access to the Chinese market.

Paradoxically, the two-fold pain is inflicted by their own government.

Huawei reviewing FedEx relationship, says packages 'diverted' | Reuters

FedEx China on Tuesday apologized on its Chinese social media account for the "mishandling" of Huawei packages and confirmed there was no "external pressure" to divert packages.


6. A Tomorrow Group bank seized

Chinese Government Takes Over Bank Linked to Fallen Tycoon

Zhou Xuedong, chair of the PBOC’s general office, and Li Guorong, the deputy head of the CBIRC’s commercial bank department, will lead the takeover team.

Li previously led the regulatory takeover of another private bank, Chengdu Rural Commercial Bank, in 2018, when its parent Anbang Insurance Group Co. was seized by the government after founder and former Chairman Wu Xiaohui came under investigation for fraud and embezzlement.

Baoshang is a key piece of Xiao’s sprawling business empire. Even though it’s a small, lesser-known lender based in the industrial city of Baotou in the Inner Mongolia Autonomous Region, the bank is considered to have a particularly close relationship with Tomorrow Holdings.

“Baoshang Bank doesn’t function normally as a financial institution. It’s a cash machine for Tomorrow Holdings,” a source familiar with the bank told Caixin.

The source said Baoshang Bank helped Tomorrow Holdings put together at least 150 billion yuan of funding through shadowy practices

Question: Is this a sign Xiao will soon go on trial?

Baoshang Bank’s Creditors Get Added Backstop on Deposits, Debts Worth Over 50 Million Yuan - Caixin

The People’s Bank of China and the China Banking and Insurance Regulatory Commission said in a statement Friday that they were taking over Baoshang Bank, which has links to fallen tycoon Xiao Jianhua’s conglomerate Tomorrow Holdings, for one year. The regulators said they were concerned about Baoshang’s “severe credit risk.”

The regulators also said in another statement (link in Chinese) on Sunday that all of Baoshang’s corporate deposits and interbank debts of up to 50 million yuan would be guaranteed. For those worth more than 50 million yuan, the takeover team will negotiate with creditors for further protection, according to the statement...

The rare takeover came two years after Xiao, the billionaire founder of conglomerate Tomorrow Holding, was reportedly placed under graft investigation by Chinese authorities.

Tomorrow Holding owns at least a 70% stake in Baoshang Bank through various subsidiaries, sources told Caixin.

China’s First Bank Seizure in 20 Years Sets Investors on Edge - Bloomberg

The Chinese government’s first seizure of a bank in more than two decades reverberated through markets for a second day, driving up funding costs for smaller lenders and adding pressure to shares that already trade at rock-bottom valuations.

China’s bank regulators take over Baoshang Bank, moving a step closer to breaking up financier Xiao Jianhua’s business empire | South China Morning Post

The Chinese authorities have been trying to carve up his business interests ever since Xiao left Hong Kong in January 2017 on the eve of the Lunar New Year for mainland China, where he is believed to be helping with one of the biggest investigations into deal making. Xiao has not been seen in public since, and is awaiting trial on charges of bribery and manipulating stock prices.

Comment: No South China Morning Post Xiao did not "leave", he was kidnapped from his hotel in Hong Kong and taken over the border...


7. Peking University crackdown

Excellent, disturbing story by Gerry Shih - At China's Peking University, students groomed as leaders become targets of crackdowns - The Washington Post

Today, at least 21 members of Peking University’s Marxist society — including its slight but steely leader Qiu — have been placed under house arrest or have vanished altogether. Scores more are regularly hauled in for interrogation and live under constant surveillance. Months of clashes, five waves of arrests and an influx of plainclothes police have, at moments, turned a world-leading university into a surreal battleground.

The story of Peking University’s Marxist club — as told by four members who remain secretly active and spoke on the condition of anonymity for their safety, their supporters, and a trove of writings and videos left by activists anticipating arrest — illustrates the anxious political atmosphere in China, where idealistic students who embrace the party’s own ideology can be suppressed just like any other political threat...

“The government is scared because the domestic contradictions are growing,” Michael said. “Once you study Marxism, you know real socialism and China’s so-called socialism with Chinese characteristics are two different things. They sell fascism as socialism, like a street vendor passes off dog meat as lamb.”..

Perhaps sensing the potential for unrest, the Communist Party in October appointed Qiu Shuiping, a former head of the Beijing branch of the Ministry of State Security — the feared foreign and domestic spy agency — to be Peking University’s new top official.

Orwell in the Chinese Classroom - Made In China Journal

This is the translation of a blog post published on 1 May 2019 by an anonymous Chinese student...

while members of the former Marxist student group at Peking University who have been blacklisted by the institution (there is indeed such a list with more than 30 students on it) are victims of this logic, they are not the only victims.

Everyone can see that the air on the campus today is much colder than a year ago. ‘Face-to-Face with Ideology and Politics’ playing in the canteens seems the strongest sound of this epoch.

There is no need to ask what kind of era this is. The only answer I can provide is, what kind of youth does this era need:

‘I love my wild grass, but I hate the ground decorated with it. The fire runs and rushes underground. Once lava ejects, it will burn up all wild grass and trees, and it never rots.’ (Lu Xun, Wild Grass)

Question: How can any foreign academic institution with an exchange program at Peking University guarantee the safety of its students in this environment?


8. Cybersecurity Review Measures

Tighter data storage rules could protect security, counter US crackdown on Huawei: analyst - Global Times

China is planning to further tighten regulations on internet data storage, banning the transfer of data on domestic users overseas and asking domestic and foreign companies to provide data to regulators for national security purposes, said a new draft rule.

Coming at a time when China and the US are locked in an escalating trade and technology spat, the move could be seen as a countermeasure to the US crackdown on Chinese telecom firm Huawei, as the draft rules could affect US companies such as Google, Microsoft and Amazon, analysts said.

Citing the need to protect national security and users' personal information, the Cyberspace Administration of China (CAC) released the draft regulation on Tuesday that significantly tightens rules on how companies, foreign and domestic, should handle data generated in the country. The draft rules are open for public comment until June 28.

China's Cybersecurity Reviews for 'Critical' Systems Add Focus on Supply Chain, Foreign Control (Translation)

First, U.S.–China trade discussions have touched on several major aspects of the Cybersecurity Law, including this cybersecurity review regime in specific, as well as another important set of draft measures related to cross-border data flows. Several additions to this version appear designed to address concerns raised by U.S. and European interests, and it is quite possible CAC had been waiting to release this draft in case adjustments were needed (should U.S.–China trade and economics have succeeded in time).

Second, elements of the new draft mirror U.S. actions linking political and legal issues to supply chain security, including a sweeping executive order scrutinizing the security of products or services linked to a “foreign adversary” last week, as well as ongoing U.S. efforts to persuade European and other partners to ban or restrict Huawei network equipment in their networks, including through the “Prague Proposals” on 5G security.

Yet the changes also reflect domestic developments that have little to do with the United States.

Xi sends congratulatory letter to China Int'l Big Data Industry Expo - Xinhua

"The new generation of information technology, represented by the Internet, big data and artificial intelligence, is booming at present and has significant and profound impacts on the economic development, social progress and people's lives of all countries," Xi said.

Different countries need to strengthen cooperation, deepen exchanges, grasp the opportunities of digital, internet-based and intelligent development, and properly address the legal, security and governance challenges in the development of the big data industry, he said.


Business, Economy and Trade

Shenzhen, Guangzhou to Ease Car Ownership Restrictions - Caixin The southern megacities of Guangzhou and Shenzhen will ease up on car ownership restrictions in a bid to boost China’s flagging auto sales — one of the country’s important economic drivers.

China's April Industrial Profits Fall as Trade Standoff Worsens - Bloomberg Industrial firms’ profits declined 3.7% in April from a year earlier..State-owned enterprises’ profits fell 9.7% in the first four months of 2019, while private businesses’ profits increased 4.1% during the same period

China paid record $22bn in corporate subsidies in 2018 | Financial Times $$ Payments by Beijing and local governments to listed companies rose 14 per cent year on year to Rmb153.8bn ($22.3bn) in 2018, according to corporate earnings data collected by financial database Wind.

In Depth: Risks Are Building Up in China’s Internal Finance Companies - Caixin The case of Baota Petrochemical Group was one of several reported defaults and missed debt payments over the last year that have raised the market’s hackles about risks building up in an obscure and under-regulated corner of China’s financial sector — the finance units of state-owned and private enterprises. In China, these internal finance companies are the subsidiaries set up by conglomerates and other companies to help manage their funds and keep financial risks under control.

Chinese tourism to US drops for 1st time in 15 years - AP Travel from China to the U.S. fell 5.7% in 2018 to 2.9 million visitors, according to the National Travel and Tourism Office, which collects data from U.S. Customs forms. It was the first time since 2003 that Chinese travel to the U.S. slipped from the prior year.

China confident of keeping yuan stable: central bank governor - Reuters Yi has become the latest senior official to join a verbal campaign reminding markets about China’s exchange rate policy

Economic Watch: Power consumption reveals China's economic vitality - Xinhua As a key barometer of economic activity, China's power consumption rose 5.8 percent year on year in April, reflecting a flourishing development of new economic drivers and consumption upgrading. Total power use reached 553.4 billion kilowatt hours in April. The increase of power consumption on new energy vehicles, photovoltaic production, and big data services were all over 50 percent, according to the National Energy Administration.

China releases guidelines on promoting innovation in economic, technological development zones - Xinhua The State Council, China's cabinet, has released guidelines on promoting innovation in state-level economic and technological development zones. The country should make efforts to promote innovation in the development zones in terms of opening-up, technology and mechanisms, according to the guidelines. The market should play a decisive role in allocating resources while the government should play its role better to boost market vitality and foster new drivers for growth, the guidelines said. 国务院印发《关于推进国家级经济技术开发区创新提升打造改革开放新高地的意见》

Henan province and a slowing Chinese economy - Reuters Reuters reporters travelled to six cities across Henan, from bustling Zhengzhou to the smog-choked industrial hub of Anyang in the north, interviewing dozens of residents from all walks to life to document how the economic slowdown feels in the heart of China.

Chinese firms stole sensitive data from Swiss-based competitor - SWI swissinfo.ch The SonntagsZeitungexternal link  reports that the victim of this case was a Swiss subsidiary of the Dutch company Besiexternal link, which manufactures machines that make computer chips. //Comment: And the attempts to steal tech will only intensify given the stare of things

Alibaba Is Said to Weigh Raising $20 Billion in H.K. Share Sale - Bloomberg Alibaba Group Holding Ltd. is considering raising $20 billion via a second listing in Hong Kong after a record-breaking 2014 New York debut, people with knowledge of the matter said

Xi sends congratulatory letter to CIFTIS - Xinhua Chinese President Xi Jinping sent a congratulatory letter to the 2019 China International Fair for Trade in Services (CIFTIS), which opened Tuesday in Beijing. "With the deepening of economic globalization, trade in services has become a key part of international trade and an important area for economic and trade cooperation among nations, injecting new impetus to the world economic growth," Xi said in the letter.

Politics and Law

30 Years After Tiananmen, a Chinese Military Insider Warns: Never Forget - The New York Times  Now, in the run-up to the 30th anniversary of the June 4, 1989, crackdown, Ms. Jiang, 66, has decided for the first time to tell her story...Ms. Jiang left China this week...Ms. Jiang’s account has a wider significance: She sheds new light on how military commanders tried to resist orders to use armed force to clear protesters from the square..She described her role in spreading word of a letter from senior generals opposing martial law, and gave details of other letters from commanders who warned the leadership not to use troops in Beijing. And she saw on the streets how soldiers who carried out the party’s orders shot indiscriminately as they rushed to retake Tiananmen Square...

China's robot censors crank up as Tiananmen anniversary nears - Reuters “When I first began this kind of work four years ago there was opportunity to remove the images of Tiananmen, but now the artificial intelligence is very accurate,” one of the people said. Four censors, working across Bytedance, Weibo Corp and Baidu Inc apps said they censor between 5,000-10,000 pieces of information a day, or five to seven pieces a minute, most of which they said were pornographic or violent content.

The road not taken: China after Tiananmen | Financial Times $$ Thirty years after covering the massacre, James Kynge goes in search of the dissidents who shook Beijing

Regulation issued to improve China's cadre selection, appointment - Xinhua - 中共中央办公厅印发《干部选拔任用工作监督检查和责任追究办法》--新闻报道-人民网

How Powerful Parents and a Manhole Cover Patent Helped a Serial Rapist Escape Prison Twice - Caixin Global Police in Yunnan province’s capital Kunming discovered the case when they were investigating other crimes in mid-March, according to a recent statement by provincial authorities. Sun, a suspect in the March investigation, had in fact already been sentenced to death for another crime in 1998, police found. But, if that was the case, how had Sun been living as a free man in Kunming, where he reportedly ran multiple nightclubs and was allegedly involved in criminal gang activity? The March discovery kicked off a major investigation that brought central gang-busting forces to Yunnan and caused the arrest of at least 43 people, including Sun’s mother and stepfather.

Rapist’s network probed - Global Times According the yunnan.cn, it is Sun's mother, a former police officer named Sun Heyu, and his stepfather, former deputy director of a public security bureau in Kunming, capital of Yunnan, named Li Qiaozhong, who helped Sun Xiaoguo escape death penalty 20 years ago.

Kindergarten asks teachers to inspect children on gang crimes, local official says wrong message - Global Times Authorities in Wuxi, a city in East China's Jiangsu Province said on Tuesday that the kindergarten mis-conveyed the local government's message on fighting gang crimes after a photo showing the school requests its teachers to inspect children whether they were involved in gang crimes sparked wide questions online.

China's religious leaders vow integration with Confucianism - Global Times A five-day study and experience activity on traditional Chinese culture was launched in Qufu, Jining in East China's Shandong Province on Monday. The activity was held by the United Front Work Department of the Communist Party of China Central Committee, Tongzhan Xinyu, the department's WeChat account, reported on Monday.

After Downfall of Moutai Head, Famed Spirits Maker’s Former E-Commerce Chief Arrested - Caixin Global Just days after word emerged that the company’s former chairman Yuan Renguo was being investigated for accepting massive bribes, the former head of Moutai’s e-commerce unit is also coming under the microscope. This time it’s Nie Yong who’s just been formally arrested after being booted from the company last November for inappropriate behavior.

Foreign and Defense Affairs

Jaw-Jaw: Peter Mattis on the Intentions of the Chinese Communist Party - War on the Rocks What threat does a revisionist China pose to the United States and democratically minded states around the world? Where should we look to find out the intentions of the Chinese Communist Party? If left unchecked, will China export its illiberal form of government? These and other questions are explored in this week’s episode of Jaw-Jaw.

China seeks security guarantees for Pakistan belt and road projects after terror attacks | South China Morning Post Wang met Pakistan’s Prime Minister Imran Khan during a three-day state visit to Islamabad, which concluded on Tuesday, and raised concerns for the China-Pakistan Economic Corridor (CPEC), including the need for “effective measures to provide security guarantees” for the US$62 billion network of roads, railways, and pipelines in Pakistan. Khan said during the meetings that Pakistan had established a special committee dedicated to ensuring the safety of Chinese personnel in the country, according to a report from China’s Xinhua state news agency.

Chinese college offers to hire two neuroscientists sacked by Emory University | South China Morning Post Jinan University president says researchers ‘can contribute to social and economic development if they decide to come back’ Li Xiaojiang and his wife, Li Shihua, were dismissed over alleged undisclosed funding ties to China after investigation

China appoints its envoy on North Korea its ambassador to Japan - Reuters China has appointed its special envoy for North Korea, Vice Foreign Minister Kong Xuanyou, its ambassador to Japan, Chinese state media said on Tuesday.

China will always stand by Pakistan's 'core interests', says Vice-President Wang Qishan on $60-billion CPEC - Firstpost Islamabad: China will always stand by Pakistan's "core interests" no matter how the international landscape changes, visiting Chinese Vice President Wang Qishan has said as he cited the USD 60 billion CPEC as the manifestation of their all-weather relationship.

Xi meets representatives of overseas Chinese - Xinhua Wang Yang, a member of the Standing Committee of the Political Bureau of the CPC Central Committee and chairman of the Chinese People's Political Consultative Conference National Committee, was also present. At the meeting of the COFA board of directors held Tuesday morning, participants were urged to make a greater contribution to national rejuvenation, the country's opening-up, peaceful reunification of the motherland and mutual learning of civilizations. You Quan, a member of the Secretariat of the CPC Central Committee and head of the United Front Work Department of the CPC Central Committee, was elected COFA president at the meeting.

Chinese premier holds talks with Vanuatuan PM to promote ties - People's Daily Online Vanuatu places high importance on ties with China, Salwai said, adding that bilateral ties were based on mutual trust and win-win cooperation, and his country was firmly committed to the one-China policy, and supported China's efforts in safeguarding sovereignty and territorial integrity.

War hero Zhang Fuqing, 95, a model for all, president says - ECNS Zhang, a native of Shaanxi province, behaved courageously in the Liberation War in 1948, repeatedly achieving military glory. He retired from active service in 1955. Over the following decades, he kept his battle achievements a secret, even from his children. His story was made public at the end of last year, as information about veterans nationwide was being collected by the authorities.

习近平会见第九届世界华侨华人社团联谊大会和中华海外联谊会五届一次理事大会代表_CCTV Top of the Tuesday CCTV Evening News on Xi meting the overseas Chinese

She Thought She’d Married a Rich Chinese Farmer. She Hadn’t. - The New York Times In recent weeks, Pakistan has been rocked by charges that at least 150 women were brought to China as brides under false pretenses — not only lied to, but in some cases forced into prostitution. Others said they were made to work in bars and clubs, an unacceptable practice in Pakistan’s conservative Muslim culture.

China looks to Russia, Central Asia for support amid tensions with US | South China Morning Post President Xi Jinping is expected to meet his Russian counterpart Vladimir Putin next month, when he will also address the St Petersburg International Economic Summit, Russian presidential aide Yuri Ushakov told state-run TASS news agency earlier. The Chinese president will also visit the Kyrgyzstan capital Bishkek for the Shanghai Cooperation Organisation (SCO) summit in June, as well as another regional security forum in Dushanbe, Tajikistan.

Historic Liberal victory in Chisholm faces legal challenge over alleged dirty tactics - Australian Broadcasting Corporation The ABC understands Labor's legal challenge to the Court of Disputed Returns will focus on how-to-vote information posted on her account on Chinese social media platform WeChat, telling locals to vote "1" for Ms Liu.

Xi Calls off June Visit to Seoul - The Chosun Ilbo Beijing also took stalled denuclearization talks with North Korea into account, and since Xi will not be visiting the North he would consider it a breach of protocol to visit the South, according to Shin Jung-seung, South Korea's former ambassador to China.

With its national security at stake, Israel takes sides in U.S.-China trade war - Haaretz.com Israel's security officials object to a Chinese infrastructure project in central Israel. What seems like a shift in policy comes amid growing U.S. concerns that China could strategically gain from such investments

Australian pilots hit with lasers during Indo-Pacific exercise | The Strategist Some helicopter pilots had lasers pointed at them from passing fishing vessels, temporarily grounding them for precautionary medical reasons. Was this startled fishermen reacting to the unexpected? Or was it the sort of coordinated harassment more suggestive of China’s maritime militia? It’s hard to say for sure, but similar incidents have occurred in the western Pacific.

Vatican’s Chinese Christian artworks go on display at Beijing’s Palace Museum | South China Morning Post The Vatican and China first planned to exchange about forty pieces of art each in November 2017 to boost strained ties between the two sides in a show of “art diplomacy”, but the plans have been stalled until now.

China wages relentless crackdowns on its Muslims. But Saudi Arabia stays quiet as it bolsters ties with Beijing. - The Washington Post Saudi Arabia’s acquiescence showed the fruits of a relentless campaign by China to quell any criticism from Muslim-majority nations. Over the past six months, the campaign has focused on members of the Organization of Islamic Cooperation. It has been so vigorous — involving a corps of Chinese diplomats, economic inducements as well as threats — that some of the 57 member states regarded China’s entreaties as a national security matter, according to people familiar with Beijing’s lobbying effort.

Full Text: Joint Press Communique Between the People's Republic of China and the Republic of Vanuatu - Xinhua

Hong Kong and Macao

In Hong Kong, battles grow over identity and future of special status within China - The Washington Post Hui penned a column at Emerson’s student paper, titled “I am from Hong Kong, not China.” She opened with the line: “I am from a city owned by a country I don’t belong to.” It was soon followed by an intense and, at times, threatening backlash from mainland Chinese students at her college.

Tech and Media

The rise of rural influencers: Understanding the popularity of China's "tuwei" KOLs - Trivium UB - User Behavior & Market Attitudes in China What makes it [Kuaishou] unique among Chinese apps is not its feature set, but the demographics of its user pool, which is comprised of a higher percentage of rural and small-town residents than competing short video platforms. This emerging user segment has given rise to a new type of influencer, the tuwei 土味 KOL, one that doesn’t bother with the manicured, fashion-focused gloss — aka the chaowei 潮味 style — that characterizes urban internet celebs.

Tencent's China Literature Sinks Amid Nation's Crackdown on 'Obscene' Content - Caixin Global China Literature, in which Tencent holds a controlling stake, tumbled as much as 10% before closing down 7.3% at a new low in Hong Kong, as another of its online sites was targeted for alleged violations. The stock has dropped more than 70% from a record high reached shortly after its debut in November 2017, when it was one of the city’s hottest new listings. It is still 45% below its initial public offering price.

Campaign Against Online Video ‘Addiction’ Expands - Caixin Global After a March trial on three short video apps – Douyin, Kuaishou and Huoshan – authorities have rolled out similar restrictions on teen viewing time to an additional 18 additional online video platforms, following orders from the Cyberspace Administration of China (CAC). The newly targeted platforms include Tencent’s short-video app Weishi, anime streaming platform Bilibili, and Alibaba-owned video platform Youku.

Society, Arts, Sports, Culture and History

Why Are China's Expat Artists Moving to Berlin? - The Atlantic The city’s affordable housing, the country’s special visa for freelancers and artists, and German-government support for a few of China’s best-known creatives have meant that some of the most interesting developments in modern Chinese culture are happening as much in Berlin as in Beijing.

Energy, Environment, Science and Health

69 Dialysis Patients Infected With Hepatitis C in Jiangsu Authorities said the infections were caused by ‘negligent management’ at Dongtai People’s Hospital, but staff told Sixth Tone the hospital’s blood center continues to operate as normal.

‘Water-Powered' Carmaker Speaks, But Mysteries Remain - Caixin Global Youngman Automobile Group claimed last week it has successfully developed an engine that uses a chemical reaction to convert water into hydrogen to fuel the car. However, experts and scientists remain dubious of the claim for various reasons, such as confusion over the required additional energy source to derive hydrogen from water and doubts over the cost of such an engine.

Beijing

Beijing Places Second to Last in Quality of Life Index | the Beijinger A new survey by Deutsche Bank Research, the eighth that the bank has undertaken, has ranked the Chinese capital in 55th place in terms of quality of life on a list of 56 cities from around the world. The only city deemed worse than Beijing in terms of living standards was the Nigerian capital of Lagos.

Education

Repressive Experiences among China Scholars: New Evidence from Survey Data | The China Quarterly This paper examines the nature of China's current research climate and its effects on foreign scholarship. Drawing on an original survey of over 500 China scholars, we find that repressive research experiences are a rare but real phenomenon and collectively present a barrier to the conduct of research in China.

Rural and Agricultural Issues

Dim Sums: Rural China Economics and Policy: Gangster Pork Monopolies in China Gangster monopolies of local pork markets are common money-makers for China's criminal syndicates in third- and fourth-tier cities, according to news media coverage of the Chinese government's crackdown on "evil black societies" or triads this month.

Big Pork Purchase Is Just a Taste of What China Needs to Buy | Agweb.com USDA confirmed a large buy of pork from China this week. Of the 46,300 metric tons (MT) of exports sold, China bought 31,400 MT, the second-largest purchase even of U.S. pork. The growing hunger for pork this year is due to African swine fever (ASF) continuing to sweep the country, and the sale is just a taste of the amount of pork exports that could be coming in the next few months. RaboBank’s protein analyst Christine McCracken describes the losses as “massive,” and larger than the entire U.S. hog production on an annual basis, which could create a historic protein shortage in China and Asia.