Supply chain financing mess; US-China tech; WTO victory for China; Beidaihe
|Bill Bishop||Jul 17, 2019|| 4|
Apologies for the lack of commentary but it is just to hot to think in DC today and I don’t see the point in wasting your time…Sorry, just a bit punchy in the swamp here.
Thanks for reading.
The Essential Eight
1. Supply chain financing mess
Shockwaves caused by the detention of Camsing Global founder Lo Ching continued spreading through China’s finance sector as more institutions disclosed exposure to Lo’s alleged supply-chain financing fraud....
As the scandal unfolds, Caixin learned that the China Banking and Insurance Regulatory Commission on July 11 issued a set of guidelines [银保监会约法三章规范供应链金融] to financial institutions regarding supply-chain financing. The document outlined 22 measures including requirements to enhance transaction verification and logistics monitoring to prevent risks in the sector.
The case sheds light on loopholes and potential risks in China’s often opaque supply-chain finance market, which involves more than more than 500 billion yuan of securities backed by corporate accounts receivable.
Caixin has been all over this story:
Question: Could this have the makings of a grey rhino?
2. US-China trade
“We have a long way to go as far as tariffs where China is concerned, if we want. We have another $325 billion we can put a tariff on, if we want,” Trump said. “So, we’re talking to China about a deal, but I wish they didn’t break the deal that we had.”..
“If the U.S. imposes new tariffs, this would create a new obstacle for U.S. and China trade negotiations, would make the road to coming to an agreement longer,” Foreign Ministry spokesman Geng Shuang told reporters in Beijing. “China still hopes to resolve U.S.-China trade frictions through consultation and dialogue.”
If Hu has accurate information then there is no prospect for a real deal any time soon.
The country will continue to strengthen law enforcement for IPR protection, actively advance the revision of relevant laws and regulations, and improve the quality and efficiency of IPR examination, according to a statement released after a State Council executive meeting chaired by Premier Li Keqiang.
Apple is about to start trial production of its popular AirPods wireless earphones in Vietnam as it accelerates plans to diversify manufacture of its consumer electronics lineup beyond China, Nikkei Asian Review has learned.
3. US-China technology competition
“Whether it’s Apple, Google, or any of the high tech companies, any of the social media companies, they’re so desperate for market share that they’ll do things to compromise our safety here,” John Bolton said at the inaugural National Conservatism Conference in Washington, DC...
“It calls to mind Lenin’s famous remark that the ‘Capitalists will sell us the rope we hang them with.’ And I say to that — ‘Not on our watch,'” he said. “That’s called taking a hard line.”..
“We don’t want your malign intentions to gain control and access to all of our telecommunications and information technology systems. We’re not going to pretend you’re a real private company engaged in real private competition. You’re a state-owned enterprise doing what your masters in Beijing want you to do,” he said...
On Clash Of Civilizations
He demurred on whether the U.S. was approaching a “Cold War” with China but said there are “elements of Samuel Huntington’s clash of civilizations” — the historian’s theory that conflict would eventually come, not between nations, but between cultures.
China’s foreign ministry said new bill targeting Huawei is to contain China’s development, and it will “seriously” undermine US credibility, the interests of US companies and the global value chain.
Google’s chief executive officer told U.S. Senator Mark Warner that the company has ended some partnerships in China, the lawmaker said Tuesday on Bloomberg Television.
Cape, a Redwood City, California-based startup, plans to inform customers Wednesday that it will stop selling software compatible with Chinese drones to its clients, most of whom use the tools to remotely dispatch and operate the small aerial vehicles to surveil possible incidents or crime scenes.
4. WTO victory for China
The case was originally opened by China in 2012 in response to US tariffs aimed at goods that Washington said were unfairly subsidised by Chinese state-owned enterprises and hurt American jobs and businesses...
The WTO appellate body’s final decision on the case accepts the US argument that Chinese state groups subsidised the costs of some materials. But it also stated that the US must accept Chinese pricing — not its own calculations on pricing — when calculating the tariffs.
China went to the WTO in 2012 to challenge U.S. anti-subsidy tariffs on Chinese exports including solar panels, wind towers, steel cylinders and aluminium extrusions, exports that it valued at $7.3 billion at the time.
China's Ministry of Commerce has urged the United States to correct faulty practices in anti-subsidy probes against Chinese products, after a World Trade Organization (WTO) report ruled that U.S. countervailing measures were inconsistent with WTO rules...
The report once again proved that the United States has repeatedly abused trade remedy measures against WTO rules, which seriously damaged the fairness and equity of international trade environment, the ministry said in a statement on its website.
"China has always respected multilateral trade rules and opposed the abuses of trade remedy measures," the statement said.
Today’s appellate report recognizes that the United States has proved that China uses State-Owned Enterprises (SOEs) to subsidize and distort its economy. Nonetheless, the majority in the report says that the United States must use distorted Chinese prices to measure subsidies, unless the U.S. provides even more analysis than the hundreds of pages in these investigations. This conclusion ignores the findings of the World Bank, OECD working papers, economic surveys, and other objective evidence, all cited by the United States...
5. South China Sea tensions
"I'm calling now America. I am invoking the RP-US pact, and I would like America to gather their Seventh Fleet in front of China. I'm asking them now," he said during a TV interview with Pastor Apollo Quiboloy...
This pronouncement comes after the Philippines and US concluded the Bilateral Strategic Dialogue in Manila.
The President invoked the 68-year-old pact amid calls to enforce the MDT in light of the Recto Bank incident in June, where a Chinese vessel rammed a Filipino fishing boat in Philippine waters and left the fisherfolk adrift at sea.
The talks come after Philippine Defense Secretary Delfin Lorenzana earlier called for a review of the 1951 Mutual Defense Treaty (MDT) between the long-allied countries. At the time, Lorenzana said he saw it fit to review the MDT because of its "vagueness."..
On Monday, Lorenzana met with US Ambassador to the Philippines Sung Kim, US Assistant Secretary of State for East Asian and Pacific Affairs David Stillwell, and Assistant Secretary of Defense for Indo-Pacific Security Affairs Randall Schriver. Kim tweeted that the meeting sought “to explore ways to deepen our military partnership.”
Twice in the last six weeks, the same China Coast Guard (CCG) vessel has harassed oil and gas operations by its neighbors in contested waters on opposite sides of the South China Sea. A Chinese state-owned vessel, meanwhile, has been undertaking a seismic survey of oil and gas blocks off the Vietnamese coast. This risks a confrontation between the contingent of CCG and militia boats escorting the survey ship and a group of Vietnamese vessels dispatched to the area. The situation also reveals a double-standard: Beijing appears to be committed to preventing new unilateral oil and gas activities by its neighbors anywhere in the “nine-dash line,” which demarcates its claims in the South China Sea, even as it explores and exploits hydrocarbons in contested waters...
No matter how these incidents develop, China’s actions off both the Malaysian and Vietnamese coasts since May show that Beijing is increasingly willing to employ coercion and the threat of force to block oil and gas operations by its neighbors, even while pursuing its own energy exploration in disputed waters.
unlike a similar dispute in 2014, both governments have maintained a low profile over the issue.
The 2014 incident began with a Chinese oil rig operating in disputed waters and ended with accusations from both sides of vessel ramming, as well as mass anti-China protests across Vietnam.
Chinese President Xi Jinping on Friday met with visiting Chairwoman of the National Assembly of Vietnam Nguyen Thi Kim Ngan, calling on the two countries to promote friendship and deepen cooperation to lift bilateral ties to a new level.
Xi asked Ngan to convey his greetings to Nguyen Phu Trong, general secretary of the Communist Party of Vietnam Central Committee and Vietnamese president.
Calling the two countries "comrades and brothers," Xi said that they form a community of shared future with strategic significance.
China’s so-called summer capital -- located on the Yellow Sea, more than 200 kilometers (124 miles) from Beijing -- each year plays host to a conclave of party luminaries including President Xi Jinping, his top aides, as well as retired leaders. While the meeting’s agenda, guest list and exact dates are shrouded in secrecy, there are indications that events are already underway, such as the traffic restrictions that took effect Saturday and last until Aug. 18...
The nation’s top leaders usually fall out of public view during their own meetings in Beidaihe, adding to the mystery around the event. Since coming to power in 2012, Xi has largely disappeared from the front page of the party’s flagship People’s Daily newspaper for a 15-day window stretching from July 31 at the earliest to Aug. 17 at the latest.
Comment: We are entering the annual Beidaihe silly season, where rumors get especially frenzied. Be skeptical until presented with real evidence
From the July 10 newsletter:
Hebei Party boss, together with his deputies, visited checkpoints and police bureaus in Beidaihe, telling the policemen to make sure the city is “absolutely safe”, adding that the safety of tourists is a political task. Prepping for whatever happens at Beidaihe in August...
From the August 19, 2018 newsletter:
I got no sense from anyone I consider serious that Xi is in any real trouble. There is definitely grumbling, and some now refer to Xi as 圣上 Sheng4shang4, “his majesty”. But there has always been grumbling among the Beijing chattering classes, and it is a far cry from grumbling to a significant challenge.
7. Erosion of women’s rights
instead of making it easier for women to both work and have children, China’s leader, Xi Jinping, has led a resurgence in traditional gender roles that has increasingly pushed women back into the home.
“When the state policymakers needed women’s hands, they sent them to do labor,” said Wang Zheng, professor of women’s studies and history at the University of Michigan. “Now they want to push women into marriage and have a bunch of babies.”
In a stark turnaround from the early decades of Communist rule, officials now look the other way when employers, reluctant to cover costs related to maternity leave, openly pick men over women for hiring and promotions. At home, women are increasingly disadvantaged in divorce and losing out on gains in the country’s property boom.
In 2011, Lü Pin began working closely with other activists in developing a national feminist network to promote women’s rights. In 2016, after relocating to the U.S., she co-founded a new organization in New York to support the feminist movement in China, including the #MeToo movement.
8. Undercover in Beijing KTV clubs
Many of these KTV bars are exactly what they claim to be—places to get drunk and sing karaoke—but a large number also allow their clients to proposition employees. For this reason police treat all venues with scepticism, and KTV bars regularly get raided. Proving that a place is actually facilitating sex work is difficult, though, so police often settle for fining managers who illegally employ foreign women—as many places do...
For two months, one such woman was Russian freelance photographer Valya Lee, who worked as a “party girl” at several Beijing clubs. She captured her experience on a camera phone to illuminate an industry the government claims doesn’t exist.
Business, Economy and Trade
Bank Lent Millions to Shareholders’ Affiliates, Including Firm Linked to Suspected Child Molester - Caixin A rural bank lent hundreds of millions of yuan to a shareholder and two firms linked to shareholders in a possible violation of banking regulations, a Caixin investigation found. Some of the companies involved have links to Wang Zhenhua, the property tycoon recently arrested on suspicion of child molestation.
Premier Li calls for more efforts to keep steady, healthy economic development - Xinhua China will continue to implement a proactive fiscal policy, a prudent monetary policy and an employment-first policy, while making good use of countercyclical regulation tools and carrying out anticipatory adjustments and fine-tuning when necessary, according to him.
'Expect craziness' as China readies debut of Nasdaq-style board - Reuters “You will see kamikaze squads in this market, definitely,” said investment banker Terence Lin, using a local term for groups of die-hard punters who drive share prices to the sky. Lin, CEO of boutique investment bank World Financial Holding Group, said that while Nasdaq is dominated by professional investors STAR risks becoming a playground for speculators.
This Corner of China's Debt Market May Grow to $654 Billion - Bloomberg The asset-backed market is expected to expand 45% to 4.5 trillion yuan ($654 billion) by the end of this year, said Zuo Fei, general manager of the innovation financing department from China Merchants Securities Co. The sector also had little impact from the surprise government takeover of a troubled lender in May, he said.
Office glut creeps up in Shenzhen, Beijing and Shanghai as trade war saps growth plans while start-ups move to hipper co-working space | South China Morning Post Shenzhen’s office vacancy rate rose to 16.6 per cent at end of June, while Beijing’s was at 11.5 per cent, and Shanghai jumped to 18 per cent
租金持续下行 北京写字楼开启“白银时代”_财新网_财新网 Caixin - Rents for office buildings in Beijing have declined two quarters in a row.
Yicai Global - China's New Megacity Xiongan to Spend USD3.6 Billion on Airport Express The tender document shows that the inter-city line will be 85 kilometers long and have four to six stations.
Two Chinese ports halt customs clearances for coal imports: sources - Reuters Chinese customs is no longer permitting coal cargoes to enter the country at the ports of Jingtang and Caofeidian, said three coal traders, who were told by customs officials of the halt on Tuesday.
China startup deals shrink as fundraising for investors plummets | TechCrunch China’s deal-making activity for startups in the six months ended June halved from a year ago to 1,910, according to data from consulting firm ChinaVenture’s research arm. The amount invested in domestic startups during the first half of 2019 plummeted 54% to $23.2 billion.
AIIB offers local-currency funding to private sector - Global Times The Asian Infrastructure Investment Bank (AIIB) will start this month to offer local-currency financing to private-sector clients from India, Indonesia, Thailand, Turkey and Russia, the lender disclosed in a statement sent to the Global Times on Wednesday. The AIIB's offer meets the financing needs of local companies at a time when they are feeling increasingly insecure about the US dollar, as the Trump administration often imposes financial sanctions on other countries, an expert said.
Alibaba vies for control in reportedly rocky tie-up with China's top automaker · TechNode Alibaba is reportedly planning to spin off its team responsible for developing its AliOS Auto operating system and integrate it with Banma Network Technologies, a joint venture (JV) between the company and Chinese automaker SAIC, in a move to gain more control over the company.
For China’s Studios, Movies Have Lost Their Magic - Caixin All but one of the 13 listed Chinese film studios that had released first-half earnings forecasts by Tuesday expect to see either their profits fall or sink into the red amid tighter government scrutiny over the industry. Among the 13 studios, seven said they expect to report a first-half loss and five expect to see lower profits for the period.
China prepares to axe inefficient industry in manufacturing heartland, despite slowing economy | South China Morning Post While its gross domestic product (GDP) growth accelerated to 6.4 per cent last year from 5.7 per cent in 2017, it slipped back to 5.5 per cent in the first quarter of 2019, according to to Liu Jiayi, the secretary of Shandong Provincial Committee of the Communist Party of China. The primary reason for the slowdown in growth was a plunge in production in “backward” industries at the start of the year, due in part to cuts already made to reduce production capacity, said Liu. He added that the capacity cutting measures will help the province reduce air pollution, one of the central government’s priorities for 2019...Liu, the former head of the National Audit Office who led the nationwide investigation into local government debt in 2014, said he was not concerned with GDP growth in Shandong.
Politics and Law
Xi calls for efforts to win 'three tough battles' in Inner Mongolia - CGTN President Xi, who is also the general secretary of the Communist Party of China (CPC) Central Committee, visited a community, a museum, a forestry farm and a village in Chifeng city. He also toured Inner Mongolia University and the Department of Natural Resources of the autonomous region in Hohhot city, talking with residents and officials during each tour.
China is fighting "three tough battles" against risk, poverty and pollution to deliver a moderately prosperous society in all respects by 2020, Xi said. He urged the authorities of the autonomous region to improve people's livelihoods by tackling problems in areas such as education, employment, social security, healthcare and housing to "resolutely win the 'three tough battles.'"
牢记初心使命贯彻以人民为中心发展思想 把祖国北部边疆风景线打造得更加亮丽 In his visit to Inner Mongolia, Xi said Chinese economy has entered “a key stage” to overcome major difficulties, and the government will have to make “hard efforts” in the “three battles” against financial risk, poverty, and pollution. He also mentioned that now China faces more external uncertainty, and the key is to have everyone follow the party central’s judgement of the situation and its policies, and to focus on the job at hands.
2019年上半年12所教育部直属高校“一把手”调整--组织人事-人民网 China appointed new presidents or party bosses for 12 universities in the first half of the year. Does the Party now prefer to reshuffle these positions among different universities rather than promoting someone from within a university?
指引新中国创造发展奇迹（光辉的历程 深刻的启示·庆祝新中国成立70周年） Xu Guangchun, former governor of Henan and a long-time propagandist wrote in People’s Daily about the “glorious history” of the CCP's development of Marxism in China. More than half of the article is praise for Mao and Xi.
Chinese Court Rejects Appeal by Veteran Activist of Subversion Sentence - RFA A court in the central Chinese province of Hubei has rejected an appeal by jailed rights activist Liu Feiyue against his five-year jail term for "subversion." Citizen journalist and rights activist Liu, who founded the Civil Rights and Livelihood Watch website, was jailed for five years on Jan. 29 by the Suizhou Intermediate People's Court, which found him guilty of "incitement to subvert state power."
Families of fallen Chinese oligarchs are taking to Twitter — Quartz Yaxue Cao, founder of US-based human rights advocacy group China Change, called Twitter the “new petition bureau for fallen members of China’s privileged class.”
The world’s top 50 thinkers 2019 | Prospect Magazine Xu Zhangrun is on the list
Chief procurator of Jilin under investigation - Xinhua Yang Keqin, chief procurator of Jilin Provincial People's Procuratorate, has been under investigation for being suspected of serious violations of discipline and law, the top anti-graft body said Wednesday. 吉林省人民检察院党组书记、检察长杨克勤接受中央纪委国家监委纪律审查和监察调查 http://www.ccdi.gov.cn/toutiao/201907/t20190717_197305.html He worked for many years in the Central Politics and Law Commission
The backlash is growing against Xi Jinping in China and around the world - CNN By Richard McGregor
Xi Jinping: much more than just one man | The Interpreter - Geoff Raby reviews Xi Jinping: The Backlash by Richard McGregor Xi has sworn enemies and many hold grievances, but many more support him and the system of which he is a creature. //Comment: Sinocism is planning to run an excerpt of Mr. McGregor's book this Friday
Foreign and Defense Affairs
Xi meets Chinese diplomatic envoys to foreign countries - Xinhua President Xi Jinping on Wednesday met with Chinese diplomatic envoys to foreign countries, who are in Beijing to attend a work conference for overseas envoys...Wang Huning, a member of the Standing Committee of the Political Bureau of the CPC Central Committee and a member of the Secretariat of the CPC Central Committee, was also present. // Comment: Interesting that Wang Huning was there, overseas propaganda work on the agenda, or all about ideological work and Xi Thought study? Wang Yi gave a speech in which he urged the diplomats to work harder under Xi’s “strong leadership” with the guidance of Xi Jinping Thought.
习近平会见2019年度驻外使节工作会议与会使节_CCTV CCTV Evening News on the meeting
中方反制布拉格市政府和市长反华行径？耿爽：奉劝趁早改弦更张_国际新闻_环球网 The foreign ministry lambasted the Prague mayor for his comments on Tibet and Xinjiang. Spokesman Geng Shuang said the mayor “severely hurt the feelings of Chinese people”, and urged the mayor and other Czech officials to stop damaging the bilateral relations, “otherwise they will only end up hurting their own interests”.
2019年7月17日外交部发言人耿爽主持例行记者会 — 中华人民共和国外交部 China’s foreign ministry said Yang Hengjun, a former Chinese official and now an Australian citizen who is under arrest by the state security bureau in Beijing, “is in good health”, and that the case is still under investigation.
Commentary: Under new leadership, Brussels should work with Beijing to lift ties to new height - Xinhua Like their predecessors, the new EU leadership can count on China as a reliable and important partner in safeguarding multilateralism and an open world economy. More importantly, a stronger China-EU relationship during their tenures will benefit both sides as the world is undergoing profound changes amid growing uncertainties and risks. Despite their adoption of different political systems and differences on certain issues, China and the EU are not necessarily becoming rivals. Instead, cooperation has already become the mainstay of China-EU relations.
MoU on China-Ireland STI cooperation signed in Dublin - Xinhua Comment: Sure seems like a sudden burst of attention for Ireland from the PRC. Brexit-related? Is Ireland ready?
U.S. Needs New Bases in Asia to Counter China Threat, Esper Says - Bloomberg “Alternate operating locations” will be sought as the Pentagon works “to develop new concepts, build a distributed and resilient force posture and field new capabilities to counter these threats,” Esper, who had been serving as Army secretary and then as acting defense secretary, said in written answers to questions from lawmakers ahead of a Senate confirmation hearing that convened on Tuesday morning.
China’s Cultural Persecution of the Uighurs Demands a Response - Bloomberg OpEd Eli Lake There’s no reason not to publicize high-resolution photos of China’s Gulag Archipelago in Xinjiang and show how it has expanded in the last three years. Such a policy would help document a crime the Chinese have tried to keep hidden from the world. The U.S. should also sanction the Communist Party officials in charge of Xinjiang province under the Global Magnitsky Act, specifically governor Chen Quanguo.
The Debate over US Policy toward China Heats Up: Doves, Hawks, Superhawks, and the Viability of the Think Tank Middle Ground | The Asan Forum The aim of this synopsis is to clarify the debate that has erupted in the early summer of 2019, to differentiate the main schools of thought, to put the debate in historical perspective, and to suggest some tests that lie ahead.
Taiwan primaries highlight fears over China’s political influence | Financial Times $$ Journalists working at the China Times and CTiTV told the Financial Times that their editorial managers take instructions directly from the Taiwan Affairs Office, the body in Chinese government that handles Taiwan issues. “They call every day,” said one China Times reporter. “They don’t meddle in everything, mainly topics related to cross-Strait relations and to China. They have a say in the angle of the story, and whether it goes on the front page.”
【獨家專訪】林飛帆：「今日香港、今日台灣」是我現在面對中國的視角 ｜深度｜端傳媒 Initium Media Interesting Initium interview with Lin Fei-fan, a Taiwanese activist who led the Sunflower Student Movement in 2014 and who is now a deputy secretary general of the DPP
Tech and Media
The Data - MacroPolo Chinese companies are not equally capable across these dimensions—for instance, they often lag behind their American peers in quality and diversity of data. But the Chinese ecosystem is particularly strong in the depth of data on each person.
Inside Apple Factory Thefts: Secret Tunnels, Hidden Crawl Spaces — The Information The audacious theft was a wake-up call for Apple. In the years following, Apple created the New Product Security team, known as NPS, in China to monitor security at its most sensitive suppliers. The team ultimately put a stop to most device leaks—and discovered some audacious attempts, such as some factory workers who tried to build a tunnel to transport components to the outside without security spotting them. Last year, Apple began to trim the team and is now moving some of the work to contractors, according to people familiar with the team. “We were in wartime before, but now we’re in peacetime,” said one former team member.
Society, Arts, Sports, Culture and History
Energy, Environment, Science and Health
100 Rural Doctors Quit Over $2.2 Million in Unpaid Medical Subsidies - Caixin Doctors in Yilan county said in a joint resignation letter that rural doctors each had to foot the bill for up to tens of thousands of yuan worth of medical insurance subsidies on behalf of the local authorities for villagers in 2018, and that the full sum had never been paid back, Caixin learned. Additionally, they shouldered heavy workloads despite having a lower status and fewer rights than public hospital doctors, the rural doctors said.
Peking University Scientists Pioneer New Gene-Editing Technology - Caixin Known as LEAPER, the technique — described Monday in a paper in British peer-reviewed journal Nature Biotechnology — is said to avoid several of the pitfalls of CRISPR-Cas13, the cousin of the well-known DNA-editing technique CRISPR-Cas9.
Rural and Agricultural Issues