Trump Administration discord over China policy; Xi says China will "punch back"; Sri Lanka's Belt & Road quagmire; No more period of strategic opportunity

Jun 26, 2018

Good morning from Sinocism. Here are the top things I am watching about China today:

The discord among President Trump’s advisors over restrictions on Chinese technology investments and purchases is confusing just about everyone.
US and Chinese stock markets have both been dropping. Xi may not care so much about stock prices but Trump does and a continued drop in the stock market may lead him to make concessions to China to avoid a full-blown trade war.
Lingling Wei of the Wall Street Journal talked to people inside the room with Xi Jinping at last week’s meeting of the “Global CEO Council” and reports that he told the assembled CEOs that China will “punch back” against US trade tariffs.

There was an important change to the official rhetoric in the authoritative report (English, Chinese) on the recent Central Foreign Affairs Work Conference (CFAWC). Gone is any reference to the “period of strategic opportunity 战略机遇期”. It was in the 19th Party Congress report and was in the 2014 CFAWC, as Chris Johnson of CSIS, and a Sinocism reader who helped me think through some of this change overnight, noted in his excellent 2014 commentary on that meeting:

Perhaps more important still, however, is Xi’s reaffirmation in the speech that China remains in a “period of strategic opportunity” (POSO) running through at least 2020, or roughly the period of Xi’s time in office. This concept encapsulates the CCP’s primary external strategic guideline and reflects the leadership’s judgment that China is enjoying a window in which a benign external security environment allows it to focus on its internal development. The precept is highly authoritative within the Chinese system, having been validated and revalidated now by three party congresses (the 16th in 2002, the 17th in 2007, and the 18th in 2012), and it is frequently referenced in official speeches and formal documents (such as China’s Defense White Paper). Xi’s repeated admonitions to the Chinese military to develop greater fighting capability to prepare itself to “fight and win wars,” along with more direct comments by senior Chinese officials under his leadership describing the U.S. rebalance as detrimental to China’s security interests, had cast a shadow of doubt on the leadership’s assessment of the POSO and had suggested that perhaps a view was emerging that the likelihood of conflict on China’s periphery was higher than the CCP previously had judged. Xi seemed to reject this notion in his speech, encouraging cadres to “not allow our views to be blocked by intricate developments” in the international system, but instead to remain focused on the POSO.
Moreover, implicit in Xi’s endorsement of the POSO is a clear signal that China is not overtly seeking to be a disruptive power either regionally or globally. As long as the concept remains in force, there will be hard limits on Beijing’s willingness and ability to set out on a truly revisionist course aimed at fundamentally reshaping the balance of power in East Asia. As good dialectical thinkers, CCP leaders have historically been quite reliable in abiding by the parameters they set out for themselves in terms of their theoretical assessments and prognostications. As a very traditional CCP leader, Xi Jinping is no exception. Consequently, authoritatively acknowledging that China’s external security environment will remain largely benign for the foreseeable future makes it far more difficult for the leadership to argue—as have revisionist powers in the past—that they must assert Chinese power more overtly and forcefully because the country’s interests in the region are somehow under threat.

The January 14, 2018 “manifesto” in People’s Daily “紧紧抓住大有可为的历史机遇期 Tightly grasping the very promising period of historical opportunity" used the term “period of historical opportunity 历史机遇期” but not “period of strategic opportunity 战略机遇期”.

The 2018 CFAWC repeatedly uses the term “历史交汇期 historical juncture” but not “period of historical opportunity 历史机遇期” or “period of strategic opportunity 战略机遇期”. Changes to these long-standing strategic precepts are a big deal (or BFD to be precise…).

I will guess that this change shows a recognition that the security environment is no longer benign and signals a belief that while China’s external challenges are more complicated the opportunities for China are even greater than they were just a year ago. I would read this less as a sign of concern from Beijing and more as one of confidence and a signal to expect more assertiveness and, as Chris Johnson wrote in 2014, revisionism.

Everyone seems to like to say “buckle up” but I am not sure that will help…

A housekeeping reminder, the newsletter is off tomorrow as I take my kids to Maine for camp. See you Thursday.

You can now comment on each issue of the newsletter. Click the button below to make and read comments from your fellow subscribers and sometimes yours truly as well. I am especially keen to hear thoughts on the end of the period of strategic opportunity, or at least the end of the use of that term.

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Thanks for reading, and for your comments.

The Essential Eight

1. Trump Administration discord over China policy

Trade advisor Navarro says no plans for investment restrictions on China, other countries - CNBC:

Earlier in the day, Treasury Secretary Steven Mnuchin put out a tweet that indicated the administration won't focus its restriction efforts solely on China but on all countries. That sent the market to its lows of the day, a nearly 500-point drop in the Dow on a day when volatility spiked.
Navarro sought to tamp down the implication that Trump was looking for widespread restrictions.
"The only thing that's going to happen in the near term is on Friday the Treasury secretary is going to report to the president on the issue related to China. That's all that's going to happen," he said. "With respect to other countries, there's absolutely nothing on the table."

U.S. Investment Restrictions Won’t Name China but Will Apply Broadly, Mnuchin Says - WSJ

Treasury Secretary Steven Mnuchin said that the Treasury Department’s proposed investment restrictions, part of the ongoing trade battle against China, won’t specifically name Beijing but will target “all countries that are trying to steal our technology.”
In a tweet, Mr. Mnuchin labeled The Wall Street Journal and Bloomberg News stories on the investment restrictions as “false, fake news” based on information provided by an anonymous source who “either doesn’t exist or know the subject very well.”
But the Treasury secretary’s tweet contradicts the White House statement on May 29 discussing the investment restrictions.
“To protect our national security, the United States will implement specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology,” the statement said.

US disagreements over China trade strategy heat up | Financial Times $$:

People familiar with the internal discussions said Mr Mnuchin and his treasury appeared determined to push back against the investment restrictions until the very end. While Mr Trump has resisted his treasury secretary’s arguments in recent weeks he has not yet given his final sign-off to the plan, administration officials and others familiar with the discussions said.
“The bottom line is that [Mr] Mnuchin has been trying to litigate this thing still. The president has not signed off on the final [plan] and until he does treasury is not going to relent,” said one person familiar with the discussions.
But that person said that in the end the president was likely to go ahead with the tough restrictions on Chinese investment, noting that anything else would make him look weak — something at which he has bristled in the past.

2. Xi says China will "punch back"

China’s Xi Tells CEOs He’ll Strike Back at U.S. - WSJ $$:

After President Donald Trump raised the ante last week on punitive tariffs against Chinese products, Mr. Xi told a group of 20 mostly American and European multinational chief executives on Thursday that Beijing plans to strike back, according to people briefed on the event.
“In the West you have the notion that if somebody hits you on the left cheek, you turn the other cheek,” the Chinese leader said, according to the people. “In our culture we punch back.”..
Now Mr. Xi has settled on an unyielding approach in dealing with Washington, according to Chinese officials.
“China is not going to yield to outside pressure and eat the bitter fruit,” a senior official said. “That’s the negotiation principle set by President Xi.”..
At his meeting with the global CEOs on Thursday, Mr. Xi suggested that preferential treatment awaits companies whose countries aren’t embroiled in a trade fight, according to the people briefed on the event.

So this Monday article looks wrong - Beijing ‘won’t target’ US firms in China to hit back at US President Donald Trump’s trade threats | South China Morning Post As I commented on it yesterday: This is huge if true, but what then are the "qualitative measures" threatened by the Ministry of Commerce last week?

China Begins to Question Whether It’s Ready for a Trade War - Bloomberg:

In recent weeks, prominent academics have begun to question if China’s slowing, trade-dependent economy can withstand a sustained attack from Trump, which is already started to weigh on stock prices. The sentiments are being expressed in carefully worded essays circulated on China’s heavily censored internet and -- according to interviews in recent days with ministry officials and foreign diplomats who asked not to be identified -- repeated in the halls of government offices, too.
The essays have raised concerns that the ruling Communist Party underestimated the depth of anti-China sentiment in Washington and risked a premature showdown with the world’s sole superpower. Such views push the bounds of acceptable public debate in a nation where dissent can lead to censure or even jail time, and are particularly bold given Xi has amassed unrivaled control while leading China to a more assertive role on the world stage.

Comment: There are also people arguing better now than to wait in confronting the US across multiple domains, and my money is on Xi listening more to those folks. If things really start going sideways the nationalism card will likely get played hard, and the propaganda about the us keeping China down and thwarting the Great Rejuvenation will effectively write itself.

3. EU sees opportunity in US-China trade war?

China, EU to form group to modernize global trade rules - AP:

China and the European Union agreed Monday to launch a group that will work to update global trade rules to address technology policy, subsidies and other emerging irritants and preserve support for international trade amid U.S. threats of import controls.
Actions such as U.S. President Donald Trump’s unilateral tariff hikes in a technology dispute with Beijing show World Trade Organization rules need to keep pace with changes in business, said an EU vice president, Jyrki Katainen.
Katainen said Europe was not siding with Beijing in its dispute with Trump but was taking action to protect the global system of regulating free trade. He said the EU wants other governments to join the WTO group.

Talks with EU speed up amid headwinds - People's Daily Online:

China and the European Union are accelerating negotiation of investment and trade deals amid agreement to defend the multilateral trading system, Vice-Premier Liu He said on Monday.
Both sides agreed to firmly oppose unilateralism and protectionism and prevent such practices from impacting the world economy, which could be dragged into recession, Liu said at a news conference after the Seventh China-EU High-level Economic and Trade Dialogue held in Beijing.

China tells France an Airbus deal is still alive | Reuters:

Chinese Premier Li Keqiang said on Monday Beijing was willing to continue talks over the purchase of Airbus (AIR.PA) jets after French President Emmanuel Macron failed to clinch a deal earlier this year.

4. Dialing down the Made in China 2025 propaganda

Facing U.S. blowback, Beijing softens 'Made in China 2025' message | Reuters:

A senior western diplomat told Reuters that in meetings Chinese officials have recently begun downplaying Made in China 2025. The officials have stressed that the aspects that have raised the most ire abroad were simply proposals by Chinese academics.
And state news agency Xinhua, which made more than 140 mentions of Made in China 2025 in Chinese language news items in the first five months of the year, has not done so since June 5, a search of a public database found.
The diplomat said some Chinese officials have gone so far as to suggest it was a mistake for the government to have pushed the plan so forcefully and publicly because it had increased pressure on China.
“China is apparently starting to adjust to the blowback caused by the heavy propaganda,” said the diplomat, who declined to be identified because of the sensitivity of the matter.
“They won’t stop doing it,” the diplomat said, referring to Made in China 2025. “The way they talk about it is changing.”

5. Shantytown redevelopment money tap slowing for local governments

China Development Bank tightens approvals for property redevelopment programme - Reuters:

China Development Bank (CDB) has halted funding for new shantytown redevelopment projects, and has transferred approval authority from its local branches back to the policy bank's headquarters, a source at the bank told Reuters late on Monday.
The source said new funding is being reined in due to concerns about risks associated with rising debt for local governments, the primary recipients of the loans used to fund shantytown redevelopment.

CDB Loans 437 Billion Yuan to Support Shantytown Renovation Projects - Caixin:

China Development Bank, a policy lender, said it issued 437 billion yuan ($67 billion) of loans to support shantytown re-development projects as of the end of May.
The bank said it will work with local governments to grant financing support for shantytown projects in an orderly and lawful manner under the guidance of central government regulators.
The CDB’s statement came after rumors that the central government has tightened control over shantytown-related lending with concerns over hidden local government debts.

三四线楼市传来大消息拆迁户和开发商们不淡定了_手机新浪网:

证券时报报道称，国开行内部近日正在重新全面梳理授信白名单，强化业务风险管理，受此影响，不少尚未审批通过的新增项目被暂停，但已获批的存量项目仍在继续执行中。
所谓“棚改”，是指为改善困难家庭住房条件的城镇危旧住房改造工程。对于棚户区改造后的安置问题，2015年以来兴起了货币化安置的方式，即拆迁人获得与安置房等价的安置款，自行选购住宅。该政策推行的初衷，是改善困难家庭住房条件的同时，推进房地产去库存。

6. Deep dive into Sri-Lanka's Belt & Road quagmire

How China Got Sri Lanka to Cough Up a Port - The New York Times

Months of interviews with Sri Lankan, Indian, Chinese and Western officials and analysis of documents and agreements stemming from the port project present a stark illustration of how China and the companies under its control ensured their interests in a small country hungry for financing...

During the 2015 Sri Lankan elections, large payments from the Chinese port construction fund flowed directly to campaign aides and activities for Mr. Rajapaksa, who had agreed to Chinese terms at every turn and was seen as an important ally in China’s efforts to tilt influence away from India in South Asia...

Though Chinese officials and analysts have insisted that China’s interest in the Hambantota port is purely commercial, Sri Lankan officials said that from the start, the intelligence and strategic possibilities of the port’s location were part of the negotiations...

At least $7.6 million was dispensed from China Harbor’s account at Standard Chartered Bank to affiliates of Mr. Rajapaksa’s campaign, according to a document, seen by The Times, from an active internal government investigation. The document details China Harbor’s bank account number — ownership of which was verified — and intelligence gleaned from questioning of the people to whom the checks were made out.

Comment: BRI maybe should also be known as the BKI--Bribery and Kickback Initiative?

Are any countries happy with their BRI deals? - Chinese Influx Stirs Resentment in Once-Sleepy Cambodian Resort - Bloomberg:

The influx of Chinese — they arrive on 87 flights a week at a single-runway airport that can’t yet handle jumbo jets — is tied to China’s Belt and Road Initiative, an ambitious plan to build an estimated $1 trillion worth of infrastructure across Asia and parts of Africa, dwarfing the post-World War II Marshall Plan. In Sihanoukville, projects include a special economic zone, where more than 100 Chinese-owned factories are already operating, and a four-lane toll road to the capital city of Phnom Penh, about 225 kilometers (140 miles) away which, will be built by China Communications Construction Co. In all, Chinese state-owned and private companies are involved in about $4.2 billion of infrastructure projects on Cambodia’s southern coast, including power plants and offshore oil exploration, according to RWR Advisory Group in Washington, which tracks Chinese investment.

7. Tsai Ing-wen talks to AFP

Taiwan's Tsai urges world to stand up to China: AFP interview:

She urged other nations to unite with Taiwan in defending against China's expansionist aims and to protect shared liberal values.
"This is not just Taiwan's challenge, it is a challenge for the region and the world as a whole, because today it's Taiwan, but tomorrow it may be any other country that will have to face the expansion of China's influence," Tsai told AFP.
"Their democracy, freedom, and freedom to do business will one day be affected by China," Tsai added.
"We need to work together to reaffirm our values of democracy and freedom in order to constrain China and also minimise the expansion of their hegemonic influence."

Global Times not happy with the Tsai interview--蔡英文接受外媒采访妄称遏制“中国的霸权扩充”|蔡英文|当局|狂言_新浪新闻

这是蔡英文上台以来对大陆发出的最激烈攻击之一。尤其与以往不同的是，她这一次把两岸之间的事说成是大陆与民主世界的对抗，呼吁西方世界一起遏制大陆，公开要让台湾充当外部干涉的杠杆。
蔡继续保持了她的政治虚伪。由于她拒绝承认“九二共识”，两岸的所有官方渠道接触全都停了，她却侈谈愿意举行两岸领导人会面，还摆出“对等”和“没有政治前提”的条件，她在拿完全没有可能性的假提议作秀。
蔡英文喜欢接受西方媒体采访，原因是她不被任何有影响的国际场合接纳，只好通过在西方媒体上露面刷存在感。不过她这一次说得很出格，满嘴跑火车，显示台当局在遭到一连串失败后，如今真的慌了，急了，扛不住了，要通过说些猛的来给自己壮胆，激励绿营，讨好“急独”分子，在国际上也赚点同情分

8. Creditor committees

The Island of Misfit Toys: Deleveraging and the Evolution of Credit Committees - MacroPolo-by Dinny McMahon:

Creditors’ committees and joint credit committees are best understood as part of Beijing’s double pronged strategy to clean up the financial system. On one hand, Beijing wants banks to gradually dispose of their bad loans. On the other, it is aiming to improve the quality of those assets that remain on the banks’ books. And it wants to achieve both at a minimal cost to the state.
As part of that process—one that will be drawn out over a long period of time—creditors’ committees can potentially help minimize economic disruption, force the cost of adjustment onto the banks, and gradually impose discipline on banks and companies and so prevent a repeat of the waste and excess that accumulated over the past decade. At least, that seems to be the theory behind the mass deployment of these committees. Whether they are up to the task or will simply end up preserving the status quo is something we hope to explore in the future.

Business, Economy, Finance And Trade

Chinese Stocks Enter Bear Market as Trade, Growth Risks Increase - Bloomberg The Shanghai Composite Index fell 0.5 percent at the close, taking its loss since a January high to more than 20 percent. Airlines extended a rout as a slumping yuan boosted the cost of their dollar-denominated debt, while property developers also sank. Investors have largely ignored government measures to support market sentiment, including a weekend reserve-ratio cut and scrutiny on the liquidation of pledged stock, as trade tensions added to concern about Beijing’s deleveraging campaign and weaker-than-expected economic data. The latest stock rout, coming three years after China’s equity bubble burst, has now wiped out $1.8 trillion through Monday since January’s high.

Chinese Financial Regulators Says Stock Collateral Risk is Under Control - China Banking News In a rare move from China’s regulators three of the country’s top financial authorities have issued simultaneous statements seeking to assuage concerns about risk in relation to the use of stocks as collateral for loans by key shareholders. The issue of controlling shareholders using stock as collateral for loans has recently risen to the fore on China’s capital markets, triggering concerns over cascading price declines should creditors make margin calls... The China Securities Regulatory Commission, the Shanghai Stock Exchange and the Shenzhen Stock Exchange have since sought to assuage market trepidations, issuing simultaneous statements at on June 26, indicating that share collateral risk is “under control overall.” 3部门罕见集体发声:股票质押风险总体可控

China drops import tariffs on feed ingredients from Asian neighbors as U.S. dispute mounts | Reuters: China on Tuesday said it would remove import tariffs on animal feed ingredients including soybeans from five Asian neighbors, in a sign that Beijing wants to boost foreign supplies of the commodities as a trade dispute with the United States escalates.

Surprises lurk in Trump's China tariff list, from thermostats to vaping devices | Reuters: For instance, the Nest thermostat, assembled in China and sold in the United States by Alphabet Inc’s (GOOGL.O) Google for around $250, is classified in the “capital goods category” of imports and will be subject to the tariffs. Imports of Chinese-made vaping devices to the tune of $300 million a year will be hit, as will $16 million of electronics effects units, used by rock bands to distort guitar sounds.

Central Bank Faces Tough Balancing Act After Reserve Cut - Caixin Global Much of the liquidity released by a targeted cut to most banks’ reserve requirement ratios will support debt-for-equity swaps or be used for loans to small businesses *However there are concerns that the swaps could impair banks’ capital adequacy if they write off a large amount of bad loans in return for little-valued equity holdings

China to implement three-year transport development plan - People's Daily Online By 2020, China will have 30,000 kilometers of high-speed railway, covering 80 percent of Chinese cities with a population of over 1 million, according to the plan which lists 76 targets. The country also aims to add some 180 new deep-water berths at its seaports for 10,000-tonne vessels and above. Integration of transport within the Beijing-Tianjin-Hebei area will be accelerated, according to the plan, as driving time between the cities of Beijing, Tianjin, Baoding and Tangshan will be reduced to within one hour.

Britain's Diageo offers to raise stake in China's Sichuan Shuijingfang | Reuters Diageo Plc (DGE.L), the world’s largest spirits company, said it has proposed to increase its stake in Chinese baiju maker Sichuan Shujingfang Company to raise its stake to up to 60 percent through a partial tender offer

Troubled HNA Group Shuffles Assets to Raise Money - Caixin Global But whether the HNA units can raise money in the capital markets remains to be seen. Last week, Bohai Capital Holding Co., which runs the group’s aircraft-leasing business, managed to raise only 1.06 billion yuan from a bond issuance that was originally intended to bring in more than 2 billion yuan, sources with knowledge of the sale told Caixin. Bohai Capital will have to pay 7% interest on the bond, its first sale since January. That compares with a weighted average interest rate on loans offered to nonfinancial enterprises and other sectors of 5.96% in March, according to the latest central bank quarterly monetary policy report.

One-hour commute circles to link Beijing, surrounding cities - ECNS The Ministry of Transport has pledged more efforts to accelerate the building of a multi-layered, comprehensive transport network to better link Beijing, Tianjin and Hebei amid integrated regional development. Mao Jian, an official with the ministry’s planning bureau, said the transportation network will help form a "one-hour commuting circle" among downtown areas in Beijing, Tianjin, Shijiazhuang (capital of Hebei Province) as well as new satellite cities. Meanwhile, Beijing, Tianjin, Baoding and Tanggu will be connected within an hour’s commute, said Mao at a press conference on Monday.

Defaults surge in China as companies suffer credit crunch - Nikkei Asian Review Companies have defaulted on at least 20.7 billion yuan ($3.19 billion) in yuan bonds and $350 million in dollar debt in the six months through June, marking a 40% increase compared to the same period last year. The government's deleveraging campaign and a crackdown on shadow banking have left more businesses strapped for cash. The data was compiled by Nikkei from Shanghai DZH and other sources.

Evergrande unit jumps 80% after disclosing $860m Faraday stake | Financial Times $$ Evergrande Health Industry Group, a unit of China’s third-biggest property developer by sales, will buy Hong Kong-based Season Smart, an entity that owns a 45 per cent stake in Faraday parent company Smart King, according to a filing with the Hong Kong stock exchange. The investment will make the Evergrande unit Faraday’s largest shareholder, and provide a boost for the company after a string of financial problems under the tenure of Jia Yueting, its founder and former chief executive.

Politics, Law And Ideology

China’s Ex-Soldiers Join Its Legions of Protesters - The New York Times “The problem is that there’s too much corruption at the local level,” Chen Wuliang, a former soldier from eastern China who said he had gone to Zhenjiang, said by telephone. “Where the local corruption is bad is also where old veterans who fought in wars are worst oppressed.” The recent burst of veteran-led protests does not present a dire threat to Communist Party rule, which remains broadly popular and backed by a daunting police apparatus. On Monday, the protests in Zhenjiang appeared to have dispersed. But the demonstrations show how even under the sweeping dominance of President Xi Jinping discontent persists, taking forms that can catch the government by surprise

Chinese Police Detain, Beat Military Veterans in Crackdown Operation - RFA Video footage of the city posted to social media showed police in riot gear lining the streets, with large numbers of police vehicles parked and very few pedestrians. Later, riot police moved in on the protesters in the middle of the night, beating and detaining them en masse, a source close to the protests told RFA. "At about 3.00 a.m. on Sunday, the Zhenjiang government and police department sent in more than 9,000 riot police and regular police to beat up around 2,000-3,000 veterans who were fast asleep," the veteran said.

Late former senior political advisor cremated - Xinhua The body of Zhao Nanqi, former vice chairman of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), was cremated Monday in Beijing. Zhao, also a former member of the Central Military Commission, died at the age of 91 on June 17 in Beijing. Xi Jinping, Li Keqiang, Li Zhanshu, Wang Yang, Wang Huning, Zhao Leji, Han Zheng, Wang Qishan, Hu Jintao as well as other senior officials paid their final respects at the service at Babaoshan Revolutionary Cemetery in Beijing. --CCTV Evening News report on the memorial service - 赵南起同志遗体在京火化. The entire PBSC plus Wang Qishan attended. Hu Jintao was shown after Wang Qishan

China’s Social Credit System: A Mark of Progress or a Threat to Privacy? | PIIE No government has a more ambitious and far-reaching plan to harness the power of data to change the way it governs than the Chinese government. Its Social Credit System (SCS), laid out in a plan released in 2014 and still under construction, aims to extend financial credit scoring systems—commonly used by financial institutions in the United States—to other areas of government regulation, from contract enforcement to food safety, corruption, and environmental protection. The plan is to link public and private data on financial and social behavior across China, use the data to evaluate behavior of individuals and organizations, and punish or reward them according to certain agreed upon standards of appropriate conduct. While many of the SCS goals are laudable, the scale and potential impact pose serious risks to individuals and organizations that could result in the opposite of the promised effects. There is still time to shape the SCS to become an effective tool to deal with some of China’s most intractable domestic problems and at the same time minimize the odds of it becoming an Orwellian system of social control.

Scholarship Highlight: The NPCSC Legislative Affairs Commission and Its “Invisible Legislators” – NPC Observer The Legislative Affairs Commission (LAC; 法制工作委员会) under the NPC Standing Committee (NPCSC) is such a unique institution that one can hardly find an equivalent in another country’s legislature. Consisting mostly of unelected and unidentified members, the LAC works in secrecy, making all decisions behind closed doors. In fact, there is not even a website detailing its functions and organizational structure. The LAC’s employees outnumber NPCSC members, and unlike the latter cohort, they all work full-time and include more legal experts than the staff of any other NPC body (Lu 2013). Their decisions play significant roles throughout the legislative process, from the agenda-setting stage to deliberations—and even after laws are enacted. One Chinese scholar thus aptly dubs the LAC staff “invisible legislators” (隐形立法者) (Lu 2013, p. 74). Some even worry that they may have usurped the powers of elected NPCSC members, thus becoming de facto legislators (Chu 2017). Here in the third installment of Scholarship Highlight, we provide an overview of the LAC—an essential yet peculiar institution under the NPCSC—and its roles in the legislative process.

浙江嘉兴市长胡海峰拟任设区市党委书记|胡海峰|嘉兴|省委_新浪新闻 Hu Jintao's 46 year old son Hu Haifeng to be promoted to become party secretary Zhejiang's Jiaxing city

Beyond development and diversity - Himal Southasian The expanding reach of Chinese money and power has seen both triumphalist as well as critical reporting around the world. But how is Tibet responding to these shifts in the region’s political economy? In this interview, Tsering Shakya, a leading historian of Tibet, talks to us about its place in the BRI, some of Tibet’s most exciting dissident individuals and why anthropologists of Tibet should read more history.

Prosecutors to get tougher with financial, environmental, poverty-relief crime - Xinhua | Over the next three years, Chinese prosecutors will get tougher on financial and environmental crime as well as crime in poverty-relief efforts, especially corruption, Deputy Procurator-General Tong Jianming said Monday at a news briefing. Tong said the Supreme People's Procuratorate (SPP) has issued a circular to provide judicial support for the country's "three tough battles," namely to forestall and defuse major risks, carry out targeted poverty alleviation, and control pollution.

民族复兴新征程的宪法引领与保障（人民要论）--观点--人民网 谢伏瞻 2018年06月26日

Chinese-Uyghur PhD Student Feared Detained in Re-Education Camp - Scholars at Risk In May 2018, it was reported that Guligeina Tashimaimaiti (also referred to as Gulgine Tashmemet), a Chinese-Uyghur PhD student at the University of Technology in Malaysia (UTM), had gone missing in China’s Xinjiang Uyghur Autonomous Region several months earlier. Sources suggest that authorities took Ms. Tashimaimaiti into custody and are holding her in a re-education camp.

新时代共青团工作怎么做？习近平这样指明方向 CCTV looks at how CYL work should be done in the Xi Era...one thing is for sure, X has brought the organization to heel...The CYL Congress opened today... // 党的十八大以来，习近平总书记围绕青少年和共青团工作发表了一系列重要论述，深刻阐释了新形势下青少年和共青团工作的重大理论和实践问题，为当代青年的成长道路指引前程，为共青团工作指明了方向。

Foreign and Military Affairs

Mattis is out of the loop and Trump doesn't listen to him, say officials - NBC News The way these recent presidential decisions on major national security issues have played out, as detailed by current and former White House and defense officials, underscores a significant change in Mattis's role in recent months. The president is relying less and less on the advice of one of the longest-serving members of his cabinet, the officials said. "They don't really see eye to eye," said a former senior White House official who has closely observed the relationship. // Comment: Nice of this story to hit right as Mattis gets to Beijing...

Xi Jinping puts out a call to diplomats: toe the Communist Party line | South China Morning Post Analysts said the call was an effort to shore up decision-making power within the party as it seeks to override the interests of different agencies involved in the nation’s diplomatic affairs. In a diplomatic work agenda meeting that wrapped up on Saturday, Xi said the authority of the party’s central leadership on foreign policy should be upheld, and any external work should be based on the Central Committee’s overall plan.... Beijing-based political analyst Deng Yuwen said that stressing the party’s central leadership authority over foreign policymaking could also be read in the context of the looming trade war. “In the past, different departments and local governments involved in foreign affairs might not have coordinated efficiently enough in policy implementation because they tended to look after their own interests,” he said. Deng added that the party had always been in charge of foreign policy, but the increased emphasis was a result of the “New Era” political climate under Xi.

Commentary: Xi's thought on diplomacy offers wisdom for shared future - Xinhua | A new chapter of major country diplomacy with Chinese characteristics will be opened, with China in its best ever period of development in modern times and the world undergoing profound and unprecedented changes.

How China Became an Insider in Global Governance | Center for Strategic and International Studies In this episode, we assess China’s engagement with multilateral institutions and global governance. Joining the show to track China’s transition from institutional outsider to cautious observer to international insider in global governance are Dr. Scott Kennedy, Deputy Director of the CSIS Freeman Chair in China Studies, and Dr. Stewart Patrick, James H. Binger Senior Fellow in Global Governance at the Council on Foreign Relations. Scott and Stewart also assess the health of the international order and sovereignty, examine China’s efforts to participate in and shape global governance, and evaluate where the United States stands in a period of declining internationalism.

China's 1st nuclear-powered icebreaker in the pipeline - People's Daily Online China has opened the bid to construct its first nuclear-powered icebreaker support ship, a move to prepare for the construction of a nuclear-powered aircraft carrier, military observers said.

FireEye denies 'hack back' claims detailed in new book - Cyberscoop The company that authored a watershed report on how Chinese hackers operate is pushing back against claims in a new book that the research was conducted through the use of illegal offensive hacking techniques. In “The Perfect Weapon: War, Sabotage, and Fear in the Cyber Age,” New York Times national security correspondent David Sanger writes that the U.S.-based cybersecurity firm Mandiant penetrated a Chinese military cyber unit after it hacked into one of its customer’s systems in order to nail down attribution.

China's Huawei top sponsor of Australian politicians' overseas trips | Reuters The research from the Australian Strategic Policy Institute (ASPI) found Huawei paid for 12 trips by Australian federal politicians to the company’s headquarters in Shenzhen, including business class flights, local travel, accommodation and meals, between 2010 and this year, based on politicians’ disclosures. Politicians who took those trips include Foreign Minister Julie Bishop, Trade Minister Steve Ciobo and former Trade Minister Andrew Robb. Huawei accounted for 12 out of 55 corporate-sponsored trips by federal politicians, the ASPI research found.

Arab states discuss cementing ties with China ahead of ministerial meeting in Beijing - Xinhua The meeting aimed to prepare for the eighth ministerial meeting of the China-Arab States Cooperation Forum (CASCF) to be held on July 10 in Beijing. The meeting, attended by permanent delegates of Arab states to Arab League, discussed how to build an integrated partnership between Arab states and China through the China-proposed Belt and Road Initiative.

Australia buys hi-tech Triton drones to monitor South China Sea, enhance ‘anti-submarine warfare’ | AFP Australia will invest A$7 billion (US$5.2 billion) to develop and buy hi-tech US drones for joint military operations and to monitor waters including the South China Sea, it said Tuesday.

China, Myanmar to increase cooperation - Xinhua Chinese Vice President Wang Qishan on Tuesday met with Myanmar's Union Parliament Speaker U Mahn Win Khaing Than in Beijing, and both sides expressed hope to enhance cooperation in various fields. "Developing the comprehensive strategic cooperative partnership between China and Myanmar on the basis of carrying forward traditional friendship is in line with the fundamental interests of the two peoples, Wang said.

Man convicted in Sweden of spying for China travelled to Poland: reports - Radio Poland :: News from Poland A Swedish court in mid-June convicted a man of spying on Tibetan refugees and passing the information to an agent working for the Chinese security services, according to the Reuters news agency. According to Poland’s niezalezna.pl website, the man was detained while returning from Poland where he passed information to an intelligence officer from the Chinese embassy in Warsaw.

Hong Kong, Macao

A storm of unprecedented ferocity: The shrinking space of the right to political participation, peaceful demonstration, and judicial independence in Hong Kong | International Journal of Constitutional Law | Johannes Chan As Hong Kong celebrated its twentieth anniversary of becoming a Special Administrative Region of China under the One Country, Two Systems model, the tension between the socialist/civil law system and the common law system on the two sides of the border has become increasingly strenuous. The tension is most obvious in relation to the independence of the judiciary, and is aggravated by the rising economic power of China and the emergence of the so-called “localism” in Hong Kong. This article argues that the latest interpretation of the Basic Law by the Standing Committee of the National People’s Congress in the context of disqualifying a number of popularly elected legislators constitutes the most blatant interference with judicial independence in Hong Kong to date. At the same time, the judiciary in Hong Kong is facing mounting challenges from demonstrators who have tried to test the boundary of public demonstrations in the pretext of civil disobedience. The Court has done well so far in defending the rule of law, but it has to secure its own institutional space within a shrinking public space, and is treading an ever-slippery path of maintaining the liberal values of the common law system amidst a rising and powerful authoritarian regime.

Tech And Media

Ant Financial's Hong Kong venture launches blockchain-based remittance service | Reuters A venture owned partly by China fintech firm Ant Financial launched on Monday a blockchain-powered cash remittance service between Hong Kong and the Philippines, an initiative the territory hopes will improve its fintech reputation.

Bytedance files RMB 10 million lawsuit against Baidu for unfair competition · TechNode Just weeks after Bytedance and Tencent announced plans to take one another to court, the owner of China’s popular news aggregator Jinri Toutiao has filed a RMB 10 million lawsuit against Baidu for unfair competition. According to Beijing’s Haidian People’s Court, Bytedance said that content on a Baidu-owned platform detailing the spat between it and Tencent was disparaging and slanderous. The filing claims that Baidu’s reports said Bytedance merely wanted public attention from fights with big tech companies such as Baidu and Tencent.

Meituan-Dianping Pares Operating Loss on Booming Revenue - Caixin Global The company, which offers services like restaurant reservations, travel, ticket-booking and food delivery, cut its operating loss to 3.8 billion yuan ($584 million) in 2017 from 6.3 billion yuan the previous year, according to a draft prospectus submitted to the Hong Kong Stock Exchange on Monday. Revenue jumped to 34 billion yuan from 13 billion yuan. Total losses were 19 billion yuan last year, widening from 5.8 billion yuan in 2016, due to one-time items such as share-based compensation expenses and fair-value changes of convertible redeemable preferred shares, the prospectus said.

Not Live From Beijing, It’s Not Saturday Night! - Caixin Global The Chinese version of the iconic American comedy sketch show “Saturday Night Live” (SNL) has finally premiered. But China’s version wasn’t live — nor was it that popular. Co-produced and broadcast by Alibaba Group Holding Ltd.’s online video unit Youku, “SNL China,” the first hourlong episode of which was aired on Saturday, inherited the American show’s opening monologue, sketches and music slots, but the show was taped in advance and edited.

The worldwide race against China to build a quantum economy - Axios What they're doing: China is reportedly investing $10 billion in a Los Alamos-esque National Laboratory for Quantum Information Science, slated to open in 2020. Last summer, a team led by physicist Pan Jianwei demonstrated advances in quantum communications to securely send information. Other researchers there claim they've created a quantum radar system for stealth submarine surveillance. Chinese tech giants Alibaba, Baidu and Tencent are all investing heavily in quantum computing and attracting top researchers from around the world. "It's clear over the last few years that Chinese leadership prioritizes quantum technology. No other nation has invested as much in building quantum communications up." — Elsa Kania from the Center for a New American Security

HBO Website Is Down in China After John Oliver Skewers Xi - Bloomberg Chinese authorities appear to have blocked HBO’s website in that country following a critical segment about the nation’s president by comic host John Oliver. HBO.com, an informational site, is currently unavailable to internet users in China, according to Greatfire.org, a watchdog group. A Bloomberg reporter in the country also was unable to access the page.

Beijing launches 30-bln-yuan fund for technological innovation - Xinhua The government-guided fund will also establish underlying funds to attract angel and venture capital. The funds will be used to support technological innovation in universities, research institutes and innovative companies. The funds will be invested in the frontiers of science and technology, including nanotechnology, intelligent manufacturing, artificial intelligence, brain-inspired intelligence, biomedicine and quantum computing.

Billionaire Trio Grabs a Slice of Xiaomi’s IPO - Bloomberg Former CK Hutchison Holdings Ltd. Chairman Li Ka-shing, known in the former British colony as “superman” for his business acumen, plans to invest $30 million for an unknown slice of the Chinese smartphone maker, according to people familiar with the matter. Alibaba founder Jack Ma and Tencent Chairman Pony Ma -- the country’s two richest persons -- have also agreed to take stakes in Xiaomi, said the people, who asked not to be identified discussing personal investments.

ZhenFund's CEO Discusses the Changing Landscape of Tech Funding – Bloomberg Silicon Valley may no longer be the undisputed king of early-stage financing, startups in China have raised nearly triple their US peers in series A rounds so far this year. Anna Fang, CEO of ZhenFund, one of China's largest angel investors, speaks to Bloomberg's Tom Mackenzie about the changing landscape of angel investing in China

Society, Art, Sports, Culture And History

Meet China’s Abudushalamu Abudurexiti, the NBA draft’s mystery man – The Athletic Abudushalamu Abudurexiti – pronounced Ah-BOO-Doo-Shah-LAH-Moo Ah-BOO-Doo-Rex-EE-Tee – has a chance to be the only NBA prospect from China drafted in June.

Extinct Gibbon Found in Tomb of Ancient Chinese Emperor’s Grandmother - The New York Times British researchers have identified a gibbon found in an ancient Chinese tomb as a never-before-seen, now-extinct genus and species. Samuel Turvey, a conservationist and gibbon expert, was touring a Chinese museum in 2009 when a partial skull caught his eye. It had been found buried, along with several other animals in the tomb of Lady Xia, a grandmother of China’s first emperor Qin Shihuang, in what is now Shaanxi, China. The tomb was estimated to be 2,200 to 2,300 years old. // it appears this Gibbon witnessed the rise and fall of the Qin Empire

Xi Jingping’s “New Era”: New college course in China is teaching women how to be the perfect housewives - The Washington Post At a college in southern China, Duan Fengyan is studying to be an accountant. She is also getting lessons in how to be a woman in the time of President Xi Jinping. In a course launched in March, not long after China abolished presidential term limits, Zhenjiang College and the All-China Women’s Federation have been teaching female students how to dress, pour tea and sit just so — all in the name of Xi’s “new era.”

Two held for inciting Chinese woman to jump to her death from shopping centre | South China Morning Post Cao Huaiyu, Qingyang’s deputy police chief, told a news briefing on Monday that two people had been detained for inciting the woman to jump, while police had gathered information about six others with links to the offending videos. The website report quoted Li’s father as saying she had been the victim of a sexual assault in 2016. Her alleged attacker was one of her teachers, who was detained for 10 days pending an investigation but later released without charge.

Energy, Environment, Science And Health

China Draws ‘Red Line’ to Protect Green Land - Caixin Global China has announced plans for an “ecological red line” that will bar development of nearly a quarter of the country by the end of the decade. The policy was introduced in a State Council document published on Sunday, which also affirmed several other ambitious environmental targets to be completed by 2020 as China enters a “new era” of “ecological civilization,” according to the document. The guidelines also double down on commitments to reducing China’s heavy-water pollution and the amount of sewage and contaminants entering waterways. It targets making more than 70% of water fit for human contact by 2020, with Beijing, Shanghai and Tianjin encouraged to meet the goal ahead of schedule. Only a third of China’s water is suitable for inclusion in the water supply, and 13% is too contaminated even for industrial use, according to the Institute for Public & Environmental Affairs (IPE), a Beijing-based non-governmental organization.

Blue Skies in China Will Be a Global Gas Producer’s Best Friend - Bloomberg Chinese President Xi Jinping’s push to clear his nation’s notorious smog will drive global natural gas demand into next decade, according to the International Energy Agency. The world’s largest energy user will boost consumption of the fuel by 8 percent a year from 2017 to 2023, a total increase of 139 billion cubic meters and accounting for more than one-third of global demand growth, the IEA said in its annual gas market report Tuesday. Almost 60 percent of that incremental demand will come from the industrial and residential sectors, which have been pushed by the government to use more natural gas in place of coal.

Tiangong-2: China's New Space Station Unexpectedly Dives Toward Earth, Baffling Experts China’s Tiangong-1 space station caused a sensation earlier this year when it crashed to Earth in an uncontrolled fireball. Now, its successor, Tiangong-2, has been displaying some strange behavior, which has left experts puzzled. On June 13, the spacecraft unexpectedly dropped from its usual orbit of 242 miles to 183 miles before returning to its original position, according to Jonathan McDowell, an astronomer from the Harvard-Smithsonian Center for Astrophysics who examined new data from the U.S. Strategic Command’s Joint Force Space Component Command.

Food And Travel

Beijing-Shanghai Air Fares Take to Skies - Caixin Global The Shanghai-based China Eastern Airlines Corp. and the Beijing-based Air China Ltd., the two carriers with the greatest market share on the route, are increasing the price of a one-way trip between the two cities from 1,240 yuan ($191) to 1,360 yuan, effective from Monday and Tuesday respectively, Caixin has learned. The move comes after the Civil Aviation Administration of China (CAAC) announced plans in January to further liberalize the aviation industry, allowing carriers more freedom to set prices on some of the country’s busiest air routes.

U.S. Airlines Could Lose Passengers Over Taiwan Defiance - Bloomberg With a month to go before the world’s major airlines must comply with Beijing’s order to recognize Taiwan as part of China, U.S. carriers risk flying fewer mainland passengers by staying defiant. While Japan Airlines Co., ANA Holdings Inc. and Australia’s Qantas Airways Ltd. have changed how they described Taiwan on their websites, Delta Air Lines Inc. and American Airlines Group Inc. are among the last few standing, calling the island a region or country. They could face measures such as air-traffic control delays, ramp inspections, hold-ups at immigration and security checks, according to Robert Mann, the New York-based head of aviation consultancy R.W. Mann & Co.

Beijing

15 arrested on suspicion of causing serious accident crime in deadly Beijing apartment fire - Xinhua Beijing police have arrested 15 people on suspicion of causing serious accident crime in a deadly apartment fire in November causing 19 deaths, authorities said Monday. The arrests were approved by the procuratorate. The fire broke out on the evening of Nov. 18, 2017, at a three-story apartment in Xinjian Village, Xihongmen Township, in the city's Daxing District, killing 19 people and injuring eight others. The suspects arrested included Fan Zhaotian, who built the 20,000-square-meter apartment bloc between 2002 and 2006 without approval from authorities and an underground cold storage basement, where the fire broke out. // Comment: the fire that was the proximate cause of the migrant cleansing