Happy Monday, from DC not Davos.

Are the global elite gathered in Davos paying attention to the emergence of the Trump Administration's new approach to China? The administration has now relaesed three key documents in a month.

Last month the administration released the new National Security Strategy, which stated that:

For decades, U.S. policy was rooted in the belief that support for China’s rise and for its integration into the post-war international order would liberalize China. Contrary to our hopes, China expanded its power at the expense of the sovereignty of others. China gathers and exploits data on an unrivaled scale and spreads features of its authoritarian system, including corruption and the use of surveillance. It is building the most capable and well-funded military in the world, after our own. Its nuclear arsenal is growing and diversifying. Part of China’s military modernization and economic expansion is due to its access to the U.S. innovation economy, including America’s world-class universities.

At the end of last week the US Trade Representative issued its annual report on China's WTO compliance. The report was breathtaking in its scathing candor and concluded that:

Given these facts, it seems clear that the United States erred in supporting China’s entry into the WTO on terms that have proven to be ineffective in securing China’s embrace of an open, market oriented trade regime.

On Friday Secretary of Defense Mattis unveiled the new National Defense Strategy, which listed "revisionist" China as a top threat:

China is leveraging military modernization, influence operations, and predatory economics to coerce neighboring countries to reorder the Indo-Pacific region to their advantage. As China continues its economic and military ascendance, asserting power through an all-of-nation long-term strategy, it will continue to pursue a military modernization program that seeks Indo-Pacific regional hegemony in the near-term and displacement of the United States to achieve global preeminence in the future. The most far-reaching objective of this defense strategy is to set the military relationship between our two countries on a path of transparency and non-aggression...

There are many reasons to question the Trump Administration's approach to crafting a new strategy towards China, starting with the seemingly schizophrenic economic bashing of key allies and the withdrawal from the TPP, but is there really much doubt about the diagnosis of China's goals, methods and its challenge to America?

From my non-Davos perch it sure looks like the markets either do not care about a material increase in US-China frictions, or have not yet registered the growing risks.

The Essential Eight

1. US Trade Representative Says "United States erred in supporting China’s entry into the WTO"

USTR Releases Annual Reports on China’s and Russia’s WTO Compliance | United States Trade Representative:

"After its accession to the World Trade Organization (WTO) in 2001, China was supposed to revise hundreds of laws, regulations and other measures to bring them into conformity with its WTO obligations, as required by the terms set forth in its Protocol of Accession. U.S. policymakers hoped that the terms set forth in China’s Protocol of Accession would dismantle existing state-led policies and practices that were incompatible with an international trading system expressly based on open, market-oriented policies and rooted in the principles of nondiscrimination, market access, reciprocity, fairness and transparency. But those hopes were disappointed. China largely remains a state-led economy today, and the United States and other trading partners continue to encounter serious problems with China’s trade regime. Meanwhile, China has used the imprimatur of WTO membership to become a dominant player in international trade. Given these facts, it seems clear that the United States erred in supporting China’s entry into the WTO on terms that have proven to be ineffective in securing China’s embrace of an open, market oriented trade regime."...
“China is determined to maintain the state’s leading role in the economy and to continue to pursue industrial policies that promote, guide and support domestic industries while simultaneously and actively seeking to impede, disadvantage and harm their foreign counterparts, even though this approach is incompatible with the market-based approach expressly envisioned by WTO members and contrary to the fundamental principles running throughout the many WTO agreements.”
“Many of the policy tools being used by the Chinese government…are largely unprecedented, as other WTO members do not use them, and include a wide array of state intervention and support designed to promote the development of Chinese industry in large part by restricting, taking advantage of, discriminating against or otherwise creating disadvantages for foreign enterprises and their technologies, products and services.”

The PDF of the report

China in the crosshairs in 2018 - Politico Trade:

The senior White House official told reporters to expect Trump and his administration to hammer away on that theme in 2018, especially as a Section 301 investigation of Chinese intellectual property and forced technology practices matures into action. “This administration has not been satisfied with the way past administrations have negotiated with respect to the Chinese,” the senior White House official said.
The official declined to say how soon the results of the 301 probe would be announced or whether the administration would leave time for talks with China before any trade remedy is imposed. But “the president’s advisers are united on this — across the board, everyone sees China as a major threat that needs to be dealt with,” the senior White House official said.

The decline and fall of Wilbur Ross - Axios:

Trump told Ross he didn’t trust him to negotiate anymore. Ross had tried in the early months of the administration, before Robert Lighthizer was confirmed as the U.S. Trade Representative, to take the lead on several crucial trade conversations. Once Lighthizer arrived there was a tussle for control over several issues. But after Ross botched — in Trump's eyes — his dealings with China, he decided Lighthizer would be the lead negotiator on all trade issues.

Washington underestimates China’s contribution to WTO - Global Times:

Seeing Beijing is about to surpass Washington economically, the US seems to be utterly discomfited. It does not care if China has taken over 1 billion people out of extreme poverty, or how much it has contributed to the globe. The US' own interests must come first. Looking for excuses to break the China-WTO contract is, thus, not surprising. Nevertheless, disputes in trade can be resolved through the WTO, instead of a trade war.
What kind of standard is the US using to treat the world's development and its own? The answer is obvious. But can the US be great again simply by containing others' progress?

China says United States is real threat to global trade, not itself - Reuters:

“I think everyone has seen that it’s precisely the United States’ unilateralist methods, and the sounds it’s made on unilateralism, that are an unprecedented challenge to the multilateral trade system,” Hua told a regular news briefing.
“Many WTO members have already expressed worry about this,” she added.
“So we hope the United States can correctly view China and at the same time take their own actual steps to protect the multilateral trading system.”

2. New US National Defense Strategy Lists "Revisionist Power" China As Top Threat

China, Russia listed as top threats in Pentagon's new National Defense Strategy | TheHill:

"We face growing threats from revisionist powers as different as China and Russia ... nations that do seek to create a world consistent with their authoritarian models," Defense Secretary James Mattis said while unveiling the document in Washington....
"China is a strategic competitor using predatory economics to intimidate its neighbors while militarizing features in the South China Sea," the NDS notes.

Key China-related quotes from the PDF of the public summary:

"The central challenge to U.S. prosperity and security is the reemergence of long-term, strategic competition by what the National Security Strategy classifies as revisionist powers. It is increasingly clear that China and Russia want to shape a world consistent with their authoritarian model—gaining veto authority over other nations’ economic, diplomatic, and security decisions"...
China is leveraging military modernization, influence operations, and predatory economics to coerce neighboring countries to reorder the Indo-Pacific region to their advantage. As China continues its economic and military ascendance, asserting power through an all-of-nation long-term strategy, it will continue to pursue a military modernization program that seeks Indo-Pacific regional hegemony in the near-term and displacement of the United States to achieve global preeminence in the future. The most far-reaching objective of this defense strategy is to set the military relationship between our two countries on a path of transparency and non-aggression...
China and Russia are now undermining the international order from within the system by exploiting its benefits while simultaneously undercutting its principles and “rules of the road.” ..
Expand Indo-Pacific alliances and partnerships. A free and open Indo-Pacific region provides prosperity and security for all. We will strengthen our alliances and partnerships in the Indo-Pacific to a networked security architecture capable of deterring aggression, maintaining stability, and ensuring free access to common domains. With key countries in the region, we will bring together bilateral and multilateral security relationships to preserve the free and open international system.

China blasts new US defense strategy - China Daily:

A spokesperson of the Chinese embassy in Washington quoted a Chinese saying that one's mentality will determine how they see the world. "If someone is always wearing dark glasses, they will never see a bright world," the spokesman said in a statement to the press on Friday evening.
"Peace and development are the themes of this era, and are also the shared aspirations of mankind. However, if some people look at the world through a Cold War, zero-sum game mindset, then they are destined to see only conflict and confrontation," the spokesperson said.

Beijing hits back at US defence strategy and ‘cold war mindset’ | South China Morning Post:

Shi Yinhong, director of American Studies at Renmin University in Beijing, said it was another worrying sign for China-US relations.
“It is clear that conflicts between China and the US are heading in the direction of becoming more strategic, more serious ... and more comprehensive,” Shi said on Saturday.
The defence strategy is the latest indication of hardening resolve by President Donald Trump’s administration to address challenges from Russia and China, at the same time he is pushing for improved ties with Moscow and Beijing to rein in a nuclear North Korea.

3. Dan Rosen On A "Post-engagement US-China Relationship"

Comment: This is a remarkable essay by Dan Rosen and should be triggering warning bells for anyone senior in Beijing who still thinks they can keep the US-China relationship on a relatively stable track with just a few tweaks and more dialogue and partially fulfilled promises.

Rhodium Group » A Post-Engagement US-China Relationship? Dan Rosen:

In the first weeks of 2018 many are still catching up to the reality of shifting deep forces in US-China economic relations. Many in China think this is a rough patch and will blow over. It won’t....
First, most American analysts have believed that changing fundamentals justifies a US rethink for several years. Consider the notion of “pivoting” born in the Obama Administration. Second, the strongest lobby for US moderation has been the business community, but today much of that community actively favors a shift in strategy. Third, the sentiment behind this adjustment is not just American: there is emerging alignment found in Europe, parts of Asia, Oceania and elsewhere. The prospect of a coalition is novel, after years of expectation that each economy would chase the best deal it could get to secure benefits, and the US blunder of pulling out of TPP. And finally, the nascent US strategic shift is more likely to be sustained because Chinese leaders are doing relatively little to counter it – either because they still doubt it is serious, or because they think this is inevitable, or because they cannot think of a way to assuage US concerns without unacceptable compromises at home.
Some consequences of a strategic shift are already evident. Of four bilateral dialogues President Trump kicked-off at Mar-a-Lago, three are frozen (economics, law-enforcement, and people-to-people: only the military-to-military channel is still operational, largely on the topic of North Korea). Dozens of agency-to-agency channels of engagement set up over the past decades are in hiatus. Very few American officials are visiting China. China is not alone in this regard, but the US-China bilateral agenda is more important that virtually any other. This reduces the channels for managing and delivering solutions on the broad spectrum of bilateral issues in the future.

4. "Lingxiu 领袖" Xi Jinping And The People's Daily Manifesto On Seizing The Historical Opportunity

The China Media Project points out that last week's remarkable People's Daily piece (see China wants to reshape the global order - Axios ) used the term "lingxiu 领袖", the first time that term has been used for Xi Jinping in The People's Daily.

Declarations for Xi Jinping | China Media Project:

…perhaps the most important passage comes toward the end of the article, which refers to the “core,” a status conferred on Xi Jinping back in the fall of 2016, and to “the leader,” or lingxiu (领袖), a word that hardly rings in English but in Chinese bears far more weight than a simple lingdao (领导), which can also be translated as “leader.”...
The word lingxiu appearing as a designation for Xi Jinping in this prominent piece in the People’s Daily is significant because this is the first time this elevated title has been extended in the pages of the Party’s flagship paper. As we saw above, the strongest praise has come up to now from local jurisdictions scurrying to show their allegiance.

Party paper swears loyalty to lingxiu Xi - Global Times:

"The word lingxiu means more than just a leader. It is often bestowed to a leader who enjoys the highest prestige, who is the most capable and who is widely recognized by the entire Party," Su Wei, a professor at the Party School of the CPC Chongqing Municipal Committee, told the Global Times.
Su said the emergence of a lingxiu is the symbol of a mature political party, adding that since the 18th CPC National Congress, Xi's achievements in various fields, especially the anti-graft drive, have been widely acknowledged.
It is the first time for People's Daily to refer to Xi as lingxiu. The CPC identified Xi, general secretary of the CPC Central Committee, as the core of the Party in 2016.

5. Second Plenum Tees Up Constitutional Revisions

Xi thought proposed to be included in Constitution - Xinhua:

Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era is a guideline that the Party and state will uphold in the long run.
-- Leadership of the Party must be strengthened and upheld in all areas of endeavor.
-- The five-sphere integrated plan, which is to promote coordinated economic, political, cultural, social and ecological advancement, and the new vision of innovative, coordinated, green and open development that is for everyone, are vital for national rejuvenation.
-- The goals of finishing the building of a moderately prosperous society in all respects by 2020, basically realizing socialist modernization by 2035, and building China into a great modern socialist country by the middle of the 21st century, are also emphasized.
-- Following the path of peaceful development, pursuing a mutually beneficial strategy of opening up, and promoting the building of a community with a shared future for mankind are of great significance to the cause of peaceful development for humanity.
-- The reform to establish a national supervisory system, which is under the Party's leadership and covers all who exercises public power, is a significant political system reform and a major decision to strengthen the self-supervision of the Party and the state.

Just in case there were any doubts—National legislators vow to amend Constitution according to CPC suggestion - Xinhua:

They agreed to resolutely implement the CPC Central Committee's overall requirement and principle in revising the Constitution and subject the process under the centralized and unified leadership of the CPC Central Committee.

Explainer: China to Amend the Constitution for the Fifth Time – NPC Observer:

Step 1: The Party (through its Central Committee) adopts and submits to the NPCSC proposals for amending the Constitution
Neither the Constitution nor any national law requires this first step. Yet, the NPCSC has each time started the constitutional amendment process after and only after receiving from the Party a set of proposals for amending the Constitution. In other words, despite what the Constitution says, only the Party can initiate the constitutional amendment process. In 2014, this long-standing practice was memorialized in a key Party policy document, the Decision Concerning Several Major Issues in Comprehensively Advancing Governance According to Law.;
Step 2: At a single session, the NPCSC studies the Party’s proposals, and then approves and submits to the NPC a draft constitutional amendment.;
Step 3: The NPC deliberates and adopts the constitutional amendment.

6. Beijing To Use US FONOPS In The South China Sea As Pretext To Accelerate Militarization In The Region

Comment: It was completely predictable that Beijing would use the increasingly frequent US FONOPS in the South China Sea as an excuse to continue is military buildup up in the contested waters.

Defense ministry warns U.S. against "causing trouble out of nothing" - Xinhua:

Wu Qian, spokesperson for the ministry, made the remarks Saturday in response to the actions of a U.S. warship Wednesday.
According to Wu, on Jan. 17, the USS Hopper, a guided missile destroyer, arbitrarily entered waters surrounding Huangyan Island in the South China Sea, before Chinese missile destroyer Huangshan immediately conducted an identification and warning process to drive it away.
Under joint efforts by China and the Association of Southeast Asian Nations (ASEAN), the situation around the South China Sea is becoming more and more stable and positive, Wu said.

China vows 'necessary measures' in S.China Sea - Global Times:

China and ASEAN countries have agreed to use negotiations to solve problems, so the US and other non-regional forces no longer have an excuse to get involved in the South China Sea issue to some extent, An said. "But the stance of some regional countries, like the Philippines and Vietnam, is not that important to the US. If they want to be used by the US, the US will use them, if they don't agree with the US, the US will ignore them and do what it wants."
China wants to explore the region peacefully and jointly with regional states, and share its facilities with the neighbors, but the US' provocation can only force China to strengthen its defense capacity, and then China will gain de facto dominance in the region step by step, An suggested...
China has multiple countermeasures it could take, such as speeding up the construction of its islands, including reclamation of Huangyan Island, to improving its law-enforcement and military capability in the region. "The US can do nothing to stop us," said Song Zhongping, a military expert and TV commentator.

People's Daily Zhong Sheng is not happy about latest Fonop, makes clear US activities will be the pretext for increasing PRC militarization the South China Sea--破坏南海稳定是不识时务的妄动（钟声）

美国利用南海问题给中国找麻烦已经不是一天两天了。对此，中国的立场历来是明确的，行动历来是坚决的——中国维护本国领土主权和海洋权益的决心坚定不移，维护南海和平稳定的意志坚定不移，同争端直接当事方以对话协商解决问题的抉择也坚定不移。一年半前，南海形势一度看似风雨欲来，中国未曾有过半点退缩犹豫，今日更不可能动摇战略定力。如果有关方面一再在本地区无事生非、制造紧张，最终只会让中方得出这样的结论：为切实维护南海和平，中方在南海的相关能力建设确实有必要加强、加快。

7. Xi Reminds Everyone That The Party Is Above The Law

China Focus: Xi stresses Party's "absolute leadership" over political, legal work - Xinhua:

Xi, also general secretary of the Communist Party of China (CPC) Central Committee and chairman of the Central Military Commission, made the statement in an instruction read at the central conference on political and legal work, which opened in Beijing Monday.
He urged law enforcement and judicial agencies to better safeguard the country's "political security and social stability," promote justice and guarantee a safe living environment for the people.

习近平对政法工作作出重要指示; 强调坚持以人民为中心的发展思想履行好维护国家政治安全确保社会大局稳定促进社会公平正义保障人民安居乐业的主要任务

Chinese justice minister stresses CPC leadership of lawyers - Xinhua:

China's Minister of Justice Zhang Jun has underscored the importance of the Communist Party of China (CPC) leadership of lawyers, calling it the "soul of the country's legal system."
Zhang's remarks were made at a recent forum for lawyers and published in Friday's edition of the People's Daily, the flagship newspaper of the CPC.
Strengthening Party leadership of the work of lawyers is by no means just a slogan, nor a matter of expediency, Zhang said, adding that it fully accords with the national conditions and is an arrangement of the political system concerning the long-term development of the role of lawyers.

Chinese Police Seize Publisher From Train in Front of Diplomats - The New York Times:

Mr. Gui [Minhai, bookseller with Swedish citizenship who was kidnapped from Hong Kong in 2016] was sitting on a train bound for Beijing, accompanied by two diplomats from the Swedish Consulate in Shanghai, Ms. Gui said. As the train neared Beijing, plainclothes police officers boarded at a station and led Mr. Gui away. His daughter said she did not have details of what happened, and did not know whether he or the diplomats resisted...
When he was taken off the train, Mr. Gui had been traveling to the Chinese capital for a medical examination at the Swedish Embassy, after he showed symptoms of amyotrophic lateral sclerosis, also called A.L.S. The disease attacks the brain and spinal cord, progressively impairing actions like walking, swallowing and using chopsticks…
After Mr. Gui was taken away, Chinese officials told Swedish diplomats that he was suspected of sharing secret information with Swedish diplomats and of meeting them illegally. Ms. Gui said she was baffled by what secrets her father could have known, and did not see how it could be unlawful for her father to meet a Swedish diplomat.

China Rights Lawyer Detained After Posting Pro-Democracy Appeal - The New York Times:

Yu Wensheng, one of China’s most prominent lawyers and political activists, was detained as he left his apartment building in Beijing to walk his 13-year-old son to school, according to his wife, Xu Yan, and two associates.
Mr. Yu, who has defied previous arrests and warnings for his outspoken appeals for political change, had already appeared to be on a new collision course with the authorities. This week, he learned that his license to practice law had been suspended and that he would not receive a passport to travel abroad because he was a security risk — all of which he daringly disclosed on social media...
Patrick Poon, a researcher for Amnesty International in Hong Kong, said he feared that Mr. Yu could be subjected to harsh treatment in custody, as he was when he was arrested in 2014 and held for 99 days.

8. Has Jared Kushner Mixed China Policy Work With Family Business Interests?

Jared Kushner Is China’s Trump Card | The New Yorker:

By the spring of 2017, investigators in charge of evaluating whether to give Kushner a permanent security clearance had new information to consider. U.S. intelligence agencies aggressively target Chinese government communications, including Cui’s reports to Beijing about his meetings in the United States.
According to current and former officials briefed on U.S. intelligence about Chinese communications, Chinese officials said that Cui and Kushner, in meetings to prepare for the summit at Mar-a-Lago, discussed Kushner’s business interests along with policy. Some intelligence officials became concerned that the Chinese government was seeking to use business inducements to influence Kushner’s views. The intelligence wasn’t conclusive, according to those briefed on the matter. “I never saw any indication that it was successful,” a former senior official said, of Chinese efforts to compromise Kushner. The Chinese could have mischaracterized their discussions with Kushner. But the intelligence reports triggered alarms that Chinese officials were attempting to exploit Kushner’s close relationship with the President, which could yield benefits over time. “They’re in it for the long haul,” the former official said.

Question: How has the US government Jared and Ivanka Trump's Chinese nanny, an was she recommended by Wendi Deng?

Business, Economy, Finance And Trade

China’s VPN crackdown is about money as much as censorship China’s concept of “internet sovereignty” takes the right to censor one step further by creating protected businesses for tech companies sheltered by the Great Firewall, while raising costs for citizens or businesses trying to access the global internet. As part of its Belt and Road initiative, Beijing is offering to help other countries construct an internet architecture similar to its Great Firewall, extending this rent-seeking opportunity to new markets. Call it Belt and Router.

Real Estate Loans Slow in 2017 - Caixin Global As of the end of 2017, outstanding loans related to the country's real estate industry amounted to 32.2 trillion yuan ($5.03 trillion), up 20.9% year-on-year, 6.1% lower than at the end of 2016, according to a People’s Bank of China (PBOC) report released Friday. As of December 2017, outstanding individual mortgage loans totaled 21.9 trillion yuan, accounting for more than 68% of total outstanding loans, up 22.2% year-on-year, growing 14.5% slower than in 2016, according to the report.

China: market bulls beat the short sellers — for now - FT $$ “There was a great deal of momentum built up in the [short China] trade. But they missed the fact that China both had the will and the wallet to deal with these issues,” says Michael Gomez, a Pimco fund manager. “That turned the tide.”

How China forces American companies to do its political bidding - The Washington Post: Everyone should be deeply concerned by the PRC’s growing comprehensive campaign to exploit trade and commerce to advance its global Communist agenda,” Sen. Ted Cruz (R-Tex.) told me. “For decades the Communist Party has limited speech within China on topics and opinions that threaten their one-party rule, and we are now seeing this form of information warfare influence the way American companies conduct business.”

Wanda Chief Vows to Repay All Overseas Debt - Caixin Global Wanda Group Chairman Wang Jianlin has promised his company will gradually repay all of its overseas debt and will not default on any loans, as the real estate and entertainment conglomerate continues to shed assets abroad. Wang noted that it’s not a good idea to increase leverage at a time when reducing debt is the trend in China and the rest of the world, according to a transcript of his speech during the firm’s annual meeting on Saturday

Chairman Admits Wanda Overinvested in Internet Unit - Caixin Global Among Wanda Internet’s problems is a partnership with IBM to bring the latter’s cloud computing services to China. The partnership has already ground to a halt, according to people familiar with the matter. The partnership is in jeopardy because IBM couldn’t provide a new-generation data center, but only an older one, geared for small and midsize enterprises. In addition, Wanda couldn’t persuade IBM to cover a greater share of the hardware costs, which was important because Wanda Internet was already burning through much of its parent company’s cash, sources said

Ex-China Central Banker Joins Rating Firm for Offshore Push - Bloomberg The Hong Kong-based unit of Shenzhen’s Pengyuan Credit Rating Co. has hired 11 people since the start of October, according to Jonathan Hu, Chief Executive Officer at Pengyuan. The team comprises of four sector heads, that includes a former People’s Bank of China official, six junior analysts and one chief analytical officer. Among them is Liang Zhong, a former section head at China’s central bank’s international department, who is heading up Pengyuan’s sovereign and public finance ratings team.

Listed Chinese Firms Bought $192 Billion Worth of Opaque Investment Products in 2017 - WSJ Last year more than 1,170 publicly listed companies in China invested a record 1.24 trillion yuan ($192 billion) in financial instruments known as wealth-management products, according to data provider Wind Information Co. The volume was up 49% from 2016 and more than double the total amount two years earlier.

China Inc.'s Debt Bills Could Be Worse Than Thought in 2018 - Bloomberg So-called put options, which give noteholders the right to demand repayment even though the securities don’t mature until later years. Rising interest rates are making it more likely that investors will do just that -- using the funds to buy recently issued bonds with higher coupons. There’s a record 1.25 trillion yuan ($195.2 billion) of notes that could be put in 2018, more than three times last year, according to data compiled by Tianfeng Securities Co.

Localities Play Losing Game of Whack-a-Mole Against Online Swindlers - Caixin Global because the internet makes wide-scale scamming easy – providing access to investors anywhere – fraudsters can quickly close shop and move elsewhere if they start to feel the heat in a city where they were only loosely connected. Stretched local authorities are left feeling like they are playing the Whack-a-Mole arcade game, where the target of their investigation pops up somewhere else, in a city where they have no jurisdiction. “Beijing has over 80 microloan companies plus 400 online lending firms. But there are only several people in the office (overseeing each sector),” said one official at the Beijing municipal financial bureau.

Central Bank Fines Firm Linked to Fallen Officials - Caixin Global Globebill is one of the 17 cross-border payment providers licensed by the State Administration of Foreign Exchange in a 2013 pilot project. In 2014, 75% of the company was sold for 1 billion yuan to IZP Group, whose top managers have been unreachable since April last year and are believed to be assisting an investigation by the Communist Party’s anti-corruption agency into former Chongqing party chief Sun Zhengcai.

Chinese power consumption climbed over 6 percent in 2017: NEA - Reuters China’s power consumption rose 6.6 percent in 2017 from the year before to 6.31 trillion kilowatt hours (kWh), according to data published on Monday by the National Energy Administration (NEA). The nation’s industrial power consumption climbed 5.5 percent to 4.36 trillion kWh in 2017, the NEA said.

How a China Bank Foxed Regulators And May Force a Market Rethink - Bloomberg Financial indicators at Shanghai Pudong Development Bank Co..’s branch in the western Chengdu city were healthy, officials raised no red flags, and Fitch Ratings upgraded the parent last July citing tighter support and supervision by local authorities. Unknown to most, however, regulators had been probing the lender for a fraud that may reverberate across China’s financial industry. "It is not just about Pudong Bank," analysts at Guangfa Securities Co., led by Ni Jun, wrote in a report. "The underlying issue is that the market may conduct a systemic review and re-rating on the bad loan ratios of those highly-leveraged Chinese banks that had gone through a round of balance-sheet expansion."

Shanghai Pudong Development Bank Fined $72 Million for Illegal Loans - Caixin Global The China Banking Regulatory Commission’s bureau in Sichuan province delivered the 462 million yuan fine on Friday. The regulator accused the Chengdu branch of SPD Bank of falsifying loan deals and hiding non-performing assets. The regulator said the Chengdu branch of SPD Bank worked with seven property and mining companies to set up about 1,493 shell companies to transfer risky debts to help the bank cover bad loans. The bank issued 77.5 billion yuan worth of credit lines to the shell companies by falsifying business and employing other irregular methods.

调查丨假投资假出口假外资，“注水”经济数据这样出炉_证券时报网 Securities Times looks at how local governments fake their GDP data, in the wake of several admitting to faking it, and many more expected

China's national economic data veracity unaffected by regional statistics: official - Xinhua "The data quality has been improved, both at national and regional levels," said Ning Jizhe, head of the National Bureau of Statistics (NBS), in response to data fabrication reported in Tianjin and some other regions.

Politics, Law And Ideology

Former Bo Xilai family aide jailed over murder of UK businessman Neil Heywood ‘released early’ | South China Morning Post Zhang Xiaojun, 39, joined Bo family members to pay his respects at the grave of Bo Yibo – Bo Xilai’s late father and a Communist Party elder – at the Babaoshan Revolutionary Cemetery in Beijing on Monday, the 11th anniversary of his death, the source told the South China Morning Post.

Recording & Review: An Introduction to Constitutional Review with Chinese Characteristics – NPC Observer On October 18, 2017, halfway through his mind-numbing three-hour report to the Communist Party’s 19th National Congress, President Xi Jinping called for “advancing the work of constitutional review” (推进合宪性审查工作). We then noted, and Chinese media later confirmed, that it was the first time such expression appeared in Party documents. While the expression might be novel, the concept of constitutional review is not—it has been an inherent part of “recording and review” (备案审查; “R&R”) since at least 1982. For purposes of our discussion,[1] R&R is a process whereby various governmental entities with lawmaking powers record the legislation they enact with the NPC Standing Committee (NPCSC), and the NPCSC then, through several established mechanisms, review such legislation for potential violations of the Constitution and national laws and take appropriate actions. The primary goal is to ensure the uniformity in the hierarchical legal system.

全国统战部长会议：今年要加强新的社会阶层人士统战工作_中国政库_澎湃新闻-The Paper National United Front Work Department meeting emphasizes strengthening efforts targeting the "new social classes"

省部级异地大调整_凤凰资讯 list of 18 recent provincial level personnel changes. Interesting that former PBoC vice governor Yin Yong is now a Beijing vice mayor

官方披露北京卫戍区政治部主任杨振国最近因工作变动调离北京 head of the political department of the Beijing Garrisson has been transferred out, no word on destination or replacement. Yang Zhenguo took the job in August 2015, was promoted in 2016 //公开资料显示，杨振国至晚于2015年8月初担任北京卫戍区政治部主任，后于2016年“八一”建军节前夕晋升少将军衔。

Star Lawyer David Boies and Chinese Tycoon Guo Wengui Split - Bloomberg Boies Schiller & Flexner LLP will no longer represent Guo, said a representative at the law firm that Boies founded, confirming court filings this month. Former federal prosecutor Duncan Levin of Tucker Levin PLLC is also severing ties with Guo on three cases, according to court documents. Levin confirmed he no longer represents Guo and declined further comment. A spokeswoman for Guo declined to comment on the reason for the change.

The Murky Case of a Fallen Business Mogul - Sixth Tone After his release from prison, onetime home appliances magnate Gu Chujun targets a retrial for a case mired in allegations of corruption

Foreign and Military Affairs

Alleged CIA China turncoat Lee may have compromised U.S. spies in Russia too - NBC News Comment: NBC News has more revelations from the PRC's huge win over the CIA. Between this and the OPM hack the PRC intelligence services have to be feeling pretty good about themselves. And if this report is true, what did Putin give Xi in return for this information?// A secret FBI–CIA task force investigating the case concluded that the Chinese government penetrated the CIA's method of clandestine communication with its spies, using that knowledge to arrest and execute at least 20 CIA informants, according to multiple current and former government officials. American officials suspect China then shared that information with Russia, which employed it to expose, arrest and possibly even kill American spies in that country, said the current and former officials...

Six Chinese Ships Covertly Aided North Korea. The U.S. Was Watching - WSJ A review by The Wall Street Journal of corporate records and shipping databases shows that the six vessels identified by the U.S. are owned or managed by Chinese companies or firms that are registered in Hong Kong and have shareholders who are Chinese nationals and have used addresses in mainland China. In December, the U.S. asked the sanctions committee to formally designate the six ships as sanctions violators. China resisted that request but allowed four other vessels with no apparent links to Chinese companies to be blacklisted. The names of the four blacklisted ships were announced by the U.N., but the other six weren’t.

Small Chinese Shippers From Troubled Ports Seen Aiding North Korea Trade - WSJ For small-time shipowners in China, the sanctions were more bad news. Trade with North Korea had been legal—and was considered just another business opportunity in Asia, according to an official at a shipowner association in Jiangsu Province, where Nantong is located. Mr. Lu’s son said his father had made no secret of the fact that his business had ties to North Korea and included purchasing North Korean coal, often in barter deals. “If we’re looking at it objectively, and ignore nationalities, it’s just normal trade,” said Mr. Lu’s son. “But [North Korean leader] Kim Jong Un always makes trouble. It’s all about politics.”

China sought to water down Vancouver meeting on North Korea | The Japan Times In apparent efforts to water down the significance of the Vancouver Foreign Ministers’ Meeting on Security and Stability on the Korean Peninsula, the Chinese ministry approached some of the 20 countries several times and urged them to skip the one-off event or avoid sending their foreign ministers to it, the sources said. The degree of persuasion varied, possibly depending on how much each country’s economy relies on China, one of the sources said. Although the 20 countries all participated in the meeting, nearly half of them were eventually represented by senior diplomats rather than foreign ministers

Steve Bannon’s two-faced antics have burned his bridges – to US and Beijing | This Week In Asia | South China Morning Post The Chinese embassy in Washington learned from Trump administration officials that Bannon still had the confidence of the president and then made relevant recommendations to Beijing. So when CLSA invited Bannon to be a keynote speaker at its conference in Hong Kong in September, it seemed like a good opportunity to fly him to Beijing. Bannon was paid US$300,000 for his speech in Hong Kong, believed to be on the top-end of speaking fees for political figures of Bannon’s standing....Just three weeks after Bannon’s trip to Beijing, Guo, the fugitive billionaire, posted photos on Twitter of himself meeting Bannon twice in less than a week. Guo did not say what they talked about but said Bannon agreed to have the images posted. The posting was an affront to Chinese officials and a sort of coup for Guo, who is wanted in China

China to select astronauts for its space station - Xinhua "We plan to select suitable candidates from space industry companies, research entities and universities and train them into engineers and payload specialists capable of working on the space station," he said during an open day at Beijing's Astronaut Center of China. "Those who want to apply for an engineer's post will need a master's degree, while candidates for payload specialists will need a doctoral degree," he said. "They will also have at least three years of work experience."

Quite the stirring new propaganda video for the PRC space program, on Youtube here with subtitles:

Commentary: Gov't shutdown exposes chronic flaw in U.S. political system - Xinhua Washington loves to brand itself as a "shining city on the hill", yet the latest government shutdown in the heart of Western democracy has once again exposed its chronic flaws. The shutdown, the fourth in the past 25 years, is another product of the political battle between the Republicans and Democrats. What's so ironic is that it came on the first anniversary of Donald Trump's presidency on Saturday, a slap in the face for the leadership in Washington.

Why Ma Zhaoxu, China’s new man at the United Nations, signals greater ambition on global stage | South China Morning Post The former ambassador to Australia made a name for himself with his controversial comments on human rights

South Pacific nations slam Australian minister for irresponsible remarks on China - People's Daily Online Australian Minister Concetta Fierravanti-Wells accused China of constructing “useless buildings” and “roads to nowhere” on South Pacific islands earlier this month. Samoa’s Prime Minister Tuilaepa Sailele Malielegaoi on Jan. 12 said the criticism of Fierravanti-Wells is “insulting” to Pacific Island leaders, and could “destroy” Australia’s relationship with the region. Vanuatu’s newspaper Daily Post published an article rebuking Fierravanti-Wells’s point, saying these roads lead to their homes rather than “nowhere.”

Exiled Maldives leader says Chinese deals on islands are ‘land grabs’ | South China Morning Post Ex-president Mohamed Nasheed said Chinese interests had leased at least 16 islets among the 1,192 scattered coral islands and were building ports and other infrastructure there

Surveillance under the sea: how China is listening in near Guam | South China Morning Post The cutting-edge acoustic sensors – some of which have a listening range of more than 1,000km – are being used for scientific research such as studying earthquakes, typhoons and whales, according to the Chinese government. But security experts say the sensors can also track the movement of submarines in the South China Sea and intercept underwater signals between the submarines and their command base. The high-end surveillance devices have been in operation since 2016, though the information was released by the Chinese Academy of Sciences only this month.

Hong Kong, Macao

New report: 'Academic Freedom in Hong Kong since 2015: Between two systems' — Hong Kong Watch Hong Kong Watch today releases an in-depth study into academic freedom in Hong Kong. The report concludes that although academic freedom is ‘alive and generally well’ in Hong Kong, it is under threat due to the politicization of universities following the 2014 Occupy protests.The state of academic freedom in Hong Kong is a microcosm of the state of “one country, two systems” as a whole. It is alive, and generally well, but only due to constant public vigilance against growing threats.

Tech And Media

Guang Gong from Qihoo 360 wins Google's largest bug bounty ever - Business Insider Google announced this week it awarded $112,500 to Guang Gong, a researcher who works for Chinese security giant Qihoo 360. It's the largest amount Google has awarded since increasing its top payouts for bug bounties in June. In August, Gong submitted a working remote exploit chain, or remote attack, on Google's Pixel phone, which could be used to steal data or introduce malware onto a device. Google said on its developers blog that it patched the bug in a December update.

WeChat mini programs 1 year on: Key figures and trends · TechNode At the WeChat Open Class PRO held in Guangzhou on January 15, WeChat announced that they now have 980 million monthly active users.

Rapper GAI Abruptly Removed from Reality Show Following Reported New Hip-Hop Ban | Radii China “The secretary of the propaganda department, Gao Changli, brought up that when radio and TV shows invite guests, they should [adhere to] ‘Four Firmly Don’t Use’: firmly don’t use actors who are in conflict with the Party’s core values and morals; firmly don’t use actors who are vulgar and kitsch; firmly don’t use actors who have low class and unrefined tastes; firmly don’t use actors who have gossiping and moral problems. In addition, SAPPRFT requires that artists with tattoos, hip-hop music, sub-culture (non-mainstream culture) and depressed culture (decadent culture) can not be on any shows.”

WeChat says it will remove any Official Account "distorting party and national history" · TechNode WeChat announced that their media platform will regulate user’s information dissemination behavior and those trying to conduct marketing activities by distorting China and CCP history, ThePaper is reporting [in Chinese]

Society, Art, Sports, Culture And History

Where China Built Its Bomb, Dark Memories Haunt the Ruins - The New York Times The decaying clusters of workshops, bunkers and dormitories are remnants of Plant 221, also known as China’s Los Alamos. Here, on a mountain-high grassland called Jinyintan in Qinghai Province, thousands of Tibetan and Mongolian herders were expelled to create a secret town where a nuclear arsenal was built to defend Mao Zedong’s revolution.

Why China’s Beauty Consumerism is Going Too Far – Elephant Room: Make China Relatable Today, China stands as the largest beauty market in the world with over 21 billion RMB annual revenue; although domestic economy has cooled in recent years, year-on-year growth for skincare and make-up products still reached 5 percent and 12 percent respectively as in 2016. Such cheering growth has a dark side though: while many are busy buying more and showing off their purchasing powers, others who lack the financial support have fallen into the trap of overspending, chasing after beauty consumerism at a price too high to pay.

China Teeters on Edge of Becoming an Aged Society - Caixin Global China is aging rapidly. The number of people over the age of 65 soared to 158.21 million, or 11.4% of the population in 2017, according to data released last week by the National Bureau of Statistics. Meanwhile, the country’s working-age population — those between the ages of 15 to 64 — has shrunk to just over 1 billion people after peaking in 2013.

Energy, Environment, Science And Health

China’s breathtaking transformation into a scientific superpower - The Washington Post The National Science Foundation and the National Science Board have just released their biennial “Science & Engineering Indicators,” a voluminous document describing the state of American technology. There are facts and figures on research and development, innovation and engineers. But the report’s main conclusion lies elsewhere: China has become — or is on the verge of becoming — a scientific and technical superpower.

China to build national NEV technological innovation center - Xinhua China will build a technological innovation center for new energy vehicles (NEV) in Beijing, according to the Ministry of Science and Technology. The center will boost the supply of key new energy vehicle technologies to meet growing demand, said the ministry in a response to a request made by the Beijing government to establish the center.

China's "Micius" completes intercontinental quantum key distribution - Xinhua The achievement, jointly made by Chinese and Austrian scientists, was published on Jan. 19 in the journal Physical Review Letters. It demonstrates that the Chinese quantum satellite is capable of facilitating intercontinental quantum-secured communications. Through satellite-to-ground secure key distribution, a secret key was created between the two countries at locations some 7,600 km away from each other.--Satellite-Relayed Intercontinental Quantum Network

Are China’s Blue Skies Here to Stay? | ChinaFile Conversation The one essential strategy that hasn’t been mentioned yet in this discussion is to tackle air pollution and climate change together through an integrated approach. Last fall, Tsinghua University published a modeling study concluding that China cannot achieve its 2030 air quality targets through end-of-pipe controls alone. Only by aggressively optimizing the energy and industrial structure (i.e., switching away from coal and heavy industry) can China deliver the necessary deep reductions in air pollution—and with clear climate co-benefits. When the State Council releases its expected second phase air quality improvement action plan later this year, we will be looking for strengthened components on sustainable energy and measures to curb carbon emissions in parallel with air pollutants

China, Unhampered by Rules, Races Ahead in Gene-Editing Trials - WSJ In a quirk of the globalized technology arena, Dr. Wu can forge ahead with the tool because he faces few regulatory hurdles to testing it on humans. His hospital’s review board took just an afternoon to sign off on his trial. He didn’t need national regulators’ approval and has few reporting requirements. Dr. Wu’s team at Hangzhou Cancer Hospital has been drawing blood from esophageal-cancer patients, shipping it by high-speed rail to a lab that modifies disease-fighting cells using Crispr-Cas9 by deleting a gene that interferes with the immune system’s ability to fight cancer. His team then infuses the cells back into the patients, hoping the reprogrammed DNA will destroy the disease.

China's Push Into Gene Therapy Targets Biotech's 1% - Bloomberg It's not hard to see the potential. For one thing, China's huge population means an abundance of patients for trials. For another, the nation is now flooded with venture-capital money to throw at well-qualified "sea turtles" -- as returning Chinese expats are known -- to build world-class medical labs at home.

Education

The China Syllabi Project – American Mandarin Society ***Newly updated January 2018*** // Tim Heath of Rand and I did the China Politics one

Jack Ma has a solution for China’s ‘left-behind kids’: boarding school | South China Morning Post “Many pupils have to climb mountains or take a boat to go to school. In my opinion, these kids should not be commuting between home and school every day – they should go to a boarding school,” Ma said, calling on more than 80 Chinese entrepreneurs at the event to work with him to promote the development of boarding schools in rural areas.

Sinocism

Trump China Strategy Triad; "Post-Engagement…

Comments on this post are for paid subscribers