US Government Pressures AT&T To Kill Huawei Handset Deal ; French President Macron Goes To China; PRC Influence And Espionage Scandal In Taiwan; Financial Crackdown Signaling; Hu Shuli Steps Down As Caixin Editor In Chief
|Bill Bishop||Jan 9, 2018|
Poor Huawei, the company was just about to announce a deal with AT&T to sell its handsets through the American carrier when the US government reportedly pressured AT&T to kill the deal. That is going to have more people in Beijing wondering why major US phone makers can have Chinese carrier deals but PRC handset manufacturers can not have US deals. Reciprocity, which many in the US are pushing for, goes both ways.
The Essential Eight
1. US Government Pressures AT&T To Kill Huawei Handset Deal
Huawei’s deal with AT&T to sell its flagship phone in the U.S. was killed just days ago due to “political pressure,” according to a person familiar with the deal. On Dec. 20, members of the Senate and House intelligence committees sent a letter to the Federal Communications Commission raising fresh concerns about Huawei’s plans to launch consumer products through a major U.S. telecom carrier. The letter, which was viewed by The Information, cited an intelligence committee report on Huawei’s alleged ties to the Communist Party as well as China’s intelligence and security services.
Huawei has positioned itself to dominate future global telecom networks, according to several U.S. telecom executives, providing stiffening competition to incumbents Nokia Corp. of Finland and Sweden’s Ericsson AB. This comes just as big U.S. carriers are expected to invest about $275 billion over seven years to deploy fifth generation, or 5G, networks that can carry huge amounts of data for high-quality mobile video and self-driving cars, according to Accenture. Early commercial deployments of the technology are to start later this year.
Comment: We will see how much of this business Huawei actually gets in the US.
2. Growing PRC Influence And Espionage Scandal In Taiwan
An investigation into New Party spokesman Wang Ping-chung (王炳忠) has found that China’s Taiwan Affairs Office (TAO) allegedly promised to pay Wang NT$15 million to NT$16 million (US$506,278 to US$540,030) annually for running the pro-unification propaganda Web site Fire News (燎原新聞網), the Taipei District Prosecutors’ Office said yesterday...
Wang cofounded Fire News, which Chinese student Zhou Hongxu (周泓旭) helped promote as a consultant, and allegedly used it as a platform to recruit members for an organization he was setting up for the Chinese government, the report said...
Prosecutors in July last year charged Zhou with “colluding with an enemy of the nation to create organizations” — a violation of the National Security Act.
The Taipei District Court in September last year sentenced Zhou to 14 months in prison.
3. French President Macron Goes To China
France welcomes long-term investments from China, but only after screening deals to ensure French assets are not “looted”, Finance Minister Bruno Le Maire said on Tuesday in Beijing.
Xi made the remark while meeting with French President Emmanuel Macron at Diaoyutai State Guesthouse in Beijing. Macron is making a state visit to China from Monday to Wednesday, his first China visit since assuming office in May.
China and France should uphold the spirit of being responsible to history, sticking to the right path and striving for a better future for bilateral relations, Xi said.
Mentioning that there are lots of uncertainties in today's world, Xi said China has proposed to build a community of a shared future for mankind, a proposal also echoed by France.
On Monday (Jan. 8) evening, Macron tweeted a video of himself practicing saying 让地球再次伟大 (rang diqiu zaici weida), or “Make our planet great again” in Mandarin. In the video, Macron is seen repeating the phrase bit by bit after his translator, and taking notes carefully on his transcript.
According to the VOA reporter covering the Macron-Xi Press conference, Macron took a tough line on trade:
If #China was thinking divide and conquer, it perhaps may need to think again: France's President Macron says: A coordinated European approach to trade with China is neededJanuary 9, 2018
Comment: The French President and his delegation, in spite if the gift of a horse, do not seem to be patting its cul too hard to ingratiate themselves with Xi Jinping.
4. North Korea On Track For A Negotiating Gold Medal?
Comment: Why is it that North Korea always seems to get concessions without giving any in return? Word around DC is that Japan Prime Minister Abe has repeatedly told President Trump that South Korean leader Moon would "go soft". Trump's reaction to reports of possible temporary lifting of sanctions will be interesting.
North Korea said during rare talks with the South on Tuesday it would send a delegation to the Pyeongchang Winter Olympics in South Korea next month and Seoul said it was prepared to lift some sanctions temporarily so the visit could take place.
Although the deadline to shut down all North Korean companies in China is Jan. 9, some North Korean restaurants in Beijing are still accepting reservations beyond this date.
When Caixin called North Korean restaurant Okryugwan in Beijing’s Wangjing area on Jan. 9, for reservations for the following weekend, a North Korean staffer said “We are open as usual. Reservations for rooms and halls are both possible.”
Some companies have evaded sanctions by changing their ownership structure and transferring majority stakes to Chinese investors, people with knowledge of the matter said.
But as just one sign of how fraught the situation remains, simply consider this: U.S. officials are quietly debating whether it’s possible to mount a limited military strike against North Korean sites without igniting an all-out war on the Korean Peninsula.
5. China Continues Its Militarization Of The South China Sea
Comment: Talk is cheap and FONOPs don't dissuade Beijing. The Trump administration, like the Obama Administration, has no feasible strategy for reversing Beijing's efforts to turn the South China Sea into a PRC lake ( Perhaps it is too late and the PRC has succeeded in its fait accompli?). Meanwhile the North Korea issue has served as a wonderful distraction from Beijing's perspective...
Brian Hook, a senior adviser to US Secretary of State Rex Tillerson, said on Tuesday that the issue of the South China Sea was raised at all diplomatic and security dialogues between China and the US...
“China’s provocative militarisation of the South China Sea is one area where China is contesting international law. They are pushing around smaller states in ways that put a strain on the global system,” Hook said during a media telephone conference.
“We are going to back up freedom-of-navigation operations and let them know we will fly, sail and operate wherever international law allows.”
Philippine Defence Secretary Delfin Lorenzana’s comment followed a Dec. 30 broadcast of aerial footage by the official China Central Television (CCTV) showing Fiery Cross Reef, which appeared to have been transformed into an airbase.
“The Chinese government said some time ago that they were not going to militarize those reclaimed islands,” Lorenzana told reporters, adding that the protest would be made through the foreign ministry.
“If it is true and we can prove that they have been putting soldiers and even weapons systems, that will be a violation of what they said.”
Comment: And what exactly will the Philippines do if it is a “violation of what they said”? Nothing, and Beijing knows it.
6. Financial Crackdown Signaling
Comment: There is no let up in the official signaling that the regulatory crackdown across the financial sector is real. The institutions don't seem to be fully convinced that the regulators have the stomach to see it through so are still playing chicken as we transition from the year of the rooster to the year of the dog. My money is on more regulatory fortitude than in past efforts but given the depths of the problems there will likely be some fitful backsliding.
On Nov. 17, Chinese financial regulators released a draft of unified regulations for the asset management industry. The draft regulations aim to create industrywide requirements for leverage ratios, risk reserve funds and investment restrictions, all in an effort to gets banks’ off-balance-sheet assets back under some kind of regulatory framework...
As banks continue to fret over the draft regulations, some have taken defensive action. Several banks have started to issue wealth management products that mature in two to five years, far longer than the current standard of six to 12 months.
Some see the debate as the typical back-and-forth between the regulator and the regulated. Caixin has learned that regulators said they would consider extending the grace period for compliance until the end of 2019 and plan to conduct a thorough investigation into the underlying assets of banks’ asset management products.
But the regulators appear determined not to compromise further. “Easy money has been earned for years, and now the irregularities are filling the market,” one regulatory official said.
“How can we allow the chaos to continue?” he asked rhetorically.
Since March, the regulator has uncovered 59,700 instances of wrongdoing involving 17.7 trillion yuan ($2.72 trillion), it announced Monday...
Of the near-60,000 cases of wrongdoing that the regulator says it found, 11,534 centered on industry rules and law, 4,060 on arbitrage that capitalized on uncoordinated regulations, 12,800 on improper business innovation and practices, and 31,300 on flaws in corporate governance, such as violations in ownership structure and investment activities, according to the CBRC.
7. Amway's "Investments In Guanxi" Losing Their Efficacy, The Company Now In Trouble In China?
The former distributors said they believed that regional officials sympathetic to Amway had quashed their complaints. They cited an instance when the state television channel in Gansu, after interviewing them, received a directive not to report on their case.
According to a journalist at the station, Gao Zenglei, the directive came from the Communist Party’s provincial propaganda department. At the time, it was headed by Liang Yanshun, who once participated in an Amway program that enrolled officials in classes at Tsinghua University and Harvard University, according to Harvard and his online biography. Mr. Liang did not respond to requests for comment.
Comment: The Amway "investment" in training CCP officials at Harvard has been lucrative for Amway and Harvard.
In a program bankrolled by Amway at a cost of about $1 million a year, Harvard’s John F. Kennedy School of Government has been training Communist apparatchiks known as Amway fellows. Since it started in 2002, the program has brought more than 500 Chinese officials to Cambridge, Mass., to study public management for a few weeks. They also visit Amway’s headquarters in Ada, Mich.
In a country where nothing is more valuable than guanxi, the term for the connections considered crucial to doing business, Amway has supersized its network thanks to Harvard. Though there are no public lists of participants, Bloomberg Markets identified 50 alumni through references in résumés in official publications and on Web sites.
8. Hu Shuli Steps Down As Caixin Editor In Chief
Hu Shuli retires as editor in chief of Caixin, to be replaced by managing editor Wang Shuo. Hu will remain as CEO and president and says she will continue to oversee all major policy decisions.--财新传媒人事调整 王烁出任总编辑_财新网:
Comment: With Wang Qishan out of the PBSC are Caixin's best days behind it? As usual there is much speculation about the political machinations that may lie behind this move...
Business, Economy, Finance And Trade
China Changes the Way It Manages Yuan After Currency's Jump - Bloomberg: The People’s Bank of China recently told some lenders that contribute to the reference rate to adjust their use of the “counter-cyclical factor” in such a way that it would have no impact on the mechanism known as the fixing, said the people, who asked not to be identified as the details are private. They said the change has already taken effect... The yuan’s strength over the past year paved the way for the policy shift. With the dollar in a protracted decline outflows from China have slowed, resulting in the yuan’s turnaround. The currency strengthened for the first time in four years in 2017, and reached a four-month high on Monday.
China's Ruyi Emerges as Leading Bidder for Bally - Bloomberg Chinese textile producer Shandong Ruyi Group is emerging as the leading bidder for Swiss luxury leather goods maker Bally International AG, people with knowledge of the matter said.
Jack Ma's Debt Giant Grinds to Halt as China Curbs Micro-Loans - Bloomberg The company hasn’t sold any asset-backed securities since early December, according to data compiled by Bloomberg and China Securitization Analytics. That marks an abrupt shift after Ant Financial issued a record 238 billion yuan ($37 billion) in 2017 of such securities backed by consumer loans. It comes after authorities announced on Dec. 1 they were requiring micro lenders to consolidate ABS into their balance sheets.
国车红旗将全面电动化 意欲三年内完成市场化转型_公司频道_财新网 FAW announces Red Flag (Hongqi) plans for electric vehicles, aggressive sales targets, batmobile like concept car.
China's Landmark Sovereign Dollar Bond Leaves Bitter Taste - Bloomberg China’s first sovereign dollar bond in more than a decade has done poorly for investors who scrambled to get a piece of the rare offering amid overwhelming demand. The tight pricing of the notes, lauded by China’s finance ministry, had a lot to do with it, according to analysts. The $2 billion securities sold in late October handed investors 0.73 percent of losses in the last two months of 2017, one of the few Asian nations that saw their government bonds generate negative payback during the period.
Ian Mulgrew: Following real estate money from China — impossible! | Vancouver Sun A new lengthy B.C. Supreme Court judgment reveals the complicated financial and real-estate legerdemain gatekeepers face trying to regulate ultra-wealthy Chinese investors in Canada. Those on both sides in the litigation, who called each other liars, acted as if they cared little about financial transparency or honesty in record-keeping even in deals involving sums that would stagger ordinary Canadians. As a result, the court concluded it was virtually impossible to “follow the money” to determine who paid what and who truly owned three multi-million homes on Vancouver’s west side.
China’s corruption crackdown could affect BCLC ‘whale’ gambler revenue | Vancouver Sun B.C. Lottery Corp. casinos rely heavily on large transactions from Asian “whale” gamblers, but revenue connected to this high-roller group could be affected by factors including China’s hunt for alleged financial fugitives, documents obtained by Postmedia News show. Observations about BCLC’s reliance on so-called “whale” gamblers from China and Macau, and the risks associated to the revenue that VIP gamblers are pouring into B.C. government coffers, are revealed in a slide presentation prepared by BCLC’s anti-money-laundering director, Ross Alderson.
时隔三年桔子水晶创始人吴海又写了封信：地方总会错中央意思_经济_宏观频道首页_财经网 - CAIJING.COM.CN 凤凰网财经讯 1月9日凌晨1点23分，桔子水晶创始人吴海在微博发布了一篇题为《又写了一封信》的文章。2015年，同样也在凌晨，吴海在其微信公号发出了致李克强总理的一封公开信。在信中，吴海披露基层政府部门利用政策漏洞对酒店企业的各种潜规则，感慨“做企业这么多年，我太憋屈了”。这封公开信曾在当时引起轰动，不仅得到了李克强的批示，他本人也因此被请进中南海进行座谈。
每经独家：华融证券明星投资经理被公安带走 曾为公司创收超10亿 | 每经App NBD reporting that a start Huarong Securities investment manager has been detained
国际酒店万豪集团被曝将港澳台西藏列为“国家”|万豪|国际酒店|西藏_新浪新闻 Marriott Hotels caught listing Taiwan, Hong Kong, Macao and Tibet as "countries", going to get pilloried in China
China's Lanzhou eases property tightening measures, more cities may follow - Reuters The provincial capital of China’s northwestern Gansu province, with a population of 3.6 million, lifted property tightening measures in the suburbs while relaxing some restrictions on home purchases in downtown areas, according to a notice posted on the website of the city’s housing authority late on Friday.
Politics, Law And Ideology
房峰辉涉嫌行贿受贿 被移送军事检察机关依法处理_网易新闻 Fang Fenghui has been handed over the military prosecutors on charges of bribery // 新华社北京1月9日电日前，经党中央批准，中华人民共和国中央军事委员会委员房峰辉（中共中央军事委员会原委员、中央军委联合参谋部原参谋长）因涉嫌行贿、受贿犯罪，被移送军事检察机关依法处理。
周滨狱中疑用化名曝光 周永康儿媳孙女无恙_中国-多维新闻网 Comment: a lawyer claiming to represent Zhou Yongkang's son Zhou Bin has said he was denied access to see Zhou Bin in a prison in Yichang, Hubei, where he says Zhou Bin is serving his 18 year sentence under the name Zhao Xiang
小马奔腾创始人去世 妻子被判承担2亿债务_新浪财经_新浪网 Comment: The widow of Beijing Galloping Horse Group has been found liable for 200 million RMB in corporate debts stemming from an agreement with a pre-IPO investor. The TV and film producer was on the cusp of a 2014 IPO when its founder, Li Ming, was detained as part of the probe of Zhou Yongkang crony Li Dongsheng. Li Ming died in custody (1.4.14 SCMP on his death ), officially due to a heart attack but the word that went around Beijing, including from some who claimed to have seen pictures, was that he had been beaten to a pulp in custody. Li Ming went to jail after June 4, 1989 but when he was released his friends who had stayed free helped him, including with a lucrative CCTV ad contract, because he had kept his mouth shout and not implicated anyone else.
Foreign and Military Affairs
India, China Avoid Another Doklam-Like Standoff, Resolve Intrusion Incident Near Arunachal Border - News18 India and China averted another Doklam kind standoff and resolved a dispute over intrusion by Chinese troops into Arunachal Pradesh’s Tuting area. Army Chief General Bipin Rawat said the Chinese side agreed to stop road construction activity on the Indian side of the Line of Actual Control and returned the two excavators and other equipment seized from workers last month.
China's Foreign Ministry says happy to see talks between North and South Korea - Reuters China’s Foreign Ministry said on Tuesday it was happy to see talks between North and South Korea take place, their first formal dialogue in more than two years, and welcomed all positive steps.
Five things to know about the Lancang-Mekong Cooperation summit | South China Morning Post When China and the leaders of nations along the Mekong River meet on Wednesday at the Lancang-Mekong Cooperation summit in Cambodia, a top item will be mapping out a five-year development plan that would include building hydropower dams and other projects for the region – pointing to its importance in China’s ambitious belt and road infrastructure plan.
Former Hong Kong home secretary Patrick Ho pleads not guilty in US court to offering US$2.9m in bribes to African presidents and ministers | South China Morning Post The court did not address the issue of bail for Ho. The defendant’s lawyers had requested that he be released on a US$10 million bond. That amount was increased from a US$1 million offer given after charges were brought against Ho in November. He has been in custody since. New York judge Katherine Forrest has tentatively set the start of the trial for sometime in January 2019 // Comment: Wonder if he will cut a deal and tell the Feds a lot about CEFC?
Chinese premier lauds Lancang-Mekong cooperation, China-Cambodia friendship - Xinhua The Lancang-Mekong River, which stretches for nearly 5,000 km, "brings the six riparian countries together into a community with a shared future featuring equality, sincerity, mutual assistance and kinship," Li said. Centering on the three pillars of political and security issues, economic and sustainable development, and social, cultural and people-to-people exchanges, the six countries have cemented cooperation in the areas of connectivity, industrial capacity, cross-border economic interactions, water resources, agriculture and poverty reduction, the premier said.
Hong Kong, Macao
China's legal move into train station hits Hong Kong rule of law, bar chief says - Reuters The remarks by Paul Lam, the head of the bar association, marked its strongest warning yet about the impact of the move in December by China’s parliament, the National People’s Congress.
Hong Kong Stock Index Heads for Best Winning Streak This Century - Bloomberg The gauge has risen 6.1 percent from the start of this streak on Dec. 21, led by property developers and energy producers, and is 2 percent shy of the record level reached in 2007. Country Garden Holdings Co., the top performer over the past 12 months, has soared 37 percent, followed by China Overseas Land & Investment Co. and Wharf Holdings Ltd., both up more than 20 percent.
Tech And Media
No pending VPN ban: China Telecom staff member - Global Times China Telecom staff denied on Monday ever receiving any notice to block private virtual private networks (VPNs) after media reports saying a ban will take place on Thursday. "It's strange because we didn't ever receive such a notice banning access to VPNs," an employee from a China Telecom service hall in Beijing's Hujialou region told Global Times on Monday. A customer service employee at China Telecom also denied the ban.
Facebook's Oculus says Xiaomi will make standalone VR headset in China - CNBC Xiaomi is also building a product called the Mi VR Standalone for the Chinese market based on Go technology and powered by a Qualcomm processor. Executives from the three companies presented at an event at the 2018 Consumer Electronics Show in Las Vegas. "Xiaomi is our hardware partner for launching Oculus Go globally," Hugo Barra, a former Xiaomi executive who was hired by Facebook a year ago as vice president of VR, said on Monday.
Renren to Scrap ICO After Talks With China Regulators, Sources Say - Bloomberg Regulators, which in September declared ICOs in China illegal, have held talks with Renren and other Chinese companies that sought to skirt the rules on such offerings, according to the people, who asked not to be identified as they weren’t authorized to publicly discuss the talks. It is unclear whether the rules apply to those listed outside the mainland, such as New York-traded Renren. Two of the people said regulators are focusing on overseas-listed Chinese companies.
A clone of a failed mobile game has just gone viral on WeChat · TechNode The game went viral overnight, but very few seem to notice the uncanny resemblance to another mobile app game developed by French app developer Ketchapp called Bottle Flip. Tencent, the Chinese tech giant who owned WeChat, has acknowledged the seminaries between the two mobile games. In a statement, Tencent’s mini-game team stated, “WeChat’s mini-games are developed by Tencent’s internal teams… From the beginning, WeChat has paid respect to classic works, innovation, and habits of technology.
Didi Detours Into Bike-Sharing Services - Caixin Global Didi Chuxing Technology Co. Ltd., whose backers include Apple Inc. and Uber Technologies Inc., unveiled the plan to develop its own-branded shared-bike service as part of a broader announcement saying it would launch a comprehensive bike-sharing platform within its core car services app. That platform will include the new Didi shared-bike service, as well as rival services offered by Ofo and a third player, Bluegogo, according to Didi. It said that other services could also be added in the future. Didi is already an investor in Ofo Inc., after pouring millions of dollars into the company in at least two funding rounds last year. The pair further cemented their ties when a top Didi executive became the president of Ofo last summer.
Axios Media Trends - China exploits U.S. investment to conquer media There's a misconception that the Chinese push into the Western media tech market is to target new American users or to compete directly with U.S. tech companies. In reality, they're looking to expand their Chinese user base abroad and make money from Chinese expats who would rather use their own social, messaging, and commerce apps in the U.S.
Society, Art, Sports, Culture And History
Chinese women reveal sexual harassment, but #MeToo movement struggles for air - The Washington Post China’s #MeToo moment still hasn’t arrived, suppressed by a patriarchal culture and a male-dominated one-party state that obsessively protects those in power. “There is still a belief in China, deeply ingrained in traditional culture, that it is a virtue of women to be submissive to the wishes of others,” said women’s rights activist Ye Haiyan, whose own struggle to bring to justice a school principal for molesting six schoolgirls in 2013 — and the persecution she faced from the government and police for doing so — was recorded in the documentary Hooligan Sparrow.
The Farmers Who Carve Frozen Rivers for the Harbin Ice Festival - Sixth Tone Video For a few frigid weeks in December, famers earn extra cash by cutting and hauling ice from the frozen Songhua River to be used in elaborate sculptures at the annual International Ice and Snow Festival in Harbin, Heilongjiang province
Energy, Environment, Science And Health
Iranian oil tanker burns for third day as winds, high waves lash rescuers - Reuters The size of the oil spill from the ship and the extent of the environmental harm were not known, but the disaster has the potential to be the worst since 1991 when 260,000 tonnes of oil leaked off the Angolan coast. “We can’t grasp the level of oil contamination at this moment. The cargo is still on fire, so it is hard to figure out if oil is being spilled,” Park Sung-dong, an official from South Korea’s Ministry of Oceans and Fisheries, told Reuters.
Chinese truck makers fined US$5.8m for emissions fraud and breaching pollution standards | Reuters The environment ministry said the move was the first time that vehicle manufacturers had been fined as a result of violations of China’s air pollution regulations, and showed the country would display “zero tolerance” for firms that break the law. Tackling vehicle pollution has been a key element of the country’s ongoing war on pollution, especially in its big cities, with emissions from cars believed to contribute about 40 per cent of total air pollution in the capital Beijing.
Across China: AI enhances photo app's spotless reputation - Xinhua Meitu is one of the most widely used free photo editing apps in the world, and MTskin is based on a database of medical photos of facial problems. AI technology matches users' selfies with the problems and link them to professional dermatologists who deal with problems ranging from acne or chloasma to melanocytic nevi.
习近平的科技情怀-新华网 Xinhua on "Xi Jinping's S&T Feelings" in the wake of the latest science awards
“大气十条”保卫战：北京的天空是如何变蓝的|周刊封面推荐_政经频道_财新网 Caixin cover story on the tough measures taken to improve Beijing air quality
Agriculture And Rural Issues
China's youth entrepreneurs go back to countryside - Xinhua For decades, young people have tried to flee the countryside, so long mired in poverty. Now they are harvesting opportunities there, attracting aspiring entrepreneurs to start businesses and build better lives. In Shangshui County, 20,000 young women work in a garment factory filling orders for Uniqlo and Zara. In neighboring Lankao County, billboards hail "Returned Business Stars" on a major road. Lankao [Xi's adopted county] officially rose out of poverty last year. In the eastern Zhejiang Province, people who found success in the cities are invited back by local Communist Party branches and elected as village heads to lead rural revitalization.
Meet the Beijing Residents Affected by the 40-Day Evacuation Campaign – Thatsmags.com We visited three of the areas affected in early December. Here’s what it was like, in residents’ own words.
Beijing to build wetland park in central area - Xinhua The wetland park will be built on Xihai, a 7.4 hectare lake near west Deshengmen, surrounded by historic sites including temples and watchtowers. According to the district government, the lake will be expanded to 10.9 hectares and a 1,450-meter walkway will be built. Commercial property around the lake will be demolished