Xi inspects Chongqing; GDP; Taiwan

Apologies for taking a personal day Tuesday. I had to make an unscheduled trip out to Arizona to help my ailing dad and a couple of flight delays blew up my schedule.

The GDP data Wednesday was slightly better than expected. How ugly the underlying numbers really are may be besides the point in the near term. The economy looks to have stabilized, as expected.

Xi went on an inspection tour of Chongqing this week, putting Chongqing Party Secretary Chen Min’er in the spotlight. The propaganda rollout of the tour is just beginning and so I should have more to say about it in the next issue. The most interesting things I have seen so far: Hu Chunhua joined the trip, leading to some speculation that Xi was showing off two potential “successors” (Hu Chunhua and Chen Min’er), and Xinjiang chief Chen Quanguo joined the symposium Xi chaired in Chongqing.

Thanks for reading.

The Essential Eight

1. Xi inspects Chongqing

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19:30 minutes at top of the Wednesday CCTV Evening News on Xi's inspection tour to Chongqing and his presiding over a symposium about solving prominent problems including meeting the basic needs of food and clothing and guaranteeing compulsory education, basic medical care and housing.

Ding Xuexiang, Liu He, Hu Chunhua and He Lifeng were mentioned as going with Xi on the tour, Chen Min'er led the Chongqing side of course. Interesting that CCTV says Xinjiang chief Chen Quanguo attended the symposium..Was Chen sharing stability maintenance and risk-mitigation learnings?

Xi Focus: Xi calls for greater efforts to win battle against poverty on time - Xinhua

After hearing the work reports from Chongqing's Party and government officials Wednesday morning, Xi hoped that Chongqing will act as a major drive in boosting the development of China's western region in the new era, play a leading role in promoting the joint construction of the Belt and Road, and become a model in advancing green development of the Yangtze River Economic Belt.

China's Xi, in scandal-plagued Chongqing, praises city's achievements - Reuters

On a visit to the city, Xi “gave affirmation to the achievements Chongqing has made in its work”, the official Chongqing Daily said, after he heard a report from party and government officials.

Xi said he hoped that the city could ensure party instructions are fully implemented and continue to create a “pure and honest political ecology”, the paper added.

Dissidents, Petitioners Under House Arrest, Silenced For Xi Jinping's Chongqing Trip - RFA

Xi "inspected" Chongqing on Monday, generating images in state media of an avuncular president shaking hands with joyful schoolchildren and visiting ethnic minority villages.

"He learned about the progress of poverty alleviation and in solving prominent problems, including meeting the basic needs of food and clothing and guaranteeing compulsory education, medical services and housing," according to identically worded reports in all state media outlets.

Local police had begun placing dissidents and rights activists under surveillance several days ahead of the presidential visit, activists told RFA.

2. Econ data

Chinese Economy Grows at 6.4%, Outstripping Estimates - Caixin

All other major activity indicators gauging investment, industrial output and consumption hit multi-month highs, according to data released by the National Bureau of Statistics (NBS)...

Value-added industrial output, which measures production at factories, mines and utilities, soared 8.5% from March 2018, the steepest increase since July 2014’s increase of 9%, NBS figures showed. The rate was also much stronger than a median projection of a 5.9% increase in the Bloomberg survey of economists.

China Steel Production Hits Record 231 Million Tons - Bloomberg

The maker of half the world’s steel churned out 231 million tons between January and March, up almost 10 percent from a year earlier and the highest for any first quarter on record. Production in March climbed 10 percent to 80.3 million tons, according to data from the statistics bureau.

China house prices rise signals economic rebound | Financial Times $$

Housing prices in 70 big Chinese cities increased an average of 10.6 per cent year on year in March, the quickest gain since April 2017 and the latest indication that the world’s second-largest economy is rebounding after a difficult start to the year.

3. More stimulus coming?

China Rebounds as Officials Are Said to Prepare New Stimulus - Bloomberg

Officials are drafting measures to bolster sales of cars and electronics, according to people familiar with the matter, who asked not to be named because they aren’t authorized to discuss the plan. That news coincided with data showing a 6.4 percent year-on-year expansion in the first quarter -- beating economists’ estimates.

China's cabinet reaffirms prudent monetary policy - Reuters

China will continue to implement a prudent monetary policy and will resolutely not adopt a “flood-like” stimulus, the cabinet said on Wednesday, reiterating the current stance.

Central Bank Refocuses on Keeping Money Supply Under Control - Caixin

The language about the money supply was a new addition to the latest report on the quarterly meeting of the People’s Bank of China’s (PBOC) Monetary Policy Committee, which is chaired by central bank Governor Yi Gang...

The emphasis on keeping the money supply under control means that implementation of monetary policy is going to tighten marginally, Ming Ming, an analyst with Citic Securities Co. Ltd., said in a note on Tuesday.

4. US-China

China to Consider U.S. Request to Shift Tariffs on Farm Goods

China is considering a U.S. request to shift some tariffs on key agricultural goods to other products so the Trump administration can sell any eventual trade deal as a win for farmers ahead of the 2020 election, people familiar with the situation said.

The step would involve China moving retaliatory duties it imposed starting last July on $50 billion worth of U.S. goods to non-agricultural imports, said the people, who asked not to be identified because the discussions were private. The shift is because the U.S. doesn’t intend to lift its own duties on $50 billion of Chinese imports even if an agreement to resolve the trade war between the two nations is reached, one the people said.

U.S. firms no longer 'positive anchor' for Beijing ties: AmCham in China - Reuters

“Crucially, the mood has shifted,” the American Chamber of Commerce in China said in a statement accompanying its annual report on China’s business climate.

“The U.S. business community in China, so long an advocate of good bilateral relations, can no longer be relied upon to be a positive anchor. U.S. companies continue to face an uncertain operating environment in China amid decreasing optimism about their investment outlook,” it said.

Donald Trump, China Savior? Some Chinese Say Yes - The New York Times

Business leaders and intellectuals say one of Beijing’s toughest critics could force the country to change. Still needed: voices of support from the inside.

Comment: Be careful of the wishful thinking feedback loop

US and China in ideological battle for the future, defence official says | South China Morning Post

The United States is in an ideological battle with China and needs to devise an effective, coordinated strategy with its allies to counter the rise of the Asian giant, according to a senior US defence official.

China’s use of “predatory economics” and its growing military clout threatened to worsen corruption, undermine the sovereignty of smaller nations, erode human rights and weaken free trading systems, said Randall G. Schriver, assistant secretary of defence for Indo-Pacific security affairs at the US Department of Defence.

Washington's smear campaign against China is failing - Xinhua

With protectionism and unilateralism rearing its ugly head, humanity is standing at a crossroads. Wisdom and courage are needed for the world to grow together.

Washington's barrel of lies against China is failing to sway global public opinion. A growing China is good for the world, a truth that even the U.S. cannot change.


People's Daily commentator "Zhong Sheng" pushes back against Pompeo's remarks about China in Latin America, says the people in the region know who their real friends are

5. Taiwan

Terry Gou Made Your iPhone. Now He Wants to Run Taiwan. - NYT

Mr. Guo’s speech at the temple Wednesday was delivered in the Taiwanese language, a nod to Taiwan’s unique identity. Yet his choice to cite Mazu, a deity hailing from across the Taiwan Strait in the Chinese province of Fujian, also carried significance.

When Mazu spoke to him in his dream, he said, she told him, “You must preserve cross-strait peace.”

Taiwanese Populist Han Kuo-yu Advances China's Interests - The Atlantic

Welcome to Taiwan, where Han Kuo-yu, a once–washed-up former legislator, shocked this island of 23 million last year by beating out the early favorite to become the mayor of Kaohsiung—an office that, in American terms, has the same political currency as that of the governor of Texas or Florida. And with a presidential election coming up in January, a growing chorus of voices on the China-friendly side of Taiwan’s political spectrum is calling for this Trumpian figure to enter the fray. Han has not officially said that he will run, but he has already enchanted much of the Taiwanese electorate, and has a good chance of becoming Taiwan’s next president.

Military drill near Taiwan 'necessary' - China Daily

On Monday, various warships, bombers and reconnaissance aircraft of the People's Liberation Army Eastern Theater Command conducted "necessary training" around Taiwan as a means to test the joint assault capability between different branches of the military, Senior Colonel Zhang Chunhui, the theater command's spokesman, said in a statement on Monday.

The exercise took place in waters east of Taiwan and was part of a scheduled PLA exercise, he said.

"It is completely within the normal legal rights of a sovereign country, and it's beneficial for maintaining peace and security in the Taiwan Straits," Zhang said.

U.S. denounces coercion as China conducts drills near Taiwan - Reuters

“Any attempt to influence Taiwan through threats or coercion, we believe, destabilizes the region and threatens stability in the Taiwan Strait,” James Moriarty, chairman of the American Institute in Taiwan, said at a ceremony to mark the last four decades of U.S.-Taiwan relations.

China’s People’s Liberation Army said its warships, bombers and reconnaissance aircraft had conducted “necessary drills” around Taiwan on Monday, though it described them as routine.

6. Nasty National Security Day speech in Hong Kong

China facing its worst national security threats since cold war, says Beijing’s top official in Hong Kong as he attacks political groups in the city for foreign links | South China Morning Post

Beijing’s top official in Hong Kong on Monday said China was facing its worst national security threats since the end of the cold war as he condemned some political groups in the city for “colluding with anti-China forces” by accepting invitations to travel abroad for secretive meetings.

Wang Zhimin, director of the central government’s liaison office in Hong Kong, also hit out at the Occupy movement of 2014, calling it a threat to Hong Kong’s public security and damaging to the city’s rule of law.

In a speech at the National Security Education Day Hong Kong Symposium in Admiralty, Wang praised the convictions last week of nine leaders from the civil disobedience movement

7. More PLA restructuring

Chinese military chiefs set to move PLA service branch headquarters out of Beijing | South China Morning Post:

Chinese military leaders are reviewing plans to relocate the headquarters of its five service branches away from Beijing to second- and third-tier cities, according to sources close to the People’s Liberation Army.

The top brass began considering the relocation plans around 2015 but a decision to proceed was made in the last two years, several military sources said.

The sources said the leadership believed the move would help reduce cronyism and nepotism within the PLA and improve combat readiness – a top priority in President Xi Jinping’s reform plans.

8. Huawei

Who Owns Huawei? by Christopher Balding, Donald C. Clarke :: SSRN

As Huawei has come under increasing scrutiny over the last several months, the question of who really owns and controls it has come to the fore. Huawei calls itself “employee-owned,” but this claim is questionable, and the corporate structure described on its website is misleading. A number of pertinent facts about Huawei’s structure and ownership are in fact well known and have been outlined many times in the Chinese media, but the myth of Huawei’s employee ownership seems to persist outside of China. This article, drawing on publicly available sources such as media reports, corporate databases, and court cases, aims to refute this myth once and for all.

Huawei reveals it has no 5G contracts from mainland China | Financial Times $$

The revelation came as analysts said that China was slowing down its roll-out of 5G, the next generation of mobile internet that is expected to enable everything from instant downloads of movies to connected cars. Annual results from the country’s biggest telecoms carrier, China Mobile, show its planned capital expenditure on 5G is running at half the levels that analysts had forecast.

U.S. to press allies to keep Huawei out of 5G in Prague meeting: sources - Reuters

Officials from more than 30 countries will meet May 2-3 to agree on security principles for next-generation telecoms networks, said Robert Kahofer, chief of cabinet at Czech cybersecurity agency NUKIB.

A U.S. official familiar with the plan said the Prague meeting marks a strategic shift in how the U.S. government plans to urge allies to drop Huawei and other 5G vendors in the future, which Washington believes pose a risk to national security. The official described the approach as “softer.”

Huawei Escaping European Ban, But 5G Regulators Are Closing In - Bloomberg

While no European agency has targeted Huawei by name, U.S. warnings haven’t exactly fallen on deaf ears: the region’s regulators have been tightening standards that may hit Huawei harder than Nokia Oyj and Ericsson AB, its main European rivals.

Business, Economy and Trade

Chinese Central Bank on Verge of Launching Second Generation Credit System - China Banking News The second generation system will cover information that was not included by the first generation credit system, including revolving loans, large-sum specialist installments for credit cards, joint borrowers, companies providing guarantees to individual persons, individual persons providing guarantees to companies, and late repayment information.

Electric-Car Startup Nio Shifts Gears With Plans to Fine-Tune Workforce Specifically, the company is planning to cut about 3% of its workforce over the four months starting from the end of February this year, he said.

Investors turn cold on Chinese education start-up VIPKID | Financial Times $$ VIPKID, which connects English language teachers in the US with a vast pool of Chinese students over the internet, is struggling to raise a fresh $500m round of funding at a targeted $5.5bn to $6bn valuation, according to investors.

Study Xi Jinping Thought to Win Cheap Bank Loans - Bloomberg Qiu said he began improving his company’s work promoting the party about four to five years ago and now it has 12 party members out of its 170 employees. He encourages employees to use “Xue-Xi-Qiang-Guo,” or “Study Xi to Strengthen the Country,” an app that promotes President Xi’s ruling doctrines, he said. “The party building work has paid off,” said Qiu. “We have got the government support. It means a lot.”

Daimler suspends Mercedes franchise in China after customer complaint goes viral - Reuters Daimler said in a statement on Tuesday that the dealership in Xi’an city in the northwestern province of Shaanxi had reached an agreement with the customer and was investigating its customer service and business operations...China’s banking and insurance regulator has asked Mercedes-Benz’s car finance unit to investigate its dealership arrangements, state media said on Tuesday.

California Wineries Feeling Effects Of US-China Trade War – CBS San Francisco A report this month from the Wine Institute in San Francisco found U.S. wine exports to China fell nearly 25-percent last year.

Anbang Cuts Registered Capital, Allowing Creditors to Demand Repayment - Caixin Global The move allows its creditors to request that Anbang pay off debts or offer more guarantees, Anbang said, citing China’s Company Law.

Student Sues JD.com and CEO Liu for Damages Over Alleged Rape - Bloomberg Jingyao Liu, a 21-year-old student at the time of the incident, charged the Chinese company and its employees played a key role in the alleged August rape while Liu was attending a doctor of business administration program at the university.

New results on the China shock, furthermore the China shock is largely over - Marginal REVOLUTION our data suggest Chinese trade redistributed jobs from manufacturing in lower income areas to services in higher income areas. Finally, the impact of Chinese imports appear to have disappeared after 2007 – we find strong employment impacts from 2000 to 2007, but nothing since from 2008 to 2015.
That is from a new paper by Nicholas Bloom, Kyle Handley, André Kurmann, and Philip Luck.  Via Bryan Caplan.

China’s SenseTime sells out of Xinjiang security joint venture | Financial Times $$ SenseTime, a facial recognition software company that supplies Chinese police, set up a “smart policing” company with Leon, a major supplier of data analysis and surveillance technology in Xinjiang, in November 2017. It has now sold its 51 per cent stake in the joint venture, Tangli Technology, to Leon, which said Tangli would continue with its strategy and that its research team had mastered key technologies. // Question: Is the JV still using SenseTime technology?

Automakers Ramp Up Ride-Hailing Offensive to Unseat Didi - Caixin As ride-hailing grows in popularity in big cities like Shanghai and Beijing, the concern is that more and more of China’s car owners will ditch their Volvos and Hondas for the convenience of summoning a ride from their smartphones. In response, a swathe of automakers, including Geely, BMW and SAIC Motor, have ramped up their offensive against Didi with their own mobility services. Tech firms such as Meituan Dianping, Alibaba and Tencent have also entered the fray. On March 28, Chongqing Changan Automobile Co. Ltd. said it has partnered with a dozen companies to set up a 9.76 billion yuan ($1.46 billion) joint venture to explore ride-hailing with new-energy vehicles.

Politics and Law

Chinese authorities step up crackdown on Twitter users | Financial Times $$ Chinese authorities are targeting Chinese Twitter users for “liking” posts that they say insult the Communist party leadership or even for just opening an account, as Beijing intensifies efforts to control cyber space beyond its firewall. 

Beijing prison authority launches inaugural ‘Political Reform Day’ - Global Times The Beijing Municipal Prison Administration (BMPA) launched the first "Political Reform Day" activity recently, organizing prisoners to watch news on TV, attend flag-raising ceremonies, sing revolutionary songs and undergo anti-gang crime education.

‘Harmful to politics’: Chinese actor Zhao Lixin kicked off Weibo as censors turn the screw on social media | South China Morning Post Screen and stage star silenced after Japanese imperialism controversy

Xi's article on cultural confidence to be published - Xinhua "All practitioners in culture, literature, art, philosophy and social sciences shoulder the important tasks of enlightening thoughts, nurturing sentiments and warming hearts," the article wrote. As this year marks the 70th anniversary of the founding of the People's Republic of China, the article called on them to reflect the struggle of the Party and the people over the past 70 years.

Foreign and Defense Affairs

Australian university signs A$100m China deal despite concerns | Financial Times $$ The Monash deal, which will allow Chinese investors and local governments to commercialise its scientific breakthroughs, has been announced at a time when several prominent educational institutions in the US and the UK have been seeking to distance themselves from Chinese entities

Chinese Navy's 70th Anniversary features eye-catching large vessels - China Military China’s first domestic-made aircraft carrier will continue to undergo sea trials, and the world-leading 10,000-ton Type 055 guided-missile destroyer will be commissioned soon. Both the Type 055 destroyer and the Liaoning aircraft carrier will participate in the massive 70th anniversary’s fleet review on April 23. This will be an important milestone in China’s steady rise as a major naval power.

Former Head of Military Disease Control Body Stripped of Doctorate - Caixin The former director of the People’s Liberation Army’s Institute for Disease Control and Prevention has been stripped of his doctorate due to plagiarism, according to a notification from the university seen by Caixin. Portions of Huang Liuyu’s 2007 doctoral thesis were found to have been copied from another student’s thesis that had been turned in several years earlier, which the Army Medical University said constituted “academic misconduct.”

Woman arrested at Mar-a-Lago will remain jailed, was ‘up to something nefarious,’ judge says - The Washington Post During a hearing, U.S. Magistrate Judge William Matthewman appeared swayed by the argument made by federal prosecutors that Yujing Zhang — who authorities said made her way through Mar-a-Lago’s security last month before being arrested carrying multiple cellphones and other electronics — had ulterior motives in accessing the president’s club. It appeared that “Ms. Zhang was up to something nefarious,” Matthewman said during the hearing.

Japan to Send ‘High-Level Delegation’ to China’s Belt and Road Summit - Caixinl Japanese officials said they will attend in order to expand their cooperation in Belt and Road-related fields. Minister of foreign affairs Wang Yi said the dialogue over the weekend was “constructive,” though China expects Japan to participate in the Belt and Road Initiative with a “more positive and clear” manner.

Tech and Media

TikTok vanishes from Google, Apple app stores in India after ban - Reuters A court in southern Tamil Nadu state asked the federal government on April 3 to ban TikTok, saying it encouraged pornography and warning that sexual predators could target child users.

The stars who vanished from China's live-streaming galaxy · TechNode The reason for their disappearance is by no means mysterious—they either said or did the “wrong” things and were banned. This was the case for four of China’s most popular and highest-grossing live-streaming celebrities: Li Tianyou, Lu Benwei, Chen Yifa, and Yang Kaili.

BiliBili threatened with lawsuit about videos mocking Chinese idol · TechNode Anime-themed video streaming website BiliBili received a letter on Friday from Chinese singer Cai Xukun’s lawyer to take down defamatory videos of the Chinese idol, not from the law firm itself, but via netizen reposts on Weibo. In the Weibo post dated Friday, BiliBili said it “cares about the feelings of Mr. Cai Xukun” and that it trusts legal professionals to reach a fair judgement. The post sparked heated debate on the microblogging site, reaching 510 million reads as of Monday afternoon

Society, Arts, Sports, Culture and History

Chinese runners accused of faking finishing time records to qualify for place in Boston Marathon | South China Morning Post The accusations were made by a running industry insider on WeChat, who claimed that an unidentified Chinese travel company collaborated with a group of “more than 90” mainland runners to falsify their records.

After Notre Dame Blaze, Chinese Netizens Remember How the French Burned Down the Old Summer Palace | What's on Weibo While many mourn the Notre Dame blaze, thousands of Chinese netizens point out the burning of the Old Summer Palace in Beijing was actually “worse.”

Notre Dame fire provokes deep thoughts - Global Times People from third world countries would think: Why didn't the world feel the same pity for the Old City of Damascus that was damaged in the bomb attacks? Western people should try to empathize with such a situation. On Tuesday, fringe voices emerged in Chinese public opinion, saying the Notre Dame fire reminded them of the time the Old Summer Palace in Beijing was burned down by British and French troops during the Second Opium War. They opposed Chinese who expressed sympathy for the Notre Dame fire. But mainstream Chinese public opinion disagrees with this view.

China’s acceptance of Vatican-approved bishop candidates ‘a positive sign’ | South China Morning Post Father Anthony Yao Shun and Father Stephen Xu Hongwei have been elected in Inner Mongolia and Shaanxi province...Sources said both elections were held in hotels rather than the local bishops’ residences.

New Scholarship Is Revealing the Private Lives of China’s Empresses | At the Smithsonian | Smithsonian Ever political, Cixi wanted a Westerner to paint a portrait destined for the West. She commissioned artist Katharine A. Carl to do the painting for the 1904 St. Louis Exposition, hoping to boost U.S.-China relations at a fraught time. Carl did the portrait in the Art Nouveau style. It went to St. Louis and was then gifted to Teddy Roosevelt. This is one of the many startling discoveries in the exhibition, “Empresses of China’s Forbidden City, 1644 – 1912,” at the Smithsonian’s Arthur M. Sackler, which opened March 28 and continues through June 23.

Energy, Environment, Science and Health

Greenpeace Study Shines Light on China’s Polluted Soils - Sixth Tone The study — the first of its kind in China — sheds light on how the country is dealing with the environmental costs of industrialization. Around 41% of all listed plots are the sites of former chemical plants, while more than half of all identified soil pollution comes from heavy metals, which are linked to a number of health risks, including some cancers.

Chinese Cities Struggle With Public Hospital Ownership Reform - Caixin Suqian in Jiangsu province and Luoyang in Henan were previously considered the best examples of market-oriented reform of public hospitals in China. But the local governments of both places recently took steps to reverse the process after years of mixed results and failed transformations. In January, the two cities’ governments almost simultaneously announced plans to regain control of the local hospital systems through “new construction” and “reacquisition.”.. Over time, the experiments seemed to show that China’s health-care industry is as ill-suited to reforms driven by market forces as the American medical system. By 2016, the reform initiative lost the backing of central government authorities.

Rural and Agricultural Issues

Dim Sums: Rural China Economics and Policy: China Soy Imports Slide Due to Multiple Factors China's decline in soybean imports during Q1 2019 soybean market is due to weak fundamentals, including impact of African swine fever, the overhang of large U.S. inventories and expanded plantings in South America, according to an article in the country's Grain and Oils News this week.