"Sinocism is the Presidential Daily Brief for China hands"- Evan Osnos, New Yorker Correspondent and National Book Award Winner
President Trump has made it a pattern of tweeting at Xi Jinping on the eve of important US-China meetings. Wednesday he woke up to news of North Korea’s successful ICBM test and tweeted:
“Trade between China and North Korea grew almost 40% in the first quarter. So much for China working with us – but we had to give it a try!”
The Essential Eight
1. Calm Before The Storm In The US-China Relationship Is Over
Sinocism readers have known for many weeks that this was coming. Investors and analysts may want to rediscover the worries about the relationship that were so prevalent during Trump’s transition period.
This week’s Trump-Xi meeting is unlikely to change the trajectory.
Haley said, the United States will seek to penalize other countries that engage in trade with North Korea — a comment that was a shot at China, Pyongyang’s main economic lifeline.
“There are countries that are allowing, even encouraging trade with North Korea, in violation of U.N. Security Council resolutions,” Haley said. “Such countries would also like to continue their trade arrangements with the United States. That’s not gonna happen. Our attitude on trade changes when countries do not take international security threats seriously.”
Comment: If the UN does not tighten sanctions expect the US to add to the list of PRC institutions, including financial ones, and PRC individuals sanctioned directly by the US.
Global action is required to stop a global threat. Any country that hosts North Korean guest workers, provides any economic or military benefits, or fails to fully implement UN Security Council resolutions is aiding and abetting a dangerous regime. All nations should publicly demonstrate to North Korea that there are consequences to their pursuit of nuclear weapons. We intend to bring North Korea’s provocative action before the UN Security Council and enact stronger measures to hold the DPRK accountable.
Comment: “Aiding and abetting” I believe is new language.
The players: The most muscular internal enthusiasm for across-the-board tariffs comes from Steve Bannon and trade-policy director Peter Navarro. Commerce Secretary Wilbur Ross, a longtime friend of the president’s, is seen as sharing Bannon’s view but is cooler to outright tariffs.
The likely solution: With the caveat that Trump can always make unexpected decisions, the administration is headed toward a more tailored approach that targets China and countries through which it trans-ships steel — Vietnam, for example. That could include possible tariffs, based on unfair trade practices, like dumping.
Comment: July 16 is the 100 day deadline of the trade talks announced after the Trump-Xi “citrus summit”. If there are not significant breakthroughs, and there is no reason to expect there will be, the US is likely to get much more aggressive on trade and Beijing will respond by targeting some of the more successful US firms and sectors operating in and exporting to China.
Meredith Sumpter, director of Asia for Eurasia Group, wrote in a note to clients Tuesday that the odds of a U.S. military strike on North Korea remain low—about a 10% probability—adding it would probably be well-signaled by the U.S. and “clear to outside observers in advance of any military move.”
Comment: I hope the probability is only 10% but worry it is higher. BTW, the Eurasia Group has built quite an impressive Asia team, with several hires in the last year or so.
The plan would see North Korea suspend its ballistic missile program and the United States and South Korea simultaneously call a moratorium on large-scale missile exercises, both moves aimed at paving the way for multilateral talks.
The initiative was set out in a joint statement from the Russian and Chinese foreign ministries issued shortly after President Vladimir Putin and Chinese President Xi Jinping held wide-ranging talks in the Kremlin.-中华人民共和国外交部和俄罗斯联邦外交部关于朝鲜半岛问题的联合声明–人民网
Comment: And called for stopping the THAAD deployment. 67 years after the start of the Korean War the US is still facing off against North Korea, Russia and the PRC. The Kims have been remarkably skilled at playing several US administrations…
2. Xi Visits Putin, Both See Lots of Opportunities In The Trump Era
China-Russia relations are at their “best time in history” with exchanges between Xi and his Russian counterpart Vladimir Putin playing a crucial role in bilateral relations.
A joint statement signed by the two on further deepening comprehensive strategic partnership of coordination, called on both countries to continue the synergy of their respective development strategies as well as between the China-proposed Belt and Road Initiative and the Russia-led Eurasia Economic Union.
Huge potential is expected to be tapped for cooperation on cyber security, Arctic research, space, trade, technology, connectivity, finance and BRICS cooperation.
Huang Kunming, executive vice director of the Publicity Department of the Communist Party of China Central Committee, made the remarks during a keynote speech at the Third China-Russia Media Forum held in Moscow.
China-Russia relations have entered the best period in history, which creates vast room for media cooperation between the two countries, he said.
The Chinese and Russian media cannot let others interpret the international order and international rules on their behalf, and should take the initiative in this fierce international competition over discourse, Lu [Lu Xinning, deputy editor-in-chief of the People’s Daily] added. “This new media era has redefined the way in which information is disseminated and acquired, creating a rare opportunity for developing countries and emerging market countries to win the right to speak.”
Comment: Beijing understands that the Russia cloud hanging over Trump makes it politically impossible for him to attempt any sort of rapprochement with Putin that could be useful in checking the PRC.
3. Xi Goes To Germany Ahead of G-20
The unveiling of the bears was broadcast live on German television and watched by millions of viewers. The panda pavilion will open to the public on Thursday.
But she added: “In my view we must intensively pursue the human rights dialogue, looking at how different parts of society can better express themselves. In this respect, cooperation in the field of civil society can be further strengthened.”
Frustrated by Trump’s first trip to Europe in late May, Merkel, addressing an election campaign in Germany’s southern state of Bavaria, said the Europeans “really have to take destiny into their own hands.”
In this context, it’s right time for China and the EU, sharing similar positions on free trade and climate change, to deepen cooperation…
It’s no secret that China and the EU continue to bicker on issues like steel overcapacity, market economy status, and market openness. But these do not constitute the mainstream of China-EU relations.
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4. Long-rumored, Delayed National Financial Work Conference Set for Next Week?
National Finance Work Conference likely to elevate role of central bank in coordinating regulatory moves
Comment: There have been repeated rumors over the last year that this meeting was imminent, now looks like it may finally be happening. Local Chinese media followed with stories about the meeting, those articles in Chinese now look to have been censored (see this tweet), so obviously this is quite sensitive if it is correct. From the reporting there will be no rumored super-regulator but rather a strengthened PBoC. Expect this meeting to revise the institutional framework around financial regulation in ways consistent with making the current crackdown in the financial sector institutionalized.
The Caixin English story still not censored: Long-Awaited Meeting on Financial Reform Slated for Mid-July – Caixin Global:
The news came shortly after the central bank issued its annual industry review on Tuesday. In the 152-page China Financial Stability Report《中国金融稳定报告（2017）》, the People’s Bank of China said credit and liquidity risks within the financial sector remain largely controllable. But it also reiterated the urgent need for financial regulators to work together to plug regulatory loopholes and curb excessive leverage in the financial system.
The conference will be held at the same time as a closed-door meeting on global and domestic economic conditions in the second half of the year, business news service Caixin reported.
5. India-China Border Tensions Heating Up
The dispute flared in June after Chinese teams began building a road on territory also claimed by Bhutan. Although China and Bhutan have spent decades negotiating the precise border without serious incident, the tiny Himalayan kingdom sought help this time from its longtime ally, India, which sent troops onto the plateau to stop the Chinese workers.
“The Chinese people are very angry as India is occupying Chinese territory. The Chinese government is facing great pressure,” Luo said, according to a statement posted on the website of the Chinese embassy on Wednesday. Luo said Beijing hoped the stand-off could be solved by diplomatic negotiations, but comments by Indian officials had left Beijing suspicious.
6. Big Plans For Artificial Intelligence
China’s top technology official said Beijing has laid out a national roadmap to guide the development of artificial intelligence (AI) until the year 2030 as the country’s tech companies pour resources into competing with Western rivals in a race to dominate the field.
The Beijing-based company said on Wednesday that more than 50 companies, including 12 Chinese cars makers and two western car firms – Ford and Daimler – as well as suppliers, component providers and ride sharing firms such as China’s UCAR and Singapore-headquartered Grab Taxi, have jumped on board. It is the first such partnership since Baidu launched its Project Apollo open autonomous driving platform in mid April.
Robin Li live streams himself riding to Baidu conference in driverless car, police launch investigation: Shanghaiist Footage has gone viral on Chinese social media of Li video-calling into the Baidu Create conference in Beijing from the passenger seat of a driverless car. In the video, Li says that he is currently on his way to the conference and is just now passing by the city’s 5th Ring Road.
a profitable startup based out of Seattle that has developed a framework to build and power chatbots and voice-based applications across multiple platforms and devices
Min refers to Alibaba’s recent launch of “Brains”: Alibaba domain-specific intelligence solutions for domains such as healthcare, transportation, and manufacturing. This is in stark contrast to AWS, which offers generic infrastructure and tools and lets clients build applications on top of that.
Min explained that the rationale was to diversify from AWS by offering a value-add proposition instead of trying to play catch-up with them
7. Tencent’s Game Honor Of Kings Slammed For Addicting Kids
Comment: This brings back bad memories. I tried and failed at building a Chinese online game company 2004-8, at significant damage to my ego and financial pain to me and investors. Back then there was the original push for limiting minors’ play time and implementing an anti-fatigue system. Those policies never really stuck because the games that are blockbusters are so successful precisely because they are addictive. Could this time the crackdown be more meaningful? Quite possibly, since Xi has taken a much tougher line to everything Internet.
The People’s Daily, the official newspaper of the Communist Party, ran two editorials in its Tuesday edition criticizing the game, including one headlined “‘Honour of Kings’: Entertainment for the Masses or a ‘Menace’ to Human Life?”
users below 12 years of age will be limited to one hour of play time each day, while those aged between 12 years and 18 years will be limited to two hours a day, Tencent said. Tencent did not say whether the limits will be imposed only in China or elsewhere too.
Comment: The anti-fatigue system Tencent rolled out already cracked in 24 hours, accounts for sale online- “王者荣耀”防沉迷系统上线首日遭破解_深度_新京报网
Tencent Dominates in China. The Next Challenge Is Rest of the World – Bloomberg Comment: Profile of Martin Lau
8. An American Journalist Writes About An Effort To Recruit Him To Spy For The PRC
On the day I received my first message from Chinese intelligence agents from the Ministry of State Security, they, of course, didn’t say they were Chinese spies. The note was from “Frank Hu,” a “project assistant” from Shanghai Pacific & International Strategy Consulting Co, saying he had found me on the Internet and was writing to “seek potential cooperation opportunities.”
It sounded innocent enough, but it raised red flags. His company, he said, “is a Shanghai-based consulting firm, specializing in independent policy analysis and advisory services. We strive to help our clients properly assess political dynamics, risks and opportunities in countries and regions they operate in.”
Business, Economy And Trade
LeEco faces tightening pressure as court freezes another $2.3 billion in assets – TechNode This comes right after RMB 1.2 billion worth of assets owned by co-founder Jia Yueting, his wife Gan Wei and three subsidiaries were frozen earlier this week. The court carried this order on behalf of China Merchants Bank. However, local media pointed out China Merchants Bank is not the only bank involved. The report noted that LeEco has also borrowed tens of billion RMB from Ping An Bank. In addition, it has two company loans, totaling RMB1.93 billion, due in August and September this year, which means the worst is probably yet to come for the struggling company.
China central bank doubles June liquidity injections to avert cash crunch | Reuters The People’s Bank of China switched to a modest tightening stance at the start of this year to help cool explosive growth in debt, but it injected substantial liquidity last month to avoid a quarter-end cash crunch, market participants said. The PBOC said in a statement it lent 498 billion yuan in loans to financial institutions via its medium-term lending facility (MLF) in June.
Missing Chinese tycoon’s Tomorrow Holdings puts investments up for sale – sources | Reuters The financial empire of missing Chinese-born tycoon Xiao Jianhua has put billions of dollars of investments up for sale, including stakes in a life insurer, a trust and banking assets, three people involved in the process told Reuters.
China changes tack on ‘social credit’ scheme plan – FT $$ Beijing has now decided not to award any licences this year after regulators expressed increasing concern about the potential for conflicts of interest. Their worries centre on the fact that many of the companies developing the systems also operate their own e-commerce and online financing arms and have proved reluctant to share data with rival platforms. This has made it difficult to establish comprehensive scores for individuals.
Property Developers Feel Pinch of Borrowing Curbs – Caixin In a sign that capital-hungry property developers are being squeezed by government restrictions on borrowing, equity financing is accounting for an increasing percentage of the money they raise, newly released data show.
JPMorgan Chase Allowed to Conduct Interbank Bond Settlement – Caixin The U.S.-based bank has received a license from the People’s Bank of China to act as a bond settlement agent in the China Interbank Bond Market. The announcement on Tuesday came a day after the Chinese government launched its Bond Connect program between the Chinese mainland and Hong Kong, enabling overseas investors more channels to access the Chinese bond market.
A Remote Chinese Province Uses Its Climate To Grow A Big-Data Industry : All Tech Considered : NPR Guizhou’s story illustrates how China simultaneously inhabits multiple developmental eras. While parts of Guizhou remain mired in the pre-industrial stage, others are edging into the space age. It also illustrates how China is trying to upgrade its industries, from labor-intensive factories making goods for export, to cleaner and more capital-intensive high-tech and service companies.
Nation should focus on key risk points, central bank warns – China Daily While risks in the nation’s financial sector are manageable now, the central bank will elevate the importance of prevention, the People’s Bank of China said in its annual China Financial Stability Report released on Tuesday. The bank and other financial regulatory bodies will work to fend off risks involved in shadow banking, real estate financing, local government financing platforms, internet financing and illegal fundraising activities, the report said.
China releases bike-sharing industry standards – Xinhua Bicycle associations in Shanghai and Tianjin drafted the regulations, which will take effect on Oct 1, after soliciting advice from major bicycle manufacturers and bike-sharing operators.
Politics And Law
Chinese Cinemas to Show Patriotic Trailer Ahead of Screenings – Sixth Tone In preparation for an important Party meeting later this year, four videos remind viewers of key ideological points.
Senior official stresses Party leadership in poverty relief – Xinhua Liu Yunshan, senior official of the Communist Party of China (CPC), has underlined the importance of Party leadership in helping all the country’s poor people out of poverty. “The key to the campaign for poverty eradication lies in Party leadership,” Liu, a member of the Standing Committee of the Political Bureau of the CPC Central Committee, said during a three-day inspection tour to central China’s Henan Province concluding on Wednesday.
Chinese Hospital Invites Cancer Experts to Help Treat Nobel Laureate – The New York Times Wednesday’s statement, which was posted on the Shenyang Justice Ministry’s website, did not mention which foreign doctors had been invited or whether any had responded.
Why Are So Many Tibetans Moving to Chinese Cities? | ChinaFile For China’s policy makers, however, urbanization is more than just an economic strategy for developing Tibetan areas. Throughout ethnic minority areas—from Xinjiang to Inner Mongolia and Tibet—urbanization is also a key mechanism within a series of ethnic policies designed to integrate restive minority populations. Cities promote cultural transformation and political integration through increased interethnic “mingling” (jiāoróng) with the Han majority. And while this process is intended to reduce separatist tendencies by minimizing ethnic difference, cities also conveniently lend themselves to monitoring and high-tech surveillance by China’s state security apparatus.
Guo Wengui: The extraordinary tale of a Chinese billionaire turned dissident, told by Mike Forsythe and Alexandra Stevenson – Sinica Podcast New York Times journalists Mike Forsythe and Alexandra Stevenson have spent over a dozen hours with the turbulent tycoon at the New York City penthouse overlooking Central Park where he resides in exile, listening to his stories and carefully investigating his most scandalous claims // Comment: Guo will not be happy with their comments, lots of skepticism about the vast majority of his claims
Top graft-buster stresses enforcement of discipline in poverty relief Wang urged graft-busters at the grass-roots to be stronger in supervision and enforcement of discipline, to make sure that by 2020, people from impoverished areas can join the people all over the country to live in a moderately prosperous society.CCTV Video-王岐山在扶贫领域监督执纪问责工作电视电话会上强调 为打赢脱贫攻坚战提供坚强保障
学好用好马克思主义中国化最新成果–理论-人民网Comment: He Yiting in latest Study Times on learning and using well the latest achievements of the Sinicization of Marxism
Xinhua Insight: After almost a century, the CPC story remains one of success – Xinhua Communism was called a haunting ghost more than a century and a half ago, and few believed the Communist Party of China (CPC) could survive when it was founded in 1921. Now, the world is watching the largest ruling party in the world march toward its first centenary goal. The CPC is celebrating its 96th anniversary on Saturday and the 19th National Congress will be held in the latter half of this year. The congress will elect the leadership for another five-year term, the critical period for a goal of completing building a well-off nation by the Party’s 100th anniversary. 不忘奋斗初心 跨越新的征程——纪念中国共产党成立96周年
官员救灾时抽烟嚼槟榔女子帮撑伞 被纪委严重警告_网易新闻 Comment: If you are an official inspecting disaster relief work it is best not to be photographed smoking, chewing betel nut and having a woman hold an umbrella for you…old habits die hard, and a Changsha official is in trouble
Foreign And Defense Affairs
What arms is Taiwan actually getting for its US$1.4 billion? | South China Morning PostComment: From what I have heard this is the same or nearly the same package the Obama Administration had prepared in late 2016 but then tabled to give the Trump Administration the decision.
Two Asia Hands Clash Over the Future of U.S. Strategy in the Region Editor’s Note: A recent article in Foreign Affairs by Ely Ratner has sparked a debate among Asia-watchers. Part of this debate has played out in The Interpreter, the online magazine of the Lowy Institute for International Policy, an independent, nonpartisan think tank based in Sydney. War on the Rocks is proud to be publishing select articles from The Interpreter, where Hugh White responded to Ratner, who then chimed in with a retort
Insider Information: An intrusion campaign targeting Chinese language news sites – The Citizen Lab We confirm the news portal China Digital Times was the target of a phishing operation and show how content and domains were made to mimic four other newsgroups in reconnaissance and malware operations: Mingjing News, Epoch Times, HK01, and Bowen Press. We cannot confirm if these other groups were directly targeted. These news websites report on issues sensitive to the government of China and are blocked in the country. However, this report does not conclusively attribute the campaign to a publicly reported threat actor or state sponsor.
China Plans Arctic Belt and Road Initiatives – The Maritime Executive The Vision for Maritime Cooperation under the Belt and Road Initiative, released on June 20 by China’s National Development and Reform Commission and the State Oceanic Administration, explains that a “blue economic passage” is “envisioned leading up to Europe via the Arctic Ocean.”
The top engineer with the key to China’s dream of having the world’s most powerful navy | South China Morning Post Dubbed the father of China’s electromagnetic aircraft launch system (EMALS), Rear Admiral Ma describes himself as a “teacher without any dreams”. He is one of 17 nominees for 10 Order of August 1 awards to be presented by President Xi Jinping on August 1, the 90th anniversary of the founding of the Red Army, the PLA’s precursor.
Why Chinese submarines could soon be quieter than US ones | South China Morning Post In a recent interview with China Central Television, Rear Admiral Ma Weiming, a leading Chinese naval engineer, showed a component of a new Integrated Electrical Propulsion System (IEPS) for naval warships in a laboratory. He said the system, which turns all the engine’s output into electricity, and a rim-driven pump-jet had been fitted to the People’s Liberation Army Navy’s newest nuclear submarines.
PM Modi, Xi Jinping set to meet at G20 summit in Germany amid talk of war by Chinese experts | Hindustan Times A Chinese deputy foreign minister said the meeting would be part of the informal talks among leaders of five major emerging economies – Brazil, Russia, India, China and South Africa – on the sidelines of the G20 summit.
New Flight Ops Video From China’s Carrier Features Loaded Up J-15 Fighters – The Drive Liaoning put up an aerial presence of its own sometime during its voyage south from its home in Qingdao. It left the port city on June 25th. A new video has been published containing a montage of footage showing the carrier and its battle group flexing its operational muscle during drills.
Tech And Media
Tencent Literature Unit Writes New Story of Profits in IPO Run-Up – Caixin China Reading said its revenue rose 59.1% last year to 2.6 billion yuan ($382 million), according to regulatory documents filed this week in the run-up to its planned initial public offering (IPO). It posted a net profit of 30.4 million yuan for the year compared with a net loss of 354 million yuan in 2015, the documents showed.
China’s Xiaomi Snaps Up Nokia Patents to Galvanize Global Drive – Bloomberg The deal expands a portfolio augmented last year by the purchase of some 1,500 patents from Microsoft Corp., and may help smooth over potential legal tangles abroad. Under their agreement, Xiaomi will buy patents from Nokia for an undisclosed sum, while the two companies have agreed to share essential licensing rights.
Alibaba launches voice assistant Tmall Genie – TechNode Chinese e-commerce giant Alibaba launched the smart speaker Tmall Genie X1 today, elbowing its way into the crowded digital voice assistant market where there’re already big name incumbents like Amazon, Apple, Google, and JD
Saying Goodbye: A Last Supper from China Real Time – WSJComment: Sad, a really excellent blog
China’s bloggers, filmmakers feel chill of internet crackdown | Reuters On Friday, an industry association circulated new regulations that at least two “auditors” will, with immediate effect, be required to check all audiovisual content posted online – from films to “micro” movies, documentaries, sports, educational material and animation – to ensure they adhere to “core socialist values”.
Society, Art, Sports, Culture And History
Four women arrested in northeast China after leaving elderly accident victim to die | South China Morning Post They thought ‘he wasn’t injured but would seek compensation when he woke up’
Hu Line: China’s Forgotten Frontier – Sixth Tone This is the first article in a series that explores life along the Hu Line, an imaginary diagonal line across China that has vast demographic, environmental, and political significance.
Why China and the NBA have been waiting for Zhou Qi – Houston Rockets Chinese fans got a brief tease when Yi returned to participate in the Los Angeles Lakers’ training camp before asking to be released due to concerns over playing time. After a long wait, they now have another possibility. Zhou Qi, the best big man in China, is signing a multiyear deal to join the Rockets, according to ESPN’s Adrian Wojnarowski. The expectations are high for the 2016 second-round draft pick.
The American story at the heart of China’s national anthem — Quartz much of the enduring charm, relevance and humanity of “March of the Volunteers” lies in its complex history, which cuts across boundaries of language, culture and geography — and which involves some of the most compelling American voices of the 20th century.
Energy, Environment, Science And Health
47 dead, 22 missing after flood hits Hunan, Guangxi – Xinhua The ensuing floods have forced the evacuation of more than 1.2 million people. More than 38,000 homes collapsed and nearly 880,000 hectares of crops were damaged. The water levels in Dongting Lake and several major rivers all rose above warning levels.
Too much rain: China’s floods roil hydropower, corn supplies | Reuters The government said it had disbursed 700 million yuan ($103 million) in emergency aid to four flood-hit provinces – Zhejiang, Jiangxi, Hunan and Guizhou.
Drought in Northern China Is Worst on Record, Officials Say – The New York Times The drought is affecting the northeastern and eastern areas of the Inner Mongolian Autonomous Region, which is near Beijing. In recent years, Chinese scientists have attributed extreme weather patterns in China, and especially in northern China, to climate change. The region of Inner Mongolia and its residents have been hit especially hard by wide fluctuations in the weather.
China’s Electric Cars Are Actually Pretty Dirty – Bloomberg One recent study by Chinese engineers estimated that electric vehicles generate about a 50 percent increase in both greenhouse gas emissions and total energy consumption over their life cycle. The manufacture of the lithium-ion battery alone accounts for 13 percent of the energy consumption and 20 percent of the emissions.
Beijing parents protest at being denied primary school choice – Reuters About 100 parents rallied outside the Beijing government offices on Friday after their children were denied admission to their primary school of choice, the second such protest in the Chinese capital this month.
Commentary: Beijing’s party bosses promise to reshape the capital – Channel NewsAsia It seems that the new leadership of Beijing under Cai Qi and Chen Jining is repositioning the capital in China. According to a report made by Cai on Jun 19 to the 12th Party Congress of Beijing, the municipality would have seven specific goals in the next five years:
Beijing to Slow Down Traffic by Confusing Drivers With Optical Illusions | the Beijinger Beijing is looking to make its street intersections safer by introducing optical illusions to help convince its drivers to slow down for pedestrians.
Jobs And Events
Managing U.S.-China Relations: American and Chinese Perspectives: A Report Launch | Center for Strategic and International Studies – June 6 For the past year, experts in the United States and China have been working on parallel reports on US-China relations. Teams of experts have developed analyses and policy recommendations on several critical areas that shape the relationship: military relations, the Asia-Pacific region, economic relations, global governance, and domestic politics. This event will feature the release of the US side’s report, entitled Joint US-China Think Tank Project on the Future of US-China Relations: An American Perspective. Contributors to both sides’ reports will discuss and compare their respective findings, conclusions, and recommendations.
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