President Trump’s commitment to Xi Jinping to “honor our One China Policy”, as discussed yesterday, likely gives Xi significant domestic political benefits. Nine months or so out from the 19th Party Congress the odds look very high that Xi will succeed in appointing his allies into the new leadership. A big risk to that happy scenario for Xi is a sharp downturn in the US-China relationship in a way that would allow Xi’s opponents to blame him.
PRC representatives have been scrambling around DC since the election trying to find inroads into the Trump administration, and we should expect that those representatives have been under enormous pressure from Beijing to get answers about Trump’s intentions. Some Trump supporters argue that the Tsai call, Trump’s tweets, and his questioning of the One China Policy scared Beijing, and it was that “fear” that has driven the frenzied activity in DC. I think there is a difference between “fear” and very rational attempts to fathom the intentions of a chaotic, threatening and only partially formed new administration.
One of the key contacts for PRC Ambassador Cui Tiankai was the former National Security Advisor Michael Flynn. Ambassador Cui, who according to several sources has had his appointment to the US extended to maintain stability in the relationship in this very sensitive year, looks to have built a decent relationship with Jared Kushner and Ivanka Trump so the Flynn departure should not be a problem.
Corralling Trump for the call was a victory for Xi and the PRC representatives in DC, and that success should give Xi cover if the relationship deteriorates significantly due to what could be spun inside the PRC system as unilateral or unreasonable US actions.
I wrote in the January 19th, 2017 newsletter that it is possible increased tensions with the US in advance of the 19th Party Congress might benefit Xi:
Any significant moves by the US to push back on trade, South China Sea, East China Sea or Taiwan could feed the “foreigners, especially the Americans, are trying to contain China and keep us down” narrative and be used to underscore the need for deepening PLA reform and modernization and for the importance of a strong, unified leadership in the face of an “enemy”.
The PRC policies about which the US is so upset—mercantilism, rapid PLA modernization and growth, maritime territorial assertiveness, Taiwan to name a few—are Chinese Communist Party policies whose formulation and in some cases implementation predated Xi’s ascension to General Secretary. It seems possible that any substantive US challenges may very well be seen as an attack against the Party and the PRC, not Xi Jinping solely, and therefore the CCP response may be to coalesce around Xi and strengthen him rather than to go against Xi and weaken the Party and the state.
I think the arguments that Trump has put Xi off-balance or scared him are wrong. Given Trump’s performance so far I expect Xi sees far more opportunity from him than risk.
THE ESSENTIAL EIGHT
1. U.S. Eyes New Tactic to Press China – WSJ The currency plans are part of a China strategy being assembled by the White House’s new National Trade Council, which seeks to balance the goals of challenging China while still keeping relations with the country on an even keel. To do that, measures taken against China would also apply to other nations. The administration would avoid, at least for now, making confrontational claims about whether China is manipulating its currency for trade benefit, the people said. // Comment: Sounds like a weak move
Related: Currency deal with US possible – China Daily China has never undervalued its currency to get an export advantage, Foreign Ministry spokesman Geng Shuang said at a regular news conference. Geng said China will continue to reform its renminbi rate setting procedures. Geng’s comments were made in response to a Wall Street Journal report that the administration of US President Donald Trump is considering ways to avoid confronting Beijing over currency.
Related: U.S. business in China warms to possible Trump trade policy shake-up | Reuters “Reciprocity” has become the new buzzword in the U.S. business community in China, with some industry leaders saying they would welcome a tougher approach from the Trump administration in opening up the markets of the world’s second-largest economy. It’s a striking shift within the American community here, which had long lobbied Washington against taking more aggressive policies, fearing they could draw retribution from China’s leaders.
2. Xi Jinping’s Economic Policy in the Run-up to the 19th Party Congress: The Gift from Donald Trump | China Leadership Monitor-Barry Naughton In the run-up to the 19th Party Congress in the fall of 2017, Xi Jinping has a strong interest in sustaining three narratives: the Chinese economy is growing stably, economic reform is moving forward, and a rising China is playing a more important role on the global scene. Xi has a good chance of sustaining all three of these narratives to his domestic audience, in part because of the valuable gift given him by the new U.S. president, Donald Trump.
Related: China credit growth slows as stimulus wanes-FT Some analysts had expected that President Xi Jinping would go all out to stimulate growth this year to strengthen his hand as he seeks to place his political allies in key positions at a five-yearly Communist party congress that will convene in November. But the latest data suggest that the parallel need to control debt growth is also influencing policy. Chinese banks traditionally splurge on lending in January, following the renewal of lending quotas at the start of each year. But central bank data released on Tuesday show new local-currency bank loans were Rmb2.13tn ($310bn) last month, far above the Rmb994bn in December but below the Rmb2.54tn in January last year. It was also short of expectations of Rmb2.30tn, according to a Reuters poll.
Related: China Credit Surging to Record Underscores PBOC Shift to Tighten – Bloomberg The broad M2 money supply increased 11.3 percent from a year earlier, the same pace as the prior month. “It becomes more and more difficult to imagine how the fight against asset price bubbles and rising debt levels might become a success, at least in the short term,” said Frederik Kunze, chief China economist at German lender NordLB in Hanover. “It shows that China’s financial market is still under construction.”
Related: China Inflation Hits Multiyear High in January – Caixin Global The producer price index (PPI), a gauge of product prices at the factory gate and a leading indicator of consumer inflation, soared 6.9% last month from a year earlier, the highest since a gain of 7.3% in August 2011, according to data released by the National Bureau of Statistics (NBS). The January reading marks the fifth straight month of growth since a 54-month losing streak ended in September. It also beat a median forecast of a pickup of 6.6% in a Caixin survey of 11 economists.
3. Kim Jong Un’s brother dies in suspected assassination in Malaysia “Beijing is stuck. They don’t trust Kim [Jong Un] but they have no better options,” said Bill Bishop, a China expert who publishes the popular Sinocism newsletter on Chinese politics. “Beijing was livid when he killed his uncle, who was one of — if not the — key link with Beijing.” Chris Johnson, another former top CIA analyst, said the assassination could complicate US efforts to deal with the mounting nuclear threat from North Korea. Mr Trump has stressed that dealing with Pyongyang would be one of his top priorities, but short of a pre-emptive strike, the US is heavily reliant on China to tackle the issue.
4. 提高工作预见性 营造安全稳定的社会环境（深入学习贯彻习近平同志系列重要讲话精神）–人民网 2.15.17 page 7 People’s Daily piece from Meng Jianzhu, an exhortation to prevent problems, create a safe environment for the 19th Party Congress. I think the CCP vision resembles Minority Report? // 再次，要认识到新一轮科技革命正孕育兴起。随着移动互联网、物联网及大数据、云计算、人工智能的发展，人类生活所经历的一切都在转变。这样一个快速发展的时代，从未在人类历史上存在过。要尽快适应新一轮科技革命大趋势，既运用好现代科技最新成果有效破解难题，增强政法工作前瞻性、精准性、高效性，又积极防范应对其可能给安全稳定带来的挑战。
5. Lao Gan Ma: The Story of China’s Most Spicy Godmother Tao Huabi | What’s on Weibo She is China’s ‘Old Godmother’: Tao Huabi (陶华碧) is the creator of one of China’s most famous chili sauces and is the embodiment of the ‘Chinese dream.’ By following her own path and relying on her business instinct, Tao rose from poverty and became a multi-billionaire. China’s spiciest businesswomen has now quietly retired.
6. Columbia’s Chinese Students Targeted by Racist Vandalism | Sixth Tone “I don’t think this is racial discrimination,” Yan, 19, told Sixth Tone, referring to the vandalism. “This is xenophobia.” The sophomore student said the impetus for the video was to reach out to Americans on campus and start a conversation. “The video serves as a statement from the stereotypically ‘silent’ Chinese community and a first step toward gaining more understanding,” he added…A Chinese student at Columbia surnamed Lin told Sixth Tone that a second “heavier” video in which 10 Asian or Asian-American students directly address the vandalism will be released later this week.
7. On the frontline of China’s spending revolution: small loans, big data – Reuters For Home Credit and other nationally licensed consumer finance firms like Suning Consumer Finance Co, big data, as employed by Jiao on her tablet, is the answer – determining how much they can lend, to whom, and when. “The banks wouldn’t touch a lot of our clients,” said Ondrej Frydrych, chief executive of Home Credit China, which is backed by Czech billionaire Petr Kellner’s investment firm PPF Group and has 145,000 point-of-sales (POS) operations in 312 cities.
8. In China’s Greenwich, Hedge Funds Rule Their Own Private Village – Bloomberg Like Greenwich, Conn., the leafy town an hour’s drive north of Wall Street, Yuhuang Shannan, about an hour from Shanghai by high-speed train, has become a big hit with the hedge fund crowd. So big, in fact, that local authorities turned the entire village—until recently a hub for the design industry—into an exclusive enclave for China’s aspiring masters of the universe. These days, resident money managers and their guests are the only ones allowed past the guarded entrance to Yuhuang Shannan. Inside, villa-style office buildings offer rows of trading terminals and waterfront views
BUSINESS, ECONOMY AND TRADE
The Hidden Side to the Reflation Trade Is China’s Surging Prices – Bloomberg The producer price index has staged an 10 percentage-point turnaround in the past 10 months, posting for January a 6.9 percent jump from a year earlier. Though much of that reflects a rebound in commodity prices including iron ore and oil, China’s economic stabilization and its efforts to shutter surplus capacity are also having an impact.
Trump wins key China trademark; Are Trump toilets a goner? – The Washington Post Trump’s late victory in the fight to wrest back one sliver of his brand — the trademark for building construction services — could signal a shift in fortune for the U.S. president’s intellectual property in China. At stake are 49 pending trademark applications — all made during his campaign — and 77 marks already registered in his name, most of which will come up for renewal during his term. The case also raises the possibility that the president could claw back control of more than 225 Trump-related marks in China that do not belong to him.
Government Suspends Asset Management Plans for 16 Cities’ Commercial Housing – Caixin Global China has banned the registration of privately offered asset management plans (AMPs) that channel funds to commercial housing projects in 16 cities where home prices had been rising fast — the country’s latest effort to curb investment in the real estate market.
China piles into Cuba as Venezuela fades and Trump looms | Reuters Cuban imports from China reached a record $1.9 billion in 2015, nearly 60 percent above the annual average of the previous decade, and were at $1.8 billion in 2016 as the flow of oil and cash slowed from Venezuela due to economic and political turmoil in the South American country. China’s growing presence gives its companies a head start over U.S. competitors in Cuba’s opening market
Chinese Investors Pile Into London Property – WSJ Buyers from China and Hong Kong bought more than $3.75 billion of central London real estate in 2016
China’s Property Market Has a New Blind Spot – WSJ Beijing-based Fang Holdings, China’s largest online real-estate portal, has since at least 2010 published its compilation of home prices in 100 Chinese cities into a monthly index. The index usually shows sharper increases in China’s runaway property prices than the official index, despite several interventions by Beijing to control property prices in recent years. Fang has decided to stop updating the index online, to avoid disrupting the property market, Vincent Mo, Fang’s chairman and chief executive, told The Wall Street Journal.
Morgan Stanley Sees a Bright Decade for China Stocks – Bloomberg “The key message of this report is that China can transition to high income status, something few other EMs have achieved,” Morgan Stanley strategists led by Jonathan Garner wrote in a 118-page macro outlook received Tuesday. “It is likely that over the next 10 years MSCI China can keep up its long track record of outperformance of EM.”
Midea Buys Control of Israeli Automation Company – Caixin Global While Fang didn’t disclose the terms, Israeli media reported that Midea valued Servotronix at $170 million, citing Servotronix Chief Executive Officer Ilan Cohen. Fang didn’t comment on that valuation in the Caixin interview.
China forex regulator surveying Shanghai firms about potential impact of higher U.S. tariffs: sources | Reuters The State Administration of Foreign Exchange (SAFE) is asking firms with large trading operations and cross-border payments with the United States whether they have U.S. production facilities, their tolerance for higher tariffs, and how they would deal with the higher tariffs, said one of the sources.
China’s Expanding 1 Trillion Yuan Club Shows Changing Economy – Bloomberg The two cities are benefiting from a national push to generate more economic activity from sectors like services and consumption and less from old smokestack industries. Jiangsu and Qingdao each saw their gross domestic product exceed 1 trillion yuan ($146 billion) last year, bringing to 12 the number of Chinese municipalities with economies on that scale.
POLITICS AND LAW
Xinhua Insight: Ministerial officials crucial to state governance – Xinhua This year’s workshop focused on and brought up requirements for “key minorities,” which was first raised at a workshop in February 2015, referring to the small group of officials at provincial and ministerial level who have both big power and responsibilities. The term has since been regularly brought up. Last month, senior CPC leader Liu Yunshan asked organization departments to practice strict intra-Party political life and strengthen intra-Party supervision, focus on “key minorities” and promote comprehensive and strict governance of the Party. According to Xin Ming, a professor with the Party School, this group of officials is crucial to governing the country, as many are members of, or alternate members of the CPC Central Committee. // Comment: On the “key minorities” 习近平告诉“关键少数”如何发挥引领作用
人民日报评论员：维护党中央权威 向党中央看齐——二论学习贯彻习近平总书记在省部级专题研讨班上重要讲话-新华网 在我们党内，决不允许自行其是、各自为政，决不允许有令不行、有禁不止，决不允许搞上有政策、下有对策。
Residents of Chinese city protest against aluminum plant-AP Video footage circulating on social media purportedly from the protest in northeast China showed more than 200 people chanting and holding banners outside the Daqing city government headquarters. Several dozen police officers stood guard outside the building. The 46 billion yuan ($6.7 billion) plant proposed by aluminum producer Zhongwang Holdings would create more than 30,000 jobs, according to a government statement about the project forwarded by Zhongwang’s media manager, Jiang Qiha
Confusion over missing Chinese tycoon’s grip on business empire | South China Morning Post Doubts are rising over missing tycoon Xiao Jianhua’s grip on his vast business empire, with one source close to Xiao’s family saying the billionaire’s contact with the outside world has been severed “in the last couple of days”. The source said that in the days immediately after his return to the mainland from Hong Kong on January 27, Xiao had been allowed limited external contact, including phone calls to his wife. “That’s not the case any more,” the source said last night. But another source close to the investigation insisted that Xiao was still in contact with his wife and his business associates.
Eight killed in Xinjiang knife attack | South China Morning Post A news portal of the Hotan government reported on early Wednesday morning that three knife-wielding men attacked and stabbed several people in Pishan county. Police shot dead the three attackers.
What Would Deng Do? | China Leadership Monitor-Alice Miller Xi Jinping’s ideological proclivities have been variously described as drawing from Mao Zedong, Confucius, and Deng Xiaoping. This article examines this question from the perspective of his volume of speeches and talks on issues in governance and of the party Central Committee’s recent Sixth Plenum.
26th Session Watch Pt. 1: NPCSC to Review Draft Revisions to Enterprise Income Tax Law and Anti-Unfair Competition Law – NPC Observer As is usual for February sessions, the proposed agenda contains only a handful of—this time three—legislative bills (due to the proximity of NPC plenary sessions in early March). Still, that number is the highest yet for a February session of the 12th NPCSC, as it enters its last year in office.
Beijing police develop app for citizen crime-busters — jokingly world’s 5th intelligence group-XInhua The app, named “Chaoyangqunzhong HD” and available for free in the Apple store, encourages citizens to anonymously provide tip-offs and upload photos and videos related to all kinds of violations of rules and laws. Users can also check on the progress of their reported cases. Chaoyangqunzhong, which literally refers to citizens living in Chaoyang District in Beijing, is a well-known code phrase in China for those righteous citizens, or “public security volunteers”, who pay attention to suspicious events or people in their communities and closely cooperate with local police to bust crimes.
China to enhance transparency in administrative law enforcement The State Council has released a circular to promote openness and fairness in administrative law enforcement by introducing pilot systems of information disclosure, full-process recording, and legal review of major law enforcement decisions.
FOREIGN AND DEFENSE AFFAIRS
“Scraping Poison Off the Bone”: An Examination of the Campaign to “Eliminate the Baneful Influence of Guo Boxiong and Xu Caihou” | China Leadership Monitor-James Mulvenon In July 2016, Chinese state media began using a new formulation about “eliminating the baneful [pernicious] influence of Guo Boxiong and Xu Caihou” from the military. As discussed in previous issues of the China Leadership Monitor, Guo and Xu are the highest-ranking Chinese military officers indicted in Xi Jinping’s ongoing anti-corruption purge. This article examines the origins and course of this new campaign, and assesses its implications for party-military relations.
Trump Affirms One-China Policy in Call With Xi – Carnegie Endowment for International Peace Speaking on CGTN, Carnegie’s Douglas H. Paal evaluated the prospects of future U.S.-China cooperation now that President Donald Trump has announced that he will honor the “One China” policy.
China’s Asian Dream: Empire Building along the New Silk Road: Tom Miller “China,” Napoleon once remarked, “is a sleeping lion. Let her sleep, for when she wakes she will shake the world.” In 2014, President Xi Jinping triumphantly declared that the lion had indeed awoken, and “China’s Asian Dream” became his signature slogan. Under Xi, China has pursued an increasingly ambitious foreign policy with the aim of restoring its historical status as the dominant power in Asia. Journalist Tom Miller has been on the ground in Asia watching this unfold for over a decade and in China’s Asian Dream he offers an approachable, exciting, and in-depth look at China’s growth and ascendant power.
HONG KONG, MACAO AND TAIWAN
TECH AND MEDIA
Head of Wanda’s E-Commerce Arm Quit, Source Says – Caixin Global Li Jinling, the chief executive officer of the e-commerce division of Dalian Wanda Group, has left amid the property giant’s bumpy journey to expand into online shopping, a person close to Wanda told Caixin Monday.
Baidu Retrenches Nuomi Group Buying Unit – Caixin Global a source inside Baidu said the company has started reviewing some of its operations since the arrival last month of former Microsoft executive Lu Qi as new chief operating officer. Last week, Baidu announced the closure of its mobile health care unit as part of a broader effort to move away from low-end services to higher-end ones centered on artificial intelligence.
微信将推公众号付费阅读 原创者：要钱还是要传播力–百度百家 Wechat to launch paid subscriptions official accounts
SOCIETY, ART, SPORTS, CULTURE AND HISTORY
Longevity Pilgrims Go to Guangxi to Learn Secrets of Old Age | Sixth Tone Bama County boasts 96 people over the age of 100 among its 300,000 residents, according to local government records. Of the county’s centenarians, sprightly 112-year-old Huang Ma Kun is one of the most famous.
China’s Great Awakening | Foreign Affairs How the People’s Republic Got Religion By Ian Johnson
ENERGY, ENVIRONMENT, SCIENCE AND HEALTH
Central Government Investigates HIV Infections at Top Public Hospital – Caixin Global The task force, with members from the National Health and Family Planning Commission and the State Administration of Traditional Chinese Medicine, is also assisting efforts to contain the infection, according to a statement the health commission released Monday. Central government agencies decided to step in after provincial health authorities blamed the Jan. 26 incident at the Zhejiang Provincial Hospital of Chinese Medicine, located in the provincial capital of Hangzhou, on “medical negligence.”
Poor households see few benefits from Qinghai solar pilot | China Dialogue A government scheme to reduce poverty through solar power is raising concerns
医院护工转行当“血头”，他如何利用互助献血漏洞组织卖血?国内新京报网 Comment: The Beijing News on a blood selling case in Beijing
State Council issues plan to prevent chronic diseases-SCIO The plan, based on the “Healthy China 2030” blueprint, is to help reduce people’s financial burden in medical expenses, improve the average life expectancy and boost their health. 国务院办公厅印发《中国防治慢性病中长期规划（2017－2025年）》
AGRICULTURE AND RURAL ISSUES
Dim Sums: Rural China Economics and Policy: Bank Loans and Bulldozers for Agriculture China is revving up its build-it-and-they-will come economic growth model to overhaul the countryside. China’s Central Document No. 1 lays out an elaborate grand-sounding program for supply side structural reform of the countryside, but it boils down to doling out cash to mop up surplus commodities, bulldozing old stuff, pouring concrete, and creating a “market” for uncompetitive seed and farm equipment companies.
How Farmland Mortgages Could Stimulate Rural Entrepreneurship in China – Paulson Institute In a new Paulson Policy Memorandum, Yanling Peng, Calum G. Turvey, and Rong Kong note that many Chinese farmers face considerable constraints in their effort to obtain access to credit. And a significant source of these constraints involves policies related to land use rights.
FOOD AND TRAVEL
‘Pangolin Princess’ detained in China after posting images online of cooked wildlife woman who was nicknamed “Pangolin Princess” in China after she posted online images of various cooked wildlife that she had eaten has been held by police, authorities said on Tuesday. Among the dishes posted by the woman, who was named Ms Lin by authorities, was a soup made up of meat from eight different animals, including “pangolin, snake and swan”.
Chinese tourist town pledges to clean up act after attacks, scams | South China Morning Post Communist Party boss says tourism market in Lijiang will be regulated with an ‘iron fist’, news website reports
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