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Tuesday, June 26, 2018
SupChina Access / Weekly Digest
1. Yan Xuetong and Xi Jinping on China’s place in the world
It’s a translation by the David Bandurski of an interview with Yan Xuetong 阎学通, director of the Institute for International Relations at Tsinghua University and perhaps China’s most respected thinker on foreign policy. You should read the whole thing, but if you only have a minute, here’s the ADHD version:
The international system of the post world war period remains “hegemonic” and has not yet fundamentally changed.
However, Western liberalism (西方自由主义 xīfāng zìyóu zhǔyì) is no longer leading international norms, and we are moving to a state where international norms are no longer respected. Power will be redistributed around the world instead of focused in the West.
Protectionism and economic sanctions will be the primary means of competition among major powers, as nuclear weapons will continue to successfully deter conflict.
U.S. supremacy is ending, and the unipolar state of the post cold war period will be replaced by a bipolar system (两极格局 liǎngjí géjú), possibly within five years. Yan believes a multipolar world is not possible: China and the U.S. are the only players, and the world is destined to be bipolar (pun intended by me, but not Yan).
Western countries are ceasing to influence international politics in a unified manner, and at some point, “the political concept of ‘the West’ will no longer objectively suit the study of international relations.”
On Trump: “From the standpoint of international relations, within the next two years, one of the biggest problems we will face is how to deal with Trump’s unpredictability. Because he essentially makes decisions according to his own, there is little continuity between these decisions, and it is very difficult to predict.”
Taiwan independence and the concomitant “risk of a full-fledged standoff between China and the United States” is Yan’s biggest worry for the next ten years.
Xi Jinping is doing his best to ensure that China does become one of our world’s bipolar powers within Yan's five year timeline. On Sunday, Xinhua News Agency published notes from Xi’s address at the Central Conference on Work Relating to Foreign Affairs (English, Chinese).
Xi said the years 2017 to 2022 — the period between the 19th and 20th Party congresses — are "a historical juncture for realizing the two centenary goals of China, and of great significance in the historical progress of the great rejuvenation of the Chinese nation.”
The use of “historical juncture” (历史交汇期 lìshǐ jiāohuì qī) rather than a previous Party favorite, “period of strategic opportunity” (战略机遇期 zhànlüè jīyù qī), is seen by noted China watcher Bill Bishop (paywall) as “a big deal” that “shows a recognition that the security environment is no longer benign and signals a belief that while China’s external challenges are more complicated the opportunities for China are even greater than they were just a year ago.” Bishop sees more Chinese assertiveness ahead.
2. ‘In our culture we punch back’ — trade war update
U.S. President Donald Trump announced a week ago that he was going all in with his big bet on tariffs against China, escalating the scope of threatened import taxes from $50 billion to $250 billion, or even $450 billion if the Chinese didn’t fold.
A couple days later, a group of 20 mostly American and European CEOs visited Beijing and met the Chinese leader, Xi Jinping, who the Wall Street Journal reports (paywall) told them this:
“In the West you have the notion that if somebody hits you on the left cheek, you turn the other cheek...In our culture we punch back.”
We detailed in our report last week a few of the ways that the punch back could happen, including ramped-up inspections at American-affiliated factories in China, delayed or denied licensing, or even a full blown boycott of American goods.
China would have to rely on these so-called “qualitative measures” to match Trump’s threatened levels of tariffs, because it doesn’t import enough goods from the U.S. to match tariff-for-tariff.
China’s uncompromising tone is “dashing hopes among businesses and investors of a settlement by July 6,” the day the first round of tariffs will officially go into effect, the Journal reports.
Meanwhile, Trump backtracked on a plan to restrict Chinese investment in the U.S., telling reporters that he would probably let Congress go ahead with legislation to strengthen the Committee on Foreign Investment in the U.S. (CFIUS), instead of taking executive action.
The legislation would “strengthen the authority of CFIUS, allowing it to review transfers of minority interests in companies dealing in critical technologies and infrastructure. It also allows for reviews of purchases and leases of property near sensitive U.S. government land and facilities,” Reuters reports.
The executive actions that had been under discussionwould have blocked “firms with at least 25 percent Chinese ownership from buying U.S. companies with ‘industrially significant technology.’”
Steven Mnuchin and Peter Navarro contradicted each other before Trump talked to the press, with the Treasury Secretary saying that actions would target “all countries that are trying to steal our technology,” and the trade advisor saying that they would be China-specific.
In other trade war news:
“Shanghai’s benchmark stock index plunged for a second day, sending Asia’s largest equity bourse into official bear market territory, as concerns of a trade war with the US sent investors scurrying to extract their funds from the capital markets,” the SCMP reports.
Alibaba-affiliated Ant Financial struck a calm note amid the trade war chaos, according to CNBC. Senior VP of global business Doug Feagin expressed enthusiasm for Ant’s ability to innovate new technologies: “The technology that we’re using is based on our existing customer base and expanding that out,” he said, adding that the company is not “looking to go around the world and try to buy technology.”
Energy dependency may be China’s greatest worry heading into a trade war. The SCMP reports that China is set to become the world’s largest liquified natural gas (LNG) importer by 2019 as it attempts to decrease coal use. The same report shows that the United States will become the world’s second largest energy supplier, highlighting the importance of China maintaining good trade relations to meeting rising LNG demands.
Likewise, the United States is dependent on China as a growing energy market. The agreements in limbo include a $84 billion deal with China Energy Investment Corp. and a $43 billion deal with Sinopec, according to Bloomberg (paywall).
Chinese tariffs on American coal stand to harm Trump’s base. The industry, once slated to help balance the trade deficit between China and the United States, is now “walking a tight rope” as it prepares for demand to slow, Reuters reports.
Chinese airlines’ share values are plummeting, with firms losing a total of $11.4 billion recently, according to Bloomberg (paywall). Many airlines have purchased billions of dollars of equipment in U.S. currency, making it difficult to manage payments as the RMB is devalued.
China slashed tariffs on imports from South Korea, India, Laos, Bangladesh, and Sri Lanka, according to the SCMP. The regulations, effective July 1st, are part of the Asia-Pacific Trade Agreement and could balance against the economic hit that would come with tit-for-tat tariffs with the Americans.
—Lucas Niewenhuis and Lucy Best
3. Sexual harassment, a suicide, and awful crowd behavior
On June 20 in Qingyang, Gansu Province, a 19-year-old female student surnamed Li 李 jumped to her death after being allegedly sexually assaulted by her teacher. (Chinese media reports about crimes and accidents usually refer to both victims and perpetrators by their surnames only, often in the form 李某 Lǐ mǒu or “somebody Li.”
The case has become controversial for a few reasons: the light punishment of the perpetrator, lack of concern from the school authorities, questionable police actions and some awful crowd behavior. Click through to SupChina for details.
4. The global Mandarin robocall scam
“Mandarin robocalls are flooding U.S. cities” says the South China Morning Post, in the latest report of a global scam that targets PRC citizens abroad. The basic setup seems to be the same in the U.S., Canada, Australia, and New Zealand: robocalls targeting Chinese speakers claim to be from Chinese consulates and says there is an urgent message or some kind of trouble. People who fall victim to the con end up handing over their bank details.
Lang Lang brings Hangzhou to New Yorkers through music
On June 16, world-renowned pianist Lang Lang surprised commuters passing through Vanderbilt Hall at Grand Central Terminal in New York with a performance of Autumn Moon Over the Calm Lake (平湖秋月 pínghú qiūyuè). He also shared his views on music education in China.
Gloom and doom for China’s stock markets China leads slump in Asian markets amid rising trade fears / MarketWatch “Asian markets were largely in the red, led by a 1.8% drop in the Shanghai Composite SHCOMP, -0.79% and a 1.5% fall for Hong Kong’s Hang Seng index HSI, -0.92% . The tumble comes after a U.S. stocks selloff deepened Monday in response to news that the White House favors further restrictions on Chinese investment in U.S. technology firms.” China moves to shore up economy as slowdown and trade fight loom / NYT (paywall) China has freed up money for commercial banks with a catch intended to aid the economy’s looming debt burden, “The banks must use the money to help heavily indebted companies or lend more to small businesses with little or no collateral to offer.” China's Shanghai Composite closes in bear market territory / FT (paywall) “The Shanghai Composite slipped 0.5 per cent on Tuesday to close at 2,844.66, marking a decline of 20.1 per cent from its January peak and down 14 per cent for the year to date.” Message to China: Prepare for the worst / Caixin (paywall) “Downside risks to China’s economic growth in the second half of this year are increasing due to deepening trade friction with the U.S. and slowing domestic demand, a senior policy adviser has warned.” China stock rout may worsen, analysts warn no end in sight / Bloomberg (paywall) “Chinese stocks are on the cusp of sinking into a bear market, and analysts expect losses to deepen as concern over China’s economy, yuan weakness and a trade feud with the U.S. continue to rattle investors.”
Qualcomm deal at risk? Investor makes massive bet that China could scuttle Qualcomm-NXP deal / WSJ (paywall) “An options trade on NXP stock costing $32 million changed hands Monday, according to data provider Trade Alert… [Trade Alert’s Founder Henry Schwartz suspects it could be] an outright wager that Qualcomm may be forced to walk away as the July 25 deadline approaches.”
Blockchain everywhere China issues its first blockchain-based tax invoice / TechNode “China has issued its first blockchain-based tax invoice in the southern city of Guangzhou, as part of an effort to stamp out fraud and increase the ease of reimbursements.”
Pentagon chief in Beijing with open mind Mattis to become first Pentagon chief to visit China since 2014 / Bloomberg (paywall) “Jim Mattis was set to arrive Tuesday in Beijing on the first China visit by a U.S. defense secretary in four years, as the Trump administration moves to push back against the country’s growing economic and military influence.” Amid tensions, Mattis arrives in China to ‘have a conversation’ / NYT (paywall) “I want to understand how they see the strategic relationship developing,” Mr. Mattis told reporters that day before the first stop of his trip, in Alaska. “And so I want to go in, right now, without basically poisoning the well at this point, as if my mind’s already made up.” Mattis arrives in China; NKorea to be key topic of meetings / AP “The North Korean negotiations are expected to be a primary discussion during Mattis' meetings in China. Beijing is considered a key influencer on Pyongyang and Chinese President Xi Jinping said last week that China would ‘as always play a constructive role’ in the process.”
How China got a Sri Lankan port How China got Sri Lanka to cough up a port / NYT (paywall) “Under heavy pressure and after months of negotiations with the Chinese, the government handed over the port and 15,000 acres of land around it for 99 years in December.” “Months of interviews with Sri Lankan, Indian, Chinese and Western officials and analysis of documents and agreements stemming from the port project present a stark illustration of how China and the companies under its control ensured their interests in a small country hungry for financing.” “Nihal Rodrigo, a former Sri Lankan foreign secretary and ambassador to China, said that discussions with Chinese officials at the time made it clear that intelligence sharing was an integral, if not public, part of the deal. In an interview with The Times, Mr. Rodrigo characterized the Chinese line as, ‘We expect you to let us know who is coming and stopping here.’”
South China Sea US aircraft carrier patrols disputed sea amid China buildup / AP “The 97,000-ton USS Ronald Reagan, carrying more than 70 aircraft, anchored in Manila Bay on Tuesday after plying the contended waters for meetings between navy officials of the two countries and liberty for its thousands of sailors after weeks at sea.” Australia invests in unmanned spy drones to fly over South China Sea / CNN Australia recently spent $6 billion on remotely piloted aircrafts that will “complement the current surveillance aircraft Australia already uses to survey its maritime borders, conduct search and rescue, and carry out Freedom of Navigation exercises in the contested South China Sea.”
Australia-China relations: it’s still very complicated Australia to ban covert foreign interference in politics / AP “Australia's House of Representatives has overwhelmingly approved national security legislation that would ban covert foreign interference in domestic politics and make industrial espionage for a foreign power a crime.” China's Huawei top sponsor of Australian politicians' overseas trips / Channel NewsAsia “The report comes as several politicians have called for Huawei to be banned from participating in a roll-out of Australia's 5G next-generation communications network, amid fears the company is effectively controlled by the Chinese government.”
Ivanka Trump investigators out on bail Men who investigated Ivanka Trump China suppliers off bail / AP “Three China Labor Watch activists arrested last year while investigating abuses at Chinese suppliers for Ivanka Trump's fashion brand were released from bail Tuesday, the New York non-profit group said, but questions remain about their ability to live and work freely in China.”
Tibet Tsering Shakya on Tibet, development, and diversity / China Digital Times University of British Columbia historian Tsering Shakya discusses a wide range of Tibet-related topics in an interview with Himal Southasian, including “the region’s place in Beijing’s Belt and Road Initiative; inequalities in development; similarities and differences between the situations in Tibet and Xinjiang” and more.
Defying spinster stereotypes Why Chinese unmarried women are rooting for actress Faye Yu / What’s on Weibo “The various quotes show how Yu, in a relaxed and matter-of-fact way, addresses questions about her being unmarried, expressing that she does not need a partner to fulfill her needs, and that she did not feel she wants or needs to adapt her life to existing social expectations on the right age to get married.”
Organ donation Phillip Hancock: Rare foreign organ donor praised in China / BBC “Phillip Hancock had been working as an English teacher in China when he unexpectedly fell ill and died last month. The posthumous gift of the Australian's organs has been lauded in China, a nation with few foreign donors, and changed five lives.”
Jinshanling, a section of the Great Wall located in Luanping County, Hebei Province, was built during the Ming dynasty (1368–1644) and renovated in 1567. It has 67 watchtowers, three beacon towers, and five passes.