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Today’s commentary is from a post I wrote early this morning, before regulators announced that they have suspended the poorly designed stock market circuit breaker mechanism. The post is available online here-Will The Year of The Monkey Turn Into The Year Of The Bear in China? As I am sending the newsletter the Chinese markets have opened up and the RMB fixing was set slightly higher. Crisis averted? I doubt it so long as Xi has made it so clear politics are back in command. 

China’s new stock market circuit breaker mechanism is so poorly designed that the stock markets have closed early on two of the first four trading days of 2016. China’s markets have been volatile and dysfunctional for a long time but this week has seen a whole new level of craziness.

The widely held belief in the competence of Chinese policymakers came under pressure last year after the disastrous policies to first blow a stock market bubble and then try to stop the crash, followed by the poorly communicated and hugely expensive adjustment of the RMB fixing process. Investors though have short memories when greed is involved, and there was a modicum of confidence reappearing at least around the stock market by the end of 2015.

Now that confidence has been totally destroyed by the boneheaded design and implementation of the circuit breaker mechanism. Even if policymakers now modify or remove that mechanism they have dug themselves such a deep credibility hole, domestically and overseas, that even in as populous a country as China there may be a shortage of suckers for stocks.

Why do the policymakers keep making such stupid mistakes? Were they never that competent but just looked smart because there was so much low hanging fruit? Is China’s economy such a mess now that they have no good options left? Or has the policy-making process broken down under the centralization of decision-making under Xi Jinping, the diversion of attention to ideological work with shades of “better red than expert” amidst a cadre cultural revolution, the exodus of experienced financial regulators to both better opportunities in China’s financial sector and interrogations in padded cells, as well as the suffocating pressure of Wang Qishan’s Central Commission for Discipline Inspection (CCDI) inspection teams that justifiably went into all the financial regulators and top financial firms after the stock market crash?

The Chinese government desperately needs to restore confidence. Capital outflows have increased dramatically, good luck finding anyone in China who isn’t looking at their finances now with the expectation of RMB devaluation, and even diehard stock market boosters are having a hard time crafting coherent justifications that are convincing to even the greatest of fools.

So what can Beijing do? Expect the taking of a symbolic scalp, likely that of Xiao Gang, chairman of the China Securities Regulatory Commission (CSRC), along with the embarrassing removal of the new stock market circuit-breaker. Perhaps Fang Xinghai, recently installed at the CSRC but still double-hatted with his position on the Central Leading Group for Financial and Economic Affairs, would be a good choice[1.8 Clarification: a good choice as the new head of the CSRC], but even those moves would be more symbolic than substantive.

Will Xi see this mess as a political opportunity to be used to his advantage, especially now that we are well into the jockeying for the 19th Party Congress expected in late 2017, or will this mess be used against Xi? Premier Li Keqiang is at least titularly responsible for the economy, and there has been speculation growing for months that he will be gone at the 19th Party Congress. Perhaps he needs to go before then, to be replaced by Wang Qishan. I know, highly unlikely, but markets would probably love that move, both because Wang understands finance and economics and because such a reshuffling might spur hope that the corruption and discipline crackdown would ease.

I would not bet on such a move, and so long as Xi is making it clear that politics, not markets, are in command (政治挂帅), the odds increase that the upcoming Year of the Monkey will turn out to be the Year of the Bear.

Today’s Links:

THE ESSENTIAL EIGHT

1. China suspends market circuit breaker mechanism after stock market rout | Reuters “The circuit breaker mechanism was not the main reason for the market slump. It just didn’t work as anticipated based on actual situations,” Deng Ge, a spokesman for the China Securities Regulatory Commission said in a statement. “The negative effect of the mechanism outweighed its positive effect.”

Related: 三大交易所暂停实施熔断机制金融频道财新网 Caixin on the suspension of the stock market circuit breaker

Related: The Inventor of Market Circuit Breakers Says China Got It Wrong – Bloomberg Business The man responsible for stock circuit breakers says Chinese officials must revise their safety net to avoid creating panic, joining critics who argue the nation’s trading halts are triggered too easily for such a volatile market. “They’re just on the wrong track,” said Nicholas Brady, 85, the former U.S. Treasury secretary who ran a committee that recommended the curbs on equity trading after the 1987 crash. “They need a set of circuit breakers that appropriately reflects their market.”

Related: 党媒评熔断:理论实践存在距离 证监会刚刚暂停了运行仅四天的股市熔断机制，让几日来屡尝熔断滋味的股民和机构颇感惊讶。这也提醒人们，当我们脱离社会运行去谈论任何一种看起来很美的制度时，都必须意识到理论与实际之间的距离。新的修补还在讨论中，而在此之前，惟愿熔不断的是人民的信心，停不了的是股市的发展

Related: China’s stock markets are plummeting, but that’s only part of the story | Public Radio International It’s only one week into 2016 and twice now, massive sell-offs of Chinese stocks have triggered a new circuit breaker meant to prevent a market free fall there. This has sent shock waves to markets beyond China’s borders.  So, is it 2008 all over again?  “It is not,” says Bill Bishop, author of the influential Sinocism China Newsletter. “Even if it were, it wouldn’t be caused by the Chinese stock market.”

Related: Why the Fed isn’t running to the rescue of the ailing stock market – MarketWatch San Francisco Fed President John Williams said a spillover of China’s stock market declines into the U.S. wasn’t “a big concern.” “A lot of people will tell you China’s stock market affects a relatively small share of Chinese citizens and doesn’t affect the U.S. financial system that much directly. So to me those are not major concerns in terms of systemic risk right now,” Williams said in an interview on CNBC on Monday.

Related: Cramer: Communist China is guessing with stocks rule is very simple — the Communist Party runs the show, and they will do whatever is necessary to keep the balls in the air, and do it longer than anyone here in the West believes possible,” the “Mad Money” host said.// remarkably insightful segment from Jim Cramer

2. Pressure on China central bank for bigger yuan depreciation: sources | Reuters Policy insiders are now calling for a quick and sharp yuan depreciation, backed by tighter capital controls to curb speculation and the flight of money out of the country. “We should let the yuan have a considerable depreciation, but we should have a bottom line; it cannot create a big impact on the economy and the financial system, and big panic in the capital market,” an influential government economist told Reuters, suggesting the yuan be allowed to depreciate by 10-15 percent over an unspecified timeframe.  //  actually some have been calling for this for a while, I first heard there was a serious discussion about a big one-off devaluation in early December, still lots of very good reasons they will try to avoid this, we will find out soon enough

Related: Why China Shifted Its Strategy for the Yuan, and How It Backfired – WSJ The IMF’s decision on Nov. 30 to declare the yuan an official reserve currency removed an incentive for the central bank to keep propping up the currency. Rather, it aims to let it gradually depreciate with an eye toward sending it modestly higher in this year’s second half, according to advisers to the PBOC. That is when Beijing will host leaders from the Group of 20 major economies and will be eager to showcase China’s economic might. But that strategy is fraught with risks.

Related: China Foreign-Exchange Reserves Extend Slump – Bloomberg Business The currency hoard shrank by a record $108 billion to $3.33 trillion in December, the People’s Bank of China said Thursday. The median forecast of economists surveyed by Bloomberg was for a drop to $3.42 trillion. The reserves fell by more than half a trillion dollars in 2015.

Related: China central bank pleases and unsettles – FT.com plenty of domestic government agencies welcome the People’s Bank of China’s willingness to let the market drive down the renminbi against the US dollar. These include the ministry of commerce, with its traditional concern for the country’s struggling exporters.

Related: White House: Not Expecting Overnight Reform in China – Excerpt | MNI Our approach has been to press China on the pace of its reforms, including the additional measures for an orderly transition to a market oriented exchange rate that responds to upward as well as downward market pressure.  //  letting market determine RMB value would likely have it well below 7 to a US dollar…can’t wait for the politicians to explode in hypocrisy if that happens

3. A “Year of Innovation” for Internet Controls – China Media Project Held on January 5 and 6, the National Online Propaganda Work Conference (全国网络宣传工作会议) was attended by officials from the Cyberspace Administration of China (CAC) — the agency now taking charge of internet censorship directly under President Xi Jinping’s Office of the Central Leading Group for Cyberspace Affairs —the various CAC regional offices, and the heads of central-level internet sites such as People’s Daily Online.

Related: China vows to make Party’s voice strongest in cyberspace – Xinhua The Cyberspace Administration of China (CAC) discussed cyberspace publicity work on Tuesday and Wednesday, with a statement issued after the talks promising continued exploration and improvements to the governance of cyberspace with Chinese socialist characteristics. It was agreed that the CPC’s theories and achievements would be the mainstream opinions and main tone of China’s cyberspace, and the Internet would be utilized to garner public support on the 13th Five-Year Plan (2016-2020).// 全国网络宣传工作会议在京召开 强调让党的主张成为网络空间最强音

4. ‘Punishment better than words’: China’s top graft-buster vows no let-up in hunt for corrupt ‘tigers’ | South China Morning Post “Punishment works better than words,” Wang, head of the graft-busting Central Commission of Discipline Inspection, told a preparatory meeting for an upcoming CCDI conference involving provincial party leaders. “We will let the public see and enjoy our achievement fighting corruption,” he said. “The strength of our anti-corruption efforts will not be lessened.” The CCDI will hold its sixth plenary session in Beijing next Tuesday to Thursday to map out its direction for the coming months // 王岐山在筹备中央纪委六次全会座谈会上强调:正风反腐要力度不减节奏不变 厚植党执政的政治基础

5. China’s army keeps grip on top military jobs in ‘compromise’ reshuffle | South China Morning Post “It’s not easy to scrap so many departments under the CMC and the seven military commands. The new leadership is the result of a lot of compromises,” a source said. The heads of the five new commands were all leaders of one of the former seven zones but have been moved from their power bases, with some relocated from the south to the north and the east to the west…“The new leadership is just a transitional team. Xi is keeping a close eye on them. Experience tells him that he needs to be on alert for any betrayal,” the source said.

Related: What the Latest Ousting of a Chinese General Means-Peter Mattis A note of caution is warranted to temper any overreaction to Gen. Liu Yuan’s departure. The wide-ranging set of reforms promulgated at the end of November probably would take years to shake out properly even without any internal opposition. The PLA probably has reached a point of no return with President Xi’s announcement; reform will go forward unless individuals in the military leadership want to create a public break with the party’s leadership. Whatever the pathologies of civil-military relations in China, the likelihood of a PLA revolt is slim. The exact contours and the staffing of new organizations, however, may be up in the air, and organizational change on such a wide scale always provides latitude for “entrenched interests” to influence the process. The Liu retirement probably is one of the first of what will be many skirmishes as the PLA goes through its most significant change since the 1950s.

6. Xi envisions Chongqing as int’l logistics hub, stresses development – Xinhua  Chinese President Xi Jinping has urged Chongqing, the start point of a transcontinental railway to Europe, to build itself into an international logistics hub in the hinterlands and a leading inland open economy. Xi made the remarks during his first inspection tour of 2016 in southwest China’s Chongqing Municipality from Monday to Wednesday. // CCTV Evening News on Xi’s Chongqing visit.// [视频]习近平在重庆调研时强调 落实创新协调绿色开放共享发展理念 确保如期实现全面建成小康社会目标 Lots of speculation going around about what this visit means for the political futures of Sun Zhengcai and Huang Qifan

Related: Xi stresses “green development” along Yangtze River – Xinhua Chinese President Xi Jinping stressed ecology and “green development” in boosting the growth of the Yangtze River Economic Belt. He made the remarks in Chongqing at a meeting with officials from Shanghai, Jiangsu, Zhejiang, Anhui, Jiangxi, Hubei, Hunan, Chongqing, Sichuan, Guizhou, Yunnan and some departments under the State Council on Tuesday.

Related: [视频]习近平在视察第13集团军时强调 深入推进政治建军改革强军依法治军 坚定信心狠抓落实开创强军兴军新局面新闻频道央视网(cctv.com) XI also visited the 13th Group Army on his Chongqing tour, gave speech about the PLA reforms

Related: Xi underscores military building via reforms – Xinhua Xi said the military must be guided by the objective of building a strong army, carry out military strategies under the new circumstances and advance army building through the enhancement of political awareness. Xi, also general secretary of the Communist Party of China (CPC) Central Committee and chairman of the Central Military Commission, made the remarks during an inspection of the 13th Group Army stationed in the southwestern municipality of Chongqing on Tuesday.

Related: 习近平新年考察三大主题：交民心 系民生 重创新新闻腾讯网 2016年，习近平将首次国内考察定位重庆，也将国家重视创新的声音带到了这座山城。除了考察重庆果园港，习近平还特意走访了重庆京东方光电科技有限公司。作为“科技达人”，习近平在柔性屏、超高清显示屏等产品前仔细观看演示，了解8.5代液晶面板生产工艺流程，还用放大镜贴着玻璃面板观看里面的电路。考察中，习近平强调，五大发展理念，“创新”摆在第一位，一定要牢牢把创新抓在手里，把创新搞上去。

7. China’s Reaction to North Korea’s Nuclear Test | Center for Strategic and International Studies-Bonnie Glaser Beijing is likely to join in United Nations Security Council (UNSC) actions to condemn North Korea’s latest nuclear test, including authorization of a new UNSC resolution that includes another round of sanctions. China may be more willing than in the past to strictly enforce existing and new UN sanctions, for example by conducting more rigorous inspections of vehicles crossing the border China-North Korea and more closely monitoring the cargo carried by North Korean flights over Chinese territory. China may also be prepared to take unilateral steps to put pressure on North Korea, including delaying delivery of oil and other forms of assistance. However, it is unlikely that China will agree to actions that could endanger stability and lead to economic or political collapse, and result in sudden Korean unification with the potential deployment of U.S. troops close to the Chinese border. Gaining Chinese support for UN sanctions that focus on the banking sector is likely to meet with resistance.

Related: Kerry urges China to end ‘business as usual’ with North Korea | Reuters U.S. Secretary of State John Kerry said he made clear in a phone call with Chinese Foreign Minister Wang Yi that China’s approach to North Korea had failed. “China had a particular approach that it wanted to make, that we agreed and respected to give them space to implement that,” Kerry told reporters. “Today in my conversation with the Chinese I made it very clear that has not worked and we cannot continue business as usual.”

Related: A snub for China, North Korea’s reported nuclear test shows Beijing’s waning influence – The Washington Post “In a way, this is a protest against Beijing,” said Bo Zhiyue, director of the New Zealand Contemporary China Research Centre at the Victoria University of Wellington. “They are saying: ‘we can do whatever we want. This shows our independence and we don’t need your approval.’”

8. Out of Autocracy, Off the Shelves » The LARB Blog Communist Party considers itself locked in an existential ideological struggle with the West. It regards even the idea of universal values as anathema to its own ideological survival. As a bulwark against these attacks, party ideologues have deployed shields of cultural and national exceptionalism. Their argument is that China exists as it is because that’s the way it was meant to be. Qin Hui’s separation of culture and systems knocks against the very foundations of this tautology.

9. An extra one tonight for a good cause—match4lara Lara is a 24-year-old student passionate about human rights and working on refugee issues. She was diagnosed with Acute Myeloid Leukemia in December 2015, and will need a stem cell donor to save her life. Lara is Chinese-Thai and Italian, which makes it extremely hard to find a stem cell donor as matching types are an inherited trait. Sadly her only brother is not a match. Only 3% of donors on the public stem cell registries are of mixed race. By joining a national bone marrow registry you can provide a potential gift of life to Lara and others like her in their time of greatest need.

BUSINESS, ECONOMY AND TRADE

Another Chinese billionaire goes missing – FT.com The billionaire founder of Metersbonwe, one of China’s best-known fashion brands, has gone missing, the latest in a series of Chinese business people and financiers apparently embroiled in the country’s anti-corruption campaign. Metersbonwe suspended trading in its shares on the Shenzhen stock exchange on Thursday while the company said it was investigating reports in the Chinese media that Zhou Chengjian, its chairman, had been picked up by police. // 美特斯邦威停牌核查 传董事长被警方带走

Donald Trump Says He Favors Big Tariffs on Chinese Exports – First Draft. Political News, Now. – The New York Times “The only power that we have with China,” Mr. Trump said, “is massive trade.” “I would tax China on products coming in,” Mr. Trump said. “I would do a tariff, yes — and they do it to us.” Mr. Trump added that he’s “a free trader,” but that “it’s got to be reasonably fair.” “I would do a tax. and the tax, let me tell you what the tax should be … the tax should be 45 percent,” Mr. Trump said.

Shenzhen Officials End Cab Driver Strike with Payout Offer-Caixin Taxi drivers back behind wheel after two-days of protests over what they say is unfair competition from app companies and their private drivers and cars

Standard Chartered, DBS among banks in China forex ban – sources | Reuters The notices sent to banks did not give a reason for the suspension, but the sources for the Dec. 30 story said the banks might have been targeted due to the large scale of their cross-border forex businesses.

U.S. Marshals Raid Hoverboard Booth at CES – Bloomberg Business The raid on the show floor, which involved federal law enforcement, was the result of a weekslong effort by Future Motion, a Silicon Valley startup that said it invented and patented a self-balancing electric skateboard that looks strikingly similar to the ones the marshals confiscated…The raid on the show floor, which involved federal law enforcement, was the result of a weekslong effort by Future Motion, a Silicon Valley startup that said it invented and patented a self-balancing electric skateboard that looks strikingly similar to the ones the marshals confiscated

Leadership Change at Food Giant Clouds Company’s Future-Caixin The State-owned Assets Supervision and Administration Commission (SASAC), the agency that oversees public assets, recently appointed Ning Gaoning, chairman of China National Cereal, Oils and Foodstuffs Corp. (COFCO), to run the country’s fourth-largest oil company. Ning will take over from long-serving Sinochem Corp. chairman Liu Deshu, 63, who has to step down after reaching the mandatory retirement age. Zhao Shuanglian, the former chairman of the state-backed grain stockpiling agency, China Grain Reserves Corp. (Sinograin), has been appointed to the top job at COFCO.

POLITICS AND LAW

Beijing Party Figure ‘Got Homes for Well Below Market Value’-Caixin Nearly 40 apartments in the development that Lu bought two homes in were sold to senior government officials and executives of state-owned companies for less than 15,000 yuan per square meter, the person close to the inquiry said. Twenty three units were sold for between 11,000 and 12,000 yuan per square meter, he said.

Former Beijing deputy Party chief expelled for bribery, criticism – Chinadaily.com.cn Lyu Xiwen, former deputy Party chief in Beijing, has been expelled from the Party and removed from her post for serious disciplinary violations that included accepting bribes and making groundless criticisms of the party, the Communist Party of China’s watchdog said on Tuesday.
Lyu also failed to follow the central authority’s major policies, formed cliques and lived a luxurious lifestyle, the Party’s Discipline Inspection Commission said

Between Bullying and Flattery: A Theory on Chinese Politics | The Diplomat A popular misunderstanding about Xi holds that he is trying to consolidate power to the level of Mao Zedong as a dictator. However, people who make these kinds of comments don’t fully understand the real dynamics of Chinese politics. Xi was appointed, and most of his Politburo Committee members were chosen by his predecessors, not him. If he doesn’t have authority and power, he can do nothing. And if he wants to avoid the same fate as Hu Jintao, he needs to consolidate power. Actually many Chinese scholars I have talked with consider it as a positive sign that Xi is taking the responsibility and initiative to make changes. They understand that he needs more power to implement his reform plans.

国企领导被双规前夜和情妇开房 遭中纪委通报新闻腾讯网 今天上午，中纪委通报了各级纪检监察机关查处的131起违反中央八项规定精神问题,其中有一位为山西焦煤集团公司原副总经理刘生瑞，其被查实有违规收受他人礼金等问题。 法制晚报记者（微信公众号：观海内参guanhaineican）查阅资料发现，山西省委书记王儒林此前批的一名国企领导在被双规的前一夜，还约其中的一个情妇到宾馆寻欢作乐，这名国企领导就是刘生瑞。

Controls on Uyghur Villages, Mosques Continue Into New Year-RFA Tight security restrictions in ethnic Uyghur areas of northwestern China’s restive Xinjiang region are being extended into the new year, with police carrying out daily patrols in villages and checking the identification of worshippers at mosques, Uyghur sources say. Patrols in one township in Guma (in Chinese, Pishan) county in the western prefecture of Hotan (Hetian) are now carried out “day and night,” a Mokuyla township police officer told RFA’s Uyghur Service.

Meeting stresses Party’s leadership in national affairs – Xinhua The top leadership of the Communist Party of China (CPC) met with CPC leaders of five major state organs on Thursday and stressed the need for them to adhere to central CPC policy. The Standing Committee of the Political Bureau of the CPC Central Committee heard reports from the “leading party groups” of the National People’s Congress Standing Committee, the State Council, the Chinese People’s Political Consultative Conference National Committee, the Supreme People’s Court, and the Supreme People’s Procuratorate, as well as from the Secretariat of the CPC Central Committee. Leading party groups are made up of senior CPC officials of various organizations.

China’s streamlined inspection system targets central organs – Xinhua China’s top discipline watchdog is planning fewer but more efficient inspection agencies to cover all central Party and government organs. Forty-seven agencies directly answering to the Central Commission for Discipline Inspection (CCDI) of the Communist Party of China (CPC) will be tasked with checking 139 central organs for misconduct, according to a plan made public Tuesday by the General Office of the CPC Central Committee. Twenty-seven of the agencies will be mandated to inspect multiple targets, in a move the CCDI said demands more efficiency from inspectors.

国务院办公厅关于印发国务院部门权力和责任清单编制试点方案的通知 《国务院部门权力和责任清单编制试点方案》已经党中央、国务院同意,现印发给你们,请认真贯彻执行。

真心学哲学 真正用哲学——从毛主席的五篇文章谈学哲学-新华网 2016年01月08日  来源： 人民日报–毛泽东哲学思想是马克思主义哲学中国化的产物，是毛泽东思想的重要组成部分。学习和运用毛泽东哲学思想，无论过去、现在还是将来都具有重大意义。-2016年01月08日 05:56:03 来源： 人民日报–[陈云]说的毛泽东同志的五篇文章，是指《中国革命战争的战略问题》《实践论》《矛盾论》《论持久战》《战争和战略问题》，均写于新民主主义革命时期。它们充满辩证唯物主义和历史唯物主义哲学思想，充分说明毛泽东同志是一位马克思主义唯物辩证法大家，毛泽东哲学思想是永远值得学习和运用的。 // Chen Yuan, Chen Yun’s son, on page 7 of Friday’s People’s Daily on the importance of five of Mao’s essays per his father in understanding Maoist philosophical thought. No doubt that will help with the economy, the currency and the markets

Journalist Detained a Year Is Told He’s Ineligible for Payout-Caixin Prosecutors in the capital have told a former investigative reporter who spent nearly a year in jail awaiting trial on libel charges only to have his case dropped for lack of evidence that he cannot be compensated for wrongful imprisonment. Liu Hu, a former journalist at the Modern Express newspaper in the southern city of Guangzhou, was detained by Beijing police at his home in the southwestern city of Chongqing on August 23, 2013, over allegations he committed libel.

FOREIGN AND DEFENSE AFFAIRS

Secretary Carter Illuminates the South China Sea FONOP – Lawfare Put simply, the United States’ view is that Subi Reef—formerly a “low-tide elevation” completely submerged at high tide—is not on its own entitled to a territorial sea. Under Article 13 of UNCLOS, however, if a low-tide elevation is located within 12 nautical miles of the mainland or another maritime feature entitled to its own territorial sea, the low-tide elevation, and not the coastline, sets the “baseline” at which the 12-nautical-mile territorial sea begins.  According to Carter’s letter, this “might be the case here.” A neighboring feature, Sandy Cay, “might be” entitled to its own territorial sea, and Subi Reef “could be used as the baseline” for measuring that territorial sea.

South China Sea dispute: Vietnamese subs deployed as deterrent to China | smh.com.au Bangkok: The first of Vietnam’s new advanced Kilo-class submarines have begun patrolling disputed waters of the South China Sea, as deterrents to China’s 10 times-bigger navy, Vietnamese officials and diplomatic sources say. Vietnam is also expanding use of its strategically important Cam Ranh Bay deep-water harbour, where six of the submarines will be based by 2017.

China lands more civilian planes on Fiery Cross reef – BBC News China has landed two civilian planes on an artificial island built in the disputed South China Sea, days after an earlier landing there prompted international concern. Xinhua state news agency released pictures of two commercial jets on the Fiery Cross Reef, which it called by its Chinese name Yongshu.

Republicans seek more naval resources amid South China Sea dispute | Reuters Tension over the South China Sea highlights the need for the United States to maintain a strong Navy to serve as a deterrent, U.S. House Speaker Paul Ryan said on Thursday, criticizing the Obama administration for proposals he said would reduce the U.S. naval fleet. “This just shows that we need to have a strong Navy,” Ryan said at a news briefing. “We should not have a president proposing to lower our ship count to pre-World War One levels. This means we need to have a strong military and a strong Navy, and a real foreign policy, which we do not now have.”

Indonesia turns to China as ethnic Uighurs join would-be jihadis | Reuters ndonesian authorities are working with their counterparts in China to stem a flow of ethnic Uighur militants seeking to join Islamist jihadists in the world’s most populous Muslim country, Indonesia’s counter-terrorism chief said. Saud Usman Nasution’s comments come amid mounting concern in Indonesia about possible attacks by sympathizers of the Islamic State group and follows the arrest of 13 men across the island of Java, including a Muslim Uighur with a suicide-bomb vest.

【海外】这位60后会是未来中国驻美大使吗 按照中国外交部的惯例，中国驻美大使一般由现任副外长出任，而郑泽光此番由部长助理晋升为副部长，正走了关键一步。 //  Zheng Zeguang likely the next PRC ambassador to the US?

China’s Non-Kinetic Three Warfares Against America | Peter Navarro The Three Warfares were first officially recognized as an important warfighting capability by China’s Central Military Commission and Communist Party in 2003. They include everything from psychological and legal to media warfare.

China Launches a New High-Tech Spy Ship – The Daily Beast The Type 815 surveillance vessel Neptune, featuring sensitive electronic listening devices, could help Beijing further improve its already impressive ability to gather intelligence on its rivals, in particular the U.S. Navy. China’s state media announced the Neptune’s Dec. 26 commissioning two days after the ceremony, which reportedly took place at an undisclosed naval base on the South China Sea. Neptune “is able to conduct continuous all-weather reconnaissance of various targets within a certain range,” explained PLA Daily, the official publication of the Chinese People’s Liberation Army.

The Evolution of Interstate Security Crisis-Management Theory and Practice in China | Andrew S. Erickson this makes it all the more important to develop a general understanding of the dynamics of Chinese crisis behavior across a variety of scenarios. In “The Evolution of Interstate Security Crisis-Management Theory and Practice in China,” Alastair Iain Johnston sets out to do exactly that. In a pathbreaking analysis that encompasses a growing Chinese academic literature as well as the organization and organizational culture of China’s military and security bureaucracies, Johnston shows that Chinese crisis-management thinking has been shaped to a surprising extent by the tradition of American, or more broadly Western, theorizing on crises originating in the Cold War. While emphasizing that this tradition is in many ways in tension with traditional Chinese attitudes toward war, he suggests that there may be an opening here for a productive dialogue between the two nations.

Xinhua Insight: Xi’s worldwide diplomacy benefits China, the world – Xinhua As the year 2016 begins, China is again at a new starting line in its race toward the great rejuvenation of the Chinese nation. As China pursues a new-type international relations featuring cooperation and win-win results, the world will continue to benefit from China’s development.

Inside China: Military reform is not a song-and-dance party – Washington Times In September last year, when he announced a 300,000-man troop cut, a primary target was the dismantling of the military entertainment corps. This week’s abolition of the powerful and much glorified Song and Dance Troupe of the PLA Political Department is just the beginning of Mr. Xi’s own bloodless military cultural revolution.

面对改革作风建设有新要求 中央军委委员、总政治部主任、全军教育整改领导小组组长张阳出席会议并讲话。 会议认为，自去年初开展专题教育整顿以来，各级坚决贯彻习主席和中央军委决策指示，贯彻整风整改基调，狠抓“四项整顿”任务落实，扎实推进“八个专项清理整治”，深入肃清郭伯雄徐才厚案件影响，在净化思想灵魂、革除作风积弊、修复政治生态等方面，带来深刻变化、彰显正向效应，部队作风建设向前迈进了一大步，为改革强军聚集了强大正能量。

论政治建军与改革强军的内在统一 政治建军重大战略思想引领我军重塑政治生态，核心在于铸牢党对军队绝对领导的强军之魂，奠定改革强军、向现代化军队全面转型的思想政治基础

HONG KONG, MACAO AND TAIWAN

Many in Hong Kong Fear Beijing’s Reach After Editor’s Disappearance – NYTimes The case of Lee Bo — Paul Lee is his English name — and his four missing colleagues has all the makings of an espionage thriller. But to many of the 7.2 million people in this former British colony, his disappearance and apparent surfacing across the border that demarcates Hong Kong from the rest of China have fueled a profound fear, by calling into question the legal guarantee that people here would be shielded until midcentury from Beijing’s reach under an arrangement known as one country, two systems. The case also threatens to stoke tensions between the mainland and Britain, which has recently pushed to move closer to China, declaring the beginning of a “golden decade” of ties between the two countries. On Tuesday, Philip Hammond, the British foreign secretary, said during a visit to Beijing that Mr. Lee was a British citizen.

Hong Kong bookshops pull politically sensitive titles after publishers vanish | World news | The Guardian Page One, a major Singapore chain, with outlets in both Hong Kong and mainland China, has decided to stop selling all politically sensitive books in Chinese – known locally as “jinshu”, or “forbidden books” – in its Hong Kong shops, as the mystery over the whereabouts of the five vanished men deepens. The chain, which specialises in graphic design and visual art volumes, had been limiting the number of political books it sold ever since clinching a deal a few years ago with authorities to expand its operations in the mainland – where no Chinese-language “sensitive” political books published in Hong Kong are allowed for distribution. However, until recently Page One’s outlet in the departure hall of Hong Kong airport had continued to cater to the strong appetite of mainland Chinese travellers for volumes on political intrigue and gossip.

TECH AND MEDIA

微信红包资金加码至10天广告收入公司频道财新网 【财新网】（记者 刘晓景）距离猴年春节仅剩一个月，各大互联网平台围绕春节的红包大战也不断升级。1月6日，微信官方宣布，将原来公布的红包方案从5天朋友圈广告收入增至10天，意即除夕前后10天的朋友圈广告收入全部作为红包发放给微信用户。而明天（1月7日），蚂蚁金服将就今年春节红包事宜召开媒体发布会。

SOCIETY, ART, SPORTS, CULTURE AND HISTORY

China’s First Marriage Equality Case Accepted by Court – China Digital Times (CDT) The Furong district court in Hunan province has accepted a lawsuit filed against the Changsha civil affairs bureau by 26-year-old Sun Wenlin, who was denied the right to marry his same-sex partner by the bureau last June

‘The Zhaos’ — The Demarcation of a Divide « China Change As the year 2015 was drawing to its end, a new expression was born on China’s social media: “the Zhaos” (“赵家人”).  New phrases pop up regularly online in China, but “the Zhaos” has been hailed as revolutionary. Never has an expression captured the essence of China’s politics and economy with such pithiness and precision—that a class of people thinks China belongs to them, acts like its owner, and is indeed the owner. Compared to the phrase “your country,” (an inversion of the official reference to China as “our country”) which has been in vogue for a while, “the Zhaos” brings into focus a critical divide that has never been encapsulated. It is, many believe, destined to permanently enter the Chinese lexicon. This article presents a compilation of explanations and uses of the expression, and its social and political interpretations. — The Editors

Major League Baseball Games to Be Streamed in China by LeTV – Hollywood Reporter Chinese tech and entertainment company LeTV has signed an exclusive three-year deal with Major League Baseball to stream games live in China, Hong Kong and Macau.

ENERGY, ENVIRONMENT, SCIENCE AND HEALTH

Banking on Gene Power for ‘Precision Medicine’-Caixin Genome sequencing companies, including niche service providers, are at the heart of a new health care initiative backed by the Chinese government

China Weighs Ban on Manta Ray Gills, Sold in Traditional Market as Modern Panacea – The New York Times Then there are the plastic sacks stuffed with manta ray gill plates: feathery filaments of cartilage that the rays — majestic cousins of the shark — use to filter plankton from seawater as they swim. Retailers claim that the gills are a time-tested panacea for modern ills, that they can increase the amount of breast milk, detoxify the blood, cure chickenpox, heal tonsillitis and clear a smoker’s lungs.

AGRICULTURE AND RURAL ISSUES

Dim Sums: Rural China Economics and Policy: China Imports Ag Commodity Deflation China imported farm commodities at a robust pace during 2015 as Chinese buyers took advantage of bargains on the international market. With imported commodities as much as 40-percent cheaper than Chinese commodities, mills and processors are eager to buy imports even though Chinese markets are swimming in excess supply.

FOOD AND TRAVEL

Four Top Airlines Stop Selling Tickets on Major Travel Website-Caixin China Eastern Airlines and Air China said on Weibo, the Chinese version of Twitter, on January 4 that they will stop selling plane tickets on Qunar.com because of an increase in complaints about overpriced tickets and extra charges for changes. China Southern Airlines, Hainan Airlines and two of their subsidiaries released similar statements on December 31.

Chinese travel giant Ctrip invests $180M in India’s MakeMyTrip – Tech in Asia the company announced today that it will invest US$180 million in India’s MakeMyTrip via convertible bonds. The agreement also gives Ctrip the right to purchase MakeMyTrip shares on the market (both companies are listed on the NASDAQ) until it owns up to 26.6 percent of MakeMyTrip’s total outstanding shares (counting the shares convertible under the convertible bonds).

JOBS AND EVENTS

USITO Seeks Candidates for Managing Director-Beijing In addition to managing the USITO operation in China, the Managing Director works closely with the USITO Board of Directors and the USITO parent associations to develop and implement policy advocacy strategies on behalf of USITO members and the U.S. information communications technology (ICT) sector in China

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