Beidaihe Over, Xi Meets US Gen. Dunford; Steve Bannon On China & North Korea; Rule By Law In Hong Kong – Sinocism 08.17.17

"Sinocism is the Presidential Daily Brief for China hands"- Evan Osnos, New Yorker Correspondent and National Book Award Winner

Good afternoon. I am playing around with a shorter summer format and struggling with jet lag so today’s issue is a bit disjointed and just the essential items.

Beidaihe is clearly over as Xi Jinping’s meeting Thursday in Beijing with US General Dunford was the top item on CCTV Evening News-[视频]习近平会见美军参联会主席_CCTV. Hong Kong’s retreat from rule of law continues with the new prison sentences for three of the Occupy leaders. And top Trump aide Steve Bannon gave a bombshell interview in which he expounded on his views about China and North Korea.

1. Steve Bannon Talks China And North Korea

Comment: Bannon’s talk with Robert Kuttner of The American Prospect seems important but we do not know if he is really speaking for President Trump. If he is, perhaps the most damming revelations are that Trump’s threats of a military strike on North Korea are empty, and that the US would consider a deal with China that would result in US troops leaving South Korea. The Chinese suspect Trump is a paper tiger, if they believe Bannon speaks for him than any credibility Trump had with is threats about military pre-emption is gone. 

The economic war talk is neither unsurprising or particularly wrong. 

“We’re at economic war with China,” he added. “It’s in all their literature. They’re not shy about saying what they’re doing. One of us is going to be a hegemon in 25 or 30 years and it’s gonna be them if we go down this path. On Korea, they’re just tapping us along. It’s just a sideshow.”

Bannon said he might consider a deal in which China got North Korea to freeze its nuclear buildup with verifiable inspections and the United States removed its troops from the peninsula, but such a deal seemed remote. Given that China is not likely to do much more on North Korea, and that the logic of mutually assured destruction was its own source of restraint, Bannon saw no reason not to proceed with tough trade sanctions against China.

Contrary to Trump’s threat of fire and fury, Bannon said: “There’s no military solution [to North Korea’s nuclear threats], forget it. Until somebody solves the part of the equation that shows me that ten million people in Seoul don’t die in the first 30 minutes from conventional weapons, I don’t know what you’re talking about, there’s no military solution here, they got us.” Bannon went on to describe his battle inside the administration to take a harder line on China trade, and not to fall into a trap of wishful thinking in which complaints against China’s trade practices now had to take a backseat to the hope that China, as honest broker, would help restrain Kim…

But what about his internal adversaries, at the departments of State and Defense, who think the United States can enlist Beijing’s aid on the North Korean standoff, and at Treasury and the National Economic Council who don’t want to mess with the trading system?

“Oh, they’re wetting themselves,” he said, explaining that the Section 301 complaint, which was put on hold when the war of threats with North Korea broke out, was shelved only temporarily, and will be revived in three weeks. As for other cabinet departments, Bannon has big plans to marginalize their influence.

“I’m changing out people at East Asian Defense; I’m getting hawks in. I’m getting Susan Thornton [acting head of East Asian and Pacific Affairs] out at State.”

Kuttner’s article that piqued Bannon’s interest: 

The problem here is that China holds most of the cards. If China does manage to restrain Kim from his threatened missile launch, Trump would be obliged as part of the deal to indulge China’s harmful trade practices, backing off from any retaliation. Yet the United States would be no better off over the long term with Kim, who will keep expanding his nuclear arsenal.

Mr. Bannon, Mr. Trump’s chief strategist, said he might consider a deal in which United States troops withdrew from South Korea in exchange for a verifiable freeze in the North’s nuclear program.

Such a deal, which would be a radical departure from decades of United States policy, is unlikely to happen. But its mere suggestion stunned analysts in a region still grappling with the implications of Mr. Trump’s threat last week to unleash “fire and fury” on North Korea.

Hua Chunying added: Beijing hopes “the relevant people can refrain from dealing
with a problem in the 21st century with a zero-sum mentality from the 19th or the 20th century.”

2. Near-term Risks Of Korean Peninsula Military Crisis Look Much Lower

“I say this with confidence: There will be no war on the Korean Peninsula ever again,” Moon told reporters on his 100th day in office, adding that President Trump had agreed to discuss any action with his administration.

Gen. Dunford said he held broad-strokes discussions about a “contingency” in case of conflict with North Korea and that he had stressed to his Chinese counterparts the need for robust communication ties. He declined to provide details of how the Chinese side had responded.

China’s Defense Ministry said the two sides discussed North Korea, citing Gen. Fang Fenghui, chief of China’s Joint Staff Department, saying the Chinese military was willing to enhance communication to “effectively control risks,” and to work together to resolve “current problems.” It didn’t elaborate further.

Although the international community recently agreed to punish North Korea over its nuclear programme, food exports were excluded from the UN sanctions in the hope of ensuring a minimum living standard for the country’s citizens.

3. Rule BY Law In Hong Kong, Now Just Another PRC City

Alex Chow, Nathan Law, and Joshua Wong, the bespectacled student dubbed Hong Kong’s “face of protest” were sentenced to between six and eight months imprisonment each.

The trio, aged 26, 24 and 20 respectively, had avoided jail a year ago after being convicted of taking part in or inciting an “illegal assembly” that helped spark the umbrella protests, in late September 2014. But this month Hong Kong’s department of justice called for those sentences to be reconsidered, with one senior prosecutor attacking the “rather dangerous” leniency he claimed had been shown to the activists.

Suzanne Pepper, a Hong Kong-based scholar of Chinese politics, said the new sentences were “part of a larger pushback by Beijing against Hong Kong’s democracy movement.”

“It’s a two-part strategy aimed at targeting the leaders, making an example of them, showing the cost for all who might want to follow in their footsteps and offering rewards to all who settle down,” she said in an email. “Sort of a combined carrots-and-sticks strategy, plus ‘killing the chicken to frighten the monkeys.’”

4. More On General Dunford’s China Visit

Is the most likely timing for a Trump visit after APEC, and after the 19th Party Congress?

Chinese President Xi Jinping on Thursday met with visiting Chairman of the U.S. Joint Chiefs of Staff Joseph Dunford at the Great Hall of the People in Beijing. “You are the first senior military official to visit China since U.S. President Donald Trump took office,” Xi told Dunford.

Xi asked Dunford to convey his greetings to President Trump, and said China is looking forward to Trump visiting China.

“But wrong actions on the Taiwan issue, the United States deploying the THAAD system around China, U.S. ships and aircraft’s activities in the South China Sea, the United States close-in surveillance in the sea and air near China have had a large, negative influence on bilateral military ties and mutual trust,” Fan added.

While not unprecedented and not in violation of international law, the deployments nonetheless remind the region, the United States, and the world that China is a rising power (and major maritime power) willing to fully leverage its maritime rights as “interpreted” under UNCLOS. That, in turn, underscores Beijing’s “double standards,” in terms of selectively choosing parts of UNCLOS that it likes and ignoring (or reinterpreting) parts that it does not like or find incongruent with its national interests. While Washington and Canberra tolerated, exercised restraint, and even downplayed the presence of the AGI within their respective EEZ; Beijing has more-often-than-not admonished the offending nation(s) for violating its territorial sovereignty and sometimes even harassed the such ships from other nations.

5. Speculation On A Promotion To The PLA’s Central Military Commission

General Li Zuocheng, 64, a veteran of the 1979 war with Vietnam, expected to become new vice-chairman of CMC, sources say…

The promotion would be a “breakthrough” in terms of the make-up of the CMC, another military source said, because Li was not one of the existing 10 military members. President Xi, who is also chairman of the CMC, is its only civilian member.

“There is a medium- and long-term political consideration behind Li’s nomination – it’s a sign that promotion within the PLA will go back to being based on achievements and experience rather than connections and background,” the source said.

6. “It’s The Most Serious Crisis In India-China Relations For 30 Years.”

“It would be very complacent to rule out escalation,” said Shashank Joshi, an analyst with the Royal United Services Institute in London. “It’s the most serious crisis in India-China relations for 30 years.”

The standoff also reflects an expanding geopolitical contest between Asia’s most populous nations. As China fortifies islands in the South China Sea and exerts its influence through ambitious infrastructure projects throughout the continent, its dominance of Asian affairs is growing, as is its unwillingness to brook rivals. India is seen by some as the last counterbalance.

“The most significant challenge to India comes from the rise of China, and there is no doubt in my mind that China will seek to narrow India’s strategic space by penetrating India’s own neighborhood. This is what we see happening,” former Indian foreign secretary Shyam Saran said recently at an event in New Delhi.

None of this is to suggest that a Chinese attack is inevitable. But prudence dictates that Indian security managers must assume it is instead of comforting themselves with various reasons why it might not be. In addition, it must be assumed that this will be a full-scale conventional assault, rather than confined to one sector or the other, or that it might be minor skirmishes. India can hope that diplomacy and deterrence can together hold China, but also recognise that this is far from certain. India cannot afford magical thinking when it comes to a confrontation with China.

The English-language video [Here on Youtube], published by Xinhua, the official news agency of China’s central government, attempts to use humor to discredit India’s contention that China is not the rightful owner of a strategic stretch of land in the Himalayas.

The three-minute clip offers stereotypes, stilted jokes and canned laughter, using a scissors-wielding man with a fake beard and a turban to represent India. He is shown at various points snoring loudly, waving his arms in fear and using scissors to threaten a man representing a neighboring country, Bhutan.

India is tightening the rules for businesses entering its power transmission sector and making stringent checks on both power and telecoms equipment for malware – moves that government and industry officials say aim to check China’s advance into sensitive sectors.

Chinese firms such as Harbin Electric, Dongfang Electronics, Shanghai Electric and Sifang Automation either supply equipment or manage power distribution networks in 18 cities in India.

For long a hotly-contested field among ideological rivals of the left, right, and centre of Indian politics, these textbooks have begun to peddle outright lies.

It may be still a trickle, but here is a glimpse of the false history that millions of Indian school students will be learning now on.

7. Alibaba And Tencent Have Blowout Quarters

Comment: Try arguing with a Chinese official that the PRC’s Internet control is not working…The Party has regained the propaganda initiative online, the Internet offers massive economic and surveillance-state benefits, the listed valuation of Chinese Internet firms is around $1 Trillion USD…

On Thursday, Alibaba Group, the Chinese e-commerce giant, said its profit for the three months that ended in June almost doubled, while its revenue rose more than half. But just as impressive a jump was its stock price, which has increased more than 80 percent so far this year. Now Alibaba and its biggest Chinese rival, Tencent Holdings, have valuations that hover around $400 billion.

By contrast, has a valuation of about $470 billion, while Facebook is at about $490 billion.

According to CNG, which runs a Chinese video game industry database, Honor of Kings generated about $828 million in revenue in the first three months of this year. That would make the game the biggest revenue generator among smartphone games globally, according to data from App Annie, a market research firm that tracks app performance.

Tencent’s revenue, that has been scaling new highs every quarter since 2007, surged 59 percent to 56.6 billion yuan.

Both profit and revenue were all-time highs and soared past average estimates of 14.15 billion yuan and 52.98 billion yuan, respectively, from analysts polled by Thomson Reuters.

But the controls continue to tighten and there are real social costs

Five websites have been asked to carry out immediate “self-examination and correction” to remove vendors that sell illegal virtual private networks (VPNs), according to a notice posted by the Zhejiang provincial branch of the Cyberspace Administration of China (CAC), China’s top cyber regulator. 浙江网信办约谈淘宝网、同花顺金融网等5家网站

Comment: Much of the Internet addiction is from online gaming. China has had several cycles of outrage about mistreatments at internet addiction centers and attempts to regulate online gaming and limit minors’ time. Given the current Internet regulatory environment and the very real social issues I would not be surprised to see a much more forceful effort against online games.

8. Two New Reports From German Think Tank MERICS

The decisions presented at the 19th Party Congress will define China’s future path. MERICS researchers have analysed the main developments characterizing China’s ruling party today. In the China Monitor “Hardening the party line – The 19th CCP Congress will boost strongman politics and narrow China’s developmental options”, MERICS researcher Matthias Stepan argues that the events at this year’s congress will provide clear hints about the real extent of Xi’s power and his ability to shape China’s political agenda for the next five years and potentially even beyond the end of his second term in 2022.

This MERICS China Monitor written by Lea Shih and Kerstin Lohse-Friedrich looks at the changing membership structure of the world’s second-biggest party: “Centralized leadership – Heterogeneous party base” describes how the party’s face changed due to a substantial growth in membership, which rose by 26 percent from 2005 to 2016. Today, the CCP has nearly 90 million members with very different social backgrounds, political interests and ideological preferences. This widening gap is worrying to the party leadership, which pushes for organizational unity and strives for expanding its influence over Chinese society. For instance, the CCP has built up 1.8 million grassroots organizations in the private sector and even foreign companies in less than a decade.

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