"Sinocism is the Presidential Daily Brief for China hands"- Evan Osnos, New Yorker Correspondent and National Book Award Winner
Nearly 28,000 investors, policymakers, executives, analysts, diplomats, journalists, scholars and others rely on the newsletter for valuable insights into China. If you too want to get smarter about China, enter your email below to subscribe now.
[gravityform id=”1″ name=”p1 email” title=”false” description=”false”]
Yesterday’s newsletter appears to have triggered some email filters so if you did not get that issue you can read it here.
Readers in the DC area may be interested in the panel On the Road to the 19th Party Congress: Elite Politics in China under Xi Jinping at the Center for Strategic and International Studies tomorrow, Wednesday, May 17, at 1PM. I will be trying to punch very far above my weight in the discussion with Chris Johnson and Dr. Joe Fewsmith. If you attend please say hello.
The Essential Eight
1. Focus Turns to North Korea Sleeper Cells as Possible Culprits in Cyberattack – The New York Times Since the 1980s, the reclusive North has been known to train cadres of digital soldiers to engage in electronic warfare and profiteering exploits against its perceived enemies, most notably South Korea and the United States. In recent years, cybersecurity experts say, the North Koreans have spread these agents across the border into China and other Asian countries to help cloak their identities. The strategy also amounts to war-contingency planning in case the homeland is attacked. Now, this force of North Korean hacker sleeper cells is under new scrutiny in connection with the ransomware assaults that have roiled much of the world over the past four days //Comment: Considering the impact of WannaCry in China, Beijing would likely take harsh action against North Korea if they believe Kim was behind the ransomware. Much if not all of the DPRK’s internet links flow through China right?
Related: ROK president’s special envoy to visit China – Xinhua Lee Hae-chan, a member of the National Assembly of the Republic of Korea (ROK) and former prime minister, will visit China from May 18 to 20 as ROK President Moon Jae-in’s special envoy, Foreign Ministry spokesperson Hua Chunying told a routine press briefing Tuesday.
2. China quietly releases draft of tough new intelligence law | Reuters On Tuesday, a top law-making body, the standing committee of the National People’s Congress (NPC), released a draft version of the National Intelligence Law on its website, inviting responses from the public until June 14. “State intelligence work should…provide support to guard against and dispel state security threats (and) protect major national interests,” the document said, without giving a timeframe for passage of the law. National interests listed in the document include state power, sovereignty, independence and territorial integrity.
Related: National Intelligence Law of the People’s Republic of China (Draft)-China Law Translate
3. Interview: Theresa Fallon On Understanding China’s One Belt, One Road Plan But the feasibility of the initiative remains unclear, says Theresa Fallon, a China expert at the Center for Russia, Europe, Asia Studies, a Brussels-based research group. She spoke to RFE/RL’s Carl Schreck about the potential geopolitical and economic impact of the trade initiative, and the prospects that China can pull it off.
Related: China’s Silk Road Initiative Sows European Discomfort – WSJ After European officials protested the proposed trade language, China released a list of countries it said supported the wording. The list included Portugal, but European officials said Portuguese officials told them they didn’t support the language and hadn’t been consulted. Beijing’s actions appeared to be an attempt to play off individual EU members against the wider bloc, the European officials said.
Related: Australia signs China trade statement despite protest | afr.com Australia opted not to join a European protest over the wording of a trade statement issued at China’s “One Belt, One Road” summit in Beijing, with Trade Minister Steve Ciobo confirming he signed the controversial document.
4. China banking regulator tightens rules on WMPs, flags more curbs | Reuters The China Banking Regulatory Commission (CBRC) said in a notice late on Monday it plans to launch 46 new or revised rules this year, part of which targets risks related to shadowbanking activities.
Related: China Pumps $24.7 Billion Into Financial System – WSJ The People’s Bank of China pumped a net 170 billion yuan ($24.7 billion) into the financial system via its daily money-market operation, the largest amount since just before the Lunar New Year holiday in January. The huge provision of cash follows comments from Chinese officials in recent days that suggest they are concerned that recent moves to tighten market regulation have caused too much disruption.
Related: Goldman Builds China Financial-Stress Index and, Yes, It’s Risen – Bloomberg “We find that an increase in financial stress hurts economic growth, but only to the extent that broader financial conditions tighten as a result,” economists including Hong Kong-based Zhennan Li wrote in a note dated May 16. “Growth will not necessarily be affected significantly if a sharp increase in financial stress is followed by a quick reversal.”
Related: China’s insurance regulator to inspect market irregularities – Xinhua From June to mid-October, local insurance authorities will conduct on-site investigations on 46 branches of 16 insurance entities, as well as seven part-time insurance agents, which had been ranked poorly in terms of customer complaints in the past two years, China Insurance Regulatory Commission said in the statement.
Related: 独家 | 保监会弥补监管短板 拟发文规范信保业务-新闻-上海证券报·中国证券网 综合偿付能力充足率不低于150%；承保的信保业务责任余额不得超过上一季度末净资产的10倍；严禁为四类融资行为提供信保业务
5. World’s No.1 Money Fund Said to Face Pressure to Cut Inflows – Bloomberg Yu’E Bao, the world’s largest money-market fund, will cut its current 1 million yuan ($145,000) investment cap by more than half after receiving input from the People’s Bank of China, according to the people, who asked not to be identified discussing sensitive information. The limit may be imposed as soon as this month and will apply to new money inflows, they said…Yu’E Bao’s size has spurred concerns about its influence over the nation’s interbank market, where most of its money is invested, and where borrowing costs have soared to a two-year high amid the government’s renewed campaign against leverage
Related: Alibaba’s $60bn payments arm stalls planned IPO-FT $$ According to one banker, Ant’s IPO has been pushed back to late 2018 or the first half of the following year because of the need to secure regulatory approval and to focus on building the business. Ant has been buying up assets overseas, including in India, South Korea and the US, where it is seeking to acquire MoneyGram. “Ant would like to convert into an [overseas] shareholding, and it needs the blessing of government to do that,” the banker said. “And in a year of political uncertainty and manoeuvring, no one is making decisions.”
6. 楼市限售成调控常态 多地成交量“腰斩”公司频道财新网 Comment: Caixin on a new twist in administrative attempts to try to cool the property market–around 20 cities have introduced housing sales restrictions. Kaifeng for example now bans sales within three years of purchase…so much for letting the market play a decisive role.
Related: Despite cooling market, developers spending more on real estate-Global Times The real estate market may have lost some of its heat as China’s local governments have ratcheted up restrictions on home buying, but that hasn’t stopped developers from snapping up land at premium prices. Through Wednesday, at least 21 domestic real estate companies, including Longfor Properties Co and China Poly Group Corp, had each spent more than 10 billion yuan ($1.45 billion) on land in 2017, according to a report by the 21st Century Business Herald on Sunday.
Related: 50城4月土地均价创近7年新高 市场溢价率持续走低_财经网 Comment: Average land prices in April in 50 cities at a 7 year high.
Related: 商住房冰封财新周刊频道财新网 据中原地产统计，近十年，北京二手房市场约有逾40万套存量商业办公类（下称商办类）物业，其中约25万套为商住房；目前市场在售商办类物业6万套，其中2.3万套为商住房；潜在供应还有超过15万套商办类物业，合计近60万套商办类物业，近半为商住房。 过去销售的商办物业90%为个人购买，但自3月26日起，北京市这类物业被全部纳入企业购买或限购。
7. China’s Copy of Manhattan Is No Longer a Ghost Town – Bloomberg in the towering Manhattan-style district, more than half of the 47-story apartment building where Zhang, the security guard, works has been sold, and some businesses and companies have moved into the buildings. Property sales jumped 94.3 percent in 2016, the fastest of all provinces, according to the National Statics Bureau. It’s no surprise Tianjin’s big development plans weren’t a failure because it’s a major city with backing from heavy hitters in the party, Polk said. Vice Premier Zhang Gaoli, and Sun Chunlan, a member of the Politburo, are both former party secretaries of the area.
8. Mobile Payments Charge Up McDonald’s, Starbucks in China – Caixin Global $$ About 45% of purchases at McDonald’s Corp.’s more than 2,400 China stores are made through mobile payments, usually involving checkered QR codes generated from a person’s smartphone, the leading fast food giant revealed at an event over the weekend. Meantime, coffee giant Starbucks Coffee Co. said 29% of transactions at its China stores were made through mobile payment in the first quarter
Business, Economy And Trade
China’s Investor Army Is Bracing for More Stock-Market Pain – Bloomberg More than $250 billion has been wiped off the value of Chinese equities since April 1, as a drive to reduce financial leverage kicked into high gear with President Xi Jinping ordering a check of risks. The flurry of regulation seems to have unnerved mainland investors more than those outside China — big foreign names like Mark Mobius have lauded the initiative as a step toward a more mature market. The following is a cross-section of reactions from so-called retail investors in domestic shares.
Yum China Revs Up Takeout Business With Acquisition of Sherpa’s – Caixin Global The China unit of U.S. restaurant giant Yum Brands Inc. said it will receive a controlling stake in Daojia.com.cn, owner of the Sherpa’s takeout delivery service, under a newly signed agreement that is expected to close at the end of this month.
President Trump’s evolving claims about when China stopped manipulating its currency – The Washington Post it would be no surprise that Trump would have to give up on this pledge, since it would be rather difficult for the Treasury Department to argue that China met the legal requirements for currency manipulation. (In any case, all the label means is that the treasury secretary would begin negotiations to try to deal with the situation.) But look at how Trump’s statements have evolved. In recent weeks, he has begun to claim that China stopped manipulating the currency because he was elected — or even because he raised the issue during the campaign.
China Announces Hong Kong Bond Connect After Stock Links – Bloomberg The People’s Bank of China and Hong Kong Monetary Authority said Tuesday that the bond connect system would only be northbound at the start, giving foreigners a channel to buy onshore securities. There will be no daily quota, and the regulators didn’t provide a date for when trading would begin.
Doubts over Japanese-US ties ‘may nudge Tokyo’ into China-led AIIB fold | South China Morning Post Toshihiro Nikai, secretary general of the ruling Liberal Democratic Party, said it was crucial for Japan to decide soon whether it should join the AIIB, Japan’s Nikkei newspaper reported. Nikai, known for his close ties with Beijing, made the assessment at a two-day summit in the Chinese capital for China’s “Belt and Road Initiative”.
Politics And Law
China: Police DNA Database Threatens Privacy | Human Rights Watch In many parts of the country, police officers are compelling ordinary individuals – neither convicted nor even suspected of a crime – to have their blood drawn and DNA taken. Samples have also been collected from vulnerable groups already targeted for increased government surveillance, including migrant workers, dissidents, and minority Muslim Uyghurs. Because police wield wide powers, and because there are no actionable privacy rights in China, people have little ability to refuse the collection of such personal information.
Senior CPC official calls for studying Xi’s speeches – Xinhua Liu Yunshan, who is president of the Party School of the CPC Central Committee, made the comment during the opening ceremony for the second group of students at the school’s 2017 spring semester Tuesday. Chief officials and leading cadres should take the lead in studying Xi’s speeches and mastering Marxist standpoints to raise political awareness and improve governing ability, Liu said. Speeches delivered by Xi, also general secretary of the CPC Central Committee, are the latest achievements in adapting Marxism to Chinese conditions, Liu stressed, asking officials to unite closely around the CPC Central Committee with Comrade Xi as the core.
刘奇葆强调 全力做好迎接党的十九大宣传各项工作-新华网 新华社北京5月16日电 5月16日，中宣部在北京召开迎接十九大宣传暨“砥砺奋进的五年”重大主题宣传动员会。中共中央政治局委员、中央书记处书记、中宣部部长刘奇葆出席会议并讲话，强调要深入学习贯彻习近平总书记系列重要讲话精神和治国理政新理念新思想新战略，全力做好迎接党的十九大宣传各项工作，做好“砥砺奋进的五年”重大主题宣传，用辉煌的成就鼓舞人心，用美好的前景催人奋进，为党的十九大胜利召开营造良好思想舆论氛围。// Comment: Liu Qibao emphasizes propaganda work for the 19th Party Congress. will involve lots of studying of Xi Jinping’s important speeches…
China intensifies crack down on telecom, Internet fraud – Xinhua China has been strengthening its forces for combatting telecom and Internet fraud, with 32 provincial anti-fraud centers and 206 city-level anti-fraud centers having been established, according to the Ministry of Public Security (MPS).
北京:向38家单位党组织反馈专项巡视情况——中央纪委监察部网站 日前，北京市委巡视工作领导小组办公室通报了十一届市委第十三轮巡视反馈情况。2016年12月至2017年3月，市委巡视组分别对38家单位党组织进行了专项巡视，发现和收到干部群众反映的一些问题，主要集中在以下几个方面。// Comment: Beijing CCDI reports on results of recent inspection tour, no doubt useful for Cai Qi
挖内鬼！两纪委要员刚换身份就被查 – 今日头条 Comment: A look at the spate of corruption investigations in Xinjiang // 在目前的新疆党委班子中，有两位纪检系统的干部，一位是乌鲁木齐市委书记徐海荣，他由自治区纪委书记任上转任，还有一位是刚从中央纪委案件审理室主任岗位上空降而来的罗东川，他接替徐海荣担任自治区纪委书记。 从去年底开始，新疆及兵团持续掀起反腐风暴，覆盖各个工作领域，一批重量级老虎被果断拿下，反腐成果令人印象深刻。
China’s Supreme Court Tests Lighter Drunk-Driving Penalties-Sixth Tone In a Supreme People’s Court sentencing guideline effective May 1, defendants accused of drunk driving will be exempt from conviction or criminal punishment if the circumstances are, respectively, “obviously minor” or “minor,” reported The Beijing News on Friday.
BBC World Service – Newshour, China Desk: My husband was tortured by the Chinese authorities In this first edition of Newshour’s China Desk: The BBC’s John Sudworth speaks to Wang Qiaoling, wife of the human rights lawyer Li Heping, who was detained by the Chinese authorities in 2015. She alleges that her husband was severely tortured by the Chinese authorities during his detention. Earlier this week Li Heping was given a suspended prison sentence, and returned home for the first time since his arrest.
Translation: Next Weekly Interview With Guo Wengui – China Digital Times (CDT) CDT has translated a recent Hong Kong news story on Guo. This interview and backgrounder was originally published on May 8 by Hong Kong’s Next Weekly (壹周刊), and has been translated in full
Foreign And Defense Affairs
Hanban pursues global teaching mission – China Daily the Confucius Institute, which was conceived 12 years ago to teach foreigners the Manadarin language and immerse them in Chinese culture, will increase its presence in foreign countries to enhance “connectivity in mind”, said Xu Lin, former director-general of the Confucius Institute Headquarters in Beijing, which is also known as Hanban. “Thanks to the joint efforts of the Chinese and foreign sides, Confucius Institutes have been launched in 51 of the 65 countries linked to the initiative’s two main routes – the Silk Road Economic Belt and the 21st Century Maritime Silk Road,” Xu said ahead of the Belt and Road Forum for International Cooperation that concluded in Beijing on Monday.
U.S. ally Turkey may have a new best friend in Beijing – The Washington Post Erdogan was in Beijing over the weekend for a two-day “Belt and Road Forum” convened by Chinese President Xi Jinping. On Monday, just one day before his trip to the Oval Office, the Turkish president fired off a series of tweets — in English as well as Turkish — offering praise for Xi’s new international infrastructure and development plan.
China, ASEAN officials to meet on South China Sea this week-Xinhua According to Chinese Foreign Ministry spokesperson Hua Chunying, Chinese Vice Foreign Minister Liu Zhenmin and senior diplomatic officials from ASEAN countries will attend the meeting. Prior to the meeting, there will be the 21st Joint Working Group meeting on the Implementation of the DOC.
Defense Minister stresses national defense education – Ministry of National Defense He called for clear understanding of the complicated situation facing China’s national security and development and of the importance of national defense education for all citizens. Chang said such education should include remembering history, looking at the past as a mirror, remaining level-headed, memorializing martyrs and maintaining a revolutionary spirit.
Project 2049 Institute – The Limits of CCP Liaison Work: Sino-Vietnamese Relations The PRC has fully leveraged its relative receptiveness to communist liaison work, carried out through CCP Central Committee’s International Department (CCP/ID). With Sino-Vietnamese tensions in mind, party-to-party exchanges have provided a more subtle channel for rapprochement. This party-centric dimension of diplomacy between China and Vietnam has received relatively scarce analytical attention thus far but remains active and important elements of the People’s Republic of China’s (PRC) pursuit of its foreign policy interests
China begins deep-sea research in northwestern Pacific Ocean – Xinhua The 38th oceanic scientific expedition started on Feb. 6. Jiaolong completed a dive in the northwestern Indian Ocean earlier this year in the mission’s first stage. It will also conduct surveys in the Yap Trench and the Mariana Trench in the third stage.
Shooting at Union Banks Underscores Need for Code of Conduct | Asia Maritime Transparency Initiative In what might be an event soon forgotten by the international community, China’s paramilitary forces once again demonstrated their willingness to use force to intimidate other countries and risk escalation. Although the specifics of the incident remain sketchy, reports indicate that on March 27 a speedboat, presumably operated by the China Coast Guard, fired seven times upon the unarmed Princess Johann, a Filipino fishing trawler, while the vessel was operating near Union Banks in the Spratly Islands, which is near Gaven Reef – one of China’s newly built artificial islands. It is unknown whether the incident occurred within the exclusive economic zone of the Philippines, international waters, or the territorial sea of a disputed feature.
The U.S.-China trade agreement—a huge deal for China | Brookings Institution U.S. recognition of the importance of the OBOR initiative will reinforce a perception that the United States is giving China space to exercise greater regional leadership. This outcome seems to be the result of a lack of a coherent economic strategy for Asia and the administration’s economic nationalist agenda.
Why China is splashing cash around in the Pacific-Newsroom Chinese intentions in the Pacific Islands go beyond generosity for new buildings. So deep are China’s pockets and so active its diplomats and development funders, the trend is again the focus of a think tank report, this time from the Australian Strategic Policy Institute. Crowded and Complex, the changing geopolitics of the South Pacific, made headlines a fortnight ago when it suggested the flow of no-strings-attached aid money from China could destabilise the neighbourhood.
Hong Kong, Macao And Taiwan
CY Leung accused of colluding with pro-Beijing lawmaker to revise scope of UGL payout investigation | Hong Kong Free Press A document on a select committee investigation into Australian firm UGL’s HK$50 million payment to Leung was seen by HKFP. It was submitted by Pro-Beijing DAB party lawmaker Holden Chow Ho-ding to the Legislative Council’s secretariat. The document contains at least 34 edits made on April 21 and 22 by a user named “CEO-CE,” which stands for the Chief Executive’s Office-Chief Executive. The committee discovered the document’s edit history at a closed door meeting on Monday.
Hong Kong police seek mastermind behind attack on top executive of Macau casino junket operator | South China Morning Post Hong Kong resident, Lo, 37, is chief investment officer with Suncity Group, one of the biggest organisers of VIP gaming in the former Portuguese enclave. He is also an executive director of Hong Kong-listed Sun Century Group . Suncity hit the headlines last month when a parliamentary hearing in Manila – probing how part of the US$81 million stolen from the account of Bangladesh’s central bank at the Federal Reserve Bank of New York last February ended up in the Philippines – heard that some of the money was received by Suncity founder and current chairman Alvin Chau Cheok-wa.
Tech And Media
Chinese City Rides in Tandem With Bike-Sharing Companies to Punish Unruly Cyclists – Caixin Global $$ Nanjing is pushing back against the flood of often-unruly shared-bike riders who have taken over its streets, as the city toughens punishments for traffic violators and works with rental companies to track down offenders who flee police. Nanjing is believed to be the first city in China to levy such heavy punishments for rule-defying cyclists, according to the official Xinhua News Agency.
Catching That Flying Pig: From Shared Bikes to (Over)shared Power Banks| China Buzz Report – Elephant Room: Make China Relatable At least 15 startups in China have joined in the competition for the growing domestic power bank rental services. From March 31 to April 10, within 10 days, power bank sharing companies has received about 300 million yuan (USD 44 million) of funding from over 20 agencies. Investors include some of the most reputable Chinese VCs such as IDG and Yuan Jing Capital, as well as well-known individual angel investors.
China state firms set up 150 billion yuan fund to invest in new technologies: Xinhua State-owned China Aerospace Science and Technology Corporation (CASC) has teamed up with other government-owned companies for a 150 billion yuan ($21.78 billion) fund to invest in new technologies, the official Xinhua news agency said on Tuesday.
China requires real-name registration for civilian drones – Xinhua | China will require civilian drones weighing more than 250 grams to be registered under real names starting from June 1 to improve civil aviation safety, the country’s civil aviation regulator announced Tuesday.
Meituan rebuffs rumors of Tencent withdrawing from funding round – TechNode Chinese O2O giant Meituan-Dianping has denied a recent media report that its major shareholder Tencent has withdrawn from its new round of financing which is said to be underway, claiming that the statement is erroneous and that the company as a whole has broken even.
Smartphone maker Coolpad rescinds contracts with hundreds of new graduates-ECNS Chinese smartphone maker Coolpad Group Ltd has confirmed cancelling employment agreements with hundreds of new graduates amid what it calls business restructuring, a potential sign of its largest shareholder LeEco’s financial woes.
Why App Aggregators Are Betting Big on India-Sixth Tone Mobile apps developed in China have also found a passage to India, including Android-based web browser UC Browser, which lays claim to 43 percent of India’s browser market, and Cheetah Mobile’s Security AppLock antivirus, India’s eighth most popular app in 2016. Now, these internet giants, alongside lesser-known breakthrough firms, are heading in droves into the development of content and news aggregation apps
Actor’s Death Sparks Self-Imposed Industry Blacklist Against Drunk Driving Violators | the Beijinger Actor Liu Shuo succumbed to his injuries after he drove his car into a guardrail in Hengdian, Zhejiang in the early hours of April 29. A test of his blood revealed Liu had been driving with a blood alcohol level of 230mg/100ml.
Society, Art, Sports, Culture And History
Footballer Ezequiel Lavezzi apologises over ‘racist’ photo – BBC News Ezequiel Lavezzi was photographed pulling the corner of his eyes in pictures taken for the Chinese Super League side Hebei China Fortune. The club has since said they were meant to be “light-hearted” and “wacky”. But instead they have caused huge offence in China, with people accusing him of racism.
Energy, Environment, Science And Health
Chinese appetite for totoaba fish bladder kills off rare porpoise | Environment | The Guardian Only 30 vaquita are left in Gulf of California as pirate fishermen net them when fishing for highly valued totoaba maws
Big pharma hopes rule change will ease China sales pain-FT $$ China in February added 130 new compounds to the roughly 1,200 eligible for reimbursement. The update was heralded by multinationals — nearly all of which had at least new two drugs that became eligible — as a way to boost the reach of their products in China. Sellers of branded drugs tend to receive reimbursement priority over Chinese generics, which have faced questions about quality. But joining the covered list comes with price pressure. To gain placement on the updated list, GSK slashed the price of its hepatitis drug Viread in China by two-thirds last year, and AstraZeneca halved the price of cancer drug Iressa, leading to 16 per cent decline in sales values.
First-Ever Overseas Campus by a Chinese University Taps Into Belt and Road Opportunities – Caixin Global Construction at the first-ever overseas campus built by a Chinese university, Xiamen University Malaysia, is nearing its halfway mark. The school says it has tapped into opportunities created under the Belt and Road Initiative, and had enrolled nearly 2,000 students by the end of April.
Is Beijing Getting Scared of Homeschooled Confucian Activists?–Sam Crane–Foreign Policy In February, the country’s Ministry of Education issued a notice aimed at reigning in one aspect of the multivalent Confucian revival: private schools that emphasize classical philosophical texts and practices. Although specific mention of sishu — traditional schools — does not appear until the notice’s fifth subheading, a follow up article in state-owned Global Times makes the announcement’s intent clear: “As parents are increasingly turning to traditional Chinese methods to educate their children, local education departments have been told to pay close attention to private schools that use these methods, known as sishu.”
Jobs And Events
Leaders Speak: PACOM Commanders | National Committee on United States – China Relations May 23, 2017 4:30pm to 6:30pm EDT, NYC and Live-stream
If you like Sinocism please spread the word using this link.