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The Year of the Pig begins on Feb. 5. The official holiday lasts February 4–10 and the country will basically shut down. The Axios China newsletter will be off next week, back Friday the 15th.

If you want a daily and deeper look at China, please check out my daily Sinocism China Newsletter, now with a 20% discount for Axios readers. Plus, follow me on Twitter @niubi.

1 big thing: U.S.-China trade talks grind forward

Illustration: Lazaro Gamio/Axios

The U.S.-China trade talks this week were constructive, though as expected there were no big breakthroughs, sources tell me.

What's next: The talks appear to have led to these two noteworthy outcomes...

  1. Soon after the Lunar Year holiday, U.S. Trade Representative Robert Lighthizer will lead a delegation to China to continue the discussions.
  2. President Trump and Chinese President Xi Jinping are likely to meet later this month when Trump is expected to travel to Asia for the second summit with North Korean leader Kim Jong-un.

In a meeting in the Oval office, Vice Premier Liu He delivered an artful letter from Xi that Trump called "beautiful." Among the highlights of Xi's letter, per the White House transcript:

As I often say, I feel we have known each other for a long time, ever since we first met.  I cherish the good working relations and personal friendship with you.  I enjoy our meetings and phone calls in which we could talk about anything.  It falls to us to work together and accomplish things meaningful for the people of our two countries and the world at large.

My thought bubble: Of course the Chinese want another Trump-Xi meeting. They know they can not trust any agreement that is not made directly with the U.S. president, and they believe that if they can get a face-to-face meeting with Trump, they will probably end up with a more favorable deal for China.

  • As I wrote in last week's newsletter, this will continue to be a grind, but I still believe Xi is very motivated to make a deal as the trade war is one more risk he does not want right now.
  • More importantly, I hear he is very concerned about the push from some U.S. officials towards "decoupling" and so views a deal as a way to blunt those forces even as the U.S.-China competition heats up across multiple dimensions.

The big question: When they meet, will Xi make a last-minute request to release Meng Wanzhou and settle the Huawei indictments with a fine? It worked for Xi in the ZTE debacle.

Go deeper:

  • Read the White House's statement regarding the China talks.
  • Check out the official Xinhua readout on those same talks.
2. Top prize for Chinese quantum researchers

34 Chinese physicists have won the 2018 Newcomb Cleveland Prize from the American Association for the Advancement of Science (AAAS) for quantum research that could become the foundation of a next-generation internet.

Details: AAAS explains...

This year’s winning paper describes an exponential increase in the distance at which particles can remain in a mysterious state called “quantum entanglement,” laying the groundwork for ultra-secure communication networks of the future...
In their June 16, 2017 Science paper, a group led by Jian-Wei Pan, physicist at the University of Science and Technology of China in Shanghai, proved the viability of a new technique that minimizes particle degradation. Pan and his colleagues used a satellite to send photon pairs through the near-vacuum of space, successfully measuring the quantum keys at Tibetan receiving stations 1,203 kilometers apart. The research shows that a network of satellites could one day form the infrastructure of a quantum internet

Why it matters, from one of the members of the selection committee:

“Secure communication is of crucial importance in the modern world,” said Jeremy Berg,editor-in-chief of Science and chair of the Newcomb Cleveland Prize Selection Committee. “In principle, methods based on the phenomenon of quantum entanglement — about which Einstein was very skeptical, referring to it as ‘spooky action at a distance’ — represent solutions to the problem of perfectly secure communication.”
“However, many challenges remain in converting these ‘in principle’ methods into practice,” Berg added. “The Newcomb Cleveland Prize winning paper presents a substantial step in addressing these challenges, demonstrating quantum communication over very long distances.”

Go deeper:

3. China's relaxed rules may usher in EV and AV era

Illustration: Aïda Amer/Axios

Professor John Paul Helveston writes for Axios Expert Voices ... Tesla recently began construction on its first gigafactory in China, suggesting that foreign automakers may be eyeing new opportunities in China.

  • This is due to the country's decision to dismantle its requirement that foreign automakers create joint ventures with Chinese firms to make and sell vehicles there.

The big picture: The rule relaxation, which applied to electric vehicles immediately and will cover all vehicles by 2020, could increase incentives for EV and autonomous vehicle companies to develop and sell vehicles there. But removing the joint venture requirement doesn't remove all risks.

Background: The joint venture rule was intended to encourage a technology transfer that would benefit Chinese automakers, but research suggests that it backfired.

  • Foreign automakers have brought older technologies to China and kept advanced vehicle technology development at home, leaving their Chinese partners (often state-owned enterprises) struggling to absorb new technology.
  • Coinciding with the rule change, China recently reduced its import tariffs amid the trade war and rolled out new fuel economy standards and an EV sales mandate, further incentivizing global automakers.

What we’re watching: China’s EV market — the largest in the world — is currently almost entirely comprised of domestic Chinese brands.

  • But following the rule relaxation, foreign firms, including AV startups, may now be inclined to develop advanced vehicle technologies in China, which already has one of the world’s largest AV research and development communities, including tech giants like Baidu, Alibaba and Tencent.

The bottom line: China’s reversal of a decades-old requirement could open the flood gates to foreign investment in advanced vehicle development in China, which could accelerate EV and AV technological progress, but with attendant risks.

Read the full post

Helveston is an assistant professor in engineering management and systems engineering at George Washington University

4. Electric vehicle software update fail

Speaking of EVs, a U.S.-listed Chinese EV manufacturer called Nio had an embarrassing problem earlier this week on one of Beijing's busiest roads. South China Morning Post reports:

Nio, which markets itself as a challenger to Tesla, confirmed the incident on its Weibo account on Tuesday, claiming the driver “accidentally made a series of operations that activated the system update” during a traffic jam on Changan Avenue.
The car “went dark to start a system [update] that lasted more than an hour”, according to a message with a screenshot posted by the Nio employee on social media...
“So there we were, parked in Changan Avenue, motionless yet bold as brass. Police officers came, one group after another, yet we could not even wind the window down,” the Nio rep’s Weibo post said.

Quick take: One lesson, I guess, is if you want to update your car's OS you should first roll the windows down.

5. The Year of the Pig

A celebration of the coming Chinese New Year 2019 in Greece. Photo: Helen Paroglou/ SOPA Images/LightRocket via Getty Images

This upcoming Year of the Pig is the 己亥 (ji3hai4) year, or the 36th year in the 60-year sexagenary cycle. Per Wikipedia, this is:

A cycle of sixty terms used for reckoning time in China and the rest of the East Asian cultural sphere. It appears as a means of recording days in the first Chinese written texts, the Shang oracle bones of the late second millennium BC. Its use to record years began around the middle of the 3rd century BC...
This traditional method of numbering days and years no longer has any significant role in modern Chinese time-keeping or the official calendar. However, the sexagenary cycle is used in the names of many historical events, such as the Chinese Xinhai Revolution, the Japanese Boshin War, and the Korean Imjin War. It also continues to have a role in contemporary Chinese astrology and fortune telling

If you were born in the year of the pig this coming lunar year is your 本命年 (ben3ming4nian2, or year of your zodiac sign). Those of you who are superstitious may want to wear something red every day to ward off the bad luck that many believe abounds in your zodiac year.

Chinesenewyear.net has more on the zodiac Pig:

The Pig is the twelfth of all zodiac animals. According to one myth, the Jade Emperor said the order would be decided by the order in which they arrived to his party. Pig was late because he overslept. Another story says that a wolf destroyed his house. He had to rebuild his home before he could set off. When he arrived, he was the last one and could only take twelfth place.
The Pig is also associated with the Earthly Branch... and the hours 9–11 in the night. In terms of yin and yang, the Pig is yin. In Chinese culture, pigs are the symbol of wealth.

Happy Year of the Pig! 新年快乐,万事如意!

Go deeper:

6. One satellite thing

China Great Wall Industry Corp. signed an agreement with Satellogic to launch 90 commercial nano-satellites or micro-satellites by the end of 2020, via 5 or 6 rocket flights, Spaceflight Now reports.

Why it matters: This is "one of China's biggest wins," as it's the largest single deal in more than 20 years for China's launch industry in the international commercial market, per Spaceflight Now.

Go deeper: The state of the space race in 1 chart (Axios)

7. Worthy of your time

China Media Project — PSC Converges for Media Convergence

ABC News Australia — Yang Hengjun: Controversy surrounds detained Australian-Chinese writer's relations with Beijing

Caixin — Regulators Spell Out Trading Rules for New High-Tech Board

The Washington Post — Blackwater founder Erik Prince’s new company is building training center in Xinjiang

Foreign Policy — Xi’s China Is Steamrolling Its Own History

Foreign Affairs — Reports of Belt and Road’s Death Are Greatly Exaggerated

LARB China Channel — The Besieged Rainbow: Dispatches from an ally of China’s LGBT movement by Xiaoyu Lu

China Narrative Reunited at 40, Three Pals Await First Crush

Hollywood Reporter Chinese Sci-Fi Movie 'The Wandering Earth' to Get U.S. Release

Fairbank Center for Chinese Studies, Harvard University Teaching China Through Black History

Bloomberg — Chinese Heart Drug Valsartan Recall Shows FDA Inspection Limits

China Economic Review — The formation of Taobao villages in China

artnet News — 'The Real Problem Comes From the West': Ai Weiwei Slams the US and Canada for Their Complicity in Tensions With China

This week's issues of my Sinocism China Newsletter, now with a special 20% discount for Axios readers