Feb 22, 2019

Axios China

The U.S.-China trade talks have been extended through the weekend (more below).

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1 big thing: U.S.-China trade talks are extended

Chinese Vice Premier Liu He (center) with U.S. Trade Representative Robert Lighthizer (right) and Treasury Secretary Steven Mnuchin (left) at Feb. 21 trade talks in D.C. Photo: Liu Jie/Xinhua/via Getty Images

The latest round of U.S.-China talks will continue for another two days.

What's happening, from AP:

President Donald Trump says he will consider delaying a March 2 deadline to reach a trade deal with Beijing before he would escalate his tariffs on $200 billion in Chinese imports.
Trump told reporters that he would “certainly consider” an extension if trade talks are going well. He said that talks between China and the United States in Washington will be extended through this weekend to give the countries more time to reach a breakthrough in their trade dispute.

Details: According to various reports, the two sides reached a deal on currency stability, the Chinese agreed to buy more U.S. goods, and Trump and Chinese President Xi Jinping are likely to meet at Mar-a-Lago in late March.

Yes, but: There remain significant unresolved issues, as Bloomberg writes...

Trade Representative Robert Lighthizer, who is leading talks for the White House, said the two sides have made progress on structural issues related to the Chinese economy but still have major hurdles to clear.

My thought bubble: It sounds like the easy wins have been made (they were there for the taking, for a long time). The Chinese have resisted significant concessions and it's not clear what leverage the American president wants to use before March 1 to convince them to move much more.

Go deeper:

2. Trump puts Huawei into the negotiations

Meanwhile, CNBC reports that when asked if dropping the criminal charges against Huawei would be part of the deal during the Oval Office meeting with Chinese Vice Premier Liu He, Trump said he'll be discussing the issue with U.S. attorneys and attorney general in the coming weeks.

My thought bubble: In one statement, the president has made clear to the Chinese that he can intervene in U.S. criminal matters, has shown that the U.S. judiciary is not really independent, and has possibly undermined the U.S. government's campaign (see next item) to block Huawei from 5G networks around the world.

Chalk up a win...for China.

3. Allies question U.S. hardline on Huawei

A billboard for Huawei hangs at Berlin Hauptbahnhof railway station on Jan. 24. Photo: Sean Gallup/Getty Images

The U.S. campaign to prevent key allies from using Huawei equipment in 5G networks may be floundering.

What's happening: In an interview Thursday, Secretary of State Mike Pompeo made the U.S. position clear...

'"[C]ountries [must] understand the risk of putting this Huawei technology into their IT systems. We can’t forget these systems were designed by — with the express work alongside the Chinese PLA, their military in China. They are creating a real risk for these countries and their systems, the security of their people..."
"If a country adopts this and puts it in some of their critical information systems, we won’t be able to share information with them, we won’t be able to work alongside them. In some cases, there’s risk we won’t even be able to co-locate American resources, an American embassy or an American military outpost."

But, but, but: The U.K. and Germany appear to be among the U.S. allies pushing back on a complete ban of Huawei.

In the U.K., the National Cyber Security Centre (NCSC) has determined that there are ways to limit the risks from using Huawei in 5G networks, FT reports. And, on Wednesday, the NCSC published a long blog post explaining how they secure the U.K.'s telecom networks while clearly not ruling out Huawei for 5G...

How Huawei (and other vendors) are used in the UK’s 5G build out will be determined by the government's telecoms supply chain review, which is gathering evidence at the moment and will report to ministers in spring. That review is the only policy vehicle for making decisions on how future telecoms networks in the UK will be built and run, in line with strong security principles.

Germany has also not ruled out Huawei, according to the Wall Street Journal...

The German government is leaning toward letting Huawei Technologies Co. participate in building the nation’s high-speed internet infrastructure despite U.S. warnings about the risks posed by the Chinese tech giant, according to senior German officials.

India doesn't seem to be swayed by U.S. arguments either, per WSJ...

Policy makers and telecommunications firms here are so far largely unpersuaded by U.S. warnings ... according to more than a dozen government officials and industry executives. Many argue that any such risk is outweighed by Huawei’s cut-rate prices and technological prowess...
While India’s 5G development is still in its infancy, the heft of the Indian market means the direction the South Asian country takes could make or break U.S. efforts to thwart Chinese influence in other nations that have yet to choose a side, analysts say. For years, many officials assumed India would stay in the U.S. corner given its own longtime rivalry with China.

Why it matters: The U.S. is expending significant effort and prestige to block Huawei from 5G networks but so far looks to be less than successful. The U.K., New Zealand, Australia, Canada and the U.S. make up the "Five Eyes" intelligence sharing alliance.

My thought bubble: Will the U.S. really stop sharing information with any of the members who have Huawei gear in their networks? China would be ecstatic to see that alliance fracture.

Go deeper:

4. U.S. DNA expertise helps China crackdown

An Uighur woman holding the Chinese flag. Photo: Guillaume Payen/SOPA Images/LightRocket via Getty Images

From Mike Allen's indispensable Axios AM newsletter (sign up here) ...

"Chinese authorities turned to a Massachusetts company and a prominent Yale researcher as they built an enormous system of surveillance and control," the N.Y. Times Sui-Lee Wee reports.

Details, per NYT:

  • "China wants to make the country’s Uighurs, a predominantly Muslim ethnic group, more subservient to the Communist Party."
  • "Collecting genetic material is a key part of China’s campaign ... [A] DNA database could be used to chase down any Uighurs who resist conforming."
  • "[S]cientists affiliated with China’s police used equipment made by [Massachusetts-based] Thermo Fisher [and] relied on genetic material from people around the world that was provided by [Yale geneticist] Kenneth Kidd."

Go deeper:

5. CRISPR babies may have had brains altered

The gene-editing scandal from Chinese scientist He Jiankui's genetic modification on the embryos of twin girls could have another twist.

What's new: Antonio Regalado reports in the MIT Technology Review that Chinese scientist He's experiment may have enhanced their ability to learn and form memories. Per Tech Review...

The goal was to make the girls immune to infection by HIV, the virus that causes AIDS. Now, new research shows that the same alteration introduced into the girls’ DNA, to a gene called CCR5, not only makes mice smarter but also improves human brain recovery after stroke, and could be linked to greater success in school.
“The answer is likely yes, it did affect their brains,” says Alcino J. Silva, a neurobiologist at the University of California, Los Angeles. Silva’s lab has been uncovering a major new role for the CCR5 gene in memory formation and the brain’s ability to form new connections. 

The big picture: Silva tells Tech Review he's worried about the desire for designer babies...

Silva says because of his research, he sometimes interacts with figures in Silicon Valley and elsewhere who have, in his opinion, an unhealthy interest in designer babies with better brains. That’s why, when the birth of the twins became public on November 25, Silva says he immediately wondered if it had been an attempt at this kind of alteration.
“I suddenly realized — Oh, holy shit, they are really serious about this bullshit,” says Silva. “My reaction was visceral repulsion and sadness.”

Read more here.

6. Chinese hackers undeterred by DOJ

Photo: SOPA Images/Getty Images

By Joe Uchill, author of the Axios Codebook newsletter (sign up here)...

A landmark year of Department of Justice actions against China did not immediately diminish Chinese hacking, according to CrowdStrike VP of intelligence Adam Meyers, who spoke to Codebook in advance of the firm's new global threats report.

Why it matters: In the past year, the DOJ charged several Chinese agents with stealing intellectual property both in person and through digital means.

  • Stealing intellectual property is one of the primary reasons China is involved in hacking — and deterring China is a key reason the DOJ pursues these charges.

What they're saying: "It hasn't had an impact with China other than to cause their operators to be more careful," Meyers said.

Contrast that with Iran. After an Iranian espionage group was charged in 2018, "those guys disappeared," he said.

The CrowdStrike report compares how quickly different nations' hackers can "break out" of one account to infect the broader network. Russian hackers can complete the task in under 20 minutes, while Chinese hackers take an average 4 hours.

Read more of Joe's story here.

My thought bubble: This is entirely expected. In the last year Xi has repeatedly stressed the need to control core technologies and become increasingly self-reliant, and there'ss no way China can do that on its own in the near-term, so acquiring those capabilities by any means possible is the obvious path.

7. 1 big read: World’s biggest building and China's economy

Simon Rabinovitch has a 6,000 word piece in the latest Economist using the New Century Global Centre in Chengdu as a metaphor for China's economy:

The world’s biggest building got off to a bad start. On the eve of its opening, Deng Hong, the man who built the mall-and-office complex, disappeared...
Today, more than five years on, the story has taken a series of surprising turns. For one, the building is not a disaster. During the summer, the waterpark is crowded. The mall has come to life, a testament to the rise of the middle class. The offices are a cauldron of activity: 30,000 people work there in every industry imaginable, from app design to veterinary care. Mr Deng has been released and is back in business, declaring last summer that he had a clean slate.
A triumphant return? Not quite. Mr Deng’s freedom is marred by the fact that he no longer owns the centre but is now an employee. It was bought by an arm of the state — a transaction that regulators are probing for financial irregularities.

Go deeper: Read the whole article here.

8. Worthy of your time

Dim Sums"Document No. 1" Worries About Supply of Farm Products

The New York Times — Family of American Imprisoned on Spy Charge in China Appeals for Help

RUSI — China–UK Relations: Where to Draw the Border Between Influence and Interference?

Council on Foreign Relations — The Future of U.S.-China Relations

Texas National Security Review — After the Responsible Stakeholder, What? Debating America’s China Strategy

Charles W. Boustany and Aaron L. Friedberg — Answering China's Economic Challenge: Preserving Power, Enhancing Prosperity

The Guardian — Chau Chak Wing wins defamation case against Sydney Morning Herald

South China Morning Post — Shock confession of China’s whistle-blower judge: It was me

Sixth Tone — Why China Is Reactivating Its ‘Work-Unit People’

Bloomberg Big Brother Billionaires Get Rich as China Watches Everyone

The Washington Post — China and Russia have deep financial ties to Venezuela. Here’s what’s at stake

New America — Translation: Key Chinese Think Tank's "AI Security White Paper"

Caixin — Popular WeChat Account Shuts Down After ‘Endangering Social Stability’

Chinarrative When Midnight Homicide Strikes, Cup Noodles Must Wait

This week's issues of my Sinocism China Newsletter