Oct 19, 2018

Axios China

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1 big thing: "End of engagement"

Courtesy of The Economist

As I've mentioned before, the U.S.-China relationship has evolved into a new level of rivalry, with both sides dropping engagement policies and instead adopting starkly antagonistic tones.

Buzz: The Economist writes that one aspect of this is the general belief that time is more on China's side. Axios' Mike Allen summarized this nicely in his AM newsletter this morning:

"America fears that time is on China’s side," The Economist writes in its cover editorial:

  • "The Chinese economy is growing more than twice as fast as America’s and the state is pouring money into advanced technology, such as artificial intelligence, quantum computing and biotech."
  • "Action that is merely daunting today — to stem the illegal acquisition of intellectual property, say, or to challenge China in the South China Sea — may be impossible tomorrow."
  • Why it matters: "Like it or not, the new norms governing how the superpowers will treat each other are being established now. Once expectations have been set, changing them again will be hard. For the sake of mankind, China and America need to come to a peaceful understanding."

The big picture: In the longer article that accompanies the cover editorial, the magazine describes the shift in American views towards China:

America is undergoing a deep shift in its thinking about China on right and left alike. There is a new consensus that China has a deliberate strategy to push America back and impose its will abroad, and that there needs to be a strong American response.
The coalition takes in conventional free-traders in the White House as well as the zero-summists in Team Trump and the national-security hawks in Congress. Pentagon chiefs and the bosses of spy agencies have framed China as the greatest threat to America’s security, requiring a “whole of government” response.
In civil society, the coalition includes religious conservatives, human-rights advocates, labour unions and old-school protectionists. ...
On October 4th Vice-President Mike Pence hammered the new attitude home in a de facto declaration of cold war.

The other side: The American shift, long overdue some longtime China watchers believe, finds a welcome audience in part of the PRC leadership:

Well-connected scholars and retired officials have shared their concerns with Western contacts about a febrile mood within China’s national-security establishment. They detect genuine excitement over the prospect of a great-power contest in which China is one of the protagonists. This coincides worryingly with the squeezing of public space for discussion.
Scholars are not now supposed to debate foreign policy in the open, and strident nationalists dominate what debate there is. Even the idea of an expensive arms race with America strikes some Chinese experts as a fine plan, given their confidence in the long-run potential of their economy.

The big question: Are you ready for the new era of U.S.-China relations?

2. China sees slowest econ growth since 2009

Photo: Yu Hongchun/VCG via Getty Images

China's economic growth dropped to 6.5% in Q3 — the weakest it's been since the financial crisis, according to the Wall Street Journal.

The big picture: The economy overall is on track to still meet its growth target of 6.5%, WSJ reports, though the drop in numbers could hurt China's ability to negotiate with the U.S. amid the brewing trade war.

The details, per WSJ: The drop was due to growth "in industrial output and consumption."

  • Chinese financial officials released statements Friday seeking to ease investors' concerns, with People’s Bank of China Gov. Yi Gang saying the recent “abnormal fluctuations” in the Chinese stock market don’t reflect the country’s “stable financial system.”

What's next: If growth continues to slow, China is "ready to roll out more pro-growth measures," WSJ reports, doing things like giving banks more money to provide loans and increasing government spending.

Meanwhile, Caixin reports that the combination of slowing GDP growth and the fact the stock markets are deep in bear market territory is making regulators very concerned:

"President Xi’s top economic adviser and the heads of the securities regulator, the combined insurance and banking watchdog and the central bank all released statements urging investors to stay calm as the country’s main stock market neared a four-year low."

Go deeper:

3. Trump and Xi may still meet at G20

The South China Morning Post reported Friday that:

Chinese President Xi Jinping and his US counterpart Donald Trump have tentatively agreed to meet on the sidelines of the G20 leaders’ summit in Buenos Aires next month, according to a source.
An initial date has been set for November 29, the day before the summit formally gets under way, the person said on condition of anonymity.

My thought bubble: I am hearing from various sources that the Chinese side at least is hoping for some sort of Trump-Xi framework deal to cool trade tensions while setting a schedule to come to a detailed agreement.

I am skeptical as this sounds more like the usual Chinese approach to negotiating with the U.S., something the Trump administration has criticized repeatedly.

Plus, as I wrote in last week's newsletter:

  • Even if there's a deal that mitigates some of the short-term tensions, the broader security and strategic issues remain. Vice President Mike Pence's speech [a couple weeks ago] made very clear there are many more problems than just trade in the relationship.
  • The last few months of dealing with the Trump administration have made it clear to the Chinese that the U.S. view towards the PRC has shifted fundamentally and so any trade deal would at best be a useful delaying action to give China time to prepare for much more difficult longer-term relations with the U.S.
4. #MeToo and China's feminist awakening

China's #MeToo movement may be fledgling, but it's starting to rise, according to American author Leta Hong Fincher, who recently authored "Betraying Big Brother: The Feminist Awakening in China."

Why it matters: The U.S. recently had its 1-year-anniversary of the start of #MeToo, but the global momentum of the movement has had mixed results. China — considered one of the most authoritarian regimes resistant to feminist ideologies — is facing a growing number of women coming forward with stories of abuse or injustice, Hong Fincher tells me.

Here are some excerpts from my interview with her...

Why does the Communist Party see activists for women's rights as threats?

"I argue that China’s male leaders see the control of women and their bodies as critical to maintaining their authoritarian rule. The Communist Party reduces women to their roles as reproductive tools for the state, as dutiful wives and baby breeders in the home, to try to boost falling birth rates and prevent social unrest."
"But the feminist movement shows women they have the right to control their own bodies and they should not have to marry or have babies if they don’t want to."
"The Chinese government’s crackdown on feminism is a form of state-level, fragile masculinity, terrified at the prospect of angry women rising up across class boundaries to challenge the government’s political legitimacy."

The #MeToo movement has come to China, but so far no one too powerful seems to have been affected. Why is that, and do you think that might change?

"That the #MeToo movement has already spread so widely across the country is astonishing, given the hostile environment for any kind of social movement. In spite of draconian internet censorship, the lack of press freedoms, and often severe retaliation against prominent #MeToo activists, young women continue to come forward fearlessly to demand change."
"In just one example of the retaliation some activists face, police detained the #MeToo activist and recent graduate of Peking University, Yue Xin, for trying to unionize workers, and she has been missing for over six weeks. It’s possible that some women have already tried to go public about abuse by powerful Communist Party officials but the news has been muzzled so we don’t know about it."

What do you see as the prospects for advancing women's rights and equality on China?

"I am deeply inspired by the bravery and determination of so many young women standing up for their rights. They are taking on the world’s most powerful authoritarian regime, which sees the subjugation of women as critical to its own political survival."
"The backlash against feminism will likely intensify as China’s economic growth slows even further, the workforce shrinks, the population ages, and the battle for Communist Party survival becomes more fraught."
"But I also believe the women’s rights movement is potentially China’s most transformative social movement since 1989 and it will be extremely difficult for the government to wipe it out because it is so popular."

Go deeper:

5. Corruption with Chinese characteristics

Lai Xiaomin, then chairman of China Huarong Asset Management Co., speaking at a 2016 conference. Photo: STR/AFP/Getty Images

Earlier this year the Communist Party placed Lai Xiaomin, then chairman of state-owned China Huarong Asset Management Co., under investigation for disciplinary violations.

What's new: This week Caixin reported on some of the more salacious details of his alleged transgressions, including:

  • He had 3 tons of cash worth 270 million RMB (roughly $39 million) stored at some his more than 100 properties.
  • He had over 100 mistresses.
  • There was 300 million RMB in his mother's bank account.

My thought bubble: While the allegations are impossible to verify independently, Caixin has a pattern of obtaining exclusive, salacious details about a fallen official, especially when that person may be linked to a much larger corruption case involving more senior officials.

Go deeper: Hong Kong stock market analyst and corporate governance activist David Webb has been digging into the web of relationships Huarong has. His post earlier today concludes with a tantalizing thread:

"[T]he connection between the Shanghai Government, its media arm Shanghai United Media, and Shanghai-listed Greenland Holdings Corp Ltd and their Huarong-assisted funding of various HK-listed companies all bear further scrutiny."
6. House Dems denounce China meddling claims

Democrats on several House committees said in a joint statement Wednesday that a Department of Homeland Security briefing last week does not support statements by Trump and Pence that Chinese interference in U.S. elections surpasses that of Russia, Axios' Shannon Vavra reports.

Why it matters: This provides insight into the kinds of information the White House has access to on Chinese interference, which the administration has been publicly discussing since Trump claimed China was meddling in U.S. elections without offering evidence.

The Democrats — Reps. Bennie Thompson, Elijah Cummings, Jerrold Nadler, Adam Smith and Robert Brady — claim the White House is "driven by partisan politics" in pushing this narrative forward "rather than the facts."

My thought bubble: So far the Trump administration has not provided evidence of nefarious interference. Meanwhile, Canada and New Zealand are dealing with reports of far more serious interference efforts:

  • The Canada Wenzhou Friendship Society is under investigation for offering cash over WeChat in exchange for voting for certain candidates of Chinese descent, per TheStar.
  • Allegations that a leader of New Zealand's National party tried to hide a NZ $100,000 ($65,900) from a Chinese businessman, according to Newsroom.NZ.
7. U.S. aims to match China's ante

OPIC president Ray Washburne and Ivanka Trump during the CEO Summit of the Americas in Peru. Photo: Manuel Medir via Getty Images

The Atlantic Council's Aubrey Hruby writes for Axios ... Earlier this month, Trump signed the BUILD Act, establishing a new $60 billion development finance agency to invest in less developed countries.

Details: The U.S. International Development Finance Corporation (USIDFC) will replace the Overseas Private Investment Corporation (OPIC), and in doing so will double its funding and enhance its capabilities.

Why it matters: Growing economic competition from China in emerging markets has finally shaken the U.S. out of its complacency toward development finance. With new and more efficient investment capabilities, the USIDFC has the potential to re-establish the U.S. as a global leader in commercial diplomacy.

China has over the past two decades transformed its formerly negligible economic ties to other developing countries.

Meanwhile, OPIC has not innovated or expanded for decades and mainly measured its performance vis-à-vis European development finance entities.

  • Despite consistently returning money to the U.S. Treasury, OPIC has faced criticism, especially from Republicans who view its investment as "corporate welfare," and was initially zeroed out in Trump's 2018 budget.
  • But over the past year, OPIC president Ray Washburne has stressed that an increased focus on development finance is critical to countering China’s "Belt and Road Initiative" and protecting U.S. strategic interests abroad.

The details: The BUILD Act was passed by the House and Senate with broad bipartisan support. By combining OPIC with several funds at the U.S. Agency for International Development, the new USIDFC will streamline U.S. development finance

The bottom line: The USIDFC presents a once-in-a-generation opportunity for the U.S. to double down on its market-driven approach to commercial diplomacy, enhance American competitiveness and advance economic development in emerging markets.

Go deeper: Read her full piece.

8. Google CEO discusses China search engine

Google CEO Sundar Pichai has, for the first time, publicly acknowledged that Google has considered relaunching its search engine in China, earlier this week. He stated that the reason is the company's mission "is to provide information to everyone," Axios' Kia Kokalitcheva reports.

Why it matters: Since leaks of Google's Project Dragonfly, an internal project prototyping a potential search engine for China, the company has faced criticism for wanting to enter a market that would require it play by the government's censorship rules.

Quoted: Pichai, speaking at Wired's 25th anniversary conference Monday, noted that 20% of the world's population lives in China. Though this fits nicely with the company's mission to offer everyone access to information, it's difficult to ignore what it also means — a huge business opportunity for Google. He said:

"The reason we did the internal project — it's been years, we've been out of the market ... We wanted to learn what it would be like if Google was in China ... We'll be able to serve well over 99% of queries and there are many many areas in where we would provide information better than what's available. ..."
"Our mission is to provide information to everyone ... .every time we work on countries across the world ... We're always balancing a set of values. We're providing users access to information, freedom of expression, user privacy, but we also follow the rule of law in every country."

Meanwhile, Bai Tongdong, a professor of philosophy at Fudan University in China and a global professor of law at NYU’s Law School, argues in an op-ed in SCMP that For China, even a censored Google search engine would be better than Baidu:

As a college professor, I find Baidu’s search results on scholarly matters deeply frustrating, because they don’t lead me to the webpages I wish to find. In contrast, Google’s search results are far more useful. Thanks to my part-time employment at New York University’s law school, I can use its virtual private networks (VPN) to access Google, a benefit that I consider more valuable than the extra pay.
And it is not just terrible search results, and the lack of access to useful tools such as Google Books. Baidu’s shameless commercialisation of its search engine has been the subject of controversy. For example, companies could – and maybe still can – bid for the top spots in Baidu’s search results, and users are not warned that these results are the outcome of commercial bidding and not sorted by relevance, as is the practice with Google.
Bonus: Worthy of your time

Bloomberg — Trump's China Battles Give Taiwan Supporters New Influence

Nikkei Asian Review — Beijing sweats over date of Shinzo Abe visit

China Media Project — Mapping Xi Jinping News Thought

What's on Weibo — CCTV Airs Program on Xinjiang's 'Vocational Training Centers': Criticism & Weibo Responses

The Guardian — China’s new diplomacy in Europe has a name: broken porcelain (David Bandurski)

Foreign Affairs — Why a U.S.-Chinese War Could Spiral Out of Control

Mercator Institute for China Studies — Serve the people. Innovation and IT in China’s social development agenda

China Change — Chinese Students at Bard College Offended By Art Exhibit

SCMP — No longer welcome: how, under Trump, the American dream is now out of reach for Chinese immigrants

The Verge — How China rips off the iPhone and reinvents Android

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