Nov 10, 2017

Axios China

By Bethany Allen-Ebrahimian
Bethany Allen-Ebrahimian

Good morning, and welcome to the first issue of the weekly Axios China newsletter. I am so excited to have moved the free weekly Sinocism China Newsletter to the awesome Axios platform. Please send me comments and feedback by replying to this email or contacting me at bill.bishop@axios.com or signal +13012460858.

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1. Trump in Beijing: Smiles mask growing tensions

President Trump has finished his "state visit plus" to China. General Secretary Xi Jinping, now the most powerful Chinese leader in decades, put on a masterful show of pomp and flattery, including the first dinner in the Forbidden City for a foreign leader since 1949. Trump returned the flattery, as you would expect a guest to do, and even updated his Twitter cover photo with a pic with Xi.

Our thought bubble: Pomp and flattery aside, it is not so clear that Xi played Trump. The administration has a good team of China people. Trump may return to the U.S. and, barring a real breakthrough over the North Korea issue, begin rolling out a tougher policy towards China, especially on trade. Trump has been consistent for decades in his criticism of China and its trade practices, so the last 10 months of relative calm in the U.S.-China relationship seem more an anomaly than the status quo.

The leaders made a big show of announcing $250 billion in deals, but some, including Boeing's $37 billion plane order, were repackaged from deals already announced, while others are MOUs that may never come to fruition. The Chinese are always happy to announce big deals during presidential visits as they are flashy, often non-binding, and do nothing to address the structural barriers.

What we're hearing: Sources told me before the trip that the administration's approach to the structural issues was going to be "you know what you need to do" rather than a set of specific asks. Trump delivered that message in his private meetings, and in his public comments on the trade deficit he credited the Chinese and blamed his predecessors.

Read my full story here.

2. Chinese Communist Party propaganda has quite the Facebook presence

Facebook is under fire for Russian manipulation of the platform around the 2016 U.S. election. So far there are no signs China has used the platform as nefariously but the NYT reports that Communist Party external propaganda organizations are quite active on Facebook.

  • "As if to demonstrate the platform's effectiveness, outside its borders China uses it to spread state-produced propaganda around the world, including the United States. So much do China's government and companies value Facebook that the country is Facebook's biggest advertising market in Asia, even as it is the only major country in the region that blocks the social network…"
  • "Each quarter China's government, through its state media agencies, spends hundreds of thousands of dollars to buy Facebook ads, according to a person with knowledge of those deals, who was unauthorized to talk publicly about the company's revenue streams," according to the NYT.

Thought bubble: China's "cybercrats" look at how "hostile foreign forces," to use their term, manipulated American social media platforms and are even more confident that their approach to information control and censorship is correct.

3. Chinese official media attacks U.S. media for "fake news"

The Global Times, a nationalist tabloid affiliated with the People's Daily, argues that generally the Chinese public holds a positive attitude toward the Trump.

Yes, but: The taboid says this attitude was not easy to come by.

  • "[T]he initial impression of Trump was completely led by U.S. media reports. These absurd reports deeply influenced Chinese public opinion. It wasn't until his election victory that the Chinese public realized they had been cheated by the American media."
  • "Many leading US media outlets are now discredited among the Chinese public, partly because of their fake reports during the elections and subjective opposition against Trump," The Global Times writes.

Irony alert: Most leading U.S. media outlets are blocked in China so few Chinese can actually read them.

4. Trump and Xi articulate dueling visions at the APEC Summit

Trump and Xi both addressed the summit in Da Nang, Vietnam, on Friday. Here's a glimpse of their dueling comments:

Xi:

  • "Over the last few decades, economic globalization has contributed significantly to global growth. Indeed, it has become an irreversible historical trend."
  • "In pursuing economic globalization, we should make it more open, more inclusive, more balanced, more equitable and more beneficial to all."
  • "We should continue to foster an open economy that benefits all. Openness brings progress while self-seclusion leaves one behind."
  • "China will not slow its steps in opening up itself. We will work together with other countries to create new drivers of common development through the launching of the 'Belt and Road' Initiative."

Trump:

  • "We are not going to let the United States be taken advantage of anymore. I am always going to put America first the same way that I expect all of you in this room to put your countries first."
  • "I will make bilateral trade agreements with any Indo-Pacific nation that wants to be our partner and that will abide by the principles of fair and reciprocal trade."
  • "But for this -- and I call it the Indo-Pacific dream -- if it's going to be realized, we must ensure that all play by the rules, which they do not right now. Those who do will be our closest economic partners. Those who do not can be certain that the United States will no longer turn a blind eye to violations, cheating, or economic aggression. Those days are over."

Winner: Trump jettisoned the Trans Pacific Partnership soon after taking office. China for years has been pushing the Regional Comprehensive Economic Partnership (RCEP). RCEP is getting much more traction in the absence of TPP.

One perspective: Ian Bremmer, president of the Eurasia Group, tweeted last night: "Every foreign leader I've spoken with at #APEC thinks Trump presidency has been enormous gift for the Chinese. Every single one."

Go deeper: Antony J. Blinken, a deputy secretary of state during the Obama administration, argues in a New York Times op-ed this week that Trump Is Ceding Global Leadership to China.

5. China deals this week

Who says censorship is bad for business? There were several huge deals this week:

  • Beijing Bytedance Technology, operator of personalized news service Toutiao, is paying nearly $1 billion to buy Musical.ly, the Shanghai-based company behind the tween and teen focused app Music.ly, Bloomberg reports.
  • Search engine Sogou "Search Dog" went public in New York on Thursday, raising $585 million at a $5 billion valuation, per WSJ.
  • Tencent listed its online literature site China Literature in Hong Kong. At the end of the first day of trading China Literature was worth $12 billion, per South China Morning Post.
  • Tencent now owns a 10% stake in Snapchat, per an SEC filing this week.

Sound smarter: The total market capitalization of all the Chinese internet firms is well over $1 trillion, with two companies — Tencent and Alibaba — valued at around $470 billion each.

6. Saturday is the “Singles' Day” online shopping frenzy in China

Alibaba first created the 11.11 "Singles' Day" shopping event in 2009.

The numbers: In 2016, Alibaba generated $18 billion in gross merchandise volume on that one day. Citigroup estimates sales this year may hit 158 billion RMB ($24 billion). Amazon sold about $1 billion of merchandise on its most recent "Prime Day" event and it dwarfs U.S. holiday shopping:

  • "More merchandise is sold in the 24 hours of Singles' Day than during the entire five-day U.S. holiday-buying spree that begins on Thanksgiving, runs through Black Friday and ends on Cyber Monday," Bloomberg Businessweek reports.

Other Chinese firms have joined in but Alibaba dominates the day, and the company has turned the launch party into a gala event with global stars, including Pharrell Williams this year.

The details: "This year, over 140,000 brands will participate and offer promotions on 15 million-plus product listings, including more than 60,000 international brands engaging with the more than half-billion Chinese consumers that will be visiting Alibaba's platforms," Alibaba says via Alizila.

7. UCLA basketball players meet China’s criminal justice system

UCLA and Georgia Tech men's basketball teams are in China for the November 11 Pac-12 China basketball game.

What's happening: Three UCLA players — LiAngelo Ball (brother of LA Lakers rookie Lonzo Ball and son of LaVar Ball), Cody Riley and Jalen Hill — were arrested on suspicion of shoplifting sunglasses from a Louis Vuitton store in Hangzhou, USA Today reports.

Where it stands: They may get off lightly, the USA Today says:

  • "Jerome Cohen, the faculty director of New York University's U.S.-Asia Law Institute, said that if Ball and his teammates have been allowed to return to their hotel, it is "a very good sign."
  • "This shows they're getting special treatment," Cohen said. "Normally, the Chinese do not give bail, certainly not this early in a case that they're going to prosecute."

Quick take: China is basketball crazy and Alibaba Group, headquartered in Hangzhou, recently acquired the China broadcast rights to Pac-12 Sports, as well as the sponsorship of the Pac-12 China basketball game. If anyone has pull with the local Hangzhou police, it is Alibaba.

Don't forget: Alibaba vice-chairman Joe Tsai recently bought 49% of the Brooklyn Nets, with an option to buy the rest, per Bloomberg.

8. China is on the hunt for aliens

The new issue of The Atlantic takes us to China's new radio telescope, the world's largest and nearly twice the size of America's one Arecibo.

Buzz: FAST, the 500-meter aperture spherical telescope, was designed specifically to search for extraterrestrial intelligence (SETI). Congress defunded U.S. SETI research in 1993.

The Atlantic says the new telescope is part of a shift in China's approach to science as it aspires to superpower status:

  • "China has largely focused on the applied sciences. It built the world's fastest supercomputer, spent heavily on medical research, and planted a 'great green wall' of forests in its northwest as a last-ditch effort to halt the Gobi Desert's spread. Now China is bringing its immense resources to bear on the fundamental sciences..."
  • "The country plans to build an atom smasher that will conjure thousands of 'god particles' out of the ether, in the same time it took CERN's Large Hadron Collider to strain out a handful. It is also eyeing Mars. In the technopoetic idiom of the 21st century, nothing would symbolize China's rise like a high-definition shot of a Chinese astronaut setting foot on the red planet. Nothing except, perhaps, first contact," The Atlantic writes.

An alien idea: Some day "take me to your leader" may mean the Chinese Communist Party general secretary, not the American president…

Bethany Allen-Ebrahimian