Axios China

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January 11, 2019

Happy 2019! It is nice to be back in your inboxes.

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Thanks for reading, and 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, and follow me on Twitter @niubi.

1 big thing: The U.S.-China trade talks

Donald Trump and Xi Jinping

U.S. President Trump and Chinese President Xi Jinping. Photo: Xinhua/Pang Xinglei via Getty Images

The U.S. and China held deputy-level trade talks in Beijing earlier this week. The discussions lasted one day longer than planned and both sides issued vague but mildly positive official statements about the discussions.

The Wall Street Journal has confirmed that Vice Premier Liu He, China's lead negotiator, will come to Washington, D.C. to continue the negotiations:

"Vice Premier Liu He is planning to meet with his U.S. counterparts including U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin for negotiations on Jan. 30 and Jan. 31, according to people briefed on the matter. These people caution that the plan could be delayed by the partial U.S. government shutdown."

My thought bubble: The Chinese do need to make a deal, both because the trade conflict is exacerbating underlying problems in their economy and also because I hear Xi is quite concerned about the possibility of U.S. decoupling from China, especially in technology.

However, the Chinese side can not accede to all US demands without making structural changes that could pose an existential challenge to the Party’s view of how the economic system needs to be structured, so whether or not there is ultimately a deal will come down to how much is enough from the Chinese side to get the President Trump to say “we have a deal.”

The bottom line: I expect that the Chinese offer will fall far short of what U.S. Trade Representative Robert Lighthizer wants, but using a mixture of big purchase commitments, unofficial lobbying, flattery, and headline concessions it will ultimately prove enough for Trump.

2. Huawei's rough start to 2019

This morning we learned that Poland has arrested a Huawei executive and a Polish citizen on suspicion of espionage:

"Polish public broadcaster TVP identified the Huawei employee as the Chinese company’s sales director in Poland, 'Weijing W', also known as Stanislaw Wang.
"'Piotr D' was a former high-ranking officer of Poland’s Internal Security Agency, the report quoted a court document of their arrest as saying.
"The two men were accused of spying against Poland for China but details of the charges were not released."

On Thursday, news broke that that the U.S. government is blocking some of Huawei's exports from its U.S. R&D operations (WSJ):

"The Chinese telecommunications giant has been unable to send home certain technologies from its Silicon Valley research-and-development unit, Futurewei Technologies Inc., after the Commerce Department signaled it wouldn’t renew a Futurewei export license, according to people familiar with the matter and documents reviewed by The Wall Street Journal.
"The department said in a June letter to Futurewei that it intends to deny its application to renew the license, citing national security concerns, according to the documents."

Huawei is coming under increasing suspicion among U.S. allies.

Norway is considering whether to exclude Huawei from building 5G network, justice minister says, citing espionage fears (Reuters):

“We share the same concerns as the United States and Britain and that is espionage on private and state actors in Norway,” Justice Minister Tor Mikkel Wara said in an interview on the sidelines of a business conference.

Sinopsis: Huawei’s Battle for Central Europe (China Digital Times):

An unusually blunt warning by Czech intelligence against the use of Huawei and ZTE products in telecommunications infrastructure was met with similar bluntness from the PRC.

U.S., Israel air concerns over China telecom companies: U.S. official (Reuters)

The administration does not want any obstacles to being able to share sensitive information with the Israelis, the senior official told reporters ahead of the meeting, referring to the concerns about Chinese technology and investment at the port of Haifa. “We specifically put it on the agenda,” the official said.

Go deeper:

3. But Huawei is doing well in developing markets

Bloomberg's Sheridan Prasso spent months investigating the success of Chinese tech firms, including Huawei, in Africa. She writes that China’s Digital Silk Road is looking more like an Iron Curtain

"The first billboard that greets passengers arriving at the airport in Lusaka, before Pepsi's "Welcome to Zambia," is an advertisement for Bank of China. Nearby, a Chinese company is building a sleek terminal. On the road into the capital city, near the office of Chinese telecom company ZTE Corp., another billboard features surveillance cameras made by Hangzhou Hikvision Digital Technology Co. At the national data center built by Huawei Technologies Co., a Chinese man in a bright orange vest walks toward a building that houses government servers.
"This southern African nation, a former British colony rich in copper and cobalt, is spending $1 billion on Chinese-made telecommunications, broadcasting, and surveillance technology. It's all part of China's 'Digital Silk Road'...
"What's playing out in Zambia is part of a larger contest between the U.S. and China for dominance over the future of technology and global influence. Companies from both countries sell tech products around the world, but Chinese businesses are offering a wide range of gear and relatively cheap financing in countries from Zimbabwe to Vietnam. They have an advantage in developing nations such as Zambia, which are looking to modernize their technology infrastructure..." 

Go deeper: Read the whole story here.

What's next: "Digital Iron Curtain" is a term I expect we will starting hearing much more.

4. The dangers of tweeting from China

The PRC security services started a crackdown on PRC citizens using Twitter last year and it is now getting attention in major media.

Last week Washington Post published Twitter in China: Authorities crack down one user at a time and yesterday the New York Times had Twitter users in China face detention and threats in new Beijing crackdown, with some chilling details:

"Interviews with nine Twitter users questioned by the police and a review of a recording of a four-hour interrogation found a similar pattern: The police would produce printouts of tweets and advise users to delete either the specific messages or their entire accounts. Officers would often complain about posts that were critical of the Chinese government or that specifically mentioned Mr. Xi..."
"The police have impressed upon activists that they can see posts outside China’s wall of censorship. After a four-hour grilling of a Twitter user with a small following who had complained in a post about the environment, a police officer offered him some advice. The user, who spoke on the condition of anonymity for fear of further reprisal, recorded the interrogation and provided a copy of the audio.
"'Delete all your tweets, and shut down your account,' the officer said. 'Everything on the internet can be monitored, even the inappropriate comments in WeChat groups,' a reference to a popular Chinese messaging app."

My thought bubble: The Chinese government believes it needs to control discussion of China globally. The PRC authorities can not manage Twitter like they can Chinese Internet firms operating behind the Great Firewall but they have no constraints in cracking down on Chinese Twitter users.

Meanwhile, Chinese Communist Party and State media outlets are very active users of Twitter:

An unreciprocal relationship: The PRC is leveraging Twitter for propaganda purposes while blocking the service inside China and detaining its own citizens for using it. I have often said mastering cognitive dissonance is the key still for trying to understand China but this makes my head hurt...

Go deeper: China Steps up Nationwide Crackdown to Silence Twitter Users

5. The climate stakes of China's Belt and Road initiative

Adapted from a Mercator Institute for China Studies map; Map: Lazaro Gamio/Axios
Adapted from a Mercator Institute for China Studies map; Map: Lazaro Gamio/Axios

Axios' Ben Geman looks at a report on the environmental impact of the BRI:

Yale Environment 360 has a cautionary look at the emissions stakes of China's Belt & Road initiative (BRI), the massive collection of infrastructure projects that spans several continents.

Why it matters: The multi-decade project formally launched in 2013 aims to project China's economic interests through a network of infrastructure projects that include shipping ports, railways and highways, Isabel Hilton, writing for Yale Environment 360, argues: "BRI has the potential to transform economies in China’s partner countries. Yet it could also tip the world into catastrophic climate change."

Where it stands: She notes that the project will "absorb massive amounts of concrete, steel, and chemicals, creating new power stations, mines, roads, railways, airports, and container ports, many in countries with poor environmental oversight."

  • But her biggest focus is on the initiative's connection to Chinese-backed plans to expand coal-fired power construction in other countries — even as it takes steps to curb domestic air pollution and carbon emissions.

The big picture: "China may be pursuing eco-civilization at home, but it urgently needs to address the global risks it is creating in the Belt and Road Initiative," Hilton writes.

Go deeper: The staggering scale of China's Belt and Road initiative

6. How China could dominate science

China "is more than ever consumed by the pursuit of national greatness," The Economist writes in its lead editorial:

  • "China's landing of a spacecraft on the far side of the Moon on January 3rd, a first for any country, was a mark of its soaring ambition."
  • "President Xi Jinping is counting on being able to harness leading-edge research even as the Communist Party tightens its stranglehold on politics."
  • We should be doing this: "Xi talks of science and technology as a national project."

Why it matters: "Amid the growing rivalry between China and America, many in the West fear that he will succeed."

7. Worthy of your time

Ian Johnson - Foreign Affairs - How the State Is Co-Opting Religion in China

The New York Times - China Targets Prominent Uighur Intellectuals to Erase an Ethnic Identity

ChinaFile - Where Did the One Million Figure for Detentions in Xinjiang’s Camps Come From?

Jamestown - Beyond “Debt-Trap Diplomacy”: The Dissemination of PRC State Capitalism

War on the Rocks - The Party Congress Test: A Minimum Standard for Analyzing Beijing’s Intentions

60 Minutes - CBS News - Chinese Spy: How a former CIA officer was caught betraying his country

The Washington Post - Why U.S. universities are shutting down China-funded Confucius Institutes

South China Morning Post - Chinese parents clash with police as they demand answers over children’s vaccine scandal

Israel National News - Shin Bet chief: Chinese influence in Israel is 'dangerous'

China Narrative - NYC Migrant Recalls Fleeting Romance, Brush with Chinatown Underworld

BBC News - A woman's murder in Peking and a literary feud

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