News roundup: Warning of a ‘devastating confrontation’

South China Sea: Tillerson risks ‘devastating confrontation’ with Beijing

Beijing’s backlash to comments made by Rex Tillerson, the prospective secretary of state under the Trump administration, continued on Friday. An editorial in the state-run Global Times belittles Tillerson’s suggestion to cut off China’s access to islands it claims in the South China Sea. The China Daily warns of a “devastating confrontation” if Tillerson carries through on his promises. NPR has a detailed report on the war of words. Meanwhile, the South China Morning Post quotes an analyst at the Chinese Academy of Social Sciences, who says that “China should stay calm and not intensify the situation in the South China Sea just on the basis of that tough talk. After all, the U.S. has not put those hawkish remarks into reality.”

Another issue that could bedevil China-U.S. relations under Trump: Taiwan’s China Post reports that the island’s former National Security Bureau chief Tsai De-sheng “predicted…that U.S. president-elect Donald Trump will ‘play the Taiwan card and the Russia card’ in his Asia-Pacific strategy after assuming office.”

Payment companies ordered to stop earning interest on customer funds

Caixin reports that China’s central bank ordered more than 260 third-party payment companies, including the Alibaba spin-off Alipay and Tencent’s Tenpay, to stop earning interest from money they handle for their customers. The article says that the payment services handle more than 460 billion yuan ($66.3 billion). The funds are temporarily stored in the payment companies’ bank accounts until the transactions are settled; the companies have been earning interest from these deposits but not passing it on to their customers. The central bank said that this “creates the wrong incentives for companies,” leading them to “look for ways to keep client money in their accounts for as long as possible.”

Starting April 17, all payment companies will have to keep 12 to 20 percent of payments they process for their customers in an interest-free account with a designated bank, with the ratio planned to increase to 100 percent. The rules will cut off a major source of income for payment companies.  

Today on The China Project

Science fiction has come a long way in China, from decades of small readership and government suppression to international recognition in the 21st century. As a follow-up to yesterday’s Sinica Podcast with Ken Liu, who translated the first Chinese sci-fi book to receive the prestigious Hugo Award, enjoy The China Project’s introduction to 10 notable sci-fi works published in China in the past decade.

Today, we also begin publishing a special weekly roundup of Trump-China news.

In case you missed it, this week we also published:

• Sidney Rittenberg: Reflections on a lifetime in China
• No captions: The singular photography of Chen Man
• The Garinafins: An excerpt from The Wall of Storms, by Ken Liu

This week’s news roundups are:

• January 9: Trump’s son-in-law has been courting ‘shadowy’ Chinese investor
• January 10: Xi Jinping and China’s richest men to attend Davos
• January 11: Taiwan scrambles jets
• January 12: China smiles at Vietnam while consumers snap up Japanese products

More China stories worth your time are curated below, with the most important ones at the top of each section.

BUSINESS AND TECHNOLOGY:

• Opinion: Trump’s pick on trade could put China in a difficult spot / NYT (paywall)
  U.S. president-elect Donald Trump named Robert Lighthizer, a China critic who served in the Reagan administration, as the new U.S. Trade Representative on January 3. The move “could put China in a difficult spot,” as Lighthizer is known for blaming U.S. trading partners for the problems of working-class Americans and manufacturers. Lighthizer, who previously pushed for “very aggressive” tactics at the World Trade Organization to reduce the U.S. trade deficit with China, said in a testimony to a congressional commission in 2010, “It seems clear that the U.S. manufacturing crisis is related to our trade with China.” Read more about his testimony here.
• China overseas investment spree set to run out of steam / WSJ (paywall)
  After years of robust increases, China’s direct investment overseas in many areas, such as infrastructure and real estate, is likely to decline this year, according to a government think tank. Growth of China’s overseas direct investment, which doesn’t include stocks and bonds, has been increasing at an annualized rate of 35 percent since 2003. However, several factors, including stricter scrutiny of overseas investment and the prospect of a tougher U.S. trade policy, will put downward pressure on outbound investment in 2017.

• China posts worst export fall since 2009 as fears of U.S. trade war loom / Reuters
• China credit growth exceeds estimate as lending remains robust / Bloomberg
• China’s reputation for low-cost manufacturing under attack / The Economist
• The limits of China’s ‘Silk Road’ to Europe / The Diplomat
• China has built the world’s largest bullet-train network / The Economist
• Why China is counting its chickens / CNN
• The rise of Pear Video: Making short news videos trending on Chinese social media / What’s on Weibo

POLITICS AND CURRENT AFFAIRS:

• China, Russia agree on more ‘countermeasures’ against U.S. anti-missile system: Xinhua / Reuters
  For nearly a year now, the U.S. and China have been at odds over an American plan to install a Terminal High Altitude Area Defense (THAAD) system in South Korea. Today, Russia formally announced that it is joining China in opposing the plan and implementing unspecified “countermeasures,” in a statement that characterized U.S. actions as aiming to contain China and Russia.
• China fears sovereignty rows with neighbors may spark ‘patriotic’ protests at home / SCMP
  Since the Tiananmen demonstrations of 1989, China has strictly controlled mass protests in nearly all situations — though local protests are generally allowed, as long as they do not question the legitimacy of the Communist Party or “threaten social stability.” Now the authorities see a new reason for concern: rising nationalism. An official responsible for maintaining domestic stability, not usually the type to be quoted in state media, wrote in the Global Times to single out “sovereignty disputes” as a cause of mass protests to watch out for and nip in the bud. For more on China’s struggles to control burgeoning nationalism at home and online, see this Financial Times article (paywall) from Monday.

• Opinion: Australia needs a new foreign policy. Tillerson’s remarks on China make it urgent / The Guardian
• Death penalty for economic crimes in China faces increased scrutiny / Caixin
• China again arrests prominent pastor on suspicion of embezzlement / Reuters

SOCIETY AND CULTURE:

• China says it will ban abuse of children at internet detox camps / NYT (paywall)
  In order to crack down on abuse at internet detox camps, which sometimes use controversial methods to cure internet addiction, the Legislative Affairs Office of the State Council drafted a law that would ban abusive treatment such as electroshock therapy and “physical punishment.”
• What happens when all of China goes on vacation at once / CNN
  With Chinese New Year starting on January 28, the world’s biggest human migration, known as chunyun, has begun. Over the 40-day period from January 13 to February 21, Chinese authorities anticipate “2.5 billion trips by land, 356 million by rail, 58 million by plane, and 43 million by sea.” Transport networks are likely to set a new record: CNN writes that “the total number of trips is expected to reach 1.2 billion kilometers (745 million miles): the equivalent of eight times the distance from Earth to the Sun or a leisurely rocket ride to Saturn.”

• China billionaires whip up racehorse world / Financial Times (paywall)
• Care facility in China offers help to aging parents who have lost only children / Globe and Mail
• China faces weightlifting ban after three Beijing Olympics gold medalists fail dope tests / SCMP

WEI WATCH:

Keep an eye on what’s buzzing among China’s 700 million social media users.

Internet users divided on new regulations for payment companies / Weibo (in Chinese)

As mentioned above, China’s central bank today released a statement ordering non-bank payment companies such as Alibaba’s Alipay and Tencent’s Tenpay to cease making money by earning interest from their customers’ money. Online commenters are divided on the new rules. Some question why companies like Alipay aren’t allowed to make money from people’s funds when the central bank can. Others say they feel more secure when their money is in the state’s hands.