Blame Canada

Announcement for Access members:

• There are just two more days left to get guaranteed shipping (in the U.S. only) by Christmas on our The China Project Shop!

—Jeremy Goldkorn and team

1. ‘Vile in nature’ — Canada’s arrest of Meng Wanzhou

Today, the bail hearing of Huawei’s chief financial officer Sabrina a.k.a. Cathy Mèng Wǎnzhōu 孟晚舟 continued. She was arrested in Canada last week, at the request of the U.S. Justice Department, apparently in connection with the violation of Iran sanctions. She has cited health concerns — high blood pressure — as a reason she should not be incarcerated.

At the time of this writing, the hearing had not concluded, but the Vancouver Sun has a live blog from the court. Joanna Chiu at The Star Vancouver is also live-tweeting updates.

• “China has launched a series of propaganda tirades and threats against Canada. It is hard to see how those threats will not backfire on Beijing, and it is also interesting to note that so far the the nastiest vitriol has been directed at Canada not the US,” commented (paywall) China-watcher Bill Bishop.

• “Beijing is walking a fine line between defending one of the crown jewels of the country’s tech industry and preventing a nationalist backlash that could derail its ongoing trade talks with Washington,” according to the South China Morning Post. Bishop agrees: “China does want the US-China trade talks to continue and for now at least will not allow the arrest of Meng to derail the negotiations.”

• “China decided to pick a fight with Canada over the arrest of a senior Huawei executive because it wants to avoid further confrontation with the United States as talks to resolve the trade war continue,” says a separate piece in the South China Morning Post.

• “Canada is at risk of retaliation from China, including the arrest of Canadians in the country, said a former ambassador to China,” after Meng’s arrest, reports The Star. Meng’s arrest has already derailed a planned British Columbia trade trip to China.

• Beijing’s ire is rather amusing considering how the Chinese government typically answers questions about people it has detained. Editor of nationalist rag Global Times Hú Xījìn 胡锡进, in a series of tweets (1, 2, 3), said:  

Arresting Meng Wanzhou is bringing terrorism to state and business competition. Piling pressure on a company and the country behind it by detaining a core executive, it is much worse than an ordinary human rights violation.

No business people in the world will espouse the arrest of Meng Wanzhou. It may turn economic and technology competition into competition of arresting people. If it spreads, all entrepreneurs will face risks. Canada and the US could create a horrible new era.

Arresting Meng Wanzhou is a proof of judiciary independence of Canada and the US? My god, is there a more naive, if not more hypocritical conclusion than this?

• “Canada’s misdeeds, which are lawless, unreasonable and callous, have caused serious damage to its relations with China,” said the People’s Daily in a Facebook post. See also People’s Daily growls over Meng arrest on the China Media Project.

• On Saturday, vice foreign minister Lè Yùchéng 乐玉成 “summoned Canadian Ambassador to China John McCallum over Meng’s detention, calling it ‘unreasonable, unconscionable and vile in nature,’” reports the China Daily. Yesterday Le “summoned United States Ambassador to China Terry Branstad on Sunday over the detention of Huawei executive Meng Wanzhou.”

Caviar wishes and champagne dreams

One of the effects of Meng’s arrest has been to shine a spotlight on the privileged lives of people like Meng. This is not the kind of attention the Communist Party and its elite members enjoy.

• Meng has had eight different passports, including Hong Kong passports, regular P.R.C. passports, and a special passport for government officials, according to the Apple Daily (in Chinese). Ordinary Chinese people are not allowed to hold two different passports.

• More than $10 million is the value of two mansions in Vancouver owned by Meng and her husband, says the South China Morning Post.  

Nervous tech execs on both sides of the Pacific  

It’s not only government propaganda organs that are angry: “The last time I saw so many liberal-minded Chinese elites so disappointed by the American government was after the bombing of the Chinese Embassy in Belgrade, Serbia, in 1999, which killed three Chinese nationals,” writes Li Yuan in the New York Times (porous paywall).

Moreover, in China and the U.S., Meng’s arrest has spooked some of the most frequent fliers across the Pacific: “Already, some tech types are reconsidering their travel plans, if not their connections, to the other country.”

Huawei worries in Germany

Thorsten Benner, director of the Global Public Policy Institute in Berlin, writes in Foreign Policy that “Germany is soft on Chinese spying” (porous paywall), adding, “Huawei has deep ties to the Chinese government. Berlin might let it build the country’s next generation of communications infrastructure anyway.”

2. Another crackdown on Christians

The South China Morning Post reports:

About 100 worshippers at an unofficial church in southwestern China were snatched from their homes or from the streets in coordinated raids, which began on Sunday evening.

Chinese authorities targeted members of the Early Rain Covenant Church across various districts of Chengdu, the provincial capital of Sichuan, in what appeared to be an effort to close down one of the country’s most prominent Protestant house churches.

Members’ personal accounts and cell group discussions on social media channels were blocked at around 9pm on Sunday while the church’s telephone line was also cut. The homes of the church’s leaders, including pastor Wáng Yí 王怡, were among those raided.

Journalist, and scholar of religion in contemporary China, Ian Johnson tweeted: “This is really disturbing news — something many have feared for a while now — it looks like the government might finally be cracking down on Early Rain Church, one of the most prominent unregistered churches in China, led by one of the country’s most famous pastors, Wang Yi.”

See also:

• Saving Buddhist statues in Hebei / Bitter Winter
  “After the central government ordered to demolish all religious statues in Wu’an city, local people decided to conceal 500 Buddhist statues in an attempt to save them.”

• Is China reneging on Vatican deal by detaining bishop? / The Atlantic
  “The suspected arbitrary detention of a Vatican-appointed priest last month has reinforced worries that Beijing won’t ease its pressure on the Church but will instead use the deal to push for even more control.”

—Jeremy Goldkorn

3. The money behind healthcare startups in China

Daniel Hsu, an independent adviser on innovation, startups, and corporate venturing, writes on The China Project to bend the current media narrative that Chinese startups are experiencing a sweeping “capital winter.”  

That’s not true, Hsu writes, in at least one area: healthcare. Multinational corporations are pouring money into the healthcare system in China, particularly into startups that apply new technologies in the digital health and life sciences arenas. Read Hsu’s piece to find out why.

4. Trade war, day 158: Lighthizer places tech, but not Huawei, at center of negotiations

Other than the complicating, but so far separately treated factor of Meng Wanzhou’s arrest, the trade war is continuing its post-G20 path:

• Negotiations continue, and U.S. Trade Representative Robert Lighthizer, who is leading the talks on the American side, repeatedly emphasized to CBS (full transcript here) that Meng’s arrest is “entirely a criminal justice matter. It has nothing to do with anything I’m working on.”

• Lighthizer disagreed with the prospect of banning Huawei from the U.S. market, an idea that Senator Marco Rubio has proposed and some Trump administration officials probably find appealing: “It’s not my position that we should ban telecom from China into the United States.”

• The 90-day deadline is important to Lighthizer, he told CBS, and he called March 1 a “hard deadline” for the U.S. and China to reach a deal. Unfortunately, president Trump has already signaled otherwise.

• He is focused on technology, and frames the tariffs as primarily targeted to counter underhanded tactics from Beijing at acquiring technology:

China has a policy of-of theft of intellectual property from American and other companies from forced technology transfer and from cyber theft and then state capitalism to buy up technology. Technology is the most important advantage that Americans have economically. We are innovators and we are excellent at technology. So you have a policy from China that’s designed really to get at this technology and not economic grounds.

• The only concession given so far on technology appears to be new rules (in Chinese; Caixin English report here) for punishment of intellectual property violations dated November 21 and announced on December 4.

• Outside technology, a Chinese purchase of U.S. soybeans was first reported to be in the works by Bloomberg last week. It will be announced this month, and come in the form of either a 5 million or 8 million ton amount, mostly destined for state reserves, Bloomberg reports today (porous paywall).

Other trade-war-related news:

• Venture capital competition
  China poised for first time to attract more venture capital than US for early-stage start-ups in 2018 / SCMP
  “Already in the first half of the year, China outpaced the US in venture capital for promising privately held companies worth at least US$1 billion, raising US$56 billion versus US$42 billion, according to “The Year of the Red Unicorns” study by Preqin and graduate business school INSEAD.”

• Disillusionment of American businesspeople
  American entrepreneurs who flocked to China are heading home, disillusioned / WSJ (paywall)
  “Worsening costs, taxation, tech transfer and regulation prompt foreign-owned businesses to throw in the towel.”

• Supply chains shifting
  GoPro moving some production out of China to avoid US tariffs / CNN

• American universities brace for impact
  Universities are insuring against a China shock / Quartz
  “Since 2017, the [University of Illinois’s business school] has paid a total of $424,000 in premiums for coverage up to $60 million if there’s a 20% drop or more in revenue from Chinese students in a single year following ‘triggering events…these triggers could be things like a visa restriction, a pandemic, a trade war — something like that that was outside of our control.’”

• Trans-atlantic dysfunction
  Europe and U.S. agree on Chinese threat, but are too busy feuding to fight it / NYT (porous paywall)
  An anecdote that stands out from the piece:

Mr. Kofod [a Danish member of the European Parliament] said he first realized the depth of the Trump administration’s antagonism toward Europe during a lunch in Washington late last year with [Commerce Secretary Wilbur] Ross and a delegation from the European Parliament. The meal, in a room at the Library of Congress with a view of the Capitol, began on a cordial note, Mr. Kofod recalled. But then Mr. Ross began attacking what he said were Europe’s unfair trade practices.

“We appealed to him that we should take on China together,” Mr. Kofod said. “He said, ‘No, you are as bad as China.’”

Mr. Ross said he remembered the conversation differently. “What I said was that both Europe and China espouse free trade rhetoric but are in reality much more protectionist than the United States,” Mr. Ross said in a statement on Friday.

• Europe-China relations
  Opinion: China’s real endgame in the trade war runs through Europe / CNBC
  Fred Kempe, CEO of the Atlantic Council, writes, “Despite facing new scrutiny, China is undeterred in its European strategy, taking advantage of European divisions, America’s trade strains with Europe and the urgent investment needs of particularly Southern and Eastern European countries.”

• Competition for influence in Africa
  Trump admin to unveil Africa strategy amid fear over China’s influence / NBC
  “The Trump administration plans to unveil a new strategy for Africa this week focusing on countering China’s growing influence on the continent, as well as Russia’s attempts to gain footholds in resource-rich, unstable countries, two senior U.S. officials told NBC News.”

• Qualcomm’s business in China
  China bans some iPhones in court victory for Qualcomm / FT (paywall)
  “The Intermediate People’s Court in Fuzhou, China, has granted a preliminary injunction against Apple after finding it in violation of two Qualcomm patents, related to photo manipulation and using apps on a touchscreen.
  Qualcomm said the ruling, which was made on November 30, means that Apple’s four Chinese subsidiaries are barred from importing and selling seven iPhone models, ranging from 2015’s iPhone 6s to last year’s iPhone X.
  However, Apple may design around the infringing patents through software updates and its latest models, including the iPhone XS and XR, are not caught by the ruling.”
  Qualcomm axes staff, winds down data center processor efforts … while China takes the blueprints and runs / The Register
  “Qualcomm is laying off 269 folk in America as it gradually wakes up from its dream of filling data centers worldwide with its own Arm-based server processors.
  Although the axed employees are said to work in divisions across the chip design giant, the cuts are largely due to Qualcomm winding down its plan to personally invade cloud providers with its own beefy Centriq CPUs – a plan that may have somewhat displaced Intel and a rising AMD, had it come to fruition. However, as we’ll explain later on, Centriq does still live on, in a fashion: in China.”

• Global Times on cyberattacks
  Top engineer discloses how China deals with foreign intelligence-backed cyberattacks / Global Times
  “In reality, China has always been a victim of cyber attacks. The Global Times (GT) reporter Guo Yuandan interviewed Xiao Xinguang (Xiao), the chief technical architect of Beijing-based Antiy Labs, on the cyber threats China has been facing in recent years.”

—Lucas Niewenhuis

—–

Our whole team really appreciates your support as Access members. Please chat with us on our Slack channel or contact me anytime at jeremy@thechinaproject.com.

—Jeremy Goldkorn, Editor-in-Chief

BUSINESS AND TECHNOLOGY:

• Richard Liu rape allegations
  Prosecutors to decide soon whether to charge Chinese billionaire over rape allegations / WSJ (paywall)
  “Authorities have been considering whether to move ahead with charges after a woman alleged in late August that Mr. Liu [Liú Qiángdōng 刘强东], chief executive of Chinese e-commerce giant JD.com Inc., raped her after a group dinner, which he denies. A decision is expected within weeks, according to a person familiar with the matter.”

• Lunar landing
  Here’s why China’s launch to the far side of the Moon is a big deal / Ars Technica
  “This may be a precursor for a space race back to the Moon,” writes Eric Berger.
  A guide to the logos on China’s Chang’e-4 moon mission / Quartz

• Distressed real estate
  Add an apartment to your online shopping basket? In China, sure / Bloomberg (porous paywall)
  Lulu Yilun Chen on Twitter: “Distressed property listings on Alibaba’s auction site, the country’s largest, rose 88 percent in October yoy. Across all auction sites in China, distressed real estate listings surged to a record 1.3 trillion yuan ($190 billion) this year.”

• Cockroaches to eat kitchen waste
  Bug business: Cockroaches corralled by the millions in China to crunch waste / Reuters
  “On the outskirts of Jinan, capital of eastern Shandong Province, a billion cockroaches are being fed with 50 tonnes of kitchen waste a day — the equivalent in weight to seven adult elephants.”

• Avocados and drought in Latin America
  China’s taste for avocado linked to drought in Latin America / Chinadialogue
  “Middle-class demand for the fashionable fruit has contributed to water stress and deforestation in Mexico and Chile.”

• Video game censorship
  China’s new games censors take tough stance / BBC
  “A panel of censors set up to vet mobile video games in China has signaled it will be hard to please. State media reports that of the first 20 titles it assessed, nine were refused permission to go on sale.”

POLITICS AND CURRENT AFFAIRS:

• Chorus of condemnation of Xinjiang abuses grows
  Testimony of Deputy Assistant Secretary Scott Busby / Senate Foreign Relations Committee
  Scott Busby is Deputy Assistant Secretary in the Bureau of Democracy, Human Rights and Labor at the U.S. Department of State. He testified on December 4: “Since April 2017, Chinese authorities have detained at least 800,000, and possibly more than 2 million, Uighurs and members of other Muslim minorities in internment camps for indefinite periods of time. This is the U.S. government assessment, backed by our intelligence community and open source reporting.”
  Opinion | A photographer goes missing in China / NYT (porous paywall)
  Robert Pledge, the co-founder of photojournalism agency Contact Press Images, writes, “Lú Guǎng 卢广 is an internationally acclaimed photographer from China, and he has been my friend for more than 15 years… Five weeks ago, he was invited to travel to Urumqi, the regional capital of Xinjiang, in Western China. He went there to share his passion for photography by leading an informal, weeklong workshop with local photographers… According to local sources, the security services detained Lu Guang, along with his local host, on or about November 3.”
  “Lu Guang lives with his wife, Xu Xiaoli, and their son, Michael, in New York, where they are permanent United States residents. Xu Xiaoli has attempted multiple times to learn about her husband’s status and his health from the Chinese authorities, calling officials both in Xinjiang and in Lu Guang’s hometown province, Zhejiang. The Chinese authorities have not responded to her.”
  Human rights situation of the Uyghurs and other Turkic Muslims in Xinjiang, China / House of Commons of Canada
  Appeal for the closure of the camps for Uyghurs and for the observance of universal human rights in the PRC / Appeal China Rights
  “On the 70th anniversary of the adoption of the Universal Declaration of Human Rights, we, the undersigned representatives of academia, public life and civil society in the Czech Republic and Slovakia, feel compelled to express our concern with the growing violations of human rights in the People’s Republic of China (PRC).”
  A week in Xinjiang’s absolute surveillance state / Palladium
  “Then we got into the city and reality started to set in. The reports aren’t fake news. It’s all quite true.”

• The end of the African honeymoon?
  Africa awakens from its China naivety / WorldCrunch
  Opinion: China’s One Belt, One Road may be a dead end for African countries / by Odongo Kodongo in Business Day (South Africa)
  Kodongo is an associate professor in finance at Wits University.
  China-Africa researcher Eric Olander on Twitter: “Despite years of relationship building, billions spent on media and high profile events, China is rapidly losing control of its story in Africa. If China wants to retain what’s left of its favorable public opinion, it’ll have to move fast to present a counter-narrative.”

• June 4 museum in Hong Kong
  June 4 museum to open in Hong Kong in April in time for 30th anniversary of Tiananmen crackdown / SCMP
  “A new June 4 museum will open in April in Hong Kong to mark the 30th anniversary of Beijing’s 1989 Tiananmen Square crackdown, as the organizer of the annual vigil [the Hong Kong Alliance in Support of Patriotic Democratic Movements of China] has decided to purchase a property for the museum with HK$8 million (US$1 million).”

• Xi Jinping and China’s future
  Opinion: The year China’s luck ran dry / by Kerry Brown in East Asia Forum
  “Many are again asking the questions that have haunted China’s leadership for the last few years. Is Xi’s power for real? Can he really enforce positive change? Will the country avoid political reform?
  These questions are no easier to answer than they ever were. What we do see, though, are clear signs of a country whose leadership lacks both imagination and any real ability to make fundamental political and social changes that might impact its desire for total control.
  This year will probably be remembered — in China at least — as the year that the hard times began.”

• Chinese-funded research in New Zealand
  New China research and learning centers at Auckland Uni / Newsroom
  “New China-funded research and learning centers have sprung up at the University of Auckland, with little fanfare. Laura Walters asks whether Kiwis should be concerned about foreign government funding within New Zealand universities.”

• Taiwan military  
  Taiwan to upgrade Navy ships’ self-defense system against air threats / Focus Taiwan
  “Taiwan plans to spend nearly NT$2 billion ($65 million) to upgrade the electronic warfare system on its four Kidd-class destroyers in response to China’s missile threats and to enhance surface-to-air combat capability, according to the Ministry of National Defense (MND).”

• Police brutality
  Chinese police accused of brutality by kneeling on woman’s neck – next day she thanks their ‘sincere assistance’ / SCMP

SOCIETY AND CULTURE:

• A murder in Phuket
  A Chinese man who allegedly killed his wife when vacationing in Phuket, Thailand, so he could cash in on her life insurance policy worth more than 30 million yuan ($4.34 million) has been arrested by the local police. He will probably be extradited to China, Jīnyún Guānzhù 津云关注, a Tianjin-based newspaper, reports (in Chinese). For more on the case, see our report on The China Project.

• Cleansing Beijing of Chinglish for the 2022 Olympics
  Please vomit here / Language Log
  “Here we go again. With the 2022 Beijing Winter Olympics coming up, China aims to eliminate Chinglish, and all sorts of negative examples are adduced. We’ve covered scores of them on Language Log, but here’s one I hadn’t seen before.”

• The wrong kind of virtue
  Another ‘feminine virtues’ school closed amid public outcry / Sixth Tone
  “Summer camp ordered to shut down after teaching children that disobeying their parents will give them cancer and wearing revealing clothes will get them raped.”

VIDEO ON SUPCHINA

Viral on Weibo: ‘Jewelry-stealing prank’ video goes viral in China

Without knowing the circumstances, a store employee’s initial assumption was that a customer was trying to steal a piece of jewelry, so a salesperson leaped over the counter to chase the person.

FEATURED ON SUPCHINA

The quiet wave of corporations funding Chinese healthcare startups

If you’ve been reading about the startup space in China these past few months, you could be forgiven for thinking the forecast is all gloom and doom, as analysts bemoan China’s national deleveraging (or debt reduction) campaign, tightening regulations, and tensions with the U.S. But it’s not that simple. What matters to individual entrepreneurs is not the overall funding environment, but what specific resources exist in their immediate sector. And Chinese startups are seeing a surge of new support in at least one industry: healthcare.

Kuora: Chinese prejudice and prejudgment of foreigners, explained

Xenophobia certainly persists in China, but the sad fact is that for nearly the entire history of this species — indeed of a great many animal species — xenophobia has been the rule, with only very few and mostly recent exceptions. Only in the last century, to be generous, has this started to change, and we’ve started to see humanity show a little more, well, humanity when it comes to prejudices and in-group preference.

Friday Song: ‘Made in China’ by Higher Brothers is the anthem Chinese rap needs

Rap and hip-hop have been on the underground music scene for years in China, but the Chengdu foursome Higher Brothers has burst onto the international stage with a greater impact than any predecessor. Check out their song “Made in China,” all about cultural synthesis.

PHOTO OF THE DAY

Card time

A group of men play cards, drink baijiu (a type of Chinese liquor), and smoke cigarettes at midnight in Qingdao, Shandong Province. Photo by Daniel Hinks.