Trade war by Twitter, and growing legal weed in Yunnan

1. Did China try to ‘renegotiate’ deal, spurring Trump’s tweets?

Eight minutes after midnight in Beijing this morning, shocking news came from Donald Trump’s Twitter feed:

Global markets were thrown for a loop. Just days ago, the yes men surrounding Trump such as his treasury secretary and chief of staff indicated that trade talks were in “the final laps” and reaching the last “couple of weeks.” The China Project noted that Trump appeared desperate for a deal, as his negotiating team softened one hardline demand after several others.

• Today, the S&P 500 “fell by as much as 1.6 percent before clawing back some of its losses by midday…China’s CSI 300 index of major Shanghai- and Shenzhen-listed stocks tumbled 5.8 percent, marking its worst day since February 2016,” according to the FT (paywall).

• Beijing was also caught off guard, judging by state media silence for over twelve hours according to SCMP, but lead negotiator Liú Hè 刘鹤 could still be coming to Washington this week, the SCMP separately reports.

What prompted the tweets? The Washington Post reported comments from officials a few minutes ago:

• U.S. Trade Representative Robert Lighthizer said: “Over the course of the last week or so, we have seen an erosion in commitments by China. I would say retreating from specific commitments that had already been made. That, in our view, is unacceptable.”

• Lighthizer said that the changes were “substantial” and that he “would use the word reneging on prior commitments.” Bloomberg earlier reported that “China had previously agreed to change its laws in the text of the deal,” but that last week’s negotiations saw the Chinese step back from that agreement.

• The U.S. still “expects Chinese Vice Premier Liu He and a Chinese team for further talks in Washington Thursday evening and Friday,” according to Lighthizer and Treasury Secretary Steven Mnuchin.

More on trade talks and tensions:

• Xi thinks “fifty-fifty” chance talks fail
  China’s Xi faces a ‘big gamble’ after Trump rebuke / FT (paywall)
  “During a closed-door meeting with Austrian chancellor Sebastian Kurz last week, Xi Jinping was asked what he thought the chances were for a successful conclusion of this week’s China-US trade talks in Washington. ‘Fifty-fifty,’ the Chinese president replied, according to three people briefed on the discussion.”

• Trump’s hard line enjoys bipartisan support in Washington
  Senate Minority Leader Chuck Schumer on Twitter: “Hang tough on China, President @realDonaldTrump. Don’t back down. Strength is the only way to win with China.”

• Delayed IPO for DouYu
  Chinese startup DouYu delays U.S. IPO launch on trade jitters / Bloomberg (porous paywall)
  The video game live-streaming platform, which “initially planned to start its IPO roadshow Monday U.S. time, is considering postponing the launch by at least a week, the people said, asking not to be identified because the information is private. DouYu, backed by Tencent Holdings Ltd., had been aiming to seek about $500 million, one of the people said.”

—Lucas Niewenhuis

2. Farming weed in China

The New York Times reports (porous paywall):

[Yunnan and Heilongjiang] are quietly leading a boom in cultivating cannabis to produce cannabidiol, or CBD, the nonintoxicating compound that has become a consumer health and beauty craze in the United States and beyond.

They are doing so even though cannabidiol has not been authorized for consumption in China, a country with some of the strictest drug-enforcement policies in the world.

After signing the United Nations Convention on Psychotropic Substances in 1985, China banned all cultivation of marijuana and hemp. But in 2010, farmers and companies in Yunnan were allowed to resume production of hemp for clothing. In 2017, Heilongjiang also legalized cannabis cultivation.

As China has not approved CBD for use in foods or medicines, companies producing it in China are looking to export to the U.S. and elsewhere.

See also:

• Yunnan ready to cash in on cannabis boom / Asia Times

• Green gold: how China quietly grew into a cannabis superpower / SCMP

3. Xinjiang internment camps now in mainstream American news

In the fall of last year, “the United States was on the verge of imposing sanctions on top Chinese individuals and companies” for their involvement in Xinjiang internment camps. It did not happen because “some administration officials said doing so would jeopardize trade talks with Beijing,” reports the New York Times (porous paywall).

However, the issue is attracting much more attention from the mainstream press in the U.S. and elsewhere, and not just in the China sections. Just today, the influential-in-Washington newsletter Axios led with “1 big thing: World shrugs as China locks up 1 million Muslims,” while the New York Times’s popular The Daily podcast published The Chinese surveillance state, part 1. Other coverage in the international press:

• Will China’s Uighur detentions spur U.S. sanctions? Pompeo won’t say / NYT (porous paywall)

• The glaring absence in Trump’s showdown with China / Washington Post

• China putting minority Muslims in ‘concentration camps,’ U.S. says / Reuters

• US accuses China of using ‘concentration camps’ against Muslim minority / Reuters via Guardian

• China bans Muslims from fasting Ramadan in Xinjiang / Al Jazeera

• Thousands rally in Indonesia to protest China’s crackdown on Uyghur Muslims / Radio Free Asia

Related:

• Security lapse exposed a Chinese smart city surveillance system / TechCrunch

• Airbnb listings in China are littered with racist discrimination / Wired UK

4. The Canadian China rethink

In an opinion piece for the Globe and Mail, David Mulroney — Canada’s ambassador to China from 2009 to 2012 — writes:

Canada’s primary foreign-policy challenge with China has been clear for months now. We have to secure the freedom of detained Canadians Michael Kovrig and Michael Spavor, and save the lives of fellow Canadians Robert Schellenberg and Fan Wei, who face death sentences from a murky Chinese legal system that takes instruction from the Chinese state. Our message to allies is clear, too: we all have a stake in pushing back against a China that uses hostage diplomacy, economic blackmail and even the threat of execution to achieve its objectives.

But there’s another equally challenging China task on the horizon. We need to start thinking about what we’ve learned from this terrible episode, and how it should shape our future relationship with China…

…We should start by skipping events dedicated to China’s boundless appetite for international self-promotion or the delusion that China is a democracy in the making

Mulroney essentially recommends getting tough on China in ways that Canada is able, and seeking alternative markets for products such as canola to ensure that when Beijing is displeased, the Canadian economy does not tank.

Note: Mulroney recently joined a Sinica Podcast together with former Mexican ambassador to China Jorge Guajardo.

Meanwhile, in the antipodes, Australia’s political and business elite remain as divided as ever over China. The country’s former prime minister Paul Keating publicly attacked the heads of his country’s intelligence agencies as “nutters,” reports the Sydney Morning Herald.

• Keating praised China as “a great state,” and predicted that if the Labor Party won the next election, the “government would ‘make a huge shift’ in Australia’s China strategy by accepting Beijing’s right to express its growing power.”

• Keating urged his Labor Party’s candidate for next prime minister to “clean out” the security agency ASIO: “They’ve lost their strategic bearings, these organizations.”  

• Keating attacked by name John Garnaut, a former Sydney Morning Herald and Age China correspondent who became an adviser to former prime minister Malcolm Turnbull and co-wrote an influential, classified report on Chinese influence in Australia.

• Keating is on the advisory board of the China Development Bank, as several commentators have pointed out.

—Jeremy Goldkorn

—–

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:

• Coffee and cheese tea
  Starbucks’ China rival Luckin seeks to raise up to $586.5 million in IPO / Reuters
  “Luckin Coffee Inc, the Chinese challenger to Starbucks Corp, is looking to raise up to $586.5 million, its filing with the U.S. Securities and Exchange on Monday showed.”
  Also: Is Luckin Coffee a real business? / China Tech Investor Podcast
  A schmear campaign aims at all the tea in China / WSJ (paywall)

Dairy giant Fonterra is egging on consumers to take their traditional beverage with cream cheese… Known as nǎi gài chá 奶盖茶 (“milk-lidded tea”) in Chinese, the drink is made using a base of tea topped with a cap of cream and cream cheese that is whipped together until it forms a light, fluffy texture. Tea houses encourage drinkers to sip it at a 45-degree angle for the ideal mouthful. And it’s become a bona fide phenomenon.

• Tech winter
  Sequoia China to cut up to 20 percent of investment staff as tech growth slows – sources / Reuters
  “Sequoia Capital China, widely viewed as a bellwether for Chinese tech investment, is set to lay off as much as 20 percent of investment staff as a slowdown in the country’s tech sector saps appetite for risk, said two people with knowledge of the matter.”
  Video game license approvals plummet in April / TechNode
  “China’s game regulator, the State Administration of Press and Publication (SAPP), has drastically reduced the number of game approvals in April, approving licenses to only 40 titles compared with the 170 granted in March.”

• Pharma
  India’s biggest drugmaker wades into China’s war on health care costs / Bloomberg via Caixin

Sun Pharmaceutical Industries Ltd. is scouting for a partner in China to help it win a larger piece of the world’s second-largest drug market, where the government is on a mission to drive down the cost of health care. With a recovery underway in its U.S. business, Sun Pharma’s billionaire founder Dilip Shanghvi is homing in on China and believes market watchers are underestimating the potential there for India’s largest drugmaker.

• Importing fresh produce
  Alibaba’s grand strategy to feed China’s middle class / TechNode

Increasing food imports and an escalating ‘fresh produce war’ — which has already seen some early casualties — make access to high quality overseas suppliers a key competitive advantage. Although all online grocery players are in one way or another dabbling in direct sourcing, supplier partnerships or even vertically-integrated food production, none have a supply chain strategy that is as comprehensive or as ambitious as that of Alibaba.

• A hit in China for Marvel
  Avengers: Endgame takes a cool US$178 million at Chinese box office over Labor Day holiday / SCMP
  Chinese moviegoers spent 1.5 billion yuan ($222.7 million) on tickets over the four-day break for International Workers Day. Avengers: Endgame accounted for more than 1.2 billion yuan ($180 million) of the total.

• Wine and intellectual property
  Penfolds ‘copycat’ ordered to pay $800k for trademark infringement in China / Australian ABC
  Courts in Shanghai and Melbourne have ordered an Australian company to pay another Australian company, which owns well-known wine brand Penfolds, AU$826,000 ($578,000) for infringing its trademark in China.

SCIENCE, HEALTH, AND THE ENVIRONMENT:

• Bird-watching in Beijing
  Birds of Beijing: China’s capital is port on ‘avian super highway’ / SCMP
  The amazing birdlife of Beijing and a profile of Terry Townshend, the man behind the website Birding Beijing. You can hear a Sinica Podcast with Terry here.

POLITICS AND CURRENT AFFAIRS:

• China-U.S. rivalry in the South China Sea and the Arctic
  Beijing ‘warns off’ US warships in South China Sea as tensions rise / SCMP
  “China expressed its ‘strong opposition’ on Monday after two U.S. warships sailed near disputed islands in the South China Sea. It is the third time this year that Washington has challenged Beijing’s maritime claims in the region.”
  ‘Entitled to exactly nothing’: U.S. Secretary of State Mike Pompeo warns China and Russia against aggression in Arctic / SCMP
  “The Trump administration warned China and Russia on Monday that the US will not stand for aggressive moves in the Arctic region, which is rapidly opening up to development and commerce as temperatures warm and sea ice melts.”

• No Huawei for Dutch 5G
  Dutch telecom KPN won’t use Huawei for ‘core’ 5G network / Reuters
  “Dutch telecom firm Royal KPN NV said on Friday it would select a Western supplier to build its core 5G mobile network, making it one of the first European operators to make clear it would not pick China’s Huawei for such work.”

• China’s military through the eyes of the American Defense Department
  Military and security developments involving the People’s Republic of China 2019  / U.S. Dept. of Defense
  The report is wide in scope, and goes beyond an assessment of military readiness to include Made in China 2025 (see The China Project explainer) and influence operations. One notable conclusion of the report: Belt and Road “will probably drive military overseas basing through a perceived need to provide security” for Belt and Road projects.

• Taiwan presidential elections
  Recognize Taiwan’s title and then we’ll talk, Foxconn billionaire Terry Gou tells Beijing / SCMP

Foxconn’s billionaire chairman and aspiring Taiwanese presidential candidate Terry Gou [郭台銘 Guō Táimíng] has called on Beijing to recognize the “Republic of China,” Taiwan’s official title. Gou also said he had no plan to meet Chinese President Xí Jìnpíng 习近平, countering critics who claim he would sell out the self-ruled island because of his multibillion U.S. dollar manufacturing empire on the mainland.

• Electric bikes start deadly fire in Guilin
  Five Chinese university students killed in dormitory fire sparked by electric scooters / SCMP
  Five people were killed in a “blaze started when electric scooters parked near the stairs on the ground floor caught fire. A door on the ground floor that was installed to prevent the theft of the scooters hindered students as they tried to escape.”

• Human trafficking and murder
  China executes six for killing workers in mining compensation scam / SCMP
  “Six men were executed in northern China last month for killing mine workers and then claiming millions of yuan in compensation from the pit owners.”
  Pakistan busts prostitution ring that sent young women to China / Reuters
  Pakistani authorities said they arrested eight Chinese nationals and four Pakistanis on suspicion of operating a prostitution ring using fake marriages to take young Pakistani women to China. An official “said several gangs were believed to be operating, mainly targeting members of Pakistan’s Christian minority.”

• The uses and abuses of May Fourth  
  Anniversaries new & old in 2019 — Remembering 5.4, accounting for 4.28 / China Heritage
  Xi Jinping tries to crash the May Fourth Movement’s centenary / New Yorker (porous paywall)
  See also on The China Project: 1919 to 2019: A century of youth protest and ideological conflict around May 4, by Eric Fish.

SOCIETY AND CULTURE:

• The slow death of Cantonese
  Why Cantonese lost to Mandarin on its own turf / SCMP
  Two main reasons cited: government campaigns to standardize the use of Mandarin in primary and high schools, and the dwindling appeal of Hong Kong as compared with the rise of Guangzhou and Shenzhen.

• The social credit song
  “Be as good as your word”: The Chinese social credit song is here / What’s on Weibo
  “First published April 30 2019 ‘Be as Good as Your Word’ is a pop song featuring young Chinese celebrities…part of a bigger initiative propagating China’s social credit system among the younger generation.”

• Mental health in manufacturing
  Factory psychology: My time counseling China’s migrant workers / Sixth Tone
  “As one of a handful of factory-affiliated mental health professionals in a city of 5 million industrial workers, I know firsthand just how hard it is for migrants to find help.”

• Awful wedding customs
  Chinese county vows to put an end to violent and vulgar ritual of wedding day hazing / SCMP
  “A county government in eastern China has vowed to crack down on traditional wedding hazing rituals that are notorious for their violence and vulgarity. Practices such as tying grooms to trees or telephone poles and pouring beer and sauce on them would be banned.”

FEATURED ON SUPCHINA

‘Trump on Show,’ reviewed: Cantonese Opera meets Donald Trump (and Mao, Kim Jong-un, Ivanka, etc.)

Li Kui-ming’s Trump on Show is, like its title character, over the top, sensationalist, and unpredictable. But is it enough to make Cantonese opera great again?

Kuora: Zhuge Liang and the myth of the hermit genius

Zhuge Liang, in the mythologized and fictionalized Romance of the Three Kingdoms of Luo Guanzhong, wasn’t just smart: He was also the embodiment of Confucian virtues. His decision to back Liu Bei was based not on personal ambition and an assessment of which warlord offered the best career prospects. Of course, novelized versions of history like Three Kingdoms tend to exaggerate the extent of the isolation of men like Zhuge Liang.

China Sports Column: Cannavaro out as Chinese national team coach, and Guangdong sweeps way to ninth CBA title

Former World Player of the Year and Ballon d’Or winner Fabio Cannavaro has decided not to manage the Chinese national football team, and reports are that Cannavaro’s mentor, Marcello Lippi, might return to his old role. Meanwhile, the Guangdong Southern Tigers, led by Yi Jianlian, won the CBA finals for the team’s ninth championship. The team didn’t lose a game in this year’s playoffs.

SINICA PODCAST NETWORK

Sinica Early Access: Howard French on how China’s past shapes its present ambitions

On this week’s show, recorded live in New York on April 3, Kaiser and Jeremy have a wide-ranging chat with former New York Times China correspondent Howard French, now a professor at Columbia University’s School of Journalism. We talk about his book Everything Under the Heavens and China’s ambitions and anxieties in the world today.

• Sinica Early Access is an ad-free, full-length preview of this week’s Sinica Podcast, exclusively for The China Project Access members. Listen by plugging this RSS feed directly into your podcast app.