Trump threatens nuclear option for Huawei; China formally arrests Canadian hostages

1. Huawei and the Canadian hostages

In the last 24 hours, U.S.-China tensions ratcheted up once again, this time by several notches.  

On Wednesday, May 15, Donald Trump issued an executive order declaring a national emergency caused by foreign adversaries “increasingly creating and exploiting vulnerabilities in information and communications technology and services.” The order instructs the commerce secretary, Wilbur Ross, to ban transactions “posing an unacceptable risk.”

Although not singled out by name, Huawei was the target. The Commerce Department separately announced “that it had placed the company and its dozens of affiliates on a list of firms deemed a risk to national security,” per the New York Times (porous paywall).

• Huawei is already effectively excluded from the U.S. market. If the threat implicit in the executive order goes through, Huawei will not be able to buy American-made components that are vital to its supply chain.

• Qualcomm, Intel, and Broadcom are among Huawei’s American suppliers who stand to lose business.

• Because so many global mobile network operators are dependent on Huawei equipment, the knock-on effects could be felt worldwide.

• However, Huawei “has been preparing for almost a year” for this eventuality, says the South China Morning Post, by stockpiling American components.  

• For more on why the latest American move could be so consequential for Huawei and China, see Bloomberg’s Huawei threat by Trump is nuclear option to halt China’s rise (porous paywall) or this Twitter thread by Bloomberg journalist Joe Weisenthal.

On Thursday, May 16, at the Chinese foreign ministry’s regular media briefing, the spokesperson announced that the two Canadians detained after the arrest of Huawei CFO Mèng Wǎnzhōu 孟晚舟 in apparent retaliation have been formally charged, reports the South China Morning Post.

• Former diplomat and International Crisis Group associate Michael Kovrig was charged with gathering state secrets, while entrepreneur and North Korea specialist Michael Spavor was charged with stealing and providing secrets for overseas forces.

• Kovrig and Spavor were originally detained in December 2018. The formal arrest “means the cases are still in the investigation phase but now the prosecutors are directly involved as well as the public security forces,” explains Maggie Lewis in this informative Twitter thread.

• The Canadian government’s response was to release a statement: “Canada strongly condemns their arbitrary arrest as we condemned their arbitrary detention on December 10.”

Other Huawei news:

• “News from the Netherlands: intelligence services investigating Huawei in relation to Chinese espionage activities, @volkskrant reports, citing ‘intelligence sources’ (without more details),” according to a tweet by journalist Laurens Cerulus.

• “Never mind the 5G network,” says a tweet by British satirical and news magazine Private Eye. Unfortunately, you have to buy a print copy to read how “Huawei is already embedded in every British embassy throughout the world, carrying vital confidential information.”

• How are other countries responding to Trump’s Huawei threat? The Guardian has a roundup.

—Jeremy Goldkorn

2. No date for next trade talks, as broader conflict looms

After Treasury Secretary Steven Mnuchin said yesterday, “My expectation is we will most likely go to Beijing at some point in the near future to continue those discussions,” Beijing today declined to confirm further talks, according to the SCMP. Saying that China is “not aware of the United States’ trip plan,” a spokesperson at the Ministry of Commerce added:

Both sides had candid and constructive communications in the last round of talks, but very regretfully the US unilaterally and continuously escalated the trade conflict, which led to grave damage to the discussions.

• Trade talks have indeed taken “grave damage,” though reporting continues to come out — recently from the SCMP and Nikkei — that confirms the Reuters account that what broke negotiations was Beijing playing hardball and deleting substantial portions of the draft trade agreement related to law enforcement of commitments.

Besides the Huawei hunt covered above, a few recent things indicate even more unsteady U.S.-China relations in the foreseeable future:

• “Trade can no longer anchor America’s relationship with China,” according to a special report by David Rennie at The Economist (porous paywall). “America has become more confrontational because multinational businesses that oppose barriers to trade have lost clout in a populist age,” Rennie notes. On Twitter, Rennie adds that “America and China really could stumble into a new cold war.”

• “Trump sees a China trade deal through a new prism: The 2020 election,” the New York Times reported (porous paywall) several days ago, noting how enthusiastically Trump has seized on the message that Joe Biden, the current democratic frontrunner for 2020, is weak on China.

• “Tom Friedman and Steve Bannon agree on China. What else does the Chinese leadership need to know about the American sentiment towards China?,” NYT columnist Li Yuan tweeted. She was referencing an interview between the two where Bannon preaches his economic nationalist gospel — unchanged from the early days of the trade war — and the famous NYT columnist nods along, including as Bannon asserts this:

The elites [in Europe and the U.S.] thought the rise of China [was] like the second law of thermodynamics, it was some physical reality we just had to accept. Thucycides trap says we’re the declining power, they’re the rising power. What Donald Trump says [is] you’re got it wrong. We’re the dominant power, and we’re going to reform the world along the lines of free market, democratic capitalism.

Other recent reporting on U.S.-China trade and related issues:

• Trump warns China against ‘substantial’ retaliation in trade war / Bloomberg (porous paywall)

• Walmart says higher tariffs on China goods will increase prices for U.S. shoppers / NBC News

• Chinese propaganda carefully guides public reaction to trade spat / China Digital Times

• China slams Donald Trump’s ‘false and fake’ assessment of its economic performance amid trade war tensions / SCMP

• China cuts U.S. Treasury holdings to lowest level since 2017 / Bloomberg (porous paywall)

• Trade war threatens much-needed Chinese investment in US public transport / Chinadialogue

—Lucas Niewenhuis

3. Swine fever to have ‘stunning’ impact on pork industry

An official from the China Animal Agriculture Association today told an industry forum that the African swine fever epizootic “represents a national crisis requiring more government funding to quell,” reports the South China Morning Post.

He said that the damage to the country’s US$128 billion pork industry is unknown, “and any estimate of the economic impact from the virus on the swine industry will be ‘stunning.’”

Not everyone sees this as bad news, though. Bloomberg notes (porous paywall) that “while China’s pig supplies tumble in the wake of the contagious swine epidemic, its imports of pork, beef, seafood, poultry and sheep meat from suppliers from Brazil to New Zealand are booming.”

—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:

• Alibaba in bricks-and-mortar retail
  Alibaba invests about $635M in Red Star Macalline, one of China’s largest furniture sellers / TechCrunch
  “Alibaba Group has acquired about RMB 4.36 billion ($635 million) worth of convertible bonds in Red Star Macalline, one of China’s biggest furniture retailers. If converted, this would give Alibaba about a 10% stake in the company.”

• Ride hailing and electric vehicles
  China’s Tesla wannabe Xpeng starts ride-hailing service / TechCrunch
  “Xpeng’s ride-hailing app is currently only available in a limited area within Guangzhou where it’s headquartered, shows a test conducted by TechCrunch on Thursday.”

• Extremes of the on-demand economy
  Viral ‘Dad Sharing’ WeChat mini program may violate advertising law / TechNode
  “A WeChat mini program named ‘Dad Sharing’ has gone viral on the mega chatting app after its release on Tuesday. An accompanying five-minute video advertises a service that allows busy users to rent another, more ‘professional,’ father figure when the actual parent can’t be there for important family moments.”

SCIENCE, HEALTH, AND THE ENVIRONMENT:

• Lunar exploration
  China’s far-side-of-the-Moon rover reveals subterranean secrets / Sixth Tone
  What lies below the Moon’s crust? China’s Yutu-2 rover may be the first to find out. / Space.com
  Chang’e-4: Chinese rover ‘confirms’ Moon crater theory / BBC

The rover’s landing site lies within a vast impact depression created by an asteroid strike billions of years ago.

Now, mission scientists have found evidence that impact was so powerful it punched through the Moon’s crust and into the layer below called the mantle.

Chang’e-4 has identified what appear to be mantle rocks on the surface.

It’s something the rover was sent to the far side to find out.

• Moves to waste less renewable energy
  China to introduce provincial energy quotas in fight against renewables waste / Caixin (paywall)

China leads the world in solar and wind capacity, but a significant amount of the potential generation goes unused due to a lack of coordinated planning with the power grid and provincial-level governments, which are often under pressure to support other local generators such as coal plants.

Yet the era of power wastage, which is known as curtailment, may be coming to an end. A notice (link in Chinese) from the National Energy Administration (NEA) and state planner the National Development and Reform Commission (NDRC) yesterday told local energy authorities to come up with a plan for maximizing the share of renewable electricity they consume, based on their current resources.

POLITICS AND CURRENT AFFAIRS:

• Coca-Cola, Adidas, and GAP and the Xinjiang internment camps
  Western companies get tangled in China’s Muslim clampdown / WSJ (paywall)
  “Adidas AG, Hennes & Mauritz AB, Kraft Heinz Co., Coca-Cola Co. and Gap Inc. are among those at the end of the long, often opaque supply chains that travel through China’s northwest region of Xinjiang.”

• China in the Australian elections
  Bill Shorten wants Australia to embrace China. But at what cost? / NYT (porous paywall)
  “In a recent online discussion, Bill Shorten, the front-runner in the race to be Australia’s next prime minister, left little doubt about where he stood on the politically delicate issue of relations with China — and where the world’s other superpower fit into his calculus.”
  Fears of China and WeChat as Australia heads to the polls / SCMP
  “When a Sydney council chose Chinese-language newspaper Vision China Times to sponsor its Lunar New Year celebrations last year, the Chinese consulate in the city warned the inclusion of the “anti-China” newspaper would harm China-Australia relations.”
  The Chinese-Australians making political history / BBC
  One of these candidates is expected to make history in Australia’s upcoming election.

• Balochistan Liberation Army
  Why China’s investment in Pakistan is the No 1 target for Balochistan separatists / SCMP
  The Balochistan Liberation Army “commander said discouraging further Chinese presence in Pakistan was their ultimate goal: ‘Now the Chinese are our No 1 enemy. We will target them throughout Pakistan.’”

• Pakistan bride-trafficking gang
  The Pakistani brides being trafficked to China / BBC
  A detailed report, including interviews with victims, on the bride-trafficking gang (or gangs) luring women from Pakistan to China.

• Hong Kong: Grinding down the remnants of the Umbrella Movement
  Hong Kong democracy activist Joshua Wong returns to jail after court hears Umbrella Movement appeal / Hong Kong Free Press

Hong Kong activist Joshua Wong [黃之鋒 Huáng Zhīfēng] returned to prison on Thursday after he sought to appeal a court case relating to the 2014 pro-democracy Umbrella Movement. However, the appeal judge shortened the sentence from three months to two. Wong was among several protesters who failed to comply with an injunction to clear the Umbrella Movement protest camp in Mong Kok.  

SOCIETY AND CULTURE:

• Jack Ma, role model
  Jack Ma faces backlash for telling employees how often to have sex / Caixin Live

“At work, we emphasize the spirit of 996. In life, we should follow 669,” Ma [马云 Mǎ Yún] told 102 couples at an annual company mass wedding on May 10, referring to the “996” work week, where employees are expected to work from 9 a.m. to 9 p.m. six days per week. The second number, “669,” refers to sex six times in six days — with an emphasis on duration (nine sounds like “long time” in Chinese).

Ma’s comments prompted a backlash after a video of his speech was posted to Alibaba’s official Weibo account. China Women’s News asked in a Weibo post if the Alibaba founder should be discussing employees’ private lives. Another Weibo user wrote, “Everyone is working 996, who is in the mood for 669?”

Ma’s comments were also clearly aimed at men and reinforced harmful ideas of male sexual dominance, Liu Xingyu, a member of the Suzhou-based non-governmental organization Queer Workers’ Service Center, wrote in an online essay.

• Restrictions on LGBT life
  Fewer rainbows, less social media for China’s LGBT community / AFP via SCMP
  “Tighter restrictions have led the LGBT community to prepare for muted celebrations of the International Day Against Homophobia, Transphobia and Biphobia on Friday.”
  See also:
  Noteworthy Weibo moment: Qingdao government account shows support for LGBT community / What’s on Weibo

• Social media and gender equality
  Dressing up for gender equality: Taiwanese “Men’s Skirt Week” becomes a viral hit on Weibo / What’s on Weibo
  “A ‘Men’s Skirt Week’ initiative at various Taiwanese schools to raise awareness on gender discrimination has become a social media hit.”

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Sinica Podcast: ‘Haunted by Chaos: China’s Grand Strategy,’ with Sulmaan Wasif Khan

This week on Sinica, Kaiser and Jeremy speak with Sulmaan Wasif Khan, assistant professor of international history and Chinese foreign relations at the Fletcher School at Tufts University, about his book, Haunted by Chaos: China’s Grand Strategy from Mao Zedong to Xi Jinping. He makes the case that China’s overriding concern is for maintaining the security and integrity of the state — something that, given China’s long history of foreign invasion, warlordism, civil war, and contested borders, hasn’t been easy.

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