Hong Kong braces for mass strikes

1. Hong Kong braces for mass strikes

Hong Kong is bracing “for mass strikes on Wednesday after thousands braved thunderstorms overnight to stage fresh protests against a proposed extradition bill that would allow people to be sent to mainland China for trial,” report James Pomfret and Greg Torode of Reuters.

• Hong Kong Chief Executive Carrie Lam (林鄭月娥 Lín Zhèng Yuè’é) has vowed to “press ahead with the legislation despite deep concerns across large swathes of the Asian financial hub that on Sunday triggered its biggest political demonstration since its handover from British to Chinese rule in 1997.”

• Most estimates of the crowd size of Sunday’s protests exceed 1 million. The territory’s total population is roughly 7.5 million.

• Many businesses are expected to join street protestors in the Wednesday strike, which coincides with the second round of debates about the extradition bill in Hong Kong’s 70-seat Legislative Council.

2. Foreign companies in China — a report from the ground

The lawyers at China Law Blog report on what they are hearing from their clients about their business operations in China. Here are some excerpts:

• Are foreign companies leaving China? Foreign companies are not leaving China, at least as far as we can tell. I am not aware of a single client of ours who has left China and, in fact, we are busier than we’ve ever been in helping clients form WFOEs [wholly owned foreign enterprises] to go into China.

• A couple of clients have heard that Chinese police (from Beijing?) are going into foreign company offices (especially in Shanghai) and testing everyone for drug usage. They are cutting hair and sampling that and those who test positive are being immediately deported and told never to return to China.  

• Are foreign companies moving their production outside China? Absolutely they are. All sorts of companies are and all sorts of our clients are.

• Whenever China has problems with a foreign country or with its own economy (both of which are happening in spades right now), it starts cracking down on foreign companies. That is happening right now and we are seeing it with all the foreign companies that are coming to us with major compliance problems. Again though, this sort of thing is nothing new and this sort of thing can almost always be avoided by making sure both you and your company are in full compliance with Chinese laws.

3. Tomorrow Group, and business secrets we’ll never know  

In January 2017, Chinese tycoon Xiào Jiànhuá 肖建华 was taken away from his apartment at the luxury Four Seasons Hotel in Hong Kong by Chinese security agents and spirited across the border to an unknown location in mainland China.

Until his arrest, Xiao controlled — in the words of a 2014 New York Times profile (porous paywall) — “a sprawling business empire with interests largely in state-dominated industries, including banking, insurance, coal, cement, property and even rare-earth minerals, and largely managed by his holding company, the Tomorrow Group.”

In September 2018, the South China Morning Post reported that Xiao was “about to face trial in Shanghai charged with stock price manipulation and bribery,” but that was never confirmed by later reports and Xiao’s whereabouts remain unknown.

But something is happening at his former company. Caixin reports (paywall):

Tomorrow Holding, one of China’s most secretive conglomerates, has shed its stakes in more than 10 financial institutions, all of which are now managed by new shareholders, the country’s top banking regulator said, noting that the institutions are operating normally.

The statement marks Chinese authorities’ latest effort to prevent panic in the market, as concerns have arisen that the Tomorrow-controlled Baoshang Bank Co. Ltd., a small lender that was taken over by the government last month, might be just the first in a line of dominos to fall…

…The financial firms that Tomorrow has divested include the small lenders Bank of Weifang Co. Ltd. and Bank of Taian Co. Ltd. — both headquartered in the eastern province of Shandong, the home province of Tomorrow’s founder Xiao Jianhua’s hometown — and Zhongjiang International Trust Co. Ltd., a trust company located in the eastern province of Jiangxi, the CBIRC said.

4. U.S. messaging in the South China Sea

Washington, D.C., is signaling its commitment to the Western Pacific — a favored umbrella term for any part of the Pacific Ocean that China claims as its own — more and more frequently, and in a number of ways. Here are two that made the news today:

U.S. Marines release photo of Taiwanese major general at Indo-Pacific military talks

The U.S. Pacific Marine Corps released photos showing Taiwanese Major General Liu Erh-jung (劉爾榮 Liú Ěrróng) at the Pacific Amphibious Leaders Symposium in Hawaii last week. His presence was, according to the South China Morning Post, “the latest in a series of moves that Taipei said demonstrated closer relations with Washington [which] include Taiwan being on a list of ‘countries’ in a U.S. Department of Defence report on its Indo-Pacific strategy released on June 1,” the White House posting a photo to Instagram of Donald Trump congratulating U.S. Air Force Academy graduates with Taiwan’s flag in the background.

U.S. Coast Guard cutters in South China Sea

Bloomberg reports (porous paywall) that the “U.S. Coast Guard is touting increased operations in the Western Pacific, thousands of miles from American shores, as China’s coast guard and civilian fishing militias increasingly assert the country’s territorial claims.”

• The “418-foot national security cutter with 170 crew members” USCGC Bertholf and the similarly sized USCGC Stratton are being deployed with the Seventh Fleet based in Yokosuka, Japan.

• “A presence in the South China Sea and elsewhere will help enforce the sovereignty of partner nations in the disputed waters, U.S. Coast Guard Pacific Area Commander Vice Admiral Linda Fagan told a conference call,” according to Bloomberg.

• This is not the first time the U.S. Coast Guard has been active in these waters: The Bertholf joined a U.S. Navy transit through the Taiwan Strait in March, and in May, “the U.S. Coast Guard staged a joint exercise with two Philippine vessels in Chinese-claimed waters, reportedly sailing past two Chinese ships in the process.”

• Local news media in the Philippines, Vietnam, Malaysia, and Singapore have picked up the story.  

FLASHPOINT TO WATCH FOR

The Bloomberg article notes, “This is the time of year when China enforces a fishing plan off its shores,” which often results in confrontations.

Vice Admiral Linda Fagan said the Coast Guard vessels will help “law enforcement and capacity-building in the fisheries enforcement realm.”

Watch this space over the summer fishing season.

5. Killer stink bugs and armyworms

Bloomberg reports (porous paywall):

Scientists in China are seeking to deploy an army of predatory stink bugs to battle a fall armyworm incursion that threatens to devastate the country’s grain crops.

The insect, Arma chinensis, is a natural enemy of fall armyworm, according to the Institute of Plant Protection of the Chinese Academy of Agricultural Sciences. Researchers there believe it may be a useful biological agent to control the crop-ravaging caterpillar, which arrived in China early this year after spreading from the Americas to Africa and across parts of southern Asia.

The stink bug’s killing powers are impressive.

No comment.

—Jeremy Goldkorn

6. Trade war: Previews for the G20 episode begin

The U.S.-China trade war, as defined by the era of large-scale bilateral tariffs, is nearing its one-year anniversary (“day one” was July 6, 2018).

At this point, the pattern of threat from Tariff Man, speculation of a summit, and ever-rising stakes is extremely familiar. We don’t see any reason why this “episode” in the ongoing reality TV show starring Trump would conclude differently than previous installments.

THE TARIFF THREAT

• Trump says he will raise tariffs if Xi fails to meet him at G20 / CNN

“I think he will go and I think we’re scheduled to have a meeting. I think he’ll go,” Trump said in a phone interview with CNBC Monday. “I would be surprised if he didn’t go. I think he’s going. I haven’t heard that he’s not. We’re expected to meet and if we don’t that’s fine and if we do that’s fine.”

But when asked if a failure by Xi to meet him at the summit would lead to tariffs being imposed on the last $300 billion of Chinese imports to the United States to have so-far escaped the trade war, Trump replied: “Yes it would.”

• Trade war latest: Trump says he’s holding up China deal / Bloomberg (porous paywall)

“It’s me right now that’s holding up the deal,” Trump said. “And we’re going to either do a great deal with China or we’re not going to do a deal at all.”

Last month, the U.S. accused China of reneging on provisions of a tentative trade deal, bringing talks to a halt. “We had a deal with China and unless they go back to that deal I have no interest,” Trump said.

• President Trump to CNBC: China is going to make a deal because ‘they’re going to have to’ / CNBC

THE NEXT SUMMIT — OSAKA JUNE 28–29

• Donald Trump’s G20 meeting with Xi Jinping in Osaka could again be a formal dinner, source says / SCMP

• US Commerce Secretary Wilbur Ross rules out ‘definitive’ trade deal at Xi-Trump G20 parley / SCMP

• China mobilizes diplomats to drum up global support ahead of G20 / SCMP

INCREASED STAKES AND NEXT STEPS

• Supply chain shifts — avoidance of “Made in China”
  Apple has capacity to make all iPhones for US outside of China / Bloomberg (porous paywall)

“Twenty-five percent of our production capacity is outside of China and we can help Apple respond to its needs in the U.S. market,” said Liu, adding that investments are now being made in India for Apple. “We have enough capacity to meet Apple’s demand.”…

Apple has not given Hon Hai instructions to move production out of China, but it is capable of moving lines elsewhere according to customers’ needs, Liu added. The company will respond swiftly and rely on localized manufacturing in response to the trade war, just as it foresaw the need to build a base in the U.S. state of Wisconsin two years ago, he said.

• Vietnam: China companies using fake ‘Made in Vietnam’ labels / AP
  “Vietnam’s government says it is taking more steps to prevent Chinese companies from using illegal ‘Made in Vietnam’ labels to avoid high tariffs that have been imposed by the United States on Chinese goods.”

• More analysis, secondary effects, words
  Is China running out of retaliatory ammunition in the trade war? / MacroPolo
  After analyzing the tariffs already in place, Joy Dantong Ma concludes that “if President Trump makes good on his threat to tax all Chinese exports, then it’s not unthinkable that Beijing could reciprocate with its own nuclear option that includes taxing $13 billion of US airplanes and $8 billion of chips.”
  Chinese cash is suddenly toxic in Silicon Valley, following U.S. pressure / WSJ (paywall)
  “After hitting record levels early last year, Chinese funding for U.S. startups slowed beginning in May 2018, according to research firm Rhodium Group. And state-backed Chinese investors all but disappeared by year-end, Rhodium said. Meanwhile, foreign direct investment from China, which includes acquisitions of U.S. companies, plunged 90% to $5 billion in 2018 from $46 billion in 2016.”
  US accused of undermining trade talks by demanding ‘hundreds’ of changes to Chinese law / SCMP
  Shí Yīnhóng 时殷弘, a well-connected international relations scholar from Renmin University, told the SCMP, “The US demanded that China change a number of laws. It wasn’t one or two, it was enormous, maybe hundreds… Beijing just cannot make that many changes.”

—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:

• Anbang selling Waldorf Astoria apartments
  NYC’s Waldorf Astoria to start luxury-condo sales this year / Bloomberg (porous paywall)
  “Four years after buying the famed Waldorf Astoria for a record $1.95 billion,” China’s troubled Anbang Insurance Group “is getting ready to begin sales of 375 luxury apartments, betting that the hotel’s cachet can attract attention in a glutted market.”

• The business of English and etiquette lessons
  For children of Chinese elite, balancing the books is all about etiquette and manners / SCMP
  “Tutor Guillaume de Bernadac’s deportment classes help to create the ‘perfect’ child. In Shanghai, $389 an hour buys instruction in walking, conversation and dining.”
  Chinese parents are paying for their kids to learn English from U.S. online tutors. Here’s how the job works / USA Today
  “Tens of thousands of Americans are teaching English remotely, connecting to a massive Chinese population eager to learn the language, and aided by advances in global communication technology and huge investments in Chinese online education companies.”

• Huawei
  How Philippines’ embrace of Huawei reflects China’s growing influence and failure of US pressure tactics / SCMP
  “Philippines — one of the oldest US allies in Asia — is moving ahead with plans to use Huawei equipment in upcoming trials of 5G wireless systems. Countries are reluctant to exclude Huawei, whose products are considered equal to or better than Western rivals, and can be 30 percent cheaper.”
  Trump is trying to ‘murder’ Huawei when he can just ban it, head of US-China business group says / CNBC
  “The administration blacklisted Huawei last month amid the escalated trade war, effectively halting its ability to purchase American-made chips and forcing U.S. companies to cut ties with the Chinese giant.”
  Top Japanese chip gear firm to honor U.S. blacklist of Chinese firms — executive / Reuters
  “Japan’s Tokyo Electron, the world’s No. 3 supplier of semiconductor manufacturing equipment, will not supply to Chinese clients blacklisted by Washington, a senior company executive told Reuters.”
  Huawei not bound by Chinese spy laws, company’s cybersecurity chief John Suffolk tells British parliament / SCMP

• Corruption at the world’s most valuable liquor company
  Graft underpins distribution at world’s most valuable liquor company / Caixin (paywall)
  “…the drink’s state-owned producer Kweichow Moutai Co. Ltd. is currently suffering headaches of its own, after Yuán Rénguó 袁仁国, its chairman from 2011 to 2018, was arrested in May for taking a ‘massive’ amount of bribes and other ‘severe violations of discipline and law,’ according to the Central Commission for Discipline Inspection (CCDI).”

• The Party still likes blockchain
  People’s Daily launches online ‘Blockchain Academy’ / TechNode
  China may have effectively outlawed bitcoin and other cryptocurrencies, but its enthusiasm for blockchain technology has not waned: The Party’s house newspaper, the People’s Daily, has started the Blockchain Academy, which offers free online courses in blockchain technology.

SCIENCE, HEALTH, AND THE ENVIRONMENT:

• Healthcare and aging
  China’s fragmented health care system under increasing pressure as nation rapidly ages / SCMP

China’s provision of health care is extremely unbalanced, with more than 2,300 top tier public hospitals running at capacity and struggling to attend to almost 20 per cent of total annual outpatient consultations every year, while the remaining low-tier hospitals, community health centres and clinics — close to 950,000 — are struggling to attract patients.

• See also on The China Project: What ails China’s healthcare system? Roberta Lipson has a detailed diagnosis.

• Fossil fuels are back with a vengeance
  Carbon emissions from energy industry rise at fastest rate since 2011 / Guardian
  “Carbon emissions from the global energy industry last year rose at the fastest rate in almost a decade after extreme weather and surprise swings in global temperatures stoked extra demand for fossil fuels.”

• Floods in southern China
  China rains: Thousands stranded after record downpour / BBC
  “At least five people have been killed and thousands more have been left stranded after record rainfall hit southern China, officials say.”

• Hebei air pollution down
  Chinese smog hotspot Hebei breathes a little easier after hitting air quality standard for first time / SCMP
  “Smog-prone Hebei, China’s biggest steel producing region, met a national air quality standard for the first time in May, the province’s environment bureau said on Tuesday. Hebei surrounds Beijing and has been on the front line of a war on pollution since 2014, after toxic smog spread to the Chinese capital.”

POLITICS AND CURRENT AFFAIRS:

• New Zealand blocks extradition of murder suspect to China
  New Zealand court, blocking extradition, is latest to rebuke China’s judiciary / NYT (porous paywall)
  “In a strongly worded ruling, the New Zealand court ordered the country’s government to consider human rights risks in China before deciding that the suspect, Kyung Yup Kim, should be sent there.”
  China extradition decision ‘profound and important’ human rights victory / Stuff (New Zealand)

• Anti-Chinese sentiment in the Philippines
  Row over China flags sold in Philippine park: Chinese embassy in Manila speaks out / SCMP
  Over the weekend, photos that purportedly show four people selling Chinese flags in Manila’s Luneta Park were circulated online, causing outrage on the Filipino internet. The photos turned out to be staged, but the anti-Chinese sentiment behind the online anger is real, and apparently growing.
  More about perception of China in the Philippines on The China Project: ‘We are Filipinos, and we hate China’: China’s influence in the Philippines, and backlash against Tsinoys

• The Mar-a-Lago intruder will get her day in court
  Chinese Mar-a-Lago intruder Zhang Yujing deemed mentally competent and allowed to represent herself at trial / SCMP
  “A federal judge ruled on Tuesday that the Chinese woman accused of trespassing at US President Donald Trump’s private Palm Beach club would be allowed represent herself after her lawyers found no evidence of mental incompetence.”

SOCIETY AND CULTURE:

• Anime in Chinese theaters
  Studio Ghibli’s “Spirited Away” gets a Chinese poster ahead of 18-year-late cinema release / Radii China
  “Seminal Japanese animated film Spirited Away is set to officially show in Chinese cinemas for the first time, 19 years after it was initially released… Shanghai has had an official Studio Ghibli store since 2016 and many anime fans are intimately familiar with the works despite their absence from cinemas, thanks to piracy and online discussions.”

• LGBT nightlife in Hong Kong
  A tour of lesbian Hong Kong / LARB China Channel

Probably my favorite spot in Hong Kong’s Central district, right off Hollywood Road and next to Club 71 in Pak Tsz Lane Park, the bar is a hidden gay sanctuary that makes for a particularly enlightening pit stop. In my experience, four out of five Hong Kongers don’t know it exists, or that it relates closely to Chinese history.

• American vlogger who loves China
  American comedian wins fans with pro-China music videos — including one for Huawei / SCMP

[Bart] Baker became a full-time video blogger on YouTube after he graduated from film school at the University of Miami in Florida. Now he has stopped updating his YouTube account and wants to move his “total career” to China. He started learning Chinese three months ago, and visited China for the first time in March… He plans to sign a contract with a company in Shanghai soon and to live in China for at least six months of the year.

FEATURED ON SUPCHINA

Sina Finance publishes remarkably sexist, ageist commentary, angers everyone

An article about Taiwanese supermodel Lín Zhìlíng 林志玲 and her recent marriage to Japanese pop star Akira, which was published online by Sina Finance on June 8, has been removed by the publication after it was widely panned for being grossly lowbrow, offensive, and sexist. Sina Finance, an online media outlet affiliated with Sina News, apologized and fired the editors involved in publishing the piece.