Baidu tanks as Alibaba soars

Dear Access member,

A weekly feature that The China Project publishes, called the The China Project Signal, is now in its eighth week. A collection of these articles — which aim to present accurate and accessible information on China-related topics that every global citizen should be informed about — can be found at signal.supchina.com. 

We have recently refreshed and updated some of the earlier Signals, including the 2020 U.S. presidential election China tracker and the U.S. Sinophobia Tracker. 

The newest Signal was published today: China’s ‘social re-engineering’ of Uyghurs, explained by Darren Byler. It’s a Q&A with the scholar who writes the Xinjiang Column on The China Project, and is meant to serve as an update to the explainer on Xinjiang that I wrote a year ago, which remains one of the most-visited articles on The China Project. 

To give us feedback on these or any other feature that The China Project publishes, or of course on the Access newsletters, you can always email editors@thechinaproject.com. Thank you for reading! 

—Lucas Niewenhuis, Associate Editor

1. Baidu tanks as Alibaba soars

Bloomberg reports that Baidu has lost so many tens of billions of dollars that its former status as one of the “big three” Chinese internet firms — Baidu, Alibaba, Tencent — is history. 

Baidu Inc. has dropped off the list of China’s five most valuable internet companies, underscoring the challenges facing the search giant from a weakening economy to intensifying competition.

NetEase Inc., China’s second-largest gaming house, has overtaken Baidu in market value after posting better-than-expected quarterly earnings last week. Shares of NetEase have gained 11 percent this year, while Baidu’s plunged 40 percent. The latter company, once touted as a member of China’s internet triumvirate alongside Alibaba Group Holding Ltd. and Tencent Holdings Ltd., has bled $66 billion of capitalization since its peak in May 2018 — the equivalent of one Morgan Stanley.

Baidu has struggled to fend off competition from the likes of Tencent and ByteDance Inc., both of which are luring smartphone-savvy consumers and advertisers to their popular mini-video and social media apps.

Baidu has been on a downtrend trend for a couple years now, but the bad news has intensified this year. In addition to struggling with competition from Tencent and Bytedance, the company has failed to address some of its own biggest flaws, like fake or dangerously misleading search results, and antagonistic responses to critics. 

Meanwhile, ecommerce giant Alibaba is seeing soaring sales, indicating that the underlying economic force of Chinese consumers remains healthy, despite cooling and questionable GDP numbers (covered in yesterday’s newsletter). Alibaba offered this explanation for how it achieved a 42 percent year-on-year growth in revenue for the three months ending in June, per the New York Times: 

“The question that is invariably asked is: How does Alibaba’s business, which is consumption-driven, continue to deliver robust growth despite challenges in the broader economy?” an Alibaba co-founder, Joseph Tsai, said in a conference call.

“I want to offer two reasons. Both are big secular trends that are happening in China that we have taken advantage of. First is demographics, and the second is the rapid pace of digitization.”

China’s $5.5 trillion domestic consumption market is driven by the emergence of a middle class of over 300 million people living in large cities as well as the rapid urbanization of the countryside, Mr. Tsai said.

—Lucas Niewenhuis

2. No foreign black hands — Hong Kong police officers 

Sophia Yan and Roland Oliphant of The Telegraph interviewed three senior Hong Kong police officers, who say that the “protests that have besieged Hong Kong all summer show no signs of foreign influence or interference, according to the city’s police force, signalling a split between Beijing and the police.

• “The remarks from Hong Kong police directly contradict Beijing’s claims that unidentified foreign forces, deemed ‘black hands,’ are fomenting protests in the city that form the most serious political crisis since the former British colony was returned to Chinese rule in 1997.”

• China has not announced plans to “snuff out mass demonstrations in the city” to the police, according to the anonymous police officers who also denied rumours that mainland police were already working in the city.

• Beijing is sticking to its “black hands” conspiracy theory. Here is a particularly tinfoil hat piece of propaganda from the Global Times: “When Hong Kong youngsters were incited to protest on the street, ringleaders who are messing Hong Kong up were enjoying dinner with their foreign ‘advisors’ to further scheme the Hong Hong riots. Watch the video and as they are unmasked.”

• “Terrorism” has been adopted as a regular description of the protesters by state media: Brutalities at Hong Kong airport resemble acts of terrorism says Xinhua News Agency today. 

• Beijing is dangling economic incentives, judging from this Global Times piece: “The government of the Hong Kong Special Administrative Region (SAR) unveiled an economic package worth HK$19.1 billion ($2.44 billion) on Thursday to bolster the city’s enterprises and residents to cushion the impact of recent unrest as well as external pressure.”

• Donald Trump is tweeting incoherently on Hong Kong: See reports on Politico, the South China Morning Post, or CNN. Or better yet, ignore all of it. 

• “The police have barred a prominent organiser of Hong Kong rallies from holding a march on Sunday, saying the group could not ensure public safety given the escalating violence at recent protests,” reports the South China Morning Post. “This is the first time the Civil Human Rights Front, which leads the annual pro-democracy march on July 1 and drew a turnout of two million for a protest June, has had its protest plans banned.”

• Here’s a good roundup of reaction and analysis to recent events in Hong on China Digital Times: Anger and introspection follow assaults by HK protesters.

 —Jeremy Goldkorn

3. State-owned companies are freezing us out — Cisco

The latest on the techno-trade war, now on day 406:

There will be “perhaps another phone call in a couple of weeks,” but “I don’t believe a date has been set” for further trade talks, Commerce Secretary Wilbur Ross told CNBC per Politico. 

“China has to take necessary countermeasures in response to the U.S. announcement of imposing additional 10 percent tariffs on 300 billion U.S. dollars of Chinese imports, an official with the Customs Tariff Commission of the State Council said Thursday,” according to Xinhua. 

Stocks wobbled today in response to this statement from China, though the New York Times and Yahoo Finance both indicated that these words from the Chinese foreign ministry eased traders’ worries: “We hope the US can work in concert with China to implement the two Presidents’ consensus that was reached in Osaka, and to work out a mutually acceptable solution through equal-footed dialogue and consultation with mutual respect.”

A “countermeasure” already taken? “CEO of Cisco, which saw a huge drop in China sales, says state-owned enterprises shunned them” is a headline from CNBC. This could be a qualitative measure in the trade war done at Beijing’s direction. 

The toymaking industry helped throw a monkey wrench into Trump’s plans to raise tariffs on September 1, and contributed to the pushing back of some tariffs to December 15 so they would not affect holiday retail shopping. “Obviously, toys are a sympathetic product,” a former U.S. Trade Representative spokesperson told the New York Times, which added these industry statistics for context: “Toymakers both large and small say they don’t have the ability to absorb cost increases, and would have to almost immediately raise prices. The typical toy in the United States retails for only $10, and profit margins for some of them may be just pennies on the dollar.” 

Quartz has a breakdown of The new lists of Chinese products being hit with US tariffs.

Trump can’t help but tie together largely unrelated foreign policy issues, in this case Hong Kong and the trade war. See Reuters, Trump ties China trade deal to ‘humane’ Hong Kong resolution after troop buildup worry, and New York Times, Trump says ‘Hong Kong is not helping’ in trade war with China.

“China has severely restricted imports of gold since May, bullion industry sources with direct knowledge of the matter told Reuters, in a move that could be aimed at curbing outflows of dollars and bolstering its yuan currency as economic growth slows,” reports Reuters.

“China cut its soybean import forecast for the current crop year to 83.5 million tons, down by 1.5 million tons from July’s projection, according to official data released Monday,” Caixin says.

4. A Uyghur in the White House

Though Donald Trump and his Treasury Secretary Steven Mnuchin appear dead set on turning a blind eye to the horrors happening to Uyghurs in Xinjiang — at least as long as the trade war rages on — others in the Trump administration have different ideas. That’s the clear signal from this new government appointment, reported by Foreign Policy:

The Trump administration has appointed a Uyghur American academic as director for China at the National Security Council in a symbolic move that could impact talks—and relations—between the two countries. 

Current and former U.S. officials told Foreign Policy that Elnigar Iltebir, a Harvard Kennedy School-educated academic and daughter of a prominent Uyghur intellectual and journalist, was recently appointed to the White House post… 

In her role, Iltebir will be tasked with helping to manage China policy, one of the most critical priorities for the Trump administration, including issues related to trade, military, and human rights.

Other Xinjiang-related reports to note:

• The New York Times podcast The Daily today features Ferkat Jawdat, a Uyghur who “dared to speak out against China’s mass detentions in Xinjiang.” 

• We have published a Q&A with Darren Byler, who writes our Xinjiang column, that functions both as a general explainer on the current situation and a discussion of some of the more complicated aspects of the crisis. The piece is titled, China’s ‘social re-engineering’ of Uyghurs, explained by Darren Byler. 

—Lucas Niewenhuis

5. The People’s Daily wants to censor Amazon 

Social media outrage in China, stoked by state media, has forced a handful of companies including Versace, Calvin Klein, and Taiwanese fruit tea chain Yifang to issue apologies in recent days for listing Hong Kong and Taiwan as countries on their websites or clothing and other perceived violations of China’s sovereignty. 

Even Huawei, every Chinese patriot’s favorite phone maker, has been in trouble online for listing Taiwan as a country “in the time zone settings on Huawei phones when the user interface is in traditional Chinese language, commonly used in Taiwan and Hong Kong,” according to TechNode. 

Now the online mob and their state media enablers have found a new target: Amazon. From the Global Times:

U.S. online retail giant Amazon has irritated many in China on Wednesday after some netizens revealed it was selling T-shirts with images and slogans supporting violent protests in Hong Kong and their secessionist movement, which many view as not only offensive but also in violation of China’s sovereignty.

The top opinion piece (in Chinese) on the People’s Daily’s website today is about the same matter. Titled “If you don’t respect China’s sovereignty, you can’t enjoy profits in China,” the piece mentions various controversies Amazon has had in different countries and accuses the company of taking an “disrespecting the sovereignty and insulting the image of other countries,” and taking an “evil stance.” 

Don’t anyone tell the People’s Daily what happens if you search on Amazon for Texas secession or anti U.S. government T-shirt!

—Jeremy Goldkorn

BUSINESS AND TECHNOLOGY:

• China Mobile, Unicom, Telecom
  China wireless carriers soar on savings from 5g cost-share plan / Bloomberg (porous paywall)

China’s big three wireless carriers soared after China Unicom (Hong Kong) Ltd. Chairman Wang Xiaochu said his company was close to an agreement to share resources for building a 5G network.

Joint investment with one of two rivals — China Mobile Ltd. or China Telecom Corp. — on the superfast network will start next year, Wang told reporters on Wednesday after the company’s earnings filing. Sharing 5G infrastructure could save the companies involved as much as 270 billion yuan ($38 billion) in capital expenditure over the next five years, Kevin Chen, an analyst at China Merchants Securities Co., wrote in a note to clients.

• Huawei 6G?
  Huawei researching 6G cellular technology in Canada: Report / Sixth Tone

Huawei has begun researching 6G cellular technology in Ottawa, Ontario, according to an exclusive report Tuesday from Canadian media outlet The Logic… 

Sixth Tone was unable to reach Huawei by time of publication, and the company has not commented publicly on Tuesday’s report…

[earlier this year] the president of Huawei’s 5G product line predicted that 6G technology will not arrive until 2030.

• Ping An profits
  China’s Ping An Insurance Group profit surges 68.1 pct in H1 / Xinhua
  “For the six months of the year, Ping An’s individual clients increased by 9.5 percent year-on-year.”

• The fruits of Thailand’s free trade agreement with China
  Thai mangosteen exports to China enormously increase under FTA dealings / Xinhua
  “Thai mangosteen exports to China have earned 229.4 million U.S. dollars and accounted for a 408 percent increase during this year’s first half, compared to the same period last year.”

SCIENCE, HEALTH, AND THE ENVIRONMENT: 

• Endangered species
  Proposed expansion of China’s protected species list should be good news but won’t end pangolin trade / EIA International
  “China’s National Forestry and Grasslands Administration is in the process of revising the country’s list of protected wildlife species, as revealed by a document leaked online comprising a new draft list of protected species alongside a call for feedback from Government agencies. This is the first time the list has been overhauled since 1988.”

• Solar power
  Solar power in China is now cheaper than the grid in hundreds of cities / CNN

Solar energy in hundreds of Chinese cities is now cheaper than electricity supplied by the national grid, and it can even compete with coal-fired power in 75 of them, a new study has found.

Some 344 Chinese cities were found to have solar systems producing energy at lower prices than the grid, without any subsidies, according to the research published in the journal Nature Energy. 

• Climate change
  Chinese less troubled by climate change than others, study shows / Sixth Tone
  “Outside of younger people, women, and the urban middle class, few demographics in China are particularly concerned about climate change,” according to a first-of-its-kind paper published the China Quarterly.
  The U.S. left a hole in leadership on climate. China is filling it. / Politico
  An article based on an episode of Politico’s Global Translations podcast, with interviews by several notable analysts of China’s clean energy development.

• Swine fever to wipe out “almost a quarter of the world’s pork supply”
  Swine fever is killing vast numbers of pigs in China / NPR

“Every day, we hear of more outbreaks,” says Christine McCracken, a senior analyst at RaboResearch, which is affiliated with the global financial firm Rabobank.

McCracken and her colleagues now estimate that by the end of 2019, China’s production of pork could be cut in half. “That’s roughly 300 million to 350 million pigs lost in China, which is almost a quarter of the world’s pork supply,” she says. “It’s a massive number.”

POLITICS AND CURRENT AFFAIRS:

• Indonesia
  Indonesia still wants Chinese investments, but Jokowi is also wooing Middle East money / SCMP

Indonesia made great strides in reforming its economy during the first term in office of President Joko Widodo, popularly known as Jokowi…But securing capital remains a big challenge…  

Finance minister Sri Mulyani says foreign investment is crucial to the economic ambitions of Southeast Asia’s biggest economy because the amount coming from domestic sources is limited and largely hindered by the country’s poor savings ratio…

While Jokowi’s administration has actively wooed Chinese investments, Indonesia is also diversifying its sources of funds and has looked to the oil-rich countries of the Gulf.

• South China Sea
  Beijing starts military exercise in disputed South China Sea as tensions with Vietnam rise / SCMP
  “Ships were prohibited from entering three locations in and near the Paracels from Tuesday morning until Thursday afternoon, according to three brief notices published on the Maritime Safety Administration website on Monday. No details were given of the purpose of the training, nor which military units would be involved.”

• Samoa
  Samoa prime minister plays down fears over China in Pacific / AFP

Pacific island leaders do not share Australia’s concerns about China’s rising influence in the region, Samoa’s Prime Minister Tuilaepa Malielegaoi said Thursday (Aug 15).

While Canberra and Washington fear China’s long-term ambition is a military base in the Pacific, Malielegaoi said he was more interested in the practical aid Beijing offered.

SOCIETY AND CULTURE:

• Documentary director breaks ranks with Beijing film authorities
  Chinese documentary director Zhu Yu defies Beijing’s boycott of Taiwan’s Golden Horse awards / SCMP

The film, whose title loosely translates as Young People Question Taoism [少年問道 shàonián wèn dào], is directed by Beijing Film Academy graduate  Zhū Yù 朱昱 and is the only mainland Chinese production still registered for the festival… 

[The film’s Taiwanese promoter] added that Zhu, a devout Taoist, had “no political intentions at all” in registering the film for the awards, and had no intention of promoting the film in Hong Kong or mainland China.

“There is no commercial motivation behind it whatsoever. She told me she prayed to the ancient Taoist sage Master Changchun and he told her she should continue letting the film be registered. She then realised it was her fate to carry on the same path,” he said.

• Childbirth and tradition
  Why new Chinese moms are opting to ‘sit the month’ in style / Sixth Tone

Sitting the month — or zuò yuèzi 坐月子 in Chinese — is a traditional form of postpartum confinement meant to help women recover and stay healthy after giving birth…

In recent years, new postpartum medical facilities known as yuezi centers have emerged in cities across China. Many of these centers are not cheap — a friend of mine booked a monthlong stay at a luxury yuezi center for more than 100,000 yuan ($14,200) — but they offer an attractive option to urban women trying to stay in touch with traditional culture on their own terms, while still enjoying the fruits of modern life. Or in the words of my friend, because “(they let you) sit the month scientifically, without having to worry about your family’s old ideas.” 

• A Chinese police car in Australia
  WA police investigating Chinese cop livery vehicle driving on Perth streets / WAMN Perth News
  “WA Police…are investigating the recent spotting of a Chinese Police livery vehicle roaming the street of Perth. The picture shows the bonnet of the vehicle wrote ‘Police’ [警察 jǐngchá] in Chinese characters, a China Police badge on the side with ‘Public Safety’ [公安 gōng’ān ] in Chinese characters.”

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Mass internment in concentration camps, forced labor, parent-child separation: These are just a few of the realities of life for Uyghur Muslims in China’s Xinjiang region. Scholar Darren Byler explains.

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