Cathay Pacific’s ‘week from hell’

Access Archive
Jeremy Goldkorn

Dear Access member,

Today’s word of the day is “hell”: 地狱 dìyù, literally “underground prison.” 

On that note, have a great weekend!

—Jeremy Goldkorn, Editor-in-Chief

1. Cathay Pacific’s ‘week from hell’ 

After a week of rising anger and violence, and potentially pivotal moments for the future of the city (see Week in Review below), “Hong Kong police have banned two upcoming protests planned for this weekend,” according to Hong Kong Free Press. “The force also revealed that they have arrested 748 people since the mass anti-extradition law protests began in June” and “115 of them have been charged.” However, protesters plans to go ahead with demonstrations. 

Here is the rest of the news from Hong Kong:

“The chief executive of Cathay Pacific Airways stepped down on Friday following a storm of criticism from the Chinese government and state news media over its employees’ participation in the territory’s protests,” the New York Times reports. 

It’s not clear if he resigned voluntarily or if there was pressure from Beijing. The “most remarkable part of this is Beijing’s influence over a Hong Kong private company. Chinese state TV announced the resignation of Cathay’s CEO before Cathy did & Beijing told its major shareholder to make “management changes, according to a FT source,” Financial Times reporter Sue-Lin Wong tweeted. 

This was Cathay’s “week from hell” in Bloomberg’s description. To recap: A week ago, Beijing banned Cathay Pacific flight crew who protest from Chinese airspace. Bloomberg reported that “Chinese state-run companies have told employees to avoid taking Cathay Pacific Airways flights.” The company then warned its staff that those who “support or participate in illegal protests” could be fired, and later did fire two of its pilots.

Next up: Big Four accounting firms? The nationalistic tabloid Global Times is identifying them as targets, as it cited an anonymous employee at EY as claiming an internal letter “shows the company condones violent behavior of anti-government secessionists.” 

“These are the foreign brands apologizing to China amid Hong Kong tensions” is a post on What’s on Weibo listing the companies in trouble for matters related to Hong Kong’s status as part of China and the protests. Also see on The China Project: From Versace to Calvin Klein: Major brands apologize for undermining China’s territorial sovereignty by Jiayun Feng, and The impossible politics of doing business in “China” by Tianyu M. Fang.

In Australia, “Hong Kong pro-democracy demonstrators and Beijing supporters clashed in Melbourne as a series of heated protests took place across” the country on Friday, reports the South China Morning Post. 

Not just Australia: “heated exchanges on university campuses in Australia, New Zealand and Canada have led to accusations that Beijing may be attempting to stoke nationalist sentiment beyond its borders,” says Bloomberg (porous paywall). See also: The battle for Hong Kong Is being fought in Sydney and Vancouver in the New York Times (porous paywall).

Finally, what information is Beijing receiving about the situation in Hong Kong? It’s probably not accurate, according to the South China Morning Post, which says, “The labyrinthine information network spanning multiple ministries across the central government — each with its own lines of reporting — is confusing even to insiders.” An associate law professor at Beihang University in Beijing also told SCMP that it is quite likely there is a “pro-establishment bias” in the information stream, and that “the voices of pan-democrats and young localists are marginalized.” 

As for what ordinary mainland Chinese hear about Hong Kong, the BBC has a report on that.

—Lucas Niewenhuis

2. Beijing issues white paper defending Uyghur internment camps

In July, facing growing international pressure about the internment camps that are imprisoning more than a million Uyghurs, the Chinese government released a white paper on Xinjiang  which claimed that Uyghurs are not Turkic people. 

Now Beijing has issued another white paper about Xinjiang. This time it’s a defense of the internment camps system. From Xinhua: 

China released a white paper on vocational education and training in Xinjiang Friday.

There are six chapters in the white paper: urgent needs for education and training, law-based education and training, content of education and training, protection of trainees’ basic rights, remarkable results in education and training, and experience in countering extremism.

The white paper, published by the State Council Information Office, said that terrorism and extremism are the common enemies of humanity, and the fight against terrorism and extremism is the shared responsibility of the international community.

Here is the full text of the white paper: English, Chinese.  

—Jeremy Goldkorn

3. Japan surpasses China as top holder of U.S. Treasuries

Is a global recession coming? This question has been posed by every major business and financial news organization in the United States in the last few days. The consensus view: not necessarily, but things aren’t looking good. 

How long before such gloomy sentiment inspires a change of heart on tariffs, or a new tweet-negotiating tactic from the impetuous American president? As we live with this uncertainty, here’s the latest from the U.S.-China techno-trade war, day 407 and related matters:

“Japan surpassed China in June as the top holder of U.S. Treasuries as the trade war between the world’s two largest economies intensified,” reports Bloomberg (porous paywall).

Japan increased its holdings of U.S. bonds, bills and notes by $21.9 billion to $1.12 trillion, the highest level in more than two and a half years, according to data released by the Treasury Department on Thursday. Meanwhile, China’s ownership rose for the first time in four months to $1.11 trillion, up by $2.3 billion.

“U.S. technology and telecoms companies still do not know whether they will be able to sell to Huawei after Monday, when a temporary export licence runs out, leaving many in the industry frustrated over the lack of information from the Trump administration,” reports the Financial Times (paywall). 

Despite Trump’s demands for agricultural purchases, “concerns over an excessive reliance on the United States for supplies of soybeans, coupled with China’s now weaker position in the market when buying the often-controversial agricultural product, are two key factors underlying Beijing’s reluctance to place large orders,” according to “industry insiders” cited by the South China Morning Post. Meanwhile Bloomberg says (porous paywall) that China is ramping up its imports of soybean from Brazil, “rebuffing U.S. crops.” 

However, “China made its biggest purchases of U.S. pork in seven weeks last week,” reports Reuters. “The world’s largest pork consumer bought 10,211 tonnes of U.S. pork between August 2-8 for shipment in 2019 as a highly contagious swine disease continued to ravage the Chinese hog herd.” 

Is the trade war making Xí Jìnpíng 习近平 stronger? Reuters reports: 

Many in Beijing believe U.S. President Donald Trump’s approach to the trade war, and the Chinese government’s effort to use Washington as a scapegoat for the Hong Kong unrest, provides Xi with convenient and effective short-term political cover.

U.S. Commerce Secretary Wilbur Ross “was a senior executive from 2006 until he joined Trump’s cabinet in February 2017” at a company called Invesco, which “has become the top foreign manager of Chinese money in China over the past year through its joint venture Invesco Great Wall Management,” reports Reuters. Is there anything dodgy here? Maybe: “American tariffs appear to have helped at least one Invesco steel investment in China, according to interviews and company disclosures.” Invesco and Wilbur Ross’ own company sold their equity stake in a Chongqing steel company in late 2018, “realizing a 1.6 times return on investment in about 12 months.”

A China-owned oil tanker stealthily changed its name in an “apparent effort to evade U.S. sanctions” on Iran, reports Reuters. “A U.S. government official had warned ports in Asia not to allow the ship to dock, saying it was carrying Iranian crude in violation of U.S. economic sanctions.”

Iconic American tractor manufacturer “Deere & Co.’s third-quarter earnings on Friday missed Wall Street estimates, hurt by the U.S.-China trade war that has dented the demand for farm equipment, forcing the company to revise down its full-year profit and sales growth forecasts,” reports Reuters. 

“Where are all the Chinese tourists?” That is the lament of American retailers facing a drop in big-spending Chinese tourists, according to the Financial Times (paywall). The drop is attributed to new difficulties for Chinese citizens to get U.S. visas, and Chinese tourists generally feeling less welcome. 

4. Want to invest in (half) a Chinese VPN?

The South China Morning Post reports:

China’s effort to further up open up and attract foreign investment continued with the city of Beijing unveiling plans to allow overseas firms to invest in virtual private network services within a trial zone by the end of the year.Foreign investors w

Foreign investors will be allowed to invest in virtual private network (VPN) services, which allow users to bypass China’s Great Firewall to access services such as Google and Facebook which are currently blocked, although foreign ownership in such providers will be capped at 50 per cent, the Beijing Municipal Bureau of Commerce announced on Thursday.

This comes in the same week that Beijing announced foreign capital could invest in “online games downloading and online audio-visual program services on the basis of content supervision and data security.”

VPNs, gaming, films, TV, and music in China: it would take a much braver soul than I to enter those industries in China right now. 

—Jeremy Goldkorn 

The biggest story: Hong Kong

  • Beijing began to label Hong Kong protestors as terrorists in a speech by Yáng Guāng 杨光, the spokesperson for the Chinese government’s Hong Kong and Macau Affairs Office. Xinhua’s language went a little further: “Hong Kong will slide into a bottomless abyss if the terror atrocities are allowed to continue.” These are ominous signs of just how ruthless a crackdown the government could be preparing to justify. 

  • At the same time, anger at police grew, after they shot tear gas into a subway station and blinded a female medical volunteer in one eye by pelleting her with a beanbag round. Activist Nathan Law (羅冠聰 Luó Guāncōng) called August 12 “the single most violent day in more than two months of the Hong Kong protests as we see the police all across town acting completely out of their control.” 

  • The Hong Kong airport was shut down on August 12, after thousands of protestors filled the main terminal building. 

  • Then, the protests turned ugly at the airport on August 13, after protestors assaulted “at least three men” amid intense “fear of infiltrators” — such as suspected undercover Hong Kong police, or suspected agents from mainland China, according to the BBC. “Hong Kong terrorists besiege mainland tourists” (香港恐怖分子围攻内地游客 xiānggǎng kǒngbù fènzi wéigōng nèidì yóukè) became a trending hashtag on Weibo for several hours. 

  • Protesters bound the wrists of one of the men with cable ties. They went through his bags and found a blue “I ♥︎ police” T-shirt of the kind “worn by thugs last week” and proceeded to interrogate him aggressively. The man appeared to faint before eventually being taken away by paramedics. CNN reporter James Griffiths called it “the most out of control, angry and just plain nasty I think I’ve ever seen a protest in Hong Kong.” 

  • That man was identified as Fù Guóháo 付国豪, a state media employee working for the Global Times. Fu was immediately hailed as a hero in mainland China, and state media and millions of Chinese internet users piled on to amplify anti-protestor messages — see Brutalities at Hong Kong airport resemble acts of terrorism in Xinhua, or a roundup in China Digital Times. 

  • It is still unlikely that Beijing will send troops to Hong Kong, according to multiple analysts. Instead, scholar Sebastian Veg suggests that Beijing appears to be implementing a “4-pronged strategy”: intimidate protestors with police, use the judiciary for politicized prosecutions, reunite the pro-establishment camp, and turn Hong Kong public opinion against the movement. The punishment of Cathay Pacific is also a portent: companies that display any sympathy for the protesters will likely be targeted.  

  • Senior Hong Kong police officers contradicted Beijing on its theory that foreign “black hands” are fomenting the protests, according to reporting by The Telegraph. 

Other stories that caught our eye this week:

  • Baidu dropped out of China’s top five internet companies by market cap, and its former status as one of the “big three” Chinese internet firms — Baidu, Alibaba, Tencent — is history. 

  • Huawei employees helped African governments to spy on opponents in Uganda and Zambia, reporting by the Wall Street Journal revealed. 

  • In techno-trade war news: Two former central bankers, Chén Yuán 陈元 and Zhōu Xiǎochuān 周小川, predicted expanded conflict between China and the U.S., including a “financial war.” Trump made his first public admission that Americans pay for tariffs, as he delayed some of the taxes until December 15 to avoid hurting U.S. consumers’ holiday shopping. Beijing called the tariff delay a “positive signal,” but Commerce Secretary Wilbur Ross denied that the tariff delay was a quid pro quo. China announced that it “has to take necessary countermeasures” to the tariffs, though a possible non-tariff countermeasure became apparent: Cisco said that it is being shunned by state-owned enterprises in China. 

  • A Uyghur-American academic, Elnigar Iltebir, was appointed as director for China at the National Security Council, indicating that parts of the Trump administration are concerned about developments in Xinjiang, even if Donald Trump and Steven Mnuchin are not. 

  • A plea for the U.S. government to treat Chinese scholars fairly was signed by 19 universities and associations. 

  • Social credit blacklists were criticized by two pieces in popular Shanghai-based website The Paper and by Qianjiang Evening News, a major Zhejiang newspaper. 

  • Ninety percent of Canadians have negative impressions of China, and sixty percent of Americans feel the same way, according to new survey data. 

  • Economic growth cooled to 6.2 percent for the second quarter — and as always, economists widely agreed that these numbers were “far too smooth to be realistic.”

  • Foreign teachers are being detained and deported in rising numbers, according to multiple reports 

  • The “mainlanders can’t afford pickles” affair: Chinese internet users have been unleashing their fury on Taiwanese financial expert Huang Shih-tsung (黄世聪 Huáng Shìcōng) after he said China’s slowing economy had made pickles unaffordable for mainlanders.

  • The People’s Daily wants to censor Amazon: The Communist Party’s main newspaper published an opinion piece accusing the company of “disrespecting the sovereignty and insulting the image of other countries.” 

BUSINESS AND TECHNOLOGY:

Kai-Fu Lee, a prominent venture capitalist in China and founder of Sinovation Ventures, says his firm’s new startup should be able to reach $100 million in revenue next year and go public the year after.

AInnovation, established in March 2018, develops artificial intelligence products for companies in industries such as retail, manufacturing, and finance. Its customers include Mars Inc., Carlsberg A/S, Nestle SA, Foxconn Technology Group, China Everbright Bank Co. and Postal Savings Bank of China Co.

  • Dealing with household debt
    Regulator tightens oversight of consumer lending as household debt booms / Caixin (paywall)
    “Since the end of June, local bureaus of the China Banking and Insurance Regulatory Commission (CBIRC) in cities including Shanghai, Shenzhen and Ningbo, and provinces including Yunnan have found at least 13 cases where banks violated rules on the approval of personal loans, including credit card borrowing, according to Caixin calculations based on public records.”

  • Venture capital in Kenya from China’s leading African mobile phone brand
    China’s Transsion and Kenya’s Wapi Capital partner on Africa fund / TechCrunch
    “Starting in September 2019, Transsion Future Hub will work with Wapi Capital to select early-stage African fintech companies for equity-based investments of up to $100,000, Transsion Future Hub Senior Investor Laura Li told TechCrunch via email.”

  • State council wants borrowing to be cheaper
    China adds detail to long-awaited interest rate reform plan / Bloomberg (porous paywall)
    In a “move aimed at lowering borrowing costs for the economy,” the “State Council…ordered improvements to the formation of the Loan Prime Rate, the price of loans banks offer to their best clients. Officials intend to turn that into a new benchmark reference rate, according to a state media report late Friday.”

  • Steel industry
    Weight of history: Chongqing Steel and China’s state sector dilemma / Reuters
    “Baosteel and Four Rivers expect China’s steel industry to consolidate and reorganize. U.S. tariffs on steel could add pressure to those forces — and Chongqing Steel could benefit.”

  • Rare earth sales
    China court puts Fanya exchange’s rare earth stock up for auction / Reuters
    “The Chinese court auctioning off inventory formerly held by the now-defunct Fanya Metal Exchange has put two batches of rare earths, with a market value of around $41.5 million, up for sale on Aug. 31, along with antimony worth around $97 million.”

SCIENCE, HEALTH, AND THE ENVIRONMENT: 

  • Why China might fully move away from gas-powered vehicles
    Fossil fuel free: A plan to phase out China’s ICEVs / Council on Foreign Relations
    Lucy Best and Michael Collins analyze three apparent motivations for China to “phase out internal combustion engine vehicles (ICEVs) in favor of new energy vehicles (NEVs) by 2050,” as a leading think tank report proposed in a report in May:

One factor behind this policy direction is the technological dominance China would achieve should it become a leader in an auto industry increasingly projected to embrace green technology… 

Another reason behind the ICEV ban policy is that the anticipated decrease in fossil fuel use from NEVs would improve Chinese energy security… 

The final motivation for ICEV phase out is this policy’s public health and environmental benefits.

  • Animal conservation
    Saving Yunnan’s rare snub-nosed monkey / Caixin (paywall)
    “About 3,000 Yunnan snub-nosed monkeys are thought to remain in the wild, all confined within a relatively narrow area of 20,000 square kilometers (7,722 square miles) in northwestern Yunnan. The monkey is capable of living at higher altitudes than any other known primate aside from humans.”

POLITICS AND CURRENT AFFAIRS:

Last week, Duterte announced before members of the Federation of Filipino-Chinese Chambers of Commerce and Industry that he was going to China. “Did I not tell you before, that before my term ends, I will be talking about the [South] China Sea?”…The announcement is a marked departure from [his earlier] position of not displeasing China.

Some say that Duterte has been told of rumblings in the military who feel they have had enough of the Chinese blatant violation of Philippine laws. They feel, a source in the military said, that they have been rendered inutile in effectively performing their constitutional mandate to uphold the sovereignty and preserve the patrimony of the Republic of the Philippines.

  • China to dredge shipping lane in Argentina
    China set to deepen Argentine trade ties with bid for grains ‘superhighway’ / Reuters
    “Chinese state-owned construction giant CCCC is preparing a bid to dredge Argentina’s Parana River, the country’s main cargo superhighway that takes soy and corn from the Pampas farm belt to the shipping lanes of the south Atlantic and the world.”

  • Deep sea mining
    China extends domain with fifth deep sea mining contract / Chinadialogue
    The International Seabed Authority, a United Nations organisation headquartered in Jamaica, approved China’s fifth mining contract, “meaning China holds more mining claims than any other nation [and] the right to explore and potentially exploit 238,000 square kilometres…of the deep sea in areas outside national jurisdiction for cobalt, nickel, copper and other valuable minerals.”

  • Political competition and climate change for Pacific islands
    China’s Pacific climate pitch angers Australia, U.S. / Sydney Morning Herald

China’s special envoy to the Pacific, ambassador Wáng Xuěfēng 王雪峰…told Pacific Islands Forum members that China attached great importance to the “special concerns and legitimate demands” of small island countries in combating climate change. 

The Chinese climate pitch infuriated Canberra on Friday, coming after three days of tough discussions during which Mr Morrison talked up Australia’s commitment to climate change and contrasted its emissions and reliance on coal with that of China.

  • Bias against China analysts from China?
    Australia has too few home-grown experts on the Chinese Communist Party. That’s a problem / The Conversation
    Euan Graham writes, “This is a sensitive point, but universities should resist the temptation to hire China-trained academics as a quick fix to plug the expertise gap. Chinese-born Australians should of course be welcomed if they have received a liberal education outside of China. The language skills and knowledge they bring are invaluable.”
    Australian scholar David Brophy responds on Twitter: “Am I right in saying that this is the first explicit call we’ve seen for Australian public institutions to discriminate against people who were born/educated in China?”

SOCIETY AND CULTURE:

A Chinese education association under the Ministry of Education has suspended the membership of Swiss international education company EF due to “recent public opinion.”… 

The decision comes just over a month after seven English teachers working for EF in the eastern Chinese city of Xuzhou were detained after allegedly testing positive for drugs — a case that sparked heated discussion about the quality and character of foreign English teachers working in the country.

The music that Yunmao makes doesn’t fit into any one genre in particular: The company cheerfully pivots to whatever the market desires on any given day. But Chinese listeners refer to these viral, flash-in-the-pan hits as shénqū 神曲 — “god songs”.

FEATURED ON SUPCHINA

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Han Han’s racing film ‘Pegasus’ is the best Chinese movie of 2019 (so far)

For his third outing as a director, Han Han returns to his roots as a former race car driver with a fun race-car comedy. As a comedy, ‘Pegasus’ is able to make up for its thinly sketched cast with a great sense of humor.

Hong Kong artist Jackson Wang pulls out of 88Rising festival after expressing support for Beijing

Jackson Wang 王嘉尔 Wáng Jiā’ěr, a Hong Kong performing artist who has publicly supported Beijing and has faced intense criticism from those in Hong Kong, will no longer perform at the “Head In The Clouds” music festival this weekend in Los Angeles. 

China’s ‘social re-engineering’ of Uyghurs, explained by Darren Byler

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.

Why Chinese are good at math (and it’s not racial)

Kaiser Kuo gives an explanation for why the Chinese perform so well in math competitions. 

Mandopop Month: Rocket Girls 101 celebrates growth with emotional single ‘Wind’

As part of our monthlong series on mandopop, we highlight a song written in celebration of this 11-member girl group’s first anniversary. 

Sponsored: Education in China: How the gaokao exam shapes Chinese students’ lives and futures

For high-school graduates across China, two days in June mark some of the most life-changing moments in their lives. That’s when the gaokao, China’s university entrance exam, takes place.

SINICA PODCAST NETWORK

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TechBuzz China Ep. 50: TechBuzz Live: The Transpacific Experiment: How China and California Collaborate and Compete for Our Future

Episode 50 of TechBuzz China features author and journalist Matt Sheehan, author of a new book on the ties between California and China. 

Sinica Podcast: The world according to Jeremy Goldkorn

This special episode of Sinica, starring our very own Jeremy Goldkorn was recorded in New York on July 17. 

ChinaEconTalk: Reform and Opening with Soviet characteristics: Russian perspectives on China’s rise 

Jordan interviews Chris Miller, associate professor of international history at Tufts University and a specialist on Russian politics, economics, and foreign policy.

The Caixin-Sinica Business Brief, episode 94

This week on the Caixin-Sinica Business Brief: China’s yuan dropping below seven per dollar, Hengfeng Bank’s official approval for a restructuring plan, the story of Hu Huaibang 胡怀邦, Tesla’s Shanghai facility, Huawei’s new operating system “Harmony,” and more. 

PHOTO OF THE DAY

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BE京jing No. 20: Scaffold

This photo from Jiuxianqiao in October 2016 is part of BE京jing, a 30-part photo essay project by Gregorio Soravito. 

Jeremy Goldkorn worked in China for 20 years as an editor and entrepreneur. He is editor-in-chief of The China Project, and co-founder of the Sinica Podcast. Read more

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