Carrie Lam denies wanting to resign; swine flu and heart disease drugs

Dear Access member,

Please join us for a Slack Q&A about Hong Kong this Thursday, September 5, at 10 a.m. New York time (10 p.m. Hong Kong time) with Antony Dapiran. Antony previously appeared on Sinica twice: once in June to discuss the beginning of the protests, and again in July, following the occupation of the Legislative Council. If you haven’t already joined the Slack channel, click here to do so. 

Our word of the day is “struggle”: 斗争 dòuzhēng. See story #2.

—Jeremy Goldkorn, Editor-in-Chief

The China Project illustration

1. Carrie Lam denies wanting to resign  

“For a chief executive to have caused this huge havoc to Hong Kong is unforgivable. It’s just unforgivable. If I have a choice, the first thing is to quit, having made a deep apology, is to step down.”

Those are the words of Hong Kong chief executive Carrie Lam, as recorded on tape at a gathering last week and obtained and published on September 2 in a bombshell report by Reuters. At this meeting with city businesspeople, Lam also said:

• There is a “huge degree of fear and anxiety amongst people of Hong Kong vis-a-vis the mainland of China, which we were not sensitive enough to feel and grasp.”

• Her “room for maneuvering is very, very, very limited” because the Hong Kong chief executive “has to serve two masters by constitution” — Beijing, and the people of Hong Kong. 

• Beijing is willing to exercise patience. “I can assure you that Beijing does not have a deadline. They know this will ripple on…they and ourselves have no expectations that we could clear up this thing before the 1st of October” — the 70th anniversary of the founding of the People’s Republic of China. Beijing “has absolutely no plan to send in the PLA [People’s Liberation Army],” she added. 

This follows a separate report by Reuters last week that even more directly illustrated the lack of promised autonomy for Hong Kong’s government: Lam had “submitted a report to Beijing that assessed protesters’ five key demands and found that withdrawing a contentious extradition bill could help defuse the mounting political crisis in the territory.” But the “Chinese central government rejected Lam’s proposal to withdraw the extradition bill and ordered her not to yield to any of the protesters’ other demands at that time.” 

Lam responded to the report (per a Reuters video) with “disappointment,” and contradicted her recorded statements about wanting to resign. However, she confirmed the authenticity of the recording, saying it had violated “Chatham House rules.” 

Beijing’s growling dog website Global Times further confirmed the authenticity of Reuters reporting by calling it “fake news.”

Other news from and of Hong Kong

“Singapore’s hotel occupancy rates have climbed to their highest in over a decade as travelers and business events switched from Hong Kong, where pro-democracy protests have slammed tourist numbers and wider business sentiment,” reports Reuters. 

“A state-backed disinformation campaign used by China to sow political discord and discredit pro-democracy protesters in Hong Kong is more widespread than previously thought, according to a new report released [by] the Australian Strategic Policy Institute,” says Bloomberg via Straits Times. Some of the accounts recently used for spreading misinformation about Hong Kong “date back years and have been used in a series of state-sponsored disinformation operations targeting Beijing’s political opponents, including an exiled billionaire, a human rights lawyer and a bookseller targeted by officials for distributing tales of China’s political elite.”

“Lithuania on Monday summoned China’s ambassador over the involvement of embassy staff in an incident at a rally in Vilnius last month backing Hong Kong’s pro-democracy protesters,” reports Agence France-Presse. “Embassy staff ‘were involved in organizing unlawful actions’ when counter-demonstrators approached the rally, the foreign ministry said.”

“A political activist who was barred from running in elections to Hong Kong’s legislature on political grounds has won an appeal against the administrative decision,” reports Radio Free Asia. “Former 2014 student protest leader Agnes Chow (周庭 Zhōu Tíng), now a member of the political party Demosisto, was disqualified from running in a LegCo by-election in March 2018 because her political views were judged to be pro-independence.”

“The owner of a store selling protective gear to Hong Kong’s anti-government protesters has vowed to continue his business despite his arrest last weekend,” reports the South China Morning Post.

2. Xi Jinping: Prepare for ‘struggle’ 

Bloomberg reports (porous paywall):

Oxford Economics, Bank of America Merrill Lynch, and Bloomberg Economics on Tuesday all cut their forecasts for [China’s] gross domestic product growth in 2020 to below 6 percent as a result of increasing risks from the tariff war with the U.S. In addition, Bank of America’s Helen Qiao and others are warning that the government’s current approach to stimulus is proving insufficient…

That’s endangering President Xi Jinping’s ability to claim China has reached a “moderately prosperous society” that has doubled 2010 GDP by next year, as a rate above 6 percent in 2019 and 2020 would be needed.

This is just the latest economic warning signal from China, which perhaps explains why General Secretary Xí Jìnpíng 习近平 has been using the word struggle (斗争 dòuzhēng) with increasing frequency in recent weeks. All central state media today lead with a report (English, Chinese) on a speech Xi gave to Party officials, characterized by Reuters as a warning that the country is “facing a period of ‘concentrated risks’”:

Xi emphasizes “struggles” to achieve national rejuvenation

President Xi Jinping on Tuesday called on officials, particularly young officials, to maintain a fighting spirit and strengthen their ability to struggle, to strive for achieving the two centenary goals and the Chinese Dream of national rejuvenation.

Xi reminded the officials of both a hard-won historic opportunity and a series of major risks and tests the country faces, adding that maintaining a fighting spirit and strengthening the ability to struggle is a must in meeting the targets set by the Party.

He warned of growing complexity of risks and tests which can be “unthinkably challenging,” stressed the long-term nature of various struggles, and called for the courage to fight and the mettle to win.

Xi is not just preparing the nation and his cadres for economic hard times. He is also continuing his campaign of directly linking himself to China’s revolutionary leaders, including and especially the former chairman Mao. See this note from the Twitter account of a perceptive Beijing-based observer of Chinese politics:

Xi is really a faithful student of Mao…Throughout the speech, the key word is 斗争 “struggle” — which on my count appears 58 times in the state media readout…

You’ll recall Mao’s famous words on “struggle”:… struggle with the Heaven, the joy is boundless; struggle with the Earth, the joy is boundless; struggle with the People, the joy is boundless.

That same text from Mao in Chinese:
与天斗，其乐无穷；与地斗，其乐无穷；与人斗，其乐无穷
yǔ tiān dòu, qí lè wúqióng; yǔ dì dòu, qí lè wúqióng; yǔ rén dòu, qí lè wúqióng

3. Swine fever in China may lead to heart disease drug shortage

Heparin is a widely used anticoagulant that prevents the formation of clots within the blood stream. It is, per Bloomberg (porous paywall), “a critical drug for heart attack patients and is used in surgery to stop clots.” 

• Now “one major producer of heparin, a subsidiary of Germany’s Fresenius SE, said it has started limiting allocations of the drug ‘due to a potential shortage of raw ingredient.’”

• China’s pork industry supplies much of the world’s active pharmaceutical ingredient (API) of heparin. The API is made from mucosal tissues of pig intestines, or bovine lungs. In the 1990s, concerns about mad cow disease led heparin manufacturers to switch to pig intestines.

• As many as 200 million pigs may have died in the African swine fever epizootic that has spread to most pig-farming regions of the country. With pork prices rising dramatically — more than 25 percent in August from July — the government is seeing the crisis as a “major political task,” according to the Financial Times (paywall). However, feeding the people is likely to be a priority over providing ingredients for foreign drug makers. 

• The U.S. Food and Drug Administration (FDA) “said that while there were shortages of some heparin products, there was sufficient overall supply.” The FDA “has listed two companies, Baxter International Inc. and Pfizer Inc.’s Hospira,” as having “shortages of heparin going back to November 2017.” 

• In 2008, tainted raw materials for heparin, some apparently from China, “made their way into the U.S. drug supply,” resulting in the deaths of more than 200 patients. Now “a congressional committee has raised concerns that shortages could lead suppliers to cut corners again, putting patients at risk.”

See also: China’s pork supply worries increase as local authorities offer discounts to quell rising anger over soaring prices in the South China Morning Post.

4. American consumers about to face tariff pain

“Americans better make the most of their Labor Day discount shopping. It could be the last they see for a long time,” advises the Washington Post: 

A 15 percent tariff that went into effect September 1 on about $112 billion of goods imported from China will start pushing up prices of clothing, shoes and other consumer goods arriving at U.S. ports this week.

That should start taking a serious toll on shopping in the U.S. While 82 percent of intermediate inputs are already affected by tariffs, just 29 percent of consumer goods have had levies to date. That figure will now rise to 69 percent, and 99 percent when a final tranche is imposed on December 15, according to the Peterson Institute for International Economics.

See also:

• ‘Final nail’ in the coffin? Trump’s new tariff ante on China will hammer Texas businesses and consumers / Dallas News

• In escalating trade war, U.S. consumers may see higher prices / Associated Press

“The yuan neared 7.2 to the dollar, less than a month after Beijing let the currency pass a threshold it had previously defended,” reports the Wall Street Journal (paywall): “Chinese authorities are seeking to offset the impact of higher charges on exports to the U.S. without sparking a stampede of money abroad, or depleting foreign-exchange reserves, analysts and investors say.”

“Chinese authorities are looking into another case involving FedEx, with the US shipping firm accused of ‘illegally accepting controlled knives to be sent to Hong Kong’ from the mainland,” according to the South China Morning Post. 

Oh no, don’t go after the pandas! “After media reports emerged suggesting that the trade war between the Trump administration and the Chinese government could cause the Smithsonian National Zoo to lose its beloved pandas, zoo officials said they are hopeful that China will allow Washington, D.C., to keep its panda program going,” says The Hill.

—Jeremy Goldkorn

5. Zara apologizes again, denies supporting strikes in Hong Kong 

Fast-fashion giant Zara, which apologized last year for listing Taiwan as an independent country on its website, has again found itself caught in the vortex of China-related political controversy over Hong Kong, where protests have been escalating for months. 

On September 3, the apparel retailer issued a statement (in Chinese) on Chinese microblogging site Weibo, saying that as a “long-term advocate” for the “one country, two systems” policy, it “fully endorses China’s territorial integrity.”

The statement came as an official response to mounting doubts from mainland China regarding the brand’s stance on China’s territorial disputes, which spiked after mainland internet users found out that Zara closed four Hong Kong stores on September 2, when a large-scale strike  took place across the city, involving hundreds of shops, schools, and offices.

For details, click through to The China Project.

—Jiayun Feng

BUSINESS AND TECHNOLOGY:

• Evergrande makes desperate lurch into electric cars
  China’s most indebted firm is too big to fail / Bloomberg (porous paywall) 

There’s a lot working against China’s most indebted property firm. China Evergrande Group is sitting on $113.7 billion in debt and its core profit fell 45 percent in the first half of the year. Real-estate growth is slowing, with banks under orders to curb home loans. 

[But] the company, whose portfolio already includes theme parks and a football club, now wants to become the world’s biggest electric-vehicle maker in the next three to five years. It’s burning through precious cash — 160 billion yuan ($22 billion) to build factories in Guangzhou.

• Selfie apps, ethics, and artificial intelligence
  Chinese ‘deepfake’ app censured over privacy concerns / Sixth Tone
  Zao, an app that can put faces on the bodies of stars and celebrities and in effect create “deepfakes,” has become China’s second most widely downloaded free app. But its growth has taken a hit over concerns raised over its terms and conditions, which give the company “rights to user-supplied images within the app, as well as the right to distribute or sell such images.”
  The app is available globally from Apple, and at various Chinese app stores. 
  Behind the rise of China’s facial-recognition giants / Wired
  AI unicorn Megvii is planning a Hong Kong IPO despite the political uncertainty in the city. Its filings reveal many contracts with municipal governments in China to install facial-recognition technology, including systems at public housing projects to keep non-residents from coming in.
  Controversial artificial intelligence (AI) specialist and IPO candidate Megvii is finding itself at the center of yet another debate, this time on how its products may infringe on students’ privacy.
  AI startup Megvii gets knuckles rapped over class monitoring demo / Caixin
  “This time the buzz is coming from chatter over a photo that went viral online, taken from an event where Megvii’s software was hard at work monitoring and analyzing teenage students’ class behaviors.”

• Athletic footwear company Anta kicks short sellers in the head
  Billionaire founder of Lululemon making millions off China bet / Bloomberg (porous paywall)
  Dennis Wilson, the “billionaire founder of Lululemon Athletica…has made $32.3 million in three months off his investment in Anta Sports Products,” a Jinjiang, Fujian-based company.

Dennis Wilson has seen his stake in China’s biggest sportswear maker gain 32 percent after strong earnings boosted Anta’s shares last week, extending a rally that’s now at 72 percent for the year. Anta reported 28 percent growth in net income for the first half of 2019, beating analysts’ estimates.

Anta’s continued rally comes in defiance of attacks by short sellers Blue Orca Capital LLC and Muddy Waters Capital LLC, which issued critical reports less than six weeks apart earlier this year questioning the company’s accounting and corporate governance. Investors shrugged off the allegations — which the company said were untrue and showed a lack of knowledge about business operations — and sent its stock to an historic high…

Wilson’s 0.59 percent stake in Anta is now valued at HK$1.03 billion, up a third from the HK$778 million he paid at the end of May.

• New yuan notes and coins
  China issues new edition of renminbi bills, coins / Xinhua
  Last week, new editions of the 50-, 20-, 10-, and one-yuan banknotes as well as coins of one yuan, 0.5 yuan, and 0.1 yuan were released. Click through to Xinhua for images, or see higher-quality scans here. 

SCIENCE, HEALTH, AND THE ENVIRONMENT: 

• Frack, baby, frack
  China aims to rev up shale gas drive, wean itself off imports amid U.S. trade row / Reuters via Yahoo

China aims to slash its growing dependence on gas imports by boosting domestic projects like shale fields as the security of its energy supply comes under the spotlight amid a festering trade war with the United States…

[A] report, released on Saturday by the oil and gas department at the National Energy Administration (NEA) and a State Council research arm, calls for boosting natural gas production in key resource basins in the southwestern province of Sichuan, the Erdos basin in the north and offshore China.

According to the report, China’s gas consumption will rise by about 10 percent this year to 310 billion cubic meters (bcm), and to continue growing until 2050. Though slowing from last year’s 17.5 percent, 2019’s growth still represents an annual addition of 28 bcm, faster than the annual average growth of 19 bcm during 2007-2018, the report said.

• New energy vehicles — hydrogen fuel cells
  China’s installed capacity of hydrogen fuel cells soars sixfold in first seven months / Xinhua

China’s installed capacity of hydrogen fuel cells surged 642.6 percent year-on-year to 45,876.9 kilowatts in the first seven months of this year despite a subsidy withdrawal from the new energy vehicles (NEVs) sector, according to industry data…

The hydrogen fuel cells are still mainly used for powering buses and special purpose vehicles instead of passenger cars, due to the high cost and a lack of technical support facilities such as hydrogen stations, the report said.

POLITICS AND CURRENT AFFAIRS:

• Eight students die in school attack
  Attack at school in China leaves at least 8 children dead / NYT (porous paywall)
  “A man attacked an elementary school in [Enshi city, Hubei province], killing at least eight students and wounding two others, the police said.” The police “did not mention the method of attack or a possible motive,” but a Chinese media report, since censored, said he was “released last year after serving an eight-year sentence for attempted murder,” having “stabbed his girlfriend 40 times because of ‘emotional problems.’”

• Xinjiang “re-education” camps are at capacity — time to fill up the prisons?
  China’s prisons swell after deluge of arrests engulfs Muslims / NYT (porous paywall)
  Chris Buckley reports that in addition to the “vast network of re-education camps and a pervasive system of surveillance to monitor and subdue millions from Muslim minorities in the Xinjiang region,” Beijing is stepping up the use of conventional prisons, convicting and incarcerating Muslims in record numbers:

Courts in Xinjiang — where largely Muslim minorities, including Uighurs and Kazakhs, make up more than half of the population — sentenced a total of 230,000 people to prison or other punishments in 2017 and 2018, significantly more than in any other period on record in decades for the region.

• Other news of Xinjiang:
  Sources say China used iPhone hacks to target Uyghur Muslims / TechCrunch
  “A number of malicious websites used to hack into iPhones over a two-year period were targeting Uyghur Muslims, TechCrunch has learned. Sources familiar with the matter said the websites were part of a state-backed attack — likely China — designed to target the Uyghur community.”

SOCIETY AND CULTURE:

• Obituary for a liberal
  Su Shaozhi obituary / Guardian
  “The political scientist Sū Shàozhì 苏绍智, who has died aged 96, was a campaigner for reform of the Chinese Communist party in the post-Mao years, until he was forced into exile after the Tiananmen Square massacre of 1989. Su was eventually allowed to return to China, but the news of his death has been ignored except on unofficial websites.”

• Cinema
  Venice film review: ‘No. 7 Cherry Lane’ / Variety
  A review of the first film in a decade and the first animated feature by “veteran Hong Kong auteur” Yonfan (楊凡 Yáng Fán). 

[T]his frequently dream-distracted vision of young love against the turmoil of the 1967 Hong Kong riots practically defies critics not to resort to that hoarily overused term “valentine to cinema”… Many will be left bewildered by the sheer, deranged obsessiveness of Yonfan’s nostalgia head-trip — indeed, there were whistles and walkouts at its first Venice press screening — but accustomed Yon-fans and patient adventurers will fall madly for its madness.

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