A tipping point in Hong Kong?

Dear Access member,

Our word of the day is tipping point: 引爆点 yǐnbào diǎn — literally, “point of detonation.”

The China Project is hiring a business reporter! Please spread the news. 

Tune in to the CHINA Town Hall next Monday, November 18, at 6 p.m. EST. We will be simulcasting the event from our Facebook page for the National Committee on U.S.-China Relations. 

—Jeremy Goldkorn, Editor-in-Chief

A screenshot from a video of an intense standoff between protesters and police at the Chinese University of Hong Kong on November 12. 

1. A tipping point in Hong Kong?

“The Hong Kong government has taken the unprecedented step of warning 180,000 employees they will face immediate suspension and other disciplinary action if they are caught taking part in unlawful public activities,” says the South China Morning Post. 

• “Violent protests ground the city to a halt for the fifth straight day, causing widespread disruptions and a rising number of casualties.” This is the first time that protests have continued throughout the work week.

• Protesters occupied several university campuses. By Friday night, only Polytechnic University and Hong Kong University are still occupied, according to the SCMP. The New York Times has a feature and photo gallery of the scenes on campus, Inside Hong Kong’s battle-ready campuses (porous paywall), or see the SCMP video on Twitter. 

• The “toughest public comments yet” from Xí Jìnpíng 习近平 about the Hong Kong protests, and a slew of state media articles calling for action, came yesterday. The state press continues its unprecedented coverage of the protests on its Chinese-language websites: 

  • Hong Kong Liaison Office severely condemns mob attack and death of innocent citizens

  • Hong Kong Department of Justice: Never tolerate attacks on the judiciary

  • The Hong Kong subway that does not run on time

  • Spokesperson for Hong Kong and Macao Affairs Office of the State Council said in a speech that President Xi Jinping’s speech in Brazil issued the strongest message from the central government on the anti-riot work and unrest in Hong Kong

  • Xi’s remarks point way to stabilizing Hong Kong situation: spokesperson (English)

• The message is focused on the criminality of the protesters. This is consistent with yesterday, when I observed that we can expect more arrests of protesters in the short term, and in the coming months, all kinds of news laws and lawfare aimed at crushing the protesters and their supporters. 

• The crackdown “won’t necessarily be in the form of tanks rolling in. But it is still possible to get a group of soldiers and police to control Hong Kong. Using the identity of Hong Kong police to do Beijing’s bidding is the way Beijing will do it.” That’s according to a tweet (in Chinese) from scholar and wry observer of elite politics Zhāng Lìfán 章立凡.

Other news and views from and of Hong Kong: 

“[I]t’s felt like we’re at some type of tipping point since Wednesday. What’s happening right now is simply unsustainable,” writes the anonymous Hong Kong–based scholar behind the Being Water newsletter:

Either the government acknowledges everything they’ve tried has failed and they set a new course or things are about to get a lot worse. For the third time in the past five months, it seems like this would be the time PLA or PAP intervenes if that’s a card Beijing is willing to play. I don’t see how they could get inside these Fortress Universities without using live ammo if they don’t want to wait out the students barricaded inside.

Things are so unpredictable that the universities might be abandoned as soon as I hit ‘send.’ Only a fool would make predictions.

“The 11-year-old dissident: Hong Kong’s schoolchildren fuel protests” is the title of a Wall Street Journal article (paywall): “Extreme youthfulness of protesters has alarmed Chinese officials [as] a new type of front line emerges in high schools.”

“Beijing has demanded that the British government investigates an incident in which Hong Kong’s justice minister fell over and hurt her arm during a confrontation with protesters in London,” reports the South China Morning Post.

2. Mood music, but still no phase one deal 

The Wall Street Journal reports (paywall): 

The U.S. and China are nearing a trade deal, but President Trump isn’t ready to sign off, White House economic adviser Lawrence Kudlow said Thursday.

They are getting close to an agreement, Mr. Kudlow said in an event held at the Council on Foreign Relations.

“The mood music is pretty good,” he said, adding that Mr. Trump “likes what he sees, he’s not ready to make a commitment, he hasn’t signed off on a commitment for phase one, we have no agreement just yet for phase one.”

Other news from various fronts of the U.S.-China techno-trade war, day 498:

Huawei: No Google, no problem? “Chinese tech giant Huawei is selling its first folding smartphone without Google apps or U.S.-made processor chips following sanctions imposed by Washington,” reports the Associated Press. “The long-awaited Mate X foldable phone sold out within seconds of being made available in China on Friday, months after the planned mid-year launch,” says TechNode.

“China has agreed to lift a more than four-year-old ban on U.S. poultry imports, both governments said, in what a U.S. industry group said could lead to sales of about $2 billion of poultry,” according to the Wall Street Journal (paywall):

American poultry had been banned in China since 2015 following an outbreak of avian influenza, and the two sides have discussed lifting the ban as part of the trade negotiations between Beijing and Washington.

—Jeremy Goldkorn

Here are the stories that caught our eye this week:

• University campuses became battlegrounds in Hong Kong, as police broke a previous unwritten rule treating them as safe havens. The Chinese University of Hong Kong and other colleges canceled classes for the rest of the semester, as protesters engaged in clashes with police that looked like medieval sieges. 

• A second protester was shot by police with live bullets, on Monday, November 11, the same day that a man was lit on fire following an argument with demonstrators. 

• Xí Jìnpíng 习近平 commented publicly on the protests, saying, “Stopping violence, controlling chaos, and restoring order are Hong Kong’s most urgent duties.” State media featured these comments more prominently than any previous coverage of Hong Kong, and a deluge of propaganda articles followed calling for more arrests and stricter punishments for protesters. 

• The U.S. and China have still reached no agreement on rolling back tariffs, or on how much China would purchase in U.S. agricultural products and when. Meanwhile, two reports came out this week with dramatically different takes on U.S.-China relations: John L. Graham and Benjamin Leffel wrote, “The data of the last 25 years portray U.S.-China commerce as the most synergistic bi-lateral relationship in world history, bringing peace along with mutual prosperity.” Meanwhile, the U.S.-China Economic and Security Review Commission released a nearly 600-page report that raised alarm about a multitude of aspects of the U.S. relationship with China, and generally advised Washington to get substantially tougher on Beijing. Chinese companies are paying no heed to any of this, as they continue to prioritize New York over Hong Kong for their future IPOs. 

• Women initiate over 70 percent of divorces in China, Zhōu Qiáng 周强, president of the Supreme People’s Court, revealed. This contrasts with long-held assumptions that Chinese women tend to endure unhappy marriages due to societal expectations and economic pressures. 

• Xi Jinping visited Greece, where officials made friendly noises about the start of a “new era,” and agreed on new Chinese energy investments in Greece. Xi also offered to help Greece retrieve the contested Parthenon Marbles from the U.K., where they are kept at the British Museum, despite decades of Greek complaints. 

• Xi then went to Brazil, where he schmoozed with President Jair Bolsonaro, who gladly returned the favor despite his fiery rhetoric about China on the campaign trail last year. Brazil was rewarded with a billion-dollar investment in the port of Sao Luis via China Communications Construction Company. 

• Chinese company sentiment may be deteriorating, according to a post by well-connected lawyer Dan Harris on his China Law Blog. Companies that his firm helps advise are increasingly exhibiting short-term thinking similar to Russian companies in the 1990s. 

• Alibaba recorded $38.4 billion in sales during its genius annual publicity stunt, Singles Day, while rival JD.com reported $29 billion from bandwagoning on the same concept. 

BUSINESS AND TECHNOLOGY:

• Herbalife bribery in China
  Chinese ex-Herbalife execs charged in US over decade-long bribery scheme / Reuters via SCMP

Two former executives of a Chinese unit of Herbalife Nutrition were criminally charged in the United States on Thursday over an alleged decade-long scheme to bribe Chinese government officials and circumvent the company’s internal accounting controls, a person familiar with the matter said… Both defendants are 51-year-old Chinese citizens and remain at large. 

• ICBC bid-rigging in New York
  Former executive at Chinese bank pleads guilty in bid-rigging case / WSJ (paywall)
  Peter Volino, a former vice president at the New York brokerage unit of the Industrial and Commercial Bank of China, “pleaded guilty to a criminal antitrust charge, the latest defendant ensnared in a federal crackdown on the market for American depositary receipts.”

• Economic indicators: Lottery sales down
  Mainland China lottery sales down 13 percent in September / GGRAsia

Mainland China’s total lottery sales for September stood at 36.4 billion yuan ($5.19 billion), down 13 percent year-on-year, according to official data published on Thursday by the country’s Ministry of Finance. Sales of lottery products have now declined for eighth straight months, according to official data.

• JD has a good quarter
  China’s JD.com beats quarterly revenue estimates, shares rise / Reuters

China’s JD.com Inc beat analysts’ estimates for quarterly revenue on Friday, boosted by stronger sales in its core ecommerce business, sending its shares up nearly 7 percent. The company attributed the strong results to growth in lower-tier cities…

The company’s total net revenue rose 28.7% to 134.8 billion yuan ($19.27 billion) in the third quarter ended Sept. 30. Analysts had expected revenue of 128.6 billion yuan.

• Earlier this week on Caixin: Weibo reports 11.5 percent drop in third-quarter profit, Tencent profits drop 13 percent in 3rd quarter.

• Huawei in Taiwan
  Taiwan halts sale of Huawei phones over territorial dispute / Bloomberg via SCMP
  “National Communications Commission orders firms to stop offering P30, P30 Pro and Nova 5T models because their displays include the words ‘Taiwan, China’ for time zones and contacts.”

• Alibaba new listing
  Alibaba’s homecoming is about pleasing China and buying trade war insurance / CNN
  “Alibaba’s plan to raise billions of dollars by selling shares on the Hong Kong stock market will be one of the largest public offerings in the world this year. It’s also a savvy political move.”
  Alibaba offers glimpse of plans for long-awaited Hong Kong IPO / TechNode

• Stimulus
  China central bank injects 200 billion yuan to boost liquidity, keeps rate unchanged / Reuters 

SCIENCE, HEALTH, AND THE ENVIRONMENT: 

• New lymphoma treatment
  China’s BeiGene gets FDA approval for drug to treat rare form of lymphoma / Reuters

The U.S. Food and Drug Administration on Thursday approved BeiGene Ltd’s lymphoma treatment, validating the China-based drugmaker’s strategy of largely using data from trials held outside the United States to file for approval…

The FDA granted accelerated approval to the capsules for treatment of adult patients with mantle cell lymphoma, who have received at least one prior therapy. 

Mantle cell lymphoma is a rare, aggressive form of non-Hodgkin lymphoma, a blood cancer that most often affects men aged over 60. The company estimates between 3,000 and 4,000 new patients were diagnosed in the U.S. in 2015.

POLITICS AND CURRENT AFFAIRS:

• Losing friends in Sweden
  China envoy threatens Sweden over award to detained writer Gui Minhai / Reuters

Sweden’s minister for culture will be banned from entering China if she attends a literary award ceremony on Friday for detained Swedish bookseller Guì Mǐnhǎi 桂敏海, Beijing’s ambassador to the Nordic country said on Friday.

Gui Minhai, a Chinese-born Swedish citizen, was abducted in Thailand in 2015 and is now detained in China. When based in Hong Kong, he published books critical of China’s leaders, and the case has soured ties between Sweden and China.

Svenska PEN, a literary organization, has awarded Gui Minhai the 2019 Tucholsky Prize, praising his work in the service of free speech. An empty chair will symbolically represent the writer at the ceremony in Stockholm on Friday, Svenska PEN said. As is customary, the award is to be presented by Swedish Culture Minister Amanda Lind.

“If Amanda Lind, in spite of our advice, attends this ceremony, then no government representatives responsible for cultural affairs will be welcome to China,” Chinese Ambassador Guì Cóngyǒu 桂从友ui told Swedish news agency TT.

…Sweden’s foreign ministry said its view remained that China should release Gui Minhai and that it had contacted Chinese authorities over the ambassador’s statements.

“It is not okay to interfere with what the Swedish government does,” Foreign Minister Ann Linde said in an emailed statement to Reuters.

• Internet censorship
  Internet regulators shut down news site for defying desist order / Caixin

Internet regulators in Shanghai have shut down Chinese news website Business Times after it refused to comply with an official order to change its name and cease “unauthorized” reporting activities.

The bilingual outlet’s parent company, whose name translates to Shanghai Leading News Information Technology, used the “Business Times” name to “illegally conduct interviews, publish, and reprint online news and information,” thereby disrupting the distribution of news on the internet and misleading the public, according to a Wednesday announcement [in Chinese] by the Cyberspace Administration of China (CAC).

• Sri Lanka’s China policies set for another shake-up?
  China-friendly strongmen eye return to power in Sri Lanka vote / Bloomberg (porous paywall)

A family of strongmen are eyeing a return to power in Sri Lanka’s presidential election on Saturday, an outcome that could also shift the island nation back toward China.

The Rajapaksas, once a powerful force in the island nation’s politics who lost the presidency in 2015, are staging a comeback. This time Gotabaya Rajapaksa, 70, is running for the top job, backed by family members including his brother Mahinda, who enjoyed warm ties with Beijing during his 10-year rule.

• Japanese man held on espionage charges released
  Japanese ‘spy’ detained in China last month allowed to return home / SCMP

Tokyo confirmed last month that a Japanese man in his 40s had been held by Chinese authorities since September on suspicion of violating Chinese laws, without providing details…

“We confirmed his return…I’m glad he is back to Japan safely,” Foreign Minister Toshimitsu Motegi told reporters without disclosing the details of the charges. “This is a case that Prime Minister [Shinzo] Abe and I strongly pressed on China and this has borne fruit.”

In Beijing, China’s foreign ministry said the man — who they identified as Nobu Iwatani — confessed to collecting a large amount of “classified information”.

“The facts are clear, the evidence is conclusive,” said spokesman Gěng Shuǎng 耿爽 at a regular press briefing in Beijing.

The man is suspected of violating both China’s criminal and counter-espionage laws and is awaiting trial on bail, Geng told reporters, adding that the man left China on Friday and returned to his home country…

SOCIETY AND CULTURE:

• Sculpture
  Artist Anish Kapoor plays with reality in his debut solo show in China, which brings his mirror sculptures indoors for the first time / SCMP
  British artist Anish Kapoor’s debut solo exhibition in China creates the illusion he has transformed a temple. Stainless steel works in the form of a concave mirror “turn the world upside down” at the Imperial Ancestral Temple, just outside the Forbidden City in Beijing, the artist says.

OPINIONS, OP-EDS, AND RANTS:  

• How the U.S. should deal with China
  U.S. doesn’t need to break up with China / Bloomberg (porous paywall)
  Scott Kennedy and Jude Blanchette write: “The Trump administration’s policies are drawing the two nations toward a self-destructive decoupling. There’s a better way.”

• Western disillusionment with China
  The West is now surer that China is not about to liberalize / The Economist
  Columnist Chaguan attended the Stockholm China Forum, “a semi-annual meeting for politicians, officials, ambassadors, business bosses, scholars and journalists hosted by Sweden’s foreign ministry and the German Marshall Fund, a think-tank,” where the mood was gloomy:

Long ago at these gatherings Western speakers urged China, too, to be smart. They would craft clever ways to explain why liberal economic and even political reforms would be in China’s own interests. Not this time. A reform-minded Chinese speaker said his country was “too big, too old and too conservative” to adopt a different model. Some of the Westerners dared to suggest that autocratic statism might harm China in the long term. Chinese counterparts scolded them for “cultural arrogance”. Talking is better than fighting, but it can still feel pretty bleak.

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