A big deal for BMW

Dear Access member,

While today’s news cycle has been dominated by news and commentary on Donald Trump’s meeting with Vladimir Putin in Helsinki, European Union officials have been in Beijing, talking about trade.

There has been little new reporting on the U.S.-China trade war, but we’ve rounded up a few noteworthy stories, together with our usual selection of must-read news at the top.

I will be traveling for the next week, and will leave the newsletter in my colleagues’ competent hands.

—Jeremy Goldkorn, Editor-in-Chief

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1. BMW wins, as EU says China ‘knows how to open up’

European Council President Donald Tusk, European Commission President Jean-Claude Juncker, and other EU officials met with Chinese Premier Li Keqiang in Beijing today, releasing a joint statement with an annex on climate change and clean energy. The EU-China meeting is annual, but this was the first joint statement in three years.

The Wall Street Journal characterized (paywall) the meeting as China courting the European Union “as an ally in its trade conflict with the U.S., offering to improve access for foreign companies and work with the EU on reforming the World Trade Organization.” But the EU delegates weren’t really buying it. Reuters reports:

Long accused of protectionist tactics that make it a difficult place for foreign firms, China is trying to reverse that narrative amid the escalating trade war by approving huge investments, such as a $10-billion petrochemicals project by Germany’s BASF.

At a joint news briefing with Li and Tusk in Beijing’s Great Hall of the People, Juncker said that move showed “if China wishes to open up it can do so. It knows how to open up.”

Bloomberg says (porous paywall) that “the ink had barely dried” on the China-EU joint statement when Li Keqiang was made to hear “unfiltered comments from senior EU officials about the everyday reality for Europeans of conducting commerce in China.” Li vowed to help, saying the following:

• To a BMW executive: “I want to hear if any big company here would like to make a complaint here on the theft of intellectual property, so that I will take great measures.”

• To an Airbus representative: “Whatever problems you have, we will solve them.”

BMW is perhaps the happiest foreign company in China today:

• “BMW has received the green light to raise its stake to 75 percent of its onshore venture, becoming the first foreign manufacturer to get a super majority control,” reports the South China Morning Post.  

• Current rules, which change in 2022, allow foreign companies a maximum 50 percent stake in auto factories. BMW currently owns 50 percent of a joint venture with Brilliance China Automotive Holdings.

• BMW is the “biggest exporter of vehicles from the US to China,” according to the SCMP. In the event of a protracted trade war, BMW’s new China plant will mitigate against losses caused by tariffs.

2. Trade war, day 11

With the media focus on the Trump-Putin love-in, it was a slow news day for the U.S.-China trade war. Here are a few developments:

• China filed a World Trade Organization (WTO) complaint today about Donald Trump’s latest tariff threat, reports the Washington Post, which says the move “is unusually swift, coming less than one week after the U.S. Trade Representative proposed 10 percent tariffs on a $200 list of Chinese goods.”

• Next under scrutiny — Chinese venture capital? The Wall Street Journal reports (paywall): A new study “shows China is pouring money into cutting-edge American technologies at a record pace this year through loosely regulated venture capital investments,” and “national security hawks” are paying attention.

• “Aerospace thrives on free and open trade,” said Boeing CEO Dennis Muilenburg, according to the BBC. Although Muilenburg “is reported to have a good relationship with President Trump,” and he “insisted that the White House was listening to his firm’s arguments,” he warned that the trade war could disrupt supply chains and hoped “to find ‘alternative solutions’ to trade disputes.”

• ZTE: “Investors on Monday cheered the lifting of a U.S. supplier ban on China’s ZTE Corp, pushing its shares up 17 percent,” reports Reuters, “though analysts cautioned the telecommunications equipment maker still faced many challenges as it works to revive its business.”

• “Hong Kong said on Monday HK$130 billion ($16.56 billion) worth of trade could be affected if the United States imposes extra tariffs on imports from China, accounting for 2.2 percent of the Chinese-ruled city’s exports,” according to Reuters.

3. As Xinjiang repression spreads, will the Muslim world notice?

The worsening religious and cultural repression in Xinjiang may be spreading to neighboring Gansu Province. Agence France-Presse reports:

The Communist Party has banned minors under 16 from religious activity or study in Linxia, worrying many of the local Hui people. One senior imam reflected on the policies similarities to those in Xinjiang, stating, “Frankly, I’m very afraid they’re going to implement the Xinjiang model here.”

Meanwhile, in neighboring countries with heavily Muslim populations, awareness of the situation in Xinjiang is growing:

• The testimony of an ethnic Kazakh woman who fled from Xinjiang to Kazakhstan after working in a re-education camp has been published to YouTube in an English-subtitled version from Radio Free Europe. She describes conditions in the camps, and she illegally crossed into Kazakhstan in fear for her life.

• Saudi news website Al Arabiya has published an opinion piece titled “Pakistan’s ‘Muslim solidarity’ disappears on Uyghurs issue.” Money quote: “Pakistanis will not waste a second criticizing Myanmar for their appalling treatment of the Rohingya — and rightly so. The cause of the Palestinians is loudly proclaimed, as are those of Chechens, Bosniaks and Albanians. But on the Uyghurs, all are silent.”

In a related development, last week, the Times of Islamabad reported that “spy chiefs” from Russia, China and Pakistan met in Islamabad to discuss “the dangers arising from a buildup of the Islamic State on the Afghan territory.” I wonder if the current Chinese strategy in Xinjiang was mentioned.

—Jeremy Goldkorn

4. China reports 6.7 percent growth amid declining investment

On July 16, China’s National Bureau of Statistics (NBS) released the government’s official report (in Chinese) of economic growth for the second quarter of 2018.

• The headline number: 6.7 percent GDP growth, basically the same as the 6.6 percent growth that a panel of 76 economists surveyed by Reuters predicted last week.

• China’s previous three quarters each saw 6.8 percent growth, the Financial Times points out (paywall), making this the slowest quarter since 2016, though still above the government’s official goal of “about 6.5 percent” growth for the year. Of course, many observers don’t trust China’s government statistics, and analyzing inconsistencies in NBS data is a regular activity for China-focused economists.

• The trade war is not responsible for the slowdown — yet. Rather, the FT points to “curtailed investment in infrastructure” as a result of the government taking on debt, as well as a “tighter monetary policy.”

• Infrastructure investment rose only 6 percent in the first half of this year, in contrast with previous years that regularly saw a boost of “about 20 percent” in money for construction, the New York Times says (paywall).

• Subway and light rail projects received strict new requirements for approval on July 13, Caixin reports (paywall), probably dooming debt-heavy projects in Baotou, Hohhot, Lanzhou, and Urumqi. The new rules require a city to have at least 30 billion yuan ($4.49 billion) of annual fiscal revenue to build a subway and 15 billion yuan ($2.24 billion) to build a light rail system, multiple times the levels that had been required since 2003.

• Stocks in Asia edged slightly lower upon news of China’s lower GDP numbers, along with trade war fears: The Shanghai Composite Index was down 0.4 percent, AP reports, and the Nikkei Asia300 Index lost 0.1 percent, according to Nikkei.

• For more analysis, check out economic consultancy Trivium’s newsletter for today.

—Lucas Niewenhuis

5. Rural China and ecommerce

The New Yorker’s Jiayang Fan has written a wide-ranging examination (porous paywall) of China’s number two ecommerce giant: JD.com. The piece includes reporting on JD’s efforts to bring ecommerce to remote rural areas, drone deliveries, JD’s cooperation with the government, and the author’s own childhood experiences at the work unit shop of the military hospital where her mother worked as a doctor.

Want more from Jiayang Fan? Check out the following:

• Sinica Podcast: Why do so many Chinese people admire Donald Trump? and Jiayang Fan on beauty in China.

• The Secret Menu cooking videos: Making spicy and sour shredded potatoes with Jiayang Fan.

—Jeremy Goldkorn

6. World Cup: Chinese internet chatter  

The World Cup was huge in China, drawing a total of 790 million domestic viewers. More tickets were sold to people from China than from England, according to FIFA, and 60,000 Chinese traveled to Russia for the World Cup.

How else do we know the World Cup played well in China? Because soccer talk flooded the Chinese internet over the course of the 32-day tournament, with articles written about everything from Japan’s opening-game victory to “football’s coming home” (China News even commented on Gary Lineker’s now-famous tweet in a piece headlined: “‘Three Lions’ more like ‘Three Kittens’: Is ‘football’s coming home’ mere humor?”).

And because this is the internet we’re talking about, there were jokes and invented neologisms to describe everything from French “luck” to German scapegoating of Mesut Özil. Read this The China Project story by Bingxuan Wang for more fun soccer-related Chinese memes.

—Anthony Tao

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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:

• Epic box office flop
  Producers yank China’s costliest movie from screens after three meagre days at the box office / SCMP
  “The producers of Asura, the most expensive Chinese film ever made at 750 million yuan (US$112 million), on Monday decided to pull it from the cinemas after a disastrous opening weekend where it only made 49.05 million yuan.”

• Stock market
  China’s stock exchanges rule out expanding stock connect scheme / Reuters
  “China’s stock exchanges said on Saturday they would not expand their stock connect scheme with Hong Kong to foreign firms, companies with different voting right structures and so-called ‘stapled’ securities.”

• World Cup — cryptocurrency gambling bust
  Chinese police break up US$1.5 billion cryptocurrency World Cup gambling ring / SCMP
  “Chinese police have broken up an illegal World Cup gambling ring hosting more than 10 billion yuan (US$1.5 billion) worth of cryptocurrency bets, in the first major sports betting crime involving digital money in the country.”

• Tencent and Alibaba lose source of easy money
  Tencent and Alipay set to lose $1bn in revenue from payment rules / FT (paywall)
  “Tencent and Alipay set to lose $1 billion in revenue from payment rules.”

• Huawei in South Korea
  Huawei may beat Samsung to 5G in its own backyard / SCMP
  Despite Samsung’s strong South Korean roots, “Huawei Technologies Co., the Chinese company slammed in the U.S. Congress as a security threat, is in the running to supply equipment to all three of South Korea’s national mobile carriers.”

• Electric and autonomous vehicles
  Listing of EV unit “right around the corner,” says BAIC chairman / Bloomberg
  Self driving cars in China: The roadmap and the risks / China Law Blog
  Intelligent and Connected Vehicles (ICV) (智能网联汽车) are “an ideal goal for China because it combines elements of all three of its current key technology programs: Made in China 2025, Internet+ and the Artificial Intelligence Strategic Plan.”

• Co-working wars
  WeWork’s biggest rival in China is on an acquisition spree / TechCrunch
  “An acquisition spree from Ucommune — which was forced to rebrand from UrWork following a lawsuit from WeWork — has seen it snap up lesser but strategic players Wedo, Woo Space and New Space to boost its presence and rival WeWork.”

• Quantum computing
  Chinese researchers achieve stunning quantum entanglement record / Live Science
  “Scientists have just packed 18 qubits — the most basic units of quantum computing — into just six weirdly connected photons. That’s an unprecedented three qubits per photon, and a record for the number of qubits linked to one another via quantum entanglement.”

• Xiaomi, and the drawbacks of a Hong Kong IPO
  China traders barred from buying Xiaomi through stock link / Bloomberg (paywall)
  “China’s stock exchanges said they won’t allow mainland investors to buy shares with weighted-voting rights in Hong Kong, sending Xiaomi Corp. shares slumping… The ban also may continue to make Hong Kong-listed companies that do most of their business outside greater China, such as Prada, Samsonite and L’Occitane, inaccessible to mainland investors.”

• Thailand boating disaster aftermath
  Phuket hit by more than 7,000 cancellations from Chinese tourists after boat tragedy / The Straits Times
  “So far, 7,300 Phuket hotel room bookings for July and August have been cancelled by Chinese tourists. Industry insiders say the numbers are likely to increase as more hotels report their booking status.”  

POLITICS AND CURRENT AFFAIRS:

• Censorship of feminist Weibo account  
  A platform for female factory workers’ rights has disappeared from China’s Twitter / Quartz
  “It’s unclear if the censorship was a response to the account’s discussion of #MeToo, which originated in the U.S. last year after revelations of sexual harassment in Hollywood, or to the group’s general feminist leanings.”

• Emigration and capital flight
  China’s super-rich lead the way as applications for British millionaire visas surge / SCMP
  “There has been a 46 percent increase in the number of the global super-rich prepared to invest £2 million (US$2.65 million) for the privilege of living and working in the UK despite Theresa May’s ordering a crackdown on a wealthy visa scheme to root out ‘illicit and corrupt’ money flowing into the UK.”

• Liu Xia
  Poet Liu Xia escaped China, but will Beijing ever set her free? / Washington Post
  “She wanted to leave China in the company of her brother, Liu Hui, so that Chinese authorities could not use threats against him to reach her. It seems Chinese officials did not agree to that plan. She arrived in Germany without him.”

• Belt and Road
  For China, the Belt and Road runs through the Middle East / SCMP
  “The eighth Ministerial Meeting of the China-Arab States Cooperation Forum (CASCF) was held last week, bringing the foreign ministers of the 22 Arab League member states together with their Chinese counterpart, State Councilor Wang Yi. Not surprisingly, the Belt and Road Initiative (BRI) was a central focus of the meeting.”
  China in the Middle East: Behind Xi’s economic charm offensive / Aljazeera.com
  “China, the world’s second-largest consumer of crude, has stepped up its investment in the oil-rich Middle East with a pledge of more than $23bn in loans and millions more in aid.”
  Chinese ‘highway to nowhere’ haunts Montenegro / Reuters via Times of India
  “A Chinese loan for the first phase has sent Montenegro’s debt soaring and forced the government to raise taxes, partially freeze public sector wages and end a benefit for mothers to get its finances in order.”

• New Zealand and the Chinese navy
  How Boeing’s helping U.S. allies defend against China / Motley Fool
  “Mark did not mention China in his statement announcing the purchase, but the Chinese Navy’s increasingly aggressive moves to build a foothold in the South China Sea are central to the decision to invest in the Poseidon aircraft.”

• Surveillance
  Looking through the eyes of China’s surveillance state / NYT (paywall)
  “They perch on poles and glare from streetlamps. Some hang barely visible in the ceiling of the subway, and others seem to stretch out on braced necks and peer into your eyes. Surveillance cameras are everywhere in China.

• Bad vaccines
  Rabies vaccine producer ordered to halt production / Caixin (paywall)
  “The country’s drug watchdog said that it found evidence of data tampering at a Changchun Changsheng Life Sciences Ltd. plant that could affect the rabies vaccine’s effectiveness and the recipient’s health… The company has recalled all its freeze-dried rabies vaccine for human use…”

• Beijing residence permit corruption
  Officer sentenced to 10 years for ‘hukou’ profiteering / Sixth Tone
  “The Tongzhou District officer, surnamed Liu, reportedly received more than 2.6 million yuan ($389,000) in bribes from 19 people who did not meet the capital’s application criteria for hukou — a form of household registration in China that comes with education, health care, and property entitlements.”

• Chemical plant disaster
  Sichuan chemical plant explosion: Investigation reveals familiar problems / China Labour Bulletin
  “The initial investigation into last week’s deadly explosion at a chemical plant in the southwestern province of Sichuan suggests safety shortcuts were taken after the facility was established three years ago.”

• Himalayan Viagra
  Caterpillar fungus fever leaves Tibetan nomads vulnerable / Chinadialogue
  “‘Since I was nine I followed my parents on this pastureland to dig for yarsagumba,’ says Tsering Tsomo. ‘Now I’m married, and yarsagumba [a.k.a. caterpillar fungus or Himalayan Viagra] is the only source of income for me and my husband because we have settled in the town. We no longer have yaks on the grassland.’”

• Social credit
  A student was rejected by a college because of China’s “social credit system” / BuzzFeed
  “The college notified them that he may not be able to attend because of his father’s poor credit standing — the father owed 200,000 RMB (about $30,000) to a local bank, and had been put on a blacklist dubbed the ‘lost trust list’ for individuals with bad social standing.”

• The ink-splashing protestor
  Police interrupt YouTube live stream of father of ‘missing’ Chinese woman who splashed ink on Xi Jinping photo / Hong Kong Free Press

SOCIETY AND CULTURE:

• Didi sexual assault
  Didi driver arrested for sexual assault on female passenger / TechNode
  “Police in Huai’an City in Jiangsu Province have arrested a driver named Liu for the suspected rape of a female passenger, local media is reporting. The driver confessed on July 13th and is waiting for legal processing.”

• World Cup
  The World Cup winner in China is a little-known oven maker / Quartz
  Chinese oven-maker Vatti promised to refund customers if France, the team it sponsored, won the World Cup. Although the company now has to pay up, the buzz generated from its “unusual pledge” promises long-term benefits.
  Guy waving Chinese flag during France v Croatia World Cup final goes viral / What’s on Weibo
  What Chinese soccer fans are laughing about / Sixth Tone

• Infant milk formula
  Ten years after China’s infant milk tragedy, parents still won’t trust their babies to local formula / Quartz
  “The Sanlu scandal cast a light on the problems plaguing China’s booming economy, as companies ramped up food production for the domestic market and for export, often with support from the state, while one-party rule made transparent regulation and whistle-blowing difficult.”

• Floods
  Beijing airport cancels 670 flights, as heavy rain wreaks havoc across northern China / SCMP
  “Transport networks across northern China were in chaos on Monday as torrential rains caused the cancellation of hundred of flights in Beijing, and left roads cracked, crumbled and submerged.”

VIDEO OF THE DAY

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Cute alert: Panda in Germany celebrates 8th birthday with a beet and sweet potato cake

Jiao Qing and Meng Meng, a male and female panda pair, are the only pandas in Germany. They arrived at the Berlin Zoo last June on a 15-year loan and remain wildly popular.

Viral on Weibo: Gas station attendant lauded for bravery after extinguishing fire in 12 seconds

A woman named Song Juanjuan 宋娟娟 probably thought she was just doing her job, putting out a fire at the gas station she worked at in eastern China’s Jiangxi Province. But surveillance footage of the incident, recently posted online, received an astounding 3 million likes on the streaming platform Douyin, making her a viral sensation.

ON SUPCHINA

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‘Dying to Survive’ apologizes for ripping off Japanese anime in poster

Dying to Survive (我不是药神) is a legitimate summer box office hit. But its marketers are somewhat ruining its shine. The film issued an apology on Monday for plagiarizing a promotional poster for Japanese anime “My Hero Academia.” An earlier poster apparently also copied artwork from the Japanese manga series “One Piece.”

Kuora: On Chinese cheating

Why do many forms of cheating seem to be widely considered a justifiable means to an end in China? It’s all basically a function of scarcity and of the intensity of competition, writes Kaiser Kuo in this week’s Kuora. These, in turn, come down to the fact of China’s enormous population, breakneck development, and brutally pragmatic focus on results. When dishonesty seems to pay so handsomely and honesty seems to lead only to penury, it’s to be expected, regrettably, that many within society will choose dishonesty.

Sinica Early Access: Poisonous pandas: Cigarette smoking in China

This week on the Sinica Podcast, Kaiser and Jeremy chat with Matthew Kohrman, associate professor of anthropology at Stanford University, about his work on China’s tobacco industry – and why China isn’t doing more to curb smoking. His new book on the subject is titled Poisonous Pandas: Chinese Cigarette Manufacturing in Critical Historical Perspectives.

• Subscribe to the early-access Sinica feed by plugging this RSS feed directly into your podcast app!

The Caixin-Sinica Business Brief, episode 56

This week on the Caixin-Sinica Business Brief: New-energy vehicle sales in China, Tesla’s agreements with Shanghai, Sun Yat-sen University suspending a professor accused of sexual assault, Doug Young on Xiaomi’s long-awaited IPO, and more.

• Subscribe to the Business Brief on Apple Podcasts, Overcast, or Stitcher.

PHOTO FROM MICHAEL YAMASHITA

Chinese herbal medicine

A woman makes up a prescription of herbal medicine at a shop in Hangzhou in 1988. Traditional Chinese medicine (TCM) (中医 zhōngyī) has a history of more than 2,500 years and remains widely used in China.

—Jia Guo