Gloom and doom

Dear Access member,

I promised you gloom and doom in the subject line of this email — below I make good on that promise, with four things at the top, including our daily trade war update.

—Jeremy Goldkorn, Editor-in-Chief

1. The coming recession?

“U.S. President Donald Trump has offered to host a dinner for Chinese President Xi Jinping on December 1 in Buenos Aires after the G20 leaders summit, an invitation Beijing has tentatively accepted,” according to the South China Morning Post.

In response, “Asian stock markets jumped Friday, reflecting investor relief about upcoming trade talks between China and the U.S., as well as the dollar’s gains against a basket of major currencies including the yen,” reports MarketWatch. “Irrational investor optimism” is how I characterized the mood of the markets in our email sent to non-Access members today (let me know if you’d like to receive these on Mondays and Fridays).

Nothing I’ve read today gives me any cause for optimism about an early end to the trade war. On top of that, despite happy stock markets, today’s news brings a number of signals of tough times ahead, in China and around the world:

• “Chinese stocks are sending a scary signal about the economy,” says Bloomberg: “With official data already showing retail sales growth slowing, investor alarm increased when China’s biggest liquor maker, Kweichow Moutai, reported its weakest profit expansion in almost three years.”

• “Chemicals are the best leading indicator for the global economy,” says the Financial Times (porous paywall), and they are not indicating happy things: “Data for both Chinese and global chemical production…are warning that we may now be headed into recession.”

• “Alibaba reported lower-than-expected quarterly revenue on Friday, another sign of slowing momentum for China’s giant e-commerce platforms and its economy,” according to Reuters.

• Xí Jìnpíng 习近平 “has told entrepreneurs that their businesses will be protected and Beijing will try to find new ways — such as tax cuts and bailout funds — to help them, his latest bid to shore up confidence in the private sector,” reports the South China Morning Post. In response, that newspaper’s former editor-in-chief, Wáng Xiàngwěi 王向伟, tweeted:

Desperate times call for stupid measures. Beijing is asking local authorities already mired in trillions of yuan in debts to set up bailout funds worth hundreds of billions of yuan to buy into high-leveraged private firms. Make no sense.

2. No Marxism, please, this is a Communist country

Two students at Nanjing University were assaulted and hauled away, “according to a witness and video footage, after they led protests against their university on Thursday for refusing to recognize an on-campus Marxist student society,” reports Reuters.

On October 20, Cornell University suspended a partnership with the prestigious Renmin University in Beijing after students affiliated with its Marxist society were punished for supporting labor rights in China. About 50 students from across China, including students from both Nanjing and Renmin universities, went to Huizhou in southern China in August to protest against the treatment of factory workers.

The author of China’s Millennials, Eric Fish, tweeted:

Especially ironic given how obsessively Chinese leaders have been trying to purge “Western liberal values” from universities. While they were looking so nervously to the right, they got snuck up on from the left.

3. Xinjiang Victims Database

Nathan Vanderklippe of the Globe and Mail has a new report on Uyghur reactions to the internment camps: “Uyghurs around the world are uploading personal video testimonials, sending information to Uyghur organizations and adding names of the vanished to a small but growing Xinjiang Victims Database, a nascent catalogue of Muslims missing in western China.”

—Jeremy Goldkorn

4. Trade war, day 120: Will Trump’s ‘meeting plus dinner’ with Xi go anywhere?

As mentioned above, markets were very excited when the South China Morning Post reported today that Trump changed his schedule to stay in Argentina a day longer to have a dinner meeting with Xi Jinping on December 1. They were even more excited when Bloomberg reported (porous paywall) that “Trump asked key Cabinet secretaries to have their staff draw up a potential deal to stop the escalating trade conflict with Beijing.”

But: The reasons for pessimism about the potential for a substantive deal remain numerous and significant.

• It’s only four days until the U.S. midterm election, and Michael Every, head of Asia financial markets research at investment bank Rabobank, pointed out that that could be exactly why we are hearing positive things right now: “This seems a perfect way to ensure equities rally into election day, put Xi into a box in terms of what is expected of him in the terms of the deal…and then have someone to blame when the deal then falls through.”

• Trump economic adviser Larry Kudlow denied that any special planning is happening for the dinner meeting: He appeared on CNBC to emphasize, “We’re doing a normal, routine run-through of things we already put together and normal preparation. OK, there’s no mass movement, there’s no huge thing, we’re not on the cusp of a deal.”

• U.S. officials are still threatening to expand tariffs to include all Chinese imports if these talks go nowhere.

• “The best possible outcome of the Xi-Trump meeting would be a suspension of tariffs on each other, but the US would continue its all-out blockade on development of China’s technology,” Renmin University international relations professor Shi Yinhong told the SCMP.

• The intellectual property theft fight is just heating up, with two indictments from the U.S. Justice Department this week, of 10 Chinese nationals for stealing aerospace technology and of a Chinese company for stealing computer technology. China isn’t happy about this: “If the US does have some concerns over this issue, it should present solid evidence that can stand tests by facts,” a foreign ministry spokesman said today.

• Chinese hacking is increasing in frequency and skill, according to data gathered by security software vendor Carbon Black, Ars Technica reports.

Other trade-war-related news:

• Trade deficit
  US imports hit all-time high, trade deficit with China sets new record despite tariffs / MarketWatch
  “Trade deficit up 1.3% in September to 7-month high of $54 billion.”

• Made in China 2025
  US concern as Chinese chipmakers try to grab top talent / FT (paywall)
  “Under the Thousand Talents Plan, a program set up 10 years ago by Beijing, China wants to recruit top science and engineering experts from abroad to help as part of its Made in China 2025 project to build world-leading capacity in key sectors. That has fueled concerns in the US over technology theft and forced technology transfer.”
  Trade war could hit China’s innovation powerhouse plans / SCMP
  “Local governments have been offering these subsidies to patent filing, but if the economy slows, we worry that such subsidies may not be as much as before,” says Hong Kong-based intellectual property expert Catherine Zheng.

• Boeing
  Boeing’s China plant to start operations in December / Reuters

• Vietnam
  Vietnam garment exports surge on US-China trade war / Reuters
  “Vietnam’s garment exports are set to rise by 14.8% this year to $35 billion, an industry official said on Friday, as US retailers diversify their product sourcing to keep costs under control amid an escalating trade dispute with China.”

• Bloomberg chip-hacking report
  US senators demand probe into China’s alleged hacking of tech giants’ supply chains / SCMP
  “In a letter dated October 16, Senators Ron Johnson (a Wisconsin Republican) and Claire McCaskill (a Democrat representing Missouri), who head the Committee on Homeland Security and Governmental Affairs, formally asked US Homeland Security Secretary Kirstjen Nielsen and FBI Director Christopher Wray to pursue the matter behind closed doors.”
  Read on The China Project: Experts doubt Chinese chip-hacking story.

• Tesla
  Tesla develops plan to make 3,000 Model 3s per week in Shanghai to cut tariff impact / Reuters via Channel NewsAsia
  “Tesla Inc said on Friday that it is developing plans to start producing about 3,000 Model 3 vehicles per week in Shanghai in the initial phase of its Gigafactory 3 to reduce the impact of tariffs. The company also said in a filing that Model S and Model X sales in China have been, and will likely continue to be, hurt by recently increased tariffs imposed by the Chinese government on U.S.-manufactured vehicles.”

—Lucas Niewenhuis

—–

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

Here are the stories that caught our eye this week:

• Legendary novelist Louis Cha, who wrote martial arts fiction under the pen name Jīn Yōng 金庸, passed away at the age of 94 in Hong Kong. It is difficult to overstate the cultural influence of Cha’s novels in the Chinese-language world: “roughly equal to that of ‘Harry Potter’ and ‘Star Wars’ combined,” one writer offered earlier this year.

• Top officials are divided on how to deal with China’s slowing economy — or at least, that’s what many observers are assuming based on the fact that the Communist Party has not yet announced the date for the annual fall plenum of the Party’s Central Committee. There are also other signs of grumbling amongst China’s political elite.

• The trade war has led more companies to consider moving their supply chains out of the country, and some industry numbers from September showed the sector slowing down faster than expected, worrying officials. Meanwhile, the Trump administration targeted Chinese chipmaker Fujian Jinhua, first with a Commerce Department export ban, and then with an indictment alleging the company had conspired with UMC in Taiwan to steal technology from U.S.-based Micron Technology.

• The U.S. ramped up the pressure on China by accusing 10 Chinese nationals, including two intelligence officials and six hackers, with stealing American and European aerospace technology secrets.

• Donald Trump spoke with Xi Jinping for the first time in months, and tweeted that he had a “long and very good conversation…with a heavy emphasis on Trade.” Chinese media also made friendly noises about the official contact, and the two leaders plan to meet at the G20 in Argentina at the end of this month. It won’t be all smiles and handshakes: U.S. officials are threatening to expand tariffs to include all Chinese imports if these talks go nowhere.

• A $150 million, 75,000-square-foot robot factory will be built in Shanghai by ABB, the Swedish-Swiss Fortune 500 engineering company.

• Cornell University ended its partnership with Renmin University, over Renmin’s treatment of students who supported workers’ rights in a labor conflict at Jasic Technology in Shenzhen.

• China authorized the use of rhino horns and tiger parts for Chinese medicine, sending the wildlife protection world into an uproar.

• A man who molested his own daughter on a train in Jiangxi Province was let go by the police without punishment, enraging the Chinese internet.

• Almost half of Chinese scientists have issues with how their studies are valued, a survey revealed, and more than 90 percent of those who have published papers admit that ascending in the academic system is a primary motivator for them.

BUSINESS AND TECHNOLOGY:

• Autonomous vehicles
  Volkswagen taps Baidu’s Apollo platform to develop self-driving cars in China / Reuters
  “Volkswagen on Friday said it would join China’s Apollo autonomous driving consortium, which was founded by Baidu, as it seeks to develop self-driving cars for the world’s largest car market.”

• Tencent strategy
  Tencent unrolls multibillion dollar bet on the cloud / TechNode
  “Chinese internet giant Tencent will invest billions of dollars to spur the company’s push into cloud computing aimed at business clients.”

• New airline routes
  Sichuan Airlines launches Taiyuan-Chengdu-Saint Petersburg, considers expanding Russia network / CAPA Center for Aviation

• Doing business behind the Great Firewall
  China’s internet crackdown raises costs and security concerns / FT (paywall)
  “European companies in China are suffering heightened security risks and greater expenses due to a requirement to use state-run telecoms companies to bypass the country’s ‘great firewall’ of internet blocks, according to a business advocacy group. The EU Chamber of Commerce in China’s Shanghai chapter said that the Chinese government required foreign companies in the city to use state-approved services rather than commercially available virtual private networks.”

POLITICS AND CURRENT AFFAIRS:

• Active measures in Taiwan
  China subverting elections: premier / Taipei Times
  Taiwanese premier “William Lai (赖清德 Lài Qīngdé) and lawmakers yesterday said that the November 24 nine-in-one elections are being undermined and national security is under threat, because of China’s spread of disinformation, financial support of certain candidates and sponsoring of television and radio programs, as well as cyberattacks.”

• U.K.-China military tech sales
  Britain to sell China ‘unlimited’ amount of military radar equipment, technology / SCMP
  “A British defense company has been given the green light to supply an unlimited quantity of goods to China’s military, including airborne radar technology likely to be used by the PLA Air Force. Although the supplier has not been named, the ‘open individual export licence’ (OIEL) has been in place since April.”

• Pakistan — China’s all-weather friend
  China is next on Khan’s list as Pakistan looks for bailout money / Bloomberg (porous paywall)
  “Pakistan’s Prime Minister Imran Khan began a four-day visit to China on Friday to shore up support for a financial bailout that the South Asian nation desperately needs.”
  China promises Pakistan support as new PM Imran Khan tells of ‘very difficult’ economy / Reuters via Straits Times
  “China…promised to support Pakistan’s economy as new Pakistani Prime Minister Imran Khan spoke of his country’s ‘very difficult’ economic situation amid a burgeoning financial crisis. Pakistan’s foreign reserves have plunged 42 percent since the start of the year and now stand at about US$7.8 billion, or less than two months of import cover.”

• Sri Lanka
  Sri Lanka’s new Foreign Minister Amunugama says he won’t ’tilt’ to China / Bloomberg via Channel NewsAsia
  “Sri Lanka’s newly appointed Foreign Minister said he would not pursue closer ties with China at the expense of its neighbor India, following the appointment of a prime minister with a history of borrowing heavily from Beijing to fund infrastructure projects.”

• Espionage
  The CIA’s communications suffered a catastrophic compromise. It started in Iran. / Yahoo
  “From around 2009 to 2013, the U.S. intelligence community experienced crippling intelligence failures related to the secret internet-based communications system, a key means for remote messaging between CIA officers and their sources on the ground worldwide. The previously unreported global problem originated in Iran and spiderwebbed to other countries, and was left unrepaired — despite warnings about what was happening — until more than two dozen sources died in China in 2011 and 2012 as a result.”

• Corruption and suicide
  Chinese police chief kills himself after two former colleagues come under corruption cloud / SCMP

• Suppression of free speech in Hong Kong
  Dissident cartoonist cancels Hong Kong show after China ‘threats’ / Reuters
  “Hong Kong organizers of an exhibition by a dissident Chinese-Australian cartoonist, a persistent thorn in the side of leaders in Beijing, canceled the event in the Chinese-ruled city on Friday given what they said were threats by China. The exhibition by Badiucao was to have been his first international solo event.”

• China, Russia, and Norway block Antarctic nature reserve
  Plan to create world’s biggest nature reserve in Antarctic rejected / Guardian
  “A plan to turn a huge tract of pristine Antarctic ocean into the world’s biggest sanctuary has been rejected, throwing the future of one of the Earth’s most important ecosystems into doubt. Environmental groups said Russia, China and Norway had played a part in blocking the proposal.”

• Military technology
  Scientists use sperm whales to run secret military messages / SCMP
  “Chinese scientists have found a way to hide secret messages in the sound pulses that sperm whales emit to keep enemy reconnaissance systems from deciphering them — a breakthrough that could help military submarines avoid scrutiny, researchers said. With this technique, whale sounds are edited and a coding system is built around it.”

SOCIETY AND CULTURE:

• Fear of fiction
  Exiled Chinese writer says Hong Kong publishers ‘too afraid to bring out’ Chinese version of his new novel / Hong Kong Free Press
  “Exiled Chinese writer Mǎ Jiàn 马建 has said that Hong Kong publishers were ‘too afraid’ to publish the Chinese version of his new novel. Ma, 65, was born in Qingdao but lives in exile in the UK. An English translation of his book China Dream was published on Thursday.”
  Ma Jian: ‘Freedom can’t be taken for granted. We have to remain constantly vigilant’ / Guardian

• A deadly fight on a bus
  Chinese police say row between bus driver and passenger led to crash that killed 13 people / SCMP
  At least 13 people were killed on Sunday when a bus crashed into the Yangtze River in Chongqing.  

• Academic fraud
  Publish or perish: The dark world of Chinese academic publishing / Sixth Tone
  “Many Chinese doctorate students can’t graduate until they publish articles in academic journals — a demand that pushes many into corruption.”

• Sexist sporting events
  Women’s 10km race in China offers hair, makeup, cupcakes, and male models / SCMP

• Obituary: Film producer Raymond Chao
  Godfather of HK film industry Raymond Chow dies at age 91 / The Straits Times
  “Mr. Raymond Chow Man-wai [邹文怀 Zōu Wénhuái], the man whose name was synonymous with gongfu legend and cultural icon Bruce Lee, has died at the age of 91. Known as the ‘godfather of the Hong Kong film industry,’ Mr Chow had been the one who introduced Bruce Lee to the world after the late gongfu star appeared on Hong Kong’s popular variety show Enjoy Yourself Tonight.”  

VIDEO ON SUPCHINA

Viral on Weibo: Not your average hula-hoop girl!

This Chinese girl spun her hula hoop around her body like a boss. She twirled nearly 300 metal wires at once!

We also published the following videos this week:

• Legendary Chinese novelist Jin Yong passes away at 94

• Beloved TV host Li Yong dies at 50

• A 360-degree food tour in Flushing

FEATURED ON SUPCHINA

Bus plummets into Yangtze River after passenger assaults driver

On October 28 in Chongqing, a bus collided with a car on a bridge over the Yangtze River and then plummeted into the water. At least 13 passengers have been confirmed dead, while two are unaccounted for. It was a dispute between a passenger and the driver that led to the crash, as surveillance footage from inside the bus shows.

WTA Finals ready for Shenzhen, but are Chinese fans ready to embrace women’s tennis?

Beginning next year, Shenzhen will start a 10-year run as host of the season-ending WTA Finals. The sports division of real estate company Gemdale is bankrolling the prestigious tournament to the tune of $14 million per year — twice what previous host Singapore was paying. But when things kick off next year, Shenzhen will have its work cut out, especially if there are no Chinese players (there likely won’t be) or the sport’s biggest global stars.

The Chinese internet is freaking out over a five-year-old’s résumé

A five-year-old kid — or, let’s be honest, his parents — mastered the art of self-aggrandizing by publishing a 15-page PDF detailing his accomplishments and experience in stunning detail.

Who really killed Pamela Werner? Old Beijing’s most infamous murder

The brutal unsolved murder of Pamela Werner, a young British woman in Beijing (then known as Beiping 北平) in the winter of 1937, is the subject of Graeme Sheppard’s new book, A Death in Peking. Drawing on years of police experience, Sheppard reveals the facts behind the 1937 crime, while also illustrating the extraordinary lives of the people involved, both foreigners and Chinese.

Diego Tardelli fined, suspended for ‘disrespecting’ Chinese flag

Brazilian footballer Diego Tardelli was fined 40,000 yuan ($5,734) and suspended one game for “inappropriate behavior” — namely, rubbing his face — during the playing of the Chinese national anthem before his team, Shandong Luneng 山东鲁能, took on Shanghai SIPG FC 上海上港 on October 28. His club has condemned the Chinese Football Association for its ruling.

Vampires & Ghosts: A Brief History of Chinese Horror, Part 2

From killer butterflies and hopping zombies (in a movie nominated for Best Film at the Hong Kong Film Awards) to dismemberment, cannibalism, and worse levels of exploitation and sleaze, Chinese horror films in the last four decades have taken a smorgasbord of configurations and forms. In this second of a two-part series, Tristan Shaw takes a look at notable Chinese horror flicks from the 1980s to the present.

China’s civil code and calls for legal recognition of same-sex marriage

Amid a government call for public consultation to a proposed revision of China’s civil code, one activist, Sun Wenlin, has proposed legal protection for same-sex marriage. The Marriage Law in China, enacted in 1950, only recognizes a union between a man and a woman. Although not without its detractors, Sun’s call has received a lot of support, and the hashtag “civil code, same-sex marriage” (#民法典同性婚姻) has attracted 70 million views and almost 130,000 posts on Weibo.

Kuora: Mao Zedong’s legacy — and Deng Xiaoping’s role in preserving it

This month’s Kuora columns were in the subject of modern Chinese history. To wrap up this mini-series, we’re going to take a look at Mao Zedong’s legacy, and why Deng Xiaoping chose to preserve it — calling him “70 percent good, 30 percent bad” — and not denounce him in much the same way that Khrushchev denounced Stalin.

SINICA PODCAST NETWORK

Sinica Podcast: Kevin Rudd on Xi Jinping’s worldview

This week on Sinica, Kaiser speaks with the Honorable Kevin Rudd, the 26th prime minister of Australia and the inaugural president of the Asia Society Policy Institute. He is also a doctoral student at Jesus College, University of Oxford, who, through his studies, hopes to provide an explanation as to how Xi Jinping constructs his worldview. Rudd elaborates on the extent to which the Chinese government’s worldview has changed, the current direction of that worldview, and how much of that can be owed to Xi Jinping and domestic political maneuvering.

• Subscribe to the Sinica Podcast on Apple Podcasts, Overcast, or Stitcher, or plug the RSS feed into your favorite podcast app.

TechBuzz China: Poking at the Hornet’s Nest: Fake Reviews in China Tech

In episode 27 of TechBuzz China, co-hosts Ying-Ying Lu and Rui Ma discuss the latest scandal to come out of the Chinese internet — fake reviews on one of China’s leading travel websites, Mafengwo. Mafengwo had $1.5 billion in sales last year, 63,000 transactions, and over 100 million monthly active users. It’s already backed by some of the best investors in the business, including Temasek, Hillhouse, General Atlantic, and Capital Today, and in August, it was leaked that it was in the middle of raising $300 million at a valuation up to $2.5 billion.

• Subscribe to TechBuzz China on Apple Podcasts, Overcast, or Stitcher, or plug the RSS feed into your favorite podcast app.

NüVoices Podcast: A rocket maker turned journalist: Lijia Zhang tells the stories of everyday people

In the seventh episode of the NüVoices Podcast, co-hosts Sophie Lu and Joanna Chiu interview author, journalist, activist, and NüVoices Collective editorial board member Lijia Zhang. Writing in English, Lijia has found creative freedom and uses her strong literary voice to tell stories of China’s “little people” (小人物 xiǎorénwù) — those of the disadvantaged class who live on the margins of society. She seeks to bring to light many social inequalities while also telling the stories of Chinese people with humanity.

• Subscribe to the NüVoices Podcast on Apple Podcasts, Overcast, or Stitcher, or plug the RSS feed into your favorite podcast app.

ChinaEconTalk: Matt Sheehan on Google in China

What is the history of Google in China? Does the company have any hope of bringing its search engine back into the Chinese market? How does China’s development of artificial intelligence stack up against the rest of the world’s? To answer these questions, Matt Sheehan of MacroPolo makes his triumphant return to ChinaEconTalk.

• Subscribe to ChinaEconTalk on Apple Podcasts, Overcast, or Stitcher, or plug the RSS feed straight into your favorite podcast app.

The Caixin-Sinica Business Brief, episode 67

This week on the Caixin-Sinica Business Brief: The opening of the Hong Kong-Zhuhai-Macau Bridge, Bytedance’s new fundraising round, Haidilao’s first “smart” concept restaurant, Doug Young on Malaysia and its reevaluation of some of the deals that the previous administration had made, and more.

• Subscribe to the Business Brief on Apple Podcasts, Overcast, or Stitcher, or plug the RSS feed into your favorite podcast app.

PHOTO FROM MICHAEL YAMASHITA

Drying tobacco in Yunnan

Local residents in Yunnan Province carry tobacco leaves. Yunnan exports tobacco to many countries and provides much of China’s own supply of the carcinogenic weed. While China has done more in recent years to discourage smoking, it is still home to 300 million smokers, more than anywhere else in the world. The Chinese tobacco industry is owned by the state.

—Jia Guo