Zaijian Long Beach

Dear Access member,

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—Jeremy Goldkorn, Editor-in-Chief

1. The Port of Long Beach is no longer in Chinese hands

Today we highlight a story that symbolizes of how American attitudes to Chinese investment in the U.S. have changed within less than a year. The South China Morning Post reports:

A Hong Kong-based company has been forced to sell its American container port after the US government raised security concerns about its parent being a Chinese state-owned shipping giant.

Orient Overseas (International), which is majority-owned by Cosco Shipping Holdings, will sell off its entire interest in Long Beach Container Terminal in California for US$1.78 billion (HK$13.97 billion) in cash, according to a stock exchange filing on Tuesday morning.

The sale to a US infrastructure fund is the fulfilment of a national security agreement signed last year and is expected to net OOIL a profit of US$1.29 billion (HK$10.15 billion), the company said in the announcement.

Cosco purchased Orient Overseas in 2018, giving it control over the Long Beach port.

In related news, today there were several new reports (see SCMP and VOA) on the difficulties getting visas now facing American and Chinese students and scholars. Bloomberg notes (porous paywall) that China could win from the tech cold war: “By driving Chinese researchers back home, new export controls are more likely to hurt than help the U.S.”

Finally, a steady hum of positive noises about the U.S.-China trade negotiations continues to emanate from Washington and Beijing, but there is no concrete news. Today’s reports:

• Tariffs that started the U.S.-China trade conflict now dog its finish / WSJ (paywall)

• White House’s Mulvaney says China trade talks will be resolved one way or another within two weeks / CNBC

• China and United States focus on progress before fresh round of trade war talks / SCMP

• Negotiators are in Beijing for talks on ending U.S.-China trade war / NPR

2. Which way to deal with Huawei?

There’s Huawei news from all over the world today:

• Vodafone, “Europe’s biggest phone company identified hidden backdoors in the software that could have given Huawei unauthorized access to the carrier’s fixed-line network in Italy,” reports Bloomberg (porous paywall). In short, in 2011, Vodafone told Huawei to remove telnet access to routers they had bought from the Chinese company. Huawei said they had done so but Vodafone found that they had not.

• The blocks on Canadian canola oil — that Chinese government spokespeople have tied to Canada’s arrest of Huawei CFO — have been expanded to other Canadian agricultural products including peas and soybeans, according to CBC.

• New Zealand, “one of Canada’s closest allies has declined to back Canada in its ongoing dispute with China, despite at least one personal call to its leader by Prime Minister Justin Trudeau,” reports CBC:

Although New Zealand’s Prime Minister Jacinda Ardern is often seen as a natural partner for Trudeau’s progressive brand of politics, and her country is a member of the Five Eyes intelligence-sharing network with Canada, the Pacific nation appears reluctant to publicly criticize China over the dispute.

• The U.K. apparently cannot decide if it wants to be a part of the EU or not. A similar indecisiveness seems to haunt London’s views of Huawei. The latest statement: “British Foreign Secretary Jeremy Hunt has urged caution over the role of China’s Huawei in the UK, saying the government should think carefully before opening its doors to the technology giant to develop next-generation 5G mobile networks,” according to the South China Morning Post.

• Cambodian officials have announced “plans to sign an agreement with China’s Huawei Technologies as early as Sunday to help roll out a 5G data network next year,” says the Nikkei Asian Review.

• “Czech President Milos Zeman said the West’s allegations of espionage against Chinese telecoms company Huawei are not supported by evidence,” reports the South China Morning Post. “Zeman made the remarks during his trip to Beijing for last week’s Belt and Road Forum, when he met Chinese President Xí Jìnpíng 习近平 and Huawei executives.”

—Jeremy Goldkorn

3. WeChat’s censors are not #HereForJingyao: Public accounts supporting woman accusing Richard Liu of rape are shut down

WeChat appears to be purging public accounts that have voiced support for Liu Jingyao, the University of Minnesota student who has filed a lawsuit saying she was raped last August by Richard Liu 刘强东, the chief executive officer of China’s ecommerce giant JD.com.

The abrupt clampdown happened yesterday when a number of public accounts on the all-encompassing mega app found themselves unceremoniously banned from posting. The affected accounts are blogs featuring a diverse range of topics, including gender issues, feminism, philosophy, and social affairs. Despite their different focuses, these accounts, at some point in the past few weeks, had all circulated the online petition in support of Liu Jingyao in her case against Richard Liu.

Click through to The China Project for more details.

—Jiayun Feng

—–

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:

• Cooked books at TCM pharma giant?
  A $4.4 billion accounting error burns investors in China / Bloomberg (porous paywall)

One of China’s largest listed drugmakers said it overstated cash holdings by $4.4 billion, sending its shares and bonds tumbling and heightening concerns about the quality of accounting in a country that has become a fast-growing part of global investment portfolios.

Kangmei Pharmaceutical Co., a producer of traditional Chinese medicines, disclosed what it called an accounting “error” in an exchange filing on Tuesday, about four months after telling investors that it was being investigated by regulators. The stock, a constituent of MSCI Inc.’s global indexes, plunged by the 10 percent daily limit. Kangmei’s 2.4 billion yuan ($356 million) notes due 2022 fell as much as 14 yuan to 60 yuan.

• A pharma company investors love
  Most loved China drug stock sells hormones to make kids taller / Bloomberg (porous paywall)

The most favored Chinese pharmaceutical producer among domestic fund managers is a northeastern-based company that makes hormone products used to help children increase height. Changchun High & New Technology Industry (Group) Inc. — which makes vaccines and products used to treat growth-hormone deficiency — has seen a 77 percent rally in its share prices this year, far outperforming a 28 percent gain in a benchmark index tracking major health-care and pharmaceutical stocks listed on Shanghai and Shenzhen exchanges.

• A sweet quarter for Yum
  Pizza Hut is tasty again for Yum China / WSJ (paywall)
  “The company that runs KFC and Pizza Hut in China posted expectation-beating results, justifying its rejection of a takeover bid last summer.”

• Auto — GM suffers in China
  GM’s Operating Profit Hurt by China Results, U.S. Production Cuts / WSJ (paywall)
  “General Motors Co.’s operating profit declined in the first quarter, dragged down by weaker results in China and a planned cut in production of big sport-utility vehicles in the U.S.”

• Tencent and Alibaba
  The people with power at Tencent / The Information (paywall)

Pony Ma [马化腾 Mǎ Huàténg] is well known as the co-founder and chief executive of Chinese tech giant Tencent, which operates the ubiquitous app WeChat. The bookish Mr. Ma, whose passion outside of work is astronomy, has long been the public face of Tencent.

But the key executive in Tencent’s daily operations is as much President Martin Lau [刘炽平 Liú Chìpíng] as Mr. Ma. All of the top Tencent executives report to Mr. Lau, a former Goldman Sachs banker who joined the company in 2005, except Daniel Xu [许晨晔 Xǔ Chényè], one of Tencent’s co-founders whose current title is chief information officer, The Information has learned. Even some of Tencent’s current and former managers who spoke with The Information weren’t aware of Mr. Lau’s breadth of direct reports, due to Tencent’s policy of keeping its organizational structure confidential.

• Long freeze between Tencent and Alibaba thaws / FT (paywall)
  “Chinese tech giants have been following each other into the same investments.”

• Economic indicators
  China’s manufacturing activity falters / WSJ (paywall)
  “A gauge of China’s factory activity weakened sharply, suggesting that any turnaround in the world’s second-largest economy after months of slower growth has yet to take root.”

• Controlling capital flight
  China closes online currency regulation loopholes to ease fears over foreign exchange transactions / SCMP
  “China has upgraded a set of ‘provisional guidelines’ into mandatory rules covering its 134.7 billion yuan ($20 billion) of online cross-border foreign currency transactions, as worries about the possibility of large capital outflows continue to haunt the world’s second largest economy.”

• Job stimulus
  China to use $14.9 billion from unemployment insurance fund to support jobs / Journal Pioneer
  “China will utilize 100 billion yuan ($14.9 billion) from its unemployment insurance fund as part of its efforts to support a vocational training scheme and stabilize employment, the cabinet said on Tuesday.”

SCIENCE, HEALTH, AND THE ENVIRONMENT:

• Endangered animal trade
  Tackling the trade in endangered marine species / Chinadialogue
  “Trade controls crucial for conservation of ocean creatures, but face challenges.” See also Cracking down on the swim bladder smugglers on Chinadialogue.

• Air pollution control
  Why is air pollution worse in places? Inspectors in new round will find out / China Daily
  “China’s top environmental watchdog will soon launch a new round of air pollution control inspections that will involve its entire staff, as some cities in northern China saw deteriorating air quality in the first quarter of this year.”

• Chinese fishing boats off West Africa
  Sierra Leone’s 1-month fishing ban achieves little / DW

When it comes to assigning blame, many point their fingers firmly in the direction of China. China’s distant water fleet (boats fishing in areas outside of the country’s domestic waters) is the largest in the world. A 2013 study estimated that 3,400 Chinese vessels trawled the waters of nearly 100 countries.

It’s estimated that half of China’s total catch from the distant water fleet is from West Africa.

POLITICS AND CURRENT AFFAIRS:

• China says there has been progress on designation of Masood Azhar as a global terrorist
  ‘Will be properly resolved’: China on listing Masood Azhar as global terrorist / Hindustan Times

China on Tuesday said there has been “positive progress” in consultations on the listing of Jaish-e-Mohammed (JeM) chief Masood Azhar as a global terrorist and the matter will be “properly resolved”, an apparent indication Beijing is close to lifting its hold on the sanctioning of the Pakistan-based terrorist…

…China has so far blocked four attempts to list Azhar at the 1267 Sanctions Committee – a move interpreted as a sign of its “all-weather” relationship with Pakistan. However, the latest block resulted in international criticism of China for providing an escape route to Azhar, especially after Beijing signed off on a UN Security Council statement condemning the Pulwama attack that named JeM.

• Context on The China Project and The China Project Access: India and Pakistan scramble jets as China watches uneasily; China blocks U.N. from designating JeM leader a terrorist; Why China won’t call JeM terrorists?

• Xinjiang internment camps
  UN chief Antonio Guterres raised ‘situation in Xinjiang’ in talks with Xi Jinping / AP via SCMP
  “UN Secretary General Antonio Guterres raised the plight of an estimated 1 million Uyghurs incarcerated in re-education camps in China during a recent meeting with the country’s president, Xí Jìnpíng 习近平, the United Nations said on Monday.”
  China frees ‘lost’ Uyghur wives but at a price, families say / AFP via CNA

Their Uighur wives vanished in 2017, swept up in a Chinese dragnet tackling Islamic extremism, now they’ve been released – but the Pakistani husbands left behind say freedom has come at a price…

…AFP interviewed nine of the women’s husbands, who confirm their wives are free but cannot leave Xinjiang for three months, during which time they will be closely monitored.

“They will observe her adaptability to Chinese society and if they deem her to be unfit she will be sent back,” a gemstone trader said of the rules of release.

Their initial joy at the release of much-loved wives and mothers has faded because the women who’ve returned are like strangers.

“My wife said she was forced to dance, wear revealing clothes, eat pork and drink alcohol in the camp,” he revealed, adding that she now carries with her a book of guidelines, which features illustrations such as a mosque marked with a red cross, and a Chinese flag with a green tick.

“She used to pray regularly but now it’s gone, and she has started occasionally drinking (alcohol) which she does in the restaurants,” he explained, adding that he believed officials required such acts from the women.

• Another death sentence for Canadian accused of drug trafficking
  China sentences another Canadian to death for drug trafficking / Channel NewsAsia
  “A Chinese court sentenced a second Canadian man to death for drug trafficking on Tuesday April 30 amid diplomatic tensions between Ottawa and Beijing.”

• Beijing influence in Taiwan
  China aid to Taiwan business empires like Foxconn sparks outcry / Nikkei Asian Review
  “Foxconn, the Taiwanese Apple supplier whose China-friendly founder is making a bid for the presidency, and media group Want Want are among major companies from the island receiving hundreds of millions of dollars in subsidies from Beijing, raising questions about Chinese influence in the economy.”

SOCIETY AND CULTURE:

• Being gay in China, a documentary
  China’s resistance to gay relationships and surrogate births, seen through a filmmaker’s own family / SCMP

Chinese documentarian Hao Wu’s [吴皓 Wú Hào] latest film, All in My Family, focuses on Chinese family tradition, social expectations, gay relationships and children born using surrogacy through an extremely personal lens.The 40-minute film — Wu’s fourth and set for release on streaming service Netflix this Friday — was shot over a series of Lunar New Year holidays on periodic trips back to Chengdu from New York.  

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SINICA PODCAST NETWORK

Sinica Early Access: Strength in Numbers: USTR veteran Wendy Cutler on managing trade with China

This week on Sinica, Kaiser and Jeremy chat with Wendy Cutler, vice president at the Asia Society Policy Institute, about a new paper she has authored calling for coordination between the U.S. and other countries in managing issues related to China trade. She makes the case for working through the WTO and other multilateral organizations, and why China is more apt to respond more positively to multilateral over bi- or unilateral approaches.

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