The Frankenstein cruise, and the never ending techno-trade war

Dear Access member,

Quick reminder about two The China Project events in New York: 

• We’re recording a Sinica Podcast with a live studio audience at Lair East in Manhattan on July 17. In this show, Kaiser will interview me, and you will be welcome to ask questions or throw rotten tomatoes. Bring your own. It’s free for Access members, but $20 for everyone else: Please email events@thechinaproject.com to register.

• She Loves Tech is partnering with The China Project to host the U.S. round of the world’s largest tech startup competition for women on August 5. There are just four days left to apply. She Loves Tech’s website is here, you can read more about the New York pitch event here, and you can apply to participate here. 

—Jeremy Goldkorn, Editor-in-Chief

1. No end in sight for the techno-trade war 

The U.S.-China techno-trade war drags on and on and on in this petty pace from day to day. Here are the latest developments: 

• The department of gee, ya think? “The Trump administration is increasingly concerned about prospects for a trade deal with China, amid an unexpected reshuffling of the Chinese negotiating team and a lack of progress on core issues since the Group of 20 summit in Japan, according to U.S. officials and senior Republicans,” says the Washington Post. However, the South China Morning Post reports that Beijing is “playing down” the significance of the personnel changes. 

• “An early rally in stocks faded a bit after President Donald Trump tweeted a complaint that China is ‘letting us down’ by not buying U.S. farm products,” per Bloomberg (porous paywall), and CNBC. See also China and U.S. differ over agricultural purchases Trump boasted about in the New York Times (porous paywall).  

• Are Chinese students choosing the U.K. over the U.S.? “Applications from Chinese students to study at U.K. universities have gone up 30 percent since last year,” according to the South China Morning Post. 

• “U.S. Republican Senator Marco Rubio introduced a bill in Congress Thursday to boost the country’s rare-earth industry, in an effort to break American advanced manufacturing’s reliance on importing key metals and compounds from China,” according to Nikkei Asian Review (porous paywall).

2. The Frankenstein cruise?

In 2016, Foreign Affairs magazine published a story titled The cruise that changed China (porous paywall): 

On September 2, 1985, the SS Bashan cruised through the green-leaved gorges of the Yangtze River, its prow breaking the waters along its 259-foot length…The cruise ship was hosting a weeklong meeting of some of the world’s most brilliant economists, who had assembled to figure out a plan for China’s troubled economy. The gathering came at the zenith of an era when officials under Dèng Xiǎopíng 邓小平 were scouring the globe for fresh ideas that would set China on the path to prosperity and global economic power.

One of those “brilliant economists” was the Hungarian Janos Kornai, who China-focused economist Andrew Batson tweeted “arguably had more influence on China in the 1980s than any other foreign economist.” In the same tweet, Batson describes a recent opinion piece by Kornai in the Financial Times (paywall) as an “extraordinary, and indeed historically significant, op-ed.” 

Kornai writes that “chilling changes are taking place inside China” under Xí Jìnpíng 习近平 and he partly blames himself:

Are not western intellectuals also responsible for this nightmare? We not only watched China’s transformation with approval but actively contributed to these changes. We are the modern version of Mary Shelley’s Frankenstein, the 19th-century tale of an experimenting scientist who brought a dead body to life using that era’s technology: the electric shock. The resurrected creature became a murderous monster.

3. IBM and China’s surveillance state

The Intercept reports: 

The OpenPower Foundation — a nonprofit led by Google and IBM executives with the aim of trying to “drive innovation” — has set up a collaboration between IBM, Chinese company Semptian, and U.S. chip manufacturer Xilinx. Together, they have worked to advance a breed of microprocessors that enable computers to analyze vast amounts of data more efficiently.

Shenzhen-based Semptian is using the devices to enhance the capabilities of internet surveillance and censorship technology it provides to human rights-abusing security agencies in China

This is not IBM’s first questionable collaboration: “IBM’s technology helped facilitate Nazi genocide through generation and tabulation of punch cards based upon national census data,” according to investigative journalist Edwin Black. 

—–

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:

• Will China kill its own movie industry?
  China is stifling its own movie business / Bloomberg (porous paywall)
  “Tougher government censorship has blocked potential hits and compelled filmmakers to stick with safe formulas that aren’t winning audiences, while a tax evasion crackdown has made some investors reluctant to back films, crimping output even further.”

• Apple wants more Chinese apps
  Apple opens app design and development accelerator in China / TechCrunch
  “Apple has opened a design and development accelerator in Shanghai — its first for China — to help local developers create better apps as the iPhone maker looks to scale its services business in one of its key overseas markets.”

• Education technology
  Video interview: How Squirrel AI learning Is shaking up education in China / Bloomberg (porous paywall)
  An interview with Joleen Liang of Yixue Group about the company’s AI-powered adaptive education app, Squirrel AI Learning.

• The implosion of CLSA
  China wants its own Goldman Sachs. It has a big headache instead / Bloomberg via Yahoo Finance

For the executives at Citic’s CLSA unit who sat listening to [Citic Securities Co. and its Chairman Zhāng Yòujūn 张佑君] in silence, it also marked the end of a tumultuous three-year relationship. 

Nearly all of them would quit over the next few weeks, kicking off a wave of more than 50 resignations that now threatens to upend China’s push to create a global investment-banking powerhouse.

The story behind the exodus — pieced together from interviews with almost a dozen current and former executives who asked not to be named so they could speak freely — illustrates the difficulties China faces as it tries to project its financial might abroad. It involves bruised egos, lost bonuses and a culture clash that some say was inevitable after Citic Securities bought CLSA six years ago, putting the free-wheeling Hong Kong institution in the hands of a state-owned giant that ultimately answers to China’s Communist Party.

• Robots
  China still biggest industrial robot buyer even as purchases dip / Caixin Global

China was the world’s largest buyer of industrial robots for the sixth straight year in 2018, despite a dip in purchases from the previous year. The country bought 135,000 robots used across industries such as electronics and automobiles, down 3.8% from 2017, according to a report released by the China Robot Industry Alliance (CRIA) on Tuesday. 

• The end of Anbang
  Watchdog hands Anbang units to new insurance firm / Caixin Global

China’s insurance regulator said Thursday that the newly created Dajia Insurance Group will take over several of Anbang Insurance Group Co. Ltd. ’s subsidiaries, the latest move in restructuring the fallen financial star since it was seized by the government. 

• Context, on The China Project: Anbang confirms billionaire chairman is in trouble.

• Gloom in China auto sector — gas and electric
  Bleak China auto outlook triggers raft of profit warnings / Reuters

Auto suppliers Johnson Electric Holdings and Sensirion slashed their earnings forecasts on Thursday, blaming a slowdown in car sales and pessimism about the prospects of a Chinese car sector recovery.

The news is the latest to signal weaker global industrial activity and ripples from a trade war that has already forced China’s Geely, Swiss engineering company ABB, Germany’s Aumann, and chemicals giant BASF, to warn of turbulence ahead. 

• Chinese EV startup Seres halts US launch, lays off 90 people in Silicon Valley / The Verge

Seres, the Chinese EV startup formerly known as SF Motors, is laying off 90 people in its Silicon Valley office, the company announced in a staff meeting held earlier today. The US launch of its first electric SUV, the SF5, is also now on hold…[the news coming] at a time when some of the most high profile Chinese and Chinese-American EV startups are struggling. 

• Bye-bye, battery subsidies, hello, red ink
  Electric-vehicle battery makers under pressure as prices, subsidies fall / Caixin Global (paywall)
  “The Shenzhen-listed Sichuan Chengfei Integration Tech Corp…initially saw strong profits from its electric battery businesses thanks in part to generous government subsidies offered to help spur the development of China’s electric-vehicle industry.”

• Didi gets into Brazilian banking
  Chinese ride-hailing app Didi offers banking services as it moves into Brazil and Mexico / SCMP
  “Didi Chuxing, the Chinese ride-hailing giant, has launched new financial services in Brazil and Mexico, in an expansion plan that will again see it go up against Uber Technologies.”

• China still good for Uniqlo
  Uniqlo owner’s profit falls short despite China gains / Bloomberg (porous paywall)
  “Fast Retailing Co.’s profit fell short of analyst estimates as weakness in the Uniqlo owner’s home market of Japan overshadowed a strong showing in overseas markets, particularly China.”

• Deflation fears
  China’s looming deflation fears strengthen policy easing case / Bloomberg (porous paywall)
  “Growth in China’s producer price index slowed to zero in June from a year earlier, the weakest reading in almost three years. Prices fell 0.3% from May. The downward trend accentuates fears of a return of deflation for manufacturing, which would erode company profits and increase debt repayment pressures.”

SCIENCE, HEALTH, AND THE ENVIRONMENT: 

• Mission to Mars
  China will explore Mars in 2020 / Pandaily
  An “academician of the Chinese Academy of Sciences told a Chinese news outlet on July 7 that China will explore Mars next year with a satellite, a lander and a rover.”

• Wuhan air pollution protests
  China has made major progress on air pollution. Wuhan protests show there’s still a long way to go / CNN

Local officials were apparently surprised by the scale and size of the protests, which came after several similar waste plants were reportedly found to be giving off dangerous emissions. Photos and videos shared on social media showed large crowds marching in the streets near where the plant was to be built, and police arresting numerous protesters.

The government has since suspended building of the plant, which locals said had halted protests, but a heavy police presence remains in the city where the situation is tense.

• Dirty cruise ships
  Chinese tourist-led cruise ship boom sails into troubled environmental waters / SCMP
  The Chinese cruise market is now the second largest in the world after the U.S., but “new ‘monster liners’ are fueling fears of air and ocean contamination.” 

POLITICS AND CURRENT AFFAIRS:

• Propaganda campaign about Xinjiang repression
  22 nations biased on governance of Xinjiang / Global Times
  “Chinese people know how to best govern Xinjiang. Improving Xinjiang’s conditions concerns all Chinese people, including residents of Xinjiang, and only Chinese people will spare no effort to do it. We will listen to Western countries’ advice. But these countries are making themselves unwelcome if they act as China’s teacher and force China to do things.”
  See also: 新疆是个好地方 (Xinjiang is a good place).
  Context: What are the 10 stages of genocide? / Al Jazeera

• Tanzania suspended project “not off the table”
  China, Tanzania in talks to get US$10 billion Bagamoyo Port project back on track, ambassador says / SCMP
  “The troubled project was ‘not off the table’ and the remaining issues could be sorted after consultations between the Tanzanian government and investor China Merchants Port Holdings, [Tanzania’s Minister of Mining] Mbelwa Kairuki told reporters during a visit to Hong Kong.”
  On The China Project Access last month: Tanzania scraps $10 billion Chinese port project.

• Chinese military drills in Europe
  Chinese military deploys armored vehicles to Europe for the first time as Chinese medics train in Germany / Military Times
  “The joint exercise — Combined Aid 2019 — is focused on preparing troops with the medical service units of the Chinese and German armed forces to respond to humanitarian crises, such as mass casualty incidents and serious disease outbreaks, China’s Xinhua News Agency reported.”
  Chinese troops in first joint medical drill with major Nato power in Europe / SCMP

• Hong Kong extradition law protests
  China throws support behind Hong Kong’s Lam ahead of new protest / Bloomberg (porous paywall)
  “China’s top official in Hong Kong said Beijing ‘fully supports’ embattled leader Carrie Lam’s [林鄭月娥 Lín Zèng Yuè’é] efforts to safeguard social order, as protesters vowed to continue the mass marches that have roiled the city.”
  Trump team sends defiant signal to Beijing by meeting activist / Bloomberg (porous paywall)
  “Jimmy Lai [黎智英 Lǐ Zhìyīng], who is also a democracy advocate, met with National Security Advisor John Bolton on Wednesday, after meetings earlier this week with Vice President Mike Pence, Secretary of State Michael Pompeo and Republican Senators Ted Cruz, Cory Gardner and Rick Scott.”
  Hong Kong protests spark mixed emotions in mainland Chinese residents / Hong Kong Free Press

SOCIETY AND CULTURE:

• The police really don’t want foreigners who live in China to smoke weed
  Seven foreign EF teachers reportedly among 19 detained for drug offenses / Caixin (paywall)
  “A total of 19 people in the city of Xuzhou have been detained after their urine tested positive for illegal substances during a raid, out of whom 16 were foreigners, including 7 teachers at an unnamed education organization, local authorities announced Wednesday. The police, who said they had acted on a tip-off earlier this month, didn’t specify the nationalities of the foreigners arrested.”
  Foreign teachers and students held in China on drugs charges / SCMP

• Context: 

  • Elliott Zaagman on Twitter: “Well, have you ever been in China enjoying a drink with friends at a legitimate establishment on a Saturday night when police come in and make you urinate in a cup in front of them, along with everyone else at the bar?”

  • The coming crackdown on ‘cannabis culture’ in China? / The China Project 

• Vintage culture
  Make America dated again: The Chinese reproducing U.S. vintage / Sixth Tone

As the owner of Shanghai-based vintage brand Lucky Forces, Shen is one of a growing number of Chinese entrepreneurs faithfully re-creating Western items from the 1930s to 1960s. He sells to a burgeoning community of newly minted vintage fans in the country — typically men in their 30s and 40s — who see in the objects a timeless aesthetic, an air of prestige, and an escape from the pressures of work.

FEATURED ON SUPCHINA

Click Here

‘Broken Wings’: Jia Pingwa’s controversial novel explores human trafficking and rural China

In the novel “Broken Wings,” Jia Pingwa goes for the third-rail issues that once made him persona non grata in the Chinese literary scene, tackling rural poverty, human trafficking, and family planning policy. It’s a tough read, with frequent scenes of brutality, and no happy ending. The story is told from the point-of-view of Butterfly, a young woman who is kidnapped while working with her parents in the city. She is transported to rural Shaanxi and sold as a bride to an impoverished villager, who imprisons her in a cave. Her captor rapes her and she bears his child.

SINICA PODCAST NETWORK

Click Here

Sinica Podcast: Searching for roots in China

This week, Kaiser chats with Huihan Lie, founder of the genealogical research startup MyChinaRoots, and with two of his colleagues, Clotilde Yap and Chrislyn Choo. The three have fascinating things to say about why a growing number of people are taking a new interest in their ancestry in China, how their company goes about finding information on the family histories of people even several generations removed from China, and some of the surprising and occasionally scandalous things they unearth when they start digging.

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