The real crackdown begins in Hong Kong

Dear Access member,

Please join us for a Slack Q&A about Hong Kong next Thursday, September 5, at 10 a.m. New York time (10 p.m. Hong Kong time) with Antony Dapiran. Antony previously appeared on Sinica twice: once in June to discuss the beginning of the protests, and again in July, following the occupation of the Legislative Council. If you haven’t already joined the Slack channel, click here to do so. 

We will be off on Monday for Labor Day in the U.S. We’ll be back in your inbox on Tuesday. 

—Jeremy Goldkorn and team

1. Activists and lawmakers arrested, no concessions allowed in Hong Kong

On the eve of the five-year anniversary of the decision by the National People’s Congress on August 31, 2014, to establish screening procedures for Hong Kong’s chief executive selection, rather than allowing true universal suffrage — leading to the Umbrella Movement from late September to December — the government has apparently decided it is time to ramp up the crackdown on protesters. Here is the latest.

Activists and lawmakers are arrested

Two hours after our Access newsletter went out yesterday, the Hong Kong pro-democracy youth activist group Demosistō tweeted:

BREAKING: Our secretary-general [Joshua Wong 黃之鋒 Huáng Zhīfēn] was just arrested this morning at roughly 7:30, when he was walking to the South Horizons MTR station. He was forcefully pushed into a private minivan on the street in broad daylight. Our lawyers following the case now.

Demosistō later added that another one of its leaders, Agnes Chow, was also arrested. 

Lawmakers were also put under arrest, the New York Times reports:

Three pro-democracy lawmakers, Cheng Chung-tai, Au Nok-hin and Jeremy Tam were arrested Friday, according to the police, a legislative assistant and Facebook posts from their offices.

“More than a dozen people” in total were arrested since Thursday, the Washington Post said, including pro-independence activist Andy Chan. 

Wong and Chow were later released on bail, and gave defiant statements to the media — see Demosistō’s Twitter page for the latest.

Chinese state media was not pleased that the two of them did not stay locked up, with the Global Times writing, “The release of two heads of secessionists in Hong Kong on Friday, hours after their arrestment the same day, had deepened concerns that a banned rally on Saturday could turn into extreme violence.”

The New York Times reports that the arrests are all part of a deliberate strategy to stem the protests, even though the protest movement has been described as leaderless, and Wong in particular had “publicly called this summer for protesters not to use violence.”

Officials in Beijing, along with the Hong Kong government that answers to them, have decided on a policy of stepped-up arrests of demonstrators, who would be publicly labeled the most radical of the activists, according to Hong Kong cabinet members and leaders of the local pro-Beijing establishment…

Beijing and Hong Kong officials are betting that the protests will gradually die down as the police detain the most hard-line demonstrators, and that public opinion will turn more decisively against the use of violence, said Lau Siu-kai, a longtime adviser to the Chinese government on Hong Kong policy.

The Hong Kong police said on Friday that they had arrested more than 900 people this summer in connection with the protests. Some of the local political figures estimated that as many as 4,000 protesters were seen by the authorities as radicals, but that it was unclear how many would eventually face legal action.

Carrie Lam cannot withdraw the extradition bill

In a tense confrontation at a press conference on August 13, Reuters reporter James Pomfret asked Chief Executive Carrie Lam, “Have your hands been tied by Beijing?” and “Do you have the autonomy or not to withdraw the extradition bill?” Lam did not directly answer his questions.

Pomfret and Greg Torode now report that the answer is that Beijing vetoed a proposal by Lam to withdraw the bill: 

Earlier this summer, Carrie Lam, the chief executive of Hong Kong, submitted a report to Beijing that assessed protesters’ five key demands and found that withdrawing a contentious extradition bill could help defuse the mounting political crisis in the territory.

The Chinese central government rejected Lam’s proposal to withdraw the extradition bill and ordered her not to yield to any of the protesters’ other demands at that time, three individuals with direct knowledge of the matter told Reuters.

Students are warned not to protest

Sophia Yan and Anna Kam of The Telegraph report:

Chinese police are warning mainland students enrolled in university programs in Hong Kong to stay away from “illegal mass protests and street violence,” The Telegraph can reveal, as authorities try to suppress the unrest.

Students received text message alerts from local police this week that said “please stand firm on the position, ‘love the country, love Hong Kong,’ and by no means should you participate in any form of illegal assemblies, marches or demonstrations.”

Some students may not listen, though it’s not clear how many of these could be from the mainland: “Up to 10,000 students from close to 200 Hong Kong secondary schools could walk out of classes on Monday, as the new term begins against a backdrop of continuing street protests,” the SCMP says. 

Other news from Hong Kong

“Hong Kong tourist arrivals dived abruptly in July, falling 4.8 percent year on year as anti-government protests continued to rock the city…Numbers for visitors from all markets except South and Southeast Asia decreased, while the number of tourists from mainland China fell for the first time since January last year, declining 5.5 percent to 4.16 million,” the South China Morning Post reported. 

“Cathay Pacific has warned staff they risk being sacked if they join a planned Hong Kong strike, as the airline intensifies its crackdown on employee support for the rolling pro-democracy protests,” according to AFP. 

In response to cyberbullying, the Hong Kong Police Force has “started handing out rape alarms to the children of officers amid online threats including hate speech and calls for attacks against them,” the SCMP says. 

—Lucas Niewenhuis

2. WSJ reporter ejected for report on Xi’s cousin

In late July, the Australian 60 Minutes TV show and the newspapers The Age and the Sydney Morning Herald revealed that Ming Chai (齐明 Qí Míng), the cousin of Xi Jinping, is a high roller at Crown Casino in Melbourne, Australia. 

Philip Wen and Chun Han Wong of the Wall Street Journal followed up on this extremely rare revelation about the family of the top Chinese Communist Party leader, in a report titled, Chinese president Xi Jinping’s cousin draws scrutiny of Australian Authorities. The report said that Chai has “links to…one man under investigation for money-laundering,” adding, “Over 18 months in 2012 and 2013, Mr. Chai bet about $39 million at the casino,” and “There is no indication that Mr. Xi did anything to advance Mr. Chai’s interests, nor that the Chinese leader has any knowledge of his cousin’s business and gambling activities.” 

But even the attempt to shed light on the finances of Xi Jinping’s family apparently went over a red line for Beijing, because Chun Han Wong — a Singaporean national — has been denied his journalist credentials, the Washington Post reports. New York Times diplomatic reporter Edward Wong noted that it is one of several instances of denied visas for reporters in recent years, but stated that “this is the first time China has taken this action against such a large US news organization.” 

The Foreign Correspondents’ Club of China says that “Wong is the sixth journalist to leave China under such circumstances since 2013,” and added in a statement:

Expulsions amount to an extreme attempt by Chinese authorities to punish news organizations that conduct factual work that does not cast the country or its leadership in a flattering light. Foreign correspondents are not propaganda workers, and should not be treated as such.

3. Techno-trade war update: American companies want to stay in China

A new survey from the U.S.-China Business Council is out, and its key findings show that the rhetoric in Washington over the past couple of years is pretty far out of step from the reality on the ground in China, at least according to the members of the U.S.-China Business Council:

• Eighty-seven percent of American companies do not plan to leave China, and of those who have moved or plan to move operations outside the country, they are three times more likely to move to a third country rather than back to the U.S. 

• Profits are healthy: “The number of respondents reporting a profit margin rate for their China operations that is higher than that of their overall operations jumped from 38 to 46 percent in 2019.”

• Companies unanimously said that intellectual property protection had either stayed the same or improved, though they also overwhelmingly had concerns about the enforcement of intellectual property protections. 

• “Technology transfers…ranked 24 out of the 27 possible top challenges companies face in the China market.” 

• “Made in China 2025 (MIC 2025), has reportedly had limited impact on the majority of American companies surveyed. In a shift of sentiment, the number of companies indicating that MIC 2025 offered positive opportunities for their business in 2019 has nearly doubled since 2018.”

Just two other updates to note related to the trade war today:

There was a big fentanyl bust in Virginia: Per the AP, “Law enforcement officials in the US state of Virginia said on Thursday that they had taken down a multi-state drug ring and seized enough cheap fentanyl from China to kill 14 million people… One of the 39 people charged is accused of ordering fentanyl from a vendor in Shanghai.” 

The Fujian Jinhua case is moving slowly: “10 months after the U.S. Justice Department unveiled the case amid an escalating trade war, a trial is still long way off for the Chinese company, a Taiwan-based firm and three Taiwanese nationals jointly indicted for stealing secrets from Idaho-based Micron Technology,” Bloomberg reports via Yahoo Finance. 

4. 4th plenary session announced for October

Ten months ago, the “biggest story, or non-story in China” was that the annual fall plenum of the Party’s Central Committee had not been scheduled. Analysts at the time suggested that the delay was due to “a lack of consensus among the Chinese leadership over how to battle the growing headwinds” facing China, especially the rapidly escalating trade war. 

That fall plenum has finally been announced, Xinhua reports (in Chinese here) — for this fall, a year after it was expected to be held. “October” is as specific as the announcement got as far as a date for the plenum. 

See also a report on the announcement in the SCMP: China’s Communist Party elite to meet in October after a year’s delay.

—Lucas Niewenhuis

Here are the stories that caught our eye this week:

• Trump called Xi a “great leader,” completely reversing the tone of his Twitter tirades from August 23, one of which labeled him an “enemy.” Trump also lied about Beijing calling D.C. to resume trade talks, which the foreign ministry denied on August 26 — and again on August 27. The new tariffs that Trump announced on August 23, however, are real: Import tax increases have been officially scheduled for implementation on September 1 and December 15. 

• China is treating the trade war toddler tantrum with patience — the Ministry of Commerce announced that it will not immediately retaliate against the new tariff increases. 

• “China’s Corporate Social Credit System is here to stay,” the president of the EU Chamber of Commerce in China, Jörg Wuttke, said, referencing a report by the Chamber and the German consultancy Sinolytics. The consultancy Trivium China also warned about the possibility of Beijing “co-opting technology to enforce political orthodoxy” with social credit, as other companies worried about social credit being used as trade war retaliation. 

• Chinese-Australian writer Yáng Héngjūn 杨恒均 was charged with espionage, after eight months of detention. He now faces a possible death sentence, and has pleaded for help from the Australian government. In response, Australian Prime Minister Scott Morrison has called the espionage charge “absolutely untrue,” and said, “We do expect Australians, indeed all citizens, to have their human rights appropriately looked after.”

• The volatile situation continued in Hong Kong, as protesters and police clashed over the weekend in what one observer called “urban warfare,” and Beijing amplified its warnings about a “color revolution” and increased its pressure on companies to conform to the Party line. The former chief executive of Hong Kong, Leung Chun-ying (梁振英 Liáng Zhènyīng), launched a website offering a bounty for information on “wanted” anti-government protesters. Tens of thousands protested on August 28 after multiple women “reported being sexually humiliated during strip searches while in police custody.” Then on August 29, the girl who suffered a serious eye injury during clashes on August 11 — becoming a symbol of the protests — appeared on camera for the first time, calling for the police “to stop all violent acts.” 

• The Unirule Institute of Economics has been officially shut down, leaving essentially no independent think tanks operating in China. At around the same time that Unirule was being finally shut down, another group of scholars was presenting papers at the first “China International Frontier Education Summit,” held in Beijing in July. They claimed that after years of research, they had discovered that the English language and Western culture actually come from China. 

• To boost domestic consumption, the State Council announced 20 proposed measures, including giving out licenses for night markets to operate and encouraging customers with parking facilities and other infrastructure.

• American app users have no idea that TikTok is Chinese, according to a survey by China Books Review. 

• Turkey has deported a Uyghur family to China, raising fears that the country may be losing its status as a safe haven for the Uyghur community abroad. 

• The Austria-China Peaceful Reunification Promotion Association registered as a foreign NGO in China. Why would an overseas office of the Communist Party’s United Front Work Department register as a foreign NGO in China? Perhaps because it helps boost the numbers of “foreign NGOs” in China, and provides “foreign experts” who back the Party line. 

• The Pentagon wants Americans to make drones to replace DJI — but there’s a long way to go for American firms to catch up with DJI’s quality. 

• There will be a grand military parade on October 1 in Beijing, marking the 70th anniversary of the founding of the People’s Republic of China. 

• American Factory, a documentary about Fuyao Glass America in Ohio, was released on August 21. The first production by Barack and Michelle Obama’s production company, Higher Ground, does a fine job portraying the cultural differences and realities of work for both Chinese and Americans. 

• The first Costco in China opened to chaos on August 27 in Shanghai, as U.S.-China trade tensions could not stop a rampage of Chinese deal seekers from descending upon the American bulk-selling supermarket. 

BUSINESS AND TECHNOLOGY:

• Young Chinese consumption patterns
  Young Chinese spend like Americans—and take on worrisome debt / WSJ (paywall)
  “While previous generations were frugal savers — a product of their years growing up in a turbulent economy with a weak social safety net — the more than 330 million people born in China between 1990 and 2009 behave much more like Americans, spending avidly on gadgets, entertainment and travel.”

• Mainland money in Hong Kong
  Mainland capital floods into Hong Kong stocks for weeks on end / Caixin (paywall)

The value of Hong Kong stocks bought by Chinese mainland investors has exceeded the value of the stocks they sold for 16 consecutive weeks, the longest streak for around a year and a half…The total size of the net inflow, which is calculated by subtracting the value of stocks sold from the value of stocks bought, reached HK$129 billion ($16.4 billion) since the streak began in mid-May, as of Thursday. 

• Pinduoduo subsidizes big-city consumption
  In depth: After conquering the bargain basement, Pinduoduo sets sights on big cities / Caixin (paywall)

As of June, orders from top cities like Beijing, Shanghai and Wuhan made up 48% of Pinduoduo’s total transactions, up from just 37% in January, founder and CEO Zheng Huang said in a call after announcing his company’s latest results last week… 

Pinduoduo’s strong move into larger cities followed the launch of its “10-billion-yuan subsidy program” that, according to the name, subsidized users to the tune of up to $140 million during a shopping festival running on the first 18 days of June.

• Real estate: Evergrande underperforming
  Real estate giant Evergrande’s half-year profits sliced in half / Caixin (paywall)

The country’s third-largest property firm reported a net profit of 14.9 billion yuan ($2 billion) in the six months to June, down 51.6% year-on-year… 

Evergrande is the only one of China’s three largest developers by sales to report a drop in mid-year earnings. No. 1-ranked Country Garden Holdings Co. Ltd. and No. 2-ranked China Vanke Co. Ltd. both turned a profit, with the former’s profit growth increasing slightly while latter’s decreased. Evergrande blamed a 25% reduction in its delivered property area in the first half for the poor performance.

• Banking risk
  China calls on local governments to ‘defuse the bomb’ of troubled small banks / SCMP
  “Move comes after Baoshang Bank, Jinzhou Bank and Hengfeng Bank all ran into trouble in recent months.”

• Lingang Special Area
  China cuts taxes in Shanghai free trade zone to lure investment / Bloomberg (porous paywall)
  “The Lingang Special Area, part of the existing Shanghai free trade zone, will lower the tax some companies have to pay on revenue to 15% from 25% for 5 years and offer some income tax subsidies to workers that are in high demand, the Shanghai government said in a statement on Friday.”

SCIENCE, HEALTH, AND THE ENVIRONMENT: 

• Anonymous info on afforestation
  Can China’s afforestation knowledge green the world? / Chinadialogue

Speaking anonymously to chinadialogue, a forestry expert explained that in the last four decades China has developed systems for calculating and monitoring forestry carbon stores. The technology is now mature enough to measure and predict carbon storage within various forest ecosystems. This expertise means that: “Our ready-made approach could be applied elsewhere in the world,” said the expert.

• Pangolin scales in traditional medicine
  Pangolin scale medicines no longer covered by Chinese insurance / National Geographic
  “Traditional medicines containing pangolin scales will no longer be covered by China’s state insurance funds, according to a government announcement.”

POLITICS AND CURRENT AFFAIRS:

• China’s military in Taiwan’s eyes
  China plans to attain strategic nuclear capabilities by 2020: MND / Focus Taiwan
  “China is planning to attain strategic nuclear capabilities that can counter other nuclear powers and protect its territory by 2020, according to Taiwan’s Ministry of National Defense’s (MND’s) latest assessment on the country’s military power.”

• Execution for Didi driver
  China executes ride-hailing driver who killed passenger / AFP
  “China on Friday (Aug 30) executed a man convicted of raping and killing a female passenger last year while he was working as a driver for ride-hailing service Didi Chuxing.” 

SOCIETY AND CULTURE:

• Nezha
  Surprise blockbuster tops ‘Avengers’ in China cinema rebound / Bloomberg via Caixin Live
  “‘Nezha,’ which tells the story of an underdog demon-child who chooses good over evil to avoid a terrifying fate, grossed 4.6 billion yuan ($644 million) as of Aug. 28.”

• 854 million internet users in China
  Even more Chinese people are online now / Caixin Live

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