An interesting offer from Huawei as American lawmakers growl

Dear Access member,

From all of us at The China Project: Happy Mid-Autumn Festival, which is also our word of the day: 中秋节 zhōngqiū jié. 

Eat well this weekend and see you on Monday! 

—Jeremy Goldkorn, Editor-in-Chief

1. Huawei offers to sell 5G tech as American lawmakers growl

In an interview (porous paywall) with New York Times columnist Thomas Friedman, Huawei chief executive Rén Zhèngfēi 任正非 said, “There are no restrictions on what we would be willing to discuss with the Department of Justice.” He went on to make an interesting offer:

And if the United States — which has no indigenous 5G networking manufacturer — still does not trust Huawei to install its equipment across America at scale, added Ren, then he is also ready, for the first time, to license the entire Huawei 5G platform to any American company that wants to manufacture it and install it and operate it, completely independent of Huawei.  

The Economist was also given an interview (porous paywall), and confirmed the offer:

For a one-time fee, a transaction would give the buyer perpetual access to Huawei’s existing 5G patents, licences, code, technical blueprints and production know-how. The acquirer could modify the source code, meaning that neither Huawei nor the Chinese government would have even hypothetical control of any telecoms infrastructure built using equipment produced by the new company. Huawei would likewise be free to develop its technology in whatever direction it pleases.

In a separate editorial, the Economist called this “a peace offering that deserves consideration.” The BBC called it an “extraordinary 5G offer.”

This is still a tough sell, given the mood in Washington, D.C. The top comment on the New York Times piece as I write this is:

There’s no show of good faith in Ren’s flexibility. I see no reason to see Ren’s stance as anything more than predatory public relations.

WASHINGTON SEEKS NEW TARGETS

It’s not just Huawei. Any Chinese company with exposure to the American market, particularly tech firms, should be bracing for trouble: 

“A bipartisan group of U.S. lawmakers asked the Pentagon on Thursday to name companies owned by the Chinese military operating in the United States, as they seek to curb what they called Beijing’s effort to ‘steal’ technology for military purposes,” reports Reuters. 

Pointing the finger at Tencent, Alibaba, and Baidu: “A mid-level official with the State Department asserted in a little-noticed speech on Wednesday that several huge Chinese tech companies — Tencent, Alibaba and Baidu — were effectively arms of the Chinese government,” according to The Information (paywall):

His comments raised the prospect that the Trump administration, which in May effectively barred Chinese smartphone maker Huawei from doing business with U.S. companies, may be considering taking action against other Chinese tech firms.

One of our scenarios for the Year of the Pig in our January Red Paper was greater U.S. government scrutiny of Tencent and Alibaba — this development is unsurprising. 

In antipodean Huawei news, “China’s foreign ministry has again lashed out at Australia for its decision to ban Chinese telecommunications company Huawei from participating in the rollout of its 5G network and accused Australia of…‘blatant discrimination against Chinese companies,’” reports the Sydney Morning Herald. 

2. A lull in the trade war to eat mooncakes 

It’s the Mid-Autumn Festival, time for family reunions, and the lull in the trade war continues. The New York Times reports (porous paywall): 

A recent calming of trade tensions between the United States and China continued on Friday as Beijing said it would exempt some American soybeans, pork and other agriculture products from new tariffs, state media reported.

The announcement was made after President Trump delayed the next round of tariff increases on Chinese goods until after trade talks that are scheduled for early October, and officials in Washington confirmed China had made its first major purchase of American soybeans in months.

The People’s Daily is also sending reassuring messages: “Chinese and U.S. economic and trade teams have maintained effective communication,” says the Party newspaper (English, Chinese), and preparations for the next round of talks are under way.  

How long can this temporary cease-fire last? Perhaps until after October 1, National Day? The two articles below don’t offer much hope:

“U.S.-China trade deal coming soon? Big companies are not buying it,” says this CNBC article:  

If you follow the markets, there’s been recent reason for optimism about a U.S.-China trade deal. Some investors are buying it — literally — with recent gains in stocks attributed to positive signals from the U.S. and China after a volatile August. But there’s one group of market insiders not buying the talk: corporate executives. In other words, the people who run the companies whose publicly traded shares have been rebounding.

“Democratic presidential hopefuls criticized President Donald Trump’s trade war with China but gave no hint they would work toward a quick resolution if elected, pledging during their debate on Thursday to hold Beijing accountable for ‘corrupt” practices,’” reports Reuters. 

See The China Project’s election tracker for more on the Democratic candidates and China. 

3. London Stock Exchange rebuffs Hong Kong 

That was quick. The South China Morning Post reports:

The London Stock Exchange has rebuffed Hong Kong’s unsolicited takeover bid in a strongly worded letter and separate website post spelling out its concerns about the “fundamental flaws” of the plan, which included the current political crisis engulfing the city.

Yesterday, in an editorial (paywall) urging London to reject the bid from Hong Kong Exchanges and Clearing, the Financial Times noted:

The bid would have caused less concern before anti-government and pro-democracy protests in Hong Kong, and questions over the depth of China’s commitment to liberal aspects of “one country, two systems”. The latter has been a vital foundation of Hong Kong’s economic success.

4. Disappeared Taiwanese held for ‘endangering national security’   

The New York Times reports (porous paywall):

A Taiwanese man who disappeared during a visit to China is being investigated for suspected activities that “endanger national security,” the Chinese authorities said on Wednesday, the latest twist in a mystery that may dovetail with months of pro-democracy protests in Hong Kong.

A spokesman for the Taiwan Affairs Office of China’s State Council revealed that the man, Lee Meng-chu [李孟居 Lǐ Mèngjū], was under investigation. Newspapers in Hong Kong and Taiwan reported that he went missing about three weeks ago.

What did Lee do to get detained? The New York Times says he “works for a volunteer group, according to reports by Hong Kong and Taiwanese newspapers.” In addition:

In late August, The Liberty Times, a Taiwanese newspaper, published a photo of Chinese military vehicles that it said had been taken by Mr. Lee on the mainland. It said that he was thought to have been in Shenzhen on August 19 and 20.  

News of Lee’s detention led a spokesperson for Taiwan’s ruling DPP, per CNN, to warn Taiwanese:

The situation inside Hong Kong and China is severe and travel should be reduced. If you have to go to these areas, you must pay close attention to your own safety, and keep your friends and relatives informed of your whereabouts.

5. U.S. Senate passes Uyghur Human Rights Policy Act

The South China Morning Post yesterday reported:

The United States Senate has passed a bipartisan bill urging the government to take action to counter China’s crackdown on Muslims and other minorities in its far western region of Xinjiang.

The Uyghur Human Rights Policy Act, which passed on Wednesday, appeals for the Trump administration to consider human rights sanctions against Chinese officials and prohibit the export of US goods and services to state agents operating in Xinjiang.

Also, today’s grim reading: Christian Shepherd and Yuan Yang of the Financial Times have published an excellent report (paywall) that documents the Chinese government’s war on Uyghur culture, the arrests of leading Uyghur intellectuals, and the removal of Uyghur language, spoken and written, from public spaces. 

If you can’t get behind the paywall, Shepherd has posted a background and some of the key points of the story in this Twitter thread. 

6. A peaceful Friday in Hong Kong

There were peaceful protests tonight in Hong Kong, and they look set to continue this weekend. 

“Thousands of Hongkongers formed human chains at two of the city’s iconic hilltops on Friday evening in a show of solidarity with pro-democracy protesters,” says the Hong Kong Free Press.  

Maybe not so peaceful fortycoon Li Ka-shing (李嘉诚 Lǐjiā Chéng), who “has hit back at an ‘unwarranted’ attack from Beijing’s political and legal affairs commission over his comments on Hong Kong’s ongoing anti-government protests,” reports the South China Morning Post: 

An article published on Thursday in an official WeChat account of the party department accused the 91-year-old billionaire of condoning crime and causing the city’s housing crisis.

Li had urged those in power to “provide a way out” for the young demonstrators, describing them as the “masters of our future”. He said the protesters should consider the city’s overall interests too.

“Hang Lung Properties chairman Ronnie Chan [陳啟宗 Chén Qǐzōng] said the ‘unwise policies’ of Hong Kong’s government had contributed to an atmosphere that sparked protests and civil unrest and are now threatening the city’s business community,” according to the South China Morning Post. 

Hong Kong’s “High Court has granted a woman who suffered an eye injury during clashes last month permission to challenge the police refusal to provide a copy of the warrant used to access her medical records,” says Hong Kong Free Press.

The woman — known only as “K” owing to privacy and cyber-harassment concerns — was injured in her right eye by a suspected bean bag round in Tsim Sha Tsui on August 11. K has since become a symbol of alleged police violence during the city’s pro-democracy protests.

“China has called on its biggest state firms to take a more active role in Hong Kong, including stepping up investment and asserting more control of companies in the financial hub,” according to Reuters. 

—Jeremy Goldkorn

Here are the stories that caught our eye this week:

• “Comrades, pork prices really scare me!” is the cry of consumers at meat markets across the country, the South China Morning Post reported. Pork reached record highs of 30 yuan ($4.20) to 33 yuan per kilogram, double the price in June. Vice Premier Hú Chūnhuá 胡春华 was quoted as saying the inflation in pork prices threatened to “seriously affect the achievements of a well-off society and hurt the image of the party and the state.” Premier Lǐ Kèqiáng 李克强 also called for urgency in addressing pork price inflation and the decimation of pig farmsfrom African swine fever. 

• In a plea for foreign capital, Beijing lifted quotas for its Qualified Foreign Institutional Investor (QFII) and RMB Qualified Foreign Institutional Investor (RQFII) programs. The move is partially a symbolic gesture of financial opening, at least for now, because foreign investors had not even reached the previous quota. But commentators also pointed out that it may have been motivated by China “edging dangerously close to twin deficits in its fiscal and current accounts.” 

• Hong Kong protestors wrote their own anthem, titled “Glory to Hong Kong” (願榮光歸香港 yuàn róngguāng guī xiānggǎng), and sung it in shopping malls as a primary form of protest this week, other than forming human chains. But while protestors stayed off the streets out of respect for the anniversary of 9/11 in the U.S., the China Daily went full post truth and posted a shocking photo on Facebook of the World Trade Center in New York in flames 18 years ago, with the caption, “Anti-government fanatics are planning massive terror attacks in Hong Kong on September 11.” No attacks or attempted attacks were confirmed. 

• Joshua Wong, the most recognizable activist active in the protests, toured Germany — leading to rebukes from the Chinese Foreign Ministry and the Chinese ambassador to Germany — and then headed to Washington, D.C.

• The Solomon Islands is considering breaking relations with Taiwan, a move that leave Taiwan with only 16 countries that recognize it diplomatically. As one of the larger South Pacific nations, the Solomon Islands making a switch could inspire smaller neighbors to make the same decision. Taiwanese President Tsai Ing-wen (蔡英文 Cài Yīngwén) is working hard to ensure that doesn’t happen. 

• U.S.-China trade tensions lowered slightly, as China excluded some U.S. goods from additional tariffs, Trump delayed his next round of tariffs by two weeks, and China bought 600,000 tons of U.S. soybeans. Meanwhile, China seems to be preparing for a future without U.S. agricultural goods, and a significant number of American companies are looking outside China for further investments — but China’s slowing economy was a greater concern than the trade war. 

• Economic reforms were announced, though Chinese-language state media sources made clear these reforms had nothing to do with political liberalization. One interesting reform involves restricting the production of some plastic products to increase sustainability. 

• Jack Ma handed over the reigns of Alibaba, the ecommerce giant he cofounded 20 years ago, to soft-spoken Daniel Zhang (张勇 Zhāng Yǒng). 

• The Qatar-based Al Jazeera published again on Xinjiang, producing a comprehensive TV package that draws on a variety of sources and interviews with specialists — and also reliable Party praise singer Victor Gao (高志凯 Gāo Zhìkǎi), who shamefully called critical media reports about the vast internment camp system in Xinjiang “fake news.” Meanwhile, Emile Dirks wrote an interesting analysis that suggests the roots of the Xinjiang surveillance system lie in what are known as “key population management” (重点人口管理 zhòngdiǎn rénkǒu guǎnlǐ) programs. 

• New Zealanders mocked Simon Bridges, the leader of the opposition New Zealand National Party, after he gave a fawning interview to CGTN and rejected the (accurate) characterization of politburo member Guō Shēngkūn 郭声琨 as “the leader in charge of China’s secret police.” 

• JPMorgan told staff to write “Hong Kong SAR, Macau SAR and Taiwan, China” in all documents, to ensure the bank doesn’t enrage Beijing just after it became the first international company to take control of its joint venture in China. 

• Dozens of biotech startups are looking to list in Shanghai or Hong Kong in coming months, according to Nikkei Asian Review, the latest news in the boom in Chinese biotech. 

• Zhang Yujing, the Mar-a-Lago trespasser, was found guilty of trespassing and lying to U.S. Secret Service agents, after her trial hit a strange delay when Zhang complained that she had not been provided any underwear. 

BUSINESS AND TECHNOLOGY:

• Slowdown for electric car startup NIO 
  NIO laying off dozens more employees in Silicon Valley / The Verge

Tencent-backed EV startup NIO is laying off 62 employees from its Silicon Valley office in San Jose, California, according to a new filing with the state’s Employment Development Department. It’s the Chinese company’s second round of cuts in the US this year, as NIO laid off 70 employees and closed a San Francisco office back in May. NIO began 2019 with 640 employees in Silicon Valley, according to financial filings.

• See also:
  ‘Tesla of China’ sputters a year after IPO / Caixin (paywall)
  Why there’s no rush to buy into NIO Stock / InvestorPlace

• First celebrity ambassador for 230-year-old French jeweler
  Chaumet’s new “Mulan” approach in China / China Film Insider

French jeweler…Chaumet made the global announcement that Chinese actress Liú Yìfēi 刘亦菲 would be the brand’s new ambassador. This was particularly surprising to many because Mansvelt said in 2018 that “Chaumet will not appoint a celebrity ambassador, because the brand’s blue blood heritage, distinctive Parisian style, the art of jewelry creation, and all the clients it has served are the [true] ambassadors.”

SCIENCE, HEALTH, AND THE ENVIRONMENT: 

• Treating HIV with gene editing
  Chinese scientists use CRISPR tool on HIV patient for the first time / CNN
  Although the case mentioned in the headline was not an outright success, scientists Dèng Hóngkuí 邓宏魁 believes CRISPR-Cas9 will change the treatment of blood-related diseases such as AIDS, sickle cell anemia, hemophilia and beta thalassemia.

• Guizhou telescope captures radio signals
  China’s giant alien-hunting telescope detects ‘mysterious signals’ / 9News
  “The Five-hundred-meter Aperture Spherical Telescope (FAST) captured the Fast Radio Bursts — small pulses of radio signals that originate from deep space — in August… Scientists at the Chinese Academy of Sciences still don’t know the source of the pulses.”

POLITICS AND CURRENT AFFAIRS:

• RCEP trade agreement to be signed in November?
  All 16 nations set for final RCEP deal: Australian negotiator / The Hindu
  Today, teams from all 16 RCEP countries that are negotiating the Regional Comprehensive Economic Partnership (RCEP) met in New Delhi for a “Track 1.5 round table on Global and Regional Trade and Economic Integration Issues.” The countries are the 10 ASEAN states, and six ASEAN-FTA partners China, India, Australia, New Zealand, Japan, and South Korea.
  Despite doubts that India may back away from the agreement, Australia’s lead negotiator said that “all ministers including India reiterated their commitment to concluding the negotiations in full by the time of the leaders summit in November.”

• Chinese crime gang in the Philippines
  Philippines arrests 277 Chinese accused of running online investment scam / SCMP
  “Philippine immigration agents have arrested 277 Chinese in a raid against an online investment scam syndicate… The arrests came after the Chinese Embassy provided information about the fraud, which has victimized more than 1,000 Chinese.”

SOCIETY AND CULTURE:

• Sexual harassment at the University of Illinois
  As students from China flock to University of Illinois, lawsuit alleges ex-professor targeted female Chinese students / ProPublica
  “The allegations came at a time when the flagship campus at Urbana-Champaign was enrolling more Chinese undergraduates during some years than any university in the U.S.”

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