China Week in Review
Week of Nov. 26, 2018
China and the world
- Xi Jinping packs his calendar with diplomatic trips in the lead up to the G20, possibly to court potential allies and make up for failure at the APEC summit.
- The peace and denuclearization process on the Korean Peninsula appears to be progressing smoothly, despite some minor hiccups.
Nov. 26:
- Cheong Wa Dae, the executive office of the South Korean presidency, said that South Korea welcomes North Korean leader Kim Jong Un’s visit to Seoul before the end of the year.
- China and India agreed to increase border trade and restraint border troops.
Nov. 27:
- Xi Jinping arrives in Spain for a two-day visit, and Spanish daily newspaper ABC publishes an article signed by Xi. During the trip, China and Spain signed 18 cooperation agreements.
- While in Germany for a four-day trip, Chinese vice premier Liu He said that “no one ever emerged as a winner from a trade war.” Liu also pledged that the PRC will open up its economy “even wider.”
- European Competition Commissioner Margrethe Vestager urges the PRC to work with the European Union on reforming the World Trade Organization at a conference in Hamburg which Liu He was attending.
- The U.S. Department of Justice files a complaint to forfeit over $3 million from two Chinese companies and one Singaporean company who were accused of money laundering on behalf of North Korean banks.
- Over 200 Google employees sign an open letter demanding that the company cease developing a censored search engine for Chinese users.
Nov. 28:
- In Spain, Xi Jinping said that China will “make efforts to open, even more, its doors to the exterior world.”
- Xi Jinping publishes an article entitled, “Creating A New Era of China-Argentina Relations” in the Argentinian press on the eve of G20 summit in Buenos Aires.
- Maryland Democrat Sen. Chris Van Hollen and Florida Republican Sen. Marco Rubio call on President Trump to investigate if the Maduro regime in Venezuela is working with ZTE to track Venezuelan citizens.
- Two U.S. Navy destroyers sail through the Strait of Taiwan in the third such freedom of navigation operation in the year.
- Spark, New Zealand’s largest telecommunications company, said that government officials informed them that using Huawei’s 5G equipment “would, if implemented, raise significant national security risks.”
- Noam Chomsky, the notable libertarian socialist linguistic professor, joined over 30 scholars from around the world in calling for a boycott of Marxist conferences in China due to the PRC’s crackdown of student activists organizing pro-worker groups.
Nov. 29:
- President Donald Trump tweeted: “Billions of Dollars are pouring into the coffers of the U.S.A. because of the Tariffs being charged to China, and there is a long way to go. If companies don’t want to pay Tariffs, build in the U.S.A. Otherwise, lets just make our Country richer than ever before!”
Nov. 30:
- U.S. officials and congressional sources tell Reuters that the Trump administration is considering new background checks and other restrictions on Chinese students in the U.S. due to increasing concerns about espionage.
- Xi Jinping and Donald Trump arrive in Argentina for the G20 summit. Both sides held meetings with the various G20 leaders on the sidelines of the summit.
- President Trump, Canadian prime minister Justin Trudeau, and outgoing Mexican president Enrique Pena Nieto signed an authorization for the new United States–Mexico–Canada Agreement.
- South Korea sends a train across the border into North Korea for the first time in a decade.
- A North Korean soldier crosses a heavily fortified border to defect to South Korea.
Dec. 1:
- The G20 leaders issued a statement that recognized the benefits of multilateral trade and included a commitment to reform the World Trade Organization. The statement mentioned a need to “work towards enhancing debt transparency and sustainability … including infrastructure financing.” According to media reports, the statement was produced after late-nights of tough negotiations.
Sino-U.S. trade war
- To avoid U.S. tariffs, China imports Siberian pork from Russia. There was an outbreak of African swine fever in 2017, leading some to believe that Siberia is the likely source of the disease on the mainland. The spreading swine fever has forced China to buy tariffed pork from the United States.
- Argentina, one of the largest producers of soybeans globally, ends up becoming the biggest purchaser of U.S. soybeans during a period when its currency is depreciating. A situation may have developed where Argentina is selling its own soybeans at a high price to China, and making up domestic demand by importing from America.
Nov. 26:
- The People’s Daily publishes a commentary entitled, “A Confident China Will Always be Here.” The article expresses optimism about China’s economic development and asserts that China will be able to overcome all challenges.
- PRC ambassador to the United States Cui Tiankai said in an interview with The Wall Street Journal that “there’s a real risk that the integrating global market might become fragmented” with a prolonged Sino-U.S. trade conflict.
- In an interview with WSJ, Trump said that it is “highly unlikely” that he will accede to a request by Beijing to delay the raising of tariff rates from 10 percent to 25 percent.
- General Motors announced that it is shutting down plants and cutting jobs in the U.S. and Canada, prompting Trump and Canadian prime minister Justin Trudeau to call GM CEO Mary Barra to express disappointment. The following day, Trump tweeted that GM made a “big China bet years ago” and added that he does not think that the bet will “pay off.”
- According to the U.S. Department of Agriculture, nearly 1.3 million metric tons of U.S. soybeans were inspected for export to Argentina from Sept. 1 through Nov. 22. During the same period last year, Argentina exported no soybeans from America.
Nov. 28:
- U.S. Trade Representative Robert Lighthizer said that he is exploring all available tools to raise U.S. auto tariffs on Chinese vehicles to 40 percent, the current rate which China levies on U.S. car imports.
Nov. 29:
- WalMart and the Home Depot are advancing some planned purchases to avoid the likely increase of tariff rates in January 2019, according to WSJ. Meanwhile, Amazon is cutting orders and purchases for some of its private-label products due to the tariffs.
- The U.S. Department of Agriculture said private exporters sold 268,748 tonnes of U.S. soybeans in the last day to unknown destinations.
- According to industry tracker SWIFT, the renminbi ranked sixth as an international payment currency in October, dropping one rank from the previous month. Also, the RMB’s share among other currencies fell to 1.7 percent from 2.5 percent.
Nov. 30:
- According to the U.S. Department of Agriculture, China bought 3,348 tonnes of pork to be shipped this year in the week ending Nov. 22, the largest purchase since February. China also bought 9,384 tonnes of pork for shipment next year, or 72 percent of total weekly sales to all countries. Currently, the PRC has 62 percent tariffs on U.S. pork.
Dec. 1:
- Xi Jinping and Trump meet for dinner. Both sides agreed to a pause in the escalation of the trade war.
Politics
- The CCP’s effort to strengthen control over grassroots organizations is likely related to the ongoing anti-Mafia campaign.
- If rumors of power retired generals being purged recently are accurate, this suggests that Xi Jinping continues to face strong opposition in the regime.
- There is speculation that the purge of retired generals Wu Shengli, Cai Yingting, and Wang Hongyao is connected with the Fourth Plenum being delayed.
Nov. 26:
- The People’s Daily publishes a list of 100 individuals who made “outstanding contributions” to the PRC’s “reform and opening up.” At least 17 entrepreneurs made the list, including the heads of Alibaba, Tencent, and Baidu.
- The Politburo held a meeting to review working regulations for rural grassroots organizations as well as the supervisory and discipline inspection organs.
Nov. 29:
- Former PLA naval commander Wu Shengli, former Nanjing Military Region commander Cai Yingting, and former PLA General Armaments Department political commissar Wang Hongyao were reportedly arrested on the same day (Nov. 29), according to speculation in Chinese-language media.
Economy
- Official data shows that China’s economy continues to worsen.
- The central bank and other regulatory authorities release guidelines on supervising China’s financial system, possibly due to risk concerns.
- The Chinese authorities pursue back taxes from film and television studios, a fall out of the Fan Bingbing incident. The CCP may also be sourcing new revenue streams through back taxes to make up for financial shortages.
Nov. 27:
- The People’s Bank of China, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission issued new guidelines for the “supervision of systemically important financial institutions” to “ improve areas of weakness in financial supervision” and “give guidance to large financial institutions on prudent operations and forestall systemic financial risks.”
Nov. 28:
- Mainland media outlets report that China’s taxation department notified some Chinese film and television studios that they have to pay three years worth of back taxes. The back taxes, calculated at 40 percent of personal service tax, will be levied on at least 70 percent of total studio revenue from 2016 to 2018. The taxation department notice estimated that the studios may have to pay as much as 192,500 yuan in back taxes for every 1 million earned in revenue. If the studios promptly pay the back taxes before the end of December 2018, the relevant authorities will not pursue them for administrative penalties or other fines.
Nov. 29:
- According to the National Bureau of Statistics, China’s official Purchasing Managers’ Index (PMI) fell to 50 in November, falling from and missing market expectations of 50.2 in October. The non-manufacturing PMI fell to 53.4 from 53.9 in October, missing expectations of 53.7.
Nov. 30:
- Chinese stock markets rally somewhat this week thanks to the efforts of the authorities. The Shanghai index rose by 0.34 percent, but remains below 2,600 points.
Society
Nov. 26:
- He Jiankui, an associate professor at Southern University of Science and Technology in Shenzhen, claims to have created the world’s first genetically edited babies. China’s National Health Commission said it was “highly concerned” over He’s work. However, a former professor of science at a university in Shanghai claimed on Twitter that the CCP and He’s university had in fact promoted He’s work, which was supposedly a secret plan. He Jiankui is a member of the CCP’s “Thousand Talents Plan” program.
Nov. 27:
- A group of 278 scholars from around the world held a press briefing in Washington to condemn the mass detention of Uyghur Muslims in Xinjiang and call on the U.S. to sanction key PRC officials and security companies linked to the rights abuses.
Nov. 28:
- An explosion occurred at the Hebei Shenghua Chemical factory in the province’s Qiaodong District. Official media said that 23 people were killed and 22 were injured, while 50 vehicles were destroyed by fire. Government officials declared that the air was not contaminated by the blast.
Nov. 29:
- Hundreds of villagers in Bantong Village, Guangxi Province clashed with the local government over the government’s attempt to forcefully seize over 400 mu of arable land. The villagers wielded wooden sticks and shovels as they tangled with riot police. Over 40 villagers were arrested, and four others were wounded.
Nov. 30:
- Five victims of financial fraud at a commodity exchange in Tianjin attempted to commit suicide by drinking pesticide in Tiananmen Square, according to Chinese language media. Their fates remain unclear.
- Hundreds in Xi’an City, Shaanxi Province, took to the streets to protest forced demolitions by the local government. The protesters were intercepted by riot police.
SinoInsight 1
On Nov. 24, Liu Lirong, the founder of Chinese smartphone maker Gionee, told the official Securities Times in an interview that he had once lost 1 billion yuan while gambling in Saipan. Previous, there were rumors that Liu had lost over 10 billion yuan gambling.
Gionee shareholders have speculated that Liu might have even misappropriated about 6 billion in public funds, and may have lost as much as $700 million playing a round of cards in Saipan.
Gionee was a dominant player in the Indian mobile phone market before 2014. In January 2018, however, Chinese-language media reported that the company may owe debts of about 10 billion yuan.
OUR TAKE
1. Liu Lirong’s interview exposes the trend of wealthy Chinese tycoons engaging in money laundering through gambling overseas.
2. After Xi Jinping implemented the anti-corruption campaign in 2013, China’s wealthy have avoided “gambling” at casinos in Hong Kong and Macau to escape scrutiny from the authorities. Instead, some of these tycoons have invested in casino construction in South Korea’s Jeju Province and Saipan.
3. According to Chinese-language media reports, a principal shareholder of a Saipan casino operated by Imperial Pacific International Holdings is Ji Xiaobo. Ji is rumored to be a crony of Che Feng, the son-in-law of Dai Xianglong, the former Tianjin mayor and central bank governor.
Che Feng was investigated for corruption in June 2015. Official media reported that Che has involved in laundering huge sums of money and selling intelligence to Western intelligence agencies. The Che Feng case reportedly implicated CCP elite, including the families of former Politburo Standing Committee members Zeng Qinghong, Liu Yunshan, and Jia Qinglin.
Ji Xiaobo is also rumored to have laundered as much as $4 billion each month at the Saipan casino for Lai Xiaomin, the former chairman of Huarong Asset Management. Lai, a Jiang faction associate, was officially investigated in April 2018. He was found with nearly 270 million yuan of cash in his home and his case involved sums exceeding 2 billion yuan. Official media said that the investigation into his corruption is wide-ranging and also one of the largest cases of financial corruption since the founding of the CCP.
