China Week in Review
Week of Aug. 27, 2018
China and the world:
America steps up the reshaping of a new global order, which puts the PRC at a disadvantage.
- Aug. 26: The United States and Mexico sign a new trade agreement to replace the North American Free Trade Agreement (NAFTA).
- Aug. 28: U.S. Treasury Secretary Steven Mnuchin said in an interview with CNBC that America is looking to complete trade negotiations with Mexico, Canada, and the European Union first before talking to China.
- Aug. 30: Cecilia Malmström, the EU’s top trade official, says that the EU is prepared to eliminate all auto tariffs if the U.S. does the same.
- Aug. 30: President Donald Trump again criticizes the World Trade Organization (WTO), and says that he will withdraw the U.S. from the WTO if it does not “shape up.” (link)
- Aug. 31: Sen. Marco Rubio (R-Fla.) told The Washington Post that he is planning to introduce a bill to ensure that China-based companies operating in the U.S. comply with American law.
- Aug. 31: After days of negotiation, the U.S. and Canada announced that they have yet to reach a new trade agreement. Fresh talks are scheduled for Sept. 5.
- Aug. 31: The U.S. cuts aid to the United Nations Relief and Works Agency (Unrwa), a UN refugee agency. America is the largest single donor to Unrwa, funding nearly 30 percent of its operations in the region and giving $364 million in 2017, according to the BBC.
- Aug. 31: According to The Wall Street Journal, the U.S. Congress is looking to pass a bill to expand the Overseas Private Investment Corp. and give it authority to do $60 billion in development financing. The new U.S. investment agency would also be given broad authority to compete with China in offering to finance major development and infrastructure projects overseas.
- On Sept. 1, Trump tweets that “there is no political necessity” for keeping Canada in the new NAFTA deal, and that there would be a new agreement with or without Canada.
Sino-U.S. trade war:
- Aug. 28: Wei Jianguo and Chen Wenliang, two senior researchers with the state-linked China Centre for International Economic Exchanges, said at a public forum in Beijing that China’s economy is “tough,” and that the country can win the trade war with America over the long-term. Wei also suggested that Africa can be a replacement market for America.
- Aug. 28: The Argentine Ministry of Agriculture announced that it would export soybean oil (an estimated 90,000 tons) to China for the first time in three years. This year, drought has affected Argentina’s harvest of soybeans. Soybean oil and meal producers had to import beans from Brazil, Paraguay, and the U.S. to supply China with soybean oil.
- Aug. 30: According to Bloomberg News, Trump is preparing to impose another $200 billion of tariffs on Chinese imports right after a public comment period ends on Sept. 6.
Politics:
Personnel movements continue briskly. Prominent reshuffles at the provincial level and below involve changes to the top leadership of local Organization Department, United Work Front Department, Political and Legal Affairs Committee, and Public Security Bureau. There are also several changes to the political commissar ranks and the heads of Political Work Departments.
Meanwhile, anti-corruption purges and the “sweeping black” anti-mafia campaign continue.
- Aug. 28: Generals Wei Liang and Xu Fenlin were demoted and made to retire, according to Hong Kong media.
- Aug. 28: The Chinese Communist Party (CCP) Central Committee dispatched nine “sweeping black” teams to nine provinces to carry out anti-corruption and supervision work.
- Sept. 3: Duan Yuliang, chairman and Party secretary of the Pingdingshan City CPPCC, was investigated. Duan previously served as director of Pingdingshan’s Public Security Bureau.
Economy:
Foreign funds continue to leave China. Also, vegetable prices go up substantially.
- Aug. 27: Hong Kong Rising Sun International, the parent company of Australian clothing chain Jeanswest, announced that it is selling its mainland chains, which have been operating at a loss for consecutive years, for HK$800 million (about $102 million). As of 2013, Jeanswear had over 2,500 stores in China with sales of nearly HK$5 billion.
- Aug. 28: Nikkei Shimbun reported that Asahi Kasei, a Japanese chemical firm, would be moving its manufacture of automobile components from China back to Japan.
- Aug. 31: According to the National Purchasing Managers Index released by China’s National Bureau of Statistics in August, the new export orders index fell by 49.4 percent in the month. This is the first time in the past two years that the export order index has fallen below the 50-point mark for three consecutive months.
- Aug. 31: China’s annual tax-free threshold was increased to 60,000 per year, seemingly a tax cut. However, this change would mean increased social insurance premiums for some workers next year when new regulations kick in, and hence lesser take-home pay for those affected.
According to China’s Ministry of Agriculture, a survey conducted the previous week found that the average price of 19 vegetables had increased by 7.3 percent month-on-month and 21.4 percent year-on-year. Cucumbers saw the most significant price increase (55.6 percent YoY).
Society:
Recent criminal cases in China have sparked debate on the mainland.
- Aug. 24: A 20-year-old female passenger using a Didi Chuxing ride-sharing service was raped and killed. The inadequate response from the local police and Didi angered those who were following the incident. Online discussions about Didi’s operations and murderer’s migrant worker background ultimately touched on systemic problems in China.
- Aug. 27: In Jiangsu’s Kunshan City, a local gangster who attacked a bicyclist with a knife ended up being stabbed and killed instead by the bicyclist. The gangster was later revealed to be a member of the “Tian An Society,” a triad whose “chamber of commerce” served as a “black glove” (illegitimate, “dirty” work) for local CCP officials. The incident was captured on video and widely circulated on the Chinese internet.
- Sept. 1: Police and civilians clashed in Hunan’s Leiyang City over public school quotas and surging tuition fees. Officials said that over 30 people were wounded and 46 people were arrested. Chinese netizens say that many civilians were hurt in the clash.
SinoInsight 1
A search of China’s National Enterprise Credit Information Publicity System shows that Alipay’s legal representative was changed from founder Jack Ma to Ye Yuqing on Aug. 29.
Ye Yuqing is Alipay’s chairman and general manager. He is also the legal representative of Alibaba (China) Co. Ltd. Yuhang branch and the director of the Ali Technology branch in Hangzhou.
OUR TAKE
The worsening and chaotic financial situation in China could have prompted Jack Ma to take precautions by appointing someone else as Alipay’s legal representative. Legal representatives face huge liabilities when a company is in trouble.
The bosses of some peer-to-peer lending platforms (P2P) that failed recently appointed another person to serve as the company’s legal representative, and hence escaped legal responsibility when their company collapsed. Alipay is a third-party payment platform that is owned by Ant Financial, which provides online financial services and loans.
