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A warning shot before the war


Welcome to the Access Friday newsletter! A few things for members:


A warning shot before the war

Yesterday, President Trump signed a memorandum calling for at least $50 billion in tariffs on a wide range of Chinese products, with the full list of targeted imports to be announced by the U.S. Trade Representative within 15 days.

China has yet to announce direct countermeasures for these tariffs, though China’s Ministry of Commerce announced $3 billion in tariffs today in retaliation for American steel and aluminum tariffs announced three weeks ago that went into effect today, and the Wall Street Journal aptly described (paywall) this retaliation as a “warning shot” to Trump.

  • The $3 billion will include a “15% tariffs on imports including fruit, nuts, wine and seamless steel pipes,” while a “second round of tariffs of 25% on pork and recycled aluminum would be imposed after further evaluating the U.S. penalties on Chinese exports.”

  • The response is tentative: The Ministry of Commerce “didn’t give a specific time for imposing the tariffs on U.S. goods and said that Chinese companies have until the end of the month to make comments.”

  • It is also proportional — “roughly equivalent to the $2.79 billion worth of steel and aluminum that China exported to the United States last year, according to Commerce Department data,” the New York Times says (paywall).

So what’s next?

  • China undoubtedly has “an equally specific, but longer” list of products imported from the U.S. that it can tax in retaliation for the $50 billion in tariffs, if and when they take effect, Arthur Kroeber, research head and co-founder of Gavekal Dragonomics, told SCMP.

  • Soybeans, sorghum, airplanes, and telecoms equipment are likely at the top of that list, according to Bloomberg. The two farming exports are produced in rural states that are important pieces of Trump’s political base, while Boeing and Cisco Systems, leading manufacturers of the other two items, respectively, saw their stocks drop 5 percent and 2.8 percent today.

  • Bill Bishop writes that “it’s possible that during the 45-day period the U.S. and China could reach agreement on broader concessions that may forestall a broader trade war, at least in the near-term,” as Liu He, who became a vice premier overseeing financial and industrial policy this week, had given U.S. officials a list of areas that China was willing to compromise on when he visited Washington at the beginning of this month.

  • But “we are not interested in dialogue. We are only interested in actions,” a senior U.S. official insisted to SCMP. “The point here is the change of behavior.”

What is the change in Chinese behavior that the U.S. is trying to achieve? Trump himself has an unshakable obsession with the bottom line of the trade deficit total — former Trump White House chief of staff Reince Priebus described him as “like a dog with a bone on this trade issue” who won’t back down until the deficit decreases substantially — but that is not what is making these tariffs so widely supported by Trump’s advisors. There appear to be three main issues:

  • Limited market access, which Trump wants to address by applying “reciprocal” tariffs.

  • Theft of intellectual property, which the USTR estimated costs the U.S. “between $225 billion and $600 billion annually.”

  • “Unfair” industrial policy, by which trade advisor Peter Navarro appears to specifically mean the “Made in China 2025” initiative, Inkstone News writes.

What are the chances that China will make substantial concessions on any of these points? The New York Times writes (paywall) that “most experts assume that only collective global action can pressure China to change its trade practices,” so Trump’s unilateral — increasingly synonymous with “America First” — approach appears rather weak.

Furthermore, Trump seems likely to provoke China on both North Korea and Taiwan, making the likelihood that Beijing is willing to make concessions on trade even smaller. Axios writes that the concurrent dismissal of Rex Tillerson as Secretary of State and replacement of National Security Advisor H.R. McMaster with the provocative hyper-hawk John Bolton could “fundamentally tip the balance of power on Trump’s national security team.” Last year, Bolton advocated (WSJ – paywall) for a much closer military relationship with Taiwan, and to “see how an increasingly belligerent China responds,” and last month he wrote (WSJ – paywall) about the “Legal case for striking North Korea first.”

It seems that a war is brewing. Let’s just hope it’s a war of bills, not bullets.

We really appreciate your support as Access members. Please chat with us on our Slack channel or contact our whole editorial team at editors@supchina.com. We love feedback!

—Lucas Niewenhuis (Jeremy is off until 3/27)



BUSINESS AND TECHNOLOGY:

  • Guo Shuqing to lead merged banking and insurance regulator
    A highly regarded and efficient financial bureaucrat will lead the new combined banking and insurance regulator, according to Caixin. A key priority for Guo will likely be the crackdown on shadow banking, a major source of risk that is also a key target of Xi Jinping’s campaign to clean up and consolidate control over the financial sector.

  • Huawei in America and Apple in China
    The U.S.-China trading relationship is complicated by the leading smartphone companies Huawei and Apple, which regularly get intense scrutiny for their behavior abroad. Fear among Americans regarding data security — for Apple’s servers in China, and for Huawei phones at home — is a common factor.

POLITICS AND CURRENT AFFAIRS:

  • An oath, and tears of joy in the Great Hall of the People
    To no one’s surprise, Xi Jinping was elected president for a second term by a unanimous vote at China’s National People’s Congress over the weekend. The atmospherics and accompanying propaganda have emphasized Xi’s extraordinary powers as national leader.

  • China appoints new top officials as part of largest-in-years government reshuffle
    Among the new top-level officials appointed at the end of China’s annual Two Sessions: Wang Qishan, the trusted adviser of President Xi Jinping, who is a new vice president; Yi Gang, the low-key technocrat who will now lead the People’s Bank of China; and Liu He, the economic mastermind who may wield even more authority than Yi Gang in his role as a vice premier overseeing financial and industrial policy.

  • Xi talks tough on Taiwan at close of China’s Two Sessions political gathering
    Xi Jinping gave a 40-minute speech at the close of China’s Two Sessions, which hewed closely to well-worn themes of national rejuvenation and achieving the “China dream.” Remarks about territorial “reunification” stood out and caused anxiety among many observers.

  • China gears up to better project its image abroad — and control its message at home
    The Voice of China, a huge new propaganda outlet for China, will aim to “promote the Party’s theories, line, principles, and policies” and “tell good China stories.” Meanwhile, China’s publicity department has swallowed the country’s top media regulator, and the covert United Front department is emerging from the shadows, both moves to boost pro-China nationalistic sentiment.

SOCIETY AND CULTURE:

  • Shanxi college wants to track students’ menstrual cycles to stop truancy from morning exercises
    “One of the worst experiences of being an undergraduate at Chinese universities, at least for me and most of my classmates, is early-morning running,” writes Jiayun Feng. “We had to be at the track by 6 a.m., and we tried every possible way to get out of this morning routine. One method was to find a substitute runner to fake our attendance, but that only worked if the teacher did not have a good memory for faces. The classic excuse for the females in our class was: ‘It’s my day of the month.’” However, to stop the abuse of such excuses, a university in Shanxi Province recently came up with the idea of tracking every female student’s menstrual cycle.

  • A pro-Xi propaganda banner on model Bella Hadid’s Instagram sends the Chinese internet into confusion
    The American model, whose sister Gigi Hadid was denied a Chinese visa last year, visited Shanghai, where she snapped a selfie while commuting in a car and shared it with her 17.2 million followers on Instagram. The photo seems innocuous except for the red-and-yellow banner in the background, which reads: “Closely united around the party that has Xi as the core. Making relentless efforts to realize the Chinese dream of the great national rejuvenation.” (紧密团结在习近平为核心的党中央周围 为实现中华民族伟大复兴的中国梦而不懈奋斗)

  • China’s education ministry to adjust bonus points in national college exams
    The Ministry of Education revoked a policy that gave some students the advantage of extra points on the national college entrance exam. The move is expected to affect student athletes, medal winners of International Science Olympiads and other competitions in science subjects, provincial-level “excellent” students, and those who are honored for demonstrating outstanding deeds of morality.

  • High school teacher fired after video shows him kissing student during tutoring session
    A high school physics teacher in Shanxi Province was fired this week after video footage surfaced of him kissing a 17-year-old female student during a private tutoring session.

  • SAPPRFT bans parodies of classic TV shows and films
    On March 22, the State Administration of Press, Publication, Radio, Film and Television released an urgent notice to ban “defaming, distorting, and parodying” classic TV shows and films, which SAPPRFT thinks might “cause misunderstanding of the works’ original meaning.”


VIDEO OF THE DAY

Bargaining in Beijing

A video of a shopkeeper’s bargaining with an American at a counterfeit market in Beijing went viral on the Chinese internet. Though her English skills and bargaining tactics are common for shopkeepers in China’s big cities, many internet users in China were impressed.


ON SUPCHINA

Why Chinese companies crush Western tech giants in China

While reading the news, Lawrence Kuok regularly comes across articles stating that Chinese tech giants have the Chinese government to thank for their dominance within China. For example, Bloomberg published an article earlier this month titled “China protectionism creates tech billionaires who protect Xi,” with the author stating, “That’s helped create thriving domestic giants, including Tencent Holdings Ltd. and Alibaba Group Holding Ltd.” Lawrence is here to argue: wrong.

Mingbai: What type are you? Chinese stereotypes

Like anywhere, China has stereotypes of all kinds. You probably know about metalheads, valley girls, rednecks, and chavs, but do you know about phoenix men, oily uncles, Buddhist youth, and the wash-cut-dries? Today, Mingbai introduces four oft-used stereotypes from the Chinese internet.

Kuora: The importance of engaging with China

With the Two Sessions set to wrap up, we turn again to politics, and this question, which Kaiser very recently answered — it was originally posted on Quora on Sunday, March 18, 2018: Were Clinton-era (and earlier) engagement theorists naive to believe that economic reform would necessarily be a precursor to political reform and ultimate dissolution of the Leninist form of government?

Ink and drink: Watch this guy get a tattoo in a Beijing nightclub

Token foreigner bands? Yes. Expensive champagne bottles with sparkler fireworks attached being paraded around to the most loaded clients? Classic. Tattoo artist? Hmm. Of the in-club entertainments you expect inside one of Beijing’s flashier nightclubs, this last item probably wasn’t on the list.

Goodbye, SAPPRFT (but not Chinese censorship)

Last Tuesday, during the National People’s Congress, China announced that it was dismantling its top media regulator, the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT). According to the notice, the five-year-old institution would be succeeded by a television and radio administration that would be directly attached to the State Council, or Cabinet, giving the Communist Party further control of China’s media and entertainment.

A pro-Xi propaganda banner on model Bella Hadid’s Instagram sends the Chinese internet into confusion

American model Bella Hadid is currently in Shanghai, China, where she snapped and shared a selfie taken on March 20 that includes a pro-Xi propaganda banner reading, “Closely united around the party that has Xi as the core. Making relentless efforts to realize the Chinese dream of the great national rejuvenation.” (紧密团结在习近平为核心的党中央周围 为实现中华民族伟大复兴的中国梦而不懈奋斗)

The Caixin-Sinica Business Brief, episode 41

This week on the Caixin-Sinica Business Brief: a sweeping plan to tackle China’s slow economic growth, Trump’s China tariffs, Ofo’s latest fundraising round, Doug Young on China’s plan to test commercial-quality 5G wireless services next year, and more.

Sinica Podcast: The Chinese student experience in America, with Siqi Tu and Eric Fish

Two researchers of Chinese students in America discuss the identity issues that these young people face, as well as how the Chinese student experience abroad has changed over the years — and since Trump’s election.

Video:


PHOTO FROM MICHAEL YAMASHITA

Styrofoam overload

In this photo from the 1990s (exact year unknown), a man transports a huge bundle of Styrofoam that is to be recycled in Guangzhou. China used to be the world’s biggest consumer of scrap. In 2016, the country accounted for about 51 percent of the world’s plastic scrap imports. However, in keeping with China’s increased efforts to clean up its industrial pollution, it has implemented a new ban on the import of other countries’ plastic trash, which started on January 1, 2018.

Jia Guo

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Jeremy Goldkorn

Jeremy Goldkorn worked in China for 20 years as an editor and entrepreneur. He is editor-in-chief of SupChina, and co-founder of the Sinica Podcast.