Gray rhino seeks red cash

Access Archive

Dear Access reader,

The Fairbank Center for Chinese Studies at Harvard has produced a useful new infographic of “China’s economic governance,” which shows the people and organizations that control the Chinese economy. At the center is, of course, the red, red sun of General Secretary Xí Jìnpíng 习近平.

Here’s a blog post explaining the infographic.

—Jeremy Goldkorn and team


1. Gray rhino seeks red cash

In July 2017, the People’s Daily popularized a new term in Chinese business: gray rhinos. In a front-page editorial (in Chinese), the Party’s newspaper warned that “preventing and resolving financial risks, especially systemic financial risks, is the fundamental task of financial work” of the government. The article mentions two types of risks: black swans (黑天鹅 hēi tiān’é) and gray rhinoceroses (灰犀牛 huī xīniú). The first are risks that are completely unpredictable; the second stem from the title of a book about large and obvious “dangers we ignore” until they start running too fast.

One of the companies that became known as a gray rhino was Wanda, the real estate conglomerate run by Wáng Jiànlín 王健林, who has been the richest man in China at various times, but not since 2017. From 2012 until last year, Wang went on an international spending spree — buying up movie studios, theater chains, and sports teams, and announcing ambitious plans to crush Disney’s theme parks in China by building scores of resort complexes around the country. Since then, Wang has been quiet, and the company has dramatically scaled down its plans.

Now — ever resourceful and attuned to the political winds — Wang has announced that Wanda will “spend 12 billion yuan ($1.74 billion) to build a theme park in the Communist Party’s revolutionary birthplace Yan’an to cash in on the growing trend of so-called ‘red tourism,’” reports the South China Morning Post. Wang said that “Wanda is committed to the Yan’an spirit and will turn the Yan’an Wanda City into a new brand for red tourism.”

The SCMP also notes that since selling many of its assets and “emerging from regulators’ scrutiny, Wanda has hewed close to the Chinese government’s preferred state agenda. It announced a 20 billion yuan tourism project in the Gansu provincial capital of Lanzhou city in northwest China, a step-off point along China’s ancient Silk Road.”

On SupChina in 2017:

—Jeremy Goldkorn

2. Trade war, day 162: One Canadian in touch with embassy

Here are the latest updates on the Canada-China hostage situation, as well as developments in the trade war.

One of the two detained Canadians, Michael Kovrig, is now in touch with his embassy, Joanna Chiu at The Star Vancouver reports:

Global Affairs Canada just released update that Canada’s ambassador was able to meet with Kovrig in Beijing. Still no consular access to second missing Canadian Michael Spavor. It is a relief to hear at least that Kovrig is physically able to meet with the ambassador.

Amid the anti-Canada ferver in China, luxury jacket maker Canada Goose has delayed the opening of its first physical store in the country, which is slated to be located in Beijing’s Sanlitun district.

We also now have a bit more background on what led up to initial detention of Huawei CFO Mèng Wǎnzhōu 孟晚舟, per the Sydney Morning Herald:

It was a warm evening this past July when Canadian Prime Minister Justin Trudeau shared a drink with the world’s most powerful intelligence network.

Spy chiefs from the Five Eyes nations [Australia, the US, Canada, New Zealand and the UK] had come to a secure resort in coastal Nova Scotia for an informal evening after intense talks in nearby Ottawa…

The conversation returned to a debate…should the agencies go public with their concerns about China?…

As the spy bosses sat down to savour Nova Scotia’s famous lobster that evening with a glass of local wine, their recent clash with Russia was seen as a template for the power of working collectively…

Not all agreed to speak publicly about China when they returned home, but all were determined to act. And the Five Eyes network would include allies like Japan and Germany in the conversation.

The timeline SMH provides shows how “operation hang up on Huawei” has heated up since that important meeting in July:

  • February 24 – Malcolm Turnbull [was lobbied by] US spy agencies to ban Huawei and ZTE from Australian 5G network

  • August 19 – Turnbull rings US President Donald Trump and tells him of the Huawei, ZTE ban

  • August 23 – Australia announces Huawei, ZTE ban

  • August 24 – Turnbull dumped as Prime Minister

  • October 29 – Mike Burgess explains decision to ban “high risk vendors” from 5G, cites risks to critical infrastructure

  • November 21 – White House slams China for increasingly frequent cyber attacks

  • November 27 – New Zealand bans Huawei citing “significant network security risk”

  • December 1 – Huawei executive Meng Wanzhou arrested in Vancouver

  • December 7 – British Telecom says it will strip Huawei equipment out of its 3G and 4G networks and will not use in 5G

Finally, here is today’s news from the trade war — a dispute officially unrelated to the independent justice systems of the U.S. and Canada and their scrutiny of Huawei, unless Donald Trump has anything to say about it.

The New York Times reports (porous paywall):

On Friday, Chinese officials reported surprisingly weak growth in monthly retail sales and industrial production, weighing on global stock markets. Many economists say the slowdown is the worst since the global financial crisis a decade ago, when Beijing was forced to plow trillions of dollars into its economy to keep growth from derailing…

While the trade war with the United States provides a handy scapegoat, public blame for a prolonged downturn could ultimately fall on [Xi Jinping]. Already the government has ordered that bad economic news be censored.

Naturally, Donald Trump claimed credit:

China just announced that their economy is growing much slower than anticipated because of our Trade War with them. They have just suspended U.S. Tariff Hikes. U.S. is doing very well. China wants to make a big and very comprehensive deal. It could happen, and rather soon!

The New York Times story adds this parenthetical after the tweet:

(The slowdown began before the imposition of the tariffs, but they have hurt both business and consumer confidence and will probably pinch even more if they linger or intensify.)

The Nikkei Asian Review reports that a variety of pieces of economic data have been kept secret in recent months by the Chinese government — including the numbers on trade in oil and cars, the purchase manager index of economic powerhouse Guangdong Province, and even data that could indicate the country’s total fertility rate — leading to suspicion that the slowdown is even worse than Beijing is letting on.

The much-ballyhooed purchase of American soybeans, and reduction in auto tariffs have also officially been announced. But neither is as much of a “win” as Trump makes it sound.

  • 1.13 million tonnes of soybeans will be purchased, the BBC reports, though that number “fell short of estimates,” according to traders, one of whom said it is “not nearly enough to fix our problems in regards to soybeans and a soybean oversupply in this country.”

  • Auto tariffs will fall to 15 percent from 40 percent starting January 1, the FT notes (paywall), though German automakers in the U.S. will be the biggest beneficiaries, and 15 percent is not preferential at all — it is simply the rate that every country except the U.S. has been taxed at since July 1, 2018. The lower rate will also expire after three months if no trade deal is reached.

  • But Tesla is happy: “The Palo Alto, California-based electric carmaker, which is competing against dominant domestic Chinese electric carmakers in the world’s largest auto market, announced after the State Council’s move that it will reduce the prices of its cars sold in China. For example, the price of its Model S 75D will be cut by 84,200 yuan (about US$12,200), according to the company’s Chinese website,” the SCMP reports.

—Lucas Niewenhuis

3. Xinjiang: Burning of books and burying of scholars

On the website of the Association for Asian Studies, Elise Anderson writes:

In April 2018, the China and Inner Asia Council of the Association for Asian Studies awarded me a Small Grant to travel to Ürümchi, Xinjiang, China, to conduct a two-week feasibility study on the topic of “Gender and Music in Uyghur Society.”… Unsurprisingly, I encountered numerous obstacles from the second I entered China on June 14 of this year…

I quickly discovered that individuals and institutions with whom I had hoped to collaborate wanted nothing to do with me. I initially planned to contact research participants, all of whom I already know personally, only after arriving in Ürümchi, naïvely believing that it would be safer to contact them if I were already in the country rather than abroad.

I received one rejection after another, however: my previous advisor at Xinjiang University, Rahile Dawut, had long been disappeared, and no one would allow me on the campus; my contacts at the Xinjiang Arts Institute, where I studied for five semesters between 2014 and 2016, communicated through a proxy that I should not attempt to set foot on their campus; my attempts to contact the Muqam Ensemble and Women’s Association were met with silence; and the regional library, where I had planned to do text-based research, was shut down (ostensibly for remodeling, which has now gone on for more than three years).

Moreover, the bookstores I knew best had been shuttered, much of their previous Uyghur-language stock having been banned and/or burned in a recent “cleansing.” Musical instrument shops, meanwhile, had been relocated to a tourist bazaar, which took me days to find. I discovered in branches of Xinhua, the state-run bookstore, that the scant Uyghur-language resources still available for purchase included no works that would be useful for the research I proposed.

Read the whole thing: Change of plans: Conducting research in Xinjiang.

Also, the New York Times reports (porous paywall) that Lú Guǎng 卢广, a famous Chinese photographer, was “arrested by the police while visiting Xinjiang, his wife said on Friday, in an update on a disappearance that has drawn additional attention to the far western region where hundreds of thousands of Muslims have been detained.”

—–

Our whole team really appreciates your support as Access members. Please chat with us on our Slack channel or contact me anytime at jeremy@supchina.com.

—Jeremy Goldkorn, Editor-in-Chief


Headlines from the trade war this week:

Here are the stories that caught our eye this week, other than the trade war and Canada-China hostage situation:

  • The most famous Christian pastor in China was detained, along with his wife and about 100 members of his congregation. Wáng Yí 王怡 and his wife are now reported to be charged with “inciting subversion,” and face up to 15 years in prison.

  • A 12-year old who murdered his mother was set free, because he was too young to be detained or sent to juvenile prison.

  • Dozens of villagers were punished for burning low-quality coal in Hebei Province. The case led to worries that northern China was heading towards a repeat of the heating crisis of winter 2017.


BUSINESS AND TECHNOLOGY:

  • Pyramid scheme crackdown
    Founder of US$14.5 billion Chinese pyramid scheme Shanxinhui jailed for 17 years / SCMP
    “Zhāng Tiānmíng 张天明 was also fined 100 million yuan, while nine of his staff were given prison sentences for their part in the scam.”
    More about Shanxinhui on SupChina from July 2017: Investors hold loud protest in heart of Beijing

  • Bitcoin and cryptocurrency
    China’s plan to sideline Bitcoin / Bloomberg (porous paywall)
    “The People’s Bank of China, the country’s central bank, plans to introduce a digital currency of its own. But unlike the decentralized blockchain-based offerings, this one could give Beijing more control over its financial system. It would enhance the PBOC’s ability to root out risks and crack down on money laundering. It could also give the government an unprecedented window into individuals’ private lives.”

  • Microsatellites
    How tiny satellites are helping China in the space race / Bloomberg via SCMP
    “A space race known for giant rockets and billion-dollar exploration vehicles is shrinking to the size of a Cheerios box, and that is opening a launch window for entrepreneurs like Chinese millennial Yang Feng. Yang’s start-up, Spacety, builds microsatellites and then has them shot into orbit, offering to provide Wi-fi service on planes or eyes into the furthest reaches of space — at prices starting around US$16,000.”

POLITICS AND CURRENT AFFAIRS:

“Although he’s been living in exile for more than 30 years, Ma Jian’s depiction of China in his writing hasn’t been frozen in time,” said Maura Cunningham, a historian of modern China based in Ann Arbor, Mich., who interviewed Mr. Ma on stage at the Hong Kong festival.

“In ‘China Dream,’ Ma blends fact and fiction to explain how Xi Jinping and the party are enacting violence against, and even attempting to eradicate, the collective memory of China’s recent history,” she said.

  • Hong Kong — Umbrella activists on ice until spring
    Trial ends for nine Umbrella Movement activists, judgment expected in April / Hong Kong Free Press
    “The trial of activists involved in the 2014 Umbrella Movement ended on Friday, with the court’s judgment expected to come out April 9 next year…… Nine activists and politicians were charged with varying levels of public nuisance and incitement, which come with a maximum jail sentence of seven years. All have pleaded not guilty.”
    In a development that may bear on the verdict and sentencing, the South China Morning Post reports: “Beijing’s top legislative body has binding power over Hong Kong, even if the city’s mini-constitution does not spell it out, a mainland legal scholar said on Friday — a day after a local court left the question unanswered.”

SOCIETY AND CULTURE:


VIDEO ON SUPCHINA

Snow wonderlands in China

Just in time for the holiday season, many places across China received their first winter snowfall this week. We compiled some videos and photos of the snow scenes, from Xinjiang to Harbin to the provinces of Jilin and Zhejiang.

We also published the following videos this week:


FEATURED ON SUPCHINA

Huawei’s fight in an unfair U.S. market: A Chinese point of view

In the wake of Huawei CFO Meng Wanzhou’s arrest on December 1 in Vancouver, we’ve been reading long analysis from China of Huawei’s history, especially stories that focus on its international ambitions. We’ve translated this article, which provides a detailed, analytical perspective of the broader political, business, and technological dynamics impacting Huawei, all while apologizing for the beleaguered company. Hopefully it gives some insight into how Chinese commentators view the Huawei situation.

I was mayor of a remote Chinese town in southeast Guizhou

Chris Taylor writes for SupChina: I was mayor of Danzhai Wanda Village, and in fact 63 rotating mayors preceded me, most of them Chinese social media influencers. How does one get to be mayor in China? Good question… Let this story be a reminder — at a time when we really need one — that China is vast, complex, and impossible to relay within the constraints of any one narrative.

The quiet wave of corporations funding Chinese healthcare startups

If you’ve been reading about the startup space in China these past few months, you could be forgiven for thinking the forecast is all gloom and doom, as analysts bemoan China’s national deleveraging (or debt reduction) campaign, tightening regulations, and tensions with the U.S. But it’s not that simple. What matters to individual entrepreneurs is not the overall funding environment, but what specific resources exist in their immediate sector. And Chinese startups are seeing a surge of new support in at least one industry: healthcare.

Kuora: Chinese prejudice and prejudgment of foreigners, explained

Xenophobia certainly persists in China, but the sad fact is that for nearly the entire history of this species — indeed of a great many animal species — xenophobia has been the rule, with only very few and mostly recent exceptions. Only in the last century, to be generous, has this started to change, and we’ve started to see humanity show a little more, well, humanity when it comes to prejudices and in-group preference.


SINICA PODCAST NETWORK

Sinica Podcast: Blaming China

This week on the Sinica Podcast, Jeremy and Kaiser are joined by Benjamin Shobert. He is a senior manager at Healthcare NExT, a healthcare initiative of Microsoft, and leads strategy with national governments. The topic of discussion is his compelling book, Blaming China: It Might Feel Good but It Won’t Fix America’s Economy. The three discuss the taxonomy of dragon slayers and panda huggers, and some realities with which the world is now grappling: the rise of China, outcomes of globalization, the watershed moment of the 2016 U.S. presidential election, and the impact it has had — and will continue to have — on the bilateral relationship between the United States and China.

TechBuzz China: Luckin Coffee: Starbucks Challenger or a New Breed of F&B for the 21st Century?

In episode 32 of TechBuzz China, co-hosts Ying-Ying Lu and Rui Ma talk about Luckin Coffee, the hybrid online-offline coffee chain unicorn startup that’s turning heads in China with its rapid expansion and innovative business model. In fact, immediately after we completed recording this episode, news broke that the year-old company has raised another $200 million in fresh funding, upping its valuation to $2.2 billion. Throughout Luckin’s existence, Western media has had a habit of comparing Luckin with Starbucks, and describing Luckin as the “Starbucks challenger.” But just how accurate is this juxtaposition? Additionally, how has now-celebrity CEO Qian Zhiya, or Jenny, been able to attract tremendous amounts of venture capital and instill strong investor confidence as a first-time founder?

NüVoices Podcast: Beijing Broads

In the 10th episode of the NüVoices Podcast, Alice Xin Liu and Sophie Lu interview Anete and Silvia — members of the all-female improv group Beijing Broads! Comprising participants from seven different countries and six different first languages, the group has been performing for over two years.

ChinaEconTalk: The Chinese Financial Crisis That Never Came, With Logan Wright

Foreign investors have lost billions expecting a Chinese financial crisis that hasn’t come yet. So what gives? According to the Rhodium Group’s Logan Wright, it’s not China’s domestic savings rate or RMB-denominated debt that’s keeping the economy afloat, but rather the government’s credibility.


PHOTO OF THE DAY

Colorful Dali

The old town of Dali in Yunnan Province. Photo by Ilona Koch.