Two Sessions reports, and Tesla’s coming suffering in China

Access Archive

1. Tesla gets the first of a thousand cuts from China

“Tesla Inc said on Tuesday that China’s customs authorities have accepted the electric carmaker’s plan to resolve problems with the clearance of its Model 3 sedans that centered around misprinting of labels,” reports Reuters via Channel NewsAsia:

Shares in Silicon Valley billionaire Elon Musk’s company fell more than 5 percent in early trading after Chinese media reported Shanghai customs had suspended clearance for a batch of Tesla’s cars. They were last down 1.3 percent at $281.73.

“We have already reached a resolution with Chinese customs, and we are working closely with them to resume clearance procedures on these vehicles,” a Tesla spokesperson said in a statement.

“Sales of Model 3 in the country are not impacted, and we continue to deliver Model 3 vehicles that have already been processed.”

Making inroads into China, the world’s largest electric vehicle market, is crucial for the Tesla as it seeks to offset softening demand in the United States and convince investors of its ability to become consistently profitable.

The markets are, of course, idiots, which is why very few people can emulate Warren Buffett or George Soros. But the markets are right this time to respond negatively to this news about Tesla:

A customs holdup is relatively insignificant. But it’s just the first of a thousand cuts that Elon Musk will have to endure as he seeks to make his new Shanghai Gigafactory profitable.

2. Tax cuts and defense spending — NPC announcements

China’s premier, Lǐ Kèqiáng 李克强 (who is nominally second-in-command but practically impotent), gave the annual work report at the annual event when China showcases its legislative achievements: the National People’s Congress (NPC) a.k.a. Two Sessions.

Keith Bradsher and Chris Buckley of the New York Times focused (porous paywall) on economic commitments in Li’s speech:

China’s premier said on Tuesday that his government would respond to an economic slowdown by cutting taxes, easing burdens on the private sector and giving markets a bigger role — diluting the heavily pro-state pronouncements and policies that critics have warned were scaring investors.

Calling 2019 a “crucial year” for China’s economy, Premier Li Keqiang, the second-ranking official in China after President Xi Jinping, laid out measures long supported by private businesses. Mr. Li’s annual report to the national legislature revived rhetoric about market solutions after the government faced growing criticism for favoring government initiatives and state-owned companies, squeezing out private enterprise.

Other news from the NPC:

Energy

Chinese President Xi Jinping has a plan to help meet the country’s growing energy needs and clear its dirty air: Spin off the tens of thousands of miles of pipelines held by three state-owned oil and gas giants and merge the networks into a new company. The resulting “China Pipelines Corp.” would aim to attract private investors to help expand the $74 billion network and ease supply crunches in some parts of the country. Such an overhaul, announced at the National People’s Congress in Beijing on Tuesday, would radically reshape China’s energy sector although it leaves central planning power in a single, albeit different, pair of hands.

The official take

The budget: Defense and tax cuts

Locking up the few remaining activists still at large

3. Huawei, and Trump’s failing trade war

“The pain of President Trump’s trade war with China may soon be over, but American businesses and farmers are left wondering whether it was worth the trouble,” says the New York Times (porous paywall). See also “Why investors shouldn’t get too elated about a U.S.-China trade deal” on MarketWatch.

But even if Trump’s bravado ends with a whimper not a bang, tensions between the U.S. and many other Western countries remain. Huawei is at the center of those tensions. Here is the latest from the various fronts of the tech and trade cold war:

Trade war cease-fire

Pleasing Trump’s base

Huawei

4. Xinjiang detention camps — the latest reports

The latest reporting on the ongoing horrors in Xinjiang:

“I have requested for a visit to go there, because this is a priority for me in terms of looking at what is happening there. There is reason to be seriously concerned about reports coming out of the Xinjiang region,” UN special rapporteur Ahmed Shaheed told a news briefing in response to a Reuters query.

China has not yet replied to his February request, he said.

Shaheed, a former Maldives minister, disclosed he was among several UN rights experts to write to China last November voicing anxiety at its anti-extremism programme.

—Jeremy Goldkorn

5. Ride hailing is dangerous for unaccompanied minors. Is there a fix?

Chinese ride-hailing giant Didi Chuxing recently conducted a WeChat poll to gauge the public’s thoughts about minors using ride-hailing services alone. The poll ended on March 3 with an aggregation of over 4.2 million votes, with 57 percent of the voters expressing approval.

The results (in Chinese) have prompted intense debates on the Chinese internet, where voters on both sides listed their arguments and cited past cases to defend their choices.

Click through to SupChina for details.

—Chelsea Cheng

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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


BUSINESS AND TECHNOLOGY:

China’s microblogging platform Weibo broke through the 200 million daily active users mark in December, which now gives the company a significant base to monetize. The company also reported 462 million monthly active users, of which 93 percent are mobile users of the platform.

Those numbers may sound impressive, but they are still much lower than the billion active users its rival WeChat boasts. But Weibo does have some interesting advantages over WeChat. For one, it has a younger user base, so it has great growth potential among the massive Gen Z and millennial markets in China, plus, it attracts a strong travel-related following, which can benefit niche influencers and brands that want to connect with ever-more-mobile users.

Based on its user data, Weibo got a big boost from advertisers in the final quarter of 2018, thanks to value-added services like its live broadcasting function.

  • Biotech: Another victim of U.S. foreign investment reviews
    China’s biotech investors have caught a chill / Bloomberg
    “If CFIUS starts holding up Chinese biotech deals, that would leave a lot of Chinese money with few places to go, especially because Europe has grown more concerned with privacy protections and thus warier about foreign tech investments… That’s a problem for U.S. companies but perhaps a bigger one for China, whose biotech industry remains less than one-10th the size of that of the U.S.”

  • Drone taxi company to IPO
    Chinese drone maker EHang plans US IPO: Sources / Reuters via Channel NewsAsia
    “Chinese drone maker EHang is planning a US initial public offering (IPO) this year, according to two people with direct knowledge of the matter, with one saying it could raise between $400 and $500 million… Founded in 2014 and headquartered in Guangzhou Province, EHang first made headlines in 2016 when it unveiled a passenger drone concept which it said would retail at up to $300,000.”

POLITICS AND CURRENT AFFAIRS:

  • Solar energy in Argentina
    China builds Latin America’s largest solar plant / China Dialogue  
    “Chinese banks and companies have developed coal-fired power plants worldwide. Now they are making the foray into cross-border solar energy development,” say Fermín Koop and Lili Pike. They ask but don’t quite answer — despite some hopefuls signs — whether projects such as a new China-financed, 500 megawatt solar energy field in northern Argentina are “exceptional or a sign of a broader shift towards China developing clean energy overseas”?

  • The disappearing fish of the East China Sea
    East China Sea fish stocks hit hard by global warming / China Dialogue  
    “Warming oceans have caused a slump of up to 35 percent in some global fish populations, with over-exploitation of stocks exacerbating the problem, a new study has found… The worst-affected ocean was the Sea of Japan, with a 34.7 percent reduction in fishery size. The East China Sea saw a drop of 8.3 percent.”

  • Did Pakistan use its Chinese JF-17 jets to shoot down Indian planes?
    Indian media: In love with the military, blind to the truth of Pakistan conflict? / SCMP
    An interesting detail in this article by Sohini C:

Beijing has refused to confirm a former Pakistani air force officer’s claim that China-made JF-17 fighters were used by the Pakistan Air Force to shoot down Indian military aircraft…

“Proud to announce, I was project director for JF-17 Thunder programme jointly produced by Pakistan and China during the [2001-2008] tenure of general Pervez Musharraf,” retired PAF air marshal Shahid Latif tweeted early Wednesday morning.

“Today, same jets targeted and shot down Indian jets which entered Pakistani airspace.”

When trading opened less than two hours later in China, shares in Shenzhen-listed Sichuan Chengfei Integration Technology (CAC-SCIT), a sister company of JF-17 maker Chengdu Aircraft Corporation (CAC), rose 10 percent in five minutes — hitting the maximum daily rise allowed on the Chinese stock market.

SOCIETY AND CULTURE:


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Chinese Corner: The unapologetic patriotism of Wu Jing, the Wolf Warrior

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Middle Earth: China’s soft power with Anthony Kuhn

Today, we are trying another format of the show, a “case study episode” where one guest will go over a specific project or a theme in China’s culture industry. And to kick off this new format, we start with Anthony Kuhn, who works at NPR.


PHOTO OF THE DAY

Art glass

An artist makes glass items at the Slender West Lake tourist attraction in Yangzhou during the 2019 Lunar New Year celebration. Photo by Jia Guo.