Trade war by Twitter, and growing legal weed in Yunnan

Access Archive

1. Did China try to ‘renegotiate’ deal, spurring Trump’s tweets?

Eight minutes after midnight in Beijing this morning, shocking news came from Donald Trump’s Twitter feed:

Donald J. Trump@realDonaldTrump

For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars….

Global markets were thrown for a loop. Just days ago, the yes men surrounding Trump such as his treasury secretary and chief of staff indicated that trade talks were in “the final laps” and reaching the last “couple of weeks.” SupChina noted that Trump appeared desperate for a deal, as his negotiating team softened one hardline demand after several others.

  • Today, the S&P 500 “fell by as much as 1.6 percent before clawing back some of its losses by midday…China’s CSI 300 index of major Shanghai- and Shenzhen-listed stocks tumbled 5.8 percent, marking its worst day since February 2016,” according to the FT (paywall).

  • Beijing was also caught off guard, judging by state media silence for over twelve hours according to SCMP, but lead negotiator Liú Hè 刘鹤 could still be coming to Washington this week, the SCMP separately reports.

What prompted the tweets? The Washington Post reported comments from officials a few minutes ago:

  • U.S. Trade Representative Robert Lighthizer said: “Over the course of the last week or so, we have seen an erosion in commitments by China. I would say retreating from specific commitments that had already been made. That, in our view, is unacceptable.”

  • Lighthizer said that the changes were “substantial” and that he “would use the word reneging on prior commitments.” Bloomberg earlier reported that “China had previously agreed to change its laws in the text of the deal,” but that last week’s negotiations saw the Chinese step back from that agreement.

  • The U.S. still “expects Chinese Vice Premier Liu He and a Chinese team for further talks in Washington Thursday evening and Friday,” according to Lighthizer and Treasury Secretary Steven Mnuchin.

More on trade talks and tensions:

  • Xi thinks “fifty-fifty” chance talks fail
    China’s Xi faces a ‘big gamble’ after Trump rebuke / FT (paywall)
    “During a closed-door meeting with Austrian chancellor Sebastian Kurz last week, Xi Jinping was asked what he thought the chances were for a successful conclusion of this week’s China-US trade talks in Washington. ‘Fifty-fifty,’ the Chinese president replied, according to three people briefed on the discussion.”

  • Trump’s hard line enjoys bipartisan support in Washington
    Senate Minority Leader Chuck Schumer on Twitter: “Hang tough on China, President @realDonaldTrump. Don’t back down. Strength is the only way to win with China.”

  • Delayed IPO for DouYu
    Chinese startup DouYu delays U.S. IPO launch on trade jitters / Bloomberg (porous paywall)
    The video game live-streaming platform, which “initially planned to start its IPO roadshow Monday U.S. time, is considering postponing the launch by at least a week, the people said, asking not to be identified because the information is private. DouYu, backed by Tencent Holdings Ltd., had been aiming to seek about $500 million, one of the people said.”

—Lucas Niewenhuis

2. Farming weed in China

The New York Times reports (porous paywall):

[Yunnan and Heilongjiang] are quietly leading a boom in cultivating cannabis to produce cannabidiol, or CBD, the nonintoxicating compound that has become a consumer health and beauty craze in the United States and beyond.

They are doing so even though cannabidiol has not been authorized for consumption in China, a country with some of the strictest drug-enforcement policies in the world.

After signing the United Nations Convention on Psychotropic Substances in 1985, China banned all cultivation of marijuana and hemp. But in 2010, farmers and companies in Yunnan were allowed to resume production of hemp for clothing. In 2017, Heilongjiang also legalized cannabis cultivation.

As China has not approved CBD for use in foods or medicines, companies producing it in China are looking to export to the U.S. and elsewhere.

See also:

3. Xinjiang internment camps now in mainstream American news

In the fall of last year, “the United States was on the verge of imposing sanctions on top Chinese individuals and companies” for their involvement in Xinjiang internment camps. It did not happen because “some administration officials said doing so would jeopardize trade talks with Beijing,” reports the New York Times (porous paywall).

However, the issue is attracting much more attention from the mainstream press in the U.S. and elsewhere, and not just in the China sections. Just today, the influential-in-Washington newsletter Axios led with “1 big thing: World shrugs as China locks up 1 million Muslims,” while the New York Times’s popular The Daily podcast published The Chinese surveillance state, part 1. Other coverage in the international press:

Related:

4. The Canadian China rethink

In an opinion piece for the Globe and Mail, David Mulroney — Canada’s ambassador to China from 2009 to 2012 — writes:

Canada’s primary foreign-policy challenge with China has been clear for months now. We have to secure the freedom of detained Canadians Michael Kovrig and Michael Spavor, and save the lives of fellow Canadians Robert Schellenberg and Fan Wei, who face death sentences from a murky Chinese legal system that takes instruction from the Chinese state. Our message to allies is clear, too: we all have a stake in pushing back against a China that uses hostage diplomacy, economic blackmail and even the threat of execution to achieve its objectives.

But there’s another equally challenging China task on the horizon. We need to start thinking about what we’ve learned from this terrible episode, and how it should shape our future relationship with China…

…We should start by skipping events dedicated to China’s boundless appetite for international self-promotion or the delusion that China is a democracy in the making

Mulroney essentially recommends getting tough on China in ways that Canada is able, and seeking alternative markets for products such as canola to ensure that when Beijing is displeased, the Canadian economy does not tank.

Note: Mulroney recently joined a Sinica Podcast together with former Mexican ambassador to China Jorge Guajardo.

Meanwhile, in the antipodes, Australia’s political and business elite remain as divided as ever over China. The country’s former prime minister Paul Keating publicly attacked the heads of his country’s intelligence agencies as “nutters,” reports the Sydney Morning Herald.

  • Keating praised China as “a great state,” and predicted that if the Labor Party won the next election, the “government would ‘make a huge shift’ in Australia’s China strategy by accepting Beijing’s right to express its growing power.”

  • Keating urged his Labor Party’s candidate for next prime minister to “clean out” the security agency ASIO: “They’ve lost their strategic bearings, these organizations.”  

  • Keating attacked by name John Garnaut, a former Sydney Morning Herald and Age China correspondent who became an adviser to former prime minister Malcolm Turnbull and co-wrote an influential, classified report on Chinese influence in Australia.

  • Keating is on the advisory board of the China Development Bank, as several commentators have pointed out.

—Jeremy Goldkorn

—–

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:

Dairy giant Fonterra is egging on consumers to take their traditional beverage with cream cheese… Known as nǎi gài chá 奶盖茶 (“milk-lidded tea”) in Chinese, the drink is made using a base of tea topped with a cap of cream and cream cheese that is whipped together until it forms a light, fluffy texture. Tea houses encourage drinkers to sip it at a 45-degree angle for the ideal mouthful. And it’s become a bona fide phenomenon.

Sun Pharmaceutical Industries Ltd. is scouting for a partner in China to help it win a larger piece of the world’s second-largest drug market, where the government is on a mission to drive down the cost of health care. With a recovery underway in its U.S. business, Sun Pharma’s billionaire founder Dilip Shanghvi is homing in on China and believes market watchers are underestimating the potential there for India’s largest drugmaker.

Increasing food imports and an escalating ‘fresh produce war’ — which has already seen some early casualties — make access to high quality overseas suppliers a key competitive advantage. Although all online grocery players are in one way or another dabbling in direct sourcing, supplier partnerships or even vertically-integrated food production, none have a supply chain strategy that is as comprehensive or as ambitious as that of Alibaba.

SCIENCE, HEALTH, AND THE ENVIRONMENT:

POLITICS AND CURRENT AFFAIRS:

Foxconn’s billionaire chairman and aspiring Taiwanese presidential candidate Terry Gou [郭台銘 Guō Táimíng] has called on Beijing to recognize the “Republic of China,” Taiwan’s official title. Gou also said he had no plan to meet Chinese President Xí Jìnpíng 习近平, countering critics who claim he would sell out the self-ruled island because of his multibillion U.S. dollar manufacturing empire on the mainland.

SOCIETY AND CULTURE:


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SINICA PODCAST NETWORK

Sinica Early Access: Howard French on how China’s past shapes its present ambitions

On this week’s show, recorded live in New York on April 3, Kaiser and Jeremy have a wide-ranging chat with former New York Times China correspondent Howard French, now a professor at Columbia University’s School of Journalism. We talk about his book Everything Under the Heavens and China’s ambitions and anxieties in the world today.

  • Sinica Early Access is an ad-free, full-length preview of this week’s Sinica Podcast, exclusively for SupChina Access members. Listen by plugging this RSS feed directly into your podcast app.