Negative China-related content

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1. ‘Negative China-related content’ in $750 billion U.S. defense bill

Yesterday afternoon, the U.S. Senate passed the 1168-page National Defense Authorization Act (NDAA), which allocates defense spending for the fiscal year of 2020. “Our margin of military supremacy has eroded and is undermined by new threats from strategic competitors like China and Russia,” says the NDAA, and that “strategic competition with China and Russia [is] the central challenge presently facing to U.S. security and prosperity.”

The bill lays out a $750 billion budget, “with provisions that target China on issues from technology transfers to the sale of synthetic opioids, pushing to counter growing Chinese influence around the world,” per Reuters

The Chinese foreign ministry responded with boilerplate: “China firmly opposes the passage of relevant bill containing negative China-related content.” (A Chinese-language transcript is here.)

Amongst the measures that particularly target China, the NDAA does the following (language quoted from the Senate Armed Services Committee summary of the NDAA): 

  • Increases funding “for the Indo-Pacific region to develop capabilities and operational concepts to restore the U.S. comparative military advantage in the region.”

  • “Modifies the annual report on Chinese military and security developments to include an assessment of Chinese overseas investment as it relates to their military and security.”

  • Requires new reporting “on the nuclear capabilities of Russia and China.”

  • Funds development of rare earth processing capability.

  • Calls for an assessment of U.S. “equipment and munitions capabilities vis-a-vis those of Russia and China.”

  • “Requires the Secretary of Defense to develop a list of academic institutions in China and Russia associated with defense programs of those countries, in order to identify any university heavily engaged in military research as part of an effort to protect American national security academic researchers from undue influence and other security threats.”

—Jeremy Goldkorn

2. China at the Dem debates

Where do the Democratic candidates for U.S. president stand on China? We launched our 2020 Presidential Election China Tracker earlier this week, and have already updated it with all the China comments from the Democratic Party debates last night and the night before. Below are all the China-related comments from the debates: 

NIGHT ONE

The moderators asked each candidate about the “greatest geopolitical threat to the United States right now,” and 4 of the 10 candidates took the opportunity to put the label on China — with some qualifications. 

Tom Delaney: “The greatest geopolitical challenge is China, while the greatest geopolitical threat remains nuclear weapons.”

Amy Klobuchar: “Two threats: Economic threat, China, but our major threat right now is what’s going on in the Middle East with Iran.”

Julian Castro: “China and climate change.”

Tim Ryan, who earlier in the debate recalled having “family members that had to unbolt a machine from the factory floor, put it in a box, and ship it to China,” answered the question unequivocally: “China without a question. They’re wiping us around the world economically.”

NIGHT TWO

The moderators picked up where they left off on China, citing the previous night’s “geopolitical threat” question to ask several candidates how they would stand up to Beijing. 

Michael Bennett: “I think the biggest factor in national security is Russia, not China… We should mobilize the entire rest of the world who all have a shared interest in pushing back on China’s mercantilist trade policies.”

Andrew Yang: “Russia is our greatest geopolitical threat, because they have been hacking our democracy successfully… Now China, they do pirate our intellectual property, it’s a massive problem, but the tariffs and the trade war are just punishing businesses and producers and workers on both sides. So we need to crack down on Chinese malfeasance in the trade relationship. But the tariffs and the trade war are the wrong way to go… We need to cooperate with them on climate change, AI, and other issues [like] North Korea.” 

John Hickenlooper: “[If] we are going to deal with all of the challenges of the globe, we’ve got to have relationships with everyone.”

Pete Buttigieg, responding to the question “How would you stand up to China?”:

I mean, first of all, we’ve got to recognize that the China challenge really is a serious one. This is not something to dismiss or wave away. And if you look at what China is doing, they’re using technology for the perfection of dictatorship.

But their fundamental economic model isn’t going to change because of some tariffs. I live in the industrial Midwest. Folks who aren’t in the shadow of a factory are somewhere near a soy field where I live. And manufacturers, and especially soy farmers, are hurting.

Tariffs are taxes. And Americans are going to pay on average $800 more a year because of these tariffs. Meanwhile, China is investing so that they could soon be able to run circles around us in artificial intelligence. And this president is fixated on the China relationship as if all that mattered was the export balance on dishwashers. We’ve got a much bigger issue on our hands.

But at a moment when their authoritarian model is being held up as an alternative to ours because ours looks so chaotic compared to theirs right now because of our internal divisions, the biggest thing we’ve got to do is invest in our own domestic competitiveness. If we disinvest in our own infrastructure, education, we are never going to be able to compete. And if we really want to be an alternative, a democratic alternative, we actually have to demonstrate that we care about democratic values at home and around the world.

Daniel Schoolenberg

3. Growing scrutiny of Chinese scientists in the U.S.

Science Magazine reports on the growing scrutiny of foreign (read Chinese) scientists in the U.S.:

An aggressive effort by the National Institutes of Health (NIH) to enforce rules requiring its grantees to report foreign ties is still gathering steam. But it has already had a major impact on the U.S. biomedical research community. A senior NIH official tells ScienceInsider that universities have fired more scientists — and refunded more grant money — as a result of the effort than has been publicly known.

Since August 2018, Bethesda, Maryland–based NIH has sent roughly 180 letters to more than 60 U.S. institutions about individual scientists it believes have broken NIH rules requiring full disclosure of all sources of research funding. To date, the investigation has led to the well-publicized dismissals of five researchers, all Asian Americans, at MD Anderson Cancer Center in Houston, Texas, and Emory University in Atlanta.

But other major U.S. research universities have also fired faculty in cases that have remained confidential, according to Michael Lauer, head of NIH’s extramural research program. And some have repaid NIH “hundreds of thousands of dollars” in grants as a result of rule violations, he says. 

In other news, Emily Feng of NPR reports that the FBI is “encouraging American research universities to develop protocols for monitoring students and visiting scholars from Chinese state-affiliated research institutions, as U.S. suspicion toward China spreads to academia.”

See also this op-ed by Dominic Ng in the L.A. Times: Targeting Chinese students and entrepreneurs in the U.S. is the wrong way to battle Beijing (porous paywall):

The impact of anti-Chinese policies and sentiment will be even greater, long term, on American technology. According to the National Science Foundation, foreign citizens account for more than half of the nation’s graduate students in engineering. Chinese citizens in particular represent one quarter of all those doing advanced artificial intelligence research globally.

4. Dampened expectations for Xi-Trump meeting

Call me pessimistic about the results of the meeting set for this weekend between Donald Trump and Xí Jìnpíng 习近平 at the G20 summit in Osaka. 

“U.S. President Donald Trump on Friday said he hoped for productive talks with Chinese President Xi Jinping on a trade war that is casting a shadow on global growth, but said he had not made any promises about a reprieve from escalating tariffs,” reports Reuters

Meanwhile, Chinese state media “sought to dampen public expectations of a trade war breakthrough when the leaders of China and the United States meet in Japan this weekend, playing up the need for compromise while playing down the potential impact of continued conflict on the Chinese economy,” says the South China Morning Post

See also: How Mike Pompeo became Trump’s China hawk in the Washington Post: 

As President Trump heads into a crucial meeting with Chinese President Xi Jinping, sitting by his side will be Secretary of State Mike Pompeo, who is quietly but steadily pushing U.S.-China policy into a more competitive and often confrontational position.

Pompeo’s first year as the nation’s top diplomat focused largely on North Korea and Iran, but he is now spending more time and attention on dealing with China. 

On Monday, we’ll have a full report on the G20 and Xi-Trump meeting for you. 

—–

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


Here are the stories that caught our eye this week:

  • A tentative trade war truce, but with impossible preconditions, was reported to be in the works ahead of Trump and Xi’s much-anticipated meeting at the G20 summit in Japan on June 29. The South China Morning Post reported that Trump had agreed to avoid imposing more tariffs for now, but the Wall Street Journal said that Xí Jìnpíng 习近平 insists on a lifting of the Huawei ban and a removal of all existing tariffs as a precondition for a deal. Earlier in the week, a Chinese Commerce Ministry official said that Xi and Trump were looking to “consolidate the important consensus” they had reached in an earlier phone call, but did not specify what that consensus was, and the U.S. Treasury Secretary said, way over-optimistically, that “we were about 90% of the way there [with a deal] and I think there’s a path to complete this.” 

  • Shenzhen-based DJI, the world’s leading manufacturer of consumer drones, announced that it plans to assemble some of its products in California and still hopes to sell them to some U.S. government agencies. But suspicion in Washington of these high-tech Chinese drones, which are essentially flying computers that transmit geodata and can be accessed remotely, is rising fast, so DJI had better make another backup plan. 

  • Huawei denied that it has military ties in China, after a Bloomberg report alleged that several of the company’s employees had “collaborated on research projects with Chinese armed forces personnel.” Meanwhile, Huawei continues to gear up for a prolonged fight with the U.S. government, and filed a lawsuit challenging the legality of an American seizure of Huawei equipment that had traveled from China to the U.S. and back again. 

  • French supermarket chain Carrefour is leaving China, as it announced this week that it will sell a majority stake of its Chinese operations to Suning.com, the electronics and white goods retailer that has been trying to transform itself into a hybrid ecommerce and brick-and-mortar supershop. Reuters attributed the sale to the French company’s need to focus on competition with Amazon.com in Europe, and “Carrefour’s falling sales and operating losses in China.”

  • Unmanned convenience stores are not dead yet, though many have closed in China in recent months, due to problems such as the perishability of food and the untrustworthiness of customers. But the capitalist’s dream of a shop with no pesky human labor is too appealing for the likes of Alibaba to be dissuaded by such petty problems. The ecommerce giant is puffing up the benefits of Sesame Credit, its affiliate social credit system, and its application to concepts like unmanned stores and on-demand rental kiosks. 

  • Tanzania has suspended a $10 billion port development in Bagamoyo, which would have been operated by China Merchants Holding International as the largest of its kind in Africa. John Magufuli, the president of the East African nation, announced the decision to cancel the deal that his predecessor had struck, accusing the Chinese of “exploitative and awkward” terms and “tough conditions that can only be accepted by mad people.” 

  • Some music proficiency exams were suspended for unknown reasons, the latest sign of progressively tightening restrictions on academic freedom and foreign educational influence. Four cities canceled music exams administered by the London-based ABRSM. 

  • China has suspended all meat imports from Canada, in the latest move of apparent retaliation against the country’s arrest of Huawei CFO Mèng Wǎnzhōu 孟晚舟 in December 2018. Later, the plot thickened, as Canadian Trade Minister Jim Carr said that the veterinary health certificates that Beijing had deemed forged were attached to a pork shipment of non-Canadian origin. 

  • The fall armyworm is now munching on crops across 19 provinces, China’s agriculture ministry announced this week. The pest outbreak began in January this year, and has spread across hundreds of thousands of hectares of farmland since then. 

  • Xi Jinping kept the ball rolling on Korean diplomacy, as he had a positive meeting with South Korean President Moon Jae-in, and urged Donald Trump and Kim Jong-un to have a third summit and “show flexibility and push for progress for dialogue.” 

  • Beijing is making moves to cultivate supporters in Taiwan, and one of the operatives in this campaign is Chang An-lo (张安乐 Zhāng Ānlè), also known as White Wolf (白狼 bái láng), who founded the Chinese Unification Promotion Party in 2004. 

  • Lifestyle diseases that afflict wealthier countries have overtaken lung infections and neonatal disorders as the leading causes of premature death in China, according to a study published in the Lancet this week. 


BUSINESS AND TECHNOLOGY:

China’s policies to boost its fledgling hydrogen-powered auto industry are coming at just the right time for entrepreneur and former carmaker executive Wáng Cháoyún 王朝云. His startup, Anhui Mingtian Hydrogen Energy Technology Co., makes fuel-cell stacks for vehicles propelled by the element, which produces no emissions from the tailpipe. During Mingtian Hydrogen’s brief existence, the fuel-cell vehicle industry has received more than $1 billion worth of investments from Chinese companies, according to data compiled by researcher BloombergNEF.

China’s top industry organization for household appliance manufacturers has called on e-commerce platforms to stop forcing appliance brands to “pick sides,” after a recent dispute between microwave-maker Galanz and Alibaba’s Tmall.

Some e-commerce platforms are “using advantageous market positions” to force home appliance companies to sell their products on only one platform, the China Household Electrical Appliances Association said in a statement Friday.

  • Faraday Future is not dead yet
    Electric-car maker Faraday Future’s financial lifeline delayed / Caixin (paywall)
    “Faraday Future, the electric-car maker founded by entrepreneur and blacklisted debtor Jiǎ Yuètíng 贾跃亭 has hit another bump in the road, as the partner in its proposed car-production joint venture has failed to come up with $200 million in investment by the scheduled date.”

  • Alibaba’s CFO
    Maggie Wu, Alibaba’s ascendant finance chief / FT (paywall)
    Yesterday we noted a Caixin report (paywall) that states that “ecommerce juggernaut Alibaba Group Holding Ltd. plans to raise $10 billion through a second listing in Hong Kong.” The FT profiles the company’s head bean-counter: “Not many finance chiefs can claim to have steered two record-breaking listings and still be around to line up a third. But Maggie Wu [武卫 Wǔ Wèi], chief financial officer at Chinese tech giant Alibaba, is on track to pull it off.”

  • Profiting from China’s ban on foreign waste
    Entrepreneur seizes business opportunity in China recycling ban / The Age (Australia)

China’s decision to stop importing much of the world’s used plastic spelt disaster for countries around the globe. But Melbourne-based Chinese entrepreneur Harry Wang saw it as a business opportunity. Mr Wang has since invested AU$20 million [14.04 million] on that idea and after several years of research and development, his new business — Advanced Circular Polymers — is open in Melbourne’s outer north.

China’s second-largest search engine Sogou has been ordered to pay a total of 30 million yuan ($4.37 million) to rivals including Baidu and Alibaba-backed browser UC for engaging in ‘unfair competition,’ a court in Beijing ruled Friday.…

The court said Sogou unfairly directed users to its own site using suggested search pop-ups on its keyboard, even when users were trying to input keywords into rival search engines.

After a state education department in northern Shanxi Province warned students to avoid using search engines when seeking the official university application website, China’s biggest search engine Baidu said a statement on Thursday that it has taken steps to ensure accurate search results for college-related queries.

SCIENCE, HEALTH, AND THE ENVIRONMENT: 

  • Pollution
    China’s environmentally stressed regions to curb industry in new rules / Reuters
    “China will order local governments to raise the approval threshold for new industrial projects and limit the number of polluting factories in regions where environmental conditions are already stressed, an environment official said on Friday (June 28).”
    Hong Kong air pollution at 7-year high / SCMP via Bangkok Post
    “The concentration of harmful ozone gas in the Pearl River Delta region is at a seven-year high, raising questions over the validity of a Hong Kong government report that suggested there was a general decline in pollution in the city.”

POLITICS AND CURRENT AFFAIRS:

Authorities in the southwestern megacity of Chongqing have jailed the moderator of a social media news chat group bringing verified news from overseas to a Chinese audience, RFA has learned. Liú Péngfēi刘鹏飞, who ran the Global Report news service on the popular social media app WeChat, among other platforms, was handed a two-year jail term by a district court in Chongqing, rights lawyer Shàng Bǎojūn 尚宝军 said. 

The Vatican asked Beijing on Friday to stop intimidating Catholic clergy who want to remain unequivocally loyal to the Pope and refuse to sign ambiguous official registration forms.

The request, contained in Vatican guidelines to clergy in mainland China, was the latest hiccup in relations between the Holy See and Beijing since the two sides signed a historic and disputed pact on the naming of bishops last September.

Here’s an ice-breaker for Donald Trump and Chinese President Xi Jinping when they meet at the G-20 in Osaka: “Don’t you just hate it,” one might ask the other, “when people call your internment centers ‘concentration camps’?”

It is a surreal moment when the leaders of the world’s two most powerful countries and largest economies are both responsible for illegally locking up masses of people on the basis of ethnicity. Of course, Xi might argue that his camps are cleaner (at least the ones he lets the press see), and he doesn’t put children in cages. But, Trump might counter, he’s only thrown a few thousand Latin American asylum seekers in his prison-like facilities on the US southern border. And Xi holds 1–2 million Uyghurs and other Turkic peoples in his Xinjiang gulag. After this bit of banter, they might share a laugh and get on to reducing tariffs.

This conversation won’t happen — I doubt either will bring up the camps in their discussion — but it is an astounding thing to have in common. 

SOCIETY AND CULTURE:


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