Dear Access member,
We had a fun and informative SupChina Direct conference call with TechBuzz China podcaster Rui Ma earlier today: We’ll make the recording available to members in the next few days.
Watch this space for news about our next call.
—Jeremy Goldkorn, Editor-in-Chief
1. China’s defense industry is huge
“The burgeoning Chinese defense industry has blown past the majority of its U.S. counterparts while leaving virtually all of Europe in the dust,” reports Breaking Defense, based on an annual list of the 100 biggest defense companies in the world, published by Defense News.
A whopping six Chinese companies have stormed into the top 15 global defense firms world…The top Chinese company on the list, Aviation Industry Corporation of China, boasts an estimated revenue from defense sales of $24 billion, pushing past traditional US defense giants General Dynamics and BAE Systems…
Pentagon officials have long bemoaned the Chinese government’s ability to order industry to respond quickly — and completely — to its demands. The new report shines a spotlight on the gravity of those complaints while shining a spotlight on secretive Chinese defense industry.
Here are the top 15 companies according to Defense News, although I wonder about the reliability of the revenue numbers.
2. Li Peng, 90, dies in Beijing
The BBC reports:
Former Chinese Premier Lǐ Péng 李鹏, who ordered martial law during the 1989 Tiananmen protests, has died at the age of 90, state media have announced.
Li died on Monday evening in Beijing of an unspecified illness.
He served in several top positions in China in the 1980s and 1990s.
But he was best known as the “Butcher of Beijing” for his role in the Tiananmen Square crackdown on pro-democracy protesters in 1989. Soldiers killed hundreds of unarmed civilians.
Li later defended his actions as a “necessary” step.
For a more colorful memory of Li, read Supping with a long spoon — dinner with Premier Li, November 1988 by scholar Geremie Barmé.
3. Shanghai’s falling STAR
STAR, the new Nasdaq-style stock market launched in Shanghai yesterday, got off to a booming start in its opening hours. But that did not last long.
“More than 20 of the 25 companies among the first batch to be listed on Shanghai’s new STAR Market tech board saw steep declines on Tuesday, with some dropping more than 15 percent,” reports CNBC.
“The biggest shareholders in China’s new Nasdaq-style STAR Market lost a combined $1 billion in the second day of trade on Tuesday, a day after the board’s roaring debut created three new billionaires,” according to Reuters. “All but four companies of the 25 stocks listed on the market fell as investors took profits from opening day gains, erasing about 9 percent of the total market capitalization.”
“After semiconductor shares posted massive gains on the new Nasdaq-style high-tech board’s first day of trading, the sector’s stocks edged down on the second day,” reports Caixin (paywall). “The board’s six semiconductor companies saw their combined market capitalization shrink 4.7 billion yuan ($680 million) on Tuesday.”
“The frenzy that greeted China’s new Nasdaq-style stock board is already fading,” says Bloomberg (porous paywall).
For more on STAR, see:
China’s newest stock exchange experiment: Shanghai’s technology innovation board / TechBuzz China podcast on SupChina
China’s plan to lure big tech listings back home / Bloomberg (porous paywall).
4. A reprieve for Huawei, and farm goods purchases
CNBC suggests that the trade war is coming down “to the U.S. easing up on Huawei and China buying agricultural products”:
“Olive branches were extended from both China and the U.S. as the two nations are set to restart face-to-face trade negotiations after a monthlong truce,” says CNBC:
President Donald Trump on Monday agreed to give “timely licensing decisions” to allow a slew of tech companies including Google and Broadcom to sell to Chinese telecom giant Huawei. The administration blacklisted Huawei in May at the height of the trade war, effectively halting its ability to buy U.S.-made chips.
On China’s side, President Xi Jinping seems to be following through on his promise made at the G-20 summit to continue buying U.S. agricultural products.
See also: Trump agrees to timely decisions on Huawei as China talks near, from Bloomberg via Yahoo. Here are other developments from various fronts of the U.S.-China techno-trade war, day 383 by our count, and news of Huawei around the globe:
Iranian oil: “For the first time, the Trump administration is imposing economic penalties on [Zhuhai Zhenrong, and its chief executive] for importing Iranian oil, a decision certain to add to tensions between Washington and Beijing,” reports the New York Times (porous paywall). China today called the sanctions “illegal,” according to AFP.
U.S. farmers still hope to sell pork to China as it copes with the African swine fever epizootic, according to Reuters. As the serious nature of the swine fever threat became known “during the second half of 2018, expectations for demand started to pick up — even though duties on U.S. pork going to China were raised to 62 percent from 12 percent last year as part of tit-for-tat trade sanctions.”
“Hikvision Digital Technology, China’s top surveillance camera provider, has sharply increased its stockpile of components and finished products amid concerns that the US may bar it from doing business with American suppliers like it did with Chinese telecommunications giant Huawei Technologies,” reports the South China Morning Post.
“Huawei has cut more than 600 jobs at its U.S. research unit Futurewei after Washington put the Chinese firm on a trade blacklist,” according to the BBC.
Huawei’s ambitions in Canada appear to be unaffected: “The embattled Chinese telecom giant Huawei has unveiled plans to deploy high-speed wireless internet to dozens of underserved communities in Canada’s remote northern regions,” reports the Guardian.
However, Huawei has a hostage problem. The company’s “Canadian unit sought to distance itself from the actions of the Chinese government on Monday, with a top local executive saying the company is worried about two Canadian men being held by Beijing,” says Reuters. A lot of Canadians are worried, too — the Christian Science Monitor reports on businesspeople canceling trips to China in fear of being detained or subject to an exit ban.
Meanwhile, in the U.K., “a decision on whether controversial Chinese firm Huawei should be excluded from the rollout of 5G mobile phone networks…has been postponed,” says the BBC.
In Italy, Huawei announced plans to invest $3.1 billion and directly create 1,000 new jobs from 2019 to 2021, reports the China Daily.
5. How to treat foreigners?
In the wake of recent debates about preferential policies enjoyed by foreign university students in China, the country’s Ministry of Education last week said that it would make further efforts to make sure management and services for Chinese students and overseas students studying in China are “nearly the same” but not “totally identical.” (See SupChina for details.)
The mixed feelings about how to treat foreigners are widespread. What’s on Weibo reports on an online controversy that started when an elementary school teacher in Zhuhai told students to take a photo with five foreigners this summer holiday as homework. “In the eyes of many netizens, the assignment is inappropriate, as it supposedly teaches pupils to look up to (or ‘worship’) foreigners.”
Meanwhile, Sixth Tone reports that online education provider “51Talk says it will comply with a national guideline that requires foreign teachers’ information to be made public,” following negative media reports about its lack of disclosure.
6. Sinophobia update
Two updates related to the trends described in our Sinophobia Tracker:
In a new essay, Peter Mattis and Matt Schrader call for an informed approach to U.S. national security worries about China: America can’t beat Beijing’s tech theft with racial profiling.
University of California “campuses from San Diego to Berkeley are reporting that Chinese students and scholars are encountering visa delays, federal scrutiny over their research activities, and new restrictions on collaboration with China and Chinese companies,” reports the Los Angeles Times (porous paywall).
—Jeremy Goldkorn, Editor-in-Chief
BUSINESS AND TECHNOLOGY:
China buys another slice of the German auto sector
China’s BAIC takes 5 percent stake in Daimler: German carmaker / AFP
China’s state-owned BAIC has taken a 5 per cent stake in Daimler, whose top shareholder for the past year has been rival Chinese carmaker Geely, the luxury German automaker said Tuesday (Jul 23).
Daimler, which produces the luxury brand Mercedes-Benz, has long worked with BAIC in China and has previously said it was possible that BAIC could purchase a stake in its capital.
Tough times in the movie business
China’s cinema business faces a bad scene / Caixin (paywall)
Huayi Brothers Media Corp., which earlier this month posted net losses along with most other cinemas in China, is now saying it will sell its cinema equipment on lease-back terms as a result of financial pressure and greater competition. Caixin reports:
The 25-year-old company, one of China’s largest private film studios, is selling projection gear from four cinemas to Hebei Financial Leasing Co. Ltd., which has agreed to lease it back to Huayi for 24 months.
Luckin goes abroad
Luckin Coffee eyes markets in Middle East and India with Americana partnership / TechNode
[Luckin Coffee] announced on Monday that it has signed a memorandum of understanding with Kuwaiti food company Americana Group for a joint venture to expand its coffee chain business in the Middle East and India… This is the first time the Chinese coffee chain has announced plans to expand its operations overseas.
Libra spurs Chinese digital currency
China fast-tracks development of national digital currency in response to Libra / TechNode
Facebook’s recently announced cryptocurrency Libra has spurred China to develop its own digital currency that can be kept under its own control.
E-cigarette regulation incoming
Smoking giant China planning e-cigarette regulation / AFP
China is planning to regulate e-cigarettes in an attempt to stave off a new gateway addiction in what is already the world’s largest smoking population.
“The supervision of electronic cigarettes must be severely strengthened,” said Máo Qún’ān 毛群安, head of the National Health Commission’s (NHC) planning department, at a press conference on Monday (July 22).
Ping An’s big data bet
China’s biggest private sector company is betting its future on data / Fortune
“Ping An built an empire around safe and staid products like life insurance. Now it’s betting its future on inventive uses of big data — and gearing up to do battle with fast-growing tech giants like Alibaba.”
20 bankers have been placed under corruption investigation this year / Caixin (paywall)
Caixin reports that “at least 20 banking executives have been placed under investigation in the past six months.” And in a Caixin exclusive, Zhōng Xiǎolóng 钟小龙, head of the Shandong provincial branch of China Development Bank, was confirmed to have committed suicide as a result of one such investigation.
Two more private firms join China’s growing ranks of defaulters / Caixin (paywall)
Two of the largest private sector companies in the eastern city of Nanjing have become the latest to join the wave of corporate debt defaults in China, as the country forges ahead with its crackdown on financial risks and its campaign to deleverage the economy.
Thirty private businesses missed their repayment obligations on 89 issues valued at a combined 60 billion yuan (US$8.7 billion) so far this year, an increase of 150 percent from the same period in 2018, according to data by Shanghai Wind Information. That’s more than the state-owned enterprises that missed eight bonds valued at 10 billion yuan, and topping last year’s 126 defaults worth 11.4 billion yuan.
Managing the economy in tough times
China says needs ‘arduous efforts’ to meet 2019 industrial output goal / Reuters
“China’s industry ministry said on Tuesday that ‘arduous efforts’ will be needed to achieve this year’s industrial output growth target, as trade protectionism weighs on exports and clouds the outlook for the world’s second-largest economy.”
China’s Politburo meeting to gauge outlook for the economy and policy amid US trade war / SCMP
“Chinese economists are keeping a close eye on the upcoming Politburo meeting headed by President Xí Jìnpíng 习近平 to see what clues it will offer on how Beijing will manage an economy grappling with uncertainties.”
SCIENCE, HEALTH, AND THE ENVIRONMENT:
Pork industry problems
How the pig became a ‘pork factory’ in China / Chinadialogue
“Once a symbol of prosperity and health, pigs in China are now factory farmed on Western lines, with disastrous consequences for people’s health, the environment and biodiversity.”
Dark matter lab to receive new equipment / Global Times
The world’s deepest underground lab designed to detect dark matter in Langzhong, Southwest China’s Sichuan Province will receive new equipment, which is one of the most important science and technology infrastructure projects of the country.
POLITICS AND CURRENT AFFAIRS:
Harassment of Uyghurs abroad
China’s police state goes global, leaving refugees in fear / AFP
Muslims who escaped China’s crackdown in Xinjiang still live in fear, saying new homes abroad and even Western passports afford them no protection against a state-driven global campaign of intimidation.
With menacing text and voice messages, and explicit threats to relatives still living in Xinjiang, China’s powerful state security apparatus has extended its reach to Uighurs living in liberal democracies as far away as New Zealand and the United States, in a bid to silence activists and recruit informants.
Hong Kong protests
Donald Trump says Xi Jinping ‘acted responsibly’ in Hong Kong extradition bill protests / SCMP
“U.S. President Donald Trump said China’s Xi Jinping has ‘acted responsibly’ after seven weekends of demonstrations in Hong Kong and new fears that protesters and the China-backed government are heading toward a violent confrontation.”
China tells U.S. to remove ‘black hands’ from Hong Kong / Reuters
“China accused US officials on Tuesday (June 23) of being behind violent protests in Hong Kong and advised them to remove their ‘black hands’ from the territory.”
Yuen Long recovers but anxiety looms over weekend protest against Sunday’s attacks, as residents, businesses lose faith in Hong Kong police / SCMP
“Shops and businesses have reopened in the Hong Kong district that was the scene of unprecedented violence on Sunday night, but residents say they have lost all faith in the city’s police.”
中央权威不容挑战 / People’s Daily
“The authority of the central government cannot be challenged” is the title of this stern warning on the front page of Sunday’s People’s Daily.
Reacting to China’s presence in the Pacific and South China Sea
U.S. steps up its activities in the Pacific to counter China’s growing influence: Coast Guard chief / SCMP
The United States Coast Guard will intensify its activities in the Pacific in response to China’s growing influence across the region, according to the force’s commandant Admiral Karl Schultz, who said there were “clear indicators” of Beijing’s increased presence even in the U.S.’ Pacific territories.
The Philippines is considering inviting tourists to its biggest and most strategically important outpost in the South China Sea, part of efforts to assert its claim to sovereignty over some of the world’s most contested islands. Thitu island [中业岛 zhōngyè dǎo] in the Spratly archipelago is in the midst of major upgrades to its dilapidated facilities, playing catch-up with China and Vietnam, which have been developing facilities on islands they either occupy or have built from scratch on top of submerged reefs.
The port of Piraeus
Boxed in at the docks: How a lifeline from China changed Greece / Fortune
“When Chinese shipping giant Cosco snapped up the historic port of Piraeus, it threw Greece an economic lifeline. Now the port’s success is reshaping the Greek political landscape — and generating choppy waters for China in Europe.”
Korean air space
China says South Korea’s air defense zone not territorial airspace / Reuters
China’s foreign ministry said on Monday that South Korea’s air space identification zone is not a territorial airspace and all countries enjoy freedom of movement there.
Foreign ministry spokeswoman Huà Chūnyíng 华春莹 made the remarks after South Korea said two Chinese bombers and two Russian bombers entered the Korea Air Defence Identification Zone (KADIZ) together early on Tuesday.
Chinese student murdered in Japan
Chinese man arrested in Tokyo after flatmate is stabbed to death with sashimi knife / SCMP
“A Chinese student has been stabbed to death by a flatmate at their home in Tokyo, Japanese media reported.”
SOCIETY AND CULTURE:
Soccer in kindergartens
China takes football to 3,000 kindergartens and keeps its eye on goal of World Cup glory by 2050 / SCMP
“China is taking football into 3,000 kindergartens this year as part of efforts to inspire interest in ‘the beautiful game’ among more children and continue laying the foundations for a World Cup winning team by 2050.”
Designing a honeycomb-inspired hotel in Sichuan’s countryside / That’s Magazine
A photo of the honeycomb tree house interiors and exteriors of a new hotel near Chengdu.
Hairy history / World of Chinese
All about the long-braided pigtail or “queue” (辫子 biànzi) hairstyle, which all Chinese men were forced to adopt during the Qing dynasty (1644–1911).
FEATURED ON SUPCHINA
‘Grapes of God,’ smitten: The transformation of a small Catholic village in Yunnan
Cizhong, located in northern Yunnan Province near the border of Sichuan and Tibet, is known for both its unusual French Catholic heritage and a historic wine industry. It was a thriving, wine-producing village until a new dam downriver recently changed everything. “Our land is gone,” said a guesthouse owner. But not everyone objects to the new way of life.
SINICA PODCAST NETWORK
ChinaEconTalk: Little Red Book, Big Red Ideas: A Global History of Maoism, Part 2
Jordan continues his interview with Professor Julia Lovell, author of the recently published book on Mao’s international legacy entitled Maoism: A Global History. In this episode, Lovell recounts the ways in which Maoism truly started going global in the 1950s and 1960s.