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Thread: What’s Happening Lately on the China Front?

1. Here is a survey of lightly-reported events on the Beijing front over the past couple of weeks. It’s good to keep a close watch on the Spider Dragon! From some recent intel reports:
2. German newspaper Handelsblatt reported that the German government was considering ways to exclude Chinese tech giant Huawei from the 5G mobile network.…
3. The Federation of German Industries criticized the report, saying no vendors should be excluded without evidence of wrongdoing.
4. If Germany moves forward, it will join countries such as Australia, New Zealand, Japan and the U.K. in heeding U.S. warnings about security concerns related to Huawei. (The company is under investigation in the United States for stealing trade secrets from U.S. companies.)
5. However, Germany and China signed two agreements, deepening cooperation in the financial sector, in part because Germany hopes to become a hub for yuan-denominated financial products in Europe.
5A. I guess money (marks and renminbi in this case) trump other considerations!…
6. China has reportedly offered to increase imports from the United States by $1 trillion, aiming to zero out its trade surplus with the U.S. by 2024.…
7. U.S. trade negotiators appear to have countered by requesting regular reviews of Chinese progress on trade reforms – a measure Beijing isn’t too keen on. (The criteria, frequency and conductors of these reviews have not been specified.)
8. As the trade war drags on, it’s putting an increasing strain on China’s economy. The China Institute for Employment Research reported that demand for export-import jobs dropped by 53 percent year on year in the third quarter of 2018 and by 40 percent in the fourth quarter.
9. Pressure is also mounting from China’s neighbors. Countries in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership met recently to discuss procedures for adding new members to the pact – with the lingering hope of getting the U.S. on board.
10. If that happens, it would be another blow to China’s trade relationships in the region.
11. China’s Finance Ministry, central bank and National Development and Reform Commission (the country’s top economic planning agency) seem to be working together to help keep the economy moving – a change from earlier this year.
12. China’s central bank has said it had injected $37.9 billion into the banking system, following the National Development and Reform Commission’s recent call for banks to increase medium- and long-term loans to private companies.…
13. The Finance Ministry also announced its plans to implement large-scale tax cuts and to reduce social insurance fees for employers. Chinese news agency Xinhua warned, however, that growth may slow down because of these cuts.
14. It seems the government is preparing the Chinese public for a downturn. And we’ve already examined that recently here:…
15. And the hits keep coming for Huawei, as U.S. prosecutors have filed criminal charges against Chinese tech firm Huawei. Washington unsealed two indictments, one of which accuses CFO Meng Wanzhou, detained by Canadian authorities last month, ….
15A. … and the company of selling U.S. technology to Iran, and another which accuses Huawei of stealing cellphone testing technology from T-Mobile.…
16. The director of the FBI said, “Huawei and its senior executives repeatedly refused to respect the laws of the United States and standard international business practices.” A spokesperson for China’s Foreign Ministry said the charges were unreasonable and politically motivated
17. Next up, a Financial Times report indicates that the trade war with the U.S. will force Chinese chipmaker Fujian Jinhua to stop production by March.…
18. Additional reports suggest the Chinese government is preparing to complement its stimulus plans with roughly $370 billion worth of tax cuts and infrastructure spending, and putting pressure on banks to extend more credit.
19. One of China’s four big state-owned banks recently became the first domestic lender to sell perpetual bonds after the Financial Stability and Development Committee approved them in December.…
20. Washington and Beijing continue high-level trade talks; China wants a deal but the U.S. isn’t making it easy for Beijing (excellent!).
21. China has learned the hard way that agreements hammered out in even Cabinet-level negotiations are ephemeral, at best, unless @POTUS himself is directly involved.
22. Beijing has reportedly proposed a summit next week in Hainan, a short jaunt from where Trump is expected to be meeting with North Korean leader Kim Jong Un.
23. Notably, @POTUS left open the possibility that the U.S.-imposed March 1 deadline, after which the bulk of U.S. tariffs would increase to 25 percent, might be pushed back.
24. The U.S. clearly thinks China is serious about making substantive concessions, but a preliminary or conditional agreement might be needed to give Beijing time to work out the mechanics of implementation.
25. As always, the devil will be in the details, and what’s left out of the deal will shape U.S.-China relations for years to come. Isn’t it amazing that, for the first time in decades, we have a president actually pushing back on China’s unfair trade practices? I love it!
26. Ahead of the 40th anniversary of the Sino-Vietnamese War last weekend, Beijing had deployed extra security to a number of Chinese provinces to monitor veterans hoping to mark the anniversary, which the Chinese government does not officially observe.…
27. But aside from a few articles in the Hong Kong-based English daily South China Morning Post about veterans frustrated with the Chinese government’s lack of acknowledgment, the anniversary passed quietly.
28. In the past, China has steered clear of the anniversary to avoid damaging diplomatic ties with Vietnam and to bring attention to the People’s Liberation Army’s success (or more precisely, the lack thereof), ….
28A. … but this year fears also centered on whether the anniversary might encourage protest among Chinese veterans, especially in the wake of Xi Jinping’s PLA reforms and troop reductions.
29. Meanwhile, the official newspaper of the Communist Party of China’s Beijing Municipal Committee reported updates on an initiative to install police officers in Beijing in CPC cells overseeing communities throughout the city.
30. The CPC continues to maintain control – and feels the need to deepen that control over Chinese society.…
31. Lastly, the Communist Party of China and the State Council released development plans for the Guangdong-Hong Kong-Macao Greater Bay Area. These three regions have an economy worth $1.48 trillion, about the same size as Spain’s.…
32. The plan is part of China’s broader strategy for economic reform, including components focused on developing an innovation and technology hub, expediting infrastructure connectivity and creating a globally competitive modern industrial system – ….
32A. … all of which this region is more conducive for than other regions in China. As is the case with most of China’s ambitious development plans, this one is easier said than done.
33. The three distinct regions have different social and legal systems, customs unions and currencies, underscoring how unwieldy China’s governing approach of “one country, two systems” can be.
34. There is more to report on the national security and FONOPS front, but I’ll save that for a future thread. ///The end.
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