GIF by Lucas Niewenhuis. View pronunciation video from Jia.

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Dear reader,

We’ve got three stories and a reading list at the top today, and the usual links below.

For Access members, tomorrow we’ll have a brief guide to China’s relations with the island nations of the Pacific.

As always, send me feedback anytime by email or tweet me @goldkorn or all of us @supchinanews.

—Jeremy Goldkorn, Editor-in-Chief

1. Australia tells Huawei to hit the highway

Australia has banned Chinese handset and network equipment maker Huawei from supplying equipment for a 5G mobile network.

• “The move, following advice from security agencies, signals a hardening of Australia’s stance toward its biggest trading partner as relations have soured over Canberra’s allegations of Chinese meddling in Australian politics,” reports Reuters. It also brings Australia in line with the United States, which has restricted Huawei and compatriot ZTE from its lucrative market for similar reasons.
• The Australian government statement was clear about the perceived threat: Australian ABC reports: “The Government said it would be interpreting rules announced last year as disqualifying any company that was ‘likely subject to extrajudicial directions from a foreign government that conflict with Australian law.’”
• Huawei Australia tweeted: “We have been informed by the government that Huawei and ZTE have been banned from providing 5G technology to Australia. This is a extremely disappointing result for consumers.” Reuters also notes that Huawei’s Australian arm “strenuously denies it is controlled by Beijing.”
• Huawei may pursue legal action against the ban, according to a statement reported by Sina (in Chinese).  
• The Chinese Foreign Ministry spokesperson reacted by saying Australia “should know better than citing all sorts of excuses to erect artificial hurdles and enforce discriminatory measures,” and that China urges the Australian government “to abandon ideological bias and level the playing field for Chinese enterprises’ operations in Australia.”

—Jeremy Goldkorn

2. Trade war, day 49: Headed toward economic ‘disengagement’?

Today, lower-level American and Chinese negotiators met in Washington for the second day of talks (expectations were rock-bottom low on the first day), attempting to pave the way for further negotiations to work out trade tensions. The South China Morning Post indicates that today’s talks have ended “not with a bang but a whimper, if heard at all.”

Today is also the day that the reciprocal tariffs in the U.S.-China trade war reached $50 billion. A previously announced second tranche of American tariffs on $16 billion in Chinese imports, on top of the $34 billion already in place, went into effect, and China retaliated right away. Here are the products hit on both sides, summarized by the SCMP:

• U.S. tariffs hit “279 product categories – including semiconductors, plastics, chemicals and railway equipment – which [the U.S. Trade Representative] said had benefited from ‘Made in China 2025.’”
• Chinese tariffs taxed “333 product categories including aviation fuels, scrap copper and vehicles.”

You can read the USTR statement accompanying the second tranche of tariffs here, and a much shorter statement on what the Chinese Ministry of Commerce calls “necessary counterattacks” here (in Chinese).

Investors who had held out hope, for some reason, that the current negotiations would delay the second round of tariffs rushed to sell stocks at risk: “Caterpillar and Boeing, two bellwethers of global trade, fall 2 percent and 0.7 percent, respectively, after additional U.S. and China tariffs come into effect,” CNBC reports.

Where does this all leave us?

• “If the hawks in the Trump administration get their way, where this ends is in a disengagement of the two economies, not in a settlement through the kinds of negotiations that have been going on in Washington today,” Scott Kennedy, deputy director of the Freeman Chair in China Studies at the Center for Strategic and International Studies, said today.
• “Disengagement” has been considered a possible outcome of the U.S.-China trade war for months — see a New York Times report from May, “On Trade, the U.S. and China Consider the Unthinkable: Breaking Up” — but as tensions have worsened, it has seemed more and more likely.
• “The idea of going back to a world of higher tariff walls is no longer out of the question,” noted political scientist Joseph Nye told (paywall) Bloomberg Businessweek in July. He added that “after [Trump’s] European visit and tariff war, we have to consider the hypothesis that his intent is to destroy the institutions of the liberal international order” — including those that support free trade.
• But what if the tariffs are actually working? Will the trade war change China’s behavior with regard to market access, intellectual property theft, forced tech transfers, and the technology subsidies from the Chinese government set out in Made in China 2025? Fox Business asked this question to Robert Kuhn, a former banker, author of The Man Who Changed China: The Life and Legacy of Jiang Zemin, and producer of this state TV miniseries on understanding the Communist Party of China.
• “Tariffs at least will get people’s attention, and everybody’s focused on this,” Kuhn says. While he claims China is making progress on intellectual property protection, curbing industrial espionage, and market access, he says the country has maintained the “same ways of thinking and rules” as it had when it joined the WTO in 2001 when it was truly a developing country. Kuhn says the tariffs are forcing China to have a new way of thinking about itself.

—Lucas Niewenhuis

3. Rainbow trout is salmon, China’s fishery organization insists, despite backlash

Rainbow trout is clearly not salmon, according to science. But the China Aquatic Products Processing and Marketing Alliance (CAPPMA) — the government-backed association that claimed the two species are the same in its new industry standards issued earlier this month — is obviously not interested in science: their primary concern seems to be boosting its members’ profits by scamming customers.

About two weeks ago, the organization faced intense criticism from Chinese consumers angry about its statement equating rainbow trout with salmon. This was widely interpreted as a move to legitimize the practice of mislabeling rainbow trout as salmon to trick buyers into paying the premium price of salmon for less expensive rainbow trout. Consumers raised their voices to protest the deliberate mislabeling, and question the health effects of potentially eating raw rainbow trout.

Despite the fierce backlash, in a public hearing held by the Shanghai’s Consumers’ Association on August 21, CAPPMA stood firm on its previous statement, insisting that rainbow trout is indeed salmon and is safe for raw consumption.

Click through to SupChina for more details.

—Jiayun Feng

4. A gallimaufry of links

This is what I’ve been reading this morning, arranged in no particular order:

• Alibaba pleasantly surprised its investors with its most recent report: despite the weakening economy, Alibaba “beat analyst expectation after clocking 61 percent annual revenue growth,” reports TechCrunch.
• “An educated public is the best defense to Beijing's growing influence operations in Asia” is the very sensible conclusion of Bilahari Kausikan, former permanent secretary at Singapore Ministry of Foreign Affairs, in this piece on Chinese influence operations on Nikkei Asian Review. He examines how China conducts influence operations, citing examples from Singapore.
• Dodgy accounting at the Hong Kong Jockey Club: In Macao, Stanley Ho 何鸿燊 had a monopoly on gambling from 1962 until 2002. In Hong Kong, there’s still only one legal operator of gambling: the Hong Kong Jockey Club. A generous part of the fortune they make — nearly $4.3 billion in the year ending June 2017 — is supposed to be given to charitable causes, justifying the gambling license. But Hudson Lockett of the Financial Times reports (paywall) that “the club exaggerates its donations, paying out only a sliver of the charity funds that serve to justify its lucrative monopoly.”
• The Africa-China Project and their collaborators at Wits University journalism school in South Africa have produced a journalist’s guide to the Forum on China Africa Cooperation (FOCAC), which takes place in Beijing this year September 3 to 4.
• “Massive pyramid, lost city, and ancient human sacrifices unearthed in China” is the title of this piece on Live Science about an excavation of a 4,300-year-old city in Shimao, Shaanxi Province.
• “The CCP’s efforts to cultivate foreign political parties and generate an appreciative consensus around Xi Jinping’s policies have now reached Iceland,” according to Sinologists Jichang Lulu and Martin Hála.
• If there really has been a concerted push back against Xi Jinping among the Party elite, “those moves look to have been squashed, and they likely gave Xi an even clearer idea of where enemies are,” says Bill Bishop on Sinocism (paywall). He adds: “If you come at the king and you miss, your life in the CCP will not be pleasant, and the message to any other cadres who might be wavering is very clear.”

—Jeremy Goldkorn 

Video of shirtless construction workers goes viral

A video of four construction workers taking off their shirts and putting them on the seat of a taxi so they wouldn’t get dirty when sitting down has gone viral.

Sinica Podcast: Legendary diplomat Chas W. Freeman, Jr., on U.S.-China strategy and history: Part 2

Jeremy and Kaiser continue chatting with Ambassador Chas W. Freeman, Jr., on how he got interested in China, his early diplomatic career, his extraordinary experience as chief interpreter during Richard Nixon’s historic visit to China in 1972, and his prescient predictions of how China would evolve after the normalization of relations with the U.S.

Subscribe to the Sinica Podcast via Apple Podcasts, Overcast, or Stitcher, or plug the RSS feed into your favorite podcast app.