GIF by Lucas Niewenhuis. View pronunciation video from Jia.
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Dear reader,
We’ve got six things at the top today, and a heavily annotated bunch of links beneath.
This just flashed across my screen so I’ll just give you the link: It’s a follow up to the 2017 New York Times story (porous paywall) about how the “Chinese government systematically dismantled C.I.A. spying operations in the country starting in 2010, killing or imprisoning more than a dozen sources over two years and crippling intelligence gathering there for years afterward.”
The new piece is by Zach Dorfman in Foreign Policy: Botched CIA communications system helped blow cover of Chinese agents.
—Jeremy Goldkorn, Editor-in-Chief
1. Tencent stock slumps while regulators sit on approvals
There has been a sell off of Chinese tech and entertainment stocks, led by stock market darling Tencent, the company behind the ubiquitous-in-China WeChat mobile app.
Tencent shares are down around 27 percent since January, but trading yesterday wiped out around $15 billion from the company’s market value. Then today, Tencent announced its first decline in quarterly profits in nearly 13 years, and another $25 billion went poof! Why?
- “Weak gaming revenue” is the reason cited by Tencent for the fall in profits. Like all gaming companies in China, Tencent has been waiting government approvals for games since March, after a regulatory reform.
- “The world's largest gaming market has been rattled for months as a game approval freeze drags on. Insane to think that because of leadership shift on top, the world's biggest gaming companies are in complete disarray.” That was a tweet from Lulu Yilun Chen, China tech reporter for Bloomberg.
- “We don’t have visibility on when exactly the official approval will start yet,” said Tencent President Martin Lau on a conference call with investors, according to Bloomberg (paywall).
- New York Times China tech correspondent Paul Mozur unpicked Lau’s comments in a tweet: “Tencent president Martin Lau just explained how Beijing bureaucratic restructuring is holding up the entire gaming approval process and doing real damage to a company that’s supposed to be an emblem of Chinese innovation.”
Knock on effects and related phenomena:
- Shares of U.S. tech giants Facebook, Apple, and Alphabet all dropped, as did Chinese tech stocks like Alibaba and JD.com. Macy’s is down. The Dow Jones, S&P, and Nasdaq are down.
- Tencent spinoff China Literature, mobile phone maker Xiaomi and China Tower — an infrastructure company launched by China’s three large mobile networks — all “saw their share prices drop below where the stocks had priced in recent highly-anticipated public listings, in the latest sign of weakening investor demand for some China-focused companies,” according to the Financial Times (porous paywall).
Further reading: China freezes game approvals amid agency shakeup and Nasty earnings surprises dog China's tech darlings on Bloomberg (both with porous paywalls).
—Jeremy Goldkorn
2. Trade war, day 41: China undecided on next move?
On day 29 of the U.S.-China trade war (covered on SupChina Access), when China responded to a threatened additional $200 billion in tariffs from the American side, some observers were surprised that China backed away from a dollar-for-dollar retaliation and chose to only announce $60 billion in reciprocal tariffs. Of course, China only imports a bit more than $150 billion in U.S. goods a year, so the initially promised full reciprocation wasn’t possible, but the point is that China sort of hedged its bets with a measured response.
The New York Times counts that as the first instance where China really did “shift course” since the trade war began, and suggests (paywall) that we may be approaching another turning point in China’s strategy:
“In recent days, officials from the Commerce Ministry, the police and other agencies have summoned exporters to ask about plans to lay off workers or shift supply chains to other countries.”
“Confronting the possibility that the tariffs may remain for months or years and that Chinese access to the American market could tighten further, Mr. Xi does not appear to have settled on a strategy for limiting the damage or for persuading Mr. Trump to negotiate a deal.”
China’s Commerce Ministry in particular is reportedly feeling stretched as it tries to keep up with the twists and turns of the trade war and give leaders advice. The South China Morning Post reports:
“The Chinese Communist Party has ordered the Ministry of Commerce to stem an ‘exodus’ of cadres as the country goes into battle in a trade war with the United States.
The party’s disciplinary watchdog issued the order late last month after a three-month inspection of the ministry.
A retired trade official told the South China Morning Post that a shortage of veterans in the ministry, especially those experienced in trade negotiations and macroeconomic management, could affect the quality of advice given to those making decisions in the trade war.”
Many commentators are pointing out that now is a particularly tricky time for the leadership of Xi Jinping, as well as for China’s economy:
- With the latest vaccine scandal, “Public antipathy has grown more widespread. After similar scandals in the past, the far left in Chinese society would typically voice their unconditional support for the authorities. This time, most have maintained a rare silence, even if they have not directly criticised the government,” Deng Yuwen, an independent political commentator writes in the South China Morning Post.
- “Some scholars have warned that the trade war might trigger an eruption of public anger,” Deng says. He warns that “an overall restlessness is appearing in society and people are crying out for changes to the system.”
- Several prominent intellectuals have either criticized the leadership directly, or been criticized for their excessive nationalism, as we have summarized on SupChina.
- “China is in a tough spot. The strengthening dollar threatens to provoke more capital flight out of China, but any effort to shore up the renminbi in response could further slow the Chinese economy,” Ruchir Sharma, the head of emerging markets and chief global strategist at Morgan Stanley Investment Management, writes in the New York Times (paywall).
An apparent censorship order from the State Administration of Radio and Television (SART), screenshot by Hao Hong, Chief Strategist at BoCom Int’l, shows authorities actively trying to maintain calm.
- “Don’t use words like ‘plunge,’ ‘boom,’ ‘crash,’ or other words that stir up emotion” (不使用‘暴跌’‘暴涨’‘崩盘’等煽情用语 bù shǐyòng bàodiē bàozhǎng bēngpán děng shānqíng yòngyǔ) when discussing the stock market, broadcast and other media are instructed by SART.
- The Finance Ministry ordered 1 trillion yuan in bonds ($144 billion) to be sold by local governments by the end of September, Caixin reports (paywall), one of several new measures being taken to support growth during the current time of uncertainty.
- To learn more about how policymakers are encouraging financial stability, check out this report from economics consultancy Trivium on the Politburo’s plans for the second half of 2018.
Other trade war reporting:
- Cyber aspect of trade war
China could reportedly use its 'unwritten' tech rules as an 'invisible tool' against US firms / CNBC
“With Sino-American trade tensions escalating, China's cybersecurity standards could be used as an ‘invisible tool’ of retaliation against Washington's tariffs, according to one expert.
Those so-called standards are government-issued guidelines about things like firewalls and software that are technically voluntary, but are oftentimes treated as mandatory by foreign firms' Chinese business partners. Over the past several years, Beijing has issued close to 300 new national standards, Washington-based think tank the Center for Strategic and International Studies said in a report earlier this month.”
- China doesn’t want U.S. oil
Chinese oil importers shun US crude despite tariff reversal / Reuters
“Not a single tanker has loaded crude oil from the United States bound for China since the start of August, Thomson Reuters Eikon ship tracking data showed, compared with about 300,000 barrels per day (bpd) in June and July.”
- Christmas shopping in July
Trump trade war with China spurs 'off the charts' rush at Port of LA / CNBC
“The escalating trade war with China is leading U.S. retailers to speed up the import of goods from Asia's largest economy to avoid new tariffs and ensure they have adequate supplies for the winter holidays.”
“Executives say nervous importers pushed forward shipments into the Port of Los Angeles that would normally arrive later in the year into July due to uncertainty surrounding the U.S.-China trade fight and looming tariffs proposed on a variety of imported consumer products.”
—Lucas Niewenhuis
3. TV host sues former intern who accused him of sexual harassment
Prominent TV host Zhu Jun 朱军 has hit back against what his lawyer called “false information” regarding accusations of sexual harassment.
In a statement (in Chinese) released by the Beijing Xingquan law firm, Zhu’s attorney claims that all of the information online about Zhu sexually harassing a former intern is not true, and a lawsuit has been filed at the Beijing Haidian District People’s Court against the alleged victims who posted the accusations online. The attorney says she needs to take legal responsibility for “spreading rumors.”
The alleged victim remains defiant, telling one journalist: “My response to the statement is that I want to confront Zhu in court. I’m dying to know what happened to the evidence collected by the police four years ago, whether the surveillance footage is still available, and how the whole case will conclude.” Click through to SupChina for more details.
—Jiayun Feng
4. Labor activists allege sexual humiliation and sleep deprivation in police custody
Yesterday, Radio Free Asia reported on a “Maoist labor campaigner 'kidnapped,' believed detained, in China's Guangdong.” Reuters follows up today with a report by Sue-Lin Wong and Christian Shepherd.
- Shen Mengyu 沈梦雨, a former employee of Jasic Technology, a car parts factory in Shenzhen, is the “Maoist” detained by the authorities. She had tried to form a union to negotiate collectively on behalf of 1,000 Jasic workers.
- Shen has a master’s degree “from a top Chinese university,” according to Reuters. But instead of going into a corporate or government career, she got a job at Jasic. She was fired in May for activism.
- Conditions at Jasic are grim: “Sometimes we would work for one month straight without any time off… They wouldn’t let us freely quit and they even watched us go to the toilet,” said one former employee — who was also detained for activism — to Reuters.
- The police abused workers detained for organizing. Sue-Lin Wong tweeted some of her reporting that did not make it into the article, and video clips of plainclothes cops around the Jasic factory. She mentions worker accounts that allege police used sleep deprivation and sexual humiliation to get them to sign documents they had not read and make video recordings.
5. Propaganda about Xinjiang re-education camps
On Monday, China said there were “no such thing as re-education centers” in Xinjiang, denying all the abuses alleged at the United Nations Committee on the Elimination of Racial Discrimination (CERD) last Friday and in written reports submitted by civil society organizations.
Now, the propaganda machine is creaking into gear:
- “Some anti-China forces have made false accusations against China for political purposes…The people of all ethnic groups in Xinjiang cherish their happy and peaceful life… All rumors and slander will be futile.” That’s what one foreign ministry spokesperson’s response to allegations heard at CERD, according to Xinhua.
- “Why deradicalization education is ineffective in Europe” is the title of a piece in nationalist rag Global Times. Like last week’s op-ed — titled “Protecting peace, stability is top of human rights agenda for Xinjiang” — the new piece justifies rather than denies the existence of the camps:
“The impact of extreme religious thought cannot be underestimated… The ways China has adopted for deradicalization are more stringent, yet they worked. Europe's methods are less effective, but that does not necessarily mean that Beijing is simply doing better in this regard. It is a common challenge faced by all and it is time to set aside conflicts over different values to prevent radicalism from globalizing. Otherwise, this double standard will jeopardize Europe's own stability.”
6. Xenophobia and Hong Kong independence
Andy Chan Ho-tin 陈浩天, founder of the pro-independence Hong Kong National Party, gave a speech yesterday at the Hong Kong Foreign Correspondents’ Club despite objections from China’s foreign ministry and Hong Kong’s chief executive Carrie Lam, and street protests outside the venue. Wei Du 杜唯, North Asia correspondent for Channel News Asia, posted a Twitter thread that begins with this question:
“I asked Andy Chan yesterday [at the FCC event] why he singles out mainland migrants on a one-way permit, which is essentially a family reunion visa. It comes across as xenophobic/discriminatory. He didn't have very good answers, so I want to discuss it further here.”
Wei Du concludes that “the poor mainland migrants end up being the bogeyman for the resentment” that ordinary Hong Kongers feel for the rich and powerful elite of the territory.
Scapegoating mainlanders “is not justified,” she says, but, unfortunately, discriminatory attitudes to mainlanders are not new, and are likely to remain a feature of local politics. In 2012, for example, a bunch of Hong Kongers pooled together enough money to publish a full-page newspaper ad calling mainlanders “locusts” (蝗虫 huángchóng) who, left uncontrolled, will overrun Hong Kong.
—Jeremy Goldkorn
