China Cautious in Resisting Trump’s Trade War


SCMP shows its ignorance of Chinese people’s strong nationalism in its report “Don’t mention the trade war: what China doesn’t want people to know in its dispute with the US” on July 14.

The report says, “Beijing is taking a softer approach to deal with the US compared with its previous tactic of making public attacks and launching popular boycotts, which has been used against Japan, South Korea and the Philippines in the past.” But China has to deal with the US, the only superpower in the world now, in a way different from that in dealing with Japan, South Korea and the Philippines.

Relations with the US carry much heavier weight for China than with the above-mentioned countries even Japan the third largest economy in the world.

Therefore, even when Chinese college students protested US bombing of Chinese embassy, a much more serious incident than what caused the public attacks and popular boycotts mentioned in the report, Chinese Vice President Hu Jintao asked protesters not to go to extreme in a special TV speech on the event.

To avoid college students’ protests from growing into mass protests, the then Chinese President Jiang Zemin sent coaches for students’ travel to and fro the US embassy in order to prevent the students’ protests from rousing public indignation so that the mass of people may join the students.

Jiang was upset by the bombing but he was very careful in dealing with China’s relations with the US.

So are Chinese leaders now. They are very careful to tell media to avoid using the term trade war. The term “war” may cause some Chinese to regard it as something similar to a military war and respond accordingly. That will make the situation grow out of control.

I said in my previous post that soldiers may fight with emotion but commanders must fight with wisdom.

In a trade war, protests are utterly not helpful.

That is why according to the report, “State media outlets with a higher political ranking are allowed to publish news and editorials about the trade war, while local media and internet news portals are often told to republish what state media have already published and not to overplay the issue.”

Do not forget that US strategic goal is to make Chinese economy suffer so as to reduce China’s ability to get high technology.

China needs to attract US companies and talents to get their technology. For that, mass friendship to American people will be helpful while mass hostility may scare US companies and talents away.

Chinese leaders shall turn to their advantages the damages the trade war may cause. For example, the high tariff may cause some enterprises to bankrupt as they will be unable to export their goods to their major market the US. The government will subsidize them to move to the Silk Road economic belt for export to the US. In such movements, the staff and workers’ nationalism may make them willing to move along with the enterprises to backward countries in the economic belt so that the enterprises will have competent engineers, technicians and skillful workers as soon as they have moved there.

Moreover, I have mentioned the water diversion project to turn the desert in Xinjiang into farmland to produce agricultural goods not only as substitutes for imports from the US but even compete with the US in world market. The problem is that few Chinese are willing to move to remote Xinjiang to develop the area. The workers and staff unemployed due to the trade war will be willing to move there due to their nationalism. It is much better for them to protest against the trade war in the street.

With wise strategy, China will come out of the trade war much stronger and richer. The trade war will test Chinese leaders’ wisdom. Are they wise enough to win the trade war?

I have said in my previous post that tit-for-tat retaliation is stupid. Chinese leaders must be wise to win the trade war. Tit-for-tat retaliation at best is frontal engagement. China has to conduct ingenious surprise moves to win the war. That is Chinese gifted strategist Sun Tze’s teaching.

Comment by Chan Kai Yee on SCMP’s report, full text of which can be viewed at https://www.scmp.com/news/china/economy/article/2155264/dont-mention-trade-war-what-china-doesnt-want-people-know-its.

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China looks to get cozy with EU in annual talks as Trump tariffs bite


Reuters Staff July 16, 2018

BEIJING (Reuters) – The European Union will open an annual meeting with China on Monday, and will be looking to fend off overtures for an anti-U.S. alliance as China seeks a European counterbalance to U.S. tariffs.

Premier Li Keqiang will host European Council President Donald Tusk and European Commission President Jean-Claude Juncker in Beijing, where the two sides could reinvigorate long-running investment treaty talks with the expected exchange of markets access offers for the first time.
The meeting is expected to produce a modest communique affirming the commitment of both sides to the multilateral trading system. Leaders failed to find sufficient consensus for such a joint statement after meetings in 2016 and 2017.

This year’s talks come with the United States and China increasingly mired in a trade dispute with no sign of negotiations on the horizon.

U.S. President Donald Trump has warned he may ultimately impose tariffs on more than $500 billion worth of Chinese goods – nearly the total amount of U.S. imports from China last year.

China has sworn to retaliate at each step.

European envoys say they have sensed a greater urgency from China since last year to find like-minded countries willing to stand up against Trump’s “America First” policies.

China’s ambassador to the European Union, Zhang Ming, said in a commentary in the ruling Communist Party’s official People’s Daily newspaper on Sunday that the focus of the meeting would be how China-EU relations could become a “standard of stability” amid the “din of unilateralism and protectionism”.

China and Europe are “two major forces of stability and responsibility” that support inclusive globalization, Zhang said.

But the world’s largest trading bloc, while sharing Trump’s concern over Chinese trade abuses if not his prescription of tariffs, has largely rebuffed efforts by China to pressure it into a strong stance against Trump. [nL8N1U000T]

There is deep scepticism in the EU about China’s actual commitment to opening its market further, as well as concern that it seeks to divide the bloc with its economic influence in Eastern Europe.

Nonetheless, European officials suggest that Trump, who has also targeted Europe with tariffs, has created a widow of opportunity to show that EU-China relations can be a bulwark for global trade.

China and the EU are also expected to set up a working group on reforming the World Trade Organization during the talks.

European Commission spokesman Margaritis Schinas said on Friday that discussions with China would focus on “trade and investment, on the commitment to combating climate change and investing in clean energy and on foreign and security issues, including the situation on the Korean peninsula”.

Schinas said the two sides’ leaders would also talk about their joint commitment to preserving the Iran nuclear deal.

Reporting by Michael Martina in Beijing and Robin Emmott in Brussels; Editing by Robert Birsel

Source: Reuters “China looks to get cozy with EU in annual talks as Trump tariffs bite”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


China’s Belt and Road Success in Middle East


SCMP’s report “For China, the Belt and Road run through the Middle East” reflects China’s Belt and Road successes in the Middle East.

According to the report China’s Belt and Road initiative was a central focus of The recent eighth Ministerial Meeting of the China-Arab States Cooperation Forum (CASCF).

The CASCF was a biannual event from 2004 between China and the Arab League to promote Sino-Arab cooperation on political, economic and cultural issues.

China’s two achievements in the current event greatly facilitate China’s Belt and Road initiative: First the announcement of strategic partnership of comprehensive cooperation and common development between China and Arab League and second, the release of the Declaration of Action on China-Arab States Belt and Road Cooperation.

The report says, “China committed US$23 billion in loans and aid to Arab states, with money bookmarked for infrastructure and reconstruction projects, humanitarian aid and efforts to support social stability in Arab states.”

It has been decided that China will develop industrial parks in Oman, Saudi Arabia, Egypt and the UAE that connect with regional ports in Djibouti. That will enable China to move its industries for export to the US to the Middle East and thus avoid US tariff hikes and win trade war with the US. If successful, China’s $23 billion wo;; be well spent.

However, is it wise to invest in the Middle East, an area well-known for its lack of security. Chinese leaders’ strategy is security through development. They believe when the area has become rich through economic development, people may focus their attention on the creation of wealth instead of the creation of political trouble.

That will be a tremendously great goal very hard to attain.

Comment by Chan Kai Yee on SCMP’s report full text of which can be viewed at https://www.scmp.com/news/china/diplomacy-defence/article/2155258/china-belt-and-road-run-through-middle-east.


China must improve core technology innovation, says Xi


Reuters Staff July 13, 2018

BEIJING (Reuters) – China must improve its core technology innovation, President Xi Jinping told a top government decision-making body on Friday, saying it was key to national security and high-quality economic development.

The country should have a sense of urgency as it works to boost China’s technology innovation capabilities, the group said, according to a readout after the meeting, Xinhua news agency reported.

The group said China will step up intellectual property rights protection and seek expanded opening up in the science and technology sector, according to the report.

China and the United States are locked in a heated trade dispute, with the U.S. pressuring Beijing to make major changes to its trade, technology transfer and industrial subsidy policies.

Reporting by Beijing Monitoring Desk; Editing by Nick Macfie

Source: Reuters “China must improve core technology innovation, says Xi”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


U.S. lifts ban on suppliers selling to China’s ZTE


Karen Freifeld July 14, 2018

(Reuters) – The U.S. Department of Commerce on Friday lifted a ban on U.S. companies selling goods to ZTE Corp, allowing China’s second-largest telecommunications equipment maker to resume business.

The Commerce Department removed the ban shortly after ZTE deposited $400 million in a U.S. bank escrow account as part of a settlement reached last month. The settlement also included a $1 billion penalty that ZTE paid to the U.S. Treasury in June.

“The department will remain vigilant as we closely monitor ZTE’s actions to ensure compliance with all U.S. laws and regulations,” Commerce Secretary Wilbur Ross said in a statement that described the terms of the deal as the strictest ever imposed in such a case.

The terms will allow the department to protect U.S. national security, Ross said.

The administration has clashed with lawmakers from its own party over issues related to China, and this was no different. On Friday, Senator Marco Rubio, a Republican, criticized the lifting of the ban.

“ZTE should be put out of business. There is no ‘deal’ with a state-directed company that the Chinese government and Communist Party uses to spy and steal from us where Americans come out winning,” Rubio said in a statement.

A photograph circulating among employees around midnight showed ZTE’s new chief executive and 10 other managers each giving a thumbs-up to the news, which was flashed on a screen at the company, according to a person familiar with the money if ZTE violates the June settlement.

On Thursday, ZTE’s Hong Kong shares surged about 24 percent after Reuters broke news the United States had signed an escrow agreement that paved the way for ZTE to deposit the $400 million.

ZTE’s U.S.-listed shares fell 2.4 percent to $3.70 on Friday. The news came after markets closed in Asia.

Shares of U.S. suppliers Acacia Communications and Lumentum Holdings rose more than 3 percent on the news before ending less than 1 percent higher.

ZTE paid U.S. companies more than $2.3 billion in 2017, including Qualcomm Inc, Intel Corp, Broadcom and Texas Instruments Inc.

The company, which employs some 80,000 people, got a limited one-month waiver last week to maintain existing networks and equipment.

ZTE has replaced its board of directors and senior management, as required by the June settlement, the Commerce Department noted.

It will now operate with a 10-year suspended ban hanging over its head, which the United States can activate if it finds new violations. The current ban could have lasted seven years.

Many U.S. lawmakers see the company as a national security threat and, on Thursday, a group of Republican and Democratic U.S. senators urged that ZTE’s penalties be reinstated.

The U.S. Senate paved the way for a showdown with Trump over the issue last month, when it passed an annual defense policy bill with an amendment attempting to reverse the deal. Its fate unclear.

Reuters reported on U.S. demands for a deal on June 1, and on June 5, revealed that ZTE had signed a preliminary agreement with the Commerce Department, along with the fine and other terms. It also broke news of the ban in April.

A U.S. investigation into ZTE was launched after Reuters reported in 2012 that the company had signed contracts to ship hardware and software worth millions of dollars to Iran from some of the best-known U.S. technology companies.

Reporting by Karen Freifeld; additional reporting by Sijia Jiang in Hong Kong and Sinead Carew and Chuck Mikolajczak in New York and Diane Bartz in Washington; Editing by Richard Chang and Tom Brown

Source: Reuters “U.S. lifts ban on suppliers selling to China’s ZTE”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


China market jolt far less contagious than 2015 shock


Karin Strohecker July 13, 2018

LONDON (Reuters) – Three years after a financial shock in China rocked world markets, a slower-motion 20 percent reversal of China’s main stock index and the yuan’s worst month on record have had much less of a viral effect around the globe.

Rather than the bolts from the blue investors endured over the past decade, Chinese market adjustments this year feel more transparent and akin to those in other developed markets.

That in part reflects a greater maturity of Chinese markets, defter control by Beijing authorities and the more resilient world economy.

A rapidly escalating trade dispute between Washington and Beijing that risks exaggerating the steady deceleration of China’s rapid national output growth has taken its toll on Chinese assets since the first quarter.

In June, some mainland indexes .CSI300 recorded their biggest fall since January 2016, when the bursting in June 2015 of China’s stock market bubble eventually spilled over into global markets.

“The bubble in 2015, that level was during a period of high euphoria, high speculation,” said Douglas Morton at Northern Trust Capital Markets.

At the time Chinese main indexes traded more in value than any other single index in the world, including the S&P 500 or Japan’s Topix, he added.

(Graphic: China Stocks Volumes – reut.rs/2NRhsoG)

“We are a long, long way off that at the moment, and the renminbi and the Chinese stock market has been relatively mature at this point,” he said, adding the lack of tampering by authorities in both currency and stock markets had also provided some reassurance.

In June and July 2015, China’s Shanghai stock index .SSEC lost more than a third of its value in just over two weeks. Both equity and debt markets suffered hefty outflows in the following months, according to data from the Institute of International Finance (IIF).

In recent months, China’s equity markets have seen steady inflows, underpinned by MSCI’s decision in June 2017 to include yuan-denominated Chinese stocks, known as “A-shares”, in its widely tracked emerging market index.

(Graphic: China fund flows – tmsnrt.rs/2KNxHRB)


With the trade spat between Washington and Beijing escalating in recent weeks, the IIF found non-resident portfolio equity flows had ground to a “sudden stop” in late June. But while overseas investment in Chinese shares has been on the rise, the share held by foreigners remains relatively small and high domestic retail participation in China’s local stock market provides some extra protection.

China Securities Index Co Ltd3493.2605


.CSI300.SSEC

(Graphic: Daily non-resident portfolio equity flows – reut.rs/2NJhU8h)

Reuters Graphic

The broad and deep economic recovery seen in the past few years has helped further diminish the prospect of sudden falls in China impacting other markets.

“Contagion happens not because of equity markets, contagion happens because of the real world,” said Paul Donovan, chief economist at UBS Global Wealth Management.

“The key thing about the last couple of years would be that European and U.S. domestic demand has really picked up, Asian domestic demand has started to pick up — and this is something that mitigates a lot.”

(Graphic: World Stocks and China Equity Indexes – reut.rs/2JiNlmr)

China’s currency has been another flashpoint in the puzzle that keeps investors preoccupied. In 2015, just two months after the stock market bubble burst, China’s central bank devalued the yuan by nearly 2 percent.

While the yuan has weakened in recent weeks both against the dollar and against a basket of currencies of its main trading partners, drawing a parallel with the sharp move three years ago does not take into account the prolonged emerging markets crisis of the time, said Zhou Hao at Commerzbank in Singapore.

Few fear China could see a “hard landing” — a specter that haunted markets in 2015. And yuan weakness is deemed to be a policy-loosening tool, alongside targeted reserve requirement cuts, while the increased access to onshore markets for foreign investors and a falling offshore yuan pool has made betting against the currency an expensive business.

But recent moves have sparked concern among some fund managers, said Benn Eifert, chief investment officer at QVR Advisors in San Francisco.

“There are investors who look back and see a lot of parallels to the third quarter of 2015, which started out this way, with kind of a long-trending decline in Chinese equity prices and then some rapid devaluation of the yuan. And that cascaded through global markets and led to a pretty big selloff,” said Eifert.

“You do see just general concern about what exactly is going on over there.”

Reporting by Karin Strohecker in London, additional reporting by Saqib Ahmed in New York and Andrew Galbraith in Shanghai, graphics by Karin Strohecker, Alasdair Pal and Tommy Wilkes in London; Editing by Catherine Evans

Source: Reuters “China market jolt far less contagious than 2015 shock”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


China Exports High-tech Remote Sensing Satellite to Pakistan


Mil.huanqiu.com says in its report on July 10 that China has made Bayao 1 satellite and sent it and PakTES-1A satellite made by Pakistan to their orbits for Pakistan with a Changzheng 2C rocket on July 9.

Bayao 1 is a remote sensing satellite for land resources survey, environmental protection, disaster monitor and management, estimate of agricultural output, urban planning, etc. It will provide space remote sensing services for China-Pakistan Economic Corridor and other Belt and Road projects.

The satellite has super wide-angle lateral and vertical sway capabilities to greatly widen the area in its view. According to the report, there have so far been only two satellites in the world to have such capabilities.

Moreover, it adopts third-generation data transmission to enable real-time transmission of the images it takes to the ground.

Source: mil.huanqiu.com “What information about China’s space technology has been released by the successful launch of Bayao I” (summary by Chan Kai Yee based on the report in Chinese”