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SupChina: Newsletter on China

Thursday, June 7, 2018

China’s security picture, from North Korea to the South China Sea

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TOP STORIES

GIF by Lucas Niewenhuis. View pronunciation video from Jia.

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1. ZTE pays to play

U.S. Commerce Secretary Wilbur Ross told CNBC today that his department had struck a deal with beleaguered Chinese telecom giant ZTE to end sanctions for its business dealings with Iran and subsequent failure to comply with U.S. demands.

ZTE must pay a $1 billion fine, in addition to $1.19 billion in fines paid earlier. ZTE must also put $400 million in escrow to cover any future violations.ZTE must change its board of directors and executive team within 30 days, and work with a compliance team chosen by the U.S. "We are literally embedding a compliance department of our choosing into the company to monitor it going forward. They will pay for those people, but the people will report to the new chairman," Ross said in the CNBC interview.Qualcomm shares jumped on the news, CNBC then reported, both because ZTE is a major customer for its chips and because Qualcomm is still waiting on Chinese regulator approval on its proposed merger with Dutch semiconductor company NXP. ZTE’s survival makes that merger more likely.Many American voices have wondered about or opposed the sudden rescue of ZTE, but as Gizmodo puts it: Trump is saving China's ZTE for some reason and Congress can't do jack shit about it.Yale Law School fellow and scholar of Chinese tech and legal issues Graham Webster tweeted about the deal:

“Mistakes re ZTE, not exhaustive…
—Imposing penalty disproportionate to a still-serious offense
—Saying change to penalty was due to Xi talks
—Blending law enforcement, natsec & trade deals
—Once blended with trade, giving in with little in return
—Still no details on natsec risk”


—Jeremy Goldkorn, Editor-in-Chief

2. Propaganda and finger vein recognition: China’s 2018 college entrance exams

The gaokao (高考 gāokǎo) is a three-day college entrance test that covers literature, science, math, and English (see SupChina’s brief history of the exam). This year more than 9.75 million students are taking the test, according to Sixth Tone.

Propaganda is big this year. Today’s morning test session was for Chinese language and literature and included an 800-character essay. Quartz reports: “Of the nine essay questions asked across the nation — there are some regional variations — five were directly related to propaganda terms put forward by the Chinese president.”Cheating on the gaokao already carries a penalty of up to seven years in jail, but Chinese authorities are instituting additional measures this year. Test centers in Inner Mongolia will use finger vein recognition (as opposed to fingerprint recognition) to verify test takers’ identities, according to the South China Morning Post. Metal detectors, facial recognition, and fingerprint recognition are expected to be commonplace around the country.

—Lucy Best

3. China pulls plug on solar subsidies, giving opportunity to India

On May 31, the National Development and Reform Commission, Ministry of Finance, and National Energy Administration issued a surprise joint statement (in Chinese) that sent shudders through the Chinese solar industry.

The government had decided that “in order to promote the sustainable development of the solar industry,” no new solar energy projects for the rest of 2018 would receive subsidies. Additionally, the incentive for producing solar energy from the projects currently being built would be scaled back by 0.05 yuan per kilowatt hour, starting June 1. Depending on the region, this amounted to “a cut of 6.7 to 9 percent,” according to the SCMP. Stocks for multiple solar companies immediately dropped by the daily limit of 10 percent, Caixin reported.

Now the solar industry is fighting back, Reuters reports, as “executives from 11 Chinese solar firms” sent a letter to the Xinhua state news agency arguing that the subsidy cut was ill-timed, and that they “still needed another three to five years of government backing.”Officials from the National Energy Administration said they had “promised to speed up the launch of a quota system forcing regions to buy more renewable power,” the day before the complaint letter was published, Reuters says.A budget deficit: Both the solar subsidy shrinkage and a move last month to make the “awarding of all new wind farm development rights...subject to competitive bidding” are aimed at “keeping in check the more than 100 billion yuan (US$15.6 billion) deficit in a state-run renewable energy fund, which is financed by a surcharge on power users’ bills,” the SCMP points out.The U.S. looks to be a loser: “Slower demand in China will increase competition, exacerbate a panel glut and drag down prices. That will mirror the conditions that prompted some struggling U.S. panel makers to seek tariffs last year,” Bloomberg writes(paywall).But India looks to be a winner: The country, which Quartz notes imports 90 percent of its panels and is building some of the world’s largest solar parks, will greatly benefit from falling prices of Chinese panels. Bloomberg New Energy Finance forecasts(paywall) “module prices to drop 34 percent this year and a further 10 percent to 15 percent in 2019,” as the Chinese policy is expected to add to a supply surplus that was already building.

—Lucas Niewenhuis

4. Three things

Xi Jinping plans to award “friendship medals” to foreigners who have contributed to China’s objectives overseas — see Xinhua report (in Chinese). Director of the China Policy Institute at the University of Nottingham Jonathan Sullivan tweeted: “Long history of seeking endorsement of Chinese greatness through conferral of ‘foreign friendship.’”Use WeChat to cross Hong Kong-China border: Tencent announced a new service in cooperation with the government for a “biometric data-based E-card scheme” that would allow mainland and Hong Kong citizens to travel between the two regions, Reuters reports.Hackers: DEF CON, the hacking convention that began in Las Vegas in 1993, recently hosted its first event in China. Kevin Collier of BuzzFeed reported on the event: China has some of the best hackers in the world. Its government wants to keep them there.On Tuesday, June 19, Kaiser and Jeremy will record a Sinica Podcast in front of a live audience with Kevin and Priscilla Moriuchi former East Asia and Pacific cyber threat specialist for the NSA. Click here to buy your tickets

—Lucy Best

VIDEO OF THE DAY

Firefighters rescued 20 dogs and cats from pet store fire

Firefighters rescued about 20 dogs and cats from a local pet store in flames in Hefei, Anhui Province, on May 31.

TODAY ON SUPCHINA

Sinica Podcast: China’s security picture, from North Korea to the South China Sea

In this week’s episode of Sinica, Kaiser chats with Bonnie Glaser in a crossover show that will appear both on Sinica and on the ChinaPower Podcast from CSIS, the Center for Strategic and International Studies. Bonnie is a well-known specialist on China’s security issues, and this week, we tour several locations where the Chinese military has evolving plans: the Korean Peninsula, Japan, the South China Sea, and Taiwan.

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

From propaganda to pollution to smartphones: A history of gaokao essay questions

No other assessment test has been taken by more people than the gaokao, China’s national college entrance examination. As the gaokao essay prompts often reflect the Chinese government’s attitudes, it would not be a stretch to say that there’s a parallel between the evolution of gaokao essay questions and how the country itself has changed over the past 40 years. Let's take a look.

TODAY’S NEWS ELSEWHERE ON THE WEB:

BUSINESS AND TECH:

Push and pull on the Belt and Road
EU warns UK-centered China import scam may shift to Europe's 'Silk Road' / Reuters
“European Union anti-fraud investigators suspect Greece and Hungary may have become the main EU centers of a multi-million-euro scam involving imports of Chinese clothing and footwear that uses the infrastructure of China’s new ‘Silk Road.’”
Sri Lanka pushes forward plans for Chinese investment zone in controversial port / Reuters via SCMP
“Sri Lanka’s cabinet has approved a proposal for Singapore-based urban planning consultancy Surbana Jurong, owned by state investor Temasek Holdings, to draw up a plan for a Chinese investment zone in the country’s southern port city of Hambantota, a government spokesman said on Wednesday. The move comes after a delay of more than 18 months.”
China eyes role as world’s power supplier / FT (paywall)
“Chinese companies have announced investments of $102bn in building or acquiring power transmission infrastructure across 83 projects in Latin America, Africa, Europe and beyond over the past five years, according to RWR. Adding in loans from Chinese institutions for overseas power grid investments brings the total to $123bn.”Bike sharing
As bike rentals cool, Ofo chooses to stand alone / TechNode
“A cooling of the availability of capital, intense competition, uncertain profit models, a saturating market, and tightening regulation all contributed to swift market consolidation.”The rise of Douyin
Short videos, big ambitions / Caixin (paywall)
“Douyin, launched in 2016, overtakes 5-year-old Kuaishou as top video app in China.” How did that happen?Crackdown on capital outflows — ATM cards
Macau money chiefs order UnionPay clampdown over illicit mainland China cash fears / SCMP
“A new crackdown on UnionPay cards has been launched by Macau monetary chiefs, as fresh concerns surface over illicit capital flows out of mainland China.”Alibaba
Big tech listings in China loom after final rules released / Bloomberg (paywall)
“China published final rules of a trial program for securities that would allow companies such as Alibaba Group Holding Ltd. to list on domestic exchanges, a major step in the country’s push to bring some of the world’s biggest technology firms back home.”
Exclusive: Alibaba gets into farming – without getting its hands dirty / Tech in Asia
“From their smartphones, farmers can now monitor whether bugs are munching away on their apple fields, or if grapes are ready to be picked.”Luxury boom
Luxury sales are rebounding in China. Just not in stores. / NYT (paywall)
“After several years of slumber, China’s luxury market is finally returning to growth.”Blockchain, a triad boss, and Cambodia: What could possibly go wrong?
Former Macau triad boss ‘Broken Tooth’ Wan Kuok-koi to use blockchain and overseas Chinese links in Cambodia venture / SCMPElectric scooters — Chinese design and manufacturing 
Letter: Electric scooters aren’t selfies, they’re selfie sticks / The Atlantic
“These electric scooters [in San Francisco] reflect the growing influence of Chinese manufacturing on our global urban environment. Many of the electric scooters seem to be rebranded Xiaomi products, and they are part of the larger global phenomenon of dockless transport reshaping urban life.”

POLITICS AND CURRENT AFFAIRS:

Mystery illness in U.S. Guangzhou consulate
China pledges to investigate fears of sonic attacks on U.S. diplomats / NYT (paywall)
“China said on Thursday that it is prepared to help get to the bottom of a mysterious illness that has sickened Americans working at the United States Consulate in the southern part of the country and led to the evacuation of a number of diplomats this week.”
A diplomat's mysterious illness could jeopardize China's relationship with the US / Washington Post
More US gov’t staff evacuated from Guangzhou, China over mystery illness / AFP via HKFP
“The department said Wednesday that ‘a number of individuals’ were sent to the United States for further evaluation following initial screenings.”U.S. and Taiwan military ties
U.S. bill calls for Pentagon to send troops to take part in Taiwan military drills / SCMP
“The U.S. Senate Armed Services Committee has passed a draft bill calling for American troops to take part in Taiwan’s Han Kuang exercise — the island’s most important annual war games — in another move that is expected to provoke Beijing.”
Taiwanese think tank floats South China Sea base plan for U.S. troops / SCMP
An “unnamed pro-independence think tank” has suggested through Taiwanese media that “Washington could benefit from stationing troops on Taiping as it continued to face off with Beijing over the South China Sea.” Taiping is part of the Spratly chain of islands, and though it is controlled by Taiwan, an “international arbitration tribunal has ruled that it is merely a land formation over which no claimants are entitled to claim sovereignty.”North Korea: Singapore summit
China may send fighter jet escort for Kim Jong-un when he flies to Singapore to meet Trump / SCMPCensorship
China fires, probes top newspaper chief who 'opposed censorship' / Radio Free Asia
“The ruling Chinese Communist Party has expelled its Party Secretary at the Qinghai Daily News newspaper in the northwestern province of Qinghai for ‘disciplinary violations,’ the Party's disciplinary arm announced on Wednesday…’He opposed censorship and illegally kept secret Party work documents in his possession,’ the CCDI said”Rights of prisoners and citizens in Hong Kong 
Yip Kai-foon inquest finds Hong Kong prisoners should have access to Chinese medicine / SCMP
Hong Kong’s ‘“King of Thieves,” the AK-47 wielding jewelry store robber Yip Kai-foon 叶继欢, died of cancer while serving a 41-year jail term last year, but today a Hong Kong inquest posthumously approved his demand for the right to be treated with traditional Chinese medicine (TCM).
Hong Kong activist Joshua Wong seeks compensation after being ‘dragged’ into police van and cuffed at protest / Hong Kong Free Press
“Activist Joshua Wong 黄之锋 was ‘dragged and pulled’ onto a police van and handcuffed at a protest last year during Chinese President Xi Jinping’s visit, the Small Claims Tribunal heard on Thursday. Wong is suing the Commissioner of Police for assault and false imprisonment on the grounds that it was unlawful for the police officers to handcuff him without first placing him under arrest.”Top official praises Taiwan for not having a Cultural Revolution
Top Chinese Communist Party cadre criticizes Cultural Revolution for damage to tradition / SCMP
“The Cultural Revolution eliminated a large part of both the essence and the dregs of traditional culture on the mainland,” said Wang Yang 汪洋, chairman of the Chinese People’s Political Consultative Conference. He added, “But Taiwan preserved it well.”Russia — Putin’s heading to Beijing
Putin state visit to China reflects strengthening of Sino-Russia ties amid US pressure / SCMP
“Just a month after beginning his new term in office, Russian President Vladimir Putin is heading to China for a state visit, underscoring how mounting pressure from the United States is drawing the two countries increasingly close.”Chinese warships in Africa
28th Chinese naval escort taskforce visits Ghana / Chinese Ministry of Defence
“The 28th Chinese naval escort taskforce consisting of the guided-missile frigates Yancheng and Weifang and the comprehensive supply ship Taihu arrived at the Port of Tema of Ghana on June 4 for a four-day friendly visit. This is the first time for the Chinese naval ships to visit Ghana.”South China Sea
Vietnamese see special economic zones as assault from China / SCMP
Opinion: Trump's Indo-Pacific strategy: Where's the beef? / Washington PostChina and Europe
MERICS Interview: Documenting China’s influence in Europe / China Digital Times
China's love affair with oak a mixed blessing for France / SCMP

SOCIETY AND CULTURE:

Contemporary music from Shanghai
Modernizing the accordion / Neocha
A short video, essay, and photo gallery about independent accordion improv musician CK, or Chen Kai 陈楷.On-demand nurses
Apps that let users hire nurses for home visits spark heated debate in China / Abacus
“From rental pets to 24-hour couriers, it seems like you can hire pretty much anything through apps these days. Now there’s one more: home nurses.”Chinese food in Canada
The best Asian food in North America? Try British Columbia / NYT (paywall)
“With a robust immigrant population and access to fresh seafood and produce, Richmond, B.C., has become a one-stop paradise for lovers of Asian food.”Confronting mortality 
Taboos make it hard to discuss mortality in China / Economist (paywall)
“People often feel that it is their filial duty to ensure that sick parents receive curative treatment, even when doctors advise that there is no chance of recovery and the treatment will be painful. Applications to build hospices are sometimes challenged by local residents who resent the presence of death on their doorsteps.”
Will-writing is becoming more popular in China / Economist (paywall)
China has no tradition of will writing, but it is becoming more popular as the first beneficiaries of China’s reform and opening up enter their old age. But, the Economist says, “the rich worry about recording their wealth.”551 million-year-old footprints
Scientists discover 'oldest footprints on Earth' in southern China dating back 550 million years / Independent
“They potentially date to 10 million years before the Cambrian Explosion, when arthropod and other animal life rapidly flourished, and when creatures with pairs of legs capable of leaving such footprints were thought to have arisen.”Civil society — support for the marginalized
Disabled speakers offer Shandong prisoners inspiration, empathy / Sixth Tone
“Somehow, I can feel a kind of connection between disabled people and prisoners: Both of us are vulnerable groups living in fear of discrimination and suffering from inequality.”Acts of heroism
Chinese Spider-Man saves boy, 2, hanging from fifth-floor window / SCMP
“A former soldier scaled a building to save a two-year-old boy dangling from the grille of a fifth-floor window in central China, in a scene reminiscent of the recent ‘Spider-Man’ rescue in Paris.”

PHOTO OF THE DAY

Prada and the recycler

A man carting materials to be recycled on a three-wheeled bike pauses in front of a Prada store in Beijing. Photo taken by Naomi Xu Elegant.

View on SupChina View all photos

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