Resumption of a Trade War Shakes Up the US Markets

 The Story:

US stocks lost 2.9% of their value Monday, in their worst day of 2019. The Dow Jones Industrial Average dropped by 767.27 points. The fall was widely linked to the latest developments in the ongoing trade war between the US and the People’s Republic of China.

Background:

On June 29 of this year, the leaders of the two countries directly involved in the ‘war’ announced a truce, at a summit of the major industrialized nations (the G20 summit) in Japan. President Trump and President Xi Jinping said that while existing tariffs would remain in place, neither country will add to them “for the time being.” Also, the US agreed to allow US companies to do business with the Chinese tech giant Huawei,  although it is still on the US trade blacklist.

That truce has badly unraveled in the final days of July and the early days of August. The US has officially declared China a currency manipulator, and China has halted all agriculture purchases from the US. Those shots precipitated the stock market plunge Monday.

The Thing to Know:

In March 2018, President Trump tweeted, “Trade wars are good, and easy to win.” Events this year are falsifying that breezy assertion. The truce announced in Osaka has been good for the business climate in both countries, and its end may prove to be a grave misfortune.

 

Korea: How Many Parties in the Talks?

President Trump, North Korean leader Kim Jong Un open to third summit

The Story:

For many decades, US policy with regard to talks about the Korean peninsula was simple: the US would not engage in one-on-one talks with the North Korean government. There would have to be representatives of our ally, South Korea, in the room. Furthermore, since such talks would naturally also include North Korea’s ally, the People’s Republic of China, US policy was in effect a rejection of two-party talks in favor of four-party talks. The Presidency of Donald Trump has decisively broken with this.

The Debate:

On July 30, ten of the candidates for the Presidential nomination of the Democratic Party met in debate, the first half of a two night event. Only hours before, the North had fired off missiles, in violation of UN Security Council resolutions, so naturally the subject of the Trump administration’s policy toward the North was discussed.

The Thing to Know:

Nobody involved in the Democratic debate made a case for insisting on the presence of South Korea (or for four-party talks in general). Representative Ryan made the case that Trump has helped boost the prestige of the northern regime, and he clearly thought this a bad thing, but he gave no indication that a larger number of participants in the talks would have changed his view.

US to put pressure on UK government after leaked Huawei decision

The UK headquarters of Huawei in Reading.

Donald Trump’s administration is expected to put further pressure on the UK to reconsider the decision to allow Chinese telecoms company Huawei to help build parts of the UK’s 5G telecoms network.

The US has arranged for a representative from the state department, which has repeatedly warned of the risks of using Huawei, to give a briefing on Monday.

Robert Strayer, a deputy assistant secretary, who has been at the forefront of anti-Huawei lobbying, argued earlier this month that if countries adopt “risk-based security frameworks” it “will lead inevitably to the banning of Huawei”.

The latest US lobbying comes after the leak of a decision by the normally secret UK National Security Council, which agreed to allow Huawei to supply 5G technology after a contested meeting in which five cabinet members raised objections.

The decision at Tuesday’s NSC meeting was forced through, according to one source, on the casting vote of the prime minister with a formal announcement expected later in the spring once further technical safeguards had been prepared.

But while Downing Street may regard the Huawei decision as final there are signs that it could yet be reversed once Theresa May steps aside, with sources close to Boris Johnson indicating the former foreign secretary could be willing to “look again” at the Huawei approval if he were to become prime minister.

The chancellor, Philip Hammond, was the first minister to publicly confirm that a leak inquiry had started, when asked about Huawei at an Chinese government investment forum in Beijing – and said it needed to be dealt with.

“My understanding from London [is] that an investigation has been announced,” Hammond said. “I think it is very important that we get to the bottom of what happened here.”

On Thursday it emerged that the cabinet secretary, Sir Mark Sedwill, had written to the senior ministers present at the meeting to demand that they and their aides cooperate with the inquiry and state…

Huawei leak highlights collapse of discipline in May’s cabinet

Theresa May

Leaks from deep within Theresa May’s bitterly divided administration have become widespread and common: as one despairing official remarked recently, “this government is a sieve”.

But the revelation of the highly sensitive news that ministers have decided to set aside cybersecurity concerns and involve the Chinese firm Huawei in the creation of Britain’s 5G network is regarded by many as a leak too far.

The decision was taken at the national security council, on which ministers sit alongside officials and members of the security services. The secrecy of its discussions has never before been breached.

A full-scale inquiry is now expected to be launched, but a slew of other briefings and counter-briefings from private meetings in recent weeks and months has not just gone unpunished but become almost unremarkable.

There are several, allied reasons for this pervasive culture of briefing and counter-briefing, which means multiple competing accounts of cabinet meetings are available shortly after ministers walk out of Downing Street.

One is simply the ready availability of instant electronic communication – a string of WhatsApp messages is a lot quicker and more straightforward than the old-fashioned gossip over lunch or in a Westminster bar (though that still happens too, of course).

Another is the historic significance of the issues at stake and the lack of trust on both sides of the Brexit debate, which means all the key players want to ensure their point is heard even if they lost the argument in the room.

There has been a complete breakdown of discipline. Theresa May long ago…

How US–China political tensions are affecting science

US President Donald Trump with Chinese President Xi Jinping in Florida in 2017.Credit: Jim Watson/Getty

Research is becoming increasingly embroiled in ongoing political tensions between the United States and China.

In the latest twist, several US universities are expected this month to announce the actions they have taken against foreign scientists caught breaking rules concerning National Institutes of Health (NIH) funding, according to comments made by agency director Francis Collins to the Senate Appropriations Committee last week.

Meanwhile, Chinese scientists planning to attend conferences or meetings in the United States have told Nature that they are experiencing significant delays in obtaining short-term visas. Those affected include star quantum physicist Jian-Wei Pan, who heads China’s world-leading programme in super-secure quantum communication at the University of Science and Technology of China in Hefei.

Nature investigates the circumstances of the tensions, and the repercussions for scientists and research.

What’s the background?

For several years, the United States has accused China of distorting global trade by offering generous subsidies to its favoured industries and restricting foreign companies’ access to its markets. It also says that Chinese policies are forcing US companies to hand over intellectual property in exchange for access to Chinese markets, and that its government has supported cyber-attacks on companies’ tech secrets.

After several rounds of negotiations to resolve these issues failed, US President Donald Trump started a trade war when he put tariffs on 818 Chinese goods. China followed suit with tariffs on 545 US goods. Further meetings between the two countries have so far failed to strike new trading terms.

How did science get sucked in?

Last August, Collins wrote a letter to the more than 10,000 US institutions that it funds, stating that the agency was concerned that “some foreign entities” were interfering in the funding, research and peer-review of NIH-supported projects.

Then, last week, Collins said that investigations at 55 US universities had found some “egregious” breaches of rules governing the agency’s grants — including grant recipients not disclosing foreign government money or diverting intellectual property from their US institution to other countries such as China. He said that some facility members would probably be sacked as a result.

What about other agencies?

This February, a memo from the Department of Energy (DOE) reportedly said it was banning its employees, contracted scientists and grant recipients from participating in talent recruitment programmes run by the governments of “sensitive” countries, over fears that participants could share government-funded research.

The memo didn’t specifically mention China, but the country has one of the world’s largest talent recruitment programmes, the Thousand Talents Plan, which, since 2008, has prompted thousands of Chinese engineers and scientists, many of whom had moved to the United States, to return to China. Researchers are given prominent positions and generous funding, and some maintain affiliations at institutions in both countries.

A researcher from the DOE’s Office of Science, who requested anonymity because they weren’t authorized to speak to the press, told Nature that the department is now improving its security policies for international collaborations in some research fields.

The US Department of Commerce is also updating rules governing technology exports that could complicate security protocols on a range of research projects. Even under existing rules, conflicts frequently arise for researchers — and the students and postdoctoral researchers involved — when they submit projects for security vetting, says Wayne Mowery, an export-compliance officer at Pennsylvania State University in State College and chair of the Association of University Export Control Officers. Sometimes, Mowery has to tell researchers that their Chinese students might not get clearance.

In such cases, some researchers decide to walk away from the project, and in others, young researchers are told that they cannot participate for security reasons, Mowery says. That creates a problem for the university, given that 30–40% of its international students are Chinese, he adds, and it can also affect recruiting. “If students are told they cannot do cutting-edge research at US institutions, they are…

China’s Communist Party tells its members to celebrate two birthdays: The day they were born, and the day they signed up

xi jinping wine
Chinese President Xi Jinping, who is the head of the Communist Party of China, raises his wine glass in Beijing in September 2014.
  • The Communist Party of China (CPC) is making its members celebrate their “political birthday,” or the day they joined the party.
  • Commemorating “political birthdays” can “fuel, recharge, and supplement” members’ love and loyalty to the party.
  • Celebrations are not like typical birthdays: Members are told to host study groups and discussions on CPC’s politics.
  • Applicants have to go through multiple background screenings, exams, and interviews in order to join the CPC.
  • The CPC’s new “political birthday” directive comes as it ramps up members’ loyalty to the party and its leader, President Xi Jinping.

The Communist Party of China (CPC) is telling its members to celebrate two birthdays a year: The day they were born, and the day they joined the party.

The party’s disciplinary watchdog, the Central Commission for Discipline Inspection (CCDI), told members in a Tuesday notice to start observing their “political birthday” to remind themselves of their pledge to uphold communist principles.

“For ordinary people, there is only one birthday, which is the day of birth,” the CCDI said. “But for Chinese Communist Party members, there are two birthdays. In addition to birthdays, another special birthday is the ‘political birthday.'”

“When members swear by the party’s bright red flag, ‘I volunteer to join the Chinese Communist Party,’ they are making a political choice to firmly believe in communism and making a solemn commitment to hand everything over to the party,” it continued. “Such an important moment in life should be…

Europe-China political unity still far off despite Xi’s nimble diplomacy

  • Mathieu Duchatel writes that Chinese diplomacy worked in Rome with a divided Italy and in Paris with a Franco-German-EU coalition, but the problem of a lack of a political engine for Europe-China cooperation remained unsolved
  • null

    Business is business, and politics set the stage for deals to be concluded – or not. The politics around Chinese President Xi Jinping’s state visit to France were far from auspicious. Beijing has several reasons to dislike the China policy of Emmanuel Macron:

    This, in the language of Chinese foreign policy, amounts to a lack of “strategic trust”.

    But distrust had zero impact on the conclusion of 15 major commercial deals in aeronautics, shipping, wind energy, waste treatment and banking. The two sides plan for the next chapter of their space cooperation, and China’s 2015 embargo on imports of French poultry was lifted.

    Europe brings down the barriers for Xi Jinping in Paris

    China’s decision to order 300 Airbus planes is clearly driven by the growth needs of China’s domestic airlines, but the timing of the announcement of these mega contracts is always highly political. Clearly there was an intention to create a positive atmosphere in Paris and it worked to some extent. It could have been otherwise.

    These commercial deals reflect mutual corporate interests but also a Chinese effort to build trust on this state visit to France.

    French President Emmanuel Macron has been reluctant to sign a memorandum of understanding to take part in China’s “Belt and Road Initiative”. Photo: AP

    But the attention they have received in the media is proportional to the lack of concrete deliverables on the political front.

    From that perspective, Xi’s European tour provides three important lessons on the current state of Europe-China relations.

    First, there is an undeniable acknowledgement by Beijing that mutual economic interests can be pursued outside the framework of the belt and road plan.

    A divided Italian government criticised by its domestic media presented a weak face to China, signed a belt and road memorandum of understanding in an atmosphere of crisis, and got very little reward in return. In contrast, a French government orchestrated a successful visit despite cold politics with China.

    This suggests that countries dealing with China should concentrate their foreign policy resources on…

    China Politics and YOUR Business

    China Spain international lawyers

    With all that is going on with China’s economy and with its trade discussions with the United States and with US tariffs and with the EU’s mounting frustration with China, our China lawyers are finding themselves more often engaged in “big picture” discussions with our clients than ever before. We are constantly getting hit with questions like the following:

    1. What are you seeing in China?
    2. Where do you see things going in China?
    3. What’s going to happen with the tariffs?
    4. Will China ever open up?
    5. Are China’s new foreign investment and IP laws going to change things?

    We are well-trained and well-positioned to answer some of these, such as the one regarding China’s new laws and we write about those. See China’s New Foreign Investment Law and Forced Technology Transfer: Same As it Ever Was and China Approves New Foreign Investment Law to Level Playing Field for Foreign Companies. MEH.

    But when it comes to something like how the winds are blowing with the Chinese government and how those winds will impact foreign companies that do business in China or with China, we love reading the experts who truly focus on these big picture political-economic issues. I mention all this because I was today sent a report from one of our largest Spain clients, entitled China’s 2019 Two Sessions: What It Means for Your Business. Our client had read the report, found it exceedingly helpful, and thought we too would benefit from it. And we have.

    Now before I talk about that article and explain why you should go read it yourself, I am going to indulge in a relatively quick diversion. Yesterday, my law firm had its bi-weekly “international team” meeting. We have one meeting a month at 9:00 a.m. PST so as to make life easier for our lawyers in Spain (at 5 p.m. there) and the other meeting at 5 p.m. PST so as to make life easier for our lawyers in China (at 8:00 a.m. there). One of the things I love discussing…

    Meng Wanzhou’s Arrest and What it Means

    The Story:

    Canadian authorities arrested Meng Wanzhou, the vice chairperson and chief financial officer of giant Chinese tech company Huawei. The arrest, on December 1, 2018, was at the request of the US government, which contends that Meng has conspired “to defraud multiple international institutions” in order to help Iran evade US sanctions.  

    What Comes Next:

    On December 11, Meng was released on bail, in Canada.

    The US now has until the end of January 2019 to submit its formal extradition papers to Canada, laying out the case against her.

    China has arrested three Canadians since Meng’s arrest in what are seen as tit-for-tat cases. One of the three was soon released, the others are still in custody as of this writing.

    The Thing to Know:  

    Whatever the merits of the charges with regard to trading with Iran, or related bank fraud, there is naturally much suspicion that the real position of the US government with regard to Meng is that she serves as a hostage in the ongoing trade disputes with China.


    Blankenship Plays the China Card

    The Trump Postcards: Asia Edition

    The Story: 

    Don Blankenship, the former coal executive and ex-con running in West Virginia for the Republican nomination for a seat in the US Senate, has responded to criticisms from the Senate leadership by trying to tie Senate Majority Leader Mitch McConnell to the People’s Republic of China.

    Key Quotes: 

    Blankenship said, of McConnell, “there’s a lot of connections to some of the brass, if you will, in China,” and he described McConnell’s wife, Secretary of Transportation Elaine Chao, as the daughter of a “wealthy Chineseperson.”

    He also said, “I read in books that people think he [McConnell] is soft on China.”

    This smacks of desperation. The most recent polling shows that Blankenship is falling behind his two main rivals for the nomination.

    Blankenship may be taking this tack in the hope that criticizing the McConnell-Chao power couple will burnish his anti-establishment credentials.

    The Thing to Know:

    Blankenship may be thinking of the wrong ‘China.’ Secretary Chao was born in Taiwan in 1953, the daughter of parents who fled there after the Communist victory on the mainland in 1949. In US political history, being ‘soft on Taiwan’ has never been an accusation with much heft to it.