The Sinocism China Newsletter – October 12, 2016

Bill Bishop , October 13, 2016 9:31am


1. Xi stresses CPC leadership of state-owned enterprises – Xinhua President Xi Jinping stressed the Communist Party of China’s (CPC) unswerving leadership over state-owned enterprises (SOEs) during a national meeting on building the role of the Party within SOEs held here from Monday to Tuesday. Efforts should be made to strengthen and improve Party leadership, as well as to build the role of the Party in SOEs to make them the most trustworthy and reliable forces of the CPC and the state, said Xi, who is also general secretary of the CPC Central Committee. SOEs should also become important forces to implement decisions of the CPC Central Committee, the new development concept, deepened reform, major strategies such as the “going out” strategies and the Belt and Road Initiative, as well as to enhance overall national power, economic and social development and people’s wellbeing, Xi added. The president urged deepening the reform of SOEs, improving management and stepping up supervision of state assets to make SOEs stronger, bigger and better.// Tuesday CCTV Evening News report on it, top 12:30 of the broadcast…seems more like Marxist reform than market reform…

Related: 习近平在全国国有企业党的建设工作会议上强调:坚持党对国企的领导不动摇-新华网 Xi speech at SOE Party construction work conference

2. Xi Jinping May Delay Picking China’s Next Leader, Stoking Speculation – The New York Times Predicting what happens depends on “whether or not you think the de facto rules and norms of elite succession will hold,” said Evan S. Medeiros, the former senior director for Asian affairs in the National Security Council under President Obama. “If not, predicting outcomes is a crapshoot.”…Even if he delays picking a successor, that does not mean he is determined to stay on as leader past 2022, when he will be 69, said Christopher K. Johnson, a senior China analyst at the Center for Strategic and International Studies in Washington. “The only thing he’s focused on right now is next fall,” Mr. Johnson said. “If he gets his way next fall, which I think would mean they don’t signal the successor, that doesn’t then mean he’s already decided to stay on forever.”  // and at the the start of the 17th Congress five year period it was not a done deal that Xi would be Hu Jintao’s successor, though it was obvious he was very much in the running…seeing lots of what I think is very premature speculation, doubt anyone in Beijing even knows the likely outcome, western voices I trust the most on this subject are those of Chris Buckley and Chris Johnson.

Related: CPC to convene plenum from Oct. 24 to 27 – Xinhua The cadre Cultural Revolution continues, and may even kick up a notch  //  The sixth plenary session of the 18th Communist Party of China (CPC) Central Committee will be held here from Oct. 24 to 27, the Political Bureau of the CPC Central Committee announced on Tuesday. At a meeting on Tuesday, the Political Bureau members heard reports on the drafting of two documents to be submitted to the plenum for deliberation, namely, the norms of political life within the Party under the new situation and a revision to an intra-Party supervision regulation, according to the announcement. The meeting was presided over by Xi Jinping, general secretary of the CPC Central Committee. History shows that as a Marxist party, the CPC must be politically conscious and adopt a serious and meticulous approach to intra-Party political life, it said. “To strengthen and standardize intra-Party political life, the Party Constitution must be followed, and the CPC’s political, ideological, organizational and mass lines be upheld,” the statement read. Efforts should be made to enhance the Party’s capability to purify, improve and renovate itself, to resist corruption and risk, and prevent itself from degeneration, according to the statement.

Related: CCDI warns of weakening of Party leadership after inspections – Xinhua The Central Commission for Discipline Inspection (CCDI) of the Communist Party of China (CPC) kicked off a new round of inspections in July covering Tianjin Municipality and the provinces of Jiangxi, Henan and Hubei, all of which had been inspected previously. This round of inspections uncovered major problems plaguing the regions, including the weakening of the CPC leadership, violations in personnel selection and placement, and corruption, according to the findings released by the CCDI.

Related: 大型专题片《永远在路上》即将播出——中纪委视频页面——中央纪委监察部网站 中央纪委宣传部、中央电视台联合制作八集专题片《永远在路上》将于10月17日10月25日播出。首播时间:CCTV-1 20:00;重播时间:CCTV新闻当晚21:30、次日13:00

3. Why Philippine President Rodrigo Duterte Distrusts The U.S. : Parallels : NPR The Meiring case is one reason for Duterte’s mistrust of the U.S. — the main reason, according to most — but not the only one. His sense of grievance goes back even further into the past, to history dating back to the U.S. colonial rule of the Philippines from 1898 to 1946. “He’s not against the American people. But more the policy,” says Davao journalist Editha Caduaya, who has known Duterte for decades. He is angry, she says, about “the injustice done to the Moros,” the Muslims of Mindanao. Why? “Because his mother has roots from the Muslim settlers of Mindanao.”  // could be fairly easy pickings for a skillful and cashed up China, Duterte may help Beijing win the South China Sea without firing another shot

Related: US, EU investors put Philippine plans on hold | The Philippine Star Investors from the US and Europe are now having second thoughts on the Philippines, with several manufacturing and business process outsourcing (BPO) companies opting to put their investments on hold while some are choosing to take them elsewhere. A number of trade and investment missions to the country are likewise being cancelled, officials from US and European business groups in the Philippines told The STAR.  // expect China to fill the void

Related: The Philippine pivot: Duterte readies huge business delegation for Beijing visit | Reuters About 250 Philippine business executives will visit Beijing with President Rodrigo Duterte next week as he puts aside years of hostility to seek a new partnership with China at a time when tensions between Manila and its traditional ally, the United States, are mounting. There has been no announcement about the delegation, but business groups and government officials said registration to join Duterte on his Oct. 19-21 visit had been oversubscribed.

Related: Behind Duterte’s Bluster, a Philippine Shift Away From the U.S. – The New York Times But beyond the blasts of hyperbole — he recently compared himself to Hitler — lies a real and potentially historic shift in Philippines foreign policy. In public statements and interviews during the past week, Mr. Duterte’s top foreign policy advisers said he was seeking to break the Philippines out of the United States’ orbit and signal to China that he is ready to negotiate closer ties after years of wrangling over its military presence in the South China Sea. The move is a radical departure for a country that has historically been the most dependable American ally in Southeast Asia, and could undermine Mr. Obama’s so-called pivot to Asia, a keystone of his foreign policy. That strategy depends on American allies to counter China’s increasing power in the region.

Related: Philippines to open giant rehab center soon, funded by China tycoon | Reuters The center, located in a military camp north of the capital, Manila, was paid for by Chinese philanthropist and real estate developer Huang Rulun, whose net worth Forbes magazine has estimated at $3.9 billion. It will be built using 75 shipping containers of material imported from China, said Ubial. The government plans to build four more mega treatment and rehabilitation facilities elsewhere in the country and many donors, including Chinese, have come forward, she added.

4. Xi stresses Internet innovation, security – Xinhua Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee, has called for more independent innovation in the Internet and information technology, as well as enhanced cyberspace security. Xi made the remarks Sunday afternoon at a study session attended by members of the Political Bureau of the CPC Central Committee. He called for the construction of a safe and controllable information technology system, and for major breakthroughs in the fields of high-performance computing, mobile communication, quantum communication, core chips and operating systems. At the meeting, Xi said the digital economy should play a greater role in pushing forward economic development and that the country’s Internet management and cyberspace security defense should also be enhanced. The Internet and information technology should be better used to advance social governance, Xi said, calling for a greater voice from China in setting the rules of the Internet, as well as greater efforts to build China into an Internet power. At the session, Wei Shaojun, director of the Institute of Microelectronics at Tsinghua University, gave a lecture on China’s strategy on developing Internet power. Noting that the Internet and information technology are developing rapidly and increasingly integrated with society, Xi warned of the gap between China and the world’s frontiers in relevant fields. // CCTV Evening News on the meeting 习近平在中共中央政治局第三十六次集体学习时强调 加快推进网络信息技术自主创新 朝着建设网络强国目标不懈努力 “deglobalizing” of the PRC IT stack remains a key goal, don’t expect foreign lobbying to change it in any substantive way

Related: 第三届世界互联网大会11月16日开幕 习近平将发表视频讲话-中新网 Wuzhen Internet Conference to be held 11.16, Xi will not attend but will give a speech by video. Which foreign Internet execustives will attend? Last year Linkedin’s Reid Hoffman was the big laowai get, as evidenced by his prominent positioning in various propaganda around the conference

5. Xi urges strengthened, innovative social governance for “safe China” – Xinhua Chinese President Xi Jinping has called for strengthened and innovative social governance, stressing the need to improve systems to prevent and forecast risk. Xi, general secretary of the Communist Party of China (CPC) Central Committee, made the remarks in a prepared statement about the country’s social management that was released Wednesday. The statement was delivered by Meng Jianzhu, head of the Commission for Political and Legal Affairs of the CPC Central Committee, at a national conference on public security governance held on October 10 and 11. “More efforts should be made to build a safe China at a higher level and further enhance people’s sense of security,” Xi said. // Two Wednesday CCTV Evening News reports on this: 习近平就加强和创新社会治理作出重要指示强调 完善中国特色社会主义社会治理体系 努力建设更高水平的平安中国  and 全国社会治安综合治理创新工作会议召开 so does forecasting risk mean a Minority Report approach?

Related: Snooping in the Bathroom to Assess Credit Risk in China – The New York Times Extensive consumer databases are not in place for lenders to check, but companies are scrambling to crack the credit code.  //  will this data also be available to the relevant organs for social governance (a rhetorical question I would guess…)

6. Hollywood’s dangerous obsession with China – LA Times China is something new for filmmakers and the U.S. government — a nation of grave concern to us that we also want to sell to and cooperate with. If a free culture is essential to our national well-being, it matters that the U.S. is surrendering its ability to respond to this historic challenge through film. Congress is right to worry that Hollywood’s global business model has implications for national security. The film industry needs to prove it is protecting creative freedom in the face of Chinese pressures and temptations, before the invitations arrive from Capitol Hill. Robert Daly is director of the Kissinger Institute on China and the United States at the Wilson Center in Washington. He was a cultural exchange officer at the U.S. Embassy in Beijing, and later an actor, producer and program host on Chinese TV. //  Robert Daly a very knowledgeable and reasonable person, not one prone to “reds under the bed” scaremongering, so this is a noteworthy op-ed…momentum seems to be building for a backlash against PRC forays in US media

Related: Why DC Started Caring About Dalian Wanda Group and China in Hollywood-TheWrap as members of Congress have plenty of issues to occupy their minds and public pronouncements aside from Chinese investments in entertainment companies, one instrumental factor in the recent string of fusillades from Capitol Hill has been a campaign by Richard Berman, the president of D.C. lobbying firm Berman & Co.

Related:  Jack Ma, Spielberg Strike Deal to Bring Hollywood to China – Bloomberg Fellow Chinese billionaire Wang Jianlin’s Dalian Wanda Group Co. has been among the most aggressive in its overtures. It bought “Jurassic World” co-producer Legendary Entertainment and has agreed to co-finance and market releases in China for studios including Sony Pictures. Wanda, now said to be eyeing Golden Globes show-runner Dick Clark Productions, also runs the world’s biggest chain of movie theaters after buying AMC Entertainment. Other Chinese players investing in studios include Fosun Group and Huayi Brothers. But the rapid pace of acquisitions has some in Washington spooked. Lawmakers have called for an overhaul of regulations to give the U.S. greater ability to scrutinize and block Chinese investment in U.S. media, as well as force lobbyists acting for the Chinese to register their interests.

Related: Omission of Tibet in ‘Doctor Strange’ Pays Off With November China Release – China Film Insider In the original Marvel comics, Swinton’s character, the Ancient One, is portrayed as a mystical male Tibetan mentor for Cumberbatch’s character Stephen Strange. But in the upcoming film, the character’s ethnicity has been changed to Celtic and gender to a woman, prompting some to accuse Marvel of “whitewashing” the character. Protests gained steam earlier this year when Doctor Strange screenwriter C Robert Cargill argued on the Double Toasted Podcast that Tilda Swinton was cast partly as a political move to prevent the Chinese government from banning the film.

Related: U.S. Lawmakers Urge Greater Scrutiny of Chinese Corporate Purchases – NYTimes In a list of nine questions at the end of the letter, the signers also asked whether the committee sufficiently reviews Chinese angel or venture capital funds being established in the United States, as well as Chinese investment in technology accelerators and regulators.

7. New Restrictions Show Beijing’s Growing Concerns of Property Bubble-Caixin Last week’s long National Day holiday was a turbulent time for China’s overheated real estate market, as a growing number of cities rolled out new restrictions to cool prices during a time that’s traditionally a prime season for home sales. The next major signal will come in December at the Central Economic Work Conference, the Communist Party’s top economic agenda-setting meeting, which could set the tone for how Beijing will manage the housing market in the year ahead. That meeting could show how housing inventories will be reduced and could stress more localized policies to squash an asset bubble and channel funds back into the real economy. // so where will the liquidity go now? back to stocks? to bitcoin?

Related: China’s Regulators Plan Tighter Control of Funds Into Property – Bloomberg Authorities including the central bank, the China Banking Regulatory Commission and the China Securities Regulatory Commission aim to tighten control on speculative real-estate investments and money involved in land transactions, said the people, who asked not to be identified because the information isn’t public. The people didn’t provide further details.

Related: 央媒:当公司主业收益被炒房抛在身后,一切经济转型都是空谈_地产界_澎湃新闻-The Paper 抛开上市公司纷纷卖房传递了什么样的楼市信号不谈,这一现象背后所透露出的当前中国经济最为扭曲的一面,就足以值得我们警惕:当其主业产生的收益被“炒房”远远抛在身后时,一切经济转型都是空谈。一方面,“炒房”带来了超高收益,会诱导越来越多的社会资金从实体经济中抽离出来,流向房地产市场,导致资金“脱实入房”的出现,进一步恶化实体经济的发展空间。另一方面,房地产价格的高涨,会进一步抬高个人创业、企业创新转型的租金以及其他成本,抑制整个经济体的创新发展动力。实际上,在超高的投资收益的诱惑下,越来越多的上市公司正在把触角伸向房地产市场。WIND统计数据显示,截至2016年上半年,两市共计有1308家上市公司持有投资性房地产,合计到5950.79亿元,此外,新三板共有521家企业拥有“用以出租或短期出售”的房产,价值合计达117亿元。

8. In search of China’s hidden credit | FT Alphaville Mr Chen estimates that adding hidden credit pushes China’s total debt-to-GDP ratio from 244 per cent to 231 per cent and growth in credit outstanding in the first quarter to 18 per cent from 16 per cent. He writes that “the trajectory (of credit growth when hidden credit is included) … is not very different from the simple sum of private-sector credit (i.e., TSF) and government bonds, and for most purposes that will still be a fine indicator.” Ms Wang broadly agrees. Her adjustment for hidden credit adds about eight percentage points to China’s total debt-to-ratio and raises credit growth to 17 per cent in 2014 and 2015 from 14.6 per cent and 15.2 per cent before the adjustment.

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Bill Bishop

Author and curator of the daily Sinocism newsletter.