Last week I noted a flurry of stories in the Western press suggesting Xi Jinping might have “overplayed his hand” in asserting China’s claims to prominence on the global stage and sparring with Donald Trump on trade. This week the flurry flared into a storm.
On Tuesday, the New York Times gave prominent play to Chris Buckley’s analysis of an “erudite jeremiad” by Xu Zhangrun, an influential Chinese intellectual. Xu’s essay seemed to rebuke Xi for (among other things) exaggerating China’s military and technological prowess, stifling personal liberties, and attempting to resurrect the “cult of personality” rejected by China’s ruling elite after the death of Mao Zedong. On Friday, my former Washington Post colleague John Pomfret weighed in with an essay of his own describing China as gripped by an “overwhelming feeling of unease“—about the slowing economy, recurring corruption scandals, rampant destruction of the environment and a host of other challenges. Pomfret, also quoting at length from Xu, noted that many in China blame Xi for the nation’s malaise.
Common to many of the reassessments is the idea that Xi has fostered a spirit of reckless “triumphalism,” and bears personal responsibility for misreading Trump’s resolve on trade issues—thereby bungling relations with China’s most important trade partner. In the Financial Times Tom Mitchell discerns a “growing chorus of soto voce criticism” that Xi should not have “casually discarded” former Chinese leader Deng Xiaoping’s policy of seeking to “hide China’s brightness.” In today’s Guardian, Lily Kuo ponders “cracks” in Xi’s aura of invincibility. On Bloomberg TV, Richard McGregor, a senior fellow at the Lowy Institute in Sydney, mused dryly that “we might have reached peak Xi Jinping.”
That would be an extraordinary shift in global sentiment. In the Western press, Xi has been variously described as “president for life,” “China’s modern Mao,” “the chairman of everything” and (my personal favorite) “Xi who must be obeyed.” Until only a few weeks ago, the conventional wisdom on Xi—the one thing that any self-respecting “Washington insider” could tell you about him at a cocktail party—was that the Chinese leader had an iron grip on power and, unlike Trump, didn’t need to worry about getting reelected. Pomfret faults Trump critics for transforming China into a rhetorical fantasyland, “a place with ever-increasing power, graphs that always go up and a permanently stable political system, in contrast to the failing United States.”
The key question, of course, is whether the morphing global Zeitgeist bears any correlation to machinations inside Zhongnanhai. Bill Bishop at Sinocism suggests not much. “Color me skeptical,” he writes, “that Xu’s letter will do anything other than lead to investigations of and crackdown on anyone associated with it.”
Financial Times columnist Martin Wolf, channeling Sean Connery’s “Chicago Way” speech in The Untouchables, argues that, far from trying to make peace, Xi should hit Trump with everything he’s got, tripling down on retaliatory tariffs and sticking American firms with investment and regulatory restrictions. Beijing’s announcement Friday that it has targeted an additional $60 billion worth of U.S. goods for tariffs suggests Xi intends to do just that. If nothing else, it now seems clear the two sides are digging in for a protracted standoff. Indeed, if Xi is battling perceptions of weakness, and if there is any truth to rumors that his domestic political position is more precarious than previously understood, perhaps that leaves him less willing to offer trade concessions rather than more.
More China news below.
Economy and Trade
Bad Apple. Apple has been criticized by state media for failing to curtail the spread of illegal content through its software and services. Five media outlets have panned the Californian icon this week, including state broadcaster CCTV, which ran a half-hour special report on Apple’s shortcomings. The main complaints are that Apple allows gambling apps to feature on the App Store and permits spam to be sent through iMessage. An analyst at Canalys said the criticisms should be viewed as part of the ongoing trade war with the U.S. – a warning to America that its darling tech companies aren’t safe. Wall Street Journal
Pinduoduo pinched. Things have turned sour for social e-commerce app Pinduoduo after its celebrated debut on NASDAQ just last week. On August 1 Chinese regulators said they were investigating the firm for selling counterfeit goods, sending stocks into a slump that wiped out nearly $9 billion of market value. Six U.S. law firms are also investigating whether Pinduoduo issued misleading information in its IPO filing, threatening the possibility of bringing class action law suits against the company on behalf of its new investors. Caixin Global
Tightening the belt. Pakistan is likely to seek a $12 billion bailout from the IMF, a request that the U.S. has objected to, believing the money will be used to help pay off Chinese creditors. Pakistan has been a major target of China’s Belt and Road Initiative (BRI), receiving some $62 billion in loans and investments, despite international observers warning that it was diving into a debt trap. The risk attached to China’s BRI was highlighted earlier this year when Sri Lanka handed over a strategic port on a 99-year lease to China in order to pay back its debt. This week, Myanmar scaled back a China-funded port project over debt concerns. Financial Times
Innovation and Tech
A Starbucks on every app. Starbucks has partnered with Alibaba to expand its digital presence and provide delivery services. The delivery service, powered by Ele.me, will initially be available from 150 stores across Shanghai and Beijing but will be expanded to 2,000 stores by the end of the year. As for its digital mark, CEO Kevin Johnson said, “We’re going to integrate a Starbucks virtual store into all of the Alibaba Group properties,” essentially meaning that a Starbucks order feature will sit inside apps like AliPay, Hema or Taobao. CNBC
Apple takes bronze. Huawei, China’s number one phone brand, surpassed Apple in the second quarter to become the world’s second largest smartphone manufacturer by sales, settling in behind Samsung. Huawei shipped 54.2 million phones in the quarter, up 41% from last year, while Apple sold 41.3 million, up just 1%. It is the first time in seven years that Samsung and Apple have been separated from the top two positions. Huawei’s growth is especially impressive since the brand has been unable to get a grip on the U.S. market, where it is viewed as a potential security threat. The Guardian
Searching… Google is reportedly seeking to re-enter the Chinese search engine market with an Android app designed especially for China. Google withdrew its search engine from China in 2010 because of the state’s censorship practices, but anonymous sources have said its new search app will adhere to China’s standards and filter out websites and content backlisted by the authorities. The news has already been criticized by human rights activists. This isn’t the first time Google has been rumored to mull a return to China – where it still runs services besides its search engine. After the rumors emerged this week, state-owned China Securities Daily said “relevant departments” had refuted the claims. A further report claims Google is also developing a censored news aggregator app for China, where it would compete with local champion Toutiao. The Intercept
Banking on blockchain. The Agricultural Bank of China (ABC) has issued its first loan using blockchain technology, funding a farmer $300,000 to purchase tea and taking a plot of land as collateral. ABC, one of China’s Big Four banks, used a distributed ledger to record the transaction enlisting other banks as “node partners” to verify the exchange. Despite its heavy crackdown on cryptocurrencies and digital exchanges, China continues to promote research into blockchain’s alternative applications. Besides ABC, twelve publicly listed banks have utilized blockchain tech in the last year. Interestingly, this particular blockchain loan was issued by a branch in Guizhou, a province being developed as China’s hub for Big Data. Asia Times
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Politics and Policy
Aussie rules. China will take part in upcoming naval exercises hosted by Australia, despite the strained relations between the two states. Over the past year, Canberra has frequently accused Beijing of attempting to intervene in its domestic politics and, as a result, passed a new counter espionage law. The U.S., which uninvited China from its own naval war games earlier this year due to disputes in the South China Sea, will also take part in Australia’s war games this month. Reuters
Censorship and corruption. Lu Wei, the former head of China’s online regulator, the Cyberspace Administration of China, was formally charged with corruption on Monday. Lu, once the overseer of China’s online censorship and thought to have been one of President Xi Jinping’s favored allies, has had a tremendous fall from grace, beginning in 2016 when he was suddenly removed from his position at the top of the CAC. His status was left on hold until November last year when he was officially placed under investigation, then in February he was expelled from the Communist Party and lambasted as “shameless” – a peculiarly strong denunciation. As Lu’s status has declined, former associates of Xi Jinping have seen their own positions rise. South China Morning Post