CEO Daily: Saturday, July 8, 2017

July 8, 2017, 12:31 PM UTC

Good morning.

Donald Trump is scheduled to meet with Chinese president Xi Jinping today on the sidelines of the G20 summit in Hamburg, Germany. For all the hoopla about Trump’s Friday face-off with Russia’s Vladimir Putin, the stakes of today’s meeting are much higher.

This will be Trump’s second meeting with the Chinese leader. Their first, held in April at Trump’s resort in Mar-a-lago, Florida, ended with unexpected affirmations of bonhomie. “We had great chemistry,” Trump boasted after that encounter. “I liked him and he liked me a lot.” But the chemistry this time may prove combustible.

Over the past two weeks, Trump has signaled his growing exasperation with Xi for China’s failure to pressure North Korean strongman Kim Jong-un to abandon his quest to develop nuclear missiles capable of striking the United States. The first hint of trouble came in a backhanded Trump tweet: “While I greatly appreciate the efforts of President Xi & China to help with North Korea, it has not worked out. At least I know China tried!”

Twits followed tweets. Over the past week the U.S. has slapped sanctions on the China-based Bank of Dandong for helping North Korea to finance its weapons programs; announced $1.4 billion in arms sales to Taiwan; and conducted “freedom-of-navigation operations” within 12 nautical miles of Triton, an island in the South China Sea that is occupied by China but claimed by Vietnam. The State Department also placed China on its global list of the worst offenders in human trafficking, and senior U.S. officials renewed trade threats against Beijing including steep tariffs on Chinese steel imports.

China expressed “outrage” at the arms sales to Taiwan, but mostly held its fire. Not so Kim Jong-un. On July 4, the Dear Leader supervised the launch of Pyongyang’s first intercontinental ballistic missile, a weapon experts say demonstrates North Korea ability to lob nukes as far as Alaska. Kim described the missile test as an Independence Day “gift” for the “American bastards.”

Suddenly the Trump – Xi tryst looks as fleeting as a Taylor Swift fling. “Where did the bromance go?” lamented Hong Kong’s South China Morning Post. “The surprise is not that the honeymoon has come to an end but that there was ever one at all,” tsked the Economist.

Among global pundits there’s an emerging consensus that the relationship was “doomed” from the start because of “illusions” on all sides. Huang Jing, an expert at the National University of Singapore, says Xi was “rather naive” to imagine he could mollify Trump with minor trade concessions and personal charm. He thinks “Trump is a weak and embattled leader” beholden to conservatives who will crucify him if he goes soft on China.

Others fault Trump for imagining he could prod Xi to risk destabilizing an unpredictable neighbor just as the Communist Party is preparing for a crucial meeting to pick its next generation of leaders. Eurasia Group’s Evan Medeiros says Xi “can’t don’t anything, commit to anything, that could create a political vulnerability for him” ahead of fall’s 19th party congress.

Some say Trump was doubly foolish to assume Xi had any real leverage over Kim in the first place. Many China-based global executives share the view of Paul Haenle, director of the Carnegie-Tsinghua Center in Beijing, who argues Trump’s decision to make North Korea the “singular focus” of U.S.-China relations has proved “naive and ineffectual.”

As the New Yorker’s Evan Osnos puts it, both sides have been operating on different wavelengths, talking to each other but not really communicating—a phenomenon the Chinese describe as “a chicken talking to a duck.”

So what now? US secretary of state Rex Tillerson insisted yesterday that Trump has “not given up hope” on Beijing. He acknowledged Chinese efforts to convince North Korea to abandon its nuclear program had been “uneven” but stressed that last week’s sanctions “certainly got [China’s] attention.” New York Times columnist Bret Stephens makes a good case for why Trump’s new get-tough policy with China might actually be “on the right track.”

We’ll see. But the outcome of today’s meeting is anybody’s guess. Stay tuned!

China at the G20

Europe's disdain for Trump creates an opportunity for China in Hamburg. Xi used the gathering in Hamburg to position China as the world's biggest defender of open markets, free trade and multilateral cooperation on climate change. Xi came bearing the gift of pandas for the Berlin Zoo. German chancellor Angela Merkel joined Xi at a Chinese-German youth soccer match. New York Times

Did Xi Jinping snub India's Modi? The Indian foreign ministry has vehemently denied reports that China cancelled a bilateral meeting in Hamburg with Indian prime minister Narendra Modi.  A spokesman for the ministry told reporters that a meeting with Mr Xi had never been on Mr Modi's agenda. China's foreign ministry had said the atmosphere was not right for a meeting. Relations between the two nations have turned frosty in recent weeks following skirmishes between troops on their shared border along the Himalayas. China's foreign ministry said the "atmosphere was not right" for a meeting. BBC 

China patches up relations with Singapore. Xi met with Singapore’s prime minister Lee Hsein Loong on Thursday and assured him that China is ready to improve relations with the city-state. Relations China and Singapore took a rocky turn last year after Singapore affirmed an international tribunal ruling that dismissed most of Beijing’s claims to the South China Sea, and deteriorated further in November when Hong Kong seized and impounded nine armored patrol boats on their way back from military exercises in Taiwan. The meeting in Hamburg was the first time the men had met since China hosted the G20 summit in Hangzhou in September of last year. Lee wasn't invited to Beijing for China’s 'new Silk Road' summit in May, an omission many  analysts interpreted a ­deliberate snub. South China Morning Post



Hong Kong 20 years after

Under Chinese rule, has Hong Kong lost its luster? Sure, the trains run on time, crime and taxes are low and the air is less polluted than in Beijing or Shanghai. But veteran New York Times correspondent Keith Bradsher argues in this lengthy and detailed essay that Hong Kong's days as a "vibrant crossroads of East and West" that mainland cities might wish to emulate are "fading fast." With locals agitating for more democracy and Beijing looking over its shoulder, Hong Kong's government is paralyzed. The city is "increasingly held up as not as a model of China's future but as a cautionary tale—for Beijing and its allies of the perils of democracy, and for the opposition of the perils of authoritarianism." This is a gloomy piece, but as a longtime Hong Kong resident, I thought it wasn't gloomy enough. New York Times

How the Communist Party "lost" Hong Kong. The Economist's Banyan columnist blames Hong Kong's outgoing chief executive C.Y. Leung for "showing fealty to the [Communist] party, undercutting colleagues and treating democrats with contempt" and leaving the new chief executive Carrie Lam in charge of a city that is almost ungovernable. Lam claims to want to heal political divisions, but in her first speech after being sworn in, she dismissed the idea of democratic reform. That and other encroachments on civil liberties leave young Hong Kongers fearful of life after 2047, when terms of Sino-British treaty promising "one country, two systems" expires. Economist


Asia Society draws fire for barring Hong Kong activist from writers conference. The The Hong Kong chapter of PEN, the literary and free speech group, says it was forced to find a new venue for a literary event after the Asia Society in  Hong Kong, the original host, refused to allow Joshua Wong, a prominent leader of 2014 democracy protests, to speak. PEN moved the event to Hong Kong's Foreign Correspondent's Club. The Asia Society, stung by charges of censorship, issued a statement Friday saying it took issue "very seriously" while blaming "an error in judgement at the staff level" for the decision.  New York Times


In Case You Missed It

Who's the tech copy-cat now? Bloomberg

China just shut down one of its most popular VPNs, further tightening Internet controls FORTUNE

Photo of the week: A dizzying view of a bicycle graveyard in China WIRED


Technology and innovation

Volvo to produce only electric vehicles after 2019. Volvo, the Swedish luxury automaker, shocked rivals with an announcement Wednesday that, beginning in 2019, it will cease production of conventional vehicles and swtich to manufacturing only fully electric or hybrid electric vehicles. Volvo, purchased by China's Geely Holding Group in 2010, is the first major automaker to abandon gas-powered engines, the technology on which the industry has been based for more than a century. Volvo said it would launch five new electric or hybrid vehicles between 2019 and 2021, and vowed to sell more than a million vehicles by 2025. Wall Street Journal


Will Baidu's open-source Apollo platform  become the Android of self-driving vehicles?  The proprietor of China’s most popular internet search engine wants to use its technology in mapping and artificial intelligence to create an autonomous driving vehicle with the ability to navigate city roads and highways by 2020. Instead of trying to get into the self-driving vehicle segment on its own, it has created an open-source platform called Apollo and forged partnerships with more than 50 entities including Intel, Microsoft, chip maker Nvidia Corp. and Dutch navigation device maker TomTom. Wall Street Journal


Founder of LeEco, beleaguered tech conglomerate, resigns. Jia Yueting stepped down as chairman of Leshi Information & Technology, the listed arm of digital and hardware giant LeEco. In a statement, the company said he would no longer play a role in management. The announcement of Jia's departure came after a court in Shanghai froze assets worth more than $180 million belonging to Jia, his wife and three LeEco affiliates. Variety


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