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CEO Daily: Saturday, August 19, 2017

August 19, 2017, 3:44 PM UTC

Donald Trump’s decision to sack White House advisor Steven K. Bannon elicited no official comment from Beijing today but it may be safely surmised that China’s leaders are fighting the urge to gloat.

Bannon, right-wing Savonarola and the man credited by many with crafting the electoral strategy that put Trump in the White House, was the administration’s most strident China hawk. He championed tariffs on Chinese imports, penalties against American companies building factories in China, and tighter restrictions on Chinese investment in the U.S.

Only days before his ouster, Bannon reaffirmed, in an interview with a left-leaning political journal, his long-held conviction that the U.S. is locked in an “economic war” with China, and boasted of plotting behind the scenes to take down White House rivals who lacked the courage to join his call to arms. American Prospect editor Robert Kuttner says Bannon initiated the interview, and in it described in detail his efforts to undermine colleagues who favor a more conciliatory approach to China. The administration’s China doves, Bannon told Kuttner, are “wetting themselves” in fear of his maneuvering.

On Friday Bannon himself ended up all wet, the latest in a parade of Trump West Wing-ers forced to walk the plank. (It didn’t help that in the interview Bannon scoffed at the idea that U.S. would ever take military action against North Korea.)

Bannon’s ouster adds to the confusion that has characterized Trump’s actions on China since he took office. As candidate, Trump berated China for unfair trade practices and promised to slap tariffs on Chinese imports as soon as he was sworn in. As president, Trump by turns has professed admiration for Chinese president Xi Jinping and decried the Chinese leader for his failure to do more to help the U.S. contain North Korea. On Monday, barely a week after China voted in favor of tough new United Nations sanctions against North Korea, the Trump administration launched an investigation into whether China is pirating the intellectual property of American firms under Section 301 of the 1974 Trade Act.

Commerce secretary Wilbur Ross, economist Peter Navarro and U.S. Trade Representative Robert Lighthizer remain to press for a harder line on China. But Bannon’s absence will embolden Treasury Secretary Steven Mnuchin, White House economic advisor Gary Cohn, Secretary of State Rex Tillerson and Trump’s son-in-law Jared Kushner who are said to fear a trade war with China could backfire and weaken the U.S. economy.

Washington Post columnist Joshua Rogin argues that with Bannon banished, those who oppose his China policies “are positioned to reassert their control over the relationship and stifle many of Bannon’s key initiatives.” That, says Rogin, “could be a boon for the status quo—and a relief for the Chinese government.”

In the meantime, this week brought fresh evidence of China’s rising prowess as the country’s two tech giants, Alibaba and Tencent, reported record quarterly earnings, prompting the New York Times to point out that the two companies now rank alongside Apple, Google, Facebook, Microsoft and Amazon as the world’s most highly valued companies.

Enjoy the weekend!

Clay Chandler
@claychandler
clay.chandler@timeinc.com

Technology and Innovation

See you in court – onlineChina's Hangzhou Court of the Internet, the first cyber court in the world, officially started operations this week. The court presides over the growing number of online trade disputes and copyright lawsuits in the Hangzhou area, a hotbed for Chinese -commerce companies such as Alibaba. Users can file cases on the court's online platform and attend trials via live stream. TechNode 

Beijing subway upgrade leaves Apple with no bite. Commuters in Beijing can now travel on all Beijing subway lines by swiping near-field communications-enabled Android phones at the gantries. But Apple's decision to restrict contactless payment on iPhones to its Apple Pay app means it's being left out of the party - and the profits. FT

Chinese car maker races to clock Tesla. Nanjing-based Future Mobility Corp (FMC) says it aims to compete with Tesla on a global scale with its electric cars designed to meet safety requirements not just in China but in the U.S. and Europe too. The Tencent and Foxconn-funded company led by former BMW and Tesla executives will start taking global bookings after unveiling their first concept car next January, in time for a 2019 delivery. South China Morning Post 

Alibaba not spared. Chinese authorities have warned Taobao, China's most popular e-commerce platform run by the Alibaba group, to shut down webstores that sell illegal virtual private networks (VPNs) used to circumvent China's strict cyber censors. Regulators had previously targeted tech giant peers Tencent, Weibo and Baidu and the latest round of of warnings included four other women-focussed social shopping and entertainment websites. Reuters 

Ofo rolls into the U.S. Chinese bike-sharing unicorn Ofo will be rolling out an initial batch of 1,000 dockless rental bicycles in Seattle, Washington for its North American debut, following a recent funding round that saw it raise $700 million from investors such as Alibaba Group Holding, Hony Capital and Citic Private Equity. South China Morning Post 

Trade and Economy

HSI sharpens China index. Hong Kong's Hang Seng Indexes will add a cluster of 10 leading red chips and P-chips to its main China-tracking Hang Seng China Enterprises Index next year. The HSCEI currently only comprise H-shares and the changes, amid growing investor interest, will reduce the complexities of China’s multiple share classes and make it more reflective of the increasingly consumption-driven Chinese economy. FT

IMF cautiously bullish on China. The International Monetary Fund this week revised its growth forecast for China from 6.2 percent to 6.7 percent in its annual review. But it also issued a strong warning to China to tackle its structural issues, such as overcapacity and inefficiency in its state-owned enterprises, to avoid relying on debt-fuelled growth. CNBC

China cries copycat. Beijing has pointed fingers at developing countries who have "spied on and stolen" China's bullet train technologies and urged its officials to ramp up legislation around intellectual property protection. The commentary published in a state-backed publication came days after Trump ordered his trade representative to look into trade practices and intellectual property violations by ChinaThe Shanghaiist

In Case You Missed It

China’s Economy Just Gets More and More Interesting Fortune

China Tech Workers Wanted: Women Need Not Apply WSJ

After a false start, China sees its first bike-rental IPO TechNode

China Plans to Build 'World-Famous' Cybersecurity Schools in 10 Years The Diplomat

China bans weird and long company names BBC

Chinese state news agency slammed over ‘racist’ India border row video SCMP

China Blockbuster Leads Pack as Box Office Stages a Comeback WSJ

Alipay partners with Yelp to continue its pursuit of Chinese tourist money TechCrunch

Politics and Policy

The ultra-secretive meeting that never was. According to South China Morning Post, quoting inside sources, China's informal annual meet between senior and retired Communist Party leaders didn't take place this year, and leaders at the Beihaide beachside resort were purely on "holiday". The meetings used to be where senior leadership built consensus on ideology and succession issues, and observers say its non-occurrence is an indicator of Xi Jinping's now-unchallenged control over party affairs. South China Morning Post

Jail time for Hong Kong's teen democrats stokes China fears. Hong Kong's justice secretary says the jail sentences handed to young activists Joshua Wong, Alex Chow and Nathan Wong, was not driven by a "political motive", but pro-democracy supporters say the move is a clear indicator of the Communist Party's growing grip over the autonomous territory. Reuters

Beijing names new envoy to North KoreaKong Xuanyou, now in charge of Asian affairs, will replace outgoing veteran diplomat Wu Dawei, after the latter retires from 13 years of mostly futile efforts to check North Korea's nuclear ambitions. An ethnic Korean born in China's northern Heilongjiang province, Kong has been tasked to revive the six-party denuclearization talks between China, the U.S., North and South Korea, Russia and Japan that Beijing initiated in 2003. The talks have stalled since 2008. South China. Reuters

The U.S. sends mixed messages. White House chief strategist Stephen Bannon on Wednesday said that there was "no military solution" in the Korean Peninsula and that he might consider a withdrawal of U.S. troops, but Joint Chiefs of Staff chairman Joseph Dunford dismissed the possibility a day later, after his 3-day meet with Xi Jinping on BeijingDefense Secretary James Mattis and Secretary of State Rex Tillerson reiterated General Dunford's statements and praised China for their cooperation. The Guardian

Summaries by Debbie Yong.
@debyong
debbie.yong@timeinc.com

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