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CEO Daily: Saturday, August 26, 2017

August 26, 2017, 2:08 PM UTC


I’m writing from Hong Kong today where we, like Texans, are smack in the middle of tropical storm season. On Wednesday, we weathered Typhoon Hato, the strongest storm to hit this city in 18 years and a rare “No. 10,” the Hong Kong observatory’s highest classification of typhoon intensity. In Hong Kong, Hato battered buildings, overturned cars, and flooded parking garages, wreaking more than a billion dollars in property damage. The destruction was even greater in Macau, the nearby gambling Mecca, and across the mainland border in Guangdong province. In total, Hato killed 16 people in southern China and as I write another typhoon is closing in. (I live in small seaside village that’s often the frontline for approaching storms; a friend posted this video of Hato pounding the beach across the street from our house.)

As the world prays for Texas, a different kind of storm is gathering over the Korean peninsula. On Saturday shortly before 7 a.m. Korea-time North Korea launched three short range missiles, defying repeated warnings from the United States and South Korea. The U.S. Pacific Command said one of the missiles exploded immediately after take off but the other two traveled about 155 miles before splashing down, a range that would be far enough to reach not only Seoul but also an advanced missile-defense system the U.S. has begun installing in South Korea. The launch comes only days after U.S. Secretary of State Rex Tillerson praised North Korean leader Kim Jong Un for showing restraint by not launching a missile since its last ICBM test in July. At a campaign rally this week, President Trump said Kim is “starting to respect us” and expressed hope that perhaps “something positive can come of that.”

Meanwhile, tensions over North Korea’s nuclear program are taking a toll on the South Korean economy. The Wall Street Journal reports this week that China has launched an unofficial campaign to punish South Korean companies for Seoul’s support for installation of the missile-defense program. The Journal says China sales of Korean products like Kia and Hyundai autos have taken a nose dive this year.

That has to make it all the more painful for—and baffling to—Seoul that Trump is moving to curb U.S. trade with Korea as well. On Thursday, Trump threatened to terminate the U.S. trade agreement with South Korea declaring it a “horrible deal” that had left Americans “destroyed.”

Enjoy the weekend!

Clay Chandler

Trade and Economy

Is Great Wall buying Jeep? Automotive News reports that Wang Fengying, president of Great Wall Motor Co. has declared his interest in doing so was "connecting" Fiat Chrysler with  to begin negotiations. Fiat Chrysler has denied that it had been contacted, but Yang Jian, managing editor of Automotive News China the Italian-American automaker should not give Wang the cold shoulder. Automotive News

China ratchets up rhetoric on trade. China says it will use “all means necessary” to defend Chinese companies, after the U.S. launched a probe into the theft of intellectual property by Chinese companies this week. China’s foreign ministry has also demanded that the U.S. immediately withdraw sanctions unilaterally imposed on Chinese companies and individuals for illegally trading with North Korea, a move that China has called “irresponsible”, “protectionist” and a violation of the rules of the World Trade Organization. Washington Post 

Fundraising fervor. Four of China’s largest state-owned commercial banks have been conducting roadshows to raise at least $15 billion from onshore and offshore investors to fund Beijing’s “Belt and Road” initiative. The fundraising would buttress ambitions of reviving ancient Silk Road trade routes and internationalizing the yuan. Reuters 

Not a welcome party. Executives from top European firms in China convened in Beijing last month over concerns that the communist party was exerting greater sway over their local operations. The firms felt increasing political pressure to give the party the final word over business operations and investment decisions in joint ventures with state-owned partners. Reuters 

More leads on HNA's obscure ownership. Previously unreported documents obtained by the New York Times have established new links between troubled Chinese conglomerate HNA Group and Pacific American Corporation, a company that buys airline equipment. The non-disclosure may contravene securities laws on “connected” transactions, and add scrutiny in the United States and Europe, where HNA is awaiting approval for ambitious asset acquisitions. NYT

Technology and Innovation

Chinese hacker charged. The U.S. has arrested and charged a Chinese National for providing hackers in China with malicious software used to hack into four unnamed U.S. companies. One of the malware he provided, known as “Sakula”, is a rare program linked to the 2015 breach of the U.S. Office of Personnel Management, when security clearance records of millions of American government employees were stolen. WSJ 

VIPKID's new VIP status.  Online English education platform for children VIPKID has become China's newest tech unicorn, thanks to its latest $200m fundraising round led by Sequoia Capital China and Tencent Holdings. The Beijing-based start-up connects English speakers in the U.S. and Canada with Chinese children looking for tutors, a market estimated to be worth $8bn. FT 

Autos for allThe latest offering in China's red-hot sharing economy: BMWs that can be rented by the kilometer. Beijing-based Hongyang Shared Cars has launched in central Shenyang, a northeastern Chinese city of 8 million residents with a fleet of 1,500 blue BMW 1-series sedans for just US$0.25 per kilometer, and a returnable deposit of $150 made through its android app. Tech in Asia 

China Life and Baidu's new 1B technology fund. Chinese insurer China Life and internet behemoth Baidu will tie up to launch the Baidu Fund Partnership, a 7 billion yuan ($1bn) private equity fund that will target mid to late stage investments in artificial intelligence, fintech and mobile technologies. China Money Network 

Put your name to it. All users leaving comments on internet forums and video streaming sites will now have to register with their real names and identities, said the Cyberspace Administration of China, which published a new set of regulations on Friday. Caixin

In Case You Missed It

The U.S. Can Win a Trade War With China. That Doesn't Mean It Should Try. TIME

Robots Have Been Taking Jobs at a Blistering Pace in China Fortune

Taiwan Is Suffering From a Massive Brain Drain and the Main Beneficiary is China TIME

New Balance wins $1.5m damages for China logo infringement FT

One of China's hottest stocks is a tiny glass company you've never heard of CNBC

Activist Confesses to Subversion in Chinese Show Trial NYT

The Dark Side of China's Tech Boom The Diplomat

Drone swarms vs conventional arms: China’s military debate FT

China in the World

Cambridge reverses stanceAfter a storm of academic protest, Cambridge University Press has reposted over 300 papers and book reviews relating to the 1989 Tiananmen Square protests, the Cultural Revolution and Tibet on its China Quarterly website. The world's oldest publisher last week removed the articles following a request from the Chinese government. Reuters  

Curbing China's hunger. Germany, France and Italy have submitted a proposal to Brussels to veto Beijing’s hunger to acquire European technology and key companies. The policy paper urges the European Commission to intervene when a takeover is driven by political objectives rather than market forces. Politico 

China's Leadership Reshuffle

War veteran to lead army. Xi Jinping has appointed Li Zuocheng to lead the military's Joint Staff Department. Li, a veteran of China's 1979 war with Vietnam, is one of the few top generals with combat experience, and his appointment underscores Xi’s aim to groom the People's Liberation Army as one that is “able to fight and win wars.” Bloomberg 

Air Force head identified. Meanwhile, sources of the South China Morning Post have tipped Lieutenant General Ding Laihang as the front runner to head the country’s 420,000-strong air force. Ding will succeed Ma Xiaotian, 68, who has been the air force commander since 2012 and is expected to retire. SCMP 

Graft buster shafted? China’s anti-corruption czar Wang Qishan is not among the latest candidates for the seven-member Political Bureau Standing Committee, the nation’s top leadership group, said The Yomiuri Shimbun, quoting inside sources. Wang's likely retirement at the age of 68 is in line with the party’s retirement customs, it added. The Japan News 

Summaries by Debbie Yong.

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