CEO Daily: From Beijing to Osaka, via Pyongyang
Good morning. Eamon Barrett, filling in for Clay.
President Xi Jinping concluded a two-day state visit to North Korea yesterday – the first state visit from a Chinese leader in 14 years. Analysts didn’t expect Xi to visit North Korea until later this year, if at all, so the timing of Xi’s surprise sojourn, a week before the Chinese president holds an “extended meeting” with President Trump at the G20 summit in Osaka, is no coincidence. Xi wants to remind the U.S. that China is vital for applying pressure on Kim Jong-un’s wayward regime.
However, Lu Kang, a spokesperson for China’s Foreign Ministry, denies the visit was a message to Trump. “I must say, people with such an idea are just overthinking…It has been over a year since the China-U.S. trade friction started…I don’t see why the present is any more sensitive than any time between then and now,” Lu said.
Of course, now is a more sensitive time because it’s been over a year since the friction began. Prolonged uncertainty has spooked businesses; tariffs have rattled economies; the threat of further tariffs looms; and meanwhile, the U.S. has turned Hong Kong’s political turmoil into another pressure point on Beijing. Xi Jinping has a growing number of headaches and little in the way of relief.
Before flying to Pyongyang, Xi filed an op-ed in North Korea’s state newspaper where he pledged Beijing would create a “grand plan” to secure peace on the Korean peninsula. After landing on Thursday, China’s state media reported Xi told Kim he hoped the U.S. and North Korea could continue talks.
But Stephen Biegun, the U.S. Special Representative to North Korea, said China wasn’t making the trip for the benefit of the U.S. “This is China’s national interest, and in this case Chinese national interests and American national interests coincide,” he said
Denny Roy, a senior fellow at U.S. think tank East-West Center, told the Journal that Washington shouldn’t be “comfortable” with the idea of China as a mediator. “A lot of hopes on various issues about North Korea from 2018 have been dashed in 2019,” Roy said.
In February, President Trump blamed Xi for scuttling the second U.S.-North Korea summit, where Trump walked away from meetings with Kim. The North Korean leader had visited Beijing before heading to meet Trump in Vietnam. “There was a difference when Kim Jong-un left China the second time,” Trump told reporters.
After bluffing in the past, North Korea might no longer be a strong bargaining chip for Xi.
More China news below.
Economy and Trade
Going into shutdown. The Commerce Department blacklisted five more Chinese entities yesterday, all of which are involved in the production of supercomputers. By total number of units, China is the world leader in supercomputing, with 227 supercomputers compared to 109 in the U.S. – however the U.S. has the world’s two fastest units. Supercomputers can perform over a billion-billion computations a second and are used in weapon design and advanced encryption. Like much China tech, China’s supercomputers are built using U.S. components from suppliers like AMD, Advanced Micro, Intel and Nvidia. Wall Street Journal
Business against tariffs. The U.S. Chamber of Commerce has petitioned the Office of the U.S. Trade Representative to revoke tariffs imposed on Chinese imports over the past two years and warned the White House against implementing further levies. “Tariffs are hidden, regressive taxes that are being paid by U.S. businesses and consumers,” the Chamber said. Last week, 600 U.S. companies urged President Trump not to proceed with threats to submit another tranche of tariffs. Financial Times
China’s poker face. Guo Shuqing, chairman of the China Banking Regulatory Commission, said that even if the U.S. did increase tariffs on China it would have a “very limited impact on the Chinese economy” and might even “backfire.” South China Morning Post
Premier pledge. A group of foreign CEOs, including the heads of Dow, Pfizer and Hyatt Hotels, met with Chinese premier Li Keqiang this week. During the powwow, Li pledged that China would continue to open up its economy to foreign businesses. Business leaders from other multinationals, including Volkswagen AG and Nokia attended too. Bloomberg
Innovation and Tech
The age of Libra. Facebook’s cryptocurrency, Libra, launched to applause in the U.S. but to some yawns in China. “The technologies are all very mature, it’s not hard,” said Tencent CEO Pony Ma. Tencent runs China’s paramount messenger app, WeChat, and launched a digital coin in 2002. Although Tencent’s coin isn’t backed by blockchain, mobile payments have been a WeChat feature for years. Wall Street Journal
Shaking the tree. Apple is exploring moving 15-30% of production outside of China, Nikkei reports. The Cupertino company has asked suppliers to review costs of shifting location to Southeast Asia and Mexico. Foxconn. Apple’s primary manufacturer previously said it had capacity to move iPhone production out of China but walked back its comments this week, to allay fears the Taiwanese company would divest from China. Nikkei Asia Review
Some Young blood. Foxconn has picked Liu Young, the head of its semiconductor unit, to succeed founder Terry Gou as chairman of the board, as the latter steps down to continue his run for Taiwan’s presidency. Reuters
In Case You Missed It
UBS faces a China backlash because of a quip about pigs The Economist
Politics and Policy
Policing the police. The former chief of Interpol, Meng Hongwei, pleaded guilty to accepting over $2 million worth of bribes. Meng was arrested during a trip to China last year but Chinese authorities only revealed as much when his wife reported him missing. Meng was serving as Interpol’s president at the time but the charges brought against him relate to his service as a Chinese minister. NPR
Rewriting history. Beijing is banning certain AP History tests provided by a U.S. non-profit, starting from 2020. China’s Ministry of Education didn’t provide a reason for the suspension but it comes as Beijing clamps down on educational material it deems unfriendly. Reuters
Protesting the Law. Thousands in Hong Kong continued to protest against an extradition bill this week. Turnout was lower than at mass demonstrations convened the past two Sundays but groups still managed to surround police headquarters, shut down Inland Revenue headquarters and close off major roads. The protests have already pressured Hong Kong leader Carrie Lam to suspend the bill’s passage and issue an apology to citizens, but a body of protestors demand further action, including the complete withdrawal of the bill and an investigation into police violence. Time