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LTN: China Published Draft Data Security Bill

Major Taiwanese news network Liberty Times Network (LTN) recently reported that, in addition to passing the Hong Kong National Security Law, China’s 13th National People’s Congress also passed a draft Data Security Bill. According to the official draft version online, the proposed new law may require foreign companies operating in China to surrender operational data obtained outside China or face a fine or closure. Until August 16, the draft is currently seeking public opinion. The new proposed data law was drafted under the name of protecting “important data.” It has a broad definition of data whose breach can cause damage in areas of national security, economic security, and social stability. The proposed draft is planned to become law in 2021. The law may also ask foreign companies operating in China to provide information related to “network security.” Experts expressed the belief that the government is, for the first time, seeking an “Extraterritorial effect,” which is designed to cancel out a similar power U.S. laws sometimes have. It also authorizes the government to define what “important data” is. According to the proposal, individuals and organizations operating outside China may also be covered if their activities harm China’s national security or public interests.

Source: LTN, July 9, 2020
https://news.ltn.com.tw/news/world/breakingnews/3222500

Briefings | | |   Information/Technology

AmCham in Hong Kong: Thirty Percent of Surveyed Members Consider Withdrawal

Radio Television Hong Kong (RTHK), the official broadcasting service in Hong Kong, reported that the American Chamber of Commerce in Hong Kong surveyed 183 businesses regarding the national security law, which accounted for 15 percent of its total membership.

Forty-nine percent of the respondents believed that the national security law has had a negative impact on business. Thirty percent considered divestment or moving their business out of Hong Kong over the medium or long term. Another 5.5 percent were thinking about short-term divestment. The study showed that 41 percent of the interviewees are extremely concerned about the national security laws, including the coverage of the law, the ambiguity of law enforcement, the impact on the judicial independence of Hong Kong, and the weakened status of Hong Kong as a financial center. Another 56 percent believed that the provisions were stricter than expected, and worried about provisions such as extraterritorial jurisdiction, extradition to China, and collusion with foreign forces.

Fifty-one percent of the respondents felt working and living conditions in Hong Kong were less safe after the implementation of the law, and 41 percent were pessimistic about the prospects of Hong Kong.

Source: Radio Television Hong Kong, July 13, 2020
https://news.rthk.hk/rthk/ch/component/k2/1537397-20200713.htm

Briefings | | |   Economy/Resources

China’s Looming Bad Debt Risks

The China Banking and Insurance Regulatory Commission (CBIRC), which regulates the country’s financial industry, is concerned about the rise in non-performing assets, or bad loans, due to the deteriorating economic and epidemic conditions. The CBIRC suggested measures to prepare for the increase in non-performing loans.

In response to the questions from journalists, the spokesperson of the CBIRC listed four major risks and challenges.

1. The increased pressure of non-performing loans. Although the balance of non-performing loans has not increased significantly since the beginning of this year, due to the time lag between the decline in the real economy and the impact seen in the financial sector, as well as the short-term hedging effect of macro policies, the risk of default has been temporarily delayed. However, the number of non-performing loans will continue to rise in the coming months.

2. Serious problems in some small and medium-sized financial institutions. As the asset quality has increasingly deteriorated under the impact of the epidemic, risks continue to build up.

3. The resurgence of chaotic practices. Some high-risk shadow banks have revived; the leverage (debt) ratio of companies and households has increased. Some funds have flown into the real estate and stock markets, adding to the asset bubbles.

4. Illegalities occur from time to time. For example, the fake gold scandal of Wuhan’s Kingold Jewelry has revealed the almost nonexistent internal control and risk management in some financial institutions.

As of the end of June, the balance of non-performing loans in the banking industry was RMB 3.6 trillion (US $0.51 trillion), an increase of RMB 400.4 billion (US $57.2 billion) from the beginning of the year, with a non-performing loan ratio of 2.10 percent, 0.08 percentage points higher than the beginning of the year.

Source: Central News Agency, July 11, 2020
http://https://www.cna.com.tw/news/acn/202007110163.aspx

Briefings | | |   Economy/Resources

Merkel’s Weak Attitude Toward Beijing Criticized

The French newspaper Le Monde published an editorial on Wednesday, criticizing the European Union’s weak response after Beijing passed its rubber-stamp Hong Kong National Security Law. The newspaper cited Washington’s elimination of Hong Kong’s special status and the ban on arms exports, Canada’s suspension of its extradition treaty with Hong Kong, and the UK’s offering of citizenship to up to 3 million Hong Kong residents. However, the 27 EU countries have fallen into the trap of interdependent economic relations with China.

Le Monde pointed the finger at Germany, which has served as the EU’s rotating presidency since July 1. Germany finds it difficult to look beyond the economic cooperation that has been carefully woven with China for 15 years, which translates to an annual trade of over 200 billion euros between Berlin and Beijing. The Hong Kong people are disappointed with Merkel.

The newspaper also criticized France, which fears to damage relations with Beijing at the moment when it must fully reopen the economy after coming out of the epidemic. While not giving any details, on Wednesday evening, French Foreign Minister Le Drian assured the Senate that France would take countermeasures against the Hong Kong National Security Law.

Le Monde believes that since the emergence of the epidemic, Beijing has shown its true face. Xi Jinping’s China has transformed and become more aggressive in all respects without hesitation, including the usage of provocative rhetoric to support its policies and disparage the EU model. It has proven that Beijing has become the EU’s institutional opponent. The newspaper pointed out that China’s brutal approach in Hong Kong also poses a severe test for European Commission President Ursula von der Leyen. It proposes that the EU could at least suggest to the Hong Kong people that they would be willing to provide asylum to whoever wishes to escape from the authoritarian regime. If the EU wants to become a global actor and be respected, there is no other choice but to be tough when facing China.

Inside Germany, there has been much criticism of Merkel’s weak performance on the Hong Kong issue. The Social Democratic Party (SPD) criticized Merkel’s attitude towards China. Nils Schmid, a spokesman for the SPD’s parliamentary group, reminded Merkel that she should bid farewell to her outdated perception of China and face reality. Christian Lindner, leader of the Free Democratic Party (FDP), believes that Germany cannot betray its values.

Source: Radio France International, July 8, 2020
https://www.rfi.fr/cn/中国/20200708-港版国安法-默克尔对北京小心翼翼受质疑

Briefings | | |   Geo-Strategic Trend

Belgium: Senate Passes Resolution Condemning the Chinese Regime’s Organ Harvesting Crimes

The Belgium Senate passed Resolution 7-162 on June 12, 2020. The resolution condemns the Chinese Communist Party (CCP)’s state-sanctioned organ harvesting from living prisoners of conscience, especially Falun Gong practitioners and Uighurs. Ten Senators sponsored the resolution. They introduced it on May 12; the Senate discussed it on June 8 and passed it on June 12. Several Senators spoke on behalf of their respective political parties and condemned the CCP’s live organ harvesting.

Senator Fatima Ahallouch said that in 2006, the Belgian Transplantation Association (BTS) noticed that China’s Transplant Assistance Center website became active on the Internet with the purpose of promoting rapid organ availability in China. The China Tribunal pointed out that the extremely short waiting times for transplantation in Chinese hospitals suggested that the CCP obtained organs illegally. Formerly imprisoned Falun Gong practitioners and Uighurs have testified that they were repeatedly forced to undergo medical examinations while in prison.

Source: Falun Gong’s Minghui.Org, July 3, 2020
https://en.minghui.org/html/articles/2020/7/3/185732.html

Briefings | | |   Social Stability

China Times: Cambridge Considers Revoking Honorary Fellowship Awarded to Hong Kong Chief Executive Carrie Lam

Major Taiwanese news network China Times recently reported that Cambridge Wolfson College President, Professor Jane Clarke, issued an announcement that the College paid strong attention to the series of events that happened after China passed the Hong Kong National Security Law. The College strongly supports human rights protection and freedom of speech. They are considering revoking the Honorary Fellowship that was awarded to Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor in 2017. Last November, three British Members of the House of Lords wrote to Cambridge, asking for the removal of Carrie Lam’s Honorary Fellowship title, citing her political “incompetence and aggressive approach.” Previously, Carrie Lam had taken short term courses at Cambridge. Her husband had a Doctor’s degree from Cambridge and both of her sons graduated from Cambridge.

Source: China Times, July 2, 2020
https://www.chinatimes.com/cn/realtimenews/20200702004347-260409?chdtv

Briefings | | |   Geo-Strategic Trend

BBC Chinese: Boris Johnson Changes Position on Huawei to Avoid Supplier from Potential Enemy

BBC Chinese recently reported that British Prime Minister Boris Johnson changed his position on Huawei. With the Chinese communists passing the new Hong Kong National Security Law, the British government is reevaluating Huawei’s reliability in the British 5G network. Boris Johnson used to be open to allowing a partial Huawei presence in the British 5G communications market. However, in a recent press conference, the Prime Minister said he does not want to see any risk in the critical national infrastructure to be controlled by suppliers from potential enemy countries. Huawei has been working hard on the British market for the past 20 years. High ranking British officials have suggested recently that the U.S. sanction on Huawei may impact the feasibility of using Huawei equipment in the British 5G network. The recent new ban that the U.S. government  imposed caused Oliver Dowden, British Secretary of State for Culture, Media and Sport, to order an emergency review. Many Conservative Party members of parliament were against including Huawei in any part of the British 5G market. They believed they could rally enough votes if Parliament were to have another vote. However, they hoped the Prime Minister would change his mind before such a vote.

Source: BBC Chinese, July 2, 2020
https://www.bbc.com/zhongwen/simp/uk-53266772

Briefings | | |   Geo-Strategic Trend

Lianhe Zaobao: Intel Put Supplying Chinese Manufacturer on Hold

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that, in order to comply with the U.S. government’s new export restrictions, Intel has put supplying Chinese manufacturer Inspur Group on hold. Intel explained in an announcement that the move was solely to ensure that U.S. laws are followed. Inspur Group is China’s largest computer server manufacturer and is ranked number three in the world. It is a large customer of Intel’s and Inspur’s entire product line of families uses Intel processors. Intel’s decision formed a strike on Inspur’s future, causing its stock to fall five percent within a day. The U.S. Department of Defense established a 20-company list not long ago identifying Chinese companies either owned or controlled by the Chinese military. According to new U.S. regulations, these companies are banned from obtaining advanced U.S. technologies. The list includes both Huawei and Inspur. Inspur manufactures both traditional servers and Artificial Intelligence (AI) servers.

Source: Lianhe Zaobao, July 3, 2020
https://www.zaobao.com.sg/realtime/china/story20200703-1066076

Briefings | | |   Information/Technology US-China Relations