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China’s Reaction to Trump’s Election Win

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Xinhua Commentary Series: Spotlight on the U.S. Presidential Election

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Wu Guoguang: Xi Jinping’s Reversal of the Course, Will China’s Transition be Peaceful or Marked with Bloodshed?

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Cheng Xiaonong: U.S.-China Strategic Relations Have Crystallized

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China’s Central Bank’s Digital Currency Enables Cross-Border Payments without Settlement Risk

A Chinese scholar recently told Russia’s Sputnik News that China’s central bank’s digital currency (CBDC) can achieve cross-border payments without settlement risk.

Due to the Chinese government’s promotion and rapid development of related technologies, China may become the first country in the world to issue legal digital currency. The Ministry of Commerce recently announced that it will carry out digital RMB pilot programs in the Beijing-Tianjin-Hebei region, the Yangtze River Delta, the Guangdong-Hong Kong-Macao Greater Bay Area, and the central and western regions where conditions permit. The People’s Bank of China (PBOC) will formulate a set of policy support measures.

Regarding the cross-border circulation of digital currency, Liu Yihua, a researcher with the Taihe Institute, a government affiliated think tank, said that traditional currency cross-border circulation is mainly reflected in international trade settlement under the current account, in international investment and financing under the capital account, and in international reserves. This is usually done by domestic and overseas banks through the international CLS FX clearing system. Although this model meets the needs of cross-border payments, it lengthens the cross-border payment chain. At the same time, cross-border transactions under this model are highly dependent on bank accounts. Taking RMB cross-border payment as an example, overseas banks need to connect to domestic correspondent banks, clearing banks, domestic fund custodian banks and other institutions to conduct RMB business. Overseas residents and overseas institutions need to open RMB deposit accounts to complete RMB cross-border payments.

Liu said that the central bank digital currency (CBDC) issued by the PBOC belongs to the monetary base (M0), which is the central bank’s direct liability to the public (including overseas residents and institutions). The public owns and uses CBDC by opening a CBDC electronic wallet. In this process, the public directly establishes a creditor-debt relationship with the central bank. For the central bank, domestic and overseas (including offshore) CBDC wallets make no difference; for the public, any two CBDC wallets can initiate peer-to-peer transactions, and there is no difference between domestic and overseas (including offshore). For operators of CBDC electronic wallets such as commercial banks, they only perform management functions, and the CBDC in the electronic wallet does not enter their balance sheet. In CBDC transactions, the flow of funds only involves both parties to the transaction. Because CBDC uses a loosely coupled account model (transfers can be realized without a bank account, and the transaction is settlement) to complete the transaction, compared with traditional cross-border payments, CBDC can realize cross-border payment with almost no settlement risk.

Liu pointed out that, for foreign residents and institutions to participate in CBDC cross-border payments, they only need to open a CBDC wallet. As the requirements for opening a CBDC wallet are much lower than opening bank accounts (especially offshore bank accounts), it is beneficial for overseas residents and institutions to own and use CBDC.

Source: Sputnik News, August 27, 2020
http://sputniknews.cn/china/202008271032040233/

Briefings | | |   Economy/Resources

Cypress Papers: China’s Riches Quietly Emigrate Overseas

Al Jazeera’s Investigative Unit has obtained copies of documents that were leaked and which reveal that Cyprus, an EU country, approved 1,400 “golden passports” between 2017 and 2019, among which more than 500 were issued to Chinese. The project started in 2013, when Cyprus launched a “Cyprus Investment Plan.” According to this plan, through the purchase of real estate and other forms of investment in the local area amounting to at least 2.15 million euros, a foreigner could apply for a so-called “golden passport.” A Cyprus passport brings benefits including no requirement of a local residence and the freedom to live and work in the other 26 EU countries.

Al Jazeera discovered that most of the people who obtained the “golden passports” were Russians, Chinese, and Ukrainians. By selling citizenship, the Cyprus government received 7 billion euros in revenue within two years, a good boost for a sluggish economy.

Among about 500 naturalized people from China, Al Jazeera released the information on eight individuals, including Yang Huiyan, a property developer and the majority shareholder of Country Garden Holdings. In 2007, her father, Yang Guoqiang largely transferred the stake to her. She is the richest woman in Asia. It is legal for a Chinese to apply for a passport or permanent resident status of another country, but China does not recognize dual citizenship. In theory, after Yang Huiyan obtained the Cyprus passport on October 23, 2018, she could not continue to remain Chinese as her nationality.

The Chinese who have acquired Cyprus citizenship include a few representatives of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC) in provincial and city governments. Lu Wenbin, a representative of the Chengdu Municipal People’s Congress, obtained a Cypress passport in July 2019. Chen Anlin, a member of the CPPCC in Huangpi District, Wuhan City, became a Cypress citizen in July 2018. Fu Zhengjun, a former member of the CPPCC in Jinhua city of Zhejiang Province, was naturalized in November 2017. Zhao Zhenpeng, a member of the CPPCC of Binzhou City, Shandong Province, received a Cyprus passport in February 2019. The South China Morning Post pointed out that once these people are found to have foreign citizenship, they will be disqualified as representatives of the NPC or the CPPCC.

According to the South China Morning Post, people holding important positions in state-owned enterprises are not allowed to have foreign passports. Tang Yong, executive director and president of the state giant China Resources Power, is on the list that Al Jazeera disclosed. Tang obtained a Cyprus passport in January 2019. Then in December, he was transferred to China Resources Power as its president.

Being rich is not the only condition for investing in Cyprus to obtain a passport. The Cyprus government requires strict verification of the background of the applicants. Those with criminal records cannot be naturalized. However, the “Cypress Papers” show that Zhang Keqiang, a businessman from China, was sentenced for equity trading. Another Chinese businessman, Li Jiadong, was sanctioned by the United States for laundering more than US$ 100 million. Both of them bought Cyprus “golden passports.” In 2019, Cyprus revised relevant laws so that it now requires a strict investigation of investors and allows cancellation of passports already issued.

The “Cyprus Investment Plan” is an ongoing project. According to Al Jazeera, out of more than 500 people from China, only eight “politically public figures” have been disclosed. Most of the rest have no important political background or criminal history.

The European Commission once gave out warnings about some EU countries carelessly issuing EU visas and even granting EU citizenship for money, claiming that this approach contains risks.

Source: Deutsche Welle, August 25, 2020.
https://p.dw.com/p/3hUXA
Al Jazeera, The Cyprus Papers.
https://www.aljazeera.com/investigations/cypruspapers/

Briefings | | |   Social Stability

China Held Online Seminar with the Ruling Party of Panama

China’s state media People’s Daily reported that, on August 25, the Chinese Communist Party (CCP) and the Democratic Revolutionary Party (RPD) of Panama held the opening ceremony of an online seminar for party cadres. Song Tao, head of the CCP’s International Liaison Department, said that, under the joint promotion of General Secretary Xi Jinping and Panama’s leader, over the past three years since the establishment of diplomatic relations, there have been “fruitful cooperation results.” The purpose of this online seminar was to “implement the important consensus of the two heads of state, and contribute to the development of Sino-Panama relations.” Song discussed the content of the third volume of Xi Jinping’s writings on State Governance. Fujian’s provincial CCP Committee Secretary Yu Weiguo talked about Fujian’s social economic development under the guidance of Xi Jinping Thought and expressed willingness to strengthen cooperation with Panama in areas such as the “Belt and Road Initiative.”

Panama’s RPD reportedly agreed with Xi Jinping’s idea of a “community with a shared future for mankind,” and stated that it firmly adheres to the one-China principle and is willing to participate actively in the “Belt and Road Initiative.”

Source: People’s Daily, August 26, 2020
http://paper.people.com.cn/rmrb/html/2020-08/26/nw.D110000renmrb_20200826_6-03.htm

Briefings | | |   Geo-Strategic Trend

People’s Daily Attacks Pompeo, Again

On August 25, the Chinese Communist Party’s mouthpiece newspaper People’s Daily, in three full pages out of a total of 20, published an extremely lengthy opinion that runs through a barrage of criticisms against U.S. Secretary of State Mike Pompeo, as a response to his speech on July 23, 2020, at the Richard Nixon Presidential Library in California.

The first two paragraphs read:

“A few days ago, U.S. Secretary of State Pompeo delivered a speech at the Richard Nixon Presidential Library in California. He totally negated China-U.S. relations, maliciously attacked the leadership of the Chinese Communist Party and China’s political system, drove a wedge between the Chinese Communist Party and the Chinese people, and made groundless accusations on China’s domestic and foreign policies. Pompeo spread the ‘China Threat Theory’ in an attempt to provoke and piece together an international anti-China alliance and contain China’s development.”

“Pompeo’s remarks, ignoring history and reality, are full of strong ideological prejudice and a Cold War mentality. Not only did the Chinese people condemn Pompeo’s remarks, but also rational people in the United States and the international community criticized and opposed them.”

It then dug out 26 statements from Pompeo’s speech and ran a point-by-point rebuttal. The 34,000-Chinese-character-long article, if put into Word with a font size of 12 and normal margins, would be 30 pages long.

Source: People’s Daily, August 25, 2020
http://paper.people.com.cn/rmrb/html/2020-08/25/nw.D110000renmrb_20200825_1-10.htm

Briefings | | |   US-China Relations

Global Times: Hong Kong Is Changing Textbooks

Global Times recently reported that seven Hong Kong publishers have submitted changes to their General Studies Textbooks. General Studies is a core course in Hong Kong high schools. Traditionally, Hong Kong has allowed private sector publishers to design textbooks and high schools have been allowed to pick textbooks from approved publishers. According to the Hong Kong Education Bureau, the publishers are making adjustments to the textbooks based on new “guidelines” that the government has offered. So far, the media has discovered that the changes are mainly on political topics. For example, “separation of powers” was removed; the mention of “fighting for social justice via social movements like demonstrations and protests” was also removed. Pictures of protesters asking for a “true general election” disappeared as well. The publishers that do not follow the guidelines that the the Education Bureau “recommended” will not be allowed to upload textbooks to the approved list.

Source: Global Times, August 19, 2020
https://china.huanqiu.com/article/3zWhfBksORA

Briefings | | |   Geo-Strategic Trend Social Stability

LTN: Huawei Came up with New Method to Avoid U.S. Sanctions

Major Taiwanese news network Liberty Times Network (LTN) recently reported that, with the United Stated continuously tightening up sanctions against Huawei in order to cut off its chip-making capabilities, leading U.S. Electronic Design Automation (EDA) vendor Synopsys saw strong growth. The source of the growth came mainly from China. Many integrated Circuit (IC) companies in China suddenly started purchasing chip design software on a large scale. This type of software is on the Huawei sanction list, so Huawei can no long purchase licenses. Synopsys, along with two other U.S. companies Cadence and ANSYS, plus the German vendor Siemens, control over ninety percent of the global chip design software market. Chinese local governments were also found to be purchasing U.S. EDA software. IT Experts from Japan expressed the belief that it is highly likely Huawei can use Chinese chip design firms to perform the design work previously done by its own branch named HiSilicon. All it takes is for HiSilicon to send a group of semiconductor engineers to a small local firm to bypass U.S. sanctions on software completely.

Source: LTN, August 21, 2020
https://ec.ltn.com.tw/article/breakingnews/3267514

Briefings | | |   Information/Technology US-China Relations

CNA: Peking University Tightens Permission to Attend Overseas Online Conferences

Primary Taiwanese news agency CNA (The Central News Agency) recently reported that China’s top university, Peking University, just announced new rules for attending online conferences held overseas. The new rules apply to all branches of the University. The leaders of all branches are required to review the applications from the faculty or from students strictly in order to tighten up attendance at conferences that organizations outside of China may host. The rules emphasized that “confidentiality requirements” must be “strictly” followed. No individual can personally decide on attending such events. Instead, each person must follow the exact same review and approval process the University had in place before for attending overseas events in person. All applications must be submitted for approval at least 15 days before the event starts and should include an invitation letter and a clear agenda. All online events hosted in Hong Kong, Macau and Taiwan are considered “international.” The announcement mentioned that the new rules are based on the requirements that the government authorities have set. The goal is to “ensure the online international exchanges are done in an orderly fashion.”

Source: CNA, August 21, 2020
https://www.cna.com.tw/news/acn/202008210054.aspx

Briefings | | |   Government/Politics Social Stability

$50 Billion Worth of Cryptocurrency Left China within 12 Months

According to a report from the blockchain analytics firm Chainalysis, over the past 12 months, over $50 billion worth of cryptocurrency has left China. Analysts claim that the yuan’s fluctuating valuation over this year and tensions amid the ongoing U.S.–China trade war could be spurring local investors to evade capital controls. Beijing bars citizens from moving more than the equivalent of $50,000 out of the country each year.

Tether (USDT) in particular — could be playing a key role. Since Beijing’s 2017 ban on the direct conversions of the yuan to cryptocurrency, the U.S. dollar-pegged stablecoin Tether has served as a popular stand-in for fiat for traders in the Chinese market. In the East Asian market, over $18 billion worth of Tether was moved to addresses based in foreign jurisdictions over the past year. How much of this reflects capital flight remains difficult to establish conclusively.

While yuan-USDT trades are, strictly speaking, also prohibited, OTC (over the counter) brokers continue to sell the stablecoin to enable traders to lock in their gains from crypto trades without worrying about price volatility. In June of this year, Tether outflanked Bitcoin to become the digital asset that East Asian addresses received the most.

The government has meanwhile cracked down on routes for offshoring capital via foreign real estate investments and other assets, leaving cryptocurrency as a possible alternative.

Other contributing factors include uncertainty as to how Beijing’s forthcoming national cryptocurrency will impact the private digital asset market. Chainalysis suggests that this may be driving China’s cryptocurrency community “to move portions of their holdings overseas.”

Source: Central News Agency, August 22, 2020
https://www.cna.com.tw/news/acn/202008220203.aspx

Briefings | | |   Economy/Resources