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China Securities Regulatory Commission to Include “Party Development Work” into Corporate Articles of Publicly Traded Companies

On June 15, the China Securities Regulatory Commission published a revision to the existing “Corporate Governance of Public Traded Companies” and solicited public opinion to be submitted for a period of one month. Described as “important content on the Corporate Governance for companies with Chinese Characteristics,” the revised governance required that publicly traded companies “strengthen the efforts to develop the party” and include the requirement that relevant party development work be included in the company’s articles of incorporation. According to a Financial Times report, over 30 State Owned Companies worth a total of US$1.15 trillion revised their corporate article last year to “place the Party at the central position of the company.” A Voice of America (VOA) article reported that, shortly after China’s accession to the WTO in 2001, the Communist Party’s control was formally introduced into the private sector. The official China Daily reported last year that nearly 70% of China’s approximately 1.86 million private companies have party organizations. In the past decade, party branches have been established in more and more foreign companies in China. The VOA article further quoted the comments from two Chinese scholars who stated that Chinese leaders don’t have a clear idea of where China’s economy is headed. On the one hand, Xi Jinping wants to promote the ideology from Mao’s era and let the party lead everything; on the other hand he wants to maintain China’s current economic status with the hope that state-owned enterprises will become bigger and stronger. The private sector, the most vigorous component of China’s economy, is gradually dying. Many private companies have been transferring their assets overseas but some of the top names like Wang Jianling, Guo Guangchang, Xiao Jianhua and Wang Xiaohui ended up being arrested and their money was confiscated. Therefore, according to one economist that the VOA quoted, “party development” work will not improve the financial challenges that SOEs face; nor will it become a “protection umbrella” for private business owners.

1. Voice of America, June 15, 2018
2. China Securities Regulatory Commission, June 15, 2018

Taiwan United Daily News: Four Possible Outcomes of the China U.S. Trade War

Trump announced on June 15 that the U.S. will impose US$50 billion in tariffs on Chinese products. Taiwan’s United Daily News published an article on June 16 and listed four possible outcomes of the China-U.S. trade war. A summary follows:

1. Both sides take a step back: This would have been possible a month ago. Secretary of the Treasury Mnuchin announced that the U.S. would put the trade war on hold while the U.S. accepted China’s increase in the purchase of U.S. products. That scenario fell by the wayside a few days later and both parties are back at ground zero. Currently it is unlikely that both parties will reach an agreement. The U.S. wants China to focus on structural change and stop forcing U.S. companies operating businesses in China to transfer their technology while Beijing will not make any concessions that result in major changes to its path to “Made in China 2025.”

2. China Makes Concessions: Xi Jinping has repeatedly expressed his desire to defend the current global trade order and promote economic restructuring. Once a trade war occurs, it will interfere with the Chinese government’s economic management work. In May, China’s economic performance already started to slow down. The most favorable situation for the U.S. is that China retreats on the issue of science and technology and becomes open to more imports of U.S. products and services.

3. The U.S. Makes Concessions: Although Trump boasted that he is a great “negotiator,” his record on foreign negotiations conducted after he took office is still lacking. China understands that Trump has always bluffed and he is quite satisfied with the rise in the stock market and the enthusiasm for the economy. The list of items involved in China’s revenge includes a series of agricultural products such as soybeans, sorghum, and cotton, which will be a major blow to states that are agricultural. It is the agricultural states that generally supported Trump in the 2016 election. Therefore, Trump’s current action may be suggesting that he not only wants to continue negotiations, but also wants to solve short-term problems first, rather than long-term problems.

4. The U.S. and China start the Trade War: Both parties may not be able to solve the problem soon and the situation may change rapidly. Both parties are reluctant to show weakness. Trump gets a lot of support from the “rust belt” traditional industrial states and these states have been heavily hit by “globalization.” As the U.S. Congress is about to hold a mid-term election in November, he must appease his political base.

Xi Jinping’s long-term strategy is to make China a global technology leader. If the U.S. requires China to make a systematic change to its basic economic model, it may put both parties in a state of long-term tension. In the past, the U.S. asked China to relax control of the steel making industry but achieved limited results.

Bloomberg’s economists expect that the direct impact of the trade war on the economic growth of the two sides will be limited. However, the harm incurred will intensify if it hurts corporate and consumer confidence. A trade war may harm American laborers, farmers, and consumers. Although it has not reached that point, it has caused anxiety. Once a major conflict occurs, the consequences will be difficult to reverse.

Source: United Daily News, June 16, 2018

Sohu: China’s Hard Counterattack on U.S. Imposed Trade Tariffs Conveys Four Meaningful Signals

Liu Hong, whose pen name is “Bull Piano” in Chinese, wrote a commentary article that Sohu published. Liu graduated from the Department of International Business at Nanjing University and has worked as a reporter for Xinhua for a long time. Now he is the deputy chief editor of Xinhua‘s “Global Magazine.” The article stated that China has made it clear that its bottom line is that, “It firmly defends its national interests and the interests of the people and resolutely defends economic globalization and the multilateral trading system.” The fact that China made an immediate tough counterattack on the U.S. imposed tariff of US$50 billion worth of Chinese products conveyed four meaningful signals. Below is a translation of the summary:

1. China predicted a long time ago that Trump would not easily give up on a trade war. Therefore China’s trade negotiation team was well prepared for the uncertainty of the U.S. counterpart. China shouldn’t expect that Trump will be sympathetic toward China because of his arrogant personality, the rise of populism, and the anti-globalization wave back in the U.S. Trump is very clear that, as the mid-term election is approaching, launching a trade war against China will help to increase his support. In order to win more votes, Trump will not easily give up the trade war with China.
2. China is very clear that, if someone crosses its red line, China will launch a hard counterattack. China does not want to be in a trade war and has exercised maximum patience and restraint. However, China is facing Trump who is unpredictable. As a matter of fact, the most uncertainty that China faces right now is the uncertainty of the White House. China should be clear that the end results of the trade war will hurt both sides. China will pay a big price but, in the long run, this is for China’s national interest.
3. China is ready to face the trade war. Without enough courage, without sufficient research and judgment, and without its growing power, China would not be able to withstand Trump’s intimidation. Trump launched the trade war against China to win more votes. The items on the tariff product list from the U.S. will have a limited impact on the livelihood of the people in the U.S. The trade war will impact China but the effect will be limited and manageable. Therefore, China has the confidence, ability, and experience to deal with the trade war.
4. The U.S. is turning the whole world into enemies. Trump is attacking almost all of his trade partners and threatening them with tariffs. This practice of completely ignoring the rules of the WTO is in fact extremely destructive to free trade around the world, to economic globalization, to the multilateral trading system, and to the global industrial chain. The U.S. has positioned itself against the interests of humanity and is forcing other countries to come together to resist the bullying behavior of the U.S. This could end up being a global trade war with the U.S. on one side against those countries against whom the U.S. has transgressed. China will become the most determined defender of globalization and the U.S. will be a troublemaker. It is a fact that the U.S. has the hard power and is still the strongest {country} in the world. However, the arrogant practices of the U.S. have even terrified the world. The U.S. will lose its moral influence and fall sharply from its leading position in the world. The change may not be obvious in the short term but the summer of 2018 could be a major turning point on the world stage.

Source: Sohu, June 15, 2018

Sinchew: Myanmar Worried about Losing Port of Kyaukpyu to China

Major Singapore newspaper Sinchew recently reported that the Myanmar government is in the middle of re-evaluating a Chinese investment project to develop a deep-water port at the Port of Kyaukpyu. The project is part of China’s One Belt One Road initiative; the total investment was estimated to be US$9 billion. The Myanmar government is deeply concerned about the high cost and what a potential debt default could lead to. Based on what has happened elsewhere, Myanmar may lose control of Kyaukpyu. Sources inside the Myanmar government reported that negotiations are going on with China to reduce the cost of the project. Kyaukpyu is located in west Myanmar’s Rakhine Province. That port offers China a direct path to the Indian Ocean from Southwest China, bypassing the Strait of Malacca. If started, the Port of Kyaukpyu development project will be the largest infrastructure project in Myanmar’s history. The project is also located at the starting point of an oil and gas pipeline station leading to China’s Yunnan Province.

Source: Sinchew, June 4, 2018

China Has Slowly Obtained South China Sea Control

The well-known Chinese newspaper in North America, the World Journal, recently published a commentary on the South China Sea. The commentary started with pointing out that, while the world’s attention has been on trade wars and the North Korean nuclear talks, China has consistently been increasing its military presence in the South China Sea. Analysts expressed the belief that China must have surmised that, no matter how upset the United States became, it would not start a real war with China over the South China Sea issues. China has been deploying military equipment in the South China Sea for quite some time now. That includes communication equipment, radar interference facilities and air defense missiles. Although the U.S. warned about “serious consequences” on China’s continuous militarization activities, China did not seem to stop its plan. China’s ultimate goal has been to change the status quo in the South China Sea. Quietly, it has largely achieved that goal in a short period of time – to the point that China has obtained actual control of that region without winning a naval war against the U.S.

Source: World Journal, June 3, 2018

China Had 57 Percent Increase in Crude Oil Imports from the U.S.

Well-known Chinese news site Sina recently reported that the China Customs Administration just released the numbers on crude oil imports for the first quarter of this year. According to the official data, China had a year-over-year 57 percent increase in crude oil imports from the United States. Also, based on the same data, the U.S. crude oil weight in China’s total crude oil imports increased to 2.5 percent in the first quarter. This new development is positive for the China-U.S. trade relationship, as well as China’s goal of diversifying oil suppliers. China is currently the second largest buyer of U.S. crude oil. However, China’s two largest oil suppliers are still Russia and Saudi Arabia. At this moment, the United States has domestic bottlenecks and limitations in its capacity for pipeline deliveries as well as port loading capacity limitations for its rapidly increasing oil export volume.

Source: Sina, June 7, 2018

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