Chinascope – Page 304

China’s Chip Maker Saw Its Stock Price Fall; Lost 24 Percent in First Week

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that China’s top semiconductor manufacturer SMIC had its IPO in Shanghai on July 16. One week later, the stock price dropped by 24 percent. SMIC’s stock in the Hong Kong Stock Exchange fell 33 percent at the same time. With the United States imposing sanctions on Huawei, SMIC is Huawei’s only hope for its critical chip supply. However, SMIC’s technology is three generations behind the market leader – Taiwan’s TSMC, which was Huawei’s primary chip manufacturer. SMIC, headquartered in Shanghai, voluntarily withdrew from the U.S. stock market in June 2019. Between 2005 and 2010, SMIC was accused of stealing TSMC’s intellectual property and settled the lawsuit by paying TSMC nearly US$400 million and surrendered eight percent of its company’s stock to TSMC.

Source: Sina, July 25, 2020
https://bit.ly/3g4065E

Briefings | | July 29, 2020 | Information/Technology

Apple’s Second Largest Supplier Plans Move to India

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that Pegatron, Apple’s number two manufacturing supplier, is setting up a new factory in India. Pegatron has been looking for a proper location for at least its partial iPhone manufacturing capabilities. Now the company has reportedly registered a branch in India. Another place of interest for Pegatron was Northern Vietnam. Among the three Apple iPhone manufacturers (the other two are Foxconn and Wistron), Pegatron is the only one that does not manufacture in India. Half of Pegatron’s business depends on orders from Apple. The new Pegatron branch was registered in Chennai in eastern India. However, the actual factory location is still being discussed with multiple Indian provincial governments. Once settled, Pegatron will move its equipment. The Indian government has been pushing its “Made in India” strategy for a while now. Back in June, the Indian government announced a US$6.6 billion plan to attract top cellphone manufacturers to invest in India. The goal is to reach a US$190 billion cellphone manufacturing capacity by 2025. India’s current smartphone industrial output is only US$24 billion.

Source: NetEase, July 18, 2020
https://tech.163.com/20/0718/14/FHQSSEPI00097U7S.html

Briefings | | July 28, 2020 | Geo-Strategic Trend Information/Technology

The Powers Behind Tomorrow Holding Fought Back against Xi Jinping’s Take-Over

Xiao Jianhua is the owner of Tomorrow Holding (trading as the Tomorrow Group), a diversified investment company involved with banking, insurance, real estate development, coal, cement and rare earth minerals. He was involved in crashing China’s stock market in 2015, which was called a “financial coup” against Xi Jinping. He was abducted in Hong Kong and taken back to China in 2017. His whereabouts are unknown.

On July 17, the China Banking and Insurance Regulatory Commission announced it would take over four insurance companies and two trusts from Tomorrow Holding. The China Securities Regulatory Commission also commissioned four institutes to oversee three securities and commodity companies from Tomorrow Holding. Thus, the authorities have taken over all of Tomorrow Holding’s nine core companies in the insurance, trust, and securities fields, with total assets of over 1.2 trillion yuan (US $ 171 billion).

According to New Fortune, a company that specializes in evaluating Chinese financial service companies, Tomorrow Holding holds stocks in 44 financial companies, whose collective financial assets are over 3 trillion yuan (US $430 billion).

On July 18, Tomorrow Holding published a “Solemn Statement” on WeChat. It stated that the authorities “spared no effort to push for the takeover” and questioned the authorities’ underlining agenda. The statement was removed a few hours later.

Tomorrow Holding’s “Solemn Statement” stated that the company has been fully cooperative with the authorities’ investigation since Xiao Jianhua was arrested in 2017. It received several hundred billion yuan through the disposal of assets and overseas remittances and also raised nearly 300 billion yuan, and thus it paid in full the principle and interest of the wealth management insurance product of the Tianan Property Insurance Co. (so there was no financial risk with the company).

It also pointed out that the regulatory commissions sent “Research and Investigation Teams” into each institute to monitor them closely. The authorities deprived the institutes off operational autonomy, did not allow them to conduct business normally or expand operations, and did not allow employees to enter and leave the company normally. It tried to force the institutes into a state that would “trigger the conditions for a takeover.”

It also stated that the group will report this to the relevant authorities.

He Chun, a Chinese scholar in the China University of Political Science and Law, told Radio Free Asia in an interview, “It is unusual that Tomorrow Holding could issue the statement. Ordinary private business could never do this. We know that the company is not supported by the current leader, but obviously there are political force(s) supporting it. This force is not just a ministerial-provincial level official; it has to be high enough to challenge the top official.”

There are comments that Zeng Qinghong is the power behind Tomorrow Holding. Zeng was the former Vice President of China and the right-hand man of Jiang Zemin, the former Chinese Communist Party (CCP) head. Xi Jinping’s taking over the core assets of Tomorrow Holding is like ransacking Zeng Qinghong’s home and confiscating his assets.

Independent commentator Wen Zhao said that Xiao Jianhua managed the Tomorrow Holding not only for Zeng Qinghong, but also for several other top ranking officials. Xi Jinping faces strong internal political pressure at the upcoming annual Beidaihe meeting, where the top leaders, both current and retired, will meet to discuss the overall situation that the CCP faces. Xi wants to confiscate the money bag of the top officials as leverage.

Elmer Yuen, a Hong Kong businessman expressed that there is severe infighting among the CCP’s top leaders. The retired former top leaders are pressing Xi Jinping. Xi is pushing Jiang Zemin and his faction to bring back the money that they pocketed earlier. Now that Xi has control over the military, public security, and the armed police, his next battle is the financial power. To take back the financial power, Xi has shown he is willing to destroy Hong Kong and ruin the economy.

Sources:
1. Apple Daily, July 18, 2020
https://hk.appledaily.com/finance/20200718/37PUZ3FTGEGF6D22DVFFM5BWXU/
2. Radio Free Asia, July 21, 2020
https://www.rfa.org/mandarin/yataibaodao/gangtai/ql1-07212020062426.html
3. Have8.tv, July 23, 2020
https://news.have8.tv/2617231.html

Briefings | | July 28, 2020 | Economy/Resources Government/Politics

RFA Chinese: China’s First Half Year Government Fiscal Deficit Jumped Significantly

Radio Free Asia (RFA) Chinese Edition recently reported that, according to official government numbers, China’s fiscal situation has worsened significantly. In the first half of this year, the fiscal deficit reached a record RMB 3.4 trillion (around US$485 billion). Expenditures exceeded income by 26.6 percent. Experts expect this gap to expand to 30 to 40 percent in the second half of the year. Government income saw an 8.6 percent decline, year-over-year, while government investments increased by 0.6 percent, which is the only hope to sustain the economy. At the same time, national and local government bond issuance reached record highs of 46.2 percent and 22.9 percent, respectively. Four years ago, most economists expressed the concern that, if the local bonds reached RMB 24 trillion, it would become a “nuclear bomb” for the Chinese economy. Now the number has reached RMB 24 trillion and is still growing. In the meantime, personal income tax revenue increased by 2.5 percent, while the largest tax revenue, the Value-Added Tax (VAT), declined by 19.1 percent, and the second largest tax revenue, the Corporate Income Tax, declined by 7.2 percent, year-over-year.

Source: RFA Chinese, July 22, 2020
https://www.rfa.org/mandarin/Xinwen/wul0722a-07222020055450.html

Briefings | | July 27, 2020 | Economy/Resources

CCP Scholar: CCP Can Cut Down the Number of U.S. Diplomatic Staff if U.S. Closes another Consulate

On July 24, The United States closed the Chinese Consulate in Houston, Texas. Assistant Secretary of State for East Asian and Pacific Affairs David R. Stilwell said the consulate was the command center for Beijing to develop students and spies and to gather economic and military intelligence.

Recently, Cai Wei, China’s Consul General in Houston, along with two other Chinese diplomats brought a few passengers to the boarding gate of a special flight that the Chinese government arranged for Chinese citizens at the Houston airport. However, the birthdate on one of the traveler’ ID cards was incorrect.

On July 21, the Chinese staff started burning things inside the consulate. The flames and smoke from the fires was visible from outside. Firefighters were called to come to the scene, but the consulate didn’t let them in.

Beijing closed the U.S. Consulate in Chengdu City, Sichuan Province, in retaliation.

However, Huanqiu (the Global Times), a hawkish state-controlled media with a strong anti-America attitude, published an article on July 24, showing a softer tone.

It quoted from Lv Xiang, a researcher at the Institute of American Studies, Chinese Academy of Social Sciences, that from the perspective of confronting China, it is not impossible for the U.S. to close more Chinese consulates (e.g. the San Francisco Consulate). Beijing can consider responding by cutting down the number of U.S. diplomatic staff, especially the staff doing intelligence work in Hong Kong.

However, the article did not suggest closing another U.S. consulate as a reciprocal countermeasure.

Source:
1. BBC, July 22, 2020
https://www.bbc.com/zhongwen/simp/world-53496291
2. Huanqiu, July 24, 2020
https://world.huanqiu.com/article/3zBMqPJ9Tl8

Briefings | | July 27, 2020 | US-China Relations

Wechat Article: How Can China Win the Sino-US Technology War If the Chinese Academy of Sciences Is in Constant Trouble?

On June 15, 90 out of 180 researchers from the Institute of Nuclear Energy Safety Technology of the Hefei Institute of Material Science, Chinese Academy of Sciences quit their job on the same day. The news topped the search results in China for a number of days. The Chinese Academy of Sciences website announced that Vice Premier Liu He was urged to launch an investigation into the incident. On July 17, the party cell of the Chinese Academy of Sciences formed a special task team and arrived at the Hefei Institute for an on-site investigation. The initial public information suggested that the incident was related to the former head of the Hefei Institute because most of the researchers went to join him at a different nuclear energy and technology research institution called the “Frontier Development of Science (中科凤麟 http://www.fds.org.cn).” Tencent posted a question asking for comments on why 90 scientists left the Hefei Institute. One of the answers received most of the “likes.” It stated, “There have been no scientific research achievements there even though the institute has a big name. All you do is flatter other people and run unrelated chores including playing volleyball with the boss. Front-line researchers who want to display their talents don’t have the opportunity. People are sidelined if they do not cater to the leadership. Those who couldn’t stand it all left.”

In recent years, there have been an increasing number of research institutions that have not been able to retain talented people. People often complain about receiving low pay and benefits, lacking career advancement, working under high pressure, having long working hours, and dealing with complicated guanxi (inter-personal networks) and bureaucracy. According to the data from the Minister of Science and Technology, China’s total R&D investment in 2019 was 2.17 trillion yuan (US$0.31 trillion). This accounted for 2.19 percent of GDP, which is roughly equivalent to the EU average. However there have been increases in news reports on mishandling and waste of the R&D funding as well as excessive overhead, which is allocated to support a multi-layer bureaucratic system.

A Wechat article stated that, as Huawei is battling with an Eight-Nation Alliance, the failure rate of rocket launches is significantly higher than it was in the prior year and the U.S. could block jet engine purchases. People are therefore concerned about how China can win the Sino-US technology war if the Chinese Academy of Sciences is in constant trouble.

Source: Wechat, July 21, 2020
https://mp.weixin.qq.com/s?__biz=MzA3NzIxNzI4Mw==&mid=2671013850&idx=2&sn=cedd23c72e121395e92dc42a365c79b1&chksm=8595a4b6b2e22da0d34de58461f97316196f5eced680c6ce0236c61143002988e43daa8db0ed&scene=27#wechat_redirect

Briefings | | July 26, 2020 | Information/Technology

World Outbreak: California Church Network Sued Governor Newsom over Ban on Worship

On July 17, a network of California churches filed a lawsuit against California Governor Newsom, against his announcement to close or suspend indoor activities at many facilities, including places of worship.

The churches believe that the worship service has “been essential for 2,000 years.”

It also challenged Newsom for having a double standard in banning the indoor church service while state officials had been encouraging protests.

Mat Staver, founder and chairman of Liberty Counsel, representing Harvest International Ministry in the lawsuit, said in a statement on the lawsuit: “Newsom encourages tens of thousands of people to gather for mass protests, he bans all in-person worship and home Bible studies and fellowship. Such repression is well-known in despotic governments, and it is shocking that even home fellowship is banned in America.” “This outrage will not stand!”

On July 15, three Northern California churches, including Calvary Chapel of Ukiah, Calvary Chapel of Fort Bragg, and River of Life Church in Oroville, filed a lawsuit, seeking to block Newsom’s July 1 ban on singing in houses of worship to stop the spread of coronavirus.

China’s Reaction to Trump’s Election Win

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

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

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