Chindia Alert: You’ll be Living in their World Very Soon
aims to alert you to the threats and opportunities that China and India present. China and India require serious attention; case of ‘hidden dragon and crouching tiger’.
Without this attention, governments, businesses and, indeed, individuals may find themselves at a great disadvantage sooner rather than later.
The POSTs (front webpages) are mainly 'cuttings' from reliable sources, updated continuously.
The PAGEs (see Tabs, above) attempt to make the information more meaningful by putting some structure to the information we have researched and assembled since 2006.
The African Union headquarters in Addis Ababa is a shiny spaceship-like structure that glistens in the afternoon sun.
With its accompanying skyscraper, it stands out in the Ethiopian capital.
Greetings in Mandarin welcome visitors as they enter the lifts, and the plastic palm trees bear the logos of the China Development Bank.
African Union HQ, Addis Ababa
Everywhere, there are small indications that the building was made possible through Chinese financial aid.
In 2006, Beijing pledged $200m to build the headquarters. Completed in 2012, everything was custom-built by the Chinese – including a state-of-the-art computer system.
For several years, the building stood as a proud testament to ever-closer ties between China and Africa. Trade has rocketed over the past two decades, growing by about 20% a year, according to international consultancy McKinsey. China is Africa’s largest economic partner.
But in January 2018, French newspaper Le Monde Afrique dropped a bombshell.
It reported that the AU’s computer system had been compromised.
The newspaper, citing multiple sources, said that for five years, between the hours of midnight and 0200, data from the AU’s servers was transferred more than 8,000km away – to servers in Shanghai.
This had allegedly continued for 1,825 days in a row.
Le Monde Afrique reported that it had come to light in 2017, when a conscientious scientist working for the AU recorded an unusually high amount of computer activity on its servers during hours when the offices would have been deserted.
It was also reported that microphones and listening devices had been discovered in the walls and desks of the building, following a sweep for bugs.
The reaction was swift.
Both AU and Chinese officials publicly condemned the report as false and sensationalist – an attempt by the Western media to damage relations between a more assertive China and an increasingly independent Africa.
But Le Monde Afrique said that AU officials had privately expressed concerns about just how dependent they were on Chinese aid – and what the consequences of that could be.
In the midst of all of this, one fact remained largely unreported.
The main supplier of information and communication technology systems to the AU headquarters was China’s best-known telecoms equipment company – Huawei.
The company says it had “nothing” to do with any alleged breach.
Huawei “served as the key ICT provider inside the AU’s headquarters”, said Danielle Cave of the Australian Strategic Policy Institute, in a review of the alleged incident.
Huawei headquarters in Shenzhen, China
“This doesn’t mean the company was complicit in any theft of data. But… it’s hard to see how – given Huawei’s role in providing equipment and key ICT services to the AU building and specifically to the AU’s data centre – the company could have remained completely unaware of the apparent theft of large amounts of data, every day, for five years.”
There is no evidence to indicate that Huawei’s telecoms network equipment was ever used by the Chinese government – or anyone else – to gain access to the data of their customers.
Indeed, no-one has ever gone on record to confirm that the AU system was compromised in the first place.
But these reports played into years of suspicions about Huawei – that a large Chinese company might find itself unduly influenced by the Chinese government.
Ren and the rise of Huawei
“When I first started out 30 years ago… we didn’t really have any telephones. The only phones we had were those hand-cranked phones that you see in old World War II films. We were pretty undeveloped then.”
Huawei’s founder and chairman Ren Zhengfei is reminiscing to the BBC about the origins of the world’s second-biggest smartphone firm, while sitting in the Huawei headquarters in Shenzhen – a symbol of the success that he’s worked his whole lifetime for.
A long marbled staircase, covered in plush red carpet, greets you as you first walk in.
At the top of the stairs, a giant painting depicts a traditional Chinese New Year scene.
Inside Huawei’s Shenzhen HQ
A few kilometres away in Dongguan, Huawei’s latest campus is even more eye-catching.
The site – designed to accommodate the company’s 25,000 R&D staff – comprises 12 “villages”, each of which recreates the architecture of a different European city, among them Paris, Bologna and Granada.
It’s as if Silicon Valley had been re-imagined by Walt Disney. Long corridors of Roman pillars and picturesque French cafes adorn the campus, with a train connecting the different areas, running through manicured gardens and past an artificial lake.
It’s a world away from the environment that Mr Ren found himself in when he first started the company in 1987. “I founded Huawei when China began to implement its reform and opening up policy,” he says. “At that time, China was shifting from a planned economy to a market economy. Not only people like myself, but even the most senior government officials, did not have the vaguest idea of what a market economy was. It seemed it was hard to survive.”
Ren was born in 1944 in Southern China – a tumultuous, chaotic place, one of the poorest regions in an already destitute country.
For a long time, hardship was all he ever knew.
He was from a family of seven children. “They were very poor,” says David De Cremer, who has co-written a book on Ren and Huawei.
“I think hardship is something that you can see throughout his life, and which he keeps emphasising himself.”
To escape that life of poverty and drudgery, Ren did what many young Chinese men of that era did. He joined the army.
Soldiers from the People’s Liberation Army, 1972
“I was a very low-ranking officer in the People’s Liberation Army,” he says. “I served in an ordinary construction project, not a field unit. At the time, I was a technician of a company in the military, and then I became an engineer.”
He left the military in 1983 when China began to downsize its forces, and went into the electronics business.
By his own admission, he wasn’t a great businessman at first.
“I was someone who had been in the military all my life at the time, used to doing what I was told,” he says. “Suddenly, I began to work in a market economy. I was at a total loss. So I too suffered losses, I too was deceived, and I was cheated.”
But he was quick to learn, and was a keen student of Western business practices and European history.
“I did research on what exactly a market economy was all about,” he says. “I read books on laws, including those about European and US laws. At that time, there were very few books on Chinese laws, and I had to read those on European and US laws.”
Five years later, he founded Huawei – the name can be translated as “splendid achievement” or “China is able” – to sell simple telecoms equipment to the rural Chinese market. Within a few years, Huawei was developing and producing the equipment itself.
Sometime in the early 90s, Huawei won a government contract to provide telecoms equipment for the People’s Liberation Army.
By 1995, the company was generating sales of around US$220,000, mainly from selling to the rural market.
The following year Huawei was given the status of a Chinese “national champion”. In practice, this meant the government closed the market to foreign competition.
At a time when China’s economy was growing by an average of 10% per year, this was no small advantage. But it was only when Huawei started to expand overseas in 2000, that it really saw its sales soar.
In 2002, Huawei made US$552m from its international market sales. By 2005 its international market contracts exceeded its domestic business for the first time.
Ren’s early days in business instilled in him a desire to protect his company from the whims and fancies of the stock market. Huawei is privately held and employee-owned. This gave Ren the power to plough more money back into research and development. Each year, Huawei spends US$20bn on R&D – one of the biggest such budgets in the world.
“Publicly listed companies have to pay a lot of attention to their balance sheets,” he says. “They can’t invest too much, otherwise profits will drop and so will their share prices. At Huawei, we fight for our ideals. We know that if we fertilise our ‘soil’ it will become more bountiful. That’s how we’ve managed to pull ahead and succeed.”
One story from the early days of the company tells how Ren was cooking for his staff (he loves to cook, or so the story goes). Suddenly he rushed out of the kitchen and announced to the room: “Huawei will be a top three player in the global communications market 20 years from now!”
And that’s exactly what happened. In fact, those ambitions were surpassed.
Today, Huawei is the world’s biggest seller of network telecommunications equipment.
From aspiring to be a company like Apple, it now sells more smartphones than Apple.
But shadows have continued to loom over Huawei’s international success.
Ren and Huawei’s links to the Chinese Communist Party have raised suspicions that the company owes its meteoric rise to its powerful political connections in China. The US has accused Huawei of being a tool of the Chinese government.
It’s an accusation which Ren denies. “Please don’t think that Huawei has become what it is today because we have special connections,” he says. “Even 100% state-owned companies have failed. Do good connections mean you will succeed then? Huawei’s success is still very much due to our hard work.”
The case against
It was 1 December 2018. US President Donald Trump and China’s President Xi Jinping were dining on grilled sirloin followed by caramel rolled pancakes at the G20 summit in Buenos Aires.
They had a lot to discuss. The US and China were in the middle of a trade war – imposing tariffs on each other’s goods – and growth forecasts for both countries had recently been cut as a result. This was adding to the fear of a slowing global economy.
In the event, the two leaders agreed a truce in the trade war, with Donald Trump tweeting that “Relations with China have taken a BIG leap forward!”
Xi Jinping and Donald Trump at dinner, December 2018
But thousands of kilometres north in Canada, an arrest was taking place that would throw doubt on this rapprochement.
Meng Wanzhou, Huawei’s chief financial officer and Ren Zhengfei’s eldest daughter, had been detained by Canadian officials while transferring between flights at Vancouver airport.
The arrest had come at the request of the US, who accused her of breaking sanctions against Iran.
“When she was detained, as her father, my heart broke,” says Ren, visibly emotional. “How could I watch my child suffer like this? But what happened, has happened. We can only depend on the law to solve this problem.”
Meng Wanzhou being driven to court in Canada
Huawei’s problems were just beginning. Nearly two months later, the US Department of Justice filed two indictments against Huawei and Ms Meng.
Under the first indictment, Huawei and Ms Meng were charged with misleading banks and the US government about their business in Iran.
The second indictment – against Huawei – involved criminal charges including obstruction of justice and the attempted theft of trade secrets.
Both Huawei and Ms Meng deny the charges.
January 2019: Acting US attorney general Matthew Whittaker announces charges against Huawei and Meng Wanzhou
The charge of stealing trade secrets centres on a robotic tool – developed by T-Mobile – known as Tappy.
According to legal documents, Huawei had tried to buy Tappy, a device which mimicked human fingers by tapping mobile phone screens rapidly to test responsiveness.
T-Mobile was in partnership with Huawei at the time, but it rebuffed the Chinese firm’s offers, fearing it would use the technology to make phones for T-Mobile’s competitors.
It’s alleged that one of Huawei’s US employees then smuggled Tappy’s robotic arm into his satchel so that he could send its details to colleagues in China.
After the alleged theft was discovered, the Huawei employee claimed that the arm had mistakenly fallen into his bag.
Huawei claimed that the employee had been acting alone, and the case was settled out of court in 2014. But the latest case is built on email trails between managers in China and the company’s US employees, linking Huawei management to the alleged theft.
The indictment also details evidence of a bonus scheme from 2013, offering Huawei employees financial rewards for stealing confidential information from competitors.
Huawei has denied any such scheme exists.
Meng Wanzhou, photographed in 2014
This is not the first time that Huawei has been accused of stealing trade secrets. Over the years companies like Cisco, Nortel and Motorola have all pointed the finger at the Chinese firm.
But US fears about Huawei are about much more than industrial espionage. For more than a decade, the US government has seen the company as little more than an arm of the Chinese Communist Party.
These concerns have been brought to the fore with the advent of “fifth generation” or 5G mobile internet, which promises download speeds 10 or 20 times faster than at present, and much greater connectivity between devices.
As the world’s biggest telecoms infrastructure provider, Huawei is one of the companies best placed to build new 5G networks. But the US has warned its intelligence partners that awarding contracts to Huawei would be tantamount to allowing the Chinese spy on them.
US Secretary of State Mike Pompeo recently cautioned against Huawei, saying, “If a country adopts this and puts it in some of their critical information systems, we won’t be able to share information with them.”
US Secretary of State Mike Pompeo
The UK, Germany and Canada are reviewing whether Huawei’s products pose a security threat.
Australia went a step further last year, and banned equipment suppliers “likely to be subject to extrajudicial directions from a foreign government”.
Huawei was not mentioned by name, but Danielle Cave of the Australian Strategic Policy Institute says the company posed a national security risk because of its government links.
She cites an article in Chinese law that makes it impossible for any company to refuse to help the Chinese Communist Party in intelligence gathering.
“Admittedly, what is missing from this debate is the smoking gun,” she says.
“For the average person who has a Huawei smartphone it’s not a big deal. But if you’re a Western government that has key national security to protect – why would you allow this access to a company that is in the political system that China is in?”
For his part, Ren says that Huawei’s resources have never and would never be used to spy for the Chinese government.
“The Chinese government has clearly said that it won’t ask companies to install backdoors,” he says. A “backdoor” is a term used to describe a secret entry point in software or a computer system that gives access to the person or entity who installed it to the inner workings of the system.
“Huawei will not do it either,” he continues. “Our sales revenues are now hundreds of billions of dollars. We are not going to risk the disgust of our country and our customers all over the world because of something like that. We will lose all our business. I’m not going to take that risk.”
Xi’s China
Zhou Daiqi is Huawei’s chief ethics and compliance officer.
He’s been with the company for nearly 25 years, in a number of different positions – chief engineer, director of the hardware department, head of the research centre in Xi’an, according to his biography on the company’s website. He is also understood to combine his high-ranking executive duties with another role – party secretary of Huawei’s Communist Party committee.
All companies in China are required by law to have a Communist Party committee.
Zhou Daiqi’s profile on Huawei’s website
The official line is that they exist to ensure that employees uphold the country’s moral and social values. Representatives of the committee are also often tasked with helping workers with financial problems.
But critics of China’s one-party system argue that they allow the state to exert control on corporate China. And they say the level of this control has increased in recent years.
“[President] Xi Jinping is exerting greater control over the business community in China,” says Elliott Zaagman, who regularly advises Chinese companies on their PR strategy. “As these companies gain power and influence overseas, the party doesn’t want to lose control over them.”
Ren, however, argues that the role of Huawei’s Communist Party committee is far less important than many in the West believe.
“[It] serves only to educate its employees,” he says. “It is not involved in any business decisions.”
In China, most chief executives are Communist Party members.
Every year, they dutifully turn up to the National People’s Congress along with local and national party chiefs, officials and chief executives.
It’s where the big economic decisions are voted on – although no proposal is put forward which hasn’t already been agreed upon.
Still, big CEOs come to show their commitment to the party, and to contribute to working papers that are meant to help the government understand the concerns of the business community.
Being a member of the party is very much a networking opportunity – in the way one would join a business association.
Elliott Zaagman argues that this is a system that demands loyalty.
“There is no separation from the party and the state,” he says.
“The system in China encourages the lack of transparency in companies like Huawei.”
The worry is that these close links mean that if the Communist Party asked a company to do something, they would have no choice but to comply.
And if that company is one that is involved in sensitive global telecoms infrastructure projects, it’s easy to see why Western observers would be worried.
There is no evidence to indicate that Huawei is in any way under the orders of the Chinese government, or that Beijing has any plans to dictate business plans and strategy at Huawei – particularly when it comes to spying.
But the way in which the Chinese Communist Party has robustly defended Huawei has raised questions about how independent the company is of its influence.
For example, Beijing stated that Ms Meng’s detention was a rights abuse .
And while her extradition case to the US was moving forward, China detained two Canadian citizens and accused them of stealing state secrets. Critics say the detentions are linked to Ms Meng’s arrest.
December 2018: Chinese police patrol outside Canada’s embassy in Beijing
While not commenting on the arrest of the Canadians, Ren says China’s defence of Huawei is understandable.
“It is the Chinese government’s duty to protect its people,” he says. “If the US attempts to gain competitive edge by undermining China’s most outstanding hi-tech talent, then it is understandable if the Chinese government, in turn, protects its hi-tech companies.”
Over the past few years, there have been signs of a bigger push by the government to get private companies, and in particular tech firms, to cooperate with party rules – even when they are firmly resistant.
A Didi Chuxing logo adorns a building in Hangzhou, China
China’s ride-hailing giant Didi Chuxing’s troubles are an example of the struggles Chinese firms face when they try to uphold their independence in the face of government pressure.
Chinese attitudes to data collection and data privacy are different to those in the West – many people don’t care if businesses have access to their data, arguing that it adds to the convenience of life and work.
Government access to data in China is not the free-for-all that many outside of China assume it to be
Samm Sacks, CSIS
So it wasn’t unusual when, after the murders of two of its passengers by Didi drivers, regulators used the scandal to force Didi to share more corporate data with the government. But Didi resisted – citing customer privacy. Under Chinese law, it had no choice but to comply.
When it did, it handed over “three boxes of data printed on paper, including 95 hard copies for authorities to review”.
According to Samm Sacks of the Center for Strategic and International Studies (CSIS), the case demonstrates that “government access to data in China is not the free-for-all that many outside China assume it to be”.
She says this indicates that there appears to be “a kind of tug of war between the government and companies over data”.
How this plays out will determine how Chinese companies are viewed by foreign governments when they do business overseas.
Companies like Huawei have grown up in a system where to survive and thrive they needed strong links to the Chinese government – there was and is no other choice. But these links could harm their reputation abroad.
“It’s two different systems,” says Zaagman. “Think of it like an electrical outlet. China’s plug doesn’t fit in to the outlets we have in the West.”
What’s at stake
“Basically you want to connect to everything that can be connected.”
Zhu Peiying, head of Huawei’s 5G wireless labs, is showing off devices that can connect to the new technology. From a smart toothbrush that collects data about how well you brush your teeth, to a smart cup that reminds you when you should drink some water, this is a world where everything you can think of is being measured and analysed.
At its most sophisticated, everything in entire cities would be connected – driverless cars, the temperature of buildings, the speed of public transport – the list is endless.
Huawei is thought to be a year ahead of its competitors in terms of its technological expertise and what it can offer customers, according to industry sources.
It’s also thought that the company can offer prices that are about 10% cheaper than its competitors, although critics claim this is because of state support.
Ren dismisses this, saying that Huawei doesn’t receive government subsidies.
He says the real reason behind the US resistance to Huawei is its superior technology.
“There’s no way the US can crush us,” he says. “The world needs Huawei because we are more advanced. Even if they persuade more countries not to use us temporarily we could just scale things down a bit.”
Many analysts say that Huawei’s exclusion from US networks could actually cause the US to fall behind in its 5G capabilities.
“It would mean we wouldn’t be able to participate in any blended network [using Huawei] in Europe or Asia,” says Samm Sacks of CSIS. “That would put us at a significant disadvantage.”
What this would mean in reality is a world of two internets – or what analysts are calling a “digital iron curtain” – dividing the world into parts that do business with Chinese companies like Huawei, and those that don’t.
Because of US pressure on its allies, Huawei has been on an aggressive public relations campaign to win over customers and government stakeholders.
In recent days, Vodafone’s boss Nick Read called on the US to share any evidence it has about Huawei, while Andrus Ansip, the European Commission’s vice president for the digital single market, said in a tweet that he had met with Huawei’s rotating CEO to discuss the importance of being open and transparent, as they explored ways of working together.
But suspicions about Huawei remain.
One security firm reports a sharp rise in inquiries by Asian government clients about Huawei.
“Some have asked us how much they should worry about whether Huawei is really a liability,” says an analyst who consults to Asian governments, on condition of anonymity.
Ren is sanguine about such concerns.
“For countries who believe in them [suspicions about Huawei] we will hold off,” he says. “For countries who feel Huawei is trustworthy, we may move a little faster. The world is so big. We can’t walk across every corner of it.”
But this is about more than just one company or one CEO and his family.
Increasingly, this is perceived as a battle between two world orders, and which one is the future.
In the early days of China opening up, US presidents like George HW Bush espoused the merits of engagement.
“No nation on Earth has discovered a way to import the world’s goods and services while stopping foreign ideas at the border,” he said in a 1991 speech. “Just as the democratic idea has transformed nations on every continent, so, too, change will inevitably come to China.”
1989: George HW Bush in Beijing – he encouraged economic engagement with China
Previous US administrations believed that economic engagement in China would lead to China following a freer, more “liberal” path.
There’s no denying China has made remarkable strides in the past 40 years. The economy grew by an annual average of 10% for three decades, helping to lift 800 million people out of poverty. It is now the second-largest economy in the world, only surpassed by the US.
Some estimates put China’s economy ahead of America’s by 2030.
It achieved this while maintaining one-party rule and the supremacy of the Communist Party.
But its success has raised concerns that it is only possible with a huge amount of government control over the country’s companies. The fear is that control could be used to achieve the Communist Party’s goals – which are at this point unclear.
“It’s a double-edged sword for China,” says Danielle Cave. “[Because of its laws] the Chinese Communist Party has made it virtually impossible for Chinese companies to expand without attracting understandable and legitimate suspicion.”
Added to this, China has become more authoritarian under Xi Jinping’s rule.
President Xi Jinping
“Xi is systematically undermining virtually every feature that made China so distinct and helped it work so well in the past,” writes Jonathan Tepperman, editor in chief of Foreign Policy.
“His efforts may boost his own power and prestige in the short term and reduce some forms of corruption. On balance, however, Xi’s campaign will have disastrous long-term consequences for his country and the world.”
But Ren dismisses this, insisting that China is more open than ever before.
“If this meeting took place 30 years ago,” he says of our interview, “it would have been very dangerous for me. Today, I can be straightforward when answering difficult questions. This shows that China has a more open political environment.”
Still, Ren is hopeful of the direction China will take in the future.
“China has more or less tried to close itself off from the outside world for 5,000 years,” he says. “Yet we had found ourselves poor, lagging behind other nations. It was only in the past 30 years since Deng Xiaoping opened China’s doors to the world that China has become more prosperous. Therefore, China must continue to move forward on the path of reform and opening-up.”
In one of Huawei’s vast campus sites across Shenzen, lies a man-made lake. Swimming in these serene waters are two black swans.
There is a story that Ren put the birds here to remind employees of “black swan” events – unpredictable and catastrophic financial eventualities that are impossible to prepare for. He dismisses this as an urban myth, but it’s hard not to read something into it.
For Huawei, and Ren, these are highly uncertain times with no way of telling what lies ahead.
BEIJING (Reuters) – China’s exports likely contracted in February after a surprise bounce in January, while imports fell for a third straight month, a Reuters poll showed, heightening anxiety over whether Washington and Beijing can resolve deep differences over trade.
China’s exports in February are expected to have fallen 4.8 percent from a year earlier, according to the median estimate of 32 economists in a Reuters poll, following a 9.1 percent rise in January.
Such a drop would be the biggest since December 2016, and suggest a further weakening in global demand.
Imports in February are expected to have fallen 1.4 percent from a year earlier, compared with the previous month’s 1.5 percent decline.Stronger-than-expected imports could prompt some China watchers to say the economy is showing signs of bottoming out in response to a string of stimulus measures in 2018.
But most analysts typically caution that China’s data early in the year can be highly distorted by the timing of the Lunar New Year holidays, when some business rush out shipments or scale back output before shutting for a extended break. As such, analysts’ estimates for February varied widely.
TRADE DEAL NOT A SILVER BULLET
In recent weeks, the United States and China appear to have moved closer to a trade deal that would roll back tit-for-tat tariffs on each others’ goods, with Beijing making pledges on structural economic changes, a source briefed on negotiations said on Sunday.
But President Donald Trump will reject any pact that is not perfect, Secretary of State Mike Pompeo said this week.
Even if concrete steps such as dismantling tariffs are agreed, it would not be a panacea for all of China’s economic woes. Its exporters would have to piece supply chains back together, win back market share and contend with slowing demand globally.
Factory surveys have suggested exports and imports will remain weak in coming months, with February’s official gauge showing export orders fell to their weakest level since the global financial crisis.
China’s overall trade surplus is seen to have shrunk sharply to $26.38 billion in February from $39.16 billion the previous month, according to the Reuters poll.
In response to growing domestic and global pressure, China’s government this week unveiled a 2019 economic growth target of 6.0-6.5 percent, down from an actual 6.6 percent in 2018, the slowest pace in nearly 30 years.
China to slash taxes, boost lending to prop up slowing economy
Premier Li Keqiang told parliament on Tuesday that China will shore up the economy through billions of dollars in additional tax cuts and infrastructure spending, and will lower real interest rates.
“A set of pro-growth measures are planned despite positive progress in U.S.-China trade talks, which makes us think that either China doesn’t have full confidence in a trade truce or that the damages from the trade conflict cannot easily be undone,” said Iris Pang, Greater China economist at ING.
WASHINGTON (Reuters) – U.S. President Donald Trump said he had asked China to immediately remove all tariffs on U.S. agricultural products because trade talks were progressing well.
He also delayed plans to impose 25 percent tariffs on Chinese goods on Friday, as previously scheduled.
“I have asked China to immediately remove all Tariffs on our agricultural products (including beef, pork, etc.) based on the fact that we are moving along nicely with Trade discussions,” Trump said on Twitter, pointing out that he had not raised tariffs on Chinese goods to 25 percent from 10 percent on March 1 as planned.
“This is very important for our great farmers – and me!” Trump said.
Farmers are a key constituency for Trump’s Republican Party, and the U.S. president’s trade war with China has had a heavy impact on them. Beijing imposed tariffs last year on imports of soybeans, grain sorghum, pork and other items, slashing shipments of American farm products to China.
U.S. Agriculture Secretary Sonny Perdue said this week that U.S. trade negotiators had asked China to reduce tariffs on U.S. ethanol, but it was not immediately clear whether Beijing was willing to oblige.
Trump’s post on Twitter came several hours after the U.S. Trade Representative’s office said that it would delay the scheduled hike in tariffs on $200 billion worth of Chinese goods.
The notice, due to be published in the Federal Register next Tuesday, says it is “no longer appropriate” to raise the rates because of progress in negotiations since December 2018. The tariff would remain “at 10 percent until further notice.”
In a statement on Saturday, China said it welcomed the delay.
Speaking at a separate briefing in Beijing, a Chinese government official said both countries were working on the next steps, though he gave no details.
“China and the United States reaching a mutually-beneficial, win-win agreement as soon as possible is not only good for the two countries, but is also good news for the world economy,” said Guo Weimin, spokesman for the high profile but largely ceremonial advisory body to China’s parliament.
A tariff increase to 25 percent from 10 percent was initially scheduled for Jan. 1, but after productive conversations with Chinese President Xi Jinping, the Trump administration issued a 90-day extension of that deadline.
Trump had said on Sunday he would again delay the increase because of progress in the talks.
President Donald Trump has said that the US and China are “very very close” to signing a trade agreement, potentially ending the long-running feud between the two countries.
Mr Trump told US governors on Monday that both nations “are going to have a signing summit”.
“Hopefully, we can get that completed. But we’re getting very, very close,” he said.
It follows a decision to delay imposing further trade tariffs on Chinese goods.
Mr Trump’s decision to delay tariff increases on $200bn (£153bn) worth of Chinese goods was seen as a sign that the two sides were moving ahead in settling their damaging trade war.
Last week, Mr Trump noted progress in the latest round of negotiations in Washington, including an agreement on currency manipulation, though no details were disclosed.
Sources told CNBC on Friday that China had committed to buying up to $1.2 trillion in US goods, but there had been no progress on the intellectual property issues.
Image copyrightAFPImage captionPresident Trump met China’s Vice Premier Liu He on Friday
Gregory Daco, chief US economist at Oxford Economics, said: “We had anticipated such a delay and believe a handshake agreement in which China will promise to import more agricultural products, work towards a stable currency and reinforce intellectual property rights protection will be achieved in the coming weeks.
“However, we don’t foresee a significant rollback of existing tariffs, and see underlying tensions regarding China’s strategic ambitions, its industrial policy, technological transfers and ‘verification and enforcement’ mechanisms remaining in place.”
What has happened in the trade war so far?
Mr Trump initiated the trade war over complaints of unfair Chinese trading practices.
That included accusing China of stealing intellectual property from American firms, forcing them to transfer technology to China.
The US has imposed tariffs on $250bn worth of Chinese goods, and China has retaliated by imposing duties on $110bn of US products.
Mr Trump has also threatened further tariffs on an additional $267bn worth of Chinese products – which would see virtually all of Chinese imports into the US become subject to duties.
Image copyrightAFPImage captionPresident Trump met China’s Vice Premier Liu He on Friday
President Donald Trump has announced that the US will delay imposing further trade tariffs on Chinese goods.
The rise in import duties on Chinese goods from 10% to 25% was due to come into effect on 1 March.
Mr Trump said both sides had made “substantial progress” in trade talks, which sent Chinese stocks up nearly 5%.
He added that he was planning a summit with Chinese President Xi Jinping in Florida to cement the trade deal if more progress was made.
A report from China’s official news agency Xinhua also noted “substantial progress” on specific issues such as technology transfer, intellectual property protection and agriculture.
Mr Trump’s decision to delay tariff increases on $200bn (£153bn) worth of Chinese goods was seen as a sign that the two sides are making progress on settling their damaging trade war.
Last week, Mr Trump noted progress in the latest round of negotiations in Washington, including an agreement on currency manipulation, though no details were disclosed.
Sources told CNBC on Friday that China had committed to buying up to $1.2 trillion in US goods, but there had been no progress on the intellectual property issues.
What has happened in the trade war so far?
Mr Trump initiated the trade war over complaints of unfair Chinese trading practices.
That included accusing China of stealing intellectual property from American firms, forcing them to transfer technology to China.
The US has imposed tariffs on $250bn worth of Chinese goods, and China has retaliated by imposing duties on $110bn of US products.
Mr Trump has also threatened further tariffs on an additional $267bn worth of Chinese products – which would see virtually all of Chinese imports into the US become subject to duties.
SEOUL/HANOI (Reuters) – North Korean leader Kim Jong Un made his way across China by train on Sunday, media reported, bound for a high-stakes second nuclear summit with U.S. President Donald Trump in Vietnam’s capital of Hanoi.
Few details of Kim’s trip have been announced but he left Pyongyang by train on Saturday afternoon for the Feb. 27-28 summit accompanied by senior North Korean officials as well as his influential sister, North Korea’s state media reported.
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Trump and Kim will meet in Hanoi eight months after their historic summit in Singapore, the first between a sitting U.S. president and a North Korean leader, where they pledged to work towards the complete denuclearisation of the Korean peninsula.
With little progress since then, the two leaders are expected to focus on what elements of North Korea’s nuclear programme it might begin to give up, in exchange for U.S. concessions.
In rare, revealing coverage of Kim’s travel, while it is still going on, the North’s Rodong Sinmun newspaper featured photographs of him getting a red-carpet send-off in Pyongyang and waving from a train carriage door while holding a cigarette.
He was accompanied by top officials also involved in the Singapore summit, including Kim Yong Chol, a former spy chief and Kim’s top envoy in negotiations with the United States, as well as senior party aide Ri Su Yong, Foreign Minister Ri Yong Ho and defence chief No Kwang Chol.
The North Korean leader’s sister, Kim Yo Jong, who acted as a close aide in Singapore, is again part of the delegation, the North’s KCNA news agency reported. It made no mention of his wife, Ri Sol Ju.
The extensive coverage in the secretive North’s official media was a contrast to the limited reporting that has traditionally prevailed during his foreign trips.
Other senior officials, such as his de facto chief of staff Kim Chang Son and Kim Hyok Chol, negotiations counterpart to U.S. envoy Stephen Biegun, were already in Hanoi to prepare for the summit.
With scant progress since the June summit, the two leaders are likely to try to build on their personal connection to push things forward in Hanoi, even if only incrementally, analysts said.
Both sides are under pressure to forge more specific agreements than were reached in Singapore, which critics, especially in the United States, said lacked detail.
“They will not make an agreement which breaks up the current flow of diplomacy. (President Trump) has mentioned that they’ll meet again; even if there is a low-level agreement, they will seek to keep things moving,” said Shin Beom-chul, a senior fellow at the Asan Institute for Policy Studies.
LEARNING FROM VIETNAM
The Trump administration has pressed the North to give up its nuclear weapons programme, which, combined with its missile capabilities, poses a threat to the United States, before it can expect any concessions.
North Korea wants an easing of punishing U.S.-led sanctions, security guarantees and a formal end of the 1950-1953 Korean War, which ended in a truce, not a treaty.
Few details of summit arrangements have been released.
Some lamp posts on Hanoi’s tree-lined streets are decked with North Korean, U.S. and Vietnamese flags fluttering above a handshake design, and security has been stepped up at locations that could be the summit venue, or where the leaders might stay.
It could take Kim at least 2-1/2 days to travel to Vietnam by train.
Some carriages of a green train were spotted at Beijing’s station on Sunday, but it was not confirmed it was Kim’s.
South Korea’s Yonhap news agency said Kim’s train had passed through a station in China’s port city of Tianjin, southeast of Beijing, at around 1 p.m. (0500 GMT).
China has given no details of his trip. Its foreign ministry did not immediately respond to a request for comment.
Two top North Korean officials who were not in Singapore but will be in Hanoi are Kim Phyong Hae and O Su Yong, vice chairmen of the party’s Central Committee, respectively in charge of personnel management and industrial affairs, KCNA reported.
O is a former minister of electronics and vice minister of metals and machine building. He might try to learn about Vietnam’s development of manufacturing, analysts said.
Kim Jong Un may tour some economic facilities while in Vietnam.
Vietnam, like North Korea, fought a war against the United States and keeps tight control over its people and economy. It has been touted as a model for North Korea’s development.
Vietnamese media reported that a North Korean cargo plane arrived on Sunday carrying personnel who appeared to be Kim’s security guards and state media workers. They were driven under police escort to a downtown hotel.
WASHINGTON (Reuters) – President Donald Trump said on Friday there was “a very good chance” the United States would strike a deal with China to end their trade war and that he was inclined to extend his March 1 tariff deadline and meet soon with Chinese President Xi Jinping.
U.S. and Chinese negotiators had made progress and will extend this week’s round of negotiations by two days through Sunday, Trump told reporters at the White House as he met with his top negotiators and their counterpart, Chinese Vice Premier Liu He.
“I think that we both feel there’s a very good chance a deal will happen,” Trump said.
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Liu agreed there had been “great progress”.
“From China, we believe that (it) is very likely that it will happen and we hope that ultimately we’ll have a deal. And the Chinese side is ready to make our utmost effort,” he said at the White House.
The Republican president said he probably would meet with Xi in March in Florida to decide on the most important terms of a trade deal.
Extending the deadline would put on hold Trump’s threatened tariff increase to 25 percent from 10 percent on $200 billion of Chinese imports into the United States. That would prevent a further escalation in a trade war that already has disrupted commerce in goods worth hundreds of billions of dollars, slowed global economic growth and roiled markets.
Optimism that the two sides will find a way to end the trade war lifted stocks, especially technology shares. The S&P 500 stock index reached its highest closing level since Nov. 8. Oil prices rose to their highest since mid-November, with Brent crude reaching a high of $67.73 a barrel. [.N] [O/R]
CURRENCY AGREEMENT
Trump and Treasury Secretary Steven Mnuchin said the two sides had reached an agreement on currency. Trump declined to provide details, but U.S. officials long have expressed concerns that China’s yuan is undervalued, giving China a trade advantage and partly offsetting U.S. tariffs.
Announcement of a pact aimed at limiting yuan depreciation was putting “the currency cart before the trade horse,” but would likely be positive for Asian emerging market currencies, said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York.
“How can you agree to avoid excessive Chinese yuan depreciation or volatility if you have not made an agreement on trade that could have huge FX implications?” Ruskin asked in a note to clients.
In a letter to Trump read aloud by an aide to Liu at the White House, Xi called on negotiators to work hard to strike a deal that benefits both country.
Trump said a deal with China may extend beyond trade to encompass Chinese telecommunications companies Huawei Technologies and ZTE Corp.
The Justice Department has accused Huawei of conspiring to violate U.S. sanctions on Iran and of stealing robotic technology from T-Mobile US Inc.
Chinese peer ZTE was last year prevented from buying essential components from U.S. firms after pleading guilty to similar charges, crippling its operations.
MEMORANDUMS NO MORE
Trump appeared at odds with his top negotiator, U.S. Trade Representative Robert Lighthizer, on the preliminary terms that his team is outlining in memorandums of understanding for a deal with China. Trump said he did not like MOUs because they are short term, and he wanted a long-term deal.
“I don’t like MOUs because they don’t mean anything,” Trump said. “Either you are going to make a deal or you’re not.”
Lighthizer responded testily that MOUs were binding, but that he would never use the term again.
Reuters reported exclusively on Wednesday that the two sides were drafting the language for six MOUs covering the most difficult issues in the trade talks that would require structural economic change in China.
Negotiators have struggled this week to agree on specific language within those memorandums to address tough U.S. demands, according to sources familiar with the talks. The six memorandums include cyber theft, intellectual property rights, services, agriculture and non-tariff barriers to trade, including subsidies.
An industry source briefed on the talks said both sides have narrowed differences on intellectual property rights, market access and narrowing a nearly $400 billion U.S. trade deficit with China. But bigger differences remain on changes to China’s treatment of state-owned enterprises, subsidies, forced technology transfers and cyber theft of U.S. trade secrets.
Lighthizer pushed back when questioned on forced technology transfers, saying the two sides made “a lot of progress” on the issue, but did not elaborate.
The United States has said foreign firms in China are often coerced to transfer their technology to Chinese firms if they want to operate there. China denies this.
The U.S. Chamber of Commerce on Friday urged the U.S. government to ensure the deal was comprehensive and addressed core issues, rather than one based on more Chinese short-term purchases of goods.
China has pledged to increase purchases of agricultural produce, energy, semiconductors and industrial goods to reduce its trade surplus with the United States.
China committed to buying an additional 10 million tonnes of U.S. soybeans on Friday, U.S. Agriculture Secretary Sonny Perdue said on Twitter. China bought about 32 million tonnes of U.S. soybeans in 2017. The commitments are a “show of good faith by the Chinese” and “indications of more good news to come,” Perdue wrote.
China was the top buyer of U.S. soybeans before the trade war, but Beijing’s retaliatory tariffs on U.S. soybeans slashed business that had been worth $12 billion annually.
Opinion piece in major state media outlets is seen to be part of Beijing’s efforts to reassure its citizens that the tariff war with the United States will soon be over
A Chinese delegation led by Vice-Premier Liu He is expected to leave on Tuesday for the American capital after last week’s trade talks in Beijing produced ‘progress’
China applauds ‘positive’ Donald Trump tweet ahead of Washington talks
18 Feb 2019
China and US make ‘progress’ but talks to head to Washington next week
16 Feb 2019
Chinese President Xi Jinping urged for a “mutually beneficial” trade deal in this week’s talks when he met US trade representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin in Beijing on Friday, according to Xinhua. Photo: Xinhua
A tweet by US President Donald Trump on the ongoing trade war is a “positive” signal, brightening prospects of a deal from this week’s talks in Washington, according to an opinion piece published by China’s major state media outlets on Monday.
Monday’s opinion piece was published the day before a Chinese delegation led by Vice-Premier Liu He is expected to leave for talks in Washington.
In the tweet on Sunday, Trump said: “Important meetings and calls on China trade deal, and more, today with my staff. Big progress being made on soooo many different fronts! Our country has such fantastic potential for future growth and greatness on an even higher level!”
The opinion piece, which was published by the official Xinhua news agency, the People’s Daily and the Global Times under the pseudonym Niu Tanqin, is seen to be part of Beijing’s efforts to reassure its citizens that the trade war with the United States will soon be over.
It did contrast previous columns on Trump by the same author, who in March last year argued that China dislikes the American president for his “insatiable demands, greediness and lack of trust worthiness”.
Last week’s trade talks in Beijing produced “progress” ahead of the March 1 deadline, which could see tariffs on US$200 billion worth of Chinese products increased from 10 per cent to 25 per cent if the world’s two largest economies fail to reach a deal.
The outcome of the talks in Washington, which are likely to be the last before March 1, will largely decide whether China and the United States can reach a pact, likely in the form of a memorandum of understanding, to suspend the tariff battle that has been roiling global markets and clouding growth prospects since last year.
According to the opinion piece, Trump’s use of “soooo” instead of “so” indicated that the US president was excited when he heard reports from his trade envoys following the talks in Beijing, which Chinese President Xi Jinping attend on Friday.
Donald J. Trump
✔@realDonaldTrump
Important meetings and calls on China Trade Deal, and more, today with my staff. Big progress being made on soooo many different fronts! Our Country has such fantastic potential for future growth and greatness on an even higher level!
“The US side is attaching great importance [to the trade talks]. Although Trump is on vacation, he listened to relevant reports and he definitely will make specific instructions,” it added.
Trump has been upbeat about the prospects of reaching a trade deal with China, and said on Friday at the White House: “It’s going extremely well.”
Chinese President Xi urged for a “mutually beneficial” trade deal in this week’s talks when he met US trade representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin in Beijing on Friday, according to Xinhua.
Stocks in China and Hong Kong surged on Monday, partly bolstered by the increased likelihood of a trade deal between China and the United States.
Monday’s opinion piece fits into the latest official line that an agreement is very likely to end the tariff war after the Global Times said over the weekend that the bilateral trade talks are “sprinting” towards a positive end.
Donald Trump’s demands ‘good for China’, says economist Jin Keyu
Meanwhile, reports in China suggest differences between Beijing and Washington still remain over forced technology transfer, intellectual property rights, cyber theft as well as a verification system to ensure China keeps its promises.
Xi told the US trade envoys that China is willing to “cooperate” but “cooperation has principals”, a statement showing that Beijing will not entertain US demands if it finds such demands violate China’s principals.
A White House statement on Friday said that “much work remains”, showing gaps still exist.
German Chancellor Angela Merkel makes appeal to Beijing at Munich Security Conference as Washington prepares to leave INF treaty
But China’s top diplomat Yang Jiechi says nation’s missiles are defensive, do not pose a threat
Chinea’s top envoy Yang Jiechi chats to German Foreign Minister Heiko Maas at the Munich Security Conference. Photo: AP
China on Saturday rejected German Chancellor Angela Merkel’s appeal to join a cold war-era arms control treaty that the United States accuses Russia of breaching, saying it would place unfair limits on its military.
Fearing a nuclear arms race between China, Russia and the US after the collapse of the Intermediate-Range Nuclear Forces (INF) treaty, which the US is withdrawing from, Merkel made her call for a global treaty.
“Disarmament is something that concerns us all and we would of course be glad if such talks were held not just between the United States, Europe and Russia but also with China,” she told the Munich Security Conference.
Is China about to abandon its ‘no first use’ nuclear weapons policy?
Russia and the United States are the signatories to the 1987 INF treaty that bans land-based missiles with a range between 500km (310 miles) and 5,500km, and which US President Donald Trump started the six-month withdrawal from this month, blaming Russian violations.
Moscow denies any wrongdoing, but the US and its Nato allies want Russia to destroy its 9M729 nuclear-capable cruise missile system, which Washington says could allow Russia to strike Europe with almost no warning.
Merkel’s suggestion of involving China in a negotiation is seen by European Nato diplomats as a potential way out of the impasse because a new treaty could address American concerns about a growing military threat from China and Russia.
But China’s top diplomat Yang Jiechi, who spoke on a panel in Munich, said that Chinese missiles were defensive.
“China develops its capabilities strictly according to its defensive needs and doesn’t pose a threat to anybody else. So we are opposed to the multilateralisation of the INF,” he said.
China’s stated ambition is to modernise its People’s Liberation Army by 2035, improve its air force and push into new technologies including very high speed cruise missiles and artificial intelligence.
Its defence budget grew nearly 6 per cent between 2017 and 2018, according to the London-based International Institute for Security Studies.
Chinese scientists make progress on nuclear submarine communication
Retired Chinese general Yao Yunzhu told delegates a new arms control agreement would only work if it included sea- and air-launched missiles, as well as land, because most of China’s military technology was ground-based and the country would not want to put itself at a disadvantage.
Cheaper to build, more mobile and easier to hide, ground-based rocket launchers are an attractive option for China as it develops its armed forces, experts said, whereas the United States operates more costly sea-based systems to comply with the INF.
“China is traditionally a land power and the Chinese military is a ground force,” Yao said.
“If China is to enter into these kinds of negotiations, I think it ought to be more comprehensive to include not only land-based but also air and sea-based strike capabilities … and that would be hugely complicated,” she said.
The usual cast of characters were back at the negotiating table, trying to find a way to stem another round of US tariff increases that were stayed in December after the Buenos Aires G20 meeting between US President Donald Trump and Chinese President Xi Jinping.
US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer were back in Beijing, where they again sat across the table from Vice-Premier Liu He, China’s lead trade negotiator. The US delegation also met Xi himself at the end of the talks on Friday.
Both nations said they had made progress to settle their disputes, but admitted there were still difficult issues to deal with. Negotiators will continue the talks in Washington next week.
The stakes are clear and the clock is ticking. The two sides need to arrive at an understanding by March 2, the day on which Trump has said he will move forward with an increase in tariffs.
At least that was the idea. In recent days, Trump has made multiple remarks that suggest the March deadline is anything but absolute. He has hinted he would be open to pushing it back if he sensed that a deal was around the corner. Reports have even suggested the White House is considering another 60-day extension of the tariff truce.
Already articulated US concerns cover a broad range of Chinese practices. The ideal short-term measures the American side would like to see include unconditional market access for US firms in China; a less insulated environment for state-owned enterprise decision making; greater regulatory transparency; and fairer legal protections for American businesses in China.
As with so many aspects of the Trump administration’s foreign policy, the US president’s personality is taking over the process, leaving his deputies who are doing the negotiating in a disadvantageous position. For China, the obvious answer then becomes not to discuss the nuances of what kinds of structural reform might be necessary with Lighthizer, but to simply get Xi in the room with Trump.
This mirrors the lesson that North Korea’s Kim has taken away over the course of nearly a year of negotiations with the US. Instead of expending any serious diplomatic capital in a detail oriented negotiation with the secretary of state or the president’s special representative, the key is to simply meet Trump and work out high-level arrangements mano a mano.
In this climate, we can’t expect a real resolution on the core issues. Everything from American misgivings about Beijing’s interventionist industrial policies that protect Chinese enterprises to broader structural shifts in the nature of the US-China economic relationship since the turn of the century are on the table today – and they’ll stay there.
Xi and Trump may well find a temporary way out of the impasse, giving global investors the runway necessary to avert the panic that would likely ensue if the US pushed ahead with a tariff increase on US$200 billion in Chinese goods. Even if China doesn’t quite give the United States a down payment on structural reforms, Xi can promise Trump that he will chip away at the trade deficit while leaving untouched the issues that a more detail oriented negotiator like Lighthizer might zero in on.
If there is a “win-win” outcome here, it would be for Trump and Xi to find an agreeable arrangement that would allow the US president to walk away looking tough to his base while leaving China’s core, long-term industrial policy trajectory unharmed. That would strip away any remaining negotiating leverage the US side might have within the trade war, and it’s not unlikely.
CHINDIA ALERT: You'll be living in their world, very soon 
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