Commentary on Political Economy

Saturday 28 September 2019


China’s repressive reach is growing

Ethnic Uighur demonstrators hold portraits of family members they say have gone missing during a demonstration against China in Istanbul on Feb. 23.  (Umit Bektas/Reuters)
By Editorial Board
September 28 at 6:37 am Taiwan Time
IT’S ONE thing to know that China runs a far-flung system of detention camps for Muslim Uighurs, a fact of which the world has been aware for the past two years. It’s quite another to see that system in operation. And now we have that kind of visual evidence, in the form of a clandestinely recorded video showing hundreds of Uighur men, handcuffed and gripped by armed guards, being marched through a train station in their native region of Xinjiang. The video has been authenticated by Nathan Ruser, a satellite analyst at the Australian Strategic Policy Institute, a government-supported think tank. Mr. Ruser said it was made in mid-2018 and depicts the transfer of prisoners from one center, in Kashgar, on China’s far western border, to a new facility near Korla, 600 miles deeper into the Chinese interior. Australia’s foreign minister, Marise Payne, called the newly released images “deeply disturbing,” and they certainly are that — as well as a powerful counter to the Beijing government’s claims that it is merely offering Uighurs educational and job-training opportunities to de-radicalize a population prone to terrorism.
Actually, China is engaged in a wide-ranging effort to root out and crush the ancient culture of the Uighurs, who are ethnically Turkic and religiously Muslim. In addition to mass detention, the means employed include arrests, torture and disappearance of political and cultural leaders, as well as technological surveillance of the general population. Xinjiang has always been a “restive” province, loath to submit to domination and colonization by the remote Communist Party authorities in Beijing. But the systematic crackdown occurring now goes well beyond what past isolated acts of anti-government violence might possibly justify.
Indeed, President Xi Jinping seems bent on ending or at least limiting any independent commitment to a belief system other than the one embodied in official Communist Party propaganda. His government’s next target appears to be the 10-million-member Muslim Hui minority, who live not in Xianjiang but in Gansu province, and who have no particular record of separatism or extremism. As The Post’s Gerry Shih reports, government agents have begun purging the Huis’ region of visible symbols of Islam, such as mosque domes and minarets. Arabic script signage has been banned in public spaces, as have sales of the Koran. Some liken what’s happening to the anti-religious frenzies of the Cultural Revolution, but Mr. Xi enforces ideological conformity bureaucratically, not via Red Guard mobs.
China’s systematic anti-Muslim campaign, and accompanying repression of Christians and Tibetan Buddhists, may represent the largest-scale official attack on religious freedom in the world. Other governments must not remain silent. The Trump administration’s condemnations have ebbed and flowed, depending on President Trump’s interest in courting Mr. Xi for trade concessions. Mr. Trump is not alone: Many Western countries’ economic interests dictate their China policies.

There was a welcome moment of U.S. toughness on the sidelines of the U.N. General Assembly on Tuesday, however, when the United States led more than 30 countries, along with nongovernmental organizations, in condemning what a State Department official called the “horrific campaign of repression.” Former Chilean president Michelle Bachelet, the United Nations’ top human rights official, is demanding unrestricted access to China. She should get it but probably won’t, because, when it comes to China’s official cover stories, seeing is disbelieving.


Yang Hengjun: detained blogger is being shackled in chains and interrogated

Sources describe concerning treatment akin to ‘a convicted criminal awaiting execution’
Published:04:00 Sat 28 September 2019
The Australian political blogger and novelist, Yang Hengjun, is being shackled in chains and interrogated inside a Beijing detention centre, and told by authorities he could face the death penalty for espionage.
Detained in China since January, Yang continues to protest his innocence to authorities and says he can clear his name if he is able to speak with senior officials in the Chinese government.
Speaking exclusively to the Guardian, multiple sources have described Yang’s conditions inside the ministry of state security detention centre in Beijing, where he was moved in July before being formally charged. Investigations in his case are continuing and could last until March next year.

Strict conditions inside the detention centre

Yang, a former Chinese government diplomat-turned-“democracy pedlar” who ran a popular and influential blog, has not been allowed access to a lawyer, and has not been permitted to speak with his family. He has received no letters, but has been given two Xi Jinping books.
Chinese officials have cited national security concerns for denying him access to his legal team for more than seven months.
Embassy officials have passed a bible and family photographs to detention centre authorities but it’s unknown if these have been passed to Yang.
He is allowed to shower once a week, and has access to a small enclosure outside his cell – with access to fresh air and natural light – for one hour, twice a day.
He is able to drink water when he needs it, and can purchase additional food, including fruit, biscuits, and chocolate.
He shares his cell with two other prisoners. The lights are on in the cell at all times.
Yang is taken from his cell once a week for interrogation, for up to four hours at a time. His hands and feet are shackled with heavy chains during questioning.
Investigators from the ministry of state security have reportedly told him he is shackled because of the seriousness of the crimes he is alleged to have committed. He has been told he potentially faces the death penalty.
The current investigative phase of his case, which began when he was formally charged on 23 August, could last up to seven months, until March of next year.

Defence hindered by lack of access

Yang’s Beijing lawyer Mo Shaoping told the Guardian he and his colleagues had not been able to see Yang, nor received any updates from authorities since his formal arrest in August.
Mo said they have applied five or six times to meet Yang but were refused because the case involves state secrets and their applications must be approved by China’s state security organ.
“What we are doing now is still asking for meeting him. If the lawyers cannot meet him, we cannot understand the case. You have to meet him before you can do the defence work,” he said.
In Australia, Yang’s former doctoral supervisor Dr Feng Chongyi said there appeared to be no evidence Yang has ever been engaged in espionage, and that the charges against him were politically motivated.
“He continues to protest his innocence. This is important, after many months in detention he insists he is innocent and believes he can clear his name. But his future is still very unclear.”
Feng, an associate professor in China Studies at the University of Technology Sydney, said Yang had not previously been restrained in manacles during interrogations.
“I am very concerned that his hands and feet are being shackled during interrogations, as though he is a convicted criminal awaiting execution.”
The Guardian understands none of Yang, his legal team, or the Australian embassy have been told the specific charges against him, or presented with any evidence of his alleged offending.
The Criminal Law of the PRC details punishment for “crimes of endangering national security”.
Collusion with foreign states to harm China’s territorial integrity, sovereignty or security attracts a prison term of at least 10 years.
“State organ personnel”, such as diplomats, who defect and endanger national security can be jailed for between five and 10 years.
But crimes that endanger national security, that have caused “particularly serious harm to the country and the people”, and where “the circumstances are particularly vile”, can attract the death penalty.
Yang was formerly a diplomat for China’s ministry of foreign affairs, before working in the private sector in Hong Kong and moving to Australia, then to the US. A novelist under the nom de plume Wei Shi, he has been a popular blogger, political commentator and agitator for democratic reforms in China for more than a decade.
Yang, who became an Australian citizen in 2002, had been living in the United States, where he was a visiting scholar at Columbia University, before flying to Guangzhou with his family in January. His wife and child were able to enter China, but authorities escorted Yang from the plane into detention.
He was initially held under a system known as “residential surveillance at a designated location”, a type of secret detention of up to six months in which authorities can deny a suspect access to lawyers and to family, and restrict external communication. In July Yang was moved to a Beijing detention centre in the lead-up to being charged. He is allowed one half-hour consular visit a month.

‘Serious concerns’ for Yang’s welfare

Australia’s foreign minister, Marise Payne, has previously discussed Yang’s case with her Chinese counterpart Wang Yi.
“We have serious concerns for Dr Yang’s welfare, and about the conditions under which he is being held. We have expressed these in clear terms to the Chinese authorities,” Payne said last month.
“It is important, and we expect, that basic standards of justice and procedural fairness are met. I respectfully reiterate my previous requests that if Dr Yang is being held for his political beliefs, he should be released.”
Pointedly, Payne insisted Yang had to be treated in accordance with international human rights law, “with special attention to those provisions that prohibit torture and inhumane treatment, guard against arbitrary detention and that protect the right to freedom of thought, conscience and religion”.
A spokesman for China’s foreign ministry, Geng Shuang, last month said Yang’s arrest had been handled in accordance with the law and that the Australian citizen was in good health.
“China deplores the Australian statement on this case … the Australian side should earnestly respect China’s judicial sovereignty and must not ... interfere with a Chinese case,” he said.
From detention, Yang has pleaded for Australian help.
“Please help me go home as soon as possible,” he said in a message relayed through a consular official.0

Friday 27 September 2019


The White House is weighing a plan to stop Chinese companies listing on US exchanges in a move that would take its trade war with China to Wall Street.
President Donald Trump’s advisers are exploring steps to limit financial investments between the US and China, according to people briefed on the plans. Other options include curbing the ability of US government pension funds to buy Chinese equities.
Beijing is preparing to mark the 70th anniversary of the founding of the People’s Republic of China with a national celebration next week and is due to have new trade talks with the US in October.
A widening of the US-China economic conflict into the arena of capital markets has long been pushed by hawks in Washington, particularly Marco Rubio, the Republican senator from Florida, and like-minded officials within the administration. But it has been resisted by other Trump advisers who fear that it could deal a fresh blow to markets and undermine investor confidence.
The idea prompted a pointed response from one of the largest US stock markets, Nasdaq, which said in a statement: “One critical quality of our capital markets is that we provide non-discriminatory and fair access to all eligible companies. The statutory obligation of all US equity exchanges to do so creates a vibrant market that provides diverse investment opportunities for US investors.”
The US equity benchmark, the S&P 500, turned negative after news of the discussions was first reported by Bloomberg, ending Friday down 0.5 per cent. There was also a sharp fall in the shares of New York-listed Chinese companies and a weakening of the renminbi.
Ecommerce giant Alibaba’s shares were down 5 per cent, search engine Baidu dropped almost 4 per cent and the depository receipts of online retailer were down 6 per cent, respectively.
As of February this year, 156 Chinese companies with a total market capitalisation of $1.2tn were listed on the biggest US stock exchanges, according to the US-China Economic and Security Review Commission, with at least 11 of them being state-owned.
China’s renminbi, traded in offshore foreign exchange markets outside the mainland, weakened by as much as 0.4 per cent, a sizeable move for the currency, but tempered that decline to be 0.2 per cent softer at 7.14 per US dollar.
After a flurry of tariff escalations rattled markets in August, US and Chinese officials have been exploring ways to reduce tensions ahead of next month’s new round of talks.

Any capital markets restrictions by the US would come after China decided this month to scrap caps on foreign purchases of domestic stocks and bonds. Action by the Trump administration could stymie the potential flow of international capital into the Asian country.
“If this most extreme retaliation takes place, we will see the potential for additional escalation,” said Cesar Rojas, Citigroup global economist. “This is another negotiation strategy. It is showing what would be the cost of not co-operating with the US and not giving in to concessions.”


James Politi in Washington and Peter Wells in New York 

The Trump administration is considering aggressive steps to limit financial investments between the US and China, which would represent an escalation in the trade war ahead of a new round of negotiations between the countries next month. According to people familiar with the matter, Donald Trump’s advisers are weighing measures including stopping Chinese companies from listing on US exchanges, and curbing the ability of US government pension funds to make investments in Chinese equities. An expansion of the US economic conflict into the arena of capital markets has long been pushed by China hawks in Washington, particularly Marco Rubio, the Republican senator from Florida, and like-minded officials within the administration. However, it has been resisted by other Trump advisers who fear that it could deal a fresh blow to markets and undermine investor confidence. The Trump administration’s move to actively consider cutting the ties binding China to Wall Street was reported by Bloomberg on Friday, prompting a sharp drop in the shares of New York-listed Chinese companies and a weakening of the renminbi. Alibaba was down 4.2 per cent and Baidu dropped 1.7 per cent. The depository receipts of Tencent and online retailer were down 1.6 per cent and 3.4 per cent, respectively. China’s renminbi, traded in offshore foreign exchange markets outside the mainland, weakened by as much as 0.4 per cent — a sizeable move for the currency — as the news broke. It tempered that decline to be 0.2 per cent softer at 7.1372 per US dollar. After a flurry of tariff escalations rattled markets in August, US and Chinese officials have been exploring ways to reduce tensions ahead of next month’s new round of negotiations, with Beijing moving to boost its purchases of US farm goods in a gesture of goodwill towards Washington. Potential limits would also come in the wake of China’s decision this month it would scrap caps on foreign investors purchases of domestic stocks and bonds. Action by the Trump administration could therefore stymie the potential flow of international capital into the Asian country.

Thursday 26 September 2019


China Still Can’t Break Into FTSE Russell’s Bond Index

Analysts have estimated that an inclusion would bring about $150 billion of inflows into China 

China has been liberalizing its financial markets to help reduce strain on an overstretched banking system. Above, the Shanghai skyline. PHOTO: WANG GANG/ZUMA PRESS
FTSE Russell held off on adding Chinese government bonds to its key benchmarks, saying international investors still had important reservations about investing in the country’s debt markets.
The move contrasts with rulings from JPMorgan Chase & Co. and Bloomberg LP, which are both adding Chinese bonds to some widely followed gauges.
Two Contrasting Yield CurvesChinese government bonds in yuan havehigher yields than their U.S. equivalents.
FTSE Russell hailed significant progress in opening up China’s bond markets, citing changes such as an end to quotas under the Qualified Foreign Institutional Investor program
But the index compiler said investors wanted “improvements to secondary market liquidity, and increased flexibility in [foreign-exchange] execution and the settlement of transactions” before it upgraded China’s market accessibility rating, which determines index inclusion.
In recent years, China has opened up its main interbank bond market to overseas investors, and let foreign firms buy bonds through a Hong Kong trading link known as Bond Connect.
Earlier in September, JPMorgan decided to add Chinese government debt to its indexes. Bloomberg took a similar decision last year, which began to take effect in April.
An upgrade by FTSE Russell would have led to Chinese debt joining its flagship FTSE World Government Bond Index—a benchmark for investment vehicles such as Franklin Templeton’s $33 billion Templeton Global Bond Fund. The next review will be in a year’s time.


Do you think managers of global bond funds should be adding Chinese debt to their portfolios? Join the conversation below.
HSBC analysts have estimated such an inclusion would bring about $150 billion of inflows into China. They estimated the Bloomberg decision was likely to draw a similar amount of money, while JPMorgan’s could lead to roughly $20 billion of inflows.
China has been liberalizing its financial markets to help reduce strain on an overstretched banking system. The country’s leaders are also eager to turn the yuan into a global currency, in part by encouraging central banks to hold more yuan debt in their reserves.
Index inclusions have helped drive foreign interest in Chinese bonds, even as the trade war with the U.S. stretches into its second year and growth has slowed to its lowest in decades.
Foreign ownership of Chinese bonds topped 2 trillion yuan ($280 billion) in June, according to the People’s Bank of China, or about 2.2% of the overall market. International investors hold a higher proportion of government and policy-bank debt.
FTSE Russell, a unit of London Stock Exchange Group , began adding Chinese stocks to its equity benchmarks in June. The initial inclusion of shares is through a three-stage process that will be completed by March.


SHANGHAI—The world’s fastest-growing market for electric vehicles is slowing.
In China, sales of the vehicles declined 5% and 11% year over year in July and August respectively, raising concerns that even in tech-hungry China, EVs could be a hard sell for years to come.
“New-energy vehicles are not selling well,” said a BAIC Motor Corp. salesman surnamed Li recently at a dealership in the western city of Chongqing. “Consumers have concerns about the range, the convenience of charging and the value retention of EVs.”
China remains by far the biggest EV market—1.26 million were sold there last year, 60% of the global total—and most analysts still expect widespread adoption in the long term. But sales have sputtered during a brutal downturn in the broader automobile market.
Chinese vehicle sales fell for the first time in decades last year, declining 3%, before falling 11% in the first eight months of 2019. While EVs initially proved resilient, they, too, have now succumbed to the fragile consumer confidence sapping the Chinese economy.
An official target of two million EV sales in 2020 now looks challenging.
BYD Co. 1211 0.64% , China’s largest seller of EVs, said its EV sales declined 23% in August, after sliding 12% the month before, and the country’s bevy of EV startups is under pressure as the uptick in sales needed to become profitable fails to materialize.
NIO Inc., NIO -5.53% one of the most prominent Chinese startups seeking to dethrone Tesla Inc. as the leader in premium EVs, said Tuesday that it lost $453 million in the second quarter of 2019, bringing its losses over the past two years to $2.61 billion, according to the company’s filings.
The five-year-old company’s New York-listed shares have lost over 80% of their value since March as investors cool on the Chinese EV sector, which had once been a magnet for funding. The Tencent Holdings Ltd. -backed company delivered 6,692 vehicles in the first half of the year, after delivering 7,980 in the final quarter of 2018, underscoring its failure to build momentum.
In its second-quarter report, NIO said Tencent and William Li, NIO’s founder, would each provide $100 million to the company, though at its current rate of cash burn that money would only last about six weeks. Mr. Li blamed “tempered market conditions” for the company’s struggles.
Across China, dealerships desperate to shift inventory have been offering steep discounts on gasoline cars, stunting EV sales. But more critical, people in the industry say, has been the removal of two government props for the EV market. 
The first, subsidies, helped keep the prices of otherwise expensive electric models artificially low. China spent $58 billion on direct and indirect subsidies through 2018, according to the Center for Strategic and International Studies, a U.S. think tank. In July the government drastically reduced subsidies, and next year it will discontinue them.
Second, the government’s resolve to promote EVs appears to have wavered in the face of the greater need to stoke economic growth. Earlier this year it told cities that had imposed limits on gasoline-car purchases to loosen their restrictions to help boost general auto sales. The near impossibility of buying a traditional car had been the clincher for thousands of people who bought EVs in Beijing, Shanghai and other Chinese megacities, but that motivating factor looks like it is being watered down.
In September, the southern city of Guiyang eliminated purchase restrictions. It had previously issued just 2,000 new license plates a month, a limit designed to combat pollution and congestion.
But while momentum may have been lost, Beijing isn’t giving up on EVs. Nor are local governments across China that are counting on EV makers to provide jobs and that have in many cases invested hundreds of millions of dollars in EV startups to support their production.
The government is still forcing all auto makers to start building EVs this year, guaranteeing mass production despite the unattractive economics. Meanwhile, Tesla says it will start producing Model 3 EVs at its new Shanghai plant by December, further cranking up the local EV supply.
Electric vehicles must account for roughly 3%-4% of an auto maker’s Chinese output in 2019, with the level set to rise gradually in subsequent years. Many auto makers including General Motors Co.and Volkswagen AG have announced ambitious EV rollout plans despite the risk the vehicles will be unprofitable, at least at first.
Auto makers have accepted the prospect of having to build unprofitable EVs as a cost of doing business in China, said Jing Yang, an associate director at Fitch Ratings. “Their near-term focus is not on profitability, but rather on increasing production to fulfill the regulatory requirements,” she said.
For many EV makers, profits will be elusive for several years, especially with manufacturers reluctant to pass the cost of subsidy reductions on to consumers for fear of killing the market. Mr. Li, the BAIC dealer, said the company had increased the cost of its EU series EVs—China’s best-selling electric cars this year—by 3,000 yuan, or roughly $420.
But that increase doesn’t begin to fill the hole left by vanishing subsidies. In Shanghai, for example, the maximum subsidies for an EV in 2018 were 90,000 yuan, and this year they have dropped to 25,000 yuan. Next year they will fall to zero.

Wednesday 25 September 2019

HAN CHINESE DOGS! Like People, Like Cars! HAHAHA!

Another Shocker From China’s ‘Tesla Killer’

Chinese electric vehicle maker NIO is losing money on every car it sells and will soon need to raise more cash

Slow LaneNIO's monthly deliveriesSource: the company
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China’s answer to Tesla is in the breakdown lane.
The company, New York-listed electric-vehicle maker NIO Inc.,NIO -20.22% said it lost $483 million last quarter, a 25% greater loss than the previous quarter. That was partly because of a June recall of 4,803 cars—equivalent to around a quarter of those it had ever delivered—for battery problems. Even excluding recall costs, though, NIO’s gross margin was still minus 10.9%.
Further stoking investor anxiety, the company decided to cancel its earnings call scheduled for Tuesday, just hours before it was to take place. NIO’s shares fell 20% in response to the results and the cancellation. The company promptly rescheduled the call for Wednesday.
William Li, chairman and co-founder of NIO Inc., with one of his company’s cars. Mr. Li pumped $200 million into the company this month through convertible bonds. PHOTO: GIULIA MARCHI/BLOOMBERG NEWS
It has been quite the turn of events. Back In March, the company was basking in media glory as it was portrayed by CBS’s “60 Minutes” as a “Tesla killer.” Its share price is now nearly 80% lower and it is laying off a fifth of its staff.
NIO’s current market value of $2.3 billion is less than the amount of money the company has ever raised. That includes a total of $3.5 billion through private fundraising and last September’s initial public offering and another $850 million in convertible bonds following its listing.
The company had around $500 million in cash on its balance sheet as of June, a big drop from the $1.1 billion it reported a quarter earlier. Chinese internet giant Tencent, which owns a 13% stake, and NIO’s own chairman and founder, William Li, pumped another $200 million into the company this month through convertible bonds. At the rate that the company is burning through cash, though, it will likely have to issue more securities soon. 
It will be hard for NIO to drive out of this ditch. It loses money on every car it sells, but demand probably would evaporate if it tried to raise prices. NIO’s sport-utility vehicles fetch around $50,000 to $70,000, about half the price of a Tesla Model X in China, yet they are struggling to attract buyers.
The situation could get worse after the government slashed electric vehicle subsidies by at least 65% in late June. Overall sales of new-energy cars in China, including plug-in hybrids, had been rising steadily but declined in the two months for which there is data following the subsidy cut. Competition has become cutthroat with the appearance of hundreds of Chinese EV startups in the past few years just as foreign brands including Toyota and Volkswagen are launching electric or hybrid cars.
Once looking forward to a bright future, NIO’s investors are now feeling range anxiety.
Write to Jacky Wong at