The Month in U.S.-China Relations 中美关系一个月 (September 2017)

Last September at the G20 Summit in Hangzhou, the United States and China traded jabs over the South China Sea and ratified climate deals. One year later, America has withdrawn from the Paris climate deal and North Korea is the issue in the U.S.-China relationship. But as President Trump becomes more distracted by Pyongyang and his domestic challenges, Beijing continues to press its claims in the South China Sea. The BBC reported on July 23rd that Vietnam terminated a gas-drilling expedition about 250 miles off its southeast coast “following strong threats from China.” In August, a Philippine lawmaker released photos of Chinese vessels surrounding a disputed atoll in the Spratly island chain—presumably to block access. (The Asia Maritime Transparency Initiative confirmed the presence of nine Chinese fishing ships and two naval/law enforcement vessels near the Spratly’s on the day in question). This month, the Washington Beacon reported on the shift in China’s legal justification for its claims in the South China Sea from the “nine-dash line” narrative to the “Four Sha”. Although the writers at Lawfare argue that “China’s legal justification for the Four Shas is just as weak, if not weaker, than its Nine-Dash Line claim,” these moves illustrate Beijing’s commitment to prevailing in the region. Maintaining stability and appearing as a strong leader will consume General Secretary Xi until the conclusion of the upcoming 19th Party Congress on October 18th.

Sandy Pho

Senior Program Associate

Kissinger Institute on China and the United States

Major Issue Tracker

China as an Emerging Superpower

China Merchants Buys Control of Brazil's Most Profitable Port (September 3): The purchase of Brazil’s most profitable port terminal, for about 2.9 billion reais ($924 million), is a sign of growing interest in assets across Latin America’s largest economy. Related: Panama Can Be Strategic Point to Bring Belt-Road Initiative to Latin America; China Invests US$30 Billion in Attempt to Bring Haiti into ‘Silk Road’.

What Chinese Scholars Think About the North Korea Crisis (September 3): This Chinese survey analysis classifies Chinese scholars by their recommended policy prescription, falling under three basic approaches: 1) limited support for North Korea; 2) favoring North Korea; or 3) cutting ties with North Korea. Bottom line: There isn’t one view in China. Related: China’s Hawks Find their Voice as Kim Infuriates Beijing (subscription); Can War Be Prevented on Korean Peninsula?; Divisive, Fragmented Policy Towards North Korea Fuels Spiraling Tensions; Time to Prepare for the Worst in North Korea; China's Central Bank Tells Banks to Stop Doing Business with North Korea; China to Close North Korean Firms Under UN Sanctions.

Nepal and China Fast Track Rail Link in Aftermath of Sino-Indian Border Row (September 7): Premier Li Keqiang’s trip is his fourth in two years and comes as China tries to expand its influence in the landlocked Himalayan country. Related: China Builds Road to Nepal Border, Sets Up Flag

California Resolution Shelved After Chinese Opposition (September 8): The symbolic resolution condemning persecution of Falun Gong practitioners was shelved after lawmakers received a letter from the Chinese consulate warning the measure would be detrimental to relations between California and China…Read More>>

Is China Leaping Past Us? (September 11): Daniel Kilman and Harry Krejsa argue: With little notice in Washington, Beijing has quietly become an innovative superpower. They outline how to respond to the challenge. Related: China is Leaving Donald Trump’s America Behind (subscription).

Lotte to Sell China Stores as THAAD-Linked Consumer Ire Smolders (September 15): The South Korean conglomerate saw its China retail business plummet amid THAAD backlash, with revenue generated from hypermarkets in China down nearly 95% to 21 billion won ($22 million). Related: Ghost Stores, Lost Billions as Korea Inc's China Woes Grow.

Chinese Firm’s Stake in Ukraine Military Aircraft Engine Maker ‘Frozen’ (September 16): Motor Sich is one of the world’s largest high-powered aircraft and helicopter engine manufacturers. According to the South China Morning Post, the acquisition of its technologies could be strategically valuable to Chinese scientists and engineers.

China Rushes to Surpass U.S. in Decoding Citizens’ Genes (September 20): According to the Wall Street Journal (subscription), China has raced ahead with amassing human genetic samples, while the U.S. is still preparing precursory infrastructure needed to formally begin that process. However, China’s haste is outpacing its ability to iron out basic procedural details, such as where the data collected from participants can be stored. Related: Is China Leaping Past Us?

China’s Millennials Are Driving World Travel Growth (September 21): In 2015, Chinese made 128 million trips abroad, government data show, with adults ages 18-34 accounting for about 60 percent of outbound travelers that year…Read More>>

Chinese Domestic Car Brands Outperforming International Brands, For First Time (September 28): “…For Chinese domestic brands, they will still need to proactively address consumers’ concerns and complaints on both design-related problems and defects/malfunctions in a timely manner.” Related: China Sets New Deadline for Electric Car Quota; China Startup Races Tesla with Driverless Trucks in Arizona.

Southeast Asia and the South China Sea

Cambodian Leader Gets China’s Backing as West Condemns Crackdown (September 3): One of China’s closest allies in the region, Prime Minister Hun Sen has increasingly ignored criticism from Western donors. Western states’ budget support is no longer as critical as it was during the early years of his rule, when Cambodia was little more than a failed state.

As World Watches Kim, China Quietly Builds South China Sea Clout (September 5): Last month, a Filipino lawmaker released photos he said showed Chinese fishing, coast guard and navy vessels surrounding a Philippine-occupied isle in the Spratly island chain. Vietnam in July halted drilling in an area leased to Spain’s Repsol S.A, amid reports it did so under Chinese duress…Read More>>

China and the Rohingya Crisis in Nearby Myanmar (September 7): According to Quartz, China offered to mediate the diplomatic row between Myanmar and Bangladesh over a previous flight of Rohingya earlier this year. But rhetoric aside, China seems to have no strategy in place for a large-scale crisis. Related: China Offers Support to Myanmar at UN; Aung San Suu Kyi Gains Popularity with Chinese Netizens. 

From Trade to Trains, China and Singapore Boost Their Economic Ties (September 20): Singapore’s Prime Minister Lee Hsien Loon concluded a three-day trip to China in September. The South China Morning Post outlined 5 key areas where trade and economic ties are developing in Singapore-China relations. 

Philippines Yet to See Economic Reward From China Ties (September 20): According to the Financial Times (subscription), Chinese foreign direct investment remains low when compared with Indonesia, Malaysia and Thailand, and projects that are to be financed by official development assistance from Beijing have not been started. Related: People in the Philippines Still Favor U.S. Over China, but Gap Is Narrowing.

The South China Sea and China's "Four Sha" Claim: New Legal Theory, Same Bad Argument (September 25): The Washington Free Beacon reports that China may be backing away from its most controversial legal justification in the South China Sea: the “Nine-Dash Line.” According to Lawfare, China’s legal justification for the Four Shas is just as weak, if not weaker, than its Nine-Dash Line claim. 

Science & Technology, Espionage, and Surveillance

China's Artificial Intelligence Technology is Fast Catching Up to the U.S. (September 1): Goldman Sachs released a report on “China’s Rise in Artificial Intelligence” in September.  "We believe AI technology will become a priority on the government's agenda, and we expect further national/regional policy and funding support on AI to follow," the bank said. Related: China Building World’s Biggest Quantum Research Facility.

Google Continues to Hire in China Even as Search Remains Blocked (September 4): Multiple listings are shown in the field of machine learning and artificial intelligence. The company has been seeking to promote use of its TensorFlow AI tools in China. Related: Google and Xiaomi Partner to Launch the Android One Mi A1 Smartphone in 40+ Markets; Google Looking to Build Its Own Team of AI Specialists in China.

Facebook May Open Office in Shanghai to Make Hardware (September 7): Facebook's new hardware initiatives would require plugging into China's electronics supply chain, which helps build some of the world's most popular gadgets like Apple's iPhone.

China’s Game Developers Take the Stage at Steve Jobs Theater (September 13): The two gaming companies featured at the recent iPhone launch were either coming from China or founded by Chinese entrepreneurs. Chinese gaming companies are playing increasingly important roles in Apple’s content ecosystem…Read More>>

Chinese Internet Companies to Overtake American Counterparts (September 18): A recent report (in Chinese) by the Boston Consulting Group (BCG) together with the research divisions from Alibaba, Baidu and Didi reveals just how fast Chinese internet companies have grown compared to their American counterparts.

Mobike's dockless bike-sharing service comes to Washington, DC (September 20): The bike-sharing program is starting with 200 dockless bikes in the pilot program for now, a pittance next to the millions it has in China, but plans to expand the program across the US if things go well…Read More>>

Media, Soft Power, and Censorship

Kobe Bryant Helps Set Up Basketball Academy at Hainan Resort (September 12): Last year, NBA China opened three training centers in Zhejiang, Shandong and Xinjiang for top Chinese male and female prospects, and is working with the ministry of education on a basketball curriculum for schools…Read More>>

China's Latest Crackdown on Message Groups Chills WeChat Users (September 12): Regulations released in September make creators of online groups responsible for managing information within their forums and the behavior of members. 40 people have been disciplined for spreading petition letters and a man who complained about police raids has been arrested.

China Blocks WhatsApp (September 25): Over the past few months, WhatsApp has experienced brief disruptions to service, with users unable to send video chats or photos. Now, even text messages are completely blocked. The New York Times (subscription) originally reported on this story. Related: China Disrupts WhatsApp Ahead of Party meeting; China Blocks WhatsApp; China Says WhatsApp Should Stop Spread of ‘Illegal Information’.

Education and NGOs

Foreigners Teaching Chinese Children Online is a Booming Business (September 7): Online start-ups are gaining ground with parents who grew up in the internet era and see advantages in digital learning. Beijing-based VIPKid has expanded to 200,000 students and just raised venture money at a valuation of more than USD $1.5 billion…Read More>>

China Retaliating Against U.S. University for Inviting the Dalai Lama to Speak at Graduation (September 19): In June, University of California, San Diego (UCSD) hosted the Dalai Lama to speak at its school-wide commencement ceremony. The Chinese government has barred Chinese scholars from receiving state funding to study at UCSD…Read More>>

Chinese Universities Encourage Professors, Students to Post Online Content That Promotes ‘Socialist Values’ (September 21): China’s top universities are encouraging academics and students to write online articles promoting socialist values, with some offering authors the same academic credits they would get for papers published in journals.

China’s Roving Students are Lured Home (September 24): China has long provided a large proportion of the international students on MBA courses in western business schools. But according to the Financial Times (subscription), the qualitative difference between local and overseas (American/European) schools is narrowing, as increasing numbers of domestic institutions have gained international accreditation that qualifies them for global rankings.

China Steps Up Ideology Drive on College Campuses (September 25): As reported by the Wall Street Journal (subscription), President Xi declared that universities should become “strongholds that adhere to party leadership,” and that—amid increasing collaboration with Western universities and more Chinese students studying abroad—China should develop its own vision of education guided by its unique history.

Progress as of August in Implementing the Overseas NGO Law (September 25): As of August 22, the Ministry of Public Security Overseas NGO Office website shows a total of 185 representative offices, of which around 88 (48%) were registered just in the last three months…Read More>> 

Class of ’78: Studying in the US Post-Cultural Revolution (September 25): More than 300,000 Chinese nationals now study at American universities, and most are millennials. But Liu Baicheng was 45 years old when he traveled to the U.S. to study in 1978 as part of that first group of state-sponsored students after the Cultural Revolution…Read More>>

Trade and Economic Relations

Chinese Bid to Buy Chicago Stock Exchange Stirs Security Fears (September 5): The $20 million sale, which requires clearance by the Securities and Exchange Commission, has been lambasted by Republicans and Democrats on Capitol Hill, many of whom say it would be risky to sell such a critical part of the U.S. financial market to a foreign investor…Read More>>

'China Hustle' Documents the Chinese Reverse-Merger Scandal in U.S. (September 8): “The biggest takeaway: Chinese executives could lie to the SEC, lie to U.S. markets with no consequence. In this scandal, $50 billion was stolen. Mostly by these Chinese executives but also by their enablers in the U.S.—the lawyers, banks, promoters—all of whom got away scot-free.”

Ahead of Hong Kong Talks, Steve Bannon Stokes Ideas of Trade Wars with China (September 11): In an interview with 60 minutes, the former top Trump Administration strategist declared that China was “already at economic war with the United States” and that ““Donald Trump, for 30 years, has singled out China as the biggest single problem we have on the world stage”. Related: Bannon Met with Communist Party Official in Beijing.

Amazon's China Hiring Signals Renewed Ambitions in Alibaba Battle (September 11): Amazon’s market share in China continues to shrink in the face of fierce competition. Its sales represented just 1.1 percent of China’s online gross merchandise value in 2015, and by 2016 that figure had dropped to 0.8 percent…Read More>>

Montana Ranchers Lasso China Ties (September 11): Agriculture is Montana's single largest economic driver. "So by driving access to these markets, by shipping more beef into China, more grain into China, more sugar beets into China, it will increase jobs here in Montana, increase wages. And that's a big win"…Read More>>

PRC Court Recognizes a U.S. Court Judgment for First Time Based on Principle of Reciprocity (September 11): The underlying case before the Los Angeles Superior Court involved a dispute over a share transfer agreement between PRC domicilliaries pertaining to shares in a U.S. company. 

U.S. Department of Commerce on Tool Chests and Cabinets from China (September 12): The investigation found that exporters of tool chests and cabinets from China received countervailable subsidies ranging from 17.32 percent to 32.07 percent…Read More>> 

Trump Blocks China-Backed Lattice Bid (September 13): The move blocking the sale of Lattice Semiconductor by Chinese buyers was just the fourth time in a quarter century that a U.S. president has ordered a foreign takeover of an American firm stopped on national-security concerns…Read More>>

How Rich Chinese use Fixers to Move to the U.S. (September 14): Out of nearly 10,000 EB-5 investor Visas issued last year 7,516 went to Chinese nationals. Bloomberg reports on the agents and fixers involved in their acquisitions of the conditional green cards.

China is Recreating an Iowa Farm Near Beijing. And There's A Lot at Stake for Both Countries (September 23): China is eager to modernize the operations of its $260 million mostly small-scale farmers, with Iowa held up not only as a model but an ideal. Iowa is “the place where the dream for modern farming began”…Read More>>

If You Read/Watched Nothing Else in September…

The fine writing and film/videography on U.S.-China relations published each month far exceeds the assimilating capacity of any institution.  It would be ridiculous to feature “the best” efforts of the past 30 days, but KICUS would like to highlight the following work nonetheless:

Op-Eds and Commentary

Trump Needs a Real North Korea Strategy, Fast (Michael J. Green, Foreign Policy [subscription], September 5)

The Dystopian Vision that Westerners have about China is Pretty Backward (Siyi Chen, Quartz, September 17)

Policy Paper

Magic Weapons: China’s Political Influence Activities Under Xi Jinping (Anne-Mary Brady, Presented at the conference on “The corrosion of democracy under China’s global influence,” September 16-17) Related: China’s ‘United Front’ Seeks to Undermine U.S. Support for Taiwan

Article

China’s Moment (Lee Billings, Scientific America, October 2017)

Blog Posts

Understanding China’s Third Sea Force: The Maritime Militia (Andrew S. Erickson, Fairbank Center Blog, September 8)

U.S.-China Competition in the Developing World, Then and Now (Gregg Brazinsky and Charles Kraus, Sources and Methods; September 11)

China’s Strategic Thinking on Building Power in Cyberspace (Elsa Kania, Samm Sacks, Paul Triolo and Graham Webster, New America, September 25)

Reports

China’s Position on a Code of Conduct in Space (September 11, U.S.-China Economic and Security Review Commission)

Book

Asia’s Reckoning: China, Japan, and the Fate of U.S. Power in the Pacific Century (*Richard McGregor, Penguin Random House, September 5) *McGregor discussed his new book at an event at the Wilson Center in September.

Little Soldiers: An American Boy, a Chinese School, and the Global Race to Achieve (Lenora Chu, HarperCollins, September 19)

Interview

Worried by Pyongyang's nuclear and missile tests, China will restrict oil exports to North Korea (Robert Daly, Australian Broadcasting Corporation, September 25)

Podcasts

China’s Arctic and Antarctic Ambitions (Wilson Center, September 18)