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Sinocism China Newsletter 02.06.17-Initial Trump-Xi Call Looks To Be Imminent, Trump Administration Softening Its Stance Towards the PRC?

An initial phone call between Donald Trump and Xi Jinping should happen soon. Chinese State Councillor Yang Jiechi and National Security Advisor Michael Flynn spoke last week, likely laying the groundwork for the first conversation between the two leaders since Trump’s inauguration.

The US appears to be dialing back some of the more bellicose rhetoric towards China which, depending on Trump’s mood, may make for a more cordial call. Defense Secretary Mattis stated in a press conference (transcript) last week in Japan that:

“there is no need right now at this time for military maneuvers or something like that, that would — that would solve something that’s best solved by the diplomats.

At the same time, freedom of navigation is absolute, and whether it be commercial shipping or our U.S. Navy, we will practice in international waters and transit international waters as appropriate. “

So, at this time, we do not see any need for dramatic military moves at all.”

Secretary of State Tillerson, in a letter (PDF) to Senator Ben Cardin reaffirmed the One China policy:

“The United States should continue to uphold the One China policy and support a peaceful and mutually agreeable cross-Strait outcome. “

Secretary Tillerson also appeared to walk back his earlier comments interpreted by some as advocating for using a blockade or force to prevent the PRC from accessing the facilities it has built on reclaimed land in the South China Sea:

“To expand on the discussion of U.S. policy options in the South China Sea, the United States seeks peaceful resolution of disputes and does not take a position on overlapping sovereignty claims, but the United States also does not recognize China’s excessive claims to the waters and airspace of the South China Sea. China cannot be allowed to use its artificial islands to coerce its neighbors or limit freedom of navigation or overflight in the South China Sea. The United States will uphold freedom of navigation and overflight by continuing to fly, sail, and operate wherever international law allows. If a contingency occurs, the United States and its allies and partners must be capable of limiting China’s access to and use of its artificial islands to pose a threat to the United States or its allies and partners.”

The Washington Post reported over the weekend that National Economic Council chairman Gary Cohn may have a moderating influence on the policy prescriptions of National Trade Council director Peter Navarro:

“Gary Cohn, a Democrat and former president of Goldman Sachs who is chairman of Trump’s National Economic Council, has helped bring a more progressive Wall Street sensibility to the administration. He worked to prevent CNBC commentator Larry Kudlow, a longtime Trump economic adviser, from joining the administration and has tried to sideline Peter Navarro, a vocal China critic and hard-liner on trade inside the White House, according to someone with knowledge of his moves.”

I believe the PRC could make significant concessions, aka a “deal”, on trade if pushed hard enough. They will not when it comes to sovereignty and leading with those most sensitive issues at the start of this administration would be a mistake, especially when so much of the Asian region has little faith in Trump.

Today’s Links:

1. China’s Intelligent Weaponry Gets Smarter – The New York Times The advance of the Chinese was underscored last month when Qi Lu, a veteran Microsoft artificial intelligence specialist, left the company to become chief operating officer at Baidu, where he will oversee the company’s ambitious plan to become a global leader in A.I. And last year, Tencent, developer of the mobile app WeChat, a Facebook competitor, created an artificial intelligence research laboratory and began investing in United States-based A.I. companies. Rapid Chinese progress has touched off a debate in the United States between military strategists and technologists over whether the Chinese are merely imitating advances or are engaged in independent innovation that will soon overtake the United States in the field. // Comment: In this context Baidu’s AI lab in Silicon Valley is problematic

2. New Law to Screen Online Products, Services in Key Sectors – Caixin Global The Cyberspace Administration of China, headed directly by President Xi Jinping, in an internet posting on Saturday sought public opinion on its draft internet product and service security inspection law, a follow-up to the sweeping Cybersecurity Law that was passed last November and will take effect in June. The draft spells out who exactly will be responsible for putting different elements of the Cybersecurity Law into practice and how, said Shen Yi, deputy director of the Cyberspace Governance Research Center at Fudan University in Shanghai. // Measures for Security Reviews of Network Products and Services (Draft for Solicitation of Comments) 网信办就《网络产品和服务安全审查办法》征求意见

3. US-China war would be a disaster for the world, says Communist party | World news | The Guardian “Were the United States and China to wage war on one another, the whole world would divide itself,” the People’s Daily newspaper argued in a commentary, paraphrasing Henry Kissinger, the veteran US diplomat whose secret mission to China led to the historic rapprochement between Richard Nixon and Mao Zedong in 1972. Fears of a potentially calamitous trade war, or even a military clash between the two nuclear powers, have been building since Trump’s shock election win last November. 合作是中美两国唯一正确选择(钟声)

Related: SDF won’t join U.S. operations in South China Sea: Inada | The Japan Times “I told Secretary Mattis that Japan supports the U.S. military’s freedom of navigation operation in the sea,” Inada said on a TV program Sunday. “But the SDF will not be sent to the area.”

Related: Perpetual Stalemate: China Can Neither Be Dislodged From the South China Sea Nor Control It | The Diplomat Speaking to a U.S.-Japan-Australia strategy conference in January, Sir Angus Houston, who led Australia’s armed forces in the mid 2000s, told attendees that it was “too late to stop the China program in the South China Sea.” In an interview to The Cipher Brief, former Chief of Naval Operations Admiral Jonathan Greenert said, “it is too late to reverse or undo [Chinese] occupancy, without risking a conflict.”…

4. China issues guidelines to preserve traditional culture – Xinhua The guidelines, which were jointly issued by the General Office of the Communist Party of China (CPC) Central Committee, and the General Office of the State Council, have been designed to preserve and carry forward various forms of traditional arts and Chinese culture. The guidelines set out that by 2025, major achievements will be registered in traditional culture-related research, education, protection, inheritance, innovation and exchanges. The international influence of Chinese culture should register a “marked boost.” 中共中央办公厅 国务院办公厅印发《关于实施中华优秀传统文化传承发展工程的意见》

Related: 《关于实施中华优秀传统文化传承发展工程的意见》答记者问-新华网 中共中央办公厅、国务院办公厅《关于实施中华优秀传统文化传承发展工程的意见》日前正式公布。中共中央宣传部负责同志就意见的有关问题,回答了记者提问。

Related: Why’s Beijing So Worried About Western Values Infecting China’s Youth? | ChinaFile What was also striking from the education conference, Minzner noted, was the absence of the usual nods toward openness to the outside world and learning from foreign achievements and culture while developing China. Instead, there was an emphasis on guiding students to correctly understand the historic inevitability of “Socialism with Chinese characteristics” when making international comparisons. “I think they are sending a signal,” Minzner said. “And that signal alone will probably be enough to accomplish 70 or 80 percent of the goal by increasing self-censorship in universities. Then the push for ideological control may continue in some form until, ideally—from the standpoint of Party censors—it trickles down to students watching what they say even in the dorm room.”

5. Billionaire Is Reported Seized From Hong Kong Hotel and Taken Into China – The New York Times Comment: Xiao Jianhua knows a lot. Taken to squeeze him for what he knows about senior leaders that might help Xi in the runup to the 19th Party Congress, and to keep him from talking about what he knows about Xi? Remarkable he thought he was safe in Hong Kong given it is just another PRC city in all but name now

Related: China sends its billionaires a chilling message-FT $$ Some who know Mr Xiao believe his abduction is a warning to one of the political factions he was close to or that he knew too much about the business dealings of top Chinese leaders. Others believe the party may try to nationalise his significant holdings in major financial institutions. As one person familiar with this case put it: “Most Chinese billionaires are like geese — they get fat on their political connections and close ties to party leaders, but at some point the emperor decides he wants to eat foie gras.”

Related: Billionaire in exile Guo Wengui targets China’s deputy police chief Guo Wengui, the controlling shareholder in Beijing Zenith Holdings and Beijing Pangu Investment, appeared in a video interview last Thursday on Mingjing, an overseas Chinese political rumors website. Guo said in the interview that Li You, former CEO of technology conglomerate Founder Group, had powerful “backers” in the party’s Politburo Standing Committee. He vowed to name some of these backers later. // Comment: Is Guo Wengui AKA Miles Kwok now on Twitter

threatening all sorts of new exposes?

6. Facebook Is Trying Everything to Re-Enter China—and It’s Not Working – WSJ Over about the past two years, Facebook has stepped up its China groundwork, said current and former Facebook executives and employees. Since at least 2014, the task of coordinating the company’s China initiative has fallen to Vaughan Smith, vice president of mobile, corporate and business development, who helped negotiate dozens of Facebook’s earliest acquisitions, they said. In December, China’s elite Tsinghua University announced Mr. Smith would co-teach a class on innovation. He declined to be interviewed. To deploy a Hong Kong-based field commander, Facebook in 2014 hired Wang-Li Moser, who spent more than a decade at Intel Corp. in China, where former colleagues said she made her name as a quiet fixer.

7. The Parachute Generation – The New York Times Even as U.S.-China relations have slipped toward mutual antagonism, the flood of Chinese students coming to the United States has continued to rise. Roughly 370,000 students from the mainland are enrolled in American high schools and universities, six times more than a decade ago. Their financial impact — $11.4 billion was contributed to the American economy in 2015, according to the Department of Commerce — has turned education into one of America’s top “exports” to China…In 2005, only 641 Chinese students were enrolled in American high schools. By 2014, that student population approached 40,000 — a 60-fold increase...