China Newsbrief and Sitrep

November 25, 2020

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China Newsbrief and Sitrep

By Godfree Roberts – selected from his extensive weekly newsletter : Here Comes China

This is why we study China.

There is no point in believing we can make sense of China by a skin-deep knowledge of present-day China. We will be little the wiser. Chinese civilization is over 4,000 years old: as a political entity it is over 2,000 years old, the longest continuously existing polity in the world. Chinese history and culture is fundamentally different from that of the West: it always has been and always will be. So best to dispense with our Western-tinted spectacles and open our minds to arguably the world’s most successful civilization. China has been the most advanced country not just once but at least four times; and we are on the verge of this becoming five. A country, a culture, and a people with the most extraordinary history that is fast becoming the magnet of the future.    (This was the keynote address to the Buzz Expo China Summit.)


A small diplomatic snub

Mike Pompeo, US Secretary of State and fourth in line for the presidency, requested a meeting with his opposite number in China’s six-man cabinet but, China delivered a gentle snub by sending Yang Jiechi, a member of the 35-member State Council.


Debt Forgiveness

Of course the West would want China to forgive debts and thus enhance the value of Western revenue streams. This is another aspect of the war. Just as trillions of dollars of cash injected into the banking cartel at the start of the crisis constitute a prophylactic against the damage of this closure policy, it also defends the asset values from destruction while allowing Western banks to buy up assets from the failed business sector and freeze out China, from cash flows of any kind. The extension of the crisis to the West’s debt peons means that those who participate locally in the West’s protection racket can be asked to freeze China out on the international lending stage. The nature of the Western “loansharking” business remains obscured. China should wait until the West cancels all its fraudulent debt instruments before even discussing its own loan book.


Scholarship for Sale?

Five of Washington’s most prominent think tanks have been producing policy papers urging closer U.S. ties with Taiwan — a territory locked in an uncertain legal status that threatens to be a flashpoint between Beijing and Washington. These seemingly impartial research institutions are pushing for expanded arms sales and trade agreements with Taiwan without widely disclosing their high-level funding from the Taipei Economic and Cultural Representative Office (TECRO), Taiwan’s equivalent to an embassy. The five think tanks — the Brookings Institution, the Center for American Progress*, the Center for a New American Security, the Center for Strategic and International Studies, and the Hudson Institute — all disclose their funding from TECRO but bury it deep on their websites or annual reports. [I am shocked, shocked! to find partisan scholarship traded on the open market]

None of their researchers disclose the potential conflict of interest between Taiwanese funding and advocating for more security guarantees for and trade with Taiwan. “Taiwan is an interesting case because we know Taiwan gives a good amount of money to think tanks, and we know they have a good amount of influence around town,” said Ben Freeman, director of the Foreign Influence Transparency Initiative at the Center for International Policy. “For most people in this town, Taiwan doesn’t have the scarlet letter that funding from Saudi Arabia or China would, but it begs the question, why not just disclose at the front of a report, ‘We get funding from this government,’” said Freeman, who authored “Foreign Funding of Think Tanks in America,” a recent report. “I don’t see the reasons you’d just keep this under wraps.” And yet, while urging greater U.S. economic and security commitments to Taipei, Washington’s most influential think tanks do just that.

What Taiwan’s money buys: When Ryan Hass of the Brookings Institution wrote for the Taipei Times in December about the importance of bipartisan support in both Taiwan and the U.S., it appeared to be an impartial op-ed. Nowhere in the article was the Taiwan government’s funding for Brookings and its scholars disclosed. One would have to go to Brookings’s 2019 annual report to see that TECRO provides between $250,000 and $499,999 to the think tank. In February, Hass, again writing for the Taipei Times, urged policymakers in Washington and Taipei to counter potential economic risks to Taiwan in a U.S.-China technology competition by “pursu[ing] a U.S.-Taiwan trade agreement that includes chapters covering trade in goods and services, as well as e-commerce, investment rules, and possibly other areas.”  The Center for American Progress, a liberal think tank with close ties to the Clinton and Obama administrations, collected between $50,000 and $99,999 from TECRO in 2019. That information was only disclosed in an “annual honor roll recognizing supporters who make gifts of $5,000 or more.”It was not disclosed when CAP senior fellow Trevor Sutton published a March column in Washington Monthly, in which he posited that strengthening U.S.-Taiwan relations would assist in “defeating” the “narrative” by “illiberal movements” to portray “democratic governance” as “messy, corrupt, and ineffective.” Nor was TECRO’s funding disclosed when CAP senior fellow Michael H. Fuchs published a September 2019 report on “How to Support Democracy and Human Rights in Asia,” and offered direct recommendations about what U.S. policymakers should do to “robustly support Taiwan.” [MORE]

Footnote: Taiwan is a breakaway Chinese province, one of hundreds led astray by warlords over the centuries. Like most US protectorates, it is a stagnant, corrupt backwater whose educated elite are leaving in droves for careers in China proper.


Those Chinese Scientists Arrested by the US?

Michael Lauer, deputy director of the NIH, confessed that 93% of the 189 researchers surveyed by the NIH had undisclosed scientific research funding from China, but only 4% of them have intellectual property issues, and another 9% had hidden the establishment of companies abroad. Under the pressure of the investigation, 54 scholars were expelled or offered to resign because they did not fully disclose their cooperation with China. The vast majority of them were ethnically Chinese scholars. Some scholars have also been prosecuted and sentenced. There were no cases of theft of significant intellectual property.

This means that the researchers under investigation did not, as previously claimed by the FBI, systematically transfer intellectual property rights to China or other countries. Rao Yi, a professor at Peking University, pointed out that even among the 4% of the respondents involved with IP rights issues, it could be their personal issues, and it does not mean that China’s initial establishment of the talent plans was for stealing US intellectual property rights. Rao Yi’s letter to NIH head Francis Collins August 2018:  “Your August 20th statement is shocking because it is the first time when any government official has issued a statement restricting scientific collaborations in peacetime. If there are competitions, the Olympic Games have shown us how to compete.”  [MORE]


Who Knew?

Trump’s Chip Ban Gives Huawei and South Korea an Enormous Incentive to Strike a Grand Bargain “Chip fabricators will remove American equipment from production lines in order to maintain market share in China.”  A US ban on foreign companies’ sales of chips to Huawei Technologies if American equipment or software is involved will undermine America’s already-weakened position in the global semiconductor equipment market, industry sources say. Chip fabricators will remove American equipment from production lines in order to maintain market share in China, the world’s largest purchaser of semiconductors.  [MORE]

Huawei surpassed Samsung to become the world’s largest smartphone maker in April, a feat that was considered impossible with America’s ban in effect. Huawei now holds a 19% market share ahead of Samsung’s 17%.

Huawei’s new 54,000 sq.ft flagship store in Shanghai has more than 200 customer care consultants that can provide support in 10 languages. At the same time, it also has 19 reception counters and 12 after-sales service area.

Shanghai Micro Electronics Equipment announced that the first China-made 28nm immersion type lithography machine will be delivered in 2021-2022. Although it still has a big gap with the Dutch 7nm chip preparation process, it also marks a leap forward in China-made lithography, which is gradually reducing the gap with ASML. The Chinese market accounts for one-third of global semiconductor sales, and there is an urgent need for semiconductor import substitution.[MORE]

Yangtze Memory Technologies has unveiled its latest 3D NAND memory chip with cutting-edge 128-layer technology. The Wuhan-based company, whose work was not interrupted by the Covid-19 outbreak, said its new chip, the X2-6070, has passed sample verification with several partners, and could start mass production by end of this year or in the first half of 2021. The rollout makes it China’s first NAND chip using 128-layer technology, where the number of layers determines the density of data storage. The new chips will come in two specifications, one featuring 1.33 terabytes of storage and the other 512 gigabytes, according to a company announcement dated on Sunday. Yangtze Memory hopes the 1.33 TB product will initially be used in high-capacity USB drives, flash memory cards and solid-state hard drives, and eventually be expanded into enterprise-level servers and data centers


The Ruling in the Meng Case

On 28 January 2019, formal charges were laid by the U.S. Department of Justice, accusing Meng’s employer, Huawei, of misrepresentations about its corporate organization which had enabled it to circumvent laws that imposed economic sanctions on Iran. Huawei was also charged with stealing technology and trade secrets from T-Mobile USA. Meng, the Chief Financial Officer of Huawei, was charged with fraud and conspiracy to commit fraud. Huawei pled not guilty to the charges of violating the Iran sanction provisions in a New York court and not guilty to the stealing charges in a Seattle court. After a number of preliminary legal skirmishes, the extradition hearings against Meng began in 2020. Associate Justice Holmes issued her ruling on 27 May, 2020. Law takes its time.

Meng had told HSBC officials who met with her in the back of a Hong Kong restaurant in 2013 that, despite the allegations in a newspaper article, Huawei had not made improper use of a closely associated firm, named Skycom Tech, to supply U.S. materiel to Iran. The reason she had made this statement to HSBC, it was alleged, was that Huawei used HSBC as a banker when transacting business. If Huawei, as alleged, was implicated in violations of the Iran sanction laws, HSBC might well be held to be complicit in such crimes. The U.S. alleged that Meng’s representations to HSBC constituted fraud under its law.

Meng Wanzhou argued that, for a case of fraud to be made out, in both the U.S. and Canada, it was necessary for the prosecution to prove that the fraud materially contributed to a tangible loss. This could not be made out here. For Meng’s deception of HSBC to cause it a tangible loss in the U.S., it was necessary for U.S. prosecutors to invoke the impact of another law, the Iranian sanction law. Without it there would not be any harm and, therefore, no fraud in the U.S. As Canada did not have any such sanction provisions in place, Meng’s deception would not have led to any tangible loss in Canada and there would have been no fraud committed in Canada. This argument that the basic requirement for extradition–mirroring laws–had not been met, was rejected by Associate Chief Justice Holmes.

She deployed standard legal reasoning that is, she looked for previous holdings and used the imprecisions she found in them and in the wording of the legislation she was interpreting. Holmes found that previous decisions had held that, in order to determine whether the conduct in the applicant jurisdiction created an offence, it was necessary to assess the essential nature of that conduct. That meant evaluating the foreign conduct in its context, in its legal environment. Meng argued that looking at the legal environment required taking a foreign law, one distinct from the laws being compared, into account, something which should not be done under the Extradition Law.

The presiding judge responded that only some aspects of the legal environment, constituted by that other law, had to be taken into account, not all of it. It was her job to say which aspects could be so used. Holmes admitted that she was going out on a limb because the distinction between looking at some aspects of a foreign law and taking the actual law into consideration is fraught, both as a matter of logic and of established law. She wrote that “the issue is at what level of abstraction… the essence … of the conduct is to be described… there is little authority or precisely what may be included in ‘imported legal environment’.”

Undeterred by the lack of any known criteria (remember the Rule of Law!), she used what she likely calls her common sense and what Meng’s supporters probably think was her unconscious bias. Associate Justice Holmes decided that, in this case, it was appropriate, when looking for the essential nature of the foreign conduct, to look at the effects of that U.S. law, the Iran sanction law. As its effects made Meng’s deceiving conduct fraudulent in the U.S., and as deception is the core of fraud in Canada, the essential/contextualized nature of Meng’s conduct satisfied the essence of fraud as defined under Canada’s Criminal Code. Lawyers call this sort of finessing good lawyering; in the wider community it is seen as legal chicanery. Holmes ruled that Canada was free to extradite Meng. [MORE]

Canada’s government has the authority to halt the extradition of a Huawei executive and should do so as part of efforts to secure the release of two Canadian citizens detained in China, a former Supreme Court Justice has said. Former Supreme Court justice Louise Arbour told Radio Canada on Tuesday that it was “high time for the [justice] minister to exercise his authority, his responsibility under the law and put an end to this process. From the beginning it was not in Canada’s interest to go ahead with this extradition request from the United States,” added Arbour, also a former UN High Commissioner for Human Rights. She added Meng is accused by Washington of violating “unilateral American sanctions against Iran” that Ottawa has never applied. [MORE]

Harry Glasbeek comments: Everyone on earth knew why US charged Huawei and its CFO: to obtain bargaining chips in its fight with China: to persuade Americans that the government was right to deny them access to cheaper goods and a better 5G system and to make China more pliable when the US demanded better trade terms and more protection for its intellectual property. There was no attempt to hide any of this. Did the Canadian government understand this? Of course. Did it feel it had to allow the U.S. to use Canada’s supposedly neutral legal machinery to further its political project? Of course. Could the Canadian government have said “no” and simply turned a blind eye when Wanzhou Meng landed in Vancouver? Of course. Was Associate Justice Holmes, at the very least, in a position to guess all of this? Of course.

More on the Meng Case – Jeff J Brown did a fascinating expose which he recently published at Covert Action Magazine and gave us permission to post here.

Exclusive: Huawei Sting Operation Exposed

What makes Meng’s story so volatile, is that, due to her being arrested/kidnapped in Canada, her case is now a ménage-à-trois, with Ottawa being the submissive, as it has been caught in the middle. While claiming that they are only “respecting its extradition treaties,” Canada and the U.S. indicate they must defer to their “independent judiciaries” and honor the “rule of law.” Upon close examination, however, this case demonstrates gross hypocrisy, if not many inconsistencies and fault lines. At least U.S. President Trump admitted publicly what routinely goes on behind closed doors. On December 11, 2018, just days after Meng’s apprehension, Trump said he would be happy to use her as a bargaining chip to win a better trade deal with China.


Finally, a Note to China from Michael Hudson

This is from January 2020 and I’m sure it was presented to Mr.Hudson’s students.  De-dollarization is the alternative to privatization and financialization.

“The United States is not telling China or Russia or third world countries or Europe how to get rich in the way that it did, by protective tariffs, by creating its own money and by making other countries dependent on it. The United States does not want you to be independent and self-reliant. The United States wants China to let itself become dependent on U.S. finance in order to invest in its own industry. It wants Chinese corporations to borrow from the United States, and to sell its stocks to US investors just like Khodorkovsky in Russia was trying to sell Yukos oil to Standard Oil, and essentially turn Russia’s oil reserves to U.S. investors.”


This represents but a fraction of what is included in the Here Comes China newsletter.  If you want to learn about the Chinese world, get Godfree’s newsletter here

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