Driving the Day
1. US blacklists more Chinese tech firms
The burgeoning tech war with the US kicked up a notch over the weekend.
On Friday, five more Chinese companies were placed on the US Entity List.
The unlucky companies:
- Chengdu Haiguang Integrated Circuit
- Chengdu Haiguang Microelectronics Technology
- Wuxi Jiangnan Institute of Computing Technology
The US Department of Commerce targeted the companies because they work on supercomputing technology with alleged military applications.
The broader context: The move comes just days before US President Donald Trump and Xi Jinping are slated to meet at the G20 summit in Japan.
Given the upcoming meeting, in someareasthe US is being more cautious. The Trump administration has postponed a potentially incendiary speech by Vice President Mike Pence originally scheduled for today (Monday).
Get Smart: Like Huawei, the newly blacklisted firms rely heavily on US components. This willonly underscore to Chinese leadership how dependent the country is on foreign technology.
Get Smarter: Using the Entity List to cripple Chinese companies is looking less and less like a trade war bargaining chip, and more and more like a sustained attack on China’s critical technologies.
Bloomberg: Trump Blacklists More China Tech Companies Days Before Xi Summit
2.China is running out of pork storage space
Cold storage space at China’sports is quickly running out.
The reason: Near-record high pork imports, which were up 63% y/y in May.
But that’s not all: Local producers have also been flooding the market with fresh pork as they slaughter their herds to stay ahead of African Swine Fever, which has been decimating local pork populations.
That meansall theimported frozenpork has to chill (ba dum tss) in warehouses.
Logistics official Wang Zhen told Bloomberg that:
- “Chilled storage at ports including Tianjin, Shanghai and Dalian is now almost full.”
And warehouses are likely to stay full for the rest of the year:
- “The meat is likely to be stored at the ports… in anticipation of the country’speak consuming season.”
Peak consuming season is right around Spring Festival – a good seven months away.
Get smart: The supply glut should keep prices in check for the near term, but pork prices are forecast to rise sharply in the second half of the year. That’simportant because a serious jump ininflation wouldconstrain monetary policy.
3. Private businesses to seeincreased Party oversight
On Saturday, officials sat down with business leaders at the Central Party School.
The reason: To discuss Party-building in private companies.
According to He Yiting, executive vice president of the Central Party School, Party-building boosts business performance.
How, you ask? (People.cn):
- “Party building points out the correct political direction for private enterprises’ development.”
How that helps: It’s hard to succeed in China if your business is not aligned with Party goals.
What’s more, Gu Shengzu, vice chairman of country’s political advisory body (CPPCC), believes Party-building can actually help boost innovation in companies.
And innovation, according to Gu, is particularly important given the current standoff with the US:
- “The current Sino-US trade friction is essentially a struggle…for…innovation capability.”
The BIG question: Can China’sParty-led, state-driven model foster innovation?
4.Party looks to improve governance in the countryside
On Sunday, the general offices of the Central Committee and State Council released new guidelines for improving rural governance.
Some context:Xi Jinping has made rural revitalization a cornerstone of his second term.
The latest goals (Gov.cn):
- “By 2020, China aims to develop an institution structure and policy system for modern rural governance.”
- “By 2035, the country plans to…perfect the Party-led rural governance model.”
Surprise, surprise: According to the guidelines, the key to better rural governance is enhancing the role of local Party groups.
Higher-level governments are also being called to contribute to the rural governance push (Xinhua):
- “Party committees and governments at all levels were told to put rural governance as a priority of their work, enhance coordination and pool resources from different departments.”
- “They should also spend more resources in training rural officials at the primary level and encourage local business people, migrant workers, college graduates and veterans to return to villages and play a constructive role in rural governance.”
Get smart: For decades, the Party has encouraged urbanization. Now Xi is encouraging people to move back to the countryside.
Gov.cn: 中共中央办公厅 国务院办公厅印发《关于加强和改进乡村治理的指导意见》
Gov.cn: China issues guideline for enhancing rural governance
Xinhua:China issues guideline for enhancing rural governance
5.What’sin a name?
Xi Jinping wants Chinese to have more confidence in their culture (see June 18 Tip Sheet).
The drive for cultural confidence is producing strange results:
- In the past three months, local governments across the country have gottenrid of foreign names for buildings and residential communities.
The reason?Authorities sees these names as “damaging national culture.”
Some context: After instructions from Xi last year, six ministries initiated a country-wide campaign aimed at correcting “foreign, exaggerated, strange, and recurring” names by the end of September.
Not everyone is on board (FT):
- “[When] government officials in…Hainan told popular hotel chain Vienna International to change the name of its branches because their reference to the European city reflects a ‘worship of foreign things’, [it sparked] a stand-off with China’slargest hotel group.”
Now the government is backing down. On Friday, the central government walked the campaign back a step (Xinhua).
Don’t worry, foreigners: The central government has made it explicit that the names offoreign companiesshould be left alone.
Get smart: If the government had more confidence, they wouldn’t be threatened by foreign names. Just sayin’…
FT: China orders Vienna hotels rebrand in purge of foreign names