Driving the Day
1. The PRC’s big bash
You may have heard – the Communist Party threw a massive bash on October 1 to celebrate the 70th anniversary of the founding of the PRC.
Xi Jinping presided over the festivities and used the occasion to address the country and the world.
He reminded everyone that life was bad before the Party took over (CPC):
- “This great event completely reversed China’s miserable fate born from poverty and weakness and being bullied and humiliated over more than 100 years since the advent of modern times.”
And he assured everyone that the Party would not let China be brought low again:
- “Today, socialist China towers majestically in the East.”
- “No force can ever undermine our great motherland’s position.”
- “No force can stop the Chinese people and nation from marching forward.”
Then, to reinforce his point, he paraded some very, very large missiles down the middle of Beijing.
Get smart: The Party’s legitimacy derives first and foremost from its claim to have ended China’s “century of humiliation” at the hands of foreign powers. Bolstering this narrative is the animating force in much of Chinese politics – and foreign policy.
2.Golden Week, by the numbers
China’s number crunchers have just shared some exciting spending data for the week-long National Day holiday, October 1 to 7.
Some context: The aptly nicknamed Golden Week got its name (partly) from the vast loads of cash Chinese consumers dole outduring their holidaying each year.
According to the Ministry of Culture and Tourism, domestic travel was up this year (Xinhua):
- Chinese citizens made 782 million domestic tourist trips – up 7.81 % from last year.
- Tourism revenue reached nearly RMB 650 billion yuan – up 8.47 % from last year.
But when it came to outbound tourism, things looked a bit gloomier. According to the National Immigration Administration:
- Outbound trips stood at 6.07 million for the week – down 15.1% from last year.
Most striking was the hard drop in trips to Hong Kong:
- The border crossings at Luohu, Shenzhen Port, and Futian saw outbound traffic drop by 47.8%, 31.2%, and 37.7%, respectively.
Get smart: The decrease in outbound tourism was thanks in large part to the huge drop in visits to Hong Kong. But a weak currency and a slowing economy likely played a role as well – as peopletraded in their European holidays for something closer to home.
Xinhua:China sees 782 mln domestic tourist trips during National Day holiday
3. Paypal gets the green light
Paypal is looking to compete with Alipay and Wechat Pay on their home turf.
On September 30, the company announced that it had been given the go ahead to take a controlling stake in a local e-payment provider.
Reuters has the details:
- “Gopay Information Technology, PayPal’s acquisition target, has received approval from China’s central bank to sell a 70% stake to PayPal, both companies said on Monday.”
- “Gopay has licenses for mobile, online and cross-border yuan payment services, the Chinese company said in its statement.”
- “PayPal will make the acquisition through a subsidiary in Shanghai.”
- “No financial terms were disclosed.”
Get smart: Paypal has virtually zero chance of competing for significant market share against China’s entrenched domestic champions, but the payments space is so big in China that even carving out a tiny niche would be big business.
The bigger picture: The move is yet another in the steady stream of financial opening measurethat Chinese authorities have pushed forward over the past year and a half. Expect more to come on this front.
Reuters:PayPal to enter China market through local acquisition
Tech Crunch:PayPal to enter China through GoPay acquisition
4.Houston, we have a problem
It all went down with a tweet.
On Friday, Houston Rockets general manager Daryl Morey sent out a tweet in support of pro-democracy protests in Hong Kong – immediately triggering widespread anger on Chinese social media.
In response, a number of organizations dropped cooperation agreements with the Rockets:
- The Chinese Basketball Association
- Chinese sportswear brand Li-Ning
- Tencent’s online sports channel
- Shanghai Pudong Development Bank (the Rockets’ Chinese sponsor)
Amid the backlash:
- Morey deleted his tweet.
- Rockets owner Tilman Fertitta said Morey doesn’t speak for the team.
- The NBA said it was “extremely disappointed” by Morey’s “inappropriate” tweet.
NBA commissioner Adam Silver later recalibrated the organization’s stance, sayings “Daryl Morey is supported…to exercise his freedom of expression.”
It was a whirlwind of a day for the NBA in China.
But the real kicker came on Tuesday, when state-backed broadcaster CCTV said it is suspending all broadcasts of NBA games. The statement cited Silver’s support for Morey and noted (CCTV):
- “We believe any speech challenging national sovereignty and social stability is outside of the realm of freedom of speech.”
Get smart: Balancing political risks in host and home markets is becoming an ever-more intricate exercise for Western companies doing businesses in China. That won’t change any time soon.
Japan Times: NBA boss Adam Silver addresses China tweet controversy in Tokyo
CCTV: 中央广播电视总台央视体育再发声明 立即暂停NBA赛事转播安排
5.Hong Kong violence heats up
While mainlanders have been busy celebrating the 70th Anniversary of the PRC – protests and violence have continued to plague Hong Kong.
Things took a turn for the worse on National Day, October 1, when protestors:
- Blocked roads
- Vandalized shops
- Damaged public facilities (including metro stations)
- Set fires and hurled petrol bombs
- Besieged the HKSAR government headquarters and some police stations
- Assaulted police officers and residents
As a response to the increased mayhem, Hong Kong Chief Executive Carrie Lam introduced a new regulation on October 4 – banning the wearing of masks during demonstrations in an effort to deter hardline protesters.
Of course, Lam’s new regulation had Beijing’s full support (Xinhua):
- “The chaotic situation in Hong Kong cannot continue endlessly.”
- “It has come to a crucial moment to end violence and chaos with a more clear-cut attitude and more effective measures.”
Unsurprisingly, the protestors’ response was counter to Lam’s – and Beijing’s – expectations, as violence only continued to increase throughout Golden Week.
Get smart: We would have thought that – having gotten through National Day without any (major) incident – Chinese officials could now afford to wait out the protestors. But the ongoing increase in violence from both sides seems to be giving Beijing further urgency to settle the situation.
Xinhua:Liaison office of China’s central gov’t in Hong Kong firmly supports enactment of anti-mask law
CNN:Hong Kong’s ban on masks at protests sparks night of violent protests
6.Trade talks resume Thursday
(Never-ending) trade negotiations with the US continue this week.
- Vice Premier Liu He will meet his US counterparts in DC on Thursday and Friday.
- Vice Minister of Finance Liao Min is already in DC to prepare for the talks.
Expectations for progress toward a deal are very low.
For one thing, the Chinese aren’t willing to address core US complaints right now (Bloomberg):
- “Vice Premier Liu He…[recently] told visiting dignitaries he would bring an offer to Washington that won’t include commitments on reforming Chinese industrial policy or the government subsidies that have been the target of longstanding U.S. complaints.”
And this will further complicate matters (WSJ):
- “The U.S. added 28 Chinese entities to an export blacklist Monday, citing their role in Beijing’s repression of Muslim minorities in northwest China.”
To muddy the waters further, US President Donald Trump has also said that Beijing’s handling of Hong Kong will impact on whether or not a deal gets done.
Trump certainly didn’t sound too optimistic on Monday (Reuters):
- “Can something happen? I guess, maybe. Who knows. But I think it’s probably unlikely.”
Get smart: The negotiations are a mess and it’s hard to predict exactly what will happen. A comprehensive deal looks nearly impossible, but we could see a smaller, intermediate deal.
White House: Statement from the Press Secretary
Bloomberg: China Narrows Scope for Trade Deal With U.S. Ahead of Talks
Reuters: U.S.-China strains over Hong Kong and minority rights hinder chance of trade deal
WSJ: U.S. Adds Chinese Firms to Blacklist, Citing Repression of Muslim Minorities