driving the day
1. Xi signals further political tightening
On Thursday, Xi Jinping and other top leaders attended a ceremony to commemorate the 75th anniversary of the end of World War II – known in China as the Chinese People’s War of Resistance Against Japanese Aggression and the World Anti-Fascist War.
Xi also chaired a symposium to discuss the lessons that the war has for contemporary China.
Xi told the assembled that there are five “never-allows” (Xinhua):
- The Chinese people will never allow any individual or any force to distort the history of the CPC or smear the Party’s nature and mission.
- The Chinese people will never allow any individual or any force to distort and alter the path of socialism with Chinese characteristics, or deny and vilify the great achievements the Chinese people have made in building socialism.
- The Chinese people will never allow any individual or any force to separate the CPC from the Chinese people or counterpose the Party to the Chinese people.
- The Chinese people will never allow any individual or any force to impose their will on China through bullying, change China’s direction of progress, or obstruct the Chinese people’s efforts to create a better life.
- The Chinese people will never allow any individual or any force to jeopardize their peaceful life and right to development, obstruct their exchanges and cooperation with other peoples, or undermine the noble cause of peace and development for humanity.
Get smart: The remarks are a not-so-veiled rejoinderto recent aggressive actions by the United States.
Get smarter: The five “never-allows” herald a further tightening of the political space within China.
2. China maps out semiconductor plan
Get this: China is set to import around USD 300 billion worth of semiconductors this year.
- USD 300 billion is more than Vietnam’s annual GDP.
Why it matters: The dependence on foreign semiconductors is a major economic – and strategic – vulnerability in a world moving toward technological decoupling.
That’s why officials are on the case (Bloomberg):
- “China is planning a sweeping set of new government policies to develop its domestic semiconductorindustry and counter Trump administration restrictions, conferring the same kind of priority on the effort it accorded to building its atomic capability, according to people with knowledge of the matter.”
- “Beijing is preparing broad support for so-called third-generation semiconductors for the five years through 2025, said the people, asking not to be identified discussing government deliberations.”
- “A suite of measures to bolster research, education and financing for the industry has been added to a draft of the country’s 14th five-year plan, which will be presented to the country’s top leaders in October, the people said.”
Get smart: Developing domestic capabilities in semiconductors and other critical technologies is the motivating force in economic policy these days. But there is still considerable debate about how to best pursue that goal.
3. MofCom says export restrictions aren’t about TikTok
That’s what Ministry of Commerce (MofCom) spokesperson Gao Feng said Thursday when asked if new export controls were intended to delay the sale of TikTok.
Some context:On August 28, MofCom released its updated Catalog of Technologies Prohibited and Restricted from Export, which covers algorithm-driven apps like TikTok.
- The updated coverage had been in the works for some time andis not company specific.
But Bytedance, owner of TikTok, is singing from a different hymn sheet.
- The company put out a statement hours after the release of the Catalog saying that it will follow the new rules.
Get smart:It is true that authorities had been revising the catalog since 2018. But no onebelieves that the content and timing of thenew export controls are not about the sale of TikTok.
Get smarter:Moves like this reinforce the impression that private Chinese companies like Bytedance actually work hand in hand with the government.
4. Sinopec wants you! And you! And…
State-owned oil behemoth Sinopec is onahiring spree.
- On Thursday the company announced plans to hire more than 11,000 college gradsin 2021.
Some context: That’s the biggest hiring announcement ever for the company.
But something doesn’t add up.
- Sinopec lost RMB 19.8 billion in the first quarter of 2020.
- Still the company has been taking on scores of new employees since March.
Why hire so many people while the company is struggling?
The answer: It’s all about politics.
The head of Sinopec’s human resources department explains (The Paper):
- “Expanding the recruitment of college graduates is to fulfill the political responsibility for the ‘six ensures.’”
A refresher: In April, the Politburo debuted a new economic mantra “six ensures,” one of which isensuringemployment (see April 21 Tip Sheet).
Get smart: With the pandemic wreaking havoc on the job market, the employment situation for fresh college graduates isbleak. And Beijing knows that a large number of unemployed youngsters rhyme poorly with social stability.
Get smarter: This is a good reminder thatChina’s state-owned enterprises are motivated as much by politics as by profits.
5. Huawei is not taking this lying down
On Wednesday, Huawei’s rotating CEO, Guo Ping, addressed the company’s new hires.
What every new employee is thinking:Can Huawei survive recent US sanctions?
Some context:the Trump administration has effectively cut off Huawei’s supply of chips by banning the company from utilizing American-made hardware and software to design or produce its own chips, and by making it all but impossible to purchase third-party products (see May 18 and August 19 Tip Sheets).
Luckily for us,a summary of Guo’s statements at the meeting were leaked to the press.
Guo was relatively upbeat on the company’s ability to surmount these challenges.
- “Huawei will establish its own lasting technical capabilities and a reliable supply chain.”
- “We will continue to invest in HiSilicon [Huawei’s chip arm], while helping partners [in chip manufacturing, production equipment and raw materials] to improve their capability.”
Guo did admit that for now Huawei is still reliant on global supply chains and overseas markets.
- “We still need global cooperation and markets to obtain various advanced factors to meet customer needs.”
This is big:Guo also hinted that the company’s expansion in the global 5G market is over.
- Its focus now is to better service existing clients to harvest the dividends of 5G technology, he argued.
Reality check:Despite Guo’s optimism, the harsh reality is that these US measures have teeth and Huawei is having to fundamentally rewire its business to deal with them.