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China’s exports in August beat expectations

SINGAPORE – Asia Pacific stocks were mixed in trading on Tuesday as data showed China’s August trading data was above expectations.

The Shanghai composite in mainland China gained 0.77%, while the Shenzhen share rose 0.398%.

China’s exports rose 25.6% yoy in August, customs data on Tuesday showed – above analysts’ expectations in a Reuters poll of 17.1%.

Hong Kong’s Hang Seng index gained 0.61%.

The stocks of retailers listed in the city surged after Bloomberg reported that Hong Kong will allow quarantine-free entry to mainland visitors from September 15. Chow Sang Sang rose 3.8% while Giordano International rose 2.6% and Sa Sa International rose 5.26%.

Japan’s Nikkei 225 rose 0.86% while the Topix index rose 1%, with the country’s stocks continuing to climb after two consecutive days of trading with solid gains. This comes as investor sentiment is bolstered by the prospect of further stimulus reportedly being called for by Prime Minister candidate Fumio Kishida.

Elsewhere, the South Korean Kospi lost 0.7% while the S & P / ASX 200 in Australia lost 0.24%.

MSCI’s broadest index for Asia Pacific stocks outside of Japan was below the flatline.

Elsewhere, the South Korean Kospi lost 0.7% while the S & P / ASX 200 in Australia lost 0.24%.

MSCI’s broadest index for Asia Pacific stocks outside of Japan was below the flatline.

RBA rate decision

The Reserve Bank of Australia announced on Tuesday that it would stick to its cash rate target.

In a statement, Australia’s Central Bank Governor Philip Lowe also said the RBA will buy bonds at a price of A $ 4 billion (about $ 2.98 billion) a week until at least February 2022.

In August, when the plan was announced to reduce bond purchases from A $ 5 billion to A $ 4 billion in early September, Lowe had announced that the new weekly bond purchases would last at least until mid-November.

Following that announcement, the Australian dollar changed hands at $ 0.7449 from an earlier low of $ 0.7431.

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Markets in the US were closed on Monday for a public holiday.

Currencies and oil

The US dollar index, which tracks the greenback versus a basket of its peers, came in at 92.126, still off the 92.4 level it hit last week.

The Japanese yen was trading at 109.78 the dollar, stronger than the 110.1 levels seen against the greenback last week.

Oil prices were mixed on the afternoon of Asian trading hours, with the international benchmark Brent crude oil futures rising 0.47% to $ 72.56 a barrel. U.S. crude oil futures declined 0.19% to $ 69.16 a barrel.

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World News

The newest goal of China’s tech regulation blitz: algorithms

Computer code is seen on a screen above a Chinese flag in this July 12, 2017 illustration photo.

Thomas White | Reuters

BEIJING — Chinese authorities are planning to restrict how companies use algorithms to sell products to consumers, a move analysts said likely runs counter to business interests and sets a precedent for other countries.

China’s largest tech companies from e-commerce giant Alibaba to TikTok-owner ByteDance have built their multibillion dollar businesses on algorithms that serve up content a customer is more likely to spend money or time on, based on previous viewing records.

The increasingly powerful cybersecurity regulator on Friday released sweeping draft rules for regulating use of these so-called recommendation algorithms. The proposal is open for comment until Sept. 26, with no specified implementation date so far.

The groundbreaking rules could set up a clash between China’s technology giants — which have been subject to increasing regulation over the past 10 months — and Beijing, which has sought to rein in their power.

And China’s algorithm rules will be closely watched by other countries and technology firms around the world for how it might affect business models and innovation, analysts said.

“Companies are going to have a lot to say about this because this has the potential to restructure business models,” Kendra Schaefer, Beijing-based partner at Trivium China consultancy, told CNBC.

The rules have also thrown up questions about how enforcement will happen and how intrusive regulators might have to be to actually get companies to comply with these rules.

What the draft says

Here are some of the key points in the draft rules:

  • Companies must not set up algorithms that push users to become addicted or spend large amounts of money.
  • Service providers need to notify users in a clear way about the algorithmic recommendation services they provide.
  • Users need to have a way to switch off algorithmic recommendation services. Users should also have a way to choose, revise, or delete user tags used for the recommendation algorithm. 
  • When algorithms are used to market goods or provide services to consumers, the company behind it must not use the algorithm to carry out “unreasonable” differentiation in terms of prices or trading conditions.
  • Any violations of the rules could land companies with fines between 5,000 yuan and 30,000 yuan ($773 and $4,637).

These proposed rules come as the Chinese government has ramped up its regulation on homegrown technology giants in the last year, primarily in the name of cracking down on monopolistic practices and increasing data protection.

On Wednesday, a new data security law took effect. A personal data privacy law is set to take effect on Nov. 1.

What enforcement might look like

Recommendation algorithms are formed of code that is fed specific information about users to help provide more tailored results. If you’re on an e-commerce site, some of items you see on the homepage are likely there because of your browsing or shopping habits.

But the algorithm’s code is not something that is made public and that could make enforcement difficult. At the very least, it could require regulators to inspect companies’ code behind the algorithms.

“You can’t carry out algorithmic regulation without looking at the code,” Trivium China’s Schaefer said.

Authorities are to carry out algorithm “security assessments” and inspection of the recommendation services, according to the draft rules. Companies must cooperate and provide any necessary technical or data support.

That would give regulators in China enormous power.

But it also throws up some challenges.

“First of all you need the technical capacity to do this. … You also need the bureaucratic process to do it. All that has to be sorted and it has not been yet,” Schaefer said.

This intrusiveness could set up a clash between China’s technology giants and regulators.

“I’m sure there are issues with privacy rights with companies … that [the code] is proprietary information,” Schaefer added.

None of the Chinese tech companies contacted by CNBC had immediate comment on the draft rules, with two indicating it’s too early in the process to assess them. The cybersecurity regulator did not immediately respond to a CNBC request for comment on the extent of implementation or impact on innovation.

Business model changes?

Many of China’s technology giants aren’t making money off of their algorithms directly. Instead, they’re used to direct consumers to products. For example, you may be watching videos on an app and then get recommended similar content. A company would monetize that via advertising or even getting you to buy things.

The latest rules could have the potential to force companies to change their business models, but it’s unclear as to what extent.

“The jury is still out on the implications for operations and profits,” said Ziyang Fan, head of digital trade at the World Economic Forum.

“It depends on a number of factors, such as the level of enforcement, and market reactions — how many users would choose to ‘turn off’ [the] recommendation algorithm if that’ll lead to a suboptimal user experience, such as getting cat videos pushes when you are a dog person?” he said in an email.

“If we see a significant drop in indicators such as DAUs [daily active users] and retention rates, then the implications for profits could also be significant,” he said, noting that social media companies may see the impact more, while online shopping and ride-hailing “probably less so.”

Where the rest of the world stands

As the intersection between tech and daily life grows, countries and regions around the world are increasingly looking at ways to regulate technologies and the companies that sell them.

That’s resulted in different approaches, so far. In the area of algorithms, China is specifically focused on the technology’s recommendation feature, while the U.S. and European Union are discussing broader laws around artificial intelligence.

Earlier this year, the European Union issued a draft law called the Artificial Intelligence Act with the purpose of facilitating “the development of a single market for lawful, safe and trustworthy AI applications” and pushing innovation in the space.

The law has “specific requirements that aim to minimise the risk of algorithmic discrimination.”

But there are a number of differences with China’s algorithm rules.

WEF’s Fan said the EU follows a “risk-based approach” while China’s rules “do not differentiate risk levels and apply to all use of algorithm recommendation technology.” That can cover a broad range of industries from food delivery to education.

And China’s rules “target algorithms directly at the user and product level,” such as the ability for users to switch off the algorithm, as stated in the proposed rules, Fan added.

Read more about China from CNBC Pro

Once enacted, China’s law on algorithms will be closely watched around the world as authorities try to figure out how to regulate technology in the future.

“This is going to set a global example,” Schaefer said. “Tech companies overseas are going to see how Chinese tech companies do or do not profit given these restrictions on algorithms. If they change business models, if they can succeed despite regulation on algorithmic process, there is very little excuse for … foreign governments not to do the same.”

“If they fail and they are not as profitable and shareholders are disappointed, then that is bad, too,” she said. “That bolsters the argument you can’t implement algorithmic regulation without detrimental effects to innovation.”

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World News

The U.S. is deciding how to reply to China’s digital yuan

China is beating the U.S. when it comes to innovation in online money, posing challenges to the U.S. dollar’s status as the de facto monetary reserve. Nearly 80 countries — including China and the U.S. — are in the process of developing a CBDC, or Central Bank Digital Currency. It’s a form of money that’s regulated but exists entirely online. China has already launched its digital yuan to more than a million Chinese citizens, while the U.S. is still largely focused on research.

The two groups tasked with this research in the U.S., MIT’s Digital Currency Initiative and the Federal Reserve Bank of Boston, are parsing out what a digital currency might look like for Americans. Privacy is a major concern, so researchers and analysts are observing China’s digital yuan rollout.

“I think that if there is a digital dollar, privacy is going to be a very, very important part of that,” said Neha Narula, director of the Digital Currency Initiative at the MIT Media Lab. “The United States is pretty different than China.”

Another concern is access. According to the Pew Research Center, 7% of Americans say they don’t use the internet. For Black Americans, that rises to 9%, and for Americans over the age of 65, that rises to 25%. Americans with a disability are about three times as likely as those without a disability to say they never go online. That is part of what MIT is researching.

“Most of the work that we’re doing assumes that CBDC will coexist with physical cash and that users will still be able to use physical cash if they want to,” Narula said.

The idea of a CBDC in the U.S. is aimed, in part, at making sure the dollar stays the monetary leader in the world economy.

“The United States should not rest on its current leadership in this area. It should push ahead and develop a clear strategy for how to remain very strong and take advantage of the strength of the dollar,” said Darrell Duffie, professor of finance at Stanford University’s Graduate School of Business.

Others see the digital yuan as insidious.

“The digital yuan is the largest threat to the West that we’ve faced in the last 30, 40 years. It allows China to get their claws into everyone in the West and allows them to export their digital authoritarianism,” said Kyle Bass of Hayman Capital Management.

Watch CNBC’s deep dive video into CDBCs to learn more.

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World News

Asia-Pacific shares rise as buyers await China’s commerce knowledge for June

SINGAPORE — Shares in Asia-Pacific rose in Tuesday morning trade as investors awaited the release of China’s trade data for June.

The Nikkei 225 in Japan gained 0.55% in early trade while the Topix index advanced 0.57%. South Korea’s Kospi climbed 0.54%.

Shares in Australia also advanced as the S&P/ASX 200 edged 0.25% higher.

MSCI’s broadest index of Asia-Pacific shares outside Japan traded 0.1% higher.

On the economic data front, China is set to release its trade data for June at 11:00 a.m. HK/SIN on Tuesday.

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Overnight stateside, the major indexes on Wall Street rose to record closing highs.

The Dow Jones Industrial Average advanced 126.02 points to 34,996.18 while the S&P 500 gained about 0.35% to 4,384.63. The Nasdaq Composite climbed 0.21% to 14,733.24.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 92.214 as it struggled to return to levels above 92.7 seen last week.

The Japanese yen traded at 110.30 per dollar, still weaker than levels below 110 seen against the greenback last week. The Australian dollar changed hands at $0.7481, above levels around $0.745 seen yesterday.

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World News

The Tech Chilly Warfare’s ‘Most Difficult Machine’ That’s Out of China’s Attain

SAN FRANCISCO — President Biden and many lawmakers in Washington are worried these days about computer chips and China’s ambitions with the foundational technology.

But a massive machine sold by a Dutch company has emerged as a key lever for policymakers — and illustrates how any country’s hopes of building a completely self-sufficient supply chain in semiconductor technology are unrealistic.

The machine is made by ASML Holding, based in Veldhoven. Its system uses a different kind of light to define ultrasmall circuitry on chips, packing more performance into the small slices of silicon. The tool, which took decades to develop and was introduced for high-volume manufacturing in 2017, costs more than $150 million. Shipping it to customers requires 40 shipping containers, 20 trucks and three Boeing 747s.

The complex machine is widely acknowledged as necessary for making the most advanced chips, an ability with geopolitical implications. The Trump administration successfully lobbied the Dutch government to block shipments of such a machine to China in 2019, and the Biden administration has shown no signs of reversing that stance.

Manufacturers can’t produce leading-edge chips without the system, and “it is only made by the Dutch firm ASML,” said Will Hunt, a research analyst at Georgetown University’s Center for Security and Emerging Technology, which has concluded that it would take China at least a decade to build its own similar equipment. “From China’s perspective, that is a frustrating thing.”

ASML’s machine has effectively turned into a choke point in the supply chain for chips, which act as the brains of computers and other digital devices. The tool’s three-continent development and production — using expertise and parts from Japan, the United States and Germany — is also a reminder of just how global that supply chain is, providing a reality check for any country that wants to leap ahead in semiconductors by itself.

That includes not only China but the United States, where Congress is debating plans to spend more than $50 billion to reduce reliance on foreign chip manufacturers. Many branches of the federal government, particularly the Pentagon, have been worried about the U.S. dependence on Taiwan’s leading chip manufacturer and the island’s proximity to China.

A study this spring by Boston Consulting Group and the Semiconductor Industry Association estimated that creating a self-sufficient chip supply chain would take at least $1 trillion and sharply increase prices for chips and products made with them.

That goal is “completely unrealistic” for anybody, said Willy Shih, a management professor at Harvard Business School who studies supply chains. ASML’s technology “is a great example of why you have global trade.”

The situation underscores the crucial role played by ASML, a once obscure company whose market value now exceeds $285 billion. It is “the most important company you never heard of,” said C.J. Muse, an analyst at Evercore ISI.

Created in 1984 by the electronics giant Philips and another toolmaker, Advanced Semiconductor Materials International, ASML became an independent company and by far the biggest supplier of chip-manufacturing equipment that involves a process called lithography.

Using lithography, manufacturers repeatedly project patterns of chip circuitry onto silicon wafers. The more tiny transistors and other components that can be added to an individual chip, the more powerful it becomes and the more data it can store. The pace of that miniaturization is known as Moore’s Law, named after Gordon Moore, a co-founder of the chip giant Intel.

In 1997, ASML began studying a shift to using extreme ultraviolet, or EUV, light. Such light has ultrasmall wavelengths that can create much tinier circuitry than is possible with conventional lithography. The company later decided to make machines based on the technology, an effort that has cost $8 billion since the late 1990s.

The development process quickly went global. ASML now assembles the advanced machines using mirrors from Germany and hardware developed in San Diego that generates light by blasting tin droplets with a laser. Key chemicals and components come from Japan.

Peter Wennink, ASML’s chief executive, said a lack of money in the company’s early years had led it to integrate inventions from specialty suppliers, creating what he calls a “collaborative knowledge network” that innovates quickly.

“We were forced to not do ourselves what other people do better,” he said.

ASML built on other international cooperation. In the early 1980s, researchers in the United States, Japan and Europe began considering the radical shift in light sources. The concept was taken up by a consortium that included Intel and two other U.S. chip makers, as well as Department of Energy labs.

ASML joined in 1999 after more than a year of negotiations, said Martin van den Brink, ASML’s president and chief technology officer. Other partners of the company included the Imec research center in Belgium and another U.S. consortium, Sematech. ASML later attracted big investments from Intel, Samsung Electronics and Taiwan Semiconductor Manufacturing Company to help fund development.

That development was made trickier by the quirks of extreme ultraviolet light. Lithography machines usually focus light through lenses to project circuit patterns on wafers. But the small EUV wavelengths are absorbed by glass, so lenses won’t work. Mirrors, another common tool to direct light, have the same problem. That meant the new lithography required mirrors with complex coatings that combined to better reflect the small wavelengths.

So ASML turned to Zeiss Group, a 175-year-old German optics company and longtime partner. Its contributions included a two-ton projection system to handle extreme ultraviolet light, with six specially shaped mirrors that are ground, polished and coated over several months in an elaborate robotic process that uses ion beams to remove defects.

Generating sufficient light to project images quickly also caused delays, Mr. van den Brink said. But Cymer, a San Diego company that ASML bought in 2013, eventually improved a system that directs pulses from a high-powered laser to hit droplets of tin 50,000 times a second — once to flatten them and a second time to vaporize them — to create intense light.

The new system also required redesigned components called photomasks, which act like stencils in projecting circuit designs, as well as new chemicals deposited on wafers that generate those images when exposed to light. Japanese companies now supply most of those products.

Since ASML introduced its commercial EUV model in 2017, customers have bought about 100 of them. Buyers include Samsung and TSMC, the biggest service producing chips designed by other companies. TSMC uses the tool to make the processors designed by Apple for its latest iPhones. Intel and IBM have said EUV is crucial to their plans.

“It’s definitely the most complicated machine humans have built,” said Darío Gil, a senior vice president at IBM.

Dutch restrictions on exporting such machines to China, which have been enforced since 2019, haven’t had much financial impact on ASML since it has a backlog of orders from other countries. But about 15 percent of the company’s sales come from selling older systems in China.

In a final report to Congress and Mr. Biden in March, the National Security Commission on Artificial Intelligence proposed extending export controls to some other advanced ASML machines as well. The group, funded by Congress, seeks to limit artificial intelligence advances with military applications.

Mr. Hunt and other policy experts argued that since China was already using those machines, blocking additional sales would hurt ASML without much strategic benefit. So does the company.

“I hope common sense will prevail,” Mr. van den Brink said.

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Entertainment

China’s Communist Celebration Turns 100. Cue the (State-Authorized) Music.

Yan Shengmin, a Chinese tenor, is known for bouncy renditions of Broadway tunes and soulful performances in operas like “Carmen.”

But lately, Mr. Yan has been focusing on a different genre. He is a star of “Red Boat,” a patriotic opera written to celebrate the 100th anniversary this week of the founding of the Chinese Communist Party. Mr. Yan has embraced the role, immersing himself in party history and binge-watching television shows about revolutionary heroes to prepare.

“I feel a lot of pressure,” Mr. Yan said in an interview between rehearsals. “The 100th anniversary is a big occasion.”

A wave of nationalistic music, theater and dance is sweeping China as the Communist Party works to ensure its centennial is met with pomp and fanfare.

Prominent choreographers are staging ballets about revolutionary martyrs. Theaters are reviving nationalistic plays about class struggle. Hip-hop artists are writing songs about the party’s achievements. Orchestras are performing works honoring communist milestones like the Long March, with chorus members dressed in light-blue military uniforms.

The celebrations are part of efforts by Xi Jinping, China’s authoritarian leader, to make the party omnipresent in people’s lives and to strengthen political loyalty among artists.

Mr. Xi, who has presided over a broad crackdown on free expression in China since rising to power nearly a decade ago, has said artists should serve the cause of socialism rather than become “slaves” of the market.

In honor of the party’s centennial, Mr. Xi’s government has announced plans for performances of 300 operas, ballets, plays, musical compositions and other works. The list includes classics like “The White-Haired Girl,” a Mao-era opera about a young peasant woman whose family is persecuted by a cruel landlord. There are also new productions like “Red Boat,” which chronicles the party’s first congress in 1921 on a boat outside Shanghai.

The outpouring of artistic expression comes amid rising nationalism in China. Many artists have little choice but to comply with the government’s demands for more patriotic art, with officials in China’s top-down system wielding considerable influence over decisions about financing and programming.

“It has become very important for artists to follow the political line,” said Jindong Cai, director of the U.S.-China Music Institute at Bard College. “The government wants artists to focus on Chinese works that relate to people’s lives and positively reflect China’s image.”

Critics have denounced the so-called “red” works as propaganda. But Chinese artists say that is partly the point.

“China is very strong now and people should respect that,” said Warren Mok, a Chinese tenor who is embarking on a national tour to celebrate the centennial.

Mr. Mok said he hoped to use music to remind people about the party’s success in improving living standards in China. Still, he said it was important that patriotic works are balanced with Western music and other art forms.

“Anything you do should not be too extreme,” he said. “If you’re so insecure about your own culture, your own nationalism, you close your door. Isolation is not good for any country.”

Hundreds of performances related to the party’s centennial have already taken place, and scores more are expected by year’s end.

In Suzhou, a city west of Shanghai, the choreographer Wang Yabin recently staged “My Name is Ding Xiang,” a new ballet about a 22-year-old martyr who died during the Second Sino-Japanese War. In Nanjing, an eastern city, an orchestra recently performed “Liberation: 1949,” a symphony about the Communist revolution by the composer Zhao Jiping.

Some works deal with contemporary themes, including the party’s efforts to eliminate extreme poverty and its success in fighting the coronavirus, which Mr. Xi has held up as evidence of the superiority of China’s authoritarian model. A play called “People First” depicts the heroism of medical workers in Wuhan, where the coronavirus emerged in late 2019.

Propaganda art has a long history in China, and some of the country’s most celebrated works emerged during periods of intense political control, including the decade of bloody upheaval in the 1960s and 1970s known as the Cultural Revolution. During that time, classical music was attacked as decadent and bourgeois, and many Western composers and instruments were banned.

In modern China, music and dance from the Cultural Revolution still resonates with the public, including works such as the “Yellow River Piano Concerto” and “The Red Detachment of Women,” a revolutionary ballet.

“These cultural products have their own artistic value,” said Denise Ho, assistant professor of history at Yale University who studies 20th century history in China. “For many Chinese, there is a nostalgia for certain aspects of the Mao era.”

By reviving older works, Mr. Xi appears eager to remind the public of the party’s glory days. His government has redoubled efforts to fortify ideological loyalty among artists. This year, a government-backed industry association released a moral code for performing artists — dancers, musicians and acrobats included — calling on them to be faithful to the party and help advance the socialist cause.

China’s Tightening Grip

    • Xi’s Warning: A century after the Communist Party’s founding, China’s leader says foreign powers would “crack their heads and spill blood” if they tried to stop its rise.
    • Behind the Takeover of Hong Kong: One year ago, the city’s freedoms were curtailed with breathtaking speed. But the clampdown was years in the making, and many signals were missed.
    • One Year Later in Hong Kong: Neighbors are urged to report on one another. Children are taught to look for traitors. The Communist Party is remaking the city.
    • Mapping Out China’s Post-Covid Path: Xi Jinping, China’s leader, is seeking to balance confidence and caution as his country strides ahead while other places continue to grapple with the pandemic.
    • A Challenge to U.S. Global Leadership: As President Biden predicts a struggle between democracies and their opponents, Beijing is eager to champion the other side.
    • ‘Red Tourism’ Flourishes: New and improved attractions dedicated to the Communist Party’s history, or a sanitized version of it, are drawing crowds ahead of the party’s centennial.

Mr. Xi, in a ceremony this week at Beijing’s Great Hall of the People, handed out centennial medals to 29 party cadres, including Lan Tianye, an actor often described as a “red artist,” and Lu Qiming, a patriotic composer known for the piece “Ode to the Red Flag.”

“For Xi, as for Mao, art is first and foremost a political instrument,” Professor Ho said.

The Chinese government has tried to use music, dance, television and movies in recent years to improve its image, especially among young people, many of whom have no direct connection to the Communist revolution of 1949.

A rap song celebrating the centennial, titled “100 Percent,” has been widely shared on the Chinese internet in recent days. But the 15-minute track, featuring 100 artists, has been mocked for its wooden propaganda slogans.

“Our spaceships are flying in the sky,” says one lyric. “The new China must get lit.”

Performers say they hope the high caliber of the centennial productions, including elaborate costumes, sets and visual effects, will appeal to younger audiences.

Wang Jiajun, 36, a principal dancer at Shanghai Dance Theater who plays a martyr in a revival of the dance production “The Eternal Wave,” said young people could identify with the work.

“These heroes were only in their teens, 20s or 30s when they lost their lives,” Mr. Wang said. “The stories of young people will attract young people.”

For artists taking part in the centenary, the effort has at times been laborious.

Xie Menghao, a Chinese-born graduate student in music composition in Germany, spent six months repurposing a suite of Red Army songs into a piano concerto about the Long March, a 6,000-mile retreat of Communist forces that began in 1934 and established Mao’s pre-eminence. He said he was proud of the piece, which the Shanghai Philharmonic Orchestra premiered last month, but added that the experience was “more like a job.”

“I just did what they said,” he said in an interview. “Every composer just thinks about the music.”

Mr. Yan the tenor starring in “Red Boat,” said he has found it easy to connect with his character, Chen Duxiu, a founder of the party. But he said rehearsals have not always been easy. Younger performers, for instance, have needed help better understanding the emotional experience of being part of the early communist struggle, he said.

“They don’t have the ideas to fight or sacrifice for the nation’s destiny,” Mr. Yan, 56, said. “I can do it in one take.”

Mr. Yan said he was confident that the show would have success in China and perhaps beyond.

“We’re depicting history, not just lecturing how great the Communist Party is,” he said. “This isn’t a communist slogan-type performance. It’s plain storytelling.”

Javier C. Hernández reported from Taipei, Taiwan, and Joy Dong from Hong Kong.

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World News

China’s Crackdown on Hong Kong

In the year since China passed a sweeping national security law for Hong Kong, the mainland government has steadily tightened its grip on the city, quashing the pro-democracy movement.

Officials said they would censor Hong Kong films that they considered a threat to Beijing’s sovereignty, a sharp slap to the city’s artistic spirit. In March, Pro-Beijing lawmakers called for work by the dissident artist Ai Weiwei to be barred from a museum. Courts have sentenced pro-democracy activists to prison. And last week, the police raided Apple Daily, the biggest openly pro-democracy newspaper in the city, arrested its top editors and froze its bank accounts. Today, the newspaper said it would close this week.

Vivian Wang, who covers Hong Kong for The Times, updates us on the situation.

Claire: Last time we talked with you about Hong Kong in this newsletter was in March. What’s happened since?

Vivian: A lot has changed, but all in line with a general trend: increasingly harsh, and overt, suppression of the rights that made Hong Kong different from mainland China. An annual vigil on June 4, to commemorate the 1989 Tiananmen Square Massacre against pro-democracy protesters in Beijing, was banned.

Tell us about China’s involvement in Hong Kong’s elections.

China has overhauled Hong Kong’s election system. Before anyone can run for office, they will have to pass a screening committee set up by Beijing. The central government had gotten worried that pro-democracy residents were going to try to sweep the upcoming legislative elections. So Beijing passed another top-down order, as it had with the security law.

There are a few major changes. Only “patriots,” defined by a screening committee, will be allowed to run for office.

Also, in the past, half of the seats in the legislature were directly elected (the other half were reserved for representatives of industry groups, often dominated by pro-Beijing candidates). Now, less than a quarter will be directly elected.

Many pro-democracy leaders are in prison. What does that mean for the movement?

Those sentenced range from some of the most veteran pro-democracy leaders to people in their 20s who had been considered the next generation. The government is sending a message: Anyone who becomes too prominent, or too vocal, is putting themselves at risk. These figures were definitely important in boosting public morale and giving people someone to rally around.

On a logistical level, this may not change much. There basically haven’t been any protests or organized pro-democracy events in the past year, and the pro-democracy political parties are limited in what they can do, especially with the new election system.

You mentioned censorship. What does that mean for pop culture in Hong Kong?

Hong Kong has historically had a strong film industry, and it’s been trying to turn itself into an arts hub. But with the new rules around movie censorship, and other recent attempts to get artwork banned from museums, it’s hard to imagine how the city could keep up the reputation it wants.

There are still attempts to keep Hong Kong’s cultural world alive, notably through independent bookstores. But the mainland Chinese market is so big that many creators, especially in the corporate world, don’t want to alienate it. That will probably mean a shrinking space for anything critical.

What’s the mood inside the pro-democracy movement?

It’s still bleak. Some people say protesters will come out again when the pandemic fully ends and social distancing rules can’t be used anymore to ban public assembly. But many people I talk to say they are really scared.

For more: A 23-year-old protester is the first person charged under the security law to stand trial. He could face life in prison.

  • With almost all in-person ballots counted, Eric Adams was leading in the Democratic primary for New York City mayor. Maya Wiley was second.

  • Andrew Yang, the former presidential candidate, conceded.

  • These results are not final, and we may not know the winner for weeks. The city still has to count absentee ballots, as well as the ranked-choice votes. (New Yorkers could rank up to five candidates in order of preference.)

  • For more: A detailed map of how people voted, takeaways and the latest vote count.

Amazon bills its annual Prime Day as a “holiday.” For many of the company’s workers, it’s miserable, Alex Press writes in Jacobin.

The case surrounding Britney Spears’s conservatorship is back in court today, and The Times has obtained court records that provide a rare view of her perspective. Spears will address the court directly, although it’s unclear if she will make her remarks in public.

The conservatorship, which started in 2008, restricts Spears’s rights, prohibiting her from making most decisions. Her father, Jamie Spears, is the steward of her roughly $60 million fortune. Among the findings in the records: Spears, now 39, could not make friends or restain her kitchen cabinets without the approval of her father.

Conservatorships are supposed to be a last resort for people who cannot take care of themselves, such as older people with dementia. Spears’s case has drawn public scrutiny in part because she has regularly performed over the past decade.

Spears’s father and others involved in the conservatorship have maintained that it is a smooth-running machine that rescued the star after public struggles and concerns about her mental health. But the court records tell a different story: Spears has pushed for years to end the conservatorship. It “comes with a lot of fear,” she said.

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Health

China’s Guangzhou studies zero new circumstances for first time in new cluster

A citizen reacts to a throat swab sampling during a mass covid test in Guangzhou in south China’s Guangdong province Monday, May 31, 2021.

Barcroft Media | Barcroft Media | Getty Images

GUANGZHOU, China — The southern Chinese city of Guangzhou has reported zero new locally transmitted coronavirus cases for the first time since a new cluster of cases cropped up in May.

The recent uptick in cases prompted mass testing and lockdowns, and also threatened global trade.

On Tuesday, health authorities found no new confirmed cases in Guangzhou, a city of over 15 million people which became China’s new Covid hotspot.

The first new case, a 75-year-old woman, was detected on May 21. It was the first time the delta variant of the virus, first identified in India, was detected in China.

Authorities were concerned because of the highly transmissible nature of the variant and took action swiftly.

Liwan, in the west of Guangzhou, had parts of the district locked down. People were not allowed in or out of these areas except under special circumstances. Some restaurants had to close, while others operated take-out only or at a reduced capacity.

Health workers lined the streets of Guangzhou to carry out mass coronavirus testing on the population. Tens of millions of people have been tested in the last two weeks.

Meanwhile, police in Guangzhou fined and detained individuals who allegedly broke laws such as not wearing masks in public, or not cooperating when asked to take a coronavirus test.

Guangzhou’s outbreak, which threatened to spread more broadly across the Guangdong province, an economic and trading powerhouse, has also impacted shipping. Increased checks and virus prevention measures have caused delays at Guangdong’s key shipping ports with experts warning it could lead to disruptions to the global supply chain.

Authorities have also urged people to get vaccinated in Guangdong province and across China. Over 900 million doses of vaccine have been administered in the country.

While one day of zero new cases is a positive development, authorities will be hoping it can be sustained so they can eventually fully reopen the local economy and take areas out of lockdown.

On Wednesday, Chen Bin, deputy director of the Guangzhou Municipal Health Commission, said zero cases “does not mean zero risk,” according to comments reported by local media. Authorities have continuously urged citizens to remain cautious and continue to wear masks and reduce unnecessary social contact.

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Politics

To Counter China’s Belt-and-Highway, Biden Tries to Unite G7

PLYMOUTH, England – President Biden on Saturday urged the nations of Europe and Japan to counter China’s growing economic and security influence by providing hundreds of billions in funding to developing countries as an alternative to building new roads, railways, ports and communications networks in Beijing offer.

It was the first time the world’s richest nations discussed organizing a direct alternative to China’s Belt and Road Initiative, President Xi Jinping’s overseas loan and investment plan that now spans Africa, Latin America and, hesitantly until it has spread to Europe itself. But the White House made no financial commitments, and there is sharp disagreement between the United States and its allies over how to respond to China’s rising power.

Mr Biden has made the challenge of an emerging China and a disruptive Russia at the heart of a foreign policy aimed at building democracies around the world as bulwarks against the spread of authoritarianism. For its part, Beijing has pointed to the US’s poor response to the pandemic and divisive American policies – particularly the January 6 uprising in the Capitol – as a sign that democracy is failing.

In scope and ambition, China’s development efforts far surpass the Marshall Plan, the United States’ program to rebuild Europe after World War II. At the Summit of the Group of Seven, discussions on Saturday about how to counteract this mirrored the debate in the West over whether to see China as a partner, a competitor, an adversary or an absolute security threat.

It is far from clear that the wealthy democracies will be able to come up with a comprehensive answer.

The plan described by the White House appeared to bring together existing projects in the United States, Europe, and Japan, and encourage private funding. An information sheet distributed to reporters named it “Build Back Better for the World,” with roots in Mr. Biden’s campaign theme – B3W for short, a game about China’s BRI.

He stressed the environment, anti-corruption efforts, the free flow of information and funding conditions that would allow developing countries to avoid excessive debt. One of the criticisms of Belt and Road is that the nations that sign it become dependent on China, which gives Beijing too much leverage over them.

It was a sign of growing concern about the ubiquitous Chinese surveillance that the UK hosts of this year’s G7 meeting cut all Internet and Wi-Fi connections in the room where the leaders met and so they away from uncoupled from the outside world.

Leaders broadly agree that China is using its investment strategy to both strengthen its state-owned enterprises and build a network of commercial ports and communication systems through Huawei, over which it would have significant control. But officials emerging from the meeting said Germany, Italy and the European Union are clearly concerned about risking their huge trade and investment deals with Beijing or accelerating what has increasingly taken on the tone of a new Cold War.

Mr Biden used the meeting to advance his argument that the fundamental struggle in the post-pandemic era will be democracy versus autocracies.

The first test could be whether he can convince the Allies to refuse participation in projects that rely on forced labor. It is unclear, American officials said what language about rejecting goods or investing in such projects would be included in the meeting’s final communiqué, which will be released on Sunday.

But the meeting comes just one day after Foreign Minister Antony J. Blinken, who is traveling here with Mr. Biden, told his Chinese counterpart in a telephone conversation that the United States is actively opposing “ongoing genocide and ethnic cleansing” of Muslims in Xinjiang in far west China and “the deterioration of democratic norms” in Hong Kong. The European heads of state and government have largely avoided this terminology.

The divisions on how to view China help explain why the West has not yet found a coordinated response to the Belt and Road. A recent study by the Council on Foreign Relations described Washington’s own reactions as a “scattershot,” a mixture of modest adjustments by Congress to rules governing the Export-Import Bank to compete with high-tech Chinese loans and efforts to get Huawei to China’s telecommunications, outlaw champion.

The risk to American strategy is that dealing with a patchwork of separate programs – and Western insistence on good environmental and human rights practices – may seem less attractive to developing countries than Beijing’s all-in-one package of finance and new technology .

“Many BRI countries appreciate the speed with which China can move from planning to construction,” said the council report, written by a bipartisan group of China experts and former US officials.

These countries, she added, also value China’s “willingness to build what host countries want instead of telling them what to do and the ease with which to deal with a single group of builders, financiers and government officials.”

Still, Mr Biden feels an opening as European nations have begun to understand the risks of reliance on Chinese supply chains and watch China’s reach expand into their own backyards.

Britain, which once pursued arguably the most China-friendly policies in Europe, has firmly stood behind the American hard line, especially with regard to Huawei, which the US sees as a security threat. After trying to accommodate Huawei, Prime Minister Boris Johnson announced that it was ripping older Huawei devices from its networks.

Biden in Europe

Updated

June 12, 2021, 7:11 a.m. ET

Germany, for which China has become the number 1 market for Volkswagen and BMW, remains committed to its commitment and is profoundly opposed to a new Cold War. It has launched decisions about the use of Huawei and other Chinese-made network devices after Chinese officials threatened to retaliate by banning the sale of German luxury cars in China.

Italy became the first member of the G7 to join the “Belt and Road” in 2019. It then had to resign in part under pressure from NATO allies who feared that Italian infrastructure, including the telecommunications network, would depend on Chinese technology.

When China sent face masks and ventilators to a desperate Italy during the Covid outbreak, an Italian official told his fellow Europeans stressed that the country would remember who its friends were after the pandemic.

France has not joined Belt and Road, despite welcoming Chinese investment in the country and not banning Huawei from its wireless network. Relations with China have cooled after President Emmanuel Macron criticized Beijing for its lack of transparency about the origins of the coronavirus.

“America would be well served if the European Union works together and defines a coherent China strategy,” said Wolfgang Ischinger, former German ambassador to the USA. “Interests are not served well if there is a German China strategy, a French China strategy and a British China strategy.”

That’s easier said than done. Britain moved closer to the US under pressure from former President Donald J. Trump – less because it changed its view of China’s strategy or security risks than because it feared being isolated from its key ally after Brexit.

Chancellor Angela Merkel, who firmly believes in her commitment to China, will resign in a few months. But not much is likely to change in Germany’s politics, especially if her successor as CDU leader Armin Laschet replaces her in the Chancellery. He is considered to be in step with Ms. Merkel.

France is a different story. Macron faces a formidable challenge from the populist right in next year’s elections. Right-wing leader Marine LePen has vowed to counter China’s ambitions in the Indo-Pacific region.

“Whenever you have one of these meetings, you will see a fluid movement in one country or another,” said Simon Fraser, a former top official in the UK Foreign Office. But he added: “There is a lack of cohesion on the European side that needs to be addressed”.

Italy is a good test case of how China has tried to build influence in Europe. Since joining Belt and Road, Rome has signed nearly two dozen agreements with Beijing, ranging from tax rules to sanitary rules for pork exports. However, Italy also vetoed a 5G deal between Huawei and one of its telecommunications companies.

At the heart of China’s investment in Europe is a rail network that would connect its factories on the Pacific Ocean to London – a project China’s Prime Minister Li Keqiang once called an expressway to Europe. Italy, which has a terminus on the route, welcomes the investment as a tonic for its ailing economy.

But Britain’s relations with China are frozen. The government imposed sanctions on China’s treatment of the Uyghur population and offered residency and access to citizenship to more than 300,000 British foreign passport holders in Hong Kong after China imposed a draconian national security law on the former British colony.

Analysts say China’s human rights record is hardening European attitudes across the board. The European Parliament refused to ratify a landmark investment agreement backed by Germany as China stubbornly responded to sanctions for its treatment of the Uyghurs. China has sanctioned ten EU politicians.

There is also evidence that Mr Biden realizes that his aggressive language about China – as the great adversary in a fateful struggle between democracies and autocracies – is uncomfortable for many Europeans. He largely avoided this framing in the days leading up to his European tour and spoke more generally about the need to promote democracies in a competitive world.

For some analysts, this opens the door to a hopeful scenario in which the United States and Europe are moving towards each other, moderating the most extreme aspects of the confrontation towards reconciliation in each other’s approaches.

“America becomes more realistic from the hard line to China, while Europe becomes more realistic from the soft line,” said Robin Niblett, director of Chatham House, a think tank in London.

Categories
World News

China’s Guangzhou fights Delta Covid variant with lockdowns, mass testing

People wait in lines for nucleic acid tests in Guangzhou, China on May 26, 2021.

Visual China Group | Getty Images

GUANGZHOU, China – Authorities in southern China’s Guangdong Province are conducting mass tests and have closed areas to control a flare-up of coronavirus cases in Guangzhou.

The city has cited the delta variant of the coronavirus, which was first discovered in India, as the driver behind the surge in cases reported since late May. The Delta Tribe is known to be highly transmissible.

Guangzhou, a city of over 15 million people and the provincial capital, reported 96 of the over 100 cases in Guangdong Province in this latest outbreak.

China, where the coronavirus first emerged last year, has quickly got the epidemic under control and has had very few cases in the past 12 months. However, clusters have emerged in parts of the country, including major cities such as the capital Beijing and the financial center of Shanghai.

The cases in Guangzhou may be even more worrying as it is the delta strain of the coronavirus, which can spread very quickly.

Lock

A 75-year-old woman in Liwan, a district of Guangzhou to the west of the city, was the first confirmed case of the Delta variant on May 21. She went to a restaurant and eventually infected her husband. The most recent infections started from there and have since spread to other areas of the city.

Liwan, still the hardest hit district, has strictly closed certain streets. Some areas do not allow people into a certain zone and residents are not allowed to leave their building. Checkpoints have been set up 24 hours a day to monitor movement in and out of these areas.

Restaurants and entertainment venues have also been closed.

But the virus has also spread to other parts of the city and province. Foshan, a city southwest of Guangzhou, has reported cases. On June 6th, six members of the same family in Guangzhou’s Nansha District tested positive for the coronavirus. On Sunday, a positive case was found at the Chinese technology center in Shenzhen, home to companies like Huawei and Tencent.

In other areas of Guangzhou that are less affected by the recent accumulation of cases, some restaurants and bars have started offering take-away meals.

Mass tests, travel restrictions

After the first case was found, Guangzhou first conducted mass tests in Liwan, which have since been expanded to other areas.

In the central business district known as Zhujiang New Town, residents were asked between Friday and Sunday to take a test at a location near their homes.

One such test site, which was set up on a street full of bars and restaurants, had huge lines on Friday.

Guangzhou performed over 16 million tests at midnight between May 26 and June 5.

In Guangzhou, the authorities have imposed stricter travel restrictions. Some metro stations in the city are closed. The authorities have asked people not to leave the city. However, if residents must leave the province, they should have a negative nucleic acid test within 48 hours of their departure. Previously, travelers had a 72-hour window.

Hundreds of domestic flights from Guangzhou’s Baiyun International Airport have also been canceled.

Driverless cars that carry supplies

Guangzhou has become a hub for driverless automakers to test their vehicles on public roads. And since Liwan is blocked, these companies transport goods to Liwan with their autonomous vehicles.

Guangzhou-based WeRide has used its autonomous bus to transport groceries to Liwan. Pony.ai, another autonomous driving company, has sent its vehicles to Liwan with supplies.

Chinese internet giant Baidu also used its autonomous vehicles to bring food and medical personnel to the affected areas.