Menagerie, Oct 27-28

U.S. plans more arms sales to Taiwan, China cleaning up mobile web browsers, no new U.S. COVID stimulus package expected until after Nov. 3 elections

Good morning/evening,

Today’s newsletter leads with further U.S. arms sales to Taiwan, this time a 100 Harpoon Coastal Defense Systems including cruise missiles. China has also launched a new crackdown on mobile web browsers to clean up content being accessed by the general public through them.

It also appears that Americans can wave goodbye the possibility of getting another stimulus check in the mail with President Trump now conceding that the passage of another COVID stimulus package appears unlikely.

Things will probably remain quiet in China until the end of the Fifth Plenum setting the next five-year economic plan. We may not fully know the results of the new plans until the next annual meeting of parliament in March, though the preponderance of evidence points to significant changes including a reduction in the growth target and further structural reforms push to advance President Xi Jinping’s so-called dual circulation agenda.

Thanks for reading, as always.


A. The Lead

U.S. State Department approves $2.4 bln more in potential arms sales to Taiwan -Pentagon

WASHINGTON, Oct 26 (Reuters) - The U.S. State Department has approved the potential sale of 100 Boeing-made Harpoon Coastal Defense Systems to Taiwan in a deal that has a potential value of up to $2.37 billion, the Pentagon said on Monday.

The move comes days after the State Department approved the potential sale of three other weapons systems to Taiwan, including sensors, missiles and artillery that could have a total value of $1.8 billion, prompting a sanctions threat from China.

China will impose sanctions on Lockheed Martin, Boeing Defense, Raytheon and other U.S. companies it says are involved in Washington's arms sales to Taiwan, a Chinese foreign ministry spokesman said Monday.

"We deplore Beijing’s efforts to retaliate against U.S. and foreign companies for their sales that support Taiwan’s legitimate self-defense requirements," U.S. State Department spokeswoman Morgan Ortagus said in a statement.

Monday's formal notifications to Congress by the State Department covered the proposed sale of up to 100 Harpoon Coastal Defense Systems (HCDS), which includes 400 RGM-84L-4 Harpoon Block II Surface Launched Missiles to serve as coastal defense cruise missiles.

Taiwan said the arms sales showed the island's defense was of "great importance" to the U.S. government.

"Facing China's military expansion and provocation, Taiwan will continue to enhance the modernization of defense capacity and speed up asymmetric warfare capabilities," it said in a statement.

The State Department sent notifications to Capitol Hill last week for the first tranche of arms sales including truck-based rocket launchers made by Lockheed, Standoff Land Attack Missile Expanded Response (SLAM-ER) missiles and related equipment made by Boeing Co, and external sensor pods for F-16 jets.

China launches crackdown on mobile web browsers, decries 'chaos' of information

SHANGHAI, Oct 26 (Reuters) - China's top cyber authority said on Monday it would carry out a "rectification" of Chinese mobile internet browsers to address what it called social concerns over the "chaos" of information being published online.

China's strict internet censorship rules have been tightened numerous times in recent years and in the latest crackdown, the Cyberspace Administration of China (CAC) has told firms operating mobile browsers that they have until Nov. 9 to conduct a "self examination" and rectify problems.

The problems include the spreading of rumours, the use of sensationalist headlines and the publishing of content that violates the core values of socialism, it said in a statement.

"For some time, mobile browsers have grown in an uncivilised way ... and have become a gathering place and amplifier for dissemination of chaos by 'self-media'," the CAC said, referring to independently operated social media accounts, many of which publish news.

"After the rectification, mobile browsers that still have outstanding problems will be dealt with strictly according to laws and regulations until related businesses are banned."

The campaign will initially focus on eight of the most influential mobile browsers in China, including those operated by Huawei Technologies Co Ltd, Alibaba Group Holding's UCWeb and Xiaomi Corp, it said.

Others include the QQ platform owned by Tencent, Qihoo-owned 360, Oppo and Sogou.

Huawei's browser unit said in a statement on Tuesday it would conduct a comprehensive self-examination and clean-up in line with the regulator's requests, and would also place strict controls over 'self media' accounts.

Xiaomi and UCWeb declined to comment, while Tencent, Oppo, Sogou and 360 did not immediately respond to requests for comment.

Legislation introduced in recent years by China include measures to restrict media outlets, surveillance measures for media sites and rolling campaigns to remove content deemed unacceptable.

Trump concedes no coronavirus relief deal before Nov. 3 election

WASHINGTON, Oct 27 (Reuters) - President Donald Trump acknowledged on Tuesday that a coronavirus economic relief deal would likely come after the Nov. 3 election, with the White House unable to bridge differences with fellow Republicans in the U.S. Senate as well as congressional Democrats.

"After the election we'll get the best stimulus package you've ever seen," Trump told reporters at the White House before leaving on a campaign trip.

Trump and House of Representatives Speaker Nancy Pelosi have traded blame for the impasse over another large stimulus package worth around $2 trillion to help Americans weather the pandemic.

"We'll always talk about it because our people should get it, the stimulus, but Nancy Pelosi is only interested in bailing out badly run, crime-ridden Democrat cities and states," Trump said.

Pelosi, the top elected Democrat, led the House to pass a $3 trillion coronavirus relief bill in May, but Republicans who control the U.S. Senate balked at another large bill. They pushed a much smaller measure targeting a few areas for relief.

The White House has said aid to state and local governments has been the main sticking point in the talks, while Democrats also cited the lack of a national coronavirus testing plan.

"In all of our legislation, we have stressed the importance of testing, but the administration has never followed through," Pelosi wrote in a letter to lawmakers on Monday. "The Republicans’ continued surrender to the virus – particularly amid the recent wave of cases – is official malfeasance."

Infections are surging again in the United States and 36 out of 50 states have seen an increase for at least two weeks in a row, according to the Reuters analysis. Deaths from the respiratory disease have also more than doubled in seven states.

On Monday, Pelosi's spokesman said she was hopeful an agreement could be reached before the elections.

But the White House on Tuesday morning began tamping down expectations for a major package to be agreed upon by next Tuesday's presidential and congressional elections.

"The chances are slim," White House spokeswoman Kayleigh McEnany said on Fox Business Network.

B. China

China's industrial profit growth slows as factory-gate deflation weighs

BEIJING, Oct 27 (Reuters) - Profits at China's industrial firms rose for a fifth straight month in September, but at a slower pace as factory-gate deflation and rising raw materials costs undercut a recovery in the manufacturing sector.

China's economic rebound has been gaining momentum following the sharp COVID-19-driven downturn thanks to strong exports, pent-up demand and government stimulus, but slower-than-expected third quarter gross domestic product growth highlighted pockets of weakness for one of the few drivers of global demand.

Profits at Chinese industrial firms in September rose 10.1% year-on-year to 646.43 billion yuan ($96.34 billion), National Bureau of Statistics (NBS) data showed on Tuesday.

That marked the fifth month of profit growth albeit slower than a 19.1% increase in August.

Zhu Hong, a senior statistician at the NBS, attributed the slower growth in September to deepening declines in factory-gate prices, rising losses from asset depreciation and increasing raw material costs for auto and electronics sectors.

Factory gate prices, a key barometer of industrial demand, fell at a faster-than-expected pace in September, and consumer inflation slowed to its weakest in 19 months. (Full Story)

"Although industrial profits continued to recover steadily in the first three quarters, cumulative operating income and profit growth have yet to turn positive, while growth rates of accounts receivable and inventory of finished goods are still high," Zhu said.

"The foundation for continued improvements in corporate profits still needs to be consolidated."

For January-September, industrial firms' profits fell 2.4% on an annual basis to 4.37 trillion yuan, with the downturn easing from a 4.4% decrease in the first eight months.

Hong Kong leader to visit Beijing to discuss plans to revive economy

HONG KONG, Oct 27 (Reuters) - Hong Kong leader Carrie Lam will travel to Beijing next week for a three-day visit to discuss plans to revive the global financial hub's economy which has been battered by the COVID-19 pandemic and anti-government protests.

Lam, speaking at a weekly news briefing on Tuesday, said she would leave on Nov. 3 for the southern Chinese city of Shenzhen, where she will take a coronavirus test before travelling to Beijing.

"My trip to Beijing this time is solely on the economic side that is in light of the economic situation, which of course is very serious in Hong Kong," Lam said on Tuesday.

"We need more support measures from the mainland of China, especially in light of the overall direction that Hong Kong should move to better integrate with the mainland of China especially in the Greater Bay Area."

The Beijing-backed leader postponed her annual policy address earlier this month in order to travel to the mainland for talks on how the central government can support the former British colony's economic recovery.

She said she still plans to deliver her policy address by the end of November.

Lam has repeatedly touted the importance of the Greater Bay area - a region that includes Hong Kong, Macau and nine cities in China's Guangdong province - as a key pillar to provide economic benefits to the Chinese-ruled city.

Hong Kong is reeling from the double blow of anti-government protests that plunged the city into its biggest crisis in decades last year and the impact of coronavirus.

C. US

AMD to buy chip peer Xilinx for $35 billion in data center push

Oct 27 (Reuters) - Semiconductor designer Advanced Micro Devices Inc (AMD) said on Tuesday it would buy Xilinx Inc in a $35 billion all-stock deal, intensifying its battle with Intel Corp in the data center chip market.

The deal, which AMD expects to close at the end of 2021, will create a combined company with 13,000 engineers and a completely outsourced manufacturing strategy that relies heavily on Taiwan Semiconductor Manufacturing Co Ltd (TSMC).

The two U.S. companies have benefited from a more nimble approach to grab market share from Intel, which has struggled with internal manufacturing.

AMD has long been Intel's chief rival for central processor units (CPUs) in the personal computer business.

Since Chief Executive Lisa Su took over AMD in 2014, she has focused on challenging Intel in the fast-growing business of data centers that power internet-based applications and services and are fueling the rise of artificial intelligence and fifth-generation telecommunications networks.

Xilinx has also been working to penetrate data centers with programmable processors that help speed up specialized tasks such as compressing videos or providing digital encryption. Its primary rival in the area, Altera Corp, was scooped up by Intel for $16.7 billion in 2015 in what was then Intel's largest-ever deal.

"There are some areas where we're very strong, and we will be able to accelerate some of the adoption of the Xilinx product family," Su told Reuters in an interview. "And there are some areas where (Xilinx CEO) Victor (Peng) is very strong, and we believe that we'll be able to accelerate some of the AMD products into those markets."

The tie-up comes at a time when Intel's manufacturing technology has fallen years behind TSMC's. AMD, which spun off its factories nearly a decade ago, has rocketed ahead of Intel with chips that perform better. The performance edge helped AMD gain its best market share since 2013 at slightly less than 20% of the CPU market, which has in turn pushed its shares up 79% this year.

Shares of AMD were down 1.8% shortly after markets opened at 9:30 a.m. ET (1330 GMT), while those of Xilinx surged nearly 12% after the two companies held a joint conference call about the deal.

Xilinx also uses TSMC's factories, called "fabs" in the industry, to make its chips, with both U.S. companies using modular designs that let them swap out different pieces of a chip to avoid bottlenecks or delays.

Political adviser sparked COVID-19 outbreak on VP Pence team -sources

WASHINGTON, Oct 27 (Reuters) - A political adviser to U.S. Vice President Mike Pence is suspected of sparking an outbreak of the coronavirus on his team that sidelined a senior official days before the presidential election, according to a current White House official and a former official familiar with the matter.

Marty Obst, a political strategist for Pence, was determined by contact tracers from the White House Medical Unit to be the likely origin of the outbreak, the two people said.

Obst did not immediately reply to a request for comment.

Obst, who does not draw a government salary, accompanied Pence to rallies in Bangor, Maine and Harrisburg, Pennsylvania on Monday, Oct. 19, the White House official said.

"If you had to pick a patient zero it was Marty and he brought it in from the outside," the White House official said, declining to be named since he was not authorized to speak on the matter.

A spokesman for Pence said Marc Short, Pence's chief of staff, had tested positive for the coronavirus over the weekend. Pence, who has faced criticism for keeping a busy campaign schedule despite being considered a close contact of Short, has tested negative in the days since.

The outbreak on Pence's team, which follows closely on the heels of a flurry of cases in President Donald Trump's inner circle, comes as coronavirus infections and hospitalizations are surging across the country.

That has kept Trump's handling of the virus in the headlines ahead of the Nov. 3 election. Polls show Trump trailing Democratic rival and former Vice President Joe Biden, who is consistently seen by likely voters as better able to handle the pandemic.

In an interview with Reuters on Tuesday, Short defended the decision to keep Pence, the head of the White House Coronavirus Task Force, traveling in the final days of the campaign despite his possible exposure.

He noted the White House had encouraged other essential workers, such as 'blue collar' meat packers, to keep working even if they had close contact with someone later diagnosed with COVID-19, so they had set the same example.

"I think we're actually following the guidelines that we established," Short said, noting that he had experienced symptoms akin to a head cold but now felt good.

Vaccines, not spy planes: U.S. misfires in Southeast Asia

JAKARTA, Oct 27 (Reuters) - For months, by Zoom calls and then by jet, Indonesian ministers and officials scoured the world for access to a vaccine for the coronavirus that Southeast Asia's biggest country is struggling to control. This month, their campaign paid off.

Three Chinese companies committed 250 million doses of vaccines to the archipelago of 270 million people. A letter of intent was signed with a UK-based company for another 100 million.

Absent from these pledges: the United States.

Not only was it not promising any vaccine, but months earlier the United States shocked Indonesian officials by asking to land and refuel its spy planes in the territory, four senior Indonesian officials told Reuters. This would reverse a decades-long policy of strategic neutrality in the country.

With the U.S. Secretary of State Mike Pompeo due to visit Jakarta on Oct. 29, Washington's campaign to buttress its influence in the region - part of its escalating global rivalry with China - has been misfiring, say government officials and analysts.

On the other hand, China - Indonesia and the region's biggest investor and trading partner - has won ground with vaccines and trade.

America's strategic interests converge with those of many others in the region; Washington opposes Beijing's island-building and militarisation of the South China Sea. Vietnam, the Philippines, Malaysia and Brunei dispute China's territorial claim to over 90% of the waterway.

Indonesia does not have a formal claim to the waters, but it, too, opposes China's claim. China is less popular among Indonesians than the United States, according to polling in 2018 by the Pew Research Center, a think-tank in Washington.

This is an edge that the United States under President Donald Trump has blunted, according to interviews with more than a dozen government officials, former diplomats and analysts. Meanwhile China is managing to parlay its economic heft and early recovery from coronavirus restrictions to strategic advantage, they said.

"The U.S uses sanctions and muscle too much," said one Indonesian government source. "China is smart. It always uses the soft power approach, the economic approach, the development approach." …

A former Dutch colony with hundreds of ethnic groups scattered over more than 17,000 islands, Indonesia is a founder member of the non-aligned movement, an alliance of developing countries which agreed after World War Two to avoid any defence tie-ups that serve the interests of the big powers. Since emerging from authoritarian rule 22 years ago, it has never allowed foreign militaries to stage operations on its soil, although it does conduct military exercises with other nations.

With this in mind, Indonesian officials said it was a surprise when the United States made multiple high-level approaches in late July and early August to Indonesia's defence and foreign ministers to grant landing and refueling rights to its P-8 Poseidon surveillance aircraft. These play a central role in monitoring China's military activity in Southeast Asia.

The proposal - first reported by Reuters - was swiftly rejected after it was reviewed by Indonesia's President Joko Widodo, commonly known as "Jokowi," the officials said. …

The P-8 bid was part of a region-wide U.S. diplomatic blitz that began in mid-July with three days of speeches by Pompeo and other senior U.S. officials denouncing China's conduct in the South China Sea.

As well as declaring China's territorial claims unlawful, the United States accused Beijing of "gangster tactics," saying Beijing denies Southeast Asian states the opportunity to develop the sea's resources. Washington has also announced sanctions on Chinese firms and individuals that help China build military installations on islands, atolls and shoals in the waters. China bases its claim in the South China Sea on what it calls "historic rights."

Repeated incursions into Indonesia's waters by Chinese coast guard and fishing vessels are an emotive issue in Indonesia, where there is a strong nationalist streak. The presence of about 36,000 Chinese workers in Indonesia - one-third of all foreign workers according to government data - has also riled many Indonesians.

In the past, the government has blown up Chinese and other foreign fishing vessels.

Senior officials say Indonesia has told China bluntly of its concerns of its aggression in the South China Sea this year. In July, Indonesia held military exercises in the portion of the waterway its claims as its exclusive economic zone.

But Indonesian officials said Washington's response to China has been unnecessarily combative. Adding to their anxiety, they said, was a growing fear that military conflict was brewing after the U.S. and China held major military exercises in the South China Sea within sight of each other near the contested Paracel Islands on July 4. …

Jokowi's close confidant and Indonesia's coordinating minister for maritime affairs and investment, Luhut Pandjaitan, gave the president cause for hope when he returned in October from China's Yunnan province with promised supplies of vaccines, which are in phase three trials, as well as a pledge to help Indonesia manufacture and export one of the vaccines to other countries.

"It is very easy dealing with the Chinese and they actually executed almost all of their promises and commitments," said a senior adviser who travelled to Yunnan with Pandjaitan.

The U.S., grappling with one of the world's most severe COVID-19 outbreaks, has hoarded its vaccines, withdrawn from the World Health Organization and, unlike China, refused to join a WHO-sponsored plan to pool vaccines and distribute them to countries based on need.

"They are completely ceding the field to China," said Aaron Connelly, an analyst with Singapore's International Institute for Strategic Studies. …

Indonesia's foreign minister Retno Marsudi says Indonesia wants to engage with as many countries as possible when it comes to combating the coronavirus and developing its economy, including the U.S. This, she told Reuters, was the essence of Indonesia's "independent and active" foreign policy.

"It's not only China," she said.

NPR: U.S. Agency Targets Its Own Journalists' Independence

A regulatory "firewall" intended to protect Voice of America and its affiliated newsrooms from political interference in their journalism was swept aside late Monday night by the chief executive of the federal agency which oversees the government's international broadcasters.

Michael Pack, a Trump appointee who assumed leadership of the U.S. Agency for Global Media in June, wrote that he acted to eliminate policies that were "harmful to the agency and the U.S. national interest." And Pack argued they had interfered with his mandate "to support the foreign policy of the United States."

Pack has already come under fire for revelations that his senior aides investigated the agency's journalists for bias against President Trump and pushed for their dismissals and reassignments, in seeming violation of the rules he has now rescinded, effective immediately.

The move set off a firestorm.

"I am stunned," former Voice of America director Amanda Bennett told NPR early Tuesday morning. "It removes the one thing that makes Voice of America distinct from broadcasters of repressive regimes."

In addition to VOA, the U.S. Agency for Global Media includes the Office of Cuba Broadcasting, Radio Free Europe/Radio Liberty, Radio Free Asia and Middle East Broadcasting Networks. Collectively, the networks reach more than 350 million people across the world each week.

They historically have demonstrated American pluralism by providing balanced coverage of news events and robust political debate, regardless of how it reflected on current government officials. The broadcasters are also intended to serve the citizens of nations which do not allow journalists to operate freely. …

Several others who work at the agency told NPR they believe the threat to the VOA's independence is "existential." They requested anonymity out of fear of retribution. Pack has purged USAGM and its broadcasters of top executives whom he believed to be insufficiently loyal.

Pack and a top deputy who handles the press did not respond to questions from NPR shortly after the release of the order rescinding the regulation. It was posted on USAGM's website, accompanied by a more formal policy statement that spelled out the justification for the decision.

"By design, [the broadcasters'] purpose and focus is foreign relations and the promotion of American objectives — not simply presenting news or engaging in journalistic expression," the statement read.

D. Rest of the File

Sony seeing 'very considerable' PS5 demand ahead of launch

TOKYO, Oct 28 (Reuters) - Sony Corp is seeing "very considerable" demand for its PlayStation 5 (PS5) console via pre-orders, its gaming chief said on Wednesday, as users rush to secure the next-generation device ahead of its Nov. 12 launch.

The Japanese tech company pre-sold as many PS5 consoles in the first 12 hours in the United States as in the first 12 weeks for its predecessor PlayStation 4 device, Jim Ryan, CEO of Sony Interactive Entertainment, said in an interview.

"The demand as expressed by the level of pre-order has been has been very, very considerable," Ryan told Reuters.

Sony, which went on to sell more than 100 million PS4 units, aims to persuade its user base to upgrade to its new device to play titles like "Marvel's Spider-Man: Miles Morales" with enhanced graphics, sound and feedback via a new controller.

The launch comes in the midst of the COVID-19 pandemic that has boosted gaming companies' revenues but also disrupted retail networks, games development and manufacturing supply chains around the world.

"It may well be that not everybody who wants to buy a PS5 on launch day will be able to find one," said Ryan, adding the company is "working as hard as we ever can" to ensure supply for the year-end shopping season.

'Very Nice!' - Kazakhstan taps new Borat movie to woo tourists

MOSCOW/ALMATY, Oct 27 (Reuters) - Ridiculed once again in a film featuring fictional Kazakh journalist Borat Sagdiyev, the ex-Soviet state of Kazakhstan has embraced the joke this time round and adopted Borat's catch phrase to try to attract tourists.

"Borat Subsequent Moviefilm: Delivery of Prodigious Bribe to American Regime for Make Benefit Once Glorious Nation of Kazakhstan," a follow-up to a 2006 film featuring the same sexist and racist character, was released on Amazon Prime last week.

Like the first film, the movie has Borat on the rampage in the United States where he tries to trick U.S. politicians and others into letting their guard down and compromising themselves.

Borat's first outing caused anger in Kazakhstan where authorities discouraged its screening and threatened legal action over what they saw as an insult to their national character.

This time round, they have taken a different approach and adopted Borat's catchphrase "Very Nice!" to try to promote tourism in the vast Central Asian country.

In a slick video released by the tourism board featuring spectacular mountains and lakes, an exotic food market, and futuristic-looking cityscapes, a series of foreign tourists use the catch phrase to signal their appreciation for what they are seeing.

The idea to use Borat's catch phrase belongs to Dennis Keen, a U.S. citizen living in Kazakhstan, who is married to a Kazakh woman and has a business running walking tours.

"It was something I'd been thinking about for years as everyone who comes here is aware of the Borat thing being attached to the country's brand," Keen told Reuters.

Borat's "Very Nice!" catch phase could be put to good use instead, he said.

"It's actually the perfect description of the country in the most sincere way. The people and the food are very nice."