Keywords: National People’s Congress, National People’s Political Consultative Conference, economic reform, media control, draft Charity Law, South China Sea, Causeway Bay Bookstore, One Country Two Systems.

CHINA

1. The National People’s Congress in Session (05-16 March)

ECONOMY

The Premier Li Keqiang pledged to ensure economic growth of at least 6.5% with a deficit budget of 3% of GDP in 2016 in the NPC’s session. Many observers doubt whether the central government can tackle the problem with excess capacity and implemented the supply-sided reform given the difficult choice of laying off thousands of workers which may lead to social instability. While incident of protests by laid-off workers already took place, it was estimated that about 5-6 million state workers would be laid off as part of the plan to reduce excess capacity in the steel and coal industries in the next few years.

1.1. GDP growth forecast: minimum 6.5% with deficit budget 3% of Annual GDP

• //Continued economic growth of at least 6.5 percent can be achieved in 2016, and a similar rate is foreseeable until 2020, he said. That, Mr. Li suggested, would help dull the pain from cuts to wheezing state-supported industries that must shed millions of workers, as part of a program that China’s powerful president, Xi Jinping, has promoted as “supply-side structural reform.” The Chinese economy, Mr. Li said, is “hugely resilient and has enormous potential and ample room for growth.” […] “In China we have a new saying: ‘Reform running idle,’ ” said Yao Yang, an economics professor at Peking University. “We talk of the reforms, but the reforms are never being implemented. That’s the problem,” Mr. Yao said. “We know that monetary expansion is not going to have a huge effect.” In his speech, Mr. Li appeared guarded about saying how any cuts would be administered. He did not specify how many workers could lose their jobs as part of the government’s plan to close, merge or restructure mines and factories weighed down by excess capacity. The government will set aside $15.3 billion to support laid-off workers and hard-hit areas, he said. On Monday, a labor official estimated that 1.8 million workers in the steel and coal sectors would be laid off, around 15 percent of the work force in those industries.// Source: New York Times, 05 March 2016

• //市场预期的财政赤字扩大终成现实。2016年，赤字率提高到3%，金融危机以来首次触及3%。3月5日，国务院总理李克强在做政府工作报告（全文）时表示，今年积极的财政政策要加大力度。今年拟安排财政赤字18万亿元，比去年增加5600亿元，赤字率提高到3%。其中，中央财政赤字1.4万亿元，地方财政赤字7800亿元。安排地方专项债券4000亿元，继续发行地方政府置换债券。他称，中国的财政赤字率和政府债务率在世界主要经济体中相对较低，这样的安排是必要的、可行的，也是安全的。适度扩大财政赤字，主要用于减税降费，进一步减轻企业负担。// Source: Caixin, 05 March 2016.

Concerns over the capacity of the Beijing Government to handle the economic slowdown

• //The new slogan, expected to receive top billing when China’s legislature convenes Saturday, represents an effort to rejuvenate Mr. Xi’s faltering plans to overhaul the Chinese economy. But he still faces widespread skepticism that he is committed to thorough restructuring, which would require reducing bloated state enterprises, along with millions of jobs. […] The supply side Mr. Xi is referring to would, like Reaganomics, include lowering taxes and reducing the government burden on investors. Yet its main goal appears to be shutting or paring down mines and factories that produce far more coal, steel, cement and other industrial products than the market demands and reining in the credit and subsidies that feed that glut. Some economists say the supply-side rubric is at least a step toward painful measures that could lead to healthier growth. “It is an important new initiative designed to reinvigorate the reform process,” Barry Naughton, a professor of economics at the University of California, San Diego, said by email. “Policy makers have stumbled repeatedly, and over all the achievements in market-oriented reform have been meager. Policy makers needed to come up with another approach.” […] On Wednesday, Moody’s Investors Service, the credit ratings agency, lowered its outlook for China from stable to negative, citing “uncertainty about the authorities’ capacity to implement reforms.” Skeptics attribute the problem partly to the repeated clash of Mr. Xi’s economic goals with his political objectives. While he has shown great enterprise in centralizing power, they say, he has been reluctant to restrain the reach of the state, especially to curtail state companies’ privileged, often monopolistic, access to loans, resources and customers. […] Many liberal economists remain unconvinced that for all the tough talk, the Chinese government would willingly reduce its own power and risk a backlash from displaced workers. Recalibrating state-supported industries to true market levels would mean cutting millions of jobs. Xi first laid out a sweeping blueprint for economic rejuvenation, including vows to revamp the state sector and nurture market forces, in 2013. But the halting progress reflected his reluctance to cede state control, several economists said. The mixed signals have paralyzed state officials, who are unsure how far to impose cuts while preserving stability. “The central government emphasizes supply-side reform,” said Yao Yang, an economist at Peking University. “On the other hand, you still encourage local governments to invest. That’s the confusion that local government officials are facing, so they don’t know the direction.” […] Curbing inefficient state-subsidized industries, however, has near universal support among economists and policy makers. Further delays in doing that are likely only to repress growth, deepen the malaise and hurt workers, said Sheng Hong, the executive director of the Unirule Institute of Economics in Beijing, which advocates economic liberalization. “If there’s no sign of a solution, this year could be especially dangerous,” he said. “Without reforms, there’ll be big problems.”// Source: New York Times, 1 March 2016.

Incident of laid-off workers’ protests in Heilongjiang Province

• //兩會期間，黑龍江省長陸昊表示當地煤礦企業8萬職工沒有欠薪現象，引起民憤。週五（3月11日）和週六（12日），該省雙鴨山市數千煤礦工人和家屬上街遊行。 網上流傳的視頻顯示，多人手舉“我們活著我們要吃飯”、“陸昊睜眼說瞎話”的標語上街抗議，有人高呼“我們要生存，打倒貪污犯”，手持盾牌、戴著頭盔的武警出現在鐵路旁，有抗議者與警察疑似發生衝突。 《星島日報》指，週五和週六，龍煤集團旗下雙鴨山礦業集團多個礦區的數千工人及家屬走上街頭，稱工資被拖欠半年以上，一個月只有數百元人民幣的生活補助。他們一度佔據前往北京的鐵路，阻撓火車通行。有數人被捕。而在遊行發生後，3月12日，黑龍江政府網站發佈新聞稿稱，當天下午，陸昊在北京主持召開龍煤集團脫困發展工作專題會議，指之前的報告情況信息不準確，承認龍煤集團目前仍拖欠職工工資、稅收和企業應上繳的各類保險，不少職工生活遇到困難。// Source: SCMP (Chinese Edition), 13 March 2016.

• //The government of northernmost Heilongjiang province has vowed to “financially support” a struggling state-owned coal firm after miners went to the streets to protest over unpaid wages. Governor Lu Hao said on Saturday that his government would continue to support Heilongjiang Longmay Mining Holding Group but also ordered the firm to pay its miners their overdue salaries, a government statement said. It was the first time Lu, who is in Beijing for the annual National People’s Congress, has acknowledged backpay problems at Longmay, the biggest coal enterprise in China’s northeast. Lu’s promise came hours after miners and their families took to the streets in Shuangyashan to demand their wages. […] But Lu’s latest comment contradicted remarks he made just a week ago at a Heilongjiang delegation meeting during the congress, in which he said the miners did not have “even a penny” cut from their pay. Lu had also cited Longmay as a prime example of an inefficient, overstaffed state-owned firm, saying that the government could not afford to bail out the group.// Source: SCMP, 13 March 2016.

Estimated number of laid off workers in steel and coal industries

• //China aims to lay off 5-6 million state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution, two reliable sources said, Beijing’s boldest retrenchment program in almost two decades. China’s leadership, obsessed with maintaining stability and making sure redundancies do not lead to unrest, will spend nearly 150 billion yuan ($23 billion) to cover layoffs in just the coal and steel sectors in the next 2-3 years. The overall figure is likely to rise as closures spread to other industries and even more funding will be required to handle the debt left behind by « zombie » state firms. The term refers to companies that have shut down some of their operations but keep staff on their rolls since local governments are worried about the social and economic impact of bankruptcies and unemployment. Shutting down « zombie firms » has been identified as one of the government’s priorities this year, with China’s Premier Li Keqiang promising in December that they would soon « go under the knife » […] The government has already drawn up plans to cut as much as 150 million tonnes of crude steel capacity and 500 million tonnes of surplus coal production in the next three to five years. It has earmarked 100 billion yuan in central government funds to deal directly with the layoffs from steel and coal over the next two years, vice-industry minister Feng Fei said last week. The Ministry of Finance said in January it would also collect 46 billion yuan from surcharges on coal-fired power over the coming three years in order to resettle workers. In addition, an assortment of local government matching funds will also be made available. However, the funds currently being offered will do little to resolve the problems of debts held by zombie firms, which could overwhelm local banks if they are not handled correctly.// Source: Reuters, 03 March 2016.

1.2. Managing Housing prices across China

While the government intended to boost up housing market in smaller cities, the same policy has led to an intensification of the overheat housing market in first-tier cities such as Beijing, Shanghai, etc.

• //China’s top policy makers, gathered in Beijing for the National People’s Congress (NPC), pledged to tighten home buying restrictions in larger mainland cites as part of efforts to stabilise home prices, although the cooling measures were dismissed by property experts as unlikely to succeed in tamping down the red hot housing market. In a separate move, Premier Li Keqiang announced plans to implement a value-added tax (VAT) to replace a business tax in the property and construction sectors from May 1, although few details on the new tariff were provided. Surging home prices in first tier cities have been among the most talked about issues on the sidelines of the annual NPC meeting, which kicked off Saturday. […] Chen Zhenggao, the country’s housing minister, said the central government is working closely with authorities in Beijing, Shanghai, Shenzhen and Guangzhou to introduce measures to help rein in the market. Du Jinsong, head of Asia property research at Credit Suisse said the government has a difficult balancing act between its conflicting policy goals of spurring housing markets in smaller cities while attempting to cool things down in larger cities. Among the unintended consequences, credit appears to leaking into the housing market in first tier cities, stoking up prices in what many believe is an already overheated market.// Source: SCMP, 08 March 2016.

POLITICS

1.3. Control over media during the Two Sessions

It is reported that the Central Propaganda Department issued 21 rules for reporting on the annual “Two Sessions”. A number of issues which are forbidden to be reported by the media can be found from the China Digital Times for details. Caixin has once published an article that interviewed the NPPCC delegate Jiang Hong who urged the Chinese Communist Party to allow citizens and NPPCC delegates to express diverse opinions. The article was soon removed from Caixin’s website. Yet, an op-ed article on state-controlled China Daily was published with similar views.

• //As the ongoing “Two Sessions” meetings of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC) began in Beijing last week, an air of tension regarding government intolerance of dissent from Party members and the media was well noted. On Tuesday, the influential news organization Caixin Media posted an English-language article highlighting the censorship of an earlier Chinese article quoting CPPCC delegate Jiang Hong on the need for advisors to offer unrestrained suggestions. The English article has now also been deleted from Caixin’s website, but is stored in Google Cache:
• [Jiang Hong, a CPPCC delegate from Yangchun, in the southern province of Guangdong, who advises the government on economic policy, said in an article that appeared on Caixin’s Chinese-language site on March 3 that advisors should be free to give Communist Party and government agencies suggestions on economic, political, cultural and societal issues. “However, influenced by certain events, everyone is a bit dazed and doesn’t want to talk too much,” he said in the article. “That’s what the atmosphere is like now.” Jiang did not explain what he meant by “certain events.” An article based on the interview was posted on the news website, but on March 5 it was deleted by the Cyberspace Administration of China, a government censorship organ, because it contained “illegal content.” Jiang also said in the interview that the ruling Communist Party has a tradition of “listening to different opinions” and that the right of people to speak freely was enshrined in the country’s constitution. Jiang, who is not a party member, said he was not interested in meddling in the party’s affairs, but “the rights to speak freely must be protected.” The administration told Caixin’s editors that the article “violated laws and regulations.”]// Source: China Digital Times, 08 March 2016.

• //《財新網》3日專訪全國政協委員、上海財經大學教授蔣洪，並以「公民表達的權利必須要保障」為題刊出訪問文章。[…] 根據財新網報道，蔣洪已是第8次參加兩會，他在訪問中直言「聽人說人大是橡皮圖章，政協是花瓶，幾年下來，我本人也有了很多切身的感受。但是，該表達還是要表達，其實表達也是履行職責的組成部分，否則的話，覺得自己傻傻的，來幹什麼呢？」蔣洪透露，會就當前公眾關注的話題發表看法，甚至包括一些較敏感的話題。他又覺得「中國共產黨歷來也是主張聽取不同意見的，習近平總書記也說過，要容得下尖銳批評，做到有則改之、無則加勉」。他說，雖然因為某些事情的影響，令公眾希望少說些話，但他指，「公民表達權利必須保障」，不少網民讚好。不過，蔣洪發現，該篇文章雖然仍可在網上流傳，但他想從微信中看時，文章已被屏蔽，理由為「該網頁包含違法或違規內容，被多人舉報」。蔣洪在「中國數字時代」發表文章，表示對此不可理解，認為自己以政協身分發言，而發言內容「是法治社會、民主社會、現代國家治理體系中的社會的一個基本條件」，不應該被屏蔽，「我可以想到，還有多少類似的情況發生」。// Source: MingPao Daily, 06 March 2016.

• // Even prior to his maiden show as spokesman for the National Committee of the Chinese People’s Political Consultative Conference at Wednesday’s news conference, what Wang Guoqing said had already turned heads.« The more sensitive a question is, the harder I will try to clarify. As long as it does not affect national security and the overall situation, why should we shrink from some questions? » he was quoted as saying. We appreciate that open-mindedness, and wish those precious lines be repeated a thousand times and written into textbooks for government spokespeople who should be information sharers. By dodging questions they find « sensitive », spokespeople may end up stoking confusion and undermining the credibility of the institutions they represent. And those lines deserve a much broader audience. At the impending annual session of the country’s top political advisory body, as well as that of the National People’s Congress, the top legislature, at least, people need to see the country’s political elite tackle « sensitive » issues upfront. From reemploying the millions to be laid off in the campaign to cut surplus production capacity, to assuaging the pervasive sense of uncertainty regarding social security, they have plenty of sticky issues to address. The thornier the topics, the more candid the discourse needs to be. In that regard, Zhu Zhengfu, deputy chairman of the AllChina Lawyers Association and a member of the CPPCC National Committee, set a laudable example for other CPPCC members and NPC delegates. He brought to the session a number of proposals targeted at some of the most pressing issues concerning judicial justice. Among those was the suggestion to stop criminal suspects confessing on TV.// Source: China Daily, 03 March 2016.

1.4. Draft foreign non-governmental organization law under consideration in light of comments received

The Draft Foreign NGO Law was said under consideration and yet no schedule has been announced about when it will be put to the NPC for approval.

• //It has been more than two years since the Chinese government proposed tighter controls on foreign nongovernmental organizations, prompting fears for the future of a wide range of groups active in China, like medical charities, branches of foreign universities and business chambers. Among their concerns are the prospect of requirements to obtain government sponsors and police approval of projects and restrictions on fund-raising. Yet two drafts later, a “Foreign NGO Management Law” still has not passed, raising questions as to if the government is reconsidering whether the national security-driven legislation could crimp international cooperation in areas it cares about — such as education, industry and the environment — as it seeks to expand the economy in new ways. At a news conference on March 4, just before the opening of the National People’s Congress, Fu Ying, the spokeswoman for the congress, refocused debate on the issue when she said that the government was still reviewing comments on the legislation from around the world, even though the official comment period ended in June. She appeared to say that action on the law was uncertain. “It has still not yet been definitely decided which session of the Standing Committee will submit the review,” Ms. Fu said. “We still have to deal with various recommendations and opinions in order to revise this law well.” A Western diplomat, speaking on condition of anonymity because he was not authorized to discuss the subject, said that Ms. Fu’s comments “could be code for the fact that it” — the latest draft — “has been passed over, because she didn’t attach a definite time frame for when they would be finished.” Although the government and security forces probably did not heed the opinion of human rights nongovernmental organizations, they might listen to other groups, he said. “A lot of international critical comment wasn’t based on human rights issues, but that it would make it very difficult for academic contacts, research organizations” and other groups, he said.// Source: New York Times, 11 March 2016.

SOCIETY

1.5. China’s first draft charity law to be deliberated

Currently, charities in China face difficulties in carrying out their work due to administrative barriers and lack of public confidence in them. With the draft Charity Law, it is reported that charitable organizations can do charities in a more facilitative environment. First, they only need to register with the Ministry of Civil Affairs, unlike now they need to find a supervising unit from the government in addition to the Ministry of Civil Affairs, which has made the registration very difficult in practice. Second, those charitable organizations, after two years of registration, can apply from the government to do public fundraising. Third, governments above county level are required to publicize information related to charitable organizations to the public. The draft charity law also regulates the way charitable organizations spend money on so as to boost public confidence. Yet, charities are strictly forbidden to fund or carry out any activities that threaten national security. Also, they are only allowed to raise fund publicly after two years of registration and do online fund-raising on government-designated websites and offline appeal within the areas in which the charities are registered. For the English translation of the Charity Law (Second Draft) by the China Development Brief, please see here.

Current problems with charitable donation in China:

• //China’s top legislative body will on Wednesday begin deliberating the country’s first charity law, which some observers say could go some way to reversing that reluctance to give. But others suggest that much more than a new law is needed to bring life to the third sector and unleash funds for needy causes. Part of the problem is the administrative barriers to setting up a charity on the mainland. At the moment all charitable groups must be affiliated with a government organisation before being registered with the Ministry of Civil Affairs. If passed, the law would scrap that requirement. Another issue is the lack of public trust in charities. The reputation of the sector as a whole took a battering five years ago with the Guo Meimei saga. Guo, a young woman, falsely claimed to work for the state-backed Red Cross Society of China and openly flaunted her wealth and extravagant lifestyle on social media. In the aftermath, the organisation was criticised for poor management and misuse of donations.// Source: SCMP, 09 March 2016.

Major changes with the new charity law:

• //此前成立慈善组织不仅需要让民政部门作为“登记管理机构”，还要找到“业务主管单位”，造成了实际上的登记难。《慈善法》通过后，慈善组织无需再“找婆婆”，且民政部门应当自受理申请之日起三十日内作出是否准予登记的决定。草案明确了慈善组织的直接登记制度，并且简化了慈善组织的登记程序。[…]根据草案规定，“依法登记满两年、运作规范的慈善组织，可以向原登记的民政部门申请公开募捐资格证书”。这实际上是开放了公募权。在过去只有公募基金会享有向不特定公众进行公开募捐的资格，而现在，草案将公开募捐的权利平等地授予慈善组织。[…]《慈善法》草案关于信息公开的最大亮点是，不仅明确了慈善组织应当每年向社会公开信息有哪些，同时也明确了“县级以上人民政府民政部门和其他有关部门应当及时向社会公开”的信息，如慈善组织登记事项；慈善信托备案事项；具有公开募捐资格的慈善组织名单；具有公益性捐赠税前扣除资格的慈善组织名单；对慈善活动的税收优惠、资助补贴等促进措施等等。// Source: Caixin, 09 March 2016.

• //The draft released for public view on March 9 says « public foundations should not use more than 15 percent of the funds they raises to cover administration and payroll costs. » Many charitable organizations have complained about difficulties in hiring experienced workers, and higher staff turnover because these organizations could not offer competitive salaries due to this restriction. The draft charity law will go before the top legislature for a vote on March 16. The proposed change will make non-profits more competitive in terms of attracting skilled workers, industry analysts said. If passed by the top legislature, the law that is applicable to both foreign and domestic charities operating in the country, will also ease restrictions on how much funds an organization needs to spend on projects each year.// Source: Caixin (English Edition), 10 March 2016.

• //The draft charity law, submitted to the National People’s Congress for its third reading on Wednesday, lays out details on registration, fundraising, and government oversight. According to the draft, charities would not be allowed to carry out or sponsor activities that endangered national security or the public interest. It would also prohibit charities from launching public campaigns within two years of being officially registered. Offline appeals for public donations could only be conducted within the area the organisation was registered. “These limitations would pose a big challenge for the survival of newly registered charities because public appeals are an essential source of funding for them,” said Zhang Gaorong, assistant director of the China Philanthropy Research Institute.// Source: SCMP, 09 March 2016.

Some clarifications by The vice chairman of the NPC Standing Committee, Li Jianguo:

• //After a lawmaking process which has lasted eleven years, suggestions and thoughts from related governmental bodies, research institutes and colleges, charities, and society in general have been integrated into the Draft. The Draft specifies the entities of fundraising activities, an issue of widespread public concern. According to the Draft, charitable organizations are the legal entities which publicly operate fundraising activities; individuals who are not eligible to organize such activities can cooperate with charities to raise funds if this is based upon philanthropic purposes. […] Concerning the management and operation of charitable organizations, the income of charitable organizations should be used entirely for philanthropic purposes; organizations should disclose the use of the donations they receive, says the Draft. It also specifies regulations concerning the record keeping（备案制度） of charitable trusts (慈善信托).// Source: China Development Brief, 11 March 2016.

• //The Third Draft lowers the standard for organizations to be able to raise funds on the internet. The requirement contained in the Second Draft, according to which only organizations registered with a civil affairs department at the provincial level or above are allowed to use their websites to publish fund-raising information, has been erased. The term “non-public fund-raising” has also been changed to “targeted fund-raising”, which cannot however be conducted publicly on the internet. The Third Draft adds that charitable organizations should report and put forward their fund-raising proposals for record-keeping to the departments of civil affairs. Concerning the recent fund-raising frauds, the Third Draft emphasizes the protection of the targets’ right to know the truth on fund-raising activities, and that it is not allowed to induce people into making donations through the use of fictional facts.// Source: China Development Brief, 14 March 2016.

Zhang Gaorong, assistant director of China Philanthropy Research Institute:

• //in the past donation drives were usually organised by employers. This approach had been phased out “but we have yet to build enough other channels that people trust”, he said. […] Zhang said another key controversy in the draft law was that charity organisations could only launch online public donation appeals on websites designated by local governments. “The selection of websites by the government apparently gives room for power rent seeking,” he warned. “Also, the internet is changing fast. Will governments be able to keep up?” An additional barrier would be the ban on organisations launching public donation drives within two years of registration. “For most charity groups, public donations are an important source of funding. Without the right to do so in the first two years, they could hardly develop,” Zhang said.// Source: SCMP, 09 March 2016.

ENVIRONMENT

1.6. Cap on the annual energy consumption

• //China has introduced its first limit on annual energy consumption in a five-year plan – by capping total consumption of standard coal at 5 billion tonnes by 2020 – up on 2015’s use of 4.3 billion tonnes. Experts says the relatively loose and conservative move shows that the government is concerned about energy demand rebounding. The nation’s 13th five-year plan, released on Saturday, also revealed that energy intensity – the consumption per unit of economic growth – would be cut by 15 per cent compared with 2015 levels, while carbon emissions per unit of economic growth would drop by 18 per cent compared with 2015’s levels. Yang Fuqiang, a senior adviser at the environmental group, Natural Resources Defence Council, said the cap of 5 billion tonne had been calculated using figures including upper end of the GDP target – a 7 per cent growth rate – and the target of a 15 per cent drop in energy intensity over the next five years. […] Yang said China’s economy was now being fuelled more by the service sectors, which consumed a great deal less energy, so such structural change would contribute greatly to improvements in energy intensity “A higher [energy intensity] target would put more pressure on officials to restructure the economy … but this is a bit conservative,” Yang said.// Source: SCMP, 10 March 2016.

2. China’s construction of military base in South China Sea and American responses

• //When the aircraft carrier John C. Stennis and four other American warships sailed into the South China Sea last week for what were described as routine exercises, the message was clear: The United States is the dominant military power in the region and plans to keep it that way. […] The new fortifications pose little threat to the United States military, which could easily destroy them in a conflict. But American officials are increasingly worried that the buildup, if unchecked, will give China de facto control of an expanse of sea the size of Mexico and military superiority over neighbors with competing claims to the waters. That, some say, could prompt a regional arms race and increase the risk of conflict. […] Chinese analysts argue that the buildup preserves peace by deterring others with territorial claims to the sea, including Brunei, Indonesia, Malaysia and Taiwan. “The main reason for the construction is to tell other countries to stop their provocations, because if they continue to push, we have the capability to push back,” said Xu Liping, a researcher at the Chinese Academy of Social Sciences. // Source: New York Times, 8 March 2016.

2.1. Background: military construction in the Spratly Islands is of strategic importance for China

• //The new islands allow China to harness a portion of the sea for its own use that had been relatively out of reach. Although there are significant fisheries and possible large oil and gas reserves in the South China Sea, China’s efforts serve more to fortify its territorial claims than to help it extract natural resources, said Mira Rapp-Hooper, formerly the director of the Asia Maritime Transparency Initiative at the Center for Strategic and International Studies, a Washington research group. Though they are too small to support large military units, the islands will also enable sustained air and sea patrols, strengthening China’s influence in the area. […] China has built airstrips, ports, radar facilities, solar arrays, lighthouses and support buildings on the islands. The airstrips and ports lengthen the reach of Chinese ships and planes, while the radar facilities allow the country to keep a closer eye on what is happening nearby. Imagery from January compiled for a recent report by the C.S.I.S. suggests that China may be constructing a longer-range high-frequency radar installation on Cuarteron Reef that would help the country monitor air and ship traffic in the south, farther from the Chinese mainland.// Source: New York Times, 7 March 2016.

HONG KONG

1. Updates of mysterious disappearance of Causeway Bay Bookstore owners

The bookstore owner Lee Bo recently appeared on the mainland Television, announcing his giving up of the British passport in order to stop people from picking quarrels with his case. The style of his appearance and the content of his statement are similar to the case of another bookshop owner Gui Minhai who confessed his crime in front of the television some time ago. While the other three bookstore employees were reported on bail and allowed to be back to Hong Kong, two of them returned to Hong Kong to cancel their cases with the Hong Kong Police and went back to China on the same day. According to the law in Hong Kong, those who are reported missing with the Police must go to cancel the case with the Police on their own but not anyone on their behalf.

• //失蹤超過130天以後，銅鑼灣書店的兩名相關人士於近日先後返港，第一時間的舉動皆是：與香港警方見面，要求銷除其失蹤案，表示毋須港府或警方提供任何協助，亦拒絕透露更多。3月4日，銅鑼灣書店母公司巨流傳媒有限公司的股東兼總經理呂波最先返港，自他於2015年10月17日在深圳失蹤計起，已過去139天。兩天之後，巨流的業務經理張志平也回到香港，他於2015年10月24日在東莞家中被十幾名便衣攜槍人士帶走。自2015年10月開始，出版、發行並銷售中國禁書的巨流傳媒及其所收購的銅鑼灣書店，五名相關人士陸續失蹤。截至發稿，其中上述二人已經返港，而其餘失蹤的三人李波、桂敏海與林榮基仍身在內地。此前，五人先後接受包括內地媒體央視、澎湃新聞和香港媒體星島日報、鳳凰衛視的訪問，在鏡頭前解釋自己為何身在內地、所犯何事。最後一名失蹤人士為李波，他於2015年12月30日在香港失蹤，61天以後，2016年2月29日，他再次出現在公眾視野，微笑着同時接受多家媒體訪問。在長達16分鐘的採訪視頻中，他穿著米黃色夾克與格子襯衫，坐在沙發中，以廣東話接受香港媒體鳳凰衛視、香港星島日報和內地媒體澎湃新聞的訪問，其中澎湃和鳳凰先後於2月29日晚上8點與10點，發佈了上述採訪視頻。[…] 此次李波訪問重點有二，第一是居英權。1月5日，英國外相夏文達證實李波持有英國護照，是英國公民，而中國外長王毅則對此回應稱「李波首先是屬中國公民」，更籲「各方無必要作出無謂猜測」。有人利用我（擁有）居英權的問題進行炒作，令事情變得複雜，我因此決定放棄居英權。[…] 無獨有偶，已入瑞典籍的桂敏海1月17日於中央電視台露面時亦稱：「不希望瑞典方面介入或干涉我回國的事情。我雖然有瑞典國籍，但是真切地感到自己是中國人。」對此，瑞典外交部長 Margot Wallstrom 表明事件「不能接受」。//Source: The Initium, 07 March 2016.

• //銅鑼灣書店五子離奇受查事件再有新進展，警方發言人表示，今午（2/3）接獲廣東省公安廳警務聯絡科覆函，指因涉及一名姓桂人士的案件，而早前在內地被採取強制措施的呂波、張志平及林榮基，將於未來數天內取保候審。有熟悉內地時局的時事評論員表示，取保候審與香港的保釋相若，即3人可回港。// Source: Hong Kong 01, 03 March 2016.

• //據報道，過去一周內先後返回香港要求警方就銅鑼灣書店人員失蹤案銷案的書店總經理呂波和業務經理張志平，在3月4號和6號先後返回香港的當天便返回內地。有分析表示，呂波和張志平返回香港純粹就是為了要求警方銷案，給港人一個他們返回香港的錯覺，因為內地當局不可能冒險讓兩人留在香港透露任何信息。香港英文的南華早報星期四引述知情人士報道，3月4日返港的書店總經理呂波和6號回港的書店母公司巨流傳媒的業務經理張志平，在向警方要求銷案後的幾小時後又離港返回內地。呂波的妻子在深圳工作及居住，張志平的妻子住在東莞。//Source: Voice of America, 10 March 2016.

2. Hong Kong and the NPC and the NPPCC sessions

The National People’s Congress chairman Zhang Dejiang (張德江) reaffirmed the continued practice of ‘One Country Two Systems’ despite the recent social disturbance in Hong Kong.

On One Country Two Systems

National People’s Congress chairman Zhang Dejiang:

• // On the “one country, two ­systems” principle, CPPCC delegate Samuel Yung Wing-ki quoted Zhang as saying: “There are new situations and new problems in Hong Kong, and some people are worried that the principle would change … but these worries are unnecessary.” Yung said: “Zhang also said the ‘one country, two systems’ principle is firm and unswerving; it would not sway or change.”… State broadcaster CCTV quoted Zhang as saying Hong Kong must “maintain an environment that is good for business and stable to live in, and not appease acts that challenge the rule of law”.// Source: SCMP, 05 March 2016.

On future development of Hong Kong

 CPPCC chairman Yu Zhengsheng (俞正聲):

• // Speaking a day after CPPCC chairman Yu Zhengsheng urged Hong Kong delegates to participate in youth work, Zhang also described young people’s employment as “a problem faced by many countries”. He urged the city to boost its competitiveness by depending on the mainland and working along the nation’s 13th five-year plan, Chan [Ching-har Eliza] said.// Source: SCMP, 05 March 2016.

Analysis by Lau Siu-kai, vice-chairman of the Chinese Association of Hong Kong and Macau Studies:

• // For many Hong Kong representatives to China’s top advisory body, Beijing’s 13th five-year plan showed the central government’s strong backing for the city as it promised to support its technological sector and arbitration services. Professor Lau Siu-kai shares that feeling, but he also sees another side of it. According to the government’s former think tank chief, who was involved in formulating the 12th five-year plan, Beijing latest blueprint reflected its concern about the Hong Kong government’s ability to execute what is planned. “The 12th five-year plan mentioned six new industries for Hong Kong and about 10 infrastructural items [for cross-border cooperation], but they were not delivered on … so this year there was no actual item at all. This reflected that we performed poorly on accomplishing tasks,” he said.// Source: SCMP, 06 March 2016.

Change of seat arrangement indicates that Hong Kong no longer enjoys special status in its relation with China

• // In a gesture that demonstrated Beijing’s authority, the seating arrangement for the annual meeting between the state leader overseeing Hong Kong and the city’s deputies to the national legislature was changed for the first time since the 1997 handover… Ching Cheong, a veteran journalist and commentator on China, said there used to be a tacit understanding that Hong Kong held a slightly more significant position than provinces on the mainland. “The latest seating arrangement signifies that Hong Kong no longer holds a special status from Beijing’s point of view. Instead it is now on the same level as mainland provinces,” he said. Chief Executive Leung Chun-ying’s duty visit to the capital in December also saw state leaders’ remarks and pledges take a back seat to a seating change. In their separate talks with Leung, President Xi Jinping and Premier Li Keqiang were seated at the head of a long table, with Leung placed at one side. It stood in stark contrast to previous protocol under which the chief executive would always sit side by side with state leaders on sofas, giving the impression of an equal footing.// Source: SCMP, 06 March 2016.

3. Legco approval of the additional budget for the Guangzhou-Shengzhen-Hong Kong Express Rail

The Legislative Council’s scrutiny of the proposal to increase the budget for the Express Rail construction has been filled with the filibustering by the pro-democracy lawmakers. The final votes on this proposal, despite controversy over the voting method, was cast and the budget was subsequently approved before the deadline set by the government on 31 March 2016 beyond which the whole construction work must be halted with the government facing the payment for suspension costs.

• // The HK$19.6 billion extra funding request for the controversial express rail link from Hong Kong to Guangdong was abruptly passed by the legislature’s Finance Committee yesterday, triggering chaos inside and outside the chamber. An angry legislator threw ink at acting committee chairman Chan Kam-lam as he out-manoeuvred pan-democratic lawmakers’ efforts to stall the vote, while police had to forcibly remove protesters who had the building. The drama erupted at around 5pm, two hours into the meeting, when Chan suddenly called for a vote on the government’s request for extra money to complete the railway that will link Hong Kong to Shenzhen and Guangzhou.// Source: SCMP, 11 March 2016.

• //The MTR Corporation has been ordered to map out a plan for the suspension of the ill-fated high-speed rail link to Guangzhou as the government makes a last-ditch attempt to secure extra funding from sceptical lawmakers by end of this month. If the government is eventually forced to put the brakes on the long-delayed and overbudget project because of a deadlock over the additional HK$19.6 billion needed, it will have to pay another HK$233 million per month for the suspension costs. The acting chairman of the Legislative Council’s Finance Committee, Chan Kam-lam, said yesterday he was still unsure whether there would be enough time for voting on the funding, even with the extra meetings scheduled this month.// Source: SCMP, 01 March 2016.