China Reform Monitor: No. 1294

July 3:

Under the new "Bond Connect" scheme Agricultural Development Bank of China and China Development Bank will sell RMB-denominated bonds to offshore investors worth a combined 36 billion yuan ($5.43 billion). Bond Connect will give offshore investors direct access to China's interbank bond market without the need to open bank accounts on the mainland. In the first phase, Bond Connect will allow foreign and Hong Kong investors to buy onshore bonds in the primary or secondary markets, under the so-called northbound trading link. The first batch of primary issuers will be well-known Chinese borrowers including state-owned enterprises such as China Three Gorges and China Aluminum Corp., which already have international ratings. "I suppose the offshore demand (for the bonds) will be primarily from offshore Chinese investors," said one credit analyst in comments quoted by Singapore’s Straits Times.

July 4:

To ensure all audiovisual content posted online – including films, "micro" movies, documentaries, sports, educational material and animation – adhere to "core socialist values,"the China Netcasting Services Association has circulated new regulations requiring at least two "auditors" to check their content. This is the latest in a sweeping crackdown on internet content that has sent a chill through Chinese filmmakers, bloggers, media and educators who fear their sites will be shut down, Reuters reports. "According to these censorship rules, nothing will make it through, which will do away with audiovisual artistic creation," wrote Li Yinhe at the Chinese Academy of Social Sciences. Under the government rules, such works as Georges Bizet's opera "Carmen" and Shakespeare's "Othello" would be banned for depicting prostitution and overt displays of affection, she said. "This is a return to ideology. To the Party, entertainment will make people lose their revolutionary spirit,"said Qiao Mu, a Beijing-based media scholar.

July 6:

Loans from China for Malaysian port and railway projects, which amount to some RM400 billion ($95 billion), “may understate the extent of Chinese involvement in the Malaysian economy, but overstate the impact on GDP growth,"Citi Research economist Kit Wei Zheng said. Kit questioned the viability and cost of China’s projects in Malaysia, particularly the port expansions, which come despite existing overcapacity. Those investments may be more strategic than economic, as they would allow China better access to the Straits of Malacca. Citi Research noted that Malaysia's fiscal deficit grew to RM30.5 billion ($7.24 billion) in the first five months of 2017, from RM26 billion ($6.17 billion) in the same period last year, Malaysiakini News reports.

July 7:

India has deployed its largest-ever fleet to participate in naval war games in the Bay of Bengal alongside American and Japanese warships. The Malabar exercises, which include dozens of warships, submarines and aircraft, started as a bilateral U.S.-India exercise in 1992. Since 2014, Japan has been included as a permanent member after participating sporadically in years prior. A request by Australia to join the exercises this year was denied by Delhi, ostensibly over fears of antagonizing China, NDTV reports. "We hope that this kind of relationship and cooperation will not be directed against third country and that it will be conducive to the regional peace and security," said China’s Foreign Ministry spokesperson.

Prosecutors in Taiwan indicted former Chinese student and alleged spy Zhou Hongxu, 29, on charges of violating the National Security Act. Zhou is accused of offering a Ministry of Foreign Affairs official $10,000 to pass on classified government materials. The Taipei District Prosecutors’ Office concluded a four-month investigation by pressing charges against Zhou for attempting to develop a spy network on Beijing’s orders. Zhou, who is from Liaoning, came to Taiwan as an exchange student at Tamkang University in 2009, enrolled at National Chengchi University in 2012, graduated in last July, and later returned to work in Taiwan. During the investigation, Zhou admitted to spying and attempting to recruit Taiwanese officials, Taipei Deputy Chief Prosecutor Chang Chieh-chin said, adding that if Zhou provided details of his espionage, prosecutors would request a reduced sentence. Zhou joined several social networks and established a relationship with junior officials who had access to top-secret materials. Zhou was told by his handlers to try to get Taiwanese officials to take trips abroad, where they would be met by Chinese officials, the Taipei Times reports.