Wynn Resorts is still getting punished for a $258 million heist in Macau.

After a slight pop in the share price after the theft, the stock is down 4% on Thursday, suggesting that the market thinks that Wynn's troubles aren't over.

It's the last the thing the company needs right now. 

Wynn has two properties, the Wynn and Encore Casino and Hotel in Las Vegas and the Wynn and Encore Casino and Hotel in Macau.

The Macau property brings in 53% of Wynn's revenue annually. Compare that to its peer, MGM which brings in only 15% of its revenue from Macau.

In short: if Wynn Macau gets hit, all of Wynn gets hit.

This couldn't have come at a worse time. The company has already been hurting due to a massive slow down in Macau revenues. The stock is down 61% since this time last year.

That's when the Chinese government really started turning the screws on Macau, in part, because of its anti-corruption campaign. It capped the number of visitors to the island, started monitoring gamblers' debit cards, and gone after illegal gambling ads on the mainland.

The VIP segment, which is mostly financed through junkets, has been hit the hardest since Chinese officials are really into cutting down on the flash cash. 

Junkets are independent businesses that service gambling VIPs. Investors put in money (expecting steady 1%-2% returns) and high-rollers then use that cash to leverage their bets on the casino floor. A portion of their winnings are then returned to investors. It's a system that's worked for Macau since it became the world's casino Mecca.

But that's been changing. An estimated 16% of all junkets on Macau shut down in 2014. That's the anti-corruption campaign at work, and the government has given no indication that it's over.

Losing $258 million is a huge deal for the entire junket system, casinos included, because it means there's a lot less cash floating around for high-roller play. And even though the money didn't belong to Wynn, analysts think that this could harm the junket's ability to pay any debts to the casino and slow down VIP activity at the casino.

A spokesman for Wynn told Business Insider: "“With respect to the current reported concerns related to the junket operator “Dore”, the Company wishes to advise that Dore owes no money to the Company and continues to operate at Wynn Macau.

He added that any issues related to Dore's failure to honor the withdrawal of funds requests are between Dore and those parties requesting withdrawals. 

"The Company hopes that all parties will be able to resolve their differences in the near future. The Company will continue to monitor the situation."

Wynn faces two other headwinds as well.

First, the Chinese economy is slowing down fast. Exports, manufacturing, property development — all sectors are flashing red. The government has been trying policy after policy to keep the economy chugging along at a steady clip, but so far nothing seems to be working.

And of course, pain on the mainland means pain in Macau.

Second, there's a supply issue at work here. Even though the Chinese government has capped the number of mainland visitors to the island, new casinos are still waiting in the pipeline.

Galaxy Entertainment opened massive projects this spring. Las Vegas Sands, which Morgan Stanley has argued is better positioned than Wynn in the stronger retail gambling segment — plans to open a project in 2016. Wynn has one on deck for 2018.

On top of that, it's Macau's government which decides how many tables will be on each casino floor at each hotel, and all signs point to companies getting fewer tables than they're asking for. When Galaxy opened its two projects it asked for 400 tables. The government gave it 150.

There's just less to go around.

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The Fed didn't budge.

On Thursday, the Federal Reserve kept its benchmark interest rates pegged at 0% to 0.25%, where they've been since December 2008.

So, effectively, not much has changed.

But there was one new phrase that jumped out in the latest statement that wasn't in the previous statement (emphasis ours):

The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced, but is monitoring developments abroad.

And some analysts believe that the Fed seriously considered these "developments abroad."

"Volatility in international markets and worries over global growth appear to have stayed the Fed's hand," argues to UBS global chief investment officer Mark Haefele.

When it comes to the Fed's decisions, generally, its main concern is the US economy. Often we don't hear much about its thoughts on what's going on overseas except for a few mentions in the Minutes from each meeting, released three weeks after the initial statement. 

But it looks like this time around, things are a tad different, as what's happening abroad is materially affecting businesses that make up the US economy.

Over the summer, China has been front and center with its volatile stock market, newly devalued currency, and slowing economic metrics.

And US businesses are speaking up as reported by the Beige Book, the Fed's collection of business anecdotes from across the US.

"Relative to the last FOMC meeting (in June), US data have provided no smoking gun in either direction. But new axes of uncertainty are emerging," writes UBS strategist Themos Fiotakis.

"Market volatility and risks to growth associated with the economic slowdown in China. 'China' was a frequent reference in the Beige Book of economic conditions prepare for the September meeting."

And as seen in the chart to the right from UBS, the spike in the number of China references in September's Beige Book is noting to ignore.

In a sentence, as MUFG chief financial economist Chris Rupkey suggests: "Fed policy is held hostage by events outside our borders."

However, the "developments abroad" statement also appears to raise new questions.

"While it may be said that a great majority of the FOMC expect a rate increase by the end of this year, this appears inconsistent with any reasonable expectation of a resolution of the global picture," Wells Fargo chief economist John E. Silvia wrote in a note to clients. "Perhaps the global issue is just a temporary reason for no action. If so, this simply adds to uncertainty given that the global situation has made a sudden appearance that these developments are difficult to quantify and unlikely to change much before the end of the year — yet a great majority expect to raise funds rate by the end of the year?"

"Uncertainty persists," he concludes.

SEE ALSO: The 27 scariest moments of the financial crisis

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China wants to be Asia's unquestioned military power and is rapidly upgrading its arsenal.

Beijing is developing next-generation fighter jets, ballistic missiles, and advanced naval vessels — partly in order to keep pace with the US.

The two powers are in a low-key arms race in east Asia. The US is currently engaged in a "pivot to Asia," focusing military and diplomatic attention on an increasingly important part of the world.

Meanwhile, China is trying to expand its territorial reach into the South China Sea, an effort that's bringing Beijing into recurring conflict with US allies like Japan, the Philippines, and Vietnam.

And China is constantly building its military with a possible invasion of Taiwan in mind.

China has already become the world's second-largest military spender, behind only the US. Since 1995, China has increased its defense budget by 500% in real terms. 

Although China's military has a long way to go before it is qualitatively or even quantitatively at parity with the US, the country's development of high-end weaponry has been notable, and counts as one of the major geo-strategic developments of this decade. 

Here are some of China's fanciest new weapons — and how they could shift the balance of power in Asia.

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Chengdu J-20

The Chengdu J-20 is China's fifth-generation fighter, its response to the US F-35 and the Russian T-50. The J-20 is a stealth aircraft that is currently in its fourth round of prototypes. 

The J-20 bears striking resemblance to the F-35 and the F-22, likely due to data theft and Chinese imitation of the designs of both planes. China may have stolen the design specifications needed to give the J-20 stealth capabilities that are on par with the F-35. 

Although the plane is estimated to have a striking range of 1,000 nautical miles, the aircraft itself is still reliant upon Russian engines and is in a relatively early stage of its development.

Shenyang J-31

The Shenyang J-31 is the other Chinese fifth-generation aircraft currently in development.

Unlike the J-20, which is heavily based on stolen American plans, the J-31 boasts an indigenous design. The plane is about the same size as the F-35 but has a smaller weapons bay — giving the J-31 improved fuel efficiency and speed at the expense of some firepower. 

The J-31 is also designed to be deployable to China's planned fleet of aircraft carriers. It would join the F-35 as the only two carrier-based stealth fighters in the world. 

The J-31 is scheduled to make its public debut at China's largest commercial and defense airshow in Zhuhai in early November.

Shenyang J-15 Flying Shark

The Shenyang J-15 is a carrier-based fighter aircraft that debuted in 2009. In a 2014 report to Congress, the Pentagon noted that the Fying Shark was conducting full-stops and takeoffs from China's Liaoning aircraft carrier with full weapons payloads. 

When operating from a ground base, the J-15 should have a combat radius of about 1,200 kilometers. However, since the Liaoning does not provide a useful catapult launch, the aircraft will have a reduced range while operating at sea, the Pentagon reported. 

The Chinese-produced J-15 is based on designs of the Russian Sukhoi Su-33. The plane is a Russian-type design fitted with Chinese radar, engines, and weapons. 

Douglas Flint, HSBC chairman, should know a thing or two about the Chinese economy.

For a start, he's on the economic advisory boards for both the mayor of Beijing and mayor of Shanghai. And his bank was founded in China in 1865.

So when he says "the data suggests that China will stage a modest recovery in the coming quarters, with full-year growth of around 7%," it makes you wonder what data he's looking at.

As noted earlier by Jim Edwards, many analysts think the real figure is around 4-5%.

This is because objective data for the demand for the raw materials of growth, like cement, metal and electricity are all heading the same direction: down. Meanwhile the country is dealing with its stock market losing the GDP of Britain in less than a month and a huge corporate debt pile.

So why the optimism? The Chinese government will pull its two emergency levers – interest rates and state spending – and effectively buy the growth it needs, says Flint.

"It has the room to cut interest rates to boost domestic demand.  It can cut reserve ratio requirements to increase bank lending capacity.  And it can deliver strong fiscal support for growth," Flint said in a speech given at Cass Business School in London on Thursday.

Over the course of the evening, Flint was asked three interesting questions and answered one of them.

A question on what he thought of the Chinese government's attempts to prop up falling markets – which Goldman Sachs Chief Lloyd Blankfein slammed on Wednesday– was waived away by the Q&A moderator as not being relevant to the discussion.

Another on HSBC's review of where to base its holding company headquarters – London or Hong Kong – was answered with "the process is ongoing."

Lastly, as he was leaving, the Glasgow-educated Flint was asked who would win the rugby, with the Rugby World Cup kicking off in London this week.

"Scotland," Flint said, backing a team currently at 100-1 on Paddy Power.

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As China's economy loses pace and car sales flatline, automakers are having to redouble their efforts to squeeze every dollar from their dealerships - beefing up after-sales and financing services that are a staple in more developed markets.

New car sales still make up a "ridiculous" 70 percent or more of dealer revenue in China, compared to as little as 5 percent in a market like Britain, where dealers make most of their money from car repairs, insurance and auto finance, said an executive at a chain of luxury dealerships in China.

For years, Chinese car makers and their dealers had it easy. As China raced from being an undeveloped indigenous market to being the world's biggest - and a main growth driver for global manufacturers - new car sales sped along at double-digit growth. This year, sales may contract for the first time in at least two decades.

That's prompted global car makers such as BMW to intensify training programs, teaching dealers how to maximize revenue from businesses beyond just selling new cars.

In a classroom-cum-car repair service bay in Beijing last week, groups of BMW after-sales service managers huddled around tables, poring over spreadsheets on repair revenues per model and productivity per service mechanic.

Elsewhere, new recruits learn how to compose follow-up mobile messages to potential car buyers browsing the showrooms. That personal touch can later help drum up repeat after-sales business that might otherwise go to cheaper backstreet repair yards.

"We're under conditions that make us sweat with urgency, so we need to participate more in these mind-expanding activities and cooperate with the manufacturer to find a way to survive," said Xu Dapeng, who manages after-sales services for a BMW dealership in Beijing and attended last week's training.

As car sales in China soared since the mid-2000s, few manufacturers and dealers bothered to diversify their revenue streams. But around 60 percent of all car dealerships now say they're losing money on each new car sold, prompting manufacturers to build out other ways to make money.

BOOT CAMP

At BMW, where deliveries to dealers in China have grown just 1 percent so far this year, this means putting recruits through sales 'boot camp' and turning experienced staff into spreadsheet wonks.

The world's top luxury car maker this month opened its largest Asia training center in Xi'an in Shaanxi province. It is also rolling out online training phone apps and having in-house trainers at dealerships look after basic skills so training centers can focus on teaching more advanced skills.

Training classes have shifted to help dealers identify areas they can change for a quick improvement in results, said BMW's China training chief Xiao Yi.

"They need to know which kind of customers support big margins and have high turnover," said Ma Gang, a BMW training manager who oversees after-sales classes. That way dealers can target those customers in follow-up calls and increase the chance they'll bring in their cars for repairs or a tune-up.

BMW is not alone in beefing up its training effort as the market becomes more challenging.

Lu Cheng, general manager of DZMC Training, who taught last week's BMW class, said there's more demand for such training sessions from all his clients, including Daimler AG and Porsche . His firm has increased its training staff by a fifth since last year.

GETTING PERSONAL

Profits from selling new cars are being squeezed from competitive price discounting, making it even more crucial to generate steady high-margin income from after-sales services.

After-sales margins in China can be as high as 50 percent - if a dealership is run efficiently - the luxury dealership executive said.

Much of BMW's training focuses on follow-up contact with customers - honing sales reps' SMS skills, for example.

Trainer Lee Yida opened a basic skills session by asking BMW dealer trainees: "What kind of SMS message will move consumers' hearts?" Choosing between a handful of messages, one saleswoman said her group opted for brevity. "Our customers are very busy," she said. "We thought it was better because it was shorter."

Dealers are also taught how to maximize the use of each car repair bay, and ensure that all customers pay for work done.

Training and increased after-sales revenue alone are unlikely to offset the sales slowdown. Volkswagen and its luxury brand Audi , for example, are scaling back production and making other cuts.

After-sales margins are already under pressure, with average per customer revenue dipping to 3,480 yuan ($546) this year from 4,288 yuan last year for luxury car brands, according to a study by J.D. Power & Associates released in July.

Many dealers in what is still a relatively young Chinese autos industry are untried in after-sales. "It's an area in China that, to be frank, they're not very good at," the dealer executive said.

"Anyone can sell cars, after-sales is complicated," said another manager at a major chain of Mercedes dealers.

(Reporting by Jake Spring; Editing by Ian Geoghegan)

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BEIJING (Reuters) - A unit of China's CRRC Corp, the world's biggest train maker by revenue, on Thursday joined a group of its domestic peers in agreeing a deal to help build a high-speed link from Las Vegas to Los Angeles, underlining the rail giant's lofty overseas ambitions.

Announced in a joint statement by the Chinese firms and U.S. partner XpressWest at a government forum in Beijing, the deal is the latest in a series of deeper Sino-American business ties to be unveiled before President Xi Jinping visits the United States next week. Computer maker Dell Inc said it will invest $125 billion in China, and new bilateral investment treaty offers have been exchanged.

CRRC, formed from a state-driven merger of China's two largest train makers, is among a large group of the country's rail firms that has inked an accord for the project with XpressWest, a venture set up by Las Vegas-based hotel and casino developer Marnell Companies. Investment terms weren't disclosed.

Gary Wong, a Hong Kong-based analyst at brokerage Guotai Junan, estimated that the project could be worth $5 billion. He said that although it would likely offer the many Chinese firms involved little financial benefit, it was significant for their long-term goals.

"If this opens up the U.S. market for them, opportunities for future expansion will increase. And if (their technology) is used in the United States, it will be easier for them to sell to other countries," he said.

CRRC is leading China's aggressive pursuit of overseas high-speed rail deals in competition with traditional suppliers such as Germany's Siemens AG and France's Alstom SA. Beijing recently clinched contracts in Russia, although it has faced hurdles in Mexico and Indonesia due to bureaucratic flip-flops in those countries.

US POTENTIAL

The United States is a key target for China's rail industry, even though policymakers have been split over the need for high-speed rail and some have taken a dim view of Chinese involvement in potentially strategic deals. Most of a dozen or so U.S. projects lined up have struggled to gain traction, leaving the country far behind Europe and Asia in this area.

XpressWest won the green light for the 230-mile high-speed line linking Los Angeles to Las Vegas in 2011 and applied for a federal loan in 2010, according to the company's website. It did not say whether its loan application had been successful.

The U.S. company didn't respond to calls or emails seeking comment on the project after the partnership deal with the Chinese firms — grouped in a Nevada-based venture called China Railway International U.S.A. — was announced.

XpressWest and the Chinese firms said in their statement that the accord would help accelerate the project without disclosing details of how it would achieve that. Additional regulatory approvals will be required before the construction begins, expected early as September 2016.

"The United States market is huge because the fact is that their railway tracks and facilities are aging and need upgrading," Cao Gangcai, CRRC's vice chief economist, told Reuters in an interview on Wednesday, before the XpressWest deal was announced.

The company plans to grow its share of revenue from work overseas to 30 percent within the next five years, he said. Having completed its merger in May, it booked first-half revenue of 91.8 billion yuan ($14.42 billion), only 12 percent of which was booked overseas.

"We want to attain the position we deserve in the global market...There is no other company on earth that is able to simultaneously research and produce high-speed trains, electric multiple units, subways," he said. 

(Additional reporting by Megha Rajagopalan, SHANGHAI Newsroom and Robin Respaut in SAN FRANCISCO; Editing by Kenneth Maxwell)

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On Thursday, the Federal Reserve kept its benchmark interest rate pegged at 0% to 0.25%, which is where they have been since December 2008.

At first glance, it looked as if nothing really changed.

But the Fed's statement included new language that helped explain why policymakers thought it was necessary to keep monetary policy so loose (emphasis ours):

The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced, but is monitoring developments abroad ... This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

In her news conference on Thursday, Fed chair Janet Yellen pointed directly to the economic slowdown and market volatility in China and other emerging markets as risks.

Economists quickly flagged this new language, and some also noted that it raised all sorts of wrinkles to the monetary policy calculus.

"Global developments were brought into the discussion," Wells Fargo chief economist John Silvia writes."These developments bring in another element of uncertainty."

Silvia also pointed to some internal contradiction. He argued that if the Fed were indeed on hold because of "developments abroad," then we probably shouldn't expect a rate hike anytime soon because those problems abroad will not be fixed in the near-term.

But according to the Fed's so-called dots, most members of the Fed think we see a rate hike before the year is over. As Silvia wrote in a note to clients on Thursday (emphasis ours):

We believe the resolution of the global picture is unlikely to provide much guidance in the short run. While it may be said that a great majority of the FOMC expect a rate increase by the end of this year, this appears inconsistent with any reasonable expectation of a resolution of the global picture. Perhaps the global issue is just a temporary reason for no action. If so, this simply adds to uncertainty given that the global situation has made a sudden appearance that these developments are difficult to quantify and unlikely to change much before the end of the year — yet a great majority expect to raise funds rate by the end of the year? Uncertainty persists.

He's not alone in that thinking. Other analysts have also pointed out that factoring in the global situation makes things more complicated:

"The key factor that held the Fed back today is China, or specifically, the possibility of a more abrupt slowdown in China, which could then spill over to the global economy and financial markets," Societe Generale's Aneta Markowska said. "The Fed wants to see this question 'resolved to some extent' before it raises rates. Unfortunately, it is unlikely to be resolved over the next eight weeks, which makes the October rate hike unlikely."

It's worth pointing out that when it comes to the Fed's decisions, the main concern is generally the US economy. We rarely hear much about the Fed's thoughts on what's going on overseas except for a few mentions in the minutes from each meeting, released three weeks after the initial statement.

But it looks as if this time around, things are a tad different, as what is happening abroad is materially affecting businesses that make up the US economy.

China was front and center this summer with its volatile stock market, newly devalued currency, and slowing economic metrics.

And US businesses are speaking up as reported by the Beige Book, the Fed's collection of business anecdotes from across the US.

"Relative to the last FOMC meeting (in June), US data have provided no smoking gun in either direction. But new axes of uncertainty are emerging," UBS strategist Themos Fiotakis writes.

"Market volatility and risks to growth associated with the economic slowdown in China. 'China' was a frequent reference in the Beige Book of economic conditions prepare for the September meeting."

And as seen in the above chart from UBS, the spike in the number of China references in September's Beige Book is nothing to ignore.

In sum, as economies become increasingly more integrated, it's increasingly difficult to ignore "developments abroad." It is also difficult, however, to make decisions within certain times frames when factoring in those aforementioned developments.

"Strong data on job creation in the US continue to suggest strongly that the current stance of Fed policy is too loose, but global considerations apparently are weighing on the Committee," Credit Suisse's Dana Saporta wrote. "Indeed, the question is less 'When will the Fed initiate normalization?' and more 'Will the Fed tighten this year?'"

SEE ALSO: The 27 scariest moments of the financial crisis

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The United States government repatriated a Chinese businessman on the list of the top 100 wanted Chinese fugitives on Friday, says the Chinese government.

Yang Jinjun, who is suspected of bribery and corruption, is the first of the 100 targets to be forcibly repatriated to China by the US government, said a statement released by the Central Commission for Discipline Inspection on Friday.

He is the 13th fugitive sent back to China as part of the mainland’s “Operation Sky Net” anti-graft operation, since it was launched in April this year.

The other 12 fugitives were either convinced by Chinese agents to return, or repatriated by other countries.

Yang fled to the US in 2001, and had been listed as a fugitive, subject to red notices issued by Interpol, since 2005.

A red notice appeals for the location and arrest of each wanted person, and asks those member states that have signed up to the organisation, which facilitates international police cooperation, to extradite them.

Yang, who is a Wenzhou native, is the manager and legal representative of Minghe Group, according to state media.

The announcement of this repatriation comes only days before President Xi Jinping’s visit to the US, which begins on Tuesday.

China has called for the US to help the repatriation of China’s corrupt officials or businessmen hiding in the US.

The repatriation of Chinese fugitives topped the agenda of a visit to the US earlier this month by Meng Jianzhu, the head of China’s Communist Party’s Central Politics and Legal Affairs Committee.

China especially wanted the US to repatriate Ling Wancheng, brother of former presidential aide Ling Jihua, and Guo Wengui, a businessman related to disgraced spy chief Ma Jian, South China Morning Post reported today.

In April, CCDI released a detailed list of the 100 fugitives it wants to extradite back to China as part of “Sky Net”.

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NOW WATCH: China is ramping up its military with a show of force in and outside the country

With President Xi Jinping’s pending visit to the United States, it is important to take stock of the subjects uniting China and America and those over which disagreement is inevitable. 

The latter subjects include cybertheft and China’s continued repression of various elements of free speech, personal freedoms, and minority rights within its own territory. The former include most elements of the trade relationship and cooperation on environmental sustainability, among other matters.

Where does the South China Sea fit in? For some American strategists, this is the place where right now China is showing the most worrisome tendencies towards great-power brutishness.

It is reclaiming reefs and sand bars and turning them into islands with potential military capabilities, while occasionally winding up in skirmishes with neighbors like Vietnam and the Philippines (the latter a formal U.S. ally) over specific reefs, shoals, and the like.

Map of the South China Sea locating China's nine-dash line claim on the South China Sea, and the Air Defense Identification Zone (ADIZ). Note: The Spratleys, Parcels, and other islands in the South China Sea are disputed to various degrees by different parties. Photo credit: Reuters.

It is true that we need to keep a close eye on Chinese behavior in this region. In particular, Beijing’s establishment of a “nine-dash line” that encompasses almost all the South China Sea (with its key trade routes), islands, and seabeds (with their own associated economic resources) is very worrisome. If China literally intends to enforce sovereign claims to all these zones and assets, we are in for a very difficult period ahead.

The United States should stand firm in opposing any such claims, and also in insisting that China pursue its claims in the region peacefully and with full respect for the rights of all nations to use the crucial sea lanes in this busy body of water.

Separating the wheat from the chaff

But in another sense, I believe there is a way to defuse some of the problems with China in this region.

The United States should not view every development of an artificial island, or even a modest military airfield, as a threat to our interests or those of other states. To some extent, this is expected behavior for a new great power. It is also in a sense hard for us to object to. In a way, China is building “stationary aircraft carriers” that are analogous to our actual aircraft carriers.

We sail our ships to the region from thousands of miles away; they base some military assets on artificial islands from a homeland hundreds of miles away. 

It is not entirely clear how our actions can be legal and legitimate and theirs fundamentally illegitimate. To be sure, international convention has long condoned the rights of any nation to use international waterways for its naval and commercial vessels. Island reclamation is a new phenomenon. But that does not, to my mind, make it automatically threatening.

What we can demand of Beijing is transparency, and moderation, in how much it builds up militarily in this region, and a commitment to the non-use of force in how it pursues its interests in the region. China also must not be allowed to claim broad territorial waters and economic rights around these artificial islets; again, they can and should be treated like ships, not land formations.

But we would be better advised not to push back equally hard against all aspects of Chinese behavior in the South China Sea. Some aspects of China’s rise in that region are nearly inevitable, and so we should focus our attention on trying to shape or change those aspects of China’s behavior that are truly objectionable and threatening.

SEE ALSO: Here's how China's aircraft carrier stacks up to other world powers'

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NOW WATCH: China is ramping up its military with a show of force in and outside the country

James Mann is a fellow at the Johns Hopkins School of International Studies and the author of three books about America and China, including “About Face: A History of America’s Curious Relationship With China.”

This summer, President Obama offered a pithy description of the way that inertia sometimes prevents the United States from discarding old ideas that no longer fit current circumstances.

"Sometimes we allow ourselves to be trapped by a certain way of doing things," he said. "We don't have to be imprisoned by the past. When something isn't working, we can — and will — change."

The president was talking about Cuba. But he should also apply these words with equal force to U.S. policy toward China.

As Washington prepares for a visit from Chinese President Xi Jinping next week, American thinking about China seems stuck on concepts developed in the 1970s, '80s and '90s. Since that time, however, China has evolved in ways that few, if any, in Washington saw coming.

It has become more assertive overseas, more repressive at home and more mercantilist in its trade practices than was anticipated two decades ago.

Back then, American leaders regularly predicted that trade and prosperity would produce a more open China, one that would ease into the existing international system created under U.S. leadership.

Yet even as China moves in new directions, we use the mindset of the past when we talk about it. We continue to draw on ideas dating to Richard Nixon's opening — even though it seems likely that Nixon himself, were he alive today, would take a much tougher stance toward China than he did in 1972.

Several intellectual traps stand in the way of developing new approaches.

The first is the notion of "engagement." This concept dates to the period after the 1989 Tiananmen Square massacre, when President George H.W. Bush resisted proposals to cut off all contact with Chinese leaders.

Instead, he laid down a policy of engagement — meaning that his administration would meet with Chinese leaders in hopes of changing them. President Bill Clinton perpetuated the use of "engagement," and it has become a catchphrase for conciliatory, non-punitive approaches to our differences.

But it was never really clear what "engagement" sought, other than meetings and talk. And now, a quarter century after Tiananmen, when no one suggests cutting off contact, "engagement" has lost whatever slight meaning it once held.

Likewise, those who resist any policy change frequently argue that, beginning with Nixon, eight presidents in a row have come around to roughly the same China policies — and that therefore these policies should not be altered. This idea also has a history.

Since the Nixon era, several presidents — most notably Ronald Reagan and Clinton — have campaigned promising to change U.S. policy toward China, only to do an about-face in office.

Yet the history isn't so simple. Obama, for example, actually did a reverse about-face: He set out to avoid conflict, then toughened his approach after his first year in office.

More fundamentally, as Obama's words on Cuba recognize, what a series of predecessors have done does not answer what the United States should do when circumstances change. Nixon himself inherited a China policy carried out by his four immediate predecessors, but rightly reversed the policy.

Then there are the recurrent calls for a "G-2." It is sometimes proposed that China and the United States should reach a broad strategic accommodation allowing them, together, to guide the affairs of the world.

This idea gained strength during the financial crisis, when China appeared to be the economically strongest partner for the United States. More recently, Xi's repeated proposal for a "new type of major-power relationship" seems a variant of the old calls for a "Group of 2."

But such formulations overlook larger realities. They implicitly downgrade the interests of U.S. allies and friends (Japan, India, South Korea and the European Union, for starters) who would naturally feel threatened by the notion of the United States and China teaming up without them. They also ignore fundamental differences in values and political systems. Do advocates expect the United States to stay silent on issues such as China's severe repression of dissent?

The underlying reality is that the congruence of strategic interests that held the United States and China together in the late Cold War no longer exists.

And the desire of the U.S. business community for trade and investment in China, which drove U.S. policy in the 1990s, has also been transformed: These days, U.S. businesses tend to come to the White House not to get help in expanding trade but looking for a tougher line on issues such as intellectual property and cybertheft.

In this climate, efforts to perpetuate the old U.S.-China relationship seem increasingly out of touch.

The truth is, the United States' China policy is already changing at the working levels of government and at the grass-roots level, but our overriding ideas about this relationship have not kept pace. Over the next few years, a new U.S. policy toward China is sure to emerge, but it may do so gradually, from the bottom up.

As it does, some simple concepts could be brought back into play. One is the idea that China should be treated by the same rules as other countries. Another is the notion of reciprocity: When China penalizes U.S. businesses or media, the United States should respond with similar limits on Chinese entities.

We should develop a more businesslike approach, forsaking the dream that some personalized diplomacy or dramatic communiqué can bring back the special relationship of the past.

The United States and China are in a new era. It's time to develop policies and ideas that don't try fruitlessly to replicate the past. 

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NOW WATCH: China is ramping up its military with a show of force in and outside the country

An epic military parade earlier this month showed off some of the Chinese military's new toys, unveiling heavy vehicles in maritime camouflage as the country's island-building in the South China Sea sits in US military planners' minds.

So how does China stack up to other world powers when it comes to aircraft carriers, one of the biggest factors in air and sea dominance?

Take a look at the photos and graphics below to get an idea of China's naval power:

SEE ALSO: Every surface ship in the Chinese navy, in one chart

This is China's only aircraft carrier, the Liaoning. Like much of China's military hardware, the Liaoning is a reworking of an older Russian-made model.

The Liaoning's particulars and capabilities sound impressive.

Source

The Admiral Kuznetsov, which the Liaoning is based on, is Russia's sole aircraft carrier. The ships have the same size and speed, and they both feature the "ski jump" platform.

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If China's economy is growing at 7% or more per year, why has the price of cement there dropped by 25% in the last two years?

You can't build anything permanent without cement. It's a great indicator of how the underlying, real economy is actually doing: If people are buying a lot of cement then it means they have the cash to build large, new, permanent objects. Houses, roads, bridges and cities. If building and construction are on the decline then the price of cement should fall.

This is what Chinese cement looks like right now, according to a fantastic note to investors from Macquarie's Chief China Economist, Larry Hu:  

The Chinese government is "serious" about keeping GDP growth at 7%, says Hu. 

Macquarie reckons "fixed asset investment" growth — spending on infrastructure and buildings basically —   should be steady at about 20% growth each period since 2013. Official numbers say China GDP remains above 7%:

This doesn't make sense ... unless you are one of those people who believe that China is lying about its GDP growth. Outside observers suspect it may be as low as 4% in reality. That's still pretty good growth in an economy of that size.

But China's stock market is collapsing, it has a massive debt overhang, objective indicators like electricity consumption look soft, and the country is about to go through a generational reversal that will erase its population growth advantage. 

And now cement prices have collapsed at about the same time as ... Chinese metal prices, as Goldman Sachs noted recently:

None of this looks good, unless you believe that the Chinese have figured out a way to grow their economy at 7% a year without using concrete or metal.

SEE ALSO: If China's GDP is so amazing then why have Chinese metal prices collapsed?

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NOW WATCH: We got our hands on Donald Trump's failed 1989 board game and it's bizarre

Despite claims in August that it would stop reclaiming land in the South China Sea, Beijing is continuing to pursue construction of man-made islands flush with military equipment. 

Citing the Center for Strategic and International Studies (CSIS), The Washington Post reports that China is planning large-scale construction on the recently dredged Subi Reef and Mischief Reef, including a new airfield. The new airfield, when operational, would allow China to establish interlocking zones of air control over the region. 

In addition to the airfield, China is also planning on equipping the recently dredged islands with anti-aircraft weapons and various naval vessels, Michael J. Green, a senior CSIS vice president, told the Post, citing Chinese officials. This combination of weapons would further solidify China's position within the region. 

These developments, Green told the paper, would establish “overlapping air control over the South China Sea, and not just from one airfield but from three. ... [I]t won’t stop the U.S. policy of asserting freedom of navigation, but it makes it a lot more complicated operation.”

The construction on the Subi and Mischief Islands follows the pattern of China's previous construction on the Fiery Cross Reef. In April, satellite images from Airbus Defense and Space located and identified a 3,000-meter (9,842-foot) long military-grade runway, as well as construction of seawalls on the island for an artificial harbor. 

According to CSIS, Subi Reef is already equipped with a potential 3,000-meter airstrip in addition to a helipad and a military facility. Mischief Reef, which is rapidly being expanded, is equipped so far with two military facilities and fortified seawalls. 

"China appears to be expanding and upgrading military and civilian infrastructure — including radars, satellite communication equipment, antiaircraft and naval guns, helipads and docks — on some of the man-made islands," the US-China Economic and Security Review Commission stated in a staff report from December 2014.

The continuation of construction and dredging on the islands, despite China's promises to stop, will likely cast a cloud over Chinese President Xi Jinping's state visit later this month. The US has repeatedly called on China to halt construction in the region so as to not inflame regional tensions. 

The expansion of Chinese construction in the South China Sea is kicking off a series of territorial disputes with Beijing's neighbors in the south, all of whom also have competing maritime claims to the reefs and islands.

Taiwan, Malaysia, Vietnam, and the Philippines all have military bases within the South China Sea on islands that those countries control.

As of June 2015, China has reclaimed more than 2,900 acres of land since December 2013. View the details of the power struggle below:

SEE ALSO: Every surface ship in the Chinese navy, in one chart

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NOW WATCH: VIDEO: Watch the men who helped overpower a gunman on a Paris-bound train tell their story

As many as half of all undergraduates in the United States don’t know what their major will be when they enroll in college. 

As the scholar Eric St. John once wrote, “There is, perhaps, no college decision that is more thought-provoking, gut wrenching and rest-of-your-life oriented—or disoriented—than the choice of a major.”

Today’s “undecided” students, however, are by no means wearing that label like a scarlet letter; rather, it’s often seen as a symbol of whimsical youth, of spontaneous self-discovery, of a Tolkien-esque desire to explore: “Not all those who wander are lost …” Well, sort of.

In reality, for many students checking off the “undeclared” box when applying to college probably has more to do with instability or apathy or inexperience—but the point is, at least in The Land of Opportunity, undeclared students are ominipresent in lecture halls and dining halls, Solo-cup showdowns and awkward-dorm-sex moments.

Some academics see undeclared majors as the epitome of Deweyan education, the last vestiges of America’s one-time liberal-arts sensibility. Indeed, a study from the 1960s study found that undeclared majors were “more likely to emphasize intellectual development as a goal of college” than they were vocational training. And regardless, it’s worth noting that an estimated three in four college students change majors at least once.

But this entire debate is pointless when neither decision nor indecision is even an option. That’s now the case for hundreds of students at the University of South China, which according to a number of news outlets has essentially barred those who are in their second year of the school’s civil-engineering program from selecting their specialties; the program is broken down into seven of them.

Instead, the university—which according to its website offers dozens undergraduate majors in fields ranging from engineering to the liberal arts and serves a growing international population—is forcing all but the program’s top 190 students to choose their majors Harry Potter-style: picking them, as the lifestyle blog Shanghaiist put it, “out of a hat.”

Okay, the new policy doesn’t involve a literal hat—but it’s still a lottery-like system that one legal worker, according to the Wall Street Journal, described as “a game for kids in kindergarten.”

Shanghaiist quotes a university spokesperson, Lu Qinghua, offering an earnest and amusingly simple rationale for the school’s widely criticized move: It didn’t have a choice. “If choosing a major is solely based on students’ wants, some majors will be overcrowded and others will have difficulty enrolling enough students,” Lu reportedly said, adding that other institutions have adopted similar policies and that among the 400 or so students who have to leave their majors to fate, the highest achievers can apply to change their specializations after a year of study.

People are, of course, pissed, blasting the decision on the Internet and in the news media. Someone quoted by Xinhua said the rule amounts to “discrimination,” while the aforementioned legal worker criticized it as “the product of laziness and mismanagement.”

There’s little doubt that colleges in China (and pretty much everywhere) struggle to keep course enrollments perfectly balanced and workforces perfectly distributed. That’s in large part a byproduct of humanity’s imperfection and what happens when, God forbid, young adults are allowed to study subjects in which they’re interested.

Some colleges simply expand course offerings when there’s heightened interest; some form partnerships with third-party institutions or academic programs. And globally, the degree to which students have discretion over their area of specialization varies. Certain countries, for example, in the past have set quotas on the numbers of students who pursue higher education in certain disciplines based on workforce demands.

At lots of U.S. colleges, efforts to avoid problems with supply and demand are, of course, often stymied by bureaucratic dysfunction. And on the reverse, there are certainly some overzealous efforts to diversify offerings. Andrew Hacker and Claudia Dreifus’s book, Higher Education? How Colleges Are Wasting Our Money and Failing Our Kids, lists some of the more, er, niche bachelor’s degrees offered by some American postsecondary institutions in 2008, including: Equine science and management; poultry science; and fiber, textile, and weaving arts.

I wonder what an aspiring business major might say if he or she were forced to specialize in the horse industry because there were too many people signing up for Macroeconomics 101.

Of course, China isn’t known for being particularly compromising when it comes to solving its higher-ed pickles: In 2011, the country’s Ministry of Education notoriously announced that it would be canceling all majors that didn’t produce employable graduates—largely programs that didn’t accommodate the country’s export- and manufacturing-based economy.

I’m not sure how that plan has played out, but it’s clear that prioritizing the most employable disciplines can be tricky business—and, at least with prestigious U.S. universities, often inconsequential. I know of a former Harvard Folklore & Mythology major, for example, who’s now a successful Wall Street consultant. After all, only about a fourth of college grads in the country have a job related to their major.

I’m no expert on Chinese higher ed, but whoever decided to address the University of South China’s civil-engineering qualms as if it were Hogwarts House-sorting time seems, well, a tad misguided.

Perhaps the kerfuffle at University of South China is emblematic of the reason why postsecondary education in the United States—despite all its administrative shortcomings and financial crises and political mayhem—has yet to lose its spark. Why higher learning is still one of America’s “hottest exports.” Why the country is now attracting hordes China’s nouveau riche—not just those pursuing the “American Dream.” Sometimes, indecision is a luxury.

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Renewed anxiety about China’s economic performance appears to be at odds with the fact that the country’s growth has been declining for years.

How much of the recent nervousness is based on a balanced assessment of the risks, and how much on an outdated view of China’s policy direction?

That China’s economy is slowing is hardly news. The country’s real GDP growth peaked in 2007 at 14.2% and slumped the following year to 9.6%.

Since then, it’s declined more or less steadily, dropping to 7.0% in June this year, in line with the government’s target.

We expect it to fall further, but the fact that it’s taken eight years to reach its current level is consistent with our expectation of a managed economic slowdown, rather than the hard landing that many China bears predicted.

And yet, since the end of the China A Shares rally in June and July, investors have renewed their focus on the economy amid fresh concerns that it may indeed land with a thud.

This seems strange, given that the rally wasn’t predicated on expectations of an economic upturn. Instead, it reflected optimism about the potential success of government reforms, and was fuelled by an inherently volatile mix of retail investment and margin loans.

It’s possible that much of investors’ current anxiety about China comes from viewing the country through the lens of developed-world companies with exposure there—a narrow and slightly removed perspective which, like the popular game “Chinese whispers,” or “telephone,” can distort the overall picture.

Starbucks Bucks the Trend

For example, Caterpillar—the US construction and mining machinery manufacturer—experienced a 21% fall in its Asia-Pacific revenues in the second quarter of this year, caused largely by a slowdown in the Chinese construction industry.

This led to a 13% drop in overall quarterly revenues compared to the previous corresponding period. For fiscal 2015, the company expects revenues to be more than 11% lower than the previous year.

Caterpillar’s global competitors, such as Japanese companies Komatsu and Hitachi Construction Machinery, have been similarly affected, as have companies in other sectors, such as business aviation, automobiles, elevators and semiconductors.

Clearly, the message for investors is that China’s economic slowdown and the recent (modest) devaluation of the renminbi have been bad for business.

While this is true as far as it goes, it presents a rather one-eyed view of what’s really going on in the country. The single most important dynamic in China’s economy and financial markets, in our view, is the policy strategy of rebalancing the economy so that domestic consumption becomes a much more important driver of growth alongside the traditional engines of investment and heavy manufacturing.

This policy has succeeded to the extent that, for more than a year now, retail sales in China have remained resilient while fixed-asset investment has declined.

Our research suggests that it’s important to evaluate the experience of Caterpillar, Komatsu and others in this context, because at least some of the decline in their China fortunes stems from the fact that they are exposed to an industrial sector—heavy machinery—where there is considerable overcapacity, and which has been de-emphasized by government policy. (The corollary of this is that US retail companies such as Starbucks and Apple continue to perform well in China.)

Foreign firms in China must also take into account the growing competitiveness of domestic companies in many sectors and the government’s policy of identifying and supporting “national champions.”

All these factors suggest that foreign companies will continue to find China challenging, but they bode well for the success of China’s reform agenda and the move toward a more market-oriented economy capable of sustaining long-term growth.

Lower Growth Will Be Normal

In our recent research white paper, Future Shock: How China’s Reforms Are Creating Disruptive Risks (and Opportunities), we wrote that we expect 5%‒6% GDP growth to become widely regarded as normal for China, and that this would be a positive for the country. We’re not quite there yet, but we’re beginning to see developments which are likely to support growth, and help ensure that China continues to make a managed economic landing. We’ll explore those trends in our next blog.

SEE ALSO: The chairman of HSBC just defied everyone on China's growth target

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WASHINGTON (Reuters) - Major intrusions by Chinese hackers of U.S. companies' computer systems appear to have slowed in recent months, private-sector experts say, ahead of a meeting between China's president and President Barack Obama with cyber security on the agenda.

Three senior executives at private-sector firms in the field told Reuters they had noticed a downtick in hacking activity.

"The pace of new breaches feels like it’s tempering," said Kevin Mandia, founder of Mandiant, a prominent company that investigates sophisticated corporate breaches.

A point of friction in U.S.-Chinese relations, cyber security will be a major focus of talks with Chinese President Xi Jinping this week in Washington, D.C., Obama said earlier this week.

In the same remarks, Obama called for a global framework to prevent the Internet from being "weaponised" as a tool of national aggression, while also holding out the prospect of a forceful U.S. response to China over recent hacking attacks.

Mandia has probed major corporate breaches, including those at Sony Pictures Entertainment, Target  and healthcare insurers. Experts have connected some of these to a breach of classified background investigations at the U.S. Office of Personnel Management, which was traced to China.

Government-supported hackers in China may have backed off recently as Chinese and U.S. officials began negotiating in earnest over cyber security ahead of the Obama-Xi summit.

“In my gut, I feel like the Chinese and the U.S. over the next couple of years are going to figure this out,” said Mandia, now an executive at Mandiant’s parent, FireEye.

The FBI declined to comment on Friday.

The Obama administration has been weighing bringing economic sanctions against Chinese companies that have benefited from intellectual property theft. But no sanctions have been brought and U.S. companies disagree on the wisdom of such retaliation.

U.S. Assistant Attorney General John Carlin, who leads the Justice Department's National Security Division, has scheduled a press availability on cyber security for Wednesday in Pittsburgh.

That is the same day that President Xi is scheduled to attend an Internet industry forum in Seattle hosted by Microsoft. Xi will depart the next day for Washington, D.C.

On Saturday, a Justice Department spokesman said Carlin will make routine remarks and answer questions. The spokesman said he expected U.S cyber espionage charges brought in May 2014 against five Chinese army officers would come up. The indictment alleged the officers conspired from 2006 to 2014 to hack into U.S. entities' computers and steal information.

In July, the FBI said economic espionage cases it had handled in the preceding 12 months were up 53 percent from a year earlier, with China the biggest offender. Statistically, that period could have included a falloff toward the end.

While Mandia said his perception of a slowdown was unscientific and based on “how often my phone has been ringing,” others voiced similar views.

Stuart McClure, chief executive of Cylance Inc., a smaller cyber security firm, said he too had noticed a drop-off in presumed Chinese attacks going back about six months.

"He has more volume" and so has a broader perspective, McClure said of Mandia. "But we have not seen the samples of attacks like we had been."

Mandia and McClure spoke Thursday on the sidelines of the Billington Cyber Security Summit in Washington, D.C.

Tom Kellermann, chief cyber security officer at large security vendor Trend Micro, said in an interview in New York he also had seen fewer new Chinese hacks recently, though he said one campaign that compromised U.S. defense contractors years ago might be adding new government targets.

“There’s been a consolidation in activity coming out of China,” Kellermann said. “It’s down a notch.”

A spokeswoman for security investigations firm CrowdStrike said in an email that it had not seen a significant change.

The Billington conference featured White House cyber security policy coordinator Michael Daniel. After speaking on a panel, Daniel suggested to reporters that Chinese officials have been listening hard to U.S. complaints on economic spying.

(Additional reporting by Roberta Rampton, Warren Strobel; Editing by Kevin Drawbaugh, Editing by Franklin Paul)

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Chinese President Xi Jinping's attendance at the funeral earlier this year of a one-time propaganda minister was a surprise; Deng Liqun, who died aged 99, was never a top-ranked official and had been a political enemy of Xi's father.

Xi's presence, sources said, was in fact part of a nascent effort to heal wounds across China's ideological divide after his unrelenting crackdown on corruption alienated senior officials from the ruling Communist Party, government and military.

Xi wants to consolidate support ahead of the 19th party congress in 2017, when the seven-member Politburo Standing Committee, the apex of power in China, is reshuffled, said the sources, who have close ties to the leadership.

While Xi is expected to rule until 2023, he needs to get allies on the committee who will back his three-year war on corruption and his plans for reforming China's slowing economy, experts said.

Xi has been involved in a number of funerals this year for ex-officials who spanned China's political spectrum.

Funerals of notable figures have a unique place in Chinese politics and are carefully choreographed by the party.

Attendance is often scrutinized for clues as to whether retired officials are among the mourners, indicating they still have clout.

Xi's bridge-building shows a different, more nuanced side of a president who appears to the outside world as China's most top-down ruler since Mao Zedong.

The Chinese leader's anti-graft campaign has netted scores of senior officials, targeted influential families and frightened a bureaucracy to the point where some officials won't make decisions for fear of drawing attention to themselves.

It has also traumatized political factions.

Father's Nemesis

That's why Xi was among the mourners at Deng's funeral in Beijing on Feb. 17, where he bowed three times before the body of the ultra-conservative Marxist ideologue, sources said.

Xi had no obligation to go, the sources added, requesting anonymity because they were not authorized to speak to foreign media.

Deng had also been a nemesis of Xi's late father, Xi Zhongxun, a vice premier in the late 1950s and early 1960s.

"Deng Liqun was a leftist and Xi Zhongxun a rightist. They were political enemies since ... the 1950s," one source said.

In China, leftists are opposed to market-oriented reforms and Western-style democracy, while rightists are more liberal-minded. Precisely where President Xi sits is fluid, which is how he wants it, experts say.

"Xi went because he needs leftists in his fight against corruption," the source said.

Experts believe that, in a worst-case scenario, conservatives could try to oust Xi, especially if the economy falters further and unemployment sky-rockets.

The president has walked a tightrope targeting "tigers", or senior figures, in his corruption crackdown.

Among them has been former security tsar Zhou Yongkang, a conservative heavyweight jailed for life in June.

Despite that balancing act and China's plunging stock markets, Xi is sure to display confidence when he holds talks with U.S. President Barack Obama in Washington this week and give little ground on issues that bedevil ties, from cyber security to China's territorial ambitions.

"He's Their Guy"

Xi has also paid tribute to those on China's political right.

Zeng Yanxiu, the first party member purged in the 1957 Anti-Rightist movement against liberal intellectuals, died in Beijing on March 3, according to sources close to the family. He was 96.

The party banned the holding of a public service because Zeng's death coincided with the annual full session of parliament, the sources said.

Neither Xi nor his father were close to Zeng, but the president sent a wreath, they added.

"Xi has been courting both the left and the right in the party," a second source with leadership ties said. "Xi is a pragmatist, neither a rabid conservative nor excessive liberal."

In the living room of Zeng's flat at the time, a Reuters reporter saw visitors bow before a portrait of Zeng, flanked by wreaths from Xi and other leaders.

"Xi draws strength from convincing both sides of the ideological divide that he's their guy," said Christopher Johnson, a China expert at the Center for Strategic and International Studies in Washington, referring to Xi's focus on funerals.

Another notable funeral Xi attended was for Qiao Shi, 90, a former chairman of parliament and once head of the party's anti-corruption watchdog who was a proponent of strengthening the legal system. Qiao died in Beijing on June 14.

Disquiet in the ranks

Xi also went to the funeral of General Zhang Zhen, former vice chairman of the powerful Central Military Commission, who died in Beijing on Sept. 3 aged 100.

Anti-graft investigators have focused particular attention on the military, causing much disquiet throughout the ranks, sources have said.

While Xi appears to have attended no public weddings since assuming power, his own showed his penchant for keeping his cards close to his chest.

Xi, then 34, and his wife, Peng Liyuan, then 24 and a popular army singer, exchanged vows in a simple ceremony at Xi's home in the southeastern port city of Xiamen in 1987 where he was a vice mayor, official media reported last year.

Xi then informed the mayor, who invited colleagues to a dinner.

The first to arrive recognized Peng and asked, while shaking Xi's, hand: "Why is she here?"

Xi replied: "She is my wife", official media said.

SEE ALSO: Cyber attacks from China against the US may be slowing down ahead of Obama's meeting with Xi Jinping

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Didi Kuaidi, Uber's No. 1 rival in China, holds the majority share of the Chinese market, and it's heavily armed with venture capital money — the ride-hailing company just closed a massive $3 billion round of funding last week.

But two documents  — first surfaced by the Financial Times last week and also seen by Business Insider — appear to show that while Didi Kuaidi is growing fast throughout the country, it's spending buckets of money getting drivers on board.

One of the documents appears to be a pitch deck, the other a document that an outside accounting firm put together. The documents did not come from Didi, and Didi had no comment on the documents or the numbers in them. 

An unusual definition of "net revenue"

Didi Kuaidi was created in February, when competing apps Didi Dache and Kuaidi Dache merged to cut the costs of competing with each other — and more importantly, with Uber. Didi Kuaidi is currently outstripping Uber in company size — Didi has about 4,000 employees, and Uber employs about 200 in China, according to the Wall Street Journal.

According to the financial report obtained by Business Insider, which breaks down revenues and losses for Didi Dache and Kuaidi Dache, each entity recorded operating losses for $305 million and $266 million, respectively, in the first five months of 2015.

It's not unusual for a growth-stage company to operate at a loss. It certainly doesn't mean the company is in danger. Many tech companies that raise a lot of money aren't profitable, and many go public while they're in the red.

The companies' "net revenues" for the same time frame were $141 million and $44 million, respectively, according to the document.

But those "net revenue" numbers seem a little odd. According to numbers in both the PwC report and the investor deck, the company is calculating revenue by looking at gross bookings, without subtracting driver subsidies. That could be misleading to investors. (Uber, in private presentations leaked to various media outlets, deducts driver payments from net revenues.)

Also, the business seems to be spending a lot of money getting drivers on board — Didi Dache spent $227 million on driver payments and subsidies in the first five months of 2015, according to the document. That's more than the $141 million it collected from all trips.

Kuadi Dache spent $103 million on driver payments and subsidies, versus the $44 million it collected from all trips.

Only half of requested trips are completed

The investor deck shows Didi Kuaidi is growing like crazy in China — between August 2014 and May 2015, Didi Kuaidi's private car requests grew 16 percent every week.

The investor deck also shows that Didi Kuaidi's request-to-complete ratio is approximately 50 percent, meaning that just 50 percent of trips that are requested on Didi Kuaidi's platform are completed.

In addition, according to its investor deck, Didi Kuaidi cites "requests" instead of "trips," which accounts for requested trips that weren't fulfilled or completed. This could be artificially inflating Didi Kuaidi's volume of business.

Competition in China is fierce

Uber's three most popular cities — Guangzhou, Hangzhou, and Chengdu — are all in China. And Uber’s service is taking off in China much faster than it did in the US; nine months after launching in Chengdu, Uber had 479 times the trips it had in New York after the same amount of time.  

Uber's China branch recently closed a $1.2 billion round of funding. Uber is aggressively expanding its Chinese footprint, with plans to operate in 100 more cities in the country in the next year.

Interestingly, Didi Kuaidi also reportedly invested in Lyft — Uber's biggest US rival — earlier this year, The Wall Street Journal reports. Citing sources close to the matter, The Wall Street Journal reports that Lyft has "discussed ways to work with its Chinese investors to compete strategically with Uber, including sharing product plans."

Didi Kuaidi says it controls 80 percent of China's ride-hailing market. Meanwhile, Uber CEO Travis Kalanick recently said Uber has increased its market share in China from one percent to "30 to 35 percent market share." Market share inherently can't exceed 100 percent, so at least one company is being overly optimistic with its estimates.

SEE ALSO: Here’s everything you need to know about Uber's plan to turn China into its biggest market

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Chinese President Xi Jinping has been attending a lot of funerals lately, and it's because he needs friends, badly.

For months, Reuters reports, the president has been attending to the funerals of high-level, retired party officials from various factions of the Chinese government.

All of them are members of the all-encompassing Chinese Communist Party (CCP), but some are from the right-wing, market-friendly faction, and others are in the left-wing faction, which believes in a more pure version of communism.

Where Xi sits on the spectrum is a bit murky, a good thing for a politician who needs to build support at an incredibly delicate time.

For a little over a year the Chinese economy has been slowing down. That slowdown was crowned, most recently, with two major market meltdowns this summer and a devaluation of the Chinese yuan.

During that time, Xi instituted a party-wide anticorruption campaign, which experts also consider his way of consolidating power. He promised to go after "flies" and "tigers," even ensnaring the country's former security czar, Zhou Yongkang.

Zhou, sentenced to life in prison at age 73, was the most powerful person to go down since the brutal purges of Mao Zedong.

So Xi, who will be in power until 2023, has made some powerful enemies, and we know he knows it.

Read it in the news

"It should become a norm for officials to relinquish their power after retirement," said an editorial published last month in government mouthpiece The People's Daily.

That was a not-so-veiled message from Xi to members of the party who may not be happy with the direction in which things were going. The message was: back off.

This after Xi and other officials attended an annual agenda-setting meeting at a seaside resort in Hebei, China.

"The in-depth reform touches the basic issue of reconfiguring the lifeblood of this enormous economy and is aimed at making it healthier," the article said. "The scale of the resistance is beyond what could have been imagined."

It was written under the pen name "Guoping," used by party leadership when it wants to get its message across.

The visits

Reuters reports that Xi has attended the funerals of the following officials:

• Deng Liqun, a leftist, who died at age 99. Xi went to the funeral in February, even though Deng was an enemy of his father.
• Xi also attended General Zhang Zhen's funeral. He was a very powerful military official who died in September.
• Finally Xi attended former parliament chair Qiao Shi's funeral. He was a legal reformer who died in Beijing at age 90.

Xi also sent a wreath when Zeng Yanxiu died in March at age 93. Zeng was the first rightist to be purged from the Communist party in 1957.

State-related funerals are carefully orchestrated affairs in China, so Xi is sending a message by even showing up. Likely he's letting his enemies know that he can still derive power from all over the CCP.

Results

Regardless of his friends, though, Xi will have to show that his policies are producing results. He's grabbed more power than any president since Mao and, as such, bares more responsibility.

For example, economic matters used to be under the purview of the office of the Premier — in this case Li Keqiang. But when Xi took over, he created special committees called "small leading groups" that supersede the power of everyone else in the party.

And so even though Li Keqiang is getting blamed for the governments botched handling of its stock market crisis, it's well known that Xi was and is at the helm.

What's more, this isn't just about the stock market, or even the fact that the country's economy is slowing down rapidly with indicators flashing warning signs unseen since the darkest days of the global financial crisis.

The deadly chemical blasts that leveled parts of the port city of Tianjin last month have also outraged citizens. They embody the corruption and environmental destruction that Xi and his people have vowed to stamp out.

To the Chinese people, these are broken promises.

And when the government breaks promises, the people start to break away. That's why Xi's enemies are sharpening their knives. That's why he's attending funerals.

SEE ALSO: China just invited the world to take a big risk at the worst time since 2009

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NOW WATCH: China has been upgrading its military and is now stronger than ever

When Chinese President Xi Jinping arrives in Seattle on his way to Washington, D.C., this week, he'll be visiting the American state that exports more to his country than any other.

Washington last year sent more than $20 billion in airplanes, wheat, apples and other products to China. Redmond-based Microsoft, Seattle-based Amazon.com and Boeing, with deep roots in the state, are among the companies lining up to capitalize on the president's visit, focusing on the country's long-term potential at a time when its economy is troubled.

Xi's three-day stay, beginning Tuesday, also carries with it an opportunity for him to use the sight of major American companies, from Apple to General Motors, to send a reassuring message home: China is still very much a much sought-after market.

"One of the reasons he's talking to the high-tech executives is not necessarily for business purposes here, but to convey back to the Chinese audience that, see, Western firms — the biggest Western firms — are still anxious to do business with us," said David Bachman, a University of Washington professor and former chair of its China Studies Program.

"He's trying to exude a sense of confidence at a time when some of that self-confidence about China's economic future has been dissipated," he said.

The visit comes as friction between the China and the U.S. has grown. Among the sources of tension are hacking attacks on the U.S. said to be directed by Beijing and China's moves to assert its territorial claims in the South China Sea. Xi has quickly become China's most powerful leader in decades, cracking down on corruption and activists alike.

Xi is the fourth consecutive Chinese leader to visit Washington state — Deng Xiaoping came in 1979, Jiang Zemin in 1993 and Hu Jintao in 2006.

He plans visits to Boeing's Paine Field in Everett, Microsoft's campus in Redmond and a high school in Tacoma, sister city to the Chinese port of Fuzhou. In 1994, as a leader in Fuzhou, Xi signed the sister-city agreement between the ports, as The News Tribune newspaper in Tacoma noted.

A big driver of Washington's top ranking in terms of China exports is Boeing, which last year sold a record 155 airplanes to Chinese customers.

This year about one-quarter of the planes Boeing has built have gone to China, and over the next 20 years, China is expected to be Boeing's biggest commercial airplane market, with a projected need for 6,330 new airplanes, worth an estimated $950 billion, the company said.

Washington's ties to China go beyond business, state leaders were quick to note.

With backing from Microsoft, the University of Washington and Beijing's Tsinghua University are opening a new technology graduate school in Bellevue called the Global Innovation Exchange. It's the first Chinese research institution to establish a U.S. location, with students and faculty from both universities working to tackle complex global problems.

Former Washington Gov. Gary Locke, who recently served as U.S. ambassador to China, said the visit goes beyond raising the profile of Washington state and the Seattle area among the Chinese people and businesses "looking for expansion or looking to buy American products or services."

Locke said it will give U.S. companies a chance to press some of their concerns.

"For many foreign companies in China, there are concerns about a level playing field; about a strong, transparent legal system that will enforce intellectual property rights; about just being allowed to operate in China," said Locke, who as ambassador caused a sensation for his humility in carrying his own backpack on his way to the country.

Among the items on Xi's agenda is a round-table discussion Wednesday moderated by former U.S. Treasury Secretary Henry Paulson, whose Chicago-based Paulson Institute promotes sustainable economic growth in the U.S. and China.

On the U.S. side, chief executives Tim Cook of Apple, Jeff Bezos of Amazon, Satya Nadella of Microsoft and investor Warren Buffett were among those attending. Those reportedly attending from China include Jack Ma of the e-commerce giant Alibaba and Robin Li of the web-services firm Baidu.

The meeting will provide an important opportunity to discuss the U.S.-China business relationship, China's economy, and the future of Chinese reforms, Paulson said.

"This U.S.-China relationship is the most important bilateral relationship in the world, and it's under real tension and stress right now," he said. "There are differences that have got to be dealt with, but we can't let those preclude us from working in the areas where we have a common interest."

SEE ALSO: China's president has been going to funerals lately — it's a sign of trouble

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