Matt Turpin's China Articles - April 2, 2023
Friends,
This week, the Associated Press released an investigative report on Chinese Communist Party ‘friendship’ with elected leaders in Utah… an issue that people have been warning Utah politicians about for years.
This targeted, sub-national interference, which uses proxies and business relationships to influence legislation that favors Beijing, should not be surprising. We see a similar interference campaign unfolding in Canada at the national level through the targeting of local community leaders, Europe has struggled with this same problem, and Australia went through its own ordeal five years ago.
But lest we feel too depressed, I recommend everyone read or watch Ursula von der Leyen’s speech on EU-China relations on Thursday.
The President of the European Commission and long-time subordinate of Chancellor Angela Merkel signaled an important shift away from ‘Wandel durch Handel’ (Change through Trade) towards a policy of ‘de-risking’ Europe’s relationship with the PRC and viewing the relationship as increasingly one of ‘systemic rivalry.’
Her speech lays out a clear case for why and how Europe should pursue an ‘economic de-risking strategy’ and an ‘economic security strategy’ towards China in coordination with Europe’s allies to maintain a liberal, rules-based international order (while not closing the door completely to cooperation with the PRC where interests align or that change might someday take place in China).
Clearly, von der Leyen’s speechwriters understand the worldview of the Chinese Communist Party elites and as we can see from Beijing’s reaction to the speech (see #5), it really disturbs the Party that their ‘inside game’ is undermining their ‘outside game.’
Here are a couple of quotes:
“China is becoming more repressive at home and more aggressive abroad.”
“China has now turned the page on the era of ‘reform and opening' and is moving into a new era of security and control. We saw this earlier this month when President Xi repeated his pledge to make the Chinese military a ‘great wall of steel that effectively safeguards national sovereignty, security, and development interests'.”
“All companies in China, for example, are already obliged by law to assist state intelligence-gathering operations and to keep it secret.”
“We can also expect even stricter economic control measures as part of a strengthening of the Chinese Communist Party's steering of the economy through its institutions and leaders. And we can expect to see a clear path and push to make China less dependent on the world and the world more dependent on China.”
“[T]he imperative for security and control now trumps the logic of free markets and open trade. In his report to the recent Party Congress, President Xi told the Chinese people to prepare for struggle. It is no coincidence that he used in his opening speech the words ‘douzheng' and ‘fendou' repeatedly – which both can be translated as struggle. This is indicative of a world view shaped by a sense of mission for the Chinese nation.”
“[T]he Chinese Communist Party's clear goal is a systemic change of the international order with China at its centre.”
President von der Leyen makes a direct reference to the video contained in the Tweet below (see #11)… the entente between Beijing and Moscow is clearly driving the shift in thinking across Europe.
NOTE: To be honest, I like the term ‘de-risk’ more than ‘decouple’, and I think the United States should adopt the term… but it is kind of a distinction without a difference.
I don’t mean to offend my European colleagues, but what von der Leyen unveiled on Thursday looks awfully close to speeches and strategy documents I helped write during the last U.S. Administration… we should probably keep that as a secret just between us.
Thanks for reading!
Matt
MUST READ
1. Xi Jinping Says He Is Preparing China for War: The World Should Take Him Seriously
John Pomfret and Matt Pottinger, Foreign Affairs, March 29, 2023
Chinese leader Xi Jinping says he is preparing for war. At the annual meeting of China’s parliament and its top political advisory body in March, Xi wove the theme of war readiness through four separate speeches, in one instance telling his generals to “dare to fight.” His government also announced a 7.2 percent increase in China’s defense budget, which has doubled over the last decade, as well as plans to make the country less dependent on foreign grain imports. And in recent months, Beijing has unveiled new military readiness laws, new air-raid shelters in cities across the strait from Taiwan, and new “National Defense Mobilization” offices countrywide.
It is too early to say for certain what these developments mean. Conflict is not certain or imminent. But something has changed in Beijing that policymakers and business leaders worldwide cannot afford to ignore. If Xi says he is readying for war, it would be foolish not to take him at his word.
2. An Anxious Asia Arms for a War It Hopes to Prevent
Damien Cave, New York Times. March 25, 2023
Asia and the Pacific are steering into an anxious, well-armed moment with echoes of old conflicts and immediate risks. Rattled by China’s military buildup and territorial threats — along with Russia’s war of aggression in Ukraine and doubts about U.S. resolve — nations across the region are bolstering defense budgets, joint training, weapons manufacturing and combat-ready infrastructure.
3. Amid strained US ties, China finds unlikely friend in Utah
Alan Suderman and Sam Metz, Associated Press, March 27, 2023
China’s global campaign to win friends and influence policy has blossomed in a surprising place: Utah, a deeply religious and conservative state with few obvious ties to the world’s most powerful communist country.
An investigation by The Associated Press has found that China and its U.S.-based advocates spent years building relationships with the state’s officials and lawmakers. Those efforts have paid dividends at home and abroad, the AP found: Lawmakers delayed legislation Beijing didn’t like, nixed resolutions that conveyed displeasure with its actions and expressed support in ways that enhanced the Chinese government’s image.
Its work in Utah is emblematic of a broader effort by Beijing to secure allies at the local level as its relations with the U.S. and its western allies have turned acrimonious. U.S. officials say local leaders are at risk of being manipulated by China and have deemed the influence campaign a threat to national security.
Beijing’s success in Utah shows “how pervasive and persistent China has been in trying to influence America,” said Frank Montoya Jr., a retired FBI counterintelligence agent who lives in Utah.
“Utah is an important foothold,” he said. “If the Chinese can succeed in Salt Lake City, they can also make it in New York and elsewhere.”
4. Key takeaways from AP’s report on China’s influence in Utah
Alan Suderman and Sam Metz, Associated Press, March 27, 2023
China’s global influence campaign has been surprisingly robust and successful in Utah, an investigation by The Associated Press has found.
The world’s most powerful communist country and its U.S.-based advocates have spent years building relationships with Utah officials.
Legislators in the deeply conservative and religious state have responded by delaying legislation Beijing didn’t like, nixing resolutions that conveyed displeasure with China’s actions and expressing support in ways that enhanced the Chinese government’s image.
The AP’s investigation relied on dozens of interviews with key players and the review of hundreds of pages of records, text messages and emails obtained through public records’ requests.
5. China lashes out at von der Leyen over fiery remarks
Nicolas Camut, Politico, March 31, 2023
Ursula von der Leyen isn’t making friends in China.
The Commission president did not pull any punches in a speech Thursday about China — sparking blowback from Chinese diplomats.
Fu Cong, China’s ambassador to the European Union, said Friday he was “a little bit disappointed.”
“That speech contained a lot of misrepresentation and misinterpretation of Chinese policies and the Chinese positions,” Fu told state-owned broadcaster CGTN.
“Whoever wrote that speech for President von der Leyen does not really understand China or deliberately distorted Chinese positions,” he added.
In in a scathing address delivered Thursday, the head of the European Commission called on Europe to be “bolder” on China, arguing that Beijing has become “more repressive at home and more assertive abroad.”
For the first time, von der Leyen gave hints that the EU could put an end to long-standing efforts to land a major trade agreement with China.
COMMENT – Clearly, whoever wrote that speech for von der Leyen, understands the Chinese Communist Party all too well… that is what makes Beijing so uncomfortable. The scales are dropping from European eyes and that is a diplomatic and strategic disaster for Xi Jinping.
For those of you who have not read the von der Leyen speech, I recommend you do: video and transcript.
So great to see von der Leyen give this speech next to my friend, Mikko Huotari, the executive director of MERICS… a think tank sanctioned by the PRC back in early 2021 for telling the truth about the PRC.
6. German Christian Democrats rewrite Merkel’s China playbook
Gabriel Rinaldi, Politico, March 26, 2023
The conservatives are adjusting their views on Beijing, saying the balance has shifted ‘toward systemic rivalry.’
Germany's Christian Democrats, the country's largest opposition group, are planning to shift away from the pragmatic stance toward China that characterized Angela Merkel's 16 years as chancellor, claiming that maintaining peace through trade has failed.
It's a remarkable course change for the conservative party that pursued a strategy of rapprochement and economic interdependence toward China and Russia during Merkel's decade and a half in power. The volte-face has been spurred by Moscow's invasion of Ukraine and Beijing's increasingly aggressive stance — both economically and politically — in the Asian region and beyond.
According to a draft position paper seen by POLITICO, the conservatives say the idea of keeping peace through economic cooperation “has failed with regard to Russia, but increasingly also China.” The 22-page paper, which is to be adopted by the center-right Christian Democratic Union/Christian Social Union (CDU/CSU) parliamentary group in the Bundestag around Easter, outlines key points for a new China policy.
COMMENT – Quote from the CDU/CSU policy paper: “We should not close our eyes to the fact that China has shifted the balance on its own initiative and clearly pushed the core of the relationship toward systemic rivalry.”
7. China as an International Lender of Last Resort
Sebastian Horn, Bradley Parks, Carmen Reinhart, and Christoph Trebesch, Kiel Institute for the World Economy, March 28, 2023
This paper shows that China has created a new global system for cross-border rescue lending to countries in distress. We build a comprehensive new dataset on China’s overseas bailouts between 2000 and 2021 and come to surprising new insights. Most importantly, we find that the People’s Bank of China’s (PBOC) global swap line network has been heavily used as a financial rescue mechanism, with more than USD 170 billion in emergency liquidity support to crisis countries.
In addition, we document that Chinese state-owned banks and enterprises have extended an additional USD 70 billion in rescue loans for balance of payments support. In total, China’s overseas bailouts correspond to more than 20% of total IMF lending over the past decade and bailout amounts are growing fast.
However, China’s rescue loans differ from those of established international lenders of last resort in that they (i) are opaque, (ii) have relatively high interest rates, and (iii) are almost exclusively targeted to debtors of China's Belt and Road Initiative. Our results have implications for the international financial and monetary system, which is becoming more multipolar, less institutionalized, and less transparent.
8. China’s fake science industry: how ‘paper mills’ threaten progress
Eleanor Olcott, Clive Cookson, and Alan Smith, Financial Times, March 28, 2023
As part of his job as fraud detector at biomedical publisher Spandidos, John Chesebro trawls through research papers, scrutinising near identical images of cells. For him, the tricks used by “paper mills” — the outfits paid to fabricate scientific studies — have become wearily familiar.
They range from clear duplication — the same images of cell cultures on microscope slides copied across numerous, unrelated studies — to more subtle tinkering. Sometimes an image is rotated “to try to trick you to think it’s different”, Chesebro says. “At times you can detect where parts of an image were digitally manipulated to add or remove cells or other features to make the data look like the results you are expecting in the hypothesis.” He estimates he rejects 5 to 10 per cent of papers because of fraudulent data or ethical issues.
Spandidos, based in Athens and London, accepts a large volume of papers from China, with around 90 per cent of its output coming from Chinese authors. In the mid-2010s, independent scientists accused Spandidos of publishing papers with results that recycled the same sets of data. As part of its response to the allegations, the publisher is using a team of in-house fraud detectors to weed out and retract fake research.
Over the past two decades, Chinese researchers have become some of the world’s most prolific publishers of scientific papers. The Institute for Scientific Information, a US-based research analysis organisation, calculated that China produced 3.7mn papers in 2021 — 23 per cent of global output — and just behind the 4.4mn total from the US.
At the same time, China has been climbing the ranks of the number of times a paper is cited by other authors, a metric used to judge output quality. Last year, China surpassed the US for the first time in the number of most cited papers, according to Japan’s National Institute of Science and Technology Policy, although that figure was flattered by multiple references to Chinese research that first sequenced the Covid-19 virus genome.
The soaring output has sparked concern in western capitals. Chinese advances in high-profile fields such as quantum technology, genomics and space science, as well as Beijing’s surprise hypersonic missile test two years ago, have amplified the view that China is marching towards its goal of achieving global hegemony in science and technology.
That concern is a part of a wider breakdown of trust in some quarters between western institutions and Chinese ones, with some universities introducing background checks on Chinese academics amid fears of intellectual property theft.
But experts say that China’s impressive output masks systemic inefficiencies and an underbelly of low-quality and fraudulent research. Academics complain about the crushing pressure to publish to gain prized positions at research universities.
“To survive in Chinese academia, we have many KPIs [key performance indicators] to hit. So when we publish, we focus on quantity over quality,” says a physics lecturer from a prominent Beijing university. “When prospective employers look at our CVs, it is much easier for them to judge the quantity of our output over the quality of the research,” he adds.
The world’s scientific publishers are becoming increasingly alarmed by the scale of fraud. An investigation last year by their joint Committee on Publication Ethics (Cope) concluded: “The submission of suspected fake research papers . . . is growing and threatens to overwhelm the editorial processes of a significant number of journals.”
The problem is that no publisher — even the most vigilant — has the capacity to weed out all the frauds. Retractions are rare and can take years. In the meantime scientists may be building on a fake paper’s findings. In the biomedical sphere this is all the more worrying when the aim of a lot of research is the development of treatments for serious diseases.
…
Estimates of the extent of fake scientific output vary enormously, from 2 per cent to 20 per cent or more of published papers. Extrapolating from his own research, Sabel puts paper mills’ global revenues at a minimum of €1bn a year and probably much more. There is general agreement that China is one of the world’s worst offenders, Sabel says, though Cope points out the paper mills are “by no means confined to China”.
Online brokers selling written-to-order papers proliferate on Chinese ecommerce sites such as Taobao. One broker advertising recently on Taobao charged clients $800 for a submission to a middle-tier domestic medical publication.
“Scientific misconduct is an organised practice and has been run as a business almost always half openly,” says a Chinese medical researcher based in the US. She explains that fraudulent papers from low-tier universities, which use cheaper paper mills, are easier to spot. They tend to recycle the same fraudulent data sets multiple times, while academics at more prestigious universities may purchase “leftover” experimental data from other researchers.
AUTHORITARIANISM
9. Foreign Startups Fearful of Returning to Post-Covid Zero China
Jennifer Creery, Bloomberg, March 28, 2023
China wants the world to know its economy is open for business again, but foreign startups and smaller companies have a growing list of reasons the giant consumer market is losing its allure.
A sense of caution reigns as firms face an unpredictable business environment. Beijing’s absolutist pandemic policy effectively blocked newcomers from entering the market, while those already there were mired in a cycle of lockdowns and reopenings that hurt profit and highlighted the complexity of doing business in a country where the government exerts ultimate control.
10. Ukraine is changing the math for countries caught between the U.S. and China
Phelim Kine and Stuart Lau, Politico, March 28, 2023
Russia’s invasion of Ukraine is finally forcing the EU to get real about reliance on authoritarian states.
China and the U.S. are in a race to build up their world power blocs, and both are using the same pressure point: the war in Ukraine.
Last week, China’s leader Xi Jinping spent three days in Russia, solidifying his “no limits” partnership with Russian President Vladimir Putin. On Tuesday, U.S. President Joe Biden kicks off his second Summit for Democracy — aiming to rally world leaders around principles of freedom, rule of law and human rights.
The not-so-subtle subtext: the world needs to unite against China and Russia.
In Biden’s alliance of democracies, Europe has been at best ambivalent on China. Some of the most important countries, such as France and Germany, have worried that decoupling from China would cause too much economic pain.
Since Russia’s full-scale invasion of Ukraine, the Europeans are starting to pay more attention to Biden’s message about the dangers of dependence on dictatorships. With urgency like never before, they are restricting exports of chip-making equipment to China, banning TikTok on government devices and pushing protectionist trade policy. Even long-time holdout Germany, the European Union’s biggest economy and a heavy investor in China, is starting to question its business-first ethos.
Valerie Hopkins, Twitter, March 21, 2023
12. An influential Chinese blogger disappeared from the internet. This woman says she knows why
Nectar Gan, CNN, March 29, 2023
For 12 years, Program Think, an anonymous Chinese blogger, mounted an open challenge to China’s tightening authoritarian grip and expanding surveillance state.
The freewheeling blog offered a mixture of technical cybersecurity advice and scathing political commentary – including tips on how to safely circumvent China’s Great Firewall of internet censorship, develop critical thinking and resist the increasingly totalitarian rule of the Chinese Communist Party.
The blogger took pride in their ability to cover their digital tracks and avoid getting caught – even as a growing number of government critics were ensnared in Chinese leader Xi Jinping’s strident crackdown on dissent.
Then, in May 2021, Program Think suddenly went silent.
The blog stopped updating and its Twitter and GitHub accounts turned dormant. Its author had promised followers to never stay inactive for more than 14 days. Many feared the blogger had been struck by an accident or illness, or tracked down and detained by authorities.
Speculation abounded, yet no one was able to offer concrete evidence.
Program Think had so closely guarded their identity that no supporters knew who the blogger was – except that they had been a programmer inside mainland China with a decade-long career in information security.
Now, almost two years later, the wife of a blogger recently sentenced to seven years in a Chinese prison for “inciting subversion of state power” believes she has the answer to the question: What happened to Program Think?
13. VIDEO – Putin under Pressure: Is China the Winner in the Ukraine War?
Deutsche Welle, March 23, 2023
As Russian missiles and drones blasted civilian buildings in Ukraine, Chinese President Xi Jingping concluded what he called a „journey of friendship and peace“ to Moscow. His warm reception there comes as no surprise: Vladimir Putin is badly in need of friends after the International Criminal Court issued a warrant for his arrest.
He’s clearly hoping Xi’s grand display of solidarity…will translate into economic and military support to help Russia cope with sanctions-induced shortages. China has bigger aims: nothing less than rebalancing global geopolitics. So we’re asking: “Putin under Pressure: Is China the Winner in the Ukraine War?"
14. China Detains Japanese Employee from Drugmaker Astellas
Wenxin Fan, Wall Street Journal, March 27, 2023
15. Chinese Authorities Raid Office of U.S. Investigations Firm Mintz Group
Wall Street Journal, March 24, 2023
16. Chinese Government Raids and Shuts Down a Well-Known American Business. This is a REALLY BIG Deal.
Dan Harris, Harris Bricken, March 24, 2023
COMMENT – Worth reading this piece in full.
17. Deloitte told to ‘learn lesson’ as China vows tougher scrutiny of auditors
Cheng Leng, Edward White, and Joe Leahy, Financial Times, March 27, 2023
After the PRC imposed a record fine against Deloitte, along with a three month suspension, the Vice Minister of Finance warned the global chair of the auditing firm that the PRC Government would enforce strict oversight of them.
This development comes as the Big Four auditing firms are being phased out of audits of PRC state-owned enterprises.
COMMENT – I suspect that time is running out for the Big Four (Deloitte, PwC, KPMG and EY) in the PRC. That should serve as yet another flashing red siren for foreign investors and multinational corporations.
18. A portal to China is closing, at least temporarily, and researchers are nervous
Bochen Han, South China Morning Post, March 25, 2023
CNKI, a portal for Chinese academic papers, will restrict foreign access to some databases starting April 1, for security concerns. It is unclear when access might be resumed, leading some scholars to fear the suspension might become permanent.
China’s top internet portal for academic papers will suspend foreign access to some databases starting next week, sparking concerns among scholars that they will lose not only an important resource for understanding China but also a useful guardrail to reduce misunderstanding between China and the West.
This week, research institutions around the world – including the University of California, San Diego, Kyoto University and the Berlin State Library – notified affiliates that they would indefinitely lose access to up to four databases provided by the China National Knowledge Infrastructure (CNKI) platform starting on April 1.
In a notice sent to affected institutions on March 17, CNKI’s operator – Tongfang Knowledge Network Technology – noted that the suspension was made in accordance with “the Measures of Data Cross-Border Transfer Assessment and relevant laws effective September 1, 2022”.
19. Jack Ma returns to China as government tries to allay private sector fears
Julie Zhu, Kane Wu, and Kevin Huang, Reuters, March 27, 2023
Alibaba founder Jack Ma has returned to China, ending a stay overseas of more than a year that industry viewed as reflecting the sober mood of its private businesses, and which sources said eventually spurred the new premier to reach out.
The return of China's best-known entrepreneur may help to quell the concerns of its private sector after a bruising two-year regulatory crackdown.
20. Zelenskyy to Xi Jinping: Come to Ukraine
Nicolas Camut, Politico, March 29, 2023
Ukrainian President Volodymyr Zelenskyy on Wednesday invited his Chinese counterpart Xi Jinping to Ukraine, for what would be the first direct communication between the two leaders since the beginning of Russia’s all-out war on Ukraine.
“We are ready to see [Xi] here,” Zelenskyy said in an interview with the Associated Press, a U.S. newswire, on a train to Kyiv, adding, “I want to speak with him.”
“I had contact with him before full-scale war. But during all this year, more than one year, I didn’t have [contact],” Zelenskyy said.
In spite of being a key ally to Russia, Xi has sought to position Beijing as a peace broker between Moscow and Kyiv in recent months — spurring criticism from EU and NATO officials, who raised doubts over China’s capacity to act as a neutral intermediary.
Yet, Zelenskyy has recently signaled his openness to Chinese-led peace talks, using Beijing’s 12-point peace plan as a basis.
“I think some of the Chinese proposals respect international law, and I think we can work on it with China,” the Ukrainian president said earlier this month.
COMMENT – For a country that claims to be neutral on the conflict and that has offered a peace plan, the refusal to speak with the victim of aggression would suggest that Beijing has clearly “picked a side.”
21. China’s Economic Coercion Needs Congressional Response, Ambassador Says
Peter Landers, Wall Street Journal, March 27, 2023
U.S. Ambassador Rahm Emanuel called for congressional legislation to protect countries whose economies are targeted by China over political disputes and a global coalition to soften the blow for those countries.
“This is not stopping until it’s confronted,” said Mr. Emanuel, the U.S. ambassador to Japan, in an interview Monday. “The economic coercion is part of China’s overall strategy, and if you don’t have a play for that playbook, you’re leaving yourself vulnerable.”
China has frequently resorted to punitive measures against trading partners in recent years amid disputes over issues such as Taiwan or Covid-19. It effectively blocked most exports from Lithuania to China in December 2021 after Lithuania took moves to support Taiwan, the self-governing island that Beijing considers to be part of China.
22. China’s Cities Are Buried in Debt, but They Keep Shoveling It On
Li Yuan, New York Times, March 28, 2023
China has long pursued growth by public spending, even after the payoff has faded. Cities stuck with the bill are still spending — and cutting essential services.
ENVIRONMENTAL HARMS
23. Why US-China Rivalry Can Actually Help Fight Climate Change
Noah J. Gordon, Internationale Politik Quarterly, March 24, 2023
Political analysts have often framed international climate change mitigation as a collective action problem. Nobel Prize winner and economist William Nordhaus argued in a seminal 2015 paper on “climate clubs” that the fundamental reason that countries had not joined an international agreement requiring significant emissions reductions was “free-riding.” This refers to a country’s interest in receiving the benefits of a public good without paying to create it. For example, since the United States benefits from a world with fewer carbon dioxide emissions and thus fewer dangerous heatwaves or droughts but it makes no difference to the atmosphere whether it is the US or China that cuts emissions, the US might decide to avoid taking expensive steps to replace fossil fuels with renewables. Other widely-cited analyses of the politics of climate change mitigation, like Swiss political scientist Thomas Bernauer’s 2013 paper, also frame climate change as first and foremost a collective action problem.
While this remains a useful lens for understanding climate mitigation, new political science research shows that free-riding is not as decisive an obstacle as many claim. US-based political scientists Michaël Aklin and Matto Mildenberger contend that the collective action theory is “empirically unsubstantiated in many important climate politics cases” and that “governments implement climate policies regardless of what other countries do, and they do so whether a climate treaty dealing with free-riding has been in place or not.” In other words, we have seen climate policymakers as “prisoners of the wrong dilemma”: policy preferences are shaped at least as much by domestic interest groups as by the actions of other major emitters. Political scientists Jeff Colgan, Jessica Green, and Thomas Hale make a similar case, showing that climate politics can be understood as a contest between owners of “climate-forcing” assets like oil rigs and owners of “climate-vulnerable” assets such as coastal property. No nation is a monolith that wholly opposes or supports climate action.
The key point is that the state of cooperation between the US and China does less to determine climate policy than do the desires of key political constituencies within each country, such as the Guangdong industrialists who want to export electric cars, or the Texas executives who see that they can get rich by building wind turbines. Texas generates more renewable electricity than California, and it’s not because local policymakers consider the Paris Agreement sacrosanct.
FOREIGN INTERFERENCE AND COERCION
24. China's diplomatic faux pas pushes Manila back into U.S. arms
Toru Takahashi, Nikkei Asia, March 26, 2023
Beijing has only itself to blame if it loses out to Washington strategically.
25. China threatens Taiwan over president’s trip to US
Kathrin Hille, Financial Times, March 19, 2023
China has threatened to retaliate if Taiwan’s president Tsai Ing-wen meets US House Speaker Kevin McCarthy during an upcoming trip to the US.
26. The campaign to save TikTok has been years in the making
Hailey Fuchs, Clothilde Goujard, and Daniel Lippman, Politico, March 30, 2023
TikTok began working to win over the U.S. and European governments long before the latest concerns about its Chinese ownership.
TikTok’s battle for survival has become a vivid study in how a wealthy, foreign-owned corporation can use its financial might to build an impressive-looking network of influence — and also in the limitations of what lobbying can do to protect a company at the center of a geopolitical firestorm.
…
The campaign to save TikTok has been years in the making. A POLITICO investigation revealed an effort by TikTok and its parent company, ByteDance, dating back to at least 2018, long before concerns about TikTok’s Chinese ownership reached their current pitch. Interviews with more than two dozen people, including lobbyists and lawmakers, in the United States and Europe illuminated the architecture of a lobbying apparatus that has moved TikTok and its parent company closer to institutions of government, including European lawmakers, leaders of both American political parties and even the White House.
In 2019, one recruiter representing TikTok described the company’s goal in superheroic terms: The recruiter said it wanted to build a “Team of Avengers,” according to one Washington lobbyist approached for a job, who like a number of others was granted anonymity to discuss sensitive conversations with a powerful company.
TikTok has tried to overcome some firms’ reservations with a willingness to pay handsomely. The company recently approached a second Washington lobbyist who works for Big Tech clients and, according to the lobbyist, asked flatly: “How much will it take?” The lobbyist declined the overture.
But that approach has worked on others in Washington, London and Brussels, where the company is facing serious though seemingly less existential regulatory threats than in America.
27. Biden’s Options on TikTok Narrow After Beijing Pushes Back
New York Times, March 23, 2023
The Biden administration recently told TikTok that it wanted the app’s Chinese owners to sell the app or face a possible ban in the United States. But that plan hit a roadblock on Thursday, when Beijing said it would oppose a sale. The announcement scrambled the debate over the future of the app, leaving the White House with few if any clear options.
28. TikTok admits it banned former NBA player critical of China
Washington Post, March 23, 2023
Enes Kanter Freedom, the former NBA player known for his outspoken political activism against China, was banned from TikTok for 12 days before being reinstated Thursday, when lawmakers were grilling the Chinese-owned company’s chief, the company confirmed Friday.
Freedom’s account was banned on March 11 following several warnings that his past videos had broken the app’s “community guidelines,” he told The Washington Post.
Freedom appealed the ban shortly after but was told that TikTok reviewers had determined his account would not be restored. On Thursday, TikTok reinstated the account while CEO Shou Zi Chew was on Capitol Hill to argue that Americans’ TikTok feeds are unaffected by China’s censorship rules.
29. New allegations and a resignation strain already fraught China-Canada relations
Amy Hawkins and Leyland Cecco, The Guardian, March 26, 2023
30. Belgian intelligence puts Huawei on its watchlist
Samuel Stolton and Laurens Cerulus, Politico, March 28, 2023
Belgium's intelligence service is scrutinizing the operations of technology giant Huawei as fears of Chinese espionage grow around the EU and NATO headquarters in Brussels, according to confidential documents seen by POLITICO and three people familiar with the matter.
In recent months, Belgium's State Security Service (VSSE) has requested interviews with former employees of the company’s lobbying operation in the heart of Brussels’ European district. The intelligence gathering is part of security officials' activities to scrutinize how China may be using non-state actors — including senior lobbyists in Huawei’s Brussels office — to advance the interests of the Chinese state and its Communist party in Europe, said the people, who requested anonymity due to the sensitivity of the matter.
The scrutiny of Huawei's EU activities comes as Western security agencies are sounding the alarm over companies with links to China. British, Dutch, Belgian, Czech and Nordic officials — as well as EU functionaries — have all been told to stay off TikTok on work phones over concerns similar to those surrounding Huawei, namely that Chinese security legislation forces Chinese tech firms to hand over data.
The scrutiny also comes amid growing evidence of foreign states' influence on EU decision-making — a phenomenon starkly exposed by the recent Qatargate scandal, where the Gulf state sought to influence Brussels through bribes and gifts via intermediary organizations. The Belgian security services are tasked with overseeing operations led by foreign actors around the EU institutions.
COMMENT – I wonder which European parliamentarians will be implicated in taking bribes and gifts from Huawei? For years, Huawei has sponsored events like the annual political party conferences in Germany and other countries.
31. China thinks it’s diplomatically isolating Taiwan. It isn’t
Eric Cheung, CNN, March 24, 2023
HUMAN RIGHTS AND RELIGIOUS PERSECUTION
Amy Mackinnon, Foreign Policy, March 20, 2023
33. Exiled leader tells US Congress Tibet faces 'slow death' under China
Michael Martina and David Brunnstrom, Reuters, March 28, 2023
Tibet is dying a "slow death" under Chinese rule, the head of the India-based organization known as Tibet's government in-exile said on Tuesday in a first address to the U.S. Congress.
Some Tibetan activists lament what they see as a fading focus on alleged abuses in Tibet amid growing concerns in Washington and other Western capitals about China's expanding military, pressure on democratic Taiwan, and crackdowns in Hong Kong and on minority groups in China's Xinjiang region.
34. Sichuan Tibetan Writer Sentenced to 4 Years for Defending Tibetan Language
Lopsang Gurung, Bitter Winter, March 29, 2023
Zangkar Jamyang was declared a “separatist” for having posted an article on the Internet.
35. Cultural Genocide: The Indoctrination of Uyghur Children
Gulfiye Y, Bitter Winter, March 28, 2023
36. Why Doesn’t the World Care More About the Uyghurs?
Foreign Policy, March 26, 2023
INDUSTRIAL POLICIES AND ECONOMIC ESPIONAGE
37. Chip equipment exports to China tumble as U.S. pushes decoupling
Nikkei Asia, March 29, 2023
Exports of semiconductor-manufacturing equipment from the U.S. and Japan to China fell for the first time in three years in 2022 as Washington stepped up its trade restrictions on advanced chip technology.
In the October-December quarter, Japanese exports of such equipment to China slid 16% on the year by value, while the U.S. saw a 50% plunge and the Netherlands logged a 44% drop, according to trade and other data. This was even as exports to the rest of the world from Japan and the U.S. grew 26% and 10%.
38. Syngenta Caught Out by Eleventh Hour Delay to Mammoth China IPO
Hallie Gu, Alfred Cang, and Pei Li, Bloomberg, March 29, 2023
Shanghai exchange cancels planned hearing, sparking confusion. Company plays role in China’s effort to bolster food security.
Bumps on the road are not unusual for corporate China, even for the largest initial public offerings. Still, having spent roughly four years on on-again off-again preparations for a listing, executives and advisers at agrochemical giant Syngenta Group were left shocked by a last-minute hitch.
Syngenta had been due to have a hearing Wednesday with the Shanghai Stock Exchange, one of the last steps before launch. Instead, with a day to go, the exchange called off the meeting, saying only that “the situation warrants a cancellation.”
COMMENT – Echoes of the Ant Financial debacle and other arbitrary interventions into the market by the Chinese Communist Party… this cannot be reassuring to foreign investors.
39. China’s Rise Relied on Ties to the West, Which Xi Is Now Loosening
New York Times, March 23, 2023
The Chinese leader has edged ever closer to Russia, while distancing China from countries that have helped it develop over the past four decades.
40. Tim Cook praises Apple’s ‘symbiotic’ relationship with China
Joe Leahy, Financial Times, March 25, 2023
COMMENT – Of course, Tim failed to mention the five-year effort to pursue a ‘China+1’ manufacturing policy to make Apple less symbiotic with the PRC.
41. China Premier Li Qiang hones in on advanced manufacturing, calls for action at ‘important juncture’
South China Morning Post, March 23, 2023
Li Qiang used his first trip as premier this week to prioritise the development of China’s advanced manufacturing sector to guard against risks amid efforts by the United States to curb Beijing’s technology ambitions.
42. Meet the Xi Jinping Loyalist Now Overseeing China’s Economy
Keith Bradsher, New York Times, March 27, 2023
He Lifeng’s long career in government has spanned the extremes of China’s approach, from the early embrace of small business in the 1980s to today’s tighter state control.
43. Precision Targets: Accelerating the U.S.-India Defense Industrial Partnership
Gopal Nadadur and Dhruva Jaishankar, ORF America, March 27, 2023
This report details the opportunities for U.S.-India collaboration across their defense industrial enterprises, building on years of closer cooperation.
44. US adds Hikvision subsidiaries from Xinjiang to its trade blacklist
Orange Wang, South China Morning Post, March 29, 2023
45. Loophole Allows U.S. Tech Exports to Banned Chinese Firms
Wall Street Journal, March 24, 2023
The U.S. moved this month to cut off a Chinese conglomerate’s access to Western technology, but the firm can still secure those goods through a technicality that some former senior officials say is a major loophole in the U.S. export-control regime.
46. 'No line to be drawn' in tech war with China, says former Commerce Department BIS official
DigiTimes Asia, March 24, 2023
Talking to DIGITIMES, Nazak Nikakhtar, who served as the Assistant Secretary for Industry and Analysis between 2018 to 2021 while also fulfilling the duties of the Under Secretary for the BIS, saw the possibility of wider sanctions against China in the future to close current loopholes. Currently, Nikakhtar serves as a senior fellow at Krach Institute for Tech Diplomacy.
"There are specific gaps in the rules and those will inevitably be fixed after reports are made public about China's continued acquisition of sensitive semiconductor technology," said Nikakhtar. "A number of companies have received exemptions from compliance with the new export control rules so that will need to be addressed as well."
47. South Korea to Surpass China in Chip Machine Spending Next Year
Bloomberg, March 27, 2023
US pressure weighs on China’s ability to buy key equipment Semiconductor supply chains are realigning along security ties.
48. Huawei Touts Progress Replacing Chip Design Software Led by US
Bloomberg, March 27, 2023
49. China frees top chip investor to bolster semiconductor efforts
Financial Times, March 23, 2023
Head of Hua Capital released from detention as Beijing seeks expert help to navigate tough western sanctions.
50. Taiwan braces for drought in key chip hubs again
Nikkei Asia, March 23, 2023
Taiwan, home to Asia's biggest semiconductor industry, is once again bracing for water shortages less than two years after overcoming its worst drought in a century. Chipmaking is a thirsty business. Take Taiwan Semiconductor Manufacturing Co., the world's biggest contract chipmaker, for example. Its chip facilities in the Southern Taiwan Science Park alone consume 99,000 tonnes of water per day, according to the company's latest figures. And as chip production techniques become more advanced, their water needs grow.
51. The Lure of the ‘Made in America’ Sales Pitch
Peter Goodman, New York Times, March 25, 2023
Geopolitics forced an entrepreneur, Taylor Shupe, to bring jobs back from China. It’s helping sell his meme-inspired socks too.
CYBER AND INFORMATION TECHNOLOGY
52. U.S. and China wage war beneath the waves – over internet cables
Reuters, March 24, 2023
Subsea cables, which carry the world's data, are now central to the U.S.-China tech war. Washington, fearful of Beijing's spies, has thwarted Chinese projects abroad and choked Big Tech's cable routes to Hong Kong, Reuters has learned.
53. Ernie Bot, China’s answer to ChatGPT, is delayed — again
Lyric Li and Meaghan Tobin, Washington Post, March 28, 2023
Ernie Bot, China’s answer to ChatGPT, doesn’t want to talk about Chinese politics or protests against covid-19 controls. Ask a question even approaching something the Communist Party considers sensitive — such as famous actors or world-class tennis players who’ve run afoul of the system — and it will simply terminate the conversation. A button will appear: “Start a new conversation.”
Baidu, the maker of China’s biggest search engine, has had to overcome multiple problems while building its artificial intelligence chatbot Ernie Bot — including the same technological challenges that faced American firms such as OpenAI, Microsoft and Google when they were making ChatGPT, Bing and Bard respectively.
54. Europe’s Cloud Security Regime Should Focus on Technology, Not Nationality
Nigel Cory, ITIF, March 27, 2023
The EU’s new cloud cybersecurity regime should focus on good security practices, as the U.S. FedRAMP regime does. Emulating China’s protectionist focus on firm nationality is a bad security practice that weakens transatlantic influence over cybersecurity issues globally.
55. China is developing a quantum communications satellite network
SpaceNews, March 10, 2023
Chinese research institutes are working to construct a quantum communications network using satellites in low and medium-to-high Earth orbits. Pan Jianwei, a scientist with the Chinese Academy of Sciences (CAS) and a member of the member of the 14th National Committee of the Chinese People’s Political Consultative Conference (CPPCC), made the comments in an interview with media March 4 on the sidelines of China’s annual political sessions in Beijing.
56. Baidu cancels launch event for cloud services integrated with Ernie Bot
Che Pan, South China Morning Post, March 27, 2023
57. France bans all recreational apps – including TikTok – from government devices
Simon Sharwood, The Register, March 27, 2023
58. Popular apps with Chinese ties can gather more data than TikTok
Joseph Menn, Washington Post, March 26, 2023
As Congress weighs an unprecedented ban of the wildly popular Chinese-owned TikTok over supposed security concerns, millions of Americans are downloading Chinese-designed apps to their phones that pose greater privacy risks with no outcry from lawmakers or regulators.
Known as mobile virtual private networks, or VPNs, the apps create a virtual tunnel through the internet that disguises a user’s virtual and physical location, in theory rendering them anonymous to the websites they visit, the communications providers that take them there, and advertisers and government snoops trying to suck up information along the way.
But experts have warned for years that everything the VPNs hide, they can see themselves. That means users who are working not to reveal who and where they are as well as what they are doing online are surrendering that very information to the VPNs. Some VPNs have the capability to see even more, including encrypted email content and banking information, because they have been placed in a highly trusted position on user devices.
59. Is TikTok Its Own Worst Enemy?
James Palmer, Foreign Policy, March 29, 2023
As the United States moves closer to a ban on the app, its executives and the Chinese government aren’t doing it any favors.
TikTok CEO Shou Zi Chew faced a grueling congressional hearing in Washington last week, with lawmakers determined to pummel the popular video-sharing app owned by Chinese parent company ByteDance. Chew did not come out of the event looking good; his inability to acknowledge Uyghur oppression in China was a particularly embarrassing moment. Chew’s performance solidified existing hostility in Congress and sped up movement toward a U.S. ban of the app.
Other TikTok executives have performed similarly in response to questions over the app’s parent company. The app’s vice president of public policy for Europe recently claimed that ByteDance wasn’t a Chinese company because it was incorporated in the Cayman Islands and has foreign investors. That would come as a surprise to executives at ByteDance’s Beijing headquarters, who have repeatedly made statements about their commitment to the Chinese Communist Party (CCP). ByteDance reportedly circumscribes Chew’s own power.
MILITARY AND SECURITY THREATS
60. European ammunition maker says plant expansion hit by energy-guzzling TikTok site
Richard Milne, Financial Times, March 26, 2023
Norwegian group Nammo blames ‘storage of cat videos’ for threatening its growth as data centre corners spare electricity.
One of Europe’s largest manufacturers of ammunition is facing a roadblock to the planned expansion of its largest factory because a new data centre for TikTok is using up all the spare electricity in the area.
Nammo, which is co-owned by the Norwegian government and a Finnish state-controlled defence company, has been told there is no surplus energy for its Raufoss plant in central Norway as a data centre that counts the social media platform as its main customer is using up the electricity in the region.
“We are concerned because we see our future growth is challenged by the storage of cat videos,” Morten Brandtzæg, Nammo chief executive, told the Financial Times.
Demand for ammunition has surged thanks to the war in Ukraine, which is using about 6,000 rounds per day — equivalent to the annual orders from a small European country — and would like to fire 65,000 if it could, according to Nammo.
61. Pentagon Prepares for Space Warfare as Potential Threats from China, Russia Grow
Doug Cameron, Wall Street Journal, March 28, 2023
White House’s spending request includes plans for simulators, equipment to train Space Force members for battle.
The Pentagon is gearing up for a future conflict in space as China and Russia deploy missiles and lasers that can take out satellites and disrupt military and civilian communications.
The U.S. military long ago dropped the notion of crewed, orbiting space weapons in favor of satellites because the logistics of supporting people outside of Earth’s atmosphere were formidable.
62. Taiwan President’s U.S. Trip Touches a Flashpoint in U.S.-China Ties
Charles Hutzler and Joyu Wang, Wall Street Journal, March 28, 2023
The U.S. and China have described Taiwan as the most volatile flashpoint in their increasingly fraught bilateral relations.
Now, after months of sparring by Washington and Beijing over the Ukraine war, a suspected surveillance balloon, TikTok and other issues, Taiwan is set to return to the center of great power tensions, with the island’s leader traveling to the U.S.
Taiwanese President Tsai Ing-wen is stopping in New York and Los Angeles on her way to and from Central America, with plans to meet House Speaker Kevin McCarthy next week in California. Some in the Biden administration are concerned that the visit will give Beijing the pretext to conduct military exercises near the island, as it did last summer, or erode Taiwan’s security in other ways, according to officials.
63. China Threatens Retaliation if Kevin McCarthy Meets Taiwan’s Tsai Ing-wen
Wenxin Fan and Joyu Wang, Wall Street Journal, March 29, 2023
China said it would retaliate if House Speaker Kevin McCarthy meets with Taiwanese President Tsai Ing-wen during her planned stop in California next week, further stoking tensions around a highly scrutinized visit that is poised to test strained ties between Beijing and Washington.
Ms. Tsai is set to meet with Mr. McCarthy and other Republican members of Congress at the Ronald Reagan Library in Simi Valley on her way back from visits to Guatemala and Belize. It is the second of two planned stops in the U.S. bookending her trip to Central America.
64. Pentagon Woos Silicon Valley to Join Ranks of Arms Makers
Wall Street Journal, March 26, 2023
65. China-linked Russian body armor is landing on the battlefield in Ukraine
Erin Banco and Steven Overly, Politico, March 28, 2023
A Russian body armor manufacturer is importing Chinese components for its vests — some of which are being used on the battlefield in Ukraine, according to trade data, photographs and Ukrainians who say they’ve recovered the vests from the front lines.
In 2022, multiple Chinese companies, including one linked to the government in Beijing, sent parts for body armor manufacturing to Klass, a Russian manufacturer of body armor with ties to the country’s national guard and law enforcement, according to customs and trade data obtained by POLITICO from Import Genius, a customs data aggregator.
66. China launches second classified Gaofen-13 remote sensing satellite
Andrew Jones, SpaceNews, March 17, 2023
ONE BELT, ONE ROAD STRATEGY
67. China grants billions in bailouts as Belt and Road Initiative falters
James Kynge, Financial Times, March 28, 2023
China has significantly expanded its bailout lending as its Belt and Road Initiative blows up following a series of debt write-offs, scandal-ridden projects and allegations of corruption.
A study published on Tuesday shows China granted $104bn worth of rescue loans to developing countries between 2019 and the end of 2021. The figure for these years is almost as large as the country’s bailout lending over the previous two decades.
The study by researchers at AidData, World Bank, Harvard Kennedy School and Kiel Institute for the World Economy is the first known attempt to capture total Chinese rescue lending on a global basis.
Between 2000 and the end of 2021, China undertook 128 bailout operations in 22 debtor countries worth a total of $240bn.
COMMENT – The PRC has spent close to a quarter of a trillion dollars propping up Xi’s Belt and Road vanity initiative. I suspect Chinese citizens are unlikely to learn of this spending, particularly as health insurance benefits are being cut.
68. How China may keep subverting sovereign debt workouts
Alan Beattie, Financial Times, March 27, 2023
Beijing’s reluctance to restructure complicates Sri Lanka’s IMF rescue, plus the EU’s plan to save the Amazon through trade.
69. China spent $240 billion bailing out 'Belt and Road' countries – study
Rachel Savage, Reuters, March 28, 2023
China spent $240 billion bailing out 22 developing countries between 2008 and 2021, with the amount soaring in recent years as more have struggled to repay loans spent building "Belt and Road" infrastructure, a study published on Tuesday showed.
70. Gunmen kill 9 Chinese at mine in Central African Republic
Jean-Fernand Koena and Krista Larson, Associated Press, March 19, 2023
Gunmen stormed a Chinese-operated gold mining site that had recently been launched in Central African Republic, killing nine Chinese nationals and wounding two others Sunday, authorities said.
However, the rebel coalition initially blamed by some for the attack put out a statement later in the day. Without providing evidence, it accused Russian mercenaries from the Wagner Group of being behind the violence.
The attack early Sunday came just days after gunmen kidnapped three Chinese nationals in the country’s west near the border with Cameroon, prompting President Faustin Archange Touadera to plan a trip to China in a bid to reassure investors.
71. Brazil, China strike trade deal agreement to ditch US dollar
Bradford Betz, Fox News, March 29, 2023
Brazil and China have reportedly struck a deal to ditch the U.S. dollar in favor of their own currencies in trade transactions.
The deal, announced Wednesday, will enable China and Brazil to carry out trade and financial transactions directly, exchanging yuan for reais – or vice versa – rather than first converting their currencies to the U.S. dollar.
72. China’s Uneven Military, Political, and Commercial Advance in Panama
R. Evan Ellis, The Diplomat, March 25, 2023
Since establishing ties in 2017, China has invested significant effort in Panama and made important, if uneven, progress in building influence.
From March 12-18, I traveled to Panama to interview government officials, businesspeople, and others about the country’s evolving relationship with China. My trip came shortly after a Chinese donation of military gear including 6,000 bulletproof vests and helmets to Panama’s security forces, as well as congressional testimony by the head of U.S. Southern Command, General Laura Richardson, in which she warned of the strategic risks from China’s presence in Panama.
Thanks to COVID-19 and added scrutiny of Chinese projects by the government of Laurentino “Nito” Cortizo, the rate of China’s advance in Panama is less alarming than it was under the administration of Juan Carlos Varela, who switched Panama’s diplomatic relations to Beijing in 2017. Under Varela, Panama had signed up to a series of eventually abandoned high-profile initiatives with Chinese companies, including $4 billion high-speed train between Panama City and David, a $1 billion port investment by a shady China-based consortium in the port in Colon, and a $1 billion natural gas power plant originally designed to support the project.
China’s setbacks in Panama under the Cortizo administration should not invite complacency. It is investing significant effort in Panama and making important, if uneven progress in building influence, as well as commercial position.
73. Chinese-owned apps are the big winners after Nigeria’s cash crisis
Alexander Onulwue, Semafor, March 27, 2023
The main winners in Nigeria’s banking sector after a botched currency overhaul are two Chinese-owned fintech apps.
Vendors and customers turned to upstarts OPay and PalmPay in recent weeks to send and receive money after a central bank edict to swap old banknotes for new ones, which was later overturned, created a shortage of cash in Africa’s biggest economy. Traditional banks could not handle the surge in online transactions. As of March 24, the two apps were ranked first and second in a list of Nigeria’s most downloaded finance apps on Google’s Play Store compiled by analytics company SimilarWeb — above the apps of traditional banks.
OPay, owned by Chinese billionaire Yahui Zhou through his web browser company Opera, has become the main alternative to banks for money transfer and bill payments during the cash crunch, say industry observers. It comes three years after the company shut various services on its app, including motorcycle taxis and food delivery, that were part of an initial push to be a super app. Zhou made the call to focus OPay as a digital bank.
But that early super app push and a highly coveted payments license from Nigeria’s central bank have positioned OPay as one of Nigeria’s leading financial services companies.
Opera increased its stake in OPay this year to 9.5% from 6.4%. It ultimately plans to sell its stake in the fintech startup. “OPay continued its strong growth trajectory through 2022, giving us comfort in the ultimate marketability of our increased ownership stake,” Opera wrote in a US Securities and Exchange Commission filing in February.
74. Honduras Establishes Diplomatic Ties with Beijing, Abandoning Taiwan
Joyu Wang and Selina Cheng, Wall Street Journal, March 26, 2023
Asked on Thursday about reports that Beijing had offered Honduras large sums of aid in exchange for diplomatic recognition, Chinese Foreign Ministry spokesman Wang Wenbin dismissed the suggestion as “preposterous and groundless,” saying instead that Honduran President Xiomara Castro had made the decision “in response to the trend of the world and in light of the realities of Honduras.”
A spokesman for the American Institute in Taiwan, the de facto U.S. Embassy in Taipei, said, “While Honduras’s action is a sovereign decision, it is important to note the PRC often makes promises in exchange for diplomatic recognition that ultimately remain unfulfilled,” referring to the formal name of the government in Beijing, the People’s Republic of China. He added, “We strongly encourage all countries to expand engagement with Taiwan.”
OPINION PIECES
75. Xi and Putin Have the Most Consequential Undeclared Alliance in the World
Graham Allison, Foreign Policy, March 23, 2023
It’s become more important than Washington’s official alliances today.
Chinese President Xi Jinping’s decision to visit Moscow this week in his first trip abroad since his reelection comes as no surprise to those who have been watching carefully. When one steps back and analyzes the relationship between China and Russia, the brute facts cannot be denied: Along every dimension—personal, economic, military, and diplomatic—the undeclared alliance that Xi has built with Russian President Vladimir Putin has become much more consequential than most of the United States’ official alliances today.
Many observers still find this alliance hard to believe. As former U.S. Defense Secretary James Mattis put it in 2018, Moscow and Beijing have a “natural nonconvergence of interests.” Geography, history, culture, and economics—all the factors that students of international relations focus on—give both nations many reasons to be adversaries.
On today’s map, large swaths of what was in earlier centuries Chinese territory are now within Russia’s borders. This includes Moscow’s key naval base in the Pacific, Vladivostok—which on Chinese military maps is still labeled by its Chinese name, Haishenwai. The 2,500-mile border between the two nations has repeatedly seen violent clashes, most recently in 1969. On the Russian side, the land east of the Ural Mountains is full of natural resources but has a population of just 32 million people, while on the Chinese side, hundreds of millions of people live with few natural resources.
76. China, Japan, and the Ukraine war
Gideon Rachman, Financial Times, March 27, 2023
The merging of geopolitical rivalries in Asia and Europe has disturbing echoes of the 1930s.
77. The Cold War with China Is Changing Everything
David Brooks, New York Times, March 23, 2023
So I guess we’re in a new cold war. Leaders of both parties have become China hawks. There are rumblings of war over Taiwan. Xi Jinping vows to dominate the century.
I can’t help wondering: What will this cold war look like? Will this one transform American society the way the last one did?
The first thing I notice about this cold war is that the arms race and the economics race are fused. A chief focus of the conflict so far has been microchips, the little gizmos that not only make your car and phone work, but also guide missiles and are necessary to train artificial intelligence systems. Whoever dominates chip manufacturing dominates the market as well as the battlefield.
Second, the geopolitics are different. As Chris Miller notes in his book “Chip War,” the microchip sector is dominated by a few highly successful businesses. More than 90 percent of the most advanced chips are made by one company in Taiwan. One Dutch company makes all the lithography machines that are required to build cutting-edge chips. Two Santa Clara, Calif., companies monopolize the design of graphic processing units, critical for running A.I. applications in data centers.
78. The cloud over China’s entrepreneurs raises capital flight risk
Henry Sender, Financial Times, March 26, 2023
If investors had hoped Beijing crackdown was over, the disappearance of a dealmaker has fuelled worries over the contrary.
Until recently Bao Fan was hardly a well-known name outside China, despite encapsulating the wealth that the country’s tech industry generated over the past 30 years. That was until news broke in mid-February that he had disappeared.
His company China Renaissance put out a notice saying it had been unable to contact Bao. Investors close to him have been reported as saying his problems were likely to be linked to the investigation of another executive at the firm.
For years, Bao had used his connections among the tech elite to bring the best consumer internet companies public, brokering alliances and divorces among them as they jockeyed for market share. China Renaissance listed in 2018, and Bao and his clients prospered; the deal maker was driven around Beijing in a purple Rolls-Royce.
His disappearance struck an unsettling note for investors and entrepreneurs in China. Following a high profile crackdown on some big tech companies and the imposition of pandemic lockdowns, there have been rising market hopes of a shift towards a more positive approach on growth and business after the National People’s Congress in October and the long-awaited withdrawal of the zero-Covid policies.
Those hopes helped fuel explosive market gains in Chinese stocks, with the MSCI China jumping almost 60 per cent from the end of October to highs in mid-January. It has since retreated about 15 per cent, mostly as a result of cooling of expectations on the rebound of the Chinese economy.
But one factor that has far from helped are the uncertainties over China’s attitude to entrepreneurs and business. If investors had hoped the tech crackdown was over, the Bao disappearance fuelled worries to the contrary. Indeed, these days it seems that positive signals on business are often countered by negative ones.
In January, Chinese authorities gave ride-hailing group Didi permission to sign up new customers after a long halt and its forced delisting from the New York Stock Exchange. But in the same month, Beijing moved to take a “golden share” in the local units of Tencent and Alibaba that formalise its greater control over the companies by giving the government special rights over certain business decisions.
Questions that were posed decades ago are being raised once more: How much wealth is too much wealth? At what point does an entrepreneur cross the invisible line into becoming an exploitative and monopolistic capitalist? Such uncertainty might be one reason venture capital funding for companies dropped sharply in the fourth quarter of last year to $7bn from $27bn in the same period in 2021, according to CBInsights.
In October, a Europe-based lawyer who works with wealthy Chinese families told the FT that the business elite was worried about rumours of a wealth tax and even their personal safety. A December note from Goldman Sachs’ consumer and wealth management arm pointed out some of the entrepreneurs that have stepped back from at least part of their roles at companies in recent years. In ecommerce, they include Jack Ma of Alibaba, Colin Huang of Pinduoduo and Richard Liu of JD.com. Other notable names listed were Zhang Yiming of TikTok parent company ByteDance and in the property sector, Pan Shiyi and Zhang Xin of Soho China and Wu Yanjun of Longfor Group.
Their motivations might have been varied but concerns over the business climate and indirect or direct pressure to maintain a low profile are undoubtedly a factor. In a speech last July, former Australian prime minister and China expert Kevin Rudd said a number of China’s most successful entrepreneurs were voting with their feet.
One Hong Kong-based mainland tycoon told me that in 2018, he worried that President Xi Jinping’s decision to cancel the two-term limit on the office meant the end of more than 40 years of consensual leadership and more anti-market rhetoric in Beijing. And so he began selling out of the Shanghai property holdings he had amassed over the previous 25 years.
The concern now among some investors is whether other individuals follow suit in moving money out of the country after the lifting of lockdown travel restrictions. Already there has been a boom in family offices setting up in Singapore. Ma was living in Tokyo last year for a period and the FT has reported that Bao was considering establishing a family office in Singapore in preparation to move some of his wealth there.
“If they reopen the borders, then capital flight becomes a risk,” adds one economist in Hong Kong at a multinational bank. “In the past, we saw money move first. Now people are trying to move. First the billionaires. Now the millionaires.”
79. What the U.S. Can Do to Prepare for a War with China
Seth Cropsey, Wall Street Journal, March 28, 2023
The military’s problem isn’t technological. It’s a strategy designed only for low-intensity conflict.
The U.S. is unprepared for an impending great-power conflict. That’s widely understood, but most commentary on American military preparedness misses three critical points: the time horizon for a conflict with China, the logistical challenges of building and sustaining American military power, and the industrial difficulties of replenishing and expanding current stockpiles. A war with Beijing wouldn’t be decided primarily with high-end weapons systems but with the traditional elements of military power.
A new cold war has begun. At its heart is a fundamental disagreement between the U.S. and China over the structure of Asian security considerations. The original Cold War’s antagonism stemmed from Soviet insistence that Washington remove itself from Europe and Eurasia more broadly. China’s strategic effort to deny U.S. forces access to international waters where a naval conflict could occur, its increasing numbers of military bases around the world, and its growing ability to interrupt logistic communications with America’s Indo-Pacific allies demonstrate that Beijing has the same ambition today. Just as Soviet Russia sought to destroy the North Atlantic Treaty Organization and thereby eliminate U.S. political engagement in Western Europe, communist China now seeks to capture Taiwan and to fragment the U.S. alliance system in Asia.
China has something against which to measure its policy that the Soviets never had: history. Beijing has studied Moscow’s Cold War mistakes, notably the tendency among Soviet strategists to wait patiently until their military power exceeded that of the U.S. This never occurred, primarily because the West engaged in a massive military expansion in the 1980s that nullified Soviet gains over the preceding two decades.
The Chinese aren’t going to wait patiently. They are prepared to capitalize on an apparent shift in their favor. China enjoys a growing advantage in geographic position, fleet size and missile numbers. In Xi Jinping, it also has a leader willing to use force to achieve political objectives. China stands a better chance now than it ever has of defeating the U.S. and its allies in a major war. The U.S. should expect an attack on Taiwan within this decade, perhaps as soon as 2025.
80. Russia’s War Has Wrecked Beijing’s Hopes of Keeping NATO Away
Blake Herzinger, Foreign Policy, March 29, 2023
Ukraine has sparked renewed interest in East Asia tensions.
NATO Secretary-General Jens Stoltenberg recently concluded a visit to South Korea and Japan. Given there’s a war raging to the alliance’s east, it’s clear how seriously NATO’s leadership views its relationships with these two partners. Considering Japanese Prime Minister Fumio Kishida’s remarks at the 2022 Shangri-La Dialogue—that “Ukraine today may be East Asia tomorrow”—it seems likely that NATO’s partners are equally concerned about the future—and that there’s a burning interest in what’s happening in Europe. Kishida’s own visit to Ukraine confirmed this concern.
While Beijing has long resisted what it deems interference in its neighborhood by outside powers, Russia’s invasion of Ukraine may have finally forced NATO to pay attention to Asia in a way that no amount of complaining from Beijing will reverse.
While its geographic focus does not overlap with Asia, NATO’s relationships with Japan and South Korea are substantial, dating back to the Cold War in the case of Japan. Tokyo initiated informal dialogues between the two in 1979 and continued into the 1980s as Japan attempted to engage NATO regarding its security concerns about ongoing arms control negotiations. That relationship was formalized in the 1990s, making Tokyo NATO’s oldest partner outside Europe. Ties expanded rapidly from 2001, when Japan sent military forces into the Indian Ocean to support U.S. and European ships engaged in combat operations against the Taliban regime in Afghanistan. South Korea’s dialogue with NATO began in 2005, but a number of NATO members are also “sending states,” which contribute forces to the United Nations Command committed to defending South Korea in the event of an attack from Pyongyang. Both states supported Afghan reconstruction efforts as well as serve as contributing participants to NATO’s Cooperative Cyber Defense Center of Excellence.
….
While NATO’s mutual defense treaty obligations do not extend to the Indo-Pacific, its members’ interests are deeply intertwined with the region’s future. Like Japan and South Korea, other regional states including Australia and New Zealand are increasingly attracted to deepening engagement and exchanges with NATO as an avenue for internationalizing deterrence of would-be aggressors, including the issue of Chinese revisionism on its borders and upon the oceans. While Beijing has long opposed the internationalization of its many disputes with its neighbors, Russia’s war has dashed any chance of keeping others out of its quarrels.
81. How to avoid a developing world debt crisis
Financial Times, March 29, 2023
82. TikTok Snatched Defeat from the Jaws of Victory
Tim Culpan, Bloomberg, March 21, 2023
TikTok had four years to save itself. That’s how long it’s been since talk of banning the Chinese social media app was floated in the US under the administration of Donald Trump, who even tried to force its sale, first to Microsoft Corp. and then to Oracle Corp. It subsequently enjoyed a stay of execution largely because of a change in US president.
Yet Joe Biden rolled back very few China policies initiated by his predecessor, with the TikTok ban or divestiture put on the back burner to focus on more immediate concerns like semiconductor curbs. In the meantime, a rollcall of US states along with other nations such as Australia, the UK, and New Zealand have moved to eliminate the short-video app from government devices or, in India’s case, blocked it all together.
83. AUDIO – Greg Levesque and Varun Vira on publicly available information
NatSec Tech Podcast, March 29, 2023
Greg Levesque of Strider Technologies and Varun Vira of C4ADS join host Jeanne Meserve for a conversation on the private and nonprofit sector use of publicly available information.
84. The dollar is our superpower, and Russia and China are threatening it
Fareed Zakaria, Washington Post, March 24, 2023
The most interesting outcome of the three-day summit between Vladimir Putin and Xi Jinping got limited media attention. Describing their talks, Putin said, “We are in favor of using the Chinese yuan for settlements between Russia and the countries of Asia, Africa and Latin America.” So the world’s second-largest economy and its largest energy exporter are actively trying to dent the dollar’s dominance as the anchor of the international financial system. Will they succeed?
85. Xi is using Putin for influence in Europe
Edward Lucas, Times of London, March 27, 2023
Russia’s relationship with China may be tactically smart but is strategically stupid for the Kremlin.
A full-blown alliance between China and Russia spells dread for the West. On the surface the signs are ominous. Military co-operation has been intensifying for years. Xi Jinping and Vladimir Putin meet each other more often than either of the dictators sees anyone else. Their 40th summit was in Moscow last week. Amid cloying rhetoric about their personal and strategic ties, they lambasted the American-led global order for its hypocrisy and hegemonic pretensions. But despite the common enemy, and Xi’s childhood fascination with the Soviet Union, any talk of an alliance is overblown.
One reason is Chinese contempt for an ill-run and backward Russia. In the Sino-Soviet era, China was the junior partner. Now it is the senior.
86. The risks of China’s regulatory shake-up
George Magnus, Financial Times, March 29, 2023