Matt Turpin's China Articles - April 16, 2023
Friends,
To start this week’s issue, here is a bit of breaking news…
Nine months after the assassination of former Japanese Prime Minister Abe Shinzo during a campaign speech, Prime Minister Kishida Fumio escaped from an assassination attempt while giving a campaign speech in southwestern Japan yesterday.
Footage shows a man throw a pipe bomb at Kishida before being wrestled to the ground and dropping what appears to be a second pipe bomb. Kishida was shielded by his security detail before the explosion, and it appears no one was hurt. Kishida resumed his speeches later in the day.
Japan will conduct parliamentary byelections and local elections later this month and is hosting the G7 Summit this year, bringing the G7 leaders together in mid-May in Kishida’s hometown of Hiroshima.
I’m relieved to hear about Prime Minister Kishida’s safety, his leadership has been critical as Japan wrestles with an increasingly dangerous international environment.
Picking sides – As we end our ‘vacation from history,’ companies and investors (as well as political leaders and citizens) face some difficult choices.
Over the past three decades since the end of the First Cold War, many owners, investors, and their corporate management teams optimized their business models on an assumption that capital, labor, technology, goods, and manufacturing could freely flow across borders. In practice, this resulted in the hyper-concentration of manufacturing in one country. Rana Foroohar, the global business columnist and associate editor of the Financial Times, makes this point in her latest book, Homecoming: The Path to Prosperity in a Post-Global World (for a review go here or a condensed version of her argument go here).
To build business models around that assumption of the free flow of capital, labor, technology, and goods, one had to make another, larger assumption: that geopolitical rivalry was a thing of the past… or at least that geopolitical rivalry could be narrowly confined and that it wouldn’t disturb their businesses.
Those two assumptions can no longer be justified with evidence.
As I’ve asserted on a few occasions: geopolitics drive business models, not the other way around. Business models adapt to the world as it is, those investors and managers that stick to models that are designed for a world that no longer exists, will be disrupted and displaced over time.
This is a harsh reality and it imposes costs that we don’t want to pay, but ‘kicking-the-can’ or ‘hiding-one’s-head-in-the-sand’ is not a good approach to dealing with these changes.
I could go into detail on the companies and investors who are making this most common mistake (side-eye at you, Volkswagen, Tesla, and BlackRock), but it might be more useful for us to start concentrating on those who see these trends and are adapting for the world as it is. Those adaptations by our private sector and public companies, strengthen our democratic forms of government and the open societies we live in.
As a shameless endorsement of my own company, Palantir leads on this issue… in our public documents we declared that “we have chosen sides,” our advanced software products are intended to aid democratic and open societies, not to sit on the fence and “indulge in the fantasy of a world without conflict.”
Our executive team speaks openly about how the international environment is changing, efforts by rivals to undermine our societies, the role that the company’s technology plays in geopolitical rivalry, and how the company will position itself to take advantage of these trends and ensure that democratic forms of government and their open societies have the tools and knowhow to prosper.
Thanks for reading!
Matt
MUST READ
1. China carries out 'simulated' precision attacks on Taiwan targets
Eric Cheung, Larry Register, CNN, April 10, 2023
China said Sunday it was simulating precision attacks on key targets in Taiwan as the military drills it launched in response to the island president’s meeting with the US House Speaker entered a second day.
The mock drills included “tactical maneuvers” by the Chinese navy, state media reported.
Multiple services had carried out “simulated joint precision strikes on key targets on Taiwan Island” and in the surrounding waters, CCTV reported.
2. Europe must resist pressure to become ‘America’s followers,’ says Macron
Jamil Anderlini and Clea Caulcutt, Politico, April 9, 2023
Europe must reduce its dependency on the United States and avoid getting dragged into a confrontation between China and the U.S. over Taiwan, French President Emmanuel Macron said in an interview on his plane back from a three-day state visit to China.
Speaking with POLITICO and two French journalists after spending around six hours with Chinese President Xi Jinping during his trip, Macron emphasized his pet theory of “strategic autonomy” for Europe, presumably led by France, to become a “third superpower.”
COMMENT – Both Putin and Xi could not have dreamed of a better result from a French leader’s visit to Beijing.
3. How a Volkskrant-reporter became the target of Chinese intimidation
Marije Vlaskamp, Volkskrant, April 8, 2023
Marije Vlaskamp, a reporter from De Volkskrant, a Dutch newspaper, faced intimidation from Chinese authorities and their supporters due to her investigative reporting on China's human rights abuses.
Journalists like Vlaskamp, reporting on sensitive issues related to China, face various challenges, including surveillance, harassment, and threats. China maintains ongoing efforts to silence critical voices and restrict press freedom, both domestically and internationally.
4. China’s struggles with lab safety carry danger of another pandemic
Joby Warrick and David Willman, Washington Post, April 12, 2023
China has poured billions of dollars into lab construction and genetic engineering in its bid to become a science superpower, but safety practices have failed to keep up, investigations and reports of accidents show.
COMMENT – In response to the SARS outbreak in 2002 and Beijing’s cover up, the international community worked hard to build trust with the PRC Government so that it would never happen again. Obviously, that failed in 2019 as the processes and procedures that were set up in the aftermath of SARS were discarded by the Chinese Communist Party which was far more interested in bolstering its own reputation then in protecting public health.
No matter where you stand on the natural origin vs lab leak debate, this piece of investigative journalism by the Washington Post should concern you deeply. Our interconnected world deepens upon transparency and the rule of law to function… two concepts that the Chinese Communist Party rejects whole-heartedly.
5. ‘The hand of China reaches here’: how Beijing pushes Uyghurs to spy on each other overseas
Ayla Jean Yackley, Financial Times, April 11, 2023
The Chinese Communist Party and its security forces wage an extraterritorial campaign to manipulate, intimidate, and coerce Uyghurs and other Turkic Muslims around the world. By threatening family members in Xinjiang, the Party enlists overseas Uyghurs to spy on their friends and neighbors.
Authoritarianism
6. China slaps security reviews on AI products as Alibaba unveils ChatGPT challenger
Nian Liu, Financial Times, April 11, 2023
7. Hong Kong's 'new normal' is anything but
Pak Yiu, Nikkei Asia, April 12, 2023
City retains its business buzz as political freedoms wither.
8. Jimmy Lai asks Hong Kong court to overturn government decision on UK lawyer
Brian Wong, South China Morning Post, April 12, 2023
9. China to the West: Don’t tell us what to do on Russia
Nicolas Camut, Politico, April 7, 2023
10. The US wants to elevate China to ‘developed country’ status; Beijing disagrees
Sébastian Seibt, France 24, April 5, 2023
The US House of Representatives has voted to strip China of its status as a developing country. China has condemned the move and refuses to join the ranks of developed or "wealthy" nations. At stake are critical economic and geopolitical issues for the world’s second-largest economy.
COMMENT – This is a critical issue and it goes to the heart of the breakdown in our globalized trading system. If the second largest economy in the world, the world’s largest factory, and a massive investor in global infrastructure building can’t be considered “developed,” then we can’t have a functioning system.
The Chinese Communist Party objects to any change in its “official” status because doing so would entail accepting responsibilities and costs that come from being a “developed country.”
11. A punch in the face for Xi caricature: Taiwan air force badge goes viral
Sarah Wu and Yew Lun Tian, Reuters, April 11, 2023
COMMENT – Trying to find a place to purchase these… will post when I do.
12. Hong Kong emigrants to UK blocked from accessing £2.2bn in pensions
Primrose Riordan, Financial Times, April 12, 2023
Environmental Harms
13. Coal returns to the China–Pakistan Economic Corridor
Zofeen Ebrahim, China Dialogue, April 13, 2023
News that the Pakistan government plans to secure financing and start construction on a long-stalled 300 megawatt coal-fired power plant in the port city of Gwadar has triggered a debate on the direction of the country’s energy sector.
Set to be built and funded by Chinese state-owned entities, recent developments have also raised fresh questions about China’s pledge – made at the UN General Assembly in 2021 – not to build any new coal power plants overseas.
14. China doubles down on coal ahead of potential summer blackouts
Andrew Hayley and Albee Zhang, Reuters, April 12, 2023
Foreign Interference and Coercion
15. Malaysia says it will protect its rights in South China Sea
A. Ananthalakshmi, Reuters, April 08, 2023
16. Rand Paul backed by GOP donor with $33B TikTok stake
Lydia Moynihan, New York Post, April 06, 2023
Sen. Rand Paul’s heated opposition to a TikTok ban startled Capitol Hill last week, but you could look at it as a straightforward case of following the money, according to insiders – in this case, the money of a major GOP donor who has $33 billion on the line.
The gentleman from Kentucky – who has made his career partly as a China hawk – surprised colleagues on the Senate floor last week when he blocked Missouri Republican Sen. Josh Hawley’s hopes for fast-tracked legislation to ban TikTok.
“Speech is protected whether you like it or not,” Rand said, jumping on Hawley’s proposal as soon as he stopped speaking. “Have faith that our desire for freedom is strong enough to survive a few dance videos.”
Sources claim credit for Paul’s impassioned speech should go to GOP mega donor Jeffrey Yass.
The billionaire CEO of Susquehanna Financial Group has given Paul more than $10 million since 2020, according to election filings.
17. Macron Takes Pitch for EU Power to The Hague Amid Backlash
Ania Nussbaum, Bloomberg, April 11, 2023
18. Brazil's Lula departs for China, seeking deeper economic ties
Hidetake Miyamoto, Nikkei Asia, April 12, 2023
19. US moves to expand Taiwan’s global presence, citing ‘attempts to exclude’ island
Robert Delaney, South China Morning Post, April 12, 2023
20. Le Maire Says EU Must Not Be Pushed Around in US-China Rivalry
William Horobin, Bloomberg, April 11, 2023
French Finance Minister Bruno Le Maire said Europe mustn’t be pushed around due to the rivalry between the US and China, standing by President Emmanuel Macron’s comment that the bloc’s countries shouldn’t become vassals in a global crisis.
“The president is perfectly correct to demand European independence and sovereignty,” Le Maire said on Europe 1 radio on Tuesday. “Just because we’re US allies doesn’t mean we should be against China.”
21. Brazil’s foreign policy is hyperactive, ambitious and naive
The Economist, April 10, 2023
22. Tea with Xi: Macron gets personal touch as China visit highlights EU differences
Sam Fleming, Financial Times, April 7, 2023
23. China's Role in the US Fentanyl Crisis
Bonnie S. Glaser and Vanda Felbab-Brown, GMF, March 28, 2023
Human Rights and Religious Persecution
24. China: Quash Convictions of Prominent Rights Lawyers
Human Rights Watch, April 10, 2023
25. Congress Warns That Chinese Shopping Apps Could Enable Uyghur Forced-Labor Imports
Jimmy Quinn, The National Review, April 11, 2023
26. Prominent Chinese legal activists jailed - BBC News
Nicholas Yong, BBC, April 13, 2023
27. “We know you better than you know yourself”: China’s transnational repression of the Uyghur diaspora
David Tobin and Nyrola Elimä, University of Sheffield, April 11, 2023
This report finds that the scale of transnational repression in the Uyghur diaspora is universal, and its impact severely restricts their rights to free speech and associations, and the capacity to maintain their culture. Transnational repression has expanded in Xi Jinping’s “new era,” but its tactics have gradually changed since 2017, with increased use of Uyghur informants to gather intelligence while backing off from harassing those who resist pressure. These tactics have evolved to avoid international attention by harassing isolated individuals, placing community figures under surveillance, quietly intimidating Uyghurs from speaking publicly and even enlisting them to create positive images of China.
The U.K.’s democratic political environment gives Uyghurs space to exercise their civil rights though many request support to assist with integration and information on their rights when facing transnational repression. However, in Turkey, there are growing dangers of deportations of Uyghurs with humanitarian visas, surveillance, and restrictions on civil rights. Transnational repression is less visible in Thailand because it is used as a transit stop for Uyghurs escaping persecution through human trafficking routes from southwest China.
The PRC claims that its approach to international relations is guided by principles of state sovereignty and non-interference but its governance practices consider all citizens, former citizens, and their family members, regardless of location, to be under its legal and moral jurisdiction. The PRC’s transnational repression globally exports its domestic model of governance and genocidal oppression to target all Uyghurs and their family members through enforced family separation, mobility restrictions, and surveillance. The party-state’s transnational repression, therefore, undermines both human rights and the organising principle of sovereignty in international relations.
28. China Sentences Human-Rights Activists to Prison for Subversion
By Keith Zhai and Sha Hua, Wall Street Journal, April 10, 2023
Industrial Policies and Economic Espionage
29. Special report: How U.S.-made chips are flowing into Russia
Nikkei Asia, April 12, 2023
30. China Auto-Parts Makers Join Apple in Offshore Factory Push
Bloomberg, April 10, 2023
31. China reluctantly keeps sanctions powder dry
Pete Sweeney, Reuters, April 13, 2023
32. France’s Macron ends China trip with pact to bolster business, military ties
Finbarr Bermingham, South China Morning Post, April 08, 2023
33. Volkswagen aims to fill China’s EV talent void with new academy in Hainan
Iris Ouyang, South China Morning Post, April 10, 2023
34. China leads rise in export restrictions on critical minerals, OECD says
Harry Dempsey, Financial Times, April 11, 2023
35. Renminbi’s share of trade finance doubles since start of Ukraine war
Hudson Lockett, Financial Times, April 12, 2023
36. US House committee chair 'concerned' by Tesla deals in China
Michael Martina and Patricia Zengerle, Reuters, April 10, 2023
37. Grasping Shadows: The Politics of China’s Deleveraging Campaign
Logan Wright, CSIS, April 10, 2023
China is currently facing a long-term, structural economic slowdown and rising risks of a financial crisis.
Trustee Chair senior associate (non-resident) and partner at the Rhodium Group Logan Wright argues that the deleveraging campaign that China’s leadership launched in 2016 to reduce systemic financial risks is the only logical starting point to explain how China’s structural economic slowdown began. By reducing the growth of the “shadow” or informal banking system, China’s financial authorities cut credit growth in half and made it far more difficult for Beijing to power the economy using its traditional tools of credit-fueled investment by state-owned enterprises and local governments. Over the course of the deleveraging campaign, property developers continued expanding their own borrowing, which inflated an unprecedented real estate bubble even larger before it finally burst in late 2021. The deleveraging campaign marked the end point of China’s unprecedented credit expansion after the global financial crisis.
This report aims to objectively and comprehensively analyze the economic and political consequences of China’s deleveraging campaign, which are closely related to China’s current economic slowdown. The deleveraging campaign is an important test case of the adaptability and flexibility of the Chinese state to respond to meaningful economic challenges, such as the growth of the shadow banking system. The rising risks within China’s economy and financial system also raise new policy questions for the United States in the context of rising systemic competition.
38. Five years into the trade war, China continues its slow decoupling from US exports
Chad P. Bown and Yilin Wang, PIIE, March 16, 2023
39. The US is greening itself toward more dependence on China
Teresa Mull, Spectator, April 7, 2023
40. Assessment of Chinese industrial espionage risks
Dragonfly, March 29, 2023
Cyber & Information Technology
41. China's SenseTime unveils new AI products and chatbot
Josh Ye, Reuters, April 10, 2023
42. China Mandates Security Reviews for AI Services Like ChatGPT
Bloomberg, April 11, 2023
43. Tim Cook to Open First Apple Stores in India in Pivot Beyond China
Sankalp Phartiyal and Saritha Rai, Bloomberg, April 11, 2023
44. Beijing chooses targets carefully as it goes on offensive in US chip wars
Eleanor Olcott, Financial Times, April 10, 2023
45. ByteDance Moves into Iconic Hong Kong Tower as Banks Depart
Zheping Huang and Shawna Kwan, Bloomberg, April 12, 2023
46. US, Japanese, and Dutch semiconductor equipment export values to China dropped; more substantial strategies demanded by expert
Maisha Lu, Digitimes Asia, April 7, 2023
47. NY quietly banned TikTok on government devices 3 years ago
Brendan J. Lyons, Times Union, April 11, 2023
48. Old tactics could slow China's advances in technology race
Philip Athey, National Journal, April 6, 2023
China has rapidly become one of the most advanced technological powers in the world. But the factors that have allowed China's tech sector to grow so rapidly, including the acquisition of foreign tech and top-down planning, have become a burden as the nation attempts to transition from imitator to innovator.
Fewer than 20 years ago, the Chinese domestic tech sector was largely a national and international afterthought. But in 2006, the Chinese Communist Party released its Medium-to Long-Term Program for the Development of Science and Technology, kick-starting its tech revolution.
As part of its race to tech dominance, China invested massively in advanced industries including semiconductor production, artificial-intelligence research, and printing technology. Beijing also expanded its policy on forced transfer of technology and intellectual property, essentially forcing foreign businesses to hand over their tech secrets to China.
The plan worked, and China’s tech industry rivals any nation’s. A study by the Australian Strategic Policy Institute found that China was leading the world in 37 of the 44 technologies the organization tracks.
Military and Security Threats
49. U.S. House to vote on bill to address potential Huawei, ZTE threats
David Shepardson, Reuters, April 11, 2023
50. EU Chips Act likely to get green light on April 18 -sources
Foo Yun Chee, Reuters, April 5, 2023
51. China ends Taiwan drills after practising blockades, precision strikes
Ben Blanchard and Yimou Lee, Reuters, April 10, 2023
52. Lindsey Graham warns of crisis unfolding over Taiwan
Gregory Svirnovskiy, Politico, April 9, 2023
53. China backtracks over no-fly zone near Taiwan
Kathrin Hille, Financial Times, April 12, 2023
54. The Coming Threat of a Genetically Engineered ‘Ethnic Bioweapon’
Jim Geraghty, National Review, April 10, 2023
55. US sharing of intelligence with India in China border clash seen as pivotal
Khushboo Razdan, South China Morning Post, April 11, 2023
56. China urged to boost self-reliance in weapons tech to beat Western sanctions
Amber Wang, South China Morning Post, April 11, 2023
57. China military 'ready to fight' after drills near Taiwan
Huizhong Wu, Associated Press, April 10, 2023
58. Japan’s Defense Plans Are Big, Popular, and Expensive
William Sposato, Foreign Policy, April 19, 2023
59. Taiwan Says China Curtailed Plan for No-Fly Zone After Complaint
Cindy Wang, Bloomberg, April 12, 2023
60. Rivalry between America and China has spread to the Indian Ocean
The Economist, April 10, 2023
61. Iran in secret talks with China, Russia to acquire sanctioned missile fuel
Matthew Karnitschnig, Politico, April 12, 2023
62. UK’s Truss says Macron ‘wrong’ on Taiwan, blasts China trip
Andrew McDonald, Politico, April 11, 2023
One Belt, One Road Strategy
63. China’s huge Asian investments fail to buy it soft power
The Economist, April 05, 2023
64. Debt Standoff Between China and U.S. Hurts Poor Countries, Zambia’s President Warns
Gabriele Steinhauser, Wall Street Journal, April 10, 2023
65. China in Talks for Compromise on Poor Country Debt
Alexander Saeedy, Lingling Wei, and Gabriele Steinhauser, Wall Street Journal, April 11, 2023
Opinion Pieces
66. How China’s Economic Slowdown Could Hurt the World
Sophie Lu, Foreign Affairs, April 10, 202
67. TikTok might be part of a plot to make us dumber
Kathleen Parker, Washington Post, April 14, 2023
68. Europe’s China confusion does the world a disservice
Brad Glosserman, Japan Times, April 11, 202
69. Macron Blunders on Taiwan—and Ukraine
Wall Street Journal, April 9, 2023
70. Europe is feeling its way towards a new relationship with China
Sylvie Kauffman, Financial Times, April 7, 2023
71. I Love the Country I Was Told to Hate, and I’m Not Alone
Se-Woong Koo, New York Times, April 10, 2023
72. China’s new world order is taking shape
Ishaan Tharoor, Washington Post, April 10, 2023
73. Like it or Not, the US Faces a Russia-China Axi
Chels Michta, CEPA, March 31, 2023
74. The bipartisan plot to save TikTok
Michael Sobolik, The Hill, April 8, 2023
75. Why Taiwan matters to the world
Gideon Rachman, Financial Times, April 10, 2023
76. CPTPP members now have to figure out what to do about China
Wendy Cutler, Nikkei Asia, April 11, 2023
77. ‘A free China’: Why the words of a jailed dissident should be read far and wide
Washington Post, April 12, 2023
78. Analysis: Macron's aim of EU unity on China undone by trip fallout
John Irish, Jan Lopatka, Reuters, April 11, 2023
79. Emmanuel Macron’s blunder over Taiwan
The Economist, April 12, 2023