Matt Turpin's China Articles - December 18, 2022
Friends,
Lots of material this week that I couldn’t include. I’ll push out one more issue before the end of the year and include some overall observations of 2022. In that spirit, I recommend reading #1, a short piece by Richard Haass, the out-going President of the Council on Foreign Relations.
My commentary this week is mixed in with articles below.
Thanks for reading!
Matt
MUST READ
1. Ten Lessons from the Return of History
Richard Haass, Project Syndicate, December 13, 2022
One thing we learned in 2022 is that war between countries, thought by more than a few academics to be obsolete, is anything but. And that is far from the only expectation or assumption about international relations that has not survived 2022.
COMMENT – Short but powerful piece by the President of the Council on Foreign Relations.
2. VIDEO – Chinese and Indian troops clash at disputed border
Deutsch Welle, December 13, 2022
The Indian army said on Monday that soldiers from India and China clashed last week along the two countries' disputed Himalayan border. It was the first reported standoff between troops from the two Asian giants since deadly clashes in 2020 strained their already tense relations. Troops from both sides have adhered to long-standing protocols to avoid the use of firearms along the frontier, known as the Line of Actual Control (LAC).
COMMENT – Not sure what motivates Beijing to pursue territorial aggression against its largest neighbor but given all the other problems facing the Chinese Communist Party this seems anti-strategic.
Of course, this is nothing new for the PRC. Since its war of territorial expansion in 1962 against India, the PRC has sought to annex the Indian state of Arunachal Pradesh.
3. Xi Jinping Doubles Down on His Putin Bet. ‘I Have a Similar Personality to Yours.’
Lingling Wei and Marcus walker, Wall Street Journal, December 14, 2022
The Chinese leader has long admired Vladimir Putin. Now, he is strengthening ties between the two nations with increased trade and energy partnerships.
China’s leader Xi Jinping has in recent months tried to put public distance between Beijing and Moscow as Russia has suffered defeats in its war on Ukraine.
In recent weeks, he has instructed his government to forge stronger economic ties with Russia, according to policy advisers to Beijing, building on a trade relationship that has strengthened this year and become a lifeline to Moscow in the face of Western pressure.
The plan includes increasing Chinese imports of Russian oil, gas and farm goods, more joint energy partnerships in the Arctic and increased Chinese investment in Russian infrastructure, such as railways and ports, the advisers say.
4. Number of jailed journalists spikes to new global record
Arlene Getz, Committee to Protect Journalists, December 14, 2022
#2: CHINA – China’s tight censorship of the media and the fear of speaking out in a country that conducts such extensive surveillance on its people makes it especially difficult to research the exact number of journalists among its prison population. Against that backdrop, the slight drop in the known number of journalists jailed in the country – from a revised total of 48 in 2021 to 43 in 2022 – should not be interpreted as any easing of the country’s intolerance for independent reporting.
Uighur journalists continue to comprise a significant portion of those serving harsh sentences on nebulous charges. Omerjan Hasan, for example, is serving 15 years for publishing an unofficial history of the Xinjiang region. Ilham Weli, Juret Haji, Mentimin Obul, and Mirkamil Ablimit have been held since 2018 on the accusation of being two-faced – a term Chinese authorities frequently use to describe those they see as openly supporting but secretly opposing government policy. Editor Memetjan Abliz Boriyar, also detained since 2018, is accused of approving the release of books that only later were banned by Chinese authorities. Another disturbing trend: A group of students who worked for Ilham Tohti, the jailed-for-life founder of Xinjiang news website Uighurbiz, are among those believed to have completed their sentences – and then moved to so-called “reeducation camps” instead of being released.
In Hong Kong, independent media outlets have been silenced following Beijing’s punitive targeting of those like pro-democracy media entrepreneur Jimmy Lai. The treatment of Lai, incarcerated since December 2020, is seen as emblematic of authorities’ growing disregard for due process and the “one country, two systems” arrangement guaranteeing Hong Kong’s judicial independence from China. Lai, who has U.K. citizenship, remains in a maximum-security prison even after completing a 20-month sentence on various charges. On December 10, while awaiting the start of another trial that could lead to a life sentence under a draconian national security law, he was sentenced to five years and nine months on fraud charges – even as his legal preparation for the security trial was hampered by Hong Kong authorities’ pushback against the November ruling by the city’s top court that he could be represented by a British lawyer.
COMMENT – CPJ ranks the PRC as the second worst global offender after Iran.
5. US adds 36 Chinese companies to trade blacklist
Demetri Sevastopulo, Kathrin Hille, and Qianer Liu, Financial Times, December 15, 2022
The US has placed three dozen Chinese companies on a trade blacklist, in another escalation of its effort to slow China’s development of advanced chips and technologies for military uses such as hypersonic weapons.
The commerce department put 36 Chinese groups on the “entity list”, a move that means American companies will require extremely hard-to-obtain licences to export critical technologies to those customers in China.
It also applied the “foreign direct product rule” to 21 entities, meaning non-American companies will be prohibited from exporting products that contain a specified amount of US technology to the Chinese groups.
The dramatic action comes after Washington in October unveiled severe export controls designed to prevent China from developing high-end chips or producing the tools required to manufacture the chips domestically, as part of a growing effort to slow its military modernisation.
“We are building on the actions we took in October to protect US national security by severely restricting . . . China’s ability to leverage artificial intelligence, advanced computing and other powerful, commercially available technologies for military modernisation and human rights abuses,” said Alan Estevez, the top commerce department official for export controls.
The best-known target on the list is Yangtze Memory Technologies, China’s largest memory chip producer, which has been accused of violating US export controls by supplying Chinese telecom equipment maker Huawei, the Financial Times reported. The commerce department said it targeted YMTC and a subsidiary in Japan because of “the risk of diversion”.
6. Japan lawmaker in Taiwan says China threat needs more military spending
Ben Blanchard, Reuters, December 11, 2022
Japan needs to increase its military spending in the face of the "grim reality" of the threat from China and North Korea, a senior member of Japan's ruling Liberal Democratic Party said on Sunday during a visit to Taiwan.
Although Chinese-claimed and democratically-governed Taiwan and Japan do not have formal diplomatic ties, they have close unofficial relations and both share concerns about China, especially its increased military activities near the two.
…
As Japan prepares next year's budget Prime Minister Fumio Kishida has already announced plans to lift defence spending to an amount equivalent to 2% of gross domestic product within five years, from 1% now.
COMMENT – Of note, Koichi Hagiuda is the policy chief for the Japanese LDP, the former METI Minister until August 2022, and a senior member of the Japanese Diet… this speech was given in Taipei.
7. The Global Economic Disruptions from a Taiwan Conflict
Charlie Vest, Agatha Kratz and Reva Goujon, Rhodium Group, December 14, 2022
Over the course of 2022, as the war in Ukraine shone a spotlight on geopolitical risks, Rhodium Group examined the potential global economic disruptions resulting from a hypothetical conflict between China and Taiwan. Our work builds on research dating back to 2004 that examined Taiwan’s global economic relationships.
Unsurprisingly, we find that the scale of economic activity at risk of disruption from a conflict in the Taiwan Strait is immense: well over two trillion dollars in a blockade scenario, even before factoring in international responses or second-order effects. The disruptions would be felt immediately and would be difficult to reverse. They would impact trade and investment on a global scale, leaving few countries untouched. Such disruptions could occur even if the conflict does not become kinetic.
COMMENT – After reading Rhodium’s great work, I see four main take-aways:
It is irresponsible for countries and companies to ignore the risk that sometime in the future the Chinese Communist Party will fulfill its threats and use its substantial military capabilities to attempt an annexation of Taiwan.
Countries and companies must make it clear to the Chinese Communist Party that using force to annex Taiwan is unacceptable and a violation of international law, as well as making it clear that the CCP’s aspirational claims of sovereignty over Taiwan are illegitimate.
Preventing the ‘unthinkable’ requires a combination of military and economic deterrence: clearly demonstrate to the CCP that the ‘costs’ of using force against Taiwan far exceed any ‘benefits’ they could gain. And as long as Beijing maintains a military posture poised to attack Taiwan and refuses to denounce the use of force against Taiwan, countries that are committed to the “maintenance of international peace and security” should pursue “collective self-defense” (as permitted under Articles 51, 52, and 53 of the United Nations Charter) to impose costs on Beijing and make them less capable of conducting a successful military operation.
The only sustainable, long-term way to maintain international peace and security in the Western Pacific is for the Chinese Communist Party to abandon its “Cold War mentality” and drop its desire to annex its neighbor.
AUTHORITARIANISM
8. Hong Kong takes biggest ever fall in global 'Power City' rankings
Rurika Imahashi, Nikkei Asia, December 14, 2022
Hong Kong has logged its biggest fall in a global ranking of cities' ability to attract people, business and capital, due largely to COVID-19 headwinds and deteriorating economic freedoms.
The Asian financial hub slipped to 23rd place in the latest Global Power City Index, down from 13th last year. The number of arrivals and departures at airports in Hong Kong has yet to recover to pre-pandemic levels, hurting the city's score on accessibility. By contrast, the number of air travelers going through other hubs, such as New York and Chicago, has increased sharply from the previous year.
9. VIDEO – U.S. manufacturing orders in China drop 40%, report says
CBS News, December 6, 2022
A report from CNBC says there's less demand in the U.S. for Chinese manufacturing. It comes as both the EU and the U.S. express concerns about reliance on China due in part to its ties to Russia. Keith Bradsher, Beijing bureau chief for the New York Times, joins "CBS News Mornings" to explain the shift and what that means for consumers and the economy.
10. Chinese Tweeter in Exile Ran One-Man News Hub on Protests
Shen Lu, Wall Street Journal, December 13, 2022
‘Teacher Li’ became a record-keeper out of the reach of censors as demonstrations swept his homeland.
Because protest images were quickly scrubbed from Chinese social-media platforms, many in China and around the world looked to Twitter for information. In the process, the artist, Li Ying, who is known as Teacher Li to his followers, became a vital one-man news hub.
Twitter is blocked in China, but people in the mainland are able to access it using virtual private networks, or VPNs. Mr. Li set up a Twitter account in 2020 and fully migrated there from Chinese microblogging platform Weibo in April. His account quickly gained prominence as he collected and reposted grievances about China’s hard-line Covid controls, from Foxconn workers to urban residents under lockdown.
11. China Protesters Face Possible Criminal Charges
Wenxin Fan, Wall Street Journal, December 14, 2022
The Chinese government and official media have barely mentioned the demonstrations and have said nothing about detentions of protesters. Rights activists have been scrambling to figure out how many people who participated in the protests are now in detention; they say such information has been hard to come by.
Over the weekend, friends of Yang Zijing, an LGBT activist in the southern Chinese metropolis of Guangzhou, circulated a digital poster online saying she was detained by police the previous Sunday.
12. 'Panic-buying' and shortages as restrictions are eased
Kerry Allen, BBC, December 14, 2022
13. Asian countries top list for worst jailers of journalists: report
Pak Yiu and Thompson Chau, Nikkei Asia, December 14, 2022
Asian nations were the worst jailers of journalists this year as the number of imprisoned reporters globally hit a new record, according to a new report.
A confirmed 119 journalists were detained across Asia as governments continued to relentlessly suppress media, with China, Myanmar and Vietnam standing out as among the worst offenders, the Committee to Protect Journalists (CPJ) said.
ENVIRONMENTAL HARMS
14. China's daily coal output hits record high in November to meet heating demand
Muyu Xu, Reuters, December 15, 2022
China's daily coal output hit an all time high in November as miners increased operations to meet higher demand for heating despite the logistics problems and resulting stock builds caused by Beijing's heavy-handed zero-COVID curbs.
China churned out about 390 million tonnes of coal last month, data from the National Bureau of Statistics (NBS) showed on Thursday, equivalent to 13.04 million tonnes per day.
COMMENT – To put those figures in perspective here are some back-of-the-envelope statistics:
In 2021, the United States consumed a total of 454 million metric tons of coal… last month alone, the PRC extracted 390 million metric tons.
In 2021, the United Kingdom (world’s fifth largest economy) consumed a total of 8.6 million metric tons of coal for the entire year… last month the PRC extracted the equivalent of 13 million metric tons PER DAY.
The PRC’s “record” in November was proceeded two months earlier by another record: “China digs deep to raise coal output to record high,” John Kemp, Reuters, September 20, 2022. Quote:
“Production hit a record 2,929 million tonnes in the first eight months of 2022, according to China’s National Bureau of Statistics.”
“Mine output was up by 332 million tonnes (13%) compared with the same period in 2021 and 520 million tonnes (22%) compared with the last pre-pandemic year in 2019.”
“Thermal power generation, nearly all from coal, set a new record of 3,883 billion kilowatt-hours (kWh) in the first eight months of the year.”
15. China's 'No New Coal Overseas' Pledge Has a Big Catch
Charmaine Lee, Fair Planet, December 14, 2022
Despite Beijing’s pledge to stop building overseas coal projects, dozens were found to have still gone ahead, and the energy efficiency of the existing ones also need improvement.
About a year ago, Chinese president Xi Jinping made a pledge at a United Nations meeting that the enormous coal-fired power plants funder would halt any new projects overseas.
But while research shows that no new investment gas been made in any new coal plants, experts say the ambiguity in Beijing's plan has nonetheless allowed such facilities to be built.
As of mid-2022, Chinese funds have supported at least 77 coal-fired power plants overseas, many of them in Indonesia. The remaining are located in Vietnam, Sri Lanka, Bangladesh, Pakistan, Malaysia, Cambodia, Turkey and Kazakhstan, among other countries and Belt and Road partners.
So far, coal still represents the largest share of energy power facilities funded by China’s overseas investment (34 percent).
16. Carbon Trading in China Isn't Helping Tackle Climate Change
Heesu Lee and Sheryl Tian Tong Lee, Bloomberg, December 8, 2022
Participation in market is too narrow and permits too generous. Expansion plans have been set back by economic concerns.
More than a year after its launch, China’s national carbon market has failed to force the country’s power companies to slash emissions.
Trading volumes have underwhelmed as narrow participation and outsized allowances keep the price of polluting at a fraction of the more established market in the European Union. And while coal remains at the forefront of China’s electricity generation, utilities don’t have much incentive to limit the amount of carbon they spew into the atmosphere.
FOREIGN INTERFERENCE AND COERCION
17. Zakon o policiji koji uvodi kineske kamere ponovo na dnevnom redu u Srbiji [Chinese-Style Surveillance Back On The Books In Serbia] – ORIGINAL IN SERBIAN
Iva Martinovic, Radio Slobodna Evropa, December 12, 2022
GOOGLE TRANSLATE – The draft of the new law on internal affairs, which was withdrawn in September 2021 after sharp criticism from civil society in Serbia, is back on the agenda.
Among the most controversial provisions is the introduction of a video surveillance system for automatic facial recognition.
This is made possible by the security cameras of the Chinese company Huawei, which the Ministry of Internal Affairs (MUP) of Serbia bought in 2019 and which have already been installed on the streets of Belgrade.
Although non-governmental organizations have warned that their use threatens citizens' right to privacy, recognition based on biometric facial characteristics and data processing are also provided for in the new Draft Law published by the Ministry of Interior on its website.
"Almost all the problematic provisions that we identified last year are also in this Draft," Bojan Elek from the non-governmental Belgrade Center for Security Policy (BCBP) told Radio Free Europe (RSE).
18. The Fight in Serbia Over Chinese-Style Surveillance (Part 1)
Reid Standish, Radio Free Europe/Radio Liberty, November 22, 2022
19. Serbia's Legal Tug-Of-War Over Chinese Surveillance Technology (Part 2)
Reid Standish, Radio Free Europe/Radio Liberty, November 23, 2022
As hundreds of thousands of people filled the streets across Serbia in late 2021 to protest weak environmental standards and changes in the law to the benefit of a foreign company’s plan to mine lithium, images began circulating that alarmed activists and tapped into a multiyear political fight over the expansion of Chinese surveillance technology.
In the photos and videos shared by environmental groups on social media, what appeared to be plainclothes police can be seen filming crowds of protesters with a device that Serbian authorities later said was a Huawei EP 821 trunking terminal -- equipment increasingly used by Chinese security forces that Serbian police bought from China as part of a security-cooperation agreement.
The countrywide, monthslong protests were the largest to sweep Serbia in decades and the government eventually backed down and repealed the proposed legal changes that sparked the outcry. But the appearance of the Huawei device in the hands of alleged law enforcement officers triggered accusations that officials had begun using facial-recognition technology to identify protesters, despite there currently being no law that allows its use.
Concerns were further fueled when more than 1,000 misdemeanor traffic violations were issued to protesters following the demonstrations for blocking roads and other traffic offenses.
“We don’t know if it was facial-recognition technology or not. At the end of the day, the actions we saw [from the authorities] were about scaring and intimidating people,” said Bojan Simisic, the founder of the environmental NGO Eco Guard, which was among the first to raise suspicions about the use of the Huawei devices at the protests. “Our biggest worry is that technology like this could be used to help make a database of people that are not desirable in the eyes of the authorities.”
The government has already deployed thousands of surveillance cameras across the country as part of plans to introduce some 8,000 Chinese-made Huawei surveillance cameras with facial-recognition capabilities. That rollout has faced public resistance for years and Belgrade says that facial-recognition software is not yet deployed, but the use -- and potential abuse -- of the technology has been a source of concern for activists, the country’s political opposition, civil rights groups, and cybersecurity experts.
20. Pacific Gambit: Inside the Chinese Communist Party and Triad Push into Palau
Bernadette Carreon, Aubrey Belford, and Martin Young, OCCRP, December 12, 2022
The tiny Pacific nation of Palau is a key hotspot in the growing rivalry between China and the West. Organized criminals with links to the Chinese Communist Party are trying to find a way in — and many in the local elite have welcomed them.
Key Findings
In 2019 and 2020, Palauan law enforcement detained and deported hundreds of mostly Chinese citizens working in illegal online gambling operations based in the country.
The operations are just the latest in a string of questionable ventures by ethnic Chinese business people in the country, including U.S.-sanctioned senior triad figure Wan Kuok Koi, also known as “Broken Tooth”. Paluan authorities believe the plans are interlinked, and tied to influence efforts by the Chinese Communist Party (CCP).
The Chinese push into Palau has been facilitated by longtime Chinese expatriates in the country, as well as members of the local elite.
Among these prominent locals have been two former presidents, Tommy Remengesau, Jr., and Johnson Toribiong.
…
Palau is also one of just 14 nations worldwide that diplomatically recognize Taiwan; it does not have full diplomatic relations with mainland China, which is ruled by the Chinese Communist Party (CCP). In recent years, Beijing has used aid and diplomacy to convince Kiribati and the Solomon Islands to switch their allegiance to China, leaving Taiwan with relations with just four Pacific Island nations.
While Palau’s government has remained steadfastly pro-West and pro-Taiwan, a group of business figures has in recent years begun pushing Beijing’s interests in Palau. Some have openly proclaimed they are promoting the CCP’s foreign policy goals, while others have furthered Chinese influence by setting up new business ventures and cultivating close relationships with Palau’s elite.
Semdiu Decherong, the former head of the country’s financial regulator, said that these businesspeople and organized crime figures — including a senior triad member known as “Broken Tooth” — appear to be operating with the knowledge of the Chinese state.
“From my understanding… they’re all very interconnected,” he said. “There is no way that Broken Tooth was going to come to Palau without the communist government knowing about it. And either they are turning a blind eye or actually behind the scenes supporting.”
OCCRP reporters conducted interviews and examined hundreds of pages of company records and files from law enforcement investigations to better understand the Chinese push into Palau. Along with the illegal online gambling operations, they discovered that this interlinked group of business people has proposed a series of sometimes improbable projects across the country since at least 2016. The prospective businesses have ranged from a blockchain-based insurance scheme to a real-world casino and a special economic zone.
These plans have so far mostly failed to bear fruit, thanks to the skepticism of local law enforcement and regulators, and pressure from Western countries. But they continue nonetheless, aided at times by members of the local elite who have built close relationships with these business figures. Some have even partnered in the ventures.
Among these prominent Palauans have been two former presidents — Johnson Toribiong and Tommy Remengesau Jr. — as well as state governors, a minister, and the country’s former postmaster general.
What is happening in Palau is part of a growing trend seen across the Pacific Islands and Southeast Asia over the past decade, according to Jason Tower, an expert on China’s overseas criminal networks at the United States Institute for Peace.
Chinese organized crime groups are moving into countries with weak governance in order to build illicit business empires and launder money, often through businesses similar to those popping up in Palau, like casinos and cryptocurrency schemes, he said. By offshoring their criminal activities, they avoid Beijing’s ire and show their usefulness to the CCP through corrupting local elites.
“They’re also recognizing that in order to protect themselves from law enforcement and from political campaigns in China, they also need to maintain close relationships with political actors in China, and ultimately, to do their bidding,” Tower told OCCRP.
21. US charges China student with stalking peer who put up pro-democracy fliers
Frances Mao, BBC, December 15, 2022
An overseas Chinese student in the US has been charged with stalking and threatening another Chinese student who took part in pro-democracy activism on their campus.
US prosecutors say Xiaolei Wu, 25, sent threats to the girl and also reported her family to authorities in China. The Berklee College of Music student was arrested in Boston on Wednesday. He is alleged to have targeted the girl after she put up fliers calling for greater political freedom in China.
COMMENT – Let’s hope that university administrators take these issues as seriously as the situation deserves.
22. TikTok will be used by China to ‘influence’ young voters, warns security minister
Natasha Clark, The Sun, December 14, 2022
23. Pakistan Tops New Index Measuring Chinese Influence Around the World
Reid Standish, Radio Free Europe/Radio Liberty, December 8, 2022
24. China removes 6 officials from U.K. after alleged beating of protester
Nikkei Asia, December 14, 2022
China has removed six officials from Britain who police wanted to question over the treatment of a man who said he was kicked and punched while protesting outside the Chinese consulate in Manchester, British foreign minister James Cleverly said.
Cleverly said the removal of the officials, including the consul general in Manchester, came after a police request to interview them over the incident.
"I am disappointed that these individuals will not be interviewed or face justice," Cleverly said in a written statement.
"Nonetheless, it is right that those responsible for the disgraceful scenes in Manchester are no longer -- or will shortly cease to be - consular staff accredited to the UK."
The Chinese embassy hit back, saying Britain had failed to protect its staff, adding it launched its own representations with Britain over the incident.
It said the consul general had returned to China under a "normal rotation of Chinese consular officials".
COMMENT – Why did it take so long for UK police to try to question these individuals involved in beating a protester on October 16th? For those of you who don’t recall this event, here’s the BBC reporting on it.
25. U.S. to appeal dismissal of Chinese agent lawsuit against casino tycoon Wynn
Kanishka Singh, Reuters, December 9, 2022
26. Taipei, Beijing trade barbs over latest import bans as Taiwan plans WTO case
Lawrence Chung, South China Morning Post, December 14, 2022
Thousands of Taiwanese food and drink products – from seafood to alcohol – have been blocked from mainland China. Taipei calls it unfair and another move to pressure the island, while Beijing says accusations are an act of ‘political manipulation’
HUMAN RIGHTS AND RELIGIOUS PERSECUTION
27. David Lin: China Promises to Free in 2030 American Pastor Detained Since 2006
Mao Xiaosi, Bitter Winter, December 8, 2022
His life imprisonment sentence has been reduced after American pressures, but eight further years in jail may be too much for his frail health.
28. Xinjiang: China trying to erase Uyghur identity with forced marriages to Han Chinese
Firstpost, December 14, 2022
29. Forced Marriage of Uyghur Women: State Policies for Interethnic Marriages in East Turkistan
Andrea Worden, et al, Uyghur Human Rights Project, November 16, 2022
Key Takeaways
Chinese state media videos, government sanctioned stories, and accounts from women in the diaspora offer evidence that government incentivized and forced interethnic marriages have been occurring in the Uyghur Region since 2014.
Evidence suggests it is highly likely the Chinese government is systematically imposing forced interethnic marriages on Uyghur women.
The Chinese state maintains that interethnic marriage promotes ethnic unity and social stability. However, evidence indicates that the government’s program to incentivize and promote interethnic marriage is in fact a tactic intended to assimilate Uyghurs into Han society.
Forced and incentivized marriages in the Uyghur Region are forms of gender-based crimes that violate international human rights standards and further the ongoing genocide and crimes against humanity being committed in East Turkistan.
INDUSTRIAL POLICIES AND ECONOMIC ESPIONAGE
30. Italy: EPPO seizes imported electric cars in anti-fraud operation
European Public Prosecutor’s Office, December 14, 2022
In a complex anti-fraud operation concerning the parallel import of cars, the European Public Prosecutor’s Office (EPPO), in cooperation with the Civitavecchia Customs Office, on Monday seized 28 new electric vehicles by a well-known car manufacturer at the Port of Rome (Italy).
The vehicles had been imported from China to Italy, and were destined for Austria, the place of residence of the importer.
The investigation showed that the importation of these vehicles into the EU was never authorised, either by the brand of the car company or by any of its agents or licensees – therefore constituting an illicit parallel import.
The cars were declared to the Customs Office of Civitavecchia – Port of Rome for a value shortly under €80 000, including the cost of transportation from China.
However, the real value of the imported vehicles is more than 10 times the value declared to customs. The taxable value of the shipment exceeds €900 000.
The EPPO’s Rome office, therefore, ordered the seizure of these cars, for the purpose of confiscating the profits of the crime of smuggling, in order to fully recover the damages to the national and EU budgets.
The importation of these cars at a much lower value would also have led to unfair competition within the EU automobile market.
COMMENT – An example of smuggling from the PRC to Europe in an effort to avoid paying European tariffs on new electric vehicles produced in the PRC.
31. China restricts export of industrial data as Beijing seeks to enhance data security
Xinmei Shen, South China Morning Post, December 14, 2022
Industrial data that needs to be exported should undergo a security assessment, according to new regulations published by MIIT on Tuesday. China has ramped up its data security push, rolling out a network of regulations that have increased compliance costs for businesses.
China’s industry ministry has passed new rules mandating that important industrial data be stored within the country, as Beijing expands its web of regulations governing data security in a drive to tighten control over domestic data.
“Important” and “core” industrial data collected and generated in mainland China should be kept within the country, while data that needs to be exported should undergo a security assessment, according to new regulations published by China’s Ministry of Industry and Information Technology (MIIT) on Tuesday.
The new rules cover data produced in areas including industry, telecoms and radio waves as they fall under the purview of the MIIT. China’s Data Security Law, which came into effect in September last year, requires each government body to supervise data security in their own realms.
32. Trump metal tariffs ruled in breach of global rules by WTO
Emma Farge and Philip Blenkinsop, Reuters, December 9, 2022
The World Trade Organization ruled on Friday that U.S. tariffs imposed on steel and aluminium imports by then President Donald Trump contravened global trading rules in a judgment immediately criticised by Washington.
In one of the most high-profile and potentially explosive cases to come to the WTO, the three-person adjudicating panel said the U.S. measures were inconsistent with WTO rules and recommended the United States bring them into conformity.
COMMENT – The WTO’s three-person adjudicating panel ignored the WTO’s own Article XXI (Security Exceptions) in making this ruling:
“Nothing in this Agreement shall be construed… to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests… relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment.”
Little wonder that the Biden Administration’s U.S. Trade Representative (the American representative to the WTO) immediately rejected the ruling.
33. Statement from USTR Spokesperson Adam Hodge
Office of the U.S. Trade Representative, December 9, 2022
Assistant United States Trade Representative Adam Hodge today released a statement in response to the final public reports in United States – Certain Measures on Steel and Aluminum Products (DS544, 552, 556, and 564).
“The United States strongly rejects the flawed interpretation and conclusions in the World Trade Organization (WTO) Panel reports released today regarding challenges to the United States’ Section 232 measures on steel and aluminum brought by China and others. The United States has held the clear and unequivocal position, for over 70 years, that issues of national security cannot be reviewed in WTO dispute settlement and the WTO has no authority to second-guess the ability of a WTO Member to respond to a wide-range of threats to its security.
“These WTO panel reports only reinforce the need to fundamentally reform the WTO dispute settlement system. The WTO has proven ineffective at stopping severe and persistent non-market excess capacity from the PRC and others that is an existential threat to market-oriented steel and aluminum sectors and a threat to U.S. national security. The WTO now suggests that the United States too must stand idly by. The United States will not cede decision-making over its essential security to WTO panels.
“The Biden Administration is committed to preserving U.S. national security by ensuring the long-term viability of our steel and aluminum industries, and we do not intend to remove the Section 232 duties as a result of these disputes.”
COMMENT – Bravo to Ambassador Tai and her team!
Given the utter failure of the World Trade Organization to uphold the basic tenants of the institution when it comes to the PRC’s non-market trade activities over the last two decades (here is the Obama Administration trying to address this problem of Chinese steel dumping back in 2016 and here), I suspect we are witnessing the WTO becoming the League of Nations: an institution that exists, but is largely ignored.
The time for the WTO to have taken strong stand against non-market behavior was December 2016, when Beijing’s 15-year grace period expired. In 2001 when the PRC joined the WTO it was given a 15-year grace period to complete its transition from government control of the economy to being a market economy. At the time, many assumed that period would be sufficient to finish Deng Xiaoping’s ‘reform and opening’ that had encouraged other WTO members to grant an exception to Beijing in the first place. Everyone else joining the WTO must become a ‘market economy’ BEFORE joining… unwisely, we allowed the CCP to promise the world that they would complete the process AFTER gaining all the benefits of being a WTO member.
Needless to say, the incentives to continue market-based reforms evaporated when this exception was granted. By the end of the next decade, serious efforts to fulfill the PRC’s obligations came to a halt and we witnessed significant backsliding in the wake of the Global Financial Crisis. Unsurprisingly, CCP leaders preferred to maintain direct control of the Chinese economy (with all the subsidies and discriminatory policies that entailed) AND gain the benefits of being a member of the WTO (all the benefits while avoiding the costs and responsibilities of membership).
By December 2016, when the PRC was supposed to be a full ‘market economy’ and completely in line with its obligations to the rest of the world, Xi Jinping was moving the country in the opposite direction. A country that has little regard for the rule of law and is ruled by a single political party that sees itself as beyond any checks or balances, cannot be expected to fulfill international obligations.
For context, see James Fallows’ piece in the December 2016 issue of The Atlantic titled, “China’s Great Leap Backward” or this interview in April 2017 with Ambassador Charlene Barshefsky, President Clinton’s U.S. Trade Representative who helped negotiate the PRC’s entry into the WTO.
34. US to Add More Than 30 Chinese Companies to Trade Blacklist
Jenny Leonard, Bloomberg, December 13, 2022
Yangtze Memory and others will move to US Entity List US and China have battled over access to leading technology
35. Picking Winners? Government Subsidies and Firm Productivity in China
Lee G. Branstetter, Guangwei Li, and Mengjia Ren, National Bureau of Economic Research, December 2022
Are Chinese industrial policies making the targeted Chinese firms more productive? Alternatively, are efforts to promote productivity undercut by efforts to maintain or expand employment in less productive enterprises? In this paper, we attempt to shed light on these questions through the analysis of previously underutilized microdata on direct government subsidies provided to China’s publicly traded firms. We categorize subsidies into different types. We then estimate total-factor productivity (TFP) for Chinese listed firms and investigate the relationship between these estimates of TFP and the allocation of government subsidies.
We find little evidence that the Chinese government consistently “picks winners”. Firms’ ex-ante productivity is negatively correlated with subsidies received by firms, and subsidies appear to have a negative impact on firms’ ex-post productivity growth throughout our data window, 2007 to 2018.
Neither subsidies given out under the name of R&D and innovation promotion nor industrial and equipment upgrading positively affect firms’ productivity growth. On the other hand, we find a positive impact of subsidy on current year employment, both for the aggregated and employment-related subsidies. These findings suggest that China’s increasingly prescriptive industrial policies may have generated limited effects in promoting productivity.
COMMENT – Fascinating paper about whether the PRC’s industrial policies (subsidies) lead to more productivity from the firms that receive assistance. The authors find little evidence of this and even evidence of the opposite: Chinese firms that receive subsidies are less productive.
The authors seem to suggest (and commentators have latched on to this) that because these subsidies aren’t effective in creating greater productivity, they aren’t harmful. This ignores the harm these zombie companies do to the rest of the global economy as they disincentivize innovation and undermine more competitive firms with dumping.
36. Netherlands plans new curbs on chip-making equipment sales to China
Kanjyik Ghosh, Reuters, December 8, 2022
CYBER AND INFORMATION TECHNOLOGY
37. Share of Chinese and Non-Chinese Vendors in 31 European Countries
Strand Consult, December 15, 2022
This report follows Strand Consult’s earlier report “Understanding the Market for 4G RAN in Europe: Share of Chinese and Non-Chinese Vendors in 102 Mobile Networks from 2020.” At the time of publication of the earlier report, 5G had not yet started in EU. The new report brings us up to date and covers the development in the intervening years, including which operators have switched out Chinese equipment.
The European Union uses its 5G security toolbox to focus on the security of equipment and to elevate risk management. This report can be used in conjunction with the toolbox to bring greater knowledge and transparency to communications infrastructure which is the foundation of modern society and economy.
With its new report “The Market for 5G RAN in Europe: Share of Chinese and Non-Chinese Vendors in 31 European Countries”, Strand Consult brings valuable evidence of the location, amount, and share of Chinese and non-Chinese equipment in European telecom networks. This report, the second of its kind, describes the respective amounts of 5G equipment from Huawei, ZTE, and non-Chinese vendors in European mobile networks and the share of such in equipment in the 5G Radio Access Network (RAN). Here are the highlights from the new report.
There is little transparency about the amount, type, location, and share of 4G and 5G Chinese equipment in European networks.
In 8 of 31 countries, more than 50% of the 5G RAN equipment comes from Chinese vendors. In 2020, it was 16 of 31 countries in which the 4G RAN equipment came from Chinese vendors.
In one country, 100% of the 5G RAN comes from Chinese vendors. In 2020 there were 3 European countries with 100% 4G RAN equipment from Chinese vendors.
Only 11 of 31 European countries can offer their users access to clean, non-Chinese networks.
41% of the mobile subscribers in Europe have access to 5G RAN from Chinese vendors. In 2020, 51% of European mobile subscribers had access to 4G RAN from Chinese vendors.
The large European countries–Germany, Italy, Poland, Portugal, Austria, and Spain–purchase significant amounts of 5G equipment from Chinese vendors.
Operators like Telenor and Telia in Norway, TDC in Denmark, 3 in Denmark and Sweden, T-Mobile Nederland’s, and Proximus in Belgium have switched out Chinese suppliers. None of those operators report increased networks cost or delay in 5G rollout.
The data suggests that Germany appears not to take the security threat of China seriously. Nord Stream 2 was Germany’s debacle oil energy supplies from Russia; it appears that Germany sets up a similar scenario in the communications domain with Huawei and ZTE.
As Germany accounts for 25% of European mobile customers, the German government’s lax approach to communications infrastructure creates a risk for Germany and all people who interconnect with German networks.
Germany together with Italy, Poland, and Austria, comprise 50% of European mobile customers. These countries are heavily dependent on Chinese equipment, creating risk for their own nations and others which use their networks.
In 2020, 57% of Germany’s 4G RAN came from Chinese vendors. In 2022, 59% of the 5G RAN in Germany comes from Chinese vendors.
Huawei enjoys a higher market share in Berlin than in Beijing where it shares the market with ZTE and other vendors.
US General Darryl A. Williams serves as the commanding general of the United States Army Europe and Africa (based in Wiesbaden, German) and commander of the Allied Land Command. He oversees more than 20,000 staff. Unwittingly when he uses a commercial mobile phone, the traffic is sent through a network built with Chinese equipment. Similarly when American military use their personal devices, they engage on a Chinese network at risk for intrusion.
Strand Consult’s report delivers detailed information about Chinese and non-Chinese network equipment in Europe at country level. The report highlights of the importance of the EU’s 5G toolbox and provides recommendations to improve its implementation. The toolbox applies to most of Europe’s 102 mobile operators across 31 countries serving some 673 million mobile customers. The report also provides valuable economic context to understand the market for RAN equipment.
The focus on 5G and 4G RAN reflects the shift of the security debate. There is consensus across most countries outside China that equipment provided by vendors owned and affiliated with the Chinese government and military poses unacceptable risk for the security and integrity of the core of the network. The discussion has evolved to whether and to what degree should such vendors be allowed to supply the RAN.
Despite the widespread knowledge of the threat associated with using Chinese equipment, some of Europe’s largest operators have purchased and deployed Chinese 5G equipment in their networks after 2020. That decision could have major consequences for their shareholders if Europe’s policymakers conclude that it is not smart to depend on Chinese telecommunications infrastructure in the same way as it did for Russian gas.
COMMENT – An extremely disappointing report.
Important note: the authors found that of the Telecom Operators that DID abandon PRC suppliers of telecom equipment, none reported an increased network cost or a delay in 5G rollout… of course “cost” and “delay” were the reasons most cited by those countries and telecom operators who refused to take action against untrusted equipment manufacturers.
This suggests that fears of PRC retaliation were the real reasons these countries failed to abandon PRC equipment providers… unsurprisingly, Beijing likely concludes that economic coercion is an effective tactic and will continue to use it against countries that make themselves vulnerable to it.
38. Defending Digital Freedom and the Competition for the Future of the Global Order
Special Competitive Studies Project, December 15, 2022
COMMENT – The fifth of six reports by the Special Competitive Studies Project which examines the contours of the strategic rivalry with the PRC.
39. AUDIO – After the Huawei and ZTE bans, what’s next for China trade policy
Tom Temin and Matt Turpin, Federal News Network, December 9, 2022
The administration, prompted by Congress, has banned sales of telecommunications gear from Chinese companies. Now the question is: Should anything come next, when it comes to Chinese products that might have national security implications? The Federal Drive with Tom Temin has spoken on the matter with FCC Commissioner Brendan Carr. In this interview, his guest is Matt Turpin, visiting fellow at the Hoover Institution and former China director at the National Security Council.
MILITARY AND SECURITY THREATS
40. Border clashes between India and China ‘regularly covered up’
Joe Wallen and Samaan Lateef, The Telegraph, December 14, 2022
Conflict along the Line of Actual Control is increasing, say sources, but army officers are told ‘not to discuss these incidents’
India is covering up the true extent of border clashes with China to avoid panicking the public, senior Indian Army sources have told The Telegraph.
Several incidents are taking place in the northern state of Arunachal Pradesh every month, the sources said, with soldiers from the two nuclear-armed countries sometimes engaging in violent hand-to-hand combat, often using clubs and other homemade melee weapons.
China seized Arunachal Pradesh during a war with India in 1962 and returned it as part of a peace deal, but Beijing has maintained its claim over the territory ever since. In recent years, Delhi has accused China of stepping up aggression along the border and attempting to gradually seize strategically important territory.
A clash on December 9 in Arunachal Pradesh’s Tawang district, in which at least 20 Indian soldiers were injured, was widely reported. But Indian Army sources said such incidents are commonplace.
“Face-offs with the People’s Liberation Army (PLA) have become a common feature along the border in Arunachal Pradesh, particularly in the Yangtse area,” said a senior Indian Army officer. “They have happened on average two or three times a month, recently, and the incursions have increased in frequency over the last two years.”
41. China And India: On the Brink of a War?
Peter Suciu, 1945, December 13, 2022
42. Indian and Chinese troops clash on disputed border
Vedika Sud and Simone McCarthy, CNN, December 13, 2022
Indian and Chinese troops have clashed on their disputed Himalayan border, the first known incident between the two nuclear-armed Asian powers in nearly two years.
In a statement, India’s Ministry of Defense said soldiers from both sides sustained minor injuries in the face-off, which took place Friday in the Tawang Sector in India’s northeastern territory of Arunachal Pradesh, a remote, inhospitable region that borders southern China.
43. Taiwan’s Assessment of the PRC Military Threat: The 2022 Chinese Communist Military Power Report
John Dotson, Global Taiwan Brief, December 14, 2022
This year’s Chinese Communist Military Power Report, produced by Taiwan’s Ministry of National Defense in early September, presents a summary overview and analysis of the PLA’s developmental trends and significant operations in 2022. The report places a heavy emphasis on the PLA’s employment by the CCP as a tool for “military intimidation” and psychological warfare directed against Taiwan’s citizens.
44. Indian and Chinese troops fight with sticks and bricks in video
Jessie Yeung, CNN, December 14, 2022
The video, according to a serving Indian military officer with knowledge of the clashes on the China-India border, was filmed in the mountainous Indian state of Arunachal Pradesh at the Line of Actual Control – the de facto border between the two countries – on September 28, 2021.
45. China will soon be military threat in Atlantic, says UK defence chief
George Grylls, Times of London, December 15, 2022
46. How to Keep War with China from Being a Pick-Up Game
Bryan Clark, Defense One, November 2, 2022
ONE BELT, ONE ROAD STRATEGY
47. Central Asia Caught Between 'Two Fires' As It Branches Out from Russia
Reid Standish, Radio Free Europe/Radio Liberty, December 6, 2022
Ahmad Mukhtar, CBS News, December 13, 2022
A loud blast followed by gunfire was heard in downtown Kabul on Monday afternoon as assailants attacked a guesthouse used predominantly by Chinese nationals, according to the Kabul police. An Italian-run emergency hospital less than a mile away in the Afghan capital said it had received 21 patients from the attack, three of whom were dead on arrival.
OPINION PIECES
49. China’s Brute Force Economics: Waking Up from the Dream of a Level Playing Field
Liza Tobin, Texas national Security Review, December 13, 2022
Liza Tobin argues that the time has come for the United States and its allies to abandon the notion that competing on a level playing field with China’s state-led economy is possible and confront the reality of what she calls the country’s “brute force economics.”
China’s tactics are not merely an assortment of cutthroat moves made by individual actors. Rather, they are features of Beijing’s long-term strategy and are backed up by the full force of the country’s party-state system, creating a challenge that Washington cannot afford to ignore.
50. China’s War Against Taiwan Has Already Started
Anne Applebaum, The Atlantic, December 14, 2022
How Beijing tries to make a democracy submit without putting up a fight.
51. What the World’s Most Important Company Must Do
Jason Hsu, Project Syndicate, December 15, 2022
With the outlook for Sino-American relations remaining grim, the globally indispensable Taiwan Semiconductor Manufacturing Company (TSMC) is quietly exploring its options. Stuck in the middle of the twenty-first century’s great-power contest, its future will depend on playing a smart long game.
52. The fight to build up Japan’s military is just beginning
Gearoid Reidy, Bloomberg, December 15, 2022
Monks at Kyoto’s Kiyomizu Temple this week announced the Japanese public’s choice for the kanji character that best represents the year 2022. In a narrow vote, the winning character was sen or ikusa, meaning battle — or war.
It’s an appropriate choice not just because of the conflict in Ukraine, the threat of a missile barrage from North Korea and the other stories that have defined the year: it comes just as the country is starting to take seriously the idea of fighting for itself. Prime Minister Fumio Kishida has ordered a doubling of the defense budget to 2% of the country’s gross domestic product in the next five years, an outlay of some ¥43 trillion ($312 billion) that would lift the ostensibly pacifist nation into the ranks of the world’s biggest defense spenders.
Another reason the selection of the kanji (one of the 2,000 or so Chinese characters commonly used in Japanese writing) works is because of the fight currently taking place over how to pay for it. Kishida doesn’t want to raise deficits further to pay for it and has suggested future increases in corporate and other taxes as funding sources instead. That led to an unusual public rebuke from two of his Cabinet ministers, emboldened by the prime minister’s low public popularity, who reject the idea of crimping the economy by boosting taxes.
It seems for now that, with a deft kicking of the can down the road, the move will proceed with plans for a combination of increased or otherwise appropriated taxes, including higher tobacco levies and a redirection of a reconstruction tax applied after the 2011 earthquake and tsunami. A corporate tax surcharge is also being considered, though that’s sure to meet the opprobrium of Japan’s corporate world, that delighted in the 8 percentage points of tax cuts in the past decade. Mainstream income and consumption tax hikes are, thankfully, off the table. Kishida’s rebelling ministers seem to be falling into line. The plans are expected to be included in tax reforms set to be finalized Thursday and will gradually ramp up defense spending each year through fiscal 2027.
Perhaps as surprising as the fight about how to pay for it is a lack of confrontation about whether it’s a good idea or not. Once raised, budgets are difficult to cut. As a result, Kishida’s steps will likely prove to be much more consequential in the long term than during the late Shinzo Abe’s efforts to loosen security legislation. Yet the clamor these days is much lower, with a total absence of street protests in Tokyo opposing the move. Even the left wing Tokyo Shimbun seemed more concerned with getting value for money than with the overall direction.
Likewise outside Japan, a move that would once have been treated with suspicion is being welcomed. When Abe was moving to boost Japan’s military between 2013 and 2015, English-language publications frequently fretted about the country’s “abandoning its pacifism,” while Chinese officials penned editorials in major papers blasting the country and comparing it to the intangible yet looming threat of Voldemort from the Harry Potter novels.
It shows how much the world around China has woken up to the real threat in the region — one that Abe warned about. China’s increasing isolation and its more muscular stance on Taiwan and in the South China Sea have opened doors for Japan to be welcomed as a military power, rather than shunned. The headlines that once fretted about “re-militiarization” or the “hawkish” ruling party have been replaced with more level-headed analyses, which more than anything reflects the shift in U.S. rhetoric.
Seen from Japan, the pace of Washington’s China pivot over the past decade has been breathtaking. The days when presidents would bypass Japan to cozy up to Xi Jinping seem over. So too does the era when the U.S. would treat breaches of Japanese territory by China as a “he said, she said” affair. Few fret anymore about the “death of liberalism in Japan” or push back against claims that Beijing is a threat as “not standing up to scrutiny.” Chinese officials are no longer invited to pen the kind of editorials that invoke a supposed Japanese “threat to global peace.”
Tokyo is ever-more closely being brought into the fold. Last week, Australia’s defense and foreign ministers seemed to float the idea of involving Japan in the AUKUS security pact with the U.S. and U.K.. The country has also sought to be the sixth member of the Five Eyes intelligence-sharing alliance and is reportedly set to join U.S. efforts to tighten exports of advanced chipmaking equipment to China. It’s also continued to move closer to Taiwan, with Koichi Hagiuda, the policy chief of Kishida’s Liberal Democratic Party, warning Beijing from attempting to change the status quo during a recent visit to Taipei, the first by a senior official in 19 years.
The debate even appears to have been good news domestically for Kishida’s dismal polling numbers, pushing the party’s tenuous links with the Unification Church off the front pages. It helps that for once, it makes the prime minister look like he’s doing something of consequence — and leaving a legacy behind. Some 51% of those surveyed by NHK in a poll released this week support the increased spending, while 36% opposed it. Government surveys from 2016, after Abe’s security legislation passed, found just 30% in favor of expanding Japan’s military power.
53. How to counter China's military ambition
Rebeccah Heinrichs, Washington Examiner, December 9, 2022
54. Xi’s Saudi Visit Shows Riyadh’s Monogamous Marriage to Washington Is Over
Aaron David Miller, Foreign Policy, December 7, 2022
In today’s Cold War 2.0, not only will Saudi Arabia refuse to choose sides, but it’s also likely to move closer to Beijing and Moscow.