Matt Turpin's China Articles - January 22, 2023
Friends,
This week I’m writing from the World Economic Forum in Davos, a place abuzz with excitement for the reopening of the PRC and the expectation of positive economic news.
Outgoing Vice Premier Liu He gave a speech that seemed to electrify investors and encouraged the influx of capital into long-depressed Chinese stocks. Unfortunately, the broader systemic challenges facing the PRC got much less attention.
First, the PRC’s security organs continue to expand in both size and scope of responsibility. The 20th Party Congress gave us a taste of what ‘comprehensive security for a New Era’ means: just as the Party controls everything, an ever-expanding definition of security takes precedence over everything.
Second, the structural weaknesses of the Chinese economy have not been addressed by Xi Jinping and his cadres over the past decade. The Party understood that the economic model that got the PRC to where it was when Xi took power, could not take the PRC to its next stage of development. This package of crucial economic reforms were unveiled at the Third Plenum of the 18th Party Congress in November 2013.
Observers at the time were optimistic about China’s future on the assumption that these reforms would be implemented. Now it’s a decade later and as multiple analysts and economists have pointed out over the years, those crucial economic reforms have never been fulfilled (See Stephen S. Roach’s article, #1). At the time, reformers like Liu He pleaded with his colleagues to institute tough economic reforms that would entail significant political costs. A decade later, Liu He is retiring, and the Party has abandoned those economic liberalization reforms to embrace their Stalinist obsession with control of the economy.
A decade ago, the PRC faced this reform challenge under the backdrop of a relatively benign international order. Russia had not yet annexed Crimea and the Obama Administration was offering assistance to the new Chinese leader. That is not the international environment Xi faces as he enters his third term.
After reviewing this week’s collection of articles, these are PRC trends that seem to be particularly important:
The population is declining
Property investment is declining
Exports are declining
Growth is declining
Carbon emissions are increasing
Control over commercial entities is increasing
Social control is increasing
Inequality is increasing
These are not good trends for the PRC.
Thanks for reading!
Matt
MUST READ
Stephen S. Roach, The Wire China, January 15, 2023
When the dust settles on the coming economic snapback, China’s chronic growth problems are likely to resurface with a vengeance.
Long critical of Chinese censorship and Communist Party verbiage, world financial markets have enthusiastically embraced Beijing’s spin heralding a powerful post-Zero Covid reopening. Western media are similarly enthusiastic. In a breathless recent cover story, The Economist concluded that “China’s reopening will be the biggest economic event of 2023.” Just like that, the perfect storm is apparently about to turn into a beautiful day.
Proponents of the reopening play concede that there will be some bumps in the road as China works through the near-term difficulties that have arisen from the wholesale abandonment of an absurdly impractical zero-Covid policy. But both Beijing and the broad consensus of investors are more than willing to ignore these bumps.
Never mind that we have no idea of how to dimension the bumps. To the displeasure of the World Health Organization, we are being asked to swallow this dramatic about-face on policy — a first for Xi Jinping — without any hard data documenting the full extent of its ramifications for the rapid Covid spread that is now engulfing China.
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For China, the reopening gambit borrows a page out of its standard playbook — activating the policy levers of state control to compensate for a worrisome growth shortfall. As well as the reversal of zero-Covid, Beijing has in recent weeks relaxed constraints on the country’s beleaguered property sector and made an effort to walk back earlier regulatory pressures on its once high-flying tech sector. This trifecta of stimulus actions is well-timed to hit the economy at its nadir, sparking the sort of upturn that has long made China famous.
The conclusion that a recovery is imminent is correct in one important sense: Covid-related lockdowns retard economic growth, and when they are reduced, an arithmetic snapback occurs. As a teaching device, I have always told my classes to think of this as the “rubber band effect” — underscoring the snapback that automatically happens when a taut rubber band is released. That is exactly what happened in China after the Wuhan lockdown of early 2020 and then with a one-quarter lag in other major economies around the world. China’s coming reopening — whether it takes one to three quarters to appear — is unlikely to be any different.
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But then what happens? Will the stimulus spark cumulative increases — the so-called economic multiplier effects — in an extremely weak Chinese economy? That is actually the most important question of all and where my now cautious view on China comes into play. As I see it, when the dust settles on the coming snapback, China’s chronic growth problems are likely to resurface with a vengeance. Multiplier effects work best when underlying economic growth foundations are solid. That is not the case in China today. With its working age population declining due to demographic headwinds that are likely to persist for at least another 25 years, China needs an acceleration in productivity growth to compensate and sustain overall economic growth at a reasonable pace. Yet there is good reason to believe that the opposite will occur.
Chinese total factor productivity growth, which has been declining for a decade, is likely to continue on a downward path for the foreseeable future. At work is the confluence of regulatory pressures on its once dynamic Internet sector; diminished incentives for risk-taking entrepreneurs in an era of “common prosperity;” a tech conflict with the United States which could take a serious toll on the embryonic AI and quantum computing efforts that have long underpinned Chinese aspirations for indigenous innovation; and the risks of a military over-stretch associated with a security-focused China’s more muscular foreign policy and the concomitant potential for a cold war collision with the United States.
Here, as well, Beijing’s spin is hard at work in attempting to ease concerns. Senior regulators now claim that the worst is over for constraints on Internet platform companies. They must be gratified by the Pavlovian response of investors to buy sharply depressed Chinese tech shares in recent days. But the enduring tight controls on the activities of these companies — video streaming, gaming curfews, online music, fan culture, ridesharing, and private tutoring — don’t exactly promise a return to dynamism from what had been the most rapidly growing and exciting segment of the Chinese economy.
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Count me among those who worry more about what comes after the short-term snapback — both for China, as well as for a global economy that has long been heavily dependent on China’s legacy of hyper growth. China’s five-year GDP growth rate is likely to average just 4.8 percent in 2023 — well less than half the peak five-year growth rate of 11.7 percent recorded in 2007. China is not the growth engine it used to be.
Putting it another way, in Xi Jinping’s first two terms, spanning 2013 to 2022, Chinese economic growth averaged 6.25 percent, well below the 10 percent pace that the so-called Deng Xiaoping model delivered from 1980 to 2010. And in light of the demographic and productivity considerations noted above, there is good reason to believe that Chinese economic growth in Xi’s second ten years will slow even further.
For Xi, this has become personal: China’s aggressive about face on policy reflects the growing discomfort the “leader for life” must be feeling about whether he can deliver on the economic bargain that underpins the aspirational rejuvenation promised in his fabled Chinese Dream.
You would never know that from the post-Covid spin embraced by the unlikely consensus between Beijing and western financial markets. Steeped in ideology and party dogma, and plagued by non-transparency, censorship, and information distortion, China’s spin machine is now in overdrive. But the message behind the spin is worrisome: The standard Chinese policy playbook is unlikely to be effective in countering a corrosive weakening in the economy.
COMMENT – As a slipped in and out of conference rooms at Davos this week, I should have handed out copies of this OpEd out to everyone I saw… there was a lot of Kool-Aid drinking going on here in the Swiss Alps.
Ben Jiang, South China Morning Post, January 14, 2023
Apple reportedly cut back on orders citing weakening demand in potential blow to its Chinese suppliers that are heavily dependent on the US giant. Analysts have lowered their shipment predictions across a range of Apple products.
Four days before Christmas, while China was battening down the hatches to survive the explosion of Covid-19 infections around the country, the world’s largest contract assembler of electronic gadgets quietly finalised plans to relocate some of its Apple iPad and MacBook production to Vietnam.
The move by Foxconn Technology Group, on the drawing board since late 2020, is expected to become reality this year, with the first products expected to roll off its plant in Vietnam’s Bai Giang province as early as May.
3. A tragedy pushed to the shadows: the truth about China’s Cultural Revolution
Tania Branigan, The Guardian, January 19, 2023
It is impossible to understand China without understanding this decade of horror, and the ways in which it scarred the entire nation. So why do some of that era’s children still look back on it with fondness?
4. China to launch state-owned ride-hailing platform
Cissy Zhou, Nikkei Asia, January 18, 2023
Move is response to 'disorderly expansion and data security problems' in sector
China will launch a state-owned transportation platform that includes ride-hailing and flight services, state media has announced, as Beijing continues to keep a tight grip on the country's tech sector.
Qiangguo Jiaotong, which translates literally to "The Strong Country's Transportation," has completed internal testing and will soon launch its ride-hailing service for the public, Beijing Daily, the Chinese Communist Party's mouthpiece, said on Wednesday.
COMMENT – The ‘Tech Crackdown’ is over because the Chinese Communist Party completely controls the Chinese tech industry.
5. Building a New Order after Overcoming an Illusion
Minister Nishimura Yasutoshi, CSIS, January 5, 2023
An address by Japanese Minister Nishimura Yasutoshi, Ministry of Economy, Technology and Industry, at the Center for Strategic and International Studies.
6. China's precarious path forward – insights from the MERICS China Forecast 2023
Roderick Kefferpütz, MERICS, January 18, 2023
Our survey of 880 China watchers suggests the country’s course is most unpredictable – except that it will continue to stand by Moscow and accept EU-China relations fraying.
Unbridled power in the hands of Xi Jinping, underlying pressures economic and social, and unpredictable policies in any number of fields – the level of uncertainty about China in the year ahead has never been higher than in this fourth edition of our MERICS China Forecast. We solicited the views of 880 China experts and non-expert members of the public with an interest in the country. Their responses don’t make for optimistic reading.
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The pressure-cooker scenario
The China watchers we surveyed consider the ongoing dynamics of Covid-19, the geopolitical environment and a looming global recession as the top three challenges for the country in the year ahead. They are seen as additional risks to China’s economic and technological development, with the potential to put greater pressure on society. At the same time, survey participants predict an even more Xi-dominated China and widely expect greater state control over the economy.
Heightened economic and social risks alongside a more unrelenting, more centralized power structure suggest the possibility of a “pressure cooker” scenario for China. Interrelated risks in the areas of public health, geopolitics and economics raise the likelihood of economic stress. The resulting increase in the potential for protests would be met by a regime with Xi Jinping at its pinnacle, a leader with an unprecedented level of personal control.
Stable ties with Russia, deteriorating EU relations
Our survey participants predominantly foresee China’s relations with the EU and some Western countries deteriorating. A majority of respondents expects China to maintain its pro-Russian “neutrality” as Moscow continues its war on Ukraine (55%) and economic ties between China and Russia to deepen further.
These reservations appear to be influencing long-upbeat views on EU-China economic relations. Those we surveyed expect ties to deteriorate in many fields: 81% of respondents cite conditions for EU citizens working in China, 77% science and technology cooperation, 55% EU investments into China, 46% EU exports to China, 40% Chinese investments into the EU. Then again, Chinese exports to the EU will rise slightly, according to 40% of participants.
COMMENT – For all those China bulls in the financial markets, it might be a good idea to read MERICS’ latest survey.
7. US-China Defense Talks Stalled Two Months After Biden-Xi Meeting
Philip Heijmans, Bloomberg, January 17, 2023
The Pentagon is struggling to get China to resume military-to-military talks, according to a senior US defense official, underscoring continuing tensions between the two sides despite last year’s meeting between Presidents Joe Biden and Xi Jinping.
8. China signals desire to work with US on trade and climate change but remains defiant on defence
Teddy Ng, South China Morning Post, January 13, 2023
9. Blinken to test limits of China’s diplomatic engagement on Feb. 5-6 Beijing trip
Phelim Kine, Politico, January 16, 2023
The secretary of State’s agenda is likely to include the war in Ukraine, Beijing’s growing nuclear arsenal, stalled counternarcotics cooperation and U.S. citizens held in China.
10. Yellen to travel to China as US weighs investment restrictions
Tobias Burns, The Hill, January 18, 2023
Treasury Secretary Janet Yellen is planning a trip to China “in the near future,” the Treasury Department announced Wednesday, following a meeting between Yellen and a top Chinese official in Switzerland.
The secretary “looks forward to traveling to China and to welcoming her counterparts to the United States in the near future,” Treasury said in a readout of the meeting in Zurich between Yellen and Chinese Vice Premier Liu He.
COMMENT – It makes zero sense to me that Secretary Blinken and Secretary Yellen would press forward on these trips to Beijing as the CCP continues to refuse to allow Secretary of Defense Austin to even have a phone conversation with his PRC counterpart. When you allow yourself to be divided internally, your rival will take advantage. Beijing needs the optics of the Blinken and Yellen visits far more than Washington does, particularly to bolster those bulls pushing more money into Chinese stocks.
But as usual, State and Treasury undermine broader national objectives to achieve symbolic photo-ops and raise questions across the U.S. and with Allies about whether the Administration will fall back into the failed groove of Treasury/State-led ‘engagement’ where national security considerations and human rights are side-lined for the hope of ‘improved’ relations. [Head-slap emoji]
My advice to Blinken and Yellen: Don’t pull a Scholz…
AUTHORITARIANISM
11. Public Perceptions of China in 13 European Countries
Center for Insights in Survey Research, January 18, 2023
The PRC’s support for Russia over the past year has significantly worsened public opinion of the PRC across 13 European countries.
12. How Apple tied its fortunes to China
Patrick McGee, Financial Times, January 17, 2023
The company spent two decades and billions of dollars building a supply chain of unprecedented sophistication. Now, a reckoning is coming.
In 2007, Nokia had 900mn users. Its market dominance seemed so great that Forbes ran a cover story on the company asking “Can anyone catch the cell phone king?” The same year, Apple launched the iPhone.
Sixteen years and 1.2bn users later, the story of how the Finnish handset maker got blindsided by the iPhone is well known. Nokia, the story goes, didn’t have enough software savvy to keep up with visionary Apple co-founder Steve Jobs and design whizz Jony Ive.
But the cellphone’s multitouch, full-screen features were not Apple’s only advantages. The company was also outmanoeuvring Nokia on hardware and production before the iPhone even went on sale. And it did so by making a substantial bet on China and its manufacturing sector.
Supply chain researcher Kevin O’Marah vividly remembers his confusion when, in mid-2007, Apple vaulted from out of nowhere into the No. 2 spot of the Supply Chain Top 25, an annual ranking of the world’s best-run corporate supply chains.
“Everyone was shocked,” he says. “It was like, ‘What? This doesn’t make sense. They have a terrible reputation.’”
The supply chain ranking turned out to be an early indication of a profound shift in operations at Apple, which held the No.1 spot for the next seven years. In that time it became the world’s most valuable company, while placing itself at the centre of geopolitical tensions.
O’Marah began to learn that Apple was not really “outsourcing” production to China, as commonly understood. Instead, he realised that Apple was starting to build up a supply and manufacturing operation of such complexity, depth and cost that the company’s fortunes have become tied to China in a way that cannot easily be unwound.
Over the past decade and a half, Apple has been sending its top product designers and manufacturing design engineers to China, embedding them into suppliers’ facilities for months at a time.
These Apple employees have played integral roles co-designing new production processes, overseeing the minutiae of manufacturing until things were up and running, and keeping close tabs on suppliers to ensure compliance.
Apple has also spent billions of dollars on custom machinery to build its devices, developing niche expertise that its rivals did not even know about, let alone compete with.
It has transformed the company and the country. “All the tech competence China has now is not the product of Chinese tech leadership drawing in Apple,” O’Marah says. “It’s the product of Apple going in there and building the tech competence.”
These operations played such a salient role that the unassuming character behind them, chief operating officer Tim Cook, would succeed Steve Jobs as CEO in 2011. It was Cook who shifted Apple’s production from the US to China, where he established unparalleled efficiencies that underpinned Apple’s ascent.
But this extraordinary success story has also created Apple’s biggest vulnerability: its dependence on a single country, China, which under President Xi Jinping has grown increasingly authoritarian and estranged from the west.
The manufacturing concentration is glaring for a risk-averse company widely lauded for leading the world in supply chain brilliance. More than 95 per cent of iPhones, AirPods, Macs and iPads are made in China, where Apple also earns about a fifth of its revenue — $74bn last year. That contrasts with rivals such as Samsung, which have sharply cut back manufacturing in China.
Even in recent years, as competition between Washington and Beijing has escalated sharply, Apple has continued to invest in China and further cement its connections with the country.
The result is intense political scrutiny of Apple and its relationship with China, the country most in Washington consider to be America’s principal rival. Cook and his company are now under intense pressure from investors and US politicians to “decouple” from China and accelerate a diversification strategy that already has some products assembled in Vietnam and India.
Apple declined to comment on this story. But interviews with 25 supply chain experts, including nine former Apple executives and engineers, suggest the iPhone maker has few viable paths out and none in the short term.
13. What it would take for Apple to disentangle itself from China
Patrick McGee, Financial Times, January 18, 2023
The tech giant increasingly finds itself beholden to America’s biggest geopolitical rival. But is diversification even possible?
When Tim Cook visited Capitol Hill to meet privately with senior lawmakers in early December, his company’s relationship with China was high on the agenda.
In the prior month, Beijing’s strict Covid-19 policies had led thousands of workers to flee the Zhengzhou megafactory known as “iPhone City” run by Foxconn, Apple’s manufacturing ally for a quarter of a century. When those trapped at the factory protested, police responded with violence in riot gear.
But when a Fox News reporter put him on the spot in Washington, he declined to answer. “Do you support the Chinese people’s right to protest? Do you have any reaction to the factory workers that were beaten and detained for protesting Covid lockdowns?” asked Hillary Vaughn, as Cook walked through the building. “Do you think it’s problematic to do business with the Communist Chinese party when they suppress human rights?”
Cook ignored Vaughn, eyes cast downward as he changed direction to avoid her. The clip was played repeatedly on US cable news, and the Wall Street Journal highlighted it in an op-ed entitled, “Tim Cook’s Bad Day on China.” One supply chain executive, who declined to speak on record, characterised the confrontation as “the worst 45 seconds of Cook’s career”.
COMMENT – A great two-part series by Patrick McGee of the Financial Times. Apple’s Faustian Bargain with the Chinese Communist Party is going to be increasingly difficult for the company to manage. Hopefully, it can execute an aggressive diversification effort.
14. Hong Kong Police Arrest Six for Sedition in Fresh Crackdown
Selina Cheng, Wall Street Journal, January 18, 2023
Raid on pro-democracy market comes days after national security chief was promoted and as city’s leader warns against foreign forces.
Authorities here arrested six people for sedition in a raid on a market selling pro-democracy books, trinkets and souvenirs, signaling there will be no letup in the crackdown on dissent in the city.
The raid, the biggest since April, came just days after the city’s national security chief was named by Beijing as its top representative in the semiautonomous city. It also followed a warning by Hong Kong leader John Lee that foreign forces were still at work in the city, which was roiled by antigovernment protests in 2019 and early 2020.
The three men and three women were arrested Tuesday evening during a raid in Mong Kok, a bustling shopping district known for its night markets that are especially busy during the run-up to the Lunar New Year holiday.
As authorities clamped down on public demonstrations and other explicit shows of support for the pro-democracy movement, some local businesses encouraged consumers to vote with their wallets. People ate, drank or shopped at places supportive of the protests, forming a “yellow” economy—the color that symbolizes the pro-democracy movement.
COMMENT - Great place to have a financial center which depends upon transparency and the rule of law.
15. Hong Kong’s financial hub is at a crossroads
Patrick Jenkins, Financial Times, January 16, 2023
Beijing’s growing influence on the former British colony — evident in four years of security crackdowns and tough Covid lockdowns — has raised existential questions about the sustainability of the territory’s role as Asia’s unparalleled bridgehead to global finance.
COMMENT – Singapore is the clear beneficiary of the Chinese Communist Party’s destruction of Hong Kong as the gateway for global finance in Asia. See next piece…
16. The lure of Singapore: Chinese flock to ‘Asia’s Switzerland’
Mercedes Ruehl and Leo Lewis, Financial Times, January 15, 2023
17. China faces growing threats from ‘external forces’, former spy chief warns
William Zheng, South China Morning Post, January 17, 2023
A former Chinese spy chief has warned that China is facing increasing threats from “external forces” that risk thrusting the country into food shortages and financial instability.
In an article in Communist Party mouthpiece People’s Daily on Tuesday, Qiu Jin, a former deputy state security minister, said China should prepare for the potential escalation of “bullying by the hegemonies”, which aimed to exert “extreme pressure” on the country and push for zero-sum games.
“The instability and uncertainty of the international situation have increased significantly, and the world has entered a new period of turmoil and change,” Qiu said in the article.
COMMENT – For the Chinese Communist Party, nearly all challenges they face spring from ‘hostile foreign forces’ conspiring against the Chinese nation.
18. Hong Kong sports bodies told to include ‘China’ in names
Gerry Harker, The China Project, January 17, 2023
Hong Kong’s Olympic Committee has told its member associations to include “China” in their official names or risk having funding pulled.
COMMENT – Why does the international community continue to treat Hong Kong as some sort of independent jurisdiction, whether it is the International Olympic Committee or the World Trade Organization? The Chinese Communist Party has erased Hong Kong’s autonomy and independence while it takes advantage of the arbitrage that Hong Kong’s ‘autonomy’ provides.
19. China’s Corporate Social Credit System and Its Implications
Stanford Center on China’s Economy and Institutions, January 15, 2023
INSIGHTS
China’s corporate social credit system (CSCS) is a data-driven scoring system to rate the “trustworthiness” of all business entities registered in China.
In the first publicly-available CSCS scores from Zhejiang Province, neither better-governed nor more profitable firms received higher overall scores, but highly-leveraged firms subject to higher default risks were associated with lower total scores.
This research finds that politically-connected firms received higher CSCS scores, primarily by accumulating soft merits for charitable donations sanctioned by the party-state, volunteer activities, and awards from government organs.
The findings underscore the CSCS’s potential to nudge firms to adopt the preferred policies of the CCP and to exhibit increasing fealty to the CCP.
COMMENT – None of the readers of this newsletter will find SCCEI’s conclusions surprising (the PRC’s Corporate Social Credit System advantages firms that demonstrate fealty to the Chinese Communist Party), but it is incredibly important to have robust research that provides evidence of what many expected to find. I continue to be impressed by SCCEI’s work.
20. A Shrinking, Aging China May Have Backed Itself into a Corner
Chris Buckley, Joy Dong, and Amy Chang Chien, New York Times, January 18, 2023
A demographics challenge has been building for years, but Beijing’s preparations are lagging. Now, many worry that current measures may offer too little, too late.
China’s leaders have long known that the country is nearing a demographic crossroads. Policymakers have warned that China must prepare for a slowly shrinking population and an era of fewer workers and more retirees. State media have urged young couples to seize the opportunity to have two or three children under relaxed family-size rules, to soften the looming economic crunch.
And yet the sense of incipient crisis grew on Tuesday, when the government confirmed that the nation’s population shrank last year for the first time in six decades, sooner and sharper than many experts had forecast.
Even if Chinese officials have warned that a demographic Rubicon was approaching, their preparations have not kept pace with the long-term needs of an aging society, in the eyes of many experts and Chinese people.
China’s abrupt abandonment of “zero Covid” controls exposed a government ill prepared for an explosion in infections. And, similarly, the mounting population pressures may reveal a government that has not done enough to avoid tough choices in coming decades over rival priorities. Between the demands of caring for young and old. Between paying for social welfare and building up China’s technological and military might.
COMMENT – Rather than pursue history’s most expansive military build-up and modernization over the past two decades, perhaps the Chinese Communist Party should have spent that treasure on making the Chinese social safety net more robust.
21. China's first population drop in six decades sounds alarm on demographic crisis
Albee Zhang and Farah Master, Reuters, January 18, 2023
China's population fell last year for the first time in six decades, a historic turn that is expected to mark the start of a long period of decline in its citizen numbers with profound implications for its economy and the world.
22. Zero COVID: Chinese Propaganda Tries to Rewrite History
Hu Zimo, Bitter Winter, January 17, 2023
The Party claims it had decided to abandon the policy on November 10, before the Urumqi Fire and the protests. This is false.
Over the last few days, the CCP has launched a concerted propaganda effort to deny that the end of the Zero COVID policy was due to its catastrophic economic and social consequences and the widespread, unprecedented protests. Several media, including the Party organ “People’s Daily” and the official news agency Xinhua have published articles claiming that the change of policy was decided on November 10 at an extraordinary meeting of the Standing Committee of the Political Bureau of the CCP Central Committee, presided by Xi Jinping himself.
The date is of course all-important. November 10 was 14 days before the Urumqi Fire of November 24, when 44 Uyghurs died because the doors of a building that caught fire had been locked at night as part of the Zero COVID policy. It was after the Urumqi Fire that vigils commemorating the victims and protests started on social media and quickly moved to the streets, with tens of thousands protesting against the regime’s handling of the COVID crisis. November 10 was also before the November 22–23 protests at the world’s biggest iPhone factory in Zhengzhou, Henan, which helped persuading the CCP that anti-Zero-COVID protests were becoming impossible to control.
While blaming the development of the protests on foreign agents trying to create a “color revolution” in China, the CCP regarded the unrest as a most dangerous virus than COVID 19 and abandoned the Zero COVID policy almost overnight on December 7.
So, was it December 7 or November 10? The story of the extraordinary Standing Committee meeting of November 10 is told as an epic tale, which will surely become standard CCP history for years to come.
Unfortunately, the epic story is not true. Perhaps it may be deleted or changed, but so far you can still easily access the CCTV account of the November 10 extraordinary meeting. You can hear there that Xi Jinping and the Standing Committee’s instructions were to “accurately and comprehensively implement the decisions and plans of the CPC Central Committee, put people first and life first, implement the general strategy of preventing imports from abroad and preventing rebound from home, unswervingly implement the general policy of dynamic Zero COVID.”
On November 10, the orders were to “unswervingly implement” the Zero COVID policy, not to abandon it. CCTV also mentioned, as usual, that a “war of annihilation” was being fought against the virus. Twenty measures were suggested, but none implied that the Zero COVID policy was no longer in force.
It is true that the meeting’s account also mentioned that China should “restore normal order of production and life as soon as possible.” But this song had been consistently sung during the long Zero COVID months and never signaled a departure from the policy. It was through Zero COVID, not against it, that it was believed the virus would be “annihilated” and the normal life restored.
What happened is thus clear. Even if at the November 10 meeting voices calling for restoring life back to normal as soon as possible were perhaps louder than normal, nothing was changed about Zero COVID, and orders to continue with the policy were confirmed. It is only after the Zhengzhou factory unrest, the Urumqi Fire, and the massive national protests that followed that the CCP decided to change the policy, in such a sudden way that infections and deaths exploded. All the rest is just propaganda.
23. In China, doctors say they are discouraged from citing COVID on death certificates
Martin Quin Pollard and Engen Tham, Reuters, January 18, 2023
During a busy shift at the height of Beijing's COVID wave, a physician at a private hospital saw a printed notice in the emergency department: doctors should “try not to” write COVID-induced respiratory failure on death certificates.
Instead, if the deceased had an underlying disease, that should be named as the main cause of death, according to the notice, a copy of which was seen by Reuters.
If doctors believe that the death was caused solely by COVID-19 pneumonia, they must report to their superiors, who will arrange for two levels of "expert consultations" before a COVID death is confirmed, it said.
24. WHO urges China to release more information about new COVID infections
Julia Mueller, The Hill, January 15, 2023
The World Health Organization (WHO) on Saturday urged China to release more information about new COVID-19 infections in the country after Beijing announced nearly 60,000 people had died from the virus since early last month.
COMMENT – This is becoming a broken record: the WHO publicly calls on Beijing to live-up to its international obligations of reporting health data during a pandemic and the Party continues to restrict access for its own selfish purposes.
25. China’s Latest Source of Unrest: Unpaid ‘Zero Covid’ Workers
David Pierson, Keith Bradsher, and Muyi Xiao, New York Times, January 16, 2023
Companies that reaped windfalls helping the government implement strict ‘zero Covid’ controls are now struggling to pay and keep workers.
After China’s abrupt reversal of “zero Covid” restrictions, the nation’s vast machinery of virus surveillance and testing collapsed, even as infections and deaths surged. Now, the authorities face another problem: Angry pandemic-control workers demanding wages and jobs.
In the southwestern Chinese city of Chongqing, hundreds of workers locked in a pay dispute with a Covid test kit manufacturer hurled objects at police officers in riot gear, who held up shields as they retreated. Standing on stocks of inventory, protesters kicked and tossed boxes of rapid antigen tests on to the ground, sending thousands of tests spilling.
In the eastern city of Hangzhou, witnesses said several workers climbed on the roof of a test kit factory and threatened to jump to protest unpaid furloughs. And at a separate test manufacturing plant in the city, workers protested for days over a wage dispute.
The unrest this month highlights a little-noticed aspect of the social and economic fallout from China’s “zero Covid” policy U-turn. Mass testing was a cornerstone of China’s strategy of isolating the virus before it could spread. But Covid testing of any sort is no longer in high demand. Companies that manufactured test kits and analyzed results in a lab are seeing their revenues plummet, leading to layoffs and pay cuts for their workers. One report suggested that mass testing in large cities accounted for about 1.3 percent of China’s economic output.
26. VIDEO – Episode 8 of Whale Hunting, Where is Jho Low
Project Brazen, January 13, 2023
COMMENT – Fascinating video series that documents the investigation to find Jho Low, one of the world’s most notorious white-collar criminals who stole billions from the Malaysian 1MDB fund and has been hiding in the PRC for years with Beijing’s protection.
27. The Last Generation: Why China’s Youth Are Deciding Against Having Children
Barclay Bram, Asia Society Policy Institute, January 2023
The epidemic-prevention workers stand in the doorway of the home of a couple who are refusing to be dragged to a quarantine facility in May 2022, during the infamous Shanghai lockdown. Holding a phone in his hand, the man in the household tells the epidemic workers why he won’t be taken. “I have rights,” he says. The epidemic-prevention workers keep insisting that the couple must go. The conversation escalates. Finally, a man in full hazmat gear, with the characters for “policeman” (警察) emblazoned on his chest, strides forward. “Once you’re punished, this will affect your family for three generations!” he shouts, wagging a finger toward the camera. “We’re the last generation, thank you,” comes the response. The couple slam the door.
This scene, posted online, quickly went viral, and the phrase “the last generation” (最后一代) took the Chinese internet by storm. It captured a growing mood of inertia and hopelessness in the country, one that had been percolating for a number of years but finally boiled over during the COVID-19 pandemic.
That dark mood may be contributing to a key challenge for China: a widespread disinterest in having children. China’s birthrate has declined precipitously in recent years. In 2021, the most recent year for which there is data, 11 provinces fell into negative population growth. From 2017 to 2021, the number of births in Henan, Shandong, Hebei, and other populous provinces dropped more than 40 percent. The United Nations predicts that in 2023, China’s overall population will start to decline. When young people claim that they are the last generation, they are echoing a social reality. Many young people are the last of their family line. This trend is extremely worrying for the government in Beijing, as it sees the oncoming demographic collapse as one of the greatest existential threats facing the country.
ENVIRONMENTAL HARMS
28. China Posts Record Fossil Fuel Output as Security Trumps Climate
Bloomberg, January 17, 2023
Fossil fuel production in China soared in 2022, with coal and gas hitting record highs, as environmental targets took a back seat to energy security after a tumultuous year for prices.
29. Demand for oil to hit an all-time high, says energy agency
Emily Gosden, Times of London, January 19, 2023
Global oil demand will hit a record high this year, driven by the lifting of Covid restrictions in China and threatening a supply shortage, the International Energy Agency has predicted.
The world is expected to consume an average of 101.7 million barrels of oil per day in 2023, up from 99.9 million barrels per day last year, with almost half the growth coming from China.
FOREIGN INTERFERENCE AND COERCION
30. Why Taiwan’s Main Opposition Party Can’t Shake Its Pro-China Stance
Chieh Yen, The Diplomat, January 18, 2023
The KMT’s structure keeps it beholden to a group that is increasingly out of step with Taiwan’s general population on China and unification.
The Kuomintang (KMT), or Chinese Nationalist Party, despite being the main opposition party in Taiwan and receiving around 38 percent of the popular vote in the 2020 presidential election, is widely regarded as “pro-China.” In an era in which authoritarian regimes are getting more aggressive, the China-friendly label has caused damage to the KMT’s reputation both at home and abroad.
KMT leaders are well aware of this issue. Yet, no matter who is the party’s chairperson or presidential candidate, they have failed to get rid of this pro-China stigma. This dynamic has confused observers of East Asian politics, and it requires explanation for a better understanding of cross-strait relations.
As with every other political party in the world, a wide spectrum of national identities exist within KMT, and all of them receive different levels of support from party members.
Generally, there are three categories. The first group, led by chairperson Eric Chu, argues that engaging with the United States while maintaining a good relationship with China will make Taiwan safe. The difference between this KMT faction and President Tsai Ing-wen’s cross-strait policy is that Chu and believe sticking to the “1992 Consensus” is the “key” to communicating with Beijing – regardless of the fact that Chinese leader Xi Jinping has declared that the 1992 Consensus means “both sides of the Taiwan Straits belong to one China and will work together toward national reunification.”
This stance on the cross-strait relationship is not acceptable to the bulk of voters from both the KMT and Tsai’s Democratic Progressive Party (DPP). KMT and other pan-Blue voters are of the opinion that Chu’s China policy is too similar to the DPP’s, while pro-Green supporters regard Chu and others as “giving up Taiwan’s sovereignty.” Thus, these leaders have received little support in almost every poll.
The second group in the KMT has a more pro-mainland stance, asserting that the KMT should keep its distance from the United States in order to not frustrate the Chinese Communist Party. They believe that diplomacy, rather than deterrence, is the way to keep the Taiwan Strait safe. To achieve that goal, proponents like former President Ma Ying-jeou insist the Taiwanese government should explicitly state that it agrees with the 1992 Consensus as the foundation for further communications and cooperation.
This community within the KMT has more popularity than all the others, as it claims to offer another way to achieve peace, while proclaiming that it can perform better than the DPP in terms of economic welfare since they are capable of establishing better economic ties with China.
The last group within the KMT mainly consists of veterans and their descendants and is the least popular subgroup within the party. After having retreated from the mainland in 1949, this group of KMT members are die-hard supporters of reunification with China, as they still regard China as their home.
Given the “median voter theorem,” we might expect the KMT’s China policy will ultimately shift toward somewhere between the first and the second group. Yet the situation has not unfolded as the theory supposed, due to the structures and mechanisms within the KMT.
After retreating from China, the KMT veteran community established branches of the Huang Fu-hsing, a highly united group that loyally backed the political leaders who came over with them from China. Huang Fu-hsing members still firmly believe that ultimate reunification is the best option. Although their stance on cross-strait affairs is extreme compared to Taiwan’s general public, Huang Fu-hsing branches represent roughly 25 percent of the party member vote, and reportedly have a meticulous mechanism to allocate all their votes to serve various political aims. As a result, the organization became a comparatively strong power within the KMT.
No one seeking to win the KMT’s chair position could ignore the voice of Huang Fu-hsing simply due to the fact that no single candidate could take the risk of losing 25 percent of the vote in the primary. If that occurred, a candidate would need more to secure more than two-thirds of the vote in the rest of the supporters to barely win the primary. Tus the Huang Fu-hsing must be courted – and the result is that the KMT’s most extreme voices on cross-strait relations have disproportionate clout within the party. Given this dynamic, the KMT’s leader will always to some extent support the most pro-China opinions.
The chair – currently Eric Chu – will be leading the rule-making process to govern the KMT’s primary election for the 2024 presidential election, and thus the presidential candidate’s stance could not shift too much from the chair’s – and the opinions of those deeply pro-China groups.
As a result, all potential KMT candidates for the 2024 presidential election to date have given speeches distancing themselves from the United States. The mayor of New Taipei City, Hou You-yi, claims that “Taiwan should not be a chess piece for the great power”; Eric Chu suggested that Taiwan should accept the 1992 consensus; and Terry Gou asserted that buying weapons from the U.S. could prompt China to attack Taiwan.
These sentiments seem to be very different not only from the DPP position, but from the mainstream of Taiwanese people. Unfortunately, this rhetoric will not change because these KMT candidates all need support from the most extreme side within the party.
As the opposition party, the KMT will still receive support from those who suffer from the economic hardships caused by COVID-19, but the party has provoked serious concerns both domestically and internationally about whether it will provide a China policy that can satisfy the Taiwanese people and the democratic world.
COMMENT – Chieh Yen provides an excellent thumbnail sketch of the often-confusing political dynamics within Taiwan’s main opposition party, the KMT.
Peter Lee, Hong Kong Free Press, January 17, 2023
In an interview with state-backed newspaper Commercial Daily on Tuesday, Chief Executive John Lee said that “some people were using journalistic work as a cover to do other things,” however, he failed to provide examples to back up his claims.
COMMENT – This is rich coming from the Party’s hand-picked administrator in Hong Kong… the same Chinese Communist Party that asserts that the media “must be surnamed Party.” (Xi Jinping in February 2016)
The entire purpose of “journalism” inside the PRC is to glorify the Party and to help achieve the Party’s political objectives (See Xi Jinping’s News Alert: Chinese Media Must Serve the Party, Edward Wong, New York Times, February 22, 2016 and How China uses the news media as a weapon in its propaganda war against the West, Raksha Kumar, Reuters Institute at the University of Oxford, November 2, 2021).
32. Youngkin says he blocked Ford battery plant on China concerns
Gregory S. Schneider, Washington Post, January 13, 2023
Gov. Glenn Youngkin (R) said this week that he had rejected efforts by Ford Motor Co. to consider locating an electric battery plant in Virginia over concerns that the automaker’s partnership with China created a security risk.
“We felt that the right thing to do was to not recruit Ford as a front for China to America,” Youngkin said Wednesday night to reporters after delivering his State of the Commonwealth speech to the General Assembly.
HUMAN RIGHTS AND RELIGIOUS PERSECUTION
33. Canada Looks Poised to Pass Law on Forced Labor
Richard Vanderford, Wall Street Journal, January 16, 2023
Canada could require that companies report on their efforts to stop goods made with forced labor from entering their supply chains, adding to momentum among Western governments to tackle the practice.
34. The World Muslim Communities Council Hails Xinjiang as a Religious Liberty Paradise
Kok Bayroq, Bitter Winter, January 13, 2023
TWMCC is just another fake NGO, made up of bureaucrats from Arab governments who need to humor China for their own purposes.
China’s international propaganda newspaper “Global Times” reported that The World Muslim Communities Council (TWMCC) visited the Uyghur region on January 9, 2023, with more than 30 Islamic scholars from Saudi Arabia, Egypt, and the United Arab Emirates (UAE) participating in the visit. Where did this organization, which was not well-known nor came forward on international issues before, come from? Are we to believe that Emirates scholar Ali Rashid Al Nuaimi, who had never spoken a word about Uyghurs before, suddenly became concerned about us?
Let’s look at the characteristics of the visit and Al Nuaimi’s statement: “The level of attention that we found in Xinjiang embodies [the] determination of Chinese leadership to serve all the components of the people in the region.”
Al Nuaimi’s statement implies that, during his visit, he believed in the smiles on the faces of the Uyghurs who were introduced to him, the praise they offered, and the excitement in their dances. Setting aside the fact that East Turkistan is under colonial control, it is no secret that China is a one-party state and its citizens cannot speak freely under such a regime. Not to realize that China was offering to the visitors a political sideshow, one would have to be either weak-minded or a willing player in the show.
Al Nuaimi went on to state, “We congratulate China on completion of anti-terrorism plan in Xinjiang.”
TWMCC, which quickly concluded that China’s genocide against the Uyghurs is a war against terrorism, did not visit any of the more than 100 exiled Uyghur organizations or speak with 50 available camp survivors, or hundreds of experts of the Uyghur crisis before or during the visit. Faced with an urgent international issue such as the Uyghur genocide, refusing to listen to the opinions of both sides involved in the problem and adopting a one-sided approach is unacceptable from the perspectives of science, Islam, and humanity.
Al Nuaimi was impressed by what he saw in China’s “Museum of Fighting Extremism & Terrorism in China’s Xinjiang Region.” He lectured that “it’s the responsibility of wise people everywhere to understand that the threat of terrorism and extremism is not a threat to one single nation or a single region. It’s a threat to the world.”
35. Where is Hu Xinyu? A New Scandal Rocks the CCP
Lei Shihong, Bitter Winter, January 18, 2023
Three months ago, a 15-year-old student disappeared from a private school in Jiangxi. Because of the lack of action by the police, all sort of rumors are circulating.
Remember the chained mother of eight? It happened one year ago, on January 2022, and it generated the largest Internet protests in China in a decade (to be surpassed at the end of 2022 by the protests about the Urumqi fire, which extended from the web to the streets).
The CCP’s propaganda about a brave Party man raising eight children alone in Jiangsu province led inquiring netizens to investigate who the mother of eight was. Finally she was found, and a video showed her emaciated and chained. In a few days, the video had gathered more than ten million downloads. After contradictory answers and attempts to suppress the scandal, the CCP had to admit that the “chained mother of eight” had been one among many victims of human trafficking, and had been sold to an abusive husband. The “brave Party man” ended up being arrested, and several local CCP cadres lost their jobs.
In retrospect, the story of the “chained mother of eight” taught the CCP that web protests of this magnitude cannot be suppressed, which probably played a role in the subsequent decision to hear the protesters and withdraw the Zero COVID policy.
In the last three months, a new story that involves millions of social media users and is evolving into a major scandal has emerged.
Three months ago, on October 14, 2022 , Hu Xinyu, a 15-year-old boy from Zhiyuan Middle School in Shangrao city, Jiangxi province, disappeared after having been last seen leaving the school’s dormitory. Zhiyuan is an expensive private boarding school that Hu, a brilliant student, was able to attend thanks to a scholarship.
Hu is not the first minor who disappeared, but the school is a prestigious one and his family made noise claiming that the police has been strangely unwilling to investigate and even register the case.
The rumors snowballed on social media. Some of them, such that other students at Zhiyuan had disappeared or had even been killed, seem to be demonstrably false. On the other hand, after the case of the “chained mother of eight,” many netizens speculated that Hu had become himself a victim of human trafficking, and had been kidnapped to be forced into prostitution or worse. Some went so far to suggest that Hu may have become a victim of gangs kidnapping healthy young men and women for organ harvesting.
The CCP has been very active cancelling posts and suppressing discussions, but it has only itself to blame for the escalation of wild rumors. A police that gives the impression to be unwilling to investigate, and is unable to communicate with the citizens and reassure them, cannot but fuel the rumors. The CCP has now learned that social media scandals have a way of becoming uncontrollable. But it does not seem to be willing to amend its ways.
INDUSTRIAL POLICIES AND ECONOMIC ESPIONAGE
36. Industrial espionage: How China sneaks out America's technology secrets
Nicholas Yong, BBC, January 17, 2023
It was an innocuous-looking photograph that turned out to be the downfall of Zheng Xiaoqing, a former employee with energy conglomerate General Electric Power.
According to a Department of Justice (DOJ) indictment, the US citizen hid confidential files stolen from his employers in the binary code of a digital photograph of a sunset, which Mr Zheng then mailed to himself.
It was a technique called steganography, a means of hiding a data file within the code of another data file. Mr Zheng utilised it on multiple occasions to take sensitive files from GE.
GE is a multinational conglomerate known for its work in the healthcare, energy and aerospace sectors, making everything from refrigerators to aircraft engines.
The information Zheng stole was related to the design and manufacture of gas and steam turbines, including turbine blades and turbine seals. Considered to be worth millions, it was sent to his accomplice in China. It would ultimately benefit the Chinese government, as well as China-based companies and universities.
Zheng was sentenced to two years in prison earlier this month. It is the latest in a series of similar cases prosecuted by US authorities. In November Chinese national Xu Yanjun, said to be a career spy, was sentenced to 20 years in prison for plotting to steal trade secrets from several US aviation and aerospace companies - including GE.
It is part of a broader struggle as China strives to gain technological knowhow to power its economy and its challenge to the geopolitical order, while the US does its best to prevent a serious competitor to American power from emerging.
The theft of trade secrets is attractive because it allows countries to "leapfrog up global value chains relatively quickly - and without the costs, both in terms of time and money, of relying completely on indigenous capabilities", Nick Marro of the Economist Intelligence Unit told the BBC.
37. OPEC Cartel Has Nothing on China’s Clean-Energy Monopoly
Carol Ryan, Wall Street Journal, January 16, 2023
The supply chain for renewable energy technology is even more concentrated than for fossil fuels. Fixing its overreliance on China will raise the cost of the energy transition.
Countries that import oil and gas worry about the clout of producing nations, particularly since Russia invaded Ukraine. Yet an even bigger vulnerability is building in the global supply chain for green energy.
China refines 95% of the world’s supply of cobalt, a metal used in lithium-ion batteries. It manufactures over 70% of sicilia-based solar photovoltaic modules and is home to three-quarters of global electric-vehicle battery production capacity. Such numbers, published by the International Energy Agency last week, underline just how concentrated the global supply chains necessary for the transition to renewable energy are.
The oil market looks fragmented by comparison. The 13 countries of the Organization of the Petroleum Exporting Countries have cornered around 40% of the world’s oil supply since the early 1990s, according to Goldman Sachs. Add the additional producers of the larger OPEC+ group, such as Russia, and this jumps to 60%. For now, the oil cartel has much greater power over the global economy than green-energy technology suppliers, but this could change as the world’s energy mix shifts.
China dominates the manufacturing of renewable-energy technologies today due to years of generous subsidies, access to cheap power, labor and land. The Chinese government first identified clean energy as strategically important more than a decade ago. Between 2018 and 2022, Beijing’s share of global investment in new factories for clean-energy products such as solar panels and wind turbine components held steady at 80%, based on data from BloombergNEF.
COMMENT – U.S. efforts with the Inflation Reduction Act are meant to address this problem. Over the last week, I was disappointed to listen to multiple European colleagues who could not understand the commercial and industrial dynamics at play in the energy transition, nor grasp the geopolitical implications of overreliance on the PRC.
Salina Li, South China Morning Post, January 19, 2023
China is rolling out a raft of measures to encourage foreign investors to set up innovation centres in the country and attract professional talent.
The move comes amid the country’s stepped-up efforts to accelerate innovation across the board, with leaders and policymakers in the world’s second-largest economy repeatedly highlighting their intentions to turn it into a global tech powerhouse.
“Foreign-invested research and development (R&D) centres are important components of China’s science and technology innovation system,” the Ministry of Commerce and Ministry of Science and Technology said in a joint statement published by the State Council on Wednesday.
It pledged to “accelerate the implementation of [China’s] innovation-driven development strategy”, “expand international science and technology exchanges and cooperation”, and “increase support for foreign investment in China to set up R&D centres to carry out scientific and technological research and innovation activities”.
39. India among lowest-cost manufacturing hubs, beating China: Report
The Federal, January 16, 2023
Research by US-based Reshoring Institute indicates manufacturing wages have risen in China, which is no longer the global low-cost labour market; India, Mexico and Vietnam have taken over.
40. China's 2022 property investment falls for first time since 1999
Liangping Gao and Kevin Yao, Reuters, January 17, 2022
41. China's 2022 economic growth one of the worst on record, post-pandemic policy faces test
Kevin Yao and Ellen Zhang, Reuters, January 17, 2023
China's economic growth in 2022 slumped to one of its worst levels in nearly half a century as the fourth quarter was hit hard by strict COVID curbs and a property market slump, raising pressure on policymakers to unveil more stimulus this year.
42. Biden administration imposes China chip curbs on Macau
Karen Freifeld, Reuters, January 17, 2023
The Biden administration on Tuesday hit Macau with sweeping new export controls it previously imposed on shipments of advanced chips and chipmaking equipment to Beijing, flagging the risk that the technology could be diverted from the region to the rest of China.
The United States in October placed the new restrictions on China, including controls on advanced computing integrated circuits and certain semiconductor manufacturing items, in a bid to thwart China's military modernization and punish it for human rights abuses.
Macau has been a Special Administrative Region of China since 1999 when it was returned to Chinese sovereignty from Portuguese administration, the rule noted, adding that China gives Macau limited autonomy in economic and commercial relations.
43. Transatlantic Approaches to Outbound Investment Screening
Emily Benson, Francesca Ghiretti, and Daniel Elizalde, CSIS, January 17, 2023
44. Dutch PM Rutte sees progress in talks on U.S. chip export restrictions
Bart Meijer and Toby Sterling, Reuters, January 17, 2023
Dutch Prime Minister Mark Rutte on Tuesday said he saw gradual progress in talks over new restrictions the United States wants it to implement on exporting chip-making technology to China.
"I think that step by step we will be able to reach a good outcome in cooperation," Rutte said in an interview with Dutch TV programme Nieuwsuur following his visit to the White House.
CYBER AND INFORMATION TECHNOLOGY
45. TikTok’s E-Commerce Management Structure Undercuts Claims of Autonomy from China
Juro Osawa, The Information, January 17, 2023
The new head of TikTok’s important push into e-commerce in the U.S. answers directly to a boss at the app’s Chinese owner, ByteDance, bypassing TikTok’s own CEO. The previously unreported structure could undercut TikTok’s efforts to convince Washington lawmakers that it can operate independently from ByteDance.
Sandie Hawkins, a U.S.-based TikTok executive who became the app’s head of U.S. e-commerce in November, reports to Bob Kang, ByteDance’s e-commerce chief, who in turn reports to Zhang Lidong, ByteDance’s China chair based in Beijing, according to people with knowledge of the matter. But neither Hawkins nor Kang reports to TikTok’s CEO, Shouzi Chew, the people said.
Rishi Iyengar, Foreign Policy, January 12, 2023
“Overall, TikTok’s greatest issue is that discretion regarding content censorship, demotion, or promotion are at the discretion of a company whose staff can be coerced by the [Chinese] government,” Cary said in an email to Foreign Policy. The risk, he said, is heightened for members of the Chinese diaspora globally, who could be targeted by Beijing through the app.
“China chose to export its repression and surveillance abroad; TikTok is unfortunately paying for that policy choice,” he said.
47. TikTok Banned from University of Texas Campus on Cybersecurity Concerns
Shelly Hagan, Bloomberg, January 17, 2023
The Baltic Times, January 18, 2023
The Lithuanian high-tech company group Teltonika has signed a technology cooperation agreement with Taiwan’s Industrial Technology Research Institute (ITRI). Under the agreement, ITRI will share technologies with Teltonika that can facilitate the creation of a semiconductor chip industry in Lithuania.
MILITARY AND SECURITY THREATS
49. Ferdinand Marcos Jr says Taiwan tensions ‘very, very worrisome’ for Philippines
Gideon Rachman, Financial Times, January 19, 2023
50. Don’t appease China, warns Taiwan’s likely presidential successor
The Guardian, January 19, 2023
William Lai urges Taiwanese to unite in the face of ‘the expansion of China’s authoritarianism’, in first comments since taking party leadership.
Appeasing China will not bring peace, Taiwan’s vice-president has said, days after he was elected head of the ruling party in a move that makes him a prime presidential contender at the next election.
William Lai, 63, is seen as a likely successor to President Tsai Ing-wen, who is barred from running again after her second four-year term ends in May 2024.
Lai has been more outspoken on Taiwanese independence than Tsai, and he is openly loathed by Beijing for that reason.
“Appeasement cannot buy peace,” Lai said on Wednesday in his first comments on China since assuming the Democratic Progressive party leadership.
Helen-Ann Smith, Sky News, January 18, 2023
Tensions across the Taiwan strait are the highest they have been for many years, with China now flying fighter jets towards the self-governing island's airspace on a daily basis.
Taiwan's foreign minister has said he believes China is now "more likely" to invade Taiwan to distract from leader Xi Jinping's domestic problems.
Speaking exclusively to Sky News in his first sit-down interview of the year, Joseph Wu set 2027 as the key date such action will most likely happen.
His words come at a time when tensions across the Taiwan strait are the highest they've been for many years, with China now flying fighter jets towards Taiwanese airspace on a daily basis.
Mr Wu also said that the current "status quo" arrangement, in which Taiwan is self-governing but does not officially declare independence, "might not last forever", in a rare acknowledgement that the island might one day either be assimilated by China or become an independent country.
Taiwan is a democratic, self-governing island that China sees as its own.
52. Biden and Kishida Vow to Bolster U.S.-Japan Alliance as China’s Power Grows
Edward Wong, New York Times, January 13, 2023
The two leaders discussed tensions with China, North Korea and Russia and plans for deterrence in Asia with U.S. troops and missiles.
53. Taiwan’s Outlying Islands Are at Risk
Frederik Kelter, Foreign Policy, January 16, 2023
Chinese domestic instability could encourage the CCP to attack the Taiwanese archipelagos of Kinmen and Matsu.
On the Taiwanese island of Kinmen, as waves break against the rows of anti-landing spikes that protrude from the sand, Wang Ne-Xie—a local and former military man—gazes out across the water.
Through the light haze shrouding the horizon he spots the vague silhouettes of skyscrapers rising like ghostly columns toward the sky. They constitute the outline of the Chinese city of Xiamen, which stands only a few miles from Kinmen on the Chinese mainland.
54. China's Political-Economy, Foreign and Security Policy: 2023
Asia Society Policy Institute, January 2023
ONE BELT, ONE ROAD STRATEGY
55. India foreign minister visits Sri Lanka with stronger ties, China in focus
Uditha Jayasinghe, Reuters, January 19, 2023
India's foreign minister arrives in Colombo on Thursday following his country's backing of Sri Lanka for a $2.9 billion International Monetary Fund (IMF) loan, leaving China as the island's last remaining major creditor which has yet to agree to the debt restructuring plan.
56. Europe Is Trying (and Failing) to Beat China at the Development Game
Michele Barbero, Foreign Policy, January 10, 2023
One year after the European Union launched Global Gateway, a much-touted new strategy for infrastructure development around the world, Brussels is struggling to convince skeptics inside and outside the bloc that it really means business and that the EU can be a credible player in a game that China has dominated for a decade.
57. Chinese and Local Workers Clash at Indonesia Nickel Smelter, Leaving Two Dead
Jon Emont and Austin Ramzy, Wall Street Journal, January 16, 2023
A clash involving Chinese and Indonesian workers at a nickel smelter in Indonesia left two people dead and a part of the facility burned down, showing how tensions have accompanied the expansion of Chinese investment in operations to mine and process the lucrative metal in the Southeast Asian country.
The violence—which broke out Saturday at the facility of PT Gunbuster Nickel Industry, a subsidiary of China’s Jiangsu Delong Nickel Industry Co.—involved the use of pipes and rocks, a police spokesman said. As the confrontation spiraled, workers set fire to mess halls, dozens of rooms and heavy machinery, said the spokesman, Didik Supranoto.
“Once they entered [the facility], they took anarchic action,” he said.
Chinese investment has poured into Indonesia in recent years to tap the country’s reserves of nickel, which is used in electric-vehicle batteries and to make steel. Indonesia doesn’t allow the export of raw nickel, pushing foreign investors to build nickel-processing smelters in the country. President Joko Widodo traveled to Central Sulawesi for the inauguration of PT Gunbuster’s smelter in December 2021.
The Chinese investment has brought with it larger numbers of Chinese workers, a trend Indonesian labor unions say cheats locals of jobs.
Tensions at PT Gunbuster’s site, which is located in the nickel-rich region of Central Sulawesi, began to rise last month after a workplace accident resulted in two Indonesian workers being burned to death, according to the local government. A local labor union called a strike on Saturday over what it called unaddressed safety issues and unfair pay practices.
When some striking Indonesian workers entered the smelter, they were attacked by Chinese workers, said Minggu Bulu, an administrator at the union, who attended the strike. This ignited more intense violence later in the evening when Indonesian workers forced their way into the facility to settle scores, he said.
58. Why China and Egypt Are Growing Closer
Nosmot Gbadamosi, Foreign Policy, January 18, 2023
As the Egyptian economy falters, Sisi is turning to the Chinese government for support.
On Sunday, China’s new foreign minister, Qin Gang, ended his five-nation African tour in Egypt, where he held separate meetings with Egyptian President Abdel Fattah al-Sisi and Arab League Secretary-General Ahmed Aboul-Gheit. The visit came at a precarious moment for Egypt’s economy and currency, which the government has allowed to drop precipitously—17 percent since Jan. 1 and 50 percent in the last 10 months—in an apparent newfound embrace of a flexible exchange rate policy.
COMMENT – A clear pattern has emerged over the past decade, Beijing’s quest for influence seems to only work on the naïve (side-eye at you, Berlin) or the desperate.
OPINION PIECES
59. ‘Strategic Ambiguity’ Has the U.S. and Taiwan Trapped
Raymond Kuo, Foreign Policy, January 18, 2023
Washington’s long-held policy has outlived its usefulness.
…
Strategic clarity might offer the best chance for a superior Taiwanese force posture that is aligned with the United States’ defense strategy. Moreover, as Taipei enhances its asymmetric defenses, the need for U.S. intervention decreases. Ukraine’s successful fight against Russia’s invasion demonstrates how the right weapons, paired to an effective strategy, can defeat a seemingly overwhelming force—all at relatively little cost to the United States and other NATO allies. Strategic clarity would resolve the political obstacles currently preventing Taiwan from adopting a similar posture. Clarity would advance U.S. interests by improving Taiwan’s defense, lowering the risk of a wider war, and containing China.
For its proponents, the idea of strategic ambiguity seems to have become an end in itself that has not, and logically cannot, adapt to the disruptive growth in Beijing’s military power. The conditions under which the policy worked seem to have evaporated with China’s rise.
COMMENT – Raymond Kao’s piece is a good antidote to those who long for policy orthodoxy for orthodoxy’s sake.
60. Why markets should not get carried away by China’s reopening
Nicholas Spiro, South China Morning Post, January 19, 2023
Just as a full reopening of China’s economy is no panacea for the world’s ills, a soft landing could turn into a harder one if inflation remains a problem. The economic and financial environment remains exceptionally volatile, with investors continuing to be blindsided by shifts in policy – including positive ones.
As the World Economic Forum’s annual jamboree returns to Davos during the winter for the first time in three years, there is plenty for the global elite to fret about. Whether it is Russia’s invasion of Ukraine, the fallout from the dramatic rise in interest rates, concerns about a global recession or the risk of further geopolitical shocks, there is no shortage of threats and challenges.
Yet, as delegates discuss the gloomy outlook, the mood in financial markets has improved markedly in the past several weeks. Many investors in both advanced economies and emerging markets are now bullish.
61. China bets on Saudi oil and gas
Andrew Latham, The Hill, January 18, 2023
It was only a few years ago that the signing of the China-Iran Comprehensive Strategic Partnership (CSP) seemed to augur the crystallization of a new axis of evil in the Middle East. That agreement involves unprecedented bilateral economic, military and cybersecurity cooperation. The fear was that the signing of this agreement signaled that China would now be backing Iran in its struggle for regional supremacy against both the Gulf Arab states and their American backer.
This was always somewhat overblown. Beijing has, formally at least, long pursued a policy of equivalency in its diplomatic engagements and military cooperation, signing comprehensive strategic partnership agreements with both Saudi Arabia and Iran in 2016, for example, and in both 2017 and 2019 participating in separate military drills with both Iran and Saudi Arabia.
But, fundamentally, those who argued that China had decided to back Iran in its cold war with the Gulf Cooperation Council (GCC) states were not wrong. Beijing had clearly decided that its policy of strategic even-handedness was unsustainable and that the best way to achieve its core interests – to undermine U.S. hegemony in the Gulf and to secure access to the region’s oil and gas resources – was to enter into a strategic partnership with Tehran. And so, in 2021 it signed the China-Iran CSP.
Since then, however, two developments have so transformed the geopolitical landscape that China now appears to be reversing itself, not in the sense of returning to strategic even-handedness, but in the sense of decisively favoring the Gulf Arab states over Iran.
First, the growing desire on the part of the GCC states for greater strategic autonomy (greater independence from Washington) has created an opening for Beijing. Since the Obama administration first began negotiating with Tehran over the latter’s nuclear program, and especially since the Joint Comprehensive Plan of Action (JCPOA) was signed in 2015, the sense that the United States was softening its stance on Iran and could therefore no longer be considered a reliable security partner has been growing among the Gulf Arab states.
In turn, this has provided a powerful incentive for those states to adopt a hedging strategy — that is, to cultivate closer relations with China to minimize their dependence on a United States whose interests are increasingly divergent from theirs. This has created opportunities for Beijing that simply did not exist before.
Second, China’s growing reliance on GCC oil and natural gas has naturally inclined it to take steps to ensure that that supply remains uninterrupted and secure. Not long ago, China’s leaders wagered that Iran would become the preferred supplier of oil and gas to China, providing one of the incentives to tighten their strategic relations with Tehran. The failure to revive the JCPOA, however, and the resulting continuation of sanctions (which have inflicted serious damage on the Iranian oil and gas sector and made doing business with Iranian firms incredibly onerous) have revealed this to be a very bad bet indeed. Conversely, in the new era of strategic hedging on the part of the GCC, betting on Saudi oil and gas now appears to be the far more rational wager. This has created an incentive structure for Beijing that simply didn’t exist before.
62. Dell Me Something New: Ditching Chinese Chips Is Great, but Not Enough
Emily de La Bruyere and Nathan Picarsic, Force Distance Times, January 18, 2023
Dell announced at the start of the year that it intends to stop using semiconductors made in China by 2024 – and that it is encouraging its suppliers also to reduce their dependence on Chinese components. This is great. It is a sign of a major US company waking up to the risks posed by reliance on China. It could even be an indicator of a broader recognition by the US private sector.
But Dell’s move is also wildly insufficient given the breadth of the company’s ties to and reliance on China – and the latent costs those carry. The company’s supply-side exposure to China extends well beyond semiconductors. As of 2021, 85% of Dell’s supply chain was in China. So was 75% of its productive capacity. Phasing out made in China semiconductors suggests a recognition of today’s market and geopolitical threats — that Beijing leverages its role as the world’s workshop to steal technology, cement dependence, and support its own champions at the expense of international companies, markets, and security. But what about Dell’s manufacturing plants, maker laboratories, and research and development centers in China?
63. Germany’s Bet on China Is a Crisis in the Making
John Austin and Elaine Dezenski, National Interest, January 15, 2023
64. US-China war game shows need for victory if deterrence fails
Joseph Bosco, The Hill, January 17, 2023
The Center for Strategic and International Studies (CSIS) recently conducted a war game testing the scenarios and outcomes in a possible U.S.-China war over Taiwan. The reason for the exercise was that, “What was once unthinkable — direct conflict between the United States and China — has now become a commonplace discussion in the national security community.”
Actually, the near-doomsday scenario played out in the 1995-1996 Taiwan Strait Crisis, when China fired missiles toward Taiwan and Washington sent a carrier battle group through the Taiwan Strait. A Clinton official called it “our own Cuban missile crisis; we had stared into the abyss.”
Since then, only one U.S. carrier has entered the Strait, though smaller Navy ships have conducted freedom of navigation transits under the Trump and Biden administrations. China’s recently deployed carriers freely move through the Strait.
Vladimir Putin’s latest aggression against Ukraine and Xi Jinping’s increasing pressure on Taiwan — with each other’s rhetorical support — have raised new alarms, the CSIS report acknowledges.
“The possibility of one country invading another to acquire territory seemed antiquated. Russia’s [latest] attack on Ukraine has reminded the world that cross-border invasions are possible. Speculation about a Chinese invasion of Taiwan was inevitable. … [I]nvasion is the most dangerous threat to Taiwan and is thus the first course of action that needs to be analyzed.”
The CSIS exercise was run 24 times. “In most scenarios, the United States/Taiwan/Japan defeated a conventional amphibious invasion by China and maintained an autonomous Taiwan.”
But all parties in the war game suffered high losses. “Victory is therefore not enough. The United States needs to strengthen deterrence immediately.” The report recommended measures to improve U.S. capabilities:
“Increase the arsenal of long-range anti-ship cruise missiles. Bombers capable of launching standoff, anti-ship ordnance offer the fastest way to defeat the invasion with the least amount of U.S. losses. Procuring such missiles and upgrading existing missiles with this anti-ship capability needs to be the top procurement priority.”
65. Big News About a Smaller Chinese Population
Wall Street Journal, January 17, 2023
A slowing economy and falling number of births challenge Xi Jinping.
China’s Communist Party tried for decades to engineer slower population growth, and now it has what it wished for. The country’s population declined last year for the first time in six decades, data released Tuesday show, at the same time economic growth fell to its slowest pace in nearly 50 years.
The demographics are especially startling. China’s population fell to 1.412 billion last year from 1.413 billion the previous year. Birth rates have been falling for some time, and last year reached 6.77 per 1,000 people compared to 7.52 in 2021. That translates to more than a million fewer births.
This is happening even though the Communist Party dropped its one-child policy in 2016. Beijing tried for decades to contain population growth, sometimes via forced abortions and sterilizations. This caused enormous social disruption, especially as Chinese parents anxious for sons engaged in sex-selective abortions in large enough numbers to create a significant male-female imbalance. The Party only belatedly realized that slower population growth would make it harder for China to grow rich before its population grows old.
Yet now that the Party wants more children, it finds the Chinese public unwilling or unable to oblige. A decline in optimism about the economy may be one reason.
66. AUDIO – U.S Dollar's Role in The Great Power Competition
Michael Kao, On the Margin Podcast, January 18, 2023
On today's episode of On the Margin, Michel Kao joins the show for a discussion on the U.S Dollar and its role in the great power competition.
Michael outlines his thesis for an upcoming paper on the U.S Dollar looking at the geopolitical significance of the Dollar and the four key economic pillars of which is stands upon. As many have called for the demise of the U.S Dollar, Michael sees the current rules based order continuing, despite the less favourable policies the U.S has enacted.
67. Freewheeling Xi is becoming a graver threat
Roger Boyes, Times of London, January 17, 2023
His startling U-turn over Covid restrictions shows the Chinese strongman does just as he likes.
68. Mike Gallagher’s China challenge
Ben Domenech, The Spectator, January 16, 2023
The chair of a new House committee on the PRC faces a daunting in-tray.
69. How to Win the Geoeconomics Revolution
Adrian Woodridge, Bloomberg, January 17, 2023
A fracturing strategic landscape is reshaping global trade and investment with bewildering speed. Neoliberals need to get on board or risk irrelevance.
The world is in the early stages of the biggest revolution in geoeconomics in decades. From the late 1970s onward, a collection of institutions and policies were gradually but relentlessly marginalized: state-owned enterprises (SOEs), national champions, import- and export-controls and industrial policy. Now they are coming back along with a few newfangled phrases for the same thing such as “techno-nationalism” and “critical technologies.”
This confronts neoliberals with a dilemma: Do they imitate William F. Buckley and “stand athwart history, yelling Stop,” or do they make strategic compromises with the new fashions in order to reduce the chances of disaster?
The pace of change is startling: For all his impression of being a doddering stop-gap, Joe Biden is both consolidating the Trump revolution and pushing it in a progressive direction. Trump dealt in bluster and crude policies such as tariffs. Biden is using a panoply of policies not only to protect and promote “strategic” American industries but also to slow China’s economic development. America must pursue “as large of a lead as possible” in chipmaking, quantum computing, artificial intelligence, biotechnology and clean energy, says Jake Sullivan, America’s National Security Advisor.
70. China’s hidden hold on the West’s national security supply chain
Sam Olsen, The Hill, January 15, 2023
A key lesson learned from the COVID pandemic is how important the international supply chain is to national security. Whether it was personal protective equipment (PPE) for the health care system, or microchips for car production, or the food system, shortages from suppliers abroad led to widespread disruption across the U.S. and its Western allies. The national security supply chain is far more than just a military matter — it is expected to include keeping a country’s economy and society healthy. As President Biden noted in his introduction to the National Security Strategy released in October, “If parents cannot feed their children, nothing else matters.”
The problem for Washington is that a strategic competitor — China — is responsible for around 30 percent of global manufacturing output. It is dominant in almost all areas of manufacturing, ranking first in terms of share of global output in 16 of 22 tracked categories, and second in six others. In short, China produces parts and materials that keep American factories and defense assets going.