Matt Turpin's China Articles - July 2, 2023
Friends,
Lots of material to cover this week.
I was going to analyze the new Foreign Relations Act that Beijing implemented on Saturday, but I will wait until next week to do that and offer a bit of context on the various pieces of national security legislation that the PRC’s rubber-stamp parliament has approved over the last few years.
Spoiler Alert: Beijing concludes that it is in a cold war with the United States and is pursuing its own decoupling strategy, even as it seeks to discourage the rest of the world from similar policies.
Thanks for reading!
Matt
MUST READ
1. China has its eyes on Okinawa
The Economist, June 22, 2023
When Xi Jinping strolled around the national archives in Beijing earlier this month, it seemed like a routine tour. China’s supreme leader commented on various items that piqued his interest, such as ancient scripts engraved on animal bone and an astronomical map from the Song dynasty (960–1279). But his remarks about a manuscript from the Ming dynasty (1368-1644) received the most attention. It described old ties between the Chinese province of Fujian and the independent Ryukyu kingdom, a collection of islands that was later annexed by Japan and turned into Okinawa prefecture. The book, said a staffer, “plays an important political role”. Mr. Xi responded that, having served as a senior official in Fujian, he was aware of the “deep” history of the exchanges.
That may not seem like much of a statement. The Chinese government has never asserted a claim to the Ryukyu Islands. But for years a collection of Chinese scholars, analysts and military officials have questioned Japanese rule there, with some arguing that the islands’ inhabitants paid tribute to Chinese emperors long before they recognised Japan’s authority. So it is curious that Mr. Xi’s comments were reported on the front page of the People’s Daily, the official newspaper of the Communist Party. Some observers think it was meant to send a message to Japan.
COMMENT – This is worth following.
As the PRC’s power and influence grows, so grows its ambition to take territory belonging to others. This is how wars start, a growing and aggressive power sees territorial expansion as its birthright, while employing the language of victimization to justify recovering what it defines as “lost territory.”
For the PRC this is true of territory belonging to India, of territory belonging to countries in Southeast Asia, of territory belonging to Russia and Japan, and equally to Beijing’s narrative about Taiwan.
The best thing we could do is to push back strongly against the Party’s victimization narrative and its interpretation of history. We should recognize these tendencies for what they are: an ill-legitimate authoritarian regime using nationalism to boost its image and legitimacy. The Party is seeking to normalize the idea that the use of military force against its neighbors is justified.
2. Biden’s Trade Challenge: Kicking the China Dependency Habit
Greg Ip, Wall Street Journal, June 22, 2023
China has many sources of geopolitical leverage, from its military to its vast market. Potentially, the most potent and least appreciated is the choke-point position it has built in global supply chains.
President Biden has devoted a lot of his foreign policy to addressing that vulnerability, from cultivating closer ties to India, which aspires to become an alternative manufacturing base to China, to negotiating critical minerals deals with Europe.
Oddly, he hasn’t used a more obvious tool: trade deals. Biden has turned aside pleas to join pacts such as the Trans-Pacific Partnership, an accord between 12 Pacific Rim economies, or use access to the U.S. market as a tool of diplomacy.
A speech by U.S. Trade Representative Katherine Tai last week provides important new insight into why this is. While reiterating progressive criticism of free trade, she also argues it increased rather than decreased China’s influence over the world’s production networks.
Past trade deals’ emphasis on efficiency and low cost caused “significant content to come from countries that are not even parties to the agreement,” she said. “These rules benefit the very countries that have used unfair competition to become production hubs.”
How can China benefit from a free-trade agreement of which it is not a member? Via the “rules of origin,” which determine how much of a product’s value can come from outside a free trade area and still qualify for duty-free access. A reason the Trump administration renegotiated the North American Free Trade Agreement was that its rules of origin were so loose as to allow a growing portion of auto content to originate outside North America, particularly in China.
A similar argument was leveled against the TPP, negotiated by former President Barack Obama and repudiated by former President Donald Trump. Critics, including then-candidate Trump in 2015, said its rules of origins were loose enough that even though China wasn’t a member, products with substantial Chinese content could enter the U.S. duty free.
Many Asian countries would love Biden to rejoin the TPP or turn his less formal Indo-Pacific Economic Framework into a free-trade agreement that lowers barriers to trade. But their goal in any trade deal with the U.S. is to leverage their existing supply chains which are already tightly integrated with China. The result would be more, not less, dependence on Beijing.
As Tai said in her speech: “The supply chain rules in these FTAs tend to reinforce existing supply chains that are fragile and make us vulnerable. This doesn’t make sense at a moment in history when we are trying to diversify and make them more resilient.”
Tai avoided singling out China in her remarks. In part that is because Biden administration officials want to avoid unnecessarily antagonizing Beijing or ratifying its accusations (and allies’ worries) that the U.S. harbors a “Cold War mentality.”
It is also because Tai, like Biden, sees free trade in general, not just with China, as part of a discredited orthodoxy that gave priority to efficiency and consumers while undermining workers, the environment and national security. In its place, they champion industrial policy and buy-American incentives, a doctrine I’ve called “Bidenomics.”
“We decided to replace this theory with what the press has now called ‘Bidenomics,’” Biden told a campaign-style event in Philadelphia on Saturday. “I don’t know what the hell that is. But it’s working.”
COMMENT – I think Greg Ip makes an important point in this piece, USTR Katherine Tai is making a more substantive criticism of past free trade agreements than is broadly understood. Certain countries (in other words: the PRC) gain disproportionate benefit from FTAs given the chokepoints they control in various supply chains.
Instead of debating whether we should discard “free trade” in general by rejecting neoliberalism, we should be figuring out how to prevent the PRC from destroying our “free trade” system. [NOTE: we are far beyond euphemism in 2023, instead of obliquely referring to countries that aren’t parties to FTAs, USTR Tai should be straightforward and call out Beijing directly.]
The international trading system, established after WWII under GATT and expanded after the Cold War under the WTO to include Communist and formerly Communist regimes, is built upon “the principles of non-discrimination, market access, reciprocity, fairness and transparency.” While other members of this system adapted to the fundamentals of a market economy, the PRC, due to its heft and political rejection of these principles, destroys our free trade system from the inside, like a cancer.
For more on this, see USTR’s July 2018 submission to the WTO, “China’s Trade-Disruptive Economic Model.”
Our grand and optimistic experiment of incorporating a Communist regime into a global market economy has failed. We were not able to reshape that Communist regime into one that respects those fundamental principles (those fundamental principles undermine the rule and legitimacy of the Chinese Communist Party). That failure has consequences as it appears increasingly likely that this same Communist regime will destroy our global market economy from the inside.
Instead of discarding the entire system of free trade and all the rules and processes that we have built over the past century, we should excise the one country most responsible for perverting the system. De-risking should entail remaking global supply chains to decrease the PRC’s influence and removing our dependencies on Beijing.
As I see it, our choices are:
Option #1 - Discard the entire free trade system and balkanize the global economy; or
Option #2 - Remove the PRC from the free trade system and rebuild it around those countries committed to the fundamental principles of free trade.
The longer we wait, the more difficult and costly it will be to pursue Option #2 and the more likely it will be that Option #1 is unavoidable.
For those who suggest maintaining the status quo as Option #3, I think they are naïve: the status quo leads to Option #1. Since the PRC joined the WTO, we have been unable to make any necessary reforms to the system. For as long as the PRC, under the Chinese Communist Party, is permitted to gain the benefits of this system with impunity, then the entire system will continue to degrade and dissolve.
Anyone who is a true champion of free trade should be an advocate of Option #2.
3. Putin’s Struggles Are a Teachable Moment for China
Minxin Pei, Bloomberg, June 26, 2023
Whether or not Russia’s invasion of Ukraine has strategically benefited China remains thoroughly debatable. But one thing is clear: Russia’s struggles over the past 16 months have taught Chinese President Xi Jinping many valuable lessons. If applied well, they may strengthen his hold on power.
The latest instructive moment for Xi has been the short-lived armed rebellion by the mercenary Wagner Group, led by Russian President Vladimir Putin’s former ally, Yevgeny Prigozhin. Although the farcical insurrection folded bloodlessly, it has nevertheless humiliated Putin and revealed the cracks in his regime.
On the one hand, Xi can be confident that the Chinese state is much stronger than its Russian counterpart. The presence of private armies is a hallmark of state weakness, signaling the state’s loss of its monopoly on violence. China, wrecked by regional warlords only a century ago, would never allow anything remotely resembling the Wagner Group to operate within its borders or alongside its armed forces in a conflict.
Compared with Putin’s personalistic rule, the Chinese Communist Party (CCP) maintains much more direct and institutionalized control of the state. While Putin’s political party, United Russia, functions mostly as an election machine and has at best a thin presence in the Russian military and other state organs, the CCP boasts a party cell in the smallest unit of any state bureaucracy. In the People’s Liberation Army (PLA), the party maintains a branch organization in every company-sized unit to enforce political loyalty.
At the same time, the Wagner mutiny highlights at least three risks Xi will not want to ignore.
The first and most important priority is to ensure the political loyalty of the Chinese military, in particular its senior commanders. In his decade in power, Xi has gone much further than his two immediate predecessors in asserting his personal control of the PLA. As soon as he assumed the chairmanship of the Central Military Commission in late 2012, Xi launched an anti-corruption campaign that purged more than 100 senior military commanders within five years.
In 2017, the party passed a new rule further cementing Xi’s direct command authority over the commission. At the party’s 20th national congress last October, Xi kept on one loyalist as the CMC’s first vice chairman, even though he was over the retirement age, and promoted another to be the other vice chair.
Further precautions could include more thorough vetting of senior officers, stepped-up surveillance of commanders, and more frequent rotation of generals. Even if such preventive measures degrade the military’s fighting capabilities, Xi will likely see the cost as worthwhile to guard against disloyalty in a crisis.
Second, China will want to head off rivalries among different branches of the military early. Ostensibly, poor coordination and logistics fueled the tensions between Prigozhin and top Russian commanders. Perhaps the most glaring mistake Putin made — and one Xi will be determined not to repeat — was to allow their feud to fester openly rather than shutting it down quickly.
Since the CCP has more intensive control of the press and the military than Putin, the risks of open political warfare among top brass are much lower. Nevertheless, this is another danger Xi will not want to face in the middle of a conflict.
Finally, Prigozhin’s antics are a reminder to Xi that nationalism is a double-edged sword. The Chinese leader has built public support in part as a tough-guy defender of China’s territorial claims, especially over the island of Taiwan. Yet excessive, “wolf warrior” rhetoric also builds up expectations that can be hard to meet.
Politically, ultra-nationalists can outflank a strongman by espousing even more jingoistic rhetoric, as Prigozhin has done to Putin. Xi has begun to mitigate this risk by reining in his subordinates: New Foreign Minister Qin Gang has generally refrained from “wolf warrior” rhetoric even as he faithfully executes Xi’s uncompromising foreign policy. One of Qin’s first official acts was to reassign the most infamous wolf warrior, former deputy spokesman Zhao Lijian, to an obscure corner of the foreign ministry.
Xi cannot be happy about Putin’s unending series of setbacks, which are weakening China’s key ally in its confrontation with the West. But the Chinese leader cannot be entirely ungrateful either: Putin’s woes are offering up lessons too precious not to learn.
COMMENT – Meme of the Week
4. China's ruling party expels Beijing official for possessing banned books, journals
Gu Ting and Jing Wei, Radio Free Asia, June 28, 2023
Chinese Communist Party investigators have expelled a high-ranking official in the Beijing city government for possession of banned political books and journals, as the authorities continue to purge unapproved content and replace it with official propaganda that sticks to the party line.
The Beijing branch of the party's disciplinary arm, the Central Commission for Discipline Inspection, announced on June 25 it had expelled former state assets supervisory official Zhang Guilin for "serious violations of discipline and law," paving the way for a criminal prosecution.
"The investigation found that Zhang Guilin's political awareness was weak, and he kept and read books and periodicals with serious political issues," the commission said in a statement reported by state news agency Xinhua, which didn't elaborate on the nature of Zhang's chosen reading material.
Government censors already routinely remove dissenting opinions and criticism of the government from social media and other online platforms, but the party now appears to be targeting a quieter, slower way to transmit information – books and journals that can slip into the country under the official radar, or be ordered from overseas publishers.
According to Xinhua, Zhang had also accepted favors and failed to disclose "sexual transactions," with disciplinary officials calling for “stern punishment.” Zhang’s case has been handed over to the state prosecutor's office for prosecution, it added.
Zhang is the latest in a long line of high-ranking Chinese officials to be accused of secretly keeping and reading books "with serious political issues."
Authorities in Shanghai announced earlier this month that former Dongfang.com editor-in-chief Xu Shiping had been expelled from the Communist Party after accusations of "hiding and reading prohibited books," as well as misuse of public funds and abuse of official power.
In recent years, former Changsha deputy mayor Chen Zehui, former Huainan deputy mayor Li Zhong, former Chongqing state security police officer Li Bin have all been expelled from the party and removed from their posts for bringing banned books into the country.
COMMENT – I’ve written this before: the Chinese Communist Party is both arrogant AND paranoid.
While I empathize with those calling for greater engagement with the PRC, I think we should be very skeptical that engagement will lead to any serious breakthrough under the current regime. Those who are advocating for a “reset” or some sort of détente with Beijing should have to justify their position with a cost-benefit analysis. In my judgement, the costs of pursuing a “reset” or détente with Beijing outweigh the benefits, since those benefits are unlikely to materialize.
5. Russia launches lab to study Xi Jinping ideology
Elena Giordano, Politico, June 22, 2023
The center aims at understanding the ideas of the Chinese president and strengthening relations between the two countries.
Xi-ism is on the march.
Russia has set up the first-ever program outside China to study the ideology of Chinese President Xi Jinping, the autocratic leader in Beijing who keeps a fierce grip on civil society and recently moved to become ruler for life.
The Xi Jinping Thought Research Laboratory has been established at a major China studies institute in Moscow, with the goal of researching Xi’s ideas on economics, foreign and domestic policy, social policy, culture, art and ideology, according to the institute’s website.
China and Xi remain among the Kremlin’s top global allies, even after Vladimir Putin’s full-scale invasion of Ukraine began in February last year.
In 2025, the center will publish a series of scientific studies to acquaint Russian readers, including the authorities, with Xi’s ideas, and their significance for the development of China and Russia-China relations.
“We are well aware that today Xi Jinping’s ideas determine China’s policy in many areas,” Kirill Babaev, director of the Institute of China and Modern Asia of the Russian Academy of Sciences (ICSA RAS), told the Chinese Xinhua news agency, on Tuesday.
“We need to know and analyze Xi Jinping’s ideas very well, because China today is our main strategic partner, our main economic partner. Therefore, in order to build relationships most effectively, our government needs to have a good understanding of what the ideological basis for the development of today’s China is,” he added.
COMMENT – This is likely to grate on Russian ultra-nationalists and as others continue to challenge Putin, I wouldn’t be surprised to see condemnation of initiatives like this.
6. Cambodia PM sends troops to Vietnam border to shoot down drones
Shaun Turton, Nikkei Asia, June 28, 2023
Hun Sen warns of 'action' as deployment comes ahead of elections next month.
Cambodian Prime Minister Hun Sen has ordered troops be sent to the eastern border with Vietnam after unidentified drones were spotted flying in his country's territory.
Speaking Wednesday, Hun Sen said he would award $200,000 to any military unit able to shoot down a drone, several of which have reportedly been flying into Cambodia in recent days.
COMMENT – Hun Sen wouldn’t pursue this action against a fellow ASEAN member state without the approval and support of the Chinese Communist Party. Beijing continues to undermine ASEAN as a potential rival with its domination of Cambodia and Laos.
Unfortunately for inter-governmental and supranational organizations like ASEAN and the European Union, which base their decision-making on unanimous consent, they can be effectively neutered by their rivals (the PRC and Russia) when those rivals turn certain member states into vassals (see Cambodia and Hungary).
Authoritarianism
7. China warns on consular visits to dual citizens detained in Hong Kong
Pak Yiu and Kenji Kawase, Nikkei Asia, June 28, 2023
Foreign consulates in Hong Kong were sent a reminder by China's Ministry of Foreign Affairs that dual-national detainees are not allowed to receive visits from consular officers, ahead of the third anniversary of the national security law Beijing imposed on the city.
In a letter seen by Nikkei Asia, dated May 31, the Hong Kong representative of the Ministry of Foreign Affairs stressed that Chinese law does not recognize dual nationality and "foreign consular officers shall not be entitled to visit any Chinese nationals detained in the HKSAR," using the official abbreviation for the Special Administrative Region.
COMMENT – Beijing continues to destroy all that made Hong Kong into a thriving center for international business and finance.
8. Sanctioning China in a Taiwan crisis: Scenarios and risks
Charlie Vest and Agatha Kratz, Atlantic Council, June 22, 2023
In recent months, growing tensions in the Taiwan Strait as well as the rapid and coordinated Group of Seven (G7) economic response to Russia’s invasion of Ukraine have raised questions—in G7 capitals and in Beijing alike—over whether similar measures could be imposed on China in a Taiwan crisis. This report examines the range of plausible economic countermeasures on the table for G7 leaders in the event of a major escalation in the Taiwan Strait short of war. The study explores potential economic impacts of such measures on China, the G7, and other countries around the world, as well as coordination challenges in a crisis.
COMMENT – This work is absolutely necessary. Governments, businesses, and investors cannot hide their heads in the sand or kick the can down the road on the potential impacts to the global economy if Beijing initiates a war over Taiwan or with any of its neighbors.
We need to dispel two myths that seem to be gripping portions of the policy community and their counterparts in the business world (I heard these myths repeated again this week at an event I attended).
The first is pretending that the threat doesn’t exist. Dismissing concerns that the PRC would start a war and that we are hyping the threat for domestic political purposes. In short, I call this the “nothing to see here” myth.
The second is that in preparing for this threat we are somehow provoking Beijing. I call this the “provocation” myth.
The Chinese Communist Party does NOT want the world to prepare for or deter them from using force to annex Taiwan. Beijing wants everyone to help them isolate Taiwan. The Party, and its proxies, push a narrative that it is dangerous to resist the PRC’s territorial expansionism and that war is only possible if we cause it. It reminds me of the kinds of arguments an abusive spouse would use to justify themselves. It is the victim and those who protect the victim who are to blame for the violence the abuser feels compelled to use to get their way. Others “force” the abuser into violent outbursts, that they wouldn’t do if everyone just minded their own business: hence Beijing’s continuous demands that this is an internal affair.
We should reject these myths and hold Beijing responsible for the instability that they are causing, as well as the economic disruptions that emerge as folks prepare for what Beijing threatens to do.
To expand on the abusive spouse analogy, it is just and proper for third parties to intervene and we should dismiss Beijing’s self-serving rationales.
9. Sequoia Made a Fortune Investing in the U.S. and China. Then It Had to Pick One.
Kate O’Keeffe, Berber Jin, and Aruna Viswanatha, Wall Street Journal, June 27, 2023
10. Yellen Plans July China Trip While US Preps Investment Curbs
Jenny Leonard and Annmarie Hordern, Bloomberg, June 26, 2023
11. Young Sends Letter to SEC Chair Highlighting Steps Needed to Protect U.S. Economic, National Security from CCP Market Manipulation
Todd Young, Todd Young U.S. Senator for Indiana, June 22, 2023
12. VIDEO – Former Canadian AIIB communications director opens up about China-led bank
CBC News, June 20, 2023
13. Hong Kong student’s indictment for online posts from Japan shows China's reach
Kathleen Benoza and Daniel Traylor, Japan Times, June 23, 2023
14. An acrimonious debate about covid’s origins will rumble on
The Economist, June 26, 2023
15. China censors financial blogger as economic recovery falters
Edward White and Hudson Lockett, Financial Times, June 27, 2023
16. Xi’s Bet on Putin Looks Even More Risky After Russian Rebellion
Lucille Liu, Rebecca Choong Wilkins, and Kari Soo Lindberg, Bloomberg, June 26, 2023
17. G7 affirms unity and need for close coordination on China, State Department says
Kanishka Singh, Reuters, June 22, 2023
18. VIDEO – Europe, the United States, and Relations with China: Convergence or Divergence?
U.S.-China Economic and Security Review Commission, June 15, 2023
19. If Biden Wanted to Ease U.S.-China Tensions, Would Americans Let Him?
Ian Prasad Philbrick, New York Times, June 27, 2023
20. Olaf Scholz to tread fine line in meeting with Chinese government
Laura Pitel, Yuan Yang, and Patricia Nilsson, Financial Times, June 18, 2023
21. Influencers face backlash for calling Shein factory conditions ‘pleasantly surprising’ during PR trip to China
Manuela Vega, Toronto Star, June 26, 2023
Environmental Harms
22. China’s Scorching June Sparks Fears of a ‘Sauna’ Summer and Economic Pain
Lili Pike, The Messenger, June 28, 2023
Foreign Interference and Coercion
23. ASML says decoupling chip supply chain is practically impossible
Cheng Ting-Fang, Nikkei Asia, June 22, 2023
Decoupling the global semiconductor supply chain would be "extremely difficult and expensive" if not impossible, a senior executive at ASML, the world's most valuable chip equipment maker, told Nikkei Asia.
Christophe Fouquet, ASML's executive vice president and chief business officer, said in an exclusive interview that any single country would struggle to build its own fully self-reliant chip industry.
COMMENT – We should interpret statements like this as a form of lobbying that has worked well for Beijing over the last decade or two.
These companies know that publicly promoting Beijing’s policy preferences leads to business opportunities in the PRC, staying silent will reduce those opportunities, and denouncing Beijing will lead to harsh retribution. In their home countries, these companies face little to no risk of backlash if they promote Beijing’s interests.
Therefore, these companies act in their rational self-interest: promote the CCP’s interests even if that undermines their home country’s national interests.
24. Hungarian Minister Warns China De-Risking Is ‘Brutal Suicide’
Bloomberg, June 27, 2023
A European “de-risking” of supply chains from China would be devastating for the bloc’s economy, a senior Hungarian minister warned, in comments highlighting the divisive nature of the policy.
“Political leaders in Europe are not too much interested in the interconnectivity between Europe and China,” Hungary’s Foreign Minister Peter Szijjarto said Tuesday. “They are interested in so-called decoupling or de-risking. Which, to be honest according to our understanding, would be a brutal suicide.”
COMMENT – Here’s another example of how the CCP gets others to influence European policy making to benefit Beijing.
25. China's premier tells German CEOs biggest risk is lack of cooperation
Christina Amann, Alexander Hübner and Patricia Weiss, Reuters, June 20, 2023
26. China’s premier avoids ‘factional confrontation’ with Europe on maiden trip
Yuan Yang, Financial Times, June 24, 2023
27. China Shifts Strategy on De-Risking with Direct Appeals to CEOs
Bloomberg, June 27, 2023
COMMENT – This week PRC Premier Li Qiang sought to redefine the nascent European strategy of “de-risking” by calling on European business leaders to take responsibility for determining risk instead of their governments:
“If there is a risk in a certain industry, it’s not up to the government to say. It is business that is most sensitive and is in the best position to assess such risk.”
“Businesses should be left to come to their own conclusions and make their own choices.”
“Governments shouldn’t overstretch the concept of risk or turn it into an ideological tool.”
Li Qiang’s hypocrisy is breathtaking. Could anyone imagine the PRC Government following this advice?!?
The entire rationale for de-risking/decoupling is that the Chinese Communist Party manipulates companies, markets, and commercial transactions to advantage the PRC geopolitically and undermine democracies in Europe, Asia, and the Americas. The Party controls its own companies, as well as the subsidiaries of foreign companies, to use them as ideological tools in this geopolitical conflict.
Anyone interested in European sovereignty and autonomy should reject Li Qiang’s appeals and prevent European companies from being the lobbying arm of the Chinese Communist Party. See remarks above by the ASML executive.
28. China Tries to Gain U.S. Cooperation Over Upcoming Taiwan Elections
Lingling Wei, Charles Hutzler, and William Mauldin, Wall Street Journal, June 25, 2023
29. Palau under CCP pressure to switch recognition from Taiwan to China
Cleo Paskal, Sunday Guardian, June 25, 2023
30. Fiji pulls plug on Taiwan office’s name change
Lawrence Chung, South China Morning Post, June 22, 2023
31. Could China’s hardball tactics drive Seoul further towards Washington?
Shi Jiangtao, South China Morning Post, June 22, 2023
32. Solomon Islands grapples with disinformation as China stands to gain
Atsushi Teraoka, Nikkei Asia, June 28, 2023
33. 2022 Taiwan Election: Foreign Influence Observation Report
Doublethink Lab, Medium, June 21, 2023
34. China signs pacts with 'friend and partner' New Zealand
Reuters, June 28, 2023
35. Trapped in the Crossfire of the U.S.-China Rivalry
Peter S. Goodman, New York Times, June 26, 2023
Human Rights and Religious Persecution
36. The Case of Comedian Li Haoshi, detained for a Joke, Is Far from Over
Hu Zimo, Bitter Winter, June 22, 2023
37. What’s Next for the Uyghur Forced Labor Prevention Act?
Marti Flacks, Center for Strategic & International Studies, June 21, 2023
38. Volkswagen plans external audit of controversial plant in Xinjiang
Patricia Nilsson and Yuan Yang, Financial Times, June 21, 2023
Industrial Policies and Economic Espionage
39. America’s plan to vet investments into China
Economist, June 22, 2023
40. With China in mind, Biden and Modi to seal deals from space to chips and 5G
Khushboo Razdan, South China Morning Post, June 22, 2023
41. China-linked stocks tumble after rate cut disappoints
Noriyuki Doi, Kensaku Ihara, and Yoshikazu Imahori, Nikkei Asia, June 22, 2023
42. China urged to play greater role in global finance after Sri Lanka bailout woes
Luna Sun, South China Morning Post, June 28, 2023
43. The ‘de-risk’ is in the details: A look at Europe’s ambitious new economic security strategy
Atlantic Council, June 22, 2023
44. China’s Days as a Sole Overseas Source for U.S. Companies “Are Over” — Stephen Roach
Russell Flannery, Forbes, June 23, 2023
45. Yuan is internationalizing more than meets the eye
Stewart Paterson, Asia Times, June 21, 2023
46. Packages from China are surging into the United States. Some say $800 duty-free limit was a mistake
Kevin Freking, Associated Press, June 24, 2023
Conservatives anxious to counter America’s leading economic adversary have set their sights on a top trade priority for labor unions and progressives: cracking down on the deluge of duty-free packages coming in from China.
The changing political dynamic could have major ramifications for e-commerce businesses and consumers importing products from China valued at less than $800. It also could add to the growing tensions between the countries.
Under current U.S. law, most imports valued at less than $800 enter duty-free into the United States as long as they are packaged and addressed to individual buyers. It’s referred to as the de minimis rule. Efforts to lower the threshold amount or exclude certain countries altogether from duty-free treatment are set to become a major trade fight in this Congress.
“De minimis has become a proxy for all sorts of anxieties as it relates to China and other trade-related challenges,” said John Drake, a vice president at the U.S. Chamber of Commerce, who argues that the current U.S. law should be preserved.
The rule speeds the pace of commerce and lowers costs for consumers. It also allows U.S. Customs and Border Protection to focus its resources on the bigger-ticket items that generate more tariff revenue for the federal government.
The volume of products coming into the U.S. that benefit from the de minimis rule has soared in recent years. Congress raised the U.S. government’s threshold for expedited, duty-free treatment from $200 to $800 in 2016.
The volume of such imports has since risen from about 220 million packages that year to 771 million in 2021 — with China accounting for about 60%, according to the government — and 685 million last year.
“I think everybody’s got to kind of wrap their head around what kind of mistake this was,” Robert Lighthizer, the former U.S. trade representative during the Trump administration, told a House panel last month. “Nobody dreamt this would ever happen. Now we have packages coming in, 2 million packages a day, almost all from China. We have no idea what’s in them. We don’t really know what the value is.”
Lighthizer urged Congress to get rid of the de minimis rule altogether, or take it to a much lower amount, say $50 or $100. He said foreign companies are taking advantage of the “loophole” and “putting people out of work in stores, they’re putting people out of work in manufacturing.”
COMMENT – The business models of Shein, Temu, and other direct to consumer Chinese e-commerce companies are set up to undermine the protections that the Trump and Biden Administrations have put in place to address harmful trade practices by the PRC, reduce the importation of synthetic opioids (fentanyl), as well as guard against the importation of goods produced with forced labor.
Closing the de minimis loophole is critical.
47. Troubled Robot Truckmaker TuSimple Says It May Sell Off U.S. Business
Alan Ohnsman, Forbes, June 26, 2023
48. Chinese investment in U.S. startups under scrutiny for espionage
Sabri Ben-Achour, Marketplace, June 22, 2023
49. US overtakes China as market for South Korean goods
Christian Davies, Financial Times, June 22, 2023
50. GLG scales back in China as Beijing zeroes in on due diligence firms
Joe Leahy, Nian Liu, and Eleanor Olcott, Financial Times, June 25, 2023
Cyber & Information Technology
51. Baidu Claims Its Ernie Bot Now Beats ChatGPT on Key Measures
Zheping Huang, Bloomberg, June 27, 2023
52. VIDEO – Tech race with China: Toward a comprehensive strategy
Peter Engelke and Emily Weinstein, Atlantic Council, June 27, 2023
53. Micron Aggression: The Right Response to Beijing’s Ban on the U.S. Chipmaker
Matthew Reynolds, Center for Strategic & International Studies, June 22, 2023
54. Huawei’s Meng Wanzhou sees continued global expansion of 5G mobile services
Tracy Qu, South China Morning Post, June 28, 2023
55. Indictment details plan to steal Samsung secrets for Foxconn China project
Ju-min Park and Heekyong Yang, Reuters, June 27, 2023
56. China’s Cloud Computing Firms Raise Concern for U.S.
David McCabe, New York Times, June 21, 2023
57. Billionaires and Bureaucrats Mobilize China for AI Race With US
Jane Zhang and Sarah Zheng, Bloomberg, June 28, 2023
Military and Security Threats
58. Attorney General Merrick B. Garland Delivers Remarks on Charges Against China-Based Chemical Manufacturing Companies and Arrests of Executives in Fentanyl Manufacturing | United States Department of Justice
Attorney General Merrick B. Garland, U.S. Department of Justice Office of Public Affairs, June 23, 2023
59. US brings first charges against Chinese entities over fentanyl ‘precursors’
Stefania Palma and Demetri Sevastopulo, Financial Times, June 23, 2023
COMMENT – Important action by the Justice Department… the Chinese Communist Party enables drug trafficking and the deaths of tens of thousands of Americans each year.
U.S. cabinet secretaries Janet Yellen and Gina Raimondo should not be visiting the PRC until Beijing ceases these exports.
I’ve shown this chart from the National Institutes of Health before and it bears showing it again… these Synthetic Opioids are overwhelmingly coming from the PRC:
60. What the Moon means for the China-U.S. split in space
Miriam Kramer, Axios, June 27, 2023
61. ‘Shoot them down’: Taiwan vows to destroy ‘risky’ mainland Chinese balloons
Lawrence Chung, South China Morning Post, June 27, 2023
62. Military base talks in Cuba and Biden's 'dictator' quip complicate thaw of U.S.-China ties
Alexander Ward and Jonathan Lemire, Politico, June 21, 2023
63. China fears Russia chaos after Wagner uprising
Amy Chew, Nikkei Asia, June 27, 2023
64. Ukraine urges G7 to clamp down after western parts found in Russian missiles
Dan Sabbagh, The Guardian, June 14, 2023
65. China’s Real Military Budget Is Far Bigger Than It Looks
Mackenzie Eaglen, 1945, June 16, 2023
66. VIDEO – How the U.S. Caught A Chinese Spy
CNBC, June 22, 2023
67. Japan, U.S. and Philippine national security chiefs hold first meeting
Japan Times, June 17, 2023
68. Germany's Scholz: I warned China on using force against Taiwan
Reuters, June 22, 2023
69. Chinese Firm Sent Large Shipments of Gunpowder to Russian Munitions Factory
Ana Swanson and John Ismay, New York Times, June 23, 2023
70. Explainer: The China-U.S. military chill: do they talk at all?
Greg Torode and Yew Lun Tian, Reuters, June 27, 2023
71. U.S. Considers New Curbs on AI Chip Exports to China
Asa Fitch, Yuka Hayashi, and John D. McKinnon, Wall Street Journal, June 27, 2023
72. Russia Turmoil Undermines China’s Global Diplomatic Push
Brian Spegele, Wall Street Journal, June 28, 2023
One Belt, One Road Strategy
73. China’s Huayou Cobalt Sets Up $1.5 Billion Hungary Cathode Plant
Zoltan Simon, Bloomberg, June 21, 2023
74. China affords Nigeria ‘super’ target status
James Kynge, Financial Times, June 28, 2023
75. Why Zambia’s debt deal is good news for struggling countries
Kate Marino, Axios, June 26, 2023
Opinion Pieces
76. Analysis: After a decade, Xi floats 'G2' world with U.S. again
Katsuji Nakazawa, Nikkei Asia, June 22, 2023
COMMENT – Back in 2013 at the Sunnylands Summit, Xi Jinping proposed to President Obama a concept called ‘New Type Great Power Relations.’ In essence, this was a G2 relationship in which the United States and the People’s Republic would split the world into two spheres of influence. Each of the ‘Great Powers’ would set the rules within their sphere of influence and show mutual respect to one another by not “interfering” in the sphere of influence of the other Great Power.
Rightly, the Obama Administration rejected this formulation as antithetical to global peace and security… the United States had no right to consign large swaths of the Eurasian landmass and its periphery to a Sino-centric sphere of influence, doing so would only invite conflict as Japan, India and others would resist subjugation by Beijing.
President Obama and his Administration tried in vain the explain this reality to Xi and his advisors. I suspect that the Chinese Communist Party won’t be talked out of this idea.
77. How Putin and Xi resurrected America
Edward Luttwak, UnHerd, June 23, 2023
Future historians will struggle to explain the recent dramatic rise of America’s global power. Faced with a long list of irreconcilable differences at home, and two consecutive presidents whose distinguishing characteristic is the intensity of the opposition they provoke, this century is so often painted as one of US decline.
But the blatant contradiction between disarray at home and increased power abroad has a simple explanation: the greater part of American power does not derive from what the US itself, let alone individual presidents, are able to do, but from the cooperation and support it receives from friendly countries around the world. US power depends on the magnitude and the cohesion of its alliances — and the latter can change very quickly.
This, of course, is key. Years of talk in Europe of replacing the “increasingly outdated” US-directed Nato alliance with an alternative centred in the European Union ended abruptly last February when the Russians attempted to seize Kyiv in a day and Ukraine in a week. Had they succeeded, as both Russian and US intelligence had predicted (it was the always-wrong CIA that prompted Biden’s offer to evacuate Zelenskyy), Nato would have collapsed.
Yet because the Ukrainian guards fought off elite Russian paratroopers at the Antonov airfield, inaugurating fierce resistance across the entire front, and because the US and UK immediately reacted by promising military aid, a seemingly moribund Nato was suddenly resurrected.
Without waiting for discussions or agreements, some countries simply acted: Norway airlifted 2,000 LAW anti-tank weapons, which are point-and-shoot rockets, neither new nor advanced — but just the thing to fire at Russian armour flooding into the country. And its example was followed by Denmark, Canada and then others, while far more advanced missiles arrived very quickly from the US and the UK, inaugurating a flow of weapons from most Nato countries that still continues.
Seeing all this, Sweden’s government abandoned its long-cherished stance of neutrality to apply for Nato membership, while Finland, which shares a very long border with Russia, felt confident enough to sign up as well. Russian threats were met with ridicule: “We already have 50,000 Russians buried in our country from the last war… but we have room for many more.”
The United States thus suddenly found itself leading a thoroughly revived and expanded Western alliance the power of which has reach into North Africa and the Middle East. All of which greatly added to the sum total of American power, even if Biden sometimes stumbles and his Vice President sometimes laughs at the wrong time.
But the war in Ukraine is far from the only boost. In fact, now that Russia is declining in several ways, what has added to global American power is the emergence of a vast, if informal, Indo-Pacific de facto alliance to contain China.
Today, there is no equivalent of the “multilateral” North Atlantic Treaty that formally links the US and Canada to European states; nor is there a second Nato-style structure of multinational commands staffed by thousands of officers. Instead, in response to the threat from China, there are “joint activities”, ranging from constant diplomatic coordination and intelligence exchanges to an entire panoply of air, land and naval exercises that bring together American, Australian, Indian and Japanese forces, with lesser participations by Canada, Chile, France, the Philippines, South Korea, the UK and Vietnam.
Vietnam’s involvement is particularly revealing — and not only because it regularly hosts US and Japanese naval vessels and submarines where it most hurts Beijing: very close to the major Chinese submarine base on the island of Hainan. On paper, Vietnam’s ruling Communist Party has warm, indeed “fraternal”, relations with the Chinese Communist Party. In practice, however, the Chinese are constantly trying to dislodge the Vietnamese from their islands in the Gulf of Tonkin, and neither side forgets for a minute their bloody wars, both ancient and modern, including the 1979 conflict in which some 30,000 Chinese soldiers died. As a result, Vietnam, which started sharing intelligence with Australia many years ago, and has received much help from the Indian navy with its submarines, is now cooperating at sea with the US and Japan, receiving retired naval vessels from both.
As for India, whose armed forces have been steadily advancing in competence, it was not American diplomacy that overcame its long-standing “non-alignment” — but a very long series of Chinese territorial seizures, from Ladakh in the west to Arunachal in the east, some of which resulted in armed confrontations. For decades, whenever the two countries’ leaders met, Beijing only wanted to discuss the splendid opportunities for profitable economic cooperation and for vast joint infrastructure projects, brushing aside the border disputes as very minor matters that could be resolved by low-ranking officials. Then, in the subsequent months and years, while the grand economic projects were never actually implemented, Chinese border troops would creep forward to seize more territory.
This Chinese gambit worked beautifully until June 2020, when skirmishes at the high-altitude Himalayan border in Ladakh resulted in a number of casualties. When the Chinese stuck to its playbook again this year, India’s Foreign Minister rebuffed them decisively.
Why did the Chinese keep pushing India until it was forced into an informal but powerful alliance with the United States? The only possible explanation is that China’s rulers are too absorbed in invisible but constant intra-party intrigues and too distracted by everyday matters to acquire any serious understanding of the outside world. The result is that foreign nations are reduced to caricatures, with the Indians written off as dirty and weak.
China’s behaviour with India is certainly consistent with its equally irrational territorial claims elsewhere. Japan, for instance, has long been a very close US ally, but for a brief interval in 2010 when a new party came to power that gave in to neutralist temptations. Yet that ended abruptly on 7 September, 2010, when a Chinese fishing trawler with a reportedly drunk skipper collided with two Japanese patrol boats off the coast of the disputed Senkaku islands.
Instead of apologising, or at least ignoring what happened, China’s foreign ministry issued imperious demands for the immediate return of the captain and furious denunciations that incited mob attacks against Japanese offices and even visiting Japanese tourists — culminating in a series of incidents that seemed perfectly designed to rekindle Tokyo’s loyalty to Washington. Since then, Japan has built up its armed forces and, starting with prime minister Abe from 2012, it has re-emerged as an active ally of the US. Meanwhile, with Australia both now more pro-American and more interested in rebuilding its neglected armed forces, the US has capable allies across the Indo-Pacific that magnify its power — a principle reason why Xi’s threats to invade Taiwan have simmered down.
Neither Biden’s gaffes nor Trump’s tantrums can change the realities created by Putin and Xi’s bellicosity; America’s European and Asian alliances have rarely been so empowered. Indeed, the only consequence of America’s disarray at home is that the US cannot start wars to pursue fanciful aims, such as bringing democracy to Iraq or progress to Afghanistan. And that is just as well.
COMMENT – As usual Luttwak writes a great piece, we should be optimistic and confident in our position. It will take hard work and there will be significant costs associated with remaking the global system and putting the PRC at a disadvantage, but we can do it if we commit ourselves to a worthy task.
78. How Advanced Is Russian-Chinese Military Cooperation?
Dmitry Gorenburg, Elizabeth Wishnick, War on the Rocks, June 26, 2023
79. Chinese Firms Are Evading Chip Controls
Tim Fist, Lennart Heim, and Jordan Schneider, Foreign Policy, June 21, 2023
80. The US and China are rivals — but can talk like adults
David Ignatius, Washington Post, June 21, 2023
81. Nikki Haley: My Plan to Confront the Chinese Threat
Niki Haley, Wall Street Journal, June 26, 2023
82. The Russian Mutiny Through a Chinese Lens
Howard Chua-Eoan, Bloomberg, June 27, 2023
83. What Is Putin Worth to China?
Michael Schuman, The Atlantic, June 26, 2023
84. Why China keeps snubbing U.S. overtures for military dialogue
Hiroyuki Akita, Nikkei Asia, June 28, 2023
85. Best Place for the Navy to Test Secret Drones? Lake Michigan
James Stavridis, Bloomberg, June 28, 2023
86. Washington’s Supposed Consensus on China Is an Illusion
Robert A. Manning, Foreign Policy, June 27, 2023
87. Dictator Gets Upset When You Call Him a Dictator
James Freeman, Wall Street Journal, June 23, 2023
88. Prigozhin’s Mutiny Is the Beginning of Putin’s End
Lucian Kim, Foreign Policy, June 24, 2023
89. The Government Must Say What It Knows About Covid’s Origins
Zeynep Tufekci, New York Times, June 21, 2023
90. Pivot to the Pacific? That Misses the Point
Andrew A. Michta, Wall Street Journal, June 23, 2023
91. The GOP should treat the China threat as a major campaign issue
Hugh Hewitt, Washington Post, June 26, 2023
92. Joe Tsai can't take Alibaba back to its golden days
Henny Sender, Nikkei Asia, June 26, 2023
COMMENT – The advantages that Joe Tsai once brought to Alibaba are uniquely disadvantageous to Alibaba now.
Tsai’s strong ties to the United States will garner deep suspicions from the Chinese Communist Party, which has spent years knee-capping Alibaba’s influence. For Tsai to assuage those suspicions in Beijing, he will have to lobby the United States more actively on behalf of the CCP, which will only invite more antibodies against him in Washington.
For more, see “Brooklyn Nets owner Joe Tsai is the face of NBA's uneasy China relationship” (ESPN, April 14, 2022).
93. BRICS Faces a Reckoning
Oliver Stuenkel, Foreign Policy, June 22, 2023