Matt Turpin's China Articles - July 9, 2023
Friends,
Last week, the PRC’s innocuous sounding “Foreign Relations Law” went into effect, and I thought it was time to review the Party’s legislation from the last few years which makes doing business with, and travel to, the PRC riskier and prepares the Chinese state for the new Sino-American Cold War.
Before we jump in, it is important to keep in mind that the Party’s conception of law and the broader legal system is significantly different than what readers most likely have in mind given conceptions of legal systems within democracies.
First, we should keep in mind that the PRC is a ‘rule by law’ system as opposed to one built around the ‘rule of law.’ Under a ‘rule of law’ system, laws limit the power of government and delineate the purview of the state from that of individuals and civil society. As we’ve covered before, the Chinese Communist Party rejects that concept of constitutionalism and limited government. The Party’s power cannot be limited by law, instead the Party employs law to exercise control over state apparatus and other elements of society. The broader legal system is different as well. Judges in the PRC (more accurately called ‘judicial officials’), as well as all lawyers, are not independent custodians of the legal system, but instead are the Party’s representatives who job it is to officiate over a legal system on behalf of the Party.
Judges, legal scholars, and lawyers from around the world have spent decades trying to help shape the PRC’s legal system away from one dominated by the Party into an independent, professional system that can provide for the kind of transparency, consistency, and non-discrimination necessary for international business. That effort has largely failed, yet countless companies and investors are stuck given that they had expected that this effort to liberalize the PRC legal system would work. As the Party continues to reverse reforms, the logic of economic coupling will continue to unravel.
Between 2015 and 2017, the PRC implemented three laws meant to prepare the nation for an increasingly hostile international environment. The 2015 National Security Law and the 2017 National Intelligence Law set out requirements for all PRC citizens and entities (including foreign entities operating in the PRC) to assist with security and intelligence work when ordered by the PRC Government. These laws created “affirmative” legal responsibilities to collaborate with, and provide unacknowledged access to, whatever the country’s intelligence and security services required of them. In conjunction with that, the PRC implemented the 2017 Cybersecurity Law which broadly mandated the localization of data within the PRC and required that it be accessible to the intelligence services.
Also during this time, the PRC imposed the Foreign NGO Law, which set strict limitations on how foreign non-governmental organizations could operate inside the PRC. The result since 2017 has been an environment increasingly hostile to any entity seen as a vector of foreign influence, particularly against those organizations focused on religious activities, human rights, labor, or environmental concerns. Those NGOs that have survived, find Party cells placed inside their organizations and continuous reporting to the nation’s security services.
In 2021, Beijing implemented four more laws: the Data Security Law, the Cyber Vulnerability Reporting, the Personal Information Protection Law, and the Anti-Foreign Sanctions Law. The first three expanded and guaranteed the PRC government’s ability to collect data from all individuals and entities, control the flow of data across China’s borders, and gain access to all software operated within the country. The last one made it illegal for individuals and entities inside the PRC to cooperate or comply with foreign laws that the PRC government views as harmful to the PRC. This sets up serious dilemmas for foreign companies. Their Chinese employees and families, or foreign employees in the PRC, are in jeopardy of arrest and imprisonment for complying with legal requirements of the United States or other countries.
The latest law, the 2023 Foreign Relations Law, should rightly be viewed as a stronger version of the PRC’s Counterespionage Law. It criminalizes the collection and sharing of routine business information in ways that are so ambiguous that the U.S. State Department warned American citizens this week to reconsider travel to the PRC [Full Disclosure: the State Department has been warning U.S. citizens against traveling to the PRC due to the risk of exit bans and arbitrary detention since 2018… it strikes me as irresponsible for companies to put their employees at risk by sending them there].
After years of progress towards liberalizing the PRC’s legal system, the past decade under Xi’s rule has seen a significant reversal on reforms. What had been hopeful shoots of an independent and reliable legal system in the early 2010s has been dismantled as the Party reasserted complete control. Decisions made by companies and investors over a decade ago about governance risk must be reevaluated in light these developments.
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Beijing announced yet another retaliation against the strengthen of export controls on advanced semiconductors (the first being legal actions against Micron… see above for how the Party employs its legal system). On Monday, the PRC Government directed a restriction on the export of gallium and germanium. Similar, but likely more refined, to the 2010 embargo of rare earth minerals to Japan, this action operationalizes Beijing’s new export control regime.
While prices of gallium rose this week (27% as of Friday), it remains to be seen how effective this will be. This action against two rare earth metals that the PRC is nearly the exclusive refiner of, will add even more impetus to efforts in the US, Europe, Canada, Japan, and Australia to build out alternatives for critical minerals… a process that has already begun.
The last few years have taught me one important lesson about export controls. In order to achieve a strategically significant advantage, one in which you really put a rival at a disadvantage, a country must only block those items that one’s rival CANNOT make or get from other sources. Blocking commodities that
It is not clear to me that gallium or germanium fit into those categories.
PRC dominance of critical minerals like gallium and germanium derive from the state’s willingness to subsidize overcapacity and bear the environmental costs of production, which pushes other producers out of the market and makes the margins razor thin (I suspect the refiners of critical minerals in the PRC are NOT profitable).
This might seem like an effective “market capture” strategy (particularly for a mercantilist country) and might work if one could establish a real monopoly, but it does not create the kind of strong moat a country would need to use export controls effectively as a tool of strategic competition. For once a country cuts off its rivals from these exports, then all of the advantages that enabled that country to dominate the market disappear. Rivals will suffer disruptions and will pay some higher costs, but ultimately they will simply start producing again given the demand.
I could be wrong, maybe there is something really special about gallium and germanium, but my prediction is that this action will backfire against Beijing, just as it did in 2010 when the PRC embargoed rare earth minerals to Japan.
Thanks for reading!
Matt
MUST READ
1. Department of Defense Strengthening Efforts to Counter Unwanted Foreign Influence on DOD-Funded Research at Institutions of Higher Education
U.S. Department of Defense, June 30, 2023
The U.S. Department of Defense released a list of foreign entities engaged in activities posing risks to the integrity of DoD-funded research and development efforts. Primarily these are PRC and Russian entities.
2. AUDIO – The Strangers Next Door: Is the Japan-China relationship at a turning-point?
Drum Tower, July 4, 2023
Podcast episode explores Japan's approach to dealing with a more aggressive PRC, something that has been unfolding for a decade. As Prime Minister Kishida has said: “Ukraine today could be East Asia tomorrow.”
3. Taiwan’s Impossible Choice: Be Ukraine or Hong Kong
Yaroslav Trofimov and Joyu Wang, Wall Street Journal, July 5, 2023
People in Taiwan have been following every twist of the war in Ukraine. But, while their sympathy for the Ukrainian cause is near-universal, the conclusions for the island’s own future widely diverge.
To some, the takeaway is that even a seemingly invincible foe can be defeated if a society stands firm, an inspiration for Taiwan’s own effort to resist a feared invasion by China. Others draw the opposite lesson from the images of smoldering Ukrainian cities. Anything is better than war, they say, and Taiwan should do all it can to avoid provoking Beijing’s wrath, even if that means painful compromises.
These two competing visions will play out in Taiwan’s presidential elections, slated for January, and shape how the island democracy revamps its defenses as China’s military might expands. The soul-searching inside Taiwan, and the determination with which it will strengthen its armed forces, is also bound to affect the extent to which the U.S. will get involved militarily should Beijing try to capture the island, home to 24 million people—and most of the world’s advanced semiconductor production capacity.
While Taiwan has been living under a threat of invasion ever since China’s Communist Party took control of the mainland in 1949, the Russian thrust into Ukraine drove home to many Taiwanese that war can erupt with little notice. Chinese leaders have intensified their rhetoric around Taiwan, repeating that they won’t rule out using force to achieve what they call “national reunification.” Beijing has also ramped up naval and air probes around the island that wear out Taiwanese defenses. The U.S. Central Intelligence Agency estimates that Chinese leader Xi Jinping has set 2027 as the deadline for his military to be ready to take the island.
“What Ukraine has underscored is that it’s not a remote possibility that an aggressive neighbor can unilaterally decide to take action against you. It’s a wake-up call,” said Enoch Wu, founder of the Forward Alliance, a nongovernmental organization that has started training Taiwanese civilians in emergency response and first aid. “The threat that we face is an existential one, and so our defense mission has got to involve the entire society.”
4. My Plan to Preserve Peace in the Taiwan Strait
Lai Ching-te, Wall Street Journal, July 4, 2023
Taiwan’s Vice President and leading candidate for the January 2024 Presidential election describes his perspectives on the PRC and how to preserve peace in the Western Pacific.
5. US recommends Americans reconsider traveling to China due to arbitrary law enforcement and exit bans
Associated Press, July 3, 2023
Americans are advised to reconsider traveling to China due to concerns over arbitrary law enforcement, exit bans, and the risk of wrongful detentions.
A State Department spokesperson explained that because the Chinese government “continues to engage in this practice” of wrongful detention.
COMMENT – Until the Party ceases its campaign of intimidation and threats against foreigners, folks should hold off on travel to the PRC.
Here’s the State Department travel advisory.
Authoritarianism
6. China’s answer to Top Gun is a flat spin
Evan Freidin, Lowy Institute, July 3, 2023
In the battle for cultural supremacy, the Chinese film industry has released their counterpoint to the American blockbuster Top Gun: Maverick. The May 2023 release of Born to Fly, about People’s Liberation Army Air Force test pilots risking their lives to develop a Chinese next-generation stealth fighter jet, aims to do for the Chinese air force what Top Gun did for the American’s in the 1980s.
Despite The Economist reporting Born to Fly as a box office hit, it is not doing that well with Chinese audiences.
Born to Fly is not a good movie by any standard. It is dull, poorly written, and the action when it is there is unremarkable. However, it does possibly reveal how the Chinese government and military perceive their standing in international affairs.
7. Why China is so keen to salvage shipwrecks in the South China Sea
The Economist, June 29, 2023
COMMENT – It’s about strengthening its territorial expansion.
8. China suspends 2 online media outlets as censors tighten grip
Yuanyue Dang, South China Morning Post, July 5, 2023
9. China passes foreign relations law to strengthen Xi Jinping’s response to sanctions
Edward White, Financial Times, June 29, 2023
10. Chinese college grads are 'lying flat' and rejecting intense work culture
Vic Chiang, Lillian Yang, and Lily Kuo, Washington Post, June 30, 2023
11. US and UK condemn Hong Kong bounties for exiled political dissidents
Chan Ho-him, Financial Times, July 4, 2023
12. The latest game show topic in China: X_ J_np_ng
Christian Shepherd, Washington Post, July 3, 2023
A young Chinese Communist Party official pulls out his phone on the bus home from work and opens the “Rejuvenation No. 1” app.
It’s not a style or a shopping site. It’s an app devoted to the sayings of Xi Jinping, China’s leader, and the official’s dedication to it propels his Communist Party branch to the top of the leader board. Smiling, he punches the air in celebration.
The man is the star of an advertisement encouraging officials to sign up in the app for a nationwide quiz on Xi’s personal ideology. So far this summer, 700,000 cadres have logged into the app daily to take part by trying to recall what Xi said about, well, almost everything.
To reach the final next month, they need to accurately answer hundreds of multiple-choice questions like: “In modern China, the essence of patriotism is to resolutely love the nation and the party and be highly unified in […].” Is the answer A) loving socialism, B) pursuing progress, C) daring to take responsibility or D) honing our ability to struggle? (It was A.)
The quiz is the latest avenue for mass displays of political loyalty and fervor toward Xi, who has secured more personal power than any Chinese leader since Mao Zedong and began a norm-busting third term as president in March.
In April, he launched a Marxist-study campaign focused on his personal ideology, with a modern twist. Since then, everyone from employees of technology companies to college students has been schooled on Xi Thought, in lessons delivered in apps, on game shows and during exams.
During his first decade in power, Xi developed a philosophy, formally known as Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era.
COMMENT – I have one word: dystopian.
13. China’s Central Bank Appoints New Top Communist Party Official
Keith Zai, Wall Street Journal, July 1, 2023
14. New Chinese Law Raises Risks for American Firms in China, U.S. Officials Say
Kate O’Keeffe, Wall Street Journal, June 30, 2023
U.S. counterintelligence officials say revised Chinese law potentially turns normal business activities into espionage.
U.S. counterintelligence officials are amping up warnings to American executives about fresh dangers to doing business in China under an amended Chinese law to combat espionage.
A bulletin issued Friday by the National Counterintelligence and Security Center warns that the revised law is vague about what constitutes espionage and gives the government greater access to and control over companies’ data, potentially turning what would be considered normal business activities into criminal acts.
The amended counterespionage law, which takes effect Saturday, has unsettled foreign businesses in China. The publication of those revisions this spring came amid a wave of raids, inspections and other acts by Chinese authorities against foreign, chiefly American businesses, as tense U.S.-China relations deteriorated further.
The revised law expands the definition of espionage without defining terms in a way that is “deeply problematic for private sector companies,” said Mirriam-Grace MacIntyre, who leads the counterintelligence center.
Teams from the center have been stepping up briefings for U.S. business leaders since April, she said.
MacIntyre declined to name the businesses being advised. China’s recent actions appeared to focus on due diligence and consulting firms and other businesses collecting information about China’s economy and business climate.
China’s government has said that the rights of foreign businesses are protected under Chinese law. “As long as one abides by laws and regulations, there is no need to worry,” a Chinese Foreign Ministry spokeswoman said this week in response to a question about whether the updated counterespionage law would affect foreign journalists and researchers.
At the briefings, MacIntyre said she and her teams have received questions from U.S. businesses about the raids on U.S. due-diligence firm Mintz Group and Capvision, an expert-network consulting firm. They have also been asked whether officials think it is still safe to travel to China.
“An executive’s decision to travel is their own personal decision,” said MacIntyre, but her team wants to make sure they know the risks. Officials have been flagging to companies a State Department travel advisory in March urging Americans to reconsider travel to China, citing that government’s arbitrary enforcement of laws and use of exit bans blocking the departure of some U.S. citizens.
15. Yellen's job in Beijing: Explain Biden's shifting China policy
Ck tan and Ryo Nakamura, Nikkei Asia, July 5, 2023
16. Yellen’s China Visit Aims to Ease Tensions amid Deep Divisions
Alan Rappeport, Keith Bradsher, and Ana Swanson, New York Times, July 4, 2023
17. Parsing China’s response to the Wagner rebellion
Joseph Torigian, Asia Times, July 3, 2023
18. Watching China in Europe - July 2023
Noah Barkin, GMF, July 4, 2023
DE-RISKING “LITE”
Toward the end of a news conference last Friday, at the conclusion of a meeting of EU leaders in Brussels, Olaf Scholz was asked to provide his definition of “de-risking”. His response was not altogether surprising to anyone who had been listening closely to the German chancellor in recent weeks. But it was extraordinary nonetheless because it echoed, almost word for word, the message that Chinese Premier Li Qiang had delivered in Berlin just days before to an audience of German CEOs. De-risking, Scholz and Li both said, was better left to companies. It was not the role of the state to tell firms where or where not to invest.
Leaving aside the fact that telling firms where to invest is precisely what the Chinese state has been doing for years, it is not difficult to understand why Li made this argument in Germany. Entrusted by China’s President Xi Jinping with getting China’s struggling economy back on track, Li is worried that European governments could move in tandem with their partners in the G7 in placing new restrictions on trade and investment with China. The main aim of his first trip abroad as China’s premier was to convince European leaders including Scholz and Emmanuel Macron to reject de-risking and prioritize economic cooperation.
A GARDEN WITHOUT A FENCE
Scholz’s response to the question in Brussels is more perplexing. If there is a lesson that Germany should have learned from Russia’s invasion of Ukraine, it is that a state’s failure to think strategically about its economic relationships, and to set basic boundaries for business, can have devastating consequences. This lesson seems to have been lost on Scholz. When asked at a German industry conference, hours before he met with Li, about restricting trade in sensitive goods to China, he fell back on one of his favorite strawman arguments, replying that Germany could never subject its entire export business to state control. Scholz now talks about a “smart diversification” and “targeted de-risking” from China, as if these terms need softening qualifiers.
We have seen over the past years what happens when Germany outsources its national security decisions. We get Nord Stream 2 and a 5G network chock full of Huawei. When speaking about restrictions on economic engagement with China, US National Security Advisor Jake Sullivan has used the analogy of small gardens with high fences. Scholz, it seems, does not care about the size of the garden, as long as there is no fence. What are the implications of this stance? First, there is a risk that European Commission President Ursula von der Leyen’s attempt to jolt EU member states out of their lethargy on economic security will stall before it has even begun.
Von der Leyen’s argument rests on the idea that European governments must get serious about setting red lines in their economic and technological relationship with China. Scholz has made clear he sees a very limited role for governments in drawing these red lines. As one Brussels-based diplomat put it to me: “Scholz is killing the economic security strategy before our eyes.” A senior EU official added: “Some member states are looking for an excuse not to do anything. They think a passing reference to de-risking in the G7 communique was enough.”
COMMENT – Frustrating… how can German leaders be so naïve?
19. China Postpones Beijing Trip by Top European Diplomat, EU Says
Natalia Drozdiak and Li Liu, Bloomberg, July 4, 2023
The Chinese government has postponed a trip to Beijing by Josep Borrell, the European Union’s foreign affairs chief, which had been due next week, a spokesperson for Borrell said Tuesday.
No details were given on the postponement.
20. China’s Pensions System Is Buckling Under an Aging Population
Zongyuan Zoe Liu, Foreign Policy, June 29, 2023
Environmental Harms
21. China’s new problem: climate misinformation driven by nationalism
Purple Romero, Aljazeera, July 3, 2023
22. China urges developing countries to oppose ‘unrealistic’ shipping levy
Oliver Telling, Financial Times, July 1, 2023
23. How China Came to Dominate the World’s Largest Nickel Source for Electric Cars
Jon Emont, Wall Street Journal, July 5, 2023
Foreign Interference and Coercion
24. Kilts and Qipaos in Britain: Nearly 400 China 'United Front' Groups Thrive
Didi Kirsten Tatlow, Newsweek, June 29, 2023
The goal of the Chinese Qipao Association in Scotland is to celebrate the slim-fitting dress that is the quintessence of Chinese elegance. At least on the surface.
The association is one of nearly 400 groups identified by a Newsweek investigation that are embedded in British society but are also part of Communist Party of China networks that aim to spread influence around the world and help China achieve global pre-eminence by 2049. That has put China at the top of the list of global security threats for U.S. political and intelligence leaders—even ahead of Russia.
The extent of the organizations that are linked—directly or indirectly—to the party's United Front system in America's closest intelligence ally is revealed for the first time just as Washington is pressing its friends to do more to counter growing CCP influence and what is known as transnational repression of Chinese abroad. The United States has made multiple arrests recently.
From London's touristy Chinatown to windswept Stirling in Scotland, from South Wales to Belfast in Northern Ireland, Newsweek's investigation found 384 groups in the U.K. that are part of United Front networks amplifying the CCP's political line and working to influence public opinion overseas, for example by calling for unification with Taiwan in line with Beijing's policy, supporting party congresses and policies, extolling Chinese leader Xi Jinping, staging pro-Beijing demonstrations, and building relationships with politicians and business people at every level of society.
Some of the groups openly say they adhere to the Chinese constitution, as well as British laws. Some monitor the overseas Chinese community, especially since about 150,000 Hong Kongers fled to Britain, Hong Kong's former ruler, escaping deepening repression by Beijing at home. And some people in the groups have engaged in documented assaults on critics of the Communist Party.
Like the qipao association, many Chinese organizations in Britain have been set up for overtly cultural reasons and there is no evidence that all members are aware of their links to the Communist Party's United Front Work Department—an opaque department directly under the party's powerful Central Committee. Nor is there evidence that British members of the groups are necessarily involved in illegal activities. But those who have studied the overseas networks say the apparent innocence belies their significance.
"There are many reasons the presence of the United Front system in the U.K. matters," said Martin Thorley, a senior analyst at the Global Initiative for Transnational Organized Crime headquartered in Geneva, Switzerland, who has researched the situation for years.
"Its main purposes are to neutralize threats to the party and ensure desirable scenarios for the party. It poses a danger to critics of the party, for example, extending the reach of a one-party state inside the U.K.'s borders," Thorley said.
The front "has an outsized influence on U.K. elites, engineering outcomes that are good for the elite in questions, good for the party, but in some instances potentially harmful for the U.K. as a whole," Thorley said.
Newsweek reached out to each group and person named in this article for comment, by telephone, email, on social media or in person. None responded to questions about their ties to the Front. The Chinese embassy in London did not respond, either.
Britain's interior ministry, known as the Home Office, said in an emailed statement that it did not comment on the details of intelligence or security matters, but added: "It is, and always will be, an absolute priority to protect the U.K. against foreign interference, and we will continue to call out and respond to malign activity."
"We are strengthening our laws through the National Security Bill, to provide the security and intelligence agencies with the tools they need to keep the U.K. safe," it said.
25. China's top diplomat urges greater co-operation with Japan, South Korea
Reuters, July 3, 2023
26. Vance, Brown call for action against China over fentanyl crisis
Kelly Garrity, Politico, July 2, 2023
27. EU agrees to de-risk from China and debates what this means
Philip Blenkinsop, Reuters, June 30, 2023
28. Chinese hospital ship to visit Pacific to boost 'responsible' image
Reuters, July 3, 2023
29. Perceptions and trust: Chinese views of Canada and Australia amid geopolitical tensions
Ye Xue, Daniel Lincoln, Reza Hasmath, and Jia Wang, Lowy Institute, June 23, 2023
30. Barbie movie gets Vietnam ban over South China Sea map
Nicholas Yong, BBC, July 3, 2023
31. Putin, Xi and Modi Meet on Camera, but with No Signs of Greater Unity
David Pierson, Anatoly Kurmanaev, and Sameer Yasir, New York Times, July 4, 2023
32. New Zealand's bind: Balancing Western security against Chinese trade
Rachel Pannnett, Washington Post, July 5, 2023
33. ‘Another small step’ as Argentina allows deposits in China’s ‘safe haven’ yuan
Kandy Wong, South China Morning Post, June 30, 2023
Human Rights and Religious Persecution
34. China Took Her Husband. She Was Left to Uncover His Secret Cause.
Vivian Wang, New York Times, July 5, 2023
He was brilliant, quirky and intensely private — and also, she now suspects, an anonymous dissident blogger who had won fame for years of evading the surveillance state.
It wasn’t as if Bei Zhenying didn’t know that her husband was unusual, or even that he had some secrets.
He was a talented computer programmer, and she fell for his inquisitive intelligence and playfulness when they met at university in Shanghai. But he was also proudly nonconformist — refusing to use social media or buy new clothes — and intensely private, disappearing into his study to do work he wouldn’t discuss.
Ms. Bei, 45, accepted those quirks as the habits of a professional geek, someone engrossed in a world that she, a corporate business manager, didn’t understand. But she never imagined just how little she knew about her husband, Ruan Xiaohuan, until the Shanghai police stormed into the couple’s apartment and took him away.
The authorities accused Mr. Ruan of plotting to overthrow the Chinese government, by writing articles “smearing our country’s political system.” In February, a judge sentenced him to seven years in prison. Ms. Bei was left to try and piece together the life that he had kept from her.
What she learned, over the following months, was more than a personal secret. Ms. Bei now believes that Mr. Ruan was the writer behind one of the most mysterious blogs on the Chinese internet, which for 12 years had ridiculed the ruling Communist Party from within the country — a seemingly unthinkable feat under China’s hard-line leader, Xi Jinping.
The blog, Program Think, had a near-mythical status among its fiercely devoted following. The anonymously written posts mapped the hidden wealth of China’s leaders, one of the government’s most sensitive topics. They shared tips on covering digital tracks, mocking the authorities for failing to unmask the author. And they urged readers to think for themselves, in defiance of the society around them
Then, the blog went silent in May 2021 — the same month Mr. Ruan, now 46, was arrested.
Whether Mr. Ruan was Program Think is virtually impossible to confirm. The court that sentenced him did not name his website, probably to avoid drawing attention to it. China treats national security cases with absolute secrecy, and Ms. Bei has not been allowed to speak to Mr. Ruan. Program Think offered almost no identifying details.
Either way, the fates of Program Think and Mr. Ruan are part of the same story, about the drastic measures of subterfuge that Chinese citizens must take to offer dissenting opinions under Mr. Xi. They ultimately may also point to the near impossibility of doing so in an ever-expanding surveillance state.
But their stories also show how independent thought continues to emerge, despite — or, at times, because of — Mr. Xi’s unrelenting campaign against it. Ms. Bei had no interest in politics before her husband’s arrest, she said when we met earlier this year, after she decided to publicize her belief about Mr. Ruan’s identity. She didn’t even bother circumventing China’s internet censorship. But as she was forced to search for answers, she found herself on a journey of awakening — much like the kind Program Think had set out to inspire.
COMMENT – The Chinese Communist Party is terrified of citizens like Ruan Xiaohuan.
35. Hong Kong: Warrants Aim at Activists Abroad
Human Rights Watch, July 4, 2023
36. Hong Kong puts a price on the heads of democracy activists
The Economist, July 4, 2023
37. As China Reopens Borders, Trafficking of Women and Girls Resumes
Liyan Qi, Wall Street Journal, June 30, 2023
38. Shein Flew Influencers to China to Help Its Image. A Backlash Ensued.
Jordyn Holman and Sapna Maheshwari, New York Times, June 29, 2023
Industrial Policies and Economic Espionage
39. China restricts exports of chip-making metals gallium and germanium
Bingyan Wang, MarketWatch, July 3, 2023
40. China Is Gearing Up to Evade Chip-Export Rules
Matt Brazil and Peter Singer, Defense One, June 26, 2023
As one avenue for China to illicitly acquire high-end dual use technology dries up, watch for others to expand.
China has long relied on foreign-made computer chips for bleeding-edge national security efforts, from supercomputers to domestic surveillance to AI. Now, as American policymakers work to stem this flow of advanced technology, China is trying to accelerate its own chipmaking industry—and devising ways to circumvent export restrictions.
For over three decades, the business model used by Western companies made it easy for local middlemen to sell and resell pocket-sized supercomputer chips, smoothing their path to sanctioned organizations on the U.S. Entity List. For instance, Intel’s multi-core Xeon CPUs were used to build China’s Tianhe-2, the world’s fastest supercomputer as of 2013, owned by the National University of Defense Technology and used for a wide range of military research. This business model is made up of four parts: company sales and engineering staff and their senior management, who are almost all Chinese citizens; Chinese computer manufacturers such as Lenovo, Haier, and others, that purchase chips in bulk and sometimes resell them on the open market; the huge electronics emporiums throughout China, such as Huaqiang Electronics World in Shenzhen; and the electronics distributors (“distis”), that resell CPUs and GPUs throughout China. Semiconductor powerhouse AMD, for example, has 32 authorized distributors in China, most of which are smaller entities, while Intel has 11.
This model emphasizes maximizing sales per quarter, as company shareholders in any industry would expect. However, in doing so, it also weakens the guardrails meant to prevent tech transfer to PLA and other prohibited entities. Under this model, locally hired Chinese nationals pursue direct sales to big Chinese computer manufacturers like Lenovo, or sell to local electronics distributors. In the PRC, the sales managers who directly interact with Chinese end-users are themselves Chinese citizens, more beholden to Chinese law than they are to any corporate code of conduct.
This business model also provides an easy “in” for parties on the U.S. Entity List seeking clandestine transfer of technology. By using local middlemen, they have multiple opportunities to disguise purchases and thefts of sensitive technology. Most notoriously, these middlemen are likely also responsible for the recent proliferation of U.S. computer technology in North Korea.
41. Financial sanctions may not deter China from invading Taiwan
The Economist, June 29, 2023
42. China Official Meets with Foreign Drugmakers to Boost Confidence
Bloomberg, July 5, 2023
43. Microvast Nixes Battery Plant After US Pulls Loan Over Company’s China Ties
Ari Natter, Bloomberg, July 5, 2023
44. Letter from prison: South Korean chip executive denies stealing Samsung data for China factory
Heekyong Yang and Ju-min Park, Reuters, June 30, 2023
45. Could China lose its lead in shipbuilding as West looks at industrial decoupling?
Amanda Lee and Ralph Jennings, South China Morning Post, June 30, 2023
46. German industry urges reduced dependency after China export controls
Reuters, July 4, 2023
47. The U.S.-China rare earths battle
Yifan Yu, Nikkei Asia, July 5, 2023
48. Shadow reserves — how China hides trillions of dollars of hard currency
Brad Setser, The China Project, June 29, 2023
49. China’s export curb on chip metals requires EU response
Nikkei Asia, July 5, 2023
50. ‘Step in right direction’: China to ease economic, trade rules to aid CPTPP bid
Amanda Lee, South China Morning Post, June 30, 2023
51. Biden’s trade experiment is ticking people off. His trade rep is on the receiving end.
Steven Overly and Doug Palmer, Politico, July 3, 2023
52. China’s curb on metal exports reverberates across chip sector
Financial Times, July 4, 2023
53. China’s Chip Industry Braces for Further Sanctions with Concerns and Defiance
Yoko Kubota, Wall Street Journal, July 4, 2023
54. China’s Weakening Currency Is Becoming a Headache for Its Central Bank
Weilun Soon, Wall Street Journal, July 5, 2023
55. China’s Brain Drain Threatens Its Future
Nathaniel Taplin, Wall Street Journal, July 5, 2023
56. Supply Chain Latest: Rotterdam Port CEO Sees More Business Anxiety Over China
Cagan Koc and Diederik Baazil, Bloomberg, July 5, 2023
57. U.S., China Start Talking Again, With Global Economic Order at Stake
Andrew Duehren, Wall Street Journal, July 2, 2023
58. Vietnam becomes vital link in supply chain as business pivots from China
Orla Ryan, Financial Times, July 3, 2023
59. ASML Hit with New Dutch Limits on Chip Gear Exports to China
Cagan Koc, Bloomberg, June 30, 2023
60. China’s Economy Shows New Signs of Weakness
Stella Yifan Xie, Wall Street Journal, June 30, 2023
61. Micron’s Long Road Back Hits China Detour
Dan Gallagher, Wall Street Journal, June 29, 2023
Cyber & Information Technology
62. China seeks leg up in 6G standards race with faster wireless tech
Takashi Kawakami and Shiho Miyajima, Nikkei Asia, June 30, 2023
63. The Perils of China’s Great Information Wall
Dewey Murdick and Owen Daniels, Time, June 25, 2023
The Chinese government recently cut off international access to a significant portion of the country’s public data—including contracts, patents, scientific conference proceedings, dissertations, and statistical information. Coverage has attributed the disappearance of some of this data to reports by think tanks that leveraged such data to highlight, among other findings, how the People’s Liberation Army hoped to access and weaponize American-designed semiconductors.
This ongoing situation is unfortunate for numerous reasons, not least because the research we conduct at Georgetown’s Center for Security and Emerging Technology (CSET) using Chinese data has consistently been recognized as accurate, balanced, and responsible. More importantly, locking down data and preventing responsible researchers who rely on publicly available materials (often called “open source”) from understanding China is a strategic mistake for the People’s Republic. Allowing global access only to unsatisfactory data may lead to unsatisfactory outcomes for everyone.
China likely cares more about controlling its message than the accuracy of U.S. analysts’ work. Chinese Communist Party (CCP) leaders have for decades limited foreigners’ access to domestic news and information to try to control global narratives about their country. But this latest expansion of the Great Firewall does little to boost China’s image, and it could strengthen the influence of foreign analysts who present one-sided perspectives on the country.
64. China’s chipmaking export curbs ‘just a start’, Beijing adviser warns before Yellen visit
Reuters, July 6, 2023
65. In its tech war with America, China brings out the big guns
The Economist, July 4, 2023
66. ‘Smashed the China wok’? Chinese state media hits out at Meta’s Zuckerberg
Tracy Qu, South China Morning Post, July 5, 2023
67. Zuckerberg’s Quest to Re-Enter China Faces Challenge: His Own Words
Newley Purnell and Raffaele Huang, Wall Street Journal, July 3, 2023
68. EU and Japan look to partner on A.I. and chips as China ‘de-risking’ strategy continues
Arjun Kharpal, CNBC, July 3, 2023
69. Should We Chat? Privacy in the WeChat Ecosystem
Mona Wang, Pellaeon Lin, and Jeffrey Knockel, The Citizen Lab, June 28, 2023
70. The new kids on China’s AI block
Caiwei Chen, Rest of World, 2023
71. U.S. Looks to Restrict China’s Access to Cloud Computing to Protect Advanced Technology
Yuka Hayashi and John D. McKinnon, Wall Street Journal, July 4, 2023
Military and Security Threats
72. Myanmar land mine danger grows as military rings Chinese assets
Marwaan Macan-Markar, Nikkei Asia, July 3, 2023
73. China’s New Conscription Rules Reveal Concerns
Thomas Corbett and Peter Singer, Defense One, June 8, 2023
Recent revisions to the regulations that govern China’s draft highlight some of the military’s deepest insecurities about its own capabilities and people.
In April, China’s Central Military Commission announced that it had revised the “Regulations on Conscription Work.” Released by the Xinhua state news agency, the announcement said that the revisions were carried out to implement “Xi Jinping Thought on strengthening the military” and improve the quality of conscripts to the People’s Liberation Army, or PLA. Yet certain changes inadvertently highlight some of the PLA’s deepest insecurities about its own capabilities and people.
Perhaps most notably, the updated Regulations have a brand-new chapter about the wartime conscription process. The new rules allow the CMC to adjust conscription requirements at will after issuing a national defense mobilization order. It also indicates that during wartime, former soldiers can be called up as a supplement to active service units.
All this strongly suggests that the PLA is thinking not just about what it would actually need in wartime, but also how it continues to suffer from poor retention of its personnel. In particular, better-educated personnel tend to leave after their two-year enlistment is up, put off by the harsh conditions and attracted by more appealing options in the private sector.
74. Japan and ASEAN justice ministers reaffirm support for rule of law
Japan Times, July 6, 2023
Justice ministers from Japan and the Association of Southeast Asian Nations (ASEAN) pledged Thursday to cooperate on promoting the rule of law amid China’s increasing maritime assertiveness in the Indo-Pacific region.
In a joint statement issued after their meeting in Tokyo, Justice Minister Ken Saito and his ASEAN counterparts reaffirmed their commitment to the “peaceful resolution of disputes” without “resorting to the threat or use of force.”
Japan and the 10-member ASEAN said in the statement that they will uphold and promote “shared values and fundamental principles such as the rule of law and respect for human rights, as well as national sovereignty and territorial integrity.”
75. Russia buying civilian drones from China for war effort
Jacob Fromer, Nikkei Asia, July 1, 2023
76. “Production Is Deterrence”
Stacie Pettyjohn and Hannah Dennis, Center for a New American Security, June 28, 2023
77. VIDEO – The state of the U.S. Navy as China builds up its naval force and threatens Taiwan
Norah O'Donnell, CBS News, July 2, 2023
78. Analyzing China’s Escalation after Taiwan President Tsai’s Transit through the United States
Bonny Lin, Brian Hart, Samantha Lu, Hannah Price, and Matthew Slade, CSIS, June 29, 2023
79. Chinese Balloon Used American Tech to Spy on Americans
Nancy A. Youssef, Wall Street Journal, June 29, 2023
80. Chinese balloon was using US surveillance technology, finds FBI
Demetri Sevastopulo, Financial Times, June 30, 2023
81. How China’s Overseas Security Forces Differ from Wagner
James T. Areddy, Wall Street Journal, July 1, 2023
82. China Says It Wants More Cooperation with Russia's Military
Kari Soo Lindberg and Xiao Zibang, Bloomberg, July 2, 2023
83. Xi Jinping warned Vladimir Putin against nuclear attack in Ukraine
Max Seddon, James Kynge, John Paul Rathbone, and Felicia Schwartz, Financial Times, July 4, 2023
84. Taiwan Looks to Ukraine Playbook in Race to Build Satellite Internet
Clarence Leong, Wall Street Journal, July 3, 2023
85. Wagner Uprising Highlights China's Risks with Russia
David Pierson and Olivia Wang, New York Times, July 1, 2023
86. Defense engagement between Japan and Italy picks up pace
Gabriel Dominguez, Japan Times, July 6, 2023
With a joint fighter program, navy port calls and information exchanges in F-35B operations, Italy and Japan are quickly expanding defense and security ties as Rome seeks to intensify engagement in the Indo-Pacific while Tokyo broadens its network of partners to counterbalance China's growing military ambitions.
The rapid pace of bilateral military engagement has become evident in recent weeks. On Tuesday, Maritime Self-Defense Force Chief of Staff Adm. Ryo Sakai announced that the service can exchange information with the Italian Navy on the operation of the F-35B fighter aircraft both countries are acquiring.
Italy and Japan are procuring both the F-35A (conventional take-off and landing) and F-35B (short take-off and vertical landing) variants of the advanced aircraft, with Rome set to field 60 F-35As and 30 F-35Bs and Tokyo planning to acquire up to 105 F-35As and 42 F-35Bs over the coming years — the most of any non-U.S. customer.
One Belt, One Road Strategy
87. China automaker BYD to invest $620 million in Brazil industrial complex
Reuters, July 5, 2023
88. China Jumps Ahead in the Rush to Secure Lithium from Africa
Annie Lee, Bloomberg, July 3, 2023
89. Chinese navy makes rare foray into West Africa with Nigeria visit
Reuters, July 3, 2023
90. Senior China Diplomat Dispatched to Italy to Keep Nation in Belt and Road Initiative
Bloomberg, June 30, 2023
Opinion Pieces
91. To reduce dependence on China, more of us need to work in factories
Elisabeth Braw, Politico, June 26, 2023
92. On Foreign Policy, the New Populists Are Old Declinists
Rebeccah Heinrichs and Matthew Kroenig, National review, July 2, 2023
93. The Governance Threat to Prosperity
Michael Spence, Project Syndicate, June 28, 2023
Maintaining policy stability has long been recognized as essential to long-term investment and economic development. But the past few years have been characterized by growing polarization and political instability, which increases the risk of abrupt policy reversals that could dampen investment and undermine growth.
94. Japan and Nuclear Deterrence
Dan Blumenthal, 1945, June 29, 2023
95. China Is Bad at Soft Power in Asia
Zuri Linetsky, Foreign Policy, June 28, 2023
96. Why China should be friendlier to its neighbours
The Economist, July 4, 2023
97. Alexander Gabuev on China’s strategic calculations after the turmoil in Russia
Alexander Gabuev, The Economist, July 3, 2023
98. Is Russia Losing Its Grip on Central Asia?
Temur Umarov and Alexander Gabuev, Foreign Affairs, June 30, 2023
99. Xi Jinping's Schadenfreude Over the Mutiny Against Putin
Craig Singleton, Foreign Policy, June 29, 2023