Friends,
One note before we jump in, I’m writing this on Thursday evening and will program it to go out on Sunday morning while I’m on vacation… fingers crossed that nothing I write here will be overcome by events.
It has been about nine months since Treasury Secretary Janet Yellen made her last visit to Beijing and she was back last week. The main outcome of this latest trip, and the thing that Secretary Yellen stressed in her remarks, is the creation of new U.S.-PRC economic dialogues.
For those of you who have lost count, Secretary Yellen now has four bilateral dialogue mechanisms with the PRC that cover various economic issues and her staff has been busy conducting these with the PRC:
the “U.S.-China Economic Working Group” (announced in July 2023)
the “Financial Working Group” (announced in July 2023)
the “Balanced Growth in the Domestic and Global Economies” Dialogue (announced last week)
the “Joint Treasury-PBOC Cooperation and Exchange on Anti-Money Laundering” Dialogue (announced last week)
In fairness to the Secretary, she and her staff (as well as the White House) conspicuously avoid using the term dialogue and instead call them “working groups,” “exchanges,” or “conversations” and describe them with various adjectives like: “substantive,” “in-depth,” and “intensive.”
But we should be clear with one another, the word dialogue rightly applies to what has restarted over the last nine months.
Monopoly rules apply.
There is a little-known rule in U.S. policy-making, that once a Treasury Secretary establishes four separate, standalone dialogues with their counterparts in Beijing, it qualifies for the “hotel” of dialogues: the vaunted “Strategic Economic Dialogue,” also known as the SED.
For those of you who are nerds about these rules, you might remember that if the Secretary of State joins with the Treasury Secretary to co-host their PRC counterparts, then it automatically becomes the “Strategic AND Economic Dialogue” also known as the S&ED, think of this like the mega-resort hotel of dialogues… we aren’t there yet, but trust me, it’s coming.
Talking ain’t bad, right?
You might ask some questions about this development, like:
What do these Treasury-led talk-fests accomplish?
Does the Treasury Secretary spend this much time dialoguing with our allies?
Have we ever tried this approach before?
Has this approach worked in the past with the PRC?
Why does this guy keep harping on the Treasury Department?
Short answers are: nothing; nope; oh yeah; nope; and I clearly have a problem.
Setting up and running these dialogues always starts small and innocent. However starting an open-ended dialogue with the PRC is like creating a gravitational singularity, it quickly becomes a black hole. It consumes an Administration’s most precious resource, the time and attention of its most senior officials, and then it starts to expand, filling the calendar and blotting out other more pressing priorities.
As Treasury seeks to include more topic areas in these dialogues (as we witnessed last week), the State Department is forced to participate because nothing in the U.S.-PRC relationship is solely “economic” and the State Department is fundamentally responsible for our foreign relations (not Treasury). Then as State gets pulled into this ever-expanding time suck, other Departments are forced into its gravitational field, cross the event horizon, and plunge into the gravity well (DoD, USDA, USTR, Commerce, Energy, Justice… the list goes on and on).
Before you know it, you get the absolute monstrosity that was the S&ED of the late Obama era, in which thousands of officials were toiling away at these biannual dialogues focused on 160+ “deliverables” and “working groups.” Nearly all the oxygen was taken up by preparing for or conducting the “next” high-level meeting with the PRC. These same officials are the ones who should have been focused on our allies, or on providing domestic relief to the harms Beijing was doing to the U.S. economy, or modernizing our military to better deter a modernizing PLA, or coming up with reciprocal countermeasures that would have imposed real costs on the PRC and hence things that Beijing would have paid attention to.
The performance of “dialogue” became the purpose… and we can see the glimmering of this in the Secretary’s remarks about what she has restarted. Process is all important, accomplishing objectives for the American people is secondary.
As Matt Pottinger and Mike Gallagher point out below in their great Foreign Affairs piece, titled “No Substitute for Victory: America’s Competition with China Must Be Won, Not Managed” (#90 below):
“Washington is allowing the aim of its China policy to become process: meetings that should be instruments through which the United States advances its interests become core objectives in and of themselves.”
Never has the term “Sisyphean task” been more apt.
I have often thought of the SED (and even more so, the S&ED) as essentially the Rube Goldberg approach to confronting Beijing about the harms it does to the U.S. economy and our national security.
Instead of imposing a reciprocal harm on the PRC for the harms they are doing to U.S. interests, prosperity, and security, the dialogue approach of the SED/S&ED seeks to engage with Beijing in an endless cycle of talking points, in which we hope to wear down the Chinese Communists with our persistence and our perfectly rational arguments (from our perspective) that what Beijing is doing is wrong and that they better stop.
Beijing loves this approach, they have all the time in the world, all they have to do is throw some banquets and rack up the frequent flyer miles, whereas we are the ones suffering the injury from their actions and trying to hold together an international order that they are destroying.
At the end of each dialogue cycle, we pat ourselves on the back for “engaging” with the PRC, for being “responsible,” and for showing Beijing the “right way” to do diplomacy. We then mark that cycle as complete (because the meeting took place), we hand out some awards to mid-level officials who helped with the organization of the meetings, and people list this achievement on their resumes and CVs with pride (I had thought about providing some examples, but I will avoid naming names).
Of course, nothing was resolved or achieved with these meetings and Beijing is still harming our interests.
When I raised questions about the wisdom of this approach, I was condescendingly told that “you just don’t understand how sophisticated diplomacy works.”
That may be so, I’m not particularly sophisticated, but if the purpose of diplomacy is to protect and achieve one’s interests (i.e. the objectives the American people expect of their elected and government servants), then this approach does not work.
I’ve come to conclude that “sophisticated diplomacy” is a euphemism for “bad diplomacy.”
So, what should we do? Stop, just stop.
The first rule of diplomacy with the Chinese Communist Party is Cabinet Secretaries should not hold open-ended, bilateral dialogues with Beijing.
That approach is appropriate for our allies and partners where a degree of trust and goodwill exists. In fact, we started this obsession with open-ended bilateral dialogues with Beijing back when we thought they were converging with us, back when we thought they may become a close partner. Two decades later and the world is very different from the G2 fantasies that folks like Treasury Secretary Hank Paulson and Deputy Secretary of State Robert Zoellick had about the relationship.
We have an Embassy in Beijing and they have one in Washington, those facilities are filled with wonderfully smart individuals who can speak on their country’s behalf. Nick Burns is more than capable of communicating America’s messages to the Chinese Communists. Our relationship should have open communication executed by those embassies and it should be premised on reciprocity.
When Beijing refuses to open its markets to U.S. goods, we should treat them with reciprocity. When Beijing blocks U.S. social media and internet companies from operating in the PRC, we should treat them with reciprocity. When Beijing mounts political interference campaigns and conducts industrial scale economic espionage, we should treat them with reciprocity. When Beijing employs economic coercion against the United States and other countries, we should treat them with reciprocity. When Beijing threatens our treaty allies and partners with aggression and annexation, we should treat them with reciprocity.
If the President wants to talk with Xi Jinping on the sidelines of APEC or the G20: spectacular, let’s do it.
If Wang Yi wants to talk with Secretary Blinken about ending the war in the Middle East or Ukraine: awesome, Secretary Blinken should take that phone call or meet with him in person.
If the PRC Vice Chairman of the Central Military Commission wants to meet with the Secretary of Defense on the sidelines of the Shangri-La Dialogue in Singapore to discuss safe and responsible interactions in international waters or airspace: I welcome that.
What doesn’t work is setting up an endless cycle of meetings where we say in a passive aggressive tone “please stop doing X or we will fly here again and ask you to stop doing X.” It didn’t work when Hank Paulson started these ridiculous dialogues in 2006 and it didn’t work when the Obama Administration held eight rounds of the S&ED between 2009 and 2016.
Secretary Yellen should not repeat those mistakes.
***
Tweet of the Week revisits our favorite “borrowed boat,” Harvard Professor Graham Allison, who never seems to skip an opportunity to ingratiate himself to Xi Jinping.
This week’s winner is from Dhruva Jaishankar, Executive Director of ORF America and the son of Indian Foreign Minister S. Jaishankar.
Congrats Dhruva, two birds with one stone and only four words, that’s some high-quality trolling.
Thanks for reading!
Matt
MUST READ
1. Messages between Chinese hackers show Australian Strategic Policy Institute is a target
James King, The Nightly, April 10, 2024
Chinese spymasters have identified Australia’s top security research institute as a priority target in their cyber-attack operations, with an investigation by The Nightly for the first time able to reveal messages between hackers that refer to our nation.
The group chat exchanges also offer a remarkable insight into the daily lives and frustrations of state-sponsored hackers working for China, including their dismay at being told they’re working too slowly while being tasked with disrupting “a big asset in two days”.
The Nightly investigation can reveal hackers working for the Chinese Government have been directed to target the Australian Strategic Policy Institute.
Withdrawing funding for the institute was among 14 demands to the Australian Government released by the Chinese embassy in 2020.
Among its other grievances was “thinly veiled allegations against China on cyber-attacks without any evidence” and a rebuke of the Australian government it repeated as recently as last fortnight when a Chinese Foreign Ministry spokesperson said “China firmly opposes and combats all kinds of cyber-attacks”.
But The Nightly has discovered group chat messages on a social media channel exchanged between a hacker collective working for the Chinese Government.
The messages reveal a target list that includes ASPI — a think tank partly funded by Australia’s Department of Defence — among a range of other governmental organisation across the US and Taiwan.
In the exchanges, the hackers discuss hitting critical infrastructure in the Indo-Pacific, receiving directives to support Chinese security agencies and receiving letters of thanks for their service.
2. Japanese PM Fumio Kishida addresses U.S. 'self-doubt' about world role in remarks to Congress
Rebecca Shabad and Scott Wong, NBC News, April 11, 2024
Japanese Prime Minister Fumio Kishida asserted in an address to a joint meeting of Congress on Thursday that his country stands with the U.S. at a time when history is at a turning point.
Kishida said the U.S. held a certain reputation decades ago that "shaped the international order" and "championed freedom and democracy."
"You believed that freedom is the oxygen of humanity," he said. "The world needs the United States to continue playing this pivotal role in the affairs of nations. And yet, as we meet here today, I detect an undercurrent of self-doubt among some Americans about what your role in the world should be."
Kishida said that this is happening when the world is "at history's turning point" as "freedom and democracy are currently under threat around the globe," climate change is causing natural disasters, and technology such as artificial intelligence is advancing.
Japan is facing "an unprecedented and the greatest strategic challenge" from China," the prime minister said. He also spoke about the threats from North Korea and from Russia in Ukraine.
"Ladies and gentlemen, as the United States’ closest friend, tomodachi, the people of Japan are with you, side by side, to assure the survival of liberty," he said. "Not just for our people, but for all people."
COMMENT - Great job by Prime Minister Kishida… Japan is the model for a “responsible stakeholder” in the international system. The world is lucky to have a leader like him.
I was unaware that he attended public elementary schools in Queens, New York as a child.
3. Press Conference by Prime Minister Kishida regarding His Visit to the United States of America
Kantei (Prime Minister’s Office of Japan), April 8, 2024
First, I will be making an official visit to the United States in response to the invitation by President Biden. With the international community now facing complex and diverse challenges and the security environment around Japan turning increasingly severe, I feel the Japan-U.S. Alliance is becoming all the more imperative.
During this visit, the first official visit to the United States by a Japanese prime minister in nine years, I intend to reaffirm first of all that Japan and the U.S. are global partners, that we will together take the lead on various issues facing the international community, and that, as we work to accomplish this, Japan-U.S. relations have become even more rock-solid. I also consider this an extremely valuable opportunity to communicate these points to the world.
As for my address to the U.S. Congress, now, with the international community approaching a historic turning point, I intend to deliver an address firmly focused on the future, namely, what kind of international community and what sort of future should Japan and the United States aim to bring about, and what must Japan and the U.S. do in order to make those a reality? I wish to take this as an opportunity to send out a clear message to the U.S. Congress, the American people, and, indeed, the entire world regarding such matters as these, based on the various experiences and knowledge I have gained regarding diplomacy.
With regard to the trilateral summit to be held among Japan, the U.S., and the Philippines, I regard partnership among our three nations as critically important in reality in terms of peace and stability in the Indo-Pacific, and furthermore, in defending the free and open international order based on the rule of law. This will be the first time for us to hold a Japan-U.S.-Philippines trilateral summit meeting, and, in the sense I just mentioned, reaffirming the partnership among our three countries is extremely important, in my view.
Those are my thoughts with regard to your questions. And, alongside all that, I will also pay a visit to North Carolina during this trip. North Carolina is an area where Japanese companies are making large-scale investments. I hope that by meeting with people related to Japanese-affiliated companies, people studying Japanese, and so on, I will have the opportunity to show that Japan-U.S. relations are underpinned by this broad array of fields and that our relations enjoy a wide-reaching base which also includes local areas rather than only the central government.
4. AUDIO – Tuvalu govt confirms it will ratify landmark security treaty with Australia
Doug Dingwall, ABC News, April 8, 2024
Tuvalu's government says it will ratify a landmark security treaty with Australia, ending months of speculation over concerns the treaty would affect the Pacific nation's sovereignty.
5. US considers easing warnings for Americans traveling to China
Michael Martina and David Brunnstrom, Reuters, April 9, 2024
The U.S. is considering easing advisories against its citizens traveling to China, Deputy Secretary of State Kurt Campbell said on Tuesday, acknowledging concerns that the warnings may have curtailed exchanges between Americans and Chinese people.
Communication channels between Washington and Beijing had largely normalized after months of heightened tensions, Campbell told an event hosted by the non-profit National Committee on U.S.-China Relations.
COMMENT – Foolish… Beijing has done nothing to demonstrate that it has changed its policies around arbitrary detentions and exit bans which forced the U.S. State Department to issue these travel warnings over six years ago.
My advice to State: Don’t cave to lobbying by the National Committee and the U.S.-China Business Council.
6. Fitch Revises Outlook on China to Negative; Affirms at 'A+'
Fitch Ratings, April 9, 2024
Negative Outlook: The Outlook revision reflects increasing risks to China's public finance outlook as the country contends with more uncertain economic prospects amid a transition away from property-reliant growth to what the government views as a more sustainable growth model. Wide fiscal deficits and rising government debt in recent years have eroded fiscal buffers from a ratings perspective.
Fitch believes that fiscal policy is increasingly likely to play an important role in supporting growth in the coming years which could keep debt on a steady upward trend. Contingent liability risks may also be rising, as lower nominal growth exacerbates challenges to managing high economy-wide leverage.
7. Putin and Xi’s Unholy Alliance: Why the West Won’t Be Able to Drive a Wedge Between Russia and China
Alexander Gabuev, Foreign Affairs, April 9, 2024
Just a decade ago, most U.S. and European officials were dismissive about the durability of the emerging partnership between China and Russia. The thinking in Western capitals was that the Kremlin’s ostentatious rapprochement with China since 2014 was doomed to fail because ties between the two Eurasian giants would always be undercut by the growing power asymmetry in China’s favor, the lingering mistrust between the two neighbors over a number of historical disputes, and the cultural distance between the two societies and between their elites. No matter how hard Russian President Vladimir Putin might try to woo the Chinese leadership, the argument went, China would always value its ties to the United States and to U.S. allies over its symbolic relations with Russia, while Moscow would fear a rising Beijing and seek a counterbalance in the West.
Even as China and Russia have grown significantly closer, officials in Washington have remained dismissive. “They have a marriage of convenience,” U.S. Secretary of State Antony Blinken told U.S. senators in March 2023 during Chinese leader Xi Jinping’s state visit to Moscow. “I am not sure if it is conviction. Russia is very much the junior partner in this relationship.” And yet that skepticism fails to reckon with an important and grim reality: China and Russia are more firmly aligned now than at any time since the 1950s.
The tightening of this alignment between Russia and China is one of the most important geopolitical outcomes of Putin’s war against Ukraine. The conscious efforts of Xi and Putin drive much of this reorientation, but it is also the byproduct of the deepening schism between the West and both countries. Western officials cannot wish this axis away, hoping in vain that the Kremlin bridles at its vassalage to Zhongnanhai or making futile attempts to drive a wedge between the two powers. Instead, the West should be prepared for an extended period of simultaneous confrontation with two immense nuclear-armed powers.
COMMENT - Another great contribution by Alexander, keep it up my friend!
8. How China allegedly interfered with Canada’s elections
Amanda Coletta, Washington Post, April 10, 2024
The conclusions in the top-secret intelligence briefing were stark: China “clandestinely and deceptively” interfered in Canada’s 2019 and 2021 federal elections, seeking to support candidates favorable to Beijing’s strategic interests.
The activity was aimed at discouraging Canadians, particularly Chinese Canadians, from voting for the Conservative Party, which it viewed as having an anti-Beijing platform, the Canadian Security Intelligence Service reported.
In both elections, China got the outcome it wanted — the reelection of Prime Minister Justin Trudeau with a minority government — but intelligence officials have said there is no evidence that Beijing’s efforts had an impact on the result.
The document was prepared for the prime minister’s office after Canadian news outlets reported last year on leaked intelligence documents that alleged that China sought to interfere in the elections. Now those claims are at the center of a public inquiry in Ottawa.
Christopher Nardi and Catherine Lévesque, National Post, April 10, 2024
Prime Minister Justin Trudeau said he did not receive “sufficiently credible information” to remove Liberal candidate Han Dong from the 2019 election ballot despite a warning from security intelligence officials that they suspected irregularities and potential interference by China in Dong’s nomination.
He also told the inquiry that he considered that intelligence officials might not be familiar enough with candidate nomination processes to understand that bussing large numbers of foreign students into a riding to vote, as happened in Dong’s nomination, was not necessarily incriminating evidence of interference.
“In this case, I didn’t feel that there was … sufficiently credible information that that would justify this very significant step as to remove a candidate,” Trudeau testified before a packed room on the final full day of hearings of the Public Inquiry into Foreign Interference.
The prime minister said he first found out about intelligence officials’ concerns about the 2019 Liberal nomination race in the Toronto riding of Don Valley North from a senior adviser in Ottawa during the election in September 2019.
The prime minister recounted how he met with Liberal campaign director Jeremy Broadhurst in a holding room at the Ottawa airport, as Trudeau prepared to continue campaigning, to discuss “concerns” from the Canadian Security Intelligence Service (CSIS) and the Security and Intelligence Threats to Elections (SITE) Task Force.
“Intelligence services had shared with him (Broadhurst) concerns that Chinese officials in Canada had been developing plans to possibly engage in interference in the nomination contest. Specifically, by mobilizing buses filled with students or buses filled with Chinese speakers or Chinese diaspora members who … would have been mobilized to support Han Dong,” the prime minister told the inquiry.
COMMENT – Canadians need to make up their own minds, but I found Prime Minister Justin Trudeau’s testimony unconvincing and self-serving.
If you want to watch it yourself, here is the link, Trudeau’s testimony starts at 6:02:20.
This is just speculation, but if Han Dong had been from any other political party than the Prime Minister’s own Liberal Party, then Trudeau would have found the evidence from the Canadian Intelligence Services to be “sufficiently credible” as to warrant taking action and likely Trudeau would have pushed to make it public.
It is interesting to contrast Trudeau’s obvious dismissal of politically inconvenient evidence and Trudeau’s actions seven months ago, when he used even less credible information to push a public narrative that was politically beneficial to him.
As a reminder, on September 18, 2023… just as Parliament was about to force Trudeau to submit to this exact public inquiry into PRC political interference, Trudeau went on the floor of the Canadian Parliament and used unverified “intelligence” to accuse the Indian Government of being linked to the killing of a Canadian citizen (to quote Trudeau directly: “Over the past number of weeks, Canadian security agencies have been actively pursuing credible allegations of a potential link between agents of the government of India and the killing of a Canadian citizen Hardeep Singh Nijjar.”).
Trudeau made this allegation against the Indian Government just as the demands for a public inquiry over his failure to address PRC interference in the 2019 and 2021 elections was coming to a head. This changed the debate over how Beijing’s political interference aided the Liberal Party to a more general debate over the many countries that interfere in Canada. His accusation also provided a political boost to his own Liberal Party and his coalition partners with an important diaspora community in Canada. The accusation against India at that time was far less credible than what Trudeau had been shown in 2019, as evidenced by his own Cabinet Ministers walking back Trudeau’s public statement within hours.
So I’m deeply skeptical that Prime Minister Trudeau is capable of weighing what is and what is not “sufficiently credible” when it comes to issues that help or hurt him politically.
The Liberal Party’s chances in the 2019 election, and Trudeau’s position as Prime Minister, were tenuous.
Had he done the right thing for Canadian democratic integrity, revealing that the PRC Government was actively aiding his Liberal Party, it could have seriously swayed public opinion, cost the Liberal Party seats in Parliament, and forced Trudeau from office.
Remember the context of late 2019 as this election was being held.
Two Canadians had been taken hostage by the PRC in order to coerce the Canadian government to release the Huawei CFO who was being held for potential extradition to the United States (the two Michaels would be held by Beijing on trumped up charges for 1,019 days, only releasing the two once the Biden Administration dropped the extradition request and entered into a deferred prosecution against the Huawei CFO and she had arrived back in the PRC to a hero’s welcome). When Trudeau got this briefing and dismissed it, the Two Michaels still had another 750 days of being held hostage.
Early in 2019, Trudeau had been forced to fire his own Ambassador to the PRC, John McCallum. The long-time former Liberal Party cabinet minister had stated publicly that the case against the Huawei CFO was weak and that Canada should release her. Here was a senior Liberal Party politician siding with Beijing even as Beijing held Canadian citizens hostage… not a good look and only reinforced the public perception that Trudeau’s Liberal Party was compromised by the Chinese Communist Party. [As an aside I was curious what the disgraced Ambassador is doing now, he’s at a Canadian business law firm focused on “building business-to-business contacts and creating opportunities in both China and Canada.” No surprise there.]
As if that weren’t enough, this was just a few years after two other Canadian citizens, Kevin and Julia Garrett, had been held hostage by the PRC for 775 days early in Trudeau’s premiership. The Chinese Communists had taken the Garretts hostage in order to coerce the Canadian government to release a PRC intelligence officer who was being held for extradition to the United States during the Obama Administration (a fact that Trudeau fails to mention in his testimony).
So, we should imagine what Trudeau was thinking when he was given a personal briefing weeks before the National Election about evidence from his intelligence services that yet another important Liberal Party member appeared to be compromised by the Chinese Communist Party.
It seems to me that Trudeau decided to do the easier wrong (dismiss the evidence presented by his Intelligence services as not “sufficiently credible”) instead of the harder right (protect the integrity of Canadian democracy) because doing so might have cost him his job as Prime Minister. Since Trudeau made that decision almost five years ago, he has tried very hard to cover it up and ensure that the Canadian public never learn about what he did.
That cover-up, and the fact that similar shenanigans happened to the 2021 National Elections, is what likely drove a patriotic Canadian to leak the information about this sordid affair to the public. When we look at what Trudeau actually cares about, he is far more bothered by a whistleblower, than how the Chinese Communist Party undermines Canadian democracy.
This whole thing is absolutely shameful and it raises serious questions about Canadian institutions and their legitimacy and trustworthiness.
The question now is: can the Canadian political class hold their ‘wonder boy’ responsible for this failure of leadership (putting Party, and personal interests, before Country) or will the Canadian Liberal Party simply circle the wagons again and sweep this under the rug?
In many ways, both Beijing and Moscow design their political interference campaigns so that they create these kinds of dilemmas for elected leaders (aid one political party against its domestic political rivals and that party becomes beholden to them… in fact they become compromised to blackmail).
But as we know in all human affairs, eventually the truth gets out (or these hostile foreign powers see it as beneficial to leak it themselves). As that happens and citizens understand that their leaders failed to address these issues head-on, Beijing and Moscow achieve their secondary objective: undermine the legitimacy of democracy… it’s what makes these political interference campaigns so pernicious.
We must treat Beijing and Moscow for what they are: adversaries, not partners to engage with.
Authoritarianism
10. Jamie Dimon says America ‘slept’ while China stealthily established itself as an economic powerhouse
Eleanor Pringle, Fortune, April 8, 2024
Jamie Dimon used his annual shareholder letter from JPMorgan Chase to highlight America's need to engage with China, a nation he says has established itself as a "potential superpower" with the influence to rival that of the U.S.
However, the self-professed "full-throated, red-blooded, patriotic, unwoke, capitalist CEO" said while collaboration between the two countries is key, it's his home nation that should be setting the global political and economic agenda.
In his letter to shareholders released Monday, the leader of America's biggest bank wrote that geopolitical tensions were high up on his list of concerns.
Government and business in the Western world "essentially underestimated the growing strength and potential threat of China," Dimon added, saying the Communist nation has been "comprehensively and strategically focused" on its economic national security while the West "slept."
"Over the last 20 years, China has been executing a more comprehensive economic strategy than we have," Dimon added. "The country’s leaders have successfully grown their nation and, depending on how you measure it, have the first or second largest economy in the world.
"That said, many question the current economic focus of China’s leadership as they don’t have everything figured out."
COMMENT – I read Jamie Dimon’s 2023 Annual Report and found this interesting tidbit, apparently last year JP Morgan created a new role – “Head of Asia Pacific Policy and Strategic Competitiveness — to focus specifically on key policy issues critical to the firm’s (and, in fact, the country’s) competitiveness, such as trade restrictions, supply chains and infrastructure. We also created a new strategic security forum to focus on emerging and evolving risks, including trade wars, pandemics, cybersecurity and actual wars, to name just a few.”
Not sure what the position does, but likely a good idea for other firms.
11. Chinese leader Xi meets Russia’s Lavrov as two partners tout strong ties
Simone McCarthy, CNN, April 9, 2024
12. Xi Meets with Russia’s Foreign Minister, Reaffirming Ties
David Pierson and Ivan Nechepurenko, New York Times, April 9, 2024
13. Yellen says China trip 'moved ball' on key issues, warns on Russia links
CK Tan, Nikkei Asia, April 8, 2024
14. Yellen Sees ‘More Work to Do’ as China Talks End with No Breakthrough
Alan Rappeport, New York Times, April 8, 2024
15. China constantly coerces Japan and Philippines, US envoy to Japan Emanuel says
David Brunnstrom, Reuters, April 8, 2024
China constantly uses coercion and pressures other countries, including Japan and the Philippines, U.S. Ambassador to Japan Rahm Emanuel said on Monday.
Emanuel made the remark at a Center for Strategic and International Studies event in Washington days before U.S. President Joe Biden hosts Japanese Prime Minister Fumio Kishida and Philippines President Ferdinand Marcos Jr for a summit.
COMMENT – I do hope that Rahm keeps up his tweets and remarks, it is so refreshing to hear a political leader use straightforward language.
If there is a Biden second term, my vote is for Rahm as Secretary of State.
16. VIDEO – Previewing Prime Minister Kishida’s Visit to Washington: A Conversation with Two Ambassadors
CSIS, April 8, 2024
17. AUDIO – Rahm on China: Colorful Diplomacy, Alliances, and the Military-Industrial Complex
China Talk, April 2, 2024
COMMENT – Listen to this great interview of Rahm by my friend Jordan Schneider… if you aren’t a subscriber to China Talk (both the Substack and Podcast), do so now.
Seriously, we can wait…
18. China Won’t Change Tack on Economic Policy
James Palmer, Foreign Policy, April 9, 2024
Beijing’s political leadership isn’t likely to listen to friendly advice from foreign investors or criticism from foreign officials.
The recent China Development Forum, where Chinese President Xi Jinping greeted foreign CEOs and influential academics, was supposed to be a chance for Beijing to show it was open for global business again, following the COVID-19 pandemic and years of increasing hostility toward the West.
However, at least one participant, Stephen Roach, a former head of Morgan Stanley Asia, found it to be anything but. Roach, who has participated in the forum since 2001, the year after it was founded, described the event as hollow, hostile, and censorious. He wrote that it “effectively been neutered as an open and honest platform of engagement. … Anyone who raises questions about problems, or even challenges, faces exclusion from the public sessions.”
In China’s current atmosphere, there appears to be no room for such advice—even from someone such as Roach, who has described himself as a “congenital China optimist” and could be willing to act as an interlocuter between Beijing and Washington. His recent book focused on avoiding accidental superpower conflict. He has recently been critical of China’s turn under Xi but would be receptive to signs of a change of approach in economic and governance policy.
But that change of approach isn’t coming. As an article on economic policy in the Study Times, the newspaper of the Central Party School of the Chinese Communist Party (CCP), put it last week: “The most essential feature … is the leadership of the party.” Even as the party tries to throw crumbs to private business, its rhetoric continues to support years of crackdowns, hostility to foreign investment, and the major financial impacts of its ideological decisions.
In a reverse of China’s reform era, the state has advanced, the private sector is retreating, and the market capitalization of the country’s big private firms has fallen by some 60 percent since 2021.
Another recent visitor with tough words for Beijing was U.S. Treasury Secretary Janet Yellen, who wrapped up a four-day trip to China on Monday with a rhetorical broadside against “artificially cheap Chinese products.” Yellen was echoing broad concerns, shared by economies as far apart as France, Brazil, and Indonesia, that China is flooding global markets with low-priced goods as it shifts back to manufacturing.
However, it’s not clear how China will change its mind on manufacturing policy for three primary reasons. The first is that manufacturing fits in neatly with Xi’s ideology: an old-fashioned Marxist vision of production, combined with a suspicion of global finance. In China, financial regulators’ salaries have been slashed to bring them closer to those of other officials, resulting in a talent drain.
The second is that the new emphasis on manufacturing offers the prospect of jobs for young people in an economy that badly needs them, even if they’re not jobs that college graduates necessarily want to do. China began releasing youth unemployment figures again in January, after the state “optimized” its methods, resulting in a nominal drop from 21.3 percent last June to 14.9 percent in December.
Finally, China has no appetite for foreign criticism on any issue, and the United States—busy with its own industrial policy—doesn’t have much of a rhetorical leg to stand on, as FP’s Keith Johnson reported this week. There is certainly a lot of state money floating around in China, but one of the key areas for investment is in clean energy and electric vehicles, which has seen considerable innovation and private successes that give China an edge over global competitors.
19. Biden Aims to Project United Front Against China at White House Summit
Michael Shear, New York Times, April 11, 2024
20. Would America dare to bring down a Chinese bank?
The Economist, April 10, 2024
If any politician has the demeanour to ease tensions with Beijing, it is Janet Yellen. America’s treasury secretary comes across as a twinkly eyed professor, rather than a foreign-policy hawk. Sure enough, she used a recent trip to China, which ended on April 9th, to praise the “stronger footing” that Sino-American relations are now on compared with a year ago. Ms Yellen was not merely there to extend an olive branch, however. She also carried a warning for China’s banks: those that help “channel military or dual-use goods to Russia’s defence-industrial base expose themselves to the risk of us sanctions”.
Ms Yellen’s warning marks the latest escalation in America’s financial war with Russia. Since Vladimir Putin’s invasion of Ukraine in February 2022, lawmakers in Washington have issued sanctions on nearly 3,600 Russian targets, according to Castellum.ai, a compliance firm. Allies, especially in Europe, have issued many more. Central-bank reserves have been frozen and exports of military goods banned. swift, a messaging service used by 11,500 banks to make around $35trn-worth of cross-border payments a day, has banned some of Russia’s biggest banks. Yet none of this has stopped Russia from outproducing the West in artillery shells, holding its frontline and gearing up for a big push.
Dewey Sim, South China Morning Post, April 11, 2024
22. Going Into Battle Lightly Equipped
Ryan Ho Kilpatrick, China Media Project, April 8, 2024
“Going into battle lightly equipped” is a metaphor frequently employed by Hong Kong’s political leaders and state media in the lead-up to new national security legislation known as Article 23 in early 2024. It represents the promise that further curbs on local freedoms will empower authorities to revitalize the territory’s anemic economy, which has been on the ropes since the national security crackdown began in 2020.
Since its national security crackdown began in 2020, Hong Kong has been speaking a new language. Local officials now decry “soft resistance” against the state and exclusively refer to the pro-democracy protests that drew millions of mostly peaceful marchers to the streets as the “black riots” and an attempted “color revolution” orchestrated by foreign “black hands”.
More recently, the campaign to push homegrown security legislation known as Article 23 has created a whole new set of vocabulary. When the law sailed through in a record-breaking 11 days, concerns that the city’s now opposition-less legislature hadn’t adequately scrutinized the bill were hand-waved — what we were witnessing, they said, was merely the kind of “high quality, high efficiency” legislation possible in a “patriots-only” chamber. In fact, the law was passed “not too quickly but too slowly”, according to the Hong Kong Commercial Daily and others, since the previous attempt in 2003 had been derailed — when such things were possible — by massive public opposition.
Perhaps the most curious new addition to this dialect of officialese, however, has been “going into battle lightly equipped”. The four-character set phrase has been a favorite of Chief Executive John Lee Ka-chiu when delivering promises about how the law will revitalize Hong Kong’s economy, which has been in the doldrums since the first national security law imposed by Beijing in 2020.
Environmental Harms
23. World Bank’s funding of ‘hog hotel’ factory farms under fire over climate effect
Jon Ungoed-Thomas, The Guardian, April 7, 2024
The private sector arm of the World Bank is facing claims that it contributes to global heating and the undermining of animal welfare by providing financial support for factory farming, including the building of pig farming tower blocks in China.
A coalition of environmental and animal welfare groups is calling on the World Bank to phase out financial support for large-scale “industrial” livestock operations. More than $1.6bn was provided for industrial farming projects between 2017 and 2023, according to an analysis by campaigners.
The International Finance Corporation (IFC), part of the World Bank Group, is owned by 186 member countries including the UK, which has a 4.5% shareholding. Andrew Mitchell, the minister for development, is a governor of the IFC.
Kelly McNamara, a senior research and policy analyst at Friends of the Earth US, said there was a “mismatch” between the World Bank’s commitments on the climate crisis, sustainable development and animal welfare, and its financing of intensive farming. “Expanding industrial livestock production is a threat to climate, sustainable development and food security,” she said, adding that investing in such projects put smallholders out of business and increased meat consumption, fuelling global heating.
In June last year, the IFC approved a $47.3m (£37.4m) loan to the Chinese company Guangxi Yangxiang providing capital for four multistorey industrial pig-rearing complexes and a feed mill. “There are big advantages to a high-rise building,” a company manager told Reuters during early construction of the blocks at Yaji Mountain in southern China in 2018. “The land area is not that much, but you can raise a lot of pigs.” The farms, known as “hog hotels”, can be 13 floors high.
COMMENT – Yet another example of how the World Bank has been captured by the Chinese Communist Party.
Take a look at the current World Bank President’s remarks three weeks ago at the China Development Forum… not even a whisper of criticism for gross human rights abuses, the world’s largest emitter of carbon (and growing), the destruction of Hong Kong as a global financial center, or a mention that the PRC refuses to cooperate with other lenders (the Paris Club) in resolving unsustainable debts in the global south which further impoverishes the countries that the World Bank is responsible for.
Ajay Banga reflexively parrots the CCP’s talking points about poverty reduction in the PRC, crediting the PRC Government (the Chinese Communist Party) with pulling 770 million Chinese out of poverty since 1978… what Banga fails to mention is that it was the PRC Government (the CCP) which put those 770 million people into abject poverty by 1978 with the Great Leap Forward (killing 30-40 million of their own citizens) and the Cultural Revolution waged by the Party against itself and the Chinese people.
Western Imperialists didn’t impoverish the Chinese people by the 1970s… Mao Zedong did that.
In the three decades between 1949 and 1978, the Chinese Communist Party drove the PRC and its people into crushing poverty.
What happened after 1978 is that the Chinese Communist Party started getting out of the way of the Chinese people and it was the Chinese people, NOT their government or ruling their Party, which lifted themselves out of poverty.
Just imagine where the Chinese people would be today, had it not been for those first three decades of Communist rule.
Now Xi Jinping is dragging his country backwards, destroying the entrepreneurialism, the individuality, and the decentralized execution that lifted 770 million people out of poverty.
Rather than congratulating Xi and his cadres, and lending them legitimacy from the World Bank, it would be far better for the World Bank President to speak truth to power and hold China’s leaders accountable.
24. Driven by China, Coal Plants Made a Comeback in 2023
Max Bearak, New York Times, April 10, 2024
Global capacity to generate power from coal, one of the most polluting fossil fuels, grew in 2023, driven by a wave of new plants coming online in China that coincided with a slowing pace of retirements of older plants in the United States and Europe.
Global Energy Monitor, April 2024
Global operating coal capacity grew by 2% in 2023, with China driving two- thirds of new additions, and a small uptick was seen for the first time since 2019 in the rest of the world, according to Global Energy Monitor's annual survey of the global coal fleet.
26. Australian cobalt refiner bets on demand for 'ethical' China-free EV metals
Shaun Turton, Nikkei Asia, April 5, 2024
27. China braced for rise in air pollution deaths
Gary Fuller, The Guardian, April 5, 2024
Thomas J. Duesterberg, Wall Street Journal, April 7, 2024
Before environmental protection became a global issue, Chinese leader Deng Xiaoping taught that “only development is a solid truth.” Deng saw the degradation of the environment as a “necessary evil” in the drive for Chinese growth. As a result, China now leads the world in carbon-dioxide emissions, land and water pollution, and the depletion of natural resources.
China’s current leader, Xi Jinping, has pledged to build what he calls an “ecological civilization” in service of a net-zero future. This is a claim ripe for re-evaluation, especially with Treasury Secretary Janet Yellen on a visit to Beijing and Earth Day approaching. The Chinese Communist Party isn’t a serious steward of the global commons, and Western leaders must refute this dangerously misleading narrative.
Foreign Interference and Coercion
29. Canada spies found China interfered in last two elections, probe hears
David Ljunggren, Reuters, April 8, 2024
Canada's domestic spy agency concluded that China interfered in the last two elections, an official probe heard on Monday, the firmest evidence so far of suspected Chinese meddling in Canadian politics.
Prime Minister Justin Trudeau's Liberal Party won both the elections, held in 2019 and 2021. Under pressure from opposition legislators unhappy about media reports on China's possible role, Trudeau set up a commission into foreign interference.
The commission was shown a slide on Monday containing an extract of a February 2023 briefing from the Canadian Security Intelligence Service (CSIS).
"We know that the PRC (Peoples' Republic of China) clandestinely and deceptively interfered in both the 2019 and 2021 elections," it said.
"In both cases, these FI (foreign interference) activities were pragmatic in nature and focused primarily on supporting those viewed to be either 'pro-PRC' or 'neutral' on issues of interest to the PRC government."
30. Beijing's Interference Ops: Vindications.
The Real Story, April 8, 2024
If Chinese students could vote en masse for Han Dong and the Liberals thought it was okay, who elected Justin Trudeau to lead the Liberal Party in 2013? There's no way of knowing.
…
The big thing about last week: All the testimony and Canadian Security and Intelligence Service summaries merely confirmed the same bombshell reports about Beijing’s election monkeywrenching that have been consistently sneered at, disputed or outright denied by the Trudeau government, all along.
Trudeau took high-dudgeon umbrage with the reports whe they first came out. Canadians were treated with the same contempt for Parliament and the public by Trudeau’s “special rapporteur” and whitewasher David Johnston, one of the most senior “friends of China” in Canada.
Those bombshell reports were denied up and down as well in the most melodramatic fashion by that serial dissembler Han Dong, the Dishonorable Member for Don Valley North.
Just one story from last week: It turns out that Dong wasn’t only misleading Inquiry Commission counsel as recently as last month about what he was up to. He now admits he actively recruited those Chinese highschoolers from New Oriental International College who showed up by the busload to cast votes for him in the 2019 nomination race that paved his way to a seat in the House of Commons.
And CSIS says China’s Toronto consulate threatened the students with severe repercussions if they didn’t do what they were told, and a Beijing proxy arranged for false addresses for students outside the riding, just in case anybody checked.
All the creepy stuff about Dong that grabbed all those headlines last week was known to Trudeau nearly five years ago, and it was all known to Johnston, too, before he filed his dog’s breakfast of a report last June. The point: They knew all along. They said nothing and did nothing. They pretended the hullabaloo was all about “racism.”
Nectar Gan and Wayne Chang, CNN, April 10, 2024
32. Romanian Intellectuals Publicly Appeal to Putin and Xi for Help, But Some Now Getting Cold Feet
Oana Despa, Radio Free Europe, April 7, 2024
33. European Lawmakers React After Alleged Targeting in Chinese Hacking Campaign
Reid Standish and Ionut Benea, Radio Free Europe, March 27, 2024
China Media Project, April 9, 2024
One of Southeast Asia’s largest media groups announced this month that it would collaborate on content with a Chinese magazine. Is it turning a blind eye to the powerful political motives and interests that lay behind?
Last week, the Star Media Group (SMG), one of Malaysia’s largest integrated media conglomerates, announced a partnership with China’s Contemporary World magazine, an outlet directly under the Central Committee of the Chinese Communist Party. In a press release on the cooperation that made no mention of the magazine’s government ties, SMG said that “both media companies agreed to collaborate on news sources and explore further cooperation opportunities.”
The tie-up is just the latest example of China’s determined push to enhance its influence across Southeast Asia through media diplomacy, partnerships, journalism outreach programs, and state-led external propaganda initiatives — in many cases without any public transparency whatsoever about the Chinese entities involved.
SMG’s Chan Seng Fatt, who stepped into the CEO spot at the group only last month, called the partnership a “golden opportunity” to bridge divides between China and Southeast Asia through what he called “concerted media collaboration.” He also hinted at the complexities in a region where views of China remain mixed. “In the context of China’s efforts in Southeast Asia, we see challenges and opportunities,” he said. “Language barriers, cultural misunderstandings and differing political landscapes pose significant challenges.”
Human Rights and Religious Persecution
35. What Chinese Outrage Over ‘3 Body Problem’ Says About China
Li Yuan, New York Times, April 8, 2024
The Netflix series showcases one of the country’s most successful works of culture. Instead of demonstrating pride, social media is condemning it.
The first five minutes of the Netflix series “3 Body Problem” were hard to watch.
I tried not to shut my eyes at the coldblooded beating of a physics professor at the height of the Cultural Revolution in 1967. By the end of it, he was dead, with blood and gruesome wounds all over his head and body. His daughter, also a physicist, watched the public execution. She went on to lose hope in humanity.
I made myself sit through this violent scene. I have never seen what was known as a struggle session depicted blow by blow on the screen. I also felt compelled to watch it because of how the series, a Netflix adaptation of China’s most celebrated works of science fiction, has been received in China.
36. National security trial of Hong Kong media tycoon Jimmy Lai: what's happened so far
Jessie Pang and Edward Cho, Reuters, April 10, 2024
37. US treads carefully in responding to Hong Kong’s new national security law
Didi Tang, Associated Press, April 8, 2024
38. Hong Kong Detains and Expels Journalism Advocate, Group Says
David Pierson, New York Times, April 10, 2024
A representative of Reporters Without Borders was attempting to monitor the national security trial of a media tycoon, Jimmy Lai.
A representative of Reporters Without Borders was denied entry to Hong Kong on Wednesday while attempting to enter the city on a fact-finding mission about shrinking press freedoms there, the organization said.
Aleksandra Bielakowska, a Taipei-based advocacy officer for the group, said she had been detained for six hours at Hong Kong International Airport, where she was questioned and her belongings searched several times. She was later expelled without explanation.
Reporters Without Borders, which is based in Paris and advocates on behalf of journalists around the world, said it was the first time one of its representatives had been denied entry or held in Hong Kong.
“We are appalled by this unacceptable treatment of our colleague, who was simply trying to do her job,” Rebecca Vincent, director of campaigns for Reporters Without Borders, said in a statement.
39. The Global Dimensions of the Chinese Government Human Rights Abuses
Rachel Cody Owens, Stanford Freeman Spogli Institute for International Studies, March 11, 2024
40. How it feels to live under surveillance by China
Vicky Xu, The Saturday Paper, April 6, 2024
I write this as an Australian citizen targeted by the Chinese security establishment. I am also a journalist, a former commentator on China for international media and a recovering patient of post-traumatic stress disorder, acquired as the result of persecution by the Chinese security apparatus. I’ve been accused of treason in the People’s Republic of China, where I’m no longer a citizen. The actions of mine that were deemed treasonous involved writing about China’s concentration camps, which hold up to a million Uighurs, and forced Uighur labour that implicated global supply chains.
In recent years, I have shied away from the spotlight. By writing this piece I’m temporarily thrusting myself back into the public eye and asking for trouble. The rationale is simple: in the visit of Chinese Foreign Affairs Minister Wang Yi last month, there was positive talk of trade and bilateral relations between Australia and China but nothing about me or the many other Australian citizens and residents targeted by the Chinese state on Australian soil. I thought I’d remind people of our existence and present my point of view.
At least three times during and after her meeting with Wang, Australian Foreign Affairs Minister Penny Wong repeated the same sentence: “Australia will always be Australia, and China will always be China.” She added the two countries were culturally and politically different, and differences had to be managed “wisely”. She characterised her meeting with Wang as a step towards stabilising the relationship. Key points of discussion included trade impediments, Australians facing death sentences in China, human rights in China and regional stability.
I see a problem with the idea that “Australia will always be Australia, and China will always be China”. It suggests an acceptance of what should be unacceptable, and a naivety that misleads and risks disastrous consequences for all. It has grown tiresome for me to recount how my life has been ruined by the Chinese state, how my family and friends were taken away as a result of my journalistic work on China. In Australia I’ve been followed around. Strange East Asian men stood in front of my apartment complex like voluntary doormen. I changed my number, got new email addresses, installed home security systems, moved again and again. Counter-surveillance has been a full-time job. As I write this, I do not have a stable home address because my current solution to the problem is leading a nomadic lifestyle to stay a step ahead of Chinese Communist Party goons. I don’t know what their plans are if and when they catch up with me again. I’m not the only China scholar who lives in fear of abduction or assassination.
I wish I was being paranoid. In August last year, I was told by a representative from the Australian Federal Police that, during an investigation into foreign interference activities within Australia, they identified me as “a person of interest to persons of interest”. The officer told me I would be “aware of this anyway”, and “persons subject of this investigation sought information regarding your whereabouts”. He went on to give me a security briefing, advising me not to walk at a consistent pace when I’m out and about. Rather, stroll for a bit and run for a bit and try to take different routes between destinations. Don’t keep going to the same cafes or bars. Never make reservations. Make false visits to places.
As I write this, I do not have a stable home address because my current solution to the problem is leading a nomadic lifestyle to stay a step ahead of Chinese Communist Party goons.
In our call the officer, who was not part of the investigation team, was as professional and empathetic as humanly possible. He told me the investigation was ongoing and I was not allowed to divulge details to the media. I later asked whether I could have a letter or certificate from the police saying I have been a target of the Chinese government and I’m an individual at risk – so I don’t appear deranged when I tell people about my circumstances. The answer was no. This piece will be my certificate.
Four months later, around Christmas, I received an email from an uncle I hadn’t spoken to in years. He was in Australia on a business trip, he said, and happened to be passing through three Australian cities I’d lived in. He wanted to meet and offered to give me money. Experts said this sounded like a textbook case of Operation Fox Hunt – where Chinese authorities forcibly repatriate corrupt officials and sometimes dissidents. This was the first time my poor uncle had left China. I saw a scan of his brand-new passport. In the photo he was red-faced and his eyes were bulging.
He – or whoever orchestrated his trip – wrote to me to say he was in Perth at the DoubleTree by Hilton hotel in Northbridge. He gave me a room number and encouraged me to meet him. I kept the Australian police updated on this as it took place. It was unclear what steps they took, if any.
I’m acutely aware a complicating factor in my case is I’m ethnically Chinese and a former citizen of the People’s Republic of China. I also know of people who are born and bred Australians and have been subject to similar treatment within Australian borders. Computers have been hacked. People have been intimidated in their homes. In one case, a bounty was allegedly taken out on an Australian who had frequently criticised China. Not all these cases can be neatly traced to the Chinese party-state, but the victims can’t think of any perpetrator other than the party-state and its fanatic supporters.
As early as 2005, defected Chinese diplomat Chen Yonglin warned there were “over 1000 Chinese secret agents and informants in Australia”. Chen was a former first secretary at the Chinese consulate in Sydney before seeking asylum in Australia. He worked in the surveillance of Chinese expatriates and was involved in the surveillance and blacklisting of Australian politicians deemed hostile to China. In the years after he defected, while he was still living in safe houses, he said: “The penetration into Australia has been massive, from the top to bottom. In Australia, there is no secret from China.”
I started working as a journalist in Australia in 2017, when former Chinese premier Li Keqiang visited Australia, and the Chinese consulate in Sydney orchestrated a 6000-people rally to drown out protesters. During a secret meeting, Chinese officials encouraged participants to beat up dissenters in Sydney’s central business district.
Between 2017 and 2019, Australian media was on a journey of discovery regarding the political interference of the Chinese Communist Party. The world learnt of the existence of Chinese concentration camps holding up to a million Uighurs, as well as forced Uighur labour that implicated global supply chains. Under the Turnbull government, Australia passed its first anti-foreign interference law. Then Covid-19 hit. Ironically Scott Morrison, the politician with the least backbone, was the last Australian prime minister to stand up to the Chinese party-state by demanding an independent investigation into the origins of the pandemic.
While the recent visit to Australia of China’s foreign minister has demonstrated a settling of the bilateral relationship, it also reveals a misalignment on longer-term goals.
Wang Yi is the most senior Chinese official to visit Australia since 2017. His trip was an exercise in the exertion of control. Wang refused to attend the routine press conference following his meeting with Wong, leaving her to field questions by herself. Provocatively, he went on to meet and put an arm around Paul Keating, the former Labor prime minister who had recently lambasted Wong over China. Observers say the move was intended to insult Wong and sow discord within the Labor Party. I also read sexism and reverse racism.
Throughout his two-day trip, Wang was shielded from questions. Numerous events were held, such as the Australia China Business Council lunch, that included Chinese state media but no Australian journalists. The same was true of the Keating meeting, which was held at the Chinese consulate in Sydney. One could say wherever Wang passed, Australia was remodelled into China for him.
Wang also met with Prime Minister Anthony Albanese, who boasted of the Labor Party’s historical alliance with the Chinese Communist Party. Relations are “back on the right track”, Wang concluded. “There should be no further hesitation, no derailment and no backpedalling in advancing bilateral ties.”
The day before Wang Yi arrived in Australia, the commissioner of the Australian Federal Police, Reece Kershaw, shook hands with his Chinese counterpart, Wang Xiaohong, in Beijing. Wang Xiaohong heads the Chinese Ministry of Public Security, one of the main organisations responsible for rounding up Uighurs into camps as well as pursuing and harming individuals like myself. A Chinese government press release distributed after the meeting promised: “A new chapter in law enforcement cooperation between China and Australia.”
Industrial Policies and Economic Espionage
41. America’s Flailing Industrial Policy Can Take Lessons from China
Bob Davis, Foreign Policy, April 11, 2024
The Biden White House has put together the most ambitious industrial policy program in decades, hoping to revive strategic industries that have withered at home because of foreign competition. The goal: to stay ahead of China by pumping up the United States’ industrial and technological might through a focus on clean energy and semiconductor manufacturing.
But in its push to confront Beijing, Washington has ignored lessons China learned through trial and lots of errors over its own decades of industrial policy aimed at catching up with the West. As different as the two countries’ political systems are, there’s still a lot Washington could learn—if it wants to.
The U.S. has led since at least World War II in one area of industrial policy: fostering new technologies. Federal dollars and support, often via the Pentagon, played an essential role in developing technologies that revolutionized the global economy, from jet aircraft to supercomputers to communications satellites to the internet. But since the early 1980s, when the United States started obsessing about losing out to foreign competitors such as Japan, the government has failed miserably in reshoring vital industries.
42. US Buys More Taiwan Exports Than China for First Time Since 2003
Samson Ellis and Miaojung Lin, Bloomberg, April 10, 2024
43. Drugmakers race to find alternative suppliers as US cracks down on Chinese biotech
Financial Times, April 10, 2024
44. U.S. to Crack Down on Trade ‘Loophole’ Used for China Apparel Shipments
Richard Vanderford, Wall Street Journal, April 5, 2024
The U.S. will crack down on an import method, favored by e-commerce giants such as Temu and Shein, that has allowed cheap clothes from China to flow stateside with no duties and little scrutiny.
De minimis shipments—low value packages often sent directly to U.S. consumers—will receive heightened scrutiny, including into whether goods are being imported in defiance of a U.S. forced-labor ban, the U.S. Department of Homeland Security said Friday.
The move, part of a broader push against illicit apparel imports, comes after U.S. industry groups, unions and lawmakers from both parties have urged a clampdown.
COMMENT – We should have clamped down on these loopholes as soon as the Uyghur Forced Labor Prevention Act was passed in 2022 and before Temu and Shein became such e-commerce juggernauts, instead of waiting so long.
45. Europe Needs a Systemic Response to China's Car Offensive
Francois Godement, Institut Montaigne, April 10, 2024
China is mounting an economic and technological challenge of unprecedented magnitude with its giant auto production and export boom, including for electric vehicles (EVs). To an unprecedented challenge we propose an unprecedented answer, although it does take a leaf from the fast-track industrialization of East Asia and China itself.
COMMENT – Amen… it would be spectacular if VW and Mercedes would listen.
46. The Bretton Woods institutions under geopolitical fragmentation
Martin Mühleisen, The Atlantic Council, October 9, 2023
The economic and military rise of China presents Western democracies with a challenge unlike any they have faced since the inception of the Bretton Woods system.1 The Warsaw Pact was too weak to question the West’s economic dominance during the Cold War, but China—with its successful brand of state capitalism—has turned into a formidable competitor. It has become the largest trade partner for many countries, and the Belt and Road Initiative (BRI), despite its shortcomings, has made geopolitical inroads into the Global South that the West has struggled to match.
As the West has begun to respond to the challenge, concerns about economic fragmentation have intensified after Russia’s attack on Ukraine and increasing military tensions in the Taiwan Strait. Both China and Western countries are considering means to shore up critical supply chains and reduce strategic dependencies on each other. Global trade volumes have not yet been affected in a significant way, but a growing web of trade and investment restrictions has had a chilling effect on economic sentiment.
This dynamic also throws a shadow over the work of the International Monetary Fund (IMF) and World Bank, as well as other institutions created to support free markets and open trade. Nations that were once dependent on multilateral institutions for development funding, investment projects, and emergency aid now have the opportunity to secure economic and financial assistance from other creditors with less benign interests. Moreover, a shift toward protectionist trade policies, and the sanctioning of foreign exchange reserves by the United States and its allies, has diminished the West’s standing in many capitals around the world.
On the other hand, the US dollar’s central role in the international monetary system, of which the Bretton Woods institutions are an integral part, still provides the West with a significant advantage. The renminbi may challenge the dollar’s dominance at some point, but China’s efforts to internationalize its currency have so far been met with only modest success.
COMMENT – I didn’t see this piece when it came out but it’s an interesting look at the impacts that the PRC is having on our global system.
47. Europe launches subsidies probe into Chinese wind turbine suppliers
Hanna Ziady, CNN, April 9, 2024
48. China protests EU’s investigation of subsidies in green industries, calling the move protectionist
Ken Moritsugu, Associated Press, April 10, 2024
49. Chinese minister says cognac probe unrelated to EU probe on EVs – source
Gilles Guillaume and Inti Landaur, Reuters, April 9, 2024
Chinese Commerce Minister Wang Wentao told French Finance Minister Bruno Le Maire that the probe started in China on the cognac market is not linked to the one started by the European Union on Chinese electric vehicles, a source at the French ministry said on Monday.
50. China Shock 2.0 Will Be Different
Jacky Wong, Wall Street Journal, April 11, 2024
51. VIDEO – Hungarian Beekeepers Stung by Honey Imports from Ukraine, China
Jakab Kuczogi, Radio Free Europe, April 1, 2024
Kandy Wong, South China Morning Post, April 8, 2024
53. China Pushes Back Against Janet Yellen’s Warnings on Overcapacity
Liyan Qi, Wall Street Journal, April 9, 2024
54. European ports turned into ‘car parks’ as vehicle imports pile up
Financial Times, April 7, 2024
55. What overcapacity? China says its industries are simply more competitive
Marius Zaharia, Pasit Kongkunakornkul, Riddhima Talwani and Sumanta Sen, Reuters, April 11, 2024
56. China's overcapacity is here to stay
Robyn Mak, Reuters, April 9, 2024
China's factories will keep chugging along, regardless of what overseas officials like Janet Yellen say. On Monday the U.S. Treasury Secretary was the latest to warn Beijing not to hobble Western firms by flooding markets with cheap exports. The country's industrial overcapacity, though, looks here to stay.
"We've seen this story before," Yellen warned as she wrapped up four days of official meetings in the People's Republic. She was referring to the early 2000s when Beijing's policies led to "below-cost Chinese steel that flooded the global market and decimated industries across the world and in the United States." Today, policymakers in the U.S., Europe and elsewhere are fretting about Chinese over-investment in electric vehicles, solar panels, lithium-ion batteries and other industries that may be driving output levels beyond domestic demand.
Beijing, which has pledged to rein in excess capacity, says the Western complaints are misguided. The concerns, though, look justified in some sectors. Chinese solar-panel manufacturers, for example, control more than 80% of the market, far exceeding the country's 36% share of global demand, according to a 2021 study, opens new tab from the International Energy Agency. Similarly, China's dominant battery makers led by the $118 billion CATL produced 747 gigawatt-hours of power last year, nearly double the 387 GWh actually installed into products bought in the mainland, according, opens new tab to the South China Morning Post, citing industry data.
There are signs that this over-expansion is widespread. As of early last year, aggregate utilisation rates, which measure overall unused factory capacity, had dropped below 75% for the first time since 2016, note, opens new tab analysts at the Rhodium Group. The decline happened not just in sectors linked to the property sector, but across the board in industries including food, textiles, chemicals and pharmaceuticals. Absolute inventory levels have also risen.
That's largely due to Beijing's industrial push to prop up economic growth amid sluggish consumption and a protracted property crisis. Manufacturing loans at the country's four big state-owned banks jumped 25% last year to $1.2 trillion, targeting strategic sectors like technology and clean energy. The support is paying off: the latter sector was the country's largest driver of growth in 2023, contributing a record 11.4 trillion yuan ($1.6 trillion) to the Chinese economy, according, opens new tab to research group Carbon Brief, accounting for 40% of the expansion of GDP.
COMMENT – Great chart from Reuters. None of these are private banks making loans based on market dynamics, these are State-owned policy banks that respond to Chinese Communist Party directives.
57. China Struggles to Kick Deflationary Concerns
Jason Douglas, Wall Street Journal, April 10, 2024
Inflation in China retreated sharply, reigniting concerns over deflation even as its economy starts to feel the benefit of a manufacturing-led revival that is fueling trade tensions overseas.
Consumer prices rose just 0.1% in March compared with a year earlier, according to official data released Thursday, a weaker-than-expected reading that highlights ongoing strains in China’s economy from a drawn-out property crunch and restrained consumer spending.
Beijing’s response to the economy’s weaknesses has been to double down on its strength as the world’s factory floor. Investment is pouring into manufacturing, especially in sectors such as electric vehicles and green energy equipment. As a result, industrial production is picking up.
COMMENT – Beijing is pursuing beggar thy neighbor policies to boost their own economic numbers and avoid empowering Chinese consumers.
58. Yellen Faces Diplomatic Test in Urging China to Curb Green Energy Exports
Alan Rappeport, New York Times, April 5, 2024
59. US will not accept Chinese imports decimating new industries, Yellen says
David Lawler, Reuters, April 8, 2024
60. Fitch cuts China's ratings outlook on growth risks
Reuters, April 10, 2024
61. China says economy ‘stable,’ rejects Fitch Ratings downgrade of its fiscal outlook
Elaine Kurtenbach, Associated Press, April 10, 2024
China’s Finance Ministry denounced a report by Fitch Ratings that kept its sovereign debt rated at A+ but downgraded its outlook to negative, saying Wednesday that China’s deficit is at a moderate and reasonable level and risks are under control.
Risks to China’s public finances are rising, Fitch said, as Beijing works to resolve mounting local and regional government debts and to shift away from heavy reliance on its troubled property industry to drive economic growth.
62. German premium carmakers struggle to revive demand in China
Reuters, April 10, 2024
63. Ahead of Scholz trip, study shows German economy still dependent on China
Matthias Williams, Reuters, April 9, 2024
The German economy is still highly dependent on China for a number of products and raw materials despite efforts to diversify to other markets, a study by the German Economic Institute showed on Tuesday.
While overall imports from China dropped by nearly a fifth between 2022 and 2023, the share of product groups for which Germany relies on China for more than half of its imports has barely changed, including chemicals, computers and solar cells.
COMMENT – Germany’s current conundrum with both Beijing and Moscow shows the failure of Merkel’s ‘change through trade’ approach.
64. S&P slashes property giant China Vanke's credit rating to junk
Marc Jones, Reuters, April 10, 2024
65. Asia Economies to Keep Growing Despite China Slowdown, Other Headwinds, ADB Says
Fabiana Negrin Ochoa, Wall Street Journal, April 11, 2024
66. Chinese Cement Maker Halted After 99% Crash in 15 Minutes
Bloomberg, April 10, 2024
67. The High Cost of Education in China
Dezhuang Hu, Hongbin Li, et al., Stanford Center on China’s Economy and Institutions, April 1, 2024
Insights:
China’s households spend on average 17.1% of their annual income and 7.9% of their total annual expenditures on education, surpassing Japan, Mexico, and the U.S. (1–2%) by significant margins.
73% of household education expenditure is dedicated to in-school expenses such as tuition and school fees, while 12% is allocated to extra-curricular activities and tutoring.
China’s lower-income households allocate 56.8% of their income towards their children’s education, compared to 10.6% among China’s higher-income households.
Researchers attribute China’s outsized household expenditure on education to an insufficient supply of high-quality educational opportunities coupled with a high demand for such education that may contribute to declining fertility and low consumption.
68. China now a rival rather than boon for South Korean exporters, warns minister
Financial Times, April 10, 2024
Cyber and Information Technology
69. Chip dreams: Young tech workers are flocking to Taiwan
Lam Le and Chong Pooi Koon, Rest of the World, April 11, 2024
70. Senate Republican leader backs legislation to force Chinese divestment of TikTok
David Shepardson, Reuters, April 8, 2024
U.S. Senate Republican Leader Mitch McConnell on Monday called for legislation to force TikTok's parent company, China's ByteDance, to divest the short video app used by 170 million Americans.
"Requiring the divestment of Beijing-influenced entities from TikTok would land squarely within established constitutional precedent," McConnell said, adding "it would begin to turn back the tide of an enormous threat to America’s children."
71. Google investing $1 bln to boost connectivity to Japan via two subsea cables
Granth Vanaik, Reuters, April 10, 2024
72. Apple’s India iPhone Output Hits $14 Billion in China Shift
Sankalp Phartiyal, Bloomberg, April 10, 2024
It now assembles about 1 in 7 of its iPhones from India. That ramp-up suggests an accelerating shift from China.
73. Huawei building vast chip equipment R&D center in Shanghai
Cheng Ting-Fang, Nikkei Asia, April 11, 2024
74. AI Chips for China Face Additional US Restrictions
Rajeswari Pillai Rajagonaian, The Diplomat, April 5, 2024
Military and Security Threats
75. The China Whisperer: How a little known Australian led a global shift on China.
Katrina Northrop, The Wire China, April 7, 2024
COMMENT – Great in-depth article on my friend John Garnaut.
76. Sweden expels a Chinese journalist, calling her a threat to national security, report says
Associated Press, April 8, 2024
Sweden has expelled a Chinese journalist, saying the reporter was a threat to national security, Swedish media reported on Monday.
The journalist, an unnamed, 57-year-old woman, was arrested by the Swedish security service in October and expelled by the government in Stockholm last week, Swedish broadcaster SVT reported. She is banned from returning.
The woman arrived in the Scandinavian country some 20 years ago. She held a residence permit and was married to a Swedish man, with whom she has children, according to the broadcaster.
The woman has had contacts with the Chinese Embassy and with people in Sweden who are connected to the Chinese government, SVT said.
77. Chinese firms helping military get AI chips added to US export blacklist
Karen Freifeld and Doina Chiacu, Reuters, April 11, 2024
The United States is adding four Chinese companies to an export blacklist for seeking to acquire AI chips for China's military, a U.S. official said on Wednesday.
The companies are "involved with providing AI chips to China's military modernization programs" and military intelligence users, the Commerce Department's Kevin Kurland, an export enforcement official, said at a U.S. Senate subcommittee hearing on strengthening export control enforcement.
78. The rusting Philippine ship forcing Joe Biden and his Asia allies to focus on China
Financial Times, April 9, 2024
79. China Plays Tense Game of ‘Russian Roulette’ With U.S. Ally
Niharika Mandhana, Wall Street Journal, April 9, 2024
Chinese coast guard ships have slammed Philippine boats with water cannons, shattering a windshield and injuring Filipino crew.
80. How China could respond to US sanctions in a Taiwan crisis
Logan Wright, Agatha Kratz, Charlie Vest, and Matt Mingey, Atlantic Council, April 1, 2024
Beijing has watched carefully as Western allies have deployed unprecedented economic statecraft against Russia over the past two years. Our report from June 2023 modeled scenarios and costs of Group of Seven (G7) sanctions in the event of a crisis in the Taiwan Strait. However, that report largely left unanswered a critical question: How would China respond?
This report examines China’s ability to address potential US and broader G7 sanctions, focusing on its possible retaliatory measures and its means of sanctions circumvention. We find that reciprocal economic statecraft measures would exact a heavy financial toll on the G7, China itself, and the global economy. Crucially, however, we also find that China is developing capacities that are making its economy more resilient to Western sanctions.
We consider the use of economic statecraft tools in two main scenarios: a moderate escalation over Taiwan limited to the United States and China that remains short of military confrontation, and a more severe scenario with G7-wide restrictions targeting Chinese firms and financial institutions. For each, we consider China’s potential responses to adversarial economic statecraft in terms of retaliatory action (including restrictions on economic activity within China and China’s potential actions abroad) and attempts to circumvent G7 sanctions.
We arrive at seven key findings:
China’s economic statecraft toolkit is quickly expanding. In the past five years, China has used a range of formal and informal statecraft tools, including tariffs, import bans, boycotts, and inspections, to punish firms and countries for their stances on Taiwan and other sensitive issues. In anticipation of the potential for more extensive foreign sanctions, China has also been legislating to equip itself with an expanded toolkit to respond. This scope of options distinguishes China from Russia, which had prepared for additional sanctions in a less organized fashion, and presents a significantly more difficult challenge for Western economic statecraft.
China’s statecraft toolkit is heavily weighted toward trade and investment rather than financial statecraft. We assess that in a moderate scenario where US exports to China are curtailed, more than $79 billion worth of US goods and services exports (such as automobiles and tourism) would be at risk. In a higher-escalation scenario involving G7-wide sanctions against China, around $358 billion in G7 goods exports to China could be at risk from the combination of G7 sanctions and Chinese countermeasures. On the imports side, we estimate that the G7 depends on more than $477 billion in goods from China which could be made the target of Chinese export restrictions. Regarding investment, at least $460 billion in G7 direct investment assets would be at immediate risk from the combined impact of G7 sanctions and retaliatory measures by Beijing. By comparison, China has limited financial tools available to directly influence G7 economies. What restrictions China imposes on capital outflows are likely to be driven more by financial stability concerns rather than attempts to coerce.
China will face steep short- and medium-term costs if Beijing deploys economic statecraft tools. China would face high economic and reputational costs from using economic statecraft tools, especially in a high-escalation scenario. While export restrictions would be one of China’s most impactful economic statecraft tools, it would also be among the costliest options for China. Over 100 million jobs in China depend on foreign final demand, and nearly 45 million of these jobs depend on final demand from G7 countries. In a high-escalation scenario, most of these jobs would at least temporarily be put at risk. Even in a moderate-escalation scenario, China’s viability as a destination for foreign investment would dramatically decline, with implications for China’s exchange rate and domestic financial stability.
China may prefer to avoid tit-for-tat retaliation for strategic reasons. As a result of the major costs to its citizens, China is unlikely to follow a tit-for-tat approach but will target sectors where it can inflict asymmetric pain, particularly through the use of export controls or trade restrictions on critical goods such as rare earths, active pharmaceutical ingredients, and clean energy inputs (e.g., graphite). China’s political objectives in a Taiwan crisis are unlikely to be served with a completely reciprocal response to G7 sanctions.
China will likely attempt to divide the G7 and thereby limit the impact of sanctions. In scenarios where the United States alone imposes sanctions on China, Beijing has more opportunities to circumvent sanctions using targeted retaliatory measures against the United States, but not other G7 countries. The G7 has varied relations with and commitments to Taiwan, and a significant proportion of firms, particularly in Europe, continue to see China as a critical export destination. In addition, China may use positive inducements to encourage countries across the Group of Twenty (G20) to stay neutral. Beijing may also leverage its large bilateral lending with a range of emerging and developing economies to attempt to circumvent or not implement G7 sanctions.
China is seeking to create resiliency to sanctions by developing alternatives to the dollar-based financial system, including renminbi-denominated transaction networks. Renminbi-based networks are never likely to replace the US dollar-denominated global financial system. However, the gradual expansion of these networks can help Beijing find alternative mechanisms for maintaining access to financing and trade transactions even in the event of far reaching Western sanctions or trade restrictions. A rapidly growing number of domestic and cross border payment projects are being designed with the possibility of Western sanctions in mind.
The timing of any crisis can significantly alter the impact of statecraft tools, for both the G7 and Beijing. Western efforts to de-risk and shift supply chains in the next five years may reduce Beijing’s “second strike” statecraft capacity over time. At the same time, China’s renminbi-based financial networks will expand in scope and liquidity, providing Beijing with more options to mitigate Western sanctions.
COMMENT – This is a very helpful contribution.
Muhammad Ibrahim, Arab News, April 6, 2024
82. Leading Kazakh Sinologist Jailed on Treason Charge Released on Parole
Radio Free Europe, April 5, 2024
83. European defence groups warn over reliance on Chinese cotton used in gunpowder
Financial Times, April 9, 2024
84. Israel and Ukraine dominate Biden’s life. China gets its moment this week.
Alexander Ward and Jonathan Lemire, Politico, April 10, 2024
85. What Chinese Navy Planners Are Learning from Ukraine’s Use of Unmanned Surface Vessels
Lyle Goldstein and Nathan Waechter, The Diplomat, April 4, 2024
86. Japan, U.S., Australia, Philippines hold drill in South China Sea
Kyodo News, April 8, 2024
The Philippines' military said late Sunday it held a joint maritime exercise with Japan, the United States and Australia in the South China Sea, leading China to launch a naval and air patrol in response.
The four-nation drill held Sunday within the Philippines' exclusive economic zone demonstrated the countries' "commitment to strengthen regional and international cooperation in support of a free and open Indo-Pacific through interoperability exercises in the maritime domain," the Philippines' armed forces said.
COMMENT – Expect to see PRC and Russian joint exercises soon.
One Belt, One Road Strategy
87. Protesters blockade Peru's Las Bambas mine after talks fall through
Marco Acquino, Reuters, April 10, 2024
Peru's Las Bambas copper mine, owned by China's MMG is facing renewed blockades of a key transport route after failed talks over donations to local development projects, a community leader said on Wednesday.
Peru is one of the world's top copper producers and Las Bambas, which normally supplies 2% of global supply, has a history of stoppages due to protests organized by local communities.
Last week, residents of the Velille district in Cusco's Chumbivilcas province began blocking Peru's main mining corridor but lifted the protest on Tuesday to meet with company representatives.
By Wednesday, however, the protest was back on after the community members rejected a company offer to contribute one million soles ($270,000) annually in 2024 and 2025 to local development programs - half of what protesters are demanding.
88. Argentina caught between US and China in battle over Beijing space base
Sam Meadows, Times of London, April 10, 2024
89. China invites Uganda's energy minister for talks on pipeline financing
Elias Biryabarema, Reuters, April 5, 2024
China has invited Uganda's energy minister to Beijing to discuss the East African country's $5 billion crude oil pipeline, Uganda's presidency said on Friday.
The development could signal a possible breakthrough in Uganda's efforts to woo Chinese financiers to fund the pipeline, which the country requires to start crude production from oilfields that were discovered in 2006.
Potential Chinese funding is being considered as pivotal after Western banks declined to fund the pipeline after pressure from environmentalists who said the project would add to global carbon emissions.
China's special envoy for the Horn of Africa Affairs, Xue Bing, delivered a message to President Yoweri Museveni on Thursday, in which Chinese President Xi Jinping expressed his support for the 1,445-km (898-mile) pipeline, Museveni's office said.
"Chinese financial institutions are open to discussions on the project and extended an invitation to Hon. Ruth Nankabirwa, the Minister of Energy and Mineral Development, to visit China for further discussions," Museveni's office said.
COMMENT – Call me cynical, but I suspect Minister Nankabirwa and President Museveni may see some money show up in their Swiss bank accounts… a quick fact check, Museveni has been the Ugandan President since 1986.
Opinion Pieces
90. No Substitute for Victory: America’s Competition with China Must Be Won, Not Managed
Matt Pottinger and Mike Gallagher, Foreign Affairs, April 10, 2024
Amid a presidency beset by failures of deterrence—in Afghanistan, Ukraine, and the Middle East—the Biden administration’s China policy has stood out as a relative bright spot. The administration has strengthened U.S. alliances in Asia, restricted Chinese access to critical U.S. technologies, and endorsed the bipartisan mood for competition. Yet the administration is squandering these early gains by falling into a familiar trap: prioritizing a short-term thaw with China’s leaders at the expense of a long-term victory over their malevolent strategy. The Biden team’s policy of “managing competition” with Beijing risks emphasizing processes over outcomes, bilateral stability at the expense of global security, and diplomatic initiatives that aim for cooperation but generate only complacency.
The United States shouldn’t manage the competition with China; it should win it. Beijing is pursuing a raft of global initiatives designed to disintegrate the West and usher in an antidemocratic order. It is underwriting expansionist dictatorships in Russia, Iran, North Korea, and Venezuela. It has more than doubled its nuclear arsenal since 2020 and is building up its conventional forces faster than any country has since World War II. These actions show that China isn’t aiming for a stalemate. Neither should America.
What would winning look like? China’s communist rulers would give up trying to prevail in a hot or cold conflict with the United States and its friends. And the Chinese people—from ruling elites to everyday citizens—would find inspiration to explore new models of development and governance that don’t rely on repression at home and compulsive hostility abroad.
In addition to having greater clarity about its end goal, the United States needs to accept that achieving it will require greater friction in U.S.-Chinese relations. Washington will need to adopt rhetoric and policies that may feel uncomfortably confrontational but in fact are necessary to reestablish boundaries that Beijing and its acolytes are violating. That means imposing costs on Chinese leader Xi Jinping for his policy of fostering global chaos. It means speaking with candor about the ways China is hurting U.S. interests. It means rapidly increasing U.S. defense capabilities to achieve unmistakable qualitative advantages over Beijing. It means severing China’s access to Western technology and frustrating Xi’s efforts to convert his country’s wealth into military power. And it means pursuing intensive diplomacy with Beijing only from a position of American strength, as perceived by both Washington and Beijing.
No country should relish waging another cold war. Yet a cold war is already being waged against the United States by China’s leaders. Rather than denying the existence of this struggle, Washington should own it and win it. Lukewarm statements that pretend as if there is no cold war perversely court a hot war; they signal complacency to the American people and conciliation to Chinese leaders. Like the original Cold War, the new cold war will not be won through half measures or timid rhetoric. Victory requires openly admitting that a totalitarian regime that commits genocide, fuels conflict, and threatens war will never be a reliable partner. Like the discredited détente policies that Washington adopted in the 1970s to deal with the Soviet Union, the current approach will yield little cooperation from Chinese leaders while fortifying their conviction that they can destabilize the world with impunity.
BIDEN’S NEW BASELINE
The administration’s China policy initially showed promise. President Joe Biden maintained the tariffs that President Donald Trump had imposed on Chinese exports in response to the rampant theft of U.S. intellectual property. He renewed, with some adjustments, the executive orders Trump had issued to restrict investment in certain companies affiliated with the Chinese military and to block the import of Chinese technologies deemed a national security threat. In a particularly important step, in October 2022, Biden significantly expanded the Trump administration’s controls on the export of high-end semiconductors and the equipment used to make them, slowing Beijing’s plans to dominate the manufacturing of advanced microchips. Across Asia, Biden’s diplomats pulled longtime allies and newer partners closer together. They organized the first summits of the Quad, or Quadrilateral Security Dialogue, bringing together the leaders of Australia, India, Japan, and the United States, and convened high-profile trilateral summits with the leaders of Japan and South Korea. Biden also unveiled AUKUS, a defense pact among Australia, the United Kingdom, and the United States.
As it turned out, however, aggression would come from the opposite direction, in Europe. Less than three weeks before invading Ukraine, Russian President Vladimir Putin had signed a “no limits” security pact with Xi in Beijing. In a prudent step after the invasion, Biden drew a redline by warning Xi in a video call that the U.S. government would impose sweeping sanctions if China provided “material support” to Moscow. Xi nonetheless found plenty of ways to support the Russian war machine, sending semiconductors, unarmed drones, gunpowder, and other wares. China also supplied Moscow with badly needed money in exchange for major shipments of Russian oil. Chinese officials, according to the U.S. State Department, even spent more money on pro-Russian propaganda worldwide than Russia itself was spending.
Beijing was also coordinating more closely with Iran and North Korea, even as those regimes sent weapons to help Moscow wage war in Europe. Yet Washington was pursuing siloed policies—simultaneously resisting Russia, appeasing Iran, containing North Korea, and pursuing a mix of rivalry and engagement with China—that added up to something manifestly incoherent. Indeed, the situation that Xi had forecast at the start of the Biden administration was becoming a reality: “The most important characteristic of the world is, in a word, ‘chaos,’ and this trend appears likely to continue,” Xi told a seminar of high-level Communist Party officials in January 2021. Xi made clear that this was a useful development for China. “The times and trends are on our side,” he said, adding, “Overall, the opportunities outweigh the challenges.” By March 2023, Xi had revealed that he saw himself not just as a beneficiary of worldwide turmoil but also as one of its architects. “Right now, there are changes, the likes of which we haven’t seen for 100 years,” he said to Putin on camera while wrapping up a visit to the Kremlin. “And we are the ones driving these changes together.”
If ever the time was ripe to call out Beijing for fomenting chaos and to start systematically imposing costs on the country in response, it was early 2023. Biden, inexplicably, was doing the opposite. On February 1, residents of Montana spotted a massive, white sphere drifting eastward. The administration was already tracking the Chinese spy balloon but had been planning to let it pass overhead without notifying the public. Under political pressure, Biden ordered the balloon shot down once it reached the Atlantic Ocean, and Secretary of State Antony Blinken postponed a scheduled trip to Beijing to protest the intrusion. Press reports suggested the administration had kept quiet about the balloon in order to gather intelligence about it. But a troubling pattern of downplaying affronts by Beijing would persist in other contexts.
In June 2023, leaks to the press revealed that Beijing, in a remarkable echo of the Cold War, was planning to build a joint military training base in Cuba and had already developed a signals intelligence facility there targeting the United States. After a National Security Council spokesperson called reports about the spy facility inaccurate, a White House official speaking anonymously to the press minimized them by suggesting that Chinese spying from Cuba was “not a new development.” The administration also greeted with a shrug new evidence suggesting that COVID-19 may have initially spread after it accidentally leaked from a Chinese laboratory. If the virus, which has led to the deaths of an estimated 27 million people worldwide, turns out to have been artificially enhanced before it escaped, the revelation would mark a turning point in human history on par with the advent of nuclear weapons—a situation that already cries out for U.S. leadership to govern dangerous biological research worldwide.
In the spring of 2023, as Beijing’s actions grew bolder, Biden initiated what the White House termed an “all hands on deck” diplomatic campaign—not to impose costs on Beijing but to flatter it by dispatching five cabinet-level U.S. officials to China from May to August. Blinken’s June meeting with Xi symbolized the dynamic. Whereas Xi had sat amiably alongside the billionaire Bill Gates just days earlier, the U.S. secretary of state was seated off to the side as Xi held forth from the head of a table at the Great Hall of the People. For the first time in years, Xi appeared to have successfully positioned the United States as supplicant in the bilateral relationship.
What did the United States get in return for all this diplomacy? In the Biden administration’s tally, the benefits included a promise by Beijing to resume military-to-military talks (which Beijing had unilaterally suspended), a new dialogue on the responsible use of artificial intelligence (technology that Beijing is already weaponizing against the American people by spreading fake images and other propaganda on social media), and tentative cooperation to stem the flood of precursor chemicals fueling the fentanyl crisis in the United States (chemicals that are supplied mainly by Chinese companies).
Any doubts that Xi saw the American posture as one of weakness were dispelled after Hamas’s October 7 massacre in Israel. Beijing exploited the attack by serving up endless anti-Israeli and anti-American propaganda through TikTok, whose algorithms are subject to control by the Chinese Communist Party (CCP). Chinese diplomats, like Russian ones, met with Hamas’s leaders and provided diplomatic cover for the terrorist group, vetoing UN Security Council resolutions that would have condemned Hamas. And there is little sign Beijing has done anything, despite Washington’s requests, to help rein in attacks carried out by the Houthis on commercial vessels and U.S. warships in the Red Sea—attacks conducted by the Yemeni rebel group using Iranian missiles, including ones with technology pioneered by China. (Chinese ships, unsurprisingly, are usually granted free passage through the kill zone.)
Whether Xi is acting opportunistically or according to a grand design—or, almost certainly, both—it is clear he sees advantage in stoking crises that he hopes will exhaust the United States and its allies. In a sobering Oval Office address in mid-October, Biden seemed to grasp the severity of the situation. “We’re facing an inflection point in history—one of those moments where the decisions we make today are going to determine the future for decades to come,” he said. Yet bizarrely—indeed, provocatively—he made no mention of China, the chief sponsor of the aggressors he did call out in the speech: Iran, North Korea, and Russia. Through omission, Biden gave Beijing a pass.
THAT ’70S SHOW
The current moment bears an uncanny resemblance to the 1970s. The Soviet Union was undermining U.S. interests across the world, offering no warning of its ally Egypt’s 1973 surprise attack on Israel; aiding communists in Angola, Portugal, and Vietnam; and rapidly expanding its nuclear arsenal and investing heavily in its conventional military. These were the bitter fruits of détente—a set of policies pioneered by President Richard Nixon and his top foreign policy adviser, Henry Kissinger, who stayed on and continued the approach under President Gerald Ford. By using pressure and inducement, as well as downplaying ideological differences, the United States tried to lure the Russians into a stable equilibrium of global power. Under détente, Washington slashed defense spending and soft-pedaled Moscow’s human rights affronts. The working assumption was that the Soviet Union’s appetite for destabilizing actions abroad would somehow be self-limiting.
But the Russians had their own ideas about the utility of détente. As the historian John Lewis Gaddis observed, the Soviets “might have viewed détente as their own instrument for inducing complacency in the West while they finished assembling the ultimate means of applying pressure—their emergence as a full-scale military rival of the United States.” Nixon and Kissinger thought détente would secure Soviet help in managing crises around the world and, as Gaddis put it, “enmesh the U.S.S.R. in a network of economic relationships that would make it difficult, if not impossible, for the Russians to take actions in the future detrimental to Western interests.” But the policy failed to achieve its goals.
President Jimmy Carter came into office in 1977 intending to keep détente in place, but the policy didn’t work for him either. His attempt to “de-link” Soviet actions that hurt U.S. interests from Soviet cooperation on arms control ultimately yielded setbacks in both categories. The Soviets became more aggressive globally, and a wary U.S. Congress, having lost faith in Moscow’s sincerity, declined to ratify SALT II, the arms control treaty that Carter’s team had painstakingly negotiated. Meanwhile, Zbigniew Brzezinski, Carter’s national security adviser, had grown increasingly skeptical of détente. Brzezinski felt that a turning point had come in 1978, after the Soviets sponsored thousands of Cuban soldiers to wage violent revolution in the Horn of Africa, supporting Ethiopia in its war with Somalia. The Soviet invasion of Afghanistan the following year was “the final nail in the coffin” for arms control talks, Brzezinski wrote in his journal—and for the broader policy of détente.
By the time President Ronald Reagan entered the White House, in 1981, Nixon and Kissinger’s invention was on its last legs. “Détente’s been a one-way street that the Soviet Union has used to pursue its aims,” Reagan stated flatly in his first press conference as president, effectively burying the concept.
Reagan sought to win, not merely manage, the Cold War. In a sharp departure from his immediate predecessors, he spoke candidly about the nature of the Soviet threat, recognizing that autocrats often bully democracies into silence by depicting honesty as a form of aggression. In 1987, when Reagan was preparing to give a speech within sight of the Berlin Wall, some of his aides begged him to remove a phrase they found gratuitously provocative. Wisely, he overruled them and delivered the most iconic line of his presidency: “Mr. Gorbachev, tear down this wall.”
91. Japan Could Be America’s New Special Relationship
Bloomberg, April 10, 2024
The alliance has become stronger than many could have imagined. Both sides should seize the chance to make it even more powerful.
Japanese Prime Minister Fumio Kishida is rightly being feted in Washington this week as leader of America’s closest ally in Asia. But Japan is positioning itself as something more: a military power able to shoulder greater global responsibilities. Officials in both countries should seize the chance to make that prospect a reality.
The changes Kishida has overseen would have been unthinkable just a few years ago. Once-pacifist Japan is increasing national-security spending to 2% of gross domestic product by 2027. It has committed to a forward-leaning defense strategy, adding long-range Tomahawk missiles to its arsenal for the first time. Rules blocking weapons exports have been loosened. The country has stabilized long-rocky relations with South Korea while deepening security ties with Australia, India and the Philippines.
Vinod Khosla, Financial Times, April 9, 2024
The US House of Representatives in March overwhelmingly passed a bill to force divestiture of TikTok from its Chinese parent. Many in Silicon Valley are against this bill but I staunchly support it. Neither I nor my firm stands to gain or lose anything on the back of this bill’s outcome, but I can see how TikTok can be weaponised by a foreign adversary.
This TikTok divestiture is about preventing a foreign adversary from controlling a platform to deploy what I call “persuasive AI”, to surreptitiously manipulate US citizens, compromise elections, push divisive content, and otherwise promote the objectives of the Chinese Communist Party. Some think we can prevent these problems with narrow legislation restricting the transfer of data. But none of these harms require data to be transferred. Privacy safeguards will not solve this problem.
It is telling that the Chinese government considers the TikTok algorithm a key asset, having included it on a restricted list of technologies in 2020, preventing its export without government approval. Precisely due to TikTok’s importance as a tool for espionage and a launch pad for persuasive AI, the Chinese government will choose a ban over divestiture. TikTok is a tool that has proven so valuable — for social influence campaigns and espionage — that ByteDance is spending money hand over fist on an intimidation campaign. Donald Trump, who signed an executive order in 2020 to ban TikTok, has now opposed it after meeting with mega donor Jeff Yass, who may have as much as 75 per cent of his net worth tied up in ByteDance. Is Senate influence for sale?
Some argue that this bill runs counter to the value of free speech. First, contrary to how it is being characterised by TikTok, this bill itself is not a ban. It is a forced divestiture, and hopefully, a precedent on foreign corporate ownership of tools that can reach hundreds of millions of Americans.
We no longer live in an era where explosives are the only destructive weapons; winning hearts and minds with surveillance and viral ideas are among this century’s main theatres of warfare. To do so, TikTok uses an algorithm powered by advanced artificial intelligence. And it is in the hands of the CCP. Recognising that TikTok is an AI-powered subversion weapon, we should view it as we do other weapons and materials relevant to our homeland and national defence industry. We banned Huawei routers in US telecommunications networks for surveillance prevention reasons. TikTok’s surveillance and persuasion capability is well documented.
Second, a forced divestiture of TikTok does not violate the First Amendment of the US constitution. Some members of Congress opposed the bill, because like the CCP, they’re worried about free speech. But they are evidently less concerned for the TikTok shareholders who are unable to criticise TikTok for fear of having their holdings seized. Can you discuss the #UyghurGenocide or #HongKongProtest on TikTok? Isn’t this a strong indication of CCP control? The proposed legislation targets TikTok’s foreign ownership, not its content. It doesn’t censor specific speech. Passing this bill is a question of corporate ownership, not speech. The First Amendment in no way grants China the right to own US media properties.
Even if one could argue that this bill strikes at the First Amendment, there is legal precedent for doing so. In 1981, Haig vs Agee established that there are circumstances under which the government can lawfully impinge upon an individual’s First Amendment rights if it is necessary to protect national security and prevent substantial harm. TikTok and the AI that can be channelled through it are national and homeland security issues that meet these standards.
Should this bill turn into law, the president would have the power to force any foreign-owned social media to be sold if US intelligence agencies deem them a national security threat. This broader scope should protect against challenges that this is a bill of attainder. Similar language helped protect effective bans on Huawei and Kaspersky Lab.
As for TikTok’s value as a boon to consumers and businesses, there are many companies that could quickly replace it. In 2020, after India banned TikTok amid geopolitical tensions between Beijing and New Delhi, services including Instagram Reels, YouTube Shorts, MX TakaTak, Chingari and others filled the void.
Few appreciate that TikTok is not available in China. Instead, Chinese consumers use Douyin, the sister app that features educational and patriotic videos, and is limited to 40 minutes per day of total usage. Spinach for Chinese kids, fentanyl — another chief export of China’s — for ours. Worse still, TikTok is a programmable fentanyl whose effects are under the control of the CCP.
93. The Messy Battlespace That Would Be a U.S. vs. China War
James Holmes, National Interest, April 9, 2024
94. Americans are still not worried enough about the risk of world war
Noah Smith, Noahpinion, April 10, 2024
China is becoming better prepared for war. The U.S. is not.
A few Americans like Jamie Dimon are starting to wake up to all of this, but most Americans are not — they’re still focused on domestic conflict. As a result, America hasn’t mustered the urgency necessary to resuscitate its desiccated defense-industrial base. China is engaging in a massive military buildup while the U.S. is lagging behind.
…
Again, I don’t know which of these measures represent purposeful preparation before the launching of a great-power war. But they all definitely make China better-prepared. Even as the U.S. tries its best to ignore its glaring inability to build ships and missiles and ammunition, China is shoring up its key weaknesses in fuel, food, and finance.
All of this should scare you a bit. It certainly scares me a lot. The possibility that revisionist great powers will launch a world war in order to overturn the global order is now a lot higher than it was a few years ago, and arguably even higher than one year ago. Americans need to be screaming our heads off about this, so that we can start planning for this disaster today, instead of allowing ourselves to wait and be blindsided by it. We need to be warning our friends, and telling them to warn their friends. We need to be talking about this on national TV, in the New York Times, on podcasts, and on whatever social media the CCP still doesn’t control.
Right now, what I mostly hear is a deafening, horrible silence.
COMMENT – If you aren’t subscribed to Noah Smith’s Substack, Noahpinion, you should be.
95. Leveling the playing field: U.S. needs new tactics for space competition
Clayton Swope, SpaceNews, April 8, 2024
China’s digital communications technology conglomerate Huawei grew faster in 2023 than during any of the past four years. This follows Huawei’s introduction of a new smartphone in August 2023 powered by a sophisticated processor which U.S. experts did not think could be made in China.
Another Chinese telecommunication firm, ZTE, also reported significant growth last year. We should be prepared for the same story to unfold in China’s space industry.
China will be able to make ever more sophisticated space systems, with more advanced payloads, using domestically produced components. Chinese space companies, subsidized by investments from Beijing, will find customers around the world eager to buy their affordable products and services.
Given these trends, how can the United States maintain its commercial competitive edge in space? The U.S. government will have to use all tools at its disposal. This means going toe to toe with China to set international space standards, working with U.S. companies to close foreign deals, and reassessing export controls.
To many of us in the United States, it might be surprising that the biggest-name Chinese telecom companies have had such a strong showing. After all, Huawei and ZTE have effectively been squeezed out of the United States, as well as Canada and the United Kingdom, given bipartisan security concerns and policy actions to ban their equipment.
96. Dysfunction and division darken the WTO’s 30-year dream of free trade
Larry Elliott, The Guardian, April 7, 2024
As the organisation’s anniversary nears, borders around the world are closing again.
When trade ministers gathered in the Moroccan city of Marrakech 30 years ago this month to sign the agreement creating the World Trade Organization (WTO), the mood was celebratory. The Berlin Wall had come down only recently, communism had collapsed, and there was optimistic talk of how the body would prise open new markets and act as the arbiter when disputes broke out between countries.
The atmosphere today is much darker than it was in April 1994. Any enthusiasm for groundbreaking trade liberalisation deals disappeared decades ago and has been replaced by covert – and often overt – protectionism.
Relations between the US and China are at a low ebb, and likely to get worse. Late last month, China formally opened a WTO case against the US in which Beijing attempted to safeguard its electric vehicle industry, saying Joe Biden’s subsidies to promote green manufacturing in America broke global trade rules.
The dispute over Biden’s Inflation Reduction Act (IRA) highlights three trends: an ebb tide for globalisation, the increasingly difficult relationship between the world’s two biggest economies, and the dysfunctional state of the WTO itself.
There is scant hope that China’s case against the US will ever be resolved, because the WTO can no longer settle disputes. Any country on the wrong side of a WTO ruling has the right to go to appeal, but the appellate body needs judges to operate and since late 2019 the US has been blocking any new appointments to the panel.
That’s not the only reason Washington will stand firm over the IRA. At root, the problem is being caused by China’s huge trade surplus with the US and the Biden administration’s conviction that America’s deficit is the result of unfair competition.
Responding to China’s formal objection to the financial support provided by the IRA, Katherine Tai, the US trade representative, said it was a case of the pot calling the kettle black, given China’s record of protecting its own manufacturers.
Neil Shearing, chief economist at the consultancy Capital Economics, says there has been a “substantial expansion” of China’s manufacturing capacity since the Covid pandemic. In part, he says, that reflects a response to increased global demand but it also – as in the case of electric vehicles – represents a deliberate policy decision by Beijing to go for market share.
COMMENT – The WTO ceased functioning in any meaningful way over a decade ago. Like other institutions that have outlived their usefulness, it lumbers on as its leaders, employees, and advocates refuse to acknowledge what everyone else sees.
97. China’s Economy Needs a Strategy, Not a Buzzword
Minxin Pei, Bloomberg, April 4, 2024
Xi Jinping is counting on “new productive forces” to revive growth. He is likely to be disappointed.
98. Prabowo's China policy dilemma evident in Beijing trip
Mangantar Simon Hutagalung, Nikkei Asia, April 8, 2024
Next Indonesian leader focused on security but keen for development support.
COMMENT – Last week I commented on the implications of the election of Prabowo as the next President of Indonesia. Some readers reached out and let me know some things I left out.
Prabowo has been a strong advocate of building defense relations with the U.S. and Japan during his time as Defense Minister, he visited Tokyo on the same trip he made to Beijing, and is likely most interested in providing development and prosperity for Indonesia. This means if we want to help reinforce good governance in Indonesia, we need to engage both from a security perspective and an economic one.
99. The World’s Digital Backbone Needs Defending
Bloomberg, April 5, 2024
100. Ditching European trade for China and India was ever a poor bet. Now it’s a farce
Will Hutton, The Guardian, April 7, 2024
The world has changed since, post-Brexit, “Global Britain” set itself to “pivot” from sclerotic Europe towards booming Asia. Always a fanciful idea that disregarded Asian realities, it has now become farcical. Neither China nor India are proving the easy pickings on which “buccaneering” Britain could ride to economic success, denied through being tied to the “corpse” of an EU economy allegedly shackled by regulation and tax. Brexiter ambitions are turning to ashes.
Instead, there is China, run by an ever more openly dictatorial and militarily ambitious communist government. Its economy is plagued by politically inspired production targets: everything from building flats to EV batteries outstripping any likely demand. There is growing youth unemployment and a once fevered, now overblown, property market retrenching to such an extent it threatens the viability of the vastly over-extended banking system.