Friends,
I meant for this issue to go out last weekend, but I was traveling with my family for the holidays and… well… it didn’t get done.
¯\_(ツ)_/¯
So, here’s a roll-up for the end of the year.
You want the good news or bad news first?
Well, you’re getting the bad news…
Just before Christmas, we narrowly averted yet another federal government shutdown with a Continuing Resolution.
Over the last few months, I’ve been very critical of Congress’ decision to pursue yet another Continuing Resolution (see “Assumptions and Force Planning” (May 26, 2024) and “Gates Raising the Alarm” (September 29, 2024)). For nearly 15 years, through four Presidential Administrations and six congresses, our elected officials… in a bipartisan manner… undermined the power and influence of the United States with their failure to develop workable compromises and conduct their routine budgetary responsibilities.
I’m critical of Secretary of Defense Austin’s roll in all this, but I’d ask you to read the statements he issued after these last two Continuing Resolutions (#47 from September 2024 and #48 from a week ago):
SecDef Statement after the 47th Continuing Resolution in the last 15 years.
SecDef Statement after the 48th Continuing Resolution in the last 15 years.
My sense is that most elected officials (and large portions of the American people) have become desensitized to this issue. When faced with another government shutdown or a breach of the debt limit or a failure to match revenues to expenditures, they give a collective shrug of the shoulders.
Some say: Look, we’ve had 48 of these things and nothing bad has happened. What’s the big deal?
Others will say: The government spends way too much anyway (especially on the military), so starving it of funding is probably a good thing.
Others will think: The economy is doing great, so this can’t matter that much.
But the problem is that irresponsible budgeting is cumulative, and it hits a country’s military particularly hard. It creates fractures and gaps that go unseen until that military is tested and subjected to enormous stress.
So, everything appears fine and elected officials make bold claims like this from October 2023:
Yet beneath the veneer of confidence, we aren’t doing the things or making the investments to fulfill those bold claims, and our adversaries can see it. They know we are stretched thin; they know we are deeply divided; and they suspect we don’t have the power we used to.
In short, we are inviting our adversaries to roll the Iron Dice.
Our friends and allies see it too and they are hedging. Edward Wong covered parts of this dynamic in a piece this week in the New York Times: “Biden and Aides Courted Allies Who Undermined U.S. Goals.”
If there is one thing that I’m wishing for in the New Year, it’s that we put this silliness behind us. Congress and the Executive branch must focus on its most routine government function: allocate tax revenue to priorities in a responsible and predictable manner.
Now the good news, let’s focus on something a bit more positive… like re-engineering global trade.
Much of what gets published each week is filler.
Don’t get me wrong, I think it is important to pay attention to this stuff as it gives us a sense of direction and provides the details we need to interpret the world.
But occasionally, someone writes an article that illuminates more than just a few feet into the distance. One such article came out last week in Foreign Affairs by my friend Peter Harrell. The title isn’t very good (apparently the editors at FA retain sole discretion for that), but the content is spot-on, and it is worth reading in full.
Peter is a Nonresident Fellow at the Carnegie Endowment for International Peace, and he spent the first two years of the Biden Administration serving as the Senior Director for International Economics and Competitiveness at the National Security Council and the National Economic Council.
With less than 3000 words, his thesis is that the next Administration has an opportunity to remake the global trading system and hence reset the playing field for U.S. national security and prosperity in the decades ahead.
How to Stop a Trade War: Trump, Tariffs, and the Coming Transformation of Global Commerce
Peter E. Harrell, Foreign Affairs, December 19, 2024
I asked ChatGPT to create a Sci-Fi image of individuals re-engineering global trade… I guess that involves a Minority Report-like room with see-through monitors… I can’t wait for the future!
Harrell suggests that the next Administration use both threats and targeted negotiations to achieve a trading system based on outcomes, not rules, for rules sake.
“In a recent television interview, Trump suggested that he sees tariffs as both a tool to expand manufacturing in the United States and as leverage for negotiations with foreign governments. And as Trump moves to turn his trade instincts into policy, he will hear conflicting advice. Fortune 100 CEOs will urge him to use the threat of tariffs to force foreign governments to give their companies better access to markets abroad. Domestic manufacturers and labor leaders will push Trump to follow through on implementing new tariffs to boost U.S. production. National security types will press Trump to strengthen trade with allies as a counterweight to China. Markets, meanwhile, may drop if Wall Street traders think Trump’s tariffs or other trade policies will drive inflation or hurt corporate profits.
Trump’s willingness to be a disrupter gives him the potential to bring about the most significant changes to the international trading order since the current liberal global system arose in the early 1990s. He could reshape trade flows in ways that advance the United States’ geopolitical position and strengthen its industrial base. But Trump’s disruptive nature is also a great source of risk. If he overplays his hand, he may blunder into tariff wars that do little more than hike costs for Americans. Success will require new paradigms for U.S. trade policy and skillful diplomacy, as foreign leaders guard their own national interests.”
…
“[Trump] should, in particular, work with foreign countries to reduce their trade with Beijing. Here, Trump should find an increasingly receptive audience. As China’s manufacturing surplus has increased, a growing number of its trade partners outside the United States, including major emerging markets such as Brazil, Chile, and South Africa, have begun to impose tariffs and other protectionist measures of their own. Trump’s task will be to use American trade policy to coordinate and expand those nascent efforts.
Pushing trading partners to raise their own barriers to Chinese products will ultimately boost U.S. manufacturing, as well. Chinese imports to other countries not only displace those countries’ manufacturers but also undercut American workers. U.S.-made products often cannot compete with cheaper Chinese-made products on the international market. And there is evidence that as China increases sales of cars and other high-end products to industrial countries such as South Korea, those countries’ manufacturers respond to the competition by exporting more of their products to the United States—another hit to U.S. manufacturing.
This is not to say that tariffs should only be used as leverage for deals: imposing tariffs on China is an essential part of “de-risking” the U.S.-Chinese relationship, which is why the Biden administration continued the ones that Trump established in his first term. Targeted tariffs—even on allies—can help promote key strategic industries in which national and economic security requires more domestic production and for which “friend shoring” is insufficient. And it would be fair for Trump to push for more reciprocity in U.S. trading rates. The maximum tariff rates that Washington committed to maintaining when it joined the World Trade Organization, for example, were about 40 percent lower than the tariff rates Europe agreed to. India’s are several times as high. That may have been acceptable in the early 1990s, when India was a small economy and the United States and Europe were adapting to the post–Cold War era. But it does not make sense in today’s global economy. But Trump and his team will find that both the American economy and American security will generally be better served by striking new deals than by imposing sweeping tariffs on the 85 percent of American trade that comes from countries other than China.
BACK TO THE FUTURE
Achieving the results Trump wants will require a set of paradigm shifts for U.S. trade negotiators. This starts with the fact that there is little modern precedent for Washington’s use of trade negotiations to persuade partners to raise tariffs against a third country, especially in a coordinated fashion. For decades, U.S. trade policy has instead sought to reduce barriers to trade—opening foreign markets to American products and offering foreign producers more access to the U.S. market in exchange. When in recent years, the United States has persuaded trade partners to raise barriers to China—such as, for example, the tariffs Canada imposed in October on Chinese electric vehicles and steel—Washington has done so through ad hoc diplomacy rather than as part of formal negotiations.
Under Trump, U.S. officials will need to design trade deals that get partners to reduce their own trade with China. They can start by pressing key trading partners to adopt common external tariffs, alongside the United States, on imports of agreed-on critical products from China, such as vehicles and critical minerals. In exchange, Trump would agree to exempt these partner countries from new tariffs on those targeted imports.
U.S. officials should also change the “rules of origin” that determine what country a product is from for the purposes of calculating tariffs. Current trade rules generally treat products as “made” in the country where they were assembled, overlooking those products’ components. For example, if a piece of wood furniture is made in Vietnam, it is considered Vietnamese, even if the wood came from elsewhere. China can exploit these rules by setting up manufacturing facilities in other countries that rely heavily on Chinese companies and components. Trump should push to change the rules so that such products would be tariffed at Chinese rates. Some of Washington’s partners might be wary of such a shift, but Trump should point out that the rule change will help them by creating an incentive for entire supply chains to diversify away from China.
Trump’s negotiating team will have to make another paradigm shift—one that involves integrating, rather than separating, trade and national security. During the Cold War, the United States and its allies cooperated on trade and security through mechanisms such as the Coordinating Committee for Multilateral Export Controls. But since the Soviet Union collapsed in 1991, U.S. officials have tended to draw a line between the two, arguing that tools of economic statecraft such as export controls and sanctions should not be used to promote trade interests and that tariffs should not be used to promote security interests. In today’s era of intense geopolitical competition, Washington should consider returning to its earlier approach. That means Trump should prod U.S. trade partners to match U.S. rules in areas including export controls and foreign investment screening, especially in regard to China. In exchange, Trump could simplify the export controls and investment screenings that partners face in trading with the United States.
Finally, Washington should start pursuing trade policies that focus less on rules and more on outcomes. For the past 30 years, U.S. policymakers have developed detailed sets of rules to govern the terms of trade. These regulated tariff rates, subsidies, and nontariff barriers—including those applying to food safety, intellectual property, anticorruption policies, currency manipulation, and sectors such as banking. Rules are, of course, important to promoting cross-border trade, investment, innovation, and competition. But the types of measures needed to achieve Trump’s goals require more creativity.
Take the United States’ persistent trade deficit with Germany, which Trump has decried since at least 2017. U.S. tariffs on German car imports are lower than European tariffs on American autos, but Germany’s trade surplus persists in large part because it is driven by German macroeconomic policies that result in too little domestic investment and generate too little domestic demand. As a result, German manufacturing focuses more on the export market than on domestic consumption. German steps to boost domestic demand—for example, increasing its defense spending to three percent of GDP, boosting domestic infrastructure and investment, and beefing up spending on research and development—would be more effective at reducing trade imbalances than increased U.S. tariffs on German products. Changes in global capital flows could also be used to rebalance global trade.
Before the rise of the post–Cold War trading order, policymakers around the world treated macroeconomic factors as an essential aspect of trade policy. That is why the Plaza Accord focused on reducing the value of the U.S. dollar instead of establishing rules governing currency manipulation. American trade policymakers did not exactly abandon their understanding of the importance of macroeconomics over the last 30 years; the Obama administration repeatedly urged China to boost domestic demand as a way of reducing the U.S. trade deficit. But American trade officials pivoted away from using tools such as tariffs to persuade foreign governments to change their macroeconomic policies. Instead, they focused on the rules that governed the actual flow of goods and services across borders. Trump, as a politician who relishes making threats, is well positioned to bring this tradition back. And his economic team, stacked with business executives, is well positioned to identify macroeconomic policy objectives that would reduce the U.S. trade deficit and help U.S. workers.
This chart from a recent report titled “The Future of Industrialization” by the United Nations Industrial Development Organization helps illustrate what has gone horribly wrong over the past quarter century. And why ‘business as usual’ approaches will not fix things.
If trends continue, the PRC will go from 6% of global industrial production in 2000 to 45% by 2030. This is NOT globalization… it is the hyper-concentration of industrial activity in just one country. And that one country is increasingly the adversary of its neighbors and the United States.
Unless and until we fix THAT problem, we will find ourselves in an increasingly dangerous world.
The opposite of Harrell’s article (one that does more harm than good) is one by Benn Steil and Elisebeth Harding on CFR’s blog page.
Titled “Soaring Abuse of “National Security” Exceptions Has Wrecked the Multilateral Trading System” (December 19, 2024), the authors make the all too common mistake of confusing cause and effect.
With this chart as its opener, the authors claim, “the past two U.S. administrations, Trump and Biden, have undermined the multilateral trading system—and neutered its guardian, the World Trade Organization—by abusing the “national security” exception when erecting new trade barriers.”
Steil and Harding argue that for 70 years members of GATT/WTO “rarely invoked the security exception, recognizing the potential for damaging exploitation.” However, since 2017, America invoked it 30 times and has blocked the appointments or re-appointments of members to the Appellate Body that can settle disputes.
Steil and Harding apparently believe that everything was swell with the international trading system and its oversight international organization, the World Trade Organization (WTO) until America ruined it.
Shame on you America!
How could you wreck the innocent WTO?!?
Another, far more plausible, explanation for the rise of “national security” notifications is that the WTO, and the broader post-First Cold War trading system it represented, had a critical flaw: the assumption that great power rivalry would never return after the collapse of the Soviet Union.
Notice the sleight of hand used in coming up with the “70 year” statistic of members not invoking a national security exception.
“Article XXI of the WTO’s predecessor regime, the General Agreement on Tariffs and Trade (GATT), allows a member state to take “any action which it considers necessary for the protection of its essential security interests.” For the GATT/WTO’s first 70 years, members rarely invoked the security exception, recognizing the potential for damaging exploitation. But since 2017 the U.S. has referenced national security in 30 “Technical Barriers to Trade” (TBT) notifications—the procedure for members to inform others about proposed trade-impacting regulations.”
The WTO only came into existence in 1995, less than 30 years ago… and Russia only joined the WTO in 2012 (five years before Steil and Harding identify the collapse).
The most important characteristic of its predecessor, the General Agreement on Tariffs and Trade (GATT), which was founded in 1947, was that it was a trading agreement that helped guarantee the national security of member nations by excluding geopolitical rivals like the Soviet Union, its Eastern European satellites, and the People’s Republic of China.
All that seemed to change with fall of the Berlin Wall and the collapse of the Soviet Union.
It was the *end of history*, liberal democracy and market-based economies had triumphed. There was no longer any need to have grubby national security considerations soil free trade utopianism. Those heady days convinced many that war and violence and great power rivalry were things of the past (or at least violence was relegated to terrorism and some rogue regimes who were economic midgets). Multilateralism and free trade, as guaranteed by the WTO from its headquarters on the shores of Lake Geneva, would dissuade anyone from doing those horrible things that had plagued mankind for millennia.
However, once Beijing and Moscow were allowed in the new WTO (the PRC in 2001 and Russia not until 2012), the whole thing began to collapse.
What had been fairly regular negotiating rounds during the GATT which culminated with adjustments and reforms, came to a crashing halt with the failure of the Doha Round of negotiations which started when the PRC joined in late 2001.
To pretend that “everything was fine” with the WTO up until 2017, when Trump ruined it, is to ignore the obvious.
Another indicator that all was not right at the WTO before 2017 was the rise of regional trading blocs after the failure of the Doha Round. Remember that the rationale for the Trans-Pacific Partnership (TPP) was to create an alternative trading system, above the WTO, to protect the U.S. and its partners from the harmful effects of China… heck President Obama even wrote an OpEd in the Washington Post in May 2016 arguing just that.
Rules-based multilateralism cannot function effectively when geopolitical rivals are inside the system. During periods of hostile geopolitical rivalry, multilateral institutions only work for subsets of allies and partners.
We are witnessing the demise of the WTO, an experiment in multilateral institutional building that was well suited for a limited set of like-minded countries, but failed when it expanded to included geopolitical rivals.
I know that is hard for some people to accept this reality, but until we do and begin building something new that is suited to the geopolitical conditions we have (not the geopolitical conditions we wish for), we are going to be stuck with a failed system that gets worse over time.
***
We can’t let that ruin our holiday spirit, so here’s some cheer!
I’m not necessarily a Philadelphia Eagles fan, but I don’t hate them (and want to see them defeat the Cowboys today), so here is Jason Kelce singing that Christmas classic, “Dominick the Donkey” off last year’s album A Philly Special Christmas:
I’m not making fun of Kelce here, on the left is the actual picture he has at the top of his own Facebook page… no lie.
Merry Christmas, Happy Hanukkah, and Happy New Year!
Thanks for reading!
Matt
MUST READ
1. China Races to Squelch Unrest as Signs of Economic Malaise Spread
Chun Han Wong and Brian Spegele, Wall Street Journal, December 16, 2024
Knife attacks and car rammings have officials unnerved about widespread societal discontent.
Faced with rising social frustrations and public unrest, China’s leaders are ramping up security measures and squelching discordant views on the country’s economic health.
A spate of deadly attacks in China in recent weeks—including mass stabbings and car-ramming incidents—has unnerved officials and ordinary people alike, raising concerns that stagnating growth has played a role in fueling unrest and even outbursts of violence, amid an increase in public protests over economic grievances.
In response, the Communist Party’s security czar last month ordered nationwide efforts to “resolve conflicts at the grassroots and nip them in the bud.” China’s top prosecutor urged officials to better protect the rights of low-income workers, job-seeking graduates and vulnerable groups such as the elderly as a way to “strictly prevent extreme cases from happening.”
Officials have fanned out to screen for people who have suffered financial or emotional setbacks and assess their risks of disrupting public order. Authorities also deployed paramilitary troops to help guard some schools in Beijing and elsewhere, after some recent attacks appeared to target students. Internet censors, meanwhile, have scrubbed viral commentaries about weaknesses in the world’s second-largest economy.
At its latest meeting this month, the party’s elite Politburo implicitly acknowledged the connection between economic difficulties and social unrest, ordering officials to “protect people’s livelihoods” with the goal of “ensuring the overall stability of society.”
The challenges facing Xi Jinping are formidable. Millions of young Chinese struggle to find jobs. Homeowners have been watching their property values sink, while others worry that debt-laden developers might not finish building the apartments they bought. Many migrant workers and even some government employees aren’t getting paid.
2. Xi Defends Purges as Part of ‘Inevitable’ Internal Party Strife
Josh Xiao, Bloomberg, December 16, 2024
Chinese President Xi Jinping dismissed internal divisions within the ruling Communist Party as unavoidable, while calling for greater efforts to instill discipline, according to newly disclosed remarks he made at an anti-graft meeting in January.
“Changes in the external environment and in the party membership will inevitably lead to various conflicts and problems within the party,” Xi said at the annual huddle of the Central Commission for Discipline Inspection. “It is necessary to eliminate all kinds of negative influences in a timely manner with the courage of turning the blade inward to ensure that the party is always full of vigor and vitality.”
3. Beijing seeks to curb ‘shakedown’ detentions of Chinese executives
Cheng Leng and Ryan McMorrow, Financial Times, December 28, 2024
Senior figures at more than 80 listed companies were held by local authorities in 2024, FT analysis finds. In many cases the detentions were carried out by authorities based far away from the target’s business operations, a practice Chinese media have dubbed ‘long-range fishing’.
China’s central government is trying to curb a spate of detentions by local authorities of business executives that is fuelling anxiety among entrepreneurs and risks undercutting efforts to boost economic growth.
A review of filings by the Financial Times found senior figures in more than 80 companies listed on the Shanghai and Shenzhen stock exchanges were detained in 2024.
China’s securities regulator requires listed that companies disclose detentions of controlling shareholders, chairs, chief executives and other top managers, and the numbers suggest much broader action against executives across the country.
Some of the detentions appeared to have little or no legal basis and in many cases were carried out by authorities based far from the target’s business operations, a practice Chinese media have dubbed “long-range fishing”. One leaked official document from the southern province of Guangdong said thousands of companies in a single city had been targets of action by authorities from other areas since 2023.
Premier Li Qiang this month called for stronger supervision of company-related law enforcement, saying the government would review regions with abnormal income growth from fines and confiscations or high levels of enforcement outside their jurisdiction.
“Instances of abuse of administrative discretion and unfair enforcement persist in certain areas and sectors,” Li said, according to the official news agency Xinhua. The premier added that it was essential to address “the pressing issues raised by citizens and businesses”.
COMMENT – 🍿
If you are a business leader, it would be insanity to travel to the PRC these days.
4. How U.S. Firms Battled a Government Crackdown to Keep Tech Sales to China
Ana Swanson, New York Times, December 12, 2024
An intense struggle has unfolded in Washington between companies and officials over where to draw the line on selling technology to China.
At a meeting in Washington this spring, tech company representatives and government officials once again found themselves at odds over where to draw the line when it came to selling coveted technology to China.
The Biden administration was considering cutting off the sales of equipment used to manufacture semiconductors to three Chinese companies that the government had linked to Huawei, a technology giant that is sanctioned by the United States and is central to China’s efforts to develop advanced chips.
Applied Materials, KLA Corporation and Lam Research, which make semiconductor equipment, argued that the three Chinese companies were a major source of revenue. The U.S. firms said that they had already earned $6 billion by selling equipment to those Chinese companies, and that they planned to sell billions more, two government officials said.
U.S. officials, who view the flow of U.S. technology to Huawei as a national security threat, were stunned by the argument. In regulations issued this month, they ultimately rejected the American companies’ plea.
Over the past year, an intense struggle has played out in Washington between companies that sell machinery to make semiconductors and Biden officials who are bent on slowing China’s technological progress. Officials argue that China’s ability to make chips that create artificial intelligence, guide autonomous drones and launch cyberattacks is a national security threat, and they have clamped down on U.S. technology exports, including in new rules last week.
But many in the semiconductor industry have fought to limit the rules and preserve a critical source of revenue, more than a dozen current and former U.S. officials said. Most requested anonymity to discuss sensitive internal government interactions or exchanges with the industry.
The U.S. chip equipment companies argue that they do not oppose stronger rules as long as they also apply to international competitors. Their chief complaint is that the U.S. industry is the only one facing restrictions, allowing companies in Japan and the Netherlands to step in to supply China with technology. That damages U.S. companies while also failing to restrain Beijing, they argue.
Over the course of this year, the chip equipment companies deployed lobbyists to Capitol Hill and the White House, set up advocacy organizations and funded supportive research by think tanks to make their argument. They put in dozens of calls to officials and leaned on vulnerable Democrats in Congress, warning of job losses in their districts and asking them to reach out to the Biden administration.
Data from OpenSecrets, a nonprofit, shows that lobbying spending by Applied Materials, KLA and Lam Research has roughly doubled since 2020, as the United States has tightened its technology controls.
Applied Materials and KLA declined to comment. Lam Research said in a statement that it “diligently adheres to U.S. export controls” and that it engaged regularly “in constructive dialogue with policymakers on trade-related matters for the benefit of the semiconductor industry, national security and the U.S. innovation economy.”
Some U.S. officials have privately said that the lobbying undercut their recent rules. It helped feed an argument against the United States taking action by itself and it delayed restrictions on certain Chinese factories, they said, resulting in billions of dollars of additional sales.
Some officials have had longer-running concerns about industry influence. Eight current and former officials expressed concerns about the close relationship between the Commerce Department’s Bureau of Industry and Security, which oversees export controls, and the semiconductor equipment industry, which employs several former officials as executives or legal advisers.
In recent years, according to four of those officials, some B.I.S. employees inappropriately informed U.S. companies about forthcoming sanctions. That information had sometimes been passed on to Chinese customers, who then stockpiled U.S. products, three of the people said.
Other U.S. officials denied that the industry had any influence on the administration’s decisions. Some acknowledge they should move faster, but say they struggle with a lack of resources.
Alan Estevez, the under secretary for B.I.S., said in an interview that lobbying had no impact on his deliberations. He said his department had worked closely with other agencies and U.S. allies to set tough restrictions that sought to target advanced chip production, not China’s industry overall.
“National security is my north star,” he said. “There is nothing that industry would ever do that would make me compromise that bottom line.”
The debate over how best to control technology demonstrates the difficulty for the United States in dealing with China, a military rival but also a crucial trading partner. Many officials believe the chip industry needs to be regulated, but also nurtured: Without its cutting-edge companies, after all, the United States would have no leverage over China at all.
That relationship between American companies and China could become an even greater source of tension under President-elect Donald J. Trump, who has promised to take aggressive action against the country.
China has been investing heavily in technology, and it is currently constructing nearly two dozen new chip factories, U.S. officials say. Beijing has also responded more hostilely to recent U.S. restrictions — including by banning rare earth exports to the United States and by starting an investigation into the chip maker Nvidia — potentially presaging a widening conflict over technology and supply chains.
Many Biden officials agree with the companies that say the United States should work with allies. After months of negotiations, the administration reached an agreement in September with Japan and the Netherlands to each halt the exports of roughly two dozen types of advanced chip manufacturing equipment to China.
Speaking at the Reagan Defense Forum in Simi Valley, Calif., on Dec. 7, Gina Raimondo, the commerce secretary, said the United States had to work with allies to ensure its efforts were not undercut. “When I set the rules, I have to make damn sure China can’t just buy the stuff from Japan or Korea or the Europeans,” she said.
The government also needed a “continuous dialogue” with the industry to figure out how to restrict technology that was incredibly complex, she said. “My thing is, you can’t put a price tag on national security. So if I dig into your profits, such is life.”
Hidden Huawei Factories
The export controls issued last week ban certain chips and manufacturing equipment from being shipped to China, some on a global basis. They also add 140 Chinese companies to the “entity list,” which prevents exporters from sending them certain technology without a special license. The three Chinese companies that bought billions of dollars of U.S. equipment — Swaysure Technology; Shenzhen Pengxinxu Technology, or PST; and Si’En Qingdao — were among those added to the list.
But some analysts said that the rules contained carve-outs that could undercut their power, and that they might come too late. According to a commercial market research report obtained by The New York Times, Swaysure, PST and Si’En Qingdao have finished building a dozen chip factories in China and may have already filled them with machinery.
While the rules will stop the most advanced chip-making equipment from being shipped anywhere in China, they do not impose additional restrictions on several major Chinese chipmakers or on some factories that, U.S. officials recently learned, are connected with Huawei.
One such plant, a multibillion-dollar state-owned chip factory in southern China, recently finished construction. According to corporate records from Wirescreen, a data platform, the factory does not share shareholders with Huawei or other companies on the entity list — and thus would not raise red flags for due diligence. But it sits on land owned by Huawei and is directly adjacent to another Huawei factory, public records show.
Two officials said that the U.S. government was aware of the information and that it was concerning that Huawei factories might still be receiving U.S. equipment. Huawei did not respond to request for comment.
Gregory C. Allen, a technology expert at the Center for Strategic and International Studies, said Chinese firms were finding ways around U.S. controls much more quickly than the U.S. was stopping them.
“The U.S. now has a track record of closing loopholes once per year, and China’s loophole identification operation runs 24/7/365,” Mr. Allen said.
Loophole Identification
In fact, those loopholes are what many officials believe allowed Huawei to survive, despite being targeted by U.S. restrictions since 2019.
In August of 2023, as Ms. Raimondo was traveling through China, Huawei surprised U.S. officials by releasing a phone that contained a Chinese-made advanced chip. Ms. Raimondo said the chip had “almost certainly” been made with banned U.S. technology and promised to investigate.
Media reports had documented a network of enterprises that appeared to be supporting Huawei — including Swaysure, PST and Si’En Qingdao — and some U.S. officials began pushing to add them to the entity list.
In late 2023, Bureau of Industry and Security officials started seizing U.S. shipments to those three Chinese firms. U.S. companies objected, arguing that the stoppages would hurt them.
Other B.I.S. officials sympathetic to that argument weighed in to have the block lifted, and shipments to the three companies resumed, ultimately continuing for another year, according to two officials and another person familiar with the incident.
Officials also believed U.S. equipment makers were sidestepping regulations by shipping to China from subsidiaries in Asia, and began investigating Applied Materials.
The Biden administration had been pushing Japan and the Netherlands to agree to restrictions, but those governments had reservations about hurting their companies, and about Chinese retaliation. In June, the United States threatened to deploy the foreign direct product rule, which would effectively steamroll the other governments and impose global restrictions on their exports.
By September, the governments reached an agreement, which fell short of what some American officials had wanted, but constituted a significant expansion of global rules.
Mr. Estevez said that the United States was not afraid to act by itself, but that doing so would encourage global companies over time to remove American technology from their supply chains. Now the United States has a framework with allies that it can update to address new threats from China, he said.
“That frankly protects national security to a greater degree,” he added.
Miracle Makers
The machines that make semiconductors are as big as a van or a bus, and they are mind-bogglingly complex, manipulating materials at the scale of just a few atoms to create the intricate features on computer chips.
At Applied Materials’ Silicon Valley offices in November, Tristan Holtam, the group vice president, said making chips involved “two miracles.” One is fitting 19 billion switches and 70 miles of wiring on a chip as big as a fingernail, he said, and the other “is that you can make that chip for $30.”
Mr. Holtam stood before a massive construction site, where Applied Materials is investing more than $4.5 billion to build a research center that will develop new chips for uses like A.I. and quantum computing.
As the technology war widens, concerns have grown that U.S. companies could lessen investments like these as they lose ground to competitors that are selling more to China.
A paper by the New York Fed this year found that profitability and employment had decreased for U.S. firms. In a letter to the Biden administration in August, lawmakers in California complained that U.S. companies were “rapidly losing” market share and “at risk of a ‘death spiral.’”
Other say these arguments are overblown, arguing that U.S. companies have maintained steady gross margins and that export controls have had minimal impact, according to earnings calls. In a call in May, Brice Hill, the chief financial officer of Applied Materials, described the last three quarters in China as “very strong.”
“We don’t see a cliff for that market,” he said.
A Final Push
In September, as the Biden administration prepared to announce new restrictions, the chief executives of KLA Corp, Lam Research and Applied Materials visited the White House and Capitol Hill to argue that unilateral controls would cause them long-run harm.
They stirred up several offices in Congress, which requested briefings from B.I.S. on the controls, according to two congressional staff members. Amid pressure from companies and Congress, Ms. Raimondo asked staff in early October to reassess whether the restrictions would have too much unilateral impact.
A senior administration official said the effort aimed to determine if restricted technology would be available from other sources, to make sure they effectively protected national security.
Some Commerce officials pushed to create a broad license exception for some Chinese factories, including those owned by Huawei, if products were available from non-U.S. sources, according to two people familiar with the events.
That effort was mostly overruled, they said, though the final rules contained new licensing exceptions for some Chinese companies. Other chipmakers that are substantial revenue sources for U.S. industry, which had previously been considered for entity listings, were not targeted.
COMMENT – One of the best ways to make money in DC is to be an “industry analyst” that attacks the effectiveness of U.S. export controls in semiconductors. The semiconductor industry, as well as the makers of equipment that makes semiconductors, are spending Big Bucks to lobby against restrictions and they are spreading a ton of money around to have so-called independent “think tanks” and “analysts” make their arguments for them.
I’d be happy to show a few examples… but I’d probably get in trouble.
One reflection of the effectiveness of this lobbying can be seen from a recent statement by Commerce Secretary Raimondo who claimed in a recent interview that: “[t]rying to hold China back is a fool’s errand.”
Imposing export controls in not a “fool’s errand,” it is a huge mistake to implement export controls with tons of non-transparent exceptions granted by regulators to companies that lobby effectively.
5. Matson completes third LNG dual-fuel boxship retrofit
Ajsa Habibic, Offshore Energy, December 13, 2024
U.S. shipowner Matson has wrapped up the conversion of its third containership to run on liquefied natural gas (LNG) as part of the long-term strategy to reduce greenhouse gas (GHG) emissions.
Namely, the 2019-built containership Kaimana Hila was retrofitted with an LNG dual-fuel gas supply system in accordance with a contract Matson had signed with Chinese shipbuilder COSCO Shipping Shipyard (Nantong) in February 2024.
As per the contract terms, the 3,600 TEU containership was equipped with LNG dual-fuel gas supply and control systems for both the main engine and four auxiliary engines.
The ship’s engine was converted from a MAN B&W S90ME-C10.5 unit to a dual-fuel ME-GI unit capable of running on LNG. MAN PrimeServ, the after-sales division of MAN Energy Solutions (ES), executed the retrofit.
Following the conversion and with the addition of the new bow windshield for improved aerodynamics and fuel conservation, Kaimana Hila returned to service, Matson informed on December 12, 2024.
Kaimana Hila is Matson’s third vessel to operate on LNG, joining its sister ships, Daniel K. Inouye and Manukai.
These conversions are said to be part of the shipowner’s long-term strategy to reduce Scope 1 fleet GHG emissions by 40% by 2030 and achieve net zero emissions by 2050.
Apart from retrofitted ships, Matson also has three LNG-ready Alhoa Class containership newbuilds on order at compatriot Philly Shipyard.
The first unit, Makua, is under construction and scheduled for delivery in 2026.
All three new vessels will be delivered sometime during 2027, representing a $1 billion investment for Matson. The newbuilds will be Jones Act-compliant, with a carrying capacity of 3,600 TEU and speeds exceeding 23 knots, engineered for Matson’s Hawaii and China-Long Beach Express (CLX) services.
As disclosed, the new vessels will be equipped with dual-fuel engines, capable of running on both conventional marine fuels and LNG, as well as other ‘green ship technology’, such as a fuel-efficient hull design, double hull fuel tanks, and freshwater ballast systems.
COMMENT – Umm… this seems like a terrible idea.
If we’re going to impose climate regulations on ourselves (like forcing logistics companies to refit their ships to be powered by natural gas), shouldn’t we demand that the work be done in such a way that it aids the U.S. shipbuilding industry rather than relying on a PRC state-owned enterprise which supports the PLA Navy?!?
6. ‘Command and control’: Labor’s cuts to hawkish think tank raises hackles
Matthew Knott, Sydney Morning Herald, December 18, 2024
A high-profile think tank known for its hawkish views of the Chinese Communist Party is set to have its funding cut as the result of a review that will allow the federal government to exert more influence over national security research.
Former Department of Foreign Affairs and Trade head Peter Varghese briefed think-tank bosses on Wednesday about the findings of his review of national security strategic policy work, which the government plans to release publicly later this week.
Think tanks that rely on the federal government for core funding would have to apply for competitive grants every five years, and the government would have observer status on their governing councils under Varghese’s recommendations.
Sources familiar with Varghese’s confidential briefings said that the Australian Strategic Policy Institute (ASPI) and the Australian American Leadership Dialogue (AALD) were set to be two big losers from the review.
Since the review was announced in February, Australia’s strategic policy community has been abuzz with speculation the audit was driven in part by a desire among senior public servants and Labor figures to rein in ASPI, a Canberra think tank established in 2001 and led by former Liberal Party staffer Justin Bassi.
While saying he could not go into detail because of the confidential nature of the briefings, Bassi said: “I can say that the early impressions that this review was an effort to clamp down on ASPI and the contestability it provides on national security policy have been confirmed. Even more importantly, it sends a clear signal to all Australian national security think tanks that the government will exercise greater command and control over their work.”
Officials from the Chinese embassy in Canberra included government funding for “anti-China” research at ASPI on an infamous list of 14 grievances provided to journalists from Nine News and this masthead in 2020.
ASPI received about $8 million a year in government funding – more than half its annual budget – with most coming through the Defence Department.
COMMENT – I really hope the Australian Labour Government does not follow through on this. It would send a terrible message to the national security community in Australia that the Government will bend to Beijing’s demands.
Back in November 2020, when the Chinese Communist Party targeted Australia with economic coercion, the PRC gave the Australians a list of 14 grievances that had to be “fixed” in order to repair the relationship.
One of them was to cut funding to ASPI.
See article from the Sydney Morning Herald, “'If you make China the enemy, China will be the enemy': Beijing's fresh threat to Australia,” (November 18, 2020)
It is a bad look for the Labour Government to make these cuts just days after the PRC announced the lifting of its last trade ban on Australia. It makes it look like the there is a quid pro quo.
The Chinese Ambassador to Australia made the point clearly when interviewed by The Australian a few days ago, mentioning the Australian Strategic Policy Institute by name as an irritant in the relationship.
My advice to the Albanese administration: don’t cave to Beijing’s demands… increase ASPI’s funding.
Bojan Pancevski, Wall Street Journal, December 19, 2024
Law enforcement from four European countries are investigating the Yi Peng 3’s possible role in cutting undersea cables.
The Chinese government after weeks of secret talks allowed European investigators accompanied by Chinese officials to board the ship suspected of sabotaging two key data cables in the Baltic Sea, European law-enforcement officers and diplomats said.
Beijing’s approval for investigators to access the Chinese-registered bulk carrier, the Yi Peng 3, which has been surrounded by coast guard vessels and North Atlantic Treaty Organization warships since the end of November, comes after weeks of intense secret diplomacy, officials said.
The negotiations over the ship were mainly conducted by the German and Chinese foreign ministries amid an international investigation including Germany, Sweden, Denmark and Finland, according to these officials. Investigators from those four European countries and China on Thursday boarded the 740-foot-long, 105-feet-wide vessel, which is loaded with Russian fertilizer and anchored in the Kattegat Strait for a month.
Denmark has hosted the international group of investigators from four countries since Monday as preparations were made to board the ship, the Danish foreign minister Lars Løkke Rasmussen told reporters on Thursday. He said that once the investigation is completed, the ship would be allowed to continue its journey.
“There has been an interest, naturally, from all the countries that have experienced damage to cables—and of course also Denmark, because the ship has also sailed in Danish waters—in getting to the bottom of this matter,” Rasmussen said.
China dispatched a delegation of 19 officers and investigators, of whom 14 came on board, together with nine Germans, six Swedes, three Finns and one Dane, according to a person who was present during the probe. The group assembled in Denmark on Monday but the boarding was delayed due to last-minute negotiations with the Chinese, which were mediated by the Danish hosts. Bad weather also postponed the boarding, which finally took place on Thursday morning.
The Chinese and the German teams were leading the investigation, while the Swedes and the Finns were acting as observers, and the Dane coordinated the efforts.
European investigation teams included maritime engineers, who inspected the ship and its equipment including the anchor that investigators say cut the undersea cables. The ship, which is nearly 24 years old, is in a dilapidated state, the person who was president during the probe said.
The ship is expected to pull anchor and resume its journey imminently. No crew member could be detained because the probe took place in international waters, which was part of the agreement with China, according to several people familiar with the investigation.
The chief of Germany’s federal police, Dieter Romann, thanked the Chinese government for enabling the investigation.
Such intense multilateral negotiations over a privately owned ship are unprecedented, officials said, as international maritime law rarely allows for the detaining of commercial vessels. The European governments that have effectively detained the ship otherwise strictly uphold freedom of navigation and have in the past criticized China for disrupting shipping lanes around its territorial waters.
The Chinese government ordered the ship to drop anchor and has since cooperated with European authorities, according to officials familiar with the investigation.
NATO ships or law-enforcement vessels can’t force the Yi Peng 3 to sail into one of their ports. Maritime law grants the flag state, China, exclusive jurisdiction over the ship and its crew, which is why European governments have been discreetly negotiating with Beijing over access to the vessel.
Investigators are looking into whether the captain of Yi Peng 3, which departed the Russian Baltic port of Ust-Luga on Nov. 15, was persuaded by Russian intelligence to carry out the sabotage. Two European intelligence officials said that they suspected the captain or other officers on the ship could have been bribed by Russian agents. At least one member of the crew is Russian, according to investigators. The Chinese government most likely wasn’t involved in the incident, according to investigators, intelligence officials and diplomats.
The ship’s crew, captained by a Chinese national, is suspected of deliberately severing internet cables connecting Finland and Germany, and Sweden and Lithuania, by dragging its anchor across the seabed for over 100 miles on Nov. 17-18. The cables, known as BSC and C-Lion1, were cut in Swedish waters.
The Chinese government appeared to want the incident resolved, one investigator and one diplomat familiar with the talks said.
If Russia emerges as a culprit, it would be the latest in a series of attacks on Europe’s critical infrastructure that law-enforcement and intelligence officials said have been orchestrated by Moscow.
Such revelations could cause friction between Russia and China, which has been providing support to Moscow since its full-scale invasion of Ukraine.
Russia denied any wrongdoing and dismissed the accusations as absurd in a statement issued by the Kremlin’s press office to The Wall Street Journal.
The ship’s owner, Ningbo Yipeng Shipping, is cooperating with the investigation and has allowed the vessel to be held in international waters, according to people familiar with the probe. The company declined to comment.
Immediately after the incidents, the ship was pursued and then stopped by the Danish navy. It has since been anchored in international waters between Denmark and Sweden, constantly encircled by a rotating guard of warships and police vessels from the countries leading the investigation.
The Chinese Foreign Ministry denied any involvement in sabotage and said it was willing to cooperate with the investigation.
Beijing said it would dispatch investigators, maritime experts and possibly other officials to the ship, according to people familiar with the investigation.
Swedish Prime Minister Ulf Kristersson told reporters earlier that his government had “sent a formal request to China to cooperate with Swedish authorities in order to create clarity on what has happened” and requested for the ship to return to Swedish waters to be investigated.
“We expect China to comply with the request we have sent,” he said.
Yi Peng 3 operated solely in Chinese waters from December 2019 through early March 2024, when it suddenly changed its pattern of operation, said Benjamin L. Schmitt, senior fellow at the University of Pennsylvania’s Kleinman Center for Energy Policy.
The ship then started carrying Russian coal and other cargo, making calls in Russian ports such as Nakhodka on the Sea of Japan, several trips to the Port of Murmansk in the Barents Sea and a trip to the Baltic Sea. At present, the ship is loaded with Russian fertilizers, according to Kpler, a global data and analytics provider.
The cable connecting Sweden and Lithuania was repaired on Nov. 28, said a spokesman for Arelion, the company that operates it. The second cable, connecting Finland and Germany, was restored on Nov. 29, according to Cinia, its owner.
German authorities offered to host the Chinese team of investigators and transport them to the ship by helicopter or using a German police vessel, according to investigators.
On Thursday, speedboats belonging to a German police ship and a Danish navy vessel, which are anchored next to the Yi Peng 3, approached the Chinese ship, according to Marine Traffic, a maritime traffic tracking website.
COMMENT – Hmmm
It is fascinating to me on what was left out of this article.
First, the article rightly mentions that the two cables that were cut ran between four different European countries. Then the article neatly jumps to the fact that there are investigators from four European countries involved in this investigation. Straight forward, right?
Not so fast…
The four European countries that had their cables cut were: Sweden, Finland, Germany, and Lithuania.
The four European countries that have investigators participating are: Sweden, Finland, Germany, and Denmark.
I can understand why Germany got itself designated as the “lead” investigator and I understand why Denmark is involved, since the ship was stopped in Danish waters (apparently the inspection is taking place in international waters though), but why isn’t Lithuania included as an observer alongside Sweden and Finland?
We will come back to that question…
Second, the article uncritically puts forward the narrative that “[t]he Chinese government most likely wasn’t involved in the incident, according to investigators, intelligence officials and diplomats.” The explanation being offered is that Russian intelligence bribed the crew of an unwitting, “privately owned Chinese ship.” This allows everyone to maintain the fiction that Beijing isn’t Moscow’s ally in its war against Europe.
“The Chinese government appeared to want the incident resolved, one investigator and one diplomat familiar with the talks said.” – I bet they do.
The reporter goes on to speculate that this theory of Russian bribery “could cause friction between Russia and China.” – I wouldn’t bet on that.
Maintaining plausible deniability is the position that Berlin “wants” to believe, and Beijing is happy to perpetuate, hence why Beijing agreed to cooperate with a German led investigation.
Third, we’re told that the Yi Peng 3 is a “privately owned Chinese ship.” Who owns the Yi Peng 3? Well, that’s Ningbo Yipeng Shipping Co Ltd, which only owns two ships, which up until 2022 operated almost entirely within Chinese territorial waters… after 2022 and Russia’s invasion of Ukraine, Ningbo Yipeng’s two ships shifted to running cargo to and from Russian ports.
One might even suppose that Ningbo Yipeng Shipping Co Ltd could be a part of the vast “shadow fleet” that the PRC Government has mobilized through its direct control of supposedly “private companies” to provide critical logistics to Russia for its war on Urkaine and to help Russia avoid Western sanctions (the EU just started sanctioning this shadow fleet this week: “EU adopts new Russia sanctions targeting China, shadow fleet”).
Fourth, we get back to the question of Lithuania.
According to the evidence we have, the internet cable running between Sweden and Lithuania was cut by the Yi Peng 3 at 8am GMT on Sunday, November 17.
I wonder if anything else was going on in the world at that same time that MIGHT have something to do with this particular act of sabotage?
From Bloomberg, “Taiwan Minister Leads Mission to Lithuania to Discuss Drone Tech,” November 16, 2024.
That’s interesting… so just as the Taiwanese Foreign Minister was set to attend an event in Lithuania on strengthening a democratic defense industrial base and speaking alongside the Lithuanian vice defense minister, a Chinese vessel, which had been running supplies on behalf of the PRC Government for the Russians to avoid sanctions for the last two years, just happened to “accidently” cut an internet cable to Lithuania. Oh, by the way, just a reminder, Lithuania was the only European country that was a victim of this sabotage that has been excluded from the investigation that the PRC Government agreed to in “secret negotiations” led by Berlin.
The PRC’s anger and coercion of Lithuania is well documented and goes back years, predating the full scale invasion of Ukraine (see “Why Little Lithuania Is Taking On Mighty China” (November 29, 2021), “China’s trade attack on Lithuania exposes EU’s powerlessness” (December 16, 2021), “An Analysis of China’s Economic Coercion Against Lithuania” (May 12, 2022), “Lithuania defies China over Taiwan ties in new Asia strategy” (July 6, 2023), and “China interference in Lithuania polls 'can't be ruled out', says security chief” (March 7, 2024). And just over a week after the Yi Peng 3 cut the cable, Lithuania expelled three PRC diplomats citing “violations of the Vienna Convention and Lithuanian legislation.”
I’m reminded of a Global Times OpEd from August 2021 titled, “China, Russia can cooperate to punish Lithuania.” Here’s a representative quote:
“China must take strong countermeasures against Lithuania. If Lithuania persists, China must be prepared for a breakdown in ties. In addition, China should join hands with Russia and Belarus, the two countries that border Lithuania, and punish it. China and Russia are necessary to jointly deal a heavy blow to one or two running dogs of the US to warn other countries.”
Ah yes, the rhetoric of “running dogs,” it can’t help but bring back memories of Maoist diplomacy.
Two months later Global Times ran another one with a similar theme, “Punishing Lithuania like swatting a fly” (November 19, 2021). Some representative quotes:
“Lithuania is just a clown that plays bravado and loyalty. China will definitely deal a heavy blow to it, but we don't have to focus too much on wresting with such a small role because that will be a favor to it. Lithuania dares to show off its teeth with the protection of the US and the EU, which reflects the loopholes in China-US ties and China-Europe ties that enable it to behave so badly.”
…
“Beijing can calmly decide how to punish Lithuania based on the need to compete with the US and the need to deal with relations with Europe. It should make Lithuania feel the pain and display our dignity as a major power. It should not jeopardize our own interests or affect our broader strategy.
It is like we are swatting a fly - we just need to be careful not to stain our hands or walls and not break the vase on the table.”
Is there any mention of this in the WSJ article, or by the European “investigators, intelligence officials and diplomats” who appear eager to provide their theories to reporters and absolve Beijing of direct involvement?
Nope.
Move along, nothing to see here…
I’m sure the German investigators (with the “help” of German diplomats who, I would assume have their instructions from the Chancellor) have everything under control and will work diligently to protect the interests of other EU and NATO member states.
Just like when Berlin persuaded the EU to suspend their WTO case against China’s economic coercion of Lithuania earlier this year.
[Perhaps that is too harsh… I don’t have any direct evidence that Berlin strong-armed Brussels to throw Vilnius under the bus to protect its own companies… but I have my suspicions]
So, call me skeptical when I read that this so-called investigation, led by Germany which excluded Lithuanian investigators, reveals that the PRC Government was completely innocent of sabotage against Lithuania.
8. China nearly triples nuclear arsenal since 2020, Pentagon report says
Matt Seyler, ABC News, December 18, 2024
China has nearly tripled its nuclear warhead arsenal since 2020, according to the Pentagon's latest China military power report released Wednesday.
"DOD estimates the PRC has surpassed 600 operational nuclear warheads as of mid-2024," a senior U.S. defense official told reporters this week.
In 2020, the Pentagon estimated China's nuclear stockpile was in the low 200s.
"The PLA continues its rapid nuclear build up," the official said, using an acronym for the People's Liberation Army, adding that China is expected to exceed 1,000 warheads by 2030.
COMMENT – Umm… this is a big problem.
Authoritarianism
9. China is building new detention centers all over the country as Xi Jinping widens corruption purge
Yong Xiong, CNN, December 28, 2024
China has built or expanded more than 200 specialized detention facilities nationwide to interrogate suspects ensnared in Xi Jinping’s widening anti-corruption drive, a CNN investigation has found, as the Chinese leader extends his crackdown beyond the ruling Communist Party to a vast swath of public sectors.
Since taking power in 2012, Xi has launched a sweeping campaign against graft and disloyalty, taking down corrupt officials as well as political rivals at an unprecedented speed and scale as he consolidated control over the party and the military.
Now well into his third term, the supreme leader has turned his relentless campaign into a permanent and institutionalized feature of his open-ended rule.
And increasingly, some of the most fearsome tools he has wielded to keep officials in line are being used against a much broader section of society, from private entrepreneurs to school and hospital administrators – regardless of whether they are members of the 99-million-strong party.
The expanded detention regime, named “liuzhi,” or “retention in custody,” comes with facilities with padded surfaces and round-the-clock guards in every cell, where detainees can be held for up to six months without ever seeing a lawyer or family members.
COMMENT – The beatings will continue until morale improves!
10. More Hongkongers than ever perceived news outlets to be self-censoring, survey finds
Hong Kong Free Press, December 10, 2024
11. Gerald Roche on the Erasure of Tibet's Minority Languages
Sophie Beach, China Digital Times, December 12, 2024
12. China Customs seizes Hong Kong geography textbook said to wrongly depict Chinese borders
Irene Chan, Hong Kong Free Press, December 16, 2024
13. China quietly razes Uyghur business landmark in Xinjiang
Kasim Kashgar, VOA, December 13, 2024
14. Asia’s Walled City: The Erosion of Transparency in Hong Kong
Samuel Bickett, International Republican Institute, December 12, 2024
15. Memorandum on the Establishment of the China Censorship Monitor and Action Group
The White House, December 12, 2024
16. ‘China Beyond Borders’ documentary explores Beijing’s transnational repression
Radio Free Asia, December 11, 2024
17. Xi Jinping calls for wider use of Mandarin in China’s border areas
Taejun Kang, Radio Free Asia, December 12, 2024
18. Inside China's data-driven hunt for taxes on overseas gains
Stella Yifan Xie and Echo Wong, Nikkei Asia, December 16, 2024
19. Gallium Rises to Highest Since 2011 Following China Export Curbs
Jack Ryan, Bloomberg, December 13, 2024
20. The Decisive Decade: Advancing National Security at the Department of Commerce
U.S. Department of Commerce, December 16, 2024
21. Memorandum on the Establishment of the Countering Economic Coercion Task Force
The White House, December 12, 2024
22. Why Do China’s Banks Lend to Failing SOEs? The Effect of Lending Targets on Bad Debt and Economic Efficiency
Stanford SCCEI China Briefs, December 16, 2024
23. China's Quest for Supremacy Moves into Space
Didi Kirsten Tatlow, Newsweek, December 18, 2024
24. EU adopts new Russia sanctions targeting China, shadow fleet
Julia Payne, Reuters, December 17, 2024
25. Congress to vote on new restrictions on US investment in China
David Shepardson, Reuters, December 18, 2024
26. Yellen won't rule out sanctions on Chinese banks, curbs on 'dark fleet' oil tankers
David Lawder and Andrea Shalal, Reuters, December 13, 2024
U.S. Treasury Secretary Janet Yellen told Reuters on Friday that the U.S. is looking at further sanctions on "dark fleet" tankers and will not rule out sanctions on Chinese banks as it seeks to reduce Russia's oil revenue and access to foreign supplies to fuel its war in Ukraine.
Yellen said in an interview that the U.S. and its allies also could consider lowering their $60-per-barrel oil price cap on Russian oil, which prohibits Western insurance and maritime services on cargoes above that level.
The Treasury has already sanctioned individual tankers and their owners for operating above the price cap and can do more in this area, Yellen added, suggesting additional measures in the five weeks before she leaves office.
"There are a number of possibilities here. We don't preview sanctions, but we're always looking at oil revenues and if we can find ways to further impair Russian oil revenues, that would, I think, strengthen Ukraine's hand. That remains on our list," Yellen said.
COMMENT – I think Yellen’s threats would have been much more credible two years ago when Beijing’s material support to Moscow was obvious. Delivering it a month before she and her team leave office rings a bit hollow.
Though if she’s willing to push it through in her final weeks, I welcome that.
27. One US-sanctioned Hong Kong company disappears, another takes its place
Ha Syut, RFA, December 20, 2024
VPower, named as a supporter of Russia’s war effort, disappears as Horsemart comes out of nowhere to win high-end government contracts.
A Hong Kong security company sanctioned by the United States for allegedly supporting Russia has disappeared from a list of government-licensed security firms, only to be replaced by a start-up company that has directors and government contracts in common with its predecessor or its parent company, RFA Cantonese has learned.
VPOWER Finance Security (Hong Kong) Ltd. had been in the business of cash counting, management and the transportation of valuables under armed escort until it was sanctioned on June 12 by the United States for allegedly providing armed gold escort services to Russia.
The company held a Category 2 Armed Escort License that is granted by Hong Kong’s Security Bureau to a select and highly experienced group of security firms including Brink’s Cash Solutions, Loomis International and Guardforce International.
Hong Kong is gaining a reputation as a safe haven for companies wishing to skirt the restrictions imposed by U.S. sanctions on Russia.
The Russian private military company Wagner Group, which made headlines last year by starting to march on Moscow amid an apparent dispute with Russian President Vladimir Putin, has longstanding ties to Hong Kong.
The city was named in a U.S. Treasury Department investment ban aimed at curbing China’s military-linked high-tech ambitions in artificial intelligence, advanced computer chips and quantum computing, amid growing evidence that the ruling Chinese Communist Party is leveraging Hong Kong universities and private companies for research funding, expertise and links to global supply chains.
COMMENT – One of the critical vulnerabilities of our entity-based approach to sanctions… when the PRC Government colludes with its so-called private sector, we probably should make our sanctions cover the entire jurisdiction of the PRC instead pretending that we can precisely target individual businesses.
Environmental Harms
28. Squid game? The hidden costs of China’s seafood empire
Ian Urbina, Global Initiative Against Transnational Organized Crime, December 16, 2024
Since 2018, global seafood consumption has doubled and is expected to double again by 2050. In response to this increased demand, the fishing industry has developed through advances in vessel design, refrigeration and navigation systems, which allow fishing vessels to stay at sea longer and to travel greater distances. Thanks to hefty state subsidies (reaching US$7 billion in 2018), today China has the world’s largest and most far-reaching fishing industry, with a distant-water fleet that dwarfs those of other countries. China also owns or runs fishing terminals in more than 90 ports.
But China’s dominance at sea comes at a high human and environmental cost. According to the Global Organized Crime Index, China is a major hub for human trafficking and forced labour, and these criminal activities have also been detected within its fishing fleet. In 2023, the country scored 7 out of 10 for human trafficking, a 0.50 increase since the 2021 Index, and 9 out of 10 for fauna crimes, which include activities related to illegal, unreported and unregulated (IUU) fishing. IUU fishing increases the vulnerability of workers in fishing fleets and puts the marine ecosystem at risk. In 2022, a European Parliament report found that half the vessels identified as participating in IUU fishing were flying Chinese flags.
According to the UN’s International Labour Organization, in 2021 at least 128 000 fishers were trapped in forced labour aboard fishing vessels worldwide. Abuse of these workers is common, with Chinese squid ships being among the most brutal. An investigation by the Outlaw Ocean Project, a non-profit journalism organization based in Washington, found a pattern of human rights abuses on the Chinese ships that were part of the study. Abuses included debt bondage, the withholding of wages, confiscation of passports, lack of timely access to medical care, violence and excessive working hours of 15 hours per day, six days a week. Crew members were found to suffer from injuries, malnutrition and other illness.
Labour and human rights abuses are also found in China’s processing plants that are supplied by the fishing vessels. Over the past decade, the Chinese government has been forcibly relocating tens of thousands of workers from the Uygur ethnic community, sending them to seafood processing plants in the Shandong province, a fishing hub on the eastern coast. In 2022, the Office of the UN High Commissioner for Human Rights flagged forced labour practices in China, where coercion was used to transfer Uyghur ‘surplus labourers’ to processing plants, while the International Labour Organization expressed ‘deep concern’ over China’s labour policies in Xinjiang.
Through a search of company documents and state media stories, the Outlaw Ocean Project’s investigation revealed that over the past five years, more than 1 000 Uyghurs and other Muslim minorities were sent to work in at least 10 seafood processing plants in China. The investigation also found that workers from North Korea are sent to work in Chinese processing plants, mainly in the Liaoning province. For 30 years, the North Korean government has sent citizens to work in factories in Russia and China, and taken 90% of their earnings to deposit in government-controlled accounts. As of November 2022, more than 80 000 North Koreans were employed in Chinese border cities, including hundreds in seafood plants.
As demand for seafood exceeds supply in many European countries, China has stepped in to fill the gap. In 2022, China was the largest non-European supplier of seafood to the EU. At the same time, the Outlaw Ocean Project’s investigations have linked Chinese fishing vessels that use forced labour to distributors of seafood into countries such as France, the UK, Germany, the Netherlands, Switzerland, Finland, Belgium, Sweden and the Czech Republic. Using satellite tracking, investigators have traced the movement of squid from Chinese fishing ships to refrigeration ships and back to China for processing. Seafood from at least 10 processing plants in China linked to human rights and labour crimes were found to have been distributed to supermarkets, restaurants and food service companies in the EU and the US. Many European countries have also purchased seafood from companies that source products from processing plants using Uyghur forced labour.
The UK, France, Germany and Norway have passed anti-human-rights abuse legislation in an attempt to pressurize companies to address slavery risks in their supply chains. In the US, the Uyghur Forced Labor Protection Act applies restrictions to the import of goods produced in Xinjiang due to the legal presumption that all commodities ‘wholly or in part’ from the province are derived from state-imposed forced labour. American trade agreements with its neighbours Canada and Mexico require these countries to implement their own import bans comparable to the US Withhold Release Order process. These orders enable customs officials to block goods produced with forced labour from entering the US.
In an attempt to address gaps in the regulation of imported goods, the EU has proposed two pieces of legislation. The first one is similar to the due diligence legislation in countries such as France and Germany, and puts pressure on large companies across member states to assess forced labour risks in their supply chains. The second law seeks to prohibit products made using forced labour from entering member countries and applies to goods tied to any kind of forced labour, including Uyghurs and others.
However, past implementation of measures is not cause for optimism. Since 2010, the EU has used a carding system to penalize countries exporting seafood that is tied to illegal fishing or other crimes. A yellow card serves as a warning and, if the country fails to take action in time, it is issued a red card, meaning a ban is imposed of all imports of seafood from the country. According to the European Parliament, despite ‘considerable evidence of its significant and growing involvement in IUU fishing’, China has never been issued a yellow or red card by the EU. Without robust legislation and effective enforcement, Europe remains at high risk of becoming a ‘dumping ground’ for seafood sourced or produced in violation of human rights and fishing regulations.
29. Ex-CCP Officials Funneled Millions to US Universities, Nonprofits to Promote Green Energy, Tax Forms Show
Thomas Catenacci, Washington Free Beacon, December 10, 2024
30. China’s emissions are peaking. Bringing them down will be the hard part.
Christian Shepherd, Washington Post, December 13, 2024
Will Beijing be able to dramatically slash carbon emissions, or will it just let them plateau? The answer has huge implications for the climate.
China’s annual greenhouse gas emissions, by far the largest in the world today, are at an inflection point.
Thanks to huge investments in renewable energy, combined with a sharp decline in construction, China’s carbon dioxide output is likely to hit its peak this year, a growing number of analysts say — five years ahead of Beijing’s 2030 goal.
What China does next could be decisive in the next phase of the global fight against climate change.
“It’s now clear the peak will come before 2030, but when exactly China peaks is not that important,” said Hu Min, director of the Institute for Global Decarbonization Progress, a Chinese think tank. “The question is whether China will plateau or decline sharply.”
Will China, which still burns more coal than the rest of the world combined, attempt what no major economy has done before: slash emissions sharply after hitting the peak?
COMMENT – If you think the PRC will dramatically slash carbon emissions over the next decade, you are living in a fantasyland.
Sky News, December 18, 2024
Global demand for the fossil fuel is forecast to hit a record 8.77 billion tonnes, offsetting likely growth in renewable energy, as demand in China, by far the world's largest coal consumer, is expected to be nearly a third higher than in the rest of the world.
32. China’s Soaring Emissions Are Upending Climate Politics
Brad Plumer and Mira Rojanasakul, New York Times, December 19, 2024
For many years, wealthy places like the United States and Europe have had the biggest historical responsibility for global warming and have been tasked with taking the lead in stopping it.
China’s astonishing rise is upending that dynamic.
Over the past three decades, China has built more than 1,000 coal-fired power plants as its economy has grown more than 40-fold. The country has become by far the largest annual emitter of greenhouse gases in the world.
The United States has still pumped more total planet-warming pollution into the atmosphere since the 19th century, in part because the country has been burning coal, oil and natural gas for longer. But China is quickly catching up.
Last year, China for the first time passed Europe as the second-largest historical emitter, according to an analysis published on Tuesday by Carbon Brief, a climate research site.
When humans burn fossil fuels or cut down forests, the resulting carbon dioxide typically lingers in the atmosphere for hundreds of years, heating the planet all the while. That’s why historical emissions are often used as a gauge of responsibility for global warming.
COMMENT – Articles like this one from the Times continuously harp on the fact that the U.S. is the biggest cumulative emitter of CO2 without mentioning that between 65-80% of CO2 released into the atmosphere dissolves into the ocean over a period of 20-200 years, meaning that a significant chunk of what the U.S. (and Europe) emitted in the early 20th Century (and the 19th Century) is no longer in the atmosphere.
So as both Europe and the United States REDUCE their emissions (which both have been doing for the past two decades), their responsibility for the CURRENT CO2 levels in the atmosphere drops as well.
Foreign Interference and Coercion
33. Trump asks Supreme Court to pause TikTok ban, while Biden admin says app poses ‘grave’ threat
John Fritze, CNN, December 27, 2024
President-elect Donald Trump urged the Supreme Court to pause a controversial ban on TikTok that is set to take effect next month, telling the justices in a legal filing Friday that a delay would allow his administration to “pursue a negotiated resolution.”
Trump’s request for a delay in implementing the ban puts him at odds with the Biden administration, which defended the law in its own brief Friday, warning of “grave” national security concerns about TikTok’s continued operation in the US.
In one of the most significant pending cases before the Supreme Court, the justices must weigh whether the TikTok ban Congress approved in April violates the First Amendment. The court has already scheduled two hours of oral argument in the case for January 10.
The court was flooded with roughly two dozen briefs Friday from groups and officials who have landed on both sides of that question. Trump is technically not a party in the case —he filed a “friend-of-the-court” brief, as did several outside groups, members of Congress and others who wanted to offer their perspective.
COMMENT – Very frustrating and it suggests that there will be plenty of continued missteps over the next four years.
34. The Near Enemy: China’s Subnational Reach into the United States
Emily de La Bruyère and Nathan Picarsic, Foundation for Defense of Democracies, December 17, 2024
35. Labour’s review of UK-China relations on hold until after chancellor visits Beijing
Eleni Courea, Jessica Elgot, and Amy Hawkins, The Guardian, December 17, 2024
36. Will Labour’s China reset last?
Rachel Cunliffe, New Statesman, December 17, 2024
37. China’s ‘magic weapon’ helping Beijing wield influence in the UK
James Kynge and Joe Leahy, Financial Times, December 18, 2024
38. China tells UK to ‘stop creating trouble’ over alleged spy
Jonathan Wheatley and Lucy Fisher, Financial Times, December 17, 2024
39. Taiwan warns internet celebrities on collusion after video uproar
Alan Lu, Radio Free Asia, December 11, 2024
40. European Commission investigates TikTok for suspected election interference in Romania
Finbarr Bermingham, South China Morning Post, December 17, 2024
41. Malaysia's ethnic Chinese walk delicate business tightrope
Amy Chew, Nikkei Asia, December 17, 2024
42. UK minister defends talks with Beijing despite China spy claims
George Parker and William Wallis, Financial Times, December 15, 2024
Human Rights and Religious Persecution
43. UK regulator's Shein IPO decision slowed by challenge from Uyghur group
Helen Reid, Reuters, December 12, 2024
44. Yunnan Muslims protest outside government building as imam detained
Qian Lang, Radio Free Asia, December 16, 2024
45. China's record 'worsening' on Human Rights Day, activists say
Radio Free Asia, December 10, 2024
Industrial Policies and Economic Espionage
46. Last Multinational Standing? Can Volkswagen survive in China and still thrive at home?
Luke Patey, The Wire China, December 15, 2024
Volkswagen’s “Transparent Factory,” in Dresden, Germany, was designed as a “beacon” to demonstrate all that the company has to offer.
Made almost entirely of glass, the small, but sleek factory plays with the double meaning of “transparency,” and invites VW customers to visit and see the production process for themselves.
But on a recent grey November day, the electric hum of the automated assembly line of VW’s fully electric ID.3 model instead masked the factory’s many troubles.
Just a few weeks earlier, 150 workers had gathered outside the factory to protest VW’s reported plan to carry out mass layoffs, impose sweeping 10 percent pay cuts, and shut at least three VW factories in Germany. VW management has pointed to the untenable manufacturing costs and poor productivity in its German factories, and says the company aims to make some $5 billion in cutbacks in its home market as early as next year.
With the showcase Dresden site rumored to be a shutdown target, the local work council called the restructuring announcement “embarrassing and brazen,” and local politicians warned that the factory’s closing would leave a “gaping wound in the heart of the city.”
Indeed, if the shutdowns move ahead, it will represent the first time in the storied-German automaker’s almost 90-year history that it closed factories at home. Management and the union resume negotiations this week as roughly 100,000 workers carry out a new wave of strikes at nine factory sites across Germany. The Volkswagen Group, which includes brands like Porsche and Audi, is Germany’s largest employer with nearly 300,000 workers on its payroll at home.
“Volkswagen clearly must address its high-cost situation,” says Stephen Reitman, a London-based analyst at Bernstein Research, “but human nature will push the unions and politicians to resist too many layoffs and plant closures”
Adding to this predicament is the fact that VW is acting altogether differently in China, which Volkswagen Group chief executive Oliver Blume has called the automaker’s “second home market.”
COMMENT – What the heck are VW’s leaders thinking? And how could German political leaders let themselves be taken in by these fools.
This will spawn a political backlash across Germany (and Europe) and German political leaders will only have themselves to blame. Embracing overly optimistic views of the PRC and the economic benefits that would accrue to Germany was a huge mistake. I don’t think leaders in Berlin have grasped the depth of their problem yet.
47. China Has Limited Firepower to Counter U.S. Tariffs
Jason Douglas, Wall Street Journal, December 29, 2024
While Beijing has already brandished the ways it could hit back at Trump’s levies, such retaliation risks boomeranging.
In the weeks since the election, China has flaunted the ways in which it could hit back at the U.S. in the event of a new trade war with the U.S., including everything from choking off the metals needed for everyday products to punishing American companies that do business in China.
But using such tools too aggressively risks backfiring on Beijing.
The big danger is that taking shots at Western companies and restricting exports of critical minerals and other essentials will only encourage the U.S. and its allies to double down on their efforts to untangle their economies from China’s.
That would spell trouble for Beijing as long as it remains wedded to an economic model that relies so heavily on selling its goods to Western consumers.
While China can inflict pain on the U.S. with the economic tools at its disposal, it is more likely to wield them sparingly, according to analysts. Instead, Beijing could use the measures to force talks to negotiate a truce with Donald Trump should he follow through on his promise to impose 60% tariffs on Chinese imports.
“Just using these tools willy-nilly doesn’t make sense. You have to be driving towards an outcome, which is some sort of negotiation,” said Logan Wright, head of China markets research at Rhodium Group, a New York-based think tank.
48. China’s Housing Rescue Falls Short in City That Signaled the Crisis
Bloomberg, December 17, 2024
49. China May Keep Trying to Spur Consumption Without Big Stimulus
Bloomberg, December 16, 2024
50. Japan's Shiseido pays heavy price for dependence on China
Ryota Nishiyama, Nikkei Asia, December 14, 2024
51. Temu, Shein face roadblocks in Southeast Asia push
Yuji Nitta, Nikkei Asia, December 14, 2024
52. Americans can now visit China for up to 10 days without visas
Mithil Aggarwal, NBC, December 17, 2024
53. China’s Slowdown Has Changed the Trade War
Daniel H. Rosen, Reva Goujon, and Logan Wright, Foreign Affairs, December 17, 2024
54. China’s economy is in for another rough year
The Economist, December 17, 2024
55. China’s Stunning 2024 Export Growth
Brad W. Setser and Michael Weilandt, Council on Foreign Relations, December 17, 2024
56. Slamming the Brakes: The EU Votes to Impose Tariffs on Chinese EVs
Ryan Featherston, CSIS, December 16, 2024
57. In Depth: Even More European Airlines Drop China Routes
Zou Xiaotong and Kelsey Cheng, Caixin, December 17, 2024
58. Australia lowers tax revenue forecast on weak Chinese economy
Nic Fildes, Financial Times, December 16, 2024
59. Weak China retail sales add to pressure on Beijing to lift economy
Thomas Hale, Arjun Neil Alim, and Joe Leahy, Financial Times, December 16, 2024
60. Trump’s Tariffs Helped Northern Vietnam Boom Like Never Before. What Now?
Damien Cave, New York Times, December 17, 2024
61. Critical metals will be a key battleground in US-China trade war
Andy Home, Reuters, December 18, 2024
62. Chinese entrepreneurs, wary of tariffs, tag along with investments in US visa bids
He Huifeng, South China Morning Post, December 15, 2024
63. China’s Economy Loses Momentum
Jason Douglas, Wall Street Journal, December 15, 2024
Cyber & Information Technology
64. China wants to dominate in AI — and some of its models are already beating their U.S. rivals
Arjun Kharpal, CNBC, December 16, 2024
65. China companies count data holdings as assets under new accounting rules
Noriyuki Doi, Nikkei Asia, December 17, 2024
66. Inside Huawei's mission to boost China's tech prowess
Cheng Ting Fang, Lauly Li, and Shunsuke Tabeta, Nikkei Asia, December 18, 2024
67. Taiwan in talks with Amazon’s Kuiper on satellite communications amid China fears
Kathrin Hille, Financial Times, December 17, 2024
68. Chinese tech group Hikvision ditches Xinjiang surveillance projects
Eleanor Olcott, Financial Times, December 13, 2024
69. Major cloud providers could get key role in AI chip access outside the US, sources say
Alexandra Alper and Karen Freifeld, Reuters, December 13, 2024
70. U.S. Prepares New AI Chip Restrictions to Close China’s Backdoor Access
Liza Lin and Asa Fitch, Wall Street Journal, December 13, 2024
Military and Security Threats
71. China unveils new futuristic fighter jets in surprise flyby
Cate Cadell, Washington Post, December 27, 2024
Viral images on Chinese social media show the sophisticated jets flying at low altitude. Analysts say it could mark a breakthrough in Beijing’s military modernization.
Images of advanced aircraft cruising at low altitudes in China on Thursday have surprised analysts, who say they could mark the maiden flights of sixth-generation fighter jets, representing a major breakthrough for the country’s military.
Photos and videos originating on Chinese social media platforms and reposted to X on Thursday show large triangular aircraft making sweeping slow turns at a very low altitude. The images appear to show two different aircraft, one smaller than the other — both featuring a tailless, stealthy design suggesting they rely on advanced computational technology to be piloted.
Videos of the jets were trending on Friday on Weibo, a Chinese social media site similar to X, though their origin is unclear, and The Washington Post was unable to verify authenticity. In one video, the large fighter appears to be flanked by the fifth-generation J-20, China’s current top operational fighter jet.
The testing of two new advanced aircraft in broad daylight is also highly unusual, analysts say, and could indicate Beijing is putting on a purposeful show of force.
It comes amid uncertainty about the future of the United States’ own sixth-generation fighter initiative — known as the Next-Generation Air Dominance (NGAD) Program. Projected costs for each of the future U.S. aircraft are estimated to reach hundreds of millions of dollars, and the Air Force in November decided to defer key decisions about the project’s direction to the incoming Trump administration.
COMMENT – This should serve as a flashing and blaring red siren for members of Congress that continue to sabotage American military modernization through Continuing Resolutions and sequestration.
72. Employee of Hong Kong trade office in London pleads not guilty to spying charges in UK court
Hans Tse, Hong Kong Free Press, December 13, 2024
73. Prince Andrew spy scandal may have further exposed threat posed by China
Dan Sabbagh, The Guardian, December 16, 2024
74. China’s ban on critical minerals to be felt across ‘all branches’ of US military
Seong Hyeon Choi, South China Morning Post, December 17, 2024
75. Why China’s UAV Supply Chain Restrictions Weaken Ukraine’s Negotiating Power
Aosheng Pusztaszeri, CSIS, December 16, 2024
76. Up North: Confronting Arctic Insecurity Implications for the United States and NATO
Mathieu Boulègue, Minna Ålander, Charlotta Collén, Edward Lucas, Catherine Sendak, and Krista Viksnins, CEPA, December 5, 2024
77. Military and Security Developments Involving the People’s Republic of China 2024
U.S. Department of Defense, December 18, 2024
78. Biden Administration Takes First Step to Retaliate Against China Over Hack
David E. Sanger, New York Times, December 16, 2024
79. Polish airport to drop Chinese Nuctech scanners due to security concerns
Reuters, December 18, 2024
80. US government tells officials, politicians to ditch regular calls and texts
Raphael Satter and A.J. Vicens, Reuters, December 18, 2024
81. PLA releases electronic warfare ‘kill list’ for US carrier groups
Stephen Chen, South China Morning Post, December 16, 2024
82. U.S. Weighs Ban on Chinese-Made TP-Link Router in Millions of American Homes
Heather Somerville, Dustin Volz, and Aruna Viswanatha, Wall Street Journal, December 18, 2024
83. VIDEO - Uyghur fighters in Syria vow to come for China next
The Telegraph, Youtube, December 14, 2024
One Belt, One Road Strategy
84. Botched Belt and Road project triggers political crisis in Serbia
Jens Kastner, Nikkei Asia, December 19, 2024
Protesters blame Chinese contractors, corrupt government for fatal roof collapse.
Serbian students have taken to the streets over the past six weeks to protest government corruption and opaque deals with Chinese contractors after the collapse of a railway station canopy killed 15 people.
President Aleksandar Vucic has been under pressure since the fatal accident in the northern city of Novi Sad on Nov. 1, with the populist leader's opponents blaming corruption and nepotism for sloppy renovation work that was part of a Chinese-led upgrade under Beijing's Belt and Road Initiative (BRI).
85. Leveraging U.S. Foreign Assistance in Southeast Asia
Wilson Beaver and Sydney Hudson, Heritage Foundation, December 16, 2024
86. BRI: The (In)visible Hand of Geopolitical Change
Federica Cordova, IARI, December 16, 2024
China’s Belt and Road Initiative (BRI), also known as the New Silk Road, launched by President Xi Jinping in 2013, has emerged as one of the most ambitious geopolitical strategies of the 21st century. The BRI was immediately presented as a new vision for intercontinental cooperation, designed to promote economic growth, trade connectivity, and cultural exchanges, highlighting a set of plans for carrying on an international trade program and investment project led by China.
The Belt and Road also reflects the contribution of Chinese government to reduce poverty, improve people’s wellbeing and develop sustainability, sharing its development experience and financing a network of infrastructure projects, which includes railways, ports, roads, and energy pipelines, in over 140 countries of Asia, Europe, and Africa.
However, the circle of influences that China is creating around the BRI is designed to build not only an economic border, but also a small open door in terms of security along the neighborhood.
A critical examination reveals that the BRI is a vector for China’s geopolitical ambitions, carrying with it significant economic, political, and environmental risks for participating nations. The BRI, in fact, has extended China’s sphere of influence in multiple regions, generating economic and political dependencies, as in the case of the Persian Gulf, where a mainly energy-related interest seems to be emerged, but probably a commercial and economic expansion will be followed by a contextual military penetration.
87. Is the U.S. Answer to China’s Belt and Road Working?
Lili Pike and Christina Lu, Foreign Policy, December 16, 2024
88. China’s Belt and Road Initiative Aims for Long-Term Global Leadership
Eli Amdur, Forbes, December 8, 2024
Opinion Pieces
89. Elon Musk Is a National Security Risk
Russell L. Honoré, New York Times, December 29, 2024
It is now fair to ask the question: Is Elon Musk a national security risk?
According to numerous interviews and remarks, Mr. Musk’s Department of Government Efficiency co-leader, Vivek Ramaswamy, once appeared to believe he was. In May 2023, Mr. Ramaswamy went so far as to publicly state, “I have no reason to think Elon won’t jump like a circus monkey when Xi Jinping calls in the hour of need,” a reference to China’s leader. In a separate X post targeting Mr. Musk, he wrote, “the U.S. needs leaders who aren’t in China’s pocket.”
Mr. Ramaswamy has since walked back his numerous public criticisms of Mr. Musk, but he was right to raise concerns. According to news reports, Mr. Musk and his rocket company, SpaceX, face federal reviews from the Air Force, the Defense Department’s Office of Inspector General and the under secretary of defense for intelligence and security for failing to provide details of Mr. Musk’s meetings with foreign leaders and other potential violations of national-security rules.
These alleged infractions are just the beginning of my worries. Mr. Musk’s business ventures are heavily reliant on China. He borrowed at least $1.4 billion from banks controlled by the Chinese government to help build Tesla’s Shanghai gigafactory, which was responsible for more than half of Tesla’s global deliveries in the third quarter of 2024.
China does not tend to give things away. The country’s laws stipulate that the Communist Party can demand intelligence from any company doing business in China, in exchange for participating in the country’s markets.
This means Mr. Musk’s business dealings in China could require him to hand over sensitive classified information, learned either through his business interests or his proximity to President-elect Donald Trump. No federal agency has accused him of disclosing such material, but as Mr. Ramaswamy put it, China has recognized that U.S. companies are fickle. He added, “If Xi Jinping says ‘jump,’ they’ll say, ‘How high?’”
Mr. Musk’s relationship with China’s leaders could prove a problem for America’s national security given that SpaceX has a near monopoly on the United States’ rocket launches. The United States is in an intense space race with China. In a May interview, Maj. Gen. Gregory J. Gagnon, the deputy chief of space operations for intelligence at the U.S. Space Force, said that there has never been a buildup comparable to what the Chinese are attempting in space — not even during World War II — and that “an adversary arming this fast is profoundly concerning.” The last thing the United States needs is for China to potentially have an easier way of obtaining classified intelligence and national security information.
Mr. Musk already has a history of pleasing the Chinese Communist Party. He heaped praise on Mr. Xi to commemorate the party’s 100th anniversary. In 2022, earning thanks from Chinese officials, he went to bat for the party by arguing that Taiwan should become a special administrative region of China.
In May 2023, Mr. Musk also reportedly told Qin Gang, then the Chinese foreign minister, that Tesla opposed the United States decoupling from China, stating that U.S. and Chinese interests are “intertwined like conjoined twins.”
Although claiming to be a free-speech advocate, Mr. Musk was the first foreigner to contribute an article to China Cyberspace, a magazine that is run by the Communist regime’s internet censorship agency.
Chris Stewart, a Republican former congressman and senior member of the House Intelligence Committee, whom Mr. Trump reportedly considered nominating as director of national intelligence, once pushed for closed-door briefings on Mr. Musk’s China ties. Mr. Trump’s choice for secretary of state, Senator Marco Rubio, who previously accused Tesla of covering up for the Chinese Communist Party, introduced a bill to prevent NASA and other federal agencies from giving contracts to companies linked to China or Russia.
The question now is whether the incoming Trump administration will take this risk seriously.
Mr. Musk is one of Mr. Trump’s top advisers. Mr. Trump may have gone so far as to reject a bipartisan congressional budget measure because it did not have Mr. Musk’s stamp of approval. In November, after his election, Mr. Trump traveled to Texas to watch Mr. Musk’s Starship launch. That is fine, but doing nothing to ensure America’s space apparatus remains secure from potential vulnerabilities would not be.
The Musk-China concerns might just represent the beginning. In a November letter to Attorney General Merrick Garland and the Pentagon’s inspector general, two Democratic senators asked that they investigate Mr. Musk’s “reliability as a government contractor and a clearance holder” because of his reported conversations with Vladimir Putin and other Russian officials. In a separate letter, the senators asked the Air Force secretary, Frank Kendall, to reconsider SpaceX’s “outsized role” in America’s commercial space integration. Mr. Kendall wrote back stating that, while he was legally prohibited from discussing Mr. Musk’s case, he shared their concerns.
If the federal investigations demonstrate deep connections to China and Russia, the federal government should consider revoking Mr. Musk’s security clearance. It should already be thinking about using alternatives to SpaceX’s launch services.
The fact that Mr. Musk spent a quarter of a billion dollars to help re-elect Mr. Trump does not give the incoming White House the license to look the other way at the national security risks he may pose. If Mr. Trump and his appointees mean what they say about getting tough on America’s adversaries, then they will act on this matter without delay. There is too much at stake to ignore what’s right in front of them.
Lt. Gen. Russel L. Honoré led Task Force Katrina following the devastation of New Orleans and, after retiring from the Army, led a post-insurrection review of security at the U.S. Capitol.
COMMENT – General Honoré is on target. Elon Musk is too compromised to have the access he has.
90. Angela Merkel’s Blind Spot-on China
Noah Barkin, The Wire China, December 11, 2024
91. China’s Quiet War Against America
Frank Fannon, The National Interest, December 17, 2024
China is waging a war against the United States through minerals and refineries. It’s past time for Washington to acknowledge this reality so America can adopt the war footing necessary for victory.
92. The Crumbling Foundation of America’s Military
Mark Bowden, Atlantic, December 17, 2024
93. The China-Russia relationship and threats to vital US interests
Patricia M. Kim, John L. Thornton, Aslı Aydıntaşbaş, Angela Stent, and Tara Varma, Brookings Institution, December 16, 2024
94. Trump’s Worldview Isn’t as Unpredictable as You Think
Hal Brands, Bloomberg, December 15, 2024
95. How China can achieve its next wave of economic growth
Nancy Qian, South China Morning Post, December 17, 2024