Xi and Biden will meet in San Francisco... what next?
Friends,
With just four days before his flight would have to depart from Beijing, the PRC Government confirmed on Friday that Xi Jinping will meet with Biden for a bilateral meeting on Wednesday and attend the APEC leaders’ summit in San Francisco.
When I wrote the original draft of this week’s newsletter on Friday afternoon Taipei time this announcement had not yet been made. I thought at the time that Beijing ultimately would agree to attend but that a small chance remained that Xi would snub Biden at the last minute and then accuse the U.S. of not showing the proper amount of contrition for harming the Sino-American relationship. Xi could take this action with confidence that this would simply cause the Biden Administration to try even harder to re-establish dialogue.
I believe this dynamic remains at play and that while we may see some announcements next week, fundamentally nothing has changed in the U.S.-PRC rivalry.
So what should we make of this whole diplomatic drama?
A few things seem clear [I am not saying that these things are actually true, just that the CCP believes them to be true and this influences their actions]:
Beijing believes that it has the initiative in its rivalry with Washington;
Beijing believes the U.S. side is more anxious about the relationship than they are and that this anxiety grants them considerable leverage;
Beijing believes that Washington is willing to concede to their demands to make this meeting and future meetings happen; and
Beijing believes that even if Xi snubs Biden (which now looks unlikely), the U.S. side won’t abandon its efforts to find areas of cooperation with the PRC and will narrowly scope its most harmful policies toward the PRC.
As a result, Beijing feels confident in playing this game of diplomatic chicken.
All of this is happening when the Chinese Communist Party is in an objectively weak position. Foreign investment into the PRC is at an all-time low. Chinese citizens, rich and poor, are fleeing the PRC, and those who are staying are not confident about the future (consumer spending remains seriously depressed and China continues to make much more than it can consume, dumping on foreign markets). The death of Li Keqiang revealed deep dissatisfaction among Chinese citizens of the current leadership. Global public opinion of the PRC, and Xi Jinping in particular, is in the dumpster and there appears no way out of the massive debt fiasco the PRC got itself into both domestically and internationally (see the Belt and Road and the revelations this week that the debts that Pakistan owes the PRC are not the $46 billion many believed, but $67 billion). And the PRC has aligned itself with the Russian Federation, the Islamic Republic of Iran, the Islamic Republic of Pakistan, and the Democratic People’s Republic of Korea (North Korea), not exactly the all-star team of alliance partners.
So given these conditions, how does Beijing convince itself it has both the leverage and the initiative in this new cold war?
To be blunt, the Party has played an incredibly weak hand very well in its dealings with the United States and Europe. By canceling his trip to the G-20 at the last minute in September, Xi scared the Biden Administration and the Europeans into believing Xi might skip APEC as well. This has resulted in a flurry of diplomatic overtures to Beijing (to be fair, these diplomatic overtures predated Xi’s decision to skip the G20 Summit).
The other reason is that the United States and Europe refuse to recognize what Beijing knows to be true: we are in a new cold war and the globalized economic system that the United States and Europe are most comfortable with is rapidly changing into something else. In many ways, Washington and the European capitals are “fighting against the tide,” while Beijing understands these two trends, sees these trends as advantageous, and is trying to position itself for what is to come (this goes far to explain how Beijing can outmaneuver Washington… Beijing understands the “game” being played and significant parts of the U.S. and Europe are willfully blind to it).
It should also be remembered that Beijing is simultaneously trying to make it as difficult as possible for the U.S. and Europe to grasp these trends and make their own strategic adjustments (buying time for the PRC to make theirs and arrange the new game board to their benefit). The Party’s United Front work in the U.S. and Europe is directed at preventing political, business, and cultural leaders from coming to a consensus on confronting the PRC. Their efforts seek to intensify partisan and alliance differences as a way to pour sand in the gears of our policy-making.
These efforts to prevent policy consensus gain purchase because many of those in power in the United States and Europe are comfortable with the globalized economic system that has arisen over the last three decades. It is the system they advocated for and it is the system that provides them with out-sized rewards. They are loath to consider alternatives and only put forward half-measures as solutions to the system’s most glaring problems. Their preferred approach is to hope that everything can go back to the heady days of the late 1990s and the early 2000s.
Rather than exploit Beijing’s vulnerabilities, the Biden Administration seems intent on reassuring the Chinese Communist Party, which Xi and his team are happy to pocket and take advantage of. IMO, none of this goodwill from the U.S. side will be appreciated or reciprocated, it will simply reinforce in the minds of the Party’s leaders that taking a recalcitrant approach yields benefits, holding diplomacy hostage results in the paying of ransoms, and confronting the United States will result in capitulation. This last bit may not be true (the U.S. may not capitulate when directly confronted), but it points to the danger associated with miscalculation and allowing Beijing to become overly confident in their preferred approach.
How might this confrontation with the United States play out?
I predict that in the coming months Beijing will take harsh action against the Philippines over its territorial disputes in the South China Sea, but in reality, this will be a test of the United States when Washington is not well positioned to respond. We have seen tensions increasing over the past few months in the Spratly Islands, but with everything else happening in the world it has received relatively little attention.
I’m particularly concerned over the exposed position of the Philippine Navy ship/outpost, the BRP Sierra Madre. The Sierra Madre, formerly known as the USS Harnett Country, is a World War II-built Landing Ship, Tank (LST), that was first transferred from the U.S. Navy to the South Vietnam Navy in 1970, then to the Philippine Navy in 1976. In 1997, it was deliberately run-aground by the Philippine Government on Second Thomas Shoal in the Spratly Islands, so that the Philippines could maintain a permanent presence there with Philippine Marines and prevent the PRC from seizing the surrounding features.
Undated photo of the BRP Sierra Madre aground on Second Thomas Shoal in the Spratly Islands. From United States Naval Institute.
By grounding a Philippine Navy vessel on the shoal, one that remains a commissioned ship in the Philippine Armed Forces manned by members of the Philippine Marine Corps, and hence sovereign territory of the Republic of the Philippines, Manila is able to exercise de facto sovereignty over this feature that Beijing asserts is Chinese territory.
Given that few Americans (nor anyone else in the world) could point to Second Thomas Shoal on a map, nor would they find the particulars of the BRP Sierra Madre as anything other than a bit ridiculous, Beijing might see a proactive operation to “remove” the Sierra Madre as a convenient test of their leverage. An operation executed rapidly could present Manila and Washington with a fait accompli and few good options on how to respond.
If this were to happen, it would be because Beijing calculated that Washington will ultimately back-down and seek an off-ramp.
So why might the Party’s leadership convince themselves of this?
Beijing likely believes that the Biden Administration is deeply divided on its approach to the PRC and that by applying pressure and driving wedges, it can get the Biden Administration to adopt a more conciliatory approach to Sino-American relations and provide the PRC with the time and space to improve its strategic position vis-à-vis the United States. They see a handful of foreign policy and national security realists being outmaneuvered by die-hard engagers who refuse to exploit Beijing’s manifest weaknesses (side-eye at Secretary Yellen… see her unhelpful WaPo OpEd from last Monday, #1 below, which was clearly written as a desperate appeal to Xi and his advisors to come to San Francisco).
The fact that the Treasury Secretary has once again become the point person for the U.S.-PRC relationship must please Beijing quite a bit and likely leads them to conclude that they have an opportunity to press their advantage.
This might be a bad miscalculation on Beijing’s part. Swift and deadly action over a territorial dispute with a U.S. ally might backfire on Beijing, resulting in the kind of realist consensus that Beijing is trying to prevent. But for the Party’s leaders to consider that scenario, they would have to be open to questioning their own assumptions, something that Xi’s tenure has rarely demonstrated.
Thanks for reading!
Matt
MUST READ
1. There’s a way for the U.S. to compete with China — and to work with China
Treasury Secretary Janet Yellen, Washington Post, November 6, 2023
President Biden and I have been clear-eyed about navigating the complexities of the U.S.-China relationship with a pragmatic economic strategy: one that protects our vital national security interests while seeking a stable and healthy economic relationship.
In July, I traveled to Beijing to pursue this approach with China’s new economic team. We’ve made significant strides in deepening senior-level contact since then. This week, I’ll host my Chinese counterpart, Vice Premier He Lifeng, in San Francisco, as we engage in more intensive diplomacy designed to further stabilize the relationship and make progress on key issues.
Here are the principles behind our approach.
As a foundation, our two nations have an obligation to establish resilient lines of open communication and to prevent our disagreements from spiraling into conflict. But we also know that our relationship cannot be circumscribed to crisis management. Together, the United States and China represent 40 percent of the global economy. A constructive economic relationship can not only serve as a stabilizing force for the overall relationship but also benefit workers and families in both countries and beyond.
America’s economic strategy is centered on lifting our economic potential at home — not on suppressing other economies. That’s why President Biden has enacted historic legislation that invests in infrastructure and the key industries of the future. We recognize that economics is not a zero-sum game, and we seek healthy economic competition with China that can benefit both countries over time.
But healthy competition requires a rules-based, level playing field. This week, I will speak to my counterpart about our serious concerns with Beijing’s unfair economic practices, including its large-scale use of non-market tools, its barriers to market access and its coercive actions against U.S. firms in China.
In certain sectors, these unfair practices have resulted in the overconcentration of the production of critical goods inside China. The United States, along with our allies and partners, has been taking well-calibrated steps to mitigate this concentration by diversifying our critical supply chains. Our goal is not to trigger a disorderly, wholesale private-sector pullback from China. As I said in Beijing in July, there is an important distinction between diversifying our supply chains and decoupling our economies. Diverse supply chains are necessary in a volatile world; decoupling our economies would be economically disastrous and run counter to our national interests.
In all U.S. foreign relations, our administration’s first strategic priority is to protect our national security and that of our allies. This is an area where we do not compromise. We continue to take targeted actions to secure our vital security interests, including through our announcement of an outbound investment regime this summer. As we take these actions, our policy is to clearly articulate their intent and design to other countries, including China, to reduce the risk of misunderstanding and miscalculation. During my trip to Beijing, I explained to my counterpart that our outbound investment program is tailored toward the specific national security objective of preventing the advancement of highly sensitive technologies that are critical to the next generation of military innovation and could be used to conduct activities that threaten the national security of the United States. This program — like all of our national security actions in the economic sphere — is predicated on straightforward national security considerations and not designed for us to gain a competitive economic advantage over any other country.
We’ve recently deepened our discussions with China through the establishment of economic and financial working groups under Vice Premier He’s direction and mine. The purpose of these groups is to provide ongoing channels for our teams to drill into the substance of economic and financial policy issues. We are not reconstituting the wide-ranging U.S.-China Strategic and Economic Dialogue by another name but, rather, focusing on specific high-priority economic topics on which we can make tangible progress.
These working groups met for the first time last month, and they will convene again this week. The groups enable us to exchange information on macroeconomic and financial developments about the world’s two largest economies, which is particularly crucial today, given uncertainties in the global outlook and the economic headwinds facing China in its recovery. They also enable us to address some of the underlying sources of bilateral tension in the economic relationship. And they provide an opportunity to advance cooperation on common challenges — from reducing illicit financial flows that support terrorism and the illegal drug trade to tackling the existential threat of climate change.
COMMENT – Back in April when Secretary Yellen unveiled her version of the U.S. China Strategy during her John Hopkins speech I was deeply skeptical (you can read the old post here… re-reading it seven months later, I stand by my analysis then).
It is clear that Secretary Yellen is now driving U.S. China policy from the Treasury. Helping the Chinese economy recover is now the (unstated) priority. The realist foreign policy approach (something that various media outlets pejoratively label as a “China hawk” approach) that Biden adopted in the first 12-18 months in office has been replaced by an effort to return to the old fantasy of building a mutually “constructive economic relationship” and to shove national security concerns to a small portion of the yard that can be walled off with a fence that isn’t too onerous.
Despite stressing that the first pillar of her economic strategy towards the PRC was to not compromise on protecting U.S. national security interests, her entire approach is about making compromises on national security and trying to help the PRC economy recover. She refuses to recognize that a stronger, more capable, and technologically advanced PRC IS a national security threat to the United States. Clear evidence is Beijing’s unwavering economic and technological support for Russia’s war on Ukraine, Iran and its proxies across the Middle East, and the ongoing threats, aggression, and coercion of U.S. and its allies across Asia.
To be blunt, this entire economic approach to the PRC is unserious, as it depends entirely on convincing Beijing to “play by the rules”… a fantasy held by all of her predecessors going back to the 1990s. [See Einstein’s definition of insanity – doing the same thing over and over and expecting different results.]
Realists within the Biden Administration know how contradictory this strategy offered by the Treasury Secretary is compared to the strategy the White House published in February 2022, but they are too disciplined to speak out and they are also uncertain that the President agrees with them.
For Yellen’s China Strategy to make any sense, there needs to be serious consideration of what the U.S. will do if Beijing does NOT “play by the rules” and the economic relationship is NOT constructive:
“A constructive economic relationship can not only serve as a stabilizing force for the overall relationship but also benefit workers and families in both countries and beyond.
America’s economic strategy is centered on lifting our economic potential at home — not on suppressing other economies. That’s why President Biden has enacted historic legislation that invests in infrastructure and the key industries of the future. We recognize that economics is not a zero-sum game, and we seek healthy economic competition with China that can benefit both countries over time.”
On one level she is right, “constructive economic relationship[s]” certainly CAN do those things and economics doesn’t have to be a “zero-sum game”… but observing these platitudes does not change the situation we find ourselves in:
Beijing has no intention of “playing by the rules,” which it views as rigged against them;
Beijing uses its economic and technological advantages to threaten the U.S. and its allies;
Beijing is happy to let Washington pursue a constructive economic relationship, while it views itself as in a zero-sum game with the United States.
Yellen likely believes that the United States must reassure Beijing of our good intentions (a thesis popularized by James Steinberg and Michael O’Hanlon in their 2014 book, “Strategic Reassurance and Resolve: U.S. -China Relations and the Twenty-First Century”… I don’t recommend reading the book, it didn’t age well). If Beijing “feels” contained or threatened by the United States, then it is Washington’s job to convince the PRC, through word and deed, that the United States isn’t doing those things.
Unsurprisingly, Beijing really likes this arrangement.
By taking containment off the table, we surrender leverage. By continuously claiming that the U.S. doesn’t desire decoupling (code for what House and Senate Republicans advocate), even as Beijing pursues its own, we box ourselves into an untenable position. By refusing to consider imposing actual economic harms on the PRC, Beijing can rest assured that it won’t be compelled to change its behavior or compromise on its objectives. An example of the last is that despite nearly two years of enormous economic, technological, and military support to Putin’s invasion of Ukraine, we refuse to recognize the scope of that support and pretend that we are deterring the PRC from supporting Russia.
2. Putin lauds Russia's 'high-tech' military cooperation with China
Guy Faulconbridge, Reuters, November 8, 2023
Zhang told Putin through a translator that China respected Russia for its ability to withstand what the West casts as its most stringent sanctions every imposed on a major economy.
"The Russian Federation, under your leadership, stubbornly stands in the face of Western sanctions, which shows that no difficulty bends you and Russia," Zhang said. "For this, the Chinese side expresses respect to you."
Zhang said that his delegation had come in order to implement important agreements and further strengthen bilateral military cooperation.
COMMENT - General Zhang Youxia, Vice Chairman of the PRC’s Central Military Commission, is the closest equivalent to the U.S. Secretary of Defense. This visit further demonstrates that the Sino-Russian strategic relationship is closer than ever and that unconvincing sanctions threats by the U.S. and Europe has done little to degrade PRC support for Russia, which has allowed them to turn the Ukraine War into a war of attrition.
3. Why the US Can’t Stop Iran’s Lucrative Oil Trade with China
Serene Cheong, Bloomberg, November 9, 2023
Washington’s hawks are demanding that President Joe Biden’s administration tighten US sanctions on Iran as punishment for its support of Hamas, the militant group behind the attacks that triggered the current conflict with Israel. Tehran, they argue, has been exporting more oil over recent months than it has in years.
But fresh measures and tougher enforcement will struggle to curtail the Islamic Republic’s key source of income — thanks to China’s appetite for discounted crude, and what traders, analysts and oil industry executives describe as expanded payment and transport networks that the US cannot reach.
COMMENT – I guess this is what Beijing considers a “constructive economic relationship.”
If we were to pull up a chart of who supports North Korea, it would look much the same, perhaps with Russia replacing Syria and Venezuela.
4. The People’s Liberation Army is not yet as formidable as the West fears
The Economist, November 6, 2023
Overestimating China’s armed forces would be dangerous, argues Jeremy Page.
In 1957 America was gripped by fears of a “missile gap” with the Soviet Union. The Kremlin had stunned the world with a test flight of an intercontinental ballistic missile (ICBM) and the launch of Sputnik. An American intelligence report predicted that by 1962, the Soviets could have 500 ICBMs, outstripping America’s arsenal. When word of that leaked, a political furore erupted. Eyeing the presidency from his Senate seat, John F. Kennedy demanded action to prevent a Soviet “shortcut to world domination”.
It was bunkum. By his 1961 inauguration, spooks had new satellite images. The Soviets actually had about six ICBMs late that year, to America’s 60. But Kennedy stayed the course; his rhetoric and continued atomic buildup stoked tensions with the Kremlin that erupted in the Cuban missile crisis. As for the prior years, Lyndon Johnson would observe in 1967: “We were doing things we didn’t need to do. We were building things we didn’t need to build.”
COMMENT – Analogizing the “missile gap” controversy to the military build-up of the last two decades by the PRC strikes me as some pretty wishful thinking from The Economist.
It is also historically ignorant to conclude that the missile gap debate, which culminated in the 1960 U.S. presidential election, somehow “caused” the Cuban Missile Crisis, as if all agency resided in Washington and that Khrushchev was what my son would call a NPC (non-playable character).
5. It’s Time to Talk About No First Use
Tong Zhao, Foreign Policy, November 6, 2023
Long a nonstarter in Washington, it may now be the best source of common ground with Beijing.
On Monday, the Biden administration is holding talks with China on nuclear arms control, a rare departure from their otherwise tense relationship, ahead of the anticipated November summit between U.S. President Joe Biden and Chinese President Xi Jinping. The talks—the first of their kind since the Obama administration—will broadly cover arms control and nonproliferation, but could also include crisis communications as well as nuclear doctrine, policy, and spending, as reported by the Wall Street Journal.
The talks come at a time of heightened nuclear tensions—not only amid Russia’s saber-rattling in Ukraine, but also as China rapidly expands its nuclear capabilities, and the United States feels immense pressure to enhance its own arsenal. If trends continue, this buildup could potentially overturn the decades long trend of U.S. nuclear reduction and further exacerbate the unprecedented regional arms racing in the Asia-Pacific.
Beijing maintains that the policy of no first use of nuclear weapons (NFU), which China has long endorsed, should be the foremost topic for any discussion on nuclear weapons. In August, China’s Ministry of Foreign Affairs doubled down on this insistence. However, such a prerequisite would mark a significant divergence from U.S. declaratory policy and has thus been a nonstarter for Washington.
But the United States’ assumption that discussing nuclear issues with China requires it to be open to adopting a categorical NFU policy is mistaken. There is indeed an opening to start dialogue with China on substantive and mutually beneficial issues, all without requiring Washington to commit to significantly altering its existing nuclear policy.
For decades, China has maintained a unilateral policy of NFU, in which Beijing pledges not to use nuclear weapons first under any conditions. But in the United States, NFU has been caught up in its own tangled history of domestic debates. Since the Cold War, U.S. decision-makers have frequently believed that maintaining a policy of “calculated ambiguity” provides a more robust deterrent than an unequivocal rejection of first use. Concerns have also arisen about whether conventional weapons alone can effectively deter adversaries from launching chemical, biological, and other nonnuclear strategic attacks.
In recent years, both Presidents Barack Obama and Joe Biden have exhibited interest in NFU, but they faced opposition from certain U.S. allies. Japan, for instance, worries that an unconditional U.S. NFU commitment might embolden China’s conventional military aggression or undermine Washington’s commitment to employ nuclear weapons in defense of its allies against existential threats.
Here, as with elsewhere in the U.S.-China relationship, fear and suspicion are pervasive. Whatever each country feels about the credibility and consequences of their own assurances, it’s clear that they both harbor mistrust about other side’s sincerity. Many in Washington contend that China’s NFU policy can be deceptive. U.S. nuclear strategists have drawn parallels to the Soviet policies of the 1980s, when military planners secretly included first-use options in their contingency plans despite political leadership publicly endorsing NFU. For such reasons, in 2020, then-commander of the U.S. Strategic Command Adm. Charles Richard claimed that he “could drive a truck through” China’s NFU policy. U.S. skepticism has only grown as Beijing expands and diversifies its nuclear arsenal. This, along with the introduction of precision regional-range nuclear weapons and an emphasis on rapid launch capabilities, has heightened Washington’s concerns that Beijing may be contemplating the first use of nuclear weapons against regional military targets—directly contradicting its NFU pledge.
China shares strikingly similar concerns. When Biden advocated for reducing the role of nuclear weapons in U.S. foreign policy during his presidential campaign, Chinese experts raised questions about the substantive value and reliability of a potential U.S. NFU declaration.
Growing Chinese suspicion of U.S. strategic intentions in recent years has often led to the misinterpretation of specific U.S. policies. Though the U.S. posture primarily focuses on deterring the first use of nuclear weapons by adversaries, Beijing suspects that Washington may be increasingly inclined to issue nuclear threats in the event of future conflicts due to diminishing U.S. conventional military superiority in the region. The renewed U.S. emphasis on low-yield tactical nuclear weapons has further fueled China’s apprehension that Washington intends to make its nuclear weapons more usable.
Whether or not these assessments are true, the mere fear that the other side might use nuclear weapons first may trigger worst-case reactions during crises. This fear also generates significant pressure to engage in nuclear arms racing during peacetime, further undermining the already tense bilateral relationship.
Monday’s initial meeting—though likely to be a general discussion without much substantive exploration of forward-looking measures—is a much-needed first step for both parties to better understand each other and their respective nuclear postures. To this end, although NFU has proved thorny in the past, discussing it in the current context is one of best ways available to reduce the risks of mutual misperception and catastrophic escalation.
First and foremost, Washington and Beijing need a shared understanding of what defines a credible NFU commitment. Government-affiliated experts from both countries should take part in comprehensive discussions to develop a common set of criteria for assessing whether a nation’s nuclear force structure, technological capabilities, operational postures, and military doctrines align with an NFU commitment. This is a vital prerequisite for any potential formal negotiations on the topic and should be seriously addressed in a U.S-China nuclear dialogue. With China’s growing nuclear forces, ensuring consistency between declaratory and operational policies is no longer primarily a U.S. responsibility.
The security concerns of U.S. allies in East Asia will continue to pose a significant hurdle for Washington in embracing NFU, so long as they feel threatened by China’s conventional military actions. If China hopes to sway the United States in this area, it stands to benefit from a better understanding of how its own behavior affects the conventional security concerns of U.S. allies.
Thus, another valuable topic for a U.S.-China nuclear dialogue to address is the interplay between conventional and nuclear issues within the NFU context. Given the pace of its conventional buildup, Beijing has yet to fully appreciate the threat perceptions that have developed among its neighbors. U.S. representatives could offer in-depth briefings to their Chinese counterparts on Washington’s endeavors to comprehend and mitigate allies’ concerns about the potential adverse impacts of NFU on their conventional military security.
COMMENT – Much has been made about the “arms control” talks that took place between the US and the PRC last week, but we need to temper our expectations. The U.S. side (State and DoD) only spoke with the Ministry of Foreign Affairs NOT the People’s Liberation Army.
The MFA does not speak for the PLA.
And as we saw from the article above, the PLA’s most senior leader was simultaneously meeting with Putin in Moscow in which the Russian leader publicly stressed Sino-Russian military cooperation in developing “modern and promising weapons which will certainly ensure the strategic security of both Russia and the People's Republic of China."
The United States is entering a dangerous new era in which we will soon face two, aligned peer nuclear powers. This will require an all-new concept for arms control negotiations in which we are dealing simultaneously with two hostile rivals who are coordinating with each other to place the United States at a disadvantage. Out track-record on arms control negotiations were never great when we were dealing with just one power, two will be exponentially more difficult.
I’m not sure there is much evidence to support Tong Zhao’s assertion that “discussing [NFU] is one of best ways available to reduce the risks of mutual misperception and catastrophic escalation.” Deterrence through actual military capabilities has been a much more reliable way to reduce the risks of catastrophic war… arms control negotiations and other diplomatic efforts have only been successful when the prerequisites of actual military advantage were in place.
Also I disagree with his claim that “[g]iven the pace of its conventional buildup, Beijing has yet to fully appreciate the threat perceptions that have developed among its neighbors.” Beijing is well aware of the threat perceptions of its neighbors… its entire military build-up was premised on achieving that kind of intimidation. Beijing seeks to achieve what Melvyn Leffler called a “preponderance of power” (a phrase he borrowed from a statement by Paul Nitze in 1952).
6. China’s cognitive dissonance in the Israel-Hamas war
Dale Aluf, The China Project, November 3, 2023
The underlying premises driving China's approach in the Middle East seem increasingly out of sync with the shifting realities. Perhaps most ironically, Hamas (and its supporters in Iran, etc.) embrace a strand of radical Islam that China fears most.
The Israel-Hamas war has revealed a deep-seated cognitive dissonance emanating from Beijing’s assumptions about and approach toward the Middle East.
China has sought to portray itself as a neutral party in the conflict, an apparent attempt to position itself as a peacemaker. However, Beijing has refused to condemn Hamas’s October 7 attack on Israel or the role played by Iran in executing these attacks. Instead, Chinese officials, state-controlled media outlets, and social media platforms blame Israel and the U.S. for the war.
It appears routine statecraft: China has sympathized with the Palestinian cause since as far back as the Cold War and has long engaged in the practice of denouncing Israel to curry favor with its Arab and Muslim partners — as evidenced by its voting in the UN. Likewise, capitalizing on the opportunity to portray the U.S. as a destabilizing actor and socializing the world to believe there is a viable alternative to America’s liberal international order is a familiar tactic.
However, the underlying premises driving China’s approach seem increasingly out of sync with the shifting realities of the Middle East.
The UAE and Bahrain, for instance, have since released statements condemning Hamas, which runs counter to Beijing’s rationale. While Chinese officials continue to repeat their long-held assertion that the Israel-Palestinian issue is “the core issue of the Middle East,” their Sunni friends no longer seem to share this sentiment. Instead, many Arab states now share with Israel the conviction that China’s comprehensive strategic partner, Iran, is the region’s most destabilizing force.
China’s relationship with Iran and Saudi Arabia
This common threat perception emanates from Iran’s promotion of an intolerant radical Islam, nuclear and ballistic missile programs, and aggressive deployment of proxy groups designed to stoke regional chaos, overthrow these Sunni regimes, and destroy Israel. Senior Hamas members, along with Iranian officials, have already confirmed that Iran’s Islamic Revolutionary Guard Corps and its proxies aided Hamas in this assault. (Hamas’s other primary source of funding is Qatar.) Hezbollah, another Islamist-militant group linked to Iran, called the attack “a message to those seeking normalization with Israel.”
The ideological threat posed to these moderate-Sunni states by Iran and its proxies cannot be understated. For at least a decade, governments from Morocco to the UAE have sought to promote a tolerant version of Islam as an alternative to the radical Islamism promulgated by the likes of Tehran’s Ayatollah. These desires to create a more stable and pluralistic Middle East have been articulated in the 2016 Marrakesh Declaration, and 2019 Charter of Makkah.
Like Iran, China is likely betting that as the conflict intensifies, rising public support for the Palestinians among Sunnis across the region will compel their leaders to ultimately denounce Israel. What’s more, should the current conflict derail the U.S.-led Abraham Accords, which has seen the UAE, Bahrain, Morocco, and Sudan normalize relations with Israel, it will poke a hole in America’s containment belt and create space for China to implement its alternative vision for regional security — as articulated in its February 2023 “Global Security Initiative” concept paper.
Granted, Tehran’s plan may well backfire. After all, the Iranian-supported attack by Hamas strikes at the very core of many Sunni states’ security concerns, a reality that is likely to enhance Israel’s appeal as a security partner in the medium to long term. Just this week, Ali Rashid Al Nuaimi, chairman of the Defense, Interior, and Foreign Affairs Committee of the United Arab Emirates Federal National Council, affirmed this notion. According to the chairman: “The Accords are our future. It is not an agreement between two governments, but a platform that we believe should transform the region where everyone will enjoy security, stability and prosperity.”
China might see an advantage in having some influence over a destabilizing actor like Iran. Should the need arise, Beijing can leverage its relationship with Tehran as a bargaining chip in broader geopolitical negotiations with other powers. China currently lacks both the credibility among regional actors and regional hard power to meaningfully involve itself in the mediation process. However, Beijing’s relationship with the Islamic Republic will likely ensure China gets a seat at the negotiating table. Beijing will not offer to exercise this influence over Tehran free of charge.
Saudi Arabia is certainly not pleased. The Kingdom was hoping for calm in the wake of its Chinese-brokered detente with Iran. Saudi Crown Prince Mohammed bin Salman (MBS) wanted to focus on the country’s digital and economic transformation, promote a more moderate version of Islam, and inch toward normalization with Israel.
Saudis believe joining the accords would marginalize Hamas and compel the Palestinians to abandon terrorism and adopt a peace settlement. MBS is watching apprehensively, with Yemen and the Houthis (another Iranian proxy) squarely in mind. He will have indeed noted the arrival of two U.S. aircraft carrier strike groups as a symbol of what it means to be part of the U.S. security umbrella. This may not necessarily play in China’s favor in the long term.
A squandered opportunity?
Needless to say, despite Beijing’s widespread interests in the region — spanning energy, economic, technology, and security sectors — China’s Fujian carrier likely won’t be coming to a theater in the Middle East any time soon. Rising tensions between China and the West have only heightened China’s engagement in the region, as illustrated by its endeavors to expand BRICS and the Shanghai Cooperation Organization. China’s nascent regional military presence renders it rather exposed, relying on its strategic rival’s regional hard power projection capabilities to protect its interests.
Nevertheless, Beijing surrendered a rare opportunity to find common ground with its rivals, the U.S. (and West more broadly), India, and Japan, when it failed to denounce Hamas. Beijing understands its position will resonate with many in the Global South — like South Africa, Malaysia, or others — especially when colored with anti-colonial rhetoric.
Reports have already surfaced alleging that anti-Israel and anti-U.S./Western propaganda have intensified and become increasingly coordinated across the Iran-China-Russia axis. This trend is likely to continue. To lend perspective, one commentator described a segment that recently ran on CCTV as creating “the airy illusion that Israel just started bombing Gaza to smithereens out of nowhere for no particular reason (and targeting emergency vehicles) because that’s what Israel does.”
According to Matt Turpin, who served as the U.S. National Security Council’s China Director from 2018 to 2019, the axis is disseminating content that “feeds on divisions within and between democracies by amplifying popular criticisms from both the left and right of the political spectrums within individual countries.”
Accordingly, Chinese officials, academics, and state media continue to promulgate the ideas that “the root of this problem” is “the lack of a Palestinian state,” and “the historical injustice suffered by the Palestinian people” and the core issue of the Middle East at large. What Chinese scholars, policymakers, and commentators consistently fail to acknowledge is that Hamas has publicly stated that it plans to create an Islamic State of Palestine that stretches “from the river to the sea” — meaning there will be no Israel.
But reductionism is convenient when it supports Beijing’s interest in blaming Israel and the U.S. for all the region’s woes. It is also likely intentional: Offering a simple formula for a complex issue makes for a most effective meme. Chinese academics have been quick to draw on history to construct their narratives but almost always (conveniently) fail to mention that Israel had offered the Palestinians a state on several occasions, and each time, the Palestinians rejected the proposal.
COMMENT – Nice to be quoted in this China Project article!
The team at the China Project (formerly known as SupChina) announced this week that they are shutting down, which is surprising given the proliferation on PRC-focused reporting across nearly every platform I watch.
The team obliquely blamed the deterioration of the U.S.-China relationship had put “several targets on [their] backs” in both countries. I suspect it just goes to show that it is tough to start and run a media company with uncertain revenue streams.
Authoritarianism
7. Li Keqiang funeral in China brings out crowds despite suppression effort
Amy Hawkins, The Guardian, November 2, 2023
Police line road amid strictly controlled public tributes to premier once seen as antidote to authoritarian Xi Jinping.
Hundreds of people have gathered near a state funeral home in China as former premier Li Keqiang was being laid to rest.
Plainclothes and uniformed police lined the road leading to the funeral home, blocking traffic and telling people to move along while watching for the presence of unofficial or foreign media.
China’s president, Xi Jinping, and his wife, Peng Liyuan, attended the funeral, along with six other members of the Politburo standing committee, according to Xinhua. The news agency reported that former president Hu Jintao sent a wreath to convey his condolences.
Public tributes to Li have been strictly controlled as the government seeks to prevent a mass outpouring of grief that it regards as a possible trigger for social unrest.
But despite censorship targeting “overly effusive” comments and gatherings, in Li’s home city of Hefei, in Anhui province, hundreds of mourners laid flowers for one of their most significant sons over the weekend.
On posts relating to Li, social media platform Weibo replaced the like button with a chrysanthemum flower, symbolising mourning. The top three trending topics on Weibo were about Li’s life and funeral.
8. Chinese tech executive Chen Shaojie, founder and CEO of DouYu, said to be held ‘incommunicado’ after authorities find porn on popular live-streaming platform
Zhou Xin, South China Morning Post, November 6, 2023
9. How views of the U.S., China and their leaders have changed over time
Pew Research Center, November 6, 2023
People in 23 countries tend to see U.S. President Joe Biden more positively than Chinese President Xi Jinping, according to a Pew Research Center survey conducted in spring 2023. A median of 54% have confidence in Biden to do the right thing regarding world affairs, compared with 19% who say the same of Xi.
Particularly in high-income countries, the gap in these views can be quite large. In Poland, for example, people are 75 percentage points more likely to rate Biden positively than Xi. In Germany, Japan and Sweden, the gap is at least 50 points. Views of the two leaders are more comparable to one another in middle-income countries, but even in most of these places, more have confidence in Biden than Xi. Indonesia and Hungary are two notable exceptions where the leaders receive nearly identical marks.
COMMENT – Pretty interesting interactive chart from Pew.
10. A Look Ahead at the EU-China Summit
Noah Barkin, GMF, November 7, 2023
The last time the EU and China held a summit, the back-and-forth over Russia’s invasion of Ukraine, just five weeks old at the time, was so fraught that the bloc’s top diplomat, Josep Borrell, described it as a “dialogue of the deaf”. One-and-a-half years on, with the war still raging and an incendiary new conflict unfolding in the Middle East, EU leaders will travel to Beijing in early December for what is shaping up to be another tense sparring session with Chinese President Xi Jinping.
Since her last summit meeting with Xi, European Commission President Ursula von der Leyen has presented plans to restrict the flow of sensitive technologies to China and launched an anti-subsidy probe into electric vehicle (EV) imports from the EU’s top trading partner. And there is a possibility, several officials in Brussels and other capitals told me, that the Commission will deliver another blow in the weeks leading up to the summit by imposing export curbs on a handful of Chinese entities that are sending dual-use items to Russia. This would be part of the EU’s 12th sanctions package.
“I would be surprised if there was no action given the increase in dual-use items making their way from China into Russia,” one diplomat from a large EU member state said, describing China as an emerging “hub” for the export and re-export of equipment found on the battlefield in Ukraine. “It is not just backfilling. It is circumvention. And despite ongoing talks with Beijing, there is no campaign to rein this in.”
Although the timing of the sanctions package is uncertain, several officials told me that it was likely to become a flashpoint before the summit. Another said: “If Beijing takes care of the issue, then there is no issue anymore. Many third countries have taken action. But others are refusing to engage. And China is a particular challenge for us.”
11. China-Russia Convergence in the Communication Sphere: Exploring the Growing Information Nexus
Maria Repnikova, Wilson Center, October 2023
This paper examines China-Russia relations through the lens of information politics. Specifically, it analyzes the extent of the bilateral “information nexus” or the strengthening of ties between the two sides in the communication domain, and its key dimensions, limitations, and policy implications. Drawing on a mix of primary and secondary sources in Chinese and Russian languages, this study demonstrates a growing and systematic coordination and collaboration in the information sphere at the bilateral level.
The analysis uncovers an increasing institutionalization and socialization in bilateral media relations and efforts at content co-production and synchronization of mutual media coverage. At the same time, this relationship also faces some limitations, including inconsistency and asymmetry in media interactions and limited coordination directed at global and non-official contexts.
12. US law firms rethink China future amid economic woes, data crackdown
Andrew Goudsward, Reuters, November 6, 2023
13. Multinationals plan moves to minimise China risk, ECB survey shows
Reuters, November 6, 2023
14. US consultancy Gallup withdrawing from China, Financial Times reports
Reuters, November 4, 2023
15. Hong Kong's flagship banking summit largely muted on China market
Echo Wong, Nikkei Asia, November 8, 2023
Environmental Harms
16. China’s Xi Jinping turbocharges state role in energy, rail–laying stable track but sparking market worries
Kinling Lo, South China Morning Post, November 8, 2023
17. The Revenge of Energy Security: Reconciling Asia’s Economic Security with Climate Ambitions
Erica Downs and Vandana Hari, The National Bureau of Asian Research, November 7, 2023
18. Hungary Sees EV Investment Surge as BYD Poised to Set Up Factory
Zoltan Simon and Marton Kasnyik, Bloomberg, November 6, 2023
19. Saudi Arabia Looks to China to Help Build Up Its Renewables Industry
Li Zengxin, Luo Guoping and Kelsey Cheng, Caixin, November 6, 2023
Foreign Interference and Coercion
20. China urges Estonia not to allow opening of Taiwan office
Reuters, November 8, 2023
21. Pacific Islands Forum: four leaders fail to attend as China-US rivalry takes centre stage
Daniel Hurst, The Guardian, November 6, 2023
22. The hidden power of China's pandas — and why the U.S. is losing them all
William Wan, Washington Post, November 7, 2023
23. China and Russia Claim Moral High Ground Over Palestinian Deaths
Yaroslav Trofimov, Wall Street Journal, November 8, 2023
The U.S. rivals are tapping outrage over Israel’s war in Gaza to gain support in the developing world.
The bloody war in Gaza is providing America’s main geopolitical rivals China and Russia with a valuable opportunity to garner support around the world, enabling the two repressive autocracies to harness a wave of sympathy for the Palestinians and to position themselves as champions of humanitarian values and peace.
While both Moscow and Beijing maintained close relations with Israel for decades—Prime Minister Benjamin Netanyahu even used billboards of himself with Russian President Vladimir Putin during last year’s election—the two powers have pointedly declined to criticize Hamas for the Oct. 7 attack on southern Israel that triggered the war.
Distancing themselves from Israel, Russia and China have since focused on framing the war as part of a global power struggle against the U.S., with Israel reduced to little more than Washington’s regional pawn.
Putin, whose forces have flattened several Ukrainian cities, said in an address last week that his “fists clench and eyes tear up” as he watches the Israeli bombing of Gaza. Russian soldiers in Ukraine are fighting the same American “root of evil,” he said, and their battles “will decide the fate of Russia, and of the entire world, including the future of the Palestinian people.”
China’s rhetoric has been more subdued, with Xi Jinping avoiding public comments on the Middle East since the conflict erupted. Chinese state media, however, has been filled with commentary blasting U.S. “hypocrisy” and “warmongering” in the Middle East, and contrasting it with Beijing’s demands for an immediate cease-fire and Palestinian statehood.
China has said that its position on the Palestinian issue is the same as Russia’s and the two nations voted together at the United Nations Security Council last month to veto a U.S.-sponsored resolution on the crisis.
“Countries should uphold the moral conscience, rather than clinging on to geopolitical calculations, let alone double standards,” China’s U.N. envoy Zhang Jun said in a veiled reference to the U.S. “China will continue to stand on the side of international fairness and justice, on the side of international law, and on the side of the legitimate aspirations of the Arab and Islamic world.”
24. Uruguay Reflects Latin American Drift from U.S., Turn to China
Samantha Pearson, Wall Street Journal, November 8, 2023
A democratic, pro-trade country in a region governed by populists strengthens ties with China after struggling to secure a free-trade deal with the U.S.
Welcome to the People’s Republic of China, the name of a gleaming new elementary school in the rough outskirts of Uruguay’s capital, built as part of Beijing’s charm offensive in South America as U.S. influence in the region wanes.
“It’s transformed this neighborhood,” said Laura Álvez, director of the school, a steel and glass structure where students take Mandarin classes and learn how to make mooncakes, traditional Chinese pastries. The poorest kids have never before been as far as the beach, which is 5 miles away, but they now dream of going to China, she said.
Uruguay is tiny, democratic, relatively affluent and sandwiched between Latin America’s two biggest countries, Brazil and Argentina. It should be a natural ally for the U.S. in Latin America, say former diplomats and foreign-policy experts, given its low levels of corruption, respect for the rule of law and pro-trade policies, making it an island of economic and political stability in a region where populist leaders averse to U.S. policies abound.
But for years, Uruguay has tried and failed to get a free-trade deal with the U.S. The center-right government here in Montevideo is now negotiating one with China, which has stepped up donations to the country’s schools, hospitals and military in recent years.
There are similar stories across the region, according to government officials and former diplomats. They say ineffective engagement by the Biden administration with Central and South American governments on a range of issues has driven countries closer to Beijing, even as China struggles with a challenging economic slowdown at home and lower longer-term growth trajectories.
“The U.S. is missing a huge opportunity with Uruguay,” said Eric Farnsworth, head of the Washington office of the Council of the Americas, an organization that promotes free trade, and a former State Department official.
“In the U.S. I don’t think we’ve truly internalized the idea that there is serious and significant competition in the Western Hemisphere…we’ve always been the only game in town,” Farnsworth said of Washington’s attitude to South America.
While Secretary of State Antony Blinken traveled to the region last year in an effort to engage leaders, Washington’s efforts have often paled in comparison to those of Beijing, which has sent an army of business delegations across the region in recent years, leading to a string of concrete deals and investments, said foreign-policy analysts.
COMMENT – Quite frustrating.
25. Xi to Meet US Business Executives for Dinner in San Francisco
Shawn Donnan, Bloomberg, November 7, 2023
26. Japan’s scallop industry seeks safe harbour from China ban
Leo Lewis and Kana Inagaki, Financial Times, November 5, 2023
27. China Says Australia’s Exporters Can Come Back. Some Say No Thanks.
Rhiannon Hoyle, Wall Street Journal, November 4, 2023
Human Rights and Religious Persecution
28. APEC: Press China’s Xi on Human Rights
Human Rights Watch, November 8, 2023
29. The Hong Kong Activist Who Called Washington’s Bluff
Timothy McLaughlin and Shibani Mahtani, The Atlantic, November 4, 2023
30. Hong Kong student who made ‘seditious’ online posts in Japan jailed for 2 months
Hillary Leung, Hong Kong Free Press, November 3, 2023
Yuen Ching-ting, who was arrested when she came back from Japan where she was studying politics at university, was accused of publishing “seditious” Facebook and Instagram posts, including ones calling for Hong Kong independence.
A Hong Kong student accused of making “seditious” online posts, many of them while abroad, has been sentenced to two months in jail.
Yuen Ching-ting, wearing a beige hoodie and a mask, appeared at the West Kowloon Magistrates’ Courts on Friday. The 23-year-old pleaded guilty in late October to publishing online speech with seditious intent in relation to a number of social media posts, made from September 2018 to March 2023.
Handing down the sentence, judge Victor So said Yuen was remorseful and cooperative with the police investigation after her arrest. Her chance of reoffending was low, he added, and the seriousness of the offence was less than other similar cases.
Yuen was arrested in March after returning to Hong Kong from Japan, where she was studying. Local media outlets reported that she was in the city to change her Hong Kong identity card. She was initially arrested on suspicion of inciting secession, a crime under the national security law.
Her passport was confiscated and she was unable to return to Japan to continue her studies, according to local media reports.
Beijing imposed security legislation on Hong Kong in June 2020 following months of protests and unrest sparked by a controversial extradition bill that would have allowed the transfer of fugitives to mainland China.
The law criminalised subversion, secession, terrorism and foreign collusion, and covers alleged offences committed outside Hong Kong. Those convicted can face up to life in prison.
Yuen, however, was officially charged under the sedition law in June. Dating back to the colonial era, the sedition law is separate from the Beijing-imposed security legislation. Those convicted under the sedition law face up to two years in prison, but are subject to similarly strict bail restrictions.
COMMENT – Attention university administrators, your Chinese students face significant threats for simply exercising rights that you expect all of your students have.
What are you doing to protect the hundreds of thousands of foreign students you have recruited from the PRC from this kind of intimidation?
These actions by the PRC Government are a direct attack upon the academic freedom and critical thinking that you claim are the bedrocks of your institutions.
31. Ethics watchdog investigating Zara Canada over alleged ties to forced labour
The Canadian Press, CBC, November 6, 2023
32. China Resists Efforts to Free ‘Wrongfully Detained’ Americans
James T. Areddy, Wall Street Journal, November 7, 2023
Industrial Policies and Economic Espionage
33. Tracking China’s Control of Overseas Ports
Zongyuan Zoe Liu, Council on Foreign Relations, November 6, 2023
This interactive map tracks China’s growing maritime influence through investments in strategic overseas ports. Users can plot the location of each port and view satellite images alongside detailed information on the share of Chinese ownership, the total amount of Chinese investment, and the port’s suitability for use by the Chinese military.
COMMENT – Really helpful report from the team at CFR, a reference I’m certain that will help a number of readers.
34. China’s Vice Premier He Lifeng Heads Top Financial Policy Bodies
Bloomberg, November 6, 2023
35. Janet Yellen to meet China’s vice-premier ahead of Biden-Xi summit
Demetri Sevastopulo and Joe Leahy, Financial Times, November 6, 2023
36. China’s ‘silver-haired’ investors exit the game with no one waiting in the wings
Mandy Zuo, South China Morning Post, November 08, 2023
37. China tightens controls over rare earth exports, imports of key commodities
Frank Tang, South China Morning Post, November 7, 2023
38. China’s Comac moves ahead with C929 widebody jet amid reports Russia joint venture has fallen apart
Amanda Lee, South China Morning Post, November 5, 2023
Chinese aviation giant says the passenger plane has entered ‘detailed design’ stage, but makes no mention of Russian firm’s involvement. The project has been marred by delays, and Moscow’s aerospace industry has been heavily sanctioned following invasion of Ukraine.
Chinese aerospace giant Comac is pushing ahead with the design of a new widebody passenger jet amid reports that its joint venture with Russia to build the plane has fallen apart.
Addressing an aviation conference in Beijing on Friday, Qi Xuefeng, vice-president of the Commercial Aircraft Corporation of China (Comac), said the design of the C929 widebody passenger jet had progressed.
“The C929 aircraft has entered into [the stage of] detailed design. At the same time, we are making efforts in the fields of hybrid, electric, hydrogen and other new energy aircraft to provide more economical, comfortable and environmentally friendly products,” Qi said at the conference organised by the China Air Transport Association (CATA).
COMMENT – It seems like a complete no-brainer that Europe, Japan, and the U.S. should be seeking to undermine COMAC as much as possible BEFORE it becomes a major player.
In much the same way that various semiconductor companies in the US, Japan, Korea, Taiwan and Europe seem unable to resist the urge to build out PRC competitors to themselves, various aerospace companies in the same countries seem unable to resist the urge to help Beijing build its own industry at their expense.
The best way to handle what will likely be very difficult economic and national security challenges in the future, is to take action BEFORE these PRC companies become established leaders.
39. Flying High
James Fallows, The Wire China, November 6, 2023
America's favorite small plane company, Cirrus Aircraft, has thrived under the ownership of a Chinese SOE. But with an IPO set for Hong Kong, can it continue to soar?
40. Chinese scientists claim anti-ageing breakthrough with spinal cord discovery
Dannie Peng, South China Morning Post, November 6, 2023
41. Global asset managers talk up China as long-term bet
Reuters, November 8, 2023
42. WeWork China will not participate in WeWork's strategic reorganisation
Reuters, November 7, 2023
43. China Energy Storage Push Gets Boost from New Gravity Projects
Dan Murtaugh, Bloomberg, November 6, 2023
44. China tightens rare-earth export curbs amid tension with U.S.
Shunsuke Tabeta, Nikkei Asia, November 7, 2023
45. Foreign investment in China turns negative for first time
Iori Kawate, Nikkei Asia, November 4, 2023
Money flows out of country on concerns over U.S. tensions, anti-spy laws.
Outflows of foreign direct investment in China have exceeded inflows for the first time as tensions with the U.S. over semiconductor technology and concerns about increased anti-spying activity heighten risks.
The shift was reflected in balance-of-payments data for the July-September quarter released Friday by the State Administration of Foreign Exchange.
46. American AI Startups Quietly Raise Money from Top Chinese VC Firms, Including Sequoia Capital China
Juro Osawa, The Information, November 7, 2023
47. Wall Street Bosses See Financial Dangers Everywhere
Cathy Chan and Bei Hu, Bloomberg, November 7, 2023
48. Beijing Tightens Its Grip on the Critical Minerals Sector
Christina Lu, Foreign Policy, November 7, 2023
49. Mammoth Chinese chip project raises another $5bn
Shunsuke Tabeta, Nikkei Asia, November 6, 2023
50. Thanks to US curbs, Chinese internet giants are seeking suppliers outside of Nvidia
Ananya Bhattacharya, Quartz, November 7, 2023
51. Big Western Brands Are Getting Squeezed by Chinese Belt-Tightening
Newley Purnell, Stella Yifan Xie, and Rachel Liang, Wall Street Journal, November 5, 2023
52. Foreign Firms Pull Billions in Earnings Out of China
Jason Douglas and Weilun Soon, Wall Street Journal, November 6, 2023
53. China’s Exports Tumble Again in Fresh Sign of Economic Trouble
Jason Douglas, Wall Street Journal, November 7, 2023
54. China Deal Slump Sends Bankers’ Fees to Decade Low
Dave Sebastian and Rebecca Feng, Wall Street Journal, November 7, 2023
55. Bond Selloff at Another China Property Giant Spurs Authorities to Action
Cao Li and Rebecca Feng, Wall Street Journal, November 7, 2023
56. Wall Street CEOs Flocked to Hong Kong—and Kept Quiet on China
Elaine Yu, Wall Street Journal, November 7, 2023
57. It May Be Too Late to Fend Off China’s Battery Giants
Jacky Wong, Wall Street Journal, November 7, 2023
58. China culls spend in response to US trade hostility
Amanda Chu and Claire Bushey, Financial Times, November 7, 2023
59. China’s Banks and Property Sector Threaten a Growing Economy
Keith Bradsher and Alexandra Stevenson, New York Times, November 7, 2023
60. China Is Becoming a Problem for Investors
Charley Grant, Wall Street Journal, November 8, 2023
Cyber & Information Technology
61. China warms to U.S. chipmaker Micron, as tensions with Washington ease
Reuters, November 3, 2023
62. Huawei and Tencent spearhead China's hold on cybersecurity patents
Akinobu Iwasawa, Nikkei Asia, November 5, 2023
63. Senators urge US to take steps to boost battery production, citing China
David Shepardson, Reuters, November 6, 2023
64. Chinese apps are a mixed blessing for American big tech
The Economist, November 2, 2023
65. Nexperia sells Newport Wafer Fab for $177m after national security probe
Matthew Gooding, Tech Monitor, November 9, 2023
66. More Semiconductors, Less Housing: China’s New Economic Plan
Keith Bradsher, New York Times, November 6, 2023
Military and Security Threats
67. Western machine tools evade sanctions to fuel China’s nuclear program
Toru Tsunashima, Tetsuya Abe, and Kazuhiro Kida, Nikkei Asia, November 2023
Suspicions emerge that China is diverting advanced technology from Western countries to its nuclear development efforts -- not just the latest U.S. chips but also machine tools, dubbed "mother machines."
It was spotted in a video uploaded to social media by the Shenyang Hunnan District's Eighth Primary School in northeastern China's Liaoning province.
“A child from a farming village studied hard and became an engineer contributing to a powerful nation in a decade or so. We should study his example and emulate him as a role model.”
A teacher introduced to students a TV program broadcast by a state-run station. The primary school posted the typical classroom scene on the social media platform WeChat in 2022.The broadcast focused on building military strength. After showing footage of missiles launching from a warship and a combat vehicle, the focus shifted to the technician.
“I just want to become a skilled workman who can contribute to the national defense projects in the new era that General Secretary Xi Jinping spoke of. I want to serve my country with my skill.”
His name is Chen Xingxing. He belongs to the China Academy of Engineering Physics (CAEP), China’s main research institute for nuclear weapons.
The program was produced mainly by China Central Television (CCTV), with the participation of local stations, radio stations and newspapers. It talked about Chen in the form of an easy-to-understand story of his rise to prominence.
According to the program, Chen was born in 1989 in a poor village in Shandong province. After studying hard at a technical institute, he started working at the CAEP as a technician. In 2019, he received the national title of "great craftsman" at an unusually young age after drastically reducing the machining time of critical components that could be used for nuclear development.
“In the field of new CNC machining, Chen Xingxing always makes the impossible possible,” praised the narrator. To boost national pride, Chinese propaganda used him as a hero of nuclear development.
Nikkei collected a large amount of publicly available information to examine the conflict between the U.S. and China over supply chains. While doing so, it found several key reports and articles by Chinese national media about Chen.
One image seen by the investigation team showed a state-of-the-art machine tool.
In the still image above, one can see some of the distinctive features of the machine and make out product model numbers. Jakub Janovsky, a military analyst for the Oryx Blog, confirmed that the machine in the picture matches the DMU 60 monoBlock, a five-axis model manufactured in Germany by DMG Mori, a global supplier of high-precision machine tools.
China is rushing to modernize its nuclear weapons. It has developed a hypersonic missile that can travel at more than five times the speed of sound. Such a missile would be difficult to intercept with conventional missile defense systems, changing the fundamental premises of global security.
The Pentagon estimates that China could increase its holdings of nuclear warheads to 1,000 from the current above 500 by 2030. That would put it almost at par with the number of warheads deployed by the U.S. and Russia -- 1,770 and 1,674, respectively -- as of January, according to estimates by the Stockholm International Peace Research Institute.
“China’s nuclear capability is growing rapidly in both quality and quantity, aiming to enhance deterrence against the U.S. with a Taiwan contingency [invasion] in mind,” said Masafumi Iida, head of the China Division of the Regional Studies Department at the National Institute for Defense Studies in Japan.
68. China and US reportedly agree to rare nuclear arms control talks
The Guardian, November 2, 2023
69. China’s Space Collaboration with Africa: Implications and Recommendations for the United States
Julie Michelle Klinger and Temidayo Isaiah Oniosun, United States Institute of Peace, September 19, 2023
70. Assistant Secretary Mallory Stewart’s Meeting with the People’s Republic of China’s (PRC) Ministry of Foreign Affairs Director-General of Arms Control Sun Xiaobo
U.S. Department of State, November 7, 2023
71. China Stealing U.S. Research: Congress Demands Answers
Didi Kirsten Tatlow, Newsweek, November 3, 2023
72. China’s Cold War with America Has Already Gone Hot
Anne Pierce, National Interest, November 4, 2023
One Belt, One Road Strategy
73. Comparing China’s Engagement in Africa and Latin America
R. Evan Ellis, The Diplomat, October 21, 2023
74. China has acquired a global network of strategically vital ports
Liz Sly and Julia Ledur, Washington Post, November 6, 2023
75. China Is Lending Billions to Countries in Financial Trouble
Keith Bradsher, New York Times, November 6, 2023
76. Why the Philippines is exiting the Belt and Road
Richard Javad Heydarian, Asia Times, November 2, 2023
77. US plans to build a $553 million terminal at Sri Lanka's Colombo port in rivalry with China
Bharatha Mallawarachi and Didi Tang, Associated Press, November 8, 2023
Opinion Pieces
78. China is working on a weapon the US decided was too dangerous to exist
David Axe, The Telegraph, November 2, 2023
79. Will China and Russia Reap the Rewards of Global Chaos?
Matt Schrader and Daniel Twining, The National Review, October 22, 2023
80. In Israel vs. Hamas, China Backs Iran vs. America
Matt Pottinger, David Feith, and Ben Noon, FDD, November 7, 2023
81. With Two Wars Raging, China Tests America in Asia
James Crabtree, Foreign Policy, November 8, 2023
82. Tools of economic statecraft are powerful — and can cause lasting harm
Julia Friedlander and Josh Lipsky, Politico, November 2, 2023
In director Christopher Nolan’s “Oppenheimer,” which chronicles the life of the father of the atomic bomb, the character of physicist Niels Bohr warns: “We have to make the politicians understand, this isn’t a new weapon, it’s a new world.” And for many economists watching the film, the moment may have rung eerily true.
Over the past few years, politicians have leaned heavily on the power of economics to shape foreign policy — what we call “economic statecraft.” From sanctions and export controls to the blocking of assets overseas, these tools appeal to policymakers who want to make an impact on a competitor or adversary, while avoiding direct military conflict.
Of course, sanctions are nothing like atomic weapons, but the gap between its practitioners — in this case economists and the private sector — and the expectations of those who implement these economic tools can be dangerous. And we have now crossed a point of no return in this hard-to-define area between finance and war.
These tools didn’t just appear overnight. Throughout history, nations have been no strangers to embargos or creative tariffs and taxation. But modern economic warfare based on the integration of financial markets is a relatively newer affair, dating back just 22 years, to the aftermath of the 9/11 attacks in the United States.
In the wake of this unprecedented terrorism on American soil, U.S. Congress granted federal agencies sweeping powers to choke off the financing of al-Qaida and its affiliates, leveraging the U.S. financial system’s global reach. However, Washington also used these measures for purposes of international law enforcement to protect Americans from terrorism — complementing, but not replacing, the military targeting of al-Qaida.
Fast-forward a decade, and sanctions then begin to play a different role in foreign policy: Driving Iran to the negotiating table over its nuclear program through multilateral — and, on the U.S. side, increasingly unilateral — financial punishment. Here, sanctions were used as leverage, as the credible threat of direct force was still part of the equation, looming large over negotiations.
And just last month, the outbreak of the Israel-Hamas war and Iran’s continued support of terrorist organizations has renewed this pairing of sanctions and military deterrence as a first-move policy option for the West.
But so much has changed in the evolution of sanctions over the years. It now truly is, as Niels Bohr said, “a new world.”
Since Russia’s invasion of Ukraine, the G7 has unleashed the most sweeping sanctions regime ever to be placed on a major economy. It isn’t just the raw number of designations or the various banks cut off from SWIFT that make it so, but the sweeping export-control measures covering everything from handbags to airbags, and blocking approximately $300 billion in Russian sovereign assets.
Also, unlike previous instances where tensions ebbed and flowed between the U.S. and its European partners over the severity and impact of sanctions, the allies are now aligned. And unlike before, the West is clear it won’t be confronting Russia with direct military engagement.
During the war’s initial stages, when consensus held that Ukraine would fall in weeks, economic statecraft attempted to inflict enough damage on Russia to cripple an invasion in real time. And though it may now sound naive, we maintain that this ambitious and daring tactic could have worked. With all the financial and economic unknowns unleashed by battering a global economy overnight, a chain of events could have caused a major financial crisis and bankrupted Russia.
However, we also aren’t surprised it didn’t.
If one were to ask an economist at the U.S. Treasury Department or the International Monetary Fund (IMF) about Russia withstanding such a severe barrage, they would have quickly pointed to the country’s history of weathering financial crises, and lessons learned from the decades-long Iranian sanctions regime — a regime that will now be put to the test again in the months to come.
Economists would also add that substitution effects mobilize quickly, and that the global economy is increasingly more multipolar — but this doesn’t mean sanctions have failed. Instead, they have forced Russia into newer, unreliable markets and severed access to credit, complicating Moscow’s war. And Russia’s long-term GDP growth will now be significantly lower than projected before the invasion, in part because of sanctions and the associated emigration of young professionals.
All this means, the results of the sanctions on Russia are mixed. But will Washington understand the implications for its policymaking going forward?
Some economists are now quietly worried about what they have helped unleash. Early last year, we had warned that the G7’s efforts against Russia were the ultimate test of economic warfare, and that the U.S. and its allies risked exhausting options without adequate return — as well as perhaps drawing the wrong lessons from the experience, namely that they had crafted a blueprint for future conflicts.
For Western countries targeting Russia, flexing nearly all their economic power proved a risk worth taking. It also proved an economically tenable risk for a bloc that could outbid others for alternatives to Russian energy and has a small business footprint in Russia since President Vladimir Putin’s aggression against Ukraine began in 2014.
However, the gamble between governments’ national security aims and the global economy’s macroeconomic realities would look much different with a stronger financial adversary. As research by the Atlantic Council and Rhodium Group showed, shape-shifting the same sweeping sanctions tools to address a Chinese escalation in the Taiwan Strait, for example, could cost Western economies trillions and potentially erode Western economic influence across the world.
Over the past two years, the “Global South” has already been watching the rapid expansion of the tools of economic statecraft with growing alarm. And in private conversations with non-G7 central banks, we have heard a deep desire to reduce the dollar dependency of their nations. The recent expansion of the BRICS grouping is just the latest public manifestation of this.
Along these lines, in a recent publication, we showed that sanctions do risk alienating countries from their dollar holdings. And at last month’s IMF-World Bank meetings in Marrakech, India’s finance minister explained to the Atlantic Council why her country — and many others — were concerned about an overreliance on the dollar.
While these countries aren’t yet close to immediately detaching themselves from the currency, they are, as the minister said, searching for alternatives — and we shouldn’t ignore this sign. Countries that rely on the U.S. and European financial system have a right to understand the way the West thinks about these issues and have a voice in their implementation. This isn’t about being “nice,” it’s about guarding our own financial system and reducing the risk of damage.
So, how best to acknowledge these concerns? We propose setting out a new framework for the use of the tools of economic statecraft. Just as the Atomic Energy Commission was created to guide the future use of nuclear weapons, the U.S. and Europe should jointly propose guidelines for what kind of sanctions and other economic measures should be used and when.
Can a belligerent state’s foreign reserves held in dollars or euros be frozen? What is the threshold that must be crossed to seize those assets? If the U.S. bans the export of certain microchips to China, what happens when an ally or partner wants to ship a similar product? Without answering these questions, the world can only guess at what the West will do — and look for alternatives to its system.
The second step is to then remind the “Global South” — and ourselves — of the positive dimensions of statecraft. The tools of trade and international aid are just as powerful, in fact more so, than anything coercive. But the U.S., at least, spends far too much time thinking about how to punish economies and far too little about how to bring more countries onside. However, recent efforts from both the U.S. and Europe on the joint Trade and Technology Council and the Indo-Pacific Economic Framework for Prosperity, as well as new capital for the World Bank, are small steps in the right direction.
Back in 1944, just as scientists began focusing on a test implosion in New Mexico for the atomic bomb, 44 nations met in Bretton Woods, creating the IMF and World Bank — the original tools of economic statecraft. They weren’t intended to be institutions to sanction or punish but rather massive lending organizations to rebuild from war and avoid future conflict. And the financial and trade network built around these institutions helped the U.S. and Europe, while also generating growth across many economies.
But now, in the face of such sweeping sanctions regimes and other punitive measures — and without serious effort at reform based on the changing shape of the global economy or the replenishment of these institutions’ resources — the IMF and World Bank will decline in relevance in the years to come. And in their absence, rival lending banks will exert more influence.
The tools of economic statecraft are powerful, and their use can come with lasting harm. We need to understand that the Russian experiment was a turning point after two decades of escalating economic power play. And now is the moment to think carefully, and strategically, about the next steps in the evolution of economic statecraft.
COMMENT – It strikes me that the practitioners that Julia and Josh describe (the economists and private sector) have been astonishingly naïve to believe that their world of finance and market efficiency could remain aloof from geopolitics as great power rivalry re-emerged from its three-decade slumber (the vacation from history is over).
It is really an indictment of economists (and their counterparts in the private sector) that they could lack the foresight to perceive these entirely predictable developments.
As Julia and Josh point out, economic sanctions aren’t nuclear weapons, but unlike their reference to Niels Bohr, this isn’t a “new world”… finance, trade, technology, and industry have always been weaponized during periods of geopolitical rivalry.
If there is anything that is “dangerous” about this development, it is that economists (particularly ones in North America and Europe) developed theories and built financial infrastructure around a completely false set of assumptions: that geopolitics wouldn’t matter anymore, that labor, capital and goods would always flow freely across borders, that finance could sit above it, and that a globalized economy would prevent war. These utopian visions were unrealistic in the 1990s and they are untenable today.
Rather than deplore the use of these tools of economic statecraft (or worse yet create some sort of “Atomic Energy Commission” to regulate economic statecraft), we must rapidly rebuild our commercial, financial, and economic infrastructure to account for the conditions we now face, instead of clinging to a fantasy world that no longer exists.
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