Beijing briefing: China aims for tech self-reliance The World Today mhiggins.drupal 28 March 2023

Xi Jinping’s new appointments are tasked with a technology led recovery, but they face a daunting task to restore growth, writes Yu Jie.

The three-day state visit to Moscow by President Xi Jinping in March may have eclipsed the National People’s Congress in Beijing a fortnight earlier, but as Xi seeks to establish a new global order with China at its centre, the political events in the Great Hall of People provide an important insight into the country’s longer-term economic plans.

While a new cohort of cabinet members was appointed to sit on the State Council for the next five years, much of the attention remains on China’s economic stimulus plan to enable a rapid post-Covid recovery, as well as proposals to restructure central government.

Mountainous task

Three aspects of this year’s Congress deserve deeper scrutiny: Li Qiang’s confirmation as premier to succeed Li Keqiang’s decade-long subdued tenure under Xi; the extent to which Xi’s new cabinet sheds light on China’s economic and scientific self-reliance; and the unveiling of a major restructuring of central government administration in sectors such as finance and science.

China’s new premier initially faces the mountainous task of restoring growth and market confidence. During a press conference much shorter than his predecessor would hold, Li Qiang praised China’s private business sector and repeated the words ‘China remains open to foreign business’ to address the growing anxieties among foreigners and Chinese private entrepreneurs.

Beside the daunting task of economic recovery, Li Qiang faces another big challenge. Unlike his predecessors, he has never worked as a vice premier and overseen ministries under the State Council. The test for him will be to pursue a sound economic recovery plan while coordinating numerous central government agencies. He will also need to regulate relations among provincial heads who have a tendency to argue endlessly over the distribution of public finances.

Even though Xi is secure in his third term, his involvement in shaping and implementing macro-economic policies is keenly felt. Li Qiang made explicit the State Council under his leadership will be the chief implementor of all policies approved by the president. This is a less equal working partnership with Xi than his predecessors on the State Council enjoyed in the past.

Beijing published its official plan to restructure its central government administration announcing planned cuts of 5 per cent of its civil service. The newly established Central Commission on Finance intends to deal with systemic financial risks and to coordinate the financial regulatory bodies, central bank and Ministry of Finance. This is seen to reflect the Chinese leadership’s growing concern with the poor performance of local government loans and debt as well of the volatility of the property market, all of which threaten huge uncertainty for the economy.

As well as reorganizing the financial sector, Xi’s intention to pursue an integrated national strategy combining economic and scientific self-reliance has led to significant appointments following the Congress. As a starter, a new Central Commission for Science under the party leadership has been established. This commission will focus on providing a renewed impetus to accelerate China’s drive to achieve ‘scientific reliance’ and to ease the choke points in the economy, such as the supply chain for semiconductors.

It remains unclear who will head this new commission or who will be on it, however, as scant detail has been made public. It is seen as a direct response to the tough measures adopted by the United States designed to dent China’s ambitions of technology supremacy.

Departure from the past

New appointees to the Politburo come with substantial backgrounds in science as well as a solid track record of running state-owned enterprises. This is a departure from the past.

Instead of inserting financial specialists, Xi appointed two scientists, Liu Guozhong and Zhang Guoqing, as the vice premiers overseeing science, education and industrial policies. This signals that Xi intends to prioritize science and innovation during his third term. The appointment of technocrats to the State Council is seen as a move to strengthen innovation and prepare the Chinese economy, political system and society for potential external shocks.

India-China relations: Is the Quad the answer? Interview NCapeling 28 March 2023

The threat of China’s military aggression is being felt across the world, but this is a phenomenon India has been contending with for decades.

India’s border with China became the site of tense conflict in 2020, which led to India reinvesting in the Quad. Arzan Tarapore discusses key issues from his International Affairs article, such as how India is responding to increased aggression at the border and how a reinvigorated Quad may hold answers to balancing China in the Indo-Pacific.

What have India-China relations been like in the past?

Relations between India and China have varied over the decades. In the years following World War Two there was some hope they would find common cause in their international outlooks but that was quite quickly extinguished with their border war of 1962.

Since then, the two countries have oscillated between detente and tension. It took decades for them to normalize their relations and slowly build trust through several confidence-building agreements.

More recently it seemed the two countries were both willing to set aside their border dispute in order to profit from their burgeoning economic relationship – as, for both, there is no question development and economic growth is the primary national objective.

The question has been the extent to which their unresolved sovereignty and security issues undermine those goals as, at the same time, they both began paying more attention to the security of their territorial claims.

China in particular matched its explosive economic growth with startling military modernization and assertiveness. Its long-standing military doctrine and terrain advantages means it relies heavily on quality military infrastructure on the Tibetan plateau and it has accelerated the pace of those infrastructure upgrades and expansion.

In the 2010s, India belatedly began to improve its own transport infrastructure near the border, which threatened to reduce China’s military advantages. The earlier quiet on the border began to crack and China began launching border incursions with increasing frequency and scale.

This was a dynamic, iterative process, with incursions prompting India to accelerate its infrastructure development, which in turn probably prompted more incursions by China.

What happened around 2020 to change their relationship?

The cycle of competitive security policies on the border reached a tipping point in 2020 with Chinese incursions at multiple points simultaneously in Ladakh, apparently designed to establish a new status quo on the Line of Actual Control (LAC) separating Indian and Chinese-controlled territory.

The Indian political leadership played down the incursions but both Indian and Chinese militaries rushed to reinforce their positions near the border. They held multiple rounds of military talks which made halting progress.

On 15 June 2020, a skirmish resulted in the loss of 20 Indian troops, and an unknown number of Chinese troops. In the weeks that followed, both sides further reinforced their positions in a scramble to gain positional advantage.

How has India responded to China’s increasing military might?

The Indian government’s response to the Chinese landgrab was to threaten the entire bilateral relationship. In a reversal of decades of policy, it argued China had demolished the painstakingly constructed confidence-building measures on the border, and so the relationship could not continue as normal until the border crisis was resolved.

It imposed new restrictions on Chinese investment in India – even as overall trade continued to increase – and adopted a more assertive diplomatic posture.

Strategically, the 2020 border crisis had two major effects. First, it reinforced the Indian proclivity to see its northern borders as the primary threat to Indian national security.

India has heavily reinforced the border, reassigning some major formations and making numerous new investments in military capability to manage the threat. The significance of this however is that, in the context of budget scarcity, these military improvements come at the cost of potential increases in India’s capability in the Indian Ocean region – ultimately a more consequential zone of competition in the Indo-Pacific.

The Indian government may yet change course and reallocate resources for power projection but, at this stage, I see no evidence of that.

The second major strategic effect of the crisis was to unleash Indian cooperation with its partners, especially the US and the reinvigorated Quad grouping of Australia, India, Japan and the US.

India has generally avoided formal international alliances, and the Quad was in hiatus for years – why has India invested in it now?

India had always been mindful not to embrace external partners too closely so as to maintain its freedom of action and to not provoke a Chinese reaction. But since the Ladakh crisis, New Delhi has a newfound willingness to work more closely with the US, Japan, and Australia – because it calculates correctly that these partnerships enhance its freedom to act, and that China has already adopted the aggressive posture India feared.

It is important to note however that the border crisis was not the only driver of India’s strategic adjustment. The crisis coincided with the COVID-19 pandemic which highlighted to India the ineffectiveness of existing international institutional arrangements.

For New Delhi, then, the twin crises of Ladakh and the pandemic stressed the need for new international arrangements, and the Quad offered the best combination of agility and capability to meet the most pressing challenges of the Indo-Pacific region.

What do the Quad partners hope to achieve in their renewed partnership?

Beginning in 2021, the Quad assumed far greater significance. The first national leader summits happened – which have since continued at regular intervals – and its members have all agreed to a continually expanding agenda of work.

It seeks to provide international public goods, and everything from climate action to telecommunications regulations. Critically, it has limited its security role to some niche and relatively unprovocative areas, such as humanitarian assistance and maritime domain awareness – issues which benefit the Indo-Pacific as a whole and do not intensify security competition. It has certainly eschewed military cooperation.

Interestingly, the four Quad countries have also separately accelerated their military cooperation, bilaterally, trilaterally, and even quadrilaterally. But that cooperation lies outside the formal mechanisms of the Quad.

What impact will these Quad actions have on Chinese aggression and the Indo-Pacific region?

This Quad approach, which I call ‘zone balancing’ in my article, is specifically designed to build the capacity and resilience of regional states, and to not inflame dyadic security competition.

The relatively uncompetitive character of these activities helps to deflate Chinese claims that the Quad is an antagonistic new bloc, and to ameliorate southeast Asian states’ concerns over the potential intensification of strategic competition.

But the Quad’s agenda is not fixed and not bounded. It has expanded year on year and may continue to extend into new areas. This gives it a degree of flexibility and coercive leverage as Beijing cannot be confident about the Quad’s future direction.

This slate of activities has a lot of utility in building the Quad’s regional legitimacy and habits of cooperation among its members. But it conspicuously does not address the region’s most pressing security challenges.

It is not, in its current form, equipped to manage the challenge of territorial disputes or aggression. So the Quad will not address India’s unresolved border dispute with China, potential crises over Taiwan, or the South China Sea.

I would argue, however, that the four members of the Quad have unparalleled advantages of capacity and geography. With further military cooperation, even outside the formal structures of the Quad, they have the potential to deter Chinese aggression, but that remains subject to their political preferences.

Will other countries in different parts of the world adopt similar balancing strategies?

Zone balancing could be an attractive strategy for other countries which want to either avoid the costs of hard military balancing, or to not provoke their rivals.

It has been used in the past – such as the Marshall Plan during the early Cold War – and I would not be surprised if other countries competing with China, or even China itself, use it.

The Critical Transition: China’s Priorities for 2021 Research paper sysadmin 31 January 2017

This paper sets out the core issues for the Xi leadership, and focuses on what these might mean for the UK, particularly in the post-Brexit world and with the election of Donald Trump as US president.

In 2017 Xi Jinping will complete his first full five-year term as China’s leader. Towards the end of the year, in autumn, the country is due to hold its 19th Party Congress. This major meeting usually marks the moment when the Communist Party of China (CPC) assesses its performance over the previous five years, sets out political goals for the coming five-year period and makes new appointments.

Xi Jinping’s leadership has been characterized by a number of significant domestic and international policy strategies. China’s economic growth rate is slowing, and the country’s economy is undergoing major restructuring. Export-led manufacturing growth and capital investment in fixed assets are now being replaced by consumer-led and service-dominated expansion. Meanwhile, the role of the CPC has been rearticulated with a major anti-corruption struggle since 2013 that has sought to clear away a raft of different networks and senior officials and connected business people. Xi has proved a more communicative, more populist and more nationalistic leader than his predecessors. He is also crafting an image of himself as a more visionary leader.

Internationally, China is striving for a relevance and role that it has never had before. Its reach is felt in international organizations, regionally, and through its economic and resource needs. It has a role in global affairs that embraces places once considered on its periphery, such as Latin America, the Arctic and Antarctic Circles, and the Middle East. Its impact in Asia is particularly striking, marked by activity in the South China Sea, and a new kind of relationship with Russia, India and the US. The major Belt and Road Initiative, in particular, has started to outline a new expansiveness in China’s relations with the outside world, despite the largely abstract nature of its overall shape and form at the moment.

The themes and viewpoints in this collection of essays are particularly geared towards those with an interest in policy engagement with China. While setting out the core issues for the Xi leadership, it also focuses on what these might mean for the UK, particularly in the post-Brexit world and with the election of Donald Trump as US president. As the UK seeks a new kind of relationship with a rapidly changing China, this group of expert opinions maps out the key markers in the run up to 2021, when China is due to celebrate achieving the first of its centennial goals: the delivery of middle-income status and a moderately prosperous society.

Brexit: Implications for EU–China Relations Research paper sysadmin 10 May 2017

For Beijing, the EU–China relationship will take priority over UK–China ties – with China’s relative focus on Germany becoming even more significant.

Summary

• The extent of current UK relations with China means that Brexit will notably reduce the scale and diversity of overall EU–China economic and commercial interactions. But the impact will vary across different areas.
• In policy terms, liberal voices on economic policy towards China will be somewhat weaker among the post-Brexit EU27. Brexit will not be the most important factor determining the future level of strategic coherence in EU policy towards China.
• The impact on post-Brexit EU27 trade with China will be felt both in the volume of trade and its composition. Following Brexit the EU will no longer be China’s largest trading partner.
• There will be some relative shift in Chinese investment in Europe away from the UK, though over time the impact of Europe-wide policy approaches to Chinese investment will have more impact than Brexit per se.
• EU–China educational exchanges will be weakened after Brexit, but inbound Chinese tourism will be less affected by Brexit.
• By 2025, the EU will have compensated for Brexit’s impact in some areas, but much depends on the EU’s own trajectory over the next decade.
• For Beijing, the EU–China relationship will take priority over UK–China ties. Within the EU, China’s relative focus on Germany will be even more significant.

Arguments Over Innovation Capacity Miss How Much the US and China Are Intertwined Expert comment sysadmin 30 May 2018

Most discussions of current US–China trade tensions fundamentally misrepresent the globalized nature of innovation.

Among the many issues at play in the ongoing economic and trade tensions between the US and China are questions of technological capability and innovation.

Two of the main complaints in the US Section 301 report were that American companies have been forced to transfer technology to China and been the subject of cyber espionage. The presentation of the issues in this report has been disputed, but behind it lies concern in the US that Chinese innovative and technological capability is catching up with that in the US, thanks partly to the support of state policies set out in the Made in China 2025 initiative.

One important feature of the package of measures announced by the US last month is that it was designed to contain China’s technological development as much as to reduce the trade deficit, even though the latter has been the focus of President Donald Trump’s rhetoric.

(Some have cast doubt on this picture of Chinese innovation, suggesting that China is more of a ‘fat tech dragon’ whose massive inputs into research and development do not translate into real innovative capacity.)

The problem with the debate comparing Chinese and American technological capability is that it misunderstands or misrepresents the globalized nature of innovation in today’s world.

Contrary to the economic nationalist rhetoric emanating mainly from Washington, and to a lesser extent from Beijing, the US and China are not two separate economies competing for economic hegemony. As part of the globalization of manufacturing and production over the last 40 years and the more recent globalization of consumption, the shape and structure of innovation has also changed.

As we argue in a new paper, the key to understanding this is to think of innovation as being carried out through global or transnational networks linking economic actors, not within separated economies. What the recent phase of globalization has demonstrated is that innovation is achieved most effectively and efficiently when those engaged in innovation are connected not just within national borders but across them.

China has become integrated into these global innovation networks in ways which reflect its relative strengths and weaknesses in research and development. China’s extensive manufacturing ecosystem has enabled its companies to perform well in production-related and efficiency-driven innovation. Moreover the rapid growth in its large and dynamic consumer market provides fertile ground for consumer-related innovation by Chinese and foreign-invested enterprises alike. The rapidly increasing talent pool in China also provides additional human capital for innovation and technology.

Apart from the increased emphasis by Chinese enterprises on innovation, multinationals have also been stepping up their research and development (R&D) efforts in China. These now consitute a significant part of China’s R&D landscape, and are an increasingly important part of the global innovation by multinationals.

Things are of course changing. China’s overall innovation capacity is improving, and there are concerns in both in the US and Europe that Chinese policy is moving backwards towards the promotion of ‘indigenous innovation’ – or self-reliant innovation – and away from openness. In other words, we may be seeing a more ‘techno-nationalist’ China as well as a protectionist US.

China has also been criticized for inadequate protection of intellectual property rights, though the establishment of special courts for such disputes marks a commitment to improve – and the rights of Chinese companies increasingly need protection too.

As the benefits of globalization increasingly come under question, and with some degree of nationalist political pressure in both the West and China, it is not going to be possible – or politically desirable – to do away with national borders when it comes to innovation. But at the same time, the extent to which businesses and consumers have globalized means that fully ‘indigenous’ innovation is not possible, even if it were politically desirable.

EU-China innovation relations, as well as those between Washington and Beijing, therefore need careful management. But both Americans and Europeans should have more confidence in their innovation capability, given the relative strengths and weaknesses of Chinese innovation.

Americans and Europeans should acknowledge and promote the opportunities that come from globally networked innovation processes. Taking advantage of the comparative advantage of all the players in these networks means working with China as an innovation partner.

China: End of the Reform Era 20 July 2018 — 12:30PM TO 1:30PM Anonymous (not verified) 30 May 2018 Chatham House, London

The speaker will argue that China’s reform era is ending, and that core factors which characterized it - including political stability, ideological openness and rapid economic growth - are unravelling.

Since the 1990s, Beijing’s leaders have firmly rejected any fundamental reform of their authoritarian one-party political system, even as a decades-long boom has reshaped China’s economy and society. On the surface, their efforts have been a success, but Carl Minzner says a closer look at China’s reform era reveals a different truth.

He outlines how over the past three decades, a frozen political system has fuelled both the rise of entrenched interests within the Communist Party and the systematic underdevelopment of institutions of governance among state and society at large. Economic gaps have widened, social unrest has worsened and ideological polarization has deepened.

The speaker will discuss how China’s leaders are attempting to address these looming challenges, including institutional reforms and a shift back towards single-man rule. The speaker will also consider the question of regime stability given that China’s era of ‘reform and opening up’ is ending and there is now a renewed uncertainty over Beijing’s future.

THIS EVENT IS NOW FULL AND REGISTRATION HAS CLOSED.

China Needs to Make the Belt and Road Initiative More Transparent and Predictable Expert comment sysadmin 29 April 2019

The global infrastructure project must move beyond mish-mash of opaque bilateral deals

As China welcomes dozens of world leaders to Beijing for its second Belt and Road forum, it has one simple aim: relaunching President Xi Jinping’s controversial global infrastructure drive.

Since it began five years ago, the Belt and Road Initiative (BRI) has sunk hundreds of billions into port, railway and power projects stretching from south-east Asia to central Europe. But its path has been bumpy, drawing sharp criticism over the ruinous debts that some countries have racked up amid Chinese largesse.

Xi will stress sustainable financing and transparency this week, amid the usual talk of ‘win win’ cooperation. Yet BRI’s problems are structural, not presentational. For any pledges to be meaningful, China must move beyond its present mish-mash of opaque, bilateral deals.

After bad headlines last year, BRI has in fact enjoyed a good run in recent weeks. Malaysia announced it would resume a previously cancelled high-speed rail project, while Italy’s decision to join up last month marked a further European incursion. Indeed, if attendance is any guide to success, BRI looks in fine fettle. The first forum in 2017 attracted 29 world leaders. China says 37 will turn up this week. Phillip Hammond, UK chancellor, arrives hunting deals too, just a day after news that Chinese technology group Huawei will be allowed to help build 5G networks in Britain.

Even so, three interlinked problems remain at the heart of President Xi’s pet project, all of which must be addressed if BRI is to move beyond the pitfalls that have damaged its reputation.

The first and most obvious is debt. Critics allege that China ‘traps’ its BRI partners financially, often pointing to a debt-for-equity deal that handed China control of a port in Sri Lanka. These claims are exaggerated — few other projects have ended up this way. Yet poorer nations from Laos to Tajikistan are still signing up to vastly expensive Chinese schemes that offer poor value for money while straining their public finances.

The second problem is transparency. Despite its grand scale there is still no reliable list of BRI projects, no disclosure of the lending standards China follows, nor even the amount China has invested. Beijing claims more than $1 trillion; independent estimates suggest perhaps a few hundred billion. Either way, it will be hard for China to convince doubters on debts until it is open about the criteria it uses in deciding who to lend to and why.

BRI’s third and most important challenge is its muddled organization. Despite BRI’s image as a centrally run mega-project, China has allowed many deals to be struck locally, via a mix of state-backed companies, public sector banks and freewheeling regional governments. And it is here that the problems began.

Infrastructure deals are notoriously complex, especially for transnational projects like high-speed rail. Renegotiations are common, even for experienced bodies like the World Bank. Yet BRI has repeatedly seen terms negotiated behind closed doors, in countries such as Malaysia and Pakistan, come unstuck in the face of public outcry.

Rather than seeking to trap others with debt, China’s central government more often has to step in to fix dubious projects agreed by underlings lower down the chain.

These negotiations go one of two ways. Either China’s partners complain and win terms, as was true in Malaysia and in Myanmar over a multibillion-dollar deep-sea port. Or, as in the case of Sri Lanka, the renegotiations go in China’s favour, but at the cost of accusations of debt trickery. In both cases China looks bad.

Speaking last year, Xi responded to criticism of BRI by describing it as ‘an open platform for cooperation’. Yet, so far, he has proved resistant to the step that would deliver on that vision — namely turning BRI into an institution with open standards and international partners.

The reasons for his reluctance are obvious. Ending BRI’s reliance on loose bilateral deals would limit Beijing’s room for geopolitical manoeuvre. Yet what might be lost in political flexibility could easily be gained in economic credibility, while avoiding some of the painful renegotiations that have dogged many BRI projects.

At a time when China’s economy is slowing and its current account surplus is shrinking, formalising and institutionalising, BRI could also help avoid wasting scarce public resources on white elephant projects. China even has an easy template in the form of the Asian Infrastructure Investment Bank, the Beijing-based institution that has won plaudits for its project quality and openness since it started in 2016.

Whichever model is chosen, a dose of Chinese-style central planning is called for, along with more openness. Without it, the oddly chaotic and decentralised model pioneered in BRI’s first five years is unlikely to help the project thrive over the next five.

This article was originally published in the Financial Times.

China's Evolving Economic Relations with North Africa: Before and After COVID-19 10 September 2020 — 12:00PM TO 1:30PM Anonymous (not verified) 20 August 2020 Online

China’s economic presence across North Africa has grown in recent years. The global power has forged close economic relationships with Egypt and Algeria, while also continuing to develop ties with Morocco and Tunisia.

Beijing, which views the region as a geostrategic intersection between Mediterranean, Middle East, and Africa, has primarily focused its efforts on developing bilateral relations, while also working within the Forum on China–Africa Cooperation (FOCAC) and the China–Arab States Cooperation Forum (CASCF).

All countries of the region have agreed to participate in China’s Belt and Road initiative (BRI), which has raised concerns among Western powers. As North African countries grapple with fiscal constraints as part of the fallout from COVID-19 (and the oil price drop for hydrocarbon exporters such as Algeria), it is yet to be seen whether China’s ambitions and relations within the region will continue to develop at the same pace going forward.

In this webinar, organized by Chatham House’s MENA and Asia-Pacific Programmes, experts will discuss the evolving economic relationship between China and North African states, and explore the impact of China’s pandemic diplomacy across the region.

How asymmetric are economic relations between China and North African states? Which sectors are most important, and what are the prospects for China to develop the region’s digital and healthcare infrastructure? Will China’s increasing economic interests necessitate an increasing political and security engagement? Should North African states be wary of Chinese loans? What is the public opinion of China’s economic presence in North Africa? Have Chinese ‘soft power’ efforts helped to bolster economic (and political) ties? What will be the likely fallout of COVID-19 on BRI and infrastructure projects in the region?

You can express your interest in attending by following this link. You will receive a Zoom confirmation email should your registration be successful. Alternatively, you can watch the event live on the MENA Programme Facebook page.

Nancy Pelosi in Taiwan: What lies ahead for China and the US? Expert comment GBhardwaj 3 August 2022

Chatham House experts examine the implications for Taiwan, China and the United States of Nancy Pelosi’s visit to the island.

China’s fading ties with Washington?

Dr Yu Jie

US House Speaker, Nancy Pelosi’s, visit to Taiwan has plunged China-US relations into a new low as the reservoir of trust forged between the two sides over the last 40 years appears to be almost exhausted.

However, her move will likely not result in the full-scale crisis across the Taiwan strait that some hawkish voices in both Beijing and Washington believe. Instead, Beijing will most likely offer a combination of military posturing toward the US navy and economic sanctions on Taiwanese agricultural and manufacturing products in order to send a clear bellwether to any future potential visits by high-level Western political figures.

Neither Beijing nor Washington has declared a willingness to change the current status quo as the present impasse benefits both governments – but for different reasons. For China, the best approach is to reach a military and economic capability that prevents US engagement with Taiwan without the use of force. For the US, the strategic ambiguity under the Taiwan Relations Act remains an effective card to counter China’s growing military influence in the Indo-Pacific and keep itself relevant within the region as a security guarantor. Yet, both sides have decided to kick the issue of Taiwan’s status down the road, believing that time is ultimately on their side.

Despite a chorus of nationalistic rhetoric, China will be careful not to stumble into an accidental conflict which risks colossal damage on all fronts. Chinese President, Xi Jinping, must weigh all of the options before him as Beijing cannot afford to be perceived as unilaterally seeking to change what it agreed with the US back in 1979 when ties were re-established. If that happens, it will provoke the US political establishment to reach a unanimous agreement to change its ‘One China Policy’ and, ahead of the 20th Communist Party Congress where Xi is expected to be crowned for a historic third term, the last thing he wants is an unnecessary conflict with Taiwan.

The road to escalation?

Dr Bill Hayton

Beijing has chosen to take issue over Nancy Pelosi’s visit to Taiwan in a way that it did not do for other recent US Congressional visits to the island. Several high-ranking US senators visited in April and May this year yet none of these visits triggered the prospect of a cross-strait crisis. So why has Beijing chosen to turn Pelosi’s visit into a stand-off?

Pelosi’s visit is part of a performance in which both actors – the US and China – are playing primarily for their domestic audiences. This comes at a time when ruling circles in Beijing are preparing for the five-yearly Communist Party Congress. Amid a slowing economy and successive COVID-19 variants, Xi Jinping cannot afford to look weak as he prepares the ground for his third term of office. Meanwhile, the US, represented either by President Joe Biden or House Speaker Pelosi, cannot back down at this point without looking weak itself.

Both sides have moved military assets into strategic positions near Taiwan to demonstrate their resolve. Neither side wants confrontation yet neither wishes to be humiliated. Currently, Pelosi’s visit, amid posturing by China, will make the US appear strong, but the consequences are likely to play out over a longer period. Xi Jinping will need to appear to have recaptured the initiative between now and the congress in the autumn when the risk of an incident will be at its greatest.

Taiwan controls several isolated islands that could be pressured by Chinese forces in the event of a future crisis. The Kinmen and Matsu archipelagos lie just a few miles off the coast of the mainland and have been at the centre of previous confrontations. There are also two other points of concern. Pratas Island – known as Dongsha – sits halfway between Taiwan and Hong Kong. Itu Aba – known as Taiping – is the largest of the Spratly Islands in the centre of the South China Sea. All would be vulnerable to an attack by the People’s Liberation Army, the principal military force of China, and the armed wing of the Chinese Communist Party.

A military confrontation between China and the US over Taiwan, or further south in the South China Sea, would have major impacts on regional and global trade. An estimated $300 billion worth of trade passes through the area every month. Japan and South Korea depend heavily on flows of oil and gas through the sea. Exports from Vietnam, Malaysia, Indonesia and the Philippines would also be heavily affected by disruptions to shipping, increased insurance costs and interruptions in inflows of raw materials. The impact on a world economy already suffering major disruption because of the Russian invasion of Ukraine and the lingering effects of COVID-19 would indeed be stark.

Is a shift in US policy on the cards?

Dr Leslie Vinjamuri

Nancy Pelosi’s visit to Taiwan will undoubtedly be seen as a provocation by Beijing – even if it should not be. Pelosi’s trip to the Indo-Pacific, which also includes visits to Singapore, Malaysia, South Korea and Japan, comes at a time of growing tension between the US and China in the region.

It also comes at a time when the divide among Washington’s foreign policy elite is growing, with some arguing that it is time to abandon the country’s policy of ‘strategic ambiguity’, where it refrains from stating how it would react were China to openly and deliberately attack Taiwan. Indeed, recent statements by President Joe Biden have raised questions about whether the US is set to make a policy change. But, since both its ‘One China Policy’ and policy of strategic ambiguity have been largely successful, it would be wise for the US to maintain them.

During her visit, Pelosi is likely to reaffirm the US’ high regard for Taiwan’s democracy and embrace the language of shared values. She has embraced Biden’s framing of international relations as a contest between democracies and autocracies. This alone will continue to exacerbate tensions. It would be a mistake, though, to signal a major policy change away from strategic ambiguity and towards strategic clarity on Taiwan’s status. Even if the US decides later to embrace a policy shift of this size, such a message should be carefully considered and communicated clearly, and not by chance.

Congress has an important role to play but President Joe Biden and his national security team should make the final decision on US policy towards Taiwan. Getting the signals right in international politics is a key part of deterrence and, especially in East Asia, deterring both China and Taiwan’s ambitions is essential. 

Increasing insecurity in the region?

Dr John Nilsson-Wright and Ben Bland

Nancy Pelosi’s visit to Taiwan has provoked mixed responses from US allies across Asia.

For Japanese policymakers, the Taiwan issue is connected to the wider issue of regional security. Fears that a military conflict over the island will inevitably draw Japanese self-defense forces into a shooting war with China – a development that is neither formally mandated under the terms of the US-Japan Mutual Security Treaty nor necessarily constitutionally sanctioned – explains the concerns in Tokyo.

While the Japanese government of Prime Minister Fumio Kishida is increasingly worried about China’s growing military presence in the East and South China Seas, Japan’s heavy trade dependence on China and the country’s economic and security vulnerabilities make it imperative to avoid any further escalation of tensions.

Given Tokyo’s non-recognition policy towards Taiwan, Japanese ties with Taipei are handled informally by politicians of the governing Liberal Democratic Party (LDP), rather than at cabinet or foreign ministry level, and in recent weeks and months there has been an increase in visits by cross party delegations from Japan.

The death of former Prime Minister Shinzo Abe as removed from public life a vocal advocate in support of enhanced ties between Tokyo and Taipei, but with public opinion in Japan increasingly tilting in an anti-Chinese direction, and with younger politicians favouring a more combative approach towards Beijing, there is a risk that the government will face pressure at home to toughen its language on Taiwan. Bolstering deterrence through increased military cooperation among allies, along with a graduated increase in defence spending, is the best way of limiting risk over Taiwan.

Nevertheless, privately, many officials in Tokyo are likely to have viewed the Pelosi visit as an unhelpful intervention and will be puzzled and perhaps frustrated by the apparent inability of the Biden administration to persuade the US Speaker of the House of Representatives to cancel her visit.

In South Korea, the government of President Yoon Suk-yeol, faces similar pressures to Japan, given the heavy dependence of the South Korean economy on China for trade and investment opportunities.

Pelosi’s visit to the region will strikingly not include meetings with either the president or Foreign Minister Park Jin. With Yoon on vacation and Park attending the ASEAN Regional Forum meeting in Cambodia, the absence of high profile engagements for Pelosi might seem to be a purely practical matter, but Seoul may also be seeking to avoid antagonizing Beijing at a time when the Chinese government is seeking to pressure South Korea not to enhance alliance coordination with the United States and Japan or to expand its commitment to the controversial Terminal High Altitude Area Defence (THAAD) missile defence system.

As in Japan, public opinion in South Korea is increasingly anti-Chinese, but the logic of regional economic and security uncertainty, requires the Yoon government to avoid getting trapped in a worsening stand-off with Beijing.

China’s renewed influence in the Gulf Interview LJefferson 14 April 2023

By disseminating narratives of its own supremacy, China deepened relations with the Gulf during the COVID-19 pandemic.

China has used the COVID-19 pandemic as an opportunity to rebrand its international role as a ‘responsible’ and ‘great’ power by voicing narratives of its own supremacy to regions like the Gulf.

In this interview, Julia Gurol-Haller draws on her International Affairs article to trace how the UAE, Saudi Arabia, Qatar and Iran have responded to China’s narratives, with key implications for Sino-US competition and regional autonomy for the Gulf. This illustrates how words and narratives help bolster authoritarian power.

What have the China-Gulf relations looked like in context of the COVID-19 pandemic?

Bilateral relations between China and the Gulf countries have grown in importance over the past decade, particularly since 2013 with the Belt and Road Initiative. The Gulf plays a crucial role in China’s Belt and Road Initiative and its westward expansion, owing to its favourable geographic position and proximity to the Red Sea. 

In the beginning, transregional relations were mainly economic partnerships since China has a growing appetite for oil and gas and the Gulf monarchies fulfil these needs. China is one of the most important markets for Saudi Arabia, the UAE, and Qatar to export these goods.

Over time, we’ve seen the Sino-Gulf relations expand beyond just economic ties and towards policy fields like security and cultural relations. While these processes were already in place, they were boosted during the COVID-19 pandemic, not only in material terms but also in respect of Chinese attempts to advance its soft power, leverage, and influence in the Gulf region.

When COVID-19 began to ravage the globe, China took that window of opportunity to rebrand its international role. Through efforts such as mask diplomacy, vaccine diplomacy and the strategic diffusion of narratives, China tried to project its image as a ‘global saviour’ and a responsible and great power.

The Gulf monarchies and Iran were among the main target audiences for this public diplomacy campaign. So, the COVID-19 pandemic has been a catalysing factor for deepening relations between China and the Gulf region.

What exactly are narratives and why are they important in China’s approach to the Gulf states during the COVID-19 pandemic?

Through diplomatic statements, news outlets and social media, China has engaged in, what I call, a ‘narrative power-play’. To understand what that is, we need to understand the political importance of narratives.

Narratives are deliberately constructed by (political) actors to influence a certain target audience. In authoritarian contexts, narratives are a useful resource for political actors to bind audiences to their rule and to appeal to people’s emotions by strategically projecting certain images. 

Ultimately, this creates linkages via attraction or persuasion that enhance the actors’ legitimacy and consolidate their power. So, in the narrative power-play, authoritarian leaders function as ‘storytellers-in-chief’, shaping reality in their favour.

What kinds of narratives has China disseminated to the Gulf region in backdrop of the COVID-19 pandemic?

There are two sets of narratives that China disseminated to the Gulf: narratives of supremacy and narratives of a new world order.

China disseminates narratives of systemic supremacy which include praising the overall efficiency of its governance structures. For instance, the Chinese political system is presented as highly efficient and centralized. It has high amounts of ‘state capacity’ for mobilization and the ability to ‘quickly adapt’ to changing situations.

Narratives of performative supremacy refer to the tangible performance of the Chinese Communist Party or China as a whole, such as economic performance, performance in governance, provision of public goods or pandemic response. The performance narratives also highlight the ‘incredible logistical efficacy’, the highly professionalized medical sector and the innovative scientific sector. 

Narratives of normative supremacy are often informed by nationalist notions such as the reclaiming of China’s rightful position in the world and negative feelings towards Western imperial powers who are depicted as having inflicted great pains on China during the ‘century of humiliation’. Overall, these narratives serve to depict China as a responsible, caring and loyal world power that helps other states. The whole idea of mask diplomacy was also carved into that notion of China’s normative supremacy.

Together, China has used these narratives to construct the idea of a new world order in which China is believed to play a much bigger role. The world order narratives are closely linked to stories about the failure of the Western system and show the intertwinement of practices of othering and self-glorification that can also be observed in Chinese official media narratives in other contexts such as diplomatic stand-offs with the United States.

What do these narratives tell us about how China understands the world order?

The narratives China disseminated to the Gulf region show that in the Chinese understanding of politics, the world order is in flux and undergoing major power reconfigurations. For China, this implies a window of opportunity to position itself as a responsible and great power and move from the side-lines to the centre stage of international politics.

This is a trend that has been long in the making in Chinese foreign policy. For instance, the launch of the Chinese Global Security Initiative or the recent brokering of the Iran-Saudi rapprochement agreement show clearly that China is becoming much more than an economic powerhouse and is adopting a more proactive foreign policy.

During the recent state visit of Xi Jinping to Moscow, he said at one point that China stands ready to ‘safeguard (…) the international order underpinned by international law ’. These examples are quite telling regarding the role China ascribes itself on the international stage.

How have the Gulf countries responded to China’s power narratives during the COVID-19 pandemic?

Saudi Arabia, the UAE, Qatar and Iran all picked up the narrative of China’s superior performance during the global crisis. That was a unified response, but they did that to different degrees and by highlighting different aspects.

The strongest reproduction of Chinese narratives can be found in the Emirati media. They buy into the story of the COVID-19 pandemic as evoking a global power shift, which includes a decline of US hegemony and a corresponding rise of China. The explicit wording of Chinese narratives such as ‘community of shared future of humankind’ has been picked up word-for-word by some Emirati media outlets.

Iranian newspapers have also reproduced Chinese narratives. However, the difference is that they also praise China’s unconditional solidarity during the COVID-19 pandemic, which is believed to be superior and more ‘responsible’ than the ostensible individualism of the West. This tells us a lot about Iran’s relationship with the West and how China is believed to be a lifeline or anchor for stability.

Saudi Arabia has been more cautious in reproducing the Chinese narratives. While it does not contest China’s role in containing the COVID-19 pandemic, Saudi Arabia has adopted a more inward-looking perspective, stressing its own role as a responsible regional player during the pandemic.

This might be explained by the kingdom’s own regional leadership claims and the attempt to use the crisis as an opportunity to strengthen this role. The most pressing questions seem to be whether the post-COVID world will be a multipolar order, and what Saudi Arabia’s own position within it might be. 

The UK must avoid conflict with Europe and China Expert comment NCapeling 10 October 2022

Liz Truss says she wants to take a tough line but any freedom to forge her own foreign policy is a casualty of the economic turmoil following her first budget.

The tax-cutting budget from new UK chancellor Kwasi Kwarteng was clearly not inhibited by any apparent concern for the markets’ response. But the interest rate rise it contributed to and the scepticism raining down on the Truss government should force a recognition that economic vulnerability now constrains what the UK tries to do abroad.

That would mean taking a more cautious approach than the new UK prime minister seems to want to adopt. The Treasury and the Foreign, Commonwealth and Development Office (FCDO) may sit next to each other in Whitehall’s parade of 18th century buildings, but a huge gulf lies between them.

When talking to officials, it is striking how those in one building make decisions without reference to the other. Foreign policy is made with no consideration of the UK’s need to borrow money in the markets, and budgets are written with little calculation of the effect of decisions next door – although the Cabinet Office does at least try to reconcile these.

But that approach is a luxury which the budget response and the sharp rise in national debt it will bring makes no longer affordable.

Repairing EU trade relations is priority

The first lesson is that any worsening of trade relations with the European Union (EU) is not now something the UK can afford to contemplate. The markets would take an even dimmer view of national finances if the UK were to become embroiled in an even more fractious trade dispute with its closest and largest trading partner.

When campaigning for the Conservative party leadership, Liz Truss talked tough on the Northern Ireland protocol and her unwillingness to compromise much with the EU. Since she became prime minister, sounds from both the UK and EU have been much more conciliatory, with suggestions that a deal could be just a few details away.

And yet the Truss government is still pressing ahead with the controversial legislation which would enable the UK unilaterally to walk away from parts of the treaty it signed – the House of Lords will debate the bill and its most contentious measures, such as the extensive new powers it gives ministers, on 11 October.

But there are suggestions from officials that, although Truss would lose too much face by withdrawing the legislation, the government may choose not to contest any Lords amendments vigorously.

That would be wise. The prime minister should know the financial path she has chosen with her chancellor makes carrying out the threats of walking away from a deal too costly to afford. As it is, the markets are hardly looking with equanimity on the prospect of the UK borrowing £100 billion to shield consumers from rising gas prices.

A £43 billion package of proposed tax cuts with no explanation – yet – of how the government will pay for them would be even less comfortable were the UK to take such a hard line on the Northern Ireland protocol that it provokes a trade war with the EU. Brussels can also make those calculations and, for all the recent talk of concessions, is expected to hold fast to its new position.

For the same reasons, the UK cannot afford to talk about taking a tougher line on China – as the prime minister has already done – without clearly knowing what the economic impact would be and being sure voters are prepared to pay this price. Years of courting commercial links with China mean they now weave their way through the UK economy.

The dependence of universities on Chinese students and the income they bring is already well-known and heavily debated – but the exposure of the UK economy to digital technology and components from China is even greater, and China is now the largest source of imports for the UK with £63.6 billion or 13.3 per cent of all goods imports according to the Office for National Statistics.

Much of that was laptops, computers, telecoms and phones as well as toys and clothes; there are few households or offices that will not have these products. China is also the sixth largest destination for UK exports, with £18.8 billion or 5.8 per cent of goods exports, much of it machinery and cars.

Scottish Liberal Democrat peer Lord Purvis expressed concern at these figures because of the implication that the UK’s ability to take a tough line with China on human rights was now enormously circumscribed. And defence and intelligence chiefs are also warning of the UK’s vulnerability.

Taking a hard line needs context

There are signs the government is concerned enough to begin to map out this economic vulnerability but no signs that it yet has a full picture. Without knowing the economic hit of a frostier relationship, and confidence the House of Commons accepts it, Liz Truss would be brave to label China ‘a threat to national security’ – as her supporters indicated during the leadership campaign – when she updates the integrated review of defence and security in the coming months.

Of course, foreign policy should not be inspired by commercial concerns alone. There are wider reasons to develop a clearer China strategy to help lay out a more consistent future path. On his recent trip to East Asia, UK foreign secretary James Cleverly heard from UK partners that they were disconcerted by the lurch from George Osborne’s ‘golden years’ to the Truss charge of a China ‘threat’.

When Liz Truss was UK foreign secretary, some forecast she would pursue mercantilism given her focus on forging post-Brexit trade deals but, as it turned out, that was not the spirit of her tenure.

Independent Thinking: War in Ukraine, Congress in China Audio NCapeling 21 October 2022

The inaugural episode of our new podcast examines the latest developments surrounding Russia’s invasion of Ukraine, and Xi Jinping’s political report from the 20th National Congress of the Chinese Communist Party.

Bronwen Maddox and her guests examine latest developments surrounding Russia’s invasion of Ukraine and Vladimir Putin’s nuclear threats, as well as Xi Jinping’s political report from the 20th National Congress of the Chinese Communist Party.  

Bronwen is joined by Gideon Rachman, chief foreign affairs columnist for the Financial Times, Orysia Lutsevych, head of the Ukraine Forum at Chatham House, and Dr Yu Jie, senior research fellow in Chatham House’s Asia-Pacific programme.

Independent Thinking is a regular podcast hosted by Chatham House director Bronwen Maddox, in conversation with leading policymakers, journalists, and Chatham House experts to provide insight on the latest international issues.

Independent Thinking: China protests, North Korea missile tests Audio NCapeling 1 December 2022

Episode seven of our new weekly podcast examines the civil unrest in China and the ongoing development of North Korea’s nuclear weapons programme.

Anti-lockdown protests are sweeping the cities of Beijing, Shanghai, and Guangzhou. What does the unrest say about China’s response to COVID-19? How serious a challenge is it to Xi Jinping’s legitimacy so soon after the Party Congress?

Meanwhile, 2022 has been a record year for Pyongyang’s ballistic missile launches. How far has North Korea’s nuclear programme and its missile systems developed, and what does it mean for the country’s neighbours?

Joining Bronwen Maddox in the studio this week from the Chatham House Asia-Pacific programme are its director Ben Bland and senior research fellow Dr Yu Jie. Joining the panel is special guest Ankit Panda, the Stanton senior fellow at the Carnegie Endowment for International Peace, and editor-at-large for The Diplomat magazine.

About Independent Thinking

A weekly podcast hosted by Chatham House director Bronwen Maddox, in conversation with leading policymakers, journalists, and Chatham House experts providing insight on the latest international issues.

UK is too tight on the money and too vague on China Expert comment NCapeling 13 March 2023

The new UK Integrated Review fills gaps left by the last one but is dominated by defence. It needs more clarity on Europe, trade, and development – and more money.

Following a long two years, the UK’s Integrated Review from March 2021 now looks prescient in calling Russia the main threat to UK interests. And Russia’s invasion of Ukraine is the main – but not the only – reason forcing an update of the review only 24 months later.

The UK’s commitment to Ukraine is now centre stage and so therefore is its cost, which immediately exposes a prime weakness of this review. An extra £5 billion on defence is more than nothing, as was originally rumoured, but far less than £11 billion which UK defence secretary Ben Wallace argues is needed.

UK military support for Ukraine cost £2.3 billion in the past year and a continuation will use up £2 billion of the new money. The report also notes £3 billion will go on infrastructure for building nuclear submarines at Barrow and nuclear training. That does not leave much for anything else.

There is a pledge to end the reduction of the armed forces which is essential if the UK contribution to Ukraine and European defence is to be credible. But an ambition to spend 2.5 per cent of GDP on defence by an unspecified date is all but meaningless – albeit prudent phrasing given fiscal uncertainties.

China challenge is one of balance

Ministers have been wrestling for months over their choice of language on China, and ‘epoch defining challenge’ is what has emerged, while also expressing concern over China’s links with Russia. But the review is careful to stop short of calling China a threat as Liz Truss intended.

The choice of vocabulary reflects a long desire to balance forging commercial ties with an increasing wariness of data and security threats under President Xi’s leadership of China. The UK wants to support the US in its concerns but not to presume conflict is inescapable.

The review does acknowledge the threat to Taiwan for the first time. Two years ago, it was fiercely criticized for not including any mention of that despite the potential disruption supposedly being ‘far more damaging than the renewed illegal invasion of Ukraine’ as MPs on the Foreign Affairs Select Committee put it.

But again the question of resources is inescapable. The ‘Indo-Pacific tilt’ which the UK declared two years ago is offered not just as a recognition of the region’s political and economic heft in any vision of the future, but as a favour to the US.

The UK lacks the resources to make that tilt credible in terms of substantial support to the US – nor, arguably, would it do the US any favours by neglecting the defence of Europe or the Middle East, which gets scant mention.

The AUKUS announcement on the same day appears to fill that gap. UK prime minister Rishi Sunak was in San Diego, California to greet the declaration that Australia will draw on British designs for its new nuclear submarines – a decision which brings more British jobs and underpins an alliance of both symbolic and practical weight in the region. But for the UK to play its part fully, it may need to divert resources from elsewhere, and this review sidesteps that hard choice.

More broadly, the UK would benefit from considering how to respond to the reality of China’s rise – analysing what happens to supply chains if tension disrupted them and how it might use membership of the Asia-Pacific CPTPP trading bloc, which appears likely to happen soon.

One of the biggest omissions in the 2021 review was relations with Europe and that is somewhat remedied but more is needed. The UK has been a leader for Europe in its clear response to Russia’s invasion of Ukraine – almost the only common thread of passionate agreement between the three UK prime ministers since the invasion – but it should now consider if it wants to take part in joint development of military assets. And a clear statement of cooperation with European Union (EU) governments would be a boost to NATO.

There is also now a Europe-shaped hole in the review’s discussion of trade. The 2021 version mentioned trade 79 times with the focus on new trade agreements outside Europe. It is now clear, if it was not before, these make little difference to GDP. The recent repairing of relations with the EU – and France in particular – may yield more practical results two years from now.

UK power in the world is changing

The review is also largely silent on another difficulty in the UK’s foreign policy which are the aims and size of its development aid – much changed from its original goal of poverty reduction to a focus on national interest with a reduced budget. This is sensitive political territory but must be better spelled out to count as a plan.

The FCDO intends to appoint a second permanent under-secretary to deliver the government’s development priorities and the minister for international development will join the National Security Council. This acknowledges the disruption caused by the merger of the FCO with DFID and the need for development staff to have clear leadership as well as, hopefully soon, a clear policy.

The pledge of a one-off payment of £20 million for the BBC World Service 42 foreign language channels for two years is welcome too as an acknowledgement of their ‘soft power’ value, especially in parts of the world where democracy is absent or in retreat.

European Hub for Contemporary China

The European Hub for Contemporary China is a three-year project focused on original research on China.

The European Hub for Contemporary China (EuroHub4Sino) is a three-year project, which began in October 2023, to produce original research on China. It also seeks to create an online platform that pools a wide array of European knowledge and expertise on contemporary China in one publicly accessible research platform. The project is run by a consortium of eight partners across six European states.

Find out more by visiting the project website.

EuroHub4Sino is co-funded by the European Union. UK participants in Horizon Europe Project European Hub for Contemporary China are supported by UKRI grant numbers 10108183 and 10108749.

China’s economic policy pendulum has swung towards stimulus – but keep expectations low Expert comment jon.wallace 14 October 2024

Beijing historically swings between stimulus and frugality. But Xi Jinping’s ambition for self-reliance will constrain any new efforts to boost the economy.

Policymakers in Beijing have spent the past three weeks trying to convince the world that they are determined to deliver meaningful support to China’s sagging economy. 

Since late September statements have come from the central bank, which promised to cut interest rates, release liquidity, and provide funding to securities firms; from the politburo, which said it wanted to stabilize the real estate market, boost the capital market and shift towards looser fiscal and monetary policy; from the government’s main planning body, which promised a package of policies to support domestic demand; and from the finance minister himself, who at the weekend committed to issue more debt to recapitalize banks, support local governments and aid unhappy consumers.

Though details have been scant, the Chinese stock market has responded enthusiastically to this flurry of rhetoric. But the bigger question for the global economy is whether a boost in Chinese demand can return the country to its former status as a reliable destination for global exports and capital.

With that measure of success in mind, it is worth keeping expectations low. For the past 15 years, Chinese authorities have been wrestling with two conflicting objectives: to grow the economy, and to minimize the risk of financial instability. Those goals sit uneasily with each other because the effort to boost growth has relied on borrowing; and yet a rise in debt can increase the risk of a debt crisis.  

Chinese policymaking has responded to this dilemma by taking on a pendulum-like quality. Sometimes the authorities boost the economy by funding more investment spending. At other times that stimulus gets reined back as policymakers worry about the economy’s indebtedness.

In the aftermath of the great financial crisis of 2008, for example, Beijing’s over-riding priority was to protect the Chinese economy from the risk of recession by implementing a huge credit-financed stimulus to spur investment in infrastructure and real estate. 

By 2012, though, concerns about over-indebtedness began to dominate, and a withdrawal of stimulus saw the Chinese economy sag. In late 2015,a new round of stimulus measures emerged, only to be withdrawn again around 2018.

With that pendulum in mind, the optimistic take on what policymakers have said in recent weeks is that we are now back in stimulus mode. That’s true in part, but three factors suggest that this time is a little different.

Different times

First, China’s rising debt burden increases authorities’ worries about financial stability. Data from the BIS show that China’s private sector debt almost doubled in the past 15 years to 200 per cent of GDP at the end of 2023. The comparable debt stock for the US and the Eurozone was much lower, at 150 per cent each.

Second, ideology is playing a growing role in shaping Chinese economic policy. The most visible effect has been to prioritize Chinese state-owned enterprises, at the expense of the private sector. This became especially visible in 2021 with a campaign against the ‘unrestrained expansion of capital’ – Beijing’s way of expressing its anxiety that China’s corporate sector was behaving in a manner inconsistent with Chinese Communist Party goals. 

Although that phrase is no longer current, entrepreneurs’ animal spirits remain in the doldrums. They are likely to stay there as long as President Xi Jinping’s preference is for ‘bigger, better, stronger’ state-owned enterprises, which use capital much less efficiently than private firms.

Third, today Chinese policy is shaped by Beijing’s perception of geopolitical risks that it faces. Those risks became starkly apparent in February 2022 after Russia’s invasion of Ukraine, when essentially every country that prints a reserve currency joined to freeze Russia’s access to its foreign exchange reserves. That enveloped the Russian economy in a network of sanctions that sharply constrained its access to a whole range of imports.

It is not difficult to consider a similar scenario confronting China. Beijing’s approach to economic policy is therefore heavily influenced by the need to insulate itself from that kind of risk (though Chinese policy had in any case been tilting in this direction for years).

‘Asymmetric decoupling’

This policy can be described as ‘asymmetric decoupling’: a simultaneous effort on the one hand to reduce China’s reliance on the rest of the world by substituting imports with domestic production; and, on the other hand, to increase the rest of the world’s reliance on China by establishing itself as a ‘zhizao qiangguo’, or manufacturing powerhouse.

This is the right context in which to understand a central economic goal of the authorities, which is to reduce the economy’s dependence on real estate investment. 

The intention is to allow capital and credit resources to migrate to new sectors of the economy that will help to build that manufacturing powerhouse: high-tech and green energy, in particular. What that means in practice is that any forthcoming support for the real estate sector will be rather limited.

How Beijing is closing surveillance gaps in the South China Sea The World Today iallan.drupal 15 October 2024

The discovery of a new radar system on China’s Triton Island military base shows that Beijing is rapidly developing its intelligence capacities in contested waters, write John Pollock and Damien Symon.

New satellite images reveal how the Chinese military is dramatically expanding its capabilities on Triton Island, which looks set to become a one of Beijing’s key signal intelligence bases in the South China Sea.

Once completed, the radar system would significantly increase China’s signals intercept and electronic warfare capabilities across the disputed Paracel Islands archipelago and add to a wider surveillance network spanning much of the South China Sea.

The enhanced facility on Triton is likely to offer a challenge to China’s competitors in the region and internationally.

China seized control of the Paracels from Vietnam in a 1974 naval battle, and competition for access to it waters has intensified since the recent discovery of oil and gas reserves. Chinese and Vietnamese maritime militia clashed off the coast of Triton in 2014.

In addition, American, British and Australian naval forces have for the past decade patrolled the waters to collectively challenge China’s contested ‘nine-dash-line’ claim to large stretches of the South China Sea. 

Overlapping anti-stealth network

A year after work was first identified on Triton, satellite images from Maxar have helped build a clearer picture of Beijing’s efforts to defend this strategic waterway.

The most striking development is the construction of a new radar system, known as SIAR – synthetic impulse and aperture radar – which purportedly detects stealth aircraft. The counter-stealth radar on Triton is characterized by its distinctive octagonal structure, which resembles another SIAR system built by China on Subi Reef in the Spratly Islands, south of the Paracels, in 2017. A half-completed tower also sits near the SIAR radar on Triton, which is likely to be the operations centre.

Once completed, the radar on Triton will form what is believed to be a wider network of at least three overlapping counter-stealth radars built across Chinese bases in the South China Sea over the past decade, including on Hainan Island, home to several Chinese naval bases. 

The positioning of the radar on Triton, 320km south of Hainan, is telling, says J. Michael Dahm, Senior Resident Fellow for Aerospace and China Studies at the Mitchell Institute. 

‘SIAR radars cannot see over the curve of the Earth, which means there is a gap in China’s air surveillance coverage between Subi Reef and Hainan Island. The Triton Island site will help close that gap’, said Dahm.

The aim, he suggests, is to give China contiguous counter-stealth radar coverage of the South China Sea.

More construction underway

The satellite images reveal other building projects on Triton. One is a large pad at the end of the road network which will probably be used as a launching point for a mobile anti-ship missile battery. The building at the northeast end of the road is probably a storage building for missile transport vehicles. 

Diminishing Vietnam’s options

The development of a new counter-stealth radar system and other suspected signals intercept structures on Triton represents a notable increase in China’s intelligence capabilities in the Paracels. The Chinese Communist Party has not disclosed the purpose of the building work on Triton, but its effects on regional and global competitors are likely to be wide ranging.

For Vietnam, which is rapidly expanding its own bases in the South China Sea, the intelligence structures on Triton would significantly diminish its capacity to operate undetected in the area. Alongside existing radar on Triton which can detect sea-going vessels, Beijing now has the potential to track Vietnamese air movements and gain forewarning of Hanoi’s manoeuvres in the area, including efforts to access oil and gas deposits.

The desire to strengthen control over these resources may explain why China is fortifying Triton Island, says Bill Hayton, Associate Fellow in the Asia-Pacific Programme, Chatham House. ‘The developments might be a warning that China is planning to mount another drilling expedition’, he suggests.

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A New Era for China: Implications for the Global Mining and Metals Industries 18 June 2018 — 9:00AM TO 10:30AM Anonymous (not verified) 8 June 2018 Chatham House, London

Since the turn of the century, China’s demand for resources has dominated global headlines. It’s rapid demand growth through the early 2000s sparked the beginning of the commodities ‘super cycle’, and encouraged a growing Chinese presence in international mining, and in global metals and minerals markets. More recently, its transition toward the ‘new normal’ of slower but higher quality growth has underpinned the sudden slowdown in global commodities demand.

Drawing on China’s domestic ambitions, as set out in the 19th party congress, and on its wider strategic ambitions through the Belt and Road Initiative, the speaker will set out his thoughts on China’s next era of growth, and its likely implications for international mining investment and global metals and minerals markets.

The Global Implications of China's Energy Revolution 4 March 2019 — 9:00AM TO 10:30AM Anonymous (not verified) 7 February 2019 Chatham House | 10 St James's Square | London | SW1Y 4LE

Ten years ago, it would have been difficult to believe that China – the world’s largest greenhouse gas emitter – would be one of the global leaders in some elements of clean energy development and deployment. With increasing air pollution and predominantly coal-fired power generation fueled by a booming economy and population, China has had to rethink its approach to environmental protection and climate mitigation.

Strong government signalling and national policies have led to the construction of the world’s largest fleets, wind farms and solar photovoltaic arrays in an effort to reduce national GDP intensities of energy and CO2 emissions. How has the availability of large amounts of capital, and the number of state-owned companies with soft budgetary constraints, helped contribute to this?

Against this backdrop, this event will consider how China must re-evaluate its approach to energy security – coal made up the majority of the country’s energy in 2016, followed by oil, of which 65 per cent had to be imported – despite the country being one of the pioneers of renewable energy. This event will look at how, in delivering on its clean energy objectives, China could redefine the traditional energy security paradox and in fact become more resilient to previously overlooked vulnerabilities.

China Paves Its Way in New Areas of International Law Expert comment sysadmin 31 March 2017

China is looking to increase its capacity and influence in international legal matters – and it is particularly in frontier areas of the law that China is likely to take a proactive stance.

Foreign Minister Wang Yi called China a staunch defender and builder of the international rule of law in his speech to the UN General Assembly in October 2014. He promised that as China grew stronger, it would make a greater contribution to the maintenance and promotion of international rule of law, and would work with other countries to build a fairer and more reasonable international political and economic order.

For many in China, that time has now come: there is a sense that China deserves a much stronger and more respected voice in discussions surrounding the future of the international system. The recent speeches of Xi Jinping in Davos and Geneva in January 2017 suggest that China is now seizing the initiative and fighting for a voice and influence commensurate with its status and power as the number two economy in the world.

But there is an interesting divide in the areas in which China chooses to assert itself. In traditional areas of international law – such as the law of the sea and international human rights law – China continues to harbour reservations about the fairness of the existing international order. Its misgivings are fuelled by a perception that it did not play a significant part in the creation of the post-Second World War international order, and that those rules operate mainly in the interests of Western powers.

There is also a sense that traditional areas of international law do not offer a level playing field for China, since Western states have far more experience at operating in those. We know from Chinese experts that in the South China Sea case, one background issue that played into China’s refusal to engage in litigation with the Philippines and other interested states (which were represented by leading Western international lawyers) was a lack of experience before international courts and tribunals.

Contrast this with newer areas of international law– such as the regimes governing cyber, space, climate change and deep sea mining issues. In these areas, the rules are still in the process of being developed and tested, and the influence of the existing powers is not so firmly established or accepted, so there is more opportunity for China’s voice to be heard and heeded.

On climate change, China has become a champion of the Paris Agreement, which it worked hard with the Obama administration to secure. China is also active in some of the processes related to cyber rule-making, both as a member of the UN Group of Governmental Experts on cyber issues and through bilateral dialogues with a number of states. China has taken a keen interest in the regime applicable to the mining of the international seabed, making submissions to the International Tribunal on the Law of the Sea about the procedure for settling disputes. In international economic law, another relatively new area, China has been assiduously cultivating expertise, and is a major player in the negotiation of the ‘mega regional’ trade deal, the Regional Comprehensive Economic Partnership.

In time, the development of China’s much heralded Belt and Road Initiative may provide an opportunity for China to be further involved in international norm-setting, through the creation of a system of economic and political interaction that is built and run more along Chinese determined lines. The emergence of the Asian Infrastructure Investment Bank may offer an early indicator of China’s attempts to shape global governance, although in this context China has so far scrupulously observed international standards and has made no open attempt to challenge them.

So far, China’s practical input to international norm-setting has been limited. While China is prone to making wide-ranging statements of principle, it finds it more challenging to engage in the nitty gritty of specific rule making. But as is clear from its membership of the WTO, China can adapt quickly. While initially it was a reluctant adherent to the WTO dispute settlement mechanism, China is now adept at making active and effective use of its rules to promote China’s interests, including launching a legal challenge regarding the contested issue of its non-market economy status. Overall, there is strong leadership backing for a more activist approach to its engagement with the international legal system.

China sees international law as an important instrument in the “toolbox” of international diplomacy. It will increasingly be seeking to leverage international law to promote its own interests, particularly in newer areas, as it seeks to strengthen its wider soft power and influence.

China, Liu Xiaobo and the New Reality of Human Rights Expert comment sysadmin 18 July 2017

Liu Xiaobo, Chinese Nobel laureate and human rights campaigner, died on 13 July while serving an 11-year prison sentence for ‘subversion’. Steve Tsang tells Jason Naselli that the reaction to Liu’s death reflects the growing confidence of the Chinese government that it can ignore Western criticism.

What does the Communist Party’s handling of the case of Liu Xiaobo tell us about its approach to dissidents and freedom of speech in the Xi era?

What it tells us is the party is tightening control much more than before. The Liu Xiaobo case shows that the party is not comfortable with people asking for the constitution of the People’s Republic of China to be enforced. Charter 08, for which Liu Xiaobo was jailed, ultimately amounts to asking for the rights of Chinese citizens, as articulated in the constitution, to be fully implemented. That resulted in Liu Xiaobo being incarcerated.

But what is really important isn’t so much that the party is tightening its control – that is happening anyway. What is more important is that the party is not that worried about how the Liu Xiaobo case affects international opinion.

If that’s the case, what lessons should countries looking to trade with China but concerned about human rights abuses take from Liu’s case?

We haven’t seen any major Western country come out to strongly and clearly hold the Chinese government to account over Liu Xiaobo’s human rights situation. A few leading governments have asked for Liu Xiaobo’s widow to be allowed to choose to stay or leave China. But so far there is no indication of any government backing that up with anything concrete.

That is very weak support for human rights in China. And it reflects a new reality: of the unwillingness of leading democracies to challenge the Chinese government on human rights matters, and the confidence on the part of the Chinese government to simply ignore what the rest of the world may think about it.

Given that there has been much discussion of China taking a larger global leadership role in the wake of an inward political turn in the US, what are the implications of Liu’s case for China’s global standing?

The implications are really small. There is a stronger expectation and desire to see China playing a global role because Donald Trump has damaged the standing of the United States as a global leader. It is not because of something that the Chinese government has done; it’s because of Trump.

That wider context hasn’t changed. So the Chinese government’s calculation is that the negative international reaction to Liu Xiaobo’s death will blow over in a matter of days – at worst, a couple of weeks – and then things will get back to normal.

There is no serious reason to believe that the Chinese government is wrong in their calculation. At the moment, the major Western countries are focusing on the economic relationship, and doing what they have to do pro forma about human rights issues in China. No major Western government is going to say that they are going to reconsider a major trade deal with China because of how Liu Xiaobo or his family has been treated. The Chinese government knows that and they act accordingly.

Moving on from the international reaction, how does Liu’s situation resonate within China?

Most Chinese don’t even know who Liu Xiaobo is. Within China, you cannot even search Liu Xiaobo’s name, or any permutation of Liu Xiaobo’s name, or the English initials of Liu Xiaobo. Anything potentially about or related to Liu Xiaobo is being censored.

Some things still get through; the ingenuity of a lot of bloggers is infinite. But most Chinese don’t even know what happened to Liu Xiaobo, or if they do, they mostly see him as a shill of the Western world trying to infiltrate and destabilize China.

If Western governments won’t engage China over human rights, what implications does that have for the global treatment of human rights as China becomes a bigger global player?

You can ‘engage’ in the sense of raising the issue with the Chinese authorities, as indeed the UK government and the German government have done, for example. But they haven’t actually taken any concrete steps.

The type of engagement where Western governments would get the Chinese government to demonstrate that something concrete was being done to improve the human rights situation – that era has gone. It is not going to come back in the foreseeable future. And therefore, the situation in terms of human rights in China will not be improving in the foreseeable future.

But what is more significant is how the Chinese government is asserting itself and dealing with domestic and international challenges, including on human rights issues. For many other countries around the world, China is showing an example for how to deal with the West. They don’t see it as being negative; they see it in positive terms.

There are still more countries in the world that abuse human rights than respect human rights. Most of those governments are pleased to see what the Chinese government has done in terms of how it handles the West.

The 2020 Inner Mongolia Language Protests: Wider Meanings for China and the Region 24 November 2020 — 3:00PM TO 4:00PM Anonymous (not verified) 12 November 2020 Online

Speakers discuss the historical roots of the language issue, as well as the wider significance of the protests in China.

Please note this is an online event. Please register on Zoom using the link below to secure your registration.

In September thousands of people protested in Inner Mongolia in opposition to a government move to replace Mongolian language with Standard Mandarin in three school subjects – history, politics and Chinese language.

Announced less than a week before the start of the new school year, the policy also requires schools to use new national textbooks in Chinese, instead of regional textbooks. The mass protests and classroom walk-outs reflect ethnic Mongolian’s anxiety that their native language may be eliminated. What has the government’s response to the protests been?