Galwan, LAC Talks & Build-up - Xi's History & Xi's Party - May Economic Data - G7, NATO & 'Small Cliques' - US Indo-Pacific Posture - Apple Daily - Arab Perceptions - Influence in Sri Lanka & Pakistan

My book Smokeless War: China’s Quest for Geopolitical Dominance is set to release on Monday, June 28. Earlier in the week, StratNews Global’s Surya Gangadharan hosted me for a chat about the book. Do check out the video below. Also, for those interested, you can pre-order the book here.


I. India-China Ties

This week marked the one-year anniversary of the Galwan Valley clash. On Tuesday, Indian Army chief led the force in paying homage to the 20 soldiers who died in the clash. “Their valour will be eternally etched in the memory of the nation,” he said. Major General Akash Kaushik, the officiating General Officer Commanding of the Fire and Fury Corps, laid a wreath at the iconic Leh war memorial. A statue of Colonel Santosh Babu, the commanding officer of the 16 Bihar Regiment who was awarded the Mahavir Chakra posthumously, was unveiled at his native place in Suryapet by Telangana Minister KT Rama Rao. On the other hand in China, the anniversary wasn’t among the top trending issues on social media and didn’t receive any real coverage in People’s Daily, the PLA Daily or Xinhua. Nevertheless the Global Times reported that:

“Chinese netizens honored and expressed gratefulness on social media platforms to Chinese frontier soldiers and officers who had sacrificed their lives in the deadly military clash for defending national sovereignty and territorial integrity, while warning the Indian government not to  attempt to provoke fresh conflicts along the border as the South Asian country suffers from the epidemic.”

Guancha, meanwhile, had a report based on a seminar held by the Center for International Security and Strategy at Tsinghua University. Do note that Chen Hongjun, one of the four soldiers identified by the PLA as having died in the Galwan Valley clash, will be among 29 people who will be honoured with a medal during the CCP centenary celebrations on July 1.

Ananth Krishnan’s piece on the narrative from China on the standoff with India is a good read. He writes:

“A reading of all of China’s public statements issued in the year since the Galwan clash underlines a two-fold approach in Beijing’s messaging: a focus only on the Galwan Valley with little to no mention of the other troubled spots on the LAC, where PLA transgressions led to multiple stand-offs, and since February this year, a more proactive propaganda effort aimed at emphasising the bravery of China’s troops in Galwan and portraying Beijing not as the aggressor, but as defending its sovereignty.”

Meanwhile, Indian Foreign Secretary Harsh Vardhan Shringla talked about the ongoing standoff in Eastern Ladakh during an online session on Friday. Shringla reiterated that “we are very clear that until these issues (existing friction points) are addressed and our border areas are peaceful and tranquil, we will not be able to go into what is known as a normal relationship as we go forward.” He further stated that “I think the entire basis of that relationship has been predicated on having peace and tranquillity on our borders,” before adding that “the onus is on China to ensure that the issues that remain are addressed.” A day earlier, the MEA had reiterated its formula of disengagement followed by de-escalation being the pathway to end the standoff. There, however, hasn’t been any forward movement in this regard. 

But there is this piece by Mayank Singh from The New Indian Express, which quotes an unidentified senior Army officer as saying that: “‘The Chinese have agreed to discuss resolution of the standoff at Gogra, Hot Spring at the Division Commanders level as they feel that things can get resolved at that level now.’ The Corps Commanders talk in future will be held if the need arises, added the officer.” This makes it sound like it was an Indian proposal to have talks at this level. I am honestly not sure what to make of it. But let’s look at what others have reported. 

For instance, India Air Force chief Air Marshal RKS Bhadauria on Saturday said that “Talks are on for the next round. There's a proposal for Commander-level talks and decisions will be taken.” I am not sure what level this implies. But earlier in the week, Snehesh Alex Philip reported for ThePrint that:

“Sources in the defence establishment said that despite a physical meeting not having taken place since 9 April, local commanders are in touch with their Chinese counterparts on the hotline to prevent any escalation of tensions on the ground. They also said that a physical meeting at the Corps Commander level for resolution of tensions, or for that matter at divisional or brigade level for follow-ups is not expected to take place before 1 July, which will mark 100 years of China’s Communist Party. Defence sources said that China had mentioned during the last Corps Commander-level meeting that further talks on disengagement in Gogra and Hot Springs, already agreed to in June last year, can take place at the divisional level, headed by a Major General rank officer.” By this account, the proposal for talks at the divisional level was made by the PLA.

Also this bit from ThePrint’s report is interesting. “The Corps Commander-level talks with China were ‘unprecedented’, as till last year, the established protocol to resolve tensions at the LAC were through local tactical commanders. The highest level of talks before recent tensions have involved divisional commanders, who are Major General rank officers.” Now does agreeing to return to divisional level talks for the remaining friction points indicate a scaling down of the urgency/importance from an Indian point of view? Why not keep it at this ‘unprecedented’ level to signify that it’s not business as usual?

In the meantime, there is considerable military and infrastructure build-up that has taken place across both sides over the course of the past year. For instance, Dinakar Peri reports for The Hindu, citing an unidentified source, that the “PLA has built additional accommodations, both permanent and temporary, in Rudok, Kangxiwar, Gyantse and Golmud areas. Construction of field hospitals and procurement of additional snow mobility vehicles by the PLA also indicate that they are preparing for the long haul and permanent winter occupation of these posts.” The report also talks about rotation of troops along Pangong Tso and “intensifying construction work behind the main confrontation points in Aksai Chin.” 

My colleague Suyash Desai has documented the increased attention that the Tibet and Xinjiang Military Districts have gotten over the past year. He writes that:

“newer weapons like the Type 15 light tank, PCL-181 laser-guided vehicle-mounted howitzers, Z-20 utility rotary-wing aircraft and GJ-2 attack drones were commissioned with the TMD after the 2017 Doklam stand-off...the latest analysis and reports indicate that this weaponry is fully integrated within the TMD…” He adds that the ongoing China-India stand-off has also “elevated the XMD’s importance. The region is reportedly being reequipped with advanced weaponry like the DF-26 intermediate-range ballistic missile, T-15 tanks, PHL-03 rocket launchers, PCL-181 and PCL-161 howitzers and ZBL-09 infantry fighting vehicles.” 

Another report in TheDrive brings together the work of OSINT analysts and satellite imagery analysis to document the upgrading of the PLAAF’s capabilities along China’s western front. It argues that:

“the overall purpose of these PLAAF infrastructure developments in China's westernmost regions is clearly centered around projecting increased airpower along the largely disputed border with India, and improving the sustainability of air operations in case of actual armed conflict...China’s efforts extend far beyond airpower itself though, and the rapid increase of active heliports and ground forces garrisons throughout Tibet and in Xinjiang paints a picture of a vast multi-domain military buildup along the edge of China’s territorial reach that airfields will be critical in sustaining. In addition to the militarization of the region, China’s infrastructure drive actually also includes a tremendous number of civilian infrastructure developments. Some of these, such as road and rail construction, serve an indirect military purpose by enhancing military logistical capabilities. Others, such as electricity generation, telecommunications, and agricultural developments help China sustain populations into the more remote western reaches of its territory and thereby cement the political claims to territorial control over Tibet and its disputed borders with India.”

I find myself in agreement with this assessment. But let me add that this overall capacity building serves multiple different purposes in my view. First, a lot of the infrastructure development is driven by domestic security interests. Second, the aim of expanding military capacity is also to cement the PLA’s advantage in the region vis-a-vis India. This not only bolsters China’s territorial claims, but will be used to intimidate and constrain India’s options in terms of its foreign policy. Third, the east and south are often seen as China’s primary theatres of concern. But the PLA today enjoys tremendous capacity in that direction to deter aggression. So Indian policymakers should not view the PLA’s priorities in the waters as something that will keep the western front relatively calm.

Meanwhile, for TOI, Rajat Pandit reports that the Indian side has fast-tracked the construction of roads, tunnels and bridges and pushed early opening of passes given the situation in Eastern Ladakh. Also Abhishek Bhalla’s report for India Today has this interesting bit:

“The enhanced boots on the ground in Ladakh could even become a permanent deployment strategy for years to come to challenge any Chinese misadventure. ‘There is a four-to-five-year roadmap for border deployments and logistics. Whatever was planned for Ladakh for this period has been achieved in the last one year ensuring our troops can sustain for long,’ said an army official...‘This was the first winter after the trouble in Ladakh. Now we are better prepared to continue with operations with the same and even more numbers for years to come,’ said the army official. The accommodation was set up for troops to withstand the severe cold and wind chill factor includes fast erectable modular shelters. Apart from the smart camps with integrated facilities which have been built over the years, additional state-of-the-art habitat with integrated arrangements for electricity, water, heating facilities, health and hygiene have been recently created to accommodate the troops.”

There’s also been some discussion around this piece by Chinese analyst Zhou Bo in SCMP on the Galwan valley clash anniversary. The arguments he’s made are largely a repeat of his comments that I covered in April. But the one comment that he makes in addition to those is this:

“In a few meetings with Indian scholars, I was surprised to learn how they almost invariably believed that the Galwan clash was the result of a planned attack by China. This is impossible. If China has to compete in an America-initiated great power competition, why would it suddenly divert its attention and strength away from that to take on India?” Ergo, the third point in my assessment above. It would be foolhardy for New Delhi to buy this line of argument. I think Jabin Jacob’s thread below does a really good job of deconstructing and responding to Zhou’s arguments.

Finally, let’s look at a couple of other key stories that have been doing the rounds. First, a survey by LocalCircles has found that around 43% of Indian consumers refrained from buying Made in China products in the last 12 months. For its survey LocalCircles received 18,000 responses from consumers in 281 districts. According to findings of the survey—43% Indian consumers did not buy made in China products in the last 12 months. 

Second, Recorded Future, the world’s largest provider of intelligence for enterprise security, has said that suspected Chinese state-sponsored hackers targeted Indian telecom companies including BSNL and aerospace and defence contractors. RedFoxtrot, the suspected Chinese state-sponsored threat activity group, targeted several government and non-governmental assets in Central and South Asia for cyber espionage, according to Insikt Group, Recorded Future’s threat research division. Apart from BSNL, the other Indian company targeted was Alpha Design Technologies, a Bengaluru-based manufacturer and provider of technological services to India’s defence and paramilitary sector, it said. Insikt Group said it found specific links between RedFoxtrot’s activities and the PLA’s Unit 69010, China’s military intelligence apparatus within the Strategic Support Force (SSF). 

Third, India’s Rajnath Singh “called for an open and inclusive order in Indo-Pacific based upon respect for sovereignty and territorial integrity of nations...” At the same time, he stressed on “peaceful resolutions of disputes through dialogue and adherence to international rules and laws.” The PIB readout also says this: “The Raksha Mantri reiterated India’s support to freedom of navigation, over-flight and unimpeded commerce for all in international waters in accordance with the UN Convention on the Law of the Sea (UNCLOS). ‘Maritime security challenges are a concern to India. The Sea lanes of Communication are critical for peace, stability, prosperity and development of the Indo-Pacific region,’ he stressed. The Raksha Mantri hoped that the Code of Conduct negotiations will lead to outcomes keeping with international law and do not prejudice the legitimate rights and interests of nations that are not party to these discussions.

Fourth, the Financial Times’ article about India being the Quad’s “weak link” has got some purchase in Chinese media. Here’s Guancha’s coverage of the piece. This week also marked the 20th anniversary of the formation of the Shanghai Cooperation Organisation. The Chinese foreign ministry celebrated this fact. Zhao Lijian said that the SCO had achieved many things, including setting “the standard for multilateralism.” He talked about next holding ”a series of events on the topics of state governance, digital economy, traditional medicine, women, education and poverty reduction.” Next week NSAs from the SCO countries will be meeting in Dushanbe, Tajikistan. The focus in the Indian media is already about Indian and Pakistani NSAs being in the same city. But, let me add to this that on June 15, People’s Daily carried a piece about the SCO and the Shanghai Spirit. Every member state was mentioned in the piece, except for India.

And finally, we have the viral image called “The Last G7,” which was created by a Chinese graphics illustrator from Beijing who goes by the handle ‘半桶老阿汤’ - ‘Bàn tǒng lǎo ā tāng’ or “Half bottle of old soup.”

The image caught not just Weibo’s attention but also the attention of the world media. To me, this is racist and crass. But here’s the Global Times telling us what the painting means. While you are at it, do check out this interesting deep-dive by What’s On Weibo’s Manya Koetse into the creators of such works, their motivations and challenges.

Also Read:


II. Xi’s History, Xi’s Regulations & the Museum Visit

Earlier this week, the Party’s journal Qiushi published an article by Xi Jinping, titled “Taking history as a mirror, use history to demonstrate convictions, know history and love the party, know history and love the country” (以史为镜, 以史明志, 知史爱党, 知史爱国). The article was basically a collection of Xi’s quotes fro, 2013 onward. Here’s how the People’s Daily summarised the key points:

“The article emphasises that history is the best textbook. It is necessary to understand the ins and outs of our party and country's cause, learn from the historical experience of our party and country, and correctly understand major events and important figures in the party and country’s history. This is very necessary for the correct understanding of the party and the country, and it is also very necessary for us to create the future.”

Then this:

“The article points out that it is a great blessing for China, the Chinese people and the Chinese nation to have the Communist Party of China in power.” 文章指出,中国有了中国共产党执政,是中国、中国人民、中华民族的一大幸事. 

And this: 

“without the leadership of the Communist Party of China, our country and our nation could not have achieved such achievements today, nor could they have such international status today.” 只要我们深入了解中国近代史、中国现代史、中国革命史,就不难发现,如果没有中国共产党领导,我们的国家、我们的民族不可能取得今天这样的成就,也不可能具有今天这样的国际地位.

And finally this:

“The article points out that patriotism education should be widely carried out, so that people can deeply understand why history and people have chosen the Communist Party of China, why we must adhere to the road of socialism with Chinese characteristics and realize the great rejuvenation of the Chinese nation.” 文章指出,要广泛开展爱国主义教育,让人们深入理解为什么历史和人民选择了中国共产党,为什么必须坚持走中国特色社会主义道路、实现中华民族伟大复兴.

Along with the publication of the article, there was also a piece by the Qiushi editorial department. This basically expands on Xi’s comments. In its first section, the argument is that the Communist Party’s rule was the choice of history and the people. It says that while many political forces emerged in China in the early part of the last century, the CCP emerged in power because: 

the “CPC is the vanguard of the Chinese working class, the Chinese people and the Chinese nation, an advanced party armed with advanced Marxist ideology, a party that represents the fundamental interests of the broadest Chinese people and has dared to fight and sacrifice...a party that has remembered its original mission and is brave in self-revolution, uniting and leading the Chinese people on the path to national independence, people's liberation, national prosperity and people's happiness.” 中国共产党之所以能够在各种政治力量、数百个政党中脱颖而出,之所以能够成为中国人民自觉而坚定的选择、始终赢得人民拥护和支持,最根本的就在于中国共产党是中国工人阶级同时是中国人民和中华民族的先锋队,是用马克思主义先进思想武装起来的先进政党,是代表中国最广大人民根本利益并敢于斗争、敢于牺牲的党,是牢记初心使命、勇于自我革命的党,团结带领中国人民走上了实现民族独立、人民解放和国家富强、人民幸福的康庄大道.

Ergo: “Facts have fully proved that the leadership of the Communist Party of China is the historical inevitability of the development of Chinese society in modern times.” 事实充分证明,中国共产党的领导是近代以来中国社会发展的历史必然.

The next bit is terribly verbose in making the point that the Party has led the reform of society and economy to “create an impressive history of the development of the Chinese nation and the progress of human society in the past 100 years.” 

The piece then comes to the operative bit, i.e., it is critical to uphold the leadership of the Party, and not just that, but also: “The ‘two safeguards’ is a major political achievement and valuable experience of our Party since the 18th Party Congress, and is a fundamental political guarantee to ensure the unity and consistency of the Party and to promote the continuous development and progress of the Party and the people.” 两个维护”是党的十八大以来我们党的重大政治成果和宝贵经验,是保证全党团结统一, 步调一致,推动党和人民事业不断发展和进步的根本政治保证.  

The piece talks about pandemic control as an example of the importance of having a strong core in Xi Jinping, and then the authors say this:

“On the way forward, the whole party must unswervingly implement the actions of maintaining General Secretary Xi Jinping’s position as the core of the CPC Central Committee and his position as the core of the whole party, safeguarding the authority of the CPC Central Committee and centralizing and unifying leadership, and unswervingly maintain a high degree of consistency with the CPC Central Committee with Comrade Xi Jinping as the core in ideological and political actions.” 前进道路上,全党必须坚定不移地把维护习近平总书记党中央的核心、全党的核心地位,维护党中央权威和集中统一领导落实到行动中去,坚定不移地在思想上政治上行动上同以习近平同志为核心的党中央保持高度一致.

The next section is about why Marxism works. It talks about Marxism’s “scientific” nature and its “vitality.” There’s a comment by Xi about how “Marxism has provided a powerful ideological weapon for China's revolution, construction and reform, enabling the great ancient Eastern country of China to create a miracle of development unprecedented in human history.” At the same time, there’s a discussion about how the Chinese experience has “enriched” Marxism. And finally, we have a comment about how Xi’s Thought is “contemporary Chinese Marxism and 21st century Marxism.”

The last section is about the strength of socialism with Chinese characteristics. The idea here is about how the Party has adapted socialism and imbued it with Chinese-ness, I guess. “The vivid practice and great success of socialism with Chinese characteristics fully prove that socialism has not failed China and China has not failed socialism.” 中国特色社会主义的生动实践和巨大成功充分证明,社会主义没有辜负中国,中国也没有辜负社会主义.

The section then talks about maintaining the “four confidences” and calls on cadres to “maintain the revolutionary spirit and fighting spirit, continue to push forward the great social revolution of socialism with Chinese characteristics in the new era...” 全党同志要按照习近平总书记的要求,保持革命精神、革命斗志,把新时代中国特色社会主义这一伟大社会革命继续推进下去,努力使中国特色社会主义展现更加强大、更有说服力的真理力量. 

Following this, the People’s Daily carried a long piece about the achievements in the construction of the party's laws and regulations since the 18th National Congress. This is attributed to the Bureau of Regulations of the General Office of the CPC Central Committee. It essentially talked about how Xi’s time has reshaped how the Party is governed. Towards the end of the piece, Xi’s authority is emphasised directly: 

“Xi Jinping’s thought of socialism with Chinese characteristics in the new era is the ‘red line’ guiding and running through the construction of laws and regulations within the party.”习近平新时代中国特色社会主义思想是指导和贯穿党内法规制度建设的一条“红线”.

The underlying argument in the piece is also that Xi’s objective has been clear, i.e., “To govern a country, we must manage the party first, be strict with the party, and be strict with the law. To persist in governing the party by system and regulations, we must solve the problem of rules and regulations, and form a perfect system of laws and regulations within the party.” 治国必先治党, 治党务必从严, 从严必依法度. 坚持制度治党, 依规治党, 必须解决有规可依问题, 形成一个完善的党内法规体系.

This is important, as a measure of how deeply the Party is being reshaped during Xi’s tenure. 

“The Party Central Committee, in response to the major issues of the whole Party and the whole army, promptly formulated and revised 146 central party regulations, which are urgently needed in practice and are practical and useful, accounting for 69.5% of the total number of central party regulations in force…” 党中央针对全党全军全国重大问题,及时制定修订146部实践亟需、务实管用的中央党内法规,占现行有效中央党内法规总数的69.5%,实现党的领导和党的建设各方面党内法规制度的全覆盖.

Also useful data here: “as of May 2021, there were 210 inner-party regulations of the central government, 162 inner-party regulations of ministries and commissions, and 3,210 inner-party regulations of local governments.” 截至2021年5月,中央党内法规共210部,部委党内法规共162部,地方党内法规共3210部.

The report also tells us that from 2012 to 2019, in two different rounds of changes, some 866 central regulations and documents have been abolished, declared invalid, and/or amended. This is presented from the perspective of making governance leaner.

From here, the piece talks about enforcing discipline. In this context, the article talks about how the “the laws and regulations within the party truly become a ‘high-voltage line.’ Some cadres said with a deep sense of emotion: ‘Now the party discipline is a real tiger, and whoever touches it will bite’.” 党内法规制度真正成为带电的“高压线”. 有的干部深有感触地说:“现在党规党纪是'真老虎',谁碰就会咬谁.’

Then it talks about improving governance efficiency. In this context, the primary focus is on upholding the Party leadership. A bunch of key regulations are listed here. Then the focus is on cadre selection and appointment, education and assessment, etc. This is followed by strengthening the internal party regulations system. The piece tells us that:

“Across the country, 27 provinces, autonomous regions and municipalities have set up research institutions or academic groups on laws and regulations within the Party, and there are 82 research institutes and research centers on laws and regulations within the Party...In the past four years, the National Social Science Foundation project guidelines have included a total of 84 research projects on party regulations...Since the 18th Party Congress, there have been 7,000 articles on the subject of party regulations, and the study of party regulations on CNKI…”

Finally, on Friday, Xi led the entire Politburo in visiting the new Museum of the CPC in Beijing. The image of Xi leading the Politburo in re-taking the Party’s oath sends a message of the hierarchy. Xi’s ahead of all, and Wang Qishan is standing with the other six PSC members. Anyway, the piece in PD is pretty much similar to the Xinhua English story. It tells us that the exhibition is themed “staying true to the founding (original) mission.” 

Xi said that the:

“Party’s history is the most vivid and convincing textbook...The past 100 years have seen the CPC unswervingly fulfilling its original aspiration and founding mission, working hard to lay a foundation for its great cause, and making glorious achievements and charting a course for the future, Xi noted. Xi said it is necessary to study and review the Party’s history, carry forward its valuable experience, bear in mind the course of its struggles, shoulder the historic mission, and draw strength from its history to forge ahead. Efforts should be made to educate and guide Party members and officials to stay true to the original aspiration and founding mission of the Party.” A lot of this might not sound new, if you’ve been following the history learning and education campaign. But it’s worth reiterating that one shouldn’t treat this as simply being propaganda that has little impact or it being about Xi’s personal power or cult of personality. This is a mission to mould the coming generation (generations perhaps).

Here’s another paragraph from Xinhua English:

“It is necessary for them to strengthen their awareness of the need to maintain political integrity, think in big-picture terms, follow the leadership core, and keep in alignment with the central Party leadership, and remain confident in the path, theory, system and culture of socialism with Chinese characteristics, as well as always closely follow the CPC Central Committee in terms of their thinking, political orientation and actions.” Essentially, here Xi’s making three big points. First, underscoring the importance of cadres political loyalty to Xi himself. Second, emphasising top-level design, i.e., the importance of implementing the center’s priorities; this of course, inhibits local autonomy. This is even more problematic, since it is presented as part of a learning from the Party’s historical experience. Of course, the history of China’s development over the past 40 years is far more complex than rather than being all about top-down policy planning and implementation. Third, Xi’s talking about the importance of adhering to the Party’s model of governance. This impacts everything, from lawmaking, economic structure to foreign policy.

Now here’s an interesting divergence in PD and Xinhua English. The next paragraph in Xinhua tells us that:

“Xi called on Party members to carry forward the fine traditions and play their exemplary role in uniting and leading the Chinese people, based on the new development stage, to follow the new development philosophy and formulate a new development paradigm, to effectively perform their work in promoting reform, development and stability, and to pool strength to fully build a modern socialist China and realize the Chinese Dream of national rejuvenation.”

The PD story talks about all of this too, but it calls on cadres to “use the Party’s innovative theories, continue the red bloodline” before then talking about traditions and the Chinese people, etc. 学好用好党的创新理论,赓续红色血脉,发扬光荣传统,发挥先锋模范作用,团结带领全国各族人民,更好立足新发展阶段、贯彻新发展理念、构建新发展格局,全面做好改革发展稳定各项工作,汇聚起全面建设社会主义现代化国家、实现中华民族伟大复兴中国梦的磅礴力量.

The rest of the story is about the exhibition. The one bit that I found fascinating is that this is about the key moments in the Party’s history, and the story tells us that the exhibition included “models of the Huoshenshan and Leishenshan hospitals” built last year in Wuhan. It just goes to show how hugely significant the Party’s performance through the pandemic has been in terms of its self-perception and its perception of the geo-strategic environment today.

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III. Space Ambitions, Economic Data, Grain Subsidies, Gangs & Rectification

Let’s begin with stories related to the economy. The National Bureau of Statistics put out data on China’s economic performance in May. I’ve done a quick breakdown based on Xinhua’s and WSJ’s reports:

  • Industrial production rose 8.8% from a year earlier in May. This is up by 13.6% from the level in 2019. The two-year average growth rate was 6.6%. But the pace of growth has slowed from April’s 9.8%.

  • Manufacturing sector PMI came in at 51

  • High-tech manufacturing sector’s output expanded by 17.5%, with an average two-year growth of 13.1%.

  • From January to May, the national investment in fixed assets (excluding rural households) was 19,391.7 billion yuan, a year-on-year increase of 15.4%, and the two-year average growth rate was 4.2%.

  • In May, the total retail sales of consumer goods was 3594.5 billion yuan, a year-on-year increase of 12.4%; this was also a 0.81-percent monthly increase. But the pace of growth for retail sales slowed from the 17.7% year-over-year growth rate in April.

  • In May, the total value of imports and exports of goods was 3,136.1 billion yuan, a year-on-year increase of 26.9%. Among them, exports increased by 18.1% year-on-year, and imports increased by 39.5% year-on-year. The import and export balance, the trade surplus was 296 billion yuan.

This Reuters report offers a good summary of the big takeaways: “Growth in China’s factory output slowed for a third straight month in May, likely weighed down by disruptions caused by COVID-19 outbreaks in the country’s southern export powerhouse of Guangdong. Retail sales and investment growth also came in below market expectations, but analysts say underlying activity still looks quite solid, noting headline readings remain highly distorted by comparisons to the pandemic plunge early last year. The Chinese economy has largely shaken off the gloom from the coronavirus slump, but officials warn its recovery remains uneven amid challenges including soft domestic demand, rising raw material prices and global supply chain disruptions.”

The State Council’s weekly meeting was delayed this wee as Li Keqiang traveled to Jilin. Xinhua tells us that Li visited farmlands in Songyuan City and stressed effective measures to stabilize the prices of agricultural materials and keep grain prices at an appropriate level. Then on Friday, the weekly State Council meeting (English report) ended with a decision to provide farmers with a “one-off subsidy” of 20 billion yuan to cushion the blow “from the sharp price increases of farming supplies.” The report says that the price surge of commodities this year has notably driven up the price of agricultural supplies like fertilizers and diesel. It said the agricultural sector is important for “maintaining public confidence and ensuring China’s stability.” 

In addition to this, there will be full cost insurance for rice and wheat planting in 500 major grain-producing counties across 13 major grain-producing provinces this year. This will cover costs of seeds, pesticides and fertilizers, land and labor costs, and provide support in case of losses caused by natural disasters, pests and diseases. In addition, the story talks about a corn planting income insurance to compensate for losses caused by price and yield fluctuations.

They then talked about a six-fold fee reduction plan for SMEs and individual households for the year. These six items are essentially about reducing bank charges and transaction fees, such as ATM withdrawal fees, card usage charges, inter-bank transfer and remittance fees, etc. These are expected to ease 24 billion yuan worth of burden for enterprises. 

The last item on the agenda is to improve housing opportunities for new urban residents such as migrant workers and newly-employed college students. The primary responsibility in this regard is that of the city government, with emphasis being laid on greater financial support and increasing the supply of small households with rents lower than the market level. The State Council also wants large cities to use collectively-operated construction land and land owned by enterprises to build affordable rental housing. In addition, idle and inefficient commercial office buildings and factories can be used to build affordable rental housing. Will be interesting to see what parameters are used to determine what’s “inefficient” in this case.Finally, they offered tax relief with regard to rental housing.

One other piece that I’d like to recommend with regard to the economy this week is this one by David Fickling. He argues that the Chinese government’s attempts using price controls in the commodities market are unlikely to work. “Like any investor caught on the wrong side of a trade, the Chinese government would like to think prices are being driven by nefarious speculators disconnected from reality. In truth, they’re moving because of activity in the real economy that won’t stop just because an official is ordering the tide to turn,” he argues. “The scale of China’s planned metal sales might be enough to scare some speculative froth out of the market…The size of Beijing’s strategic metal stockpiles is a closely guarded secret, so anyone buying on the hope of rising prices is facing a seller who may well have an unfathomably large warehouse of metal to keep levels suppressed.” Despite this, strong fixed asset investment in infrastructure and soaring house prices indicate that construction will continue and this makes it difficult for the government to clamp down.

Next, we have the launch of the launch of the crewed spacecraft Shenzhou-12. This mission sent three astronauts to China’s space station core module Tianhe for a three-month mission. On Thursday, the astronauts moved into the Tianhe space core module. This is “the first time the Chinese have entered their own space station,” the China Manned Space Agency said. This is the first of two manned space missions planned for this year, part of an intense schedule of launches aimed at completing the space station in 2022. Here’s Zhao Lijian being nice for a change.

Here’s how Global Times covered some of the excitement in the country. “The mission's launch was broadcast live on CCTV, the country's state broadcaster, and also livestreamed on China's social media platforms on Thursday morning, drawing hundreds of millions of views and soon topping the trending list on China's Twitter-like Sina Weibo. Thrilled netizens, after five years of waiting since the last batch of astronauts visited space in 2016, brought the online community into a state of frenzy as they watched the three astronauts boarding the Shenzhou-12 spaceship.”

Finally, the National Supervision Commission and CCDI issued a document on normalising the struggle against “evil gangs” and “protective umbrellas.” These say that the effort launched by “combining the fight against black and evil with the fight against corruption” has see “deep digging into the ‘protective umbrella’ of the underworld, ‘breaking the umbrella and breaking the net,’ (which) has achieved significant results, and has accumulated a series of effective experience and practices…It is necessary to sum up and use these hard-won valuable experiences, and transform them into normalised measures and requirements…”《实施意见》指出,党的十九大以来,全国纪检监察机关坚决贯彻落实以习近平同志为核心的党中央关于开展扫黑除恶专项斗争的重大决策部署,将扫黑除恶与反腐败斗争和基层“拍蝇”结合起来,深挖黑恶势力“保护伞”,“打伞破网”工作取得重大成效,在斗争实践中积累了一系列行之有效的经验做法,深化了履行职责使命的规律性认识.

Going ahead, the document calls for  work to “actively cooperate with the education and rectification of the political and legal team, consistently regard ‘breaking the umbrella and breaking the net’ as an important part of rectifying corruption and unhealthy trends around the masses, as an important battlefield for comprehensively and strictly governing the party to the grassroots level, and consistently maintain a severely high-pressure situation. The attitude remains unchanged, the determination is not eased, and the scale of the effort must not weaken.” 积极配合做好政法队伍教育整顿工作,一以贯之把“打伞破网”作为整治群众身边腐败和不正之风的重要内容、作为全面从严治党向基层延伸的重要战场,一以贯之保持严惩高压态势,态度不变、决心不减、尺度不松,一以贯之践行“三不”一体推进,推动国家治理体系和治理能力提升,持续巩固党的执政基础,为全面建设社会主义现代化国家提供坚强保障.

At the same time Guo Shengkun spoke at a meeting of the political and legal education and rectification leading group this week. He basically talked about the outcomes of the first round of the national rectification campaign targeting the political and legal apparatus. Recall that on Friday, we had data from this first round that came out. Also recall that in mid-April we had a report about the 7 tigers that had been taken down as part of this campaign so far. Anyway, Guo talks about the need to “consolidate and deepen the first batch of achievements” and then talks about grasping “the laws and characteristics of the second batch of education rectification, pay attention to stratification and classification, highlight political loyalty, highlight the role of example, highlight the establishment of rules and regulations, strengthen the organic connection with the first batch of education rectification, and ensure the smooth start of the second batch of education rectification.” 要研究把握第二批教育整顿的规律特点,注意分层分类,突出政治忠诚,突出表率作用,突出建章立制,加强与第一批教育整顿的有机衔接,确保第二批教育整顿平稳起步、顺利开局


IV. Region Watch

“The main issue for us is vaccines, and unless we get vaccines we cannot say everyone is safe,” 

Nepal’s Health Minister Sher Bahadur Tamang said in an interview with The Associated Press. Under rising pressure to acquire vaccines at the earliest, the government decided to buy four million doses of the Chinese Sinopharm vaccine. While Kathmandu tries to ease the strain on hospitals, the procurement process is being hotly debated in public and causing discomfort to the leadership. Nepal’s Health Ministry on Thursday issued a statement refuting media reports about buying vaccines from China: 

“Media reports on quantity, price, delivery, and other relevant information about the vaccine procurement are premature, speculative and misleading. The ministry refutes such unfounded and baseless media reports.”

An official at the Chinese embassy in Nepal, on condition of anonymity, expressed the vaccine manufacturer’s displeasure:

“Sinopharm is not happy with some media reports in Nepal, particularly about the price of the vaccine at which it is going to sell to Nepal,” 

The procurement of Sinopharm vaccines in the region has been under sharp media focus. Last month, reports emerged that the procurement price of China's Sinopharm vaccine in Sri Lanka sparked a row. The reports suggested that Colombo had to shell out more dollars per dose than Dhaka. With only about 2.5% of Nepal's population having been fully immunized, the opaque nature of vaccine procurement is only building pressure on the government. 

With the centenary of the founding of the Communist Party of China (CPC) only a few days away, the Sri Lankan Prime Minister Mahinda Rajapaksa made a speech to mark the milestone at a virtual event attended by cabinet ministers and major political leaders. “We appreciate the commitments made by the Chinese Government for our independence during and after the war, forever,” Rajapaksa said, before offering even more emphatic praise.

“We all know that the rise of Asia is due to the rise of China in this century,” and that historic victory was given by the Chinese Communist Party that was established 100 years ago. “China is not just a country, China is a huge civilization. China was invaded by various countries but China never invaded other countries. It is also a country that has made the largest population in the world believe in a self-sufficient economy. Not only that, China is seen as a country built on agriculture based on its trust. That is why I say that China is a greatest civilization.”

Ranil Wickremesinghe, former prime minister and leader of the United National Party, praised the CPC for making China one of the largest economies in the world.

Staying with the CPC, the party has begun engagements across Pakistan’s political class to push China-Pakistan Economic Corridor projects (CPEC) towards completion. This was evident during an event hosted by Pakistani political parties and the Chinese embassy to congratulate the CPC on its centenary. In fact, all Pakistani parties signed a letter congratulating the CPC. In a webinar hosted by Pakistan-China Institute for the CPC centenary, Chinese Ambassador to Pakistan Nong Rong said:

“We are ready to work with Pakistan’s political parties to make good use of the CPEC Political Parties Joint Consultation Mechanism, actively promote coordination between CPEC and Naya Pakistan Vision, and strengthen exchanges of ideas, policies and peoples so as to create a good political and public environment for the high-quality development of CPEC,”

The CPEC has faced opposition from various political parties across Pakistan. The Imran Khan government had stalled certain projects under CPEC on suspicion of corruption by the previous governments. Following this, the opposition created obstacles in the execution of CPEC projects. 

Also Read:


V. G7, EU-US Summit, NATO & Biden-Putin Meeting

US President Joe Biden wrapped up his European visit earlier this week. There’s much that’s come out of the visit, which was keenly watched in China. Let me do a quick wrap of all the developments.

First, here are the key China-related points in the G7 communique.

  • “We also call for a timely, transparent, expert-led, and science-based WHO-convened Phase 2 COVID-19 Origins study including, as recommended by the experts’ report, in China.”

  • “With regard to China, and competition in the global economy, we will continue to consult on collective approaches to challenging non-market policies and practices which undermine the fair and transparent operation of the global economy. In the context of our respective responsibilities in the multilateral system, we will cooperate where it is in our mutual interest on shared global challenges, in particular addressing climate change and biodiversity loss in the context of COP26 and other multilateral discussions.” (This sounds very vague)

  • “At the same time and in so doing, we will promote our values, including by calling on China to respect human rights and fundamental freedoms, especially in relation to Xinjiang and those rights, freedoms and high degree of autonomy for Hong Kong enshrined in the Sino-British Joint Declaration and the Basic Law.”

  • “We reiterate the importance of maintaining a free and open Indo Pacific, which is inclusive and based on the rule of law. We underscore the importance of peace and stability across the Taiwan Strait, and encourage the peaceful resolution of cross-Strait issues. We remain seriously concerned about the situation in the East and South China Seas and strongly oppose any unilateral attempts to change the status quo and increase tensions.”

  • Apart from all this, it’s worth noting that there are at least 16 different direct references to the democratic nature and values of the G7 throughout the communique.

Do also note this bit from Reuters, “There were few disagreements over the communique, which is going through final drafting, though Japan pushed for a tougher line on China, a diplomatic source said.”  This story from Politico, which focuses on the internal divisions and discussions in Boris Johnson’s Cabinet over China is also a good read.

Soon after the summit, Chinese media started focussing on also critical media coverage. For instance, this piece that draws from different international media outlets and commentators to say that the G7 meeting did not measure up to what the world expects. Monday was a holiday in China, so we had to wait till Tuesday before the Foreign Ministry officially responded. But before that, we had the NATO summit.

The statement after that meeting said that “China’s growing influence and international policies can present challenges that we need to address together as an Alliance.” That China was mentioned in the statement is key. But do note, “can present.” Anyway, the other China-linked bits from the statement mention:

“China’s stated ambitions and assertive behaviour present systemic challenges to the rules-based international order and to areas relevant to Alliance security. We are concerned by those coercive policies which stand in contrast to the fundamental values enshrined in the Washington Treaty. China is rapidly expanding its nuclear arsenal with more warheads and a larger number of sophisticated delivery systems to establish a nuclear triad. It is opaque in implementing its military modernisation and its publicly declared military-civil fusion strategy. It is also cooperating militarily with Russia, including through participation in Russian exercises in the Euro-Atlantic area. We remain concerned with China’s frequent lack of transparency and use of disinformation. We call on China to uphold its international commitments and to act responsibly in the international system, including in the space, cyber, and maritime domains, in keeping with its role as a major power.”

NATO maintains a constructive dialogue with China where possible. Based on our interests, we welcome opportunities to engage with China on areas of relevance to the Alliance and on common challenges such as climate change. There is value in information exchange on respective policies and activities, to enhance awareness and discuss potential disagreements. Allies urge China to engage meaningfully in dialogue, confidence-building, and transparency measures regarding its nuclear capabilities and doctrine. Reciprocal transparency and understanding would benefit both NATO and China.

Despite this, do note this reporting from Politico, which points to both Angela Merkel and Emmanuel Macorn talking down the challenge from China.

Twitter avatar for @theChinaDudeManoj Kewalramani @theChinaDude
While on NATO, note that Politico has some interesting reportage about caution from European partners with regard to the focus on China. Here's Merkel and Macron.
politico.eu/article/nato-l… This thread is also useful to understand the dynamic better: (4/) ImageImage

Pierre Morcos @morcos_pierre

So there is a lot of bad blood about President Macron's comments on #China and #NATO. Let me clarify a few things. France is not opposed to NATO assessing the security implications of China's rise but has some legitimate concerns. A 🧵 👇 https://t.co/hX1yQ4akGY

NATO Secretary General Jens Stoltenberg also identified areas of potential friction with China along with areas of cooperation.

Then on Tuesday, the Chinese Foreign Ministry responded, with Zhao Lijian lashing out at the G7, ending with this advice: “The US is ill and it's bad. We'd like to advise the G7 to save its prescription for the US.” He also hit out NATO for the formation of “small cliques,” to pursue “bloc politics” to "force other countries to choose sides...” He pointed to NATO's military expenditure, & said that the alliance was “up to its neck in debt morally and has brought wars and instability to the world for many times.” A Zhong Sheng commentary later in the week would also adopt this line of criticism for the G7.

“The noise and commotion emanating from the G7 summit has fully exposed the dangerous intention of the United States and a few other countries to try to engage in ‘small circle’ and ‘group politics’ and to suppress different development models by drawing ideological lines. There is only one system and one order in the world, that is, the international system with the United Nations at its core and the international order based on international law; there is only one set of rules, that is, the basic norms of international relations based on the purposes and principles of the UN Charter. At present, the international community urgently needs to strengthen solidarity and cooperation under the banner of the United Nations and practice genuine multilateralism. The United States and a few other countries are obsessed with confrontation, which will only attract the resentment and resistance of the international community. The unilateralism of a few countries, such as the United States, will only undermine international rules and international order.” 此次七国集团峰会传出的一些喧哗与骚动,充分暴露了美国等少数国家试图搞“小圈子”和“集团政治”、以意识形态划线打压不同发展模式的危险意图. 世界上只有一个体系、一种秩序,那就是以联合国为核心的国际体系和以国际法为基础的国际秩序;只有一套规则,那就是以《联合国宪章》宗旨和原则为基础的国际关系基本准则. 当前,国际社会迫切需要在联合国的旗帜下,加强团结合作,践行真正的多边主义. 美国等少数国家执迷于搞对抗,只会招致国际社会的反感与抵制. 美国等少数国家的单边主义逆动,只会破坏国际规则和国际秩序.

The commentary then questioned the utility and relevance of the G7 as a group, before advising them that the “US and a few other countries should cure themselves, get rid of the inertia of the Cold War mentality, abandon their attempts to restore their fragmented influence by creating so-called ‘imaginary enemies’ and rather do something for the benefit of the international community.” 美国等少数国家应好好治治自己的心病,摆脱冷战思维的惯性,摒弃靠制造所谓“假想敌”来恢复其支离破碎影响力的企图,真正做一些有利于国际社会的事情.

Also on June 15, we had the US-EU summit. The statement following this said that:

“We intend to closely consult and cooperate on the full range of issues in the framework of our respective similar multi-faceted approaches to China, which include elements of cooperation, competition, and systemic rivalry.”

The statement also mentioned Xinjiang, Hong Kong, Tibet, Taiwan, the South and East China seas, UNCLOS and the need to “coordinate on our constructive engagement with China on issues such as climate change and non-proliferation, and on certain regional issues.” There’s also a reference in there to maintaining “a free and open Indo-Pacific, which is inclusive, based on the rule of law and democratic values, and will contribute to the security and sustainable development of the region.” In this context, Myanmar and Afghanistan are mentioned.

Zhao Lijian pushed back on this saying:

“China is strongly dissatisfied with and firmly opposed to such moves to groundlessly interfere in China's domestic affairs, and create and spread disinformation. The US and the EU should reflect on their own serious problems and they are in no position to lecture others. We oppose imposing one’s own interest and requirement on other countries, forming small cliques and bloc politics targeting a third party, and dividing the world with ideology as the yardstick. The US and the EU should follow the trend of the times for peace, development and win-win cooperation, abide by the purposes and principles of the UN Charter, practice true multilateralism, and make their due contribution to the international community’s efforts to fight the epidemic together and meet global challenges.”

Zhao was also critical of the announcement that the US and EU have reached an agreement in the Boeing-Airbus dispute and agreed to address shared challenges from China. He hit out at Washington and Brussels’ “narrow-minded mentality,” and said that Beijing does not accept the unjustified accusation of “non-market practice.”

However, the Chinese foreign ministry’s spokesperson did offer much praise to Russia’s Vladimir Putin for his support for China in terms of Putin’s comments to NBC.

“As a Chinese proverb says, ‘True gold doesn't fear the test of fire.’ We have to tell those who try every means to drive a wedge between China and Russia that any attempt to undermine China-Russia relations is doomed to fail,” Zhao said.

Later in the week, he would also welcome the new Strategic Stability Dialogue between Russia and the US, saying that “as countries with the largest nuclear arsenals, Russia and the US should follow relevant UNGA instruments and international consensus, fulfill their special and primary responsibilities in nuclear disarmament, and further substantively slash their nuclear stockpile in a verifiable, irreversible and legally-binding way to create conditions for the ultimate comprehensive and complete nuclear disarmament.”

Of course, amid all this, 28 Chinese military planes flew into Taiwan’s Air Defense Identified Zones on Tuesday - the largest incursion since Taiwan began regularly reporting such actions last year, as per to Taiwan's Ministry of Defense.


VI. China-US Ties

It’s been such a news-packed week that I’m doing a brief section today with regard to China-US ties. First, the United States is upping its support for Taiwan, shipping 2.5 million doses of Moderna’s Covid-19 vaccines, tripling the original amount the Biden administration had promised. NYT reports that Chinese officials were peeved this month when three U.S. senators visited the island, which China regards as its own territory, to announce the original pledge of 750,000 doses, as well as when Japan said it was giving Taiwan 1.2 million AstraZeneca doses. A Zhong Sheng commentary this week took exception to this vaccine diplomacy by the US, arguing that “Some US politicians try very hard, but the world can see very clearly that these are just political calculations of US-Taiwan collusion of ‘using the excuse of prevention, with the intention of provocation’, provoking cross-strait relations and undermining peace in the Taiwan Strait. 美国一些政客表演得很卖力,但世人看得十分清楚,这些不过是美台勾连“假防疫、真挑衅”的政治算计,挑衅两岸关系,破坏台海和平. 

Meanwhile, US Chairman of the Joint Chiefs of Staff General Mark Milley told lawmakers this week that Taiwan was still a core national interest of China, but:

“There’s little intent right now, or motivation, to do it militarily…There’s no reason to do it militarily, and they know that. So, I think the probability is probably low, in the immediate, near-term future…My assessment in terms of capability, I think China has a ways to go to develop the actual, no-kidding capability to conduct military operations to seize through military means the entire island of Taiwan, if they wanted to do that.”

Next, we had the the ASEAN Defense Ministers Plus meeting (English report). China’s Defense Minister Wei Fenghe said that China attaches great importance to security cooperation with other countries and fully understands and respects the legitimate concerns of all countries. He also spoke about China’s “rock-solid will and determination in safeguarding its core national interests on issues related to Taiwan, Xinjiang, Hong Kong and the South China Sea.” Xinhua tells us that he also urged all parties in the region to follow a vision of common, comprehensive, cooperative and sustainable security for the world, and jointly build and leverage the mechanism of the ADMM-Plus.

The US DoD readout following the meeting says that Secretary of Defense Lloyd J. Austin III “articulated the Administration’s vision for the Indo-Pacific, underscoring the importance of allies and partners, shared principles, and multilateral approaches to security challenges, including pandemic assistance. He also highlighted unlawful PRC behavior in the South China Sea and called on Myanmar’s military to change course.” Amid this, do note this report from Politico’s Lara Seligman, which claims that:

“Pentagon is considering establishing a permanent naval task force in the Pacific region as a counter to China’s growing military might, according to two people familiar with internal discussions. The plan would also involve creating a named military operation for the Pacific that would enable the defense secretary to allocate additional dollars and resources to the China problem, said the people, who requested anonymity to discuss pre-decisional plans…The discussions grew out of work by the Pentagon’s China Task Force, which Biden commissioned in March…”

Also note that Ely Ratner, Biden’s nominee for Assistant Secretary of Defense for Indo-Pacific Security Affairs, told the Senate Armed Services Committee this week that the U.S. military should maintain a “combat-credible” posture in the Indo-Pacific to help deter potential Chinese aggression, as per Bloomberg’s reporting. Such an approach, the report adds, would include the “forward” positioning of U.S. forces in order to “deter, and, if necessary, deny a fait accompli scenario” where China tries to quickly overwhelm Taiwan…The strategy would also include “new operational concepts, modernized and high-end ready forces, and capable allies and partners proficient in their warfighting roles.”

Moving on, the Chinese media and foreign ministry have picked up on a new National Institutes of Health study, which has suggested SARS-CoV-2, the virus that causes COVID-19, was present in the U.S. as far back as December 2019. Zhao Lijian said this week that this “once again proves that origin tracing is a complex scientific matter that involves multiple places in the world.”

Moving on, some interesting developments with regard to the FBI’s crackdown on scientists in connection with China. Sixty-six-year-old ex-NASA scientist Meyya Meyyappan was sentenced to 30 days in prison on Wednesday by a federal judge in New York for lying to the FBI about working for a China-funded project that has been accused of espionage. DoJ says that Meyyappan “participated in China’s Thousand Talents Program, a program established by the Chinese government to recruit individuals with access to or knowledge of foreign technology or intellectual property, and held professorships at universities in China, South Korea, and Japan, and failed to disclose these associations and positions to NASA and the U.S. Office of Government Ethics.”

On the other hand, the trial of Anming Hu, former University of Tennessee scientist, ended with a hung jury. WSJ reports that:

“The case against Mr. Hu is part of a federal government initiative begun around three years ago to stop the transfer of trade secrets and other proprietary information to China. Part of that effort focuses on U.S.-based researchers who are receiving government grants and conducting work or exchanges in China that U.S. authorities say may have involved transferring cutting-edge know-how, wittingly or otherwise. In the past two years, federal prosecutors have escalated those efforts, charging around a dozen U.S. academics specifically with lying about their China work when seeking U.S. grants to support their research. Several have pleaded guilty, while others, including star nanotechnology experts at Harvard University and the Massachusetts Institute of Technology, argue they are innocent and are being prosecuted for administrative issues in an environment that has become hostile to scientists with China connections.”

Moving on to more news on the technology front. The US Federal Communications Commission voted unanimously on Thursday to advance a plan to ban approvals for equipment in U.S. telecommunications networks from Chinese companies deemed national security threats like Huawei. Also Reuters reports that President Joe Biden’s executive order aimed at safeguarding Americans’ sensitive data would force some Chinese apps to take tougher measures to protect private information if they want to remain in the U.S. market.

Finally, Bloomberg reports that Xi Jinping’s economic tsar Vice Premier Liu He has been tapped to spearhead the development of so-called third-generation chip development and capabilities and is leading the formulation of a series of financial and policy supports for the technology, according to people with knowledge of the matter.. The report adds that “the involvement of one of Xi’s most-trusted lieutenants in China’s chip efforts highlights the importance accorded by Beijing to the initiative, which is gaining urgency as rivals from the U.S. to Japan and South Korea scramble to shore up their own industries.”

Also Read:


VII. Long & Short of It…

a. Dong Jingwei Controversy: A tale of intrigue has been playing out on social media and Chinese-language media circles online this week. SpyTalk reported earlier in the week that “Chinese-language anti-communist media and Twitter are abuzz this week with rumors that a vice minister of State Security, Dong Jingwei defected in mid-February, flying from Hong Kong to the United States with his daughter, Dong Yang.” The rumour was that “Dong Jingwei supposedly gave the US information about the Wuhan Institute of Virology that changed the stance of the Biden administration concerning the origins of the COVID-19 pandemic.” There was also speculation that Dong’s defection was raised by Chinese officials in Alaska in March.Yang Jiechi apparently had demanded that the Americans return Dong, and U.S. Secretary of State Anthony Blinken refused.

Alas, all of this intrigue appears to be little more than rumour. In a matter of curious timing, the Central Political and Legal Affairs Commission reported (SCMP’s report) that Dong was present at a seminar discussing the new counter-espionage regulation that came into effect in April. The report on the seminar talked about intensified foreign espionage activities and the threat from “traitors” and “insiders” and “people who bankroll their activities behind the scene.” Dong isn’t quoted to have said anything in particular, however.

b. Apple Daily Crackdown: Hundreds of policemen raided the Jimmy Lai-owned Apple Daily’s offices in Hong Kong on Thursday, alleging that its reports had breached a national security law. BBC reported that the police also arrested the editor-in-chief and four other executives at their homes. Global Times informs that Cheung Kim-hung, group chief at Apply Daily parent Next Digital and Ryan Law Wai-Kwong, Apply Daily editor-in-chief were among the arrested. The other three are Next Digital chief financial officer Royston Chow Tat-kuen; Apple Daily associate publisher Chan Pui-man; and Apple Action News platform director Cheung Chi-wai.

The police also froze HK$18 million of assets owned by three companies linked to Apple Daily, i.e., Apple Daily Limited, Apple Daily Printing Limited and AD internet Limited. In a press briefing, police said that since 2019, Apple Daily had published more than 30 articles calling on countries to impose sanctions on Hong Kong and mainland China. The central government’s Liaison Office in Hong Kong on Thursday said in a statement that it supported the move. It added that “press freedom is no shield for illegal activities.” Office of the Commissioner of the Chinese Foreign Ministry in the Hong Kong Special Administrative Region said that a “few external forces…have exploited the cases and distorted the truth, smearing Hong Kong’s press freedom and even spreading rumor about so-called ‘chilling effects’ in an attempt to disrupt the rule of law in Hong Kong on the pretext of press freedom, obstruct the HKSAR government's law-based governance and undermine Hong Kong’s prosperity and stability.” Xinhua reported that the spokesperson urged the external forces to respect the rule of law in Hong Kong and stop sabotaging Hong Kong's prosperity and stability or interfering in Hong Kong affairs and China’s internal affairs as a whole in any form.

Guardian reported that on Friday, the police announced they had charged two of those arrested with foreign collusion offences, and announced prosecution proceedings against three companies for the same charge. The report added that a day after the arrest the paper led with the headline “National security police searched Apple, arrested five people, seized 44 news material hard disks.” At the bottom of the page, in the yellow colour associated so closely with the pro-democracy movement, the message: “we must press on.” In a show of support, people in the city also queued up to pick up Apple Daily’s copies. Here’s the paper’s editorial after the arrests, in which it argues that “Apple Daily is in peril and the freedom of the press in Hong Kong is at stake.”

WSJ reports that Chris Yeung, chairman of the Hong Kong Journalists Association, said the police operation was spreading fear among journalists and members of the public. “People will feel unsafe, uneasy talking to the media,” he said, urging the government to provide more details about the case. “Self-censorship will get worse if journalists are not sure whether they are able to protect their sources,” he said. On Saturday, Law and Cheung, who are charged with “collusion with a foreign country or with external elements to endanger national security” appeared at the West Kowloon Magistrates’ Courts and were denied bail by Judge Victor So. They will next appear in court on August 13.

c. Arab Views on China:  Qian Keming, vice commerce minister, talked about China’s trade ties with the Arab world this week. He said that China is now the largest trade partner for Arab states. In 2020, bilateral trade value hit $239.8 billion. Chinese exports were around $123.1 billion, a year-on-year growth of 2.2%. In particular, China's exports of electromechanical equipment and high-tech products to Arab states accounted for 67.4 percent of the total exports. Also interesting in this context is this article from the Atlantic Council, the Emirates Policy Center, and the Institute for National Security Studies in Tel Aviv. They write that:

“The People’s Republic of China (PRC) is experiencing rising favorability across the Middle East, which aligns with its strategic aims in a region where it casts itself as an alternative partner compared to other great powers. While usually styled in analysis as an alternative to the United States, this attitude might also extend to Russia. In the Arab Barometer’s latest data from the current Wave VI of polling—which is ongoing amidst COVID-19—China’s favorability ranged as high as 65 percent in Algeria to 34 percent in Jordan. While there is a spectrum of responses to China, the People’s Republic still ranks higher than Russia by an average of 17 points. This gap is widest in countries most proximate to Russian involvement in the crises in Syria and Libya (Jordan by 19 points and Libya by 34 points). China has practiced a much more restrained policy in these arenas, possibly sustaining less damage to its favorability.”

Some of the polling data that the piece draws from is fascinating. For instance:


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