'Inflexible' PLA - Cyber Threat - New Development Concept - Record Fine for Alibaba - Bhutan Boundary Talks - US Strategic Competition Act - SCS Coercion - Digital Yuan

My latest piece for the Times of India in which I look at different arguments that have been put forth for China’s assertive diplomacy and suggest that there’s much more to this than simply defensiveness, nationalism, a showing of strength or cloistered policymaking.


I. India-China Ties

It took a long time to come, but the 11th round India-China Corps Commander Level Meeting was held at Chushul-Moldo border meeting point on Friday. The talks apparently went on for 13 hours. At the end of it all, the needle on disengagement doesn’t seem to have moved. For instance, there’s no joint statement this time around, unlike after the 10th round. Shiv Aroor reports, citing sources in the 14 Corps that “the Chinese side appeared for the 11th round of talks on Friday with a predetermined decision to be totally inflexible.” He says that India has proposed a phased reduction of troops in the Gogra and Hot Springs areas “where troop build-up on both sides remains significant.” But the Chinese don’t seem interested. He adds that “China remains deployed in significant strength at Gogra, Hot Springs and Kongka La areas, with a large PLA logistics facility supporting troops there. Elements from a motorised infantry division, an artillery brigade and air-defence unit also remain deployed in the area.” 

Rajat Pandit quotes a source in his TOI report saying that “PLA did not agree to troop pullback from the friction sites at patrolling points (PPs) 15, 17 and 17A in the Hot Springs-Gogra-Kongka La area, where it is also maintaining considerable strength in the rear areas. De-escalation at Depsang is nowhere on the horizon.”

Looking at the statements issued by both sides, there’s a really interesting divergence. The Chinese statement, issued by the Spokesperson of the Western Theater Command, gives very little away. It says that “two sides exchanged views on issues of mutual concern and will continue to maintain communication through military and diplomatic channels.” It also puts the onus on India, adding that “it is hoped that the Indian side will cherish the current positive trend of relaxation and cooling in the Sino-Indian border area, abide by the relevant agreements...and the consensus of the previous talks, and meet the Chinese side halfway to jointly maintain peace and tranquility in the border area.” Also, Zhao Lijian at the Chinese Foreign Ministry on Friday sounded rather annoyed when asked about delayed talks. “There is no such thing as delay in talks as you mentioned. I'd like to stress that the ins and outs of the China-India border issue are very clear. The responsibility does not rest with China. It is hoped that India will meet with China half way...” he said.

In contrast, the Indian statement from the Defense Ministry and MEA is far more optimistic from everything you’ve read so far above. It says that the “two sides agreed on the need to resolve the outstanding issues in an expeditious manner in accordance with the existing agreements and protocols.” It further offers this curious carrot: “In this context it was highlighted also that completion of disengagement in other areas would pave the way for two sides to consider de-escalation of forces and ensure full restoration of peace and tranquility and enable progress in bilateral relations.”

Discussing both statements, this report in Global Times in Chinese and English points to the lack of a joint statement and notes that previously Chinese statements were issued by the Defense Ministry, but this time it was the PLA WTC spokesperson. “This indicated that the latest meeting did not result in an agreement of a full disengagement in other areas as expected, and the statement showed China's dissatisfaction and concerns over the slow development of the current situation, Qian Feng, director of the research department at the National Strategy Institute at Tsinghua University, told the Global Times on Sunday.”

Moving on, China’s ambassador to India Sun Weidong spoke at a public event last week. He called for strengthening confidence-building measures to jointly maintain peace and tranquillity in the border areas, adding further that “the lesson of last year’s border incident is profound and such incident should not be repeated.” But he also said that the boundary issue is “not the whole story of China-India relations.” This sounds reasonable on the surface, but I hope that this argument does not have purchase in India today. One cannot have such tensions on the boundary and Beijing refusing to clarify its claims and moving ahead on settlement while we pursue a normal relationship in other areas.

Meanwhile, speaking at another public event in the week, India’s Chief of Defense Staff Bipin Rawat warned of the cyber threat from China. He acknowledged that there was a “capability differential” between the two sides in this regard. “We know that China is capable of launching cyber attacks on us, and that can disrupt a large amount of our systems...What we are trying to do is to create a system in which we ensure cyber defence. And we have been able to, therefore, create a cyber agency, which is our own agency within the armed forces. Each service also has its own cyber agency to ensure that even if we come under a cyber attack, the down time and the effect of the cyber attack does not last long.” The idea here is to create a system that can sustain and operate during an attack.

Two more candid admissions during the event, which I hope will spur greater investment in technology and firepower over manpower are:

  1. Rawat acknowledging that China has been able to invest a lot of funds in ensuring that they imbibe technology.

  2. His statement that “we are trying to develop some kind of a relationship with western nations to see how better we can get some support from them, during peacetime at least which will help us to overcome this deficiency that we have.”

Rawat spoke about matters other than China, which Dinakar Peri has done well to capture in this Twitter thread (full video here).

A few more interesting stories in the context of the bilateral relationship. First, Taiwan Foreign Minister Joseph Wu said this week that Beijing was using its vaccine diploimacy to target Taiwan’s allies in Central America. He spoke about the case of Paraguay. According to Reuters, “the Chinese government was ‘very active’ in saying to the public that if Paraguay severed diplomatic ties with Taiwan they would get millions of doses of China’s vaccines, which put pressure on Taiwan to help, Wu added. ‘In the last few weeks, we have been speaking to like-minded countries, including Japan, the United States, India etcetera, and India fortunately has been able to provide some COVAXIN vaccines to Paraguay,’ he said, referring to a shot developed by India’s Bharat Biotech and a state research institute.” India’s MEA, however, says that while vaccines were provided to Paraguay, “no third party was involved in this.” 

Second, while Indian and Taiwanese foreign ministries have been exchanging condolence messages over the train crash in Taiwan and then the naxal attack in Chhattisgarh, the Chinese embassy in Delhi has been lashing out at the Indian media. This came in the context of an editorial in the Times of India, which argued for deeper India-Taiwan relations. “Beijing clearly doesn’t respect ‘One India’. There is no reason then for India to be overly sensitive about China’s territorial claims,” it said. The Chinese embassy then called on “the relevant Indian media to take a correct stance on issues of core interests concerning China's sovereignty and territorial integrity, adhere to the One-China principle, and avoid sending wrong messages to the public.” 

This particular exchange has led the Global Times to do what it does best, i.e., rabble-rouse. In this piece, Liu Zongyi says that while India “does not have the nerve to break the one-China principle...it has been playing tricks behind the scenes.” He adds that Indian media activism on Taiwan is “not simply because of the so-called freedom of press. To some extent, they are backed by the government to make breakthroughs step by step.” He also proposes not recognising Sikkim as part of India, in case New Delhi pushes hard on Taiwan. 

Third, and this is rather important, Bloomberg reports that Sajjan Jindal’s son-in-law Vikram Handa is setting up the country’s first manufacturer of lithium-ion battery parts in Karnataka. The plant aims to produce 100,000 tons of synthetic graphite anode by 2030, or about 10% of estimated global demand. China dominates this market currently, providing 80% of global supply of anodes, while importing raw materials from India. 

Fourth, SCMP reports that the “Tibet autonomous region on Tuesday introduced 15 border regulations ‘to maintain security and stability of the border area’...A military insider said the regulations – reiterating that actions such as moving border markers and damaging military facilities were illegal – were aimed at ‘preventing any infiltration activities’. ‘All the bans are updated rules based on previous border regulations, with the key mission being to prevent exiled Tibetans trying to infiltrate Chinese borders,’ the insider, who requested anonymity due to the sensitivity of the matter, told the South China Morning Post. They added that, according to Chinese officials, more than 10,000 exiled Tibetan were being trained as ‘special operation troops’ by India.” The report adds that some of these rules have been in place for decades. But the reiteration, of course, matters. In addition to “infiltration,” carrying or disseminating newspapers, books or electronic products deemed to endanger national security is among the acts banned under the rules.

Finally, let’s take a look at some of the commentaries from Chinese media about India. First, there’s this really long piece looking at the evolution of the Communist movement in India in the aftermath of the Chattisgarh attack. The core argument is about why Communism failed to take root in India, particularly through a violent revolution i.e., why did the sparks not ignite a “prairie fire”? The author talks about the legacy of non-violence in the freedom movement, role of religion in society, the establishment of a constitutional republic, infighting in the Communist movement, and so on. There’s, of course, a certain derisiveness to the tone at times because for the author, the lack of a Communist revolution is seen as a failure of the Communist parties in India, which are blamed for being riddled with infighting and driven by vested interests.

The Global Times’ English edition has put out a few pieces on India, but there’s little in the Chinese edition. In saying this, one must note that it did cover in detail the exchange between India and the US over the US Navy’s recent Freedom of Navigation Operation in Indian waters. The story also apparently trended on social media in China. Here’s a sample of some of the discussions on Weibo.

In another piece, Qian Feng writes that “high geostrategic expectations placed on India by Western countries” have “given India more and more ‘international visibility’ but it also puts a new test on how New Delhi handles Sino-Indian relations.” He talks about the US and Western allies all crafting strategies for the Indo-Pacific, with India being an important factor. He argues that “in India's view, the strategic competition between China and the United States has given Western countries, such as the United States, more motivation to give it substantial support in the fields of diplomacy, military affairs, economy, trade, and science and technology to hedge against the geopolitical pressure brought about by China's rise. This is self-evident for China-India relations, which are still sluggish due to border confrontations and bloody conflicts.”

He dismisses notions of common values and democracy to argue that Indian policy is rooted in realism, aimed at narrowing the strategic gap with the West. However, he implies that there’s still no decision on whether India is in an “anti-China alliance” or camp. He then says that India and China are neighbours and while ties are strained right now, “India needs to continue to work with China to resolve historical and practical conflicts through bilateral dialogue, rather than playing the ‘balancing act’ at all costs and consequences, or even taking sides and becoming a ‘frontline country’ against China.”

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II. Rule of Law, Poverty Alleviation, New Development Concept & Rectification

If you followed my coverage of Chen Yixin’s speech on Xi Jinping Thought on Rule of Law, then the new guideline on Strengthening the Construction of Socialist Rule of Law Culture is likely to make more sense. The big goal it announces over the next 15 years is this: “By 2035, a socialist rule of law culture that is compatible with a country ruled by law, a government ruled by law, and a society ruled by law, and a socialist rule of law system with Chinese characteristics will basically be formed…” 

Some of the key tasks to be carried out is to “integrate the Marxist theory of the rule of law with China's specific reality, and continue to promote the modernization and popularization of the Marxist theory of the rule of law in China.” This requires research work but also improvements in the “academic system, theoretical system, and discourse system of the socialist legal system.” There’s also a lot of emphasis on patriotic education and focus on Chinese culture, socialist values, foreign legal work and so on. At the heart of all of this is to “promote the party’s leadership into the law and regulations, transform the party’s propositions into the will of the country in accordance with legal procedures, and integrate the core socialist values ​​into the whole process of legislation…” You can find a full breakdown here in my People’s Daily Tracker.

Second, China’s State Council released its new White Paper on poverty alleviation. The full paper in English is available here. It’s a rather lengthy document, but I’ve done a detailed breakdown in my People’s Daily Tracker blog. But some broad points that I found noteworthy:

  • The paper starts by saying “The Chinese nation has a long history, diligent and intelligent people and splendid civilization. Over the history of thousands of years, eliminating poverty has been the persistent goal of the Chinese people, who suffered hardships and difficulties frequently.” In essence, the Party is saying that what it has achieved is unparalleled in the entire history of the Chinese people.

  • It’s fascinating that the poverty-related work since Xi took charge is termed as “the toughest stage,” and there’s lots of stuff in their about how he personally led and directed the work.

  • Of course, there’s the view that eradication of absolute poverty shows the strength of the Chinese system. So you have this paragraph: “This great victory shows that the CPC has held fast to its original aspiration and mission, and demonstrates its ability to lead politically, to guide through theory, to organize the people, and to inspire society. It shows the strength of socialism with Chinese characteristics in pooling resources to solve major problems.”

  • There’s really useful details in the document for anyone looking to understand what targeted poverty alleviation campaign entailed and how China’s is engaging with the international community in this area.

  • Finally, this: “the most effective way to eradicate poverty and the most reliable path towards a more prosperous life…(and) can better guarantee people's basic rights and meet their desire for a better life.” Keep this last bit in mind as China argues for changes to the notion of universal human rights. Moreover, the paper says that “to achieve success in reducing poverty, a country must follow a path in line with its national conditions, identify and remove obstacles to poverty alleviation, find driving forces for this cause, and constantly adjust and reform its strategies and policies as circumstances and local conditions change.”

Third, recall that last year the Party launched a pilot rectification campaign targeting the political-legal apparatus. Following that, this year a national campaign was launched. This week we learned that this national campaign is heading into its next stage. Guo Shengkun, Secretary of the Central Political and Legal Committee, said this week that with the education phase having worked out smoothly, the campaign is now entering the investigation and correction phase. 

The goal of this will be “eliminating the black sheep.” This requires focus on:

  • “Identify two-faced people who are disloyal and dishonest to the party.”

  • “Thoroughly investigate the "protective umbrella" of the evil forces.”

  • “Thoroughly investigate law enforcement and judicial corruption.”

  • “Rigorously investigate corrupt behaviors that have not stopped since the 18th CPC National Congress.”

Based on the details available, it appears that the Party history education campaign has been blended into this rectification work. And while we’re talking Party history, do note this notice issued by the Cyberspace Administration of China, calling on people to report those engaging in “historical nihilism” in order to “jointly maintain a healthy network ecology” online.

Finally, I wanted to highlight two pieces in the People’s Daily this week. First, this really long, special commentary under the name 任平 Ren Ping (detailed breakdown here). This is one of the new slogans. Buzzwords and we’ll continue to hear about this in the months and years to come. So  this piece is useful to unpack the concept. It talks about achieving the goal of socialist modernisation till 2035. And then explains that the new development concept is required due to external and internal changes.

Externally, “the world has entered a period of turbulent change, and the external environment has more instability and uncertainty.” Internally, “China has shifted to a stage of high-quality development. It has many advantages and conditions for continued development, and it also faces many difficulties and challenges. The key is to look at problems from a comprehensive, dialectical, and long-term perspective, and to have a deep understanding of major social contradictions and changes.” Despite this, China “is still in a period of important strategic opportunities, but both opportunities and challenges have undergone new development and changes. Most of the opportunities and challenges are unprecedented. On the whole, the opportunities outweigh the challenges.”

From a strategic perspective, the author argues that:

“We must recognize that in the face of severe and complex situations, we must adhere to the bottom line thinking and be prepared for a longer period of time to deal with changes in the external environment. At the same time, many of the problems we encounter are medium and long-term and must be understood from the perspective of protracted warfare. The construction of a new development pattern is proposed in accordance with the changes in my country’s development stage, environment, and conditions. It is a major decision made to solve medium- and long-term problems and prepare for a protracted war.”

The other piece that I wanted to highlight is about the agenda of building a modern industrial chain and supply chain. The authors argue that China should:

  • aim at setting international standards.

  • focus on improving technological innovation and import substitution, and strengthening core technology control. They argue that it is important to “realize the import substitution of core parts, basic materials and equipment, and reduce external dependence.”

  • establish industry-university-research integration alliances, industrial technology incubation bases, etc to improve the innovation system. The idea is to improve application of research for industrial development and creating new products. Part of this includes better compensation for technology sector talents.


III. Economy & Technology

Finance ministry officials spoke to the press this week about fiscal and taxation system development during the 14 FYP period. The key points that they highlighted (Chinese language report) were about supporting micro enterprises and ensuring systematic tax and fee reduction policies. Two big announcements related to technology and local government debt.

First, they promised to increase support for manufacturing and technological innovation, i.e., manufacturing enterprises can deduct 100 percent of their expenses on research and development, if the spending is not part of the intangible assets included in the profit and loss for the current period. The deduction will come into effect from Jan 1 this year. If intangible assets are formed, they shall be amortized by 200 percent of the cost of intangible assets before tax from Jan 1, the statement said, adding that tax policies would look to encourage technology research and innovation.

In addition, “in terms of enhancing the technological innovation capacity of enterprises, enterprises will be supported to lead the formation of innovation consortia, undertake major national science and technology projects, expand the size of the National Science and Technology Achievement Transformation Fund, the implementation of tax incentives for enterprises to invest in basic research, and support the development of the first (set) of major technical equipment insurance compensation pilot…”

On local government debt, they said that: “we will not allow the financing of new projects by raising implicit debt.” Local governments are not allowed to increase contingent liabilities through corporate borrowings. Financial institutions should also not provide any illegal financing to local governments...

By the end of last year, outstanding local government debt reached 25.66 trillion yuan ($3.92 trillion), still under the debt ceiling of 28.81 trillion yuan approved by the nation's top legislature. Total government debt accounted for 45.8 percent of the GDP and the debt risks are well under control, according to the Ministry of Finance.

Debt was a key issue at the meeting of the Financial Stability and Development Committee on Thursday. Bloomberg reports that Vice Premier Liu He called for “zero tolerance” on illicit activities, telling regulators to strengthen supervision of shareholders and owners of financial institutions, risk concentration, connected transactions and data authenticity. The report also quotes Cao Heping, an economics professor at Peking University, as saying that “the committee meeting signals that China will conduct a systematic review of local financial institutions, especially the ones related to local governments, to resolve risks.” Caixin reports that Liu directed regional financial institutions to focus on serving local businesses and refrain from relentlessly concentrating on growth. He also warned about problems in some institutions’ governance and outside supervision. Read this warning in the context of this report about the CCDI being concerned about corruption in local financial institutions.

Meanwhile, Nikkei Asian Review reports that non-performing debt at China's four biggest banks grew 22% last year. The Big Four banks reported that the balance of bad debt stood at 999.1 billion yuan ($152.5 billion) at the end of December, up 181 billion yuan from a year earlier. The average ratio of bad debt among the four banks rose 0.14 point from the end of 2019 to 1.54%, marking the first uptick in four years. Losses from bad debt rose 16% collectively, which put downward pressure on earnings.  Nevertheless, the Big Four all boosted profit last year thanks to the country's economic growth. Finally Bloomberg reported this week that the People’s Bank of China has asked lenders to keep new advances in 2021 at roughly the same level as last year. So far in January and February, reports suggest that Chinese banks have advanced 4.9 trillion yuan of new loans in the first two months, 16% more than the same period last year.

Moving on, the IMF’s revised growth projections suggest that China will grow at 8.4% this year. The projection for 2022 is unchanged at 5.6%. Bloomberg reports, based on IMF forecasts, that China will contribute more than one-fifth of the total increase in the world’s GDP in the five years through 2026. Global GDP is expected to rise by more than $28 trillion to $122 trillion over that period. Do check out these charts for more details.

On to the tech side of things, there’ve been some really big developments. First, Jack Ma’s troubles only seem to be getting worse. This week the State Administration for Market Regulation, China’s antitrust regulator, imposed a fine equivalent to $2.8 billion against Alibaba Group Holding Ltd for abusing its dominant position over rivals and merchants on its e-commerce platforms. The regulator said that Alibaba punished certain merchants who sold goods both on Alibaba and on rival platforms, a practice that it dubbed “er xuan yi”—literally, “choose one out of two.” WSJ reports that the fine is around 4% of Alibaba’s domestic annual sales. Under Chinese rules, antitrust fines are capped at 10% of a company’s annual sales.

At the same time, Financial Times reports that Jack Ma’s elite business academy Hupan University has been forced to suspend new student enrolments following pressure from Beijing. The story quotes an unidentified “person close to the school” as saying that:

“The government thinks Hupan has the potential to organise China’s top entrepreneurs to work towards a common goal set by Jack Ma instead of the Communist party. That cannot be allowed.”

Amid all this, reports suggest that JD Digits Technology Holding Co is planning to set up a financial holding company to comply with regulatory rules in China’s fintech sector. The holding unit, which will be regulated more like a bank, is expected to be separate from JD Digit’s other technology business.

While tech giants are dealing with the anti-trust and financial risk-related shake-up, Beijing’s digital currency plans appear to be in full swing. WSJ reports that “in tests in recent months, more than 100,000 people in China have downloaded a mobile-phone app from the central bank enabling them to spend small government handouts of digital cash with merchants, including Chinese outlets of Starbucks and McDonald’s.” The piece adds that “China’s version of a digital currency is controlled by its central bank, which will issue the new electronic money. It is expected to give China’s government vast new tools to monitor both its economy and its people. By design, the digital yuan will negate one of bitcoin’s major draws: anonymity for the user. Beijing is also positioning the digital yuan for international use and designing it to be untethered to the global financial system, where the U.S. dollar has been king since World War II. China is embracing digitization in many forms, including money, in a bid to gain more centralized control while getting a head start on technologies of the future that it regards as up for grabs.” Another noteworthy point is this: “It (China’s digital yuan) would provide options for people in poor countries to transfer money internationally. Even limited international usage could soften the bite of U.S. sanctions, which increasingly are used against Chinese companies or individuals.

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IV. Region Watch

The last time I wrote about the border Bhutan-China border was about a contested issue of encroachment in November 2020. A few months prior, in July, a statement from the Royal Bhutanese Embassy in Delhi had announced: “All disputed areas will be discussed during the next round (25th)of boundary talks, which will be held as soon as it is mutually convenient”. Bhutan and China seem to have found a time mutually convenient for the 25th round of boundary talks, the first since the 2017 Doklam standoff. Senior officials from the two countries met last week to discuss a plan to expedite boundary talks. The joint statement issued following the Expert Group Meeting (EGM)on the Bhutan-China Boundary said: 

“The EGM was held in a warm and friendly atmosphere, and held in-depth and fruitful discussions on the boundary issue in keeping with the close ties of friendship and cooperation between Bhutan and China,”

Qian Feng, director of the research department at the National Strategy Institute, Tsinghua University, told the Global Times

“The friendly talks between Bhutan and China, including the consensus reached on the roadmap for border negotiations, reflect Bhutan's desire to run its own affairs,”

Pakistan and China have also reiterated their commitment to ensuring peace in the region as the two countries pledged to back each other’s “core and major interests” in the United Nations, following bilateral consultations on UN affairs. While China has raised the Kashmir issue at the UNSC on at least three occasions between 2019 and 2020, Pakistan has lobbied for China’s support for Xinjiang and Hong Kong, amid increasing international criticism. From multilateralism to vaccine diplomacy, the Drug Regulatory Authority of Pakistan (DRAP) has authorised  emergency use of CoronaVac, a vaccine developed by Sinovac Biotech. It will be the third Chinese vaccine (after Sinopharm and Convidecia)allowed to be used in Pakistan even though its efficacy rate has been reported to be low. Another story of diplomatic success comes from Kathmandu. A feature in Xinhua reported that last Wednesday, nearly 300 people were waiting to receive a dose of the Sinopharm vaccine at a hospital in the valley. Over five hundred more were expected the following day. Jhalak Sharma Gautam, Chief of the National Immunization Program under Nepal’s health ministry, told Xinhua: 

“There is no hesitation among people (of Nepal) to take the Chinese vaccines”

Sri Lanka, on the other hand, seems to be treading cautiously. The cabinet announced that the Sri Lankan government would purchase the Russian-made Sputnik V and the Indian-made AstraZeneca vaccines, which would together suffice for the inoculation of 65 percent of Sri Lanka’s population. Dipanjan Roy Chaudhury infers that

“Sri Lanka has for all practical purposes closed the door for the Chinese-made Sinopharm vaccine despite Beijing’s claim of making a bigger donation of doses compared to India.” 

Sinopharm was permitted in Sri Lanka on the grounds that it would only be used to inoculate Chinese nationals on the island. 

Sri Lanka’s latest financial venture with China too seems to have suffered a setback. The Lankan rupee has depreciated to Rs. 203.50 against the US dollar on April 8, just days after Sri Lanka entered a currency swap agreement with China. Citing experts, local media reported that the 10 billion Yuan currency swap with China cannot be used for the strengthening of the country’s depleting foreign reserves. At the time the agreement was being discussed, State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal had said it would allow the island to weather “present difficulties”. Last month, former State Minister of National Policies and Economic Affairs, Dr. Harsha de Silva had questioned the legitimacy of the swap arrangement. Calling the swap a “plaster solution”, he added that: 

“The Government needs to map out a medium to long-term debt restructuring plan to obtain sustainable confidence in the international market”

Sri Lanka had previously sought a fresh currency swap deal with India.


V. New Bills, Taiwan & Kerry’s Visit

Let’s begin with some news about engagement before we get to the frictions. The Washington Post reports that John Kerry, Biden's special climate envoy, is expected to travel to China next week for meetings with officials aimed at boosting collaboration. So far, there’s no formal confirmation of this from the State Department, but if the visit does happen, Kerry will be the first high-level Biden administration official to travel to China. Also, Politico reports that the US State Department denied on Tuesday that it was consulting with allies about a joint boycott of the 2022 Beijing Olympics amid growing calls for the U.S. to back out of the event due to human rights violations in China. “Our position on the 2022 Olympics has not changed. We have not discussed and are not discussing any joint boycott with allies and partners,” a State Department official said.

Now we get to the frictions. First, the US Commerce Department has added seven Chinese supercomputing entities to its economic blacklist citing national security concerns. The companies are: Tianjin Phytium Information Technology, Shanghai High-Performance Integrated Circuit Design Center, Sunway Microelectronics, the National Supercomputing Center Jinan, the National Supercomputing Center Shenzhen, the National Supercomputing Center Wuxi and the National Supercomputing Center Zhengzhou to its blacklist. They were blacklisted for “building supercomputers used by China’s military actors, its destabilizing military modernization efforts, and/or weapons of mass destruction programs.” The BBC reports that “Mr Biden's move on Thursday requires the seven Chinese groups to obtain licences to access American technologies, including chip infrastructures designed by Intel and other U.S chipmakers. While the blacklist bars US-based companies from providing services and products to the Chinese firms, it doesn't bar those that are produced in facilities outside of the US.” So technically, TSMC is free to continue servicing the needs of PRC firms, I guess. 

Anyway, TSMC has found itself caught up in a bit of a story this week after a Washington Post report that suggested that its products had aided China’s weapons systems development. WAPO reported that a Chinese firm called Phytium Technology had used American software and chips from Taiwan to conduct research for People’s Liberation Army’s projects. The company is apparently involved in the development of hypersonic missiles. TSMC told the newspaper that it respects all laws and export controls and that it was unaware of any company products destined for military end-use. Another Taiwanese company, Alchip, which functions as a middleman between TSMC and Phytium, said the Chinese corporation had signed an agreement emphasizing that the chips were not for military use.

While talking about Taiwan, there’s much more to cover. The US State Department issued new guidelines to “liberalize guidance on contacts with Taiwan.” These aim “to encourage US government engagement with Taiwan.” This comes as PRC fighter jets continue to breach Taiwan’s air defense identification zone. While the jets kept buzzing, Chinese aircraft carrier Liaoning and its escorts also conducted maneuvers around Taiwan this week. CNN reports that the US Navy showed its flag around the island on Wednesday as the guided-missile destroyer USS John S McCain steamed through the Taiwan Strait. Beijing, of course, protested this move, warning the US “that the Taiwan question is highly sensitive” and that it must “avoid the dangerous path of challenging the bottom line and playing with fire.” Meanwhile, Taiwan’s foreign minister promised that they would fight till the end if there were to be a war. 

Finally, the US Senate Foreign Relations Committee introduced new legislation with the express aim of competing with China. The Strategic Competition Act of 2021 has five broad sections. These are:

  • Investing in a Competitive Future

  • Investing in Alliances and Partnerships 

  • Investing in our Values 

  • Investing in our Economic Statecraft

  • Investing in Strategic Security

I am going to do a mid-week breakdown of the bill, once I finish reading it. But for now Reuters reports that the “bill addresses economic competition with China, but also humanitarian and democratic values, such as imposing sanctions over the treatment of the minority Muslim Uighurs and supporting democracy in Hong Kong. It stressed the need to ‘prioritize the military investments necessary to achieve United States political objectives in the Indo-Pacific.’ It called for spending to do so, saying Congress must ensure the federal budget is ‘properly aligned’ with the strategic imperative to compete with China. The bill recommends a total of $655 million in Foreign Military Financing funding for the region for fiscal 2022 through 2026, and a total of $450 million for the Indo-Pacific Maritime Security Initiative and related programs for the same period.” Beijing’s obviously not pleased with this.

Another legislation that has a key component of competition with China is the Endless Frontier Act. This bill will be getting a Senate Commerce Committee hearing soon. Reuters reports that the bill was first proposed in 2020 calling for $110 billion over five years to advance U.S. technology efforts and cosponsored by Senate Democratic Leader Chuck Schumer and Republican Senator Todd Young. Senate Commerce committee chair Maria Cantwell said in a statement the hearing “will address potential actions to strengthen the U.S. innovation ecosystem, including increasing National Science Foundation research funding; growing and diversifying the science, technology, engineering, and mathematics (STEM) pipeline; improving technology transfer; and investing in regional innovation centers.”

One last bit to note, there’s been acerbic rhetoric from Beijing through the week on the issue of human rights. Here’s Zhao Lijian listing the five kinds of “crimes committed by the U.S. side in violating human rights.”

  • Colonialism

  • Racism 

  • Exporting unrest

  • Interference

  • Double standards

Three specific commentaries from Wednesday to Friday in the People’s Daily criticising the US on human rights. 

  • First, Li Yunlong, professor at the Central Party School, who writes about domestic political turmoil, racism, etc, to argue that “How can a government that cannot even guarantee the safety of the people in its own country have the right to comment on human rights in other countries?”

  • Second, a piece about the 2020 State Department Human Rights report. The author argues that the report regards its narrow understanding of human rights as the so-called ‘human rights standards’, categorizes situations that differ from its standards as "human rights violations", and treats the results of the report as suppressing countries with different political systems from its own. The tool of slander and slander is extremely capable of doing everything possible to achieve the purpose of safeguarding its international hegemony.”

  • Third, this commentary that criticizes the US on everything from political polarisation, gun violence, racism, vaccine nationalism to immigration. It even says that “In the past three months, more than 100,000 illegal immigrants have poured into the United States. US law enforcement officers separated more than 5,000 children from their parents and detained them in crowded simple houses, creating multiple ‘children's concentration camps’.”

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VI. The Long & Short of It…

a. Coercing Philippines

This has been a bit of a developing story for the past few weeks, after it was reported that several Chinese vessels were detected at Whitsun Reef, which is in the Spratly archipelago in the South China Sea. Some reports say that this has been developing since December 2020. Repeated appeals by the Philippines to withdraw the vessels, which Manila says unlawfully entered its exclusive economic zone, have not yielded dividends. Al Jazeera reports that more than 200 Chinese boats were first spotted on March 7 at Whitsun Reef, about 320 kilometres west of Palawan Island and within the Philippines’s exclusive economic zone. Since the first reported sighting, the vessels have scattered across a wider area of the South China Sea within Manila’s EEZ as defined by the International Court of Arbitration at The Hague. Discussing the developments on Wednesday, US State Department Spokesperson Ned Pierce warned that “an armed attack against the Philippines’ armed forces, public vessels or aircraft in the Pacific, including in the South China Sea, will trigger our obligations under the US-Philippines Mutual Defense Treaty.” 

On Friday, Secretary of State Antony Blinken spoke to Philippine Foreign Secretary Teodoro Locsin. SCMP reports that he reaffirmed that the mutual defence treaty between Washington and Manila applied to the South China Sea. On the same day, the US Theodore Roosevelt aircraft carrier strike group carried out joint operations with the US Makin Island amphibious ready group in the SCS. On Saturday, US Defence Secretary Lloyd Austin spoke to his Philippine counterpart Delfin Lorenzana. 

Also noteworthy is that on Friday, the Philippine armed forces said that they were investigating a report that Chinese military boats pursued a civilian vessel carrying Filipino journalists in the disputed South China Sea. A television crew from Philippine broadcaster ABS-CBN was travelling to Second Thomas Shoal in the contested Spratly Islands on Thursday when their vessel was allegedly chased by a Chinese Coast Guard boat and two attack craft. The key thing here is the report that two of the Chinese vessels involved in this chase were armed with missiles. This indicates that these are not part of the maritime militia but rather PLA vessels.

b. Xi-Merkel Talk

Xi Jinping spoke to Germany’s Angela Merkel on Wednesday. Xinhua reports Xi said that enhancing China-Germany and China-EU cooperation could produce major results with significance. He praised the bilateral economic cooperation despite the pandemic, and called for more work “in the spirit of mutual respect, mutual benefit and win-win.” 

Here’s more “China is actively building a new development paradigm, Xi said, adding that China is relying on its own strength for development while sticking to opening up and actively participating in international division of labor and cooperation. China is willing to share the opportunities brought about by its new round of opening up and development with foreign companies including those from Germany, he said.” 

Now on the frictions with the EU, he said: “Noting that China-EU relations are facing new opportunities as well as various challenges, Xi said that the key is to keep to the general direction and keynote of China-EU relations from a strategic perspective, respect each other and remove distractions. (in the Chinese language report, the term used is “干扰” which translates to interference, as I understand, and not distractions.) Xi said China's development has been an opportunity for the EU and urged the EU to make correct judgment independently and truly achieve strategic autonomy.” 

Xi then spoke about vaccine nationalism and the need for fair and reasonable vaccine distribution, particularly to developing countries. According to Xinhua, Merkel said that the EU upholds independence in its foreign relations, and spoke about willingness to cooperate on the pandemic-related issues, initiate a new round of inter-governmental consultations and so on.

c. China-Japan Tensions

Chinese Foreign Minister Wang Yi had a rather testy exchange with his Japanese counterpart Toshimitsu Motegi this week. Xinhua English reports Wang said that “in the face of the complicated international situation,” China and Japan should work tougher towards the “cause of peace and development of the region and the world at large.” He wants the two sides to “should cherish and safeguard the hard-won overall situation” and “abide by the principles and spirits established in the four political documents between China and Japan, and ensure that bilateral relations do not flip-flop, stagnate or backpedal, and do not get involved in the so-called confrontation between major countries.”

He wants Japan to take an “independent” and “rational” view of China’s development, rather than being swayed by “some countries holding a biased view.” He said that while Japan has an alliance with the United States, their two countries have also signed the Japan-China Treaty of Peace and Friendship, and Japan also has the obligation to fulfil the treaty. There’s also talk about events marking the 50th anniversary of normalisation of bilateral ties. According to Xinhua, Motegi basically agreed that bilateral ties are of “great importance” and that Japan remains committed to their “steady development.” He, however, clarified that “Japan-U.S. alliance does not target any specific third party.” The report then abruptly goes on to say that:

“Wang elaborated on China's position on issues such as the Diaoyu Islands and the South China Sea, and opposed to Japan's interference in China's internal affairs involving Xinjiang and Hong Kong. He urged Japan to abide by the basic norms governing international relations, truly respect China's internal affairs as a close neighbor and refrain from interfering in China's internal affairs.”

Now where this last bit came from is evident in the Japanese foreign ministry’s readout of the call. It says that Motegi “reiterated serious concerns” about the presence of Chinese Coast Guard vessels in territorial waters around the Senkaku islands, the situation in the South China Sea, the situation in Hong Kong, and the human rights situation in the Xinjiang Uyghur Autonomous Region, and urged concrete action. In addition, he reiterated the early abolition of import restrictions on Japanese food products. 

All this comes amid moves among Japanese lawmakers to pass a Japanese version of the Magnitsky Act, which would enable sanctions in regard to human rights violations. And of course, this comes before Japanese Prime Minister Yoshihide Suga travels to the US for a summit with President Biden on April 16.


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