LAC Talks Going Nowhere - Politburo's Pre-Centenary Session - FDI - BRI Vaccine Partnership - Afghan Pullout - Debt & Bonds - China-Russia Ties - Human Rights - Apple Daily Shuts - Bangladesh Scandal

Centenary Pieces

Before we get into this week’s newsletter, here are some pieces related to the CCP centenary that I recommend reading:


I. Boundary Talks, but No Progress

This week we saw the first set of formal talks between the Indian and Chinese side on the boundary issue since April. This was in the form of the 22nd Meeting of the Working Mechanism for Consultation & Coordination on India-China Border Affairs. From the statements issued by both sides, I am not certain if there was any real progress that has been made. Let me break it down.

The Indian statement said that both sides “had a frank exchange of views” with regard to the LAC situation. It added that they “agreed on the need to find an early resolution to the remaining issues along the LAC in Eastern Ladakh.” The aim, as I understand from the MEA’s statement, is “to reach a mutually acceptable solution for complete disengagement from all friction points so as to ensure full restoration of peace and tranquility to enable progress in the bilateral relations.

If you recall last week’s edition, I was rather annoyed at the indication that the next round of talks were likely to be held at the Division Commander level. Well, I am glad to learn that this is not happening. The MEA’s statement says that the 12th round of “Senior Commanders meeting at an early date to achieve the objective of complete disengagement from all the friction points.”

The Chinese statement also talks about the 12th round of Senior Commanders talks, but it doesn’t talk about completing disengagement; it says that the two sides “agreed to consolidate the disengagement progress of the border troops of the two countries and properly settle the remaining issues in the western sector of the China-India boundary in accordance with the consensus reached by the two foreign ministers.”

To me, this suggests that Beijing believes disengagement is done and that talks should focus on merely formalising the new status quo in one way or another. This makes sense, given that the PLA has been talking about prioritising de-escalation rather than disengagement.

While on diplomacy, Zhao Lijian clearly didn’t appreciate Indian Foreign Minister S. Jaishankar’s recent comments in Qatar. Jaishankar talked about “whether China would live up to the written commitments it has made about both countries not deploying a large armed force at the border”, and “whether we can build this relationship on the basis of mutual sensitivity, mutual respect and mutual interest.” Jaishankar also said that “the India-China border issue has pre-existed the Quad. In many ways, it’s a challenge, a problem quite independent of the Quad.” Yeah, I don’t think Beijing’s buying it.

To these comments, Zhao responded saying that “deployment along the western section of the China-India border is a normal defense arrangement aimed at preventing and responding to encroachment and threat on China’s territory by relevant country. For a long time, the Indian side has been increasing its military deployment along the China-India border and encroaching on China's territory. This is the root cause of tension along the China-India border.”

Staying with the LAC issue, Defense Minister Rajnath Singh will be visiting Ladakh today along with Army Chief General MM Naravane. Singh will inaugurate infrastructure projects constructed by BRO and also interact with troops deployed in the region, according to PTI. It adds that “sources said the defence minister will visit various key formations and high-altitude bases in eastern Ladakh to assess the ground situation as well as to boost the morale of the troops guarding the Line of Actual Control in a hostile environment.”

On the Chinese side, there have been a few noteworthy developments. China’s defense ministry said this week that the PLA has conducted more than 100 joint exercises so far this year and has stepped up its training along the disputed border with India. SCMP’s Minnie Chan reports that MND spokesman Ren Guoqiang said that the drills included a “record-breaking” high-altitude drill involving more than 1,000 troops from 20 units earlier this month. Ren said the exercise, which included the use of drones and was “aimed at boosting the border troops’ combat capabilities in an extremely cold, tough and risky environment”, was part of the celebrations of the Communist Party’s centenary. The SCMP adds that the exercises included both militia units and regular forces to strengthen their combat capabilities. This, of course, is interesting given Kallol Bhattacherjee’s report in The Hindu, which talks about the PLA raising new militia units comprising local Tibetan youth for high-altitude warfare near Eastern Ladakh. The report adds:

“The Hindu has learnt that the new units named Mimang Cheton are presently undergoing training, and are to be deployed mostly in upper Himalayan ranges, both in the eastern and western sectors of the India-China border. It is learnt that two batches of the Mimang Cheton have completed training and have been deployed along various locations in the Chumbi valley, including Yadong, which borders Sikkim and Bhutan, Cheema, Rinchengang, PB Thang and Phari. A second batch is undergoing training at Phari, which is near Sikkim. Available information indicates that the units are also being deployed at Rutog in Tibet, near the Pangong Tso (lake) in eastern Ladakh.”

Anyway, HT’s Sutirtho Patranobis has more details on the Tibet drills. He reports that the exercise was called “Peak of the Snowy Region 2021.” It involved “three aspects: Actual combat training, training with science and technology and training soldiers according to the traits required to fight on high-altitude plateau. The activities were carried out on 23 subjects related to high-altitude battles, which included comprehensive operations by combat and sniper teams, field repair and rescue. The drills were carried out under unfamiliar geographical conditions around the clock.” He further cites a PLA Daily piece saying that “a composite brigade of the Tibet military region joined hands with the Army Aviation Force to launch a three-dimensional assault, starting a normalised joint exercise and training.”

Also this week, we saw the first bullet train line in Tibet, which links Lhasa to Nyingchi near the border with Arunachal Pradesh, begin operations. Ananth Krishnan reports that the 435-km line, on which construction began in 2014, has a designed speed of 160 kilometres per hour...the Lhasa-Nyingchi rail is one among several major infrastructure projects recently completed in Tibet’s southern and southeastern counties near the Arunachal border. Last month, China completed construction of a strategically significant highway through the Grand Canyon of the Yarlung Zangbo river...This is the “second significant passageway” to Medog county that borders Arunachal, the official Xinhua news agency reported, directly connecting the Pad township in Nyingchi to Baibung in Medog county.”

Amid all this, India and the US conducted what was an “integrated bilateral exercise” in the Indian Ocean Region. The Indian navy and air force exercised with US Navy Ronald Reagan Carrier Strike Group. The IAF said that the drills included “intense air dominance exercises, advanced air defence exercises, anti-submarine exercises, tactical manoeuvres and cross deck helicopter operations.”

Moving to some other key India-China stories. First, Chinese media reports have quoted AIIB president Jin Liqun talking about the bank discussing the challenges related to the India-China boundary tensions. Jin is quoted as telling a closed-door meeting in mid-May that “bilateral conflicts between member states should not concern a multilateral institution.” Here’s an excerpt from the SCMP report on this, but if you want a more detailed take, do check out Zichen Wang’s Pekingnology newsletter.

“Jin said the incident was ‘the first major test’ for the AIIB as an international institution, and admitted he faced pressure at home over the bank’s call to maintain loans to India. Ultimately, defending the bank’s reputation by insisting it upheld international standards won ‘very positive’ reactions around the world, he said. ‘We cannot keep talking about international standards and best practices in normal times, but change when encountering difficulties,’ Jin said in his speech. ‘Once trust is broken, it is very difficult to restore your reputation’.” -- Fascinating story this; it tells us a little bit about the different policy and political imperatives at play in China. There’s been much criticism, and justifiably so, about Chinese foreign policy increasingly failing to respect the logic of strategy and being focussed on short-term, tactical gains at the cost of strategic interests. But here’s an example of the opposite.

Second, the commodities boom has led to China replacing the UAE as India’s second-biggest export destination in fiscal year 2021, with Indian exports at over $21 billion. Exports to the US at $51.63 billion still remain the largest for India. Iron ore, organic chemicals, and oil were the top exports to China in the year ending March 31. China’s share of India’s export basket increased to 7.29% in fiscal 2021 from 5.3% in the previous year.

Third, PTI reports that Han Junwe, Chinese national who was arrested recently in West Bengal, has told interrogators that several Chinese agencies are trying to hack various websites of the central government including those under the Ministry of Defence. The report says that they have targeted a Bengaluru-based company which is associated with the ministry and the BSNL. A couple of aerospace companies are also among the targets of the agencies, an STF officer told PTI on condition of anonymity. The report adds that the sleuths are still trying to unlock the sophisticated mobile phone and the laptop seized from the Chinese national who was arrested on June 12.

Fourth, we had NSA Ajit Doval visiting Dushanbe for the SCO meeting this week. Much of the Indian media’s focus in this regard was around terrorism and Pakistan. The bigger deal, however, is about the future of Afghanistan. On this, Doval said that there was a “need to preserve gains made in the last two decades in Afghanistan and give top priority to the welfare of its people,” adding that India “fully supports SCO Contact Group on Afghanistan, which should be more active”. China’s Minister of Public Security Zhao Kezhi did not attend the meeting in person. But in his comments, he called on all parties to coordinate positions on Afghanistan. Also do note the picture below, we have Dong Jingwei sitting on the far right. He’s the gentleman about whom we had all these rumours of defection.

Fifth, for the over 20,000 odd Indian students who are enrolled in Chinese universities, it looks like the wait to return to the country is going to be long. WSJ reports that Beijing is planning to keep its pandemic border restrictions in place for at least another year as officials fret over the emergence of new variants and a calendar of sensitive events. The report cites unidentified sources to say that “the provisional timeline of the second half of 2022 was set during a mid-May meeting of the country’s cabinet, or State Council, attended by officials from China’s Foreign Ministry and National Health Commission, among other government bodies...The cautious attitude is being driven by a pair of events that officials are eager to have go off without a hitch next year: the Winter Olympics in February and a once-a-decade power transition within the ruling Chinese Communist Party toward the end of the year.”

By largely restricting new visas to those who have received a Chinese vaccine and maintaining requirements for an enforced hotel quarantine of at least 14 days upon arrival, Chinese officials have sought to neutralize risks from imported cases, the people said.

Finally, Fudan University’s Zhang Jiadong writes about the Indian foreign policy debate following the open letter by 33 former Indian ambassadors as part of the Forum of Former Ambassadors of India (FOFA), supporting the Narendra Modi government. Zhang focuses on the China component  of the debate, although he does a terrible job of representing the differences between the two sides. But this bit below was useful:

“At the global level, China and the US are major strategic competitors, and India can benefit from this since it is in a favorable strategic position contended by the two countries. But at the regional level, the situation is changing. In South Asia, China is taken as India's major strategic opponent, and New Delhi needs Washington’s help (to) balance Beijing’s influence.”

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II. FDI, BRI, E-Commerce, Bonds, Debt, Chips & ‘Supply Chain Chiefs’

Let’s begin with data from the Ministry of Commerce about foreign investment in China:

  • Jan-May FDI was at 481 billion yuan, up 35.4% year-on-year, and 30.3% over the same period in 2019.

  • Around 18,497 foreign-invested enterprises were newly established during the period, up 48.6% year-on-year and 12.4% over the same period in 2019.

  • Service sector FDI was 381.9 billion yuan

  • High-tech industries FDI was up by 34.6%

  • Investment from BRI countries was up 54.1%; ASEAN was up 56% and EU was up 16.8%.

  • Also, geographic spread of FDI shows the challenges of unbalanced development: FDI in eastern, central and western regions went up by 37%, 36% and 10.4%, respectively.

The ministry also said that:

“According to the report of Business Confidence Survey 2021 released by the European Union Chamber of Commerce in China recently; 73% of the enterprises surveyed achieved profits last year; about 68% of them are optimistic about the business prospects of their industries in the next two years; 60% of them plan to expand their business scale in China this year, and a quarter of them are or will soon strengthen their supply chain construction in China.”

I decided to look at the survey that’s been quoted and some of these findings are really interesting. You can check them out on my Tracking People’s Daily blog here.

Next, this week we had the CPPCC National Committee meeting (English report) in Beijing to discuss implementing the 14th Five-Year Plan (2021-2025) and fostering the new development paradigm. Here’s a report about the end of the meeting. Wang Yang was in attendance. Xinhua tells us that State Councillor Wang Yong “urged coordinated efforts to properly handle relations between supply and demand, independence and opening up, the whole and the part, government and market, and development and security, among other factors.” 

Zhang Qingli, vice chairman of the CPPCC National Committee, said that: “members of the Standing Committee should focus on the overall situation of the work of the Party and the country, with a strong sense of political responsibility and historical mission, closely follow the theme of the meeting, actively negotiate and discuss state affairs, perform their duties at a high level to serve high-quality development, and build consensus and contribute wisdom and strength to promote the smooth implementation of the 14 th Five-Year Plan and start a new journey of building a socialist modern country in an all-round way.” 常委会组成人员要着眼党和国家工作大局,以强烈的政治责任感和历史使命感,紧扣会议主题,积极协商议政,以高水平履职服务高质量发展,为推动“十四五”规划顺利实施,开启全面建设社会主义现代化国家新征程凝聚共识、贡献智慧和力量. 

Based on the reportage, here are the policy priorities discussed during the meeting:

  • supply-side structural reforms

  • adhering to the strategy of expanding domestic demand

  • accelerating scientific and technological self-reliance

  • accelerating agricultural and rural modernization

  • improving people’s quality of life

  • implementing high-level opening to the outside world

Third, on Tuesday, Li Keqiang chaired a meeting of the State Council leading group on western development. The report (English version) tells us that they “discussed and approved the implementation plan of the 14th Five-Year Plan for the development of the western region.” Li said that the problem of inadequate and unbalanced development in the western region “is still relatively prominent.” He added that he wants western regions to “commit more efforts to empowering market entities, improving the business environment, and expanding opening up.” Here’s Li’s direct comment from PD, after he’s talked about supporting small and micro enterprises and reducing costs:

“Align with the national opening strategy, expand opening to the outside world, more effectively attract investment and technology, and improve development capabilities and levels.” He also wants the region to “better leverage their advantages in wind, solar and hydro-electric energy as well as mineral resources to build large-scale clean-energy bases and enhance their capacities in guaranteeing energy and important resources for the country.” Li also called for increased “fiscal, financial and other policy support for the development of the western regions.”

Later in the week, Li chaired the State Council’s executive meeting (English report). There were two big reported outcomes from the meeting. The first focus was on “promoting mass entrepreneurship and innovation” in the 14th Five-Year Plan period. The meeting promised work in order “to leverage the role of business startups in boosting employment, creating multiple channels to ensure employment for key groups such as college graduates and migrant workers.” 

In addition, the focus was on new regulation to ensure “fairness, oppose unfair competition, and better protect the legitimate rights and interests of small, micro- and medium-sized businesses as well as self-employed individuals.” The interesting bit here, if I understand correctly, is the call to back SMEs to emerge as “little giants” that specialise in specific technologies in the manufacturing chain. I wonder whether this will really work when one thinks of capital availability and issues of economies of scale. Also discussed were “incentives for business start-ups and innovation, including tax reductions and exemptions.” These include R&D expenditure exemptions, more employee welfare policies and support to attract foreign talent.

The next part of the meeting was about “the development of new forms and models of foreign trade.” Xinhua English has the details:

“Policies to support cross-border e-commerce development will be improved. Integrated pilot zones for cross-border e-commerce will be piloted in more areas. The list of goods in cross-border e-commerce retail import will be fine-tuned. Management of cross-border e-commerce import and export returns and exchanges will be made more convenient. Guidelines on protecting intellectual property rights in cross-border e-commerce will be drafted, to deter counterfeit and substandard goods. The meeting required vigorous efforts to advance the development of overseas warehouses. Traditional foreign trade companies, cross-border e-commerce platforms and logistics firms will be encouraged to participate in developing overseas warehouses and make them more standardized, digitized and intelligent. Such efforts will promote micro, small, and medium-sized enterprises to go global via overseas warehouses, and drive Chinese brands and products from startups and innovation firms to expand international market.”

Fourth, there was also a key BRI conference that was held this week. The report on this tells us that Foreign Minister Wang Yi first read out Xi’s speech and then delivered his own speech. Here’s the full English translation of Wang’s speech. He said:

  • Trade between China and BRI partners has exceeded 9.2 trillion US dollars. Direct investment by Chinese companies in countries along the Belt and Road has surpassed 130 billion US dollars. Last year, trade in goods between China and BRI partners registered a record 1.35 trillion US dollars.

  • China and BRI partners have held over 100 meetings to share experience on COVID prevention and control. By mid-June, China has provided more than 290 billion masks, 3.5 billion protective suits and 4.5 billion testing kits to the world, and helped many countries build testing labs. China is engaged in extensive vaccine cooperation with many countries, and has donated and exported more than 400 million doses of finished and bulk vaccines to more than 90 countries, most of which are BRI partners.

  • He then put forth four proposals: a) BRI vaccine initiative; b) need for transport infrastructure, economic corridors, and economic and trade and industrial cooperation zones, along with digital connectivity; c) green development; d) promise to keep “global industrial and supply chains open, secure and stable” and “share China's market dividends with all.”

Finally, a look at some other key stories related to the Chinese economy. First, the Ministry of Finance tells us that China’s local governments have issued nearly 2.55 trillion yuan (about $393.37 billion) worth of bonds in the first five months of this year. Of the total, special bond issuance came in at 1.17 trillion yuan in the period, while the issuance of general bonds amounted to 1.38 trillion yuan, data from the ministry showed. The average term for these is 9.8 years and average interest rate of 3.44%. While on local government bonds, here’s a report that tell us that China’s local governments and state firms are struggling to refinance their debt as investors shun them over a lack of support from Beijing and the threat of defaults. Among Chinese state firms, the value of defaults has more than tripled over the past three years and the number of nonpayments more than doubled over the same period, a trend that is set to continue, Standard & Poors Global Ratings said in a report released on Wednesday.

And it’s not just local governments who are facing the heat. China’s corporates and conglomerates are also struggling to come to terms with Beijing’s tougher attitude. Bloomberg reports that “analysts at UBS Group AG and Goldman Sachs Group Inc. now say the notion of ‘too big to fail’ no longer applies in China as defaults this year exceed $23 billion, a record pace.” The report explains that issues stemming from over-leveraged conglomerates are mounting. This is evident in the controversies over the HNA Group, Evergrande Group, China Huarong Asset Management, and Tsinghua Unigroup. Anyway, imposing discipline is painful and the challenge is how far will Beijing go

“The government has grown more comfortable with defaults, even important regional state firms, but Huarong and Evergrande present much bigger and more systemic challenges…Deleveraging and eliminating the prevalence of government guarantees may induce undesirable consequences and market panic,” said Jeffrey Chwieroth, a professor of international political economy at the London School of Economics and co-investigator at the Systemic Risk Centre.

Second, SCMP reports that China’s railway investment in the first five months of the year dipped to 203.6 billion yuan ($31.5 billion) – 8% less than the same period a year earlier. For the whole of 2020, China spent 781.9 billion yuan on railway investments, down from 803.9 billion yuan in 2019 and 802.8 billion yuan in 2018. This, the report says citing analysts, is part of a crackdown on unproductive investment and debt. But the report adds that “despite Beijing’s debt concerns, it is likely to expand fiscal stimulus in the second half of the year to ensure that growth does not slow too much. It adds that the fall in railway spending, combined with a slowdown in overall fixed-asset investment and weaker growth in consumer spending are all signalling that China’s economic recovery has begun to slow, investment bank Natixis said in a note last week.

Third, WSJ reports that Jack Ma’s Ant Group is in talks with Chinese state-owned enterprises to create a credit-scoring company that will put the fintech giant’s proprietary consumer data under regulators’ purview. It adds that "the new entity could be established as soon as the third quarter of this year, and says that Ant and regulators have also been discussing whether the firm should be run and controlled by Ant or state-owned companies.

Fourth, looking at some developments in the semiconductor and high-tech space in China. Baidu says that its artificial intelligence chip unit Kunlun has been spun off as an independent company with a valuation of 13 billion yuan ($2 billion). SCMP reports that China’s output of integrated circuits in May reached an all-time, single-month high. IC output in May surged 37.6% from a year ago to 29.9 billion units. May’s output of chips marked an increase from 28.7 billion units in April and 29.1 billion in March, showing that Chinese IC producers have been running at full capacity. In the first five months of this year, China produced 139.9 billion IC units, a 48.3 per cent surge compared to the same period last year. Regardless, shortages are still hurting sectors like automobiles. Also, these volumes don’t account for high-end 14-nm node chips.

And finally, note this SCMP report about local governments across China “rushing to appoint their own ‘supply chain chiefs,’ a new title emerging as part of a quasi-military command system for corporate governance in an effort to add some muscle to local support of Beijing’s self-sufficiency drive amid a protracted trade rivalry with the US.” The report adds that Guangzhou “was the latest to adopt the supply chain chief system, which appoints top city officials as ‘general chiefs’ for specific industries, while also naming leaders of key businesses as ‘supply chain owners’. Guangzhou’s policy has appointed chiefs of 21 industries, including new energy vehicles , artificial intelligence and semiconductors – all singled out by Beijing for government support. The purpose of the new command system is to ‘ensure safety and stability of supply chains’ by bringing down bureaucratic silos and centralising government planning. It is also an organisational adjustment to better protect supply chains from disruptions of the coronavirus pandemic, according to the Guangzhou government.”

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III. Xi’s Busy Week

This was a long week for the Chinese president and I guess it’s going to be rather hectic heading into the July 1 anniversary. On Friday, Xi addressed a group study session of the Politburo. But before the session, he took the entire Politburo to “visit the ‘Red Building,’ once the main campus of Peking University, and learned about the history of preparation and founding of the CPC at an exhibition. Xi also led the Political Bureau members to a former residence of Mao Zedong, where he worked and lived for 17 years from 1949.” Xinhua’s report about the study session mentions themes that have been consistent throughout the Party history study campaign.

“Xi urged efforts to safeguard the country established by the revolutionary martyrs and develop it well, calling for new achievements that can live up to the expectations of the revolutionary forefathers, stand the test of time and are worthy of the people…Xi said since the 18th CPC National Congress, he has visited basically all major sacred revolutionary sites and memorials related to revolutionary history during his inspection tours. Each visit meant spiritual enlightenment…for the Party that has governed a country for a long term, nothing is more dangerous than deviating from its original aspiration and becoming out of touch with the people…Currently, China is in a crucial period of realizing the rejuvenation of the Chinese nation, and the revolutionary spirit must not be abandoned, Xi said. Nor can the Party give up modesty, prudence, and its other traditions such as guarding against arrogance and impetuosity, working hard, as well as diligence and thrift, Xi noted…Historical nihilism should be opposed and resisted…”

On that last point of historical nihilism, do checkout this controversy surrounding historian Ge Jianxiong.

Anyway, prior to this Politburo session, we had Xi’s engagements with a bunch of world leaders. First, Xi’s chat with Serbian President Aleksandar VucicXinhua English tells us that “Xi said the iron-clad China-Serbia friendship is most valuable and deserves to be firmly upheld and carried forward from generation to generation. Xi stressed that the two countries should firmly support each other while making respective efforts to safeguard their national sovereignty and security.”

Xi talked about BRI, Covid-19, climate change and China-CEEC cooperation. He added that:

“China and Serbia should also strengthen coordination in multilateral affairs, firmly uphold the international system with the United Nations at its core, defend international law and the basic norms governing international relations, and practice true multilateralism.”

Vucic said that the CCP was “an important force in promoting world peace and development” and that China-Serbia ties “are at their best in history.” He pledged to work together on BRI and thanked China for its pandemic-related support.

Next, speaking (English report) to Fijian Prime Minister Voreqe Bainimarama, Xi said China will set up a China-Pacific Island Countries reserve of emergency supplies, and help Fiji and other island countries improve their ability to cope with major public health incidents and natural disasters. The report also mentions Xi talking about BRI and cooperation in trade and investment, infrastructure, transportation and communication, tourism, etc. Bainimarama said that “with Xi's foresight and sagacity and under his strong leadership, China has scored great achievements in development and played an important leading role in the world.” He added: “Fiji firmly adheres to the one-China policy, takes an objective and fair stand on issues involving Taiwan, Hong Kong and Xinjiang, and will not do things that harm China's interests.”

Then speaking to the Republic of Congo’s President Denis Sassou Nguesso (English report), Xi said that he wants to “deepen political mutual trust and share more governance experience with each other.” Xi also added that “China supports the Republic of the Congo in taking a development path that suits its national conditions, supports it in safeguarding national sovereignty, security, and development interests, and supports it in transforming its advantages in resources and geographical position into development advantages.” 

The Chinese president also talked about how the two sides had worked “closely in international and regional affairs to safeguard international fairness and justice and the common interests of developing countries.” Xi does emphasise this aspect quite frequently in certain conversations. Beijing likes having the numbers at its side when it comes to the UN. 

Xi also spoke about increasing Chinese investment in areas such as medical care and health, agriculture, and people’s livelihood.” He spoke about providing vaccines to the country. Xinhua tells us that “under Xi's strong leadership, said Sassou, China has successfully won the battle against poverty and the COVID-19 pandemic and played a pivotal and important role internationally, and the Chinese people are marching forward on the path towards prosperity and development.” He also promised support for “China's stance on safeguarding its core interests and opposes interference in China's domestic affairs.”

Anyway, what Chinese media hasn’t reported is that President Denis Sassou Nguesso asked Xi to restructure the country’s debt owed to China. Rappler quotes Congo’s Finance Minister Rigobert Roger Andely as saying that the Congolese president had told Xi that, in the two years since the restructuring was agreed, the debt had again become unsustainable due to the shock caused by the coronavirus pandemic. A request that Xi agreed to. The report also says that Congo’s debt to China is at 1.3 trillion CFA francs ($2.4 billion); that’s down from 1.48 trillion CFA francs ($2.73 billion) in 2019.

Next, Xi’s chat with Tanzania’s President Samia Suluhu Hassan (English report) also saw reference to working together to “jointly safeguard the legitimate rights and interests of developing countries.” Xi said that he views ties “from a strategic and long-term perspective and firmly supports Tanzania in taking the development path in line with its national conditions.” He added that the bilateral relationship is “facing historic opportunities,” and while mentioning BRI, he also touched on cooperation in areas like “agriculture, transportation, communications, tourism and energy.” 

Hassan said that the “CPC boasts a long and glorious history,” praised the Party for making “one after another remarkable achievements” and added that she “firmly believes that “under the strong leadership of Xi...the Chinese people will surely realize the Chinese Dream of national rejuvenation.” She also said that her country “adheres to the one-China policy and firmly supports China's stance on issues concerning China’s core interests such as Taiwan, Hong Kong and Xinjiang.” 

Hassan’s predecessor John Magufuli had in January asked China to forgive part of the country’s debt. Not sure how things have worked out since.

Finally, a report (English report) on Xi’s chat with Finland’s President Sauli Niinisto. Xi said that (and do note the language here; it’s remarkable) “Finnish firms are welcome to keep sharing the dividends brought by China's development,” he said, “voicing his hope that Finland can continue to support bilateral cooperation in investment and other fields with an open attitude.” Xi also spoke about working together in areas like “scientific research and education as well as green and low-carbon development.” 

Then he talked about China-Europe relations, saying that “the key is to jointly ensure dialogue and cooperation as the leading aspect in China-Europe relations as well as to keep mutual benefit as the main tone in bilateral ties. It is hoped that Finland will play a unique and positive role in promoting the healthy and stable development of China-Europe relations.” 

“Noting that the current world is undergoing increasingly fast changes while confronting threats and challenges on a global scale, Xi said all parties should jointly respond in ways that are cooperative rather than confrontational, and win-win rather than zero-sum. In this regard, China appreciates Finland’s positive role.” To me, all of this suggests a sense of greater anxiety in Beijing with regard to the direction of China-EU relations. 

Niinisto, Xinhua says, spoke about the Winter Olympics, cooperation in high-tech sectors, the pandemic, climate change, and called China Finland’s “most important trade partner in Asia.” He also spoke about the ‘Helsinki Spirit’ of 1975 to deal with global challenges, adding that “in this process, China's role is vital and indispensable.”

Apart from this, there was also a fair amount of propaganda around Xi’s chat with the Chinese astronauts stationed in China’s space station core module Tianhe. There was also coverage of Xi Jinping’s letter (English report) addressing international students at PKU. Xinhua tells us that Xi was replying to “45 representatives of overseas students from 32 countries who are studying at Peking University.” He asked them to “to gain a deeper understanding of China as it really is, urging them to share their thoughts and experiences with more people and play an active role in promoting friendship between the peoples of all countries.”

He added “to understand today's China, one must understand the CPC,” and argued that the Party does things because it “strives for both the well-being of the Chinese people and human progress.”

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IV. Region Watch

‘Developmental means to strategic ends’ are not unique to China even though a Google search for these terms will throw up pages of studies on the Belt and Road Initiative (BRI). For instance, Japan has a long history of infrastructure financing in Southeast Asia. Set up in service of war reparations, the Official Development Assistance (ODA) turned Japan into the world’s largest aid donor throughout the 1990s. The ODA, like China’s BRI does now, was criticised for authoritarianism, social disruption and environmental degradation in developing countries. While China may have left Japan behind in the competition of investments and connectivity projects, each Chinese initiative is placed under a global microscope for scrutiny. Most recently, it was the China-Nepal rail link. In a proposal that will be submitted to the Chinese and Nepalese governments, experts suggest that The Himalaya Tunnel would run through the core protection zone of Mount Qomolangma (Mount Everest) National Park. While more than a third of the tunnel would be inside the national park’s core protection zone it would be entirely underground. The alternative, which avoided the core area, was rejected because of geological instability. 

The reach of the BRI generates complex and extensive environmental risks, which scholars argue can be lessened if calculated for in the planning stages of projects. It is difficult for developing economies like Nepal to overlook the possible benefits of the BRI. Speaking at an event held yesterday, Former Nepalese Ambassador to China, Leela Mani Paudyal highlighted the importance of the BRI for Nepal:

‘There is a huge gap in Nepal’s development financing that BRI can supplement.’

However, despite the numerous agreements between China and Nepal, the infrastructure, cultural, and tourism development has not witnessed significant enhancement. Professor Dai Yonghong of Shenzhen University believes that Kathmandu’s political instability and general hesitation are reasons behind the low implementation of the projects. Nonetheless, last week, China-Nepal approved a joint venture to develop three separate hydropower projects

Pakistan, on the other hand, marked the completion of the Matiari-Lahore transmission line, its first large-scale transmission project under the China-Pakistan Economic Corridor (CPEC). Talking about the future of the BRI as a 'green' Belt and Road, and the CPEC as a 'green corridor', Pakistan's Energy Minister Hammad Azhar said:

‘the country is striving to achieve the target of 30 percent renewable energy in the national grid up till 2030, and the CPEC will play a vital role for it with its contribution to renewable energy projects’.

In Bangladesh, China has been charged with embezzlement in its financing of three Government-to-Government (GTG) infrastructure projects. Investigations have revealed that Chinese contractors increase expenditure by repeatedly extending the duration of projects on various pretexts. It has also been discovered that the cost of the Padma Bridge project has doubled from the original estimate due to repeated extensions. While China has withdrawn from financing, Prime Minister Sheikh Hasina has directed to reduce expenditure on the railway projects in question. 

Meanwhile, reports suggest that the People’s Liberation Army (PLA) has raised additional militia units comprising Tibetan youth in the Chumbi Valley. The Chinese Defence Ministry said that intensive training was held in altitudes over 3,700m and involved ground assault forces as well as the PLA’s aviation unit. Last month, the PLA officers were also involved in overseeing the training of Pakistan soldiers for high-altitude warfare. 

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V. China-US Ties

A couple of stories that are worth noting this week. First, China’s longest-serving ambassador to Washington, Cui Tiankai, said on Tuesday that he will be leaving his post after eight years. Reuters says that Cui, known for his more congenial, diplomatic manner, is expected to be replaced by Qin Gang, a trusted aide of President Xi Jinping known for his sharp retorts to criticism of China. So testy exchanges like the ones over the origin of COVID-19 that we saw between NSA Jake Sullivan and Zhao Lijian will now even take place with greater frequency at the embassy level?

Speaking to Fox News, Sullivan said this week that China was facing potential international isolation if it does not allow a transparent probe into COVID-19’s origins. “Either they will allow, in a responsible way, investigators in to do the real work of figuring out where this came from, or they will face isolation in the international community.” He further said that the US will not rely solely on China and indicated that America will use the efforts of its intelligence community and allies to press the matter on every front until a result is found. Zhao termed the comments “sheer blackmail and threat…There is no ground to accuse China of saying ‘no’ to origin-tracing study. It is inflammatory and sensational statement that China is facing isolation in the international community.” He then went on to also talk about the bio-lab at Fort Detrick. This is getting tiresome now.

Anyway, President Joe Biden met with Afghan leaders, President Ashraf Ghani and Abdullah Abdullah, Afghanistan’s chairman of the High Council for National Reconciliation. He told them that the United States would continue to offer security assistance, as well as diplomatic and humanitarian aid. But, as NYT reports, “his message was clear: The U.S. military is leaving. ‘Afghans are going to have to decide their future, what they want,’ Mr. Biden said at the White House. ‘The senseless violence has to stop’.”

There’s a mess in the region for which the US has much to answer, but it’s clear that Washington no longer wants to own it. This frees up resources and energy, but it’s not like the US can or will simply walk away. It still has important security and strategic interests here.

Amid this, there was an interesting comment by the Chinese MoFA. Clearly, Beijing is not happy about US departure.

“Twenty years later, the security situation in Afghanistan remains complex and grim, and the issue of terrorism is no closer to settlement. The US' sudden announcement of a complete withdrawal from Afghanistan has directly led to immediate deterioration in the security situation in Afghanistan and seriously threatened the peace and stability of Afghanistan and the safety of people's lives. The US has left to the Afghan people a future that is riddled with problems and crises. The US troops should withdraw in a responsible manner to ensure a smooth transition in Afghanistan, so as to prevent terrorist forces from taking advantage of the chaos to fester and bring more turbulence and suffering to the Afghan people, and undermine regional peace and stability.”

On all of this, do check out this piece by Richard Fontaine and Vance Serchuk in The Atlantic. They argue that “U.S. departure from Kabul could end up undermining, rather than strengthening, America’s strategic hand against China.” I don’t quite agree, but worth reading.

Moving on, the Financial Times reports that Joe Biden is set to launch the next phase of his China policy with a push for high-level meetings with Beijing officials. The US and China are discussing a possible meeting between Antony Blinken and Chinese foreign minister Wang Yi at a G20 meeting in Italy next week, according to three people briefed on the talks. The Biden administration has also told Beijing it would like to send Wendy Sherman, deputy secretary of state, to China over the summer. The White House is considering a call with Xi Jinping, which would be Biden’s second engagement as US president with his Chinese counterpart, the report says. At the same time, however, SCMP reports quoting Susannah Cooper, director of the State Department’s Office of Monetary Affairs, that Blinken is not expecting to meet with Wang during the Group of 20 meeting in Italy.

Anyway, Blinken, who is in Europe, visited Germany first and then met with President Emmanuel Macron in France. In Germany, speaking to Der Spiegel, he said that:

“what we’re focused on is not trying to contain China or to hold China back. We’re focused on trying to hold up the free and open, rules-based international system that the United States and Germany together have helped to build and we’ve invested so much in over so many decades. And if different aspects of that free and open rules-based system are being challenged by anyone, whether it’s China or any other country, then we think it’s important to stand up and defend what we built…”

“Unfortunately, if you’re doing business with a so-called private company from China, there is actually no distinction between private and the government. The government has the ability to control and to elicit information from any of these companies. And unfortunately, right now when it comes to norms and standards of human rights, of privacy, of intellectual property, the government in Beijing does not meet the standards that we’ve all set. So I think we have to be careful. So that’s all that we’re saying.”

“what I’m seeing increasingly is a shared viewpoint but one that recognizes the complexity of the relationships, the fact that they’re consequential for all of us. And we’re not asking people to choose between the United States and China. We’re simply saying we have a common set of values and interests that have helped shape the international system for almost eight decades, and we need to continue to stand for freedom and for openness when it comes to that system and to do it together.”

In France, he echoed this. NYT reports that speaking in an interview after meeting Macron, Blinken said that “the United States and France were ‘on the same page’ in their determination to resist the possibility of a Chinese-led world order that would be ;profoundly illiberal in nature.” On his first visit as secretary to France, where he lived for nine years in his youth and attended high school, Mr. Blinken said ‘our purpose is not to contain China’ or ‘try to hold China back.’ But when it comes to defending a free and open international order, ‘we will stand up’.”

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VI. Human Rights & Coercing Ukraine

Before I get into the events related to the UNHRC this week, I’d like to note that the Chinese government issued a White Paper on Human Rights on Thursday. I’ve done a breakdown here, but the key takeaway is this:

Essentially, human rights are something that the Party gives/provides rather than being inherent. The document is about the Party more than being about people. Also, there’s obviously an emphasis on developmental aspects, but the paper also tries to frame China’s human rights policies within the context of “comprehensive” human rights. This includes, right to Subsistence, Economic, Social, Cultural, and Environmental Rights, Civil and Political Rights and Rights of special groups. The political rights bit, of course, is on very weak footing. Anyway, the other key point is this:

“For China, there are no ready models to copy in respecting, protecting and developing human rights. China must proceed from its prevailing realities and go its own way. Applying the principle of universality of human rights to China’s national conditions, the CPC has opened a new path of human rights protection, and added diversity to the concept of human rights with its own practices.”

Now, at the UNHRC, we saw tremendous jostling this week over the issue of Xinjiang, in particular. A joint statement on China was read out by Canadian Ambassador Leslie Norton on behalf of more than 40 countries, including Australia, Britain, France, Germany, Japan and the United States, to the U.N. Human Rights Council. Reuters reports that the statement said that: 

“We urge China to allow immediate, meaningful and unfettered access to Xinjiang for independent observers, including the High Commissioner.” Michelle Bachelet had told the council on Monday that she hoped to agree on terms for a visit this year to China, including Xinjiang, to examine reports of serious violations against Uyghurs.

This was followed by the representative from Belarus reading out a statement supporting China, on behalf of 65 countries. Global Times reports that the statement said that respecting the sovereignty and integrity of each country is the basic code of international relations, and affairs on Hong Kong, Xinjiang and Tibet are China's domestic affairs, which should not be interfered by outside forces. GT also says that more than 90 countries expressed their support and understanding for China’s position, with 65 clearly opposing interference with China’s domestic affairs. On all of this, the Chinese foreign ministry said that “The aim of these countries is to suppress and contain China and impede China's development...This is doomed to fail.”

This entire saga on Xinjiang at the UNHRC is reflected in a Zhong Sheng commentary on the page. It talks about how all these 65 countries have opposed the “politicization of human rights issues and double standards, opposed politically motivated and unjustified accusations against China based on false information, and opposed interference in China's internal affairs on the pretext of human rights.”

It says that the West’s actions are motivated by the “political purpose of suppressing and containing China.”

“With the strong voice of the majority of developing countries firmly supporting China, the racket created by these Western countries seems particularly isolated; they represent neither human rights standards nor international public opinion.” 在广大发展中国家坚定支持中方的强大声势下,这些西方国家的聒噪显得格外孤立和刺耳,他们既代表不了人权标准,也代表不了国际舆论.

However, amid this contestation, the interesting bit relates to the position of Ukraine, which was among the 40 odd countries on whose behalf Canada read out the statement mentioned above. Associated Press reports that “China pressured Ukraine into withdrawing its support” for that statement by threatening to withhold Chinese-made COVID-19 vaccines. Soon after, the report says that “on Thursday, Ukraine pulled its name off the list of supporting states after Chinese authorities warned Kyiv that they would block a planned shipment of at least 500,000 doses of COVID-19 vaccines to Ukraine unless it did so, said diplomats from two Western countries. The diplomats spoke on condition of anonymity because they were not authorized to discuss the matter publicly.” It further tells us that “Ukraine has agreed to purchase 1.9 million doses of CoronaVac vaccine from China’s Sinovac Biotech. As of early May, Ukraine had received 1.2 million doses, according to Health Minister Maxim Stepanov.”

A Chinese government spokesperson quoted by Xinhua welcomed Ukraine’s decision saying, “This fully demonstrated that justice will always prevail and people have their fair judgment…China welcomes the decision of the Ukrainian side which reflects its spirit of independence and respect for facts and conforms to the purposes of the UN Charter and basic norms governing international relations.”

As I read this, my mind wandered to the longish piece on China’s major power diplomacy under Xi Jinping in People’s Daily this week and Wang Yi’s comments mentioned above about pandemic diplomacy. Here’s what the PD piece had said:

“With the people at heart and the world in mind, President Xi Jinping led the largest global humanitarian operation in the history of new China, contributing Chinese wisdom and strength to the global fight against the epidemic and practicing the concept of community of human destiny with practical actions.” 习近平主席心系人民,胸怀世界,领导开展新中国历史上规模最大的全球人道主义行动,为全球抗疫贡献中国智慧和力量,用实际行动践行人类命运共同体理念. 

The distance between rhetoric and reality is so incredibly stark.

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VII. The Long & Short of It…

a. China-Russia Ties: Xi Jinping will be meeting with Russia’s Vladimir Putin on Monday via video link. Ahead of this, People’s Daily carried a piece on by China’s ambassador to Russia, Zhang Hanhui. What’s fascinating is that most of the article is about Xi’s concept of community of common destiny, which he had first spoken about in 2013 in Russia. What I mean by this is that most of the piece by China’s ambassador to Russia has nothing to do with the bilateral relationship. The relationship specifically gets a mention in the third to last paragraph. Perhaps, this also indicates that the geopolitical component of the relationship is the dominant driver of ties from China’s perspective today. 

Anyway Zhang sets the context by arguing:

“At present, more than ever before, the international community needs to strengthen unity and cooperation, defend the international system with the United Nations as the core and the international order based on international law, reform and improve the global governance system, oppose power politics and illegal unilateral sanctions, and oppose interference in other countries' internal affairs through human rights issues. People of all countries should cast aside the practice of engaging in group politics based on small circles and suppressing different development models with ideological lines.” 当前,国际社会比以往任何时候更需要加强团结合作,捍卫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,改革和完善全球治理体系,反对强权政治和非法单边制裁,反对借人权问题干涉别国内政. 基于小圈子搞集团政治、以意识形态划线打压不同发展模式的行径必将遭到各国人民唾弃.

He then says that under Xi and Putin, China-Russia ties have reached “unprecedented” heights. 

This new type of state-to-state relationship that is non-aligned, non-confrontational, and non-targeted between China and Russia, completely abandons ideology and geopolitical fetters (this made me chuckle), and can be called a model of contemporary relations between major powers and neighboring countries. China and Russia uphold the consensus of the ‘four mutual resolute supports’ (四个相互坚定支持), jointly safeguard the core interests of the two countries, and actively promote the multi-polarization of the world and the democratization of international relations. 中俄不结盟、不对抗、不针对第三方的新型国家关系,彻底摒弃了意识形态和地缘政治羁绊,堪称当代大国关系和邻国关系的典范. 中俄秉持“四个相互坚定支持”共识,共同维护两国的核心利益,积极推动世界多极化和国际关系民主化.

As an aside: The four mutual resolute supports are:

  • support each other's efforts to safeguard their country’s sovereignty, security, territorial integrity and other core interests, 

  • support each other’s development path in line with their own national conditions, 

  • support each other’s development and revitalization,

  • support each other in running their own affairs well

Anyway, Zhang ends by arguing that “China and Russia are united like a mountain, and the friendship is unbreakable.”

b. BRI Vaccine Partnership: At the BRI meeting this week, a joint BRI vaccine partnership initiative was launched. The countries include: Afghanistan, Bangladesh, Brunei, Cambodia, Chile, China, Colombia, Fiji, Indonesia, Kazakhstan, Kyrgyzstan, Laos, Malaysia, Maldives, Mongolia, Myanmar, Nepal, Pakistan, Philippines, Saudi Arabia, Singapore, Solomon Islands, Sri Lanka, Tajikistan, Thailand, Turkmenistan, UAE, Uzbekistan and Vietnam.

A joint statement in this regard is published in PD. The countries committed to:

  • Strengthen vaccine regulatory policy communication

  • Encourage qualified vaccine producing countries to support enterprises to provide more vaccines to COVAX

  • Push for donation or cheap export of vaccines to developing countries

  • Promote joint vaccine research and development, including tech transfer

  • Push to establish joint vaccine production partnerships

  • Encourage multilateral banks to fund vaccine development

On the issue of vaccines, do note that China’s vaccination drive has been moving at a staggering pace. The country has administered more than 1 billion doses of its COVID-19 vaccines so far. According to state media, “a total of 21 COVID-19 vaccines have entered clinical trials in China since last year. So far, four have been granted conditional marketing approval and three have been authorized for emergency use within the country.” The NHC also says that at least 70 percent of the target population in China is expected to be vaccinated against COVID-19 by the end of this year.

Also, there’s fresh concern about the efficacy of Chinese vaccines. NYT reported this week that countries like Mongolia, Seychelles and Bahrain had relied on the easily accessible Chinese COVID-19 vaccines to combat the coronavirus pandemic and bring back normalcy. These countries are now battling a surge in infections. Examples from several countries suggest that the Chinese vaccines may not be very effective at preventing the spread of the virus, particularly the new variants.

c. Apple Daily Shuts Down: Beijing’s pressure campaign has finally led to Apple Daily shutting down. Apple Daily’s last print edition was published on Thursday; its website has also stopped being updated. The newspaper’s publisher, Next Digital, said in a separate statement that the publication will shut down no later than Saturday due to “current circumstances prevailing in Hong Kong.” WSJ reports: “After midnight, on Thursday, Apple Daily’s presence all but vanished from the Internet: Its website thanked readers and showed instructions on how to cancel their subscriptions on the Google app. It closed its Twitter and Facebook accounts. As the presses rolled on the final edition, supporters gathered in the rain outside the building in a waterfront industrial area, cheering on the journalists, who shouted thank you and shone phone flashlights back at the crowd before police came and tried to clear the well-wishers away.”

“The apple was buried in the mud, but its seeds grew into a tree with bigger, even more beautiful apples,” the paper said in a goodbye letter to readers titled “Until We Meet Again.”

Meanwhile, Reuters reports that the Chinese government on Friday approved the promotion of Hong Kong’s security secretary John Lee to chief secretary, while police chief Chris Tang will take Lee's position in what critics say will further tighten Beijing's security squeeze on the global financial hub. The report says that this reshuffle could further empower security officials, critics say, who have faithfully implemented Beijing's new security regimen to strengthen control and clamp down on freedoms in the former British colony after mass pro-democracy protests in 2019.

“The promotion of John Lee and Chris Tang completes the swift and total transformation of Hong Kong into a police state,” said Samuel Chu of the Hong Kong Democracy Council.


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