Pandemic Diplomacy - Economic Sobriety - Anti-Trust Fines - Biden's Speech - Yang's Proposal - A Tougher Europe? - Afghan Troika Talks - Marxism's Winning - Defense Ties in South Asia
Dear Subscribers,
My colleague Aditya Ramanathan and I have a new report out, looking at the evolution of the Biden administration’s Indo-Pacific policies, as it marks 100 days in power. I am sharing a brief summary below, but you can access the full report here.
I. Pandemic Diplomacy - The Good, Bad & Ugly
Through the week we’ve seen the good, the bad and the ugly dimensions of the India-China relationship. Let’s begin with the good. Beijing continued its public outreach to New Delhi in regard to the Covid crisis. Early in the week, Chinese Foreign Minister Wang Yi met with foreign ministers of Afghanistan, Pakistan, Nepal, Sri Lanka and Bangladesh. Wang said that India was also invited to this meeting. He said that China extends its “sincere condolences” to the Indian people and “is ready to provide support and assistance to the Indian people at any time according to the needs of India.” He also added that “relevant Chinese companies have taken active actions with government support, and the first batch of oxygen concentrators has arrived in India.”
Soon after that, Wang sent a letter to his Indian counterpart S. Jaishankar, expressing “empathy” and promising to provide support “according to the needs of India.” This was followed by Xi Jinping writing to Prime Minister Modi, expressing “sincere sympathies,” promising “to strengthen cooperation” and adding that “I believe that under the leadership of the Indian Government, the Indian people will surely prevail over the pandemic.” This is the first such exchange between the two leaders since February last year, when Modi had written to Xi during the lockdown of Wuhan. Thereafter, the only such bilateral leader-level exchange was on April 1, 2020, marking the 70th anniversary of bilateral ties. The messages exchanged at that time were between Xi and President Kovind, and Li Keqiang and Modi.
Finally on Friday, we had Wang Yi call Jaishankar to discuss the Covid situation. The MEA’s readout of the call says that they spoke about commercial procurement of supplies that is underway from China. The Indian side wanted this process to be facilitated by ensuring that “various transport corridors and cargo flights remained open and the necessary logistics support ensured expeditiously.”
Wang, as per the MEA, promised efforts to ensure “all the required materials flow to Indian entities without any delay. Chinese companies would be encouraged and supported to deliver requisite materials. Airports, customs and airlines would also be instructed to smoothly facilitate movement of goods. Chartered flights from India would be welcome and specific problems raised by the Indian side sorted out quickly.” We saw some action in this regard already, with the Chinese ambassador Sun Weidong responding to actor Sonu Sood’s public complaint about consignments of medical supplies from China being blocked.
Likewise, we’ve seen the embassy respond to the story about Sichuan Airlines suspending flights to India. The airline operates around 11 cargo flights to different destinations in India. The embassy’s initial response to this was clumsy, with spokesperson Wang Xiaojian terming it a “normal business decision.”
The Indian pharma industry has expressed concern about this suspension hitting supplies. While reports inform that the airline has since retracted the decision, I am not certain if flights have resumed.
Anyway, the last line about Wang’s comments in the MEA readout of the call with Jaishankar is interesting to note. It says that “Foreign Minister Wang Yi offered any other appropriate assistance required from the Chinese Government.” So it seems that Beijing has offered to do more and perhaps at a government-to-government level, but India hasn’t taken it up so far.
The Chinese readout of the call largely agrees with this. It says that, adding one more line about engagement between health experts from the two sides.
China will continue to encourage and support Chinese enterprises to speed up production and provide India with medical supplies.
The Chinese side will facilitate customs clearance and transportation of anti-virus materials purchased by the Indian side.
Health and infectious disease experts of the two countries will be organized to share experience and effective measures in overcoming the epidemic via video link.
Ambassador Sun spoke some more about China’s pandemic diplomacy in an interview with Global Times. The Chinese foreign ministry also provided some details of the supplies that have flown in from China, but it added that “freight air routes from China to India are operating normally” and told journalists that “as many donations and procurement are made through unofficial channels, I suggest you also refer to the Indian government, which should help you better understand the actual situation.”
My Thought: States are driven by interests and not altruism, and it is in China’s interest to support India in containing this second wave. Beijing is concerned about the spread of the virus mutations into China. Already there is some reportage around this, with Wu Zunyou, chief epidemiologist with the Chinese Center for Disease Control and Prevention, saying that the strain found in India has been identified in some Chinese cities. A public health crisis across South Asia would also hurt its economic and political interests. There is, of course, a commercial opportunity in assisting India, as evident by deals for supplies, and there are geopolitical opportunities in terms of perception management, expanding influence in the Indian subcontinent and underscoring China’s criticality and reliability regarding key supply chains. And while all this is important to note, it is in India’s interest to accept any and all supplies that help in rapidly augmenting capacity for testing, isolating and treatment and ensuring availability of oxygen and therapeutics, irrespective of where they come from. The longer it takes to contain the current wave, the graver will be the human, social, economic and political costs, diminishing India’s national power in the long term.
Anyway, also on the good side of the triangle lies trade data. The Chinese Commerce Ministry said this week that bilateral trade in goods in the first quarter of this year with India touched $27.7 billion, a year-on-year increase of 42.8 percent. The report quotes Dai Yonghong, a professor of the Institute of South Asia Studies at Sichuan University, as saying that the resilience reflects that the two countries are able to complement each other in certain industries such as raw materials for light industrial products, automobile parts, and medicine production. Also note this Bloomberg report about China reducing its import and export levies on steel. The report adds that “Credit Suisse suggests that export prices for Indian steelmakers have already risen in anticipation of this move and expects them to remain at elevated level.”
From the good to the bad, let’s turn our attention to tensions along the LAC, which also featured in the Wang-Jaishankar call. The MEA’s statement says that “the two Ministers also discussed the outstanding issues related to disengagement from all friction points along the Line of Actual Control (LAC) in Eastern Ladakh. External Affairs Minister conveyed that while the process of disengagement had commenced earlier this year, it remained unfinished. He emphasized that it was necessary that this process be completed at the earliest. Full restoration of peace and tranquility in the border areas would enable progress in the bilateral relationship.”
The Chinese readout of the call, however, did not mention talks about the boundary issue. It just said that the two ministers “exchanged views on bilateral relations and global cooperation.” But the LAC issue did come up during the monthly press briefing by China’s defense ministry. Senior Colonel Wu Qian responded to CDS Bipin Rawat’s comments at the Raisina Dialogue. He said:
“Regarding the situations in the western section of the China-India boundary, China has explained the ins and outs in detail, and the responsibility does not lie with China.” He added that “China hopes that the Indian side will cherish the hard-won situation, abide by the relevant agreements of the two countries and two militaries and the consensus reached in previous corps commander-level meetings, and work with China to safeguard peace and tranquility in the border area…”
There is also this report by India Today’s Shiv Aroor, which says that “far from winding down winter deployments, the Chinese Army has reinforced its presence in eastern Ladakh depth areas with permanent accommodations and depots.” He writes that “Chinese accommodations built between Kangxiwar, just north of Aksai Chin, and Rudok in Tibet's Ladakh frontier has caused alarm. Ground intelligence and imagery with the Indian security establishment has led to an assessment that has echoed through the standoff periodically: that the PLA is here for the long haul.”
Shehesh Alex Philip reports for ThePrint that given the Covid crisis, the 12th round of Corps Commander-level talks are likely to be delayed. “It could be held after a month or two,” the report quotes a source as saying. The source adds that “local commanders are maintaining contact through the hotline on a regular basis.” The report also says that the Covid situation has meant that the China Study Group has not been able to meet. Nevertheless, it adds that Indian “soldiers are sitting tight in Ladakh while monitoring Chinese activity through physical means besides drones and satellite imagery even as various infrastructure development activities are on to cater to enhanced troop levels and future exigencies…The Army’s Northern Command has put in place a series of protocols to ensure the virus doesn’t hit operational capabilities.”
Also note, this assessment by Lt Gen (Dr) Rakesh Sharma in which he debunks the Indian government’s narrative about Indian patrols being blocked in Depsang as a “legacy issue.” Recall that Depsang did not even feature in Defense Minister Rajnath Singh’s September 2020 speech to Parliament about tensions in Ladakh. Lt. General Sharma argues that patrols continued even after the standoff in the area in 2013 and continued till 2019.
“It must categorically be stated that the patrolling had continued, as planned, since April/May 2013 stand-off, except when halted due to face-offs with PLA patrols or terrain conditions. Even post face-offs, commanders on ground would attempt to re-do the task at the earliest, sometimes within a day or two! This would imply that minimum of eight to ten patrols per year from 2013-2019, would have roughed in the most difficult of terrain and weather conditions for five to six days of patrolling of PPs 10-13. Patrols face detailed debriefings, and copious patrols reports are duly vetted up the ITBP/Army Chains. These patrol reports would exist even presently. It implies that cumulatively over 2500 all ranks from ITBP and Army must have touched base at the PPs at Depsang, from 2013 to 2019. In addition ASO/ WASO, some with senior commanders, undertake regular missions, along the Limit of Patrolling (LOP). To now state that we were not able to reach our LOP since 2013 as PLA was blocking our movement, is pure heresy, and challenging integrity and honour of devoted ITBP/ Army soldiers, units formations and commanders up-the-chain! In fact similar to own movement, the PLA patrols would have also been attempting and reaching their claim line, say at Track Junction (near DBO) or close to ITBP post at Burtse. In 2020, however, as per open source, there is mutual block either side of Bottleneck on Raki Nalla, thereby denying Joint Indian patrols to reach LOP, as also PLA patrols to come towards Burtse. The ‘source’ stating that, ‘…Indian troops are being blocked in Depsang since before 2013 as well and after that,’ most certainly mandates verification of facts.
Finally, let’s come to the ugly. In last week’s newsletter, I covered details about the Chinese media’s coverage of Indian anger over the Biden administration’s delayed response. Since then, US public diplomacy and support has been ramped up tremendously. But there are still attempts at criticism from the Chinese side. So, we have this piece talking about the “selfishness of the US in the face of a COVID-19 crisis in India” being “tantamount to a stab in the back of its partner.”
Chinese media has also been extensively covering the crisis in India. So the daily caseload information, the crisis at hospitals, the rising number of cremations, criticism of the government and events like the Kumbh Mela, decisions on lockdowns and vaccination drive and Chinese diplomatic outreach have all been widely covered. There are also pieces that are very critical of the Indian government’s handling of the crisis. For instance, this one talks about breathing having become a luxury for Indians and says that the blame for the current crisis in India rests with the Modi government’s “complacency” after the first wave. It argues that in a bid to spur economic recovery, the government continued to use significant amounts of oxygen produced in India for industrial production instead of creating a strategic reserve for medical purposes. The piece also says that despite popular coverage about low-cost healthcare in India, “public hospitals are generally short of resources.” Anthony Fauci’s comments about India needing to learn from China’s pandemic control experience is another bit that’s covered. This piece expresses frustration at the Indian government’s lukewarm response to Beijing’s outreach. All of this is fine and doesn’t fall in the ugly bracket. What does fall in the ugly bracket is below.
Some Chinese media coverage has been tasteless; and some social media discussions, particularly by official Party handles has been disgusting. Below is Guancha’s homepage from Saturday, leading with Modi’s visit to the Sis Ganj Sahib Gurudwara in Delhi. The headline talks about Modi “running to pray” - Mòdí pǎo qù qídǎo “莫迪跑去祈祷” as the daily cases cross 400k.
Then there’s this utterly crass post the Central Political and Legal Affairs Commission’s Weibo account ‘China Chang’an Web’ 中国长安网. What’s on Weibo reports that the post says “Lighting a Fire in China VS Lighting a Fire in India” (“中国点火VS印度点火”). The post was later deleted, although it had been shared thousands of times. What’s heartening is that there were many comments very critical of the post. However, one fairly popular WeChat post criticising the Weibo by China Chang’an Web was blocked too.
The author wrote: “Some people will say, you are not Chinese, you are a traitor. Sorry, I’m Chinese. I want every Chinese to have humanity, know manners, understand shame, understand good and evil. Even if there is a fierce conflict with the opponent, as well as unfair treatment, one can still adhere to the bottom line of human civilisation. Here, I would like to personally apologise to the people of India. The microblog released by China Chang’an Web does not represent me.”
Of course, there were also Chinese voices on Twitter too that were critical of the post. Here’s Xinhua’s Zichen Wang’s post.
Also note this exchange between Fudan’s Shen Yi and Global Times’ Hu Xijin; Hu’s actually arguing that officials accounts should not be posting such material, while Shen’s defending it.
The China Chang’an Web post was not the first such horrendous post being shared on social media in China about the outbreak in India or even the first by an officially-linked handle, as this CDT report shows. And as sickening as it is to encounter such views, particularly from official government handles, it’s important to keep in mind that nationalistic schadenfreude whether on social media or among elements of the establishment is only going to be counterproductive for China.
Also Read:
Chinese pharma firms mull bypassing India in global supply chain amid raging virus wave
Hope nations ‘respect market rules’: China on India, Australia, Japan supply chain initiative
PLA sets up army, air force joint defence system in western theatre command
China appoints new army commander to Tibet region from elite ‘Tiger in the mountains’ force
II. Region Watch
Foreign Minister Wang Yi hosted the discussion with foreign ministers of Afghanistan, Bangladesh, Nepal, Pakistan and Sri Lanka last week. Discussing the worsening COVID-19 situation in the region, China made the following suggestions to encourage anti-pandemic cooperation among the six countries:
oppose attempts of labelling the virus and politicizing the pandemic
promote vaccine cooperation - through free aid, commercial procurement, and filling and production of vaccines, the six countries can ensure that the region has diverse and stable vaccine supplies
focus on the urgent task of economic recovery - China hopes to promote high-quality Belt and Road cooperation and help countries in the region move on the "fast lane" of economic recovery
take forward the Oriental tradition of "good neighbourliness" - China will maintain an international and regional environment that is conducive to the development of all countries
To cover the gap in its vaccination drive, Bangladesh’s drug regulator on Thursday announced it had approved the emergency use of a vaccine developed by an affiliate of China’s Sinopharm, along with Russia's Sputnik V vaccine.
Nepal, which shares a long porous border with India, fears that people in the Himalayan state have caught the mutant strains emerging out of India. Nepal began its vaccination campaign in January and inoculated around 1.9 million people. Heavily dependent on vaccines from foreign sources, the continuation of the drive was uncertain after officials had failed to procure more vaccines.
“Since coronavirus cases have spiked beyond the capacity of the health system and hospitals have run out of beds, the situation is unmanageable,” the health ministry said on Friday.
Chinese government representatives met with their Nepali counterparts to discuss the unfolding health crisis. Clad in PPE, the security personnel and administrative officials of both countries held a meeting at Miteri Bridge connecting Nepal and China on Thursday. The pandemic has also slowed down construction activity, affecting the country's economic prospects.
Parallelly, China’s Defence Minister Wei Fenghe called on countries in the region to resist “powers from outside the region setting up military alliances in South Asia”, during his visit to Bangladesh and Sri Lanka last week. General Wei’s comments in Dhaka on Tuesday and in Colombo the following day, came as a push back from China on the Quad grouping. The result: Sri Lanka has “prioritised” its ties with China as the two vowed to enhance cooperation in all sectors, “including the military”. Senior Sri Lankan Defence officials and the visiting Chinese delegation signed a ‘Military Assistance Protocol’, the details of which are yet to be disclosed. In a similar vein, Bangladesh's President Abdul Hamid expressed his hopes that the two militaries (Bangladesh and China) will continue to strengthen their practical cooperation in various fields, pushing for greater progress in their relations.
Also Read:
III. Guangxi Tour, Propaganda Appraisal, Rectification & CYL Backs Xi
Let’s begin with Xi Jinping’s inspection tour of Guangxi. Xi was accompanied by Lu Xinshe, Party Secretary of Guangxi, and Lantian Li, Chairman of the Government of Guangxi. You can find a detailed breakdown of the tour-related reports in my People’s Daily Tracker, but here are the two noteworthy bits. First, he began the tour by visiting a memorial park dedicated to the Battle of the Xiangjiang River during the Long March in the 1930s in the city of Guilin. He called the Battle of the Xiangjiang River a “heroic battle of the Long March and an important historical event that determined the ‘life-or-death’ of the Chinese revolution.”
He then called for a “new Long March to achieve the goal of the second century; we must hold the belief of winning, bravely overcome all kinds of major risks and challenges from home and abroad, and March forward bravely towards the goal of realizing the great rejuvenation of the Chinese nation.”
During the visit, Xi also emphasized that the high-quality development of the manufacturing industry as the top priority of the high-quality development of China’s economy.
“We must unswervingly follow the path of independent innovation and firmly hold the initiative of innovation and development in our own hands. We must uphold the party's overall leadership over state-owned enterprises, adhere to the unity of strengthening party leadership and improving corporate governance, do a good job in party building in deepening enterprise reform, and give full play to the leadership core role of party organizations in the reform and development of enterprises.”
Next, there was a fascinating piece in People’s Daily this week, which informs about how the Party and government approach and appraise publicity work. Of course, this ties into the notion of building discourse power. So the report says that the Central Propaganda Department evaluated the press information work of 65 departments, 31 provinces (autonomous regions and municipalities) and Xinjiang Production and Construction Corps in 2020. It found that through the year some 4,575 press conferences were held; 227 of these were held by the State Council’s information offices, 859 at various department-levels and 3,489 at local levels.
This is interesting in that it tells you how propaganda output is being evaluated. So part of it is quantity, and there are details about the number of press briefings held by different governments during the COVID-19 outbreak in 2020, and then there is this about qualitative assessment. The piece says that in the past, the key individual during a press conference was the press spokesman. But in 2020, “we can see that besides the press spokesperson, the principal responsible persons of various regions and departments, the heads of professional departments, experts and scholars, front-line staff, etc., all began to become the main body of the press conference.”
The piece discusses different experiments by different regions. For instance, it cites the example of Jiangxi, where reporters were invited to engage with officials, scholars and experts after press briefings for interviews. Briefings were held at the site of events. There’s also praise for being able to move briefings online to reduce the size of gatherings. Chongqing gets praise for building a WeChat system called “Zhihui Bafang” for sharing important information on a regular basis.
Some more data here:
“There are a total of 262 spokespersons in all regions and departments, of which about 25% are provincial and ministerial-level leading cadres, and the rest are department- and bureau-level leading cadres. Forty-three departments, including the Ministry of Foreign Affairs, the Ministry of National Defense, and the National Development and Reform Commission, publicize the list of spokespersons for their respective systems and the contact information of the press release agencies. 27 provinces (autonomous regions, municipalities) and the Xinjiang Production and Construction Corps organized and carried out the training of news release activities in the region.” have
Third, PSC member Zhao Leji this week spoke at a conference ahead of the seventh round of disciplinary inspection by the 19th CPC Central Committee. The new round of inspection targets Party committees of the Ministry of Education and 31 centrally-administrated universities, including Peking University and Tsinghua University. (Full list of entities to be inspected) He emphasised the political nature of the inspection work, underscoring the need to “learn and understand” Xi Jinping Thought on socialism with Chinese characteristics in the new era. He outlined the agenda for the the inspection further:
“Adhere to the inspection policy of ‘discovering problems, forming deterrence, promoting reform and promoting development’ and give full play to the role of the sword; adhere to the people’s perspective and focus on discovering and promoting the solution to corruption and unhealthy trends around the masses…”
He also pointed to key objectives that educational institutes must focus on:
implementation of the requirements of comprehensive and strict governance of the party
implementation of the party’s organizational line in the new era
Implementation of the party’s educational policy
adherence to the socialist operational orientation
Finally, I’d like to highlight this piece by He Junke, the First Secretary of the Central Committee of the Chinese Communist Youth League. Remember He was promoted to the post in 2018, becoming the youngest person in the country to hold a ministerial-level office. Of course, as you read these comments, remember that it was Communist Youth League’s activism that was critical in the recent nationalistic attacks on H&M. Also remember that the CYL was Hu Jintao, Li Keqiang and Hu Chunhua’s base. All of them are former First Secretaries.
Here are excerpts from the article:
“To promote the Chinese youth movement in the new era, we should always adhere to the guidance of Xi Jinping Thought on socialism with Chinese characteristics in the new era, thoroughly study and implement General Secretary Xi Jinping's important thought on youth work, strengthen the four consciousnesses, strengthen the four self-confidences, achieve two maintenance, take the banner of the party as the banner, take the will of the party as the will, take the mission of the party as the mission, and unite and lead the broad masses of young people to unswervingly listen to the party's words and follow the party.”
“In the new era, the Chinese youth movement should earnestly shoulder the historical responsibility of passing on the red gene from generation to generation, carry out in-depth publicity and education of Xi Jinping Thought on socialism with Chinese characteristics in the new era among the broad masses of young people, carry out in-depth study and education in the history of party history, the history of New China, the history of reform and opening-up and the history of socialist development, use the rich resources and fresh teaching materials of ‘the rule of China’ to deeply explore and reveal the ideal and belief of Marxism and the spiritual characteristics of the Communist Party of China…”
Here’s more:
“The Communist Youth League in the new era should always keep in mind the original mission of always following the Party, consciously follow the decision-making and deployment of the Party Central Committee with Comrade Xi Jinping as the core, firmly promote its own reform, constantly maintain and enhance the political position, advance the mass nature of the league, truly eradicate the problems of ‘organization, administration, aristocratization and entertainment’ from ideological, operational and institutional aspects, and strive to build a Marxist youth organization that has always been loyal to the party…” -- 新时代的共青团要始终牢记永远跟党走的初心使命,自觉按照以习近平同志为核心的党中央决策部署,坚定推进自身改革,不断保持和增强团的政治性、先进性、群众性,真正从思想上、工作上、制度上根除“机关化、行政化、贵族化、娱乐化”问题,努力建设成为始终忠诚于党、密切联系青年、坚持实事求是、勇于自我革命、永葆蓬勃朝气的马克思主义青年组织。
IV. Economy & Technology
The Politburo met on Friday to discuss developments in the Chinese economy. This came ahead of the May Day holiday in the country. Xinhua reports that the “leadership has called for cool heads over the impressive growth to put more focus on deepening structural reform for balanced recovery in the long term.”
The report talks about the the 18.3% year on year growth of Q1 and then adds, “soberly aware that the double-digit growth was fueled by base effect, policymakers underscored more efforts to deepen supply-side structural reform and remove the impediments to domestic and international circulations as China faced ‘a window of opportunities’ at a time when there is less pressure to maintain steady growth.”
Xinhua added that official data showed China's first-quarter manufacturing investment of 2020 and 2021 was down 2 percent on average from the 2019 level. Recovery of consumption, an important pillar of economic growth, also needs further consolidation. Other challenges include pushing industrial upgrading, keeping stability in the property market, defusing financial risks and advancing plans towards carbon neutrality, along with coping with increasing uncertainties in the global market.
WSJ reports that China’s official purchasing manager’s indexes showed manufacturing activity falling more sharply than expected, dropping to 51.1 in April, according to data released Friday by the National Bureau of Statistics—lower than March’s 51.9 reading and falling short of the 51.6 median forecast expected by economists polled by the paper. The report adds that China’s nonmanufacturing PMI, which includes services and construction activity, fell to 54.9 in April from March’s 56.3 level. The subindex measuring business activity in the service sector fell to 54.4 from March’s 55.2.
Meanwhile, SCMP reports that to better deal with the country’s financial risks – including weak liquidity at many small banks and mounting debt repayment pressures on some local governments – the central government plans to build a bad debt disposal mechanism that will be largely the responsibility of local Communist Party and government officials.
Moving on, the State Council’s executive meeting this week (English report) focussed on improving the county-level consumption environment and promoting rural consumption as “important measures to stimulate domestic demand and support rural revitalization.” A number of steps are being proposed to do this. For instance:
Support qualified townships to build commercial centers that integrate shopping, entertainment, and leisure.
Develop products that farmers need and boost tourism via development of country houses and leisure agriculture.
Expand rural e-commerce, create better cold-chain storage networks, etc.
Improve policy support for land use and finance for the construction of commercial facilities
Improve supervision to crackdown on counterfeits, while easing unreasonable regulations and prohibiting arbitrary fines
In addition, they discussed new steps to reform the government functions regarding intellectual property to facilitate entrepreneurial activity and innovation. The meeting promised that “the time needed for general trademark registration will be cut from eight to seven months” by the end of the year. Also, online processing of patent review will be prioritised.
“The quality of intellectual property will be prioritized over simple pursuit of quantity. The quantity of patent application and licensing should not be the main criterion when deciding on rewards or making qualification assessment. Financial assistance and incentives during trademark and patent application will be called off across the board.”
In addition, it was decided that “while ensuring data security, basic data of intellectual property will be made public, to catalyze corporate R&D and innovation.” The meeting also warned against easing up on epidemic control measures ahead of the May 1 holiday.
Next, Yicai reports that Sinopharm, Sinovac Biotech and other Chinese drugmakers are signing up partners to speed production and global delivery of their Covid-19 vaccines. They are said to be joining hands with so-called contract development and manufacturing organizations on research and development, clinical trials, production, and sales. Finally, Bloomberg reports that the embattled China Huarong Asset Management Co. repaid an offshore bond maturing on Tuesday with funds provided by the Industrial & Commercial Bank of China Ltd.’s Singapore branch. The loan helped Huarong repay its $452 million bond due April 27. The support comes after China’s financial regulator asked banks to extend loans to Huarong by at least six months to help the company refinance debt.
Moving to the technology sector, this week has seen fresh action on the anti-trust front. First, Caixin reports that the the State Administration of Market Regulation slapped more fines on 11 companies for violating the Anti-Monopoly Law by failing to obtain advance regulatory permission for past acquisitions or joint-venture deals. The report says that Tencent was fined 500,000 yuan ($77,200) for violations in two cases. However, Reuters reports that the tech giant is likely to hit with a bigger fine down the road, somewhere in the vicinity of “at least 10 billion yuan ($1.54 billion).”
Second, food-tech giant Meituan is now in the regulators’ crosshairs for engaging in the monopolistic business practice of forcing merchants to “pick one from two.” Meituan, which this month raised $10 billion in a stock and convertible bonds sale, said in a statement that it would cooperate with the investigation and that its business was operating normally. A few days after the probe was made public, a video clip showing a local labour official working a 12-hour shift as a Meituan employee began making the rounds on Chinese social media. SCMP reports that the two-minute clip, shared by the Beijing Municipal Human Resources and Social Security Bureau’s official Weibo account on Wednesday, featured the deputy director of the bureau’s labour relations division Wang Lin spending a day working as a Meituan delivery driver in the Chinese capital. The idea is that he works very hard, but makes very little money.
Third, Technode reports that Huawei’s Q1 revenue fell fell 16.5% year on year, in the company’s largest quarterly top-line decrease since US export restrictions took hold. Huawei said in a statement Wednesday that its revenue for the first quarter of this year was RMB 152.2 billion (around $23.5 billion).
Finally, the NPCSC has completed its second review of the new draft data security law and the draft personal information protection law. According to Xinhua, the personal information protection law will require “big internet platforms that possess the personal information of a large number of users…(to) set up an independent body mainly composed of outsiders to supervise how the information is handled. The internet giants are also required to publish social responsibility reports on personal information protection on a regular basis.” It further states that “the draft also bans ‘coercive’ measures in handling personal information. Internet platforms shall use the minimum amount of personal information possible in ways that have minimum impact on the rights and interests of users.”
Also Read:
Draft Futures Law Brings Other Derivatives Under Its Scope, Raises Penalties for Violations
China’s Policy Banks Miss Deadline to File Last Year’s Annual Reports
China spends more importing semiconductors than oil - Around $350 billion in 2020.
China to launch month-long effort in May to boost consumption
V. China-US Ties
Let’s begin with Yang Jiechi’s article on Sino-US ties, commemorating the anniversary of the ping-pong diplomacy of April 1971. Writing in In this piece in the People’s Daily, he talks about how Mao, Zhou, Nixon, and Kissinger “and other leaders of the older generations of China and the United States, proceeding from the common interests of the two peoples, with extraordinary strategic vision and political courage, made a new start” back then. He then highlights how since then the relationship has benefitted both sides. He mentions high levels trade despite the pandemic, work on the Paris Accord, the recent climate summit, the Asian financial crisis of 1997, the 2008 global financial crisis, managing the Ebola outbreak, couter-terroism, nuclear non-proliferation, etc.
He says that from this historical development, there are three lessons to be drawn:
First, focus on “peaceful coexistence” and “win-win cooperation.” In other words, proceed from the “common interests of the two peoples” and “seek common ground while reserving differences on the basis of respecting each other’s political systems and development models.” He also talks about equality and non-interference in internal affairs, before saying this
“China has no intention of denying the political system and development path of the United States or any other country, nor does it seek to popularize China's political system and development path in the world. However, if someone wants to challenge the Chinese Communist Party, China's political system and leadership system, the Chinese people will never agree.” (Keep this in mind when you get to Section VII of the newsletter)
Second, he wants the US side to keep the broader perspective in mind and “strive to build a new type of major power relationship that is based on non-conflict, non-confrontation, mutual respect, and win-win cooperation.” Essentially, this is about offering a G2-style formulation, keeping in mind global governance and global challenges. He mentions the pandemic, economic development, climate change, nuclear proliferation, counter-terrorism, the UN, etc.
Third, he talks about people-to-people diplomacy. He says that “in recent years, some people in the United States have embraced the Cold War, zero-sum mentality and have continuously interfered and created obstacles to the normal people-to-people exchanges between the two countries. They are standing on the wrong side of history and opposing the two peoples.” He wants to “create favorable conditions for exchanges and cooperation between localities, enterprises, think tanks, media, and non-governmental organizations of the two countries.”
My Thoughts: Part of this makes sense, particularly when one thinks of students, researchers, journalists, business people and so on; but part of it is just incredibly hypocritical. One need not even get into historical issues like blocking of Western social media platforms in China; the fact is that China is still actively taking actions to target individuals and think tanks. Barely two weeks ago, it was reported that Beijing blocked the CSIS website because it did not like criticism on China sanctioning European researchers, parliamentarians and institutes.
Anyway, one change that we are seeing is with regard to visa restrictions. Caixin reports that the U.S. Embassy and consulates in China are scheduled to resume visa appointments for students starting May 4 after Washington lifted travel restrictions Monday for students from China and several other countries. SCMP reports that in easing the restrictions, the US said that journalists, students and academics covered by exchange visitor programmes and travellers from Brazil, Britain, China, Iran, Ireland, the Schengen Area and South Africa who “provide vital support for critical infrastructure” may now qualify for a “national interest exception”, which would allow entry to the US. The US Department of State said students with valid visas could enter the United States 30 days before school started in August and did not need an individual national interest exception to travel.
Moving on, US President Joe Biden’s first speech to Congress this week had a number of references to China. The speech was predominantly about domestic issues but it was clear that China’s rise was a key driver for the call to “build back better.”
Here are some key quotes:
“We’re in competition with China and other countries to win the 21st century. We’re at a great inflection point in history. We have to do more than just build back better — than just build back, we have to build back better. We have to compete more strenuously than we have.”
“Decades ago, we used to invest 2 percent of our gross domestic product in America, 2 percent of our gross domestic product in research and development. Today, Mr. Secretary, that’s less than 1 percent. China and other countries are closing in fast. We have to develop and dominate the products and technologies of the future. Advanced batteries, biotechnology, computer chips, clean energy.”
In my discussions with President Xi, I told him we welcome the competition. We’re not looking for conflict. But I made absolutely clear that we’ll defend America’s interests across the board. America will stand up to unfair trade practices that undercut workers and American industries like subsidies from state to state-owned operations and enterprises and the theft of American technology and intellectual property. I also told President Xi that we’ll maintain a strong relationship in the Indo-Pacific, just as we do for NATO and Europe. Not to start a conflict, but to prevent one. I told him what I said to many world leaders, that America will not back away from our commitments, our commitments to human rights and our fundamental freedom and our alliances. I pointed out to him, no responsible American president could remain silent when basic human rights are being so blatantly violated. An American president has to represent the essence of what our country stands for. America is an idea, the most unique idea in history. We are created, all of us equal. It is who we are. And we cannot walk away from that principle and in fact say we are dealing with the American idea.
Following this, US NSA Jake Sullivan spoke at a virtual forum held by the Aspen Institute, marking the Biden administration’s 100 days in power. He spoke about the Taiwan issue, saying that “we believe in the ‘One China’ policy, the full implementation of the Taiwan Relations Act, the six assurances ... and we oppose unilateral changes to the status quo.” He spoke about the Quad, saying that “what makes the Quad so effective is that the Quad is not fundamentally about China. It's about this affirmative agenda that these four capable democracies can set.” He added that it is “an incredible platform for four highly capable democracies, to deal with a range of challenges from COVID to climate to disaster relief to maritime security and to help set the rules of the road on everything from cyber and emerging technology to freedom of navigation.” Another important comment he made related to assuring that the US would not be watering down actions in other areas in exchange for cooperation on climate change. “We are not in the business of trading cooperation with China on climate change as a favor that Beijing is doing for the United States...We think action on climate change is a fundamental responsibility in every significant country in the world.”
Also marking the 100th anniversary, US officials told the press in a national security briefing this week that:
“We believe that if China is what Secretary Austin has called the “pacing threat” for the United States, then that means our core advantage vis-à-vis China in the world is our ability to leverage our network of partnerships and alliances. We think that was a key tool that the United States has at its disposal that the previous administration left on the sidelines, and we have reactivated and are using to the greatest extent possible.”
No wonder the administration’s approach rating in China is not the greatest.
My Thoughts: With the administration marking 100 days, essentially Biden’s policy with regard to Beijing has built on Trump’s approach with some stylistic and substantive changes. It must be said that there are policy reviews that are currently underway; so there will be adjustments down the road. But by and large, Biden has not moved on trade; has remained tough on human rights; has tried to build bridges with allies and partners on values and technology and sought to view Beijing from the prism of the Indo-Pacific. At the same time, there’s been engagement on climate change, in terms of talks with Iran on the JCPOA and with regard to Afghanistan. See Aditya and my paper on Examining Biden’s Evolving Indo-Pacific Policy for more.
Finally, another area where the US and China are working together is the future of Afghanistan. This week, American, Chinese, Russian and Pakistani officials met in Doha for talks. They issued a joint statement, saying that:
“there is no military solution in Afghanistan and a negotiated political settlement through an Afghan-led and Afghan-owned process is the only way forward for lasting peace and stability in Afghanistan.”
“the withdrawal of foreign troops should ensure a steady transition of the situation in Afghanistan. We stress that, during the withdrawal period, the peace process should not be disrupted, no fights or turbulence shall occur in Afghanistan, and the safety of international troops should be ensured.”
“we expect the Taliban to fulfill its counterterrorism commitments, including preventing terrorist groups and individuals from using Afghan soil to threaten the security of any other country.”
“we reiterate our call on all parties to the conflict in Afghanistan to reduce the level of violence in the country and on the Taliban not to pursue a Spring offensive.”
They want the Afghan government to “engage openly with their Taliban counterparts.”
They welcomed the role played by Qatar and Turkey and want more UN engagement.
Also Read:
Beijing responds to U.S. alliances with ‘wolf warrior’ defiance. Will it backfire?
U.S. Aims to Shape New Phase of WHO-Led Probe Into Origin of Covid-19
VI. Is Europe Toughening?
First, we had the sixth China-Germany inter-governmental consultation led by Li Keqiang and Angela Merkel. Xinhua reports that two leaders “listened to the work reports of the heads of 25 departments, such as foreign affairs, economic and trade, justice, finance, industry, transportation, education, science and technology, health, agriculture, environmental protection and social security.” Li spoke about China and Germany’s “all-round strategic partnership”; he talked about pandemic-related cooperation, rejecting vaccine nationalism, and securing supply chains, and bringing into force the China-EU investment agreement as soon as possible.
PD reports that Merkel spoke about the importance of the investment agreement and the need for smooth exchange of officials; she added that Germany “advocates open cooperation, opposes protectionism, and advocates resolving differences through dialogue and consultation.” The two sides signed a bunch of agreements covering areas like “climate change, social security, health, food safety, international development, transportation, and sustainable development.”
Of course, neither PD and Xinhua have reported her comments about human rights or Comprehensive Agreement on Investment in entirety. In her brief opening comments, Merkel said this:
She called the CAI the “cornerstone” of China’s economic relations with Europe
She mentioned the ILO labour standards, which were discussed; she added that “reasonable working conditions everywhere for all people” are “of great importance.”
She talked about human rights, specifically mentioning the situation in Hong Kong, as something the two sides should be talking about.
Now, while mentioning human rights, Merkel did not talk about Xinjiang or the sanctions imposed on European institutions and individuals, including MEPs. And this becomes even more jarring given that MEPs were debating the issue at the same time.
Opening the debate Josep Borrell tried to soften what was to come:
“We have firmly expressed our dissent to our Chinese counterparts, both in Brussels and in European Union capitals. And we will continue to do so for as long as these measures are in place. We will do this in the framework of the European Union’s strategic approach to China, because with China we also have to engage. We have to continue engaging with China to advance on issues of common interest, while, at the same time, standing firm on our values.”
He then went on about the need to engage China, while also keeping in mind that there’s a systemic rivalry. He also believes that the Biden administration is more aligned to this European approach.
The debate, however, was full of fury. SCMP reports that “more than 30 members took the floor to denounce the sanctions imposed by Beijing...They warned China that the investment deal was ‘on ice,’ and also took aim at European Commission officials who they claimed had prioritised commercial ties with the world’s second largest economy at the expense of human rights.”
Here’s Raphael Glucksmann of France, who has been sanctioned by China: “Are we going to be free or to be nothing? To be a sovereign house, or to be a parliament that is a doormat, that a tyrant would clean his boots on, with pockets full of money.”
From SCMP: “Most of the major parties in the parliament have officially announced they will not support the deal while sanctions remain. Even with the backing of the largest one, the pro-business European People’s Party, the agreement may not have the votes to scrape through, although the EPP is known to be divided in its support in light of the sanctions.”
Next, Xi Jinping spoke to Hungarian Prime Minister Viktor Orban this week. Upon Orban, Xi seemingly heaped praise. China, he said, “highly appreciates Hungary for its firm adherence to a friendly policy towards China, as well as significant contribution to advancing cooperation between China and Central and Eastern European countries (CEECs), and safeguarding the overall China-Europe relations.” Keep in mind this report from earlier in the month: “Hungary blocks EU statement criticising China over Hong Kong, diplomats say.” Xi also spoke about BRI, the Hungary-Serbia railway, vaccine cooperation, and China-CEEC cooperation.
Orban said that “China has provided timely and valuable support to Hungary and played an important role in controlling the epidemic. Hungary is deeply grateful for this.” He then spoke about working on trade and investment and playing a “positive role in promoting cooperation between Central and Eastern European countries and China.”
Two more stories related to EU-China relations that are noteworthy. First, Bloomberg reports that the European Commission has proposed new rules, expected to be discussed next week, to levy fines and block deals. The report says that a draft of the rules doesn’t mention China specifically. However, it comes amid complaints from European businesses that the Chinese firms get support they can’t match. The report adds that Chinese business groups have already complained about the latest initiative, which will need support from EU governments before they become final. The new rules would run in parallel with oversight on foreign direct investment, which European governments have been ratcheting up in the last few years to give them more power to stop deals over industries or sectors they view as crucial. The increased scrutiny can be imposed even for minority stakes of more than 10%.
Second, Reuters reports that the European Commission is also looking to cut its dependency on Chinese and other foreign suppliers in six strategic areas including raw materials, pharmaceutical ingredients, semiconductors, batteries, hydrogen and cloud and edge technologies, under an industrial action plan to be announced next week. The report says that “a draft seen by Reuters outlined the urgency of the task ahead, citing Europe’s reliance on China for about half of 137 products used in sensitive ecosystems…” These include raw materials and chemicals used by energy-intensive industries along with active pharmaceutical ingredients and other health-care products, reports Bloomberg. The strategies discussed in the document range from diversifying supply, stockpiling, members pooling resources for Important Projects of Common European Interest, etc.
Finally, Politico’s Stuart Lau reports that the EU’s stance on China is increasingly hardening. This is evident in the debate over sanctions and CAI that I’ve covered above but also in a new report sent to the European Commission. Lau says the report “slams Beijing for ‘little progress’ on economic promises made by the Communist leadership, particularly in regard to opening up digital and agricultural markets, addressing steel overcapacity and reining in industrial subsidies. It calls for ‘further, robust’ measures to deal with the new challenges posed by China, whose economy is recovering from the coronavirus pandemic at a blistering pace.” He also quotes a letter sent by European Commission President Ursula von der Leyen and Josep Borrell along with the report. In it, they say:
“…the EU will also need to work closely with other partners. The new US administration confirmed its intention to re-engage with multilateral institutions and work closely with allies and partners, also as regards China ... We must accept that open hand and work together, whilst asserting our own stance, and our own interests, on the world stage.”
Also Read:
EU slams Russia and China for Western vaccines disinformation campaign
West and allies relaunch push for own version of China’s Belt and Road
VII. The Long & Short of It…
1. Population Controversy
Reuters reports that as per the National Bureau of Statistics China's population grew last year. The statement came after a Financial Times report earlier in the week claimed that China is set to report its first population decline since the famine that accompanied the Great Leap Forward. The report added that “the latest Chinese census, which was completed in December but has yet to be made public, is expected to report the total population of the country at less than 1.4bn, according to people familiar with the research. In 2019, China’s population was reported to have exceeded the 1.4bn mark. The people cautioned, however, that the figure was considered very sensitive and would not be released until multiple government departments had reached a consensus on the data and its implications.”
On Thursday then, NBS said that “according to our understanding, in 2020, our country’s population continued to grow.” The Bureau, however, has has delayed publishing the results of the once-in-a-decade census, with no explanation apart from saying more preparatory work was needed.
While on this issue, I recommend this piece by Andrew Batson in which he breaks down the working paper on demographics recently published by the People’s Bank of China.
2. Xi’s Marxism & Systems Competition
Two think pieces from the People’s Daily this week are worth highlighting. They tell us about the role of ideology in contemporary China and, of course, the centrality of Xi Jinping in shaping ideological thought. First, we have a piece by Li Junru, former vice president of the Central Committee’s Party School.
Li says that “the history of the Communist Party of China is a history of continuously advancing the sinicization of Marxism.” He adds that the Party’s successes over the century “cannot be separated from the scientific guidance of Marxism and the ideological power of Marxism.” He talks about Marxism being a “powerful ideological weapon” for China to “understand the world, grasp the laws, pursue the truth and transform the world…,” leading to the creation of an “unprecedented miracle of development in human history.” He then emphasises the need to continue the sinicization of Marxism, which “is the main thrust of the party’s theoretical innovation.” And the key for him in doing this is continuing to innovate based on practice. He argues that an “important purpose of carrying out party history learning and education is to strengthen the political consciousness of the entire party with the party’s innovative theories...”
He talks about the Zunyi Conference and Maoist interpretation of Marxism as a “great awakening of our party in terms of ideology and theory.” Li then tells us that “Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era is contemporary Chinese Marxism, 21st century Marxism, and the latest achievement of the Sinicization of Marxism.” He wants the Party to continue working keeping in mind the “core principles, spiritual essence, rich connotation, and practical requirements” of Xi’s thought. He wants cadres to “deeply understand and realize that this thought upholds the people's supremacy, demonstrates historical consciousness, insists on seeking truth from facts, highlighting problem orientation, strengthening strategic thinking, and carrying forward the spirit of struggle.”
The other piece is by Li Jie, former president of the Qiushi magazine. He offers much praise for Xi’s domestic and foreign policies, before saying:
“Socialism with Chinese characteristics has entered a new era, and the Party Central Committee, with Comrade Xi Jinping as its core, has led the whole party and the people throughout the country to promote the cause of socialism with Chinese characteristics and achieved remarkable great achievements, demonstrating the vigorous vitality of scientific socialism with irrefutable facts. The path of socialism with Chinese characteristics has become broader, so that there are more people in the world who believe in Marxism and socialism; the historical evolution of the two ideologies and two social systems and their contest worldwide have undergone a profound transformation in favor of Marxism and socialism.”
Sharing the specific Chinese text here too in case translation needs some work: “中国特色社会主义进入新时代,以习近平同志为核心的党中央带领全党全国人民推动中国特色社会主义事业取得举世瞩目的伟大成就,以无可辩驳的事实彰显了科学社会主义的旺盛生命力。中国特色社会主义道路越走越宽广,使世界上正视和相信马克思主义和社会主义的人多了起来,使世界范围两种意识形态、两种社会制度的历史演进及其较量发生了有利于马克思主义、社会主义的深刻转变.”
3. Spy Games
the Ministry of State Security has issued new regulations on counter-espionage security work. The regulations state that the national security authority to draw up lists of companies and organizations that are susceptible to foreign infiltration and require listed institutes to adopt security measures to prevent foreign infiltration. PD reports that organs, groups, enterprises, institutions and other social organizations have the main responsibility for the anti-espionage security work of their own units, but security authorities will be working with them on these. Global Times’ report on this has more information.
It says that:
“According to the regulation, companies, organizations or social groups on the list shoulder the responsibility to roll out detailed measures against foreign espionage, including arranging their working staff to sign letters of commitment before taking up posts, reporting their activities related to national security, giving education to personnel ahead of their departures abroad, and interviewing personnel after their return to China.”
The report quotes an unidentified staff member in charge of foreign affairs at the headquarters of a central state-owned enterprise in Beijing as saying that:
“Staff going on business trips to foreign countries, such as countries of the Five Eyes alliance - the US, UK, Australia, Canada and New Zealand - have been told to strictly report their travel destinations, agendas, and meetings with foreign personnel, and they must get approval from their direct superiors before the applications are reviewed by the headquarters.”
The report adds that:
“In particular, electrical devices including mobile phones, laptops, and USB drives, which usually contain sensitive information, are key objects for intelligence agencies, and the person told the Global Times that the company has required staff involved in sensitive fields or those holding important files to leave their electrical devices at home and bring new ones abroad.”
There’s also this interview with MSS officials about the regulations. They provide some of the details that I’ve highlighted above, but here’s their primary assessment of the need for the regulations:
“The formulation of regulations is a practical need to prevent and defuse national security risks and safeguard my country’s national security and interests. At present, foreign spies and intelligence agencies and various hostile forces have intensified their infiltration and stealing activities in China, with more diverse methods and broader fields, posing a serious threat to our national security and interests.”
On anti-espionage security guidance, they say that this includes two aspects. First, they will be focusing on “providing work manuals, guides and other publicity and education materials...holding training, holding work meetings,” and so on. Second, the focus will be on clarifying “the relevant regulations on the commendation and reward of anti-espionage safety protection.”
They also say that “security agencies may inspect the anti-espionage security work of agencies, groups, enterprises, institutions, and other social organizations in accordance with their management authority.”
Here’s more: “If the relevant units and their staff fail to perform or fail to perform their anti-espionage security responsibilities and obligations in accordance with the regulations, resulting in adverse consequences or impacts, the state security organs may transfer clues to the relevant organs and units, and suggest that the relevant organs and units should be responsible according to their management authority. Leaders and directly responsible personnel shall be dealt with according to regulations and disciplines; If a crime is constituted, criminal responsibility shall be investigated according to law.”
Other Stories:
WHO Should Look Beyond Animals on Covid Origin, Scientists Say
Vaccinating more than anywhere else, China still needs to speed up
Hong Kong passes immigration bill, raising alarm over 'exit bans'
Chinese workers allege forced labor, abuses in Xi’s ‘Belt and Road’ program
Philippines tells China to mind its own business over maritime drills
Japan approves world’s biggest free-trade deal after China’s call to boost Asian economy