SCO - Afghanistan - Jaishankar-Wang Meeting - AUKUS Ruckus - EU's Indo-Pacific Policy - Evergrande - Xi in Shaanxi - Breaking Walled Gardens - Cyberspace Civilisation - CPTPP - Meng Wanzhou Plea Talks
I. India-China Ties
The Foreign Ministers of India and China met in Dushanbe this week, ahead of the Shanghai Cooperation Organisation summit meeting. Looking at the two readouts from the meetings, there’s a marked difference, with the Indian readout indicating far greater urgency with regard to addressing the issues along the LAC. For instance, the MEA’s readout acknowledges “some progress” in disengagement along the LAC in Eastern Ladakh. But it adds that there are “still some outstanding issues that needed to be resolved.” It then adds that:
the Indian Foreign Minister reminded Wang that when they last met, “both sides had agreed that a prolongation of the existing situation was not in the interest of the either side as it was impacting the relationship in a negative manner. EAM therefore emphasized that the two sides should work towards early resolution of the remaining issues along the LAC in Eastern Ladakh while fully abiding by bilateral agreements and protocols. EAM underlined that it was necessary to ensure progress in resolution of remaining issues so as to restore peace and tranquility along the LAC in Eastern Ladakh noting that peace and tranquility in the border areas has been an essential basis for progress in the bilateral relations.”
The Chinese readout says that:
Beijing has always handled the border issue with a “positive attitude” and that the border situation was “moving towards relaxation on the whole.” He said that the two sides should “consolidate the achievements of disengagement of front-line troops and strictly abide by agreements and consensus reached,” preventing any “border-related incidents” from recurring. He wants the two sides to adhere to the “strategic consensus” that they do not pose a threat to each other but rather provide opportunities for each other.
Both readouts talk about EAM Jaishankar’s comments about the relationship in the context of the evolving Sino-US dynamic. He said:
“India had never subscribed to any clash of civilisations theory. He said that India and China had to deal with each other on merits and establish a relationship based on mutual respect. For this, it was necessary that China avoid viewing our bilateral relations from the perspective of its relations with third countries. Asian solidarity would depend on the example set by India-China relations.”
The Chinese Foreign Ministry’s Zhao Lijian later added that “China agrees with what the Indian side said about ‘it is essential to avoid viewing bilateral relations through the lens of a third country’.”
However, day prior to the Wang-Jaishankar meeting, speaking at the India International Center, India’s Chief of Defense Staff, General Bipin Rawat, had said that “we are seeing some kind of a jointmanship between the Sinic and Islamic civilisations. You can see China now making friends with Iran, they are moving towards Turkey…And they will step into Afghanistan in the years to come…Is that going to lead to a clash of civilisations with the Western civilisation?” The world, he said, is in “turmoil.”
Rawat had also said that China’s rise:
“happened faster than people envisaged…We are heading back to a bipolar or multipolar world…What we are certainly seeing is more aggression on the part of nations. Especially, the one that is trying to go into the bipolar world, and making its presence felt, that is China. They are becoming more and more aggressive and we share land borders with them. Therefore, it is time to start looking at our strategies, as to how we are going to deal with two borders, which are aggressive neighbours, adversaries. Pakistan on the western front and China on the north.”
There were other key points that Rawat also made. Ajai Shukla reports on the direction of theaterisation
He said that the Indian armed forces’ 17 single-service commands would be combined into just four geographical commands, each with elements from all three services.
These would likely be the western, northern, maritime and Andaman and Nicobar commands.
He also spoke about possibly having a dedicated air force commander-in-chief, responsible for the air space.
The sixth joint commander would be in charge of cyber war.
Rawat also said that India was “looking at creating a rocket force.”
And this provides me with a not-so-smooth segue into Beijing raising objections to India’s Agni-V test scheduled for next week. Zhao Lijian cited UNSCR 1172 while talking about the tests. Ananth Krishnan’s report in The Hindu explains that this resolution was issued in June 1998, after the Indian and Pakistani nuclear tests. It “calls upon India and Pakistan immediately to stop their nuclear weapon development programmes, to refrain from weaponisation or from the deployment of nuclear weapons, to cease development of ballistic missiles capable of delivering nuclear weapons and any further production of fissile material for nuclear weapons, to confirm their policies not to export equipment, materials or technology that could contribute to weapons of mass destruction or missiles capable of delivering them and to undertake appropriate commitments in that regard.” Of course, none of this has stoped Chinese support to Pakistan’s nuclear and missile programmes, as the report explains.
Moving on, this week, Chinese media reported Xi Jinping’s letter to a model PLA battalion stationed in “the plateau region” in an area with an average altitude of over 4,800 meters. Xi noted that this group had over the past five years had “defended the sacred territory of the motherland” with their “youth and blood.” He wants all border troops “to continue to strengthen their sense of responsibility, carry forward fine traditions, and enhance their combat readiness in order to perform their duties well.” SCMP tells us that this is Unit 77656, which is likely based in Shigatse city’s Gangba county, close to Arunachal Pradesh.
Finally, let’s look at a couple of other key stories. First, Ford’s exit from India has had some purchase in the Chinese press. For instance, here’s Global Times’ report quoting Chinese analysts to say that this is a failure of Make in India.
Second, the Quad leaders will be in a summit meeting next week. Beijing is, of course, watching closely. The foreign ministry told us this week that “forming closed and exclusive ‘cliques’ targeting other countries runs counter to the trend of the times and deviates from the expectation of regional countries. It thus wins no support and is doomed to fail.” — Of course, cliques that China forms are totally acceptable, as I will cover in the next section.
Anyway, among the Chinese commentariat, it’s not like there’s a uniform view about India in this regard. For instance, here we have Huang Jing from the Beijing Language and Culture University writing in Guancha that the US’ withdrawal from Afghanistan has “harmed” India’s security interests and shows the “total mismatch between American and Indian security interests.” The latter implies that the US’ “core interests” lie in the Asia-Pacific as opposed to the Indo-Pacific. Then we have Lin Minwang talking about the India-Australia 2+2 as “an important step in constructing an ‘Asian NATO’ by the US, Japan, India and Australia.” He adds: “The 2+2 dialogue between India and Australia not only promotes bilateral strategic defense coordination, but also makes up for the weakest link of the US-led Indo-Pacific Strategy.”
Third, the Chinese foreign ministry was asked this week about the possibility of allowing Indians to travel back to China. This was in light of Beijing allow chambers of commerce from Germany, France and Italy to bring back their employees and family members to China. Zhao Lijian was non-committal. He said that “this is a mutually beneficial arrangement made between China and relevant countries…India can also talk to China if it has such needs.”
Also Read:
US interested in transferring its capital from China to India, says Nitin Gadkari
Indian Army display firepower, air stunts at Zapad 2021; China & Pakistan watch
India can’t go ‘cold turkey’ on Chinese goods so trade keeps flourishing despite deep freeze in ties
II. SCO & Afghanistan
Prior to the SCO summit in Dushanbe, Chinese Foreign Minister Wang Yi met with officials from China, Iran, Russia and Pakistan talking about Afghanistan. Like I said earlier, some cliques are cool with Beijing. Anyway, at the meeting Wang Yi said that he wants the four to “strengthen communication and coordination, make unanimous voices, exert positive influence and play a constructive role.” He also said that “countries in the region expect the new Afghan government to be inclusive, anti-terrorist, and friendly to neighbours.”
Wang said that Afghanistan was in a “critical stage of transitioning from chaos to governance.” While the war was over, the issue of Afghanistan was not resolved. “Power politics, military intervention and so-called ‘democratic transformation’ are the root causes of the current situation in Afghanistan,” he said. He blamed the US for its “hasty withdrawal.” He then made a five-point proposal:
US must “fulfil its obligations” and “take the primary responsibility for the reconstruction of Afghanistan.” -- So much for theories that China was waiting with bated breath for the US to exit so that it can swoop in and reconstruct.
“Afghanistan has established an interim government, and its domestic and foreign policies have not yet been finalized…” He wants the country to establish a “broad and inclusive political structure, and implement moderate and stable domestic and foreign policies.”
“The Taliban have repeatedly promised not to allow any forces to use Afghan territory to harm the security interests of neighboring countries. We expect the new Afghan regime to fulfil its commitments and draw a clear line with terrorist forces, and in particular, resolutely crack down on terrorist forces that target neighboring countries.”
He wants “all parties to form a joint force to aid Afghanistan,” in terms of humanitarian assistance.
And finally, over time or in the long-run, as security and stability becomes clearer, he wants to “integrate into regional economic cooperation and connectivity networks.”
He said that the expectations of regional countries from the Taliban can be summarisd as: “tolerance, anti-terrorism, and good-neighbourliness.” The official readout ends saying that this Quartet will continue to engage as needed as the situation develops.
One must think why this group is needed when the SCO is available for this dialogue? Iran is also now a full member of the SCO.
Anyway, then we had the SCO summit. In his comments, Xi Jinping called for:
“The SCO has reached a new historical starting point. We should stay true to the Shanghai Spirit, keep to the right direction, follow the historical trends of promoting democracy in international relations, and pursue our own development as we pursue common development for humanity.”
He said that SCO members must “respect each other’s legitimate concerns and promptly resolve problems that may arise and affect our cooperation…” He added that “we should maintain firm confidence in our systems, reject condescending lecturing, and firmly support countries in exploring development paths and governance models that are compatible with their national conditions.” And he added: “We must never allow any external interference in the domestic affairs of countries in our region under whatever pretext.”
He spoke about security cooperation in terms of extremism, counter-narcotics and border control.
On Afghanistan, he said that “We need to encourage Afghanistan to put in place a broad-based and inclusive political framework, adopt prudent and moderate domestic and foreign policies, resolutely fight all forms of terrorism, live in amity with its neighbors…” — Later in a specific meeting on Afghanistan, Xi emphasised the need for “inclusive political arrangements,” the need to “resolutely crack down on and eradicate terrorist organizations in the Afghan territory and prevent terrorist forces in Afghanistan from wreaking havoc,” the need to “facilitate a new political structure that is more open and inclusive,” and the need to “provide the Afghan people with timely humanitarian and anti-pandemic support.” — None of this sounds like Beijing is satisfied with the structure and composition of the current Taliban dispensation.
He added: “We need to continue to promote trade and investment liberalization and facilitation as well as the secure and orderly flow of people, goods, capital and data.”
“In the next three years, China will provide 1,000 training opportunities in poverty alleviation for other SCO countries, open 10 Luban Workshops, and launch 30 cooperation projects in such areas as health, poverty relief, culture and education under the framework of the Silk Road Community Building Initiative…China will host an SCO youth technology and innovation forum next year…China proposes to establish an SCO alliance of traditional medicine industries…China welcomes your countries’ participation in the 2022 Beijing Olympic and Paralympic Winter Games…”
Then this direct shot at the US and advocates of a “rules-based order.”
As a Chinese saying goes, ‘Power may win for the time being, but justice will prevail for the long run.’ Acting from a so-called ‘position of strength’ is not the way to handle international affairs, and hegemonic, domineering and bullying acts should be firmly rejected. In addressing international relations, we should observe the purposes and principles of the UN Charter and the principle of extensive consultation, joint contribution and shared benefits. We need to practice true multilateralism and oppose actions that use the name of so-called rules to undermine the international order and cause confrontation and division.”
The Dushanbe Declaration after the summit says that the SCO supports “the emergence of Afghanistan as an independent, neutral, united, democratic and peaceful State, free of terrorism, war and drugs.” And, they “believe that it is critical to have an inclusive Government in Afghanistan, with representatives from all ethnic, religious and political groups of Afghan society.”
Anyway, worth noting that from an Indian perspective, Prime Minister Narendra Modi was rather blunt in saying that “the transition of power in Afghanistan is not inclusive, and it has happened without negotiation.” He added: “India supports the central role of the United Nations on this issue. The second is that, if instability and fundamentalism persist in Afghanistan, it will encourage terrorist and extremist ideologies all over the world. Other extremist groups may also be encouraged to come to power through violence…And therefore, together, we should ensure that the territory of Afghanistan is not used to spread terrorism in any other country. SCO member countries should develop strict and agreed norms on this subject. In the future, these norms can then become a template for global anti-terror cooperation. These norms should be based on the principle of zero-tolerance towards terrorism. These should be a Code of Conduct to prevent activities like Cross-Border terrorism and terror financing and also have a system for their enforcement.”
Finally, Russian President Vladimir Putin’s comments are also worth noting. He said that
“the Americans left it in haste, or perhaps I should say fled, along with their NATO allies. They all left behind an open Pandora’s box full of problems caused by terrorism, drug trafficking, organised crime and, unfortunately, religious extremism…I am convinced that it is certainly in our common interests to help Afghanistan achieve peace and stability, at long last…we are extremely interested in seeing Afghanistan assert itself as an independent, neutral, integral and democratic state free from terrorism, war and drugs, living in peace and accord with its neighbours…The Taliban movement, which has become virtually the complete master of the country, has established its own government that has assumed responsibility for the future of Afghanistan. According to the Talibs themselves, this is an interim government, and it cannot be called truly all-inclusive; nor does it represent all segments. We do not see representatives of other ethnic groups here, but it appears that we, of course, should also work with it. Speaking of recognition, I agree with those who have spoken on this matter that it is necessary to coordinate our position on this issue. We would consider it optimal to launch this dialogue under the expanded Troika format on Afghanistan, and work is now underway in this direction. I would like to recall the earlier Moscow format of consultations on Afghanistan that involved many of our partners from the Shanghai Cooperation Organisation and the CSTO. If necessary, it would be possible to resume its work, with the agreement of all states involved in it.”
Also Read:
India warned not to be ‘poison’ for SCO cooperation, as it seeks influence on Afghan issue
‘India’s concern inappropriate’: Taliban say nothing wrong in China helping Afghanistan
China will be ‘very careful’ dealing with the Taliban government, former U.S. ambassador says
III. Cyberspace Civilisation, Walled Gardens, Gig Economy & Calming Investor Anxieties
First, this week, we had a report on a new guideline issued by the Central Committee and the State Council on developing a more civilised and well-regulated cyberspace environment or rather the Opinions on Strengthening the Development of Cyberspace/Network Civilisation. The report tells us that as per the guideline “strengthening the development of cyberspace civilisation is an inevitable requirement for promoting the development of socialist spiritual civilisation and improving the degree of social civilisation.”《意见》指出,加强网络文明建设,是推进社会主义精神文明建设、提高社会文明程度的必然要求…
We are told that the guideline emphasises adherence to Xi Jinping’s thoughts on cyber power and the “construction of spiritual civilisation” while calling for the vigorous promotion of core socialist values and development of a civilised cyberspace and for civilised use of cyberspace. And in order to do so, the document calls for shaping ideological concepts, cultural trends, moral and behavioural norms along with the requisite legal environment. 《意见》强调,加强网络文明建设要坚持以习近平新时代中国特色社会主义思想为指导,贯彻落实习近平总书记关于网络强国的重要思想和关于精神文明建设的重要论述,大力弘扬社会主义核心价值观,全面推进文明办网、文明用网、文明上网、文明兴网,推动形成适应新时代网络文明建设要求的思想观念、文化风尚、道德追求、行为规范、法治环境、创建机制,实现网上网下文明建设有机融合、互相促进,为全面建设社会主义现代化国家、实现第二个百年奋斗目标提供坚强思想保证、强大精神动力、有力舆论支持、良好文化条件.
Then we learn that one of the clear aims of the document is to consolidate the guiding status of Marxism in the ideological cyberspace sphere, foster a common ideology among the whole Party and the Chinese people, and internalise core socialist values. The report says that as per the document, “the ideological and moral quality of Internet users has been significantly improved. There is a stronger online trend toward kindness, honesty and mutual assistance. The Internet literacy of young Internet users has been continuously improved, and the main responsibility of online platforms and self-discipline of the industry have been effectively implemented. The effectiveness of governance has been improved, the cyber ecosystem has improved, the rule of law in cyberspace has been further promoted, and the ability to combat, prevent, and manage cyber crimes has been continuously improved.” 道德建设迈出新步伐,网民思想道德素质明显提高,向上向善、诚信互助的网络风尚更加浓厚;文明素养得到新提高,青少年网民网络素养不断提升,网络平台主体责任和行业自律有效落实;治理效能实现新提升,网络生态日益向好,网络空间法治化深入推进,网络违法犯罪打击防范治理能力持续提升…
The next paragraph emphasises that “ideological guidance in cyberspace should be strengthened” and that Xi Thought must guide Internet content. This is followed by commitments to enhance theoretical discourse and create more online propaganda products. There’s a statement to enhance support for mainstream media outlets, while promising to adhere to a mobile-first strategy. 深入推进媒体融合发展,实施移动优先战略,加大中央和地方主要新闻单位、重点新闻网站等主流媒体移动端建设推广力度. I guess that perhaps will mean more money for state media and more games like “Clap for Xi.”
The next paragraph talks about the importance of core socialist values leading the development of online culture. “We will carry out in-depth online study and education of Party history, popularise the great achievements of the Party in revolution, development and reform, promote the great spirit of the Party and the people formed in the course of the struggle, and take a clear-cut stand against historical nihilism.” 深入开展网上党史学习教育,传播我们党在革命、建设、改革各个历史时期取得的伟大成就,弘扬党和人民在奋斗中形成的伟大精神,旗帜鲜明反对历史虚无主义. The paragraph also talks about developing high-quality cultural products.
The next paragraph talks about strengthening moral development. This entails promoting role models, outstanding volunteers, the most beautiful people, exceptional deeds and actions, etc. The aim is to create an environment in which morality and virtue are respected. This paragraph also talks about strengthening network integrity 网络诚信.
It emphasises the need to “advocate the values of honesty and trustworthiness” and “encourage and support Internet enterprises and platforms to improve their internal network integrity norms and mechanisms, and create a good atmosphere for running the Internet in accordance with the law and using the Internet with integrity.” 深化网络诚信建设,举办形式多样的线上线下品牌活动,大力传播诚信文化,倡导诚实守信的价值理念,鼓励支持互联网企业和平台完善内部诚信规范与机制,营造依法办网、诚信用网的良好氛围. There’s also talk about carrying out online public welfare projects and activities.
The next bit says that behaviour online should be well regulated, and ethics and codes of conduct in cyberspace must be line with core socialist values. All regions and departments should put out cyberspace civilisation standards in accordance with their own characteristics and these should also eventually reflect in industry management norms. In addition, there’s a call to regulate Internet slang. Also, the government, schools, families and society will work together to educate minors so that they can use the internet properly and be well prepared for online risks. And, attention will be paid to improve the mechanisms to prevent young people from becoming addicted to the Internet and prevent online bullying. It also calls to
“strengthen the responsibility of online platforms, strengthen the construction of community rules and user agreements, and guide online platforms to enhance national security awareness. Strengthen self-discipline in the Internet industry, adhere to the value orientation of placing equal emphasis on economic and social benefits, and urge Internet enterprises to actively fulfil their social responsibilities.” 强化网络平台责任,加强网站平台社区规则、用户协议建设,引导网络平台增强国家安全意识。加强互联网行业自律,坚持经济效益和社会效益并重的价值导向,督促互联网企业积极履行社会责任.
The next paragraph talks about strengthening ecological governance in cyberspace; this relates to the nature of online content. The document also talks about establishing a national rumour dispelling mechanism/or a “national mechanism to stop and prevent disinformation” as Xinhua English put it. This is to be based on the 中国互联网联合辟谣平台. I must admit that I am a little confused here. The Xinhua report that I have linked which was launched in 2018. This paragraph also promises a bunch of specific actions:
crackdown on online crimes
addressing “uncivilised problems” with public accounts, live streaming related to e-commerce, and false information
it promises to improve the mechanism for “complaints and reports” while mobilising users “to actively participate in oversight.”
it also promises to “carry forward core socialist values throughout all links of online legislation, law enforcement…”
Finally, this paragraph talks about ensuring implementation of existing laws on personal information and data security and accelerating the formulation and/or revision of other specific legislation.
The document tells us that the offices of the Cyberspace Administration of China 网信办 at all levels and the Civilisation Office 文明办 should take the lead in this effort. Towards the end, the document also calls on the private sector to extend “financial and material support” for the construction of a cyberspace civilisation.
Second, Another truly monumental change this week was the first step being taken to crack open the walled gardens that have dominated the Chinese technology ecosystem. On Monday, the Ministry of Industry and Information Technology (MIIT) said that it had been giving guidance to internet companies as they conduct self-rectification measures to unblock external website links, and will continue to push the companies to eventually solve the problem through different steps and phases. Tencent, in response, promised that it would carry out the necessary changes. Later in the week, WeChat started to allow links to its rivals to be shared in one-to-one chats.
Third, last week, I had covered the report of China’s human resource ministry calling tech firms in to talk about rights of gig economy workers. After that meeting, food delivery giant Meituan published the rules showing how algorithms estimate the time it takes delivery workers to complete jobs and said it was adjusting them. But how deep is this commitment to genuinely expand workers’ rights? This WSJ report makes some interesting points:
Aidan Chau, a researcher at the Hong Kong-based nongovernmental organization China Labour Bulletin, said Beijing’s focus on regulating algorithms and its push for redistribution are theoretical wins for Chinese workers. But it wasn’t clear how the tech companies planned to implement some of the government’s guidelines. And as independent contractors, many gig workers fall outside the new trade unions’ legal remit, Mr. Chau said. China’s Ministry of Human Resources and Social Security referred a request for comment to the All-China Federation of Trade Unions, which didn’t respond. ‘China is trying to tackle questions of redistribution without addressing the issue of representation,’ said Eli Friedman, a sociology professor at Cornell University who researches state-labor relations in China. ‘The one thing the Chinese state is unwilling to consider: granting rights to workers to actually organize themselves.’ Messrs. Chau and Friedman both pointed to continuing government suppression of independent, grass-roots labor activists and researchers.
For instance, Fang Ran, a doctoral student in sociology at the University of Hong Kong who was researching Chinese labour movements, was arrested in Nanning recently and charged with subversion of state power. Also, in February, Beijing police “detained food-delivery worker and labor activist Chen Guojiang under the charge of ‘picking quarrels and provoking trouble,’ according to information posted to a channel on the chat app Telegram that was associated with Mr. Chen. Mr. Chen was known as the leader of ‘the delivery riders’ alliance,’ a network of more than a dozen WeChat accounts that reached about 14,000 drivers, said China Labour Bulletin.”
Finally, the China-U.S. Financial Roundtable on Thursday brought together the head of the People’s Bank of China, and executives from Goldman Sachs Group Inc., Citadel and other Wall Street powerhouses, reports Bloomberg. The report says that China Securities Regulatory Commission Vice Chairman Fang Xinghai defended recent policies saying they “were to strengthen regulations for companies with consumer-facing platforms, and improve data privacy and national security, according to a person familiar with the talks, who asked to not be identified because the meeting was private. Fang defended the moves such as those aimed at the education and gaming industries as meant to reduce social anxiety.”
Also Read:
IV. Economic Data, CPTPP & Evergrande
Let’s begin with the data put out by the National Bureau of Statistics this week. Below are key highlights from Xinhua and SCMP’s reports:
China's fixed-asset investment went up 8.9 percent year on year in the first eight months of this year. FAI amounted to over 34.69 trillion yuan (about 5.38 trillion U.S. dollars). This is significantly slower month-on-month growth. For the January-July period, fixed-asset investment had been up by 10.3 percent. However, FAI in manufacturing and infrastructure gained 15.7 percent and 2.9 percent year on year, respectively.
China’s retail sales grew at 2.5% in August from a year ago; this is way down from the 8.5 per cent increase in July.
Industrial production, a gauge of activity in the manufacturing, mining and utilities sectors, grew by 5.3 percent in August from a year earlier after a 6.4 percent gain in July.
Unemployment rate is at 5.1%; the rate for workers aged 16 to 24 fell slightly to 15.3%.
Next, the Ministry of Commerce shared data on FDI into China from January to August (English report). The figure stands at 758.05 billion yuan ($113.78 billion), a year-on-year increase of 22.3%. The service sector accounted for 599.33 billion yuan of that amount. FDI in the high-tech industry increased by 30.2% year-on-year, of which the high-tech service industry increased by 35.2%, and the high-tech manufacturing industry increased by 14.9%.
Investments from the Belt and Road countries expanded 37.6%, and investment from the Association of Southeast Asian Nations rose 36.8%. In terms of regions, investment in:
Eastern region was up by 23%
Central region was up by 30.1%
Western region was up by 1.6%
Also on Thursday, Commerce Minister Wang Wentao submitted an application for China to join the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This once used to be the TTP, before Trump walked out. Shannon Tiezzi’s piece in The Diplomat is a good read to understand why China joining the pact is a bit of long shot. She writes:
“For one, China is exceedingly unlikely to actually be able to join the CPTPP. The agreement by design includes high standards that go far beyond tariff removal, including regulations guiding market access, labor rights, and government procurement. In theory, China could accept the CPTPP’s more stringent provisions as a necessary condition for joining. Some analysts, particularly within China, have argued that this would be a way to jump-start China’s own difficult domestic reforms; a similar dynamic played out in the lead-up to China’s WTO entry. However, some of the CPTPP’s requirements will challenge the Chinese Communist Party’s insistence on tight state control. For example, the higher standards for labor rights in the CPTPP forced reforms in Vietnam, which overhauled its labor code to recognize workers’ rights to form independent unions. Given China’s repeated crackdowns on independent labor organizations, Beijing is unlikely to be willing to follow Vietnam down that path. Likewise, the CPTPP’s relatively strict provisions on subsidies to state-owned enterprises, ‘free flow’ of data, and opening government procurement deals to foreign competition will challenge China.”
A quick summary here of why RCEP and CPTPP are different; ergo, China joining won’t be so straight-forward:
While all this is said, do note these comments from Stephen Jacobi and Yorizumi Watanabe in this WSJ piece. Jacobi says that “it is hard to believe that China would have taken this step if it was not prepared at least to consider reform in these areas.” On the other hand, Watanabe says “There are intellectuals in China who believe the country needs to develop by entering into a system of advanced trading rules such as the TPP…Japan can tell China, ‘If you want to get along with the U.S., you need to follow TPP rules, and Japan will help you do that’.”
Finally, let’s look at the Evergrande saga. Reuters reported today that the cash-strapped property giant has started to offer investors in its wealth management products with real estate. Caixin also reported on Sunday that an estimated 40 billion yuan ($6 billion) in Evergrande wealth management products are outstanding. The company was earlier believed to be working on a debt restructuring plan. It reportedly hired a unit of Houlihan Lokey Inc., a U.S. investment bank with a reputation for handling restructuring work, and Hong Kong-based Admiralty Harbour Capital Ltd. as financial advisers. The company, however, has denied that it would seek to restructure under a Chinese form of bankruptcy protection.
The company’s offices have seen a spate of protests this week. Check out the visuals in this video.
LA Times’ Alice Su reports that at the headquarters in Shenzhen, “police herded protesters toward a cafeteria on the fifth floor of a nearby building. There, Evergrande staff sat scattered at orange plastic tables labeled with the name of each province. Suppliers were encouraged to register their complaints with the staff, then promised that they could receive Evergrande properties — unsold apartments, commercial storefronts or parking spaces — at a discount to offset what the company owed them.”
WSJ reports that protests have also been reported in Nanchang, Zhengzhou and Chengdu. The report added that on Monday, “Evergrande proposed three repayment options for these investors, according to a company document that was reviewed by the Journal. They can opt for 10 quarterly cash installments; new property; or to offset these investments against sums they owe for properties they have already bought from Evergrande.”
Of course, there are two big questions in all of this. The first is the threat of ripple effects and the second is the role of the government, in that whether Beijing will step in to bail Evergrande out. Taking the second one first, here are some comments worth noting:
In WSJ: “It would send the wrong message if [authorities] were to step in at this stage to prevent a default,” said Julian Evans-Pritchard, senior China economist at Capital Economics. “It seems very unlikely that they would help a private firm…that’s in a sector that they’re trying to rein in,” he added.
In The Guardian: James Shi and Simon Lee of the Hong Kong data analytics firm Reorg said Beijing’s priority would be to keep Evergrande in business – even if its in a zombified form – in order to finish the estimated 1.4m homes the company has pre-sold. “This is the top priority for them and the government,” they said. “Nobody wants thousands of angry people demanding their money back. “This means that other immediate creditors such as suppliers must expect that they won’t get paid straight away. There is also a lot of anecdotal evidence that Evergrande has offered flats as payment in kind to suppliers and contractors.”
In the Diplomat, Nathan Handwerker argues that Beijing’s “red lines” last year indicate that it wants greater discipline in the real estate sector. “By bailing out its most bloated property developer right now, Beijing would shoot itself in one foot to save the other. A $300 billion bailout would just transfer the liability to the government and worsen the government’s preexisting debt hangover… (But) Currently, more than three-quarters of household wealth in China is tied up in real estate, and Beijing has a strong incentive to make sure that such wealth doesn’t go down in an exploding bubble. A collapse of Evergrande could be detrimental to property values, which would deal a blow to consumer wealth and in turn lead to a slowdown in consumption and investment, in addition to other consequences. Because the CCP has focused its attention on de-risking the property sector and other developers have done good jobs of reducing their debt burdens so far, it should reduce the effect of an Evergrande collapse. Nonetheless, the firm is so big that this ripple effect is possible.”
Finally, do check out this thread on ripple effects Lehman Brothers moment ta;kl
I’ll end by saying that this is going to be a major story next week too. Evergrande has about $84 billion in dollar-bond interest due on September 23, and firm is bracing for the worst.
Also Read:
Too Much of China’s Wealth Is in Real Estate, CSRC Ex-Head Says
Financial blogger crackdown leaves China investors scrabbling for data
V. Shaanxi Tour & Space Power
Earlier this week, Xi Jinping visited Shaanxi. In my People’s Daily tracker, I covered the visit. There was a wrap of the overall visit and then a report about him visiting a military base, talking about the importance of space power.
First, let’s look at the report on tour (Xinhua English wrap of the visit). The headline message that is being sent to Party cadre is about “freeing the mind, carrying out reform and innovation, and making persistent efforts to usher in a new chapter of high-quality development.” But there’s also a lot in there about redness.
PD tells us that Xi traveled to Yulin City, accompanied by Liu Guozhong, Shaanxi Party Secretary, and Zhao Yide, Shaanxi Governor, Xi visited enterprises, villages, schools and revolutionary sites over a period of two days. His first stop was the Yulin Chemical Co., a chemical company under the China Energy Investment Corporation. There, he emphasised that the coal industry should follow a green and low-carbon path of development. The coal chemical industry, as a sector with huge potential and good prospects, must be transformed into a high-end, diversified and low-carbon industry. He stressed on the importance of meeting the targets of carbon peak and carbon neutrality. With regard to the coal industry, he also emphasised the importance of achieving breakthroughs in key and core technologies, and developing coal-based special fuels and coal-based biodegradable materials.
Then Xi went to the village of Gaoxigou, where he chatted with local villagers. Here’s a brief video of one chat:
Apart from Xi being a man of the people, the big message here was about “the need to integrate ecological governance with the development of distinctive local businesses.” As Xinhua reports, Xi “emphasized exploring a way to attain coordinated development between ecology and economy, and harmony between humans and nature.”
Next, we head to the revolutionary site of Yangjiagou, where Mao Zedong and the Party's central authorities stayed for over four months between 1947 and 1948. This is the place where Mao launched the land reform movement. PD tells us that “Xi visited the site of the ‘December Conference’ of the CPC Central Committee, the former residences of Mao Zedong and Zhou Enlai, recalling the revolutionary history and remembering the great achievements of the revolutionary ancestors.” He emphasised the importance of adhering to Marxism. While there, he talked about the need to formulate “realistic goals, tasks, policies and strategies,” and praised Party unity.
He then talked about the need to uphold “the Party’s leadership, improve its capacity for scientific, democratic, and law-based governance, and give full play to the Party’s core role in overall planning and coordinating all parties. We must adhere to the basic tenets of Marxism and use Marxism to observe, grasp and lead the times. At the same time, we must seek truth from facts and continue to adapt Marxism to China’s conditions and adapt it to the times. Xi called for making full use of red resources and deepening the study and education of Party history to perpetuate red blood.” 要始终坚持和完善党的领导,不断提高党科学执政、民主执政、依法执政水平,充分发挥党总揽全局、协调各方的领导核心作用。要坚持马克思主义基本原理,用马克思主义观察时代、把握时代、引领时代,同时坚持实事求是,从我国实际出发,不断推进马克思主义中国化、时代化。习近平指出,要充分运用红色资源,深化党史学习教育,赓续红色血脉.
He then went to Suide county. Bloomberg’s reporting tells me that this is where Xi’s parents met while working for the party as it fought the civil war. While there, PD says that Xi talked about the older generation of revolutionaries for whom he said “the interests of the Party come first.” They stood “on the side of the majority of the working people,” he added, pointing to the importance of learning from these traits and the importance of winning hearts and minds of the people. “We must carry forward our revolutionary traditions and fine conduct, always put the people’s interests above all else, remain true to why we started out and keep our mission firmly in mind, implement the Party’s mass line, respect the principal position of the people…” 我们要继承发扬革命传统和优良作风,始终把人民利益放在最高位置,不忘初心、牢记使命,贯彻党的群众路线,尊重人民主体地位,始终同人民站在一起、想在一起、干在一起.
Then visiting a school, Xi talked about improving the quality of education while easing students' burden of excessive homework and off-campus tutoring. At the same time, he said that “we need to fully implement the Party's education policy, fulfil the fundamental task of fostering moral integrity and educating people, foster strong feelings of love for the Party, the country, the people, and socialism, and strive to train socialist builders and successors who are well developed morally, intellectually, physically, and aesthetically.” 要全面贯彻党的教育方针,落实立德树人根本任务,厚植爱党、爱国、爱人民、爱社会主义的情感,努力培养德智体美劳全面发展的社会主义建设者和接班人.
The next paragraph covers comments about culture and art; here he emphasised the importance of being guided by core socialist values. Next, he went to the village of Haojiaqiao. This has been a poverty alleviation model village. Here too, Xi visited an exhibition to look at the “glorious revolutionary history and the inheritance of revolutionary traditions” of the village. The messaging here is about ensuring a better life for people being the “unswerving mission and aspiration of the Party.”
PD says: “Ding Xuexiang, Liu He, Chen Xi, He Lifeng and responsible comrades from central departments accompanied the inspection.”
While in Shaanxi, Xi also visited a military base. One of the key points from the report (English report) on this is about Xi emphasising the development of space monitoring and control capabilities. PD tells us that he emphasised the need to implement the Party’s vision of building a strong military for the new era and the strategic guidelines for the new era, focus on combat readiness, speed up innovative development, and comprehensively improve the PLA’s ability to fulfil missions and tasks. 他强调,要贯彻新时代党的强军思想,贯彻新时代军事战略方针,聚焦备战打仗,加快创新发展,全面提升履行使命任务能力,为建设世界一流军队、建设航天强国作出更大贡献.
The report says that he fully acknowledged the important role the base in Shaanxi has played in China’s aerospace development. He said that it must now adapt to the increased frequency of space launches and higher requirements for each launch, optimise organisational structure and renew monitoring techniques to ensure tracking is reliable and missions are successful.
Xi said that “space assets are national strategic assets that should be managed and used well, but more importantly protected.” He added that “we need to comprehensively strengthen the building of defense forces to enhance disaster recovery, backup, survivability, and information protection capabilities. Space traffic management should also be strengthened to ensure stable and orderly operation of the space system. International cooperation on space security should be carried out to improve the effectiveness of space crisis management and comprehensive management.” 习近平指出,太空资产是国家战略资产,要管好用好,更要保护好。要全面加强防护力量建设,提高容灾备份、抗毁生存、信息防护能力。要加强太空交通管理,确保太空系统稳定有序运行。要开展太空安全国际合作,提高太空危机管控和综合治理效能.
The last paragraph of the story emphasises the need to lay “a solid ideological and political foundation for officers and men to listen to the Party’s command and fulfil their mission.”
Finally, towards the end of the week, China’s three astronauts, who spent a record three months on the Tiangong, returned home safely, completing a milestone journey in the country’s ambitious space programme.
VI. EU’s Indo-Pacific Strategy & AUKUS Ruckus
First, the EU put out its Indo-Pacific strategy & Ursula von der Leyen delivered a State of the Union address. I’ve summarised both of these in this Twitter thread:
While this is in the thread, I thought it’s worth highlighting the worldview that Ursula von der Leyen put out:
“We are entering a new era of hyper-competitiveness. An era in which some stop at nothing to gain influence: from vaccine promises and high-interest loans, to missiles and misinformation...An era of regional rivalries and major powers refocusing their attention towards each other. Recent events in Afghanistan are not the cause of this change – but they are a symptom of it.”
Her big announcements were:
Second, we had the AUKUS announcement this week. The official joint statement (comments by the three leaders) said that “our governments will strengthen the ability of each to support our security and defense interests. We will promote deeper information and technology sharing. We will foster deeper integration of security and defense-related science, technology, industrial bases, and supply chains. And in particular, we will significantly deepen cooperation on a range of security and defense capabilities.”
It added: “we commit to a shared ambition to support Australia in acquiring nuclear-powered submarines for the Royal Australian Navy. Today, we embark on a trilateral effort of 18 months to seek an optimal pathway to deliver this capability.”
And then “we also embark on further trilateral collaboration under AUKUS to enhance our joint capabilities and interoperability. These initial efforts will focus on cyber capabilities, artificial intelligence, quantum technologies, and additional undersea capabilities.”
The Chinese foreign ministry reacted by saying that AUKUS:
“has seriously undermined regional peace and stability, intensified the arms race and undermined international non-proliferation efforts. The export of highly sensitive nuclear submarine technology to Australia by the US and the UK proves once again that they are using nuclear exports as a tool for geopolitical game and adopting double standards. This is extremely irresponsible.”
More angry, however, are the French, who have recalled ambassadors to the US and Australia. BBC reports: “In a statement late on Friday, French Foreign Minister Jean-Yves Le Drian, who had described the pact as a ‘stab in the back’, said the ambassadors were being recalled at the request of President Emmanuel Macron. The deal ‘constitute[s] unacceptable behaviour between allies and partners whose consequences directly affect the vision we have of our alliances, of our partnerships and of the importance of the Indo-Pacific for Europe’, Mr Le Drian said.”
In another outburst, Jean-Yves Le Drian accused President Joe Biden of acting like former Trump, and called the US move “brutal, unilateral and unpredictable.” “I am angry and bitter. This isn't done between allies,” he told franceinfo radio.
Also note this:
In this thread below, I have listed articles that capture reactions and perspectives from China, Southeast Asia, Russia and India.
Do note that the day after the announcement, the People’s Daily carried a very, very long piece dedicated to telling us that the US has been the “biggest destroyer of world peace” since WWII.
It talked about the US’ “expansionist genes” 扩张基因. In a nutshell, the piece says that after emerging as a superpower after WWII, the US “spared no effort to fight for and maintain its hegemony across the world. Relying on its advantages in military, economic, scientific, technological and cultural fields, the United States frequently interferes in other countries’ internal affairs, bullies, pillages and controls other countries in the name of ‘freedom, democracy and human rights’.” We were also told that after the Second World War, the successive American governments all pursued hegemonistic policies. Be it Truman’s containment strategy, Nixon’s deterrence strategy, Bush’s “preemptive” strike strategy, Obama’s use of “smart power,” Trump’s America First or Biden’s build back better policy, they are all aimed at ensuring US hegemony.
And here’s Xinhua’s analytical report on AUKUS today:
Also Read:
Is AUKUS pact a signal to India to go for nuclear attack submarines?
France warns new Aukus alliance threatens security partnerships in Indo-Pacific
Secret Talks and a Hidden Agenda: Behind the U.S. Defense Deal That France Called a ‘Betrayal’
Other Stories:
Police raids on movie screenings. Censors closing in. Hong Kong’s filmmakers fight to stay free/ Hong Kong Forces Tiananmen Vigil Group to Delete Online Presence
China will punish its own companies if they break laws in the Democratic Republic of Congo
Chinese companies dissatisfied with pace of CPEC/ CPEC hasn’t slowed down, assures Asad Umar
Inquiry finds World Bank officials, including now-I.M.F. chief, pushed staff to inflate China data
The Globe & Mail reports that US is in talks with Huawei CFO Meng Wanzhou. The report says that the United States is prepared to end an extradition request and criminal proceedings against Meng if she pleads guilty and pays a hefty fine.