Eye on China World

What does a Trade War mean for Frenemies?

A weekly bulletin offering news and analysis related to the Middle Kingdom.

The Lead

1. Trade, Taiwan, Tensions: In what appears to be the beginning of a trade war, or at best seriously risky brinkmanship, US President Donald Trump announced trade measures, estimated at $60 billion, against Chinese imports on Thursday. The steps are based on the results of USTR’s eight-month investigation of suspected misappropriation of American technology by China.

There is a fairly lengthy period of consultation before the measures kick in, which gives some room for negotiation. It is important to note that several large business groups in the US are not in favor of such trade friction. However, negotiations seem to be further complicated, given that institutional mechanisms for dialogue have been undone.

Trump had earlier announced tariffs on imported steel and aluminum. These came into force on Friday. The tariffs are clearly focussed on China given that the White House allowed a last-minute exemption for allies like Canada, Mexico, the European Union, Australia, Argentina, Brazil and South Korea till May 1. The allies must negotiate “satisfactory alternative means” to address US concerns by then, NYT reports.

China’s embassy in Washington DC was furious in its response to Thursday’s announcement, while the Ministry of Commerce listed 128 US products that it would target for reciprocal tariffs. The first stage will see 15% tariffs on 120 types of US products, worth $977 million; the second, 25% tariffs 8 other product types estimated at $2 billion. Following the announcement, new Vice Premier Liu He rang Treasury Secretary Steven Mnuchin calling for a rational approach.

Moving away from trade, there were a few important developments with regard to Taiwan. First, Trump signed the Taiwan Travel Act, which encourages the US to send senior officials to Taiwan to meet Taiwanese counterparts and vice versa. This was followed by State Department’s Alex Wong visiting Taiwan and meeting with President Tsai, pledging US commitment to Taiwan’s democracy.

Two other important points of friction between China and the US this week were: the introduction of two new bills in US Congress targeting state-run media outlets (with key exceptions like BBC and France 24) and foreign influence activities and a US “freedom of navigation” operation within 12 nautical miles of an artificial island built by China in the South China Sea.

2. China’s government reform: The end of the NPC session this week saw the new Chinese cabinet being unveiled. Li Keqiang heads the State Council as the premier, with four vice premiers. Here’s a breakdown of the cabinet berths. Li’s NPC ending presser, meanwhile, offered some insight into the reforms we can expect going forward in terms of economic opening, job creation and healthcare.

Also, the final party and state reform plan was made public on Wednesday. It’s clear that the line dividing Party and the state is now virtually non-existent. Some of the key changes:

3. Xi-Merkel talk: The two leaders spoke on phone congratulating each other on their respective returns to power. The Xinhua report on this conversation says that the discussed “maintaining economic globalization and multilateralism,” and, as SCMP reports, overcapacity and steel tariffs. Xi reportedly told Merkel that “China and Germany should become cooperation partners despite ideological differences, Xi said. The two countries are partners, not rivals.” Meanwhile, Merkel’s reported comments indicated German discomfort with BRI. Xinhua reports that Merkel said “Germany will contribute to the joint construction of the initiative through project cooperation.” That’s not an endorsement. That’s pragmatism.

Other Stories:

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5. Australia-ASEAN Summit: The Sydney Declaration and Regional infrastructure cooperation proposed

6. Chinese rights activists fearful as policeman takes charge of legal affairs

7. China’s young consumers are snubbing foreign brands amid growing national pride

8. Must Read: Nobody knows anything about China

9. Alibaba eyes China ‘listing’ as early as mid-year: IFR

10. China Upgrades Diplomacy While the US Pulls Back

11. South China Sea: Vietnam ‘scraps new oil project’

12. After faces, China is moving quickly to identify people by their voices


Indian Interests

‘Frenemies’ eye reset: Over the past few weeks, we’ve covered the fact that after last year’s tensions, the Indian and Chinese government appear to be seeking a diplomatic reset. There has been a steady uptick in diplomatic engagement, which is expected to continue as Prime Minister Narendra Modi prepares for the Qingdao SCO summit.

Modi, in fact, called Xi following the NPC meeting to congratulate him on his second term as China’s President. The call was preceded by a statement on Weibo a day earlier. Xinhua’s report on the conversation had a particular remark, which would have surely pleased Xi. Modi is reported to have said that the election “demonstrates that Xi enjoys the support of the whole Chinese nation.”

Also, this week, the 11th round of the “Working Mechanism on Consultation & Coordination for India-China Border Affairs” was held in Delhi. The talks, the MEA said, were held in a “friendly and cordial atmosphere,” with both sides agreeing that “maintaining peace and tranquility in the India-China border areas is an important pre-requisite for further development of bilateral relations between the two countries.” The Xinhua report doesn’t echo that language of terming peace at the border an important pre-requisite, while Chinese commentariat indicates that trust is still a rare commodity.

The next big meeting between the two sides is the visit of Chinese commerce minister Zhong Shan next week. India’s envoy to China Gautam Bambawale, meanwhile, is calling for more “frank and candid” dialogue between the two countries, stressing that India regards China as a partner rather than a rival — or perhaps, frenemies, as India’s UN ambassador Syed Akbaruddin described the two sides recently.

One of the pieces of this diplomatic puzzle is Tibet, and New Delhi’s recent policy choices regarding it are inviting a fierce debate in the country. Reports suggest that a global lawmakers’ conference on Tibet, which was planned for late April in Delhi, has been called off. Here are three pieces that question India’s changing Tibet policy:

Other Stories

2. Doklam: China quietly & cleverly finds a new route to S. Doklam + Rahul slams Modi on Doklam issue

3. Maldives looks to ‘long lost cousin’ China, despite ‘brother’ India’s concerns

4. India, China and the Rohingya issue

5. India crafts its own ‘string of pearls’ to rival China’s naval jewels in the Indian Ocean

6. Japan and India are challenging China in Africa

7. Biggest threat to ‘Make in India’: Chinese capturing India’s automotive space

8. Indian exports may take a hit as trade war could lower growth in China, US

9. China provides tracking system for Pakistan’s missile programme

10. Delhi & Dhaka go into huddle as boat carrying ‘Chinese Arms’ seized in Bangladesh


Belt and Road

Reaching out to Europe: In an article this week, Chinese Ambassador to the European Union Zhang Ming sought to allay European concerns over BRI, stating that BRI was based on three pillars: openness, transparency and inclusiveness. Citing research by a Brussels-based think tank, he stated that “EU’s foreign trade will increase by 6% because of the BRI.” Another interesting point to note in the piece was this: “Governments of 11 EU member states have signed BRI cooperation documents with the Chinese government.”

Another sign that Beijing is looking to address some of the concerns over its projects in Europe is the change in approach towards the Belgrade–Budapest high speed rail link. A new Chatham House piece explains that after initial troubles over the awarding of contracts to Chinese companies without following the EU-mandated competitive procurement processes, the most recent round of contracts is to be awarded by tender.

Meanwhile, China continues to look for new European infrastructure investments, such as this Sweden-Denmark tunnel project. Another piece to note on what China’s mega connectivity projects, such as the European rail links, mean in the long term is this one by Wade Shepard in Forbes.

It argues that: “It is a mistake to overvalue tit for tat, profit/loss metrics for Silk Road projects at this juncture. Most of these projects are not about making a profit in the short-run — or even at all — but about creating a platform for future development. They offer the possibility for once-remote locations to develop new economic sectors — sometimes changing the very paradigms that these places are currently based on.”

Other Stories:

2. CPEC: Chinese firms ink 41 CPEC-linked accords in 2018 + Three out of nine industrial parks under CPEC likely to be built this year + Pakistan’s FDI jumps 15.6% on massive Chinese inflows + Revised Pak-China FTA to be signed next month

3. China’s outbound BRI investment decreases in January-February

4. PetroChina seeks more ‘Belt and Road’ acquisitions

5. China building Arctic expedition cruise ship for ‘Polar Silk Road’

6. Honeywell, other US companies look to benefit from China’s gigantic ‘Belt and Road’ initiative


Military Matters

China’s unmanned tanks: CCTV recently showcased a PLA Type 59 main battle tank being remotely operated, indicating trials of unmanned tanks. The Global Times this week further shed light on this development. It says, “China’s Type 59 is based on the Soviet T-54A tank, which was shipped to China in the 1950s. It can be armed with a 100mm or 105mm cannon and requires a crew of four to operate it.” But, analyst Liu Qingshan says that “a large number of due-to-retire Type 59 tanks can be converted into unmanned vehicles if equipped with artificial intelligence.”

Ajai Shukla’s Business Standard report quotes former US military intelligence officer Dennis Blasko as saying that: “A Type-59 tank converted to remote control could have multiple training and battlefield purposes. In training it could be used as a moving target for tank and anti-tank gunners, adding more realism to target practice. In battle, it could be used in formations as a decoy to distract and confuse enemy reconnaissance and surveillance.” Blasko adds that using it as a battlefield weapon would require the integration of remote target acquisition and fire control technologies — a more technologically challenging task. Shukla’s report ends with this rather sombre note: “In India, the Defence R&D Organisation (DRDO) is still focusing on developing the next-generation manned tank.”

Other Stories:

2. China’s missile man Lt Gen Wei Fenghe is new defence minister

3. Chinese Navy to conduct combat drills in South China Sea + Liaoning to be part of PLA Navy drills

4. What to expect when you’re expecting the PLA: A guide to meeting with the Chinese

5. Thousands of Chinese marines in major readiness drill

6. Cross-strait tensions rising, but Chinese aircraft carrier poses no threat

7. China, not North Korea, to dominate Japan military planning

8. China-Cambodia Defense Ties in the Spotlight with Military Drills


Beijing’s take

The NPC session ended this week with a first-of-its-kind address by the PRC President. In a nearly 40-minute speech, Xi Jinping stamped his authority and laid out his vision for China’s new era. But before we get to the speech, two noteworthy points on Xi’s authority.

  1. The cult of personality is well and truly evolving with People’s Daily’s reference to Xi as the helmsman, greater sensitivity on remotely critical content, enhanced focus on ideological training of students and increasing deification.
  2. In practice too, Xi today is no longer first-among-equals. In another first, CPC Politburo members submitted reports to Xi this week, who personally supervised them. Here’s Xinhua’s English report on this entire process. The SCMP version of events is far more detailed (drawing from Xinhua’s Chinese language report). It talks about Politburo members being assessed on seven criteria, including their support for Xi’s authority, their readiness to learn and promote his political thought and in terms of discipline.

Now, back to Xi’s NPC speech: You can watch the full speech here or read the official English language text here. But keep in mind that there are many inconsistencies within the translation in the video aired by CGTN and the official text put out by Xinhua. For instance, the translation put out by Xinhua doesn’t mention the phrase “bloody battles,” which led to much media commentary.

Here’s your cheat-sheet:

  • Keeping in line with his carefully cultivated image of being the people’s leader, a significant early portion of the speech was dedicated to praising the efforts of the Chinese people whose efforts “led to a tremendous transformation of the Chinese nation: it has stood up, grown rich, and is becoming strong!”
  • Early on, Xi obliquely addressed the concern over the constitutional changes to presidential term limits by saying, “I will continue to serve as a servant of the people, accept supervision by the people, and will absolutely not betray the great trust from all deputies and Chinese people of all ethnic groups.” Note the use of supervision as opposed to accountability, although how even that will work in reality is anyone’s guess.
  • Xi then went on a long historical narrative, drawing from China’s imperial and even CPC history. Much of this was in tune with the nationalistic narrative that he has pursued since 2013. However, Xi sought to eschew the undercurrent of Han ethno-nationalism. He did so by acknowledging China’s ethnic diversity while emphasizing unity, referencing the epics of Manas, Jangar and King Gesar. Another good example of that is this sentence: “We have built a united country with various nationalities, developed harmonious relationships between 56 diverse, interwoven ethnic groups, formed a big Chinese family where they keep watch for and help defend each other.”
  • Another interesting aspect of Xi’s speech was the inclusion of references to Chinese mythology, “such as Pangu creating the world, Nyuwa patching up the sky, Fuxi drawing eight diagrams, Shennong tasting herbs, Kuafu chasing the sun, Jingwei filling up the sea and Yugong removing mountains.” There were used to reflect “Chinese people’s perseverance in dauntlessly pursuing and realizing dreams.”
  • Xi then went on to stress that “only socialism can save China,” stressing on the ideas of “socialist democracy” and “socialist rule of law.” This isn’t different from his Party Congress speech, and implies greater controls and CPC role.
  • In terms of the economy too, the message was the same as the Party Congress, i.e., “deepening reform in all areas, expanding opening up…promoting high-quality economic development.”
  • Foreign policy issues came towards the fag end of the speech. Xi acknowledged that the current global situation offered a “favorable development environment that was unimaginable before.” He reiterated the idea that China’s “practical action to contribute to the peace and development of humanity should not be misinterpreted.” And assured that China “will not impose its will on others,” “will continue to actively push forward the Belt and Road Initiative,” and “participate in the evolution and construction of the global governance system” by offering “Chinese wisdom, Chinese solutions and Chinese strength to the world.”
  • Lastly on issues of territorial integrity, Xi sounded a strong nationalistic tone, promising complete reunification (reference to Taiwan) and pledging that “it is absolutely impossible to separate any inch of territory of our great country from China.”

This article first appeared on the Indian National Interest.

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About the author

Manoj Kewalramani

Manoj Kewalramani is a multimedia journalist based in New Delhi. Over the past 11 years, he has worked with prominent news networks in India and China. His news and editorial work includes field reporting, commissioning and managing assignments and producing shows and documentaries along with formulating and executing digital news strategies. Manoj is an alumnus of Takshashila’s Graduate Certificate in Public Policy. At Takshashila, he curates a weekly brief, Eye on China, which tracks developments in China from an Indian perspective.