Praying Won’t Save You Now

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

The Leading Group:

  1. China’s Policy on Religion

The State Council this week released a white paper titled China’s Policies and Practices on Protecting Freedom of Religious Belief. The document offers an insight into Party-State’s approach towards the growth of religious belief in China and its management of religious organisations. It is important to note here that the main body to manage religious affairs, the State Administration of Religious Affairs, has now been absorbed by the CPC’s United Front Department.

Here’s your cheat sheet:

  • There are approximately 5,500 religious groups in China. The major religions practiced are Buddhism, Taoism, Islam, Catholicism and Protestantism, with a total of nearly 200 million believers and more than 380,000 clerical personnel.
  • The 10 minority ethnic groups, the majority of whose population believe in Islam, total more than 20 million. Catholicism and Protestantism have 6 million and 38 million followers, respectively.
  • Article 36 of the Chinese constitution guarantees freedom of religion. However, certain principles are key to practice of religion in China, such as the principle of independence and self-management (i.e., no external influence), religions should be managed according to law (i.e., state is supreme) and religions should adapt to the socialist society (i.e., faith must be attuned to Chinese characteristics).
  • The latter parts are is further underscored with this statement: Chinese religious groups must conduct religious activities in the Chinese context, practice core socialist values, carry forward the fine traditions of the Chinese nation, and actively explore religious thought which conforms to the reality in China.
  • The document warns that no one shall use religion to interfere in the lawful rights and interests of citizens and believers should respect public order, customs, cultural traditions and social ethics in exercising their freedom of religious belief. It further states that “Religious activities should be carried out within the bounds of the law.” This refers to the supremacy of the Chinese state law over the religious laws.
  • It further states: No religion should interfere in the implementation of administrative, judicial and educational functions of the state and that no activities which employ religion to endanger social stability, national unity and state security are allowed to be carried out.
  • Foreigners shall not establish religious organizations, set up religious offices and sites for religious activities, run religious institutions, or recruit foreign students studying in China without authorization; nor shall they recruit followers, appoint clerical personnel from among Chinese citizens or engage in other missionary activities.
  • On the issue of extremism, the document says: China takes measures against the propagation and spread of religious extremism, and at the same time, carefully avoids linking violent terrorism and religious extremism with any particular ethnic group or religion. The document further identifies self-immolation or the incitement of others to do so, violent terrorist activities and development of cults as extremist behaviours.

Two other key stories this week to note in the broader context of managing religious affairs in China are about the reported disappearance of Bibles from online stores in the country and the much-talked about deal with the Vatican. Recognition of Taiwan and the principle of self-management are important factors underpinning any such deal from the CPC’s perspective.

  1. Trading tariffs

Sino-US trade frictions increased this week, with both sides threatening expanded tariffs. Responding to US tariffs against imported steel and aluminum imposed in March, Beijing’s tariffs on 128 US imports worth $3 billion became effective on Monday.

That was followed by the US Trade Representative’s office – well before its Friday deadline – on Tuesday unveiling a detailed breakdown of some 1,300 Chinese industrial, transport and medical goods that could be subject to 25 percent duties. This was part of the tariffs on goods worth $50 billion that US President Donald Trump had promised. The goods in question range from chemicals, pharma products and machine parts among others. However, key exclusions were consumer goods like electronics products such as cellphones made by Apple Inc and laptops made by Dell along with footwear and clothing products.

The Chinese embassy in Washington was poetic in promising that “it is only polite to reciprocate,” with just hours later Beijing announcing reciprocal tariffs on some 106 categories of US products worth $50 billion. These included agricultural products like soybeans, corn and wheat, along with beef, cars and planes. The composition of the 106 categories is important, argues this piece in Bloomberg by David Fickling and Shuli Ren. They argue that China’s approach is one of politics first, targeting US’ Midwestern states.

The caveat in all this is that the USTR announcement will now lead to 60-day comment period, so there is no immediate imposition of tariffs. And the Chinese tariffs will only go into effect, if and when the US acts on its announcement. So there is considerable room for a negotiated settlement. But if matters escalate, this Neil Irwin NYT piece offers a good breakdown of the unconventional tools at Beijing’s disposal.

  1. Xi’s Reform Drive

The April 8-11 Boao Forum for Asia will be the first big international event hosted in China this year. President Xi Jinping will be addressing the attendees in Hainan, with Foreign Minister Wang Yi promising that Xi’s speech will make “the most authoritative interpretation” on reforms and opening up. “People will hear a series of new important measures on reforms and opening up,” he added. Speculation is that this could refer to new free-trade ports policy, along with easing rules for foreign companies in China and further opening of sectors like finance, insurance and healthcare.

Meanwhile, Xi this week also chaired a meeting of the Central Committee for Financial and Economic Affairs, focussing on the “three tough battles.”

  • On containing financial risks, Xi termed deleveraging and debt management as a “national security” concern, with attention to be paid to reduce the leverage ratio of local governments and companies, especially state-owned enterprises. Bloomberg estimates China’s debt to GDP ratio at 266% at the end of last year, but estimates wary from anywhere between 200% and 283%.
  • Two examples of what this debt crackdown means is practice is the report that China’s Finance Ministry has forbidden state-owned financial companies from providing any sort of funding for local governments, other than the purchase of their bonds. The second is the decision to halt government funded projects, approved since January 2017, in Xinjiang, over concerns of debt accumulation.
  • On environmental issues, Xi termed them as decisive to Chinese people’s judgment of the success of building a moderately prosperous society. To stress that point, he along with Politburo Standing Committee members and VP Wang Qishan participated in a tree-planting event in Beijing.
  • On poverty alleviation, Xi warned that authorities should stick to the current standards and should not make arbitrary decisions to raise or lower the standards. China aims to eradicate absolute poverty by 2020, with some 30.46 million people estimated to be living in absolute poverty by the end of 2017. However, as the Politburo recently pointed out, the poverty reduction effort is plagued by problems such as failure in policy implementation and mismanagement of poverty relief funds, as well as misconduct such as “formality for formality’s sake, bureaucratism, and falsification.”
  1. India’s Balancing Act

Amidst all the talk of a reset, Indian Union Minister of State(MoS) Culture Mahesh Sharma and BJP General Secretary Ram Madhav attended the Thank You India event organised by the Tibetan government in exile. Madhav, however, was keen to emphasize the “spiritual” nature of India’s ties with Tibet as opposed to the political, stressing that India adheres to the one-China policy. Interestingly, there was no reference to the event in editorials or official statements in China.

Meanwhile, PTI reported this week that the Indian army is strengthening its presence on the tri-junction with Myanmar and China near Tibet. The report says that the tri-junction, located around 50 km from Walong, the easternmost town of India near the Tibet region, is extremely important for India to help it maintain its dominance in the nearby mountain passes and other areas. The vigil is perhaps part of an overall sense that with the onset of summer, there is likely to be an intensification of PLA “muscle flexing” along at least half of the 23 “disputed and sensitive areas” identified on the Line of Actual Control, stretching from eastern Ladakh to Arunachal Pradesh. Meanwhile, the Indian Defence Ministry has reportedly identified four strategic rail lines along the India-China border, with final location surveys still pending.

This is underway as Defense Minister Nirmala Sitharaman met with her Chinese counterpart Wei Fenghe in Moscow, ahead of a trip to Beijing. Also unlike 2016, India has invited China to participate in the upcoming Defence Expo 2018, which will be held in Chennai starting April 11. In addition, while India is deepening cooperation with Japan and the US on connectivity and security, reports also suggest that New Delhi’s line on BRI is likely to soften. Responding to such reports, the MEA issued a statement, which doesn’t quite entirely refute the claims made in the media.

Interesting pieces to read on the emerging Sino-Indian bilateral dynamic:

  1. Generic Drugs Policy

Xinhua reported this week that the State Council in a new guideline has stressed on reforming policies related to supply and usage of generic drugs in China. This is seen as crucial to meet growing demand and lower healthcare costs. The document calls for regular publications of lists of generic drugs in need, bringing related research projects into national plans, and improving the current protection system for intellectual property rights.

This comes on the heels of Premier Li Keqiang announcing after the NPC session that China would slash drug tariffs and look to eliminate them entirely for anti-cancer drugs.

All of this is very important from an Indian perspective, given that India is a leader in generic drugs. India’s overseas sales volume of generic drugs was estimated at $16.4 billion in 2016. That figure is expected to hit $20 billion by 2020. China is a major market for India to expand into; however, strict controls have meant that Indian companies barely figure there – a key bone of contention between the two sides.

China is the second largest pharmaceutical market in the world, forecasted to grow to $170 billion by 2020. China’s medical imports in 2017 were estimated at $28.7 billion in 2017, according to the General Administration of Customs. This Chinese market is largely dominated by generic drugs, over two-thirds, while patented drugs sales are around 22%. And if you look at the the disease profile in China and ageing trends, you’ll see why this is a big market.

For starters, the slashing of tariffs on patented drugs could make Indian generics less competitive. Despite that, given the vast price differentials between patented and generic drugs, the latter will retain an edge. Also, if China is looking to expand its own generic drug production, partnerships with Indian firms, as this Global Times piece argues, might prove beneficial.

In a sign that this is likely, at the end of March, China announced that it will accept data collected from clinical trials conducted outside the mainland for applications to register drugs and medical equipment. This opens up new possibilities for cooperation with Indian companies, easing regulatory hurdles. In addition, expanded market access for Indian pharma companies could also possibly mitigate New Delhi’s concerns over increasing dependence on Chinese API imports.

  1. Frictions along the CPEC 

Pakistan PM Shahid Khaqan Abbasi will be traveling to Hainan for the Boao Forum for Asia soon. The visit comes amid new stresses along CPEC coming to the fore.

  • For starters, after 10 rounds of talks, there is still no agreement on the second phase of the China-Pakistan free trade agreement, amid concerns raised by Pakistan’s business community.
  • China’s ambassador to Pakistan Yao Jing, this week, offered an update on CPEC, which he says comprises 43 initiatives. Among these 22 projects worth $18 billion are slated for the first five years. 8 of these have been completed. CPEC he added has already created 70,000 jobs in Pakistan, with 0.7 million more likely to be created in the future, he added.
  • While work may be underway, increasing interactions between the two peoples is leading to new tensions. For instance, Yao Jing this week spoke about the complaints of Pakistani traders from Gilgit-Baltistan, talking about easing access, customs procedures to even the bad behaviour of Chinese officials. Importantly, he also confirmed that Chinese wives of many Pakistani traders were in fact in detention in Xinjiang. “The women will be freed after completion of the inquiry process. The women are being interrogated for security purposes,” he reportedly said.
  • Another story that came to light this week was a fight between Chinese citizens working on the M4 motorway, part of CPEC, and the police in Khanewal. Dawn reports that according to police officials, Chinese engineers and other officials wanted to leave their camp and visit a “red-light” area on Tuesday. They resorted to agitation when denied permission to leave the camp without being accompanied by security officials.
  • Meanwhile, there are reports that Pakistan is stepping up efforts to address Chinese concerns on terrorism, while once-Baloch separatist leader Jumma Khan Marri has backed CPEC after setting up the Overseas Pakistani Baloch Unity in Moscow.
  1. PLA’s Mental Fitness

A fascinating piece in The Diplomat (paywalled) by researcher Zi Yang explores the issues of PLA service members’ mental health and mental health services in the Chinese armed forces. The analysis is based on an examination of articles in Chinese military medicine and psychology journals. Here’s a peek:

  • Over years, studies have provided varied estimates, but generally, at least a quarter of PLA servicemen suffer from some sort of psychological problem. While this compares to numbers in the US military, it is important to note that the PLA hasn’t been involved in a war since 1979.
  • Anxiety and mood disorders are the most common psychological problems, with work related stress and interpersonal tensions being key factors.
  • A 2016 study concluded that out of the five PLA branches, the Strategic Support Force the healthiest mentally, followed by the Ground Force, Navy, Air Force, and Rocket Force.
  • There are structural and personnel related issues that impede improvements in PLA’s mental health services, such as the absence of a systematic method of mental health assessment, mental health not being part of annual physical examinations, the shortage of military psychiatrists and psychologists, etc.

Other Stories:

  1. Is China’s Belt and Road working? A progress report from eight countries
  2. Two Chinese militants among seven killed in anti-terrorism operation in Afghanistan
  3. China saw 16-fold increase in returning jihadists in 2017, analyst says
  4. Zimbabwe’s leader thanks China’s Xi, pledges to boost ties
  5. Life inside China’s social credit laboratory
  6. Nepal PM Oli’s visit to India signifies fluidity of politics and diplomacy
  7. The Chinese economy is rebalancing, at last
  8. China to develop Bangladesh industrial zone as part of South Asia push
  9. Chinese defence chief says his visit to Moscow is a signal to the US
  10. Carrier-based attack drones to enter service with PLA Navy
  11. China’s first home-grown aircraft carrier set to carry out maiden sea trial