A weekly bulletin offering news and analysis related to the Middle Kingdom. This week, Xi works on boosting confidence as the economy stumbles.
1. Xi’s Southern Tour
China’s GDP rose 6.5% year-on-year for the third quarter of 2018, official data show. Reuters reports that this is the weakest year-on-year quarterly growth since the first quarter of 2009. State media, however, didn’t focus on that, choosing rather to highlight that GDP expanded 6.7% year-on-year in the first three quarters of 2018. This is pretty much in line with targets that have been set. Discussing the numbers, National Bureau of Statistics spokesperson Mao Shengyong admitted that “the number of external challenges has increased significantly” and so has “downward pressure” on the economy.
- Stock markets tumbling to lose nearly 30% of value since January.
- Big tech facing liquidity tightening.
- Protests over falling home prices in cities like Shanghai, Xiamen and Guiyang.
- Concern over local government debt. S&P Global Ratings estimates that local governments have piled up some $5.8 trillion in off-balance sheet debt.
Given all this, Xi Jinping is expected to embark on a southern tour next week. SCMP reports that the aim of Xi’s visit to Guangdong will be to boost confidence in the Chinese economic model. On Tuesday, the landmark Hong Kong-Zhuhai-Macau bridge is set to be opened. The bridge marks deepening connectivity across the Greater Bay Area, a tech-led economic zone that Beijing hopes will rival California’s Silicon Valley. All of this comes as China marks the 40th anniversary of the launch of the Reform and Opening policy. Xi’s remarks here would be interesting to watch for China’s private sector, given that his recent northeast tour emphasized self-reliance and the significance of state enterprises.
An example of how the Party-state is deepening its reach across the private sector is this report of the Qingdao city government’s decision to send state-appointed cadres to act as “labour union chiefs” into 92 local private enterprises. Also, as the Financial Times reports: “Private businesses have borne the brunt of a slowdown in real economic growth in China over the past few years, which has been accompanied by a tightening of state lending and the collapse of shadow financing networks.” Examples of this are the falling stock prices of giants like Alibaba and Tencent, while smaller players have been forced to sell out to state-owned rivals, the report adds.
It is such concerns that Peng Huagang, spokesman for the State-owned Assets Supervision and Administration Commission, sought to address this week, when he stressed that “SOEs have no intention to acquire or merge with listed private companies in a fair market environment regardless of the circumstances.” He added that Beijing supports the principle “competitive neutrality,” i.e., the government will also remain neutral toward companies of all categories of ownership.
2. Civil-Military Integration
Xi addressed the second meeting of the Central Commission for Integrated Military and Civilian Development on Monday. The commission’s meeting came a few days after CMC vice-chairs General Xu Qiliang and General Zhang Youxia reportedly backed civil-military integration policy as providing “strong propulsion and strategic support to make the dream of a strong military come true.”
State media reports that since late 2012, “the number of private companies with a license to design and build military equipment has increased by nearly five-fold, from about 500 to more than 2400. The PLA now publishes its needs in technology, equipment and services on a procurement website regularly. Many private firms have been given military contracts.” That’s an important step in expanding China’s military industrial complex.
Civil-military integration was accorded national strategy status in 2014, with the commission being established in January 2017. State media reports tell us that during this second meeting, officials reviewed and adopted a document on strengthening the construction of rule of law for civil-military integration.
What that means is three-fold action, with the focus on boosting domestically developed technologies and equipment. The first is to put together legislation in the field of military-civilian integration and ensure ensure that laws cover “key areas” at the earliest. The second is to curb corruption through competitive procurement, opening state-owned military enterprises and increasing the proportion of private enterprises participating in competition. Finally, identify strategic major projects as catalysts for innovation.
One other aspect of the civil-military integration strategy that came into focus this month was the PLA Rocket Force’s decision to recruit 13 experts from the private sector as consultants on key projects. SCMP reports, citing the PLA Daily, that the scientists and engineers – who have extensive experience in areas such as new materials, new energy and power and robotics – have been recruited on five-year contracts and will be involved in a range of development projects.
Another important point to note is that civil-military integration in China is not merely about equipment development and innovation. For instance, this China Daily piece argues that “Chinese military-civilian integration aims to solve real security threats,” before going on to call for more civilian facilities in the South China Sea to compliment military facilities ensuring that broader national objectives are met.
Few other noteworthy stories related to the Chinese military:
- China party expels general who killed self, indicts another
- China Test Fires Supersonic Cruise Missile
- China Successfully Tests World’s Largest Unmanned Transport Drone
The annual India-China Hand-in-Hand military drills are reportedly set to resume in December. The Times of India reports that the final conference to iron out the details for the drills is set to be held in the first week of November. The PLA Daily also published this week a rather lengthy piece on Sino-Indian military engagement. The piece says that “the relationship between the two militaries has improved markedly” this year. Here’s a snapshot of interesting points from the article:
- “Friendly relations and win-win cooperation have become the mainstream of the relations between the two countries and their militaries.”
- “The shadow of ‘Donglang event’ cast over China-India military relations being discarded, and “mutual understanding” having become the basis for their military relations.”
- The two militaries should further deepen professional exchanges, carry out joint training, strengthen exchanges and cooperation between ships, increase exchanges of young military officers, promote university, academic and public affairs exchanges…
- Looking to the future: “the two sides should promote the establishment of a regular border meeting mechanism for the generals, open the border defense hotline of the adjacent military regions, carry out personnel exchanges between the adjacent theater commands and the corresponding services at all levels, strengthen exchanges between the front-line units, carry out exchange and training for border guards in the other’s colleges and universities, and resolutely put an end to similar incidents as “Donglang event.”
Meanwhile, Zhao Kezhi, China’s Minister of Public Security, will visit India on October 22, which is when the two governments will be signing an agreement on internal security cooperation. PTI reports that the “proposed pact is expected to cover areas of intelligence sharing, exchange programme, sharing of best practices, cooperation in disaster mitigation…” Also this week, the first initiative under the India-China Plus framework was formally launched, with a program to jointly train Afghan diplomats. Chinese Ambassador to India Luo Zhaohui called for this framework of cooperation between India and China to be “extended from Afghanistan to other countries, such as Nepal, Bhutan, Maldives, Iran and Myanmar. We can also join hands under the mechanisms of SAARC, BIMSTEC and BCIM to promote regional peace, stability and prosperity.” This project was one of the outcomes of the Wuhan meeting between Xi and Prime Minister Narendra Modi, who are also likely to catch up during the G20 summit in Argentina.
Speaking of all this bonhomie, this story from Kolkata cannot be missed. The Chinese embassy sponsored a Durga Puja celebration in Kolkata’s upmarket Salt Lake area this year. Unfortunately, when West Bengal governor Keshari Nath Tripathi was late for the function, consul general Ma Zhanwu broke out into a Tai Chi routine while his wife played music to entertain the crowds. A fascinating example of public diplomacy by Chinese officials.
- India imposes anti-dumping duty on certain steel products from China
- China alerts India as 6,000 evacuated in Tibet after landslide blocks river
- China positions submarine and rescue vehicle in Indian Ocean
4. Will They Meet?
Will they or won’t they — that my friend is the question. There is still no clarity on whether Donald Trump and Xi Jinping will be meeting during the G20 in Argentina. Trump’s economic adviser Larry Kudlow says that they will meet, but don’t expect a deal. Treasury Secretary Steven Mnuchin, meanwhile, says that no final decision has yet been made. Commerce Secretary Wilbur Ross, on the other hand, says that the trade talks are on a “hiatus.” That’s the kind of thing that China’s ambassador to the US Cui Tiankai spoke about in an interview with Fox News. When asked whether he was clear about who Trump listens to on trade issues, Cui responded by saying that he had spoken to other ambassadors in Washington and “they don’t know who is the final decision-maker. Of course, presumably, the President will take the final decision. But who is playing what role? Sometimes it could be very confusing.”
Meanwhile, a new propaganda effort is underway in the Chinese media to shore up confidence in the country’s economy, owing to some of the difficulties discussed about. For instance, SCMP reports that the People’s Daily in an editorial hit back a “pessimistic” voices, arguing that such arguments were “groundless” as they misjudged China’s current economic situation and ignored China’s “unique institutional advantages.” Last week, the Communist Party’s mouthpiece had put out a lengthy defense of the Chinese view of free trade. Following that tune and keeping in mind Premier Li Keqiang’s Eurasia trip, Xinhua wants Asia and Europe to come together on free trade. Li is in Brussels for the Asia Europe Meeting, and expect him to call for greater coordination in combating protectionism and supporting multilateralism.
But that might be tricky, given this NYT report that “Fresh off securing trade agreements with South Korea, Canada and Mexico, President Trump is embarking on a new plan: refashioning the Trans-Pacific Partnership to his liking through a flurry of bilateral trade deals.” The report adds: Trump “views these new bilateral agreements as a way to contain Beijing’s growing economic, geopolitical and territorial ambitions. The White House gave formal notification to Congress this week that it would begin trade talks with Japan, the European Union and the United Kingdom. And the administration also has its sights on free trade agreements with the Philippines and Vietnam, as part of its effort to fence in China with agreements in its backyard.”
Finally, Defense Secretary James Mattis, who visited Vietnam and Singapore this week, met with his Chinese counterpart Wei Fenghe. Ahead of the meeting, Mattis said that the US wasn’t trying to contain China, but was concerned about its militarization of the South China Sea and predatory economic behaviour. That led to an annoyed response from the Chinese Foreign Ministry. Reuters quotes Randall Schriver, a US assistant secretary of defense, as saying that both men “acknowledged that the meeting itself was significant and that high-level communication can help.” He added that “What we want in terms of stability are regular interactions at senior levels so we have a good understanding of one another’s intentions, that we have confidence-building measures that will help us prevent an unintended accident or incident.” Xinhua covered the meeting, reporting that while China “stands firm on principles guiding issues of of Taiwan and the South China Sea,” Mattis said that “differences lie between the United States and China, but they do not necessarily mean confrontation, nor does competition mean hostility.”
Other noteworthy stories
- US Curbs China Nuclear Exports, Trump Says Americans Not Stupid
- US shies away from calling China a currency manipulator
- China and Europe join WTO challenge to Trump metals tariffs, opening new front in trade war
- Trump’s Latest Salvo in His Trade War With China? Pulling Out of a 144-Year-Old Postal Pact Play Video
5. Defending the Camps
Under increasing scrutiny over the reported re-education camps in Xinjiang where over one million Uighurs have reportedly been forcefully detained, Beijing this week launched a full-fledged defense of its policies. Xinjiang Governor Shohrat Zakir discussed the government’s “counterterrorism, vocational education and training” policies in a lengthy interview with Xinhua this week.
Zakir’s fundamental argument is that argued Xinjiang had “complex and grave circumstances,” including the threat of terrorism. In response, the government “sought to combine the fight against violent terrorist crimes with the protection of human rights,” i.e., the camps, which he calls an effort in “preventing terrorism” and development initiatives. This is argues was done legally.
Talking about what happens at these “vocational education” centers, he said: “Xinjiang has established a training model with professional vocational training institutions as the platform, learning the country’s common language, legal knowledge, vocational skills, along with de-extremization education, as the main content, with achieving employment as the key direction.”
As a consequence, Zakir claims: “Xinjiang has started to enjoy the dividend of effective counterterrorism efforts with its economy steadily growing, people’s livelihood improving, and overall progress being made in all respects.”
Along with the interview, state broadcaster CCTV highlighted the apparent de-extremification and skilling work at these centers. Do check out these two excellent tweet threads by Shelley Zhang and Adrian Zenz deconstructing that CCTV report. Zenz’ summation is brutal and on point. He argues: “In sum: the entire piece portrays Uyghurs as a backward & ignorant people who are naturally prone to became dangerous for society because of their way of life and lack of skills for “modern” wage labor.” This is also an example of how state media propaganda often fails terribly in achieving its intended outcome.
Meanwhile, another example of how the treatment of Uighur Muslims in Xinjiang can impact China’s international efforts was evident in Pakistan. Officials at the Chinese embassy in Islamabad reportedly met with leaders of overseas Chinese associations and Chinese Uygur organisations to explain the policies of the government in Xinjiang. In addition, the China’s Deputy Chief of Mission in Pakistan Lijian Zhao engaged in an angry and personal Twitter tirade against former Pakistani diplomat Husain Haqqani. This after Haqqani tweeted a news report claiming that China had asked its Muslim Uyghur minority to eat pork to stamp out radical religious thought.
6. Xi-Abe Summit
The long-awaited Xi-Abe summit is not too far away now. Japanese Prime Minister Shinzo Abe will be visiting China from October 25-27. The conversations will undoubtedly focus on issues of trade and protectionism, along with North Korea, territorial disputes and investments in third countries. In addition, there is talk of China easing restrictions on Japanese food imports, the two sides launching a dialogue on intellectual property rights, more pandas for Japan and a deal on maritime search and rescue operations. While pursuing such engagement, Tokyo is also expanding cooperation with other partners like Vietnam and India.
Over the past two months, the Japanese navy has been taking part in military exercises in the South China Sea, called the Indo Southeast Asia Deployment 2018. After the meetings in Beijing, Abe will be meeting with Modi during the 13th India-Japan summit in Tokyo. Reports suggest that the two sides are discussing “sharing of military assets and capabilities in the logistical sphere,” with the outcome being a deal allowing the Indian Navy access to the Japanese base in Djibouti, while Japan’s Maritime Self Defense Force would be permitted to use India’s military installations on the Andaman and Nicobar Islands.
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