Eye on China World

Xi’s Intact Authority

A weekly bulletin offering news and analysis related to the Middle Kingdom. This week Xi Jinping places party loyalty over all else while his defence minister visits India.

  1. ‘The Great New Project’ 

Over the weekend, the Chinese president attended a three-day Central Military Commission party building meeting. It’s noteworthy that this is the first public event that Xi Jinping has attended since the Beidaihe discussions. The overarching theme of Xi’s speech at the meeting was that there is a need to strengthen CPC control over the military. “The primary task is to uphold the absolute CPC leadership over the armed forces,” Xinhua quoted him as saying. He added that Party building and building a strong country with a strong military was the “great new project.”

It is important to state that this is not the first time that Xi has spoken about the need to ensure political loyalty in the armed forces. In fact, it’s a call that he has made repeatedly over the past few years. The primary reason for this is that under Xi, China began undertaking comprehensive reforms of the country’s armed forces in 2015. The reforms, involving doctrinal, structural and operational changes, have been accompanied by a ruthless anti-corruption campaign. All of this has hit traditional vested interests and networks of patronage, which leads to problems at multiple levels.

This concern, particularly with regard to loyalty at lower levels in the armed forces, was evident in Xi’s speech. For instance, he talks about the need for “the whole military” to uphold the authority of the CPC Central Committee and its centralized, unified leadership. He wants “all kinds of work to be placed under the unified leadership of the Party committees and all important issues (to be) discussed and decided by the Party committees.” He also wants that “efforts should be made to arm the military with the Thought on Socialism with Chinese Characteristics for a New Era.” This implies that he recognizes the gaps in central political control and command over the forces at different levels.

However, there are two intriguing points to note. First, the timing of this session, given that perhaps the PLA’s 91st anniversary celebrations earlier this month would have been more apt to deliver such a message. The second is Xi’s emphasis that the anti-corruption campaign “will not change direction or form.” To me, these indicate that Xi’s grip on authority is secure after the Beidaihe meetings, despite reports about questions over the economy and the trade war denting his stature.

What further buttresses this view are the remarks by Xi at a national conference on publicity and ideological work later in the week. The meeting was presided by PSC member Wang Huning. Wang has reportedly been under fire for China’s foreign policy messaging. The Xinhua report on Xi’s remarks indicates that while there have been disagreements within the Party, he remains in command.

For instance, Xi defended his record arguing that, “decisions and plans made by the CPC Central Committee since the 18th CPC National Congress in 2012 are correct and that officials on the publicity and ideological front are reliable.” He added that “unity of thinking and gathering strength” should be the central part of publicity and ideological work. He further underscored the need for “maintaining the right tone in public communication to boost morale and raise people’s spirits in the Party and across the country.” For more on this, do check out Qian Gang’s analysis for China Media Project.

  1. Defense Engagement

Chinese State Councilor and Defense Minister Wei Fenghe visited New Delhi this week, leading a 27-member delegation. Wei met with Prime Minister Narendra Modi and his counterpart Nirmala Sitharaman. The Indian Express reports that the visit has resulted in a decision to work towards full implementation of ongoing confidence building measures along the disputed border and draft a new bilateral Memorandum of Understanding on defence exchanges. The new MoU would replace the one signed in 2006. The report also adds, citing unidentified sources:

the two sides agreed that Doklam-like incidents should be handled with sensitivity, and handled with restraint, rationality and maturity. These incidents, the two ministers were said to have agreed, must be resolved by mutual discussion and interaction at all levels between the two armies.

Times of India reports that there is “a move to identify more BPM points along the LAC to add to the ones already existing at Nathu La (Sikkim), Daulat Beg Oldi and Chushul (Ladakh), Bum La and Kibithu (Arunachal).” But the Economic Times tells us that there was no mention of additional BPM points. Meanwhile, there appears to have been some movement on establishing a military-to-military hotline. The ET report says, the Chinese side has suggested that more than one military hotline, including between the local commands, could be set up. All this is happening as some 200 Indian troops traveled to Chebarkul, Russia, to participate in the SCO anti-terror drill.

Reports on Wei’s visit also contend that CPEC, terrorism, Afghanistan and the South China Sea were part of the discussions between Wei and Sitharaman. What wasn’t reportedly discussed, but perhaps should be going forward, is cybersecurity. A new report y the Indian Computer Emergency Response Team under the Ministry of Electronics and Information Technology claims that China continues to “intrude” Indian cyberspace in a “significant” way. The study assesses cyber attacks on Indian websites from April-June 2018 to find that 35% of these originated from China.

Wei wasn’t the only Asian defense minister in New Delhi this week. Also in town was Japan’s Itsunori Onodera. During his visit, India and Japan have reportedly agreed to holding joint drills, upgrade their 2+2 talks to ministerial level, expand maritime cooperation and negotiate a logistics sharing agreement which will allow the two navies to work together with greater interoperability.The Global Times was quick to take note of these reports, stating that, “China does not view cooperation between India and Japan narrowly. India is a regional power, and of course it needs to expand and develop military cooperation with neighboring countries.”

In saying this, there are clearly areas of Indian foreign policy in which China apparently wants to have a greater say. When asked about Modi and new Pakistan PM Imran Khan’s recent exchange, the Chinese Foreign Ministry spokesperson said Beijing is willing to play a “constructive role” in easing relations between India and Pakistan.

  1. Talks Amid Tariffs

A new round of talks to address the trade dispute between China and the US ended on Thursday. As expected, there was no real breakthrough that was announced. According to Reuters, the White House said that discussions included “addressing structural issues in China.” The Chinese Commerce Ministry termed the talks “constructive and candid,” adding that “both sides will keep in contact about the future arrangement.” This is the first such direct conversation between the two sides since June. Also on Thursday, both sides went ahead to impose 25% reciprocal tariffs on goods worth $16 billion. That takes the total amount of goods on which tariffs have been imposed by both sides to $100 billion.

But that could escalate in a matter of time. The US Trade Representative’s office has been holding public hearings over this week on proposed tariffs on Chinese imports worth $200 billion. Some 359 people have to present testimony in all. Most of these individuals have registered complaints about the higher costs they are likely to face due to the tariffs. So it isn’t surprising that they are warning of the negative impact of new tariffs. Chinese analysts believe that the imposition of this round would imply a full-scale trade war, i.e., a shift from the current Chinese high tech vs US agriculture trade war. This, they argue, will lead to US businesses and consumers suffering. Moody’s agrees with that view, arguing that “at 25 percent, the tariffs on $200 billion worth of Chinese products will likely result in significant price increases for a number of products consumed in the US.”

Axios, however, reports that the mood in Washington, and particularly in the White House seems to suggest that the administration is going to stick it out. This is because Trump is convinced that he is right on trade and believes that he is winning this war with China. Another sign of Trump’s confidence is this remark at a rally in West Virginia this week,

When I came we were heading in a certain direction that was going to allow China to be bigger than us in a very short period of time. That’s not going to happen anymore.

This fits squarely with the view that’s emerging in Beijing that Trump’s trade war isn’t about trade, it’s about thwarting China’s rise as a global power. Consequently, the Chinese leadership appears to have regrouped after the Beidaihe meetings, with Xi’s grip on power appearing firm (discussed in section 1). The understanding appears to be that this will be a long-drawn process, with the government needing to support the economy. SCMP tells us that it is resulting in increased commitments for infrastructure expenditure, and the China Banking and Insurance Regulatory Commission is calling on financial institutions to expand support for local governments and infrastructure projects. But getting all this money flowing comes with serious problems. Bloomberg reports of differences between the Ministry of Finance and CBIRC over a proposal to allow banks to lower their risk weighting on local government bonds to zero percent from 20 percent. This would make municipal notes appear as safe as the ministry’s own debt, expanding the coffers of the already heavily-indebted local governments.

  1. A New Axis

China’s steady pursuit of its interests in terms of ties with Iran, Russia and North Korea despite US pressure at different levels indicates a certain confidence in its foreign policy and an understanding of the need to cultivate and leverage bargaining power. For starters, speaking to his Iranian counterpart Mohammad Javad Zarif last week, Foreign Minister Wang Yi assured continued cooperation. “We have openly indicated that we oppose the wrong practices of unilateral sanctions and ‘long-arm jurisdiction’ in international relations,” Wang reportedly said. Meanwhile, Reuters reports that Chinese buyers of Iranian oil are beginning to shift their cargoes to vessels owned by National Iranian Tanker Co for nearly all their imports. The report adds, “The shift demonstrates that China, Iran’s biggest oil customer, wants to keep buying Iranian crude despite the sanctions, which were reimposed after the United States withdrew in May from a 2015 agreement to halt Iran’s nuclear program.” The report also discusses the possibility of CNPC taking over French oil major Total’s stake South Pars gas project. However, this is not likely to be a straightforward option, as this SCMP report tells us.

Similar statements of support for Iran have come from Russia. Sino-Russian relations have grown closer under Xi and Putin. This was underscored during the recent visit to Moscow by Yang Jiechi, Director of China’s Foreign Affairs Commission, for the China-Russia strategic security consultation. In addition, China has confirmed that for the first time, it will be sending troops to participate in Vostok-2018 strategic drills in Russia from late August to mid-September. Chinese media commentaries argue that this indicates that the Sino-Russian partnership is “further deepening in the military and security fields.” Another piece argues that the “China’s participation indicates, to some extent, the subtle changes in its estimation of global landscapes, with the “China-Russia alliance (being) a reasonable stance against the hegemonic impulse.” All this as the discourse around Russia in the US Congress gets even more shrill, with calls for newer and tougher sanctions.

Finally, US Secretary of State Mike Pompeo is set to visit Pyongyang next week, along with his new special representative to North Korea, Stephen Biegun. There was speculation that Pompeo would meet Kim Jong Un, but the State Department says that there are no plans for such a meeting as of now. The Korea Times reports that North Korea “plans to hand over a list of its secret nuclear test sites as well as information about its nuclear warheads” to Pompeo during the visit. This would be an important step forward in the denuclearisation effort, which as the IAEA tells us hasn’t really gone forward. In fact, 38 North, a prominent North Korea monitoring group, tells us that even the dismantling work at the Sohae Satellite Launching Station has hit a pause. Trump, however, continues to insist that “a lot of good things are happening” and that he would “most likely” meet with Kim Jong Un again.

The US president also believes that China isn’t helping him as much because of the trade dispute. Data shows that China’s trade with North Korea in the January-to-July period slumped 56.2% from a year earlier. Even month-on-month trade declined, from from $217.16 million in May to $194.62 million in July. But then that’s the on the books component of bilateral trade. Therefore, some data such as these oil deliveries reported late 2017 go unrecorded. China’s strategy with regard to North Korea combines a mix of dialogue and pressure. So if it does happen as speculated, you can view Xi Jinping’s visit to the country on 09 September in this context. The visit, if it does happen, is likely to focus on Xi supporting Kim in his development drive.

  1. Reflection along BRI

In many ways, Malaysian Prime Minister Mahathir Mohamad’s visit to Beijing was a political masterclass, in that everyone seemed to get something to suit their version of the state of China-Malaysia ties while Mahathir appears to have gotten his point across rather effectively. So much of the international media picked up the phrase “a new version of colonialism” and the cancellation of Chinese projects owing to “internal fiscal problems.” State media in China, meanwhile, focussed on Malaysia’s openness to Chinese investments, Mahathir’s recounting of Zheng He’s travels centuries ago and fawning over China’s “miraculous achievements.” The joint statement issued during the visit also emphasized that “Malaysia welcomes, supports and will continue to actively participate in the Belt and Road Initiative.” Chinese analysts seem to argue that Mahathir’s visit wasn’t a setback for BRI; rather it’s an opportunity for reflection and reassessment.

This view is most clearly expressed in this Global Times editorial. The piece says that, “When providing concessional loans, China should make sure that the recipient countries have the ability and resolve to pay back. China should think over the potential hazards before establishing credit relations with other countries.” The write-up is in the context of recent remarks by Tonga’s Prime Minister Akalisi Pohiva, calling on Beijing to write off the debts owed by Pacific island countries. The statement set off an alarm, since Pohiva also warned that if states like Tonga were unable to pay back the debt, “the Chinese may come and take our assets, which are our buildings.” The Cook Islands and Samoa publicly disagreed with Pohiva, which eventually led to him retracting his comments.

  1. No New Experiments

As China prepares to mark the 40th anniversary of the beginning of the Reform and Opening Up era, there is increasing evidence that Xi is undermining Deng Xiaoping’s legacy. Beyond the constitutional amendments, centralisation of power, increasing state control over the economy and rewriting of history, The Economist argues that Xi’s efforts are fundamentally altering the core ingredient of experimentation, which has been responsible for China’s success. Yuen Yuen Ang’s work is perhaps among the best in exploring this theory, i.e., how the China model has essentially been about local experimentation.

But that’s changing under Xi. The Economist’s piece claims that, “In 2010—two years before Mr Xi took over—around 500 policy-related pilot projects were being carried out at the provincial level, reckons Sebastian Heilmann of the University of Trier in Germany. By 2016 the number had dropped to about 70.”

The primary reasons for this, the piece claims, are increasing centralisation and fear owing to the anti-corruption campaign. As a consequence, a number of good ideas will never be considered and tried. This leads one to a larger question: Can a system that increasingly prioritises political loyalty and integrity and views numerical targets as metrics of success grow to become an innovation powerhouse?

  1. Taiwan Loses Another Ally

El Salvador became the third country this year to switch allegiances from Taiwan to China. El Salvador’s president, Salvador Sanchez Ceren announced the decision this week in a nationally-televised speech, saying that this would bring “great benefits” and “extraordinary opportunities.” The switch came amid reports, which Salvadoran authorities deny, that the country had demanded money to remain in Taiwan’s camp.

Taipei’s response to the announcement was anger mixed with frustration at what it saw as Beijing’s “increasingly out of control” behaviour. This remark by Taiwan Foreign Minister Joseph Wu was noteworthy in the context of Xi’s long-term vision for reunification: “Pressure from China would only make Taiwan more determined to continue our path of democracy and freedom.”

US State Department spokesperson said that Washington was “extremely disappointed” with El Salvador’s decision, adding that “we are reviewing our relationship with El Salvador.” Senator Marco Rubio, in fact, wants US aid to be cut off to El Salvador in response to its decision. Senator Cory Gardner, chairman of the Foreign Relations Committee’s Asia subcommittee, meanwhile, wants to introduce new measures to encourage countries to stick with Taipei. Reuters reports that among other things, the new bill would authorize the State Department to take action such as downgrading relations or altering foreign assistance to discourage decisions seen as adverse for Taiwan.

For the moment, all eyes are on the Kingdom of eSwatini, which is Taiwan’s last ally in Africa. Beijing is set to host a mega summit with African partners in early September. So far, eSwatini, formerly known as Swaziland, appears to be holding firm despite pressure from the PRC.

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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.