Eye on China World

Hand in Hand, We Stand

A weekly bulletin offering news and analysis related to the Middle Kingdom. Last week marked the 40th anniversary of Reform and Opening Up.

  1. Political Speech; Economic Meet

Two key meetings dominated Chinese media coverage for much of the week. The first was the meeting commemorating the 40th anniversary of Reform and Opening Up and the second was the annual Central Economic Work Conference.

At the gala event , Xi delivered a much-anticipated speech. (Mandarin text/English video/Text Highlights) There was little new or concrete that he offered, with vague promises being laid out and no specific action points presented. For instance, he said: “We will resolutely reform what should and can be reformed, and make no change where there should not and can not be any reform.” And while that’s led to some disappointment, I’d argue this is what should have been expected. This speech was not about a new direction or nitty gritties of policy. This was about framing the narrative of China’s transformation with the Party at its heart and rallying the domestic audience, i.e., this was a political speech and not a policy speech.

So, Xi talked about events leading up to the Third Plenary Session of the Eleventh Central Committee and was critical about the “mistakes” of the Cultural Revolution. He listed the party’s founding, the establishment of the PRC and the reform and opening up policy as the three major events that have taken place in China since the 1919 May 4 movement. Also, for those following the debate over downplaying Deng Xiaoping’s legacy, the speech, as per this count by NYT’s Chris Buckley, did mention him on seven occasions. Deng, as per this China Media Project assessment, also received significant number of mentions in the People’s Daily’s mega spread on reform and opening up – although Xi eclipsed all other leaders by a mile.

Back to the speech, the emphasis was on the Party’s important role in China and the kind of transformation that the country has experienced over the past 40 years. The message, as Reuters reports, was that China would stay on the reform and opening course but on its own terms. Bloomberg and others viewed this as Xi’s defiance, when he stated that “no one is in the position to dictate to the Chinese people what should and should not be done.” But then, as Marco Polo’s Evan Feigenbaum pointed out, this isn’t really different from Hu Jintao’s speech 10 years ago. Lastly, on foreign policy, Xi spoke about China approaching the center of the world stage and not seeking hegemony, i.e., the standard fare.

Also Read: Reading Xi’s Reform Anniversary Speech

A few days later, a statement was put out after deliberations at the Central Economic Work Conference. This is very things get interesting. The statement said that China had “effectively coped with profound changes in the external environment this year” and had “properly dealt with the Sino-U.S. economic and trade frictions.” But then it added, “Over the past year, the leadership has gained a deeper understanding about economic work under new circumstances.” Also it acknowledged that “we must see that there are new and worrisome developments amid generally steady economic operation, the external environment is complicated and severe, and the economy faces downward pressure.” The tone in this regard is undoubtedly much more downbeat than the 2017 CEWC statement. However, a quick reading of last year’s and the 2018 statement suggest that policy priorities remain the same.

The 2018 statement reaffirms that “China is still and will be in an important period of strategic opportunity for development for a long time to come.” This Xinhua report provides a quick list of the economic priorities going forward, from tackling zombie enterprises, supply-side reform to tax cuts, promoting high-quality manufacturing, rural revitalization and so on.

ING’s Iris Pang argues that the Central Economic Work Conference has “laid the framework for the economic growth plan for 2019 emphasising fiscal stimulus via local governments and monetary policy through direct financing to private enterprises and SMEs…” This Bloomberg report on the CEWC statement assesses that it “signals that China is ratcheting up the limited, targeted stimulus approach used during 2018, though still stopping short of the all-out support that would pressure the currency and hobble efforts to contain debt.” Another good resource for a deeper dive in the CEWC is this Trivium China tip sheet.

The last interesting bit on the economy is the report of a new draft foreign investment law being considered by the NPC Standing Committee. Xinhua reports that the law covers “necessary mechanisms on the facilitation, protection and management of foreign investment are written into the draft law, such as the pre-establishment national treatment and negative list management, equal supportive policies, and equal participation in government procurement.” It adds that “Once adopted, the unified law will replace three existing laws, namely the laws on Chinese-foreign equity joint ventures, non-equity joint ventures (or contractual joint ventures) and wholly foreign-owned enterprises.” The question is: Would the US view this as a trade war concession?

  1. Duets and Duels

To begin with, the Hand-in-Hand joint drills between India and China concluded this week. CGTN live-streamed the concluding ceremony, with soldiers talking about their shared experiences. All this as the foreign ministers of the two countries chaired the first-ever meeting of India-China High-Level Mechanism on People-to-People Exchanges over the weekend. Prior to the festivities, foreign minister Wang Yi’s piece in the Hindustan Times called for the two countries to “join each other in a duet, not a duel.” It’s an interesting piece in that it makes clear that Beijing’s altered approach has linkages to changes in US policy. Second, it also states that China remains committed to BRI and working with neighbours. Third, China stands firmly for the existing international order but it also wants to shape global governance.

The two foreign ministers met for two hours, with Swaraj saying that only two topics were discussed — cultural ties and people-to-people relationship. Following the meeting, 10 pillars of cooperation were identified. These include cultural exchange, cooperation in films and television, cooperation in museum administration, cooperation sports, exchanges between youths, cooperation on tourism, exchanges between states and cities, cooperation in traditional medicine, cooperation in yoga and cooperation in education. Xinhua reports that President Xi sent a message to the delegates, stating that “China-India relations are actively moving forward, with mutual political trust deepening, practical cooperation accelerating…” During the event, Wang emphasized that this new mechanism “will help in consolidating the public opinion foundation for the development of bilateral ties.” As part of this cooperation, one proposal that’s been reported is of expanding the number of Confucius Institutes in India. Other areas that were discussed include media cooperation and linkages between think tanks.

While the mood at the event was rather positive, there exist concerns within the Indian strategic community. For instance, Dr Srikanth Kondapalli argues that by promoting “soft” issues such as people-to-people ties, the Chinese side is trying to reduce the influence of “hard” issues such as the border dispute and trade deficit with India. Meanwhile, the Parliamentary panel’s report on the Doklam standoff was tabled this week and it’s once again stirred a media conversation. You can access my summary of the panel’s report in Section 4 here. One of the points that the report discusses is border infrastructure. In this context, data shared by the Telecom Ministry show that there are no mobile towers installed within 10 kilometer distance of the India-China border.

Sticking to telecommunications, the Indian government is reportedly planning to hold inter-ministerial consultations on security concerns around Huawei in the context of its participation in 5G trials. The home ministry, department of industrial policy and promotion, department of commerce, IT ministry and department of telecommunications are likely to be taking this call. The Economic Times reports that India is unlikely to ban Huawei from selling 5G equipment in the country. Huawei’s India chief, meanwhile, says that the company is ready to put up its “source code” for screening and testing to allay security concerns.

Also Read:

  1. Snooping & ‘New Progress’

China’s Ministry of Commerce says that Beijing and Washington have made “new progress” after a “deep exchange of views” on trade imbalances and the protection of intellectual property. This progress is reportedly the product of two vice-ministerial level conversations over the past week. There’s still no clarity on when delegation-level visits are expected. In the meantime, other frictions have surfaced.

The US, UK, Australia and New Zealand hit out at China over what they said was a global campaign of cyber-enabled commercial intellectual property theft. This came as two Chinese nationals, Zhu Hua and Zhang Jianguo, were indicted for hacking attacks against the U.S. Navy, the space agency NASA and the Energy Department and dozens of companies. The US says that the two men are linked to China’s Ministry of State Security. Reports state that they used a technique known as spear phishing, in which emails are sent pretending to be from legitimate addresses to targets with attached documents and files that would secretly install malware if opened, according to the U.S. That gives hackers access to the subject’s computer and allows them to steal usernames and passwords, files and other information.

Discussing the cases, FBI Director Chris Wray said, “no country poses a broader, more severe long-term threat to our nation’s economy and cyber infrastructure than China. China’s goal, simply put, is to replace the U.S. as the world’s leading superpower, and they’re using illegal methods to get there.” Apart from the Five Eyes countries, Washington Post reports that Denmark, Sweden, Finland, Japan, Norway, the Netherlands, Germany and Poland have all come out to criticize Beijing’s behavior in this context. Another important point to note is this: Bloomberg reports that Treasury Secretary Steven Mnuchin “blocked the imposition of tougher financial sanctions against people and companies linked to the new Chinese hacking case.” That’s largely in the hope of keeping the trade talks on track.

In response to the indictments, the Chinese foreign ministry denied all the charges, terming them “slanderous smears” stemming from “ulterior motives.” The Global Times’ editorial termed the charges “hysterical,” “whimsical” and an indication that “the US attack on China has become more comprehensive.”

One of the aspects of the broad conversation on espionage is the role of Huawei. This SMH piece on the Five Eyes’ campaign against Huawei is a must read. It puts into context the anger in China with regard to Huawei CFO Meng Wanzhou’s arrest. Soon after, China detained two Canadian citizens. And while Canadiana Foreign Affairs Minister Chrystia Freeland says that Chinese officials have not made a link between Meng’s arrest and the detention of the Canadians, it’s rather obvious what’s going on. This week the US, EU and Canada jointly demanded the release of Canadians detained in China. Meng’s now out on bail, but that’s not the kind of due process that’s available to the Canadian detainees. ICG says that Michael Kovrig, a former diplomat who is one of the two Canadian detainees, is being denied legal access, although the Canadian ambassador was allowed to visit him once. In the meantime, a third Canadian citizen was detained and sentenced to administrative punishment for illegal employment this week.

Finally, Trump has signed into law the the Reciprocal Access to Tibet Act. Under this law, the State Department is required to punish Chinese officials who bar American officials, journalists and other citizens from going freely to Tibetan areas. Unsurprisingly, the Chinese reacted angrily, threatening “strong countermeasures.” With the Taiwan Travel Act, this Tibet legislation and increasing US-led international criticism on Xinjiang, this year has seen a real tightening of the screws on multiple fronts.

Also Read:

  1. Af-Pak Talks; CPEC

The 2nd China-Afghanistan-Pakistan Foreign Ministers’ Dialogue ended in Kabul recently. Chinese media reports say that the three sides signed an MoU on Counter-Terrorism, discussed cooperation under BRI and called on the Afghan Taliban to join the peace process at an early date. Ma Zhaoxu repeated this call at the UN recently, asking the international community to do more, by encouraging the Taliban to return to the negotiating table.

Writing for a Chinese state outlet, Daniel Hyatt describes the trilateral foreign ministers’ meeting as follows: a “dialogue initiated by China, Pakistan and Afghanistan makes it clear that regional players are serious about ending a conflict that can be termed, at best, a multi-billion-dollar stalemate.”

Moving on to CPEC, there were a few very interesting reports over the past few days. The first is this NYT piece, which talks about “a secret proposal to expand Pakistan’s building of Chinese military jets, weaponry and other hardware” and “deepen the cooperation between China and Pakistan in space.” There are two points that are worth noting in this piece. First, while Sino-Pak military cooperation isn’t new, what’s interesting is that this proposal is reportedly explicitly stated to be under BRI. That could have major implications. Second, the role of the Beidou satellite navigation system.

“Pakistan is the only other country that has been granted access to the system’s military service, allowing more precise guidance for missiles, ships and aircraft. The cooperation is meant to be a blueprint for Beidou’s expansion to other Belt and Road nations, however, ostensibly ending its clients’ reliance on the American military-run GPS network that Chinese officials fear is monitored and manipulated by the United States,” the piece argues. The Chinese foreign ministry says that the report “is not true.”

The second noteworthy report this week is regarding the CPEC JCC meeting in Beijing. Two outcomes from the meeting were an MoU on Industrial Cooperation and a cooperation framework on socio-economic development. The MoU involves working together in areas like textiles, petrochemicals, iron and steel, and mines and minerals. Also, Minister for Planning, Development and Reform Makhdoom Khusro Bakhtiar says that in the next phase of CPEC, the two sides will cooperate in the maritime sector, port development and the automobile sector. However, there’s still no clarity on reports of China possibly giving $2 billion to boost Pakistan’s reserves. The same report had argued that the UAE would be extending $6 billion in reserves support and deferred oil payments. One part of the UAE’s support appears to be confirmed now by the country’s state news agency WAM.

Also Read:

  1. The EU Paper

The Chinese government issued a policy paper on the EU this week. This is the third such paper on the EU, after the 2003 and 2014 documents. The paper outlines a broad Chinese vision for the relationship with the EU. It says that “China and the EU have no fundamental strategic conflicts but share much more common ground than differences.”  And then adds that, “China and the EU need to stand firmly against unilateralism and protectionism, push for a more open, inclusive and balanced economic globalization beneficial to all, and support the international community in formulating and improving fair, equitable and just international rules and standards…” Here’s a snapshot of some specific aspects :

    • On BRI: It describes BRI as an “important global public good from China,” with China welcoming “the active participation of the EU and other European countries.”
    • On Taiwan: “The EU should explicitly oppose ‘Taiwan independence’ in any form, support China’s peaceful reunification, and handle Taiwan-related issues with prudence.”
    • On HK, Tibet & Xinjiang: With regard to HK and Macau, the paper says these are “part of China’s internal affairs and should not be interfered in by the EU side.” “The EU should not allow leaders of the Dalai group to visit the EU or its member states in any capacity or under any name to carry out separatist activities, not arrange any form of contact with officials from the EU and its member states, and not support or facilitate any anti-China separatist activities for ‘Tibet independence’. It is also imperative that the EU side not support or facilitate the East Turkestan Islamic Movement and any other activity of anti-China separatism, violent terrorism and religious extremism.”
    • On political, security and defense cooperation: The paper covers a range of areas from UN peacekeeping, counter-terrorism to policing, cybersecurity and so on. Most important is the demand that: “The EU and its member states should lift its arms embargo on China at an early date.”
    • On economic issues: The paper has a full section covering trade, investment connectivity and finance. Some of the notable points in that bit are that China wants the two sides to finalize a bilateral investment treaty and launch a joint feasibility study on China-EU Free Trade Area. The EU, it says, “should ease its high-tech export control on China, strictly fulfill its WTO obligations…” In addition, it must “maintain two-way openness and facilitate mutual investment.”
    • Innovation and People: The last two sections of the paper focus on cooperation in science and technology and people to people linkages. These highlight a range of sectors where the two sides can cooperation.

 

 

 

Despite the optimistic tone and wish-list put forward in the paper, there are growing economic frictions between China and the EU. For instance, the EU is doubling down against China with regard to forced technology transfers. Reuters reports that the “new complaint focuses on Chinese laws that regulate the approval of investments for electric vehicles and biotechnology and the approval of joint ventures across sectors.” The EU is also reportedly preparing to impose anti-dumping and anti-subsidy duties against Chinese e-bikes. In addition, a potential agreement on EU-wide foreign screening mechanism has led to quite some consternation in the Chinese press. “EU foreign investment screening plan shows double standards, harms own interests,” reports Global Times. “EU plan won’t stop Chinese investment, say a range of experts in the China Daily.

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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.