China in Quotes
“Chinese firms take a blow but then adjust business strategy and are able to move in another direction,”
Derek Scissors, Former Commissioner on the U.S.-China Economic and Security Review Commission.
De/Cypher Data Dive📈
Leading Chinese battery manufacturer CATL has become the top recipient of state subsidies among all mainland listed companies. The company did not disclose what it used the money for in its latest annual report. State oil companies had long dominated the list, but the most recent version places more of a focus on electric vehicles (EVs) and other high-priority tech areas like semiconductors and solar panels.
Quick China: Unmissable Stories 📜
Dalai Lama reincarnation at heart of Tibetan government-in-exile influence campaign in Europe
The head of the Tibetan government-in-exile undertook a tour of Europe last month to try to convince officials to align themselves with the United States and protect the reincarnation of the Dalai Lama from foreign influence. (IO)
China – Israel Honeymoon Over?
While ties between Israel and China have blossomed over the past two decades, they will face new challenges after the war in Gaza, including deteriorating public perceptions, a deepening US-China rivalry and heightened national security concerns, according to an Israeli think tank expert.
“The purpose for Israel remains to have friendly and fruitful relations with China,” said Assaf Orion, director of the Diane and Guilford Glazer Israel-China Policy Centre at the Tel Aviv-based Institute for National Security Studies (INSS).
“At the same time, these relations are managed under considerations of national security, like China does itself,” he said, adding that Israel’s national security included “taking into account the US’ concerns”. (SCMP)
Ministry of State Security (MSS), China’s Top Agency Wants Officials to Not Save Sensitive Data on Cloud
China’s top spy agency has warned government officials against storing classified information on cloud services, saying the data could easily be compromised by foreign spies. Cloud data has become “a major focus of foreign spy agencies”, the Ministry of State Security said on its official WeChat account on Wednesday morning. The ministry warned that “they [foreign spies] are trying to steal our sensitive information and classified data through various means, such as cyberattacks and inserting Trojan horse viruses, posing a serious threat to personal privacy and national security”. It cited several cases of government officials using cloud storage to store classified information, adding that they had “weak security awareness” and had been punished. But it did not say whether the cases involved espionage or what punishment the officials received. To prevent data leaks, the ministry urged officials and employees of government departments “involved in classified information” to “strictly prevent the storage, processing, transmission and discussion of confidential and sensitive information on the internet, mobile phones and cloud storage”. It advised officials to disable all sharing if they must use a cloud drive and to encrypt documents, change passwords frequently and turn off the automatic backup option. (SCMP)
China’s Services PMI at 10-Month High
Activity in China’s services sector grew at the fastest pace in 10 months in May, as employment expanded for the first time in four months, according to a Caixin-sponsored survey published Wednesday. The Caixin China General Services Business Activity Index, which provides an independent snapshot of operating conditions in industries such as retail and tourism, increased 1.5 points from April to 54 last month. A reading above 50 indicates an expansion in activity, while a number below signals a contraction. (Caixin)
UAE’s parastatal mining fund IRH goes on hiring spree to compete with China in strategic minerals
Through IHC’s mining subsidiary, Abu Dhabi’s national security adviser Tahnoon bin Zayed is assembling a team of trading and geology experts to conquer the metals sector, part of a race to secure the raw materials required for the transition to clean energy. (IO)
Chinese Companies Are Rebranding in the US
In December, a new company registered in Michigan: American Lidar. Its planned home would be an easy drive from the big three U.S. automakers. The company behind American Lidar, and not mentioned in its registration, is China-based lidar maker Hesai Group, which the U.S. has labeled a security concern. It is a familiar playbook: A company facing regulatory or reputational problems sets up a subsidiary or affiliate with a different name. Chinese firms trying to buffer themselves from Washington’s anti-China policies are rebranding and creating U.S.-domiciled businesses to sell their wares as the Biden administration expands the government entity lists that restrict Chinese companies’ business dealings in the U.S., say policymakers and national-security experts. The blacklisting has also created opportunities for American entrepreneurs who want to work with Chinese companies that are popular with U.S. consumers. (WSJ)
Beyond The Great Wall 🧱
Exploring News About China in Depth
Economy
China’s Exports Surge More Than Expected in Boost for Economy
China’s exports surged 7.6% in May compared to the previous year, surpassing expectations and providing a boost to the country’s economy. This increase, along with a 1.8% rise in imports, resulted in a trade surplus of $82.6 billion for the month. Beijing aims to bolster overseas sales to counteract sluggish domestic consumer spending, particularly amid a real estate downturn. While global demand appears to be strengthening, China’s high-tech firms face challenges due to trade barriers erected by advanced economies. Despite strong exports of lower-value goods, concerns remain, as indicated by a contraction in new export orders in China’s latest manufacturing PMI. Read more: Bloomberg
China to boost rail links to Xinjiang and Tibet, with eye on supply chains and energy security
China plans to enhance its railway links to Xinjiang and Tibet to support national strategies, secure supply chains, and improve energy security. By 2025, the country’s rail network will reach 165,000 km, including 50,000 km of high-speed lines, and is expected to expand further by 2035. This infrastructure development aims to boost connectivity and integration of these strategic western regions, which are crucial for European trade and border security. Read more: SCMP
China’s Guangzhou to invest $1.4bn in flying car infrastructure
The Chinese city of Guangzhou is planning to invest more than 10 billion yuan ($1.4 billion) by 2027 in the development of infrastructure for the “low-altitude economy”. The “low-altitude economy” refers to services that operate in airspace below regular commercial aviation, including both piloted and autonomous civilian aircraft that fly at altitudes up to 3,000 meters. The investment will be used to build infrastructure for flying vehicles, such as airborne taxis, and will include the construction of over 100 takeoff and landing points. Read more: Nikkei
Krugman Says China Is ‘Bizarrely Unwilling’ to Boost Demand
Nobel laureate Paul Krugman criticizes China’s reluctance to boost consumer demand through government spending, labeling the approach as “not sustainable.” He warns that China’s overreliance on production and exports poses global risks. Krugman also addresses Japan’s economic concerns, suggesting that a weaker yen should boost demand for Japanese goods, questioning the panic over the currency’s depreciation. He highlights Japan’s persistent economic challenges, including demographic issues and lack of growth, while expressing skepticism about sustainable inflationary pressures despite recent policy changes. Read more: Bloomberg
Internal Politics 🏛️
New Chinese defence minister says Taiwan separatists will be ‘crushed to pieces’ and hits out at Philippines at international forum
China’s new defense minister, Dong Jun, took a tough line on Taiwan and criticized the Philippines during his debut at the Shangri-La Dialogue, an international security forum in Singapore. He reiterated Beijing’s warnings against Taiwanese independence and international support for it, stating that anyone who tries to split Taiwan from China will be “crushed to pieces and invite their own destruction”. Dong emphasized Beijing’s commitment to peaceful reunification with Taiwan but blamed Taiwan separatists and external forces for undermining this prospect. Read more: SCMP
Hong Kong affairs veteran resigns from China’s top advisory body, ending political career
Zhang Xiaoming, the former top official on Hong Kong and Macau affairs, has resigned from China’s top political advisory body, the CPPCC, effectively ending his political career. Zhang’s resignation follows his removal as deputy secretary general of the CPPCC three months ago. His tenure was overshadowed by the anti-government protests in Hong Kong in 2019, which erupted over an extradition bill. The CPPCC Standing Committee also approved the resignation of Wang Tian from BBK Group and revoked the membership of former sports chief Gou Zhongwen and former justice minister Tang Yijun due to corruption allegations. Read more: SCMP
China’s expanding travel curbs are cutting off more state workers from the rest of the world
China’s expanding travel restrictions are increasingly isolating state workers from the rest of the world, hindering their ability to travel abroad for leisure or personal reasons. These restrictions, which have tightened over the past decade, are aimed at reducing corruption and espionage risks, preventing officials from fleeing the country, and safeguarding state secrets. The measures involve complex approval procedures, including the mandatory lock-up of passports and stringent reporting requirements for proposed trips. Even trips to Hong Kong and Macao are subject to similar restrictions. Senior officials and those with access to confidential information face even tighter constraints, with some restrictions extending even after retirement. Read more: CNA
China And The World🌐
China denies fuelling Russia-Ukraine war tensions, says it supports peace
China has refuted Ukrainian President Volodymyr Zelenskyy’s accusations of attempting to undermine the upcoming peace summit in Switzerland, asserting its support for peace in the Russia-Ukraine conflict. China’s Foreign Ministry spokesperson Mao Ning stated that China has always promoted peace and has never exacerbated tensions. Despite China’s call for a peace conference involving all parties, including Russia, it will not participate in the summit scheduled for June 15-16. China, maintaining neutrality, has seen increased trade with Russia, although it denies directly arming Moscow. Read more: Al Jazeera
China taps ‘wolf warrior’ diplomat as Cambodia ambassador
China has appointed Wang Wenbin, a former Foreign Ministry spokesperson known for his assertive rhetoric, as the next ambassador to Cambodia, aiming to strengthen economic and military ties between the two countries. Wang’s appointment signifies China’s deepening engagement with Cambodia, evidenced by infrastructure projects under the Belt and Road Initiative and joint military exercises. Read more: Nikkei
China reaches deal on Central Asian railway project linking it with Kyrgyzstan, Uzbekistan
China has reached a significant agreement for a railway project linking it with Kyrgyzstan and Uzbekistan in Central Asia, in its connectivity ambitions with Eurasian countries. President Xi Jinping hailed the China-Kyrgyzstan-Uzbekistan Railway as a strategic endeavor under the Belt and Road Initiative, signaling firm determination for regional cooperation and development. The project, with an estimated cost of $8 billion, will provide a faster and cheaper alternative to current China-Europe land routes, potentially reducing freight journeys by 559 miles. Read more: SCMP
China says MI6 recruited state workers to spy for UK
China has accused Britain’s Secret Intelligence Service (MI6) of recruiting a couple who worked for the central government to spy for the UK. According to the Ministry of State Security, MI6 operatives convinced a man named Wang, who held a “core confidential role” in the central state apparatus, to defect along with his wife, Zhou. The couple was allegedly cultivated by British spies after Wang began studying in the UK in 2015. They were offered well-paid consulting services that involved gathering intelligence on the internal workings of central state agencies. MI6 personnel later revealed their identities to Wang and directed him to return to China to collect intelligence, convincing him to coerce Zhou into doing the same. Read more: CNA
Turkey sees Brics’ economic potential as it waits for full EU membership
Turkish Foreign Minister Hakan Fidan has expressed Turkey’s interest in becoming a member of the China-backed BRICS (Brazil, Russia, India, China, South Africa) grouping as a potential alternative to the European Union (EU) for boosting its economic prospects. Fidan stated that Turkey is exploring new opportunities for cooperation with several partners in different platforms, including BRICS. Fidan, during the visit to China, also conveyed Turkey’s concerns over the treatment of Uyghurs, emphasizing the importance of addressing these issues for the benefit of all parties involved. Read more: SCMP , AP
China maintains stance on disputed Gulf islands despite Iran’s anger
China maintains its stance on three disputed islands in the Persian Gulf, despite Iran’s anger. The islands in question are the Greater Tunb, the Lesser Tunb, and Abu Musa, which are claimed by both the UAE and Iran. China expressed support for the UAE’s efforts to reach a peaceful solution to the issue, which has led to Iran summoning the Chinese ambassador to protest China’s position. However, China has reiterated its call for Iran and the UAE to resolve their differences through dialogue and consultation, maintaining its consistent stance on the matter. Read more: CNA
A Pacific Island With Ties to Taiwan Was Hacked. Was It Political?
Palau, a small Pacific Island nation that’s one of the few countries in the world that recognizes Taiwan as a sovereign country, says it is under cyberattack by China just before finalizing a U.S. aid agreement, leading to the leak of over 20,000 documents, including sensitive U.S. military information. While Palau’s leaders accuse China of orchestrating the attack to disrupt its ties with Taiwan, China denies involvement, and the ransomware group DragonForce claims responsibility. Read more: The New York Times
Tech🧑💻 in China
China’s lunar probe on way back to Earth from far side of the moon
China’s uncrewed Chang’e-6 lunar probe is returning to Earth with the first samples from the moon’s far side, having collected rock and soil from the South Pole-Aitken basin. This marks a step forward for China’s space program, demonstrating their growing capability. The scientific community anticipates that these samples will provide valuable insights into the moon’s formation and evolution, although the mission still faces critical stages, including docking and safe re-entry. Read more: The Guardian
Stanford Students Apologize After Being Accused of Copying Chinese AI Model
Stanford University’s artificial intelligence team has apologized for copying an open-source large language model developed by Tsinghua University and ModelBest in China. Two team members issued a public apology after Chinese internet users and ModelBest identified that their project, Llama3V, replicated the capabilities and errors of the Chinese model MiniCPM. Read more: Caixin Global
Chinese drone scales new heights in Mount Everest supply delivery, waste removal missions
A Chinese tech company, DJI, has successfully conducted the world’s first drone delivery tests on Mount Everest, transporting supplies and removing waste at altitudes above 6,000 meters. The FlyCart 30 drone completed a test in April, transporting 15kg of supplies from Everest’s South Base Camp to Camp 1, showcasing potential benefits for mountaineering logistics and safety. Read more: SCMP
Navigating the Thucydides Trap: Graham Allison Assesses Risks in US-China Relations
Summarized By Farheen, Policy and Trust Analyst
In his recent trip to China, Graham Allison engaged in extensive discussions with Chinese President Xi Jinping and other foreign policy leaders. Here are the key insights from his conversations:
- Xi Jinping’s Leadership: The trip to China revealed that President Xi Jinping remains firmly in control, displaying confidence and ambition in steering China towards greatness. Despite rumors suggesting otherwise, there was no evidence of insecurity or distress.
- Significance of Xi-Biden Summit: The private and candid discussions between Xi Jinping and President Joe Biden during the summit in San Francisco marked a significant shift in US-China relations. This meeting laid a stable foundation for a more constructive relationship, evident in various trend lines veering towards cooperation.
- Framework for Future Relations: Both leaders embraced frameworks of fierce competition, continuous communication, and necessary cooperation. This approach aims to manage the rivalry between the two nations while preventing escalation into conflict.
- Challenges in Managing Expectations: The differing political systems in the US and China contribute to challenges in managing expectations and executing agreements. The US’ checks and balances system contrasts with China’s top-down approach, impacting the implementation of agreements.
- China-Russia Alliance: China’s informal alliance with Russia adds complexity to the geopolitical landscape. The alignment, driven by mutual opposition to the US, presents challenges for American defense strategies, requiring a reassessment of global priorities.
- Competition for Resources: The competition for resources, particularly in advanced technologies like semiconductors, mirrors historical rivalries. However, efforts to maintain technological superiority may not necessarily lead to conflict, as the globalized economy offers alternatives and loopholes.
Graham Allison is the Douglas Dillon Professor of Government at Harvard University. He was the founding dean of Harvard’s John F. Kennedy School of Government, served as an assistant secretary of defence in the Clinton administration, and is author of the 2017 book Destined for War: Can America and China Escape Thucydides’s Trap? This interview first appeared in SCMP Plus.
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The PS-2 Gas Pipeline: Russia & China
Written By Priyanka Garodia, Geopolitical Research Analyst – South Asia
Russia’s energy strategy since 2014 has seen a clear eastward pivot, where its focus on securing energy partners in the East has emerged as a priority. Russia has sought to deepen its ties with China along a similar line, seeking to engage in a more strategic partnership. The Russian invasion of Ukraine in 2022 has led to a dramatic decrease in oil exports to Europe, resulting in a crisis in Russia. As a result, Russia is now much more dependent on China, particularly when it comes to oil exports. Gazprom, the official Russian oil exporting entity, has incurred heavily losses due to oil exports falling by 80%, exacerbated by the lack of infrastructure that would allow Russia to tap into other markets.
To ease the load of Gazprom, Russia entered into an agreement with China to trade in oil. The Eastern Gas Programme has seen the successful installation of one gas pipeline already but the second gas pipeline remains shrouded in non-commitment by the Chinese. The Power of Serbia 2 (PS-2), the second gas pipeline under the Eastern Gas Programme connecting Western Russia to China, has been stalled due to financial issues. The gas pipeline deal has severe consequences for Russia related to not simply economic questions but also for its geopolitical implications.
If China agrees to the PS-2 it would make it an undisputed ally of Russia, a development that Russia could use to increase its regional clout and international standing. Economically, the deal would allow Russia a certain sense of economic security, given its increasing pariah state in the international order, after the Russia-Ukraine War. China’s hesitance to enter into the deal stems form its need to fetch a more lucrative offer. However, if a steady decline in US-China relations take place, Beijing would want Moscow on its side, making the PS-2 an important strategic partnership between the two countries. Xi Jinping has much to mull over.
News From Asia
Friday
- Israeli Prime Minister Benjamin Netanyahu will address the US Congress on July 24, 2024, following an invitation from leaders of both the Republican and Democratic parties. Read more: Arab News
- Japan, the US, and South Korea conducted their first joint coast guard drill off the coast of Maizuru, Japan. This exercise aimed to strengthen maritime cooperation in response to China’s increased territorial assertiveness. Read more: NHK
- South Korean activists sent ten balloons loaded with anti-Kim Jong Un leaflets, K-pop music, and dollar bills into North Korea. This action follows North Korea’s retaliation with trash-filled balloons, escalating propaganda exchanges. Read more: CNA
- Hanwha Aerospace, South Korea’s leading defense contractor, has seen a significant increase in demand for its conventional ground weapons amid the ongoing war in Ukraine. Read more: Bloomberg
Thursday
- Reconciliation talks between Palestinian factions Hamas and Fatah are scheduled to take place in China in mid-June 2024, following previous discussions in China and Russia. Read more: TBS
- Myanmar’s military government has denied allegations by the Arakan Army that its troops killed 76 villagers in Byine Phyu, Rakhine. Read more: AP
- Indonesia’s Mount Ibu erupted three times on June 6, Thursday spewing red lava and clouds of grey ash. Read more: AP
- Malaysian customs denied entry to a container owned by Israeli shipping giant Zim, discovered during a routine inspection at the Padang Besar border checkpoint. Read more: SCMP
Wednesday
- A recent study by 57 scientists has found that Earth is warming at a record rate, primarily due to human activities, but there’s no significant evidence of climate change acceleration beyond fossil fuel burning. Read more: Arab News
- Emirati leader Sheikh Mohammed bin Zayed Al Nahyan met with Sirajuddin Haqqani, a Taliban official with a $10 million US bounty for his involvement in attacks, including one that killed an American citizen. Read more: AP
- In Indonesia’s Aceh province, women-led ranger teams patrol forests to combat deforestation and poaching, using friendly engagement to encourage sustainable practices among villagers. Read more: CNA
- Malaysian Prime Minister Anwar Ibrahim is facing potential by-elections in several Malay-majority constituencies due to six Parti Pribumi Bersatu Malaysia (Bersatu) MPs rebelling against party orders to retract their support for him. Read more: Strait Times
Tuesday
- Indonesian President Joko Widodo has reassured that the development of the new capital, Nusantara, remains on track despite the recent resignations of the project’s head and deputy head. Read more: CNA
- Myanmar’s military junta has arrested 35 people, including gold and foreign exchange traders, as well as agents selling foreign real estate, to stabilize the rapidly depreciating kyat. Read more: Strait Times
- South Korean President Yoon Suk Yeol announced plans to expand development aid to Africa to $10 billion by 2030 and provide $14 billion in export financing to encourage investment. Read more: AP
- Nagasaki has decided to delay inviting the Israeli ambassador to its annual peace ceremony on August 9, citing the ongoing humanitarian crisis in Gaza and concerns about potential protests disrupting the event. Read more: Arab News
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