Beyond Borders – Securing Defence and Investment
Covering Chinese chatters (discourses, narratives, policies and rhetoric) on external events and actors, military and security issues, economy and technology, and bilateral relations with India.
Guarding the Great Wall: External Military Engagements
By Anushka Saxena
In addition to their internal mandates, the Chinese People’s Liberation Army (PLA) and Ministry of National Defense (MoND) focus extensively on external engagements to both assess the military aspirations of key partners and undertaken interoperability endeavours under the umbrella of the Global Security Initiative (GSI).
These past few weeks have seen the two pillars of China’s security apparatus undertake multiple such initiatives. In this edition, I’ll do a very brief breakdown for some of these.
To begin with, between February 27 and today, and going up to March 1, a delegation from MoND is currently in Kazakhstan for defense exchanges and cooperation among the Shanghai Cooperation Organization (SCO) member states for 2024. For now, the agenda items of discussion are not yet public, and neither are any conclusions vis-a-vis joint commitments to regional security.
On a broader level, the PLA Navy’s escort missions in the Gulf of Aden are in full swing. In fact, in early December 2023, the PLAN completed its 1600th escort mission under the 45th escort taskforce. January 2024 onwards, the 46th escort taskforce is conducting routine escort operations in the Gulf of Aden and the waters off Somalia. And even though the preparation of the mission required the 46th fleet to carry out “targeted training for scenarios such as the rescue of hijacked commercial ships, the combating of terrorists and pirates, and the underway replenishment,” Senior Colonel Zhang Xiaogang, the deputy director of the MoND Information Bureau, has contended in a recent press conference that these routine escort operations are “unrelated to the current regional situation.”
This is an important contention in the context of China’s overall policy response to the attacks mounted by Houthis in the Red Sea and Gulf of Aden region. Not only has China refrained from participating in the US-led coalition of more than 20 countries that are launching retaliatory strikes against Houthis and shooting down their drones, it has also engaged in escort missions only concerned with keeping maritime commercial passageways unblocked. China’s reluctance to engage with the issue geopolitically is also linked to the risk of having to put pressure on Iran to rein in the Houthis. So far, China has expressed no willingness to do so, despite also being asked for it point blank by the UK State Secretary for Foreign Affairs, David Cameron, during his bilateral with Wang Yi at the recently concluded 2024 Munich Security Conference.
Finally, on February 19th, the 21st round of corps-commander level talks took place between India and China along the LAC, on the Chinese side of the Moldo/Chushul meeting point. The meeting was usual, with both sides emphasising the “maintenance of peace and tranquility on the border.”
Both sides also had their own demands, that came through the brief and wonted language of their individual press releases. From the Indian perspective, for example, the only way forward for “peace and tranquility” is by “seeking complete disengagement in the remaining areas along the LAC in Eastern Ladakh.” These “remaining areas” can commonsensically be understood as Depsang Bulge and Demchok, where India’s access to key patrolling points has been blocked by the PLA.
The Chinese have argued, however, that India’s above-mentioned contention “is not in line with the facts.” This has been the statement from Senior Colonel Zhang Xiaogang, who has further contended that “the overall situation along the China-India border is stable,” and the demand (or rather, “hope”) he has put forth from China’s end is “that India will work together with China to enhance mutual trust, manage differences appropriately, and jointly maintain peace and tranquility in the border areas.”
Overall, the meeting indeed hasn’t led to a major breakthrough, especially vis-a-vis discussions on the violation of mutual code of conduct treaties between the two sides to govern behaviour along the border.
In this light, I urge our readers to also tune in to the latest episode of Takshashila’s daily public policy podcast, ‘All Things Policy’, where I (Anushka Saxena) quiz Mr. Manoj Joshi (Distinguished Fellow, ORF Delhi) on “The ‘China Angle’ in Indian Foreign Policy.”
In this episode, we discuss it all – India and China on the border, to their evolving relations with the US. We also discuss how the China factor plays out in India’s relations with Russia and its smaller neighbours, especially Pakistan. So do tune in!
Econ Special: China’s FDI Numbers
By Amit Kumar
Recently, China’s State Administration of Foreign Exchange (SAFE) released the Balance of Payment Sheets for the last quarter of 2023 and the whole financial year. Bloomberg was the first to report that annual FDI inflows in China fell to USD 33 billion, the lowest since 1994.
The interesting thing about China’s publication of FDI data is that, unlike many others, it does not release data on gross FDI in the country. The National Bureau of Statistics of China which serves as the central repository of all demographic and economic data, records data on FDI but under a very different head, called “Actual Utilisation of FDI.” As the term suggests, it only records the amount of FDI used in a year, not invested. Given there is a general lag in the utilisation of FDI after investment, the numbers under this head represent mostly the older investments.
The second data set now being quoted everywhere is the one by the SAFE which publishes data on liabilities and assets in its BoP sheet. It is from this sheet that this number is recovered. Also, the figures do not represent gross FDI inflow in China but the net inflows. The net inflow would mean total FDI inflow minus repatriation/exit of FDI. The repatriation or exiting of FDI is separate from FDI outflow which refers to investments by Chinese residents into overseas countries. Exiting or repatriation of FDI on the other hand refers to the selling off of assets and investments by overseas investors in China and exiting the business or market.
Below is a time-series chart representing data on FDI in China over the last three decades.
I have tried here to show the data on FDI in China since 1991 but while data on FDI inflow was available for the period, the same for ‘FDI Actual Utilisation’ was only available since 1998. And the data on the latter for 2023 isn’t yet updated on NBS’s website.
Looking at the data, the situation does look quite concerning as it only attracted USD 33 billion in 2023, a level not seen since 1994. While significant fluctuations in y-o-y figures are usual, a decline of this magnitude is unprecedented.
What is significant is that while narratives around de-risking were becoming stronger over the past few years, the results weren’t necessarily showing up on the investment front. The recent AmCham China Business Climate Survey (that I covered earlier this month in ‘EoC’) also showed an improvement in investment sentiment among foreign businesses.
However, this data is perhaps the first concrete proof that while businesses might be prepared to retain their existing operations and investments in China, they are becoming quite sceptical of making newer investments. And this latest data is bound to have ripple effects and further discourage newer investments in China.
Latest from the Indo-Pacific Studies Team:
In this Op-Ed for FirstPost, IPSP Research Analyst Anushka Saxena discusses Implications of Chinese fishing boats in Taiwan’s ‘prohibited’ waters.