Eye on China (11 March 2023)
Contents : Section A: India-China Relations; Section B: Chinese Domestic Politics; Section C: Economy and Tech; Section D: Foreign Policy Watch; E: Military Developments
Section A: India-China Relations
This section is brought to you by Amit Kumar and Anushka Saxena
This week, there have been no major developments in India-China relations, and so we’d like to draw our readers’ attention to two publications by the staff at the Takshashila Institution’s Indo-Pacific Studies Programme on the India-China Border.
The first is a Takshashila Position Paper on “India-China Border: Tactics, Talks and Transgressions.” Authored by Anushka Saxena and Amit Kumar, this position paper discusses recent developments along the Line of Actual Control, contemporary trends in the India-China border issue, positions of the two sides, the intersection of the LAC issue with economic and multilateral relations, and the way forward.
Some of our Key Judgements are as follows:
Chinese aggression along the Line of Actual Control (LAC) since April 2020, resulting in an ensuing military standoff with India, has fundamentally transformed bilateral relations, by undermining any ‘mutual trust’ built across years of diplomatic effort since the conclusion of the 1993 Border Peace and Tranquility Agreement.
People’s Republic of China’s (PRC’s) objectives behind assertion along the LAC extend beyond mere territorial claims. Using sustained military pressure under a certain threshold, the PRC is seeking to coerce Indian policymakers into strategic acquiescence, as it seeks to craft a unipolar Asian order. Consequently, tensions and volatility along the LAC are likely to persist for the foreseeable future.
New Delhi, therefore, must not view the situation along the LAC within a limited context and must adopt a diverse set of actions to respond to the strategic gambit along the LAC. These include deployments that signal that India is ready for longer and drawn-out tensions along the LAC, the pursuit of asymmetric countermeasures such as electronic and information warfare, development of maritime power, and partnering with countervailing coalitions against China.
Finally, India’s defence spending must account for these requirements. On this front, Delhi must focus much more on capital outlays and combat capability enhancement. A 44 per cent increase in operational spending and a 57 per cent increase in the capital outlay for modernization and infrastructure development in the FY 2022-23 budget point to positive trends in this regard.
Please click the button below to read the PDF version of the Position Paper:
The second is an Occasional Paper authored by Amit Kumar for the Observer Research Foundation, on “China’s Two-Front Conundrum: A Perspective on the India-China Border Situation”.
Some of the key takeaways from the paper are as follows:
China has exploited India’s own insecurity about facing a two-front challenge to ‘outsource’ its own two-front conundrum to the latter.
India’s aggressive investment in border infrastructure upgradation and strategic alignment with the US has led to the resurgence of the two-front threat for China.
Chinese violations along the India-China border have proportionately increased with China’s rising threat perception of a two-front challenge.
Just as in the 1950-60s, China appears to be using the border issue to confront India with a two-front challenge as well as a means of managing its own problems.
China has used ‘limited and controlled confrontation’ backed by protracted stalemate, as a strategy to ensure that the matter is treated seriously by India.
India’s limitations in managing its two-front threat create a compelling case for China to use coercive tactics to exploit Indian vulnerability while it still exists.
The Chinese believe that if enough pressure is applied, the burden of maintaining peace along the border can be placed on India’s shoulders, absolving it of responsibility.
China’s violation of the LAC is also an opportunity for India to dictate a ‘new normal’. Therefore, India must convey that the two front is as much a problem for China as it is to India and thus the burden should equally rest with China.
Please click the button below to read the PDF version of the Occasional Paper:
Section B: Chinese Domestic Politics
This section is brought to you by Anushka Saxena
This week, the big news we will cover is the ‘Two Sessions’ of the Chinese government that took place between March 5 and March 13.
Before we begin, for interested readers, we’d like to share a Podcast we published on the ‘Two Sessions’, which discusses in detail a backdrop of what this entails, reports discussed, speeches made, and implications. Do listen for a holistic backgrounder of the big events:
Spotify:
YouTube:
The annual meetings of the National People’s Congress (NPC), China’s legislature, and its top political advisory body, the Chinese People’s Political Consultative Conference (CPPCC), are collectively known as the “two sessions” (lianghuai).
For interested readers, the NPC Observer has created perhaps the most comprehensive information set regarding events and insights pertaining to the Two Sessions.
Lasting only eight and a half days, it is the shortest inaugural session of an NPC in at least forty years. NPC sessions in the last three years were each shortened to seven days (from typically ten) due to Covid-control measures. This year’s session is the first one held since the zero-Covid policy ended last December, but the meeting schedule remained compressed.
The 2023 session’s agenda contains the following nine items:
Deliberate the Government Work Report;
Review a report on the implementation of the 2022 National Economic and Social Development Plan (“Development Plan”) and on the draft 2023 Development Plan;
Review a report on the execution of the 2022 Central and Local Budgets (“Budgets”) and on the draft 2023 Budgets;
Deliberate a draft amendment to the Legislation Law [立法法];
Deliberate the work report of the NPC Standing Committee (NPCSC);
Deliberate the work report of the Supreme People’s Court (SPC);
Deliberate the work report of the Supreme People’s Procuratorate (SPP);
Deliberate a State Council Institutional Reform Plan (“Reorganization Plan”) [国务院机构改革方案]; and
Elect and appoint constituent members of state institutions.
The primary appointed members of the State Institutions include the President of the government, which is Xi Jinping; the Premier of the State Council, Li Qiang; Vice-Premiers; Vice-Chairpersons and four members of the Central Military Commission'; Chairperson of the State Supervision Commission, Liu Jinguo; President of the Supreme People’s Court, Zhang Jun; Procurator-general of the Supreme People’s Procuratorate, Ying Yong; Chairman of the 14th NPC Standing Committee (NPCSC), Zhao Leji; Heads of eight special subcommittees of the 14th NPC; and 159 other rank-and-file members of the 14th NPCSC.
A detailed breakdown of major appointments is available here.
The stand-out policy discussed across the week, was scientific advancement and technological self-reliance.
In an article for ChinaFile published in January 2023, Neil Thomas, a senior China analyst at the New York-based Eurasia Group, showed that “Overall, [at the 20th CPC Congress] Xi selected what may be the most educated [Politburo Standing] committee ever—49.5 percent are technocrats, up from 37.2 percent in 2012, and 7.7 percent are senior STEM scholars, up from 4.0 percent in 2012—reflecting his calls for China to innovate a way out of its flagging growth model and dependencies on Western technology.”
Subsequently, during the 'Two Sessions’, emphasis was laid on funding efforts and endeavours toward research in science and tech. Xi laid out that “Fiscal investment in basic research should be steadily increased, enterprises should be motivated to invest more through measures such as tax incentives, input from social forces should be encouraged, and the efficiency of the national natural science fund and its joint funds should be improved.”
The State Council Institutional Reform Plan has therefore laid out a major agenda for strengthening the Ministry of Science and Technology (MSOT). It says: The MSOT will undertake “Macro-management responsibilities such as inspection, retaining national basic research and applied basic research, national laboratory construction, national major science and technology projects, national technology transfer system construction, scientific and technological achievements transfer and transformation and integration of industry, learning and research, regional scientific and technological innovation system construction, and scientific and technological supervision and evaluation system.”
Additionally, a new Scientific and Innovation Supervisory and Evaluation system and a new Scientific Integrity System will be established. This will create higher standards of innovation, by better identifying real and important breakthroughs to fund.
Here is a comprehensive Twitter Thread on Headlines concerning major announcements:
Some important elements from the State Council Institutional Reform Plan include:
Disbanding the National Rural Revitalization Bureau as a separate entity, while adding its mandate to the Ministry of Agriculture and Rural Affairs; the Bureau will conduct monitoring and help to prevent poverty, and organize and formulate key counties and key areas for rural revitalization, for the purpose of doing a good job in the "three rural" tasks centered on rural revitalization;
Establishing a new National Data Administration [国家数据局] under the National Development and Reform Commission to, among others, “coordinate and promote the development of basic data systems” and “coordinate the integrated sharing, development, and use of data resources;
Elevating the China National Intellectual Property Administration to a top-level agency under State Council, so that it is no longer subordinate to (and now on a par with) the State Administration for Market Regulation; and
Ordering an across-the-board 5% cut in the bianzhi [编制] of all central agencies (i.e., their authorized number of personnel) and allocating those positions to “key areas and important work” (without elaboration).
The NPC Observer reports: Here is the caveat: The Plan is only part of a broader plan to restructure Communist Party and state institutions. As disclosed in the Plan’s explanation, the broader plan will, for instance, establish a new Party entity called the Central Sci-Tech Commission [中央科技委员会], and MOST [Ministry of Science and Technology] will act as its administrative body. So the as-yet undisclosed document could have further implications for the State Council’s structure, either by creating additional Party entities to oversee State Council agencies, or by outright turning some State Council agencies into Party entities (like what happened in 2018). Such changes do not require NPC approval as long as they do not reorganize the so-called “departments constituting the State Council.”
Significant elements from the Draft Central and Local Budgets (especially pertaining to economy and military), the State Council Institutional Reform Plan, and Li Keqiang’s work report, are discussed in relevant sections below.
Section C: Economy and Tech
This section is brought to you by Anushka Saxena and Amit Kumar
The following pieces of news are of significance from the past week:
Li Keiang’s Work Report announced major targets for the years to come. It said:
GDP growth of around 5 percent: We’ve discussed previously how various international agencies came out with their projections for Chinese GDP growth and they were more or less around 5 per cent.
The surveyed urban unemployment rate target for 2023 is around 5.5 percent: The surveyed rate was at 5.1 per cent for FY 2020-21, and so the projections are trying to be realistic by aiming for a higher number but with a relatively stable figure of around 5 per cent. And this projection is still smaller than what we saw in 2020, which was a 5.6 per cent figure.
“Improve preferential tax and fee policies, and extend and further refine policies on tax and fee cuts, tax rebates, and tax deferrals as the situation requires”: I think this has a lot to do with the focus on keeping employment steady and linking it with the Common Prosperity campaign. Since the primary goal of Common Prosperity is to eventually lead to the making of an olive-shaped society by 2050, one that is narrower at two ends (higher-income and lower-income levels) and biggest in the center (middle-income level), an important tool for the CPC to deploy in bringing about such a society is differentiation in taxation.
The Zhejiang Implementation plan and the Work Report from 2021, delivered by the Zhejiang government in January 2022, are testimony to the varied degrees of tax compensation that rural residents and lower-income social groups have been provided – ranging from favourable tax policies for enterprises to tax rebates and credit provision on exports. There is also an urgency to “strive for the full implementation of tax and fee reduction,” levy consumption-based taxes, and expand the number of industry sources to be able to earn greater tax revenue. These suggest an upward trend in the number of tax reforms issued under Xi Jinping, with the ultimate goal of creating a shared future for mankind.
Li’s report backed the two unwaverings: I think the two unwaverings, or the two unswervings, as they have been interchangeably called, have to be looked at with a pinch of salt. For our readers, they stand for two goals of the CPC, which are to “unswervingly consolidate and develop the public sector of the economy, and unswervingly encourage, support, and guide the development of the non-public sector of the economy.” After these were enunciated in an article Xinhua carried in September 2020, subsequently, the CPC “guided” its private sector economy, especially the real estate and platform economy enterprises, by imposing on them harsh regulatory compliances to “curb excesses” and restrict their “sprawling financial services.” In the process, the country’s 100 billion dollar Edutech industry was decimated as it was forced to go non-profit, while tight debt controls over the real estate sector led to the infamous Evergrande crisis, and aftereffects that led to a brutal slump in both housing demand and delivery. Platform economy companies like Ant Group and DiDi Global faced a crackdown at the hands of the Cybserpace Administration of China, that led to the cancellation of the former’s Initial Public Offering (IPO), while the latter witnessed a major fall in market capitalization in 2021.
Since the CPC announced some economic relief beginning with the scrapping of the Zero-COVID policy, the policy narrative has shifted slightly towards infusing liquidity and relaxing restrictions on the property and platform economy industries. But the continued reiteration of the ‘Two unswervings’ may indicate continued headwinds and regulatory compliances for the private sector economy.
Even in the real estate sector, on the one hand, Liu He at Davos or Li Keqiang in his work report talked about helping the sector through infusion of liquidity and blood transfusion, but Li still said that there is a need to “prevent unregulated expansion in the real estate market to promote stable development of the real estate sector.” And so there will only be as much a focus given to fiscal stimulation as is essential to prevent a collapse, but not so far as to cause excessive growth, which will again invite a clampdown on capital excesses.
Xi’s speech at the end of the 2nd plenary of the 20th party congress, Li’s work report, etc. all acknowledged China’s “deep-seated problems” regarding reform, development and stability, with the “triple pressures” of shrinking demand, disrupted supply, and weakening expectations; and therefore calling for consolidating the economic recovery. So, overall, it is likely that even though government intervention in and control of the private sector and the market won’t go anywhere, pragmatically, the government will invest in letting the economy recover and taking concerted policy effort to ease fiscal and monetary policies for growth.
Li’s report has acknowledged that “Uncertainties in the external environment are on the rise. Global inflation remains high, global economic and trade growth is losing steam, and external attempts to suppress and contain China are escalating.” And this has had impacts on both Chinese foreign policy and domestic economy. Exports have taken a major hit as empty container ships are stacking up on ports of Shanghai and Guangdong. In this context, China needs not just a sound economic and financial policy, but a moderate foreign policy tone that lets its economic allies and supply chain partners regain trust.
So we see a 54.836 billion yuan budget on diplomatic endeavors, up by 12.2%. And since Wang Yi has taken over the post of Director of the Central Foreign Affairs Commission, among the 30 meetings and phone calls since his promotion, half were with European counterparts, with most taking place during his February visits to Italy, Hungary, Germany and Brussels. Wang’s narrative after the trip expressed China’s hopes of a reset in its relations with Europe, strained over the war in Ukraine, human rights issues, and national security concerns.
The Budget Report announced by the Ministry of Finance said, “Total expenditure will exceed total revenue, leaving a deficit of 3.16 trillion yuan, 510 billion yuan higher than in 2022, which will be supplemented through the issuance of government bonds.”
Economic analysts show us that the case for Chinese government bonds has become relatively stronger since 2021, given that China’s policy stance has shifted from over-tightening for most of 2021 towards easing in recent months. Following calls for more support to the real economy, the People’s Bank of China (PBoC) cut the reserve requirement ratio (RRR) for banks twice since December. Except in the housing sector, for most of 2022 and 23, Inflation is relatively under control in China, so there is no urgency for the PBoC to tighten policy, in sharp contrast to the US, the UK and other major economies where persistent inflationary pressures have forced central banks to pull forward policy normalization.
Even though foreign ownership in the CBG market is relatively lower, the market itself has become the third largest in the world. It has the rare advantage of providing a positive real yield despite great government interventionism in the market. Chinese corporate bonds also boast attractive yields and wider spreads with lower duration risks than other global credit markets, and so if the government can work towards expanding foreign investor ownership of these bonds, it shall be a boost to revenue.
Other announcements of importance pertaining to Chinese finance and economy at the ‘Two Sessions’ include:
Plans have been announced to establish a new national financial regulatory body that will replace its banking and insurance watchdog, the China Banking and Insurance Regulatory Commission (CBIRC), as part of a wider government overhaul that also includes the creation of a National Bureau of Data. The new body, which will bring supervision of the industry under the State Council, is intended to strengthen institutional oversight and coordination between different financing markets. A rough translation of what the new body would be called is “National Bureau of Financial Supervision and Regulation”.
CNBC report: "The overhaul of financial regulation framework reflects the new focus on 'dual circulation' - both domestic and global circulation of the economy - and 'uniform national markets'," said Winston Ma, an adjunct professor at New York University law school.
The financial regulation proposal would bring supervision of the industry, excluding the securities sector, into a body directly under the State Council, or cabinet, in an effort to strengthen institutional oversight. Currently, the three pillars of China’s regulatory setup are the CBIRC, the People’s Bank of China, and the China Securities Regulatory Commission (CSRC), all of which are headed by the Financial Stability and Development Committee of the State Council. The new body to replace the CBIRC will now be under direct control of the Premier, Li Qiang, and so will be the CSRC.
The National Data Bureau mentioned above is tasked with the responsibility of expansive data collection to better inform policies. The data is also set to be transparent and available for public access.
Finally, The People’s Bank of China is also set to see major reforms, including the elimination of super-regional and country branches. The Bank’s tasks of supervising financial companies and day-to-day regulation will be taken over by the new National Bureau.
These developments, and more, have been discussed elaborately in the State Council Institutional Reform Plan.
Finally, ASPI’s Critical Technology Tracker
Australian Strategic Policy Institute (ASPI) has come out with a policy brief called ‘Critical Technology Tracker’ which analyses 44 critical technologies and respective leaders in each of these sectors. It has relied on citations of scientific publications and high-quality papers as a proxy to rank countries. The report sounds a warning to democratic countries by underlining China’s position as the lead country in 37 of the 44 technologies assessed in the report. In addition, it also classifies ‘monopoly risks’ arising from China’s dominance in respective categories.
Some significant graphics from the report:
The report also ranks the respective universities of countries that are leading the research and innovation in these technologies. The Chinese Academy of Sciences is a particularly high performer, ranking in the top 5 in 27 of the 44 technologies. India’s IIT and NITs figure among the leading universities in AI, computing, and communications category, advanced integrated circuit design and fabrication.
Other highlights from the report:
China produces more than five times as much high-impact research as its closest competitor.
In the 7 categories that are led by democratic countries, in all instances the US is the lead country.
The UK and India, both of which claim a place in the top five countries in 29 of the 44 technologies.
South Korea and Germany follow closely behind, appearing in the top five countries in 20 and 17 technologies, respectively.
Australia is in the top five for nine technologies, followed closely by Italy (seven technologies), Iran (six), Japan (four) and Canada (four).
Russia, Singapore, Saudi Arabia, France, Malaysia and the Netherlands are in the top five for one or two technologies
Exercising caution while reading the report and making a judgement:
First, the report is based on progress in scientific research and innovation in critical technologies. It does not necessarily mean the lead country is an industrial leader in these categories as well. Translating scientific research into industrial gains and its commercialisation brings a whole new set of challenges. The commercialisation of scientific research is key to driving innovation and a failure in this regard might make the gains redundant. The report instead assesses “the potential future capability of nations within each critical technology and to highlight long-term strategic trends including areas of focus for each country.”
Second, it is also worth probing as to how much of these technologies breakthrough is dependent on foreign technologies and patents. The report does not tell us about the same.
Third, one needs to know how much of the research and innovation in China is being driven by foreign nationals studying in China. The report only tells us the leading universities driving the research but does not give a nationality-wise break up of the innovators in respective categories. Although, the report does provide some insighst with regard to the above in the advanced aircraft engines (including hypersonics category.
The report contains several other details such as global flow of talent in each of these categories and is worth reading in full.
Finally, 28 Chinese entities including Inspur added to US’ Entity List
Chinese Foreign Ministry spokeswomen Mao Ning said the US was “once again cracking down on Chinese companies under false pretexts through unfair means,” according to SCMP.
The US has added Inspur, the world’s third largest supplier of the servers used in data centres to power cloud computing, to its trade blacklist for allegedly acquiring US-origin items in support of the China’s military modernisation effort, the report added.
The result could be a halt in sales by Nvidia and AMD to Inspur and its subsidiaries. The report said that the restrictions on Inspur are comparable with the ones on Huawei, as it prohibits shipment of any product to Inspur made with the US technology, even if they are made in a foreign country.
Section D: Foreign Policy Watch
This section is brought to you by Kingshuk Saha
There have been some very interesting developments over the past few days, which are worth capturing in this week’s section.
Chinese Foreign Minister Qin Gang held a press conference on 7 March on Foreign Policy
Qin Gang held a press conference on Tuesday on the sidelines of the first session of the 14th National People's Congress in Beijing. During the press conference, Qin outlined China’s foreign policy template for the coming years.
Qin said, “Chinese modernization offers solutions to many challenges facing human development. Achieving the modernization of a country of more than 1.4 billion people will be an unprecedented feat in human history, one of profound global significance in itself. It busts the myth that modernization is westernization. It creates a new form of human advancement, and it provides an important source of inspiration for the world, especially developing countries.”
Qin blamed the US for rising tensions between Beijing and Washington. He said, “The U.S. claims that it seeks to out-compete China but does not seek conflict. Yet in reality, its so-called 'competition' means to contain and suppress China in all respects, and get the two countries locked in a zero-sum game. If the U.S. does not hit the brake but continue to speed down the wrong path, no number of guardrails can prevent derailing and there will surely be conflict and confrontation. China is firmly opposed to such competition, which is a reckless gamble with the stakes being the fundamental interests of the two peoples and even the future of humanity. If the U.S. has the ambition to make itself great again, it should also have a broad mind for the development of other countries.”
Antony Blinken had warned China for its support to Russia and said that “China can’t have it both ways when it comes to the Russian aggression in Ukraine. It can’t be putting forward peace proposals on the one hand while actually feeding the flames of the fire that Russia has started with the other hand.”
During his press conference, Qin responded to Blinken's comment and said, “The relationship between China and Russia is based on the principles of non-alliance, non-confrontation and non-targeting of third parties. The China-Russia relationship is not a threat to any country, nor is it subject to any interference or discord sown by any third party. With China and Russia working together, the world will have the driving force toward multipolarity and greater democracy in international relations, and global strategic balance and stability will be better ensured. The more unstable the world becomes, the more imperative it is for China and Russia to steadily advance their relations.”
The Guardian reports: In his first media appearance as foreign minister, held on Tuesday on the sidelines of the “two sessions” political gathering, Qin Gang outlined China’s foreign policy agenda for the coming years, presenting China and its relationship with Russia as a beacon of strength and stability, and the US and its allies as a source of tension and conflict. Qin’s comments aligned with a speech by China’s leader, Xi Jinping, to political delegates on Monday, decrying what he called US-led “suppression” of China. Qin’s press conference set out China’s foreign policy intentions for the new five-year political term, which began with the reappointment of Xi as Chinese Communist party leader in October last year, and with new government appointments to be announced this week. Qin emphasised China as a force for global stability and prosperity, inspiring modernisation around the world, particularly in the global south.
Netherlands to restrict semiconductor tech exports to China, joins US effort
On 8 March 2023, the Dutch government announced its plans for restrictions on the exports of semiconductor technology. It’s a major boost in the US effort to undermine chip exports to China.
Liesje Schreinemacher, the Dutch Foreign Trade Minister, said, “Given the technological developments and the geopolitical context, the government has come to the conclusion that the existing export control framework for specific equipment used for the manufacture of semiconductors needs to be expanded, in the interests of national and international security”.
ASML based in the Netherlands is Europe's biggest tech firm and one of the world’s top manufacturers of machines and lithographic tools that make semiconductors. This new restriction will affect ASML export to China, thereby impacting Europe’s semiconductor industry.
For interested readers, we’d like to share a Podcast we published on the US-China Semiconductor Competition, which also happens to highlight what comparative advantages various countries possess when it comes to manufacturing, design, research and export. ASML and the Dutch Semiconductor Policy finds a mention there too, along with other interesting stuff. Do listen:
Spotify:
YouTube:
Dexter Roberts, a senior fellow at the Washington-based Atlantic Council, said “The decision by the Netherlands was a real step forward, a real victory for the US and also very bad news for China. US-China relations are already in a pretty bad place. This clearly will make things even worse."
The SCMP reports: Beijing has formally protested against Dutch plans to restrict semiconductor exports, with the Netherlands set to be the first country to join the US drive to hobble Chinese hi-tech development. This came as the Netherlands, a key player in chipmaking technology, said it planned to introduce restrictions on exports of some semiconductor technology over national security concerns. China was not named but would be affected as a key customer of semiconductor technology from the Netherlands. The US has spent months trying to push major suppliers the Netherlands and Japan to join its efforts to hold back China’s semiconductor industry. Washington has already banned US companies from selling advanced chips or setting up factories in China since last year, as strategic competition with Beijing intensifies.
Mao Ning, China’s Foreign Ministry Spokesperson, said, “We noted the reports. We disapprove of the Dutch side’s interference through administrative means in the normal trade between Dutch and Chinese businesses and have made démarches to the Netherlands [some irony to be noted here]. In recent years, the US, in an attempt to deprive China of its right to development and maintain its hegemony, has overstretched the concept of national security, politicized and instrumentalized trade and tech issues, and coerced or courted some countries to adopt export restrictions against China. Such bullying acts seriously violate market principles and the international trade order. They not only harm Chinese companies’ lawful rights and interests but also seriously undermine the stability of the global industrial and supply chains as well as global economic growth. China firmly opposes them”.
On 10 March, China has brokered a breakthrough diplomatic deal between Iran and Saudi Arabia, as a result of which, the two countries have agreed to reestablish diplomatic ties that were severed in 2016.
Wall Street Journal reported: In a statement issued along with China, rivals Saudi Arabia and Iran said Friday they agreed to re-establish diplomatic ties that were severed in 2016. To propel the agreement, China hosted an unannounced four-day negotiating session between the Middle East adversaries in Beijing, where the parties pushed an agreement over the finish line.
It adds: The surprise development puts Washington on notice that despite the U.S.’s historical role and military footprint in the Middle East, China is a rising economic and diplomatic force there, according to foreign-policy analysts. While Beijing has participated in past international talks—like efforts to compel both Iran and North Korea to halt their nuclear weapons programs—the latest deal added some substance to initiatives by Beijing that it says serve as a new model for conducting international relations.
A notable plank of Mr. Xi’s vague security initiative described China as intent on “peacefully resolving differences and disputes between countries through dialogue and consultation, support all efforts conducive to the peaceful settlement of crises,” according to a recent analysis on the GSI by Manoj Kewalramani, The Takshashila Institution.
Before this deal was brokered, Xi visited Saudi Arabia in December 2022 and met with Iranian President Raisi in Beijing in February 2023. During both meetings, Xi lauded China’s commitment to the strategic partnerships, and to fostering peace and diplomacy in the world.
Finally, here are some interesting questions and their responses by Mao Ning, China’s Foreign Ministry Spokesperson, on March 9, 2023:
Global Times: According to Western media reports, there are “residential schools” in Tibet that are part of the Chinese government’s large-scale assimilation campaign targeting Tibetans. What’s China’s response?
Mao Ning: This is certainly not true and apparently just another allegation meant to mislead the public about China and smear China’s image. In the case of China’s Tibet, this is a region of high altitude and highly scattered population in many areas. For children from herding families in particular, they have to travel long distances to get to school. If schools were to be built in every place the students live, it would be very difficult to ensure adequate teachers and quality of teaching in each school. That is why boarding schools have been set up as a practical way to ensure all children’s equal right to education. It is entirely up to the students and their parents whether to board or not. Just like schools in other Chinese provinces and regions, the boarding schools in the Tibet Autonomous Region attach great importance to the participation of students’ families. Parents are invited to take part in the management and planning of school life through parent committees and open days. Students can choose to go home on every weekend, holiday and festival (including traditional Tibetan festivals such as the Tibetan New Year and the Shoton Festival), as well as during the winter and summer breaks. Parents can visit their children at school any time and take their children home whenever needed. Courses of traditional culture, such as Tibetan language and literature and folk dance, are widely available, traditional food unique to the Tibet Plateau is provided, and students are allowed to wear traditional dresses at these schools. When reporting on the boarding schools in China, it is important to respect the facts and be objective and rational, rather than quote hearsay or even make up stories and spread false accusations.
Bloomberg: Just a question on Australia’s nuclear submarines. It’s reported that they will use both British design as well as American parts and upgrades. Does the foreign ministry have any position or view on this?
Mao Ning: China has made clear its strong position on nuclear submarine cooperation between the US, the UK and Australia on multiple occasions. This trilateral cooperation constitutes serious nuclear proliferation risks, undermines the international non-proliferation system, exacerbates arms race and hurts peace and stability in the Asia-Pacific. It has been widely questioned and opposed by regional countries and the wider international community. We urge the US, the UK and Australia to abandon the Cold War mentality and zero-sum games, honor international obligations in good faith and do more things that are conducive to regional peace and stability.
Section E: Military Developments in China
This section is brought to you by Anushka Saxena
This week, the following developments concerning the Chinese military and police force, have grabbed my attention :
The big news comes from developments related to the military in the ‘Two Sessions’ of the NPC and the CPPCC (discussed in detail in the ‘Domestic Politics’ section above).
To begin with, the Ministry of Finance’s ‘Report on the Execution of the Central and the Local Budgets for 2022 and on the Draft Central and Local Budgets for 2023’ highlights the goals for national defense for 2023. It states:
“Implementing the Party’s thinking on strengthening the military for the new era, we will provide support for modernization and development of the national defense and armed forces and work to strengthen our capacity in defense-related science, technology, and industry.”
Then, it lays out a 1.5537 trillion yuan budget for national defense for FY 2022-23, which is a 7.2 per cent increase from the 1.449963 trillion yuan budget for FY 2021-22. The report also notes that there is no difference between the defense budget and expenditure for the previous FY, meaning that 100 per cent of the exact budget figure was utilized. 208.972 billion yuan have also been allocated to public security and the People’s Armed Police, which is up by 6.4 per cent.
Wang Chao, the NPC spokesperson, said, “The increase in defence spending is needed for meeting the complex security challenges, and for China to fulfil its responsibilities as a major country. The increased expenditure will help provide Chinese forces with better training and more advanced equipment. It also supports the military in tackling non-conventional security threats such as major epidemics and natural disasters.”
The increase in budget for the eighth consecutive year is likely to be spent in achieving the goals of modernization (mechanization, informatization and intelligentization) of the military into a world-class force by 2027 (the Centenary of the founding of the PLA), integration and joint operations capability, and ‘high-quality development’ through original innovation and development of defense equipment, as well as the upskilling and training of personnel in the fields of science and technology.
The State Council’s ‘Report on the Work of the Government’, presented by Li Keqiang, discussed the achievements of the military in the previous year in an elaborate and resounding manner. Key achievements highlighted read as follows:
“The people’s armed forces intensified efforts to enhance their political loyalty, to strengthen themselves through reform, scientific and technological advances, and personnel training, and to practice law-based governance. They stepped up military training, increased combat preparedness, and became a much more modernized and capable fighting force.”
“We remained committed to the Party’s absolute leadership over the people’s armed forces. A series of major achievements were made in national defense and military development. As a result, a number of significant changes took place in this domain.”
But it wasn’t all chest-thumping. Li Keqiang’s report, in a nuanced manner, also instructed on what the future policy on military affairs should look like. It said:
“The armed forces should intensify military training and preparedness across the board, develop new military strategic guidance, devote greater energy to training under combat conditions, and make well-coordinated efforts to strengthen military work in all directions and domains.” Our previous editions and a podcast on PLA military drills discusses how the country’s armed forces have already begun undertaking ambitious combat preparedness projects both at home and abroad. All of this energy and endeavour is directed towards the big goal: “Winning modern wars.”
“We should improve all-around military governance and build on and expand the gains of national defense and military reform. We should see that military operations, capacity building, and combat preparedness are well-coordinated in fulfilling major tasks and speed up the implementation of major defense-related projects.”
“We should consolidate and enhance integration of national strategies and strategic capabilities and step up capacity building in science, technology, and industries related to national defense.”
“We in governments at all levels should give strong support to the development of national defense and the armed forces and conduct extensive activities to promote mutual support between civilian sectors and the military. In doing so, we will open a new chapter of unity between the military and the government and between the military and the people.”
And of course, “We should fully implement Xi Jinping’s thinking on strengthening the military and the military strategy for the new era. Our armed forces, with a focus on the goals for the centenary of the People’s Liberation Army in 2027, should work to carry out military operations, boost combat preparedness, and enhance military capabilities so as to accomplish the tasks entrusted to them by the Party and the people.”
Then, the ‘Report on the Work of the Standing Committee of the National People’s Congress’, presented by Li Zhanshu, provided insights on useful legislations pertaining to national security, military and police that the NPCSC passed and ratified. It says:
“We ratified treaties and important agreements in areas such as extradition, criminal judicial assistance, countering extremism, transfer of sentenced persons, arms trade, joint military exercises, counter-terrorism, and civil aviation. We formulated the Law on International Mutual Legal Assistance in Criminal Matters and revised the Criminal Procedure Law, thus providing legal means for pursuing fugitives who have fled abroad and recovering stolen state assets.”
“We formulated the Coast Guard Law, the Law on the Protection of the Status, Rights, and Interests of Servicepersons, the Reserve Forces Law, and the Regulations on Firefighter Ranks.”
“We revised the National Defense Law, the Law on the People’s Armed Police, the Military Service Law, and the Law on the Protection of Military Installations.”
“We made decisions on temporarily adjusting the application of certain laws during the reform of the national defense mobilization system, on the rank system for active-duty enlisted service members of the People’s Liberation Army, and on adjusting the application of certain provisions of the Criminal Procedure Law for the military during wartime.”
“All this has helped strengthen the rule of law in national defense and military development.”
The report has fairly generic recommendations regarding the overall role of the NPCSC and doesn’t have much to offer on the military front. However, we can ascertain from the emphasis on “Ensuring constitutional implementation and carrying out legislative work,” and “Enhancing the effectiveness of oversight,” that the legislative body will adhere to the supremacy of the CPC, with Xi Jinping at its core, in all defence related matters. Greater focus will be laid on law-based governance of the military, and its implementation will be at the whims and fancies of the Central Military Commission.
Next, Xi Jinping attended the plenary meeting of the delegation of the People's Liberation Army and the Armed Police Force at the first session of the 14th National People’s Congress on 8 March 2023, and made a speech regarding the agenda to be achieved by the countries armed forces by its centennial in 2027.
He said, “consolidating and improving the integrated national strategic system and capabilities is a strategic deployment made by the Party Central Committee to grasp the new situation, new tasks and new requirements faced by a strong country and a strong military, with a view to better coordinating development and security, and better coordinating economic construction and national defense construction.”
The phrase “integrated national strategic system and capabilities,” which has been used in many of Xi’s speeches, essentially refers to adherence to the military strategic guidelines outlining what kind of a military strategy China follows to win in the era of modern wars. “Integrated” refers to the coming together of various services under commands and the oversight of the CMC.
As per the Ministry of Defence, “The military strategic guideline for a new era adheres to the principles of defense, self-defense and post-strike response, and adopts active defense. It keeps to the stance that “we will not attack unless we are attacked, but we will surely counterattack if attacked”, places emphasis on both containing and winning wars, and underscores the unity of strategic defense and offense at operational and tactical levels.”
The big picture indeed lies in “integration”. In the same breadth as urging adherence to the centralized and unified leadership of the Party, Xi highlighted the need to “strengthen the integration of strategic layouts in various fields, the integration of strategic resources, and the integrated use of strategic forces.”
Then, he discussed the need to “enhance the resilience of the industrial chain and supply chain,” signifying that defence manufacturing, as well as original innovation in defence, will both be paid an equal emphasis amidst growing Western sanctions on technology export. Expansion of national laboratories found a mention in the same breadth, given their role in the promotion of high-level scientific and technological self-reliance for China.
Xi also pointed out that this year marks the 80th anniversary of the Yan'an Rectification Movement, and therefore, itt is necessary to carry forward the glorious tradition of supporting the government, loving the people, and supporting the military, consolidate and develop the unity between the military and the government, the military and the people in the new era, and create a strong atmosphere in the whole society that cares about national defense, loves national defense, builds national defense, and defends national defense.
Other aspects of the speech were very usual, ranging from consolidating and developing national defence research and science and tech capabilities, to creating a work pattern that is standardized and orderly.
At the meeting, other representatives such as Liu Zejin from the Science and Technology Committee of the CMC, Rao Wenmin from the Equipment Development Department of the CMC, Wang Hongyu from the National Defense Mobilization System, Tang Linhui from the Joint Logistics Support Force, Wan Jinyang from the Army, and Wang Yaru from the Navy also made speeches.
They put forward opinions and suggestions on issues such as national laboratory construction, national defense science and technology industry capacity building, major infrastructure construction, national reserve construction, border and coastal defense work, and national defense education.
Next, as expected, the “high-quality narrative” has now entered the military.
At a meeting of military representatives on 8 March in Beijing, in PLA Daily’s words, “heated discussions” took place on how to speed up the high-quality development of the Chinese military. The fundamental conclusion of the discussion was that the PLA will actively promote the modernization of national defense and the military from "quantity" value-added to "quality" improvement.
“High-Quality” development in the military will essentially entail the following elements:
Talent: On this front, various representatives argued that “the core of military modernization is the modernization of people. Talent is the key factor to promote the high-quality development of our military, win military competition and take the initiative in future wars.” The military representatives said that in the new era, the fast-forward button should be pressed for the construction of high-level strategic management talents. Combining major tasks such as the military's modernization strategy design, mid- and long-term plan formulation and demonstration, to cultivate high-level strategic management personnel, [we] must update management concepts, enhance the ability to judge strategic direction, adapt to the strategic environment, plan strategic decisions, and implement strategies. These talents should ideally possess and be good at “supervision ability, comprehensive training and forging of understanding people with overall vision, good at strategic planning, and proficient in modern management.”
Originality and Innovation in Manufacturing and Technology: On this front, a Representative Chen Jinlan said that scientific and technological innovation is a powerful driving force for high-quality development, and improving the quality and efficiency of national defense and military modernization is to gain combat effectiveness from technological innovation. He also said that “Over the years, the development of our military's equipment has achieved a leap from quantitative accumulation to qualitative leap, from point breakthroughs to improvement of system capabilities. It is an important way to lead the high-quality development of our military equipment.” During the meeting, examples used to indicate China’s developing defence tech innovation capabilities include the completed Chinese space station ‘Tiangong’, launch of the PLAN’s third aircraft carrier ‘Fujian’, official delivery of the first large C919 aircraft, and the full operationalization of theBaihetan Hydropower Station.
Integration: On this front, a representative of the National People's Congress from the theater commands said that in recent years, in the new pattern of "military commission management, theater main battle, and military branch construction,” various joint exercises and joint training are carried out on a regular basis under the dispatch and command of the theater. Data and information that were difficult to share in the past are now efficiently transferred among the various services and arms in the theater.
Finally, there is quite a lot of recent discussion on Chinese deployment of drones to enhance its defence capabilities.
First, as per a recently published paper, China claimed to have conducted an aerial clash in which an unmanned aerial vehicle (UAV) operated by artificial intelligence (AI) outsmarted a drone operated by a human pilot on the ground. The exercise was conducted by a team of Chinese researchers led by professor Huang Juntao of the China Aerodynamics Research and Development Centre, a People’s Liberation Army research institute in the southwestern province of Sichuan, that develops and tests futuristic weapon technologies.
It is reported that during the aerial battle, the human-controlled UAV made the first move to gain an advantage over its AI-guided opponent. However, the AI-controlled drone predicted the intention and managed to outmaneuver it by sticking close behind the human-controlled autonomous system.
SCMP reports: The Chinese team said it built the AI dogfight pilot with the intention of making it easy for the military to use. The AI’s decision-making process, for instance, was not related to the hardware of a specific plane. This means the AI pilot can operate on almost any fighter jet in the PLA hangar.
Another SCMP report also highlighted: The use of drones in the war – which has now entered its second year – is being closely watched by the Chinese People’s Liberation Army. A commentary in its mouthpiece PLA Daily on February 23 said drones and other technology such as commercial satellites being used in the conflict had redefined modern warfare.
This could have implications for PLA’s training tactics in Taiwan. The PLA has revealed little information on its preparations for “urban warfare” in Taiwan, but highly realistic “mock cities” built in China’s training bases have included structures similar to the Presidential Office building in Taipei, a military drill broadcast by state media showed in 2015.
As China continues to draw lessons from Russia’s failures in its invasion of Ukrainian cities, the PLA may itself continue to adapt tactics to conduct successful “urban warfare” campaigns in Taiwan, including through the integration of AI and drones.
To read more on developments concerning Chinese military forces, please refer to :
Spacebattles (a more informal channel for public discussions)
Eye on China is a weekly newsletter curated by the Indo-Pacific Studies Programme at The Takshashila Institution, a public policy think-tank based out of Bengaluru, India.
Contributors :
India-China Relations: Amit Kumar and Anushka Saxena
Chinese Domestic Politics: Anushka Saxena
Economy and Tech: Anushka Saxena and Amit Kumar
Foreign Policy Watch: Kingshuk Saha
Military Developments in China: Anushka Saxena
