Eye on China (4 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 Development
Section A: India-China Relations
This section is brought to you by Manoj Kewalramani
There have been some very interesting developments over the past few weeks, which are worth capturing in this week’s section.
A lot of talks to report this week, and that’s not a bad thing. First, the foreign ministers of India and China met in Delhi on the sidelines of the G20 foreign ministers’ meeting. This was the first engagement between Qin Gang and S. Jaishankar. No breakthroughs were expected. So based on what both sides have said after the meeting, it lived up to that expectation.
The Chinese readout (English report) says that:
Qin said during the meeting that as neighbor countries and major emerging economies, China and India have far more common interests than differences. The development and revitalization of China and India display the strength of developing countries, which will change the future of one-third of the world's population, the future of Asia and even the whole world, Qin noted. The two sides, said Qin, should view their bilateral relations in the context of the once-in-a-century changes in the world, understand bilateral cooperation from the perspective of their respective national rejuvenation, and be partners on the path to modernization. He said the two sides should implement the important consensus of the leaders of the two countries, maintain dialogue and properly resolve disputes, and promote the improvement of bilateral relations and the steady moving forward of the relations. The boundary issue should be put in the proper place in bilateral relations, Qin said, adding that the situation on the borders should be brought under normalized management as soon as possible. China is willing to speed up the resumption of exchanges and cooperation with India in various fields, resume direct flights at the earliest date and facilitate people-to-people exchanges, said the Chinese foreign minister. He said China and India have shared interests in many areas including safeguarding the rights and interests of developing countries, promoting South-South cooperation, and addressing global challenges such as climate change. China supports the Indian side in fulfilling its chairmanship of the G20 and is ready to strengthen communication and cooperation to safeguard the common interests of developing countries and international equity and justice, so as to inject stability and positive energy into the world, Qin said.”
Comment: We often talk about Beijing viewing ties with India not from a bilateral prism, but rather from the perspective of its geopolitical contest with the US. This is Qin rather categorically stating that.
The Chinese readout says: “Jaishankar said the current situation on the borders is gradually stabilizing, and both sides should work together to maintain peace and tranquility in the border areas.” This is, of course, very different from what Jaishankar told the media in India.
In a briefing, he said: “On the China meeting, I met Minister Qin Gang on the sidelines of the conference this afternoon. It's our first meeting after he took over as Foreign Minister. So we spent, I don't know, maybe about 45 minutes talking to each other and the bulk of our conversation understandably was about the current state of our relationship, which many of you have heard me describe as abnormal, and I think those were among the adjectives that I used in that meeting. We have, you know, there are real problems in that relationship that need to be looked at, that need to be discussed very openly and candidly between us. That's what we sought to do today. We also had a brief discussion on what was happening in the G20 framework, but the thrust of the meeting was really on our bilateral relationship and the challenges in the bilateral relationship, especially that of peace and tranquility in the border areas.”
On this business of normalcy in ties, there’s an interesting bit from this article by Shishir Gupta in HT. He writes:
“Ever since the PLA unilaterally tried to change the ground situation in May 2020 with transgressions in north Pangong Tso, Gogra-Hot Springs, Khugrang nullah and Galwan Valley, the two armies are locked in a stand-off in East Ladakh with men, missiles, rockets and armor on both sides. While the potential explosive situation on the 1597 km long Line of Actual Control (LAC) has been averted with both armies creating buffer zones or no patrolling areas on all the friction points, there has been no de-escalation of forces on either side for the past three years. In fact, the Indian Army was forced to strengthen its deployment in the middle and eastern sector of the LAC with the PLA bringing in additional troops before the 20th National Congress of the Chinese Communist Party last October. These additional forces are still to return to their barracks though some thinning of PLA forces has been seen across the easternmost side of the border across Arunachal Pradesh. However, the key to resumption of normal bilateral ties between the two countries lies in PLA allowing resumption of legitimate patrolling rights of Indian Army in Depsang Plains in Daulet Beg Oldi (DBO) sector and at Charding Nullah junction in Demchok area in East Ladakh followed by de-escalation.”
Later in the piece, he also writes: “the Narendra Modi government is clear that the PLA must reverse its aggression all along the LAC and de-escalate forces to the past levels.”
Comment: I am not sure how to interpret this. Does it mean restoring the pre-April 2020 status quo on friction points and addressing Demchok and Depsang? Or does it mean that buffer zones are here to stay with regard to those friction points, but restore Indian forces’ patrolling access to Demchok and Depsang and pull back forces brought up since April 2020? Also, what is the formula of de-escalation, when one says “past levels?”
Another interesting development in the week was the decision by China and Russia to not accept two paragraphs in the G20 foreign ministers’ outcome document.
First, it is good to see that the Indian side pressed ahead with this outcome document the way it did. Second, the footnote specifying the paragraphs related to the Ukraine war that China and Russia refused to agree informs us that these were “taken from the G20 Bali Leaders’ Declaration” in November last year. Beijing had signed on to that, but refused to do so here. For folks in India, three more important developments to note.
First, Qin’s meeting with Russia’s Sergei Lavrov. Xinhua reports:
“Under the strategic guidance of presidents of the two countries, the China-Russia relations have maintained sound and steady development, setting a new paradigm for a new type of major-country relationship, and playing an important role in promoting solidarity and cooperation among emerging markets and developing countries, Qin said. The two sides should maintain exchanges at all levels and step up communication and coordination between their foreign ministries, he said. In the face of the complex and grave international situation, China stands ready to work with Russia and other members of the international community to safeguard peace, security, development and prosperity, and join hands to build a community with a shared future for mankind, the Chinese foreign minister said.”
Second, Lavrov’s comment at Raisina, talking about Russia balancing ties between China and India and criticizing the Quad’s greater engagement.
Finally, reports informed that India has received the third squadron of the S-400 air defense system from Russia. Firstpost reports that this squadron is being deployed at the border with Pakistan in order to tackle aerial attacks on Punjab and northern Rajasthan.
Anyway, speaking of the Quad, the joint statement of their foreign ministers’ meeting on Friday is an interesting read.
It reiterates the big agenda: “Through the Quad, we seek to support the region through practical cooperation on contemporary challenges such as health security, climate change and the clean energy transition, critical and emerging technologies, infrastructure and connectivity, addressing the debt crisis through sustainable, transparent and fair lending and financing practices, space cooperation, cyber-security, humanitarian assistance and disaster relief (HADR), maritime security and counter-terrorism.”
Some key points:
We are committed to further strengthening our respective relationships with ASEAN, thus creating a platform for greater Quad collaboration in support of the AOIP.
We support regional institutions in the Pacific and are also further strengthening our cooperation with the Indian Ocean Rim Association (IORA), to address the region’s most pressing and important challenges.
On the East and South China Seas, they said that “We strongly oppose any unilateral actions that seek to change the status quo or increase tensions in the area. We express serious concern at the militarization of disputed features, the dangerous use of coast guard vessels and maritime militia, and efforts to disrupt other countries’ offshore resource exploitation activities.”
They also talked about working together in the context of the UN Security Council 1267 Sanctions Committee. “In this regard, we express our concern at attempts to politicize the working of the UNSC Sanctions Regimes and call on all states to maintain the transparent, objective and evidence-based working methods of UNSC Sanctions Committees.”
Finally, let’s look at a couple of other stories.
First, Bloomberg reports that India has approved its largest-ever hydropower project in Arunachal Pradesh. The government approved the estimated investment of 319 billion rupees ($3.9 billion) for the 2,880-megawatt Dibang project in Arunachal Pradesh, state-run hydropower producer NHPC Ltd. said Monday. The project is estimated to take nine years to build.
Second, India and Japan ended the 4th edition of a joint military exercise, Dharma Guardian, at Camp Imazu in the Shiga province of Japan from February 17 to March 2. Meanwhile, Japan’s Air Self-Defense Force (ASDF) also conducted a joint transport exercise, Shinyu Maitri 23, with the Indian Air Force on March 1-2.
Third, a Chinese press release says that the group of officials from its Ministry of National Defense also traveled to Delhi this week for discussions under the SCO framework. India holds the rotating SCO chair this year.
To read more on developments concerning India-China Relations, please refer to :
India's close Southeast Asian partners push back against Beijing's South China Sea plans
Czech Foreign Minister Jan Lipavsky condemns China's aggressive actions on India's northern borders
India grabs higher share of PE investments in Asia as China declines
Section B: Chinese Domestic Politics
This section is brought to you by Amit Kumar
For this week, the following news caught our attention in China’s domestic politics:
China’s top political advisory body begins its annual session
The 14th National Committee of the Chinese People’s Political Consultative Conference (CPPCC) began its first annual session on March 4, at the Great Hall of the People. The meeting was attended by Xi Jinping and other top officials.
Government press release reads: “Wang Yang, chairman of the 13th CPPCC National Committee delivered a work report of the Standing Committee of the 13th CPPCC National Committee to the session during the opening meeting of the first session of the 14th CPPCC National Committee.”
The details of the session will be out at the end of the session.
CPC Central Committee’s communique at the end of 2nd Plenum
The 20th CPC Central Committee issued a communique at the end of its second plenary session on 28 February.
Xinhua reports that the plenum was attended by 203 members and 170 alternate members of the Central Committee. The key outcomes of the session are highlighted below:
The session adopted a list of proposed candidates for the leading positions of state institutions to be recommended to the first session of the 14th National People's Congress (NPC), and a list of proposed candidates for the leadership of the Chinese People's Political Consultative Conference (CPPCC) National Committee to be recommended to the first session of the 14th CPPCC National Committee.
A plan for the reform of Party and state institutions was adopted. Xi delivered explanatory remarks on the draft plan at the session.
Fully affirming the work of the Politburo since the first plenum, it emphasized that the upcoming sessions of the NPC and the CPPCC National Committee are of great significance for further mobilizing the whole Party and people of all ethnic groups to strive in unity to build a modern socialist country in all respects and advance the great rejuvenation of the Chinese nation on all fronts.
The session acknowledged that since the 18th CPC National Congress, the CPC Central Committee with Comrade Xi Jinping at its core has made deepening the reform of Party and state institutions an important task in modernizing China's system and capacity for governance.
As a result, the functions of the Party and state institutions have been transformed in a systematic and holistic manner, which has provided a strong guarantee for the Party and the country to make historic achievements and see historic changes in the pursuit of the cause of the Party and the country.
It noted that the world is undergoing momentous and rapid changes unseen in a century, and it has entered a new phase of turbulence and transformation and that China has entered a development period in which strategic opportunities, risks and challenges are concurrent, and uncertainties and unforeseen factors are rising, and it must therefore be ready to withstand high winds, choppy waters and even dangerous storms.
On the domestic front, it 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
It stressed the importance of efforts to expand domestic demand, rural revitalization, deepening reform and opening up towards building a modern socialist country in all respects
It said, “all local authorities and departments should fully appreciate the importance and urgency of the reform of Party and state institutions, and faithfully implement the tasks of institutional reform”
The session underscored efforts to coordinate the institutions of the CPC Central Committee, the NPC, the State Council, and the CPPCC National Committee, and coordinate the central and local authorities.
Thoroughly studying, disseminating and implementing the guiding principles from the 20th CPC National Congress is the primary political task of the whole Party, the session stressed.
It called for thoroughly implementing the strategic plans on Party building laid out at the 20th CPC National Congress, as well as improving the system of full and rigorous self-governance of the Party.
On the disciplinary front, it stressed that efforts must be made to improve Party conduct and enforce Party discipline with a strict tone, and consistently tackle the problems of formalities for formalities' sake, bureaucratism, hedonism, and extravagance
Finally, it called on all Party members and people of all ethnic groups to rally more closely around the CPC Central Committee with Comrade Xi Jinping at its core to make solid strides to advance Chinese modernization
Xi’s Speech at Central Party School
Addressing the Party School of the CPC at its 90th anniversary, Xi Jinping called on the party cadres to “stay committed to nurturing talent, and contributing wisdom,” reports Xinhua.
The speech was highly ideological in nature. Following are the highlights from Xi’s speech:
He directed the party school to stay true to their founding mission of fostering talent for and contributing wisdom to the Party
Party schools must focus on the central task and serve the overall interests of the country
Party schools should closely follow the needs of the Party and give full play to their strengths to cultivate officials needed by the CPC
He emphasized the significance of adhering to the right orientation in running Party schools and urged the schools to align their thinking, political stance and action with the CPC Central Committee.
Noting that nurturing talent for the CPC is the unique value of Party schools which serve as the main channel for educating and training officials, Xi called on Party schools to play an active role in fostering key officials for governance who are capable of shouldering the task of national rejuvenation.
Party schools need to step up the education and training in Marxist theory, with a focus on using the latest achievements in adapting Marxism to the Chinese context and the needs of the times to achieve unity in thought, will and action, as well as enhancing cohesion and forging the Party's soul with the Thought on Socialism with Chinese Characteristics for a New Era
Noting that Party schools are places where leading officials strengthen consciousness, Xi called on Party schools at all levels to guide and help leading officials in adopting the right attitude towards power, performance and career to preserve the political character of Communists.
Xi stressed that leading officials must improve their capabilities in all respects, strive to be highly proficient in their work, and make constant efforts to enhance their professionalism to be more competent in their work.
Acknowledging the crucial role of Party schools in contributing wisdom to the CPC, Xi emphasized the need for them to produce more quality output in various domains including the study and interpretation of the Party's new theories, boosting the Party's theoretical innovation and offering suggestions and proposals to the Party and the government.
Finally, he recognized the central role of the school in the Party’s ideological work which must be held in the hands of those loyal to the Party and Marxism
Meeting of CCDI Committee
Li Xi, a member of the Politburo Standing Committee and Secretary, the CPC Central Commission for Discipline Inspection (CCDI), presided over the CCDI Standing Committee and underlined the importance of discipline inspection commissions and supervision agencies at all levels to thoroughly study and implement the guiding principles of the second plenary session of the 20th Communist Party of China (CPC) Central Committee.
Li stressed: “Discipline inspection commissions and supervision agencies should align their thinking and action with the decisions and plans of the CPC Central Committee and further advance full and rigorous Party self-governance to provide a firm guarantee for better fulfilling the Party's mission and tasks on the new journey of the new era”
The preceding three items respectively emphasises the three tools - narrative, ideological alignment and discipline, among many others apart from coercive means, that the party uses to ensure sustain itself.
Section C: Economy and Tech
This section is brought to you by Anushka Saxena
The following stories were of interest from the past week :
The big story is that on 27 February, the US White House Office of Management and Budget released a ‘Memorandum for the Heads of Executive Departments and Agencies’, which effects that the Chinese app ‘TikTok’ is to be uninstalled from the devices of all government staff and contractors within a 30-day period.
The Memorandum highlights: “The Consolidated Appropriations Act, 2023, enacted the ‘No TikTok on Government Devices Act’… which instructs the Director of the Office of Management and Budget, in consultation with the Administrator of General Services, the Director of the Cybersecurity and Infrastructure Security Agency, the Director of National Intelligence, and the Secretary of Defense, to develop standards and guidelines for agencies requiring the removal of TikTok from Federal information technology.”
The Memorandum additionally instructs that Federal staff shall also have to “Prohibit internet traffic from IT owned by agencies to a covered application” (here, TikTok and its parent company, ByteDance). There is, however, no instruction on how this can be achieved or whether after installation, ‘internet traffic’ will still be a problem or not.
The Act, however, permits limited exceptions to the restrictions outlined in this memorandum for law enforcement activities, national security interests and activities, and security research. It instructs that agencies should limit the use of exceptions outlined within “this section” (‘IV. Exceptions’) to instances in which the use of a covered application is critical to their mission and alternative approaches are not viable. Agency heads, who are responsible for enforcing the Act, are themselves exempted from the restrictions.
On Exceptions, the memorandum even goes so far as to say that “Blanket exceptions applying to an entire agency are not permitted,” and that there will be a review for each and every case where a Federal staff member with a device on which the restrictions are indeed applicable, still wants to keep the app installed. Overall, the exceptions are also meant to last for only a year, after which the Office shall either renew or terminate them.
These developments come in the backdrop of an intensifying crackdown on the Chinese owned and operated software platforms in the US.
On 28 February, the US House Foreign Affairs Committee also debated a bill that would allow the president to completely ban TikTok in the US. The bill was introduced by the committee’s chair Rep. Michael McCaul (R-Texas) who has expressed concerns that the social media app was giving the Chinese government “a back door into our phones.”
The Bill also proposes that TikTok and ByteDance have the capability to conduct ‘Election Interference’ within the US, and the paranoia and suspicion is justified given the history of election interference during Donald Trump’s 2016 election, which saw Russia deploying Facebook to influence voters.
In March, TikTok CEO Shou Zi Chew is also set to testify before the US House Energy and Commerce Committee on the app’s data handling policies, privacy measures and its relationship with the Chinese government.
Observers must also watch out for ‘Project Texas’, Shou Zi Chew’s answer to the US Congress’s security concerns. Through the Project, TikTok in the US would maintain local data servers disallowing any flow of information of American users outside the country, and these servers will reportedly be owned by Oracle. Moreover, as part of the Project, TikTok might also reveal its algorithm to the US agencies for greater transparency.
It is interesting also to note that in tandem with US regulations, Canada on 28 February has also issued guidelines to remove TikTok from government-issued devices. After governmental deliberations on and review of ByteDance Canada, the Chief Information Officer of Canada determined that TikTok presents “an unacceptable level of risk to privacy and security.”
The Canadian Prime Minister, Justin Trudeau, taking a strong stand on the issue, did not rule out further action against TikTok. He said: “I suspect that as government takes the significant step of telling all federal employees that they can no longer use TikTok on their work phones, many Canadians from business to private individuals will reflect on the security of their own data and perhaps make choices.”
Next, a report released on March 1 by Fitch Ratings, a New York-based finance and insurance company, highlights that investors in China are adjusting their future plans due to an increased perception of risk caused by failing Wealth Management Products (WMPs).
In China, WMPs refer to uninsured financial products like bonds issued by Chinese banks to companies and individuals/ families at high-interest rates, and they are accompanied by assured guarantees of return. However, the Fitch report highlights that year-on-year, between 2021 and 2022, successful WMPs have declined from 25 per cent to 23 per cent of nominal GDP. Overall, they have seen a 5 per cent decline.
The report adds: “The falling WMP yield likely depressed investor appetite and underpinned the unusually high retail bank deposit growth in 2022. Investors have reduced their risk appetite towards WMP sales in recent years, as 28% invested in level 1 (lowest risk category) WMPs as of end-2022, higher than the 12% at end-2020.” Hence: “Sustained improvement in WMP transparency and the elimination of implicit guarantees would be positive for our [Fitch’s] assessment of China‘s bank operating environment score and may widen the headroom for bank Viability Ratings [a comprehensive score that determines the future viability of a bank/ corporation].”
The adjusted investment and risk-appetite plans indicate a downward spiral for investor confidence in China, and needs to be leveraged through improved transparency and fiscal adjustment through government interventions. The Chinese government has often intervened in bank bonds to protect investors, and still, WMPs have failed. Hence, a substantive shift in economic policy is essential to enhance scope for future investments.
This development is accompanied by comments made on March 1 by the American Chamber of Commerce in Shanghai’s President Michael Hart, who argued that “A year ago, 60% of companies said China was the top or a top 3 investment priority and this year that’s fallen to 45%.” He also added: “China is falling in the rankings as a place for people to invest globally. It’s still important but not one of the top destinations for the majority of companies.”
Bloomberg reported in tandem with Hart’s comments that “Overall, American companies in China turned much more pessimistic over the past year, the data showed, with more than half of firms saying they wouldn’t be profitable in 2022.” This is attributable to restrictions placed by the Zero-COVID policy in China.
We at the Takshashila Institution have conducted our own research and iterative analysis on the matter, and have only recently released a Position Paper titled “Chinese Economy: A Bird’s Eye View,” covering major trends, developments, data indicators, policy shifts and future policy projections for China’s Economy. Interested readers may click the button below:
Political developments are equally to look out for when studying how businesses in China are interacting with the party-state. As per an article by Forbes from 27 February, “This week, the CCP cell inside the Beijing office of Big Four accounting firm EY demanded that party members wear CCP badges at work in the run-up to China’s annual parliamentary meetings.”
The article added: “Recently, the China Securities Regulatory Commission began requiring the creation of CCP cells in foreign financial firms as well. Within Chinese corporations, CCP committees serve as labor unions. In some cases, they function as a way to install a party member in a corporation’s executive ranks.” This process is also undertaken by the CPC buying ‘golden shares’ within various companies, even with external stakeholders, that allow party officials a seat on the board and allows them to make influential decisions.
Such expansive control over the private economy in general and foreign firms in specific may not necessarily mean that CCP committees influence the direction of a firm and or have a formal role in their day-to-day activities, but it is being increasingly viewed as suspicious by foreign governments, who may encourage their firms to align more with national security interests that the latter’s own profit-related interests. Subsequently, excessive state interventionism may also raise an alarm among corporations and discourage them from continuing to operate in the country.
SCMP reports that on 25 February, “Economist Zhou Xiaochuan [former governor of the People’s Bank of China] told a wealth management forum in Beijing that pressure on the pension system was building as the country’s vast population aged.”
“He said the state pension pool amounted to several trillion yuan, or less than 10 per cent of the country’s gross domestic product (GDP), well below the 50 to 100 per cent of GDP in “most countries”.”
Amidst reports highlighting a decline in the Chinese population for the first time in six decades, as well as an overall increase in the ‘Age Dependency Ratio’ [individuals dependent on the workforce aged 15-64] from 38 per cent to 44 per cent under Xi Jinping (2013-2021), China’s pension pool is likely to see a massive hit. The total Unemployment rate has also remained stable at around 5 per cent between 2018 and 2021, with no reprieve.
In addition to arguing that “State pensions will guarantee the basics and will not be too high; in other words, a relatively large gap will be largely supplemented by private pensions,” Zhou also said that depending on life expectancy, retirees could have a standard of living of about 70 or 80 per cent of what they had when they were still working.
Hence, in the context of China’s policy emphasis on high development growth and high-quality living, both, the conditions for future retirees and the current working population need to be addressed through structural reforms.
This would have to include the expansion of incentives provided by Chinese banks under the CPC’s ‘Private Pensions Scheme’, which was launched in November last year with tax breaks of up to 12,000 yuan (US$1,725) each year per person to encourage workers to contribute.
The report published by the party announcing the scheme acknowledged that “the aging population has put great pressure on the social security fund as seniors' needs for services, such as healthcare, grow after retirement.” Hence, Li Zhong, vice-minister of human resources and social security, rightly said after the announcement, that “private pensions are [and will continue to become] significant as they provide individuals with another source of income after retirement to help them enjoy a better quality of life.”
Next, in a report from 28 February featuring comments by Jonathan Edwards, Managing Director of a global recruiting company Antal based in Shanghai, SCMP highlighted that “China’s efforts to bolster its abilities in science and engineering are being hampered by frustration among expats about the way the government handled the coronavirus pandemic.”
Edwards was quoted as saying, “[the] demand for foreign talent in China has slowed over the past two years and, given the global economy is weakening, the outlook for the nation’s recruitment drive is mixed… I think people are waiting to see if this policy is going to stick … the number of flights is still restricted compared to how it was and also the price of flights as well.”
He also commented: “It’s not just the case of opening up normally. There’s part of a trend of localisation as well – the fact that China doesn’t need as many expats as they needed in the past.”
As both China and the US are embroiled in a quest for self-sufficiency in high-technologies, and the former has become a target of sanctions and curbs on critical technological imports from the latter, the need to boost talent and attract skilled personnel from all over the world has risen. China is especially paying focus to attracting talent in science and technology, because of its perception that the US and the West have placed a ‘stranglehold’ on its scientific advancement.
The SCMP report also quoted Yasheng Huang, an MIT professor, as acknowledging that “Modern science is extremely expensive and it is both capital and labour intensive…Compared with other countries with a similar income level, China spends far more on research and development and China has deep talent.”
This may not necessarily be the direct the case if one looks at the numbers on government spending on R&D as a percentage of GDP in 7 years between 2013-2020, which have remained stagnant at around 2 per cent even as Chinese GDP has continued to grow.
In this light, Chinese Premier Li Keqiang has already kickstarted the year by promising in his comments at a Beijing-based symposium in January 2023, that “Efforts will be made to optimize the country's work permit, visa and residence policies for foreign talent and improve policies relating to issues such as tax, the purchase of foreign currencies, medical insurance and services as well as the admission of foreigners' children to school.” Hence, it is likely that we will see a continued effort toward attracting foreign talent and capital, to both, attain self-sufficiency and boost investor confidence.
Moreover, China disagrees that it has become an unattractive place for expats and foreign talents. In an article published as a retort to SCMP’s report on 1 March, Global Times argues that as per a new report published by HSBC, “In the Chinese mainland, 75 percent of respondents in [a] study indicate that they would stay within the next 12 months, and this proportion ranks among the highest across the nine markets surveyed which is on average of 61 percent, demonstrating that the market of Chinese mainland is attractive to international citizens.”
The HSBC study was also quoted as saying that “with the recovery of global travel, over a third or 34 percent of respondents currently living abroad plan to either return home or move to another destination within the next 12 months, whilst almost two-thirds or 61 percent plan to stay in their current host location.”
Moreover, “HSBC expects that demand for cross-border financial services and international asset allocation will be further stimulated, and professional and convenient international banking services will support the diversified demands of international businesses and individuals, further accelerating the international connectivity of businesses and people.”
China believes that it has now won a victory over COVID-19 and consequently, any fears regarding restrictions on business activity and scientific progress must be allayed. In this regard, HSBC’s numbers may point to some stability in the Chinese foreign talent market, if not absolute positive growth.
Finally, as regulatory compliances on the functioning of private sector entities in tech have intensified within China, exclusive sources from Caixin global have said that Yang Jun, Vice-President in charge of risk control at Tencent Financial Technology, is set to leave the company soon.
The regulatory compliances under question concern party control over financing services deployed by platform economy companies. The move, Caixin highlighted, is meant “to reshuffle their [Tencent/ WeChat/ even Ant Group] sprawling financial services and apply for a financial holding company license as part of Beijing’s campaign to rein in financial risks.”
The report also added: “Further supervision of the internet sector will be normalized, Guo Shuqing, Communist Party secretary of the People’s Bank of China, said in January [2023].” Caixin has learned that regulators have launched several rounds of discussions with Tencent over its financial business restructuring, but a final plan has not been settled.
Tencent Financial Technology’s core businesses include Tencent’s payment service WeChat Pay, a wealth management platform Licaitong and a micro-loan service. The formation of a financial holding company is still a pending issue for Tencent’s financial business overhaul. Unlike rivals like Alibaba Group and JD.com Inc., which spun off financial service assets into independent entities, Tencent’s financial businesses are still scattered inside the group, hindering the restructuring progress.
As per the understanding generated by Stanford’s DigiChina Forum earlier this year, China is not exercising a ‘crackdown’ on tech with the purpose of decimating the platform economy (with the exception of EdTech, which was coerced to go non-profit). Rather, it is directed at “curbing excesses” in the financial services sectors of the digital economy.
Before Tencent, Alibaba and Ant Group also had to comply with resulting regulations, where fintech giant Ant Financial was forced to halt its IPO as a state-market power balance played out. DiDi also faced an IPO review last year, and the sense is that now, the ‘tech crackdown’ is finally over.
Interested readers may also skim through a report published by ChinaDaily on 2 March, which carried comments from Chinese Minister of human resources and social security Wang Xioping’s news briefing in Beijing. He argued that China's job market had a good start in the first two months of 2023 and is expected to stay stable this year as the country's economy continues to recover, with fundamentals remaining sound and the government taking effective measures to support employment. Yu Jiadong, the Vice-Minister of human resources and social security, also acknowledged at the news conference that employment pressure comes from a large working-age population, though the nation faces slower population growth.
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 weeks, which are worth capturing in this week’s section.
More on Chinese FM Qin Gang’s meeting with Indian counterpart S. Jaishankar
On Thursday, the Chinese Foreign Minister met his Indian counterpart S. Jaishankar in New Delhi on the side-lines of the G20 summit. It is Qin's first meeting with Jaishankar since becoming the Chinese foreign minister in December 2022.
The Mint reports: “This is Qin's first visit to India. India-China relations are at their lowest point in six decades following the brutal clash at Galwan Valley in June 2020.”
Qin, during his meeting with Jaishankar, was quoted as saying: “India needs to look at relations in the context of once-in-a-century changes in the world and to put the border issue in the proper place.” This is China’s regular rhetoric on separating the border issue from other elements of the relationship.
Author and journalist Ananth Krishnan writes on the meeting: “As much as Beijing is trying, with several countries, to use the new third term to start afresh - note the recent thaws with Australia and Japan - a major thaw with India appears unlikely for now unless there is a significant change in Beijing's posture on the border.”
Belarusian president visited China with trade ties and Ukraine crisis in focus
Belarusian President Alexander Lukashenko arrived in Beijing on 28 February for a three-day state visit, during which he met his Chinese counterpart Xi Jinping.
Le Monde reports: “In power since July 1994, Lukashenko is on his thirteenth visit to China. In September 2022, the two countries decided to raise their relationship to the level of a "comprehensive strategic partnership under all conditions. The West fears that this new visit could be an opportunity for Beijing to support Russia indirectly by helping a nearby country that is also subject to sanctions.”
The Global Times reports: “The two sides agreed to deepen comprehensive cooperation under the framework of the BRI, unleash the potential of cross-border transport such as the China-Europe Railway Express, steadily increase bilateral trade, expand direct investment and promote the high-quality development of the China-Belarus Industrial Park. The two sides will cooperate in defence, judicial and other fields to jointly fight transnational crimes, terrorism and prevent a color revolution. They will carry out all-round cooperation within multilateral frameworks, and China supports Belarus in becoming a member of the Shanghai Cooperation Organization as soon as possible.”
President Xi Jinping was quoted as saying during the meeting that “the world is experiencing profound changes unseen in a century. And Beijing appreciates Minsk's support for the Global Development Initiative and the Global Security Initiative. He says China is willing to strengthen coordination and cooperation with Belarus on United Nations' multilateral platforms while jointly coping with global challenges and building a community with a shared future for mankind.”
Cui Hongjian, Director of the Department of European Studies at the China Institute of International Studies, is of the opinion that “Lukashenko’s visit will make China better aware of Belarus' position on the Russia-Ukraine conflict. It will be very constructive for China to grasp the whole situation of the crisis and play a better role in promoting a political settlement.”
Lukashenko's visit to China is to be seen in the context of Minsk getting more isolated in Europe and being at the receiving end of European Union sanctions for its support of the Russian war in Ukraine, and its violent repression of domestic political opposition.
Chinese Premier Li Keqiang’s phone conversation with IMF Managing Director Kristalina Georgieva
Chinese Premier Li Keqiang had a telephonic conversation on 1 March with Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva. Li Keqiang expressed China was willing to "constructively" participate in multilateral efforts to help debt-laden countries.
The SCMP reports: “China, the largest bilateral creditor to the world’s poorest states, has been in disputes with multilateral lenders over which parties should spearhead efforts to restructure sovereign debt. It had earlier urged Group of 20 (G20) countries to conduct a fair, objective and in-depth analysis of the reasons behind global debt issues and to resolve problems in an effective manner.”
World Bank president David Malpass said, “At the end of 2021, China was the largest bilateral creditor to World Bank’s International Development Association countries, accounting for US$100 billion of their bilateral debt stock, up from US$15 billion in 2010.”
During the call, Li underpinned China’s commitment to bridging the North-South divide. Li said: “Last year, unexpected factors such as the COVID-19 pandemic had a significant impact on China's economy [but] the government responded quickly and decisively, implementing established policies and measures ahead of schedule, and introducing a package of policies and ongoing measures to stabilize the economy, thereby also stabilizing the macroeconomic market.”
Li further added: “The Chinese economy has grown at an average annual rate of 4.5 percent, higher than the world average. Throughout the year, cities and towns have added over 12 million new jobs adding that in the face of high global inflation, the consumer price index increased by only 2 per cent. China’s economic growth is stabilizing and rebounding, with vast development potential in the future.”
Georgieva appreciated China's constructive role and said: “China has made a positive contribution to the world economy and will continue to serve as a powerhouse for global growth. IMF would enhance coordination and cooperation with China.”
Through Li Keqiang's conversation with Kristalina Georgieva, China potentially wishes to show its willingness to work within the existing multilateral framework and negate the accusation by the West that it is against the rule of law and existing international institutions.
CCP delegations visiting Malta and Tanzania
Guo Yezhou, deputy director of the International Liaison Department of the CPC Central Committee, led a CPC delegation to visit Malta from 28 February to 2 March. At the invitation of the Maltese Labour Party. During the visit, he met foreign minister Ian Borg and other leaders of the ruling and opposition parties. Both sides agree to deepen cooperation and create new opportunities between China-Malta and EU-China.
Li Mingxiang, deputy director of the International Liaison Department of the CPC Central Committee, led a CPC delegation to visit Tanzania along the same dates at the invitation of the Tanzanian Revolutionary Party. Li held a meeting with Chairman and President Hassan of the Tanzanian Revolutionary Party, Vice Chairman Kinana, General Secretary Jonggro, and President Kiriga, Dean of the Nyerere Leadership Institute.
People Daily reports on the meeting carry comments from the Tanzanian delegates: “The 20th National Congress of the Communist Party of China has brought historical opportunities for Tanzania-China and Africa-China cooperation and is willing to strengthen exchanges and mutual learning with China, deepen pragmatic cooperation, and promote the development of bilateral relations.”
CCP delegations’ visits to Malta and Tanzania highlights its endeavour not only to deepen its ties with the countries but also with the political parties of the respective countries to deepen its connection and have a greater ability to influence the policymakers in China’s favour.
Finally, on the US-China-Taiwan equation and the COVID ‘lab-leak’ theory, an interesting question and its response by Mao Ning, China’s Foreign Ministry Spokesperson, on February 28, 2023:
The Paper asked: “US Secretary of State Antony Blinken said a few days ago that “one of the reasons that the world is so concerned about a crisis across the Taiwan Strait is because this is not an internal matter, as China would have it, based on its sovereignty. It’s a matter of concern to quite literally the entire world” and that “if there were a crisis in Taiwan as a result of China’s aggression in some fashion, that would have I think disastrous consequences for the world economy and for countries around the world”. What is your response?”
Mao Ning: Secretary Blinken’s remarks are absolutely irresponsible and absurd. China firmly opposes that. It seems that some history lessons are in order for the top US diplomat on the Taiwan question. Taiwan has been an inalienable part of China since ancient times. The ‘One-China’ principle is a universally recognized basic norm in international relations and the important political prerequisite and foundation for China’s diplomatic relations with countries in the world.
In 1972, the US stated in the Shanghai Communiqué that “The United States acknowledges that all Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is a part of China. The United States Government does not challenge that position.”
In 1978, the US stated in the Joint Communiqué on the Establishment of Diplomatic Relations between the United States of America and the People’s Republic of China that “The United States of America recognizes the Government of the People’s Republic of China as the sole legal Government of China. The Government of the United States of America acknowledges the Chinese position that there is but one China and Taiwan is part of China.”
In 1982, the US stated in the August 17 Communiqué that “the United States of America recognized the Government of the People’s Republic of China as the sole legal Government of China, and it acknowledged the Chinese position that there is but one China and Taiwan is part of China. The United States Government...reiterates that it has no intention of infringing on Chinese sovereignty and territorial integrity, or interfering in China’s internal affairs, or pursuing a policy of ‘two Chinas’ or ‘one China, one Taiwan’.”
The US made those political commitments to China on the Taiwan question, which are written down in black and white.
For some time, the US has been deliberately ignoring and twisting the history and sending the wrong message on the Taiwan question. The US has significantly relaxed its restraint on official interactions and reinforced military contact with Taiwan and touted “Ukraine today, Taiwan tomorrow”. It has even been revealed by the media that the US government has a plan for “the destruction of Taiwan”. We cannot help but ask, what exactly is the US trying to achieve?
I need to stress again that the Taiwan question is purely China’s internal affair. It is at the very core of China’s core interests. It is the political foundation of China-US relations, and the first red line that must not be crossed in this relationship. China will never allow any external force to interfere in our internal affairs. We have a clear message for the US: It is time to stop - stop walking on the edge, stop using the salami [slicing] tactics, stop pushing the envelope, and stop sowing confusion and trying to mislead the world on Taiwan. If the US refuses to change course and goes down that wrong path, there will be real consequences and it will come at real costs to the US.
Reuters asked: “US Ambassador to China Nicholas Burns said recently that China should be more transparent about origins-tracing of the pandemic. What’s China’s comment?”
Mao Ning: On the origins-tracing of SARS-CoV-2, China has been open and transparent, and shared information and data on COVID-19 with the international community in a timely manner [China’s usual rhetoric']. China is the only country that has invited more than once WHO expert groups to come into the country to conduct joint origins study. China has shared more data and research findings on SARS-CoV-2 origins study than any other country, making important contribution to global origins-tracing.
It is the US who should respond to the world’s questions and concerns over Fort Detrick and its military and biological labs across the world. By politicizing the issue, the US will not succeed in discrediting China. Instead, it will only hurt the US’s own credibility.
As US ambassador to China, Mr. Burns needs to do more to help improve China-US relations and promote mutual understanding between the two peoples, rather than the opposite.
Before you go further, please tune in to the latest episode of Takshashila’s daily podcast, All Things Policy. In this episode, we provide a background to reforms in the Chinese PLA, discuss PLA’s military drills and joint operations capabilities, and highlight in brief why this is important for India.
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Section E: Military Developments in China
This section is brought to you by Anushka Saxena
In this section, there are two big stories to cover this week :
On 27 February, the PLA Navy came out with a promotional video highlighting details of its recruitment plans for the year 2023. The video has since gained much traction as it gives a first-time glimpse of what the PLA’s latest next-gen carrier-based fighter aircraft looks like.
Despite the blurred frame, the general aerodynamic design of this aircraft shows that it is a stealth fighter jet, Song Zhongping, a former PLA instructor and TV commentator, told the Global Times on 28 February.
He did not provide any clarity on whether this was what analysts are speculating is China’s new fighter jet, the J-35. Currently, the only carrier-based fighter jet China possesses is the J-15.
Previously, in October 2021, foreign media outlets also reported rumours of a prototype J-35 carrier-based stealth fighter jet making its maiden flight. The reports said the J-35 was developed based on China’s second stealth fighter jet, the made-for-export FC-31, with analysts arguing that it could rival the US's F-35. Chinese authorities are yet to confirm this development.
Song was also quoted as saying that the new fighter jet will likely operate not only on China's third aircraft carrier, the Fujian, but also on the Liaoning and the Shandong.
The promotional video has also made big announcements regarding many firsts in its recruitment policy for 2023 - the first time the PLAN recruits female carrier-based aircraft pilots and selects students outside of military academies for this position, and the first time it holds 15-hour flight tests for the recruits. Historically, the carrier pilot program was restricted to graduates of China's military service academies.
These particular ‘firsts’ should be analyzed in the context of an increasing focus on recruiting highly skilled and trained personnel in the PLAN, with degrees in science and technology, may it be from a military or a civilian graduate college. The goal is to contribute talent to the agenda of the naval fleet’s complete modernization and intelligentization by 2050.
Yet another development in the US-China back-and-forth in the Taiwan Strait occurred on 27 February, as a US P-8A anti-submarine patrol aircraft flew through the Taiwan Strait.
Senior Colonel Shi Yi, the spokesperson for the Chinese PLA Eastern Theater Command, released a statement on Monday, declaring that “the PLA Eastern Theater Command had organized troops to track and monitor the US aircraft in the whole course, and had everything under control.”
But that is not all. The next day, on 28 February, the PLA Ground Force deployed the PHL-16 Multiple Launch Rocket System (MLRS) in its 73rd Group Army of the Eastern Theatre Command.
Janes reported that a video clip released by state-owned broadcaster China Central Television (CCTV) confirms at least two PHL-16s in service with the PLAGF's 73rd Artillery Brigade of the 73rd Group Army. The system is manufactured by China North Industries Group Corporation (NORINCO).
The Taiwan issue is trailblazing again as Senior Colonel Tan Kefei, spokesperson for China's Ministry of National Defense, at a regular press conference held on 23 February, again reiterated that “Taiwan is part of China, and the Taiwan question is an internal affair that the Chinese people will resolve on their own at their own discretion, without brooking any foreign interference.”
This was apparently in response to conflicting claims and heightened speculations among US officials regarding the timeline for a potential Chinese invasion of Taiwan.
As per recent reports, while the Director of the US Central Intelligence Agency recently claimed that the PLA has been ordered to get ready for attacking the Taiwan Island before 2027, in contrast, the US Assistant Secretary of Defense for Indo-Pacific Security Affairs said at a Congress hearing that he was confident that the Chinese mainland won’t make any major “aggression” against the Taiwan region before 2030, while US Air Force Chief of Staff said he didn’t think the mainland's “aggression” of Taiwan is pressing or inevitable.
More importantly, now that on March 1, Washington announced a sale of arms worth 619 million to Taipei, the situation may continue to heat up and may see more incursions from China in Taiwan’s ADIZ.
The official press release from the US Department of Defense’s Security Cooperation Agency reads: “The [US] State Department has made a determination approving a possible Foreign Military Sale to the Taipei Economic and Cultural Representative Office in the United States of F-16 Munitions and related equipment for an estimated cost of $619 million. The Defense Security Cooperation Agency delivered the required certification notifying Congress of this possible sale today.”
It also adds: “This proposed sale serves U.S. national, economic, and security interests by supporting the recipient’s continuing efforts to modernize its armed forces and to maintain a credible defensive capability. The proposed sale will help improve the security of the recipient and assist in maintaining political stability, military balance, and economic progress in the region.”
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: Manoj Kewalramani
Chinese Domestic Politics: Amit Kumar
Economy and Tech: Anushka Saxena
Foreign Policy Watch: Kingshuk Saha
Military Developments in China: Anushka Saxena