India-China Roads & Trade - Doklam Village - Research Vessel in SL - Tensions over Taiwan - Xi's Big Speech ahead of 20th Congress - Politburo Discusses Economy & COVID Policy - Wang Yi at SCO
Hi folks,
Before we get into this week’s newsletter, I’d like to share that I am excited and honoured to be testifying before the US-China Economic & Security Review Commission on August 3, discussing the zero-COVID policy. You can watch the hearing at the link in the tweet below. The full written testimony should be available after the hearing.
I. India-China Ties
In its monthly press briefing, the Chinese defense ministry discussed the 16th round of Corps Commander-level talks between India and China to address the tensions in Eastern Ladakh. Senior Colonel Wu Qian said that the two sides had reached a four-point consensus, which entailed:
First, adhering to the political guidance and earnestly implementing the important consensus reached by the leaders of the two countries;
Second, focusing on the overall situation and maintaining the resumption momentum of bilateral relations;
Third, effectively managing and controlling differences, and safeguarding the security and stability in border areas until the issue is solved;
Fourth, maintaining communication and dialogue, and reaching a mutually acceptable solution as soon as possible.
If one reads through the joint statement issued after the meeting earlier this month, it does not talk about maintaining the resumption momentum of ties. It says: “The two sides reaffirmed that the resolution of remaining issues would help in restoration of peace and tranquility along the LAC in the Western Sector and enable progress in bilateral relations.”
Meanwhile. SCMP reported last week that “China plans to build a new highway close to its disputed border areas with India, as part of Beijing’s efforts to strengthen its strategic position and project its power…The highway, running from Lhunze county in Tibet to Mazha in Xinjiang, is among 345 construction plans proposed in the new national programme, which aims to build a total of 461,000km (286,400 miles) of highway and motorway by 2035, as China seeks to revive its faltering economy and boost consumer spending through infrastructure investment. Under the plan released last week, the highway known as G695 is expected to run through southern Tibet’s Cona county – which lies immediately north of the disputed India-Tibet border demarcated by the Line of Actual Control (LAC) – Kamba county, host of a noted military camp, and Gyirong county near the border with Nepal. It will also go through Burang county between Tibet, Nepal and India as well as Zanda county in Ngari prefecture, parts of which are held by India. Details of the new construction remain unclear, but the highway, when completed, may also go near hotly contested areas such as the Depsang Plains, Galwan Valley and Hot Springs on the LAC.”
There’s also fresh data on Indian road-building activity. Ajay Bhatt, Minister of State for Defence, informed the Rajya Sabha on Monday that the government had built altogether 3,595.06 km of border roads along India’s boundaries with its neighbours – China, Pakistan, Myanmar, Nepal and Bangladesh. He added that 2,088.57 km of all-weather roads out of the total length of 3,595.06 km of border roads built in last five years had been constructed along the India-China boundary.
Moving on to trade, Union Minister of State for Commerce and Industry Anupriya Patel told Lok Sabha this week that India’s total imports from China increased by nearly 29% in the past five years. Compared to 2017-18 and 2021-22, the annual imports from China rose from USD 89714.23 million to USD 115,419.96 million.
A large portion of the total imports are animal or vegetable fats; ores, slag and ash; mineral fuels, inorganic chemicals, organic chemicals, fertilizers, tanning or dyeing extracts, miscellaneous chemical products, plastic and articles, paper and paperboard, cotton, textile fabrics, footwear, glass and glassware, iron and steel, copper; nuclear reactors, boilers, machinery, and mechanical appliances; electrical machinery, furniture, among others, government data showed.
Next, let’s look at what Chinese analysts have been saying about INS Vikrant, which was recently handed over to the Indian navy. Chinese military expert Song Zhongping compared the INS Vikrant to China’s Liaoning carrier. He told the Global Times that “the Liaoning is a large carrier while the Vikrant is only a medium-size carrier. In addition, the Liaoning has stronger carrier-based aircraft capabilities than the Vikrant.”
In May, Adil Brar had noted a PLA article on the INS Vikrant. In his translation, he wrote:
“‘The second is to boost the implementation of India’s ‘two oceans’ strategy. At present, India’s only aircraft carrier Vikramaditya is deployed in the western waters of India. After the INS Vikrant aircraft carrier is commissioned, it will strengthen the control of the waters east of India and promote India’s ‘Eastward Strategy’ implementation, thereby expanding India’s influence in Southeast Asia and the Asia Pacific’, wrote author Hong.”
Moving to a couple of reports on India and China’s engagement in the neighbourhood. First, Indian army chief General Manoj Pande visited Bhutan this week. The visit came amid a new NDTV report of Chinese construction and village-building along the Doklam plateau. The report says:
“New satellite images accessed by NDTV indicate that a Chinese village, constructed 9 km East of the Doklam plateau where Indian and Chinese forces faced off in 2017, is now fully inhabited with cars parked at the doorstep of virtually every home. Significantly, the village, which Beijing calls Pangda, lies squarely within Bhutanese territory, details of which were first reported by NDTV in 2021. Alongside Pangda is a neatly marked all-weather carriageway, part of China's extensive land-grab in Bhutan. This cuts 10 km into Bhutanese territory, along the banks of the fast-flowing Amo Chu river. For India, construction along the Amo Chu means that Chinese forces could end up getting access to a strategic ridge in the adjacent Doklam plateau. This would give them a direct line-of-sight to India's sensitive Siliguri corridor, the narrow sliver of land that connects the northeast states with the rest of the country.”
In Sri Lanka, meanwhile, the country’s Ministry of Defence on Saturday confirmed that a Chinese research vessel will be docking at the Hambantota port “from August 11 to 17, mainly for replenishment, including fuel.” The Hindu’s Meera Srinivasan reports:
“Reports of the vessel — Yuan Wang 5 — involved in space and satellite tracking, came to New Delhi’s notice earlier this week, when External Affairs Ministry spokesman Arindam Bagchi told the weekly media briefing that India ‘carefully monitors any development having a bearing on its security and economic interests’. Soon after, China said it hopes that ‘relevant parties’ would refrain from interfering with its ‘legitimate maritime activities’, news agency Reuters reported. The remark indicated that the Chinese vessel’s arrival could potentially leave Colombo caught between New Delhi and Beijing’s interests once again.”
Also worth noting is this interview by Sri Lanka’s ambassador to China. Ambassador Palitha Kohona says that:
“Colombo wants China to ask its companies to buy more Sri Lankan black tea, sapphire, spices and garments and to make Chinese import rules more transparent and easier to navigate. He said Beijing could also help by pouring further investment into vast China-backed port projects in Colombo and Hambantota. Major Chinese investment plans had not materialised because of the COVID-19 pandemic, Kohona said. In addition, Sri Lanka would like to see more Chinese tourists, whose numbers fell from 265,000 in 2018 to almost zero after the 2019 suicide attacks and the pandemic. Kohona said new Sri Lankan President Ranil Wickremesinghe has plans to visit China to discuss cooperation on matters including trade, investment and tourism.”
Finally, given all the furore around Nancy Pelosi’s likely visit to Taiwan, here’s a piece from the Global Times that reminds India of the 1962 war. It begins by telling us:
“‘Don't say we didn't warn you!’ - a phrase that was used by the People's Daily in 1962 before China was forced to fight the border war with India and ahead of the 1979 China-Vietnam War, was frequently mentioned during a forum held Friday by a high-level Chinese think tank, as analysts warned that open military options and comprehensive countermeasures ranging from the economy to diplomacy from China await if US House Speaker Nancy Pelosi gambles with a visit to the Taiwan island during her Asia tour.”
Also Read:
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Exclusive | No measures planned against Chinese trade and investments, officials say
The Indian government must stop appeasing China to protect its image
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II. Road to the 20th Party Congress
Reports inform that Communist Party officials are preparing for the retreat meeting at Beidaihe. Ahead of that meeting, there were a bunch of key developments this week, which signal that Xi remains firmly in power. In fact, this was quite a busy week for the Chinese leader. There was a study session with provincial and ministerial-level officials, a Politburo meeting on the economy, the 41st Politburo study session, and the central conference on the United Front. I am going to cover all of these.
First, Xi addressed a study session of provincial and ministerial-level officials held from Tuesday to Wednesday in Beijing. The session was held to study the gist of Xi’s remarks about the 20th Party Congress. Xinhua English put out a detailed report on Xi’s comments at this meeting. Read this as a big campaign speech.
Here’s what Xi said:
The 20th Congress is of “great significance, as it will be held at this crucial moment when we embark on the new journey to build China into a modern socialist nation in all respects. At the congress, we will lay out goals, tasks, and major policies for developing the cause of the Party and the country in the next five years or even longer periods to come, which are pivotal to the further development of the Party and the country's cause, the future of socialism with Chinese characteristics, and the realization of national rejuvenation.”
“Xi noted that to plan and advance the work of the Party and the country, we must thoroughly review the international and domestic situations to have a clear understanding of the strategic opportunities, risks and challenges we face. At present, profound changes unseen in a century are evolving rapidly across the world, exhibiting more distinctive features of our world, our times, and the historic change we are facing. China faces new strategic opportunities and new strategic tasks, enters a new strategic stage, and is confronted with new strategic demands and strategic environment for its development. The risks and challenges we are to face and the problems we are to address are more complex than ever before. The whole Party must be more mindful of potential dangers, be always prepared for worst-case scenarios and have a strong will and greater capability to respond to even harder situation. We must formulate right strategies to respond to changes, foster opportunities, and make breakthroughs, and rely on tenacious struggle to open up new horizons for our cause. The most essential is to manage our own affairs well, Xi said.”
Speaking about achievements over the past 5 years, he said:
“We have continued to strengthen the Party's overall leadership and the centralized and unified leadership of the CPC Central Committee. We have worked with full strength to build a moderately prosperous society in all respects, boosted high-quality development and taken swift yet steady steps in advancing reforms. We have promoted the whole-process people's democracy, developed advanced socialist culture and improved public well-being. We have pooled our efforts in eradicating absolute poverty and spurred ecological conservation. We have defended national security, maintained overall social stability, advanced the modernization of national defense and the armed forces, safeguarded peace and stability across the Taiwan Strait, and carried out major-country diplomacy with Chinese characteristics on all fronts.”
“We celebrated the centenary of the founding of the CPC and the 70th anniversary of the founding of the People's Republic of China (PRC), and carried out a campaign to encourage the study of the Party's history among Party members. In particular, in the face of the sudden outbreak of COVID-19, we have put the people and their lives first and launched an all-out people's war to curb the epidemic. We have protected people’s lives and health to the maximum extent and achieved the best performance in the world in coordinating economic development and epidemic response. We have enforced the central government’s overall jurisdiction over the special administrative regions in accordance with the Constitution and the Basic Laws, and formulated and implemented the Law on Safeguarding National Security in the Hong Kong Special Administrative Region, securing a firm control over the overall situation of Hong Kong.”
“Facing the rapid changes in international situation, we have worked hard to safeguard our national dignity and core interests, keeping in hand the initiative in our country's development and security. We have made further efforts to exercise full and rigorous governance over the Party, worked ceaselessly to improve Party conduct and enforce Party discipline, and made coordinated efforts to ensure that officials do not have the opportunity, desire or audacity to engage in corruption. As a result, the Party’s ties with the people have become closer, and a healthy political atmosphere has been fostered and developed within the Party, providing strong political underpinnings for the development of the cause of the Party and the country, Xi said.”
And then there’s this bit on socialism with Chinese characteristics entering the new era since the 18th Party Congress. Worth noting how Xi refers to the thought attributed to him, without being able to mention his own name. At least, he is still unable to refer to himself in third person.
“We have taken a host of strategic approaches, carried out a series of transformative moves and made many breakthroughs and remarkable progress. We have also solved many tough problems that remained unsolved for a long time, accomplished many things of vital importance and long-term significance, and withstood the test brought about by risks and challenges from political, economic, ideological, and natural domains. We have scored historic achievements and historic shifts in the cause of the Party and the country. Such great changes in the first decade of the new era are of landmark significance in the history of the Party, the PRC, reform and opening up, and the development of socialism and the Chinese nation, Xi said. Xi stressed that achieving national rejuvenation will be no walk in the park, and it will take more than drum beating and gong clanging to get there. We must undertake a great struggle with many new contemporary features and be prepared to work even harder toward this goal…Having Marxism as a sound theoretical guide is the source of our Party's distinctive political character and huge political strength, Xi noted. It has been proved that at the fundamental level, the capability of our Party and the strengths of socialism with Chinese characteristics are attributable to the fact that Marxism works. Since the 18th CPC National Congress, changes taking place at home and abroad and developments in practices have presented us with a series of important theoretic and practical questions that urgently require our in-depth answers. We have continued to adapt the basic tenets of Marxism to China's specific realities and its fine traditional culture, forming the Thought on Socialism with Chinese Characteristics for a New Era and achieving a new breakthrough in adapting Marxism to the Chinese context. The whole Party must grasp the outlook and methodology of the Thought on Socialism with Chinese Characteristics for a New Era, and uphold and make good use of its standpoints, viewpoints and methods. We will thus be able to open up new horizons in adapting Marxism to the Chinese context and the needs of our times through great practices in the new era.
From a policy point of view, this paragraph is worth noting:
“The 20th CPC National Congress will envision the two-step strategic plan for building China into a great modern socialist country, with a focus on outlining strategic tasks and major initiatives for the next five years. The next five years are crucial as we set out to build China into a modern socialist country in all respects, and doing a good job during this period is of vital importance to achieving the Second Centenary Goal. We must focus our efforts on addressing unbalanced and inadequate development, and on addressing inadequacies, strengthening areas of weakness, consolidating fundamentals and giving full play to strengths, and work out new approaches and measures for solving our problems.”
He also spoke about self-revolution and strict governance of the Party. Apart from this, I also recommend that people read Li Keqiang’s comments. Xinhua’s report says:
“Hailing Xi’s speech as highly political, theoretical and instructive, Li said that it plays a critical role in helping the whole Party deeply understand the decisive significance of the establishment of both Comrade Xi Jinping's core position on the Party Central Committee and in the Party as a whole and the guiding role of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era; strengthen their consciousness of the need to maintain political integrity, think in big-picture terms, follow the leadership core, and keep in alignment with the central Party leadership; stay confident in the path, theory, system, and culture of socialism with Chinese characteristics; and uphold Comrade Xi Jinping's core position on the Party Central Committee and in the Party as a whole, and uphold the Central Committee's authority and its centralized, unified leadership.”
Meanwhile, the list of delegates to the 20th Party Congress are being published. For instance, this week, the list of 293 elected deputies from central and state organs was published online. Also, do note this Substack, Ginger River Review, by Xinhua journalist Jiang Jiang. He has compiled the full-text official reports delivered by the 31 party secretaries at their local CPC congresses, and the name lists of their elected deputies to the Party’s 20th national congress - available as PDF file and Excel file.
Moving on, the 41st study session of the Politburo focused on “implementing the strategy of strengthening the military by training competent personnel in the new era.” Xinhua’s detailed report on this has Xi saying that since the 18th Party Congress, “great efforts have been made to reassert the political principle of the Party exercising leadership over personnel, to clarify that the cultivation of military personnel must be combat-oriented, to optimize the layout for the development of military personnel, to deepen reform in human resources policies and systems, and to promote openness and integration in talent work. Historic achievements have thus been made in cultivating military personnel.”
“Xi noted that the world has entered a new period of volatility and transformation, and instability and uncertainty are increasing in China's national security landscape. In the next five years, the central task for developing our military is to realize its centenary goal. Efforts should be made to comprehensively strengthen military personnel by increasing their awareness of potential dangers, sense of responsibility and willingness to forge ahead. To ensure the personnel we trained are competent enough to serve the cause of building strong armed forces, it is imperative that we grasp the occupational characteristics of the military service and the laws governing the development of military personnel, and make personnel work more targeted and effective, stressed Xi. We must lay emphasis on political integrity when cultivating, evaluating and appointing personnel, so that the Party's absolute leadership over the military is implemented in the whole process of personnel work, said Xi. He emphasized that the armed forces must always be led by reliable people who are loyal to the Party. Noting that the starting point and ultimate goal of personnel work is to build armed forces that are able to fight and win, Xi called for efforts to enhance the supply of personnel with strong combat readiness in close step with developments in the forms of war. The armed forces should redouble efforts to study modern science and technology, especially military-related high technology, so that they better understand and apply science and technology to make innovations in this regard, and enhance their caliber by improving scientific and technological competence, said Xi.”
Also Read:
China’s Xi Promotes Team of Allies to Influential Posts, Fortifying His Power
China Puts Minister in Charge of Tech Regulation Under Investigation — Xiao Yaqing is first incumbent government minister to be targeted by Chinese anticorruption agencies in years
Xi Focus: Xi stresses unity of Chinese at home, abroad to pool strength for rejuvenation
III. Economic Policy & COVID Containment
On Thursday, the Politburo met to analyse (Chinese language report) the current economic situation, plan economic work in the second half of the year, and review a comprehensive report on the ninth round of disciplinary inspection missions of the 19th CPC Central Committee. The meeting first offered the government’s handling of the COVID and economic situation a positive review:
“It was noted at the meeting that since the beginning of this year, China has been confronted with a complex and challenging international situation, as well as demanding tasks of advancing reform, promoting development, and maintaining stability at home. Under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, we have effectively coordinated COVID-19 response with economic and social development, attaining positive results in COVID-19 prevention and control and making new headway in economic and social development. All of us throughout the country have made strenuous efforts and scored commendable achievements. Still, we have prominent issues to address in pursuing economic development. We should maintain strategic resolve and continue to manage our own affairs well.”
The following points were then emphasised:
Victory comes from perseverance. We should effectively coordinate epidemic response with economic and social development. The relations between both should be viewed in light of comprehensive, systematic and long-term influences and in particular political implications. We should put the people and human life above all else, work to prevent both inbound cases and domestic resurgences and uphold a dynamic zero-COVID policy. Immediate responses and strict measures should be adopted once an epidemic outbreak occurs, so as to ensure resolute and effective control wherever necessary. No let-up is allowed in relevant efforts. We should faithfully carry out the epidemic response policies and measures identified by the CPC Central Committee, ensuring that key sectors with a bearing on economic and social development function well, and that safeguards are in place wherever necessary.
“Macro policies should play a proactive role in boosting demand. Fiscal and monetary policies should be able to effectively offset deficiency in social demand. Utilization of special local government bonds should be optimized and local governments should be encouraged to make adequate and good use of the special debt quota. The monetary policy should help maintain a proper and adequate liquidity supply, increase credit support for enterprises, and make good use of new loans from policy banks as well as their funding for infrastructure projects. Efforts should be made to enhance the stability and international competitiveness of industrial and supply chains, facilitate logistics and ensure smooth transportation, optimize the layout of domestic supply chains, and support central and western regions in improving their infrastructure and business environment.”
More work should be done to safeguard food security, boost the capacity to ensure energy and resource supply, and work out a system for the supply and use of new energy. Actions should also be taken to stabilize the real estate market. Upholding the principle that ‘housing is for living in, not for speculation,’ we will make full and good use of our policy toolkit by adopting city-specific policies, and support people's essential housing needs as well as their needs for better housing. The local governments should be held accountable for ensuring timely delivery of pre-sale housing and maintaining stability of living standards. Efforts should also be made to ensure overall stability in financial markets, appropriately deal with risks from rural banks in some localities, and crack down on financial crimes.
The three-year action plan for the reform of state-owned enterprises will continue to be implemented. To ensure rule-based, sound and sustained development of the platform economy, a special program for platforms to rectify their problems will be completed and routine supervision and regulation over the platform economy will be put in place. A number of investment cases will be given the green light to encourage orderly investment in the area. Efforts will be urged to boost export, expand import and promote the introduction of technology and foreign investment. High-quality Belt and Road cooperation will be promoted as well.
As always, Mao’s on point:
On inspections, the report says: “As the inspection tours have shown, central Party and government departments have been continuously boosting the consciousness of the need to maintain political integrity, think in big-picture terms, follow the leadership core, and keep in alignment with the central Party leadership, staying confident in the path, theory, system, and culture of socialism with Chinese characteristics, upholding General Secretary Xi Jinping’s core position on the Party Central Committee and in the Party as a whole, and upholding the Party Central Committee's authority and its centralized, unified leadership. They have shown conscientiousness, optimism and a strong sense of responsibility, and have made new progress in their work. At the same time, some problems have also been discovered during the inspection tours, which require our close attention and must be effectively dealt with.”
central Party and government departments should play an exemplary role in rectifying problems discovered in inspection missions. It is necessary to strengthen political building, make tireless efforts to thoroughly understand and effectively apply Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, and improve the capacity for political judgment, thinking and implementation.
they must fully implement the plans for comprehensively deepening reform, make them systematically integrated, coordinated and efficient, and continuously modernize China's governance system and capacity.
central Party and government departments should balance development and security imperatives, pursue a holistic approach to national security, and shoulder the political responsibility for warding off risks.
Remaining committed to the principle of being strict in self-governance, Party committees at all levels and disciplinary inspection and supervisory authorities must be held accountable for the full and rigorous governance of the Party, with major leaders and specific departments at all levels being pushed to take on their respective responsibilities.
central Party and government departments will carry out an organizational line for the new era
Later in the week was the State Council’s Executive meeting focussed on effective investment and consumption. Xinhua reported:
“Keeping employment and prices stable is important to the stabilization of the economy, the meeting said, noting that comprehensive measures should be taken to expand effective demand. The key role of effective investment should be given full play in the recovery and development of the economy, said the meeting, adding that the implementation of investment projects under the central budget and the use of local government special bonds should be accelerated. Policy-based and development-oriented financial instruments should be properly adopted, and mainly leveraged to support infrastructure projects in areas such as transport, energy, logistics and agriculture, as well as new types of infrastructure, said the meeting. Efforts should be made to maintain consumption's role as the major economic growth driver, the meeting stressed. With certain exceptions, areas with car purchase restrictions should gradually raise the limit on new cars and ease car purchase qualifications. The second-hand car market should be further developed and tax exemptions for new-energy vehicle purchases should be extended. The government will support people’s essential housing needs as well as their needs for better housing, the meeting noted. Supportive policies for sectors like catering, retail, tourism and transport should be well implemented, it said.”
I thought it would also be worth having a few reports offering analysis of all that has been covered above.
First, this WSJ report by Jonathan Cheng talks about the Chinese leadership relaxing the imperative of the GDP target of 5.5%. It says:
“‘The 5.5% growth target is no longer a must for China,’ Iris Pang, chief China economist at ING Bank, said Thursday, describing the country’s Covid-19 measures as the biggest challenge facing the economy in the remainder of the year. Ms. Pang praised Beijing’s decision to effectively shelve its growth target as a wise move that would avoid the waste and inefficiency of a stimulus drive. Policymakers have ‘implicitly walked back from the original growth target,’ Larry Hu, China economist for Macquarie Group Ltd., told clients after the Politburo meeting. ‘It means that they no longer view 5.5%, or even 5% as achievable for this year,’ he said. While the Politburo called Thursday for local governments to deploy all of this year’s funds raised by issuance of special bonds, it didn’t announce any new bond quotas or pull forward bond quotas allotted for next year, as many economists had expected—suggesting that Beijing isn’t seeking to dramatically stimulate growth. As of the midway point of the year, Chinese local governments had already issued 93% of this year’s allocation of special bonds, according to the Finance Ministry.”
Another report on the topic by Cheng and Stella Yifan Xie, says:
“‘It’s clear that Beijing has lowered its desirable growth target, in large part because they see the price associated with large-ticket stimulus to be too costly,’ said Zhennan Li, chief China economist at AllianceBernstein, who expects gross domestic product to expand this year by about 4%. Most economists say China, having refrained from large-scale stimulus since the pandemic started, still has plenty of room to spur the economy. But Beijing’s hesitancy to uncork a bazooka’s worth of stimulus reflects a number of considerations.” These include:
Xi’s political authority, which is strong enough to allow him to “swallow the bitter pill of structural reform without the sugar coating of stimulus.”
“With surging inflation and slowing growth in the West threatening to drag down the global economy, Beijing may also see value in keeping its powder dry in the event of a steeper-than-expected economic slowdown.”
Political imperative to maintain zero-COVID policy
“Perhaps most importantly, economists say, stepping on the gas pedal to boost GDP could undermine Mr. Xi’s longer-term efforts to squeeze out excesses in the economy and ensure financial stability.”
On housing, this report by Rebecca Feng and Cao Li says that:
“China’s slowing property market has been one of the biggest problems for its struggling economy, which grew at only 0.4% in the most recent quarter year over year. Home sales slumped again this month as developers struggled to finish homes and home buyer confidence remained weak…Stabilizing the property market ‘will be no easy task given the recent deterioration in home buyer sentiment and the large funding shortfalls among developers,’ said Julian Evans-Pritchard, an economist at Capital Economics. Local governments have rolled out a flurry of incentives in recent weeks to boost their property markets, including tax rebates, cash rewards and lower down payments…At least a dozen other cities have allowed prospective home buyers to share mortgage payment obligations with parents and other family members. Nearly 170 cities across the country have rolled out a collective 325 policies to lower barriers to home buying, according to Zhuge.com, a Chinese property search engine. In July alone, nearly 70 cities have issued policies to stabilize their local housing market, according to state media reports. City governments have jumped in to try to stem the downward spiral in home buyers’ sentiment as some of China’s property developers struggle to finish projects after Beijing put rules in place to prevent excessive borrowing. Many homeowners are now threatening to stop paying for unfinished properties…The revolt has left local authorities scrambling to reassure home buyers that projects will be completed. Authorities in Zhengzhou, in central China’s Henan province, said on Wednesday that the city will take over troubled projects from seven major developers, state media reported. Taiyuan, a city in northern Shanxi province, pledged that all presold apartments would be completed in 24 months. But the measures by local governments have failed to dispel the gloom hanging over the market. A small rebound in home sales in June was quickly reversed by a slowdown in July as a combination of harsh pandemic-related lockdowns in some cities and the widening mortgage strike hit sentiment. Sales by volume in 30 large and medium-sized Chinese cities registered notable declines this month, according to a report published Tuesday by China Real Estate Information Corp., a Shanghai-based property research firm. ‘This is the first time in decades that the housing market didn’t respond much to the easing. I think we are still in a vicious cycle of declining home sales, declining land acquisition and then declining real-estate investments,’ said Dongming Xie, head of Greater China research and strategy at OCBC Bank. The mortgage revolt began in mid-July and has quickly spread to roughly 320 unfinished housing projects across the country, according to a tally of statements from homeowners saying they will stop paying their mortgages circulating on GitHub, a Microsoft Corp.-owned coding-collaboration site. Unlike the U.S. subprime mortgage crisis in 2008, a precedent that some market watchers have invoked, Chinese home buyers in this case have the ability to repay mortgages—they simply don’t want to, says Mr. Xie of OCBC. ‘They are turning this mortgage boycott into a tool to pressure local governments and safeguard consumer rights,’ he said.”
Bloomberg reports that the Chinese government is considering a plan to seize undeveloped land from distressed real estate companies, using it to help finance the completion of stalled housing projects that have sparked mortgage boycotts across the country. “The proposal, which is still under discussion and could change, would take advantage of Chinese laws allowing local governments to wrest back control of land sold to real estate companies if it remains undeveloped after two years, without compensation. That would give authorities more leeway to direct funds toward uncompleted homes, potentially to the detriment of creditors who would lose claims on some of developers’ most valuable assets,” the report says.
Also Read:
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China Semiconductor Fund Graft Scandal Widens as Another Executive Probed, Sources Say
China’s Manufacturing Sector Unexpectedly Contracts Amid Weak Demand, Covid Lockdowns
China’s Village Bank Collapses Could Cause Dangerous Contagion - Do Read
China Banks Rush to Raise Record Debt as Credit Losses Mount
IV. Wang Yi at SCO
Chinese Foreign Minister Wang Yi visited Uzbekistan this week for the SCO Foreign Ministers’ meeting. At the meeting, he made a five-point proposal. This is really interesting in that there appears to be greater emphasis on leveraging these blocs not just for the immediate purposes but also for a systemic and values-based confrontation with the US-led West.
“SCO countries should “support the protection of each other's core interests and major concerns, and safeguard the sovereignty, security and development interests of all countries.”
“SCO countries should practice the vision of common, comprehensive, cooperative and sustainable security, and oppose creating bloc confrontation and undermining regional stability. The SCO countries should intensify efforts to combat the ‘three forces’ of terrorism, separatism and extremism, including the East Turkestan Islamic Movement, reach a plan acceptable to all parties on improving the mechanism for responding to security threats and challenges as soon as possible, and expand cooperation in non-traditional security areas.”
“SCO countries should leverage the unique advantages of the member states, make the SCO’s voice heard and demonstrate SCO’s responsibility in maintaining the security of international industrial and supply chains as well as international food and energy security. The SCO countries should draw up a roadmap for expanding the scale of local currency settlement, and provide stronger financing guarantees for cooperation on major projects. The SCO countries should continue to carry out all-round cooperation in fighting the pandemic, and advance cooperation in poverty alleviation, green development and other fields.”
“SCO countries should oppose peddling the false so-called narrative of ‘democracy’ against ‘authoritarianism’ and creating confrontation in the international community. The SCO countries should firmly promote genuine multilateralism, advocate the common values of all mankind, and work to improve global governance. The SCO countries should strengthen multilateral coordination and cooperation, oppose unilateral sanctions and ‘long-arm jurisdiction’, and defend the common interests and development space of emerging markets and developing countries.”
“SCO countries should promote the enlargement of the group in a steady and orderly manner, take into account the geographical distribution and other factors, accept more observer states and dialogue partners while increasing new members, and make more countries that share the same cooperation concepts of the SCO obtain a corresponding legal status, so as to increase the comprehensive strength of the SCO and demonstrate its openness and inclusiveness.”
At the sidelines of the meeting, Wang had bilateral engagements several of his counterparts.
Speaking with Russian Foreign Minister Sergei Lavrov, Wang said that the two sides “should strengthen strategic communication in a timely manner, which will help show the basic momentum of China-Russia comprehensive strategic partnership of coordination, promote the sound and steady development of China-Russia relations, uphold and practice true multilateralism and push for a just and equitable international order.” He added that “China is ready to strengthen solidarity and cooperation with Russia and other member states to make the SCO a strong pillar for defending international fairness and justice, a stabilizing factor for maintaining regional and world peace, and an important engine for promoting global recovery from the pandemic.”
The Chinese readout says that “the two sides believe that the SCO, which brings together major food and energy producers and consumers, needs to strengthen coordination, build consensus and jointly play a constructive role in addressing global food and energy security challenges.” Lavrov also supported China’s view on Taiwan, amid all the tension around a possible visit by US Speaker Nancy Pelosi. “Our position on the existence of only one China remains unchanged," Lavrov told reporters in Tashkent. "We have no problem with upholding the principle of China's sovereignty.”
Wang and Lavrov also spoke about the situation in Afghanistan. Wang then met with Acting Foreign Minister of the Afghan Interim Government Amir Khan Muttaqi. The Chinese readout says:
“China appreciates the Afghan Interim Government's unremitting efforts in overcoming the four challenges posed by the winter, earthquake, flood and sanctions, in reconstruction and recovery and the improvement of people's livelihood, and its steady progress toward the goal of lasting peace and stability. China hopes to push the alignment of the Belt and Road Initiative with the development strategies of Afghanistan, support the extension of the China-Pakistan Economic Corridor to Afghanistan, and share China's development opportunities. China will grant zero tariff treatment to 98 percent of the tariff lines of the Afghan products exported to China, and is willing to import more quality specialty products from Afghanistan. China appreciates Afghanistan's firm attitude to the counter-narcotics issue, and is willing to assist Afghanistan in planting alternative crops.
Wang Yi emphasized, China will continue to urge the United States and other Western countries to remove unreasonable sanctions on Afghanistan, and earnestly fulfill its primary responsibility for the economic reconstruction of Afghanistan. China hopes that Afghanistan can build a broad-based and inclusive government and exercise moderate and prudent governance, maintain domestic stability and realize national harmony, take resolute measures to crack down on all terrorist forces, including the East Turkestan Islamic Movement, and actively respond to the concerns of the international community and gain more understanding and recognition.”
Also: “Wang Yi further announced that, since August 1, China will resume the issuance of visas for Afghan citizens to enter China.”
Next, Wang met with his Pakistani Foreign Minister Bilawal Bhutto Zardari. The Chinese readout of this meeting is really interesting. Wang Yi talked about injecting “fresh connotations of the times into the ‘ironclad’ friendship” between the two countries and enhancing pragmatic, infrastructure and industrial cooperation, etc. But there’s no more money that Beijing is offering for the ailing Chinese economy. Instead, Pakistan is looking to the IMF and American support, more specifically, for a bailout. On this, I recommend reading my colleague Anupam Manur’s latest piece why the IMF must place certain conditions to ensure that the funds are not simply used to payback Beijing for what were unproductive loans.
Back to the Wang-Bhutto meeting. The other interesting aspects of the meeting include Bhutto’s acknowledgement of the slowing down of CPEC projects via the promise of a “new Pakistan speed” in implementation and the talk of an agreement around “enhanced version” of security work.
“Bilawal said, the Pakistan-China friendship has withstood the test of time and grown even stronger. Pakistan has always regarded the Pakistan-China all-weather friendship as the cornerstone of its foreign relations. He thanked China for its strong support for Pakistan's efforts to safeguard its territorial integrity and achieve economic and social development. Pakistan will continue to stand firmly with China on issues involving China's core interests and major concerns. Pakistan looks forward to strengthening high-level exchanges and strategic communication to continuously inject new impetus into bilateral cooperation. Pakistan will speed up the development of the CPEC and demonstrate the "new Pakistan speed". Pakistan is ready to actively explore and promote the extension of the CPEC to Afghanistan. He thanked China for facilitating the return of Pakistani students to China for school and the increase in direct flights between the two countries.
Bilawal said, Pakistan highly appreciates China's leading role in upholding multilateralism, safeguarding world peace and tranquility, promoting global sustainable development and addressing global challenges. Pakistan supports and stands ready to take an active part in the implementation of the Global Development Initiative and the Global Security Initiative both put forward by President Xi Jinping. Bilawal stressed that Pakistan attaches great importance to ensuring the security of Chinese institutions and personnel in Pakistan. The terrorists involving in the April 26 terrorist attack are enemies of the Pakistan-China friendship and Pakistan, and Pakistan will surely give exemplary punishment to them. Pakistan will make all-out efforts to advance the ‘enhanced version’ of security work to prevent similar incidents from happening again. Wang Yi expressed appreciation for this and hopes that Pakistan will speed up the investigation into the April 26 terrorist attack and give exemplary punishment to the murderers. China is ready to reach an agreement with Pakistan on the ‘enhanced version’ of the security work plan and put it into practice.”
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V. Region Watch
by Shibani Mehta
The Doklam plateau, which is claimed by both China and Bhutan and is of strategic importance for India, has been making headlines. But because of its complicated history, I’m not going to look at the latest updates. It is worth mentioning that two weeks earlier, Bhutan had announced that the country would reopen its borders to tourists on September 23. Foreign Minister Tandi Dorji shared his hope that the reopening would also be a step towards resolving their boundary dispute with China. The process has been stalled for years, first due to the Doklam standoff in 2017 and then by the pandemic. In October last year, Bhutan and China had agreed on a three-step roadmap to accelerate boundary negotiations following which one expert group meeting (EGM) took place. According to the Bhutanese minister, the next EGM is likely to take place soon following which border talks will begin.
The 2021 agreement was seen as a “positive development” that would enable the two sides to have “more focused and systematic discussions” on the boundary dispute. The 24 rounds of talks and about 10 EGMs, held in the past 37 years, have largely focused on two separate areas of dispute, the India-China-Bhutan trijunction (including Doklam) and valleys located near Tibet to Bhutan’s north.
Nepal too has revived efforts to resume boundary-related mechanisms to address outstanding disputes.
Regular joint boundary inspections are a condition of the agreed protocols by Nepal and China. Since 2011, however, inspections have been stalled due to conflicting claims by both sides.
“During the virtual meeting on Thursday (14 July 2022), our proposal will be to revive these boundary mechanisms in order to inspect and update the Nepal-China border that has stopped since 2011,” a senior official at Nepal’s Department of Survey told the Kathmandu Post.
Nepal and China signed agreements in 1960, 1961 and 1963 aimed at reducing friction on the alignment of the boundary. A similar agreement, Boundary Management System, was signed during the Chinese President’s visit to Nepal in October 2019. Although the nuances of the Boundary Management System haven’t been disclosed, a prominent media source has found that two panels will be constituted - a joint commission on boundary matters between Nepal and China, and a committee of boundary representatives to be led by authorities of both countries.
Ten days after the revitalised momentum, Nepal’s Minister of Land Management, Cooperatives and Poverty Alleviation received a memo alerting authorities of the unlawful occupation of territory by the Chinese. The Rastriya Ekata Abhiyan, a civil-society group claims that,
“The encroachment in various areas of the Nepal-China border, including Ruila, in violation of international law and values, is not only an insult to the friendship between the two countries but also a direct challenge to the sovereignty of Nepal,”
Labelling this as a smear campaign, the Global Times added that
“The civic group has been employing sustained, radical strategies in its repeated attacks against China,”
The Rastriya Ekata Abhiyan has previously submitted a similar memo to a UN office against Chinese land grabbing and had staged a protest against China for expanding the wire fence within no-man’s land in Gorkha and encroaching into Nepali territory in the north.
In March 2022, Foreign minister Narayan Khadka and his Chinese counterpart Wang Yi agreed to carry out a joint inspection of the Nepal-China boundary through mutual consultation.
Also Read:
China Is Building Entire Villages in Another Country’s Territory
India’s Fog of Misunderstanding Surrounding Nepal–China Relations
VI. The Pelosi Visit & Biden-Xi Call
US House Speaker Nancy Pelosi embarked on a four-nation tour of East Asia, with tensions around the possibility of her travel to Taiwan. The official itinerary says that she will Singapore, Malaysia, South Korea and Japan. Let’s see if the visit to Taiwan does indeed happen. Over the past week, there has been a lot that has been said about the impact of a potential visit to Taiwan, with the Biden administration and the Pentagon indicating that it might not be the best of ideas.
SCMP reports that ahead of Pelosi’s trip, the Chinese navy is holding live-fire drills in the Taiwan Strait and released footage of a similar exercise in the South China Sea. The report says:
“The maritime administration in Fujian province said the exercise off the waters of Pingtan would be carried out between 8am and 9pm, adding that all vessels were banned from entering the area. Pingtan is about 125km (75 miles) from Taiwan’s coast and about 185km from Taipei, its capital. The exercise was announced on Thursday afternoon – hours before a phone conversation between Presidents Xi Jinping and Joe Biden aimed at reducing tensions – but not widely reported by Chinese media until Friday night.”
The People’s Daily and social media commentators in China have been warning the US on the consequences of the visit. Here’s the People’s Daily on Twitter.
If you are interested in the views of Chinese analysts, Pinran Liu and Yang Liu have a good compilation for Beijing Channel.
Also on Thursday, President Joe Biden spoke to Xi Jinping in a call that lasted 2 hours and 20 minutes. This was the fifth time the two presidents have spoken since President Biden came into office. US officials described the conversation as “substantive”, “in-depth”, and “candid.”
The US readout of the call is limited. Instead the background briefing by American officials has much more to offer. They said that the two sides:
Had a “detailed discussion of areas where the two countries can work together, with particular focus on climate change and health security, as well as counternarcotics. The two teams will be following up on these areas.”
“The two leaders exchanged views on Russia’s war in Ukraine and the global impacts it is having.”
“They had an in-depth discussion of Taiwan. They discussed, you know, as they always do, areas of difference. And the two, I would say, on Taiwan had a — had a direct and honest discussion. President Biden reaffirmed the United States’ commitment to our One China Policy, guided by the Taiwan Relations Act, the Three Joint Communiqués, and the Six Assurances. He underscored to President Xi the United States’ opposition to unilateral changes to the status quo by either side, and commitment to the maintenance of peace and stability across the Taiwan Strait. The two discussed that the United States and China have differences when it comes to Taiwan, but that they have managed those for over 40 years and that keeping an open line of communication on this issue is essential to doing so.”
The official readout says that “The call was a part of the Biden Administration’s efforts to maintain and deepen lines of communication between the United States and the PRC and responsibly manage our differences and work together where our interests align.” It adds that “the two presidents discussed a range of issues important to the bilateral relationship and other regional and global issues, and tasked their teams to continue following up on today’s conversation, in particular to address climate change and health security. On Taiwan, President Biden underscored that the United States policy has not changed and that the United States strongly opposes unilateral efforts to change the status quo or undermine peace and stability across the Taiwan Strait.”
The Chinese readout says that “the two presidents had a candid communication and exchange on China-U.S. relations and issues of mutual interest.” Xi made the case for a G2 again:
“Xi pointed out that in the world today, the trends of turbulence and transformation are evolving, and deficits in development and security are looming large. Faced with a world of change and disorder, the international community and the people around the world expect China and the United States to take the lead in upholding world peace and security and in promoting global development and prosperity. This is the responsibility of China and the United States as two major countries.”
Xi added that viewing China-US ties “in terms of strategic competition” and viewing “China as the primary rival and the most serious long-term challenge would be misperceiving China-U.S. relations and misreading China's development.” He added that closer cooperation was needed “on such important issues as coordinating macroeconomic policies, keeping global industrial and supply chains stable, and protecting global energy and food security. Attempts at decoupling or severing supply chains in defiance of underlying laws would not help boost the U.S. economy. They would only make the world economy more vulnerable.” On Taiwan, the readout says:
Xi “highlighted that the historical context of the Taiwan question is crystal clear, and so are the fact and status quo that both sides of the Taiwan Strait belong to one and the same China. The three China-U.S. joint communiques embody the political commitments made by the two sides, and the one-China principle is the political foundation for China-U.S. relations, Xi said, adding that China firmly opposes secession aimed at "Taiwan independence" and external interference, and never allows any room for "Taiwan independence" forces in whatever form. The position of the Chinese government and people on the Taiwan question is consistent, and resolutely safeguarding China's national sovereignty and territorial integrity is the firm will of the more than 1.4 billion Chinese people, he said. The will of the people cannot be defied and those who play with fire will perish by it, he said, adding that it is hoped that the United States will be clear-eyed about this. He also called on the United States to honor the one-China principle and implement the three China-U.S. joint communiques both in word and in deed.”
Good thread this below by Ryan Hass to contextualise the talk around Pelosi’s Taiwan visit:
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