EU suspends ratification of China investment deal, "G7 takes aim at China," Confucius Institutes “collapsing” across the U.S. & The "sang wenhua" (丧 文化) of China's youth -- China Boss News 5.10.21
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EU “suspends” ratification of China investment deal
It appears that the European Parliament has made good on its “vow to kill” the EU-China Comprehensive Investment Agreement (CAI), or - at least - put it to sleep for a while. That’s because, last week, news broke that the European Commission has “suspended” efforts to ratify the deal.
On Tuesday, EU Trade Commissioner Valdis Dombrovskis told Agence France-Presse:
We have ... for the moment suspended some efforts to raise political awareness on the part of the Commission, because it is clear that in the current situation, with the EU sanctions against China and the Chinese counter-sanctions, including against members of the European Parliament, the environment is not conducive to the ratification of the agreement.
In March, I wrote that the deal was on “life support”:
China’s livid response to EU sanctions crossed the line between “making a point” and Yosemite Sam ridiculous. Even the renowned Berlin-based think-tank Mercator Institute for China Studies (MERICS) was not spared the wrath of Beijing’s outrage.
And Andreea Brînză, Vice President of the Romanian Institute for the Study of the Asia-Pacific (RISAP), had said that China’s sanctioning of 10 EU politicians, as well as prominent European academics and analysts in retaliation for EU sanctions on four Xinjiang officials are “the latest proof that Beijing doesn’t understand democracies.”
So where do we go from here? We can talk about the winners and the losers, and, despite the Commission’s conservative language, the decreasing chance that the EU-China deal will be revived in the future. In other words, the CAI is probably dead.
In commercial terms, Chinese companies, especially automakers, stand to benefit most from the EU’s suspension of ratification efforts. The reason the CAI was pushed though quickly at the end of last year was to benefit German automakers. The CAI was set to change the status quo for them and other European manufacturers by lifting Chinese restrictions on wholly-owned enterprises.
According to Michael Schroeder, Elise Bukowski and Philipp Hackel from the Oxford China International Consultancy:
[T]he strongest impact [of the CAI] will most likely be felt in the automotive sector which currently accounts for 28% of total European FDI in China. While other areas of investment have been rather volatile, automotive investment has been a steady leader in EU FDI for the last five years.
This is hardly surprising, considering that China has become a world leader in the automotive industry, particularly in the field of New Energy Vehicles (NEV). Indeed, McKinsey found that China’s NEV market accounts for roughly half of the global market, allowing it to dictate major industry trends. As a result, European companies have moved large R&D capacities for NEV technologies to China and many major European car manufacturers have partnerships with Chinese technology companies on autonomous driving, as missing out would be fatal.
Nevertheless, existing joint-venture requirements and targeted subsidies to Chinese firms continue to kneecap European firms in their competitive standing in the Chinese market. European car manufacturers currently need to enter joint-ventures with Chinese counterparts, in which the foreign partner is required to hold less than a 50% stake. As a result, the majority of European automotive FDI comes with a non-controlling stake. The CAI will now change these limitations, allowing for European majority stakes, and lifting joint venture requirements altogether. In addition, the agreement foresees a suspension of subsidies and more transparent subsidy control mechanisms. Without those restrictions, the situation looks truly different for European car manufacturers.
Emphasis added. So things are looking up for China’s auto manufacturers, while European industry will have to make do with things as they are now for the foreseeable future. At any rate, whether European ratification of the CAI would have changed anything at all for European automakers is up for debate as Chinese authorities have a history of complying with treaties and international laws only when they believe it’s in their strategic interests to do so - cf. Sino-British Joint Declaration on Hong Kong, and the Hague’s Philippines v. China (PCA case number 2013–19), also known as the South China Sea Arbitration.
In geopolitical terms, however, as I mentioned in my post back in March - “the primary beneficiary of President Xi’s overplayed hand may turn out to be the United States.” Last week, I wrote about how Europe’s China policy is “hardening,” and “beginning to align with that of the U.S.” President Biden will visit Brussels for an EU-US summit in June, and, according to The Parliament magazine, “MEPs see the upcoming Biden visit to Europe as a chance to reinvigorate transatlantic relations.”
Stuart Lau of Politico thinks that China policy will be “front and center” in discussions. Me, too. And that brings us to the question of whether the EU will ever revive its investment deal with China.
Frankly, most experts - including those who have large stakes in the China game - would agree that the CAI is, effectively, over. But this is because - as one senior EU diplomat put it - “EU diplomats including some from Germany were [already] sceptical [about it] from the beginning but the last straw was the Chinese sanctioning of European Parliament members, including the entire human rights committee.” The move really shows how spiteful the Chinese Communist Party can be, and who wants to increase ties with a party-state that cannot be expected to behave in measured ways. Plus, alignment with US policies - if that occurs - will move EU member states further away from China’s sphere of influence, and - although China business will never completely disappear - negotiations with other countries are already in the works to nurture new markets for European businesses and protect diversity in supply chains.
Law and International Xi
“G7 takes aim” at China & US proposes “consultation mechanism” to coordinate response to China’s economic coercion
Cristina Gallardo, Politico, reported the essential elements of the G7’s new position on China which was announced last week after several rounds of meetings in London:
In a strongly-worded communique issued after two days of face-to-face meetings in London, foreign ministers from the group of advanced economies called on China “to participate constructively in the rules-based international system.”
“We underscore the importance of peace and stability across the Taiwan Strait, and encourage the peaceful resolution of cross-Strait issues,” they said. “We reiterate our strong opposition to any unilateral actions that could escalate tensions and undermine regional stability and the international rules-based order and express serious concerns about reports of militarisation, coercion, and intimidation in the region.”
It marks the first time that the EU and some of its most prominent members, including Germany and France, have aligned with the U.S. over the situation in the Taiwan Strait.
Gallardo added, that - although “not every G7 member shares the same views on the recognition of Taiwan as an independent state . . . the final communique backed Taiwan’s “meaningful participation” in the World Health Organization and the World Health Assembly.”
The communique is chock-full of tough rhetoric, and China was none too pleased. Foreign Ministry Spokesperson Wang Wenbin told reporters in a press conference that China “strongly condemns” what he described as “groundless accusations” and “blatant interference” in China’s internal affairs.
According to the Voice of America (VOA): U.S. Secretary of State Antony Blinken met with Britain’s Foreign Secretary Dominic Rabb ahead of the summit and told reporters that the US is not “try[ing] to contain China or to hold China down.”
Blinken said:
What we are trying to do is to uphold the international rules-based order that our countries have invested so much in over so many decades to the benefit, I would argue not just of our own citizens, but of people around the world including, by the way, China.
Finally, Bloomberg reported that the G7 “is considering a U.S. proposal to counter what the White House sees as China’s economic coercion.”
Per Bloomberg:
A paper was circulated before a two-day meeting of G-7 foreign ministers in London, according to officials, who were granted anonymity to discuss private talks. Officials meeting on Tuesday spent some 90 minutes discussing ways in which China tries to get nations and individuals to do what it wants via the Belt and Road initiative or by leveling economic threats, according to a senior State Department official who spoke on condition of anonymity.
A diplomat told Bloomberg that US officials have asked for “a consultation mechanism that would involve the G-7 -- as well as other stakeholders -- to ensure a coordinated response to China’s moves and with the aim of bolstering the resilience of G-7 nations.” Emphasis added.
China’s Confucius Institutes are “collapsing” across the U.S.
In part one of the Washington Examiner’s series, “China on Campus,” Jerry Dunleavy reports that China’s Confucius Institutes are “collapsing” across the U.S.
Dunleavy, Washington Examiner:
The Chinese Communist Party-linked Confucius Institutes are collapsing in the United States, falling from over 100 to just over a couple dozen in a few years thanks to pressure from the Trump administration and growing concern within the U.S. government about the challenge posed by Chinese influence at U.S. colleges and universities.
Most revealing is that Columbia University has “recently, and quietly, closed the institute after nearly a decade of operation.” Columbia’s media relations director told the Washington Examiner that the university “no longer host[s] a Confucius Institute.”
Citing a U.S. China Economic and Security Review Commission (USCC) report from 2018, Dunleavy added that “a number of official and quasi-official entities conduct overseas activities guided or funded by [China’s] United Front” — including Confucius Institutes.”
Dunleavy, Washington Examiner:
Numerous security experts and U.S. government officials have warned that the United Front Work Department is part of the Chinese government’s foreign influence efforts, with the U.S. China Economic and Security Review Commission’s August 2018 report contending that “China uses what it calls ‘United Front’ work to co-opt and neutralize sources of potential opposition to the policies and authority of its ruling Chinese Communist Party” and that United Front-related organizations” are playing an increasingly important role in China’s broader foreign policy" under Xi Jinping — who has called United Front work a “magic weapon” for bringing about “the great rejuvenation of the Chinese nation.”
Dunleavy’s article is well researched and provides a detailed list of Confucius Institutes in the US with operational status. It’s the only resource of its kind of which I’m aware. (Read it in its entirety here.)
Yet, another remarkable development that’s got me shaking my head in disbelief at how fast things are happening in the China policy sphere. It’s like watching huge columns of the PRC’s soft power and influence evaporate into thin air.
China policy “at the heart” of German vote in September
The German federal elections in September are shaping up to be a real China policy game-changer. In a surprising twist, Annalena Baerbock of the Green party has become stiff competition for Armin Laschet - Angela Merkel’s replacement in the Christian Democratic Union (CDU) - with just months to go before the election.
Experts think that the most likely outcome will be a coalition in which both parties are forced to share power. But that will spell trouble for Beijing, as Baerbock seeks to re-balance Germany’s foreign policy to give greater priority to human rights.
Per The Guardian:
Baerbock, a 40-year-old with a background in international law, has been one of the Greens’ most vocal advocates of tying German foreign policy more firmly to values rather than economic needs.
…Echoing rhetoric from within the White House, she recently said that Germany’s relationship with China should be marked by a “competition of systems: authoritarian powers versus liberal democracy”.
Will September spell the end of Germany’s “pragmatic” approach towards China? I’ll be glued to political weather reports for signs of an extraordinary “fall” in Berlin.
Geopolitics
Vietnam “overtakes” China as largest furniture exporter to US
Citing US Customs and the US International Trade Commission data, Furniture Today’s Senior Editor Thomas Russell reports that “Vietnam has overtaken China as the largest exporter of finished [furniture] goods to the U.S. market.”
Russell:
According to Furniture Today research, Vietnam shipped just over $7.4 billion in furniture to the U.S. in calendar year 2020, up 31% from the $5.7 billion it shipped in 2019. By comparison, China shipped $7.33 billion to the U.S in the same 12-month period. That number was down 25% from the $9.7 billion China shipped in 2019.
While the gap is relatively small, Vietnam’s position on the world stage shows how it has grown in importance over the years.
Russell calls the development a sign of “one of the most dramatic shifts in the recent history of furniture imports ” which began “slowly with Vietnam emerging as a force in wood bedroom in response to Chinese bedroom manufacturers being hit with antidumping duties starting in June 2004.” But, he says, the trend really picked up in 2019 when the US attached tariffs of up to 25% “on almost all furniture categories.”
Lee Boone, president of Hooker Furnishings which is a division of Home Meridian International (HMI), whose brands include SLF, Pulaski and Prime Resources International, told Furniture Today:
It was all driven by the antidumping duties years ago and the (China) tariffs today. That ran a lot of furniture out of China. And Vietnam is still trying to catch up and create capacity. They are not there yet with upholstery, but they have come a long way.
It’s safe to say that most of the increases resulted from the exodus from China. If the tariffs hadn’t happened, there wouldn’t be a demand for it. Because of the tariff, there is demand and these other countries are able to be competitive.
As a couple of commentators noted on my LI post, the increases may well turn out to be from Chinese manufacturers moving to Vietnam to avoid US tariffs. But the point of the tariffs was to pressure the Chinese government to abide by trade rules, and - if that didn’t work - let countries who did compete fairly reap the economic benefits of increased trade, like jobs and the boost to local businesses, regardless of the nationality of their manufacturers.
The Week’s Best China Reads
Leaked documents reveal China’s sinister virus plan (news.au.com)
A highly significant development in the Covid19 origins mystery. Granted, the headline is sensational, but this article is fact-based, published by a mainstream Australian paper and includes analysis from the Australian Strategic Policy Institute, as well as Robert Potter, a renowned China cyber-security expert, who authenticated the document. Didn’t stop LinkedIn from removing it from my news-feed, however, for violating its policies. I’ve contacted them to argue my case, but haven’t received a response yet.
Opinion: Regime change in China is not only possible, it is imperative (Roger Garside, The Globe and Mail)
Excellent piece from Roger Garside, a former British diplomat.
Garside:
Many readers will recoil at this in disbelief. How can we suppose that the Communist Party that has transformed China from Maoist poverty to the world’s second-largest economy could be susceptible to a change of regime?
Such incredulity is testimony to the narrative of Chinese success we have been fed for decades, by the regime itself and by all those, in business or other fields, who have a stake in that story. It is only part of the true picture. Besides, our view of the future is often shaped by inertia: We are naturally inclined to think that the world will continue very much as it is. Who in January, 1991, was predicting that before the year was out the Soviet Union and its Communist Party would dissolve themselves?
But even if regime change is possible, what right have we to dictate to China how it should be governed? Such a reaction is based on a misunderstanding. Our goal should not be to dictate to China how it is governed, but to embolden and enable those Chinese who want change to achieve it.
Emphasis added.
China Has Lost the Philippines Despite Duterte’s Best Efforts (Derek Grossman, senior defense analyst at the RAND Corporation, Foreign Policy)
Derek Grossman:
Since his election in 2016, Philippine President Rodrigo Duterte has time and again underscored his anti-U.S. and pro-Chinese orientation. …
But in the course of a year, Duterte appears to have done an about-face on China, frustrating Beijing’s attempts to pull Manila out of Washington’s strategic orbit.
…Duterte now recognizes, in spite of his continued rhetoric to the contrary, that China is no friend, and the Philippines needs its long-standing security ally—the United States—after all.
Duterte’s realization will have significant geostrategic implications between now and the end of his term in June 2022, when the Philippine Constitution requires him to step down.
For example, he is unlikely to pursue his long-standing plan for joint oil and gas exploration with Beijing in disputed waters.
Emphasis added.
China's bombshell move to get Sun Yang to Tokyo Olympics (Yahoo Sports Australia)
The doping scandal saga of the PRC swimming star continues.
Yahoo Sports Australia:
Sun was suspended for the maximum of eight years by the Court of Arbitration for Sport in February last year after refusing to give samples during a surprise doping test where a vial of his blood was smashed with a hammer.
But Switzerland's top court overturned the ban in December, in a surprise decision in which it said the CAS was guilty of bias.
As he prepares for a new tribunal hearing, Sun appears to have been given a huge lifeline in his bid to compete at the Tokyo Olympics.
On Thursday, the China Swimming Association laid out its eligibility requirements for the upcoming Games, saying all gold medallists at the 2019 world championships can participate.
That would appear to include Sun, however Chinese media reports the 29-year-old is not taking part in this week's Chinese championships and Olympic qualifiers in Quingdao.
Middle Kingdom Surreal
“Sang wenhua” (丧 文化): How a Russian model became an icon of China’s youth disillusionment
BBC published a great piece on Lelush, the Russian male model who was trapped on a Chinese reality TV show because audience members kept voting for him despite his pleas not to. Lelush, who is fluent in Chinese, was originally hired by the show’s producers to teach other foreign contestants the language for a televised boy-band singing competition. However, his good looks quickly gained attention, and he was asked if he would also like to compete.
Lelush agreed, but soon discovered the show’s demands were more than he bargained for: He could not leave his accommodation on Hainan island, was “cut-off from the online world,” and had to endure hours of singing and dance classes “with his every move broadcast to the rest of China.” Nevertheless, he was bound to the show's grueling conditions by contract subject to enormous fines for early termination. The only way he could afford to leave, according to the BBC, “was if [he] got voted out.” As the BBC tells it:
And so, Lelush decided to be the worst contestant ever on Chuang 2021.
Week after week he slept in late, sulked through his interviews, and listlessly took part in classes, taking every opportunity to slack off during rehearsals.
For his stage performances, while other contestants crooned romantic ballads or performed energetic dance numbers, he mumbled his way through a mournful Russian rap - twice.
To his exasperation, the audience loved it all - his dourness, his deadpan answers, his low-key frustration at being trapped in a 21st Century Kafkaesque nightmare.
The show's directors, sensing he was ratings gold, played up his reluctance in their edits of episodes. Meanwhile his ever-growing fanbase - who christened themselves "sun si", or "mean fans" - voted for him repeatedly to ensure he remained in the show for weeks, grimacing and gyrating for their viewing pleasure.
Thus, like an unwilling phoenix half-heartedly flapping out of the ashes, a new star of Chinese slackerdom was born.
Unfortunately, Lelush seems to have picked the worst time in China’s social history to embody youth apathy. China’s youth are “celebrating” a loss of faith in the system in what has been described as “sang wenhua” (丧 文化), or “mourning of loss culture,” where slackers are becoming increasingly appreciated as symbols of resistance to a life of grueling work on a 996 schedule (9am to 9pm, 6 days a week) with few rewards.
Dr. K Cohen Tan, associate professor of digital media and cultural studies at University of Nottingham Ningbo China, told the BBC that although “[m]uch of China has been lifted out of poverty . . . there's a greater level of social inequality than seen in their parents and grandparents' generations.”
Per the BBC:
Faced with worse inequality and unemployment rates compared to previous generations, and rising housing prices in major cities, many youths have found traditional goals such as getting a job and owning a home becoming increasingly unattainable, say experts.
Dr Hui Faye Xiao, associate professor of modern Chinese literature and culture at the University of Kansas said:
"Sang" [has come to represent] an illusory utopia where youths can escape from their exhausting, anxiety-ridden everyday lives.
Lelush’s predicament and witticisms seem to have especially resonated with his young Chinese fans. At one point in the show, after receiving an “F” for poor performance, Lelush uttered: "F is for freedom." The BBC called it “a turning point”:
In an instant, he turned a prospect that many Chinese youths dread - getting a bad grade - into an ironic rallying cry.
Finally, after three miserable months on the show, Lelush got his wish. He was voted off a few weeks ago. But now he’s China’s super-slacker superstar. Here’s a clip of Lelush (yellow hoodie) trying to make his way to freedom past throngs of adoring fans.
Greatest Hits
Bloomberg’s response to the “technology trumps China’s demographics” argument: China’s Ascent May Soon Expose Its Achilles Heel, received 16,168 views in only one day.
*China has a looming population composition & resource problem that robotics can’t solve. Per Bloomberg: “China’s rise is likely to be thrown off by a massive age imbalance. By 2050, one in three Chinese will be over 60, a cohort of seniors so enormous that if they formed a country, its population would be comparable to America today.”
Bloomberg’s China Deletes Social Media Posts Mocking India Amid Backlash received 11,329 views. More PRC soft power gone.
My newshare of new.com.au’s Leaked documents reveal China’s sinister virus plan received over 7k views within 6-7 hours before LinkedIn removed it from public access.
Another reminder that there will be no update this Friday. I’m traveling to the Belgian-French border to see cathedrals and drink beer. Europe is great. Enjoy your week.