Local EVs rout foreign carmakers in China market; PRC, Russia, Iran negotiate sanctioned missile fuel & Experts worry China will use inspection flotillas to blockade Taiwan -- China Boss News 4.17.23
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The Big Story in China Business
Local EVs rout foreign carmakers in China market
At the 2023 China Auto Show in Shanghai, scheduled to take place from April 18–27, Chinese carmakers will be doing victory laps to flaunt their lead positions in China’s automobile market.
The event, expected to be the largest since 2019, is China’s first auto trade show after harsh zero-Covid travel restrictions were lifted in December, and foreign executives started pouring in last week to get a good look at their domestic rivals who will unveil the latest electric SUVs, sedans and muscle cars.
“The rapid rise of Chinese electric carmakers like Li Auto, BYD, Nio and Xpeng Motors is the main preoccupation of the executives, engineers and designers arriving in Shanghai,” New York Times’ Keith Bradsher reported. “The country is now the world’s largest car market, and the home teams are routing multinational competitors that had until now mined the riches of China’s giant pool of customers.”
MC Automotive analyst John Zeng said “the biggest challenge for foreign brands” was that Chinese buyers were no longer interested “in gasoline cars.”
Although the success of China’s local carmakers wasn’t entirely their own - the Chinese government has been incubating them for decades with tech transfers, subsidies and grants - analysts say Beijing’s financial support has slowed.
“Beijing is winding down government support,” forcing Chinese producers to spend “billions of dollars into developing models that can compete on price and features without subsidies,” AP staff noted.
That may leave local producers leaner and meaner in the competition for consumers, while encouraging others to join the race.
AP Business News (ABC News):
Baidu Inc., best known as a search engine operator, is the most prominent among developers that also include Pony.ai. Geely Group, owner of Volvo Cars, Lotus and Polestar, has announced plans for satellite-linked autonomous vehicles. Network equipment maker Huawei Technologies Ltd. is working on self-driving mining and industrial vehicles.
Ford, General Motors, and Volkswagen have all seen their share of car purchases take nosedives. The exception, so far, has been Tesla - which has managed to hold its position, Bradsher said.
Bradsher, NYT:
Volkswagen is so concerned about the China market that it chartered two flights from Germany to Shanghai to bring board members of the Volkswagen Group and its VW, Audi and Porsche brands to the auto show, said a person familiar with the company’s plans, who spoke on the condition of anonymity because the plans were not public.
For the rest of Bradsher’s NYT report, China’s Car Buyers Have Fallen Out of Love With Foreign Brands, click here. For AP’s coverage on the Auto Show, China auto show highlights intense electric car competition, click here.
Law and International Xi
PRC, Russia, Iran in secret talks for sanctioned missile fuel
Several diplomats told Politico last week that Iran is in "secret talks with China and Russia for sanctioned missile fuel." The shipping of the fuel ingredient, known as ammonium perchlorate, or AP, from China to Iranian companies would be “a clear violation of UN Sanctions.” The diplomats also said some of that sanctioned chemical could "possibly help Moscow replenish its depleted stock of rockets" in Ukraine.
Politico:
The exact quantity of AP Iran is seeking to purchase isn’t clear, but the diplomats familiar with its plans estimate it would be sufficient to build thousands of rockets, including the Zolfaghar missile, which has a range of 700 kilometers and has been used by both Iran and its proxies in the Middle East in recent years. If the deal goes through, some of those rockets could end up being deployed against Ukraine, the diplomats said.
Analysts that Politico spoke also think the development shows "deep concern in Beijing" that Russia may not prevail in its war against Ukraine.
News of the talks comes on the heels of leaked Pentagon documents that yielded additional "insights into US intelligence gathering on Beijing's activities, particularly in relations to US concerns about China's potential involvement in the war in Ukraine," as CNN reported last week.
The Washington Post's analysis of a “top-secret intelligence summary, dated Feb. 23" revealed a Russian intelligence “intercept” which stated that "China approved 'provision of lethal aid' to Russia in its war in Ukraine,” and that Beijing “planned to disguise military equipment as civilian items.”
WaPo:
A separate U.S. intelligence assessment from the same period, part of a more widely circulated batch of Discord files, assessed that Beijing would view a “significant” Ukrainian attack within Russia using U.S. or NATO weapons “as indicative that Washington was directly responsible for escalating the conflict and possibly as further justification for China to provide Russia with lethal aid.”
For the rest of Politico’s report, Iran in secret talks with China, Russia to acquire sanctioned missile fuel, click here. For CNN’s coverage of the leaked Pentagon files, Leaked Pentagon documents provide snapshot of US intelligence officials watching China, click here, and for WaPo’s report on the Russian intelligence intercept, Russia says China agreed to secretly provide weapons, leaked documents show, click here.
Geopolitics
Experts worry China will use inspection flotillas to blockade Taiwan
Experts are growing increasingly concerned Chinese leader Xi Jinping will use commercial ship inspections in the Taiwan Strait as a pretense for a Taiwan blockade.
In an opinion written for the Wall Street Journal, Senior fellow at the American Enterprise Institute Elizabeth Braw warned that recent patrols sent by Beijing into the Taiwan Strait accompanied by threats of inspections after Taiwan President Tsai Ing-wen met US House Speaker Keven McCarthy last week should be a wake-up call.
Braw, WSJ:
This time, the fleet reportedly conducted no inspections—but next time it might. Inspections would wreak havoc on the 240 ships that travel through the strait on an average day. “Ten ships an hour in a 15-mile area means they could quickly back up if not carefully managed,” said Neil Roberts, secretary of the Joint War Committee, a maritime-insurance body that classifies risks. Through such maneuvers, China would be marking the Taiwan Strait as its exclusive economic zone and could create a blockade. The strait passage is essential not only for countries in the region but global supply chains, which depend on parts and assembly in Southeast Asia and Northern China.
Although China needs international shipping flows to support its ailing economy after three years of zero-Covid lockdowns, inspections could take place if leader Xi Jinping "need[s] clout more than maritime trade," Braw said.
Braw, WSJ:
We should prepare for such a scenario. Weeks before acts that might rile Beijing, governments should alert the Joint War Committee and other maritime organizations so that ships can take alternate routes. But because Beijing wants to frighten the shipping industry—which transports 80% of the world’s trade—away from Taiwan, the first step is for friendly navies to signal their support of the island. “The U.S. Navy should conduct joint exercises with the Taiwanese Navy, and we could conduct them near ports,” Adm. Montgomery said. The National Defense Authorization Act for fiscal 2023 includes expanded U.S.-Taiwan military cooperation.
For the rest of Braw’s WSJ analysis, China Eyes Commercial Ships in a Move to Intimidate Taiwan, click here.
Beijing backtracks over no-fly zone near Taiwan
“Taiwan said on Wednesday it had successfully urged China to drastically narrow its plan to close air space north of the island,” Reuters reported. China’s air space restrictions during military drills conducted after Congresswoman Nancy Pelosi’s official visit to Taipei last August “were significant disruptions to flights in the region, with some aircraft required to carry extra fuel,” news staff added.
Reuters:
Beijing initially notified Taipei it would impose a no-fly zone from April 16-18, but Taiwan's transport ministry said this was later reduced to a period of just 27 minutes on Sunday morning after it protested.
The ministry published a map showing what it labelled China's "aerospace activity zone" to the northeast of Taiwan and near a group of disputed islets call Diaoyu by China and Senkaku by Japan.
Japanese media confirmed that account, citing local government officials familiar with Beijing’s first no-fly-zone notification.
A senior Taiwan official told Reuters that "Taipei had used ‘multiple channels’ including diplomacy, intelligence and aviation authorities to persuade Beijing to rein in its original plan.”
Reuters:
The official said Taiwan had informed all parties that would be impacted by the Chinese request, including some Group of Seven (G7) countries whose foreign ministers are set to travel to Japan for a meeting from April 16-18.
"Everyone found that to be unbelievable," the official said.
For the rest of Reuters’ report, Taiwan says it convinced China to rein in no-fly zone plan, click here.
The Week’s Best China Reads
Can China’s Long-Term Growth Rate Exceed 2–3 Percent? (Michael Pettis, Carnegie Endowment)
Read to learn why Pettis thinks that “China’s annual GDP growth is unlikely to exceed 2–3 percent for many years.”
Why Taiwan matters to the world (Gideon Rachman, Financial Times)
Read to see if you’re persuaded by Rachman’s “three main arguments for sticking up for Taiwan.”
Silicon Valley Is Beating Washington to China Decoupling (Rishi Iyengar, Foreign Policy)
Read to learn how American and Chinese tech investors “were dialing back bilateral links years before Biden decided to.”
Middle Kingdom Surreal
Chinese police use spies to prevent Uyghurs from fasting during Ramadan
A Chinese policewoman told Radio Free Asia (RFA) that local law enforcement recruited "ordinary citizens, police and members of neighborhood committees," to prevent Uyghur Muslims from fasting during the holy month of Ramadan.
RFA:
Police stations in Turpan have enlisted two or three spies from each village to surveil residents previously interrogated and detained for fasting during Ramadan, and those released from prison, officers told RFA.
“Our ‘ears’ came from three fields — the ordinary residents, the police and the neighborhood committees,” said the police officer from an area near Turpan.
“Because of the language barrier, we recruited Uyghurs to surveil other Uyghurs,” she said. “In my workplace, there are 70-80 Uyghur policemen who either directly work as ‘ears’ or lead other civilian ‘ears.’”
A policeman from Turpan City Bazaar Police Station also said that 56 Uyghurs were "summoned" in the first week of Ramadan for questions about their "activities," and all but two were "determined" to have "violated the law by fasting." He would not discuss their punishment, RFA staff said.
For the rest of RFA’s report, China use spies to keep Muslim Uyghurs from fasting during Ramadan, click here.
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