Syria is a serious setback for Russia and China; Plus US-China tech war escalates over critical minerals and Nvidia -- China Boss News 12.13.24
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What happened
China's engagement with the Iran-backed "axis of resistance" faces its first major "stress test" due to the fall of Syria’s dictator Bashar al-Assad.
China is also struggling to grasp the implications of Assad’s downfall, as Russia enters its third year of invading Ukraine, a feat that was supposed to take three days.
Ding Long, a professor with the Middle East Studies Institute of Shanghai International Studies University, told Global Times that he expected conflicts to continue among Syria’s several major factions, and that “Turkey, along with the HTS and the Syrian National Army, will likely play a key role in reshaping Syria's political landscape.”
“Moreover, as Turkey's influence in Syria rises, Iran's influence in Syria and the region has noticeably declined. The Iran-led ‘Axis of Resistance’ has been severed and is even at risk of disintegration,” Ding said.
On LinkedIn, Daniel Tu, Founder and Managing Director at Active Creation Capital, said two former advisers to Jiang Zemin told him they were shocked by how quickly the Syrian regime fell.
The former advisers marveled at the ineffectiveness of the Syrian army and the weakness of the Assad regime and cautioned that Beijing should learn from Assad's collapse and Russia's lack of timely help.
Why it matters
Powerless
Tu also keenly noted that the developments took place “as Beijing aspires to become a Middle East power broker.”
“The vacuum left behind from the fall of Assad portends many moving parts in the region and mostly all beyond China's control,” he said.
Meanwhile, China’s Ministry of Foreign Affairs was stuttering on an appropriate spin of the new situation.
“The future of Syria should be decided by the Syrian people. We hope relevant parties will find a political settlement to restore stability and order in Syria for the long-term and fundamental interest of the Syrian people,” said PRC Ministry of Foreign Affairs spokesperson Mao Ning.
Rich, eh?
At any rate, the writing was on the wall for Assad well before last week, and it’s odd to think that Beijing wouldn’t have known it.
At the 11th hour of Russia’s invasion of Ukraine, British paper The Times disclosed that Russia's most effective fighting force, the Wagner Group, transported over 400 contractors from the Central African Republic in mid- to late-January 2022 with the intent to assassinate President Zelenskyy.
When that campaign failed, leader Yevgeny Prigozhin was forced to funnel his better men who fought valiantly against rebels in Syria to manage Putin's front lines and Russian training camps.
Assad certainly knew that would make a difference. After the Syrian Civil War broke out in 2011, the president stopped frequent international trips and mostly limited himself to once-a-year visits to Moscow.
Then, suddenly, in 2023, it seemed he was in Oman, UAE, and Saudi Arabia all at once. When that disappointed, he left his "friends" in the MiddleEast to meet Xi Jinping in Beijing - his first trip to China in two decades.
Xi valued Syria as one of the first Arab nations to recognize China in 1949, reinforcing bilateral ties and reflecting China's interest in Middle Eastern influence due to its growing energy needs.
But Assad's meteoric defeat reveals how inapt China truly is in shaping the region’s outcomes, and overthrow of his regime tars Beijing’s awkward attempts to portray itself as a negotiator and potential kingmaker in the region. Experts now say China is good for broad engagement, but little else.
Up in smoke
Still, it's of no minor significance that Beijing has also supported Assad extensively at the United Nations Security Council, where China used its veto power on eight occasions to block resolutions against the regime.
China has only used the veto 16 times in its council membership, and the support damaged its reputation among other Arab governments when China gained so little in return from its relationship with Syria.
There are few major Chinese investments in the war-torn country, and trade is tiny.
Some experts believe China went to bat for Assad to avoid another Arab Spring, like the one in 2011, which greatly alarmed the CCP.
Although the party does try to get ahead of major unrest around the world to prevent it from reaching China's borders, I don't buy into that reasoning.
There are other tyrants with protests and rebellion in the region that China doesn't put itself out for as it does - or did - for Syria.
No, Syria was important to China because it was important to Putin, Iran, and the "changes-we-haven't-seen-in-a-hundred-years" plan.
Syria was especially crucial for Russia because it hosted the Hmeimim airbase and the Tartus naval base, providing access to the Mediterranean Sea and a strategic point for Moscow’s influence operations in the Middle East and Africa.
Faced with the most draconian sanctions the world has ever seen, Putin had planned to make both regions into strongholds for reclaiming Russia’s lost power.
According to Natasha Hall from the Center for Strategic and International Studies, President Vladimir Putin needed to maintain a friendly government in Syria to keep access to vital military facilities.
Zineb Riboua, a research fellow and program manager at the Hudson Institute, also noted on X that "losing Syria would be a big deal for Russia.'"
"Most of its plans in the Sahel and Libya revolve around supporting Russia's access to the Mediterranean; without a strong Russian military base in Syria, all of Putin's plans collapse," she added.
Said differently, China's protection of Syria was a critical backstop to Moscow's slide into geostrategic impotence and oblivion.
It’s unclear what will happen to Putin’s bases in Syria: Reuters reports Moscow is in contact with rebel leaders in attempts to preserve them.
But if - as regional analysts suggest - Assad's downfall is also a supersized blow to Russia’s collaborations, not only in the Middle East but also in Latin America, Africa, and even Europe, then Xi’s dreams of taking Taiwan and remaking the world in his image with a steady and credible partner go up in smoke just like the House of Assad.
This Week's China News
The Big Story in China Business
CRITICAL MINERALS BAN, NVIDIA PROBE SHARP ESCALATION US-CHINA TECH WAR: Beijing last week announced an antitrust investigation into Nvidia, a leading American chipmaker known for its Artificial Intelligence (AI) processors.
The investigation follows additional restrictions that were imposed by the Biden Administration on China's access to high-end semiconductors the week prior.
Conflicts between the US and China have heightened recently, with the US imposing tariffs and restrictions on various Chinese goods. At the same time, President-Elect Trump has threatened to increase tariffs on all Chinese imports to 60%.
Analysts say the move signals to the US that China will respond to trade and technology sanctions, especially with Donald Trump set to return as president.
A retroactive review: According to CNN, Chinese officials are probing Nvidia's acquisition of Israeli company Mellanox for violations of anti-monopoly laws.
Nvidia's merger with Mellanox was approved by Chinese regulators in 2020, but that was before China's tech rivalry with the US intensified.
Concerns were already growing among multinational companies working with China following Beijing’s recent decision to ban the export of critical minerals earlier this month.
The New York Times reported that the measures are “tougher than expected,” and that “Beijing ordered companies around the world not to allow critical minerals mined in China to reach the U.S., while deepening its efforts to replace imports with domestic products.”
The ban on gallium, germanium, graphite and antimony, the production of which China dominates, is likely to complicate global supply chains, compelling businesses to decide if they will serve only the American or the Chinese market for products containing specific materials and components.
But analysts told news staff that was precisely China’s motive - to actively encourage companies, particularly in Europe, to invest in its production networks instead of those in the US.
Hits on both sides: Ironically, Nvidia is also facing antitrust scrutiny in the US as both Washington and Beijing work to secure chip production capabilities.
The US invests heavily in domestic chip manufacturing through the CHIPS Act, while China has also announced "The Big Fund."
Officially known as the National Integrated Circuit Industry Investment Fund, the Big Fund's first phase began in 2014, with 139 billion yuan invested. The effort then shifted towards a market-driven approach involving state-owned enterprises and private investors to mimic China's manufacturing ecosystems in other industries.
The second phase, initiated in 2019 with 204 billion yuan, focused on specialized parts of the supply chain, such as etching machines and self-sufficiency as a hedge against US sanctions.
However, eye-watering levels of corruption and poor investment decisions severely hampered that attempt.
According to Lizzi C. Lee at the Asia Society Policy Institute's Center for China Analysis, The Big Fund 3.0 - implemented in May 2024 for 15 years - is designed to learn from these past mistakes with new institutional investors and a supervising central body.
But "the success of Big Fund 3.0 is far from assured," she says, as US curbs and China's struggling economy pose "immense challenges."
Nvidia's shares dropped 2. 3% in midday trading as China accounted for a significant portion of its revenue, totaling $13. 5 billion in the past year, the Wall Street Journal reported.
Law and International Xi
CHINATOWN GANGSTER BECOMES BEIJING’S ELECTION FIXER: Recent federal investigations into foreign influence in New York have revealed some surprising connections to Beijing.
An aide linked to China had her home searched, and prosecutors also charged an aide to Gov. Kathy Hochul for allegedly serving the Chinese government. Even the New York Fire Commissioner is accused of having inappropriate ties to China.
But the most dramatic figure to emerge from investigations, New York Times staff say, is 70-year-old John Chan from Brooklyn, who had "remarkable proximity to the highest levels of power in China while acting "as a power broker in America's largest city, with immense sway over an important subset of New York politics."
Mr. Chan has not been formally accused of wrongdoing. Still, NYT told his story at length to reveal how "a Chinatown gangster" went on to become "a powerful force in New York politics — one closely aligned with the Chinese Communist Party."
Beijing’s New York “fixer": A Times' investigation into Chan unearthed a network of nonprofits established to support his chosen political candidates and organize protests against opponents of Chinese leader Xi Jinping.
His targets included politicians who oppose the Chinese government, including those supporting Hong Kong protests and visiting Taiwanese dignitaries.
In 2022, his backing of a congressional candidate likely influenced a primary, resulting in the defeat of another Taiwan-born state legislator.
But even as recently as two weeks ago, Chan helped unseat a Taiwan-born Democratic incumbent.
"Throughout it all, perhaps the most extraordinary element of Mr. Chan's rise to prominence in New York politics was not his ties to the Chinese Communist Party, but a part of his personal history he has taken pains to hide from his supporters: that he was a felon, having pleaded guilty, in another life, to human smuggling and heroin trafficking," news staff wrote.
‘King of Brooklyn’: When Mr. Chan came to New York City over 30 years ago, he was already a part of a Chinese crime group. He escaped China's hardships in the 1970s by sneaking into Hong Kong, where he joined a gang.
After moving to New York, he became involved with the Wo Lee Kwan triad and began smuggling Chinese citizens into the US, charging about $40,000 per individual. Despite his criminal activities, Mr. Chan became a leader in the Chinese immigrant community through his restaurant and activism.
In 1999, he organized a protest against the U. S. bombing of the Chinese Embassy in Yugoslavia. His criminal career took a turn in July 2001 when he was charged with smuggling migrants in shipping containers. Facing severe penalties, he cooperated with federal investigators targeting a dangerous crime boss, Frank Ma. After years of assistance, in January 2008, he was sentenced to time served for racketeering, human smuggling, and illegal gambling, leading to the conviction of Mr. Ma.
In 2014, Representative Grace Meng honored Mr. Chan as an example of the American dream. He formed a nonprofit to elevate Asian American political influence and address anti-Asian hate.
This earned him the nickname "The King of Brooklyn." However, he also engaged politically, protesting against those he opposed, including state senator Iwen Chu, after she attended an event with Taiwan's president, leading to public disputes.
The summary does not do justice to the Times' investigative report, How a Criminal With Close Ties to China Became a New York Power Broker, which I urge you to read and share.
Geopolitics
TAIWAN ON HIGH ALERT AS PLA CONDUCTS LARGEST DRILLS IN DECADE: Taiwan is on high alert while China conducts its largest regional maritime deployment in decades, CNN reported.
On Tuesday, Taiwan's Defense Ministry reported multiple Chinese naval and coast guard vessel formations moving in nearby waters.
PLA drills near Taiwan are increasingly frequent - a sign of Beijing's growing impatience with the “status quo.”
Still, the sheer scale of these drills seems to have unsettled even senior Taiwanese military officials, who've seen their fair share of "gray zone" tactics.
Taiwan's Lt. Gen. Hsieh Jih-Sheng said the number of Chinese vessels is astonishing and could potentially block external forces. 😶
Beyond the “first island chain”: According to Hsieh, the PLA naval forces' deployment was aimed not just at Taiwan but also encompassed an area of operation extending beyond the first island chain.
American diplomat John Foster Dulles conceived "the first island chain" strategy during the Korean War.
Back then, Japan, Taiwan, portions of the Philippines, and Indonesia were crucial locations for US naval bases encircling China and the USSR.
Today, they underpin the US' ability to project power in the Pacific.
According to CNN, Taiwanese authorities saw a sharp rise in Chinese military aircraft activity, with 47 jets detected near the island "in the 24 hours before 6 a.m. Tuesday."
China has also established seven airspace reservation zones near its coastal provinces, although no live-fire exercises have occurred yet.
Experts point to recent visits by Taiwan's president to the US territory of Guam and the state of Hawaii, and the State Department's approval of a massive arms sales package to Taipei as reasons for China’s dramatic escalation.
Best Reads
The Fiction of Western Unity on China De-Risking (James Crabtree, Foreign Policy): Crabtree makes clear the choice for US partners who are increasingly under pressure: They can oppose US-led decoupling from China, risking Trump's anger or support it, which could harm their relations with Beijing.
Changing Cadre Incentives: The Untold Story of China's Economic Challenge (Zhuoran Li, The Diplomat): Li says Chinese local administrators are transitioning from promoting economic growth to security paperwork and inspections.
Chinese security companies are putting boots on the ground in Myanmar. It could go disastrously wrong (Adam Simpson, The Conversation): The authors warn of the risks, including PLA infiltration, of Chinese private security companies entering Myanmar.
Middle Kingdom Surreal
PLA MOVES DEEPER INTO AFRICA: Approximately 1,000 Chinese troops participated in land and sea training in China's two-week military exercises with Tanzania and Mozambique last summer.
According to Paul Nantulya at the Africa Center for Strategic Studies, the "Peace Unity-2024" exercises included around twenty different types of weapons and equipment, such as small arms and heavy artillery. They were a significant step in expanding the People's Liberation Army’s (PLA's) involvement in Africa.
They also marked the first time PLA deployments in Africa extended beyond China's first overseas base in Djibouti, which previously only accommodated shorter missions.
Over the past ten years, China has strengthened its military role in Africa by sending the PLA to establish a more substantial presence on the continent.
According to Timothy Ditter, a Senior Research Scientist in the Center for Naval Analysis China Studies Program, Africa has become the largest area for China's military deployments outside its borders. This is driven by a need to protect its investments along the Belt and Road while responding to global instability.
China also uses its leadership in forums like the Forum on China-Africa Cooperation to enhance security collaboration and influence on the continent.
The PLA currently has about 4,100 members in Africa, including personnel in peacekeeping operations. While these numbers are slightly less than those of the US and France, Ditter said the PLA's operations, such as anti-piracy patrols and peacekeeping, are significant activities for China outside Asia.
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We’re gearing up for the Christmas holiday feast which, in Portugal, generally includes “bacalhau” or salty cod fish and potatoes. The final China Boss Newsletter of 2024 will hit your inbox next Friday. Hope your holiday prep is going well!
Thank you, Shannon